WILLIAM SINCLAIR HOLDINGS PLC

("William Sinclair", the "Company" or the "Group")

Audited Preliminary Results for the 12 months ended 30 September 2014

William Sinclair Holdings PLC is the most technically advanced manufacturer of growing media in the UK horticulture market. Customers include The Garden Centre Group, B&Q, Tesco, Wilkinson and Morrisons as well as a large number of independent garden centres and garden centre groups.

Operational Highlights

·      Commencement of operations at new 50 acre site at Ellesmere Port

·      Installation of state of the art screening, mixing and bagging facility

·      Improved product quality

·      Healthy stocks of harvested peat to meet customer demand

·      Significant upgrade to quality and volumes of SuperFyba reducing dependence on future peat harvest

·      Restructured sales capability, significant investment in key brands and new products

·      Cessation of operations at Bolton Fell, Gainsborough and Knottingley

·      Settlement with Natural England

Financial Highlights

·      Revenue £46.2 million (2013: £46.5 million)

·      Profit before tax £1.95 million (2013: loss before tax £1.67 million)

·      Underlying EBITDA loss £0.85 million (2013: profit £1.78 million)

·      £12.25 million final payment from Natural England (total compensation: £21.25 million)

·      £8.24 million raised to maintain development of Ellesmere Port

·      Net debt to bank £3.4 million (2013: £9.6 million)

·      Loan notes balance £8.7 million (2013: nil)

Peter Rush, Chief Executive, William Sinclair Holdings PLC, said:

"The substantial part of the £25 million investment at Ellesmere Port is complete and we now consider William Sinclair to be the most technically advanced manufacturer in the UK in terms of production capacity, consistency and efficiency. Ellesmere Port will drive our strategy of seeking to increase our share of the growing media market and capitalising on some of our leading brands.

"Solid foundations have now been built. Further investment and activity will be required to complete the modernisation strategy. However, the re-launch and promotion of our key brands have resulted in positive reactions from our customers against a backdrop of competitive market conditions. Together with the restructured sales force the Company intends to rebuild sales lost during the disruption caused by Ellesmere Port's development.

"William Sinclair has changed significantly during the year and we can begin to look forward to benefiting from the strengths and opportunities the Company has created."

William Sinclair Holdings PLC                        Tel:  01522 537 561

Peter Rush, Chief Executive

Peter Williams, Finance Director

WH Ireland                                         

Andrew Kitchingman                                         Tel:  0113 394 6600

Paul Shackleton                                   

Liam Gribben                                        

CHAIRMAN'S STATEMENT

During the year William Sinclair continued its strategy of creating the most advanced manufacturing site in the UK horticulture industry at Ellesmere Port.

The results to 30th September 2014 were disappointing, with an underlying EBITDA loss of £0.85 million on turnover of £46.2 million, a slight reduction on the previous year.  At the same time there was a considerable level of exceptional costs (which are outlined in the Strategic Report), offset by the proceeds from the claim against Natural England regarding our peat bog assets at Bolton Fell.  Underlying EBITDA is defined as operating profit before exceptional items, interest, depreciation and amortisation.

As a result of the very significant level of capital expenditure in the year and the lack of a settlement with Natural England at the time, the Company raised just over £8 million in convertible loan notes in December 2013.

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.  Overall, although gaining business from The Garden Centre Group we lost business elsewhere.

The major achievements at Ellesmere Port during the year were the transfer of the Silvaperl operations from Gainsborough, the very significant upgrade to the SuperFyba operations and the installation of the new screening, mixing and bagging facility following the closure of the Bolton Fell operations.

Each one represented a considerable challenge and they have all been achieved but each caused an element of disruption to production and to the smooth running of the business.  Some of these issues were caused by installation and commissioning of plant and some were caused by the fact that Ellesmere Port is effectively a start up site with a new team needing to become familiar with operating practices and procedures.  We are beginning to see some of the benefits of concentrating more operations onto one site and this will increase once more volume is going through the site and once stable operations allow for continuous improvement.

Following the installation of the growing media line at Ellesmere Port with its enhanced screening and mixing capability, and subsequent improvements to protect peat stocks from the weather, we believe our product quality is better than ever.  We will look to improve our customer service levels by working more closely with our haulage partners.  Combined with our high product quality this should enable us, over time, to recover much of the professional business lost in recent years and make increased inroads into the retail sector.

During the very significant upgrade to the SuperFyba operations, which was delayed five months by the process of having to refinance our banking facility, production was severely restricted.  In addition our opportunity to use SuperFyba reduced during the late spring and summer months due to the impact of the closure of Boothby, the development of Ellesmere Port and our new product packaging.  However we now have the capability to produce SuperFyba of high quality at significant volumes.  We hope that the availability of a peat replacement made from recycled and reformulated green waste will provide momentum to helping achieve the UK government's voluntary 2020 peat reduction targets.

An additional benefit of the growth in SuperFyba will be considerably reduced exposure to poor peat harvests. Partly because of the increased usage of SuperFyba in our growing media for the coming selling season, we have surplus peat stocks which already provide comfort for the following selling season.  In any event our peat bogs are in the best condition they have been in for years and initiatives have been taken to improve harvesting potential.

As we progress up the learning curve at Ellesmere Port, from a customer service, manufacturing and logistics viewpoint, there will inevitably be challenges.  We will endeavour to achieve the best customer service possible as we work through these challenges.  We remain confident that Ellesmere Port is on track to become a world class facility and will be able to provide first class customer service in the coming years.

At the same time as the very significant changes to our manufacturing operations we have streamlined our sales and marketing operations to provide more support to our key brands, J Arthur Bower, Growing Success and Deadfast.

Performance at Freeland Horticulture has been strong.  All of the business lost following the completion of the Olympic site contracts has been replaced and the specialist soils business is expanding across the country. Freeland Horticulture also gained important composting contracts at their Wroot facility and are now an important supplier of raw material for SuperFyba.

As with most businesses we have a range of financial covenants with which we are obliged to comply.  Our forecasts show us meeting these tests with sufficient headroom.  However in the event that the ongoing transformation of the business and the bedding in of operations at Ellesmere Port should threaten that position then the Group will take various cost cutting measures to reduce its overheads and will accelerate the disposal of certain surplus properties.  Our bank is aware of these options and has expressed its support.

I would like to thank all the staff within the William Sinclair Group for their very hard work over the last 12 months.  I would particularly like to thank the staff at all the sites which closed in the year, in many cases working up to and through the closure and helping with the commissioning of the new equipment at Ellesmere Port.  Your dedication was greatly appreciated.

I would also like to thank my predecessor Hugh Etheridge who was Chairman of the Company through a difficult period up to receipt of the Natural England monies.

The Company has changed fundamentally over the last 12 months, and now has a modern production facility, a top performing alternative to peat, a strong brand portfolio and what we believe is the best quality product on the market.  These strengths will be pivotal in our efforts to regain market share and begin to rebuild sales.

Rupert King

Chairman

CHIEF EXECUTIVE'S STATEMENT

Introduction

2014 was a very challenging year for William Sinclair.  However the Company's modernisation programme has continued and good progress was made with the development of Ellesmere Port.

While more work remains, the substantial part of the main investment at our £25 million growing media supersite at Ellesmere Port is complete.

As a result we moved closer towards our objective of transforming William Sinclair into an efficiently structured, consumer-led organisation based on leading technology, innovative brands and new product development.

As part of this process, we restructured our sales organisation into a single team and reallocated the subsequent cost savings into funding substantial new brand development and marketing activities.

We also completed the development of SuperFyba 2.0 and commenced its manufacture.  With a secure supply of renewable materials, we now have the opportunity to leverage SuperFyba's full potential.

Once complete William Sinclair will have an unrivalled capacity for the mass-volume manufacture of the products our professional and retail markets demand to consistently high quality standards.

Financial Highlights

Sales for the year were down slightly at £46.2 million (2013: £46.5 million) following the loss of customers by the professional division.  In addition some sales were lost during the closure of our Boothby site.  An improved contribution from Freeland Horticulture resulted in group revenues remaining relatively flat.

Our pre-tax losses before exceptional items of £3.72 million reflected the tough trading conditions and pressure on pricing.  Margins also came under pressure as costs increased, due in part to higher than normal overheads and the transportation of stock to the various manufacturing sites.

While we started to realise efficiency gains from the relocation of some of our operations to Ellesmere Port, the Group's underlying EBITDA loss for the year was £0.85 million.

We had a number of exceptional items in the year the net impact of which was a gain of £5.7 million.  In June we reached a resolution of the long-term claim against Natural England regarding our peat bog interests at our Bolton Fell site.  An overall sum of £21.25 million was agreed and the balance of £12.25 million was received in July 2014 following the receipt of an initial £9 million in April 2010.  The settlement has been accounted for in full in the year giving rise to a gain of £9.5 million.

To maintain our investment in new equipment at Ellesmere Port we needed to raise additional capital.  We successfully raised £8.24 million through the issue of secured redeemable convertible loan notes, mainly to existing shareholders in the Company.  At the same time we also refinanced our £25 million banking requirements to an asset based facility provider.  This type of finance is well suited to support the seasonal nature of our operations.  This process incurred exceptional costs of £1.4 million.

Other exceptionals of £1.3 million were incurred by the dual running costs of our Boothby site, prior to its closure.

Finally, our SuperFyba peat free product went through a major phase of improvement work.  However this process temporarily interrupted SuperFyba's production leading to an under recovery of costs and a further exceptional item of £0.9 million.

Net debt due to our bank reduced by £6.2 million to £3.4 million.  In addition the Company has loan note debt of £8.7 million at the year end including rolled up interest.

Reflecting the capital investment still required to complete the development of Ellesmere Port and the poor trading result, the Board has decided not to pay a dividend.

Operational Highlights

Production at our new 50-acre commercial, technical, operational and logistical centre of excellence at Ellesmere Port began in September 2014 signalling a new era for the UK's wider horticultural industry.  Following the installation of new growing media plant (screening, mixing and bagging equipment) we are now the most technically advanced manufacturer in the UK in terms of production capacity and consistency. 

The new site has the potential to increase capacity over the next two years, and is already home to the manufacture of our Silvaperl, Growing Media and SuperFyba product groups.

The move of Silvaperl production from our Gainsborough manufacturing site is providing the efficiency gains that we expect to make across all product groups and as volumes increase further economies of scale will be generated.

Ellesmere Port is also now home to all production of our SuperFyba 2.0 peat alternative, which we launched in September 2014.  SuperFyba 2.0 gives us a major opportunity to produce growing media products containing significantly reduced levels of peat of comparable quality and costed at the same level as peat.  Critically, we now have a fully secure and sustainable supply of materials, aided by our own green compost site at Wroot near Doncaster. 

This improved version of our original product is already a key ingredient in many of our retail compost products and is currently being blended with peat to produce a new high performance multipurpose growing media for 2015.

In independent trials this outperformed a 100% peat product and equivalent multipurpose products from leading competitors.

While the development of SuperFyba 2.0 is highly significant, we also made major investments in draining and improving our Scottish mosses.

This work has improved the harvesting potential of high-quality professional and retail peat and following a satisfactory peat harvest, we have sufficient high quality peat stocks for the 2015 season, and some additional product remaining for 2016.

Recent expenditure in both of these areas is now complete and the combination of our improved Scottish resources and SuperFyba 2.0 production capabilities means we now have healthy levels of peat and peat alternative resources.

Freeland Horticulture - Specialist Soils Division

Freeland Horticulture ("Freeland") recovered well, replacing the Olympic Park contracts with new sales off the back of the continued improvement of the construction sector.  With its depth of specialist soil knowledge Freeland will continue targeting the landscaping sector nationwide.

Freeland also has a growing focus on developing its composting business.  Its composting site at Wroot has become one of the largest in the country with composting volumes growing over 50% during 2014.

During the processing of green waste on behalf of nearby councils, the Wroot operation has the extra benefit of creating green compost which is high in plant nutrients.  This is used by Freeland in the make up of its own specialist soils.

Wroot also creates oversize (composted wood) thereby guaranteeing the supply of quality raw material for the manufacture of SuperFyba 2.0.

With a proven ability to run composting operations efficiently Freeland is looking to grow this side of its business, both organically or by potential acquisitions.

Sales Growth

During the year we appointed several new members of our senior management team, each with a proven record of success and expertise in our sector.

By bringing together responsibility for our Professional and Retail divisions under a single director and team, we aim to promote collaboration across both of our key product groups.

The programme of investment in brand development, now complete, has consolidated and repositioned our brands into six key category groups, including J Arthur Bower, Growing Success and Deadfast.  While this streamlining has caused some disruption to our sales effort in the market we believe that our offer is now more compelling to the major retail groups.

Our brand and marketing decisions will increasingly be based on having greater in-depth understanding of our customers and is now central to the new more consumer-focused culture we are creating.

William Sinclair Staff

As part of the agreement with Natural England, William Sinclair has now ceased the majority of its operations at Boothby.  I would like to thank all of our Boothby staff there for their significant efforts and co-operation, both during the period of negotiation with Natural England and during the site's closure.

I would also like to thank the staff located at Gainsborough and Knottingley for their hard work, loyalty and co-operation during the closures of these manufacturing sites, and to the staff at Wroot during the relocation of its SuperFyba operation to Ellesmere Port.

Outlook

We anticipate that the growing media market will remain highly competitive and that pressure on pricing will continue.  However, the capacity and efficiencies generated by Ellesmere Port will drive our strategy of seeking to increase our share of the growing media market and capitalising on some of our leading brands.

Our growing media ambition is to be the most technically advanced and efficient manufacturer of consumer-focused products.  In our specialist soils division, Freeland Horticulture will continue to increase its geographical reach across the UK following the resurgence of the construction sector.  Our Scottish mosses will be well maintained and receive continual investment to protect these important assets.

Our new and refreshed brands based on close consumer understanding have already received favourable feedback and will be promoted aggressively during 2015.

We are focused on building stronger relationships with our key customer groups via all available retail and wholesale channels, and promote our capability to produce consistently high quality products on a large scale basis to potential customers.

Following substantial investment, we now have the industry's most advanced production capabilities with a fully scalable peat-alternative and a line-up of re-invigorated leading brands and have a continually developing product pipeline.

There is still much further work to do and the new plant is still settling down.  However while 2015 will remain a period of further consolidation and additional investment we can begin to look forward to benefiting from the Company's strengths and market opportunities we are creating.

Peter Rush

Chief Executive

WILLIAM SINCLAIR HOLDINGS PLC

Group Income Statement

for the year ended 30 September 2014

All results relate to continuing operations.

WILLIAM SINCLAIR HOLDINGS PLC

Group statement of comprehensive income

for the year ended 30 September 2014

WILLIAM SINCLAIR HOLDINGS PLC

Group and Company statement of financial position

at 30 September 2014

WILLIAM SINCLAIR HOLDINGS PLC

Group and Company statement of financial position

at 30 September 2014 (continued)