Recent torrential rain may provide relief for gardens parched by a dry winter, but garden supplier William Sinclair will be looking nervously at the outlook for the summer – especially if the UK's gardeners are restricted to tending their indoor succulents. That's because the company's profits are heavily weighted towards the second-half growing season. Still, the shares have held up in tough markets and the company's long-term defensive appeal remains intact.
Sinclair supplies most of the major gardening and DIY chains and improving conditions in May meant a flurry of sales. However, that spurt came alongside higher costs as hefty fuel prices bolstered transport and harvesting overheads – transport alone comprises 25 per cent of William Sinclair's cost base – causing reported profits to slide. Regulation is another concern as the government's approach to peat-free compost, currently under industry self-regulation, could change after heightened concerns over the environmental impact of peat harvesting. But management believes it has enough peat-free alternatives to cope. Meanwhile, the company's compensation claim against Natural England, after it gave up its interests at Bolton Fell in Cumbria, has now been referred to the Lands Tribunal.
Broker WH Ireland forecasts full-year pre-tax profit of £3.3m, giving EPS of 14p (£3.2m and 13.4p in 2011).
WILLIAM SINCLAIR (SNCL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 164p | MARKET VALUE: | £27.9m | |
| TOUCH: | 160-167p | 12-MONTH HIGH: | 206p | LOW: 143p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 91p | NET DEBT: | 60% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 26.1 | 0.64 | 2.7 | 1.8 |
| 2012 | 26.2 | 0.38 | 1.5 | 1.9 |
| % change | - | -41 | -44 | +6 |
Ex-div: 11 Jul Payment: 7 Aug | ||||
