Leaner Wedgwood delivers a dividend


Deputy City Editor

Waterford Wedgwood, the crystal and tableware manufacturer, has paid its first interim dividend since 1988 as a cost-cutting programme in both divisions continued to boost the return from flat sales.

Tony O'Reilly, the chairman, warned that trading conditions remained competitive. But he added: "Market share gains, together with the improving profits and balance sheet, demonstrate the success of our continued joint strategies of tenacious cost reduction."

Profit before tax in the six months to June jumped 45 per cent to IRpounds 7.4m from sales of IRpounds 150.9m (IRpounds 149.3m). After a 37 per cent rise in earnings per share to 0.82p, an interim payout of 0.25p a share was recommended. The shares, which have risen from a low of 14p three years ago, closed 2p lower at 62p.

The company's recovery since 1992 follows a bleak start to the decade, when in three years it notched up cumulative losses of more than IRpounds 40m. First, problems at the Waterford crystal division were put right and now work at Wedgwood is starting to pay off.

During the period Waterford benefited from a 12 per cent growth in sales from its Marquis brand, the middle-range glass products manufactured under contract. The brand has been a success despite early concerns about consumer resistance because they are not made in Ireland.

Profits from Waterford grew by 32 per cent to IRpounds 4.5m and the division received another boost earlier this year with the acquisition of Stuart & Son after a bitter family feud at the UK-based glass maker. Stuart was Waterford's first acquisition.

At Wedgwood, operating profits of IRpounds 5.6m showed an improvement for the third year running, up 24 per cent, 30 per cent in sterling terms.

Sales in the division increased by 3 per cent, with the Wedgwood brand making the running with a 10.4 per cent improvement. The lower-priced brands, including earthenware producer Johnson, declined by 7 per cent.

Wedgwood has adopted a similar policy to Waterford, introducing a new line called Wedgwood Homecare, aimed at the higher growth middle market. Shipping of the range began at the beginning of the year.

Wedgwood has also introduced Embassy, a range made under contract in Japan and California. The range is produced at lower cost than would have been possible by investing in new machinery in England.

The rationalisation programme at Wedgwood has included the closure of five of the company's 11 plants in the last three years.

Staffing levels have been reduced from a peak of 8,000 in 1990 to about 5,500 now. Cost savings are forecast to run at about pounds 13m a year by 1996.