FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of June 2004
Commission File Number
WATERFORD WEDGWOOD PLC
(Translation of registrant's name into English)
1/2 UPPER HATCH ST, DUBLIN 2, IRELAND
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F..X.. Form 40-F.....
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ..... No ..X...
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82- ________
Waterford Wedgwood plc
("Waterford Wedgwood" or "the Group")
Preliminary results for the year ended 31 March 2004
Year to 31 March 2004 Year to 31 March 2003
EUR millions EUR millions
Sales
- - at prevailing exchange rates 831.9 951.3
- - at constant exchange rates 831.9 860.7
Operating profit/(loss)
- - pre goodwill amortisation and exceptional items 28.4 64.2
- - post goodwill amortisation and exceptional items (14.8) 21.6
EBITDA 68.1 114.9
Pre-tax (loss)/profit (44.9) 7.2
Year end debt 382.9 356.7
Net interest expense (32.4) (25.3)
(Loss)/earnings per share - cents
- - pre goodwill amortisation and exceptional items (0.96)c 4.23c
- - post goodwill amortisation and exceptional items (5.63)c 0.22c
Dividend per share - 1.9c
- - Sales at EUR831.9 million were 3.3% down at constant exchange
rates and 12.6% down at prevailing rates (2003: EUR951.3 million)
- - Operating profit before goodwill and restructuring charge of
EUR28.4 million, down from EUR64.2 million due in large part to
adverse exchange
- - EBITDA (earnings before interest, tax, depreciation,
amortisation and restructuring charge) of EUR68.1 million (2003:
EUR114.9 million)
- - Operating margin of 3.4% (2003: 6.7%), due mainly to adverse exchange
- - Net debt was EUR382.9 million
- - Post balance sheet date agreement to sell All-Clad for $250 million
(about EUR205 million) in cash (cost of All-Clad in 1999: $110 million)
"The All-Clad disposal is a significant milestone. Our balance sheet will be
substantially improved when we receive the proceeds. As our debt falls, interest
cost will reduce significantly. That will allow us to re-invest in marketing, to
drive our top line and to enhance our margin. It is the essential first step of
our Plan for Growth. We remain committed to this fine company and its great
brands."
Sir Anthony O'Reilly
Chairman
17 June 2004
Waterford Wedgwood plc
("Waterford Wedgwood" or "the Group")
Chief Executive's Statement
Results
"It was another challenging year for your group and for others in our industry.
Although there was some improvement in the second half, the full year results
did not meet our standards. Earnings before interest, taxation, depreciation,
amortisation and restructuring charges were EUR68.1 million, compared to
EUR114.9 million in fiscal 2003. The first six months were especially tough due
to the war in Iraq and the SARs epidemic.
"The continuing weakness of the US dollar has been unhelpful to us. About half
of our business is denominated in dollars. Consider the rates at which we did
business over the past two years. In the three months to March 2002, the
exchange rate was EUR1 = $0.88. In the financial year to March 2003, we
translated at EUR1 = $1. In the year to March 2004, the rate was EUR1 = $1.18.
This deterioration in the dollar makes our costs, whether in Ireland or the UK,
higher in dollar terms. It makes the revenues from the US lower when translated
into euro.
"As a result, our operating profit was EUR28.4 million compared with EUR64.2
million in 2003. Unfortunately, the significant benefits from the restructuring
of recent years were not sufficient to overcome the impact of a weaker dollar
and lower volumes. It is important to note that the adverse effect of exchange
rates was EUR30 million, principally due to the U.S. Dollar.
"Our sales for the year were EUR831.9 million, EUR119.4 million lower than in
2003. At constant currency, the fall was EUR28.8 million or 3.3%. We lost
EUR49.3 million after tax and minority interests compared to a net profit of
EUR1.8 million the previous year. We do not propose to pay a dividend.
"Although the numbers set out in these results provide evidence of the
challenging conditions we faced, there was some good news. Core sales of
Rosenthal increased in a very difficult retail environment. Cash's Mail Order,
which we purchased in 2002, experienced strong demand. Vera Wang, our very
successful bridal range at Wedgwood, more than doubled. Our licensed sales in
Japan continued to be enormously successful. Other brand extensions and designer
alliances also did well.
Plan for Growth
"We all recognise that these results are not satisfactory. We also recognise
that our long-term success cannot be contingent on exchange rates or other
external factors. We will chart our own destiny. We are now positioning the
Group to be profitable, even at a weak Euro-Dollar exchange rate. We cannot wait
for the dollar to strengthen.
"Accordingly, in recent months, we have begun to implement a Plan for Growth.
The proposed sale of All-Clad is the essential first step in this plan. Subject
to necessary approvals, the proceeds (about EUR205 million, before expenses of
approximately EUR8 million) are scheduled to be received at the end of July.
These proceeds will be used to reduce our debt which, at EUR382.9 million on
March 31, was too high. Most of this debt was incurred in making substantial
capital investment in our key plants, closing non-core plants and on
acquisitions. There will be a significant reduction in the cost of servicing our
debt going forward.
"In parallel, our plan encompasses a root-and-branch review of our business to
reduce required working capital. Too much of our money is used to finance
inventory. By changing the way we do business, we will free up cash. We have
engaged consultants to help with this project. We expect that, over the next 18
months, our team will release a significant amount of cash from the business.
There may be a once-off adverse effect on the profit-and-loss account but this
would be offset against our much greater capital gain on the disposal of
All-Clad.
"Next, we will apply some of the freed-up working capital to supporting our
great core brands. In the second half of the current year, we will begin to
increase marketing spend, growing in 2006/7 to at least EUR20 million more than
previously allocated to marketing.
"There is much more to marketing than just spending. We have begun to implement
new marketing plans. We will also broaden our design alliances to support a new
crystal range for the US. We are confident that we can replicate the success of
our many brand extensions and designer alliances: Vera Wang, Jasper Conran, Andy
Warhol, Emeril Lagasse, to name just a few. In addition, we will target
significant sales at the casual segment.
"The appointments of Peter Cameron, currently Chief Executive of All-Clad, as
Chief Operating Officer and Paul D'Alton as Chief Financial Officer are an
integral part of our Plan for Growth.
"Your management team is confident that, with increased sales, the substantial
investment in plant and restructuring completed over recent years will bear
fruit. Between 1997 and 2004, we spent over EUR300 million on technology and
restructuring with the result that, on an incremental cost basis, while
maintaining the highest quality in the world, our European-based production unit
costs are close to those achieved in the People's Republic of China. This means
that as we drive increased volume through our state-of-the-art plants, we will
achieve substantially improved margins and profits."
Financial
Balance sheet
On the financial front, the Group has totally restructured its debt profile,
putting balanced facilities in place with an average life of five years
including a seven-year high yield bond of EUR166 million. The new structure was
completed in December 2003 by a rights issue of EUR38.5 million. At year end,
the Group had net assets of EUR198 million (2003: EUR204 million). This will
increase substantially with the All-Clad proceeds.
Operating profit before goodwill amortisation and exceptional charges
Group operating profit was EUR28.4 million (2003: EUR64.2 million). Margin
erosion and pension costs, translation and transaction exchange rate impacts,
primarily in the U.S. dollar, account for most of the year-over-year changes.
EBITDA
During 2004, the Group earned EUR68.1 million EBITDA, before restructuring
charges (2003: EUR114.9 million). The impact of the US dollar, weaker sales,
competitive pressure on margins, particularly in the latter part of the year,
all combined to produce this less-than-satisfactory performance.
Market expectations were in the region of EUR80 million after the third quarter.
The shortfall was due to tighter margins particularly in Germany and the U.S.
and higher than anticipated pension costs at Rosenthal.
Cash Flow and Debt
Net debt at 31st March 2004, was EUR382.9 million, broadly in line with market
expectations. Before rights issue proceeds of a gross EUR38.5 million, cash
outflow during the year was EUR109.5 million primarily related to a major
restructuring at Wedgwood including the closure of two U.K. based factories and
consolidation of facilities into a single U.K. production location and the
rationalisation of over 1,100 jobs, and financing fees.
Sector Overview
Crystal
Crystal sales declined from EUR314.3 million to EUR263.2 million (-16.3%). At
constant exchange rates, the decline was 7%. Operating profit was EUR3.1
million, down from EUR28 million. Our brands maintained their market share in
the United States, Ireland and the UK.
Ceramics
Ceramics sales fell from EUR414.2 million to EUR365.6 million (-11.7%). At
constant exchange rate, the decline was 5.5%. There was an operating loss of
EUR0.4 million compared to an operating profit of EUR3 million in 2003. Consumer
demand was weak in Britain, Germany and the rest of Europe. On the other hand,
Japanese sales were up by 7.5% and US sales - boosted by the highly successful
Vera Wang bridal range - were up 4.2%.
Other Products
Our other products sector grew from EUR101 million to EUR103 million (+2%). At
constant exchange rates, sales were up 18%. There was an operating profit of
EUR12.8 million, up from EUR11.7 million. Cash's Mail Order and Waterford's
Holiday Heirloom range of Christmas products were the main contributors.
Cookware
Sales of cookware were down from EUR121.8 million to EUR100.1 million (-17.8%)
or by 3.3% at constant exchange rates. Operating profit was EUR12.9 million,
down from EUR21.5 million.
In January 2004, following several unsolicited approaches, we appointed advisers
to evaluate the possibility of the sale of All-Clad, our U.S. luxury cookware
company. On June 2, we agreed a sale price of $250 million, about $50 million
above market expectations. The sale to Groupe SEB is scheduled to close by 1
August.
All-Clad contributed EUR18.3 million of EBITDA, EUR17 million of operating
profit before goodwill amortisation. Although it made a significant contribution
to EBITDA, the after tax impact of the disposal is small compared with the
interest reducing effect of the EUR205 million all cash consideration.
With the sale of All-Clad, we are retaining Spring, our Swiss cookware brand,
one of the industry's great luxury names in fine cookware. We will therefore
retain a presence in this market segment.
Restructuring
Last year, the Group announced restructuring actions at both Wedgwood and
Waterford which were designed to reduce manufacturing headcount by about 1,000
people. Implementation of these plans is now largely complete. The related
outsourcing of Johnson Brothers Earthenware Products to the Peoples Republic of
China has been successful.
Board/Management Changes
Paul D'Alton who took over as Chief Financial Officer on 4 May, 2004 has been
appointed to the Board effective 17 June 2004. Peter Cameron, Chief Executive of
All-Clad, will become Group Chief Operating Officer. Bob Niehaus, a
non-executive Director since 1990, has retired from the Board as has Brian
Patterson, a Board member since 1992. Richard Barnes, a Director since 1993 and
former Finance Director has also retired from the Board.
Current trading
Trading in June is a little ahead of last year. At constant exchange, we expect
that volumes in the first quarter will be 2% ahead of the same period last year.
Redmond O'Donoghue
Group Chief Executive Officer
17 June, 2004
Enquiries
Waterford Wedgwood plc +353 1 478 1855
Redmond O'Donoghue, Group Chief Executive Officer
Paul D'Alton, Chief Financial Officer
Powerscourt (UK and international media) +44 207 236 5615
Rory Godson +44 7909 926 020
John Murray +44 7831 314 672
College Hill (Analysts) +44 207 457 2020
James Henderson +44 7774 444 163
Kate Pope +44 7798 843 276
Dennehy Associates (Ireland) +353 1 676 4733
Michael Dennehy +353 87 2556923
Waterford Wedgwood plc
Consolidated profit and loss account
12 months to 12 months to
31 March 31 March
2004 2003
Note EUR millions EUR millions
Sales
Crystal 263.2 314.3
Ceramics 365.6 414.2
Premium cookware 100.1 121.8
Other products 103.0 101.0
Total Group sales 831.9 951.3
Operating profit/(loss)
Crystal 3.1 28.0
Ceramics (0.4) 3.0
Premium cookware 12.9 21.5
Other products 12.8 11.7
Group operating profit before restructuring
charge and goodwill amortisation 2 28.4 64.2
Exceptional restructuring charge 3 (36.5) (35.7)
Goodwill amortisation 5 (6.7) (6.9)
Group operating (loss)/profit (14.8) 21.6
Gain arising on conversion of $ loans - 9.7
Profit on sale of fixed assets 6.0 5.1
Deficit arising on closed pension scheme - (3.9)
Make whole payment (3.7) -
Net interest payable (32.4) (25.3)
(Loss)/profit on ordinary activities before taxation (44.9) 7.2
Taxation (4.7) (4.9)
(Loss)/profit on ordinary activities after taxation (49.6) 2.3
Minority interests 0.3 (0.5)
(Loss)/profit attributable to members of parent
company (49.3) 1.8
Dividends - (15.1)
Loss absorbed for the year (49.3) (13.3)
(Loss)/earnings per share (cents) 4 (5.63c) 0.22c
Diluted (loss)/earnings per share (cents) (5.63c) 0.22c
(Loss)/earnings per share (cents) pre goodwill
amortisation and exceptional items 4 (0.96c) 4.23c
Waterford Wedgwood plc
Consolidated balance sheet
As at 31 March
2004 2003
Note EUR millions EUR millions
Fixed assets
Intangible assets 5 100.4 115.8
Tangible assets 206.2 209.5
Financial assets 15.1 14.9
321.7 340.2
Current assets
Stocks 320.3 291.3
Debtors 154.6 159.3
Cash and deposits 51.6 84.0
526.5 534.6
Creditors (amounts falling due within one year) (188.7) (208.9)
Net current assets 337.8 325.7
Total assets less current liabilities 659.5 665.9
Creditors (amounts falling due after more than
one year) (460.4) (460.8)
Provisions for liabilities and charges (1.1) (1.1)
Net assets 198.0 204.0
Capital and reserves
Called up share capital 73.5 56.7
Share premium account 213.7 194.8
Revaluation reserve 7.2 9.3
Profit and loss account (102.7) (63.6)
Capital conversion reserve fund 2.6 2.6
Shareholders' funds - equity interests 194.3 199.8
Minority interest - equity interests 3.7 4.2
198.0 204.0
Waterford Wedgwood plc
Consolidated summary cash flow
12 Months to 12 months to
31 March 2004 31 March 2003
EUR millions EUR millions
Operating profit before restructuring spend and
exceptional items 21.7 57.3
Restructuring spend (29.0) (20.6)
Depreciation and amortisation 40.4 46.7
Deficit/(surplus) on sale of fixed assets 1.5 (0.5)
Working capital (49.6) (1.4)
Cash flow from operations (15.0) 81.5
Net interest (26.0) (24.9)
Makewhole payment (3.7) -
Debt issue costs (25.0) -
Capital expenditure less disposals (26.2) (12.1)
Taxation (6.0) (4.4)
Dividend (7.6) (21.6)
Issue of share capital (net of expenses) 35.3 0.1
Cash flow (74.2) 18.6
Unamortised debt issue costs 25.0 -
Exchange 23.0 41.8
Acquisitions - (26.9)
Opening net debt (356.7) (390.2)
Closing net debt (382.9) (356.7)
Statement of total recognised gains and losses and
reconciliation of shareholders' funds
12 months to 12 months to
31 March 2004 31 March 2003
EUR millions EUR millions
(Loss)/profit for the year (49.3) 1.8
Exchange translation effect on net
overseas investments 6.8 (34.7)
Total recognised losses for
the period (42.5) (32.9)
Dividends - (15.1)
Scrip dividends 1.7 2.1
New share capital subscribed 38.5 5.7
Expenses relating to the issue of shares (3.2) -
Opening shareholders' funds 199.8 240.0
Closing shareholders' funds 194.3 199.8
Notes
1. Basis of financial statements
The information contained within this preliminary release has been extracted
from audited financial statements for the year ended 31 March 2004. The
accounting policies applied in the financial statements are consistent with
those applied in previous years and are as set out in the audited financial
statements for the 12 months ended 31 March 2003.
2. Effect of change in accounting estimates
During the year the Group reviewed the basis of the valuation of inventory
resulting in an uplift in values by EUR5.7 million and the reduction of
inventory provisions by EUR2.6 million, thereby benefiting the profit and loss
account for the 12 months to 31 March 2004 by EUR8.3 million.
3. Exceptional charge
In the results for the 12 months to 31 March 2004, the following exceptional
costs have been charged to operating profit;
Cost of Distribution
Sales costs Total
EUR millions EUR millions EUR millions
Restructuring costs 27.5 2.9 30.4
Inventory write-downs 3.3 - 3.3
Earthenware outsourcing set-up costs 2.8 - 2.8
33.6 2.9 36.5
Restructuring Costs
In 2003, as a result of the decrease in demand for luxury products due primarily
to the continued global economic downturn, the outbreak of the SARS epidemic and
the conflict in Iraq, the Directors announced a restructuring programme aimed at
further lowering operating costs. In the accounts for the 12 months ended 31
March 2003, a charge of EUR35.7 million was recognised of which EUR13.5 million
was for fixed asset impairments, EUR15.0 million for inventory write-down and
EUR7.2 million for integration and rationalisation projects. In the accounts for
the 12 months ended 31 March 2004, a charge of EUR30.4 million has been
recognised, representing redundancy and related costs associated with the
closure of two earthenware manufacturing facilities in the U.K., the
consolidation of Wedgwood branded earthenware production into the existing
manufacturing facility in Barlaston, Stoke-on-Trent, the outsourcing of
production of Johnson Brothers branded earthenware to the People's Republic of
China and the re-organisation of Wedgwood's European retail and marketing
operations. The charge also covers the implementation of an early retirement and
redeployment programme and further automation and rationalisation of Waterford's
manufacturing operations in Ireland.
Inventory write-downs
As a result of the initiative to move Johnson Brothers production to the
People's Republic of China, the carrying value of inventory has been reduced to
its estimated net realisable value resulting in a charge of EUR3.3 million in
the accounts for the 12 months ended 31 March 2004.
Earthenware outsourcing set-up costs
As a result of moving Johnson Brothers production to the People's Republic of
China, one-off set-up costs amounting to EUR2.8 million have been incurred and
charged to profit in the accounts for the 12 months ended 31 March 2004.
4. (Loss)/earnings per share
12 months to 12 months to
31 March 2004 31 March 2003
No. of Per Profit/ No. of Per
Loss shares share (loss) shares share
EUR millions millions cents EURmillions millions cents
(Loss)/profit for the year before
amortisation of goodwill and exceptional
items (8.4) 875.1 (0.96) 34.5 816.2 4.23
Amortisation of goodwill (6.7) 875.1 (0.76) (6.9) 816.2 (0.85)
Exceptional items (34.2) 875.1 (3.91) (25.8) 816.2 (3.16)
Basic EPS (49.3) 875.1 (5.63) 1.8 816.2 0.22
The calculation of earnings per share is based on 875.1 million shares, being
the weighted average number of shares in issue during the twelve months to 31
March 2004 (12 months to 31 March 2003: 816.2 million). The weighted average
number of shares and the earnings per share for the 12 months to 31 March 2003
has been adjusted to reflect the bonus element of the rights issue which was
announced in November 2003.
5. Intangible assets
The movement on intangible assets arises as follows:
Acquired Mailing
Goodwill brands list Total
EUR millions EUR millions EUR millions EUR millons
At 31 March 2003 96.7 17.7 1.4 115.8
Amortisation (5.5) (0.9) (0.3) (6.7)
Exchange (8.6) (0.1) - (8.7)
At 31 March 2004 82.6 16.7 1.1 100.4
6. Net debt
Net debt at 31 March 2004 comprising finance leases, short and long term
borrowings less cash and deposits and unamortized debt issue costs amounted to
EUR382.9 million (31 March 2003: EUR356.7 million).
7. Foreign exchange
Exchange rates used to translate the results of the Group's principal overseas
subsidiaries were as follows:
Profit and loss transactions Balance sheet
12 months to 12 months to As at As at
31 March 2004 31 March 2003 31 March 2004 31 March 2003
U.S. dollar $1.18 $1.00 $1.24 $1.07
Sterling GBP0.69 GBP0.64 GBP0.67 GBP0.69
Yen Y132.70 Y121.39 Y129.29 Y128.65
8. Copies of the Annual Report and Accounts will be posted to shareholders in
due course.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Waterford Wedgwood PLC
(Registrant)
By: Patrick Dowling
(Signature)*
Date: June 17, 2004