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C O N T E N T S
1
2
3
S T R AT E G I C R E P O R T
G OV E R N A N C E R E P O R T
F I N A N C I A L S TAT E M E N T S
02 At a Glance
06 Chair’s Statement
08 Market Review
20 Our Brand Partnerships
66 Our Portfolio
68 Our Showrooms
70 Business Model
72 Chief Executive Officer’s Review
80 Our Strategy
96 Our Strategy in Action
106 Financial Review
112 Key Performance Indicators
Non-financial Information
115
Statement
Chair’s Introduction
Corporate Governance Statement
171
173
182 Board of Directors
184 Nomination Committee Report
188 Audit Committee Report
194 ESG Committee Report
196 Remuneration Committee Report
200 Directors’ Remuneration Report
208 Annual Report on Remuneration
Proposed 2022 Directors’
212
Remuneration Policy
Directors’ Report
224
116 Section 172
118
Environmental, Social
and Governance
156 Risk Management
160 Principal Risks and Uncertainties
166
Going Concern and
Viability Statement
240
Independent Auditor’s Report
230
236 Consolidated Income Statement
Consolidated Statement of
237
Comprehensive Income
238 Consolidated Balance Sheet
Consolidated Statement of
239
Changes in Equity
Consolidated Statement of Cash
Flows
Notes to the Consolidated
Financial Statements
Company Balance Sheet
Company Statement of Changes
in Equity
Notes to the Company Financial
Statements
277
278
279
241
283 Glossary
286 Shareholder Information
A YEAR OF FURTHER
PROGRESS WITH STRONG
MOMENTUM INTO FY23
We delivered an outstanding performance across the
Group during the year, with consistently strong sales
and demand which continued to exceed supply.
Our teams excelled in offering best in class service,
with the Group’s elevated client experience programme,
Xenia, launching in all showrooms.
We continued to execute our strategy and Long Range
Plan, maintaining our market-leading position in the UK
and growing our presence in the US. This was supported
by ongoing investment, including refurbishment of existing
showrooms, and the roll out of new sites.
We are incredibly proud of the work of The Watches
of Switzerland Group Foundation, to which we have
donated £4.5 million to date to benefit the communities
in which we serve.
Looking ahead, our planned entry into the European
market provides the Group with further opportunities
and market diversification.
Our strategy, people and brand partnerships underpin
our confidence for continued growth within the large
and growing luxury watch and jewellery markets.
01
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS AT A G L A N C E
OU R PU R POSE
To WOW our clients while caring for our
colleagues, our communities and our planet.
The Watches of Switzerland Group is an international retailer of world leading
luxury watch brands with a growing complement of luxury jewellery brands.
The Watches of Switzerland Group provides clients with the finest selection of luxury
timepieces from all of the major groups and independent brands together with an
impressive presentation of smaller independent brands.
OU R VA LU ES
WELL-INVESTED SHOWROOM NET WORK
171
TOTAL SHOWROOMS
AT 1 MAY 2022
65%
FY22 REVENUE
FROM THE UK
35%
FY22 REVENUE
FROM THE US
2,400+
NUMBER OF COLLEAGUES
AT 1 MAY 2022
02
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 HIGHL IGH TS
REVENUE
RETURN ON CAPITAL EMPLOYED1
SALES BY CATEGORY
£1,238m
CHANGE VS LY (AT CONSTANT CURRENCY
EXCLUDING FY21 53RD WEEK)1
+40%
27.4%
CHANGE VS LY
+770bps
ADJUSTED EBIT1
OPER ATING PROFIT
£130m
+68%
CHANGE VS LY
£142m
+74%
CHANGE VS LY
PROVEN TR ACK RECORD AND MARKET-LEADING PROPOSITION
1 Proven track record of delivering
a strong, consistent financial
performance with robust sales,
sustained profitable growth,
elevated returns on capital and
strong cash generation.
5 Well-invested showrooms
providing an exceptional client
experience through welcoming
and expert service and luxurious,
contemporary, spacious
browsable environments.
2 Long-standing, collaborative
partnerships with the most
prestigious and recognised luxury
watch and jewellery brands.
3 Multi-channel specialist with
a leading UK position and a
significant and growing position
in the US and which has high
barriers to entry, robust demand,
proven value creation and
supply-driven dynamics.
4 National coverage in the UK,
a significant growing presence
in the US and opportunities
for European expansion.
6 Bold, impactful marketing
focused on digital communications,
Customer Relationship
Management (CRM), client
experience and co-operative
activity with brand partners.
7 State-of-the-art SAP-based
IT systems supporting all
showrooms and websites
in the UK and in the US.
8 ESG focus with sustainability
pillars for people, planet and
responsible sourcing.
Well placed to continue to build our leading position in the robust UK market
and to become a clear leader in the US, an under-invested market for luxury
watches, with expansion plans into Europe.
1 This is an Alternative Performance Measure. Refer to the Glossary on pages 283 to 285 for definition
and reconciliation to statutory measures where relevant.
2 Please refer to the Glossary on pages 283 to 285 for a definition.
£m
1,400
1,200
1,000
800
600
400
200
0
£m
140
120
100
80
60
40
20
0
03
FY22
6%
(FY21: 6%)
9%
(FY21: 7%)
85%
(FY21: 87%)
Luxury watches2
Luxury jewellery2
Other
SIGNIFICANT INCREASE IN SALES
Growth in sales 118%
687
774
811
CAGR 17%
905
568
1,238
FY17
FY18
FY19
FY20
FY21
FY22
INCREASE IN PROFITABILIT Y AND LEVER AGE
130
Growth in
Adjusted EBIT1
286%
78
56
43
45
34
FY17
FY18
FY19
FY20
FY21
FY22
Adjusted EBIT
Adjusted EBIT%
11%
10%
9%
8%
7%
6%
5%
4%
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
04
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 S T R AT E G I C R E P O RT
1 ST R AT EGIC
R E PORT
02 At a Glance
06 Chair’s Statement
08 Market Review
20 Our Brand Partnerships
66 Our Portfolio
68 Our Showrooms
70 Business Model
72 Chief Executive Officer’s Review
80 Our Strategy
96 Our Strategy in Action
106 Financial Review
112 Key Performance Indicators
Non-financial Information
115
Statement
Environmental, Social and Governance
116 Section 172
118
156 Risk Management
160 Principal Risks and Uncertainties
166
Going Concern and
Viability Statement
0 5
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 0 6
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 C H A I R ’ S S TAT E M E N T
This has been an outstanding year for the Group, with
record sales and profit delivered through both organic
expansion and acquisition. It is clear that the Group’s
robust business model has emerged from the pandemic
stronger than ever at a time when demand for luxury
watches and jewellery remains very strong.
Since joining as Chair in November 2020, I have been
impressed by the commitment and professionalism of every one
of my colleagues. and as such I would like to thank all of our team
members for their unwavering dedication and drive. It is due to
their commitment and hard work that we have been able to
maintain our market leadership and achieve such strong metrics.
The expertise and professionalism of our colleagues has
particularly come to the fore during this year with the launch of
our ‘Xenia’ client service programme across the UK and US –
elevating our client service to an even higher level, taking
inspiration from the world of luxury hospitality. It has been
wonderful to see the feedback and reactions to the market-
leading client experiences we consistently provide to our clients.
Additionally, I have been impressed with how the management
team has further enhanced the Group’s brand partnerships,
through continued cross-departmental collaboration, spanning
areas including product launches, merchandising, distribution
opportunities, marketing initiatives and learning and development
programmes. It is the strength of these partnerships which
remains a key strength and differentiator for us.
Sustainability
As part of our commitment to continuous improvement, we
have formalised our approach to ensure ESG priorities are
governed at the highest level of our business. We have
established an ESG Committee as a Committee of our Board
and appointed an experienced Head of ESG, to drive our
sustainability agenda.
To further support the delivery of our Long Range Plan
initiatives, the Group launched a new purpose, ‘to WOW our
clients while caring for our people, our communities and our
planet’ along with Company values.
We fully support the transition to a low carbon economy
and have committed to the Science Based Targets initiative,
setting near-term science-based targets aligned to 1.5°C under
the Paris Climate Agreement.
In addition, we are delighted to have donated to date £4.5
million to support local causes through The Watches of
Switzerland Group Foundation.
While we know there is still much to do, we have made
significant progress on our journey to a more sustainable future
and look forward to delivering our Long Range Plan, guided by
purposeful business practices.
Governance
During the year, the Group fully complied with the principles and
provisions set out in the Corporate Governance Code 2018.
The Board also recognises the importance of diversity and
inclusion both
in the boardroom and throughout the
organisation. I am pleased to report that at the end of the year,
the Group met the recommendations of the FTSE Women
Leaders Review. Additionally, we ranked #11 in the FTSE 250
category. At the end of the year, we also met the recommendations
of the Parker Review.
I would like to welcome Bill Floydd, who joined the Group as
CFO in January 2022, as Anders Romberg stepped down from
the Board. I would like to thank Anders for his many contributions
to the success of the business, particularly while the business
transitioned from private to public ownership. I would also like to
welcome Chabi Nouri, who joined the Board at the end of the
financial year as a Non-Executive Director. Chabi has over 20
years’ experience in leading luxury goods companies, and we
believe she will significantly add to the strength of the Board.
Outlook
We enter into FY23 with positive momentum, a strong pipeline
of projects, visibility on supply through calendar year 2022 and
our plan to enter the European market on track.
We interact with our clients in a modern and approachable
way, sharing our love and admiration for the luxury timepieces
and jewellery we sell. In both the US and UK, we plan to
continue to build on our market-leading position through
further enhancement of the showroom portfolio, mono-brand
boutique expansion and further development of our online
capabilities. We continue with our policy of basing guidance on
committed projects only.
I am confident that through our strategy, people, brand
partnerships and consistent levels of investment, we are well
positioned to continue to deliver sustained growth and
elevated returns for our shareholders.
07
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS M A R K E T R E V I E W
W H AT DIFFE R E N TI ATES THE
LU XU RY WATCH C ATEGORY
A UNIQUE MARKET
LITTLE THREAT OF DIGITAL
PUREPLAY DEVELOPMENT
Led by globally strong brands
focused on investment, product
quality and innovation and brand
marketing, achieving a higher
average selling price than most
luxury consumer goods categories
Brands generally require
prior showroom approval
as a pre-requisite for online
selling; multi-channel is a
preferred direction
SWISS CONCENTR ATION
STRONG VALUE RETENTION
Limited threat from technology
or geography
Rarity, heritage, craftsmanship and
precious materials support brand
image and value; some products
considered investment asset class
DEMAND EXCEEDS SUPPLY
FOR KEY BR ANDS
SPECIALIST CATEGORY
The overall market demand of Swiss
watches exceeds production levels and
supply. Clients required to ‘register
interest’ and wait for progressively more
product options
Specialist for both the
manufacturer and the retailer;
consumers respond to expertise,
authority and heritage
HIGH BARRIERS TO ENTRY
Strong brand/retail partnerships are based on
many years of experience and category expertise
Brand owners actively manage distribution
through Selective Distribution Agreements
0 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
THE LU XU RY WATCH M A R K ET H AS A
ST RONG T R ACK R EC OR D OF GROW TH
The luxury watch industry is well protected with high barriers to entry
and a track record of consistent long term growth, underpinned by
sustained investment and elevated innovation.
The Group estimates global retail sales of luxury watches1 were
approximately £37.3 billion in calendar year 2021 (2020: £28.3 billion),
including the Swiss market, repairs and the contribution from non-Swiss
luxury watch brands.
Luxury watches have continued to be supported by long term increases in
prices, with the average selling price of Swiss watch exports (wholesale) generating
a 21-year CAGR of +4.0% (2021 vs 2000).
Watches at the luxury end of the market have outperformed lower priced
segments and represent 93% of the value of global Swiss watch exports in calendar
year 2021.
The UK and US have seen significant increases in Swiss Watch Exports in recent
years, as can be seen in the graph below.
140%
120%
100%
80%
60%
40%
20%
0%
(20%)
(40%)
SWISS WATCH EXPORTS (WRISTWATCHES
ALL PRICE SEGMENTS) JAN TO MAY
119%
99%
36%
31%
27.9%
73%
47%
39%
(8)%
(30)%
EU
China
Hong Kong
US
vs 2021
UK
vs 2020
Source: Swiss Watch Federation
CHF billion
Luxury
Non-luxury
RESILIENT LONG TERM GROW TH IN SWISS WATCH EXPORTS
2009:
Exports to the UK
up +0.1% (in GBP)
2011-13:
China/HK bubble
2014-16:
China/HK correction
2020:
12-weeks pandemic
lockdown in Switzerland
25
20
15
10
5
0
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Total CAGR 2000 to 2021
Luxury2 CAGR 2000 to 2021
Non-luxury CAGR 2000 to 2021
Source: Company information, Swiss Watch Federation statistics
1 CAGR shown through 2020.
2 Luxury watches in the market review are those at an export price over 500 CHF.
09
+4.0% (+2.8%1)
+5.0% (+3.8%2)
-1.8% (-2.6%1)
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS M A R K E T R E V I E W
continued
DISCIPLINED DISTRIBUTION MANAGEMENT
THROUGH SELECTIVE DISTRIBUTION AGREEMENTS
LOYAL, DIVERSE, MULTI-GENER ATIONAL
CLIENT BASE
Distribution of luxury watches takes place under Selective Distribution Agreements,
strict legally binding contracts entered into with brands. These are ordinarily limited
by geography and ensure retailers maintain strict presentation standards. Selective
distribution agreements enable brands to manage the number of points of sale and
qualitative criteria on retailer approval. Product presentation and client experience
are closely monitored by the brand owners.
Globally, the retail market for luxury watches is fragmented, predominantly
comprised of a large volume of small retailers.
Luxury watches attract a set of shoppers, who can become repeat clients, spanning
age and income groups and genders.
Showroom design, location, marketing and client service of the Group appeal
to a broad demographic audience.
GLOBAL BR ANDS HAVE SUPPLY DRIVEN GROW TH
Major
independents
Swatch Group
Richemont
LVMH
Independents
For the total luxury watch industry, demand
has increased at a faster rate than production,
in part reflecting the labour-intensive nature
of watchmaking and its dependence on highly
skilled watchmakers in Switzerland. Long term
growth has been underpinned by increased
average selling price (ASP), positive mix effects
and limited volume increases.
Luxury watch brands owners are made
up of major independents, large groups and
smaller independents as can been seen below.
Our Group provides the largest selection of
luxury watches covering a wide range of
prices and consumer preferences, including
the largest and best known brands alongside
smaller independent brands.
We stock confidently which provides our
clients with a greater width and depth of
availability, the table opposite shows the
breakdown of the Group’s brand partners.
The graph below shows estimated global retail sales for the major Swiss watch brands.
Source: Morgan Stanley, The Magnificent Seven (7 March 2022)
10
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 CONTINUOUS PRODUCT INNOVATION
AND ADVANCEMENT
GEOGR APHICAL MARKETS
Luxury watches are characterised by a focus on product innovation and
advancement which are normally introduced at prestigious watch fairs in
Switzerland. In the UK and the US, there is a strong preference for sports models
with the key brands consistently investing to ensure the highest degree of technical
(diver, aviation and chronograph) specifications.
This year saw the return of physical watch fairs, with Watches and Wonders
Geneva, where exciting new products were launched, accompanied by relevant
marketing support.
During the pandemic the luxury watch industry has been resilient and agile,
recovering from the closure of production facilities during lockdown in 2020.
The Group operates in the UK and US markets, two of the major Swiss Watch
markets. We have also announced our entry into the European market through
mono-brand boutiques. The following chart shows the luxury watch retail sales per
capita over the last three years.
The UK market has outperformed all major European and the US market since
2000. The UK market has the highest per capita retail spend by domestic clients on
luxury watches; we believe the differential to other markets reflects retail
investment, not consumer behaviour, creating an opportunity to successfully
replicate our model in other geographies and building on the success we have
delivered in the US to date.
LUXURY WATCH PER CAPITA RETAIL SALES (US$)
50
40
30
20
10
0
UK
Italy
France
Germany
Benelux
Spain
Nordics
US
2019
2020
2021
Source: Company estimates based on Swiss watch export data from the Swiss Watch Federation
Watches of Switzerland, Hudson Yards, New York
11
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS M A R K E T R E V I E W
continued
THE U K M A R K ET
UK MARKET HIGHLIGHTS
LUXURY SWISS WATCH EXPORTS TO THE UK
5
CALENDAR YEAR 2021
RANKING IN GLOBAL
MARKETS FOR SWISS
WATCH EXPORTS
£2.3bn
2021 LUXURY WATCH
RETAIL SALES (2020: £2.2bn)
The UK is the fifth largest market on a
global basis for Swiss luxury watch
exports. The Group estimates retail
sales of luxury watches amounted
to £2.3 billion in calendar year 2021
(£2.2 billion in 2020).
The UK market has been strong,
a testament to a well-invested multi-
channel market and highly engaged and
sophisticated domestic clientele which
has typically had a preference for the
sports luxury watch category.
In the period 2000 to 2021, Swiss
watch exports to the UK increased by a
CAGR of +7.2%.
The UK market is made up of
national groups, independent jewellers,
luxury department stores and boutiques
directly operated by the brands.
The UK market is led by Rolex,
with strong market positions of Patek
Phillipe, OMEGA, Cartier, Breitling,
TAG Heuer and TUDOR.
CHF 500-3,000
CHF 3,000+
CHF million
1,200
1,000
800
600
400
200
0
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
CAGR 2000 to 2021
CAGR 2000 to 2010
CAGR 2010 to 2021
1 CAGR shown through 2020.
+7.2% (+6.2%1)
+5.6%
+8.7% (+6.7%1)
UK LUXURY WATCH MARKET 2021
Watches of Switzerland Group
Multiples
Independent jewellers
Department stores
Corporate boutiques2
5%
9%
22%
41%
23%
2 Directly operated by the brands
Source: GFK and Company estimates
12
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Watches of Switzerland, Broadgate, London
13
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS US MARKET HIGHLIGHTS
1
CALENDAR YEAR 2021
RANKING IN GLOBAL
MARKETS FOR SWISS
WATCH EXPORTS (2020: 2)
$6.4bn
ESTIMATED CALENDAR YEAR
2021 LUXURY WATCH RETAIL
SALES
After a period of under-investment in the
market leading up to 2018, the US has
started to perform strongly and is today
the largest global market for Swiss watch
exports, overtaking China. The Group
estimates retail sales of luxury watches
reached US$6.4 billion in calendar year
2021 (2020: US$4.2 billion).
The US market is led by Rolex with
strong market positions of Cartier, Patek
Phillipe, Audemars Piguet, OMEGA,
Breitling, Panerai and TAG Heuer. There
is also relatively strong market positions
for smaller independent brands such as
MB&F, Bovet and H Moser.
M A R K E T R E V I E W
continued
THE US M A R K ET
Watches of Switzerland, Legacy West, Plano, Texas
LUXURY SWISS WATCH EXPORTS TO THE US
CHF 500-3,000
CHF 3,000+
CHF million
2,500
2,000
1,500
1,000
500
0
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
CAGR 2000 to 2021
CAGR 2000 to 2010
CAGR 2010 to 2021
1 CAGR shown through 2020.
14
+3.3% (+1.2%1)
-0.3%
+6.7% (+2.8%1)
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Mayors, Merrick Park, Coral Gables, Florida
US retail distribution is in the process of consolidation towards larger
showroom formats in major shopping centres and retail investment
from the Watches of Switzerland Group and others has increased.
The US market is predominantly domestic, although domestic
tourism (e.g. to Florida or Las Vegas) is significant.
Betteridge, Vail, Colorado
15
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS M A R K E T R E V I E W
continued
EU ROPE
LUXURY SWISS WATCH EXPORTS TO EUROPE
CHF 500-3,000
CHF 3,000+
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
The European market shares some
similarities to the US market, with a large
level of fragmentation. As can be seen
from the chart on page 18, luxury watch
sales per capita lag behind the UK market.
Consumer prices in Europe are
largely harmonised in Euro and also in
£ sterling and Swiss Franc. Certain markets
(Paris, Milan, Munich, Amsterdam, Vienna)
have high levels of tourist sales.
CHF million
4,000
3,000
2,000
1,000
0
CAGR 2000 to 2021
CAGR 2000 to 2010
CAGR 2010 to 2021
1 CAGR shown through 2020.
+3.5% (+2.3%1)
+5.1%
+2.0% (-0.4%1)
Breitling mono-brand boutique, Biblioteksgatan, Stockholm, Sweden
16
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 PR E - OW NE D WATCH M A R K ET
We believe the pre-owned market is a
positive development
for the new
market. It provides liquidity and value
preservation for luxury watches. This is
a growing sector due to the supply of
certain products being inadequate to
meet demand in the first-hand market.
The market is made up with pre-owned
and online marketplace players.
The pre-owned market today has
an increasing dependence on product
sold at prices above retail due to
unavailability scarcity.
The pre-owned watch market
contributes to the circular economy,
refer to pages 134 to 137 to learn more
about our ESG strategy in relation to
the circular economy.
PRE-OWNED KEY PL AYERS: PURCHASE OR TR ADE IN WATCHES TO SELL ON
Watchfinder & Co.
Acquired by Richemont in 2018
Bucherer
Govberg
Hodinkee
Crown & Caliber
Acquired by Hodinkee in 2021
Bob’s
Watches
Analog:Shift
Acquired by the Watches of
Switzerland Group in 2020
Watches of
Switzerland Group
PRE-OWNED: ONLINE MARKETPL ACE PL AYERS
Chronext
Crono24
eBay
17
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS Our
luxury watch
complemented by a strong
jewellery offering.
business
is
luxury
The global luxury jewellery market
has seen global trends towards the
branded component of the market. The
luxury jewellery market has grown at a
CAGR of 7.7% from 2007 to 2021
(Source: Bain Altagamma).
The US and UK markets are among
the largest globally on a per capita basis
for luxury jewellery (Source: World
Gold Council).
The US is the strongest market in
the Western world for luxury jewellery
per capita.
M A R K E T R E V I E W
continued
LU XU RY JEW E L L E RY
JEWELLERY DEMAND YOY %
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
2015
US
UK
2016
EU
2017
World total
2018
2019
2020
2021
Source: Metals Focus, Refinitiv GFMS, ICE Benchmark Administration, World Gold Council
LUXURY JEWELLERY DEMAND PER CAPITA (US$)
30
25
20
15
10
5
0
2017
US
UK
EU
2018
World total
2019
2020
2021
Source: Metals Focus, Refinitiv GFMS, ICE Benchmark Administration, World Gold Council
18
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 A F TE R- S A L ES A N D SE RV ICI NG
The Group believes after-sales and
servicing
complements the first-hand market for luxury watches
and is critical in protecting and prolonging the life of
the products.
The market is primarily supported by traditional
multiple and independent retailers and dedicated watch
or jewellery repair companies. The Group estimates
after-sales and servicing represents approximately 5%
of the market and is very important in terms of providing
a luxury client experience.
The Group continues to expand the capacities of
its UK National Watch Service Centre in Manchester
and US centre in Fort Lauderdale.
After-sales and servicing contributes to the
circular economy, refer to pages 134 to 137 to learn
more about our Environmental, Social and Governance
(ESG) strategy in relation to the circular economy.
19
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 2 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 O U R B R A N D PA RT N E R S H I P S
This legendary watch house was started in London in 1905, by an
ambitious 24-year-old Hans Wilsdorf – a true pioneer of his time.
At a time when everyone else thought wristwatches for men were a passing fad, he
founded a business focused on wristwatches. It was an 11-ligne, highly precise
movement, which allowed him to make his vision a reality and, once military
personnel and sportsmen took to wearing a wristwatch, gentlemen soon fell in love
with this discrete and practical way to tell the time and to signal good taste.
By 1910, the company had produced the first-ever watch to receive the Swiss
Certificate of Chronometric Precision, granted by the Official Watch Rating Centre
in Bienne. This was followed four years later by a Class A precision certificate from
Kew Observatory – a level previously reserved for marine chronometers. This
certification proved that Rolex was capable of making timepieces that were stylish
but did not compromise on accuracy. Then, in 1919, Rolex moved to Geneva,
Switzerland, marking the beginning of a history that would see the brand inextricably
linked with the watchmaking excellence of this country. Since then, it has been worn
by everyone from explorers to Presidents, celebrities to civil-rights activists, and
become one of the most sought-after watch brands in the world, not least for its
ability to design iconic timepieces with similarly iconic names.
The Watches of Switzerland Group has retailed with Rolex for over a century.
Back in 1919 we were selected to be one of the first to sell the brand, welcoming
Rolex to our Northern Goldsmiths showroom in Newcastle, which first opened its
doors in 1892. In 1935, we installed a vast four-sided golden Rolex clock above the
showroom and that very same showroom remains on the same corner of Blackett
Street today. Our two companies have worked closely together for over 100 years,
with Rolex being woven through every aspect of our business from our impressive
Rolex showrooms to our marketing, events, and media communications.
It was in April 2019 that we celebrated our centenary with Rolex with a series
of client events. We partnered with the brand to unveil 100 specially engraved
timepieces; a donation from each watch sold also raised money for the Prince’s
Trust to support disadvantaged young people across the UK.
As well as supporting cinema and the arts, Rolex is synonymous with sporting
excellence, sponsoring notably F1, all four Tennis Grand Slams and golf, all of which
have provided us with exceptional client hospitality experiences. We also partner
with Rolex in both the UK and US on client events and invest in collaborative
marketing activity across digital and traditional media.
In the UK, 2021 saw our largest client event series to date with over 30
localised intimate dinners. The US marketing team also partnered with Rolex to
create a first-of-its-kind, off-site event celebrating the Spring release of the Rolex
Novelty Collection. The event was held at a private Flamingo Drive estate in Miami,
Florida and really showcased the ‘Watches of Switzerland Difference’. At the
estate, over three days, clients were invited to participate in private viewing
vignettes and shopping lounges or relax by the expertly catered poolside area
complete with customised menu and live music. The residence provided a
picturesque backdrop for the unveiling of the new watches and allowed, for those
lucky enough to attend one of the 45 private appointments, the opportunity to
experience the new collections in a truly luxurious, once-in-a-lifetime setting.
We partner with Rolex on seven mono-brand boutiques in prestigious
locations around the world. In the US, the newly refurbished Rolex mono-brand
boutique in the Wynn Resort, Las Vegas, and the Mall at Millenia in Orlando,
Florida, while in the UK Rolex is represented in London’s Bond Street, Heathrow
Airport and Glasgow.
Rolex mono-brand boutique, the Wynn Resort, Las Vegas
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R B R A N D PA RT N E R S H I P S
continued
Utilising over 175 years of experience and perpetuating the tradition
of Genevan watchmaking, Patek Philippe has always been at the
forefront of the luxury watch industry.
As the last family-owned independent watch manufacturer in Geneva, Switzerland,
Patek Philippe enjoys total creative freedom. This position allows Patek Philippe to
entirely design, produce, and assemble some of the finest timepieces in the world,
which stay true to the spirit of innovation of its original founders, Antoine Norbert
de Patek and Adrien Philippe, who started the brand that we know today. Patek
Philippe is a brand that pushes the boundaries of watchmaking, while still keeping
traditional crafts alive. It is a brand renowned for creating exceptionally beautiful
pieces with equally stunning complications, and for keeping collectors curious with
its much-sought-after timepieces.
Patek Philippe is also known for creating grail watches, whether that is in the
form of the sleek steel lines of its Nautilus, a limited Calatrava reference, or the
wonderfully complex Grandmaster Chime, the most complicated Patek Philippe
wristwatch. It is also discerning when it comes to women, with its 2009 Ladies First
Chronograph, powered by its first entirely in-house chronograph movement, being
widely credited with kickstarting the trend for women’s complicated mechanical
timepieces. It is this tradition of innovation that has seen Patek Philippe file more
than 100 patents. Patek Philippe has its own team of engineers working in its
Advanced Research Department, founded in 2005, where they have been tasked
with pursuing research into materials, technologies, and conceptual ideologies, such
as the compliant technology that was used in the Aquanaut Travel Time Ref. 5650G,
which launched in 2017. Alongside this, there have been launches featuring its usual
creative combinations of complications, minute repeaters, and chiming watches
alongside exquisite examples of enamelling and guilloche work found in the Rare
Handcrafts collection.
Our relationship with Patek Philippe goes back over half a century and we are
privileged to partner with the brand in our showrooms in both the UK and the US,
offering our clients the chance to fall in love with this remarkable brand. To
strengthen and solidify our partnership, we also work with Patek Philippe on an
extensive training onboarding process to ensure our colleagues are trained to the
highest calibre with the knowledge and tools at their disposal to communicate to
our clients the rich history behind this brand and its timepieces.
We partner with Patek Philippe on advertising in traditional media, such as
national and local printed newspapers and magazines, as well as including them in
our very own in-house print title, Calibre. In 2021, we also created a wall mural of
the latest co-op advertising with Patek Philippe to support our Watches of
Switzerland, Soho, New York, showroom.
In both the UK and US, we host Patek Philippe events, which allow us to
immerse our clients in a true luxury experience that evokes the spirit of the brand.
Alongside these exclusive events, there are also exhibitions and roadshows in our
showrooms, so our clients can view new or historical pieces, and we are also
privileged to be able to offer the ‘money can’t buy experience’ of being flown by
private jet to the Patek Philippe Geneva Salon.
Top: Patek Philippe at Watches of Switzerland, Regent Street, London
Bottom: Patek Philippe Museum
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 23
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continued
24
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Audemars Piguet is the oldest fine watchmaking manufacturer
still in the hands of its founding families (Audemars and Piguet).
The brand’s unique blend of traditional watchmaking expertise and contemporary
culture references means its timepieces are sought after by watch enthusiasts and
collectors, as well as by internationally renowned artists in music and film. Audemars
Piguet has developed a reputation for being a brand that knows exactly what it is doing
and where it is going, allowing it to position itself as one of the true market leaders.
Formed in 1875 by Jules Louis Audemars and Edward Auguste Piguet, both of
whom had a talent for making complicated pocket watches, Audemars Piguet has
always been at the forefront of haute horlogerie. It was one of Audemars first forays into
exceptionally complicated mechanisms that inspired the Maison’s complicated pocket
watches, and by the end of the 1800s, the brand was thriving and widening its
international presence with branches in London, Paris, and New York.
It is in the Vallée de Joux, at the heart of the Swiss Jura in Le Brassus, where this
still family-owned brand continues to manufacture its horological masterpieces,
including its flagship watch – the Gerald Genta designed Royal Oak – the world’s
first luxury sports watch, which, in 2022 celebrates its 50th anniversary. First
launched in 1972, it was the first luxury watch to be made from stainless steel,
proving that a timepiece could be both robust and luxurious, it revolutionised the
thinking around materials and its integrated bracelet and screwed-down, octagonal
bezel has sparked a myriad of imitations. In 1992 the Royal Oak Offshore was
launched. Throughout its history, Audermars Piguet has been at the forefront of
innovation. There was the first jumping-hour wristwatch in 1921; the first skeleton
in 1934; the first direct-impulse escapement in 2006 and its 2015 Michael
Schumacher collaboration, the Royal Oak Concept Laptimer, was the first
mechanical chronograph with independent memory and three-column wheels.
Our partnership with Audemars Piguet has spanned more than five decades
and throughout this time we have seen many of its pieces and collections shoot
straight to the top of our watch enthusiasts’ wish lists. We are proud to display
these timepieces in our UK London showroom and our partnered mono-brand
boutique at our Mayors showroom in Lenox Square, Atlanta, Georgia, in the US.
Given the nature of these timepieces, we ensure our colleagues are equipped with
the training and knowledge they would need to fully convey exactly what makes this
brand so impressive. We will also see our marketing efforts increase as we explore
Audemars Piguet’s rich past and present and will work to widen their audiences
further through our activity across both traditional and digital marketing channels.
Audemars Piguet mono-brand boutique, Mayors, Lenox Square, Atlanta
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continued
Space, James Bond and the Olympics – when it comes
to co-associations OMEGA certainly beats most watch
brands in terms of cool but above that is their absolute
mastery of technology and ability to produce some of
the finest movements available today.
However, its beginning is more humble, namely a small workshop in the village of
La Chaux de Fonds, Switzerland, in 1848, where watchmaker Louis Brandt set up
his business, La Generale Watch Co., specialising in assembling pocket watches
from parts sourced from local craftsmen. Passionate about precision, he spent his
life developing the most accurate watches he could, and, when Louis passed away
in 1879, his sons Louis-Paul and César took over the business determined to carry
on their father’s legacy, laying the foundations of this iconic watch brand. Paul-Emile
Brandt assumed control in 1903 and renamed the brand OMEGA after the success
of the ‘OMEGA Calibre’ from 1894.
Always at the forefront of technology, OMEGA recognised the genius of the
George Daniels Co-Axial escapement, patented the design and went into
production in 1999 with what is arguably the most significant development in
horology for 200 years. This type of escapement provided the stability and accuracy
to develop the rigorous testing criteria that allows them to pass both the COSC
and METAS testing and describe their watches as Master Chronometers.
This pursuit of accuracy led to OMEGA being chosen as the timing partner for
the Olympics, which it has done since 1932. It was certainly a factor in the brand’s
Speedmaster being chosen by NASA based on quality testing, as the watch that
went to the Moon in 1969; that and being able to withstand -18º for four hours. As
well as going into space, OMEGA has also conquered the depths of the Ocean,
going deep into the Mariana Trench on adventurer Victor Vescovo’s vessel Limiting
Factor. OMEGA’s record-breaking precision, reliability, versatility, and stylish
aesthetics are reasons why this iconic brand is so popular, and we are proud to have
been in partnership with the brand since the 1950s, having seen it go from strength
to strength.
Our showroom colleagues are highly trained to be experts in the world of
OMEGA, able to take every client on an adventure through time and space. Not
only do we sell OMEGA across many of our showrooms, but we also extended our
partnership further by having opened OMEGA mono-brand boutiques in high
profile locations in the UK and New York, Florida and Las Vegas in the US. Further
boutiques are planned for 2022 with an exciting expansion into Europe in
Copenhagen and Stockholm.
Over the last few years, we have partnered closely with the brand in marketing
its new launches and releases, through traditional and digital marketing, from print
media to our in-house Calibre communications platform. OMEGA made the cover
of our 2021 UK Calibre magazine when the Seamaster 300 Bronze launched.
OMEGA is consistently communicated through our emails and is part of our
successful Group campaign that highlights several core models across our portfolio
of brands, in order to appeal to every type of client, from those at the beginning of
their watch journey through to those wanting to expand their collection. The brand
was also part of our Calibre Podcast where we hosted Andrea Nunziata, Brand
Director of OMEGA and Managing Director of the Swatch Group (UK) and
featured in our ambitious and hugely successful multi-channel Watches of
Switzerland US “Anytime. Anywhere.” campaign.
2021 and 2022 also saw key product launches for OMEGA including the
OMEGA Seamaster Planet Ocean Ultra Deep – a piece made to withstand the
toughest underwater conditions; the OMEGA Constellation with their iconic eight
stars, which represent two world records for chronometry and six first places
achieved between 1933 and 1952, and of course the OMEGA Seamaster Diver
300, worn by 007. The release of the Bond Watch provided us with an exclusive
opportunity to host over 120 clients at a private screening of the most-recent
James Bond film No Time To Die – which was the final outing for Daniel Craig as
Bond himself. It was a truly memorable experience for our clients and one that
celebrated not only a great British character but the great partnership we have
with OMEGA.
Top: OMEGA Seamaster Diver 300M Co-Axial Master Chronometer 42mm 007 Edition
Bottom: Calibre Magazine Autumn/Winter 2021 edition
26
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 27
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continued
Widely regarded as the inventor of the wristwatch for men,
Cartier was established in Paris in 1847 and is arguably one of
the most recognisable Maisons in the world.
Cartier timepieces are synonymous with luxury, style, and a chic Parisian aesthetic. From
its love of unusual case shapes to the Roman numerals with the word ‘Cartier’ written
on either the VII or the X, and the blue cabochon on the crown, the Maison’s design
codes are as iconic as its collection names. Cartier is credited with inventing one of the
first wristwatches, the Santos. It was designed in 1904 by Louis Cartier for famed
Brazilian aviator Alberto Santos-Dumont and is still one of their most popular collections
today. The Cartier Tank, launched in 1917, cemented its reputation as a maker of
beautifully designed, original timepieces. Its unusual rectangular case was inspired by the
new Renault tanks Louis Cartier saw in use on the Western Front – a rather macabre
source but it yielded an elegant and timeless watch nonetheless, which has been
adapted throughout the Maison’s history.
Cartier has since developed its own range of in-house watch movements and
has led the way in creative watchmaking with such designs as the Masse Mysterieuse,
where the entire movement is part of the winding mechanism, and also its love of
using unexpected case shapes. A rectangular case and dial are a firm favourite at
Cartier, and many of their pieces use this shape to create streamlined silhouettes
and elegant cuts. However, in 2007 Cartier introduced the Ballon Bleu, a round
watch with the crown uniquely encircled by a smooth extension of the case drawing
inspiration from a balloon. 2021 saw significant product launches for Cartier,
including the updated Cartier Santos Dumont and the Cartier Tank Must, a piece
that took inspiration from the Cartier archives. The range of Cartier Tank Musts
included those on steel bracelets and those on leather as well as the very well-
received limited-edition pops of colour. They also launched a very exceptional
Cartier Tank Must that had an eco-feature: a ‘solar beat’ movement with a
photovoltaic cell, powered by light, which can only penetrate the watch’s dial
through its numerals.
Our partnership with Cartier spans over 70 years. We have our own Cartier
Boutique housed within our flagship Watches of Switzerland showroom on Regent
Street, London along with presence in 15 of our showrooms and a growing
presence online. In the US Cartier is present in nine of our showrooms and online.
Our experts within our showrooms are highly trained in all things Cartier to
ensure we provide an exceptional personalised service to each and every client
coming to look at the watches from this storied Parisian brand. We work with
Cartier on many marketing activities across both traditional and digital media,
including promoting them through our social and CRM channels. We also create
bespoke emails and articles on the brand on our Calibre online channels. Cartier
makes regular appearances in our in-house print title, Calibre, and it has been
discussed many times throughout several different episodes of our Calibre podcast.
In more recent months, this French Maison has been a part of our uniquely curated
content themes throughout the business, where we create our own photography
of the timepieces to use across all of our channels where appropriate. The brand
was also part of our successful “Anytime. Anywhere.” campaign in the US.
Cartier at Watches of Switzerland, Brent Cross, London
Cartier at Watches of Switzerland, Regent Street, London
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O U R B R A N D PA RT N E R S H I P S
continued
TAG Heuer creates watches that will take you
anywhere – into the ocean’s depths, up a
mountain, behind the wheel of a car.
TAG Heuer timepieces are reliable, innovative, and versatile. The brand was
originally established in 1860 in Saint-Imier by Edouard Heuer when he was just 20
years-old, making mid-range pocket watches with silver cases. It was his trips to the
UK and people’s obsession with sport there that saw Heuer make the connection
between sport and chronographs; a link that would inspire some of the brand’s
most iconic watches. Heuer was the Olympic timekeeper in 1920, and it also
supplied wrist chronographs to pilots and divers looking to break records. Jack
Heuer cemented the connection between the brand and motorsport timing in
particular when, in 1963, he launched the Carrera, named after the Pan-American
highway race – the Carrera Panamericana. Accuracy is also what led Heuer to team
up with Büren, Dubois Dépraz, and Breitling to create the Calibre 11, one of the
first automatic chronograph movements launched in 1969 used in the models of the
Autavia, Carrera and Monaco, Steve McQueen’s choice of wristwear for the film Le
Mans. Cars and precision continued to be an obsession, even after Techniques
d’Avant Garde bought Heuer, turning it into TAG Heuer. Closely connected to
motor racing, with collaborations with both Ferrari and Porsche, similar values of a
daring pioneering spirit and boldness shape the identity of TAG Heuer watches. Its
rich heritage is built on pushing boundaries and breaking rules. All while finding
ingenious ways to overcome technology constraints to create daring watches and
chronographs. Breaking watchmaking conventions means that TAG Heuer watches
master time with unparalleled precision.
TAG Heuer’s motor racing DNA reflects its core values of teamwork, mental
strength, courage, and ambition. Its range of pieces inspired by Formula 1 and the
Carrera Panamericana remain ever popular, with both racers and fans of racing
wearing TAG Heuer models. The brand has even partnered with the Red Bull racing
team on various efforts from partnership and sponsorship to ambassador relationships.
TAG Heuer also partners with ambassadors, such as actor Ryan Gosling, tennis
star Naomi Osaka, Formula 1 Driver Max Verstappen and Indycar driver Alex
Rossi, who are more than just the face of the brand but share the same core values
of pushing boundaries in their respective industries.
The Watches of Switzerland ‘Divers’ campaign
Top and Bottom: Marketing activation, TAG Heuer mono-brand boutique,
Roosevelt Field, Garden City, New York
30
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 We have been in partnership with TAG Heuer for over 40 years. It’s an
enduring partnership that has strengthened through the years, seeing us celebrate
key anniversaries, such as the 160th anniversary of its Carrera models. We stock
TAG Heuer across selected showrooms in both the UK and the US and have
introduced more mono-brand boutiques this year in both countries. We are also
expanding into Europe, marking an exciting step in our partnership with the brand.
We pride ourselves on partnering with TAG Heuer on extensive training,
ensuring our showroom experts have all the knowledge on hand to ensure that
they themselves can also embody TAG Heuer’s driving ethos. Through various
marketing activities, both traditional and digital, we highlight the brand’s new
releases, innovations, and rich heritage. Partnering on events, both in our
showrooms, and outside, allows us to capitalise on the brand’s strong ties with
sport by offering our clients ‘money can’t buy opportunities’, such as football
hospitality, racing experiences, and more. TAG Heuer also feature extensively
throughout our marketing channels, from social media and email through to our
Calibre editorial platforms, both online and in the printed version. We also regularly
include TAG Heuer in our curated photoshoots and content themes, as well as on
our Calibre podcast. This year at Watches and Wonders, we interviewed their
Creative Director Guy Bove, who personally took us through the brand’s releases
at the fair and previously have interviewed their UK Managing Director Rob Diver.
The brand was also part of our ambitious and hugely successful multi-channel
Watches of Switzerland US “Anytime. Anywhere.” campaign.
TAG Heuer mono-brand boutique, Solihull
TAG Heuer featured in the Watches of Switzerland
US “Anytime. Anywhere.” campaign
31
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R B R A N D PA RT N E R S H I P S
continued
Léon Breitling started his eponymous brand in 1884 and it has specialised in
complicated timepieces and chronographs from the beginning, going on to pioneer
the wrist-worn chronograph, which was hugely popular with military pilots.
A spate of supplying cockpit clocks to commercial aircraft led to the development
of its most iconic watch, the Navitimer, a timepiece with a slide rule for accurate
in-air calculations. Their timepieces are used by pilots and chair-born squadrons, as
well as by divers both professionals and those merely dabbling, and collections such
as the Navitimer and Superocean remain as popular a choice now as they were
when they were first manufactured.
Breitling has been an early adopter of sustainability protocols, both in its
business and its watchmaking. It has introduced the first 100% eco-friendly, foldable,
and reusable watch box. Made from upcycled plastic bottles, this new box is part of
its efforts to reduce negative environmental impact and it is committed to a circular
economy. Breitling is also taking steps to ensure that its timepieces also reflect its
aspiration for sustainability. The brands Superocean Heritage 57 Outerknown has
a strap made from the innovative material ECONYL that uses repurposed nylon
waste from the likes of fishing nets.
Our relationship with Breitling dates back to the 1980s and we are proud to
work with the brand across all of our portfolio of showrooms, stocking a large
selection of its most iconic collections and ensuring that our teams are highly trained
in all things Breitling, from its history and heritage right through to its technical
innovations. We are also proud to have partnered with Breitling on multiple mono-
brand boutique locations, in both the UK and the US. 2022 sees our partnership
with Breitling extend to Europe with openings of mono-brand boutiques in both
Stockholm and Copenhagen. We partner with Breitling to ensure each boutique
has its own local marketing plan and even introduced SMART events, which allow
our colleagues to create bespoke client experiences to promote the brand.
In 2021 we also partnered with Breitling on our second exclusive piece – an
Endurance Pro in beautiful deep green with the colour extending from the dial to
the strap. Unsurprisingly, it garnered much press attention, and was featured in GQ,
the Evening Standard and was reviewed by renowned watch Editor Bill Prince for our
Calibre editorial channels. We also worked with the brand on further marketing
opportunities, both traditional and digital, from placement in national and local
papers and magazines to social media and emails. We also included Breitling in our
in-house print title Calibre and its models are regularly included in our photoshoots
and content themes. In 2021, we were delighted to host Breitling’s UK Managing
Director, Gavin Murphy, on our Calibre podcast, where he spoke about his career
history at the brand and talked through the new timepieces and collection highlights.
The brand was also part of our ambitious and successful Watches of Switzerland US
“Anytime. Anywhere.” multi-channel marketing campaign.
The Watches of Switzerland Group Exclusive Breitling Endurance Pro
32
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Breitling mono-brand boutique, Plymouth
Breitling mono-brand boutique, Short Hills, New Jersey
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continued
Back in 1926, a watch dealer and maker known as ‘Veuve de
Philippe Hüther’ registered the trademark ‘The TUDOR’ for Hans
Wilsdorf, the legendary founder of luxury watch brand Rolex.
Top, bottom left and right: TUDOR mono-brand boutique, The Mall at Millenia, Orlando, Florida
34
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 TUDOR mono-brand boutique, Westfield White City, London
“For some years now, I have been considering the idea of making a watch
that our agents could sell at a more modest price than our Rolex watches,
and yet one that would attain the standard of dependability for which Rolex
is famous. I decided to form a separate company, with the object of making
and marketing this new watch. It is called the TUDOR watch company.”
HANS WILSDORF
1946
TUDOR stopped retailing in the UK and the US for a period at the end of the 1990s
until the relaunch in the US (2013) and UK (2014) and TUDOR has now created a
very strong and loyal client base – one that only grows with every new release. It is
also a supplier to many professional and military operations. TUDOR was chosen
by the French Navy in 1956 and with their collaboration, introduced what is
recognised as their signature design cue, the ‘Snowflake’ hour hand in 1969. This
allowed more luminous material to be added to the dial and hands as an aid to
visibility in low light conditions.
Some of the most iconic TUDOR models include the Pelagos, and its most
recognisable design, the Black Bay. New TUDOR Black Bays always garner attention
from press and collectors alike. The release of the TUDOR Black Bay Fifty-Eight 925
watch, in 2021, was much talked about due to the brand’s use of silver, something
that is rare within the watch world due to the softness of the metal. TUDOR
however developed its own silver alloy to ensure the piece is as strong and long
wearing as possible. TUDOR’s diverse fan base is reflected in its roll call of
ambassadors, which include ex-footballing legend David Beckham and The All-
Blacks Rugby Team.
We are proud to have opened the first TUDOR boutique in the UK in 2020,
along with a mono-brand boutique at The Mall at Millenia in Orlando, Florida. Both
boutiques, house some of the most iconic collections from the brand, including
exclusive-to-the-boutique collections and the under-the-radar TUDOR Royal
collection. Exciting introductions in recent times include 2019’s homage to a
prototype they supplied to the US Navy in the 1960s, the Black Bay P01 and their
latest in the form of the Black Bay Pro, a professional tool watch with a GMT
function that draws inspiration from the 1952 North Greenland Expedition.
As well as working together on training our colleagues, we also partner with
the brand on marketing across a multitude of channels and disciplines. This includes
both regional and national print and outdoor advertising opportunities, as well as
across our social media channels and CRM. We also included TUDOR in our video-
first UK Group campaign, one of our most successful projects, and often include its
models in our unique content creation and photography, such as in photoshoots for
our in-house print title Calibre, as well as across our online Calibre platforms, and
our dedicated podcast. Last year saw us host a TUDOR event for 60 clients at an
exclusive venue in London’s Mayfair for an intimate dinner. The evening was hosted
by our very own President of the UK & Europe, Craig Bolton, and the General
Manager of TUDOR in the UK, Sven Olsen.
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continued
Boston watchmaker, Florentine Ariosto Jones, founded the
International Watch Company in Schaffhausen, in 1868.
Schaffhausen was chosen due to the river Rhine which passed through the town
providing hydroelectric power. The reason being his idea of using progressive
American production techniques, combined with Swiss watchmakers known-how
to manufacture timepieces, was not entirely appreciated at the time in Geneva and
the Jura. IWC’s success amplified after WWII – during the war it distinguished itself
making mil-spec pilot’s watches, which connoisseurs still go mad over.
After it developed a remarkable self-winding mechanism with a bi-directional
rotor; housed inside the Ingenieur – a collection still in the brand’s catalogue today.
Today IWC Schaffhausen has an international reputation for providing exquisite
timepieces that exude an aura of retro-sophistication; the types of watches that
accompany can-do sorts on their adventures. It embraces the very latest
timekeeping
innovations, progressively eliminating the use of third-party
movements. It has also been pioneering when it comes to managing social and
environmental impacts responsibly. It was the first Swiss watch brand to take
Global Reporting Initiative (GRI) standards as a benchmark for its first sustainability
report published in 2018. It committed to cutting greenhouse gases by 10%,
reducing packaging weight and volume by 30%, reduce absence by 10% by improving
health and well-being, and reach gender equality in training by 2020. IWC
Schaffhausen was recognised by Positive Luxury as a ‘Luxury Brand to Trust’ since
2014 – allowing them to display its Butterfly Award in each of their Boutiques
worldwide, engaging clients in their sustainability story.
We have enjoyed a partnership with IWC spanning over three decades and
we were privileged to partner with them on the opening of the IWC boutique,
located in the heart of London, at the Watches of Switzerland showroom in 155
Regent Street. We have also partnered with IWC on several exclusive timepieces,
and we work collaboratively on marketing initiatives across social media, as well as
hosting events and experiences. A highlight event of 2021 was the IWC BIG PILOT
roadshow – an innovative, interactive client experience that guided the public and
clients through the story of IWC and brought the BIG PILOT collection to life. This
touring ‘roadshow’ appeared in a number of key cities in the UK and states in the
US, allowing us to host our highly valued clients in an immersive experience, which
gained huge PR coverage. To support the roadshows, IWC created 3D animated
content to showcase on major outdoor advertising sites, including Piccadilly Lights
in London, and we covered this spectacular activation through our digital channels
across social media, CRM and across our Calibre channels. IWC has also partnered
with Airspeeder on the world’s first motorsport series for electric flying cars. We
covered this in our in-house print title Calibre, and we’ve also had the pleasure of
interviewing their CEO Christoph Grainger-Herr for our Calibre podcast. 2022
sees the Hollywood Blockbuster ‘Top Gun: Maverick’ released, adding to the
association of IWC Pilot’s watches and the Top Gun flight school.
IWC Big Pilot Roadshow
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Founded by Carlo Crocco, scion of an old Lombardi family of
watchmakers, the first-ever Hublot (meaning ‘porthole’ in
French) was totally modern.
It had a sturdy three-part yellow gold case and clean black dial and, in a first for a
luxury watch, a black rubber strap scented with vanilla. Hublot has a high-tech
manufacture in Nyon on the banks of Lake Geneva and is at the forefront of new
advances in technology and fundamental research into new materials. Fusion is the
name of the game at Hublot. Not just in fusing traditional watchmaking with an
iconoclastic flair but also with its materials. It has created Magic Gold, which is an
18ct gold alloy that doesn’t scratch, and King Gold, which is a proprietary shade of
rose gold. The brand managed to produce vivid coloured ceramics, found a way to
colour sapphire crystal for its see-through cases, and even experimented with
putting concrete in a case. It makes for an audacious, bold, brand whose new
launches you can never quite predict. Its most iconic timepiece remains the multiple
award-winning Big Bang, launched in 2005, the perfect illustration of the Fusion
concept so dear to Hublot. The Big Bang, now the brand’s signature collection and
a watchmaking icon, celebrated its 15th anniversary in 2020 and in recent times we
have seen a plethora of different colours, concepts, and variations of this design.
We have enjoyed over 30 years of collaboration with Hublot, and 2020 was
the most exciting year to date. We expanded Hublot’s presence in both the UK
and US allowing our clients to immerse themselves in the Hublot experience with
our highly trained experts, helped by the unique ‘Art of Fusion’ inspired Hublot
décor that greets clients when they enter the new branded areas.
In 2020, we took our partnership even further with the launch of our second
collaborative piece with the brand. The Classic Fusion Aerofusion Chronograph
‘Watches of Switzerland Group’ Special Edition 45mm is our own exclusive and
featured on the front cover of our in-house print title Calibre, as well as being
promoted via our traditional and digital channels; something we naturally do for all
Hublot launches.
Left and right: Hublot and DJ Snake Collaboration Big Bang Watch Launch
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Founded in Florence in 1860, Panerai’s expansion started in 1935
when it was given a contract to supply absolutely watertight watches
with brilliantly luminous hands to the Italian Navy divers.
Panerai Submersible Blu Notte PAM01068
These watches developed by Panerai at that time, including the Luminor and
Radiomir, were not made for civilians, they were covered by the Military Secrets Act
and were launched on the international market only after the brand was acquired
by the Richemont Group in 1997. Today Panerai develops its movements and
watches at its Neuchâtel manufacture including the Laboratorio di Idee and has
garnered a coterie of obsessive fans who call themselves Paneristi and who are
well-versed in the brand’s somewhat intriguing history.
At Panerai, sustainability is a key element with the introduction of sustainability
pillars ensuring it has the framework to embrace eco-friendly practises across all
aspects of the business – including using recycled packaging to help reduce the
environmental footprint. In April 2020, Panerai unveiled a watch it claims is 98.6%
recycled by weight – the EcoTitanium Submersible Elab-ID Limited Edition. We
have enjoyed a partnership spanning over 25 years with Panerai and continually
work with the brand on immersive and interesting pop-ups and in-store events.
Last year saw the introduction of Panerai into selected Goldsmiths Luxury
showrooms. We have also collaborated on client opportunities, including sailing
experiences on the brand’s classic vintage yacht – Eilean. The brand features
regularly in our themed pop-up campaigns in our UK Watches of Switzerland
showrooms – the last one being our ‘Divers Watch Collection’ theme that also ran
across our online channels. We were also privileged to interview Jean-Marc
Pontroué, CEO of Panerai, for our Calibre podcast series, where he and Brian
Duffy, our CEO, discussed how the brand has adapted since the pandemic and the
70th anniversary of its beloved and iconic Panerai Luminor would be celebrated.
Panerai at Watches of Switzerland, Stratford
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Vacheron Constantin has the accolade of being the world’s oldest
continuously operating watch manufacturer. Founded in 1755 in
Geneva, it survived even the Napoleonic Wars.
For more than 260 years, Vacheron Constantin has manufactured exquisitely made,
high-end timepieces, never succumbing to the allure of the mass-produced. It has
also been at the forefront of preserving traditional crafts through its Métiers D’arts
series, passing-on unique skills across generations and enhancing the opportunities
available for future watchmakers. Over the past few years, the brand has
concentrated on broadening its offering with the likes of the Overseas and the
gorgeous couture-inspired women’s collection, Égérie. This year, the brand has
made the bold decision to revive a classic from its own archives. At the watch fair
Watches and Wonders, it launched its new Historiques 222 model – the symbol of
an era and a watershed in the history of Vacheron Constantin. The 222 refers to
the original piece launched in 1977 for the 222nd anniversary of their Maison – a
bold design that marked a turning point in Vacheron Constantin’s stylistic evolution
– taking it out of the traditional and into the world of sports chic watches.
We have been working in partnership with Vacheron Constantin for over 40
years and are proud to have its presence in our flagship Watches of Switzerland
showroom on London’s Regent Street as well as presence in three of our Watches
of Switzerland showrooms in the US. Our highly trained experts recognise the
significance of the history and heritage of the brand and are trained to be able to
tell, effectively, the tale of such a prestigious Swiss marque.
We also collaborate with Vacheron Constantin on events and experiences, to
further educate and inspire our clients, by immersing them in the world of the
brand. We regularly communicate about Vacheron Constantin through our
marketing channels, in particular social media, CRM, and our Calibre platforms. We
also, recently, had the privilege to meet and interview its CCO & CMO Laurent
Perves who spoke to us about their latest timepieces launched at Watches and
Wonders. This was recorded and uploaded to our YouTube channels, as well as
promoted across social media and Calibre.
Vacheron Constantin at Watches of Switzerland, Regent Street, London
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The oldest watch manufacturer in the Vallée de Joux, Jaeger-
LeCoultre can trace its origins back to the 1833 when its founder
Antoine LeCoultre originally started by cutting pinions and
grinding pivots for other watchmakers in the Vallée.
Fast forward to almost 200 years later and the company continues to be a pioneer
within horology, creating collections that find innovative ways to use mechanics to
develop unusual complications. Located in the calm, serene setting in the Vallée de
Joux, the home of Jaeger-LeCoultre offers a unique sense of belonging. It is here,
inspired by the exceptional landscapes of the Jura Mountains, this grande Maison
gets its soul. Jaeger-LeCoultre is a vertically integrated manufacturer where
everything, other than its sapphire crystals and straps, is made in-house. This allows
every part of the business – the watchmakers, engineers, designers, and artisans –
to work together to give birth to its fine watchmaking creations. This same spirit has
powered the creation of more than 1,200 calibres since the brand began and has
allowed Jaeger-LeCoultre to be affectionately referred to as the Watchmaker’s
Watchmaker. Its collections are synonymous with style and a certain panache.
Some of their most iconic collections, include the Reverso range, designed for the
polo fields of the 1930s; its Master collection, which is inspired by the brand’s
designs from the 1950s, and its sports collection Polaris.
We have enjoyed a partnership spanning over three decades with Jaeger-
LeCoultre, and it features prominently throughout our key showrooms within the
UK, and also in the US. We have collaborated with the brand on several in-store
experiences and pop-ups, and our internal experts are all highly trained in the
brand’s rich history, heritage, and collections allowing them to properly communicate
the uniqueness of this storied brand. The brand regularly features across our social
media, emails, and our Calibre platforms as we aim to retell the wonderful tales of
the brand, from iconic milestones to revealing new products. Jaeger-LeCoultre has
also been included in our photoshoot features in our in-house print title Calibre, as
well as in our originally styled and themed photoshoots that run throughout
selected showrooms and on our digital channels.
Jaeger-LeCoultre Reverso One Monoface
Jaeger-LeCoultre at Watches of Switzerland, Regent Street, London
Jaeger-LeCoultre at Watches of Switzerland, Knightsbridge, London
4 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Longines has been based at Saint-Imier in Switzerland since
1832. Its watchmaking expertise reflects a strong devotion
to tradition, elegance and performance.
In its early days, the firm was run by Auguste Agassiz and was a ‘comptoir’ or trading
office like many others in the area. The watches were produced under the
‘établissage’ system, whereby watchmakers worked at home. In 1867, Ernest
Francillon, Agassiz’s nephew and successor decided to abandon this production
method and he brought together the different stages that go toward making a
watch under one roof. The Longines factory was born. From then on, the factory in
Saint-Imier steadily developed and produced many horological creations that gained
international recognition. Longines was rewarded by various prizes which gradually
gave the company its reputation of winning the most awards in international and
world exhibition up until the 1929 exhibition in Barcelona, by which time Longines
had won no fewer than 10 Grand Prix. In 1889, Francillon patented a trademark
comprising the name Longines and its now famous winged hourglass. Longines also
made a name of itself in sports timekeeping and designed timing equipment that
gained the brand a worldwide reputation. Using its expertise, the brand established
a network of advantageous links with the world of sport timekeeping which enabled
it to offer its skilled services to various prestigious sports during the 20th century.
Today, Longines is proud to continue its tradition by creating products based
on values that it has adhered to throughout the history. Longines also follows its
vocation in the field of sports timing, namely in alpine skiing and equestrian sports.
As a member of Swatch Group Ltd., the world’s leading watch manufacturer,
Longines is established in over 150 countries.
We have a long-standing partnership with Longines spanning over 65 years and
have worked closely with the brand on many events and in-store experiences. Our
internal experts help to communicate and educate our clients on Longines’ history,
heritage, and its incredible timepieces.
We have also collaborated with the brand on exclusive first-to-market
opportunities, allowing us to retail the models ahead of anyone else for a limited
period. This includes the ladies’ models from the Conquest Classic collection in
2019 and the Longines Spirit Zulu Time for 2022, for which we had an exclusive
first-to-market for the first six weeks following launch. We frequently promote the
brand through our traditional and digital marketing channels and include them in
our themed photoshoots, and features, in our in-house print title Calibre.
In the US, Watches of Switzerland hosted the Hamptons Classic Horse Show –
the only retail partner in its history, in collaboration with long time event partner,
Longines. The Watches of Switzerland Airstream mobile retail unit was on site to greet
the spectators throughout the high-peak week and weekend.
Top, bottom left and right: Longines participation in the Watches of Switzerland Airstream, The Hamptons, New York
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Kintaro Hattori began selling and repairing clocks and watches in the Ginza area
of Tokyo in 1881 and just 11 years later opened the Seikosha factory,
manufacturing clocks and subsequently pocket watches.
By 1913 he had produced Japan’s first ever wristwatch, the Laurel and then by 1924
the first ‘Seiko’ branded watch. These foundations enabled the production of the
first Grand Seiko in 1960, however, in a wonderfully ironic twist, production was
pulled in 1975 because quartz had destroyed any demand for mechanical watches.
Also a fully integrated watch manufacturer, with watchmaking centres dotted
around Japan’s prefectures, for over half a century, Grand Seiko has quietly made, by
hand, some of the most precise watches the world has ever known with some of the
most poetically inspired dials, from the texture of birch bark, to the way snow settles
on the mountains in Taisetsu, the 21st of Japan’s 24 ‘sekki’ or seasons. Some of the
most well-loved Grand Seiko collections include its Spring Drive – mechanical
watches with an electronic regulator, the Sport collection, and its Elegance collection.
We have enjoyed a fruitful partnership with the brand and have collaborated
on events such as the ‘The Nature of Time’ in 2020, based in Soho, New York. This
immersive experience featured the largest collection of Grand Seiko timepieces in
the world, as well as eight educational zones for guests to learn about the brand’s
master craftsmanship, movements, and history. The collection also featured the
Grand Seiko Toge, a piece that we partnered on, and that was launched exclusively
with us in 2020. The Toge takes inspiration from the Japanese and British legacies of
the two respective companies, combining classic British racing green with the fine
texture of Grand Seiko’s signature Mount Iwate dial. The term
(Tōgè), or
‘mountain pass’, refers to a navigable route through a mountain range, and this
special edition timepiece subtly evokes the image of a spirited drive over the many
ridges of Mount Iwate in Northern Japan. It is quite literally the embodiment of the
Grand Seiko ethos.
峠
We continue to honour our partnership with Grand Seiko by communicating
and educating our clients about the brand through social media, newsletters and
our Calibre platforms, both in print and online. At the watch fair Watches and
Wonders we also included Grand Seiko’s UK Brand Manager, Rob Brook, in our
series of interviews uploaded to our YouTube channels. The brand was also part of
our ambitious and hugely successful multi-channel Watches of Switzerland US
“Anytime. Anywhere.” campaign.
In 2021, we also launched the Grand Seiko mono-brand boutique in Soho,
New York in partnership with the brand.
Grand Seiko mono-brand boutique, Soho, New York
42
Grand Seiko featured in the Watches of Switzerland
US “Anytime. Anywhere.” campaign
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Discipline, ambition, and the incredible foresight
of a watchmaker lie at the heart of Zenith.
First established in 1865 by a then 22-year-old Georges Favre-Jacot in Le Locle, in
the canton of Neuchâtel, the brand quickly became known as the first watch
manufacturer in the modern sense of the term – using precision machinery to
manufacture nearly interchangeable watch parts in big series. In 1969, it was part of
the race to produce the first automatic chronograph, the El Primero, which is
widely regarded as one of the finest chronograph movements ever produced. It’s
also the movement that saved Zenith as a manufacture due to the vision of Charles
Vermot, the watchmaker who hid the designs and tooling for the movement in the
attic of the factory during the ‘quartz crisis’ in the belief that this would be needed
in the future. Given its spirit of adventure, it’s not surprising that its watches have
accompanied extraordinary figures as they achieve the seemingly impossible – from
Louis Blériot’s history-making flight across the English Channel in 1909 to Felix
Baumgartner’s record-setting stratospheric free-fall jump in 2012. Zenith has been
there at each point, assuring precise and reliable timekeeping. Some of its most
iconic timepieces include those from its Defy collection – the flagship sports line;
its retro-styled Pilots collection, and also its Chronomaster Sport. Every model is
inspired by a passion for accuracy and desire to create sartorially led everyday
wearers. Zenith also partners with a selection of ambassadors, including actors,
gymnasts, and architects, that it feels embody the spirit of Zenith.
We have worked with Zenith for a number of years and have consistently seen
the brand release spectacular collections. Zenith models always do well across our
marketing channels, and we communicate news about the brand and its new
releases throughout our performance marketing, social media, newsletters, and
Calibre editorial platforms. We were pleased to have Zenith’s CEO Julien Tornare
as a guest on our Calibre podcast talking us through the pieces that Zenith was
launching for 2021 and what activity would be surrounding them. At the watch fair
Watches and Wonders we included Zenith in our series of YouTube videos.
Zenith at Watches of Switzerland, Oxford Street, London
The Zenith Chronomaster Sport
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After decades of conforming to the rules of corporate watchmaking,
Maximilian Büsser broke the chains and started a rebellion in 2005; a
rebellion called MB&F – Maximilian Büsser & Friends.
The desire to allow his creativity and energy full reign saw Max resign from iconic
jewellers Harry Winston to form his creative ideal: MB&F. With his new company,
Büsser has full creative liberty to indulge in his passion for working with the most
talented independent horological professionals – pushing the limits of horology into
a new dimension. MB&F is an artistic concept laboratory based around a simple
idea: to assemble collectives of independent watchmaking professionals to develop
radical watches – either sitting in his Horological or Legacy Machines collections.
Collaborating with horological luminaries Eric Giroud, Laurent Besse and Peter
Speake-Marin produced the first machine, the HM1 in 2007. The following
Horological Machines have taken inspiration from science fiction, supercars,
aircraft and the animal kingdom – like the HM10 presented in 2020, inspired by a
bulldog. Aside from evolving the watch collection, Büsser works with clock maker
L’Epée 1839 to produce unconventional clocks with exotic names such as Starfleet
Explorer and Destination Moon.
We are proud to work with MB&F within the US, with a presence in our
Watches of Switzerland, Las Vegas showroom and we are privileged to be working
in collaboration with MB&F to open the first boutique in the UK within our flagship
Watches of Switzerland showroom on Regent Street, London.
HM10 Bulldog
LM Perpetual EVO Green
44
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 BOVET 1822 is a Swiss manufacturer of luxury timepieces that was founded in 1822, by
Edouard Bovet and his brothers, to produce high-quality, exquisitely miniature-painted and
gem-set pieces to high-end clients all over the world.
Collectors include Kings, Emperors, Sheiks, Diplomats, and lovers of fine timepieces
everywhere. BOVET is one of the few true manufactures in high watchmaking,
making nearly everything in-house, including the beating heart of the timepiece –
the hairspring and regulating organ.
Celebrating 200 years this year, BOVET 1822 continues to create timepieces
that employ artisanal techniques such as hand-finishing, hand-engraving, and
miniature painting, as well as iconic designs like the crown at 12 o’clock, beautifully
engraved movements, and innovations such as the Braveheart Tourbillon presented
in 2015, protected by six patents. BOVET’s developments are always aimed at
improving precision and reliability while creating timepieces that link watchmaking’s
past and future. The House has also received more than 40 awards and distinctions
over the last 15 years for its contributions to horology, including watchmaking’s
highest award, the Aguille d’Or, for the Récital 22 Grand Récital in 2018, as well as
the Mechanical Exception Award for the Récital 26 Brainstorm Chapter Two.
One of the House’s most iconic collections is the Fleurier, which consists of 11
styles and is characterised by round cases with the crown at 12 o’clock, referencing
BOVET’s pocket watch heritage. Within the Fleurier collection, many timepieces
feature the patented Amadeo convertible system that allows the watch to be reversed
on the wrist, used as a desk clock or on a chain as a pocket watch, all without any tools.
The main characteristics of BOVET 1822 timepieces are the exquisite finishing,
whether its angling, bevelling, enamelling, guilloche work, or engraving, alongside the
technical expertise in producing tourbillons, long power reserves (minimum of 5
days, up to 22 days), perpetual calendars, jumping hours, retrogrades, and multiple
time zone movements.
Some of its most highly sought-after collections and pieces can be found in our
Watches of Switzerland Knightsbridge showroom in the UK and our Watches of
Switzerland, Las Vegas showroom in the US. You can also browse the brand on our
Watches of Switzerland websites. Our teams have been highly trained to
communicate the fantastic history of this brand, and we are proud to be able to tell
its story to our clients.
GPHG Award Winning Récital 22
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Ulysse Nardin SA is a Swiss luxury watchmaking
company founded in 1846 in Le Locle, Switzerland.
The company became known in the nautical world for manufacturing highly
accurate marine chronometers and complicated timepieces used by over 50 of the
world’s Navies from the end of the 19th century until 1950. Ulysse Nardin garnered
its reputation for accuracy as early as 1862 achieving the Prize Medal for pocket
chronometers at the International Exhibition in London and by the mid 1970’s had
accumulated over 4,300 certificates and ten gold medals for the accurate
performance of its marine chronometers.
It is a heritage that the brand continues to draw on in terms of its inspiration,
and we have seen many variations of collections that pay homage to its archives, as
well as ones, such as the Freak, from 2001 which challenged the conventions of
watchmaking by adapting the carousel to a 60-minute rotation so the movement
platform could double as a minute hand, with the mainspring drum geared to act as
an hour hand. It also introduced the use of silicon to watch movements for the first
time ever. Met with some industry scepticism at the time this material is now
commonplace in many manufacturers’ collections.
Ulysse Nardin is committed to achieving the 17 United Nations guidelines on
Sustainable Development by 2030. Because of the brand’s connection with the
oceans, they have a particular interest in developing scientific knowledge concerning
the shark preservation and upcycling to reduce marine plastic pollution, and work
with organisations to recycle fishing nets and bottles into watch straps and
components such as bezels. They also support The Ocean Race, an around the
world yacht race that aims to inspire and educate people on the plight of the seas.
We included Ulysse Nardin in our ‘Divers’ campaign among other prestigious
luxury watch brands and we always see a great response across our digital
marketing channels when we promote the brand. At Watches and Wonders, we
were delighted to interview their CMO, Françoise Bezzola, about its new
collections launched at the fair, including their iconic Freak collection. Ulysse Nardin
has also featured throughout our Calibre editorial platform with watch journalists,
such as Watches International editor, Stephen Watson, contributing to cover the
brand. The brand was also included in our ambitious and hugely successful
multi-channel Watches of Switzerland US “Anytime. Anywhere.” campaign.
Ulysee Nardin Diver X Skeleton
4 6
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Girard-Perregaux has contributed to some of the most distinctive
landmarks in horology bringing passion to precision, art to aesthetic and a
playfulness of contrasts that never fails to create surprise.
Jean-Francoise Bautte began manufacturing watches at the tender age of 19 in 1791
and quickly gained a reputation for high quality timepieces in the royal courts of
Europe. His work lived on thanks to Girard-Perregaux, a company founded in 1856
and named after Constant and Marie, husband and wife with a strong background
in the watchmaking industry. Girard-Perregaux carried on the idea introduced by
Bautte of mastering all the required horological skills in-house to create a watch,
making it one of the oldest manufactures to date.
The craftsmanship and dedication of Girard-Perregaux to the art of
watchmaking has stayed unchanged over the years and this is evident through the
iconic Three Bridges collection, which features a movement where three identically
symmetrical visible bridges support the tourbillon, the barrel, and the gear train of
the minute and hours hands. This design had a substantial impact at the Paris
Universal Exhibitions where it won the prizes in 1867 and 1889. There is also the
timeless style of the Laureato with its integrated bracelet and iconic of the 1970s,
the captivating Cat’s Eye with its unusual elongated oval case or the recently
reintroduced digital display watch with a quirky design, the Casquette. Girard-
Perregaux was an early innovator in the field of electronic quartz watches and
produced the first commercially available Swiss quartz watch whilst establishing
32,768 Hz as the universal frequency for the industry. These innovations all have an
element of disruption in common; a desire to turn watchmaking upside-down. Our
teams are trained to the highest of standards to effectively communicate on the
brand. We feature the brand across our digital channels, including social media,
newsletters, and over at our editorial platform, Calibre. We have collaborated with
Girard-Perregaux on launching several UK exclusives, including the Laureato in
collaboration with Aston Martin, and the most recently launched, highly sought-
after Casquette model.
Tourbillon with Three Flying Bridges: a bridge to the past, a look into the future
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Blancpain is the oldest watch company name, originally founded in 1735 in the
Swiss Jura by Jehan-Jacques. Blancpain is known for making watches that pushed
the absolute limits achievable by precision machines and the human hand. Today,
Blancpain continues to push the boundaries of what this combination can achieve
with such challenging complications as equations of time and eight-day tourbillon
movements. Blancpain collections and timepieces can be found in our Oxford
Street, Knightsbridge, and Regent Street Watches of Switzerland UK showrooms
and in our Watches of Switzerland showroom in Plano, Texas.
Blancpain were the pioneers in dive watches and their CEO Jean-Jacques
Fiechter worked with the famous undersea explorer Jacques-Yves Cousteau in
the 1950’s to define what a dive watch should be in terms of legibility, water
resistance and functionality. The resulting Fifty Fathoms timepiece has been a
staple of the collection for decades – a testament to the original design.
Our internal Blancpain experts are highly trained in the heritage and history
of the brand in order to convey its rich history to interested clients. In 2021 it
featured within our ‘Divers’ pop-up campaign in our Knightsbridge Watches of
Switzerland showroom, as well as being a part of our newly created themed
photoshoot activity, along with other prestigious brands. To celebrate this, and
to provide an immersive experience, we hosted clients for the evening,
showcasing their heritage divers’ pieces from their archives.
Since its creation in 1775, Breguet has never ceased to distinguish itself as one of
the world’s elite watchmaking brands, thanks to the avant-garde spirit instilled by
its founder Abraham-Louis Breguet. An outstanding scientist and technician, he
was always on the lookout for innovations that would bring precision and
reliability to timepieces. He was also the originator of numerous inventions within
horology such as the tourbillon, the first wristwatch, the pare-chute; as well as
Breguet ‘apple’ hands. As the initiator of the neo-classical style in watchmaking,
his creation of a refined and legible design became the trademark of Breguet and
has inspired the aesthetic & trends of many timepiece brands since. This innovative
spirit has captivated numerous personalities from the political, economic and
financial elite around the world since the brand’s inception.
Since the Swatch Group acquired Breguet in 1999, the desire to perpetuate
the House’s rich heritage while continuing to build the watchmaking of tomorrow
is more relevant than ever. Breguet is devoting considerable energy to developing
the Research & Development (R&D) department, which has already invented
the silicon balance spring and the magnetic pivot. It is in the expert hands of its
craftsmen, in the manufacture located in heart of the Vallée de Joux, that each
watch and each component are created.
Excellence, know-how and passion: since 1775 the Breguet brand continues to
surprise with watch collections that perpetuate its heritage while aiming for the future.
We are proud to have collaborated with the Manufacture Breguet for several
years, which shares the same values of excellence and precision as our brands. In
2020, we were delighted to feature the brand in our pop-up campaign ‘History of
The Tourbillon’ which showcased several iconic pieces from the House of Breguet.
4 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Jacob Arabo built his fame on catering ever more lavish and exclusive jewellery
to a unique audience of celebrities and prominent entertainment figures. He
established Jacob & Co. as one of the most powerful luxury names in recent
history. As early as 2002, he applied that philosophy to timepieces with a new
motto: Inspired by the Impossible. At the onset of the 2010’s, he focused on a new
horological approach, based on extremely sophisticated timepieces, often
adorned with extensive gem-setting of the highest level of quality, colour and
diversity. The Caviar, Astronomia, Opera Godfather, Twin Turbo and Twin
Turbo Fast and Furious, Bugatti Chiron and Jean Bugatti collections spearhead a
new generation of high complication timepieces with innovative and bold
formats. The Epic X, a graphic, skeleton sport pieces collection culminating with
a tourbillon chronograph, has been recently redesigned. Never shying away from
pushing every aspect of creation and exclusivity to new heights, Jacob & Co. is
now a full-fledged member of the Haute Horlogerie circle. We are proud to
house Jacob & Co. in our US showrooms and more recently in the UK.
Armin Strom is an independent watch company based in Biel/Bienne, Switzerland.
Armin Strom timepieces offer a unique fusion of the Swiss-German horological
tradition, avant-garde ‘transparent mechanics’ and an unwavering commitment to
horological innovation. The hallmark of the brand’s low-volume, artisanal approach
to watchmaking is its commitment to exposed dial-side movement mechanics,
with every part hand-finished to the highest haute-horology standards.
Armin Strom was established in 1967 by Mr Armin Strom, a legend in the art
of hand-skeletonisation. In 2006, the stewardship of Mr Strom’s legacy became the
responsibility of Master Watchmaker Claude Greisler and businessman Serge
Michel, who together revitalised the brand with the opening of Armin Strom’s first
fully integrated Manufacture in 2009. Today the brand designs, develops, mills,
embosses, galvanises, hand-finishes and assembles all of its own watches in-house,
enabling Armin Strom to bring even the most complicated ideas to life without any
of the compromises that typically stem from reliance on a supply chain.
We have ensured our teams are highly trained in being able to effectively
communicate the brand’s history and collections via our online virtual boutique
as well as in our showrooms. You can find the brand in our Watches of
Switzerland, Soho, New York showroom in the US where the pieces can be seen
in all their glory.
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Speake-Marin is Geneva-based fine watchmaking house with British roots
founded in 2002. It is renowned for creating, developing, and assembling
innovative limited mechanical timepieces with in-house movements and unique
complications. Speake-Marin’s designs are defined by a bold, often architectural
aesthetic, reflecting the concept of ‘Belle Horlogerie’ – for those who want to
wear something unique on their wrist. The contrast of hyper-contemporary dials
with a classic case, makes for audacious designs that are unlike anything else.
Speake-Marin, as an independent fine-watchmaking house, inspires watch
collectors who love exceptional timepieces and seek to be a part of the ‘Happy
Few’ Speake-Marin owners club.
We are honoured to present some of Speake-Marin’s finest timepieces for
our most discerning clients. Distinguished by their limited availability and
formidable features, Speake-Marin watches are the epitome of independent
luxury watchmaking. Our entire selection of Speake-Marin watches is available
for sale online across our Watches of Switzerland UK and US sites, as well as in
selected showrooms.
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French fashion house CHANEL is synonymous with elegance and style and
has enjoyed over a century of success as one of the most iconic and recognised
brands in the world. They first introduced their timepiece collections in 1987
with the launch of the PREMIÈRE watch, inspired by their N°5 perfume
cabochon stopper. In 2000, we saw CHANEL release their much-loved J12
collection in revolutionary ceramic, and this is one of the collections that has
gone from strength to strength. CHANEL entered the world of grande
complications in 2005 with their J12 Tourbillon which was something that
gained much coverage at the time, and when they released their first
movement entirely developed and manufactured by CHANEL in Switzerland
in 2016, the brand firmly solidified themselves as a key player in horology. In
2021 they enlisted actress Margot Robbie to be the face of their J12 collection,
and at Watches and Wonders in 2022, we saw them release the new J12
Diamond Tourbillon Calibre 5. We have enjoyed much success with this
French brand, and our experts both in our showrooms and online share the
same passion and interest for CHANEL’s history, heritage, and models.
Passion for innovation and entrepreneurial heritage are the driving forces
behind H. Moser & Cie. Defying the norms, and continually challenging itself
to ensure it moves forward, H. Moser & Cie. occupies a distinct position in the
market. It manufactures the majority of the components in its movements,
including the hairsprings and the regulating organs which are used for its own
production as well as to supply its partner companies. As part of a Swiss
family-run group, the brand enjoys a significant degree of freedom and
autonomy allowing it to be extremely responsive to trends, as well as
wonderfully irreverent. Its timepieces are a combination of classic watchmaking
technique and an anarchic spirit. You can find the brand on our Watches of
Switzerland US website as well as in our Watches of Switzerland showroom
at the Wynn Resort, Las Vegas. Our teams are trained in the history, heritage,
and collections of H. Moser & Cie. and will be delighted to take any client
through the pieces.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Founded in 1860 in Sonvilier, Switzerland, by Louis-Ulysse Chopard, the Chopard
brand stands for innovation, quality, and authenticity. Under the impetus of the
Scheufele Family, who bought the company in 1963, Chopard has been committed
to a tradition of excellence and experienced spectacular development. Renowned
for its creativity, its high level of vertical integration and its state-of-the-art
technology, it has become one of the leading names in the fine watch and jewellery
industry. Whether you’re selecting from Chopard Racing watches or the Iconic
Happy Sport models, all timepieces in this vast collection draw from the brand’s
rich heritage of craftsmanship and have a story of their own. One of their most
iconic collections that runs across both watches and jewellery is the ‘Happy’
collection, with its moving diamonds, and it has spawned several iterations
including ‘Happy Hearts’, ‘Happy Sport’ and ‘Happy Diamonds’ and in 2021
appointed A-list actress Julia Roberts as the face of the campaign. They felt that
Roberts reflected the core values of their business, and collection and through
her ‘communicative energy and grace, Julia Roberts is the triumphant embodiment
of dancing diamonds’. We have a fantastic partnership with Chopard, and their
beautiful pieces can be seen both in key showrooms and online.
Glashütte Original stands for innovative German watchmaking art that meets
the most demanding standards. Located in the small Saxon town of Glashütte
near Dresden, the manufactory brings traditional artisanship and modern
technologies together under one roof. The company produces up to 95% of all
watch components itself, including the filigree dials.
Glashütte Original upholds the values of authentic manufactory production
and can look back on a rich history of more than 175 years. Over the decades
Glashütte Original has created a culture of excellence that is reflected in
timelessly beautiful and technically sophisticated timepieces.
Glashütte Original is available in our key Watches of Switzerland London
showrooms; Knightsbridge and Oxford Street as well as online at Mappin &
Webb and Goldsmiths. We work with them on training our internal experts to
the highest of standards in its history, heritage, and collections ensuring that it is
being represented in the best possible way. Our online experts are also on hand
to be able to effectively showcase the brand through virtual appointments.
It was in Côte-Aux-Fées that Georges-Edouard Piaget set up his first workshop
in the family farmhouse and devoted himself to producing high-precision
movements. 1874 marked the start of an ever-growing reputation in the watch
industry. In 1943, the company took a decision that would prove crucial to its
future by registering its brand name. Piaget is also a style: a marriage of gold and
an explosion of colour, new shapes, precious gems, and dials made of hard
stones, paving the way for new colours and unique aesthetics. Building on more
than 140 years of history, the ever-bold brand innovates by offering jewels in
motion, extravagant high jewellery collections as well as exceptional luxury
watches – making it one of the world’s most prestigious watchmaker-jewellers.
Two of the most iconic collections include the Piaget Polo, first developed in the
1970s and inspired by the world of polo and the Piaget Altiplano which held the
record of the thinnest mechanical watch on the market at the time in the
Altiplano 900P, standing at just 3.65mm high. At Watches and Wonders 2022,
the brand released the Altiplano Ultimate Concept, Piaget Polo Skeleton and
Piaget Polo Date to much applause, offering both everyday pieces and outstanding
horological feats.
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Founded in 1889, DOXA, the Greek word for ‘glory’, is more recently known for
its superlative dive watches that the brand began making in the second half of the
20th century. In its current iteration the brand designs brightly coloured watches
with a serious and profound diving history having discovered that orange is the
last colour on the spectrum that is visible underwater, therefore aiding visibility.
Located in Biel/Bienne in the heart of the birthplace of Swiss watchmaking, the
brand is renowned for creating one of the first professional-spec dive watches
available for the wider public since the 1960s, the DOXA SUB. We are proud to
house DOXA within the UK and US along with a presence online. We included
the brand in our ‘Divers’ themed campaign and have seen a great response
across all of our marketing channels, from social media to newsletters and
Calibre. We were also privileged to interview their CEO, Jan Edöcs on our
Calibre podcast. In the US we utilised the Watches of Switzerland Airstream to
host a series of mobile retail-unit experiences, which saw us host a 100-person
private event as the exclusive and only timepiece retail partner of DOXA for the
continent of the US. VIP guests included designer Cynthia Rowley and Dave Guy
of the Roots. In April 2022 we were proud to launch the limited DOXA Army
Watches of Switzerland Edition, 42.5mm in ceramic.
Bremont is an award-winning British luxury watch brand, manufacturing
mechanical watches in Henley-on-Thames, England. Bremont is making
considerable investment with its UK watch making and manufacturing and in
2021 opened The Bremont Manufacturing & Technology Centre, a new state-
of-the-art 35,000 sq ft purpose-built mechanical watch manufacturing centre
enabling the full machining and manufacturing of Bremont’s watches. Co-founded
by brothers Nick & Giles English in 2002, Bremont has made a substantial impact
on the watchmaking industry in a very short period of time. The brand remains
true to its original principles of aviation and military, British engineering and
adventure. As well as manufacturing watches for some of the most exclusive
military squadrons around the world, Bremont continues to play an influential
role in revitalising the British watch industry, the birthplace of numerous
timekeeping innovations still used today. All Bremont watches are ISO
chronometer rated, and are built with considerable care in the UK, including the
new Bremont ENG300 movement series which launched in October 2021 and
presents the first-time that mechanical movements have been built at scale in
over 50 years in this country. Bremont watches are immensely precise, reliable,
and durable and all are hand assembled in limited numbers making them hugely
desirable for any collector. We enjoy a fantastic partnership with Bremont, and
we regularly feature them in our marketing communications.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Swiss brand Oris was first founded in 1904 and was named after a nearby brook
in the town of Hölstein. Oris makes watches for people who are passionate
about mechanical movements and who look for genuine and contemporary
values with great designs. As they are an independent company, they are free to
be innovative and often push boundaries and be reactive to explore functions
and features that may be in demand within the world of horology. Lately, they
have been making waves with their in-house five-day power reserve movements.
Some of their key pieces are the Big Crown Pro Pilot, one of the first automatic
watches with a built-in Altimeter, and in 2022 they released the new ProPilot X
Calibre 400 at the watch fair Watches and Wonders. Sustainability is something
the brand is hugely passionate about. The first ever Oris Sustainability Report
was launched in 2022 and was the result of a three-year project to amp up their
mission to bring Change for the Better, which has already seen Oris become a
climate-neutral company and begin to reduce dramatically their carbon footprint.
Rado, a globally recognised Swiss watch brand that traces its roots to 1917, is singular
in its design, innovation, and use of revolutionary materials. Ever since its beginnings
in Lengnau, Switzerland, Rado has proudly flaunted a pioneering spirit, consistently
fulfilling its hallmark philosophy: ‘if we can imagine it, we can make it’. Only the finest
materials and tech comprise Rado watches. As horology specialists, Rado know that
hardness and scratch-resistance alone are not enough in selecting fabrics: durability
and wearer comfort are equally as important. That’s why any Rado timepiece that
you invest in will not fail to deliver strong, enduring comfort and efficiency. After
more than 100 years of watchmaking, iconic style and substance remain the key
principles of the brand – and Rado continues to showcase its mastery by creating
watches with immense visual, practical, and popular appeal. Nothing can prevent
Rado from achieving its mission to discover, invent and innovate new ways to create
premium watches. We mean it when we say that Rado is ‘the master of materials.’
We are proud to have partnered with Rado on several first-to-market exclusives,
and for 2022, we are working with them again to promote a first-to-market Captain
Cook Chrono timepiece. For the first time as a chronograph, the explorer favourite
makes a brilliant return, in updated, exquisite proportions thanks to a unique,
slimmer automatic movement, quite a rarity in the field. The Captain Cook Chrono
watch is available both in our showrooms and online.
Tissot was founded in 1853 in the small town of Le Locle, nested in the Swiss Jura
Mountains. Tissot is the largest traditional Swiss watch brand based on volume
and is represented in an impressive 160 countries across five continents but has
never forgotten its roots. Innovators by traditions, Swiss heritage is at the heart
of Tissot and is what gives the brand its reputation. The plus sign in the logo
symbolises the Swiss quality and reliability Tissot has shown since 1853. The
watches are authentic, accessible and use special materials, advanced
functionalities, and meticulous design. Tissot stands by its signature, ‘Innovators
by Tradition’. The high calibre of the brand has been repeatedly recognised. After
successfully designing and integrating some of the world’s most advanced
timekeeping systems, Tissot has been asked to serve as Official Timekeeper and
partner for many of the world’s preeminent sporting events, associations, and
federations: the Tour de France, the Giro d’Italia, La Vuelta, the NBA, MotoGP,
the FIM World Superbike World Championship, TOP 14 and European
Champions and Challenge Cups. Additionally, Tissot has partnerships with the
International Ice Hockey Federation and more. We are proud to stock Tissot in
a multitude of our showrooms and online. We were first to market with the
Tissot T-Sport Seastar 1000 chronograph 45.5mm men’s watch.
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LU XU RY JEW E L L E RY
Since its founding in 1775, Mappin & Webb has harnessed a rich and storied history
within the watch and jewellery industry. Today, over 240 years later, the brand has
continued to embrace tradition with contemporary design, becoming a British
treasure built upon the foundations of excellence, superior quality, and exquisite
craftsmanship. This historical significance and excellence in the craftsmanship of
jewellery, silverware, watches, and glassware has led Mappin & Webb to be holder
of Royal Warrants to British Monarchs since 1897. In April 2022, this honour was
granted for a further five years.
At Mappin & Webb, our clients will discover elegant fine jewellery collections
that take inspiration from our unique archive, reimagined with a modern-day
interpretation that embraces the original design. Our Amelia collection, named
after the beautiful English Amelia Rose, is a timeless celebration of romance and
femininity. Shaped engagement rings featuring emerald, pear, and oval cut stones
are simply exquisite and the diamond halo jewellery creates a dramatic presentation
to the centre stone. Masquerade is a collection of beautifully crafted cluster styles
bursting with light and the collection continues to be one of our more popular
suites with new contemporary styles added for FY22.
At Mappin & Webb, we pride ourselves in crafting scintillating gemstones set within
thoughtful and exquisite designs that encapsulate a rich and inspiring British heritage.
Goldsmiths has become one of the UK’s leading watch and jewellery retailers, with
over 55 showrooms nationwide. As part of Goldsmiths continual evolution and
investment in creating a memorable client experience, the roll out of a new luxury
showroom concept began in Autumn 2021, with an enhanced digital experience,
visual merchandising and product displays. As Goldsmiths elevates its brand
position, the brand further enhances its vision and values to ensure that the delivery
of an exceptional client experience is at the heart of everything we do.
At Goldsmiths, our clients will discover a wide choice of diamond jewellery
including beautiful wedding and engagement rings to suit all bridal styles. From the
classic round brilliant cut to the more contemporary cuts such as ovals and pear.
Our exclusive partnership with Jenny Packham Bridal Jewellery presents stunning
diamond bridal jewellery inspired by romantic destinations, and our exclusive
Goldsmiths Brightest Diamond collection introduces one of the most brilliant cut
diamonds in the world, with a remarkable 88 facets, creating maximum brilliance
and an enviable scintillating sparkle.
Mappin & Webb Empress Collection
Goldsmiths Coloured Gem Stone Collection
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Goldsmiths Spring Summer 2022 Advertising Campaign
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For over a century, Mayors has been the leading multi-brand retailer in the
Southeastern United States offering clients the world’s finest jewellery and
timepieces. Founded in 1910 by Samuel Mayor Getz, his vision was to bring the
world’s finest jewellery under one roof and over a century later, he brought his
vision to life. At Mayors you will find uncompromising quality, inspiring beauty and
impeccable craftsmanship with curated offerings for every occasion.
Mayors recently embarked on a multi-branded jewellery campaign serving as
the first of its kind for the industry. The imagery captures Mayors’ own in-house
collection of covetable, best-selling fine jewellery silhouettes and brand partners
including GUCCI, MIKIMOTO and Uneek styled effortlessly to create a fresh and
modern look. The campaign featuring model Juana Burga, appeared across a range
of platforms – in-store, online, out of home and in social media, as well as through
advertising in select top-tier media titles like Town and Country and WWD – which
enabled Mayors to increase visibility across multiple channels.
At Mayors, our clients will discover a range of diamond and fine jewellery
including engagement rings, anniversary bands and core classic pieces like the
diamond tennis necklace and flex bracelet collections designed to be worn in the
‘Always On’ fashion we promote.
Top and bottom: Mayors Jewellery Advertising Campaign
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Top and bottom: Betteridge Jewellery Collection
Betteridge beginnings can be traced in the jewellery industry back to the 18th
century in Birmingham, England, where the Betteridge name was synonymous with
fine jewellery design and silversmithing.
A.E. Betteridge Jr. opened the first Betteridge Jewellers in the early 20th
century with some assistance from his father. The first showrooms were built on
two of the most esteemed retail locales in the world: Fifth Ave & 45th Street, and
Wall Street & Broadway in New York City. Betteridge also had a boutique in the
Miami Biltmore Hotel in Coral Gables.
With the advent of modern suburbia beginning to take shape outside of New
York City in the 1950s, Bert seized the opportunity to invest in the rural future of
retail, purchasing W.D. Webb Jewellers and moving the Betteridge headquarters to
Greenwich, Connecticut. Recently, the Betteridge flagship showroom moved down
‘the Avenue’ from 117 to 239. The new building is one of the crown jewels of
Greenwich Avenue with over three times the space of the old showroom. It
showcases elegant in-store boutique areas for marquee brands, including Rolex,
Cartier and Patek Philippe, as well as a dedicated Betteridge club space complete
with a bar area for clients to relax and socialise.
Betteridge joined the Vail community in 2004 by acquiring Gotthelf’s, a well-
respected jewellery business that had been a fixture in the Vail Valley for over 25
years. Today, the showroom offers one of the finest collections of watches, designer
jewellery, and exquisite estate pieces in all of Colorado.
In 2014, Betteridge acquired Hochfield Jewellers at the base of Aspen Mountain,
nestled inside The Little Nell Hotel. Hochfield was a beloved jeweller in the community
for over 23 years. We are proud to be associated with such a distinguished location
and extraordinary family business.
Betteridge is renowned for offering the best designs by the most fabled
jewellers. It’s an open secret, however, that many of the brand’s most desired pieces
are its own, built in Greenwich, Connecticut by master craftsmen.
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FOPE mono-brand boutique, Old Bond Street, London
FOPE Essentials Jewellery Collection
FOPE has been based in Vicenza since 1929 when Umberto Cazzola, a goldsmith,
opened his workshop in the city. It was the economic boom of the 1960s that
allowed Umberto’s son Odino to expand; investing in modern technologies that
saw the development of an innovative flexible metal strap, which was the precursor
to its now-iconic Flex’it and was popular among Swiss watch brands. It is this strap
– the Novecento mesh, launched in 1985 and supplied to Swiss watch brands – that
gave the company its first name, the rather catchy initialism FICM (Italian Factory
Metal Strap in English). The boom in the jewellery side of the business led to a
change of name in the late 1960s from FICM to Factory of Jewellery Precious
Export. Luckily this time the acronym was deemed better and FOPE was born.
By the year 2000, FOPE has become successful enough to open its global
headquarters in the heart of Vicenza where the brand continues to blend traditional
Italian jewellery-making craftsmanship with cutting-edge technology.
FOPE updated, patented, and renamed its Novecento mesh Flex’it system in
2007. This new and improved mesh was rendered fully flexible due to the tiny gold
springs discretely hidden between each 18ct gold link. Ten years after the launch of
the first Flex’it collection, LadyFope was introduced – a collection of quartz watches
that embraced the Flex’it system with a Flex’it bracelet.
FOPE has now been crafting beautiful jewellery for over 90 years. The brand’s
classic yet contemporary collections harness a quintessentially Italian form of
elegance, style and sophistication, with cross-generational appeal. From the
patented flexible gold bracelets that are decadent as well as comfortable, to the
twisted white gold rings, each piece is a touch of luxury you can wear every day.
We are proud to have partnered with FOPE for many years, stocking the
brand’s elegant collections in both the UK and US. We are privileged to have also
exclusively hosted pieces from the stunning Eka and Prima collections. In November
2019 we opened the UK’s first FOPE boutique on Old Bond Street, London.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Glamorous, opulent, and feminine, BVLGARI is an Italian jewellery brand like no
other. Founded in Rome in 1884 by Greek silversmith Sotirio Bvlgari, the brand
quickly cemented a reputation for excellence with its skilled craftsmanship and
impressive jewellery creations. As the decades passed, the brand developed a
distinctive signature style, which embraced vibrant colours and inimitable motifs
and also paid tribute to its Roman heritage.
Through the decades BVLGARI continued to embrace its cultural legacy while
rewriting the rules, launching new trends, and standout contemporary pieces that
have become jewellery icons. Not shy of daring colours and eclectic flair, BVLGARI
has a history of creating spectacular jewellery resplendent with kaleidoscopic gob-
stopper jewels.
Fast forward to today and BVLGARI continues to make waves with the iconic
Serpenti Watch collection, which takes jewellery watches to a whole new level –
designing a piece that could easily be worn every day but also bejewelled enough
for a night on the town. Still retaining a decorative and bold aesthetic, BVLGARI’s
creations deliver a seductive combination of Roman heritage, beauty, and
wearability for both men and women.
Also, from a technical perspective BVLGARI has achieved unequalled success
in the production of thin watches in the Gerald Genta inspired Octo collection.
Eight world records in eight years including the thinnest tourbillon, thinnest minute
repeater the thinnest perpetual calendar which won the Aiguille D’or price in 2021
at the GPHG culminated in the 2022 Octo Finissimo Ultra, the thinnest mechanical
watch in the world at 1.8mm.
At the Watches of Switzerland Group, we are proud to have partnered with
BVLGARI for over two decades. In 2021, we opened our first BVLGARI mono-
brand boutique in Aventura Mall, Aventura, Florida and in the UK we retail
BVLGARI watches in Watches of Switzerland Broadgate, Regent St and soon to be
Battersea showroom.
BVLGARI mono-brand boutique, Aventura Mall, Aventura, Florida
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Roberto Coin’s jewellery is unlike anything else. It is imaginative,
artistic, and evokes the Italy of La Dolce Vita. The brand was founded
in 1996, when Roberto Coin, a successful hotelier at the time,
decided to pursue his true passions of art and fashion. Leaving hotels
behind, he decided to set up a jewellery brand.
Located in the heart of Vicenza, otherwise known as the City of
Gold because of the proliferation of goldsmiths, Roberto Coin
jewellery champions traditional values of Italian artisanship, with
Coin’s immense creativity and his love of fashion and the arts being
channelled throughout every piece. The marriage of skilled artisans
and Roberto Coin’s romantic vision and creativity has resulted in
jewellery pieces that resemble works of art.
Roberto Coin jewellery embraces its founder’s journey through a
variety of cultures and multi-ethnic influences, as well as personal
experiences and the natural world. Each is delicately handcrafted and
features a trademark ruby, always cast inside the jewel so it comes into
contact with the skin. Whether it is a simple gold chain or a decadent
diamond-encrusted flower pendant, every piece of Roberto Coin
jewellery is timeless, beautiful, and quintessentially Italian.
We have enjoyed a partnership with Roberto Coin for 13 years,
during which time we have exclusively hosted pieces from the
stunning Princess Flower collection. Roberto Coin jewellery features
throughout our showrooms in both the UK and US.
Roberto Coin Princess Flower Sapphire & Diamond Ring –
Exclusive to the Watches of Switzerland Group
Roberto Coin Princess Flower Collection
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Driven by a desire to create diamond fashion jewellery of unwavering beauty,
Valérie Messika created her own Maison in 2005. In her work, she reinvents the
richly symbolic and meaningful stone into a desirable and disruptive object that
lends self-confidence to anyone who wears it. Valérie constantly innovates to realise
this vision, creating new designs and new techniques. She is a jewellery designer, of
course, but above all, she is a trend-setter and brings a liberating breath of fresh air
to the industry. With Move, the three mobile diamonds quickly became an ‘it-jewel’,
perfect for everyday wear – its unique design and infinite interpretations are now
part of jewellery history. Messika revolutionised the way we wear and think about
diamonds, the stone comes alive and is never boring. Liberty of movement is key,
but so are liberty of style and technique. Valérie Messika shrugs off traditional
jewellery design, adding her own unique, fashion-oriented twist to speak to all
women and personalities. We have proudly partnered with Messika for six years,
stocking the elegant and feminine designs within the UK and US where the Messika
vision is embraced throughout the brand’s jewellery collections.
Messika Move Uno Diamond Ring
Kendall Jenner wearing the Move Collection in the new Messika campaign
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Jenny Packham Exclusive Amalfi Coast Collection Engagement Ring & Wedding Band
There is an air of old-school Hollywood glamour about one of Jenny Packham’s
gowns. The British fashion designer has become a red-carpet favourite, her
unabashedly feminine designs having been worn by the likes of Angelina Jolie, Kate
Winslet, and of course, Catherine, The Duchess of Cambridge. Jenny Packham has
now channelled her glamorous aesthetic into an exclusive bridal jewellery collection
in collaboration with Goldsmiths.
The collection is based around bridal jewellery suites and inspired by romance
in all its forms, from beautiful locations, such as Paris and Portofino, to Jenny
Packham’s own bridal dresses. Using the most romantic of stones, the diamond,
Jenny Packham has created a variety of designs that speak to the modern woman.
Intricately designed, classic-cut stones are crafted into eternity rings, wedding ring
sets and bridal jewellery suites with delicate detailing and a scintillating sparkle.
Offering fine jewellery pieces for the bride-to-be or simply a lover of fine
jewellery, Jenny Packham is a fine choice.
We are proud to exclusively house the Jenny Packham diamond jewellery
collection at Goldsmiths, where it has been resident for the last six years and
available in over 30 showrooms. Our exclusive collaboration with Jenny Packham
presents a range of desirable and showstopping bridal pieces that are perfect for
the big day, as well as every day.
Jenny Packham Exclusive Amafli Coast Collection Wedding Band
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 GUCCI Advertising Campaign
One of the world’s most acclaimed fashion houses, GUCCI represents Italian
craftsmanship at its best. Founded in 1921, GUCCI has been a major player in the
luxury world for over 100 years. Embracing an eclectic, contemporary and romantic
style, GUCCI jewellery redefines luxury for the 21st century with an influential and
innovative approach.
Inspired by the deep-rooted romantic history of the original fashion house as
well as by the design language of its creative directors, GUCCI jewellery has changed
over the years from the logo-centric vision of the 1990s with the interlocking G’s
and Horsebit designs to the more romantic designs championed by current Creative
Director, Alessandro Michele. However, all these designs sit together beautifully in
the GUCCI universe, meaning that whether it’s the perfect pair of earrings, an
elegant bracelet, breath-taking necklace or statement ring, there is something to
suit all personalities and tastes.
GUCCI jewellery continues to go from strength to strength, exploring modern
romance and symbols of love in its Link to Love collection, and redefining house
codes through its fine-jewellery collection with the likes of its yellow and white gold
rings set with precious gemstones.
We are proud to have partnered with GUCCI jewellery for many years,
showcasing the brand’s finest pieces throughout our showrooms in the UK and US
and exclusively housing pieces from the brand’s Heart collection.
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R B R A N D PA RT N E R S H I P S
continued
MIKIMOTO was founded upon a dream by Kokichi Mikimoto “to adorn the necks
of women around the world with pearls.” Kokichi’s passion was pearls, and he was
fondly known as the Pearl King. It was in 1893 that he was successful in creating the
world’s first cultured pearls, and subsequently MIKIMOTO cemented itself in the
history books. The brand has continued to produce exquisite pearls set in daring
jewellery creations ever since.
The house of MIKIMOTO is built on a love for these pure and lustrous gems of
the sea and a desire to showcase them in surprising and unusual ways. As the leading
producer of the finest quality cultured pearls, MIKIMOTO has become synonymous
with superior quality and immeasurable beauty. Each stunning piece of jewellery
illustrates the skilled craftsmanship and attention to detail that has gone into
creating each piece as well as the sophisticated, modern design language spoken by
the brand.
MIKIMOTO personifies excellence with the finest cultured pearls in the world.
To own a piece of MIKIMOTO jewellery is nothing short of a luxurious pleasure.
We have had the pleasure of partnering with MIKIMOTO for 18 years,
showcasing the brand’s lustrous pearl creations throughout our showrooms in both
the UK and US.
MIKIMOTO Classic Pearl Strands
MIKIMOTO Advertising Campaign
64
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Birks Snowflake Collection Stud Earrings
The story of Birks began four centuries ago when the Birks family were master
silversmiths in Sheffield, England. Though the brand’s roots lie deep in English
craftsmanship, it truly came to life when Henry Birks opened a boutique in the
heart of Montreal in 1879. His lifelong dream became a reality and grew into a
magnificent fine jewellery legacy that is still thriving today. Inspired by a land with
astounding natural beauty and unique joie de vivre, Birks became a treasured part
of Canadian heritage. With incomparable quality and fine craftsmanship, Birks
acquired a lasting place in the hearts of Canadians and is now an iconic Canadian
brand that is cherished and distributed internationally. As Canada’s leading designer
of fine jewellery, timepieces and gifts, their iconic blue box has proudly been part of
Canadians’ lives since 1879. Passed down from generation to generation, Birks
continues to share in Canadians’ heartfelt moments and treasured stories.
We have had the pleasure of partnering with Birks for several years, showcasing
the brand’s collections throughout our showrooms in both the UK and US.
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R P O RT F O L I O
A MU LTI - CH A N NE L
NET WOR K
Our showrooms are located in prominent, high-profile shopping areas
within the UK and US and feature a spacious, contemporary, inviting,
welcoming, high-end luxury feel, further enhancing the prestigious brands
which they showcase. Our estate includes multi-brand showrooms and
mono-brand boutiques in both the UK and the US, supported by a leading-
edge ecommerce platform.
In the UK, the portfolio covers the breadth of the market, with representation
in most major cities nationwide. In the US, the Group is primarily represented in
Florida and Georgia with Mayors showrooms and in Las Vegas, New York and
Boston with Watches of Switzerland showrooms.
In late 2020, we entered new markets with our mono-brand boutique format,
including Santa Clara, California; King of Prussia, Pennsylvania; and Nashville, Tennessee.
In 2021 Watches of Switzerland expanded further with new showrooms in Plano,
Texas; Minneapolis, Minnesota; Cincinnati, Ohio. In the same year, we also acquired
three Betteridge showrooms.
“What differentiates us is what we sell and
how we sell it. We provide an exceptional
experience to our clients through our
showrooms, which are modern, inviting,
and luxurious and staffed by our highly
trained, expert colleagues.”
BRIAN DUFFY
CEO
MULTI-BR AND FLAGSHIPS
US
Located in the most prestigious locations, flagship showrooms typically feature a
more extensive product offering in a larger footprint relative to other showrooms
in the portfolio, as well as dedicated spaces to host special client events. In the
UK, this channel is represented by the ‘Golden Triangle’ Watches of Switzerland
showrooms in central London; Regent Street, Oxford Street and Knightsbridge
and in regional locations with Goldsmiths in Meadowhall, Sheffield, Trafford
Centre, Manchester and Bullring in Birmingham.
In the US, there are two Watches of Switzerland flagship showrooms
located in New York; Soho and Hudson Yards, and one in the Wynn Resort in
Las Vegas as well as three Mayors flagship showrooms in the Aventura Mall in
Florida, Lenox Square in Atlanta and Dadeland Mall in Miami.
Showrooms in our US portfolio are predominantly shopped by the domestic
client. The Mayors network is located in Florida and Georgia, with an ongoing
showroom elevation programme. We operate two Watches of Switzerland
flagship showrooms in New York, a market with similar demographics to
London but with less investment and higher fragmentation. We are also present
in the highly lucrative Las Vegas market with showrooms located within the
Wynn Resort, including a multi-brand showroom and Rolex, OMEGA and
Breitling mono-brand boutiques. Watches of Switzerland expanded in 2021
with new showrooms in Texas, Minnesota and Ohio. We also acquired three
Betteridge showrooms in Aspen and Vail, Colorado and Greenwich Connecticut.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 UK REGIONAL
MONO-BR AND BOUTIQUES
Outside London, a well-situated network of premium regional showrooms in
the UK provides scale and national coverage and caters to a more local,
domestic client base. Multi-brand showrooms across all three brands (Watches
of Switzerland, Mappin & Webb, Goldsmiths) are located in high profile,
prominent locations, primarily shopping centres, in cities such as Manchester,
Birmingham and Liverpool. 2021 saw the launch of a new luxury Goldsmiths
concept to elevate the brand and provide exceptional client experience.
The mono-brand boutique format allows for a more tailored and brand-specific
environment and has contributed to further strengthening and enhancing our
brand partnerships. The Watches of Switzerland Group operates mono-brand
boutiques on behalf of Rolex, OMEGA, TAG Heuer, Breitling and TUDOR in
both the UK and the US, FOPE in the UK and Audemars Piguet, Grand Seiko
and BVLGARI in the US.
In FY22, we opened 16 mono-brand boutiques across the US and UK. As at 1
May 2022, we operated a global network of 55 mono-brand boutiques,
including 38 in the UK and 17 in the US.
TR AVEL RETAIL
ECOMMERCE
Travel retail provides high visibility in a prominent setting to a discerning
international client base. The Group maintains a strong presence in Heathrow
Airport in Terminals 2, 3, 4 and 5 with Watches of Switzerland showrooms
and Rolex mono-brand boutiques and is present in Gatwick North Terminal
with a Watches of Switzerland showroom.
Through our seven transactional websites across the UK and the US, we have
established an industry-leading ecommerce platform, a key component of our
multi-channel strategy. We continue to invest in enhancing the sites and
improving the client experience, through initiatives such as next day delivery,
the ‘By Personal Appointment’ booking service, both in-showroom and
virtual, and the Luxury Watch and Jewellery Virtual Boutique. The ecommerce
platform is built on SAP Commerce, which offers the benefit of a common
ERP and ecommerce technology vendor.
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
O U R S H OW RO O M S
A W E L L - I N V ESTE D PORTFOL IO
Our multi-channel leadership has been established through a network which includes multi-brand
showrooms, a presence in travel retail, a strong online platform, and a growing portfolio of mono-brand
boutiques in partnership with Rolex, Audemars Piguet, OMEGA, TAG Heuer, Breitling, TUDOR,
Grand Seiko, BVLGARI and FOPE. Our well-invested portfolio consists of 131 showrooms in the UK and
40 showrooms in the US.
Watches of Switzerland is a globally recognised
modern, leading retailer of the most prestigious
luxury watch brands in the world including Rolex,
Patek Philippe, Audemars Piguet, OMEGA,
Cartier, TAG Heuer, Breitling, TUDOR, Blancpain,
Vacheron Constantin, Panerai, IWC, Jaeger-
LeCoultre, Piaget, Hublot, Zenith, Breguet, Bovet
and Grand Seiko.
Founded in 1924, Watches of Switzerland has
been retailing the world’s finest watches for over
90 years. The Company began trading as a mail-
order business under the name G & M Lane on
Ludgate Hill, and now has showrooms in leading
retail destinations across the UK, in London,
Manchester, Glasgow, Birmingham, Brighton and
Cardiff as well as presence in both Heathrow and
Gatwick Airport. In 2018 Watches of Switzerland
went international and now has seven showrooms
spanning six states including New York, Nevada,
Massachusetts, Texas, Minnesota and Ohio.
Watches of Switzerland has an online
presence in both the UK (watches-of-switzerland.
co.uk) and the US (watchesofswitzerland.com). In
addition, there is also an online presence with
Analog:Shift, our vintage and pre-owned specialist
(analogshift.com).
2016 saw the relaunch of Mappin & Webb and
since then, the brand has been transformed into
a luxury watch and jewellery retailer with
showrooms in key locations such as Manchester,
Glasgow, Gleneagles Hotel, London and a large
showroom on Regent Street. Mappin & Webb is
for Rolex, Patek Philippe,
the destination
OMEGA, Cartier, Jaeger-LeCoultre and Breitling.
Granted a Royal Warrant by Her Majesty
Queen Victoria in 1897, the Company has held a
Royal Warrant to each succeeding monarch and
‘Jewellers,
currently holds appointments as
Goldsmiths and Silversmiths’ to Her Majesty the
Queen and ‘Silversmiths’ to His Royal Highness
The Prince of Wales.
In 2012, Mappin & Webb’s master craftsman
was appointed Crown Jeweller, custodian of the
Crown Jewels of Her Majesty the Queen, the
greatest honour that can be bestowed upon a
jeweller. In 2017, another Mappin & Webb master
craftsman was appointed to the position and
continues to hold this position.
Mappin & Webb also has a well-established
online presence and ecommerce platform with
mappinandwebb.com.
Goldsmiths is the UK destination for luxury
watches such as Rolex, OMEGA, Cartier, TAG
Heuer, Breitling, and TUDOR in key cities including
Newcastle, (where the Goldsmiths brand began
in 1778), Manchester, Sheffield, Birmingham,
Liverpool and Glasgow. The luxury watch offering
is also complemented by luxury jewellery which
includes brands such as FOPE, Messika, GUCCI,
Jenny Packham and Mappin & Webb.
In 1919, Goldsmiths was appointed as a
Rolex agency and 2019 saw the centenary
celebrations of the partnership between the
Watches of Switzerland Group and Rolex.
The Goldsmiths brand has been transformed
over the last seven years and in 2021 a new
luxury showroom concept was rolled out across
seven showrooms including Leicester, Reading
and Braehead. The new concept elevates the
Goldsmiths brand to a new luxury level and
transforms the client experience. The concept
will continue to be rolled out across the portfolio
in 2022.
Goldsmiths also trades successfully online
with goldsmiths.co.uk.
68
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 The Watches of Switzerland Group is very proud
to have been selected to operate single brand
boutiques on behalf of some of the most
important brand partners. These mono-brand
boutiques give the opportunity to showcase the
timepieces in a more tailored, brand-centric
environment within purpose-designed settings.
This enables the ethos and culture of each
individual brand
thoroughly
demonstrated than is often possible in a multi-
brand showroom environment.
to be more
The Watches of Switzerland Group
operates mono-brand boutiques on behalf of
Rolex, OMEGA, TAG Heuer, Breitling and
TUDOR in both the UK and the US, FOPE in the
UK and Audemars Piguet, Grand Seiko and
BVLGARI in the US.
Mayors is one of the most recognised luxury watch
and jewellery retailers in the US, operating in
Florida and Georgia with a portfolio of showrooms.
Mayors offers a prestigious collection of
brands such as Rolex, OMEGA, Cartier, IWC, TAG
Heuer, Jaeger-LeCoultre, Mikimoto, BVLGARI,
Messika and Roberto Coin, as well as Mayors’ own
collections of bridal, diamond and gold jewellery.
The brand is steeped in a rich heritage,
founded by Irving Mayor Getz in 1910 in
Cincinnati, Ohio. In 1937, he opened the first
Mayors store in the heart of downtown Miami’s
business district. When Irving passed away, his
son Samuel assumed control and developed
Mayors’ reputation as one of the nation’s finest
watch and jewellery retailers – a provider of
outstanding client service.
Mayors operates a transactional website,
mayors.com. Mayors was acquired by the
Watches of Switzerland Group in 2017.
Family owned and operated since 1897, Betteridge
represents five generations of American-made
fine jewellery. Founded in New York City in the
early twentieth century, Betteridge has been
making custom jewellery in American workshops,
using local craftsmen ever since.
After nearly 125 years in the watch and
jewellery business, Betteridge showrooms in
Greenwich, Vail and Aspen were acquired by the
Watches of Switzerland Group. The Betteridge
acquisition, combined with existing Watches of
Switzerland and Mayors showrooms, gives the
Watches of Switzerland Group a market-leading
position in the US, with a strategic retail foothold
in the Northeast and Mountain regions and
operations in two new states.
the
The Betteridge, Greenwich, Connecticut
location has become
largest physical
showroom in the Group’s North American
portfolio. Each of the three locations offer
exceptional opportunities for expanded growth
with Rolex, Patek Philippe and other global
luxury watch brands as well as leading jewellery
brands including CHANEL, Buccellati, Verdura,
and Marco Bicego. In addition, there is a valuable
influx of existing watch and jewellery clientele.
The Betteridge website is currently being
revamped and will launch in Autumn 2022.
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
B U S I N E S S M O D E L
HOW THE GROU P CR E ATES VA LU E
To WOW our clients while caring for our colleagues, our communities and our planet.
OUR PURPOSE
WHAT WE DO
We partner with the most prestigious luxury watch and jewellery brands to provide the highest level of client
service by well-trained, expert colleagues in modern, luxurious and welcoming showroom environments and
state-of-the-art online sites. This is all supported by leading-edge technology and bold, impactful marketing.
The Group operates in the UK, US and has announced further expansion into the European market.
INPUTS
HOW WE CREATE VALUE
BR AND
PARTNERSHIPS
COLLEAGUES
CLIENTS
SHOWROOMS
TECHNOLOGY
AND DIGITAL
CAPABILITIES
BR AND PARTNERSHIPS
SHOWROOM ENVIRONMENT
We collaborate with our brand partners to elevate and expand
their distribution and partner on demand forecasting, product
launches, showroom projects, online, clienteling, marketing and
learning and development for our colleagues. Please see page 84
for further details.
Our well-invested showrooms are luxurious, open, welcoming,
contemporary, spacious, non-intimidating and browsable.
The design concept is regularly assessed in order to ensure
we continue to appeal to a broad client demographic and
drive high levels of productivity across our estate.
CLIENT EXPERIENCE
MARKETING
Our showroom colleagues provide expertise and knowledge to
ensure an exceptional client experience through extensive learning
and development.
During the year we launched our industry leading Xenia Client
Experience Programme. Please see pages 86 and 87 for further
details.
We deliver impactful marketing focused on digital
communications, CRM, PR, client experiences and
co-operative activity with brand partners. Our editorial
content across watches and jewellery provides an authoritative
voice within our market. Please see pages 88 to 89
for further details.
MULTI-CHANNEL
OPER ATIONAL EXCELLENCE
Our multi-channel model spans a well-invested showroom
network, with flagships, regional showrooms, travel retail and
mono-brand boutiques complemented by market-leading
ecommerce platforms. The Group has a truly multi-channel
approach, which includes click & collect, and an in-person
or virtual appointment system.
In FY22 we launched our Luxury Watch and Jewellery Virtual
Boutique, a team of fully trained sales professionals who provide
the full range of client service through our ecommerce channel.
Technology: Our leading-edge IT systems are based on a
single SAP platform powering showroom point of sale, CRM,
reporting solutions, live inventory availability and operations.
This single platform enables rapid expansion capabilities in
new markets or through acquisitions.
Merchandising: Dynamic inventory management optimises
stock availability, enhances showroom productivity and in
the UK, allows for nationwide coverage, giving us a key
competitive advantage.
Retail operations: We aim to continually drive productivity
and profitability, with a high level of accountability and
performance management.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 SCALE
High barriers to entry created through national coverage
in the UK with a portfolio of 131 showrooms and a growing
and significant presence in the US with 40 showrooms
(as at 1 May 2022).
FINANCIAL DISCIPLINE
Financial performance: We run all our showrooms to
be profitable, leveraging showroom and central overheads
through top line growth with strict investment criteria on
projects or acquisitions.
Cash generation: The strong, consistent generation of cash is
fuelled by strict working capital management, with sufficient liquidity
to fund growth and to provide for potential acquisition opportunities.
We take a disciplined and data-led approach to capital allocation,
aiming to deliver long term sustainable earnings growth whilst
retaining financial capability to invest in our business and to execute
our strategic priorities.
COLLEAGUES
The Group invests in colleagues through significant training and
development. During FY22 the Group gifted 50 free shares to
all colleagues as a thank you for their continued dedication and
also launched a share save scheme, allowing colleagues to share
in the continued success of the business. The launch of our
‘Workplace’ communication platform will further enhance
colleague collaboration and engagement.
COMMUNITIES AND PLANET
During FY22, the Group launched The Watches of Switzerland
Group Foundation which supports a number charities, with an
emphasis on helping poor and vulnerable people out of poverty.
£4.5 million was paid to the Foundation in FY22, of which
£1.5 million was accrued in FY21. Please see pages 130 to 133
for further details.
The Group has an ESG Committee, which ensures our ESG
priorities are governed at the highest level of the business.
Additionally, a highly experienced Head of ESG was recruited.
We support a more circular economy through our repairs and
pre-owned businesses and have set targets in relation to our
environmental impact. Please see pages 134 to 137 for
further details.
VALUE CREATED
£1,238m
FY22 REVENUE
£130m
ADJUSTED EBIT1
27.4%
FY22 RETURN ON CAPITAL
EMPLOYED1
£187m
CASH GENERATED FROM
OPERATIONS
40
131
171
US SHOWROOMS
UK SHOWROOMS
TOTAL SHOWROOMS
2,400+
NUMBER OF COLLEAGUES
£4.5m
PAID TO THE WATCHES OF
SWITZERLAND GROUP
FOUNDATION
1 This is an Alternative Performance Measure. Refer to the Glossary on pages 283 to 285 for definition
and reconciliation to statutory measures where relevant.
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 72
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 C H I E F E X E C U T I V E O F F I C E R ’ S R E V I E W
“This has been a tremendous year for
the Group, producing record sales and
profits. It is particularly pleasing to have
delivered this performance against such
strong prior year comparatives, with the
expertise and dedication of my colleagues
proving invaluable.
We are undoubtedly operating in a
growing segment, but it is our distinctive
and proven business model, the strength of
our brand partnerships, our international
scale, our bold marketing campaigns and
our dedication to client service which
sets us apart. Taken together, these
inherent strengths have seen us attract
new consumers and continuously gain
market share, strengthening our position
as the destination for luxury watches and
luxury jewellery.”
BRIAN DUFFY
CEO
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C H I E F E X E C U T I V E O F F I C E R ’ S R E V I E W
continued
Looking back on FY22, our teams did an outstanding job,
delivering Group revenue of £1,238 million, +40% in
constant currency and excluding FY21’s 53rd week.
Profitability was also strong with Adjusted EBIT1 of £130
million, +68% on the prior year and Adjusted Profit Before
Taxation of £127 million, +76%. We generated strong cash
flow, a record level of Return on Capital Employed of
27.4% and closing net debt1 of £14 million as at 1 May 2022
(2 May 2021: £44 million).
FY22 is the third year for the Watches of Switzerland
Group reporting on the London Stock Exchange as a public
listed company. All three years were impacted significantly by
the pandemic through showroom closures, reduced traffic or
supply disruption. Despite these challenges our Group delivered
increased sales of +62% at a CAGR of +17% (in constant
currency) between FY19 and FY22. Adjusted EBIT has grown
by +152% over that same period. Our advanced technology, our
multi-channel approach, our in-house resources and, more than
anything, our team’s motivation and creativity allowed the
Group to respond positively to disruption and optimise our
results for the benefit of our clients, brand partners and
shareholders. During this time, we actively pursued investment
opportunities
for new showrooms, refurbishments, and
acquisitions in addition to increased marketing, particularly
digital, to support our growing business. The above sales CAGR
was achieved despite the loss of international sales (tourist and
airport) which represented 33% of sales in FY19 and 3% in
FY22. Our performance, despite the disruption experienced
during the pandemic, gives us confidence in the strength of the
market and the resilience of our business model. We are well on
our way to deliver against our Long Range Plan, shared with the
Market in July 2021.
Our Group provides the largest selection of luxury
watches covering a wide range of prices and consumer
preferences, including the largest and best known brands
alongside smaller independent brands. We stock confidently
which provides our clients with a greater width and depth of
availability. Our merchandising approach underpins our positive
watch sales momentum in FY22.
Luxury jewellery also had an exceptional year, with sales
+86%2 on last year, reflecting a strong market, improved
ranging and incremental growth from the Betteridge acquisition
and the opening of our first BVLGARI mono-brand boutique in
Miami, Florida.
This year saw the launch of our Xenia Client Experience
Programme in all our showrooms. We see this as a market-
leading programme, which will lift our interactions with our
clients to new levels.
We were really pleased with the performance of
ecommerce this year, with Group sales for FY22 +5%2 on last
year, when our showrooms were closed for approximately 26
weeks during the pandemic. On a two-year comparison basis,
sales were up +128% on FY20. We have had great success with
our Luxury Watch and Jewellery Virtual Boutique, which was
launched during pandemic lockdowns and which we are
expanding. The Luxury Virtual Boutique bridges the gap
between online and showrooms, offering unparalleled client
service in the industry under a truly multi-channel approach.
We have also commenced our journey of expansion into
the European market, which begins with six mono-brand
boutiques in Stockholm, Copenhagen, and Dublin in FY23.
I am also proud of the progress we are making on ESG.
Our ESG Committee was established in the year and we have
made great strides in developing our strategy, targets and
commitments. Additionally, The Watches of Switzerland
Group Foundation was also launched, the aim of which is to
provide essential support to charities located in the communities
within which we operate, focusing on poverty, the advancement
of education and relief to those in need in both the UK and the
US. The Foundation is managed by a Board of Trustees, the
majority of whom are independent, which I personally chair,
and the Group donated £4.5 million in the year (£1.5 million of
which was accrued in FY21).
Looking ahead, our FY23 guidance issued on 18 May 2022
projects sales between +£1.45-£1.50 billion and Adjusted EBIT of
£157-£169 million. Our projections assume no further lockdowns
in the UK, the US and Switzerland, and only includes committed
projects. We closed FY22 with net debt of £14 million and project
we will have net cash of between £35-45 million by the end of
FY23. This assumes capex of £70-£80 million, including new offices
in the UK.
Finally, I am delighted to welcome our new CFO, Bill Floydd,
who joined the Group in January 2022, bringing with him a
wealth of financial and listed company experience. I look forward
to working closely with him over the coming years. I would like
to thank Anders Romberg for his help and support over the past
seven years, we wish him every success for the future.
BRIAN DUFFY
CEO
1 Refer to the Glossary on pages 283 to 285 for definition and reconciliation to statutory measures.
2 Revenue growth metric presented on a constant currency basis excluding the FY21 53rd week.
74
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 75
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C H I E F E X E C U T I V E O F F I C E R ’ S R E V I E W
continued
U K A N D EU ROPE
The UK business bounced-back from the pandemic year strongly,
with UK sales of £810 million +36%1 on last year.
This sales performance was driven by strong demand across both luxury watches
and luxury jewellery. Luxury watch sales were +33%1 on last year and luxury
jewellery sales were +71%1, reflecting a strong post-pandemic consumer appetite
for these products.
This was a busy year for showroom developments; we rolled-out our
Goldsmiths Luxury concept to seven showrooms (Canterbury, Reading, Braehead,
Brighton, Lincoln, Leeds White Rose and Leicester). The Goldsmiths Luxury design
concept provides a modern, contemporary, browsable space with a focus on
hospitality. We have seen positive results in terms of client feedback and significant
sales uplifts from these showrooms following the renovations. The enhancement of
our showroom network also extends to non-Rolex anchored showrooms where
we have created a new design concept. A further seven showrooms will be
converted to the Goldsmiths Luxury concept during FY23. The elevation of our
showroom portfolio does not end with Goldsmiths, we are also developing our
Watches of Switzerland and Mappin & Webb showrooms, with a number of
projects planned.
We have continued to expand our mono-brand boutique footprint opening a
further 12 mono-brand boutiques across the UK. Plymouth, a new city for us,
showcased our first triple mono-brand boutique, with each brand standing side by side
and sharing back of house facilities. The mono-brand boutique concept continues to
allow us to provide a superior presentation of brands, which in turn increases our market
share. We have a further ten mono-brand boutiques contracted for FY23.
We are excited to have relocated and upgraded our Mappin & Webb
showroom in the historic town of Chester. During the year, we also refurbished a
further five showrooms, including two of the ex-Fraser Hart stores and our Mappin
& Webb showroom on Regent Street, London.
The next financial year will see the opening of our new Battersea showroom in
the renovated old power station. As well as this Watches of Switzerland showroom,
we are opening another four mono-brand boutiques including a Breitling boutique
with a Breitling café, a first for the UK.
We ended the year with 93 multi-brand showrooms and 38 mono-brand
boutiques in the UK.
“I am delighted with the success of our UK
division throughout FY22. We positively
delivered strong sales growth across both
luxury watches and jewellery, and in turn
we focused on the growth of our domestic
client base. We continued the development
of our digital first approach to marketing
subsequently driving awareness, conversion
and sales. Our enhanced showroom
development programme across our
network, with specific focus on mono-
brand boutiques, new showrooms and the
elevation of our Goldsmiths brand was all
delivered successfully.”
CR AIG BOLTON
PRESIDENT UK & EUROPE
Goldsmiths, Highcross, Leicester
1 Revenue growth metric presented on a constant currency basis excluding the FY21 53rd week.
76
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Rolex mono-brand boutique, Glasgow
Throughout the year, we continued our investment in performance marketing
successfully executed across a combination of channels. In addition to the digital
activity, we have supported activity with traditional media as well as giving our
colleagues in showrooms clienteling guides to enable one-on-one reach out.
In FY22, our colleagues and clients were delighted to be able to host in-person
events once again. Working with our brand partners this year’s event series ranged
from intimate, unique client experiences and dinners, through to showroom
exhibitions and new launches, showing our appreciation to clients for their ongoing
loyalty and encouraging clients back into our showrooms.
EUROPE
The team has been working hard on our entry into the European market. Six mono-
brand boutique opportunities have been secured in Stockholm, Copenhagen and
Dublin. Our first European opening took place in June 2022, with our Breitling
mono-brand boutique in Stockholm, and the remainder are planned to open during
FY23. Significant market research has been performed and we look to extend our
mono-brand boutique model into other countries in the years that follow.
We have further built on our leadership position in the UK and are well
positioned to continue to invest for further growth in this market alongside
commencing our European journey.
Mappin & Webb, Chester
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continued
US
US sales of £428 million were +48%1 on last year. Luxury watch sales growth was +48%1 on the prior
year, this significant growth was very broad based with all brands performing excellently.
Betteridge, Greenwich, Connecticut
Luxury jewellery growth has also been impressive at +130%1, boosted by the strong
market, the relaunch of our luxury jewellery in our Mayors showrooms, the
acquisition of Betteridge and the opening of a BVLGARI mono-brand boutique.
In September, October and December 2021, we successfully executed three
acquisitions totalling five showrooms. These new showrooms in Minneapolis
Minnesota, Plano Texas, Greenwich Connecticut, Vale and Aspen Colorado,
extend our showroom estate into four new US states. These showrooms bring
with them a very strong portfolio of luxury watch agencies and in the case of
Betteridge, strong high value jewellery expertise (for more details on Betteridge
and our approach to acquisitions refer to page 98). We are pleased with the
performance of these showrooms and have welcomed new colleagues to the wider
Watches of Switzerland family.
Following the year-end, we also completed the acquisition of one Rolex
anchored multi-brand showroom in New Jersey on 22 June 2022.
There has been lots of development activity in the US, across multi-brand
showrooms and the expansion of our mono-brand boutique networks. In March
2022, we opened our new Watches of Switzerland showroom in Kenwood Towne
Centre, Cincinnati, Ohio. This marks our first showroom in Ohio, which also
anchored by Rolex.
1 Revenue growth metric presented on a constant currency basis excluding the FY21 53rd week.
Refurbishment of our existing estate was a key priority in the year. Four
showrooms were refurbished or expanded, which included our Rolex mono-brand
boutique in the Wynn Resort, Las Vegas, Mayors Aventura in Miami, Florida,
Mayors Millenia Mall in Orlando, Florida and Mayors Boca Raton, Florida. To date
we have refurbished half of the Mayors estate acquired in 2017 and have been
delighted by the performance of these showrooms post investment.
This was a year of firsts for US mono-brand boutiques, demonstrating our
strong partnership with luxury watch and jewellery brands. We opened our first
TUDOR boutique in the US at the Millenia Mall, Orlando and our first ever
BVLGARI mono-brand boutique in Aventura, Miami. The boutique also includes
one-of-a-kind high jewellery exclusive to this location. Following the success of the
Grand Seiko ‘pop-up’ we had last year, this is now a permanent feature through a
mono-brand new boutique in New York. We have also continued our strong
relationship with Breitling, opening a mono-brand boutique in Short Hills, New
Jersey. This boutique joins our portfolio of Breitling mono-brand boutiques in
Nashville, Tennessee and San Jose, Philadelphia.
We ended the year with 23 multi-brand showrooms and 17 mono-brand
boutiques in the US. We now operate in 14 states in the US.
We have an exciting pipeline of projects for FY23, including the opening of our
flagship Watches of Switzerland showroom in American Dream, New Jersey.
78
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 “At the Watches of Switzerland Group,
we continue with our multi-channel
approach. The client ultimately decides
their shopping preference. We are
delighted to open our first BVLGARI
and TUDOR mono-brand boutiques
adjacent to our newly refurbished
Mayors showrooms in Aventura and
Orlando respectively. Our newly
refurbished Rolex mono-brand boutique
in the Wynn Resort, Las Vegas elevates
our presence in Las Vegas even further.”
DAVID HURLEY
PRESIDENT NORTH AMERICA & DEPUT Y CEO
Mayors and TUDOR mono-brand boutique, The Mall at Millenia, Orlando, Florida
This showroom will be anchored by both Rolex and Cartier. Our Mayors
refurbishment programme continues with a further three showrooms in Florida
and we will continue to expand our mono-brand boutique network with a further
nine boutiques.
Since our acquisition of Analog:Shift last year, our vintage and pre-owned
proposition has gone from strength to strength. During the year, we rebranded
Analog:Shift, extended showroom distribution, launched a new transactional
website and invested in a new office space which includes hospitality for clients. We
have also invested in pre-owned product and with the success of the dedicated
Analog:Shift space in our Watches of Switzerland Soho showroom, introduced a
similar concept to our newly refurbished Mayors at Millenia showroom and our
newly acquired Watches of Switzerland showroom in Plano Texas. As we refurbish
and expand our multi-brand showrooms, we will look to include Analog:Shift
where we see market opportunity. Analog:Shift also helps support the circular
economy through expanding the life of luxury watches. For more details on
Analog:Shift refer to page 100.
The marketing focus for the year was on driving brand awareness with
investment in performance marketing, social media, visual merchandising, events,
private clienteling, traditional advertising and PR.
FY22 saw the launch of “Anytime. Anywhere.”, a ground-breaking advertising
campaign featuring eight leading brand partners including OMEGA, TAG Heuer,
Breitling, Grand Seiko, MB&F and Ulysse Nardin.
The year also saw a return to in-person events providing exceptional client
experiences such as invites to our customised “Anytime. Anywhere.” Airstream
which served as a multi-branded retail location throughout the summer at its
residency in the Hamptons, New York, through to a partnership with Longines at
the Hamptons Classic Horse Show. We also partnered with Rolex to create an
off-site event celebrating the Spring release of the Rolex Novelty Collection.
In March 2022, we unveiled a limited-edition milestone watch with DOXA.
James Lamdin, Director of Vintage and Pre-owned, worked with DOXA to create
the special new Watches of Switzerland limited edition of the DOXA Army watch.
Watches of Switzerland is the exclusive distributor for DOXA in the US.
We are generating strong results and believe there is a significant growth
opportunity in the US, where we are well positioned to continue delivering on our
ambition to become the clear market leader.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 O U R S T R AT E G Y
GROU P ST R ATEGY
DE L I V E R I NG
OU TSTA N DI NG R ESU LTS
The Group delivered an outstanding sales and profit
performance during FY22, while delivering against
the strategic priorities laid out in our Long Range
Plan to FY26, issued in July 2021.
In recognition of our commitment to ESG matters,
we have now added to our strategic priorities
a commitment to continue to advance our
ESG agenda.
Within the framework of our seven strategic
priorities, we made significant progress through
elevated levels of investment and focus on further
developing our client-centric business model.
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81
O U R S T R AT E G Y
continued
1. GROW R EV E NU E , PROFIT A N D
R ETU R N ON C A PITA L E M PLOY E D
Against a backdrop of more normalised trading patterns, with our showroom network being open
throughout the year, we spent £41 million of expansionary capex to both further enhance and
build out our showroom portfolio, in the UK and the US.
During the year, projects included:
UK
– Introduction of Goldsmiths Luxury concept in seven showrooms
– Relocation and upgrade of our Mappin & Webb showroom in Chester
– Further development of the showroom network with five refurbishments
across the estate, including two of the ex-Fraser Hart stores and one new
Goldsmiths showroom in Edinburgh St James
– Opening of 12 mono-brand boutiques in the UK
US
– Opening of our new Watches of Switzerland showroom in Cincinnati, Ohio.
The showroom is anchored by Rolex and features prestigious luxury brands
such as Cartier and TUDOR
– Refurbishment and expansion of Mayors Aventura
– Refurbishment of our Rolex mono-brand boutique at the Wynn Resort,
Las Vegas
– Expansion of the US mono-brand boutique footprint with four new boutiques,
including our first BVLGARI, TUDOR and Grand Seiko mono-brand boutiques
These showroom development projects were achieved while the Group continued
to adhere to its strict capex payback metrics. Prior to entering into any lease
agreement, we confirm brand support for the project.
The US online platforms for Watches of Switzerland and Mayors were upgraded
and a new platform for Analog:Shift implemented. We continue to invest in growing
our US online business.
US ACQUISITIONS
During the year, we purchased five showrooms through three separate acquisitions.
These showrooms provide the Group entrance into four new states with locations
in Plano (Dallas), Texas; Vail and Aspen, Colorado; Greenwich, Connecticut and
Minneapolis, Minnesota. These showrooms come with an impressive portfolio of
luxury watch brands. We have plans to expand and refurbish these showrooms over
the next few years. The total consideration for these acquisitions was £48 million and
had combined annual sales of c.US$100 million under their previous ownership.
Following the year-end, we completed the purchase of one Rolex anchored
showroom in New Jersey on 22 June 2022.
FUTURE PIPELINE
We will continue to invest in our showroom portfolio in the UK and US and have
an exciting pipeline of future projects, including:
– A new Watches of Switzerland showroom in Battersea, London, alongside
mono-brand boutiques
– Opening of our new Watches of Switzerland flagship showroom in the
American Dream complex, New Jersey
– Continued roll out of Goldsmiths Luxury with a further seven elevated
showroom formats
– One further showroom to be refurbished in the Mayors network in Florida
– Expansion of the portfolio in the UK and US with a further 19 mono-brand
boutiques
EUROPEAN EXPANSION
In our Long Range Plan, we discussed our strategy to enter into the European
market. Significant progress has been made in our European entry and FY23 will
see the following:
– Opening of three mono-brand boutiques in Stockholm, Sweden
– Two new mono-brand boutiques in Copenhagen, Denmark
– One mono-brand boutique in Dundrum Dublin, Republic of Ireland
Watches of Switzerland, Kenwood Towne, Cincinnati, Ohio
82
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Goldsmiths new luxury concept, Reading
Mayors, Aventura Mall, Aventura, Florida
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continued
2 . E NH A NCE ST RONG BR A N D
PA RT NE R SHIPS
Our strong and long-standing relationships with the most recognised and prestigious luxury watch
and jewellery brands have remained a point of distinction. These relationships have been forged over
many years, but also include new relationships with exciting brands.
This year saw the first physically held Watches and Wonders event in Geneva,
which was a fantastic opportunity to reconnect with the brands in person and view
their exciting new products.
We continue to open new boutiques anchored by Rolex such as Watches
of Switzerland Battersea and American Dream, New Jersey, which are due to open
in FY23.
We have also expanded our mono-brand boutique network, with the support
of brand partners, which includes the entry into the European market in FY23. We
now have mono-brand boutique relationships with Rolex, Audemars Piguet,
OMEGA, TAG Heuer, Breitling, TUDOR, Grand Seiko, BVLGARI and FOPE.
This year saw us further develop our partnerships with luxury jewellery brands.
This included the opening of our first BVLGARI mono-brand boutique and the
hosting of our High-End Jewellery events in the US. These events were partnered
with GUCCI, Messika and Uneek where we accessed first-to-market jewellery pieces.
We are also proud to have launched Watches of Switzerland Group exclusives
with Breitling, DOXA, Girard-Perregaux, Grand Seiko and Hublot and ‘first to
market’ with Jaeger-LeCoultre, Longines, Panerai, Rado and Tissot.
We also continue to increase our collaboration with brands on all aspects of
co-operative marketing, including digital communication, events and advertising.
Our colleagues within our showrooms and Luxury Virtual Boutique are watch
and jewellery experts and much of this comes from the collaboration and investment
with the brands on significant training programmes.
TAG Heuer mono-brand boutique, Roosevelt Field, Garden City, New York
The Watches of Switzerland Group Exclusive Breitling Endurance Pro
84
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Limited DOXA Army Watches of Switzerland Edition, 42.5mm in ceramic
8 5
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y
continued
3. DE L I V E R A N E XCE P TIONA L
CL IE N T E X PE R IE NCE
Our showrooms remain a cornerstone of our multi-channel offering. They are designed to appeal to a
broad audience and make our clients feel welcome through unintimidating, inviting, browsable, modern
and luxurious environments, whilst offering the greatest choice of brands and products in the world of
luxury watches and jewellery.
To further elevate our client experience, this year saw the launch of Xenia, our
internal Client Experience Programme, which takes inspiration from the world of
luxury hospitality. The programme was named Xenia – an ancient Greek concept
of hospitality typically translated as ‘guest-friendship’ or ‘ritualised friendship’ – and
internally transformed into ‘Xenia – The Art of Hosting’. Further details on Xenia
are included on page 96.
We have also seen a continued success with our Luxury Watch and Jewellery
Virtual Boutique, which was launched during the pandemic lockdowns. The Luxury
Virtual Boutique bridges the gap between online and showrooms, offering
unparalleled client service in the industry under a truly multi-channel approach. Fully
trained colleagues assist online clients with their purchases or setting up
appointments within our showrooms. We also have watch valuation experts who
are able to assist in pre-owned trade ins or purchases. This year we have increased
the number of Luxury Virtual Boutique colleagues from ten on launch to 31 and
have plans to extend further to c45 in FY23.
In the UK, we continued to develop and enhance our client experience through
our online appointment system, ‘By Personal Appointment’ accounting for
approximately 45% of our UK sales during the period. Appointment can be pre-
booked by either clients or colleagues, in-store, by phone, or with video
conferencing. The ‘By Personal Appointment’ service allows colleagues to get to
know what the client would like to see prior to the appointment and therefore
provides an opportunity to enhance the overall experience. It also allows colleagues
to discuss as a team, the client appointments for the day and how they can support
each other to deliver an exceptional client experience.
8 6
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 We measure client satisfaction through a variety of tracking methods in the UK
and the US including Net Promoter Score (NPS) via our ‘Voice of the Client’ survey
in the UK, Trust Pilot, Mystery Shops and Podium. In the UK, our NPS score
remained over 80% whilst in the US, we use Podium to measure in-store
experiences and received a rating of 4.9 out of 5.0. Our Trust Pilot score across all
our brands average 4.5 out of 5.0. We also undertake a mystery shopping
programme to ensure consistency of our luxury service offering and this year also
introduced elements to the mystery shop programme to measure our development
of the Xenia Client Experience Programme. Consisting of physical showroom visits
and digital enquiries, supplementary programmes are also conducted to measure
the joint expectations of key partner brands.
We continue to develop our after-sales and service proposition to enhance the
client experience, through several dedicated service centres, including the National
Watch Service Centre in Manchester, complemented by 12 watch workshops
located in showrooms in the UK and in the US, the HQ service centre in Fort
Lauderdale, Florida as well as eight additional workshops located in showrooms.
The capacity in the primary centres in both the UK (Manchester) and the US (Fort
Lauderdale) has recently been expanded.
Client experiences continue to be an important part of our strategy, whether
that be intimate dinners with our clients, events to celebrate product launches, or
sporting events, we focus on ensuring we give our clients exceptional experiences.
In the US in FY22, we also saw an elevated strategy to private clienteling through
one-on-one appointments which were focused on the high-net-worth clients.
Through these elegant hospitality moments, clients were able to view new and
exclusive product with a concentration on high jewellery pieces and custom curated
timepiece pairings.
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continued
4 . DR I V E CL IE N T AWA R E NESS A N D BR A N D
IM AGE THROUGH MU LTIM E DI A W ITH BOL D ,
IM PACTFU L M A R K ETI NG
The Watches of Switzerland Group performance marketing campaign
UK
We continued with our successful performance marketing campaign executed
across a combination of channels such as search & shopping, YouTube, display and
paid social media, with our strategy focused on reaching a broad luxury audience,
underpinned by bold, impactful creative and innovative bidding strategies. The
campaign showcased a breadth of range across men’s, women’s, and icons,
reinforcing the Group as the leading destination for luxury watches in the UK. This
activity was complemented by seasonal jewellery content campaigns for Goldsmiths
and Mappin & Webb, in total generating 5.7 billion impressions and 125 million
views. As the UK pandemic related restrictions eased, we launched local campaigns
with enormous success which had a significant impact on the growth we’ve seen
through display.
Social media also continues to be an important channel to inspire, engage and
target a new, younger audience. The varying social channels allow us to communicate
and share exciting new content in different formats, showcasing our expertise in the
horology and jewellery world, whilst humanising our brands and producing
authentic content that are bespoke to us. Themes included luxury gifting, new
luxury showrooms, unboxing gifts, and new launches.
We invested in several traditional print media and outdoor advertising
campaigns, partnering with key brands such as Rolex, Patek Philippe, OMEGA,
TUDOR, Breitling, TAG Heuer and Grand Seiko. This helped to create brand
awareness and drive footfall to our local showrooms and mono-brand boutiques.
Another key element to our marketing strategy for watches was the continued
investment in Calibre, our in-house watch content. We integrated Calibre into our
brand websites, allowing for a greater access to our editorial content with clients
already within the buying funnel. We launched a Calibre-specific amplification
campaign that focused on supporting the move of Calibre to our websites, specifically
for Watches of Switzerland across paid search, display and social channels such as
Facebook, Instagram as well as trialling Pinterest and LinkedIn paid activities. We
increased the frequency of our Calibre podcast from January 2022 to further
reinforce the Watches of Switzerland Group as the leading expert in luxury watches.
Our colleagues were delighted to be able to host in-person client events once
again. Working with our brand partners, this year saw one of our largest series of
events hosting more than 5,000 clients over 122 in-person events. The event series
ranged from intimate, unique client experiences and dinners, showroom exhibitions
and new launches, through to showing our appreciation to clients for their ongoing
loyalty and encouraging clients back into our showrooms.
We held a press event in London in September to launch the new Goldsmiths
Luxury showroom concept. 39 local, regional and trade journalists attended the
event, which generated both interest and coverage ahead of the launch of the first
new showroom, in Canterbury, at the beginning of October. Each of the new luxury
showrooms that opened this year, were supported with new elevated luxury
creative, through advertising, PR, editorial and client events, a level of support which
will continued into next year as we open further locations throughout the UK.
8 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 US
Marketing in the US continued to drive brand awareness and value with a strategy
encompassing custom content across digital, social, visual merchandising, events,
private clienteling, outdoor and performance enhanced marketing and advertising.
Following the launch of @WatchesofSwitzerland_USA in autumn of 2021 and
the acquisition of Timeless and Betteridge Jewelers social accounts, we have
expanded the US social media footprint by over 59,000 followers across social
channels Facebook and Instagram.
In the US, we debuted a ground-breaking advertising campaign which served
as the most extensive multi-branded timepiece campaign the industry has ever
seen. Featuring eight leading brand partners and entitled “Anytime. Anywhere.”, it
was produced in partnership with Creative Director and Photographer, Jay Gullion.
The film imagines a life well-lived, marking exceptional moments with a curated
selection of world-class timepieces, worn by industry changemakers in spectacular
settings set across the US. Watches of Switzerland US conducted a first of its kind
multi-media campaign in partnership with brand partners simultaneously featuring
lifestyle creative for brand awareness and product assets content for commercial
conversion. The dual campaigns were customised to complement one another for
maximum US exposure and impact across programmatic media titles, display,
search, YouTube, Instagram and Facebook. The campaigns came to life across
Watches of Switzerland, Mayors and Analog:Shift visual merchandising channels
running throughout the year on screen and in vitrines throughout our showrooms.
Overall, the campaign has generated over 1 billion digital impressions and 2.2 billion
media impressions.
Serving as the physical embodiment of the “Anytime. Anywhere.” ethos, a
mobile Airstream retail unit was launched in conjunction with the debut of the film.
The fully customised Airstream served as a multi-branded retail location throughout
the Summer at its residency in the Hamptons, New York.
Experiential marketing continued through physical events in the US this year.
The Summer season culminated with Watches of Switzerland hosting the
Hamptons Classic Horse Show, their only retail partner in history, and in partnership
with long time event partner, Longines. The mobile retail unit was on site to greet
the 45,000 spectators throughout the event and made the front page of the
Washington Post in a headline titled ‘Far from Fifth Avenue: Luxury brands flock to
suburbs and vacation hot spots where the rich are riding out the pandemic’.
Public Relations remains a hallmark for brand awareness success in the US. The
Watches of Switzerland Group is focused on consistency and visibility of messaging
throughout the US market. FY22 public relations activity has generated 10 billion in
media impressions including brand and executive profiles in Esquire, Forbes, GQ,
New York Times, Robb Report and Yahoo.com.
Cartier featured in the Watches of Switzerland US “Anytime. Anywhere.” campaign
10bn
IMPRESSIONS GENERATED FROM
US PR ACTIVITY IN FY22
Watches of Switzerland Airstream Retail Unit in the Hamptons, New York
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continued
5. L EV E R AGE BEST I N
CL ASS OPE R ATIONS
MERCHANDISING
Our merchandising function is a key client-focused driver of product availability and
access and provides a unique point of difference in the way we run our showrooms.
Our merchandising capabilities utilise a client-centric approach and best in class
systems to optimise stock availability, enhance showroom productivity and allow for
nationwide coverage. Our advanced product trend tracking is run on SAP software
which enables extensive showroom profiling, productivity and trend analyses, and
sales and inventory forecasting. We are able to monitor the key attributes, such as
dial colour and case size, for the variety of luxury watches we sell, providing us with
insight into market trends.
This year, we focused on product availability across our brands, we anticipated
the strong demand over the holiday period and bought deeper into popular product
lines. We have also extended the level of SKUs we have for key brands for our
ecommerce platform, to ensure we have the full range of products available by brand.
RETAIL OPER ATIONS
Our programme of continued investment has enabled us to further drive
productivity in both the UK and the US platforms. In the UK, we introduced
Goldsmiths Luxury to seven showrooms in the period. In the US, we are focused
on generating high returns from refurbishing and upgrading the remaining
showrooms in the Mayors network which have not yet been modernised.
The Xenia Client Experience Programme has enhanced our retail operations,
unlocking the full potential of our sites. For example, providing additional hosts
within the showrooms, additional technology in-store, dedicated operations
managers in larger showrooms and dedicated hospitality staff.
The Group’s showroom base is largely run via fixed rent agreements, having
successfully renegotiated certain contracts and transitioned from turnover rent to
fixed rent agreements in the prior year period. We have also renegotiated the
contracts for our showrooms in Heathrow Airport on revised terms.
IT SYSTEMS
Our leading-edge IT systems have continued to be a fundamental competitive
advantage for the Group. Our systems comprise a single and shared SAP instance
for ERP, ecommerce and business intelligence. This SAP core is supported by a
specialist point-of-sale and CRM front-end, served on mobile tablets across all our
showrooms. Our single IT template has been deployed across the Group and can
support further expansion or acquisitions as required. Our retail payment partner
Adyen equips us with a fully featured, mobile and international payment platform
across all sales channels, and both showrooms and ecommerce benefit from a
shared inventory, shared digital assets, and click and collect capabilities.
During the year, we have continued to work on the system preparations
necessary for the launch of our first European showrooms. We have successfully
tested the core system capabilities needed to support our move into Europe.
Further, our latest US acquisition has again proved the adaptability of our IT systems
and we have completed the migration of acquisitions onto our global IT template.
We continue to refresh and expand our in-store technology, ensuring showroom
teams have the best technology to hand in support of every client transaction.
9 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 91
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continued
6. E X PA N D MU LTI - CH A N NE L
L E A DE R SHIP
Our multi-channel business model is a key competitive advantage and underscores our ability to react
with speed and agility to a rapidly evolving consumer environment whilst offering our clients an
exceptional experience. We continue to invest in expanding and enhancing our platform, consisting of
multi-brand showrooms, online, travel retail and mono-brand boutiques.
MULTI-BR AND SHOWROOMS
Our multi-brand showroom network has nationwide scale in the UK and is
continuing to build at pace in the US, where we have an established presence in
Florida, Georgia, New York and Las Vegas and recently entered the new markets of
Cincinnati, Minneapolis, Plano (Dallas), Vail, Aspen and Greenwich.
Our modern and welcoming showroom environments showcase a selection of
the world’s finest watches whilst inviting our clients to have an exceptional
experience. Our investment programme continues to focus on elevating and
upgrading the existing network as well as opening in new, strategic locations.
Watches of Switzerland, Knightsbridge, London
ONLINE
We continue to leverage our market-leading position significantly building on the
largest portfolio of luxury watch brands in the UK. We have a competitive
advantage in the volume of traffic generated via our technically advanced Artificial
Intelligence (AI)-driven marketing approach and further expanded our always-on
digital performance marketing campaigns with refreshed creative and further
optimisation through automation.
Due to the changing retail landscape, we continue to focus on offering the
widest array of shopping opportunities, allowing our clients to reach out to local
showroom expertise remotely through video, voice or in-person utilising our ‘By
Personal Appointment’ booking system, alongside our centralised Luxury Watch
and Jewellery Virtual Boutique, which we have significantly expanded due to the
continued client demand of this channel.
Since September 2020, we have extended the brand offering and invested in
our US websites; US ecommerce is growing impressively.
Following our user experience audits with Baymard, Google and SAP we made
several enhancements to our platform to improve both client experience and
improve conversion.
We expanded our payment options to offer more consumer choice and
enhance the checkout process experience.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Mappin & Webb, Kingston
Working collaboratively with key partners such as Google (digital marketing), our
Luxury Watch and Jewellery Virtual Boutique and DPD (direct delivery), we use the
most efficient, cutting-edge digital marketing while offering a best in class,
harmonised omni-channel shopping experience. We have dedicated inventory for
our luxury watches across our websites, which allows us to offer a next day delivery
service until 9pm seven days a week in the UK.
Our online business had a good year, with Group ecommerce sales +5%2
versus last year. This is compared to a year where showrooms in the UK were
closed due to the pandemic.
MONO-BR AND BOUTIQUES
We have further developed and enhanced our mono-brand boutique channel.
During the year, we opened 16 new mono-brand boutiques, bringing our global
network to a total of 55 boutiques (UK: 38, US: 17) as at 1 May 2022. Our UK
network saw the opening of 12 new mono-brand boutiques, including three in
Plymouth, a new location for the Group. In the US we opened four mono-brand
boutiques, for Grand Seiko, Breitling, TUDOR and BVLGARI.
During the year, we also refurbished our Breitling mono-brand boutique in the
Trafford Centre, Manchester and the Rolex boutique in the Wynn Resort, Las Vegas.
Next year will see us further develop our mono-brand boutique network,
most excitingly with our entry into the European market with OMEGA, Breitling,
and TAG Heuer.
TR AVEL RETAIL
Travel retail in the UK has grown exponentially since the global relaxation of
pandemic restrictions, although passenger numbers and global travel remains
below pre-pandemic levels. Passenger numbers improved over the Easter holiday
period and we expect strong passenger numbers over the Summer. However, since
the removal of tourist VAT free shopping on Brexit, we do not believe conversion
at the airports will achieve pre-Brexit levels.
We have renegotiated the contracts for our showrooms in Heathrow Airport
on revised terms, which retains profitability at lower passenger levels.
2 Revenue growth metric presented on a constant currency basis excluding the FY21 53rd week.
93
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y
continued
7. C ON TI NU E TO A DVA NCE
THE ESG AGE N DA
Operating a responsible business that delivers enduring, sustainable value for all our
stakeholders is at the heart of what we do. In FY22, we undertook a programme of
work to reset our purpose and values and thereby create a framework to help govern
our commercial strategy and behaviours.
With our expertise, stunning showrooms, prestigious brand partners and rich
heritage, we are uniquely positioned to WOW our clients, while, at the same time,
care for – our colleagues, our communities and our planet – this is our Purpose.
With the full support of, and guidance from, our Board, we have strengthened
our ESG governance and developed a sustainability strategy which puts our Purpose
at its core.
During the year we have:
– Established an ESG Board Committee and appointed a Head of ESG
– Committed to Net Zero emissions by 2050 and set near term carbon
reduction targets, in line with the Paris Climate Agreement to limit global
temperatures to 1.5°C
– Grew our After Sales and Servicing operation and increased sales of
pre-owned watches across the Group
– Achieved a post-pandemic colleague engagement score of 86%
– Awarded all colleagues 50 free shares – with the option to further invest
through a new share save plan
– Ranked #11 in the FTSE 250 Women on Boards Review
– Donated £4.5 million (of which £1.5 million was accrued in FY21) to The
Watches of Switzerland Group Foundation to support local communities, with
an emphasis on helping vulnerable people in poverty
For more details on our ESG strategy, commitments and targets refer to pages 118
to 155.
Craig Bolton, President UK & Europe, the Watches of Switzerland Group and John McCorry,
CEO Newcastle Food Bank
94
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 The Manchester Service Centre
95
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y I N AC T I O N
X E NI A
The Watches of Switzerland Group has developed a reputation for delivering world class client
experiences and our Xenia Client Experience Programme represents the latest elevation of our
client experience offering, taking inspiration from the world of luxury hospitality.
Xenia Client Experience Programme launch and training to colleagues in the UK and US
The programme was named Xenia – an ancient Greek concept of hospitality
typically translated as ‘guest-friendship’ or ‘ritualised friendship’ – and internally
transformed into ‘Xenia – The Art of Hosting.’
The initial part of the Xenia Client Experience Programme focused on
operational barriers to delivering an exceptional client experience and after a
thorough review of the end-to-end client journey, in both the UK and US, we
recognised there was an opportunity for investment in equipment in showrooms,
such as iPads and payment devices, as well as a further investment in colleague
resource to support the concept of hosting in-store.
In October 2021, we held two Xenia conferences to launch the new initiatives in
Miami for our US colleagues and London for our UK colleagues. Not only was the
removal of any physical or operational barriers welcomed by our colleagues the
conference was also the opportunity to share the next stage of the Xenia journey –
how we enhance colleagues’ behaviours to truly deliver an exceptional client experience.
To support us on the next stage of our Xenia journey we engaged with The
Ritz-Carlton Leadership Centre who have been instrumental in supporting global
brands in the development of their client experience. Through dedicated global
workshops, led by Antonia Hock, the Global Head of The Ritz-Carlton Leadership
Centre, our retail colleagues, showroom managers and the retail leadership team
designed and delivered the new Watches of Switzerland Group Global Service
Standards. By involving colleagues from all levels of our retail network, we had an
energetic and enthusiastic design team which ensured a high degree of buy in.
Once finalised the Watches of Switzerland Group Global Standards were cascaded
throughout April 2022 to all retail colleagues via 250 Xenia Champions.
Our Xenia Pillars are ‘Know Me, WOW Me, Remember Me’. Our colleagues
are focused on truly getting to know our clients, giving them an exceptional client
experience, and then always staying connected.
This is only the start of the Xenia journey, we have a lot more planned for FY23.
96
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 “Picking up a new watch is
always exciting but being
greeted by the team and
made to feel special goes
a long way too.”
WATCHES OF SWITZERL AND GROUP CLIENT
97
The Watches of Switzerland US Xenia Champions
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y I N AC T I O N
continued
BET TE R IDGE
AC QU ISITION
On 1 December 2021, the Group purchased the Betteridge showrooms in Greenwich
Connecticut, Vale and Aspen Colorado. Betteridge has nearly 125 years in the watch and
jewellery business, with Terry Betteridge being the third generation to run the business.
Each of the three locations offer exceptional opportunities for expanded growth
with Rolex, Patek Phillipe and other luxury watch brands as well as leading jewellery
brands including CHANEL and Buccellati.
We plan to expand each of the three showrooms, to further extend the space
and brand line-up in the future. Due to the heritage and the prestige of the
Betteridge brand, the showrooms will continue hold the Betteridge name.
In many ways the Betteridge acquisition demonstrates our ethos to acquisitions.
The fragmentation in the US market gives the Group an opportunity to increase
points of distribution for certain luxury watch brands. Acquisitions of these kind can
only be achieved through the support of those brands, which creates a limited pool
of potential buyers in the market.
The Group has established a best in class model for integrating acquisitions. Our
single SAP instance allows systems integration to happen in a matter of days, bringing
new acquisitions onto our shared services model quickly. Alongside this, we are able
to roll out our first-class retail operations supported by online and digital marketing.
With all acquisitions we leverage our strong brand partnerships to allow us to
bring the best brand line-up to each new acquisition.
Following our acquisition model, the new colleagues quickly become valued
and trusted members of the Group. We also look to learn from those teams about
the details of the local market and consumer base. With Betteridge, their strong
heritage and expertise in luxury jewellery is something we believe will benefit our
Group’s jewellery offering in the future.
We maintain a well-disciplined approach to acquisitions, which involves paying
a fair market price and always securing brand support prior to acquisition.
98
“After three years of strong foundational growth
in the US market, the acquisition of Betteridge
boutiques in Greenwich, Vail and Aspen is
consistent with our objectives laid out in our Long
Range Plan. Through focused investment on
new projects and acquisitions, we continue our
geographical diversification in order to solidify
our position as the pre-eminent leader in the
US market. Betteridge is the perfect complement
to our Group.”
BRIAN DUFFY
CEO
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 99
Betteridge showroom Vail, Colorado
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y I N AC T I O N
continued
A NA LOG:SHIF T
In September 2020, the Group purchased Analog:Shift, a US seller in
vintage and pre-owned timepieces. Analog:Shift was founded by James
Lamdin, a watch collector who looked to create an authentic and
trustworthy buying experience for watch enthusiasts.
The acquisition of Analog:Shift was the culmination of a partnership that began a few
years before, with the opening of the Watches of Switzerland Soho flagship
showroom in New York. We identified that a robust pre-owned and vintage
offering was an essential component of a well-rounded assortment for our discerning
clientele and approached Analog:Shift to provide an expertly curated selection for
the showroom.
With interest in vintage and pre-owned timepieces rapidly increasing, thanks to
heightened consumer awareness and education, as well as the lack of availability of
sought-after new releases from brands like Rolex, Patek Philippe, Audemars Piguet
and OMEGA, the Group realised Analog:Shift offered more opportunity, and
unlocked notable value and authenticity in a space that at times can appear
unregulated and volatile to the end consumer. By bringing Analog:Shift under the
Group umbrella, Watches of Switzerland once again differentiates itself from the
competition, adding yet another facet to its unmatched service and client offerings.
Together Watches of Switzerland and Analog:Shift provide authenticity, trust, and
value to a largely unregulated segment of the industry and stand behind the
authenticity of their products in perpetuity.
Since the acquisition, Analog:Shift has been rebranded and investment has been
made in a contemporary transactional website and a modern head office and lounge
in Manhattan to offer the best hospitality to our vintage and pre-owned clients. As
part of our hospitality experience, Analog:Shift is collaborating with The Glenrothes
Whisky (Edrington) for monthly tastings, which are well attended by clients.
The success seen in Soho is being replicated in further showrooms within the
Watches of Switzerland and Mayors showrooms in the US.
The Analog:Shift team are also providing knowledge and experience to the
Group in the development of exclusive product collaborations with luxury watch
brands. This includes the recently launched limited edition DOXA Army watch.
The pre-owned market is a significant part of our ESG strategy, contributing to
the circular economy. For further details on this ESG pillar refer to page 17.
“Very early on we realised the shared vision of our two companies to be best in class, while
not ascribing to industry norms. Both brands look to bring character into watch purchasing
and with our ability to tap into the Group’s premier retail organisation, Analog:Shift will
be able to exponentially expand our services bringing a cutting edge understanding of the
secondary market exclusively to the Group’s client.”
JAMES L AMDIN
FOUNDER ANALOG:SHIF T AND DIREC TOR OF
VINTAGE AND PRE-OWNED TIMEPIECES
10 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 101
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y I N AC T I O N
continued
GOL DSM ITHS
LU XU RY
In FY22 we announced major plans to elevate the Goldsmiths brand position
and introduce a luxurious new showroom concept. Within the financial year
seven showrooms have been refurbished to the new concept.
New Goldsmiths Showroom, Highcross, Leicester
“This is a significant milestone for
Goldsmiths, which has a well-earned
reputation for offering UK clients trusted
expert service and a fabulous presentation
of brands. Luxury today has become far
more relaxed, inclusive, and experiential,
so while we are elevating the Goldsmiths
brand position, our goal is to make our
valued clients feel at home whilst visiting
our showrooms.”
CR AIG BOLTON
PRESIDENT UK & EUROPE
The overall vision was to create a luxury showroom with increased focus on luxury
watch brands and a relaxed, inclusive, and experiential in-store experience.
Within the seven new showrooms, there are dedicated areas for luxury watch
brands, such as Rolex, OMEGA, Cartier, TAG Heuer, Breitling and TUDOR as well
as a complementary jewellery offering, featuring FOPE, Messika, GUCCI, Jenny
Packham, and Mappin & Webb. The new showrooms also provide an elevation of
the client experience centred around VIP rooms, luxury hospitality and digital
browsing tools with the vision for clients to ‘feel at home’ and be a place where they
enjoy ‘hanging out’.
The new showrooms, which were conceived in partnership with the award-
winning UK-based design collective Quadrant Design, marry contemporary luxury
design with a relaxed atmosphere. Clients experience a welcoming, accessible
environment where they are encouraged to enjoy and browse the space at their leisure.
The concept has been rolled out in showrooms in Canterbury, Reading,
Brighton, Braehead, Lincoln, Leeds White Rose and Leicester and the launches
were supported with strong local marketing campaigns.
Investment in the UK showroom network over the last decade has elevated
Goldsmiths beyond the competition. This next evolution gives that journey fresh
impetus and will differentiate Goldsmiths from market competitors for years to
come. In FY23 there is a plan for a further roll out of the concept.
102
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Top and bottom: New Goldsmiths showroom, Canterbury
103
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y I N AC T I O N
continued
EU ROPE A N E X PA NSION
We are very excited to have commenced our entry into the European market, further growing the
scale and geographical diversification of the Group’s operations. We believe the European market is
also underdeveloped in comparison to the UK market with a high level of fragmentation. The Group
has many opportunities to exploit its unique proposition within the European market.
Our expansion into Europe will take place through a combination of mono-brand
boutiques, acquisitions and ecommerce. We estimate that sales in Europe will be
5–8% of the Group’s total revenue by FY26. The country or market priorities will
be determined by opportunity.
On 16 June 2022, we opened our first European mono-brand boutique for
Breitling on Biblioteksgatan, Stockholm, Sweden. In FY23, Stockholm will be home
to a further two mono-brand boutiques.
We will also be opening mono-brand boutiques in Copenhagen, Denmark and
Dundrum Dublin, Republic of Ireland during FY23.
“We are delighted to be working with
our brand partners, as we embark
on our expansion into European
territories. This is an exciting time
for our business as we venture
on this journey to increase our
presence, our programme of projects
primarily focusing on the Nordics
and Republic of Ireland and we are
actively exploring other territories and
opportunities in the marketplace.”
CR AIG BOLTON
PRESIDENT UK & EUROPE
Left and Right: Breitling mono-brand boutique, Biblioteksgatan,
Stockholm, Sweden
104
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 10 5
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS “The Group delivered a strong financial
performance across all KPIs and is well placed
to continue to grow in the year ahead.”
BILL FLOYDD
CFO
10 6
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 F I N A N C I A L R E V I E W
The Group’s Statutory Consolidated Income Statement is shown below which is
presented under IFRS 16 ‘Leases’ and includes exceptional items.
Statutory Income Statement (£million)
Revenue
Operating profit
Net finance cost
Profit before taxation
Taxation
Profit for the financial period
Basic Earnings Per Share
52 weeks
ended
1 May 2022
53 weeks
ended
2 May 2021
1,238.0
905.1
142.1
(15.9)
126.2
(25.2)
101.0
42.2p
81.9
(18.2)
63.7
(13.1)
50.6
21.1p
YoY
variance
37%
74%
13%
98%
(92)%
100%
100%
Management monitor and assess the business performance on a pre-IFRS 16 and
exceptional items basis, which is shown below. This aligns to the reporting used to
inform business decisions, investment appraisals, incentive schemes and debt
covenants. A full reconciliation between the pre- and post-IFRS 16 results is shown
in the Glossary.
REVENUE
Group revenue increased by +37% to £1,238.0 million. FY21 was a 53-week year;
excluding the 53rd week showed growth of +40% in constant currency.
Our UK showrooms were fully operational for the whole year compared to 26
weeks in the prior year, where click and collect was in place during various
lockdowns. The US was fully operational throughout FY22 and FY21. During FY22,
footfall remained behind pre-pandemic levels, but a strong product offering
supported by digital marketing, and a focus on clienteling, and new space delivered
significant growth in the year. Group ecommerce sales increased +5% compared to
the prior year excluding the 53rd week and in constant currency, despite strong
comparatives when a higher proportion of clients were shopping at home during
the pandemic.
Revenue by geography and category
52 weeks ended
1 May 2022
(£million)
Luxury watches2
Luxury jewellery3
Other
Total revenue
UK
663.9
72.4
73.3
809.6
US
382.6
36.4
9.4
Total
1,046.5
108.8
82.7
Mix
85%
9%
6%
428.4
1,238.0
100%
Income Statement – pre-IFRS 16 and
exceptional items (£million)
52 weeks
ended
1 May 2022
53 weeks
ended
2 May 2021
YoY
variance
2 Luxury watches are defined as those that have a Recommended Retail Price greater than £1,000.
3 Luxury jewellery is defined as those that have a Recommended Retail Price greater than £500.
Revenue
Net margin1
Showroom costs
4-Wall EBITDA1
Overheads
EBITDA1
Showroom opening and closing costs
Adjusted EBITDA1
Depreciation, amortisation and loss on
disposal of fixed assets
Segment profit (Adjusted EBIT) 1
Net finance costs
Adjusted profit before taxation1
Adjusted Earnings Per Share1
1,238.0
470.6
(226.7)
243.9
(73.3)
170.6
(8.4)
162.2
905.1
332.3
(166.6)
165.7
(55.8)
109.9
(4.5)
105.4
(31.9)
(27.8)
130.3
(3.7)
126.6
41.8p
77.6
(5.5)
72.1
23.8p
37%
42%
(36)%
47%
(31)%
55%
(87)%
54%
(15)%
68%
31%
76%
76%
1
Refer to the Glossary on pages 283 to 285 for definition and reconciliation to statutory measures
where appropriate.
52 weeks ended
1 May 2021
(£million)
Luxury watches
Luxury jewellery
Other
Total revenue
UK
512.2
43.8
50.5
606.5
US
276.3
16.9
5.4
298.6
Total
788.5
60.7
55.9
905.1
Mix
87%
7%
6%
100%
UK revenue increased by +34% (+36% excluding the FY21 53rd week) during the
period through a combination of continued demand, investment in the showroom
portfolio, new showrooms and strong clienteling activity by the Group. Consumer
appetite for products remained very strong and well above the levels supplied by
certain brands. Luxury watches saw significant sales growth, alongside luxury
jewellery. The business continued to optimise consumer experience with the
expansion of personal appointments available in showrooms and online through
the Virtual Boutique. The launch of ‘Xenia’, our elevated Client Experience
Programme, backed up by strong digital marketing campaigns and offline marketing
events to showcase product will build even stronger client relationships.
107
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS F I N A N C I A L R E V I E W
continued
US revenue increased by +44% (+48% on a constant currency basis and excluding
the FY21 53rd week), and the US business made up 35% of the Group’s revenue in
FY22 (FY21: 33%). Strong growth was seen across all locations with New York and
the Wynn Resort, Las Vegas seeing the biggest benefit from returning footfall,
compared to Mayors which had a limited impact from the pandemic lockdowns and
travel reductions in the prior year. In line with the UK, consumer appetite for high
demand product remained strong, and significant growth was achieved in luxury
watches. This was accomplished through a quality product offering, backed up by
strong marketing campaigns and superior client experience.
During the period, the Group opened four mono-brand boutiques in the US and a
Watches of Switzerland showroom in Cincinnati. During Autumn 2021, the Group
completed the acquisition of five showrooms (three under the Betteridge brand
and two showrooms now branded Watches of Switzerland). The showrooms have
a combined last twelve months annual revenue of c.US$100 million and future
profitability is expected to be in line with the Group’s US average. Our US
ecommerce platform has continued to grow, and sales of vintage and pre-owned
luxury watches have been encouraging as we continue to leverage the Analog:Shift
brand following the acquisition in 2020.
Group revenue from luxury watches grew by +33% and made up 85% of revenue,
marginally down (250bps) on the prior year as jewellery sales became a greater part of
the mix.
Group luxury jewellery revenue grew by +79% (+86% on a constant currency basis
and excluding the FY21 53rd week). The UK benefitted from a full year of
showrooms being open as these purchases are more footfall and impulse-driven
than luxury watches. Our luxury jewellery ranges were well received and the
ongoing focus on premium ranges has led to continued growth of our average
selling price. Luxury jewellery revenue in the US showed strong underlying growth
and was further supported by the acquisition of the Greenwich Betteridge
showroom and the opening of our first BVLGARI mono-brand boutique.
Other revenue, consisting of servicing, repairs, insurance services and the sale of
fashion and classic watches and other non-luxury jewellery grew by +48%.
PROFITABILIT Y
Profitability as a % of
revenue
52 weeks ended
1 May 2022
53 weeks ended
2 May 2021
YoY variance
Net margin1
Showroom costs
4-Wall EBITDA1
EBITDA
Adjusted EBITDA1
Adjusted EBIT 1
38.0%
18.3%
19.7%
13.8%
13.1%
10.5%
36.7%
18.4%
18.3%
12.1%
11.6%
8.6%
1.3%
0.1%
1.4%
1.7%
1.5%
1.9%
1
Refer to the Glossary on pages 283 to 285 for definition and reconciliation to statutory measures
where appropriate.
Net margin % increased by 130 bps from 36.7% in the prior year to 38.0%, driven
by product mix. Within the watch category our higher margin brands grew the
fastest year on year, and more generally, the jewellery category outperformed the
watch category following a return of footfall to showrooms.
Showroom costs increased by £60.1 million (+36%) from the prior year, to £226.7
million as we opened more showrooms and reflect a full year of opening. Showroom
costs as a percentage of revenue improved by 10 bps from 18.4% to 18.3%.
Property related costs increased from FY21 by £18.7 million, this was as a result of
the net change in UK business rates suspension (+£7 million versus FY21) and our
increased showroom portfolio. Payroll costs increased by £15.6 million including the
impact of new showrooms, commission on additional revenue, and yearly pay rises
to colleagues. Variable showroom costs increased in line with revenue, in addition
to further digital marketing investment which successfully drove traffic and
conversion both online and in showrooms.
Overheads increased by £17.5 million (+31%) due to additional headcount and IT
costs to support growth, and a £3.0 million donation to The Watches of Switzerland
Group Foundation.
Showroom opening and closing costs include the cost of rent (pre-IFRS 16), rates
and payroll prior to the opening or closing of showrooms, or during closures when
significant refurbishments are taking place. This cost will vary annually depending on
the scale of expansion in the period. Total costs for the year were £8.4 million
versus £4.5 million in FY21 reflecting the increased number of refurbishments and
openings undertaken.
10 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Exceptional administrative items
Exceptional items are defined by the Group as those which are significant in
magnitude or are linked to one-off, non-recurring events. These items are detailed
in the table below and are stated under IFRS 16.
Exceptional items (£million)
IPO costs
Legal expenses on business acquisition
Reversal of showroom impairment
Impairment of property, plant and equipment
Impairment of right-of-use assets
Reversal of expected credit losses
Total
52 weeks ended
1 May 2022
53 weeks ended
2 May 2021
1.5
0.5
(0.4)
–
–
–
1.6
4.9
0.2
(0.1)
3.1
1.2
(0.2)
9.1
IPO costs of £1.5 million in the current period relate to IPO-linked share-based
payments (FY21: £4.9 million). The shares vested and were settled in the period,
and there will be no further costs of this nature.
Costs associated with the acquisition of new showrooms are treated as exceptional
as they are regarded as non-trading, non-underlying costs.
During the current period we have reassessed assets impaired through exceptional
items in prior periods, taking into account FY22 performance and the latest
discounted budgeted cash flows for each showroom. As a result of improved trading,
an impairment reversal of £0.4 million has been recognised at the period end.
Adjusted EBIT and statutory operating profit
As a consequence of the items noted above, Adjusted EBIT was £130.3 million, an
increase of £52.7 million (+68%) on the prior year.
After accounting for exceptional costs of £1.6 million and IFRS 16 adjustments of
£13.4 million, statutory operating profit (EBIT) was £142.1 million, an increase of
+74% on the prior year.
The Group provided updated revenue and profit guidance on 10 February 2022,
which is regarded as a profit forecast for the purposes of the Financial Conduct
Authority's Listing Rule 9.2.18. Revenue guidance at that time was £1.2 billion and
Adjusted EBITDA margin % of 13.1%, this compares to the actual results of £1,238
million and Adjusted EBITDA margin % of 13.1%.
Finance costs
Net finance costs (£million)
Pre-IFRS 16 finance costs
IFRS 16 interest on lease liabilities
Total net finance costs
52 weeks ended
1 May 2022
53 weeks ended
2 May 2021
3.7
12.2
15.9
5.5
12.7
18.2
Interest payable on borrowings reduced in the period, reflecting the reduced net
debt in the period, and lower interest rates.
In the prior year, the Group entered into a £45.0 million facility agreement as part
of the UK Government Coronavirus Large Business Interruption Loan Scheme
(CLBILS) which had a maturity of November 2021. This facility was repaid and
cancelled during the prior year.
The IFRS 16 interest on lease liabilities has decreased by £0.5 million in line with the
decreased remaining average life of our lease portfolio.
Taxation
The pre-IFRS 16 effective tax rate for the period was 20.7%. This is higher than the
UK tax rate of 19.0% due to a significant proportion of the Group being in the US
where the tax rate is higher than in the UK, and due to non-deductible expenses.
Excluding exceptional items, the effective tax rate is 20.8%.
The effective tax rate reported under IFRS 16 was 19.9%, or 20.1% before
exceptional items are included.
BAL ANCE SHEET
Balance Sheet (£million)
Goodwill and intangibles
Property, plant and equipment
Right-of-use assets
Inventories
Trade and other receivables
Trade and other payables
Lease liabilities
Net debt
Other
Net assets
1 May 2022
2 May 2021
177.8
112.5
293.6
307.0
22.3
(201.4)
(340.6)
(14.1)
4.2
361.3
150.6
93.7
253.7
226.4
10.4
(151.7)
(301.4)
(43.9)
12.5
250.3
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS F I N A N C I A L R E V I E W
continued
Goodwill and intangibles have increased as a result of the US acquisitions in the
period, which gave rise to £21.3 million of goodwill and a brand value of £2.2 million.
A further £2.2 million of computer software additions were made in the period as
part of our ongoing plans to upgrade our systems.
Net debt and financing
Net debt on 1 May 2022 was £14.1 million, a reduction of £29.8 million since 2 May
2021, driven by £112.1 million of free cash flow1 offset by £41.0 million of
expansionary capex and £44.1 million relating to acquisitions.
Property, plant and equipment increased by £18.8 million in the 52-week period to
1 May 2022. Additions of £43.8 million, including business acquisitions, were offset
by depreciation of £27.6 million, loss on disposal of £1.5 million, impairment
reversals of £0.4 million and a favourable foreign exchange impact of £3.7 million.
Including software costs, which are disclosed as intangibles, capital additions were
£43.2 million (FY21: £26.1 million) of which £41.0 million (FY21: £21.2 million) was
expansionary. Expansionary capex relates to new showrooms, relocations or major
refurbishments (defined as costing over £0.25 million). In the period, the Group
opened 23 showrooms, expanded six showrooms and refurbished 14 showrooms.
Investment in our portfolio is paramount to our strategy and the Group follows a
disciplined payback policy when making capital investment decisions.
Right-of-use assets increased by £39.9 million to £293.6 million. Additions to the
lease portfolio along with lease renewals or other lease changes have increased the
balance by £72.4 million. This has been offset by depreciation of £40.6 million and
a favourable foreign exchange impact of £8.1 million.
Lease liabilities increased by £39.2 million. The portfolio changes noted above
increased the lease liability by £70.1 million. Interest charged on the lease liability
also increased the balance by £12.2 million along with a foreign exchange loss of
£9.9 million. Lease payments have reduced the balance by £53.0 million, giving a
lease liability balance of £340.6 million.
Inventory levels increased by £80.6 million compared to the prior year. This includes
inventory from acquisitions (+£20.7 million) and increased pre-owned inventory
(+£19.9 million), in addition to the inventory in the new showrooms and higher base
stock levels to support revenue growth. Being able to carry a wide range of
inventory to represent the brands appropriately is an important differentiator. The
inventory obsolescence risk is low and therefore we expect to grow inventory levels
as more product becomes available and as the number of showrooms increases.
Trade and other receivables increased by £11.9 million. There is a general increase
in trade receivables (+£1.4 million), prepayments (+£3.3 million), rebates (+£1.6
million), and other debtors (+£0.6 million) as the Group increases in size, in addition
to the re-instatement of UK rates (+£1.4 million) and increased brand capital
contributions receivable (+£3.6 million) in the US.
Trade and other payables increased by £49.7 million. Trade payables increased by
£39.5 million driven by increased volume at new and acquired showrooms, in
addition to the timing of intake at the period end. The Group has seen a general
increase in accruals in line with the increased operations and investment in
showrooms. These include increases in capital expenditure, advertising, payroll, and
insurance activity. One-off items include a £6.7 million payable for the purchase of
shares at the period end to satisfy share incentive schemes, and £4.2 million held in
Escrow whilst the Betteridge acquisition consideration is finalised.
Other includes taxation balances and the defined benefit pension obligation of
£0.6 million (FY21: £2.6 million).
The Group’s maximum available committed facilities at 1 May 2022 were £217.7 million.
Facility
UK Term Loan – UK SONIA +1.75% to +2.80%
Expiring
June 2024
UK Revolving Credit Facility – UK SONIA +1.50% to +2.55%
June 2024
Amount
(million)
£120.0
£50.0
US Asset Backed Facility – US LIBOR +1.25% to +1.75%
April 2023
US$60.0
£120.0 million of these facilities were drawn down at 1 May 2022. Liquidity
headroom (defined as unrestricted cash plus undrawn available facilities) was
£189.6 million.
The Group maintained compliance with all of its banking covenants during the
period and expects to continue to do so.
CASH FLOW
Cash flow (£million)
Adjusted EBITDA
Share-based payments
Working capital
Pension contributions
Tax
Government grants received
Cash generated from operating activities
Maintenance capex
Interest
Free cash flow
Free cash flow conversion1
Expansionary capex
Acquisitions
Exceptional items
Financing activities
Cash flow
52 weeks ended
1 May 2022
53 weeks ended
2 May 2021
162.2
1.7
(29.8)
(0.7)
(15.6)
–
117.8
(3.0)
(2.7)
112.1
69.1%
(41.0)
(44.1)
(0.5)
–
26.5
105.4
0.8
13.9
(0.7)
(9.6)
5.4
115.2
(1.0)
(4.5)
109.7
104.1%
(21.2)
(1.4)
(0.2)
(82.1)
4.8
1
Refer to the Glossary on pages 283 to 285 for definition and reconciliation to statutory measures
where appropriate.
110
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Free cash flow increased by £2.4 million to £112.1 million in the period to 1 May 2022
and free cash flow conversion was 69.1% compared to 104.1% in the prior year.
RETURN ON CAPITAL EMPLOYED (ROCE)
Strong cash flow from trading (Adjusted EBITDA increased by £56.8 million), was offset
by a £29.8 million adverse working capital movement, primarily driven by additional
stock in new showrooms and higher base stock levels to support revenue growth.
ROCE
52 weeks ended
1 May 2022
53 weeks ended
2 May 2021
27.4%
19.7%
The repayment of furlough monies received in the prior year forms part of the
working capital movement in FY22, having been accrued for payment at FY21
period end.
ROCE increased by 770 bps from 19.7% to 27.4% in the period demonstrating
improved capital efficiency. This is as a consequence of Adjusted EBIT increasing by
+68%, compared to the increase in average capital employed of +24%.
Expansionary capex of £41.0 million (after taking into account the associated
creditors movement) was higher than the prior year due to an increase in new
showroom openings and refurbishments.
SHOWROOM PORTFOLIO
As at 1 May 2022, the Group had 171 showrooms, the movement in showroom numbers is included below:
2 May 2021
Openings
Acquisitions
Closures
1 May 2022
UK multi-brand
showrooms
UK mono-brand
boutiques
Total UK
US multi-brand
boutiques
US mono-brand
boutiques
Total US
Total Group
98
1
–
(6)
93
26
12
–
–
38
124
13
–
(6)
131
17
1
5
–
23
13
4
–
–
17
30
5
5
–
40
154
18
5
(6)
171
Mono-brand boutiques include seven Rolex boutiques during both years.
111
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS K E Y P E R F O R M A N C E I N D I C ATO R S
HOW THE GROU P M E ASU R ES
PE R FOR M A NCE
Key Performance Indicators (KPIs) are designed to measure the development, performance and position of the business. Certain KPIs are Alternative Performance
Measures (APMs) and the Directors use these measures as they believe they provide additional useful information and analyses on the underlying trends, performance
and position of the Group. 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.
During the year, the Group removed the Sales Per Door KPI and replaced this with two new non-financial KPIs to recognise the importance of our Environmental, Social
and Governance (ESG) commitments. Further detail on the new Engagement Survey and Carbon Emissions KPIs are given below.
FINANCIAL PERFORMANCE
REVENUE
OPER ATING PROFIT/EBIT
ADJUSTED EBIT
BASIC EPS
ADJUSTED EPS
D E F I N ITI O N A N D P U R P O S E
Revenue is stated exclusive of sales
taxes and is measured in accordance
with IFRS 15 ‘Revenue from contracts
with clients’.
Growing revenue is a key pillar of our
business strategy.
DEFINITION AND PURPOSE
Statutory measure under IFRS
representing Profit/Earnings Before
Interest and Taxation.
Growing profit is a key pillar of our
business strategy.
DEFINITION AND PURPOSE
Basic EPS is a statutory measure defined
by IAS 33 ‘Earnings per share’. EPS is a
direct measure of profitability per share
held in the Group.
Growing Basic EPS is a key pillar of our
business strategy.
DEFINITION AND PURPOSE
Earnings Before Interest and Tax (EBIT)
adjusted for exceptional items and
before IFRS 16 adjustments. This
measure is defined as segment profit
under IFRS 8 ‘Operating segments’ and
is reconciled to Profit Before Taxation
on an IFRS basis in note 2 to the
Financial Statements.
This is a measure of profitability
excluding exceptional items. This
presents the Group’s underlying
performance without distortion from
one-off or non-trading events to
provide comparability between years.
Growing profit is a key pillar of our
business strategy.
This measure was linked to
management’s FY22 annual bonus in the
financial year. Further detail can be
found in the Remuneration Committee
Report on page 196.
RETURN ON
CAPITAL EMPLOYED
CASH GENER ATED
FROM OPER ATIONS
4 -WALL EBITDA %
DEFINITION AND PURPOSE
Return on Capital Employed (ROCE)
is defined as Adjusted EBIT divided by
average capital employed. Average
capital employed is total assets less
current liabilities on a pre-IFRS 16 basis.
The calculation for ROCE is included in
the Glossary on page 284.
DEFINITION AND PURPOSE
Cash generated from operations is
defined under IAS 7 ‘Statement of Cash
Flows’. This is a direct measure of cash
generation from the operations of the
business excluding financing, investing,
tax and defined benefit pension
contributions.
DEFINITION AND PURPOSE
4-Wall EBITDA % is defined as net
margin less showroom costs shown as
a % of revenue. Refer to the Glossary
on page 283 for a reconciliation of this
measure to statutory IFRS measures.
4-Wall EBITDA % is a direct measure
of profitability of the showroom
operations.
DEFINITION AND PURPOSE
Basic Earnings Per Share adjusted for
exceptional items as disclosed in note 4
to the Consolidated Financial
Statements. This measure is reconciled
to statutory measures in note 9 to the
Consolidated Financial Statements.
This is a measure of profit per share
items and IFRS 16 adjustments. This
presents the Group’s underlying
performance without distortion from
one-off or non-trading events to
provide comparability between years.
held in the Group, excluding exceptional
ROCE demonstrates the efficiency with
which the Group utilises capital.
This measure was linked to management
LTIP incentives in the financial year.
Further detail can be found in the
Remuneration Committee Report on
Growing Basic EPS is a key pillar of our
page 196.
business strategy.
This measure was linked to management
LTIP incentives in the financial year.
Further detail can be found in the
Remuneration Committee Report on
page 196.
PERFORMANCE (£ MILLION)
PERFORMANCE (£ MILLION)
PERFORMANCE (£ MILLION)
PERFORMANCE (p)
PERFORMANCE (p)
PERFORMANCE (%)
PERFORMANCE (£ MILLION)
PERFORMANCE (%)
FY22
FY21
FY20
1,238.0
905.1
810.5
FY22
FY21
FY20
81.9
48.3
142.1
FY22
FY21
FY20
130.3
77.6
55.9
FY22
FY21
FY20
0.2
42.2
21.1
FY22
FY21
FY20
23.8
16.6
41.8
27.4
FY22
FY21
FY20
19.7
15.8
FY22
FY21
FY20
186.6
169.8
102.0
FY22
FY21
FY20
19.7
18.3
15.6
Revenue grew by +37% in the year to
deliver another record year.
Further details on the revenue
performance in the year are detailed
in the Financial Review on pages 107
to 111.
Operating profit grew by +74% in the
year, as a result of higher revenue and
net margin leading to the leveraging of
fixed costs in the year.
Adjusted EBIT increased by +68% on
the prior year, ahead of revenue growth
demonstrating good profitability
management.
Further details on profit performance in
the year are detailed in the Financial
Review on pages 107 to 111.
Further details on profit performance in
the year are detailed in the Financial
Review on pages 107 to 111.
Basic EPS has grown from 21.1p to 42.2p
in the year, reflecting the increase in
profitability in the year.
FY22 Adjusted EPS increased by +76%
relative to the prior year, reflecting the
increase in profitability during the year.
The increase in ROCE in the year largely
Cash generated from operations
reflects the increase in Adjusted EBIT
and demonstrates improved capital
efficiency.
increased by £16.8 million.
Further details on cash flow
performance in the year are detailed in
the Financial Review on pages 107 to 111.
4-Wall EBITDA % improved by
140 bps to 19.7%, demonstrating
an improvement in the showroom
profitability in the year.
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
LINK TO PRINCIPAL RISKS AND
LINK TO PRINCIPAL RISKS AND
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
UNCERTAINTIES
UNCERTAINTIES
1 2 3 4 5 8 9
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 8 9 10
1 2 3 4 5 8 9 10
UNCERTAINTIES
1 2 4 8 9
112
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
PRINCIPAL RISKS AND UNCERTAINTIES
S T R AT E G I C P R I O R I T I E S
1
2
3
4
5
6
Business strategy execution and development
Key suppliers and supply chain
Client experience and market risks
Colleague talent and capability
Data protection and cyber security
Business interruption
7
8
9
10
11
Regulatory and compliance
Economic and political
Brand and reputational damage
Financial and treasury
Climate change
Grow revenue, profit and
Return on Capital Employed
Leverage best in class operations
Enhance strong brand partnerships
Expand multi-channel leadership
Deliver an exceptional client service
Continue to advance the ESG agenda
Drive client awareness and brand image
FINANCIAL PERFORMANCE
REVENUE
D E F I N ITI O N A N D P U R P O S E
Revenue is stated exclusive of sales
taxes and is measured in accordance
with IFRS 15 ‘Revenue from contracts
DEFINITION AND PURPOSE
Statutory measure under IFRS
representing Profit/Earnings Before
Interest and Taxation.
Growing revenue is a key pillar of our
business strategy.
Growing profit is a key pillar of our
with clients’.
business strategy.
OPER ATING PROFIT/EBIT
ADJUSTED EBIT
BASIC EPS
ADJUSTED EPS
RETURN ON
CAPITAL EMPLOYED
CASH GENER ATED
FROM OPER ATIONS
4 -WALL EBITDA %
DEFINITION AND PURPOSE
Basic EPS is a statutory measure defined
by IAS 33 ‘Earnings per share’. EPS is a
direct measure of profitability per share
held in the Group.
Growing Basic EPS is a key pillar of our
business strategy.
DEFINITION AND PURPOSE
Earnings Before Interest and Tax (EBIT)
adjusted for exceptional items and
before IFRS 16 adjustments. This
measure is defined as segment profit
under IFRS 8 ‘Operating segments’ and
is reconciled to Profit Before Taxation
on an IFRS basis in note 2 to the
Financial Statements.
This is a measure of profitability
excluding exceptional items. This
presents the Group’s underlying
performance without distortion from
one-off or non-trading events to
provide comparability between years.
Growing profit is a key pillar of our
business strategy.
This measure was linked to
management’s FY22 annual bonus in the
financial year. Further detail can be
found in the Remuneration Committee
Report on page 196.
DEFINITION AND PURPOSE
Return on Capital Employed (ROCE)
is defined as Adjusted EBIT divided by
average capital employed. Average
capital employed is total assets less
current liabilities on a pre-IFRS 16 basis.
The calculation for ROCE is included in
the Glossary on page 284.
ROCE demonstrates the efficiency with
which the Group utilises capital.
This measure was linked to management
LTIP incentives in the financial year.
Further detail can be found in the
Remuneration Committee Report on
page 196.
DEFINITION AND PURPOSE
Basic Earnings Per Share adjusted for
exceptional items as disclosed in note 4
to the Consolidated Financial
Statements. This measure is reconciled
to statutory measures in note 9 to the
Consolidated Financial Statements.
This is a measure of profit per share
held in the Group, excluding exceptional
items and IFRS 16 adjustments. This
presents the Group’s underlying
performance without distortion from
one-off or non-trading events to
provide comparability between years.
Growing Basic EPS is a key pillar of our
business strategy.
This measure was linked to management
LTIP incentives in the financial year.
Further detail can be found in the
Remuneration Committee Report on
page 196.
DEFINITION AND PURPOSE
Cash generated from operations is
defined under IAS 7 ‘Statement of Cash
Flows’. This is a direct measure of cash
generation from the operations of the
business excluding financing, investing,
tax and defined benefit pension
contributions.
DEFINITION AND PURPOSE
4-Wall EBITDA % is defined as net
margin less showroom costs shown as
a % of revenue. Refer to the Glossary
on page 283 for a reconciliation of this
measure to statutory IFRS measures.
4-Wall EBITDA % is a direct measure
of profitability of the showroom
operations.
PERFORMANCE (£ MILLION)
PERFORMANCE (£ MILLION)
PERFORMANCE (£ MILLION)
PERFORMANCE (p)
PERFORMANCE (p)
PERFORMANCE (%)
PERFORMANCE (£ MILLION)
PERFORMANCE (%)
1,238.0
142.1
130.3
42.2
FY22
FY21
FY20
905.1
810.5
FY22
FY21
FY20
81.9
48.3
FY22
FY21
FY20
77.6
55.9
FY22
FY21
FY20
0.2
21.1
FY22
FY21
FY20
41.8
23.8
16.6
FY22
FY21
FY20
27.4
19.7
15.8
FY22
FY21
FY20
186.6
169.8
102.0
FY22
FY21
FY20
19.7
18.3
15.6
Revenue grew by +37% in the year to
deliver another record year.
Further details on the revenue
performance in the year are detailed
in the Financial Review on pages 107
to 111.
Operating profit grew by +74% in the
year, as a result of higher revenue and
net margin leading to the leveraging of
fixed costs in the year.
management.
Adjusted EBIT increased by +68% on
Basic EPS has grown from 21.1p to 42.2p
the prior year, ahead of revenue growth
in the year, reflecting the increase in
demonstrating good profitability
profitability in the year.
FY22 Adjusted EPS increased by +76%
relative to the prior year, reflecting the
increase in profitability during the year.
The increase in ROCE in the year largely
reflects the increase in Adjusted EBIT
and demonstrates improved capital
efficiency.
Cash generated from operations
increased by £16.8 million.
Further details on cash flow
performance in the year are detailed in
the Financial Review on pages 107 to 111.
4-Wall EBITDA % improved by
140 bps to 19.7%, demonstrating
an improvement in the showroom
profitability in the year.
Further details on profit performance in
Further details on profit performance in
the year are detailed in the Financial
the year are detailed in the Financial
Review on pages 107 to 111.
Review on pages 107 to 111.
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO PRINCIPAL RISKS AND
LINK TO PRINCIPAL RISKS AND
LINK TO PRINCIPAL RISKS AND
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
UNCERTAINTIES
UNCERTAINTIES
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
1 2 3 4 5 8 9
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 6 7 8 9 10
1 2 3 4 5 8 9 10
1 2 3 4 5 8 9 10
1 2 4 8 9
113
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
K E Y P E R F O R M A N C E I N D I C ATO R S
continued
PRINCIPAL RISKS AND UNCERTAINTIES
S T R AT E G I C P R I O R I T I E S
1
2
3
4
5
6
Business strategy execution and development
Key suppliers and supply chain
Client experience and market risks
Colleague talent and capability
Data protection and cyber security
Business interruption
7
8
9
10
11
Regulatory and compliance
Economic and political
Brand and reputational damage
Financial and treasury
Climate change
Grow revenue, profit and
Return on Capital Employed
Leverage best in class operations
Enhance strong brand partnerships
Expand multi-channel leadership
Deliver an exceptional client service
Continue to advance the ESG agenda
Drive client awareness and brand image
NON-FINANCIAL PERFORMANCE
NUMBER OF SHOWROOMS
AVER AGE SELLING PRICE
ENGAGEMENT SURVEY
CARBON EMISSIONS
DEFINITION AND PURPOSE
Average Selling Price (ASP) represents
revenue generated (including
sales-related taxes) in a period from
sales of the category, divided by the
total number of units of such products
sold during the period. This metric is a
measure of sales performance.
Luxury watches are defined as those that
have a Recommended Retail Price greater
than £1,000. Luxury Jewellery is defined
as those that have a Recommended Retail
Price greater than £500.
DEFINITION AND PURPOSE
In January 2022 colleagues participated
in our second company-wide
engagement survey. The first was
completed just prior to the pandemic
in March 2020.
Our colleagues are key to our business.
The Group has introduced a new
colleague engagement KPI in the period,
and the survey will be completed on an
annual basis going forwards.
DEFINITION AND PURPOSE
During the year, the Board made a
commitment to achieve Net Zero
emissions by 2050. Whilst we are in
the early stages of delivering against our
commitment, a new KPI to monitor
carbon emissions has been created,
recognising the responsibility of the
Group. This KPI reflects the Group’s near
term commitment to reduce Scope 1
and 2 carbon emissions by 50% by 2030.
The KPI reported is the total gross
Scope 1 and Scope 2 emissions (tCO2e).
PERFORMANCE
UK (£)
COLLEAGUE ENGAGEMENT (%)
PERFORMANCE (tCO 2e)
5,523
5,940
4,970
FY22
FY20
86%
85%
DEFINITION AND PURPOSE
Number of showrooms at the end
of the financial year. This metric
demonstrates the Group’s size
and scale.
171
154
146
131
124
124
PERFORMANCE
Total
UK
US
40
30
22
Luxury
watches
Luxury
jewellery
US ($)
Luxury
watches
Luxury
jewellery
1,318
1,208
1,178
11,476
12,818
12,620
6,099
5,221
4,713
FY22
FY21
FY20
FY22
FY21
FY20
In the UK, the Group opened 13
showrooms and closed six. In the US,
the Group opened five showrooms
and acquired five showrooms.
ASP increased across all brands versus
the prior year. The total luxury watches
ASP has decreased in both the UK and
US due to mix of products sold. The
luxury jewellery increase in the US
includes a strong performance from
Betteridge following the acquisition
in the period and the opening of the
BVLGARI boutique.
Colleague engagement increased in the
period from 85% to 86%, despite
disruption as a result of the pandemic.
Further detail can be found in the
Colleague Engagement Report on page
123.
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
1 2 4 5 8 9 11
1 2 3 4 5 8 9
4 11
7 8 9 11
114
Total
UK &
Europe
US
3,598
3,307
4,128
1,875
1,906
2,608
1,723
1,401
1,520
FY22
FY21
FY20
UK carbon emissions have reduced since
FY22 driven by our LED lighting and EV
initiatives. The US is not as far advanced
in these areas and has seen an increase
in emissions in line with new store
openings.
Further detail can be found in the
Environmental, Social and Governance
Report on pages 118 to 155.
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
N O N - F I N A N C I A L I N F O R M AT I O N S TAT E M E N T
The following table sets out where stakeholders of Watches of Switzerland Group PLC can find relevant non-financial information within this Annual Report and Accounts
further to the Financial Reporting Directive requirements contained in sections 414CA and 414CB of the Companies Act 2006.
This Non-Financial Information Statement highlights information necessary for an understanding of the Company’s development, performance, position and impact of its
activity, information relating to environmental, colleagues, social, respect for human rights, anti-corruption and anti-bribery matters. Where possible, the following table
also states where additional information can be found that supports these requirements:
Reporting requirement Relevant policy
Where to read in this Report
Page Additional information
Information to the extent necessary for an understanding of the Company’s development, performance and position and the impact of its activity relating to:
1. Environmental matters Environmental
Environmental, Social and Governance:
2. Colleagues
Whistleblowing
Code of Ethics
Health and safety
Group diversity
Colleague handbook
3. Social matters
4. Respect for
human rights
Responsible sourcing
No dirty gold
Supplier handbook
Dignity at work
Group diversity
Whistleblowing
Code of Ethics
5. Anti-corruption and
anti-bribery matters
Anti-bribery and corruption
Anti-money laundering
Other information:
Business model
Principal risks in relation to
(1) to (5) above and
related due diligence
processes
Relevant non-financial
KPIs
Our sustainability pillars
ESG governance
Caring for our planet
Task Force on Climate-Related
Financial Disclosures
Section 172 Statement – Colleagues
Environmental, Social and Governance:
Caring for our colleagues and communities
Anti-Bribery and Corruption
Taxation
Health and Safety
Corporate Governance Statement
Nomination Committee Report
Directors’ Remuneration Report
Section 172 Statement – Community
Environment, Social and Governance:
Purpose, culture and values
Our sustainability pillars
Caring for our colleagues and communities
Foundation – Helping our communities
Caring for our planet
Responsible sourcing
Environment, Social and Governance:
Purpose, culture and values
Responsible sourcing
Corporate Governance Statement
Environment, Social and Governance:
Purpose, culture and values
Responsible sourcing
Corporate Governance Statement
Business Model
Risk Management
Principal Risks and Uncertainties
Going Concern and Viability Statement
Key Performance Indicators
118
119
121
134
138
116
118
122
151
151
126
173
184
196
116
118
118
119
122
130
134
148
118
118
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173
118
118
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173
70
156
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112
Supplier code of conduct and supplier manual
Colleagues engagement
Diversity & inclusion
Talent and succession
Colleague relations
Charitable activities
Corporate social responsibility report1
Modern Slavery Statement
Corporate social responsibility report1
Supplier code of conduct and supplier manual Anti-
Bribery, Corruption, Taxation and Health and Safety
Data Protection and information security
Anti-Bribery and Corruption, Taxation and Health and
Safety Tax strategy statement¹
Supplier code of conduct and supplier manual
1 Available on our corporate website at thewosgroupplc.com.
An overview of our engagement with colleagues, clients, suppliers and other stakeholders can be found on pages 116 to 117 within our s172 Statement in compliance with
the Companies Act 2006.
115
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS S E C T I O N 17 2
HOW W E E NGAGE W ITH OU R
STA K E HOL DE R S
SECTION 172(1) COMPANIES ACT 2006 STATEMENT
As a Board, we believe that in order to maximise
value and deliver long term success, it is critical
that we understand who our key stakeholders are;
to build relationships with them and to engage in
proactive and constructive dialogue and to ensure
we deliver on what is important to them. To that
end, engagement with all of our stakeholder groups
plays a vital role in delivering our Group strategy.
Section 172 of the Companies Act 2006, requires
that the directors of a company must act in the way
they consider, in good faith, would be most likely to
promote the success of the Company for the benefit
of its members as a whole, having regard to each of its
stakeholders and, taking into account factors listed in
section 172(1) (a) to (f).
The following information describes how our
Directors have had regard to the need to foster the
Company’s business relationships with our partners,
clients and others. In the Corporate Governance
Report, we provide details of key Board focus which
should be read in conjunction with this Section 172(1)
Statement and can be found on page 177.
BOARD ENGAGEMENT WITH STAKEHOLDERS
The Board receives regular reports from relevant
members of the Senior Management team and uses
this information to ensure they remain closely
connected with stakeholders and to inform discussion
and decision-making. Engagement mechanisms are
reviewed and monitored regularly and the Board
ensures that they remain appropriate and effective.
The Company Secretary & General Council
ensures that as the Board make its decisions, the impact
on any of our stakeholder groups is considered and any
decisions are recorded in the Board meeting minutes.
The Directors consider the groups listed here to
be the Company’s key stakeholders and those which
are identified as most likely to be affected by the
principal decisions of the Board.
As part of our engagement strategy and
development of our ESG priorities, the Board receives
regular and relevant updates from Executive Directors,
the Designated Non-Executive Director and Senior
Management in the form of reports, presentations and
ad hoc verbal information at Board meetings.
This Statement incorporates and should be read in
conjunction with Environment, Social and Governance
on pages 118 to 137.
Further information on how the Directors have
regard to s172(1) considerations during their decision-
making process can be found on pages 176 to 178.
COLLEAGUES
INVESTORS
As a listed company we have a responsibility
to provide the capital markets community
with clear and consistent and balanced
information on our progress. In turn we value
investor feedback and participation, which are
central to delivering consistent and profitable
long term growth.
WHY WE ENGAGE WITH OUR INVESTORS
Engagement with investors helps us to understand
their views and priorities. The feedback that we
receive informs our decision-making and influences
the long term strategy of the Company. As a publicly
listed company, we recognise the importance of
communicating our
and business
performance regularly, clearly and consistently.
strategy
HOW WE ENGAGED IN FY22
– Through a variety of communications and
events, including meetings and roadshows,
corporate website, monthly investor
newsletter and our dedicated Investor
Relations & Corporate Affairs Director
– Appointment of an external PR agency to
oversee our financial PR programme, resulting
in enhanced media and PR activity, with CEO
interviews and press coverage
– The Company hosted a number of Senior
Management-guided showroom tours in the UK
and in the US along with other in-person events
– In July 2021 the Company held a Capital
Markets event to launch the Long Range Plan
– Held an in-person Annual General Meeting
– Provided important information about our
results, markets, business model and brand
partners
– Invited major shareholders to participate in our
first ESG materiality assessment to help
prioritise ESG matters
HOW DO WE MONITOR THE IMPACT OF
OUR ENGAGEMENT
Through regular feedback particularly focusing on:
– Reports after attendance at Roadshows
following the Half Year and Full Year results
presentations
– Analysis of AGM voting results
– Analysts and broker feedback
– Capital gains through share price appreciation
– Monitoring of share price trends
As a company built on values of trust and
respect, our colleagues are at the very heart of
our business and are the bedrock of our success.
It is through our colleagues that we execute our
strategy and achieve our Long Range Plan. We
continue to invest in our people to ensure that
we attract and retain the best talent.
WHY WE ENGAGE WITH OUR COLLEAGUES
Our goal is to have a loyal, diverse team of highly
trained and engaged colleagues who are well
rewarded and have opportunity to develop long-term
careers with our group. Our colleagues care about:
– Job security and future prospects
– Being experts in the luxury watches and
jewellery category
– Opportunities to learn, grow and progress
– Regular and relevant communications
– Fair salary and benefits
– Being part of a diverse and fair workforce
– Having the opportunity to have their say and
engage with management
HOW WE ENGAGED IN FY22
– Engagement Surveys and understanding what
matters to our colleagues
– Company conferences in Miami and London
where the CEO launched Xenia – our new
global Client Experience Programme
– Local Listening Forum meetings in UK and US
and the first Global Listening Forum
– Consultation with our Listening Forum
members and other colleague groups about
our proposed new purpose and values
– Innovative and accessible communication
portals including the launch of Workplace, a
collaborative two way communication platform
– Town Halls led by the CEO and Divisional
Presidents for important communication
cascades about the businesses
– Free Share awards to all colleagues and the
launch of share save plans
– Visits to showrooms by the Chair of the Board,
other Board members and Senior Management
HOW DO WE MONITOR THE IMPACT OF
OUR ENGAGEMENT
Through regular feedback particularly focusing on:
– Feedback from colleague forums
– Colleague Engagement Survey scores
– Ongoing monitoring of whistleblowing reports
– Ongoing monitoring of gender targets and
diversity metrics
– Review of working practice policies,
particularly whistleblowing and the new Code
of Ethics
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 CLIENTS
BR AND PARTNERS AND SUPPLIERS
COMMUNITIES
Our clients are at the heart of every decision
we make and the way in which they are made
to feel is a primary focus. Providing an
exceptional client experience is a major point
of difference that sets us apart from our peers.
WHY WE ENGAGE WITH OUR CLIENTS
Our business and livelihood depend upon our
clients. Building strong relationships with them,
using the expertise of our retail teams ensure that
we gain a deep understanding of their needs,
allowing us to identify where we can support them.
HOW WE ENGAGED IN FY22
– Enhancing of Watches of Switzerland Group
Service Standards via our new Xenia Client
Experience Programme
– Expanding our Personal Appointment booking
system, enabling clients to reach out to local
store expertise remotely
– Enhancing online client experiences and
expertise to be best in class client service, with
the Luxury Watch and Jewellery Virtual Boutique
– In-store colleagues connecting with their clients
using clienteling guides and CRM data on new
product launches and product exclusives
– Engaging with our clients via social media
and emails
– Introduction of the Watches of Switzerland
Group Service Standards via our new Xenia
Client Experience Programme
– A dedicated client service team ensuring clients
receive the required support during their
clienteling experience
HOW DO WE MONITOR THE IMPACT OF
OUR ENGAGEMENT
Through regular feedback, particularly focusing on:
– Measuring client satisfaction through a variety
of tracking methods including, Net Promoter
Score (“NPS”)/Podium
– Measuring the client experience via mystery
shopping programmes to ensure consistency of
our luxury service offering and the Xenia initiative
– Feedback from expert retail colleagues and
client service specialists
– Dialogue with client focus groups
– Expanding and developing our business with
existing clients
– Gaining new business with additional clients
– Online ratings
We are proud of the long-standing partnerships
we have developed with our brand partners
and suppliers. Built on mutual trust and respect,
we recognise the responsibility we undertake
to represent the brands and contribute to their
long term value appreciation. We nurture
close relationships on an ongoing basis to drive
social
improvement,
focusing on every step in our sourcing and
manufacturing processes.
and environmental
WHY WE ENGAGE WITH OUR BR AND
PARTNERS AND SUPPLIERS
We maintain an active, cross-departmental
dialogue to build long term relationships, capability
and trust in order to provide sustainable products
and solutions to clients. Working with them helps
achieve our business and sustainability ambitions in
the delivery of luxury products. We also engage
with our non-product suppliers which provide
services relating to areas including packaging,
logistics and IT as well as our landlords and lenders.
HOW WE ENGAGED IN FY22
– Ongoing dialogue with our brand partners at
global HQ and Divisional HQs introducing new
ranges, including the launch of exclusive
products
– Actively looking to identify distribution
opportunities across new markets and
delivering an agreed concept
– Expanding the mono-brand boutique channel,
a format which allows a brand to be featured
in a fully dedicated space and further enhance
its market positioning
– Collaborating with brand partners to provide
our colleagues with extensive training
– Developing line detail sales projections and
product requirements to gain maximum
advantage in product supply
HOW DO WE MONITOR THE IMPACT OF
OUR ENGAGEMENT
Through regular feedback particularly focusing on
– Feedback from expert retail colleagues and
client service specialists
– Alignment with client behaviour, especially
around ecommerce
– Dialogue with clients
– Expanding and developing our business with
existing clients and gaining additional clients
Giving back to the communities in which we
live and serve is central to our core values.
Our aim is to be fully socially responsible and
to ensure the wellbeing of our colleagues,
brand partners, clients and communities. We
believe that, in order to maintain their social
licence to operate, businesses must invest in
and benefit the places and communities that
surround them. We can only grow our
business when our colleagues, brand partners
and suppliers and communities succeed
alongside us.
WHY WE ENGAGE WITH OUR
COMMUNITIES
One of our core values is that we care for our
communities by being good citizens and actively
supporting those in need. Both The Watches of
Switzerland Group Foundation and the Company
support a range of causes including partnerships
with The Prince’s Trust, Crisis and the Fuel Bank
Foundation as well as a network of food banks in
large city centres where the Group’s colleagues and
clients live.
HOW WE ENGAGED IN FY22
– We support the Foundation in creating long
term partnerships that drive positive change
within the communities we operate and help
to relieve poverty as well as making the lives of
young people better through education and
opportunity
– Our colleagues in our support centres have
taken part in volunteering programmes
– We are signatories of the British Retail
Consortium’s ‘Better Jobs’ Diversity & Inclusion
Charter and are members of HRH Prince of
Wales Responsible Business Network, Business
in the Community
HOW DO WE MONITOR THE IMPACT OF
OUR ENGAGEMENT?
Through regular feedback particularly focusing on:
– Updates from the ESG Board Committee
– Updates from the Chair of The Watches of
Switzerland Group Foundation
– Feedback from the Listening Forums
S
T
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117
E N V I RO N M E N TA L , S O C I A L A N D G OV E R N A N C E
PU R POSE , CU LTU R E A N D VA LU ES
With our highly engaged colleagues, brand partners, scale and
expertise, we are uniquely positioned to WOW our clients
while caring for our colleagues, our communities and our
planet: this is our Purpose.
Supported by an inclusive culture of transparency and
collaboration, we are embracing our stewardship responsibilities and
making a tangible positive difference within our society and helping to
safeguard our planet for future generations.
OUR PURPOSE
To WOW our clients while caring for our colleagues, our communities and our planet.
OUR VALUES
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 OU R SUSTA I NA BIL IT Y PIL L A R S
PEOPLE
PLANET
RESPONSIBLE SOURCING
Goals
– Attract and grow a loyal, diverse team of
– Take climate action to achieve Net Zero
– Make sure every item we sell is
highly trained and engaged colleagues, who
are well rewarded for their expertise and
are committed to careers in our Company
– Support our local communities
emissions by 2050
– Help clients reduce their environmental
impact by extending the life of products
through repair, recycling and resale, as well as
promoting innovation and advancement such
as more sustainable design and packaging
responsibly sourced from a supply
chain free from forced labour
Supporting
United Nations
Sustainability
Development
Goals (SDGs)
FY22
Performance
Highlights
– Colleague engagement score of 86% with
85% participation
– Set near term targets aligned to 1.5°C in
line with the Paris Climate Agreement
– Completed a review of our supply
chain due diligence
– 50 free shares awarded to all colleagues
– 48% take up of UK Save As You Earn
(SAYE) and 32% take up of US Employee
Stock Purchase Pan (ESPP)
– Grew our After-Sales and Servicing
business by 59% across the Group
– Increased Group sales of pre-owned
watches by 121%
– Developed and piloted a bespoke
responsible sourcing programme in
line with our Supplier Code of
Conduct and industry best practice
– Ranked #11 in the FTSE 250 Women
– 100% of our UK properties now powered
Leaders Review
by renewable sources
– Donated £4.5 million to date to The
Watches of Switzerland Group Foundation
to support local communities
We continue to grow our business, while reducing our impact on the environment, investing in our people and supporting good causes.
Our progress in reporting our ESG performance
was recognised by FTSE4Good in November 2021,
with our inclusion in the FTSE4Good UK index.
We achieved the Fair Tax Mark accreditation in
February 2022, which recognises organisations that
pay tax responsibly.
In April 2022, our Mappin & Webb business was
assessed against new sustainability criteria and
awarded a five-year extension to its Royal Warrants
to Her Majesty the Queen and His Royal Highness
The Prince of Wales.
PARTNERSHIPS TO ACHIEVE THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS
We understand business can play an important part in tackling environmental
and social issues and are working with partners and specialist organisations
with a shared vision and shared goals to make a greater impact.
We are also members of the National Association of Jewellers and through
The Watches of Switzerland Group Foundation, partner with charities such
as The Prince’s Trust and Crisis to support and care for our local communities.
We are active members of organisations with a focus on purposeful business,
including
the Government’s All-Party
Corporate Responsibility Group and the Responsible Business Network,
Business in the Community.
the British Retail Consortium,
In line with our Purpose, we joined over 1,200 other organisations in April 2022
to support a campaign for a Better Business Act, which, if successful, will amend
Section 172 of the Companies Act to place environmental and social
considerations at the heart of businesses’ decision-making processes.
119
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
E N V I RO N M E N TA L , S O C I A L A N D G OV E R N A N C E
continued
OU R A PPROACH
We are committed to our value to ‘do the right thing, always’, and operate
a responsible and ethical business by aspiring to best practice and
understanding stakeholder expectations, then making sure this is reflected
in our business decisions.
We aim to deliver continuous improvements across our environmental and
social activities through collaboration with stakeholders as partners, innovation,
and directly or indirectly investing in initiatives which benefit our colleagues,
clients and local communities.
To ensure a systematic approach to ESG risk management, we have developed
a detailed ESG risk register, which allows us to formally monitor our risk profile and
manage changes at the appropriate levels, mitigating or removing risks to our business
operation before they materialise. Our risk management framework also allows us
to identify and act on opportunities arising from a changing climate. More information
can be found in our Task Force for Climate-Related Financial Disclosures Statement
on pages 138 to 147 and also Risk Management on pages 156 to 158.
MATERIALIT Y ASSESSMENT
We invited stakeholder groups to participate in a materiality assessment to help us
identify ESG aspects that matter most to them.
This feedback was used to help test and develop a sustainability strategy that
delivers value for all and has been mapped against our ESG risk framework for
full transparency.
A review of our materiality assessment will take place on an annual basis.
MATERIALIT Y MATRIX
h
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L
Strategy
Climate
Packaging
D&I
Wellbeing
Promoting a circular economy
Innovation
Stakeholder
engagement
Responsible
sourcing
Brand
Customer insights
Learning &
development
Data protection
Waste management
Health & safety
Water
Social impact
Responsible sourcing
Climate and decarbonization
Human rights
Retailer relationships
Geo-political and
economic context
Product regulation/taxation
Changing consumer behaviors
Innovative business models
Digital and technology
Competitiveness and
Responsible marketing and
productivity
Product quality and safety
brand communication
Business ethics
Community relations
Cyber security
Acquisitions and investments
Zero waste
Diversity and inclusivity
Talent attraction
and retention
Low
Medium
High
Very high
Current or potential impact on the Watches of Switzerland Group
Pension
management
Data privacy
DEVELOPING OUR PURPOSE AND SUSTAINABILIT Y STR ATEGY
Our sustainability strategy was developed in parallel to our newly defined purpose and values.
Central to this work, is our core value to ‘do the right thing, always’, in everything we do.
JUNE 2021
– ESG Committee is
AUGUST – OCTOBER 2021
– A dedicated Head of ESG is
established by the Board to
oversee the development
of our sustainability
strategy and ensure its
successful implementation
across the Group
– Brian Duffy, CEO, takes
Board level responsibility
for, and oversight of, the
development and delivery
of the sustainability strategy
appointed to help further define
and drive our sustainability agenda
– A comprehensive ESG gap
analysis is carried out
– We undertake a series of
colleague engagement workshops
across our Group to define the
Group’s unique points of
difference, which informs the
foundation for our purpose and
values
– The ESG Committee approves a
strategic framework, centred
around three strategic pillars:
People, Planet and Responsible
Sourcing
– ESG Working Groups are
established to support with ESG
strategy scoping and delivery
NOVEMBER – JANUARY 2022
– A specialist consultant is brought
in to facilitate dedicated focus
groups to refine our purpose
and values
– Work begins socialising our
purpose and values across our
wider business, including with our
Colleague Listening Forum
– Our new CFO, Bill Floydd, takes
operational responsibility for the
development and delivery of our
sustainability strategy
12 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
ESG GOV E R NA NCE
A dedicated ESG Committee was established by the Board in June 2021 and
is a Committee of the Board. It is chaired by Rosa Monckton MBE, Non-
Executive Director. Brian Duffy, CEO, takes responsibility for ESG matters
at an Executive level and is also a member of the ESG Committee. The
Committee plays an active role in the development and delivery of the
Group’s sustainability strategy, by ratifying key decisions, ensuring
alignment with United Nations Sustainable Development Goals and
providing accountability against KPIs.
The Committee meets at least three times a year and is supported by an ESG
Steering Group, which is comprised of executive level leaders, each with formal
operational responsibility for the management of environmental, social and
governance issues. The Steering Group is chaired by our CFO and driven by an
experienced Head of ESG, who was appointed in August 2021 to help further
establish and drive our ESG agenda.
The Steering Group meets once a month and exists primarily to oversee the
development of a progressive sustainability strategy and ensure its successful
implementation across the Group.
Rosa Monckton MBE, The Chair of the ESG Committee and Non-Executive Director
of the Watches of Switzerland Group PLC
ESG GOVERNANCE
BOARD
ESG COMMITTEE
Committee of the Board
TR ADING BOARD
Weekly
ESG STEERING GROUP
Monthly
SUBJECT MATTER EXPERTS*
People Working Group
Planet Working Group
Responsible Sourcing
Working Group
*
Includes internal and external experts.
– A new ESG Steering Group is
introduced to help embed ESG
practices across our Group
– Key stakeholders including
colleagues, investors and supplier
partners are invited to participate
in our Materiality Assessment to
test and further shape our
sustainability strategy
– ESG is included in the Group’s
seven strategic priorities
FEBRUARY – APRIL 2022
– Our purpose and values
are approved by the
Board, along with our
sustainability strategy
and strengthened ESG
governance structure
– Work begins embedding
our purpose and values
into everything we do
– In line with our new
purpose, we support calls
for a ‘Better Business Act’
and an amendment to
Section 172 of the UK
Companies Act, to
empower directors to give
people and planet the same
consideration as profit
MAY 2022
– Full launch of new
purpose and values, to
support our developing
sustainability strategy
121
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS E N V I RO N M E N TA L , S O C I A L A N D G OV E R N A N C E
continued
C A R I NG FOR OU R C OL L E AGU ES
A N D C OM MU NITIES
SUPPORTING UNITED NATIONS
SUSTAINABILIT Y DEVELOPMENT GOALS
PERFORMANCE HIGHLIGHTS
– Colleague engagement score of 86% with
85% participation
– Ranked #11 in FTSE 250 Women Leaders
Review and are Parker Review compliant
– 50 free shares awarded to all colleagues
– 48% take up of UK Save As You Earn (SAYE)
– 32% take up of US Employee Stock Purchase
Plan (ESPP)
– To date, donated £4.5 million to support our
communities through The Watches of
Switzerland Group Foundation
AREAS OF FOCUS
– Embedding our new purpose and values into
business as usual
– Diversity & Inclusion
– Attracting the best talent as our business grows
– Supporting the health and wellbeing of
colleagues across the Group
“As our Group continues to grow
rapidly, we were honoured to invite
everyone to share in our future
success with a gift of free shares
followed by the launch of new
share save plans. The Watches of
Switzerland team is one I am very
proud to lead.”
BRIAN DUFFY
CEO
At the Watches of Switzerland Group, we are committed to creating an inclusive culture
where colleagues grow, thrive and build long term careers; FY22 has seen a number of
initiatives to support this.
In a year of unprecedented growth for the Group, we invited colleagues to share in our success
with the grant of a free share award in December 2021 and the launch of new share save plans in
January 2022.
Laying the foundation for our future people strategies, we reviewed our purpose and values
and came together globally for the first time with the creation of Xenia – our Client Experience
Programme – developed in conjunction with the Ritz-Carlton Leadership Centre, see the Strategy
in Action pages on 96 to 105. We successfully piloted and launched Workplace, a two-way,
engaging communications platform, in both the US and UK and we are looking forward to this new
social channel underpinning our communications in the years to come. The new purpose and
values were launched in May 2022.
In January 2022, we saw the benefit of looking after our teams during lockdown when 85% of
colleagues participated in the second Company-wide engagement survey and told us that they
were more engaged than ever. Our Diversity Council and Listening Forums provided us with
feedback about a range of issues and in April 2022, we held our first Global Listening Forum chaired
by the CEO and the Designated Non-Executive Director for Workforce Engagement.
November 2021 also saw the completion of charitable status for The Watches of Switzerland
Group Foundation, with the initial planned company donation of £3 million across FY21 and FY22.
This was enhanced by a further donation of £1.5 million, making a total cash contribution to the
Foundation of £4.5 million in FY22.
Finally, this year saw a smooth CFO transition when Anders Romberg retired, and Bill Floydd
joined the business. We also saw the appointment of David Hurley as President North America &
Deputy CEO and Craig Bolton as President UK & Europe, together with the recruitment of a number
of high potential new hires to our leadership team to support our future expansion and growth.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 COLLEAGUE ENGAGEMENT
COLLEAGUES AS SHAREHOLDERS
In December 2021, we were pleased to invite all colleagues to become shareholders
with a gift of 50 free shares to say thank you for all their hard work. The shares will
vest in three years’ time, subject to continued employment with the Group.
In January 2022, following feedback from the Listening Forum, we launched
share save plans in the UK and US and were delighted to see industry beating
participation – reflective, we hope, of colleagues’ intention to stay with the Group
in the long term.
Plan
US ESPP
UK SAYE
Eligible
Colleagues
406
1,860
# Participants
% Average saving
131
898
32%
48%
US$219
£147
‘HOW ARE WE DOING?’ ENGAGEMENT SURVEY
Just prior to the pandemic in March 2020, we conducted our first ‘How Are We
Doing?’ Company-wide engagement survey. Initially planning to defer the second
survey to Autumn 2021, we decided to run it again in January 2022 to mirror the
post peak trading timing of the first survey.
Unsure how colleagues would be feeling after two years of disruption and
upheaval, we were reassured to know that teams were still highly motivated and
feeling very positive about working for the Company. Engagement increased from
85% to 86% across the Group and the response rate was 85%. We saw
improvements and some of the highlights are as follows:
I understand how my work contributes to the
success of the Company
I feel positive about the future success of the
Company
96% agree/strongly agree
94% agree/strongly agree
I feel committed to the Company’s goals
92% agree/strongly agree
I believe the Group leadership team has a
clear vision for the future of the company
91% agree/strongly agree
I am proud to work for this Company
90% agree/strongly agree
We were also pleased to see that, in response to the two ‘hot topic’ questions
we asked about the pandemic, colleagues responded very positively in light of the
range of measures put in place as we returned to work.
In response to the Coronavirus pandemic,
I believe the Company has reacted positively with
regard to colleagues
In response to the Coronavirus pandemic,
I believe the Company has reacted positively with
regard to optimising the business
87% agree/strongly agree
92% agree/strongly agree
Overall, we are very proud of our highly engaged workforce and the leadership
teams that have supported our business over the past two years. Group, divisional
and individual action plans are currently underway to address areas where we can
further improve such as a desire for even more opportunities to progress and the
growing post-pandemic request for more work/life balance.
LISTENING FORUMS
We established our UK and US Listening Forums in FY21, and the UK and US teams
met twice separately in FY22 and once collectively for the first Global Listening
Forum in April 2022. The global meeting was co-Chaired by Brian Duffy, CEO and
Rosa Monckton, Designated Non-Executive Director for Wider Workforce
Engagement. David Hurley, President North America & Deputy CEO, Craig Bolton,
President UK & Europe, Ruth Benford, Executive Director Marketing, Nikki
Zamblera, Executive Director HR and Shirley Ingold, Vice President L&D and HR
US were also in attendance. 22 representatives from across the Company put a
number of questions to the Senior Executive team and were invited to hold an
open forum at the end of the meeting. Rosa Monckton reported back to the Board
on 5 May 2022.
As a direct result of feedback received from the UK Listening Forum, a number
of enhancements to our UK benefits packages were launched in May 2022.
50
86%
FREE SHARES ISSUED
TO ALL COLLEAGUES
FY22 COLLEAGUE
ENGAGEMENT
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DIVERSIT Y & INCLUSION
We recognise the many benefits a diverse workforce can bring and embrace all
talent regardless of gender, race, sexual orientation, disability, age, mental status,
background, family responsibilities, political or philosophical beliefs.
A culture of inclusion underpins all of our management decisions, actions and
behaviours and it was reassuring to note from our engagement survey that 81% of
colleagues agreed or strongly agreed with the statement ‘I work in an environment
where everyone can feel included, respected and accepted for who they are’. Our
Diversity Policy ensures that development, promotion, opportunity and enhancement
are based solely on objective, measured criteria relevant to the situation and full and
fair consideration is given to job applications from disabled persons.
Our Board believes it is critical that its membership includes a diverse mixture
of skills, experience, expertise, gender, tenure, ethnicity, cultural and social
backgrounds together with diversity of thought. To this end, the Board reviewed its
Diversity Policy in May 2022 to reflect the new targets laid out by the FTSE Women
Leaders Review. On this note, we were pleased to move to from #98 to #11 in the
2022 FTSE 250 Women Leaders Review ranking and to rank #3 in the FTSE
ranking for consumer goods and services. We already comply with the Women
Leaders Review’s new recommendations and with the Parker Review targets.
– FTSE Women Leaders Review: 43.5% of the Executive Committee and their
direct reports are women
– 42.8% of Board members are women
– Tea Colaianni is our Senior Independent Director
– One member of our Board is from a minority ethnic background
With regard to mandated gender pay reporting, we only have a pay gap in
the upper quartile of the business and are pleased to note progress in closing this
gap as our senior team continues to grow. Our Gender pay gap report can be
found on our website thewosgroupplc.com.
We are honoured to be founder members of the Diversity in Retail (DiR)
network chaired by Tea Colaianni, Senior Independent Director, and we take an
active part in driving the agenda for our sector. Laura Battley, Company Secretary
& General Counsel sits on the DiR Advisory Board and also sits on the judging
panel for the UK Social Mobility Awards.
Our Diversity Council was established in April 2021 and has met three times.
Co-chaired by Laura Battley, Company Secretary & General Counsel and Nikki
Zamblera, Executive Director HR, council members have provoked some interesting
and lively debate and our focus for this year was the importance of role models. We
were therefore very proud when Anuradha Chopra, Deputy Manager of our
Goldsmiths showroom in Leicester and Diversity Council member was named a
Role Model for Inclusion in Retail in the 2022 Diversity in Retail Index. Anu also
graduated from the first DiR Future Ethnic Leaders Programme earlier in the year.
The Diversity Council has a dedicated channel on our communications
platform Workplace and one of its first initiatives was the creation of a cultural
events calendar.
During the year, we launched Diversity, Equity and Inclusion training in the US
and made its completion mandatory. We will be rolling out similar training in the
UK in FY23.
We are signatories to the British Retail Consortium’s Better Jobs Diversity &
Inclusion Charter and Business in the Community’s Race at Work Charter where
Laura Battley acts as executive sponsor. Additionally, a number of our female
executives are proud to serve as Ambassadors for Retail Week’s Be Inspired
programme participating in a number of activities including speed mentoring
during the course of the year. Nikki Zamblera and Laura Battley also serve on
their advisory board. In April 2022, Laura chaired a pop-up board for the DiR
Ethnic Senior Leaders Programme. Finally, we are pleased to be supporting the
10,000 Black Interns initiative and are looking forward to welcoming three interns
to our Leicester support centre over Summer 2022.
Centre left, Anuradha Chopra, Deputy Manager, Goldsmiths, Leicester, named ‘Role Model for Inclusion in Retail’ in the 2022 Diversity in Retail Index. Standing alongside (left to right)
Tea Colaianni, Senior Independent Director, Ian Carter, Chair and Nikki Zamblera, Executive Director HR
124
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 “Our goal is to attract and grow
a loyal, diverse team of highly
trained and engaged colleagues
who are well rewarded for their
expertise and committed to
developing their careers with the
Watches of Switzerland Group.”
BRIAN DUFFY
CEO
12 5
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continued
HEALTH & WELLBEING
The wellbeing of our teams became a particular focus during the pandemic and
colleagues’ physical and mental health continues to be an extremely high priority.
In July 2021, we launched a new health and wellbeing app in the UK. ‘bhsf
Connect’ provides 24/7 access to counselling and GP services; a legal helpline; a
neurological helpline; carer support; money management; ‘MyMindpal’; self-help
literature and access to a health and wellbeing calendar. Over 900 colleagues have
registered as users and there have been over 9,000 visits to the site. ‘MyMindpal’
has been visited over 700 times and the smarter spending tile has been accessed
nearly 4,000 times. The app has been extremely well received.
Towards the end of FY22, we piloted a two-day Mental Health First Aiders
programme which received extremely favourable feedback from attendees who
found it very helpful and thought provoking. We intend to roll this out to a broader
group, including the US, in FY23.
Our Menopause Policy was launched in May 2022 and was positively received
by both line managers and colleagues.
In the US, 241 colleagues from Mayors and the corporate offices participated
in the wellness programmes which included completion of a health assessment
and the completion of a biometric test by a third-party diagnostic health provider.
Finally, as result of feedback from the Listening Forum, all UK colleagues were
enrolled in a Health Cash Plan, and everyone was given an extra day’s holiday in
order for them to celebrate their birthday. Similar benefits are already in place for
our US colleagues.
HEALTH & SAFET Y
We are committed to maintaining safety standards that comply with legislation and
enable colleagues to be confident that their workplace is safe. Our Health & Safety
Policy applies to all business activities and premises to ensure the health, safety and
welfare of our colleagues, clients and visitors. A Health & Safety Committee
comprising senior leaders from our UK and US operations meets regularly and a
rolling review and audit programme is in place. A formal mechanism for reporting
accidents is in place and we work closely with third-party provider, Ensafe.
“A highly educational experience with
fantastic resources, this course has given
me the confidence and tools to provide real
support as a mental health first aider.”
LISA MITCHELL
HE AD OF VIRTUAL BOUTIQUE
Internal communication platform Workplace
New Health and Wellbeing App launched to
all UK colleagues
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 LEARNING & DEVELOPMENT
We place the highest premium on learning and development and our colleagues are
proud of their deep product knowledge and expertise.
Whilst our primary focus this year was the launch of Xenia – The Art of
Hosting (for further information see page 96) we also welcomed many new
colleagues to the business with 16 new mono-brand boutique openings in the UK
and US and the acquisition of three businesses in the US including Betteridge,
which becomes a new brand for the Group. Comprehensive induction
programmes were put in place and in the UK, colleagues working in the new
luxury Goldsmiths’ showrooms also attended a six-module training programme.
Throughout the year, we ensured that colleagues stayed informed and
educated about new products and product innovations with monthly e-learning
modules showcasing new product launches. Specific brand training with partner
brands such as Rolex, Patek Philippe, OMEGA, Breitling, TAG Heuer and
TUDOR, continued to be a priority.
46,000
RECOGNITIONS IN THE UK ON OUR
VIBE AND BRILLIANCE PLATFORMS
In the UK, colleagues completed over 33,000 hours of e-learning and each
month over 1,480 learners logged onto the platform. Modules range from brand
and product knowledge to compliance topics such as whistleblowing and anti-
money laundering.
We have an established range of in-house training and development
programmes including Bronze and Silver Academies and this year rolled out My
Personal Development Journey for support colleagues – this is a digital, learning
library containing over 100 learning activities.
In the US, in addition to supporting the significant growth of the business, our
range of training programmes includes watches and jewellery brand training,
management development programmes and selling skills. The e-learning platform
was used for compliance and operational training. In all, teams in the US attended
over 12,600 hours of training including more than 1,800 hours of watches and
jewellery training and 900 hours of specialised jewellery training.
With the Xenia pillars forming the new global foundation for client experience
and the relaunch of our purpose and values, our teams have never been more
focused and determined to deliver.
COLLEAGUE RECOGNITION
Our VibE and Brilliance recognition platforms continue to be appreciated by
colleagues across the UK with over 46,000 recognitions given over the course of
the year.
In the US, the Celebrating Success programme is used to recognise individual
and team achievements.
Since the launch of Xenia, we have been most proud to share the special
‘WOW Me’ moments that colleagues have created for their clients.
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TALENT & SUCCESSION
As our business grows and develops, the ability to attract and retain talent is key.
Our goal is to attract and grow a loyal team of highly trained, diverse and engaged
colleagues who are committed to developing their careers with the Group.
In a difficult macro recruitment market, the strength of our talent planning
and acquisition was showcased this year by our significant growth which saw
headcount across the Group increase and the appointment of new regional roles
in the UK to support the mono-brand boutique expansion. The US leadership
team was strengthened by the appointment of several new senior positions as
the organisation continues to grow. In June 2022, we began our European mono-
brand boutique expansion with the opening of our first showroom in Stockholm.
For further information see page 104.
We continue to enjoy our success in attracting talented and high calibre
candidates to the Group despite market pressures.
FY22 also saw the appointment of Bill Floydd as CFO, following the retirement
of Anders Romberg and additionally the promotion of David Hurley to President
North America & Deputy CEO and Craig Bolton to President UK & Europe to
reflect the growing size of their respective businesses.
27
INTERNAL
PROMOTIONS
IN THE US
92
INTERNAL
PROMOTIONS
IN THE UK
COLLEAGUE REL ATIONS
We place high regard in treating all colleagues fairly and have well established
procedures to enable colleagues to raise grievances formally or informally.
We have a third-party whistleblowing line, which is supported by a Whistleblowing
Policy and mandatory e-learning.
On the few occasions we have needed to enter into redundancy consultations,
for example, due to the ending of a showroom lease, we go through a full
consultation process and make every effort to relocate colleagues. We see
redundancy as a last resort when all other avenues have been exhausted.
COLLEAGUE GENDER STATISTICS AS AT 1 MAY 2022
Board
4
MALE
Executive Team
Trading Board
5
MALE
8
MALE
Executive Team &
their direct reports
22
MALE
UK FTE – Retail
597
MALE
3
FEMALE
4
FEMALE
3
FEMALE
19
FEMALE
804
FEMALE
UK FTE – Support
UK FTE – Total
US FTE – Retail
US FTE – Support
266
MALE
863
MALE
192
MALE
24
MALE
US FTE – Total
216
MALE
371
FEMALE
1,175
FEMALE
49
FEMALE
183
FEMALE
232
FEMALE
12 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
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continued
THE WATCHES OF SWITZERL AND GROUP ’S CHARITABLE ACTIVITIES
SUPPORTING UNITED NATIONS
SUSTAINABILIT Y DEVELOPMENT GOALS
“I am delighted that in FY22, The
Watches of Switzerland Group Foundation
was registered as a charity. A high-profile
Trustee Board has been appointed and
over £1.3m of the funds paid to the
Foundation have now been distributed.
With the support of colleagues, we look
forward to the significant impact the
Foundation will make to those in need in
our local communities.”
BRIAN DUFFY
CEO THE WATCHES OF SWITZERLAND GROUP & CHAIR OF
THE WATCHES OF SWITZERLAND GROUP FOUNDATION
Supporting our local communities has always been an important part of
the Watches of Switzerland Group’s culture and our approach to giving
continues to be focused on charities with whom we can develop long-
standing personal relationships and work together to create change.
In some cases, this means partnering with established national or international
charities to fund specific projects or outcomes and in others it means supporting
much smaller charities such as food banks with both funding, expertise, and the
opportunity to benefit from the wider network we have created.
Whilst traditional outcomes are not always easy to consistently compare
across the range of charities we support, we believe passionately in the difference
the depth and breadth of the impact our involvement can make.
The Watches of Switzerland Group Foundation was incorporated as a
company in October 2020 and was registered as a charity by the UK Charity
Commission in November 2021. The initial planned Company donation of
£3.0 million across FY21 and FY22 was further enhanced by an additional
donation of £1.5 million making a total cash contribution to the Foundation of
£4.5 million in FY22. The Trustees of the Foundation have since approved
donations of £1.57 million and paid £1.37 million to its chosen charities.
The Watches of Switzerland Group colleagues volunteering at the Food Bank in Leicester
£4.5m
FUNDING FOR THE FOUNDATION
TO DATE
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 THE FOUNDATION – TRUSTEES OF THE BOARD
Brian Duffy
Watches of
Switzerland Group
CEO. Chair of the
Foundation
Mary Portas
Retail consultant and
broadcaster
David Gandy
Model and fashion
expert
John Hannah
BAFTA-nominated
actor
Terence Parris
Sports, Brands and
Diversity expert
Ruth Benford
Watches of
Switzerland Group
Executive Director
of Marketing
Johnathan Joseph
Also known as
DJ Spoony
The Watches of Switzerland Group Foundation US was incorporated in
September 2021 and received its tax exempt status in May 2022. As a
consequence, the US Foundation will begin disbursing funds in FY23. £1.5 million
of funding has been allocated to the US Foundation to date.
The Foundation does not respond to requests from other charities but instead
selects specific strategic partners or projects that will directly impact the
communities where our colleagues and clients live and serve. The Foundation’s
charitable purposes and aims have been identified to further enhance the Group’s
previous charitable initiatives. The charitable objects are:
– The prevention or relief of poverty
– The advancement of education
– The relief of those in need, by reason of youth, age, ill-health, disability,
financial hardship or other disadvantage
“Our new partnership with The Watches of
Switzerland Group Foundation is unique. Through
collaborating we will extend and develop Fuel Bank
services in around a dozen foodbanks that the Watches
of Switzerland Group is already supporting. This
will be transformative for the families who are being
supported because they will not only receive food, but
also the energy needed to cook it.”
MATTHEW COLE
CEO, THE FUEL BANK FOUNDATION
FOOD BANK PROGR AMME
In response to the growing food poverty crisis caused by the impact of the
pandemic, we launched our Food Bank Programme in June 2020, prior to the
formation of the Foundation. This programme has evolved to become one of our
biggest projects so far and the Foundation has now undertaken to continue the
work started by the Company.
In the UK, all of the food bank charity partners are members of the Trussell
Trust, and five strategic partners and six city centre hubs are currently supported:
Strategic Partners
Euston Foodbank
City Centre Hubs
Birmingham Central Foodbank
Glasgow SE Foodbank
Bristol – inHope (Bristol) Ltd
Leicester South Foodbank
Cardiff Foodbank
Manchester Central Foodbank
Edinburgh Northwest Foodbank
Newcastle West End Foodbank Kingston – Doxa Deo Community Church
Liverpool – St Andrew’s Community Network
Strategic projects being supported include the establishment of a mobile
pantry project in Newcastle; the creation of a Regional Distribution Centre in
Leicester and the relocation of the Euston Food Bank to premises that are much
more fit for purpose.
In the US, the Company has previously partnered with Feeding South Florida,
3 Square in Las Vegas and the New York City Food Bank.
Pre-Foundation
Donations
Foundation
Donations
December 2021
Foundation
Donations March
2022
UK
US
£175k
US$100k
£325k
US$260k
£150k
–
Total to date
£650k
US$360k
Prior to the establishment of the Foundation, the Group created a network
amongst its food bank partners where ideas and thoughts could be shared. The
Foundation continues to support this network and in FY22 and FY23 has
embarked on a new strategic partnership with the Fuel Bank Foundation. Funded
by an initial donation of £200,000, the Fuel Bank Foundation will work with food
banks in our network to provide relief from crisis fuel poverty for those in need.
Both the Foundation and the Group are excited by this new initiative and look
forward to monitoring its impact over the coming year.
Since April 2022, when Leicester South Food Bank began to welcome
volunteers again, teams of up to eight colleagues in our support centre volunteer
every Friday. Additionally, in June 2022 we rolled out a volunteer programme, for
our colleagues in London, to support the Euston Food Bank.
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THE PRINCE’S TRUST
After many years of support for The Prince’s Trust, originally through Mappin &
Webb, we were pleased to announce a group-wide partnership in FY19. Since then,
our funding has supported 3,240 young people in the UK.
In February 2021, the Group was honoured to sponsor the launch of The
Prince’s Trust USA. Brian Duffy joined HRH The Prince of Wales and Global
Ambassador, Lionel Richie to co-host this virtual networking event attended by
over 400 guests. In April 2022, we were pleased to support the live version of this
event at The Prince’s Trust Global Gala evening held in New York.
In the UK, the Company continues to sponsor the Prince’s Trust National
Award for Young Changemaker of the Year and Brian Duffy joined Fearne Cotton
and David Harewood on stage at the Drury Lane Theatre, London to present the
award in the presence of HRH The Prince of Wales. We are also delighted that
the Watches of Switzerland Group will be the headline sponsor for the Prince’s
Trust Palace to Palace Bike Ride, which will take place in September 2022.
In FY22, the Foundation has donated a further £325,000 towards core
education programmes which will support young people in developing their
confidence, resilience and key skills. Additionally, this donation will support the
Trust’s new Education Hub and a new employability pilot in the Leicester area.
Pre-Foundation
Donations/Funds
Raised
Foundation
Donations
December 2021
Foundation
Donations March
2022
UK
£475k
£250k
£75k
Total to
date
£800k
“The disruption caused by the pandemic has taken
a real toll on young people’s education. Through our
partnership with the Watches of Switzerland Group, we
can give more students the tools they need to raise their
aspirations and build the confidence to kickstart their
future careers. This year, the Watches of Switzerland
Group have increased their financial support through
their Foundation and will also be the sponsor of the 2022
cycling challenge, Palace to Palace, helping us to raise
even more funds to support young people over the UK.”
JONATHAN TOWNSEND
CEO, THE PRINCE’S TRUST
3,240
YOUNG PEOPLE SUPPORTED
THROUGH EDUCATION PROGRAMMES
AND THE YOUNG PEOPLE RELIEF
FUND OVER THE PAST THREE YEARS
Emma-May Millar, winner of the Prince’s Trust and the Watches of Switzerland Group Young Change Maker of the Year, with Fearne Cotton, David Harewood, and the Watches of
Switzerland Group CEO, Brian Duffy
132
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 John Hannah, Carol Smillie, Trevor Nelson, Sharleen Spiteri, Brian Duffy and Rhona Baillie,
CEO of the Prince & Princess of Wales Hospice, at a fundraising event
CRISIS
In December 2021, the Group began its partnership with Crisis by supporting the
Crisis at Christmas campaign with a donation of £25,000, helping Crisis support 511
guests with somewhere safe to stay over Christmas.
The Foundation subsequently approved a proposal to support Crisis’ Clinical
Psychologists with a donation of £175,000 (underwriting 21% of the salary cost).
Crisis Clinical Psychologists intensively support a small cohort of members with
complex trauma and sit within Crisis’ wider wellbeing offer which supports people
on their journey out of homelessness.
Pre-Foundation
Donations
2021
Foundation
Donations
December 2021
Foundation
Donations March
2022
UK
£25k
£75k
£100k
Total to
date
£200k
PRINCE & PRINCESS OF WALES HOSPICE
The Prince & Princess of Wales Hospice, in Glasgow, provides specialist palliative
care to young people and their families. 1,200 patients are looked after every year.
In December 2021, Brian Duffy was delighted to host a fundraising event at London’s
Quaglino’s which saw Texas performing pro bono and raised more than £430,000
towards the £5 million annual cost of care and services.
UK
WOSG
Fundraising
2021
£434k
Foundation
Donations
December 2021
£100k
Total to
date
£534k
RED CROSS FOR UKR AINE
In response to the war in Ukraine, the Foundation trustees approved a donation of
£100k to the emergency Red Cross Ukraine Crisis Appeal to help those impacted
by the conflict.
FY22 IMPACT REPORT
Food Bank Programme
The Prince’s Trust
Crisis
Fuel Bank Foundation Partnership
Newcastle Pantry Project commenced
Leicester South Food Bank Regional DC
project
Support for 8 further regional city centre Food
Banks
840 Young People helped through education
programmes
400 young people supported through
Education Hub
52 Crisis Members receiving intensive support
Prince & Princess of Wales Hospice Over £500k towards annual running costs
We are very proud of the progress we have made with our community support
projects in the UK in FY22 and look forward to making similar progress in the US.
In terms of proportion of funds allocated to the UK and US respectively, it is
intended that funds will be allocated from the Foundation in a way that broadly
replicates the revenue split between the UK and the US, with two-thirds of funds
being donated to UK charities and one-third to US charities.
Whilst the Foundation allows us to channel our strategic community projects,
we also know that colleagues often have personal affiliations and causes dear to
their hearts. We were therefore delighted to announce that from FY23, we will
be offering matched giving as part of our established payroll giving programme.
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C A R I NG FOR OU R PL A NET
Protecting our planet is enshrined in our Company Purpose and is a key
consideration in our decision-making processes.
As part of our continual improvement and in acknowledgement of the
serious risks posed by climate change, in FY22 we strengthened
our governance mechanisms to address climate-related issues as a top
business priority.
Across our Group, we support the transition to a low carbon economy and
have set near term Science Based Targets (SBTs) aligned to 1.5°C under the Paris
Climate Agreement, with the aim of achieving Net Zero emissions by 2050.
We are driving continuous improvement in carbon reduction and energy
efficiency through our procurement decisions, the design and modification of our
showrooms, facilities management, transportation and by switching to renewable
energy sources.
With the help of our suppliers, we are growing our range of products with
environmental and social attributes and are helping our clients reduce their
environmental impact by extending the life of watches and jewellery through
repairs and reuse, as well as promoting innovation and advancements in
sustainable design and packaging.
SUPPORTING UNITED NATIONS
SUSTAINABILIT Y GOALS
PERFORMANCE HIGHLIGHTS
– Committed to achieving Net Zero emissions
by 2050 and set near term targets aligned to
1.5°C in line with the Paris Climate Agreement
– Grew our After-Sales and Servicing business
by 59% across the Group
– Increased Group sales of pre-owned
watches by 121%
– Conducted a Climate Scenario Analysis
to identify climate-related physical and
transition risks and opportunities
– 100% of UK properties within our
control are now powered by renewable
energy sources
AREAS OF FOCUS
– Participation in CDP climate change
questionnaire for the first time, to help build
an in-depth understanding of climate related
risk to review and reduce our carbon impact
– Leveraging technology to gain primary
emissions data from suppliers and improve
collaborative performance to achieve Net
Zero emissions by 2050
– Encouraging suppliers to align with well-
recognised sustainability standards or
certifications and incorporating sustainability
targets in tender processes and contract terms
– Helping clients to reduce their
environmental impact by extending the life
of products and promoting innovation and
sustainable design
– Significantly grow the sale of pre-owned
watches in FY23
Our Manchester Watch Service Centre
134
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 BUSINESS IMPACTS
Through our business operation, we have the potential to impact the environment
through the production and retailing of products, energy use, transportation, water,
waste and the extraction of metals and gemstones.
We are reducing our use of natural resources and engage in ongoing initiatives to
promote the more efficient use of energy and water. We strive to minimise waste
through avoidance and recycling, and adopt the principles of a circular economy within
our business model and operation, to keep watches and jewellery, their components
and materials at their highest utilisation and value throughout their lifecycles.
ENVIRONMENT POLICY
The Watches of Switzerland Group Environmental Policy, which was approved by
the Board in January 2022, sets out our commitment to the continual improvement
of the management and operation of our activities to minimise any adverse effects
on the environment and public health.
Our Supplier Code of Conduct and Supplier Manual specifically refer to
legislative compliance,
risk, stakeholder
transparent dealings, managing
engagement, supplier collaboration and conservation of resources. It also details
our requirements in relation to the responsible production and retailing of
products, energy use, transportation, water, waste and the sustainable extraction
of metals and gemstones.
CLIMATE ACTION
The Group is taking action to combat climate change and its impacts. It has
committed to achieving Net Zero emissions by 2050 and set the following
near term targets aligned to 1.5°C in line with the Paris Climate Agreement:
Reduce Scope 1 & 2 emissions by 50% and Scope 3 emissions by 42% by 2030
from a baseline year of FY20.
At the time of this report, we were in the process of obtaining target
validation with the Science Based Targets initiative (SBTi).
USING DATA TO DRIVE DECISIONS
We recognise the benefit of digital solutions to support collaboration, monitor
environmental standards and achieve performance targets.
In FY22, we used the Greenhouse Gas (GHG) Protocol to measure carbon
emissions across our Group and found that approximately 98% of our total
emissions result from ‘Purchased Goods and Services’. Without sufficient primary
data to calculate this figure, we adopted a spend-based approach using emission
factors from the Centre for Environmental Data (CEDA) database.
Gaining primary carbon emissions data from suppliers will help us to better
understand the impact of the products we sell and significantly support the
achievement of our near term goal to reduce Scope 3 emissions by 42% by 2030.
The EcoVadis global sustainability ratings platform incorporates a user-
friendly carbon action module. From July 2022, every new and existing supplier
will be asked to register with EcoVadis and use this module to record their carbon
emissions data.
While our brand partners are highly active in reducing their impact on the
environment and continually introduce more sustainable materials into their
products, more accurate data received through EcoVadis will provide us with
insights on GHG/carbon management practices within our supply chain and help
us prioritise the necessary action to meet our targets.
ENERGY EFFICIENCY
In FY23, we will follow ISO50001 international energy management certification
requirements, including enhancing our energy data, to better understand our
energy sources and usage, so we can continue to make the right decisions to meet
targets in line with our climate strategy.
Our energy management system includes implementing energy efficient
technologies such as LED lighting, building automation systems and SMART
metering to reduce energy waste.
We have a commitment to use LED lighting, wherever possible, in all
showrooms and warehouses across the Group by 2025. By the end of FY22, 82%
of UK and 41% of our US showrooms have been converted and this energy saving
lighting is now standard in all new showrooms and major refurbishments. Lighting
is controlled via Passive Infrared Sensor detection which automatically switch off
at night. In the UK we are compliant with Phase 2 of the Energy Savings
Opportunity Scheme and energy consumption is monitored on a site-by-site basis
in collaboration with a specialist energy partner. See page 146 for our GHG
Emissions table.
AFFORDABLE AND CLEAN ENERGY
We continue to work with new and existing landlords with the ultimate goal
of powering all of our properties from reliable, sustainable and modern
energy sources by 2025.
During the year, we achieved our target to transition to 100% Renewable
Energy (RE) in the UK, with the exception of 19 shopping centre sites, which
are operated by external landlords who are also committed to transitioning
to RE or already operate RE contracts.
In the US, we are working with energy suppliers and landlords to power
our properties from renewable sources, such as wind, hydro-electric and
solar. Our largest US landlord, with 37% of our showrooms, has committed
to reducing its Scope 1 and 2 GHG emissions by 68% by 2035, from a 2019
base year and transitioning to renewable energy sources is key to them
achieving this.
135
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS E N V I RO N M E N TA L , S O C I A L A N D G OV E R N A N C E
continued
BUILDING MANAGEMENT
Maintaining good relationships with our landlords is fundamental to the smooth and
sustainable operation of our showrooms.
Our in-house facilities management team actively engage with our landlords
to ensure our properties are well maintained and have the appropriate fire, gas
and electrical safety certifications in place, which are subject to independent
audits. In keeping with our historic brand image, we run a number of old, iconic
premises that require particular attention in order to operate at optimum
performance and be fully accessible for all colleagues and clients.
A changing climate and extreme weather events are likely to increase energy
consumption associated with heating and cooling, so we invest in the most
efficient and reliable Heating, Ventilation and Air Conditioning (HVAC) systems,
which are regularly serviced in line with manufacturer’s guidelines. We use R32
refrigerant gas and R410 A where there is no alternative. Temperatures are set
and automatically switch off when colleagues leave the premises at night.
When searching for new retail premises and negotiating new leases, we
prefer locations with green building certifications and 17% of our properties hold
either a BREEAM rating or an equivalent green certification.
Our high-quality showroom fixtures and fittings are designed to last as long as
possible. We do not use tropical hard woods and seek to use wood certified by the
Forest Stewardship Council (FSC) in new showroom, workshop and office designs.
WATER EFFICIENCY
Water meter data is used to identify sites with excessive water use and resolve
problems. As a retailer, our water-usage is relatively low, however, the introduction
of electronic billing in FY22 allows us to compare year-on-year waste use and target
areas for improvement.
We are working with experts to gather baseline data for our freshwater use
intensity to benchmark an initial 70 showrooms and inform a plan to reduce water usage.
BIODIVERSIT Y
We consider biodiversity and the impact on nature as a factor in procurement
decisions of products and services as well as in the design and modification of
showrooms, offices, equipment, and processes. In the UK, we have plans to move
into a new support centre in Leicester, which is set within 108 acres, including 32
acres of maintained woodlands and green spaces and are working with property
designers to optimise the biodiversity of this site.
TR AVEL AND TR ANSPORT
We recognise transportation is a significant contributor to global warming and
have a number of initiatives in place to drive down emissions resulting from our
business operations.
In line with our commitment to use solely electric or alternative fuel vehicles
across our Group by 2030, we have updated our Company Car Scheme in the UK
to offer a range of Electric Vehicles (EV) and Plug in Hybrid Electric vehicles
(PHEV). 58% of our UK fleet is now EV or PHEV and we have a target of
transitioning to a fully electric fleet by 2025. To support this scheme and
encourage the wider use of electric vehicles, we have installed eight charging
points at our Leicester support centre and plan to introduce more as required.
Colleagues are encouraged to cycle to work through our cycle to work
scheme, which allows them the opportunity of purchasing a tax efficient bicycle
and accessories. All UK support centres are also equipped with showering
facilities and secure cycle parking.
Our Travel Policy requires colleagues to apply sound judgement before
arranging business travel. Air travel is limited to journeys that are necessary to
progress business objectives, and digital technologies are widely encouraged as an
effective means of enabling collaborative working and maintaining engagement
across our Group.
Our Virtual Luxury Boutique provides clients with an online concierge
service, without them having to travel. In FY22, to further support a cleaner,
greener, online experience, 13% of our total home deliveries in the UK were
made by EVs.
We are also leveraging our procurement processes to prefer suppliers
aligned with well-recognised sustainability standards, such as EcoVadis
Sustainability Ratings. More information on how we are using EcoVadis to support
our procurement decisions can be found on page 135.
In FY22, we trialled reverse collections from 80 viable UK retail showrooms,
which resulted in 20% of all UK returns being transported more efficiently.
WASTE MANAGEMENT
We recognise the many benefits of effective waste management systems to prevent
landfill, conserve natural resources, reduce costs and support a more circular
economy, and are streamlining our business processes and leveraging data to gain a
more accurate and cohesive picture of waste generation, reduction and disposal to
support our goal to achieve zero waste to landfill across our Group.
In the UK, we have 49 separate waste management arrangements through
shopping centre landlords and waste management companies, and each of these
comply with all applicable legislation to ensure the responsible collection,
transportation, monitoring, disposal and recycling of waste.
In UK Retail, our largest waste management provider supports 27% of our
showrooms and reports that in FY22, less than 1% of all waste collected was sent
to landfill. The majority of our shopping centre landlords also report low or nil
waste to landfill rates.
Our support centres are serviced by a reputable waste management
providers, who reported that in FY22, 99.9% of waste collected from our
Leicester Support Centre and Millfield sites was diverted from landfill.
FY20
FY21
FY22
Waste in
Tonnes
% to
Landfill
Waste in
Tonnes
% to
Landfill
Waste in
Tonnes
% to
Landfill
UK
302
N/A
Net Sales (£ million)
585.5
268
606.5
1
375
809.6
2
To better inform our developing sustainability strategy and drive further
improvements, our goal for FY23 is to more accurately quantify our total waste
volumes across our Group, including types of recycling and a breakdown of materials
recycled and resources diverted from landfill.
WASTE ELECTRICAL AND ELECTRONIC EQUIPMENT (WEEE)
We strive to deliver continuous improvements to our recycling programme and in
the UK comply with the WEEE Directive, which forms part of our Company policy
and procedures. We encourage and enable WEEE recycling and in the US, recycle
all electronics to the standards of the Environmental Protection Agency (EPA),
Occupational Safety and Health Administration (OSHA), and federal and state laws.
HA Z ARDOUS WASTE
We comply with all applicable national and international environmental laws and
regulations, including the collection, treatment and disposal of hazardous waste, for
which we use licensed contractors who operate an infrastructure of ISO9001,
ISO14001 and OHSAS accredited hazardous waste treatment sites.
136
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 PACK AGING
While high quality, durable packaging is necessary to protect the pieces we sell, we
are working with our brand partners and suppliers to limit excess packaging and
introduce more sustainable materials wherever possible.
The majority of our branded watch boxes are kept as storage and treasured
as part of the product itself. However, we are also seeing an increase in innovation
in sustainable packaging, which is evident in Breitling’s watch box made from
upcycled plastic bottles and Panerai’s latest packaging, which is produced by using
at least 72% post-consumer recycled materials to reduce carbon emissions
resulting from the production process by 4kg per item.
We favour suppliers with well recognised sustainability certifications and our
principal packaging suppliers operate to ISO9001 and ISO14001 quality standards.
In the UK, our receipt wallets are 100% recyclable, our corrugated boxes have an
average of 80% recycled content and our gift boxes are made from a minimum of
80% recycled board.
We are reducing our core transit packaging and where this is not possible, ask
suppliers to ensure the materials they use are sourced responsibly, are recyclable
and can be easily separated. In the UK, plastic and cardboard packaging is
backhauled to our distribution centres for central processing, which enables us to
monitor consumption before it is sent for recycling. Pallets are also backhauled
and reused and in FY22 we will replace cardboard storage boxes with reusable
tote boxes.
We are continually looking for ways to make it easier for clients to be greener,
including reminders to recycle gift boxes and adding handles made from recyclable
materials to our paper carrier bags.
In the UK, we are fully compliant with The Producer Responsibility Obligations
(Packaging Waste) Regulations 2007, through the registered compliance scheme.
PRODUCT INNOVATION
Luxury watches are characterised by a focus on product innovation and advancement,
which is seen through an increase in more sustainable design and packaging.
We encourage innovation across our business model and product range,
particularly products that provide an added ecological or social value. More
information can be found on pages 152 to 155.
CIRCUL ARIT Y OF OUR PRODUCTS
The craftmanship and quality of the watches we sell is key to their longevity
and we are fortunate that our timepieces and high-quality jewellery items are
often handed down generations as heirlooms or resold to be worn again.
We are helping to further extend the life span of watches and jewellery, with
our pre-owned watch business, the restoration and resale of vintage
jewellery from designer brands and a significant investment into after-sales
and servicing.
Repairs are critical in protecting and prolonging the life of clients’ watches, so
therefore we employ a network of 55 highly skilled and accredited
watchmakers in key locations across our Group, who are supported by 27
quality control, administration and polishing specialists.
In response to the increasing demand for these services, we opened our
National Watch Service Centre in the UK in 2019 and continue to enhance
our workshops and add capacity wherever possible.
In the US, our acquisition of Betteridge and the pre-owned watch business
Analog:Shift are also key contributors to our circular economy goal to keep
products at their highest utilisation for as long as possible. In the UK, this is
further supported with a Susan Caplan range, which specialises in restoring
vintage designer jewellery.
OUR FOCUS ON CIRCUL ARIT Y
R ECOVER
1 .
P
R
O
D
U
C
T
I
O
N
E
C
U
D
E
R
.
4
C
O
N
S
U
M
P
TI
O
N
3. REU S E
REDUCE WASTE
2
.
R
E
C
Y
C
L
E
N
RIB U TIO
T
D I S
137
Recover
– Seek to range more products where waste has been
designed out and recovered back into production
processes, such as watch straps and packaging
– Save parts from our Watch Service Centres for recycling
Recycle
– Achieve zero waste to landfill across our Group
Reuse
– Increase after-sales and servicing capacity
– Significantly grow the sale of pre-owned watches across
our Group
– Source 100% renewable energy, in properties we control,
across our Group by 2025
Reduce
– Reduce packaging
– Eliminate waste from our workshops
– Promote the sustainable attributes of the products we sell
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
E N V I RO N M E N TA L , S O C I A L A N D G OV E R N A N C E
continued
TASK FORCE FOR CL IM ATE - R E L ATE D
FI NA NCI A L DISCLOSU R E
SUPPORTING THE UNITED NATIONS
SUSTAINABILIT Y DEVELOPMENT GOALS
The Watches of Switzerland Group is committed to operating in way that
is sustainable and in line with our Company Purpose to care for our local
communities and our planet.
Since disclosing our first Task Force on Climate-Related Financial Disclosures
(TCFD) statement in FY21, we continue to implement the recommendations of
the Financial Stability Board (FSB) and take the necessary steps towards
implementing a more structured, transparent and measurable sustainability
strategy, which leverages TCFD recommendations and successfully manages any
potential future impacts of climate change on our business.
We are committed to becoming Net Zero before 2050. To achieve this and
ensure climate considerations are incorporated into everyday strategic decision-
making, we have increased climate change from an emerging risk in FY21 to a
principal risk in FY22.
Also in FY22, we committed to near term SBTs and, at the time of writing,
were in the process of obtaining target validation with the Science Based Targets
initiative (SBTi).
As a UK premium listed company, we will report all non-financial disclosures
on a ‘comply or explain’ basis against the recommendations of the TCFD. This is
consistent with the requirements from the UK Financial Conduct Authority
(FCA). The Group has taken into account all the guidance stipulated for
consideration by the Listing Rule 9.8.6R(8).
To align with the Companies (Strategic Report) (Climate-related Financial
Disclosure) Regulations 2022, our TCFD disclosure is stated in full within our
Annual Report and Accounts.
COMPLIANCE STATEMENT
In meeting the requirements of Listing Rule 9.8.6 R, we have concluded that:
We fully align with TCFD recommended disclosures:
– Governance a) and b)
– Strategy c)
– Risk Management a) b) and c)
– Metrics and targets a) and c)
We partially align with TCFD recommended disclosures:
– Strategy a) and b)
– Metrics and targets b)
In the table below, we reference where the disclosures are located within our
Annual Report and Accounts or explain why we align. In assessing alignment, we
took into consideration the guidance documents referred to in the Listing Rule
guidance notes.
TCFD Disclosure
a. Describe the Board’s oversight
of climate-related risks and
opportunities
Cross-
reference
Page 140
b. Describe management’s role in
Page 140
assessing and managing
climate-related risks and
opportunities
a. Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium,
and long term
Pages 141
to 144
Summary of disclosure
Where we are on our journey
Next steps
Governance
Climate-related issues are addressed at
least three times a year by the ESG
Committee chaired by Independent
Non-Executive Director, Rosa Monckton.
Additionally, Brian Duffy has overall
responsibility for climate-related issues.
Management assesses and manages
climate-related risks and opportunities
within ESG and Audit Committees.
Additionally, senior management monitors
carbon emissions and reviews progress
towards carbon reduction targets. Please
see Governance diagram on page 140.
Strategy
The Group considers climate-related risks
and opportunities across the short (<5
years), medium (5-10 years) and
long term (>10 years).
The risks and opportunities identified
from the qualitative and quantitative
climate scenario analysis conducted in
FY22 are reported on pages 143 to 144.
138
Currently we do not disclose the
financial risk boundaries for
determining which risks and
opportunities could have a material
financial impact on the Group.
Climate-related risks and
opportunities have been
identified in FY22. The next
step is to complete a review
of our related financial risk
boundaries in FY23 to
ensure full alignment across
the business.
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Cross-
reference
Page 141
TCFD Disclosure
b. Describe the impact of
climate-related risks and
opportunities on the
organisation’s businesses,
strategy, and financial planning
c. Describe the resilience of the
Page 141
organisation’s strategy, taking into
consideration different
climate-related scenarios,
including a 2°C or lower scenario
a. Describe the organisation’s
Page 156
processes for identifying and
assessing climate-related risks
b. Describe the organisation’s
processes for managing
climate-related risks
Page 156
Page 156
c. Describe how processes for
identifying, assessing, and
managing climate-related risks
are integrated into the
organisation’s overall risk
management
Page 114
a. Disclose the metrics used by
the organisation to assess
climate-related risks and
opportunities in line with its
strategy and risk management
process
b. Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related risks
Page 146
c. Describe the targets used
Page 135
by the organisation to manage
climate-related risks and
opportunities and performance
against targets
Summary of disclosure
Where we are on our journey
Next steps
During FY22, we have performed
an initial assessment of climate risks
associated with Scope 1 and 2
emissions. We have considered
these in the financial planning
process. We do not currently have a
defined process for integrating
climate risks and opportunities and
the estimated financial impacts of
Scope 3 emissions into our financial
planning process.
We do not disclose the results of
our quantitative climate scenario
analysis in terms of financial impacts.
In FY23 we will integrate
the results of the
quantitative climate scenario
analysis of Scope 1, 2 and 3
emissions into our financial
planning process.
In addition, we will look to
disclose the quantitative
financial impacts of our
key risks.
We have not yet assessed Scope 3
related risks and plan to carry out a
Climate Scenario Analysis on our
value chain in FY23 to identify
associated risks.
Having completed our
Scope 3 analysis for the first
time in FY22, we will work
towards assessing and
disclosing Scope 3 related
risks in FY23.
Our risk reporting describes the impact
each risk and opportunity identified by the
climate scenario analysis will have on our
business strategy and financial performance.
We undertook a quantitative climate
scenario analysis to estimate the
projected financial impact of three of the
key risks to our business.
However, we are not yet disclosing the
quantified financial impacts for each of
our key risks.
In 2021 the Group conducted a qualitative
and quantitative climate scenario analysis
considering an orderly (1.5 and 2°C),
disorderly (2-3°C) and business as usual
(4°C) scenario up to 2050 to identify the
key climate-related risks and opportunities
facing the Group and where in our
operations they are realised. These risks
are reviewed annually.
Risk management
In FY22 the Group conducted a
qualitative climate scenario analysis to
identify and assess the key climate-related
risks and opportunities facing the Group.
The significance of each risk is determined
based on the likelihood of the risk
occurring and the potential impact of the
risk.
This year we have identified climate
change as a principal risk to better
manage associated risks and
opportunities. The Group has embedded
a robust risk management process across
all principal risks which is outlined on
pages 156 to 158.
The Group identifies, assesses, and
manages climate risk through our overall
risk management approach. Climate risk is
identified as a principal risk.
Metrics and targets
The Group monitors GHG emissions on
an annual basis. Other metrics include
energy consumption and percentage of
renewable electricity.
A new Group KPI to monitor carbon
emissions has been created in FY22 (see
page 114).
The Group reports Scope 1 and 2 GHG
emissions. This year marks our first year
of Scope 3 reporting. We have also
assessed our Scope 1 and 2 risks by
considering projected carbon pricing
across different scenarios.
The Group is setting near term SBTs
aligned to 1.5°C under the Paris Climate
Agreement of 50% absolute reduction in
Scope 1 and 2 and 42% absolute
reduction in Scope 3 emissions by 2030
from a FY20 base year.
Other targets include transitioning to a
fully electric or alternative fuel fleet by
2030 and sourcing 100% renewable
energy, as well as 100% LED lighting in all
properties within our control by 2025.
139
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS E N V I RO N M E N TA L , S O C I A L A N D G OV E R N A N C E
continued
ESG GOVERNANCE
As part of our continual improvement and in acknowledgement of the serious threat
posed by climate change, we undertook a review of our governance framework.
This resulted in further evolving the role of the Board and its Committees in order
to optimise the management of climate-related risks and opportunities across our
business. More information can be found in the diagram below.
ESG Committee: The ESG Committee is a Committee of the Board and is
chaired by Rosa Monckton MBE, Independent Non-Executive Director. The ESG
Committee meets at least three times a year to discuss and address climate-
related issues.
The overall aim of the ESG Committee is to play an active role in setting
environmental objectives and reducing the Group’s impact on the environment
by providing accountability against KPIs, such as sourcing renewable energy across
our Group by 2025 and achieving a 50% absolute reduction in Scope 1 and 2
emissions and a 42% absolute reduction in Scope 3 emissions by 2030 from a
FY20 base year.
Our new principal risk relating to climate change is monitored by the Audit
Committee, which ensures associated risks are managed at the top governing
level of our business.
Audit Committee: Our Audit Committee reports into the Board and
oversees the management of risks, under which climate change now falls. In FY22,
we carried out a Climate Scenario analysis and the outcomes were presented to
the Audit Committee as part of its assessment of the newly identified climate-
related risks and opportunities.
ESG Steering Group: We established a monthly ESG Steering Group in
January 2022, with our CFO, Bill Floydd, taking overall operational responsibility
for climate change issues. Our ESG Steering Group is comprised of executive
sponsors who have formal operational responsibility for the management of
climate related issues across the Group.
Planet Working Group: This group is made up of subject matter experts
from varying levels of our business. It supports our ESG Steering Group and is
tasked with identifying opportunities to collaborate across our value chain to
increase climate resilience and create shared value.
In August 2021, Kesah Trowell was appointed as Head of ESG and is
responsible for guiding our sustainability journey. This appointment reflects our
continued commitment to fully integrate sustainability across the business over
the long term.
The roles and responsibilities for monitoring climate-related risks and
opportunities are summarised in our governance structure below.
TCFD/CLIMATE CHANGE GOVERNANCE
ESG BOARD COMMITTEE:
Responsibility for:
– Approval of environmental targets
– Reviewing key climate-related risks and opportunities and overseeing mitigation strategies as part of the
quarterly review of principal and emerging risks
– Ensuring actions are taken to meet environmental goals, targets & KPIs
TR ADING BOARD:
ESG STEERING GROUP:
Responsibility for:
– Ensuring actions to manage climate-related
risks and opportunities are embedded into
core business strategy
– Delivering environmental goals, targets and KPIs
– Ensuring adequate resource and funding is
in place
Chaired by the CFO, it has responsibility for:
– Defining environmental goals, targets and KPIs over the
short, medium and long term and monitoring progress
– Ensuring actions to manage identified climate risks
and opportunities are embedded into the Group’s
risk management processes, core business
strategy and financial decision-making
Direct and advise
Report and escalate
AUDIT COMMITTEE:
Supports the Board in its responsibilities,
including:
– Considering climate change risks as part of
the regular review of principal and emerging
risks
– Overseeing compliance with, and progress
on, climate change reporting
– Reviewing effective mitigation and risk
management controls and providing
accountability
– Ensuring the TCFD statement is fair,
balanced and understandable
INTERNAL /EXTERNAL SUBJECT MATTER LEADS/EXPERTS:
PL ANET WORKING GROUP:
Coordinated by the Head of ESG and responsible for:
– Identifying climate-related risks and opportunities and how they impact the business and value chain in the
short, medium and long term
Colleague volunteers from every level of the
Group. Responsible for:
– Championing environmentally sustainable
– Developing action plans to deliver environmental targets, tracking progress against targets and reporting to
behaviours
the ESG Steering Group as required
– Establishing and reviewing effective mitigation and controls to manage climate risks, through a quarterly report
– Day-to-day delivery of climate goals and management of climate-related risks
ALL COLLEAGUES:
Responsible for:
– Putting the Group Purpose into practice by applying environmentally sustainable behaviours
– Reporting areas for improvement
– Embedding climate change culture and
mindset
– Supporting the delivery of actions to meet
environmental targets
– Identifying opportunities to collaborate
across the value chain to increase climate
resilience and create shared value
14 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 STR ATEGY
The Watches of Switzerland Group considers climate change to be a principal risk and
our approach to climate change is embedded within our overall business strategy.
Our ambition and drive to reach Net Zero emissions, as well as the already emerging
risks associated with extreme weather and increasing temperatures, present both
physical and transition risks as well as potential opportunities to our business.
The Group considers climate-related risks and opportunities across the short,
medium, and long term defined as:
Impact Time Horizon*
Year from
Year to
Short term
Medium term
Long term
2021
2026
2031
2025
2030
2031+
Duration
<5 years
5-10 years
>10 years
*
Our time horizons were considered according to our sector, the nature of the climate-related risks we
face, the long life span of our assets, our infrastructure and the geographies in which we operate. They
are aligned with the time horizons used for wider strategic and business planning.
In FY22, we conducted a qualitative and quantitative Climate Scenario Analysis
(CSA) with the support of an external consultant. The results of this work have
assisted in our understanding of the climate-related physical and transition risks
and opportunities that could impact our business in the future under different
climate scenarios and identified risks have been incorporated into our Group risk
register. Whilst this specific piece of work showed no material impact to the
Group, further work on financial risk boundaries will take place in FY23.
The climate scenario analysis considered the following scenarios using data
from publicly available third-party sources International Energy Agency (IEA),
Network for Greening the Financial System (NGFS) and IPCC Shared
Socioeconomic Pathways:
Scenario
1.5ºC
– Rapid transition to a global low carbon economy
– Unified regulations and ambitious climate policies are implemented immediately and smoothly
Transition scenario
Physical scenario
NGFS Net Zero by 2050
Not considered
Below 2ºC
– Steady transition to a global low carbon economy
– Required by the TCFD recommendations
– Aligns with the Group’s Net Zero target
2-3ºC disorderly transition
– Delayed and disorderly transition leading to notable transition and physical impacts
4ºC
– Business as usual emissions
– Assumes climate inaction
– No additional policies are implemented to address the climate agenda and
temperatures rise to 4°C above pre-industrial levels
NGFS Below 2 degrees
IPCC SSP1 RCP2.6
NGFS Delayed Transition
IPCC SSP2 RCP4.5
NGFS Current Policies
IPCC SSP5 RCP8.5
These scenarios were selected to provide a wide understanding of the range of potential risks and opportunities that could be experienced across various plausible futures.
CLIMATE-REL ATED RISKS AND OPPORTUNITIES
Risks are prioritised using impact ratings of low, medium, or high. Impact ratings are an overall rating obtained from combining the likelihood of the risk or opportunity
arising for the Group and the potential impact of the risk or opportunity if it were to be realised. This has been scored in line the Group’s risk register with the materiality
of each risk being considered. Further details can be found on pages 142 to 144.
We have considered the risks and opportunities using the TCFD categories, which cover transition risks (political and legal, market, technology and reputation),
physical risks (acute and chronic), as well as opportunities posed by a transition to a low carbon economy (resource efficiency, energy source, products and services,
market opportunity).
We consider risks across all our geographies. We have a relatively small number of operational sites (offices, showrooms and distribution centres) across the UK
and the US. However, risks are likely to vary across different regions and site types.
The key risks identified by the qualitative CSA are summarised in the table on page 142.
141
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS E N V I RO N M E N TA L , S O C I A L A N D G OV E R N A N C E
continued
The table below includes all high rated risks. A wider range of risks were also considered but deemed to have a medium or low-risk rating and have therefore not
been detailed in this table. The high rated risks are where we are focusing our adaptive initiatives.
Risk
Risk Type
Risk impact
Physical
High
Extreme weather
events disrupting
offices and
distribution centres
Business area
impacted
Operations
Time horizon
Short
(<5 years)
Increased office and
showroom energy
requirements for
heating and cooling
Physical
High
Operations Medium
(5-10 years)
Legal requirement for
fleet to be EVs UK
Transition High
Supply chain Medium
(5-10 years)
Description of risk and
impact anticipated
Risk mitigation
Our mitigation measures include:
– Using the Tableau Climate Risk dashboard to
understand where the most severe flood,
rainfall, heat, and wind events are and
integrating them into standard risk management
and business continuity approaches
– Conducting detailed analysis assessments at
high-risk sites in both the US and the UK from a
damage and flood magnitude perspective
– Identifying stock storage sites to ensure
preparation for and resilience to climatic-related
flood events
– Implementing a comprehensive hurricane
management document in the US, detailing
specific activities to be taken should they occur.
We will be expanding this to an extreme
weather business continuity document
integrating fluvial-flood management
– In the UK, formalising our business continuity
plan from extreme weather events causing sites
to be impacted
Our mitigation measures include: installing
SMART meters across the whole UK estate and
the use of temperature controls and group wide
energy monitoring.
Future mitigation measures we are considering
include:
– Updating heating and cooling appliances with
the most efficient on the market
– Collaborating with landlords to install the most
efficient heating and cooling models
Our mitigation measures include:
– Offering electric vehicles in the UK as part of
our operational fleet and company cars
– Ensuring third-party parcel distribution
companies have made a commitment to
reducing their carbon footprint
– Trialling reverse collections from our retail
showrooms with one of our partners to reduce
our carbon footprint
– Introducing EcoVadis Supply Chain Sustainability
ratings and asking suppliers to input climate data
Extreme weather events are
projected to intensify and
increase in frequency due to
climate change. These events
are likely to result in repair
costs, loss of stock, adaptation
investments and reductions in
revenue from the inability to
distribute products and closure
of sites.
In the US, especially in Florida,
hurricanes are an annual
occurrence that have
previously disrupted the ability
to receive products and
distribute them around the
country. In the UK, increased
extreme rainfall could lead to
flash flooding and increased
fluvial flooding.
Climate change is expected to
increase the instability of the
atmosphere, meaning more
extreme temperature events
are likely to occur.
Temperature extremes
will increase the office and
showroom energy requirements
for heating and cooling leading
to increased costs. In addition,
due to increased use of HVAC
and heating equipment the costs
associated with repairs and
replacements are likely
to increase.
New policies and regulations
are expected to be
implemented over the next
decade with a shift towards a
low carbon economy.
In the UK this particularly
impacts the sale of petrol and
diesel vehicles which is legally
mandated to end in 2030.
Although the Group has a
small fleet of vehicles in the UK
there is a risk that the changes
in regulations may impact it.
142
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Risk
Risk Type
Risk impact
Business area
impacted
Time horizon
Description of risk and
impact anticipated
Risk mitigation
Changing consumer
preferences
Transition High
Client
Medium
(5-10
years)
Clients are becoming more
environmentally conscious
with increased awareness of
the source of raw materials
and production methods of
products they purchase, with
many requesting evidence of
this from retailers. This may
result in decreased product
demand if these requirements
are not addressed.
Our mitigation measures include:
– Providing source information on precious stones
and metals used in our products
– Carrying out audits on our jewellery suppliers.
– Ensuring all polished diamonds are compliant
with the latest World Diamond Council System
of Warranties and to have originated from
rough diamonds that are fully compliant with
the Kimberley Process Certification Scheme
(KPCS)
– Making sure all gold is sourced from bars that
are accredited under the London Bullion Market
Association Good Delivery Scheme or the UAE
Gold Good Delivery Scheme
– Increasing our range of more environmentally
friendly products and promoting more
sustainable attributes in our marketing
While we recognise these risks, the opportunity around the transition to a low carbon economy is also significant to us. The key opportunities we identified from
our qualitative CSA are detailed below:
Opportunity
Reduced energy consumption
in showrooms, offices, and
distribution centres
Opportunity
impact
Business area
impacted
High
Operations
Time horizon Description of opportunity
Plan to realise opportunity
Short
(<5 years)
A large opportunity for the
Group is to enhance resource
efficiency through reducing
energy consumption in our
direct operations.
To realise this opportunity, we are implementing
various energy saving initiatives including:
– Installing LED lighting
– Installing SMART meters, temperature controls
and automatic lighting
– Updating heating and cooling appliances with
the most efficient on the market
– Collaborating with landlords to install the most
efficient heating and cooling models
To realise this opportunity, we are working to
engage with our suppliers to understand where
the most energy intensive parts of the business
are. This will allow us to effectively reduce energy
consumption and therefore carbon emissions.
Proactive collaboration with
suppliers to reduce energy
consumption in primary vendors
High
Supply
chain
Short
(<5 years)
In addition to reducing energy
in direct operations the Group
also has the opportunity to
proactively engage with
primary vendors to reduce
energy consumption within our
supply chain.
Use of renewable energy
in showrooms and offices
High
Operations
Short
(<5 years)
Transitioning to renewable
energy presents an opportunity
for the Group to reduce
emissions as well as diversifying
our energy supply and reducing
our dependence on fossil fuels.
We are working to realise this opportunity with
all UK showrooms already using 100% renewable
electricity. In the US, more showrooms are
rented from landlords with inclusive energy
contracts, meaning visibility of the sourcing of
energy is more challenging. Proactive engagement
with landlords will be key to meeting targets in
this area.
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Opportunity
Marketing on the prolonged
lifetime of watches and jewellery
to encourage clients to retain and
repair watches and jewellery
instead of disposing of them
Opportunity
impact
Business area
impacted
Time horizon Description of opportunity
Plan to realise opportunity
High
Supply
chain
Short
(<5 years)
One of the key selling points for
our products is that they are
products for life and we
encourage our clients to keep
them for generations. With
clients becoming more
environmentally conscious there
is increased demand for
sustainable long-life products.
The Group has a significant
opportunity to support the
longevity of products by
enhancing in-house watch,
jewellery, and silverware repair
and service centres.
To realise this opportunity, we are continuing to
enhance our in-house watch, jewellery and
silverware repair and service centres by:
– Plans to maximise the capacity of our new
National Watch Service Centre in Manchester
established in 2020
– Working to open an additional Watch Service
Centre in the Midlands, UK
We also encourage trade-ins on watches, and we
are actively developing our pre-owned luxury
watch proposition in both the UK and US, where
we refurbish, guarantee and sell on the watches,
increasing the overall circularity of products.
Following the qualitative CSA, a quantitative CSA was subsequently conducted to
quantify the potential financial impact as well as other business impacts such as
consumer sentiment and impacts to the value chain of key risks. Additionally, the
assessment allowed the Group to identify our risk hotspot locations to inform
mitigation actions. The following high rated risks were analysed in the quantitative CSA:
– Extreme weather events disrupting offices and distribution centres
– Increased office and showroom energy requirements for heating and cooling
To assess the exposure of the Group’s sites to extreme weather events and the
increased energy requirements for heating and cooling, the following indicators
were considered:
– Fluvial flooding
– Hurricane flooding
– Days exceeding 35ºC and 38ºC
– Cooling degree days (the sum of the number of degrees that a day’s average
temperature is above 18°C)
– Heating degree days (the sum of the temperature increment between the
day’s average temperature and 18°C and the number of days this occurs)
– Wind speed
The key findings from the quantitative climate scenario analysis were as follows:
– Projected >2,000 Heating Degree Days in all sites across the UK by 2030 in a
>4°C scenario. This will lead to increased usage of HVAC systems, repair and
replacement costs
– Fluvial flooding poses risk to sites in the UK with the Bristol and Kingston
These key findings have enabled the Group to identify at risk areas within our
operations and implement adaptive measures accordingly as described in the risk
table, allowing us to increase the resilience of our strategy to climate-related risks
and opportunities.
The estimated financial impact that these physical risks could have on the
Group has been calculated for both a low (<2ºC) and high (>4ºC) carbon
scenario. The Group will be working on using these estimations to integrate into
our current financial planning process over the coming years.
Additionally, the impact of carbon pricing on energy consumption and direct
emissions was considered. Although this risk was identified as a medium risk in
the qualitative CSA understanding the impact of carbon pricing allows the Group
to identify risks directly linked to our Scope 1 and 2 emissions and establish an
understanding of cost surrounding potential market, policy and technological
changes intended to facilitate the transition to a low carbon economy.
In FY23, we will explore these risks and opportunities in further detail
integrating the analysis further into our business strategy and risk management
processes as well as focusing on developing longer term climate mitigation and
adaptation planning.
Identified climate-related risks and opportunities will be reviewed annually.
Across our Group we support the transition to a low carbon economy and
have committed to the SBTi. We have set near term SBTs aligned to 1.5°C under
the Paris Climate Agreement of:
Public Commitments
Scope 1 and 2
Near term SBTs aligned to 1.5°C
under Paris Climate Agreement
50% reduction in absolute emissions
by 2030 from a FY20 base year
42% reduction in absolute emissions
by 2030 from a FY20 base year
Net Zero
2050
locations being at the highest risk. The short forecast time for fluvial flooding
could result in loss of stock and costs of repairs
Scope 3
– Average projected 24% increase from baseline number of cooling degree
days/year in the US to 2030 in a >4ºC scenario
– Average projected 91% increase from baseline number of days/year > 35ºC in
the US to 2030 in a >4ºC scenario. This will be results higher overheads to
cool sites
– 7/12 sites in Florida are at risk of flooding above 2m by 2030 in a >4ºC scenario
– Fluvial flooding poses a greatest risk to the US sites compared to hurricane
induced flooding due to a shorter forecast time
144
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 The Group has already implemented several emission reduction initiatives across
our operations and value chain (see pages 135 to 137). We are also developing a
Group Climate Strategy to focus on achieving Net Zero emissions before 2050.
This includes:
– Actions to reduce energy consumption in showrooms, offices and distribution
centres
METRICS AND TARGETS
Our carbon footprint consists of direct (Scope 1) emissions from gas and fuel
consumption, indirect (Scope 2) emissions from purchased electricity and all other
indirect (Scope 3) emissions that occur in our value chain. The table on page 146
provides a detailed breakdown of our Scope 1, 2 and 3 GHG emissions by activity,
calculated with reference to the Greenhouse Gas Protocol.
In addition, the Quantitative Climate Scenario Analysis assessed the future
– Updating heating and cooling appliances with the most efficient on the market
impact of carbon pricing on our Scope 1 and Scope 2 emissions.
– Collaborating with landlords to install the most efficient heating and cooling
models
– Transitioning to an electric and alternative fuel fleet
RISK MANAGEMENT
The Group defines risk as uncertainty around the organisation’s ability to achieve
its objectives and execute its strategy effectively. This year we have identified
climate change as a principal risk to better manage associated risks and opportunities.
The Group has embedded a robust risk management process across all principal
risks which is outlined on pages 156 to 158.
The Group’s risk management framework helps identify, assess, manage, and
monitor risks to within the risk appetite set by the Board, whilst taking advantage
of opportunities as they are presented. Management is responsible for minimising
the adverse exposure to the Group and its stakeholders.
In July 2021, Brian Duffy, CEO, was identified and appointed as the key
person responsible for climate-related risks at Board level.
Climate risks are monitored on an ongoing basis, which allows us to capture
any changes and adapt fluidly.
To assess climate risk, in FY22, we conducted a qualitative climate scenario
analysis for the first time, which is detailed within the strategy section of our
TCFD disclosure. The classification of the climate risks identified is outlined in the
strategy section of our disclosure and is in line the Group’s risk register, with the
materiality of each risk being considered. Further details can be found on page 141.
We have set a goal to reach Net Zero emissions by 2050. To achieve our
ambition, the Group has registered with the SBTi and is committed to achieving
near term SBTs reducing absolute Scope 1 and 2 emissions 50% and absolute
Scope 3 emissions 42% by 2030 from a FY20 base year.
Our Group climate-strategy focuses on a number of key metrics to assess
and manage climate-related risks and opportunities across our operations. The
following climate-related KPIs are at the core of our climate strategy:
– Transition to 100% LEDs in all showrooms and warehouses by 2025 across
our Group
– Transition to renewable energy in the UK by FY22 and Group by 2025,
wherever possible (target will cover landlord energy supplies)
– Transition to EV or alternative fuel fleet by 2030 across our Group
The Group will also be participating in the 2022 CDP (formerly the Carbon
Disclosure Project) climate change questionnaire, which will require us to build an
in-depth understanding of climate-related risk and enable us to review and improve
on our carbon impact.
TCFD PROGRESS ROADMAP
The table below summarises progress and key steps taken by the Group on our journey to fully align to the TCFD recommendations.
FY21
FY22
FY23+
– Disclosure of our first voluntary TCFD
– Made climate change a principal risk to the business
Annual Report narrative
– Collaboration with an external consultancy
to undertake a TCFD Gap analysis to identify
potential gaps against TCFD
recommendations
– Undertook a qualitative and quantitative
Climate Scenario Assessment against multiple
scenarios
– Committed to setting a near term SBTs
through the SBTi
– CEO given overall responsibility for climate-related issues.
– Establishment of ESG Committee, responsible for risk
identification and management
– Verifying our near term SBT by FY23 through the SBTi
– Responding to CDP questionnaire on climate change to
build an in-depth understanding of climate-related risk
and review and improve on our carbon impact
– Implementing Global Sustainability Ratings Network and
– The Group plan to conduct a further quantitative
CSA on key climate-related risks across our value
chain
– Supply chain engagement strategy to help manage
and mitigate our value chain emissions
Platform, EcoVadis, to help manage our value chain
emissions
14 5
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continued
Global GHG Emissions Data
Scope 1: Direct combustion from owned
and controlled sources (tCO2e)
Scope 2: Indirect emissions from the
generation of purchased electricity, heat,
steam or cooling (Location-based) (tCO2e)
Total Gross Scope 1 and 2 (tCO2e)
Total energy consumption associated with
the scope 1 and 2 emissions (kWh)
Scope 3 Emissions
Category 1 – Purchased Goods and
Services (1)
Category 2 – Capital Goods (1)
Category 3 – Fuel- and energy-related
activities (2)
Category 4 – Upstream Transportation
and Distribution (1)
Category 5 – Waste Generated
in Operations (3)
Category 6 – Business Travel * (4)
Category 7 – Employee Commuting (5)
Category 11 – Use of Sold of Products * (6)
Category 12 – End-of-life treatment
of Sold Products (7)
Total Gross Scope 3 (tCO2e)
Emission Intensities
Revenue (£’000)
Scope 1 & 2 Intensity Ratio
(tCO2e per £’000 revenue)
* Calculated as Group Figure.
FY22
US
83
UK
263
1,611
1,874
1,640
1,723
EU
n/a
1
1
Total
346
3,252
3,598
FY21
US
118
UK
214
Total
332
FY20
US
64
UK
264
1,693
1,907
1,283
1,401
2,976
3,308
2,344
2,608
1,456
1,520
Total
328
3,800
4,128
8,595,086 4,757,151
5,620
13,357,857
8,041,005
3,562,929 11,603,934
10,281,037 3,969,453
14,250,490
225,641
13,637
104,380
6,295
649
1,021
10
–
1,628
–
639
636
2
–
573
–
64
242,650
16
112,541
26
n/a
0
n/a
n/a
–
n/a
–
n/a
26
330,047
19,932
154,489
8,662
72,908
3,748
227,397
12,410
148,065
6,854
58,063
3,637
206,129
10,491
1,288
1,657
12
1,067
2,201
8
433
801
7
–
852
–
324
403
1
–
465
–
757
1,204
8
280
1,317
6
606
742
7
–
1,318
–
392
423
0
–
426
–
998
1,165
7
917
1,744
1
80
356,292
41
165,285
8
77,857
49
243,428
70
157,662
6
62,947
76
221,527
809,601
428,383
n/a
1,237,984
606,452
298,625
905,077
585,473
225,039
810,512
0.0023
0.0040
n/a
0.0029
0.0031
0.0047
0.0037
0.0045
0.0068
0.0051
Methodology
The Group’s approach to calculating and reporting its GHG emissions follows the WRI.WBCSD GHG Protocol
Corporate Accounting and Reporting Standards (Revised) on how to measure and monitor GHG emissions.
Scope 1 and 2 emissions have been reported above where the Group has operational control of a property
or an asset. This includes properties which the Group operates but which are not included as leases within
the financial statements on account of the substitution rights the landlords have (as noted within note 1 of
the financial statements).
The Groups uses three external data sources, for the emissions factors used, being:
1. UK Government GHG conversion factors for company reporting (2021 BEIS condensed set, full set and
methodology). These were used to convert our car fleet to kWh and tCO2e and our electricity, gas and
refrigerant usage to tCO2e.
2. US EPA (eGRID) emission factors for greenhouse gas inventories for US electricity generation (eGRID 2022).
3. Manufacturers’ emissions factors for cars, uplifted for the UK real-world factor (2021 BEIS Government
GHG conversion factors for company reporting).
All Scope 3 emission calculations follow the guidelines and methodologies that are outlined in the
Greenhouse protocol. The Greenhouse Gas Protocol is the most widely used greenhouse gas accounting
standard. It provides a framework for businesses and governments to measure and report their greenhouse
gas emissions.
Emissions Conversion Factors from the Department for Business, Energy & Industrial Strategy (BEIS) and
the US Environmental Protection Agency (EPA) have been used. For our US operations, emission factors
from the International Energy Agency have also been used for the estimation of emissions relating to
Distribution (T&D) losses.
See opposite more information regarding the methodology and data sources used for Scope 3 calculations.
(1) Spend - based emission factors from the Environmentally Extended Input Output CEDA database have
been employed for the emission calculations due to limited primary activity data.
(2) Well-To-Tank and Transmission (WTT) and T&D emissions have been calculated using the BEIS and IEA
emission factors for WOSG’s electricity, natural gas and fuel used in company owned vehicles.
(3) Emissions relate to WOSG’s office and stores waste disposal activity. In the UK, waste has been
estimated using store area and for the US we used sales data. We have applied UK recycling rates across
the Group and assumed a consistent UK store area over the three-year period. Emissions calculations
have taken into consideration % of waste landfilled and % of waste diverted from landfill. BEIS emission
factors have been used.
(4) Business travel emissions consider emissions relating to Hotel Stays, Flights, Taxi rides as well as Tube/
Rail journeys. A combination of both EEIO spend-based and BEIS emission factors have been used.
(5) Employee commuting and home working emissions have been calculated using EcoAct’s proprietary
Homeworking emissions Whitepaper (https://info.eco-act.com/en/homeworking-emissions-whitepaper-2020)
(6) Emissions that relate to the energy consumed from WOSG’s Quartz and Smart watches that require
electricity for the charging of their battery.
(7) Emissions relate to the disposal of product packaging. BEIS emission factors are used for UK operations
while EPA factors have been used for US Operations. NOTE - emissions relating to the disposal of
watches and jewellery have been excluded from the calculation as these products are high in value and
they are either repurposed or resold within a 100 year timeframe.
The Scope 1, 2 and 3 emissions and associated scope 1 and 2 energy consumption data for 2022 have been
independently assured through a limited assurance engagement conducted in accordance with International
Standard on Assurance Engagements 3000 ‘Assurance engagements other than audits or reviews of
historical financial information’, by BDO LLP.
14 6
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 147
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continued
R ESPONSIBL E SOU RCI NG
SUPPORTING THE UNITED NATIONS
SUSTAINABILIT Y GOALS
FY22 PERFORMANCE HIGHLIGHTS
– Completed a review of our supply chain
due diligence
– Developed and piloted a bespoke
responsible sourcing programme in line with
industry best practice and our Supplier Code
of Conduct
– Introduced additional due diligence checks
for goods not for retail (GNFR) suppliers
– Set near term targets to reduce Scope 3
emissions by 42% by 2030
FY23 AREAS OF FOCUS
– Ongoing supplier engagement to further
understand the impacts of the products we
sell throughout their lifecycles to achieve our
commitment to Net Zero emissions, support
traceability and strengthen resilience
– Implementing a Global Sustainability Ratings
Platform to support supply chain
management, transparency and due diligence
– Increasing our range of socially and
environmentally preferable options, such
vegan watch straps, recycled gold and
reduced packaging
– Actively promoting products produced from
environmentally and socially favoured materials
– Liaising with brand partners to equip colleagues
with the training they need to help clients make
more informed purchasing decisions
APPROACH
As a world class retailer, our clients expect everything they buy from us to
be sourced responsibly, from a supply chain free from forced labour. We
take our duty to all our stakeholders, and society, extremely seriously and
have strict policies and procedures in place to make sure everyone we do
business with, shares our commitment to upholding human rights and
protecting our planet for future generations.
Suppliers are key to helping us reach our Net Zero emission target and
addressing areas of public concern, such as animal welfare, along with implementing
robust traceability mechanisms.
Social and environmental criteria are built into our tender processes and
contractual terms and we regularly engage with our brand partners and suppliers
to ensure responsible sourcing practices.
Innovation is also widely encouraged across our business model and product
range to help optimise performance and minimise any negative impacts resulting
from our operation.
“To meet the changing needs and
expectations of our clients and
wider society, it’s crucial we work
in partnership with our suppliers to
understand the environmental and
social impacts of our product range
and services.”
JIM CRICHTON
BUYING & MERCHANDISING DIREC TOR
14 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 OUR BUSINESS IMPACTS
We acknowledge the watch and jewellery industry has an increased risk of human
rights violations in its precious metals, diamonds and gemstones mining supply
chains, as well as the potential for negative environmental impacts as a result of
mining processes.
In line with our Company Purpose to care for our communities and our planet,
we strive to go beyond basic risk management and compliance, by integrating
human rights and environmental considerations into every commercial decision we
make, with the aim of safeguarding against risk and growing our product range from
more ethically aware and responsible supply chains.
SUPPLIER CODE OF CONDUCT AND SUPPLIER MANUAL
Through our Supplier Code of Conduct and Supplier Manual, we provide suppliers
with clear guidelines on the high standards and common values we expect to
ensure the products we sell are ethical, and are produced and transported in a way
that is not harmful to our environment.
Our Supplier Code of Conduct sets out our minimum requirements across
human rights, labour, environment, anti-corruption, integrity, business ethics, data
security and social impact, which must be applied in addition to compliance with all
relevant national and international legislation.
All suppliers must read, sign and adhere to this Supplier Code of Conduct, or
publish an equivalent commitment.
We have introduced training to equip relevant colleagues with the knowledge
and skills they need to uphold our responsible sourcing standards and our
Whistleblowing Policy allows individuals within our supply chain to report concerns
in relation to issues such as human rights contraventions or materials from Conflict
Affected and High Risk Areas.
SUPPLY CHAIN MANAGEMENT SYSTEM
EcoVadis is a global sustainability ratings network and platform which enables
us to identify preferred suppliers and monitor performance using a ‘supplier
performance dashboard’.
From July 2022, suppliers will be asked to register with EcoVadis and
complete an online supplier assessment against a comprehensive set of
sustainability criteria.
The information provided through this secure and confidential platform, is
then subject to expert validation, verification, 360 analysis and scoring.
EcoVadis allows us to carry out robust due diligence screening and identify
suppliers most at risk of contravening our Supplier Code of Conduct, while
further supporting them with access to training materials in local languages
and, where necessary, corrective action plans. The platform also captures
primary carbon emission data and supports our climate strategy to achieve
Net Zero carbon across our value chain by 2050.
DUE DILIGENCE AND FACTORY AUDITS
The Group is committed to going beyond basic risk management and compliance
to protect human rights within our supply chain and direct operations and minimise
our impact on the environment. If we find evidence of a serious breach of our
terms, we will not hesitate to terminate our contract, publicly disclose details and
notify the relevant authorities.
UL Verification Services were engaged in October 2020 to help us develop a
bespoke responsible sourcing programme to support compliance with our Supplier
Code of Conduct and carry out assessments of facilities, processes and systems in
order to highlight inconsistencies, weaknesses and risks related to regulatory
requirements and brand reputation, as well as identify strengths and opportunities.
During the summer of 2021, three supplier manufacturing facilities were
subject to audits as part of a pilot to test our responsible sourcing programme. A
number of improvements were made as a result of this trial and the programme
is being further enhanced to integrate with the EcoVadis system ahead of a full roll
out in FY23.
We are building strong, long term relationships with our suppliers and will
always aim to collaborate to resolve issues, wherever reasonable.
RUSSIAN SANCTIONS
The Group complies with all international sanctions issued by the UK Government,
the US Government and the EU, and require our suppliers to do the same.
The invasion of Ukraine by Russian forces on 24 February 2022, set in motion
an unprecedented range of sanctions on Russia, including the trade of diamonds,
coloured gemstones and precious metals such as gold, silver and platinum.
The Group took action to cease all trade in these materials from sanctioned
Russian sources and wrote to suppliers to remind them that they must comply
with all relevant national and international law and legislation, which includes all
sanctions and requirements imposed by the US Department of the Treasury and
its Office of Foreign Assets Control.
In response to the humanitarian crisis in Ukraine, The Watches of Switzerland
Group Foundation made a £100,000 donation in March 2022, to the British Red
Cross in support of their Crisis Appeal to provide food, water, medicine, warm
clothing and shelter to those affected.
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continued
RESPONSIBLE JEWELLERY COUNCIL
The RJC is a registered not-for-profit company and the world’s largest standards
authority for responsible jewellery.
The Watches of Switzerland Group has been an accredited member of the
RJC since 2011, which involves rigorous independent audits to obtain and retain
accreditation status and ensure compliance with their Code of Practices.
On 31 March 2022, we withdrew our membership of the RJC in protest
against their failure to respond swiftly and decisively to the conflict in Ukraine, by
leading our industry and dissolving its links to Russia amid allegations of human
rights abuses by Russian forces.
The RJC later responded by accepting the resignation of a large Russian mining
company from their Board, a change in leadership and the establishment of a new
governance taskforce to help rebuild stakeholder confidence.
At the date of this report, the Watches of Switzerland Group has not
re-joined the RJC, however, we continue to uphold the principles of their Code
of Practices through our own Supplier Code of Conduct and require our suppliers
to do the same. We fully expect the highest standards of responsible business
practices and seek assurance to this effect.
While membership of the RJC is no longer a stipulation for doing business
with us, we encourage all suppliers to align with well-recognised sustainability
standards and certifications.
We will continue to monitor the situation with the RJC and our position, while
focusing our efforts on further strengthening our supply chain due diligence in line
with best practice.
HUMAN RIGHTS AND MODERN SL AVERY
We take great pride in operating with integrity and transparency and would
never knowingly engage with a supplier that is in any way involved in human
trafficking, servitude, forced labour or any other aspect of modern slavery.
The Group supports the principles set out in the UN Universal Declaration
of Human Rights and has measures in place to identify, assess and mitigate
potential labour and human rights abuses across our value chain.
There have been no violations reported in relation to human rights by our
Group businesses in FY22. More information on our commitment and
approach to Human Rights can be found in our Modern Slavery Statement,
which can be found on our website thewosgroupplc.com.
FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
Our Supplier Code of Conduct and Supplier Manual sets out our expectations in
relation to freedom of association and collective bargaining and requires employers
to adopt an open aptitude towards trade unions and their activities. All workers,
without distinction, should have the right to establish and join organisations of their
own choosing and bargain collectively without prior authorisation or interference
from government or one another.
KIMBERLEY PROCESS CERTIFICATION SCHEME AND THE WORLD
DIAMOND COUNCIL SYSTEM OF WARR ANTIES
All suppliers of diamonds, or jewellery incorporating diamonds, must comply with the
Kimberley Process Certification Scheme, as well as all laws in relation to this scheme
and the World Diamond Council System of Warranties Assurance (WDC SoW).
Any diamonds supplied to us must be conflict free and accompanied by
written guarantees in line with WDC SoW Assurance. We will not accept an
invoice without this statement. Once a diamond is imported and ready for trade,
we also require a WDC SoW Assurance statement on every invoice for rough
diamonds, polished diamonds, or diamond jewellery, through to the final invoice
to clients.
Records of warranty invoices received, as well as invoices issued when buying or
selling diamonds, are audited and reconciled on an annual basis.
GOLD AND OTHER PRECIOUS METALS
Our Supplier Manual sets out standards for the responsible sourcing of precious metals.
All precious metals supplied to us must demonstrate legal compliance
according to all the provisions of the financial market supervisory authority and
be sourced from refineries on the London Bullion Market Association Good
Delivery List or the UAE Gold Good Delivery Scheme.
Precious metals can be repeatedly recycled with no degradation in quality or
value and are indistinguishable from newly mined metals. A ring made with newly
mined gold can have a carbon cost of up to 64kg in greenhouse gas emissions,
compared to as little as 100g when made with recycled gold. Mindful of this, we
have an ambition to utilise recycled gold beyond average industry ratios in our
jewellery ranges, which is supported by the introduction of product lines, such as
rings made from recycled gold and platinum.
An increasing number of our watch suppliers are using recycled gold in their
manufacturing processes, for example, some of our suppliers have invested in their
own foundries and refining facilities, allowing them to bring precious metals
processing in house for full traceability and enabling them to reuse production chips
and scrap.
ANIMAL WELFARE AND WATCH STR APS
We will not tolerate any harsh or inhumane treatment of animals and only buy
watches through the most reputable manufacturers.
All watch suppliers must provide written confirmation that any animal skins
used to make straps are sourced from farmed and sustainably managed sources
and conform to relevant international laws, including the Convention on
International Trade in Endangered Species.
We are growing our range of more socially and environmentally preferable
product options, including straps made from materials such as recycled plastic,
rubber and cloth.
Luxury watches are characterised by a focus on product innovation and
advancement, which is seen through an increase in more sustainable design, for
example, the strap on Cartier’s Solar Beat Tank Must watch is made from apple
pulp, cotton and polyurethane, while GUCCI’s Dive watch benefits from a strap
made from bio plastic and a buckle formed from recycled steel. In summer 2022,
Ulysses Nardin is set to launch their Diver Net watch with a strap and bezel made
from recycled fishing nets and ocean plastic.
Watches from brands such as Raymond Weil are marketed with vegan friendly
straps and we are working with brand partners to provide clients with more choice
in line with changing lifestyle preferences and values.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 ORGANISATION FOR ECONOMIC CO-OPER ATION AND DEVELOPMENT
(OECD) DUE DILIGENCE GUIDANCE
The OECD Due Diligence Guidance is a risk-based approach to help organisations
avoid contributing to conflict, serious human rights impacts and financial crime
through their operations or mineral sourcing practices. We require all suppliers of
watches and jewellery to adopt and implement the OECD 5-Step framework which
includes embedding strong management systems, identifying risks, independent
third-party audits and transparency.
ANTI-BRIBERY AND CORRUPTION
The Anti-Bribery and Corruption Policy is regularly reviewed by the Audit Committee
and reinforces that the Board is committed to conducting the Group’s business affairs
to ensure that it does not engage in or facilitate any form of corruption. The aim of the
Policy is to ensure compliance with applicable anti-bribery and corruption legislation
and regulation and to ensure that colleagues act responsibly and ethically at all times
when conducting business. It also sets out the Group’s protocols in relation to
hospitality and gifts. The Board has overall responsibility for this policy. The Group’s
Company Secretary & General Counsel has day-to-day responsibility for the Policy and
will report to the Chair of the Audit Committee and to the Board as required.
Colleagues are required to complete mandatory e-learning annually.
WHISTLEBLOWING
It is important for the business to have an open and transparent work culture. The
Company aims to conduct its business with the highest standards of honesty and
integrity every day. The Board has overall responsibility for this policy and the Head
of Internal Audit has day-to-day operational responsibility. Procedures are in place
to ensure that the Chair of the Audit Committee receives a summary of all
whistleblowing reports for communication to the Board.
During the year, the Board reviewed the Group’s Whistleblowing Policy, protocols
and associated procedures and, after doing so, agreed some minor enhancements
to processes. A new escalations protocol was approved by the Board to support
the Policy (which remained unchanged) and procedures.
Under the Policy, whilst colleagues are encouraged to report any concerns or
complaints, without fear of recrimination, to their line manager in the first instance
or to the Executive Director HR, the Board acknowledge there may be
circumstances where such reporting lines may not be suitable or may discourage
colleagues from speaking out.
We use an independent third-party, who provide a facility where all colleagues can
raise their concerns confidentially, with the option of maintaining anonymity.
Colleagues are required to complete mandatory e-learning training annually.
CODE OF ETHICS
In May 2022, the Board approved a new Code of Ethics, which can be found on the
corporate website thewosgroup.com. The Code of Ethics further strengthens the
governance framework of the Company and will be distributed to colleagues and
incorporated into the new starter programme.
ANTI-MONEY L AUNDERING AND SANCTIONS
The Company has an Anti-Money Laundering (AML) Policy which was reviewed
and discussed by the Board during the year, particularly in light of the sanctions
introduced by the UK Government and other governments following the invasion
of Ukraine, by Russia. Whilst new procedures were put in place and communicated
to all relevant colleagues, no changes to the AML Policy were required.
CORPOR ATE CRIMINAL OBLIGATIONS
In March 2022, the Board approved a new Corporate Criminal Obligations (CCO)
Policy which sets out the Group’s zero tolerance approach to tax evasion. The CCO
Policy describes the legal framework, information and guidance on how to recognise
and deal with tax evasion matters. Compliance with the Policy and disclosures arising
from it will be included in the annual review undertaken by the Senior Accounting
Officer. The CCO Policy can be found on the corporate website thewosgroup.com
TA X ATION
We seek to build solid and constructive working relationships with all tax authorities. In
February 2022, the Group achieved the Fair Tax Mark, which demonstrates best
practice compliance with tax legislation. The Group pays corporation tax on its
operations in the UK and US and does not operate in any tax havens or use any tax
avoidance schemes. Our Tax Strategy Statement can be found at thewosgroupplc.com.
PAYMENT PR ACTICES
We understand the importance of maintaining good relationships with suppliers and
have transparent payment terms and payment procedures to ensure prompt payment.
It is Group policy to agree appropriate terms and conditions for transactions
with suppliers (ranging from standard written terms to individually negotiated
contracts) and for payments to be made in accordance with these terms, provided
the vendor has complied with its obligations.
Our payment practices report is available at check-payment-practices.service.
gov.uk/search, which showed the Group took on average 33.4 days to pay in the
six-month period to the end of FY22.
RETURNS POLICY
The business operates a standard Returns Policy. The manufacturer’s warranty for
timepieces varies by brand and style, however, most warranties are usually valid for
two years from the date of purchase, with three years of extended warranty for
certain watch brands. If a timepiece malfunctions, we will, at our discretion, repair
or replace the movement at no charge if such movement shows a manufacturer’s
defect under normal use.
DATA PROTECTION AND CYBER SECURIT Y
We have a responsibility to protect both electronic and physical information from
unauthorised access, processing, modification or destruction in line with all relevant
international law and legislation.
All colleagues receive comprehensive GDPR training, which they must
complete on an annual basis and all data protection policies and procedures are
regularly monitored to ensure improvements are implemented wherever necessary.
Further information on how we govern associated risk can be found on page 162.
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continued
PRODUCT I N NOVATION
In a world that needs us all to buy less – but buy well – we are proud the watches and
jewellery we sell are produced using techniques that optimise precious materials and
are designed to be enjoyed for generations.
The luxury watch industry continues its pursuit of excellence in product innovation
to delight a growing number of eco-conscious clients and help care for our planet.
While luxury timepieces are regularly made from luxury materials and
precious metals – such as gold, platinum, and synthetic rubies – stainless steel has
remained one of the most popular and widely used material for the high-end
timepiece. The material has not historically, however, been a high priority for
recycling within the watch industry until now. Luxury brands, such as Panerai,
have started to lead the way in changing this cycle.
In April 2021 Panerai unveiled a watch it claims is 98.6% recycled by weight,
and the ‘EcoTitanium’ Submersible eLAB-ID went straight to market. Almost the
entirety of the Submersible eLAB-ID – including the case, the dial, and the
movement bridges – is made from a material called EcoTitanium, a recycled
titanium alloy that is lightweight aerospace-grade metal made of more than 80%
pure recycled content. Even its silicon escapement was recycled. The Submersible
eLAD-ID also rewrote the horology history books by becoming the first watch
to use 100% recycled Super-LumiNova for its dials and hands.
Alongside it, as part of the Watches and Wonders 2021 collection, Panerai
launched the Luminor Marina eSteel collection – three dive watches that bear
traditional looks with an innovative twist: 58.4% of their total weight is constructed
from recycled material. Namely, that of second-life steel. On top of that, the
watch straps are made from recycled PET plastic in a bid to help keep our oceans
clean. All of this was achieved without losing any of the high standards that come
with a traditional stainless-steel case: the timepiece still boasts water resistance
up to 300m, a durable automatic movement with a three-day power reserve, and
the classic Panerai crown lock. The three pieces come in three unique shades, and
each pay homage to the tones of the ocean in their own way.
The EcoTitanium Submersible and Luminor Marina eSteel was just the start
of other luxury brands looking towards being more sustainable. Oris, recently
announced it had been certified climate neutral through offsetting carbon
emissions and making radical changes to its products and factory to reduce its
carbon output. The symbol of their work is the Aquis Date Upcycle – a version
of its 300m dive watch with a dial made from recycled PET plastic. To produce
the dials using salvaged plastic from our oceans, Oris have partnered with #TIDE,
a Swiss organisation that upcycles ocean-bound plastic waste and transforms it
into a premium raw material. #TIDE collects various types of plastic – including
Polyethylene Terephthalate (PET), Polypropylene (PP), and Polyethylene (PE) –
and upcycles this into granulate, yarn or filament to be used as raw material for all
sorts of new applications. As the recycling process brings colours together at
random, no two dials are the same, in effect making each watch unique.
Breitling has followed suit, but with a focus on the impact of their packaging:
over a year ago announcing that their watch boxes would be made of 100%
upcycled plastic bottles. To further compensate for the impact of transporting
such objects around the world, the boxes are flat-packed and this is offsetting the
volume-issues, prefabricated, carbon-footprint-heavy watch boxes which exist in
the industry. The boxes are small, sleek, and friendly to the planet.
Breitling’s timepieces continue to reflect its aspirations to sustainability. The
Superocean Heritage ’57 Outerknown is an example of this: the surf-culture-
inspired piece fittingly comes on a single-piece yarn strap, made of material called
ECONYL that is based on ocean nylon waste. It’s Breitling’s own sustainable strap
option and is specifically produced from that of fishing nets. The timepiece is
delivered in the very same flat-packed box mentioned above.
Breitling has followed suit with a focus on the
impact of their packaging: over a year ago
announcing that their watch boxes would be
made of 100% upcycled plastic bottles.
Ulysee Nardin Diver Lemon Shark, Breitling Superocean Heritage ’57 Outerknown
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Panerai Luminor Marina eSteel
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Oris Aquis Date Upcycle
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 E N V I RO N M E N TA L , S O C I A L A N D G OV E R N A N C E
continued
CARTIER TANK MUST
‘INNOVATION’
With a steel case and silvered dial, this
looks like a Cartier. But this version
contains a ‘SolarbeatTM’ photovoltaic
movement that recharges in the sun,
and the ‘leather strap’ is actually made
from apple waste.
OMEGA SPEEDMASTER
38 ORBIS EDITION
OMEGA has been an avid supporter of
Orbis International and its Flying Eye
Hospital since 2011. A proportion of the
proceeds from this handsome 38mm
steel chronograph with sun-brushed
blue dial will go to the foundation.
CHOPARD ALPINE EAGLE
Chopard has long been using ethical
gold and fair-mined diamonds. Now it
can add wildlife conservation to its CV
with the launch of the new Alpine Eagle
collection in support of the Eagle Wings
Foundation.
Ulysse Nardin has also dived deep into assessing their impact on the ocean. Indeed,
the Swiss watchmaker pledged to meet the United Nations’ 17 Sustainable
Development Goals by 2030 but aims to “reduce marine population by integrating
materials culled from the ocean whenever possible.” Fitting with this statement,
Ulysse Nardin released the steel diver ‘Lemon Shark’, set on an ‘R-STRAP’ – a band
of recycled fishing nets gathered from the seabed along the coast of France. The
launch coincided, without coincidence, on World Ocean Day and, with the launch,
Ulysse Nardin partnered with Ocearch and Florida International University (FIU)
Medina Aquarius Program in the FIU Institute of Environment. As the 300-piece
watch’s name makes clear, its purpose is also to highlight the threat to the Lemon
Shark – hence the zippy-yellow detailing.
Luxury brand Cartier is more discreet in their bid to sustainability. The
Cartier Tank Must innovation elegantly conceals its signature eco-feature: a
‘Solarbeat’ movement with a photovoltaic cell that’s powered by light that can
only penetrate the watch’s dial through its numerals. At a glance, the Cartier
Solarbeat dial looks remarkably similar to the Cartier Tank Louis dial, but only on
closer inspection can you tell that the numerals on the dial slightly differ as to
allow for the photovoltaic cells underneath to charge.
The work on the Solarbeat innovation is so complex and impressive, it’s said
the battery can offer 16 years of autonomy before it needs replacing.
Comparatively, two or three years are expected in a standard quartz watch
battery. Rounding out the story from Cartier is a strap made of non-animal
leather. Called ‘Altstrap’, the highly innovative material is 40% of vegetable origin,
produced from apple residues used in the agri-food industry in Switzerland,
Germany and Italy.
The story of sustainability in the world of horology so far shows one of
success. By moving in from traditional materials, these brands have introduced a
type of new ‘luxury’ into the mix and are more than up to par. They retain the
values of luxury and are designed to bring a lifetime of enjoyment.
Words taken from our in-house publication, Calibre, by Robin Swithinbank.
Robin is a former editor of Calibre, and now writes for The New York
Times, British GQ, and the Financial Times.
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R EC OGNISI NG E FFECTI V E
R ISK M A NAGE M E N T
“Risk management plays a vital role in supporting the delivery of
the Group’s strategic objectives, protecting stakeholder interests,
and delivering long term success.”
BRIAN DUFFY
CEO
The Watches of Switzerland Group defines risk as uncertainty around the
organisation’s ability to achieve its objectives and execute its strategy
effectively. Risks can be positive (opportunities) and negative (threats) and are
a combination of the likelihood of an event and the impact of the consequence.
As with any business, the Group faces risks and uncertainties that could
impact the delivery of strategic and operational objectives. Effective risk
management helps support the successful delivery of the Group’s strategic
objectives. The Board’s role is central to understanding and providing oversight
into how risks are being managed and addressed. The Board has established a
framework of prudent and effective controls which enable risk to be assessed and
managed. The Board takes responsibility for the management of risk and internal
control systems throughout the business. This includes determining the nature
and extent of the principal risks the Board is willing to take in achieving strategic
risk appetite), and challenging management’s
objectives
identification, assessment,
implementation of effective systems of risk
prioritisation, and management.
(the Board’s
The Audit Committee, on behalf of the Board, has responsibility for
maintaining oversight of the Group’s framework for risk management. Whilst
ultimate responsibility for the oversight of risk management rests with the Board,
the effective day-to-day management of risk is embedded within the business
through a layered assurance approach.
The Board recognises that risk management is an integral part of good
corporate governance and management practice and to be most effective, should
become embedded within the organisation’s culture. The Board is, therefore,
committed to ensuring that risk management forms an integral part of its
philosophy, practices, and business plans rather than being viewed or practised as
a separate programme and that responsibility for implementation is accepted at
all levels of the organisation. During the year, the Board reviewed the effectiveness
of the Group’s risk management and internal controls systems. This review
included the discussion and review of the risk registers and the internal controls
across all business functions, as part of an annual exercise facilitated by the
Internal Audit team.
RISK MANAGEMENT PROCESS
Identify
1
M
o
4
n
i
t
o
r
The Group’s established framework for
managing risks has continued to be in place
across the business throughout this financial
year, with responsibility to implement the
Board’s policies on risk management and
internal control sitting with management.
The Group’s risk management framework helps
identify, assess, manage, and monitor risks to
within the risk appetite set by the Board, whilst
taking advantage of opportunities as they are
presented. Management are responsible for
minimising the adverse exposure to the Group
and its stakeholders.
A
s
s
e
2
s
s
3
M anage
Climate-related risks follow the same framework as all other risks impacting the
business. Additional information relating to the Group’s Task Force for Climate-
Related Financial Disclosure, including risk management compliance, governance,
strategy, and TCFD related risks, can be found on page 138.
1
IDENTIFY
3
– Risk registers are completed by each
business function, identifying the
risks in their areas of control
– The Audit Committee and Board
identify key risks to the Group’s
strategic priorities
MANAGE
– Controls and mitigation plans are
implemented to manage the risks
– Consideration is given to the
Board’s risk appetite to help
determine the appropriate risk
management strategy
– Horizon scanning takes place
– Actions are agreed to further
periodically with Senior Management
ASSESS
– The likelihood of risk occurrence
2
and the potential impact of the risk
are assessed. This assessment takes
place before and after consideration
of mitigating controls
4
– The risks are reviewed to determine
their categorisation, including
financial, operational, client,
regulatory and reputational
manage the identified risks, in line
with risk appetite and according to
risk strategy
MONITOR
– Continued oversight and tracking of
identified risks. These are presented
to the Audit Committee, the Board,
and the Trading Board
– Internal Audit review the effectiveness
of controls and identify gaps in control
requiring further action
– Appetite for each key risk is
– Risk incidents are reviewed, and the
assessed with a target risk position
agreed to reflect the level of risk
that the business is willing to accept
lessons learned drive further mitigation
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 W H AT W E M O N I TO R
GROUP RISK REGISTER
Summary of the key risks facing the Group, prepared through review of departmental risks identified though the bottom-up risk
identification process, and the Group level risks identified and owned by the Trading Board.
OUR RISK L ANDSCAPE
WHAT WE ASSESS
OUR IDENTIFIED RISKS
– Current risks: risks we are managing now
that could stop us from achieving our
strategic objectives
– Risk ownership: each risk has a named
owner
– Likelihood and impact: globally applied
– Emerging risks: risks with a future potential
scoring scale
impact from external or internal
opportunities or threats
– Gross risk: before mitigating controls
– Mitigating controls: subject to Internal
Audit review
– Net risk: after mitigating controls applied
– Risk movement: any change in risk score
since previous assessment
– Risk appetite: defined at subcategory level
– Target risk: overall target risk score
– Actions: for further mitigation, if required
Risks are categorised into one of five
categories:
– Financial
– Operational
– Client
– People
– Regulatory
– Climate Change
Owned by individual departments and teams across the Group. These identify specific risks and mitigating controls arising from day-to-day operations.
DEPARTMENTAL RISK REGISTERS
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continued
H OW W E M O N I TO R
The diagram below sets out the key responsibilities and key activities of the various functions of the Group in relation to risk management.
BOARD
Collective responsibility for the management of risk throughout the business
– Oversees the adoption of appropriate risk management systems
that identify emerging and established risks facing the Group and
its stakeholders
what timeframe to reduce the likelihood of their incidence or the
magnitude of their impact
– Establishes clear internal and external communication channels on the
– Determines the nature and extent of the principal and emerging risks
identification of risk factors
faced by the Group and those risks which the business is willing to take
in achieving its strategic objectives (determining its ‘risk appetite’)
– Agrees how the principal risks should be managed or mitigated and over
– Determines the monitoring and review process
– Reviews and approves the Group Risk Management policy
TRADING BOARD
Managing the risk management process on a day-to-day basis
AUDIT COMMITTEE
Oversees risk management systems and process,
under delegation from the Board
– Conducts a quarterly review of the risk register and principal risks
– Members have responsibility for managing risk within their areas
of responsibility
– Identifies new and emerging risks
– Assists the Board to fulfil its corporate governance responsibilities
in relation to financial reporting, internal controls, and the risk
management framework
– Conducts formal reviews of the principal risks twice a year, one of which
is in connection with the consideration of the viability statement
– Reviews and oversees the Group risk register and risk management
framework and assesses their effectiveness in mitigating Group level risks
– Reviews key risk areas with relevant Senior Managers to understand the
nature of the risks and adequacy of the mitigations and controls in place
OPERATIONAL MANAGEMENT
Identifying and managing risks on a day-to-day basis
– Maintain the business function risk registers
– Embed and manage internal controls and risk management processes as
– Identify and assesses risk within their business functions and implements
actions to reduce risk exposure to an acceptable target level
part of business-as-usual operations
OPERATIONAL AUDIT, LOSS PREVENTION AND SECURITY TEAM
Reviews compliance with certain key internal procedures in stores and at other locations
– Provides an objective compliance and monitoring overview
– Identifies non-compliance with key business processes
INTERNAL AUDIT
Provides assurance to the Audit Committee through independent reviews of agreed risk areas
– Facilitates updates to the corporate and business function risk registers in
– Ensures that principal risk topics are scheduled for regular review by
partnership with operational management
the Board
– Presents the outcome of the risk review to the Trading Board and the
– Shares risk management information and best practice across the Group
Audit Committee
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 R ISK A PPETITE
THE UK CORPOR ATE GOVERNANCE CODE
REQUIRES COMPANIES TO DETERMINE
THEIR RISK APPETITE
Risk appetite is an expression of the amount and types of risk that the Company is willing to take to achieve its strategic and operational objectives. The Group
accepts that it cannot achieve its long term strategic objectives without being exposed to an element of risk. Understanding current and emerging risk is therefore
integral to the Group’s decision-making process.
The Board determines the amount of risk the Group is willing to accept in the pursuit of the Group’s strategic objectives, dependent on the type of risk.
In exploring risks and opportunities, we prioritise the interests and safety of our clients and colleagues and seek to protect the long term value and reputation
of the brand, while maximising commercial benefits to support responsible and sustained growth.
The Group assesses the level of risk exposure against its associated risk appetite to ensure that we appropriately prioritise our resources to manage risks
within our risk appetite. Where the residual risk remains outside the Board’s risk tolerance, additional actions are identified to further mitigate the risk down
to an acceptable target level.
The Group’s risk appetite and tolerance levels were considered and approved by the Board and are reviewed annually. These are used to set tolerance
limits and target risks for each of the principal risks and refine mitigation plans where appropriate.
In summary, the Board has a very low appetite (risk averse) for risks that could lead to breaches of legal and regulatory requirements. The Group has
a low appetite for risks that could impact its reputation, for example in the areas of data management and cyber security. In contrast, the Group has a
higher risk appetite (risk open) in relation to business strategy, as evidenced through our recent growth in both UK and US markets, and future growth in
European markets.
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IDE N TIFIC ATION, EVA LUATION A N D
M A NAGE M E N T OF THE GROU P ’ S R ISK S
The Board has completed its assessment of the Group’s risk landscape and has identified these to be the most significant risks and uncertainties that may impact the
Group’s ability to achieve its strategic and operational goals. The Group recognises that the profile of risks constantly changes, and additional risks not presently known,
or that may be currently deemed immaterial, may also impact the Group’s business objectives (as detailed on page 82) and performance. The risk management framework
is therefore designed to manage rather than eliminate the risk of failure to achieve business objectives, and, as such, can only provide reasonable and not absolute
assurance against these principal uncertainties impacting on business performance.
The Board confirms that it has carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model,
future success, solvency, or liquidity.
IMPACT OF THE PANDEMIC ON PRINCIPAL RISKS AND UNCERTAINTIES
Although the pandemic continues to remain an external risk impacting colleagues,
clients, the supply chain, and showrooms, the risk has reduced substantially over the
last 12 months. The continued advancement and roll out of the vaccine programme
and the easing of lockdown restrictions has enabled operations at showrooms,
offices, and distribution centres to return to full operation.
The risk of another rise in the pandemic infections posed by virus variants
and a return to pandemic restrictions is under constant review, and if necessary,
our proven response plan can be rapidly redeployed. Our business model was
resilient during the pandemic, and we were agile in our response.
During the year, we continued to embed the lessons learned from the
pandemic, including consideration of both the specific consequences of the virus
and its impact on the underlying principal risks being managed.
The pandemic has influenced the profile of our principal risks and the Group’s
response to this has resulted in a stronger control environment, with improved
flexibility, that allows key mitigating activities to be adapted in response to such events.
We have taken the opportunity to strengthen the overall governance and
effectiveness of our organisational activities by re-examining our disciplines and
ways of working in key areas as a result of our learnings from the pandemic. Many
of these activities now form part of permanent business activity.
EMERGING RISKS
As part of the ongoing risk management framework described above, the Group
identifies emerging risks and determines their potential impact on the business. The
Group undertakes horizon scanning to monitor any potential risks that could
change our industry and/or our business, looking at both the inherent risk and
opportunity. Emerging risks are new and evolving, and thus their full potential
impact is still uncertain.
The Group defines emerging risks as newly developing risks that are often
difficult to quantify but may materially affect our business. Emerging risks are
usually highly uncertain risks which are external to the Group, and we take a
proactive approach to the emerging risk management processes, with the
objective of enabling us to:
– Identify, manage, and monitor a broad range of potential emerging risks
– Mitigate the impact of emerging risks which could impact the delivery of the
Group’s strategy
We record each emerging risk within an Emerging Risk Register.
The climate change emerging risk from FY21 has now been recognised as a
principal risk in the section below.
The Board’s assessment of the principal risks and uncertainties facing the Group and the mitigation in place is set out below.
BUSINESS STR ATEGY EXECUTION AND DEVELOPMENT
Principal risk description
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, US, and Europe.
The Group’s significant investments in its showroom
IT systems, colleagues and marketing may be
portfolio,
unsuccessful in growing the Group’s business as planned.
The Group may make acquisitions or other investments
that prove unsuccessful or divert its resources. Successful
growth through future acquisitions is dependent upon the
Group’s ability to identify suitable acquisition targets, conduct
appropriate 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.
How we manage or mitigate the risk
– The Board reviews its business strategy on a regular basis to
Change in risk
No change
determine how sales and profit can be maximised, and business
operations can be made more efficient
Links to strategy
– 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 adapted its strategy to take advantage of online
trading and remote clienteling activities to maximise sales
throughout lockdown periods and post re-opening
– The Group has diversified its operations through the expansion
of mono-brand boutiques and ecommerce platforms. Having
entered the US market and the European market, there is
international market diversification reducing reliance on one
territory
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
KEY SUPPLIERS AND SUPPLY CHAIN
Principal risk description
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 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 RISKS
Principal risk description
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 interests and
waiting times for luxury 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.
STR ATEGIC PRIORITIES
Grow revenue, profit and
Return on Capital Employed
Leverage best in class operations
Enhance strong brand partnerships
Expand multi-channel leadership
Deliver an exceptional client service
Continue to advance the ESG agenda
Drive client awareness and brand image
How we manage or mitigate the risk
– The Group fosters strong relationships with suppliers, many
Change in risk
No change
Links to strategy
of which have been held for a significant length of time
– Supplier distribution contracts are monitored to ensure
ongoing compliance with contractual obligations
– The Group works collaboratively with jewellery brands to
identify product trends and forward demand
– Continued focus on providing exceptional client experience,
representing the brands in the best possible way
– 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
How we manage or mitigate the risk
– The Group provides the ultimate luxury environment for its
Change in risk
No change
Links to strategy
clients to feel welcome, appreciated and supported
– The launch of our Xenia client service programme further elevates
our client experience proposition (refer to pages 86 to 87)
– 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 Group is improving and formalising its registration of
interest process
– The CRM database allows the Group to engage with clients 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
– 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
161
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P R I N C I PA L R I S K S A N D U N C E RTA I N T I E S
continued
COLLEAGUE TALENT AND CAPABILIT Y
Principal risk description
The Group depends on the services of key personnel to manage
its business, and the departure of such personnel 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 personal
relationships with the Group’s sales colleagues. An inability to
recruit, train, motivate and retain suitably qualified colleagues,
especially with specialised knowledge of luxury watches, would
have a material impact on the Group.
DATA PROTECTION AND CYBER SECURIT Y
Principal risk description
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 both the US, UK, and European
markets, the regulatory environment surrounding these areas is
considered more complex.
Security breaches and
IT
infrastructure and networks, or those of third parties, could
compromise sensitive and confidential information and affect
the Group’s reputation.
the Group’s
failures
in
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.
Change in risk
The economic
environment is
impacting the current
labour market,
therefore increasing the
Group’s risk relating to
the ability to recruit,
train, motivate and
retain suitably qualified
colleagues
Links to strategy
Change in risk
A heightened risk
across all organisations
Links to strategy
How we manage or mitigate the risk
– 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 Group’s ‘VibE’ recognition programme is in place to
incentivise and motivate colleagues
– A share save scheme has been launched for all colleagues to
participate in the growth of the Group
– A wide range of training and development programmes are
available to colleagues, including the Group’s own Academy
– A group-wide 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
– The Group is initiating a shift from part time to full time
contracts for retail colleagues
– A talent bank has been established, which provides a pipeline
for management and high potential hires
– A two-way engaging communications platform, Workplace, was
successfully piloted and launched in both the UK and US. This
new social channel will underpin Group communications in the
coming years
How we manage or mitigate the risk
– Significant investment in systems development and security
programmes
– Systems vulnerability and penetration testing is carried
out regularly
– The Data Protection Committee meets regularly to review
related processes and emerging risks
– GDPR policies, procedures, and training in place
– Strict access rights are in place to limit access to data and
reports to limited people
– Regular communication with colleagues on the risk of ‘phishing’
emails and alerts of identified examples
– Security Information and Event Management (SIEM) tools have
been introduced across the Group’s technology estate
– VPN security controls have been enhanced considering the
increased requirement for use through working from
home arrangements
– Enhanced password security measures have been introduced
to decrease the likelihood of a breach
162
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
BUSINESS INTERRUPTION
Principal risk description
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. If a hold-up, burglary, or other theft
incident takes a violent turn, the Group may also suffer
reputational damage 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,
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.
REGUL ATORY AND COMPLIANCE
Principal risk description
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 expands in the US and Europe, there is a risk
the business lacks the detailed knowledge of US and European
laws and regulations resulting in a breach, significant fine and
reputational impact.
STR ATEGIC PRIORITIES
Grow revenue, profit and
Return on Capital Employed
Leverage best in class operations
Enhance strong brand partnerships
Expand multi-channel leadership
Deliver an exceptional client service
Continue to advance the ESG agenda
Drive client awareness and brand image
How we manage or mitigate the risk
– The Group has a framework of operational procedures and
Change in risk
No change
business continuity plans that are regularly reviewed, updated,
and tested
Links to strategy
– The multi-channel model allows clients to purchase online from
the safety and comfort of their homes
– Robust security arrangements are in place across our
showroom network to protect people and products in the case
of security incidents
– A comprehensive insurance programme is in place to offset the
financial consequences of insured events
– Business critical systems are based on established, industry
leading package solutions
– 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 put in place action plans to effectively deal with
the pandemic impact on business operations which could be
applied to future pandemics
Change in risk
Expansion into
new territories
Links to strategy
How we manage or mitigate the risk
– The Group actively monitors both regulatory developments
in the UK, US, and Europe and compliance with existing
obligations
– Clear policies and procedures are in place, including, but not
limited to, anti-bribery and corruption, 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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P R I N C I PA L R I S K S A N D U N C E RTA I N T I E S
continued
ECONOMIC AND POLITICAL
Principal risk description
The Group’s business is geographically concentrated in the
UK and US, and is expanding into Europe. 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.
BR AND AND REPUTATIONAL DAMAGE
Principal risk description
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.
FINANCIAL AND TREASURY
Principal risk description
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 the pandemic, could impact the business’s ability to operate
within committed credit facilities. This has been considered as
part of the Group’s going concern and viability assessment on
page 166.
How we manage or mitigate the risk
– Regular monitoring of economic and political events
– Focus on client service to attract and retain clients
– Detailed sales data is analysed to anticipate future trends and
demand, taking into consideration the current economic
environment
– Through the expansion into the US and Europe, the Group
is not wholly dependent on the economic or political
environment in one single market
Change in risk
The economic
environment and high
inflation rates in both
the UK, US, and
Europe, mean that this
is a heightened risk
Links to strategy
How we manage or mitigate the risk
– The Group has a clear and open culture with a focus on trust
Change in risk
No change
and transparency
– Training and monitoring of adherence by colleagues to Group
Links to strategy
policies and procedures
– Good 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 bold, impactful, digital-led marketing, along with an
in-depth knowledge of products, makes the Group an authority
in the markets it serves
How we manage or mitigate the risk
– The Group’s net debt/cash position, available funding and cash
flow projections are regularly monitored by management and
the Board
Change in risk
No change
Links to strategy
– 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
164
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
STR ATEGIC PRIORITIES
Grow revenue, profit and
Return on Capital Employed
Leverage best in class operations
Enhance strong brand partnerships
Expand multi-channel leadership
Deliver an exceptional client service
Continue to advance the ESG agenda
Drive client awareness and brand image
Change in risk
New risk
Links to strategy
CLIMATE CHANGE
Principal risk description
The Group has recognised the potential reputational, operational,
and financial impacts of climate change on our business, which has
led to this risk being moved from an emerging risk in FY21 to a
principal risk in FY22.
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 is 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.
How we manage or mitigate the risk
– Climate-related issues are addressed at least three times a year
by the ESG Committee, and our CFO has taken operational
responsibility for climate-related issues. Management assess and
manage climate-related risks and opportunities via the Audit
Committee, where reports on progress towards carbon
reduction targets are presented
– The Group undertook a qualitative and quantitative climate
scenario analysis (CSA) in 2021 which has identified risks and
opportunities for the business and provided materiality and
financial impacts of these risks to the business. Over the
upcoming year, these results are being incorporated into our
financial planning. The results of the CSA are also informing our
US and UK business continuity plans for extreme weather events
– Mitigation initiatives are being implemented across the portfolio.
These include:
– Smart metering
– Temperature controls
– Collaboration with landlords to improve HVAC efficiencies
– Electric vehicles used for company car and operational fleets
– Promoting the sustainable sourcing of our precious stones and
metals, auditing our suppliers, and increasing our
environmentally friendly product range
– The Group monitors its GHG emissions on an annual basis and
has set near term SBTs aligned to 1.5°C under the Paris Climate
Agreement of 50% absolute reduction in Scope 1 & 2 and 42%
absolute reduction in Scope 3 emissions by 2030 from a
baseline year of FY20
165
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G O I N G C O N C E R N A N D V I A B I L I T Y S TAT E M E N T
GOI NG C ONCE R N
The Directors consider that the Group has, at the time of approving the
Group Financial Statements, adequate resources to remain in operation
for the foreseeable future and have therefore continued to adopt the going
concern basis in preparing the consolidated information.
– Reverse stress-testing of this budget was performed to determine what level
of reduced EBITDA and worst case cash outflows would result in a breach of
the liquidity or covenant tests. The likelihood of this level of reduced EBITDA
is considered remote
– Severe but plausible scenarios of:
– 10% reduction in sales against the budget due to reduced consumer
confidence and lower disposable income due to the cost of living increase.
This scenario did not include cost mitigations which are given below
– A repeat of the FY21 pandemic impact on the ability of showrooms to trade
modelled without Government support
– Under these scenarios the net debt to EBITDA and the FCCR covenants
would be complied with
– Should trading be worse than the outlined severe but plausible scenarios, the
Group has the following mitigating actions within management’s control:
– Reduction of marketing spend
– Reduction in the level of stock purchases
– Restructuring of the business with headcount and showroom operations
savings
– Redundancies and pay freezes
– Reducing the level of planned capex and acquisition spend
As a result of the above analysis, including potential severe but plausible scenarios,
the Board believes that the Group is able to adequately manage its financing and
principal risks and that the Group will be able to operate within the level of its
facilities and meet the required covenants for the period to 31 October 2023. For
this reason, the Board considers it appropriate for the Group to adopt the going
concern basis in preparing the Group Financial Statements.
At the balance sheet date, the Group had a total of £217.7 million in available
committed facilities, of which £120.0 million was drawn down. Net debt at this
date was £14.1 million with liquidity headroom (defined as unrestricted cash plus
undrawn available facilities) of £189.6 million. The main UK bank facility £170.0
million expires in June 2024. The US$60.0 million US Asset Backed Loan (ABL)
expires in April 2023, during the going concern period. No extension or new ABL
has been signed and therefore the going concern assessment is based on the
remaining £170.0 million facility from April 2023 onwards.
The key covenant tests attached to the Group’s facilities are a measure of net
debt to EBITDA and the Fixed Charge Cover Ratio (FCCR) at each April and
October. Covenant EBITDA is on a pre-IFRS 16 basis and excludes share-based
payment and the Watches of Switzerland Group PLC company costs. Net debt
to EBITDA is defined as the ratio of total net debt at the reporting date to the
last 12 months Adjusted EBITDA. This ratio must not exceed 3. The FCCR is the
ratio of Adjusted EBITDA plus rent to the total finance charge and rent for the 12
months to the reporting date. This ratio must exceed 1.6. On 18 June 2020, the
covenant tests of the Group’s facilities were replaced with a monthly minimum
liquidity headroom covenant of £20.0 million for the period of June 2020 to
September 2021. The Directors sought the replacement of covenants to provide
further flexibility to deal with any unexpected circumstances during that period.
The £20.0 million minimum headroom covenant was satisfied for each month to
September 2021.
After the covenant waiver period, at 31 October 2021 and 1 May 2022, the
Group comfortably satisfied the original covenant tests with net debt to EBITDA
being less than 3 and the FCCR exceeding 1.6.
In assessing whether the going concern basis of accounting is appropriate, the
Directors have reviewed various trading scenarios for the period to 31 October
2023 from the date of this report. These included:
– The budget approved by the Board in March 2022, which included the
following key assumptions:
– A continued strong luxury watch market in the UK and US
– Low levels of tourism and travel in the US and UK
– Revenue forecast supported by expected luxury watch supply
The budget aligns to the Guidance given on page 74. Under this budget, the
Group has significant liquidity and comfortably complies with all covenant tests to
31 October 2023. It is also noted that the budget includes increased costs such as
the general market rise in energy costs, in addition to the cost of actions being
taken to achieve environmental targets.
166
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 V I A BIL IT Y STATE M E N T
In accordance with Provision 31 of the UK Corporate Governance Code
2018, the Directors are required to issue a Viability Statement declaring
whether the Directors believe the Group is able to continue to operate
and meet its liabilities over a period greater than 12 months, taking into
account its current position and principal risks.
Assessment of viability
The strategic planning process reviewed by the Board is over a three-year period.
In determining the appropriate assessment period, the Board considered the
uncertainty regarding a number of global economic events, including the pandemic,
the level of inflation, the cost of living increase and the war in Ukraine.
Assessment of prospects
The Directors have assessed the prospects of the Group by reference to its current
financial position, its recent and historical financial performance, its forecasts for
future performance, its business model (page 70), strategy (pages 81 to 105) and its
principal risks and mitigating factors (pages 159 to 165). In addition, the Board regularly
reviews the financial position of the Group, its liquidity and financial forecasts.
The Long Range Plan was reviewed and endorsed by the Board in April 2021,
which included the following key assumptions:
– A continued strong luxury watch market in the UK and US
– Low levels of tourism and travel in the US and UK
– Revenue forecast supported by expected luxury watch supply
During the normal cycle of strategic planning, budgets and forecasts are
approved by the Board in February/March each year.
In making the Viability Statement, the Board carried out a robust assessment
of the principal risks and uncertainties facing Group as described on pages 159 to
165. In addition to the uncertainties noted above, the key risks identified that
would have a material impact on the long term viability of the Group were the
loss of a key supplier and the impact of a potential penalty for statutory breaches.
The scenarios assessed in relation to viability were:
– Reverse stress-testing of this plan to determine what level of reduced EBITDA
and other possible cash outflows would result in a breach of the lending
requirements during the three-year period. This level of reduced EBITDA and
other possible cash outflows is considered not to be plausible
– A new bank facility at the current capacity is renegotiated in FY24 with similar
– Severe but plausible scenarios of a 10% reduction in sales against the budget
covenant tests
– The financial impact of actions being taken by the Group to achieve its climate
change commitment
The budget aligns to the Guidance given on page 74.
Assessment period
The Directors have assessed the prospects of the Group over a three-year period.
This period is considered an appropriate timeframe to assess the Group’s prospects
and is consistent with the Group’s business model, strategic planning period,
management incentive schemes and medium term financing considerations.
Current financing
At the balance sheet date, the Group had a total of £217.7 million in available
committed facilities, of which £120.0 million was drawn down. Net debt at this date
was £14.1 million with liquidity headroom (defined as unrestricted cash plus
undrawn available facilities) of £189.6 million. The main UK bank facility £170.0
million expires in June 2024. The US$60.0 million US Asset Backed Loan (ABL)
expires in April 2023.
The key covenant tests attached to the Group’s facilities are a measure of net
debt to EBITDA and the Fixed Charge Cover Ratio (FCCR) at each April and
October. Covenant EBITDA is on a pre-IFRS 16 basis and excludes share-based
payment and the Watches of Switzerland Group PLC company costs. Net debt
to EBITDA is defined as the ratio of total net debt at the reporting date to the
last 12 months Adjusted EBITDA. This ratio must not exceed 3. The FCCR is the
ratio of Adjusted EBITDA plus rent to the total finance charge and rent for the 12
months to the reporting date. This ratio must exceed 1.6. During the three-year
viability period the lending obligations and facility assumptions are as follows:
– Comply with the Debt to EBITDA and FCCR ratio at six monthly intervals
from October 2021 to April 2025
– A new bank facility at the current capacity is renegotiated in FY24 with similar
covenant tests
(not taking into account cost mitigations which would take place). These
scenarios would still result in the net debt to EBITDA and the FCCR covenants
all being complied with
– The loss of a key supplier to the business. This scenario would have a
significant adverse impact on the Group but would not result in a covenant
breach during the viability assessment period. Management consider that the
strength of the current supplier relationship combined with the historic
showroom investment and revenue growth achieved means that this scenario
is not plausible
– The severe impact of any statutory noncompliance has been evaluated and
would not result in a breach of the facility covenants
Whilst the pandemic and other global economic factors could impact the
Group, the business’ long term strategy for value creation in the UK, US and
Europe remains unchanged. The advantages of the Group’s multi-channel
operating model coupled with its scale and technological expertise should enable
the business to outperform the market, take market share and capitalise on the
material growth opportunities in the US and Europe.
The financial impact of actions being taken by the Group to achieve its climate
change commitment has been included in future cash flows and stress testing.
Conclusion
Based upon this assessment of the sensitivity around the significant loss of revenue
built into the scenarios tested, the Directors confirm that they have a reasonable
expectation that the Group will be able to continue in operation to meet its
liabilities as they fall due over the three-year assessment period.
APPROVAL OF STR ATEGIC REPORT
Approved by the Board and signed on its behalf:
BRIAN DUFFY
CHIEF EXECUTIVE OFFICER
6 July 2022
167
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 G OV E R N A N C E R E P O RT
2
GOV E R NA NCE
R E PORT
171 Chair’s Introduction
173 Corporate Governance Statement
182 Board of Directors
184 Nomination Committee Report
188 Audit Committee Report
194 ESG Committee Report
196 Remuneration Committee Report
200 Directors’ Remuneration Report
208 Annual Report on Remuneration
212 Proposed 2022 Directors’ Remuneration Policy
224 Directors’ Report
169
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 170
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 C O R P O R AT E G OV E R N A N C E R E P O RT
CH A IR' S I N T RODUCTION
IAN CARTER
C H A I R
“The Board is fully
committed to the
highest standards of
corporate governance
and I am pleased
to report that our
framework continues to
be extremely robust.”
IAN CARTER
CHAIR
Welcome to the Corporate Governance Report, which I am pleased to
present on behalf of the Board for the year ended 1 May 2022.
For part of the financial year, the pandemic continued to present us with some
challenges which tested our governance framework in an unconventional
environment. With the new processes and procedures put in place at the start of
the pandemic, the Board and our colleagues continued to work well and
collaboratively together, making significant progress on our Long Range Plan, which
was introduced in July 2021.
In FY22 the Board continued to develop, and further progress was made on
governance, including the completion of an externally facilitated board evaluation
process. The evaluation ensured that the manner in which the Board operates was
assessed and challenged. The Board has proven to be effective and works well
together to promote the long term sustainable success of the Group with a clear
focus on the interests of all stakeholders.
UK CORPOR ATE GOVERNANCE CODE 2018
The Board is fully committed to underpinning all of the Group’s activities with the
highest standards of corporate governance. This Corporate Governance Report
explains how the Board seeks to ensure that we have effective corporate
governance in place to help support the creation of long term sustainable value for
all our shareholders and other stakeholders. The Company has established
procedures which provide a basis for the Board to make proper judgements as to
the financial position and prospects of the Group.
The Watches of Switzerland Group PLC (the ‘Company’) endorses the Corporate
Governance Code 2018 (the ‘Code’) and the related FRC guidance on Board
Effectiveness. We continue to monitor and review our governance arrangements
and I can confirm that throughout the year ending 1 May 2022, the Company
complied with all of the principles and provisions set out in the Code.
All Directors and Senior Management are aware of their duties and responsibilities
under the Companies Act 2006, the Code, the FCA’s Disclosure and Transparency
Rules (DTR) and the Listing Rules (LR).
ENVIRONMENT, SOCIAL AND GOVERNANCE FACTORS
Board activities and stakeholder engagement
The Long Range Plan, which was approved by the Board in July 2021, sets out our
vision for future growth. When making key decisions, the Board ensures alignment
with the Group’s strategy: its strategic areas of focus; and agreed approach to
expansion as set out in the Long Range Plan. For each decision, the Board considers
the need to promote success and long term sustainable value. More information on
the Board’s decision-making, as well as the interests of each of its stakeholders, can
be found on pages 116 and 117 and on pages 176 and 178.
Rosa Monckton is our Designated Non-Executive Director, who provides
information to the Board on key areas of interest and concern from our colleagues.
This feedback helps us to ensure that our colleagues’ perspectives are considered
by the Board and Committees during their decision-making process. The CEO and
Senior Management also report back regularly to the Board on colleague feedback.
Our colleague engagement programme is sponsored internally by the Group
Executive Director HR and this year’s activities included participation in attending a
number of our Listening Forums, both UK and US specific as well as one Global
Listening Forum. Rosa’s attendance at the Listening Forums ensures that the Board
remains increasingly visible amongst our colleagues and, after each Forum, she
reports back to the Board on her findings.
171
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C O R P O R AT E G OV E R N A N C E R E P O RT
continued
One of our continued strengths lies with our internal communications with
colleagues and, towards the end of the year, we introduced a new interactive
collaborative communication platform Workplace. Workplace is an ‘all-in-one’
business communication platform which allows the Board, Senior Management and
colleagues to interact with each other, celebrate achievements, birthdays and
service recognition as well as WOW client experiences and exciting business news.
Information on other stakeholder considerations and engagement can be found on
pages 116 to 117 and the formal reporting on s172(1) can be found on page 116.
Creation of an ESG Committee
As reported in last year’s Annual Report and Accounts, the Board approved the
establishment of an ESG Committee in July 2021, which is chaired by Rosa Monckton
and held its inaugural meeting in October 2021. The ESG Committee was specifically
established to assist the Board in oversight of the ESG priorities of the Group and
good progress has been made in developing an ESG strategy and goals.
Purpose, culture and values
The Board recognises the importance of is role in setting the tone of the Group’s
culture, aligning it with our purpose, values and strategy and embedding it throughout
the Group. As the Group continues to grow internationally, it is particularly
important that our purpose is reviewed regularly to ensure it remains relevant.
The strength of the Company culture was visible as all colleagues came together to
display integrity, commitment and resilience throughout the pandemic. However,
following the announcement of the Long Range Plan in July 2021, it became evident
that the Company’s purpose needed to evolve further to support the plans for long
term growth and the Group’s people strategy. As recommended by the ESG
Committee the purpose and values were approved by the Board in March 2022,
ensuring that the vision, culture, values and purpose are aligned for the future and
remain central to the achievement of the Group’s strategy.
Additionally, in support of the Group’s purpose and values a new Code of Ethics
was approved by the Board in May 2022.
The Board is satisfied that policies, practices and behaviours across the Group, are
in line with the Company’s purpose, values and strategy.
Board changes and succession planning
There have been some changes to the Board since last year’s AGM. Bill Floydd was
appointed Chief Financial Officer on 1 January 2022, as Anders Romberg stepped
down from the Board, on the same date, and subsequently retired from the
Company at the end of February 2022. We would like to thank Anders for his
invaluable counsel and advice, particularly when the Company transitioned from
private to public ownership. I would personally like to convey my thanks to Anders
for his continued dedication in supporting the smooth transition during the transfer
of the CFO responsibilities.
Chabi Nouri was appointed as a Non-Executive Director from 1 May 2022. Chabi
joins us with a wealth of experience and relevant expertise, particularly in the
luxury watch and jewellery sector and we are already benefiting from her
contribution as a new Board member.
Additionally, Craig Bolton – Executive Director UK, and David Hurley – Executive
Vice-President US were appointed to new roles of President UK & Europe, and
President North America & Deputy CEO, respectively.
The Nomination Committee reviews succession planning both for the Board
(executives and non-executive directors) and Senior Management each year. For
more details regarding Board succession, and the Nomination Committee please
see the report from page 184. For a wider understanding of the skills and experience
of the Board see the biographies on pages 182 and 183.
DIVERSIT Y & INCLUSION
The Board recognises the importance of diversity and inclusion both in the
boardroom and throughout the organisation. This includes the benefits of recruiting
leaders who live the Group’s culture and values and represent a diversity of gender,
ethnicity, cognitive strengths and socio-economic, educational, and professional
backgrounds to reflect the diverse communities we serve. For more information on
the backgrounds of our Board members, please see their biographies on pages 182
and 183 and the composition of the Board on page 225.
We recognise the importance of both the FTSE Women Leaders Review, previously
the Hampton-Alexander Review, for gender and the Parker Review for ethnicity.
On gender diversity, I am pleased to report that, whilst the new recommendations
of the Women Leaders Review, published in November 2021, encourage
compliance by the end of 2025, the Company already fulfils the recommendation
criteria. We have appointed, since the IPO, a woman appointed as the Senior
Independent Director, more than 42.8% of women on the Board and also 43.5% of
the combined Executive Committee and direct reports being women. The
Nomination Committee has reviewed the Board Diversity Policy and made changes
to ensure that these criteria are maintained.
During the year, the Board also met the previous gender targets set by the
Hampton-Alexander Review for Board balance and we moved up to #11 in the
FTSE 250 for Women on Boards in Leadership rankings, an increase from #98 of
last year.
In terms of our ethnicity at Board level, I am also pleased to report the Board is now
in line with the recommendations of the Parker Review which sets a target for each
FTSE 250 Company to appoint at least one member of the Board from a minority
ethnic background by 2024.
Our succession planning and future recruitment continues to take into account
diversity as set out in our Board Diversity Policy, which can be found on our
corporate website thewosgroup.com/governance/governance-documents/.
ANNUAL GENER AL MEETING
I look forward to engaging with you at the forthcoming AGM which is scheduled to
take place on 1 September 2022, commencing at 2.30pm and which will be held at
36 North Row, London W1K 6DH. Full details including the resolutions to be
proposed to our shareholders can be found in the Notice of AGM which will be
sent to shareholders and made available on our corporate website. The outcome
of the resolutions put to the AGM, including poll results detailing votes for, against
and withheld, will be published via the regulatory news service and on the
Company’s website thewosgroupplc.com once the AGM has concluded.
FOCUS FOR 2023
As a Board, we recognise the value of having strategic debate in the Boardroom:
taking tough decisions on priorities and working together to achieve the Group’s
objectives, whilst considering each of its stakeholders. Following the completion of
our first externally-led Board evaluation, we have identified a number of key
priorities for the coming year. I look forward to working on these with the Board,
the Executive Team and Senior Management as we continue to execute the Long
Range Plan and delivering excellence in business performance.
IAN CARTER
CHAIR
6 July 2022
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 C O R P O R AT E G OV E R N A N C E R E P O RT
C OR POR ATE GOV E R NA NCE
STATE M E N T
features of
CORPOR ATE GOVERNANCE
STATEMENT 2022
This Corporate Governance Statement explains
key
the Group’s governance
structure and how the Group measures itself
against the standards set out in the UK
Corporate Governance Code 2018 (the ‘Code’),
as required by the Listing Rules of the Financial
Conduct Authority, the accepted standard of
good governance practice in the UK. A copy of
the Code can be found on the Financial
Reporting Council’s website at www.frc.org.uk.
We believe that good governance provides the
framework for stronger value creation and
lower risk for shareholders. It is the Board’s
responsibility to instil and maintain a culture of
openness, integrity and transparency throughout
the business, through our actions and conduct,
policies and communications.
We apply corporate governance guidelines in a
way that is relevant and meaningful to our
business and consistent with our culture and
values. If we decide that the interests of the
Company and its shareholders can be better
served by doing things in a different way, we will
explain the reasons why.
STATUTORY INFORMATION
The Group has chosen to provide certain disclosures and information in relation to the Corporate Governance
Statement as required by DTR7.2 elsewhere in this Annual Report and Accounts. These are cross referenced in
the table below:
Statutory information
Internal control and risk management
Securities carrying special rights with regard to the
control of the Company
Restrictions on voting rights
Appointment and replacement of Directors and
amendments to the Company’s Articles
Powers of the Company’s Directors relating to
transactions in own shares
Section of report
Risk Management
Directors’ Report
Directors’ Report
Directors’ Report
Directors’ Report
Page
156
226
226
225 &
226
226
Purpose, values and culture
Environmental, Social and Governance
118
UK CORPOR ATE GOVERNANCE CODE 2018 COMPLIANCE
The Company’s obligation is to state whether it has complied with the relevant provisions of the Code, or to
explain why it has not done so (up to the date of this Annual Report and Accounts).
The Board confirms that, throughout the year, the Company has applied the principles, both in spirit and in form,
and complied with the provisions set out in the UK Corporate Governance Code issued by the Financial Reporting
Council (FRC) in July 2018 (the ‘Code’). The Company’s governance arrangements have been considered
alongside the Code. The information set out in the Corporate Governance Statement and the Directors’ Report
on pages 174 to 221, including the various Board committee reports (on pages 184 to 223) is intended to provide
an explanation of how the Code’s principles were applied practically throughout the year.
BOARD APPROVAL FOR THE CORPOR ATE GOVERNANCE STATEMENT 2022
This Corporate Governance Statement is approved by the Board and signed on behalf of the Board by the Chair
and by the Company Secretary.
IAN CARTER
CHAIR
LAURA BATTLEY
COMPANY SECRETARY
UK CORPOR ATE GOVERNANCE CODE 2018
1
BOARD LEADERSHIP
& COMPANY PURPOSE
READ MORE:
Page 175
2
COMPOSITION,
SUCCESSION &
EVALUATION
READ MORE:
Page 179 and 181
3
DIVISION OF
RESPONSIBILITIES
4
AUDIT, RISK
MANAGEMENT &
INTERNAL CONTROL
5
REMUNER ATION
READ MORE:
Page 174
READ MORE:
Page 180
READ MORE:
Page 180
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
BOARD LEADERSHIP STRUCTURE
The following diagram shows the role of the Board and its Committees as well as the Trading Board.
BOARD OF DIRECTORS
The Board is collectively responsible for the long term success of the Company and the Group. The business of the Group is managed by the Board who
may exercise all the powers of the Company. The Board delegates certain matters to the Board Committees, and delegates the detailed implementation
of matters approved by the Board and the day-to-day operational aspects of the business to the Executive Directors and other members of Senior
Management. There is a schedule of matters specifically reserved for the Board which is reviewed and approved annually by the Board.
NOMINATION
COMMITTEE
Undertakes an annual review
of succession planning and
ensures that the membership
and composition of the
Board, including the
combination of skills and
diversity, remains appropriate.
AUDIT COMMITTEE
Reviews and reports to the Board on the
Group’s financial reporting, internal
control and risk management systems and
the independence and effectiveness of the
External Auditor. Reviews and approves
the responsibilities of the Internal Audit
function and ensuring the necessary
resources and access to information
is in place.
REMUNER ATION COMMITTEE
Determines the policy for remuneration,
bonuses, long term incentive
arrangements, contract terms and other
benefits in respect of the Executive
Directors, the Chair, the Company
Secretary & General Counsel and Senior
Management. Reviews workforce
remuneration and related policies.
ESG COMMITTEE
Provides oversight on behalf
of the Board in relation to
the Group’s ESG strategy
and activities, overseeing any
ESG strategic goals, targets
and key performance
indicators.
CHIEF EXECUTIVE OFFICER
– Leads the Executive Directors and the Trading Board
– Represents management on the Board along with the Chief Financial Officer
TR ADING BOARD
– Day-to-day management of the Group’s operations
– Executes the strategy once agreed by the Board
KEY ROLES
The Board has adopted written statements setting out the respective responsibilities of the Chair and the CEO, which are available on the corporate website.
The Board biographies are included on pages 182 to 183. A summary of the responsibilities of the Directors and key roles of the Board are set out below:
CHAIR
– Responsible for the operation, leadership and governance of the Board
– Sets the Board agenda and ensures sufficient time is allocated to ensure
effective debate to support sound decision-making
– Ensures the Board is fully informed of all matters and receives precise
timely and clear information sufficient to make informed judgements
– Ensures each Non-Executive Director makes an effective contribution
to the Board
– Meets with the Non-Executive Directors independently of the
Executive Directors
NON-EXECUTIVE DIRECTORS
– Are all independent, experienced and influential individuals from a
diverse range of industries, backgrounds and countries
– Provide constructive contribution and challenge to the development
of the strategy to the Executive Directors
– Scrutinise the operational and financial performance of Senior Management
– Monitor the integrity of financial information, financial controls
and systems of risk management
– Devote such time as is necessary to the proper performance of their duties
CHIEF EXECUTIVE OFFICER
– Management of the day-to-day operations of the Group
– Develops the Group’s strategic objectives for consideration and
CHIEF FINANCIAL OFFICER
– Manages all aspects of the Group’s financial affairs
– Works with the CEO to develop and implement the Group’s strategic
approval by the Board
objectives
– Implements the strategy agreed by the Board
– Leads the Trading Board and Senior Management
– Manages the Company and the Group
– Ensures effective and ongoing communication with shareholders
SENIOR INDEPENDENT DIRECTOR
– Acts as a ‘sounding board’ for the Chair and serves as an intermediary
for the other Directors where necessary
– Leads the Non-Executive Directors in their annual assessment of the
Chair’s performance
– Available to shareholders if they have concerns which the normal channels
through the Chair, CEO or other Directors have failed to resolve
DESIGNATED NON-EXECUTIVE DIRECTOR FOR WORKFORCE
ENGAGEMENT
– Gauges the views of the colleagues and identifies any areas of concern
– Ensures the views and concerns of the workforce are taken into account
by the Board, particularly when they are making decisions that could
affect the colleagues
– Ensures the Board takes appropriate steps to evaluate the impact of
proposals and developments on the colleagues and considers what steps
should be taken to mitigate any adverse impact
174
– Delivers the financial performance of the Group
– Ensures the Group remains appropriately funded to pursue its strategic
objectives
– Ensures proper financial controls and risk management of the Group
and compliance with associated regulation
– Ensures effective and ongoing communication with shareholders
COMPANY SECRETARY
– Supports the Board and its Committees with their responsibilities and
ensuring information is made available to Board members in a timely
fashion
– Supports the Chair of the Board in setting Board agendas, designing and
delivering Board inductions and Board evaluations and co-ordinates
post-evaluation action plans
– Advises on regulatory compliance and corporate governance matters
– Ensures compliance with the Board’s procedures and with applicable
rules and regulations
– Communicates with shareholders and organises the AGM
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 BOARD LEADERSHIP & COMPANY PURPOSE
THE ROLE OF THE BOARD
The Board provides leadership to the Group and is collectively responsible for
promoting its long term success and for delivering sustainable value to all stakeholders.
The Board ensures that there is a sound system of internal control and risk
management in place (including financial, operational and compliance controls) and
ensures the overall effectiveness and maintenance of those systems.
The Board is supported by a number of Committees, to which it has delegated
certain powers. The role of these Committees is summarised in the following
pages, and their membership, responsibilities and activities during the year are
detailed on pages 184 to 199.
Some decisions are sufficiently material that they can only be made by the Board as
a whole. There is a Schedule of Matters Reserved (‘Reserved Matters’) for the
Board, which contains items reserved for the Board to consider and approve,
relating to strategy and management, material contracts, financial reporting and
controls, internal controls and risk management, Board membership and succession
planning, corporate governance, structure and capital, and delegation of authority.
In addition to the Reserved Matters, each Board Committee has written Terms of
Reference defining its role and responsibilities.
The Reserved Matters and the Terms of Reference of the Board Committees can
be found on our corporate website. Further details regarding the role and activities
of the Board can be found below and in the Directors’ Remuneration Report which
begins on page 200.
The Reserved Matters and the Committees’ Terms of Reference are reviewed
annually, updated as appropriate and approved by the Board.
The Board has received updates on its duties under the Companies Act 2006 and
in particular is equipped to consider s172(1) of the Companies Act 2006 when
decision-making for the Group.
Group policies and processes have been drafted with these duties in mind and to
ensure that there is a culture of stakeholder engagement within the Group.
The Company Secretary ensures that as the Board makes decisions, the impact on
any of the stakeholder groups is considered.
The Company’s purpose and values can be found on page 02.
BOARD AND COMMITTEE ATTENDANCE
In addition to the six scheduled meetings, the Board held four additional meetings during the year to review the quarterly Trading Updates and delegate to the Disclosure
Committee for the final approval. The Board also held a full-day strategy meeting and a number of ad hoc meetings were held to cover approvals which arose outside of
the scheduled meetings.
In FY22, one of the scheduled Board meetings was held at a London showroom and, as travel restrictions have now been eased, it is the intention that during FY23 there
will be a Board meeting held in the US.
The table below indicates the number of scheduled Board and Committee meetings during the financial year:
Director
Ian Carter
Brian Duffy
Bill Floydd¹
Tea Colaianni
Rosa Monckton
Robert Moorhead
Chabi Nouri²
Anders Romberg³
Board
Audit
Remuneration
Nomination
ESG
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
6
6
1
6
6
6
–
5
6
6
1
6
6
6
–
5
n/a
n/a
n/a
4
4
4
n/a
n/a
n/a
n/a
n/a
4
4
4
n/a
n/a
3
n/a
n/a
3
3
3
n/a
n/a
3
n/a
n/a
3
3
3
n/a
n/a
4
n/a
n/a
4
4
4
n/a
n/a
4
n/a
n/a
4
4
4
n/a
n/a
3
3
n/a
3
3
3
–
3
3
n/a
3
3
3
–
n/a
n/a
1 Bill Floydd was appointed as CFO on 1 January 2022.
2 Chabi Nouri was appointed as a Non-Executive Director on 1 May 2022.
3 Anders Romberg stepped down from the Board on 1 January 2022.
During the year, the Non-Executive Directors held one meeting without the Executive Directors present. The Chair also regularly maintains dialogue with each of the
Non-Executive Directors outside of formal meetings.
BOARD SKILLS AND EXPERIENCE
It is essential to have an appropriate mix of experience, diversity and independence
on the Board. Such diverse attributes enable the Board as a whole to provide
informed opinions and advice on strategy and relevant topics, thereby discharging
its duty of oversight. Appointments to the Board are made following consideration
of the experience and expertise of existing directors, any required skill sets or
competencies, and the strategic requirements of the Company.
The principles of the Code are embodied in both the Board and the Nomination
Committee’s approach to Board evaluation and succession planning. The Nomination
Committee goes through a continuous process of evaluating the skills and experience
required on the Board.
For further information on diversity considerations please see page 179 and the
Nomination Committee Report on page 186.
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continued
INFORMATION AND SUPPORT
Full and timely access to all relevant information is given to the Board in advance of
meetings. For Board meetings, this consists of a formal agenda, minutes of previous
meetings and a comprehensive set of papers including regular operational and
financial reports. Where ad hoc meetings were required outside of the scheduled
meetings the Board is sent the documents, in advance, for consideration and approval.
STAKEHOLDER ENGAGEMENT
The s172(1) Companies Act 2006 Statement has been updated to include further
details on how the Board have had regard to the need to foster the Company’s
business relationships and includes a Statement of Engagement with Colleagues,
both to be read in conjunction with the Stakeholder pages in the Strategic Report
which can be found on pages 116 to 117.
All Directors have the right to have their opposition to, or concerns over, any Board
decision noted in the minutes. Directors are entitled to take independent
professional advice at the Company’s expense in the furtherance of their duties,
where considered necessary.
All Directors have access to the advice and services of the Company Secretary &
General Counsel.
PURPOSE , VALUES AND CULTURE
As set out in the Reserved Matters, the Board is responsible for establishing the
Company’s purpose and values and ensuring that these and the Company’s culture
are aligned. The Board monitors culture and seeks to ensure that business practices,
policies and behaviours are aligned and embedded within the Company’s purpose,
values and culture. During the year, the Board held a session dedicated to culture and
it is the intention that this will be an annual session.
The Board approved a new Code of Ethics, in May 2022, which supports existing
policies, and provides, a high level overarching framework highlighting the standards
of integrity expected from our colleagues. Further details can be found on page 151.
The Board takes responsibility for all the Group policies which are applicable to our
colleagues, including the following:
– Anti-Bribery and Corruption
– Code of Ethics
– Whistleblowing
– Corporate Criminal Offence Policy
– Anti Money Laundering
– Health & Safety
Please see further information on Group policies on page 151.
We understand that our business can only grow and prosper responsibly over the
long term if we understand and respect the views and needs of our stakeholders
including clients, colleagues and the communities in which we operate, as well as our
brand partners and other suppliers and the shareholders to whom we are
accountable. Knowing who our stakeholders are and what interests them enables us
to manage their expectations and deliver upon their requirements. We ensure
effective communication with all stakeholder groups by identifying key personnel
who manage the relationships with them. During the year, we invited our stakeholder
groups to participate in a materiality assessment to help us identify the ESG priorities
which are important to them. Information on the Company’s ESG materiality
assessment, conducted with our key stakeholders can be found on page 120.
The Board discharges its responsibilities through an annual programme of meetings.
Papers and presentations are given to the Board (and its Committees) to focus its
oversight on strengthening the fundamental elements of the business and its
performance ambitions. This information helps the Board facilitate effective
decision-making and input, or aid the Board’s oversight and awareness of business
performance or routine good governance practices operated by the Company.
Further details of a selection of principal decisions taken by the Board and how the
interests of relevant stakeholders were taken into account in arriving at their
decisions are set out below and on page 178.
Items of business considered critical to the Group’s long term success through the
achievement of the key priorities are highlighted opposite.
Governance In Action – Formation of an ESG Committee
Consideration of stakeholder views / interests and impact on decision-making
In light of the increasing importance of the ESG agenda for each of our
stakeholders the Board agreed that an ESG Committee should be established
to ensure focus and accountability, at the highest level, on the ESG priorities and
targets. In addition to the Non-Executive Directors, in recognition of the
importance of ESG matters to the Company’s Long Range Plan and strategic
objectives, the CEO is also a member of the Committee.
The Committee was established to assist with the formalisation of a structured
ESG governance framework before monitoring the Company’s ongoing
execution, development of the ESG strategy and wider ESG initiatives and
compliance with regulations. In addition to climate change and other environmental
concerns, the framework includes social matters such as colleague wellbeing,
community contributions, diversity & inclusion as well as governance issues.
In deciding to establish the ESG Committee, the views of our stakeholders, were
taken into account, and their interests in interacting with organisations who
were choosing to act responsibly with regard to protecting the planet. The
Board considered the growing contingent of our investors expecting to see
environmental, social and governance matters embedded within our strategic
objectives. Our clients, are becoming increasingly concerned with ESG issues, to
the point where we risk losing their loyalty if we cannot demonstrate that we are
addressing these concerns.
The Board considered the ESG activity of brand partners, including environmental
initiatives, and also the Supplier Code of Conduct and responsible supply chain
protocols all brand partners sign up to.
The Board considered the increasing interest from our wider community,
including current and prospective colleagues. Feedback from the Listening
Forum, was considered, which included the need to minimise our impact on the
environment and ensure that we do not contribute any further to the climate
crisis. Matters of importance to stakeholders are not solely related to the
product which the Group retails but also how it does business and the
importance of contributing to local communities.
The Board concluded that the ESG Committee would support the Long Range
Plan and the strategic pillars of the Group by earning the trust of its stakeholders
and demonstrating how we are acting in their interests by supporting the planet
which will lead to an enhanced reputation and lead to increase in value. We are
pleased to be able to report that the Group is already experiencing the benefits
and recognising the achievements of the objectives of the ESG Committee.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 BOARD AREAS OF FOCUS IN FY22
Strategy
Oversight of strategy and the execution and implementation of the
Long Range Plan
Held an Annual Strategy Day focusing on key strategic matters, including emerging
trends, client behaviour and future expectations, and brand relationships
Reviewed and approved the US business development activities, acquisitions and
various other projects
Reviewed and approved objectives and ambitions of the European expansion. Approved
the incorporation of new group subsidiaries to support the business expansion
Received regular progress updates and approved the opening of the new Virtual Luxury
Boutique as part of the ecommerce expansion
Received regular progress updates for the showroom portfolio development, including
refurbishment of the showrooms, Goldsmiths elevation and expansion of the
mono-brand boutiques
People, values and culture
Oversight of People matters and culture
Approved the Company’s new purpose and values
Considered feedback, from the Designated Non-Executive Director, Senior
Management, on the UK and US Listening Forums and the Global Listening Forum
Discussed the results of the colleague engagement, as well as the proposed actions
resulting from the engagement survey
Considered additional colleague wellbeing being initiatives
Approved the establishment of an Employee Benefit Trust
Reviewed the evolution of the Company’s culture and considered the Board’s role,
particularly on governance matters
Considered succession planning within the Board and Senior Management, resulting in
the approval of appointments for the new CFO and Non-Executive Director, plus the
President UK & Europe and the President North America & Deputy CEO
Received an update on the newly established Diversity Council meeting
Approved the Annual Gender Pay Gap Report
Planet and community
Actively supporting initiatives to reduce the Group’s impact on the
environment and to manage climate risks
Approved the formation of a new Board ESG Committee and provided to the
Committee’s agenda and priorities
Reviewed the Company’s sustainability and environmental priorities and agreed
approach to targets and climate change risk disclosures
Approved the Company’s Task Climate Financial Disclosures reporting approach
Approved the annual Group Modern Slavery Statement
Continued support of The Watches of Switzerland Group Foundation and approved
donations during FY22
Continued funding of various other charity initiatives to support the welfare of the
communities in which the Company operate
Operational and financial performance
Oversight of the business performance, both operational and financial
Approved the annual budget
Scrutinised, on an ongoing basis, performance against budget, forecasts and monitoring
performance against them
Approved the Long Range Plan and agreed the strategy to support this plan
Reviewed capex and payback on showroom refurbishments, showroom openings and
acquisitions
Considered updates on share price performance, activity and analyst sentiment
Reviewed and approved Company filings, financial and non-financial reporting including
Half Year, preliminary results announcements, Quarterly Trading Updates and the
Annual Report and Accounts
Governance
Maintaining our robust governance framework:
Approved the appointments of the new CFO and the new Non-Executive Director
Considered observations and agreed actions from the FY21 Board evaluation
Conducted an externally facilitated annual review of the Board and the Board
Committees’ effectiveness
Reviewed Board diversity (particularly ethnicity) and approved a revised Board
Diversity Policy, updated to reflect new governance guidelines set out by the FTSE
Women Leaders Review
Reviewed and continued to evolve the Board’s governance architecture and received
training on director duties and governance updates from Company lawyers
Received reports on corporate governance and regulatory developments
Updated and approved the Terms of Reference for Board Committees and approved
new Terms of Reference for the ESG Committee
Reviewed and approved the responsibilities of CEO and Chair
Updated the Schedule of Matters Reserved for the Board
Approved Delegated Levels of Authority
Reviewed the Whistleblowing Policy and approved a new escalations protocol
Approved a new Criminal Corporate Obligations Policy
Approved the new Environmental Policy
Approved the Notice of the 2021 AGM
Risks
Oversight of the Group’s risk management framework
Approved emerging and principal risks on the Group’s business
Considered and agreed an update on approach to setting the Group’s risk appetite
Received a deep dive presentation on IT roadmap and cyber security
Reviewed the terms of the 2023 Insurance Renewal programme, and discussed the
need for any additional cover
Clients
Received regular updates on how the client experience is continually being
reviewed and improved
Approved a new approach to clienteling to transform the client experience through
Xenia a new Client Experience Programme
Reviewed marketing activities and campaign including client events, following the easing
of the pandemic related restrictions
Brand partners
Oversight of the establishment and building of the brand partner relationships
Received a product deep dive review for watches – covering market trends, new lines
and exclusives
Considered engagement and maintaining the relationships with the brand partners
Reviewed a strategy for our brand partners
Shareholders
Oversight of investor needs and requirements
Received regular Investor Relations Updates (covering shareholder base, analyst
coverage, press coverage, investor activity)
Feedback from Executive Directors following meetings with investors, particularly
roadshows after the Half Year and Full Year results. The feedback would highlight any
concerns or issues raised by the investors
Held a deep dive session facilitated by the Company’s brokers
177
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C O R P O R AT E G OV E R N A N C E R E P O RT
continued
ENGAGING WITH SHAREHOLDERS
We welcome the opportunity to engage with our shareholders. The Chair has
overall responsibility for ensuring that the Company has appropriate channels of
communication with all of its shareholders and is supported in this by the Executive
Directors, the Director of Investor Relations & Corporate Affairs, and the Senior
Independent Director.
We are in frequent contact with investors through a scheduled programme of
communications and engagements.
During the year, an external presentation was given by our brokers and investor
relations updates are tabled within each Board pack giving the Board greater
visibility of the investor relations programme.
The Board organises and directs the Group’s affairs in a way that it believes will help
the Group succeed for the benefit of its members as a whole, whilst having regard
to each of its stakeholders generally. The Board seeks to ensure that it acts fairly
between all members and considers both institutional investors and private
shareholders when making decisions that impact them.
The Group ensures that it communicates the information that investors require,
using traditional methods such as the Annual Report and Accounts, RNS newswires,
corporate press releases and in person meetings. During the year, engagement
included investor meetings attended by the CEO, CFO and the Director of Investor
Relations & Corporate Affairs. Communication with investors is fed back to the
Board. Additionally since the Chair’s appointment he has met with a number of
investors both in the UK and the US.
The Board also receives feedback from the Company’s corporate brokers, the
CEO, CFO and the Investor Relations Director & Corporate Affairs on the views
of major shareholders on an ad hoc basis.
Governance In Action – Support Centre Relocation
Consideration of stakeholder views / interests and impact on
decision-making
During the year, a project relating to the relocation of the Group’s new
support centre offices in Leicester commenced. A strong governance
structure was established for the project at the outset. A steering group was
set up with key colleagues to run and manage the project. Detailed
programme plans were developed for all different aspects of the project. The
plans are reviewed, monitored and updated at regular intervals.
The Board received presentations from Senior Management, recommending
the relocation and the capital investment, which took into consideration the
interests of the Company’s stakeholders. The Board had been previously
updated following the colleague engagement survey and Listening Forum
sessions which had indicated there was a need for the premises to be
enlarged and for them to provide better facilities. The project team were
tasked to ensure the proposal not only included improvements to the
working environment but also focused on the need to ensure the environment
was engaging, focused on the culture of the business and considered colleague
welfare and wellbeing. A key component of the office relocation plan are its
community aspects and this included a sustainable office with an aim to
operate with a minimal carbon footprint. The office needs to be equipped
with appropriate technical facilities to communicate with clients, colleagues
and brand partners across the globe.
Current challenges and aspirations were considered, and it is anticipated that
enhanced working conditions will enable the Company to further develop its
strategic goals as a luxury business within a sustainable environment. Earning
a reputation for excellence as an employer, that is matched by the experience
of working for the Group, allowing us to attract, recruit and retain the people
we need.
Governance In Action – Acquisition of Betteridge
Consideration of stakeholder views / interests and impact on decision-making
Expanding the Group in the US, and Europe through acquisitions, is an important
part of the Company’s strategy to grow and develop. The current fragmentation in
the US market gives us the opportunity to increase points of distribution and the
three showrooms, purchased as part of the Betteridge acquisition, are consistent
with our objectives laid out in the Group’s Long Range Plan.
The Board plays an important role in ensuring that a robust and rigorous process
is followed, including being given the opportunity to challenge the proposal with
the CEO and Divisional Presidents, in respect of acquisitions, and those involving
the entry into new countries or market sectors, to ensure stakeholders are
carefully considered. The process is summarised on this page, and details of the
acquisitions made by the Group during FY22 can be found on page 98.
The Board considered how the proposed acquisition would affect each of the
Company’s key stakeholders including; clients; colleagues; investors; brand
partners; and local communities. The presentation detailed how the acquisition
would maximise long term value for the Group and support the Long Range
Plan and strategic objectives. The Board was also mindful of the alignment of the
transaction with the Company’s purpose, values, people strategy and high
standards of business conduct, the cultural fit, the integration of new colleagues,
the financial performance of Betteridge and anticipated synergies.
Further considerations included risks associated with the acquisition and ways of
mitigating these risks, together with the findings of the due diligence processes
undertaken by management and advisers.
Following detailed consideration, the Board concluded that the acquisition
would have a positive impact on its stakeholders. The acquisition has seen the
client base grow, as a result of providing a superior offering and complementing
the Group’s existing products, particularly for the jewellery ranges including pre-
owned. Feedback from Senior Management indicates the brand partner
relationships continue to strengthen as the Group extends its geographical
reach in the US. Colleagues have quickly integrated into the Group, benefitting
from being part of a larger organisation including the opportunity to develop
further. As the Group continues to expand in the US, it will utilise the US
Foundation to support local charities in the communities in which it serves.
178
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Balance of the Board1
Board Members By Gender1
Non-Executive Director Tenure1
Board Members by Ethnicity1
COMPOSITION, SUCCESSION & EVALUATION
2
5
3
4
Non-Executive Directors
Executive Directors
Male
Female
1 As at 1 May 2022.
COMPOSITION
The Board is comprised of a Non-Executive Chairman, two Executive Directors,
the Senior Independent Director and three independent Non-Executive Directors.
During the year, there have been a number of changes in Board membership, with
Anders Romberg stepping down from his role as an executive director and Chief
Financial Officer and being replaced by Bill Floydd on 1 January 2022, and the
appointment of a new Non-Executive Director, Chabi Nouri, effective 1 May 2022.
Biographical details of the current Directors of the Company as at the date of this
Report are set out on pages 182 and 183. Full details of Directors who have served
throughout the year can be found on page 225.
DIVERSIT Y & INCLUSION
The Company is committed to having a Board comprising Directors from different
backgrounds, with diverse and relevant experience, perspectives, skills and knowledge.
It is believed that the Board can only adequately represent all of its stakeholder groups
in the boardroom if collectively, it has the skills, experience and background to reflect
them. We believe that diversity contributes towards a high performing and effective
Board, and this is considered in all recruitment and succession planning discussions and
we fully support the aims, objectives and recommendations outlined by the FTSE
Women Leaders Review and the Parker Review.
During the year, the Company complied with the Hampton-Alexander Review
recommendations as 33% of the Board were women and 43% of the Company’s
Executive Committee and their direct reports were women. In November 2021,
the FTSE Women Leaders Review was published, setting out new recommendations
regarding gender diversity. We are pleased to report that our Board is in line with
the new recommendations in advance of the 2025 deadline as the Company has
42.8% and 43.5% of women on the Board and the combined Executive Committee
respectively and that the Senior Independent Director is also a woman. We were
also placed #11 in the FTSE 250 ranking for Women on Boards in Leadership (a
move up from #98 in the prior year).
The Group also complies with the recommendations of the Parker Review in
advance of the 2024 deadline.
All Board appointments are based on merit, and candidates are considered against
objective criteria and with due regard for the benefits of diversity on the Board. As
well as experience and track record, Board appointments will be made taking due
account of other criteria, such as curiosity, insights, engagement, cultural
contribution, personal identity, and the differentiation that they could bring to the
collective make-up of the Board.
In May 2022, the Committee reviewed the updated Board Diversity Policy and
made recommendations to the Board for amendments to reflect both the current
status of the Board and the new recommendations of the FTSE Women Leaders
Review. The amended policy was approved by the Board in May 2022. The Policy
can be found on our corporate website at thewosgroupplc.com.
1
1
3
1
0–1 year
1–2 years
2–3 years
6
White
Mixed/Multi Ethic background
SUCCESSION PL ANNING
The Nomination Committee continues to review succession plans both for the
Board and Senior Management each year. Further information on our approach to
succession planning and Board appointments can be found in the Nomination
Committee’s report on page 185.
The Board reviews annually the bench strength of the Senior Management team
taking into consideration the growth strategy of the business and the need to ensure
we maintain the right levels of talent to support the future growth of the business.
BOARD EVALUATION
In accordance with the Code, a formal external evaluation of the Board facilitated by
an independent firm, is required to be carried out every three years. For the first
time, since its IPO, the Board held an externally facilitated board evaluation. The
purpose of the exercise was to conduct a comprehensive evaluation of how the
Board and its Committees operate, as measured against current best practice
corporate governance principle and in accordance with the UK Corporate
Governance Code and associated guidance.
Further information on the Board Effectiveness and Evaluation can be found on
page 181.
RE-ELECTION OF DIRECTORS
In accordance with the Code, the Board has determined that all Directors will stand
for election or re-election at each AGM. The Chair has confirmed that the Directors
standing for election or re-election at this year’s AGM continue to perform
effectively and that they demonstrate commitment to their roles. This can be seen
by the attendance records set out on page 175. The reasons why the Board
considers that each Director’s contribution is, and continues to be, important to the
Company’s long term sustainable success are set out in the Directors’ biographies
on pages 182 to 183.
As set out in the Nomination Committee Report on page 187, three of the Non-
Executive Directors were at the end of their first three-year term in June 2022. All
three Directors expressed a willingness to remain in office and the Nomination
Committee recommended to the Board that their terms be extended for a further
three years. This was approved by the Board in May 2022.
PREPAR ATION OF THE ANNUAL REPORT AND ACCOUNTS
Assisted by the Audit Committee, the Board has carried out a review of the Annual
Report and Accounts and considers that, in its opinion, the report is fair, balanced and
understandable and provides the information necessary for shareholders to assess
the Group and Company’s position and performance, business model and strategy.
Refer to the Audit Committee Report on page 188 for details of the review process.
See pages 70 to 71 in the Strategic Report for the description of our Business Model.
See page 166 and 167 for the Going Concern and Viability Statement.
179
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C O R P O R AT E G OV E R N A N C E R E P O RT
continued
DIVISION OF RESPONSIBILITIES
AUDIT, RISK MANAGEMENT AND INTERNAL CONTROL
INDEPENDENCE AND CONFLICTS OF INTEREST
The Code recommends that at least half of the Board, excluding the Chair, should
comprise Non-Executive Directors determined by the Board to be independent.
As at the end of the year, excluding the Chair, the Board consists of six members,
of which four members are determined by the Board to be Independent Non-
Executive Directors. The composition of the Audit Committee, Nomination
Committee and Remuneration Committee comply in all respects with the
independence provisions of the Code.
Each of the Directors has a statutory duty under the Companies Act 2006 to avoid
conflicts of interest with the Company and to disclose the nature and extent of any
such interest to the Board. Under the Articles, the Board may authorise any matter
which would otherwise involve a Director breaching this duty to avoid conflicts of
interest and may attach to any such authorisation such conditions and/or restrictions
on participation at relevant Board meetings. The Chair, acting reasonably, has the
power to determine whether a matter was a conflict matter.
The Audit Committee is chaired by Robert Moorhead and is comprised entirely of
Independent Non-Executive Directors. Robert is currently the Chief Financial
Officer of WH Smith PLC and continues to have recent, relevant and up to date
financial experience. The Committee has defined Terms of Reference which include
assisting the Board in discharging its responsibilities with respect to:
1.
2.
3.
Establishing formal and transparent policies and procedures to ensure the
independence and effectiveness of internal and external audit functions and
satisfy itself on the integrity of financial and narrative statements.
Establishing and reviewing procedures to ensure that the Annual Report and
Accounts present a fair, balanced and understandable assessment of the
Group’s position and prospects.
Establishing procedures to manage risk, oversee the internal control framework
and determine the nature and extent of the principal risks the Group is willing
to take in pursuance of its long term strategic objectives.
During the year, no conflicts were declared by the Directors.
Refer to page 188 for details on the work of the Audit Committee.
EXTERNAL DIRECTORSHIPS
Any external appointments or other significant time commitments of the Directors
require the prior approval of the Board.
The Board is comfortable that external appointments of the Chair and the
Non-Executive Directors do not impact on the time that any Director devotes to
the Company.
INFORMATION PROVIDED TO THE BOARD
There is a good flow of information to the Board, with regular updates on trading,
cash flows, and financing. Board members receive weekly financial information
comprising sales analysis. Alongside this reporting there is regular ongoing dialogue
with the Non-Executive Directors. The Board also receives daily market updates
containing a summary of share performance.
All papers and agendas are circulated in advance of scheduled meetings and as well as
conducting the business of the meeting there is a review of minutes, discussion of any
matters arising and a briefing on any action points that arose from the last meeting.
TR AINING AND INDUCTION
The Directors are provided with annual refresher training on their duties and
responsibilities as directors of a publicly listed company and any new director
receives a comprehensive induction which includes a separate session on
governance and directors’ duties. During the year, the Company Secretary &
General Counsel continued to monitor the training requirements of each Director.
Technical briefings are provided in response to any training requirements.
Following their appointments, Bill Floydd and Chabi Nouri each received full and
extensive inductions, which included meetings with Senior Management, advisers
and external stakeholders. Further detail of the induction programme of Bill Floydd
can be found on page 186.
The Board is committed to the training and development of Directors to improve
their knowledge of the business and the regulatory environment in which it operates.
The Company Secretary & General Counsel is responsible for helping the Chair
identify and organise training for the Directors which is tailored to individual needs.
Training topics included corporate governance updates, Director duties, including
s172 and ESG considerations, Market Abuse Regulations, including the specific
requirements for Persons Discharging Managerial Responsibility and Inside Information.
The Board is collectively responsible for determining the nature and extent of the
principal risks it is willing to take in achieving its strategic objectives. The processes
in place for assessment, management and monitoring of risks are described in the
Risk Management section on page 156 to 158.
The Board acknowledges its responsibility for establishing and maintaining the
Group’s system of risk management and internal controls and it receives regular
reports from management identifying, evaluating and managing the risks within the
business. The system of internal controls is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives and can provide only
reasonable, and not absolute, assurance against material misstatement or loss.
The Board, assisted by the Audit Committee, has carried out a review of the
effectiveness of the system of risk management and internal controls during FY22
and for the period up to the date of approval of the Consolidated Financial Statements
contained in the Annual Report and Accounts. The Board confirms that no significant
weaknesses or failings were identified as a result of the review of effectiveness.
REMUNER ATION
The Remuneration Committee is chaired by Tea Colaianni and is made up of
Independent Non-Executive Directors and the Chair. Prior to her appointment as
Chair of the Committee, Tea had served on a Remuneration Committee for a
significant period of time, longer than the required 12 months. Tea also serves as
the Chair of a Remuneration Committee of another listed company.
The Committee has defined Terms of Reference which include assisting the Board
in discharging its responsibilities with respect to:
– Determining the policy for Executive Director remuneration and setting
remuneration for the Company Chair, Executive Directors and Senior Management
– Reviewing workforce remuneration and related policies
Refer to page 196 for further details on the work of the Remuneration Committee.
18 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 B OA R D E VA LUAT I O N
BOA R D A N D C OM M IT TE E
E FFECTI V E NESS A N D EVA LUATION
FY21 INTERNAL BOARD EVALUATION
As reported last year, towards the end of FY21, the Company undertook an internal board evaluation, under the supervision of the Chair, using an evaluation questionnaire
covering the Board and the Committees, which also included sections for free flow comments.
The conclusions and recommendations of the FY21 evaluation were discussed with the Chair and presented to the Board in May 2021 and they were subsequently
summarised to shareholders in the Annual Report and Accounts 2021. Whilst the evaluation concluded that the Board and its Committee were effective and operated
efficiently, and with good engagement, a number of recommendations were agreed and, under the supervision of the Nomination Committee, an action plan was put in
place. The action plan dealt with the information detailed below.
FY21 recommendations
Board composition and balance
of skills
Areas identified for focus in FY22
Enhancing Board composition, diversity and
skills
Enhancing the focus on strategy and
long term objectives and the
introduction of a broader agenda
Spending additional time on Group strategy
and longer term objectives of the Company
Board and Senior Management
succession planning and talent
management
The Board will continue to monitor talent,
pipeline succession and development for all
executive and business critical roles
Action taken in FY22
Following a recommendation from the Nomination Committee, the Board
appointed a new Non-Executive Director with additional expertise and experience
in the luxury retail market, particularly watches and jewellery.
The Chairman, along with the Company Secretary & General Counsel, reviewed the
agenda setting process and good progress was made with introducing a rolling
agenda, incorporating additional agenda items.
Greater focus on strategy and long term objectives was achieved by introducing
specific agenda items.
Senior Management attendees presented on key business strategies.
A Long Range Plan was prepared and distributed to the Market.
A comprehensive full-day Board strategy session was held with contributions from
key members of the Trading Board covering each business area.
The Nomination Committee continued to take an active interest in the quality and
development of talent and capabilities of Senior Management. A comprehensive
review of roles and talent, with consideration of succession planning, resulted in the
creation of two new roles, President North America & Deputy CEO and President
UK & Europe.
The Executive Director HR presented to the Nomination Committee a detailed
oversight on succession and talent management.
In terms of Non-Executive Director appointments, a continuous review of the
composition of the Board was undertaken which led to the appointment of
Chabi Nouri.
EXTERNAL BOARD EVALUATION
Towards the end of the FY22, the Chair, alongside the Company Secretary & General Counsel, agreed the proposed approach for an external board evaluation with the
Nomination Committee. Three expert facilitators provided proposals for review and meetings were held with the Chair and/or Company Secretary & General Counsel.
The Company engaged Independent Audit Limited (IAL) to conduct an interview-driven review of the performance of the Board and each of its Committees. There are
no connections between IAL and individual Directors to be disclosed.
IAL undertook a comprehensive review covering all aspects of board and committee effectiveness, which included attendance at a Board and a Committee meeting in
person, the review of a full cycle of Board information as well as undertaking one-to-one discussions with each Director, the Company Secretary & General Counsel, the
President UK & Europe and the President North America & Deputy CEO. IAL reported its recommendations to the Board in May 2022, where every Director had the
opportunity to discuss the findings, ask the reviewers questions and consider the direction of future board development. Additionally, IAL discussed its review with the
Senior Independent Director to enable her to factor in any observations relating to her review of the performance of the Chair.
The review concluded that the Board was showing the characteristics of an effective board and that the governance framework had developed well since the IPO in 2019.
The new Chair was providing strong support for the continued transition to the listed company environment. It was concluded that the Board has a range of strengths,
with relevant, complementary skills and experience that help to provide scrutiny, oversight, input and value. The Directors intend to build on these strengths to develop
the Board further with some key areas of focus:
– Activities to increase the Non-Executive Directors’ level of knowledge of the different component business parts of the Group
– Further defining and understanding in greater detail the Board’s purpose and aims
– Further evolving the Board agenda and type of information which is presented to the Board and its Committees
– Elevated visibility of the Group’s people strategy
– Further focus on non-executive succession planning
An action plan is to be developed, progressed and monitored throughout FY23 by the Nomination Committee.
181
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS B OA R D O F D I R E C TO R S
E X PE R IE NCE D L E A DE R S
GU IDI NG OU R FU TU R E
IAN CARTER
C H A I R
BRIAN DUFF Y
C H I E F E X E C U T I V E O F F I C E R
BILL FLOYDD
C H I E F F I N A N C I A L O F F I C E R
E X E C U T I V E D I R E C TO R
E X E C U T I V E D I R E C TO R
1 November 2020
7 May 2019
1 January 2022
Brian Duffy has served on several
boards across the fashion, retail and
sports sectors. He has been the CEO
of the Group since 2014, and has
previously served on the boards of
several subsidiaries of Ralph Lauren, as
well as the board of Celtic PLC. Brian
is an ICAS Chartered Accountant and
holds an Honorary Doctorate from
Glasgow Caledonian University.
Bill joined the Group from international
gaming and leisure business The Rank
Group PLC where he was CFO. Prior
to that Bill, was CFO of Experian’s UK
& Ireland business. In his earlier career
he qualified as a chartered accountant
with Price Waterhouse and was a
divisional CFO and Group Financial
Controller at Logica PLC. Bill has an
Economics degree from the University
of Birmingham.
Ian Carter brings over 30 years of
international and retail experience,
having held a number of senior positions
at UK and US consumer-facing and
luxury companies. Ian joined Hilton
International as CEO in London in 2005
becoming an integral part of the senior
team that took Hilton Worldwide
private and then public in 2013. Prior to
joining Hilton, Ian served as an Officer
and President of Black & Decker
Corporation.
significant
experience as a non-executive director
having served on a number of boards in
the UK and the US, including Burberry
Group PLC where he further developed
his knowledge and appreciation of the
global luxury industry.
has
Ian
A P P O I N T E D
B I O G R A P H Y
I N D E P E N D E N T
Yes
P R I N C I PA L E X T E R N A L
A P P O I N T M E N T S
Servpro Industries, LLC
No
None
No
None
R E L E VA N T S K I L L S
A N D E X P E R I E N C E
Ian brings to the Board a wealth of
international and retail experience and
a deep understanding of the global
luxury industry. He also has significant
experience as a non-executive director.
Brian brings to the Board significant
retail and international experience,
financial acumen and
in depth
understanding of the global luxury
watch and jewellery sector.
Bill is a commercially oriented finance
professional having developed his skills
in complex consumer
facing and
technology based public companies. Bill
brings extensive financial, commercial
and strategic experience to the Board.
C O M M I T T E E M E M B E R S H I P
Nomination (Chair)
ESG
Remuneration
ESG
182
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
TE A COL AIANNI
S E N I O R I N D E P E N D E N T D I R E C TO R
ROSA MONCKTON MBE
I N D E P E N D E N T D E S I G N AT E D
ROBERT MOORHE AD
I N D E P E N D E N T N O N - E X E C U T I V E
CHABI NOURI
I N D E P E N D E N T N O N - E X E C U T I V E
N O N - E X E C U T I V E D I R E C TO R F O R
D I R E C TO R
D I R E C TO R
W O R K F O RC E E N G AG E M E N T
7 May 2019
7 May 2019
7 May 2019
1 May 2022
Tea Colaianni was appointed as a Non-
Executive Director and Chair of the
Remuneration Committee in December
2018 and Senior Independent Director
of the Company in May 2019. Tea has
more than 25 years’ experience in
consumer facing industries and has
served as a non-executive director on
multiple boards. She currently serves on
the boards of DWF Group PLC (where
Remuneration
the
she
Committee) and SD Worx nv. Tea is the
Founder and Chair of WiHTL –
Diversity in Hospitality, Travel and
Leisure and Diversity in Retail (DiR).
chairs
Rosa Monckton has over 20 years’
experience in the luxury jewellery and
watch sectors, and was appointed as a
Non-Executive Director of the Group
in 2014. Her experience includes
setting up Tiffany & Co in the United
Kingdom, and
serving as Chief
Executive Officer and then Chair of
Asprey & Garrard. She also has
experience in the charity sector, and
campaigns on behalf of disabled
children and adults, through her role
as Chair of Team Domenica.
Robert Moorhead has
significant
experience in the retail sector. He was
appointed as a Non-Executive Director
of the Group in 2018. He currently
serves as Chief Financial Officer and
Chief Operating Officer of WH Smith
PLC, and was previously Finance
Director at Specsavers Optical Group
and Finance and IT Director at World
Duty Free Europe Limited. Robert is an
ICAEW Chartered Accountant.
Chabi Nouri has over 20 years’
experience in the luxury jewellery and
watch sectors and was appointed as a
Non-Executive Director of the Group
in 2022. Chabi has particular experience
in the jewellery sector for marketing,
merchandising, being responsible for
Cartier’s creative and fine jewellery
collections and serving as the Chief
Marketing Officer of Piaget before being
appointed as head of the company in
early 2017. Chabi is a Swiss citizen and a
graduate of the University of Fribourg.
She has also been a member of the
YPO (Young President Organisation)
since 2017.
Yes
Yes
Yes
Yes
DWF Group PLC
SD Worx nv
Team Domenica
WH Smith PLC
and
consumer
Tea brings to the Board a wealth of
experience in human resources strategy
governance
facing
industries. She has significant experience
as a non-executive director including
extensive and current experience of all
remuneration matters which enables
her to carry out her role as Chair of the
Remuneration Committee.
Rosa brings to the Board significant
experience of the luxury jewellery
industry as well as a deep understanding
of the charity sector.
Robert brings to the Board extensive
experience in the retail sector as well
as recent relevant and up to date
financial experience which enables him
to carry out his role as Chair of the
Audit Committee.
Private Equity Partner with Mirabaud
Asset Management
Chabi brings to the Board significant
experience of the luxury watches and
jewellery industry.
Nomination
Audit
ESG
Remuneration (Chair)
Nomination
Audit
ESG (Chair)
Remuneration
Nomination
Audit (Chair)
ESG
Remuneration
ESG
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
C O M M I T T E E R E P O RT S
NOM I NATION C OM M IT TE E R E PORT
IAN CARTER
CHAIR OF THE NOMINATION COMMITTEE
MEMBERS
Ian Carter (Chair)
Tea Colaianni
Rosa Monckton
Robert Moorhead
PRINCIPAL RESPONSIBILITIES
The Committee’s principal responsibilities are to:
– Review the structure, size and composition of the Board
and its Committees
– Give full consideration to succession planning for the
Board and other Senior Management taking into account
the challenges and opportunities facing the Company, and
the skills, diversity and expertise needed
– Review the leadership needs of the organisation
– Remain fully informed about strategic issues and
commercial changes affecting the Company and the
market in which it operates
– Identify and nominate potential Board candidates
– Evaluate the combination of skills, knowledge, experience,
diversity, independence, and knowledge on the Board
– Review the results of the Board performance evaluation
process and manage any recommendations
– Support people initiatives that promote a culture of
inclusion and diversity
DE A R SH A R E HOL DE R
I am pleased to report the Nomination Committee remains compliant with
the Corporate Governance Code 2018 (the ‘Code’). The Code recommends
that the Committee be comprised of a majority of Independent Non-
Executive Directors which it does as Tea Colaianni, Robert Moorhead and
Rosa Monckton are all independent. The Code states that the test of
independence is not appropriate in relation to the Chair of the Board.
The Company Secretary & General Counsel acts as Secretary to the Nomination
Committee, and by invitation, the Chief Executive Officer, other Board members,
the Executive Director HR, other Senior Management and/or external advisers
may attend as appropriate for all or part of any meeting.
ROLE
The role of the Nomination Committee is to ensure that the Board comprises
individuals with a combination of the necessary skills, knowledge, experience,
diversity and independence to ensure that the Board and its Committees are
effective in discharging their responsibilities.
TERMS OF REFERENCE
The responsibilities of the Nomination Committee are set out in its Terms of
Reference. The Nomination Committee’s Terms of Reference reflect the current
regulatory requirements and best practice appropriate to the Group’s size, nature
and stage of development. They are available on our corporate website. No
changes to the Terms of Reference were recommended this year.
The Nomination Committee’s Terms of Reference require that the Committee meets
at least twice a year. During the year, the Nomination Committee met four times. Full
details of Nomination Committee meeting attendance can be found on page 175.
BOARD CHANGES
The start of FY22 year was a busy period for the Nomination Committee as it
embarked upon a search for a new CFO, following Anders Romberg’s notification
to the Board of his intention to retire. This search process was led by the CEO and
the Executive Director HR and on 26 August 2021, we announced that Bill Floydd
would join the Company. Bill was appointed as the CFO and an Executive Director
on 1 January 2022.
Further details on Bill’s skills and experience can be found on page 182.
The search was conducted by the independent firm Russell Reynolds, which has
extensive experience in appointing executive directors who possess international
expertise and is a signatory to the Voluntary Code of Conduct for Executive Search
Firms. Russell Reynolds does not have any connection with the Company or with any
of the Directors.
In preparation for the search, Russell Reynolds met with the CEO, the Executive
Director HR and I, and this resulted in the creation of a very clear brief. The brief
included a request that Russell Reynolds ensure maximum diversity within the
search and the brief also required best in class credentials suitable for an international
listed company focused on growth.
Russell Reynolds provided an impressive list of candidates from a range of backgrounds
with many of the candidates being international. The long list was reduced to a high
quality short-list of six candidates which included two women. In addition to the CEO
and the Executive Director HR, the shortlisted candidates were interviewed by
myself, the Senior Independent Director and the Chair of the Audit Committee and
this process ultimately led to the selection and appointment of Bill Floydd.
When considering candidates for the short-list, the Nomination Committee took
into consideration the balance of skills, knowledge, independence, diversity and
experience already on the Board. It was concluded that Bill would bring to the Board
a wealth of senior financial expertise, necessary skills, international experience and
leadership qualities, and the Board and Group will benefit greatly from his experience
which will provide a positive contribution to the Group’s strategic objectives.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 KEY ACTIVITIES DURING THE YEAR
– Reviewed specifications of the roles and capabilities required for the
recruitment of the new CFO
– Considered the skills and, diversity and expertise as well as the
backgrounds of each of the Board members, when reviewing the future
needs of the Board, with particular regard, to the need to appoint a new
Non-Executive Director
– Recommended to the Board the appointment of the new CFO and the
appointment of the new Non-Executive Director
– Discussed and agreed an action plan resulting from the FY21 internal
board evaluation
– Agreed, with the Board, the plan for the FY22 externally facilitated
board evaluation
– Reviewed external appointments for the current Non-Executive
Directors and assessed whether any of the appointments were
significant or caused any conflicts
– Reviewed the Committee’s Terms of Reference and confirmed they had
been adhered to
– Reviewed the Company’s Conflicts of Interest Register
– Conducted a comprehensive review of executive succession planning
and the Senior Management talent pool
– Reviewed and recommended to the Board, the updated Board
Diversity Policy
“We are pleased to
report that we meet the
recommendations of both
the FTSE Women Leaders
Review and the Parker
Review at the end of FY22.”
IAN CARTER
CHAIR OF THE NOMINATION COMMIT TEE
Additionally, during the year, the Board undertook a search for a new Non-Executive
Director to strengthen the Board, taking into consideration the findings and
recommendations of the 2021 Board Evaluation. I led the search process, alongside
the independent firm Spencer Stuart who were selected by the Committee as they
have international expertise, operate in the luxury sector and are a signatory to the
Voluntary Code of Conduct for Executive Search Firms. Spencer Stuart does not
have any connection with the Company or any of the Directors. In preparation for
the search, the SID, the Chief Executive Officer and I met with Spencer Stuart which
resulted in the creation of a very clear brief. The brief included a request that they
ensure maximum diversity within the search and the brief also required best in class
credentials suitable for a company in the luxury sector.
Spencer Stuart provided an impressive long list of candidates from diverse
backgrounds with many of the candidates originating from either Europe or the UK.
The long list was reduced to a high quality short-list of six candidates which included
four women. The short-listed candidates were interviewed by members of the
Committee and met with the CEO, this process ultimately led to the selection and
appointment of Chabi Nouri.
INDUCTION
On joining the Company, all Directors undergo a tailored induction and
familiarisation programme. The comprehensive induction programme includes
meetings, either face-to-face or via conferencing facilities with colleagues in both the
UK and the US. Other meetings will involve external advisers and visits to offices,
showrooms and repair workshops. Director induction also focus on recent Board
and Committee activity, stakeholder engagement, brand partnerships, investor
relations and a tailored session on corporate governance.
The induction programmes are facilitated and implemented by the Executive
Director HR, the Company Secretary & General Counsel with input from the CEO.
Further information on Bill Floydd’s induction can be found on the next page, Chabi
joined the Group on 1 May 2022 and it is the intention to report on her completed
induction in next year’s Annual Report and Accounts.
SUCCESSION
As part of our succession planning, the Committee considers the current skills,
experience and tenure of the Directors, including the Non-Executive Directors,
and assesses future needs against the Long Range Plan of the Group. Additionally,
the Committee reviews succession planning at Senior Management levels. The
Committee considered talent reviews, consistently assessing potential and closely
monitoring the successors’ development plans to improve the quality and diversity
of our succession plans taking into consideration the growth strategy of the business
and the need to support the business in the future. A comprehensive review of
roles and talent, with consideration of succession planning, which included CEO
succession planning, culminated in the creation of new roles, namely President UK
& Europe, and President North America & Deputy CEO.
The Committee considered the Board skills, in light of the Company’s growth plans,
to help identify the Board’s requirements as the strategy of the Group evolves and
as part of general Board planning. As a result of the 2021 Board evaluation, it was
identified there was need for greater luxury experience on the Board with a
particular preference to gain additional luxury watch and jewellery expertise. At the
time, the Committee considered the skills and expertise as well as the backgrounds
of each of the Board members considering the future needs of the Board from an
executive and non-executive perspective. The requirement for additional expertise
has now been fulfilled by the appointment of Chabi Nouri.
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DIRECTOR INDUCTION PROGR AMME – BILL FLOYDD
Following his appointment, Bill undertook a tailored and comprehensive
induction and familiarisation programme, suited to the needs of the individual
and implemented by the Executive Director HR, with input from the CEO.
An outline of the induction process is set out below.
– Introduction to the Trading Board with follow-on deep dive sessions as
required to further develop understanding of key areas
– Introductions to colleagues from a number of different functions within
the Group, including a visit to the US
– Visits to showrooms in the UK and the US, and the repair workshops
– Meeting with key brand partners and a tour of a brand partners’ watch
service factory
– Briefing sessions on the key areas of the organisation including:
– Financial structure and key financial metrics
– Principal risk register and the Group’s risk framework
– Loss prevention, Internal Audit and the internal control framework
– Operational compliance
– Details on the Company’s FCA regulatory obligations including a
briefing by expert external consultants
– Recent Board and Committee meetings considerations, including
minutes and matters arising from the meetings
– Stakeholder perceptions and key issues raised by, for example, investors,
regulators and industry groups were explained by the Investor Relations
Director & Corporate Affairs
– Introductions to the Company’s key external advisers, including the
brokers, bankers, insurance advisers and the External Auditor
– Provided with details of the Directors and Officers Insurance
– Presentations were provided on Corporate Governance, legal and
regulatory including:
– Directors’ duties (including s172)
– Share dealing, insider dealing and Market Abuse Regulations
– Governance trends
– FY21 board effectiveness and action plan
– Overview of the Schedule of the Matters Reserved for the Board
Since the IPO, in terms of the Non-Executive Directors, the focus has been on
building the Board with directors who have experience in luxury expertise.
Succession planning for non-executive directors, including the Chair, (who was
appointed in November 2020) is to be considered by the Committee in FY23.
The Committee plays a vital role in promoting effective Board and leadership
succession, making sure it is fully aligned to the Group’s strategy.
DIVERSIT Y
The Committee, on behalf of the Board, is responsible for the development of a
diverse pipeline for succession to the Board and will ensure proper assessment as
to the values and behaviours expected on the Board as part of the recruitment
process. The Committee has responsibility for keeping the composition and balance
of the Board under review and recommends the appointment of new Directors. In
reviewing Board composition, the Committee will consider the benefits of all
aspects of diversity in order to maintain an appropriate range and balance of skills,
experience and background on the Board.
The Committee recognises the importance of diversity and inclusion and is aware of
the recommendations of the FTSE Women Leaders Review, which published its first
report on improving gender balance in FTSE leadership in November 2021, following
the publication of the final report under the Hampton-Alexander Review in the
previous year. The Company fulfils the three new recommendations of the FTSE
Women Leaders Review, in advance of the 2025 deadline. The recommendations
are: (i) 40% of FTSE 350 board and leadership positions should be held by women
by the end of 2025; (ii) FTSE 350 companies should have at least one women
appointed as chair, Senior Independent Director, CEO or CFO by the end of 2025;
and (iii) there should be best practice or other mechanisms in place to encourage
the pre-existing targets of the Hampton-Alexander Review.
During the year, the Company met the recommendations of the FTSE Women
Leaders Review as 43.5% of women are on the Board and the combined Executive
Committee respectively and that the senior independent director is also a woman.
Additionally, the Group was placed #11 in the FTSE 250 Women Leaders Review
ranking (from #98 last year).
In terms of ethnicity at Board level, the Company is complaint with the
recommendations of the Parker Review in advance of the 2024 deadline.
The Committee is required to review, annually, the Board Diversity Policy as well
as measurable objectives for achieving diversity on the Board. In May 2022, the
Committee reviewed
the updated Board Diversity Policy and made
recommendations to the Board for amendments to reflect both the current
status of the Board and the new recommendations of the FTSE Women Leaders
Review. The amended Policy was approved by the Board in May 2022.
The Committee reviews and discusses annually all measurable objectives for
achieving diversity on the Board and will recommend any changes to them or any
new objectives to the Board for adoption. The Committee conducted this review
in May 2022 in line with the Board Diversity Policy review and incorporated the
new recommendations of the FTSE Women Leaders Review.
Future Board appointments will continue to be based on merit, and candidates, will
be considered, against objective criteria and with due regard for the benefits of
diversity on the Board. As well as experience and track record, Board appointments
will be made taking due account of other criteria, such as curiosity, insights,
engagement, cultural contribution, personal identity, and the differentiation that
candidates can bring to the collective make-up of the Board.
Wherever possible, the search pool will be widened and where executive search
firms are used, the Group will only engage with those firms that have adopted the
‘Voluntary Code of Conduct for Executive Search Firms’ or similar.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 EFFECTIVENESS
The performance of the Committee was evaluated as part of the annual Board
evaluation process, which this year was facilitated by an external expert. The Board
review concluded that the Committee functions effectively.
As part of the annual evaluation of the effectiveness of the Board, and its
Committees, the Committee considers the diversity of the Board. The Board seeks
to ensure that its composition, and that of its Committees, is appropriate to
discharge its duty effectively and to manage succession issues. The FY22 Board
Evaluation was externally facilitated and further details of the progress from the
FY21 evaluation and the process for FY22 can be found on page 181. The
Nomination Committee will be responsible for overseeing an action plan to be put
in place following recommendations for the FY22 Board Evaluation.
BOARD REVIEW COMPOSITION
The Committee keeps the composition of the Board and its Committees under
continual review, to ensure that they have a suitable balance of skills and experience
to oversee and challenge the delivery of the Group’s strategy, and to discharge the
Committees’ responsibilities effectively. Board composition was a key focus
following the FY21 Board Evaluation and was discussed at each Committee meeting.
The appointment of Chabi Nouri demonstrates the Board recognising the need for
an additional Non-Executive Director with complimentary skills and experience,
particularly in the European and luxury watches and jewellery markets.
RE-ELECTION OF DIRECTORS
The effectiveness and commitment of each of the Non-Executive Directors is
reviewed by the Committee annually. The Committee has satisfied itself as to the
individual skills, relevant experience, contributions and time commitment of all the
Non-Executive Directors, taking into account their other offices and interests held.
As detailed on page 225, the Board is recommending the election or re-election to
office of all Directors at the 2022 AGM.
Shortly after the end of the financial year, the Committee considered the
reappointment terms of Tea Colaianni, Robert Moorhead and Rosa Monckton as
their first three-year term expired in June 2022. Taking into consideration the
attributes described above, and as all three Directors expressed a willingness and
desire to continue in office, the Committee recommended to the Board that their
appointment terms were extended for a further three years.
I will be available at the AGM to answer any questions on the work of the Committee.
IAN CARTER
CHAIR OF THE NOMINATION COMMITTEE
6 July 2022
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continued
AU DI T C OM M IT TE E R E PORT
ROBERT MOORHE AD
CHAIR OF THE AUDIT COMMITTEE
MEMBERS
Robert Moorhead (Chair)
Tea Colaianni
Rosa Monckton MBE
KEY RESPONSIBILITIES
Financial reporting:
– Monitor the integrity of the Financial Statements of the
Group and Company
– Review the appropriateness and consistency of significant
accounting policies
– Review and report to the Board on significant financial
issues and judgements
– Review the appropriateness of Task Force for Climate-
Related Financial Disclosures
Internal control and risk management:
– Carry out a robust assessment of the Group’s emerging
and principal risks on an annual basis
– Review the Group’s internal control and risk management
systems
– Monitor and review the effectiveness of the Group’s
Internal Audit function
– Assess the effectiveness of whistleblowing arrangements
External audit:
– Review the effectiveness of the External Auditor process
– Develop and implement policies on the engagement of
the External Auditor to supply non-audit services
– Monitor and review the External Auditor’s independence
and objectivity
DE A R SH A R E HOL DE R
I am pleased to introduce the Audit Committee Report for the financial
year ended 1 May 2022. During the year, the Committee played a key role
in the Group’s governance framework. Its activities included reviewing and
monitoring the integrity of financial information, the Group’s system of
internal controls and risk management, the internal and external audit
process, and the process for compliance with laws, regulations, and ethical
codes of practice. In addition, we work with other Committees and the
Board to ensure that stakeholder interests are protected and the Group’s
Long Range Plan is supported.
All members of the Audit Committee are deemed Independent Non-Executive
Directors. The Board considers that I have recent and relevant financial experience
as required by the Corporate Governance Code (the ‘Code’) and the Committee
members have competence relevant to the sector in which the Group operates.
Details of the Audit Committee members’ skills and experience can be found on
page 183. The Committee’s wide range of financial and commercial skills and
experience serves to provide the necessary knowledge and ability to work as an
effective committee and to robustly challenge the Executive Directors and Senior
Management as and when appropriate. At the invitation of the Committee, the
Chair of the Board, the CEO, the CFO, the Head of Internal Audit & Risk, Senior
Management, and the External Auditor attend meetings. The Committee has
regular private meetings with the External and Internal Auditors during the year
with no Executive Directors present. The Company Secretary & General Counsel
acts as Secretary to the Committee.
TERMS OF REFERENCE
The Terms of Reference of the Committee reflect the current statutory
requirements and best practice appropriate to the Group’s size, nature, and stage
of development. The Committee met its requirement to meet at least four times a
year. Details of meeting attendance can be found in the Corporate Governance
Statement on page 175. The Committee reviews its Terms of Reference annually,
recommending any suggested changes through to the Board. This year there were
no recommended changes to the Terms of Reference.
COMMITTEE EFFECTIVENESS
As part of the FY22 externally facilitated board evaluation, of the Board and the
Board Committees, the performance and effectiveness of the Audit Committee
was evaluated. The evaluation found that the Audit Committee functions effectively,
and interacts well with the Board and other Committees. Details of how the
evaluation was conducted can be found on page 181.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
ACTIVITIES UNDERTAKEN BY THE COMMITTEE
A summary of the activities undertaken by the Committee during the year is
as follows:
Financial reporting:
– Monitored the integrity of the Group’s FY22 Results Announcement,
Annual Report and Accounts 2021, and the FY22 Half Year Statement
– Assessed and recommended to the Board that the Annual Report and
Accounts are fair, balanced, and understandable, including Alternative
Performance Measures (APMs)
– Assessed the Going Concern and Viability Statement having reviewed
supporting papers from management including the consideration of the
impact of the pandemic, cost of living increases, global conditions, and
climate change on those assessments
– Considered papers from management on the key financial reporting
judgements and estimates
– Reviewed the Task Force for Climate Related Financial Disclosures
(TCFD) FY22 Year End Reporting, including the scenario analysis
undertaken to assess the impact of climate-related risks
Internal control and risk management:
– Considered the adequacy and effectiveness of the Group’s ongoing risk
management systems and control processes
– Considered the Group’s risk environment, including its significant and
emerging principal risks and uncertainties and reviewed the mitigating
actions that management has taken along with determining the risk
appetite of the business
– Reviewed the impact of the pandemic, cost of living increases, global
conditions, and climate change on the principal risks and uncertainties,
and the actions management are taking in response to this
– Considered the impact on our reporting and control environment of
the Department for Business, Energy & Industrial Strategy (BEIS)
proposals for Audit and Corporate Governance reform
– Reviewed and approved the Group’s whistleblowing protocol for
managing whisteblower incidents
– Received and reviewed whistleblowing incidents, investigation details
and follow up actions
– Received updates in relation to anti-bribery and corruption and
anti-money laundering programmes
Internal and external audit:
– Assessed the effectiveness of the external audit process and considered
the accounting, financial control, and audit issues reported by the
External Auditor
– Reviewed the Internal and External Auditor independence
– Agreed the External Auditor engagement letter and recommended the
External Auditor fees through to the Board
– Reviewed and approved the Internal Audit Charter
– Received and reviewed the annual plan and audit reports from the
Internal Audit team
– Undertook a review of the effectiveness of the Internal Audit function
– Held regular private meetings with the Internal and External Auditors
GOING CONCERN AND VIABILIT Y STATEMENT
The Committee reviewed the process and assessment of the Group’s prospects
made by management, including:
– The three-year viability assessment period and alignment with the Group’s
internal forecasts and business model
– The assessment of the capacity of the Group to remain viable after
consideration of future cash flows, financing, and mitigating factors
– The modelling of the financial impact of the Group’s principal risks
materialising using severe but plausible scenarios
The Committee reviewed management’s analysis supporting the going concern basis
of preparation, including reviewing the Group’s financial performance, budgets for
FY23 three-year plan, and cash flow projections. The going concern and viability
reviews by the Committee included the review of the results of the reverse-stress
tests performed by management, available financing in place and any further mitigating
actions that management could take. In making its assessment, the Committee took
into consideration the trading results of the Group, liquidity and covenant compliance.
As a result of the assessment, the Committee reported to the Board that the going
concern basis of preparation remained appropriate and there is a reasonable
expectation that the Group will be able to continue in operation to meet its
liabilities as they fall due over the three-year viability assessment period.
The Going Concern and Viability Statement is set out in the Strategic Report on
page 166 and 167.
SIGNIFICANT FINANCIAL REPORTING AREAS
In preparing the financial statements, there are several areas requiring the exercise
of judgement by management. The Committee’s role is to assess whether the
judgements and estimates made by management are reasonable and appropriate.
To assist in this evaluation, the CFO provided an accounting paper to the
Committee, setting out all the financial reporting judgements and estimates which
were considered material to the Financial Statements.
The main areas of judgements and estimates that have been considered by the
Committee in the preparation of the Financial Statements are as follows:
Impairment of tangible and right-of-use assets
The Committee received and considered a paper from management covering the
judgements made in respect of the impairment testing of the Group’s property,
plant and equipment and right-of-use assets. The Committee noted that
management had considered the trading results of each showroom and noted
where a showroom has low profitability, which is not expected to improve in the
near future. No impairments were identified in the year. The Committee also
reviewed management’s assessment of whether any prior impairments should be
reversed given current trading.
Management has continued to report on the performance of the business on a
pre-IFRS 16 (IAS 17) basis within its Alternative Performance Measures (APMs)
alongside statutory measures derived under IFRS 16, the paper and discussions
considered impairment assessment of these assets on both bases.
As part of their review of impairment, the Committee challenged the assumptions
used in the cash flow forecasts for impairment testing, along with the disclosures
made in the Financial Statements. The Committee also received and discussed a
paper from the External Auditor on their work in this area, which specifically
considered and reported on their challenge and assessment of the key assumptions
and methodology used.
The Committee was satisfied that the approach adopted by management was
sufficiently robust to identify when an impairment charge or reversal for showroom
assets needs to be recognised and how it should be assessed and reported.
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continued
Inventory valuation
The Committee received a paper from management on accounting for and
valuation of inventory. It discussed the judgements made by management, with
specific consideration to discontinued product and slow-moving stock. The
Committee also considered the policy for, and calculation of, rebates recognised
and absorbed into inventory.
The Committee received a paper from the External Auditor regarding the audit
work they performed over the valuation of inventory. The Committee is satisfied
that the process and judgement adopted by management for the valuation of
inventory is sufficiently robust to establish the value of inventory held and is satisfied
as to the appropriateness of the Group’s provisioning policy.
Non-underlying and exceptional items
The Committee considered the presentation of the Financial Statements and in
particular the use of APMs and the presentation of exceptional items in line with the
Group accounting policy. This policy states that adjustments are only made to
reported profit when not considered part of the normal operating costs of the
business and considered exceptional due their size, nature, or incidence. The
Committee noted that the exceptional items disclosed in FY22 related to the
significant one-off events relating to the IPO and business acquisitions.
Each of the above areas of judgement has been identified as an area of focus and
therefore the Committee has also reviewed reporting from the External Auditor
on the relevant areas.
Revenue recognition
The Committee received papers from management covering the control
environment relating to sales cut-off and accounting judgements in relation to the
accounting for gift cards, client returns and client deposits.
The Committee also received a paper from the External Auditor regarding the
audit work they performed over revenue recognition, which included the use of
computer data analytic tools. The Committee determined that the majority of the
Group’s revenue transactions are non-complex, with minimal judgement applied
over the amount recorded. The Committee is satisfied that approach taken by
management is sufficiently robust in relation to the recognition of revenue.
OTHER SIGNIFICANT ACCOUNTING AREAS
IFRS 16 ‘Leases’
During the year, the Committee reviewed the key judgements and assumptions
applied to the calculations and disclosures provided within the Financial Statements.
These included the determination of the term of the leases, the discount rates used
and the determination of whether lease agreements included substantive
substitution rights and should be treated as leases. The Committee also considered
and challenged the use of pre-IFRS 16 APMs within the Annual Report and
Accounts and concluded that these APMs align with the management reporting
used to inform business decisions, investment appraisals, incentive schemes and
banking covenants.
Pensions
The Committee assessed the accounting treatment adopted by management and
the application of IAS 19 ‘Employee benefits’ in relation to the Aurum Retirement
Benefits Scheme. The Committee reviewed the judgements made in respect of the
assumptions used in the valuation of the Group’s obligations under the scheme and
the associated disclosures made in the Financial Statements.
Acquisitions
The accounting for the acquisitions of five showrooms in the US was reported to
the Committee, including the valuation of goodwill and other intangible assets. The
Committee also reviewed and discussed the appropriateness of the acquisition
disclosures contained within the Financial Statements.
Annual Report and Accounts – fair, balanced, and understandable
assessment
At the request of the Board, the Committee has considered whether, in its opinion,
the Annual Report and Accounts 2022, taken as a whole, are fair, balanced, and
understandable and that they provide the information necessary for shareholders
to assess the Group’s position and performance, business model and strategy. The
Group has established internal controls in relation to the process for preparing the
Annual Report and Accounts. These include the following:
– Management regularly monitors and considers developments in accounting
regulations and best practice in financial reporting and, where appropriate,
reflects developments in the Financial Statements
– The Annual Report and Accounts are drafted by Senior Management with
overall coordination by a member of the finance team, to ensure consistency
across the relevant sections
– An internal verification process is undertaken to ensure accuracy
– Comprehensive reviews of drafts of the Annual Report and Accounts are
undertaken by Executive Directors and Senior Management
– The final draft of the Annual Report and Accounts is reviewed by the Audit
Committee prior to consideration by the Board
Following its review, the Committee advised the Board that the Annual Report and
Accounts 2022, taken as a whole, were considered to be fair, balanced and
understandable and that they provided the information necessary for shareholders
to assess the Group’s position and performance, business model and strategy. The
Committee was also satisfied that suitable accounting policies have been adopted
and appropriate disclosures have been made in the Financial Statements.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 RISK MANAGEMENT AND INTERNAL CONTROLS
The Board has ultimate responsibility for effective management of risk for the
Group including determining its risk appetite, identifying key strategic and emerging
risks, and reviewing the risk management and internal control framework. The
Committee, in supporting the Board to assess the effectiveness of risk management
and internal control processes, relies on several different sources to carry out its
work including Internal Audit assurance reports, the assurance provided by the
External Auditor and other third parties in specific risk areas.
The Committee monitors and reviews the effectiveness of the Group’s risk management
processes and internal financial and non-financial controls. The key features of the risk
management process that were in place during the year are as follows:
In February 2022, a carefully targeted Internal Audit plan was agreed to provide
appropriate assurance to the Committee over the effectiveness of risk management
and internal control processes across the Group. The internal audit plan is risk
based and takes an independent view of what Internal Audit considers to be the
highest known and emerging risks and strategic priorities facing the business. The
Committee is satisfied that the Internal Audit plan provides appropriate assurance
on the controls in place to manage the principal risks facing the Group. Internal
Audit resources were increased in June 2021, and resources to deliver the Internal
Audit plan continue to be reviewed, with an agreement that external partners in
both the UK and US would continue to be utilised.
The Head of Internal Audit & Risk:
– Each business function conducted risk assessments based on identified
– Attended all Audit Committee meetings and provided reports and verbal
business objectives, which were reviewed and agreed annually by the Senior
Management of each function. Risks are considered across the areas of
financial, people, and regulatory and are evaluated in respect of their potential
impact and likelihood. These risk assessments are updated and reviewed at
least quarterly and are reported to the Committee
– A Group risk assessment is also undertaken by management, which considers
all areas of potential risk across all systems, functions, and key business
processes. This risk assessment, together with the business risk assessments,
forms the basis for determining the Internal Audit plan
– A qualitative and quantitative climate scenario analysis (CSA) was undertaken,
which assisted in understanding the climate-related physical and transition
risks and opportunities that could impact the business in the future under
different climate scenarios and identified risks have been incorporated into the
company climate risk register
– The assessment, management, and monitoring of climate-related risks aligns
with the Group risk management framework, and a governance structure has
been established for the oversight of these risks, including an ESG Committee
– The Head of Internal Audit & Risk met with all Senior Management to
undertake a formal review of the internal controls across the Group. Senior
executives were required to certify compliance with the Group’s policies and
procedures and that appropriate internal controls were in operation during
the period under review. Any weaknesses are highlighted, and the results are
reviewed by the Head of Internal Audit & Risk, the Committee, and the Board
– The Committee confirmed to the Board that it has reviewed the effectiveness of
the systems of internal control, including financial, operational, and compliance
controls, and risk management for the period of this report, in accordance with
the Code and the Risk Management and Internal Control Guidance
INTERNAL AUDIT
The Head of Internal Audit & Risk, who reports directly to the Audit Committee
Chair, provides assurance to the Committee through independent reviews of
agreed risk areas. The Committee is responsible for overseeing the work of the
Internal Audit function. It reviews and approves the scope of the Internal Audit
annual plan and assesses the quality of Internal Audit reports, along with
management’s actions relating to findings and the closure of recommended actions.
updates to the Committee
– Had direct access to all Committee members and met with the Committee
Chair and Committee members privately without management being present
– Met with the Audit Committee Chair several times to carry out formal
reviews of the Internal Audit function’s resources, approach, and audit plan
– Managed the risk register review process
Following assessment by the Committee during the year, the Audit Committee is
satisfied that the Internal Audit team has the quality, experience, and expertise
appropriate for the business.
The Group also has an operational audit, loss prevention and security team who review
compliance with certain key internal procedures in showrooms and at other locations.
EXTERNAL AUDITOR
Interaction with external audit
One of the Committee’s roles is to oversee the relationship with the External
Auditor, Ernst & Young LLP (EY), and to evaluate the effectiveness of the service
provided and their ongoing independence. The effectiveness of our External
Auditor is assessed in accordance with a process agreed by the Audit Committee,
which involves gathering information through a series of questionnaires.
The External Auditor has attended all this year’s Committee meetings and at each
meeting has time with the Committee without management present. The Chair of
the Audit Committee has also met with the external audit partner to review the
audit scope and audit findings.
Auditor independence and objectivity
During the year, the External Auditor reported to the Committee on their
independence from the Group. The Committee and the Board are satisfied that EY
has adequate policies and safeguards in place to ensure that Auditor objectivity and
independence is maintained. When assessing the independence of the External
Auditor, the Committee considers, amongst other things, the length of tenure of
the audit firm and the audit partner, the value of non-audit fees provided by
the External Auditor and the relationship with the Auditor as a whole. As part of
the assessment of the External Auditor, the Committee considered whether the
External Auditor had exercised professional scepticism and an appropriate degree
of challenge to management. Julie Carlyle, the audit partner has been in place since
the appointment of EY in 2019.
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Competition and Market Authority (CMA) Order 2014 Statement of Compliance
Under CMA guidance, FTSE 350 companies are required to have held a tender for the external audit appointment within the last ten years. On Admission to the London
Stock Exchange, the Audit Committee commenced a competitive audit tender for the financial year ending 26 April 2020. Full details of the tender process are included
in the Annual Report and Accounts 2020.
EY was first appointed in 2019 after a competitive tender process. This means that FY22 represents EY’s third year as the Company’s External Auditor. Under UK legal
requirements, the Company may retain EY as its External Auditor for 20 years.
The Group confirms that it was in compliance with the provisions of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 during the financial year ended 1 May 2022.
Non-audit services provided by the External Auditor
The Committee has adopted a formal policy in respect of non-audit services provided by the External Auditor to ensure that Auditor objectivity and independence are
maintained, in accordance with the EU Audit Reform.
Non-audit service
Audit-related services
Audit-related services are services, generally of an assurance nature, provided by the Auditor as a result of their
expert knowledge and experience of the Group. Audit-related services include:
– Reviews of Half Year results
– Reporting required by law or regulation to be provided by the Auditor
– Reports to regulators
Permissible non-audit services
Including, but not limited to:
– Work related to mergers, acquisitions, disposals, or circulars
– Benchmarking services
– Corporate governance advice
Policy
The Auditors are eligible for selection to provide non-audit
services to the extent that their skills and experience make
them a competitive and most appropriate supplier of
these services.
Each new non-audit service must be approved by the
Committee in advance of the services being commenced.
Non-audit fees are capped to a maximum aggregate in any
financial year of 70% of the average of the statutory audit
fees charged in the previous three consecutive financial
years. In the case of this cap, audit-related services
concerning work required by national legislation are
excluded.
Prohibited services
In line with the FRC’s ethical standards, services where the Auditor’s objectivity and independence may be
compromised by the threat of self-interest, self-review, management, advocacy, familiarity, or intimidation are
prohibited. Prohibited services include:
– Tax services
– Services that involve playing any part in the management decision-making process
– Book-keeping and preparing accounting records and Financial Statements
– Payroll services
– Designing or implementing internal controls
– Valuation services (except such services that have no direct effect or are immaterial to the Financial Statements)
– Legal, internal, or human resources services
– Services linked to financing, capital structure and allocation and investment strategy except providing assurance
services in relation to the Financial Statements, such as the issuing of comfort letters in connection with
prospectuses issued by the audited entity
– Promoting, dealing in, or underwriting shares in the Company
The Auditor is prohibited from performing these services
for the Company or any subsidiary within the Group.
Non-audit services provided by Ernst & Young LLP during the financial year ending 1 May 2022 were limited to the Half Year review. Fees in relation to these services
were £54,000 (FY21: £52,000).
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 EXTERNAL AUDITOR EFFECTIVENESS
In January 2022, the FRC’s Audit Quality Review Team (AQRT) completed a review
of EY’s audit of the Company’s Financial Statements for the period ended 2 May
2021. The Committee considered the final inspection report, which did not raise
any significant findings, and discussed the results with the lead audit partner. The
Committee noted the overall assessment by the AQRT, which was consistent with
its own positive view of the quality and effectiveness of the external audit in respect
of 2021.
Auditor reappointment
The Committee is responsible for considering whether there should be a rotation
of the External Auditor in order to ensure continuing auditor quality and
independence, including consideration of the advisability and potential impact of
conducting a tender process for the appointment of a different External Auditor.
The Committee is also responsible for recommending to the Board whether it
should ask the shareholders to appoint, reappoint, or remove the External Auditor
at the AGM.
It is the Committee’s responsibility to assess the effectiveness of the external audit.
The Committee assessed the External Auditor’s effectiveness in September 2021
and kept this under review throughout the year taking into account the External
Auditor’s mindset and culture; skills, character and knowledge; quality control and
judgement. The assessment included:
– Reviewing the External Auditor’s risk assessment and audit approach to those risks
– Reviewing and discussing the External Auditor’s formal reports to the
Committee including their planning and results reports
– Considering the areas in which the External Auditor had challenged
management’s assumptions in key areas of judgement and the number and
nature of the accounting and control observations raised
– Considering the manner in which the audit was conducted, including the level
of senior leadership hours spent
– Assessing feedback from the Committee members and the parties involved in
the external audit process through a questionnaire
– Reviewing the FRC’s Audit Inspection report on Ernst & Young LLP and
discussing the planned resulting actions by the External Auditor
– Assessing the interaction between management, the Committee and the
External Auditor
Based on these reviews, the Committee concluded that Ernst & Young LLP (EY)
had applied appropriately robust challenge and scepticism throughout the audit,
that it possessed the skills and experience required to fulfil its duties effectively and
efficiently, and that the audit was effective.
In its oversight of the external audit, the Committee considered whether it would be
appropriate to conduct an audit tender at this time. The Committee took into account:
– Its continued satisfaction with the quality and independence of EY’s audit
– Any new External Auditor would need a transition period to develop
sufficient understanding of the business given the Company’s size and
complexity
– Frequent changes of External Auditor would be inefficient and could lead to
increased risk and the loss of cumulative knowledge
– A change in auditor would be expected to have a significant impact on the
Company, including on the Company’s finance function
– Any change in auditor should be scheduled to limit operational disruption
The Committee also considered EY’s leadership and activities in the area of climate
change. After due consideration the Committee determined it would not be
appropriate to re-tender for the external audit at this time.
EY has expressed willingness to continue in its capacity as independent Auditor of
the Company. The Committee has recommended to the Board the reappointment
of the External Auditor for FY23 and the Directors will be proposing the
reappointment of EY at the forthcoming AGM.
ROBERT MOORHEAD
CHAIR OF THE AUDIT COMMITTEE
6 July 2022
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ESG C OM M IT TE E R E PORT
ROSA MONCKTON MBE
CHAIR OF THE ESG COMMITTEE
MEMBERS
Rosa Monckton MBE (Chair)
Tea Colaianni
Ian Carter
Brian Duffy
Robert Moorhead
Chabi Nouri
PRINCIPAL RESPONSIBILITIES
The Committee’s principal responsibilities are to:
– Provide oversight on behalf of the Board in relation to the
Company’s ESG strategy and performance
– Oversee the development and delivery of ESG strategic
goals, targets and Key Performance Indicators (KPIs)
– Ensure the Company monitors current and emerging ESG
trends, as well as relevant international standards and
legal/regulatory/governance requirements with a view to
how they might impact on the business strategy,
operations and reputation of the Company
– In collaboration with the Audit Committee, review key
climate-related risks and opportunities and oversee
mitigation strategies as part of the quarterly review of
principal and emerging risks
– Receive reports and recommendations from key
management stakeholders, subject matter experts and the
ESG Steering Group
– Oversee stakeholder engagement with the ESG strategy
and progress against strategic goals, targets and KPIs
– Make recommendations to the Board in relation to the
required resourcing and funding of ESG related activity
DE A R SH A R E HOL DE R
I am delighted to present the first ESG Committee Report following the
establishment of a dedicated ESG Committee by the Board in June 2021.
Alongside myself, the ESG Committee comprises the Chair of the Board, and a
majority of independent Non-Executive Directors, Tea Colaianni, Robert
Moorhead and Chabi Nouri (appointed 1 May 2022). In addition to the Non-
Executive Directors and in recognition of the importance of ESG matters to the
Company’s Long Range Plan and strategic objectives, Brian Duffy, the CEO, is also
a member of the Committee.
The biographies of the Committee members, which details their skills and
experience can be found on pages 182 to 183.
The Company Secretary & General Counsel acts as Secretary to the ESG
Committee, and by invitation, the CFO, the Head of ESG, and other Senior
Management and/or external advisers may attend as appropriate for all or part of
the meeting.
To support the Committee and help develop and drive the Company’s sustainability
agenda, an experienced Head of ESG was appointed in July 2021. The Committee
held its inaugural meeting in October 2021.
ROLE
The ESG Committee is Board Committee and has the full support of the senior
leadership team. It plays an active part in the development and delivery of the
Company’s sustainability strategy, by approving key decisions, ensuring alignment
with the Company’s purpose and values and providing accountability against goals,
targets and KPIs.
The Committee has an important role monitoring environmental goals and ensuring
actions are taken to manage identified risks and opportunities resulting from a
changing climate, by ensuring they are embedded in the Company’s risk management
processes, financial decision-making and core business strategy.
As well as monitoring the robustness of the Group’s sustainability governance
frameworks, the Committee scrutinises the development and implementation of
changes in processes and practices and ensures compliance with legislative and
regulatory standards.
TERMS OF REFERENCE
The ESG Committee Terms of Reference set out the purpose and scope of the
Committee. The document is available on our corporate website and will be
reviewed on an annual basis. In accordance with the Terms of Reference, the
Committee met three times during FY22 and attendance records can be found on
page 175.
The ESG Committee is supported by an ESG Steering Group, chaired by the CFO.
The Steering Group is made up of Senior Management, who each have formal
operational responsibility for the management of relevant environmental, social and
governance issues. The ESG Steering Group acts under a separate Terms of
Reference and reports progress towards the development, implementation and
delivery of the Company’s sustainability strategy into the ESG Committee.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 KEY FOCUS/ACTIVITIES DURING THE YEAR
– Agreed the ESG Committee Terms of Reference and recommended
them to the Board for approval
– Oversaw a comprehensive review of the Company’s ESG approach
and governance
– Commissioned a Materiality Assessment to better understand the
expectations and requirements of key stakeholder groups
– Agreed to strengthening ESG Governance, including the formation of an
ESG Steering Group
– Agreed to a programme of work to redefine the Company’s Purpose
– Agreed to the development of a sustainability strategy prioritising,
‘People, Planet and Responsible Sourcing’
– Agreed to a project to measure the Group’s Scope 3 Emissions, in order
to assess the environmental impact of the Group’s value chain and set a
target to achieve Net Zero emissions
– Agreed to setting near term Science Based Targets aligned to 1.5°C
under the Paris Climate Agreement
– Highlighted to the Audit Committee, for consideration, that Climate
Change be included as one of the Company’s Principal Risks
– Key documents recommended to the Board for approval included,
Modern Slavery Statement, Supply Chain Policy and Environmental Policy
“An ESG Steering Group was
established to strengthen the
governance of ESG matters and
oversee the development of a
roadmap to deliver a cohesive
sustainability strategy that delivers
long term value for all.”
ROSA MONCKTON MBE
CHAIR OF THE ESG COMMIT TEE
One of the first proposals to the Committee, which was subsequently approved,
was a project to define the Company purpose in order to provide a framework for
consistent decision-making at every level. The result is a purpose that reflects
changing societal expectations and amplifies the Company’s overarching
commitment to WOW clients, whilst caring for colleagues, local communities and
the planet.
The Committee also agreed to sign up to the new Better Business Act, which, if
successful, would amend s172 Companies Act 2006 to ensure company boards
consider the interests of the wider society and the environment alongside that
of shareholders.
Other Committee outputs included an ESG priority matrix and the approval of a
series of short, medium and long term goals to support the ongoing development
of a progressive sustainability strategy, which mitigates risk and delivers positive
business, environmental and societal outcomes in line with the Company Purpose.
PL ANET
During the year, the Committee oversaw work to measure the Company’s Scope
3 emissions and approved near term targets to limit temperatures to 1.5°C in line
with the Paris Agreement and obtain target validation from the Science Based
Targets initiative. It also received information on how the Company’s pre-owned
business and After Sales and Servicing operation contribute to a more circular
economy and agreed to further support investment in these areas.
In line with the Task Force for Climate Related Financial Disclosures, the Committee
agreed to strengthen how the Company governed risks and opportunities resulting
from a changing climate and the transition to net zero and approved the escalation
of Climate Change from an emerging risk to a principal risk.
STAKEHOLDER ENGAGEMENT
The ESG Committee welcomes feedback from all stakeholders. Colleagues share
their thoughts directly via phone calls or email, through the colleague Listening Forums,
or a new engagement platform, ‘Workplace’, which was introduced across the Group
following a recommendation, by Senior Management, to the ESG Committee.
Investors ask ESG related questions through dedicated meetings and roadshows
and the Committee is kept up to date with supplier engagement activities to
support the promotion of shared sustainability goals and ensure due diligence
across our Supply Chain.
In addition, representatives from all our stakeholder groups were invited to take
part in a Materiality Assessment Survey, designed to inform our Company
sustainability strategy and help prioritise material ESG issues.
Since the Committee’s first formal meeting in October 2021, when we reviewed
the results of a comprehensive gap analysis, to the end of this financial year, it has
been a busy six months and I am extremely pleased with the progress made.
As we enter FY23, the ESG Committee remains absolutely committed to operating
transparently in its role to support sustainable business practices across the Group,
for the benefit of all.
Further information on the work of the ESG Committee and the progress being
made by the Group can be found on pages 118 to 155.
ROSA MONCKTON MBE
CHAIR OF THE ESG COMMITTEE
6 July 2022
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R E MU NE R ATION
C OM M IT TE E R E PORT
TE A COL AIANNI
CHAIR OF THE REMUNERATION COMMITTEE
Members
Independent
No. of meetings
attended
Tea Colaianni (Chair)
Ian Carter
Rosa Monckton
Robert Moorhead
Section
Chair’s Statement
At a Glance
Fairness, Diversity and Wider Workforce
Considerations
Annual Report on Remuneration
Directors’ Remuneration Policy
3/3
3/3
3/3
3/3
Page
196
200
203
208
212
The Remuneration Committee’s
Terms of Reference at:
thewosgroupplc.com
DE A R SH A R E HOL DE R
On behalf of the Remuneration Committee, I am delighted to present the
Group’s Remuneration Committee Report.
During FY22, we have further strengthened the business and delivered impressive
growth in both the UK and US markets. Our success has been testament to our
robust business model, as well as the enthusiasm and commitment shown by our
colleagues. In recognition of the Group’s unprecedented success since we listed on
the London Stock Exchange in 2019 and to ensure that colleagues have the
opportunity to share in the success of the business, we are pleased to have provided
all our colleagues employed by the Group in December 2021 with a gift of 50 free
shares and, in January 2021, we launched employee share save schemes in both the
UK and US. Our first Directors’ Remuneration Policy was approved by shareholders
at our 2019 AGM, following our admission to the London Stock Exchange in June
2019. Since then, the Group has generated exceptional growth and has a track
record of delivering strong, consistent financial performance. As a result of this
sustained growth over the last three years, we are pleased that the first LTIP grant
will vest in full this year.
In line with the normal three-year cycle, we will be submitting a new Remuneration
Policy for approval at the 2022 AGM which can be found on pages 212 to 223 of
this report. More detail on the remuneration decisions made in the year for our
Executive Directors can be found in the Annual Report on Remuneration on pages
208 to 211.
The Committee complies with the UK Corporate Governance Code 2018 in terms
of composition and Terms of Reference. The Committee’s Terms of Reference, which
are reviewed annually, are available on the Group’s website at thewosgroupplc.com.
ROLE OF THE REMUNER ATION COMMITTEE
The Committee’s responsibilities are to:
– Determine remuneration policy for the Company Chair, Executive Directors,
the Company Secretary & General Counsel and other members of Senior
Management as designated
– Determine remuneration packages for the Company Chair, Executive
Directors, the Company Secretary & General Counsel and other members of
Senior Management as designated. No Director plays a part in any decision
about their own remuneration
– Review the appropriateness of the Remuneration Policy on an ongoing basis
and make recommendations to the Board on appropriate changes
– Obtain up-to-date comparative market information and appoint remuneration
consultants as required to advise or obtain information
– Approve the design of, and set targets for, performance related incentives
across the Group
– Oversee any major changes to benefits for colleagues
– Oversee wider workforce pay practices and incentive arrangements
– Ensure that failure and excessive risk taking are not rewarded
None of the Committee members have any personal financial interest (other than
as a shareholder) in the decisions made by the Committee, any conflict of interest
arising from cross-directorships, or day-to-day involvement in running the business.
The Company is seeking an advisory vote on the Remuneration Committee Chair’s
Statement and Annual Report on Remuneration, and seeking a binding vote on the
proposed Directors’ Remuneration Policy which, if approved, will take effect from
the date of the AGM on 1 September 2022.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 WHO SUPPORTS THE COMMITTEE?
External
During the year, the Committee appointed Deloitte LLP as independent adviser to
the Committee following an independent selection process. Fees paid to Deloitte
LLP in relation to remuneration services provided to the Committee in FY22 were
£62,850, which were charged on a time and materials basis. Deloitte LLP is a member
of the Remuneration Consultants Group, and as such chooses to operate pursuant
to a code of conduct that requires remuneration advice to be given objectively and
independently. There are no connections between Deloitte LLP and individual
Directors to be disclosed. The Committee is satisfied that the advice provided by
Deloitte LLP in relation to remuneration matters is objective and independent.
Internal
Internal support is provided by the Company Secretary & General Counsel and
Executive Director HR, whose attendance at Committee meetings is by invitation
from the Remuneration Committee Chair, to advise on specific questions raised by
the Remuneration Committee and on matters relating to the performance and
remuneration of the Senior Management team. No Director was present for any
discussions that related directly to their own remuneration.
HOW THE REMUNER ATION COMMITTEE SPENT ITS TIME IN FY22
The following sets out the main items considered by the Remuneration Committee
during the year.
Key agenda items
– Selection process for appointing a new independent adviser to the
Remuneration Committee
FY22 BUSINESS PERFORMANCE HIGHLIGHTS
FY22 represented an excellent year for the business. Through a consistent
investment programme we have further strengthened the business, paving the way
for continued success as we advance our Long Range Plan objectives to strengthen
our luxury watch and jewellery leadership in the UK, become the clear market
leader in the US and capitalise on the growth potential in the EU market. Some key
highlights are as follows:
– Revenue increased +37% to £1,238.0 million
– Adjusted EBIT1 increased +68% to £130.3 million
– Operating profit increased +74% to £142.1 million
– Return on Capital Employed1 increased by 770 bps from 19.7% to 27.4%
1
This is an Alternative Performance Measure. Refer to Glossary on pages 283 to 285 for definitions and
reconciliation to statutory measures.
APPLICATION OF THE REMUNER ATION POLICY IN FY22
I have summarised below the application of the Remuneration Policy.
Board changes
As announced on 26 August 2021, Bill Floydd was appointed CFO with effect from
1 January 2022. Bill was appointed on a remuneration package reflecting his calibre
as an experienced CFO and in line with the Company’s Remuneration Policy,
as follows:
– Base salary: £380,000
– Pension: 3% of base salary (in line with the wider UK workforce)
– Annual bonus opportunity: 125% of base salary (in line with the limits set out
– Approving the Directors’ Remuneration Report for FY21
in the Group’s Directors’ Remuneration Policy)
– Approving the outcomes under the FY21 bonus outcomes, taking into account
– LTIP opportunity: 175% of base salary (in line with the limits set out in the
the considerations of wider stakeholders
Group’s Directors’ Remuneration Policy)
– Reviewing and approving the performance measures for the FY22 bonus plan
to ensure alignment with strategic objectives and shareholder interests
– Granting awards under the LTIP and determining performance conditions for
the FY22 LTIP grant
– Receiving reports and advice from advisers on a range of matters including
senior executive pay, market themes and trends and updated proxy adviser
and institutional investor guidance
– Reviewing and approving the remuneration arrangements for the incoming
CFO, Bill Floydd
– Reviewing and approving the remuneration decisions with regards to the
retirement of the former CFO, Anders Romberg
– Reviewing the Directors’ Remuneration Policy and consulting on proposed
changes with proxy advisers and our key shareholders
– Reviewing wider workforce remuneration and approving the offering of free
shares to colleagues and the launch of the employee share save schemes
– Preparation of the CEO pay ratio
As a Remuneration Committee, it is our responsibility to make decisions which
support the Group’s long term business strategy, and which align with the Group’s
culture and values. We must balance this with our desire to reflect best practice
remuneration and high standards of corporate governance. We maintain an
ongoing dialogue with shareholders and proxy advisers to understand their views.
We recognise that executive remuneration is an area of public interest and we have
worked hard to ensure that full transparency has been provided in this year’s
Directors’ Remuneration Report on the Group’s remuneration practices.
Bill’s salary level was positioned slightly higher than the salary level for the former
CFO, as the former CFO’s salary was set lower than market median, given his
significant shareholding in the business prior to and after IPO. Taking into account
the size and scale of the business, and in line with the Company’s desired policy for
new joiners, (which is set out in our previous Directors’ Remuneration Reports),
Bill’s salary was set around the median of the FTSE 250.
Bill also received share awards to compensate for the share awards forfeited on leaving
his previous employer. These awards were granted on a like-for-like basis as the
awards forfeited, and more detail in respect of the awards can be found on page 210.
Base salary/fee increases in FY22
The annual salary review process took place as usual in October 2021, and in the UK
a further review for retail colleagues was implemented in April 2022 to maintain a
differential to National Minimum Wage (NMW) rates. All retail colleagues are paid a
starting rate of at least 7.9% above the NMW and the minimum pay increase was 3%.
In the US, salary reviews took place for colleagues in the corporate office, and
where required, base pay was adjusted for retail colleagues – the compensation
structure for sales colleagues in the US being heavily biased towards commission.
The pay review budget in the US was 3%.
The Committee also reviewed the salary levels for Senior Management and, where
appropriate, some salary adjustments were approved.
The CEO and outgoing CFO elected not to take a pay review and the CEO’s base
pay has not increased since he joined the Company in 2014.
Our Chair and Non-Executive Director fees were also reviewed and no increases
were applied.
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Annual bonus outturn for FY22
The performance target for the FY22 annual bonus was based on Adjusted EBIT1. Reflecting strong performance in the year, actual Adjusted EBIT1 achieved was
£130.3 million and we exceeded the maximum EBIT target of £98.7 million.
The Remuneration Committee considered the formulaic annual bonus outcome for FY22 against a range of contextual factors and was satisfied that 100% of the bonus
should be paid in light of the Company’s exceptional financial performance and significant increase in shareholder returns over the course of the year. The Watches of
Switzerland Group was the highest growth stock in the FTSE 250 in the calendar year 2021. The Remuneration Committee also took into account the wider stakeholder
experience noting the new shareholding initiatives put in place for colleagues and the launch of The Watches of Switzerland Group Foundation. No discretion was
exercised by the Committee. The FY22 bonus outturn for the CEO, CFO and former CFO is maximum, which equates to 150% of salary for the CEO, 125% of salary for
the CFO and 100% of salary for the former CFO (based on the pro-rated salaries for the CFO and former CFO for their period in employment). Two-thirds of the bonus
will be paid in cash and one-third will be paid in shares which will be deferred for three years. The CFO’s and the former CFO’s annual bonus has been pro-rated for their
time in employment with the Company in the financial year. All colleagues in the Company’s bonus schemes earned maximum bonus in FY22.
The factors considered by the Remuneration Committee when determining the bonus outcome are set out below:
Element
Factors considered by the Committee
Setting performance conditions
– The Company set bonus targets for FY22 in line with the Company’s business plan
Shareholder experience
Colleague experience
– Shareholders enjoyed strong share price growth of almost 40% between the start and end of FY22
– All colleagues in the Company were eligible to participate in some type of commission or bonus scheme during FY22
– All colleagues, employed in the business on December 2021, received a gift of 50 free shares in FY22 aligning their interests with
other stakeholders
– All eligible colleagues were provided with access to newly launched employee share save schemes in the UK and US with a take
up rate of 48% and 32% respectively
– The wellbeing of colleagues is a firm priority for the Group. During the year, the Company continued to be mindful of the impact
of the pandemic, ensured that jobs were protected, and continued to invest in the training, education and upskilling of all
colleagues. In the US a range of health initiatives were offered by CIGNA and in the UK a new health and wellbeing app providing
access to a wide range of services and self help tools was launched. The Remuneration Committee noted that employee
engagement continues to be extremely high as evidenced by the January 2022 Company-wide engagement survey
Government assistance
– During FY21, the Group made a voluntary decision to repay all the UK furlough scheme support. The £6.8 million support
received was repaid in July 2021. In FY22, the Group received £4 million Business Rates Relief
Company reputation
– The Remuneration Committee and Board were very cognisant that the Company is a well-recognised and high-profile business
and at all times has sought to ensure that decisions on executive pay do not negatively impact on the Company’s brand
Full details on the performance outturn against the targets are shown in the At a Glance section on page 200.
FY22 Long Term Incentive Plan (LTIP) grants
The annual LTIP grant was made to the CEO, the former CFO and other senior
colleagues in July 2021. The CEO and the former CFO received LTIP awards of
200% of base salary and 175% of base salary respectively. The new CFO received
an LTIP award on joining the Company, on the same terms as the award made in
July 2021, of 175% of base salary.
Performance conditions of the award are such that 20% of the awards will vest by
reference to a three-year average ROCE performance measure. The remaining
80% of the awards will vest by reference to a three-year cumulative Adjusted EPS
performance measure. The Remuneration Committee believes that the use of both
Adjusted EPS and ROCE within the LTIP ensures there is appropriate focus on
profitability, cost and capital efficiency.
Full details of the performance measures and targets are set out on page 209.
LTIP award vesting in FY22
The first grant under the LTIP was made in FY20, based on an EPS performance
condition. The EPS targets were set in line with market consensus at the time of
award. As a result of the outstanding performance of the business resulting in
Cumulative Adjusted EPS of 82.2p over the three-year performance period, 100%
of the LTIP award is due to vest in July 2022. The LTIP award for the former CFO
will be pro-rated for his time in employment with the Company. The award for the
CEO and former CFO will be subject to a 24-month holding period.
The single figure for the CEO has increased from £1.22 million in FY21 to £5.57
million in FY22. This increase reflects the fact that our first LTIP award as a listed
company vested based on performance to the end of FY22 which accounts for
£4.29 million of this value. As noted above, our EPS performance significantly
exceeded the maximum target set and we are delighted that our first LTIP award
vested in full. The share price also increased significantly over the period from £2.70
on award to £11.59 (330% increase, based on the three month average to year end
used to value the award for the single figure purpose) delivering exceptional returns
to shareholders.
FY22 REMUNER ATION POLICY REVIEW
New Directors’ Remuneration Policy (‘the Policy’)
In line with the normal three-year cycle, we will be submitting a new Remuneration
Policy for shareholder approval at our 2022 AGM in September. In anticipation of
this, the Remuneration Committee has undertaken a detailed review of the current
Policy. Following a comprehensive review, the Remuneration Committee has
concluded that the current Policy remains fit-for-purpose and continues to support
the execution of our long term strategy and the continued generation of sustainable
shareholder value.
1
This is an Alternative Performance Measure. Refer to Glossary on pages 283 to 285 for definition and reconciliation to statutory measures where relevant.
198
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 The Remuneration Committee is, however, proposing minor amendments to the
Policy and its implementation going forward in order to better align with best
practice and investor guidance:
– We are proposing to extend the post-employment shareholding requirement
for the CEO, such that he will be required to retain 100% of his pre-cessation
shareholding requirement for a period of two years from the date of cessation
of his employment. This is in line with the approach for the current CFO
– We are also making other minor drafting amendments to the Policy to reflect
current market practice. We will be introducing the option to provide an
additional allowance such as a travel allowance for our Non-Executive Directors
should that be appropriate in the circumstances
Base salary/fee increases for FY23
Salary reviews for all colleagues are scheduled to take place in October 2022. To
the extent that there are increases, the Executive Directors will receive no more
than the same percentage increase as the wider workforce. Non-Executive
Director fees will be reviewed at the same time.
Annual bonus for FY23
The annual bonus will be determined in line with the normal cycle. For FY23, the
annual bonus will be based 100% on Adjusted EBIT. Reflecting the growing
importance of ESG to shareholders and the progress that the Company has made
in establishing its ESG strategy and setting targets, when determining bonus pay-
outs the Committee will assess the overall appropriateness of the annual bonus
outcome in light of factors including ESG performance and the experience of
colleagues, clients and shareholders in the year. No changes are proposed to the
annual bonus opportunity levels.
LTIP awards to be granted in FY23
The Remuneration Committee has determined that LTIP grants will be made in line
with the normal cycle of being awarded in July 2022. In line with last year’s grant, the
LTIP measures will be based on a three-year cumulative Adjusted EPS and three-
year average ROCE with weightings of 80% and 20% of maximum respectively. No
changes are proposed to the LTIP award levels.
ENVIRONMENTAL , SOCIAL AND GOVERNANCE CONSIDER ATIONS
Wider workforce considerations
The Watches of Switzerland Group always strives to be an organisation that is
inclusive, rewarding and fair to all colleagues. During the course of the year, the
focus has been on internal stakeholder engagement and the Board was pleased to
support the gift of free shares and the launch of new employee share save plans
across the Group. The Board notes the Company’s commitment to maintaining a
meaningful premium to the National Living Wage and is aware that total earnings
for colleagues over the past year have been in excess of this.
I am also pleased to report that, following the success of our first Listening Forums
in the UK and US at the start of 2021, we again held forums in FY22. At these
forums we gather views on a wide range of issues, including remuneration.
Specifically, at the UK Listening Forum held in February 2022, attended by Rosa
Monckton in her capacity as the Dedicated Non-Executive Director for Workforce
Engagement, representatives were invited to provide feedback on additional
benefits that colleagues would value, outside of base pay. As a result of this exercise
a new range of benefits including a Health Cash Plan was launched in June 2022.
Gender pay reporting
We have published our fifth disclosure of the pay gap based on amounts paid in the
April 2021 payroll. The bonus gap was based on incentives paid in the year to 31
March 2021. The mean gender pay gap at the Group is 25% (FY21: 28%) and the
mean bonus gap at the Group is 40% (51% last year). Whilst there is still some way
to go, we are encouraged by the progress we have made and expect it to continue
as the Group continues to grow. The full report, including details on the initiatives
we have underway to help close our gender pay gap, is available on our website
thewosgroupplc.com.
The remainder of the Remuneration Report is split into four parts:
AT A GL ANCE SECTION
The At a Glance section on page 200 provides a summary of the payments made to
the Executive Directors during FY22 and how it is proposed to operate the Policy
in FY23.
FAIRNESS, DIVERSIT Y AND WIDER WORKFORCE CONSIDER ATIONS
This section contains both discussions on the Company’s initiatives in colleague and
stakeholder engagement as well as mandatory disclosures on areas such as the
gender pay gap and CEO to wider employee pay ratios. In addition, we have
included a report on specific areas in relation to wider workforce remuneration
which the Committee reviewed during the course of the year.
ANNUAL REPORT ON REMUNER ATION
This section summarises remuneration decisions during FY22. This includes details
of annual bonus and long term incentive awards granted and vesting during the year
as well as how the Policy will be implemented for FY23.
DIRECTORS’ REMUNER ATION POLICY
This section sets out our proposed Directors’ Remuneration Policy which, if approved,
will apply from the 2022 AGM for three years to the end of the AGM in 2025. In June
2022 I wrote to a number of major shareholders to outline the minor amendments to
the new Policy being proposed and invited comments or queries. As at the date of this
Report there have been no questions regarding the proposed changes.
Last year’s report received very strong support with over 99% of votes cast in
favour. I hope that you will find this year’s report clear, transparent and informative.
If you would like to discuss any aspect of this Remuneration Report, I would be
happy to hear from you. You can contact me through our Company Secretary &
General Counsel, Laura Battley. I will also be available at the Company’s forthcoming
AGM, to answer any questions.
On behalf of the Remuneration Committee and the Board,
TEA COLAIANNI
CHAIR OF THE REMUNERATION COMMITTEE
6 July 2022
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS D I R E C TO R S ’ R E M U N E R AT I O N R E P O RT
AT A GL A NCE
WATCHES OF SWITZERL AND EXECUTIVE REMUNER ATION
Components of remuneration
The Remuneration Committee Report is coded as follows:
Salary
Pension
Benefits
Bonus Plan
Long Term Incentive Plan
Shareholding ownership requirements
WHAT IS THE LINK TO COMPANY STR ATEGY?
The following diagram shows the link between our Remuneration Policy and our
strategy through looking at our KPIs, which measure the successful implementation
of that strategy and the performance conditions we use for our incentive plans.
Revenue
4-Wall EBITDA %
Adjusted EBIT
KPIs
Adjusted EPS
Cash generated from operations
Return on Capital Employed
Business context
FY22 outturns against KPIs
KPI and outturn
Revenue:
4-Wall EBITDA1:
Adjusted EBIT1:
Adjusted EPS1:
Cash generated from operations:
Return on Capital Employed:
Fixed
£1,238.0m
19.7%
£130.3m
41.8p
£188.6m
27.4%
BONUS PL AN
Performance Condition:
Adjusted EBIT
Reflects the successful delivery
of a number of KPIs: revenue,
sales growth and EBITDA
LTIP
Performance Conditions:
Adjusted EPS and Return on
Capital Employed
Reflects the successful delivery of
a number of KPIs over the longer
term: revenue, sales growth,
capital efficiency and profit
Salary
Reflects the value of the individual, their role, skills, experience and contribution to
the business
Benefits
Aligned with all other employee arrangements
Pension
Alignment of employer pension contributions with the wider workforce at 3%
Variable
Bonus Plan
Incentivises achievement of annual objectives and aligns director and shareholder
interests by delivering one-third of the bonus in deferred shares
LTIP
Motivates key individuals to achieve long term targets and deliver sustainable
performance. Provides alignment with shareholders as the award is made in shares,
and through the post-vesting holding period
Total remuneration
Sum of the fixed and variable components of remuneration
WHAT WAS THE FIXED PAY FOR FY22?
Fixed components
Brian Duffy
(CEO)
Bill Floydd
(CFO)
Anders Romberg (former
CFO)
Salary:
£500,000
Salary:
£126,667
Salary:
£233,333
Pension: £0
Pension: £3,800
Pension: £7,000
Benefits: £23,281
Benefits: £5,989
Benefits: £24,229
Notes
1. The salary, pension and benefits figures for the CFO and former CFO reflect their time employed as
Directors of the Company in FY22.
2. Benefits include car or car allowance and private healthcare.
LTIP AWARDS VESTING IN FY22
The first grant under the LTIP was made in FY20, based on a stretching EPS
performance condition. As a result of EPS performance over the three-year
performance period, 100% of the LTIP award is due to vest in July 2022. The LTIP
award for the former CFO was pro-rated for his time in employment with the
Company (see page 211 for further detail).
WHAT WAS THE BONUS FOR FY22?
The following table sets out the bonus performance condition, targets and level of satisfaction:
Performance condition
Adjusted EBIT
Threshold
£91.3m
Target
£96.1m
Maximum
Actual
Maximum CEO Bonus
CFO Bonus
Percentage of
Former CFO
Bonus
£98.7m
£130.3m
100% £750,000
£158,333
£233,333
Note: the CFO’s and the former CFO’s bonus have been pro-rated for time as a Director of the Company for FY22, i.e. from 1 January 2022 to 1 May 2022 for the CFO and from
3 May 2021 1 January 2022 for the former CFO.
In determining the outcome of the bonus, the Committee assessed the formulaic annual bonus outcome for FY22 against a range of factors including the wider
stakeholders’ experience as outlined in the Chair of the Remuneration Committee’s letter on page 196.
The Remuneration Committee was satisfied that the outcome was reflective of the underlying performance of the business and determined that the FY22 bonus outturn
for the CEO, CFO and former CFO was maximum, which equated to 150% of salary, 125% of salary and 100% of salary respectively (based on the pro-rated salaries for
the CFO and former CFO). Two-thirds of the bonus will be paid in cash and one-third will be paid in deferred shares. The CFO’s and the former CFO’s annual bonus has
been pro-rated for their time as a Director of the Company in the financial year. No discretion was exercised by the Remuneration Committee.
1 This is an Alternative Performance Measure. Refer to Glossary on pages 283 to 285 for definitions and reconciliation to statutory measures.
2 0 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
WHAT WAS THE TOTAL REMUNER ATION FOR FY22?
Total compensation
Brian Duffy (CEO)
Salary:
Pension:
Benefits:
Bonus:
LTIP:
– Value at grant:
£500,000
£0
£23,281
£750,000
£4,293,842
£999,999
– Share price appreciation: £3,293,843
Other:
Total:
–
£5,567,123
Bill Floydd (CFO)
Salary:
£126,667
Pension: £3,800
Benefits: £5,989
Bonus:
£158,333
LTIP:
–
Other:
£48,891
Total:
£343,680
Anders Romberg (former CFO)
Salary:
Pension:
Benefits:
Bonus:
LTIP:
– Value at grant:
£233,333
£7,000
£24,229
£233,333
£2,264,699
£527,430
– Share price appreciation: £1,737,269
Other:
–
Total:
£2,762,594
Notes
1. The total compensation figures for the CFO and former CFO reflect their time as a Director of the Company in FY22, i.e. from 1 January 2022 to 1 May 2022 for the CFO and from 3 May 2021 to 1 January 2022
for the former CFO.
2. Benefits include car or car allowance and private healthcare.
3. LTIP figures are as per the single figure table on page 208, and reflect the FY20 LTIP grant which was subject to performance to the end of FY22 and vested at 100% of maximum. These awards are due to be released
in July 2022.
4. Other remuneration consists of share awards granted to Bill Floydd on his appointment to replace the final two tranches of the 2017/18 LTIP award forfeited by Bill on leaving his previous employer. Further detail
in respect of the awards can be found on page 210.
5. The single figure for the CEO has increased from £1.22 million in FY21 to £5.57 million in FY22. This increase reflects the fact that our first LTIP award as a listed company, which will vest in full in July 2022, is based
on performance to the end of FY22 which accounts for £4.29 million of this value. As noted above, our EPS performance significantly exceeded the maximum target set and we are delighted that our first LTIP award
vested in full. The share price also increased significantly over the period from £2.70 on award to £11.59 (330% increase, based on the three month average to year end used to value the award for the single figure
purpose) delivering exceptional returns to shareholders.
WHAT IS THE CURRENT SHAREHOLDING OF OUR EXECUTIVE
DIRECTORS?
The following chart shows the current Executive Directors’ shareholdings against
their shareholding requirements. The CEO already exceeds the shareholding
requirement of 200% of salary. The CFO was appointed with effect from 1 January
2022 and has a five-year period to build up a shareholding equivalent to the
minimum shareholding requirement. The shareholding numbers are calculated
using the share price as at 29 April 2022 of £10.21, which was the last trading day in
the year ending 1 May 2022. For the Executive Directors’ current holdings, this
includes all beneficially owned shares. In addition, we have also shown the unvested
2020 and 2021 LTIP awards which are subject to ongoing performance conditions
(see page 211 for full details of shareholdings).
As at the end of the financial year Anders Romberg, the former CFO, had met the
shareholding requirement.
Minimum Shareholding
Requirement
Bill Floydd
Brian Duffy
0%
3,000%
6,000%
9,000%
12,000%
15,000%
18,000%
Current Shareholding
Post tax value of unvested share awards subject to continued employment
Unvested share awards subject to performance
Minimum Shareholding
2 01
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D I R E C TO R S ’ R E M U N E R AT I O N R E P O RT
continued
H OW I S T H E P O L I C Y G O I N G TO B E I M P L E M E N T E D I N F Y 23?
This section comprises part of the Annual Report on Remuneration. The following table summarises how the proposed Remuneration Policy will be operated in FY23. The decisions
made by the Remuneration Committee took into account both internal and external conditions. The full Remuneration Policy can be found on pages 212 to 223 of this Report.
Element
Base salary
Benefits
Pension
Bonus Plan
Cash
Summary
Base salary levels for FY23
– CEO: £500,000 (No change)
– CFO: £380,000 (No change)
Salary reviews for all colleagues are scheduled to take place in October 2022. To the extent that there are increases, the Executive
Directors will receive no more than the same percentage increase as the wider workforce.
– Market standard benefits including (but not limited to) company car, private health insurance and life insurance
– The maximum value of the employer pension contribution allowance is in line with the contribution rate for the majority of
colleagues (currently this is 3% of salary)
– The CEO, Brian Duffy, has continued to waive his employer pension contribution
Annual bonus for FY23
– CEO: 150% of salary
– CFO: 125% of salary
– Two-thirds of the bonus award will be paid out in cash with the remaining one-third deferred into shares and subject to a
three-year vesting period
Deferred shares
The payouts under the bonus for levels of performance will be as follows:
Threshold
(20% of max bonus)*
Target
(50% of max bonus)*
Maximum
(100% of max bonus)*
* Straight line between these points.
Awards will be based 100% on Adjusted EBIT1. Due to commercial sensitivity, the targets will be retrospectively disclosed at the
end of the financial year. When determining bonus payouts the Committee will assess the overall appropriateness of the annual
bonus outcome in light of factors including ESG performance and the experience of colleagues, clients and shareholders in the year.
LTIP
– Maximum opportunity of 200% of salary (CEO) and 175% of salary (CFO)
– A two-year holding period will apply following the three-year vesting period
LTIP awards for FY23
– CEO: 200% of salary
– CFO: 175% of salary
– The LTIP awards will be granted in July 2022. The payouts under the LTIP for levels of performance will be as follows:
Threshold
(20% of max LTIP)*
Target
(60% of max LTIP)*
Maximum
(100% of max LTIP)*
* Straight line between these points.
Awards will be based 80% on three-year cumulative Adjusted EPS and 20% on three-year average ROCE. Targets are as follows:
– Adjusted EPS: 166.2p (Threshold); 175.0p (Target); 183.7p (Maximum)
– ROCE: 26.4% (Threshold); 27.8% (Target); 29.2% (Maximum)
Shareholding requirements
– The minimum shareholding requirement for Executive Directors is 200% of salary, which can be built up with five years
Company Chair and Non-
Executive Director Fees
of appointment
– A post-cessation minimum shareholding requirement will apply to Executive Directors. The Executive Directors will be
required to hold 100% of their pre-cessation shareholding requirement for 24 months from their leaving date. This is
formalised in our new Remuneration Policy
Annual fees for FY23 (subject to October 2022 salary/fee review)
– Chairman: £190,000 (No change)
– NED base fee: £50,000 (No change)
– Senior Independent Director fee: £10,000 (No change)
– Committee Chair fee: £10,000 (No change)
– Audit Committee, Remuneration Committee, ESG Committee membership fee: £5,000 ESG Committee is a new
Committee. The Chair does not receive any additional Committee membership fee
– Nomination Committee membership fee: £2,500 (No change)
1 This is an Alternative Performance Measure. Refer to Glossary on pages 283 to 285 for definitions and reconciliation to statutory measures.
2 02
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
FA IR NESS , DI V E R SIT Y A N D W IDE R
WOR K FORCE C ONSIDE R ATIONS
WORKING AT THE WATCHES OF SWITZERL AND GROUP
The Watches of Switzerland Group has always placed an emphasis on making the
Company a great place to work through a culture of fairness, openness and
inclusivity. We are committed to providing our colleagues with a dynamic workplace
and to ensuring they are equipped with the most comprehensive tools to develop
their full potential. This applies to colleagues both in offices and showrooms who
are vital in offering our clients an unrivalled experience. Our vision and embedded
values system enable us to celebrate and reward the achievements of our colleagues
every day.
This report aims to demonstrate these values not only through our reward offering
but also through the overall colleague experience. In making decisions on executive
reward, the Remuneration Committee considers the remuneration and conditions
for the wider workforce and we believe that it is important to be transparent about
the link between the two.
As part of our commitment to fairness, we have included this dedicated section to
provide more information on our communication with colleagues, remuneration
principles, wider workforce pay conditions, the Remuneration Committee’s remit,
our gender pay statistics, how remuneration aligns with Group performance and
the Group’s fairness, diversity & inclusion initiatives.
The Remuneration Committee seeks to ensure that pay is fair throughout the
Company and makes decisions in relation to the structure of executive pay in the
context of the wider workforce remuneration and the cascade of incentives
throughout the business.
The Remuneration Committee’s remit extends down to Executives and Senior
Management for which it determines and approves the level and structure of
remuneration. In addition, in this section, we provide context to our executive pay
by explaining our colleague policies and our approach to fairness, including whether
the approach to executive remuneration is consistent and whether the incentives
operated by the Company align with its culture and strategy.
COMMUNICATIONS WITH COLLEAGUES
Colleagues are not directly consulted on aspects of executive remuneration, however,
there are a number of existing channels where their views on remuneration can be
captured. For example, colleagues are able to talk about pay matters at the Company’s
Listening Forums and express their views through the Company’s engagement
surveys. We note that we are committed to giving our colleagues a voice and they
have always had the opportunity to interact with our Directors. In 2019 we appointed
Rosa Monckton to be the Designated Non-Executive Director for Workplace
Engagement with responsibility for gathering our colleagues’ views and presenting
these to the Board.
Rosa is Co Chair of the UK Listening Forum alongside Craig Bolton, President UK &
Europe and Nikki Zamblera, Executive Director HR. Rosa also Co Chaired the first
Global Listening Forum where representatives from showrooms and support
functions in both the UK and US met to ask questions of the Board as represented
by Rosa and Brian Duffy, CEO. This meeting took place in April 2022 and was also
attended by David Hurley, President North America & Deputy CEO, Craig Bolton,
President UK & Europe and Nikki Zamblera, Executive Director HR.
In the February UK Listening Forum, representatives were invited to report back
on which benefits colleagues would value outside of pay. The Board were pleased
to learn that colleagues were feeling very positive about the recent share plan
initiatives, the Company’s bonus plans and recognition platforms as well as the
e-learning and wellbeing platform. Feedback about the types of additional
benefits that colleagues would most welcome centred on health and wellbeing.
As a result of this a review was undertaken and an enhanced benefits offer was
launched in June 2022. Enhancements include:
– A cash and health care plan for all UK colleagues (US colleagues can already
enrol in a health plan)
– The introduction of a Buy Holiday scheme
– The provision of an additional day’s holiday for colleagues to celebrate their birthday
Early indications are that these new benefits have received an extremely positive
reception.
REMUNER ATION PRINCIPLES
Our reward strategy is designed to support and reinforce the Company’s purpose,
vision and values, and to reward all of our colleagues for delivering against our
strategic objectives. The remuneration principles that we have developed apply
across the Group and are cascaded throughout the organisation.
REMUNER ATION COMMITTEE REPORT
A process was introduced in 2020, which enables the Remuneration Committee to
carry out an annual review of wider workforce pay and policies, and to ensure that
they are designed to support the Company’s desired culture and values.
The levels of remuneration and the types offered will vary across the Company
depending on the colleague’s level of seniority and role, and also the colleague’s
location. The Remuneration Committee is not looking for a homogeneous
approach; however, when conducting its review it is paying particular attention to:
– Whether the element of remuneration is consistent with the Company’s
Remuneration Principles
– If there are differences, whether they are objectively justifiable
– Whether the approach seems fair and equitable in the context of other colleagues
Once the Remuneration Committee has conducted its review of the wider
workforce remuneration and incentives, it will consider the approach applied to the
remuneration of the Executive Directors and Senior Management. In particular, the
Remuneration Committee is focused on whether, within the framework set out
above, the approach to the remuneration of the Executive Directors and Senior
Management is consistent with that applied to the wider workforce.
To ensure all our colleagues are able to share in the success that we deliver, during
FY22 we provided our colleagues with a gift of 50 free shares, and also launched
employee share save schemes in the UK and US allowing colleagues to purchase
shares, at a discounted price, at the end of their savings contract. The Remuneration
Committee believes this will enable long term share ownership amongst our
colleagues and further increase alignment of interests with our shareholders.
As there have been no fundamental changes to the Group’s remuneration
framework between FY21 and FY22, the findings which we communicated in the
2021 Directors’ Remuneration Report on pages 146 to 156 remain accurate.
Therefore, the Remuneration Committee remains satisfied that the approach to
remuneration across the Group is consistent with the Company’s principles of
remuneration. Furthermore, in the Remuneration Committee’s opinion the
approach to executive remuneration aligns with the wider Company pay policy and
there are no anomalies specific to the Executive Directors.
2 03
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continued
The following table sets out a summary of the information received by the Remuneration Committee on the Group’s remuneration structure:
Element of remuneration
Overview of practice at the Watches of Switzerland Group
Alignment with
Remuneration Principles
The Watches of Switzerland Group’s reward principles are designed to enable fair and flexible reward structures to be developed
and implemented across the entire organisation. We continue to review and redesign our policies in line with this principle.
Salary
Annual variable pay
LTIP
Pension
Benefits
Salaries are set to reflect the market value of the role, and to aid recruitment and retention. Remuneration for all colleagues exceeds
the National Living Wage. We also monitor closely the rates of pay of people who are training with us to make sure they remain fair
and competitive.
Salary increases are awarded annually following the Company’s main pay review and are typically between 2% and 3%.
From time to time ad hoc pay reviews are conducted in order to:
– Make market adjustments, where necessary
– Ensure the Company’s targeted National Living Wage differential is maintained
All Watches of Switzerland Group colleagues are entitled to earn variable pay linked to stretching performance targets
Bonus
Subject to service and eligibility, our colleagues in support functions participate in the Company’s annual bonus plan and are rewarded
based on financial performance measured using Adjusted EBIT.
Bonuses typically operate in one of three formats depending on the level of seniority and line-of-sight to performance:
– For roles with a global remit, bonuses are based 100% on Group performance
– For roles that wholly or mainly concentrate on either our UK or the US operation, bonuses are based 100% on the performance of
the business in the relevant country
– For certain business unit roles or regional roles, 50% of bonus is based on local performance (e.g. UK/US) and 50% is based on the
performance of the relevant business unit
In line with market practice, the bonus quantum and the question of whether it is paid solely in cash or in a mixture of cash and
deferred shares depends on the level of seniority of the colleague.
Bonuses to eligible colleagues are normally paid in June.
Sales commission plans
A range of plans exist for our retail team members which reflect the size and complexity of the stores. Targets can be based on
individual objectives for larger stores or team-based objectives for smaller stores. The majority of these plans are paid monthly,
sometimes quarterly.
We review these schemes periodically to ensure they adhere to our reward principles and support good client outcomes.
The LTIP is currently available to Executive Directors and Senior Management. LTIP awards are granted annually. Malus and clawback
provisions are in place.
The vesting period is three years and all LTIP participants are subject to an additional two-year holding period.
Eligible colleagues and details of award opportunity are set out below:
Level
Group CEO
Group CFO
Senior Management
No. of eligible colleagues
Targeted ranges (% of salary)
1
1
20
200%
175%
20%-80%
The Company operates a defined contribution pension arrangement, which all UK colleagues are entitled to participate in.
The Executive Directors are entitled to receive an employer pension contribution of 3% of salary, which is aligned with the level
available to the majority of the wider workforce in the UK.
In the US the Company offers a 3% of salary 401k employer match.
We offer a suite of benefits across the Group, which are designed to be appropriate for different roles and functions. These include
health insurance (for all US colleagues and some UK colleagues), and in the UK, season ticket loans, a cycle to work scheme and a
Health Cash Plan was introduced in June 2022. Life cover is offered to varying degrees depending on grade.
We operate an Employee Assistance Programme (EAP) in the UK. This is intended to help colleagues deal with any personal
problems that may adversely impact their work performance, health and/or wellbeing.
All of our colleagues are entitled to colleague discounts, subject to the rules of the relevant schemes.
All-employee share schemes
Our colleagues are able to participate in our employee share save schemes in the UK and US.
2 04
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 A summary of the Company’s general policies is as follows:
Policy
Reward
Description
We have an ethical pay policy, whereby we ensure that our pay rates are ahead of the National Living Wage. As indicated above, we have
implemented interim reviews for relevant groups of colleagues when deemed necessary to guarantee compliance with the legislation, and to ensure
that our pay rates remain competitive with those of our main competitors. The Group has previously undergone a National Living Wage audit from
HM Revenue & Customs, with a very positive result.
Recognition and
celebration
Our recognition programme, VibE, provides all colleagues with the ability to recognise and celebrate achievements across the colleague population
instantly via a digital platform. In FY22 we launched Workplace, a two way, interactive platform that enables colleagues to engage with one another,
share Company and personal news and recognise and celebrate achievements across the Group.
Development
opportunities
Diversity & Inclusion
We are proud of our wide range of training and development programmes both in the UK and US, and we work closely with our brand partners to
ensure that our colleagues are true experts in our category. Our e-learning modules make learning and personal development accessible to all.
The Company is committed to an active Diversity & Inclusion Policy from recruitment and selection, through training and development,
performance reviews and promotion. All decisions relating to employment practices are objective, free from bias and based solely upon work
criteria and individual merit. The Company is responsive to the needs of its colleagues, clients and the community. We are an organisation that seeks
to make use of everyone’s talents and abilities, and where diversity is valued. The Company ensures that its promotion and recruitment practices
are fair and objective and encourages the continuous development and training of its colleagues, as well as the provision of equal opportunities for
the training and career development of all colleagues. Further details of this are shown on pages 124 to 128.
GENDER PAY
UK legislation requires employers with more than 250 colleagues to disclose information on their gender pay gap on an annual basis. We have published our fifth disclosure
of the pay gap based on amounts paid in the April 2021 payroll. The bonus gap was based on incentives paid in the year to 31 March 2021. The mean gender pay gap at
the Group is 25%, compared to 28% last year. The mean bonus gap at the Group is 40%, compared to 51% last year. Whilst there is still some way to go, we are
encouraged by the progress we have made and expect it to continue as the Group continues to grow. The full report, including details on the initiatives we have underway
to help close our gender pay gap, is available on our website thewosgroupplc.com.
REMUNER ATION AND ALIGNMENT WITH PERFORMANCE
CEO pay ratio
Our CEO to employee pay ratios for FY20 to FY22 are set out in the table below:
Financial year
FY22 (reported)
FY21 (reported)
FY20 (reported)
FY20 (excluding one-off IPO award)1
Method used
25th percentile pay ratio
50th percentile pay ratio
75th percentile pay ratio
Option A
Option A
Option A
Option A
253:1
61:1
317:1
25:1
213:1
51:1
262:1
21:1
157:1
37:1
179:1
14:1
Notes
1. The CEO single figure of remuneration for FY20 included the one-off IPO award (which had a value of £5,999,999 based on the IPO price of £2.70) to Brian Duffy. On the Company’s Admission, Brian Duffy was
granted a one-off award in the form of a nil-cost option by the principal selling shareholder over some of their shares, in recognition of his contribution to the Company up to Admission and to ensure ongoing
incentivisation and retention in his role following IPO. The terms of this award were agreed in FY19 (and can be found on pages 75 and 76 of the 2019 Annual Report) and subsequently finalised early in FY20 and
as such, it was included in the FY20 single total figure of remuneration.
2 0 5
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS D I R E C TO R S ' R E M U N E R AT I O N R E P O RT
continued
Details of salary and total pay and benefits as required under the regulations are set
out below:
CEO base salary (£’000): 500
CEO total pay and benefits (£’000): 5,567
NOTES ON METHODOLOGY
In determining the quartile figures, the hourly rates were annualised using the same
number of contractual hours as the CEO. Actual pay and benefits were calculated
for all UK colleagues at the snapshot date and subsequently ranked in order to
identify the relevant person at each quartile. For the purpose of the calculations the
following elements of pay were included (if applicable) for all colleagues:
Employee figures (£’000)
25th percentile employee
50th percentile employee
75th percentile employee
Salary
21.3
20.6
29.0
Total pay and
benefits
22.0
26.1
35.5
The Company has used Option A to calculate the CEO pay ratio. The Company
feels that using comparable single figure data ensures the most like for like
comparison of CEO pay against the pay levels of colleagues at the 25th, 50th and
75th percentiles. We have determined the individuals at the 25th, 50th and 75th
percentiles as at 1 May 2022, the last day of the financial year.
The CEO pay ratio has increased during the year due to the vesting of the first LTIP
award as a listed company, based on performance to the end of FY22. The FY21
and FY20 ratios do not include a value in respect of the LTIP, whereas the FY22
ratio includes £4.29 million in respect of our first LTIP award vesting in the year and
therefore accounts for a significant element of the ratio change. As previously
noted, our EPS performance significantly exceeded the maximum target set and we
are delighted that our first LTIP award vested in full. The CEO’s pay is made up of a
greater proportion of incentive pay than for colleagues generally, and this leads to a
higher degree of variability in his overall pay each year. LTIPs are provided in shares,
and therefore the significant increase in share price over the three years magnifies
the impact of the long term incentive award vesting. The LTIP is currently available
to Executive Directors and Senior Management.
We recognise that the ratio is driven by the different structure of the pay of our
CEO versus that of our colleagues generally, as well as the make-up of our
workforce. What is important from our perspective is that this ratio is influenced
only by the differences in structure, and not by divergence in fixed pay between the
CEO and wider workforce. The Remuneration Committee reviews information
about colleague pay, reward and progression policies of the Company and is
comfortable that the median pay ratio is consistent with these policies.
– Annual basic salary
– Private medical insurance value
– Car or car allowance
– Employer pension contribution (noting that the current CEO continues to
waive his employer pension contribution)
– Bonus earned in the year in question
– LTIP value
– Management incentive plan value
For FY22, the CEO received an annual bonus of 100% of maximum i.e. 150% of
salary and the LTIP award, which was granted in July 2019, vested at 100% of
maximum. See page 198 for further information on the factors considered by the
Remuneration Committee when determining FY22 bonus outcomes. No elements
of pay have been omitted. Where required, remuneration was approximately
adjusted to be on a full-time and full-year equivalent basis based on the colleague’s
contracted hours and the proportion of the year they were employed.
Percentage change in Directors’ remuneration
The following table shows how the percentage change in each Director’s salary/
fees, taxable benefits and annual bonus from FY20 to FY22 compares with the
average percentage change in each of those components of pay for the UK-based
colleagues of the Group as a whole.
This table will build up over time to a five-year comparison as required by the
reporting regulations. The regulations prescribe that all employees of the listed
company, excluding Directors, should be included in the average employee
calculation. However, as the Watches of Switzerland Group PLC does not have any
colleagues other than the two Executive Directors, no statutory disclosure can be
provided in respect of colleagues. Therefore, the Company has chosen to voluntarily
disclose the information in the table below using UK full-time colleagues as the
comparator group; this group was chosen on the basis that the majority of our
workforce is UK-based.
2 0 6
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Year-on-year changes in pay for Directors compared to the average UK employee increase:
Name
Executive Directors
Brian Duffy
Bill Floydd3
Anders Romberg4
Non-Executive Directors
Ian Carter5
Tea Colaianni
Robert Moorhead
Rosa Monckton MBE
Chabi Nouri7
FY20 to FY21
FY21 to FY22
Salary/Fees
Taxable
benefits
Annual
bonus
Salary/Fees
Taxable
benefits
Annual
bonus
0%
n/a
0%
n/a
0%
0%
0%
n/a
2.7%
n/a
(43.0)%
n/a
n/a
n/a
n/a
n/a
n/a1
n/a
n/a1
n/a
n/a
n/a
n/a
n/a
n/a1
4.3%2
n/a
(30.4)%
(0.6)%
n/a
(27.7)%
4.3%
n/a
(30.4)%
0%
10.0%6
10.8%6
18.3%6
n/a
9%
0%
0%
0%
0%
n/a
n/a
n/a
n/a
n/a
n/a
(15.5)%8
35%
Average percentage increase for UK employees
5.0%
4.0%
Notes
1. The Group bonus scheme did not trigger in FY20.
2. At the beginning of the pandemic, Brian Duffy took a temporary voluntary pay reduction in FY21.
3. Bill Floydd was appointed as CFO with effect from 1 January 2022.
4. Anders Romberg stepped down as CFO and as an Executive Director of the Board with effect from 1 January 2022.
5. Ian Carter was appointed as Chair of the Board on 1 November 2020.
6. Increase in Non-Executive Director fees is due to an additional fee being paid for membership of the ESG Committee and for the payment of chair of the ESG Committee.
7. Chabi Nouri was appointed as an independent Non-Executive Director with effect from 1 May 2022 and is therefore not included in the table above.
8. Reduction in taxable benefits is due to a move to a hybrid and electric car fleet.
Total Shareholder Return
The graph below shows the Group’s TSR performance (share price plus dividends
paid) compared with the performance of the FTSE 250 (excluding Investment
Trusts) Index and the FTSE 350 General Retailers, since the Company’s IPO in June
2019. These indices have been selected because the Company believes that the
constituent companies are the most appropriate for this comparison for the Group.
This chart will be built out in future reports until it provides a picture of performance
over ten years.
400
350
300
250
200
150
100
50
0
9
1
0
2
/
5
0
/
0
3
m
o
r
f
R
S
T
d
e
s
a
b
e
R
2019
2020
2021
2022
Watches of Switzerland Group PLC
FTSE 350 General Retailers
FTSE 250 (ex. Investment Trusts)
CEO remuneration since IPO
The Remuneration Committee does not believe that the remuneration paid whilst
the Company was private is relevant to the remuneration following IPO. As such,
FY20 was the first financial year where the Company was listed. We will add to this
table each year until a full ten-year history is shown.
Year
Incumbent
Single figure of remuneration
(excluding one-off IPO award)1
% of max annual bonus earned
% of max LTIP awards vesting
FY20
FY21
FY22
B. Duffy
B. Duffy
B. Duffy
£6,512,387
(£512,388)
£1,221,337
£5,567,123
0%
n/a
100%
n/a
100%
100%
Notes
1. The CEO single figure of remuneration for FY20 included the one-off IPO award (which had a value of
£5,999,999 at grant) to Brian Duffy. On the Company’s Admission, Brian Duffy was granted a one-off
award in the form of a nil-cost option by the principal selling shareholder over some of their shares, in
recognition of his contribution to the Company up to Admission and to ensure ongoing incentivisation
and retention in his role following IPO. The terms of this award were agreed in 2019 (and can be found
on pages 75 and 76 of the 2019 Annual Report) and subsequently finalised in the year ended 26 April
2020 and as such, it was included in the FY20 single total figure of remuneration.
Relative importance of spend on pay
The table below shows the percentage change in total employee pay expenditure
and shareholder distribution (i.e. dividends and share buybacks) from the financial
year ended 2 May 2021 to the financial year ended 1 May 2022.
Relative importance
of the spend on pay
Colleague remuneration
Distribution to shareholders
FY22
£m
119.9
£0
FY21
£m
101.3
£0
%
Change
18.4%
0%
During the year the Company has not paid a dividend. In April 2022, the Company
instructed the trustees of the Employee Benefit Trust to purchase 648,526 shares.
These shares are held in trust and will be used to satisfy future share option vestings.
2 07
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
D I R E C TO R S ' R E M U N E R AT I O N R E P O RT
continued
A N NUA L R E PORT ON
R E MU NE R ATION
SINGLE TOTAL FIGURE OF REMUNER ATION (AUDITED)
The table below sets out the single total figure of remuneration and breakdown for each Director in respect of FY22. Figures provided have been calculated in accordance with
the UK disclosure requirements: The Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2019 (Schedule 8 to the Regulations).
Name
Period
Salary/Fees
£
Taxable
benefits2
£
Bonus3
£
LTIP4
£
Pension 5
£
Other6
£
Total Fixed
Remuneration
£
Total Variable
Remuneration
£
Total
£
Executive Directors1
Brian Duffy
FY22
500,000
23,281
750,000
Bill Floydd7
Anders Romberg8
FY21
FY22
FY21
FY22
479,167
126,667
n/a
233,333
23,419
5,989
n/a
24,229
718,751
158,333
n/a
233,333
FY21
335,417
33,499
335,417
Non-Executive Directors1
Ian Carter9
FY22
190,000
6,752
Tea Colaianni10
Robert Moorhead10
Rosa Monckton MBE10
Chabi Nouri11
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
95,000
81,667
74,271
71,667
64,688
70,833
59,896
–
n/a
0
0
0
0
0
0
0
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
4,293,842
999,999*
3,293,843**
0
0
n/a
2,264,699
527,430*
1,737,269**
0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0
0
3,800
n/a
7,000
10,719
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
5,567,123
523,281
5,043,842
n/a
1,221,337
48,891
343,680
n/a
2,762,594
502,586
136,456
n/a
264,562
718,751
207,224
n/a
2,498,032
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
715,052
379,635
335,417
196,752
95,000
81,667
74,271
71,667
64,688
70,833
59,896
–
n/a
196,752
95,000
81,667
74,271
71,667
64,688
70,833
59,896
–
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Notes
1. The salary/fees for the Executive Directors and Non-Executive Directors in FY21 reflect the voluntary temporary reduction of 25% that was effective for three months from 1 April 2020 until 30 June 2020. The amounts
waived for the CEO and CFO were £20,833 and £14,583 respectively. There was no salary increase for the Executive Directors from FY21 to FY22 and the difference between FY21 and FY22 shown above reflects the
end of this temporary reduction only. The amounts waived for each of the Non-Executive Directors, in the order in which they are listed in the table above, are n/a, £3,228, £2,812 and £2,604, n/a.
2. Taxable benefits for Executive Directors includes one or more of: private healthcare; accommodation when attending different offices; company car (including private fuel); or a car allowance. Taxable benefits for
Non-Executive Directors includes reimbursement for travel and accommodation costs.
3. The annual bonus is paid two-thirds in cash and one-third in shares, with the portion deferred into shares subject to continued employment for three years but with no further performance conditions attached.
This year the annual bonus paid out at 100% of maximum for all Executive Directors. See page 209 for further details on the annual bonus outturn for FY22.
4. The LTIP award vested at 100% of maximum and a two-year holding period applies following vesting. The share price also increased significantly over the period from £2.70 on award to £11.59 (330% increase, based
on the three month average to year end used to value the award for the single figure purpose) delivering exceptional returns to shareholders. Of the total amount, £3,293,843 and £1,737,269 for the CEO and the
former CFO respectively reflects the share price appreciation in the period, since grant. There was no discretion exercised in respect of the awards.
5. No Director has a prospective entitlement to receive a defined benefit pension.
6. Other remuneration consists of share awards granted to Bill Floydd on his appointment to replace the final two tranches of the 2017/18 LTIP award forfeited by Bill on leaving his previous employer. As disclosed in
his previous employer’s 2020/21 Annual Report, 47,013 shares of the 2017/18 LTIP award vested following the assessment of the LTIP performance conditions. The first tranche of this award, 15,671 shares, vested
to Bill in October 2021 while he remained in employment and therefore is not being replaced. The amount shown in the table above comprises 1,721 shares, granted to replace the second tranche of the 2017/18
LTIP award, which will vest in October 2022 (subject to a one year holding period) and 1,722 shares, granted to replace the third tranche of the 2017/18 LTIP award, which will vest in October 2023. The value shown
in the table is based on a share price of £14.20, being the closing share price on 31 December 2021, the last trading day before his appointment. Further detail in respect of the awards can be found on page 210 of
this Report.
7. Bill Floydd was appointed as CFO and Executive Director with effect from 1 January 2022.
8. Anders Romberg stepped down as CFO and as an Executive Director of the Board with effect from 1 January 2022. He remained employed by the Company until 25 February 2022.
9. Ian Carter was appointed as Chair of the Board on 1 November 2020.
10. Fees for FY22 include fees in respect of the new ESG Committee. There has been no increase in any of the individual fee components.
11. Chabi Nouri was appointed to the Board with effect from 1 May 2022. She received fees of £nil in respect of FY22.
* Value at grant.
** Share price appreciation.
2 0 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
ANNUAL BONUS OUTCOMES IN FY22 (AUDITED)
The maximum bonus opportunity for the CEO, CFO and former CFO for FY22 was 150%, 125% and 100% of salary respectively. Two-thirds of the bonus award will be
paid out in cash with the remaining one-third deferred into shares and subject to a three-year vesting period. Details of the targets used to determine bonuses in respect
of FY22 and the extent to which they were satisfied are shown in the table below:
Performance
condition
Adjusted EBIT
Weighting
100%
Threshold
performance
required (20% of
Max Bonus)
Maximum
performance
required (100% of
Max Bonus)
Actual
performance
£91.3m
£98.7m
£130.3m
Percentage of
maximum
performance
achieved
100%
Bonus value achieved
Brian Duffy
£750,000
Bill Floydd Anders Romberg
£158,333
£233,333
Notes
1. The annual bonus value for the CFO and former CFO have been pro-rated for time employed as Directors employment in the financial year.
FY22 is the third year of operation of the Bonus Plan. In determining the outcome of the bonus, the Remuneration Committee assessed the formulaic annual bonus
outcome for FY22 against a range of factors including the wider stakeholders’ experience as outlined in the Remuneration Chair’s letter on page 196.
The Remuneration Committee was satisfied that the outcome was reflective of the underlying performance of the business and determined that the FY22 bonus outturn
for the CEO, CFO and former CFO was maximum, which equated to 150% of salary, 125% of salary and 100% of salary respectively (based on the pro-rated salaries for
the CFO and former CFO). The CFO’s and the former CFO’s annual bonus has been pro-rated for their time in employment with the Company in the financial year
(based on the pro-rated salaries for the CFO and former CFO). The CFO’s and the former CFO’s annual bonus has been pro-rated for their time in employment with
the Group in the financial year. Two-thirds of the bonus is paid in cash and one-third was paid in deferred shares. No discretion was exercised by the Committee.
LONG TERM INCENTIVE OUTCOMES IN FY22
In July 2019, the Company granted the CEO and the former CFO a long term incentive award of 200% of salary and 175% of salary respectively. The awards were subject
to performance to the end of FY22. Details of the three-year cumulative EPS targets attached to these awards and the extent to which they were satisfied are shown in
the table below. A two-year holding period applies to long term incentive awards following vesting.
Performance condition
Cumulative Adjusted EPS
Threshold
performance
required (20% of
Max LTIP)
Maximum
performance
required (100% of
Max LTIP)
Actual
performance
62.11p
68.65p
82.2p
Weighting
100%
Vesting
level
100%
The single figure for the CEO has increased from £1.22 million in FY21 to £5.57 million in FY22. This increase reflects the fact that our first LTIP award as a listed company
vested based on performance to the end of FY22 which accounts for £4.29 million of this value. As noted above, our EPS performance significantly exceeded the
maximum target set and we are delighted that our first LTIP award vested in full. The share price also increased significantly over the period from £2.70 on award to £11.59
(330% increase, based on the three month average to year end used to value the award for the single figure purpose) delivering exceptional returns to shareholders.
LONG TERM INCENTIVES AWARDED IN FY22 (AUDITED)
The table below sets out the details of the long term incentive awards granted in FY22, where vesting will be determined according to the achievement of performance
conditions that will be tested in future reporting periods:
Name
Brian Duffy
Award
type
Basis on which
award made
Nil-Cost Options
Annual – 200% of salary
Face value
of award
£999,999
Shares
awarded
106,157
Bill Floydd
Nil-Cost Options
Annual – 175% of salary
£665,000
46,830
Anders Romberg
Nil-Cost Options
Annual – 175% of salary
£612,500
65,021
Percentage of award
vesting at threshold
performance (%)
Maximum percentage
of face value that
could vest (%)
20%
20%
20%
100%
100%
100%
Performance
conditions
EPS (80%)
ROCE (20%)
EPS (80%)
ROCE (20%)
EPS (80%)
ROCE (20%)
The awards for the CEO and the former CFO were granted on 15 July 2021; the face value is calculated with reference to a share price of £9.42, being the closing share
price on 14 July 2021. The award for the CFO was granted on 14 February 2022; the face value is calculated with reference to a share price of £14.20, being the closing
share price on 31 December 2021, the last trading day before his appointment. The awards will vest, subject to the level of performance achieved, in FY24.
80% of the award vests by reference to a three-year cumulative EPS (pre-exceptionals and pre-IFRS 16 adjustment) performance measure with 20% of the award vesting
at a cumulative EPS of 103.7p and 100% of the award vesting at a cumulative EPS of 114.6p. Options vest on a straight-line basis between those targets.
20% of the award vests by reference to a three-year average ROCE performance measure with 20% of the award vesting at an average ROCE of 21.0% and 100% of the
award vesting at an average ROCE of 23.2%. Options vest on a straight-line basis between those targets. ROCE is defined in the Glossary on page 284.
2 09
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS D I R E C TO R S ' R E M U N E R AT I O N R E P O RT
continued
DEFERRED SHARE AWARDS GR ANTED IN FY22 (AUDITED)
The table below sets out the details of the deferred share awards granted under the Company’s 2019 Annual and Deferred Bonus Plan during FY22:
Name
Brian Duffy
Anders Romberg
Award
type
Basis on which
award made
Face value
of award
Nil-Cost Options Deferral of FY21 bonus
£239,579
Nil-Cost Options Deferral of FY21 bonus
£111,787
Shares
awarded
25,433
11,867
The awards for the CEO and the former CFO were granted on 15 July 2021; the face value is calculated with reference to a share price of £9.42, being the closing share
price on 14 July 2021. The awards will vest, subject to continued employment or good leaver status, in FY24.
The FY21 bonus shares awarded to Anders on 15 July 2021, are to be exercised within six months of leaving the Company. After exercise the shares will be held within a
nominee account for 12 months in line with the post cessation executive shareholding guidelines, subject to selling sufficient shares to cover any tax liability that may arise.
REPL ACEMENT AWARDS GR ANTED TO BILL FLOYDD IN FY22 (AUDITED)
The table below sets out details of the replacement awards granted to Bill Floydd, to compensate for the share awards he forfeited on leaving his previous employer:
Name
Bill Floydd
Award
type
Basis on which
award made
Face value
of award
Shares
awarded
Conditional award Replacement award
£24,438¹
£24,452¹
£502,566
1,721
1,722
35,392
Notes
1. These buyout awards were granted under a separate Agreement in accordance with Listing Rule 9.4.2. The key terms of the Agreement mirror the key Terms of the Company’s Long Term Incentive Plan.
The replacement awards were granted on 14 February 2022, and the face value is calculated with reference to a share price of £14.20, being the closing share price on 31
December 2021, the last trading day before his appointment. Further details in relation to the replacement awards are set out below.
– In respect of the final two tranches of the 2017/18 LTIP award – 3,443 shares were granted to Bill to compensate him for the portion of the 2017/18 LTIP award forfeited on
leaving his previous employer. As disclosed in his previous employer’s 2020/21 Annual Report, 47,013 shares of the 2017/18 LTIP award vested following the assessment of his
previous employer’s performance conditions. The first tranche of this award, 15,671 shares, vested to Bill in October 2021 while he remained in employment with his previous
employer and therefore is not being replaced by Watches of Switzerland. 1,721 shares were granted to Bill to replace the second tranche of the 2017/18 LTIP award (face value:
£24,438) which will vest in October 2022 (subject to a one-year holding period). 1,722 shares were granted to Bill (face value: £24,452) to replace the third tranche of the 2017/18
LTIP award, which will vest in October 2023 (no holding period will apply). These vesting dates and holding period are in line with the vesting timeline of the forfeited award
– In respect of the 2020/21 LTIP award – 35,392 shares (face value: £502,566) were granted to Bill to compensate for his forfeited 2020/21 LTIP award. This award is
due to vest in December 2023. The portion of the award vesting will be determined by the Company, in line with the original LTIP performance metrics applicable
to the 2020/21 LTIP award, to be disclosed in his former employer’s 2022/23 Annual Report. Any shares that vest will be subject to a two-year holding period. The
vesting date and holding period are in line with the vesting timeline of the forfeited award
– As set out in the ‘Long term incentives awarded in FY22’ section above, Bill also received an award of shares in recognition of joining the Group, which have the same
performance measures, targets, and vesting terms as the 2021 Watches of Switzerland Group LTIP award granted to other members of the Group’s Senior Management in
July 2021. The award will vest in July 2024 and will be subject to a two-year holding period. The award was made on an annualised basis, and equivalent to 175% of base salary,
given that on leaving his previous employer Bill was not eligible to receive an LTIP award for the financial year
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 DIRECTORS’ SHARE INTERESTS (AUDITED)
Name
Executive Directors
Brian Duffy
Bill Floydd
Anders Romberg2
Non-Executive Directors
Ian Carter
Tea Colaianni
Robert Moorhead
Rosa Monckton MBE
Current
shareholding
Beneficially
owned
Deferred shares
not subject to
performance
conditions
LTIP interests
subject to
performance
conditions
Shareholding
requirement
% salary
Shareholding
requirement met?
7,696,999
7,696,999
–
–
1,283,512
1,283,512
25,433
3,443
11,867
789,027
82,222
483,279
43,700
24,447
22,125
8,904
43,700
24,447
22,125
8,904
200%
200%
200%
n/a
n/a
n/a
n/a
Yes
No1
Yes
n/a
n/a
n/a
n/a
1 The minimum shareholding requirement can be built up within five years of appointment.
2 Shares held and LTIP interest as at 1 January 2022, the date Anders stepped down from the Board.
The market price of shares at 29 April 2022 was 1,021p and the range during FY22 was 662p to 1,518p.
Brian Duffy exercised his one-off IPO award during the year. As a result of the exercise of the option, Brian Duffy retained 1,222,222 shares in the Company.
Details of payments Anders Romberg received or will receive following his stepping down as an Executive Director are set out below. No other payments were made to
past Directors in FY22.
As announced previously, Anders Romberg stepped down as CFO and as an Executive Director of the Company with effect from 1 January 2022. Anders remained in
employment with the Company until 25 February 2022 supporting handover to the new CFO, Bill Floydd. Anders has not and will not receive any loss of office payments,
nor will he be paid any further remuneration other than that accrued up to his date of leaving. On his retirement, Anders received a watch from the Company with a
taxable value of £8,230 as a thank you for his seven years of service and his significant contribution to the business during this period.
The Remuneration Committee has treated Anders as a Good Leaver for the purpose of incentives. Anders is eligible to receive an annual bonus for FY22 based on
performance and pro-rated for time in employment, as shown on page 209. Anders is entitled to retain his unvested long term incentive awards, subject to the achievement
of performance at the normal vesting date. For this purpose, his unvested awards have been pro-rated for the period he was employed by the Company during the
performance period, with the number of shares retained being 195,344, 90,386 and 12,642 in respect of the awards granted in FY20, FY21 and FY22 respectively. Any
shares that vest must be held by Anders for 24 months following the vest date. Sufficient shares may be sold on the vest date to cover the tax liability which will crystallise.
11,867 shares awarded to Anders on 15 July 2021, under the Company’s Annual Deferred Bonus Plan, are to be exercised within six months of leaving the Company. After
exercise the shares will be held within a nominee account for 12 months, from the date of retirement, in line with the post cessation executive shareholding guidelines,
subject to selling sufficient shares to cover the tax crystallisation which will arise on the transfer.
APPROVAL OF THE DIRECTORS’ REMUNER ATION REPORT
The FY22 Directors’ Remuneration Report and Directors’ Remuneration Policy (as set out on the following pages) will be subject to a shareholder vote at the 2022 AGM.
The table below sets out the actual voting in respect of resolutions regarding remuneration at previous Annual General Meetings.
Approve the 2021 Directors’
Remuneration Report (2021 AGM)
Approve the 2019 Directors’
Remuneration Policy (2019 AGM)
Votes For
211,966,138
% For
99.06%
2,007,986
211,784,331
99.99%
14,400
0.94%
0.01%
213,974,124
538,806
211,798,731
0
Votes Against
% Against
Total Votes
Votes Withheld
TEA COLAIANNI
CHAIR OF THE REMUNERATION COMMITTEE
6 July 2022
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PROPOSE D 2022 DIR ECTOR S’
R E MU NE R ATION POL IC Y
This section contains Watches of Switzerland Group PLC’s proposed Directors’ Remuneration Policy (the ‘Remuneration Policy’) that will govern and guide the Company’s
future remuneration payments to Directors. The Remuneration Policy described in this section will be subject to approval by shareholders at the Company’s AGM on 1
September 2022, and is intended to apply from the 2022 AGM for three years to the end of the AGM in 2025 (‘Policy Period’).
The Remuneration Committee has established the Remuneration Policy for the remuneration of the Chair and Executive Directors, and the Board has established the
Remuneration Policy for the remuneration of the Non-Executive Directors.
PROCESS TO DETERMINE NEW REMUNER ATION POLICY
In order to determine the Remuneration Policy the Remuneration Committee:
– Independently reviewed the impact of the Company’s strategy on remuneration and considered whether the current approach to remuneration continues to be
the best way to align the Policy with our growth strategy
– Sought advice from its independent remuneration consultant on market practice and current investor sentiment in formulating the Remuneration Policy
– Consulted with the Chair of the Board, CEO and CFO on the proposed Remuneration Policy
During its deliberations on the Remuneration Policy, the Remuneration Committee were mindful of the potential for conflicts of interest and sought to minimise these
through an open and transparent process, both internally and externally, by seeking independent advice, and through consultation with shareholders.
REMUNER ATION STR ATEGY
The Company’s Remuneration Policy is designed to provide a framework to:
– Promote the long term sustainable success of the Group
– Support the Group strategy; linked to KPIs
– Recruit, retain and develop high quality people who are experts in their field
– Focus the Executive Directors on the delivery of the Group’s growth strategy
– Provide an appropriate balance between fixed and performance-related pay to support a high-performance culture and a platform for delivering superior service
to our clients and enabling expansion of the business and delivering value for our shareholders
– Provide a remuneration structure which is easily understood by all stakeholders
– Adhere to principles of good corporate governance and appropriate risk management
In determining the Remuneration Policy the Remuneration Committee paid particular attention to Provision 40 of the UK Corporate Governance Code 2018 (the
‘Code’). The following table summarises the Committee’s views of how the Remuneration Policy aligns with these principles:
Factor: Clarity
– The Remuneration Policy sets out clearly the basis for any payments and the terms of the incentive arrangements operated
– The performance conditions used for the Annual Bonus Plan and Long Term Incentive Plan are based on the Group’s KPIs ensuring direct alignment between the
successful implementation of the strategy and the reward provided to the Executive Directors
Factor: Simplicity
– The Incentive Plans are in line with standard UK market practice and therefore should be familiar to all stakeholders
Factor: Risk
– Setting defined limits on the maximum awards which can be under the Annual Bonus Plan and the Long Term Incentive Plan
– Requiring the deferral of a substantial proportion of the Incentives in shares for a material period of time
– Aligning the performance conditions for incentives with the strategy of the Company
– Ensuring a focus on sustainable performance through the Long Term Incentive Plan and shareholding guidelines as well as post-employment shareholding requirements
– Ensuring there is sufficient flexibility to adjust incentive payments through malus and clawback
– Ensuring an overriding discretion to depart from formulaic outcomes under the Incentives
These features outlined above mitigate against the inherent risk of incentives creating the wrong behaviours by:
– Limiting the maximum value that can be earned
– Deferring a significant proportion of the value earned in shares, for the long term which helps ensure that the performance earning the award was sustainable
and thereby discouraging short term behaviours
– Aligning any reward to the agreed strategy of the Company
– Focusing the Long Term Incentive Plan on sustainable performance over the longer term
– Reducing the awards or cancelling them if the behaviours giving rise to the awards are inappropriate
– Reducing the awards or cancelling them, if it appears that the criteria on which the award was based do not reflect the underlying performance of the Group
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Factor: Predictability
– The Remuneration Policy clearly sets out the potential rewards available to the Executive Directors depending on the performance achieved. In addition, all the
safeguards set out in the Risk section are disclosed as part of the Remuneration Policy
Factor: Proportionality
– The Company’s incentives clearly reward the successful implementation of the strategy and, through deferral and measurement of performance over a number of
years, ensure that the Executive Directors have a strong drive to ensure that the performance is sustainable over the long term. The Remuneration Committee
has overriding discretion to depart from the formulaic outcomes under the incentive plans if they do not reflect underlying business performance or the
experience of stakeholders which mitigates the risk of reward for poor performance
Factor: Alignment to culture
– A key tenet of the Group culture is a focus on ensuring long term sustainable performance. This is reflected in the type of performance conditions used in the
incentive plans
– The focus on share ownership and long term sustainable performance is also a key part of the Company’s culture
OPER ATION OF THE REMUNER ATION POLICY
The Remuneration Policy aims to align the interests of the Executive Directors, Senior Management and colleagues to the long term interests of shareholders and aims
to support a high performance, collegiate and inclusive culture with appropriate reward for superior Group, business unit and individual performance without creating
incentives that will encourage excessive risk taking or unsustainable Company performance. Overall remuneration levels have been set at a level that are considered by
the Remuneration Committee to be appropriate for the size and nature of the business, having taken specialist, independent advice where necessary. There has been no
increase to any element of the CEO’s remuneration package since our admission to the London Stock Exchange in June 2019, despite the significant increase in the size of
the business.
Desired Remuneration Policy position
The Remuneration Committee feels that it is necessary to have a specific policy position for new members of the Board to take into account that the Company continues
to mature and the size and complexity of its operations continue to increase. The CEO has been with the business since 2015 and has elected not to take an annual pay
rise at any time during his tenure. He retains a substantial equity holding in the business and his remuneration, in particular the level of his base salary, is at the lower end
of market compared to other companies of a similar size and complexity.
In the event that we were to appoint a new Executive Director, the desired policy position for remuneration (compared to the FTSE 250, excluding financial services) is
as follows:
– Median – fixed pay
– Median – upper quartile incentive opportunities
– Total target remuneration at around the median
The Remuneration Committee feels that this approach is aligned with the performance-based culture of the Group with market level of rewards only being earned if
performance is delivered with the opportunity to earn more than median for exceptional performance. The Remuneration Policy position was taken into account by the
Remuneration Committee when the remuneration package for the new CFO was agreed.
Key changes to our Remuneration Policy
Following the Remuneration Committee’s detailed review of the current Remuneration Policy, the Remuneration Committee concluded that the current Remuneration
Policy remains fit-for-purpose and continues to support the execution of our long term strategy. As such, no major changes are proposed.
In line with best practice and to further support sustainable decision-making, the Committee has extended the post-employment shareholding requirement for the CEO,
such that he will be required to retain 100% of his pre-cessation shareholding requirement for a period of two years from the date of cessation of his employment. This
is in line with the approach that was agreed with our new CFO.
Other minor changes have been made to the wording of the Remuneration Policy to aid operation, increase flexibility in certain areas in-line with standard market practice
and to increase clarity.
Given the increasing internationalisation of the business, we have included the option to introduce a travel allowance for the Chair and Non-Executive Directors where
they are required to travel outside of their country of residence to attend board meetings. We would consider introducing this allowance should it become appropriate.
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continued
Remuneration Policy summary
The following table summarises the key components of Executive Director remuneration:
Element of remuneration and link to strategy: Base salary
Provides a base level of remuneration to support recruitment and retention of Executive Directors with the necessary experience and expertise to deliver the Group’s
strategy.
Operation
An Executive Director’s basic salary is set on appointment and normally reviewed annually or when there is a change in position or responsibility. When determining an
appropriate level of salary, the Remuneration Committee considers factors such as:
– Pay increases to other colleagues
– Remuneration practices within the Group
– Any change in scope, role and responsibilities including as a result of any changes in the size and complexity of the organisation
– The general performance of the Group and each individual
– The experience of the relevant Director
– The economic environment
Individuals who are recruited or promoted to the Board may, on occasion, have their salaries set below the targeted policy level until they become established in their role. In
such cases subsequent increases in salary may be higher than the general rises for colleagues until the target positioning is achieved.
Maximum opportunity
Whilst there is no maximum salary, increases will normally be in line with the typical increases awarded to other colleagues in the Group.
However, the Remuneration Committee may determine larger increases in circumstances such as, but not limited to, there being a material change in the size and
responsibilities of the role (including as a result of a significant change in Group size and/or complexity of operations), or when the overall remuneration opportunity has been
set lower than the market and larger increases are justified based on skills/performance in role.
Performance conditions and recovery provisions
A broad assessment of individual and business performance is used as part of the salary review.
No recovery provisions apply.
Element of remuneration and link to strategy: Pension
Provides a minimum level of benefits to support a low fixed cost and a performance-based Remuneration Policy.
Operation
The Group provides a pension contribution or allowance in line with corporate governance best practice aligned with the rate of pension contribution available to the majority
of the wider workforce. This contribution or allowance will be a non-consolidated allowance and will not impact any incentive calculations.
Maximum opportunity
The maximum value of the pension contribution allowance is in line with the rate of employer pension contribution available to the majority of the wider workforce (currently
this is 3.0% of salary).
Performance conditions and recovery provisions
No performance or recovery provisions applicable.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Element of remuneration and link to strategy: Benefits
Provides a minimum level of benefits to support a low fixed cost and a performance-based Remuneration Policy.
Operation
Benefits may include (but are not limited to) provision of a car and coverage of its cost (including business fuel costs), car allowance, membership of any private health
insurance or medical scheme operated by the Group (including eligibility for spouse/civil partner and dependent children), death in service life assurance, subsistence expenses,
mobile telephone expenses and staff discounts.
Executive Directors may participate in any all-employee plans on the same basis as other colleagues up to HMRC approved limits.
The Committee may introduce other benefits if it is considered appropriate to do so taking into account the approach used for the wider workforce.
Executive Directors shall be reimbursed for all reasonable expenses and the Company may settle any tax incurred.
Where an Executive Director is required to relocate to perform their role, appropriate one-off or ongoing benefits may be provided (e.g. housing, schooling etc).
Maximum opportunity
The maximum value is the cost of providing the relevant benefits.
Performance conditions and recovery provisions
No performance or recovery provisions applicable.
Element of remuneration and link to strategy: Annual bonus
The Annual Bonus Plan provides a significant incentive to the Executive Directors linked to achievement in delivering goals that are closely aligned with the Company’s strategy
and the creation of value for shareholders.
In particular, the Annual Bonus Plan supports the Company’s objectives allowing the setting of annual targets based on the business’ strategic objectives at that time, meaning
that a wider range of performance metrics can be used that are relevant and achievable.
Operation
The performance period is normally one financial year with payout determined by the Remuneration Committee following the year-end, normally based on the achievement
against a range of performance targets.
Two-thirds of the bonus award will normally be paid out in cash with the further one-third normally deferred into shares subject to a three-year vesting period. Deferred
shares will be in the form of conditional awards or nil-cost options. There are no further performance targets on the deferred amount.
Participants may be entitled to dividends or dividend equivalents (where applicable) on the deferred share awards to the extent they vest representing the dividends paid
during the deferral period.
Maximum opportunity
The Remuneration Committee will determine the maximum annual participation in the Annual Bonus Plan for each year, which will not exceed 150% of salary.
Normally 20% of the maximum annual bonus pays out for threshold performance with 50% of the maximum bonus paying out for on-target performance. The Committee
retains discretion to vary these percentages if considered appropriate in the circumstances.
Performance conditions and recovery provisions
The specific performance measures, underpins, targets and weightings may vary from year to year in order to align with the Group’s strategy over each year. The measures
may include financial and non-financial measures. However, at least 50% of the awards will be linked to financial measures.
The measures will be dependent on the Group’s goals over the year under review and directly link to the key measurable strategic milestones to incentivise Executive
Directors to focus on the execution of the strategy. The performance targets will be calibrated each year to align with the announced strategic plan.
The Remuneration Committee retains discretion in exceptional circumstances to change performance measures, underpins and targets and the weightings attached to
performance measures part-way through a performance period if there is a significant and material event which causes the Remuneration Committee to believe the original
measures, underpins, weightings and targets are no longer appropriate.
Discretion may also be exercised in cases where the Remuneration Committee believes that the bonus does not reflect the underlying financial or non-financial performance
of the participant or the Group over the relevant period, or that such payout level is not appropriate in the context of circumstances that were unexpected or unforeseen
when the targets were set. When making this judgement the Committee may take into account such factors as the Committee considers relevant. The exercise of this
discretion may result in a downward or upward movement in the amount of bonus earned resulting from the application of the performance measures and underpins.
Any adjustments or discretion applied by the Remuneration Committee will normally be fully disclosed in the following year’s Remuneration Report.
The actual performance targets set will not normally be disclosed at the start of the financial year, as they are considered to be commercially sensitive. These will be reported
and disclosed retrospectively at the end of the year in order for shareholders to assess the basis for any bonus outcomes.
The Annual Bonus Plan contains malus and clawback provisions.
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continued
Element of remuneration and link to strategy: Long Term Incentive Plan
Awards are designed to incentivise the Executive Directors over the longer term to successfully implement the Group’s strategy.
Operation
Under the Long Term Incentive Plan (LTIP), the Remuneration Committee may award annual grants of performance share awards in the form of conditional awards or
nil-cost options.
LTIP awards will normally vest three years from the date of grant subject to the achievement of the performance measures.
A two-year holding period will normally apply following the three-year vesting period for LTIP awards granted to the Executive Directors. Upon vesting, sufficient shares can
be sold to pay tax.
Participants may be entitled to dividends or dividend equivalents (where applicable) on the LTIP shares representing the dividends paid during the vesting and holding period.
Maximum opportunity
Maximum value of 200% of salary per annum based on the market value at the date of grant set in accordance with the rules of the LTIP. The maximum value of the LTIP
awards in exceptional circumstances (such as on recruitment) will be 250% of salary.
20% of the award will normally vest for threshold performance and 100% of the award will vest for maximum performance. The Remuneration Committee retains discretion
to vary these percentages if considered appropriate in the circumstances.
Performance conditions and recovery provisions
Awards vest based on performance against stretching targets, normally measured over a three-year performance period. The Remuneration Committee will review and set
weightings and targets for each grant to ensure they remain appropriate.
The Remuneration Committee may change the balance of the measures, or use different measures for subsequent awards, as appropriate. Where material changes are made
to the type of performance conditions it would be the Committee’s intention to consult with shareholders.
The Remuneration Committee retains discretion in exceptional circumstances to change performance measures and targets and the weightings attached to performance
measures part-way through a performance period if there is a significant and material event which causes the Remuneration Committee to believe the original measures,
weightings and targets are no longer appropriate.
Discretion may also be exercised in cases where the Remuneration Committee believes that the vesting outcome does not reflect the underlying financial or non-financial
performance of the participant or the Group over the relevant period, or that such payout level is not appropriate in the context of circumstances that were unexpected or
unforeseen when the targets were set. When making this judgement the Remuneration Committee may take into account such factors as the Remuneration Committee
considers relevant. The exercise of this discretion may result in a downward or upward movement in the amount of the LTIP vesting resulting from the application of the
performance measures.
Any adjustments or discretion applied by the Remuneration Committee will normally be fully disclosed in the following year’s Directors’ Remuneration Report.
Details of the performance conditions for grants made in the year will be set out in the Annual Report on Remuneration and for future grants in the section headed
Implementation of Remuneration Policy, in the future financial year.
The LTIP contains clawback and malus provisions.
Choice of performance measures and targets
The performance measures selected for the annual bonus and LTIP awards are set on an annual basis by the Committee, to ensure that they remain appropriate to reflect
the priorities for the Company in the year ahead. For FY23, the annual bonus is based on Adjusted EBIT performance, which was selected by the Remuneration
Committee to reflect the successful delivery of a number of KPIs; revenue, sales growth and EBITDA. The performance measures for the FY23 LTIP award will be based
on Adjusted EPS and Return on Capital Employed, which were selected by the Remuneration Committee to reflect the successful delivery of a number of KPIs over the
longer term; revenue, sales growth, capital efficiency and profit. The targets for the performance measures are set taking into account a number of factors, including the
Company’s annual operating plan, strategic priorities, the economic environment and market conditions and expectations.
Discretion within the Remuneration Policy
The Remuneration Committee has discretion in several areas of the Remuneration Policy as set out in this document. The Remuneration Committee may also exercise
operational and administrative discretions under relevant plan rules as set out in those rules (see ‘Operation of incentive plans’ below). In addition, the Remuneration
Committee has the discretion to amend the Remuneration Policy with regard to minor or administrative matters where it would be, in the opinion of the Remuneration
Committee, disproportionate to seek or await shareholder approval.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Operation of incentive plans
The Remuneration Committee will operate all incentive plans according to the rules of each respective plan and the discretions contained therein. The discretions cover
aspects such as the timing of grant and vesting of awards, determining the size of the award (subject to the Remuneration Policy limits), the treatment of leavers,
retrospective adjustment of awards (e.g. for a rights issue, a corporate restructuring or for special dividends) and, in exceptional circumstances, the discretion to adjust
previously set targets for an incentive award if events happen which cause the Remuneration Committee to determine that it would be appropriate to do so. In exercising
such discretions, the Remuneration Committee will take into account generally accepted market practice, best practice guidelines, the provisions of the UK Listing Rules
and the Company’s approved Remuneration Policy.
In exceptional circumstances, the Remuneration Committee retains the discretion to:
– Change the performance measures and targets and the weighting attached to the performance measures and targets part-way through a performance period if there
is a significant and material event which causes the Remuneration Committee to believe the original measures, weightings and targets are no longer appropriate
– Make downward or upward adjustments to the amount of bonus or LTIP shares earned resulting from the application of the performance measures, if the
Remuneration Committee believe that the bonus or LTIP outcomes do not reflect the underlying financial or non-financial performance of the participant or the
Group over the relevant period, or that such payout level is not appropriate in the context of circumstances that were unexpected or unforeseen when the targets
were set. When making this judgement the Committee may take into account such factors as the Committee considers relevant
Legacy arrangements
The Remuneration Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising any discretions available to
it in connection with such payments) notwithstanding that they are not in line with the Remuneration Policy, where the terms of the payment were agreed: (i) before the
Remuneration Policy set out came into effect, provided that the terms of the payment were consistent with any shareholder-approved Directors’ Remuneration Policy
in force at the time they were agreed; or (ii) at a time when the relevant individual was not a Director of the Company (or other persons to whom the Remuneration
Policy set out above applies) and, in the opinion of the Remuneration Committee, the payment was not in consideration for the individual becoming a Director of the
Company or such other person. For these purposes, ‘payments’ includes the Remuneration Committee satisfying awards of variable remuneration and, in relation to an
award over shares, the terms of the payment are ‘agreed’ no later than at the time the award is granted.
This Policy applies equally to any individual who is required to be treated as a Director, under the applicable regulations.
Minimum shareholding guideline
The Remuneration Committee has adopted formal shareholding guidelines that will encourage the Executive Directors to build up over a five-year period and then
subsequently hold a shareholding equivalent to a percentage of salary. This Policy ensures that the interests of Executive Directors and those of shareholders are closely aligned.
The minimum shareholding guideline for Executive Directors is 200% of salary. The Remuneration Committee retains the discretion to increase the shareholding requirements.
In addition, a post-cessation minimum shareholding guideline will apply to Executive Directors who step down from the Board. Leavers will have a requirement to hold 100%
of their pre-cessation shareholding guideline for 24 months from the date they step down from the Board. In the event that a leaver has not met the relevant shareholding
requirement at the point of stepping down from the Board then they would be required to retain their full pre-cessation shareholding for the 24-month period.
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continued
Recruitment Policy
The Group’s approach is that the remuneration of any new recruit will be assessed in line with the same principles as for the current Executive Directors. The
Remuneration Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a preferred candidate with the appropriate calibre and
experience needed for the role. In setting the remuneration for new recruits, the Remuneration Committee will have regard to guidelines and shareholder sentiment as
well as giving consideration for the appropriateness of any award.
The Group’s detailed policy when setting remuneration for the appointment of new Executive Directors is summarised below:
Remuneration element: Salary, benefits and pension
These will normally be set in line with the Policy outlined above.
Remuneration element: Annual bonus
The Executive Director will be eligible to participate in the Annual Bonus Plan as set out in the Remuneration Policy table. The maximum level of bonus opportunity that may
be offered is 150% of base salary consistent with that of existing Executive Directors.
Remuneration element: LTIP
The Executive Director will be eligible to participate in the LTIP as set out in the Remuneration Policy table. The maximum level of variable award that may be offered is 250%
of base salary in exceptional circumstances for the year of recruitment. The normal maximum award level is 200% of salary.
Remuneration element: Maximum variable remuneration
The maximum level of variable remuneration which may be offered in the year of recruitment is 400% of salary. The normal ongoing maximum is 350% of salary.
Remuneration element: ‘buy out’ of incentives forfeited on cessation of employment
The Remuneration Committee’s does not provide replacement awards as a matter of course. However, should the Remuneration Committee determine that the individual
circumstances of recruitment justified the provision of compensatory payments or awards then, where an individual forfeits outstanding variable pay opportunities or
contractual rights at a previous employer as a result of appointment, the Remuneration Committee may offer compensatory payments or awards, in such form as the
Remuneration Committee considers appropriate, taking into account all relevant factors including the form of awards, expected value and vesting timeframe of forfeited
opportunities.
When determining any such ‘buyout’, the guiding principle would be that awards would generally be on a ‘like-for-like’ basis unless this is considered by the Remuneration
Committee not to be practical or appropriate.
Remuneration element: Relocation policies
In instances where a new Executive Director is required to relocate or spend significant time away from their normal residence, the Company may provide assistance with
relocation (either via one-off or ongoing payments or benefits). The level of the relocation package will be assessed on a case by case basis but will take into consideration any
cost of living differences/housing allowance and schooling.
Where an existing colleague is promoted to the Board, the Remuneration Policy would apply from the date of promotion but there would be no retrospective application
of the Remuneration Policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the remuneration package for an
existing colleague would be honoured and form part of the ongoing remuneration of the person concerned. Where required, these would be disclosed to shareholders
in the Remuneration Report for the relevant financial year.
When setting fees for the appointment of new Non-Executive Directors, the same arrangements applies as to the current Non-Executive Directors.
Service contracts and letters of appointment
The Remuneration Committee’s policy for setting notice periods is that a six-month period will apply for Executive Directors unless the Remuneration Committee
determines that 12 months would be more appropriate in the circumstances. The Remuneration Committee may in exceptional circumstances, arising on recruitment
allow a longer period, which would in any event reduce to either six or 12 months following the first year of employment. The Non-Executive Directors of the Company
do not have service contracts.
The Non-Executive Directors are appointed by letters of appointment. Each Non-Executive Director’s term of office runs for a three-year period.
The Company follows the Code’s recommendation that all directors of FTSE 350 companies be subject to annual reappointment by shareholders.
218
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Service agreements
The table below summarises the service contracts for Executive Directors.
Director
Brian Duffy (CEO)
Bill Floydd (CFO)
Date of contract
28 May 2019
1 January 2022
Notice period
6 months
6 months
Letters of appointment
The Non-Executive Directors do not have service contracts but do have letters of appointment which reflect their responsibilities and commitments.
Name
Ian Carter (Chair)
Tea Colaianni
Robert Moorhead
Rosa Monckton MBE
Chabi Nouri
Date of contract
1 November 2020
7 May 2019
7 May 2019
7 May 2019
1 May 2022
Date of contract renewal
Notice period
n/a
7 May 2022
7 May 2022
7 May 2022
n/a
3 months
3 months
3 months
3 months
3 months
Contracts and letters of appointments will be available for shareholders to view at the Company’s AGM on 1 September 2022 and are available for inspection at the
Company’s office.
Loss of office
When determining any loss of office payment for a departing Executive Director, the Remuneration Committee will always seek to minimise the cost to the Group while
complying with contractual terms and seeking to reflect the circumstances in place at the time.
The Remuneration Committee reserves the right to make additional payments where such payments are made in good faith in discharge of an existing legal obligation
(or by way of damages for breach of such an obligation); or by way of settlement or compromise of any claim arising in connection with the termination of an executive
Director’s office or employment.
Element: General
The Remuneration Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses. If a contract is to be
terminated, the Remuneration Committee will determine such mitigation as it considers fair and reasonable in each case. There are no contractual arrangements that would
guarantee a pension with limited or no abatement on severance or early retirement. There is no agreement between the Company and its Directors or colleagues providing
for compensation for loss of office or employment that occurs because of a takeover bid. The Remuneration Committee reserves the right to make additional payments
where such payments are made in good faith in discharge of an existing legal obligation (or by way of damages for breach of such an obligation); or by way of settlement or
compromise of any claim arising regarding the termination of an Executive Director’s office or employment. The Remuneration Committee may agree that the Group will pay
for the provision of outplacement support and the reasonable fees for a departing director to obtain independent legal advice in relation to their termination arrangements
and nominal consideration for any agreement to introduce contractual terms protecting the Company’s rights following termination.
Element: Salary, benefits and pension
These will be paid over the notice period. The Company has discretion to make a lump sum payment in lieu.
Element: Annual bonus – cash awards
Good leaver reason
Performance conditions will normally be measured at the bonus measurement date. Bonus will normally be pro-rated for the period worked during the financial year.
Other reason
No bonus will be payable for year of cessation.
Discretion
The Remuneration Committee has the following elements of discretion:
– To determine that an Executive Director is a good leaver. It is the Remuneration Committee’s intention to only use this discretion in circumstances where there is an
appropriate business case which will be explained in full to shareholders
– To determine whether to pro-rate the bonus for time. The Remuneration Committee’s normal policy is that it will pro-rate for time. It is the Remuneration Committee’s
intention to only use discretion to not pro-rate in exceptional circumstances where there is an appropriate business case which will be explained in full to shareholders
219
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS D I R E C TO R S ' R E M U N E R AT I O N P O L I C Y
continued
Element: Annual bonus – deferred share awards
Good leaver reason
All subsisting deferred share awards will vest.
Other reason
Lapse of any unvested deferred share awards.
Discretion
The Remuneration Committee has the following elements of discretion:
– To determine that an Executive Director is a good leaver. It is the Remuneration Committee’s intention to only use this discretion in circumstances where there is an
appropriate business case which will be explained in full to shareholders
– The Remuneration Committee’s normal policy is that the deferred share award vests at the end of the original performance period but it retains discretion to allow for
vesting at the date of cessation. The Remuneration Committee will make this determination depending on the type of good leaver reason resulting in the cessation
– To determine whether to pro-rate the maximum number of shares to the time from the date of grant to the date of cessation. The Remuneration Committee’s normal
policy is that it will not pro-rate awards for time. The Remuneration Committee will determine whether or not to pro-rate based on the circumstances of the Executive
Director’s departure
Element: LTIP
Good leaver reason
Pro-rated for time and performance in respect of each subsisting LTIP award.
Other reason
Lapse of any unvested LTIP awards.
Discretion
The Remuneration Committee has the following elements of discretion:
– To determine that an executive is a good leaver. It is the Remuneration Committee’s intention to only use this discretion in circumstances where there is an appropriate
business case which will be explained in full to shareholders
– To measure performance over the original performance period or at the date of cessation. The Remuneration Committee will make this determination depending on the
type of good leaver reason resulting in the cessation
– The Committee’s normal policy is that the LTIP award vests at the end of the original performance period but it retains discretion to allow for vesting at the date of
cessation. The Remuneration Committee will make this determination depending on the type of good leaver reason resulting in the cessation
– To determine whether the holding period will apply including whether in full or in part
– To determine whether to pro-rate the maximum number of shares to the time from the date of grant to the date of cessation. The Remuneration Committee’s normal
policy is that it will pro-rate awards for time. It is the Remuneration Committee’s intention to use discretion to not pro-rate in exceptional circumstances where there is an
appropriate business case which will be explained in full to shareholders
Change of control
The following treatment will apply on a change of control of the Company as defined in the relevant plan rules.
Element: Annual bonus – cash awards
Pro-rated for time and performance to the date of the change of control.
The Remuneration Committee has discretion regarding whether to pro-rate the bonus for time. The Remuneration Committee’s normal policy is that it will pro-rate the
bonus for time. It is the Remuneration Committee’s intention to use its discretion to not pro-rate in circumstances only where there is an appropriate business case.
Element: Annual bonus – deferred share awards
Subsisting deferred share awards will vest on a change of control.
Element: LTIP
The number of shares subject to subsisting LTIP awards will vest on a change of control, pro-rated to time and performance.
The Remuneration Committee has discretion regarding whether to pro-rate the LTIP awards for time. The Remuneration Committee’s normal policy is that it will pro-rate
the LTIP awards for time. It is the Remuneration Committee’s intention to use its discretion to not pro-rate in circumstances only where there is an appropriate business case.
22 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Definition of ‘good leaver’ under the Group’s incentive plans
A good leaver reason is defined as cessation in the following circumstances:
– Death
– Redundancy
– Ill-health
– Retirement (in agreement with the Company)
– Injury or disability
– Employing company ceasing to be a Group company
– Transfer of employment to a company which is not a Group company
– Any reason permitted by the Remuneration Committee in its absolute discretion in any particular case except where termination is for dishonesty, fraud,
misconduct or other circumstances justifying summary dismissal
Cessation of employment in circumstances other than those set out above is cessation for other reasons.
Malus and clawback
Element: Annual bonus – cash awards
Malus will apply up to the date of the bonus payment and clawback will apply for a period of two years post the bonus payment.
Element: Annual bonus – deferred share awards
Malus will apply during the share deferral period.
Element: LTIP
Malus will apply during the vesting period and clawback will apply for a period of two years post-vesting.
The circumstances in which malus and clawback could apply are as follows:
– Discovery of a material misstatement resulting in an adjustment in the audited accounts of the Group or Company
– The assessment that any performance condition or condition in respect of the annual bonus or LTIP award was based on error, or inaccurate or misleading
information
– The discovery that any information used to determine the annual bonus or LTIP award was based on error, or inaccurate or misleading information
– Action or conduct of a participant which amounts to fraud or gross misconduct
– Events or the behaviour of a participant have led to the censure of the Company or Group by a regulatory authority or have had a significant detrimental impact
on the reputation of the Group or Company provided that the Board is satisfied that the relevant participant was responsible for the censure or reputational
damage and that the censure or reputational damage is attributable to the participant
– A material failure of risk management
– Corporate failure
221
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS D I R E C TO R S ' R E M U N E R AT I O N P O L I C Y
continued
Remuneration scenario charts
The charts below seek to demonstrate how pay varies with performance for the Executive Directors based on the stated Remuneration Policy. The charts show an
estimate of the remuneration that could be received by Executive Directors under the Remuneration Policy set out in this document. Each of the bars is broken down to
show how the total under each scenario is made up of fixed elements of remuneration, the annual bonus and the LTIP. The charts indicate that a significant proportion
of both target and maximum pay is performance related.
CEO – Brian Duffy £’000
3,000
CFO – Bill Floydd £’000
3,000
2,500
2,000
1,500
1,000
500
0
1,498
40%
25%
35%
523
100%
2,773
18%
2,273
44%
36%
33%
27%
23%
19%
2,500
2,000
1,500
1,000
500
0
1,870
18%
1,537
43%
36%
31%
26%
25%
21%
1,034
39%
23%
38%
397
100%
Minimum
performance
On-target
Maximum
performance
Maximum (with
LTPI equity growth at
50% over 3 years)
Minimum
performance
On-target
Maximum
performance
Maximum (with
LTPI equity growth at
50% over 3 years)
Fixed
Annual Bonus
LTIP
Early growth on LTIP shares
Fixed
Annual Bonus
LTIP
Early growth on LTIP shares
Assumptions for the scenario charts
Element: Fixed pay
– Base salary of £500,000 for CEO and £380,000 for CFO
– No pension for CEO and 3% of base salary for CFO
– Benefits as disclosed in the single total figure of remuneration for FY22
Element: Annual bonus
Minimum
None
On-target
50% of maximum award
Maximum
100% of maximum award
Element: LTIP
Minimum
None
On-target
60% of maximum award
Maximum
100% of maximum award
222
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 External appointments
Executive Directors are permitted to accept external, non-executive appointments with the prior approval of the Board where such appointments are not considered
to have an adverse impact on their role within the Group. The Executive Directors may retain fees paid for these services, which will be subject to approval by the Board.
Neither Brian Duffy nor Bill Floydd currently have any external appointments.
Non-Executive Director Remuneration Policy
Non-Executive Directors are paid fees at a level sufficient to attract individuals of the calibre and qualifications required to manage the business of the Group effectively. Fees
are set at levels appropriate to the size and complexity of the organisation, the time commitment required, and the qualifications and experience of the individual appointed.
Element of remuneration and link to strategy
Core element of remuneration set at a level sufficient to attract and retain individuals with appropriate knowledge and experience in organisations of broadly similar size and
complexity.
Operation
The Board is responsible for setting the remuneration of the Non-Executive Directors.
The Remuneration Committee is responsible for setting the Chair of the Board’s fees.
Non-Executive Directors are paid an annual fee and additional fees for chairship of committees, the role of Senior Independent Director (SID) and membership of
committees.
The Chair of the Board receives a fee but does not receive any additional fees for membership of Committees.
Fees are reviewed annually based on equivalent roles in the comparator group used to review salaries paid to the Executive Directors. Changes to fees are normally effective
from the beginning of the relevant financial year.
Non-Executive Directors and the Chair of the Board do not participate in any variable remuneration or benefits arrangements with the exception of the staff discount
offered to colleagues.
Additional fees may be paid to reflect additional Board or Committee responsibilities or time commitment (such as travel) as appropriate.
Reasonable costs in relation to travel and accommodation for business purposes are reimbursed to the Chair of the Board and Non-Executive Directors.
The Company may meet any tax liabilities that may arise on such expenses.
Additional benefits may be introduced if considered appropriate taking into account the approach for the wider workforce.
Maximum opportunity
The fees for Non-Executive Directors and the Chair of the Board are broadly set at a competitive level against the comparator group.
In general the level of fee increase for the Non-Executive Directors and the Chair of the Board will be set taking account of any change in responsibility and will take into
account the general rise in salaries across the UK workforce. However, the Board/Remuneration Committee Chair may determine larger increases in circumstances such as
but not limited to if there is a material change in the size and responsibilities of the role (including as a result of a significant change in Group size and/or complexity of
operations).
The Group will pay reasonable expenses incurred by the Non-Executive Directors and settle any tax incurred in relation to these. Given the increasing internationalisation of
the business, we have included the option to introduce a travel allowance for the Chair and Non-Executive Directors where they are required to travel outside of their
country of residence to attend board meetings. We would consider introducing this allowance should it become appropriate.
Remuneration throughout the Group
When setting the Remuneration Policy for Executive Directors, the Remuneration Committee takes into account the pay and employment conditions elsewhere within
the Group. The Remuneration Committee considers factors such as Group colleagues’ base salary increases (the base salary increases for Executive Directors takes into
consideration base salary increases for colleagues and relevant market conditions), Group colleagues’ pension plans design and contribution levels (the pension contribution
for Executive Directors will not exceed the maximum contribution that can be made to the majority of the wider workforce), and the Group’s remuneration principles
which apply to all colleagues in the Group.
The Group seeks to remunerate in line with market salaries and benefits. Bonus arrangements are cascaded down the organisation to incentivise the achievement of
Group and personal objectives. Participation in the LTIP is extended to members of the Senior Executive Team and others on a discretionary basis. The Remuneration
Committee believes the Group’s approach to cascading its variable incentive arrangements down the organisation is fair.
Given the geographical spread of the Group’s business, the Remuneration Committee does not consider it appropriate to consult colleagues on the Remuneration Policy
in operation for Executive Directors. Although we do not specifically consult colleagues on executive remuneration, we have in place a variety of colleague engagement
channels which provide colleagues with an opportunity to provide feedback on any topics that interest or concern them.
Consideration of shareholder views
The Remuneration Committee carefully considered the views of our shareholders and shareholder bodies when developing the Remuneration Policy. The Company welcomes
continued dialogue with its shareholders and the Remuneration Committee will consult with key shareholders prior to any significant changes to its Remuneration Policy.
223
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS D I R E C TO R S ' R E P O RT
WATCHES OF SW ITZE R L A N D
GROU P PLC
Registered number: 11838443
Topic
Section of the report
STATUTORY INFORMATION
Registered office address:
Aurum House, 2 Elland Road,
Braunstone, Leicester, LE3 1TT
Country of incorporation:
England and Wales
Type: Public Limited Company
Principal activities: The principal
activity of the Group is the retailing of
luxury watches and jewellery.
the
The Directors present their report,
together with
audited
Consolidated Financial Statements
of the Group and of the Company,
for the year ended 1 May 2022. The
Company has chosen in accordance
with s414C (11) of the Companies
Act 2006 to provide disclosures and
information in relation to a number
of matters which are covered
elsewhere in this Annual Report
and Accounts. These matters,
together with those required under
the 2013 Large and Medium sized
Companies and Groups (Accounts
and Reports) Regulations 2008, are
cross
table
opposite and together form the
Directors’ Report.
referenced
the
in
POST BAL ANCE-SHEET EVENTS
On 22 June 2022, the Group acquired
the trade and assets of one showroom
from Bernie Robbins Jewelers, Inc. for
a cash consideration of $26,000,000.
The acquisition further advances the
US expansion strategy.
Important events impacting the business
Strategic Report
Financial instruments
Colleague disabilities
Modern Slavery Statement
Greenhouse gas emissions, energy consumption
and energy-efficient action
Carbon reporting
Risk Management
S172 Companies Act 2006
INFORMATION REQUIRED BY LR 9.8.4(R)
Topic
Directors’ interests in shares
Going concern
Long term incentive schemes
Note 23 of the Consolidated Financial Statements
Environment, Social and Governance
Environment, Social and Governance
Environment, Social and Governance
Environment, Social and Governance
Risk Management
Strategic Report
Section of the report
Remuneration Committee Report
Going Concern and Viability Statement
Remuneration Committee Report
INFORMATION REQUIRED BY DTR 7.2
Topic
Section of the report
Corporate Governance Statement 2022
Corporate Governance Report
INFORMATION REQUIRED BY DTR 4.1.11R
Topic
Likely future developments
Section of the report
Strategic Report
Page
02 to 167
272
124
150
146
146
156
116
Page
211
166
209
Page
173
Page
82 to 94
INFORMATION REQUIRED BY SCH 7.11(1)(B) COMPANIES (MISCELL ANEOUS REPORTING) REGUL ATIONS 2018
Statement of Engagement with Colleagues
The Group has chosen to provide information in relation to the Statement of Engagement with Colleagues elsewhere in this
report. This is cross referenced in the table below:
Information
How the Directors engage with colleagues
How the Group provides colleagues with information
on matters of concern to them as colleagues
How the Group consults with and considers
colleague feedback
Section of the report
Section 172(1) Statement
Board activity
Environment, Social and Governance
Environment, Social and Governance
How the Directors have had regard to colleagues’ interests Environment, Social and Governance
Board activity
Non-Financial Information Statement
Non-Financial Information Statement
Business relationships
Information
Foster the Company’s business relationships
Principal decisions affecting suppliers, clients and others
taken by the Company during the financial year
Section of the report
Section 172(1) Statement
Section 172(1) Statement
Board activity
Page
116
123
123
123, 176
to 178
115
Page
116
116
176 to 178
DTR 4.1.8
The Strategic Report and the Directors’ Report (or parts thereof), together with sections of this Annual Report and Accounts
incorporated by reference, are the Management Report for the purposes of DTR 4.1.8.
ARTICLES OF ASSOCIATION
In accordance with the Companies Act 2006, the Articles of Association (the ‘Articles’) may only be amended by a special
resolution of the Company’s shareholders in a general meeting.
224
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
AGM
The 2022 AGM of the Company will be held at 2.30pm on 1 September 2022, at
our offices at 36 North Row, London W1K 6DH. The Notice of AGM is given,
together with explanatory notes, in the booklet which accompanies this Annual
Report and Accounts.
BOARD OF DIRECTORS
Ian Carter
Brian Duffy
Bill Floydd – Appointed 1 January 2022
Tea Colaianni
Robert Moorhead
Rosa Monckton MBE
Chabi Nouri – Appointed 1 May 2022
Anders Romberg – Resigned 1 January 2022
Full biographies of the Directors of the Company for the year under review can be
found on pages 182 to 183, other than Anders Romberg.
Details of Directors’ beneficial and non-beneficial interests in the shares of the
Company are shown on page 211. Details of share awards are found in the
Remuneration Report on page 211.
APPOINTMENT AND REMOVAL OF A DIRECTOR
The appointment, reappointment and replacement of Directors is governed by the
Articles, the Code, the Companies Act 2006 and related legislation. The Code
recommends that all Directors of publicly listed companies stand for election every
year. At the 2021 AGM, all members of the Board stood for re-election and were
duly elected. Bill Floydd and Chabi Nouri are offering themselves for election at the
2022 AGM, which is the first AGM following their appointments. All the other
Directors are offering themselves for re-election as they did last year. The Board is
satisfied that each Independent Non-Executive Director offering themselves for
re-election is independent in both character and judgement, and that their
experience, knowledge and other business interests enable them to contribute
significantly to the work and balance of the Board.
A Director may be appointed to the Board by:
(i) Ordinary resolution of the shareholders
(ii) Board approval following recommendation by the Nomination Committee
(iii) Ordinary resolution if the Director chooses to seek re-election at a general
meeting
In addition, the Directors may appoint a Director to fill a vacancy or as an additional
Director, provided that the individual retires at the next AGM; if they are to
continue, they must offer themselves for election. A Director must vacate office in
certain circumstances as set out in the Company’s Articles and may be removed by
ordinary resolution provided special notice of that resolution has been given.
POWERS OF THE DIRECTORS
Subject to the Articles, the Companies Act 2006 and any directions given by the
Company by special resolution and any relevant statutes and regulations, the
business of the Company will be managed by the Board which may exercise all the
powers of the Company. Specific powers relating to the allotment and issuance of
ordinary shares and the ability of the Company to purchase its own securities are
also included within the Articles, and such authorities may be submitted for
approval by the shareholders at the AGM each year.
DIRECTORS’ INTERESTS AND CONFLICTS OF INTEREST
The Directors’ interests in, and options over, ordinary shares in the Company are
shown in the Directors’ Remuneration Report on Remuneration on page 211. In line
with the requirements of the Companies Act 2006, Directors have a statutory duty
to avoid situations in which they have, or may have, interests that conflict with those
of the Company unless that conflict is first authorised by the Board. The Company has
procedures in place for managing conflicts of interest. The Company’s Articles contain
provisions to allow the Directors to authorise potential conflicts of interest, so that if
approved, a Director will not be in breach of his/her duty under company law. In line
with the requirements of the Companies Act 2006, each Director has notified the
Company of any situation in which he or she has, or could have, a direct or indirect
interest that conflicts, or possibly may conflict, with the interests of the Company (a
situational conflict). Directors have a continuing duty to update any changes to their
conflicts of interest and a note is then made of that update.
During the year the conflict of interests’ procedures operated effectively.
DIRECTORS’ INDEMNITIES
Directors’ and Officers’ insurance has been established for all Directors and
Officers to provide cover against their reasonable actions on behalf of the Company.
The Company also indemnifies the Directors under a qualifying indemnity for the
purposes of s236 of the Companies Act 2006. This indemnity contains provisions
that are permitted by the director liability provisions of the Companies Act 2006
and the Company’s Articles.
DIRECTORS’ STATEMENT OF RESPONSIBILIT Y IN RESPECT OF THE
ANNUAL REPORT AND THE FINANCIAL STATEMENTS
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 prepared 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
22 5
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS D I R E C TO R S ' R E P O RT
continued
– 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 182 to 183
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 2022, 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 2022, 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
COMPANY SECRETARY
Laura Battley is the Company Secretary of the Watches of Switzerland Group PLC and
its UK group subsidiaries who can be contacted via the Company’s Registered Office.
AUDITOR REAPPOINTMENT
Having been appointed as the External Auditor in 2019, Ernst & Young LLP has
expressed its willingness to continue in its capacity as independent External Auditor
of the Company. The Directors are recommending a resolution in favour of this
reappointment and a resolution for authorisation of Auditor remuneration at the
forthcoming AGM.
DISCLOSURE OF INFORMATION TO THE AUDITOR
In accordance with Section 418(2) of the Companies Act 2006, each Director in
office at the date the Directors’ Report is approved confirms that:
i.
ii.
So far as the Director is aware, there is no relevant audit information of which
the Company’s Auditor is unaware
He/she has taken all the steps that he/she ought to have taken as a Director in
order to make himself or herself aware of any relevant audit information and to
establish that the Company’s Auditor is aware of that information
DIVIDENDS
The Directors do not recommend the payment of a dividend.
POLITICAL DONATIONS
The Group made no political donations and incurred no political expenditure
during the year.
SHARE CAPITAL AND SHAREHOLDER VOTING RIGHTS
The share capital of the Company at 1 May 2022 was as follows:
Allotted, called up and fully paid ordinary
shares of £0.0125 each
2022 number
of shares
2022
nominal value
£
239,570,297
£2,994,629
All shareholders are entitled to attend and speak at the general meetings of the
Company, appoint proxies, receive any dividends, exercise voting rights and transfer
shares without restriction. On a show of hands at a general meeting, every member
present in person shall have one vote, and on a poll, every member present in
person or by proxy shall have one vote for every ordinary share held. There are no
known arrangements that may restrict the transfer of shares or voting rights.
During the year, 114,743 ordinary shares of £0.0125 each were issued. The shares
were issued in order to satisfy the vesting of shares for participants within the
Company’s Share Option Plans.
Under the Company’s Share Incentive Plan, Trustees hold shares on behalf of
colleague participants. The Trustees will only vote on those shares, and receive
dividends, should the Company pay dividends in the future, that a participant
beneficially owns, in accordance with the participant’s wishes.
An Employee Benefit Trust also operates which has discretion to vote on any shares
it holds as it sees fit, except any shares participants own beneficially, in which case
the Trustee will only vote on such shares as per a participant’s instructions. The
Trustee of the Employee Benefit Trust has waived its right to dividends on all shares
within the Trust.
The Company is not aware of any other dividend waivers or voting restrictions in place.
RESTRICTIONS ON THE TR ANSFER OF SECURITIES
The Articles do not contain any restrictions on the transfer of ordinary shares in the
Company other than the usual restrictions applicable where any amount is unpaid
on a share. However, restrictions are imposed by laws and regulations such as the
prohibition on insider trading and the requirements of the Listing Rules whereby
PDMR’s dealings need to be approved. The Company has adopted a Share Dealing
Code to regulate PDMR dealings and has extended the scope of that Code to
include certain other colleagues.
AUTHORIT Y TO ALLOT SHARES
Under the Companies Act 2006, the Directors may only allot shares if authorised
to do so by the shareholders in a general meeting.
SHAREHOLDER AUTHORIT Y TO PURCHASE OWN SHARES
At the Company’s 2021 AGM, the Company’s shareholders passed a shareholder
resolution granting the Company authority to purchase its own shares pursuant to
sections 693 and 701 of the Companies Act 2006.
The authority is limited to an aggregate maximum number of 23,957,029 ordinary
shares, representing 10% of the Company’s issued share capital, excluding treasury
shares. The maximum price which may be paid for an ordinary share will be an
amount which is not more than the higher of (i) 5% above the average of the middle
market quotation for an ordinary share as derived from the London Stock Exchange
Plc’s Daily Official List for the five business days immediately preceding the day on
which the ordinary share is contracted to be purchased; and (ii) the higher of the
price of the last independent trade and the highest current independent bid on the
trading venue where the purchase is carried out (in each case, exclusive of expenses).
226
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 The authority shall, unless varied, revoked or renewed, expire at the end of the
Company’s 2022 AGM or, if earlier, at close of business on 31 December 2022.
To date, the Directors have not exercised any of the powers conferred by
this resolution.
not to pro-rate would only be used if there were a business case which would be
fully explained to shareholders. A new Remuneration Policy is being put to
shareholders at the 2022 AGM. The new policy makes no changes with regard to
the change of control provisions.
USE OF FINANCIAL INSTRUMENTS
Information regarding the Company’s use of financial instruments, financial risk
management objectives and policies can be found in the Risk Management section of
the Strategic Report on page 156 and note 23 of the Consolidated Financial Statements.
Various agreements that the Group has entered into with third parties, including
key distribution agreements with luxury watch and jewellery brands, lease
agreements, as well as contracts with third party service providers, provide such
parties with a right to terminate the agreement in the event of a change of control.
CHANGE OF CONTROL
There are no agreements between the Company and its Directors or colleagues
providing for compensation for loss of office or employment (whether through
resignation, purported redundancy or otherwise) by reason of a takeover bid.
The £170 million Multicurrency Term and Revolving Facility Agreement entered
into on 15 May 2019, includes certain customary mandatory prepayment and
cancellation events, including mandatory prepayments on a change of control of
Jewel UK Midco Limited if a lender so requests after a period of negotiations.
Details concerning the impact on annual bonus (cash and deferred share awards)
and LTIPs held by Directors and Senior Management in the event of a change of
control are set out in the Remuneration Policy which was approved by shareholders
at the AGM in 2019. Generally, the cash element of annual bonus and any LTIPs
would be pro-rated for time and performance in the event of a change of control.
The deferred share element of annual bonus will vest on a change of control. The
Remuneration Committee does have the discretion not to pro-rate for time,
however, its normal policy is to pro-rate. The Remuneration Committee discretion
SIGNIFICANT SHAREHOLDERS AND INTEREST IN VOTING RIGHTS
The table at the bottom of the page shows the notifiable interests in the Company’s
ordinary issued share capital, as at 1 May 2022, as notified in accordance with the
provisions of DTR 5.1.2R representing 3% or more of the Company’s issued
ordinary share capital.
It should be noted that these holdings may have changed since the Company was
notified. However, notification of any change is not required until the next notifiable
threshold is crossed.
Notifiable interest
BlackRock Inc
Voting Rights
% of capital disclosed
17,744,328
7.41
Nature of holding as per
disclosure
– Indirect interest 7.4%
– Securities Lending 0.01%
– CFD 1.91%
Aggregate of Standard Life Aberdeen plc affiliated investment management entities
with delegated voting rights on behalf of multiple managed portfolios
The Capital Group Companies
J P Morgan Asset Management Holdings Inc
Ameriprise Financial Inc and its group (Threadneedle Asset Management Limited)
Pelham Capital Ltd
Aegon Asset Management UK PLC
Brian Duffy
17,341,662
12,169,342
12,048,305
11,876,662
11,948,369
7,374,274
7,696,999
7.24
– Indirect interest 7.24%
5.08
5.03
4.96
4.99
3.08
3.21
– Indirect interest 5.08%
– Indirect interest 5.03%
– Indirect interest 5.03%
– Direct interest 4.99%
– Direct interest 1.53%
– Indirect interest 1.49%
– CFD 0.06%
– Direct interest 3.06%
– Indirect interest 0.15%
In the period from 1 May 2022 to the date of this Report, we received no further notifications.
TR ANSACTIONS WITH REL ATED PARTIES
Refer to note 24 on page 274 of the Consolidated Financial Statements for details of related party transactions in the year.
APPROVAL OF THE ANNUAL REPORT AND ACCOUNTS
The Strategic Report on pages 02 to 167 and the Directors Report on pages 224 to 227 and the Corporate Governance Report were approved by the Board on 6 July 2022.
Approved by the Board and signed on its behalf.
LAURA BATTLEY
COMPANY SECRETARY
6 July 2022
227
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22 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 F I N A N C I A L S TAT E M E N T S
3 FI NA NCI A L
STAT E M E N TS
Independent Auditor’s Report
230
236 Consolidated Income Statement
237 Consolidated Statement of Comprehensive Income
238 Consolidated Balance Sheet
239 Consolidated Statement of Changes in Equity
240 Consolidated Statement of Cash Flows
241 Notes to the Consolidated Financial Statements
277 Company Balance Sheet
278 Company Statement of Changes in Equity
279 Notes to the Company Financial Statements
283 Glossary
286 Shareholder Information
229
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WATC H E S O F S W I T Z E R L A N D G RO U P P LC
OPINION
In our opinion:
– Watches of Switzerland Group PLC’s Group Financial Statements and Parent
Company Financial Statements (the ‘Financial Statements’) give a true and fair
view of the state of the Group’s and of the parent company’s affairs as at 1 May
2022 and of the Group’s profit for the year then ended;
– the Group Financial Statements have been properly prepared in accordance
with UK adopted international accounting standards;
– the parent company Financial Statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice; and
– the Financial Statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the Financial Statements of Watches of Switzerland Group PLC
(the ‘parent company’) and its subsidiaries (the ‘Group’) for the year ended 1 May
2022 which comprise:
Parent company
Statement of Changes in Equity for the
52-week period then ended
Related notes C1 to C8 to the Financial
Statements including a summary of
significant accounting policies
Group
Consolidated Balance Sheet as at 1 May 2022 Balance Sheet as at 1 May 2022
Consolidated Income Statement for the
52-week period then ended
Consolidated Statement of
Comprehensive Income for the 52-week
period then ended
Consolidated Statement of Changes in
Equity for the 52-week period then ended
Consolidated Statement of Cash Flows for
the 52-week period then ended
Related notes 1 to 27 to the Financial
Statements, including a summary of
significant accounting policies
The financial reporting framework that has been applied in the preparation of the
Group Financial Statements is applicable law and UK adopted international
accounting standards. The financial reporting framework that has been applied in
the preparation of the parent company Financial Statements is applicable law and
United Kingdom Accounting Standards, including FRS 102 “The Financial Reporting
Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally
Accepted Accounting Practice).
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the Financial
Statements section of our report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
INDEPENDENCE
We are independent of the Group and parent in accordance with the ethical
requirements that are relevant to our audit of the Financial Statements in the UK,
including the FRC’s Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these
requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided
to the Group or the parent company and we remain independent of the Group and
the parent company in conducting the audit.
CONCLUSIONS REL ATING TO GOING CONCERN
In auditing the Financial Statements, we have concluded that the directors’ use of the
going concern basis of accounting in the preparation of the Financial Statements is
appropriate. Our evaluation of the directors’ assessment of the Group and parent
company’s ability to continue to adopt the going concern basis of accounting included:
– Obtaining management’s going concern assessment, which covers the period to
31 October 2023, and which includes details of facilities available, forecast
covenant calculations, and the results of management’s downside sensitivity
scenarios;
– Testing management’s model for clerical accuracy;
– Understanding and assessing the design effectiveness of controls over the
Directors’ going concern assessment and management’s forecasting process;
– Obtaining the agreements in respect of the Group’s financing arrangements and
confirming the maturity and covenants that are required to be met within the
going concern assessment period;
– Challenging the reasonableness of forecasts and key assumptions underpinning
the going concern model, which are based on the Board approved budget and
Long Range Plan, through assessing changes from the prior period, making
enquiries, ensuring the forecast appropriately reflect the Group’s climate
change commitments, comparing to external forecasts in the luxury goods
sector and considering whether there was any indication of management bias,
including consideration of any contrary indicators;
– Analysing the historical accuracy of budgets to determine whether forecast
cash flows are reliable based on past experience;
– Comparing management’s forecasts to actual results through the subsequent
events period and performing enquiries to the date of this Report;
– Reperforming forecast covenant calculations and comparing to the requirements
under the facilities;
– Assessing the Group’s plausible but severe downside scenarios, which factor in
the potential effect of a reduction in sales due to reduced consumer confidence
and lower disposable income as a result of the cost of living crisis or a repeat of
the FY21 COVID-19 impact on the ability of stores to trade modelled without
Government support. This included challenging the assumptions and whether
the quantum of the impact of the downside scenarios are sufficiently severe;
– Challenging whether there are any additional plausible but severe downside
scenarios which should be considered by comparing to the Group’s principal
risks;
– Assessing mitigating factors available to management should downside scenarios
be worse than anticipated, including challenging whether these are realistic and
controllable;
– Assessing the reverse stress tests used by the Directors to determine the risk
to liquidity and covenant compliance, including recalculating the level of sales
and EBITDA reduction that would be required before liquidity and covenants
are breached and assessing the likelihood of this scenario occurring;
– Enquiring of management as to their knowledge of events or conditions beyond
the period of their assessment that may cast significant doubt on the entity's
ability to continue as a going concern and comparing their response to our
understanding from completion of our audit procedures; and
– Assessing the going concern disclosures in the Financial Statements to ensure
they are in accordance with accounting standards, the Companies Act and the
UK Corporate Governance Code.
Our key observation was that the Director’s assessment forecasts that the Group
will maintain sufficient liquidity and comply with all covenants throughout the going
concern assessment period in both the base case and plausible downside scenarios.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively, may
cast significant doubt on the Group and parent company’s ability to continue as a
going concern for a period from when the Financial Statements are authorised for
issue to 31 October 2023.
In relation to the Group and parent company’s reporting on how they have applied
the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the Financial Statements about
whether the directors considered it appropriate to adopt the going concern basis
of accounting.
Our responsibilities and the responsibilities of the directors with respect to going
concern are described in the relevant sections of this report. However, because not
all future events or conditions can be predicted, this statement is not a guarantee
as to the Group’s ability to continue as a going concern.
230
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 OVERVIEW OF OUR AUDIT APPROACH
Understanding the
Watches of Switzerland
business
– We have a team with strong experience of the luxury
retail industry and have gained an understanding of the
Group’s strategy, business model and operating
environment. This was achieved through enquiry,
analytical procedures and observation in the current
and prior periods, together with visiting a number of the
Group’s operations and stores.
– We performed risk assessment procedures, including
meetings with management and the Board, our
observations from half year and interim work to identify
risks of material misstatements.
The charts below illustrate the coverage obtained from the work performed by our
audit teams.
Profit before tax and exceptional items
Revenue
1.3%
Other
procedures
0.2%
Other
procedures
Audit scope
– We performed an audit of the complete financial
information of 5 (2021: 5) components.
– The components where we performed full audit
procedures accounted for 98.7% (2021: 97.3%) of Profit
before tax and exceptional items, 99.8% (2021: 99.7%)
of Revenue and 97.9% (2021: 99.1%) of Total assets.
98.7%
Full scope
components
Total assets
Key audit matters
– Inventory valuation
99.8%
Full scope
components
2.1%
Other
procedures
97.9%
Full scope
components
Team structure
All our audit procedures were performed by the UK primary audit team, including
the US component where financial reporting control and oversight is managed
directly by management in the UK.
As part of the UK primary audit team we involved US colleagues to perform the US
distribution centre and store physical inventory count tests as well as assist auditing
US specific laws and regulations, state taxes and corporate tax. During the current
year’s audit cycle, visits were undertaken by the senior statutory auditor to the US
component head office. These visits involved touring the distribution centre and
meeting with the US finance and operations employees to understand the results
and risks of the US business as well as visiting a local store.
Materiality
– Revenue recognition including the risk of management
override
– Store
impairment/reversal of
impairment due to
changes in circumstances
– Overall Group materiality of £6.4m (2021: £3.6m)
which represents 5% of profit before tax and
exceptional items.
AN OVERVIEW OF THE SCOPE OF THE PARENT COMPANY AND GROUP AUDIT
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of
performance materiality determine our audit scope for each component within the
Group. Taken together, this enables us to form an opinion on the consolidated
Financial Statements. We take into account size, risk profile, the organisation of the
Group and effectiveness of Group-wide controls when assessing the level of work
to be performed at each company.
In assessing the risk of material misstatement to the Group Financial Statements,
and to ensure we had adequate quantitative coverage of significant accounts in the
Financial Statements, of the 14 (2021: 13) reporting components of the Group, we
selected 5 (2021: 5) components covering entities within the UK and US, which
represent the principal business units within the Group.
We performed an audit of the complete financial information of all 5 (2021: 5) of
the principal business units (‘full scope components’) which were selected based on
their size or risk characteristics.
The reporting components where we performed audit procedures accounted for
98.7% (2021: 97.3%) of the Group’s Profit before tax and exceptional items, 99.8%
(2021: 99.7%) of the Group’s Revenue and 97.9% (2021: 99.1%) of the Group’s Total
assets.
Of the remaining 9 (2021: 8) components that together represent 1.3% (2021:
2.7%) of the Group’s Profit before tax and exceptional items, none are individually
greater than 5% (2021: 5%) of the Group’s Profit before tax and exceptional items.
For these components, we performed other procedures, including analytical review
and enquiry to respond to any potential risks of material misstatement to the
Group Financial Statements.
231
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WATC H E S O F S W I T Z E R L A N D G RO U P P LC
continued
Climate change
There has been increasing interest from stakeholders as to how climate change will
impact Watches of Switzerland Group PLC. The Group has determined that the
most significant future impacts from climate change on its operations will be from
extreme weather events disrupting offices and distribution centres, increased office
and store energy requirements for heating and cooling, the legal requirement for
the fleet to be EVs in the UK and from changing consumer preferences. These are
explained on pages 138 to 146 in the required Task Force for Climate related
Financial Disclosures and on pages 160 to 165 in the principal risks and uncertainties,
which form part of the “Other information,” rather than the audited Financial
Statements. Our procedures on these disclosures therefore consisted solely of
considering whether they are materially inconsistent with the Financial Statements
or our knowledge obtained in the course of the audit or otherwise appear to be
materially misstated.
As explained in note 1 in preparing the Consolidated Financial Statements
management has considered the impact of climate change, particularly in the
context of the disclosures included in the Strategic Report this year. These
considerations did not have a material impact on the financial reporting judgements
and estimates, consistent with the assessment that climate change is not expected
to have a significant impact on the Group’s going concern assessment to 31 October
2023 nor the viability of the Group over the next three years.
Governmental and societal responses to climate change risks are still developing,
and are interdependent upon each other, and consequently Financial Statements
cannot capture all possible future outcomes as these are not yet known. The
degree of certainty of these changes may also mean that they cannot be taken into
account when determining asset and liability valuations and the timing of future cash
flows under the requirements of UK adopted international accounting standards. In
note 11 to the Financial Statements sensitivity disclosures of the impact of reasonably
possible changes in key assumptions have been provided.
Our audit effort in considering climate change was focused on inspecting
management’s assessment of the impact of climate risk, physical and transition, and
ensuring that the effects of material climate risks disclosed on pages 141 to 145 have
been appropriately reflected in management’s assessment of asset values where
values are determined through modelling future cash flows, being the impairment
testing of store assets. Details of our procedures and findings on impairment are
included in our key audit matters below. We also challenged the Directors’
considerations of climate change in their assessment of going concern and viability
and associated disclosures.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Statements of the current period and include
the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of
our audit of the Financial Statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Key observations communicated to
the Audit Committee
Based on our procedures we
consider the valuation of inventory
to be appropriate. The net
realisable value provision continues
to be appropriate.
Risk
Inventory valuation – £307.0m
Inventory (FY21 £226.4m)
Refer to the Audit Committee Report (page
190); and Accounting policies (page 244)
There is complexity in the application of
supplier price changes and rebates. There
is a further risk on inventory net realisable
value (‘NRV’) provisioning resulting from
slow moving inventory.
Our response to the risk
– We understood and assessed the design of management’s key controls over the
inventory valuation and provision calculation process.
– We inspected the value of inventory sold at less than cost during the period to confirm
stock is recorded at the lower of cost or NRV.
– We tested the completeness of inventory items flagged for NRV provision through
recalculation of stockturn by brand and product.
– In assessing the reasonableness of managements methodology, we have considered
the historical level of provisioning and subsequent utilisation and releases to determine
the accuracy of prior provisions.
– We recalculated the adjustment to inventory for price changes and tested on a sample
basis to third party supplier invoices or independently validated price lists to ensure
stock is recorded at cost.
– We recalculated the adjustment to inventory for supplier rebates and for a sample of
items we validated terms back to underlying agreements.
– For the UK and US full scope components (100% of group inventory), we utilised data
analytic procedures to map the inventory journals to cost of sales, creditors, goods
received not invoiced and other relevant accounts.
– Using data analytical tools, we identified material manual adjustments to inventory that
do not follow the core processes such as postings for rebates, NRV and price changes
for further investigation and corroboration.
232
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Risk
Revenue recognition including the
risk of management override –
£1,238.0m Revenue (FY21 £905.1m)
Refer to the Audit Committee Report (page
190); Accounting policies (page 242); and
note 2 of the Consolidated Financial
Statements (page 248)
Our assessment is that the majority of the
Group’s revenue transactions are non-
complex, with no judgement applied over
the amount recorded.
Revenue recognition is a significant risk by
presumption
material
due
misstatements as a result of fraudulent or
erroneous financial reporting.
to
We assessed the revenue recognition risk
in the following key areas:
– Manual adjustments to revenue;
– Valuation of sales returns provisions;
– Accounting for customer deposits; and
– Valuation of gift card provisions.
impairment
Store
£0.4m
impairment reversal (FY21 £5.0m net
impairment charge)
–
Refer to the Audit Committee Report (page
189); Accounting policies (page 244); and
note 11 of the Consolidated Financial
Statements (page 259)
Individual stores are cash generating units
(‘CGU’) which should be reviewed for
indicators of
at each
reporting period end.
impairment
store
impairment
Forecasts and discount rates used in
assessing
are
judgmental and involve estimates of
future trading which involves uncertainty.
In particular, there is a risk in relation to
stores where there has been a change in
circumstances in the year.
Also previously impaired CGU’s should
be reviewed for indicators of impairment
reversal. Reversals are subject to the
same judgements on the discount rate
and estimated future trading.
Our response to the risk
– We understood and assessed the design of management’s key controls over the
revenue recognition process.
– We performed analytical review procedures to understand the revenue trends
compared to the prior period and budget to identify areas that warrant further
investigation.
– For the UK and US full scope components (99.8% of group revenue), we utilised data
analytic procedures to test the postings from Revenue to Cash, correlating the cash
conversion of sales.
– Using data analytical tools, identified material manual adjustments to revenue that do
not follow the core processes such as postings for deferred revenue on deposits for
further investigation and corroboration.
– We challenged the provisions for returns and gift card deferred revenue, specifically
we:
– assessed historical returns and gift card redemption rates;
– assessed the provision calculation basis compared to the prior period;
– assessed actual gift card redemption and returns since the period end; and
– validated provision input data.
– For a sample of deposits we confirmed the existence by agreeing the receipt of the
deposit to the bank statement. We also ensured the revenue was recognised in the
correct accounting period by confirming the goods were collected after the period
end date or if uncollected, the item was not in stock at period end.
– We tested the completeness of deposits through use of data analytics procedures on
store margins and deposit releases to revenue in the period.
– We understood and assessed the design effectiveness and implementation of and
controls over the impairment indicator review and impairment test.
– We have challenged the UK and US discount rates used with the assistance of EY
valuation specialists which included independently determining a reasonable range as
a corroboration for the appropriateness of the discount rate used by management.
– We confirmed the forecasts used are in line with those approved by the Board,
including the three-year plan.
– We have challenged the store cashflow forecasts used by management in calculating
the value in use through assessing changes from the prior period, making enquiries of
management, comparing to external forecasts in the luxury goods sector and
considering whether there was any indication of management bias, including
consideration of any contrary indicators.
– We challenged the long-term growth rates applied by comparing to external forecasts
in the UK and US.
– We have validated impairment test input data and arithmetical accuracy of the model.
– We have assessed the process for allocating forecast cashflows to individual stores.
– We independently stress tested the model’s key assumptions to determine if any
plausible change in assumptions would result in a material change in impairment.
– We have assessed the adequacy of the disclosures in respect of the impairment
reversal and the associated sensitivity of assumptions in accordance with the
requirements of IAS 36.
Key observations communicated to
the Audit Committee
We did not identify any evidence
of management override through
the use of manual journal entries.
Based on our procedures
in
respect of deposits, returns and gift
cards no material misstatements
were identified.
Based on our procedures over
impairment no material
store
misstatements were identified.
to
We consider the store impairment
reversal
be
recognised
materially stated and appropriately
disclosed in exceptional items,
consistent with where the original
impairment charge was recorded.
Management have appropriately
included
analysis
sensitivity
disclosures in note 11 to the
Financial Statements to reflect the
level of estimation uncertainty.
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WATC H E S O F S W I T Z E R L A N D G RO U P P LC
continued
OUR APPLICATION OF MATERIALIT Y
We apply the concept of materiality in planning and performing the audit, in
evaluating the effect of identified misstatements on the audit and in forming our
audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate,
could reasonably be expected to influence the economic decisions of the users of the
Financial Statements. Materiality provides a basis for determining the nature and extent
of our audit procedures.
We determined materiality for the Group to be £6.4 million (2021: £3.6 million),
which is 5% (2021: 5.1%) of Profit before tax and exceptional items. We believe that
Profit before tax and exceptional items provides us with an appropriate basis for
setting materiality as it is a measure which is key to the users of the Financial Statements
and is not distorted by exceptional items which may fluctuate from period to period.
We determined materiality for the Parent Company to be £9.3 million (2021: £9.4
million), which is 2% (2021: 2%) of Equity due to the main purpose of the entity being an
investment holding company which does not trade. Where we tested balances relating
to the Group Financial Statements we used the Group Materiality of £6.4 million.
OTHER INFORMATION
The other information comprises the information included in the Annual Report set
out on pages 1 to 286, including the Strategic Report, the Governance Report,
Glossary and shareholder information, other than the Financial Statements and our
auditor’s report thereon. The directors are responsible for the other information
contained within the Annual Report.
Our opinion on the Financial Statements does not cover the other information and,
except to the extent otherwise explicitly stated in this report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the Financial
Statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the Financial Statements themselves. If, based on
the work we have performed, we conclude that there is a material misstatement of
the other information, we are required to report that fact.
We have nothing to report in this regard.
STARTING BASIS
Profit before tax – £126.2m
ADJUSTMENTS
– IPO related costs – £1.5m
– Acquisition related costs – £0.5m
– Impairment reversal- (£0.4m)
MATERIALIT Y
– Totals £127.8m Profit before tax and exceptional
items
– Materiality of £6.4m (5% of materiality basis)
During the course of our audit, we reassessed initial materiality and trued this up to
final results to reflect the full year actual profit before tax and exceptional items.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an
amount to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s
overall control environment, our judgement was that performance materiality was
75% (2021: 75%) of our planning materiality, namely £4.8m (2021: £2.7m). We have
set performance materiality at this percentage as we did not anticipate a significant
level of audit differences following our FY21 audit.
Audit work at component locations for the purpose of obtaining audit coverage
over significant financial statement accounts is undertaken based on a percentage
of total performance materiality. The performance materiality set for each
component is based on the relative scale and risk of the component to the Group
as a whole and our assessment of the risk of misstatement at that component. In
the current year, the range of performance materiality allocated to components
was £1.0m to £4.8m (2021: £0.6m to £2.7m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected
audit differences in excess of £0.32m (2021: £0.18m), which is set at 5% of planning
materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures
of materiality discussed above and in light of other relevant qualitative considerations
in forming our opinion.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, the part of the directors’ remuneration report to be audited has
been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the directors’ report for the
financial year for which the Financial Statements are prepared is consistent with
the Financial Statements; and
– the strategic report and the directors’ report have been prepared in accordance
with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the Group and the parent
company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which
the Companies Act 2006 requires us to report to you if, in our opinion:
– adequate accounting records have not been kept by the parent company, or
returns adequate for our audit have not been received from branches not
visited by us; or
– the parent company Financial Statements and the part of the Directors’
Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit
CORPOR ATE GOVERNANCE STATEMENT
We have reviewed the directors’ statement in relation to going concern, longer-
term viability and that part of the Corporate Governance Statement relating to the
Group and company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review by the Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of
the following elements of the Corporate Governance Statement is materially
consistent with the Financial Statements or our knowledge obtained during the audit:
– Directors’ statement with regards to the appropriateness of adopting the going
concern basis of accounting and any material uncertainties identified set out on
page 166;
– Directors’ explanation as to its assessment of the company’s prospects, the
period this assessment covers and why the period is appropriate set out on
pages 166 to 167;
– Director’s statement on whether it has a reasonable expectation that the
Group will be able to continue in operation and meets its liabilities set out on
pages 166 to 167;
234
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 misstatement, including how fraud might occur by meeting with management
and internal audit to understand where they considered there was susceptibility
to fraud. We also considered performance targets and the potential incentives
or opportunities to manage earnings or influence the perceptions of analysts.
We considered the programmes and controls that the Group has established to
address risks identified, or that otherwise prevent, deter and detect fraud; and
how senior management monitors those programmes and controls. Where the
risk was considered to be higher, we performed audit procedures to address
each identified fraud risk as discussed in the key audit matters section above.
These procedures included testing manual journals and were designed to
provide reasonable assurance that the Financial Statements were free from
material fraud.
– Based on this understanding we designed our audit procedures to identify non-
compliance with such laws and regulations. Our procedures involved
understanding management’s internal controls over compliance with laws and
regulations; reviewing internal audit reports and whistleblowing investigation
reports provided to the Audit Committee; making enquiries of legal counsel,
Group management, internal audit; and inspecting journal entries for evidence
of non-compliance.
A further description of our responsibilities for the audit of the Financial Statements
is located on the Financial Reporting Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
OTHER MATTERS WE ARE REQUIRED TO ADDRESS
– Following the recommendation from the Audit Committee we were appointed
by the company on 17 October 2019 to audit the Financial Statements for the
period ending 26 April 2020 and subsequent financial periods.
– The period of total uninterrupted engagement including previous renewals and
reappointments is 3 years, covering the periods ending 26 April 2020 to 1 May
2022.
– The audit opinion is consistent with the additional report to the Audit
Committee.
USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s members those matters we
are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
JULIE CARLYLE (SENIOR STATUTORY AUDITOR)
FOR AND ON BEHALF OF ERNST & YOUNG LLP, STATUTORY AUDITOR
London
6 July 2022
– Directors’ statement on fair, balanced and understandable set out on page 190;
– Board’s confirmation that it has carried out a robust assessment of the emerging
and principal risks set out on page 160;
– The section of the Annual Report that describes the review of effectiveness of
risk management and internal control systems set out on page 191; and;
– The section describing the work of the Audit Committee set out on pages 188
to 193
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ Responsibilities Statement set out on
pages 225 to 226, the directors are responsible for the preparation of the Financial
Statements and for being satisfied that they give a true and fair view, and for such
internal control as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the Financial Statements, the directors are responsible for assessing the
Group and parent company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or the parent
company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the Financial
Statements as a whole are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these Financial Statements.
EXPL ANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED
CAPABLE OF DETECTING IRREGUL ARITIES, INCLUDING FR AUD
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined above,
to detect irregularities, including fraud. The risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or
intentional misrepresentations, or through collusion. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests
with both those charged with governance of the company and management.
– We obtained an understanding of the legal and regulatory frameworks that are
applicable to the Group and determined that the most significant are
frameworks which are directly relevant to specific assertions in the Financial
Statements are those that relate to the reporting framework (UK adopted
international accounting standards, FRS 102, the Companies Act 2006 and UK
Corporate Governance Code). In addition, we concluded that there are certain
significant laws and regulations which may have an effect on the determination
of the amounts and disclosures in the Financial Statements being the Listing
Rules of the UK Listing Authority, and those laws and regulations relating to
GDPR, health and safety and employee matters.
– We understood how Watches of Switzerland PLC is complying with those
frameworks by making enquiries of management, internal audit, those
responsible for legal and compliance matters and the Company Secretary and
General Counsel. We confirmed our enquiries through our review of Board
minutes, papers provided to the Audit Committee and correspondence
received from regulatory bodies.
– We assessed the susceptibility of the Group’s Financial Statements to material
235
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C O N S O L I DAT E D I N C O M E S TAT E M E N T
52 week period ended 1 May 2022
53 week period ended 2 May 2021
Exceptional
items*
£m
Total
£m
Underlying
operations
£m
Exceptional
items*
£m
–
–
–
–
(2.0)
0.4
–
(1.6)
(1.6)
0.5
(1.1)
1,238.0
905.1
(1,056.7)
–
181.3
(39.0)
0.4
(0.6)
142.1
(784.3)
(0.2)
120.6
(27.9)
(0.8)
(0.9)
91.0
–
–
0.2
0.2
(5.1)
(4.2)
–
(9.1)
Total
£m
905.1
(784.3)
–
120.8
(33.0)
(5.0)
(0.9)
81.9
(15.9)
(18.2)
–
(18.2)
126.2
(25.2)
101.0
72.8
(14.8)
58.0
(9.1)
1.7
(7.4)
42.2p
42.0p
24.2p
24.2p
63.7
(13.1)
50.6
21.1p
21.1p
Revenue
Cost of sales
(Impairment)/reversal of impairment of trade receivables
Gross profit
Administrative expenses
Reversal of impairment/(impairment) of assets
Loss on disposal of non-current assets
Operating profit/(loss)
Net finance cost
Profit/(loss) before taxation
Taxation
Profit/(loss) for the financial period
Earnings Per Share
Basic
Diluted
* Exceptional items have been further described in note 4.
Note
3
5
5
7
8
9
Underlying
operations
£m
1,238.0
(1,056.7)
–
181.3
(37.0)
–
(0.6)
143.7
(15.9)
127.8
(25.7)
102.1
42.6p
42.4p
236
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 C O N S O L I DAT E D S TAT E M E N T O F C O M P R E H E N S I V E I N C O M E
Profit for the financial period
Other comprehensive income/(expense):
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS
Foreign exchange gain/(loss) on translation of foreign operations excluding deferred tax
Deferred tax on translation of foreign operations
Related tax movements
ITEMS THAT WILL NOT BE RECLASSIFIED TO PROFIT OR LOSS
Actuarial movements on defined benefit pension scheme
Related tax movements
Other comprehensive income/(expense) for the period
Total comprehensive income for the period
The notes on pages 241 to 276 are an integral part of these Consolidated Financial Statements.
52 week period
ended
1 May 2022
£m
101.0
53 week period
ended
2 May 2021
£m
50.6
11.0
–
(1.2)
9.8
1.4
(0.2)
1.2
11.0
112.0
(10.4)
0.5
1.7
(8.2)
(0.2)
–
(0.2)
(8.4)
42.2
8
20
8
237
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C O N S O L I DAT E D B A L A N C E S H E E T
Note
1 May 2022
£m
2 May 2021
£m
10
10
11
12
8
13
14
13
15
16
12
18
16
8
12
19
20
18
21
21
21
21
159.7
18.1
112.5
293.6
10.3
2.7
596.9
307.0
0.6
19.6
105.9
433.1
1,030.0
(200.1)
(2.0)
(46.7)
(1.0)
(249.8)
(1.3)
(0.4)
(293.9)
(118.6)
(0.6)
(4.1)
(418.9)
(668.7)
361.3
3.0
147.1
(2.2)
(6.7)
214.3
5.8
361.3
135.4
15.2
93.7
253.7
14.4
0.6
513.0
226.4
1.9
9.8
76.1
314.2
827.2
(149.6)
–
(38.4)
(0.8)
(188.8)
(2.1)
–
(263.0)
(117.9)
(2.6)
(2.5)
(388.1)
(576.9)
250.3
3.0
147.1
(2.2)
–
106.4
(4.0)
250.3
ASSETS
NON-CURRENT ASSETS
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Trade and other receivables
CURRENT ASSETS
Inventories
Current tax asset
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Current tax liability
Lease liabilities
Provisions
NON-CURRENT LIABILITIES
Trade and other payables
Deferred tax liabilities
Lease liabilities
Borrowings
Post-employment benefit obligations
Provisions
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Merger reserve
Other reserves
Retained earnings
Foreign exchange reserve
Total equity
The Consolidated Financial Statements were approved and authorised for issue by the Board and were signed on its behalf by:
W FLOYDD
CHIEF FINANCIAL OFFICER
Date: 6 July 2022
The notes on pages 241 to 276 are an integral part of these Consolidated Financial Statements.
238
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 C O N S O L I DAT E D S TAT E M E N T O F C H A N G E S I N E Q U I T Y
Balance at 27 April 2020
Profit for the financial period
Other comprehensive income
Tax relating to other comprehensive income
Total comprehensive income
Transactions with owners
Share-based payment charge (note 22)
Tax on items credited to equity
Balance at 2 May 2021
Profit for the financial period
Other comprehensive income
Tax relating to other comprehensive income
Total comprehensive income
Transactions with owners
Purchase of own shares (note 21)
Share-based payment charge (note 22)
Tax on items credited to equity
Balance at 1 May 2022
Share capital
£m
3.0
–
–
–
–
Share premium
£m
147.1
–
–
–
–
Merger
reserve
£m
(2.2)
–
–
–
–
Other reserves
£m
–
–
–
–
–
–
–
3.0
–
–
–
–
–
–
–
3.0
–
–
147.1
–
–
–
–
–
–
–
147.1
–
–
(2.2)
–
–
–
–
–
–
–
(2.2)
–
–
–
–
–
–
–
(6.7)
–
–
(6.7)
Retained
earnings
£m
47.4
50.6
(0.2)
–
50.4
5.7
2.9
106.4
101.0
1.4
(0.2)
102.2
–
3.2
2.5
214.3
Foreign
exchange
reserve
£m
4.2
–
(9.9)
1.7
(8.2)
Total equity
attributable to
owners
£m
199.5
50.6
(10.1)
1.7
42.2
–
–
(4.0)
–
11.0
(1.2)
9.8
–
–
–
5.8
5.7
2.9
250.3
101.0
12.4
(1.4)
112.0
(6.7)
3.2
2.5
361.3
239
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C O N S O L I DAT E D S TAT E M E N T O F C A S H F LOW S
CASH FLOWS FROM OPER ATING ACTIVITIES
Profit for the period
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Impairment of right-of-use assets
(Reversal)/impairment of property, plant and equipment
(Gain)/loss on lease disposal
Loss on disposal of property, plant and equipment
Loss on disposal on intangibles
Gain on lease modifications
Share-based payment charge
Finance income
Finance costs
Taxation
(Increase)/decrease in inventory
Increase in debtors
Increase in creditors, provisions, government grants and pensions
Cash generated from operations
Pension scheme contributions
Tax paid
Receipt of government grants
Total net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of non-current assets:
Property, plant and equipment additions
Intangible asset additions
Movement on capital expenditure accrual
Cash outflow from purchase of non-current assets
Acquisition of subsidiaries net of cash acquired
Settlement of deferred consideration
Interest received
Total net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from term loan
Repayment of term loan
Costs directly attributable to raising new term loan
Net repayment of short term loans
Payment of capital element of leases
Payment of interest element of leases
Interest paid
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at the end of period
Comprised of:
Cash at bank and in hand
Cash in transit
Cash and cash equivalents at end of period
24 0
52 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
Note
101.0
50.6
11
12
10
12
11
12
11
10
12
22
7
7
8
20
17
11
10
25
25
19
19
19
19
12
12
15
15
27.6
40.6
2.5
–
(0.4)
(0.1)
1.5
–
(0.8)
3.2
(0.1)
16.0
25.2
(50.6)
(6.4)
27.4
186.6
(0.7)
(15.6)
–
170.3
(41.0)
(2.2)
(0.8)
(44.0)
(44.1)
–
–
(88.1)
–
–
–
–
(40.8)
(12.2)
(2.7)
(55.7)
26.5
76.1
3.3
105.9
95.4
10.5
105.9
24.0
37.9
2.8
1.7
3.4
0.2
0.4
0.3
(1.2)
5.7
(0.2)
18.4
13.1
10.3
(1.0)
3.4
169.8
(0.7)
(9.6)
12.3
171.8
(24.1)
(2.0)
3.9
(22.2)
(0.1)
(1.4)
0.1
(23.6)
22.5
(22.5)
(0.4)
(81.8)
(44.0)
(12.7)
(4.5)
(143.4)
4.8
72.9
(1.6)
76.1
66.8
9.3
76.1
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
1. ACCOUNTING POLICIES
GENER AL INFORMATION
Watches of Switzerland Group PLC (the ‘Company’) is a public limited company,
limited by shares, which is listed on the London Stock Exchange and incorporated
and domiciled in England and Wales. The address of the registered office is Aurum
House, 2 Elland Road, Braunstone, Leicester, LE3 1TT. The Company and its
subsidiaries together form the Group.
The principal activity of the Group is the retailing of luxury watches and jewellery,
both in showrooms and online. At the balance sheet date, the Group was trading
from 131 UK based showrooms and 40 US based showrooms. The Group mainly
trades under five prestigious brands; Watches of Switzerland (UK and US), Mappin
& Webb (UK), Goldsmiths (UK), Mayors (US), and Betteridge (US).
The Consolidated Financial Statements are presented in Pounds Sterling (£), which is
the Group’s presentational currency, and are shown in £millions to one decimal place.
In the prior period the Consolidated Financial Statements were shown in £’000s.
BASIS OF PREPAR ATION
The Consolidated Financial Statements include the financial statements of the
Company and its subsidiary undertakings made up to 1 May 2022. A subsidiary is
an entity that is controlled by the parent. The financial year represents the 52
weeks to 1 May 2022 (prior financial year 53 weeks to 2 May 2021). The financial
year-end date is determined to be the Sunday closest to 30 April each year.
The financial statements are prepared in accordance with UK adopted international
accounting standards. The Consolidated Financial Statements have been prepared under
the historical cost convention except for pension assets which are measured at fair value.
GOING CONCERN
The Directors consider that the Group has, at the time of approving the Group
Financial Statements, adequate resources to remain in operation for the foreseeable
future and have therefore continued to adopt the going concern basis in preparing
the consolidated information.
At the balance sheet date, the Group had a total of £217.7 million in available
committed facilities, of which £120.0 million was drawn down. Net debt at this date
was £14.1 million with liquidity headroom (defined as unrestricted cash plus
undrawn available facilities) of £189.6 million. The main UK bank facility £170.0
million expires in June 2024. The US$60.0 million US Asset Backed Loan (ABL)
expires in April 2023, during the going concern period. No extension or new ABL
has been signed and therefore the going concern assessment is based on the
remaining £170.0 million facility from April 2023 onwards.
The key covenant tests attached to the Group’s facilities are a measure of net debt
to EBITDA and the Fixed Charge Cover Ratio (FCCR) at each April and October.
Covenant EBITDA is on a pre-IFRS 16 basis and excludes share-based payment and
the Watches of Switzerland Group PLC company costs. Net debt to EBITDA is
defined as the ratio of total net debt at the reporting date to the last 12 months
Adjusted EBITDA. This ratio must not exceed 3. The FCCR is the ratio of Adjusted
EBITDA plus rent to the total finance charge and rent for the 12 months to the
reporting date. This ratio must exceed 1.6. On 18 June 2020, the covenant tests of
the Group’s facilities were replaced with a monthly minimum liquidity headroom
covenant of £20.0 million for the period of June 2020 to September 2021. The
Directors sought the replacement of covenants to provide further flexibility to deal
with any unexpected circumstances during that period. The £20.0 million minimum
headroom covenant was satisfied for each month to September 2021.
After the covenant waiver period, at 31 October 2021 and 1 May 2022, the Group
comfortably satisfied the original covenant tests with net debt to EBITDA being less
than 3 and the FCCR exceeding 1.6.
In assessing whether the going concern basis of accounting is appropriate, the
Directors have reviewed various trading scenarios for the period to 31 October
2023 from the date of this report. These included:
– The budget approved by the Board in March 2022, which included the following
key assumptions:
– A continued strong luxury watch market in the UK and US
– Low levels of tourism and travel in the US and UK
– Revenue forecast supported by expected luxury watch supply
The budget aligns to the Guidance given on page 74. Under this budget, the Group
has significant liquidity and comfortably complies with all covenant tests to
31 October 2023. It is also noted that the budget includes increased costs such as
the general market rise in energy costs, in addition to the cost of actions being taken
to achieve environmental targets.
– Reverse stress-testing of this budget was performed to determine what level of
reduced EBITDA and worst case cash outflows would result in a breach of the
liquidity or covenant tests. The likelihood of this level of reduced EBITDA is
considered remote.
– Severe but plausible scenarios of:
– 10% reduction in sales against the budget due to reduced consumer
confidence and lower disposable income due to the cost of living crisis. This
scenario did not include cost mitigations which are given below
– A repeat of the FY21 pandemic impact on the ability of showrooms to trade
modelled without Government support
– Under these scenarios the net debt to EBITDA and the FCCR covenants would
be complied with
– Should trading be worse than the outlined severe but plausible scenarios, the
Group has the following mitigating actions within management’s control:
– Reduction of marketing spend
– Reduction in the level of stock purchases
– Restructuring of the business with headcount and showroom operations
savings
– Redundancies and pay freezes
– Reducing the level of planned capex and acquisition spend
As a result of the above analysis, including potential severe but plausible scenarios,
the Board believes that the Group is able to adequately manage its financing and
principal risks and that the Group will be able to operate within the level of its
facilities and meet the required covenants for the period to 31 October 2023. For
this reason, the Board considers it appropriate for the Group to adopt the going
concern basis in preparing the Group Financial Statements.
CLIMATE CHANGE
In preparing the Consolidated Financial Statements management has considered
the impact of climate change, particularly in the context of the disclosures included
in the Strategic Report. These considerations did not have a material impact on the
financial reporting judgments and estimates, consistent with the assessment that
climate change is not expected to have a significant impact on the Group’s going
concern assessment to 31 October 2023 nor the viability of the Group over the
next three years.
EXCEPTIONAL ITEMS
The Group presents as exceptional items on the face of the Consolidated Income
Statement those material items of income and expense which, because of the
nature or the expected infrequency of the events giving rise to them, merit separate
presentation to provide a better understanding of the elements of financial
performance in the financial period, so as to assess trends in financial performance.
Further details on exceptional items are given within note 4.
241
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
1. ACCOUNTING POLICIES (CONTINUED)
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 APMs
are not defined by IFRS and therefore may not be directly comparable with other
companies’ alternative performance measures.
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 offers interest free credit on certain goods and the cost of this product
is nettted against revenue.
Sale of goods – online
Revenue from 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.
The key APMs that the Group uses include: Net margin, Adjusted EBITDA,
Adjusted EBIT and Adjusted Earnings Per Share. These APMs are set out in the
Glossary on page 283 including explanations of how they are calculated and how
they are reconciled to a statutory measure where relevant.
Rendering of services
Revenue from a contract to provide services, such as product repairs and servicing,
is recognised in the period in which the services are provided. Revenue is recognised
when the following conditions are satisfied:
The Group makes certain adjustments to the statutory profit measures in order to
derive many of these APMs. The Group’s policy is to exclude 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.
Treatment as an adjusting item provides stakeholders with additional useful
information to assess the year-on-year trading performance of the Group but
should not be considered in isolation of statutory measures.
FOREIGN CURRENCIES
The Consolidated Financial Statements are presented in Pounds Sterling (£), which
is the Group’s presentational currency, and are shown in £millions to one decimal
place. 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 Consolidated Income Statement.
SEGMENT REPORTING
Operating segments are reported in a manner consistent with the internal reporting
provided to the Chief Operating Decision-Makers (CODMs). The CODMs, who
are responsible for allocating resources and assessing performance of the operating
segments, have been identified as the Chief Executive Officer and Chief Financial
Officer of the Group. The CODMs review the key profit measures Adjusted
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and
Adjusted Earnings Before Interest and Tax (EBIT), both shown pre-exceptional
items and IFRS 16.
REVENUE
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
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 is transferred to the customer. Retail sales are usually
settled in cash or by card. It is the Group’s policy to sell its products to the retail
– 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.
Cost of sales
Included within cost of sales are any items which are directly attributable to the sale
of goods and services. This includes the cost of bringing inventory into a condition to
sell, wages and salaries, depreciation on land and buildings and fittings and equipment
and other costs directly attributable to the cost of selling goods and services.
Insurance contracts
The Group issues contracts that transfer insurance risk which are classified as
insurance contracts. This activity is completed through the Aurum Insurance
(Guernsey) Limited subsidiary which is fully consolidated. The Group manages its
risk via its underwriting strategy within its overall risk management framework.
Commission income is earned in showrooms through the sale of insurance policies
by Watches of Switzerland Company Limited. Premiums are earned from the date
of the attachment of risk, over the indemnity period, based on the pattern of risks
underwritten. The earned portion of premiums written is recognised as revenue.
Unearned premium represents the proportion of premiums written which is
estimated to be earned in future financial years, calculated separately for each
insurance contract using the daily pro-rata method.
Claims and claims handling expenses are recognised as incurred based on the
estimated cost of settling all liabilities arising on events occurring up to the balance
sheet date.
Share-based payments
Some employees (including senior executives) of the Group receive remuneration in
the form of share-based payments, whereby employees render services as
consideration for equity instruments (equity-settled transactions). The fair value of
the equity-settled awards is calculated at grant date using a Black-Scholes model. The
resulting cost is charged in the Consolidated Income Statement over the vesting
period of the option or award and is regularly reviewed and adjusted for the expected
and actual number of options or awards vesting. This applies to LTIP Awards,
Deferred Share Bonus Schemes, Save as You Earn Awards, and Free Share Awards.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Service and non-service performance conditions are not taken into account when
determining the grant date fair value of awards, but the likelihood of the conditions
being met is assessed as part of the Group’s best estimate of the number of equity
instruments that will ultimately vest. No expense is recognised for awards that do
not ultimately vest because of non-market performance and/or service conditions
that have not been met.
The social security contributions payable in connection with the award of the share
options is determined at each balance sheet date as a liability with the total cost
recognised in the Consolidated Income Statement over the vesting period.
Own shares held
Own shares represent the shares of Watches of Switzerland Group PLC that are
held in an Employee Benefit Trust which has been set up for this purpose. The
Company adopts a ‘look-through’ approach which, in substance, accounts for the
trust as an extension of the Company. Own shares are recorded at cost and are
deducted from equity.
Taxation
Taxation, comprised of current and deferred tax, is charged or credited to the
Consolidated Income Statement unless it relates to items recognised in other
comprehensive income or directly in equity. In such cases, the related tax is also
recognised in other comprehensive income or directly in equity.
Current tax liabilities are measured at the amount expected to be paid, based on
tax rates and laws that are enacted or substantively enacted at the balance sheet
date.
Deferred tax is accounted for using the balance sheet liability method and is
calculated using rates of taxation enacted or substantively enacted at the balance
sheet date which are expected to apply when the asset or liability is settled.
Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are only recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences can
be utilised. Deferred tax is not recognised in respect of investments in subsidiaries
where the reversal of any taxable temporary differences can be controlled and are
unlikely to reverse in the foreseeable future. Deferred tax assets and liabilities are
offset when there is a legally enforceable right to offset and there is an intention to
settle the balances on a net basis.
Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of
an acquisition is measured as the aggregate of the consideration transferred, which
is measured at acquisition date fair value, and the amount of any non-controlling
interests in the acquiree. Acquisition-related costs are expensed as incurred and
included in administrative expenses.
The Group determines that it has acquired a business when the acquired set of
activities and assets include an input and a substantive process that together
significantly contribute to the ability to create outputs. The acquired process is
considered substantive if it is critical to the ability to continue producing outputs,
and the inputs acquired include an organised workforce with the necessary skills,
knowledge or experience to perform that process or it significantly contributes to
the ability to continue producing outputs and is considered unique or scarce or
cannot be replaced without significant cost, effort or delay in the ability to continue
producing outputs.
When the Group acquires a business, it assesses the financial assets and liabilities
assumed for appropriate classification and designation in accordance with the
contractual terms, economic circumstances and pertinent conditions as at the
acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognised
at fair value at the acquisition date. Contingent consideration classified as an asset
or liability that is a financial instrument and within the scope of IFRS 9 ‘Financial
Instruments’, is measured at fair value with the changes in fair value recognised in
the statement of profit or loss in accordance with IFRS 9.
Goodwill is initially measured at cost (being the excess of the aggregate of the
consideration transferred and the amount recognised for non-controlling interests
and any previous interest held over the net identifiable assets acquired and liabilities
assumed). If the fair value of the net assets acquired is in excess of the aggregate
consideration transferred, the Group reassesses whether it has correctly identified
all of the assets acquired and all of the liabilities assumed and reviews the procedures
used to measure the amount to be recognised at the acquisition date. If the
reassessment still results in an excess of the fair value of net assets acquired over
the aggregate consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses.
Intangible assets
Research and development
Expenditure on research activities is recognised in the Consolidated Income
Statement as an expense as incurred.
Other intangible assets
Expenditure on internally generated goodwill and brands is recognised in the
Income Statement as an expense as incurred.
Other intangible assets that are acquired by the Group are stated at cost less
accumulated amortisation and accumulated impairment losses.
The cost of intangible assets acquired in a business combination is capitalised
separately from goodwill if the fair value can be measured reliably at the acquisition
date.
Acquired computer software licences are capitalised based on the costs incurred to
acquire and bring to use the specific software. Software is measured initially at
acquisition cost or costs incurred to develop the asset. Following initial recognition,
software is carried at cost less accumulated amortisation. Assets are amortised on
a straight-line basis over their estimated useful lives of three to five years.
Cloud software licence agreements
Licence agreements to use cloud software are treated as service contracts and
expensed in the Consolidated Income Statement, unless the Group has both a
contractual right to take possession of the software at any time without significant
penalty, and the ability to run the software independently of the host vendor. In
such cases the licence agreement is capitalised as software within intangible assets.
Costs to configure or customise a cloud software licence are expensed alongside
the related service contract in the Consolidated Income Statement, unless they
create a separately identifiable resource controlled by the Group, in which case
they are capitalised.
Amortisation
Amortisation is charged to the Consolidated Income Statement on a straight-line
basis over the estimated useful lives of intangible assets. Amortisation is recognised
wholly within cost of sales. Intangible assets are amortised from the date they are
available for use. The estimated useful lives are as follows:
Computer software
Brands
Agency agreements
3 to 5 years
5 to 30 years
10 years
The bases for choosing these useful lives are:
– Brand longevity considering brand history and market awareness
– Agency agreements considering the longevity of the agreements in place with a
major supplier
The Group reviews the amortisation period and method when events and
circumstances indicate that the useful life may have changed since the last reporting
date.
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continued
1. ACCOUNTING POLICIES (CONTINUED)
Property, plant and equipment
Management accounts for property, plant and equipment under the cost basis of
IAS 16 ‘Property, plant and equipment’, rather than applying the alternative
(revaluation) treatment. The cost of property, plant and equipment includes directly
attributable costs.
Depreciation is provided on the cost of all other assets (except assets in the course
of construction), so as to write off the cost, less residual value, on a straight-line
basis over the expected useful economic life of the assets concerned, as follows:
Land and buildings
Fittings and equipment
Lease period
3 to 10 years
Useful lives and residual values are reviewed at each balance sheet date and revised
where expectations are significantly different from previous estimates. In such
cases, the depreciation charge for current and future periods is adjusted accordingly.
Impairment of non-financial assets
The carrying values of non-financial assets are reviewed at each balance sheet date
to determine whether there is any indication of impairment. If any impairment loss
arises, the asset is adjusted to its estimated recoverable amount and the difference
is recognised in the Income Statement.
Property, plant and equipment and other non-current assets are reviewed for
impairment if events or changes in circumstances indicate that the carrying amount
of an asset or a cash-generating unit (CGU) is not recoverable. A CGU is an individual
showroom which is the smallest identifiable group of assets that generate
independent cash flows which are monitored by management and the CODMs.
CGUs are grouped for the purposes of allocating goodwill where the CGU group is
expected to benefit from synergies, such as sharing of centralised functions and
management. Goodwill allocated to groups of CGUs is tested annually for impairment
and whenever there is an indication that the goodwill may be impaired.
Impairment testing is performed at several levels and applied in the order set out by
IAS 36 ‘Impairment of assets’. Impairment testing is first applied to the assets within
a CGU where the value of assets held by the CGU are compared to the recoverable
value. Impairment testing is then performed at a higher level which compares the
value of goodwill to the recoverable value of the associated group of CGUs.
Trade and other receivables
Trade receivables represent outstanding customer balances less an allowance for
Expected Credit Losses (ECLs). Trade receivables are recognised when the Group
becomes party to the contract which happens when the goods are received and
controlled by the end user. They are derecognised when the rights to receive the
cash flows have expired e.g. due to the settlement of the outstanding amount or
where the Group has transferred substantially all the risks and rewards associated
with that contract. Other receivables are stated at invoice value less an allowance
for ECLs. Trade and other receivables are subsequently measured at amortised
cost as the business model is to collect contractual cash flows and the debt meets
the Solely Payment of Principal and Interest (SPPI) criterion.
Expected credit losses
The Group recognises an allowance for ECLs for customer and other receivables.
IFRS 9 ‘Financial instruments’ requires a provision to be recognised on origination
of a customer advance, based on its ECL.
The Directors have taken the simplification available under IFRS 9 5.5.15 which
allows the loss amount in relation to a trade receivable to be measured at initial
recognition and throughout its life at an amount equal to lifetime ECL. This
simplification is permitted where there is either no significant financing component
(such as customer receivables where the customer is expected to repay the balance
in full prior to interest accruing) or where there is a significant financing component
(such as where the customer expects to repay only the minimum amount each
month), but the Directors make an accounting policy choice to adopt the
simplification. Adoption of this approach means that Significant Increase in Credit
Risk (SICR) and Date of Initial Recognition (DOIR) concepts are not applicable to
the Group’s ECL calculations.
Lifetime ECLs are the ECLs that result from all possible default events over the
expected life of a financial instrument. Trade and other receivables are only written
off when the Group has exhausted all options to recover the amounts due and
provided for in full when there is no reasonable expectation of recovery, which is
the Group’s definition of default.
The assessment of credit risk and the estimation of ECL are required to be unbiased,
probability-weighted and should incorporate all available information relevant to
the assessment, including information about past events, current conditions and
reasonable and supportable forecasts of economic conditions at the reporting date.
The forward looking aspect of IFRS 9 requires considerable judgement as to how
changes in economic factors affect ECLs.
ECL charges in respect of customer receivables are recognised in the Consolidated
Income Statement within cost of sales.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes all
costs incurred in bringing each product to its present location and condition. Raw
materials, consumables and goods for resale are recognised on an average cost
basis. Net realisable value is the estimated selling price in the ordinary course of
business, less applicable variable selling expenses.
Cash and cash equivalents
In the Consolidated Balance Sheet, cash and cash equivalents includes cash in hand, cash
in transit, deposits held at call with banks and other short term highly liquid investments
with original maturities of three months or less. Cash in transit largely comprises
amounts receivable on credit cards where the transaction has been authorised but the
funds have yet to clear the bank. These balances are considered to be highly liquid, with
minimal risk of default, and are typically received in less than three days.
Government grants
Government grants are recognised where there is assurance that the grant will be
received and that all attached conditions will be complied with. When the grant
relates to an expense item, it is recognised as a deduction from the related expense.
Grants are recognised on a systematic basis over the periods that the related costs
are intended to compensate.
Provisions
Provisions are recognised when:
– The Group has a present legal or constructive obligation as a result of past events
– It is probable that an outflow of resources will be required to settle the
obligation; and
– The amount has been reliably estimated. Provisions are not recognised for
future operating losses
Where there are a number of similar obligations, the likelihood that an outflow will
be required in settlement is determined by considering the class of obligations as a
whole. A provision is recognised even if the likelihood of an outflow with respect to
any one item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be
required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. The
increase in the provision due to passage of time is recognised as an interest expense.
Post-employment benefit obligations
The Group operates various post-employment schemes, including both defined benefit
schemes and defined contribution pension plans. Typically, defined benefit schemes
define an amount of pension benefit that an employee will receive on retirement, usually
dependent on one or more factors such as age, years of service and compensation.
The liability recognised in the Consolidated Balance Sheet in respect of the defined
benefit pension scheme is the present value of the defined benefit obligation at the
end of the reporting period less the fair value of scheme assets. The defined benefit
obligation is calculated by a full yield-curve independent actuarial valuation. The
present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates of high-quality corporate bonds
that are denominated in the currency in which the benefits will be paid, and that
have terms to maturity approximating to the terms of the related pension obligation.
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THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
Subsequently measured at fair value. Gains
and losses are recognised in the Consolidated
Income Statement
Subsequently measured at amortised cost
using the effective interest rate (EIR) method.
The EIR amortisation is included in finance
costs in the Income Statement
Subsequently measured at amortised cost
The current service cost of the defined benefit scheme, recognised in the
Consolidated Income Statement in employee benefit expense, reflects the increase
in the defined benefit obligation resulting from employee service in the current
period, benefit changes, curtailments and settlements. Past-service costs are
recognised immediately in the Consolidated Income Statement.
The net interest cost is calculated by applying the discount rate to the net balance
of the defined benefit obligation and the fair value of scheme assets. This cost is
included in employee benefit expense in the Consolidated Income Statement.
Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited in other comprehensive income in
the period in which they arise.
For defined contribution plans, the Group pays contributions to publicly or privately
administered pension insurance plans on a mandatory, contractual or voluntary basis.
The Group has no further payment obligations once the contributions have been paid.
The contributions are recognised as an employee benefit expense when they are due.
Financial liabilities
Initial recognition and measurement
The Group has classified its financial liabilities as follows:
Financial liabilities
Interest-bearing loans and borrowings Amortised cost
Amortised cost
Trade and other payables
(excluding accrued income)
Classification under IFRS 9
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
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.
Interest-bearing loans and
borrowings
The Group does not hold any derivative instruments in either the current or prior
period.
Trade and other payables
(excluding accrued income)
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
Trade and other receivables
(excluding prepayments)
Cash and short term deposits
Classification under IFRS 9
Amortised cost – held to collect as business
model and SPPI met
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
Consolidated 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 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.
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
Consolidated 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.
Leases
The Group’s lease portfolio is principally comprised of property leases in relation to
Watches of Switzerland, Mappin & Webb, Goldsmiths, Mayors and Betteridge
showrooms, mono-brand boutiques and central offices. The leases typically run for
terms between five and 20 years and may include break clauses or options to renew
beyond the non-cancellable periods. The majority of the Group’s lease payments
are subject to market review, usually every five years, with a number of leases which
have annual increases dependent on economic indices. Some lease agreements
include rental payments which are contingent on the turnover of the property to
which it relates. These payments are excluded from the calculation of the lease
liabilities under IFRS 16 ‘Leases’.
Definition of a lease
The Group assesses whether a contract is or contains a lease based on the definition
of a lease under IFRS 16. A contract is, or contains, a lease if the contract conveys a
right to control the use of an identified asset for a period of time in exchange for
consideration.
At inception or on reassessment of a contract that contains a lease component, the
Group allocates the consideration in the contract to each lease and non-lease
component on the basis of their relative stand-alone prices.
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continued
1. ACCOUNTING POLICIES (CONTINUED)
Leases (continued)
Lease liability – initial recognition
The Group recognises right-of-use assets and lease liabilities at the lease
commencement date. The lease liabilities are initially measured at the present value
of the lease payments that are not yet paid at the commencement date, less any
incentives receivable, discounted using the determined incremental borrowing rate
applicable to the lease.
Lease payments in the measurement of the lease liability comprise:
– Fixed lease payments (including in-substance fixed payments), less any lease
incentives
– Variable lease payments such as those that depend on an index or rate (such as
RPI), initially measured using the index or rate at the commencement date; and
– Penalty payments for terminating the lease, if the lease term reflects the
exercise of an option to terminate the lease
The Group discounted lease payments, to their present value, using its incremental
borrowing rate at the lease commencement date. The Incremental Borrowing Rate
(IBR) applied to each lease is determined by taking into account:
– The risk-free rate based on country specific swap markets
– A credit risk adjustment based on country specific corporate indices; and
– A Group specific adjustment to reflect the Group’s specific borrowing
conditions
The IBR applied to individual leases ranged from 2.10% to 6.50%.
Lease liability – subsequent measurement
Lease liabilities are subsequently measured at amortised cost and are increased to
reflect interest on the lease liability (using the effective interest method) and
decreased by the lease payments made.
Lease liability – remeasurement
Lease liabilities are remeasured when there is a change in future lease payments
arising from a change in an index or market rental review, a change in the estimate
of the amount expected to be payable under a residual value guarantee, or as
appropriate, changes in the assessment of whether a renewal option is reasonably
certain to be exercised or a break clause is reasonably certain to be exercised.
When the lease liability is remeasured, an equivalent adjustment is made to the
right-of-use asset, unless its carrying amount is reduced to £nil, in which case any
remaining amount is recognised in profit or loss.
The Group has applied judgement to determine the lease term for those lease
contracts that include a renewal or break option. The assessment of whether the
Group is reasonably certain to exercise a renewal option or reasonably certain not
to exercise a break option significantly impacts the value of lease liabilities and right-
of-use assets recognised on the Balance Sheet and Consolidated Income Statement.
Right-of-use assets – initial recognition
Right-of-use assets are initially measured at cost, which is an amount equal to the
corresponding lease liabilities adjusted for any lease payments made at or before
the commencement date, dilapidation provisions required, less any lease incentives
received. The Group has elected to apply the exemption for short term leases
(leases with a term of less than one year) and low-value assets under IFRS 16, as
such not recognising a right-of-use asset and lease liability on the Balance Sheet, but
recognising lease payments associated with those leases as an expense on a
straight-line basis over the lease term.
Where the Group has an obligation for costs to restore the underlying asset to the
condition required by the terms and conditions of the lease, a provision is recognised
and measured under IAS 37 ‘Provisions, contingent liabilities and contingent assets’.
The estimated costs are included in the related right-of-use asset. Initial direct costs
(lease acquisition costs), incurred subsequently to the initial date of application, have
been included within the right-of-use asset.
Right-of-use assets – subsequent measurement
Right-of-use assets are subsequently measured at cost less any accumulated
depreciation and impairment losses, adjusted for certain remeasurements of the
lease liabilities. Depreciation is calculated on a straight-line basis over the expected
useful economic life of a lease which is taken as the lease term.
COVID-19 related rent concessions
The COVID-19 Related Rent Concessions amendment to IFRS 16 ‘Leases’ was
adopted by the IASB on 28 May 2020 and endorsed by the European Union on 12
October 2020. The amendment applies to accounting periods from 1 June 2020
but early application was permitted and the Group has elected not to apply the
amendment in the previous period.
The amendment allows for a simplified approach to accounting for rent concessions
occurring as a direct result of the pandemic.
Lessees are not required to assess whether eligible rent concessions are lease
modifications, allowing the lessee to account for eligible rent concessions as if they
were not lease modifications. During the period, the Group has agreed rent
concessions both in the form of rent forgiveness in which the landlord has agreed
to forgive all or a portion of rents due with no obligation to be repaid in the future
and rent deferrals in which the landlord has agreed to forego rents in one period
with a proportional increase in rents due in a future period.
The rent concession has been recognised once a legally binding agreement is made
between both parties by derecognising the portion of the lease liability that has
been forgiven and recognising a reduction to the right-of-use asset.
Rent deferrals do not change the total consideration due over the life of the lease
but change the timing of future payments. Where deferrals have been agreed, the
Group has adjusted the lease liability and right-of-use asset to reflect the change in
timings of these payments.
The Group elected not to apply the amendment in the previous period and
assessed that eligible rent concessions should be treated as lease modifications. As
a result, in the prior period the Group has recognised within lease modifications an
adjustment of £0.2m with no impact on the Consolidated Income Statement
relating to these COVID-19 rent concessions.
NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS
The following standards, amendments and interpretations were applicable for the
period beginning 3 May 2021 and were adopted by the Group for the 52 week
period ended 1 May 2022. They have not had a significant impact on the Group’s
profit for the year, equity or disclosures:
– Amendments to IFRS 16 – COVID-19 concessions, extension of amendment
The following are new accounting standards and amendments to existing standards
that have been published and are applicable for the Group’s accounting periods
beginning 2 May 2022 onwards, which the Group has not adopted early:
– Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37
– Reference to the Conceptual Framework – Amendments to IFRS 3
– Property, Plant and Equipment: Proceeds before Intended Use – Amendments
to IAS 16
The adoption of these standards and amendments is not expected to have a
material impact on the Group’s Consolidated Financial Statements.
Major sources of estimation uncertainty and judgement
The preparation of consolidated financial information requires the Group to make
estimates and assumptions that affect the application of policies and reported amounts.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
reasonable under the circumstances. Actual results may differ from these estimates.
24 6
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 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.
Lease term (IFRS 16)
IFRS 16 defines the lease term as the non-cancellable period of a lease together
with the options to extend or terminate a lease, if the lessee were reasonably
certain to exercise that option.
The areas involving significant risk resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next financial period are as follows:
Post-employment benefit obligations
The Group’s accounting policy for the defined benefit pension scheme requires
management to make judgements as to the nature of benefits provided by each
scheme and thereby determine the classification of each scheme. For the defined
benefit scheme, management is required to make annual estimates and assumptions
about future returns on classes of scheme assets, future remuneration changes,
employee attrition rates, administration costs, changes in benefits, inflation rates,
life expectancy and expected remaining periods of service of employees and the
determination of the pension cost and defined benefit obligation of the Group’s
defined benefit pension scheme depends on the selection of these assumptions.
Differences arising from actual experiences or future changes in assumptions will be
reflected in subsequent periods. Sensitivity of the Group's defined benefit scheme
to movements in key assumptions is set out in note 20.
Net realisable value of inventories
Inventories are stated at the lower of cost and net realisable value, on a weighted
average cost basis. Provisions are recognised where the net realisable value is
assessed to be lower than cost. The calculation of this provision requires estimation
of the eventual sales price and sell-through of goods to customers in the future. A
20% reduction in the showroom sell-through of slow moving stock would impact
the net realisable value by c.£2.1m.
Impairment of property, plant and equipment and right-of-use assets
Property, plant and equipment and right-of-use assets are reviewed for impairment
if events or changes in circumstances indicate that the carrying amount may not be
recoverable. For the impairment test, the value-in-use method requires the Group
to determine appropriate assumptions (which are sources of estimation uncertainty)
in relation to the cash flow projections over the five-year strategic plan period, the
long term growth rate to be applied beyond this five-year period and the risk-
adjusted pre-tax discount rate used to discount those cash flows. The key
assumptions relate to sales growth rates discount rates used to discount the cash
flows. Climate risk and near term environmental actions that the Group is taking,
have been considered in future cash flows used in the impairment review.
Showroom related property, plant and equipment and right-of-use assets are
tested for impairment at a showroom-by-showroom level, including an allocation of
overheads related to showroom operations. Sensitivity of the key assumptions in
relation to impairment are included in note 12.
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:
Classification of exceptional items and presentation of non-GAAP measures
The Directors exercise their judgement in the classification of certain items as
exceptional and outside the Group’s underlying results. The determination of
whether an item should be separately disclosed as an exceptional item, non-
underlying or non-trading requires judgement on its materiality, nature and
incidence, as well as whether it provides clarity on the Group’s underlying trading
performance. In exercising this judgement, the Directors take appropriate regard of
IAS 1 ‘Presentation of financial statements’ as well as guidance from the Financial
Reporting Council and the European Securities Market Authority on the reporting
of exceptional items and APMs. The overall goal of the Directors is to present the
Group’s underlying performance without distortion from one-off or non-trading
events regardless of whether they are favourable or unfavourable to the underlying
result. Further details on exceptional items are provided in note 4.
Where a lease includes the option for the Group to terminate the lease before the
term end, the Group makes a judgement as to whether it is reasonably certain that
the option will or will not be taken.
On entering into a lease, the Group assesses how reasonably certain it is to exercise
these options. The default position is that the Group will determine that the lease
term is to the end of the lease (i.e. will not include break-clauses or options to
extend) unless there is clear evidence to the contrary.
The lease term of each lease is reassessed if there is specific evidence of a change
in circumstance such as:
– A decision has been made by the business to exercise a break or option
– The trading performance significantly changes
– Planned future capital expenditure suggests that the option to extend will be
taken
Discount rates (IFRS 16)
The discount rate used to calculate the lease liability is the rate implicit in the lease,
if it can be readily determined, or the lessee’s incremental borrowing rate if not.
Management uses the rate implicit in the lease in relation to the Group’s ‘Other’
leases and the lessee’s incremental borrowing rate for all property leases.
Incremental borrowing rates are determined on entering a lease and depend on
the term, country, currency and start date of the lease. The incremental borrowing
rate used is calculated based on a series of inputs including:
– The risk-free rate based on country specific swap markets
– A credit risk adjustment based on country specific corporate indices; and
– A Group specific adjustment to reflect the Group’s specific borrowing
conditions
As a result, reflecting the breadth of the Group’s lease portfolio, judgements on the
lease terms and the international spread of the portfolio, there are a large number
of discount rates applied to the leases within the range of 2.58% to 6.33%.
Substantive substitution rights (IFRS 16)
The Group has applied judgement to three (2021: three) contractual agreements
and has judged that they do not meet the definition of a lease under IFRS 16. In
these cases, the Group has judged that the lessor has a substantive right to
substitute the asset and as such, there is no asset identified within the contract. The
Group judges that the lessor has the practical ability to substitute; the Group
cannot prevent the lessor from proposing the substitution; and the costs of
substitution are assessed to be low.
If substituted, the lessor is able to give 14 days’ written notice to the Group
indicating that the sales area will be changed and the costs incurred to move the
sales area would be low to the lessor. As a result, the Group has deemed that the
lessor has a substantive right to substitute the asset and as such there is no asset
identified within the contract. Given this, the Group does not recognise lease
liabilities or right-of-use assets in relation to these leases and continues to account
for these on a straight-line basis.
Other areas of estimation and judgement include estimation around expected
supplier incentives receivable from third parties. Estimates are based on underlying
and forecast sales data to anticipate the level of incentive receivable based on
targets to be met in the future. Sensitivities to the assumptions for this are not
expected to result in a material change in the carrying amount. The amount
recognised as a receivable is reviewed regularly and updated to reflect management’s
latest best estimate.
247
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
2. SEGMENT REPORTING
The key Group performance measures are Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (Adjusted EBITDA) and Adjusted Earnings Before
Interest and Tax (Adjusted EBIT), both shown pre-exceptional items, as detailed below. The segment reporting is disclosed on a pre-IFRS 16 basis reflecting how results
are reported to the CODMs and how they are measured for the purposes of covenant testing. Both Adjusted EBITDA and Adjusted EBIT are APMs and these measures
provide stakeholders with additional useful information to assess the year-on-year trading performance of the Group but should not be considered in isolation of statutory
measures.
Adjusted EBITDA represents profit for the period before finance costs, finance income, taxation, depreciation, amortisation, exceptional items presented in the Group’s
Consolidated Income Statement (consisting of exceptional administrative expenses, exceptional cost of sales and exceptional impairment) on a pre-IFRS 16 basis.
The Group has created a new Corporate segment to give management a greater focus on the trading performance of individual divisions. The Corporate segment
captures central administrative costs including Directors, the costs of being a listed Group and charitable donations to The Watches of Switzerland Group Foundation.
The expense in the new Europe division represents initial showroom set up costs. The European showrooms were non-trading in the current period.
52 week period ended 1 May 2022
US
£m
Europe
£m
Corporate
£m
428.4
163.8
(81.4)
(22.6)
(3.1)
56.7
(8.7)
48.0
–
–
–
(0.4)
–
(0.4)
–
(0.4)
Total
£m
1,238.0
470.6
(226.7)
(73.3)
(8.4)
162.2
(31.9)
–
–
–
(9.0)
–
(9.0)
–
(9.0)
130.3
13.4
(15.9)
0.4
(2.0)
126.2
Revenue
Net margin
Less:
Showroom costs
Overheads
Showroom opening and closing costs
Adjusted EBITDA
Depreciation, amortisation, impairment and loss on disposal of assets
Segment profit/(loss)*
Impact of IFRS 16 (excluding interest on leases)
Net other finance costs
Exceptional reversal of impairment of assets (note 4)
Exceptional administrative costs (note 4)
Profit before taxation for the financial period
UK
£m
809.6
306.8
(145.3)
(41.3)
(5.3)
114.9
(23.2)
91.7
24 8
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Revenue
Net margin
Less:
Showroom costs
Overheads
Showroom opening and closing costs
Adjusted EBITDA
Depreciation, amortisation, impairment and loss on disposal of assets
Segment profit/(loss)*
Impact of IFRS 16 (excluding interest on leases)
Net other finance costs
Exceptional gain on trade receivables (note 4)
Exceptional impairment of assets (note 4)
Exceptional administrative costs (note 4)
Profit before taxation for the financial period
UK
£m
606.5
219.7
(109.2)
(31.6)
(3.2)
75.7
(20.0)
55.7
53 week period ended 2 May 2021
US
£m
Europe
£m
Corporate
£m
298.6
112.6
(57.4)
(16.2)
(1.3)
37.7
(7.8)
29.9
–
–
–
–
–
–
–
–
–
–
–
(8.0)
–
(8.0)
–
(8.0)
Total
£m
905.1
332.3
(166.6)
(55.8)
(4.5)
105.4
(27.8)
77.6
13.4
(18.2)
0.2
(4.2)
(5.1)
63.7
* Segment profit/(loss) is defined as being Earnings Before Interest, Tax, exceptional items and IFRS 16 adjustments (Adjusted EBIT). The segment reporting comparative has been updated to show the new Corporate
segment.
Entity-wide revenue disclosures
52 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
663.9
72.4
73.3
809.6
382.6
36.4
9.4
428.4
1,046.5
108.8
82.7
1,238.0
512.2
43.8
50.5
606.5
276.3
16.9
5.4
298.6
788.5
60.7
55.9
905.1
UK
Luxury watches
Luxury jewellery
Other
Total
US
Luxury watches
Luxury jewellery
Other
Total
GROUP
Luxury watches
Luxury jewellery
Other
Total
‘Other’ consists of the sale of fashion and classic watches and jewellery, the sale of gifts, servicing, repairs and product insurance.
Information regarding geographical areas, including revenue from external customers, is disclosed above.
No single customer accounted for more than 10% of revenue in any of the financial periods noted above.
249
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
2. SEGMENT REPORTING (CONTINUED)
Entity-wide non-current asset disclosures
UK
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Total
US
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Total
EUROPE
Property, plant and equipment
Right-of-use assets
Total
GROUP
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Total
3. REVENUE
1 May 2022
£m
2 May 2021
£m
121.6
4.8
68.4
188.9
383.7
38.1
13.3
43.8
102.6
197.8
0.3
2.1
2.4
159.7
18.1
112.5
293.6
583.9
121.6
4.4
62.1
182.0
370.1
13.8
10.8
31.6
71.7
127.9
–
–
–
135.4
15.2
93.7
253.7
498.0
The Group’s disaggregated revenue recognised under contracts with customers relates to the following categories and operating segments:
UK
US
Total
UK
US
Total
52 week period ended 1 May 2022
Sale of goods
£m
777.5
420.1
1,197.6
Rendering of
services
£m
32.1
8.3
40.4
53 week period ended 2 May 2021
Sale of goods
£m
588.1
293.6
881.7
Rendering of
services
£m
18.4
5.0
23.4
Total
£m
809.6
428.4
1,238.0
Total
£m
606.5
298.6
905.1
2 50
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 4. EXCEPTIONAL ITEMS
Exceptional items are those that in the judgement of the Directors need to be separately disclosed by virtue of their size, nature or incidence, in order to draw the
attention of the reader and to show the underlying business performance of the Group. Such items are included within the Income Statement caption to which they relate
and are separately disclosed on the face of the Consolidated Income Statement.
EXCEPTIONAL GAIN ON TR ADE RECEIVABLES
Expected credit gains (i)
Total exceptional gain on trade receivables
EXCEPTIONAL IMPAIRMENT OF ASSETS
Reversal/(impairment) of property, plant and equipment (note 11) (ii)
Impairment of right-of-use assets (note 12) (ii)
Reversal of impairment of right-of-use assets (note 12) (ii)
Total exceptional reversal/(impairment) of assets
EXCEPTIONAL ADMINISTR ATIVE EXPENSES
Professional and legal expenses on business combinations (iii)
EXCEPTIONAL ITEMS FOR IPO (IV )
Share-based payment in respect of the Chief Executive Officer (including employment taxes)
Total exceptional administrative costs
Total exceptional items
Tax impact of exceptional items
52 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
–
–
0.4
–
–
0.4
0.2
0.2
(3.1)
(1.2)
0.1
(4.2)
(0.5)
(0.2)
(1.5)
(2.0)
(1.6)
0.5
(4.9)
(5.1)
(9.1)
1.7
(i) Expected credit gains
In the period ended 26 April 2020 an exceptional provision of £0.7m was made against in-house credit debtors, linked to the exceptional circumstances impacted by the global pandemic. On 16 September 2020, the
Group made a one-time payment to remove all future obligations in relation to debt held on recourse. As the Group bears no future liability, the excess credit loss provision of £0.2m in relation to recourse debtors
was released in the prior period and accordingly reversed through exceptional items to be consistent with where the original charge was recorded.
(ii) Reversal/impairment of property, plant and equipment and right-of-use assets
In the prior year £3.1m of the impairment to property, plant and equipment and £1.2m of the impairment to right-of use assets were classified as exceptional expenses due to the materiality and exceptional nature of
these impairments, which included the impact of the pandemic. These showrooms were impaired to their estimated ‘value-in-use’ recoverable amount.
During FY22 the estimated ‘value-in-use’ recoverable amounts were reassessed taking into account FY22 performance and the latest discounted cash flow for each showroom. As a result of improved trading, an
impairment reversal of £0.4m has been made at the year end.
(iii) Professional and legal expenses on business combinations
Professional and legal expenses on business combinations completed during the periods have been expensed to the Consolidated Income Statement as an exceptional cost as they are regarded as non-trading, non-
underlying costs and are considered to be material by nature.
(iv) Exceptional items for IPO
Prior to the IPO on 31 May 2019, the CEO was granted a one-off share option award by the principal selling shareholder, over a portion of their shareholding, in recognition of his contribution to the Company up to
Admission and to ensure ongoing incentivisation and retention in his role following the IPO. This one-off award was contingent on the CEO’s continued employment until June 2021. The total charge in relation to this
award was recognised over the two-year period ending June 2021 and is considered exceptional as it is linked to a unique non-recurring event, being the IPO.
All of these items are considered exceptional as they are linked to unique non-recurring events and do not form part of the underlying trading of the Group.
2 51
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
5. OPER ATING PROFIT
Group operating profit for continuing operations is stated after charging the below items:
Depreciation on tangible assets (note 11)
Amortisation of intangible assets (note 10)
Depreciation of right-of-use assets (note 12)
Reversal/(impairment) of property, plant and equipment – exceptional items (note 11)
Impairment of property, plant and equipment (note 11)
Impairment of right-of-use assets – exceptional items (note 12)
Impairment of right-of-use assets (note 12)
Reversal of impairment of right-of-use assets – exceptional items (note 12)
Inventory recognised as an expense
Write down of inventories to net realisable value
FEES PAYABLE TO THE GROUP’S EXTERNAL AUDITOR AND ITS ASSOCIATES IN RESPECT OF:
Audit of these financial statements
Audit related assurance services
52 week period
ended
1 May 2022
£m
(27.6)
(2.5)
(40.6)
53 week period
ended
2 May 2021
£m
(24.0)
(2.8)
(37.9)
0.4
–
–
–
–
(3.2)
(0.2)
(1.2)
(0.5)
0.1
(774.4)
(0.9)
(575.8)
(2.2)
(0.5)
(0.1)
(0.6)
(0.5)
(0.1)
(0.6)
Impairment of assets and loss on disposal of non-current assets would be presented within administrative expenses had they not been presented separately within the
Consolidated Income Statement.
6. EMPLOYEES AND DIRECTORS
Staff costs for continuing operations recognised in operating profit for the Group during the period:
Wages and salaries
Social security costs
Share-based payments including exceptional costs (note 22)
Share-based payments social security costs
Pensions costs – defined contribution schemes (note 20)
Pensions costs – defined benefit scheme (note 20)
Total
Average number of people (including Executive Directors) employed:
Retail staff
Services staff
Administrative staff
Total
Average Full Time Equivalents (FTE) (including Executive Directors) employed:
Retail staff
Services staff
Administrative staff
Total
Further disclosure of the amounts paid to key management is included within note 24.
2 52
52 week period
ended
1 May 2022
£m
104.7
8.6
3.2
1.1
2.1
0.2
119.9
53 week period
ended
2 May 2021
£m
83.7
7.0
5.7
2.7
2.0
0.2
101.3
52 week period
ended
1 May 2022
1,756
94
583
2,433
53 week period
ended
2 May 2021
1,577
77
534
2,188
52 week period
ended
1 May 2022
1,604
91
558
2,253
53 week period
ended
2 May 2021
1,403
75
506
1,984
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 7. NET FINANCE COST
FINANCE COSTS
Interest payable on long term borrowings
Interest payable on short term borrowings
Amortisation of capitalised transaction costs
Other interest payable
Unwinding of discount on deferred consideration
Interest on lease liabilities (note 12)
Net foreign exchange loss on financing activities
Net interest expense on net defined benefit liabilities (note 20)
Total finance costs
FINANCE INCOME
Interest income on trade receivables
Net foreign exchange gain on financing activities
Other interest receivable
Total finance income
Total net finance cost
52 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
(2.9)
(0.1)
(0.7)
–
–
(12.2)
–
(0.1)
(16.0)
–
0.1
–
0.1
(2.8)
(1.1)
(1.1)
(0.1)
(0.2)
(12.7)
(0.3)
(0.1)
(18.4)
0.1
–
0.1
0.2
(15.9)
(18.2)
On 4 June 2019, the Group entered into a facility consisting of a term loan for £120.0m and a revolving credit facility of £50.0m. Interest on the Term Loan, which is fully
drawn, is currently charged at SONIA plus a Credit Adjustment Swap (CAS) charge to compensate for the LIBOR change to SONIA plus 1.75% margin (PY: LIBOR plus
1.75%). The Group is charged at SONIA plus CAS plus 1.50% on the revolving credit facility if the facility was drawn down (PY: LIBOR plus 1.50%). The margin on the
term loan ranges from 1.75% to 2.80% and the revolving credit facility ranges from 1.50% to 2.55% based on the leverage of the Group. The UK facility expires on 4 June
2024. The term loan facility is unsecured and is cross guaranteed by subsidiary entities.
In the prior period, during the pandemic, the Group entered into an additional £45.0m financing facility which was provided by the lenders under the Government’s
CLBILS scheme. This was repaid and cancelled in FY21.
Short term borrowings consist of the revolving credit facility noted above and an asset backed lending (ABL) facility held in US Dollars of US$60m. The ABL facility expires
in April 2023 and interest would be charged at US LIBOR plus the margin which ranges from 1.25% to 1.75%. Amounts outstanding on the revolving credit facility totalled
£nil (2021: £nil) and amounts outstanding on the ABL facility totalled £nil (2021: £nil).
Amounts undrawn on the facilities totalled £97.7m (2021: £77.5m). Borrowing on the US ABL facility is restricted to the lower of US$60.0m and the borrowing base which
is determined by reference to the assets held by the US entities.
8. TA X ATION
Tax charge for the period
The tax charge for the period is shown below. Tax is made up of current and deferred tax. Current tax is the amount payable on the taxable income in the period and
any adjustments to tax payable in previous periods.
CURRENT TA X:
Current UK tax on profits for the period
Current US tax on profits for the period
Adjustments in respect of prior periods – UK
Adjustments in respect of prior periods – US
Total current tax
DEFERRED TA X:
Origination and reversal of temporary differences
Impact of change in tax rate
Adjustments in respect of prior periods
Total deferred tax
Tax expense reported in the Income Statement
2 53
52 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
14.2
7.0
(0.4)
0.2
21.0
5.8
(1.5)
(0.1)
4.2
25.2
11.3
0.9
–
0.7
12.9
1.9
–
(1.7)
0.2
13.1
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
8. TA X ATION (CONTINUED)
Factors affecting the tax charge in the period
The tax rate for the current period varied from the standard rate of corporation tax in the UK due to the following factors:
Profit before taxation
Notional taxation at standard UK corporation tax rate of 19%
Non-deductible expenses
US tax differentials
Adjustments due to deferred tax rate change*
Adjustments in respect of prior periods
Tax expense reported in the Income Statement
52 week period ended 1 May 2022
Underlying
operations
£m
127.7
24.3
0.7
2.4
(1.5)
(0.2)
25.7
Exceptional items
£m
(1.6)
(0.3)
–
–
–
(0.2)
(0.5)
Total
£m
126.1
24.0
0.7
2.4
(1.5)
(0.4)
25.2
*
The UK Government announced that the rate of corporation tax will increase to 25% with effect from 1 April 2023. This was substantively enacted on 24 May 2021. This change has been reflected in the value of
the deferred tax balances outstanding at the end of the FY22 period based on an estimate as to when the deferred asset or liability is expected to unwind.
Profit before taxation
Notional taxation at standard UK corporation tax rate of 19%
Non-deductible expenses
Recognition of UK tax losses
Overseas tax differentials
Adjustments in respect of prior periods
Tax expense reported in the Income Statement
53 week period ended 2 May 2021
Underlying
operations
£m
72.8
13.8
1.5
(1.2)
1.7
(1.0)
14.8
Exceptional items
£m
(9.1)
(1.7)
–
–
–
–
(1.7)
Total
£m
63.7
12.1
1.5
(1.2)
1.7
(1.0)
13.1
Tax recognised in other comprehensive income
In addition to the amount charged to the Consolidated Income Statement, tax movements recognised in other comprehensive income were as follows:
CURRENT TA X:
Foreign exchange difference on translation of foreign operations
DEFERRED TA X:
Pension benefit obligation
Tax charge in other comprehensive income
Foreign exchange difference on translation of foreign operations
Total movements in other comprehensive income
52 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
(1.2)
(1.7)
(0.2)
(1.4)
–
(1.4)
–
(1.7)
(0.5)
(2.2)
Deferred tax
Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences that arise when the carrying value of assets and liabilities
differs between accounting and tax treatments. Deferred tax assets represent the amounts of income taxes recoverable in the future in respect of those differences, while
deferred tax liabilities represent the amounts of income taxes payable in the future in respect of those differences.
2 54
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 The deferred tax is made up of:
Deferred tax assets (UK)
Deferred tax liabilities (US)
Total
Accelerated capital allowances
Interest deductions available in future periods
Pension benefit obligations
Unused tax losses
Deferred tax on leases (IFRS 16)
Share-based payments
Intangible assets
Other temporary difference
Total
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
The material amounts are explained below:
1 May 2022
£m
10.3
(0.4)
9.9
1 May 2022
£m
(3.3)
1.2
0.1
2.1
4.7
3.7
(2.7)
4.1
9.9
2 May 2021
£m
14.4
–
14.4
2 May 2021
£m
(0.9)
1.5
0.5
4.1
4.0
4.9
(2.3)
2.6
14.4
(i)
The Group has a deferred tax liability for fixed assets (advanced capital allowances) as a result of bonus depreciation in the US and the availability of the super
deduction in the UK, reducing the tax value of the assets
(ii) Interest losses not utilised as they arise are available for offset against interest income in future years
(iii) Company contributions exceeded the amounts charged to pension scheme assets during the year
(iv) The tax losses relate to US losses that will be used based on restricted amounts in accordance with US tax legislation
(v) The deferred tax on leases relates to future deductions arising from IFRS 16 adjustments
(vi) The asset for share-based payments relates to the market value of the shares accrued at the balance sheet date which will be deductible when the shares vest
(vii) The liability for intangible assets relates mainly to goodwill that is deductible for tax purposes and as such reduces in value compared to the account’s value
(viii) Other temporary differences relate to timing differences whereby costs have been added back in the year but will be deductible in a later year, principally in the US
The deferred tax movement in the period is as follows:
Balance at 3 May 2021
Arising on business combinations
RECOGNISED IN THE INCOME STATEMENT:
Accelerated capital allowances
Pension benefit obligations
Unused tax losses
Interest deductions available in future years
Deferred tax on leases (IFRS 16)
Share-based payments
Intangible fixed assets
Other temporary differences
RECOGNISED IN OTHER COMPREHENSIVE INCOME:
Pension benefit obligations
RECOGNISED DIRECTLY WITHIN EQUITY:
Share-based payments
Foreign exchange differences
Balance at 1 May 2022
52 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
14.4
1.0
(2.4)
(0.2)
(2.0)
(0.3)
0.7
(0.3)
(0.4)
0.7
(0.2)
(1.1)
–
9.9
12.3
–
5.7
(0.1)
(4.3)
(4.9)
0.3
3.0
–
0.1
–
2.9
(0.6)
14.4
Interest deductions available in future years have no expiry date and have been fully recognised. These interest deductions will be fully utilised against future taxable profits
as and when they arise.
In addition to the deferred tax asset above, the Group has additional unrecognised gross tax losses of £4.2m (2021: £4.2m). These are unrecognised as it is uncertain as
to whether the losses will be capable of utilisation. There is no expiry date applicable to the use of these losses.
2 55
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
9. EARNINGS PER SHARE (EPS)
BASIC
EPS
EPS adjusted for exceptional items
EPS adjusted for exceptional items and pre-IFRS 16
DILUTED
EPS
EPS adjusted for exceptional items
EPS adjusted for exceptional items and pre-IFRS 16
52 week period
ended
1 May 2022
53 week period
ended
2 May 2021
42.2p
42.6p
41.8p
42.0p
42.4p
41.6p
21.1p
24.2p
23.8p
21.1p
24.2p
23.8p
Basic EPS is based on the profit for the year attributable to the equity holders of the Parent Company divided by the weighted average number of shares.
Diluted EPS is calculated by adjusting the weighted average number of shares used for the calculation of basic EPS as increased by the dilutive effect of potential ordinary
shares.
The following table reflects the profit and share data used in the basic and diluted EPS calculations:
Profit after tax attributable to equity holders of the Parent Company
ADD BACK:
Exceptional cost of sales – net of tax
Exceptional (reversal)/impairment of assets – net of tax
Exceptional administrative expenses – net of tax
Profit adjusted for exceptional items
Pre-exceptional IFRS 16 adjustments, net of tax
Profit adjusted for exceptional items and IFRS 16
The following table reflects the share data used in the basic and diluted EPS calculations:
WEIGHTED AVER AGE NUMBER OF SHARES:
Weighted average number of ordinary shares in issue
Weighted average shares for basic EPS
Weighted average dilutive potential shares
Weighted average shares for diluted EPS
52 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
101.0
–
(0.4)
1.5
102.1
(2.0)
100.1
50.6
(0.1)
3.3
4.2
58.0
(0.9)
57.1
52 week period
ended
1 May 2022
53 week period
ended
2 May 2021
‘000
239,483
239,483
1,119
240,602
‘000
239,456
239,456
160
239,616
2 56
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 10. INTANGIBLE ASSETS
COST
At 3 May 2021
Additions
Acquired on business acquisition (note 25)
Disposals
Foreign exchange differences
At 1 May 2022
ACCUMULATED AMORTISATION AND IMPAIRMENT
At 3 May 2021
Charge for the period
Disposals
Foreign exchange differences
At 1 May 2022
NET BOOK VALUE
At 1 May 2022
At 2 May 2021
COST
At 27 April 2020
Additions
Acquired on business acquisition (note 25)
Disposals
Foreign exchange differences
At 2 May 2021
ACCUMULATED AMORTISATION AND IMPAIRMENT
At 27 April 2020
Charge for the period
Disposals
Foreign exchange differences
At 2 May 2021
NET BOOK VALUE
At 2 May 2021
At 26 April 2020
Goodwill
£m
135.4
–
21.3
–
3.0
159.7
–
–
–
–
–
159.7
135.4
Goodwill
£m
137.1
–
0.1
–
(1.8)
135.4
–
–
–
–
–
135.4
137.1
1 May 2022
Brands Agency agreement Computer software
£m
£m
£m
10.7
–
2.2
–
1.1
14.0
2.2
0.4
–
0.3
2.9
11.1
8.5
2.5
–
–
–
0.3
2.8
0.9
0.3
–
0.1
1.3
1.5
1.6
2 May 2021
8.8
2.2
–
(0.6)
0.1
10.5
3.7
1.8
(0.6)
0.1
5.0
5.5
5.1
Brands Agency agreement Computer software
£m
£m
£m
11.9
–
0.1
–
(1.3)
10.7
2.1
0.3
–
(0.2)
2.2
8.5
9.8
2.8
–
–
–
(0.3)
2.5
0.7
0.3
–
(0.1)
0.9
1.6
2.1
10.2
2.0
–
(3.2)
(0.2)
8.8
4.4
2.2
(2.9)
–
3.7
5.1
5.8
Total
£m
157.4
2.2
23.5
(0.6)
4.5
187.0
6.8
2.5
(0.6)
0.5
9.2
177.8
150.6
Total
£m
162.0
2.0
0.2
(3.2)
(3.6)
157.4
7.2
2.8
(2.9)
(0.3)
6.8
150.6
154.8
On 2 September 2021, the Group acquired the trade and assets of one showroom from Ben Bridge Jeweler Inc. On 15 October 2021, the Group acquired the trade and
assets of one showroom from Timeless Watch Exchange LLC. On 1 December 2021, the Group acquired the trade and assets of three showrooms from Betteridge
Jewelers, Inc., Gotthelfs Acquisition Corp., and Vail Village Jewelers, Inc (‘Betteridge’). See note 25 for further details.
The Brand category is formed of intangible assets recognised on the business combinations of Mayors Jewelers, Analog Shift LLC, and Betteridge. Mayors Jewelers and
Analog:Shift were both acquired in previous reporting periods, and the additional £2.2m Betteridge brand was acquired as part of the business combination which took
place on 1 December 2021 (see note 25). The Betteridge brand has been given a ten-year life.
As at 1 May 2022, the Mayors Jewelers’ brand had a remaining useful economic life of 26 (2021: 27) years, the Analog:Shift brand had a remaining useful economic life of
3 (2021: 4) years, and the Betteridge brand had a remaining useful life of 115 months.
The Agency agreement category is solely formed of the intangible assets recognised on the business combination in relation to the showrooms within the Wynn Resorts,
acquired in December 2017. As at 1 May 2022, the Agency agreements had a remaining useful economic life of 6 (2021: 7) years.
2 57
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
10. INTANGIBLE ASSETS (CONTINUED)
Impairment tests for goodwill
As noted within the accounting policies, goodwill is allocated between groups of Cash Generating Units (CGUs) for the purposes of impairment testing. CGUs are
grouped due to sharing centralised functions and management, and this represents the smallest identifiable group of assets that generate independent cash flows that are
monitored by management and the Chief Operating Decision Makers (CODMs). Subsequent acquisitions generate independent cash flows and are monitored separately,
hence goodwill has been allocated to groups of CGUs on that basis.
Goodwill is monitored by management based on the categories set out below. Goodwill relating to the Heritage CGU consists of the Goldsmiths, Mappin & Webb and
Watches of Switzerland businesses (included in the UK segment) which were purchased as part of the acquisition of Watches of Switzerland Group Limited (formerly
Aurum Holdings Limited) in the period to 4 May 2014.
A summary of the groups of CGUs and allocation of goodwill held by the Group is presented below:
Heritage
Mayors Jewelers
The Wynn Resorts
Analog:Shift
Ben Bridge
Timeless Watch Exchange
Betteridge
Total
1 May 2022
£m
121.6
12.1
3.0
0.2
1.0
5.3
16.5
159.7
2 May 2021
£m
121.6
11.0
2.7
0.1
–
–
–
135.4
As at each period end, the recoverable amount of all groups of CGUs, owned for greater than 12 months, has been determined based on value-in-use calculations. Value-
in-use calculations are underpinned by the Group's budgets and strategic plans -covering a three-year period, which have regard to historical performance and knowledge
of the current market, together with management's view on the future achievable growth and committed initiatives. The cash flows which derive from the budgets and
strategic plans are pre-tax and include ongoing maintenance capital expenditure. Cash flows beyond the three-year period are extrapolated using the estimated long term
growth rates. Other than detailed strategic plans, the key assumptions for the value-in-use calculations are the long term growth rates and the pre-tax discount rate, which
takes into account the impact of IFRS 16 lease liabilities.
Sales growth (% annual growth rate)
Long term growth rate
Pre-tax discount rate
52 week period ended 1 May 2022
53 week period ended 2 May 2021
Heritage Mayors Jewelers
13.1%
2.0%
11.4%
13.0%
2.0%
11.3%
The Wynn
Resorts
4.3%
2.0%
11.4%
Analog:Shift
133.0%
2.0%
11.4%
Heritage Mayors Jewelers
11.9%
2.0%
11.4%
16.0%
2.0%
10.7%
The Wynn
Resorts
12.5%
2.0%
11.4%
Analog:Shift
n/a
n/a
n/a
Sensitivity analysis
Whilst management believe the assumptions are realistic, it is possible that an impairment would be identified if any of the above key assumptions were changed
significantly. A sensitivity analysis has been performed on each of these key assumptions with other variables held constant. Given on going uncertainties in the global
economy, including the impact of the pandemic on the Group’s operations, management have considered increased sensitivities. Despite this, management have concluded
that there are no reasonably possible changes in any key assumptions that would cause the carrying amount of goodwill to exceed the value-in-use.
2 58
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 11. PROPERTY, PL ANT AND EQUIPMENT
COST
At 3 May 2021
Additions
Acquired on business acquisition (note 25)
Disposals
Foreign exchange differences
At 1 May 2022
ACCUMULATED DEPRECIATION
At 3 May 2021
Charge for the period
Impairment/(reversal of impairment)
Reversal of impairment – exceptional items
Disposals
Foreign exchange differences
At 1 May 2022
NET BOOK VALUE
At 1 May 2022
At 2 May 2021
COST
At 27 April 2020
Additions
Disposals
Foreign exchange differences
At 2 May 2021
ACCUMULATED DEPRECIATION
At 27 April 2020
Charge for the period
Impairment
Impairment – exceptional items
Disposals
Foreign exchange differences
At 2 May 2021
NET BOOK VALUE
At 2 May 2021
At 27 April 2020
Land and buildings
£m
3.3
–
–
(0.6)
–
2.7
1.8
0.3
0.1
–
(0.4)
–
1.8
0.9
1.5
Land and buildings
£m
3.9
–
(0.6)
–
3.3
1.9
0.4
–
0.1
(0.6)
–
1.8
1.5
2.0
1 May 2022
Fittings and
equipment
£m
162.7
41.0
2.8
(9.5)
5.4
202.4
70.5
27.3
(0.1)
(0.4)
(8.2)
1.7
90.8
111.6
92.2
2 May 2021
Fittings and
equipment
£m
151.6
24.1
(7.7)
(5.3)
162.7
52.3
23.6
0.3
3.0
(7.3)
(1.4)
70.5
92.2
99.3
Total
£m
166.0
41.0
2.8
(10.1)
5.4
205.1
72.3
27.6
–
(0.4)
(8.6)
1.7
92.6
112.5
93.7
Total
£m
155.5
24.1
(8.3)
(5.3)
166.0
54.2
24.0
0.3
3.1
(7.9)
(1.4)
72.3
93.7
101.3
Expenditure on assets in the course of construction at 1 May 2022 was £12.8m (2021: £12.9m). The cost of assets which continue to be used that have a nil net book value
(excluding impaired assets) total £14.6m (2021: £7.0m). The loss on disposal of £1.5m (2021: £0.4m) includes £1.0m following a showroom fire in the period.
2 59
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
11. PROPERTY, PL ANT AND EQUIPMENT (CONTINUED)
Impairment of property, plant and equipment and right-of-use assets
For impairment testing purposes, the Group has determined that each showroom is a separate CGU. Each CGU is tested for impairment at the balance sheet date if any
indicators of impairment have been identified.
The value-in-use of each CGU is calculated based on the Group’s latest budget and forecast cash flows, covering a three-year period, which have regard to historic
performance and knowledge of the current market, together with the Group’s views on the future achievable growth. Cash flows beyond this three-year period are
extrapolated using a long term growth rate based on management’s future expectations, with reference to forecast GDP growth. These growth rates do not exceed the
long term growth rate for the Group’s operations in the relevant territory.
The key assumptions in the value-in-use calculations are the growth rates of sales and gross profit margins, long term growth rates and the risk-adjusted pre-tax discount
rate. Pre-tax discount rates are derived from the Group’s weighted average cost of capital, which has been calculated using the capital asset pricing model, the inputs of
which include a country risk-free rate, equity risk premium and a risk adjustment (beta). The pre-tax discount rates are 11.3% in the UK and 11.4% in the US. Pre-tax
discount rates are used to discount pre-tax cash flows. The post-tax discount rates, calculated in the same manner as the pre-tax discount rates, are 9.0% in the UK to
9.5% in the US.
During the prior period, the Group recognised an impairment charge of £3.4m relating to property, plant and equipment and £1.7m relating to right-of-use assets as a
result of showroom impairment testing. In the current period an impairment reversal of £0.4m has been recognised in relation to property, plant and equipment following
an improvement in showroom performance. The Group reviewed the profitability of its showroom network, taking into account the potential future impact on consumer
demand. At 1 May 2022 all showroom asset values are lower than their value-in-use recoverable amount.
As disclosed in the accounting policies (note 1), the cash flows used within the impairment model are based on assumptions which are sources of estimation uncertainty
and small movements in these assumptions could lead to further impairments. Management has performed sensitivity analysis on the key assumptions in the impairment
model using reasonably possible changes in these key assumptions across the showroom portfolio.
Sales growth rates are in line with the growth rate in the Guidance issued (given on page 74). Reducing sales growth by 5.0% in years two and three from the three-year
plan would result in an increase in the impairment charge of £nil. A 2.0% increase in the discount rate would increase the impairment charge by £nil. In combination, a
5.0% fall in sales growth from the three-year plan and a 2.0% increase in discount rate would increase the impairment charge by £0.1m. Reasonably possible changes of
the other assumptions would have no further significant impact on the impairment charge.
12. LEASES
Group as a lessee
Right-of-use assets have been grouped into two groups being Properties and Other. Properties are defined as land and buildings leased for our showrooms and offices
which are generally leased for between five and ten years with some office buildings leased for longer. Other leases are mainly motor vehicles which are in general leased
for four years. There are several lease contracts that include extension and termination options and variable lease payments. Management assess the lease term at
inception based on facts and circumstances applicable to each property including the period over which the investment appraisal was initially considered.
Management review the retail lease portfolio on an ongoing basis, taking into account retail performance and future trading expectations. In certain instances, management
may exercise break options, negotiate lease reductions or decide not to negotiate a lease extension at the end of the lease term. The most significant factor impacting
future lease payments is changes management choose to make to the showroom portfolio.
A number of the retail property leases incur payments based on a percentage of revenue achieved at the location. Changes in future variable lease payments will typically
reflect changes in the Group’s retail revenues. In line with IFRS 16, variable lease payments which are not linked to an index are not included in the lease liability.
The Group also has certain leases with lease terms of 12 months or less and leases of office equipment with low-value. The Group applies the ‘short term lease’ and ‘lease
of low-value assets’ recognition exemptions for these leases.
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Right-of-use assets
At 3 May 2021
Additions
Disposals
Depreciation
Leases renewed during the period
Lease breaks
Lease modifications and extensions
Foreign exchange differences
At 1 May 2022
Properties
£m
Other
£m
253.2
32.2
–
(40.4)
36.9
(0.2)
3.0
8.1
292.8
0.5
0.6
(0.1)
(0.2)
–
–
–
–
0.8
Total
£m
253.7
32.8
(0.1)
(40.6)
36.9
(0.2)
3.0
8.1
293.6
260
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Right-of-use assets
At 27 April 2020
Additions
Disposals
Depreciation
Leases renewed during the period
Rent reviews
Lease breaks
Lease modifications and extensions
Impairment
Impairment – exceptional items
Reversal of impairment – exceptional items
Foreign exchange differences
At 2 May 2021
Set out below are the carrying amounts of lease liabilities and the movements during the period:
Lease liabilities
At 3 May 2021
Additions
Disposals
Interest
Leases renewed during the period
Lease breaks
Lease modifications and extensions
Payments
Foreign exchange differences
At 1 May 2022
Lease liabilities
At 27 April 2020
Additions
Interest
Leases renewed during the period
Rent reviews
Lease breaks
Lease modifications and extensions
Payments
Foreign exchange differences
At 2 May 2021
Properties
£m
Other
£m
250.8
37.5
–
(37.6)
11.3
4.7
(3.0)
0.9
(0.5)
(1.2)
0.1
(9.8)
253.2
0.9
0.1
(0.2)
(0.3)
–
–
–
–
–
–
–
–
0.5
Properties
£m
Other
£m
(300.9)
(31.6)
0.1
(12.2)
(35.3)
0.2
(3.0)
52.7
(9.9)
(339.9)
(0.5)
(0.6)
0.1
–
–
–
–
0.3
–
(0.7)
Properties
£m
Other
£m
(307.3)
(36.9)
(12.7)
(10.9)
(4.7)
4.1
(0.7)
56.4
11.8
(300.9)
(0.7)
(0.1)
–
–
–
–
–
0.3
–
(0.5)
Total
£m
251.7
37.6
(0.2)
(37.9)
11.3
4.7
(3.0)
0.9
(0.5)
(1.2)
0.1
(9.8)
253.7
Total
£m
(301.4)
(32.2)
0.2
(12.2)
(35.3)
0.2
(3.0)
53.0
(9.9)
(340.6)
Total
£m
(308.0)
(37.0)
(12.7)
(10.9)
(4.7)
4.1
(0.7)
56.7
11.8
(301.4)
261
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
12. LEASES (CONTINUED)
The following are the amounts recognised in the Consolidated Income Statement:
Depreciation expense of right-of-use assets
Interest expense on lease liabilities
Gain/(loss) on lease disposal
Net impairment of right-of-use assets
Lease modifications and extensions
Expense relating to short term leases (included within cost of sales)
Variable lease payments (included within cost of sales)
Total amount recognised in the Consolidated Income Statement
52 week period
ended
1 May 2022
£m
(40.6)
(12.2)
0.1
–
0.8
(0.4)
(7.0)
(59.3)
53 week period
ended
2 May 2021
£m
(37.8)
(12.7)
(0.2)
(1.7)
1.2
(0.1)
(2.6)
(53.9)
Rental expense for contracts not in the scope of IFRS 16 totalled £3.2m (2021: £3.7m). Contracts not in the scope of IFRS 16 are contracts that were considered to be
leases under IAS 17 which do not meet the definition under IFRS 16, principally because the supplier is considered to have substantive substitution rights over the
associated assets.
Total cash flows in relation to leases, as defined in IFRS 16, in the 52 week period ended 1 May 2022 are £56.8m (2021: £58.1m). This relates to payments of £40.8m
(2021: £44.0m) of lease principal, £12.2m (2021: £12.7m) of lease interest, £3.4m (2021: £1.2m) of variable lease payments and £0.4m (2021: £0.2m) of other lease
payments principally relating to short term leases and leases in which tenancy has continued after the lease term has ended.
Maturity analysis of lease liabilities
The below table gives the undiscounted cash flows which relate to the leases recognised in line with IFRS 16:
Within 1 year
Between 1 and 2 years
Between 2 and 3 years
Between 3 and 4 years
Between 4 and 5 years
Total for the periods thereafter
Total
1 May 2022
£m
58.5
56.1
53.8
47.3
43.6
139.8
399.1
2 May 2021
£m
49.2
50.1
44.9
43.3
37.6
137.3
362.4
As at 1 May 2022, 10 (2021: 12) leases have cash flows that exceed ten years. The value of undiscounted cash flows greater than ten years totals £14.5m (2021: £17.7m).
Future possible cash outflows not included in the lease liability
Some leases contain break clauses to provide operational flexibility. In some instances, the Group has identified certain leases where it is reasonably likely that a break will
be served and as such have reflected this in the term of the lease. Potential future undiscounted lease payments not included in the reasonably certain lease term and
hence not included in lease liabilities total £4.5m (2021: £4.3m).
Future increases or decreases in rentals linked to an index or rate, which is applicable to two properties, are not included in the lease liability until the change in cash flows
takes effect. Approximately 54.3% of leases will be subject to rent reviews in future periods with rental changes linked rent reviews which typically occur on a five-yearly
basis. The Group is committed to payments totalling £51.1m (2021: £35.1m) in relation to leases that have been agreed but have not yet commenced and as such, do not
form part of the lease liability balance and neither included within the maturity analysis above.
Impairment of right-of-use assets
The Group has incurred a net impairment charge of £nil (2021: £1.7m) in the year in relation to right-of-use assets. Refer to note 11 for further disclosure relating to
impairment of non-current assets including right-of-use assets.
262
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 13. TR ADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Allowance for expected credit losses
Prepayments
Total
1 May 2022
2 May 2021
Current
£m
5.1
9.0
(0.2)
13.9
5.7
19.6
Non-current
£m
–
2.7
–
2.7
–
2.7
Current
£m
3.7
3.2
(0.2)
6.7
3.1
9.8
Non-current
£m
–
0.6
–
0.6
–
0.6
Included within trade receivables are amounts receivable from third parties which provide credit arrangements with our customers. Prepayments relate mainly to prepaid
property rates and service charges and insurance prepayments, and other receivables relate mainly to supplier incentives receivable. There are no material differences
between the fair values and book values stated above.
Movements on the allowance for expected credit losses (ECLs) for impairment of trade and other receivables are as follows:
Opening balance
Increase in allowance – cost of sales
Receivables written off during the period as uncollectable
Decrease in allowance – exceptional items (note 4)
Released due to the sale of trade receivables
Foreign exchange differences
Balance at period end
1 May 2022
£m
0.2
0.1
(0.1)
–
–
–
0.2
2 May 2021
£m
4.5
0.2
(2.3)
(0.2)
(1.7)
(0.3)
0.2
On 16 September 2020, the Group made a one-time payment to remove all future obligations in relation to debt held on recourse. As the Group bears no future liability,
the excess credit loss provision of £0.2m in relation to recourse debtors was been released and was accordingly been reversed through exceptional items in the prior
year.
On 13 November 2020, the Group signed an agreement for the sale of all remaining in-house credit debtors. Following the sale, the Group has no future liability in relation
to these debtors. The consideration received was in line with the carrying value of the debt held resulting in a £nil gain or loss through the Consolidated Income Statement
in the prior year.
14. INVENTORIES
Finished goods
Work in progress
Inventories
15. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Cash in transit
Cash and cash equivalents
1 May 2022
£m
305.2
1.8
307.0
1 May 2022
£m
95.4
10.5
105.9
2 May 2021
£m
225.5
0.9
226.4
2 May 2021
£m
66.8
9.3
76.1
Included in cash and cash equivalents is restricted cash of £13.8m (2021: £9.9m). Restricted cash is defined as cash controlled by the Group but which is not freely useable
by the Group in day-to-day operations. £9.6m (2021: £9.2m) relates to amounts which are contractually restricted based on third party agreements and required liquidity
reserves, with regard to the Group’s provision of insurance services. As at 1 May 2022, the Group has £4.2m held in escrow, whereby the cash is restricted, relating to a
business combination. In the prior period $1.0m of the restricted cash was held with a third party on retention.
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continued
16. TR ADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Accruals and deferred income
Total
1 May 2022
2 May 2021
Current
£m
(112.4)
(7.2)
(80.5)
(200.1)
Non-current
£m
–
–
(1.3)
(1.3)
Current
£m
(72.9)
(7.4)
(69.3)
(149.6)
Non-current
£m
–
–
(2.1)
(2.1)
Trade payables do not bear interest and are generally settled within 30 to 60 days. Accruals and deferred income do not bear interest.
17. GOVERNMENT GR ANTS
During the prior period, government grants were received to support certain administrative expenses during the pandemic. All attached conditions were complied with
before recognition in the Consolidated Income Statement.
The grants were associated to two schemes that operated differently from one another. One scheme operated on a claims basis, where cash was received after the
expense has been incurred (UK furlough scheme), and the other on an up-front basis, where cash was received prior to the expense being incurred (US Paycheck
Protection Program). These have been presented separately on the face of the Consolidated Balance Sheet and also below.
Below is the reconciliation of government grants receivable (UK furlough scheme):
Opening balance
Released to Income Statement
Cash received during the period
Balance at period end
52 week period
ended
1 May 2022
53 week period
ended
2 May 2021
£m
–
–
–
–
£m
2.6
6.8
(9.4)
–
During the prior period, the Group made a voluntary decision to repay all UK furlough scheme support relating to the period. The £6.8m support received was repaid
in July 2021.
Below is the reconciliation of government grants received (US Paycheck Protection Program):
Opening balance
Cash received during the period
Released to Income Statement
Foreign exchange movements
Balance at period end
52 week period
ended
1 May 2022
£m
–
–
–
–
–
53 week period
ended
2 May 2021
£m
(1.2)
(2.9)
4.0
0.1
–
264
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 18. PROVISIONS
Dilapidations
Movement of dilapidations provision
Opening balance
Charged to Income Statement
Utilised
Balance at period end
1 May 2022
2 May 2021
Current
£m
(1.0)
(1.0)
Non-current
£m
(4.1)
(4.1)
Current
£m
(0.8)
(0.8)
Non-current
£m
(2.5)
(2.5)
52 week period
ended
1 May 2022
£m
(3.3)
(2.1)
0.3
(5.1)
53 week period
ended
2 May 2021
£m
(2.0)
(1.7)
0.4
(3.3)
The dilapidations provision comprises obligations for showroom remediation costs to be incurred in compliance with applicable legal and environmental regulations
together with constructive obligations stemming from established practice once the property leases have expired. The key estimates associated with calculating the
provision relate to the cost of repair or replacement to perform the necessary remediation work as at the reporting date together with determining the year of retirement.
Estimates are updated annually based on the total estimated remaining life of leases.
19. BORROWINGS
NON-CURRENT
Term loan
Associated capitalised transaction costs
Total borrowings
1 May 2022
£m
2 May 2021
£m
(120.0)
1.4
(118.6)
(120.0)
2.1
(117.9)
Short term borrowings are supported by cross guarantees from various subsidiaries. In addition the US ABL facility is secured by a pledge against US inventory.
Detail on the Group’s borrowing is given in note 7.
Analysis of net debt
Cash and cash equivalents
Term loan
Net debt excluding capitalised transaction costs (pre-IFRS 16)
Capitalised transaction costs
Net debt (pre-IFRS 16)
Lease liabilities
Total net debt
2 May 2021
£m
76.1
(120.0)
(43.9)
2.1
(41.8)
(301.4)
(343.2)
Cash
flow
£m
26.5
–
26.5
–
26.5
53.0
79.5
Non-cash changes1
Foreign exchange
1 May 2022
£m
–
–
–
(0.8)
(0.8)
(82.3)
(83.1)
£m
3.3
–
3.3
0.1
3.4
(9.9)
(6.5)
£m
105.9
(120.0)
(14.1)
1.4
(12.7)
(340.6)
(353.3)
1 Non-cash changes are principally lease liability interest charges, additions and revisions.
Cash and cash equivalents consists of cash at bank and in hand of £95.4m (2021: £66.8m) and cash in transit of £10.5m (2021: £9.3m).
The key covenant tests attached to the Group’s facilities are a measure of net debt to EBITDA and the Fixed Charge Cover Ratio (FCCR) at each April and October. Net
debt to EBITDA is defined as the ratio of total net debt at the reporting date to the last 12 months Adjusted EBITDA. This ratio must not exceed 3. The FCCR is the ratio
of Adjusted EBITDA plus rent to the total finance charge and rent for the 12 months to the reporting date. This ratio must exceed 1.6. The covenant tests at October
2019 and April 2020 were fully met. On 18 June 2020, the covenant tests of the Group’s facilities were replaced with a monthly minimum liquidity headroom covenant of
£20.0m for the period of June 2020 to September 2021. The Directors sought the replacement of covenants to provide further flexibility to deal with any unexpected
circumstances during that period. The £20.0m minimum headroom covenant was satisfied for each month end to September 2021.
After the covenant waiver period, at 31 October 2021 and 1 May 2022, the Group comfortably satisfied the original covenant tests with net debt to EBITDA being less
than 3 and the FCCR exceeding 1.6.
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continued
20. POST-EMPLOYMENT BENEFIT OBLIGATIONS
Defined contribution schemes
The Group operates two (2021: two) separate UK defined contribution pension schemes. A defined contribution scheme called The Watches of Switzerland Company
Limited Pension Scheme which is a Group Personal Pension (GPP) scheme and a second scheme also called The Watches of Switzerland Company Limited Pension
Scheme which is a defined contribution multi-employer occupational pension scheme. The Group operates two (2021: two) separate US defined contribution pension
schemes, one called The Mayors Jewelers Inc. Scheme and a second called The Watches of Switzerland Scheme.
During the period to 1 May 2022, the pension charge for the period represents contributions payable by the Group to these schemes and amounted to £2.1m (2021:
£2.0m). The Group has no legal or constructive obligation to pay further contributions to the fund once the contributions have been paid. Members' benefits are
determined by the amount of contributions paid by the Group and the member, together with investment returns earned on the contributions arising from the
performance of each individual's chosen investments and the type of pension the member chooses to buy at retirement. As a result, actuarial risk (that benefits will be
lower than expected) and investment risk (that assets invested in will not perform in line with expectations) fall on the employee. The assets of the schemes are held
separately from the assets of the Group in trustee administered funds.
Defined benefit scheme
The Group operates a defined benefit scheme, the Aurum Retirement Benefits Scheme. The pension scheme operates under the regulatory framework of The
Occupational Pension Schemes Regulations 1996. This is an approved funded pension scheme. Defined benefit arrangements entitle employees to retirement benefits
based on their final salary and length of service at the time of leaving the scheme, payable on attainment of retirement ages (or earlier death). The assets of the scheme
are held separately from the assets of the Group in trustee administered funds. Contributions to the scheme are assessed in accordance with the advice of a qualified
independent actuary. As a result of the valuation at 5 April 2020, contributions of £0.7m per annum are being paid to the scheme until 5 April 2028, however, this will be
reassessed upon the next triennial valuation on 5 April 2023. The Group is expecting to make total contributions of approximately £0.7m in the 52 week period ended
30 April 2023. The most recent actuarial valuation was carried out on 5 April 2020.
By operating its defined benefit pension scheme, the Group is exposed to the risk that the cost of meeting its obligations is higher than anticipated. This could occur for
several reasons, for example:
– Investment returns on the scheme’s assets may be lower than anticipated, especially if falls in asset values are not matched by similar falls in the value of the scheme’s
liabilities
– The level of price inflation may be higher than that assumed, resulting in higher payments from the scheme
– Scheme members may live longer than assumed, for example due to unanticipated advances in medical healthcare. Members may also exercise (or not exercise)
choices in a way that leads to increases in the scheme’s liabilities, for example through early retirement or commutation of pension for cash
– Legislative changes could also lead to an increase in the scheme's liabilities
– The scheme liabilities are calculated using a discount rate set with reference to corporate bond yields. If scheme assets underperform this yield, this will create a
deficit. The Group believes that due to the long term nature of the scheme liabilities, a level of continuing equity investment is an appropriate element of the Group’s
long term strategy to manage the scheme efficiently
– A decrease in corporate bond yields will increase scheme liabilities, although that will be partially offset by an increase in the value of the scheme’s bond holdings
This scheme was closed on 28 February 2002 to new employees. There are no (2021: one) employees within the scheme. The latest full actuarial valuation was carried
out at 5 April 2020 and was updated for IAS 19 ‘Employee benefits’ purposes to 1 May 2022 by a qualified independent actuary.
Income Statement
The components of the net defined benefit expense recognised in the Consolidated Income Statement are as follows:
Administrative expenses
Charge within labour costs and operating profit
Defined benefit charge to the Consolidated Income Statement
Defined contribution schemes
Total charge to the Consolidated Income Statement
52 week period
ended
1 May 2022
£m
(0.2)
(0.2)
53 week period
ended
2 May 2021
£m
(0.2)
(0.2)
(0.2)
(2.1)
(2.3)
(0.2)
(2.0)
(2.2)
266
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Other comprehensive income
The components of the net defined benefit expense recognised in other comprehensive income are as follows:
Actuarial losses due to liability experience
Actuarial gains/(loss) due to liability financial assumption changes
(Loss)/gain on scheme assets greater than discount rate
Actuarial gain/(loss) recognised in other comprehensive income
Balance Sheet valuation
The net defined benefit pension liability recognised in the Consolidated Balance Sheet is analysed as follows:
Diversified growth funds
Cash
Fair value of scheme assets
Present value of benefit obligations
Net pension liability
Scheme obligations
Changes in the present value of defined benefit pension obligations are analysed as follows:
Opening defined benefit obligation
Past service costs and curtailments
Interest cost
Actuarial gains/(losses) on defined benefit obligation
Benefits paid
Closing defined benefit obligation
Scheme assets
Changes in the fair value of scheme assets were as follows:
Opening scheme assets
Expected return on scheme assets
Actuarial (losses)/gains on pension scheme assets
Employer contributions
Benefits paid
Administrative expenses
Closing scheme assets
52 week period
ended
1 May 2022
£m
–
1.6
1.6
53 week period
ended
2 May 2021
£m
(0.3)
(2.4)
(2.7)
(0.2)
1.4
2.5
(0.2)
1 May 2022
£m
18.0
(0.1)
17.9
(18.5)
(0.6)
2 May 2021
£m
18.2
(0.2)
18.0
(20.6)
(2.6)
52 week period
ended
1 May 2022
£m
(20.6)
–
(0.4)
1.7
0.8
(18.5)
53 week period
ended
2 May 2021
£m
(18.0)
(0.1)
(0.4)
(2.8)
0.7
(20.6)
52 week period
ended
1 May 2022
£m
18.0
0.4
(0.2)
0.7
(0.8)
(0.2)
17.9
53 week period
ended
2 May 2021
£m
15.3
0.3
2.5
0.7
(0.7)
(0.1)
18.0
None of the pension arrangements directly invest in any of the Group’s own financial instruments nor any property occupied by, or other assets used by, the Group. The
fair values of the above equity and debt instruments are determined based on quoted prices in active markets.
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continued
20. POST-EMPLOYMENT BENEFIT OBLIGATIONS (CONTINUED)
Principal assumptions
The IAS 19 (accounting) valuation of the defined benefit obligation was undertaken by an external qualified actuary as at 1 May 2022 using the projected unit credit
method. The principal actuarial assumptions used in the valuation were as follows:
Discount rate
Rate of increase in salary
Rate of future inflation – RPI
Rate of future inflation – CPI
Rate of increase in pensions in payment
Proportion of employees opting for a cash commutation
Life expectancy at age 65 (years):
Male
Female
1 May 2022
3.00%
n/a
3.70%
3.10%
3.60%
100.0%
2 May 2021
2.00%
4.30%
3.30%
2.70%
3.25%
100.0%
1 May 2022
2 May 2021
Pensioner
aged 65
Non-pensioner
aged 45
Pensioner
aged 65
Non-pensioner
aged 45
21
23
23
25
21
23
23
25
The post-retirement mortality assumptions allow for expected increases to life expectancy. The life expectancies quoted for members currently aged 40 assume that
they retire at age 65 (i.e. 25 years after the balance sheet date).
The discount rate in the current and prior year has been derived using a full yield curve approach. The yield curve is based on iBoxx AA rated GBP Corporate Bond index
and considers expected scheme cash flows at each duration. The expected average duration of the scheme’s liabilities is 17 years.
The rate of retail price inflation (RPI) has been derived in a consistent way to the discount rate, so that it is appropriate to the term of the liabilities. The RPI assumption
for the scheme allows for the inflation risk premium of 0.2% per annum (2021: 0.2% per annum).
The rate of consumer price inflation (CPI) is set at 0.6% lower (2021: 0.6% lower) than the assumption for retail price inflation, reflecting the long term expected gap
between the two indices.
The base mortality assumptions are in line with the standard S2PA year of birth tables. Future improvement trends have been allowed for in line with the CMI 2020 (2021:
CMI 2019) series with a long term trend towards 1.0% (2021: 1.0%) per annum.
Sensitivity analysis
The impact on the defined benefit obligation to changes in the financial and demographic assumptions is shown below:
0.25% increase in discount rate
0.25% decrease in discount rate
0.25% increase in pension growth rate
0.25% decrease in pension growth rate
1 year increase in life expectancy
1 year decrease in life expectancy
1 May 2022
£m
0.8
(0.8)
(0.6)
0.6
(0.6)
0.6
2 May 2021
£m
0.7
(0.7)
(0.5)
0.5
(0.5)
0.5
Defined Benefit Pension Scheme
The Aurum Retirement Benefits Scheme’s investment strategy was reviewed in early 2022 and the Trustees agreed to implement a de-risked strategy targeting full funding
on a prudent self-sufficiency type basis over the medium term. In the period between the year end and the signing of the Annual Report and Accounts, the Trustees
appointed Schroders as their new investment manager with a mandate to invest 30% of the Scheme’s assets in Liability Driven Investment (LDI) and 70% invested in a
diversified growth fund. The LDI allocation is around 3 times leveraged and therefore targets around 100% interest rate and inflation hedging of the Scheme’s liabilities.
The Trustees expect the revised strategy to provide funding level stability, even during volatile market conditions. The strategy will be kept under review and the Trustees
expect to implement further de-risking as part of future valuation cycles. The asset transfers are scheduled to take place by the end of July 2022.
268
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 21. EQUITY
On 30 May 2019, the Company was registered as a public limited company under the Companies Act 2006. On 4 June 2019, the Company was admitted for listing on
the London Stock Exchange. The Company issued 57,455,554 shares for £2.70 each with a nominal value of 1.25p recognising additional share capital of £718,000 and
share premium of £154,412,000.
As at 2 May 2021
Issuance of share capital
Purchase of own shares
As at 1 May 2022
Nominal value
£
0.0125
0.0125
–
0.0125
Shares
239,455,554
114,743
–
239,570,297
Share capital
£m
3.0
–
–
3.0
Share premium
£m
147.1
–
–
147.1
Merger reserve
£m
(2.2)
–
–
(2.2)
Other reserves
£m
–
–
(6.7)
(6.7)
Share capital
114,743 ordinary shares of 1.25p nominal value were issued in the period to satisfy the employee free share award.
Share premium account
This reserve represents the amount of proceeds received for shares in excess of their nominal value of 1.25p per share.
Merger reserve
This reserve arose as a consequence of a Group reorganisation which inserted the Company as the Parent Company of the Group.
Foreign exchange reserve
This reserve represents the cumulative effect of foreign exchange differences in relation to the retranslation of the Group’s subsidiaries which are denominated in a
currency other than the Group’s reporting currency of Pounds Sterling (£).
Other reserves
At the end of the period the Group purchased £6.7m of own shares to satisfy management incentives which will vest in FY23. The shares were purchased by an Employee
Benefit Trust which has been set up for this purpose. The payment for the shares was settled post period-end. The Company adopts a ‘look-through’ approach, which in
substance, accounts for the Trust as an extension of the Company. Own shares are recorded at cost and are deducted from equity.
22. SHARE-BASED PAYMENTS
During the period to 1 May 2022, the Group operated six (2021: three) separate share-based payment schemes.
The Group has granted a number of different equity-based awards to employees which it has determined to be share-based payments as detailed below.
Share options granted at the time of IPO to Chief Executive Officer (CEO)
On 31 May 2019, share options over 2,222,222 shares were granted to the CEO by the former owners at nil cost and a non-market vesting condition of the IPO. The
share options were able to be exercised at any point during a three-year period from the date of grant. The CEO was required to remain employed for a period of two
years unless his employment ended for an excluded reason. There were no cash settlement alternatives. During the period, the options were be settled by Jewel Holdco
S.à.r.l out of their shareholding in the Company.
Details of the share option movements are as follows:
Outstanding at 3 May 2021
Exercised
Outstanding at 1 May 2022
Exercisable price
Number of shares with options at 1 May 2022
Average fair value at grant
Share price at exercise date
Gain on exercise
1 May 2022
2,222,222
(2,222,222)
–
2 May 2021
2,222,222
–
2,222,222
£nil
2,222,222
£2.70
£10.48
£23,288,887
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continued
22. SHARE-BASED PAYMENTS (CONTINUED)
Long Term Incentive Plan (LTIP)
The LTIP is a discretionary executive share plan under which the Board may, subject to Adjusted EPS and Return on Capital Employed (ROCE) performance conditions,
grant options over shares in Watches of Switzerland Group PLC. The Group issues annual grants of awards with three-year performance periods. Grants vest and become
exercisable after three years and are awarded as nil-cost options. There are no cash settlement alternatives.
Details of the share options outstanding are as follows:
Outstanding at 3 May 2021
Change in performance
Granted
Forfeited
Outstanding at 1 May 2022
Exercisable price
Exercisable at 1 May 2022
Average fair value at grant
1 May 2022
1,794,125
–
402,739
(238,826)
1,958,038
2 May 2021
187,190
748,761
858,174
–
1,794,125
£nil
nil
£4.27
Deferred Bonus Plan (DBP)
The DBP is a discretionary bonus plan under which the Board may, subject to applicable performance conditions, issue one-third of a bonus in the form of conditional
share awards in Watches of Switzerland Group PLC. The bonus is linked to annual earnings targets. Two-thirds of the bonus is settled in cash. The remaining third of the
bonus is deferred as share options and accounted for as an equity-settled share-based payment. These deferred shares are subject to a three-year vesting period with no
additional performance conditions. Deferred shares are awarded as nil-cost options.
Details of the share options outstanding are as follows:
Outstanding at 3 May 2021
Change in FY21 number of shares granted*
Granted*
Forfeited
Outstanding at 1 May 2022
Exercisable price
Exercisable at 1 May 2022
Average fair value at grant
1 May 2022
160,039
(32,886)
126,252
(5,950)
247,455
2 May 2021
–
–
160,039
–
160,039
£nil
11,867
£9.74
*
The share price at which the number of shares granted under the DBP scheme is calculated is not confirmed until after the date of the approval of the Annual Report and Accounts. The maximum number of DBP
shares granted during the period is therefore estimated using the year-end closing share price and trued up at the date of grant.
Save As You Earn (SAYE) (UK)/Employee Stock Purchase Plan (ESPP) (US)
During the year, the Company opened a Save As You Earn scheme to all UK and US employees. Options were granted at the prevailing market rate on 14 February 2022,
less a discount of 15%, and are exercisable after three years (UK employees) and two years (US employees) from the date of grant. The scheme permits a maximum
saving of £500 (UK) and $600 (US) per month out of taxed income. SAYE/ESPP options are accounted for as an equity-settled award under IFRS 2.
Details of the share options outstanding are as follows:
Granted
Forfeited
Outstanding at 1 May 2022
Exercisable price
Exercisable at 1 May 2022
Average fair value at grant
1 May 2022
485,698
(5,062)
480,636
2 May 2021
–
–
–
£nil
nil
£10.80
FY22 Free share issue
During the year the Group issued 50 free shares to all colleagues who were employed by the Group on 15 December 2021. Employees must remain employed for a
period of three years to earn the shares.
270
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Details of the share options outstanding are as follows:
Granted
Forfeited
Outstanding at 1 May 2022
Exercisable price
Exercisable at 1 May 2022
Average fair value at grant
1 May 2022
120,850
(8,800)
112,050
2 May 2021
–
–
–
£nil
Nil
£12.66
Chief Financial Officer Buy-out award (CFO)
Two buy-out share options were granted to the CFO when joining the Group to replace those in place at his previous employment at Rank Group PLC. Performance
conditions for the first award have been met, and shares will vest at October 2022 and October 2023. Performance conditions for the second award are aligned to the
performance of the Rank Group PLC to June 2023 and will be confirmed in October 2023. The awards have been translated into Group shares at the share price on the
date of joining.
Details of the share option movements are as follows:
Granted
Outstanding at 1 May 2022
Exercisable price
Exercisable at 1 May 2022
Average fair value at grant
Charged to the Consolidated Income Statement
The amounts recognised in the Consolidated Income Statement in relation to these schemes were as follows:
CEO – Exceptional expenses
LTIP – Administrative expenses
DBP – Administrative expenses
CFO – Administrative expenses
SAYE/ESPP – Administrative expenses
Free shares – Administrative expenses
1 May 2022
38,835
38,835
2 May 2021
–
–
£nil
nil
£14.20
53 week period
ended
1 May 2022
£m
53 week period
ended
2 May 2021
£m
0.3
1.9
0.7
0.1
0.1
0.1
3.2
3.0
2.4
0.3
–
–
–
5.7
Fair value of share schemes
The fair value of equity-settled share options and share awards granted is estimated at the date of grant using share option valuation models. The schemes are valued
using the Black-Scholes model.
The following tables list the inputs to the models for options and share-based payment costs during the year:
Share price (£)
Exercise price (£)
Dividend yield (%)
Risk-free interest rate (%)
Expected life of share option
LTIP
2 May 2021
£3.20
Nil
0.00%
0.57%
3 years
1 May 2022
£9.42
Nil
0.00%
0.61%
3 years
DBP
SAYE/ESPP
IPO
CFO
26 Apr 2020
£2.90
Nil
0.00%
0.78%
3 years
1 May 2022
£10.21
Nil
0.00%
0.66%
4 years
2 May 2021
£9.42
Nil
0.00%
0.57%
4 years
1 May
2022
£10.80
Nil
0.00%
0.05%
UK 3 years
US 2 years
26 Apr 2020
£2.70
Nil
0.00%
0.78%
2 years
1 May
2022
£14.20
Nil
0.00%
0.41%
2 years
The total underlying amount charged to the Consolidated Income Statement in relation to these schemes for the 52 week period ended 1 May 2022 is £3.2m (2021:
£5.7m). £2.9m (2021: £2.7m) has been charged to administrative expenses and £0.3m (2021: £3.0m) to exceptional items as they relate to IPO costs (refer to note 4).
The Group did not enter into any share-based payment transactions with parties other than employees during the current period.
271
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continued
23. FINANCIAL INSTRUMENTS
Categories
FINANCIAL ASSETS – HELD AT AMORTISED COST
Trade and other receivables*
Cash and cash equivalents
Total financial assets
FINANCIAL LIABILITIES – HELD AT AMORTISED COST
Interest-bearing loans and borrowings:
Term loans (net of capitalised transaction costs)
Trade and other payables**
Lease liability (IFRS 16)
Total financial liabilities
1 May 2022
£m
2 May 2021
£m
16.6
105.9
122.5
(118.6)
(174.3)
(292.9)
(340.6)
(633.5)
7.3
76.1
83.4
(117.9)
(127.1)
(245.0)
(301.4)
(546.4)
* Excludes prepayments of £5.7m (2021: £3.1m) that do not meet the definition of a financial instrument.
** Trade payables excludes customer deposits of £12.4m (2021: £12.2m) and deferred income of £14.7m (2021: £12.4m) that do not meet the definition of a financial instrument.
Fair values
At 1 May 2022, the fair values of each category of the Group’s financial instruments are materially the same as their carrying values in the Group’s Balance Sheet based
on either their short maturity or, in respect of long term borrowings, interest being incurred at a floating rate.
Financial risk management
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk and capital management framework and for establishing the
Group’s risk management policies.
The Group has exposure to the following risks arising from financial instruments:
– Liquidity risk
– Interest rate risk
– Credit risk
– Currency risk
– Capital risk
No significant changes were made in the objectives, policies and processes for managing capital during the years ended 1 May 2022 and 2 May 2021.
Liquidity risk
The Group has generated sufficient cash from operations to meet its working capital requirements. Cash flow forecasting is performed in the operating entities of the
Group. The Group monitors rolling forecasts of the Group's liquidity requirements to ensure it has sufficient cash to meet operational needs while maintaining
sufficient headroom on its undrawn committed borrowing facilities at all times so that the Group does not breach borrowing limits on any of its borrowing facilities.
The table below shows the maturity analysis of the undiscounted remaining contractual cash flows, including interest, of the Group’s financial liabilities:
Term loan
Trade and other payables
Lease liabilities (IFRS 16)
Total
Term loan
Trade and other payables
Lease liabilities (IFRS 16)
Total
Less than one year
£m
(3.5)
(173.0)
(58.5)
(235.0)
1 May 2022
Between one and
five years
£m
(124.0)
(1.3)
(200.8)
(326.1)
Greater than five
years
£m
–
–
(139.8)
(139.8)
Less than one year
£m
(2.7)
(125.0)
(49.3)
(177.0)
2 May 2021
Between one and
five years
£m
(127.2)
(2.2)
(175.9)
(305.3)
Greater than five
years
£m
–
–
(137.2)
(137.2)
Total
£m
(127.5)
(174.3)
(399.1)
(700.9)
Total
£m
(129.9)
(127.2)
(362.4)
(619.5)
As at 1 May 2022, 10 (2021: 12) leases have cash flows that exceed ten years. The value of undiscounted cash flows greater than ten years totals £14.5m (2021: £17.7m).
272
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure
to the risk of changes in market interest rates relates primarily to the Group’s debt obligations with floating interest rates.
The Group's policy is to maintain low levels of variable debt by managing the cash position of the business closely and ensuring that the debt position is minimised. The
Group regularly refinances in order to obtain better rates for both long term debt and short term debt obligations. The Group uses strong cash positions to pay down
long term and short term debt when possible in order to reduce the overall debt position.
Interest rate risk – sensitivity
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected.
The analysis has been prepared using the assumptions that:
– For floating rate assets and liabilities, the amount of the asset or liability outstanding at the balance sheet date is assumed to have been outstanding for the whole
period
– Fixed rate financial instruments that are carried at amortised cost are not subject to interest rate risk for the purpose of this analysis
With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows:
Interest rate increase of 0.5%
Interest rate decrease of 0.5%
52 week period
ended
1 May 2022
£m
(0.6)
0.6
53 week period
ended
2 May 2021
£m
(0.6)
0.1
Credit risk
Credit risk arises from cash and cash equivalents, credit sales and deposits with banks. Credit risk related to the use of treasury instruments is managed on a Group basis.
This risk arises from transactions with banks, such as those involving cash and cash equivalents and deposits. To reduce the credit risk, the Group has concentrated its
main activities with a group of banks that have secure credit ratings. For each bank, individual risk limits are set based on its financial position, credit ratings, past experience
and other factors. The utilisation of credit limits is regularly monitored.
Management continually review specific balances for potential indicators of impairment. In the instance where an indicator is identified, management will determine overall
recovery from a legal perspective and provide for any irrecoverable amounts.
Credit risk also arises from the recoverability of the Group’s trade and other receivables. Trade and other receivables are only written off when the Group has exhausted
all options to recover the amounts due and provided for in full when there is no reasonable expectation of recovery, which is the Group’s definition of default. Indicators
that there is no reasonable expectation of recovery include, amongst others, the failure of the debtor to engage in a repayment plan with the Group and a failure to make
contractual payments. An expected credit loss provision is then calculated on the remaining trade and other receivables.
The ageing analysis of the trade receivables is as follows:
Not past due
Less than one month past due
One to two months past due
More than two months past due
Total
The maximum exposure to credit risk at the reporting date is the carrying value of each class of asset.
Currency risk
The exposure to currency risk is considered below:
FINANCIAL ASSETS
Trade and other receivables
Cash and cash equivalents
Total financial assets
FINANCIAL LIABILITIES
Term loan
Trade and other payables
Lease liabilities
Total financial liabilities
273
1 May 2022
£m
3.5
0.6
0.3
0.7
5.1
2 May 2021
£m
2.5
1.0
–
0.2
3.7
1 May 2022
Sterling
£m
US Dollar
£m
9.4
76.1
85.5
(118.6)
(93.9)
(217.2)
(429.7)
7.2
27.7
34.9
–
(80.4)
(121.3)
(201.7)
Other
£m
–
2.1
2.1
–
–
(2.1)
(2.1)
Total
£m
16.6
105.9
122.5
(118.6)
(174.3)
(340.6)
(633.5)
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O N S O L I DAT E D F I N A N C I A L S TAT E M E N T S
continued
23. FINANCIAL INSTRUMENTS (CONTINUED)
FINANCIAL ASSETS
Trade and other receivables
Cash and cash equivalents
Total financial assets
FINANCIAL LIABILITIES
Term loan
Trade and other payables
Lease liabilities
Total financial liabilities
2 May 2021
Sterling
£m
US Dollar
£m
4.9
33.6
38.5
(117.9)
(84.6)
(213.4)
(415.9)
2.4
42.2
44.6
–
(41.8)
(88.0)
(129.8)
Other
£m
–
0.3
0.3
–
(0.7)
–
(0.7)
Total
£m
7.3
76.1
83.4
(117.9)
(127.1)
(301.4)
(546.4)
Currency risk sensitivity
The following table demonstrates the sensitivity to a change in the US Dollar exchange rate, with all other variables held constant, and the impact upon the Group’s profit
after tax assuming that none of the US Dollar exposures are used as hedging instruments. Sensitivities have not been performed for any other currencies as the Group
has no significant exposure in any other currency.
US Dollar
US Dollar
Effect on profit after
tax
52 week period
ended
1 May 2022
£m
(1.5)
1.6
Effect on profit after
tax
53 week period
ended
2 May 2021
£m
(0.8)
0.9
(Increase)/decrease
in rate
(5%)
5%
Capital risk
The capital structure of the Group consists of debt, as analysed in note 19, and equity attributable to the equity holders of the Parent Company, comprising issued capital
reserves and retained earnings as shown in the Consolidated Statement of Changes in Equity. The Group manages its capital with the objective that all entities within the
Group continue as going concerns while maintaining an efficient structure to minimise the cost of capital.
The Directors carefully monitor the Group’s long term borrowings including the ability to service debt and long term forecast covenant compliance.
The Group takes a disciplined approach to capital allocation with the objective to deliver long term sustainable earnings growth whilst retaining financial capability to invest
in developing our business and to execute our strategic priorities. The Group is well positioned to continue investing in elevating and expanding its existing showroom
portfolio and to make complementary acquisitions which meet strict investment criteria and advance the Group’s strategic objectives.
24. REL ATED PARTY TR ANSACTIONS
Key management personnel compensation
Total compensation of key management personnel in the period to 1 May 2022 amounted to £3.6m (2021: £6.5m).
Compensation typically includes salaries and other short term employee benefits, post-employment benefits and other long term benefits. Key management are eligible
to receive discounts on goods purchased from the Group's trading companies. Such discounts are in line with discounts offered to all staff employed by Group companies.
In addition to their salaries, the Group also contributes to post-employment defined contribution plans.
Key management are those individuals who have authority and responsibility for planning, directing and controlling the activities of the Group.
Short term employment benefits
Share-based payments
Total
52 week period
ended
1 May 2022
£m
1.8
1.8
3.6
53 week period
ended
2 May 2021
£m
1.9
4.6
6.5
Transactions with key management personnel
On his retirement, former CFO Anders Romberg received a watch from the Group with a taxable value of £8,230 as a thank you for his seven years of service and his
significant contribution to the business during this period.
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. In the prior
year the Group has traded products and provided services to The Watch Shop Holdings Limited and The Watch Lab Holdings Limited, entities with the same significant
investor. In the 52 week period ended 1 May 2022 there were no similar transactions (2021: £2,000). The Group has an outstanding balance with these entities of £nil
(2021: £nil).
274
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 25. BUSINESS COMBINATIONS
During the period the Group acquired the trade and assets of a number of showrooms in the US as follows:
– On 2 September 2021, the Group acquired the trade and assets of one showroom from Ben Bridge Jeweler Inc. (‘Ben Bridge’)
– On 15 October 2021, the Group acquired the trade and assets of one showroom from Timeless Watch Exchange LLC. (‘Timeless’)
– On 1 December 2021, the Group acquired the trade and assets of three showrooms from Betteridge Jewelers, Inc., Gotthelfs Acquisition Corp., and Vail Village
Jewelers, Inc. (‘Betteridge’)
The businesses contributed revenue of £32.5m from the date of acquisition to 1 May 2022 and contributed a net profit of £5.7m.
Total cash consideration
Initial assessment of values on acquisition
Inventories
Property, plant and equipment
Trade and other receivables
Deferred tax assets
Trade and other payables
Right-of-use assets
Lease liabilities
Total identifiable net assets
Brand
Goodwill
Total assets acquired
Ben Bridge and
Timeless
£m
9.2
Betteridge
£m
39.1
3.3
0.3
–
0.1
(0.2)
1.7
(1.7)
3.5
–
5.7
9.2
17.4
2.5
2.9
0.9
(2.4)
5.4
(5.4)
21.3
2.2
15.6
39.1
Total
£m
48.3
20.7
2.8
2.9
1.0
(2.6)
7.1
(7.1)
24.8
2.2
21.3
48.3
As at 6 July 2022 the final consideration payable to Betteridge has not been finalised. An amount of £4.2m is held with a third party on retention subject to finalisation of
the working capital adjustment as set out in the sale and purchase agreement. This amount is disclosed in the cash section in note 15.
The fair value of the trade receivables amounts to £2.2m and it is expected that the full contractual amounts can be collected.
Acquisitions completed in the 52 week period to 1 May 2022
All acquisitions have been made to further enhance the US expansion strategy.
The goodwill recognised is attributable to the profitability of the acquired showrooms and is expected to be deductible for tax purposes.
The Group measured the acquired lease liabilities using the present value of the remaining lease payments at the date of acquisition. The right-of-use assets were measured
at an amount equal to the lease liabilities, with consideration given as to whether an adjustment was required to reflect the terms of the lease relative to market terms.
The values stated above are the initial assessment of the fair values of assets and liabilities on acquisition. These will be finalised within the coming year.
If the combinations had taken place at the beginning of FY22, the Group’s revenue from continuing operations would have been £1,285.0m and the profit before tax would
have been £133.7m.
275
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continued
25. BUSINESS COMBINATIONS (CONTINUED)
Analog Shift LLC
On 1 September 2020 in the prior year, the Group acquired the trade and assets of Analog Shift LLC from Airship Holdings LLC.
The following table summarises the consideration paid, and the fair value of assets acquired at the acquisition date:
Consideration at 1 September 2020
Initial cash consideration
Contingent consideration
Total consideration (100% holding)
Initial assessment of values on acquisition
Brand
Total identifiable net assets
Goodwill
Total assets acquired
£’000
77
192
269
£’000
115
115
154
269
The contingent consideration value is to be finalised during the 36-month period following the 1 September 2020 acquisition date, connected to trading performance of
the brand.
The contribution to the prior year revenue and profit before tax, if this business combination had occurred on the first day of the period, would not have been material
to the results of the Group.
26. 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.
In March 2019, a class action was brought in Florida against three US subsidiaries of the Company. The suit alleges violations of the FACTA legislation, 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 the suit is protracted, and no specific monetary amount has been claimed, the potential liability (if any) in respect of such claim or any related claims is
difficult to quantify. The subsidiaries continue to defend themselves robustly. Our legal costs of defending the claim are insured subject to the policy excess.
27. POST-BAL ANCE SHEET EVENTS
On 22 June 2022, the Group acquired the trade and assets of one showroom from Bernie Robbins Jewelers, Inc. for a cash consideration of $26,000,000. The acquisition
further advances the US expansion strategy.
The assets and liabilities acquired principally comprise working capital balances of inventory and property, plant and equipment. Due to the proximity of the acquisition
date to the date of approval these Consolidated Financial Statements, the initial accounting for the business combination is incomplete and the Group is unable to provide
a quantification of the fair values of the assets and liabilities acquired. The Group will include an acquisition balance sheet within the Group’s Interim Financial Statements
for the 26 weeks to 30 October 2022.
No further post balance sheet events have been identified.
276
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 C O M PA N Y B A L A N C E S H E E T
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors: amounts falling due within one year
Cash at bank and in hand
CURRENT LIABILITIES
Creditors: amounts falling due within one year
Net current liabilities
Net assets
EQUITY
Share capital
Share premium
Retained earnings
Total equity
Note
C2
C3
C4
C6
C6
1 May 2022
£m
2 May 2021
£m
471.9
471.9
2.7
0.3
3.0
(6.7)
(3.7)
0.3
0.3
0.6
(2.7)
(2.1)
468.2
469.8
3.0
147.1
318.1
468.2
3.0
147.1
319.7
469.8
The Company’s profit after tax was £2.2m (2021: loss of £0.5m). The profit in the current year is a result of a dividend received which allowed repayment of management
recharges from subsidiary entities.
The Financial Statements were approved and authorised for issue by the Board and were signed on its behalf by:
W FLOYDD
CHIEF FINANCIAL OFFICER
Date: 6 July 2022
The notes on pages 279 to 282 form part of these Financial Statements.
Company number: 11838443
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C O M PA N Y S TAT E M E N T O F C H A N G E S I N E Q U I T Y
Balance at 26 April 2020
Loss for the financial period
Share-based payments
Balance at 2 May 2021
Profit for the financial period
Purchase of own shares
Issuance of share capital
Share-based payments
Balance at 1 May 2022
Share capital
Share premium
Retained earnings
£m
3.0
–
–
3.0
–
–
–
–
3.0
£m
147.1
–
–
147.1
–
–
–
–
147.1
£m
317.5
(0.5)
2.7
319.7
2.2
(6.7)
–
2.9
318.1
Total equity
attributable to
owners
£m
467.6
(0.5)
2.7
469.8
2.2
(6.7)
–
2.9
468.2
At the end of the period the Company purchased £6.7m of own shares to satisfy management LTIP awards which will vest in FY23. The shares were purchased by an
Employee Benefit Trust which has been set up for this purpose. The Company adopts a ‘look-through’ approach, which in substance, accounts for the Trust as an extension
of the Company. Own shares are recorded at cost and are deducted from equity.
The other transactions above have been further described within notes C6 and C7.
278
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 N OT E S TO T H E C O M PA N Y F I N A N C I A L S TAT E M E N T S
C1. GENER AL INFORMATION
Watches of Switzerland Group PLC (the ‘Company’) is a public limited company, limited by shares, which is listed on the London Stock Exchange and incorporated and domiciled
in England and Wales. The registered number is 11838443 and the address of the registered office is Aurum House, 2 Elland Road, Braunstone, Leicester, LE3 1TT.
These Financial Statements present information about the Company as an individual undertaking and not about its Group.
The Financial Statements of Watches of Switzerland Group PLC have been prepared in compliance with United Kingdom Accounting Standards, including Financial
Reporting Standard 102, ‘The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland’ (FRS 102) and the Companies Act 2006.
The Financial Statements are presented in Pounds Sterling (£), which is the Group’s presentational currency, and are shown in £millions to one decimal place.
Accounting policies
The accounting policies set out in the notes below have been applied in preparing the Financial Statements for the 52 week period ended 1 May 2022 and the comparative
information presented in these financial statements for the 53 week period ended 2 May 2021.
The Company is included within the Consolidated Financial Statements of Watches of Switzerland Group PLC. The Consolidated Financial Statements of Watches of
Switzerland Group PLC are prepared in accordance with IFRS and are publicly available. In these Financial Statements, the Company is considered to be a qualifying entity
(for the purposes of this FRS) and has applied the exemptions available under FRS 102 in respect of the following disclosures:
– Reconciliation of the number of shares outstanding from the beginning to end of the period
– The requirement to prepare a statement of cash flows
– Certain disclosures in relation to share-based payments
– Key Management Personnel compensation
As permitted by Section 408 of the Companies Act 2006, the Income Statement of the Company is not presented as part of the Financial Statements.
The Company’s accounting policies are the same as those set out in note 1 of the Group Consolidated Financial Statements, except as noted below.
Investments
Investments in subsidiaries are measured at cost less accumulated impairment. Where merger relief is applicable, the cost of the investment in a subsidiary undertaking is
measured at the nominal value of the shares issued together with the fair value of any additional consideration paid.
Impairment
The carrying values of non-financial assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any impairment loss
arises, the asset is adjusted to its estimated recoverable amount and the difference is recognised in the Income Statement.
Trade and other debtors/creditors
Trade and other debtors are recognised initially at transaction price plus attributable transaction costs. Trade and other creditors are recognised initially at transaction
price less attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any impairment
losses in the case of trade debtors. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is
measured at the present value of future payments discounted at a market rate of interest for a similar debt instrument.
Share-based payments
Some employees (including senior executives) of the Group receive remuneration in the form of share-based payments, whereby employees render services as
consideration for equity instruments (equity-settled transactions). The fair value of the equity-settled awards is calculated at grant date using a Black-Scholes model. The
resulting cost is charged in the Income Statement over the vesting period of the option or award and is regularly reviewed and adjusted for the expected and actual
number of options or awards vesting. This applies to LTIP Awards, Deferred Share Bonus Schemes, Save as You Earn Awards, and Free Share Awards.
Service and non-service performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions
being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest. No expense is recognised for awards that do not
ultimately vest because of non-market performance and/or service conditions that have not been met.
The social security contributions payable in connection with the grant of the share options is determined at each balance sheet date as a liability with the total cost
recognised in the Income Statement over the vesting period.
Own shares held
Own shares represent the shares of Watches of Switzerland Group PLC that are held in an Employee Benefit Trust which has been set up for this purpose. The Company
adopts a ‘look-through’ approach which, in substance, accounts for the trust as an extension of the Company. Own shares are recorded at cost and are deducted from equity.
Financial risk management
The Company’s financial risk is managed as part of the Group’s strategy and policies as discussed in note 23 of the Consolidated Financial Statements.
Company result for the period
In accordance with the exemption allowed by Section 408(3) of the Companies Act 2006, the Company has not presented its own Income Statement or Statement of
Comprehensive Income.
Directors’ remuneration and staff numbers
The Company has no employees other than the Directors, who did not receive any remuneration for their services directly from the Company in either the current or
preceding period. Refer to note 24 in the Group consolidated accounts for Key Management Personnel compensation.
External Auditor’s remuneration
The remuneration paid to the External Auditor in relation to the audit of the Company is disclosed in note 5 of the Consolidated Financial Statements. The fees for the
audit of the Company’s Financial Statements are borne by a subsidiary of the Company and are not recharged.
279
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continued
C2. FIXED ASSET INVESTMENTS
The Company had the following subsidiaries as at 1 May 2022:
Entity
Jewel UK Midco Limited*
Principal activity
Intermediate holding company
Country of incorporation Registered office
England and Wales
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Heritage Hall, Le Marchant Street,
St Peter Port, Guernsey GY1 4JH
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
Aurum House, 2 Elland Road,
Braunstone, Leicester LE3 1TT
108 West 13th Street,
Wilmington, County of New
Castle, Delaware DE 19801
3131 Las Vegas Boulevard South,
Suite #11, Las Vegas NV 89109
108 West 13th Street, Wilmington,
County of New Castle Delaware
DE 19801
187 Wolf Road, Suite 101, Albany,
New York NY 12205
187 Wolf Road, Suite 101, Albany,
New York NY 12205
108 West 13th Street, Wilmington,
County of New Castle Delaware
DE 19801
1200 South Pine Island Road,
Plantation, Florida 33324
Suite 3 One Earlsfort Centre
Lower Hatch Street Dublin 2,
Dublin, D02 X288, Ireland
Store Kongensgade 68, 1264
København K, Denmark
Birger Jarlsgatan 12, 114 34
Stockholm
Herikerbergweg 88, 1101CM
Amsterdam
Oy Vanha Kaarelantie 33 A 01610
Vantaa Finland
Type of share
held by the Group
Ordinary
Proportion of ordinary
shares held by Group
Companies
100%
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary &
Redeemable
preference
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Jewel UK Bondco Limited
Dormant
England and Wales
Jewel UK Bidco Limited
Intermediate holding company
England and Wales
Watches of Switzerland Operations
Limited
Aurum Acquisitions Limited
Watches of Switzerland Company
Limited
Goldsmiths Finance Limited
Intermediate holding company
England and Wales
Intermediate holding company
England and Wales
Retailer
England and Wales
Non-trading
England and Wales
Mappin & Webb Limited
Non-trading
England and Wales
Goldsmiths Limited
Dormant
England and Wales
WoS Dormant 1 Limited
Dormant
England and Wales
WoS Dormant 2 Limited
Dormant
England and Wales
Aurum Insurance (Guernsey)
Limited**
Watches of Switzerland Limited
Captive insurance company
Guernsey
Dormant
England and Wales
Aurum Pension Trustees Limited
Pension trustee company
England and Wales
Watches of Switzerland Group USA Inc Holding company
Watches of Switzerland (Nevada) LLC Retailer
Watches of Switzerland Retailer (A/S)
LLC
Retailer
Watches of Switzerland LLC
Retailer
Watches of Switzerland (A/S) LLC
Retailer
Mayors Jewellers LLC
Retailer
Mayors Jewellers Florida LLC
Retailer
WOSG (Ireland) Limited
Non-trading
Watches of Switzerland Group
(Denmark) Aps
Watches of Switzerland Group
(Sweden) AB
Watches of Switzerland Group
(Netherlands) BV
Watches of Switzerland Group
(Finland) OY
Non-trading
Non-trading
Non-trading
Non-trading
USA
USA
USA
USA
USA
USA
USA
Ireland
Denmark
Sweden
Netherlands
Finland
Investment in Jewel UK Midco is directly held. All other investments are indirectly held.
*
** Results of this company are fully taxable in the UK as a controlled foreign company.
2 8 0
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 All subsidiary undertakings are included in the Group Consolidated Financial Statements. The proportion of the voting rights in the subsidiary undertakings held directly
by the Company do not differ from the proportion of ordinary shares held.
Investment in subsidiaries at the period end was as follows:
Investment in subsidiaries
Investments in company undertakings are recorded at cost, which is the fair value of the consideration paid.
C3. DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Amounts owed by Group undertakings
C4. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Amounts owed to Group undertakings
Other creditors
1 May 2022
£m
471.9
2 May 2021
£m
471.9
1 May 2022
£m
2.7
2 May 2021
£m
0.3
1 May 2022
£m
–
(6.7)
(6.7)
2 May 2021
£m
(2.7)
–
(2.7)
Amounts owed to Group undertakings in the prior year were unsecured and repayable on-demand.
At the end of the period the Group purchased £6.7m of own shares to satisfy management LTIP awards which will vest in FY23. The shares were purchased by an
Employee Benefit Trust which has been set up for this purpose. The Company adopts a ‘look-through’ approach, which in substance, accounts for the Trust as an extension
of the Company. Own shares are recorded at cost and are deducted from equity.
C5. FINANCIAL INSTRUMENTS
FINANCIAL ASSETS – HELD AT AMORTISED COST
Amounts owed by Group undertakings
Cash at bank and in hand
FINANCIAL LIABILITIES – HELD AT AMORTISED COST
Amounts owed to Group undertakings
Other creditors
1 May 2022
£m
2 May 2021
£m
2.7
0.3
3.0
–
(6.7)
(6.7)
0.3
0.3
0.6
(2.7)
–
(2.7)
2 81
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS N OT E S TO T H E C O M PA N Y F I N A N C I A L S TAT E M E N T S
continued
C6. EQUITY
On 30 May 2019, the Company was re-registered as a public limited company under the Companies Act 2006. On 4 June 2019, the Company was admitted for listing on
the London Stock Exchange. The Company issued 57,455,554 shares for £2.70 each with a nominal value of 1.25p recognising additional share capital of £718,000 and
share premium of £154,412,000.
As at 2 May 2021
Issuance of share capital
Purchase of own shares
As at 1 May 2022
Nominal value
£
0.0125
0.0125
–
0.0125
Shares
239,455,554
114,743
–
239,570,297
Share capital
£m
3.0
–
–
3.0
Share premium
£m
147.1
–
–
147.1
Other reserves
£m
–
–
(6.7)
(6.7)
Share capital
114,743 ordinary shares of 1.25p nominal value were issued in the period to satisfy the employee free share award.
Share premium account
This reserve represents the amount of proceeds received for shares in excess of their nominal value of 1.25p per share.
Other reserves
At the end of the period the Group purchased £6.7m of own shares to satisfy management incentives which will vest in FY23. The shares were purchased by an Employee
Benefit Trust which has been set up for this purpose. The Company adopts a ‘look-through’ approach, which in substance, accounts for the Trust as an extension of the
Company. Own shares are recorded at cost and are deducted from equity.
C7. REL ATED PARTY TR ANSACTIONS
The Company has taken advantage of the exemptions under FRS 102.33 ‘Related Party Transactions’ for wholly owned subsidiaries not to disclose intra-group transactions.
C8. SHARE-BASED PAYMENTS
Details of the Company’s share-based payments are disclosed within note 22 in the Consolidated Financial Statements.
2 82
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 G LO S S A RY
ALTERNATIVE PERFORMANCE MEASURES
The Directors use alternative performance measures (APMs) as they believe these
measures provide additional useful information on the underlying trends,
performance and position of the Group. These measures are used for performance
analysis. The APMs are not defined by IFRS and therefore may not be directly
comparable with other companies’ APMs. These measures are not intended to be
a substitute for, or superior to, IFRS measures.
The majority of the Group’s APMs are on a pre-IFRS 16 basis. This aligns with the
management reporting used to inform business decisions, investment appraisals,
incentive schemes and banking covenants.
4-Wall EBITDA
Net margin less showroom costs.
Why used
4-Wall EBITDA is a direct measure of profitability of the showroom operations.
Reconciliation to IFRS measures
£million
Revenue
Cost of inventory expensed
Other inc. supplier incentives
Net margin
Showroom costs
4-Wall EBITDA
FY22
1,238.0
(774.4)
7.0
470.6
(226.7)
243.9
FY21
905.1
(575.8)
3.0
332.3
(166.6)
165.7
FY20
810.5
(510.6)
4.8
304.7
(178.2)
126.5
Showroom costs includes rental costs on a pre-IFRS 16 basis (i.e. under IAS 17).
Refer to the IFRS 16 reconciliations below for further details.
Adjusted Earnings Before Interest and Tax (EBIT)
Operating profit before exceptional items and IFRS 16 impact.
Why used
Measure of profitability that excludes one-off exceptional costs and IFRS 16
adjustments to allow for comparability between years.
This measure was linked to management incentives in the financial year.
Reconciliation to IFRS measures
Reconciled in note 2 to the Consolidated Financial Statements.
Adjusted EBITDA
EBITDA before exceptional items presented in the Group’s Consolidated Income
Statement. Shown on a continuing basis and before the impact of IFRS 16.
Why used
Measure of profitability that excludes one-off exceptional and non-underlying items
and IFRS 16 adjustments to allow for comparability between years.
Reconciliation to IFRS measures
Reconciled in note 2 of the Consolidated Financial Statements.
Adjusted Earnings Per Share
Basic Earnings Per Share before exceptional items and IFRS 16 impact.
Why used
Measure of profitability that excludes one-off exceptional items and IFRS 16
adjustments to provide comparability between years. This measure was linked to
management incentives in the financial year.
Reconciliation to IFRS measures
Reconciled within note 9 of the Consolidated Financial Statements.
Adjusted profit before tax
Profit before tax before exceptional items and IFRS 16 impact.
Why used
Measure of profitability that excludes one-off exceptional items and IFRS 16
adjustments to provide comparability between years.
Reconciliation to IFRS measure
£million
Segment profit (as reconciled in note 2
of the Consolidated Financial Statements)
Net finance costs (note 7)
IFRS 16 lease interest (note 12)
Exceptional finance costs
Adjusted profit before tax
FY22
130.3
(15.9)
12.2
–
126.6
FY21
77.6
(18.2)
12.7
–
72.1
FY20
55.9
(46.8)
11.8
28.5
49.4
Average selling price (ASP)
Revenue (including sales related taxes) generated in a period from sales of a
product category divided by the total number of units of such products sold in such
period.
Why used
Measure of sales performance.
Reconciliation to IFRS measures
Not applicable.
Constant currency basis
Results for the period had the exchange rates remained constant from the
comparative period.
Why used
Measure of revenue growth that excludes the impact of foreign exchange.
Reconciliation
FY22 Group Revenue (£)
FY22 US Revenue (US$)
FY22 US Revenue (£) @ FY22 Exchange rate
FY22 US Revenue (£) @ FY21 Exchange rate
(£/US$ million)
1,238.0
578.9
428.4
435.0
FY22 Group Revenue (£) at Constant currency
1,244.6
FY22 Exchange rate
FY21 Exchange rate
£1 : US$1.351
£1 : US$1.331
2 83
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS G LO S S A RY
continued
Net margin
Revenue less inventory recognised as an expense, commissions paid to the
providers of interest free credit and inventory provision movements.
Why used
Measures the profit made from the sale of inventory before showroom or overhead
costs.
Reconciliation to IFRS measures
Refer to 4-Wall EBITDA.
Return on Capital Employed (ROCE)
Return on capital employed (ROCE) is defined as Adjusted EBIT divided by average
capital employed, calculated on a Last Twelve Months (LTM) basis. Average capital
employed is total assets less current liabilities excluding IFRS 16 lease liabilities.
Why used
ROCE demonstrates the efficiency with which the Group utilises capital. This
measure was linked to management incentives in the financial year.
Reconciliation to IFRS measures
Adjusted EBIT of £130.3m divided by the average capital employed, which is
calculated as follows:
£million
Pre-IFRS 16 total assets
Pre-IFRS 16 current liabilities
Capital employed
Average capital employed
OTHER DEFINITIONS
FY22
741.3
(209.4)
531.9
475.9
FY21
576.6
(156.6)
420.0
384.7
FY20
595.7
(229.3)
366.4
Expansionary capital expenditure/capex
Expansionary capital expenditure relates to new showrooms, relocations
or refurbishments greater than £250,000.
Luxury watches
Watches that have Recommended Retail Price greater than £1,000.
Luxury jewellery
Jewellery that has a Recommended Retail Price greater than £500.
Showroom maintenance capital expenditure/capex
Capital expenditure which is not considered expansionary.
Exceptional items
Items that in the judgement of the Directors need to be disclosed by virtue of their
size, nature or incidence, in order to draw the attention of the reader and to show
the underlying business performance of the Group.
Why used
Draws the attention of the reader and to show the items that are significant by
virtue of their size, nature or incidence.
Reconciliation to IFRS measures
Disclosed in note 4 of the Consolidated Financial Statements.
Net debt
Total borrowings (excluding capitalised transaction costs) less cash and cash
equivalents and excludes IFRS 16 lease liabilities.
Why used
Measures the Group’s indebtedness.
Reconciliation to IFRS measures
Reconciled in note 19 of the Consolidated Financial Statements.
Free cash flow
Cash flow shown on a pre-IFRS 16 basis excluding expansionary capex, acquisitions
of subsidiaries, exceptional items and financing activities.
Why used
Represents the cash generated from operations including maintenance of capital
assets. Demonstrates the amount of available cash flow for discretionary activities
such as expansionary capex, dividends or acquisitions.
Reconciliation to IFRS measures
£million
Net increase in cash and cash equivalents
Net financing cash flow
Interest paid
Lease payments (IFRS 16)
Acquisition of business combinations
Exceptional costs*
Expansionary capex
Free cash flow
FY22
26.5
55.7
(2.7)
(53.0)
44.1
0.5
41.0
112.1
FY21
4.8
143.4
(4.5)
(56.7)
1.4
0.2
21.1
109.7
FY20
37.0
(1.5)
(11.6)
(36.4)
31.1
5.0
27.2
50.8
*
Included within exceptional items is the cash impacting exceptional items of £0.5m of professional and
legal expenses on business combinations (as per note 4). In FY21, this included £0.2m of professional
and legal expenses on business combinations. In FY20, this included £0.3m of professional and legal
expenses on business combinations, £2.0m bonus paid to employees on IPO and £2.6m professional
and legal fees relating to the IPO.
Free cash flow conversion
Free cash flow divided by Adjusted EBITDA.
Why used
Measurement of the Group’s ability to convert profit into free cash flow.
Reconciliation to IFRS measures
Free cash flow of £112.1 million divided by Adjusted EBITDA of £162.2 million
shown as a percentage.
2 84
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022 IFRS 16 Adjustments
The following tables reconcile from pre-IFRS 16 balances to statutory post IFRS 16
balances.
FY22 Consolidated Income Statement
FY21 Consolidated Income Statement
Pre-IFRS 16
and exceptional
items
905.1
332.3
(166.6)
165.7
(55.8)
109.9
IFRS 16
adjustments
–
–
48.0
48.0
–
48.0
Exceptional
items
–
–
–
–
(4.9)
(4.9)
Statutory
905.1
332.3
(118.6)
213.7
(60.7)
153.0
(4.5)
105.4
2.7
50.7
–
(1.8)
(4.9)
151.2
(27.8)
(37.3)
(4.2)
(69.3)
77.6
(5.5)
72.1
23.8p
13.4
(12.7)
0.7
0.4p
(9.1)
–
(9.1)
81.9
(18.2)
63.7
(3.1)p
21.1p
Pre-IFRS 16
150.6
93.4
–
226.4
17.7
(178.4)
–
(43.9)
1.6
267.4
IFRS 16
adjustments
–
0.3
253.7
–
(7.3)
26.6
(301.4)
–
11.0
(17.1)
Post-IFRS 16
150.6
93.7
253.7
226.4
10.4
(151.8)
(301.4)
(43.9)
12.6
250.3
£million
Revenue
Net margin
Showroom costs
4-Wall EBITDA
Overheads
EBITDA
Showroom opening and closing
costs
Adjusted EBITDA
Depreciation, amortisation,
loss on disposal, impairment of
fixed assets and lease
modifications
Adjusted EBIT
(Segment profit)
Net finance costs
Adjusted profit before tax
Adjusted basic Earnings
Per Share
Pre-IFRS 16
and exceptional
items
1,238.0
470.6
(226.7)
243.9
(73.3)
170.6
IFRS 16
adjustments
–
–
47.2
47.2
–
47.2
Exceptional
items
–
–
–
–
(2.0)
(2.0)
Statutory
1,238.0
470.6
(179.5)
291.1
(75.3)
215.8
(8.4)
162.2
5.6
52.8
–
(2.8)
(2.0)
213.0
(31.9)
(39.4)
0.4
(70.9)
130.3
(3.7)
126.6
41.8p
13.4
(12.2)
1.2
0.8p
(1.6)
–
(1.6)
142.1
(15.9)
126.2
(0.4)p
42.2p
£million
Revenue
Net margin
Showroom costs
4-Wall EBITDA
Overheads
EBITDA
Showroom opening and closing
costs
Adjusted EBITDA
Depreciation, amortisation,
loss on disposal, impairment of
fixed assets and lease
modifications
Adjusted EBIT
(Segment profit)
Net finance costs
Adjusted profit before tax
Adjusted basic Earnings
Per Share
FY22 Balance Sheet
£million
Goodwill and intangibles
Property, plant and equipment
IFRS 16 right-of-use assets
Inventories
Trade and other receivables
Trade and other payables
IFRS 16 lease liabilities
Net debt
Other
Net assets
Pre-IFRS 16
177.8
113.8
–
307.0
31.1
(232.7)
–
(14.1)
(6.1)
376.8
IFRS 16
adjustments
–
(1.3)
293.6
–
(8.8)
31.3
(340.6)
–
10.3
(15.5)
Post-IFRS 16
177.8
112.5
293.6
307.0
22.3
(201.4)
(340.6)
(14.1)
4.2
361.3
FY21 Balance Sheet
£million
Goodwill and intangibles
Property, plant and equipment
IFRS 16 right-of-use assets
Inventories
Trade and other receivables
Trade and other payables
IFRS 16 lease liabilities
Net debt
Other
Net assets
2 8 5
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS SH A R E HOL DE R I NFOR M ATION FOR
WATCHES OF SW ITZE R L A N D GROU P PLC
COMPANY
Watches of Switzerland Group PLC
Registered office address
Aurum House, 2 Elland Road, Braunstone, Leicester LE3 1TT
Registered in England and Wales
Company Number: 11838443
VAT number: 834 8634 04
ADVISERS
Independent Auditor
Ernst & Young LLP, 1 More London Place, London, SE1 2AF
Corporate solicitors
Slaughter and May, One Bunhill Row, London, EC1Y 8YY
Registrars
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA
Joint brokers
Barclays Bank plc, 5 The North Colonnade, Canary Wharf, London, E14 4BB
HSBC Bank plc , Level 2, 8 Canada Square, London E14 5HQ
Financial PR
Headland PR Consultancy LLP, Cannon Green, 27 Bush Lane, London, EC4R 0AA
FINANCIAL CALENDAR
Q1 FY23 Trading Update:
AGM:
16 August 2022
1 September 2022
H1 FY23 Results:
December 2022
Q3 FY23 Trading Update:
February 2023
Financial year end:
April 2023
ANNUAL GENER AL MEETING
The AGM will be held at 2.30pm on Thursday 1 September 2022 at our offices at
36 North Row, London, W1K 6DH. The Notice of Meeting which accompanies this
report and accounts sets out the business to be transacted.
SHAREHOLDING INFORMATION
Registrars
Please contact our registrar Equiniti directly for all enquiries about your shareholding.
Visit their website shareview.co.uk for online information about your shareholding.
You will need your shareholder reference number which can be found on your
share certificate or telephone the Registrar direct on +44 (0)371 384 2577. The
overseas shareholder helpline number is +44 (0)371 384 2577. Lines are open
8.30am to 5.30pm Monday to Friday.
For more information see thewosgroupplc.com/investors/shareholder-contacts.
FORWARD LOOKING STATEMENTS
Cautionary statement: The Annual Report and Accounts contains certain forward
looking statements with respect to the operations, performance and financial
conditions of the Group. By their nature, these statements involve uncertainty since
future events and circumstances can cause results and developments to differ
materially from those anticipated. The forward looking statements reflect
knowledge and information available at the date of preparation of this Annual
Report and Accounts and the Company undertakes no obligation to update these
forward looking statements. Nothing in this Annual Report and Accounts should be
construed as a profit forecast. Certain regulatory performance data contained in
this Annual Report and Accounts is subject to regulatory audit.
TERMS USED IN THIS REPORT
The term ‘Group’ means Watches of Switzerland Group PLC (Company registration
number 11838443) and its subsidiaries.
ONLINE ANNUAL REPORT
Our Annual Report and Accounts is available online. View or download the full
Annual Report and Accounts from: thewosgroupplc.com/investors/results-centre.
WARNING TO SHAREHOLDERS
Please be very wary of any unsolicited contact about your investments or offers of
free company reports. It may be from an overseas ‘broker’ who could sell you
worthless or high risk shares. If you deal with an unauthorised firm, you will not be
eligible to receive payment under the Financial Services Compensation Scheme.
Further information and a list of unauthorised firms that have targeted UK investors
is available from the Financial Conduct Authority at: fca.org.uk.
2 8 6
THE WATCHES OF SWITZERLAND GROUP ANNUAL REPORT AND ACCOUNTS 2022
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