Sinclair (William) Holdings

Despite disappointing final results for the 15 months to last September, garden and commercial horticulture products specialist William Sinclair is worth investigating.

Not only have garden product sales demonstrated resilience during downturn, 'Sinclair' boasts reassuring asset backing.

Providing peat and fertiliser products to the likes of Tesco, B&Q, Wyevale and a host of garden centre independents, the company's New Horizon brand is a leader in the emerging peat-free garden compost and organic plant foods markets.

As foreshadowed by earlier warnings, cold weather during last year's peak Easter selling season and downpours, which depressed the peat harvest, dented sales and profits during the period. Nevertheless, acquisitions helped turnover (compared to a prior twelve-month period to June) 45% higher to £54.8m and a £520,000 profit was achieved in spite of escalating input costs pertaining to the surging oil price of the time. A final dividend of 1p was declared, giving a 2p total (2007: 3.5p).

In the light of events largely out of management’s control, the performance was creditable, underpinned by cost-cutting and the positioning of the business in recent years as the industry leader (in terms of cost and efficiency) in both peat- and non-peat-based composts.

With price increases pushed through and the oil price having fallen back dramatically, margins are said to be in recovery and analysts are looking for 2009 profits of £1.2m, giving EPS of 5.1p and a prospective multiple of sub-ten times. Moreover, house broker Arbuthnot’s 125p target price reflects what CEO Bernard Burns describes as a balance sheet ‘stuffed with’ tangible assets, valued at £16.7m and suggesting an undercooked market cap. Buy.

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