Waterford Wedgwood plc has received a reprieve from senior lenders, who have agreed to a one-week extension on reviewing debt repayment terms. However, that small solace coincides with yesterday’s announcement of a 6 percent fall in group sales, and an operating loss of €29m for the half-year to the end of October.
Bankers’ forbearance for the period through December 12 – which it’s hoped will be extended further – allows discussions with interested institutional investors continue to be advanced.
“Assuming progress regarding new investment in the company continues to be made, the directors have reason to believe these senior lender discussions will reach a satisfactory conclusion,” a spokesman said.
Thursday’s interim results showed a €2m increase in operating losses compared to the same stage last year. Despite much improved cash outflows (down over €43m on the corresponding period in ’07), revenues slowed in the second quarter as the increasingly difficult economic environment kicked in.
Net debt at October 4 was €448.9 million (2007: €419.5m). However, chief executive David Sculley said last night that “despite immense challenges, there are a lot of things that are right about this business and the group has a future that is worth fighting for.”
The Directors believe that Waterford Wedgwood is “generally outperforming its competition” in key markets.
He said “a comprehensive business plan designed to deliver a sustainable recovery… is well underway.” However, the necessity of bringing new institutional investors on board would most likely require a comprehensive financial restructuring – ie, a major dilution of the controlling stake of chairman Tony O’Reilly and Peter Goulandris.
Accounts for the 26-week period included a net exceptional charge of €23.9m for the restructuring of the Waterford Crystal manufacturing and supply chain operations and the further integration of the Wedgwood and Royal Doulton operations.
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An overview of Waterford Crystal’s performance during the six months showed revenues of €70m – down 8 per cent (from €84.9m) at constant exchange rates on the comparable prior-year period. At prevailing exchange rates, revenues were down 17 per cent.
Waterford Crystal’s EBITDA (earnings before interest, taxes, depreciation and amortization), less exceptional items, saw a loss of €9.5m compared with a €12m profit for the same period last year.
This, the company said, reflects the impact of lower sales, “but significantly also includes a substantial under-recovery of manufacturing overheads due to excess capacity at the Kilbarry plant”, where only 80-120 jobs will remain once the mass lay-offs announced in October are implemented.
Crystal’s operating loss (before exceptional items) was €10m, compared with a profit of €7.8m between April and October ’07. Including exceptional items of €23.4 million (2007: €0.7m) the operating loss was €33.4m, versus a profit of €7.1m at the same date last year.
The bad news doesn’t stop there. Across the group October revenues were down 19 per cent compared with the same month in ’07, and 15 per cent lower for November.
While “committed to returning the group to profitability… additional funding is required to complete the turnaround,” Mr Sculley said. However, he warned, “failure to reach said agreements or failure to obtain further forbearance from the senior lenders… would compromise the Group’s ability to continue as a going concern.”
As well as thanking lenders for their understanding, the CEO said “we are also grateful for the ongoing support of our customers and suppliers as well as our employees.”