UPDATE 1-William Sinclair profit dampened by record UK rain

LONDON Oct 2 (Reuters) - British gardening supplies group William Sinclair Holdings PLC warned that it will miss market expectations for the year and said that its chief executive will step down, after record summer rainfall played havoc with the peat harvest.

The wet weather flooded the company's peat bogs in the north of England but also affected supply beyond the UK, including Ireland, Scandinavia and the Baltic countries, leading to a European-wide shortage.

"The performance in the year ending 30 September 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 in a statement.

The supply shortage will hit professional growers in the UK, who are particularly reliant on peat as a key ingredient in compost, and this will hurt the company's revenues into next year, it said.

It added that its final dividend for 2012 is likely to be lower than last year's 4.4p per share.

Chief executive Bernard Burns will step down as of early 2013 but will retain responsibility for the resolution of a complex compensation claim for the halting of harvesting at a now protected bog area in the north of England.

The specialist horticultural supplier made a pre-tax profit of 3.2 million pounds ($5.2 million) in 2011, on revenues of 54.3 million.

In September, it completed the 4.75 million pounds acquisition of a major new production site at Ellesmere Port in Cheshire.

Shares in William Sinclair were down 14 percent to 140 pence at 0729 GMT.