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

[Sothalor]

 

 

When I owned an LGS, one of the things that we were advised early on (about RPG books, but you can expand it to other lines) is that you need the stuff that rarely sells to sell the  stuff that regularly sells. If all your stock is the popular stuff that everyone buys, then people are less interested because a limited amount of options is boring. If you stock lots of stuff, people are interested by all the cool things you have, even if 99% of the time they just buy the popular stuff. I'd imagine GW know that if all they did was sell Marines, they'd quickly crumble as people got bored. With a wide product catalogue, there's lots of enticing stuff to get people interested, before those people go off and buy more Marines anyway. 

 

Basically, making your product lines look varied is more appealing to consumers, plus it gives you a wider customer base. I don't know if this is GW's reasoning or if the theory scales from a single LGS to a multinational, but it's a possible explanation.

 

That's fascinating. It sounds like you're describing a sort of human psychological quirk: we enjoy the perception of having options, even if we ultimately choose not to partake in the full range of them.

 

I see this in the fountain pen collectors' community as well, where people get all excited about this or that manufacturer introducing a model variant in some different color. Even if all they ever actually personally buy are pens in shades of blue or brown or whatever "their" color is.

 

There's something to be said about our perception that we're participating/engaging in something that's broader than our specific scope at the moment.

[alfred_the_great]

 

IIRC the GW McDuck money pool also funds expansion. The factory upgrades are paid for with cash, not debt. This looks like it supports their stated strategy for long-term security and not being beholden to slash-and-cut accountants. Of course it only takes one ill-advised CEO to destroy the model but if the shareholders understand the strategy (they should, it's in the reports) they should prevent that.

And what is most impressive is that this is entirely contra the vast majority of the UK-US market, that seemingly abhors capital investment, and relies on debt funded expansion. 

[Cactus]

@alfred_the_great fortunately for everybody reading this my views on that approach are not appropriate for the B&C so you're spared my diatribe.

 

On the topic of leaning too much on 40k in general and Space Marines in particular, I don't think that's a major issue. In my view the other products sell well enough that if the bottom somehow fell out of the marine market it wouldn't immediately sink the company. The other lines seem to sell well enough (and often sell out) that a reprioitising of design and production resource could keep the money flowing.

[Scribe]

 

 

That's fascinating. It sounds like you're describing a sort of human psychological quirk: we enjoy the perception of having options, even if we ultimately choose not to partake in the full range of them.

 

I see this in the fountain pen collectors' community as well, where people get all excited about this or that manufacturer introducing a model variant in some different color. Even if all they ever actually personally buy are pens in shades of blue or brown or whatever "their" color is.

 

There's something to be said about our perception that we're participating/engaging in something that's broader than our specific scope at the moment.

 

I think this is a similar line of thought/motivation as the 'dead game' phenomena in any kind of gaming scene. If a game is perceived to be dead, no matter how good it is, people will sour on it and abandon it. If a game is perceived to be great, then it will grow, even if its not that good.

[N1SB]

 

Thanks as always for the educated analysis. What struck me is the commentary for Core Gross Margin. GW are spending less on holding stock in the warehouse because everything sells so quickly. So when you see that 'temporarily unavailable' project blocking message remember that your sacrifice is helping to keep the cost of products down for everyone else.

 

You literally gave the best description of Just-In-Time manufacturing.  Well done, that's brilliant.

 

This is the same issue why during the pandemic, there was a lot of shortages of basic stuff, like toilet paper.

[N1SB]

 

The success of GW, from my own meagre interpretation and seemingly confirmed by greater minds here, hinges on 40K by an ever increasing margin. Of that, I dread to think how much of that relates directly to Space Marines.

 

As a public trading company, this leads me to a question I'm not sure can be answered but I'll ask anyway - is there not a chance that evil money men in charge of the company will seek to slash and cut everything bar the big sellers?

 

Speaking as a Blood Bowl, Legions Imperialis, Adeptus Titanicus (RIP?), Necromunda and Old World fan... someone who won't touch 40K anymore... is this not a genuine concern? I mean, what reason to focus on these for nostalgic reasons when they can just sell MOAR MAHRINES?

 

Regarding profit squeezing out of us pips; 70% (approximately) is obscenely over priced yet GW feels the need to operate with a mind to not letting it drop, but I have to ask - why? Why is there this need to artificially maintain such a disproportionate profit when you compare to other companies, successful other companies at that?

 

It hints at a need for it year on year as if they are looking to sell to someone at the end of a time period? Or something is coming that they expect to cause losses, like a looming threat of 3D printing or something?

 

Thanks in advance if you have time to address these questions based on your summary. 

 

 

May I present to you my discontinued Aeronautica Imperialis Tau Air Caste as my answer.  That little French tin box I used to hold these was a gift from my friend ControllEric, who's like a CFO as well as part of our D&D Controller Wizard and a Warhammer player (the latter's my fault).  I'll be comparing notes with him, too.

 

I just had a realisation.  You know the term "cannibalism", like a company makes 2 similar products, put them in the shops, consumers choose 1 over the other, they eat into each other's sales.  That's all correct, and naturally it's how consumers see it.  What generally happens can't be seen, products cannibalise themselves behind the scenes, in the office, before they even get to the factory and obviously before they ever reach the stores.

 

I say this with a thousand mile stare, you ever been in the shark tank that's a budget meeting?  Oh man.

 

Because your premise is right, except that the men in grey suits don't even deign to give a product line a warrior's death personally.  They'll just let product managers duke it out for their amusement, "I'm not taking any sides here, just make your case."  They're fighting for resources, and for GW, time in factory is their most finite resource now.

 

 

I took a minute to find this because the way they're treating Kill Team, where each has like a defined product life, so mirrors this shark tank approach.  It's like public swimming pools where they only allow people a certain amount of time in the pool...except the pool is a shark tank.  You know they're making this for a rotating product range.

 

But this has already been the case of Warhammer Underworlds (my favourite minis tbh) and Warcry (my favourite game).

 

Before I forget, this isn't artificial scarcity.  This is actual scarcity.  The scarcity comes from how much GW's 3 Factories can produce.

 

(I really want to thank the 30k players for raising the issue, you guys were like the spotters seeing shapes in the horizon.)

 

 

+++ Why 70% +++

 

 

I think I twig you now.  Before, it was more like Why So Expensive in a general sense.  But we're talking why 70% core gross margin.

 

Gross profit margin is a piece of Mathhammer that manufacturers in particular set some sort of metric on.

 

The older GW annual reports don't go into the same clarity (btw, GW's annual reports are pretty good, except for how they kinda hide their Operating Expenditures now), but I think it was around the time they converted most miniatures to plastic/Finecast.  I have a theory.

 

My theory is they looked at the biggest Western manufacturer of plastic toys you gotta build yourself: LEGO.  LEGO has a 70% gross profit margin.

 

It's one of those things if a new GW hire asks, "Why 70%," I reckon the answer would be, "It's always been that way."

 

Having set that figure, GW grew their business that way.  They justify opening (and closing) stores based on how much they can sell, and it's based on that profit margin, which products get the go-ahead, which projects get axed.  It's not a slush fund per se, but it does fund how they operate.

 

But practically, imagine having to explain to shareholders why you're choosing to make less profit for them.

 

However, by setting it so high, it might actually be a problem for GW, not just us.  It's so high, it's very sensitive to changes, like the ever-increase energy costs.  And those costs are never going away, like so they add Factory 4...oh, another Factory needs electricity to keep plastic at 200°C to 400°C.

 

What can drive this number down?  It won't be now, they can't even keep up with demand, they need a new Factory.  But it's like you say when 3D printing becomes as common as, I won't use hyperbole like sliced bread, but as common as computer modems used to be.

 

Actually, if you can stick around a minute, I gotta thank you for something else...

[darkhorse0607]

 

(I really want to thank the 30k players for raising the issue, you guys were like the spotters seeing shapes in the horizon.)

 

Cue my dead eye, lost in the distance, staring thinking back to 2018-2019 and all the Last Chance to Buy stuff that happened with Forgeworld and how changed the Heresy is now from what it was (modeling/book wise, don't come at me about the rules because I don't pay attention to that mumbo jumbo)

[N1SB]

 

IIRC the GW McDuck money pool also funds expansion. The factory upgrades are paid for with cash, not debt. This looks like it supports their stated strategy for long-term security and not being beholden to slash-and-cut accountants. Of course it only takes one ill-advised CEO to destroy the model but if the shareholders understand the strategy (they should, it's in the reports) they should prevent that.

 

Absolutely true, and you and Brother Idaho both reminded me to mention this:

 

We've paid for the new Factory 4 expansion, but we're not charged extra for it.  It's just natural growth.

 

In a previous News & Rumour page we talked about the Factory 4 expansion and I wanted to point out the price increase around May wasn't tacked on for that, rather it was just the increased costs of productions, which this annual report confirmed.  But why don't these evil capitalists do that?

 

Because there are rules that even Daemons have to follow, but I misattributed 1 detail...which I recently found out!

 

What makes capitalism...capitalism?  I mentioned it's capital assets like, say, a FACTORY.  Like some entrepreneur invented a new product, but needs a big factory to mass produce it to sell.  He gets all these investors to fund it, and in return, they get a SHARE of profits based on that piece of the big factory they own.

 

If YOU were to pay for that big factory, then YOU'd get a share of THEIR profits...that's called buying shares, literally.

 

That was me trying to philosophise, and I found out where I was wrong about that.  I thought it was from Adam Smith's time, during the Industrial Revolution, in England, what with all those factories and child labour.  It wasn't!  The idea of capitalism pre-dated that, and in another country (but I wasn't far off).

 

It was in the Netherlands, with Dutch traders.  It wasn't with factories, but ships, carrying spices and silks and wotnot.

 

Investors literally share in the profits from whatever those ships carry.  Basically the same concept, but Dune, spice melange.

 

I found this out from listening to NPR's Planet Money podcast.  It was part of this series.  I had to take a test:

 

 

I actually have my MBA diploma somewhere, it's on fancy goat skin, I'm somehow prouder of this than that.

Edited September 25 by N1SB

[alfred_the_great]

The Dutch coffee houses (and then the London coffee houses) also invented the futures market, and subsequently insurance and hedging strategies (at least in a western context).