Inside Newsletter - Manufacturing

MANUFACTURING

Business Sentiment Index

Diving into the surveyed statistics of the Manufacturing industry

3D printer accelerates engineering firm’s growth

A Finance For Industry (FFI) funded 3D printer for Incremental Engineering

2023 Issue 1

Welcome to Inside Manufacturing

I’m delighted to bring you the latest news from the Manufacturing business. As always, it focuses on the current issues affecting Manufacturing SMEs, whilst also showcasing how Close Brothers Asset Finance has supported businesses within the industry and will continue to do so.

We start this issue, on page 3 with a case study looking at Donaldson Timber Systems. Close Brothers Asset Finance were able to put together a finance package for a new floor manufacturing production line, helping the business’s expansion plans.

We pride ourselves on not only knowing about asset finance and being able to tailor suitable financial solutions, but our specialists have also worked within the industry themselves.

By working closely with businesses, our team of industry experts see the potential for growth and provide straightforward asset finance solutions to support this.

Asset finance is an alternative form of funding used by businesses to obtain the equipment they need to grow. In effect, it utilises the residual value in an asset to either pay for or put down a deposit on another piece of kit. Our experts consider all aspects of a customer’s business and then recommend asset finance solutions that best suit their cash flow and long-term goals.

Common examples of the asset finance products we offer are Hire Purchase, Refinancing (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 by visiting closeasset.co.uk/enquiry-form

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 confidence has fallen across the

Manufacturing and Engineering sector, in part due to the rising cost of doing business.

On page 6 we have a case study featuring Incremental Engineering, the firm has doubled in size since acquiring a new 3D printer, funded by Finance for Industry.

Finally, on page 7 we have our ‘Meet the Expert’ feature. Charles Clist recently joined Close Brothers as a Trainee Area Sales Manager within our Manufacturing team. In this edition you can find out about his journey to Close Brothers and the favourite part of his role.

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

Ian Barker Managing Director, Manufacturing

Sustainability and what it means for Close Brothers

Acting sustainably isn’t a choice – it’s imperative. At Close Brothers, behaving responsibly is integral to our actions and decision-making and this is reflected across sustainability objectives we set ourselves, including:

• Supporting our customers, clients and partners in the transition towards more sustainable practices

• Reducing our impact on the environment and responding to the threats and opportunities of climate change

We are committed to meeting the goals of the Paris Agreement to achieve net zero by 2050. We are conscious that the emissions impact of the assets and sectors that we finance can contribute to climate change, and as a financial services provider we recognise the role we have to play in supporting the transition to a more sustainable future. This includes supporting our customers and partners with their own transition journeys.

Our efforts to reduce the impact of our operations on the environment continue at pace, and we strive to take actions that make a positive contribution to the world around us. Careful consideration of environmental factors and potential risks now plays an integral role in the actions we take, alongside thoughtful evaluation of where opportunities may arise for us to make a meaningful difference through our business decisions.

Today, our Renewable Energy team has funded around £1.3bn of onshore wind, solar and battery storage projects. This figure doesn’t include the smaller-scale projects, which account for another significant sum, making us an important player in the renewable finance sector.

Case Study: Funding secured for new Manufacturing Floor and Wall Line

Donaldson Timber Systems is the leading UK offsite timber systems manufacturer, specialising in the supply and construction of sustainable state-of-the-art open and close panel timber frames. The business operates across the United Kingdom with factories in Scotland and Oxford. Donaldson Timber Systems supply their product across the supply chain into private housing, affordable housing and commercial buildings.

A desire for growth

Rod Allan, Managing Director of Donaldson Timber Systems got in touch with Molly Hill, Regional Sales Manager with Close Brothers Asset Finance to discuss funding options to help with their ambitious growth plans.

For the business to continue with their growth plans, they needed to upgrade and develop their manufacturing capability at their factory in Witney, Oxford. The growth project was devised over a 5-year period, which included a new floor manufacturing production line and wall line. These were to be delivered in succession from a specialist manufacturer in Sweden.

The new machinery investment has allowed for a new automated process within the factory, increased capacity volumes and gives the factory the ability to produce more precise and precision engineering during the

manufacturing process. It will also allow the factory to become a 24-hour operation so that in peak periods, the business is able to meet the demands of their clients.

The perfect agreement

Molly put together a comprehensive finance package for Donaldson Timber Systems to acquire the new machinery which totalled circa £10 million. This involved a short-term loan facility which was used to pay the supplier prior to releasing the equipment from the factory in Sweden ahead of its arrival in the UK. Upon delivery, the manufacturing lines were funded using a Hire Purchase agreement.

The Hire Purchase agreement has allowed Donaldson Timber Systems to secure the new assets whilst being able to pay for them over a set period with manageable monthly payments which fall in line with their cash

flow. This will support the company’s growth plans and boost their turnover.

Molly commented: “It was great to work on such a large project with Rod and the wider team at Donaldson Timber Systems. Since our initial meeting, this deal has been 3 years in the making which makes it gratifying to finally be able to see the kit in the factory. I look forward to seeing Donaldson grow further in the future with continued support from us.”

“Molly was a great help and understood our needs, she was there every step of the way to ensure we got the agreement we needed to secure our growth plans. We look forward to working with Molly and Close Brothers Asset Finance again in the future.”

Rod Allan, Managing Director at Donaldson Timber Systems

continues

to

fall across all sectors, including Manufacturing & Engineering

Business sentiment across all key sectors has continued to subside – although not as dramatically as was seen between March and April last year.

Our data reveals that over the past year, positivity has fallen significantly from record highs to levels not seen since the first lockdown – and what we are seeing for the first time is the sectors aligning around a smaller spread of figures than we usually see; it’s clear the pain of the rising cost of doing business, recession, interest rate rises, energy prices and inflation is being felt across all industries, not only Manufacturing & Engineering.

According to our research, Manufacturing & Engineering business owners’ top five concerns were:

1: Energy costs

2: Inflation

3: Interest rates

4: Materials supply

5: Cash flow

Business sentiment index – December 2022

How the sectors have fared

After the highs of 12 months ago, the Manufacturing & Engineering sector – as in July 2022 - again saw the most significant fall in sentiment and is now at a lower level than Transport and Haulage for the first time since April 2020, just a month after the first lockdowns were announced.

confidence

Appetite for investment

The one positive is that, overall, over four in every five Manufacturing & Engineering firms are still looking to seek funding for investment in the next 12 months, up from July’s 78%. This is reflected across all key sectors, with the most notable rise coming in Services, where the number of firms planning to seek funding has risen by 32%.

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

Missed opportunities

The number of Manufacturing & Engineering companies missing business opportunities due to a lack of available finance continues to rise, with nearly half (45%) admitting to having lost out.

With pressure on cash flow, most ambitious businesses rely on additional finance to enable them to invest in growth.

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

Economic outlook

Business owners are, unsurprisingly, more negative than positive about the macro-economic outlook and it’s this indicator that has contributed most to the decline in the BSI; for example, in November 2021 83% of Manufacturing & Engineering respondents were positive about the economy – by December 2022 this has fallen to 38%.

Confident that the economy will grow

Concerned that the economy will slow down

I don't think there will be a significant change in the economy

Predicted business performance

Predictions about future business performance in the Manufacturing & Engineering sector – perhaps surprisingly – were more positive than six months prior.

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

Score calculation

The BSI is based on the views of 900 business owners and senior members of the UK’s business community and calculated from data charting their:

• Appetite for investment in their business in the coming 12 months

• Access to finance and whether they’ve missed a business opportunity through lack of available finance

• Views about the UK’s economic outlook

• Thoughts on their likely performance in the coming 12 months

Case Study: 3D printer accelerates engineering firm’s growth

A Finance For Industry (FFI) funded 3D printer (HP Jet Fusion 5210) for Incremental Engineering has seen the firm double in size since taking possession of the machine in July 2022, with further plans to expand on the horizon.

According to the West Sussex-based firm’s Managing Director and founder, Jerry Sutton, the machine allows the manufacture of MJF (multi-jet fusion) parts to SMEs who don’t have the technological manufacturing capability in-house.

“What it’s allowed us to do is double our capacity in a very short space of time,” explained Jerry. “After starting the business in 2018 with a few small printers we very quickly outgrew the demand placed on us by our customers and needed to increase our output.

“The HP 3D printer has really accelerated our expansion, but despite this, we are running at 100% capacity almost 100% of the time.”

Jerry said the support he’s received from FFI has been ‘brilliant’, adding: “I now see the benefit of asset finance – it’s not something I’d have considered in the past, but its flexibility has been a real eye-opener.

“And having a funder that, like us, prefers to work in partnership with its customers, really suits us because we can draw on their expert knowledge and know that they will advise and challenge, when necessary.”

Max O’Shea, Area Sales Manager, Finance for Industry: “We’ve been working with Incremental Engineering since before the pandemic and have been delighted to watch them grow as demand for their services has increased.

“This Hire Purchase deal over 48 months is typical of the type of transaction we use to help businesses across the UK reach their potential, and I can’t wait to see how Incremental Engineering develops in the months and years ahead – we have exciting developments in the pipeline.”

Jerry also paid tribute to the role Matsuura Machinery played, who supplied the machine: “Matsuura is an incredible reseller and their customer service is outstanding, including doing jobs on our behalf when we

encountered a problem, which for a new start-up is an invaluable service.

“As with FFI, Matsuura really support the growth of their customers well beyond delivery of the assets.”

Joseph Bellis, Additive Manufacturing Sales Manager at Matsuura Machinery Ltd commented: “It’s been a pleasure working with Jerry and Incremental Engineering over the last few years. He has gone from strength to strength, building a business known for its quality and engineering know-how, fully utilising the manufacturing capabilities of the HP MJF technology to create value added parts.

“At Matsuura we have a 'hands-on' collaborative approach to working with all our customers, supporting them from the outset and throughout their journey. FFI has the same ethos, working closely with their customers to understand the technology and provide the best funding solutions available.”

Meet the Expert:

Charles Clist Trainee Area Sales Manager

Charles Clist recently joined Close Brothers as a Trainee Area Sales Manager within our Manufacturing team. Here he shares what his current role involves and what it is about working at Close Brothers that is different.

Tell us about your role and your current responsibilities…

I joined Close Brothers in September 2022 as a Trainee Area Sales Manager in the Manufacturing Division. My role is centred around providing a flexible approach to funding by giving businesses access to the assets they need to perform and grow, without compromising their cash reserves. My current responsibilities involve spending a large proportion of time on the road visiting new and existing customers in the South West of England. When meeting with customers, I look to understand the worth within their business and identify how to access this value without impacting cash flow. It’s great because I get the opportunity to have amazing conversations with business owners about their direction for the future and formulate solutions to their current problems. It’s a bit like problem solving which I find extremely satisfying.

What was your journey to Close Brothers?

I graduated from Cardiff University in 2022 with a goal of one day working in the finance industry. I think my background of playing team sports and being a competitive person led me toward aspiring to work in a sales role. I applied to Close Brothers and thankfully they offered me a position within the Asset

Finance & Leasing Division. It was an amazing opportunity to learn the ropes within the finance industry and I haven’t looked back.

What is it about working for Close Brothers that is different?

For me, I think it’s the people at Close Brothers that have made it such an incredible place to work. In my first few months starting the job it was a very steep learning curve, but I was overwhelmed with the support I received. I thought that due to not having a background in finance, it would be very easy to experience imposter syndrome. However, it was quite the opposite. From the outset I have experienced nothing but support, not just from my team, but colleagues across all divisions of Close Brothers. Additionally, I have a line manager who I speak to most days and can go to for anything; he has been pivotal in my career progression in the short time I’ve been working at Close Brothers.

What’s your favourite part of your role?

Being able to fund the newest machinery which the customer didn’t think they could afford, or extract equity from the assets on the customers’ existing balance sheet and use that value elsewhere is something that opens doors and opportunities for a company. I think being able to help facilitate the growth of a SME or assist a customer

out of a difficult financial situation provides an immense sense of fulfilment that I haven’t really experienced before.

Give us an example of how you’ve helped a customer…

I was recently able to support a first-tier aerospace subcontractor by refinancing some of their unencumbered machinery. The company needed to purchase a year’s worth of expensive material in advance; which would have put an unreasonable strain on their cash reserves. The refinance facility allowed them to release the value in their existing assets whilst supporting their growth aspirations.

Tell us one thing people may not know about you…

Whilst growing up, I played both cricket and rugby to a high level. During my time at Millfield School, I broke the school record for the highest individual batting score of 254 in a 50-over match which racked up an innings total score of 492 - the fifth highest total of all time in the UK.

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