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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END
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