Waterford Wedgwood owner WWRD expects to enjoy sales of around €286 million a year, writes BARRY O'HALLORAN

THE LATEST owner of Waterford Crystal has just come through what in their business is the critical first nine months. KPS, the US private equity fund which bought Waterford Wedgwood from its receiver last March, specialises in “turnarounds” – that is, taking on ailing manufacturers and remoulding them into profitable businesses.

Pierre de Villeméjane, chief executive of WWRD, the KPS-controlled vehicle which now owns Waterford Wedgwood and Royal Doulton, says the first nine months of any turnaround are central to getting it off the ground.

“We inherited a very broken company,” he observes. It was also one with a very unhealthy culture, a lot of duplication in the organisation, and management teams responsible for each individual brand competing with each other, he says.

Brands and products cannibalised each other, he adds. For example, Waterford had a tableware line, despite the fact that the group included both Wedgwood and Royal Doulton, and there was confusion over which consumers each operation should pursue.

The problems were not just structural. “There was also a culture of spending without discipline, even though the old company was in significant financial trouble,” de Villeméjane says.

He can’t pinpoint where the problems began, but suggests they were partly a result of the company’s growing through acquisition. “They acquired Royal Doulton, there was the combination of Waterford and Wedgwood, and that stresses any organisation,” he argues.

“When you do [acquisitions] of those sizes, where you basically buy somebody who is as big as you are, there’s a very, very big job to do in terms of making sure that the culture is going to match. That’s where I think that things failed. You had the Royal Doulton team on one side, the Wedgwood team on another, and the Waterford team on the third, and then you had the Rosenthal acquisition on top of that.”

His first job was tackling these problems. The new structure has a chief executive, chief financial officer, vice-president of operations and a vice-president of marketing and design. It then has three group vice-presidents responsible for all brands in their territories – the US, Far East, and Europe/Middle East. “This enables us to manage the business as a portfolio of brands,” says de Villeméjane.

A certain amount of the restructuring happened by default once the banks appointed David Carson of Deloitte as receiver. At that point, Sir Anthony O’Reilly resigned from the board and many senior executives and management quickly followed suit.

There was not a complete shakeout. Anthony Jones in finance and Martin Devaney in marketing remained on board. Jones has been closely involved with getting the new crystal manufacturing facility visitors’ centre up and running in Waterford.

WWRD expects to generate sales of around $400 million (€286 million) a year, with Waterford contributing $115 million, Wedgwood around $100 million, and Royal Doulton and other brands the balance. It did not buy German-based Rosenthal, which was taken over by a local rival.

The company has charge of the finance, design, marketing and some manufacturing, mainly of porcelain in England. Much of its Waterford Crystal will be produced under licence in various centres around Europe.

It is aiming to generate earnings before interest, tax and write-offs (known as Ebitda) of 15 per cent. De Villeméjane says it is at around one-third of that now. Reaching the target means continuing to re-engineer the business.

This will reach down through the organisation and its suppliers, and involve bringing in what de Villeméjane calls “fantastic best practices” from electronics and automotive sectors that cover everything from manufacturing to inventory management.

Despite its image, crystal and bone china manufacturing is very industrialised. De Villeméjane believes the business needs to import suitable practices from other industries in order to work.

This is really a classic case of industrial re-engineering, something that is far removed from de Villeméjane’s own business roots. Marketing was his original focus, and he worked at L’Oreal in his native Paris.

His relationship with KPS dates back to 2003, when he was chief executive of Speedline, a division of Cookson, which made equipment for manufacturing printed circuit boards. The owner wanted to sell, and de Villeméjane contacted the private equity firm.

They put together a management buyout and sold on again in 2007. After a transitional period and a sabbatical, de Villeméjane rejoined KPS and they began the search for a new target, which turned out to be Waterford Wedgwood.