Rain Dampens Sinclair's Forecast: Share Price Sinks

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Shares in Sinclair Holdings plc (LSE:SNCL) bogged down today, slumping over 10% to an even 150.00 pence by the noon hour as the company issued a dismal trading update less than a month after releasing its first half results.

The June Forecast

Sinclair Holdings (aka William Sinclair) announced today that, further to their trading update of June 11th, it is now definitely expecting that their full-year results will come in at less than expectations.  In the June report, CEO Bernard Burns said, “In light of the economic conditions, management continues to take the necessary decisions to ensure costs remain tightly controlled and operational efficiencies are identified.  As a consequence, the outlook for the business remains in line with market expectations.”  The YTD revenue at that point was modestly ahead of year-on-year.

Rain, Rain, Go Away

The company’s interim results were based on realities up to and including March 31st.  Even though the early months of 2012 had been unusually cold and wet, it seemed reasonable that the weather would return to normal during April, May and June, giving Sinclair an excellent chance of recovery.  However, unseasonable rains continued throughout the period.  That has created two problems for Sinclair.  First, its peat bogs are thoroughly soaked and will require “a prolonged period” of dry weather before the company is able to resume full-scale harvesting.  That leads to the second problem:  Its main selling season is nearly over and the company does not see any way to recoup the losses experienced in the past three months.

Come Back Some Other Day

It’s not just the inability to harvest peat that has impacted Sinclair’s business.  The same cold, damp weather has kept home gardeners and professional landscapers from planting and decorating, so to some extent, the leading edge of the storm – consumer demand – has been down.  Aside from the obvious decline in orders, the silver lining is that the effect of the weather has been not only to reduce production, but also demand.  It’s quite possible that inability to meet demand could have had a much more significant impact on the company.

Despite the miserable results of the inclement weather, the future continues to look bright as the company continues to pursue its growth strategy, especially as it transforms to a peat-free product offering and continues to add to its growing base of synergistic companies.

Company Spotlight

Founded in 1850 by William Sinclair, the company was originally a local seed business in Lincolnshire.  Today the horticultural company has built a reputation as “the professional grower’s choice” with its broad line of gardening products.  The company produces and supplies about one million cubic metres of growing media per year.  Sinclair is a B2B enterprise that employs over 400 people in the UK.  In addition to its line of horticultural products, Sinclair has added an Industrial Aggregate division in Gainsborough.

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