William Sinclair : Unaudited results for the six months ended 31st March 2014

30 June 2014

WILLIAM SINCLAIR HOLDINGS PLC
("William Sinclair", the "Company" or the "Group") Unaudited Interim Results for the six months ended 31 March 2014
William Sinclair Holdings PLC is one of the UK's leading producers of horticulture products. William Sinclair's customers include The Garden Centre Group, B&Q, Tesco, Wilkinson, Morrisons and Makro as well as a large number of independent garden centres and garden centre groups.
Period Highlights

• Development of Ellesmere Port on budget and on time

• Revenue £21.8 million (2013: £20.4 million)

• Loss before exceptional items and tax £1.8 million (2013: £1.7 million)

• Exceptional refinancing costs of £1 million and dual running costs of £0.3 million

• £8.24 million raised via convertible loan notes, refinancing of banking facilities

• Relocation of all Silvaperl operations from Gainsborough completed

• Lease agreed for further 10 acres of pallet storage, option to acquire additional 12 acres

Current Period Highlights

• Bolton Fell compensation sum settled at £21.25 million. Cash balance of £12.25 million to be received by 1

August 2014

• Strong financial position supports on-going development work at Ellesmere Port and modernisation of the

Company

• New SuperFyba equipment installed and producing high quality product

• Installation of new mixing and bagging lines for growing media production on track

• Marketing strategy and new product plans finalised for 2015 season

Peter Rush, Chief Executive, William Sinclair Holdings PLC, said:
"We are delighted with the £21.25 million agreement to settle our claim at Bolton Fell. After four years of negotiations this is a significant step forward and our strong financial footing will enable us to accelerate the Company's transition to become the UK's most advanced manufacturer of horticulture products. While there are further milestones to be met the largest investments have been committed and good progress has been made with the more challenging work. Improvements to product quality and efficiency benefits are already being created.
"Product quality and consistency are paramount to our potential and existing customers and we will be working closely with them to ensure that our forthcoming 2015 product range not only matches these expectations but exceeds them."
For further information:
William Sinclair Holdings PLC Tel: [phone]
Peter Rush, Chief Executive
Peter Williams, Finance Director
Mark Way, Corporate Communications Tel: [phone]
WH Ireland
Andrew Kitchingman Tel: [phone]
Nick Field Tel: [phone]
CHAIRMAN'S STATEMENT
For the 6 months ended 31 March 2014 (unaudited)
Bolton Fell compensation
We are delighted to announce that the Company has reached a settlement over the buy-out of the Company's land interests and peat extraction rights at Bolton Fell and the resultant closure of the factory at the site. The tribunal case to decide the level of compensation was due to start on Monday 30 June 2014 but following a period of intense negotiations a final settlement figure was agreed instead. The total compensation sum has been fixed at £21.25 million inclusive of costs. The Company was paid £9 million in April 2010 and the final balance of £12.25 million will be received by the Company within the next few weeks.
The Board is very pleased with this outcome and wishes to express its sincere thanks to the whole Sinclair team. Our professional advisers and, most importantly, our own staff, have worked very hard to achieve this successful conclusion. The cash receipt will assist the Group to progress with its ambitious development plans.
Trading Review
Trading conditions in the six months to March 2014 were challenging as had been expected. This was made harder by the refinancing of the Company which meant our strategic plans were put on hold for four months.
Sales in the period were reasonable in the retail sector, with the new business from a major garden centre company starting to come on stream. However, a decision made 18 months ago in response to the shortage of peat for the professional sector, to raise prices significantly has proved to have had damaging longer-term consequences. As a result, our trading with this sector of the market is substantially down on previous years.
Since the disruption caused by the refinancing, our plans to develop both the manufacturing facility at Ellesmere Port and the marketing plans have progressed well.
We have commissioned new plant to screen and wash the composted wood from our green compost suppliers. This has resulted in a significantly improved input material for the SuperFyba processing plant which, in turn, means a very high quality product is now being produced. In addition the new mixing and bagging lines for the advanced manufacture of our growing media products are on course to be operational on time and within budget for production to commence in September 2014.
We have completed a full review of all of our consumer products and have developed some exciting new positioning strategies for the J Arthur Bowers and Growing Success brands, as well as consolidating on the success of the market leading Deadfast brand. We have also initiated some innovative new products and feedback from customers who have seen the preliminary plans has been very encouraging.
The Company's speciality soils business, Freeland Horticulture, was adversely affected by the winter floods but has since recovered well with performance significantly ahead of the previous year. Freeland continues to benefit from the improving construction and landscaping sectors. Silvaperl's perlite and vermiculite operations have been transferred successfully from Gainsborough to our new factory at Ellesmere Port and efficiencies are being gained as production levels increase.
Sales since the half year end, in the all important Easter period, have not been as strong as expected, despite the favourable weather. Although initially substantially ahead of last year, sales in the retail sector remained weaker than expected. Combined with the problems within our professional division and the pressure on margins generally, full year results are expected to be disappointing.
During the period we raised £8.24 million of convertible loan notes to provide additional capital and also refinanced our banking facilities. The costs of this refinancing exercise were considerable and are shown as an exceptional item. In addition we have continued to incur dual running costs for the new site at Ellesmere Port. These exceptional costs will continue until the full closure of the Boothby site which is planned to be completed by the end of the financial year.
Outlook
Notwithstanding our short-term challenges, the progress outlined above gives us confidence that by the end of this year significant progress will have been made in the modernisation of the Company. With a financial position supported by the agreement reached for Bolton Fell, we will move forward with a number of market leading brands and a highly efficient, state of the art manufacturing facility that has the capability to produce for our customers the best quality and most innovative products in the industry.
The Company will continue to make significant capital investment for the foreseeable future as well as maintain its investment into existing and new products. As a consequence the Board has decided not to pay an interim dividend.
The Board intends to return to its progressive dividend policy once the restructuring of the Company is complete and sales recovery is well underway.
Hugh Etheridge
Chairman
Group Income Statement
for the six months ended 31 March 2014 (unaudited)
Six months ended
31 March
2014
Six months ended
31 March
2013
Year ended
30 Sept
2013
Notes £'000 £'000 £'000
Revenue 21,775 20,446 46,479
Operating expenses (23,587) (22,106) (46,661)
Group operating loss before exceptional items (1,812) (1,660) (182) Exceptional items 4 (1,259) - (777)

Group operating loss after exceptional items	(3,071)	(1,660)	(959)
Finance income	3	3	3
Finance costs	(382)	(172)	(161)

Other finance costs - pensions (240) (57) (65)

Loss before taxation (3,690) (1,886) (1,182) Tax credit 1 621 406 164

Loss for the period	(3,069)	(1,480)	(1,018)
Loss for the period is attributable to: Equity holders of the parent company	(3,069)	(1,433)	(977)

Minority interests - (47) (41)
All results relate to continuing operations.

(3,069) (1,480) (1,018)
Earnings per share (pence)
Basic EPS on loss for the period 3 (17.9)p (8.4)p (5.7)p
Dividend per share 2 0.0p 1.9p 3.0p
Group Statement of Comprehensive Income
for the six months ended 31 March 2014 (unaudited)
Six months ended
31 March
2014
Six months ended
31 March
2013
Year ended
30 Sept
2013
£'000 £'000 £'000
Loss for the period (3,069) (1,480) (1,018)
Other comprehensive income
Amounts which will not be reclassified subsequently to the income statement
Actuarial (loss)/gain on defined benefit pension scheme (675) (1,202) 1,465
Tax on items taken directly to or transferred from equity 135 316 (347)

Other comprehensive income, net of tax (540) (886) 1,118

Total comprehensive income for the period	(3,609)	(2,366)	100
Attributable to: Equity holders of the parent company	(3,609)	(2,319)	141

Minority interests - (47) (41)
(3,609) (2,366) 100

Group Statement of	Equity	Share Capital
Changes in Group	share	premium redemption Revaluat'n	Other	Retained	Minority	Total

Shareholders' Equity
(Unaudited)
capital
account
reserve
reserve reserves
earnings Total
interests
equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

At 1 October 2013 4,265 150 1,523 9,035 176 (955) 14,194 275 14,469
Loss for the six months to
31 March 2014 - - - -
-
(3,069) (3,069) - (3,069)
Depreciation transfer - - - (48) - 48 - - -
Actuarial losses on defined benefit pension scheme
Tax on items taken directly to
or transferred from equity
- - - - - (675) (675) - (675)
- - - - - 135 135 - 135

Total comprehensive income - - - (48) - (3,561) (3,609) - (3,609)

Equity shares issued 54 - - - - (54) - - - Share based payments - - - - - 54 54 - 54
Equity dividends paid - - - - - - - - -

Transactions with owners 54 - - - - - 54 - 54

At 31 March 2014 4,319 150 1,523 8,987 176 (4,516) 10,639 275 10,914

or transferred from equity - - - - - 316 316 - 316
Total comprehensive income
- - - (102) - (2,217) (2,319) (47) (2,366)

Equity shares issued 9 - - - - - 9 - 9
Share based payments - - - - - 60 60 - 60

Equity dividends paid - - - - - (444) (444) - (444)

Transactions with owners 9 - - - - (384) (375) - (375)

At 31 March 2013 4,265 150 1,523 8,688 176 (2,771) 12,031 286 12,317

At 1 October 2012 4,256 150 1,523 8,790 176 (170) 14,725 333 15,058 (Loss)/profit for the year to
30 September 2013 - - - - - (977) (977) (41) (1,018)
Depreciation transfer - - - (97) - 97 - - - Actuarial losses on defined
benefit pension scheme - - - - - 1,465 1,465 - 1,465
Tax on items taken directly to

or transferred from equity - - - 342 - (689) (347) - (347)
Total comprehensive income

- - - 245 - (104) 141 (41) 100
Equity shares issued 9 - - - - (9) - - - Share based payments - - - - - 120 120 - 120

Deferred tax - - - - - (93) (93) - (93) Equity dividends paid - - - - - (699) (699) (17) (716) Transactions with owners 9 - - - - (681) (672) (17) (689)

At 30 September 2013 4,265 150 1,523 9,035 176 (955) 14,194 275 14,469
Group Statement of Financial Position
as at 31 March 2014 (unaudited) As at
31 March
2014
As at
31 March
2013
As at
30 Sept
2013
Non-current assets
Notes £'000 £'000 £'000
Property, plant and equipment 23,237 20,471 21,234
Intangible assets 1,734 1,848 1,784

Deferred tax assets 351 787 162
25,322 23,106 23,180

Current assets
Inventories 13,620 13,414 11,580
Trade and other receivables 23,892 19,982 10,953

Corporation tax recoverable 492 599 - Cash and cash equivalents 867 285 784
38,871 34,280 23,317

Assets held for sale 7,514 7,514 7,514

Total assets 71,707 64,900 54,011

Current liabilities
Trade and other payables 14,209 12,804 9,109
Financial liabilities - borrowings 15,458 16,064 10,373

Corporation tax payable - - 75
29,667 28,868 19,557

Receipt from Natural England 9,000 9,000 9,000
38,667 37,868 28,557

Non-current liabilities
Financial liabilities - borrowings 10,189 - - Provisions 149 137 145

Defined benefit pension plan deficit 11,788 14,578 10,840
22,126 14,715 10,985

Total liabilities 60,793 52,583 39,542

Net assets 10,914 12,317 14,469

Capital and reserves
Equity share capital 4,319 4,265 4,265
Share premium account 150 150 150
Capital redemption reserve 1,523 1,523 1,523
Revaluation reserve 8,987 8,688 9,035
Other reserves 176 176 176
Retained earnings (4,516) (2,771) (955)
Group shareholders' equity 10,639 12,031 14,194
Minority interests 275 286 275
Total equity 10,914 12,317 14,469

Group Cash Flow Statement
for the six months ended 31 March 2014 (unaudited)
Six months ended
31 March
2014
Six months ended
31 March
2013
Year ended
30 Sept
2013
£'000 £'000 £'000
Net cash flow from operating activities (12,219) (7,380) 706

Net cash flow from investing activities (2,895) (1,643) (3,274) Net cash flow from financing activities 5,428 (769) (1,034) Decrease in cash in the period (9,686) (9,792) (3,602) Opening cash and cash equivalents (4,589) (987) (987)
Decrease in cash and cash equivalents (9,686) (9,792) (3,602)
Closing cash and cash equivalents (14,275) (10,779) (4,589)

Increase in provisions 4 5 8
Cash generated from operations (12,219) (7,444) 341
Income taxes received / (paid) - 64 365
(12,219) (7,380) 706

Six months ended
31 March
2014
Six months ended
31 March
2013
Year ended
30 Sept
2013
£'000 £'000 £'000

Cash flow from investing activities
Interest received	3	3	3
Sale of property, plant and equipment	95	135	236
Purchase of property, plant and equipment	(2,993)	(1,781)	(3,456)

Payments to acquire intangible fixed assets - - (57)
(2,895) (1,643) (3,274)

Issue of new shares 54 9 -
Reconciliation of net cash flow to movement in net debt

5,428 (769) (1,034)
Six months ended
31 March
2014
Six months ended
31 March
2013
Year ended
30 Sept
2013
£'000 £'000 £'000
Decrease in cash and short term deposits (9,686) (9,792) (3,602) Cash flow from change in borrowings (5,505) 162 162
Movement in net debt in the period (15,191) (9,630) (3,440) Net cash at 1 October (9,589) (6,149) (6,149)
Net (debt)/cash at period end (24,780) (15,779) (9,589)

Notes to the financial information
1. Taxation
The taxation charge on ordinary activities is calculated by applying the Directors' best estimate of the full year effective tax rate to the profit before taxation.
2. Dividend
A final dividend of 1.5p per share (2013: 2.6p) was paid on 17 April 2014 to shareholders on the register on 7 March
2014. An interim dividend of nil per share (2013: 1.5p) will be paid this year.
3. Earnings per share
Basic earnings per share have been calculated by reference to a weighted average of 17,112,890 (2013: 17,038,629)
shares in issue during the period.
4. Exceptional Items
During the period the Group undertook a refinancing exercise to raise a total of £8.24 million of convertible loan notes. In addition the Group moved its banking relationship from Lloyds Bank Group to Royal Bank of Scotland. This refinancing exercise cost a total of £987,000 in the period.
In addition the specific extra cost of running two sites, at Boothby and at Ellesmere Port, during the period are estimated at £272,000.
The above two items are show as exceptional costs in the period. No exceptional costs are shown for the six month period to 31 March 2013 as activity at the new site was limited at that time.
For the year to 30 September 2013 exceptional items comprised £178,000 in respect of the closure of operations at
Knottingley and Gainsborough, £230,000 in respect of refinancing costs and £369,000 in respect of dual running costs.
5. Basis of preparation
The financial information set out in the interim report has been prepared in accordance with accounting policies under International Financial Reporting Standards as adopted by the European Union ('IFRS') as detailed in the financial statements for the year ended 30 September 2013. These policies are expected to be followed in the financial statements for the year ending 30 September 2014.
The interim report has been approved by the Board of Directors and is neither audited nor reviewed. The interim financial information does not constitute statutory accounts within the meaning of section 434 of the Companies Act
2006.
The financial information for the year ended 30 September 2013 is extracted from the audited accounts for that period. Those accounts have been delivered to the Registrar of Companies. The auditors' report on them was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
The Group does not consider that any standards or interpretations issued by the International Accounting Standards
Board (IASB), but not yet applicable, will have a significant impact on the financial statements for the year ending
30 September 2014.
A copy of this interim report will be posted to shareholders shortly and will be available to view on the Company's website at www.william-sinclair.co.uk.
6. Bolton Fell
William Sinclair is in the process of disposing of its peat bog interests at Bolton Fell to Natural England following the
terms of an agreement signed in March 2010. The final compensation sum was due to be determined by the Lands Tribunal in July 2014 but on 27 June 2014 the Company signed a settlement agreement instead. This agreement provides for a payment to the Company of £12.25 million by 1 August 2014. The Company's land interests at Bolton Fell will now all be transferred as originally agreed.
William Sinclair ceased harvesting on the whole of Bolton Fell Moss in November 2013 and has completed its permitted off take of peat from the site. The factory site itself has also now ceased production. The task of regenerating the peat bog is the responsibility of Natural England.