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.