ACCESS TO FINANCE, FOOD AND DRINK SECTOR 5 March 2020
An introduction to RSM 6 th largest network of independent firms INTERNATIONAL UK FOOD AND DRINK • • 43,000 people 3,450 people • 100 people • • 120 countries 360 partners • Focusing on food and • • 800 offices 34 locations drink sector • • Combined income of More than £330m fee • Affiliated with the FDF $5.1bn income
Making your working capital a source of finance “Compared to best in class, How long do you hold your stock? average F&D businesses are holding onto excess stock worth over £2m Best in class 4-5 days What can you do? • Look at your order quantities and lead times. Average 13 days • Don’t ignore the ageing stock in the corner.
Making your working capital a source of finance “On average there is £300,000 in How quickly do you get paid? cash tied up in working capital management for every food and drink business.” Debtor days 46.5 days What can you do? • Look at your contractual terms. Creditor days • Resolve disputes as soon as you can. 31.9 days
Take advantage of the tax relief available “The innovation taking place in Are you making food or drink that: the food and drink industry is a • meets new consumer tastes perfect environment for R&D activity.” • is fit for new international markets What can you do? • Work with an R&D specialist. • is environmentally friendly or • Review your R&D activities as soon as the sustainable financial year ends. • • Consider innovations made to your is free from certain ingredients or processes as well as products. long lasting • is being produced using new technologies
Take advantage of the tax relief available “Capital allowances claims Capital allowances claims can be continue to rise with increased made if you are: allergen regulations, gluten free foods and the gin market having • buying or building a property worth seen large- value claims.” more than £1m What can you do? • extending, refurbishing or fitting out a property with costs more than £500k • Buy your plant and machinery at the end of your accounting period. • Consider capital allowances as early as possible in a property transaction. • historic installations in your property of plant and machinery that you own
Improve your credit score to boost lender confidence “Approaching 10 per cent of What are credit scores like among middle market food and drink food and drink businesses? businesses have a score that indicates a moderate or high risk Average credit score of corporate failure.” across the industry: 85.12 What can you do? • File accounts on time. • Consider filing a profit and loss account even if it’s not formally required. Average score increased • Look for opportunities to convert debt to from 81.10 since 2015 . equity if you have net liabilities.
Consider all of your debt finance options “Debt is on the increase within What are borrowing levels like the food and drink industry, with across the food and drink sector? businesses looking for cost- efficient funding for new projects.” Debt increased by 15.3 per cent What can you do? in the period 2015 to 2018 • Review all the potential debt markets and across the food products before you borrow. and drink 4.3 per cent rose industry by EBITDA • Look at asset-based lending where during the same there’s a large trade debtor book. period • Consider debt funds, as well as banks where cash flows are strong and leverage is sought.
Apply for capital grant support for eligible projects Basic eligibility criteria for capital “Access to the UK’s capital grant grant projects: regime differs depending on where you’re based.” • the project is in a region where government can offer additional financial support What can you do? • your project has not started before the decision to award a grant • Before you start a project, consider whether a grant might be available. • Speak to your business advisor and LEP • involves capital expenditure on things like contact at the earliest opportunity. property, plant or machinery • involves the creation or safeguarding of jobs
Scan the private equity market “Investing in companies that What is private equity backing like have a positive influence on the across the food and drink sector? environment, society and corporate governance – is becoming more prominent.” All sectors Food and drink 5.6% 19% What can you do? decline decline • Talk to an adviser early. • Value the personal aspect of the investment relationship as much as the 17 financial terms on offer. food an drink • Engage an adviser who understands the businesses took on PE community and will structure the right private equity 2019 volume of UK PE deals investment in 2019 deal.
Contact details If you have any queries about the content of this Stuart McCallum Allan Kelly presentation, do not Partner and Head of Food and Drink Partner, Restructuring Advisory hesitate to get in touch. DL +44 (0) 141 285 3869 DL +44 (0) 1912 557059 E: allan.kelly@rsmuk.com E: stuart.mccallum@rsmuk.com
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