TIDMWOSG
RNS Number : 5386E
Watches of Switzerland Group PLC
08 July 2021
Watches of Switzerland Group PLC
FY21 Results
for the 53 weeks to 2 May 2021
Strong FY21 performance delivers record Group revenue and
profitability
Well positioned to accelerate strategic delivery plans in
FY22
Watches of Switzerland Group PLC ("the Group") today reports its
financial results for the 53 weeks ending 2 May 2021 (FY21).
Brian Duffy, Chief Executive Officer, said:
"I am delighted to report a year of strong growth. Our
performance is testament to the resilience and hard work of our
colleagues, good support from our brand partners and our proven
model, including our leading online platform and bold, impactful
marketing approach. The luxury watch market remains predominantly
supply-driven with demand exceeding product availability for key
brands and models.
In spite of the headwinds faced during the year, our teams
delivered fantastic results. We generated outstanding growth and
strong momentum in the US and are well positioned for future
growth. In the UK, where our stores were closed for approximately
half the year, we further enhanced our market-leading position.
We were pleased to maintain employment and full salaries during
the entire year and our performance has allowed us to repay
furlough money received in the year.
I am delighted that we are launching The Watches of Switzerland
Group Foundation, which will provide essential support in the
communities where we live and work in the UK and in the US with an
initial committed contribution of GBP1.5 million and plans to build
this during FY22 and beyond.
Trading has remained strong in both the UK and the US since the
year-end. Our customer has accumulated disposable wealth and our
category is an attractive option. Our growth projections reflect
our best estimate of future supply based on our past experience of
investment and expansion.
The momentum we bring into FY22 underpins our confidence for the
financial year ahead. Sustained capital investment will continue to
support our growth plans in the UK. Our success in the US proves
our model works in this market and we will continue to invest in
our stores and new projects, whilst pursuing selective acquisitions
at attractive returns in our ambition to become the clear leader in
the market.
We are confident in our plans to build on our long term track
record of sustained growth to capitalise on the significant growth
opportunities available."
FY21 Financial Highlights
-- FY21 Group revenue +13.3% in constant currency [1] (+11.7% in
reported terms) to GBP905.1 million (FY20: GBP810.5 million), and
+17.9% in constant currency relative to FY19 [2]
-- Adjusted EBITDA [3] increased +34.9% to GBP105.4 million (FY20: GBP78.1 million)
-- Adjusted EBIT3 +38.9% to GBP77.6 million (FY20: GBP55.9 million)
-- Statutory operating profit +69.5% to GBP81.9 million (FY20: GBP48.3 million)
-- Statutory profit before tax GBP63.7 million (FY20: GBP1.5 million)
-- Capital expenditure of GBP26.0 million (FY20: GBP23.4
million), with 18 new stores opened (FY20: five), four expanded
stores (FY20: six) and four refurbishments (FY20: nine)
-- Return on Capital Employed3 increased to 19.7% (FY20: 15.8%)
-- Net debt3 reduced to GBP43.9 million as at 2 May 2021 (26 April 2020: GBP129.7 million)
Operational Highlights
-- Strong performance driven by further development of the
multi-channel business model, adapting with speed and agility to
conditions created by COVID-19 disruption
-- Luxury watch sales1 +16.0% to represent 87.1% of Group revenue (FY20: 83.9%)
-- Outstanding and broad-based growth in the US with revenue
+38.5% vs FY20 and +64.8% vs FY19 (both in constant currency)
o Dynamic consumer trends for the category, driving high
conversion rates and offsetting lower store traffic
o Investments and initiatives exceeding expectations
o Strong sales uplifts from refurbishments in first four Mayors
stores
o Encouraging early results from the relaunch of luxury
jewellery in Mayors
-- Robust UK growth despite significant headwinds with revenue
+3.6% to GBP606.5 million (FY20: GBP585.5 million); +3.1% vs
FY19
o Strong sales to domestic customers offsetting lower tourist
and airport trade which accounted for 5.3% of Group revenue (FY20:
27.5%)
o Positive Average Selling Price (ASP)3 development due to brand
mix
o Sales supported by a more than doubling online, click and
collect during 46 weeks and strong trading in the 26 weeks during
which the stores were open
o Stores closed for approximately 26 weeks during the year
o Strong conversion rates offset significantly reduced store
traffic and airport and tourist spend
-- Group ecommerce sales +120.5% with strong UK sales and encouraging start in the US
-- The Group adapted to a changing retail environment through
enhanced CRM and clienteling and the introduction of new
initiatives including the Luxury Watch and Jewellery Virtual
boutique (UK) and the "By Personal Appointment" system, which
helped drive significantly improved conversion rates
-- Stores continue to be a focus of investment with the
completion of several important projects including:
o Opening of the new Watches of Switzerland flagship store in
Broadgate, London and expansion of the Watches of Switzerland
Knightsbridge store, including a new Rolex Room
o First Rolex mono-brand boutique in Scotland (Glasgow)
o Mono-brand network further developed with the opening of nine
boutiques in the UK and eight boutiques in the US to bring the
total across both markets to 39 at 2 May 2021
o Continued programme of store refurbishment and elevation
-- Acquisition of Analog Shift, US retailer of vintage and
pre-owned watches to further advance the Group's position in the US
market
-- Further development of the National Service Centre in
Manchester with an increase in capacity
-- Launch of The Watches of Switzerland Group Foundation ("the
Foundation") with the initial committed Company donation of GBP1.5
million and an additional GBP1.5 million planned in FY22
-- Furlough monies received in the UK in the year have now been
repaid and we have cancelled and repaid the borrowings under the
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
Outlook
Well positioned to accelerate strategic delivery in FY22
-- The Group is confident it is well placed to continue to
deliver on its strategic objectives and confirms the guidance
provided at the Q4 trading update on 20 May 2021
-- This assumes no further national lockdowns in the UK or the
US impacting the Group's sales or in Switzerland impacting the
Group's brand partners' production during the period
-- The Group expects domestic demand to remain buoyant in both
the UK and the US, it anticipates limited but improving airport
traffic and foreign tourism in the UK and improving domestic
tourism in the US
-- Trading has remained strong in both the UK and the US since the year-end
-- The Group confirms the following guidance on a pre-IFRS 16 and 52-week basis:
-- Revenue: GBP1.05 billion to GBP1.10 billion (implied +16% to
+21% vs last year)
-- EBITDA and Adjusted EBITDA margin %: flat to +0.5% vs last
year
-- Depreciation, amortisation, impairment and profit/loss on
disposal of fixed assets: GBP30.0 million to GBP32.0 million
-- Total finance costs: GBP4.0 million to GBP4.5 million
-- Underlying tax rate: 21.0% to 22.5%
-- Capex: GBP40.0 million to GBP45.0 million
-- Net debt: GBP20.0 million to GBP30.0 million
-- USD/GBP rate of $1.40
-- Additional GBP1.5 million planned contribution to the
Foundation
-- Since the year-end, we have opened one Goldsmiths store and
two mono-brand boutiques in Edinburgh
-- In addition, the Group has an exciting programme of store
projects planned for the remainder of FY22:
-- Significant refurbishment/relocation programme in the US with
Aventura, Boca Raton and Mall of Millenia as well as the Rolex
boutique in the Wynn Resort, Las Vegas
-- New Watches of Switzerland multi-brand stores: Battersea
(London, UK), American Dream (New Jersey, US), Cincinnati (US)
-- Further mono-brand boutique activity in the UK and the US
-- Refurbishment of three stores acquired from Fraser Hart (two
have been completed since year-end)
-- Commencement of roll-out of Goldsmiths Luxury elevated store
formats
-- The Group will publish its Q1 FY22 trading update on 10 August 2021 before markets open
FY21 Results Conference call
A webcast conference call for analysts and investors will be
held at 9.00am (UK time) today to announce the FY21 results. To
join the call, please use the following details:
United Kingdom (Local): +44 (0)330 336 9125
Participant Access Code: 7785267
Webcast link:
https://webcasting.brrmedia.co.uk/broadcast/60d20fd38ed35a79f70a3ccd
Long Range Plan Conference call
A separate conference call for analysts and investors will be
held at 2.00pm (UK time) today to discuss the Group's long range
plan.
This will be followed by a live Q&A for analysts and
investors, which can also be accessed using the following
details:
United Kingdom (Local): +44 (0)330 336 9125
Participant Access Code: 3169793
Webcast link:
https://webcasting.brrmedia.co.uk/broadcast/60d30e6155a96337f0d9c113
Contacts
The Watches of Switzerland Group
Anders Romberg, CFO +44 (0) 116 2817 401
Allegra Perry, Investor Relations +44 (0) 20 7317 4600
investor.relations@thewosgroup.com
Headland
Lucy Legh / Rob Walker +44 (0) 20 3805 4822
wos@headlandconsultancy.com
About the Watches of Switzerland Group
The Watches of Switzerland Group is the UK's largest luxury
watch retailer, operating in both the UK and US, comprising four
prestigious brands; Watches of Switzerland (UK and US), Mappin
& Webb (UK), Goldsmiths (UK) and Mayors (US), with
complementary jewellery offering.
As at 2 May 2021, the Watches of Switzerland Group has 148 core
stores across the UK and US (which includes 39 dedicated mono-brand
stores in these two markets in partnership with Rolex, TAG Heuer,
OMEGA, Breitling, Audemars Piguet, Tudor and FOPE) and has a
leading presence in Heathrow Airport with representation in
Terminals 2, 3, 4 and 5 as well as five transactional websites.
The Watches of Switzerland Group is proud to be the UK's largest
retailer for Rolex, Cartier, OMEGA, TAG Heuer and Breitling
watches.
Mappin & Webb holds Royal warrants as goldsmiths,
silversmiths and jeweller to Her Majesty The Queen and silversmiths
to His Royal Highness The Prince of Wales. The Mappin & Webb
master jeweller has been Crown Jeweller, custodian of the Crown
Jewels of Her Majesty The Queen since 2012.
thewosgroupplc.com
Disclaimer
Cautionary note regarding forward-looking statements
This announcement has been prepared by Watches of Switzerland
Group PLC (the "Company"). It includes statements that are, or may
be deemed to be, "forward-looking statements". These
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "anticipates", "expects", "intends", "plans", "goal",
"target", "aim", "may", "will", "would", "could" or "should" or, in
each case, their negative or other variations or comparable
terminology. They appear in a number of places throughout this
announcement and the information incorporated by reference into
this announcement and may include statements regarding the
intentions, beliefs or current expectations of the Company
Directors or the Group concerning, amongst other things: (i) future
capital expenditures, expenses, revenues, earnings, synergies,
economic performance, indebtedness, financial condition, dividend
policy, 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 presentation.
Any forward-looking statements made by or on behalf of the
Company or the Group speak only as of the date they are made and
are based upon the knowledge and information available to the
Directors on the date of this announcement, and are subject to
risks relating to future events, other risks, uncertainties and
assumptions relating to the Company's operations and growth
strategy, and a number of factors that could cause actual results
and developments to differ materially from those expressed or
implied by the forward-looking statements. Undue reliance should
not be placed on any forward-looking statements.
Before making any investment decision in relation to the Company
you should specifically consider the factors identified in this
document, in addition to the risk factors that may affect the
Company or the Group's operations which are described in the Annual
Report and Accounts 2021 in Risk Management and Principal Risks and
Uncertainties.
Chief Executive Officer's Review
Today, the UK and the US continue to make great strides on the
COVID-19 vaccination programmes , as do many other countries. Our
stores are open and we are not experiencing any COVID-19 related
supply disruption. While the COVID-19 pandemic may continue to
impact on daily life , we look forward to a further relaxation of
restrictions and a return to more normal retail conditions. We are
optimistic and positive for FY22 and beyond.
I am delighted to welcome our new Chair, Ian Carter, who joined
the Group in November 2020, bringing with him a wealth of relevant
international luxury experience.
Looking back on FY21, our teams did an outstanding job in
challenging circumstances , delivering Group revenue of GBP905.1
million, +13.3% in constant currency, and + 34.9 % year on year
improvement in Adjusted EBITDA. We generated strong cash flow , a
record level of Return on Capital Employed of 19.7 % (FY20: 15.8%)
and closing net debt of GBP 43.9 million as at 2 May 2021 (26 April
2020: GBP129.7 million), with net debt to Adjusted EBITDA of 0. 42x
(FY20: 1. 66x ).
In the US, we added $ 110.5 million in sales, an increase of
+38.5% vs last year despite the loss of approximately four weeks
trading to lockdown in May 2020, and significant traffic reductions
in Las Vegas (- 54.6 %), New York (- 83.0 %) and at Mayors (- 34.1
%) in Florida and Georgia. In the UK, we generated equally
impressive revenue growth of +3.6%, adding GBP 21.0 million in
incremental sales despite enforced store closures for approximately
half of the year, as well as reduced tourist spend (- 80.7 %) and
airport business (- 74.7 %).
In both the UK and the US, our teams responded to the challenges
and opportunities with enthusiasm, creativity, and positivity. I am
pleased that we have maintained full employment and salaries during
the year despite lockdowns.
Our advanced technology supported the development of our CRM and
clienteling efforts and the introduction of a very effective
appointment system. We remained very active in marketing,
increasing our digital advertising spend in the UK and driving both
the awareness of our brands and direct traffic to our websites and
stores. In the US, our teams were able to continue with impactful
PR events and VIP client events.
We fully engaged in remote activities and social media ,
conducting many product launches with brand partners or media
partners, personal remote appointments with clients and of course,
all of our business meetings, investor engagements and colleague
communications. We set up the Luxury Watch and Jewellery Virtual
Boutique staffed with fully trained sales consultants to assist
those researching or shopping online. We introduced new brands to
our ecommerce websites including the addition of the Tudor brand.
During the year, our ecommerce business was up strongly +120.5%,
reflecting a more than doubling in the UK and a successful launch
in the US.
We continued with capital expenditure plans, investing in our
store network, IT and systems.
The summary of our sales performance in FY21 is very strong
momentum throughout the US and in the UK , where the combination of
online, strong sales productivity during the periods of stores
opening and click and collect during the second and third lockdowns
offseting the huge challenges of store closures and the loss of
international trade and airport business.
The luxury watch industry once again proved its resilience in
responding to the COVID-19 pandemic challenges with innovative
digital activity and a very impressive programme of new product
introduction. We continue to work more closely with our brand
partners and during the year successfully adopted a new virtual
format for new product introductions, primarily on Instagram, and
partnered on remote customer presentations.
The success of our business has allowed us to repay the UK
furlough support received in FY21 and to repay the UK Government
Coronavirus Large Business Interruption Loan Scheme borrowings.
My takeaways from FY21 are:
-- We operate in a great category which is underpinned by demand
outstripping supply, as evidenced during the past year
-- The Watches of Switzerland Group model works, consisting of
strong brand partnerships, multi-channel contemporary retail
formats, scale, advanced systems technology, impactful marketing
targeted at a broad demographic audience, and luxury client
services from well trained, expert and enthusiastic sales
colleagues
-- Our positive approach to the challenges of the past year was
key to our success. We remained confident and optimised the
opportunities to drive our business forward
-- COVID-19 has accelerated developments, particularly digital,
and retail has been permanently changed
-- We are fundamentally a people business and the power of the
team spirit and "can-do" attitude in our Group is immense. Our
colleagues deserve the credit for the successful results of
FY21.
Looking ahead, our FY22 guidance issued on 20 May 2021 projects
sales growth of between +16% and +21% and profitability flat to
+0.5% relative to last year. Our projections assume no further
lockdowns in the UK, the US and Switzerland, and no acquisitions or
uncommitted projects. We closed FY21 with borrowings of GBP43.9
million which we project will be GBP20.0 million to GBP30.0 million
by end of FY22. This assumes capex of GBP40.0 million to GBP45.0
million, including some carry forward projects from FY21 in the
US.
As our corporate governance framework evolves, I am delighted
that we have established an Environmental, Social and Governance (
ESG ) Committee, chaired by Rosa Monckton, who is also our
designated workforce Non-Executive Director and the ideal person to
chair this Committee.
Finally, I am very proud to announce the launch of The Watches
of Switzerland Group Foundation (the "Foundation") with an initial
contribution of GBP1.5 million committed in FY21 and a further
planned contribution of GBP1.5 million in FY22. The aim of the
Foundation will be to further enhance our charitable initiatives
and to provide essential support to local and national charities
focused on poverty, social mobility and hardship in both the UK and
the US. The Foundation will be managed by an independent Board of
Trustees that I will personally chair.
UK
Our business proved its resilience in the UK where our stores
were closed for approximately 26 weeks during FY21 and we faced
headwinds with significantly reduced footfall, minimal
international tourism and a lack of airport business. We adapted
with ease and agility, increasing our activity on digital
platforms, investing in our people and positively embracing new
ways of engaging with our customers and colleagues via remote
solutions.
Trading through our stores during opening periods was robust,
reflecting pent up demand as well as the resumption of click and
collect during the second and third lockdowns. We continued to
invest in the store network with two important projects in our
London multi-brand flagship stores; in December 2021, we opened the
new store in Broadgate and the refurbished and expanded
Knightsbridge flagship, including an enhanced Rolex Room. We also
opened the first Rolex mono-brand boutique in Scotland, in Glasgow,
in July 2020. In addition, we completed four further refurbishments
, two further expansions and opened eight mono-brand boutiques with
Breitling, OMEGA, TAG Heuer and Tudor.
During the year, our teams adapted to the new circumstances by
driving their own footfall through utilisation of CRM systems and
clienteling activities including the newly introduced "By Personal
Appointment" and the launch of the Luxury Virtual Boutique.
Revenue growth was driven by our strong online platform, where
ecommerce sales increased by +115.4% relative to the prior
year.
We further enhanced our digital marketing initiatives, with
continued successful performance marketing campaigns executed
across a combination of channels. During lockdowns, we looked to
drive brand awareness and maximise reach through impactful and
innovative digital media including a series of Instagram Lives in
conjunction with our luxury watch brand partners as well as
traditional print campaigns to keep our brands front of mind. We
remained highly active on our multi-media luxury watch
communication platform, Calibre. We also launched an exclusive
virtual events platform, through which we hosted over 1,300 VIP
customers, and supported our colleagues in store to enhance their
reach out to customers to drive footfall and engagement. Our teams
managed very strong sales during the periods when stores were open
and strong click and collect business during the second and third
lockdowns.
We continued to invest in our people with enhanced learning and
development initiatives including over 32,000 e-learning modules
and a new Rolex training programme completed.
We continue to develop our after-sales and servicing proposition
and further expanded our National Service Centre in Manchester.
As a result of our efforts, conversion rates were up relative to
last year, more than compensating for reduced footfall during the
year.
We have further built on our leadership standing in the UK and
are well positioned to continue to invest for further growth in
this market.
Craig Bolton, Executive Director UK:
"I am immensely proud of how our teams have responded to the
significant challenges and disruptions faced during the year,
embracing the need to adapt with enthusiasm and dedication as well
as engaging with our community and charitable initiatives. We have
further strengthened our position and are well-positioned for
continued success in the future."
US
Our business in the US benefitted from strong underlying
category dynamics, underpinned by an increase in discretionary
income and the attractive value-retention and investment qualities
of luxury watches. In addition, the market was open for most of the
financial year, enabling us to continue to actively pursue our
strategy with continued investment.
Despite facing significant COVID-19 pandemic-related challenges,
we further expanded and enhanced the store portfolio. We opened
eight mono-brand boutiques during the year across the Breitling,
OMEGA and TAG Heuer brands, bringing our total network to 30 stores
at year-end (FY20: 22 stores). We completed the first phase of a
major refurbishment of our Mayors Aventura store , as well as the
refurbishment of the Rolex mono-brand boutique in the Wynn Resort,
Las Vegas. The success of our Grand Seiko Nature of Time pop-up in
Spring Street in Soho has prompted us to open a permanent
mono-brand boutique in FY22.
Our marketing efforts were further enhanced during the year. We
extended our reach in this market through our multi-channel
performance marketing campaign, a wider digital activation,
increased PR activity and a combination of virtual and in-person
events. On the luxury jewellery side, we unveiled a new Mayors
campaign supported by our brand partners.
We relaunched our online presence in the US with encouraging
initial results.
We also continue to invest in our people and completed 13,250
hours of training over the year.
The acquisition of Analog Shift, a specialist US retailer of
vintage and pre-owned watches , in September 2020 further advanced
our strong and growing position in the US market.
Despite the US being open for most of the year, traffic to our
stores was subdued. Through these various initiatives, we were able
to generate a strong uplift in conversion rates and deliver an
outstanding increase in sales during the year.
We are generating strong results and believe there is a
significant growth opportunity in the US, where we are well
positioned to continue delivering on our ambition to become the
clear market leader.
David Hurley, Executive Vice President US:
"Our strategy is working well in the US, delivering outstanding
results and positioning us well to become market leader. We have
significant opportunities for growth, both organically and through
selective acquisitions, and will continue to invest in developing
the business in the years ahead."
Delivering on our Strategic Priorities Despite Headwinds
The Group continued to deliver on its six strategic priorities
during FY21 despite facing COVID-19 pandemic-related headwinds
throughout the year, further building on its leadership position in
the UK luxury watch market and continuing to expand its growing
presence in the US.
1. Grow Revenue, Profit and Return on Capital Employed
2. Enhance Strong Brand Partnerships
3. Deliver an Exceptional Customer Experience
4. Drive Customer Awareness and Brand Image Through Multi-Media
with Bold, Impactful Marketing
5. Leverage Best in Class Operations
6. Expand Multi-Channel Leadership
1. Grow Revenue, Profit and Return on Capital Employed
-- Increase sales productivity through excellent customer
service, impactful marketing including extensive use of CRM and
clienteling initiatives; improved product availability through
analytical merchandising; continual improvement of brand
representation
-- Elevate and expand store portfolio to provide luxurious,
inviting, welcoming, spacious and browsable store environments
-- Continue to develop the multi-channel network in response to
brand direction and changing consumer preference
-- Open new stores in new retail developments and underserved markets to expand our footprint
-- Make selective complementary acquisitions
-- Continue to research further growth potential in the luxury watch category
The Group delivered profitable growth and improved Return on
Capital Employed , driven by sustained, consistent investment
across the business despite facing pandemic-related challenges and
delays. In a year of significant disruption characterised by
prolonged periods of store closure, subdued store traffic and
reduced airport business and tourist spend, new ways of reaching
customers and doing business were adopted. Several new initiatives
were introduced to enable an even more personalised and
differentiated experience, some of which the Group anticipates will
remain permanent features of the business going forward,
strengthening the Group's multi-channel business model.
FY21 Achievements
In FY21 , the Group delivered another year of growth, with
revenue +13.3% (constant currency ) and Adjusted EBIT +38.9%
relative to last year, and a further expansion of Return on Capital
Employed to 19.7% (FY20: 15.8%) despite significant COVID-19
pandemic-related headwinds. To adapt to a highly changed retail
landscape, new initiatives were introduced to enable a more
personalised and relevant customer experience such as "By Personal
Appointment" and our Virtual Luxury Watch and Jewellery Boutique;
we enhanced our clienteling activity, supported by learning and
training programmes and we maintained COVID-19 secure operations
through our stores and work spaces.
Bricks and mortar stores are expected to continue to form the
main component of a successful multi-channel luxury watch business
and as such, the Group continued to invest in the store portfolio
with GBP23.1 million in expansionary capex(1) (FY20: GBP23.4
million) on the opening of new stores and the enhancement of
existing stores, despite facing pandemic-related challenges and
delays.
NETWORK EXPANSION
The network was further expanded with a net 13 stores opened
during the year, bringing the total in the UK and the US to 148
core(1) stores as at 2 May 2021 (26 April 2020: 135).
In the UK, the network reached 118 stores as at 2 May 2021 (
FY20 : 113). A new Watches of Switzerland flagship store was opened
in Broadgate, London during December 2020 featuring a dedicated
Rolex Room, a partnered OMEGA boutique as well as eight branded
areas from partners Audemars Piguet, Tudor, Cartier, IWC,
Jaeger-LeCoultre, Panerai, Hublot and Breitling.
In addition, the UK mono-brand boutique network was expanded by
nine new boutiques to bring the total to 26.
The US mono-brand boutique network has now been firmly
established following the opening of eight new boutiques, bringing
the total to 13.
STORE ELEVATION
The Group continues to elevate the store network. The flagship
Watches of Switzerland store in Knightsbridge, London was expanded
and refurbished, featuring a new dedicated Rolex Room. The Watches
of Switzerland store in Glasgow was converted to a Rolex mono-brand
boutique, the brand's first dedicated boutique in Scotland. A
number of regional stores were also refurbished during the
year.
Finally, the four Fraser Hart stores acquired in March 2020 were
rebranded to Watches of Switzerland and Mappin & Webb,
generating a strong uplift in sales in the first year of trading,
excluding the lockdown periods. The Group's store design has now
been introduced to three of these stores in FY22.
In the US, the four Mayors stores which have been elevated since
the Group's acquisition have generated a strong uplift in sales in
the first full year of trading (excluding periods of store closure
during lockdowns). The remaining stores are planned to be completed
by end FY24.
Looking ahead, the Group will roll out the new Goldsmiths Luxury
concept across the core regional portfolio in the UK from FY22.
STRONG PIPELINE OF STORE PROJECTS
We will further enhance and build our store network across both
our markets with major projects including:
-- New Watches of Switzerland multi-brand stores: Battersea
(London, UK), American Dream (New Jersey, US), Cincinnati
-- Further development of mono-brand boutique network
-- Continued elevation of the Mayors store estate in Florida: Aventura, Boca Raton
-- Roll out of Goldsmiths Luxury concept across our core regional portfolio in the UK
-- Refurbishment of the Rolex mono-brand boutique in the Wynn Resort, Las Vegas
We will continue to evaluate potential selective, strategic
acquisitions.
2. Enhance Strong Brand Partnerships
We are proud of our strong and long-standing relationships with
the most prestigious luxury watch brands, which have been developed
over many years. Luxury watches have grown further to represent 87
.1 % of our sales (FY20: 83.9 %) with the top eight luxury watch
brands rising to 81.9 % of our sales (FY20: 75 .3 %).
Collaboration with our key brand partners spans all areas of our
business and has been further enhanced throughout the COVID-19
pandemic. We work together to identify distribution opportunities,
and partner on demand forecasting, product launches, store
projects, online platform, clienteling initiatives and marketing
activities.
During the year we continued to collaborate on product launches,
with new virtual formats adopted and exclusives introduced with
brands such as Hublot and Breitling, whilst for IWC we partnered on
an online exclusive.
With our brand partners' support, we further elevated the
emphasis on learning and development and training to ensure we
deliver an exceptional customer experience to our customers. During
the year, we launched a wide range of product-related e-learning
modules to support new product launches on the new e-learning
platform.
We continue to develop the mono-brand boutique channel in the UK
and have established a significant presence in the US with a
growing network of 39 boutiques as at 2 May 2021 with further
stores planned.
As a key component of our multi-channel business model, our UK
ecommerce platform has been further enhanced with the addition of
new brands which had previously only been transacted in store:
Jaeger-LeCoultre, Panerai, Vacheron Constantin, Piaget, Grand
Seiko, Tudor. We have received good support from our brand partners
for the US ecommerce launch.
We continue to increase our collaboration with the brands on all
aspects of co-operative marketing, including digital
communications, events and advertising.
3. Deliver an Exceptional Customer Experience
Delivering an exceptional customer experience has taken on a new
meaning and has never been of greater importance as we adapt to a
changing retail landscape. During the year, we innovated and found
new ways to offer an increasingly elevated and personalised level
of service to our customers, whether our stores were open or
closed, which we believe is a key point of difference.
Our stores remain a cornerstone of our multi-channel offering
and are designed to appeal to a broad audience and make our
customers feel welcome through unintimidating, inviting, browsable,
modern and luxurious environments , whilst offering the greatest
choice of brands and products in the world of luxury watches and
jewellery.
Across all our channels, the experience we offer our customers
is underpinned by the deep product knowledge and expertise of our
colleagues , which is supported by our extensive learning and
development programme. During the year we introduced new training
initiatives, including the development and launch of a new Rolex
Academy.
Backed by our leading-edge IT and systems, we introduced a
number of initiatives to reach our customers with a more
personalised, seamless experience despite a significant period of
store closures during the year, particularly in the UK. The Group
believes many of these new introductions will remain permanent
features of the business model going forward.
-- CRM and clienteling: CRM and clienteling tools have become
increasingly important as a result of the COVID-19 pandemic. We
rolled out a number of relevant training programmes to support our
colleagues and maximise customer engagement.
-- "By Personal Appointment": Appointments can be pre-booked by
either customers or colleagues, in-store, by phone or with Zoom,
enabling an uninterrupted experience to be offered to our customers
throughout the year including during periods of store lockdown.
Since its launch in July 2020, a total of over 140,000 appointments
have been booked in the UK and the US.
-- Virtual Luxury Watch and Jewellery Boutiques: the Virtual
Luxury Watch Boutique was launched in October 2020 for which a team
was reassigned from our airport stores, ensuring exceptional
customer service and expertise. The Virtual Luxury Jewellery
Boutique was introduced in April 2021.
Mirroring the wider luxury watch industry, we also transitioned
our event format from physical to virtual during the year, with a
series of virtual clienteling events including exclusive product
launches.
We measure satisfaction through a variety of tracking methods in
the UK and the US including Net Promoter Score ( NPS ), Feefo,
Medallia and Podium. In the UK, our NPS score was maintained at 85%
whilst in the US, we use Podium to measure in-store experiences and
received a rating of 4.9 out of 5.0. We also undertake a mystery
shopping programme to ensure consistency of our luxury service
offering. Consisting of physical store visits and digital
enquiries, supplementary programmes are also conducted to measure
the joint expectations of key partner brands.
We continue to develop our after-sales and service proposition
as a way to further enhance the customer experience, through a
number of dedicated service centres, including the National Watch
Service Centre in Manchester, complemented by 13 watch workshops
located in stores in the UK and in the US, the HQ service centre in
Fort Lauderdale, Florida as well as five additional workshops
located in stores . The capacity in the primary centres in each of
the UK (Manchester) and the US (Fort Lauderdale) has recently been
expanded.
4. Drive Customer Awareness and Brand Image through Multi-Media with Bold, Impactful Marketing
During the year, whilst typical trading was significantly
impacted as a result of the COVID-19 pandemic, our marketing
communications have been at the heart of the business, with a
nimble approach focused on digital, content and social whilst
adapting to the changing consumer environment.
We continued with our successful performance marketing campaign
executed across a combination of channels such as Search &
Shopping, YouTube, Display and Paid Social Media, with our strategy
focused on reaching high intent luxury customers, underpinned by
bold, impactful creative and innovative bidding strategies.
Activity included a YouTube first watches campaign featuring key
luxury watch brand partners such as Breitling and TAG Heuer. The
campaign showcased a breadth of range across men's, women's, and
icons, reinforcing the Group as the leading destination for luxury
watches both in the UK and US. This activity was complemented by
seasonal jewellery content campaigns for Goldsmiths, Mappin &
Webb and Mayors. In total, activity generated 3.2 billion
impressions and 195 million views in the UK and 373 million
impressions and 83. 7 million views in the US.
To complement our performance marketing campaign, wider digital
activation focused on driving brand awareness and maximising reach
among key target audiences. During lockdown periods in the UK,
tactics included impactful and innovative social media, including
an engaging series of Instagram Lives hosted by Brian Duffy, CEO in
conjunction with our luxury watch brand partners to our UK
community of over 625,000, with an average monthly reach of 46
million. In the US, standalone social pages were launched
specifically for Watches of Switzerland with customised brand
content, leveraging brand co-op funding to deliver paid social
media campaigns to support key launches and events. The US social
communities continue to grow with a combined audience of over
35,000 and impressions of 2. 5 million per month.
As we recognised the need for more content through lockdown,
with our customers and potential customers being more active on
social media and the internet as a whole, we increased our output
on our digital Calibre channels. Our multi-media luxury watch
communication platform allows us to inspire purchase and increase
loyalty, through the sharing of innovative and exclusive watch
expertise across a yearly magazine, online editorial, monthly email
newsletter to a combined UK and US database of over 250,000
subscribers, and regular podcast episodes with over 94,000 total
downloads.
Another key element to our marketing strategy is our customer
event programme. When the COVID-19 pandemic began in early 2020 we
devised a virtual event programme, maintaining the level of quality
and prestige of our in-person events held in stores and other
venues.
In the UK, we launched an exclusive virtual events platform,
capable of hosting hundreds of customers. By adapting and embracing
this new approach, the virtual events world allowed us to be at the
forefront of the market and become reactive and agile to continual
changing circumstances and restrictions. Overall, in FY21 we hosted
a number of virtual and in-person events entertaining over 1,300
customers.
A similar approach was taken in the US, with Watches of
Switzerland and Mayors holding a number of virtual and physical
events during FY21 including three exclusive product releases and a
series of first to market experiential opportunities, hosting over
1,300 customers. In September 2020, our Watches of Switzerland
store in Soho, New York partnered with Haute Living and musician,
actor and producer Curtis "50 Cent" Jackson to host a private
dinner which combined media, influencer and collector attendees and
garnered 108 million in resulting social media impressions. The
Watches of Switzerland store in Hudson Yards, New York hosted three
days of customised, one on one client appointments to unveil the
new Patek Philippe novelties.
In addition, we supported our store colleagues in both the UK
and US in enhancing their own direct customers reach-out to drive
footfall and engagement through the production of over 40
clienteling guides covering topics such as new product launches,
key focus lines and brands.
Within our luxury jewellery category, Mayors unveiled a
breakthrough image campaign designed to resonate with modern women
and bring a 110-year-old business into the future. The campaign
kicked off a series of initiatives including a revamped ecommerce
site featuring "shop the look" and an updated visual merchandising
schematic in-store with a case line curated from on-model looks
showcased in the campaign. The campaign was featured in outlets
Elle, Harper's Bazaar, Town & Country and WWD. In the UK, we
have developed a new store concept for our Goldsmiths Brand which
we will be excited to launch in Autumn 2021 with a new 360
marketing campaign.
PR is a key part of our marketing strategy, particularly in the
US where the Watches of Switzerland Group is still relatively new
and in the process of being established. In FY21, PR activity
generated 5.1 billion media impressions including brand and
executive profiles in Esquire, New York Times, Town & Country,
Wall Street Journal and Yahoo.com. The PR activities included
strategic influencer alliances including Bethany Frankel, Kevin
O'Leary and Chef R ze Traore.
Our marketing continues to drive high brand awareness in the UK
and we have been successful in driving a surprisingly high level of
awareness in the US.
5. Leverage Best in Class Operations
IT SYSTEMS
Our leading-edge IT systems have continued to be a fundamental
competitive advantage for the Group, further increasing in
importance during the COVID-19 pandemic as we looked to implement
innovative solutions to reach and engage with our customers.
Our systems comprise a single and shared SAP instance for ERP,
ecommerce and business intelligence. This SAP core is supported by
a specialist point-of-sale and CRM front-end, served on mobile
tablets across all our stores. Our single IT template has been
deployed across the Group and can support further expansion as
required. Our retail payment partner Adyen equips us with a fully
featured, mobile and international payment platform across all
sales channels, and both stores and ecommerce benefit from a shared
inventory, shared digital assets, and click and collect
capabilities.
Our stable IT infrastructure allowed our colleagues to access
our platform 24 hours a day, seven days a week, throughout the
year. Our colleagues have found their transition to home and hybrid
working over the last year seamless, as many were already equipped
with mobile IT technology with secure VPN access. We have
successfully scaled our cloud-based telephony to support all remote
contact centres.
MERCHANDISING
Powered by leading-edge systems and analytics, our merchandising
function provides a unique point of difference in the way we run
our stores.
Through a customer-focused approach, our dynamic merchandising
capabilities optimise stock availability, enhance store
productivity and allow for nationwide coverage. SAP software
provides us with market analysis which in turn enables extensive
store profiling, productivity and trend analyses, seasonal changes
and sales and inventory forecasting.
Our merchandising approach is highly collaborative and we are
working increasingly closely with our brand partners to further
improve supply chain efficiencies through vendor managed inventory
programmes. These are being trialled in our mono-brand boutiques in
the US as well as for top selling Cartier products in the UK,
enabling us to further enhance availability in our stores.
RETAIL OPERATIONS
We run all our stores to be profitable which requires a high
level of accountability and performance management across our
retail network. In order to continually drive productivity and
profitability, we look to ensure there is a collective alignment,
ownership and understanding at all levels within retail with a
regular monitoring of operational KPIs.
We have invested in the best in class expertise in the important
area of security.
6. Expand Multi-Channel Leadership
We transitioned seamlessly between bricks and mortar stores
(including mono-brand boutiques and travel retail) and online as we
faced a changing retail landscape and a period of significant
disruption. Our multi-channel leadership enabled us to further
develop our business with the UK domestic clientele in light of
limited tourism and airport business due to the ongoing disruption
to travel retail and removal of duty-free shopping in the UK. In
the US we launched our ecommerce platform and expanded our recently
established mono-brand boutique network.
ONLINE
We continue to leverage our position as the authorised luxury
watch and jewellery partner, significantly building on the largest
portfolio of luxury watch brands in the UK. We have a significant
advantage in the volume of traffic generated via our technically
advanced Artificial Intelligence ( AI )- driven marketing
approach.
Due to the rapidly changing retail landscape, we continue to
focus on offering the widest array of shopping opportunities,
allowing our customers to reach out to local store expertise
remotely through video, voice or in-person utilising our by
personal appointment booking system, alongside our centralised
Luxury Watch and Jewellery Virtual Boutique, two initiatives
introduced during the financial year.
Our web-enabled store platform has been further improved and
provides our customers access to shop the full online catalogue
whilst in our stores.
Working collaboratively with key partners such as Google
(Digital Marketing), Vee24 (video and text concierge) and DPD
(direct delivery), we use the most efficient, cutting - edge
digital marketing while offering a best in class, harmonised
omni-channel shopping experience. We have dedicated inventory for
our luxury watches across all of our websites, which allows us to
offer a next day delivery service until 9pm seven days a week.
Our online business had an exceptional year, with revenue
+120.5% versus last year.
Following the ecommerce launch in the US, we accelerated our
digital marketing strategy with a significant investment into
performance marketing and believe this channel offers a significant
opportunity to complement our growing store network in this
market.
MONO-BRAND BOUTIQUES
We see a significant opportunity to further develop our
mono-brand boutique network and have a strong pipeline of projects.
The roll - out of the format, which enables brands to be presented
in a dedicated store environment, has contributed to further
strengthening our brand partnerships.
As at 2 May 2021, we operated a global network of 39 mono-brand
boutiques (FY20: 22). During the year, we opened nine mono-brand
boutiques in the UK, taking our network to 26 boutiques. In the US,
we expanded the mono-brand boutique channel with eight new
boutiques opened, taking the total to 13.
TRAVEL RETAIL
Travel retail provides the Group and brand partners with
visibility in prominent locations and exposure to a high net worth
international clientele. Whilst this channel is expected to take
longer to recover from a disproportionate COVID-19 impact, the
Group continues to believe travel retail represents a growth
opportunity over the medium term.
Financial Review
The Group's Statutory Income Statement is shown below which is
presented under IFRS 16 "Leases" and includes exceptional
items.
53 weeks ended
Statutory Income Statement (GBPmillion) 2 May 2021 52 weeks ended 26 April 2020 YoY variance
Revenue 905.1 810.5 11.7%
-------------- ---------------------------- ------------
Operating profit 81.9 48.3 69.5%
-------------- ---------------------------- ------------
Net finance costs (18.2) (46.8) 61.2%
-------------- ---------------------------- ------------
Profit before tax 63.7 1.5 4,182.2%
-------------- ---------------------------- ------------
Tax (13.1) (1.0) (1,231.2%)
-------------- ---------------------------- ------------
Profit after tax 50.6 0.5 9,886.4%
-------------- ---------------------------- ------------
Basic Earnings Per Share 21.1p 0.2p n/m
-------------- ---------------------------- ------------
Management monitors and assesses 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 53 weeks ended
(GBPmillion) 2 May 2021 52 weeks ended 26 April 2020 YoY variance
Revenue 905.1 810.5 11.7%
-------------- ---------------------------- ------------
Net margin 3 332.3 304.7 9.1%
-------------- ---------------------------- ------------
Store costs (166.6) (178.2) 6.5%
-------------- ---------------------------- ------------
4-Wall EBITDA(3) 165.7 126.5 31.0%
-------------- ---------------------------- ------------
Overheads (55.8) (44.6) (25.3%)
-------------- ---------------------------- ------------
EBITDA(3) 109.9 81.9 34.1%
-------------- ---------------------------- ------------
Store opening and closing costs (4.5) (3.8) (18.8%)
-------------- ---------------------------- ------------
Adjusted EBITDA 105.4 78.1 34.9%
-------------- ---------------------------- ------------
Depreciation, amortisation and loss on disposal of fixed
assets (27.8) (22.2) (24.7%)
-------------- ---------------------------- ------------
Segment profit (Adjusted EBIT) 77.6 55.9 38.9%
-------------- ---------------------------- ------------
Net finance costs (5.5) (6.5) (14.6%)
-------------- ---------------------------- ------------
Adjusted profit before tax(3) 72.1 49.4 46.0%
-------------- ---------------------------- ------------
Adjusted Earnings Per Share(3) 23.8p 16.6p 43.4%
-------------- ---------------------------- ------------
Revenue
Group revenue increased by +11.7% to GBP905.1m, +13.3% in
constant currency, despite the significant disruption faced during
the year. Relative to FY19 (pre-COVID-19), revenue increased
+17.0%, +17.9% in constant currency. FY21 was a 53-week year, with
the final week contributing GBP17.6m to Group revenue for the
year.
The table below shows the revenue by quarter for the US and UK
businesses and demonstrates the impact of COVID-19 lockdowns in the
UK and US. Our stores in the UK were closed for approximately 26
weeks during the year. In the UK, click and collect was not
permitted during the first lockdown but was subsequently resumed
during the second and third lockdowns.
Our very strong online performance throughout the year as well
as the click and collect programme and other initiatives
introduced, enabled us to offset the headwinds faced. These
headwinds included significantly reduced store traffic, store
closures and lack of international consumers as a result of
COVID-19. US stores were closed for only four weeks in Q1 FY21
(with the exception of Hudson Yards, New York which re-opened
during September 2021) and remained opened for the remainder of the
year. In both the UK and US, footfall to our stores was
significantly reduced during the year, offset by higher conversion
rates as a consequence of the actions we took in response to the
changed trading environment.
Revenue by quarter Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
(GBPmillion)
UK 108.3 185.9 186.1 126.2 606.5
--------- --------- --------- --------- -----
YoY variance* (29.3%) 15.4% 2.7% 40.2% 3.6%
--------- --------- --------- --------- -----
US 43.3 76.8 86.5 92.0 298.6
--------- --------- --------- --------- -----
YoY variance* (19.5%) 37.2% 17.5% 121.0% 32.7%
--------- --------- --------- --------- -----
Total 151.6 262.7 272.6 218.2 905.1
--------- --------- --------- --------- -----
YoY variance* (26.8%) 21.0% 7.0% 65.8% 11.7%
--------- --------- --------- --------- -----
*The quarterly FY20 revenue has been restated to correctly
reflect the timing of the reclassification adjustment disclosed in
our FY20 Annual Report and Accounts. Q4 FY21 includes 14 weeks of
trade.
Our strategy delivered very strong results in the US, where the
market was less impacted by COVID-19 related lockdowns and
disruption. US revenue increased by +32.7%, +38.5% on a constant
currency basis, and the US business made up 33.0% of the Group's
revenue in FY21 (FY20: 27.8%). In the US, Mayors stores in Florida
and Georgia began to re-open from early May 2020, followed by Las
Vegas in June 2020, Soho, New York in late June 2020 and finally
Hudson Yards, New York in early September 2020. Whilst stores were
closed for a shorter period of time than in the UK during FY21,
footfall in the US was down significantly relative to the prior
year, particularly in New York (-83.0%) and Las Vegas (-54.6%). We
are particularly pleased with the performance of our recently
refurbished stores in the Mayors network.
During the year, we opened eight mono-brand boutiques in the US
and in September 2020, we completed the acquisition of Analog
Shift, a US retailer of vintage and pre-owned luxury watches, to
continue to advance the Group's strong and growing position in the
US. We are pleased with the performance of Analog Shift since
acquisition. FY21 also saw the launch of the US online platform and
initial sales are encouraging. We have also observed positive
trends in in-store sales for brands also sold online, driven in
part by our successful online marketing.
The UK was impacted more significantly by COVID-19 lockdowns
which, resulted in a loss of footfall, reduced airport business and
lack of international travel. Despite this, UK revenue increased by
+3.6% during the year through a combination of continued demand,
good supply of product and strong clienteling activity by the
Group. The number of transactions in the UK was down, offset by
higher average selling prices. The Group also introduced a number
of successful new initiatives such as the Luxury Watch and
Jewellery Virtual Boutique and "By Personal Appointment" the
virtual booking system to enhance customer engagement. During the
various periods of COVID-19 lockdown, the Group leveraged its CRM
capability and clienteling activities to drive sales. We also
invested in digital marketing to drive sales of core product to our
online channel, with UK ecommerce sales up +115.4% on the previous
year. UK revenue was driven by strong domestic sales (+54.0% vs
FY20), offsetting the lower tourist and airport businesses. Tourist
and airport sales accounted for 5.3% of Group sales in FY21
compared to 27.5% in the previous year. Throughout the year,
Heathrow Terminals 3 and 4 remained closed. Regional stores
continued to outperform London stores where footfall was
significantly weaker.
During the year, in the UK, we opened ten stores and closed ten
stores. FY21 was the first full year of trade of the recently
acquired Fraser Hart stores in York, Stratford, Brent Cross and
Kingston. We are pleased with the performance of these stores,
which has exceeded our expectations.
Revenue by category
53 weeks ended 2 May UK US Total Mix
2021
(GBPmillion)
Luxury watches 512.1 276.3 788.4 87.1%
----- ----- ----- ------
Luxury jewellery 43.9 16.9 60.8 6.7%
----- ----- ----- ------
Other 50.5 5.4 55.9 6.2%
----- ----- ----- ------
Total revenue 606.5 298.6 905.1 100.0%
----- ----- ----- ------
52 weeks ended 26 April 2020 (GBPmillion) UK US Total Mix
Luxury watches 475.9 204.0 679.9 83.9%
----- ----- ----- ------
Luxury jewellery 54.1 15.0 69.1 8.5%
----- ----- ----- ------
Other 55.5 6.0 61.5 7.6%
----- ----- ----- ------
Total revenue 585.5 225.0 810.5 100.0%
----- ----- ----- ------
Luxury watches now make up 87.1% of Group revenue, up 320 bps on
the prior year. We have continued to observe strong demand for
luxury watch brands and intake of supply constrained product was
not significantly disrupted by COVID-19.
Luxury jewellery sales have been impacted more significantly by
the COVID-19 lockdowns as these purchases are more footfall and
impulse-driven than luxury watches. Despite this, the relaunched
luxury jewellery ranges generated a positive response from
customers, and the category performed well relative to the market.
Luxury jewellery sales in the US, where footfall has been less
impacted by store closures, increased by +13.2% relative to the
prior year.
Other revenue consists of servicing, repairs and insurance
services and the sale of fashion and classic watches and other
non-luxury jewellery.
Profitability
53 weeks ended
Profitability as a % of sales 2 May 2021 52 weeks ended 26 April 2020 YoY variance
Net margin 36.7% 37.6% (0.9)%
-------------- ---------------------------- ------------
Store costs 18.4% 22.0% 3.6%
-------------- ---------------------------- ------------
4-Wall EBITDA 18.3% 15.6% 2.7%
-------------- ---------------------------- ------------
EBITDA 12.1% 10.1% 2.0%
-------------- ---------------------------- ------------
Adjusted EBITDA 11.6% 9.6% 2.0%
-------------- ---------------------------- ------------
Net margin % decreased by 90 bps from 37.6% in the prior year to
36.7%, driven by product mix, as luxury watches and mix within this
segment outperformed luxury jewellery. The impact on product margin
mainly came from the UK while our US business growth was more
broad-based.
Store costs decreased by GBP11.6 million (-6.5%) from the prior
year, to GBP166.6 million. Store costs as a percentage of sales
decreased by 360 bps from 22.0% to 18.4%. Property related costs
reduced from FY20 by GBP23.3m as a result of the UK business rates
suspension (GBP11.4 million) and UK turnover rent savings of
GBP13.5 million mainly driven by reduced travel retail. These
savings were offset by additional store payroll costs of GBP5.4
million due to pay rises, commission and the impact of new stores
along with GBP8.7 million of additional digital marketing
investment, which successfully drove further traffic and conversion
both online and in stores.
Whilst the UK stores were closed due to COVID-19 restrictions,
the Group accessed the UK Government's furlough scheme. Throughout
this period, the Group continued to supplement employee pay to the
full contractual rates. The Group has fully committed to repay all
furlough received from the UK Government during the FY21 financial
year; this repayment has been provided for in the FY21 results and
was paid in June 2021.
The Group also recognised GBP4.1 million of income under the US
Government Paycheck Protection Program (PPP), which is a loan which
is convertible to a grant under certain circumstances. The US PPP
contributed to US payroll and rent costs during the period of the
pandemic disruption.
Overheads increased by GBP11.2 million (+25.3%) due to employee
incentives of GBP7.1 million, the committed Foundation donation of
GBP1.5 million and increased salary costs of GBP2.0 million.
Store opening and closure costs
Store opening and closure costs (GBPmillion) 53 weeks ended 52 weeks ended
2 May 2021 26 April 2020
Store opening costs 2.4 1.7
-------------- --------------
Store closure costs 2.1 2.1
-------------- --------------
Total 4.5 3.8
-------------- --------------
Store opening and closing costs include the cost of rent
(pre-IFRS 16), rates and payroll prior to the opening or closing of
the store, normally during the period of fit out. This cost will
vary annually depending on the scale of expansion in the year.
The following stores were opened and closed in the year:
Store openings and closures 53 weeks ended 52 weeks ended
2 May 2021 26 April 2020
Opened:
-------------- --------------
UK 10 7
-------------- --------------
US 8 2
-------------- --------------
Total 18 9
-------------- --------------
Closed:
-------------- --------------
UK 10 10
-------------- --------------
US - 1
-------------- --------------
Total 10 11
-------------- --------------
Exceptional administrative items
Exceptional items are defined by the Group as those which are
significant in magnitude and are linked to one-off, non-recurring
events. These items are detailed in the table below and are stated
under IFRS 16.
Exceptional items (GBPmillion) 53 weeks ended 52 weeks ended
2 May 2021 26 April 2020
Impairment of property, plant and equipment 3.2 3.8
-------------- --------------
Impairment of right-of-use assets 1.1 4.8
-------------- --------------
Expected credit losses - 0.7
-------------- --------------
Reversal of expected credit losses (0.2) -
-------------- --------------
IPO costs 4.9 8.0
-------------- --------------
Legal expenses on business acquisition 0.1 0.3
-------------- --------------
Total 9.1 17.6
-------------- --------------
The COVID-19 pandemic has significantly impacted the
profitability of certain stores within our network. The Group has
reviewed the profitability of its store network, taking into
account the future impact on consumer demand. The Group identified
GBP4.3 million of fixed asset and right-of-use asset impairment
linked to COVID-19.
The reversal of expected credit losses reflects the updated
review of prior year (FY20) COVID-19 related provisions. As these
impairments had been treated as exceptional items in FY20, their
reversal in FY21 was taken to exceptional items.
The IPO costs of GBP4.9 million in the current year relate to
IPO-linked share-based payments (FY20: GBP3.3 million); these costs
will continue to be expensed until the second anniversary of the
IPO. In the prior year, the Group also incurred a GBP2.1 million
discretionary IPO bonus to employees following the success of the
IPO and GBP2.6 million of legal and professional fees linked to the
IPO.
Adjusted EBIT and statutory operating profit
As a consequence of the items noted above, Adjusted EBIT was
GBP77.6 million, an increase of GBP21.7 million (+38.9%) on the
prior year.
After accounting for exceptional costs of GBP9.1 million and
IFRS 16 adjustments of GBP13.3 million, statutory operating profit
(EBIT) was GBP81.9 million, an increase of +69.5% on the prior
year.
Finance costs
Net finance costs (GBPmillion) 53 weeks ended 52 weeks ended
2 May 2021 26 April 2020
Interest payable on borrowings 3.9 6.7
-------------- --------------
Amortisation of capitalised transaction costs 1.1 0.8
-------------- --------------
Foreign exchange loss/(gain) 0.3 (0.6)
-------------- --------------
Other 0.4 0.3
-------------- --------------
Interest receivable (0.2) (0.7)
-------------- --------------
Pre-IFRS 16 and exceptional finance costs 5.5 6.5
-------------- --------------
IFRS 16 interest on lease liabilities 12.7 11.8
-------------- --------------
Pre-exceptional finance costs 18.2 18.3
-------------- --------------
Exceptional finance costs - 28.5
-------------- --------------
Total net finance costs 18.2 46.8
-------------- --------------
Interest payable on borrowings reduced by GBP2.8 million in the
period, largely due to the refinancing which took place in June
2019. The prior year cost included 37 days of interest on the
pre-IPO debt.
The IFRS 16 interest on lease liabilities has increased by
GBP0.9 million as a result of new leases in the period.
In the prior year, the Group incurred a one-off early redemption
fee of GBP21.7 million and wrote off GBP6.8 million of transaction
costs capitalised under the pre-IPO facility. These were treated as
exceptional finance costs.
Taxation
The effective tax rate for the year was 20.5%. This reflects a
growing US business which accounts for 33.0% of Group revenue and
where the corporate tax rate is higher than the UK, as well as
non-deductible expenses.
The pre-exceptional, pre-IFRS 16 effective tax rate was slightly
higher at 20.8%.
Earnings Per Share
Adjusted basic EPS from continuing operations increased by 7.2p
to 23.8p in the current year and has been calculated as
follows:
53 weeks ended 2 May 2021 Adjusted EPS Statutory EPS
Profit after tax GBP57.1m GBP50.6m
------------ -------------
Weighted average number of ordinary shares 239,455,554 239,455,554
------------ -------------
EPS 23.8p 21.1p
------------ -------------
52 weeks ended 26 April 2020 Adjusted EPS Statutory EPS
Profit after tax GBP38.8m GBP0.5m
------------ -------------
Weighted average number of ordinary shares 233,733,000 233,733,000
------------ -------------
EPS 16.6p 0.2p
------------ -------------
Balance sheet
Balance Sheet (GBPmillion) 2 May 2021 26 April 2020
Goodwill and intangibles 150.6 154.8
---------- -------------
Property, plant and equipment 93.7 101.4
---------- -------------
IFRS 16 right-of-use assets 253.7 251.6
---------- -------------
Inventories 226.4 243.4
---------- -------------
Trade and other receivables 10.4 10.9
---------- -------------
Trade and other payables (151.8) (139.1)
---------- -------------
IFRS 16 lease liabilities (301.4) (308.0)
---------- -------------
Net debt (43.9) (129.7)
---------- -------------
Other 12.6 14.2
---------- -------------
Net assets 250.3 199.5
---------- -------------
Property, plant and equipment decreased by GBP7.7 million in the
year. Additions of GBP24.1 million were offset by depreciation of
GBP24.0 million, COVID-19 related impairments of GBP3.2 million and
a foreign exchange impact of GBP3.9 million.
Including software costs, which are disclosed as intangibles,
total capital additions were GBP26.0 million (FY20: GBP23.4
million) of which GBP23.1 million (FY20: GBP20.7 million) was
expansionary. Expansionary capex relates to new stores, relocations
or major refurbishments (defined as costing over GBP250,000). In
the period, the Group opened 18 stores, expanded four and
refurbished four stores. Investment in our store portfolio is
paramount to our strategy and the Group follows a disciplined
payback policy when making capital investment decisions.
Lease right-of-use assets have increased since 26 April 2020 by
GBP2.1 million to GBP253.7 million. Additions to the lease
portfolio along with lease renewals or other lease changes have
increased the balance by GBP51.4 million. This has been offset by
depreciation of GBP37.9 million, COVID-19 related impairments of
GBP1.2 million and a foreign exchange impact of GBP9.9 million.
Lease liabilities have decreased by GBP6.6 million. The
portfolio changes noted above increased the lease liability by
GBP49.3 million. Interest charged on the lease liability also
increased the balance by GBP12.7 million offset by a foreign
exchange gain of GBP11.9 million. Lease payments have reduced the
balance by GBP56.7 million, giving a lease liability balance of
GBP301.4 million. This means that the net lease liability on 2 May
2021 was GBP47.7 million, compared to GBP56.4 million at the FY20
year end.
Inventory levels decreased by GBP17.0 million compared to the
prior year as FY20 included higher levels of stock due to the
timing of the first COVID-19 lockdown.
Trade and other receivables are broadly in line with the FY20
year end. On 16 September 2020, the Group completed a transaction
to remove the recourse obligation on GBP1.3 million of in-house
credit balances provided by a third party. As the Group has no
future liability for this, the balance is no longer recognised in
the Balance Sheet. A gain of GBP0.4 million was made on the
transaction, of which GBP0.2 million has been recognised in
exceptional items. On 13 November 2020, the Group sold the
remaining in-house credit debtors totaling GBP0.8 million (after
provisions for expected credit losses) to a third party. Following
the sale, the Group has no liability in relation to these debtors
and the transaction resulted in GBPnil gain or loss.
Compared to FY20, trade and other payables have increased by
GBP12.7 million. Included within trade creditors at the year end
was the UK furlough repayment of GBP6.8 million and Foundation
donation of GBP1.5 million which were fully committed to at the
year end. FY21 trade and other payables also includes employee
incentive accruals, whereas bonus targets were not met in FY20.
Other includes taxation balances and the defined benefit pension
obligation of GBP2.6 million (FY20 GBP2.7 million).
Net debt and financing
Net debt on 2 May 2021 was GBP43.9 million, a reduction of
GBP85.8 million since 26 April 2020, driven by GBP109.7 million of
free cash flow(3) offset by GBP21.2 million of expansionary capex.
During the period of lockdown, management focused on cost control
and cash preservation.
During the period, the Group entered into a new GBP45.0 million
facility agreement as part of the UK Government Coronavirus Large
Business Interruption Loan Scheme (CLBILS) which had a maturity of
November 2021. This facility was repaid and cancelled during the
year.
At 2 May 2021, the Group had a total of GBP197.5 million of
maximum available committed facilities.
Facility Expiring Amount
(million)
UK Term Loan - UK LIBOR +1.75% to +2.80% June 2024 GBP120.0
----------- ----------
UK Revolving Credit Facility - UK LIBOR +1.50% to +2.55% June 2024 GBP50.0
----------- ----------
US Asset Backed Facility - US LIBOR +1.25% to +1.75% April 2023 $60.0*
----------- ----------
*Maximum subject to asset borrowing base
At 2 May 2021, GBP120.0 million of these facilities were drawn
down. Liquidity headroom (defined as unrestricted cash plus undrawn
available facilities) was GBP143.5 million.
The debt facility is subject to a six-monthly financial covenant
test on leverage and fixed charge cover ratio. These tests are
based on pre-IFRS 16 measures. On 18 June 2020, the covenant tests
of the Group's facilities were replaced with a monthly minimum
liquidity headroom covenant of GBP20.0 million for the period of
June 2020 to September 2021. The Directors sought the replacement
of covenants to provide further flexibility to deal with any
unexpected circumstances during that period. This liquidity
covenant and the old replaced covenants were fully met throughout
the period from June 2020 to June 2021.
Cash flow
Cash flow (GBPmillion) 53 weeks ended 52 weeks ended
2 May 2021 26 April 2020
Adjusted EBITDA 105.4 78.1
-------------- --------------
Share-based payments 0.8 -
-------------- --------------
Working capital 13.9 (7.3)
-------------- --------------
Pension contributions (0.7) (0.7)
-------------- --------------
Tax (9.6) (7.5)
-------------- --------------
Government grants received 5.4 1.3
-------------- --------------
Cash generated from operating activities 115.2 63.9
-------------- --------------
Maintenance capex(1) (1.0) (1.5)
-------------- --------------
Interest (4.5) (11.6)
-------------- --------------
Free cash flow 109.7 50.8
-------------- --------------
Free cash flow conversion(3) 104.1% 65.6%
-------------- --------------
Expansionary capex (21.2) (27.2)
-------------- --------------
Acquisition (1.4) (31.1)
-------------- --------------
Exceptional items (0.2) (5.0)
-------------- --------------
Net proceeds from IPO - 147.8
-------------- --------------
Financing activities (82.1) (98.3)
-------------- --------------
Cash flow 4.8 37.0
-------------- --------------
Free cash flow increased by GBP58.9 million (115.9%) to GBP109.7
million in the period to 2 May 2021 and free cash flow conversion
was 104.1% compared to 65.6% in the prior year. In addition to the
strong trading (Adjusted EBITDA increased by GBP27.3 million), a
favourable working capital movement was achieved, GBP21.2 million
higher than the previous year. Working capital benefitted from the
stores reopening in the UK in April 2021 compared to closure in
FY20, with lower stock levels and higher creditors. Free cash flow
was used to repay all short term borrowings of GBP82.1 million.
In the prior year, GBP8.2 million of the interest payment
related to 4.5 months of accrued interest for the listed bond,
which was repaid on 4 June 2019 using the net proceeds from the
IPO.
Expansionary capex of GBP21.2 million (after taking into account
the associated creditors movement) was lower than the prior year
due to the timing of capital projects due to UK lockdown; these
projects have shifted into FY22 and are reflected in our
guidance.
Return on Capital Employed (ROCE)
53 weeks ended 52 weeks ended
2 May 2021 26 April 2020
ROCE 19.7% 15.8%
-------------- --------------
ROCE increased by 390 bps from 15.8% to 19.7% in the period
demonstrating improved capital efficiency. This is as a consequence
of Adjusted EBIT increasing by +38.9%, compared to the increase in
average capital employed of +11.0%.
Watches of Switzerland Group PLC
Preliminary results
For the 53 week period ended 2 May 2021
Registered number: 11838443
53 week period ended 2 May 2021 52 week period ended 26 April 2020
Watches of Switzerland Note Underlying Exceptional Total Underlying Exceptional Total
Group PLC Consolidated operations items* GBP'000 operations items* GBP'000
Income Statement GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----- ------------ ------------ ---------- ------------- ------------ ----------
Revenue 3 905,077 - 905,077 810,512 - 810,512
Cost of sales (784,304) - (784,304) (716,717) - (716,717)
(Impairment)/reversed
impairment of trade
receivables (221) 233 12 (3,452) (695) (4,147)
------------- ------------ ----------
Gross profit/(loss) 120,552 233 120,785 90,343 (695) 89,648
Administrative expenses (27,970) (5,076) (33,046) (20,520) (8,330) (28,850)
Impairment of assets (784) (4,245) (5,029) (863) (8,526) (9,389)
Loss on disposal of
non-current assets (856) - (856) (3,123) - (3,123)
------------------------- ----- ------------ ------------ ---------- ------------- ------------ ----------
Operating profit/(loss) 90,942 (9,088) 81,854 65,837 (17,551) 48,286
Finance costs (18,343) - (18,343) (19,589) (28,490) (48,079)
Finance income 166 - 166 1,280 - 1,280
------------------------- ----- ------------ ------------ ---------- ------------- ------------ ----------
Net finance cost (18,177) - (18,177) (18,309) (28,490) (46,799)
Profit/(loss) before
taxation 72,765 (9,088) 63,677 47,528 (46,041) 1,487
Taxation 5 (14,797) 1,751 (13,046) (9,327) 8,347 (980)
------------------------- ----- ------------ ------------ ---------- ------------- ------------ ----------
Profit/(loss) for
the financial period 57,968 (7,337) 50,631 38,201 (37,694) 507
------------------------- ----- ------------ ------------ ---------- ------------- ------------ ----------
Earnings Per Share 6
Basic 24.2p 21.1p 16.3p 0.2p
Diluted 24.2p 21.1p 16.3p 0.2p
------------------------- ----- ------------ ------------ ---------- ------------- ------------ ----------
*Exceptional items have been further described in note 4.
Watches of Switzerland Group PLC Consolidated Statement of 53 week period ended 52 week period ended
Comprehensive Income 2 May 2021 26 April 2020
GBP'000 GBP'000
---------------------------------------------------------------- --------------------- ---------------------
Profit for the financial period 50,631 507
Other comprehensive income/(expense):
Items that may be reclassified to profit or loss
Foreign exchange (loss)/gain on translation of foreign operations
excluding deferred tax (10,480) 3,644
Foreign exchange gain/(loss) on translation of foreign operations
- deferred tax 629 (372)
Related tax movements 1,606 127
------------------------------------------------------------------ --------------------- ---------------------
(8,245) 3,399
Items that will not be reclassified to profit or loss
Actuarial losses on defined benefit pension scheme (248) (152)
Related tax movements 47 29
------------------------------------------------------------------ --------------------- ---------------------
(201) (123)
Other comprehensive (expense)/income for the period, net of tax (8,446) 3,276
------------------------------------------------------------------ --------------------- ---------------------
Total comprehensive profit for the period, net of tax 42,185 3,783
------------------------------------------------------------------ --------------------- ---------------------
The notes are an integral part of these Condensed Consolidated
Financial Statements.
Watches of Switzerland Group Note 2 May 2021 26 April
PLC Consolidated Balance Sheet 2020
------------------------------------- ----- ----------- ----------
GBP'000 GBP'000
Assets
Non-current assets
Goodwill 135,440 137,077
Intangible assets 15,196 17,726
Property, plant and equipment 93,682 101,390
Right-of-use assets 253,709 251,642
Deferred tax assets 14,413 12,264
Trade and other receivables 7 606 1,325
-------------------------------------- ----- ----------- ----------
513,046 521,424
------------------------------------- ----- ----------- ----------
Current assets
Inventories - finished goods 226,403 243,444
Current tax asset 1,884 3,659
Government grants 8 - 2,575
Trade and other receivables 7 9,746 8,170
Cash and cash equivalents 76,076 72,927
-------------------------------------- ----- ----------- ----------
314,109 330,775
------------------------------------- ----- ----------- ----------
Total assets 827,155 852,199
-------------------------------------- ----- ----------- ----------
Liabilities
Current liabilities
Trade and other payables (149,604) (136,467)
Lease liabilities (38,383) (46,205)
Government grants 8 - (1,186)
Borrowings 9 - (82,649)
Provisions (800) (764)
-------------------------------------- ----- ----------- ----------
(188,787) (267,271)
------------------------------------- ----- ----------- ----------
Non-current liabilities
Trade and other payables (2,153) (2,636)
Lease liabilities (262,983) (261,753)
Borrowings 9 (117,885) (117,072)
Post-employment benefit obligations (2,570) (2,714)
Provisions (2,460) (1,212)
-------------------------------------- ----- ----------- ----------
(388,051) (385,387)
------------------------------------- ----- ----------- ----------
Total liabilities (576,838) (652,658)
-------------------------------------- ----- ----------- ----------
Net assets 250,317 199,541
-------------------------------------- ----- ----------- ----------
Equity
Share capital 2,993 2,993
Share premium 147,122 147,122
Merger reserve (2,209) (2,209)
Retained earnings 106,459 47,438
Foreign exchange reserve (4,048) 4,197
-------------------------------------- ----- ----------- ----------
Total equity 250,317 199,541
-------------------------------------- ----- ----------- ----------
The prior period balances have been restated, in line with IFRS
3 "Business combinations", to reflect the finalisation of the
provisional fair values as well as the final purchase price of the
Group's acquisition of Macrocom (1077) Limited. Further detail is
disclosed within note 11.
The notes form part of these Condensed Consolidated Financial
Statements.
Watches of Share capital Share premium Merger reserve Retained Foreign Total equity
Switzerland Group earnings exchange attributable
PLC Consolidated reserve to owners
Statement of Changes
in Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 29 April
2019 66 - - 55,359 798 56,223
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Profit for the
financial period - - - 507 - 507
Other
comprehensive
(expense)/income - - - (152) 3,644 3,492
Tax relating to
components of
other
comprehensive
income - - - 29 (245) (216)
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Total comprehensive
income - - - 384 3,399 3,783
Transactions with
owners
Share-based
payment charge - - - 3,196 - 3,196
Group restructure 2,209 - (2,209) - - -
Distribution in
law - - - (11,501) - (11,501)
Share issue on
IPO 718 154,412 - - - 155,130
Costs directly
attributable to
primary issue - (7,290) - - - (7,290)
Balance at 27 April
2020 2,993 147,122 (2,209) 47,438 4,197 199,541
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Profit for the
financial period - - - 50,631 - 50,631
Other
comprehensive
expense for the
period - - - (248) (9,851) (10,099)
Tax relating to
components of
other
comprehensive
expense - - - 47 1,606 1,653
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Total
comprehensive
income/(expense) - - - 50,430 (8,245) 42,185
Transactions with
owners
Share-based
payments - - - 5,708 - 5,708
Tax on items
credited to
equity - - - 2,883 - 2,883
Balance at 2 May
2021 2,993 147,122 (2,209) 106,459 (4,048) 250,317
--------------------- -------------- -------------- --------------- -------------- -------------- --------------
Watches of Switzerland Group PLC Consolidated Statement of Cash Flows Note 53 week period 52 week period
ended ended
2 May 2021 26 April 2020
---------------------------------------------------------------------- ----- --------------- ---------------
GBP'000 GBP'000
Cash flows from operating activities
Profit for the period 50,631 507
Adjustments for:
Depreciation of property, plant and equipment 24,042 15,575
Depreciation of right-of-use assets 37,856 36,112
Amortisation of intangible assets 2,817 2,394
Impairment of right-of-use assets 1,620 5,398
Impairment of property, plant and equipment 3,409 3,991
Loss/(gain) on lease disposal 138 (658)
Loss on disposal of property, plant and equipment 391 3,781
Loss on disposal on intangibles 327 -
Gain on lease modifications (1,247) -
Share-based payment charge 5,708 3,196
Finance income (166) (1,280)
Finance costs 18,343 48,079
Taxation 5 13,046 980
Decrease/(increase) in inventory 10,270 (35,503)
(Increase)/decrease in debtors (991) 14,312
Increase in creditors, provisions, government grants and pensions 3,583 5,162
----------------------------------------------------------------------- ----- --------------- ---------------
Cash generated from operations 169,777 102,046
Pension scheme contributions (702) (705)
Tax paid (9,567) (7,466)
Receipt of government grants 8 12,333 1,330
----------------------------------------------------------------------- ----- --------------- ---------------
Total net cash generated from operating activities 171,841 95,205
----------------------------------------------------------------------- ----- --------------- ---------------
Cash flows from investing activities
Purchase of non-current assets:
Property, plant and equipment additions (24,070) (22,355)
Intangible asset additions (1,962) (1,651)
Movement on capital expenditure accrual 3,864 (4,655)
----------------------------------------------------------------------- ----- --------------- ---------------
Cash outflow from purchase of non-current assets (22,168) (28,661)
Acquisition of subsidiaries net of cash acquired 11 (77) (31,083)
Settlement of deferred consideration 11 (1,363) -
Interest received 43 43
----------------------------------------------------------------------- ----- --------------- ---------------
Total net cash outflow from investing activities (23,565) (59,701)
----------------------------------------------------------------------- ----- --------------- ---------------
Cash flows from financing activities
Proceeds raised on Initial Public Offering (IPO) - 155,130
Costs directly attributable to IPO - (7,290)
Proceeds from term loan 9 22,500 120,000
Repayment of term loan 9 (22,500) -
Costs directly attributable to raising new term loan 9 (377) (2,568)
Repayment of capital element of listed bond 9 - (247,924)
Fees on early repayment of listed bond 9 - (21,738)
Net (repayment)/ borrowing of short term loans 9 (81,797) 53,923
Payment of capital element of leases (IFRS 16) (44,044) (24,586)
Payment of interest element of leases (IFRS 16) (12,711) (11,782)
Interest paid (4,533) (11,646)
----------------------------------------------------------------------- ----- --------------- ---------------
Net cash (outflow)/ inflow from financing activities (143,462) 1,519
----------------------------------------------------------------------- ----- --------------- ---------------
Net increase in cash and cash equivalents 4,814 37,023
Cash and cash equivalents at the beginning of the period 72,927 34,538
Exchange (losses)/gains on cash and cash equivalents (1,665) 1,366
----------------------------------------------------------------------- ----- --------------- ---------------
Cash and cash equivalents at the end of period 76,076 72,927
----------------------------------------------------------------------- ----- --------------- ---------------
Comprised of:
Cash at bank and in hand 66,757 70,850
Cash in transit 9,319 2,077
----------------------------------------------------------------------- ----- --------------- ---------------
Cash and cash equivalents at end of period 76,076 72,927
----------------------------------------------------------------------- ----- --------------- ---------------
Watches of Switzerland Group PLC Notes to the Consolidated
Financial Statements
1. Accounting policies
General information
The Condensed Consolidated Financial Statements, which comprise
the Consolidated Income Statement, Consolidated Statement of
Comprehensive Income, Consolidated Balance Sheet, Consolidated
Statement of Changes in Equity, Consolidated Statement of Cash
Flows and related notes, do not constitute full accounts within the
meaning of s435 (1) and (2) of the Companies Act 2006. The auditor
has reported on the Group's statutory accounts for the 53 week
period ended 2 May 2021 and 52 week period ended 26 April 2020,
which do not contain any statement under s498 (2) or (3) of the
Companies Act 2006 and were unqualified. The statutory accounts for
the 52 week period ended 26 April 2020 have been delivered to the
Registrar of Companies and the statutory accounts for the 53 week
period ended 2 May 2021 will be filed with the Registrar in due
course.
This announcement was approved by the Board of Directors on 7
July 2021.
Basis of preparation
Whilst the financial information has been prepared in accordance
with the recognition and measurement criteria of international
accounting standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards
(IFRS) adopted pursuant to Regulation (EC) No. 1606/2002 as it
applies in the European Union, this announcement does not itself
contain all the disclosures required to comply with IFRS. The
accounting policies adopted in the preparation of the Condensed
Consolidated Financial Statements are the same as those set out in
the Group's Annual Financial Statements for the 52 weeks ended 26
April 2020 and 53 weeks ended 2 May 2021. The Group has not adopted
early any other standard, interpretation or amendment that has been
issued but is not effective.
The Condensed Consolidated Financial Statements are prepared in
accordance with the recognition and measurement criteria of
international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European Union. The Condensed
Consolidated Financial Statements have been prepared under the
historical cost convention except for pension assets which are
measured at fair value. The prior period balances have been
restated, in line with IFRS 3 "Business combinations", to reflect
the finalisation of the provisional fair values as well as the
final purchase price of the Group's acquisition of Macrocom (1077)
Limited. Further detail is disclosed within note 11.
Impact of COVID-19
The COVID-19 pandemic developed quickly during the first half of
the 2020 calendar year, with a significant impact upon many
countries, businesses and individuals. In the 53 week period ended
2 May 2021, our UK stores were closed for approximately 26 weeks of
the year (FY20: six weeks). In addition to reduced tourism and
airport business, stores were impacted by reduced footfall.
The impact of the COVID-19 on the Group's operations is
discussed within the principal risks and uncertainties on page 105
of the Annual Report. The impact of COVID-19 has been taken into
consideration in our significant areas of judgement and estimation.
A full review has been completed to consider the ongoing impact of
COVID-19 on the Financial Statements, including the recoverability
of store assets.
Going concern
The Directors consider that the Group has, at the time of
approving the Group Financial Statements, adequate resources to
remain in operation for the foreseeable future and have therefore
continued to adopt the going concern basis in preparing the
consolidated information.
At the balance sheet date, the Group had a total of
GBP197,494,000 in available committed facilities, of which
GBP120,000,000 was drawn down. Net debt at this date was
GBP43,924,000 with liquidity headroom (defined as unrestricted cash
plus undrawn available facilities) of GBP143,455,000. This funding
matures in 2023/24.
The key covenant tests attached to the Group's facilities are a
measure of net debt to EBITDA and the Fixed Charge Cover Ratio
(FCCR) at each April and October. Net debt to EBITDA is defined as
the ratio of total net debt at the reporting date to the last 12
months Adjusted EBITDA. This ratio must not exceed 3. The FCCR is
the ratio of Adjusted EBITDA plus rent to the total finance charge
and rent for the 12 months to the reporting date. This ratio must
exceed 1.6. The covenant tests at October 2019 and April 2020 were
fully met. On 18 June 2020, the covenant tests of the Group's
facilities were replaced with a monthly minimum liquidity headroom
covenant of GBP20,000,000 for the period of June 2020 to September
2021. The Directors sought the replacement of covenants to provide
further flexibility to deal with any unexpected circumstances
during that period. The GBP20,000,000 minimum headroom covenant was
satisfied for each month end from June 2020 to June 2021. The
original waived covenant tests of net debt to EBITDA and the FCCR
were also comfortably satisfied at October 2020 and April 2021.
In assessing whether the going concern basis of accounting is
appropriate, the Directors have reviewed various trading scenarios
for the period to 31 October 2022 from the date of this report.
These included:
- The budget approved by the Board in April 2021, which included
the following key assumptions:
- A continued strong luxury watch market in the UK and US
- Anticipation of some localised disruption due to COVID-19 but
assumes no further national-scale lockdowns in either the US or UK
during the period
- Lower levels of tourism in the US and UK and reduced travel
impacting our airport stores
- Sufficient luxury watch supply to support the revenue
forecast
The budget aligns to the Guidance provided. Under this budget,
the Group have significant liquidity and comfortably complies with
all covenant tests to 31 October 2022.
- Reverse stress-testing of this budget was performed to
determine what level of reduced EBITDA and worst case cash outflows
would result in a breach of the liquidity or covenant tests. The
likelihood of this level of reduced EBITDA is considered remote
- Severe but plausible scenarios of:
- 10% reduction in sales against the budget due to reduced
consumer confidence and lower disposable income
- A repeat of the FY21 COVID-19 impact on the ability of stores
to trade modelled without Government support
- Under these scenarios the GBP20,000,000 liquidity covenant,
the net debt to EBITDA and the FCCR covenants would all be complied
with.
- Should trading be worse than the outlined severe but plausible
scenarios, the Group has the following mitigating actions within
management's control:
- Review of marketing spend
- Reduction in the level of stock purchases
- Restructuring of the business with headcount and store
operations savings
- Redundancies and pay freeze
- Reduce the level of planned capex and acquisition spend
As a result of the above analysis, including potential severe
but plausible scenarios, the Board believes that the Group is able
to adequately manage its financing and principal risks and that the
Group will be able to operate within the level of its facilities
and meet the required covenants for the period to October 2022. For
this reason, the Board considers it appropriate for the Group to
adopt the going concern basis in preparing the Financial
Statements.
New standards, amendments and interpretations
Leases - COVID-19 related rent concessions
The COVID-19 Related Rent Concessions amendment to IFRS 16
"Leases" was adopted by the IASB on 28 May 2020 and endorsed by the
European Union on 12 October 2020. The amendment applies to
accounting periods from 1 June 2020 but early application is
permitted and the Group has elected to apply the amendment in the
current period.
The amendment allows for a simplified approach to accounting for
rent concessions occurring as a direct result of COVID-19 and for
which the following criteria are met:
- The revised consideration is substantially the same, or less
than, the consideration prior to the change
- The concessions affects only payments originally due on or
before 30 June 2021
- There is no substantive change to other terms and conditions
of the lease.
Lessees are not required to assess whether eligible rent
concessions are lease modifications, allowing the lessee to account
for eligible rent concessions as if they were not lease
modifications. During the period, the Group has agreed rent
concessions both in the form of rent forgiveness in which the
landlord has agreed to forgive all or a portion of rents due with
no obligation to be repaid in the future and rent deferrals in
which the landlord has agreed to forego rents in one period with a
proportional increase in rents due in a future period.
The rent concession has been recognised once a legally binding
agreement is made between both parties by derecognising the portion
of the lease liability that has been forgiven and recognising a
reduction to the right-of-use asset.
Rent deferrals do not change the total consideration due over
the life of the lease but change the timing of future payments.
Where deferrals have been agreed, the Group has adjusted the lease
liability and right-of-use asset to reflect the change in timings
of these payments.
The Group has elected not to apply the amendment in the current
period and assessed that eligible rent concessions should be
treated as lease modifications. As a result, the Group has
recognised within lease modifications an adjustment of GBP187,000
with no impact on the Income Statement relating to these COVID-19
rent concessions.
Other new standards, amendments and interpretations
The following standards, amendments and interpretations were
applicable for the period beginning 27 April 2020 and were adopted
by the Group for the 53 week period ended 2 May 2021. They have not
had a significant impact on the Group's profit for the year, equity
or disclosures:
- Amendments to References to the Conceptual Framework in IFRS
Standards
- Amendments to IFRS 3 "Business combinations"
- Amendments to IAS 1 and IAS 8 - Definition of material
- Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate
benchmark reform
- Amendments to IFRS 16 - COVID-19 concessions
The following are new accounting standards and amendments to
existing standards that have been published and are applicable for
the Group's accounting periods beginning 3 May 2021 onwards, which
the Group has not adopted early:
- Amendments to IFRS 9, IAS 39, IFRS 4 and IFRS 16 - Phase 2 of
Interest rate benchmark reform
- Amendments to IFRS 16 - COVID-19 concessions, extension of
amendment
The adoption of these standards and amendments is not expected
to have a material impact on the Group's Consolidated Financial
Statements.
The Group is also currently assessing the impact of the
following new standards, which has been issued and is awaiting
endorsement by the European Union:
- IFRS 17 "Insurance Contracts" (applicable for periods
beginning after 1 January 2023)
Other amendments have been issued but are not applicable until
after periods beginning 1 January 2022 which the Group has assessed
will not have a significant impact upon the Financial
Statements.
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.
Significant estimates
Estimates and underlying assumptions are reviewed by management
on an ongoing basis, with revisions recognised in the period in
which the estimates are revised and in any future period affected.
The areas involving significant risk resulting in a material
adjustment to the carrying amounts of assets and liabilities within
the next financial period are as follows:
Post-employment benefit obligations
The Group's accounting policy for the defined benefit pension
scheme requires management to make judgements as to the nature of
benefits provided by each scheme and thereby determine the
classification of each scheme. For the defined benefit scheme,
management is required to make annual estimates and assumptions
about future returns on classes of scheme assets, future
remuneration changes, employee attrition rates, administration
costs, changes in benefits, inflation rates, life expectancy and
expected remaining periods of service of employees and the
determination of the pension cost and defined benefit obligation of
the Group's defined benefit pension scheme depends on the selection
of these assumptions. Differences arising from actual experiences
or future changes in assumptions will be reflected in subsequent
periods.
Net realisable value of inventories
Inventories are stated at the lower of cost and net realisable
value, on a weighted average cost basis. Provisions are recognised
where the net realisable value is assessed to be lower than cost.
The calculation of this provision requires estimation of the
eventual sales price and sell-through of goods to customers in the
future. A 20% reduction in the store sell-through of slow moving
stock would impact the net realisable value by c.GBP3,000,000.
Impairment of property, plant and equipment and right-of-use
assets
Property, plant and equipment and right-of-use assets are
reviewed for impairment if events or changes in circumstances
indicate that the carrying amount may not be recoverable. For the
impairment test, the value-in-use method requires the Group to
determine appropriate assumptions (which are sources of estimation
uncertainty) in relation to the cash flow projections over the
five-year strategic plan period, the long term growth rate to be
applied beyond this five-year period and the risk-adjusted pre-tax
discount rate used to discount those cash flows. The key
assumptions relate to sales growth rates discount rates used to
discount the cash flows. Store related property, plant and
equipment and right-of-use assets are tested for impairment at a
store-by-store level, including an allocation of overheads related
to store operations.
Significant judgements
The following are the critical judgements, apart from those
involving estimations, that the Directors have made in the process
of applying the Group's accounting policies and that have the most
significant effect on the amounts recognised in the Financial
Statements:
Classification of exceptional items and presentation of non-GAAP
measures
The Directors exercise their judgement in the classification of
certain items as exceptional and outside the Group's underlying
results. The determination of whether an item should be separately
disclosed as an exceptional item, non-underlying or non-trading
requires judgement on its materiality, nature and incidence, as
well as whether it provides clarity on the Group's underlying
trading performance. In exercising this judgement, the Directors
take appropriate regard of IAS 1 "Presentation of Financial
Statements" as well as guidance from the Financial Reporting
Council and the European Securities Market Authority on the
reporting of exceptional items and APMs.
The overall goal of the Directors is to present the Group's
underlying performance without distortion from one-off or
non-trading events regardless of whether they are favourable or
unfavourable to the underlying result. Further details on
exceptional items are provided in note 4.
Lease term (IFRS 16)
IFRS 16 defines the lease term as the non-cancellable period of
a lease together with the options to extend or terminate a lease,
if the lessee were reasonably certain to exercise that option.
Where a lease includes the option for the Group to terminate the
lease before the term end, the Group makes a judgement as to
whether it is reasonably certain that the option will or will not
be taken.
On entering into a lease, the Group assesses how reasonably
certain it is to exercise these options. The default position is
that the Group will determine that the lease term is to the end of
the lease (i.e. will not include break-clauses or options to
extend) unless there is clear evidence to the contrary.
The lease term of each lease is reassessed if there is specific
evidence of a change in circumstance such as:
- A decision has been made by the business to exercise a break
or option
- The trading performance significantly changes
- Planned future capital expenditure suggests that the option to
extend will be taken.
Discount rates (IFRS 16)
The discount rate used to calculate the lease liability is the
rate implicit in the lease, if it can be readily determined, or the
lessee's incremental borrowing rate if not. Management uses the
rate implicit in the lease in relation to the Group's "Other"
leases and the lessee's incremental borrowing rate for all property
leases.
Incremental borrowing rates are determined on entering a lease
and depend on the term, country, currency and start date of the
lease. The incremental borrowing rate used is calculated based on a
series of inputs including:
- the risk-free rate based on country specific swap markets;
- a credit risk adjustment based on country specific corporate
indices; and
- a Group specific adjustment to reflect the Group's specific
borrowing conditions.
As a result, reflecting the breadth of the Group's lease
portfolio, judgements on the lease terms and the international
spread of the portfolio, there are a large number of discount rates
applied to the leases within the range of 2.58% to 6.33%.
Substantive substitution rights (IFRS 16)
The Group has applied judgement to three (2020: three)
contractual agreements and has judged that they do not meet the
definition of a lease under IFRS 16. In these cases, the Group has
judged that the lessor has a substantive right to substitute the
asset and as such, there is no asset identified within the
contract. The Group judges that the lessor has the practical
ability to substitute; the Group cannot prevent the lessor from
proposing the substitution; and the costs of substitution are
assessed to be low.
If substituted, the lessor is able to give 14 days' written
notice to the Group indicating that the sales area will be changed
and the costs incurred to move the sales area would be low to the
lessor. As a result, the Group has deemed that the lessor has a
substantive right to substitute the asset and as such there is no
asset identified within the contract. Given this, the Group does
not recognise lease liabilities or right-of-use assets in relation
to these leases and continues to account for these on a
straight-line basis.
Other areas of estimation and judgement include estimation
around expected supplier incentives receivable from third parties.
Estimates are based on underlying and forecast sales data to
anticipate the level of incentive receivable based on targets to be
met in the future. Sensitivities to the assumptions for this are
not expected to result in a material change in the carrying amount.
The amount recognised as a receivable is reviewed regularly and
updated to reflect management's latest best estimate.
2. Segment reporting
The key Group performance measures are Adjusted Earnings Before
Interest, Tax, Depreciation and Amortisation (Adjusted EBITDA) and
Adjusted Earnings Before Interest and Tax (Adjusted EBIT), both
shown pre-exceptional items, as detailed below. The segment
reporting is disclosed on a pre-IFRS 16 basis reflecting how
results are reported to the CODMs and how they are measured for the
purposes of covenant testing.
Adjusted EBITDA represents profit for the period before finance
costs, finance income, taxation, depreciation, amortisation,
exceptional items presented in the Group's Income Statement
(consisting of exceptional administrative expenses, exceptional
cost of sales and exceptional impairment) on a pre-IFRS 16
basis.
53 week period ended 2 May 2021
UK US Total
----------------------------------------------------------------------- ------------ --------- -----------
GBP'000 GBP'000 GBP'000
Revenue 606,452 298,625 905,077
Net margin 219,751 112,596 332,347
Less:
Store costs (109,193) (57,407) (166,600)
Overheads (43,543) (12,301) (55,844)
Store opening and closing costs (3,285) (1,254) (4,539)
Intra-group management charge 3,983 (3,983) -
Adjusted EBITDA 67,713 37,651 105,364
----------------------------------------------------------------------- ------------ --------- -----------
Depreciation, amortisation, impairment and loss on disposal of assets (20,011) (7,713) (27,724)
Segment profit* 47,702 29,938 77,640
----------------------------------------------------------------------- ------------ --------- -----------
IFRS 16 adjustments 13,302
Exceptional gain on trade receivables (note 4) 233
Exceptional impairment of assets (note 4) (4,245)
Exceptional administrative costs (note 4) (5,076)
Net other finance costs (18,177)
Profit before taxation for the financial period 63,677
----------------------------------------------------------------------- ------------ --------- -----------
* Segment profit is defined as being Earnings Before Interest,
Tax, exceptional items and IFRS 16 adjustments (Adjusted EBIT).
52 week period ended 26 April 2020
UK US Total
----------------------------------------------------------------------- ------------- ---------- ------------
GBP'000 GBP'000 GBP'000
Revenue 585,473 225,039 810,512
Net margin 221,328 83,378 304,706
Less:
Store costs (126,373) (51,821) (178,194)
Overheads (34,175) (10,405) (44,580)
Store opening and closing costs (2,185) (1,635) (3,820)
Intra-group management charge 3,607 (3,607) -
Adjusted EBITDA 62,202 15,910 78,112
----------------------------------------------------------------------- ------------- ---------- ------------
Depreciation, amortisation, impairment and loss on disposal of assets (16,186) (6,041) (22,227)
Segment profit* 46,016 9,869 55,885
----------------------------------------------------------------------- ------------- ---------- ------------
IFRS 16 adjustments 9,952
Exceptional impairment of trade receivables (note 4) (695)
Exceptional impairment of assets (note 4) (8,526)
Exceptional administrative costs (note 4) (8,330)
Exceptional finance costs (note 4) (28,490)
Net other finance costs (18,309)
Profit before taxation for the financial period 1,487
----------------------------------------------------------------------- ------------- ---------- ------------
* Segment profit is defined as being Earnings Before Interest,
Tax, exceptional items and IFRS 16 adjustments (Adjusted EBIT).
Entity-wide revenue disclosures
53 week period 52 week period
ended ended
2 May 2021 26 April 2020
--------------- ---------------
GBP'000 GBP'000
UK
Luxury watches 512,177 475,870
Luxury jewellery 43,810 54,130
Other 50,465 55,473
--------------- ---------------
Total 606,452 585,473
--------------- ---------------
US
Luxury watches 276,269 203,998
Luxury jewellery 16,946 14,967
Other 5,410 6,074
--------------- ---------------
Total 298,625 225,039
--------------- ---------------
Group
Luxury watches 788,446 679,868
Luxury jewellery 60,756 69,097
Other 55,875 61,547
--------------- ---------------
Total 905,077 810,512
--------------- ---------------
"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 asset disclosures
2 May 2021 26 April 2020
----------- --------------
GBP'000 GBP'000
UK
Goodwill 121,590 121,590
Intangible assets 4,428 4,696
Property, plant and equipment 62,037 66,536
Right-of-use assets 182,040 162,818
----------- --------------
Total 370,095 355,640
----------- --------------
US
Goodwill 13,850 15,487
Intangible assets 10,768 13,030
Property, plant and equipment 31,645 34,854
Right-of-use assets 71,669 88,824
----------- --------------
Total 127,932 152,195
----------- --------------
Group
Goodwill 135,440 137,077
Intangible assets 15,196 17,726
Property, plant and equipment 93,682 101,390
Right-of-use assets 253,709 251,642
----------- --------------
Total 498,027 507,835
----------- --------------
3. Revenue
The Group's disaggregated revenue recognised under contracts
with customers relates to the following categories and operating
segments.
53 week period ended 2 May 2021
---------------------------------------
Sale of goods Rendering Total
of services
GBP'000 GBP'000 GBP'000
UK 588,094 18,358 606,452
US 293,589 5,036 298,625
-------------- ------------- --------
Total 881,683 23,394 905,077
-------------- ------------- --------
52 week period ended 26 April 2020
---------------------------------------
Sale of goods Rendering Total
of services
GBP'000 GBP'000 GBP'000
UK 561,175 24,298 585,473
US 219,676 5,363 225,039
-------------- ------------- --------
Total 780,851 29,661 810,512
-------------- ------------- --------
4. Exceptional items
Exceptional items are those that in the judgement of the
Directors need to be separately disclosed by virtue of their size,
nature or incidence, in order to draw the attention of the reader
and to show the underlying business performance of the Group. Such
items are included within the income statement caption to which
they relate and are separately disclosed on the face of the
Consolidated Income Statement.
53 week period 52 week period
ended ended
2 May 2021 26 April
2020
--------------- ---------------
GBP'000 GBP'000
Exceptional gain on/(impairment of)
trade receivables
Expected credit gains/(losses) (i) 233 (695)
Total exceptional gain on/(impairment
of) trade receivables 233 (695)
Exceptional impairment of assets
Impairment of property, plant and equipment
(ii) (3,188) (3,764)
Impairment of right-of-use assets (ii) (1,196) (4,762)
Reversal of impairment of right-of-use 139 -
assets (ii)
Total exceptional impairment of assets (4,245) (8,526)
Exceptional administrative expenses
Professional and legal expenses on business
combinations (iii) (193) (310)
Exceptional items for IPO (iv)
Share-based payment in respect of the
Chief Executive Officer and legacy arrangements
(including employment taxes) (4,883) (3,314)
Bonus paid to employees on IPO - (2,071)
Professional and legal fees - (2,635)
--------------- ---------------
Total exceptional administrative costs (5,076) (8,330)
Exceptional finance costs
Early redemption fees - (21,738)
Write off capitalised transaction costs
on bond redemption - (6,752)
--------------- ---------------
Total exceptional finance costs - (28,490)
Total exceptional items (9,088) (46,041)
--------------- ---------------
Tax impact of exceptional (gain on)/impairment
of trade receivables (86) 180
Tax impact of exceptional impairment
of assets 903 1,829
Tax impact of exceptional administrative
costs 934 1,138
Tax impact of exceptional finance costs - 5,200
--------------- ---------------
Tax impact of exceptional items 1,751 8,347
--------------- ---------------
(i) Expected credit losses
At the prior year end an exceptional provision of GBP695,000 was
made against in-house credit debtors, linked to the exceptional
circumstances impacted by the global COVID-19 pandemic. On 16
September 2020, the Group made a one-time payment to remove all
future obligations in relation to debt held on recourse. As the
Group bears no future liability, the excess credit loss provision
of GBP233,000 in relation to recourse debtors has been released and
has accordingly been reversed through exceptional items to be
consistent with where the original charge was recorded.
On 13 November 2020, the Group signed an agreement for the sale
of all remaining in-house credit debtors. Following the sale, the
Group has no future liability in relation to these debtors. The
consideration received was in line with the carrying value of the
debt held at the time of the transaction resulting in a GBPnil gain
or loss through the Consolidated Income Statement.
(ii) Impairment of property, plant and equipment and right-of-use assets
GBP3,188,000 of the impairment to property, plant and equipment
and GBP1,196,000 of the impairment to right-of use assets have been
classified as exceptional expenses due to the materiality and
exceptional nature of these impairments. The COVID-19 pandemic and
associated lockdowns have significantly impacted the profitability
of the Group and future economic outlook of the retail industry.
The Government's change to VAT legislation has also had a
significant impact upon the profitability of certain stores within
the Group's portfolio. The Group reviewed the profitability of its
store network, taking into account the potential future impact on
consumer demand resulting in the impairments to property, plant and
equipment as well as the right-of-use assets. These stores were
impaired to their "value-in-use" recoverable amount.
The Group recognised an exceptional expense relating to impaired
right-of-use assets in the prior period ended 26 April 2020 linked
to the COVID-19 pandemic. An element of this is reversed here due
to a modification of a lease agreement following COVID-19 related
negotiations.
(iii) Professional and legal expenses on business combinations
Professional and legal expenses on business combinations
completed during the periods, relating to the purchases of Macrocom
(1077) Limited and Analog Shift, have been expensed to the
Consolidated Income Statement as an exceptional cost as they are
regarded as non-trading, non-underlying costs and are considered to
be material by nature.
(iv) Exceptional items for IPO
On 31 May 2019, prior to the IPO, the CEO was granted a one-off
share option award by the principal selling shareholder, over a
portion of their shareholding, in recognition of his contribution
to the Company up to Admission and to ensure ongoing
incentivisation and retention in his role following the IPO. This
one-off award is contingent on the CEO's continued employment until
June 2021. The total charge in relation to this award is being
recognised over the two-year period ending June 2021 and is
considered exceptional as it is linked to a unique non-recurring
event, being the IPO.
In the prior period, IPO costs also included a one-off
discretionary IPO bonus to employees and legal and professional
costs.
All of these costs are considered exceptional as they are linked
to a unique non-recurring event and do not form part of the
underlying trading of the Group.
5. Taxation
The tax rate for the current period varied from the standard
rate of corporation tax in the UK due to the following factors:
53 week period ended 2 May 2021
Underlying Exceptional Total
operations items
---------------- ---------------- --------
GBP'000 GBP'000 GBP'000
Profit before taxation 72,765 (9,088) 63,677
Notional taxation at standard
UK corporation tax rate
of 19% 13,825 (1,726) 12,099
Non-deductible expenses 1,508 (4) 1,504
Recognition of UK tax losses (1,227) - (1,227)
Overseas tax differentials 1,719 (21) 1,698
Adjustments in respect of
prior periods (1,028) - (1,028)
---------------- ---------------- --------
Tax expense reported in
the Income Statement 14,797 (1,751) 13,046
---------------- ---------------- --------
52 week period ended 26 April 2020
Underlying Exceptional Total
operations items
------------------ ----------------- --------
GBP'000 GBP'000 GBP'000
Profit before taxation 47,528 (46,041) 1,487
Notional taxation at standard
UK corporation tax rate
of 19% 9,030 (8,748) 282
Non-deductible expenses 1,026 651 1,677
Other differences (491) 167 (324)
Overseas tax differentials 690 (417) 273
Effect of rate change (828) - (828)
Adjustments in respect of
prior periods (100) - (100)
------------------ ----------------- --------
Tax expense reported in
the Income Statement 9,327 (8,347) 980
------------------ ----------------- --------
The Government announced that the UK rate of corporation tax
will increase to 25% with effect from 1 April 2023. This was
substantively enacted on 24 May 2021, subsequent to the period end
date. The change will affect the value of the deferred tax balances
within the UK tax workings. If the 25% rate was applied to the
existing balances, then this would increase the asset by
approximately GBP2,100,000. This change has not been reflected in
the workings since it will be accounted for prospectively in line
with IAS 10 "Events after the reporting period".
6. Earnings Per Share (EPS)
53 week period 52 week period
ended ended
2 May 2021 26 April
2020
--------------- ---------------
Basic
EPS 21.1p 0.2p
EPS adjusted for exceptional items 24.2p 16.3p
EPS adjusted for exceptional items
and pre-IFRS 16 23.8p 16.6p
Diluted
EPS 21.1p 0.2p
EPS adjusted for exceptional items 24.2p 16.3p
EPS adjusted for exceptional items
and pre-IFRS 16 23.8p 16.6p
Basic EPS is based on the profit for the year 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:
53 week period 52 week period
ended ended
2 May 2021 26 April
2020
--------------- ---------------
GBP'000 GBP'000
Profit after tax attributable to equity
holders of the parent company 50,631 507
Add back:
Exceptional cost of sales - net of tax (147) 515
Exceptional impairment of assets - net
of tax 3,342 6,697
Exceptional administrative expenses
- net of tax 4,142 7,192
Exceptional finance costs - net of tax - 23,290
--------------- ---------------
Profit adjusted for exceptional items 57,968 38,201
Pre-exceptional IFRS 16 adjustments,
net of tax (914) 625
--------------- ---------------
Profit adjusted for exceptional items
and IFRS 16 57,054 38,826
--------------- ---------------
The following table reflects the share data used in the basic
and diluted EPS calculations:
53 week period 52 week period
ended ended
2 May 2021 26 April
2020
--------------- ---------------
Weighted average number of shares: '000 '000
Weighted average number of ordinary
shares in issue 239,456 233,773
--------------- ---------------
Weighted average shares for basic
EPS 239,456 233,773
--------------- ---------------
Weighted average dilutive potential 160 -
shares
--------------- ---------------
Weighted average shares for diluted
EPS 239,616 233,773
--------------- ---------------
7. Trade and other receivables
2 May 2021 26 April 2020
Current Non-current Current Non-current
-------- ------------ -------- ------------
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 3,668 606 8,644 1,977
Other receivables 3,207 - 1,993 -
Allowance for
expected credit
losses (193) - (3,863) (652)
6,682 606 6,774 1,325
Prepayments 3,064 - 1,396 -
Total 9,746 606 8,170 1,325
-------- ------------ -------- ------------
Included within trade receivables are amounts receivable from
third parties which provide credit arrangements with our customers.
Prepayments relate mainly to insurance prepayments and other
receivables relate mainly to supplier incentives receivable.
There are no material differences between the fair values and
book values stated above.
Movements on the allowance for expected credit losses (ECL's)
for impairment of trade and other receivables are as follows:
2 May 2021 26 April
2020
GBP'000 GBP'000
Balance at 27 April 2020 4,515 3,336
Increase in allowance - cost of sales 221 3,452
(Decrease)/increase in allowance - exceptional
items (note 4) (233) 695
Receivables written off during the period
as uncollectable (2,307) (3,148)
Released due to the sale of trade receivables (1,691) -
Foreign exchange differences (312) 180
----------- ---------
Balance at 2 May 2021 193 4,515
----------- ---------
On 16 September 2020, the Group made a one-time payment to
remove all future obligations in relation to debt held on recourse.
As the Group bears no future liability, the excess credit loss
provision of GBP233,000 in relation to recourse debtors has been
released and has accordingly been reversed through exceptional
items.
On 13 November 2020, the Group signed an agreement for the sale
of all remaining in-house credit debtors. Following the sale, the
Group has no future liability in relation to these debtors. The
consideration received was in line with the carrying value of the
debt held at the time of the transaction resulting in a GBPnil gain
or loss through the Consolidated Income Statement.
8. Government grants
During the current and prior periods, government grants have
been received to support certain administrative expenses during the
COVID-19 pandemic. All attached conditions were complied with
before recognition in the Consolidated Income Statement.
The grants are two schemes that operate differently from one
another. One scheme operates on claims basis, where cash is
received after the expense has been incurred (UK furlough scheme),
and the other on an up-front basis, where cash is received prior to
the expense being incurred (US Paycheck Protection Program). These
have been presented separately on the face of the Consolidated
Balance Sheet and also below.
Below is the reconciliation of government grants receivable (UK
furlough scheme):
53 week period 52 week period
ended ended
2 May 2021 26 April
2020
--------------- ---------------
GBP'000 GBP'000
Balance at 27 April 2020 2,575 -
Released to Income Statement 6,832 2,575
Cash received during the period (9,407) -
Balance at 2 May 2021 - 2,575
--------------- ---------------
During the 53 week period to 2 May 2021, the Group made a
voluntary decision to repay all UK furlough scheme support relating
to the period. The GBP6,832,000 support received in the period will
be repaid after the period end and is disclosed within accruals and
deferred income within these accounts. The net impact on the income
statement in the current year is GBPnil (2020: Income
GBP2,575,000).
Below is the reconciliation of government grants received (US
Paycheck Protection Program):
53 week period 52 week period
ended ended
2 May 2021 26 April
2020
--------------- ---------------
GBP'000 GBP'000
Balance at 27 April 2020 (1,186) -
Cash received during the period (2,926) (1,330)
Released to Income Statement 4,056 144
Foreign exchange movements 56 -
--------------- ---------------
Balance at 2 May 2021 - (1,186)
--------------- ---------------
9. Borrowings
2 May 2021 26 April
2020
----------- ---------
GBP'000 GBP'000
Current
Short term borrowings - 82,649
- 82,649
Non-current
Term loan 120,000 120,000
Associated capitalised transaction costs (2,115) (2,928)
117,885 117,072
----------- ---------
Total borrowings 117,885 199,721
----------- ---------
Short term borrowings are supported by cross guarantees from
various subsidiaries. In addition, the ABL facility is secured by a
pledge against inventory.
On 4 June 2019, the Group initially drew down the term loan on a
new facility consisting of a term loan for GBP120,000,000 and a
revolving credit facility of GBP50,000,000. Interest is currently
charged at LIBOR plus 1.75% on the term loan and would be charged
at LIBOR plus 1.50% on the revolving credit facility if the
facility was drawn down. The margin on the term loan ranges from
1.75% to 2.80% and the revolving credit facility ranges from 1.50%
to 2.55% based on the leverage of the Group. The term loan facility
expires on 4 June 2024. The term loan facility is unsecured and is
cross guaranteed by subsidiary entities.
On 14 May 2020, the Group entered into a new GBP45,000,000
financing facility which was provided by the lenders under the
Government's CLBILS scheme. This comprised an additional term loan
of GBP22,500,000 with a term of 18 months and a revolving credit
facility of GBP22,500,000 for the same period. During the period,
the revolving credit facility was never drawn and has now been
cancelled. On 5 March 2021, the CLBILS term loan was repaid in full
following a review of the Group's cash position. The repayment
irrevocably and unconditionally released the Company from all
obligations, guarantees and security created as part of the CLBILS
scheme. The Group incurred GBP377,000 of costs in relation to the
raising of this finance which were fully amortised through the
Consolidated Income Statement in the 53 week period ended 2 May
2021.
Short term borrowings consist of the remaining revolving credit
facility noted above and an asset backed lending (ABL) facility
held in US Dollars of $60,000,000. The ABL facility expires in
April 2023 and interest would be charged at US LIBOR plus the
margin which ranges from 1.25% to 1.75%. Amounts outstanding on the
revolving credit facility totalled GBPnil (2020: GBP50,000,000) and
amounts outstanding on the ABL facility totalled GBPnil (2020:
GBP32,649,000) - $nil (2020: $40,000,000).
Amounts undrawn on the facilities totalled GBP77,494,000 (2020:
GBP16,325,000). Borrowing on the US ABL facility is restricted to
the lower of $60,000,000 and the borrowing base which is determined
by reference to the assets held by the US entities.
Analysis of net debt
26 April Cash Non-cash Foreign 2 May 2021
2020 flow changes(1) exchange
-------------------------- ---------- -------- ------------ ---------- -----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash
equivalents 72,927 4,814 - (1,665) 76,076
Short term borrowings (82,649) 81,797 - 852 -
Term loan (120,000) - - - (120,000)
Net debt excluding
capitalised transaction
costs (Pre-IFRS
16) (129,722) 86,611 - (813) (43,924)
Capitalised transaction
costs 2,928 377 (1,112) (78) 2,115
Net debt
(Pre-IFRS 16) (126,794) 86,988 (1,112) (891) (41,809)
-------------------------- ---------- -------- ------------ ---------- -----------
Lease liability (307,958) 56,755 (62,022) 11,859 (301,366)
Total net debt (434,752) 143,743 (63,134) 10,968 (343,175)
-------------------------- ---------- -------- ------------ ---------- -----------
1. Non-cash changes include interest charges as well as
additions and revisions to lease liabilities.
Cash and cash equivalents consists of cash at bank and in hand
of GBP66,757,000 (2020: GBP70,850,000) and cash in transit of
GBP9,319,000 (2020: GBP2,077,000).
The key covenant tests attached to the Group's facilities are a
measure of net debt to EBITDA and the Fixed Charge Cover Ratio
(FCCR) at each April and October. Net debt to EBITDA is defined as
the ratio of total net debt at the reporting date to the last 12
months Adjusted EBITDA. This ratio must not exceed 3. The FCCR is
the ratio of Adjusted EBITDA plus rent to the total finance charge
and rent for the 12 months to the reporting date. This ratio must
exceed 1.6. The covenant tests at October 2019 and April 2020 were
fully met. On 18 June 2020, the covenant tests of the Group's
facilities were replaced with a monthly minimum liquidity headroom
covenant of GBP20,000,000 for the period of June 2020 to September
2021. The Directors sought the replacement of covenants to provide
further flexibility to deal with any unexpected circumstances
during that period. The GBP20,000,000 minimum headroom covenant was
satisfied for each month end from June 2020 to June 2021. The
original waived covenant tests of net debt to EBITDA and the FCCR
were also comfortably satisfied at October 2020 and April 2021.
10. Financial instruments
Categories
2 May 2021 26 April
2020
----------- ----------
GBP'000 GBP'000
Financial assets - held at amortised
cost
Trade and other receivables* 7,288 8,099
Cash and cash equivalents 76,076 72,927
----------- ----------
Total financial assets 83,364 81,026
----------- ----------
Financial liabilities - held at amortised
cost
Interest-bearing loans and borrowings:
Term loans (net of capitalised transaction
costs) (117,885) (117,072)
Revolving credit facility - (82,649)
Trade and other payables** (127,132) (117,638)
----------- ----------
(245,017) (317,359)
----------- ----------
Lease liability (IFRS 16) (301,366) (307,958)
----------- ----------
Total financial liabilities (546,383) (625,317)
----------- ----------
* Excludes prepayments of GBP3,064,000 (2020: GBP1,396,000) that
do not meet the definition of a financial instrument.
** Trade payables excludes property lease incentives of GBPnil
(2020: GBP16,000), customer deposits of GBP12,208,000 (2020:
GBP17,306,000) and deferred income of GBP12,417,000 (2020:
GBP4,143,000) that do not meet the definition of a financial
instrument.
Fair values
At 2 May 2021, the fair values of each category of the Group's
financial instruments are materially the same as their carrying
values in the Group's Balance Sheet based on either their short
maturity or, in respect of long term borrowings, interest being
incurred at a floating rate.
11. Business combinations
Analog Shift LLC
On 1 September 2020, the Group acquired the trade and assets of
Analog Shift LLC from Airship Holdings LLC. The business
contributed revenue of GBP747,000 from the date of acquisition to 2
May 2021 and contributed a net loss of GBP388,000 during this
reporting period.
The following table summarises the consideration paid, and the
fair value of assets acquired at the acquisition date:
Consideration at 1 September 2020 GBP'000
------------------------------------- --------
Initial cash consideration 77
Contingent consideration 192
------------------------------------- --------
Total consideration (100% holding) 269
------------------------------------- --------
Initial assessment of values on acquisition
GBP'000
-----------------------------------------------
Brand 115
Total identifiable net assets 115
Goodwill 154
------------------------------------- --------
Total assets acquired 269
------------------------------------- --------
The contingent consideration value is to be finalised during the
36-month period following the 1 September 2020 acquisition date,
connected to trading performance of the brand.
The contribution to revenue and profit before tax, if this
business combination occurred on the first day of the period, would
not be material to the results of the Group.
Macrocom (1077) Limited
On 3 March 2020 of the prior year, the Group acquired 100% of
the share capital of Macrocom (1077) Limited, a company which owned
four stores previously trading under the brand name Fraser Hart in
Stratford, Brent Cross, Kingston and York.
As at 26 April 2020, GBP1,500,000 was held with a third party on
retention subject to the finalisation of the working capital
adjustment as set out in the sale and purchase agreement and was
disclosed as restricted cash.
During the 53 week period ended 2 May 2021, the total
consideration was finalised, resulting in the Group paying
GBP1,363,000 of the GBP1,500,000 held on retention. Finalisation of
the acquisition values resulted in an increase of goodwill to
GBP26,612,000 from GBP26,092,000 disclosed within the Annual Report
and Accounts 2020. The prior period balances have been restated to
reflect the finalisation of this business combination in line with
IFRS 3 "Business combinations" resulting in a decrease to inventory
by GBP52,000 and a decrease to trade and other receivables by
GBP58,000.
The following table summarises the final consideration paid for
Macrocom (1077) Limited and the fair value of assets and
liabilities acquired:
Consideration GBP'000
Initial cash consideration 31,083
Deferred cash consideration - settled 1,363
Total consideration (100% holding) 32,446
--------------------------------------- ---------
Final assessment of fair values on acquisition
GBP'000
--------------------------------------------------
Inventories 4,507
Property, plant and equipment 980
Trade and other receivables 51
Right-of-use assets 14,218
Lease liabilities (14,034)
Deferred tax 112
--------------------------------------- ---------
Total identifiable net assets 5,834
Goodwill 26,612
--------------------------------------- ---------
Total assets acquired 32,446
--------------------------------------- ---------
Acquisition-related costs of GBP193,000 (2020: GBP310,000) have
been charged to exceptional items in the Consolidated Income
Statement for the 53 week period ended 2 May 2021 (refer to note
4).
12. Contingent Liabilities
From time to time, the Group may be subject to complaints and
litigation from its customers, employees, suppliers and other third
parties. Such complaints and litigation may result in damages or
other losses, which may not be covered by the Group's insurance
policies or which may exceed any existing coverage. Regardless of
the outcome, complaints and litigation could have a material
adverse effect on the Group's reputation, divert the attention of
the Group's management team and increase its costs.
In March 2019, a class action was brought in Florida against
three US subsidiaries of the Company. The suit alleges violations
of the FACTA legislation, which requires persons that accept credit
and/or debit cards for the transaction of business to truncate all
but the last five digits of the card number on printed receipts
provided to consumers. As the suit is protracted, and no specific
monetary amount has been claimed, the potential liability (if any)
in respect of such claim or any related claims is difficult to
quantify. The subsidiaries continue to defend themselves robustly.
Our legal costs of defending the claim are insured subject to the
policy excess.
Following the pre-IPO carve out of The Watch Lab Holdings
Limited and The Watch Shop Holding Limited certain leases continue
to be guaranteed by the Group. The maximum liability that could
crystallise under these obligations is GBP1,045,000 (2020:
GBP1,661,000).
13. Post-balance sheet events
The Government announced that the UK rate of corporation tax
will increase to 25% with effect from 1 April 2023. This was
substantively enacted on 24 May 2021, subsequent to the period end
date. The change will affect the value of the deferred tax balances
within the UK tax workings. If the 25% rate was applied to the
existing balances, then this would increase the asset by
approximately GBP2,100,000. This change has not been reflected in
the workings since it will be accounted for prospectively in line
with IAS 10 "Events after the reporting period".
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. The Group is assessing whether to continue with APMs on
a pre-IFRS 16 basis. However, these APMs will continue to be
presented on a pre-IFRS 16 basis during FY22.
4-Wall EBITDA
Net margin less store costs.
Why used
4-Wall EBITDA is a direct measure of profitability of the store
operations.
Reconciliation to IFRS measures
(GBPmillion) FY21 FY20
Revenue 905.1 810.5
------- -------
Cost of inventory expensed (575.8) (510.6)
------- -------
Other 3.0 4.8
------- -------
Net margin 332.3 304.7
------- -------
Store costs (166.6) (178.2)
------- -------
4-Wall EBITDA 165.7 126.5
------- -------
Store costs includes rental costs on a pre-IFRS 16 basis (i.e.
under IAS 17).
Adjusted Earnings Before Interest and Tax (EBIT)
Operating profit before exceptional items and IFRS 16
impact.
Why used
Measure of profitability that excludes one-off exceptional costs
and IFRS 16 adjustments to allow for comparability between
years.
This measure was linked to management incentives in the
financial year.
Reconciliation to IFRS measures
Reconciled in note 2 to the Consolidated Financial
Statements.
Adjusted EBITDA
EBITDA before exceptional items and IFRS 16 impact.
Why used
Measure of profitability that excludes one-off exceptional items
and IFRS 16 adjustments to allow for comparability between
years.
Reconciliation to IFRS measures
Reconciled in note 2 of the Consolidated Financial
Statements.
Adjusted Earnings Per Share
Basic Earnings Per Share before exceptional items and IFRS 16
impact.
Why used
Measure of profitability that excludes one-off exceptional items
and IFRS 16 adjustments to provide comparability between years.
This measure was linked to management incentives in the
financial year.
Reconciliation to IFRS measures
Reconciled in note 6 of the Consolidated Financial
Statements.
Adjusted profit before tax
Profit before tax before exceptional items and IFRS 16
impact.
Why used
Measure of profitability that excludes one-off exceptional items
and IFRS 16 adjustments to provide comparability between years.
Reconciliation to IFRS measure
(GBPmillion) FY21 FY20
Segment profit (as
reconciled in note
2 of the financial
statements) 77.6 55.9
------ ------
Net finance costs (18.2) (46.8)
------ ------
Exceptional finance
costs (note 4) - 28.5
------ ------
IFRS 16 lease interest 12.7 11.8
------ ------
Adjusted profit before
tax 72.1 49.4
------ ------
Average selling price (ASP)
Revenue (including sales related taxes) generated in a period
from sales of a product category divided by the total number of
units of such products sold in such period.
Why used
Measure of sales performance.
Reconciliation to IFRS measures
Not applicable.
Constant currency basis
Results for the period had the exchange rates remained constant
from the comparative period.
Why used
Measure of revenue growth that excludes the impact of foreign
exchange.
Reconciliation
(GBP/$ million)
FY21 Group revenue (GBP) 905.1
----------------
FY21 US revenue ($) 397.3
----------------
FY21 US revenue (GBP)
@ FY21 exchange rate 298.6
----------------
FY21 US revenue (GBP)
@ FY20 exchange rate 311.7
----------------
FY21 Group revenue (GBP)
@ constant currency 918.2
----------------
FY21 exchange rate GBP1 : $1.331
----------------
FY20 exchange rate GBP1 : $1.274
----------------
Exceptional items
Items that in the judgement of the Directors need to be
disclosed by virtue of their size, nature or incidence, in order to
draw the attention of the reader and to show the underlying
business performance of the Group.
Why used
Draws the attention of the reader and to show the items that are
significant by virtue of their size, nature or incidence.
Reconciliation to IFRS measures
Disclosed in note 4 of the Consolidated Financial
Statements.
Net debt
Total borrowings (excluding capitalised transaction costs) less
cash and cash equivalents. Excludes the impact of IFRS 16.
Why used
Measures the Group's indebtedness.
Reconciliation to IFRS measures
Reconciled in note 9 of the Consolidated Financial
Statements.
Free cash flow
Cash flow shown on a pre-IFRS 16 basis excluding expansionary
capex, acquisitions of subsidiaries, exceptional items and
financing activities.
Why used
Represents the cash generated from operations including
maintenance of capital assets. Demonstrates the amount of available
cash flow for discretionary activities such as expansionary capex,
dividends or acquisitions.
Reconciliation to IFRS measures
(GBPmillion) FY21 FY20
Net increase in cash
and cash equivalents 4.8 37.0
------ ------
Net financing cash
flows 143.4 (1.5)
------ ------
Interest paid (4.5) (11.6)
------ ------
Lease payments (IFRS
16) (56.8) (36.4)
------ ------
Acquisition of business
combinations 1.4 31.1
------ ------
Exceptional items* 0.2 5.0
------ ------
Expansionary capex 21.2 27.2
------ ------
Free cash flow 109.7 50.8
------ ------
*Included within exceptional items is the cash impacting
exceptional items of GBP193,000 of professional and legal expenses
on business combinations (as per note 4). In FY20, this includes
GBP310,000 professional and legal expenses on business
combinations, GBP2,071,000 bonus paid to employees on IPO and
GBP2,635,000 professional and legal fees relating to the IPO.
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 GBP109.7 million divided by Adjusted EBITDA of
GBP105.4 million shown as a percentage.
Net margin
Revenue less inventory recognised as an expense, commissions
paid to the providers of interest free credit and inventory
provision movements.
Why used
Measures the profit made from the sale of inventory before store
or overhead costs.
Reconciliation to IFRS measures
Refer to 4-Wall EBITDA.
Return on Capital Employed (ROCE)
Return on Capital Employed (ROCE) is defined as Adjusted EBIT
divided by average capital employed. Average capital employed is
total assets less current liabilities on a pre-IFRS 16 basis.
Why used
ROCE demonstrates the efficiency with which the Group utilises
capital. ROCE is linked to management incentives.
Reconciliation to IFRS measures
Adjusted EBIT of GBP77.6m divided by the average capital
employed, which is calculated as follows:
GBPmillion FY21 FY20
Pre-IFRS 16 total assets 576.6 595.7
-------- --------
Pre-IFRS 16 current liabilities (156.6) (229.3)
-------- --------
Capital employed 420.0 366.4
-------- --------
Average capital employed 393.2
-------- --------
Other definitions
Expansionary capital expenditure/capex
Expansionary capital expenditure relates to new stores,
relocations or refurbishments greater than GBP250,000.
Luxury watches
Watches that have a Recommended Retail Price greater than
GBP1,000.
Luxury jewellery
Jewellery that has a Recommended Retail Price greater than
GBP500.
Non-core stores
These stores were identified as not core to the ongoing strategy
of the business at the time of the IPO and will be closed at the
end of their lease term.
Store 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.
FY21 Income Statement
GBPmillion Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Revenue 905.1 - 905.1
----------- ------------------- ------------
Operating profit 69.0 12.9 81.9
----------- ------------------- ------------
Net finance costs (5.6) (12.6) (18.2)
----------- ------------------- ------------
Profit before tax 63.4 0.3 63.7
----------- ------------------- ------------
Tax (13.4) 0.3 (13.1)
----------- ------------------- ------------
Profit after tax 50.0 0.6 50.6
----------- ------------------- ------------
Basic EPS 20.9p 0.2p 21.1p
----------- ------------------- ------------
FY21 Balance Sheet
GBPmillion Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Goodwill and intangibles 150.6 - 150.6
----------- ------------------- ------------
Property, plant and equipment 93.4 0.3 93.7
----------- ------------------- ------------
IFRS 16 right-of-use assets - 253.7 253.7
----------- ------------------- ------------
Inventories 226.4 - 226.4
----------- ------------------- ------------
Trade and other receivables 17.7 (7.3) 10.4
----------- ------------------- ------------
Trade and other payables (178.4) 26.6 (151.8)
----------- ------------------- ------------
IFRS 16 lease liabilities - (301.4) (301.4)
----------- ------------------- ------------
Net debt (43.9) - (43.9)
----------- ------------------- ------------
Other 1.6 11.0 12.6
----------- ------------------- ------------
Net assets 267.4 (17.1) 250.3
----------- ------------------- ------------
FY20 Income Statement
GBPmillion Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Revenue 810.5 - 810.5
----------- ------------------- ------------
Operating profit 34.2 14.1 48.3
----------- ------------------- ------------
Net finance costs (35.0) (11.8) (46.8)
----------- ------------------- ------------
Profit before tax (0.8) 2.3 1.5
----------- ------------------- ------------
Tax (1.2) 0.2 (1.0)
----------- ------------------- ------------
Profit after tax (2.0) 2.5 0.5
----------- ------------------- ------------
Basic EPS (0.9)p 1.1p 0.2p
----------- ------------------- ------------
FY20 Balance Sheet
GBPmillion Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Goodwill and intangibles 155.0 (0.2) 154.8
----------- ------------------- ------------
Property, plant and equipment 99.8 1.6 101.4
----------- ------------------- ------------
IFRS 16 right-of-use assets - 251.6 251.6
----------- ------------------- ------------
Inventories 243.4 - 243.4
----------- ------------------- ------------
Trade and other receivables 11.6 (0.7) 10.9
----------- ------------------- ------------
Trade and other payables (164.6) 25.5 (139.1)
----------- ------------------- ------------
IFRS 16 lease liabilities - (308.0) (308.0)
----------- ------------------- ------------
Net debt (129.7) - (129.7)
----------- ------------------- ------------
Other 1.9 12.3 14.2
----------- ------------------- ------------
Net assets 217.4 (17.9) 199.5
----------- ------------------- ------------
[1] Refer to the Glossary for definition.
[2] FY19 is a pre-COVID-19 reference period.
[3] 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.
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