Waterford shareholders unimpressed by situation

Waterford Wedgwood's beleaguered shareholders appeared bewildered and frustrated with the latest news from the company and few were optimistic about its future.

Sir Anthony O'Reilly's upbeat and jovial demeanour throughout the two-and-a-half-hour annual general meeting helped to soothe their plight, but it was clear they were unimpressed with the performance and management of Waterford Wedgwood.

When one shareholder questioned the ability and credibility of its current management team, Sir Anthony pointed out that there have been many changes amongst their ranks and expressed total confidence in them. "I am much more satisfied with the management today than I was previous to this. I am more comfortable putting my money behind them," he told the meeting.

As a major holder of Waterford Wedgwood stock himself, he sympathised with their frustration about the dwindling share price and the lack of dividend payments. "Trading is still not satisfactory. We need to roll up our sleeves, sell more, increase margins, reduce costs and be a low-cost operator."

The drive towards achieving more efficiency and cheaper costs was put forward as the main reason for Waterford Wedgwood's desire to acquire Royal Doulton. If it manages to purchase Royal Doulton, it intends to transfer its production to Wedgwood's facility in the UK, making it one of the biggest and low-cost facilities outside of China.

Sir Anthony said there were obvious synergies between the two businesses and that this was the right time to proceed with buying it. Royal Doulton has been radically restructured in recent years and has downsized its workforce by around 6,000.

Waterford Wedgwood is awaiting the resolution of a number of issues, including some surrounding its pension fund, before deciding to move forward with a bid. "The possible acquisition of Royal Doulton would transform Wedgwood," Sir Anthony said.

"With Royal Doulton's restructuring largely completed, we could add its revenues to our top-line sales without greatly increasing our costs. This would increase the profitability of the combined businesses."

Shareholders were told that the rights issue is conditional on an announcement by the group of a firm intention to make an offer for Royal Doulton but is not conditional on completion of the acquisition.

Waterford Wedgwood has also secured new banking arrangements that have been led by Burdale Financial limited, a subsidiary of the US Wachovia corporation.

Sir Anthony said its previous banking arrangement had been unsatisfactory and described negotiation with the banks over the past year and a half as "ill tempered" and "very difficult".