Inside Newsletters - Agriculture - March 2024

AGRICULTURE

Business Sentiment Index

Diving into the surveyed statistics of the Agriculture industry

Meet the Expert

Meet our industry specialist, Mike Foyle, Regional Sales Manager

Agriculture

I’m delighted to bring you the latest news from the Agriculture business. As always, it focuses on the current industry trends and how they are affecting SMEs, whilst also demonstrating the support Close Brothers Asset Finance has offered to businesses within the industry.

We start this issue on page 3 with a case study looking at Sherwood Forestry Ltd. We have worked closely with this company over the past 18 months, assisting them in funding several strategic equipment investments.

We pride ourselves on our ability to provide tailor-made finance agreements that are suitable for individual businesses. Our teams are specialists in their field, with many having worked within the Agriculture industry themselves.

By working closely with you to understand your business, our team of industry experts see the potential for growth and can provide straightforward asset finance options to support this.

Asset finance can help businesses of all sizes get the equipment, vehicles and machinery they need. All without having to pay the full price upfront. It can be used for both new and second-hand assets, or as a way of releasing the value from those you already own.

Common examples of the asset finance products we offer include Hire Purchase, Refinance/Capital Release, Finance Lease and Operating Lease.

To find out more about any of the finance options we have to offer and how they could work for your business, contact the team today.

On pages 4 and 5 you’ll find our Business Sentiment Index; our confidence tracker based on business owners’ views and thoughts on the industry. This update will look at how sentiment amongst Agriculture SMEs has continued to rise for the 3rd consecutive research period.

On page 6, we have a case study on D Lloyd Thomas & Co, a 356-acre former dairy farm in West Wales.

With increased demand for ENPlus certified wood pellets, the farm identified an expansion opportunity. We worked with the farm to offer a funding solution for the wood pellet cooling unit they required to capitalise on this new market.

Finally, on page 7 we have our ‘Meet the Expert’ feature. Mike Foyle is a Regional Sales Manager and industry expert within our Agriculture team. Here he discusses his predictions for the next 12 months across the industry and the favourite aspect of his role.

We hope you enjoy the read and as always, we look forward to working with you in the future.

Gareth Evans Head of Agriculture

Forestry company purchases a range of new equipment using Hire Purchase

Sherwood Forestry Ltd was founded in 2010 by Managing Director Toby Sherwood. Starting with a chainsaw, Toby's lifelong forestry background has helped grow the Hampshire based company into the specialist in heavy timber cutting it is today.

Upgrading the Fleet

In recent years, Sherwood Forestry Ltd has made several strategic equipment investments. These purchases have been facilitated with the help of Gareth Evans, Head of Agriculture for Close Brothers Asset Finance. Gareth has worked closely with the business guiding them through each of these finance agreements.

In the past 18 months, Gareth has worked with the business to provide two Hire Purchase agreements that helped them acquire a new enhanced digger and a new forwarder. Both these pieces of machinery are modern and efficient, ideal for timber cutting.

Harvesting Success

Sherwood Forestry Ltd was also able to acquire a John Deere harvester and a brand-new John Deere forwarder with the assistance of Close Brothers Asset

Finance. These vital assets was acquired through a comprehensive Hire Purchase agreement. By using Hire Purchase the business has been able to spread the cost of the new harvester and forwarder over fixed monthly repayments.

The business also took advantage of our VAT deferral product, which helped them delay the VAT payment on the new harvester and forwarder, meaning they could decide on how best to manage their cash flow.

A productive relationship

Using a tailored finance agreement Close Brothers Asset Finance has helped Sherwood Forestry Ltd to manage their cash flow effectively while investing in essential equipment to expand and grow their forestry business.

Gareth Evans commented: "Working closely with Sherwood Forestry Ltd has

been a rewarding experience. Our goal is to empower businesses to thrive, and seeing the positive impact of upgraded equipment on their operations is truly fulfilling. It's a testament to their dedication and the strength of our partnership and I look forward to working with Toby on further agreements in the future."

"From my early days with just a chainsaw, we've come a long way. Gareth and his team at Close Brothers Asset Finance have been instrumental in our growth, providing the means to invest in cutting-edge equipment. This partnership has not only expanded our capabilities but solidified our position in the forestry sector." Toby Sherwood, MD of Sherwood Forestry.

Sentiment among Agriculture firms continues to improve

Close Brothers Asset Finance’s Business Sentiment Index (BSI), which measures SME business confidence, has risen modestly for the third consecutive research period, with the Agriculture sector maintaining its upward trajectory.

BSI scores - June 2020 to May 2023

Appetite for investment

Agricultural firms’ appetite to invest remained steady at 76% (September 2023: 77%) and is still among the highest of the sectors we track.

Q Does your business plan to seek funding for business investment in the next 12 months?

Missed opportunities

Overall, the number of companies that have missed business opportunities because of a lack of available funding continued to fall and this latest figure is in line with the more normalised levels achieved for this question, last seen in May 2022.

However, at 46% (Sept 2023: 41%), the Agricultural sector’s responses are higher than those of the UK, as a whole.

Q Have you missed a business opportunity in the last 12 months, due to lack of available finance?

Economic outlook

Confidence in the macroeconomic outlook among SMEs – including those in Agriculture - has incrementally improved, achieving positivity for the first time in around two years, but it’s worth remembering that in November 2021, 75% of respondents were positive about the economy – by January 2024 this had reached just 46%, which is itself an improvement.

It’s worth noting that, contrary to many other sectors, those working in Agriculture are significantly more positive about the economy today than they were at the end of 2023.

Q How would you best describe your business's economic outlook for the coming 12 months?

Predicted business performance

On this measure, the Agriculture sector is also significantly more upbeat than it was in September 2023, with many more saying they hope to expand in the year ahead.

Q In general, how do you expect your business to perform over the next 12 months?

Our view

Gareth Evans, Head of Agriculture at Close Brothers’ Asset Finance, said:

“The recovery in confidence, albeit cautious, among the UK’s small and medium business owners continues, is clearly positive news.”

“However, our research reinforces the feedback we’re getting from the stakeholders in our key sectors that the recovery in sentiment very much depends which industry they operate in.”

“Our commitment to the SME community is that we will continue to work with firms through the cycle, providing expert advice and building long-term relationships, as we’ve always done.”

Case Study: West Wales farm expands with the purchase of a wood pellet cooling unit

D Lloyd Thomas & Co is a wellrespected 356-acre former dairy farm in West Wales, ran by father and son Rhys and David Thomas. The farm offers several services, including cattle rearing and supplying meat to supermarkets, a biomass heat processing plant and woodchip production.

An expansion opportunity

With escalating demand for ENPlus certified wood pellets, D Lloyd Thomas & Co identified an expansion opportunity.

To produce these certified wood pellets, the farm needed to purchase a wood pellet cooling unit and for help funding this purchase they approached Gareth Price, Regional Sales Manager for Close Brothers Asset Finance.

The perfect product

Gareth worked with Rhys and David to understand the farm and its needs.

Using his extensive experience, Gareth suggested refinancing some of the farms existing assets to release the necessary capital. Utilising a Sale & HP back product, D Lloyd Thomas & Co were able to refinance their existing assets, releasing the funds to help them purchase the wood pellet cooling unit.

A successful agreement

With the assistance of Gareth Price, the farm was able to acquire the unit. This strategic expansion not only enabled the farm to meet the surging demand for ENPlus certified wood pellets but also helped the farm to secure a prominent position in the market.

Gareth Price commented: "It was great to work with Rhys and David on this agreement. With this tailored package, the farm was able to purchase the wood pellet cooling unit, expanding their business

further. I look forward to working with them more in the future on further agreements."

"Gareth and the team at Close Brothers Asset Finance were a pleasure to work with. The funding solution not only helped us acquire the wood pellet cooling unit but also positioned us for sustained growth in meeting the market demand for ENPlus standard wood pellets. We would like to work with Close Brothers Asset Finance if we required finance in the future." Rhys James Thomas, D Lloyd Thomas & Co

Meet the Expert:

Mike Foyle Regional Sales Manager

Mike is a Regional Sales Manager and industry specialist within our Agriculture team. Here he tells us about the favourite part of his role and discusses his predictions for the industry in 2024.

Briefly tell us about your role and what you do…

I am a Regional Sales Manager in the newly formed Agriculture team at Close Brothers Asset Finance, the first task I undertook in this role was going out to see all my contacts in the South. I focused mainly on the dealer network I knew from my days working in the network and for large Original Equipment Manufacturers (OEM). I also visited many of the used traders I worked with selling part exchange machines. My main aim was for them to have Close Brothers Asset Finance in mind when looking for funding, especially when the partner finance company for the OEM said no. This gave me a good start and has now resulted in me approaching many other dealerships as my customer base grows.

Some of the questions the dealers ask are interesting; they don’t realise that Close Brothers Asset Finance is a bank. Some think we’re a broker, others say that they have heard of us but that we’re too expensive. After running a few numbers for them they realise that we’re very competitive.

Ultimately my role is making sure that when a dealer or customer needs finance, that they contact me first.

What was your journey to Close Brothers Asset Finance?

I joined Close Brothers Asset Finance having worked in the Agricultural sector all my life. I started on the family farm and then worked in the Agricultural machinery dealer network. I then moved onto working for OEMs such as Fendt, Massey Ferguson, McCormick and Krone. I started on the technical side then moved into sales over 20 years ago.

The finance side has always interested me so when I was approached by Close Brothers Asset Finance about an opportunity to join a new Agricultural team I was very interested.

What’s the favourite part of your role?

Talking to customers, pricing deals and winning them!

I especially enjoy being with customers; sitting down around the kitchen table on the farm discussing their requirements and proposing solutions that could suit them.

I also love keeping my hand in with what they are buying and what’s going on in the farming world.

Outside of work, how do you like to spend your time?

I’m a big Gloucester rugby fan, I have a season ticket and go to most home games which is not an easy watch at the moment!

I also enjoy going to my old local club Longlevens RFC, watching them play while catching up with old friends.

I can also be found on the golf course with my son who now beats me EVERY time!

Can you give us an example of a time where asset finance has helped one of your customers?

I had a customer looking to raise funds to help progress the build of his new farmyard. He wanted to buy all the gates, water troughs etc for a new building that had been built, plus lay more concrete in the yard.

I suggested we raised this money by re-financing machines he already owned. We eventually refinanced two machines and raised enough capital to enable him to do this.

What assets have you found are the most ‘in demand’ now?

There has always been a drive in farming to diversify due to the poor returns from milk, meat, corn etc. Currently, in the South we’re seeing an increase in farms seeking finance for glamping pods and shepherds’ huts etc. These are proving to be a good way for farms to earn a good return and at the same time sell some of their produce to the holiday makers in the accommodation.

What do you think 2024 holds for the Manufacturing industry?

The winter has been very wet and some crops have rotted in the ground because of this. Milk prices have dropped as have other commodities. With machinery being at its most expensive and interest rates as high as they’ve been for over a decade it’s very hard to see what will happen but this is nothing new for farmers who always find a way.

With our ability to offer competitive deals this could be where a lot of our business comes from in 2024, helping farmers through what could be another tough year.

Our teams are specialists in their fields and experts in asset finance. Contact Mike and the team today by visiting closeassetfinance.co.uk/enquiry-form