There were encouraging results from AIM quoted William Sinclair Holdings, the UK’s leading producer of commercial horticulture and branded garden products and owner of the J Arthur Bower’s brand, a name that will be familiar to all those gardeners out there!
The group’s customers include the large garden centre and DIY multiples such as The Garden Centre Group (formerly Wyevale), Wilkinson, Homebase and B&Q as well as an extensive range of independent garden centres.
Final results for the year ending September 2009 resulted in pre-tax profit of £1.2m PBT on sales of £46.3m and earnings per share of 6.8p. The total dividend of 3.5p results in a yield of c3.8% at the current share price.
Net debt of £7.0m was significant down from £8.7m at the prior year end and net assets increased to £15.9 million from £14.4 million (market capitalisation currently £14.9m) with tangibles of £20.3m.
A major factor for Sinclair is the availability of peat, so management’s comments that peat stocks are sufficient to meet expected demand in the 2010 season against a background of predicted industry wide shortages is very reassuring and seemingly gives the group a significant competitive advantage.
Continued progress at the group’s specialist soil business, Freeland, gives them the ability to reduce the peat content in their growing media, mitigating the impact of adverse weather conditions and providing a sustainable competitive advantage
Following the results the house broker upgraded their Financial Year 2010 profit before tax forecast to £1.7m (from £1.4m) on revenue of £49m leading to EPS of 7.3p and a forecast dividend per share of 4.0p.
The share price could also receive a big boost on the satisfactory conclusion of negotiations with Natural England regarding the potential compulsory purchase of their peat bog and factory at Bolton Fell in Cumbria. A voluntary agreement could be reached in the spring of 2010 as the Group seeks no more than its legal entitlement to compensation. They have been assured that funds are available to facilitate this which would probably involve a five year exit from the facility with reducing annual harvests allowing an efficient transfer of production to an alternative site.
