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[June 2003]
Waterford Wedgwood Reports Annual Results: UK Factory Closures Announced
Preliminary results reported on 4 June 2003, for the year ended 31 March 2003, showed sales at €951.3 million. This was down 4.6% at prevailing rates, but equal to the prior year at constant exchange rates and excluding acquisitions.
The operating profit was €64.2 million (up 13.6%) and the operating margin was 6.7% (up from 5.7% in the prior year). EPS was 4.52 cents, up 6.4%. Net debt was reduced by €33.5 million to €356.7 million. The proposed final dividend was 1.2 cents, making a total for the year of 1.9 cents, down from 3.1 cents in the prior year.
At Wedgwood, two factories in Stoke-on-Trent are to be closed and Johnson Brothers ware is to be outsourced, resulting in major UK job losses. Waterford Wedgwood Chief Executive Redmond O'Donoghue said: "In recent years, the mid-priced earthenware segment of the ceramics market has become highly competitive. This trend has been exacerbated by deteriorating economic conditions during the last two years. These circumstances have led to margin pressure and an imperative to reduce unit costs of Johnson Brothers' earthenware products significantly. These earthenware products are currently manufactured in the UK at significantly higher unit costs than similar products manufactured overseas.
"During the past eighteen months, technical and engineering staff have worked intensively with carefully chosen ceramics manufacturers in Asia. Our aim was to mirror the uncompromising Johnson Brothers' quality standards at out-sourced costs, which will transform margins. The project has been successfully completed. As a result, it has been decided to relocate Johnson Brothers' production to dedicated out-sourced plants in Asia. This action, which complements the many out-sourcing initiatives we have successfully implemented in the past, will allow the production of Johnson Brothers' earthenware products at significantly increased margins, and the creation of new ranges aimed at capturing sizeable incremental volumes.
"Inevitable consequences flow from this significant re-basing of our moderately priced ceramics business. Sadly, this action will entail the closure of two factories in Stoke-on-Trent and the regrettable loss of 1,058 jobs. However, the Group could not continue to sustain the losses which were occurring at Johnson Brothers."
Mr O'Donoghue reported that sales of all ceramic products were €414.2 million, down by 5.3% at constant rates of exchange. Profits were reduced to €3 million from €9.6 million as margins were adversely impacted by competitive activity, unfavourable mix and unused production capacity. He said that the German market had proved particularly difficult throughout the fiscal year.
The launch of Vera Wang at Wedgwood had been a remarkable and rapidly growing success and the performance of the Jasper Conran at Wedgwood range was also making significant contributions to sales. 'Rosenthal meets Versace', among the Group's highest priced products, had shown strong growth.
Mr O'Donoghue stated that the Johnson Brothers planned outsourcing actions and plant closures would substantially improve ceramics profits in 2004 and 2005 with a cash payback in less than one year.
Wedgwood earthenware production that was currently taking place in the factories set for closure would be transferred to the main Wedgwood production facility in Barlaston.
ENDS