THE CERAMICS INDUSTRY AND ROYAL DOULTON
27th April 2004
I am delighted that the debate has taken place today, and I particularly
want to congratulate my hon. Friend-I use that term advisedly-the Member for
Stoke-on-Trent, North (Ms Walley) on securing it, and the hon. Member for
Newcastle-under-Lyme (Paul Farrelly) on the valuable work he has done. I
rise to speak not only as a shadow trade and industry minister but as a
Staffordshire Member of Parliament. Hon. Members have already pointed out
that there are structural problems in the ceramics industry as a whole. I
would like to pay brief tribute to the work of the Ceramic Industry Forum
operating in the European Parliament, which is chaired jointly by Malcolm
Harbour and Michael Cashman.
There are problems in the ceramics industry generally, but the problems at
Royal Doulton have been exacerbated by the crass incompetence of the recent
management. The hon. Lady has already pointed out the history of Royal
Doulton, so it is clear that the demise of the company is not just the
demise of a single factory or firm. A short time ago, it was the leading
English group of fine china companies. The English fine china business has
always been cyclical, but it has been a proud and successful exporter of
fine English products.
In the early 1980s, as we heard, Pearson found that the business was not
performing to its expectations. Its response was not to close down the
company but to bring in a new chief executive to give the business inspired
and creative leadership. It engaged Stuart Lyons, who had a background in
menswear manufacturing, and had previously been managing director of the UDS
retail group.
In those days, Stuart Lyons, with the support of the Pearson chairman,
Viscount Blakenham, introduced new manufacturing technology to the
tableware, figurine and glass-making operations, and combined that with
innovative design and marketing programmes. In addition to the existing
markets of Canada, the USA and Australia, he opened distribution
subsidiaries in Hong Kong and Tokyo, and the company's products were sold in
80 countries around the globe. Royal Doulton became the world's leading
specialist fine china retailer, with more than 400 branches, including the
Lawleys shops in England and a successful chain in America.
However, 10 years ago, when the Pearson group decided to concentrate on its
media activities, Lord Blakenham invited Stuart Lyons, who had by then been
awarded a CBE for services to the china industry, to make the business
public and gain a separate listing on the London stock exchange. Royal
Doulton plc was listed in December 1993, and in the three years that
followed the company doubled its earnings per share and delivered dividend
increases of 13 per cent. annually. It was a success. Annual turnover was
more than £250 million, with profits rising to £17.6 million. On the
strength of that achievement, further expansion was planned. It was apparent
that the brand names of Royal Doulton, Royal Albert, Royal Crown Derby and
Minton, all part of the Royal Doulton group, were more powerful in the USA
than the distribution that they commanded. America was then, as now, the
world's richest market, and the company had already opened a chain of 50
stores there that were well managed and commercially profitable.
Guaranteeing Royal Doulton's success, and safeguarding the work force in
north Staffordshire, depended on further penetration of the US market, as
well as on building up the United Kingdom market.
With the full support of his board, his independent chairman, the banks and
the company's financial advisers, Lyons spent many months negotiating the
agreed acquisition of a large and profitable retail group in the USA. That
should have been a further step in Royal Doulton's expansion and a
significant boost to the Stoke-on-Trent economy.
Life is not always so simple. Two institutional holders of Royal Doulton
shares-they held 25 per cent. of the equity between them-failed to
understand the strategic logic of the proposal and adopted a policy of
short-termism, refusing to support the proposal. That is one of the costs of
the free market: those who own shares in companies are free to make
mistakes. At that time, the Royal Doulton share price stood at about £2.50.
Today, after a series of rights issues at ever lower prices, it stands at
less than one twentieth of that figure, having fallen as low as 3p.
Stuart Lyons left the business rather than preside over a new strategy in
which he had no confidence. A new management team took over. Their first
step was publicly to belittle the company that they now led. They then
proceeded to dismantle Royal Doulton's design, marketing and retailing teams
worldwide. They rationalised-if rationalisation is the word-stocks,
warehouses and advertising budgets, and wondered why the company's sales
went into freefall. Unwilling to blame themselves, they blamed the previous
management, the work force, the economy, the marketplace, the Government and
the trade unions.
For the past seven years, Royal Doulton has made trading losses, having made
substantial profits every year for the previous 12. Every loss has led to
further cuts, to factory closures and to job losses. Only the top management
team is protected, with high salaries, share options, housing allowances,
bonus entitlements and free trips abroad. Hamish Grossart, the chairman, has
much to answer for, as do M&G and Mercury Asset Management. They have
demonstrated clearly that those are the destructive forces, forces of
short-termism and lack of vision that have seen the destruction of the
well-respected Royal Doulton company.
This is not a saga about party politics or political philosophy. It is a
tragedy for the people of Stoke-on-Trent and of Staffordshire generally. It
is also a tragedy for the English exporting effort, for investors in Royal
Doulton and for Customs. I endorse the series of questions asked by the hon.
Member for Stoke-on-Trent, North and those asked by other Members including
the hon. Member for Newcastle-under-Lyme. I look forward to a full response
from the Minister.
