TIDMWOSG

RNS Number : 2988H

Watches of Switzerland Group PLC

02 August 2021

02 August 2021

Watches of Switzerland Group PLC (the "Company")

Annual Report and Accounts 2021

In compliance with Listing Rule 9.6.1, the Company announces that the following documents have today been submitted to the UK Financial Conduct Authority, and will shortly be available for inspection via the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

   --     Annual Report and Accounts 2021; and 

-- Notice of Annual General Meeting of the Company, to be held at 36 North Row, London W1K 6DH at 2pm on 2(nd) September 2021

In accordance with DTR 6.3.5(3) the Annual Report and Accounts 2021 and the Notice of Annual General Meeting are accessible on the Group's website: thewosgroupplc.com/governance /

A condensed set of Watches of Switzerland Group PLC financial statements and information on important events that have occurred during the year and their impact on the financial statements were included in the Company's FY 21 results announcement on 8(th) July 2021. That information together with the information set out below which is extracted from the Annual Report and Accounts 2021 constitute the requirements of DTR 6.3.5 which is to be communicated via an RNS in unedited full text. This announcement is not a substitute for reading the full Annual Report and Accounts 2021. Page and note references in the text below refer to page numbers in the Annual Report and Accounts 2021. To view the FY 21 results announcement visit the Company website: thewosgroupplc.com/governance /

For further information, please contact:

Laura Battley

Company Secretary and General Counsel

+44 (0)20 7317 4604

companysecretariat@thewosgroup.com

Additional Information

Principal risks and uncertainties

Below are descriptions of our principal risks and uncertainties and explanations of how we manage or mitigate the risk. It is recognised that the Group is exposed to risks wider than those listed. However, we have disclosed those we believe are likely to have the greatest impact on our business at this moment in time.

 
                 Principal risk description                     How we manage or mitigate the risk 
  Business strategy execution and 
   development: 
                                                   The Board reviews business strategy 
   If the Board adopts the wrong strategy          on a regular basis to determine 
   or does not implement its strategy              how sales and profit can be maximised, 
   effectively, the business may suffer.           and business operations be made 
                                                   more efficient 
   The Group's growth strategy exposes 
   it to risks and the Group may encounter         The Board has significant relevant 
   setbacks in its ongoing expansion               experience, including in the retail 
   in the UK and the US.                           and luxury markets 
 
   The Group's significant investments             The CEO provides updates to the 
   in its store portfolio, IT systems,             Board on key development opportunities 
   colleagues and marketing may be                 and initiatives 
   unsuccessful in growing the Group's 
   business as planned.                            Expansion of the property portfolio 
                                                   or potential acquisitions must 
   The Group may make acquisitions                 meet strict payback criteria. Return 
   or other investments that prove                 on investment of marketing and 
   unsuccessful or divert its resources.           other investment activity is monitored 
   Successful growth through future                closely 
   acquisitions is dependent upon 
   the Group's ability to identify                 Key management information is provided 
   suitable acquisition targets, conduct           to the Board on a regular basis 
   appropriate due diligence, negotiate            to help inform strategic decision 
   transactions on favourable terms,               making 
   complete such transactions and 
   successfully integrate the acquired             The Group adapted its strategy 
   businesses.                                     to take advantage of online trading 
                                                   and remote clienteling activities 
   The Group may fail to respond to                to maximise sales throughout lockdown 
   the pressures of an increasingly                periods and post re-opening 
   changing retail environment effectively 
   and rapidly, including from the                 The Group has diversified its operations 
   impact of COVID-19. The re-evaluation           through the expansion of mono-brand 
   of priorities and their delivery,               boutiques and ecommerce platforms. 
   including the consideration of                  Having entered the US market in 
   initiatives to respond to permanent             2017 there is international market 
   changes in customer behaviours                  diversification reducing reliance 
   or to change working practices,                 on one territory 
   is paramount in the current environment 
                                               --------------------------------------------------- 
  Key suppliers and supply chain: 
 
   The manufacture of key luxury watch            The Group fosters strong relationships 
   brands is highly concentrated among            with suppliers, many of which have 
   a limited number of brand owners               been held for a significant length 
   and the production of luxury watches           of time 
   is limited by the small number 
   of master watchmakers and the availability     Supplier distribution contracts 
   of artisanal skills.                           are monitored to ensure ongoing 
                                                  compliance with contractual obligations 
   Owners of luxury watch brands control 
   distribution through strict, selective         The Group works collaboratively 
   distribution agreements. Consequently,         with suppliers to identify product 
   the relationship with owners of                trends and forward demand 
   luxury watch brands is crucial 
   to the Group's success.                        Continued focus on providing exceptional 
                                                  customer experience, representing 
   Some of the Group's distribution               the brands in the best possible 
   agreements with luxury watch brands            way 
   provide owners of such brands with 
   a right to terminate the agreement             In-depth training for store colleagues 
   in the event of a change of control            is provided, including specific 
   and/or management of the Group.                training provided by the brand 
                                                  owners themselves 
   The Group is subject to the risk 
   that owners of luxury watch brands 
   may decide to terminate these contracts 
   or otherwise not to renew them 
   upon expiry, or to reduce the number 
   of agencies they grant to the Group. 
 
   The Group's distribution agreements 
   with suppliers do not guarantee 
   a steady supply of merchandise. 
 
   The Group's business model may 
   also come under significant pressure 
   should the owners of luxury watch 
   brands choose to distribute their 
   own watches, increasingly or entirely 
   by-passing third party retailers 
   such as the Group. 
 
   As a result of COVID-19, supplier 
   manufacturing operations could 
   be forced to close, impacting operational 
   activities, customer experience 
   and business strategy. 
 
 
  Customer Experience and Market 
   Risk 
                                                      The Group provides the ultimate 
   An inability to maintain a consistent              luxury environment for its customers 
   high-quality experience for the                    to feel welcome, appreciated and 
   Group's customers across the sales                 supported 
   channels, particularly within the 
   store network, and during the COVID-19             Initiatives launched in response 
   pandemic, could adversely affect                   to the COVID-19 lockdown to continue 
   business.                                          making product available safely 
                                                      to customers 
   The Group faces competition and 
   any failure by the Group to compete                Exceptional training is provided 
   effectively could result in a loss                 for our store colleagues, and other 
   of market share or the ability                     customer facing colleagues, to 
   to retain supplier agencies. The                   allow them to provide the best 
   Group also competes with the grey                  customer service, along with in-depth 
   market, where unauthorised dealers                 product knowledge 
   may be offering significant discounts. 
                                                      The CRM database allows the Group 
   Long term consumer attitudes to                    to engage with the customer from 
   diamonds, gold and other precious                  a potential to a loyal customer 
   metals and gemstones could be affected 
   by a variety of issues, including                  The Group continues to invest in 
   concern over the source of raw                     and develop its product offering 
   materials, the impact of mining                    to improve the value offered to 
   and refining of minerals on the                    consumers, retailers and manufacturers 
   environment, labour conditions 
   in the supply chain, and the availability          Competitor activity is monitored 
   and perception of substitute products,             in detail, enabling strategic decision 
   such as cubic zirconia and laboratory-created      making on key market positions 
   diamonds. Equally, longer term 
   consumer attitudes to more technologically         The diversification of the Group 
   advanced watches, such as "smart                   through mono-brand boutiques and 
   watches" could reduce consumer                     significant online presence together 
   demand for luxury watches                          with the Group's scale and technological 
                                                      capabilities are competitive advantages 
                                                      for the Group 
  Colleague talent and capability: 
 
   The Group depends on the services                  The Trading Board considers the 
   of key personnel to manage its                     development of Senior Management 
   business, and the departure of                     to ensure there are opportunities 
   such personnel or the failure to                   for career development, promotion 
   recruit and retain suitable personnel              and appropriate succession 
   could adversely affect the Group's 
   business.                                          The Nomination Committee considers 
   Customer experience is an essential                the succession planning for the 
   element in the success of the Group's              Board 
   business, where many customers 
   prefer a more personal face-to-face                The Group's award winning 'VibE' 
   experience and have established                    recognition programme is in place 
   personal relationships with the                    to incentivise and motivate all 
   Group's sales colleagues. An inability             colleagues 
   to recruit, train, motivate and 
   retain suitably qualified colleagues,              A wide range of training and development 
   especially with specialised knowledge              programmes are available to colleagues, 
   of luxury watches, would have a                    including the Group's own Academy 
   material impact on the Group. 
                                                      A group-wide engagement survey 
                                                      provides an insight into what colleagues 
                                                      feel would make the Group an even 
                                                      better place to work 
 
                                                      The Group continually reviews the 
                                                      remuneration and benefits packages 
                                                      for all colleagues to make sure 
                                                      they are appropriately rewarded 
                                                      for the substantial contribution 
                                                      they make to the Group's growth 
                                                      and success. These benefits and 
                                                      the value they bring to colleagues 
                                                      are continually communicated to 
                                                      ensure they are taking advantage 
                                                      of them 
 
                                                      A focused project group has been 
                                                      established, with an objective 
                                                      to monitor and reduce retail labour 
                                                      turnover, particularly in the first 
                                                      year of employment 
 
                                                      The Group is initiating a shift 
                                                      from part time to full time contracts 
                                                      for retail colleagues 
 
                                                      A talent bank has been established, 
                                                      which provides a pipeline for management 
                                                      and high potential hires 
 
                                                      Succession planning for key management, 
                                                      below Executive level, has been 
                                                      presented to the Nomination Committee 
 
 
  Business interruption and IT infrastructure: 
 
   Adverse weather conditions, pandemics,          The Group has a framework of operational 
   travel disruption, natural disasters,           procedures and business continuity 
   terrorism, acts of war or other                 plans that are regularly reviewed, 
   external events could adversely                 updated and tested 
   affect consumer discretionary spending 
   or cause a disruption to the Group's            The multi-channel model allows 
   operations.                                     customers to purchase online from 
                                                   the safety and comfort of their 
   The inability of the Group to be                homes 
   able to operate stores or a significant 
   reduction in available colleagues               Robust security arrangements are 
   to operate the business, such as                in place across our store network 
   during the COVID-19 pandemic, would             to protect people and products 
   significantly impact the operations             in the case of security incidents 
   of the business. 
                                                   A comprehensive insurance programme 
   The Group offers flexible delivery              is in place to offset the financial 
   options (home delivery or click                 consequences of insured events 
   and collect in store) and its online 
   operations rely on third party                  Business critical systems are based 
   carriers and transportation providers.          on established, industry leading 
   The Group's shipments are subject               package solutions 
   to various risks, including labour 
   strikes and adverse weather.                    A detailed IT development and security 
                                                   roadmap is in place aligned to 
   The Group may experience significant            our strategy 
   theft of products from its stores, 
   distribution centres or during                  Reliable and reputable third party 
   the transportation of goods. If                 logistic partners have been engaged 
   a hold-up, burglary or other theft              to ensure the secure transportation 
   incident takes a violent turn,                  of goods 
   the Group may also suffer reputational 
   damage and our customers may become             The Group put in place action plans 
   less inclined to visit our stores.              to effectively deal with the COVID-19 
                                                   pandemic impact on business operations 
   Disruptions to, or failures in, 
   the Group's IT infrastructure and 
   networks, or those of third parties, 
   could disrupt the Group's operations, 
   especially during periods of increased 
   reliance on these systems such 
   as those experienced during the 
   COVID-19 lockdowns. 
 
   The Group relies on IT networks 
   and systems, some of which are 
   managed by third parties, to process, 
   encrypt, transmit and store electronic 
   information, and to manage or support 
   a variety of business processes 
   and activities, including sales, 
   supply chain, merchandise distribution, 
   customer invoicing and collection 
   of payments. 
----------------------------------------------  ------------------------------------------- 
  Data protection and cyber security: 
 
   The increasing sophistication and               Significant investment in systems 
   frequency of cyber-attacks, coupled             development and security programmes 
   with data protection laws, highlight 
   the escalating information security             Systems vulnerability and penetration 
   risk facing all businesses.                     testing is carried out regularly 
 
   As the Group operates in both the               The Data Protection Committee meets 
   US and UK markets, the regulatory               at least six times a year to review 
   environment surrounding these areas             related processes and emerging 
   is considered more complex.                     risks 
   Security breaches and failures 
   in the Group's IT infrastructure                GDPR policies, procedures and training 
   and networks, or those of third                 in place 
   parties, could compromise sensitive 
   and confidential information and                Strict access rights are in place 
   affect the Group's reputation.                  to limit access to data and reports 
                                                   to limited people 
   Theft or loss of Company or customer 
   data or potential damage to any                 Regular communication with colleagues 
   systems from viruses, ransomware                on the risk of "phishing" emails 
   or other malware could result in                and alerts of identified examples 
   fines and reputational damage to 
   the business that could negatively              Security Information and Event 
   impact on our sales.                            Management (SEIM) tools are being 
                                                   introduced across the Group's technology 
   Potential additional COVID-19 related           estate 
   security risks in relation to increased 
   working from home arrangements,                 VPN security controls have been 
   an increase in phishing campaigns,              enhanced in light of the increased 
   and increased reliance on third                 requirement for use through working 
   parties supporting critical support             from home arrangements 
   services. 
                                                   Enhanced password security measures 
                                                   have been introduced to decrease 
                                                   the likelihood of a breach 
 
 
  Regulatory and compliance: 
 
   Fines, litigation, and reputational             The Group actively monitors both 
   damage could arise if the Group                 regulatory developments in the 
   fails to comply with legislative                UK and US and compliance with existing 
   or regulatory requirements including,           obligations 
   but not limited to, consumer law, 
   health and safety, employment law,              Clear policies and procedures are 
   data protection,                                in place, including, but not limited 
   anti-bribery and corruption, competition        to, anti-bribery and corruption, 
   law, anti-money laundering and                  whistleblowing, and data protection 
   supply chain regulations. 
   As the Group continues to expand                Mandatory induction briefings and 
   in the US, there is a risk the                  training for all staff on regulation 
   business lacks the detailed knowledge           and compliance 
   of US laws and regulations resulting 
   in a breach, significant fine and               Experienced in-house legal team 
   reputational impact.                            with external expertise sought 
   There is a risk that the Group                  as needed 
   could fail to adequately look after 
   the health and wellbeing of its                 The established culture and values 
   colleagues and customers, especially            foster open, honest communication 
   considering the challenges faced 
   by COVID-19, with potential breaches            Operational activities have been 
   of health and safety laws and regulations.      amended, and continue to be updated, 
                                                   to comply with guidance provided 
                                                   by the Government to prioritise 
                                                   the safety of colleagues and customers 
 
                                                   Regulatory compliance reviews form 
                                                   part of the rolling internal audit 
                                                   plan 
  Economic and political: 
 
   The Group's business is geographically           Regular monitoring of economic 
   concentrated in the UK and US.                   and political events 
   Any sustained stagnation or deterioration 
   in the luxury watch or jewellery                 Focus on customer service to attract 
   markets or decline in consumer                   and retain customers 
   spending in the UK or US could 
   have a material adverse impact                   Detailed sales data is analysed 
   on the Group's business.                         to anticipate future trends and 
                                                    demand, taking into consideration 
   The Group or its suppliers may                   the current economic environment 
   not be able to anticipate, identify 
   and respond to changing consumer                 Through the expansion into the 
   preferences in a timely manner,                  US, the Group is not wholly dependent 
   and the Group may not manage its                 on the economic or political environment 
   inventory in line with customer                  in one single market 
   demand. 
 
   Ongoing legal, political and economic 
   uncertainty in the UK, US and international 
   markets could give rise to significant 
   currency fluctuations, interest 
   rate increases, adverse taxation 
   arrangements or affect current 
   trading and supply arrangements. 
                                                -------------------------------------------- 
  Brand and reputational damage: 
 
   The Watches of Switzerland Group's              The Group has a clear and open 
   trading brands and its corporate                culture with a focus on trust and 
   brand are an important asset, and               transparency 
   failure to protect the Group's 
   reputation and brand could lead                 Training and monitoring of adherence 
   to a loss of trust and confidence.              by colleagues to Group policies 
   This could result in a decline                  and procedures 
   in the customer base, affect the 
   ability to recruit and retain the               Good customer experience is a key 
   best people, and damage our reputation          priority of the Group 
   with our suppliers. 
                                                   The Group undertakes regular customer 
                                                   engagement to understand and adapt 
                                                   the product, offer and store environment 
 
                                                   The use of bold, impactful, digital-led 
                                                   marketing, along with an in-depth 
                                                   knowledge of products, makes the 
                                                   Group an authority in the markets 
                                                   it serves 
                                                -------------------------------------------- 
  Financial and treasury: 
 
   The Group's ability to meet its                 The Group's debt position, available 
   financial obligations and to support            funding and cash flow projections 
   the operations and expansion of                 are regularly monitored 
   the business is dependent on having 
   sufficient funding over the short,              Current lending facilities are 
   medium and long term. The Group                 in place until April 2023 and June 
   is reliant on the availability                  2024. On 18 June 2020, the covenant 
   of adequate financing from banks                requirements on the UK facilities 
   and capital markets to meet its                 were amended to reflect a liquidity 
   liquidity needs.                                headroom requirement, rather than 
                                                   financial ratios, for the October 
   The Group's level of indebtedness               2020 and April 2021 covenant tests 
   could adversely affect its ability 
   to react to changes in the business 
   and may limit the commercial and 
   financial flexibility to operate 
   the business. 
 
   The Group is exposed to foreign 
   exchange risk and profits may be 
   adversely impacted by unforeseen 
   movements in foreign exchange rates. 
 
   Significantly reduced trading over 
   an extended period, due to the 
   COVID-19 pandemic, could impact 
   the business's ability to operate 
   within committed credit facilities. 
   This has been considered as part 
   of the Group's going concern assessment 
   on page 114 
----------------------------------------------  -------------------------------------------- 
 

Further information on the financial risks we face and how they are managed is provided on pages 102 to 113.

Directors' Responsibility Statement

The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Group and the Company as at the end of the financial year, and of the profit or loss of the Group for the financial year.

Under that law the Directors have elected to prepare the Group Financial Statements in accordance with International Financial Reporting Standards (IFRSs) in conformity with the requirements of the Companies Act 2006 and have elected to prepare the Company's financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102 (The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland) and the Companies Act 2006. Under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules, Group Financial Statements are required to be prepared in accordance with IFRSs adapted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing the Annual Report and Accounts, the Directors are required to:

- Select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (or in respect of the parent company Financial Statements, Section 10 of FRS 102) and then apply them consistently;

- Make judgements and accounting estimates that are reasonable and prudent;

- Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

- Provide additional disclosures when compliance with the specific requirements in IFRSs (or in respect of the parent company financial statements, FRS 102) is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;

- For the Group Financial Statements, state whether International Financial Reporting Standards in conformity with the requirements of the Companies Act 2006 and IFRSs adapted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union have been followed, subject to any material departures disclosed and explained in the Financial Statements;

- For the Parent Company Financial Statements, state whether applicable UK accounting standards, FRS 102, have been followed, subject to any material departures disclosed and explained in the Parent Company financial statements;

- Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the Directors are also responsible for preparing a Strategic report, Directors' report, Directors' Remuneration report and Corporate Governance statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.

Each of the Directors, whose names and functions are listed on pages 128 to 129 confirms that, to the best of their knowledge:

- that the Group Financial Statements, which have been prepared in accordance with International Financial Reporting Standards in conformity with the requirements of the Companies Act 2006 and IFRSs adopted pursuant to Regulation (EC) 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group;

- that the Annual Report and Accounts 2021, including the Strategic Report, includes a fair review of the development and performance of the business and the position of the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

- that they consider the Annual Report and Accounts 2021, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy

The Directors of Watches of Switzerland Group PLC are listed in the Group's Annual Report and Accounts 2021 and on the Group's website: thewosgroupplc.com

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