The sparkling results from Waterford Crystal in 1998 were not enough to push its parent, Waterford Wedgwood, into a strong earnings growth mode. Wedgwood, the British fine bone china and earthenware subsidiary, which used to give needed sustenance to the crystal company, has reversed its role. It is now the taker and is providing a drag on the group's restless pursuit of growth. Indeed, it will continue to act as an anchor until it resumes satisfactory profit growth.
Wedgwood, operating in a very competitive market contending with strong sterling and suffering from a fall-out in the Japanese market, has embarked on a further rationalisation programme designed to cut more from its cost base. The 500 redundancy programme involves the closure of two plants, Coalport and Shelton Jewellery. That is reflected in the £24.6 million exceptional restructuring charge in its 1998 results. Already 260 people have been let go leaving a further 240 to go.
However, there will be no further exceptional charges this year as the 1998 figure takes account of the anticipated costs. Wedgwood's chief executive, Mr Brian Patterson, said the rationalisation should result in an £8 million reduction in costs this year. This is expected to rise to £13 million next year. However, as part of these savings are to be reinvested in brands, the financial benefits are not expected to flow through until 2000 and 2001. Wedgwood is also working closely with Rosenthal which should lead to benefits in purchasing, distribution and marketing. Rosenthal's strong position in the Continental European market should help Wedgwood products there, while Wedgwood's strong position in the Japanese market should aid Rosenthal. Waterford Wedgwood is nearing the target sales of £650 million (€825 million) by the year 2000. Importantly Waterford Crystal has already achieved its operating profit margin target of 15 per cent. Rosenthal has a long way to go but is moving in the right direction. But Wedgwood which saw its margin contract from 9.2 per cent to a mere 6.1 per cent in 1998 is facing a stiff uphill battle.
