RNS Number:5890E
Sinclair (William) Holdings PLC
27 September 2007
27 September 2007
WILLIAM SINCLAIR HOLDINGS PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2007
William Sinclair Holdings plc is one of the UK's leading producers of commercial
horticulture and branded garden products. The Company provides peat and
fertiliser products to the retail and commercial sectors.
William Sinclair's well established brands include J Arthur Bower's, Silvaperl
and New Horizon - the leading brand in the fast growing peat free garden compost
and organic plant foods sector.
William Sinclair's customers include national accounts such as Wyevale,
Wilkinson, Tesco, Homebase and B&Q as well as an extensive range of independent
garden centres.
The Company has strong asset backing, is profitable and is quoted on the
Alternative Investment Market ("AIM").
FINANCIAL HIGHLIGHTS
* Profit increased 72% to #1.45 million (2006: #0.84 million)
* Turnover decreased 3.8% to #37.6 million (2006: #38.9 million) following
continued exit from unprofitable contracts
* Recommended final dividend of 2.5p per share making a total of 3.5p, an
increase of 17% from the previous year and representing an earnings cover of
1.9 times
* Basic EPS from continuing operations increased 70% to 6.8p (2006: 4.0p)
COMPLETION OF TURNAROUND STRATEGY
* Turnaround strategy completed with further margin improvement still
expected
* Reversal in recent sales decrease and significant growth opportunities
identified
ENVIRONMENTAL STRATEGY
* Manufacture composts containing lower levels of peat
* Product launch with carbon footprint data scheduled for October 2007 - an
industry first
Bernard Burns, Chief Executive, William Sinclair Holdings plc, said:
"The turnaround strategy of the Company is now complete and the transition
towards growth is underway.
"Having identified and terminated most of our lower margin business we are now
in a good position to increase sales as we target more profitable contracts by
leveraging the strength of William Sinclair's well regarded brands and our
reputation for providing the best quality service in the industry.
"William Sinclair has already become more aggressive in capitalising on its
leading position, particularly through the Company's environmental credentials.
The launch of our peat reduced composts and the associated carbon footprint data
that has been developed by a leading UK environmental agency is one example of
how William Sinclair is successfully differentiating itself from its competitors
and the Board considers that the Company is well positioned to provide further
shareholder value."
For further information:
William Sinclair Holdings plc Tel: 01522 537561
Bernard Burns, Chief Executive
Peter Williams, Finance Director
Arbuthnot Securities Tel: 020 7012 2000
Alastair Moreton
Alasdair Younie
Madano Partnership Tel: 020 7593 4000
Mark Way
Matthew Moth
CHAIRMAN'S STATEMENT
I am very pleased to be able to report a further improvement in the Company's
results for the year ended 30 June 2007. The increase in profitability and the
strengthening of the Company's balance sheet is the result of the continued
improvement in operations and increased emphasis on core activities and
profitable business activities.
Sales turnover fell by almost 4% as we exited unprofitable business areas.
Despite this, we maintained our share of the retail markets.
Our joint venture, Freeland, has developed equipment to maximise the advantage
to be gained from increasing quantities of green waste. This will give us a
significant competitive advantage in the production of more peat-free and
peat-reduced growing media. We believe capitalising on this opportunity will
play an important part in our future strategy and our intention to improve our
environmental credentials. To maximise on this potential we have recently
announced the acquisition of a controlling interest in Freeland Horticulture.
Group profit before tax has increased by 72% which represents satisfactory
progress as we continue to improve overall shareholder value.
We are proposing a final dividend of 2.5p, giving a total for the year of 3.5p.
The dividend cover is now 1.9 times which is consistent with our policy of
gradually improving this key statistic.
The last year has been another period of change within William Sinclair and I
would like to thank employees, both past and present, for their cooperation and
for their efforts which are greatly appreciated.
Transfer of Company's shares to AIM
The Company successfully moved to the Alternative Investment Market in December
2006. This has, we believe, increased the Company's profile and increased trade
in the Company's shares as investors recognised the benefits of an AIM quotation
particularly with regard to an exemption in respect of inheritance tax and other
tax advantages available to private individuals.
Change of year end
As announced last year the Board intends to change the Company year end to 30
September 2008 resulting in a fifteen month financial period. There are
considerable benefits internally from this move and the revised timetable will
be a much better reflection of our trading year.
Outlook
The retail environment remains competitive but we are confident that we have the
right products, the right quality and the right service standards to continue to
improve performance and deliver strong results.
Bill Simpson
Chairman
26 September 2007
CHIEF EXECUTIVE'S STATEMENT
The full year results to the end of June 2007 show reasonable progress in
returning the business to an acceptable level of profitability; margins have
continued to improve, partly as a consequence of withdrawing from some low
return contracts but, more substantially, from further operational efficiency
being achieved.
Sector breakdown
Sales of retail gardening consumables were very strong having benefited from
exceptionally good weather during April and May - the key selling period. These
benefits were partially offset by the effect of the heavy rain in late May and
June. The Directors estimate the total market for retail gardening consumables
grew by approximately 10% year on year.
Within retail gardening consumables the growing media sector, a key strength for
Sinclair, grew by 12% with the Company's J Arthur Bower's brand gaining market
share at the expense of branded competitors.
The Company is in the process of improving the packaging of its J Arthur Bower's
growing media range and the new products are to be available in stores this
autumn. Consequently an increase in customer demand is expected next season.
There was no growth in the plant foods sector whilst demand for lawn treatments
was down by 8%. We believe that demand from commercial growers was the same as
the previous year with buyers cautious after several years of poor sales.
William Sinclair has lost market share in this competitive area.
Although the industry's peat harvest this summer will fall short of
expectations, William Sinclair has a significant stock of raw material and the
need for substantial third party purchases in the year ahead is not anticipated.
Additional positive impact from restructuring strategy
Despite the completion of the recovery strategy the Group will continue to work
towards delivering further benefits.
The closure of our bark processing site at Flimby in Cumbria was successfully
completed in June 2007 and the new facility at Boothby is working well. The
benefits of this change will result in further efficiency improvements during
the current year.
William Sinclair's manufacturing facilities are the best available and the
Directors believe William Sinclair is the lowest cost producer of growing media
in the industry. However there is room for improvement within our plant food
and fertiliser operations and further efficiency gains are expected in this area
over the next year.
We are continuing to look at options for consolidation and relocation of our
manufacturing and distribution operations in order to further reduce costs.
ENVIRONMENTAL INITIATIVES
During the year William Sinclair took significant steps to capitalise on its
position as the most environmentally responsible manufacturer in the sector.
Reducing carbon footprint
Our peat reduced multipurpose compost will display carbon footprint data from
this autumn. This information was calculated by an independent organisation and
one of the UK's leading environmental agencies, AEA Energy & Environment. This
is a first in the gardening market.
In due course we expect most of our product range will follow suit displaying
similar information on all packaging. William Sinclair already has the lowest
footprint in the industry and the Company will continue to develop other
innovative ways to reduce this footprint further over the next five years.
Freeland acquisition - reducing peat requirements and saving landfill
In July 2007 William Sinclair acquired a controlling interest in Freeland
Horticulture, the green waste recycling business. The Group purchased an
additional 37.5% stake for #0.75 million taking its total interest to 87.5%. A
further #0.225 million is payable in cash over the next three financial years if
Freeland achieves certain performance targets. Freeland reported profit before
tax of approximately #0.39 million for the year ended 30 June 2007.
The acquisition will allow William Sinclair to reduce the peat content of many
of its mixes without compromising the product quality. Eventually 500,000
tonnes of material that would otherwise go to landfill will be used as a peat
replacement in the Group's products thereby reducing the need to harvest and
import peat.
The acquisition of Freeland is an important part of differentiating William
Sinclair from its competitors and providing environmental solutions for existing
and potential customers.
Renewable energy
All our electricity purchases are now from green sources.
Other environmental policies
Where our manufacturing operations are considered detrimental to specific
habitats we will engage in dialogue with interested parties to minimise risks.
We will consider reducing or terminating operations completely if no workable
alternative can be found.
When we have exhausted any given resource we aim to return it toward its
original condition even when we have no obligation to do so. Where we have done
this in the past biodiversity surveys show that 75% of species return within
five years of the start of the regeneration process.
All our bark is FSC (Forest Stewardship Council) certified and comes from
sustainable forests.
CAPITAL STRUCTURE AND NET DEBT
The Group's capital structure is as follows:
2007 2006
#000 #000
Net debt 421 855
Group shareholders' equity 16,340 13,864
_____ _____
Capital employed 16,761 14,719
===== =====
The Group's gearing has fallen from 5.8% to 2.5% as a function of cash generated
from operations and the reduction in the pension deficit. This leaves the Group
well within its target of borrowing not more than 35% of capital employed.
Net debt comprises the balance of a fixed term loan originally taken out in
October 2004 for the purchase of additional freehold storage land in Lincoln as
well as cash balances, overdrafts and finance leases as follows:
2007 2006
#000 #000
Cash and cash equivalent 335 153
Overdrafts - (133)
Loans (670) (742)
Finance leases (86) (133)
____ ____
Net debt (421) (855)
==== ====
CHANGE IN FINANCIAL YEAR
The financial year 2007-2008 will be the 15 months ending 30th September 2008.
The change in the year end will move the budget process away from the critical
selling period and allow management to focus on increasing turnover.
CURRENT TRADING AND THE YEAR AHEAD
Looking forward, the Company anticipates growth in sales over the coming year.
The improvement in packaging, market leading service, award winning quality and
environmental focus gives retailers products that enable them to meet the
demands of their own customers.
With capability to substantially increase output without significant capital
investment, the Directors remain confident about the Company's prospects.
Bernard Burns
Chief Executive
26 September 2007
WILLIAM SINCLAIR HOLDINGS plc
Group Income Statement
for the year ended 30 June 2007
------ June 2007 ------ ------ June 2006 ------
Before Except. Before Except.
Except. Items Except. Items
Items (Note 5) Total Items (Note 5) Total
Notes #000 #000 #000 #000 #000 #000
Revenue 37,646 - 37,646 38,889 240 39,129
Operating expenses 36,187 (117) 36,070 38,011 339 38,350
_______ _______ _______ _______ _______ ______
Operating profit 1,459 117 1,576 878 (99) 779
Share of post tax profits of
associates and joint ventures
accounted for using the equity
method 173 - 173 201 173 374
_______ _______ _______ _______ _______ _______
Group operating profit from
continuing operations 1,632 117 1,749 1,079 74 1,153
Finance revenue 11 11 29 - 29
Finance costs (326) (326) (310) - (310)
Other finance income/(cost) -
pensions 12 12 (32) - (32)
_______ _______ _______ _______ _______ _______
Profit from continuing operations
before taxation 1,329 117 1,446 766 74 840
Tax expense (284) (35) (319) (210) 29 (181)
_______ _______ _______ _______ _______ _______
Profit for the year attributable 1,045 82 1,127 556 103 659
to members of the parent company
======= ======= ======= ======= ======= =======
Earnings per share (pence)
Basic EPS on profit for the 4 6.3p 6.8p 3.4p 4.0p
year
Diluted EPS on profit for the 4 6.2p 6.7p 3.3p 3.9p
year
WILLIAM SINCLAIR HOLDINGS plc
Group Statement of Recognised Income and Expense
for the year ended 30 June 2007
2007 2006
Notes #000 #000
Income and expense recognised directly in equity
Revaluation of property - 964
Actuarial gains/(losses) on defined benefit pension plans 2,463 2,135
------- -------
2,463 3,099
Tax on items taken directly to or transferred from equity (641) (929)
------- -------
Net income recognised directly in equity 1,822 2,170
Profit for the year 1,127 659
------- -------
Total recognised income and expense for the year 3 2,949 2,829
====== ======
WILLIAM SINCLAIR HOLDINGS plc
Group Balance Sheet
at 30 June 2007
2007 2006
Notes #000 #000
Non-current assets
Property, plant and equipment 12,900 12,677
Intangible assets 1,130 1,159
Investments accounted for using
the equity method 777 858
__________ _________
14,807 14,694
__________ _________
Current assets
Inventories 5,150 4,967
Trade and other receivables 10,981 12,149
Cash and short-term deposits 335 153
__________ _________
16,466 17,269
__________ _________
Total assets 31,273 31,963
__________ _________
Current liabilities
Trade and other payables 9,824 10,930
Financial liabilities 119 251
Corporation tax payable 348 131
__________ _________
10,291 11,312
__________ _________
Non-current liabilities
Financial liabilities 637 757
Deferred tax liabilities 1,513 853
Provisions 189 170
Defined benefit pension plan deficit 2,303 5,007
__________ __________
4,642 6,787
__________ __________
Total liabilities 14,933 18,099
__________ __________
Net assets 16,340 13,864
========= =========
Capital and reserves
Equity share capital 3 4,139 4,139
Capital redemption reserve 3 1,523 1,523
Revaluation reserve 3 3,566 3,501
Other reserves 3 176 176
Share based payments 3 51 28
Retained earnings 3 6,885 4,497
__________ __________
Group shareholders' equity 16,340 13,864
========== ==========
WILLIAM SINCLAIR HOLDINGS plc
Group Cash Flow Statement
for the year ended 30 June 2007
2007 2006
#000 #000
Operating activities
Group operating profit 1,576 779
Adjustments to reconcile group operating profit to net cash
inflows from operating activities
Depreciation and impairment of property, plant and equipment 1,032 967
Amortisation and impairment of intangible assets 35 38
(Profit) on disposal of fixed assets (291) (7)
Share-based payments 23 22
Difference between pension contributions paid and amounts
recognised in the income statement (28) (139)
Decrease/(increase) in inventories (183) 583
Decrease/(increase) in trade and other receivables 1,259 (173)
(Decrease)/increase in trade and other payables (1,106) (278)
Movement in provisions 19 24
________ ________
Cash generated from operations 2,336 1,816
Income taxes (paid)/received (174) 384
________ ________
Net cash flow from operating activities 2,162 2,200
________ ________
Investing activities
Interest received 11 29
Sale of property, plant and equipment 606 1,012
Purchases of property, plant and equipment (1,570) (1,377)
Payments to acquire intangible fixed assets (6) (25)
________ ________
Net cash flow from investing activities (959) (361)
________ ________
Financing activities
Interest paid (320) (327)
Dividends paid to equity shareholders of the parent (496) (496)
Dividends received from joint ventures 47 35
Repayment of borrowings (72) (58)
Repayment of capital element of finance leases and hire purchase
contracts (47) (72)
________ ________
Net cash flow from financing activities (888) (918)
________ ________
Increase in cash and cash equivalents 315 921
Cash and cash equivalents at the beginning of the year 20 (901)
________ ________
Cash and cash equivalents at the year end 335 20
======== ========
WILLIAM SINCLAIR HOLDINGS plc
Notes
1 Statutory accounts
The Group Income Statement, Group Statement of Recognised Income and Expense,
Group Balance Sheet and Group Cash Flow Statement for the years ended 30 June
2007 and 2006 are not statutory accounts within the meaning of Section 240 (5)
of the Companies Act 1985. The statutory accounts for the years ended 30 June
2007 and 30 June 2006, which have been audited by Ernst & Young LLP, incorporate
an unqualified audit report and do not contain a statement under Section 237(2),
(3) or (4) of the Act. The statutory accounts for the year end 30 June 2006
have been delivered to the Registrar of Companies and the statutory accounts for
the year ended 30 June 2007 will be delivered to the Registrar of Companies
following the Annual General Meeting of William Sinclair Holdings plc.
The accounting policies used for the 2007 figures are unchanged on those used
for the 2006 comparatives.
This preliminary announcement of the results for the year ended 30 June 2007 was
approved by the Board of directors on 26 September 2007.
2 Analysis of Net Debt
1 July Cash 30 June
2006 flow 2007
#000 #000 #000
Cash at bank and in hand 153 182 335
Overdrafts (133) 133 -
Loans (742) 72 (670)
Finance leases (133) 47 (86)
________ ________ ________
(855) 434 (421)
======== ======== ========
3 Reconciliation of movements in equity
Equity Share
share Revaluation Other based Retained
capital reserve reserves payments earnings Total
#000 #000 #000 #000 #000 #000
At 1 July 2005 4,139 2,855 1,699 6 2,810 11,509
Total recognised income and - 675 - - 2,154 2,829
expense for the year
Depreciation transfer - (29) - - 29 -
Share-based payment - - - 22 - 22
Equity dividends paid - - - - (496) (496)
_____ _____ _____ _____ _____ _____
At 30 June 2006 4,139 3,501 1,699 28 4,497 13,864
===== ===== ===== ===== ===== =====
At 1 July 2006 4,139 3,501 1,699 28 4,497 13,864
Total recognised income and - 108 - - 2,841 2,949
expense for the year
Depreciation transfer - (43) - - 43 -
Share-based payment - - - 23 - 23
Equity dividends paid - - - - (496) (496)
_____ _____ _____ _____ _____ _____
At 30 June 2007 4,139 3,566 1,699 51 6,885 16,340
===== ===== ===== ===== ===== =====
4 Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year. Diluted earnings
per share amounts are calculated by dividing the net profit attributable to
ordinary equity holders of the parent (before deducting the cost of share based
payments) by the weighted average number of ordinary shares outstanding during
the year plus the weighted average number of ordinary shares that would be
issued under the company's share option scheme.
2007 2006
#000 #000
Net profit attributable to equity holders of the parent - continuing operations 1,127 659
Cost of share based payments 17 15
______ ______
Diluted net profit attributable to equity holders of the parent 1,144 674
====== ======
2007 2006
No. No.
Basic weighted average number of shares 16,554 16,554
Dilutive potential ordinary shares:
Employee share options 530 561
______ ______
Diluted weighted average number of shares 17,084 17,115
====== ======
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
5 Exceptional items
2007 2006
#000 #000
Recognised in arriving at operating profit:
Insurance proceeds 300 -
Redundancy and dispute settlement costs (183) -
Income from termination of sales contracts - 240
Settlement of commercial dispute with a supplier - (106)
Reorganisation redundancy costs and professional fees - (165)
Disposal of assets by joint venture - 105
______ ______
117 74
====== ======
Insurance proceeds relate to the loss of fully depreciated equipment in a fire.
The equipment was subsequently replaced.
Redundancy and dispute settlement costs relate to actions taken by management to
mitigate losses arising from a commercial dispute with a customer.
The income from the termination of sales contracts arose on giving up the
Sangral brand in the Middle East market.
Reorganisation redundancy costs and professional fees relate primarily to the
departure of a main board director and a senior divisional manager.
The disposal of assets by a joint venture relates to the disposal by Ou
Alutaguse Turvas of peat and other assets which realised a net profit of
#105,000.
6 Dividends paid and proposed
2007 2006
#000 #000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for June 2006: 2.00p (June 2005- 2.00p) 331 331
Interim for June 2007: 1.00p (June 2006 - 1.00p) 165 165
______ ______
Dividends paid 496 496
===== ======
Proposed for approval by shareholders at the AGM: ______ ______
Final dividend for June 2007: 2.5p (2006 - 2.00p) 414 331
====== ======
Subject to shareholders' approval the final dividend of 2.5p per share will be
paid on 14 December 2007 to shareholders on the register on 16 November 2007.
7 Annual General Meeting
The Company intends to post the Report and Accounts to shareholders on 26
October 2007. The Annual General Meeting of the Company will be held at The
Bentley Hotel, Newark Road, South Hykeham, Lincoln, LN6 9NH on 29 November 2007
at 11.00 am. Copies of this announcement are available from the Company's
registered office, Firth Road, Lincoln, LN6 7AH during normal office hours.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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