25 May 2012

Profits growth at William Sinclair

04/01/2012 Robert Tyerman

Acquisitive horticulture and garden products specialist William Sinclair Holdings (SNCL) is upbeat after annual profits 54 per cent ahead to £3.2 million pre-tax.

The Lincolnshire-based company, whose customers range from major retailers to independent garden centres, increased turnover nearly 12 per cent to £54.3 million in the year to September, helped by the acquisitions of another concern, Growing Success, and a speciality aggregates business for a combined outlay of less than £1.3 million.

AIM-quoted William Sinclair points out its pre-tax growth was flattered by a £460,000 provision in the previous year, while operating profits grew a more modest 13.6 per cent to £3.4 million. Earnings rose almost 38 per cent to 13.4p a share and the company, which ended its financial year with £3.4 million cash, plans to up the annual payout 24 per cent to 6.2p a share. 

Chief executive Bernard Burns explains AIM-quoted Wiliam Sinclair had a 'disappointing year' in its core business, because of a poor peat harvest, 'only 60 per cent of the year before', though early packaging purchases and distribution efficiencies helped mitigate the impact of rising oil prices, while some customers and competitors came under pressure from  their banks. With governments around the world committed to the eventual elimination of peat on environmental grounds, the company, which already produces 'highest-quality' peat-free products under the New Horizon label and says its new SuperFyba peat alternative, made from green compost, cannot keep up with demand.

Burns, who foresees a 'bumper start' to this year's February-to-May selling season, notes November's takeover of Yorkshire Horticultural Supplies to provide compost for SuperFyba, which cost 'less than £300,000', though a new plant will cost 'more than £1.5 million'. More takeovers are on the way, while analysts predict £3.3 million pre-tax profits this year and £3.6 million for 2012-13 and reckon the company, which has received £9 million interim compensation for phasing out production at its Bolton Fell peat bog in Cumbria at the behest of state body Natural England and turned down a final £12 million offer, could be hoping for £18 to £20 million when the Lands Tribunal makes its ruling in a few years.

Highlighted by Growth Company Investor last year at 173.5p, William Sinclair shares have traded between 249p and 143p over the past year and now stand at 155p, where they value the company at £26.4 million. Despite encouraging longer-term prospects, they may not shine in the short-term, though a 4 per cent yield adds comfort for income seekers. 

                  

Tags: AIM market, Bernard Burns, Growing Success, Natural England, SuperFyba

Sector: Household Goods

Companies: William Sinclair

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