TIDMWOSG
RNS Number : 8377M
Watches of Switzerland Group PLC
14 May 2020
Watches of Switzerland Group PLC
FY20 Trading and Financing Update
for the 13 and 52 weeks to 26 April 2020
Watches of Switzerland Group PLC ("the Group") today provides
the following financing update and unaudited pre-close trading
update for the 13 and 52 weeks ending 26 April 2020.
Highlights
-- FY20 Group revenue(1) increased 5.9% to GBP819.3 million,
ahead of recently revised guidance range
-- Strong trading during first 46 weeks to 15 March 2020 (pre
lockdown) with Group revenue up 15.8%, across both UK (up 9.4%) and
US (up 36.4%), driven by luxury watches up 19.3% vs prior year
-- Covid-19 related closures of all stores in the UK and US has
impacted momentum in final 6 weeks of the year
-- UK sales for 52 weeks to 26 April 2020 up 0.6% to GBP591.6
million (FY19: GBP588.2 million)
-- US sales for 52 weeks to 26 April 2020 up 22.9% to GBP227.7
million (FY19: GBP185.3 million)
-- Ecommerce sales up 45.8% vs prior year during store lockdown
period (6 weeks to 26 April 2020)
-- Four acquired Fraser Hart stores converted and integrated
during March, with encouraging trading until lockdown
-- Reacted swiftly to Covid-19 with mitigating cost and cash management actions implemented
-- Net debt(2) of GBP131.4 million as at 26 April 2020
-- New GBP45.0 million facility agreement secured post year-end,
further strengthening liquidity position
-- FY20 Unaudited adjusted pre-IFRS16 EBITDA(3) is expected to
be between GBP75.0 million and GBP78.0 million
Brian Duffy, Chief Executive Officer, said:
"The health and wellbeing of our colleagues and customers
remains our priority throughout this challenging time and beyond. I
am incredibly proud of the response from our teams, demonstrating
unwavering resilience, teamwork and dedication.
Prior to the Covid-19 pandemic, the Group had been on track to
deliver double-digit sales growth, reflecting our strong brand
partnerships, favourable market conditions and accelerating
momentum in the US.
Despite the current challenges, demand for luxury watches has
remained strong with online sales performance ahead of our
expectations. Through our longstanding partnerships with the most
prestigious Swiss watch brands, we have further enhanced the online
customer experience with the introduction of additional brands
which we had previously only transacted in our stores.
We have also been highly proactive in identifying areas of cost
savings while introducing measures to preserve cash and mitigate
the impact of store closures, all whilst continuing to maintain
full salary entitlement for all our colleagues. We are also pleased
to have further strengthened our liquidity headroom, which means we
can sustain a closure of our entire store portfolio for a prolonged
period of time.
We are working hard behind the scenes to ensure that when our
stores do re-open, they do so safely and in line with best practice
so that our customers and colleagues will be able to shop and work
confidently in a safe and healthy environment. Store openings are
proceeding in Florida and Georgia in the US and to date, the
experience of those colleagues and customers has been positive. As
we look ahead to a post lockdown environment, we are anticipating a
prolonged period of lower traffic, particularly in airports, with
ecommerce, CRM and clienteling continuing to gain importance.
We remain confident the strong fundamentals that underpin the
luxury watch category remain intact and will do so as we emerge
from the current situation. Luxury watches continue to be a
supply-driven segment with robust demand and unique value
preservation characteristics. Longer term, we are well positioned
to deliver on our plans to leverage our leading position in the UK
and become a leader in the US luxury watch market.
I would like to reiterate my gratitude to our teams in the UK
and in the US who continue to be committed, resourceful and
positive throughout this challenging time."
Trading
Group revenue (1) for the year to 26 April 2020 increased by
5.9% to GBP819.3 million (FY19: GBP773.5 million), ahead of the
recently guided range of GBP809.0 million to GBP812.0 million,
driven by strong ecommerce sales. Performance had been strong for
the first 46 weeks of the year when the lockdown of stores came
into effect, with US stores closed from 19 March 2020 and UK stores
closed from 23 March 2020.
46 weeks to 15 March 2020
Prior to the impact from the Covid-19 outbreak during the fourth
quarter, the financial year had been progressing strongly. For the
first 46 weeks of the year to 15 March 2020, total group revenue
increased 15.8% with Like-for-like(4) ("LfL") sales up 9.3% versus
the prior year period. This was driven by sales of luxury watches,
which rose 19.3% during this period. The relaunched jewellery
ranges generated a positive response from customers and the
category performed well relative to the market.
UK sales increased 9.4% during the 46 weeks to 15 March 2020
with LfL(4) sales up 9.2% relative to the prior year period. The
Group progressed its showroom elevation strategy with a total of 8
refurbished stores, including the expansion of the Rolex boutique
in the 155 Regent Street flagship store during November 2019, and 2
relocated stores. The multi-channel network was further enhanced
with the opening of 3 new stores, the first Watches of Switzerland
store in Gatwick Airport, a new Goldsmiths store in Edinburgh Fort
and the first Fope jewellery mono-brand boutique. Four Fraser Hart
stores were acquired during March 2020 and were converted and
integrated, with a strong initial response from customers prior to
entering lockdown. Ecommerce sales rose by 15.9% for the 46 weeks
to 15 March 2020.
Momentum in the US accelerated strongly during the 46 weeks to
15 March 2020 with sales up 36.4% relative to the prior year period
and by 9.8% on a LfL(4) basis. During the period, the Group further
elevated the network of Mayors showrooms. Three stores were moved
to more strategic locations and converted to the new design concept
(Merrick Park, Coral Gables; Lenox Square, Atlanta; Avalon,
Atlanta) and, in addition, the Miami International Mall showroom
was completely refurbished. Following the upgrades, these stores
received a strong response from customers.
52 weeks to 26 April 2020
The final 6 weeks of the financial year to 26 April 2020 have
been significantly impacted by the ongoing Covid-19 outbreak. All
stores within the Group's store portfolio were closed as a result
of containment measures relating to the Covid-19 outbreak adopted
by governments, with US stores closing on 19 March 2020 and UK
stores closing on 23 March through the end of the financial
year.
During the period following the closure of stores, ecommerce has
performed particularly well. Sales from this channel increased
45.8% during the last six weeks of the financial year with a
further acceleration during the month of April, when sales
increased by 82.8% relative to the same prior year period. In
response to the closure of the bricks and mortar network, the
online offering has been enhanced by the addition of several brands
which the Group had previously only transacted in its stores. These
additional brands will continue to be part of the online offering
going forward.
The Group has generated additional revenue and cash during the
period through enhanced clienteling initiatives in the UK and US,
leveraging its strong customer relationships together with its
sophisticated CRM tools and leading-edge systems. The Group
continues to work closely with its brand partners during the
lockdown period and in planning for the post lockdown business
environment.
Demand for key luxury watch brands continued to exceed supply
throughout the year.
Financing and cost mitigation
Net debt (2) as at 26 April 2020 was GBP131.4 million, which
compares to the guidance provided prior to the Covid-19 pandemic of
GBP120.0 million to GBP130.0 million.
Following the end of the period, the Group has further
strengthened its liquidity position with new financing
arrangements. The Group has entered into a new GBP45.0 million
facility agreement as part of the government Coronavirus Large
Business Interruption Loan Scheme ("CLBILS") and which has a
maturity of November 2021.
The total available facilities in place as of 13 May 2020 are
approximately GBP265.0 million. As of 13 May 2020, the Group's
liquidity post refinancing is approximately GBP83.0 million.
The Group is confident it has sufficient financial headroom at
year-end to sustain operations under a scenario of continued store
closures and dampened consumer sentiment for a prolonged period.
This assumes the impact to revenue continues to be partially offset
by a series of mitigating actions to preserve cash.
As previously announced, in light of the Covid-19 pandemic, the
Group has reacted swiftly to Covid 19 with mitigating cost and cash
management actions implemented. This includes steps taken to
eliminate discretionary expenditure, reduce working capital and
where possible, delay capital projects. Government measures
announced on business rates suspension, employee cost support and
tax payment deferrals, are having a positive impact on cash
planning. From 1 April 2020, the Board and selected senior
executives volunteered to take a temporary 25% reduction in base
pay and to defer the entirety of this base pay for the duration of
store closures.
Outlook
The Group expects Adjusted pre-IFRS 16 EBITDA (3) for the full
year to 26 April 2020 to be in the range of GBP75.0 million and
GBP78.0 million .
In light of the impact to performance and the ongoing
uncertainty from Covid-19, previously issued guidance for FY21 no
longer applies. The Group is currently reviewing guidance and will
most likely update the market with the FY results.
FY20 Revenue Performance by Geography
Q4 FY
13 weeks 13 weeks Total Constant 52 weeks 52 weeks Total Constant
to 26 April to 28 April change currency to 26 April to 28 April change currency
2020 2019 YoY change 2020 2019 YoY change
GBP million GBP million YoY GBP million GBP million YoY
-------------- ------------- ------------- ------------- -------- ----------
UK 90.7 129.7 -30.1% -30.1% 591.6 588.2 0.6% 0.6%
------------- ------------- -------- ---------- ------------- ------------- -------- ----------
US 42.1 49.8 -15.5% -16.9% 227.7 185.3 22.9% 20.4%
------------- ------------- -------- ---------- ------------- ------------- -------- ----------
Group Revenue 132.8 179.5 -26.0% -26.4% 819.3 773.5 5.9% 5.3%
------------- ------------- -------- ---------- ------------- ------------- -------- ----------
Note: LfL has been removed from the table above as all stores in
the portfolio were closed from week 47 through to the end of the
period
FY20 Revenue Performance by Category
Q4 FY
13 weeks 13 weeks Total 52 weeks 52 weeks Total change
to 26 April to 26 April change to 26 April to 28 April YoY
2020 2019 YoY 2020 2019
GBP million GBP million
--------------------- ------------- ------------- ------------- -------------
Luxury Watches 110.9 150.2 -26.1% 686.4 631.4 8.7%
------------- ------------- -------- ------------- ------------- -------------
Luxury Jewellery 11.4 14.4 -20.8% 70.7 74.7 -5.4%
------------- ------------- -------- ------------- ------------- -------------
Fashion & Classic 4.8 6.4 -26.0% 30.6 34.6 -11.5%
------------- ------------- -------- ------------- ------------- -------------
Services & Other 5.7 8.5 -32.8% 31.6 32.8 -3.5%
------------- ------------- -------- ------------- ------------- -------------
Group Revenue 132.8 179.5 -26.0% 819.3 773.5 5.9%
------------- ------------- -------- ------------- ------------- -------------
(1) During FY20 the Group has reclassified certain costs and
revenue, mainly to correctly reflect interest-free credit costs
under IFRS 9, with no impact on net profit. As the impact is not
material to the financial statements the comparatives have not been
restated. The results shown above are shown prior to making this
adjustment to aid comparability. These adjustments would reduce the
FY20 revenue as stated by GBP8.8 million. If the prior year revenue
was restated, revenue would have reduced by GBP10.7 million.
(2) Net debt is total borrowings before adjusting for
capitalised transaction costs less cash and cash equivalents.
(3) Unaudited adjusted pre IFRS 16 EBITDA is EBITDA before
exceptional and non-underlying items. Non-underlying items includes
loss on disposal of property, plant and equipment, costs from
non-trading activities and management fees. Shown on a continuing
basis.
(4) Like-for-like (LfL) sales growth is the percentage increase
in local currency sales from showrooms that have been trading
continuously from the same selling space for at least one year. LfL
excludes showrooms which have been closed during the period for
refurbishment.
Conference call
A conference call for analysts and investors will be held at
8.30am today. To join the call, please use the following
details:
Dial-in (UK): 020 3695 9267
Dial-in (all other locations):
https://public.speakservecloud.com/dial-in-numbers/ee9d2673-7e37-4058-889c-e4a9ff59f4a7
Room number: 500492
Participant pin: 7527
Contacts
The Watches of Switzerland Group
Anders Romberg, CFO +44 (0) 116 2817
Allegra Perry, Investor Relations 401
investor.relations@thewosgroup.com +44 (0) 7767 100603
Headland
Lucy Legh / Rob Walker
wos@headlandconsultancy.com +44 (0) 20 3805 4822
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 127 core showrooms across
the UK and US (which includes 22 dedicated mono-brand stores in
these two markets 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
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.
https://www.thewosgroupplc.com
Disclaimer
This trading statement does not constitute an invitation to
underwrite, subscribe for, or otherwise acquire or dispose of any
Watches of Switzerland Group Plc shares or other securities nor
should it form the basis of or be relied on in connection with any
contract or commitment whatsoever. It does not constitute a
recommendation regarding any securities. Past performance,
including the price at which the Company's securities have been
bought or sold in the past, is no guide to future performance and
persons needing advice should consult an independent financial
adviser.
Certain statements in this trading statement constitute
forward-looking statements. Any statement in this document that is
not a statement of historical fact including, without limitation,
those regarding the Company's future plans and expectations,
operations, financial performance, financial condition and business
is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially. These risks and uncertainties include, among
other factors, changing economic, financial, business or other
market conditions. These and other factors could adversely affect
the outcome and financial effects of the plans and events described
in this statement. As a result you are cautioned not to place
reliance on such forward-looking statements. Nothing in this
statement should be construed as a profit forecast.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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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
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