In the late 1940’s Arthur and Harriet had purchased quite a large area of land in the East Anglian region of the UK. With a small loan from Arthur’s father the couple soon furnished the land with twenty 50-meter poly tunnels, and their dream of growing bedding and pot plants became a reality. The abundance of labour in the region mixed with the countries desire to try to put the war behind them, meant that the business was a one season success. Arthur bought two large lorries and started the distribution arm of the business.
By the early 1970’s Arthur and Harriet had taken the business from strength to strength, the distribution arm of the business had grown to 12 lorries and they had acquired several smaller nurseries across the region. Their family had grown as well, two sons Richard and Simon, both interested in the horticulture industry and as time went on became the true back bone of the company.
In early 2010, the company was now recognised nationally as an award-winning grower, and globally as a supplier of award-winning varieties of pot plants. Their retail nurseries were supplied wholly by their commercial business and the demand was massively outstripping supply. The family had committed that they would never purchase ready to sell products from competitors, but they needed to stock their stores faster than ever before.
One solution that was available to Richard and Simon was to remove the early stages of the process, the propagation phase. If they were to purchase seedlings or plugs as they are known from specialist suppliers, they could remove one of the most time exhaustive phases, as well as one of the most expensive. Propagation of seedlings involves a large amount of heat and light to force the seeds to germinate on scale. Bypassing this stage could bring more stock to the shelves quicker and on demand.
The decision was made, and the business slowly phased over to purchasing seedlings from a counterparty based in The Netherlands. The Netherlands processed 5.4 Billion Euros of floriculture in 2017 with at least 10% of this being exported to the UK. The company that Richard and Simon had decided to partner with was one of the country’s largest suppliers based in the Den Haag region. By 2018, 100% of all of Richard and Simon’s seedlings were being purchased from the Netherlands, as the relationship had grown so had a requirement for further seasonal products. Easter bulb season, the Christmas Poinsettia and the spring Narcissus (daffodil) were a massive part of the retail business and without the overseas relationship, market share would have been lost in the region. The decision to source products elsewhere became a great success, the company was thriving, and profits were increasing month by month.
In the latter part of 2019 Richard contacted Privalgo to seek some advice. Although the business was performing well, it realised that their profit didn’t match up to predictions and forecasts. This was caused due to fluctuation in the value of settling invoices, with the need to pay invoices in Euros not GBP. Richard and Simon were performing monthly spot trades to settle roughly £600k to £700k invoices and receiving mediocre rates at best. The business couldn’t afford to purchase more than a month’s worth of invoice value at a time, as cash flow just didn’t allow this.
We introduced Richard to our specialist, Ryan. Ryan performed a Foreign Exchange Audit on the business and after gaining some understanding of the company’s situation and requirements, began to put together a proposition. This bespoke solution stood to save Richard and Simon’s business, not only money, but time. Each month Richard had spent sleepless nights trying to work out the best way to settle the most recent invoices. Hidden charges, unexplained fees and a reasonably volatile exchange rate, had meant that every settlement date became equally as stressful.
Ryan Proposed Privalgo’s “Flexible Forward”. This relatively simple mechanism allowed Richard and Simon to identify the forth coming invoices for the next six to twelve months’ and enter in to a forward contract at a fixed price and draw down against the total value as and when the Invoices became due paying the same amount of GBP every month. With the help of Ryan and his team, a rate was agreed for the term and this was fixed regardless of market movements. If the rate deteriorated, then the business would benefit as the invoices in effect got cheaper in comparison and if the rate improved then the original fixed rate would still be adhered too, sometimes creating a loss. But this did not concern the brothers, the requirement was to stabilise the payments process, so the business could budget regardless of the currency fluctuations. Knowing this “flexible forward” was in place, meant that the business could concentrate on other aspects of growth and development and they were more than happy to mitigate the risk by fixing the price. Ryan had also gone one step further and had introduced the brothers to Privalgo’s “Insight” portal, which had the capability of allowing the brothers to settle invoices, on mass if required, directly through the portal. Removing additional cost and time from every transaction.
Ryan and Privalgo’s relationship with these horticultural brothers has grown over the last 12 months and the results of great advice, professionalism and transparency allowed Richard and Simon to make informed decisions which resulted in a constructive and efficient solution. We very much look forward to continuing our affiliation with this fantastic business.
If you would like to discuss any of the areas that have been highlighted above please feel free to contact Ryan and his team at firstname.lastname@example.org.