REG - Watches of Switzlnd. - Watches of Switzerland Group PLC H1 FY25 Results
05/12/2024 07:00
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RNS Number : 8777O Watches of Switzerland Group PLC 05 December 2024
5 December 2024
Watches of Switzerland Group PLC
H1 FY25 Results
for the 26 weeks to 27 October 2024 (H1 FY25)
In-line H1 performance reflecting improved trading and good momentum in Q2
Full Year guidance unchanged
Brian Duffy, Chief Executive Officer, said:
"We are pleased to report H1 FY25 revenue growth of +4% in constant
currency(1) reflecting an encouraging improvement in trading in Q2, driven by
growing demand in the UK and US, and consistent growth in client registration
lists, along with the acquisition of Roberto Coin in the period.
"As previously outlined, in Q1 we increased showroom stock levels of key
brands to enhance displays and client experience, particularly in the US. With
the stock rebuild complete, in Q2 we drove significantly improved US revenue
of +24% (constant currency) and revenue in the UK market turned positive.
Price increases from brands in the half have been modest, and this has also
positively influenced consumer sentiment. Consequently, overall Group revenue
increased +11% in Q2, in constant currency.
"Our newly acquired Roberto Coin business in North America has traded strongly
since acquisition and is now making a good contribution to our Group.
Integration is progressing well, and growth plans are underway. We are also
encouraged by the performance of the Rolex Certified Pre-Owned programme and
the sustained growth in our overall pre-owned business. Additionally, we
acquired Hodinkee, a leading global digital platform for luxury watch
enthusiasts, further strengthening our online sector leadership. Integration
is progressing in line with our expectations.
"Q3 trading has started encouragingly, and we have continued with our showroom
transformation programme. Looking ahead, key showroom openings in H2 include
the flagship Rolex boutique in Old Bond Street, London; Audemars Piguet Town
House, Manchester; Rolex introduction in Plano, Texas, and a reintroduction in
Jacksonville, Florida; and the conversion of Mayors Lenox, Atlanta, to a Rolex
mono-brand boutique. Our trading momentum through November, visibility of
intake and second half opening of large showroom investments support our full
year guidance, which is unchanged.
"This year marks the centenary of Watches of Switzerland, celebrated with a
number of exclusive products, and we extend our gratitude to our colleagues
for their unwavering dedication and exceptional client service throughout the
year."
(£million) 26 weeks ended 27 October 2024 26 weeks ended 29 October 2023 YoY change YoY change
Reported rates Constant currency
Group revenue 785 761 3% 4%
UK and Europe 430 433 (1%) (1%)
US 355 328 8% 11%
Adjusted EBITDA(1) 87 94 (7%)
Adjusted EBITDA margin(1) 11.1% 12.3% (120bps)
Adjusted EBIT(1) 66 73 (10%) (9%)
Adjusted EBIT margin(1) 8.4% 9.6% (120bp)
Adjusted basic EPS(1) (p) 18.1 21.5
Statutory operating profit 60 78 (23%)
Statutory profit before tax 41 67 (39%)
Statutory basic EPS (p) 12.2 19.8
Free cash flow(1) 28 57
Return On Capital Employed(1) 16.5% 23.9%
Net (debt)/cash(1) (120) 16
H1 FY25 Financial Highlights
· Group revenue £785 million, +4% at constant currency, +3% at
reported rates on prior year
· Sequential revenue improvement with Q1 FY25 -2% and Q2 FY25 +11%
in constant currency, with a strong start to Q3 ahead of the holiday trading
period
o Luxury watch(2) revenue -2% in constant currency, -3% reported. As
anticipated, revenue was impacted by one-off increases in showroom stock
levels to enhance displays and client experience in Q1 FY25, particularly in
the US
§ Luxury watches represent 83% of Group revenue, a reduction of 500 bps due
to Roberto Coin increasing the mix of jewellery
§ Demand for our key brands, particularly products on Registration of
Interest lists, continued to be strong
o Certified Pre-Owned and vintage is performing strongly, with Rolex
Certified Pre-Owned becoming the Group's second biggest luxury watch brand
o Luxury jewellery(2) revenue +104% in constant currency, +103% reported,
driven by the acquisition of Roberto Coin which contributed £51 million of
revenue in the period
§ Group luxury jewellery revenue excluding Roberto Coin was -6% with positive
trends in the UK market (+4%). US luxury jewellery revenue was impacted by
the squeeze on the commodity bridal category and prior year clearance activity
§ Luxury branded jewellery significantly outperformed non-branded jewellery,
with double digit growth within our retail and online estate
o Group ecommerce revenue(2) -10% on prior year, in line with market trends.
US ecommerce revenue was in growth for the period
· US revenue of £355 million, +11% at constant currency, +8%
reported
o Sequential revenue improvement from Q1 FY25 -1% to +24% Q2 FY25 in
constant currency
o Stock build for key brands completed in Q1 FY25
· UK and Europe revenue of £430 million -1% on prior year
o Continued stabilisation of the UK market in both luxury watches and
jewellery, following a period of volatile conditions in the prior financial
year
o Sequential revenue improvement from Q1 FY25 -4% to Q2 FY25 +2%
· Adjusted EBIT of £66 million, -9% in constant currency, -10%
reported on prior year
o Adjusted EBIT margin 8.4% (H1 FY24: 9.6%), due to product mix and lack of
leverage of fixed costs
· Statutory operating profit £60 million (HY FY24: £78 million),
-23% on a reported basis
· Free cash flow of £28 million (H1 FY24: £57 million) with
conversion of 32% (H1 FY24: 60%); reduction driven by the seasonal increase in
working capital for Roberto Coin and timing of supplier payments. Expected
c.70% free cash flow conversion(1) for the full year
· Continued investment in showrooms, with expansionary capital
expenditure(2) of £44 million. A number of key showroom projects to open in
the second half of the year
· Net debt of £120 million as of 27 October 2024 (29 October 2023
net cash: £16 million), reflecting the acquisitions of Roberto Coin Inc. and
Hodinkee
H1 FY25 Operating Highlights
· Market share gains in both the UK and US as a result of our
differentiated offering and investments
· Integration of Roberto Coin progressing to plan. Positive
feedback from the network of retail partners, with sell-in and sell-out data
encouraging
o Actively negotiating new mono-brand boutiques in the US, shop-in-shop
concept for retail partners, alongside department store concession models.
Website upgrade in progress
o Strong revenue growth from the Roberto Coin brand within US WOSG
showrooms, particularly following the installation of elevated displays
· Exclusive and first-to-market watch product with a number of
brands including Cartier, Breitling, TAG Heuer and BVLGARI
· UK exclusive luxury branded jewellery launches of David Yurman and
Repossi
· On 3 October 2024, the Group acquired the editorial, insurance and
limited edition businesses from Hodinkee, the pre-eminent global digital
editorial content provider and gateway for luxury watch enthusiasts. This
acquisition will help drive online leadership
o Direct link in place driving Hodinkee traffic to Watches of Switzerland US
website
o Upgrade of US website underway, completing in the second half
o Integration is progressing in line with our expectations
· Significant progress on key showroom projects
o Completed projects in H1 FY25:
§ Opening of new 2,000 sq. ft Patek Philippe room in Betteridge Greenwich,
Connecticut
§ New Mappin & Webb, Edinburgh
§ Expansion of Watches of Switzerland Oxford Street, London
§ Relocations of Goldsmiths Cheltenham and Milton Keynes, our first Ernest
Jones project
o Projects to complete in H2 FY25:
§ Conversion and expansion of Watches of Switzerland Fenchurch Street, London
from Mappin & Webb
§ New flagship Rolex boutique Old Bond Street, London
§ Relocation and introduction of Rolex and Cartier to Watches of Switzerland
Plano, Texas
§ Relocation and reintroduction of Rolex to Mayors Jacksonville, Florida
§ Conversion of Mayors Lenox, Atlanta to a Rolex boutique
§ Relocation of Mayors Tampa, Florida
§ Expansion of Betteridge Vail, Colorado
§ New Watches of Switzerland Ross Park, Pittsburgh
§ Audemars Piguet Townhouse, Manchester to be operated as a joint venture
o Projects to complete in early FY26:
§ Mappin & Webb luxury jewellery boutique, Manchester, including our
first De Beers mono-brand boutique
· Progress made on the exit from Europe. Two showrooms closed in
the period and four sold to brand partners. Agreements to sell a further two
boutiques to brand partners in H2 FY25. This will leave one European
mono-brand boutique in the Republic of Ireland
· Accredited as a Great Place to Work employer in the UK and US, and
Living Wage Employer in the UK
Outlook
· FY25 guidance unchanged, underpinned by sequential trading
improvement, visibility of intake and the large showroom projects opening in
the second half of the year. We are well positioned for a good holiday
trading period, having made an encouraging start in November
· 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 FY25 guidance on a pre-IFRS 16
basis, assuming a £/$1.26 exchange rate:
o Revenue: £1.67 - £1.73 billion, growth of 9% - 12% at constant currency
o Adjusted EBIT margin %: +0.2 to +0.6 percentage points expansion from FY24
o Total finance costs: c.£13 million, reflecting additional financing for Roberto Coin Inc.
acquisition
o Underlying tax rate: 28% - 30%
o Capex: £60 - £70 million
o Free cash flow conversion: c.70% weighted towards H2 in line with the seasonal pattern
The equivalent guidance on an IFRS 16 basis is:
o Adjusted EBIT margin %: +0.2 to +0.6 percentage points expansion from FY24
o Total finance costs: £37 - £41 million
The equivalent guidance on an IFRS 16 basis is:
o Adjusted EBIT margin %: +0.2 to +0.6 percentage points expansion from FY24
o Total finance costs: £37 - £41 million
· The Group is exposed to movements in the £/$ exchange rate when
translating the results of its US operations into Sterling. The actual average
exchange rate for FY24 was £/$1.26. FY25 guidance assumes a £/$1.26 exchange
rate, with a five cent move resulting in an adjustment of c.£30 million to
full year Group revenue and c.£4 million on full year Adjusted EBIT, on a
pre-IFRS 16 basis
H1 FY25 Revenue Performance by Geography
H1 FY25 H1 FY24 H1 FY25 vs H1 FY24
26 weeks to 26 weeks to Reported YoY %
27 Oct 2024 29 Oct 2023 Constant currency YoY %
(£m)
UK and Europe 430 433 -1% -1%
US 355 328 +8% +11%
Group Revenue 785 761 +3% +4%
H1 FY25 Revenue Performance by Category
H1 FY25 H1 FY24 H1 FY25 vs H1 FY24
26 weeks to 26 weeks to Reported YoY %
27 Oct 2024 29 Oct 2023 Constant currency YoY %
(£m)
Luxury watches 649 670 -3%
-2%
Luxury jewellery 95 47 +103% +104%
Services/other 41 44 -9% -8%
Group Revenue 785 761 +3% +4%
H1 FY25 Results Presentation
A webcast conference call for analysts and investors will be held at 9.00am
(UK time) today to announce the H1 FY25 results. To join the call, please use
the following details:
Webcast details:
Register at: https://brrmedia.news/WOSGH1FY25
(https://gbr01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbrrmedia.news%2FWOSGH1FY25&data=05%7C02%7Cc.browne%40thewosgroup.com%7C6fcf6f9771dc4e44a72c08dd0fca3cbe%7C865fd163942a47f0ae7aa481aca11e10%7C0%7C0%7C638684083452494424%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=Y2zkyqTX%2B%2FofRVXGcKF8nqVWxI9%2F2c%2BQTGdZtOSFF0I%3D&reserved=0)
Conference call dial-in details:
United Kingdom: +44 (0) 33 0551 0200
United Kingdom (Toll-Free): 0808 109 0700
Password: WOSG H1
Contacts
The Watches of Switzerland Group
Anders Romberg, CFO
+44 (0) 207 317 4600
Caroline Browne, Group Finance
Director
+44 (0) 1162 817 420
investor.relations@thewosgroup.com (mailto:investor.relations@thewosgroup.com)
Headland
Lucy Legh / Rob Walker / Scarlett Hateley
+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 seven prestigious brands;
Watches of Switzerland (UK and US), Mappin & Webb (UK), Goldsmiths (UK),
Mayors (US), Betteridge (US), Analog:Shift (US) and Hodinkee (US), with a
complementary jewellery offering. From 8 May 2024, the Group also owns the
exclusive distribution rights for Roberto Coin in the USA, Canada, Central
America and the Caribbean.
As at 27 October 2024, the Watches of Switzerland Group had 217 showrooms
across the UK, US and Europe including 95 dedicated mono-brand boutiques in
partnership with Rolex, OMEGA, TAG Heuer, Breitling, TUDOR, Audemars Piguet,
Longines, Grand Seiko, Roberto Coin, 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, losses 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
announcement.
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 and,
except as required by law or regulation, the Company undertakes no obligation
to update these forward-looking statements. No statement in this
announcement should be construed as a profit forecast or profit estimate.
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 as
detailed above.
Chief Executive Officer's Review
The Group performed in line with expectations in the first half of the year
and we are pleased to see sequential improvement in trading in both our
markets. Group revenue was £785 million, +4% in constant currency, +3% in
reported rates, with Q2 FY25 improving to +11% in constant currency from -2%
in Q1 FY25. Profitability was impacted by the lack of leverage, which will
reverse in the second half of the year.
Demand for our key brands, particularly products on Registration of Interest
lists, continued to be strong. Luxury watches revenue was -2% in constant
currency, -3% reported. As anticipated, revenue was impacted by one-off
increases in showroom stock levels to enhance displays and client experience
in Q1 FY25, particularly in the US. The UK market showed continued
stabilisation, following a period of challenging macroeconomic conditions in
the prior financial year.
Following the launch of Rolex Certified Pre-Owned in the prior year, the
pre-owned category continues to grow. Certified Pre-Owned and vintage is
performing strongly, with Rolex Certified Pre-Owned becoming the Group's
second biggest luxury watch brand. The range of product offered in showrooms
is significantly greater than our competitors and has enabled strong growth in
the period with further opportunity to expand the category through
merchandising and advertising. We are looking forward to the introduction of
Rolex Certified Pre-Owned window displays and in-store formats. Rolex
Certified Pre-Owned is currently available in 24 agencies in the UK, 19 in the
US, and online.
Luxury jewellery revenue +104% in constant currency, +103% reported, where
Roberto Coin contributed £51 million of revenue in the period. Group luxury
jewellery revenue excluding Roberto Coin was -6% with positive trends in the
UK market (+4%). US luxury jewellery revenue was impacted by the squeeze on
the commodity bridal category and prior year clearance activity. Luxury
branded jewellery significantly outperformed non-branded jewellery, with
double digit growth within our retail and online estate.
Our long-standing relationships with the most recognised and prestigious
luxury watch brands have remained a point of distinction. We have continued to
collaborate on exclusive product which in the half included products from
Cartier, Breitling, TAG Heuer and BVLGARI. We are also pleased to bring new,
exclusive luxury branded jewellery partnerships to the UK business with David
Yurman and Repossi.
We are delighted to be accredited as a Great Place to Work employer and the
fact that we have made the list of Certified Great Places to Work in both of
our US and UK regions in our first year of entry is testament to the hard
work, passion and team spirit of all of our colleagues who work hard to
deliver positive outcomes for our clients. It is wonderful to see how proud
our colleagues are to work for our Group and how included they feel when they
join and continue to develop their careers with us.
We have continued to invest in our showroom network in both markets, with
significant progress made on key projects such as the flagship Rolex boutique
on Old Bond Street, London, Audemars Piguet Townhouse, Manchester and Mappin
& Webb Luxury Jewellery Boutique, Manchester. We have started the
renovation of our recently acquired Betteridge showrooms with the expansion of
Vail, Colorado opening in December 2024 and recently opened a new 2,000 sq. ft
Patek Philippe room in Greenwich, Connecticut, with the rest of the showroom
refurbishment to be completed in FY26. The first half of the year also saw us
complete our first Ernest Jones project, with the relocation of Goldsmiths
Milton Keynes. The second half of the year will also see the introduction of a
new Rolex agency in Watches of Switzerland Plano, Texas and the relocation and
reintroduction of Rolex in Jacksonville, Florida; along with the conversion of
Mayors Lenox, Atlanta into a Rolex mono-brand boutique and the relocation of
Mayors Tampa, Florida.
The integration of Roberto Coin, which we acquired on 8 May 2024, is
progressing to plan. We have spent significant time getting to know the
excellent Roberto Coin team and have been collaborating on a number of new
initiatives. These include actively negotiating new mono-brand boutique
locations, designing a new shop-in-shop concept for our retail partners,
alongside discussing potentially moving to a concession model with department
store partners. We are also in the process of upgrading the Roberto Coin
ecommerce site, which should be completed in H2, and initiating a new
marketing campaign. Feedback from the network of retail partners has been
positive post-acquisition, and sell-out data is encouraging. We continue to
see the Roberto Coin brand perform well within our own network of showrooms,
particularly following the installation of elevated displays.
I am also delighted to welcome our new colleagues from Hodinkee, which we
acquired on 3 October 2024. Hodinkee has become the go-to, global
destination for luxury watch enthusiasts offering digital print and video
content, limited edition watch collaborations alongside watch and jewellery
insurance services. We have successfully integrated Hondinkee's commercial
activities; their growing, engaged online traffic is being directed to the
Watches of Switzerland US ecommerce site. We are excited to see Ben Clymer,
Hodinkee's founder, returning to lead the operations of Hodinkee for the first
time since he ceded his role as CEO in December 2020. Hodinkee will continue
to have editorial independence as a leading editorial media organisation. This
will protect Hodinkee's impartial journalism, ensuring the continued creation
of unmatched editorial content presented through Hodinkee's unique voice and
lens.
From a macropolitical standpoint, the uncertainty around the UK Budget and US
election is now behind us, and we believe this will be positive for consumer
sentiment. In the UK, we are disappointed that VAT free shopping for
tourists has not yet been reinstated. The growing evidence suggests that UK
business is significantly negatively impacted by this, with tourist shopping
moving to other major European cities.
Finally, I would like to thank our teams who continue to inspire and deliver.
Their hard work and commitment continue to enable the Group to be successful.
Financial Review
The Group's Consolidated Income Statement is shown below which is presented
including IFRS 16 'Leases' and includes exceptional items.
Income Statement - post-IFRS 16 and exceptional items (£million) 26 weeks to 26 weeks to YoY variance
27 October 2024 29 October 2023
Revenue 784.8 761.4 3.1%
Operating profit 60.2 78.0 (22.9)%
Net finance cost (19.7) (11.5) (70.3)%
Profit before taxation 40.5 66.5 (39.1)%
Taxation (11.6) (19.5) 40.7%
Profit for the financial period 28.9 47.0 (38.5)%
Basic earnings per share 12.2p 19.8p (38.4)%
Management monitor and assess the business performance on a pre-IFRS 16 and
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 is shown in the Glossary.
Income Statement - pre-IFRS 16 and exceptional items (£million) 26 weeks to 26 weeks to YoY variance
27 October 2024 29 October 2023
Revenue 784.8 761.4 3.1%
Net margin(1) 284.3 280.1 1.5%
Showroom costs (141.6) (137.2) (3.2%)
4-Wall EBITDA(1) 142.7 142.9 (0.1%)
Overheads (50.6) (43.4) (16.7%)
EBITDA(1) 92.1 99.5 (7.4%)
Showroom opening and closing costs (4.8) (5.5) 13.3%
Adjusted EBITDA(1) 87.3 94.0 (7.1%)
Depreciation, amortisation and loss on disposal of fixed assets (21.1) (20.6) (2.7%)
Segment profit (Adjusted EBIT(1)) 66.2 73.4 (9.8%)
Net finance costs (7.3) (1.5) (374.7%)
Adjusted profit before taxation(1) 58.9 71.9 (18.1%)
Adjusted earnings per share(1) 18.1p 21.5p (15.8%)
Revenue
Revenue by geography and category
26 weeks to 27 October 2024 UK and Europe US Total Mix
(£million)
Luxury watches 367.3 281.6 648.9 83%
Luxury jewellery 29.4 16.2 45.6 6%
Luxury jewellery wholesale - 51.8 51.8 6%
Eliminations - (2.0) (2.0) -
Services/other 33.2 7.3 40.5 5%
Total revenue 429.9 354.9 784.8 100%
26 weeks to 29 October 2023 UK and Europe US Total Mix
(£million)
Luxury watches 369.0 301.1 670.1 88%
Luxury jewellery 28.3 18.7 47.0 6%
Services/other 36.3 8.0 44.3 6%
Total revenue 433.6 327.8 761.4 100%
Group revenue of £785m increased by +4% at constant currency, +3% at reported
rates from prior year, with sequential improvement from Q1 FY25 (-2%) to Q2
FY25 (+11%) in constant currency.
Group revenue from luxury watches declined by -2% in constant currency, -3%
reported on the prior year. As anticipated, revenue was impacted by one-off
increases in showroom stock levels to enhance displays and client experience
in Q1 FY25, particularly in the US.
Luxury watch revenue made up 83% of Group revenue versus 88% in H1 last year,
with the acquisition of Roberto Coin Inc. in the period contributing to a
higher luxury jewellery mix.
Group luxury jewellery revenue more than doubled versus the prior year, with
the acquisition of Roberto Coin contributing £51 million of revenue in the
period. Group luxury jewellery excluding Roberto Coin declined by -5% in
constant currency, -6% reported on the prior year, with positive trends in the
UK market (+4%). In the prior year, there was significant clearance of luxury
jewellery stock at lower margins in the US. In the current year we maintained
strong margins in our US luxury jewellery category.
The majority of luxury jewellery sold by the Group is retailed under our house
brands of Goldsmiths, Mappin & Webb, Mayors and Betteridge. Our strategy
is to grow our luxury branded jewellery offering, where we partner with other
major luxury jewellery brands. Luxury branded jewellery revenue continues to
significantly outperform non-branded jewellery, with double digit growth
within our retail and online estate.
On 8 May 2024, the Group signed and completed the acquisition of the entire
share capital of Roberto Coin Inc., the exclusive distributor of Roberto Coin
in the US, Canada, Central America and the Caribbean. Revenue in the period
was £51 million, in line with expectations. The business continues to work
positively with retail partners post-acquisition and demand remains robust
ahead of the key holiday period.
Group ecommerce revenue declined by -10% compared to the prior period,
impacted by the mix of products sold through this channel, the US market was
in growth for the period. We continue to be the market leader in ecommerce for
luxury watches and jewellery in the UK and are growing our proposition in the
US. On 3 October 2024, the Group completed the acquisition of the editorial,
insurance and limited edition businesses of Hodinkee, the pre-eminent global
digital editorial content provider to support our Long Range Plan objectives
to leverage sector leadership online.
US revenue increased by +8% year-on-year (+11% on a constant currency basis)
to £355 million and the US business made up 45% of the Group's revenue in H1
FY25 (H1 FY24: 43%). Revenue and EBIT margin growth was driven by the Roberto
Coin acquisition. Underlying revenue (excluding Roberto Coin Inc.) was
impacted by one-off headwinds in the first half and saw sequential improvement
through the period.
UK and Europe revenue declined by -1% during the period but showed an
improving trend in Q2 FY25. Luxury watch revenue was -3% in Q1 but improved to
+2% in Q2. Luxury jewellery revenue returned to a positive trend in the second
quarter, with revenue +4% in H1 FY25.
Sales in the UK were driven by domestic clientele and tourist sales continue
to remain low, particularly due to the absence of VAT free shopping for
tourists in the UK.
During the period, we opened one multi-brand business in Edinburgh under the
Mappin & Webb brand and closed four non-core showrooms in the UK, giving a
net reduction of three. In the period, three projects were completed enhancing
our existing estate to further elevate the partner brands we display in those
showrooms and advance our client experience; our Watches of Switzerland Oxford
Street showroom was expanded and our Goldsmiths showrooms in Cheltenham and
Milton Keynes were relocated. Milton Keynes represents the first upgrade of
Ernest Jones showrooms acquired in the prior year.
Significant progress has been made on our exit from Europe. Two showrooms
closed in the period and four sold to brand partners. Agreements in place to
sell a further two boutiques to brand partners in H2 FY25. This will leave one
European mono-brand boutique in the Republic of Ireland.
Profitability
Profitability as a % of revenue
Income Statement - pre-IFRS 16 and exceptional items (£ million) 26 weeks to 26 weeks to YoY variance
27 October 2024 29 October 2023
Net margin(1) 36.2% 36.8% (60bps)
Showroom costs 18.0% 18.0% -
4-Wall EBITDA(1) 18.2% 18.8% (60bps)
EBITDA(1) 11.7% 13.1% (140bps)
Adjusted EBITDA(1) 11.1% 12.3% (120bps)
Adjusted EBIT(1) 8.4% 9.6% (120bps)
Net margin as a % of revenue was 36.2% in the period. The reduction in margin
reflects adverse product mix, partly offset by savings on Interest Free Credit
costs from lower participation and a reduction in average term time.
Showroom costs increased by £4.4 million (+3.2%) from the prior year, to
£141.6 million. The increase in costs reflects the annualisation of prior
year openings, including acquisitions, and the additional costs of leases for
relocated or expanded showrooms. This was partly offset by efficiencies found
within showroom payroll and digital marketing investment, which continues to
maximise traffic and conversion versus cost.
Overheads increased by £7.2 million (+16.7%) due to the acquisition of
Roberto Coin Inc. (£8.2m), partly offset by tight management of the cost
base.
Showroom opening and closing costs include the cost of rent (pre-IFRS 16),
rates and payroll prior to the opening or closing of showrooms, or during
closures when refurbishments are taking place. This cost will vary annually
depending on the scale of expansion in the period. Total costs for the period
were £4.8 million versus £5.5 million in H1 FY24, reflecting timing of
refurbishments and new showroom openings.
Exceptional administrative items
The Group presents as exceptional items, on the face of the Interim Condensed
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.
Exceptional items (£million) 26 weeks to 26 weeks to
27 October 2024 29 October 2023
Business acquisition costs 0.7 0.6
Rolex Old Bond Street 2.4 -
Impairment of property, plant and equipment (IFRS 16) 6.2 1.2
Impairment of right-of-use assets (IFRS 16) 7.2 1.9
Total 16.5 3.7
Business acquisition costs
Professional and legal expenses related to business combinations have been
expensed to the Interim Condensed 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.
Rolex Old Bond Street
A new 6,000 sq. ft (selling space) showroom is being built in partnership with
Rolex. This new flagship will be our largest Rolex showroom and reflects the
importance of the London market and the special relevance of London to the
history of Rolex. The cost shown here is the IFRS 16 depreciation and interest
costs whilst the showroom is being constructed. They are deemed to be
exceptional in nature given that this unique proposition results in a project
size and complexity significantly outside of a standard build, coupled with
documented project delays outside of the Group's control. The showroom is due
to open at the end of FY25.
Showroom impairment
The current macroeconomic environment, high interest rates and inflationary
landscape gave rise to indicators of impairment in the current period.
Consequently, discounted cashflows were performed on all Cash Generating Units
(CGUs) with indicators of impairment. This resulted in a non-cash impairment
charge of £13.4 million of which £7.2 million related to right-of-use
assets.
Finance costs
Net finance costs (£million) 26 weeks to 26 weeks to
27 October 2024 29 October 2023
Pre-IFRS 16 net finance costs, excluding exceptionals 7.3 1.5
IFRS 16 interest on lease liabilities 11.1 10.0
Total net finance costs, excluding exceptionals 18.4 11.5
Interest payable on borrowings increased, primarily as a result of additional
lending for acquisitions, the most significant being the Roberto Coin Inc.
acquisition in May 2024, and the Ernest Jones acquisition in November 2023.
The impact was an increase in the pre-IFRS 16 interest charge of £5.8 million
to £7.3 million.
The IFRS 16 interest on lease liabilities increased by £1.1 million due to
recent additions to the lease portfolio.
Details of a further £1.3 million of exceptionals finance costs are given in
note 4 of the Interim Condensed Consolidated Financial Statements.
Taxation
The pre-IFRS 16 effective tax rate for the period was 28.4% and 28.5% as
reported under IFRS 16. This is higher than the applicable UK corporation tax
rate for the year of 25.0% as a result of higher chargeable taxes on US
profits, and the impact of expenses disallowed for corporation tax.
Balance Sheet
Balance Sheet (£million)
27 October 2024 28 April 2024 29 October 2023
Goodwill and intangibles 301.3 215.7 202.8
Property, plant and equipment 203.5 191.4 185.5
Right-of-use assets 369.0 381.8 402.6
Inventories 477.1 393.3 399.7
Trade and other receivables 59.1 24.6 22.3
Trade and other payables (270.3) (216.5) (250.7)
Lease liabilities (454.3) (460.4) (459.6)
Net (debt)/cash (119.5) 0.7 16.1
Other (18.3) (7.6) (2.9)
Net assets 547.6 523.0 515.8
Goodwill and intangibles increased by £85.6 million in the period, driven by
£90.8 million of additions from acquisitions, offset by an unfavourable
exchange impact. £1.7 million of computer software additions were made in the
period as part of ongoing IT developments, which was offset by amortisation of
£1.1 million.
Property, plant and equipment increased by £12.1 million in the period.
Additions of £43.1 million (including £1.0 million from acquisitions), were
offset by depreciation of £19.5 million, impairments of £6.2 million,
disposals of £2.8 million, and an unfavourable exchange impact of £2.5
million. The disposals shown are the sale of four Swedish mono-brand boutiques
to brand partners.
Including software costs, which are disclosed as intangibles, capital
additions (including accruals) were £44.8 million in the period (H1 FY24:
£49.9 million) of which £43.2 million (H1 FY24: £48.3 million) was
expansionary. Expansionary capex relates to new showrooms, relocations or
major refurbishments (defined as costing over £250k). In the period, the
Group opened one new showroom, acquired four showrooms from Roberto Coin Inc.
and refurbished or relocated four showrooms. Investment in our portfolio is
paramount to our strategy and the Group follows a disciplined payback policy
when making capital investment decisions.
Right-of-use assets decreased by £12.8 million in the period, to £369.0
million. Additions to the lease portfolio along with lease renewals or other
lease changes were £28.2 million. This was offset by depreciation of £28.8
million, impairments of £7.2 million, and an unfavourable exchange impact of
£5.0 million.
Lease liabilities decreased by £6.1 million in the period. The portfolio
changes noted above increased the lease liability by £26.0 million. Interest
charged on the lease liability was £12.4 million along with a favourable
exchange impact of £5.9 million. Lease payments were £38.6 million, giving a
closing lease liability balance of £454.3 million.
Inventory levels increased by £77.4 million compared to H1 FY24. Inventory
acquired from Roberto Coin Inc. was £49.7 million, and from Ernest Jones
showrooms was £25.3 million. We are well stocked for the holiday season.
Trade and other receivables increased by £36.8 million compared to H1 FY24.
The HY25 balance includes £20.1 million in relation to Roberto Coin Inc.,
together with £10.3m of cash balances held in third party escrow accounts
linked to acquisition spend. The remaining increase is reflective of higher
prepayments and receivables, in part due to timing of payments at the half
year, in addition to increases as the business continues to grow.
Trade and other payables increased by £19.6 million compared to H1 FY24. The
HY25 balance includes £21.0 million in relation to Roberto Coin Inc., and
£10.3 million of acquisition balances held in third party escrow accounts as
noted above. This increase is offset by a lower supplier payable.
Other includes taxation balances, defined benefit pension and capitalised
finance costs.
Net debt and financing
Net debt on 27 October 2024 was £119.5 million, an increase of £120.2
million since 28 April 2024. The main driver was the total acquisition
consideration paid of £106.9 million in the period. Cash EBITDA of £89.0
million has been utilised through an investment in working capital of £41.6
million, capex spend of £45.2 million, tax payments of £11.6 million, and
loan interest payments of £5.6 million.
Net debt post-IFRS 16 was £572.3 million. The value comprises the pre-IFRS
net cash of £119.5 million and the £454.3 million lease liability, offset by
capitalised transaction costs of £1.5 million. The balance increased by
£114.3 million in the period, driven by the acquisition consideration as
noted above.
On 23 February 2024, the Group agreed a new $115.0 million term facility
agreement for use in relation to the Roberto Coin Inc. acquisition. This
facility was drawn down in May 2024 to allow cash settlement of the
acquisition consideration on 8 May 2024.
The Group's maximum amount available under its committed facility was £313.7
million at 27 October 2024.
Facilities held Expiring Amount
(million)
Multicurrency revolving loan facility - UK SONIA + 1.50% to +2.55% May 2028 £225.0
$115m term facility - US SOFR +1.50% to 3.25% February 2026 $115.0
The Group has commenced the process to replace the short term $115.0 million
term facility with longer term funding in FY25. Based on latest discussions
with lenders the directors have a reasonable expectation that the refinancing
will complete.
£230.0 million of these facilities were drawn down at 27 October 2024.
Liquidity headroom (defined as unrestricted cash plus undrawn available
facilities) was £177.3 million.
Cash Flow
Cash Flow (£million) 26 weeks to 26 weeks to
27 October 2024 29 October 2023
Adjusted EBITDA 87.3 94.0
Share-based payments 1.7 1.9
Working capital (41.6) (8.3)
Pension contributions (0.3) (0.3)
Tax (11.6) (23.2)
Cash generated from operating activities 35.5 64.1
Maintenance capex (1.6) (1.7)
Interest (5.6) (5.7)
Free cash flow 28.3 56.7
Free cash flow conversion 32.4% 60.3%
Expansionary capex (43.6) (47.8)
Acquisitions (106.9) -
Purchase of own shares - (7.2)
Repayment of term loan - (120.0)
Proceeds from multi-currency revolving loan facility 26.4 70.0
Proceeds from $115m term loan 91.6 -
Costs directly attributable to raising new loan facility (0.3) (2.2)
Disposal of property, plant and equipment 2.7 -
Exceptional items (2.7) (0.6)
Cash flow (4.5) (51.1)
Free cash flow reduced by £28.4 million to £28.3 million in the period to 27
October 2024, and free cash flow conversion was 32.4% compared to 60.3% in the
prior year.
Cash flow from trading (Adjusted EBITDA, decreased by £6.7 million), and an
increased working capital outflow of £33.3 million, was partly offset by
reduced tax payments on account of £11.6 million. The working capital
movement difference year-on-year is linked to the seasonality of our new US
wholesale business, which both increased inventory (£6.2 million) and trade
receivables (£10.4 million) as inventory is sold to showrooms to sell ahead
of the holiday season, along with the timing of payments across the rest of
the Group. We expect this working capital build to unwind in the second half
of the year, with free cash flow conversion c.70% for the full year.
Expansionary cash capex of £43.6 million was lower than the prior year which
saw a higher proportion of spend in the first half of the year.
Acquisition cash spend of £106.9 million was financed by a new $115.0 term
loan in addition to the Group's existing facilities.
Return on Capital Employed (ROCE)
26 weeks to 26 weeks to
27 October 2024 29 October 2023
ROCE 16.5% 23.9%
ROCE decreased by 740bps from 23.9% to 16.5% in comparison to last year. This
is as a result of LTM Adjusted EBIT decreasing by 15.9% and average capital
employed increasing by 21.7% in comparison to the prior period.
Capital allocation
The Group has a clear framework of capital allocation and is focused on
optimising capital deployment for the benefit of all our stakeholders, with a
focus on long-term sustainable growth in the business. It is also important
for the Group to maintain financial and operational flexibility to be able to
react tactically to opportunities, such as strategic acquisitions, at speed.
Our capital allocation framework is as follows:
1. Showroom investments - given the attractive returns from showroom
investments, this is our key focus area to allocate capital to
2. Strategic acquisitions - this is a key pillar of our growth
strategy, as outlined in our Long Range Plan to FY28. Acquisitions must
deliver return on investment in line with our disciplined financial criteria,
within an appropriate timeframe
3. Returns to shareholders - in the event of surplus capital/cash
flow above and beyond the requirements of the business for investment into
showrooms or strategic acquisitions, we would consider returns to shareholders
either through ordinary dividends or share buy backs, with the appropriate
mechanism to be decided at the appropriate time by the Board
Showroom portfolio
As at the 27 October 2024, the Group had 217 showrooms, the movement in
showroom numbers is included below:
UK multi-brand UK mono-brand Europe mono-brand boutiques Total UK and Europe US multi-brand US mono-brand Total US Total Group
showrooms boutiques showrooms boutiques
28 April 2024 99 59 9 167 25 31 56 223
Openings 1 - - 1 - - - 1
Acquisitions - - - - - 4 4 4
Closures (3) (1) (6) (10) - (1) (1) (11)
27 October 2024 97 58 3 158 25 34 59 217
(1) 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
(2) Refer to the Glossary for definition
Certain financial data within this announcement has been rounded
Growth rates are calculated on unrounded numbers
Risks and uncertainties
The Group is exposed to several 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 remainder of the financial year, and, after careful consideration
of the current macroeconomic environment, has determined that the risks
presented in the 2024 Annual Report and Accounts, described as follows, remain
unchanged: Business strategy execution and development; Key suppliers and
supply chain; Client experience and market risks; Colleague talent and
capability; Data protection and cyber security; Business interruption;
Regulatory and compliance; Economic and political; Brand and reputational
damage; Financial and treasury; and Climate change. These are detailed on
pages 134 to 139 of the 2024 Annual Report and Accounts, 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 26 week period ended
27 October 2024 29 October 2023
Note £m £m
Revenue 2,3 784.8 761.4
Cost of sales (687.5) (659.9)
Exceptional cost of sales 4 (1.1) -
Gross profit 96.2 101.5
Administrative expenses (21.9) (19.8)
Exceptional administrative expenses 4 (0.7) (0.6)
Exceptional impairment of non-current assets 4 (13.4) (3.1)
Operating profit 60.2 78.0
Finance costs 5 (19.7) (13.5)
Finance income 5 1.3 2.0
Exceptional finance costs 4,5 (1.3) -
Net finance costs (19.7) (11.5)
Profit before taxation 40.5 66.5
Taxation 6 (11.6) (19.5)
Profit for the financial period 28.9 47.0
Earnings per share
Basic 7 12.2p 19.8p
Diluted 7 12.2p 19.7p
The notes are an integral part of the Interim Condensed Consolidated
Financial Statements.
WATCHES OF SWITZERLAND GROUP PLC
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
26 week period ended 26 week period ended
27 October 2024 29 October 2023
Note £m £m
Profit for the financial period 28.9 47.0
Other comprehensive income:
Items that may be reclassified to profit or loss in subsequent periods
Foreign exchange (loss)/gain on translation of foreign operations (7.9) 6.7
Related tax movements 0.6 (0.6)
(7.3) 6.1
Items that will not be reclassified to profit or loss in subsequent periods
Actuarial gain/(loss) on defined benefit pension scheme 12 0.6 (1.0)
Related tax movements (0.1) 0.3
0.5 (0.7)
Other comprehensive (expense)/income for the period net of tax (6.8) 5.4
Total comprehensive profit for the period net of tax 22.1 52.4
The notes are an integral part of the Interim Condensed Consolidated Financial
Statements.
WATCHES OF SWITZERLAND GROUP PLC
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
27 October 2024 28 April 2024 29 October 2023
Note £m £m £m
Assets
Non-current assets
Goodwill 8 229.8 199.3 185.2
Intangible assets 8 71.5 16.4 17.6
Property, plant and equipment 9 203.5 191.4 185.5
Right-of-use assets 10 369.0 381.8 402.6
Deferred tax assets 4.4 0.4 3.2
Post-employment benefit asset 12 0.7 - -
Trade and other receivables 2.1 2.1 2.1
881.0 791.4 796.2
Current assets
Inventories 477.1 393.3 399.7
Current tax asset 5.3 4.5 4.2
Trade and other receivables 57.0 22.5 20.2
Cash and cash equivalents 11 110.5 115.7 86.1
649.9 536.0 510.2
Total assets 1,530.9 1,327.4 1,306.4
Liabilities
Current liabilities
Trade and other payables (269.4) (215.4) (249.6)
Current tax liability (2.2) - -
Lease liabilities 10 (58.0) (57.0) (51.5)
Provisions (2.2) (1.9) (1.3)
(331.8) (274.3) (302.4)
Non-current liabilities
Trade and other payables (0.9) (1.1) (1.1)
Deferred tax liabilities (16.9) (3.4) (3.5)
Lease liabilities 10 (396.3) (403.4) (408.1)
Borrowings 11 (228.5) (113.3) (68.0)
Post-employment benefit obligations 12 - (0.2) (0.6)
Provisions (8.9) (8.7) (6.9)
(651.5) (530.1) (488.2)
Total liabilities (983.3) (804.4) (790.6)
Net assets 547.6 523.0 515.8
Equity
Share capital 3.0 3.0 3.0
Share premium 147.1 147.1 147.1
Merger reserve (2.2) (2.2) (2.2)
Other reserves (21.2) (23.4) (23.4)
Retained earnings 423.8 394.1 382.4
Foreign exchange reserve (2.9) 4.4 8.9
Total equity 547.6 523.0 515.8
The notes are an integral part of the Interim Condensed Consolidated Financial
Statements.
WATCHES OF SWITZERLAND GROUP PLC
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Merger reserve Other reserves Retained earnings Foreign exchange reserve Total equity attributable to owners
£m £m £m £m £m £m £m
Balance at 1 May 2023 3.0 147.1 (2.2) (18.4) 337.0 2.8 469.3
Profit for the financial period - - - - 47.0 - 47.0
Other comprehensive income - - - - (1.0) 6.7 5.7
Tax relating to components of other comprehensive income - - - - 0.3 (0.6) (0.3)
Total comprehensive income - - - - 46.3 6.1 52.4
Transactions with owners
Purchase of own shares* - - - (7.2) - - (7.2)
Share-based payment charge - - - - 1.9 - 1.9
Share-based payments - - - 2.2 (2.2) - -
Tax on share-based payments - - - - (0.6) - (0.6)
Balance at 29 October 2023 3.0 147.1 (2.2) (23.4) 382.4 8.9 515.8
Balance at 29 April 2024 3.0 147.1 (2.2) (23.4) 394.1 4.4 523.0
Profit for the financial period - - - - 28.9 - 28.9
Other comprehensive income - - - - 0.6 (7.9) (7.3)
Tax relating to components of other comprehensive income - - - - (0.1) 0.6 0.5
Total comprehensive income - - - - 29.4 (7.3) 22.1
Transactions with owners
Share-based payment charge - - - - 1.7 - 1.7
Share-based payments - - - 2.2 (2.2) - -
Tax on share-based payments - - - - 0.8 - 0.8
Balance at 27 October 2024 3.0 147.1 (2.2) (21.2) 423.8 (2.9) 547.6
The notes are an integral part of the Interim Condensed Consolidated Financial
Statements.
*During the prior period, the Group purchased £7.2 million of own shares to
satisfy management incentives. The shares were purchased by an Employee
Benefit Trust which has been set up for this purpose. The Group adopts a
'look-through' approach, which in substance, accounts for the Trust as an
extension of the Parent. Own shares are recorded at cost and are deducted from
equity.
WATCHES OF SWITZERLAND GROUP PLC UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
26 week period ended 26 week period ended
27 October 2024 29 October 2023
Note £m £m
Cash flows from operating activities
Profit for the financial period 28.9 47.0
Adjustments for:
Depreciation of property, plant and equipment 9 19.5 18.3
Depreciation of right-of-use assets 10 27.7 26.6
Amortisation of intangible assets 8 1.5 1.8
Exceptional impairment of right-of-use assets 10 7.2 1.9
Exceptional impairment of property, plant and equipment 9 6.2 1.2
Share-based payment charge 1.7 1.9
Finance income 5 (1.3) (2.0)
Finance costs 5 19.7 13.5
Gain on lease breaks and surrender (0.8) (0.5)
Lease modifications (0.2) -
Loss on disposal of property, plant and equipment 9 0.1 0.1
Taxation 11.6 19.5
Increase in inventories (41.2) (38.7)
Increase in debtors (16.0) (0.8)
Increase in creditors, provisions, and pensions 18.7 27.5
Cash generated from operations 83.3 117.3
Pension scheme contributions 12 (0.3) (0.3)
Tax paid (11.6) (23.2)
Total net cash generated from operating activities 71.4 93.8
Cash flows from investing activities
Purchase of property, plant and equipment 9 (42.1) (46.2)
Purchase of intangible assets 8 (1.7) (1.4)
Movement on capital expenditure accrual (1.4) -
Cash outflow from purchase of non-current assets (45.2) (47.6)
Disposal of property, plant and equipment 9 2.7 -
Acquisition of subsidiaries net of cash acquired 15 (106.9) -
Interest received 0.8 -
Total net cash outflow from investing activities (148.6) (47.6)
Cash flows from financing activities
Own shares purchased for share schemes - (7.2)
Repayment of term loan - (120.0)
Proceeds from $115.0m term loan 11 91.6 -
Proceeds from multicurrency revolving loan facility 11 26.4 70.0
Costs directly attributable to raising new loan facility 11 (0.3) (2.2)
Payment of capital element of leases 10 (26.2) (22.2)
Payment of interest element of leases 10 (12.4) (10.0)
Interest paid (6.4) (5.7)
Net cash inflow/(outflow) from financing activities 72.7 (97.3)
Net decrease in cash and cash equivalents (4.5) (51.1)
Cash and cash equivalents at the beginning of the period 115.7 136.4
Exchange (loss)/gain on cash and cash equivalents (0.7) 0.8
Cash and cash equivalents at the end of period 11 110.5 86.1
Comprised of:
Cash at bank and in hand 90.2 68.6
Cash in transit 20.3 17.5
Cash and cash equivalents at end of period 11 110.5 86.1
WATCHES OF SWITZERLAND GROUP PLC
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. General information and basis of preparation
Basis of preparation
The Group's Interim Condensed Consolidated Financial Statements for the 26
weeks to 27 October 2024 (prior year: 26 weeks to 29 October 2023) were
approved by the Board of Directors on 5 December 2024 and have been prepared
in accordance with UK adopted International Accounting Standard 34.
The results for the 26 weeks to 27 October 2024 have been reviewed by Ernst
& Young LLP and a copy of their review report is given 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 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 52 weeks to 28 April 2024 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.
The Interim Condensed Consolidated Financial Statements are presented in
Pounds Sterling (£), which is the Group's presentational currency, and are
shown in £millions to one decimal place.
Going concern
On 23 February 2024 of the prior year, the Group agreed a new $115.0 million
term facility agreement for use in relation to the Roberto Coin Inc.
acquisition. This facility was drawn down in the period to allow cash
settlement of the acquisition consideration on 8 May 2024. As a result, the
going concern assessment has been carried out taking into account both this
new facility and the existing £225.0 million multicurrency revolving loan
facility in place.
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. The facility covenants are on a pre-IFRS 16 basis and exclude
share-based payment costs. Net debt to EBITDA is defined as the ratio of total
net debt at the reporting date to the last 12 month 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. At 27 October 2024 the Group comfortably satisfied
the covenant tests with net debt to EBITDA being less than 3 and the FCCR
exceeding 1.6.
At the balance sheet date, the Group had a total of £313.7 million in
available committed facilities, of which £230.0 million was drawn down. Net
debt at this date was £119.5 million with liquidity headroom (defined as
unrestricted cash plus undrawn available facilities) of £177.3 million. The
UK bank facility of £225.0 million is due to expire in May 2028. The new
$115.0 million term facility is a 12-month facility with two six-month
extension options within the Group's control to bring the expiry date to
February 2026. Further detail with regards to covenant tests and liquidity
headroom can be found in borrowings note 11 within the Interim Condensed
Consolidated Financial Statements.
In assessing whether the going concern basis of accounting is appropriate, the
Directors have reviewed various trading scenarios for the period to 31
December 2025 from the date of this report. These included:
- The base case forecast which used the latest FY25 forecast
approved by the Board in December 2024 and six-months of the Long Range Plan.
These included the following key assumptions:
- The more challenging trading environment will continue in FY25
with improvement into FY26 in line with market sentiment
- Revenue forecast supported by expected luxury watch supply
- Increased cost base in line with macroeconomic environment and
environmental targets
- Inclusion of Roberto Coin Inc. results at historical levels
The forecast aligns to the Guidance given in this announcement. Under this
forecast, the Group has significant liquidity and complies with all covenant
tests to 31 December 2025. Our Guidance reflects current visibility of supply
from key brands and confirmed showroom refurbishments, openings and closures,
and excludes uncommitted capital projects and acquisitions which would only
occur if expected to be incremental to the business.
- Severe but plausible scenarios of:
- 20% reduction in revenue against the forecast due to reduced
consumer confidence and lower disposable income due to the cost-of-living
challenges. This scenario did not include cost mitigations which are given
below
- The realisation of material risks detailed within the Principal
Risks and Uncertainties on pages 134 to 139 (including potential data breaches
and non-compliance with laws and regulations), and environmental risks
highlighted on pages 114 to 116, of the Group's Annual Report and Accounts for
the 52 weeks to 28 April 2024
Under these scenarios liquidity would remain positive and the net debt to
EBITDA and the FCCR covenants would be complied with. Reverse stress-testing
of cashflows during the going concern period was performed. This determined
what level of reduced EBITDA and worst case cash flows would result in a
breach of the liquidity or covenant tests. The likelihood of this level of
reduced EBITDA is considered remote taking into account liquidity and covenant
headroom, as well as mitigating actions within management's control (as noted
below), and that this would represent a significant reduction in revenue and
margin from prior financial years.
- Should trading be worse than the outlined severe but plausible
scenarios, the Group has the following mitigating actions within management's
control:
- Reduction of marketing spend
- Reduction in the level of inventory holding and purchases
- Restructuring of the business with headcount and showroom operations savings
- Redundancies and pay freezes
- Reducing the level of planned capex
The directors also considered whether there were any events or conditions
occurring just outside the going concern period that should be considered in
their assessment, including whether the going concern period needed to be
extended. The scenarios modelled by the directors confirmed the ability, under
the base and severe but plausible downsides, for the Group to repay the new
$115.0 million term facility at the end of the going concern period. Whilst
not considered within the going concern assessment, the Group has commenced
the process to replace the short term $115.0 million term facility with longer
term funding in FY25. Based on latest discussions with lenders the directors
have a reasonable expectation that the refinancing will complete.
As a result of the above analysis, including potential severe but plausible
scenarios and the reverse stress test, 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 2025. For this reason, the
Board considers it appropriate for the Group to adopt the going concern basis
in preparing the Interim Condensed Consolidated Financial Statements.
Climate change
In preparing the Interim Condensed Consolidated Financial Statements,
management has considered the impact of climate change, particularly in the
context of the disclosures included in the 2024 Annual Report within the
Strategic Report. These considerations did not have a material impact on the
financial reporting judgements and estimates, consistent with the assessment
that climate change is not expected to have a significant impact on the
Group's going concern assessment to 31 December 2025.
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 52 weeks ended 28 April 2024. Following the
acquisition of Roberto Coin Inc. in the period a new accounting policy for
wholesale revenue has been introduced as shown below.
Sale of goods - wholesale
Sales of goods are recognised when a Group entity sells a product to a
customer and control of the goods is transferred to the customer. This is
either upon delivery to customers, or for consigned inventory, the date of
sell through by the customer, provided the sales price is fixed, title has
transferred, and collectability of the resulting receivable is reasonably
assured.
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 52 weeks ended 28 April 2024
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 Chief Operating Decision Makers
(CODMs) and how they are measured for the purposes of covenant testing. 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.
Adjusted EBITDA represents profit for the period before finance costs, finance
income, taxation, depreciation, amortisation, and exceptional items presented
in the Group's Interim Condensed Consolidated Income Statement (consisting of
exceptional administrative expenses, exceptional finance costs and exceptional
impairment) on a pre-IFRS 16 basis.
Wholesale revenue is reported separately to the CODM and the results are
aggregated into the US reporting segment. This is reflective of the management
structure in place. As such, following the acquisition of Roberto Coin Inc. in
the period, wholesale revenue has been reported separately. The total revenue
and profit before tax of Roberto Coin Inc. forms part of the US segment below
and has been disclosed in note 15 to these accounts.
26 week period ended 27 October 2024
UK and US Corporate Total
Europe
£m £m £m £m
Revenue 429.9 354.9 - 784.8
Net margin 153.6 130.7 - 284.3
Less:
Showroom costs (82.8) (58.8) - (141.6)
Overheads (21.0) (26.9) (2.7) (50.6)
Showroom opening and closing costs (1.7) (3.1) - (4.8)
Adjusted EBITDA 48.1 41.9 (2.7) 87.3
Depreciation, amortisation and loss on disposal of assets (13.4) (7.0) (0.7) (21.1)
Segment profit/(loss)* 34.7 34.9 (3.4) 66.2
IFRS 16 adjustments 9.2
Net finance costs (note 5) (18.4)
Exceptional cost of sales (note 4) (1.1)
Exceptional impairment of assets (note 4) (13.4)
Exceptional administrative costs (note 4) (0.7)
Exceptional finance costs (note 4) (1.3)
Profit before taxation for the financial period 40.5
* Segment profit/(loss) is defined as being Earnings Before Interest, Tax,
exceptional items and IFRS 16 adjustments (Adjusted EBIT).
26 week period ended 29 October 2023
UK and US Corporate Total
Europe
£m £m £m £m
Revenue 433.6 327.8 - 761.4
Net margin 157.8 122.3 - 280.1
Less:
Showroom costs (79.4) (57.8) - (137.2)
Overheads (23.3) (18.7) (1.4) (43.4)
Showroom opening and closing costs (4.0) (1.5) - (5.5)
Adjusted EBITDA 51.1 44.3 (1.4) 94.0
Depreciation, amortisation and loss on disposal of assets (13.0) (6.9) (0.7) (20.6)
Segment profit/(loss) 38.1 37.4 (2.1) 73.4
IFRS 16 adjustments 8.3
Net other finance costs (note 5) (11.5)
Exceptional impairment of assets (note 4) (3.1)
Exceptional administrative costs (note 4) (0.6)
Profit before taxation for the financial period 66.5
Entity-wide revenue disclosures
26 week period ended 26 week period ended
27 October 2024 29 October 2023
£m £m
UK and Europe
Luxury watches 367.3 369.0
Luxury jewellery 29.4 28.3
Services/other 33.2 36.3
Total 429.9 433.6
US
Luxury watches 281.6 301.1
Luxury jewellery 16.2 18.7
Luxury jewellery wholesale 51.8 -
Eliminations (2.0) -
Services/other 7.3 8.0
Total 354.9 327.8
Group
Luxury watches 648.9 670.1
Luxury jewellery 45.6 47.0
Luxury jewellery wholesale 51.8 -
Eliminations (2.0) -
Services/other 40.5 44.3
Total 784.8 761.4
'Services/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.
Entity-wide non-current assets disclosures
27 October 2024 29 October 2023
£m £m
UK and Europe
Goodwill 137.8 121.6
Intangible assets 5.4 5.3
Property, plant and equipment 111.3 109.6
Right-of-use assets 233.8 272.2
Total 488.3 508.7
US
Goodwill 92.0 63.6
Intangible assets 66.1 12.3
Property, plant and equipment 81.6 65.0
Right-of-use assets 129.7 124.4
Total 369.4 265.3
Corporate
Property, plant and equipment 10.6 10.9
Right-of-use assets 5.5 6.0
Total 16.1 16.9
Group
Goodwill 229.8 185.2
Intangible assets 71.5 17.6
Property, plant and equipment 203.5 185.5
Right-of-use assets 369.0 402.6
Total 873.8 790.9
3. Revenue
The Group's disaggregated revenue recognised under contracts with customers
relates to the following categories and operating segments.
26 week period ended 27 October 2024
Retail sale of goods Wholesale sale of goods Eliminations Rendering of services* Total
£m £m £m £m £m
UK and Europe 416.6 - - 13.3 429.9
US 298.9 51.8 (2.0) 6.2 354.9
Total 715.5 51.8 (2.0) 19.5 784.8
* The decrease in UK and Europe rendering of service revenue, was due to the
prior period including the gross amounts collected from the sale of insurance
policies. The disclosure for the 26 week period ended 27 October 2024 has been
updated to show only the commission earned. The change is not material and
therefore the prior year balances have not been restated.
26 week period ended 29 October 2023
Retail sale of goods Wholesale sale of goods Eliminations Rendering of services* Total
£m £m £m £m £m
UK and Europe 415.2 - - 18.4 433.6
US 321.4 - - 6.4 327.8
Total 736.6 - - 24.8 761.4
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 Interim Condensed
Consolidated Income Statement.
26 week period ended 26 week period ended
27 October 2024 29 October 2023
£m £m
Exceptional cost of sales
Rolex Old Bond Street (IFRS 16 depreciation)((i)) (1.1) -
Total exceptional cost of sales (1.1) -
Exceptional administrative costs
Showroom impairment((ii))
Impairment of property, plant and equipment (6.2) (1.2)
Impairment of right-of-use assets (7.2) (1.9)
Professional and legal expenses on actual and prospective business (0.7) (0.6)
acquisitions((iii))
Total exceptional administrative costs (14.1) (3.7)
Exceptional finance costs
Rolex Old Bond Street (IFRS 16 interest)((i)) (1.3) -
Total exceptional finance costs (1.3) -
Total exceptional items (16.5) (3.7)
(i) Rolex Old Bond Street
A new 7,200 sq. ft showroom is being built in partnership with Rolex. This new
flagship will be our largest Rolex showroom and reflects the importance of the
London market and the special relevance of London to the history of Rolex. The
cost shown here is the IFRS 16 depreciation and interest costs whilst the
showroom is being constructed. They are deemed to be exceptional in nature
given that this unique proposition results in a project size and complexity
significantly outside of a standard build, coupled with documented project
delays outside of the Group's control. The showroom is due to open at the end
of FY25.
(ii) Showroom impairment
The current macroeconomic environment, high interest rates and inflationary
landscape gave rise to indicators of impairment in the current period.
Consequently, discounted cashflows were performed on all Cash Generating Units
(CGUs) with indicators of impairment. This resulted in a non-cash impairment
charge of £13.4 million of which £7.2 million related to right-of-use assets
(ROU assets).
(iii) Professional and legal expenses on actual and prospective business
acquisitions
Professional and legal expenses related to business combinations have been
expensed to the Interim Condensed 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.
All of these items are considered exceptional as they are linked to unique
non-recurring events and do not form part of the underlying trading of the
Group.
Tax on the exceptional items noted above totalled £3.9m (26 week period to 29
October 2023: £1.0m).
5. Net finance costs
26 week period ended 26 week period ended
27 October 2024 29 October 2023
£m £m
Finance costs
Interest payable on long-term borrowings (7.6) (3.3)
Amortisation of capitalised transaction costs (0.5) (0.2)
Net foreign exchange expense on financing activities (0.5) -
Interest on lease liabilities (note 10) (11.1) (10.0)
(19.7) (13.5)
Finance income
Bank interest receivable 1.2 1.1
Net foreign exchange gain on financing activities - 0.4
Other interest receivable 0.1 0.5
1.3 2.0
Total net finance costs excluding exceptional items (18.4) (11.5)
Exceptional finance costs (note 4, 10) (1.3) -
Total net finance costs (19.7) (11.5)
Further detail of borrowing facilities in place is given in note 11 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 28.5% (26 week period to 29 October 2023: 29.2%). This is higher than the
applicable UK corporation tax rate for the year of 25.0%, as a result of
higher chargeable taxes on US profits, and the impact of expenses disallowed
for corporation tax.
OECD Pillar Two model rules
Pillar Two legislation has been enacted or substantively enacted in certain
jurisdictions in which the Group operates. The Group has performed an
assessment of the Group's potential exposure to Pillar Two income taxes based
on the most recent information available regarding the financial performance
of the constituent entities in the Group. Based on the assessment performed,
the Pillar Two effective tax rates in all jurisdictions in which the Group
operates are anticipated to be above 15%, or the results fall under a Pillar
Two Safe Harbour. The Group therefore does not have an exposure to Pillar Two
top up taxes.
7. Earnings per share (EPS)
26 week period ended 26 week period ended
27 October 2024 29 October 2023
Basic
EPS 12.2p 19.8p
EPS adjusted for exceptional items 17.6p 21.0p
EPS adjusted for exceptional items and pre-IFRS 16 18.1p 21.5p
Diluted
EPS 12.2p 19.7p
EPS adjusted for exceptional items 17.5p 20.9p
EPS adjusted for exceptional items and pre-IFRS 16 18.0p 21.4p
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 as increased by 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
27 October 2024 29 October 2023
£m £m
Profit after tax attributable to equity holders of the parent company 28.9 47.0
Add back:
Exceptional expenses, net of tax 12.6 2.7
Profit adjusted for exceptional items 41.5 49.7
Pre-exceptional IFRS 16 adjustments, net of tax 1.4 1.2
Profit adjusted for exceptional items and IFRS 16 42.9 50.9
The following table reflects the share data used in the basic and diluted EPS
calculations:
26 week period ended 26 week period ended
27 October 2024 29 October 2023
Weighted average number of shares: '000 '000
Weighted average number of ordinary shares in issue 236,588 237,056
Weighted average shares for basic EPS 236,588 237,056
Weighted average dilutive potential shares 1,320 1,358
Weighted average shares for diluted EPS 237,908 238,414
8. Goodwill and Intangible assets
Goodwill Brands Agency agreement Licenses with indefinite useful life Computer software Total
£m £m £m £m £m £m
Net book value
At 29 April 2024 199.3 10.0 1.0 - 5.4 215.7
Additions - - - - 1.7 1.7
Acquired on business combinations (note 15) 33.1 0.5 - 57.2 - 90.8
Amortisation - (0.3) (0.1) - (1.1) (1.5)
Foreign exchange differences (2.6) (0.3) (0.1) (2.0) (0.4) (5.4)
At 27 October 2024 229.8 9.9 0.8 55.2 5.6 301.3
9. Property, plant and equipment
Land and Fittings and equipment Total
buildings
£m £m £m
Net book value
At 29 April 2024 0.6 190.8 191.4
Additions - 42.1 42.1
Acquired on business combinations (note 15) - 1.0 1.0
Disposals - (2.8) (2.8)
Depreciation - (19.5) (19.5)
Exceptional impairment (note 4) - (6.2) (6.2)
Foreign exchange differences - (2.5) (2.5)
At 27 October 2024 0.6 202.9 203.5
Disposals of property, plant and equipment
In the period, the Group disposed of property, plant and equipment with a
total net carrying amount of £2.8 million for a cash consideration of £2.7
million.
10. Leases
Right-of-use assets
Properties Other Total
£m £m £m
At 29 April 2024 380.6 1.2 381.8
Additions 25.9 - 25.9
Acquired on business combinations (note 15) 1.9 - 1.9
Depreciation (27.4) (0.3) (27.7)
Exceptional depreciation (note 4) (1.1) - (1.1)
Lease breaks (0.8) - (0.8)
Lease surrender (2.2) - (2.2)
Exceptional impairment (note 4) (7.2) - (7.2)
Lease extensions 3.0 - 3.0
Lease modification 0.4 - 0.4
Foreign exchange differences (5.0) - (5.0)
At 27 October 2024 368.1 0.9 369.0
Lease liabilities
Properties Other Total
£m £m £m
At 29 April 2024 (459.3) (1.1) (460.4)
Additions (25.1) - (25.1)
Acquired on business combinations (note 15) (1.9) - (1.9)
Payments 38.3 0.3 38.6
Interest (11.1) - (11.1)
Exceptional interest (note 4) (1.3) - (1.3)
Lease breaks 1.0 - 1.0
Lease surrender 3.2 - 3.2
Lease extensions (2.8) - (2.8)
Lease modification (0.4) - (0.4)
Foreign exchange differences 5.9 - 5.9
At 27 October 2024 (453.5) (0.8) (454.3)
Impairment considerations
Property, plant and equipment and other non-current assets are reviewed for
impairment if events or changes in circumstances indicate that the carrying
amount of an asset or a cash-generating unit (CGU) is not recoverable. A CGU
is the smallest identifiable group of assets that generate independent cash
flows which are monitored by management and the CODMs. Refer to note 4 for
details of the impairment booked in the period.
During the period, the Group recognised an exceptional impairment charge of
£13.4 million, £6.2 million relating to property, plant and equipment and
£7.2 million relating to right-of-use assets. The Group reviewed the
profitability of its showroom network, taking into account the potential
future impact on customer demand and increased costs. At 27 October 2024,
following the impairment having been booked, all showroom asset values are
supported by their value-in-use recoverable amount.
The cash flows used within the impairment model are based on assumptions which
are sources of estimation uncertainty and movements in these assumptions could
lead to further impairments. Management has performed sensitivity analysis on
the key assumptions in the impairment model using reasonably possible changes
in these key assumptions across the showroom portfolio.
Revenue growth rates are in line with the Guidance as given in our H1 FY25
Results. Reducing the FY25 revenue guidance by 10.0% and modelling this lower
performance through the outer periods, would result in an increased impairment
charge of £6.2 million. A 2.0% increase in the discount rate would increase
the impairment charge by £1.6 million. In combination, a 10.0% revenue
reduction and a 2.0% increase in discount rate would increase the impairment
charge by £8.0 million. This analysis does not assume any improvement in
macroeconomic conditions or interest rates. Reasonably possible changes of the
other assumptions would have no further significant impact on the impairment
charge.
11. Borrowings
27 October 2024 28 April 2024 29 October 2023
£m £m £m
Non-current
Multicurrency revolving loan facility (141.3) (115.0) (70.0)
$115.0m term loan (88.7) - -
Associated capitalised transaction costs 1.5 1.7 2.0
Total borrowings (228.5) (113.3) (68.0)
On 23 February 2024 of the prior year, the Group agreed a new $115.0 million
term facility agreement for use in relation to the Roberto Coin Inc.
acquisition. This facility was drawn down in the period to allow cash
settlement of the acquisition consideration on 8 May 2024.
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. The facility covenants are on a pre-IFRS 16 basis and exclude
share-based payment costs. Net debt to EBITDA is defined as the ratio of total
net debt at the reporting date to the last 12 month 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. At 27 October 2024 the Group comfortably satisfied
the covenant tests with net debt to EBITDA being less than 3 and the FCCR
exceeding 1.6.
At the balance sheet date, the Group had a total of £313.7 million in
available committed facilities, of which £230.0 million was drawn down. Net
debt at this date was £119.5 million with liquidity headroom (defined as
unrestricted cash plus undrawn available facilities) of £177.3 million. The
UK bank facility of £225.0 million is due to expire in May 2028. The new
$115.0 million term facility is a 12-month facility with two six-month
extension options within the Group's control to bring the expiry date to
February 2026.
Analysis of net debt
28 April 2024 Cash flow Non-cash charges^ Foreign exchange 27 October 2024
£m £m £m £m £m
Cash and cash equivalents 115.7 (4.5) - (0.7) 110.5
$115.0m term loan - (91.6) - 2.9 (88.7)
Multicurrency revolving loan facility (115.0) (26.4) - 0.1 (141.3)
Net debt excluding capitalised transaction costs (Pre-IFRS 16) 0.7 (122.5) - 2.3 (119.5)
Capitalised transaction costs 1.7 0.3 (0.5) - 1.5
Net debt 2.4 (122.2) (0.5) 2.3 (118.0)
(Pre-IFRS 16)
Lease liability (460.4) 38.6 (38.4) 5.9 (454.3)
Total net debt (458.0) (83.6) (38.9) 8.2 (572.3)
^ Non-cash charges are principally lease liability interest charges, additions
and revisions.
Included in cash and cash equivalents is restricted cash of £16.9 million (29
October 2023: £16.5 million). Restricted cash is defined as cash controlled
by the Group but which is not freely useable by the Group in day-to-day
operations.
12. Post-employment benefit obligations
During the 26 weeks to 27 October 2024 (prior period: 26 weeks to 29 October
2023), the Group operated four (prior period: four) defined contribution
pension schemes and two defined benefit schemes (prior period: two).
The movement in the defined benefit asset/(liability) in the period is as
follows:
26 weeks to 27 October 2024 52 weeks to 28 April 2024 26 weeks to 29 October 2023
£m £m £m
Net pension (liability)/asset at the beginning of the period (0.2) 0.1 0.1
Administration costs - (0.1) -
Employer contributions 0.3 0.7 0.3
Actuarial gain/(loss) 0.6 (0.9) (1.0)
Net pension asset/(liability) at the end of the period 0.7 (0.2) (0.6)
During the period the Trustees and the Group implemented a new bond based
investment strategy.
The IAS 19 (accounting) valuation of the defined benefit obligation was
undertaken by an external qualified actuary at 27 October 2024 using the
projected unit credit method.
The scheme valuation moved from a deficit of £0.2 million at 28 April 2024 to
a surplus of £0.7 million at 27 October 2024. The movement results from
changes in the principal actuarial assumptions used in the valuation as
follows:
27 October 2024 28 April 2024 29 October 2023
Discount rate 5.15% 5.10% 5.55%
Rate of increase in salary n/a n/a n/a
Rate of future inflation - RPI 3.35% 3.45% 3.35%
Rate of future inflation - CPI 2.75% 2.85% 2.75%
Rate of increase in pensions in payment 3.10% 3.20% 3.30%
Proportion of employees opting for a cash commutation 100.0% 100.0% 100.0%
Virgin Media Limited v NTL Pension Trustees II Limited legal case
Following the High Court ruling in the case of Virgin Media Limited v NTL
Pension Trustees II Limited and others in June 2023, it was held that section
37 of the Pension Schemes Act 1993 operates to make void any amendment to the
rules of a contracted out pension scheme without written actuarial
confirmation under Regulation 42(2) of the Occupational Pension Schemes
(Contracting Out) Regulations 1996, insofar that the amendment relates to
members' section 9(2B) rights. On 25 July 2024, the court dismissed an appeal
and confirmed section 9(2B) rights included both past service rights and
future service rights.
The Trustees of the Scheme have confirmed that:
- The Scheme was contracted out of the additional state pension
between 1997 and 2016; and
- It was possible that amendments were made to the Pension Schemes
that may have impacted on the members' section 9(2B) rights.
The Trustees of the Scheme and the Directors work closely together and take
appropriate legal and professional advice when making amendments to the
Pension Schemes. However, at 27 October 2024, it is not currently possible to
determine whether any amendments to section 9(2B) rights were made to the
Pension Schemes that were not in accordance with section 37 of the Pension
Schemes Act 1993 requirements.
Further, it is not currently possible to reliably estimate any potential
impact to the defined benefit obligations of the Pension Schemes if these
amendments were not in accordance with section 37 of the Pension Schemes Act
1993 requirements. The Directors continue to assess the extent of procedures
required to confirm if there is any indication of historic non-compliance.
13. Related party transactions
Transactions with related undertakings
Transactions between the Company and its subsidiaries, which are related
parties, have been eliminated on consolidation.
14. Financial instruments
Categories
27 October 2024 28 April 2024 29 October 2023
£m £m £m
Financial assets - held at amortised cost
Trade and other receivables* 52.4 17.4 17.3
Cash and cash equivalents 110.5 115.7 86.1
Total financial assets 162.9 133.1 103.4
Financial liabilities - held at amortised cost
Interest-bearing loans and borrowings:
$115.0m term loan*** (88.7) - -
$115.0m term loan interest payable (1.5) - -
Multicurrency revolving loan facility*** (139.8) (113.3) (68.0)
Multicurrency revolving loan facility interest payable (1.4) (1.4) -
Trade and other payables** (235.3) (188.4) (225.0)
Net financial liabilities (pre-IFRS 16) (466.7) (303.1) (293.0)
Lease liability (IFRS 16) (note 10) (454.3) (460.4) (459.6)
Total financial liabilities (921.0) (763.5) (752.6)
* Excludes prepayments of £6.7 million (29 October 2023: £5.0 million, 28
April 2024: £7.2 million) that do not meet the definition of a financial
instrument.
** Excludes customer deposits of £11.5 million (29 October 2023: £5.9
million, 28 April 2024: £6.0 million) and deferred income of £20.6 million
(29 October 2023: £19.8 million, 28 April 2024: £20.7 million) that do not
meet the definition of a financial instrument.
*** Net of capitalised transaction costs
Contingent consideration
As part of the purchase agreement with the previous owners of Roberto Coin
Inc., dated 8 May 2024 (see note 15), $10.0 million of consideration is
contingent, based on future profitability of the acquired entity.
As at 27 October 2024, the key performance indicators of Roberto Coin Inc.
showed that it is probable that the target would be achieved.
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 Interim Condensed
Consolidated Balance Sheet. The fair value of trade and other receivables,
trade and other payables, cash and cash equivalents and loan 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.
15. Business combinations
Roberto Coin Inc.
On 8 May 2024, the Group signed and completed the acquisition of the entire
share capital of Roberto Coin Inc., an associate company of Roberto Coin
S.p.A. from Roberto Coin S.p.A., Peter Webster, Co-Founder and President of
Roberto Coin Inc., and Pilar Coin. The acquisition completed for a total cash
consideration of $130.0 million (£104.0 million), of which $10.0 million
(£7.9 million) is deferred for one year and contingent on the future
profitability of the acquired business, subject to working capital
adjustments. It is probable that the contingent consideration will be paid in
full.
Luxury branded jewellery is a core pillar of the Group's growth strategy and
the acquisition will significantly enhance our strategic positioning in the
luxury branded jewellery market on a per capital basis.
After Group eliminations, the business contributed revenue of £51.2 million
and profit before tax of £12.1 million from the 8 May 2024 acquisition date
to 27 October 2024.
The following table summarises the consideration paid for the acquisition net
of £4.0 million of cash acquired, and the provisional fair value of assets
acquired at the acquisition date:
£m
Total cash consideration net of cash acquired 104.0
Initial assessment of values on acquisition
£m
Inventories 49.7
Trade and other receivables 11.8
Intangibles - licenses with indefinite useful life 57.2
Intangibles - brand 0.5
Property, plant and equipment 1.0
Trade and other payables (24.0)
Provisions (0.4)
Right-of-use asset 1.9
Lease liabilities (1.9)
Deferred tax liability (13.9)
Total identifiable net assets 81.9
Goodwill 22.1
Total assets acquired 104.0
An amount of £8.2 million, from the initial consideration paid, is held with
a third-party on retention and is reported within debtors in these accounts.
This will be paid by the Group within 12 months of the acquisition
date.
The goodwill recognised is attributable to the profitability of the acquired
business and is expected to be deductible for tax purposes as amortised or
where not amortised, upon a future disposal.
Intangible assets have been recognised in relation to the license with an
indefinite useful life and the brand name CENTO was acquired. The license is
non amortising as the supply agreement with Roberto Coin S.p.A. extends into
perpetuity. The CENTO brand has been assigned a five year life.
The non-current asset balances as at 27 October 2024 have been included in
note 2 as part of the US operating segment.
The Group measured the acquired lease liabilities using the present value of
the remaining lease payments at the date of acquisition. The right-of-use
assets were measured at an amount equal to the lease liabilities.
Given the proximity of the acquisition to the beginning of FY25, the Group's
revenue and profit before tax had the acquisition been made on the first day
of the would not be materially different to the result reported and therefore
has not been disclosed separately.
Acquisition-related costs have been charged to exceptional items in the
Condensed Consolidated Income Statement for the 26-week period ended 27
October 2024, as disclosed in note 4 to these Condensed Consolidated Financial
Statements.
The values stated above are the initial assessment of the fair values of
assets and liabilities on acquisition. The finalisation of the fair values,
particularly of intangibles, requires judgement and will be disclosed in the
next annual report if significant. The assessment will be finalised within 12
months of the acquisition date.
Hodinkee, Inc.
On 3 October 2024, the Group signed and completed the acquisition of the trade
and assets of Hodinkee, Inc., a digital editorial content provider for luxury
watch enthusiasts. As part of the transaction the entire share capital of
Hodinkee Insurance Holdings Inc. was acquired to retain the licence to sell
insurance. The acquisition completed for a total cash consideration of $14.4
million (£10.9 million). The acquisition allows the Group to leverage
existing growth opportunities by growing sector leadership online, and also
further enhances the Group's ability to capture market share, particularly in
the fast growing US market.
The revenue and profit before tax from the 3 October 2024 acquisition date to
the 27 October 2024 would not have been material to the Group
result.
The following table summarises the consideration paid for the acquisition, and
the provisional fair value of assets acquired at the acquisition date:
£m
Total cash consideration net of cash acquired 10.9
Initial assessment of values on acquisition
£m
Inventories 0.2
Trade and other receivables 0.1
Trade and other payables (0.4)
Total identifiable net assets (0.1)
Goodwill 11.0
Total assets acquired 10.9
An amount of £0.8 million, from the initial consideration paid, is held with
a third-party on retention and is reported within debtors in these accounts.
This will be paid by the Group within 12 months of the acquisition
date.
The goodwill recognised is attributable to the profitability of the acquired
business and is expected to be deductible for tax purposes as amortised or
where not amortised, upon a future disposal.
If the business combination had taken place at the beginning of FY25, the
contribution to revenue and profit before tax is not material to the results
of the Group and therefore has not been disclosed
separately.
Acquisition-related costs have been charged to exceptional items in the
Condensed Consolidated Income Statement for the 26-week period ended 27
October 2024, as disclosed in note 4 to these Condensed Consolidated Financial
Statements.
Given the proximity of the acquisition to the half year end date, an
assessment to value any acquired intangible assets has not been performed,
with the value recorded only as goodwill. This assessment will be performed
after half year and recorded in the FY25 Annual Report and Accounts.
The values stated above are the initial assessment of the fair values of
assets and liabilities on acquisition. These will be finalised within 12
months of the acquisition date.
16. Contingent liabilities
From time to time, the Group may be subject to complaints and litigation from
its clients, 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.
These are not expected to result in a material liability to the Group.
17. Post-balance sheet events
No post balance sheet events have been identified.
WATCHES OF SWITZERLAND GROUP PLC
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 27 October 2024 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 27
October 2024 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 52 weeks
to 28 April 2024.
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
4 December 2024
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 27
October 2024 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 17. 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 27 October 2024 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) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. 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 are
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".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
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.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
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, including our Conclusions
Relating to Going Concern, are 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) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. 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
Birmingham
04 December 2024
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 showroom costs.
Why used
4-Wall EBITDA is a direct measure of profitability of the showroom operations.
Reconciliation to IFRS measures
£million H1 FY25 H1 FY24
Revenue 784.8 761.4
Cost of inventory expensed (507.1) (485.3)
Other inc. supplier incentives 6.6 4.0
Net margin 284.3 280.1
Showroom costs (141.6) (137.2)
4-Wall EBITDA 142.7 142.9
Showroom 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.
4-Wall EBITDA, EBITDA, Adjusted EBITDA and Adjusted EBIT Margin
For each of these areas as defined in this Glossary, the Group shows the
measures as a percentage of Group revenue.
Why used
Profitability as a percentage of Group revenue is shown to understand how
effectively the Group is managing its cost base.
Reconciliation to IFRS measures
£million H1 FY25 H1 FY24
Revenue 784.8 761.4
4-Wall EBITDA 142.7 142.9
4-Wall EBITDA margin 18.2% 18.8%
EBITDA (unadjusted) 92.1 99.5
EBITDA (unadjusted) margin 11.7% 13.1%
Adjusted EBITDA 87.3 94.0
Adjusted EBITDA margin 11.1% 12.3%
Adjusted EBIT 66.2 73.4
Adjusted EBIT margin 8.4% 9.6%
Adjusted Earnings Before Interest and Tax (Adjusted 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 Condensed Consolidated Financial Statements.
Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation
(Adjusted EBITDA)
EBITDA before exceptional items presented in the Group's Condensed
Consolidated Income Statement. Shown on a continuing basis and before the
impact of IFRS 16.
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 Condensed Consolidated Financial Statements.
Adjusted Earnings Per Share (Adjusted EPS)
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 Condensed Consolidated Financial Statements.
Adjusted profit before tax (Adjusted PBT)
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 FY25 H1 FY24
Segment profit (as reconciled in note 2 of the Condensed Consolidated 66.2 73.4
Financial Statements)
Net finance costs excluding exceptional items (note 5) (18.4) (11.5)
IFRS 16 lease interest (note 5) 11.1 10.0
Adjusted profit before tax 58.9 71.9
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 to IFRS measures
(£/US$ million)
H1 FY25 Group revenue (£) 784.8
H1 FY25 US revenue ($) 458.1
H1 FY25 revenue (£) @ HY25 exchange rate 354.9
H1 FY25 revenue (£) @ HY24 exchange rate 365.3
H1 FY25 Group revenue (£) at constant currency 795.2*
H1 FY25 exchange rate 1.291
H1 FY24 exchange rate 1.254
* Excluding Roberto Coin Inc. revenue from the retranslation (as the
acquisition took place on 8 May 2024), the H1 FY25 Group revenue (£) at
constant currency is £794 million
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
EBITDA before exceptional items presented in the Group's Condensed
Consolidated Income Statement. Shown on a continuing basis before the impact
of IFRS 16 and showroom opening and closing costs. These costs include rent
(pre-IFRS 16), rates, payroll and other costs associated with the opening or
closing of showrooms, or during closures when refurbishments are taking place.
Why used
Measure of profitability that excludes one-off exceptional and non-underlying
items, IFRS 16 adjustments and showroom opening and closing costs to allow for
comparability between years.
Reconciliation to IFRS measures
£million H1 FY25 H1 FY24
Adjusted EBITDA 87.3 94.0
Showroom opening and closing costs 4.8 5.5
EBITDA 92.1 99.5
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 Group's Condensed Consolidated Financial
Statements.
Free cash flow
Cash flow shown on a pre-IFRS 16 basis excluding expansionary capex,
acquisitions of subsidiaries, exceptional items, financing activities and the
purchase of own shares.
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 FY25 H1 FY24
Net (decrease)/increase in cash and cash equivalents (4.5) (51.1)
Net financing cash flow (72.7) 97.3
Interest paid (6.4) (5.7)
Lease payments (38.6) (32.2)
Acquisitions 106.9 -
Cash outflow related to exceptional costs 2.7 0.6
Expansionary capex 43.6 47.8
Disposal of property, plant and equipment (2.7) -
Free cash flow 28.3 56.7
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 £28.3 million divided by Adjusted EBITDA of £87.3 million
shown as a percentage.
Liquidity headroom
Liquidity headroom is unrestricted cash plus undrawn available facilities.
Why used
Liquidity headroom shows the amount of unrestricted funds available to the
Group.
Reconciliation to IFRS measures
£million H1 FY25 H1 FY24
Multicurrency revolving loan facility 225.0 225.0
$115.0m term loan 88.7 -
Total facility 313.7 225.0
Facility drawn (230.0) (70.0)
Unrestricted cash 93.6 69.9
Total headroom 177.3 224.9
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 11 of the Condensed Consolidated Financial Statements.
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 showroom 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. This
measure was linked to management incentives in the financial year.
Reconciliation to IFRS measures
LTM adjusted EBIT of £127.6 million divided by the average capital employed,
which is calculated as follows:
£million LTM to 27 October 2024 LTM to 29 October 2023
Pre-IFRS 16 total assets 1,167.7 920.6
Pre-IFRS 16 current liabilities (287.6) (257.7)
Capital employed 880.1 662.9
Average capital employed 771.5 634.2
Other definitions
Ecommerce
Ecommerce revenue is sales which are transacted online.
Expansionary capital expenditure/capex
Expansionary capital expenditure relates to new showrooms, offices,
relocations or refurbishments greater than £250,000.
Luxury watches
Watches that have a Recommended Retail Price greater than £1,000.
Luxury jewellery
Jewellery that has a Recommended Retail Price greater than £500.
Showroom maintenance capital expenditure/capex
Capital expenditure which is not considered expansionary.
IFRS 16 Adjustments
The following tables reconcile from pre-IFRS 16 balances to statutory
post-IFRS 16 balances.
H1 FY25 Consolidated Income Statement
£million Pre-IFRS 16 and exceptional items IFRS 16 adjustments Exceptional Statutory
items
Revenue 784.8 - - 784.8
Net margin 284.3 - - 284.3
Showroom costs (141.6) 32.9 - (108.7)
4-Wall EBITDA 142.7 32.9 - 175.6
Overheads (50.6) - (0.7) (51.3)
EBITDA 92.1 32.9 (0.7) 124.3
Showroom opening and closing costs (4.8) 3.4 - (1.4)
Adjusted EBITDA 87.3 36.3 (0.7) 122.9
Depreciation, amortisation, loss on disposal, impairment of fixed assets and (21.1) (27.1) (14.5) (62.7)
lease modifications
Adjusted EBIT (Segment/operating profit) 66.2 9.2 (15.2) 60.2
Net finance costs (7.3) (11.1) (1.3) (19.7)
Adjusted profit before tax 58.9 (1.9) (16.5) 40.5
Adjusted basic Earnings Per Share 18.1p 12.2p
H1 FY25 Balance Sheet
£million Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Goodwill and intangibles 301.3 - 301.3
Property, plant and equipment 202.1 1.4 203.5
IFRS 16 right-of-use assets - 369.0 369.0
Inventories 477.1 - 477.1
Trade and other receivables 70.9 (11.8) 59.1
Trade and other payables (320.2) 49.9 (270.3)
IFRS 16 lease liabilities - (454.3) (454.3)
Net debt (119.5) - (119.5)
Other (38.6) 20.3 (18.3)
Net assets 573.1 (25.5) 547.6
H1 FY24 Consolidated Income Statement
£million Pre-IFRS 16 and exceptional items IFRS 16 adjustments Exceptional Statutory
items
Revenue 761.4 - - 761.4
Net margin 280.1 - - 280.1
Showroom costs (137.2) 31.3 - (105.9)
4-Wall EBITDA 142.9 31.3 - 174.2
Overheads (43.4) - (0.6) (44.0)
EBITDA 99.5 31.3 (0.6) 130.2
Showroom opening and closing costs (5.5) 2.9 - (2.6)
Adjusted EBITDA 94.0 34.2 (0.6) 127.6
Depreciation, amortisation, loss on disposal, impairment of fixed assets and (20.6) (25.9) (3.1) (49.6)
lease modifications
Adjusted EBIT (Segment/operating profit) 73.4 8.3 (3.7) 78.0
Net finance costs (1.5) (10.0) - (11.5)
Adjusted profit before tax 71.9 (1.7) (3.7) 66.5
Adjusted basic Earnings Per Share 21.5p 19.8p
H1 FY24 Balance Sheet
£million Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Goodwill and intangibles 202.8 - 202.8
Property, plant and equipment 193.3 (7.8) 185.5
IFRS 16 right-of-use assets - 402.6 402.6
Inventories 399.7 - 399.7
Trade and other receivables 34.4 (12.1) 22.3
Trade and other payables (295.9) 45.2 (250.7)
IFRS 16 lease liabilities - (459.6) (459.6)
Net cash 16.1 - 16.1
Other (12.2) 9.3 (2.9)
Net assets 538.2 (22.4) 515.8
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