LONDON (SHARECAST) - A number of companies have used Britain's lousy summer as a reason - some would say excuse - for poor performance, but gardening products supplier William Sinclair has more justification than most.
The group has warned that full year profits will be below market expectations, sending the shares to a 52-week nadir, while the final dividend for the current year is set to be lower than last year's final divi of 4.4p. The board fully intends to re-instate its progressive dividend policy in future financial years.
It is the second profit warning the company has issued in the second half of 2012, and once again heavy rainfall is to blame. Bernard Burns, the Chief Executive Officer, looks like he might be carrying the can for the collapse in the share price, as he has announced he will resign from the board in early 2013 once his replacement has been appointed.
The wettest summer in the UK for 100 years has caused widespread flooding in the area where the company's peat bogs are located, hampering the company's ability to harvest peat.
The situation has not been much better in other areas where peat is harvested, and the group expects shortages of supplies will lead to price rises of around 10% to 15% for peat based growing media at the shop till.
On top of that, the effect of the European peat shortage is expected to reduce the size of the UK professional growing sector which is particularly reliant on the use of peat. So, despite the anticipated increase in prices, the company expects revenues will take a hit in the current financial year, which runs to the end of September.
Fortunately, Sinclair makes the industry's leading peat alternative - SuperFyba - and demand for peat alternatives is expected to grow significantly before the 2013 spring growing season.
To meet this demand, Sinclair will begin producing SuperFyba at its newly acquired site at Ellesmere Port from November 2012. The company has planning permission to produce SuperFyba seven days a week, 24 hours a day at this site.
The lousy weather has hit demand for plant growing products, however, with the company reporting that the UK "growing media" market and soil conditioner market declined by 19.2% and 18.8% respectively in the 12 months to July 2012. These two markets are the bedrock of Sinclair's business.
As might be expected, the board tried to put a positive spin on things, emphasising the medium and long-term prospects of the group.
"The performance in the year ending September 30th 2012 has been badly affected by unprecedented weather conditions and is not a reflection of the long term prospects of the business," the company said.