strategy succession structure · 2019-06-20 · review? • this is where machinery syndicates beat...
TRANSCRIPT
LFB
RURAL BUSINESS SURVEY
STRATEGY SUCCESSION STRUCTURE
Gary Markham
Director Land Family Business
Rural Tax Advisers and Accountants
Who are we?
• Grant Thornton
• Churchgates
What do we do?
• Farms and Estates
• Strategic Tax
• Succession
• Family
• Mediation
• Annual accounts
RURAL BUSINESS SURVEY 2017 RESULTS
Top 25% Average
Arable Gross Output 470 417
Arable Gross Margin 297 239
Contract Farming Income 157
Total Labour and Machinery 194 181
Profit before Rent and Finance 47 (12)
Basic Payment Scheme 97 97
Rural Business Survey
Key Points
Profit from Arable Farming
• Top 25% £ 47
• Average £ (12)
• Bottom £ (43)
Rural Business Profit
• Top 25% £232
• Average £158
• Bottom £ 80
Rural Business Survey
Key Points
Rural Business Profit excluding BPS
• Top 25% £135
• Average £61
• Bottom £ (9)
After Rent & Finance
• Top 25% £45
• Average £ (1)
• Bottom £ (51)
Rural Business Survey
Key Points
Margin from contract farming
• Top 25% - £42
• Average £ (24) £ (53)
• Bottom £4 £ (69)
Ratio of contract farming to in hand arable
• Top 25% - 31%
• Average 54% 61%
• Bottom 47% 130%
Where are we now?
• On a treadmill of being locked
into a system
• Where labour and machinery
must be kept working and every
productive area cropped
• Yield is king
• Dash for land grab – key money
paid
• Spreading fixed costs – or not?
• Supported by EU payments
Top 25% squeeze more output from inputs
Top 25% Average
470 417
173 177
• Significant differences in labour and machinery costs
• Number one culprit – depreciation – directly
proportional to investment in machinery
• Depreciation and contract/hire can be termed
“access to mechanisation”
• Top 25% £96 per acre
• Syndicates £49 per acre
• Total labour and machinery costs are similar to inputs
- where is the most scrutiny of strategy and external
review?
• This is where Machinery Syndicates beat Owner
Managed Businesses
- scrutiny
- accountability
FARMING AFTER BREXIT
Four businesses:
20% 30% 35% 15%
Cropping share farming
Separate business
machinery and labour
cost centre
Machinery syndicates
Average
£/Acre £/Acre
2017 Harvest
Top 25%
£/Acre £/Acre
2017 Harvest
Average
£/Acre £/Acre
Labour
Labour recharges 35 37 26
Management fees 4 - -
39 37 26
Machinery
Depreciation 30 66 64
Spares and repairs 20 23 23
Contracting and hire 19 30 38
Fuel 20 29 22
Other machinery 7 9 9
96 157 155
Labour and Machinery 135 194 181
The answers
- No-till/min-till?
- Grant aid?
- Machinery syndicates?
Share Farming Structure
• Forestry
• Farm woodland
• E.L.M
• Collaboration of several farms
• Public goods and natural capital
• Carbon offsetting
• Housing development
environmental offsetting
LFB
Thank you
Gary Markham
©2018 Churchgates Land Family Business Limited. All rights reserved.
This publication has been prepared only as a guide.
No responsibility can be accepted by us for loss occasioned to any person acting or
refraining from acting as a result of any material in this publication.
www.landfamilybusiness.co.uk
ADDING VALUE THROUGH NATURAL CAPITAL
“OPPORTUNITIES FOR FARMERS AND LANDOWNERS”
Annual Rural Business Survey Seminar
4th December 2018
John Lockhart FRICS FBIAC CEnv
Chairman, Lockhart Garratt Ltd
Arboriculture
Focusing on the
management and
maintenance of
trees
Ecology
Ecological
solutions to
support the
planning process
and planning
applications
Forestry & Woodland Management
Managing over
8,000 ha of
woodland from
creation to
harvesting
Landscape & Green Infrastructure
Land
management,
landscape delivery
and green
infrastructure
support
Minerals & Waste Restoration
Informed
landscape,
restoration and
environmental
management
services
Lockhart Garratt LtdEnvironmental Planning & Forestry Consultants
Celebrating 20 Years
Soils Survey & Advice
Surveying soil
resource to
inform planning
applications, and
final land use for
restoration
design.
PRESENTATION STRUCTURE
• What is Natural Capital?
• Why is it important?
• What is it worth?
• Why now?
• Opportunity or Threat?
• Roles for Farmers and Landowners
• Case Studies
• Actions / Next Steps
WHAT IS NATURAL CAPITAL?
Natural capital is our ‘stock’ of waters, land, air, species, minerals and oceans.
Natural capital underpins all other types of capital – manufactured, human and social – and is the foundation on which our economy, society and prosperity is built.
http://www.naturalcapitalcommittee.org/
Natural Capital Committee
NATURAL CAPITAL & ECOSYSTEM SERVICES
Natural Capital is the stock of natural assets, for example, habitats, soils, water and biodiversity.
The benefits that people derive from the natural environment (from Natural Capital) are known as Ecosystem Services.
Cultural
Non-material benefits people
obtain from ecosystems
WHY IS IT IMPORTANT?
State of Natural Capital Report 2017
Natural Capital Committee
• England’s Natural Capital - in long term decline
• Costly to our wellbeing and the economy
Safeguarding of Natural Capital essential to maintain Economic Growth
WHY IS IT IMPORTANT?
“Farmers may not like it but there is now overwhelming evidence that the way we farm is not sustainable environmentally”
UK Agency: Head of Rural Consultancy
“I’m not running for sainthood. I just happen to think that in life we need to be a little like the farmer, who puts back into the soil what he takes out.”
Paul Newman, Actor
UK 25 YEAR ENVIRONMENT PLAN
ANOTHER CROP
“ There is a another crop that Farmers and Landowners provide and this is in the form of the environmental benefits that their land delivers. In particular heritage, landscape, health and wellbeing, fresh water and clean air.
The Basic Payment scheme has dampened productivity and not paid for these Public Goods. GOVERNMENT NOW OWES FARMERS”
Michael Gove, CLA Rural Business Conference 2018
A GREEN FUTURE:OUR 25 YEAR PLAN TO IMPROVE THE
ENVIRONMENT
Chapter 1: Using and Managing Land Sustainably
1. Environmental Nett Gain
2. Improving management of land and incentives• New environmental land management system
• New farming rules for water
• Working with farmers to use fertilisers efficiently
• Reducing environmental impacts of pesticides
3. Improving Soils Health and Peatlands
• Better information on soil health
• Protection of peatlands
4. Focus on Woodlands
• New Northern Forest
• Large scale woodland creation
• National Tree Champion
5. Reducing Risks from Flooding and Coastal Erosion
• Expand use of Natural flood management solutions
• SUDs
• Property resilience
Chapter 2: Recovering Nature and Enhancing the Beauty of Landscapes
Chapter 3: Connecting People with the Environment to Improve Health and Wellbeing
AGRICULTURAL / LAND MANAGEMENT POLICY
Health and Harmony: the future for food, farming and the environment in a Green Brexit
• Public Payments for Public Goods
Agriculture Bill 2018
• Direct Payments phased out; 7yr transition
• Environmental Land Management Scheme (ELMS)
• Productivity/Risk Management/R&D Collaboration/Animal Welfare
WHAT IS IT WORTH?
Value of UK Natural Capital
£ Billion; 2015 prices
Source ONS 2018
OPPORTUNITY OR THREAT?
Opportunities
• New farming systems
• Innovative cropping
• Flood alleviation
• Soil protection
• Water quality
• Carbon Sequestration
• Public access
• Public engagement
• Woodland creation
• Biodiversity offsetting and habitat creation
• Green Infrastructure
• Technology
• Mapping and monitoring
• Market development
Threats
• Herbicide, fertiliser and cropping restrictions
• Land use constraints
• Loss of production subsidies
• Skills and expertise
• Public perception
• Public access
• Education and understanding
• Market failure
WHAT HAVE WE GOT?
Knowledge is Key
- What have we got?
- Environmental audit / Green Infrastructure Assessment
• Arable
• Grassland
• Woodlands
• Ditches
• Streams
• Ponds
• Hedgerows
• Orchards
• Trees
• Wetland
• Rights of Way
TECHNOLOGY
Technology and Performance mapping – understanding real performance of land
CRITICAL CONSIDERATIONS
• What can we deliver?
• Who wants it?
• What does the market look like?
- Capital
- Revenue
• Government or Private Sector?
• Monitoring
• Security and CertaintyNatural dam: Dee catchment
PUBLIC GOODS
Assets and Services providing benefits for which there is no clear free market mechanism
As yet finally undefined, but envisaged to be:-
• Environmental Management of land and water
• Public access and environmental education
• Maintenance of cultural and natural heritage
• Reducing or protecting from environmental hazards
• Improving health and welfare of animals and plants
EXISTING & EMERGING OPPORTUNITIES
Public Payment for Public Goods
Countryside Stewardship• Complexity/Uncertainty
• Changes for 2019
New Environmental Land Management Schemes• Collaboration
• Capital Grants – polluter pays – regulator receives
• User Friendly design – simple and un-bureaucratic
• Innovative mechanisms – reverse auctions
Other Initiatives• HS2 Woodland Funding
• Woodland Carbon Guarantee £50Million
• National Forest
• Great Northern Forest
• Catchment Sensitive Farming
• Upstream thinking
EMERGING OPPORTUNITIES
Natural Flood Management
Natural Infrastructure Schemes
• National Trust
Slow Clean Water• Service Providers
• NIS Contract
• Customers
CASE STUDY: TRESHAM GARDEN VILLAGE
Advance Woodland Creation
• Woodland Creation Planning Grant
• Woodland Creation Grant
• Woodland Carbon Code Registration
Ecosystem Services Mapping
• Site evaluation
• Masterplan Development and Benchmarking
Open Space Management
• Agricultural and land management opportunities
• Energy / water
BARDON 2: NATIONAL FOREST
Offsite Woodland Mitigation
• National Forest Engagement
• Guided by Ecological Network Mapping
• Third party engagement
NEXT STEPS
• Positive Action vs Passive acceptance
• Understand what you have got and what it is “worth”
• Proactive development of Market Opportunities
• Collaboration: Public and Private sectors
SUMMARY
Natural Capital
• Here to stay and at the Heart of Government thinking
Healthy Environment
• Essential for Economic Growth
Farmers/Landowners
• Understanding/new crop
Innovate and Drive market opportunities
QUESTIONS?
Lockhart Garratt Ltd
8 Melbourne House
Corbygate Business Park
Weldon, Corby
Northamptonshire
NN17 5JG
01536 408840
Lockhart Garratt Ltd
Greystones House
Burford House
Chipping Norton
Oxfordshire
OX7 5UY
01608 648 657
www.lgluk.com
Richard Jones BA(Hons) MBA FPFS
Chartered Financial Planner
Director of Oundle Wealth Management Ltd Partner Practice of St. James’s Place Management
Richard Jones and Oundle Wealth Management Ltd represents only St. James's Place Wealth Management plc (which is authorised and regulated by the Financial Conduct
Authority) for the purpose of advising solely on the Group's wealth management products and services, more details of which are set out on the Group's website
www.sjp.co.uk/products. The `St. James's Place Partnership' and the title `Partner / Partner Practice' are marketing terms used to describe St. James's Place representatives.
CL I CK TO E DI T MAS TER TI TLE S TYLE
L I F E T I M E P L A N N I N G : C A N YO U A F F O R D S U C C E S S I O N
Agenda
• The Problem With Succession Planning
• What is Lifetime Cashflow Modelling?
• What Can it be used for?
• Worked Examples
• Limitations
• Questions
CL I CK TO E DI T MAS TER TI TLE S TYLE
T H E P R O B L E M W I T H S U C C E S S I O N P L A N N I N G
CL I CK TO E DI T MAS TER TI TLE S TYLE
W H AT I S L I F E T I M E C A S H F L OW M O D E L L I N G ?
CL I CK TO E DI T MAS TER TI TLE S TYLE
W H AT C A N L I F E T I M E C A S H F L OW M O D E L L I N G B E U S E D F O R ?
• Voyant allows us to test different approaches and plans to see what difference each action makes.
• For example, what if I:➢Retire now
➢Give some money to the children
➢Downsize / move out of the Farmhouse
➢ Sell the business
➢Buy a boat
➢Fund school fees
➢Want to pass the business down a generation
➢What are the tax implications?
CL I CK TO E DI T MAS TER TI TLE S TYLE
W O R K E D E X A M P L E – T H E P R E M I S E
• Alan (50) and Ann (47) own and farm 700 acres.
• Son Johny is 17 and Daughter Jane is 15.
• Johny hopes to attend Harper Adams and then farm. Jane has no farming interest.
• Plan is to enable Johny to take on the farm in due course, with Alan and Ann gradually doing less and taking less if affordable.
• Clients would like to assist Jane buy a house in due course, and pay for her wedding when / if the time comes.
• Any surplus income retained within business bank account.
Is this affordable?
CL I CK TO E DI T MAS TER TI TLE S TYLE
W O R K E D E X A M P L E – E X P E N S E S & S O U R C E O F F U N D S
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Employment £140,000 £102,500 £105,063 £150,765 £110,381 £113,141 £162,357 £118,869 £121,840 £174,841
State Pensions
Money Purchase Pensions
Savings and Investments
£19,401 £1,557 £20,255 £863 £20,749
Asset Liquidation
Estate Credit
All Shortfall
CL I CK TO E DI T MAS TER TI TLE S TYLE
W O R K E D E X A M P L E - C A S H F L OW
CL I CK TO E DI T MAS TER TI TLE S TYLE
W O R K E D E X A M P L E - C A S H F L OW
CL I CK TO E DI T MAS TER TI TLE S TYLE
W O R K E D E X A M P L E – P O T E N T I A L S O L U T I O N S
• Reduce expenditure now – how much?
• Curb Retirement Plans – to what extent?
• Reduce Farm involvement later – make Johny wait!
• Rethink how to support Jane.
• Make provision for private income in retirement.
CL I CK TO E DI T MAS TER TI TLE S TYLE
W O R K E D E X A M P L E - C A S H F L OW
CL I CK TO E DI T MAS TER TI TLE S TYLE
W O R K E D E X A M P L E – C A S H F L OW P E N S I O N P L A N N I N G
CL I CK TO E DI T MAS TER TI TLE S TYLE
W O R K E D E X A M P L E – I N H E R I TA N C E TA X P O S I T I O N
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L L I F E E X A M P L E S
• Clients selling a parcel of land – what to do about Inheritance Tax.
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L E X A M P L E – I N V E S T I N G S A L E P R O C E E D S
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L E X A M P L E – I N V E S T I N G S A L E P R O C E E D S - I H T
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L E X A M P L E – I N V E S T I N G S A L E P R O C E E D S & I H T
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L L I F E E X A M P L E S
• Can I afford to Retire?
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L L I F E E X A M P L E S
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L L I F E E X A M P L E S
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L L I F E E X A M P L E S
• Can I afford a Boat?
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L L I F E E X A M P L E S
CL I CK TO E DI T MAS TER TI TLE S TYLE
R E A L L I F E E X A M P L E S
CL I CK TO E DI T MAS TER TI TLE S TYLE
L I M I TAT I O N S
• Is this Model Correct?
• What about inflation?
• What about a market crash?
• What if I need to pay for care?
• How accurate is it?
• What if my plans change?
• What if the rules change?
• Is it time consuming?
• What if other, non-financial factors, are more important?
CL I CK TO E DI T MAS TER TI TLE S TYLE
THANK YOU
Any Questions
Richard Jones
Office: 01832 279170
Mobile : 07447 581919
Email: [email protected]
Web: www.oundlewealthmanagement.co.uk
Thank You
LFB
RURAL BUSINESS SURVEY
STRATEGY SUCCESSION STRUCTURE
QUESTIONS