RNS Number : 1481L
Sinclair (William) Holdings PLC
06 January 2009
6 January 2009
WILLIAM SINCLAIR HOLDINGS PLC
PRELIMINARY RESULTS FOR THE 15 MONTHS ENDED 30 SEPTEMBER 2008
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
* Group turnover increased 45% to �54.8 million (2007: �37.6 million - 12 months) helped by the inclusion of sales by Freeland and
Metcalf
* Profit of �0.52 million (2007: �1.45 million - 12 months) after significant cost increases
* Strong performance from Freeland's green waste and topsoil recycling business
* Acquisition and successful integration of Joseph Metcalf
* Final dividend of 1.0p per share; total for the period 2.0p
Bernard Burns, Chief Executive, William Sinclair Holdings Plc, said:
"Previous management action to reduce the Company's cost base and improve the productivity of the business ensured the Company has been
able to endure recent extreme market conditions. In particular the early and cold Easter, the poor harvest due to heavy rains and the rising
costs of raw materials.
"With inflationary pressures subsiding, fuel and haulage costs returning to more realistic levels the Company is starting to restore its
margins as price increases begin to flow through.
"Traditionally sales of garden products are relatively resilient during economic downturns. With a low exposure to exchange rate
fluctuations, strong peat reserves, a 100 per cent increase in the use of recycled materials in our products and a reputation in the
industry for strong customer service, we are well placed to withstand the current economic downturn."
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
Dominic Barretto
Graham Moonie
CHAIRMAN'S STATEMENT
The 15 month period to the end of September 2008 has been challenging for the Company following some of the most difficult trading and
operating conditions for many years. Despite this it is very pleasing to recommend a final dividend of 1.0p making a total for the period of
2.0p (2007 - 3.5p).
Compared to the previous 12 month period, turnover for the 15 months to 30 September 2008 is ahead by 45% at �54.8million. In addition
to the extra three months trading this includes sales by Freeland and by Joseph Metcalf Ltd (which was acquired in January 2008).
Underlying sales were broadly in line with the previous period with strong demand from the professional growers offsetting the shortfall
in retail caused, in the main, by the very early Easter and by poor weather.
Our peak selling season usually begins at Easter but in 2008 it was the earliest it had been for almost a century and fell significantly
before the beginning of spring. Demand therefore started later and was concentrated into a shorter period. From Easter onwards we faced
record levels of rainfall which impacted on demand, curtailed the peat harvest and significantly increased transport costs due to heavier
product.
We have increased our own prices following the significant increase in the cost of fuel, energy, plastic packaging, fertilisers and
transport. This has begun to mitigate some of the profitability erosion that we experienced during 2008.
Consequently our margins are beginning to recover and are returning to normal levels. This is being helped by the continuing fall in
commodity prices and lower transportation costs.
As previously announced, Bolton Fell has been selected as a candidate Special Area of Conservation (cSAC) and it is likely that we will
eventually have to stop harvesting peat from this particular area. We do not anticipate any long term difficulty with sourcing alternatives
to Bolton Fell peat but these alternatives are all more expensive. We will seek to increase the use of recycled materials in our products
wherever possible. Discussions with the authorities to determine the amount that will be due to us as compensation for the higher costs are
on-going.
Our status as the cost leader of our sector and our reputation for the highest levels of service in the market have improved recently
and, while we are not completely insulated from the economic situation, our margins are continuing to recover and demand for our products
will, we believe, prove resilient.
Bill Simpson
Chairman
5 January 2009
CHIEF EXECUTIVE'S STATEMENT
Overview.
Results for the 15 months ended 30 September 2008 are disappointing and reflect a difficult year for your Company.
Margins fell as a result of severe cost inflation in raw materials and services combined with the worst peat harvest in the last 10
years and a late and limited selling season. Despite this we remain profitable, continue to pay a dividend and are confident about our
prospects in the coming year.
Review of the period
Retail sales of gardening consumables normally surge at the Easter Bank Holiday weekend which this year was in mid March 2008. Unusually
parts of the UK experienced snow in the week before Easter. Consequently, the sales increase was modest. It was late April/early May 2008
before most of the UK experienced favourable gardening conditions and the selling season never recovered from this late start.
The profit margin on this business was reduced by heavy cost inflation in packaging, fertilisers, and transport. This was caused by
rising oil prices and increasing agricultural demand for fertilisers as legislation in the US and Europe stimulated the growing of bio fuel
crops. This demand also led to worldwide shortages, particularly of chemicals, and price increases of more than 300% were commonplace for
these items.
In an unprecedented move, we were forced to introduce price increases mid-season and in August 2008 introduced an additional pallet
surcharge. However, even this failed to match the scale of the inflation. Our margins only recovered to acceptable levels after the year
end.
In contrast, sales to our professional customers were buoyant. Demand here anticipates retail sales and the excellent selling season in
2007 led buyers to order substantially more product than in recent years. As demand failed to materialise because of the weather, production
backed up in greenhouses, affecting our customers but having little affect on the Company. Here, too, inflationary factors reduced margins
and at times we simply could not source sufficient raw material even at these higher prices and some sales were lost.
Freeland, which provides processed green waste for the horticulture industry and produces topsoils for the construction and civil
engineering industries, has performed exceptionally well during the period. The nature of the Freeland business is short lead times and
short contract periods and they found it easier to keep selling prices and costs aligned. The wet summer caused some operating difficulties
but the net result was 20% ahead of plan and also ahead of last year.
The Joseph Metcalf business traded as a separate entity from January 2008 until the restructuring of the business in August 2008. The
majority of its customers continue to trade within William Sinclair and appreciate the stronger brands, improved quality and better service
that William Sinclair offers. Joseph Metcalf provides William Sinclair with significant mainland UK peat reserves.
The integration of the Joseph Metcalf business was more difficult than we had expected but has now been successfully completed.
As notified in the trading updates of 28 July and 25 September 2008, our peat harvest this period was poor. Harvested volumes were only
45% of the average of the last 10 years and only 90% of the next worst year. In addition, the peat we did harvest was heavy and therefore
the on cost of processing and delivering it will be higher than normal.
Nevertheless we incurred the usual harvest costs without sufficient reward with a significant downside to profitability.
Bolton Fell Moss
As outlined in our August announcement, Bolton Fell has been submitted to the European Union as a candidate SAC under the Habitat
Directive and it is almost certain that the SAC status will be confirmed by the EU in the coming year. This would require eventual cessation
of harvesting which in turn would undermine the viability of the adjoining factory.
Compensation would be due to the company for loss of profit and disturbance. Following discussion with Natural England we believe that
harvesting can continue for a further five years at a decreasing rate. Surveys of the area concerned and an exchange of information is
taking place in order to try to reach agreement on compensation but this is unlikely to conclude before summer 2009.
Environmental issues
In selecting Bolton Fell as a candidate SAC, Natural England acknowledge that the site can be returned to its original condition within
a limited time period. A reserve area that we have maintained and protected has preserved the full biodiversity of an upland peat bog and
can be used to reseed the extended estate. We have already begun restoring a 34 acre section of the bog and have achieved considerable
success in re-establishing typical flora and fauna.
Within the last 12 months we have increased the volume of recycled material we utilise by 100%. We believe our product has the lowest
carbon footprint of any major supplier of growing media in the UK and we lead the UK market in peat reduction. Our reduced peat and peat
free products, sold under the New Horizon brand, are acknowledged as the best of their type in the industry.
Capital structure and net debt
The Group's capital structure is as follows:
2008 2007
�000 �000
Net debt 8,690 421
Group shareholders' equity 14,214 16,340
------- -------
Capital employed 22,904 16,761
------- -------
The Group's gearing has increased from 2.5% to 37.9% as a function of the change in year end, the acquisitions of 37.5% of Freeland
Horticulture Ltd and 100% of Joseph Metcalf Ltd, the working capital requirements of the enlarged business and the increase in the pension
deficit. This leaves the Group slightly over its target of borrowing not more than 35% of capital employed. The Group expects to be back
within this target by September 2009.
Net debt comprises the balance of a new fixed term loan taken out in January 2008 to fund the acquisition of Joseph Metcalf Ltd and a
fixed term loan originally taken out in October 2004 for the purchase of additional freehold storage land in Lincoln together with cash
balances, overdrafts and finance leases as follows:
2008 2007
�000 �000
Cash and cash equivalent 883 335
Overdrafts (6,204) -
Loans (3,215) (670)
Finance leases (154) (86)
------- -------
Net debt (8,690) (421)
------- -------
Current performance
The global recession has eased inflationary pressures on the business. Raw material prices are falling although the weakness of sterling
has the effect of reducing this benefit.
Historically, recession has only a marginal effect on garden consumables. Given favourable weather we expect consumer demand to match
previous levels. However, the liquidity of some of our customers is causing concern. We insure against bad debts but necessary levels of
cover are being withdrawn on substantial and previously dependable customers.
We have sourced sufficient third party peat for our production requirements and will be able comfortably to supply projected demand in
the forthcoming season. A peat shortage in the market as a whole has underpinned price increases in growing media and, as transport costs
and polymer prices have fallen back substantially from their peak and fertiliser costs are expected to fall in the springtime, margins have
returned to acceptable levels in spite of our purchases of peat and peat substitutes from third parties.
Outlook
William Sinclair is less affected by the recent weakening of sterling than many of its competitors as it is the least exposed to Euro
zone costs. In addition, plant imports from the Dutch growers will become more expensive which will increase activity in UK nurseries and so
stimulate demand from our professional customers.
We are well placed to take advantage of this opportunity. In addition, as the lowest cost manufacturer of growing media, any increase in
customer demand towards no frills ranges as a consequence of the economic climate will strengthen our position.
Bernard Burns
Chief Executive
5 January 2009
Group Income Statement
for the period ended 30 September 2008
15 months to 12 months to
30 September 2008 30 June 2007
Before Except Before Except
Except. Items Except. Items
Items (Note 5 ) Total Items (Note 5)
Total
Notes �000 �000 �000 �000 �000
�000
Revenue 54,771 - 54,771 37,646 -
37,646
Operating expenses 53,367 361 53,728 36,187 (117)
36,070
------------------------------------------------
-----------------------------------------------
Operating profit 1,404 (361) 1,043 1,459 117
1,576
Share of post tax profits of
associates and joint ventures
accounted for using the equity
method
1 - 1 173 -
173
------------------------------------------------
-----------------------------------------------
Group operating profit from
continuing
Operations 1,405 (361) 1,044 1,632 117
1,749
Finance revenue 89 - 89 11 -
11
Finance costs (829) - (829) (326) -
(326)
Other finance income/(cost) - 217 - 217 12 -
12
pensions
------------------------------------------------
-----------------------------------------------
Profit from continuing
operations before
Taxation 882 (361) 521 1,329 117
1,446
Tax (expense) / credit (344) 105 (239) (284) (35)
(319)
------------------------------------------------
-----------------------------------------------
Profit for the period 538 (256) 282 1,045 82
1,127
-----------------------------------------------
----------------------------------------------
Profit for the period is
attributable to:
Equity holders of the parent 466 (256) 210 1,045 82
1,127
company
Minority interests 72 - 72 - -
-
-----------------------------------------------
-----------------------------------------------
538 (256) 282 1,045 82
1,127
-----------------------------------------------
-----------------------------------------------
Earnings per share (pence)
Basic EPS on profit for the 2.8p 1.3p 6.3p
6.8p
period 4
Diluted EPS on profit for the 2.8p 1.3p 6.2p
6.7p
period 4
Group Statement of Recognised Income and Expense
for the period ended 30 September 2008
Notes 2008 2007
15 mths 12 mths
�000 �000
Income and expense recognised directly in
equity
Revaluation of property - -
Actuarial (losses)/gains on defined benefit (2,467) 2,463
pension plans
-------- --------
(2,467) 2,463
Tax on items taken directly to or transferred 691 (641)
from equity
-------- --------
Net income recognised directly in equity (1,776) 1,822
Profit for the period 282 1,127
-------- --------
Total recognised income and expense for the (1,494) 2,949
period
--------- ---------
Attributable to:
Equity holders of the parent company 3 (1,566) 2,949
Minority interests 72 -
--------- ---------
(1,494) 2,949
--------- ---------
Group Balance Sheet
at 30 September 2008
2008 2007
Notes �000 �000
Non-current assets
Property, plant and equipment 16,733 12,900
Intangible assets 1,712 1,130
Investments accounted for using the
equity method 215 777
--------- ---------
18,660 14,807
--------- ---------
Current assets
Inventories 12,021 5,150
Trade and other receivables 8,119 10,981
Cash and short-term deposits 883 335
--------- ---------
21,023 16,466
--------- ---------
Total assets 39,683 31,273
--------- ---------
Current liabilities
Trade and other payables 10,176 9,824
Financial liabilities 6,997 119
Corporation tax payable 3 348
--------- ---------
17,176 10,291
--------- ---------
Non-current liabilities
Financial liabilities 2,576 637
Deferred tax liabilities 830 1,513
Provisions 209 189
Defined benefit pension plan deficit 4,475 2,303
--------- ---------
8,090 4,642
--------- ---------
Total liabilities 25,266 14,933
--------- ---------
Net assets 14,417 16,340
--------- ---------
Capital and reserves
Equity share capital 3 4,139 4,139
Capital redemption reserve 3 1,523 1,523
Revaluation reserve 3 3,498 3,566
Other reserves 3 176 176
Share based payments 3 70 51
Retained earnings 3 4,808 6,885
--------- ---------
Group shareholders' equity 14,214 16,340
--------- ---------
Minority interests 203 -
--------- ---------
Total equity 14,417 16,340
--------- ---------
Group Cash Flow Statement
for the period ended 30 September 2008
2008 2007
15 mths 12mths
�000 �000
Operating activities
Group operating profit 1,043 1,576
Adjustments to reconcile group operating profit to
net cash
inflows from operating activities
Depreciation and impairment of property, plant and 1,602 1,032
equipment
Amortisation and impairment of intangible assets 35 35
(Profit) on disposal of fixed assets (19) (291)
Share-based payments 19 23
Difference between pension contributions paid and
amounts
recognised in the income statement (78) (28)
Decrease/(increase) in inventories (5,198) (183)
Decrease/(Increase) in trade and other receivables 4,896 1,259
(Decrease)/increase in trade and other payables (2,193) (1,106)
Movement in provisions 20 19
---------- ----------
Cash generated from operations 127 2,336
Income taxes (paid)/received (77) (174)
---------- ----------
Net cash flow from operating activities 50 2,162
---------- ----------
Investing activities
Interest received 89 11
Sale of property, plant and equipment 148 606
Purchases of property, plant and equipment (1,618) (1,570)
Payments to acquire intangible fixed assets (129) (6)
Purchase of shares in subsidiary undertakings (3,875) -
Cash on consolidation of subsidiary undertakings (1,310) -
---------- ----------
Net cash flow from investing activities (6,695) (959)
---------- ----------
Financing activities
Interest paid (829) (320)
Dividends paid to equity shareholders of the parent (579) (496)
Dividends paid to minority interests (10) -
Dividends received from joint ventures - 47
New loans in the period 3,000 -
Repayment of borrowings (455) (72)
Repayment of capital element of finance leases and
hire purchase
contracts (138) (47)
---------- ----------
Net cash flow from financing activities 989 (888)
---------- ----------
(Decrease)/Increase in cash and cash equivalents (5,656) 315
Cash and cash equivalents at the beginning of the 335 20
period
---------- ----------
Cash and cash equivalents at the period end (5,321) 335
--------- --------
1 Statutory accounts
The Group Income Statement, Group Statement of Recognised Income and Expense, Group Balance Sheet and Group Cash Flow Statement for the
periods ended 30 September 2008 and 30 June 2007 are not statutory accounts within the meaning of Section 240 (5) of the Companies Act 1985.
The statutory accounts for the periods ended 30 September 2008 and 30 June 2007, 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
ended 30 June 2007 have been delivered to the Registrar of Companies and the statutory accounts for the period ended 30 September 2008 will
be delivered to the Registrar of Companies following the Annual General Meeting of William Sinclair Holdings plc.
The accounting policies used for the 2008 figures are unchanged on those used for the 2007 comparatives.
This preliminary announcement of the results for the period ended 30 September 2008 was approved by the Board of directors on 5 January
2009.
2 Analysis of Net Debt
1 July Cash 30 Sept
2007 flow 2008
�000 �000 �000
Cash at bank and in hand 335 548 883
Overdrafts - (6,204) (6,204)
Loans (670) (2,545) (3,215)
Finance leases (86) (68) (154)
---------- ---------- ----------
(421) (8,269) (8,690)
---------- ---------- ----------
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 2006 4,139 3,501 1,699 28 4,497 13,864
Total recognised income
and expense for the year - 108 - - 2,841 2,949
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
--------------- --------------- --------------- --------------- --------------- ---------------
At 1 July 2007 4,139 3,566 1,699 51 6,885 16,340
Total recognised income
and expense for the period - - - - (1,566)
(1,566)
Depreciation transfer - (68) - - 68 -
Share-based payment - - - 19 - 19
Equity dividends paid - - - - (579) (579)
--------------- --------------- --------------- --------------- --------------- ---------------
At 30 September 2008 4,139 3,498 1,699 70 4,808 14,214
--------------- --------------- --------------- --------------- --------------- ---------------
4 Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares outstanding during the period. 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 period plus the weighted average number of ordinary shares that would be
issued under the company's share option scheme.
2008 2007
�000 �000
Net profit attributable to equity holders of the parent - 210 1,127
continuing operations
Cost of share based payments 19 17
-------- --------
Diluted net profit attributable to equity holders of the 229 1,144
parent
-------- --------
2008 2007
No. No.
Basic weighted average number of shares 16,554 16,554
Dilutive potential ordinary shares
Employee share options 515 530
-------- --------
Diluted weighted average number of shares 17,069 17,084
-------- --------
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
2008 2007
�000 �000
Recognised in arriving at operating profit:
Redundancy costs on restructuring of Joseph Metcalf (361) -
business
Insurance proceeds - 300
Redundancy and dispute settlement costs - (183)
----------- -------
(361) 117
----------- --------
The decision was taken in July 2008 to restructure the Joseph Metcalf business. This followed the failure of negotiations with the local
authority to extend planning permission at the Oswaldtwistle site which would have allowed an intensification in the use of the site.
For the year to 30 June 2007 the following are relevant:
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.
6 Dividends paid and proposed
2008 2007
�000 �000
Declared and paid during the period:
Equity dividends on ordinary shares:
Final dividend for June 2007: 2.50p (June 2006- 414 331
2.00p)
Interim for September 2008: 1.00p (June 2007 - 165 165
1.00p)
---------- ----------
Dividends paid 579 496
----------- ---------
Proposed for approval by shareholders at the AGM:
Final dividend for September 2008: 1.0p (2007 - 165 414
2.50p)
---------- ---------
Subject to shareholders' approval the final dividend of 1.0p per share will be paid on 19 March 2009 to shareholders on the register on
20 February 2009.
7 Annual General Meeting
The Company intends to post the Report and Accounts to shareholders on 23 January 2009. The Annual General Meeting of the Company will
be held at The Bentley Hotel, Newark Road, South Hykeham, Lincoln, LN6 9NH on 26 February 2009 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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