(AJ):
Mm, yes, it’s one of our current projects. There’s always a new project, isn’t there? Last year we were supply chain analysts, you know, we were assessing how many ships were moored off the coast of LA. We were looking at blockages and freight rates. We’re not doing that anymore this year. We’ve been looking at, you know, how energy intensive our holdings are and then, importantly, to what extent are they hedged? So, we’ll ask company management teams, we’ll go through their results to work out how much energy they use, how big a part of their ‘cost of goods sold’ energy is. But really importantly is the hedging. And this is going to be game changing, maybe not for 2022 numbers, not for this year, because we haven’t, you know, we haven’t really seen the energy price spike embedded itself yet. But for 2023 numbers… and I think expectations are all over the place still.
But we don’t own tons of commodity companies, you know, which are the most energy intense businesses on the listed market. So, actually the energy intensity of the portfolio is quite low. Melrose would probably be the highest – they make engine parts for cars and planes.
But yes, this point about hedging is really interesting. One of our property holdings, Sirius Real Estate, they rent out space to commercial tenants in Germany and the UK, so office space, light industrial, self-storage, things like that. And they actually, in 2020, they secured fixed gas supplies, not just for them as a company for their personal use, but for their tenants. So, the whole business model is around renting out space to their tenants. If you are a Sirius tenant, you get the fixed gas supply that they organised in 2020 – fixed until December 2023. So, it makes taking space in a Sirius building, you know, incredibly appealing. And that’s one of the reasons why we would be excited about Sirius. They had very strong results this week. It’s an interesting sign-post. If they’re doing things like that in the business, then, you know, what else could they be doing? In what other ways are they making the business more resilient? It’s a great sign-post.
The other thing we’ve put back on the list, thinking about resilience is debt, of course. You know, we’ve had such low interest rates for many, many years now. Lots of analysts, I think, have probably given up looking at looking at debt levels. So, we’ve been going through the portfolio again, looking at debt levels, but also who’s fixed their costs and who is exposed to rising interest costs.
I don’t know about you, but every time I talk to friends at the moment, we talk about who’s got a fixed or floating mortgage and when people roll off. So, it’s the same with our companies. We need to work out who’s fixed and who’s floating. Again, the debt intensity of our holdings is quite low, so half of our positions are actually in net cash. So, that’s very comforting to us.
You asked about gas shortages. Yes, I mean, never say never, but the warnings around those shortages made last week, it felt kind of more like doom mongering, this doom mongering rhetoric that we seem to have become a little bit addicted to in the UK. And maybe a warning, you know, warning shot across the bows for government.
But actually, our French suppliers, our French partners, made some very soothing comments over the weekend. We’ve seen a lot less air time kind of devoted to those over the weekend. So, you know, again, we’ll be looking at that, at the possibility of energy rationing. But the UK doesn’t have a huge manufacturing base in this country anymore. It’s not, you know, it’s not Germany or similar.
(SS):
And as you pointed out there, there is a lot of doom and gloom at the moment. There doesn’t seem to be a lot positive to talk about. Can you give us anything positive about the UK market as we wrap up?