The UK is currently officially free from bird flu, whilst this is great news for our Agricultural industry and a relief for free range egg producers, the reintroduction of the disease is a constant concern for both farmers and DEFRA.
M ichael Gove’s speech at the Oxford Farming Conference gave an indication of the direction policy reform may take, but it prompted more questions than answers regarding quantum and timescale to afford farmers any certainty of subsidy entitlement following the UK’s withdrawal from the EU. It is therefore crucial to ensure your farm finances are in good order. The financial check known as EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) is likely to be a part of the accounts which will have greater prominence for your bank manager when, for example, looking at a lending decision. T he winter months are a period of concern for free-range egg producers as the risk of avian flu increases when wild bird migratory pattern move to over the UK. The current position from the Government is that: ‘The current risk of incursion (of bird flu) in the UK is medium for wild birds and low for poultry, although this depends on levels of biosecurity on individual premises”. It is not just the period during an outbreak which can have an impact on the poultry industry. Until now, producers of free- range eggs could continue to market the eggs as free-range for a period of 12 weeks
recommend taking professional advice from an independent insurance broker to make sure you have the best product for your circumstances at a competitive price.” Scrutton Bland act as the approved insurance broker for the British Free Range Egg Association (BFREPA). To find out more contact edward.nottingham@merrickhill.co.uk 01379 643444.
EBITDA is a measure of adjusted profit but care must be taken as to how it is calculated. “If all your farm staff are on your payroll then this is more straightforward to quantify,” commented Nick Banks, Business Advisory Partner at Scrutton Bland. “However if the cost of your labour force does not show up on your payroll, for example when it is a family partnership and members of the family are not formally classified as employees and paid by drawings or as a limited company dividends are paid, then the calculation becomes more complex. A common scenario may be where you are negotiating a financial package to invest in farm machinery, and without a clear EBITDA figure, there may well be a funding gap.” after a local outbreak of bird flu even though the hens were legally required to be kept under cover. DEFRA has now extended the window for free-range eggs to be marketed to 16 weeks, after which the eggs will need to be classified as barn eggs. “Bird flu remains a huge worry for free- range egg producers” commented Ed Nottingham, agricultural director at Scrutton Bland. “Any help from DEFRA has to be welcomed in mitigating the prospect of economic losses for farmers. There are also insurance products which may be helpful in providing cover for egg producers, but we
Subsidies and Brexit
EBITDA is not a figure reported in the annual accounts. Farmers need to work with their advisers to understand their EBITDA and how this stands up against existing borrowing commitments or those which may be required for investment. Sensitivity analysis can then be undertaken to see the impact of a reduction or withdrawal of subsidy. Scrutton Bland’s team of professional advisers can advise agricultural businesses of all sizes on all aspects of managing your business and personal finances. Contact nick.banks@scruttonbland.co.uk or 01473 267073.
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