Transcript ALL IN PRESENTATION TITLE CAPS

Financing Farming the
Scottish Way
Sandy Hay, Head of Agriculture, South &
East Scotland
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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Backing your ambition
in the agricultural sector.
“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 White
Managing Director of SME
Lloyds Banking Group.
“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 Naylor
Head of Agriculture
Lloyds Banking Group.
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Our Farming Ambassador.
One of Britain’s best known farmers, Adam Henson, has joined forces with Bank
of Scotland and Lloyds Bank as our farming ambassador.
“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 Henson
Cotswold Farmer and TV Presenter
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Your Bank of Scotland Head of
Agriculture, South & East Scotland
Background.
Qualifications.
Existing role.
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
HND Agriculture, East
of Scotland College of
Agriculture.
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.
Member of the
Chartered Institute of
Bankers in Scotland
Sandy Hay
07769 648387
[email protected]
Broxden House,
Lamberkine Drive,
Perth,
PH1 1RA
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Backing your ambition
with a regional agricultural team in South & East Scotland
Paul Healy
Relationship Director, Agriculture
M: 07736359431
E: [email protected]
Barry Watson
Relationship Manager, Agriculture
M: 077953 54802
E: [email protected]:
Julie McLaren
Relationship Manager, Agriculture
M: 07900 678072
E: [email protected]
Stewart McNaughton
Relationship Manager, Agriculture
M: 07900 678 002
E:[email protected]
Gavin Hay
Relationship Manager, Agriculture
M: 07920 765 670
E: [email protected]
Andrew McPhail
Relationship Manager, Agriculture
M: 07785 314672
E: [email protected]
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Specialist agriculture teams.
Our specialist agriculture managers understand how the farming industry operates and focus only on this sector. Based locally, they get out onfarm to see our customers’ businesses first hand, whatever the weather.
North and West Scotland
Donald MacDonald
Head of Agriculture
Mob:07769 648355
[email protected]
David Strachan
Relationship Director, Agriculture
Mob:07769 648335
[email protected]
Bill Murphy
Relationship Manager, Agriculture
Mob:07900 980722
[email protected]
Steven McGrath
Relationship Manager, Agriculture
Mob:07919 113234
[email protected]
Phil Reid
Relationship Director, Agriculture
Mob:07879 604436
[email protected]
Donald Stewart
Relationship Manager, Agriculture
Mob:07769 648485
[email protected]
Neil Boyle
Relationship Manager, Agriculture
Mob:07717 714318
[email protected]
Reasons to believe.
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
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Sector SWOT
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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.
200 000
Aggregate Balance Sheet for UK Agriculture
180 000
160 000
140 000
100 000
80 000
60 000
40 000
20 000
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£M
120 000
Year
Net Worth
Liabilities
Assets
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STRENGTHS
WEAKNESSES
• Well capitalised industry
• Price volatility and price takers
• Resilient Industry
• Cost rises / volatility
• Meets a fundamental human
need – to eat.
• Relatively easy access to
finance.
• Weather / climate change
outwith control of business
• Political / Regulatory changese.g. CAP reform
• Land is a limited resource.
• Climate change – and limited
water – may have a more
damaging impact on farm
outputs in parts of the world.
• 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 changese.g. CAP reform
• Strengthening £
• Increasing interest rates
• Capability of management?
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THREATS
•
Price and demand volatility
• Cost rises / volatility
• Weather / climate change
outwith control of business
• Political / Regulatory changese.g. CAP reform
• Strengthening £
• Increasing interest rates
• Supermarket sector changes
OPPORTUNITIES
• 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 values
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500
550
600
650
700
750
800
850
900
950
1000
1050
1100
1150
1200
1250
1300
1350
1400
1450
1500
1550
1600
1650
1700
1750
1800
1850
1900
1950
2000
2050
Population (millions)
The opportunity for Farming
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
Population 500 to 2007
Population projections 2008 to 2050
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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 management
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Prices and costs
• Price risk
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CEREALS VOLATILITY
Feed Wheat Futures Price – 1995 to 2014
Min
220
Max
Average
200
180
160
140
120
100
80
60
Source: HGCA / Andersons
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
40
1995
feed wheat futures price - £ per tonne
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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
180
7.7 t/Ha
10.5 t/Ha
Seed
- yield per hectare
- category spend per hectare
160
Fertiliser
140
120
£ per tonne
100
80
60
• Gap between best and
worst growing
• At forward prices range is
difference between profit
and loss
Sprays
Fuel
Labour~
Machinery*
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Other Power
Overheads
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Rent and
Finance
~ includes proprietor’s manual labour
* depreciation and repairs
0
Bottom 20%
• Differences due to
Top 20%
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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Finance
• Exchange rates
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THE IMPORTANCE OF CURRENCY
Farm Profit and € v £ Exchange Rate
550
0.95
Loam Farm Business Surplus (Real Terms)
Exchange Rate (Harvest Year Average)
500
0.90
450
350
0.80
300
250
0.75
200
0.70
150
100
0.65
50
0.60
0
Source: ECB / Andersons
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
0.55
1992
-50
Exchange Rate - €1 = £
0.85
1991
Business Surplus - £ per Ha
400
GBP:EUR Internal View
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
Source: Lloyds Banking Group International Financial Outlook December 2014
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Financial
• Exchange rates
• Interest rates
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UK Interest Rate Internal View
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 pickup in inflation in next 3 years’
Source: Lloyds Banking Group International Financial Outlook December 2014
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Financial
• Exchange rates
• Interest rates
• Lending
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Advances to Agriculture, Hunting, Forestry & Fishing
Scotland (BBA Definition)
1,500
1,450
1,400
1,350
1,300
1,250
Million Pounds
1,200
1,150
1,100
1,050
1,000
950
900
850
800
750
700
Quarter ended
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Backing your ambition
with lending and working capital solutions.
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.
Overdraft
Help 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.





Hire Purchase and Leasing
To 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 loans
Loans provided to eligible clients at a
discounted interest rate.




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.
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.
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.
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.
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People and Management
• Protect your main asset
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Wealth & Private Banking.
Supporting your personal financial wellbeing alongside your business finances.
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.
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.
Protect.
Protect your family and business with
professional and personal service and advice.
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).
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.
Manage.
Keep track of your personal finances
alongside your business finances.
Our 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.
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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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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
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regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 169628.
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