financing farming the scottish way sandy hay, head of agriculture, south & east scotland
TRANSCRIPT
Content
• Introduction
• Understanding the sector – SWOT
• Key Risks and Managing them
• Access to Finance
• Working together to get the best from WFRS
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“Our goal is to be the best bank for our clients. We’ll invest time to truly understand your business, and commit to building a relationship focused on what you want to achieve.”
Adrian WhiteManaging Director of SMELloyds Banking Group.
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Backing your ambition in the agricultural sector.
“With a wealth of experience and specialist farming and agricultural knowledge, our managers can respond quickly to your needs. We are dedicated to being the very best bank in the UK for Agricultural and Farming businesses.”
Andrew NaylorHead of AgricultureLloyds Banking Group.
Our Farming Ambassador.
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“I wouldn’t want to say there’s only one way of running a farm, but I believe that it’s hard to beat a local, knowledgeable, experienced and accessible bank manager.
And if that manager works for a bank which has demonstrated, year in, year out, that it is committed to the agricultural sector and is open for business, then I think the combination is unbeatable.”
Adam HensonCotswold Farmer and TV Presenter
One of Britain’s best known farmers, Adam Henson, has joined forces with Bank of Scotland and Lloyds Bank as our farming ambassador.
Background.
25 years experience with Bank of Scotland, mostly directly involved in supporting farming clients across Scotland as a relationship manager, and now Head of Agriculture
Qualifications.
HND Agriculture, East of Scotland College of Agriculture.
Member of the Chartered Institute of Bankers in Scotland
Existing role.
Responsibility for a team of dedicated relationship managers providing a face to face Banking service to over 1,700 farming clients in South and East of Scotland.
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Your Bank of Scotland Head of Agriculture, South & East Scotland
Sandy Hay07769 648387 [email protected] House,Lamberkine Drive,Perth, PH1 1RA
Barry WatsonRelationship Manager, Agriculture M: 077953 54802E: [email protected]:
Paul HealyRelationship Director, AgricultureM: 07736359431 E: [email protected]
Julie McLarenRelationship Manager, Agriculture M: 07900 678072E: [email protected]
Stewart McNaughtonRelationship Manager, AgricultureM: 07900 678 002 E:[email protected]
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Backing your ambition with a regional agricultural team in South & East Scotland
Andrew McPhail Relationship Manager, Agriculture M: 07785 314672E: [email protected]
Gavin Hay Relationship Manager, Agriculture M: 07920 765 670E: [email protected]
Specialist agriculture teams.
Our specialist agriculture managers understand how the farming industry operates and focus only on this sector. Based locally, they get out on-farm to see our customers’ businesses first hand, whatever the weather.
Donald MacDonaldHead of AgricultureMob:07769 [email protected]
David StrachanRelationship Director, AgricultureMob:07769 [email protected]
Bill MurphyRelationship Manager, AgricultureMob:07900 [email protected]
Steven McGrathRelationship Manager, AgricultureMob:07919 [email protected]
Phil ReidRelationship Director, AgricultureMob:07879 [email protected]
Donald StewartRelationship Manager, AgricultureMob:07769 [email protected]
Neil BoyleRelationship Manager, AgricultureMob:07717 [email protected]
North and West Scotland
Reasons to believe.
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Why Bank of Scotland is the best bank for you.
Our agricultural managers only support farms, farm based renewables and rural businesses.
Our managers have agricultural knowledge and experience to support your farm businesses from day one.
We're open for business, ready to lend and keen to support businesses like yours.
We have proven our commitment to the agricultural sector with our continued support through challenging times.
We will pro-actively visit you and your farm to understand your business first hand.
Our locally based specialist managers are available at your farm gate and have support teams in nearby towns to assist with your day-to-day banking.
We publish contact details of all our Agricultural Relationship Managers, meaning no call centres for you to navigate.
Farmers value our service. More than 2500 farmers moved their business to us between 2011-14*.
* Lloyds Banking Group Agriculture switchers
STRENGTHS WEAKNESSES
• Well capitalised industry
• Resilient Industry
• The people
• Meets a fundamental human need – to eat.
• Quality produce.
• Relatively easy access to finance.
• Land is a limited resource.
• Climate change and limited water?
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Agriculture – Strong Sector.
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Aggregate Balance Sheet for UK Agriculture
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200 000
Year
£M
Net Worth Liabilities Assets
STRENGTHS WEAKNESSES
• Well capitalised industry
• Resilient Industry
• Meets a fundamental human need – to eat.
• Relatively easy access to finance.
• Land is a limited resource.
• Climate change – and limited water – may have a more damaging impact on farm outputs in parts of the world.
• Price volatility and price takers
• Cost rises / volatility
• Weather / climate change outwith control of business
• Political / Regulatory changes- e.g. CAP reform
• A lot of issues outwith the farmers control.
• Management resource?
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THREATS OPPORTUNITIES
• Price and demand volatility
• Cost rises / volatility
• Weather / climate change -outwith control of business
• Political / Regulatory changes- e.g. CAP reform
• Strengthening £
• Increasing interest rates
• Capability of management?
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THREATS OPPORTUNITIES
• Price and demand volatility
• Cost rises / volatility
• Weather / climate change outwith control of business
• Political / Regulatory changes- e.g. CAP reform
• Strengthening £
• Increasing interest rates
• Supermarket sector changes
• Potential to improve core business performance.
• New income sources – e.g. renewable energy or other diversifications
• Food Security – population growth and Rising living standards in developing nations
• Non-food products will increasingly compete for land
• Climate change – and limited water – will cut farm outputs in parts of the world.
• Asset values14
The opportunity for Farming
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illio
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Population 500 to 2007 Population projections 2008 to 2050
Success Factors include
o Management
• Efficiency of production and cost management
• Market focused and price management
• Entrepreneurial / Developing new income streams / diversification
• Adaptability and resilience
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Risks in Farming
• Prices and costs
• Output / yields
• Political and Regulatory
• Financial
• People and management17
CEREALS VOLATILITY
Feed Wheat Futures Price – 1995 to 201419
95
1996
1997
1998
1999
2000
2001
2002
2003
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2005
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2007
2008
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2014
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Average
feed
wh
eat
futu
res
pri
ce -
£ p
er t
onn
e
Source: HGCA / Andersons
Prices and costs
• Managing price risk
• Cost risk and management
• Arable sector in cyclical downturn
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RANGE IN PERFORMANCE
Feed Wheat Range Cost of Production Harvest 2014
Bottom 20% Top 20%0
20
40
60
80
100
120
140
160
180
£ p
er t
onn
e
• Differences due to - yield per hectare- category spend per hectare
• Gap between best and worst growing
• At forward prices range is difference between profit and loss
~ includes proprietor’s manual labour* depreciation and repairs
Rent and Finance
Other Power
Machinery*
Labour~
Fuel
Sprays
Fertiliser
Seed
Overheads
10.5 t/Ha7.7 t/Ha
Output / Yield
• Weather and climate change
• Technology / innovation – in crops and crop management
• Quality of land
• Diseases / pests
• Manage what you can manage
• Recognise where someone else’s skills benefit your business.
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Political / Regulatory
• Impact of current CAP reform
• Market intervention often intended to reduce or mitigate risks.
• Support can have a huge impact on investment.
• Uncertainty can damage investment.
• Potential to impact on asset values
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THE IMPORTANCE OF CURRENCY
Farm Profit and € v £ Exchange Rate19
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2015
-50
0
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0.55
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0.65
0.70
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0.95Loam Farm Business Surplus (Real Terms)Exchange Rate (Harvest Year Average)
Bu
sin
ess
Su
rplu
s -
£ p
er H
a
Exc
han
ge R
ate
- €1
= £
Source: ECB / Andersons
GBP:EUR Internal View
26Source: Lloyds Banking Group International Financial Outlook December 2014
Main Drivers• Extremely low inflation figures from
Eurozone has led to discussions around potential Eurozone Quantitative Easing
• Political concerns around Greece with snap elections at end of January
• Risk to UK growth outlook centres around general election
• UK continues to import more than it exports, putting pressure on GBP
UK Interest Rate Internal View
28Source: Lloyds Banking Group International Financial Outlook December 2014
Main Drivers• Strong UK Data although some sign of
softening• Two members of the Monetary Policy
committee voting for immediate interest rate rises
• Continuing improvement in the employment figures and signs of real wage growth
• Inflation remains below the Bank of England’s 2% target, is forecast to drop below 1% over next few months and MPC see ‘little prospect of material pick-up in inflation in next 3 years’
Advances to Agriculture, Hunting, Forestry & FishingScotland (BBA Definition)
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Aug-04
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700
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1,000
1,050
1,100
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1,17
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143
1,16
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136
1,20
41,
217
1,17
41,
184 1,
232
1,25
51,
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1,14
51,
242
1,22
91,
104
1,16
0 1,21
21,
208
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1,17
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0
Quarter ended
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un
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Backing your ambition with lending and working capital solutions.
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Whatever you need funding for, we have a range of lending products to meet your needs.
1%discount to all SMEs for the life of their loans, commercial mortgages and hire purchase applications through the Funding for Lending Scheme (FLS).
Lending Product. Key Benefits.
OverdraftHelp ensure that extra funds are available when you need them.
Short-term borrowing to ease your cash flow. Only pay interest on the funds you use.
Fixed and Variable Rate Loans*Flexible rates and terms to suit your needs.
Terms of up to 25 years. Interest only repayment option available. Competitive rates and flexible terms. Options for maximum break costs on fixed rate loans*. Interest rate risk management support.
Hire Purchase and LeasingTo fund assets including robotic milking machine, farm equipment, tractors etc.
A cost effective alternative providing fast access to working capital.
Free up funds tied up in inventory, plant and machinery.
European Investment Bank term loansLoans provided to eligible clients at a discounted interest rate.
Minimum loan of £25,500. Loan terms from 2 to 25 years. Fixed or variable rate terms available. Loan must be used for the purchase, renovation or
extension of tangible assets other than land.
All lending is subject to a satisfactory credit assessment and we will need your permission to carry out a credit check on you and your business. You should not apply for an amount that you can not comfortably afford to repay now and in the future to avoid the possibility of legal action.*There is always a possibility that interest rates may go down leaving a fixed rate loan at a higher level compared to a variable rate loan. However, if interest rates rise, a fixed rate loan will remain at the same rate.
Any property given as security which may include your home, may be repossessed if you do not keep up repayments on your mortgage or other debts secured on it.
Specialist services.Financial advice where required, to help
you manage and grow your personal and business wealth, and plan for you and
your business’ future. This includes Will writing and ensuring you have the correct
succession plans in place.
Supporting your personal financial wellbeing alongside your business finances.
Wealth & Private Banking.
Regulated advice.We provide a range of life, pensions and
investment solutions for personal and business financial planning. These are
aimed at supporting the long-term financial planning of you and your farming
business, and include utilising available tax allowances and estate planning.
Private Banking.We offer our clients a flexible way of banking. Private Banking and Advice Managers provide a combination of service and comprehensive solutions across banking, investment management, deposits, estate administration and tax services, to wealth eligible customers in the UK (at least £250,000 in savings and investments or sole annual income of at least £100,000).
Protect.Protect your family and business with
professional and personal service and advice.
Manage.Keep track of your personal finances alongside your business finances.
Personal.Service from a Private Banking and Advice Manager who works closely with your specialist Agricultural Relationship Manager to understand your needs and develop a personalised plan to help you meet your short and long-term financial goals.
33Our products and services have individual fees, charges, terms and conditions. As with all professional advice, there will be a charge for our services. We recognise that financial advice may not be for everyone so before you commit to any charges we will ensure you understand the basis of our advice and the level of charges that will apply.
People and Management
• Protect your main assets
• What are the medium and long-term objectives of the business?
• Understand costs, plan and budget.
• Does the business have the management resource to achieve its plans?
• Manage what you can manage and recognise when additional management resource and skills are needed.
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Manage what you can manage & think about what support you need
• Doing the same thing over and over again and expecting different results - Definition of insanity
• It is probably unlikely that you will improve 1 thing by 100%, but it is definitely possible to improve 100 things by 1%- Anon
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Working together to get the best from WFRS
• Recognition & Access - Identify customers requiring additional support
• Fact Finding - Gather information and Understand the Issues
• Decision - Identify potential solutions/ Agree a Solution
• Communication - Record and monitor progress
• Timeliness - Record and Monitor Progress
• Encouraging customers to engage your professional advisors as part of your successful business team
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Important information.
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bankofscotland.co.uk/business This presentation is for information purposes only. It is intended as a summary only and whilst it contains some information about the potential risks and benefits of various products and services it should not of itself form the basis for any investment decision. Whilst Bank of Scotland plc has exercised reasonable care in preparing this presentation and any views or information expressed or presented are based on sources it believes to be accurate and reliable, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your Bank of Scotland relationship team for clarification.
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