Games Workshop: model maker represents the best of Britain

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Arm’s decision to shun its home stock market for New York was cause for commiseration between UK-focused fund managers. The odds of London attracting future tech initial public offerings look slim. Another blow came this week when box maker Smurfit Kappa opted to switch its main listing to the US.

At least UK investors still have Games Workshop. The Warhammer model maker maintains its place as one of the best-performing stocks on the London market. An update on Friday showed core sales rose 14 per cent year on year in the three months to August. This is well ahead of expectations. Shares reacted with a 10 per cent gain.

Games Workshop is the second-best performer in the FTSE All-Share index over the past decade, just a hair behind trainer and tracksuit retailer JD Sports. Share prices for both have appreciated 13 times. Price gains for Microsoft and Apple over the decade clock in at 9.3 and 9.6 times.

Games Workshop cannot best every hot tech stock. Nvidia’s returns over the decade breach one hundred times.

But add dividends in, which Games Workshop also said it would increase by an extra 50p for this year, and the company’s returns look even better. Total shareholder return over the past decade becomes 22 times. That makes it the second-best performer including dividends in the All-Share index after spread betting group Plus500’s 25 times.

Apple and Microsoft, which pay few dividends, have returned 11 times in total over the decade.

The model maker’s shares have rallied sharply along with broader equity markets from last year’s slump. Indeed, in dollar terms it acts like a tech stock, its correlation with the Nasdaq 100 index is 0.96 or near perfect.

As with tech, Games Workshop’s valuation at 25 times forward earnings far exceeds its long-run average.

Also like tech, Games Workshop may have some new sources of revenue. The market eagerly awaits a Warhammer film rights which could yield yet another pleasant surprise.

Listen to Lex deputy editor Elaine Moore talk to creators, companies and critics about the next era of social media in the FT’s new Tech Tonic podcast series.