Jimmy McLeanHead of Agricultural Services

The Royal Bank of Scotland Group

New Entrants Summit

12 September 2012

Scottish Farming Balance Sheet

ASSETS £b

Land and buildings 32.3

Plant, machinery and vehicles 1.0

Breeding livestock 1.1

Other 2.0

36.4

LIABILITIES

Loans and mortgages 0.9

Overdrafts 0.8

Other credit 0.5

2.2

NET WORTH 34.2

Source: Scottish Government

New Entrants

•New to sector

•Successor – with other beneficiaries to pay out

•Sole Successor

Scottish TIFF

0

200

400

600

800

1000

1200

1400

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

TIFF £ million Real (2011) £m Linear (Real (2011) £m)

Scottish Farming Balance Sheet

ASSETS £b

Land and buildings 32.3

Plant, machinery and vehicles 1.0

Breeding livestock 1.1

Other 2.0

36.4

LIABILITIES

Loans and mortgages 0.9

Overdrafts 0.8

Other credit 0.5

2.2

NET WORTH 34.2

Source: Scottish Government

Financial Plan

Profit↕

Cash↕

Capital

Owner EquityOwner Equity

• Percentage of Business Owned

Net Worth divided by Total Assets

Tenant - 50%Owner Occupier - 70%

Profit and Loss Account

% Gross Output Total Output 100

Variable Costs 30 - 40

Gross Margin 60 - 70

Labour 15 - 18

Power & Machinery 15 - 18

Property & General 4 - 6

Gross Profit Min 30

Rent & Interest Max 15

Net Profit Min 15

Rent Interest & P.D. Max 30

Cash

Managing the Cashflow

Risk

• Recognise the risk• Manage the risk

– Training/qualifications– Experience– Business Plan– Sensitivity Analysis– Potential Exit Strategy

Final Thoughts

• Business Training for Succession

• Availability of Tenancies

• Lack of Share Farming Opportunities

• Bespoke Loan Guarantee Schemes