The purpose of the Bill is to give Kilkenny Design Workshops Ltd. (KDW) statutory backing, to provide for an increase in its ordinary share capital from £100 to £1 million and for the taking up by the Minister for Finance of shares in the company.
KDW is one of our smaller State bodies. Yet despite its size, it performs valuable functions in the national interest. It has developed into a well run and multi-disciplinary agency with the joint objective of improving standards of design in the craft and craft based industries and of stimulating public interest in good design since its establishment in 1963. It employs 130 people; 82 in the Kilkenny workshops and 48 in the Dublin and Kilkenny retail shops. It is financed by an annual grant-in-aid from my Department and by fee and royalty income.
Through its extensive workshops, skilled technicians and craftsmen, it now provides industry with a very comprehensive design advisory and practical support service. This is KDW's primary role. Thus Irish manufacturers have for the asking specialised and expert advice on product design and development and, in some instances, market opportunities. If we as a nation are to maximise the benefits of the many hundreds of thousands of pounds spent annually by the State on industrial development in all its aspects, industry here must move, and move fast, into high value-added products. If this does not happen the consequences in both economic and social terms could be disastrous. Therefore, I am greatly encouraged to see that KDW allocates as much as two-thirds of its resources to the design of products in areas of advanced technology such as electronics, optics, telephone equipment and engineering products.
This does not mean of course that our small or craft industries are being neglected. Indeed the closest practical co-operation exists between KDW, the IDA, Shannon Development and the Crafts Council of Ireland.
KDW also plays a very active part in designer training, beginning with the new graduate near to or immediately after qualification. Through its finely tuned design and training programmes, young designers can gain practical experience and training both at home and abroad in all facets of design.
Good design like so much else depends on consumer acceptance. The promotion of public awareness of the value of good design is an important function of KDW. During its early years it was very conscious of the need for a show place where the consumer, visitor or buyer could see a representative range of the best of Irish designed and made products. There is no doubt that the shop, which KDW opened in Nassau Street, Dublin, in 1976, fulfils this need. In 1981 turnover reached £1.3 million when over a half million people visited the shop.
The Dublin shop until now has been financed entirely on borrowings both for start-up expenses and in funding of working capital associated with the company's increased sales. Because of the unprecedentedly high rates of interest that have prevailed in the meantime a cumulative operating surplus, after depreciation, of £105,000 has been turned into a cumulative deficit of £187,000.
Butler House, which is part of KDW's headquarters, underwent substantial renovations during the 1971-77 period. Though Butler House is self-financing on a day-to-day basis an outstanding debt of £100,000 remains to be discharged from the renovation costs.
A proposal by KDW for financial restructuring was examined by management consultants. The consultants advised that an equity injection of £500,000 into KDW was justified from an economic viewpoint. They recommended an injection of £400,000 equity into the Dublin retail operation and £100,000 into the design operation. The previous Government accepted the consultants' recommendation and made provision for a capital allocation of £500,000 in this year's Estimates. As a general principle I would admonish all State companies involved in commercial activities to ensure that the State capital invested in them earns a commercial rate of return.
The present Bill provides for an increase in the share capital from £100 to £1 million. It is proposed that £500,000 would be taken up immediately by the Minister for Finance in shares so as to reduce by £400,000 existing borrowings in the Dublin shop and repay the £100,000 loans outstanding from the conversion of Butler House. The balance of £500,000 could be taken up at some future date to finance further capital development. Any further capital injection into KDW will have to be justified on strict commercial grounds.