TIDMWOSG
RNS Number : 8591F
Watches of Switzerland Group PLC
13 July 2023
13 July 2023
Watches of Switzerland Group PLC
FY23 Results
for the 52 weeks to 30 April 2023
Record year of revenue, profitability and return on capital
employed
Entering FY24 well-set for further growth and significantly
ahead of Long Range Plan
Brian Duffy, Chief Executive Officer, said:
"Our record performance is testament to our unique combination
of longstanding luxury brand partnerships, dedicated colleagues
focused on delivering exceptional client service, and our
well-invested network of showrooms, which are supported by leading
multi-channel capabilities. Luxury watch demand remains strong and
continues to outpace supply, with our client registration lists
extending and average selling prices growing.
"We have been busy expanding our international network of
showrooms, adding a total of 28 across the UK, US and Europe,
whilst also upgrading a further 13 showrooms, including the rollout
of our Goldsmiths Luxury format. Our Xenia Client Experience
Programme, which we have now introduced across our business,
elevates our client service proposition even further, taking
inspiration from the world of luxury hospitality. We take great
pride in doing what we can to care for our people, our communities
and our planet, and are pleased to have achieved an MSCI ESG Rating
of AAA in recognition of our ESG credentials.
"We start the new financial year with some great projects, with
the opening of our Watches of Switzerland showroom at American
Dream in New Jersey, upgrading and relocating our Mayors showroom
in Dadeland Florida, the first opening of our new Mappin & Webb
contemporary showroom design, and five mono-brand boutiques in the
UK and Europe including our first showroom in Germany. We reiterate
our guidance for FY24 which reflects our continued confidence in
the strength of our organic growth strategy, whilst we continue to
actively pursue additional inorganic growth opportunities to
enhance that growth.
"We enter FY24 significantly ahead of where we expected to be
when we presented our Long Range Plan in 2021, and we look forward
to presenting our Long Range Plan update, which will outline our
growth ambitions beyond FY26 to FY28, in Autumn this year."
52 weeks 52 weeks YoY change YoY change
GBPmillion ended ended Reported Constant
30 April 1 May 2022 rates currency
2023 (2)
---------- ------------
Group revenue 1,543 1,238 25% 19%
UK and Europe 890 810 10% 10%
US 653 428 52% 35%
Adjusted EBITDA
(1) 201 162 24%
Adjusted EBITDA
margin 13.1% 13.1% -
Adjusted EBIT
(1) 165 130 27%
Adjusted EBIT
margin 10.7% 10.5% 20bps
Adjusted EPS(1)
(p) 52.7 41.8 26%
Statutory operating
profit 179 142 26%
Statutory operating
margin 11.6% 11.5% 10bps
Statutory basic
EPS (p) 51.2 42.2 21%
Statutory profit
before tax 155 126 23%
Free cash flow(1) 146 112 30%
Return On Capital
Employed(1) 27.9% 27.4% 50bps
Net cash/(debt)(1) 16 (14)
--------------------- ---------- ------------ ----------- -----------
FY23 Financial Highlights
-- Group revenue GBP1,543 million, +25% at reported rates, +19%
at constant currency on prior year
o Luxury watch sales grew 28% year-on-year (representing 87% of
Group revenue) driven by a combination of increased average selling
price (ASP) as well as volume growth
o Luxury jewellery sales grew 10% driven by an increase in ASP
with focus on full price sell through
o Excellent progress with showroom expansion and refurbishment
programme
-- Adjusted EBIT (1) +27% to GBP165 million (FY22: GBP130 million)
o Adjusted EBIT margin +20bps to 10.7% (FY22: 10.5%, when
margins benefited from GBP5 million of UK business rates relief)
driven by sales and operational leverage against an inflationary
backdrop
-- Statutory operating profit +26% to GBP179 million (FY22: GBP142 million)
-- Expansionary capital expenditure (2) of GBP68 million (FY22:
GBP41 million) with 27 (FY22: 18) new showrooms opened and 13
showrooms refurbished (FY22: 17)
-- Free cashflow 1 of GBP146 million (FY22: GBP112 million) with
conversion +330bps to 72% (FY22: 69%) benefiting from strong
trading in the year partially offset by investment in inventory
-- Return on Capital Employed (1) increased 50bps to 27.9% (FY22: 27.4%)
-- Net cash (1) of GBP16 million as of 30 April 2023 (1 May
2022: Net debt (1) of GBP14 million)
FY23 Operating Highlights
-- Continued strong momentum in the US, with revenue of GBP653
million (FY22: GBP428 million), +35% at constant currency, +52% at
reported rates
o Revenue growth excluding acquisitions +27% at constant
currency, with newly acquired showrooms performing well
o Further investment in showroom network with opening of six
mono-brand boutiques and one new Watches of Switzerland showroom
acquisition, anchored by Rolex, opened in New Jersey in July
o FY23 ended with 24 multi-brand showrooms (FY22: 23) and 23
mono-brand boutiques (FY22: 17)
-- Strong UK and Europe performance driven by domestic
clientele, with revenue of GBP890 million (FY22: GBP810 million),
+10% vs FY22
o Improved performance in airport business as traffic
recovers
o Significant investment in 15 new UK showroom openings
including four mono-brand boutiques and a Watches of Switzerland
multi-brand showroom at Battersea Power Station, London
o Continued rollout of Goldsmiths Luxury concept with nine
showrooms refurbished in FY23 and significant enhancements to two
Watches of Switzerland multi-brand showrooms
o FY23 ended with 89 multi-brand showrooms (FY22: 93) and 51
mono-brand boutiques (FY22: 38)
-- Opened six mono-brand boutiques in Europe. Consumers
responding well to elevated showroom experience and client
service
-- Pre-owned luxury watch revenue grew strong double digits with
pricing and margins maintained
Outlook
-- Despite the current macroeconomic sentiment our FY24 guidance
remains unchanged from that provided with our Q4 trading update on
17 May 2023. Guidance reflects current visibility of supply from
key brands and confirmed showroom refurbishments, openings and
closures, and excludes uncommitted capital projects and
acquisitions
-- FY24 guidance (on an organic pre-IFRS 16 basis):
o Revenue: GBP1.65 - GBP1.70 billion, growth of
8 - 11% at constant currency
o Adjusted EBIT margin In line with FY23
%:
o Total finance costs: c.GBP3 million
o Underlying tax rate: 27% - 28% reflecting the increase in
UK corporation tax
o Capex: GBP70 - 80 million
o Operating cash conversion: c.70% weighted towards H2 in line with
the seasonal pattern
The equivalent guidance on an IFRS 16 basis is:
o Adjusted EBIT margin In line with FY23
%:
o Total finance costs: GBP23 - GBP27 million
-- The Group has an exciting schedule of new showroom projects
for FY24, some of which have already been completed and others
which will be completed in the balance of the year, including:
o Watches of Switzerland multi-brand showroom in American Dream,
New Jersey opened in May
o Expansion of the mono-brand portfolio with 20 boutiques
planned across the UK, US and Europe:
-- Opened two mono-brand boutiques, Breitling and TAG Heuer, in
Cabot Circus, Bristol and one Breitling mono-brand boutique in York
in June
-- Opened our first showroom in Berlin, Germany and another
mono-brand boutique in the Mall of Scandinavia, Stockholm, both in
partnership with TAG Heuer in June
o Continued refurbishment and expansion of the showroom network
including:
-- Refurbishment and expansion of Mayors Dadeland, Florida
opened in May
-- Launched our first new contemporary showroom concept for
Mappin & Webb in York in June
-- Continued roll-out of Goldsmiths Luxury showroom format
o Launch of Rolex Certified Pre-Owned in the US next week and in
the UK in September
o Expanding Rolex Boutique in Millenia (Orlando) Florida in
Autumn 2023
o Watches of Switzerland multi-brand showroom at One Vanderbilt,
New York due to open early 2024
-- In FY25:
o Old Bond Street Rolex flagship boutique due to open Summer
2024
o AP House in Manchester, via a Joint Venture partnership with
Audemars Piguet due to open Autumn 2024
o Expanding Rolex boutique in Glasgow due to open Autumn
2024
o Relocating and expanding Watches of Switzerland multi-brand
showroom in Plano (Dallas), Texas with a new Rolex agency
-- The Group is exposed to movements in the GBP/$ exchange rate
when translating the results of its US operations into Sterling.
The Actual average exchange rate for FY23 was 1.20.
Conference call
A webcast conference call for analysts and investors will be
held at 9.00am (UK time) today to announce the FY23 results. To
join the call, please use the following details:
Webcast link: https://brrmedia.news/WOSG_FY23
Conference call dial-in: +44 (0) 33 0551 0200
Password: Watches of Switzerland
Contacts
The Watches of Switzerland Group
Anders Romberg, CFO +44 (0) 207 317 4600
Stephanie Crinnegan, Director of Investor Relations &
Corporate Affairs +44 (0) 776 710 0603
investor.relations@thewosgroup.com
Headland
Lucy Legh / Rob Walker / Joanna Clark +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 the UK, US and Europe comprising five
prestigious brands; Watches of Switzerland (UK and US), Mappin
& Webb (UK), Goldsmiths (UK), Mayors (US) and Betteridge (US),
with a complementary jewellery offering.
As at 30 April 2023, the Watches of Switzerland Group had 193
showrooms across the UK, US and Europe including 80 dedicated
mono-brand boutiques in partnership with Rolex, OMEGA, TAG Heuer,
Breitling, TUDOR, Audemars Piguet, Grand Seiko, BVLGARI and FOPE
and has a leading presence in Heathrow Airport with representation
in Terminals 2, 3, 4 and 5 as well as seven retail websites.
The Watches of Switzerland Group is proud to be the UK's largest
retailer for Rolex, OMEGA, Cartier, TAG Heuer and Breitling
watches.
www.thewosgroupplc.com
CEO Review
FY23 was another record year for revenue and profitability, with
Group revenue growth of 25% at reported rates against the prior
year (+19% at constant currency) and continued Adjusted EBIT (1)
margin expansion. Although, as expected, the second half of FY23
saw a more challenging trading environment, luxury watch demand
remained strong and continues to exceed supply. We generated strong
cash flow, a record level of Return on Capital Employed (1) (ROCE)
of 27.9% (FY22: 27.4%) and closing net cash (1) of GBP16 million as
at 30 April 2023 (1 May 2022: net debt (1) GBP14 million). We have
over 2,800 colleagues at the Watches of Switzerland Group and I
would like to thank all our colleagues for their continued hard
work and dedication, which is key to our success.
The US business delivered exceptional growth, +52% at reported
rates against the prior year (+35% at constant currency),
generating sales of GBP653 million, and now represents 42% of Group
revenue. We continued to expand our US network, opening six
mono-brand boutiques, one new showroom acquisition, anchored by
Rolex, in New Jersey and expanded our presence in Mayors Boca
Raton, Florida. We are building our team and resources, in what is
now the number one market globally for luxury Swiss watches, and
remain confident in the long-term growth potential of the US
market.
In the UK and Europe, revenue increased 10% vs FY22, driven by
domestic clientele with encouraging ongoing improvement in our
airport business. We made significant investment in our showrooms
during the year, opening 15 new UK showrooms including five in
Battersea Power Station, a standout project. We have continued with
the rollout of our Goldsmiths Luxury concept with the reopening of
nine showrooms including our flagship in Meadowhall, Sheffield
which now features a large, dedicated Rolex room and Cartier
'Espace'.
We are delighted to have launched our entry into the European
market with the opening of five mono-brand boutiques in Stockholm
and Copenhagen and in the final quarter of the year we opened our
first mono-brand boutique in Dublin. Following the year end we
opened our first mono-brand boutique in Berlin, Germany and another
in the Mall of Scandinavia, Stockholm, both in partnership with TAG
Heuer. Our new stores in Stockholm and Copenhagen are performing in
line with our expectations. Our teams in these new cities are full
of enthusiasm and doing a fantastic job. Consumers in these markets
are responding well to our elevated showroom experience and client
service.
Luxury watches sales grew 28% year-on-year (representing 87% of
Group revenue) driven by a combination of increased average selling
price as well as volume. Luxury jewellery sales increased at a more
modest 10% in the year reflecting a tougher macroeconomic backdrop
and focus on full price sales. Growth was driven by average selling
prices as we continued to merchandise to higher price points and
reduce discounting in the US.
Turning to full year profitability, we generated an FY23
Adjusted EBIT (1) of GBP165 million and operating profit of GBP179
million. FY23 saw another year of margin expansion, with Adjusted
EBIT (1) margin increasing 20bps, as we continued to leverage our
fixed cost base, despite headwinds from product mix and Interest
Free Credit.
Having closed out FY23, I would like to reflect on where we
stand against the Long Range Plan we presented to the market back
in the summer of 2021. Following two years of exceptional
performance, sales are significantly ahead of plan, by over GBP200
million (excluding the benefits of favourable movements in foreign
exchange, which makes the differential even greater). We are
delighted with our progress, our momentum and our prospects for
future profitable investment and growth.
I am writing this on my return from the Watch & Jewellery
Initiative 2030 CEO Forum in Paris, where as industry leaders, we
acknowledged the critical importance of us coming together to
create a fully sustainable watch and jewellery industry that is
resilient to climate change, preserves natural resources and
fosters inclusivity. I'm delighted with the progress we are making
across these areas, including the verification of our science-based
emission reduction targets, development of new ESG Partner
Standards, our continuing focus on protecting human rights, and
most recently achieving an MSCI ESG Rating of AAA. We look forward
to further advocating the aims of the initiative in FY24.
I am proud of the strong culture at the Watches of Switzerland
Group, which is based on our Purpose to 'WOW our clients while
caring for our colleagues, our communities and our planet'. Our
Company values of respect, trust and confidence, underpin our
approach to talent and equal opportunity. We continue to elevate
our offer to colleagues to ensure that we attract and grow a loyal,
diverse team of highly trained and engaged colleagues who are well
rewarded for their expertise and committed to developing their
careers with our Group. Social mobility is an important part of our
DNA across the Group and we have continued to sharpen our focus on
this in FY23. I am pleased to support the investment in the
development of our colleagues and to providing development
opportunities for all.
Caring for our communities has always been a priority for us and
it is humbling to see the tremendous positive impact made possible
by The Watches of Switzerland Group Foundation, the aim of which is
to provide essential support to charities located in the
communities within which we operate, focusing on poverty, the
advancement of education and relief to those in need in both the UK
and the US. The Foundation is managed by a Board of Trustees who
bring a unique mix of experience, expertise, drive and talent. In a
year in which the external pressures have impacted significantly on
society and in particular young people, I am proud that the
Foundation has helped over 20,000 people affected by poverty and we
are pleased to support the following charities: The Prince's Trust,
Local Food Banks, Fuel Bank Foundation, Crisis, Habitat for
Humanity, Feeding South Florida, Las Vegas Food Bank. and 3 Square
and NYC Food Bank.
Looking forward, our FY24 guidance issued on 17 May 2023
projects full year sales of between GBP1.65 and GBP1.70 billion,
reflecting underlying sales growth of 8 to 11% at constant currency
with Adjusted EBIT (1) margins in line with FY23. FY24 guidance
anticipates that the more challenging trading environment of the
second half of FY23 will continue into the first half of FY24.
We have an exciting pipeline of new showroom projects planned as
we continue to invest in the Group. These include our Old Bond
Street Rolex flagship boutique due to open Summer of 2024, AP House
in the City of Manchester, via a Joint Venture partnership with
Audemars Piguet due to open Autumn of 2024, and we most recently
opened our flagship Watches of Switzerland showroom in American
Dream, New Jersey.
Finally, I would like to thank Bill Floydd for his valuable
contribution to the Group during his time here as CFO and wish him
well for the future. I am delighted that Anders Romberg has
re-joined the business as CFO in May 2023. Anders has a strong
track record of financial leadership and thorough knowledge of our
Group, as well as the specialist luxury watch and jewellery
categories, and I look forward to working with him again.
Financial Review
The Group's Consolidated Income Statement is shown below which
is presented including IFRS 16 'Leases' and includes exceptional
items.
52 weeks ended 52 weeks ended
Income Statement - post-IFRS 16 and exceptional items (GBPmillion) 30 April 2023 1 May 2022 YoY variance
Revenue 1,542.8 1,238.0 25%
-------------- -------------- ------------
Operating profit 178.6 142.1 26%
-------------- -------------- ------------
Net finance cost (23.8) (15.9) (50)%
-------------- -------------- ------------
Profit before taxation 154.8 126.2 23%
-------------- -------------- ------------
Taxation (33.0) (25.2) (31)%
-------------- -------------- ------------
Profit for the financial period 121.8 101.0 21%
-------------- -------------- ------------
Basic earnings per share 51.2p 42.2p 21%
-------------- -------------- ------------
Management monitor and assess the business performance on a
pre-IFRS 16 and exceptional items basis, which is shown below. This
aligns to the reporting used to inform business decisions,
investment appraisals, incentive schemes and debt covenants. A full
reconciliation between the pre- and post-IFRS 16 results is shown
in the Glossary.
52 weeks ended 52 weeks ended
Income Statement - pre-IFRS 16 and exceptional items (GBPmillion) 30 April 2023 1 May 2022 YoY variance
Revenue 1,542.8 1,238.0 25%
-------------- -------------- ------------
Net margin (1) 576.3 470.6 22%
-------------- -------------- ------------
Showroom costs (279.2) (226.7) (23)%
-------------- -------------- ------------
4-Wall EBITDA (1) 297.1 243.9 22%
-------------- -------------- ------------
Overheads (84.1) (73.3) (15)%
-------------- -------------- ------------
EBITDA 213.0 170.6 25%
-------------- -------------- ------------
Showroom opening and closing costs (11.6) (8.4) (40)%
-------------- -------------- ------------
Adjusted EBITDA (1) 201.4 162.2 24%
-------------- -------------- ------------
Depreciation, amortisation and loss on disposal of fixed assets (36.3) (31.9) (13)%
-------------- -------------- ------------
Segment profit (Adjusted EBIT) (1) 165.1 130.3 27%
-------------- -------------- ------------
Net finance costs (5.9) (3.7) (55)%
-------------- -------------- ------------
Adjusted profit before taxation (1) 159.2 126.6 26%
-------------- -------------- ------------
Adjusted earnings per share (1) 52.7p 41.8p 26%
-------------- -------------- ------------
Revenue
Revenue by geography and category
52 weeks ended 30 April UK and Europe US Total Mix
2023
(GBPmillion)
Luxury watches (2) 749.6 586.5 1,336.1 87%
-------------- ----- ------- ----
Luxury jewellery (2) 67.8 51.4 119.2 7%
-------------- ----- ------- ----
Other/services 72.5 15.0 87.5 6%
-------------- ----- ------- ----
Total revenue 889.9 652.9 1,542.8 100%
-------------- ----- ------- ----
52 weeks ended 1 May UK and Europe US Total Mix
2022
(GBPmillion)
Luxury watches (2) 663.9 382.6 1,046.5 85%
-------------- ----- ------- ----
Luxury jewellery (2) 72.4 36.4 108.8 9%
-------------- ----- ------- ----
Other/services 73.3 9.4 82.7 6%
-------------- ----- ------- ----
Total revenue 809.6 428.4 1,238.0 100%
-------------- ----- ------- ----
Group revenue increased by 25% (19% on a constant currency
basis) to GBP1,542.8 million.
UK and Europe revenue increased by 10% during the year through a
combination of continued strong demand, benefits from pricing,
investment in the showroom portfolio, new showrooms and strong
clienteling activity by the Group. Consumer appetite for products
remained strong and, in many instances, well above the levels that
the Group is able to supply. Our showroom colleagues continued to
build strong client relationships through Xenia, our elevated
Client Experience Programme, backed up by strong digital marketing
campaigns and offline marketing events to showcase product. Clients
continue to have the option to choose their experience through
in-person appointments or online through the Luxury Watch and
Jewellery Virtual Boutique.
During the year, the UK opened five showrooms at the iconic
Battersea Power Station in London (one multi-brand showroom and
four mono-brand boutiques) and a further ten mono-brand boutiques
in the UK. Six showrooms were closed giving a net increase of nine
in the UK. In the year, 12 refurbishments were completed enhancing
our existing estate to further elevate the partner brands we
display in those showrooms and advance our client experience.
Tourist sales remain very low, but there has been consistent
performance improvement at airports. The Group also opened its
first six mono-brand boutiques in Europe (three in Sweden, two in
Denmark and one in the Republic of Ireland). Initial trading is in
line with expectations and the impact on the Group is not material
for the year.
US revenue increased by 52% year-on-year (35% on a constant
currency basis) and the US business made up 42% of the Group's
revenue in FY23 (FY22: 35%). Underlying growth (+27% excluding
acquisitions at constant currency) was strong across all locations
with continued consumer appetite for high demand and other
products. Key locations in Florida (Mayors), Las Vegas (Wynn
Resort), and New York all delivered significant growth. This was
accomplished through a quality product offering, superior client
experience and backed up by strong marketing campaigns which had
significant reach across offline and online channels.
During the year, the US opened six mono-brand boutiques and
completed the acquisition of one showroom in New Jersey. The
acquired showroom is now branded Watches of Switzerland and
features Rolex, TUDOR, Cartier and a significant jewellery
offering. The Group also annualised the acquisition of five
showrooms from the previous year (three under the Betteridge brand
and two showrooms now branded Watches of Switzerland). Our US
ecommerce platform has continued to grow, and sales of vintage and
pre-owned luxury watches have been encouraging.
Group revenue from luxury watches grew by 28% and made up 87% of
revenue in line with the prior year. Pre-owned revenue grew by
strong double digits, with pricing and margins maintained.
Group luxury jewellery revenue grew by 10%. UK luxury jewellery
sales declined by 6% versus the prior year, where FY23 saw a more
competitive market environment including discounting. Luxury
jewellery revenue in the US showed strong underlying growth and was
further supported by the prior year acquisition of the Greenwich
Betteridge showroom and the opening of our first BVLGARI mono-brand
boutique. The US focused on the sale of full price items and the
elimination of discounting in the year.
Other/services revenue, consisting of servicing, repairs,
insurance services and the sale of fashion and classic watches and
other non-luxury jewellery grew by 6%.
Group ecommerce sales (2) increased 3% compared to the prior
year.
Profitability
Profitability as a % of revenue
------------------------------------------------------------------
Income Statement - pre-IFRS 16 and exceptional items (GBPmillion) 52 weeks ended 52 weeks ended YoY variance
30 April 2023 1 May 2022
-------------- -------------- ------------
Net margin(1) 37.4% 38.0% (60bps)
-------------- -------------- ------------
Showroom costs 18.1% 18.3% 20bps
-------------- -------------- ------------
4-Wall EBITDA(1) 19.3% 19.7% (40bps)
-------------- -------------- ------------
Adjusted EBITDA(1) 13.1% 13.1% -
-------------- -------------- ------------
Adjusted EBIT(1) 10.7% 10.5% 20bps
-------------- -------------- ------------
Net margin as a % of revenue was 37.4% in the year. This was
60bps lower than the prior year driven by product mix and higher
costs of Interest Free Credit due to interest rate rises in the UK
and US, partly mitigated by reduced promotional discounts on
jewellery.
Showroom costs increased by GBP52.5 million (+23%) from the
prior year, to GBP279.2 million. This reflects the opening of new
showrooms and the annualisation of prior year openings. Showroom
costs as a percentage of revenue reduced by 20 bps from 18.3% to
18.1%, reflecting leverage of costs. Showroom payroll costs
increased by GBP18.7 million including the impact of new showrooms,
commission on additional revenue, and annual pay rises to
colleagues. Property related costs increased from FY22 by GBP20.4
million, driven by our increased showroom portfolio and the
reintroduction of UK business rates following their suspension
during the pandemic (+GBP5.0 million versus FY22). Variable
showroom costs increased in line with revenue.
Overheads increased by GBP10.8 million (+15%) due to additional
investment in headcount, IT costs and marketing events to support
growth.
Showroom opening and closing costs include the cost of rent
(pre-IFRS 16), rates and payroll prior to the opening or closing of
showrooms, or during closures when refurbishments are taking place.
This cost will vary annually depending on the scale of expansion in
the year. Total costs for the year were GBP11.6 million versus
GBP8.4 million in FY22, reflecting the increased number of
refurbishments and openings undertaken.
Exceptional items
Exceptional items are defined by the Group as those which are
significant in magnitude or are linked to one-off events which are
expected to be infrequent in nature.
Exceptional items (GBPmillion) 52 weeks to 52 weeks to
30 April 2023 1 May 2022
Legal expenses on business acquisition 0.9 0.5
-------------- -----------
Reversal of showroom impairment (0.7) (0.4)
-------------- -----------
Amortisation of capitalised transaction costs 0.7 -
-------------- -----------
IPO costs - 1.5
-------------- -----------
Total 0.9 1.6
-------------- -----------
Costs associated with the acquisition of new showrooms are
treated as exceptional as they are regarded as non-trading,
non-underlying costs.
During FY23 the estimated 'value-in-use' recoverable amounts
were reassessed taking into account FY23 performance and the latest
discounted cash flow for each showroom. As a result of improved
trading, an impairment reversal has been made at the year end,
where the original impairment had been made through exceptional
items.
After the year end, on 9 May 2023 the Group entered into a new
financing arrangement by way of a GBP225.0 million multicurrency
revolving loan facility. On this date the existing GBP120.0 million
Term Loan and revolving credit facility of GBP50.0 million were
extinguished. The capitalised transaction fees in relation to the
existing facilities have been accelerated through exceptional
items.
IPO costs of GBP1.5 million in the prior year related to
IPO-linked share-based payments. The shares vested and were settled
in the prior year, and there will be no further costs of this
nature.
Adjusted EBIT and statutory operating profit
As a consequence of the items noted above, Adjusted EBIT was
GBP165.1 million, an increase of GBP34.8 million (+27%) on the
prior year.
After accounting for exceptional costs of GBP0.2 million and
IFRS 16 adjustments of GBP13.7 million, statutory operating profit
(EBIT) was GBP178.6m, an increase of 26% on the prior year.
Finance costs
Net finance costs (GBPmillion) 52 weeks ended 52 weeks to
30 April 2023 1 May 2022
Pre-IFRS 16 finance costs, excluding exceptionals 5.9 3.7
-------------- -----------
IFRS 16 interest on lease liabilities 17.2 12.2
-------------- -----------
Total net finance costs, excluding exceptionals 23.1 15.9
-------------- -----------
Interest payable on borrowings increased in the year, reflecting
higher market lending rates.
The IFRS 16 interest on lease liabilities increased by GBP5.0
million due to recent additions to the lease portfolio and
increased discount rates used for new leases.
Taxation
The pre-IFRS 16 effective tax rate for the year was 21.4%. This
is higher than the UK tax rate of 19.5% largely as a result of
higher taxes chargeable on US profits (26.5% including federal and
state taxes). The effective tax rate reported under IFRS 16 was
21.4%.
Balance Sheet
Balance Sheet (GBPmillion) 30 April 2023 1 May 2022
Goodwill and intangibles 200.4 183.2
--------------- ------------
Property, plant and equipment 154.4 112.5
--------------- ------------
Right-of-use assets 359.1 293.6
--------------- ------------
Inventories 356.0 302.6
--------------- ------------
Trade and other receivables 19.8 22.3
--------------- ------------
Trade and other payables (219.6) (201.4)
--------------- ------------
Lease liabilities (410.4) (340.6)
--------------- ------------
Net cash(1) /(debt(1) ) 16.4 (14.1)
--------------- ------------
Other (6.8) 3.2
--------------- ------------
Net assets 469.3 361.3
--------------- ------------
The prior year balances have been restated to reflect the
finalisation of the provisional fair values of Betteridge Jewelers,
Inc., Gotthelfs Acquisition Corp., and Vail Village Jewelers, Inc.
('Betteridge'). The net impact was a reduction in inventory and
deferred tax asset with the corresponding entry to the goodwill
balance.
Goodwill increased as a result of the US acquisition in the
year, which gave rise to GBP18.2 million of goodwill, in addition
to a GBP0.5 million adverse exchange impact. A further GBP2.7
million of computer software additions were made in the year as
part of ongoing IT developments, offset by amortisation of GBP3.2
million.
Property, plant and equipment increased by GBP41.9 million in
the year. Additions of GBP75.0 million were offset by depreciation
of GBP32.3 million, and a loss on disposal of GBP0.8 million.
Including software costs, which are disclosed as intangibles,
capital additions (including accruals) were GBP77.7 million in the
year of which GBP73.0 million was expansionary. Expansionary capex
relates to new showrooms, relocations or major refurbishments
(defined as costing over GBP0.25 million). In the year, the Group
opened 27 new showrooms, and refurbished 13 showrooms. Investment
in our portfolio is paramount to our strategy and the Group follows
a disciplined payback policy when making capital investment
decisions.
Right-of-use assets increased by GBP65.5 million in the year, to
GBP359.1 million. Additions to the lease portfolio along with lease
renewals or other lease changes (including impairment reversal of
GBP0.2 million) were GBP117.1 million. This has been offset by
depreciation of GBP50.3 million and an adverse foreign exchange
impact of GBP1.3 million.
Lease liabilities increased by GBP69.8 million in the year. The
portfolio changes noted above increased the lease liability by
GBP112.9 million. Interest charged on the lease liability was
GBP17.2 million along with a favourable exchange impact of GBP1.1
million. Lease payments were GBP59.2 million, giving a lease
liability balance of GBP410.4 million.
Inventory levels increased by GBP53.4 million (+18%) compared to
the prior year. New showrooms and acquisitions accounted for
GBP28.0 million of the increase. The balance of GBP25.4 million is
a like for like increase in showroom inventory that supports sales
growth and is reflective of price increases on a number of brands,
in addition to an increase in average product prices. The inventory
obsolescence risk remains low.
Trade and other receivables decreased by GBP2.5 million compared
to FY22. Overall the balance remains relatively low and represents
prepayments, rebate receivables, rent deposits and other ad hoc
receivables such as property contributions.
Trade and other payables increased by GBP18.2 million compared
to FY22. The increase principally relates to an increase in the
inventory trade payable aligned with the increased inventory in the
year. The increase is also as a result of higher operational
liabilities in line with the business expansion.
Other includes taxation balances, defined benefit pension and
capitalised finance costs.
Net debt and financing
Net cash on 30 April 2023 was GBP16.4 million, an increase of
GBP30.5 million since 1 May 2022, driven by GBP145.8 million of
free cash flow(1) offset by GBP67.5 million of expansionary capex,
GBP24.9 million relating to acquisitions and GBP21.3 million for
the purchase of own shares to satisfy management incentives.
Net debt post-IFRS 16 was GBP394.0 million. The value comprises
the pre-IFRS net cash of GBP16.4 million and the GBP410.4 million
lease liability.
During FY23 the Group had the following financing facilities in
place:
Facility Expiring Amount
(million)
UK Term Loan - UK SONIA + CAS + 1.75% to +2.80% June 2024 GBP120.0
----------- ----------
UK Revolving Credit Facility - UK SONIA + CAS +1.50% to +2.55% June 2024 GBP50.0
----------- ----------
US Asset Backed Facility (ABL) - US LIBOR +1.25% to +1.75% April 2023 $60.0
----------- ----------
The US ABL facility expired in April 2023. On 4 June 2019, the
Group entered into a facility consisting of a UK Term Loan for
GBP120.0 million and a UK RCF of GBP50.0 million. The UK Term Loan
was fully drawn as at 30 April 2023.
After the year end, on 9 May 2023, the Group signed a new
five-year GBP225.0 million multicurrency revolving loan facility
with lenders. The new facility will use UK SONIA +1.50% to +2.55%.
The existing facilities were repaid and extinguished on this
date.
Cash Flow
Cash Flow (GBPmillion) 52 weeks to 52 weeks to
30 April 2023 1 May 2022
Adjusted EBITDA(1) 201.4 162.2
-------------- -----------
Share-based payments 3.5 1.7
-------------- -----------
Working capital (22.5) (29.8)
-------------- -----------
Pension contributions (0.7) (0.7)
-------------- -----------
Tax (26.6) (15.6)
-------------- -----------
Cash generated from operating activities 155.1 117.8
-------------- -----------
Maintenance capex (4.6) (3.0)
-------------- -----------
Interest (4.7) (2.7)
-------------- -----------
Free cash flow (1) 145.8 112.1
-------------- -----------
Free cash flow conversion (1) 72.4% 69.1%
-------------- -----------
Expansionary capex (67.5) (41.0)
-------------- -----------
Acquisitions (24.9) (44.1)
-------------- -----------
Purchase of own shares (21.3) -
-------------- -----------
Exceptional items - legal expenses on business acquisitions (0.9) (0.5)
-------------- -----------
Cash flow 31.2 26.5
-------------- -----------
Free cash flow increased by GBP33.7 million to GBP145.8 million
in the year to 30 April 2023 and free cash flow conversion was
72.4% compared to 69.1% in the prior year.
Strong cash flow from trading (Adjusted EBITDA increased by
GBP39.2 million), was offset by a GBP22.5 million adverse working
capital movement, driven by the inventory increase in the year as
noted above.
Tax cash payments increased to GBP26.6 million in line with the
higher profit generated in the year.
Expansionary capex of GBP67.5 million (after taking into account
the associated creditors movement) was higher than the prior year
due to an increase in new showroom openings and refurbishments.
GBP21.3 million of own shares were purchased in the year to
satisfy ongoing employee share incentive schemes.
Return on Capital Employed (ROCE)(1)
52 weeks to 52 weeks to
30 April 2023 1 May 2022
ROCE(1) 27.9% 27.4%
-------------- -----------
FY23 ROCE is 27.9%, an increase of 50 bps in comparison to the
prior year. This is as a consequence of Adjusted EBIT increasing by
+27%, compared to the increase in average capital employed of
24%.
Showroom portfolio
As at the 30 April 2023, the Group had 193 showrooms, the
movement in showroom numbers is included below:
UK UK mono-brand Europe Total US multi-brand US Total Total
multi-brand boutiques mono-brand UK and showrooms mono-brand US Group
showrooms boutiques Europe boutiques
1 May
2022 93 38 - 131 23 17 40 171
-------------- -------------- ------------ -------- --------------- ------------ ------ -------
Openings 1 14 6 21 - 6 6 27
-------------- -------------- ------------ -------- --------------- ------------ ------ -------
Acquisitions - - - - 1 - 1 1
-------------- -------------- ------------ -------- --------------- ------------ ------ -------
Closures (5) (1) - (6) - - - (6)
-------------- -------------- ------------ -------- --------------- ------------ ------ -------
30 April
2023 89 51 6 146 24 23 47 193
-------------- -------------- ------------ -------- --------------- ------------ ------ -------
(1) This is an Alternative Performance Measure and is shown on a
pre-IFRS 16 basis. Refer to the Glossary for definition, purpose
and reconciliation to statutory measures where relevant.
(2) Refer to the Glossary for definition.
(3) Ecommerce sales are sales which are transacted online.
Certain financial data within this announcement has been
rounded. Growth rates are calculated on unrounded numbers.
Principal and emerging risks and uncertainties
The Group is exposed to a number of risks and uncertainties in
its business which could impact its ability to effectively execute
its strategy and cause actual results to differ materially from
expected and/or historical results. The Board has undertaken a
robust assessment of the principal and emerging risks and
uncertainties facing the Group, including those that would threaten
its business model, future performance, solvency or liquidity. The
risks presented in the 2022 Annual Report and Accounts, described
as follows, remain unchanged: Business strategy execution and
development; Key suppliers and supply chain; Client experience and
market risks; Colleague talent and capability; Business
interruption; Data protection and cyber security; Regulatory and
compliance; Economic and political; Brand and reputational damage;
Financial and treasury; and Climate change. These are detailed on
pages 160 to 165 of the 2022 Annual Report, a copy of which is
available on the Watches of Switzerland Group PLC (the 'Company')
website at www.thewosgroupplc.com .
A full disclosure of the Group's principal risks and emerging
risks and uncertainties, including the factors which mitigate them,
will be set out within the Strategic Report of the 2023 Annual
Report and Accounts.
Disclaimer
This announcement has been prepared by Watches of Switzerland
Group PLC (the 'Company'). It includes statements that are, or may
be deemed to be, "forward-looking statements". These
forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "anticipates", "expects", "intends", "plans", "goal",
"target", "aim", "may", "will", "would", "could" or "should" or, in
each case, their negative or other variations or comparable
terminology. They appear in a number of places throughout this
announcement and the information incorporated by reference into
this announcement and may include statements regarding the
intentions, beliefs or current expectations of the Company
Directors or the Group concerning, amongst other things: (i) future
capital expenditures, expenses, revenues, earnings, synergies,
economic performance, indebtedness, financial condition, dividend
policy and future prospects; (ii) business and management
strategies, the expansion and growth of the Group's business
operations; and (iii) the effects of government regulation and
industry changes on the business of the Company or the Group.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future and may be
beyond the Company's ability to control or predict. Forward-looking
statements are not guarantees of future performance. The Group's
actual results of operations, financial condition, liquidity, and
the development of the industry in which it operates may differ
materially from the impression created by the forward-looking
statements contained in this announcement and/or the information
incorporated by reference into this presentation.
Any forward-looking statements made by or on behalf of the
Company or the Group speak only as of the date they are made and
are based upon the knowledge and information available to the
Directors on the date of this announcement, and are subject to
risks relating to future events, other risks, uncertainties and
assumptions relating to the Company's operations and growth
strategy, and a number of factors that could cause actual results
and developments to differ materially from those expressed or
implied by the forward-looking statements. Undue reliance should
not be placed on any forward-looking statements.
Before making any investment decision in relation to the Company
you should specifically consider the factors identified in this
document, in addition to the risk factors that may affect the
Company or the Group's operations as detailed above.
Watches of Switzerland Group PLC
Preliminary results
For the 52 week period ended 30 April 2023
Registered number: 11838443
Watches of Switzerland Group PLC
Consolidated Income Statement
52 week period ended 52 week period ended
30 April 2023 1 May 2022
Note GBPm GBPm
---------------------------------------------- ----- --------------------- ---------------------
Revenue 2,3 1,542.8 1,238.0
Cost of sales (1,324.1) (1,056.7)
---------------------------------------------- ----- --------------------- ---------------------
Gross profit 218.7 181.3
Administrative expenses (39.9) (37.6)
Exceptional administrative expenses 4 (0.9) (2.0)
Exceptional reversal of impairment of assets 4 0.7 0.4
Operating profit 178.6 142.1
Finance costs (24.0) (16.0)
Finance income 0.9 0.1
Exceptional finance costs 4 (0.7) -
---------------------------------------------- ----- --------------------- ---------------------
Net finance cost (23.8) (15.9)
Profit before taxation 154.8 126.2
Taxation 5 (33.0) (25.2)
---------------------------------------------- ----- --------------------- ---------------------
Profit for the financial period 121.8 101.0
---------------------------------------------- ----- --------------------- ---------------------
Earnings per share
Basic 6 51.2p 42.2p
Diluted 6 50.9p 42.0p
Watches of Switzerland Group PLC
Consolidated Statement of Comprehensive Income
52 week period ended 52 week period ended
30 April 2023 1 May 2022
GBPm GBPm
---------------------------------------------------------------- --------------------- ---------------------
Profit for the financial period 121.8 101.0
Other comprehensive (expense)/income:
Items that may be reclassified to profit or loss
Foreign exchange (loss)/gain on translation of foreign operations
excluding deferred tax (3.1) 11.0
Related current tax movements 0.1 (1.2)
------------------------------------------------------------------ --------------------- ---------------------
(3.0) 9.8
Items that will not be reclassified to profit or loss
Actuarial movements on defined benefit pension scheme 0.3 1.4
Related deferred tax movements (0.1) (0.2)
------------------------------------------------------------------ --------------------- ---------------------
0.2 1.2
Other comprehensive (expense)/income for the period (2.8) 11.0
------------------------------------------------------------------ --------------------- ---------------------
Total comprehensive income for the period 119.0 112.0
------------------------------------------------------------------ --------------------- ---------------------
The notes are an integral part of these Condensed Consolidated
Financial Statements.
Watches of Switzerland Group PLC
Consolidated Balance Sheet
Note 30 April 1 May 2022
2023
------------------------------------- ----- --------- -----------
GBPm GBPm
Assets
Non-current assets
Goodwill 182.8 165.1
Intangible assets 17.6 18.1
Property, plant and equipment 154.4 112.5
Right-of-use assets 359.1 293.6
Deferred tax assets 6.2 9.3
Post-employment benefit asset 0.1 -
Trade and other receivables 2.1 2.7
-------------------------------------- ----- --------- -----------
722.3 601.3
------------------------------------- ----- --------- -----------
Current assets
Inventories 356.0 302.6
Current tax asset 2.6 0.6
Trade and other receivables 17.7 19.6
Cash and cash equivalents 136.4 105.9
-------------------------------------- ----- --------- -----------
512.7 428.7
------------------------------------- ----- --------- -----------
Total assets 1,235.0 1,030.0
-------------------------------------- ----- --------- -----------
Liabilities
Current liabilities
Trade and other payables (218.7) (200.1)
Current tax liability (4.9) (2.0)
Lease liabilities (47.4) (46.7)
Provisions (1.8) (1.0)
-------------------------------------- ----- --------- -----------
(272.8) (249.8)
------------------------------------- ----- --------- -----------
Non-current liabilities
Trade and other payables (0.9) (1.3)
Deferred tax liabilities (3.0) (0.4)
Lease liabilities (363.0) (293.9)
Borrowings 7 (120.0) (118.6)
Post-employment benefit obligations - (0.6)
Provisions (6.0) (4.1)
-------------------------------------- ----- --------- -----------
(492.9) (418.9)
------------------------------------- ----- --------- -----------
Total liabilities (765.7) (668.7)
-------------------------------------- ----- --------- -----------
Net assets 469.3 361.3
-------------------------------------- ----- --------- -----------
Equity
Share capital 3.0 3.0
Share premium 147.1 147.1
Merger reserve (2.2) (2.2)
Other reserves (18.4) (6.7)
Retained earnings 337.0 214.3
Foreign exchange reserve 2.8 5.8
-------------------------------------- ----- --------- -----------
Total equity 469.3 361.3
-------------------------------------- ----- --------- -----------
The prior period balances have been restated, in line with IFRS
3 "Business combinations", to reflect the finalisation of the
provisional fair values of Betteridge Jewelers, Inc., Gotthelfs
Acquisition Corp., and Vail Village Jewelers, Inc. ('Betteridge').
Further detail is disclosed within note 9.
The notes are an integral part of these Condensed Consolidated
Financial Statements.
Watches of Switzerland Group PLC
Consolidated Statement of Changes in Equity
Share Share Merger Other Retained Foreign Total equity
capital premium reserve reserves earnings exchange attributable
reserve to owners
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Balance at 2 May
2021 3.0 147.1 (2.2) - 106.4 (4.0) 250.3
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Profit for the
financial
period - - - - 101.0 - 101.0
Other
comprehensive
income, net
of tax - - - - 1.2 9.8 11.0
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Total
comprehensive
income - - - - 102.2 9.8 112.0
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Purchase of
own shares - - - (6.7) - - (6.7)
Share-based
payment
charge - - - - 3.2 - 3.2
Tax on items
credited to
equity - - - - (1.1) - (1.1)
Tax on vested
shares moved
to current
tax - - - - 3.6 - 3.6
Total other
transactions - - - (6.7) 5.7 - (1.0)
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Balance at 1 May
2022 3.0 147.1 (2.2) (6.7) 214.3 5.8 361.3
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Profit for the
financial
period - - - - 121.8 - 121.8
Other
comprehensive
income, net
of tax - - - - 0.2 (3.0) (2.8)
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Total
comprehensive
income - - - - 122.0 (3.0) 119.0
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Purchase of
own shares - - - (14.5) - - (14.5)
Share-based
payment
charge - - - - 3.5 - 3.5
Share-based
payments - - - 2.8 (2.8) - -
Tax on items
credited to
equity - - - - (0.5) - (0.5)
Tax on vested
shares moved
to current
tax - - - - 0.5 - 0.5
Total other
transactions - - - (11.7) 0.7 - (11.0)
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Balance at 30
April 2023 3.0 147.1 (2.2) (18.4) 337.0 2.8 469.3
------------------ ----------- --------- --------- ---------- ---------- ---------- -------------
Watches of Switzerland Group PLC
Consolidated Statement of Cash Flows
52 week period 52 week period
ended ended
30 April 2023 1 May 2022
------------------------------------------------------------------------ --------------- ---------------
GBPm GBPm
Cash flows from operating activities
Profit for the period 121.8 101.0
Adjustments for:
Depreciation of property, plant and equipment 32.3 27.6
Depreciation of right-of-use assets 50.3 40.6
Amortisation of intangible assets 3.2 2.5
Impairment of property, plant and equipment 0.4 -
Reversal of impairment of property, plant and equipment - exceptionals (0.5) (0.4)
Reversal of impairment of right-of-use assets - exceptionals (0.2) -
Gain on lease disposal - (0.1)
Loss on disposal of property, plant and equipment 0.8 1.5
Gain on lease modifications (1.3) (0.8)
Share-based payment charge 3.5 3.2
Finance income (0.9) (0.1)
Finance costs 24.0 16.0
Exceptional finance costs 0.7 -
Taxation 33.0 25.2
Increase in inventory (51.5) (50.6)
Decrease/(increase) in debtors 1.5 (6.4)
Increase in creditors, provisions and pensions 22.1 27.4
--------------------------------------------------------------------------- --------------- ---------------
Cash generated from operations 239.2 186.6
Pension scheme contributions (0.7) (0.7)
Tax paid (26.6) (15.6)
Total net cash generated from operating activities 211.9 170.3
--------------------------------------------------------------------------- --------------- ---------------
Cash flows from investing activities
Purchase of non-current assets:
Property, plant and equipment additions (75.0) (41.0)
Intangible asset additions (2.7) (2.2)
Movement on capital expenditure accrual 7.1 (0.8)
--------------------------------------------------------------------------- --------------- ---------------
Cash outflow from purchase of non-current assets (70.6) (44.0)
Acquisition of subsidiaries net of cash acquired (24.9) (44.1)
Total net cash outflow from investing activities (95.5) (88.1)
--------------------------------------------------------------------------- --------------- ---------------
Cash flows from financing activities
Purchase of own shares (21.3) -
Payment of capital element of leases (42.0) (40.8)
Payment of interest element of leases (17.2) (12.2)
Interest paid (5.6) (2.7)
Interest received 0.9 -
------------------------------------------------------------------------ --------------- ---------------
Net cash outflow from financing activities (85.2) (55.7)
--------------------------------------------------------------------------- --------------- ---------------
Net increase in cash and cash equivalents 31.2 26.5
Cash and cash equivalents at the beginning of the period 105.9 76.1
Exchange (losses)/gains on cash and cash equivalents (0.7) 3.3
--------------------------------------------------------------------------- --------------- ---------------
Cash and cash equivalents at the end of period 136.4 105.9
--------------------------------------------------------------------------- --------------- ---------------
Comprised of:
Cash at bank and in hand 120.7 95.4
Cash in transit 15.7 10.5
--------------------------------------------------------------------------- --------------- ---------------
Cash and cash equivalents at end of period 136.4 105.9
--------------------------------------------------------------------------- --------------- ---------------
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 52 week
period ended 30 April 2023 and 52 week period ended 1 May 2022,
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 1 May 2022 have been delivered to the
Registrar of Companies and the statutory accounts for the 52 week
period ended 30 April 2023 will be filed with the Registrar in due
course.
This announcement was approved by the Board of Directors on 12
July 2023.
Basis of preparation
Whilst the financial information has been prepared in accordance
with the recognition and measurement criteria of UK adopted
international accounting standards in conformity with the
requirements of the Companies Act 2006, this announcement does not
itself contain all the disclosures required to comply with UK
adopted international accounting standards. 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 30 April 2023 and 52
weeks ended 1 May 2022. 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 have been
prepared under the historical cost convention except for
pension
assets which are measured at fair value.
Going concern
The Directors consider that the Group has, at the time of
approving the Condensed Consolidated 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 GBP 170.0
million in available committed facilities, of which GBP120.0
million was drawn down. Net cash at this date was GBP16.4 million
with liquidity headroom (defined as unrestricted cash plus undrawn
available facilities) of GBP 171.8 million . The $60.0 million US
Asset Backed Loan (ABL) expired in April 2023, and the main UK bank
facility of GBP170.0 million was due to expire in June 2024.
Refinancing
On 9 May 2023 the Group signed a new five-year GBP225.0 million
multicurrency revolving loan facility with lenders. The existing
facilities were repaid and extinguished on this date. As a result,
the going concern assessment has been carried out using the new
GBP225.0 million facility agreement now in place.
The key covenant tests attached to the Group's facilities are a
measure of net debt to EBITDA, and the Fixed Charge Cover Ratio
(FCCR) at each April and October. The new GBP225.0 million facility
covenants are in line with those previously used, notably on a
pre-IFRS 16 basis and excluding share-based payment costs. Net debt
to EBITDA is defined as the ratio of total net debt at the
reporting date to the last 12 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. At 30 April 2023 the
Group comfortably satisfied the covenant tests with net debt to
EBITDA being less than 3 and the FCCR exceeding 1.6.
In assessing whether the going concern basis of accounting is
appropriate, the Directors have reviewed various trading scenarios
for the period to 31 October 2024 from the date of this report.
These included:
- The budget approved by the Board in May 2023. The budget
assumes that the more challenging trading environment of the second
half of FY23 will continue into the first half of FY24. Further key
assumptions include:
- A continued strong luxury watch market in the UK, US and
Europe
- Revenue forecast supported by expected luxury watch supply
- Increased cost base in line with macroeconomic environment and
environmental targets
The budget aligns to the Guidance in this announcement. Under
this budget, the Group has significant liquidity and comfortably
complies with all covenant tests to 31 October 2024.
- Reverse stress-testing of cash flows during the going concern
period was performed. This determined what level of reduced EBITDA
and worst case cash flows would result in a breach of the liquidity
or covenant tests. The likelihood of this level of reduced EBITDA
is considered remote
- Severe but plausible scenarios of:
- 10% reduction in sales against the budget due to reduced
consumer confidence and lower disposable income due to the
cost-of-living crisis. This scenario did not include cost
mitigations which are given below
- The realisation of material risks detailed within the
Principal Risks and Uncertainties and environmental risks
Under these scenarios the net debt to EBITDA and the FCCR
covenants would 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:
- Reduction of marketing spend
- Reduction in the level of stock purchases
- Restructuring of the business with headcount and showroom
operations savings
- Redundancies and pay freezes
- Reducing the level of planned capex and potential 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 31
October 2024. For this reason, the Board considers it appropriate
for the Group to adopt the going concern basis in preparing the
Condensed Consolidated Group Financial Statements.
Climate change
In preparing the Consolidated Condensed Financial Statements,
management has considered the impact of climate change,
particularly in the context of the disclosures included in the
Strategic Report. These considerations did not have a material
impact on the financial reporting judgements and estimates,
consistent with the assessment that climate change is not expected
to have a significant impact on the Group's going concern
assessment to 31 October 2024 nor the viability of the Group over
the next three years.
New standards, amendments and interpretations
The following standards, amendments and interpretations were
applicable for the period beginning 2 May 2022 and were adopted by
the Group for the 52-week period ended 30 April 2023. They have not
had a significant impact on the Group's profit for the year, equity
or disclosures:
- Reference to the Conceptual Framework - Amendments to IFRS
3
- Property, Plant and Equipment: Proceeds before Intended Use -
Amendments to IAS 16
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 1 May 2023 onwards, which
the Group has adopted early:
- Classification of Liabilities as Current or Non-current and
Non-current Liabilities with Covenants - Amendments to IAS 1
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 1 May 2023 onwards, which
the Group has not adopted early:
- IFRS 17 'Insurance Contracts'
- Definition of Accounting Estimates - Amendments to IAS 8
- Disclosure of Accounting Policies - Amendments to IAS 1 and
IFRS Practice Statement 2
- Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
IFRS 17 'Insurance Contracts' applies to the Group in relation
to the reinsurance of contracts to Aurum Insurance (Guernsey)
Limited. A materiality assessment is taking place, however it is
not anticipated that the standard will have a material impact on
the Group's Condensed Consolidated Financial Statements.
The adoption of other standards and amendments noted is not
expected to have a material impact on the Group's Condensed
Consolidated 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 showroom sell-through of slow moving
stock would impact the net realisable value by c.GBP3.4m.
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
strategic plan period, the long-term growth rate to be applied
beyond this period and the risk-adjusted pre-tax discount rate used
to discount those cash flows. The key assumptions relate to sales
growth rates and discount rates used to discount the cash flows.
Climate risk and near-term environmental actions that the Group is
taking have been considered in future cash flows used in the
impairment review. This includes unavoidable future costs such as
price increases, together with the cost of mitigating climate
risks, and consideration of quantified climate-related risks on
future cash flows. Showroom related property, plant and equipment
and right-of-use assets are tested for impairment at a
showroom-by-showroom level, including an allocation of overheads
related to showroom 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 Condensed
Consolidated 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 2.1% to 7.4%.
Substantive substitution rights (IFRS 16)
The Group has applied judgement to three (2022: 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 Chief Operating Decision Makers (CODMs)
and how they are measured for the purposes of covenant testing.
Both Adjusted EBITDA and Adjusted EBIT are APMs and these measures
provide stakeholders with additional useful information to assess
the year-on-year trading performance of the Group but should not be
considered in isolation of statutory measures.
Adjusted EBITDA represents profit for the period before finance
costs, finance income, taxation, depreciation, amortisation,
exceptional items presented in the Group's Consolidated Income
Statement (consisting of exceptional administrative expenses,
exceptional finance costs and exceptional impairment) on a pre-IFRS
16 basis. UK and Europe operating segments are aggregated into one
reporting segment, which is reflective of the management structure
in place.
52 week period ended 30 April 2023
UK and Europe US Corporate Total
----------------------------------------------------------------- -------------- -------- ---------- --------
GBPm GBPm GBPm GBPm
Revenue 889.9 652.9 - 1,542.8
Net margin 330.0 246.3 - 576.3
Less:
Showroom costs (153.6) (125.6) - (279.2)
Overheads (47.8) (30.9) (5.4) (84.1)
Showroom opening and closing costs (7.3) (3.4) (0.9) (11.6)
Adjusted EBITDA 121.3 86.4 (6.3) 201.4
----------------------------------------------------------------- -------------- -------- ---------- --------
Depreciation, amortisation, impairment and loss on disposal of
assets (23.2) (13.1) - (36.3)
Segment profit/(loss)* 98.1 73.3 (6.3) 165.1
----------------------------------------------------------------- -------------- -------- ---------- --------
Impact of IFRS 16 (excluding interest on leases) 13.7
Net finance costs (23.1)
Exceptional finance costs (note 4) (0.7)
Exceptional reversal of impairment of assets (note 4) 0.7
Exceptional administrative costs (note 4) (0.9)
----------------------------------------------------------------- -------------- -------- ---------- --------
Profit before taxation for the financial period 154.8
----------------------------------------------------------------- -------------- -------- ---------- --------
52 week period ended 1 May 2022
UK and Europe US Corporate Total
-------------------------------------------------------------------- -------------- ------- ---------- --------
GBPm GBPm GBPm GBPm
Revenue 809.6 428.4 - 1,238.0
Net margin 306.8 163.8 - 470.6
Less:
Showroom costs (145.3) (81.4) - (226.7)
Overheads (41.7) (22.6) (9.0) (73.3)
Showroom opening and closing costs (5.3) (3.1) - (8.4)
Adjusted EBITDA 114.5 56.7 (9.0) 162.2
--------------------------------------------------------------------- -------------- ------- ---------- --------
Depreciation, amortisation, impairment and loss on disposal of
assets (23.2) (8.7) - (31.9)
Segment profit/(loss)* 91.3 48.0 (9.0) 130.3
--------------------------------------------------------------------- -------------- ------- ---------- --------
Impact of IFRS 16 (excluding interest on leases) 13.4
Net finance costs (15.9)
Exceptional reversal of impairment of assets (note 4) 0.4
Exceptional administrative costs (note 4) (2.0)
Profit before taxation for the financial period 126.2
--------------------------------------------------------------------- -------------- ------- ---------- --------
* Segment profit/(loss) is defined as being Earnings Before
Interest, Tax, exceptional items and IFRS 16 adjustments (Adjusted
EBIT). The segment reporting comparative has been updated to show
the new UK and Europe segment.
Entity-wide revenue disclosures
52 week period 52 week period
ended ended
30 April 2023 1 May 2022
--------------- ---------------
GBPm GBPm
UK and Europe
Luxury watches 749.6 663.9
Luxury jewellery 67.8 72.4
Other/services 72.5 73.3
--------------- ---------------
Total 889.9 809.6
--------------- ---------------
US
Luxury watches 586.5 382.6
Luxury jewellery 51.4 36.4
Other/services 15.0 9.4
--------------- ---------------
Total 652.9 428.4
--------------- ---------------
Group
Luxury watches 1,336.1 1,046.5
Luxury jewellery 119.2 108.8
Other/services 87.5 82.7
--------------- ---------------
Total 1,542.8 1,238.0
--------------- ---------------
'Other/services' consists of the sale of fashion and classic
watches and jewellery, the sale of gifts, servicing, repairs and
product 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
30 April 2023 1 May 2022
-------------- -----------
GBPm GBPm
UK and Europe
Goodwill 121.6 121.6
Intangible assets 5.0 4.8
Property, plant and equipment 100.2 68.7
Right-of-use assets 244.0 191.0
-------------- -----------
Total 470.8 386.1
-------------- -----------
US
Goodwill 61.2 43.5
Intangible assets 12.6 13.3
Property, plant and equipment 54.2 43.8
Right-of-use assets 115.1 102.6
-------------- -----------
Total 243.1 203.2
-------------- -----------
Group
Goodwill 182.8 162.7
Intangible assets 17.6 18.1
Property, plant and equipment 154.4 112.5
Right-of-use assets 359.1 293.6
-------------- -----------
Total 713.9 586.9
-------------- -----------
The prior period balances have been restated, in line with IFRS
3 'Business combinations', to reflect the finalisation of the
provisional fair values of Betteridge Jewelers, Inc., Gotthelfs
Acquisition Corp., and Vail Village Jewelers, Inc. ('Betteridge').
Further detail is disclosed within note 9.
3. Revenue
The Group's disaggregated revenue recognised under contracts
with customers relates to the following categories and operating
segments:
52 week period ended 30 April 2023
-----------------------------------------
Sale of goods Rendering Total
of services
GBPm GBPm GBPm
UK and Europe 855.4 34.5 889.9
US 641.2 11.7 652.9
--------------- -------------- --------
Total 1,496.6 46.2 1,542.8
--------------- -------------- --------
52 week period ended 1 May 2022
-----------------------------------------
Sale of goods Rendering Total
of services
GBPm GBPm GBPm
UK and Europe 777.5 32.1 809.6
US 420.1 8.3 428.4
--------------- -------------- --------
Total 1,197.6 40.4 1,238.0
--------------- -------------- --------
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.
52 week period 52 week period
ended ended
30 April 1 May 2022
2023
--------------- ---------------
GBPm GBPm
Exceptional impairment of assets
Reversal of impairment of property,
plant and equipment (i) 0.5 0.4
Reversal of impairment of right-of-use 0.2 -
assets (i)
Total exceptional reversal of impairment
of assets 0.7 0.4
Exceptional administrative expenses
Professional and legal expenses on business
combinations (ii) (0.9) (0.5)
Exceptional items for IPO
Share-based payment in respect of the
Chief Executive Officer (iii) - (1.5)
Total exceptional administrative costs (0.9) (2.0)
--------------- ---------------
Exceptional finance costs
Amortisation of capitalised transaction (0.7) -
costs (iv)
Total exceptional items (0.9) (1.6)
--------------- ---------------
(i) Reversal of impairment of property, plant and equipment and right-of-use assets
During FY23 the estimated 'value-in-use' recoverable amounts
were reassessed taking into account FY23 performance and the latest
discounted cash flow for each showroom. As a result of improved
trading of showrooms previously impaired through exceptional items,
an impairment reversal of GBP0.7m has been made at the year
end.
(ii) Professional and legal expenses on business combinations
Professional and legal expenses on business combinations
completed during the periods 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.
(iii) Exceptional items for IPO
Prior to the IPO on 31 May 2019, 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.
(iv) Amortisation of capitalised transaction costs
On 9 May 2023 the Group entered into a new financing arrangement
by way of a GBP225.0 million multicurrency revolving loan facility.
On this date the existing GBP120.0 million UK Term Loan and UK RCF
of GBP50.0 million were extinguished. The capitalised transaction
fees in relation to the existing facilities have been accelerated
through exceptional items.
All of these items are considered exceptional as they are linked
to unique non-recurring events and do not form part of the
underlying trading of the Group.
5. Taxation
The tax charge for the period is shown below. Tax is made up of
current and deferred tax. Current tax is the amount payable on the
taxable income in the period and any adjustments to tax payable in
previous periods.
52 week period
ended 52 week period
30 April ended
2023 1 May 2022
--------------- ---------------
GBPm GBPm
Current tax:
Current UK tax on profits for the period 13.0 14.2
Current US tax on profits for the period 16.5 7.0
Adjustments in respect of prior periods
- UK (1.8) (0.4)
Adjustments in respect of prior periods
- US 0.2 0.2
--------------- ---------------
Total current tax 27.9 21.0
Deferred tax:
Origination and reversal of temporary
differences 5.7 5.8
Impact of change in tax rate (0.5) (1.5)
Adjustments in respect of prior periods (0.1) (0.1)
--------------- ---------------
Total deferred tax 5.1 4.2
--------------- ---------------
Tax expense reported in the Income
Statement 33.0 25.2
--------------- ---------------
The tax rate for the current period varied from the standard
rate of corporation tax in the UK due to the following factors:
52 week period 52 week period
ended ended
30 April 1 May 2022
2023
--------------- ---------------
GBPm GBPm
Profit before taxation 154.8 126.2
Notional taxation at standard
UK corporation tax rate
of 19.5% (2022: 19%) 30.2 24.0
Non-deductible expenses 1.4 1.3
Super-deduction on fixed
assets (1.9) (0.7)
Overseas tax differentials 4.6 2.4
Current/deferred tax rate 0.9 -
difference on current year
movements*
Adjustments due to deferred
tax rate change** (0.5) (1.5)
Adjustments in respect of
prior periods (1.7) (0.3)
--------------- ---------------
Tax expense reported in
the Income Statement 33.0 25.2
--------------- ---------------
* This relates to an increase in the current year deferred tax
movement as compared to the estimate included in FY22.
** The deferred tax rate change arose due to the blended US
state tax increasing in FY23 (to 7.0% from 4.3%). In FY22 the
difference arose due to the increase in the UK rate of corporation
tax (to 25% from 19%).
6. Earnings Per Share (EPS)
52 week period 52 week period
ended ended
30 April 2023 1 May 2022
--------------- ---------------
Basic
EPS 51.2p 42.2p
EPS adjusted for exceptional items 51.5p 42.6p
EPS adjusted for exceptional items
and pre-IFRS 16 52.7p 41.8p
Diluted
EPS 50.9p 42.0p
EPS adjusted for exceptional items 51.2p 42.4p
EPS adjusted for exceptional items
and pre-IFRS 16 52.3p 41.6p
Basic EPS is based on the profit for the year attributable to
the equity holders of the Parent Company divided by the weighted
average number of shares.
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:
52 week period 52 week period
ended ended
30 April 1 May 2022
2023
--------------- ---------------
GBPm GBPm
Profit after tax attributable to equity
holders of the Parent Company 121.8 101.0
Add back:
Exceptional reversal of impairment of
assets, net of tax (0.6) (0.4)
Exceptional administrative expenses,
net of tax 0.7 1.5
Exceptional finance costs, net of tax 0.6 -
Profit adjusted for exceptional items 122.5 102.1
Pre-exceptional IFRS 16 adjustments,
net of tax 2.7 (2.0)
--------------- ---------------
Profit adjusted for exceptional items
and IFRS 16 125.2 100.1
--------------- ---------------
The following table reflects the share data used in the basic
and diluted EPS calculations:
52 week period 52 week period
ended ended
30 April 1 May 2022
2023
--------------- ---------------
Weighted average number of shares: '000 '000
Weighted average number of ordinary
shares in issue 237,641 239,483
--------------- ---------------
Weighted average shares for basic
EPS 237,641 239,483
--------------- ---------------
Weighted average dilutive potential
shares 1,713 1,119
--------------- ---------------
Weighted average shares for diluted
EPS 239,354 240,602
--------------- ---------------
The weighted average number of shares takes into account the
weighted average effect of changes in own shares during the
period.
There have been no transactions involving ordinary shares or
potential ordinary shares between the reporting date and the date
of authorisation of these Condensed Consolidated Financial
Statements.
7. Borrowings
30 April 1 May 2022
2023
--------- -----------
GBPm GBPm
Non-current
Term Loan (120.0) (120.0)
Associated capitalised transaction costs - 1.4
Total borrowings (120.0) (118.6)
--------- -----------
Analysis of net debt
1 May Cash Non-cash Foreign 30 April
2022 flow changes(1) exchange 2023
--------------------------- -------- ------ ------------ ---------- ---------
GBPm GBPm GBPm GBPm GBPm
Cash and cash equivalents 105.9 31.2 - (0.7) 136.4
Term Loan (120.0) - - - (120.0)
Net debt excluding
capitalised transaction
costs (pre-IFRS
16) (14.1) 31.2 - (0.7) 16.4
Capitalised transaction
costs 1.4 - (1.4) - -
Net debt (pre-IFRS
16) (12.7) 31.2 (1.4) (0.7) 16.4
--------------------------- -------- ------ ------------ ---------- ---------
Lease liabilities (340.6) 59.2 (130.1) 1.1 (410.4)
Total net debt (353.3) 90.4 (131.5) 0.4 (394.0)
--------------------------- -------- ------ ------------ ---------- ---------
(1) Non-cash charges are principally a release of capitalised
finance costs and lease liability interest charges, additions and
revisions.
Cash and cash equivalents consist of cash at bank and in hand of
GBP120.7m (2022: GBP95.4m) and cash in transit of GBP15.7m (2022:
GBP10.5m).
On 9 May 2023 the Group signed a new five-year GBP225.0 million
multicurrency revolving loan facility with lenders. The existing
facilities were repaid and extinguished on this date.
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 2022 and April 2023 were
fully met.
8. Financial instruments
Categories
30 April 1 May 2022
2023
--------- -----------
GBPm GBPm
Financial assets - held at amortised
cost
Trade and other receivables* 13.9 16.6
Cash and cash equivalents 136.4 105.9
--------- -----------
Total financial assets 150.3 122.5
--------- -----------
Financial liabilities - held at amortised
cost
Interest-bearing loans and borrowings:
Term Loan (net of capitalised transaction
costs) (120.0) (118.6)
Trade and other payables** (193.8) (174.3)
--------- -----------
(313.8) (292.9)
--------- -----------
Lease liability (IFRS 16) (410.4) (340.6)
--------- -----------
Total financial liabilities (724.2) (633.5)
--------- -----------
*Excludes prepayments of GBP5.9m (2022: GBP5.7m) that do not
meet the definition of a financial instrument.
**Trade payables excludes customer deposits of GBP7.9m (2022:
GBP12.4m) and deferred income of GBP17.9m (2022: GBP14.7m) that do
not meet the definition of a financial instrument.
Fair values
At 30 April 2023, 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.
9. Business combinations
Bernie Robbins Jewelers, Inc.
On 22 June 2022, the Group acquired the trade and assets of one
showroom from Bernie Robbins Jewelers, Inc. for a cash
consideration of GBP21.2 million. Goodwill recognised relates to
future cash flows from the showroom, and the acquisition further
advances the US expansion strategy.
The business contributed revenue of GBP10.5m from the 22 June
2022 acquisition date to 30 April 2023.
The following table summarises the consideration paid for the
acquisition, and the provisional fair value of assets acquired at
the acquisition date:
GBPm
-------------------------------------- -------
Total cash consideration 21.2
-------------------------------------- -------
Initial assessment of values on acquisition
-----------------------------------------------
GBPm
-------------------------------------- -------
Inventories 3.1
Trade and other payables (0.1)
Right-of-use assets 1.9
Lease liabilities (1.9)
Total identifiable net assets 3.0
Goodwill 18.2
-------------------------------------- -------
Total assets acquired 21.2
-------------------------------------- -------
An amount of GBP0.7 million is held with a third-party on
retention. This will be paid by the Group within 12 months of the
acquisition date. The values stated above are the initial
assessment of the fair values of assets and liabilities on
acquisition. These will be finalised in H1 FY24.
The contribution to revenue and profit before tax, if this
business combination had occurred on the first day of the period,
and since the acquisition date, is not material to the results of
the Group and therefore has not been disclosed separately.
Acquisition-related costs have been charged to exceptional items
in the Consolidated Income Statement for the 52-week period ended
30 April 2023, as disclosed in note 4.
Acquisitions completed in the 52-week period to 1 May 2022
During the prior period the Group acquired the trade and assets
of a number of showrooms in the US. On 2 September 2021, the Group
acquired the trade and assets of one showroom from Ben Bridge
Jeweler Inc. ('Ben Bridge'). On 15 October 2021, the Group acquired
the trade and assets of one showroom from Timeless Watch Exchange
LLC. ('Timeless'). On 1 December 2021, the Group acquired the trade
and assets of three showrooms from Betteridge Jewelers, Inc.,
Gotthelfs Acquisition Corp., and Vail Village Jewelers, Inc.
('Betteridge').
Ben Bridge Betteridge Total
and Timeless GBPm GBPm
GBPm
------------------------------- -------------- ----------- ------
Total cash consideration 9.2 39.1 48.3
------------------------------- -------------- ----------- ------
Final assessment of values on acquisition
Inventories 3.3 13.0 16.3
Property, plant and equipment 0.3 2.5 2.8
Trade and other receivables - 2.9 2.9
Trade and other payables (0.2) (2.4) (2.6)
Right-of-use assets 1.7 5.4 7.1
Lease liabilities (1.7) (5.4) (7.1)
------------------------------- -------------- ----------- ------
Total identifiable net assets 3.4 16.0 19.4
Brand - 2.2 2.2
Goodwill 5.8 20.9 26.7
------------------------------- -------------- ----------- ------
Total assets acquired 9.2 39.1 48.3
------------------------------- -------------- ----------- ------
In the prior 52-week period ended 1 May 2022, the businesses
contributed revenue of GBP32.5m from the date of acquisition to 1
May 2022 and contributed a net profit of GBP5.7m. If the
combinations had taken place at the beginning of FY22, the Group's
revenue from continuing operations would have been GBP1,285.0m and
the profit before tax would have been GBP133.7m.
During the 52-week period to 30 April 2023, the fair value of
assessment of the above entities was completed. The net impact was
a reduction in inventory and deferred tax asset, with the
corresponding entry to the goodwill balance. All adjustments are
not material at an individual line level. The assessment of values
on acquisition is now final, and consideration held on retention at
the end of the prior period has been settled.
10. Contingent Liabilities
There are a number of contingent liabilities that arise in the
normal course of business, which if realised, are not expected to
result in a material liability to the Group.
11. Post-balance sheet events
On 9 May 2023 the Group signed a new five-year GBP225.0 million
multicurrency revolving loan facility with lenders. The existing
facilities were repaid and extinguished on this date. Further
detail can be found in note 7.
No further post-balance sheet events have been identified.
GLossary
Alternative performance measures
The Directors use Alternative Performance Measures (APMs) as
they believe these measures provide additional useful information
on the underlying trends, performance and position of the Group.
These measures are used for performance analysis. The APMs are not
defined by IFRS and therefore may not be directly comparable with
other companies' APMs. These measures are not intended to be a
substitute for, or superior to, IFRS measures.
The majority of the Group's APMs are on a pre-IFRS 16 basis.
This aligns with the management reporting used to inform business
decisions, investment appraisals, incentive schemes and banking
covenants.
4-Wall EBITDA
Net margin less showroom costs.
Why used
4-Wall EBITDA is a direct measure of profitability of the
showroom operations.
Reconciliation to IFRS measures
GBPmillion FY23 FY22
Revenue 1,542.8 1,238.0
------- -------
Cost of inventory expensed (972.2) (774.4)
------- -------
Other inc. supplier
incentives 5.7 7.0
------- -------
Net margin 576.3 470.6
------- -------
Showroom costs (279.2) (226.7)
------- -------
4-Wall EBITDA 297.1 243.9
------- -------
Showroom costs includes rental costs on a pre-IFRS 16 basis
(i.e. under IAS 17). Refer to the IFRS 16 reconciliations below for
further details.
Adjusted Earnings Before Interest and Tax (Adjusted EBIT)
Operating profit before exceptional items and IFRS 16
impact.
Why used
Measure of profitability that excludes one-off exceptional costs
and IFRS 16 adjustments to allow for comparability between
years.
This measure was linked to management incentives in the
financial year.
Reconciliation to IFRS measures
Reconciled in note 2 to the Condensed Consolidated Financial
Statements.
Adjusted Earnings Before Interest, Tax, Depreciation and
Amortisation (Adjusted EBITDA)
EBITDA before exceptional items presented in the Group's
Consolidated Income Statement. Shown on a continuing basis and
before the impact of IFRS 16.
Why used
Measure of profitability that excludes one-off exceptional and
non-underlying items and IFRS 16 adjustments to allow for
comparability between years.
Reconciliation to IFRS measures
Reconciled in note 2 of the Condensed Consolidated Financial
Statements.
Adjusted earnings per share (Adjusted EPS)
Basic Earnings Per Share before exceptional items and IFRS 16
impact.
Why used
Measure of profitability that excludes one-off exceptional items
and IFRS 16 adjustments to provide comparability between years.
This measure was linked to management incentives in the financial
year.
Reconciliation to IFRS measures
Reconciled within note 6 of the Condensed Consolidated Financial
Statements.
Adjusted profit before tax (Adjusted PBT)
Profit before tax before exceptional items and IFRS 16
impact.
Why used
Measure of profitability that excludes one-off exceptional items
and IFRS 16 adjustments to provide comparability between years.
Reconciliation to IFRS measure
GBPmillion FY23 FY22
Segment profit (as
reconciled in note
2 of the Financial
Statements) 165.1 130.3
------ ------
Net finance costs (23.1) (15.9)
------ ------
IFRS 16 lease interest 17.2 12.2
------ ------
Adjusted profit before
tax 159.2 126.6
------ ------
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)
FY23 Group Revenue (GBP) 1,542.8
----------------
FY23 US Revenue ($) 785.4
----------------
FY23 US Revenue (GBP)
@ FY23 Exchange rate 652.9
----------------
FY23 US Revenue (GBP)
@ FY22 Exchange rate 581.4
----------------
FY23 Group Revenue (GBP)
at Constant currency 1,471.3
----------------
FY23 Exchange rate GBP1 : $1.203
----------------
FY22 Exchange rate GBP1 : $1.351
----------------
Exceptional items
Items that in the judgement of the Directors need to be
disclosed by virtue of their size, nature or incidence, in order to
draw the attention of the reader and to show the underlying
business performance of the Group.
Why used
Draws the attention of the reader and to show the items that are
significant by virtue of their size, nature or incidence.
Reconciliation to IFRS measures
Disclosed in note 4 of the Group's Condensed Consolidated
Financial Statements.
Net (debt)/cash
Total borrowings (excluding capitalised transaction costs) less
cash and cash equivalents and excludes IFRS 16 lease
liabilities.
Why used
Measures the Group's indebtedness.
Reconciliation to IFRS measures
Reconciled in note 7 the Condensed 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 FY23 FY22
Net increase in cash and cash
equivalents 31.2 26.5
------ ------
Net financing cash flow 85.2 55.7
------ ------
Net interest paid (4.7) (2.7)
------ ------
Lease payments (IFRS 16) (59.2) (53.0)
------ ------
Acquisition of business combinations 24.9 44.1
------ ------
Exceptional costs - legal expenses
on business acquisitions 0.9 0.5
------ ------
Expansionary capex 67.5 41.0
------ ------
Free cash flow 145.8 112.1
------ ------
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 GBP145.8 million divided by Adjusted EBITDA of
GBP201.4 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
showroom or overhead costs.
Reconciliation to IFRS measures
Refer to 4-Wall EBITDA.
Return on Capital Employed (ROCE)
Return on Capital Employed (ROCE) is defined as Adjusted EBIT
divided by average capital employed, calculated on a Last Twelve
Months (LTM) basis. Average capital employed is total assets less
current liabilities excluding IFRS 16 lease liabilities.
Why used
ROCE demonstrates the efficiency with which the Group utilises
capital. This measure was linked to management incentives in the
financial year.
Reconciliation to IFRS measures
Adjusted EBIT of GBP165.1m divided by the average capital
employed, which is calculated as follows:
GBPmillion FY23 FY22
Pre-IFRS 16 total assets 882.6 741.3
-------- --------
Pre-IFRS 16 current liabilities (231.6) (209.4)
-------- --------
Capital employed 651.0 531.9
-------- --------
Average capital employed 591.4 475.9
-------- --------
Other definitions
Expansionary capital expenditure/capex
Expansionary capital expenditure relates to new showrooms,
offices, relocations or refurbishments greater than GBP250,000.
Luxury watches
Watches that have Recommended Retail Price greater than
GBP1,000.
Luxury jewellery
Jewellery that has a Recommended Retail Price greater than
GBP500.
Showroom maintenance capital expenditure/capex
Capital expenditure which is not considered expansionary.
IFRS 16 Adjustments
The following tables reconcile from pre-IFRS 16 balances to
statutory post-IFRS 16 balances.
FY23 Consolidated Income Statement
Pre-IFRS 16 and exceptional items IFRS 16 adjustments Exceptional Statutory
GBPmillion items
Revenue 1,542.8 - - 1,542.8
--------------------------------- ------------------- ----------- ---------
Net margin 576.3 - - 576.3
--------------------------------- ------------------- ----------- ---------
Showroom costs (279.2) 56.2 - (223.0)
--------------------------------- ------------------- ----------- ---------
4-Wall EBITDA 297.1 56.2 - 353.3
--------------------------------- ------------------- ----------- ---------
Overheads (84.1) - (0.9) (85.0)
--------------------------------- ------------------- ----------- ---------
EBITDA 213.0 56.2 (0.9) 268.3
--------------------------------- ------------------- ----------- ---------
Showroom opening and closing costs (11.6) 7.1 - (4.5)
--------------------------------- ------------------- ----------- ---------
Adjusted EBITDA 201.4 63.3 (0.9) 263.8
--------------------------------- ------------------- ----------- ---------
Depreciation, amortisation, loss on
disposal, impairment of fixed assets
and lease modifications (36.3) (49.6) 0.7 (85.2)
--------------------------------- ------------------- ----------- ---------
Adjusted EBIT (Segment profit) 165.1 13.7 (0.2) 178.6
--------------------------------- ------------------- ----------- ---------
Net finance costs (5.9) (17.2) (0.7) (23.8)
--------------------------------- ------------------- ----------- ---------
Adjusted profit before tax 159.2 (3.5) (0.9) 154.8
--------------------------------- ------------------- ----------- ---------
Adjusted basic Earnings Per Share 52.7p (1.2)p (0.3)p 51.2p
--------------------------------- ------------------- ----------- ---------
FY23 Balance Sheet
GBPmillion Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Goodwill and intangibles 200.4 - 200.4
----------- ------------------- ------------
Property, plant and equipment 159.9 (5.5) 154.4
----------- ------------------- ------------
IFRS 16 right-of-use assets - 359.1 359.1
----------- ------------------- ------------
Inventories 356.0 - 356.0
----------- ------------------- ------------
Trade and other receivables 29.4 (9.6) 19.8
----------- ------------------- ------------
Trade and other payables (259.0) 39.4 (219.6)
----------- ------------------- ------------
IFRS 16 lease liabilities - (410.4) (410.4)
----------- ------------------- ------------
Net cash 16.4 - 16.4
----------- ------------------- ------------
Other (15.3) 8.5 (6.8)
----------- ------------------- ------------
Net assets 487.8 (18.5) 469.3
----------- ------------------- ------------
FY22 Consolidated Income Statement
Pre-IFRS 16 and exceptional items IFRS 16 adjustments Exceptional Statutory
GBPmillion items
Revenue 1,238.0 - - 1,238.0
--------------------------------- ------------------- ----------- ---------
Net margin 470.6 - - 470.6
--------------------------------- ------------------- ----------- ---------
Showroom costs (226.7) 47.2 - (179.5)
--------------------------------- ------------------- ----------- ---------
4-Wall EBITDA 243.9 47.2 - 291.1
--------------------------------- ------------------- ----------- ---------
Overheads (73.3) - (2.0) (75.3)
--------------------------------- ------------------- ----------- ---------
EBITDA 170.6 47.2 (2.0) 215.8
--------------------------------- ------------------- ----------- ---------
Showroom opening and closing costs (8.4) 5.6 - (2.8)
--------------------------------- ------------------- ----------- ---------
Adjusted EBITDA 162.2 52.8 (2.0) 213.0
--------------------------------- ------------------- ----------- ---------
Depreciation, amortisation, loss on
disposal, impairment of fixed assets
and lease modifications (31.9) (39.4) 0.4 (70.9)
--------------------------------- ------------------- ----------- ---------
Adjusted EBIT (Segment profit) 130.3 13.4 (1.6) 142.1
--------------------------------- ------------------- ----------- ---------
Net finance costs (3.7) (12.2) - (15.9)
--------------------------------- ------------------- ----------- ---------
Adjusted profit before tax 126.6 1.2 (1.6) 126.2
--------------------------------- ------------------- ----------- ---------
Adjusted basic Earnings Per Share 41.8p 0.8p (0.4)p 42.2p
--------------------------------- ------------------- ----------- ---------
FY22 Balance Sheet
GBPmillion Pre-IFRS 16 IFRS 16 adjustments Post-IFRS 16
Goodwill and intangibles 183.2 - 183.2
----------- ------------------- ------------
Property, plant and equipment 113.8 (1.3) 112.5
----------- ------------------- ------------
IFRS 16 right-of-use assets - 293.6 293.6
----------- ------------------- ------------
Inventories 302.6 - 302.6
----------- ------------------- ------------
Trade and other receivables 31.1 (8.8) 22.3
----------- ------------------- ------------
Trade and other payables (232.7) 31.3 (201.4)
----------- ------------------- ------------
IFRS 16 lease liabilities - (340.6) (340.6)
----------- ------------------- ------------
Net debt (14.1) - (14.1)
----------- ------------------- ------------
Other (7.1) 10.3 3.2
----------- ------------------- ------------
Net assets 376.8 (15.5) 361.3
----------- ------------------- ------------
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FR SFWESEEDSEIW
(END) Dow Jones Newswires
July 13, 2023 02:00 ET (06:00 GMT)
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