William Sinclair says market pick-up too slow to meet forecast revenues

William Sinclair has issued a profits warning after a £5.8m shortfall in sales this spring.

The interim results to 31 March 2013, announced on 10 June 2013, highlighted the shortfall in horticulture sales as a result of the coldest spring in more than 50 years. 

Sinclair said: "We anticipated some recovery of this shortfall in the second half year.  Although sales in May were good, and our sales into the retail market in June and July were double those achieved in the same months in 2012, we have not fully reached our forecast revenues for the third quarter. 

"There is little scope to achieve any further sales recovery in the final quarter. This is because our sales are largely based on growing media, which is primarily a spring product. The recent good weather, whilst very helpful for our important retail customers, will have only a limited impact on our own sales. Our full year sales are therefore now expected to be lower than previously forecast.

Sinclair added that SuperFyba operations at the company's new site at Ellesmere Port have faced "processing difficulties" causing "additional expenses and will not produce as much SuperFyba in the second half year as it had previously forecast. This means significantly more production costs will be taken to operating costs instead of being recovered into stock."

Sinclair added: "The company believes that the current difficulties are a direct result of the pressure to accelerate SuperFyba production in response to the poor peat harvest in 2012.  This meant there were some compromises in the production process which have not proved reliable.  We recently engaged a consultant engineer to address these issues and solutions have now been identified. 

"The consultant has recommended a reduction in volumes while the solutions are implemented over the next six months. The much improved peat harvest in 2013 means that the short term pressure to produce SuperFyba in large volumes has abated, giving the Company the opportunity to accept these recommendations and to concentrate on improving the production process for SuperFyba which is the horticulture market's leading alternative to peat.

Corporate finance group Westhouse Research rated Sinclair as "neutral" and reduced the financial year end 2013 sales forecast to £47.7m (£48.7m) and now expect an adjusted loss before tax of £0.6m (£0.3m).

Westhouse added: "In our view, the long-term investment case for W. Sinclair remains intact but the substantial investment in Ellesmere Port means that it remains difficult to forecast FY2014E. Therefore, we are happy to retain our 130p target price and Neutral recommendation."

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