Are you sitting comfortably?
With property values on the rise again, you could find yourself
sitting on a goldmine should you ever decide to develop your business
The last five or six years has been tough on meat companies. A combination of tough trading conditions, rising costs, and sector rationalisation have forced greater numbers of small to medium sized firms to close. It's only then that many of these companies realise just how much the value of the site their buildings occupy is worth. It is not uncommon to find owners sitting on sites valued at three, four or even five times the average worth of the entire trading value of their business says Peter Hazell, chartered surveyor and auctioneer of George Hazell at Thetford, Norfolk.
Hazell, who works at the company his
father George set up 15 years ago selling plant and machinery equipment, says the business started seeing a surge in activity over the last six or seven years when meat companies and their assets began featuring strongly at sales. It soon became clear, said Hazell, that often the freehold of the business was worth more for development than the whole of the rest of the business put together.
This has been the case in several
recent sales including the sale of Hutson's, a pig abattoir based in Beccles; Teesside Wholesale Foods;
Nidderdale Country Foods and, more recently still, DT Duggins at Bromsgrove, a multi-species abattoir, which was bought by Midland Meat Packers at Crick. The land was subsequently sold for development before Midland Meat Packers too went under the hammer.
The reason behind the recent consolidation is partly historical. Just after the Second World War, it was still the duty of local authorities to provide services to its community. One of these was a town abattoir. The council also provided meat inspectors - now environmental health officers - to
ensure the meat that was produced was not only fresh but safe to eat.
Today, the town abattoir, originally intended to be out of sight and smell of residential areas, has been swallowed up in the urban sprawl. This often means sites ripe for redevelopment should the business falter, with planning permission almost a foregone conclusion for developers looking to make a killing.
A significant proportion of the work undertaken by George Hazell is the valuation of buildings, sites, machinery and equipment for businesses looking to raise or lend money using property as security. It advises banks, company bosses and accountants, all three of which are often involved in raising cash - especially where the loan cannot be based on trading and has to be attached to assets.
Sometimes it is only then that the owners realise, like some farmers today, that they are sitting on a development gold mine compared with slugging it out in the slaughtering and meat processing industry, says Hazell.
Much of the main machinery auctioned by George Hazell goes abroad where regulations for its installation and use are more liberal than in the UK. Ireland is a prime market, he says.
The ancillary equipment and smaller machines are being bought by small-scale, emerging processors, such as farmers opening farm shops with processing lines put into redundant barns. George Hazell has offices in Bury St Edmunds, Suffolk and
AUCTIONEER PRO AUCTION
Specialisation pays off for Pro Auction
Seeing the way auctions were carried out from the other side of the fence gave Mark Flynn the incentive to move into the business. Previously a corporate recovery manager with a firm of receivers, Flynn decided, two years ago, to set up Pro Auction at Radstock in Bath, quickly followed by offices in London. He saw specialisation as the key and chose the food processing industry as his specialised subject.
It was a good call. Last year, the company handled 16 company sales of food equipment, achieving a record turnover of £12.5 million.
On Wednesday (28 June), Pro Auction will handle one of its biggest sales ever at Lloyd Maunder's abattoir and meat processing plant in Devon.
The sale of the 150-year-old family company, which is quitting the lamb processing business, will feature 740 lots, ranging from knife scabbards to specialist vacuum packing and modified atmosphere equipment.
Being selected for the task is confirmation for Flynn that Pro Auction's formula of taking complete control of the sale, from sticking labels on equipment to having it carried away by the buyer, is working well. Additionally, charging the seller only after a lot is successfully sold is another attractive proposition, says Flynn.
The company stays closely focused on the food industry and it is not, says Flynn, distracted by dozens of appointments and valuations while pitching for business in other industries. It also leads to more accurate valuations and a quicker sale, he says.
The work of valuations is a growth area and specialisation demonstrates to Pro Auction clients that Flynn and his valuer Simon Rose know what they are talking about, lessening the risk of low prices or stock sticking below the reserve prices on the day.
"Knowing how the machinery works in the live production line is an advantage which buyers can learn to trust. It means we come to a more accurate valuation," says Flynn.
This assertion is backed by Flynn's experience of more than 13 years in capital asset valuation and in insolvency during his liaison with financial institutions, banks and associated professionals, he says.
The company has been asked for valuations and appraisal of plants for insurance purposes, replacement estimates, business acquisitions, flotations, mergers and business closures.
Tightly run, there are just six executives at Pro Auction including auctioneer Jonathan Philips, administration manager Nathan Branch and Sian Taylor managing the accounts.
Northern Europe is proving a fertile ground for Pro Auction services, with plants that are bigger and often highly specialised in one animal species. Less bureaucracy and legislation, compared to the UK, leads to a higher second-hand value for equipment. Sales are less frequent but bigger and worth more to both auctioneer and seller, says Flynn.
Recent sales have included Green Acre Foods, Mathieson's Bakery and, last year, Hilton Meats, Dartington Foods, Cool Fresh Foods, TSC Foods and Bure Valley Foods. Flynn emphasises that complete control of the sale is fundamental. Clients have the sale managed from the first visit to the premises to the portering of the sold equipment. "Conventionally, an auctioneer will come down to the factory, price the kit, stick the catalogue labels on and then not be seen until the day of the sale. We do everything."
Part of the rapid progress of Pro Auction has been down to good targeting, with a fax and e-mail directory containing 200,000 named industry target customers in the food manufacturing and ancillary sectors.
The company also sells by tender or private treaty and will arrange collection and storage of sale items and, if necessary, vehicles to take it to its storage facilities in Bath.
Now Pro Auction is looking at online auctions and valuations.
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