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Games Workshop issues another profit warning

LONDON (Reuters) - Games Workshop Group Plc GAW.L issued its second profit warning this year and scrapped its dividend on Thursday, sending its shares down as much as 45 percent.

The company -- which makes figurines for fantasy role-play games such as Lord of the Rings -- said in a trading statement that sales declines in continental Europe were at the root of the problem and that it would launch a cost-cutting programme to try and correct it.

Shares in the firm were down as much as 45 percent in early trade, but recovered some ground to be down 21 percent at 257-1/4 pence by mid-morning, valuing the group at around 80 million pounds.

Finance Director Michael Sherwin told Reuters in a telephone interview that the cost-cutting would take 12 months, but that the firm could start paying a dividend again by the interim payment early next year.

“We will look hard at it at the time of the interim ... we can’t afford to invest in the business, the restructuring and the dividend at the same time but as soon as we are able we will return to the dividend stream,” he said.

Games Workshop said it will close 35 stores and cut staff by 10 percent, resulting in an exceptional cost of 6 million pounds, as well as scrapping its dividend.

The dividend had been unchanged at 18.975 pence for the past two years.

“We do believe in the underlying strength of the business and that health will return .. but we can’t just wait, we are taking control of our destiny,” Sherwin said.

Analysts at Bridgewell cut the company’s rating to underweight from neutral and said in a note that it anticipated the shares would underperform until the company’s recovery credentials are clear.

Panmure Gordon followed suit, cutting the retailer to sell from hold.

The announcement was the company’s second profit warning this year after reporting in January that Christmas sales had failed to make up for a weak summer.

Chairman and Chief Executive Tom Kirby told Reuters at the time that the firm had suffered a hangover from a bubble created by Lord of the Rings, which had been unusually popular during the release period of the three Peter Jackson movies.

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