Games Workshop's magic formula and Standard Chartered caves in on remuneration dispute

Friday, November 8, 2019 - 10:32

“Mixed messages regarding the US/China trade war have left investors frustrated, leading to a down day for the markets on Friday. The FTSE 100 dropped 0.3% and European markets fell by a similar amount,” says Russ Mould, Investment Director at AJ Bell.

“Having enjoyed a bounce yesterday on reports that the US and China were going to strike a deal, the miners today take a step back with Evraz and Anglo American the top fallers on the FTSE 100.

“Among the UK mid-caps, insurer Beazley was one of the top risers, up 5.1% after reporting a bullish third quarter trading update."

Games Workshop

Games Workshop continues to be a master in the art of brevity with its latest trading statement. The message is fairly simple: earnings are growing which is a commendable feat in the troubled world of retail.

“Having a niche focus can help certain retailers be isolated from the pains facing general merchandisers. In Games Workshop’s case, it couldn’t be any more niche if it tried. Its customers are fanatical, loyal and part of a vibrant community whose hobby is centred on miniature figures.

“While it isn’t entirely immune from any economic downturn and the negative effects that might have on consumer spending, there is a sense that Games Workshop is currently enjoying a sweet spot whereby it is offering products which appeal to its end-market and in an engaging way. The community spirit of its offering, particularly the way staff interacts with customers in-store, gives it an edge over mainstream retailers.

“It is now looking at ways of getting more out of its intellectual property with growing royalty income from PC and console games, as well as a move to develop animation and TV content.

“The business is also expanding internationally with the US and Germany as key locations for new stores. It now has more stores in both North America and mainland Europe than it does in the UK. This suggests that the scope for future earnings growth could be bigger than people may think.

“Games Workshop has fine-tuned its proposition and hit on a winning formula. The fantasy world seems less susceptible to going in and out of fashion and that should enable the company to keep delivering the magic.”

Standard Chartered

“Shareholder pressure can make a difference. Six months after emerging markets bank Standard Chartered faced a major revolt on remuneration, with 40% of investors voting against the pay policy at its AGM, the company and its chief executive Bill Winters have been forced into an embarrassing climb-down over his generous pension allowance.

“Up until today the company has been effectively poking an angry bear when it comes to addressing investor concerns.

“First it tweaked the way it defined the pay of Winters and finance chief Andy Halford ahead of the AGM so that a cut in the percentage of salary paid into their pension actually saw contributions go up.

“Then Winters bit back at shareholders in July, describing their actions in raising concerns as ‘immature and unhelpful’ in a newspaper article.

“Now the pension contribution level of 10% is aligned with that of the bank’s other employees, although the new definition of pay still stands which may frustrate some.

“So why did Standard Chartered go down this road in the first place? There is an argument that companies compete in a global marketplace for executive talent and they will look to do whatever they can in terms of rewards to attract and retain this talent.

“This argument looks stronger when shareholders are also being richly rewarded, yet since Winters took charge in June 2015 the company has posted a total return of -20.5%.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.