A shock profit warning halved William Sinclair' s (SNCL) market capitalisation in May. Following news that the compost and garden products group is about to receive a windfall cash injection, however, the shares have sprouted back.
After four years of negotiations, William Sinclair has finally reached a £21.3m settlement with Natural England. The compensation payment results from a 2010 agreement to close the company's peat extraction operations and a factory at Bolton Fell. It received a £9m interim payment four years ago, and will be paid the final balance of £12.3m in the next few weeks.
This should help clean up the group's soggy balance sheet. Although William Sinclair recently refinanced its banking facilities and raised £8.2m via convertible loan notes, it was still bogged down in £24.8m of net debt at the half-year mark.
Meanwhile, trading conditions are challenging. Sales in the all-important Easter period were not as strong as expected, inspite of favourable weather. The company has acknowledged it needs to "refresh its brands", and chairman Hugh Etheridge wrote in a statement that last year's decision to hike prices in response to a peat shortage "has proved to have had damaging longer-term consequences".
WILLIAM SINCLAIR (SNCL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 68p | MARKET VALUE: | £12m | |
| TOUCH: | 67-68p | 12-MONTH HIGH: | 154p | LOW: 51p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | na | |
| NET ASSET VALUE: | 61p | NET DEBT: | 227% | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 20.4 | -1.9 | -8.4 | 1.9 |
| 2014 | 21.8 | -3.7 | -17.9 | nil |
| % change | +7 | - | - | - |
