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The sound of smashing china and tinkling glass is all part of the fun at new year sales. Now it sounds as though the tableware industry itself is going to pieces. Crystal and fine china maker Waterford Wedgwood, a pet investment of Irish entrepreneur and non-executive chairman Sir Tony O’Reilly, is the latest household name to be put into administration, joining Royal Worcester & Spode. Banks pulled the plug after the Irish group failed to raise fresh capital.
The cracks have been apparent since Waterford, the Irish crystal maker, merged with Wedgwood in 1986. Changing tastes, working capital constraints and failure to tame high production costs in Ireland and the UK while most sales were to the US, have been recurring concerns. Sir Tony first bailed out the Irish icon in the early 1990s. He and brother-in-law Peter Goulandris poured in more than €400m, including €60m last year in spite of an unsuccessful €154m rights issue, to cut net debt of over €449m. Wearied by four rights issues since 2003, ordinary shareholders understandably ran out of patience.
Fundraising distracted management from the more pressing task of cutting duplication in a company still run as four largely unintegrated units – Waterford, Wedgwood and the more recently acquired Rosenthal and Royal Doulton. Operational efficiency at home was overlooked even as the group pursued alliances with top designers to boost sales and outsourced production to eastern Europe and Indonesia to cut costs.
Deloitte, the administrator, might attract an investor. Sir Tony believes he did all he could to preserve the company, but shareholders will be right to protest if a more objective investor achieves the efficiencies that eluded the group he has backed for two decades. The trouble with icons is that people are afraid of tinkering with them. Dissident investors in Sir Tony’s media empire will scent blood.