18 July
2024
Watches of Switzerland Group
PLC (the "Company")
Annual Report and Accounts
2024
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 2024; and
2. Notice of Annual
General Meeting of the Company, to be held at 36 North Row, London
W1K 6DH at 2.30pm on 3 September 2024
In accordance with DTR 6.3.5(3) the
Annual Report and Accounts 2024 and the Notice of Annual General
Meeting are accessible on the Group's website: thewosgroupplc.com
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
FY24 results announcement on 27 June 2024. That information
together with the information set out below which is extracted from
the Annual Report and Accounts 2024 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 2024. Page and note references in the
text below refer to page numbers in the Annual Report and Accounts
2024. To view the FY24 results announcement visit the Company
website: thewosgroupplc.com/investors
For
further information, please contact:
Laura Battley
Company Secretary and General
Counsel
+44 (0)20 7317 4604
companysecretariat@thewosgroup.com
Additional Information
Principal risks and uncertainties
Below are descriptions of our
principal risks and uncertainties and explanations of how we manage
or mitigate the risk. It is recognised that the Group is exposed to
risks wider than those listed. However, we have disclosed those we
believe are likely to have the greatest impact on our business at
this moment in time.
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Principal risk description
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How
we manage or mitigate the risk
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Business Strategy Execution and Development
If the Board adopts the wrong
strategy or does not implement its strategy effectively, the
business may suffer.
The Group's growth strategy exposes
it to risks and the Group may encounter setbacks in its ongoing
expansion in the UK and US.
The Group's significant investments
in its showroom portfolio, IT systems, colleagues and marketing may
be unsuccessful in growing the Group's business as
planned.
The acquisition of Roberto Coin Inc.
in the US moves the Group into the wholesale sector, a sector
within which the Group has more limited existing internal
expertise. There is strong reliance on incumbent management at
Roberto Coin Inc. to deliver the Group's strategy.
As the Group continues to make
acquisitions, these may prove unsuccessful or divert its resources.
Further growth through acquisition is dependent upon the Group's
ability to identify suitable targets, conduct effective due
diligence, negotiate transactions on favourable terms, complete
such transactions and successfully integrate the acquired
businesses.
The Group may fail to respond to the
pressures of an increasingly changing retail environment
effectively and rapidly. The re-evaluation of priorities and their
delivery, including the consideration of initiatives to respond to
permanent changes in client behaviours or to change working
practices, is paramount in the current environment.
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The Board reviews its business
strategy on a regular basis to determine how sales and profit can
be maximised, and business operations can be made more
efficient
The Board has significant relevant
experience, including in the retail and luxury markets
The CEO provides updates to the
Board on key development opportunities and initiatives
Expansion of the property portfolio
or potential acquisitions must meet strict payback criteria. Return
on investment of marketing and other investment activity is
monitored closely
Key management information is
provided to the Board on a regular basis to help inform strategic
decision-making
The Group has adapted its strategy
to take advantage of online trading, client 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, ecommerce
platforms and enhanced luxury branded jewellery offers. There is
international market diversification reducing reliance on one
territory
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Key
Suppliers and Supply chain
The manufacture of key luxury watch
brands is highly concentrated among a limited number of brand
partners and the production of luxury watches is limited by the
small number of master watchmakers and the availability of
artisanal skills. Owners of luxury watch brands control
distribution through strict, Selective Distribution Agreements.
Consequently, the relationship with owners of luxury watch brands
is crucial to the Group's success.
Some of the Group's distribution
agreements with luxury watch brands provide 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 the
risk that owners of luxury watch brands may decide to terminate
these contracts or otherwise not to renew them upon expiry, or to
reduce the number of agencies they grant to the Group.
The Group's distribution agreements
with suppliers do not guarantee a steady supply of
merchandise.
The Group's business model may also
come under significant pressure should the owners of luxury watch
and jewellery brands choose to distribute their own watches,
increasingly or entirely by-passing third-party retailers such as
the Group.
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The Group fosters strong
relationships with brand partners and other suppliers, many of
which have been held for a significant length of time
Supplier distribution contracts are
monitored to ensure continued compliance with contractual
obligations
The Group works collaboratively with
brand partners to identify product trends and forward
demand
Continued focus on providing
exceptional client experience, representing the brands in the best
possible way
Client experience is further
elevated through new, larger showrooms that are supported by the
brands
In-depth training for showroom
colleagues is provided, including specific training provided by the
brand partners
The Group's sales mix is becoming
more broad-based, with less reliance on individual brands to drive
success
Review opportunities to extend our
expertise into complementary business and service models
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Client Experience and Market Risk
An inability to maintain a
consistent high-quality experience for the Group's clients across
the sales channels, particularly within the showroom network, could
adversely affect business.
The increased number of registration
of interest (ROI) watches could adversely impact the perceived
client experience.
The Group faces competition and any
failure by the Group to compete effectively could result in a loss
of market share or the ability to retain supplier agencies.
Long-term consumer attitudes to diamonds, gold and other precious
metals and gemstones could be affected by a variety of issues,
including concern over the source of raw materials, the impact of
mining and refining of minerals on the environment, labour
conditions in the supply chain, and the availability and perception
of substitute products, such as cubic zirconia and laboratory-
created diamonds. Equally, longer term consumer attitudes to more
technologically advanced watches, such as 'smart watches' could
reduce consumer demand for luxury watches.
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The Group provides the ultimate
luxury environment for its clients to feel welcome, appreciated and
supported
Our Xenia Client Experience
Programme further elevates our client experience proposition (refer
to page 40)
Our brand partners audit and assess
our client experience enabling us to independently benchmark and
evaluate our performance
Exceptional training is provided for
our showroom colleagues, and other client-facing colleagues, to
allow them to provide the best client service, along with in-depth
product knowledge
The CRM database allows the Group to
engage with the client on their journey from a potential to a loyal
client
The Group continues to invest in and
develop its product offering to improve the value offered to
consumers, retailers, and manufacturers
Competitor activity is monitored in
detail, enabling strategic decision-making on key market
positions
Our Luxury Watch and Jewellery
Virtual Boutique experience is a unique differentiator and
recognised as a competitive advantage, as is the Group's scale and
technological capabilities
Consumer trends are monitored to
ensure product ranges remain aligned to client demand
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Colleague Talent and Capability
The Group depends on the services of
key talent to manage its business, and the departure of such
colleagues or the failure to recruit and retain suitable personnel
could adversely affect the Group's business.
Client experience is an essential
element in the success of the Group's business, where many clients
prefer a more personal face-to-face experience and have established
strong relationships with the Group's retail colleagues. An
inability to recruit and retain suitably qualified colleagues,
especially with specialised knowledge of luxury watches and
jewellery, would have a material impact on the Group.
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The Trading Board considers the
development of senior management to ensure there are opportunities
for career development, promotion, and appropriate
succession
The Nomination Committee considers
the succession planning for the Board, and senior
management
The Company's recognition programmes
are in place to incentivise and motivate colleagues
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
We utilise a two-way engaging
communications platform, Workplace, globally. This social channel
underpins Group communications to colleagues
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Data Protection and Cyber Security
The increasing sophistication and
frequency of cyber-attacks, coupled with data protection laws,
highlight the escalating information security risk facing all
businesses.
As the Group operates in the UK and
US markets, the regulatory environment surrounding these areas is
considered more complex.
Security breaches and failures in
the Group's IT infrastructure and networks, or those of third
parties, could compromise sensitive and confidential information
and affect the Group's reputation.
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 reputational damage to the
business that could negatively impact on our sales.
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Dedicated Group Data Protection
Officer in place
Significant investment in systems
development and security programmes
Systems vulnerability and
penetration testing is carried out regularly
The Group Data Protection Committee
meets regularly to review related processes and emerging
risks
Information security and data
protection policies, procedures, and training in place
Enhanced multi-factor authentication
(MFA) enforced across the Group
Next Generation email security
system implemented
New 24/7 security operations centre
(SOC) service onboarded
Improved reporting capabilities
allow all colleagues to promptly report any suspicious content or
activity they encounter
External maturity assessment
conducted to validate continuous security improvement
programme
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Business Interruption
Adverse weather conditions,
pandemics, travel disruption, natural disasters, terrorism, acts of
war or other external events could adversely affect consumer
discretionary spending or cause a disruption to the Group's
operations.
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 material
pandemic, would significantly impact the operations of the
business.
The Group offers flexible delivery
options (home delivery or click and collect in showroom) and its
online operations rely on third-party carriers and transportation
providers. The Group's shipments are subject to various risks,
including labour strikes and adverse weather.
The Group may experience significant
theft of products from its showrooms, distribution centres or
during the transportation of goods. Loss of high-value
low-availability pieces could damage our reputation and our clients
may become less inclined to visit our showrooms.
Disruptions to, or failures in, the
Group's IT infrastructure and networks, or those of third parties,
could disrupt the Group's operations, especially during periods of
increased reliance on these systems such as those experienced
during the pandemic lockdowns.
The Group relies on IT networks and
systems, some of which are managed by third parties, to process,
encrypt, and transmit 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.
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The Group has a framework of
operational procedures and business continuity plans that are
regularly reviewed, updated, and tested
The multi-channel model allows
clients to continue their relationship with us and to purchase in
the event of disruption to any single channel
Robust security arrangements are in
place across our showroom network to deter and prevent crime and,
in the event of an incident, protect people and products
A comprehensive insurance programme
is in place to offset the financial consequences of insured
events
A detailed IT development and
security roadmap is in place aligned to our strategy
Reliable and reputable third-party
logistic partners have been engaged to ensure the secure
transportation of goods
The Group has in place action plans
to effectively deal with the impact of a pandemic on business
operations
Revised and enhanced the crisis
response programme implemented Group-wide
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Regulatory and Compliance
Fines, litigation, and reputational
damage could arise if the Group fails to comply with legislative or
regulatory requirements including, but not limited to, consumer
law, health and safety, employment law, data protection,
anti-bribery and corruption, competition law, anti-money laundering
and supply chain regulations.
As the Group continues its US
expansion and trades in increasing state jurisdictions, there is a
risk the business lacks the detailed knowledge of local US laws and
regulations resulting in a breach, significant fine, and
reputational impact.
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The Group actively monitors both
regulatory developments in the UK, US and Europe and compliance
with existing obligations
Clear Group policies and procedures
are in place, including, but not limited to, anti-bribery,
corruption and fraud, whistleblowing, and data
protection
Mandatory induction briefings and
training for all colleagues on regulation and compliance
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
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Economic and Political
The Group's business is
geographically concentrated in the UK and US, with a more limited
European footprint. Any sustained stagnation or deterioration in
the luxury watch or jewellery markets or decline in consumer
spending in these territories could have a material adverse impact
on the Group's business.
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 manage its
inventory in line with client demand.
Ongoing legal, political, and
economic uncertainty in the UK, US and international markets could
give rise to significant currency fluctuations, interest rate
increases, adverse taxation arrangements or affect current trading
and supply arrangements.
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Regular monitoring of economic and
political events
Focus on client service to attract
and retain clients
The Group updates internal return on
investment hurdles and criteria to reflect changing market
environments
Detailed sales and inventory data is
analysed to anticipate future trends and demand, taking into
consideration the current economic environment
Through continued expansion in the
US, the Group is not wholly dependent on the economic or political
environment in one single market
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Brand and Reputational Damage
The Watches of Switzerland Group's
trading brands and its corporate brand are 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 in the
client base, affect the ability to recruit and retain the best
people, and damage our reputation with our suppliers or
investors
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The Group has a clear and open
culture with a focus on trust and transparency
Excellent client experience is a key
priority of the Group and subject to independent scrutiny by our
major brand partners through mystery shopping programmes
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
Training and monitoring of adherence
by colleagues to Group policies and procedures
The Group has conducted a
materiality assessment to understand the priorities and focus areas
of its stakeholders, including colleagues, brand partners and other
suppliers, investors and community groups
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Financial and Treasury
The Group's ability to meet its
financial obligations and to support the operations and expansion
of the business is dependent on having sufficient funding over the
short, medium and long term. The Group is reliant on the
availability of adequate financing from banks and capital markets
to meet its liquidity needs.
The Group's level of indebtedness
could adversely affect its ability to react to changes in the
business and may limit the commercial and financial flexibility to
operate the business.
The Group is exposed to foreign
exchange risk and profits may be adversely impacted by unforeseen
movements in foreign exchange rates.
Significantly reduced trading over
an extended period, due to a pandemic, could impact the business's
ability to operate within committed credit facilities.
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The Group maintains a £225 million
revolving credit facility with a term of four years
remaining
The Group's net cash position and
available funding is actively managed through a Group Treasury
policy and cash flow projections are regularly monitored by
management and the Board
Exchange and interest rates are
regularly reviewed to determine if hedging should be put in
place
A three-year strategic cash flow is
prepared and stress-tested, including the impact on covenant
calculations
Quarterly meeting with the lenders'
agent to update on forecast and trading
To support the financing of the
Roberto Coin Inc. acquisition and provide additional headroom, a
short-term loan facility of US$115 million has been agreed,
extendable up to February 2026
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Climate Change
The increased frequency of extreme
weather events may lead to the significant disruption of retail
showrooms, offices, and distribution centres, through flooding and
strong winds. The supply chain may also be impacted through
transporting goods to showrooms.
In a changing climate, there is the
potential for higher insurance premiums for business operations,
especially ones located in specific geographies.
The increasing cost of energy and
potential regulatory mechanisms on direct carbon emissions, may
impact business financials and profit if the Group cannot
transition to a more low-carbon business model.
The Group's reliance on premium raw
materials, which are a finite resource, increases its exposure to
resource scarcity, and the potential increased cost of obtaining
these resources in a challenging supply chain
environment.
The Group may fail to implement its
mitigation strategy to reduce its impact on the climate and manage
the risk appropriately, leading to increased scrutiny from
stakeholders and investors, resulting in reputational
damage.
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The Board has overall responsibility
for managing climate- related risks, as well as ensuring our
strategy creates value and achieves our Purpose to WOW our clients,
while caring for our colleagues, our communities and our
planet
Climate related issues are addressed
on a regular basis by the ESG Committee, which is chaired by an
Independent Non-Executive Director
The ESG Committee challenges our ESG
Steering Group on progress against goals and targets
Key climate related risks and
opportunities are governed via our Audit & Risk Committee along
with the accuracy of and compliance with ESG-related disclosures,
including TCFD
The ESG agenda continues to evolve
rapidly and climate training has been introduced for Board members
to ensure they have sufficient knowledge for effective
decision-making
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
of our ESG Strategy are fully embedded into our business strategy
and operation, including an underpin to Group bonus programmes
(refer to pages 185)
Each ESG pillar is supported by
Working Groups, which include senior operational managers, with
input from external consultants
The Group undergoes numerous
external assessments on climate and sustainability
activities
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Further information on the financial
risks we face and how they are managed is provided on pages 130 to
139 of the Annual Report and Accounts 2024.
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 148 and 149 of the Annual Report
and Accounts 2024 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 2024, 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 2024, 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 2024 and on the Group's website: thewosgroupplc.com