REG - Watches of Switzlnd. - Annual Financial Report
31/07/2023 14:30
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RNS Number : 7722H Watches of Switzerland Group PLC 31 July 2023
31 July 2023
Watches of Switzerland Group PLC (the "Company")
Annual Report and Accounts 2023
In compliance with Listing Rule 9.6.1, the Company announces that the
following documents have today been submitted to the UK Financial Conduct
Authority, and will shortly be available for inspection via the National
Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
1. Annual Report and Accounts 2023; and
2. Notice of Annual General Meeting of the Company, to be held at 36 North
Row, London W1K 6DH at 3.30pm on 31 August 2023
In accordance with DTR 6.3.5(3) the Annual Report and Accounts 2023 and the
Notice of Annual General Meeting are accessible on the Group's website:
thewosgroupplc.com (https://www.thewosgroupplc.com/investors/results-centre/)
A condensed set of Watches of Switzerland Group PLC financial statements and
information on important events that have occurred during the year and their
impact on the financial statements were included in the Company's FY23 results
announcement on 13 July 2023. That information together with the information
set out below which is extracted from the Annual Report and Accounts 2023
constitute the requirements of DTR 6.3.5 which is to be communicated via an
RNS in unedited full text. This announcement is not a substitute for reading
the full Annual Report and Accounts 2023. Page and note references in the text
below refer to page numbers in the Annual Report and Accounts 2023. To view
the FY23 results announcement visit the Company website:
thewosgroupplc.com/investors
(https://www.thewosgroupplc.com/investors/results-centre/)
For further information, please contact:
Laura Battley
Company Secretary and General Counsel
+44 (0)20 7317 4604
companysecretariat@thewosgroup.com (mailto:companysecretariat@thewosgroup.com)
Additional Information
Principal risks and uncertainties
Below are descriptions of our principal risks and uncertainties and
explanations of how we manage or mitigate the risk. It is recognised that the
Group is exposed to risks wider than those listed. However, we have disclosed
those we believe are likely to have the greatest impact on our business at
this moment in time.
Principal risk description How we manage or mitigate the risk
Business Strategy Execution and Development
If the Board adopts the wrong strategy or does not implement its strategy
effectively, the business may suffer.
The Board reviews its business strategy on a regular basis to determine how
The Group's growth strategy exposes it to risks and the Group may encounter sales and profit can be maximised, and business operations can be made more
setbacks in its ongoing expansion in the UK, US, and Europe. efficient.
The Group's significant investments in its showroom portfolio, IT systems, The Board has significant relevant experience, including in the retail and
colleagues and marketing may be unsuccessful in growing the Group's business luxury markets.
as planned.
The CEO provides updates to the Board on key development opportunities and
The Group may make acquisitions or other investments that prove unsuccessful initiatives.
or divert its resources. Successful growth through future acquisitions is
dependent upon the Group's ability to identify suitable acquisition targets, Expansion of the property portfolio or potential acquisitions must meet strict
conduct appropriate due diligence, negotiate transactions on favourable terms, payback criteria. Return on investment of marketing and other investment
complete such transactions and successfully integrate the acquired businesses. activity is monitored closely.
The Group may fail to respond to the pressures of an increasingly changing Key management information is provided to the Board on a regular basis to help
retail environment effectively and rapidly. The re-evaluation of priorities inform strategic decision-making.
and their delivery, including the consideration of initiatives to respond to
permanent changes in client behaviours or to change working practices, is The Group has adapted its strategy to take advantage of online trading, client
paramount in the current environment. appointments and introduced the Luxury Watch and Jewellery Virtual Boutique to
maximise sales.
The Group has diversified its operations through the expansion of mono-brand
boutiques and ecommerce platforms. The Group operates in the UK and US, and
recently entered into the European market. There is international market
diversification reducing reliance on one territory.
Key Suppliers and Supply chain
The manufacture of key luxury watch brands is highly concentrated among a The Group fosters strong relationships with suppliers, many of which have been
limited number of brand partners and the production of luxury watches is held for a significant length of time.
limited by the small number of master watchmakers and the availability of
artisanal skills. Owners of luxury watch brands control distribution through Supplier distribution contracts are monitored to ensure ongoing compliance
strict, Selective Distribution Agreements. Consequently, the relationship with with contractual obligations.
owners of luxury watch brands is crucial to the Group's success.
The Group works collaboratively with partner brands to identify product trends
Some of the Group's distribution agreements with luxury watch brands provide and forward demand.
owners of such brands with a right to terminate the agreement in the event of
a change of control and/or management of the Group. The Group is subject to Continued focus on providing exceptional client experience, representing the
the risk that owners of luxury watch brands may decide to terminate these brands in the best possible way.
contracts or otherwise not to renew them upon expiry, or to reduce the number
of agencies they grant to the Group. In-depth training for showroom colleagues is provided, including specific
training provided by the brand partners.
The Group's distribution agreements with suppliers do not guarantee a steady
supply of merchandise. The Group's sales mix is becoming more broad-based, with less reliance on
individual brands to drive success.
The Group's business model may also come under significant pressure should the
owners of luxury watch brands choose to distribute their own watches,
increasingly or entirely by-passing third party retailers such as the Group.
As a result of COVID-19 or other pandemics, supplier manufacturing operations
could be forced to close, impacting operational activities, client experience
and business strategy.
Client Experience and Market Risk
An inability to maintain a consistent high-quality experience for the Group's The Group provides the ultimate luxury environment for its clients to feel
clients across the sales channels, particularly within the showroom network, welcome, appreciated and supported
could adversely affect business.
Our Xenia Client Experience Programme further elevates our client experience
The increased number of registration of interest (RoI) watches could adversely proposition.
impact the perceived client experience.
Exceptional training is provided for our showroom colleagues, and other client
The Group faces competition and any failure by the Group to compete facing colleagues, to allow them to provide the best client service, along
effectively could result in a loss of market share or the ability to retain with in-depth product knowledge.
supplier agencies. Long-term consumer attitudes to diamonds, gold and other
precious metals and gemstones could be affected by a variety of issues, The CRM database allows the Group to engage with the client on their journey
including concern over the source of raw materials, the impact of mining and from a potential to a loyal client.
refining of minerals on the environment, labour conditions in the supply
chain, and the availability and perception of substitute products, such as The Group continues to invest in and develop its product offering to improve
cubic zirconia and laboratory-created diamonds. Equally, longer term consumer the value offered to consumers, retailers, and manufacturers.
attitudes to more technologically advanced watches, such as 'smart watches'
could reduce consumer demand for luxury watches. Competitor activity is monitored in detail, enabling strategic decision-making
on key market positions.
The diversification of the Group through mono-brand boutiques and significant
online presence together with the Group's scale and technological capabilities
are competitive advantages for the Group.
Colleague Talent and Capability
The Group depends on the services of key talent to manage its business, and The Trading Board considers the development of Senior Management to ensure
the departure of such colleagues or the failure to recruit and retain suitable there are opportunities for career development, promotion, and appropriate
personnel could adversely affect the Group's business. succession.
Client experience is an essential element in the success of the Group's The Nomination Committee considers the succession planning for the Board, and
business, where many clients prefer a more personal face- to-face experience Senior Management.
and have established personal relationships with the Group's retail
colleagues. An inability to recruit and retain suitably qualified colleagues, The Company's recognition programmes are in place to incentivise and motivate
especially with specialised knowledge of luxury watches and jewellery, would colleagues.
have a material impact on the Group.
The Group operates a share save scheme for all colleagues to participate in
the growth of the Group.
A wide range of training and development programmes are available to
colleagues.
The Colleague Engagement Survey provides an insight into what colleagues feel
would make the Group an even better place to work.
The Group continually reviews the remuneration and benefits packages for all
colleagues.
A focused project group has been established, with an objective to monitor and
reduce retail labour turnover, particularly in the first year of employment.
We utilise a two-way engaging communications platform, Workplace, globally.
This social channel underpins Group communications to colleagues.
Data Protection and Cyber Security
The increasing sophistication and frequency of cyber-attacks, coupled with Dedicated Group Data Protection Officer in place.
data protection laws, highlight the escalating information security risk
facing all businesses. Significant investment in systems development and security programmes.
As the Group operates in the UK, US, and European markets, the regulatory Systems vulnerability and penetration testing is carried out regularly.
environment surrounding these areas is considered more complex.
The Group Data Protection Committee meets regularly to review related
Security breaches and failures in the Group's IT infrastructure and networks, processes and emerging risks.
or those of third parties, could compromise sensitive and confidential
information and affect the Group's reputation. Information security and data protection policies, procedures, and training in
place.
Theft or loss of Company or client data or potential damage to any systems
from viruses, ransomware or other malware could result in fines and Strict access rights are in place to limit access to data and reports to
reputational damage to the business that could negatively impact on our sales. limited people.
Regular communication with all colleagues on the risk of 'phishing' emails and
alerts of identified examples.
Security Information and Event Management tools have been introduced across
the Group's technology estate.
Our Virtual Private Network security controls have been enhanced considering
the increased requirement for use through working from home arrangements.
Enhanced password security measures have been introduced globally to decrease
the likelihood of a breach.
Business Interruption
Adverse weather conditions, pandemics, travel disruption, natural disasters, The Group has a framework of operational procedures and business continuity
terrorism, acts of war or other external events could adversely affect plans that are regularly reviewed, updated, and tested.
consumer discretionary spending or cause a disruption to the Group's
operations. The multi-channel model allows clients to purchase online from the safety and
comfort of their homes.
The inability of the Group to be able to operate showrooms or a significant
reduction in available colleagues to operate the business, such as during a Robust security arrangements are in place across our showroom network to
material pandemic, would significantly impact the operations of the business. protect people and products in the case of security incidents.
The Group offers flexible delivery options (home delivery or click and collect A comprehensive insurance programme is in place to offset the financial
in showroom) and its online operations rely on third party carriers and consequences of insured events.
transportation providers. The Group's shipments are subject to various risks,
including labour strikes and adverse weather. Business critical systems are based on established, industry- leading package
solutions
The Group may experience significant theft of products from its showrooms,
distribution centres or during the transportation of goods. If a hold-up, A detailed IT development and security roadmap is in place aligned to our
burglary, or other theft incident takes a violent turn, the Group may also strategy.
suffer reputational damage and our clients may become less inclined to visit
our showrooms. Reliable and reputable third party logistic partners have been engaged to
ensure the secure transportation of goods.
Disruptions to, or failures in, the Group's IT infrastructure and networks, or
those of third parties, could disrupt the Group's operations, especially The Group has in place action plans to effectively deal with the impact of a
during periods of increased reliance on these systems such as those pandemic on business operations.
experienced during the pandemic lockdowns.
The Group relies on IT networks and systems, some of which are managed by
third parties, to process, encrypt, transmit and showroom electronic
information, and to manage or support a variety of business processes and
activities, including sales, supply chain, merchandise distribution, client
invoicing and collection of payments.
Regulatory and Compliance
Fines, litigation, and reputational damage could arise if the Group fails to The Group actively monitors both regulatory developments in the UK, US and
comply with legislative or regulatory requirements including, but not limited Europe and compliance with existing obligations.
to, consumer law, health and safety, employment law, data protection,
anti-bribery and corruption, competition law, anti-money laundering and supply Clear Group policies and procedures are in place, including, but not limited
chain regulations. to, anti-bribery, corruption and fraud, whistleblowing, and data protection.
As the Group continues to expand in the US and Europe, there is a risk the Mandatory induction briefings and training for all colleagues on regulation
business lacks the detailed knowledge of US and European laws and regulations and compliance
resulting in a breach, significant fine, and reputational impact.
Experienced in-house legal team with external expertise sought as needed.
The established culture and values foster open, honest communication.
Operational activities have been amended, and continue to be updated, to
comply with guidance provided by the Government to prioritise the safety of
colleagues and clients.
Regulatory compliance reviews form part of the rolling Internal Audit plan.
Economic and Political
The Group's business is geographically concentrated in the UK and US, with Regular monitoring of economic and political events.
planned further expansion in Europe. Any sustained stagnation or deterioration
in the luxury watch or jewellery markets or decline in consumer spending in Focus on client service to attract and retain clients.
these territories could have a material adverse impact on the Group's
business. Detailed sales data is analysed to anticipate future trends and demand, taking
into consideration the current economic environment.
The Group or its suppliers may not be able to anticipate, identify and respond
to changing consumer preferences in a timely manner, and the Group may not Through the expansion into the US and Europe, the Group is not wholly
manage its inventory in line with client demand. dependent on the economic or political environment in one single market.
Ongoing legal, political, and economic uncertainty in the UK, US, European and
international markets could give rise to significant currency fluctuations,
interest rate increases, adverse taxation arrangements or affect current
trading and supply arrangements.
Brand and Reputational Damage
The Watches of Switzerland Group's trading brands and its corporate brand are The Group has a clear and open culture with a focus on trust and transparency.
an important asset, and failure to protect the Group's reputation and brand
could lead to a loss of trust and confidence. This could result in a decline Training and monitoring of adherence by colleagues to Group policies and
in the client base, affect the ability to recruit and retain the best people, procedures.
and damage our reputation with our suppliers or investors.
Excellent client experience is a key priority of the Group.
The Group undertakes regular client engagement to understand and adapt the
product, offer, and showroom environment.
The use of impactful, digital-led marketing, along with an in-depth knowledge
of products, makes the Group an authority in the markets it serves.
Financial and Treasury
The Group's ability to meet its financial obligations and to support the In May 2023, the Group successfully refinanced, entering into a new £225.0
operations and expansion of the business is dependent on having sufficient million multicurrency revolving loan facility with a five-year term.
funding over the short, medium and long-term.
The Group's net cash position, available funding and cash flow projections are
The Group is reliant on the availability of adequate financing from banks and regularly monitored by management and the Board.
capital markets to meet its liquidity needs.
Exchange and interest rates are regularly reviewed to determine if hedging
The Group's level of indebtedness could adversely affect its ability to react should be put in place.
to changes in the business and may limit the commercial and financial
flexibility to operate the business. A three-year strategic cash flow is prepared and stress-tested, including the
impact on covenant calculations.
The Group is exposed to foreign exchange risk and profits may be adversely
impacted by unforeseen movements in foreign exchange rates. Quarterly meeting with the lenders' agent to update on forecast and trading.
Significantly reduced trading over an extended period, due to a pandemic,
could impact the business's ability to operate within committed credit
facilities.
Climate Change
The increased frequency of extreme weather events may lead to the significant The Board has overall responsibility for managing climate- related risks, as
disruption of retail showrooms, offices, and distribution centres, through well as ensuring our strategy creates value and achieves our Purpose to WOW
flooding and strong winds. The supply chain may also be impacted through clients, while caring for colleagues, our communities and our planet.
transporting goods to showrooms.
Climate-related issues are addressed on a regular basis by the ESG Committee,
In a changing climate, there is the potential for higher insurance premiums which is chaired by Independent Non-Executive Director, Rosa Monckton.
for business operations, especially ones located in specific geographies.
The ESG Committee challenges our ESG Steering Group on progress against goals
The increasing cost of energy and potential regulatory mechanisms on direct and targets.
carbon emissions, may impact business financials and profit if the Group
cannot transition to a more low carbon business model. Key climate-related risks and opportunities are governed via our Audit &
Risk Committee along with the accuracy and compliance with ESG-related
The Group's reliance on premium raw materials, which are a finite resource, disclosures, including TCFD.
increases its exposure to resource scarcity, and the potential increase cost
of obtaining these resources in a challenging supply chain environment. The ESG agenda continues to evolve rapidly and climate training has been
introduced for Board members to ensure they have sufficient knowledge for
The Group may fail to implement its mitigation strategy to reduce its impact effective decision-making.
on the climate and manage the risk appropriately, leading to increased
scrutiny from stakeholders and investors, resulting in reputational damage. The CEO has overall operational responsibility for Climate Strategy and the
mitigation of related risks.
The CFO has day-to-day operational responsibility for climate-related risks
and opportunities and chairs a regular ESG Steering Group, which reports into
the ESG Committee.
The Group has a dedicated Head of Sustainability and ESG, who has significant
experience in relation to climate change.
The ESG Steering Group is responsible for assessing and managing
climate-related risks and opportunities against KPIs aligned to our ESG
pillars of 'People, Planet and Product' and ensuring all operational matters
in respect to our ESG Strategy are fully embedded into our business strategy
and operation.
Each ESG pillar is supported by Working Groups, which include senior
operational managers, with input from external consultants.
Further information on the financial risks we face and how they are managed is
provided on pages 112 to 121 of the Annual Report and Accounts 2023.
Directors' Responsibility Statement
The Directors are responsible for preparing the Annual Report and Accounts in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each
financial year that give a true and fair view of the state of affairs of the
Group and the Company as at the end of the financial year, and of the profit
or loss of the Group for the financial year.
Under that law the Directors have elected to prepare the Group Financial
Statements in accordance with UK adopted international accounting standards
and have elected to prepare the Company's Financial Statements in accordance
with United Kingdom Generally Accepted Accounting Practice, including FRS 102
(The Financial Reporting Standard applicable in the United Kingdom and the
Republic of Ireland) and the Companies Act 2006.
Under company law, the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and the Company and of the profit or loss of the Group
for that period.
In preparing the Annual Report and Accounts, the Directors are required to:
- Select suitable accounting policies in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors (or in respect of the
parent company Financial Statements, Section 10 of FRS 102) and then apply
them consistently;
- Make judgements and accounting estimates that are reasonable and prudent;
- Present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
- Provide additional disclosures when compliance with the specific
requirements in IFRSs (or in respect of the parent company financial
statements, FRS 102) is insufficient to enable users to understand the impact
of particular transactions, other events and conditions on the Group's
financial position and financial performance;
- For the Group Financial Statements, state whether International Financial
Reporting Standards in conformity with the requirements of the Companies Act
2006 and UK adopted international accounting standards have been followed,
subject to any material departures disclosed and explained in the Financial
Statements;
- For the Parent Company Financial Statements, state whether applicable UK
accounting standards, FRS 102, have been followed, subject to any material
departures disclosed and explained in the Parent Company Financial Statements;
- Prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Group and the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's and the Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the Financial Statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Strategic report, Directors' report, Directors' Remuneration
Report and Corporate Governance statement that comply with that law and those
regulations. The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Company's website.
Each of the Directors, whose names and functions are listed on pages 130 and
131 of the Annual Report and Accounts 2023 confirms that, to the best of their
knowledge:
- that the Group Financial Statements, which have been prepared in accordance
with UK adopted international accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit of the Group;
- that the Annual Report and Accounts 2023, including the Strategic Report,
includes a fair review of the development and performance of the business and
the position of the Company and undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face;
- that they consider the Annual Report and Accounts 2023, taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company's position, performance, business model and
strategy.
The Directors of Watches of Switzerland Group PLC are listed in the Group's
Annual Report and Accounts 2023 and on the Group's website: thewosgroupplc.com
(http://thewosgroupplc.com/)
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