Waterford Wedgwood plc
Consolidated profit and loss account
12 months
to
31 March 2005 31 March 2004
Note €m €m
Sales by division
Waterford Crystal 221.7 253.8
Ceramics Group 441.5 438.2
WC Designs & Spring 45.2 51.3
------- -------
Total sales - continuing operations 708.4 743.3
Discontinued operations - All-Clad 24.2
88.6
------- -------
Total Group sales 732.6 831.9
======= =======
Operating (loss)/profit by division
Waterford Crystal (20.6) 17.3
Ceramics Group (50.1) 7.6
WC Designs & Spring (0.7)
(1.8)
Common costs (13.1) (11.7)
------- -------
Group operating
(loss)/profit continuing operations (84.5) 11.4
Discontinued operations - All-Clad 2.3 17.0
------- -------
Total Group operating
(loss)/profit before
exceptional charges and
goodwill amortisation (82.2) 28.4
Exceptional charges 4
(108.0) (36.5)
Goodwill amortisation (5.5)
(6.7)
------- -------
Group operating loss (195.7) (14.8)
Profit on sale of fixed assets 3.8
6.0
Profit on sale of All Clad
business 8 103.2
-
Financing costs 3 (60.5)
(36.1)
------- -------
Loss on ordinary activities
before taxation (149.2) (44.9)
Taxation on loss on ordinary
activities 5 (12.3)
(4.7)
------- -------
Loss on ordinary activities
after taxation (161.5) (49.6)
Minority interests 2.1 0.3
------- -------
Loss absorbed for the year (159.4) (49.3)
======= =======
Loss per share 10 (10.50c)
(4.75c)
Diluted loss per share (10.50c) (4.75c)
Loss per share pre goodwill
amortisation and exceptional items 10
(9.70c) (0.81c)
Waterford Wedgwood plc
Consolidated balance sheet
As at
31 March
2005 2004
Note €m €m
Fixed assets
Intangible assets 7 133.6 100.4
Tangible assets 194.6 206.2
Financial assets 3.5 15.1
------- ------
331.7 321.7
======= ======
Current assets
Stocks 241.9 320.3
Debtors 129.8 154.6
Cash and deposits 20.0 51.6
------- ------
391.7 526.5
Creditors (amounts falling due within one
year) (181.9) (177.1)
Bank overdrafts and short term borrowings - (11.6)
------- ------
Net current assets 209.8 337.8
------- ------
Total assets less current liabilities 541.5 659.5
Creditors (amounts falling due after more
than one year) (2.4) (4.4)
Long term debt (299.4) (422.9)
Provisions for liabilities and charges 9 (111.8)
(34.2)
------- ------
127.9 198.0
======= ======
Capital and reserves
Called up share capital 197.1 73.5
Share premium account 208.5 213.7
Revaluation reserve 7.2 7.2
Profit and loss account (289.0) (102.7)
Capital conversion reserve fund 2.6 2.6
------- ------
Shareholders funds equity interests 126.4 194.3
Minority interests equity interests 1.5 3.7
------- ------
127.9 198.0
======= ======
Waterford Wedgwood plc
Consolidated summary cash flow
12
months to
31
March 31 March
2005 2004
€m €m
Group operating (loss)/profit before exceptional
charges and goodwill amortisation (82.2)
28.4
Depreciation 33.5 33.7
Working capital 49.9 (49.6)
-------- -------
Cashflow from trading 1.2 12.5
Restructuring spend (17.5) (29.0)
Working capital reduction programme (22.0) -
Deficit on sale of fixed assets - 1.5
Net interest and related costs (37.2) (26.0)
Makewhole payment (5.6) (3.7)
Debt issue costs (9.0) (25.0)
Capital expenditure less disposals (5.8) (26.2)
Taxation paid (2.2) (6.0)
Dividends paid - (7.6)
Issue of share capital (net of expenses) 94.5 35.3
Acquisition of Royal Doulton including acquired debt (79.5) -
Disposal of All Clad 194.6 -
-------- -------
Net Group cashflow 111.5 (74.2)
Movement in unamortised debt issue costs (9.2) 25.0
Exchange 1.2 23.0
Opening debt (382.9) (356.7)
-------- -------
Closing debt (279.4) (382.9)
======== =======
Waterford Wedgwood plc
Statement of total recognised gains and losses and
reconciliation of shareholders' funds
12 months
to
31 March 31 March
2005 2004
€m €m
Loss for the year (159.4)
(49.3)
Exchange translation effect of net
overseas investments (3.0) 6.8
--------- --------
Total recognised losses for the year (162.4) (42.5)
Scrip dividend - 1.7
New share capital subscribed 99.7 38.5
Expenses relating to the issue of shares (5.2) (3.2)
Shareholders funds at beginning of the year 194.3 199.8
--------- --------
Shareholders funds at end of the year 126.4 194.3
========= ========
Waterford Wedgwood plc
Notes to the preliminary financial statements
1. Basis of preparation of the financial statements
The information contained within this preliminary release
has been extracted
from the audited financial statements for the year ended 31
March 2005. 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 2004.
As described in its year end trading update released on 14
March 2005, the
Groups trading environment has deteriorated in recent
months, which has impacted
upon the Groups liquidity position.
As set out in Note 12, on 4 May 2005, the Group announced a
fully underwritten
rights issue to raise approximately €100 million. The rights
issue is being
underwritten by a company controlled by the Chairman and
Deputy Chairman. The
proceeds will be used to finance a major restructuring
programme which is
expected to cost approximately €90 million.
The rights issue is dependent on certain shareholder
approvals at an
extraordinary general meeting to be held on 20 June 2005.
The Directors are confident that the rights issue and the
restructuring will
enable the Group to fundamentally restructure its cost base
in light of the
current trading environment and that there will be adequate
liquidity to meet
the Group' financial needs and obligations over the
foreseeable future. The
Directors therefore consider it appropriate to adopt the
going concern basis in
preparing these financial statements.
2. Exchange Rates
The exchange rates used for consolidation purposes between
the euro and the
principal currencies in which the Group does business were
as follows:
Profit and loss
transactions
12 months to Balance sheet as at
31 March 31 March 31
March 31 March
2005 2004
2005 2004
U.S. Dollar $1.26
$1.18 $1.29 $1.24
Sterling £0.68 £0.69
£0.69 £0.67
Yen Y135.28 Y132.70
Y138.87 Y129.29
Effective rate of
exchange on trading cash flows $1.25 $1.1
3. Financing costs 12 months to
31
March 31 March
2005 2004
€m €m
Interest and related costs 36.5 30.6
Amortisation of financing fees 4.9 1.8
Write-off of financing fees 13.5 -
Makewhole payments 5.6 3.7
--------- --------
Total financing costs 60.5 36.1
========= ========
4. Exceptional charges
In the results for the 12 months to 31 March 2005, the
following exceptional
costs have been charged to operating loss:
Cost
of Administrative
sales
overheads Total
€m €m €m
Redundancy, early retirement and
related costs - 13.2 13.2
Working capital reduction programme 50.5 4.2 54.7
Impairment of intangible assets
(note 7) - 40.1 40.1
---------- ----------- -------
50.5 57.5 108.0
---------- ----------- -------
Redundancy, early retirement and related costs
As part of its continuing initiative to lower operating
costs, the Group
incurred a charge of €13.2 million relating to redundancy
and early retirement
programmes in its key operating divisions.
Working capital reduction programme
In June 2004, the Group announced that it was working with
Accenture, the
international business consultants, on a programme to
simplify working capital
management and manufacturing processes. The objective of the
programme was to
reduce the Group's investment in stocks and debtors and to
rationalise
manufacturing runs in order to enhance cash flow. By 31
March 2005, this
programme has largely been accomplished having delivered a
significant reduction
in inventory and a 50% reduction in the number of actively
available products
(stock-keeping units - SKU's). As a result of the
rationalisation of SKU's,
lower levels of production (which led to a significant under-recovery
of
overheads) and the write down of inventory to its net
realisable value, the
Group incurred a charge of €50.5 million together with
programme management and
other costs of €4.2 million.
Impairment of intangible assets
During the year and in accordance with FRS11, a review was
carried out on the
carrying value of certain intangible assets resulting in an
impairment charge of
€40.1 million. As required by FRS11, this review did not
take into account the
expected benefits to be derived from the restructuring
programme referred to in
Note 12.
Exceptional charges in the 12 months to 31 March 2004
In the accounts for the 12 months to 31 March 2004, a charge
of €30.4 million
was recognised representing redundancy and related costs
associated with the
closure of two earthenware production 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
reorganisation of Wedgwood's European retail and marketing
operations. The
charge also covered the implementation of an early
retirement and redeployment
programme and further automation and rationalisation of
Waterford's
manufacturing operations in Ireland. The accounts for the 12
months to 31 March
2004 also reflected a charge of €2.8 million for one-off set
up costs and a
charge of €3.3 million representing the reduction in
carrying value of stock, as
a result of the initiative to move the production of Johnson
Brothers branded
product to the People's Republic Of China
5. Taxation on loss on ordinary activities
The tax charge for the 12 months to 31 March 2005 includes
the release of €12.0
million of deferred tax assets. Though the Directors believe
sufficient profits
to utilise available tax losses will arise in the future,
there is currently
insufficient evidence to support the recognition of these
assets. The majority
of the tax losses may be carried forward indefinitely under
current tax laws,
but the losses can only be offset against taxable profits
generated in the same
entities and tax jurisdictions in which they were incurred.
6. Restructuring and rationalisation provision
€m
Balance at 31 March 2004 9.3
Arising on acquisition of subsidiary undertaking 12.5
Charged to profit and loss account 13.2
Utilised during the year (17.5)
------
Balance at 31 March 2005 17.5
======
7. Intangible assets Acquired Mailing
Goodwill brands list Total
€m €m €m €m
At 31 March 2004 82.6 16.7
1.1 100.4
Arising from acquisition of
subsidiary undertaking (note 8) 93.2
39.6 - 132.8
Charged to profit on sale of
subsidiary undertaking (note 8) (56.6)
- - (56.6)
Impairment of intangibles (note 4) (24.2) (15.1) (0.8)
(40.1)
Amortisation (3.9) (1.3)
(0.3) (5.5)
Exchange 2.1 0.5
- 2.6
-------- ------- ------- ------
At 31 March 2005 93.2 40.4
- 133.6
======== ======= ======= ======
Goodwill amortisation from continuing operations amounted to
€4.2 million (31
March 2004: €2.8 million) and from discontinued operations
amounted to €1.3
million (31 March 2004: €3.9 million)
8. Acquisition and disposal of subsidiary undertakings
Acquisition of Royal Doulton
On 17 January 2005 the Group announced that the offer for
Royal Doulton plc
('Royal Doulton') was declared wholly unconditional having
received valid
acceptances representing 69.38% of the issued share capital
of Royal Doulton.
Included in these acceptances were 13,250,000 shares in
Royal Doulton
(representing approximately 4% of the issued share capital
of Royal Doulton)
owned by Indexia Holdings (a company wholly controlled by
Sir Anthony O'Reilly)
and Cantique Limited (a company wholly controlled by Peter
John Goulandris).
When combined with the Group's existing shareholding in
Royal Doulton of 21.16%,
at 3pm on 14 January 2005 the Group held, or had received
valid acceptances in
respect of 90.54% of the issued share capital of Royal
Doulton. On the 28
January 2005 the Group announced the compulsory acquisition
of the outstanding
share capital of Royal Doulton under the procedures
contained within sections
428 to 430F of the U.K. Companies Act 1985, as amended. With
effect from 15
February 2005 the admission to listing and admission to
trading of Royal Doulton
shares was cancelled. In the period between the date of
acquisition and 31 March
2005, Royal Doulton contributed €29.8 million to the Group's
turnover and an
operating loss of €0.9 million.
The net assets of Royal Doulton and its subsidiaries have
been included in the
Group's balance sheet at their provisional fair values at
the date of
acquisition as follows:
Provisional Fair
value
fair
value to the
Book value adjustments Group
€m €m €m
Tangible fixed assets 20.4 - 20.4
Stocks 35.6 (7.8) (a) 27.8
Debtors 23.1 - 23.1
Creditors due within one year (41.3) -
(41.3)
Creditors due after more than one year (9.4) (65.0)
(b) (74.4)
Debt acquired (29.3)
- (29.3)
---------- ---------- ----- -------
Net liabilities acquired (0.9) (72.8)
(73.7)
========== ========== ===== =======
The book value of the assets and liabilities have been taken
from the management
accounts of Royal Doulton at 17 January 2005 (date the offer
became
unconditional) at actual exchange rates on that date. The
book values of the net
assets acquired included provisions for closure of its last
remaining UK factory
at Nile Street, Stoke-on-Trent of €12.5 million and reflect
a write down of
tangible fixed assets of €3 million. The proposed closure
was announced in March
2004.
The intangible assets arising on the acquisition of Royal
Doulton arose as
follows:
€m
Net liabilities acquired 73.7
Cash consideration for 78.84% of the issued share
capital of Royal Doulton 45.3
Costs associated with the acquisition 4.9
Carrying value of existing 21.16% holding 8.9
------
Intangible assets arising on acquisition 132.8
======
Intangible assets arising on acquisition comprise:
€m
Value ascribed to acquired brands (note 7) 39.6
Goodwill arising on acquisition (note 7) 93.2
------
132.8
======
Provisional fair value adjustments comprise the following:
(a) Reduction in the value of inventory to replacement cost
(b) Fair value of pension liabilities not already reflected
in the balance sheet
of Royal Doulton
Disposal of All Clad USA Inc
In July 2004, the Group disposed of its interest in All Clad
USA Inc. The net
assets disposed of comprised:
€m
Goodwill (note 7) 56.6
Tangible fixed assets 7.6
Stocks 25.3
Debtors
13.4
Cash at bank and in hand 0.8
Creditors due within one year (12.3)
------
Carrying value of interest sold 91.4
Disposal costs 12.1
Profit on disposal 103.2
------
Proceeds on disposal 206.7
------
Satisfied by:
Consideration received in cash 206.7
9. Provisions for liabilities Provision Provision
and charges for onerous for Other
lease pensions provisions Total
€m €m €m €m
At 31 March 2004 1.1
33.1 - 34.2
Arising from acquisition
of subsidiary undertaking -
74.4 - 74.4
Additions - 1.5
1.0 2.5
Exchange 0.1 0.6
- 0.7
--------- -------- -------- ------
At 31 March 2005 1.2
109.6 1.0
111.8
========= ======== ======== ======
10. (Loss)/earnings per ordinary share
12 months to 31 March 2005
12 months to 31 March 2004
(Loss)/ No. of Per
(Loss)/ No. of Per
profit shares share
profit shares share
€m millions cents €m millions* cents*
Loss for the year
before goodwill
amortisation and
exceptional items
(147.3) 1,517.5 (9.70)
(8.4) 1,037.0 (0.81)
Exceptional items
(108.0) 1,517.5 (7.12)
(36.5) 1,037.0 (3.52)
Profit on sale of
All Clad business
103.2 1,517.5 6.80 - - -
Profit on sale of
fixed assets
3.8 1,517.5 0.25 6.0 1,037.0 0.58
Makewhole
payments
(5.6) 1,517.5 (0.37)
(3.7) 1,037.0 (0.35)
Goodwill
amortisation
(5.5) 1,517.5 (0.36)
(6.7) 1,037.0 (0.65)
------- ------- -------
------- ------- ------
Loss attributable
to shareholders
(159.4) 1,517.5 (10.50)
(49.3) 1,037.0 (4.75)
======= ======= =======
======= ======= ======
* The weighted average number of shares and the loss per
share for the 12 months
to 31 March 2004 have been adjusted to reflect the bonus
element of the rights
issue which was announced in October 2004.
The calculation of (loss)/earnings per ordinary share is
based on 1,517.5
million shares, being the weighted average number of shares
in issue during the
12 months to 31 March 2005 (31 March 2004: 1,037.0 million).
11. Net debt
Net debt at 31 March 2005 comprising borrowings, less cash
and deposits and
unamortised debt issue costs, amounted to €279.4 million (31
March 2004: €382.9
million).
12. Subsequent events
In its trading update on 14 March 2005, the Group indicated
that it was
reviewing its fixed cost base in order to return to
sustainable profitability at
existing demand levels and current exchange rates. Following
this review, the
Group intends to restructure its business fundamentally. The
restructuring
programme announced on 4 May 2005, which will be financed by
a rights issue, is
designed to remove excess capacity, improve manufacturing
efficiency and to
enable a more complete integration of the Wedgwood division
with Royal
Doulton.
Key features of the proposed restructuring programme are as
follows:
* €90 million restructuring investment will be targeted
across the Group with
the objective of achieving annualised savings of
approximately €90 million once
fully implemented. The benefit of the savings will largely
have been achieved by
December 2006;
* it is anticipated that the total number of personnel
employed by the Group
will reduce by about 1,800 when the proposed restructuring
is completed;
* removal of excess capacity: about €30 million will be
spent on restructuring
at Waterford Crystal and Rosenthal in order to remove excess
capacity. At
Waterford Crystal, the Dungarvan plant will be closed;
* overhead reduction: investment of €24 million is planned
to reduce overheads
at Waterford Crystal, Rosenthal and at Group level and to
upgrade manufacturing
facilities in Waterford Crystal and Rosenthal;
* the combined effect of these proposed actions will be to
reduce the numbers
employed at Waterford Crystal by 485, at Rosenthal by 160
and across the wider
Group by 200;
* Wedgwood-Royal Doulton integration savings: following
completion of the
acquisition of Royal Doulton on 14 January 2005, the Group
has identified
opportunities for more savings than originally envisaged. It
is planned to
invest a total of €36 million (of which €6.5 million has
already been spent) to
achieve savings in manufacturing, retail operations,
administration, and
warehousing efficiencies. These proposed actions are
expected to reduce the
numbers employed by Wedgwood and Royal Doulton by 950
worldwide. About 450 of
these 950 have already left the business.
The proceeds of the rights issue will also facilitate an
improvement in the
Group's liquidity position, which has been impacted by a
number of developments
over recent months.
On 24 May 2005, the Group announced that it had agreed to
dispose of
underutilised land surrounding the Waterford Crystal Sports
and Social Centre
for €32.9 million. The net book value of the land is €0.6
million.
13. Copies of the Annual Report and Accounts will be posted
to shareholders in
due course.