[DISCUSSION] GW 2024 Financial Annual Report (Prices, Production, FTSE 100)

[darkhorse0607]

I feel like when @N1SB addresses your question it's like getting a gold star from the teacher.

 

Thank you for such a thorough answer

[Mendi Warrior]

As usual, a very enjoyable analysis by brother N1SB!

 

Short of increasing their internal capabilities to produce electricity (not their core business) or have a great price hedging team (I don't have the impression they are active in the derivatives' markets, does anyone know?), GW will remain highly exposed to the risk of electricity prices shooting up. And both options would come with their own costs and risks.

 

As an aside, even if large corporate customers usually have some bargaining power to negotiate fixed price agreements with energy providers, it can happen that a large electricity production facility enters unscheduled maintenance or repairs for a couple of days during the period that serves to determine the actual price for the contract. With less supply in the market, prices have a tendency to shoot up. At least, that is a specific risk to corporate customers that was highlighted to me by someone from the energy trading desk of a large bank. For those interested in the topic, a look at Enron and its role in the California energy crisis can be interesting. Another kind of rogue traders 

[Tyriks]

7 hours ago, N1SB said:

 

... around here I see a lot of empty storefronts these days, nothing filling them up.  Rent is increasing for housing, but a glut of supply for shop space.  Shouldn't Retail be cheaper now?

.

I can shed some light on this, as my wife works in corporate real estate. The costs are high for a number of reasons - for starters, the landlords typically have to build out the space. But what worked for the restaurant that used to be there won't work for a retail shop trying to fit gaming tables and paint displays, so it needs to be built. No one wants an empty square, even though that's what every GW store I've been to looks like - they still have a back room, at least. Costs of construction have shot up a lot. Landlords' costs overall have gone up a lot, too.

 

Another issue is the lease. Companies rarely do short term leases. I'm sure it happens, but my wife has worked for 3 different landlord companies and also has managed the rental properties of 2 different companies, one of which is a multi billion dollar company with hundreds of locations they rent, and almost all of the leases she writes and manages are 5 years.  This is partially tied to the construction costs - those costs are fed back to the renter split over the course of the lease, and if it was a short lease it would be very expensive. So, longer leases means "guaranteed" income for the duration, less need to pay people to find customers, lower rent for the renter. But that also means if I lower my rent prices to get someone into a space, I'm not just losing (potential) profit for a little while, I'm losing it for years.

 

They also have expected profit margins and expected occupancy ratios. If a location remains above a certain (somewhat arbitrary) percentage of their square footage occupied, they aren't desperate to fill space, because this is expected. If they slip below they might consider lowering rates, but I think this is where corporate inflexibility tends to hit them. If I rent a space at 80% of the price I expected for it, that looks bad on paper for the next five years, whereas it sitting empty could change, so it seems like they choose potential high profit over real moderate profit a lot of the time.

 

It seems to me on the outside like the same kind of mindset as CEOs of huge companies continuing to use dying software from the 70s that needs constant work just to function, because its better to pay millions in salaries indefinitely than billions up front on replacing it all, even when it saves money in the long run.

[ZeroWolf]

Aren't business rates charged by the council another factor to retail locations though? I know I've heard a few locally having to deal with rising bills with that thrown in on top.

[Ayatollah_of_Rock_n_Rolla]

On 7/23/2024 at 4:29 PM, N1SB said:

 

Do you know where the word trade comes from?  Tradeo, Tradere, to pass on.  We're passing what we are to each other, like geneseed.  That's what this is.

 

Oh, no you didn't N1SB. I'm revoking your High Gothic privileges.

 

 

It's  "trans+do", and thus "trado, tradere, tradidi, traditum".

And English "trade" comes from a whole set of words built around Proto-Germanic tredan/trudan meaning "to tread". More specificaly words like Middle Low German "trade" and Old Saxon "trada" meaning "a way/a road/a track".

 

Edited July 24 by Ayatollah_of_Rock_n_Rolla

[N1SB]

In this post, I shall share my own mistakes, because these are hard lessons learned AND earned, to show I FEEL the truth in your words.

 

On 7/24/2024 at 9:10 PM, Tyriks said:

Another issue is the lease. Companies rarely do short term leases. I'm sure it happens, but my wife has worked for 3 different landlord companies and also has managed the rental properties of 2 different companies, one of which is a multi billion dollar company with hundreds of locations they rent, and almost all of the leases she writes and manages are 5 years.  This is partially tied to the construction costs - those costs are fed back to the renter split over the course of the lease, and if it was a short lease it would be very expensive. So, longer leases means "guaranteed" income for the duration, less need to pay people to find customers, lower rent for the renter. But that also means if I lower my rent prices to get someone into a space, I'm not just losing (potential) profit for a little while, I'm losing it for years.

 

They also have expected profit margins and expected occupancy ratios. If a location remains above a certain (somewhat arbitrary) percentage of their square footage occupied, they aren't desperate to fill space, because this is expected. If they slip below they might consider lowering rates, but I think this is where corporate inflexibility tends to hit them. If I rent a space at 80% of the price I expected for it, that looks bad on paper for the next five years, whereas it sitting empty could change, so it seems like they choose potential high profit over real moderate profit a lot of the time.

 

I made this exact mistake when I 1st became a landlord.  It was for a luxury apartment, "off-plan" (which you and Mrs. Tyriks know, I'm just explaining to our other Brothers & Sororitas),  meaning it was just a hole-in-the-ground when I "bought" it (like a Kickstarter in property terms), to lease to wealthy expatriot businessmen.

 

There WAS indeed an arbitrary number in my mind for rent.  Our own real estate agent found potential tenants, but their offer was below that.

 

It wasn't that much less, it was like £500 or so below it.  But I asked my agent to keep looking.  It took her 2 or 3 months before she could, but my property was empty for those 2 or 3 months, so I was receiving £0 rent for those 2 or 3 months.  My thought was the same as you described...and it was ONLY a 2-year lease.

 

My mistake: I was calculating what I'd lose instead of counting what I'd gain.  It's like FOMO as a capitalist instead of as a consumer.  So stupid.

 

Your insight was perfect.  Please feel free to share with Mrs. Tyriks, because I'm like the stupid landlord she deals with, but now I know, thanks to you.

 

On 7/25/2024 at 1:20 AM, Ayatollah_of_Rock_n_Rolla said:

 

Oh, no you didn't N1SB. I'm revoking your High Gothic privileges.

 

 

*opens wallet, pulls out High Gothic Library Card, hands it to you with both hands and servo-arm, my head bowed*

Thanks for catching me, Brother.  I confess to you, my sins were three-fold, I shall re-count them as part of my penance:

 

- 1st, I got my High Gothic wrong

- 2nd, why the hell did I bring High Gothic in the convo in the 1st place?  That's so smarmy of me

- 3rd, I bet I wasn't even thinking of trade.  I was probably thinking of tradition*

 

* Note: I complained in the OP about how ppl confuse luxury brands with culture.  I confused trade with tradition.  That is so damning.

 

Yeah, please kindly hold onto my High Gothic Privileges until like, I dunno, the Half-Year Report.  And thx for that meme image, lol.

[LameBeard]

@N1SB it’s great to see you limbering up, ready to take on the financial statements.

 

Hitting the FTSE100 is pretty impressive. There are many tracker funds tracking the FTSE100 that will be forced to buy GW stock, which will further push the price up - so we actually lose a bit of information content from the share price.

 

Personally, I’m most interested to see how they deal with what appears to me the absolute shambles of the website. First it didn’t work, but even when working as intended it’s as ugly and awful experience as any storefront I’ve seen. As a shareholder and as a customer, this upsets me; I’m fully expecting them to soft soap this in the words and for the financials to lack the detail to show how much money it’s cost them, but if you pick anything up, I’d be interested to get your view.

[crimsondave]

I work for a southeastern US power company so this discussion really peaked my interest.  I just looked up electricity prices in the UK.  Omg!  UK average rates are 3 times what my company charges!  Say what you want about GW, but they are obviously dedicated to being a UK made product.  Places in the central US have rates almost 40% lower than we do.  So, theoretically, a plant in Nebraska would be almost 80% less than the average UK rate.  GW obviously has loyalty if nothing else.  You do not see that many places.

[skylerboodie]

On 7/23/2024 at 3:29 PM, N1SB said:

+++ FTSE 100 +++

 

So I was talking to Chinese acquaintances, talking about the world, including the UK.  I ask them what they like about the UK.  They reply, "Burberry."  That's not an indictment or insult or anything against the UK...but I do think it's an indictment on what my people have become, our culture has been reduced to loving luxury goods.

 

Games Workshop has overtaken Burberry in terms of company value.  You heard how nVidia became the world's highest valued company for a few days before Microsoft took that spot back?  The term is Market Capitalisation and it will NOT be in the annual report, but that WILL affect the company's valuation.

 

The UK, like other countries with stock exchanges, has Tier Lists of companies like how a YouTube 40k channel makes Tier Lists of units.  The top 100 companies are in what's called the FTSE 100 (pronounced "the Footsie One Hundred"), that's like Tier 1 units.  Burberry just got knocked off the list.  GW has JUST entered it.

 

 

It's NOT just bragging rights.  When the UK government is planning its economic policy, they want to talk to business leaders, by default they'll invite ppl from the FTSE 100 because it's some sort of system.  GW JUST got a seat at the table.  Maybe then they can FINALLY get help getting the building permits for Factory 4, 5 and 6. 

 

Heh, I was complaining about my own kindred being obsessed with luxury goods?  So am I, because Warhammer IS a luxury good now.

 

 

I'm afraid GW hasn't / isn't about to join the FTSE 100 yet (sadly); the automatic entry positions are those companies ABOVE #91 (and auto exit is BELOW #110); being in the middle section (i.e. between the pink lines) doesn't move a company up or down autotaically, and this buffer zone exists so there isn't a constant change in FTSE100 constituents all the time as share prices constantly fluctuate. Table below is latest from Friday (https://www.stockchallenge.co.uk/ftse.php).

 

Burberry has dropped down to currently #130 and is looking due to be booted out, almost certainly to be replaced by Hiscox (currently at #90), at the next quarterly constituents review (due start of September). As the middle 'buffer zone' shows, there are a number of companies ahead of GW (#110) in the queue to get into the FTSE100, based on current share prices - the light orange ones like Tritax, Investec, RS Group etc that, like GW, are currently in the FTSE250. They're all currently bigger than Easyjet in #108, but remember once you get into the FTSE100 you have to fall lower than just #101 to be removed - the automatic exit position is at #111. For example, next in line (after Hiscox) is Tritax currently at #98, but it can't get into the FTSE100 yet until either it goes above #91 or the likes of Easyjet drop below #110  (the latter looking more likely).

 

So GW has a while to go yet to make the big league. It's current share price is c. £104.10, and would need to get to around £132.04 (i.e. c. +28%) to beat the current market capitalisation of Hiscox in #90 and gain an automatic entry position. (Highest GW share price has ever been is c. £120; at that level of share price, it would currently sit c. #101 in the above table.)

 

If it does get there at some point - and perhaps a successful Amazon deal in practice would take it there - then there'd potentially be quite the scramble to get shares - as all FTSE100 tracker funds (or those that include it as a constituent) used by investors and pension companies could be looking to invest to ensure there fund is correctly inline with the new FTSE100, and GW has a relatively low volume of shares for a company that would be knocking at the door of the main index (hence the high price of >£100 each; look at all the other prices (listed in pence) in the same column as GW's 10,410).

 

GW has c. 33 million shares; for comparison, Easyjet has c. 750 million, Hiscox c. 345 million. GW may then go through a stock-split (eg: you had 1x £130 share? you now have 10x £13 shares), else there could be a scramble from pension funds to buy from a small pool of shares to replicate the FTSE100 accurately, driving up the share price further (anticipation of this could start the process early by speculators/investors).

 

TL:DR - GW isn't in the FTSE100 yet - or likely soon - but hopefully one day!

 

[WrathOfTheLion]

On 7/24/2024 at 9:10 AM, Tyriks said:

It seems to me on the outside like the same kind of mindset as CEOs of huge companies continuing to use dying software from the 70s that needs constant work just to function, because its better to pay millions in salaries indefinitely than billions up front on replacing it all, even when it saves money in the long run.

I think their viewpoint would be that it could take 50+ years for that billions upfront to pay for itself theoretically if done right, so is it really saving money in the long term?

It's not quite the same viewpoint as unoccupied space in a commercial mall, which is making no money, vs possibly some (whereas the old software, which may be perfectly fine, is keeping the existing business running). While the old software works, it's not necessarily worse than new software. But while rent space isn't occupied, it is making no money, where it could be making some.

Edited July 28 by WrathOfTheLion

[Marshal Mittens]

I could be wrong, but doesn't GW only make 70% when you buy from them, and like 20-30% when you buy from an FLGS because the FLGS gets 40%, unless they do a discount?

[Joe]

Report is up.

[RWJP]

This statement in the report is really interesting and potentially very telling:
 

Quote

Since May 2023, we have increased our cash buffer from £50 million to £80 million, in line with the new three monthly cash cost of running Games Workshop. Our job is to run the business under all scenarios - some not so positive ones are highlighted in our annual report under going concern scenarios - our cash buffer levels pass all these scenarios.

So GW has a cash buffer set aside that will effectively cover the costs of running their business for 3 months. In May 2023, that buffer was £50 Million. Twelve months later, it's been increased to £80 Million! A 60% increase in the costs of running their business in just over a year is enormous. No one likes price increases, but DAMN that at least explains them to a degree.

Also, interesting point on Warhammer+
 

Quote

The exciting content delivered through Warhammer+ will remain an integral part of our digital offer and how we share our IP. Subscriber numbers are currently 176,000 (2022/23: 136,000).

A net increase of 40000 (how appropriate) subscribers (29%) over the year seems pretty positive.

Edited July 30 by RWJP

[Marshal Rohr]

On 7/27/2024 at 10:09 AM, crimsondave said:

I work for a southeastern US power company so this discussion really peaked my interest.  I just looked up electricity prices in the UK.  Omg!  UK average rates are 3 times what my company charges!  Say what you want about GW, but they are obviously dedicated to being a UK made product.  Places in the central US have rates almost 40% lower than we do.  So, theoretically, a plant in Nebraska would be almost 80% less than the average UK rate.  GW obviously has loyalty if nothing else.  You do not see that many places.

The European mind cannot comprehend a tornado

[N1SB]

On 7/29/2024 at 6:01 AM, skylerboodie said:

 

TL:DR - GW isn't in the FTSE100 yet - or likely soon - but hopefully one day!

 

 

You are absolutely right.

So to make sure everyone's on the same page as us, the FTSE 100 of the UK's top 100 stocks is not exactly the top 100.  These things fluctuate because stock prices change.  So there's like a grace period...if your company is already in the FTSE 100, but your you can drop to like 110th position and you're still counted.

 

Conversely, to join the club, you'd have to get to the 90th ranked stock.  It's like you got to prove yourself extra hard.  I legit forgot about that.

 

The other thing Brother Skylerboodle mentioned is there are investor funds that ONLY buy FTSE 100 stock.  You know how there're players that only buy Tier 1 units...like me with my Triple C'tan list early 10th?  And just like in 40k it drives up their prices in the next Balance Update?  It's like that.

[N1SB]

On 7/29/2024 at 8:00 AM, Marshal Mittens said:

I could be wrong, but doesn't GW only make 70% when you buy from them, and like 20-30% when you buy from an FLGS because the FLGS gets 40%, unless they do a discount?

 

Boy is there something scary here, I think I read it right.  But for now the TL;DR is, that 70% is this weighted average across the company.

 

So you know a Primaris Lieutenant and a single Primaris Marine actually costs about the same to make, but of course the Lieutenant is much more expensive as an individual model?  Well, it's all averaged out, because GW knows you're probably not going to make an army of all Lieutenants, you're going to have just 1 Lieutenant among a bunch of Intercessors or other Troops.  So it's all rounded out.

 

Edit - I just thought of an analogy.  So you know we do Mathhammer on a unit, like a model fires its guns and can kill on average x MEQ?  Imagine instead of doing it per unit, you just did 1 number for a whole army.  It's very fuzzy indeed, but I think we got some clarity in a weird way.

 

Hey, did you know Warhammer+ animation costs is part of that calculation?  I somehow never thought of that.

 

But anyway, I was reading just 1 line and I'm thinking the CEO, it was great he told us...I'm not sure he should've told us!

 

Imma sleep on it and read it again in the morning, but you're right

Edited July 30 by N1SB

[darkhorse0607]

Just starting to dive into it this morning but can I just say

 

"We aim to communicate in an open, fun way."

 

hahahahahahahhahahahahahahhahahahahhahaha

[Brother Casman]

22 hours ago, N1SB said:

 

[snip]

 

But anyway, I was reading just 1 line and I'm thinking the CEO, it was great he told us...I'm not sure he should've told us!

 

Imma sleep on it and read it again in the morning, but you're right

 

I'm curious which line you found that stood out. Personally, I was struck by the following: "My advice is please don’t judge us on quarters. We do not manage the business to that rhythm: we monitor 12 month moving annual trends…i.e. reviewing whether we are heading in the right direction or not. It’s very difficult to change our new release schedule live in any year, it is set in stone. " (emphasis mine)

[Dark Shepherd]

An inference I got from the report is that the % of sales for a given model on release v ongoing is wayyyy higher than we think and GW really, really hate dead/slow stock way more than we think (maybe cos they dont want clearance sales even from FLGS) so they really want to lean into/err on the side of fomo/limited editions even more than we might think

 

Just a suppositiion

[Emperor Ming]

On 7/30/2024 at 1:06 PM, RWJP said:

but DAMN that at least explains them to a degree.

Don't they just make that number up? next year we want a million billion billion!

 

Bad news for Warhammer plus?

 

Subscriber growth means they can continue to add practically nothing and keep things ticking along as they are

[Nephaston]

21 minutes ago, Emperor Ming said:

Subscriber growth means they can continue to add practically nothing and keep things ticking along as they are

People really seem to like the WH+ models. Not to mention that I'm sure many just sub and forget about it, as is typical for many subscriptions.

[Dark Shepherd]

47 minutes ago, Nephaston said:

People really seem to like the WH+ models. Not to mention that I'm sure many just sub and forget about it, as is typical for many subscriptions.

I legit think W+ is a slow rollout of digital/all encompassing rules set

 

If they have 170k now paying €50 a year they can do the maths on 500k paying €100 plus theyd save on having to make animations

 

And or Prime would love all the w+ content as free stuff

[Scribe]

So, whats the story.

[Nephaston]

2 hours ago, Scribe said:

So, whats the story.

GW makes lotsa money, but they also spend lotsa money to keep their PERPETUAL PLASTIC STEW going. Their supply of kits doesn't keep up with demand unless they get more factories, which they need permission for. To get those permissions they need to be biggerer and hugerer so senpai british government notices them more. The amazon deal might help with that.

 

TL;DR GW needs to be even bigger before they can satisfy demand.

Edited August 4 by Nephaston

[RWJP]

7 hours ago, Emperor Ming said:

Don't they just make that number up? next year we want a million billion billion!

No, because as I mentioned and as the text I quote very clearly stated, this is about their RUNNING COSTS, not the profit they want to make.

The money we're talking about here is a pot that GW is keeping to one side so that if they didn't have income, they could keep their business afloat for a period of time without having to cut staff/close departments/default on loans and bills etc etc 

Last year, GW worked out that pot needed to be £50 million to cover everything they need to spend. Now, they calculate it's £80 Million.