REG - Watches of Switzlnd. - Q4 FY23 Trading Update

Watches of SwitzerlandAnnouncement

17/05/2023 07:17

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RNS Number : 6413Z  Watches of Switzerland Group PLC  17 May 2023

17 May 2023

Watches of Switzerland Group PLC

Q4 FY23 Trading Update

for the 13 weeks (Q4 FY23) and 52 weeks (FY) to 30 April 2023

 

Strong FY23 performance in line with guidance

Entering FY24 significantly ahead of Long Range Plan

 

Brian Duffy, Chief Executive Officer, said:

"FY23 was another record year of revenue and profitability, with revenue
growth of 25% at reported rates (+19% at constant currency) and continued EBIT
margin expansion. Although, as expected, the second half of FY23 saw a more
challenging trading environment, demand remains strong and continues to exceed
supply, with client registration lists continuing to grow. I would like to
thank all my colleagues for their continued hard work and dedication.

 

We have an exciting pipeline of showroom projects, and I am delighted to
announce the Group has signed a letter of intent with Audemars Piguet ("AP")
confirming its intention to open an AP House in the UK in the region of St
Anne's, Manchester, via a Joint Venture partnership in Spring 2024. This is an
important expansion in our partnership with Audemars Piguet which has spanned
more than 50 years and we look forward to what will be a great showroom for
the city of Manchester. We also announce today our plan to open a flagship
TUDOR mono-brand boutique at Old Bond Street, one of the most prestigious
addresses in London, in Q4 FY24.

 

We enter FY24 significantly ahead of where we expected to be in our Long Range
Plan following two years of exceptional performance and notwithstanding the
macroeconomic backdrop. Our FY24 guidance assumes revenue growth of 8 to 11%
at constant currency with EBIT margin in line with prior year. We remain
confident in our goals to maintain our leadership position in the UK, become
the clear leader in the US, and capitalise on our growth potential in Europe."

 

FY23 Highlights

·      Group revenue £1,543 million, +25% at reported rates, +19% at
constant currency on prior year:

o  US revenue £653 million, +52% at reported rates, +35% at constant
currency

o  UK and Europe revenue £890 million, +10%

o  Luxury watch revenue +28% driven by increases in average selling price and
volume, demonstrating the continued dynamism of the category

o  Luxury jewellery revenue +10%

o  Group ecommerce revenue +3% at reported rates

o  Pre-owned revenue grew strong double digits with pricing and margins
maintained

·      Adjusted pre-IFRS 16 EBIT expected to be between £163 million
and £167 million (FY22: £130 million), delivering continued margin
expansion, despite headwinds from interest free credit and product mix

o  Adjusted EBIT post-IFRS 16 expected to be between £177 million and £181
million (FY22: £144 million)

·      Operating cash conversion expected to be c.70% with net cash of
£16 million as at 30 April 2023 (1 May 2022: net debt £14 million), after
accounting for £21m of acquisitions in the year

·      Group banking facilities renewed with £225 million RCF available
effective 9 May 2023 for the next five years reducing annual financing costs
going forward

 

Q4 FY23 Highlights

·      Group revenue £371 million, +22% at reported rates, +18% at
constant currency

o  US revenue £173 million, +27% at reported rates, +17% at constant
currency

o  UK and Europe revenue £198 million, +18% benefitting from timing of
deliveries of supply constrained product

·      UK showroom development programme continues with several projects
completed in the quarter:

o  Continued rollout of the Goldsmiths luxury format with two showrooms
expanded and refurbished in Cabot Circus, Bristol and Lakeside, West Thurrock

o  Two mono-brand boutiques opened in partnership with Breitling in Leicester
and Cribbs Causeway, Bristol

·      We continue our expansion into Europe, opening our sixth
mono-brand boutique, with TAG Heuer in Dublin. Early trading remains in line
with expectations

 

Outlook

·      The Group has made excellent progress in the first two years of
its Long Range Plan and enters FY24 significantly ahead of schedule

·      FY24 guidance anticipates that the more challenging trading
environment of the second half of FY23 will continue into the first half of
FY24 before improving in H2

·      Due to product intake timing, which supported Q4 FY23, and strong
prior year comparatives, the Group expects a modest sales decline in Q1 FY24
before normalising in Q2

·      FY24 guidance reflects current visibility of supply from key
brands and confirmed showroom refurbishments, openings and closures, and
excludes uncommitted capital projects and acquisitions

 

·      The Group provides the following FY24 guidance on an organic
pre-IFRS 16 basis, assuming a £/$ 1.25 exchange rate:

 

 o  Revenue:                     £1.65 - £1.70 billion, growth of 8 - 11% at constant currency
 o  Adjusted EBIT margin %:      In line with FY23
 o  Total finance costs:         c.£3 million
 o  Underlying tax rate:         27% - 28% reflecting the increase in UK corporation tax
 o  Capex:                       £70 - 80 million
 o  Operating cash conversion:   c.70% weighted towards H2 in line with the seasonal pattern

The equivalent guidance on an IFRS 16 basis is:

 o  Adjusted EBIT margin %:   In line with FY23
 o  Total finance costs:      £23 - £27 million

·      The Group has an exciting pipeline of new showroom projects
planned in FY24:

o  Watches of Switzerland multi-brand showroom in American Dream, New Jersey
opening in May 2023

o  First Watches of Switzerland multi-brand showroom in Europe in the Mall of
the Netherlands, The Hague opening at the end of the calendar year

o  Watches of Switzerland multi-brand showroom at One Vanderbilt, New York
opening in January 2024

o  AP House in Manchester, via a Joint Venture partnership with Audemars
Piguet in Spring 2024

o  Old Bond Street Rolex flagship boutique in first half of 2024

o  Expansion of the mono-brand portfolio in the UK, US and Europe including:

§ TAG Heuer mono-brand boutique in Kurfurstendamm, Berlin, Germany

§ TAG Heuer mono-brand boutique in Mall of Scandinavia, Stockholm, Sweden

o  Continued refurbishment and expansion of showroom network including:

§ Refurbishment and expansion of Mayors Dadeland, Florida opened in May 2023

§ Continued roll out of Goldsmiths luxury showroom format

§ Launch of new luxury showroom concept for Mappin & Webb

·      The Group is exposed to movements in the £/$ exchange rate when
translating the results of its US operations into Sterling. The Actual average
exchange rate for FY23 was 1.20. FY24 guidance assumes a £/$ 1.25 exchange
rate, with a five cent move resulting in an adjustment of c.£25 million to
full year Group revenue and c.£3 million on full year Adjusted EBIT, on a
pre-IFRS 16 basis

 

·      The Group plans to announce FY23 results on 13 July 2023

 

Q4 FY23 Revenue performance by geography
 
                Q4 FY23         Q4 FY22      Q4 FY23 vs Q4 FY22                       Q4 FY23 vs Q4 FY21*
                13 weeks to     13 weeks to  Reported YoY %  Constant currency YoY %  2-year Reported  2-year

                30 April 2023   1 May 2022                                            YoY %            Constant currency YoY %

 (£ million)

 UK and Europe  198             168          18%             18%                      57%              57%
 US             173             136          27%             17%                      87%              66%
 Group Revenue  371             304          22%             18%                      70%              60%

*FY21 includes a 53(rd) week
FY23 Revenue performance by geography
 
                FY23            FY22         FY23 vs FY22                             FY23 vs FY21*
                52 weeks to     52 weeks to  Reported YoY %  Constant currency YoY %  2-year Reported  2-year

                30 April 2023   1 May 2022                                            YoY %            Constant currency YoY %

 (£ million)

 UK and Europe  890             810          10%             10%                      47%              47%
 US             653             428          52%             35%                      119%             98%
 Group Revenue  1,543           1,238        25%             19%                      70%              63%

*FY21 includes a 53(rd) week
Q4 FY23 and FY23 revenue performance by category
 
                   Q4                                             FY
                   13 weeks to 30 April 2023  13 weeks to  YoY %  52 weeks to 30 April 2023  52 weeks to 1 May 2022  YoY %

 (£ million)                                  1 May 2022

 Luxury watches    329                        258          28%    1,336                      1,047                   28%
 Luxury jewellery  22                         27           (17%)  119                        109                     10%
 Other             20                         19           1%     88                         82                      6%
 Group Revenue     371                        304          22%    1,543                      1,238                   25%

 

The financial information contained herein is unaudited.

Ecommerce revenue are sales which are transacted online.

Growth rates are calculated on unrounded numbers.

 

Conference call

A conference call for analysts and investors will be held
at 9.00am (UK time) today. To access the conference call, please use the
following details:

 

Dial-in (UK): 020 3966 7028

Dial-in (all other locations): +44 20 3966 7028

Participant access code: 637954

 

Contacts

The Watches of Switzerland Group

Anders Romberg, CFO
 
                         +44 (0) 207 317 4600

Stephanie Crinnegan, Director of Investor Relations & Corporate Affairs
                             +44 (0) 776 710 0603

investor.relations@thewosgroup.com (mailto:investor.relations@thewosgroup.com)

 

Headland

Lucy Legh / Rob Walker / Joanna Clark
 
              +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 the UK, US and Europe comprising five prestigious brands; Watches
of Switzerland (UK and US), Mappin & Webb (UK), Goldsmiths (UK), Mayors
(US) and Betteridge (US), with a complementary jewellery offering.

 

As at 30 April 2023, the Watches of Switzerland Group had 193 showrooms across
the UK, US and Europe including 80 dedicated mono-brand boutiques in
partnership with Rolex, OMEGA, TAG Heuer, Breitling, TUDOR, Audemars Piguet,
Grand Seiko, BVLGARI and FOPE and has a leading presence in Heathrow Airport
with representation in Terminals 2, 3, 4 and 5 as well as seven retail
websites.

 

The Watches of Switzerland Group is proud to be the UK's largest retailer for
Rolex, OMEGA, Cartier, TAG Heuer and Breitling watches.

www.thewosgroupplc.com (http://www.thewosgroupplc.com)

 

Disclaimer

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 2022 Annual Report and Accounts in Risk Management and
Principal Risks and Uncertainties.

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