Expansion needs careful handling and attention to detail

The priority was to consolidate the business and create a stable footing for growth when Duncan Andrews joined Adam Henson at Bemborough Farm in the Cotswolds. A retiring partner was bought out in the creation of a business arrangement from which each draws 50% of the profits.

The tenanted mixed holding that Mr Henson had taken over from his father was not immune to the challenges of the time. Commodity prices were low and still falling and many farms were suffering from a decade or more of low investment.

Bemborough farm summary 

  • 650ha in the Cotswolds
  • 400ha arable – milling wheat, malting barley and oilseed rape
  • 400 commercial ewes
  • Cotswold Farm Park – rare breeds, caravan park and campsite
  • Tenanted and contract mixed farming and arable consultancy
  • Joint venture machinery syndicate
  • Equestrian cross-country course

The journey since 1997 has been far from straightforward, but a measured approach has given the business greater stability and a scale that offers long-term sustainability. It is also meeting the career aspirations of its partners and staff.

At around the time the partnership was formed, the farm took on additional rented land, taking the base holding to 650ha. This was split between about 500ha of cereals and oilseed rape and 150ha of grassland supporting about 700 ewes and a small suckler beef enterprise. Rare breeds and the Cotswold Farm Park were incorporated into the livestock activity.

This was part of a restructuring process that aimed to achieve a fair entry for Mr Andrews and to establish a stronger financial platform.

“Restructuring included 120ha of the poorer land going into arable reversion as part of a whole-farm ESA environmental stewardship agreement, and this made it possible to reduce the labour and machinery overhead,” explains Mr Andrews.

“Unfortunately, this meant redundancy for one full-time tractor driver – one of the most difficult decisions we’ve taken – but this reduced outgoings and released significant capital from the sale of some equipment.

Using contractors

“A reputable local contractor was appointed to carry out crop establishment and harvesting. The lower gearing of the business was beneficial and certainly helped us to cope with the effect of foot-and-mouth in 2001.

“Thankfully the farm never went down with the disease, but we lost revenue from the closure of the farm park to visitors – an income stream that was not insured.”

After 2001, maintaining diversity in the business was key and the partners began looking for opportunities to expand and further spread risk.

“We’ve looked at opportunities to buy land, but the prices here in the Cotswolds have so far made it difficult to justify from an agricultural business perspective,” adds Mr Andrews. “We’ve therefore expanded in stages through other means, substantially increasing the farmed area from which we now earn income through a combination of contracting, contract management, consultancy and most recently a joint venture.”

Understanding the requirements of the third parties involved in the various collaborations has been an important factor, alongside attention to detail to ensure arrangements work for all.

A sound financial structure through each stage of expansion was also crucial. In 2001, the partners moved their farm banking to Lloyds TSB.

“The business has avoided common pitfalls by adopting large company thinking,” says Lloyds TSB’s agricultural policy director Alick Jones.

“This means researching each opportunity thoroughly, taking the appropriate outside advice and being prepared to reverse a decision or change tack if something isn’t right.

“For example, the business invested a lot of time researching a straw briquetting project – which on the surface looked viable – but the feasibility study revealed technical limitations and a highly competitive market, so the idea was shelved.

“Here, outside advice proved very worthwhile – it is all too common for farm businesses to try to be too self-reliant.

“It’s also important to set criteria against which the success of a project can be evaluated and these should extend beyond pure financial returns. For example, does the project help to spread risk, motivate key people, or add value to another part of the business?

Joint venture machinery pool 

  • John Deere 7930 (225hp) with GPS and AutoSteer guidance system
  • 4m Horsch Terrano stubble cultivator with Stocks seeding unit
  • Kverneland 5-furrow reversible plough with slatted boards
  • 6m Horsch Sprinter tine coulter drill (6m)
  • 8m Twose rolls with levelling boards
  • Vaderstad NZ cultivator
  • Amazone Twin disc fertiliser spreader with variable-rate application capability (including N-Sensor system)
  • 24m Sands 3,000 litres self-propelled sprayer
  • Fendt tractor (390hp) hired in for autumn cultivating

The partners also have their own New Holland 9060 combine, New Holland 7050 tractor and two 14t Easterby trailers, plus grassland kit.

Review borrowings

“In terms of finance, it is important for any expansion-related project to be ring-fenced and any borrowings structured appropriately in relation to the expected returns and the duration, with periodic reviews, so the farm is free to focus on the operational aspects.

“It is all too common to see projects financed out of existing facilities that therefore become very difficult to cost accurately and measure.”

One of the first opportunities for growth for the Henson and Andrews partnership was to take on 300ha of mixed farming contract management and contracting on a neighbouring farm.

“This allowed us to spread our costs over a larger business area with minimal risk at a time when we had achieved overall stability,” explains Mr Andrews. “We then added a 240ha arable consultancy role that came about through contact with our agricultural contractor. This tapped in to existing expertise on the farm and helped further spread costs, again with minimal risk.”

This expansion allowed the farm to justify the recruitment of specialist arable and livestock managers, effectively relieving Mr Andrews and Mr Henson from some day-to-day responsibilities.

This enabled them to take on a more strategic role and consider further expansion possibilities, as well as allowing Mr Henson to pursue a parallel career in the media.

“We both enjoyed our time sitting on tractors or working hands-on with the livestock – and don’t object to doing it now as needs arise – but in order to develop a business in a measured and sustainable way you do need to create management time,” adds Mr Andrews.

“Finding the right calibre of staff is the key, so that you have the confidence to delegate properly. It is then also important to continue developing the business to keep these people motivated and content.”

The latest opportunity for growth came along when another neighbour approached the partnership with a proposal on machinery sharing. Again, the move was carefully considered from all angles.

“With the increased arable area we were farming by 2010 and the improvement in commodity prices, the economic arguments for machinery ownership were far stronger than they were a decade earlier when we had sold a lot of our machinery and turned to contractors,” says Mr Andrews.

“Our arable manager, Martin Parkinson, was also keen for us to have greater control over our arable operations for greater assurance of quality, so the idea of collaborating in order to run better machinery over a bigger acreage made a lot of sense.”

Shared machinery has been bought by the joint venture company that hires equipment back to the two farm businesses. There is also a contra arrangement whereby labour and management services provided at varying levels by the two farms are sold back to the joint venture company.

Clear arrangements

It has been very important to have a clear contracted arrangement which benefits both parties – if the major elements work then minor issues are easier to overcome.

“The positive result is that we have a high-capacity fleet of machinery spread across 1,100ha, with technologies such as tractor auto-steer, GPS guidance and variable rate applications at our disposal.

“At the same time, our neighbour and partner has created time for himself to develop other parts of his business, and we have similarly made better use of our resources and have more efficient arable operations.

“We still run our own combines, maintain our own crop rotations, have separate crop storage and manage most of our variable costs separately. There is scope to take the arrangement further in future – such as pooling crops in shared storage and joint marketing – but for now the relationship is working well for all parties.”

Adam Henson is Lloyds TSB’s farming ambassador, promoting a better understanding of financial and environmental sustainability in farming businesses. Recruitment and management of staff has been the biggest single challenge for him and partner Duncan Andrews during the expansion of their farming business.

Managing expansion – key points

  • Consolidate before expanding
  • Recognise risks and weaknesses
  • Consider new ways of working, such as joint venture
  • Contractors reduce capital commitment and increase flexibility
  • Get agreements right first time – attention to detail is key
  • Set criteria against which changes can be assessed
  • Careful appraisal of funding requirements for new ventures
  • Ring-fence new venture funding and monitor progress
  • Consider impact of changes on rest of business and its resources, especially staff
  • Don’t be afraid to reverse a decision or change tack if that’s the right thing to do
  • Create management time to consider and plan change properly

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