TIDMWOSG
RNS Number : 7566F
Watches of Switzerland Group PLC
17 July 2019
Jewel UK Midco Limited
Preliminary financial statements
For the period ended 28 April 2019
17 July 2019
Continued strong progress driven by luxury watches on debut
results
Group financial highlights - for Jewel UK Midco Limited
Revenue and profit given below are shown on a continuing
basis([1]) .
-- Group revenue +22.5% to GBP773.5 million
- Luxury watch([2]) revenue +28.3% to GBP631.4 million (82% of total revenue, +4ppts)
- Luxury Jewellery like for like sales +3%
- UK Like for like sales(2) +10.0%
- US like for like sales(2) (pro-forma) +7.0%
-- Adjusted EBITDA(2) +17.6% to GBP68.8 million
-- Adjusted operating profit(2) +33.2% to GBP51.8 million
-- Operating profit +21.6% to GBP45.5 million
-- Profit before tax +181% to GBP20.1 million
-- Balance sheet restructured post-IPO with high yield bonds
retired using proceeds of IPO; pro-forma net debt(2) : Adjusted
EBITDA(2) pre-opening and closing costs 1.8x
Operational highlights
-- GBP33.8m of expansionary capex(2) in the year, delivering
seven new showrooms including 2 flagship showrooms, 11 refurbished,
one expanded and two relocated showrooms
-- Continued strong growth in UK and US luxury watch markets
-- Expansion into underdeveloped luxury watch market in the US on track
-- Growing multi-channel offering and e-commerce growth (revenue +18%)
-- Actions to reduce incentives on products positively impacted margin
-- Celebrated 100 years of partnership with Rolex
-- Launched national partnership with the Prince's Trust and a
school reach-out programme ("Little Acorns")
Outlook and guidance
Current trading in the first eleven weeks of FY20 is
encouraging.
In line with pre-IPO communications, there is a strong pipeline
of projects in both the UK and US, including expansions and
refurbishments of existing showrooms and the continued roll out of
new showrooms.
The market for luxury watches remains robust in our opinion, in
line with recent trends in FY19 and continues to be impacted by
supply constraints.
The Group remains well-positioned to deliver on its strategic
aims and meet the Board's expectations for FY20 with unchanged
guidance to that provided at the time of the IPO.
The Watches of Switzerland Group CEO, Brian Duffy, said:
"I am delighted that the Group's five-year transformation has
culminated in a successful IPO on the London Stock Exchange in June
this year and I would like to thank all our colleagues for their
huge contribution to that achievement.
FY19 has been a fantastic year for The Watches of Switzerland
Group. We have continued our trajectory of strong, profitable
growth in our core markets of the UK and the US with an increase in
sales of 23% during the year. Current trading remains encouraging
and we are confident of meeting the Board's expectations for the
financial year ending April 2020.
We are the UK's leading luxury watch retailer, hold a growing
position in the US market, and operate in a highly attractive
market in which demand for luxury watches generally outstrips
supply. We are well positioned to deliver on our strategy and look
forward to achieving continued growth in the year ahead."
About The Watches of Switzerland Group
The Watches of Switzerland Group is the UK's largest luxury
watch retailer, operating in both the UK and US, comprising four
prestigious brands; Goldsmiths (UK), Mappin & Webb (UK),
Watches of Switzerland (UK and US) and Mayors (US), with
complementary jewellery offering.
The Watches of Switzerland Group has 128 core showrooms across
the UK and US (which includes 20 dedicated mono-brand stores in
partnership with Rolex, TAG Heuer, Omega and Breitling) and has a
leading presence in Heathrow Airport with representation in
Terminals 2, 3, 4 and 5 as well as five online transactional
websites.
The Watches of Switzerland Group is proud to be the UK's largest
retailer for Rolex, Cartier, Omega, TAG Heuer and Breitling
watches.
Mappin & Webb holds Royal warrants as goldsmiths,
silversmiths and jeweller to Her Majesty The Queen and silversmiths
to His Royal Highness The Prince of Wales. The Mappin & Webb
master jeweller has been Crown Jeweller, custodian of the Crown
Jewels of Her Majesty The Queen since 2012.
Analyst & shareholder enquiries
The Watches of Switzerland Group
Anders Romberg
Telephone: + 44 (0) 20 7317 4605
Email: investor.relations@thewosgroup.com
Media enquiries
Finsbury
Charles O'Brien
Telephone: + 44 (0) 20 7251 3801
Email: WoS@finsbury.com
Introduction
It has been an exciting year for the Watches of Switzerland
Group, culminating in our admission to the London Stock Exchange on
4 June 2019. Our business has been transformed over the last five
years, through significant investment in our showrooms and
technology infrastructure and a sharp focus on our customer and
supplier relationships, together with continued impactful marketing
initiatives, all resulting in a market leading proposition. Revenue
has more than doubled over the five-year period and grown at a
Compound Annual Growth Rate(2) (CAGR) of 19.8%. This has translated
to strong growth in profits and profitability and a unique platform
for future growth; Adjusted EBITDA has grown at a CAGR of 30.1%
over the same period.
Our listing on the London Stock Exchange represents the
beginning of the next stage in our journey.
Group strategy
We are committed to delivering on our key strategic aims which
have underpinned the success we have achieved in FY19. The pillars
of our strategy can be summarised as follows:
1. Growing revenue and profits through continued investment in
and elevation of our showroom portfolio and new showroom
opportunities
2. Being a strong partner for our luxury watch brands
3. Delivering exceptional customer service
4. Continuing to develop best in class practices and leverage
our scale across merchandising, marketing (including digital
marketing, social media and CRM) and retail operations
5. Expanding multi-channel market leadership
This strategy is at the heart of everything we do and we believe
it will allow us to continue to achieve sustainable profitable
growth into FY20 and beyond.
Our strategy, as outlined above, has allowed us to continue to
grow and develop our business, with each of the pillars delivering
proven success in FY19.
Region FY19 revenue FY18 revenue FY19 Like for April 2019 number
GBPm GBPm like growth of core showrooms
%
UK 588.2 541.2 10.0% 107
------------- ------------- -------------- -------------------
US 185.3 90.0 7.0%* 21
------------- ------------- -------------- -------------------
Total 773.5 631.2 10.0% 128
------------- ------------- -------------- -------------------
All revenue and profit results are shown on a continuing
basis.
1. Growing revenue and profits through continued investment in
and elevation of our showroom portfolio and new showroom
opportunities
In FY19 the Group incurred GBP33.8m in expansionary capex
including, but not limited to, the following projects:
-- The opening of flagship showrooms in New York in Greene
Street Soho (November 19) and Hudson Yards (March 19)
-- The relocation and expansion of the Watches of Switzerland flagship in Wynn Las Vegas
-- The opening of Breitling and Omega mono-brand stores in Wynn Las Vegas
-- The relocation of Mappin & Webb Fenchurch Street to a new location
-- The relocation of Goldsmiths Nottingham to a new location
-- The expansion of the Rolex presentation in Mappin & Webb
Old Bond Street and Watches of Switzerland Cardiff
-- The expansion of the showroom and Rolex presentation in Goldsmiths Bullring, Birmingham
-- Expansion of Rolex presentation in Goldsmiths Watford, Merryhill and Newcastle
-- The opening of 3 TAG Heuer mono-brand stores
Showroom / Project pipeline:
The new project pipeline is in line with pre-IPO communications
and includes the following:
-- Mayors Miami International refurbishment (April 19)
-- Mayors Merrick Park, Miami relocation to new format Mayors showroom (June 19)
-- Mayors Lenox Square, Atlanta relocation to incorporate Rolex
mono-brand, Audemars Piguet mono-brand store and Mayors showroom
(July 19)
-- Watches of Switzerland Wynn Encore Boston (July 19)
-- Three new UK TAG Heuer mono-brand stores (Autumn 19)
-- Heathrow Terminal 3 expansion to include new Rolex room (Jan 20)
-- Gatwick North Terminal (August 19)
-- Watches of Switzerland Brighton relocation (August 19)
-- American Dream New Jersey (in 2020). Rolex anchor
-- Broadgate London (Summer 20) Rolex anchor
-- Battersea Power Station London (Autumn 20)
-- Conversion of Watches of Switzerland Glasgow to a Rolex mono-brand (Autumn 19 / Jan 20)
2. Being a strong partner for our luxury watch brands
We hold strong and long-standing relationships with our key
brand partners. We are proud of our collaborations with these key
partners across all operational areas of our business. We actively
work with our partners to streamline the supply chain and gain
efficiencies wherever possible, primarily through the exchange of
data (e.g. product trends, forward demand forecasting) which
enables effective production planning as well as identifying
product development opportunities.
2019 marks the 100 year anniversary of our relationship with
Rolex. To commemorate this landmark occasion we have hosted a wide
range of events with Rolex, including a major launch event in
Newcastle, to allow our customers even greater access to our
successful relationship with the world's leading manufacturer of
luxury watches.
3. Delivering exceptional customer service
We understand the importance and value of the luxury products we
sell. Be it a once in a lifetime luxury watch purchase, an
engagement ring, or being trusted to restore a family heirloom, we
never 'just sell watches and jewellery'. We maintain a clear
customer perspective in all that we do.
Both locally and nationally customer experience is considered
and treated as a major point of difference. In our competitive and
non-essential marketplace, the way we make our customers feel is
always a primary focus. With an emphasis on local reputation, trust
and networking, every customer is treated as a potential loyal
client for life by our retail professionals.
We provide the ultimate luxury environment for our customers to
feel welcome, appreciated and supported throughout their
journey.
We continue to provide our colleagues with unparalleled training
to develop their brand knowledge and retail expertise, to allow our
staff to provide customers with an unrivalled in-store
experience.
Supporting the in-store customer journey we offer a range of
events tailored to our customers, enabled by our superior CRM
capabilities.
4. Continuing to develop best in class practices of
merchandising, marketing (including digital marketing, social media
and CRM) and retail operations
Merchandising
The Group has significantly improved its merchandising
capability in the course of transforming the business, developing
the merchandising function into a customer-focused driver of
product availability and access. Through our merchandising team,
merchandising tools and long-term relationships with brand
partners, we seek to ensure that our inventory is current with
appropriate inventory depth.
The Group's merchandising capabilities are underpinned by a
customer-centric analytical approach which focuses on showroom
profiling, productivity, trend analyses, seasonal changes and sales
and inventory forecasting through advanced market trend analysis
run on SAP software. The capability of our merchandising function
enables us to provide feedback to our brand partners on existing
inventory to facilitate the aligning of product ranges to customer
demands and thereby optimise inventory turns.
Marketing
CRM is a key focus of our strategy and we have a CRM database in
the UK of more than 4.8m people of which over 3m are contactable
clients. This is used for centralised targeted marketing via e-CRM
and direct mail and customer demographic analysis.
A key focus of the centralised marketing activity is Calibre,
our industry leading luxury watch publication which showcases the
brands we sell and is a platform to share our knowledge and
expertise in luxury watches. We produce two printed publications a
year for both the UK and US markets, as well as digital monthly
newsletters to a database of over 225,000 watch buyers. We also
launched our Calibre podcast series, hosted mainly by our CEO with
interviews and insight from industry leading figures.
In addition to Calibre, we produce Loop, which showcases our own
jewellery ranges across Goldsmiths and Mappin & Webb. Loop is
an annual publication mailed to our loyal clients as well as an
edited bi-monthly digital newsletter emailed to a broad audience of
around 400,000 clients.
In addition to the centralised marketing activity, our showroom
colleagues in the UK are also focussed on their own direct client
reach to drive footfall with over 157,000 CRM activities(2) created
at the showroom level as well as over 51,000 prospects(2) added to
the customer database for future follow up and contact. To support
the showrooms in their outreach to customers over 45 "clientelling"
guides were produced in FY19 covering topics such as new product
launches, key focus lines or brand guides.
A key component of our CRM strategy in the UK is the hosting of
our loyal clients at various events, with over 120 events in FY19,
we execute the event programme in the most relevant way to maintain
and grow our client relationships.
Social media also continues to be an important part of our
strategy as we focus on a content first approach with a social
community of over 340,000 across our Group and a monthly reach and
impressions of 9.6m and 18.7 million respectively across
Goldsmiths, Mappin & Webb and Watches of Switzerland. We focus
on acquisition, amplification with our content creation having a
renewed focus on creating our own brand assets with a consumer
centric and mobile first approach. Our content amplification
focuses on YouTube, Global Display Network, Facebook and Instagram
to drive reach and awareness and to also to reach a younger
audience.
We are actively rolling out our CRM and digital systems to our
US business.
We engage with our luxury watch partners on marketing and we
have shifted from limited cooperative advertising to broad
campaigns that target a wider audience. One of our key focus areas
is outdoor advertising with Rolex - particularly in the West London
tourist routes and at Heathrow as well as on billboards throughout
New York and Florida.
Through an increased focus on Marketing, our total brand
awareness has increased from 84% to 93% on Goldsmiths, 35% to 66%
on M&W and 46% to 70% on Watches of Switzerland since 2012([3])
.
Retail operations
Throughout our retail network there is a high level of
accountability and performance management. We strive to ensure a
collective alignment, ownership and understanding at all levels
within retail to ensure that we continually drive productivity and
profitability. The Group maximises performance through Business
Planning Reviews with showroom managers every 4-6 weeks and through
the monitoring of operational KPIs.
5. Expanding multi-channel market leadership
FY19 saw another year of strong growth for our ecommerce
business with revenue +18.0% compared to last year. This was driven
through a continuation of improving and evolving our luxury and
e-commerce strategies:
-- Increasing luxury watch and jewellery brand range
availability to become the UK's largest Authorised Retailer,
working in closer partnership with key strategic partners to drive
performance and efficiency
-- Continually pushing the boundaries of multi-channel digital
marketing. We embrace and drive forward our capabilities,
leveraging rapidly evolving Artificial Intelligence and machine
learning technologies to optimise search engine optimisation
-- By leveraging the unique capabilities of the Watches of
Switzerland Group's showroom estate and learnings of previous
years, we are able to work in partnership with key advertising
networks to evolve our leading-edge digital marketing strategy,
which was not available to us previously
-- We continue to enhance our online customer proposition
through live video and text pre & post-sales support
-- In May 2019 we updated our online customer experience to
include 9pm order cut-off, increased next day delivery through DPD
and improved luxury packaging
Financial review
Note: The results presented in this section and the table below
are the results of the Jewel UK Midco consolidated group, which was
acquired by Watches of Switzerland Group PLC as part of a share for
share exchange prior to its admission on the London Stock
Exchange.
These P&L results also exclude those of the Watch Shop and
The Watch Lab businesses, which were transferred to a related
entity of the Group in December 2018 following the decision to
further focus on the Group's activities in the luxury watch
market.
Continuing basis GBPm FY19 FY18 %
Luxury watches(2) 631.4 492.3 +28.3%
Luxury jewellery(2) 74.7 68.9 +8.5%
Fashion & classic (incl. Jewellery) 34.6 39.5 (12.4%)
Other 32.8 30.5 +7.5%
------- ------- ---------
Revenue 773.5 631.2 +22.5%
------- ------- ---------
Adjusted EBITDA(2) pre-exceptional
items and non-underlying items 78.2 65.6 +19.1%
------- ------- ---------
Showroom opening and closing costs
and other non-recurring items (9.4) (7.1) -32.0%
------- ------- ---------
Adjusted EBITDA(2) 68.8 58.5 +17.6%
------- ------- ---------
Adjusted operating profit(2) 51.8 38.9 +33.2%
------- ------- ---------
Exceptional items (6.3) (1.5) (321.6%)
------- ------- ---------
Operating profit 45.5 37.4 +21.6%
------- ------- ---------
Net finance cost (25.4) (30.2) +16.1%
------- ------- ---------
Profit before tax 20.1 7.2 +180.8%
------- ------- ---------
Revenue
Revenues grew strongly in FY 2019 to GBP773.5m, up 22.5% on the
prior year and like for like growth was 10.0%. Our revenues are
spread geographically across our portfolio of showrooms and online
as can be seen in the table below:
Region GBPm %
UK 588.2 76%
------ ----
US 185.3 24%
------ ----
Total revenue 773.5
------ ----
UK revenue has grown by 8.7% to GBP588.2m, driven by like for
like sales growth of +10% (FY18 4.0%). The like for like sales
growth contributed GBP50.8m of revenue in the year. The additional
revenue from new showrooms of GBP1.9m was offset by the loss of
revenue from closed showrooms of GBP5.7m.
US revenue has increased by 106% in the year to GBP185.3m and,
on a pro-forma basis, like for like growth is 7.0%. The
annualisation of the Mayors and Wynn showrooms acquired in 2017
contributed an additional GBP86.8m to revenue in FY19. In FY19, we
opened four new showrooms, including two flagship Watches of
Switzerland showrooms in New York, which increased revenue by
GBP8.6m.
Revenue by category
The Group continues to increase revenue in the luxury watch
sector, with an increase in revenue of 28% in the year. The split
of revenue by type is shown below:
2019 GBPm UK US Total Mix %
Luxury watches 471.7 159.7 631.4 81.6%
Luxury jewellery 55.8 18.9 74.7 9.7%
Fashion & classic 33.6 1.0 34.6 4.5%
Other 27.1 5.7 32.8 4.2%
------ ------ ------ ------
Total revenue 588.2 185.3 773.5 100%
------ ------ ------ ------
2018 GBPm UK US Total Mix %
Luxury watches 418.0 74.4 492.4 78.0%
Luxury jewellery 57.0 11.9 68.9 10.9%
Fashion & classic 38.6 0.8 39.4 6.2%
Other 27.6 2.9 30.5 4.9%
------ ----- ------ ------
Total revenue 541.2 90.0 631.2 100%
------ ----- ------ ------
Luxury watches now make up 81.6% of our revenue, an increase of
360bps on last year. Certain luxury watches are subject to waiting
lists that can last for years and in some cases are sold only to
selected clients.
Sales of Fashion & Classic watches reduced in line with our
strategy to focus on luxury watches.
Other revenue, primarily servicing and insurance, rose by
7.5%.
By focusing on the luxury end of the watch market, the average
selling price (ASP)(1) of luxury watches in the UK has increased by
9.9% in the year.
Average selling price GBP FY19 FY18 %
UK luxury watches 3,858 3,509 9.9%
US luxury watches 8,638 8,223 5.0%
------ ------ -----
Focus on profitable growth
The table below analyses our key costs and margins on a
continuing basis:
Continuing operations GBPm FY19 FY18 %
Net margin(2) 290.2 239.5 +21.1%
-------- -------- --------
as % of revenue 37.5% 37.9% (40bps)
Showroom costs (172.4) (145.2) (18.7%)
-------- -------- --------
as % of revenue 22.3% 23.0% (70bps)
4-Wall EBITDA(2) 117.8 94.3 +24.9%
-------- -------- --------
as % of revenue 15.2% 14.9% +30bps
Overheads (39.6) (28.7) (38.2%)
-------- -------- --------
as % of revenue 5.1% 4.5% +60bps
Showroom opening and closing
costs (7.5) (5.2) (44.2%)
-------- -------- --------
Other non-trading items (1.9) (1.9) -
-------- -------- --------
Adjusted EBITDA 68.8 58.5 +17.6%
-------- -------- --------
EBITDA margin %(2) 8.9% 9.3% (40bps)
-------- -------- --------
The profitability broken down between the UK and US is as
follows:
GBPm UK US Total
Revenue 588.2 185.3 773.5
------ ------ ------
Net margin 220.1 70.1 290.2
------ ------ ------
Net margin % 37.4% 37.8% 37.5%
4-Wall EBITDA 92.1 25.7 117.8
------ ------ ------
4-Wall EBITDA % 15.7% 13.9% 15.2%
------ ------ ------
Our 4-Wall EBITDA in the UK have benefited from the extensive
refurbishment programme we have undertaken over the last 5 years.
As a result, we have gained share in the luxury watch segment with
substantial productivity gains and leverage of our showroom costs.
In the US we are in the process of implementing a similar programme
for our acquired Mayors and Wynn businesses.
Net margin
Net margin grew in absolute terms by GBP50.7m in the year,
however in relative terms, net margin % decreased by 40bps,
principally driven by the increase in mix towards luxury watches
along with the effects of a competitive market in jewellery.
The impact of product mix on margin has been mitigated by
actions taken by management in relation to the Group's credit offer
and a reduction in incentives as discussed in the table below:
Credit offering In the UK we offer interest-free and interest-bearing
credit to our customers, which is provided through
a third-party. In the US we also offer both interest-free
and interest-bearing credit. 94% of credit is
provided by a US based third party with 6% provided
internally via a Mayors and Watches of Switzerland
proprietary credit card. By switching more customer
purchases onto interest bearing credit, we have
reduced the costs with our external providers.
Incentives The luxury products we showcase are in high demand,
therefore we have focused on the reduction of
incentives to a low level. This not only improves
margin, but better represents the prestige of
the brands we offer.
-----------------------------------------------------------
Showroom costs
Showroom costs have increased by GBP27.2m (+18.7%) in the year
as result of the new showroom openings and the annualisation of the
Mayors business which was acquired in October 2017. The focus on
cost control and showroom efficiency, assisted by the closure of
non-core stores, has reduced showroom costs as a % of revenue by
70bps to 22.3%.
Overheads
Overheads have increased by GBP10.9m (+38.2%) in the year as a
result of a full bonus payment of GBP3.1m in FY19 compared to
GBPnil in FY18, increase in head office costs ahead of the IPO and
the annualisation of US overheads, including those of Mayors, of
GBP4.2m.
Showroom opening and closure costs
GBPm FY19 FY18
Showroom opening costs 6.0 1.8
Showroom closure costs 1.5 3.4
Total 7.5 5.2
Showroom opening costs include the cost of rent, rates and
payroll prior to the opening of the showroom, normally during the
period of fit out. This cost will vary annually depending on the
scale of expansion in the year. We opened eight showrooms,
including two flagships, during the FY19 financial year compared to
two in FY18.
During the year we closed a total of 13 showrooms (10 being
non-core stores) with associated costs including rents, rates and
redundancy.
GBP5.7m of the total showroom opening and closing costs related
to the US operations.
Other non-trading items
Other non-trading items are made up of a number of costs which
are either non-recurring or not related to trading. These are made
up as follows:
GBPm FY19 FY18
Non-Executive Board prior to IPO 0.6 -
Redundancy costs 0.4 0.1
Transitional Services Agreement* with the previous
owner of Mayors 0.4 0.5
Share-based payments 0.4 0.5
Other one-off legal and professional fees 0.1 0.8
Total 1.9 1.9
(*The Transitional Services Agreement has now ended and all
operations are now undertaken by the Group)
Exceptional items
Reported profit for the year was impacted by significant
non-underlying and exceptional items as a result of costs incurred
in relation to the IPO. A summary of exceptional items is noted
below:
Exceptional items GBPm FY19 FY18
IPO professional and legal fees 5.9 -
Pension 'GMP' equalisation 0.4 -
Business acquisition - 1.5
----- -----
Total exceptional items 6.3 1.5
----- -----
The legal and professional fees represent those accrued for work
performed on the IPO up to the end of FY19.
The Group incurred a one-off charge in relation to the High
Court ruling on the equalising of Guaranteed Minimum Pensions (GMP)
for the defined benefit pensions of men and women.
In FY18 the Business acquisition costs relate to legal and
professional fees for the acquisition of Mayors and Wynn.
Carve-out of Watch Shop and The Watch Lab
Watch Shop, which sells classic and fashion watches online only,
and The Watch Lab, which provides a UK network of watch repair
branches, were businesses that were not considered core to the
ongoing strategy of the Group. These businesses were carved out of
the Group in December 2018. The combined revenue of these
businesses was GBP25.4m and operating losses were GBP18.2m
(including GBP16.9m of impairment) for the year prior to their
sale.
Leases and lease length
The average lease term remaining (to the nearest break clause)
on our current portfolio of showrooms is 4.1 years. More than half
of our leases (by value) will expire, or can be terminated, within
the next 4.4 years.
Only eight of our leases expire in more than 10 years at April
2019, the longest expiry being 12.4 years. Our three UK Golden
Triangle showrooms have an average of 10.7 years remaining on the
lease. We have 14 showrooms in the UK and 4 showrooms in the US
where a large proportion([4]) of the rent is variable to revenue,
in FY19 we paid GBP19.8m in turnover linked rent (FY18:
GBP18.9m).
The majority of our showrooms are highly profitable. As at the
end of FY19 there are 20 stores that have low levels of
profitability and their location and fit-out is inconsistent with
our luxury strategy. The average remaining lease term for these
stores was 1.7 years at the end of April 2019.
Net debt(2) and financing
Year-end net debt, excluding capitalised transaction costs, was
GBP240.6m, which was GBP4.5m lower than the prior year. (Refer to
Cash Flow below)
The financing of the Group at 28 April 2019 was made up of:
Type Amount m
UK Bond - 8.5% GBP247.9
UK Revolving Credit Facility - GBP40.0
LIBOR +1.75%
US Asset Backed Facility - LIBOR
+1.25% $60.0
----------
UK Bond
The Group issued listed bond notes on The International Stock
Exchange in April 2018, for a principal value of GBP265m and
between January and April 2019 the Group repurchased bonds with a
principal value of GBP17.1m.
US Asset Backed Facility
The Group has a US Asset Backed Facility which is based on the
advance lending rates for inventory, major credit card receivables,
private label and corporate accounts receivables up to a maximum
borrowing level of $60.0m. The FY19 average borrowing availability
was $44.7m. The facility was not drawn down until October 2018 and
$35.6m was drawn down at April 2019.
Post year-end refinancing
The net proceeds of the IPO of GBP139.5m were primarily used to
reduce our external debt to a level more appropriate for a publicly
listed company. Accordingly, on 4 June 2019 the outstanding
principal of the UK bonds were repaid, including an early
redemption premium of GBP21.7m.
We also entered into a new term loan facility on 4 June 2019 at
a significantly lower rate of interest. The facilities of the Group
are now as follows:
Type Expiry date Amount m
UK Term Loan - LIBOR +2.25% June 2024 GBP120.0
UK Revolving Credit Facility June 2024 GBP50.0
- LIBOR +2.0%
US Asset Backed Facility - LIBOR
+1.25% April 2023 $60.0
------------- ----------
Following the IPO and refinancing, our net debt, excluding
capitalised transaction costs, was GBP135.4m on 4 June 2019, which
represents a net debt: Adjusted EBITDA of 2.0 times.
Finance costs
The interest charge in the year was GBP25.4m, a decrease of
GBP4.9m on the prior year, mainly due to the write-off of the issue
costs following the refinancing activity in FY18 for the Mayors
acquisition and the further issue of the listed bond.
Cash flow
Reported basis GBPm FY19 FY18
EBITDA (continuing operations) 59.9 51.3
EBITDA (discontinued operations) (16.4) 2.4
------- -------
EBITDA(2) 43.5 53.7
Non-cash exceptional items 16.9 -
Working capital and other 9.6 (2.7)
------- -------
Cash generated from operations 70.0 51.0
Pension contributions (0.7) (0.7)
Interest (17.4) (13.3)
Tax (5.0) (2.9)
Maintenance capital expenditure(2)
cash flow (2.2) (1.5)
Free cash flow(2) 44.7 32.6
Expansionary capital expenditure(2)
cash flow (33.8) (13.3)
Carve-out of discontinued operations (5.7) -
Acquisition of Mayors and Wynn - (79.1)
Financing activities (20.2) 80.8
------- -------
Cash flow (15.0) 21.0
------- -------
The net cash outflow (after exceptional items and on a reported
basis) for the year of GBP15.0m was mainly driven by the high
levels of capital expenditure of GBP36.0m, repayment of GBP17.1m of
bond principal and the cash disposed on the carve-out of
discontinued operations of GBP5.7m.
Cash generated from operations increased by GBP19.0m in the year
due to the increased profitability of the business and working
capital improvements across inventory and debtor management. The
non-cash exceptional item relates to the impairment of goodwill and
other assets on the carve-out of the Watch Shop and the Watch Lab
businesses.
Following the refinancing in April 18, the interest payable
reduced by GBP0.9m in FY19 but interest paid increased by GBP3.8m
due to an adverse movement in the interest accrual arising from the
timing of interest payments.
Capital expenditure (capex)
Total capex in the year was GBP38.0m([5]) made up of GBP35.5m of
expansionary capex and GBP2.5m maintenance capex. As noted above,
the investment in our showroom portfolio is paramount to our
strategy. Over the last five years the Group has invested GBP45.2m
in refurbishing its existing portfolio in the UK and at April 2019
87% of the UK portfolio (excluding non-core stores) had been
refurbished within the last five years. This equated to 93% of
showrooms based on revenue contribution of the estate renovated.
For major 'gold' refurbishments in FY17-FY18 we typically saw an
uplift of approximately 30% of revenue post refurbishment.
Capex([6]) - continuing operations FY19 FY18
GBPm
Expansionary 35.5 12.7
Showroom maintenance 2.0 1.4
IT and technology 0.5 0.5
----- -----
Total capex 38.0 14.6
----- -----
Other Areas
Taxation
The effective tax rate for the year was 192.6%, compared to the
UK corporation tax rate of 19.0%. The high tax rate was driven by a
large amount of non-deductible expenses in relation to the
impairment of discontinued operations' intangible assets, IPO
costs, depreciation on ineligible items and other non-deductible
expenses.
In the US, we recognised a minor tax charge of GBP80,000 after
deducting intercompany interest and significant capital
expenditure. In the US, capital expenditure is fully deductible
once showrooms have fully opened.
Pension
The Group operates two defined contribution pension schemes and
one defined benefit scheme. The defined benefit scheme was closed
on 28 February 2002 to new employees. The latest full actuarial
valuation was carried out on 6 April 2017 which reflected a
technical deficit of GBP1.7m. As a result, minimum funding
contributions of GBP550,000 per annum are being paid into the
scheme until 5 April 2020.
The pension liability for accounting purposes at 28 April 2019
was GBP3.1m, an increase of GBP1.7m primarily driven a change in
the discount rate. The valuation was updated to include the impact
of Guaranteed Minimum Payment equalisation and an exceptional item
of GBP450,000 was recognised in the Income Statement in the
year.
Audit tender
Under CMA guidelines, FTSE 350 companies are required to have
held a tender for the audit appointment within the last ten years.
As a private company, KPMG has been external auditor of the Group
for over ten years. Therefore, on Admission, the Audit Committee
commenced an audit tender for the financial year ending 26 April
2020, which will be completed in September 2019. KPMG have been
invited to re-tender for the audit. Following the audit tender,
shareholders will be invited to vote on the appointment and
remuneration of the auditor.
Outlook and guidance
FY19 has been a pivotal year, and current trading in the first
eleven weeks of FY20 are encouraging.
There is a strong pipeline of projects, including new showroom,
expansions and refurbishments.
The Group remains well-positioned to deliver on its strategic
aims and meet the Board's expectations for FY20, with unchanged
guidance from the time of the IPO.
Guidance for the FY20-22 is as follows:
-- Mid-single digit Like for like sales growth in the UK and the US.
-- A revenue of GBP1bn by FY21.
-- Expansionary capex in the UK of cGBP10m-12m p.a., falling to
GBP6m-9m p.a. by FY22, based on our current project pipeline.
-- Expansionary capex in the US of cGBP15m-17m p.a. falling to
GBP7m-10m p.a. by FY22, based on our current project pipeline.
-- Other capex at cGBP5m p.a.
-- Broadly stable EBITDA margins, before IFRS 16 adjustments.
-- Showroom opening and closing costs in line with longer term averages.
-- Accounting tax rate at around 20%, subject to any changes in corporate tax rates.
Market Briefing
A presentation for analysts and investors will be held today
starting at 9.00am at One Moorgate Place, EC2R 6EA. A live
audiocast will be available at the following link:
https://webcasts.eqs.com/watchesofswitzerland2019071709_en
The dial-in number is +44 (0)330 336 9411; please state that you
wish to join the "Watches of Switzerland Full Year Results"
conference call and use the following code: 5228850. An audio
recording of the event will be available on our corporate website
shortly afterwards.
Cautionary Statement
This announcement contains certain forward-looking statements
with respect to the financial condition and operational results of
The Watches of Switzerland Group. These statements and forecasts
involve risk, uncertainty and assumptions because they relate to
events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements. These forward-looking
statements are made only as at the date of this announcement.
Nothing in this announcement should be construed as a profit
forecast. Except as required by law, WOS has no obligation to
update the forward-looking statements or to correct any
inaccuracies therein.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Registered number: 08306312
JEWEL UK MIDCO LIMITED
CONSOLIDATED INCOME STATEMENT
52 week period ended 28 April 2019 52 week period ended 29 April 2018
Note Continuing Discontinued Total Continuing Discontinued Total
operations operations Group operations operations Group
Restated
(note 1)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Revenue 3 773,518 25,358 798,876 631,188 55,709 686,897
Cost of sales before
exceptional items (700,945) (25,139) (726,084) (573,837) (53,990) (627,827)
Exceptional cost of
sales 4 - (10,007) (10,007) - - -
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Cost of sales (700,945) (35,146) (736,091) (573,837) (53,990) (627,827)
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Gross profit before
exceptional items 72,573 219 72,792 57,351 1,719 59,070
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Gross profit 72,573 (9,788) 62,785 57,351 1,719 59,070
Administrative expenses
before exceptional
items (19,414) (1,498) (20,912) (17,114) (2,453) (19,567)
Exceptional
administrative
expenses 4 (6,350) (6,922) (13,272) (1,506) - (1,506)
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Administrative expenses (25,764) (8,420) (34,184) (18,620) (2,453) (21,073)
Loss on disposal of
property, plant and
equipment (1,324) - (1,324) (1,318) (20) (1,338)
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Operating profit/(loss) 45,485 (18,208) 27,277 37,413 (754) 36,659
Finance costs (26,413) (2) (26,415) (30,603) 19 (30,584)
Finance income 1,048 - 1,048 354 - 354
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Net finance cost (25,365) (2) (25,367) (30,249) 19 (30,230)
Profit/(loss) before
taxation 20,120 (18,210) 1,910 7,164 (735) 6,429
Taxation 5 (6,221) 2,542 (3,679) (6,883) 853 (6,030)
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Profit/(loss) for
the financial period 13,899 (15,668) (1,769) 281 118 399
------------------------- ----- ------------ ------------- ---------- ------------ ------------- ----------
Earnings Per Share 6
Basic 20.9p (23.6)p (2.7)p 0.4p 0.2p 0.6p
JEWEL UK MIDCO LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
52 week period ended 28 April 2019 52 week period ended 29 April 2018
Note Continuing Discontinued Total Continuing Discontinued Total
operations operations Group operations operations Group
Restated
(note 1)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----- ------------- ------------- --------- ------------ ------------- ----------
Profit/(loss) for
the financial period 13,899 (15,668) (1,769) 281 118 399
Other comprehensive
income/(expense):
Items that will be
reclassified to profit
or loss
Foreign exchange
gain/(loss)
on translation of
foreign operations 5,252 - 5,252 (3,622) - (3,622)
Related tax movements (832) - (832) - - -
Items that will not
be reclassified to
profit or loss
Actuarial (losses)/gains
on defined benefit
pension scheme 10 (1,797) - (1,797) 978 - 978
Related tax movements 273 - 273 (166) - (166)
Other comprehensive
income/(expense) for
the period net of
tax 2,896 - 2,896 (2,810) - (2,810)
------------- ------------- --------- ------------ ------------- ----------
Total comprehensive
profit/(loss) for
the period, net of
tax 16,795 (15,668) 1,127 (2,529) 118 (2,411)
------------- ------------- --------- ------------ ------------- ----------
JEWEL UK MIDCO LIMITED
CONSOLIDATED BALANCE SHEET
---------------------------------------------------------------------
Note 28 April 29 April
2019 2018
Restated
(note 1)
------------------------------------- ----- ---------- ----------
GBP'000 GBP'000
Assets
Non-current assets
Goodwill 7 109,666 118,581
Intangible assets 7 18,063 30,348
Property, plant and equipment 8 101,268 79,772
Deferred tax assets 8,727 6,946
Trade and other receivables 4,544 7,578
-------------------------------------- ----- ---------- ----------
242,268 243,225
------------------------------------- ----- ---------- ----------
Current assets
Inventories 200,271 215,443
Trade and other receivables 35,638 23,130
Cash and cash equivalents 34,538 49,222
-------------------------------------- ----- ---------- ----------
270,447 287,795
------------------------------------- ----- ---------- ----------
Total assets 512,715 531,020
-------------------------------------- ----- ---------- ----------
Liabilities
Current liabilities
Trade and other payables (137,344) (134,097)
Current tax liabilities (2,759) (2,176)
Derivative financial instruments - (31)
Borrowings 9 (27,213) (29,228)
Provisions for other liabilities
and charges (3,312) (3,773)
-------------------------------------- ----- ---------- ----------
(170,628) (169,305)
------------------------------------- ----- ---------- ----------
Non-current liabilities
Trade and other payables (20,318) (16,298)
Borrowings 9 (239,884) (255,530)
Post-employment benefit obligations 10 (3,051) (1,345)
Provisions for other liabilities
and charges (2,275) (3,485)
-------------------------------------- ----- ---------- ----------
(265,528) (276,658)
------------------------------------- ----- ---------- ----------
Total Liabilities (436,156) (445,963)
-------------------------------------- ----- ---------- ----------
Net assets 76,559 85,057
-------------------------------------- ----- ---------- ----------
Equity
Share capital 66 66
Retained earnings 75,695 88,613
Foreign exchange reserve 798 (3,622)
-------------------------------------- ----- ---------- ----------
Total equity 76,559 85,057
-------------------------------------- ----- ---------- ----------
JEWEL UK MIDCO LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Accumulated Foreign Total Equity
Capital Premium Losses/ (Retained Exchange Attributable
Earnings) Reserve to Owners
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- ------------------- ---------- --------------
Balance at 30 April
2017 66,308 - (15,262) - 51,046
-------------------------- --------- --------- ------------------- ---------- --------------
Profit for the financial
period - continuing
operations - - 281 - 281
Profit for the financial
period - discontinued
operations - - 118 - 118
Other comprehensive
income for the period
net of tax - - 812 (3,622) (2,810)
Share-based payment
charge (restated) - - 482 - 482
Share issue - 35,940 - - 35,940
Share capital reduction (66,242) (35,940) 102,182 - -
-------------------------- --------- --------- ------------------- ---------- --------------
Balance at 29 April
2018 (Restated) 66 - 88,613 (3,622) 85,057
-------------------------- --------- --------- ------------------- ---------- --------------
Profit for the financial
period - continuing
operations - - 13,899 - 13,899
Profit for the financial
period - discontinued
operations - - (15,668) - (15,668)
Other comprehensive
income for the period
net of tax - - (1,524) 4,420 2,896
Share-based payment
charge - - 375 - 375
Dividends paid* - - (10,000) - (10,000)
-------------------------- --------- --------- ------------------- ---------- --------------
Balance at 28 April
2019 66 - 75,695 798 76,559
-------------------------- --------- --------- ------------------- ---------- --------------
*Dividends paid in specie relating to the carve out of the
Online & servicing segment (see note 14).
JEWEL UK MIDCO LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
-------------------------------------------------------------------------------------
52 week period 52 week period
ended ended
28 April 29 April
2019 2018
Restated
(note 1)
--------------------------------------------------- --------------- ---------------
GBP'000 GBP'000
Cash flows from operating activities
(Loss)/profit for the year (1,769) 399
Adjustments for:
Depreciation of property, plant and equipment 12,026 11,792
Amortisation of intangible assets 4,246 5,253
Impairment of intangible assets 16,929 -
Share-based payment charge 375 482
Guaranteed Minimum Payment equalisation 450 -
Finance income (1,048) (354)
Finance costs 26,415 30,584
Loss on disposal of property, plant and
equipment 1,324 1,338
Taxation 3,679 6,030
Decrease/(increase) in inventory 1,936 (43)
Decrease/(increase) in debtors 2,658 (4,785)
Increase in creditors 2,811 310
--------------------------------------------------- --------------- ---------------
Cash generated from operations 70,032 51,006
Pension scheme contributions (697) (695)
Tax paid (5,012) (2,888)
--------------------------------------------------- --------------- ---------------
Net cash generated from operating activities 64,323 47,423
--------------------------------------------------- --------------- ---------------
Cash flows from investing activities
Purchase of property, plant and equipment (32,775) (13,322)
Purchase of intangible assets (3,275) (1,555)
Cash disposed following carve out of discontinued (5,659) -
operations
Acquisition of subsidiaries net of cash
acquired - (79,068)
Interest received 80 354
--------------------------------------------------- --------------- ---------------
Net cash outflow from investing activities (41,629) (93,591)
--------------------------------------------------- --------------- ---------------
Cash flows from financing activities
Net proceeds from listed bond issue - 255,438
Repurchase of listed bond principal (17,076) -
Premium paid on early redemption of listed (198) -
bond
Net proceeds from new loan - 107,325
Transaction costs (718) -
Repayment of shareholder loan - (75,000)
Net repayment of borrowings (2,099) (206,500)
Repayment of hire purchase (199) (428)
Interest paid (17,399) (13,647)
--------------------------------------------------- --------------- ---------------
Net cash (outflow)/inflow from financing
activities (37,689) 67,188
--------------------------------------------------- --------------- ---------------
Net (decrease)/increase in cash and cash
equivalents (14,995) 21,020
Cash and cash equivalents at the beginning
of the period 49,222 28,402
Exchange losses on cash and cash equivalents 311 (200)
--------------------------------------------------- --------------- ---------------
Cash and cash equivalents at the end of
period 34,538 49,222
--------------------------------------------------- --------------- ---------------
Comprised of:
Cash at bank and in hand 34,538 49,222
--------------------------------------------------- --------------- ---------------
Cash and cash equivalents at end of period 34,538 49,222
--------------------------------------------------- --------------- ---------------
JEWEL UK MIDCO LIMITED
Notes to the Financial Statements
For the 52 week period ended 28 April 2019
1. General information and basis of preparation
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 each of the
financial periods 52 week period ended 28 April 2019 and 52 week
period ended 29 April 2018, 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 29
April 2018 have been delivered to the Registrar of Companies and
the statutory accounts for the period ended 28 April 2019 will be
filed with the Registrar in due course.
This announcement was approved by the Board of Directors on 16
July 2019.
Accounting policies
Whilst the financial information has been prepared in accordance
with the recognition and measurement criteria of International
Financial Reporting Standards (IFRS) as adopted by the European
Union, this announcement does not itself contain sufficient
information to comply with IFRS.
The accounting policies adopted in the preparation of the
Condensed Consolidated Financial Statements are the same as those
set out in the Group's annual financial statements for the 52 weeks
ended 29 April 2018, except for the adoption of new standards
effective as of 30 April 2018 and a change in segmental reporting
definitions. The Group has not adopted early any other standard,
interpretation or amendment that has been issued but is not
effective. The changes to segmental reporting and new standards
have been set out below.
Prior period restatement
IFRS 15 - Revenue from Contracts with Customers
The Group has applied a full retrospective transition as part of
the application of IFRS 15. We have, therefore, restated all
balances which are affected by the full retrospective application -
further disclosure on the impact of this on the financial
statements is given within 'New standards, amendments and
interpretations'.
Revision of provisional values of assets and liabilities
acquired as part of business combinations
During the measurement period, the Group has revised the
provisional values of assets and liabilities acquired as part of
the Mayors Jewelers and Wynn acquisitions. In line with IFRS 3
'Business Combinations', we have revised the comparative
information for 29 April 2018 as required. The Group is now out of
the measurement period for both acquisitions and as such, the
values stated within note 13 are stated as final.
Share-based payments
The Group has a number of share-based payment arrangements which
were not accounted for in prior years. The comparative information
has been restated to reflect accounting for these arrangements.
Refer to the Consolidated Statement of Changes in Equity for
adjustments recognised regarding these arrangements in comparative
periods. Recognising these share-based payments increased
administration expenses in the Consolidated Income Statement by
GBP482,000 for the period ended 29 April 2018. Consequently,
Earnings Per Share reduced from 1.3p to 0.6p in the financial year
to 29 April 2018 as a result of this adjustment.
Going concern
The Group regularly reviews market and financial forecasts and
has reviewed its trading prospects in its key markets. As a result,
it believes its trading performance will demonstrate continued
improvement in future periods, and that liquidity will remain
strong.
1. General information and basis of preparation (continued)
On 24 May 2019, Watches of Switzerland Group Limited (formerly
Jewel UK Newco Limited) (registered number 11838443) purchased the
entire share capital of Jewel UK Midco Limited from Jewel Holdco
SARL through a share for share exchange. On 30 May 2019, Watches of
Switzerland Group Limited re-registered as a Public Limited Company
and on 4 June 2019, its shares were admitted for trading on the
main market for listed securities of the London Stock Exchange. On
4 June 2019, the Group entered into a new term loan facility
consisting of a term loan for GBP120,000,000 and a revolving credit
facility of GBP50,000,000. The term loan facility expires on 4 June
2024.
The Board has reviewed the latest forecasts of the newly formed
Watches of Switzerland Group PLC group, reflecting the impact of
the IPO and refinancing and considered the obligations of those
Group's financing arrangements. The Board has specifically
considered the potential impact of the UK leaving the European
Union and given the continued strong liquidity of the Group, the
Board has concluded that a going concern basis of preparation of
the Group's financial statements is appropriate.
Alternative performance measures ('APMs')
The Group has identified certain measures that it believes will
assist the understanding of the performance of the business. These
APMs are not defined or specified under the requirements of
IFRS.
The Group believes that these APMs, which are not considered to
be a substitute for, or superior to, IFRS measures, provide
stakeholders with additional useful information on the underlying
trends, performance and position of the Group and are consistent
with how business performance is measured internally. The
Alternative Performance Measures are not defined by IFRS and
therefore may not be directly comparable with other companies'
alternative performance measures.
The key APMs that the Group uses include: Adjusted EBITDA,
Adjusted EBITDA pre-exceptional costs and non-underlying items and
Basic EPS adjusted for exceptional items. These APMs are set out in
the Glossary including explanations of how they are calculated and
how they are reconciled to a statutory measure where relevant. A
reconciliation to statutory measures is included in note 2.
Non-underlying costs
The Group has chosen to present Adjusted EBITDA and Adjusted
EBITDA pre-exceptional costs and non-underlying items which
excludes certain items, that are considered non-underlying and
exceptional due to their size, nature or incidence, and are not
considered to be part of the normal operating costs of the Group.
These costs may include the financial effect of non-underlying
items which are considered exceptional and occur infrequently such
as; restructuring costs, management fees paid to the controlling
shareholder and professional costs for non-trading activities. The
Group believes that the separate disclosure of these costs provides
additional useful information to users of the financial statements
to enable a better understanding of the Group's underlying
financial performance.
Foreign currencies
The Consolidated Financial Statements are presented in Pounds
Sterling (GBP), which is the Company's functional and presentation
currency. The Group includes foreign entities whose functional
currencies are not Sterling. On consolidation, the assets and
liabilities of those entities are translated at the exchange rates
at the balance sheet date and income and expenses are translated at
average rates during the period. Translation differences are
recognised in other comprehensive income.
Transactions in currencies other than an entity's functional
currency are recorded at the exchange rate on the transaction date,
whilst assets and liabilities are translated at exchange rates at
the balance sheet date. Exchange differences are recognised in the
Income Statement.
1. General information and basis of preparation (continued)
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker (CODM), who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Chief Executive Officer and
Chief Financial Officer of the Group. The CODM reviews the key
profit measures, 'Adjusted Earnings Before Interest, Tax,
Depreciation and Amortisation (EBITDA)' and 'Adjusted EBITDA
pre-exceptional costs and non-underlying items'.
In the current period, the operating segments presented differ
from those presented in the 29 April 2018 statutory financial
statements. This presentation of segmental reporting represents a
change to our historical presentation which has been based on
purely geographical revenue streams. The CODM believes that this
new segmental reporting better reflects the operations of the Group
and the varying commercial strategies within its businesses. Each
of the three segments shown operates within a different commercial
market and sells to a different customer base than the other two,
and each is governed by a separately identifiable strategic growth
plan. The CODM believes that segmentation in this manner allows a
reader of our financial accounts to better understand the differing
commercial drivers within our overall Group performance. Refer to
note 2.
New standards, amendments and interpretations
The Group applied IFRS 15 'Revenue from Contracts with
Customers' and IFRS 9 'Financial Instruments' for the first time.
The nature and effect of the changes as a result of adoption of
these new accounting standards are described below.
Several other amendments and interpretations apply for the first
time in the period to 28 April 2019, but do not have an impact on
the Consolidated Financial Statements of the Group. The Group has
not adopted early any standards, interpretations or amendments that
have been issued but are not yet effective.
IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 supersedes IAS 11 'Construction Contracts', IAS 18
'Revenue and Related Interpretations' and it applies, with limited
exceptions, to all revenue arising from contracts with its
customers. IFRS 15 establishes a five-step model to account for
revenue arising from contracts with customers and requires that
revenue be recognised at an amount that reflects the consideration
to which an entity expects to be entitled in exchange for
transferring goods or services to a customer.
IFRS 15 requires entities to exercise judgement, taking into
consideration all of the relevant facts and circumstances when
applying each step of the model to contracts with their customers.
The standard also specifies the accounting for the incremental
costs of obtaining a contract and the costs directly related to
fulfilling a contract. In addition, the standard requires extensive
disclosures.
The Group adopted IFRS 15 using the full retrospective method of
adoption. The effect of the transition on the current period has
not been disclosed as the standard provides an optional practical
expedient. The Group did not apply any of the other available
optional practical expedients.
The effect of adopting IFRS 15 is as follows:
52 week period
ended
29 April
2018
--------------------------------- ---------------
GBP'000
Revenue 1,713
Cost of sales (1,713)
--------------------------------- ---------------
Gross profit -
--------------------------------- ---------------
Profit for the financial period -
--------------------------------- ---------------
The change did not have an impact on total comprehensive loss
for the period. There is no impact on the Consolidated Balance
Sheet and Consolidated Cash Flow Statement for the periods stated
above.
1. General information and basis of preparation (continued)
The adjustment above is to recognise certain items of revenue
which were previously netted against related costs within cost of
sales. Upon application of IFRS 15, these items were identified as
separate contracts with customers and as such were required to be
shown gross of the related costs. These items related to
commissions receivable from suppliers. There is no overall impact
on the gross profit, profit for the financial period and no impact
upon the total comprehensive profit for the period.
Revised revenue accounting policy
The Group is in the business of selling luxury watches and
jewellery and providing ongoing services to our customers, such as
repairs and servicing. Revenue from contracts with customers is
recognised when control of the goods or services is transferred to
the customer at an amount that reflects the consideration to which
the Group expects to be entitled in exchange for those goods or
services. The Group has concluded that it is the principal in its
revenue arrangements because it controls the goods or services
before transferring them to the customer.
In determining the transaction price for the sale of goods, the
Group considers the effects of variable consideration and the
existence of significant financing components.
Sale of goods
Revenue from sale of goods is recognised at the point in time
when control of the asset is transferred to the customer, generally
on delivery of the goods.
Sale of goods - retail
Sales of goods are recognised when a Group entity sells a
product to the customer and control of the goods are transferred to
the customer. Retail sales are usually settled in cash or by credit
card. It is the Group's policy to sell its products to the retail
customer with a right to return within 14 days for a cash refund
and 30 days for a product exchange. The Group does not operate any
loyalty programmes.
Where sales are made on credit provided by a third party,
revenue is recognised immediately on sale of the product and
control has been passed to the customer.
The Group also offers customers the option to pay for goods over
time via credit agreements. This is discounted using the rate that
would be reflected in a separate financing transaction between the
Group and its customers at contract inception, to take into
consideration the significant financing component.
Sale of goods - online
Revenue from the provision of the sale of goods on the internet
is recognised at the point that control has passed to the customer,
which is the point of delivery. Transactions are settled by credit
or payment card. Where sales are made on credit provided by a third
party, revenue is recognised when control has been passed to the
customer, on delivery.
Rendering of services
Revenue from a contract to provide services is recognised in the
period in which the services are provided. Revenue is recognised
when the following conditions are satisfied:
- The amount of revenue can be measured reliably;
- It is probable that the Group will receive the consideration
due under the contract;
- The service has been completed; and
- Control of the good is passed back to the customer.
Contract balances - Customer deposits and gift cards
A customer deposit or gift card liability is the obligation to
transfer goods or services to a customer for which the Group has
received consideration. If consideration is received before the
Group transfers goods or services to the customer, revenue is
deferred and a customer deposit or gift card liability is
recognised. Customer deposits and gift cards are recognised as
revenue when the customer is passed control of the goods.
Gift card redemptions are estimated on the basis of historical
redemptions and are reviewed regularly and updated to reflect
management's best estimate of patterns of redemption. The estimated
non-redemption is recognised in revenue based on historical
redemptions.
1. General information and basis of preparation (continued)
IFRS 9 'Financial instruments'
IFRS 9 'Financial Instruments' replaces IAS 39 'Financial
Instruments: Recognition and Measurement' for annual periods
beginning on or after 1 January 2018, bringing together all three
aspects of the accounting for financial instruments: classification
and measurement; impairment; and hedge accounting.
The Group applied IFRS 9 prospectively, with an initial
application date of 30 April 2018. The Group has not restated the
comparative information, which continues to be reported under IAS
39. There have been no differences arising from the adoption of
IFRS 9.
Classification and measurement
Under IFRS 9, debt instruments are subsequently measured at fair
value through profit or loss, amortised cost, or fair value through
other comprehensive income ('OCI'). The classification is based on
two criteria: the Group's business model for managing the assets;
and whether the instruments' contractual cash flows represent
'solely payments of principal and interest' on the principal amount
outstanding.
The assessment of the Group's business model was made as of the
date of initial application, 30 April 2018. The assessment of
whether contractual cash flows on debt instruments are solely
comprised of principal and interest was made based on the facts and
circumstances as at the initial recognition of the assets.
Financial assets New classification Original classification Carrying amount
under IFRS 9 under IAS 39 under IAS 39
and IFRS 9
GBP'000
------------------ -------------------- ------------------------- ----------------
Trade and other
receivables* Amortised cost Loans and receivables 23,403
Cash and short
term deposits Amortised cost Loans and receivables 49,222
------------------ -------------------- ------------------------- ----------------
Financial liabilities New classification Original classification Carrying amount
under IFRS 9 under IAS 39 under IAS 39
and IFRS 9
GBP'000
----------------------- -------------------- ------------------------- ----------------
Derivatives not
designated as Fair value through Fair value through
hedging instruments profit or loss profit or loss (31)
Interest-bearing Other financial
loans and borrowings Amortised cost liabilities (294,309)
Trade and other Other financial
payables** Amortised cost liabilities (133,074)
----------------------- -------------------- ------------------------- ----------------
*Excludes prepayments of GBP7,305,000 that do not meet the
definition of a financial instrument.
**Trade payables excludes property lease incentives of
GBP12,911,000, deposits of GBP2,618,000 and gift card liabilities
of GBP1,792,000 that do not meet the definition of a financial
instrument.
Impairment
The adoption of IFRS 9 has changed the Group's accounting for
impairment losses for financial assets by replacing IAS 39's
incurred loss approach with a forward-looking expected credit loss
(ECL) approach. IFRS 9 requires the Group to recognise an allowance
for ECLs for all debt instruments not held at fair value through
profit or loss and contract assets. The new methodology for
impairment has not had a material impact on the level of provision
held for impairment losses.
1. General information and basis of preparation (continued)
Hedge accounting
At the date of initial application, the Group had no existing
hedging relationships and have no hedging relationships as at 28
April 2019.
Revised financial instruments accounting policy
Financial instruments - initial recognition and subsequent
measurement
A financial instrument is any contract that gives rise to a
financial asset in one entity and a financial liability or equity
instrument in another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified at initial recognition, and
subsequently measured at amortised cost, Fair Value through Other
Comprehensive Income (FVOCI) or Fair Value through Profit or Loss
(FVPL). The classification is based on two criteria:
- the Group's business model for managing the assets; and
- whether the instruments' contractual cash flows represent
"Solely Payments of Principal and Interest" on the principal amount
outstanding (the "SPPI criterion").
A summary of the Group's financial assets is as follows:
Financial assets Classification under IFRS 9
----------------------------- ---------------------------------
Trade and other receivables Amortised cost - held to collect
(excluding prepayments) as business model and SPPI met
Cash and short term deposits Amortised cost
----------------------------- ---------------------------------
Under IFRS 9 the Group initially measures a financial asset at
its fair value plus directly attributable transaction costs, unless
the asset is classified as FVPL. Transactional costs of financial
assets carried at FVPL are expensed in the Income Statement.
Subsequent measurement
Financial assets at amortised cost are subsequently measured at
amortised cost using the effective interest rate (EIR) method. The
amortised cost is reduced by impairment losses. Interest income,
impairment or gain or loss on derecognition are recognised in
profit or loss.
Derecognition
A financial asset is derecognised primarily when:
- the rights to receive cash flows from the asset have expired;
or
- the Group has transferred its rights to receive cash flows
from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a
"pass-through" arrangement; and either a) the Group has transferred
substantially all the risks and rewards of the asset, or b) the
Group has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the
asset.
Impairment
The Group recognises an allowance for expected credit losses
(ECLs) for all debt instruments not held at FVPL. The most
significant financial assets of the Group are its trade
receivables. ECLs are calculated in accordance with the accounting
policies set out above.
1. General information and basis of preparation (continued)
Financial liabilities
Initial recognition and measurement
The Group has classified its financial liabilities as
follows:
Financial liabilities Classification under IFRS 9
-------------------------------------- -----------------------------
Derivatives not designated as Fair value through profit or
hedging instruments loss
Interest-bearing loans and borrowings Amortised cost
Trade and other payables (excluding Amortised cost
accrued income)
-------------------------------------- -----------------------------
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
Subsequent measurement
A summary of the subsequent measurement of financial liabilities
is set out below:
Financial liabilities at FVPL Subsequently measured at fair
value. Gains and losses are
recognised in the Income Statement
Interest-bearing loans and borrowings Subsequently measured at amortised
cost using the effective interest
rated ('EIR') method. The EIR
amortisation is included in
finance costs in the Income
statement
Trade and other payables (excluding Subsequently measured at amortised
accrued income) cost
-------------------------------------- ------------------------------------
Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged, cancelled or expires. When an existing
financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or
modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in
the respective carrying amounts is recognised in the Income
Statement.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the Balance Sheet if there is a currently
enforceable legal right to offset the recognised amounts and there
is an intention and ability to settle on a net basis, to realise
the assets and settle the liabilities simultaneously.
Standards issued but not yet effective
The new and amended standards and interpretations that are
issued, but not yet effective, up to the date of issuance of the
Group's financial statements are disclosed below. The Group intends
to adopt these new and amended standards and interpretations, if
applicable, when they become effective. The new standards and
interpretations effective for periods commencing on or after 1
January 2019 and therefore applicable to the Group for the 52 weeks
ending 26 April 2020 are listed below:
- Annual improvements to IFRS Standards 2015-2017 Cycle;
- Amendments to IFRS 9 'Financial Instruments', on prepayment
features with negative compensation;
- Amendments to IAS 28 'Investments in Associates', on long term
interests in associates and joint ventures;
- Amendments to IAS 19 'Employee Benefits', on plan amendment,
curtailment or settlement;
- IFRIC 23 ' Uncertainty over Income Tax Treatments'; and
- IFRS 16 'Leases'
With the exception of the adoption of IFRS 16, the adoption of
the above standards and interpretations will not lead to any
changes to the Group's accounting policies or have any other
material impact on the financial position or performance of the
Group.
1. General information and basis of preparation (continued)
IFRS 16 Leases is effective for periods beginning on or after 1
January 2019. The Group will adopt the new financial reporting
standard from 29 April 2019. The financial statements for the 52
weeks ending 26 April 2020 will be the first prepared under IFRS
16. The Group has decided to adopt using the modified retrospective
transition approach meaning the comparative period will not be
restated.
Impact of application of IFRS 16 Leases
IFRS 16 was issued in January 2016 and it replaces IAS 17
'Leases', IFRIC 4 'Determining Whether an Arrangement Contains a
Lease', SIC-15 'Operating Leases-Incentives' and SIC-27 'Evaluating
the Substance of Transactions Involving the Legal Form of a Lease'.
IFRS 16 sets out the principles for the recognition, measurement,
presentation and disclosure of leases and requires lessees to
account for all leases under a single on-balance sheet model
similar to the accounting for finance leases under IAS 17. At the
commencement date of a lease, a lessee will recognise a liability
to make lease payments (i.e. the lease liability) and an asset
representing the right to use the underlying asset during the lease
term (i.e., the right-of-use asset). Lessees will be required to
separately recognise the interest expense on the lease liability
and the depreciation expense on the right-of-use asset.
Lessees will be also required to remeasure the lease liability
upon the occurrence of certain events (e.g., a change in the lease
term, a change in future lease payments resulting from a change in
an index or rate used to determine those payments). The lessee will
generally recognise the amount of the remeasurement of the lease
liability as an adjustment to the right-of-use asset.
Lessor accounting under IFRS 16 is substantially unchanged from
today's accounting under IAS 17. Lessors will continue to classify
all leases using the same classification principle as in IAS 17 and
distinguish between two types of leases: operating and finance
leases.
Transition
The Group will apply the modified retrospective approach and
will recognise the lease liability on transition as the present
value of the remaining lease payments, discounted using the
incremental borrowing rate at the date of transition.
The Group has chosen on a lease-by-lease basis to measure the
right-of-use asset as either:
-- Its carrying amount as if IFRS 16 had been applied since the
commencement date, but discounting using the incremental borrowing
rate at the date of initial application; or
-- An amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments relating to that
lease recognised in the Balance Sheet immediately before the date
of initial application.
The Group will not restate comparatives and the cumulative
effect of initially applying IFRS 16 will be recognised as an
adjustment to the opening balance of retained earnings.
Exemptions and Practical Expedients
The Group has elected to apply the following:
-- Exclude short-lived leases with a lease of less than one year
-- Low-value assets (defined as less than $5,000 at initial cost)
-- To rely on its assessment of whether leases are onerous
immediately before the date of transition as an alternative to
performing an impairment review
-- To exclude initial direct costs from the measurement of the
right-of-use asset on transition
-- To apply hindsight, where appropriate, for instance in determining the lease term.
Significant areas of judgement and estimation
The application of IFRS 16 requires significant estimation and
judgement, particularly around the calculation of the incremental
borrowing rate and determining the lease term when there are
options to extend or terminate early. Each of these have been
determined on a lease-by-lease basis on transition. High levels of
judgement are also involved in determining whether leases contain
'substantive substitution rights' and therefore whether they meet
the definition of a lease under IFRS 16.
1. General information and basis of preparation (continued)
Impact on the Financial Statements
There will be a significant impact on the Balance Sheet on
transition as at 29 April 2019. It is expected on a pre-tax basis
that a right-of-use asset in the range of GBP240m and lease
liability in the range of GBP265m will be recognised, along with
the derecognition of onerous lease provisions of approximately
GBP4m and other working capital balances (including lease
incentives) of approximately GBP12m, which results in an overall
adjustment to retained earnings in the range of GBP10m.
Operating profit and Adjusted EBITDA increase due to the
depreciation expense being lower than the lease expense it
replaces. The overall impact on profit before tax and adjusting
items depends on the relative maturity of the lease portfolio.
Assuming a constant portfolio of leases as at 29 April 2019, it is
estimated that for the 52 weeks ended 26 April 2020:
- Profit before tax when applying IFRS 16 is expected to be
c.GBP4m lower than under IAS 17
- Adjusted EBITDA is c.GBP42m higher due to the removal of
rental expense
- Operating profit is c.GBP7m higher due the fact that
depreciation on the right-of-use asset is lower than the rental
expense under IAS 17.
The application of IFRS 16 requires a reclassification of cash
flow from operations to net cash used in financing activities,
however, the impact to the Group is cash flow neutral.
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 defined benefit pension
schemes requires management to make judgements as to the nature of
benefits provided by each scheme and thereby determine the
classification of each scheme. For defined benefit schemes,
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 schemes depends on the
selection of these assumptions. Differences arising from actual
experiences or future changes in assumptions will be reflected in
subsequent periods. Sensitivity of the Group's defined benefit
contribution scheme to movements in key assumptions is set out in
note 10.
Net realisable value of inventories
Inventories are stated at the lower of cost and net realisable
value, on a weighted average cost basis, which requires the
estimation of the eventual sales price of goods to customers in the
future. Provisions are recognised where the net realisable value is
assessed to be lower than cost. A 20% reduction in the store
sell-through of slow moving stock would impact the net realisable
value by c. GBP1,200,000.
Significant judgements
The following are the critical judgements, apart from those
involving estimations, that the Directors have made in the process
of applying the Group's accounting policies and that have the most
significant effect on the amounts recognised in the financial
statements:
1. General information and basis of preparation (continued)
Business combination - Wynn
The Group has determined based on criteria set out in IFRS 3
'Business combinations' that the acquisition of the trade and
assets of certain retail stores within the Wynn Hotel, Las Vegas,
constitutes a business combination. The Group acquired the
inventory, which was held by the previous store owners, the right
to sell the goods from agreed locations, trained employees and a
Rolex agency. Management have reviewed IFRS 3 and have specifically
considered the guidance in relation to inputs, outputs and
processes, determining that the purchase agreement constitutes a
business combination despite not purchasing the share capital of an
entity. As such, the Group has recognised goodwill and other
intangible assets which is attributable to the business
combination.
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 of 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 be favourable or
unfavourable to the underlying result. Further details on
exceptional items are provided in note 4.
2. Segment reporting
As explained in note 1, the Group has revised its operating
segments for the current period to better reflect the operations of
the Group. Under IFRS 8 'Segmental reporting', a full restatement
of the financial history is required when primary segments evolve
to show these on a consistent basis. The key Group performance
measures are Adjusted EBITDA and Adjusted EBITDA pre-exceptional
costs and non-underlying items, as detailed below.
Adjusted EBITDA represents profit/(loss) for the period before
finance costs, finance income, taxation, depreciation, amortisation
and exceptional items presented in the Group's Income Statement
(consisting of exceptional administrative expenses and exceptional
cost of sales).
Adjusted EBITDA pre-exceptional and non-underlying costs also
excludes non-recurring costs such as store pre-opening and closure
costs as noted in the table below.
52 week period ended 28 April 2019
UK watch US watch Total Online and Total
& jewellery & jewellery continuing servicing
operations (discontinued)
------------- ------------- ------------ ---------------- ----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 588,224 185,294 773,518 25,358 798,876
Operating profit 40,779 4,706 45,485 (18,208) 27,277
Depreciation 10,287 1,541 11,828 198 12,026
Amortisation 1,123 1,468 2,591 1,655 4,246
------------- ------------- ------------ ---------------- ----------
11,410 3,009 14,419 1,853 16,272
------------- ------------- ------------ ---------------- ----------
EBITDA 52,189 7,715 59,904 (16,355) 43,549
Exceptional items
(note 4) 5,961 389 6,350 16,929 23,279
Non-underlying items
Loss on disposal
of property, plant
and equipment 1,116 208 1,324 - 1,324
Costs from non-trading
activities and management
fees (947) 2,136 1,189 49 1,238
Adjusted EBITDA 58,319 10,448 68,767 623 69,390
Additional non-recurring
items
Store pre-opening
costs 363 5,625 5,988 - 5,988
Store closure costs 1,442 28 1,470 - 1,470
Other non-trading
fees (i) 1,494 433 1,927 - 1,927
Adjusted EBITDA
pre-exceptional
costs and non-underlying
items 61,618 16,534 78,152 623 78,775
------------- ------------- ------------ ---------------- ----------
Total assets 432,642 80,073 512,715 - 512,715
------------- ------------- ------------ ---------------- ----------
Total liabilities (367,538) (68,618) (436,156) - (436,156)
------------- ------------- ------------ ---------------- ----------
Non-current assets
Goodwill and intangible
assets 99,773 27,956 127,729 - 127,729
Property, plant
and equipment 68,491 32,777 101,268 - 101,268
Other non-current
assets 2,612 10,659 13,271 - 13,271
------------- ------------- ------------ ---------------- ----------
Total 170,876 71,392 242,268 - 242,268
------------- ------------- ------------ ---------------- ----------
2. Segment reporting (continued)
(i) Other non-trading fees relates principally to management
fees, transfer pricing adjustments and other non-recurring
professional and legal fees.
2. Segment reporting (continued)
52 week period ended 29 April 2018
Restated (note 1)
UK watch US watch Total Online and Total
& jewellery & jewellery continuing servicing
operations (discontinued)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ------------- ------------ ---------------- ----------
Revenue 541,195 89,993 631,188 55,709 686,897
Operating profit 34,215 3,198 37,413 (754) 36,659
Add back:
Depreciation 10,665 774 11,439 353 11,792
Amortisation 1,845 629 2,474 2,779 5,253
------------- ------------- ------------ ---------------- ----------
12,510 1,403 13,913 3,132 17,045
------------- ------------- ------------ ---------------- ----------
EBITDA 46,725 4,601 51,326 2,378 53,704
Exceptional costs
(note 4) 59 1,447 1,506 - 1,506
Non-underlying
costs
Loss on disposal
of property, plant
and equipment 1,318 - 1,318 20 1,338
Costs from non-trading
activities and
management fees 1,573 2,771 4,344 28 4,372
Adjusted EBITDA 49,675 8,819 58,494 2,426 60,920
Additional non-recurring
costs
Store pre-opening
costs 1,700 61 1,761 - 1,761
Store closure costs 3,450 - 3,450 - 3,450
Other non-trading
fees (i) 1,367 531 1,898 - 1,898
------------- ------------- ------------ ---------------- ----------
Adjusted EBITDA
pre-exceptional
costs and non-underlying
items 56,192 9,411 65,603 2,426 68,029
------------- ------------- ------------ ---------------- ----------
Total assets 365,669 123,943 489,612 41,408 531,020
------------- ------------- ------------ ---------------- ----------
Total liabilities (343,654) (96,854) (440,508) (5,455) (445,963)
------------- ------------- ------------ ---------------- ----------
Non-current assets
Goodwill and intangible
assets 88,489 36,786 125,275 23,654 148,929
Property, plant
and equipment 68,325 10,424 78,749 1,023 79,772
Other non-current
assets 3,014 13,767 16,781 (2,257) 14,524
------------- ------------- ------------ ---------------- ----------
Total 159,828 60,977 220,805 22,420 243,225
------------- ------------- ------------ ---------------- ----------
2. Segment reporting (continued)
Entity-wide revenue disclosures
The period ending 29 April 2018 has been restated, as described
further in note 1, to reflect the IFRS 15 transition
adjustments:
52 week period 52 week period
ended ended
28 April 29 April
2019 2018
Restated
(note 1)
--------------- ---------------
GBP'000 GBP'000
UK watch & jewellery
Luxury watches 471,717 418,030
Luxury jewellery 55,827 56,961
Fashion & classic (incl. jewellery) 33,614 38,646
Other 27,066 27,558
--------------- ---------------
Total 588,224 541,195
--------------- ---------------
US watch & jewellery
Luxury watches 159,729 74,324
Luxury jewellery 18,906 11,929
Fashion & classic (incl. jewellery) 953 818
Other 5,706 2,922
--------------- ---------------
Total 185,294 89,993
--------------- ---------------
Online and servicing (discontinued)
Fashion & classic (incl. jewellery) 22,148 49,921
Other 3,210 5,788
--------------- ---------------
Total 25,358 55,709
--------------- ---------------
Group
Luxury watches 631,446 492,354
Luxury jewellery 74,733 68,890
Fashion & classic (incl. jewellery) 56,715 89,385
Other 35,982 36,268
--------------- ---------------
Total 798,876 686,897
--------------- ---------------
'Other' consists of the sales of gifts, servicing, repairs and
insurance.
Information regarding geographical areas, including revenue from
external customers and non-current assets is disclosed above.
No single customer accounted for more than 10% of revenue in any
of the financial periods noted above.
3. Revenue
The Group's disaggregated revenue recognised under contracts
with customers relates to the following categories and operating
segments. The period ending 29 April 2018 has been restated, as
described further in note 1, to reflect the IFRS 15 transition
adjustments:
52 week period ended 28 April 2019
Sale of goods Rendering Total
of services
GBP'000 GBP'000 GBP'000
UK watch & jewellery 564,926 23,298 588,224
US watch & jewellery 179,692 5,602 185,294
Online and servicing (discontinued) 22,148 3,210 25,358
-------------- ------------- --------
Total 766,766 32,110 798,876
-------------- ------------- --------
3. Revenue (continued)
52 week period ended 29 April 2018
Restated (note 1)
Sale of goods Rendering Total
of services
GBP'000 GBP'000 GBP'000
UK watch & jewellery 515,482 25,713 541,195
US watch & jewellery 87,365 2,628 89,993
Online and servicing (discontinued) 49,921 5,788 55,709
-------------- ------------- --------
Total 652,768 34,129 686,897
-------------- ------------- --------
4. Exceptional items
Exceptional items are those that in the judgement of the
Directors need to be disclosed by virtue of their size, nature or
incidence, in order to draw the attention of the reader and to show
the underlying business performance of the Group. Such items are
included within the income statement caption to which they relate
and are separately disclosed on the face of the Consolidated Income
Statement.
52 week period 52 week period
ended 28 ended 29
April 2019 April 2018
--------------- ---------------
GBP'000 GBP'000
Exceptional cost of sales
Impairment of discontinued operation's (10,007) -
intangible assets (i)
Exceptional administrative expenses
Impairment of discontinued operation's (6,922) -
goodwill (i)
Professional & legal expenses on business
combinations (ii) - (1,447)
Revision of estimates of payments to
former owners (iii) 22 (59)
Exceptional professional fees for Initial (5,922) -
Public Offering (iv)
Guaranteed Minimum Pension (GMP) equalisation (450) -
(v)
--------------- ---------------
Total exceptional items (23,279) (1,506)
--------------- ---------------
Tax impact of exceptional items 77 -
--------------- ---------------
(i) Impairment of discontinued operation's goodwill and
intangible assets
During the period, the Group carved out the trade and assets of
the Watch Shop (including the Watch Hut) and Watch Lab businesses.
As part of the exercise, the businesses were valued, see note 7,
which indicated that the brand, technology and goodwill relating to
the discontinued operations were impaired. The impairment charge is
regarded as a non-trading, non-underlying cost.
(ii) Professional and legal expenses on business
combinations
Professional and legal expenses on business combinations
completed during the periods have been expensed to the Income
Statement as an exceptional cost as they are regarded as
non-trading, non-underlying costs.
(iii) Revision to estimates of payments to former owners
As part of the consideration for The Watch Lab Limited
acquisition, the former owners received an additional pay-out based
on the performance of the acquired entities as long as they
remained in employment. This is regarded as an exceptional expense
as it does not form part of underlying trading costs.
(iv) Exceptional professional fees for Initial Public Offering
(IPO)
The Group has incurred exceptional professional costs for
services performed as part of the IPO process. These costs are
regarded as an exceptional expense as these are only expected to be
incurred once and do not form part of underlying trading costs.
4. Exceptional items (continued)
(v) Guaranteed Minimum Pension (GMP) equalisation
On 1 November 2018, the High Court ruled that companies are
required to amend the defined benefit pension obligations in order
to equalise the GMP obligation for men and women. As such, during
the period to 28 April 2019, the Group incurred an additional
one-off charge in relation to this ruling. This is regarded as an
exceptional expense as it does not form part of the underlying
trading costs and is not expected to re-occur.
5. Taxation
The effective tax rate for the period was 192.6% (29 April 2018:
87.3%). 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 28 ended 29
April 2019 April 2018
--------------- ---------------
% %
UK corporation tax rate 19.0 19.0
Non-deductible expenses 72.8 9.3
Depreciation and amortisation on non-qualifying
assets 90.4 9.7
Exchange losses, included in subsidiary
computations - (7.8)
Group relief (4.1) 32.0
Impact of change in tax rates (1.8) 46.2
Other 3.6 (21.9)
Adjustments in respect of prior periods 12.7 0.8
--------------- ---------------
Effective total tax rate on profit before
taxation 192.6 87.3
--------------- ---------------
6. Earnings Per Share (EPS)
52 week period 52 week period
ended ended
28 April 29 April
2019 2018
--------------- ---------------
Basic EPS (2.7)p 0.6p
Basic EPS (continuing operations) 20.9p 0.4p
Basic EPS adjusted for exceptional items
(continuing operations) 30.4p 2.7p
Basic EPS is based on the profit/(loss) for the year
attributable to the equity holders of the parent company divided by
the net of the weighted average number of shares ranking for
dividend.
Diluted EPS is not calculated as there are no convertible
instruments in issue.
6. Earnings Per Share (EPS) (continued)
The following table reflects the profit data used in the basic
and diluted EPS calculations:
52 week period 52 week period
ended 28 ended 29
April 2019 April 2018
--------------- ---------------
GBP'000 GBP'000
Profit/(loss) after tax attributable
to equity holders of the parent company
Continuing operations 13,899 281
Discontinued operations (15,668) 118
--------------- ---------------
(Loss)/profit attributable to ordinary
equity holders of the parent for basic
earnings (1,769) 399
--------------- ---------------
Profit after tax attributable to equity
holders of the parent company (continuing
operations) 13,899 281
Add back:
Exceptional administrative expenses
(continuing operations), net of tax 6,273 1,506
--------------- ---------------
Profit adjusted for exceptional items
for continuing operations 20,172 1,787
--------------- ---------------
The following table reflects the share data used in the basic
and diluted EPS calculations:
52 week period 52 week period
ended 28 ended 29
April 2019 April 2018
--------------- ---------------
'000 '000
Weighted average number of ordinary
shares for basic EPS 66,308 66,308
Refer to note 16 for details of post-balance sheet events
regarding other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of
authorisation of these financial statements.
7. Intangible assets
28 April 2019
--------------------------------------------------------------------------
Goodwill Brands Technology Agency agreement Computer Total
software
--------- -------- ----------- ----------------- ---------- ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net book value
At 30 April 2018 118,581 20,401 2,952 2,371 4,624 148,929
Additions - - - - 3,275 3,275
Transfer from property,
plant and equipment - - - - 185 185
Amortisation - (2,084) (515) (264) (1,383) (4,246)
Impairment (6,922) (7,942) (2,065) - - (16,929)
Carve-out of discontinued
operations (2,950) (1,430) (372) - (574) (5,326)
Foreign exchange differences 957 668 - 174 42 1,841
--------- -------- ----------- ----------------- ---------- ---------
At 28 April 2019 109,666 9,613 - 2,281 6,169 127,729
--------- -------- ----------- ----------------- ---------- ---------
Impairment of intangibles
During the period ended 28 April 2019, management identified
that the recoverable amount of the Watch Shop, Watch Hut and The
Watch Lab (together the "Online and servicing" operating segment)
had declined due to increasingly difficult market climates. As part
of a group reconstruction, these CGUs were carved-out of the Jewel
UK Midco Limited Group and passed to a related undertaking outside
of the Group.
Management contracted independent third party valuers to value
these CGUs. The combined value of the group of Watch Shop and Watch
Hut CGUs was valued at GBP16,562,000 and the group of The Watch Lab
CGUs at GBP4,450,000. The independent valuers used a "fair value
less costs to sell" methodology and the market approach to value
the businesses. This methodology takes the earnings of the group of
CGUs and capitalises this at a multiple that reflects the risks of
the group of CGUs and the stream of earnings which it expects to
generate in the future. The fair value of the CGUs was determined
using level 2 and level 3 inputs. The multiple used to value the
Watch Shop and Watch Hut combined business, x5.5, was based upon
quoted comparable companies, notably within the watch and jewellery
market sectors, and adjusted to consider variations in operations,
size, profitability and diversity. For The Watch Lab, comparable
transactions in private companies which are broadly similar to The
Watch Lab in terms of factors including trading activities, margins
and geographic spread (where possible) were used to determine the
appropriate multiple of x4.0.
7. Intangible assets (continued)
A total impairment of GBP16,929,000 has been recognised within
the financial statements for the 52 week period to 28 April 2019.
This consists of:
Impairment
recognised
GBP'000
Recognised in Exceptional administrative expenses
Goodwill
Watch Hut 1,175
Watch Shop 4,824
The Watch Lab 923
------------
6,922
Recognised in Exceptional cost of sales
Brand
Watch Shop 7,942
Technology
Watch Shop 2,065
------------
10,007
------------
Total 16,929
------------
The impairment of the brand and technology has been recognised
in Exceptional cost of sales in line with where the amortisation of
the intangible assets has been recognised.
8. Property, plant and equipment
28 April 2019
Land and Fittings Total
buildings and equipment
----------- --------------- ---------
GBP'000 GBP'000 GBP'000
Net book value
At 30 April 2018 1,891 77,881 79,772
Additions 435 34,845 35,280
Disposals (9) (1,315) (1,324)
Transfer to intangible assets - (185) (185)
Depreciation (298) (11,728) (12,026)
Carve-out of discontinued
operations (note 14) (114) (973) (1,087)
Foreign exchange differences - 838 838
----------- --------------- ---------
At 28 April 2019 1,905 99,363 101,268
----------- --------------- ---------
During the period to 28 April 2019, the Group invested
significant levels of capital expenditure in the stores based in
the US on new store fit outs and refurbishment of Mayors
stores.
9. Borrowings
28 April 29 April
2019 2018
--------- ---------
GBP'000 GBP'000
Current
Revolving credit facility 27,103 29,000
Finance lease liabilities 110 228
--------- ---------
27,213 29,228
Non-current
Listed bond 239,884 255,449
Finance lease liabilities - 81
--------- ---------
239,884 255,530
--------- ---------
Total borrowings 267,097 284,758
--------- ---------
Borrowings are secured against the assets held by entities
within the Group.
9. Borrowings (continued)
On 18 April 2018, Jewel UK Bondco PLC, a subsidiary of Jewel UK
Midco Limited, issued a listed bond note on The International Stock
Exchange for a principal value of GBP265,000,000. Interest is
payable at 8.5% with the notes maturing in 2023.
During the period to 28 April 2019, the Group repurchased the
principal value of GBP17,076,000 of the listed bond note. A premium
was paid of GBP198,000 which has been recognised within Finance
costs.
On 6 June 2019, the Group repurchased the entire outstanding
balance on the listed bond and entered into a new term loan and
revolving credit facility (refer to note 16).
The listed bond is presented net of capitalised transaction
costs. Capitalised transaction costs are amortised using the
effective interest rate.
10. Post-employment benefit obligations
52 week period 52 week period
ended ended
28 April 29 April
2019 2018
--------------- ---------------
GBP'000 GBP'000
Opening net pension liability (1,345) (2,841)
Current service cost (23) (23)
Administration expenses (102) (85)
Past service costs and curtailments (450) -
(note 4)
Interest cost (31) (69)
Employer contributions 697 695
Actuarial (losses)/gains (1,797) 978
Closing net pension liability (3,051) (1,345)
--------------- ---------------
The net defined benefit pension liability recognised in the
Consolidated Balance Sheet is analysed as follows:
28 April 29 April
2019 2018
--------- ---------
GBP'000 GBP'000
Equities 16,347 16,264
Cash 2 (9)
--------- ---------
Fair value of plan assets 16,349 16,255
Present value of benefit obligations (19,400) (17,600)
--------- ---------
Net pension liability (3,051) (1,345)
--------- ---------
Financial assumptions
The financial assumptions for the pension scheme and the most
recent actuarial valuation have been updated by an independent
qualified actuary to take account of the requirements of IAS 19
"Employee Benefits" in order to assess the liabilities of the
scheme. The most significant of these are the discount rate and the
inflation rate which are 2.55% (29 April 2018: 2.90%) and 3.35% (29
April 2018: 3.20%). The inflation rate reflects the Retail Price
Index (RPI) rate.
On 1 November 2018, the High Court ruled that companies are
required to amend the defined benefit pension obligations in order
to equalise the GMP obligation for men and women. As such, during
the period to 28 April 2019, the Group incurred an additional
one-off charge of GBP450,000 in relation to this ruling. This is
regarded as an exceptional expense as it does not form part of the
underlying trading costs and is not expected to re-occur.
10. Post-employment benefit obligations (continued)
Sensitivity analysis
The impact on the defined benefit obligation to changes in the
financial and demographic assumptions is shown below:
28 April 29 April
2019 2018
--------- ---------
% %
0.25% increase in discount rate (4.0) (4.0)
0.25% decrease in discount rate 4.0 4.0
0.25% increase in salary growth rate 0.1 0.1
0.25% decrease in salary growth rate (0.1) (0.1)
0.25% increase in pension growth rate 2.7 2.7
0.25% decrease in pension growth rate (2.7) (2.7)
1 year increase in life expectancy 3.0 3.0
1 year decrease in life expectancy (3.0) (3.0)
11. Analysis of net debt
29 April Cash flow Non-cash Foreign 28 April
2018 charges exchange 2019
---------- ---------- --------- ---------- ----------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash
equivalents 49,222 (14,995) - 311 34,538
Revolving credit
facility (29,000) 2,099 - (202) (27,103)
Corporate bonds (255,449) 17,794 (2,229) - (239,884)
Finance lease
liabilities (309) 199 - - (110)
---------- ---------- --------- ---------- ----------
Total net debt (235,536) 5,097 (2,229) 109 (232,559)
---------- ---------- --------- ---------- ----------
12. Related party transactions
Transactions with subsidiary companies and companies under
common control
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
During the 52 week period ended 28 April 2019, the Company
incurred interest charges of GBPnil (2018: GBP11,722,000) on
balances owed to Jewel UK Topco Limited. The outstanding balance
was repaid during the period ended 29 April 2018 with a cash
payment of GBP75,000,000 and the remaining balance settled via the
issue of one additional share. The outstanding balance as at 28
April 2019 was GBPnil (2018: GBPnil).
During the 52 week period ended 28 April 2019, the Group made
the strategic decision, as part of a group reconstruction, to
carve-out the Online and servicing operating segment from the Group
and pass it to a related undertaking outside of the Group. The
Group passed up GBP10,000,000 of the investment as a dividend in
specie to Jewel Topco Limited with the remaining GBP11,012,000
being settled in the form of a loan note. The loan note incurs
interest at a rate of 8.75% per annum. The balance of the loan note
and associated accrued interest as at 28 April 2019 was
GBP11,420,000 (2018: GBPnil). This balance was waived post period
end (refer to note 16).
During the period ended 28 April 2019, the Group received
corporation tax group relief of GBP77,000 (2018: GBP2,211,000
surrendered) relating to the tax position of the Jewel UK Topco
Limited group.
13. Business combinations
On 23 October 2017, the Group acquired 100% of the share capital
of Mayors Jewelers, Inc, a group of companies operating as a high
street jeweller through 17 retail stores outlets in Florida and
Georgia in the United States, for GBP80,759,000. The business
contributed revenue of GBP81,048,000 and net profit of GBP3,907,000
to the Group from the date of acquisition to 29 April 2018. The
goodwill arising on the
acquisition is attributable to Mayors Jewelers' strong position
in this market in addition to employees acquired as part of the
business combination and access to new locations.
The following table summarises the consideration paid for Mayors
Jewelers and the fair value of assets acquired and liabilities
assumed at the acquisition date for each of the applicable
periods:
Consideration at 23 October 2017 GBP'000
---------------------------------------------- ---------
Initial cash consideration 80,759
---------------------------------------------- ---------
Total consideration (100% holding) 80,759
---------------------------------------------- ---------
Recognised values on acquisition
Property, plant and equipment 6,703
Intangible assets 11,086
Inventories 50,749
Trade and other receivables 11,369
Cash and cash equivalents 1,691
Deferred tax assets 10,078
Borrowings (200)
Provisions for other liabilities and charges (1,223)
Trade and other payables (20,973)
---------------------------------------------- ---------
Total identifiable net assets 69,280
Goodwill 11,479
---------------------------------------------- ---------
Total assets acquired 80,759
---------------------------------------------- ---------
Fair value adjustments were made to uplift lease creditors to
reflect market value of lease arrangements and to adjust intangible
assets to reflect the value of previously unrecognised brand. The
brand intangible assets will be amortised over a period of 10
years. The deferred tax assets acquired included an asset of
GBP7,777,000 relating to losses brought forward to be utilised.
Acquisition-related costs of GBP1,447,000 have been charged to
Exceptional expenses in the Consolidated Income Statement for the
period ended 29 April 2018.
On 11 December 2017 the Group acquired the trade and assets of
certain retail stores within the Wynn Hotel, Las Vegas. The fair
value of consideration paid totalled GBP14,410,000 which was
settled by the issue of two promissory notes which have a fair
value of GBP8,572,000 and GBP5,838,000 to be repaid over 1 and 5
years respectively. The business contributed revenue of
GBP8,945,000 and net profit of GBP1,442,000 to the group for the
period from the date of acquisition to 29 April 2018. The goodwill
arising on the acquisition is attributable to the prime location
and trained employees acquired as part of the business
combination.
13. Business combinations (continued)
The following table summarises the consideration paid for the
trade and assets of Wynn Hotel and the fair value of assets and
liabilities acquired at the acquisition date for each of the
applicable periods:
Consideration at 11 Dec 2017 GBP'000
----------------------------------------------------- --------
Consideration satisfied via the issue of promissory
notes 14,410
----------------------------------------------------- --------
Total consideration (100% holding) 14,410
----------------------------------------------------- --------
Recognised values on acquisition
Property, plant and equipment 456
Intangible assets 2,557
Inventories 8,571
----------------------------------------------------- --------
Total identifiable net assets 11,584
Goodwill 2,826
----------------------------------------------------- --------
Total assets acquired 14,410
----------------------------------------------------- --------
Fair value adjustments were made to adjust intangible assets to
reflect the value of previously unrecognised agency agreements. The
intangible asset will be amortised over a period of 10 years.
There were immaterial acquisition-related costs in relation to
the Wynn Hotel acquisition charged in the Consolidated Income
Statement for the period ended 29 April 2018.
Had Mayors Jewelers been consolidated from 1 May 2017, the
Consolidated Income Statement for the period would show:
Mayors Jewelers Consolidated Proforma
results for results
the period
1 May 2017 52 week period 52 week period
to 22 October ended 29 ended 29
2017 April 2018 April 2018
---------------- --------------- ---------------
GBP'000 GBP'000 GBP'000
Revenue 61,618 686,897 748,515
(Loss)/profit for the period (16) 399 383
Results for the Wynn Hotel acquisition have been excluded from
these proforma results because it would be impracticable to include
as these stores were not separately accounted for under their
previous ownership. However, the Directors do not consider that
these have a material effect on the Group results as a whole.
14. Discontinued operations
On 3 December 2018, the Online and servicing segment was
carved-out of the Group and passed to a related undertaking outside
of the Group. A third party, independent valuation of these
businesses was obtained immediately prior to disposal, totalling
GBP21,012,000 for the combined businesses. As this transfer was
entirely intra-group, no cash proceeds were generated.
The impact upon the Balance Sheet and Statement of Cash Flows
for the historic periods have been presented below:
Cash flows (used in)/from discontinued operations
52 week period 52 week period
ended ended 29
28 April April 2018
2019
--------------- ---------------
GBP'000 GBP'000
Net cash from operating activities 73 2,571
Net cash used in investing activities (516) (652)
--------------- ---------------
Net cash (used in)/from discontinued
operations (443) 1,919
--------------- ---------------
Effect of the disposals on individual assets and liabilities
As at date 29 April
of carve 2018
out
(3 December
2018)
------------- ---------
GBP'000 GBP'000
Goodwill 2,950 9,872
Intangible assets 2,376 13,782
Property, plant and equipment 1,087 1,023
Inventories 16,704 12,839
Trade and other receivables 780 1,059
Cash and cash equivalents 5,659 5,090
Trade and other payables (8,544) (5,455)
Deferred tax liabilities - (2,257)
------------- ---------
Net identifiable assets and liabilities 21,012 35,953
------------- ---------
15. Financial instruments
Categories
28 April 29 April
2019 2018
---------- ----------
GBP'000 GBP'000
Financial assets - held at amortised
cost
Trade and other receivables* 30,697 23,403
Cash and cash equivalents 34,538 49,222
---------- ----------
65,235 72,625
---------- ----------
Financial liabilities - held at fair
value through profit and loss
Derivatives not designated as hedging
instruments - (31)
Financial liabilities - held at amortised
cost
Interest-bearing loans and borrowings:
Corporate bonds** (247,924) (265,000)
Revolving credit facility (27,103) (29,000)
Finance lease liability (110) (309)
Trade and other payables*** (132,523) (133,074)
---------- ----------
(407,660) (427,383)
---------- ----------
15. Financial instruments (continued)
*Excludes prepayments of GBP9,485,000 (2018: GBP7,305,000) that
do not meet the definition of a financial instrument.
** Excludes capitalised transactions costs of GBP8,040,000
(2018: GBP9,551,000).
***Excludes property lease incentives of GBP18,010,000 (2018:
GBP12,911,000), deposits of GBP5,083,000 (2018: GBP2,618,000) and
gift card liabilities of GBP2,046,000 (2018: GBP1,792,000) that do
not meet the definition of a financial instrument.
Fair values
The fair values of each category of the Group's financial
instruments are the same as their carrying values in the Group's
Balance Sheet, other than corporate bonds, based on the following
assumptions:
Trade and other receivables, The fair value approximates
trade and other payables, cash the carrying amount because
and cash equivalents, revolving of the short maturity of these
credit facility, finance lease investments.
liability
Derivative financial instruments The fair value is determined
as the net present value of
cash flows using observable
market rates at the reporting
date.
--------------------------------- --------------------------------
The fair value of corporate bonds is as follows:
28 April 2019 29 April 2018
Carrying Fair value Carrying Fair value
amount amount
--------- ----------- --------- -----------
GBP'000 GBP'000 GBP'000 GBP'000
Corporate bonds 239,884 254,940 255,449 264,285
--------- ----------- --------- -----------
Corporate bonds are held at amortised cost net of capitalised
borrowing costs.
Fair value hierarchy
Financial instruments carried at fair value are required to be
measured by reference to the following levels under IFRS 13 'Fair
Value Measurement':
Hierarchy level Inputs Financial instruments
Level 1 Quoted markets in Corporate bonds (disclosure)
active markets for
identical assets or
liabilities
----------------------------- -----------------------------
Level 2 Inputs other than Derivative financial
quoted prices included instruments
within Level 1 that
are observable for
the asset or liability,
either directly (i.e.
as prices) or indirectly
(i.e. derived from
prices)
----------------------------- -----------------------------
Level 3 Inputs for the asset Not applicable
or liability that
are not based on observable
market data (unobservable
market data)
----------------------------- -----------------------------
16. Post-balance sheet events
On 17 May 2019, Jewel UK Topco Limited sold its investment in
Jewel UK Midco Limited and its related subsidiaries to Jewel Holdco
S.a.r.l. As at this date, the immediate parent company of the Group
was Jewel Holdco S.a.r.l. The principal amount owed to Jewel UK
Bidco Limited (a subsidiary of Jewel UK Midco Limited), of
GBP11,012,000 and associated interest of GBP408,000, by Jewel UK
Topco Limited was transferred to Watches of Switzerland Group PLC
(formerly Watches of Switzerland Group Limited) in exchange for a
receivable from Jewel UK Topco Limited.
On 24 May 2019, Watches of Switzerland Group PLC acquired the
entire shareholding of Jewel UK Midco Limited and its related
subsidiaries by a way of a share for share exchange with Jewel
Holdco S.a.r.l. becoming the Group's immediate parent company.
On 30 May 2019, Watches of Switzerland Group PLC was
re-registered as a public limited company under the Companies Act
2006.
On the 4 June 2019, Watches of Switzerland Group PLC was
admitted for listing on the London Stock Exchange. The primary
proceeds from the initial public offering were used to refinance
the Group's debt. The principal amount owed to Jewel UK Bidco
Limited (a subsidiary of Jewel UK Midco Limited), of GBP11,012,000
and associated interest of GBP408,000, by Jewel UK Topco Limited
was transferred to Watches of Switzerland Group PLC (formerly
Watches of Switzerland Group Limited) with a receivable of
GBP11,518,000 between Jewel UK Bidco Limited and Watches of
Switzerland Group plc arising as a result. Watches of Switzerland
Group PLC repaid the intercompany payable of GBP11,518,000 to Jewel
UK Bidco Limited by utilising proceeds received from the primary
listing and recognised a receivable from Jewel UK Topco Limited of
GBP11,420,000. This balance was subsequently waived. The waiver has
no impact on the financial position of the Jewel UK Midco Limited
group.
On 4 June 2019, the Company entered into a new term loan
facility consisting of a term loan for GBP120,000,000 and a
revolving credit facility of GBP50,000,000. Interest is charged at
LIBOR plus 2.25% on the term loan and LIBOR plus 2.0% on the
revolving credit facility. The term loan facility expires on 4 June
2024. The term loan facility is unsecured and is cross guaranteed
by subsidiary entities.
On 4 June 2019, Jewel UK Bondco PLC repaid the outstanding
principal of GBP247,924,000, accumulated associated interest of
GBP8,229,000 and redemption premiums of GBP21,738,000 in relation
to the listed bond notes. The redemption premium will be treated as
an exceptional expense in the financial period ending 26 April
2020.
On Admission to the London Stock Exchange, Brian Duffy, CEO, was
granted an award of 2,222,222 nil-cost options. The award is
subject to his continuous service with the Group from Admission
until the second anniversary of the grant.
17. Contingent liabilities
From time to time, the Group may be subject to complaints and
litigation from its customers, employees, suppliers and other third
parties. Such complaints and litigation may result in damages or
other losses, which may not be covered by the Group's insurance
policies or which may exceed any existing coverage. Regardless of
the outcome, complaints and litigation could have a material
adverse effect on the Group's reputation, divert the attention of
the Group's management team and increase its costs.
On 17 March 2019, a claim was brought against a subsidiary of
the Company, Watches of Switzerland Group USA, Inc., in the U.S.
District Court for the Southern District of Florida by a group of
individuals who, in the two years prior to filing the complaint,
had engaged in debit or credit card transactions with the Group in
the United States and who were issued customer receipts that
displayed more than the last five digits of the credit or debit
card number used in connection with the transaction.
17. Contingent liabilities (continued)
The suit alleges violations of the FACTA, which requires persons
that accept credit and/or debit cards for the transaction of
business to truncate all but the last five digits of the card
number on printed receipts provided to consumers, as a means of
protecting against identity theft and fraud. Because the suit is
only in its early stages, and no specific monetary amount has been
claimed, the potential liability in respect of such claim or any
related claims is difficult to quantify. The Company continues to
robustly defend it and, at this point in time, believe that the
Group has a good defence. Our legal costs of defending the claim
are insured subject to the policy excess.
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.
APM Definition Why used Reconciliation to IFRS
measures
Adjusted Operating profit Measure of profitability Reconciled in the Financial
operating before exceptional that excludes Review.
profit items. one-off exceptional
costs.
------------------------ -------------------------- ---------------------------------------
Average Revenue generated Measure of sales Not applicable.
selling in a period performance.
price from sales of
a product category
divided by the
total number
of units of
such products
sold in such
period.
------------------------ -------------------------- ---------------------------------------
EBITDA Earnings before Measure of profitability Reconciled in Note 4 of
Interest, Taxation, which excludes the financial statements.
Depreciation financing, tax
and Amortisation. and investing
Shown on a continuing activities.
basis.
------------------------ -------------------------- ---------------------------------------
4-Wall Net margin less 4-Wall EBITDA GBPm 2019 2018
EBITDA store costs is a direct Revenue 773.5 631,188
shown as a % measure of profitability Cost of
of revenue. of the showroom inventory
operations expensed (488.0) (393,485)
Other 5.6 1,806
-------- ----------
Net margin 290.2 239,509
Store costs (172.4) (145.2)
-------- ----------
4-Wall EBITDA 117.8 94.3
-------- ----------
------------------------ -------------------------- ---------------------------------------
Adjusted EBITDA before Measure of profitability Reconciled in Note 4 of
EBITDA exceptional that excludes the financial statements.
costs, non-underlying one-off exceptional
costs. Non-underlying costs and non-underlying
costs includes items.
loss on disposal
of property,
plant and equipment,
costs from non-trading
activities and
management fees.
Shown on a continuing
basis.
------------------------ -------------------------- ---------------------------------------
Adjusted Adjusted EBITDA Showroom opening Reconciled in Note 4 of
EBITDA adjusted for and closing the financial statements.
pre-exceptional showroom opening costs, non-underlying
items and closing and exceptional
and non-underlying costs, other items are removed
items non-underlying from EBITDA
items and exceptional in this measure
items. Shown to provide a
on a continuing consistent view
basis. of profitability
excluding significant
items that are
one-off in nature.
This measure
was linked to
management incentives
in the financial
year.
Adjusted Net debt at Measures the Net debt GBP240.6m divided
EBITDA the end of a Group's indebtedness by
leverage period divided compared to Adjusted EBITDA GBP68.8m
by Adjusted its cash profitability.
EBITDA.
------------------------ ------------------------- ------------------------------------
Adjusted Net debt post Measures the Net debt post IPO GBP135,356
EBITDA IPO refinancing Group's indebtedness, Adjusted EBITDA GBP68.6
leverage divided by Adjusted using the financing
(post EBITDA. in place post-IPO
IPO) compared to
its cash profitability.
------------------------ ------------------------- ------------------------------------
EBITDA Adjusted EBITDA Measure of profitability Adjusted EBITDA GBP68.8m
margin as a percentage compared to divided by
% of revenue. revenue. Revenue GBP773.5m.
Shown on a continuing
basis.
------------------------ ------------------------- ------------------------------------
Exceptional Items that in Draws the attention Disclosed in Note 6 of
items the judgement of the reader the financial statements.
of the Directors and to show
need to be disclosed the items that
by virtue of are significant
their size, by virtue of
nature or incidence, their size,
in order to nature or incidence.
draw the attention
of the reader
and to show
the underlying
business performance
of the Group.
------------------------ ------------------------- ------------------------------------
Free cash Cash generated Represents the Reconciled in the Business
flow from operations amount of cash and Financial Review.
from the Statement generated in
of Cash Flows the year available
less pension for discretionary
contributions, spend.
interest, tax
and maintenance
capex.
------------------------ ------------------------- ------------------------------------
Like for The percentage Enables the Not applicable
like sales increase or performance
growth decrease in of the showrooms
sales from showrooms to be measured
that have been on a consistent
trading continuously year-on-year
from the same basis and is
selling space a common term
for at least used in the
one year. Like retail industry.
for like sales
are measured
on a constant
currency basis.
------------------------ ------------------------- ------------------------------------
Proforma Pro-forma for Enables the Not applicable
like for the US includes performance
like sales the like for of the US showrooms
like revenue to be measured
of the US business on a consistent
for the relevant year-on-year,
pre-acquisition assuming it
trading period. had always been
part of the
Group.
------------------------ ------------------------- ------------------------------------
Net debt Total borrowings Measure of the Net debt is reconciled
(including capitalised Group's indebtedness. in note 24 of the financial
transaction statements.
costs) less
cash and cash
equivalents.
------------------------ ------------------------- ------------------------------------
Net debt Total borrowings Measures the GBPm 2019 2018
excluding (excluding capitalised Group's indebtedness Net debt
capitalised transaction compared to (note 4
transaction costs) less its cash generation to the
costs cash and cash financial
equivalents. statements) (232.6) (235.5)
Capitalised
transaction
costs (8.0) (9.6)
-------- --------
Net debt
excluding
capitalised
transaction
costs (240.6) (245.1)
-------- --------
------------------------ ------------------------- ------------------------------------
Net margin Revenue less Measures the GBPm 2019 2018
inventory recognised profit made Revenue 773.5 631.2
as an expense, from the sale Cost of
commissions of inventory inventory
paid to the before store expensed (488.9) (393.5)
providers of or overhead Other 5.6 1.8
interest free costs. -------- --------
credit and inventory Net margin 290.2 239.5
provision movements. -------- --------
------------------------ ------------------------- ------------------------------------
Net margin Net margin % Direct indicator Net margin GBP290.2m divided
% is calculated of profitability. by revenue GBP773.5m.
as net margin
as a percentage
of revenue.
------------------------ ------------------------- ------------------------------------
[1]During the year the Watch Shop and Watch Lab businesses were
carved-out of the Group, these P&L results reflect the
continuing business only
[2] Refer to the glossary for definition
[3]Source: Pragma Watch and Jewellery Survey 2012 & Insight
Consulting Consumer Brand Research for the Watches of Switzerland
Group June 2019
[4]Where turnover linked rent is greater than GBP100,000.
[5]Capex in this section relates to additions to property, plant
and equipment and intangible assets including capital accruals
[6]Capex in this section relates to additions to property, plant
and equipment and intangible assets, including capital accruals
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR RFMTTMBBBTAL
(END) Dow Jones Newswires
July 17, 2019 02:00 ET (06:00 GMT)
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