Interactive Investor

William Sinclair out of cash

26th May 2015 13:10

Harriet Mann from interactive investor

After launching a "transformation programme" earlier this year, hard-up William Sinclair will run out of cash this summer. Bosses at the struggling compost to plant food and seed trays firm admit they may have to go cap in hand to the market and sell off assets to finance the turnaround. There is talk of more "aggressive operational changes", too.

Clearly, fixing loss-making parts of the business is harder, and more expensive, than first thought. So is addressing unprofitable customer contracts. Management won't say what the summer shortfall is, but it's likely to be significant.

"The directors are considering a number of strategic options which may include raising capital, disposal of assets and more aggressive operational changes to resolve the matter" said the company in a brief statement. "The directors are, however, confident that, with funding, the Transformation Plan will lead to the necessary operational improvement needed for the long term success of the business."

Chief executive Peter Rush was kicked out as Sinclair launched its turnaround in March. Former US meat company executive Stuart Burgin has been parachuted in as interim chief executive, and experienced number cruncher Sheryl Tye has just replaced finance director Peter Williams on an interim basis.

It's clear why. Sinclair shares have crashed by 90% since summer 2011 to a new low of just 21p.

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Earnings are seasonal - the green-fingered usually wait until the sun's out to spend - and the group has pumped £25 million into its new manufacturing facility at Ellesmere Port. But there has been a series of hiccups

In its end of year results, the group blamed negotiations over its long-term claim against Natural England regarding its peat bog interests at the Bolton Fell site for its losses. "The market has been competitive, we have suffered from some historic quality issues and we have been distracted by the negotiations with Natural England and the time and energy absorbed in relocating various elements of production," it said.

After four years, the horticultural group came to a £21.3 million settlement with Natural England over the closure of its peat extraction operations and a factory in Bolton Fell. The final instalment of the pay-out was received in July last year and helped pay-down some bills.

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