WILLIAM SINCLAIR HOLDINGS PLC
("William Sinclair" or "the Company")
William Sinclair, one of the UK's leading suppliers of growing media to the horticulture industry, announces a Trading Update ahead of its preliminary results which will be announced on 3 January 2013.
UK harvest conditions
As previously reported, 2012 has been the wettest summer in the UK for 100 years and this has severely challenged the Company's ability to harvest peat from any of its bogs. During the final part of the peat harvesting season last month the unusually severe weather conditions have continued, creating widespread flooding, particularly in the north of the country, where the Company's peat bogs are located.
The record rainfall this year adversely affected customer demand for plant growing products across the entire horticulture industry. In the 12 months to July 2012 the UK growing media market and soil conditioner market declined by 19.2% and 18.8% respectively. These are the most important markets within which the Company operates. In contrast the pest control market (principally slugs and snails) increased by 5.6%. This demonstrates the distortion that climactic conditions have introduced to demand this season.
The very poor harvest and suppressed consumer activity experienced in the last few weeks will increase the negative impact on the Company's 2012 financial performance in addition to that reported previously with the result that the Company will miss market expectations for the year ended 30 September 2012.
European Peat Supplies
Poor weather conditions have also affected peat supplying regions beyond the UK, including Ireland, Scandinavia and the Baltic countries. The UK and Ireland have achieved approximately 30% of normal harvest levels with Scandinavia and the Baltic countries generally achieving between 30% and 50% of normal harvest levels.
This phenomenon has created firstly, an industry wide shortage of peat across Europe which the Company believes will lead to price rises of approximately 10-15 percent for peat based growing media for retail customers.
Secondly, the effect of the European peat shortage is expected to reduce the size of the UK professional growing sector which is particularly reliant on the use of peat. This contraction will negatively impact the Company's revenues for the year ended 30 September 2013, despite a 25% increase in peat prices within this sector.
Demand for peat alternative products
Due to the European shortage of peat the Company expects demand by the UK retail sector for peat alternatives to increase significantly before the 2013 spring growing season.
William Sinclair manufactures the industry's leading peat alternative called SuperFyba, a high quality growing media which is made from a renewable and widely available by-product created during the composting of household garden waste.
Production of SuperFyba has just come on stream at the Company's Doncaster site and a second, larger manufacturing plant will begin producing SuperFyba at the Company's newly acquired site at Ellesmere Port in November 2012. The Company has planning permission to produce SuperFyba seven days a week, 24 hours a day at this site.
In 2011 Salford Council turned down William Sinclair's planning application to harvest peat at its Chat Moss site.
The Company subsequently appealed to the Secretary of State for the Environment to have this decision overturned and fully expects its appeal to be successful. The ministry has delayed the announcement of the decision which had originally been promised for 19 September and the Company now believes the decision will not be made public for several weeks.
The Company is committed to its progressive dividend policy and it increased the interim dividend to 1.9p per share in August. However the final dividend for 2012 is likely to be lower than last year (2011: 4.4p per share) due to the impact of the climate conditions.
The Board fully intends to re-instate its progressive dividend policy in future financial years.
Bernard Burns has decided to step down as William Sinclair's Chief Executive and will resign from the Board in early 2013 once his replacement has been appointed.
After stepping down from the Board, Bernard will continue to work with the Company, retaining responsibility for the resolution of the Bolton Fell compensation claim. This is perhaps the most significant issue facing the Company at present and Bernard's expertise in the matter is paramount. The Board is delighted that he is willing to continue to manage this matter.
Bill Simpson, Chairman, William Sinclair, said:
"In the seven and a half years since Bernard joined the Board, the Company has made significant progress towards the strategic objectives of growing the Company both organically and by acquisition and achieving long term targets for profit and, consequently, total shareholder returns.
"Due to Bernard's close control of costs and long term vision William Sinclair will emerge from the current industry challenges with the right products at the right price, ready for the return of consumer buying in spring 2013.
"Bernard has brought to the Board a real sense of purpose and much radical thinking and innovative ideas. He will be badly missed and I am pleased that we have secured an on-going working agreement, albeit in a different role."
The Board remains confident that the Company's strategy will lead to significant growth in both turnover and profit in the medium and longer term. The performance in the year ending 30 September 2012 has been badly affected by unprecedented weather conditions and is not a reflection of the long term prospects of the business.
For further information:
William Sinclair Holdings PLC
Tel: 01522 537561
Bernard Burns, Chief Executive
Peter Williams, Finance Director
WH Ireland Limited
Tel : 0113 394 6619
Tel : 0207 220 1658