Wicklow based ceramics company hopes its bathroom can float

LATER this month, Quality Ceramics is aiming to bring the company to the London and Dublin stock markets to raise £6 million. The Arklow based company, which will trade as Qualceram plc, is expected to be valued at around £20 million following the flotation.

While its advisers finalise its prospectus over the coming weeks, managing director John O'Loughlin, together with his two codirectors, John Byrne and Tom Byrne, will be trying to keep their minds on the business which employs 105 people. But they will also be looking forward to the next stage of development for the company they started just 10 years ago.

Quality Ceramics was founded in 1987 following the closure of Armitage Shanks. The British bathroom manufacturer's decision to move production from Arklow to Staffordshire in Britain after 21 years was a major blow to the Wicklow town which, at peak production, had employed 160 local people.

Despite the withdrawal of the multinational manufacturer from the Irish market, Mr O'Loughlin says the three current directors remained convinced that there was enormous potential for an Irish based quality bathroom suites manufacturer.

The three men have known each other for a long time. They met while working for Armitage Shanks having gone from school into the factory. Mr O'Loughlin became financial controller and company secretary, but left to join Waterford Foods 18 months before the closure. Mr Tom Byrne was production manager while Mr John Byrne (no relation) was Armitage's sales manager.

"We had a major decision to make. We had to weigh up the risks involved and we needed £1 million to get up and running," says Mr O'Loughlin. "Having set out a business plan, we first won the support of the Industrial Development Authority, whose backing for the project was key to putting a financial package in place," he says.

"Winning the IDA's confidence was a major task in itself. At that time most people were asking why should we succeed where a major multinational had failed," says Mr O'Loughlin.

The banks also took some convincing, with the company looking to borrow up to £500,000. Their own bank turned down their application on the grounds that it did not believe it was a viable project.

Soon after though, they managed to get the necessary funds from Bank of Ireland and ICC Bank which, when topped up with their own investments, gave them the necessary £1 million to get off the ground. Mr O'Loughlin says it still retains the same bankers and continues to work with Forbairt, the State development agency for indigenous firms. "We have never forgotten those that stood by us."

Quality Ceramics was incorporated in December 1987 and started production in the old Armitage Shanks factory the following August. Initially employing 17 people, most of whom were former colleagues at Armitage Shanks, it immediately began to design a range of bathroom suites for the Irish market.

"We started in a small way, with a limited range of products. As we grew we looked at new markets, first Northern Ireland and the UK, and later expanded to France, Holland, and the Middle East," says Mr John Byrne.

The key to its success to date in Ireland has been the continued support of the domestic builders merchants, he says. "We helped to stabilise the price and the bathroom suites market in the Irish market at that time."

In the early years, Mr O'Loughlin says the company met with the same problems that tend to beset most new ventures. But he says they worked hard to control the growth of the business, trying to ensure that it was not overtrading.

Today, Quality Ceramics manufactures 10 types of porcelain bathroom suites and a range of acrylic baths. The company primarily serves the top end of the market with luxury suites ranging in price from £800 to £1,500.

Most of its suites are sold for refurbishment purposes and the range is currently enjoying strong demand both in Ireland and in its international markets.

Last year sales were strong, with the group reporting a 31 per cent increase in turnover to £7.3 million and pre tax profits of £1.54 million. "People are tending to spend more on bathrooms now, typically spending up to £2,000 on the suite and fittings. More homes also tend to have more than one bathroom and people are generally changing their suites at least once every 11 years," according to Mr Byrne. The long term objective, he says, is to be able to supply everything for the modem bathroom while it is also anxious to improve the mix of its business.

The flotation will give the company funds to expand its production process and to develop its markets, he says. Some of the £6 million will go towards enlarging its acrylic bath production process while a research and development programme to improve overall production will also be completed. The group also intends to establish a distribution depot in Dublin for its products.

For future growth Quality Ceramics will be focusing on expanding its export business and Mr O'Loughlin insists that its peripheral location is proving not to be a disadvantage.

"We are fairly close to Rosslare and transport costs are relatively cheap. While bathroom suites are a bulky product to export, in general it only costs around £2 to ship one suite to the UK. Those going to Europe work out costing around £4 a suite," according to Mr O'Loughlin.

In 10 years, he says the company has been transformed from being a project started by three people to include a substantial workforce and capable management team. "These are achievements which can't be put down on a balance sheet but which have ensured our success to date."

Mr O'Loughlin says the senior management will retain a majority shareholding in the company after the flotation. "It will still be our bread and butter. The company has good strong cashflow and a young management team. We intend to stick with it and drive it forward," he adds.

Qualceram is due to come to the market towards the end of this month.