ROYAL DOULTON - 27 & 28-Apr-2004 House of Commons

ROYAL DOULTON - 27 & 28-Apr-2004 House of Commons

Extract from The Parliamentary Debate of 27-Apr-2004
commencing Column 216WH of Hansard
to read the whole debate for context CLICK HERE .

EXTRACTED News Release

28th April 2004

Michael FABRICANT BLAMES

"CRASS INCOMPETENCE"

FOR CLOSURE OF ROYAL DOULTON

In a wide ranging debate in the House of Commons called by Joan Walley, Member of Parliament Stoke on Trent North, Michael Fabricant yesterday (27th April) accused the management of Royal Doulton of "crass incompetence" and laid the finger of blame on its chairman Hamish Grossart and the "short termism" of its financial investors M&G and Mercury Asset Management. Michael Fabricant says: "If managed properly, Royal Doulton and its associated companies needn't have closed. There are lessons here not only for the ceramics industry, but for manufacturing as a whole in the UK. The present management blamed everyone else for the shortcomings in Royal Doulton: the market place, the workers, the trade unions. But they should have looked at themselves".

There now follows the text of the speech which is protected by Parliamentary Privilege:-

Michael Fabricant (Lichfield) (Con): 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.

To view the original of this extract CLICK HERE

Hamish McLeod GROSSART52 born 07-Apr-1957

SPECulative Society of Edinburgh Member

IndigoVision
Non-Executive Chairman joined the board as chairman in 1996.Cairn Energy PLC
currently also non-executive deputy chairmanCairn India Limited
a non-executive director Member and Chairman of the Audit, Remuneration, Nomination & Corporate Governance Committees

British Polythene Industries PLC
Deputy Chairman
Artemis Investment Management Limited
a non-executive directorScottish Radio Holdings
Royal Doulton

He has over 20 years' experience on public company boards, in a wide range of industries,

both in an executive and non-executive capacity, frequently with catastrophic consequences.

He has left:
a long trail of broken lives, betrayed staff, colleagues and women,

who have suffered from his emotional inadequacies and lack of maturity.

A weak and bullying individual, who brings shame and unhappiness to his children,

and those who misguidedly cared for him, as he sets out to prove his worth to himself.

Always acting egocentrically at the expense of those he can bully, exploit and control.
An emotional Narcissist & a manipulative sociopath.