PROFILE – A clear account

PROFILE - A clear account

Waterford Wedgwood's group FD Richard Barnes always wanted to be afireman, sadly vertigo put pay to his plans. But, as he tells Harriot LaneFox, he's now a firefighter of a different kind.

The smoke chamber wasn’t the problem, it was the teetering on a parapet one brick wide and six storeys above Southend. Roped to the practice tower, the 17-year-old Richard Barnes discovered a fear of heights and came down to earth with a bump. He was never going to be a fireman.

Today, some 20 years on from the day he shadowed his dad at work, Barnes is group finance director of Waterford Wedgwood plc, a company he’d never have walked into if he had developed a fireman’s nose for danger. The facade was attractive. The building looked sound. But, inside, flames just waited to erupt.

‘I joined in 1988 before any of the troubles,’ Barnes smiles at the understatement.

‘There were times when I thought I’d made the worst mistake ever. In three years Waterford lost the equivalent in after-tax profits of one year’s worth of revenue.’

By 1989, the over-confident but under-managed Irish crystal manufacturer had defeated a restructuring programme and almost propelled itself and Wedgwood (acquired in 1986) into oblivion: it was paying workers 30% over the going rate, the products were overpriced, and the company was too reliant on US sales, leaving it high and dry when the dollar crashed.

Two of the world’s most venerable brands would have been history if it weren’t for a u79.5m cash injection from a consortium headed by Irish industrialist Dr Tony O’Reilly.

The only consolation is Barnes wasn’t the only newcomer to the group to regret the inadequacy of his pre-move due diligence. It may be why he guards his tongue even more than most finance directors, appearing mentally to rehearse each word. From time to time a well-suppressed swagger ruffles the calm exterior, but then Barnes, and his partners in Waterford Wedgwood’s unusual management triumvirate, have earned a quiet strut.

In the five years following the rescue, staff numbers at Waterford shrank by 35%, the group cut UK manufacturing from 11 factories to 6 and production workforce by 37%, and sales per employee soared from around u30,000 to over u46,500. All this has had a dramatic effect on the numbers. By the end of the 1995 financial year, a pre-tax loss of u3.9m before exceptional restructuring costs had turned into a pre-tax profit of u28.1m. This grew by another 28% in the first half of this year and the group made its first dividend payment in six years.

No longer quite so much the supplicant as he does the rounds of City analysts, Barnes now has the air of a prosperous bantam. Dick Watson, who tracks Waterford Wedgwood for Goodbody Stockbrokers, says: ‘He’s a very good communicator, very helpful and efficient.’

Such approbation, which cloaks both the group and its finance director, is the norm now and due in no small part to Barnes’ dedication to the ‘art of investor relations’. It’s about being more open than the industry standard whether with the banks, close-linked investors or the institutions – even at the risk of having to go back and explain why you’ve failed to meet the targets.

‘I have to say that over the last four to five years Waterford Wedgwood has pretty well delivered on where it indicated it was going,’ comments Joe Burnell of Davy Equity Research.

Ironically, this paragon isn’t even a qualified accountant. Barnes quit a part-time ACMA course when he swapped his first job as a trainee at the Central Electricity Generating Board to join Ford. ‘Ford’s a meritocracy.

Once inside it it didn’t matter what you were outside. And it is, I still believe to this day, one of the best training platforms for any form of management.’

He spent 20 years there – a pretty resounding endorsement – rising to assistant treasurer of Ford of Europe and then finance director in Spain.

Though it appears on his CV, Barnes refuses to take the credit for the awe-inspiring Spanish turnaround – u5m losses into u123m profits in three years. The market picked up and it was a big team.

In fact, being part of a much more compact management was one of the attractions that lured him away to Wedgwood. ‘I guess I was at that archetypal break point in a man’s life when he’s nearly 40 and thinks “well, what am I going to do for the next 20 years?”. The attraction of playing a much more significant role in running the business appealed to me.’ Three kids at a crucial age for schooling came into it too.

Barnes started as Wedgwood finance director in 1988 and spent seven months ensuring the ceramics veteran performed its socks off in order to shore up Waterford Crystal. In March 1989, the banks demanded that the latter be ringfenced. The new operating structure split the Wedgwood managing director’s role into two and Barnes took one half, heading up the UK arm. The company reintegrated two years later as Waterford slowly came back to health and he became ‘the data man’, controlling finance, logistics, purchasing and IT.

By nature ‘a relatively hands-on individual’, Barnes does miss the day-to-day contact with employees and operations, and the wider span of control of his old job – he still displays an unexpectedly detailed knowledge of product lines and manufacturing minutiae. But there are considerable compensations.

‘I get a particular buzz out of having delivered those results and being able to actually represent the company in terms of making sure that those who have an interest in us recognise that success.’ He quickly adds: ‘I am not claiming that all of that’s mine – it’s our backers, our people, our manufacturing, the whole array. The team here has been together through the whole of that process.’

The team refers to the two chief executives, Brian Patterson at Wedgwood and at Waterford Redmond (‘Red’) O’Donoghue. Barnes completes the triumvirate.

With no executive titular head, it’s an unorthodox structure but the two companies market very distinct brands, manufacture separately and only combine distribution overseas where it would be nonsensical not to do so. There’s never been a fight for resources so irreconcilable he’s had to refer it to the board. Even the analysts, not noted for their tolerance of the unusual, seem to approve. ‘It’s worked for them and the market takes the view that if it ain’t broke don’t fix it’ says Burnell.

Barnes reports directly to non-executive chairman Tony O’Reilly. The good doctor giggled – and the team heaved a huge sigh of relief when he did – at a recent snippet in The Times. It described how, every Sunday evening, Barnes has to check in with the boss wherever he is in the world at six o’clock local time. The market takes the view too that O’Reilly is lucky to have him on the other end of the line. ‘From my own personal view, and I deal with the finance directors of many publicly-quoted companies, I regard him very very highly. He’s one of the best,’ says Watson.

If Ford of Spain wasn’t hairy enough, that is certainly not likely to be the complaint about the next few years at Waterford Wedgwood. Like adrenaline junkies in a Pepsi commercial, the team is now taking on what they refer to as the Chairman’s Challenge. A target they volunteered for themselves, it means doubling sales and trebling profits by the millennium.

And you don’t disappoint the chairman. ‘I’d say I get a great kick out of achieving things other people thought were unachievable. I quite enjoy challenges that are deemed very aggressive.’

The aim is to make the Waterford and Wedgwood brands work harder by turning the group into a diversified luxury goods house in the style of Dunhill or Hermes (linens, luggage, coffee and tea already bear the company name in Japan). Over the past three years u57m has already gone into updating production. Penetrate beyond the museum at Wedgwood’s Barlaston (Barnes is quite the showman when he leads the tour) factory and there are few untouched vestiges of the past – four elderly men hunched over to paint intricate patterns on only the most highly prized ware.

Now the group is looking to subcontract manufacturing where appropriate, overhaul its branded shops and expand the mail order side. Rumours have been flying about an imminent take-over of troubled German ceramics manufacturer Rosenthal. Barnes naturally side-steps the specifics to focus on the broader issue – acquisition.

Waterford Wedgwood will probably spend its cash on a number of small to medium sized companies, both rivals and those that will help it diversify, over the next few years rather than attempt to swallow a major player.

Only organic revenue increases count towards the challenge and Barnes is relishing the chance ‘to build plans that looked exciting and growth-like rather than perhaps not quite so exciting and more survival-like’.

He is extremely reluctant to comment on incentives to meet the targets: ‘I’m sure that remuneration will be consistent – oh dear – with the benefits that will be achieved by the shareholders and everybody else inside the company. We have a broad idea of how we’re going to achieve the chairman’s challenge and we are certainly being incentivised appropriately to do so. It’d be nice to believe that it’ll see me through in a fashion I might become accustomed to.’

Barnes might even be able to fulfill the dream of rebuilding an E-type Jaguar – open-top, of course – to reflect his ‘advancing age’. He’ll be ‘hands-on’ if he does, greasy up to the elbows, not lounging in deckchairs at classic car shows. In fact, he almost relaxes talking about it. But since the man is about as likely to take early retirement as he is to rope himself to a tower six storeys above Southend again, the nearest he’s going to get to a Jaguar for some time yet is the modern one he drives today.

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