UK Export Finance used its Bond Support Scheme to help the company to fulfill a large order and to look for further work overseas.
In June 2012 Hughes Safety Showers won a large contract and the company was required to give its client performance bonds and an advance payment bond, which would have placed a significant strain on cash flow. UK Export Finance support helped raised Hughes Safety Showers’ bond limit, allowing it bid for further contracts worth up to a total of £5 million.
Through providing support like this, we are contributing to increasing the UK’s exports and making the UK more competitive.
Hughes Safety Showers started in 1950 and supplies the oil and gas industry, hospitals and laboratories with emergency showers and eyebaths for use after chemical spillages. Around 65% of the 110-strong company’s work is overseas and its 2012 turnover was £14 million.
Big order, big bond
In June 2012 Hughes Safety Showers won a £1 million contract to provide BP’s Rotterdam liquid natural gas plant with 44 customised showers. This was a big contract – but the company was required to give its client performance bonds and an advance payment bond worth a total of £140,000. At any one time, Hughes Safety Showers has around 20 bonds, worth up to a total of £1 million, in place. An additional £140,000 in cash deposits for the BP contract would have placed a significant strain on cash flow.
Stephen Dootson, Financial Director at Hughes Safety Showers said:
In our industry, bonds are a standard requirement. Our bank was uncomfortable with the level of exposure these bonds entailed, and asked us for 100% cash cover.
We can only supply so many bonds without running out of security, leaving us unable to look for more work until earlier bonds are returned, so in August 2012 we approached UK Export Finance for help.
The right solution
By September 2012, UK Export Finance had agreed, under its Bond Support Scheme, to cover 50% of the bank’s liability for the BP bonds, as well as to underwrite all of the company’s existing export bonds. The help raised Hughes Safety Showers’ bond limit from £250,000 to £500,000.
Increasing the export flow
UKEF’s support will allow Hughes Safety Showers to bid for contracts worth up to a total of £5 million. The company had a turnover of £15.5 million in 2013 and expects a turnover of £16 million in 2014.
Since getting the help from UKEF, we’ve won six more contracts, in South Korea and the Middle East, worth over £1 million in total. We’re looking to expand in North America and the Far East.
Now this bond facility is in place we can aim for more jobs, or bigger jobs, confident that we can afford to take them on. I don’t think we’d have achieved this growth without UKEF’s help.
More information on the Bond Support Scheme
Under the Bond Support Scheme we provide a partial guarantee to a bank where it issues a bond in respect of a UK export contract. This protects the bank against the risk of the exporter being unable to repay them if a call is made on the bond by the beneficiary. The bank can then issue the bond even if it doesn’t have sufficient risk appetite. With advance payment and progress payment bonds, this may result in more working capital being available for the exporter.
Criteria for eligibility are:
- UK-based exporter
- Buyer based overseas
- Export goods and services need a minimum of 20% UK content
We can typically guarantee up to 80% of the value of the bond.
Read the full guide to the Bond Support Scheme, including how to apply.
Contact an Export Finance Adviser in your region or alternatively call:
New business enquiries
Telephone 020 7271 8010