Tough times at Waterford crystal group

A DIP of 4.6% in annual sales to €951.3m, a modest rise in profits before tax, a cut in its dividend and the loss of more than 1,000 jobs in Britain has been reported by the Waterford Wedgwood group.

The share price dipped about 10% following publication of the figures for the last financial year, but closed unchanged at 23 cent.

Results for the year to March 31, would have shown a pre-tax loss but for first half gains of €5.1m for the sale of fixed assets and a €9.7m gain from the conversion of US debt to euro.

Profits before tax came in at €7.2m for the year against a loss in 2002 of €54m. Sales were hit as global demand continued to weaken and Earnings Per Share were at 4.5c for the year against 3.1c at the interim stage.

Chief executive Redmond O'Donoghue said people in Ireland failed to realise just how tough it was in the global economy.

The results were satisfactory in what was an "extraordinary difficult year," he said.

The final dividend has been declared at 1.2c, making a total for the year of 1.9c against 3.1c in 2002.

Mr O'Donoghue refused to be drawn on future dividend outlook. The current payout was a "prudent response to the situation we are in I wouldn't talk about future years," he said.

The group also announced it is currently renegotiating its debt covenants with its 12 banks ahead of the December 31 deadline.

It denied it was doing this under pressure from the banks but pointed out that with the restructuring currently underway following the closure of two Johnson Brothers plants in the heart of the Potteries in Britain, it needed to be sure of its financing arrangements going forward.

There were few bright spots in the WW figures and shares fell to a very low 22c as the markets took on board the tough times ahead for the group.

Net debt was cut by 9% to €356m however, but even at that the debt load is about twice the market capitalisation of the group at present.

In other developments WW is switching its core Wedgwood earthenware production to a new plant outside Stoke, preserving 275 jobs.

On the plus side WW said its operating profit rose to €64.2m for the year ending March 2003 from €56.5m in 2002 while pre-tax profits, before exceptional restructuring costs and goodwill, came in at €38.9m, up 24% from last year's €31.3m.

In the case of the closure of the Johnson Brothers plants production will be out-sourced to plants in Asia with 70% of production to be carried out in China, reducing costs by €28.7m on an ongoing annual basis.