REG - Watches of Switzlnd. - H1 FY22 Results
09/12/2021 07:00
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RNS Number : 0455V Watches of Switzerland Group PLC 09 December 2021
Watches of Switzerland Group PLC
H1 FY22 Results
for the 26 weeks to 31 October 2021 (H1 FY22)
Strong performance underpinning recently upgraded guidance
US expansion strategy advanced with acquisitions of five stores now completed
Watches of Switzerland Group PLC ('the Group') today provides the following
financial results relating to the 26 weeks ending 31 October 2021.
Strong, broad-based sales performance resulting in significant growth in H1
FY22 profit
· Group revenue £586.2 million (H1 FY21: £414.3 million), +44.6% vs
H1 FY21 and +40.8% vs H1 FY20 (both in constant currency(2))
o Continued strong demand for luxury watches and jewellery, with growth led
by a significant increase in volumes of non-supply constrained brands
o Each individual brand showed positive average selling price (ASP) growth
o Group ecommerce sales(1) grew +28.7% on last year
· Adjusted EBITDA(2) +58.8% to £82.8 million (H1 FY21: £52.2
million)
o Adjusted EBITDA margin(2) of 14.1% (H1 FY21: 12.6%)
· Adjusted EBIT(2) +62.7% to £67.5 million (H1 FY21: £41.5
million)
· Statutory operating profit +58.6% to £72.3 million (H1 FY21:
£45.6 million)
· Statutory profit before tax £64.7 million (H1 FY21: £36.2
million)
· Expansionary capital expenditure(3) of £19.1 million (H1 FY21:
£9.1 million) with eight new stores opened, two stores acquired, three
stores expanded, and five stores refurbished
· Free cashflow(2) of £102.3 million (H1 FY21: £116.1 million)
with conversion of 123.6%
· Return on capital employed(2) increased to 23.1% (H1 FY21: 17.2%)
· Net cash(2) of £30.0 million as at 31 October 2021 (25 October
2020: net debt(2) of £22.7 million)
Operating highlights
· Growth achieved through consistent investment in marketing,
stores, systems and people
· Following a period of destocking during Q1 FY22, in Q2 FY22 the
Group actively re-built store stock for Rolex in the US and the UK to enhance
brand representation
o Change in management of Rolex store stock to be exhibition-only
· Outstanding US performance delivered with revenue £167.6 million,
+50.2% vs H1 FY21 and +66.7% vs H1 FY20 (both in constant currency)
o Expansion strategy advanced with previously announced agreements to
purchase five stores in Plano (Dallas), Vail, Aspen, Greenwich and
Minneapolis. The combined Last Twelve Months revenue for these stores was
approximately US$100.0 million and future profitability is expected to be in
line with the Group's US average
· Robust UK performance continues to be generated by a thriving
domestic clientele, with revenue £418.6 million +42.3% vs H1 FY21
o Revenue +31.8% vs H1 FY20 when 33.6% of Group sales were generated by
tourists(3) and airports (all in the UK) vs negligible tourist and
significantly reduced airport business in H1 FY22
· Continued investment in store network across both the UK and the
US with several important projects completed:
o Opening of enhanced Rolex dedicated space within Mayors Aventura, Phase I
of the store's refurbishment plan
o Introduction of Goldsmiths Luxury concept in two stores (Canterbury and
Reading)
o Refurbishment of a further five stores in the UK
o Opening of a mono-brand boutique in Trafford Centre
o Opening of one Goldsmiths store and two mono-brand boutiques in Edinburgh
St James
o Opening of three mono-brand boutiques in Plymouth
Current trading and outlook
· Q3 trading to date supports full year guidance upgraded on 9
November 2021
· Well-stocked for Holiday trading period
· Since the end of H1 FY22, we have opened our first Bvlgari
mono-brand boutique in Mayors Aventura, completed the refurbishment of a
further three stores in the Goldsmiths Luxury format, acquired a further three
stores in the US, and opened an additional two mono-brand boutiques in the UK
· The Group has an exciting pipeline of store projects planned:
o Continued investment in the Mayors network in Florida and Georgia
§ Opening of refurbished stores in Aventura Phase II, Florida and Boca Raton,
Florida
o Further expansion of Watches of Switzerland stores in the US:
§ Opening of new stores in American Dream, New Jersey and in Kenwood Towne
Centre, Cincinnati
o Opening of refurbished Rolex boutique in Wynn Resort, Las Vegas
o Further mono-brand activity in the UK and the US
o Opening of new Watches of Switzerland store in Battersea
o Roll out of Goldsmiths Luxury elevated store formats
· Our guidance reflects visibility of supply of key brands. The
Group does not expect the return of tourism and airport business to
pre-pandemic levels during the year
· As announced on 9 November 2021, we upgraded our guidance for
FY22 as follows (on a 52-week, pre-IFRS 16 basis):
o Revenue: £1.15 billion to £1.20 billion (previous guidance £1.05
billion to £1.10 billion)
o EBITDA and Adjusted EBITDA margin %: +1.0% to +1.5% vs last year (previous
guidance flat to +0.5% vs last year)
o Depreciation, amortisation, impairment and profit/loss on disposal of
fixed assets: £30.0 million to £32.0 million (no change vs previous
guidance)
o Total finance costs: £4.0 million to £4.5 million (no change vs previous
guidance)
o Underlying tax rate: 21.0% to 22.5% (no change vs previous guidance)
o Capex: £45.0 million to £50.0 million (previously £40.0 million to
£45.0 million)
o Net debt: £10.0 million to £20.0 million (previously £20.0 million to
£30.0 million)
o Average USD/GBP full year rate of $1.40
Brian Duffy, Chief Executive Officer, said:
"I am delighted with our excellent first half year performance. We introduced
several initiatives and enhancements during difficult trading circumstances
last year which have become permanent features of the business, enabling us to
continue to maintain high engagement levels with our customers whilst
providing an exceptional experience and delivering attractive returns. Our
success in both the UK and the US has been testament to our robust
multichannel business model, the enthusiasm and commitment of our people, and
the attractive dynamics of our category where demand continues to outpace
supply.
We have started the third quarter with continued strong momentum and are well
positioned heading into the Holiday period.
Through a consistent investment programme, we have further strengthened the
business, paving the way for continued success as we advance our Long Range
Plan objectives to strengthen our luxury watch leadership in the UK, become
the clear market leader in the US and capitalise on the growth potential in
the EU market."
H1 FY22 Revenue performance by geography
H1 FY22 H1 FY21 H1 FY22 vs H1 FY21 H1 FY22 vs H1 FY20
26 weeks to 26 weeks to Reported YoY % 2-year Reported YoY % 2-year constant currency YoY %
31 Oct 2021 25 Oct 2020 Constant currency YoY %
(£million)
UK 418.6 294.2 42.3% 42.3% 31.8% 31.8%
US 167.6 120.1 39.5% 50.2% 50.9% 66.7%
Group Revenue 586.2 414.3 41.5% 44.6% 36.7% 40.8%
H1 FY22 Revenue performance by category
H1
26 weeks to 26 weeks to Reported YoY %
(£million) 31 Oct 2021 25 Oct 2020
Luxury watches 508.8 362.1 40.5%
Luxury jewellery 40.8 26.3 54.9%
Other 36.6 25.9 41.6%
Group Revenue 586.2 414.3 41.5%
H1 FY22 Results Conference call
A webcast conference call for analysts and investors will be held
at 9.00am (UK time) today. To access the webcast, please use the following
details:
Webcast
link: https://webcasting.brrmedia.co.uk/broadcast/615ad0594e29f55a9419010f
(https://url4.mailanyone.net/v1/?m=1mv16U-0003tl-3b&i=57e1b682&c=uGcIMnYgR6oddSZOnVKi0RkPYiF_hF_clyGA5U7Q9tRZ45pTlAE1KTcazuUn_uUEvAyWCHKkQtFosotCDvx1138w2bpRwirkemvCDyjtcuYkgDbf8gX0IdF0wNBFlfs65e78JGtfwMc4n1spuleDsec6rJmMJDLJCW5jbRrxv-6NwxdPDn4BAY3K7S2AbWDBtZVXBN3ygwnPwushybyBPlRrsCHGuBffdgxkuzo4n-e_cOD3V8FeHb0-aWob1rqxzl-k3r4_0fkO5jfKUGBbdA)
Participant Access Code: 8698080
The presentation will be followed by a live Q&A for analysts and
investors, who will be able to ask questions via the following telephone
details:
United Kingdom (Local): +44 (0)330 336 9125
Participant Access Code: 8698080
___________________________________________________________________________________________
1 Ecommerce sales are sales which are transacted online
2 This is an Alternative Performance Measure and is shown on a pre-IFRS 16
basis. Refer to the Glossary for definition, purpose and reconciliation to
statutory measures where relevant
3 Refer to the Glossary for definition
Contacts
The Watches of Switzerland Group
Anders Romberg, CFO
+44 (0) 116 2817 401
Allegra Perry, Investor
Relations
+44 (0) 20 7317 4600
Caroline Browne, Group Finance
Director
+44 (0) 116 2817 420
investor.relations@thewosgroup.com (mailto:investor.relations@thewosgroup.com)
Headland
Lucy Legh / Rob
Walker
+44 (0) 20 3805 4822
wos@headlandconsultancy.com (mailto:wos@headlandconsultancy.com)
About the Watches of Switzerland Group
The Watches of Switzerland Group is the UK's largest luxury watch retailer,
operating in both the UK and US, comprising four prestigious brands; Watches
of Switzerland (UK and US), Mappin & Webb (UK), Goldsmiths (UK) and Mayors
(US), with complementary jewellery offering.
As at 31 October 2021, the Watches of Switzerland Group has 163 stores across
the UK and US including 46 dedicated mono-brand boutiques in these two markets
in partnership with Rolex, TAG Heuer, OMEGA, Breitling, Audemars Piguet,
Tudor, Grand Seiko and FOPE and has a leading presence in Heathrow Airport
with representation in Terminals 2, 3, 4 and 5 as well as six transactional
websites.
The Watches of Switzerland Group is proud to be the UK's largest retailer for
Rolex, Cartier, OMEGA, TAG Heuer and Breitling watches.
Mappin & Webb holds Royal warrants as goldsmiths, silversmiths and
jeweller to Her Majesty The Queen and silversmiths to His Royal Highness The
Prince of Wales. The Mappin & Webb master jeweller has been Crown
Jeweller, custodian of the Crown Jewels of Her Majesty The Queen since 2012.
https://www.thewosgroupplc.com (https://www.thewosgroupplc.com)
Cautionary note regarding forward-looking statements
This announcement has been prepared by Watches of Switzerland Group PLC (the
'Company'). It includes statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "anticipates", "expects", "intends", "plans", "goal",
"target", "aim", "may", "will", "would", "could" or "should" or, in each case,
their negative or other variations or comparable terminology. They appear in a
number of places throughout this announcement and the information incorporated
by reference into this announcement and may include statements regarding the
intentions, beliefs or current expectations of the Company Directors or the
Group concerning, amongst other things: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy and future prospects; (ii) business and
management strategies, the expansion and growth of the Group's business
operations; and (iii) the effects of government regulation and industry
changes on the business of the Company or the Group.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future and may be beyond the Company's ability to control or
predict. Forward-looking statements are not guarantees of future performance.
The Group's actual results of operations, financial condition, liquidity, and
the development of the industry in which it operates may differ materially
from the impression created by the forward-looking statements contained in
this announcement and/or the information incorporated by reference into this
presentation.
Any forward-looking statements made by or on behalf of the Company or the
Group speak only as of the date they are made and are based upon the knowledge
and information available to the Directors on the date of this announcement,
and are subject to risks relating to future events, other risks, uncertainties
and assumptions relating to the Company's operations and growth strategy, and
a number of factors that could cause actual results and developments to differ
materially from those expressed or implied by the forward-looking statements.
Undue reliance should not be placed on any forward-looking statements.
Before making any investment decision in relation to the Company you should
specifically consider the factors identified in this document, in addition to
the risk factors that may affect the Company or the Group's operations which
are described in the Annual Report and Accounts 2021 in Risk Management and
Principal Risks and Uncertainties.
Chief Executive Officer's Review
Our Group has reached new heights during the first half of the financial year,
with a further strengthening of the business in our existing markets of the UK
and the US. We delivered a strong increase in first half year profit, driven
by margin enhancing and broad-based growth, as we progressed on our Long Range
Plan objectives.
Luxury watches continue to benefit from a strong demand environment and we
have seen growth in the period led by a significant increase in volumes of
non-supply constrained brands. Luxury jewellery has also experienced robust
growth, with sales in the category +54.9% vs last year.
Our robust UK performance has been generated by a thriving domestic
clientele. Despite negligible tourist and much reduced airport business, UK
revenue in the first half grew by +42.3% vs H1 FY21 and +31.8% vs H1 FY20,
when 33.6% of the business was generated by tourists and airports. We
continue to invest in our stores, where we further expanded and elevated the
network. We generated strong growth from our ecommerce business despite stores
being fully opened this year and having been partially closed in the prior
year period.
In the US, we are continuing to make strides in further establishing a strong
presence in the market. US revenue increased by +50.2% vs H1 FY21 and +66.7%
vs H1 FY20 (both in constant currency). We continue to enhance the Mayors
network with phase I of the Aventura store elevation complete. We also
advanced our expansion strategy through the agreement to acquire five stores
in four new states for the Group, broadening our representation in the market
to a total of 36 stores (22 multi-brand, 14 mono-brand boutiques).
We have introduced the new customer experience initiative, Xenia, in our
business in the UK and in the US and will continue to develop and enhance this
in coming months.
I would like to thank our teams who have been remarkable in embracing new ways
of engaging with our customers and adapting to new challenges, particularly
during the last eighteen months. Their resilience and commitment have enabled
the Group to be successful.
As announced, we are very excited to have Bill Floydd join us as CFO on 1
January 2022. Anders Romberg, the current CFO, will be stepping down and will
retire from the Group following a suitable handover period with Bill. I want
to thank Anders for all his help and support over the past seven years and he
goes with our best wishes for the future.
I am proud of the progress we are making on ESG. We held the inaugural meeting
of The Watches of Switzerland Group Foundation during the period and have many
exciting plans for this initiative in coming months. The recently established
ESG Committee has also begun its work in advancing our priorities in this
area.
Looking ahead, we will continue to invest in our business in order to deliver
on our Long Range Plan objectives. I am confident that our Group is stronger
than ever and well positioned for growth.
Group Strategy Delivering Outstanding Results
The Group delivered an outstanding sales and profit performance during H1
FY22, advancing on the strategic priorities laid out in the Long Range Plan to
FY26.
To recognise the importance of our Environmental Social and Governance (ESG)
programme, this workstream has been added to the Group's strategic priorities.
Within the framework of its seven strategic priorities, the Group made
significant progress through continued elevated levels of investment and focus
on further developing a customer-centric business model.
1) Grow revenue, profit and return on capital employed
Against a backdrop of more normalised trading patterns with our store network
being open throughout the first half year period, we continued to invest in
further enhancing and building our portfolio, both in the UK and the US.
Significant progress has been delivered during the half year period including:
UK
· Introduction of Goldsmiths Luxury concept in two stores
(Canterbury and Reading)
· Opening of three mono-brand boutiques (OMEGA, TAG Heuer,
Breitling) in Plymouth
· Opening of a new Goldsmiths store and two new mono-brand
boutiques (OMEGA, Breitling) in Edinburgh and one new TAG Heuer mono-brand
boutique in Manchester
· Further development of store network with five refurbishments
across the estate
US
· Opening of enhanced Rolex dedicated space within Mayors Aventura,
Phase I of the store's refurbishment plan
· Eight mono-brand boutiques recently opened are performing
strongly and gathering pace
· Purchase of five stores (three of which completed on 1 December
2021) leading to the entrance of the Group in four new states with locations
in Plano (Dallas), Texas; Vail and Aspen, Colorado; Greenwich, Connecticut and
Minneapolis, Minnesota
We will continue to invest in our store portfolio and have an exciting
pipeline for future store projects across both the UK and the US including
several new mono-brand boutiques, the continued elevation of the Mayors estate
in Florida and Georgia, as well as the ongoing upgrade and modernisation of
the core store portfolio in the UK, with the continued roll out of Goldsmiths
Luxury.
2) Enhance strong brand partnerships
Our strong and long-standing relationships with the most recognised and
prestigious luxury watch brands have remained a point of distinction and have
further strengthened during this period.
In the US, we debuted a ground-breaking advertising film which served as the
most extensive multi-branded timepiece campaign the industry has ever seen.
Featuring eight leading brand partners including Grand Seiko, TAG Heuer,
OMEGA, Breitling, MB&F and Ulysse Nardin and entitled 'Anytime.
Anywhere.', it was produced in partnership with Creative Director and
Photographer, Jay Gullion. The film is an unprecedented artistic undertaking
that speaks directly to today's watch connoisseurs. It imagines a life
well-lived, marking exceptional moments with a curated selection of
world-class timepieces, worn by industry changemakers in spectacular settings
set across the United States.
The mono-brand boutique channel has been further developed in both the UK and
the US with several new openings and some enhancements. This includes
several mono-brand boutiques in new markets in the UK across the OMEGA, TAG
Heuer and Breitling brands, the enhanced Rolex boutique in Mayors Aventura as
well as our first Bvlgari boutique, also in Mayors Aventura. Further
mono-brand boutique openings are planned in both the UK and the US going
forward.
We are also proud to have launched exclusive timepieces with key partners
brands, further distinguishing our competitive advantage in both the UK and
US.
3) Deliver an exceptional customer experience
Our first half saw the global launch of 'Xenia' our new customer experience
programme, with retail led training to set new industry standards in client
hospitality, with over 250 of our team colleagues in attendance at launch
events held in the UK and the US.
We continued our core focus of 'experience', resuming in person, live events.
Over 70 events were held in the UK, entertaining over 3,800 clients in
localised, private, intimate client appreciation dinners and receptions, or
instore exhibitions, the first time since pre-pandemic. In the US, the Summer
Watches of Switzerland 'Airstream' event included a 100-person private event
for the Doxa brand, where the Group is the exclusive distributor. VIP guests
included designer Cynthia Rowley and Dave Guy of the Roots. This culminated in
the Group hosting the Hamptons Classic Horse Show in partnership with long
time event sponsor, Longines. The mobile retail unit was on site to greet the
25,000 spectators throughout the week. Watches of Switzerland hosted 20 VIP
guests for a Grand Prix luncheon celebrating the best in show jumping and
awarding the winner with a Longines timepiece.
In the UK, we continued to develop and enhance our customer experience through
our online appointment system, 'By Personal Appointment' accounting for
approximately 40% of our UK sales during the period. We also invested in our
Virtual Luxury Boutique and expanded our in-house photography team to ensure
we provide the very best experience to all customers online.
CRM and clienteling remained a core focus with over 30 guides produced in
support of new product launches, trends, gift guides and specialist
timepieces.
4) Drive customer awareness and brand image through multimedia with bold,
impactful marketing
Investment in our digital marketing channels and campaigns has continued to be
a core pillar and has grown from strength to strength.
At the beginning of the financial year, we refreshed our digital display first
campaign globally, continuing to focus on communicating the breadth of range
available to a highly targeted luxury audience, combining our Search &
Shopping strategy with YouTube, Display and Paid Social.
In the first half year in the UK, we achieved an average monthly digital
social media reach of 40.1 million and a total of 2.9 billion digital
impressions. In the US, we delivered 400 million impressions and had an
average social media reach of 6 million, in addition to generating over 2.4
billion PR impressions.
We also transitioned 'Calibre', our online platform for all luxury watch
knowledge and expertise, to our core websites to benefit from higher traffic.
We launched our new Goldsmiths Luxury stores in the UK with two stores
converted to the new concept during H1 FY22. We introduced dedicated launch
plans across PR, social media, events and email to support each store, along
with a new local advertising campaign and localised sponsorships to elevate
the brand awareness locally. To kick start the launch, we held a press lunch
in July, hosting over 35 key UK journalists from a range of national and local
media titles.
We continue to partner with key brands on co-operative marketing activities
with increased investment across both digital and traditional marketing,
including new national and local advertising plans to support our core brands
and mono-brand boutique business.
The first half has seen us launch seven new mono-brand boutiques globally, six
in the UK and one in the US, each with their own local marketing support plan
to create localised awareness. Since the end of the period, we have opened the
first Bvlgari mono-brand boutique globally, located in Mayors Aventura.
5) Leverage best in class operations
Merchandising
Our merchandising function is a key customer-focused driver of product
availability and access and provides a unique point of difference in the way
we run our stores.
Our merchandising capabilities utilise a customer-centric approach and best in
class systems to optimise stock availability, enhance store productivity and
allow for nationwide coverage. Our advanced market analysis is run on SAP
software which enables extensive store profiling, productivity and trend
analyses, and sales and inventory forecasting.
Retail operations
As an integral part of our multi-channel model, each of our stores is run to
be profitable. This is achieved through maintaining a high level of
accountability and performance management in running our retail network.
Our programme of continued investment has enabled us to further drive
productivity in both the UK and the US platforms. In the UK we introduced
Goldsmiths Luxury to two stores in the period, and completed a further three
stores in this format after the period end. In the US, we are focused on
generating high returns from refurbishing and upgrading the remaining stores
in the Mayors network which have not yet been modernised.
The Group's store base is largely run via fixed rent agreements, having
successfully renegotiated certain contracts and transitioned from turnover
rent to fixed rent agreements in the prior year period. We have also
renegotiated the contracts for our stores in Heathrow Airport on revised
terms.
IT Systems
Our leading-edge IT systems have continued to be a fundamental competitive
advantage for the Group. Our systems comprise a single and shared SAP
instance for ERP, ecommerce and business intelligence. This SAP core is
supported by a specialist point-of-sale and CRM front-end, served on mobile
tablets across all our stores. Our single IT template has been deployed across
the Group and can support further expansion as required. Our retail payment
partner Adyen equips us with a fully featured, mobile and international
payment platform across all sales channels, and both stores and ecommerce
benefit from a shared inventory, shared digital assets, and click and collect
capabilities.
We continue to refresh and expand our in-store technology, ensuring store
teams have the best technology to hand in support of every customer
transaction.
We continue to work on further developing and enhancing CRM and sales support
technology, with updates planned in coming months.
6) Expand multi-channel leadership
Our multi-channel business model is a key competitive advantage and
underscores our ability to react with speed and agility to a rapidly evolving
consumer environment whilst offering our customers an exceptional experience.
We continue to invest in expanding and enhancing our platform, consisting of
multi-brand stores, online, travel retail and mono-brand boutiques.
Multi-brand stores
Our multi-brand store network has nationwide scale in the UK and is continuing
to build at pace in the US, where we have an established presence in Florida,
Georgia, New York and Las Vegas and recently entered the new markets of
Cincinnati, Minneapolis, Plano (Dallas), Vail, Aspen and Greenwich.
Our modern and welcoming store environments showcase a selection of the
world's finest watches whilst inviting our customers to have an exceptional
experience. Our investment programme continues to focus on elevating and
upgrading the existing network as well as opening in new, strategic locations.
Online
We continue to leverage our position as the authorised luxury watch and
jewellery partner of choice, significantly building on the largest portfolio
of luxury watch brands in the UK. We have a competitive advantage in the
volume of traffic generated via our technically advanced Artificial
Intelligence (AI)-driven marketing approach and further expanded our always-on
digital performance marketing campaigns with refreshed creative and further
optimisation through automation.
Due to the continued changing retail landscape, we continue to focus on
offering the widest array of shopping opportunities, allowing our customers to
reach out to local store expertise remotely through video, voice or in-person
utilising our 'By Personal Appointment' booking system, alongside our
centralised Luxury Watch and Jewellery Virtual Boutique, which we have
significantly expanded due to the continued customer demand of this channel.
Following our user experience audits with Baymard, Google and SAP we made
several enhancements to our platform to improve both customer experience and
improve conversion.
We expanded our payment options to offer more consumer choice and enhance the
checkout process experience.
Our web-enabled store platform has been further improved and provides our
customers access to shop the full online catalogue whilst in our stores.
Working collaboratively with key partners such as Google (digital marketing),
Vee24 (video and text concierge) and DPD (direct delivery), we use the most
efficient, cutting-edge digital marketing while offering a best in class,
harmonised omni-channel shopping experience. We have dedicated inventory for
our luxury watches across our websites, which allows us to offer a next day
delivery service until 9pm seven days a week.
Our online business had an exceptional half year, with Group ecommerce sales
+28.7% versus last year.
Mono-brand boutiques
We have further developed and enhanced our mono-brand boutique channel.
During the half year period, we opened four new mono-brand boutiques, bringing
our global network to a total of 46 boutiques (UK: 32, US: 14) as at 31
October 2021.
During the first half, our UK network saw the opening of six new mono-brand
boutiques, including three in Plymouth, a new location for the Group. In the
US we opened two enhanced Rolex boutiques, one in Mayors Aventura as Phase I
of the store's refurbishment programme, and one in Wynn Resort, Las Vegas. We
opened our first Bvlgari mono-brand boutique, also in Mayors Aventura, after
the half year end.
We will continue to work closely with our brand partners to further develop
and enhance our mono-brand boutique network with a strong pipeline of projects
planned.
Travel retail
Travel retail has started to show encouraging signs of a post COVID-19
recovery, although passenger numbers and global travel remains below
pre-pandemic levels. The Group does not expect the return of tourism and
airport business to pre-pandemic levels during the year but believes the
channel offers a significant medium and long-term growth opportunity for the
business, with visibility in prominent locations providing access to the
international customer base. Our network is well positioned for improved
industry trends.
We renegotiated the contracts for our stores in Heathrow Airport on revised
terms.
7) Continue to advance the ESG agenda
We have always prided ourselves on operating a responsible business and
upholding our core value to 'do the right thing', which is reflected in our
ESG programme.
As part of our commitment to continuous improvement, we have formalised our
approach to ensure ESG priorities are governed at the highest level of our
business.
We have appointed a Head of ESG and established an ESG Committee as a
sub-Committee of our Board, which is Chaired by our Non-Executive Director,
Rosa Monckton, MBE.
With the full support of our Board, we are in the process of developing a
sustainability and social impact strategy, which puts positive social purpose
at its core. This includes:
· Rejuvenating our purpose, vision, values and culture to align with our
commitment to help maintain a robust economy, protect our planet and support a
stronger society
· Further enhancing stakeholder engagement to enable us to make
highly informed decisions
· Delivering on our pledge to achieve decarbonisation across our
Group before 2040
· Contributing to a more circular economy by striving to keep
products, components and materials at their highest utilisation and value
throughout their lifecycles
· Pledging £3.0 million through our Watches of Switzerland Foundation
to support a number of causes, with an emphasis on helping poor and vulnerable
people out of poverty
We plan to continue to further enhance our ESG programme going forward,
recognising the importance these areas have in the way we do business.
Chief Financial Officer's Review
The Group's Statutory Income Statement is shown below which includes IFRS 16
adjustments and exceptional items.
Statutory Income Statement (£million) 26 weeks to 26 weeks to
31 October 2021 25 October 2020 YoY variance
Revenue 586.2 414.3 41.5%
Operating profit 72.3 45.6 58.6%
Net finance costs (7.6) (9.4) 19.5%
Profit before tax 64.7 36.2 79.0%
Tax (13.1) (7.3) -79.4%
Profit after tax 51.6 28.9 78.9%
Basic Earnings Per Share 21.6p 12.0p 80.0%
Management monitors and assesses the business performance on a pre-IFRS 16 and
pre-exceptional items basis, which is shown below. This aligns to the
reporting used to inform business decisions, investment appraisals, incentive
schemes and debt covenants. A full reconciliation between the pre- and
post-IFRS 16 results are shown in the Glossary. It should be noted that IFRS
16 is not material to profit before tax, the total adjustments increased
profit before tax by £0.8 million in H1 FY22 (H1 FY21: reduced by £0.3
million).
We have also provided a comparison to FY20, which is more comparable due to
the impact of COVID-19 during FY21.
Income Statement - pre IFRS 16 and exceptional items (£million) 26 weeks to 26 weeks to 26 weeks to 27 October 2019 2-year variance
31 October 2021 25 October 2020 YoY variance
Revenue 586.2 414.3 41.5% 428.7 36.7%
Net margin(2) 220.5 150.5 46.5% 160.6 37.3%
Store costs (100.2) (72.1) -39.0% (93.1) -7.6%
4-Wall EBITDA(2) 120.3 78.4 53.5% 67.5 78.3%
Overheads (33.1) (24.3) -36.5% (23.8) -39.6%
EBITDA(2) 87.2 54.1 61.1% 43.7 99.2%
Store opening and closing costs (4.4) (1.9) -120.6% (2.5) -71.4%
Adjusted EBITDA 82.8 52.2 58.8% 41.2 100.9%
Depreciation, amortisation and loss on disposal of fixed assets (15.3) (10.7) -43.7% (10.1) -52.5%
Adjusted EBIT (Segment profit) 67.5 41.5 62.7% 31.1 116.7%
Net finance costs (1.8) (3.2) 44.5% (4.6) 62.1%
Adjusted profit before tax(2) 65.7 38.3 71.6% 26.5 148.0%
Adjusted basic Earnings Per Share(2) 21.8p 12.6p 73.0% 9.3p 134.4%
Revenue
Group revenue increased by +41.5% to £586.2 million in the first half of the
year, +44.6% in constant currency(2). The prior year was impacted by COVID-19
lockdowns, and on a two-year basis, revenue increased by +36.7%, +40.8% in
constant currency.
The UK business was impacted more by COVID-19 lockdowns in the prior year than
the US. UK stores were closed for a seven-week period from the start of the
year until 15 June 2020. In the US, stores began to re-open in early May 2020,
with Hudson Yards being the last store to open in September 2020. As disclosed
during FY21, we estimate that the Group lost approximately £80.0 million of
sales in H1 FY21 as a result of COVID-19.
Group ecommerce sales, grew +28.7% on last year, despite stores having been
fully opened in H1 FY22, showing the continuing strength of our online
proposition.
Q1 and Q2 of FY22 were impacted by a number of factors which influenced the
timing of sales.
In Q1 FY22 the Group sold more supply-constrained product than intake, which
increased sales but reduced stock levels. This led to store displays being
significantly depleted, particularly of Rolex product. In Q2 FY22, the Group
agreed with Rolex to implement a minimal level of display stock within all
stores in the UK and US. This allows the business to appropriately represent
the Rolex range and provide customers with the ability to view product. This
display product is not for sale and is displayed as 'For Exhibition Only'
within the stores. As such, the Group went through a re-stocking process in Q2
FY22 which reduced possible sales within that quarter. The correct level of
display stock is now in place, therefore the re-stocking can be considered a
one-off event in Q2 FY22.
Revenue by category
26 weeks to 31 Oct 21 UK US Total
(£million) Mix
Luxury watches 353.4 155.4 508.8 86.8%
Luxury jewellery 32.2 8.6 40.8 7.0%
Other 33.0 3.6 36.6 6.2%
Group revenue 418.6 167.6 586.2 100.0%
26 weeks to 25 Oct 20 UK US Total
(£million) Mix
Luxury watches 249.9 112.2 362.1 87.4%
Luxury jewellery 20.5 5.8 26.3 6.4%
Other 23.8 2.1 25.9 6.2%
Group revenue 294.2 120.1 414.3 100.0%
We saw continued strong demand for luxury watches, for which sales grew by
+40.5% in the first half of the year, making up 86.8% of the mix. We were
particularly pleased with the performance of non-supply constrained brands
during the period. Rolex sales grew by mid-teens, whilst the overall growth in
luxury watches was +40.5%. Non-supply constrained brand sales more than
doubled compared the prior year period and made up 28.2% of the total sales
mix compared to 18.5% in H1 FY21. This demonstrates that revenue growth was
transaction-led, rather than being driven by ASP. ASP increased by individual
watch brand but reduced in total due to brand mix.
Jewellery has performed exceptionally well, increasing by +54.9%, ahead of the
Group total sales increase. Demand for bridal and diamond jewellery has been
particularly strong, with the reintroduction of weddings post COVID-19
restrictions.
Other revenue consists of servicing, repairs and insurance services and the
sale of fashion and classic watches and jewellery. Sales of fashion and
classic watches and jewellery now make up 3.0% of Group sales.
Sales by region
The UK performance continues to be robust, with sales +42.3% vs H1 FY21 to
£418.6 million. This has been delivered through a thriving domestic
clientele.
The table below shows the proportion of airport and tourist( )sales compared
to total Group sales.
26 weeks to 26 weeks to 26 weeks to 27 October 2019
31 October 2021 25 October 2020
Tourist and airport sales as a percentage of total revenue 1.7% 7.4% 33.6%
The tourist customer demographic has been replaced with domestic clientele,
with the domestic business in the UK doubling from H1 FY20. With the UK
Government's decision to end the VAT-free shopping scheme for tourists, we do
not expect tourist shopping to come back to FY20 levels. Four stores at
Heathrow are now operating, whilst two stores at Terminal 4 remain closed.
Passenger numbers within the airports are increasing, and during the first
half of the year we renegotiated terms with Heathrow Airport.
The Group has continued to progress its mono-brand boutique strategy by
opening seven mono-brand boutiques during the 26 week period. The Group also
completed the refurbishment of the ex-Fraser Hart stores at Stratford, Brent
Cross and Kingston along with the commencement of the Goldsmith Luxury
roll-out with Reading and Canterbury.
Strong momentum in the US has continued, with revenue of £167.6 million up by
+39.5% on the prior year and +50.2% in constant currency. On a two-year basis
sales were +50.9% and +66.7% in constant currency.
Q3 FY22 will see the annualisation of the US mono-brand boutiques opened last
year, along with the opening of the Grand Seiko boutique in Manhattan, New
York. We are pleased with the performance of these stores to date.
Profitability
Profitability as a % of sales 26 weeks to 26 weeks to 26 weeks to
31 October 2021 25 October 2020 27 October 2019
Net margin 37.6% 36.3% 37.5%
Store costs 17.1% 17.4% 21.7%
4-Wall EBITDA 20.5% 18.9% 15.7%
EBITDA 14.9% 13.1% 10.2%
Adjusted EBITDA 14.1% 12.6% 9.6%
Adjusted EBIT 11.5% 10.0% 7.3%
Net margin % increased by 130 bps as a result of product mix. The increase in
mix of non-supply constrained brands in H1 FY22 improved the margin mix along
with the higher proportion of jewellery sales. The net margin is now more in
line with pre-COVID levels as can be seen in the table above.
Store costs increased by £28.1 million (+39.0%) from the prior year, to
£100.2 million. £8.5m of the increase relates to COVID-19 one-offs
recognised in the prior year. This included £3.5 million under the US
Government's Paycheck Protection Program, £2.8 million from the UK
Government's Furlough Scheme and incremental rates relief of £2.2 million.
In the second half of FY21 an accrual was made for the repayment of UK
furlough funding received (and the payment subsequently made in H1 FY22). The
further increase in store costs comes from variable costs and investment in
new stores, performance marketing, and our newly launched Xenia project.
Despite the reduction in Government support in H1 FY22, the Group managed to
leverage store costs further, with a decrease in store costs as a percentage
of sales of 30 bps.
Overheads increased by £8.8 million (+36.5%) through the investment in
marketing, people (including incentives) and a further commitment of £1.5
million accrued to the Watches of Switzerland Group Foundation. Overheads also
benefited from £0.9 million of furlough/PPP funding in the prior year.
Store opening and closure costs
Store opening and closing costs include the cost of rent (pre-IFRS 16), rates
and payroll, prior to the opening or closing of stores, normally during the
period of fit out and includes periods of refurbishment. This cost will vary
annually depending on the scale of expansion in the period.
Exceptional administrative items
Exceptional items are defined by the Group as those which are significant in
magnitude and are linked to one-off, non-recurring events. These items are
detailed in the table below and are shown post-IFRS 16.
Exceptional items (£million) 26 weeks to 26 weeks to
31 October 2021 27 October 2020
IPO costs 1.5 2.1
Acquisition costs 0.4 -
Reversal of expected credit losses - (0.2)
Reversal of impairment of right-of-use assets - (0.1)
Total 1.8 1.8
The IPO costs of £1.5 million in the current year relate to IPO-linked
share-based payments (H1 FY21: £2.1 million), these options vested in June
2021 and there will be no further expense in relation to these in future
periods.
The acquisition costs relate to legal and professional expenses incurred on
business acquisitions.
The prior year reversal of expected credit losses and impairment of
right-of-use assets reflected the updated review of prior year COVID-19
related provisions.
Finance costs
Net finance costs (£million) 26 weeks to 26 weeks to
31 October 2021 25 October 2020
Interest payable on borrowings 1.3 2.3
Amortisation of capitalised transaction costs 0.4 0.5
Other 0.1 0.5
IFRS 16 interest on lease liabilities 5.8 6.3
Interest receivable - (0.2)
Total 7.6 9.4
Interest on borrowings reduced by £1.0 million due to the lower level of debt
in the current year. Interest was limited to the non-current term loan, and
the margin on that loan has reduced in line with the more favourable leverage
of the Group.
Interest on IFRS 16 liabilities has reduced by £0.5m as a result of the
average remaining life on leased assets reducing.
Taxation
The overall Effective Tax Rate (ETR) for the period was 20.7% after IFRS 16
adjustments and 20.3% before these adjustments. The ETR is higher than the UK
rate of 19% as it incorporates a US ETR of 27.3% on US profits for the period.
The UK rate is 18.5%, which is lower than the standard UK rate of 19% largely
due to the additional capital allowance deductions available in the period
(the super deductions), which more than offset the permanent disallowances
that usually drive the rate above 19%.
The US rate reflects the federal rate of 21% plus state taxes due in the
region of 6.5%.
Earnings Per Share
Adjusted basic EPS from continuing operations increased by 9.2p to 21.8p in
the current half year and has been calculated as follows:
26 weeks to 31 October 2021 Adjusted EPS (before exceptional items and IFRS 16 adjustments) Statutory EPS
Profit after tax £52.1 million £51.6 million
Weighted average number of ordinary shares 239,456,000 239,456,000
EPS 21.8p 21.6p
26 weeks to 25 October 2020 Adjusted EPS (before exceptional items and IFRS 16 adjustments)
Statutory EPS
Profit after tax £30.2 million £28.9 million
Weighted average number of ordinary shares 239,456,000 239,456,000
EPS 12.6p 12.0p
Acquisitions
Two acquisitions for the trade and assets of two stores were completed at the
end of Q2 FY22. One store opened to the public on 13 September 2021 at Mall of
America in Minneapolis, Minnesota followed by one further on 25 October 2021
in Plano (Dallas), Texas.
On 1 December 2021, the Group completed the acquisition of three further
stores in Greenwich, Connecticut, Vail and Aspen, Colorado.
The combined Last Twelve Months revenue for these stores was approximately
US$100.0 million and we expect profitability to be in line with the US
average.
Balance sheet
£million 2 May 2021
31 October 2021 25 October 2020
Goodwill and intangibles 155.9 151.8 150.6
Property, plant and equipment 99.8 99.0 93.7
IFRS 16 right-of-use assets 256.2 256.8 253.7
Inventories 240.8 221.9 226.4
Trade and other receivables 13.9 11.7 10.4
Trade and other payables (190.4) (190.8) (151.8)
IFRS 16 lease liabilities (303.1) (311.1) (301.4)
Net cash/(debt) 30.0 (22.7) (43.9)
Other 4.8 9.6 12.6
Net assets 307.9 226.2 250.3
Goodwill and intangibles increased as a result of the two US acquisitions in
the period.
Property, plant and equipment increased by £6.1 million in the period.
Additions of £19.6 million were offset by depreciation of £13.1 million,
loss on disposal of £1.0 million (following a store fire), and a favourable
foreign exchange impact of £0.4 million.
Including software costs, which are disclosed as intangibles, total capital
additions were £19.9 million (H1 FY21: £9.4 million) of which £19.1 million
was expansionary (H1 FY21: £9.1 million). Expansionary capex relates to new
stores, relocations or major refurbishments (defined as costing over
£250,000). In the period, the Group opened eight new stores, acquired two
stores, expanded three, and refurbished five stores. Investment in our store
portfolio is paramount to our strategy and the Group follows a disciplined
payback policy when making capital investment decisions.
Lease right-of-use assets have increased since 2 May 2021 by £2.5 million to
£256.2 million. Additions to the lease portfolio along with lease renewals or
other lease changes have increased the balance by £21.0 million. This has
been offset by depreciation of £19.4 million, and a favourable foreign
exchange impact of £0.9 million.
Lease liabilities have increased by £1.7 million. The portfolio changes noted
above increased the lease liability by £20.1 million. Interest charged on the
lease liability also increased the balance by £5.8 million, in addition to a
negative foreign exchange impact of £1.2 million. Lease payments have reduced
the balance by £25.3 million, giving a lease liability balance of £303.1
million. This means that the net lease liability on 31 October 2021 was £46.9
million, compared to £47.7 million at the FY21 year end.
On an IFRS 16 basis our leases are generally recognised to the end of the
lease term, regardless of whether a break clause is in place. The average
lease lengths were as follows:
Weighted Average Lease length (years) 31 October 2021 25 October 2020
Nearest break clause 3.8 4.6
End of the lease 5.6 6.0
Inventory levels increased by £14.4 million in the period to £240.8 million
(H1 FY21: £221.9 million). The increase is as a result of higher levels of
Rolex to deliver optimal display capacity, along with deep purchasing of
non-supply constrained brands ahead of Christmas trading.
Trade and other receivables were £13.9 million (H1 FY21: £11.7 million),
increasing by £3.5 million from 2 May 2021. The increase in the period
reflects the higher trading activity, in addition to the timing of a number of
prepaid balances.
Trade and other payables were £190.4 million (H1 FY21: £190.8 million),
increasing by £38.6 million from 2 May 2021. The increase in the period is
principally as a result of our increased stock intake. This is partly offset
by the £6.8 million repayment of the UK furlough monies which were accrued at
the FY21 year end. Trade payables includes an accrual for the Foundation of
£3.0 million.
The main components of 'Other' are taxation assets of £9.1 million (H1 FY21:
£14.2 million), the defined benefit pension obligation of £2.2 million (H1
FY21: £4.9 million), and capitalised transaction costs. The taxation asset
has reduced following utilisation of US tax losses in the period.
Net debt/cash and financing
At 31 October 2021, the Group was in a net cash position of £30.0 million.
Net debt reduced by £73.9 million in the six-month period driven by strong
cash flow. Movements of £73.1 million are detailed in the cashflow below, in
addition to a favourable foreign exchange impact of £0.8 million.
Year-end net debt is expected to be between £10.0 million and £20.0 million.
The outlook includes the cash acquisition of the five US stores announced
within the Q2 FY22 trading update. Capex and tax expenditure are also expected
to be higher in the second half of the year.
At 31 October 2021, the Group had a total of £213.9 million of available
committed facilities as follows:
Facility Expiring Amount (million)
UK Term Loan - UK LIBOR +1.75% June 2024 £120.0
UK Revolving Credit Facility - UK LIBOR +1.5% June 2024 £50.0
US Asset Backed Facility - US LIBOR +1.25% to +1.75% April 2023 $60.0
At 31 October 2021, only the £120.0 million of the UK Term Loan was drawn
down. Liquidity headroom (defined as unrestricted cash plus undrawn
available facilities) was £235.8 million.
The debt facility is subject to a six-monthly financial covenant test on
leverage and fixed charge cover ratio. These tests are based on pre-IFRS 16
measures. On 18 June 2020, the covenant tests of the Group's facilities were
replaced with a monthly minimum liquidity headroom covenant of £20.0 million
for the period of June 2020 to September 2021. The Directors sought the
replacement of covenants to provide further flexibility to deal with any
unexpected circumstances during that period. Both sets of covenants were
comfortably satisfied throughout the financial period.
Cash flow
£million 26 weeks to 26 weeks to
31 October 2021 25 October 2020
Adjusted EBITDA 82.8 52.2
Share-based payments 0.1 1.6
Working capital 24.8 69.9
Pension contributions (0.3) (0.3)
Tax (3.0) (4.3)
Cash generated from operating activities 104.4 119.1
Maintenance capex3 (0.8) (0.4)
Interest (1.3) (2.6)
Free cash flow 102.3 116.1
Free cash flow conversion 123.6% 222.6%
Expansionary capex (19.9) (8.6)
Acquisitions (9.0) (0.1)
Exceptional costs (0.3) -
Financing activities - (59.7)
Cash flow 73.1 47.7
The Group generated £102.3 million of free cash flow with a free cash flow
conversion of 123.6% in H1 FY22. This strong result was driven by Adjusted
EBITDA of £82.8 million in addition to favourable working capital movements.
Due to the seasonality of the Group, working capital is generally positive in
the first half before normalising in the second half of the year. The prior
period comparison contained higher working capital benefits due to the impact
of store closures on the timing of inventory payments, and other one off
COVID-19 impacts including government grants received of £8.9 million
relating to the UK furlough scheme and US PPP.
Interest payments have reduced by £1.3 million. As a result of the Group's
strong cash position, borrowing has been limited to the non-current UK Term
Loan. In the prior year, the Revolving Credit Facility and US Asset Backed
Loan were fully drawn and held in cash to provide additional flexibility
during the COVID-19 lockdown period.
Expansionary capex of £19.9 million (after taking into account the associated
creditors movement) was higher than the prior year due to the timing of
capital projects, both in relation to new stores and the refurbishment of
existing stores. In the prior year, several projects were delayed until FY22
due to COVID-19.
Return on Capital Employed (ROCE)(2)
LTM to LTM to LTM to
31 October 2021 25 October 2020 2 May 2021
ROCE 23.1% 17.2% 19.7%
ROCE, which is calculated on a Last Twelve Months (LTM) basis, has increased
by 340 bps to 23.1% in the period demonstrating improved capital efficiency.
This is as consequence of annualised Adjusted EBIT increasing by 33.5%,
compared to the increase in average capital employed of 13.9%.
Risks and uncertainties
The Group is exposed to a number of risks and uncertainties in its business
which could impact its ability to effectively execute its strategy over the
remaining six months of the financial year and cause actual results to differ
materially from expected and/or historical results.
The Board has considered the principal risks and uncertainties for the first
half and the remaining half of the financial year and determined that the
risks presented in the 2021 Annual Report and Accounts, described as follows,
remain unchanged Business strategy execution and development; Key suppliers
and supply chain; Customer experience and market risks; Colleague talent and
capability; Business interruption and IT infrastructure; Data protection and
cyber security; Regulatory and compliance; Economic and political; Brand and
reputational damage; and Financial and treasury. These are detailed on pages
105 to 113 of the 2021 Annual Report, a copy of which is available on the
Watches of Switzerland Group PLC (the 'Company') website at
www.thewosgroupplc.com (http://www.thewosgroupplc.com) .
WATCHES OF SWITZERLAND GROUP PLC
UNAUDITED INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
26 week period ended 31 October 2021 26 week period ended 25 October 2020
Note Pre-exceptional items Exceptional items Total Pre-exceptional items Exceptional items Total
£'000 (note 4) £'000 (note 4)
£'000 £'000 £'000 £'000
Revenue 2,3 586,211 - 586,211 414,279 - 414,279
Cost of sales (494,022) - (494,022) (353,208) 233 (352,975)
Gross profit 92,189 - 92,189 61,071 233 61,304
Administrative expenses (18,055) (1,819) (19,874) (13,737) (1,985) (15,722)
Operating profit 74,134 (1,819) 72,315 47,334 (1,752) 45,582
Finance costs 5 (7,584) - (7,584) (9,574) - (9,574)
Finance income 5 10 - 10 164 - 164
Net finance cost (7,574) - (7,574) (9,410) - (9,410)
Profit before taxation 66,560 (1,819) 64,741 37,924 (1,752) 36,172
Taxation 6 (13,480) 347 (13,133) (7,781) 459 (7,322)
Profit for the financial period 53,080 (1,472) 51,608 30,143 (1,293) 28,850
Earnings Per Share 7
Basic 22.2p 21.6p 12.6p 12.0p
Diluted 22.2p 21.6p 12.6p 12.0p
WATCHES OF SWITZERLAND GROUP PLC
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
26 week period ended 26 week period ended
31 October 2021 25 October 2020
Note £'000 £'000
Profit for the financial period 51,608 28,850
Other comprehensive income/(expense):
Items that will be reclassified to profit or loss
Foreign exchange gain/(loss) on translation of foreign operations 1,277 (4,743)
Related tax movements (168) 828
1,109 (3,915)
Items that will not be reclassified to profit or loss
Actuarial gains/(losses) on defined benefit pension scheme 13 184 (2,417)
Related tax movements (35) 459
149 (1,958)
Other comprehensive income/(expense) for the period net of tax 1,258 (5,873)
Total comprehensive profit for the period net of tax 52,886 22,977
WATCHES OF SWITZERLAND GROUP PLC
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
31 October 2021 25 October 2020 2 May 2021
Note £'000 £'000 £'000
Assets
Non-current assets
Goodwill 8 141,389 135,794 135,440
Intangible assets 8 14,495 15,969 15,196
Property, plant and equipment 9 99,812 98,985 93,682
Right-of-use assets 10 256,173 256,823 253,709
Deferred tax assets 9,973 12,111 14,413
Trade and other receivables 2,715 825 606
524,557 520,507 513,046
Current assets
Inventories - finished goods 240,821 221,859 226,403
Current tax asset - 2,100 1,884
Trade and other receivables 11,220 10,845 9,746
Cash and cash equivalents 12 150,042 119,814 76,076
402,083 354,618 314,109
Total assets 926,640 875,125 827,155
Liabilities
Current liabilities
Trade and other payables (188,957) (189,601) (149,604)
Current tax liability (888) - -
Lease liabilities 10 (42,539) (52,744) (38,383)
Government grants 11 - (74) -
Provisions (867) (694) (800)
(233,251) (243,113) (188,787)
Non-current liabilities
Trade and other payables (1,443) (1,170) (2,153)
Lease liabilities 10 (260,578) (258,366) (262,983)
Borrowings 12 (118,252) (139,714) (117,885)
Post-employment benefit obligations 13 (2,159) (4,860) (2,570)
Provisions (3,027) (1,737) (2,460)
(385,459) (405,847) (388,051)
Total liabilities (618,710) (648,960) (576,838)
Net assets 307,930 226,165 250,317
Equity
Share capital 2,993 2,993 2,993
Share premium 147,122 147,122 147,122
Merger reserve (2,209) (2,209) (2,209)
Retained earnings 162,963 77,977 106,459
Foreign exchange reserve (2,939) 282 (4,048)
Total equity 307,930 226,165 250,317
WATCHES OF SWITZERLAND GROUP PLC
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Merger reserve Retained earnings Foreign exchange reserve Total equity attributable to owners
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 26 April 2020 2,993 147,122 (2,209) 47,438 4,197 199,541
Profit for the financial period - - - 28,850 - 28,850
Other comprehensive expense - - - (2,417) (4,743) (7,160)
Tax relating to components of other comprehensive income - - - 459 828 1,287
Total comprehensive income/(loss) - - - 26,892 (3,915) 22,977
Transactions with owners
Share-based payment charge - - - 3,119 - 3,119
Tax on items credited to equity - - - 528 - 528
Balance at 25 October 2020 2,993 147,122 (2,209) 77,977 282 226,165
Balance at 2 May 2021 2,993 147,122 (2,209) 106,459 (4,048) 250,317
Profit for the financial period - - - 51,608 - 51,608
Other comprehensive income - - - 184 1,277 1,461
Tax relating to components of other comprehensive income - - - (35) (168) (203)
Total comprehensive income - - - 51,757 1,109 52,866
Transactions with owners
Share-based payment charge - - - 1,620 - 1,620
Tax on items credited to equity - - - 3,127 - 3,127
Balance at 31 October 2021 2,993 147,122 (2,209) 162,963 (2,939) 307,930
WATCHES OF SWITZERLAND GROUP PLC
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
26 week period ended 26 week period ended
31 October 2021 25 October 2020
Note £'000 £'000
Cash flows from operating activities
Profit for the period 51,608 28,850
Adjustments for:
Depreciation of property, plant and equipment 9 13,129 9,200
Depreciation of right-of-use assets 10 19,424 19,011
Amortisation of intangible assets 8 1,177 1,410
Share-based payment charge 1,620 3,119
Finance income 5 (10) (164)
Finance costs 5 7,584 9,574
Impairment reversal of right-of-use assets and associated property, plant and - (139)
equipment
Gain on lease disposal 10 (94) (94)
Lease modifications and renewals (157) -
Loss on disposal of property, plant and equipment 9 997 232
Government grant income 11 - (7,405)
Taxation 13,133 7,322
(Increase)/decrease in inventories (10,960) 18,032
(Increase) in debtors (2,641) (2,263)
Increase in creditors, provisions, government grants and pensions 37,209 54,012
Cash generated from operations 132,019 140,697
Pension scheme contributions 13 (340) (349)
Tax paid (3,006) (4,305)
Receipt of government grants 11 - 8,924
Total net cash generated from operating activities 128,673 144,967
Cash flows from investing activities
Purchase of non-current assets
Purchase of property, plant and equipment 9 (19,607) (9,068)
Purchase of intangible assets (334) (301)
Movement on capital expenditure accrual 92 353
Cash outflow from purchase of non-current assets (19,849) (9,016)
Acquisition of subsidiaries net of cash 14 (9,004) (77)
Interest received - 77
Total net cash outflow from investing activities (28,853) (9,016)
Cash flows from financing activities
Net proceeds from term loan - 22,500
Net repayment of short-term borrowings - (81,797)
Costs directly attributable to raising finance - (377)
Payment of capital element of leases 10 (19,507) (19,593)
Payment of interest element of leases 10 (5,833) (6,342)
Interest paid (1,347) (2,656)
Net cash outflow from financing activities (26,687) (88,265)
Net increase in cash and cash equivalents 73,133 47,686
Cash and cash equivalents at the beginning of the period 76,076 72,927
Exchange losses on cash and cash equivalents 833 (799)
Cash and cash equivalents at the end of period 12 150,042 119,814
Comprised of:
Cash at bank and in hand 136,471 109,466
Cash in transit 13,571 10,348
Cash and cash equivalents at end of period 12 150,042 119,814
1. General information and basis of preparation
Basis of preparation
The Group's condensed set of interim financial statements for the 26 weeks to
31 October 2021 (prior year: 26 weeks to 25 October 2020) were approved by the
Board of Directors on 8 December 2021 and have been prepared in accordance
with UK adopted International Accounting Standard 34.
The results for the 26 weeks to 31 October 2021 have been reviewed by Ernst
& Young LLP and a copy of their review report appears at the end of this
interim report. The condensed set of interim financial statements has not been
audited by the auditor and does not comprise statutory accounts within the
meaning of section 434 of the Companies Act 2006. The comparative information
for the half year to or as at 25 October 2020 has been reviewed by Ernst &
Young LLP but has not been audited.
The financial information contained in this report is condensed and does not
include all of the information and disclosures required in the annual
financial statements, and should be read in conjunction with the Group's
Annual Report and Accounts for the 53 weeks to 2 May 2021 which have been
delivered to the Registrar of Companies. The audit report for those accounts
was unqualified, did not draw attention to any matters by way of emphasis and
did not contain a statement under 498(2) or (3) of the Companies Act 2006.
The financial statements have been prepared on the historical cost basis
except for certain financial instruments, pension assets and liabilities, and
share-based payment liabilities which are measured at fair value. Where
applicable, disclosures required by paragraph 16A of IAS 34 'Interim financial
reporting' are given either in these interim financial statements or in the
accompanying Interim Report.
Impact of COVID-19
The COVID-19 pandemic developed quickly during the first half of the 2020
calendar year, with a significant impact upon many countries, businesses and
individuals. The impact of COVID-19 on the Group's operations is discussed
within the principal risks and uncertainties on page 105 of the Group's Annual
Report and Accounts for the 53 weeks to 2 May 2021, as well as set out within
note 1.
COVID-19 has been considered in our significant areas of judgement and
estimation, and as noted throughout the interim financial statements, a number
of balances have been impacted. During the period and subsequent to the
balance sheet date, the Group has reviewed the trading performance of our
stores and reviewed other relevant external factors, including changes in
government policies and restrictions. This review also included analysis of
the collectability of customer debtors and the recoverable value of store
assets. Based on this review, there have been no further impairments of
right-of-use assets or property plant and equipment.
Going concern
The Directors consider that the Group has, at the time of approving the Group
financial statements, adequate resources to remain in operation for the
foreseeable future and have therefore continued to adopt the going concern
basis in preparing the consolidated information.
At the balance sheet date, the Group had a total of £213,925,000 in available
committed facilities, of which £120,000,000 was drawn down. Net cash at this
date was £30,042,000 with liquidity headroom (defined as unrestricted cash
plus undrawn available facilities) of £235,831,000; this funding matures in
2023/24.
The key covenant tests attached to the Group's facilities are a measure of net
debt to EBITDA and the Fixed Charge Cover Ratio (FCCR) at each April and
October. Net debt to EBITDA is defined as the ratio of total net debt at the
reporting date to the last 12 months Adjusted EBITDA. This ratio must not
exceed 3. The FCCR is the ratio of Adjusted EBITDA plus rent to the total
finance charge and rent for the 12 months to the reporting date. This ratio
must exceed 1.6. On 18 June 2020, the covenant tests of the Group's facilities
were replaced with a monthly minimum liquidity headroom covenant of
£20,000,000 for the period of June 2020 to September 2021. The Directors
sought the replacement of covenants to provide further flexibility to deal
with any unexpected circumstances during that period. The £20,000,000 minimum
headroom covenant was satisfied for each month end from June 2020 to September
2021. The original waived covenant tests of net debt to EBITDA and the FCCR
were also comfortably satisfied at October 2020 and April 2021.
At the end of the covenant waiver period, 31 October 2021, the Group satisfied
the original covenant tests with net debt to EBITDA being comfortably less
than 3 and the FCCR exceeding 1.6.
In assessing whether the going concern basis of accounting is appropriate, the
Directors have reviewed various trading scenarios for the period to 31
December 2022 from the date of this report.
The budget and Strategic Plan approved by the Board in April 21 and the FY22
forecast approved in October 21 included the following key assumptions:
- A continued strong luxury watch market in the UK and US
- Anticipation of some localised disruption due to COVID-19 but assumes no
further national-scale lockdowns in either the US or UK during the period
- Lower levels of tourism in the US and UK and reduced travel impacting our
airport stores
- Sufficient luxury watch supply to support the revenue forecast.
Under the budget and Forecast used for the going concern assessment, the Group
has significant liquidity and comfortably complies with all covenant tests to
31 December 2022.
Reverse stress-testing of this budget was performed to determine what level of
reduced EBITDA and worst case cash outflows would result in a breach of the
liquidity or covenant tests. The likelihood of this level of reduced EBITDA is
considered remote.
The following two severe but plausible scenarios were tested:
1) 10% reduction in sales against the budget due to reduced consumer
confidence and lower disposable income
2) A repeat of the FY21 COVID-19 impact on the ability of stores to trade
modelled without Government support to reflect the worst case scenario of any
further lockdowns arising as a result of the emergence of new variants
Under these scenarios, there is sufficient liquidity, and the net debt to
EBITDA and the FCCR covenants would all be complied with.
Should trading be worse than the outlined severe but plausible scenarios, the
Group has the following mitigating actions within management's control:
- Review of marketing spend
- Reduction in the level of stock purchases
- Restructuring of the business with headcount and store operations savings
- Redundancies and pay freeze
- Reduce the level of planned capex and acquisition spend
As a result of the above analysis, including potential severe but plausible
scenarios, the Board believes that the Group is able to adequately manage its
financing and principal risks and that the Group will be able to operate
within the level of its facilities and meet the required covenants for the
period to 31 December 2022. For this reason, the Board considers it
appropriate for the Group to adopt the going concern basis in preparing the
financial statements.
Accounting policies
The accounting policies adopted in the preparation of the condensed set of
interim financial statements are the same as those set out in the Group's
Annual Report and Accounts for the 53 weeks ended 2 May 2021.
A number of amendments to, and the interpretation of, existing accounting
standards became effective during the period, none of which have had a
significant impact on the condensed interim financial statements.
Exceptional items
The Group presents as exceptional items on the face of the Consolidated Income
Statement, those material items of income and expense which, because of the
nature or the expected infrequency of the events giving rise to them, merit
separate presentation to provide a better understanding of the elements of
financial performance in the financial period, so as to assess trends in
financial performance. Further details on exceptional items are given within
note 4.
Alternative performance measures (APMs)
The Group has identified certain measures that it believes will assist the
understanding of the performance of the business. These APMs are not defined
or specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to be a
substitute for, or superior to, IFRS measures, provide stakeholders with
additional useful information on the underlying trends, performance and
position of the Group and are consistent with how business performance is
measured internally. The Alternative Performance Measures are not defined by
IFRS and therefore may not be directly comparable with other companies'
alternative performance measures.
The key APMs that the Group uses include: Net margin, Adjusted EBITDA,
Adjusted EBIT and Adjusted EPS. These APMs are set out in the Glossary
including explanations of how they are calculated and how they are reconciled
to a statutory measure where relevant.
The Group makes certain adjustments to the statutory profit measures in order
to derive many of these APMs. The Group's policy is to exclude items that are
considered non-underlying and exceptional due to their size, nature or
incidence, and are not considered to be part of the normal operating costs of
the Group. Treatment as an adjusting item provides stakeholders with
additional useful information to assess the year-on-year trading performance
of the Group but should not be considered in isolation of statutory measures.
Major sources of estimation uncertainty and judgement
The preparation of consolidated financial information requires the Group to
make estimates and assumptions that affect the application of policies and
reported amounts. Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including expectations of
future events that are reasonable under the circumstances. Actual results may
differ from these estimates. The critical accounting judgements and major
sources of estimation uncertainty remain consistent with those presented in
the Group's Annual Report and Accounts for the 53 weeks ended 2 May 2021
unless otherwise stated.
2. Segment reporting
The key Group performance measures are Adjusted Earnings Before Interest, Tax,
Depreciation and Amortisation (Adjusted EBITDA) and Adjusted Earnings Before
Interest and Tax (Adjusted EBIT), both shown pre-exceptional items, as
detailed below. The segment reporting is disclosed on a pre-IFRS 16 basis
reflecting how results are reported to the CODMs. Both Adjusted EBITDA and
Adjusted EBIT are APMs and these measures provide stakeholders with additional
useful information to assess the year-on-year trading performance of the Group
but should not be considered in isolation of statutory measures.
The Group have created a new Corporate segment to give management a greater
focus on the trading performance of the UK and US divisions. The Corporate
segment captures central administrative costs including Directors, the costs
of being a listed Group, and one off items such as the donation to the
charitable Foundation.
26 week period ended 31 October 2021
UK US Corporate Total
£'000 £'000 £'000 £'000
Revenue 418,625 167,586 - 586,211
Net margin 155,980 64,567 - 220,547
Less:
Store costs (66,660) (33,552) - (100,212)
Overheads (19,951) (6,783) (6,407) (33,141)
Store opening and closing costs (2,701) (1,653) - (4,354)
Intra-group management charge 707 (2,474) 1,767 -
Adjusted EBITDA 67,375 20,105 (4,640) 82,840
Depreciation, amortisation and loss on disposal of assets (11,657) (3,728) - (15,385)
Segment profit* 55,718 16,377 (4,640) 67,455
IFRS 16 adjustments 6,679
Exceptional administrative costs (note 4) (1,819)
Net other finance costs (note 5) (7,574)
Profit before taxation for the financial period 64,741
* Segment profit is defined as being Earnings Before Interest, Tax,
exceptional items and IFRS 16 adjustments (Adjusted EBIT).
26 week period ended 25 October 2020
UK US Corporate Total
£'000 £'000 £'000 £'000
Revenue 294,163 120,116 - 414,279
Net margin 105,558 44,972 - 150,530
Less:
Store costs (49,616) (22,500) - (72,116)
Overheads (15,393) (4,714) (4,174) (24,281)
Store opening and closing costs (1,491) (483) - (1,974)
Intra-group management charge 644 (1,615) 971 -
Adjusted EBITDA 39,702 15,660 (3,203) 52,159
Depreciation, amortisation and loss on disposal of assets (7,000) (3,706) - (10,706)
Segment profit* 32,702 11,954 (3,203) 41,453
IFRS 16 adjustments 5,881
Exceptional administrative costs (note 4) (1,752)
Net other finance costs (note 5) (9,410)
Profit before taxation for the financial period 36,172
* Segment profit is defined as being Earnings Before Interest, Tax,
exceptional items and IFRS 16 adjustments (Adjusted EBIT).
The segment reporting comparative has been updated to show the new Corporate
segment.
Entity-wide revenue disclosures
26 week period ended 26 week period ended
31 October 2021 25 October 2020
£'000 £'000
UK
Luxury watches 353,396 249,882
Luxury jewellery 32,190 20,547
Other 33,039 23,734
Total 418,625 294,163
US
Luxury watches 155,440 112,223
Luxury jewellery 8,609 5,797
Other 3,537 2,096
Total 167,586 120,116
GROUP
Luxury watches 508,836 362,105
Luxury jewellery 40,799 26,344
Other 36,576 25,830
Total 586,211 414,279
'Other' consists of the sale of fashion and classic watches and jewellery, the
sale of gifts, servicing, repairs and insurance.
Information regarding geographical areas, including revenue from external
customers is disclosed above.
No single customer accounted for more than 10% of revenue in any of the
financial periods noted above.
Seasonality
In the 53 week period to 2 May 2021, the Group earned total revenues of
£905,077,000. Of these revenues, 45.8% of these were earned in the first 26
week period to 25 October 2020 and 54.2% were earned in the following 27 week
period to 2 May 2021. However, the first half of the prior year was impacted
COVID19 related store closures in the UK and US.
Entity-wide non-current assets disclosures
31 October 2021
2 May 2021
£'000 £'000
UK
Goodwill 121,590 121,590
Intangible assets 3,767 4,428
Property, plant and equipment 65,028 62,037
Right-of-use assets 182,201 182,040
Total 372,586 370,095
US
Goodwill 19,799 13,850
Intangible assets 10,728 10,768
Property, plant and equipment 34,784 31,645
Right-of-use assets 73,972 71,669
Total 139,283 127,932
GROUP
Goodwill 141,389 135,440
Intangible assets 14,495 15,196
Property, plant and equipment 99,812 93,682
Right-of-use assets 256,173 253,709
Total 511,869 498,027
3. Revenue
The Group's disaggregated revenue recognised under contracts with customers
relates to the following categories and operating segments.
26 week period ended 31 October 2021
Sale of goods Rendering of services Total
£'000 £'000 £'000
UK 403,505 15,120 418,625
US 164,393 3,193 167,586
Total 567,898 18,313 586,211
26 week period ended 25 October 2020
Sale of goods Rendering of services Total
£'000 £'000 £'000
UK 283,975 10,188 294,163
US 118,228 1,888 120,116
Total 402,203 12,076 414,279
4. Exceptional items
Exceptional items are those that in the judgement of the Directors need to be
disclosed by virtue of their size, nature or incidence, in order to draw the
attention of the reader and to show the underlying business performance of the
Group. Such items are included within the Income Statement caption to which
they relate and are separately disclosed on the face of the Consolidated
Income Statement.
26 week period ended 26 week period ended
31 October 2021 25 October 2020
£'000 £'000
Exceptional gain on trade receivables
Expected credit losses((i)) - 233
Total exceptional gain on trade receivables - 233
Exceptional impairment of assets
Reversal of impairment of right-of-use assets((ii)) - 139
Exceptional administrative expenses
Professional and legal expenses on business combinations((iii)) (347) -
Exceptional costs in relation to Initial Public offering ('IPO')((iv))
Share-based payment in respect of the Chief Executive Officer and legacy (1,472) (2,124)
arrangements (including employment taxes)
Total exceptional administrative costs (1,819) (1,985)
Total exceptional items (1,819) (1,752)
Tax impact of exceptional items 347 459
Total exceptional items net of tax (1,472) (1,293)
(i) Reversal of expected credit losses
At the year ended 26 April 2020 an exceptional provision of £695,000 was made
against in-house credit debtors, linked to the exceptional circumstances
caused by the global COVID-19 pandemic. On 16 September 2020, the Group made a
one-time payment of $300,000 to remove all future obligations in relation to
debt held on recourse. As the Group bears no future liability, the expected
credit loss provision in relation to recourse debtors was released and was
accordingly reversed through exceptional items.
(ii) Reversal of impairment of right-of-use assets
The Group recognised an exceptional expense relating to impaired right-of-use
assets in the period ended 26 April 2020 linked to the COVID-19 pandemic. An
element of this was reversed during the 26 week period ended 25 October 2020
due to a modification of a lease agreement following COVID-19 related
negotiations.
(iii) Professional and legal expenses on business combinations
Professional and legal expenses incurred for business combinations have been
expensed to the Consolidated Income Statement as an exceptional cost as they
are regarded as non-trading, non-underlying costs and are considered to be
material by nature and are expected to be quantitatively material for the full
year.
(iv) Exceptional items for Initial Public Offering
On 31 May 2019, prior to the IPO, the CEO was granted a one-off share option
award by the principal selling shareholder, over a portion of their
shareholding, in recognition of his contribution to the Company up to
Admission and to ensure ongoing incentivisation and retention in his role
following the IPO. This one-off award was contingent on the CEO's continued
employment until June 2021. The total charge in relation to this award was
recognised over the two year period ending June 2021 and is considered
exceptional as it is linked to a unique non-recurring event, being the IPO.
Following exercise of the option in the period there will be no future charges
in relation to this item.
All of these costs are considered exceptional as they are linked to a unique
non-recurring event and do not form part of the underlying trading of the
Group.
5. Net finance costs
26 week period ended 26 week period ended
31 October 2021 25 October 2020
£'000 £'000
Finance costs
Interest payable on long term borrowings (1,128) (1,537)
Interest payable on short term borrowings (198) (799)
Amortisation of capitalised transaction costs (372) (476)
Other interest payable (29) (68)
Unwinding of discount on deferred consideration - (74)
Net foreign exchange loss on financing activities - (249)
Interest on lease liabilities (note 10) (5,833) (6,342)
Net interest expense on net defined benefit liabilities (note 13) (24) (29)
(7,584) (9,574)
Finance income
Interest income on trade receivables - 77
Other interest receivable 10 87
10 164
Net finance costs (7,574) (9,410)
Further detail of borrowing facilities in place is given in note 12 to these
interim financial statements.
6. Taxation
The income tax expenses recognised in the results is based on management's
best estimate of the full-year effective tax rate based on estimated full-year
profits excluding any discrete items. The effective tax rate at the half year
is 20.3% (26 week period to 25 October 2020: 20.2%), slightly higher than the
UK Corporation tax rate of 19.0% as a result of overseas tax differentials and
non-deductible expenses.
7. Earnings Per Share (EPS)
26 week period ended 26 week period ended
31 October 2021 25 October 2020
Basic
EPS 21.6p 12.0p
EPS adjusted for exceptional items 22.2p 12.6p
EPS adjusted for exceptional items and pre-IFRS 16 21.8p 12.6p
Diluted
EPS 21.6p 12.0p
EPS adjusted for exceptional items 22.2p 12.6p
EPS adjusted for exceptional items and pre-IFRS 16 21.8p 12.6p
Basic EPS is based on the profit for the period attributable to the equity
holders of the parent company divided by the net of the weighted average
number of shares ranking for dividend.
Diluted EPS is calculated by adjusting the weighted average number of shares
used for the calculation of basic EPS, taking into account the dilutive effect
of potential ordinary shares.
The following table reflects the profit and share data used in the basic and
diluted EPS calculations:
26 week period ended 26 week period ended
31 October 2021 25 October 2020
£'000 £'000
Profit after tax attributable to equity holders of the parent company 51,608 28,850
Add back:
Exceptional administrative expenses net of tax 1,472 1,293
Profit adjusted for exceptional items 53,080 30,143
Pre-exceptional IFRS 16 adjustments, net of tax (969) 15
Profit adjusted for exceptional items and IFRS 16 52,111 30,158
The following table reflects the share data used in the basic and diluted EPS
calculations:
26 week period ended 26 week period ended
31 October 2021 25 October 2020
Weighted average number of shares: '000 '000
Weighted average number of ordinary shares in issue 239,456 239,456
Weighted average shares for basic EPS 239,456 239,456
Weighted average dilutive potential shares - -
Weighted average shares for diluted EPS 239,456 239,456
Shares granted in the period under the FY21 Deferred Bonus Plan are
anti-dilutive as at 31 October 2021.
8. Intangible assets
Goodwill Brands Agency agreement Computer software Total
£'000 £'000 £'000 £'000 £'000
Net book value
At 2 May 2021 135,440 8,431 1,635 5,130 150,636
Additions - - - 334 334
Acquisitions (note 14) 5,750 - - - 5,750
Amortisation - (168) (123) (886) (1,177)
Foreign exchange differences 199 112 21 9 341
At 31 October 2021 141,389 8,375 1,533 4,587 155,884
9. Property, plant and equipment
Land and Fittings and equipment Total
buildings
£'000 £'000 £'000
Net book value
At 2 May 2021 1,506 92,176 93,682
Additions 591 19,016 19,607
Acquisitions (note 14) - 214 214
Disposals (36) (961) (997)
Depreciation (151) (12,978) (13,129)
Foreign exchange differences 1 434 435
At 31 October 2021 1,911 97,901 99,812
For impairment testing purposes, the Group has determined that each store is a
separate cash generating unit ('CGU'). Each CGU is tested for impairment at
the balance sheet date if any indicators of impairment have been identified.
During the 53 week period to 2 May 2021 the Group recognised an impairment
charge relating to property, plant and equipment and right-of-use assets as a
result of store impairment testing. The impairment followed a full review of
the profitability of the store network considering the impact of COVID-19 on
the Group. Further detail can be found in the 2021 Annual Report, a copy of
which is available on the Watches of Switzerland PLC (the 'Company') website
at www.thewosgroupplc.com (http://www.thewosgroupplc.com) .
Impairment has further been considered as at 31 October 2021 in line with the
current trading environment. It has been concluded that the impairment made
at 2 May 2021 remains appropriate, and asset values held at 31 October 2021
are supported by expected future cashflows.
10. Leases
Right-of-use assets
Properties Other Total
£'000 £'000 £'000
At 2 May 2021 253,219 490 253,709
Additions 16,151 26 16,177
Disposals (22) - (22)
Depreciation (19,297) (127) (19,424)
Leases renewed during the period 4,793 - 4,793
Lease modifications 22 - 22
Foreign exchange differences 918 - 918
At 31 October 2021 255,784 389 256,173
Lease liabilities
Properties Other Total
£'000 £'000 £'000
At 2 May 2021 (300,860) (506) (301,366)
Additions (15,582) (26) (15,608)
Disposals 116 - 116
Interest (5,823) (10) (5,833)
Leases renewed during the period (4,401) - (4,401)
Lease modifications (135) - (135)
Payments 25,202 138 25,340
Foreign exchange differences (1,229) (1) (1,230)
At 31 October 2021 (302,712) (405) (303,117)
11. Government grants
During the 26 week period to 25 October 2020, government grants were received
to support certain administrative expenses during the COVID-19 pandemic. All
attached conditions were complied with before recognition in the Consolidated
Income Statement.
There were two grant schemes that operated differently from one another. One
scheme operated on claims basis, where cash was received after the expense has
been incurred (UK furlough scheme), and the other on an up-front basis, where
cash was received prior to the expense being incurred (US Paycheck Protection
Program). These have been presented separately on the face of the Consolidated
Balance Sheet and also below.
During the 53 week period to 2 May 2021, the Group made a voluntary decision
to repay all UK furlough scheme support. The £6,832,000 support received was
repaid in July 2021.
Below is the reconciliation of government grants receivable (UK furlough
scheme):
31 October 2021 25 October 2020 02 May
2021
£'000 £'000 £'000
Opening balance - 2,575 2,575
Received during the period - (5,998) (9,407)
Released to Income Statement - 3,423 6,832
Receivable at period end - - -
Below is the reconciliation of government grants received (US Paycheck
Protection Program):
31 October 25 October 2020 02 May
2021 2021
£'000 £'000 £'000
Opening balance - (1,186) (1,186)
Received during the period - (2,926) (2,926)
Released to Income Statement - 3,982 4,056
Foreign exchange movements - 56 56
Balance at period end - (74) -
12. Borrowings
31 October 2021 25 October 2020 02 May 2021
£'000 £'000 £'000
Non-current
Term loans 120,000 142,500 120,000
Associated capitalised transaction costs (1,748) (2,786) (2,115)
Total borrowings 118,252 139,714 117,885
On 4 June 2019, the Company initially drew down the term loan on a new
facility consisting of a term loan for £120,000,000 and a revolving credit
facility of £50,000,000. Interest is currently charged at LIBOR plus 1.75% on
the term loan and LIBOR plus 1.5% on the revolving credit facility. The margin
on the term loan ranges from 1.75% to 2.80% and the revolving credit facility
ranges from 1.50% to 2.55% based on the Net Debt to EBITDA covenant test of
the Group. The term loan facility expires on 4 June 2024. The term loan
facility is unsecured and is cross guaranteed by subsidiary entities.
On 14 May 2020, the Group entered into a new £45,000,000 financing facility
which was agreed under the Governments' CLBILS scheme. This comprised of an
additional term loan of £22,500,000 with a term of 18 months and a revolving
credit facility of £22,500,000 for the same period. At 31 October 2020, the
£22,500,000 term loan was fully drawn down and none of the revolving credit
facility was drawn. On 5 March 2021, the CLBILS term loan was repaid in full
following a review of the Group's cash position. The repayment irrevocably and
unconditionally released the Company from all obligations, guarantees and
security created as part of the CLBILS scheme.
Short term borrowings consist of the remaining revolving credit facility noted
above and an asset backed lending (ABL) facility held in US Dollars of
$60,000,000. The ABL facility expires in April 2023 and interest would be
charged at US LIBOR plus the margin which ranges from 1.25% to 1.75%. Amounts
outstanding on the revolving credit facility totalled £nil and amounts
outstanding on the ABL facility totalled £nil - $nil.
Amounts undrawn on the facilities totalled £93,925,000. Borrowing on the US
ABL facility is restricted to the lower of $60,000,000 and the borrowing base
which is determined by reference to the assets held by the US entities.
Analysis of net debt
2 May 2021 Cash flow Non-cash charges¹ Foreign exchange 31 October 2021
£'000 £'000
Cash and cash equivalents 76,076 73,133 - 833 150,042
Term loans (120,000) - - - (120,000)
Net (debt)/cash excluding capitalised transaction costs (Pre-IFRS 16) (43,924) 73,133 - 833 30,042
Capitalised transaction costs 2,115 - (372) 5 1,748
Net (debt)/cash (41,809) 73,133 (372) 838 31,790
(Pre-IFRS 16)
Lease liability (301,366) 25,340 (25,861) (1,230) (303,117)
Total net debt (343,175) 98,473 (26,233) (392) (271,327)
1. Non-cash charges are principally lease liability interest charges,
additions and revisions.
13. Post-employment benefit obligations
During the 26 weeks to 31 October 2021 (prior period: 26 weeks to 25 October
2020), the Group operated two (prior period: two) defined contribution pension
schemes and one defined benefit scheme (prior period: one).
The movement in the defined benefit deficit in the period is as follows:
26 weeks to 31 October 2021 26 weeks to 25 October 2020 53 weeks to 2 May 2021
£'000 £'000 £'000
Net pension liability at the beginning of the period (2,570) (2,714) (2,714)
Current service cost (13) (11) (23)
Past service cost and curtailments - - (90)
Administration costs (76) (38) (142)
Net interest (24) (29) (55)
Employer contributions 340 349 702
Actuarial gains/(losses) 184 (2,417) (248)
Net pension liability at the end of the period (2,159) (4,860) (2,570)
The IAS 19 (accounting) valuation of the defined benefit obligation was
undertaken by an external qualified actuary at 31 October 2021 using the
projected unit credit method.
The deficit in the schemes moved from £2,570,000 at 2 May 2021 to £2,159,000
at 31 October 2021. The movement results from changes in the principal
actuarial assumptions used in the valuation as follows:
31 October 2021 25 October 2020 2 May 2021
Discount rate 1.90% 1.50% 2.00%
Rate of increase in salary 4.50% 4.35% 4.30%
Rate of future inflation - RPI 3.50% 3.10% 3.30%
Rate of future inflation - CPI 2.90% 2.50% 2.70%
Rate of increase in pensions in payment 3.40% 3.00% 3.25%
Proportion of employees opting for a cash commutation 100.00% 100.00% 100.00%
14. Business combinations
Ben Bridge Jeweler, Inc. ('Ben Bridge')
On 2 September 2021, the Group acquired the trade and assets of one showroom
from Ben Bridge Jeweler Inc.
Timeless Watch Exchange LLC. ('Timeless')
On 15 October 2021, the Group acquired the trade and assets of one showroom
from Timeless Watch Exchange LLC.
Both acquisitions contributed revenue of £602,000 from the date of the
acquisition to 31 October 2021 and contributed a net profit of £30,000 during
this initial setup period.
The following table summarises the consideration paid for both acquisitions,
and the provisional fair value of assets acquired at the acquisition date:
£'000
Total cash consideration 9,163
Initial assessment of values on acquisition
£'000
Inventories 3,366
Property, plant and equipment 214
Trade and other payables (167)
Right-of-use assets 1,691
Lease liabilities (1,691)
Total identifiable net assets 3,413
Goodwill 5,750
Total assets acquired 9,163
An amount of £159,000 is held with a third party on retention in relation to
the Ben Bridge Jeweler, Inc. acquisition. This will be paid within 12 months
of the acquisition date.
The values stated above are the initial assessment of the fair values of
assets and liabilities on acquisition. These will be finalised within the
coming year.
The contribution to revenue and profit before tax, if these business
combinations had occurred on the first day of the period, would not be
material to the results of the Group and therefore have not been disclosed
separately.
Acquisition-related costs of £347,000 have been charged to exceptional items
(note 4) in the Consolidated Income Statement for the 26 week period ended 31
October 2021.
15. Related party transactions
Transactions with related undertakings
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
In the prior period, the Group has traded products and provided services to
Watch Shop Holdings Limited and The Watch Lab Holdings Limited, entities with
the same significant investor. In the 26 week period to 31 October 2021 there
were £nil products and services traded (October 2020: £449,000). The Group
has an outstanding balance with these entities of £nil (October 2020:
£1,000, May 2021: £nil).
16. Financial instruments
Categories
31 October 2021 25 October 2020 2 May 2021
£'000 £'000 £'000
Financial assets - held at amortised cost
Trade and other receivables* 10,146 9,935 7,288
Cash and cash equivalents 150,042 119,814 76,076
Total financial assets 160,188 129,749 83,364
Financial liabilities - held at amortised cost
Term loans (net of capitalised transaction costs) (118,252) (139,714) (117,885)
Trade and other payables** (164,365) (169,021) (127,132)
Net financial liabilities (pre-IFRS 16) (282,617) (308,735) (245,017)
Lease liability (IFRS 16) (note 10) (303,117) (311,110) (301,366)
Total financial liabilities (585,734) (619,845) (546,383)
*Excludes prepayments of £3,789,000 (October 2020: £1,735,000, May 2021:
£3,064,000) that do not meet the definition of a financial instrument.
**Excludes customer deposits of £14,263,000 (October 2020: £11,618,000, May
2021: £12,208,000) and deferred income of £11,772,000 (October 2020:
£10,132,000, May 2021: £12,417,000) that do not meet the definition of a
financial instrument.
Fair values
The fair values of each category of the Group's financial instruments are
materially the same as their carrying values in the Group's Balance Sheet. The
fair value of trade and other receivables, trade and other payables, cash and
cash equivalents and revolving credit facilities all approximate their
carrying amount because of the limited movement in the short maturity of these
instruments and limited change in prevailing interest rates since recognition.
17. Contingent liabilities
From time to time, the Group may be subject to complaints and litigation from
its customers, employees, suppliers and other third parties. Such complaints
and litigation may result in damages or other losses, which may not be covered
by the Group's insurance policies or which may exceed any existing coverage.
Regardless of the outcome, complaints and litigation could have a material
adverse effect on the Group's reputation, divert the attention of the Group's
management team and increase its costs.
In March 2019, class action was brought against three US subsidiaries of the
Company, including Watches of Switzerland Group USA, Inc., in the U.S.
District Court for the Southern District of Florida. The suit alleges
violations of the FACTA legislation, which requires persons that accept credit
and/or debit cards for the transaction of business to truncate all but the
last five digits of the card number on printed receipts provided to consumers.
Because the suit is protracted, and no specific monetary amount has been
claimed, the potential liability (if any) in respect of such claim or any
related claims is difficult to quantify. The Company has robustly defended
itself and, at this point in time, the claim has been stayed by the Florida
courts. Our legal costs of defending the claim are insured subject to the
policy excess.
18. Post-balance sheet events
On 1 December 2021, the Group acquired the trade and assets of three showrooms
from Betteridge Jewelers, Inc., Gotthelfs Acquisition Corp., and Vail Village
Jewelers, Inc. for a cash consideration of $52,000,000. The acquisition
further advances the US expansion strategy.
The assets and liabilities acquired principally comprise working capital
balances of inventory, debtors and creditors. Due to the proximity of the
acquisition date to the date of approval these interim financial statements,
the initial accounting for the business combination is incomplete and the
Group is unable to provide a quantification of the fair values of the assets
and liabilities acquired. The Group will include an acquisition balance sheet
within the Group's Annual Report and Accounts for the 52 weeks to 1 May 2022.
Statement of Directors' Responsibilities
The directors confirm that, to the best of their knowledge, this condensed
consolidated interim financial information has been prepared in accordance
with UK adopted International Accounting Standard 34 and that the interim
report includes a fair review of the information required by DTR 4.2.4R, DTR
4.2.7R and DTR 4.2.8R, namely:
· an indication of important events that have occurred during the
first 26 weeks to 31 October 2021 and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining 26 weeks of the financial year; and
· material related party transactions in the first 26 weeks to 31
October 2021 and any material changes in the related party transactions
described in the last annual report.
There have been no changes to the directors of Watches of Switzerland Group
PLC to those listed in the Group's Annual Report and Accounts for the 53 weeks
to 2 May 2021.
A list of current directors is maintained on the Group's website:
www.thewosgroupplc.com (http://www.thewosgroupplc.com) .
For and by order of the Board:
Brian
Duffy
Anders Romberg
Chief Executive
Officer
Chief Financial Officer
8 December 2021
INDEPENDENT REVIEW REPORT TO WATCHES OF SWITZERLAND GROUP PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the 26 weeks ended 31
October 2021 which comprises the Unaudited Interim Condensed Consolidated
Income Statement, Unaudited Interim Condensed Consolidated Statement of
Comprehensive Income, Unaudited Interim Condensed Consolidated Balance Sheet,
Unaudited Interim Condensed Consolidated Statement of Changes in Equity,
Unaudited Interim Condensed Consolidated Statement of Cash Flows and notes 1
to 18. We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the 26 weeks ended 31 October 2021 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 1, the annual financial statements of the group will be
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion is based on procedures that are
less extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK and
Ireland) "Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our work, for this report, or for the conclusions
we have formed.
Ernst & Young LLP
London
8 December 2021
GLossary
Alternative performance measures
The Directors use alternative performance measures (APMs) as they believe
these measures provide additional useful information on the underlying trends,
performance and position of the Group. These measures are used for performance
analysis. The APMs are not defined by IFRS and therefore may not be directly
comparable with other companies' APMs. These measures are not intended to be a
substitute for, or superior to, IFRS measures.
The majority of the Group's APMs are on a pre-IFRS 16 basis. This aligns
with the management reporting used to inform business decisions, investment
appraisals, incentive schemes and banking covenants.
4-Wall EBITDA
Net margin less store costs.
Why used
4-Wall EBITDA is a direct measure of profitability of the store operations.
Reconciliation to IFRS measures
£million H1 FY22 H1 FY21
Revenue 586.2 414.3
Cost of inventory expensed (369.8) (264.9)
Other 4.1 1.1
Net margin 220.5 150.5
Store costs (100.2) (72.1)
4-Wall EBITDA 120.3 78.4
Store costs includes rental costs on a pre-IFRS 16 basis (i.e. under IAS
17). Refer to the IFRS 16 reconciliations below for further details.
Adjusted Earnings Before Interest and Tax (EBIT)
Operating profit before exceptional items and IFRS 16 impact.
Why used
Measure of profitability that excludes one-off exceptional costs and IFRS 16
adjustments to allow for comparability between years.
This measure was linked to management incentives in the financial year.
Reconciliation to IFRS measures
Reconciled in note 2 to the Consolidated Financial Statements.
Adjusted EBITDA
EBITDA before exceptional items presented in the Group's Income Statement,
professional costs for non-trading. Shown on a continuing basis and before the
impact of IFRS 16 'Leases'.
Why used
Measure of profitability that excludes one-off exceptional and non-underlying
items and IFRS 16 adjustments to allow for comparability between years.
Reconciliation to IFRS measures
Reconciled in note 2 of the Consolidated Financial Statements.
Adjusted Earnings Per Share
Basic Earnings Per Share before exceptional items and IFRS 16 impact.
Why used
Measure of profitability that excludes one-off exceptional items and IFRS 16
adjustments to provide comparability between years. This measure was linked
to management incentives in the financial year.
Reconciliation to IFRS measures
Reconciled within note 7 of the Consolidated Financial Statements.
Adjusted profit before tax
Profit before tax before exceptional items and IFRS 16 impact.
Why used
Measure of profitability that excludes one-off exceptional items and IFRS 16
adjustments to provide comparability between years.
Reconciliation to IFRS measure
£million H1 FY22 H1 FY21
Segment profit (as reconciled in note 2 of the financial statements) 67.5 41.5
Net finance costs (note 5) (7.6) (9.4)
IFRS 16 lease interest (note 5) 5.8 6.2
Adjusted profit before tax 65.7 38.3
Average selling price (ASP)
Revenue (including sales related taxes) generated in a period from sales of a
product category divided by the total number of units of such products sold in
such period.
Why used
Measure of sales performance.
Reconciliation to IFRS measures
Not applicable.
Constant currency basis
Results for the period had the exchange rates remained constant from the
comparative period.
Why used
Measure of revenue growth that excludes the impact of foreign exchange.
Reconciliation
(£/$ million)
H1 FY22 Group Revenue (£) 586.2
H1 FY22 US Revenue ($) 232.0
H1 FY22 US Revenue (£) @ HY22 Exchange rate 167.6
H1 FY22 US Revenue (£) @ HY21 Exchange rate 180.5
HY22 Group Revenue (£) @ Constant currency 599.1
H1 FY22 Exchange rate 1.385
H1 FY21 Exchange rate 1.286
_________________________________________________________________________________________________________________
Exceptional items
Items that in the judgement of the Directors need to be disclosed by virtue of
their size, nature or incidence, in order to draw the attention of the reader
and to show the underlying business performance of the Group.
Why used
Draws the attention of the reader and to show the items that are significant
by virtue of their size, nature or incidence.
Reconciliation to IFRS measures
Disclosed in note 4 of the Consolidated Financial Statements.
Net debt/cash
Total borrowings (excluding capitalised transaction costs) less cash and cash
equivalents and excludes IFRS 16 lease liabilities.
Why used
Measures the Group's indebtedness.
Reconciliation to IFRS measures
Reconciled in note 12 of the Consolidated Financial Statements.
Free cash flow
Cash flow shown on a pre-IFRS 16 basis excluding expansionary capex,
acquisitions of subsidiaries, exceptional items and financing activities.
Why used
Represents the cash generated from operations including maintenance of capital
assets. Demonstrates the amount of available cash flow for discretionary
activities such as expansionary capex, dividends or acquisitions.
Reconciliation to IFRS measures
£million H1 FY22 H1 FY21
Net increase in cash and cash equivalents 73.1 47.7
Net financing cash flow 26.7 88.3
Interest paid (1.3) (2.6)
Lease payments (IFRS 16) (25.4) (26.0)
Acquisition of business combinations 9.0 0.1
Exceptional costs 0.3 0.0
Expansionary capex 19.9 8.6
Free cash flow 102.3 116.1
Free cash flow conversion
Free cash flow divided by Adjusted EBITDA.
Why used
Measurement of the Group's ability to convert profit into free cash flow.
Reconciliation to IFRS measures
Free cash flow of £102.3 million divided by Adjusted EBITDA of £82.8 million
shown as a percentage.
Net margin
Revenue less inventory recognised as an expense, commissions paid to the
providers of interest free credit and inventory provision movements.
Why used
Measures the profit made from the sale of inventory before store or overhead
costs.
Reconciliation to IFRS measures
Refer to 4-Wall EBITDA.
Return on Capital Employed (ROCE)
Return on capital employed (ROCE) is defined as Adjusted EBIT divided by
average capital employed, calculated on a Last Twelve Months (LTM) basis.
Average capital employed is total assets less current liabilities excluding
IFRS 16 lease liabilities.
Why used
ROCE demonstrates the efficiency with which the Group utilises capital. ROCE
is linked to management incentives.
Reconciliation to IFRS measures
Adjusted EBIT of £103.6m divided by the average capital employed, which is
calculated as follows:
£million LTM to 31 October 2021 LTM to 25 October 2020
Pre-IFRS 16 total assets 675.3 618.1
Pre-IFRS 16 current liabilities (197.5) (200.3)
Capital employed 477.8 417.8
Average capital employed 447.8 384.7
Other definitions
Expansionary capital expenditure/capex
Expansionary capital expenditure relates to new stores, relocations
or refurbishments greater than £250,000.
Luxury watches
Watches that have Recommended Retail Price greater than £1,000.
Luxury jewellery
Jewellery that has a Recommended Retail Price greater than £500.
Non-core stores
These stores are not core to the ongoing strategy of the business and will
be closed at the end of their lease term.
Store maintenance capital expenditure/capex
Capital expenditure which is not considered expansionary.
Tourist sales
Tourist sales are represented by those sales with VAT refund claims
IFRS 16 Adjustments
The following tables reconcile from pre-IFRS 16 balances to statutory post
IFRS 16 balances.
H1 FY22 Income Statement
£million Pre-IFRS 16 and exceptional items IFRS 16 adjustments Exceptional Statutory
items
Revenue 586.2 - - 586.2
Net margin 220.5 - - 220.5
Store costs (100.2) 22.3 - (77.9)
4-Wall EBITDA 120.3 22.3 - 142.6
Overheads (33.1) - (1.8) (34.9)
EBITDA 87.2 22.3 (1.8) 107.7
Store opening and closing costs (4.4) 3.4 - (1.0)
Adjusted EBITDA 82.8 25.7 (1.8) 106.7
Depreciation, amortisation and loss on disposal of fixed assets (15.3) (19.1) - (34.4)
Adjusted EBIT (Segment profit) 67.5 6.6 (1.8) 72.3
Net finance costs (1.8) (5.8) - (7.6)
Adjusted profit before tax 65.7 0.8 (1.8) 64.7
Adjusted basic Earnings Per Share 21.8p 21.6p
H1 FY22 Balance Sheet
£million Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Goodwill and intangibles 155.9 - 155.9
Property, plant and equipment 100.6 (0.8) 99.8
IFRS 16 right-of-use assets - 256.2 256.2
Inventories 240.8 - 240.8
Trade and other receivables 22.1 (8.2) 13.9
Trade and other payables (219.5) 29.1 (190.4)
IFRS 16 lease liabilities - (303.1) (303.1)
Net cash 30.0 - 30.0
Other (5.7) 10.5 4.8
Net assets 324.2 (16.3) 307.9
H1 FY21 Income Statement
£million Pre-IFRS 16 and exceptional items IFRS 16 adjustments Exceptional Statutory
items
Revenue 414.3 - - 414.3
Net margin 150.5 - 0.2 150.7
Store costs (72.1) 23.5 - (48.6)
4-Wall EBITDA 78.4 23.5 0.2 102.1
Overheads (24.3) - (2.0) (26.3)
EBITDA 54.1 23.5 (1.8) 75.8
Store opening and closing costs (1.9) 1.3 - (0.6)
Adjusted EBITDA 52.2 24.8 (1.8) 75.2
Depreciation, amortisation and loss on disposal of fixed assets (10.7) (18.9) - (29.6)
Adjusted EBIT (Segment profit) 41.5 5.9 (1.8) 45.6
Net finance costs (3.2) (6.2) - (9.4)
Adjusted profit before tax 38.3 (0.3) (1.8) 36.2
Adjusted basic Earnings Per Share 12.6p 12.0p
H1 FY21 Balance Sheet
£million Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Goodwill and intangibles 151.9 (0.1) 151.8
Property, plant and equipment 97.9 1.1 99.0
IFRS 16 right-of-use assets - 256.8 256.8
Inventories 221.9 - 221.9
Trade and other receivables 16.4 (4.7) 11.7
Trade and other payables (219.7) 28.9 (190.8)
IFRS 16 lease liabilities - (311.1) (311.1)
Net debt (22.7) - (22.7)
Other (1.7) 11.3 9.6
Net assets 244.0 (17.8) 226.2
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