[PREVIEW] 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 Wednesday at 05:21 PM 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.