A B U S I N ES S B U I LT O N
D ELI V E R I N G E XC E L LE N C E
ANNUAL REPORT AND ACCOUNTS 2023
C O N T E N T S
2
3
C O R P O R AT E G OV E R N A N C E R E P O RT
126 Corporate Governance At a Glance
128 Chair's Introduction
130 Board of Directors
132 Corporate Governance Statement
144 Nomination Committee Report
148 Audit & Risk Committee Report
154 ESG Committee Report
156 Remuneration Committee Report
172 Directors’ Report
F I N A N C I A L S TAT E M E N T S
178 Independent Auditor’s Report
184 Consolidated Income Statement
185 Consolidated Statement of Comprehensive Income
186 Consolidated Balance Sheet
187 Consolidated Statement of Changes in Equity
188 Consolidated Statement of Cash Flows
189 Notes to the Consolidated Financial Statements
224 Company Balance Sheet
225 Company Statement of Changes in Equity
226 Notes to the Company Financial Statements
230 Glossary
233 Shareholder Information
1
S T R AT E G I C R E P O RT
02 At a Glance
04 Our Investment Case
08 Chair’s Statement
10 Chief Executive Officer’s Review
14 Market Review
24 Our Business Model
26 Our Brand Partnerships
28 Our Strategy
32 Our Strategy in Action
40 Key Performance Indicators
44 Financial Review
50
51 Section 172 Statement
55
112 Risk Management
116 Principal Risks and Uncertainties
122 Going Concern and Viability Statement
Environmental, Social and Governance
Non-financial Information Statement
A Y E A R O F STRO N G
PER F O R M A N C E A S W E ENTER
F Y 24 S I G N I F I C A NTLY A H E A D O F
TH E LO N G R A N G E PL A N
FY23 was another record year of revenue and profitability
for the Group with luxury watch demand remaining strong and
continuing to exceed supply.
We continue to execute on our strategy and Long Range Plan,
with ongoing market share gains in both the UK and US. We made
significant investment in our showrooms during the year, opening
21 new showrooms including five at Battersea Power Station, and
the continued refurbishment of existing sites.
We are delighted to have launched our entry into the European
market with the opening of six mono-brand boutiques.
Our proven business model, international scale, impactful marketing
and dedication to client service underpin our confidence in
continued growth within a large, underdeveloped
and growing market.
OUR PURPOSE
To WOW our clients while caring for our
colleagues, our communities and our planet.
OUR VALUES
WE EARN TRUST
& CONFIDENCE
WE TREAT EVERYONE
WITH RESPECT
WE DO THE RIGHT
THING, ALWAYS
WE CARE FOR OUR
COMMUNITIES
WE PROTECT
OUR PL ANET
WE ADVOCATE FOR
OUR INDUSTRY
01
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS AT A G L A N C E
A B O U T U S
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.
OUR SHOWROOMS
UK ONLINE
US ONLINE
TR AVEL RETAIL
WELL-INVESTED SHOWROOM NET WORK
146
47
193
SHOWROOMS IN THE UK AND
EUROPE AT 30 APRIL 2023
SHOWROOMS IN THE
US AT 30 APRIL 2023
TOTAL SHOWROOMS
AT 30 APRIL 2023
2,800+
NUMBER OF COLLEAGUES
AT 30 APRIL 2023
02
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 F I N A N C I A L H I G H LI G HT S
REVENUE
RETURN ON CAPITAL EMPLOYED1
SALES BY CATEGORY
£1,543m
CHANGE VS LY (AT CONSTANT
CURRENCY)1:
+19%
27.9%
CHANGE VS LY:
+50bps
ADJUSTED EBIT1
OPER ATING PROFIT
SALES BY REGION
£165m
+27%
CHANGE VS LY:
£179m
+26%
CHANGE VS LY:
SIGNIFICANT INCREASE IN SALES
INCREASE IN PROFITABILIT Y AND LEVER AGE
£m
1,600
1,400
1,200
1,000
800
600
400
200
0
Growth in sales 238%
CAGR 19%
1,543
1,238
774
811
905
687
568
456
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
£m
180
150
120
90
60
30
0
Growth in
Adjusted EBIT
807%
165
130
34
43
45
56
18
78
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Adjusted EBIT 1
Adjusted EBIT%
12%
11%
10%
9%
8%
7%
6%
5%
4%
1 This is an Alternative Performance Measure. Refer to the Glossary on pages 230 to 232 for definition
and reconciliation to statutory measures where relevant.
2 Please refer to the Glossary on pages 230 to 232 for a definition.
OUR BR AND PARTNERSHIPS
03
FY2387%6%7%Luxury watches2Luxury jewellery2Other/ServicesFY2358%42%UK and EuropeUSSTRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
O U R I N V E S T M E N T C A S E
K E Y R E A SO N S TO I N V EST
1 Proven track record of delivering a
employed and strong cash generation. 2 Long-standing, collaborative partnerships
strong, consistent financial performance
with robust sales, sustained profitable
growth, elevated returns on capital
with the most prestigious and recognised
luxury watch and jewellery brands.
3 Multi-channel specialist operating in
creation and supply-driven dynamics. 4 National coverage in the UK, a
significant growing presence in the
US and continued opportunities
for European expansion.
markets with high barriers to entry,
luxury watch demand, proven value
0 4
exceptional client experience through
5 Well-invested showrooms providing an
luxurious, contemporary, spacious
welcoming and expert service and
browsable environments.
communications, Client Relationship
6 Impactful marketing focused on digital
events and co-operative activity with
Management (CRM), client experience
brand partners.
supporting all showrooms and websites
7 Fully integrated SAP-based IT systems
in the UK, US and Europe.
through strategic ESG pillars: People,
8 Investing in a more sustainable future
Planet and Product.
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 strong, consistent financial performance
1 Proven track record of delivering a
employed and strong cash generation. 2 Long-standing, collaborative partnerships
with the most prestigious and recognised
with robust sales, sustained profitable
growth, elevated returns on capital
luxury watch and jewellery brands.
5 Well-invested showrooms providing an
exceptional client experience through
welcoming and expert service and
luxurious, contemporary, spacious
browsable environments.
6 Impactful marketing focused on digital
communications, Client Relationship
Management (CRM), client experience
events and co-operative activity with
brand partners.
markets with high barriers to entry,
3 Multi-channel specialist operating in
creation and supply-driven dynamics. 4 National coverage in the UK, a
luxury watch demand, proven value
US and continued opportunities
for European expansion.
significant growing presence in the
7 Fully integrated SAP-based IT systems
supporting all showrooms and websites
in the UK, US and Europe.
8 Investing in a more sustainable future
through strategic ESG pillars: People,
Planet and Product.
0 5
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 1 STR ATEG I C
R E P O RT
C O N T E N T S
08 Chair's Statement
10 Chief Executive Officer's Review
14 Market Review
24 Our Business Model
26 Our Brand Partnerships
28 Our Strategy
32 Our Strategy in Action
40 Key Performance Indicators
44 Financial Review
50 Non-financial Information Statement
51 Section 172 Statement
55 Environmental, Social and Governance
112 Risk Management
116 Principal Risks and Uncertainties
122 Going Concern and Viability Statement
0 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 07
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS C H A I R ’ S S TAT E M E N T
0 8
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 This has been another excellent year for the Group
despite a more challenging macroeconomic environment
in the second half of FY23. Our team's performance is
testament to continued investment in leading showroom
design, international scale, strength of brand relationships
and dedication to client service through our Xenia Client
Experience Programme.
GOVERNANCE
We continue to make advances in relation to diversity and
inclusion both in the boardroom and throughout the
organisation. I am pleased to report that the Group meets the
recommendations of the FTSE Women Leaders Review, ahead
of the encouraged compliance deadline of end of 2025, as well
as meeting the Parker Review recommendations early.
We continue to pursue our growth strategy through a
combination of targeted capital investment into showrooms,
selective acquisitions and driving underlying operational leverage.
FY23 represented another year of successful strategic progress
on all of these fronts.
During the year, I was pleased to meet with some of our largest
institutional shareholders, alongside our Director of Investor
Relations and Corporate Affairs, to hear their views and discuss
our governance approach and sustainability efforts. I look
forward to continued engagement in the coming year.
During the financial year we opened 27 showrooms across the
UK, US and Europe with highlights including five new
showrooms at the newly restored Battersea Power Station in
London. We entered new markets of Stockholm, Copenhagen
and Dublin and, early into FY24, we opened our new Watches
of Switzerland showroom in American Dream, New Jersey
anchored by Rolex and Cartier. In June last year we acquired a
new Watches of Switzerland showroom located in New Jersey
and anchored by Rolex. We welcome all of our new colleagues
into the Watches of Switzerland Group.
We are known for our best-in-class client experience and our
continual pursuit of further elevating the luxury experience for
our clients. This year we focused on embedding Xenia, our
elevated Client Experience Programme, across our broader
organisation. Based on the excellent feedback we have received
to date from clients, the programme continues to impress.
SUSTAINABILIT Y
In last year’s report, we introduced our Sustainability Strategy,
which is supported by three pillars across People, Planet and
Product. In FY23, we continued to evolve this strategy in line
with best practice and stakeholder expectations and I am
delighted with the progress we are making to deliver our goals,
mitigate against risk and measure our performance.
Embedding Our Purpose: To WOW our clients while caring
for our colleagues, our communities and our planet was a key
priority for FY23, and I am glad to report we have made
excellent progress, with 85% of our colleagues agreeing our
purpose and values are important to them.
As reported last financial year, we welcomed Chabi Nouri, as a
Non-Executive Director, from 1 May 2022. During the year
Chabi was appointed to the Audit & Risk Committee, alongside
her previous appointment as a member of the ESG Committee.
Chabi brings significant luxury watch and jewellery experience
to the Board. I would also like to welcome back Anders
Romberg, who was reappointed as CFO with effect from 12
May 2023, after Bill Floydd stood down from the Board, due to
challenges with his travel commitments. We would like to
thank Bill for his valuable contribution to the Group and wish
him well for the future.
LOOKING AHEAD
We enter FY24 in a position of strength, significantly ahead of
where we expected to be in our Long Range Plan after two
years of exceptional performance. We have an exciting pipeline
of showroom projects as we continue to invest in the business
and build on our market-leading position in both the UK and US
alongside our ongoing expansion into Europe. I am confident
that through our proven and distinctive business model we are
well positioned to continue to deliver sustained growth.
I want to personally thank Brian, our executive team and
colleagues throughout the organisation for their hard work and
dedication, as well as my fellow Board members for their active
role in supporting the work of the team.
I would also like to take this opportunity to thank you, our
shareholders, for your continued support.
More details of our progress on our ESG Strategy can be found
on pages 55 to 111.
IAN CARTER
CHAIR
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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
10
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 “Our record performance is testament to our unique
combination of longstanding luxury brand partnerships,
dedicated colleagues focused on delivering exceptional
client service, and our well-invested network of showrooms,
which are supported by leading multi-channel capabilities.
Luxury watch demand remains strong and continues to
outpace supply, with our client registration lists extending
and average selling prices growing.”
BRIAN DUFFY
CEO
FY23 was another record year for revenue and
profitability, with Group revenue growth of 25% at
reported rates against the prior year (+19% at constant
currency) and continued Adjusted EBIT1 margin
expansion. Although, as expected, the second half of
FY23 saw a more challenging trading environment,
luxury watch demand remained strong and continues to
exceed supply. We generated strong cash flow, a record
level of Return on Capital Employed1 (ROCE) of 27.9%
(FY22: 27.4%) and closing net cash1 of £16 million as at 30
April 2023 (1 May 2022: net debt1 £14 million). We have
over 2,800 colleagues at the Watches of Switzerland
Group and I would like to thank all our colleagues for
their continued hard work and dedication, which is key
to our success.
The US business delivered exceptional growth, +52% at
reported rates against the prior year (+35% at constant
currency), generating sales of £653 million, and now represents
42% of Group revenue. We continued to expand our US
network, opening six mono-brand boutiques, one new
showroom acquisition, anchored by Rolex, in New Jersey and
expanded our presence in Mayors Boca Raton, Florida. We are
building our team and resources, in what is now the number
one market globally for luxury Swiss watches, and remain
confident in the long-term growth potential of the US market.
In the UK and Europe, revenue increased 10% vs FY22, driven
by domestic clientele with encouraging ongoing improvement
in our airport business. We made significant investment in our
showrooms during the year, opening 15 new showrooms
including five in Battersea Power Station, a standout project.
We have continued with the rollout of our Goldsmiths Luxury
concept with the reopening of nine showrooms including our
flagship in Meadowhall, Sheffield which now features a large,
dedicated Rolex room and Cartier ‘Espace’.
We are delighted to have launched our entry into the European
market with the opening of five mono-brand boutiques in
Stockholm and Copenhagen and in the final quarter of the year
we opened our first mono-brand boutique in Dublin. Following
the year end we opened our first mono-brand boutique in
Berlin, Germany and another in the Mall of Scandinavia,
Stockholm, both in partnership with TAG Heuer. Our new
showrooms in Stockholm and Copenhagen are performing in
line with our expectations. Our teams in these new cities are
full of enthusiasm and doing a fantastic job. Consumers in these
markets are responding well to our elevated showroom
experience and client service.
Luxury watches sales grew 28% year on year (representing 87%
of Group revenue) driven by a combination of increased average
selling price as well as volume. Luxury jewellery sales increased a
more modest 10% in the year reflecting a tougher macroeconomic
backdrop and focus on full price sales. Growth was driven by
average selling prices as we continued to merchandise to higher
price points and reduce discounting in the US.
11
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
Turning to full year profitability, we generated an FY23
Adjusted EBIT1 of £165 million and operating profit of £179
million. FY23 saw another year of margin expansion, with
Adjusted EBIT1 margin increasing 20bps, as we continued to
leverage our fixed cost base, despite headwinds from product
mix and Interest Free Credit.
Having closed out FY23, I would like to reflect on where we
stand against the Long Range Plan we presented to the market
back in the summer of 2021. Following two years of exceptional
performance sales are significantly ahead of plan, by over £200
million (excluding the benefits of favourable movements in
foreign exchange, which makes the differential even greater).
We are delighted with our progress, our momentum and our
prospects for future profitable investment and growth.
I am writing this on my return from the Watch & Jewellery
Initiative 2030 CEO Forum in Paris, where as industry leaders,
we acknowledged the critical importance of us coming together
to create a fully sustainable watch and jewellery industry that is
resilient to climate change, preserves natural resources and
fosters inclusivity. I’m delighted with the progress we are
making across these areas, including the verification of our
science-based emission reduction targets, development of new
ESG Partner Standards, our continuing focus on protecting
human rights, and most recently achieving an MSCI ESG Rating
of AAA. We look forward to further advocating the aims of
the initiative in FY24.
I am proud of the strong culture at the Watches of Switzerland
Group, which is based on our Purpose to 'WOW our clients
while caring for our colleagues, our communities and our
planet'. Our Company values of respect, together with trust
and confidence, underpin our approach to talent and equal
opportunity. We continue to elevate our offer to colleagues to
ensure that we 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
our Group. Social mobility is an important part of our DNA
across the Group and we have continued to sharpen our focus
on this in FY23. I am pleased to support the investment in the
development of our colleagues and to providing development
opportunities for all.
Caring for our communities has always been a priority for us and
it is humbling to see the tremendous positive impact made
possible by The Watches of Switzerland Group Foundation, 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 who bring a unique mix of experience, expertise, drive
and talent. In a year in which the external pressures have impacted
significantly on society and in particular young people, I am proud
that the Foundation has helped over 20,000 people affected by
poverty and we are pleased to support the following charities:
The Prince’s Trust, Local Food Banks, Fuel Bank Foundation,
Crisis, Habitat for Humanity, Feeding South Florida, Las Vegas
Food Bank and 3 Square and NYC Food Bank.
Looking forward, our FY24 guidance issued on 17 May 2023
projects full year sales of between £1.65 and £1.70 billion,
reflecting underlying sales growth of 8 to 11% at constant
currency with Adjusted EBIT1 margins in line with FY23. FY24
guidance anticipates that the more challenging trading
environment of the second half of FY23 will continue into the
first half of FY24.
We have an exciting pipeline of new showroom projects planned
as we continue to invest in the Group. These include our Old
Bond Street Rolex flagship boutique due to open Summer of
2024, AP House in the City of Manchester, via a Joint Venture
partnership with Audemars Piguet due to open Autumn of
2024, and we most recently opened our flagship Watches of
Switzerland showroom in American Dream, New Jersey.
Finally, I would like to thank Bill Floydd for his valuable
contribution to the Group during his time here as CFO and
wish him well for the future. I am delighted that Anders
Romberg has re-joined the business as CFO in May 2023.
Anders has a strong track record of financial leadership and
thorough knowledge of our Group, as well as the specialist
luxury watch and jewellery categories, and I look forward to
working with him again.
BRIAN DUFFY
CEO
1
This is an Alternative Performance Measure and is shown on a pre-IFRS 16 basis. Refer to the Glossary for definition, purpose and reconciliation to statutory
measures where relevant.
12
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 13
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS M A R K E T R E V I E W
W H AT D I F F ER ENTI ATES TH E
LUXU RY WATC H C ATEGO RY
A UNIQUE MARKET
SUPPORTS A MORE CIRCULAR ECONOMY
Led by the most prestigious global brands
focused on investment, product quality and
innovation and brand marketing, achieving a
higher average selling price than most luxury
consumer goods categories
High quality mechanical luxury watches can be
passed down for generations, traded in or resold.
Most can be repaired indefinitely and many of
the materials they contain are recyclable
DEMAND EXCEEDS SUPPLY
FOR KEY BR ANDS
The overall market demand for Swiss watches
exceeds production levels and supply. Clients
required to ‘register interest’ for key products
SWISS CONCENTR ATION
Limited threat from technology
or geography
14
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
LITTLE THREAT OF DIGITAL PUREPLAY
DEVELOPMENT
STRONG VALUE RETENTION
Brands generally require prior showroom
approval as a pre-requisite for online selling;
multi-channel is a preferred direction
Rarity, heritage, craftsmanship and precious
materials support brand image and value;
some products considered investment
asset class
HIGH BARRIERS TO ENTRY
SPECIALIST CATEGORY
Strong brand partnerships are based on many
years of experience and category expertise
Brands actively manage distribution through
Selective Distribution Agreements
Specialist for both the manufacturer and the
retailer; consumers respond to expertise,
authority and heritage
15
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
M A R K E T R E V I E W
continued
TH E LUXU RY WATC H M A R K E T H A S A
STRO N G TR AC K R ECO R D O F G ROW 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.
RESILIENT LONG-TERM GROW TH IN SWISS WATCH EXPORTS
CHF billion
Luxury
Non-luxury
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
2022
Total CAGR 2000 to 2022
Luxury2 CAGR 2000 to 2022
Non-luxury CAGR 2000 to 2022
Source: Company information, Swiss Watch Federation
1 CAGR shown through 2021.
2 Luxury watches in the market review are those at an export price over 500 CHF.
+4.4% (+4.0%1)
+5.4% (+5.0%1)
-2.3% (-1.8%1)
The Group estimates global retail sales of luxury watches were
approximately £44.1 billion in calendar year 2022 (2021: £37.3 billion). This
is based on the estimated retail value of Swiss luxury watches (Swiss
exports and the Swiss market), repairs and services 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 (ASP) of Swiss watch exports (wholesale) generating
a 22-year CAGR of +5.4% (2022 vs 2000).
Watches at the luxury end of the market have outperformed lower priced
segments and represent 94% of the value of global Swiss watch exports in calendar
year 2022.
The UK, US and EU have seen significant increases in Swiss watch exports in recent
years, as can be seen in the graph opposite.
60%
40%
20%
0%
(20%)
(40%)
(60%)
(80%)
SWISS WATCH EXPORTS (WRISTWATCHES
PRICED ABOVE 500 CHF) JANUARY TO MAY 2023
53%
41%
34%
34%
12%
8%
8%
0%
28%
18%
12%
US
UK
EU
China
Hong Kong World
(59)%
vs 2022
vs 2021
Source: Swiss Watch Federation
16
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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, income groups and genders. The internet has, over the years, had an increasingly
positive impact on digital and social media appealing to a younger market.
Our showroom design, location, marketing and unique client service of the Group
appeal to a broad demographic audience.
Market trends have benefitted more recently from price increases and consumer
trends towards higher price point products.
GLOBAL BR ANDS HAVE SUPPLY DRIVEN GROW TH
Major
independents
Swatch Group
Richemont
LVMH
Independents
luxury watch
industry,
For the total
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 ASP, positive
mix effects and limited volume increases.
Luxury watch brand owners are made up
of major independents, large groups and
smaller independents, as can be seen
opposite. 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 2022 global retail sales for the major Swiss watch brands.
Source: Morgan Stanley, Sixth Annual Swiss Watcher (28 March 2023)
17
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS M A R K E T R E V I E W
continued
CONTINUOUS PRODUCT INNOVATION
AND ADVANCEMENT
Luxury watches are characterised by a focus on product innovation and
advancement and 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 largest watchmaking gathering ever to take place in Geneva,
Watches and Wonders 2023, where exciting new products were launched,
accompanied by relevant marketing support.
Watchmakers are making greater use of strap and dial combinations to increase
consumer interest.
The luxury watch industry is benefitting from greater flexibility over production
and reduced product development timeframes due to the advancements in artificial
intelligence (AI) and 3D printing.
GEOGR APHICAL MARKETS
The Group operates in the UK and US markets, two of the major Swiss watch
markets. We have also entered the European market through the opening of six
mono-brand boutiques in the financial year. The following chart shows the luxury
watch retail sales per capita over the last four years.
The UK market has outperformed the US market and all major European markets
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 ($)
60
50
40
30
20
10
0
UK
Italy
France
Germany
Benelux
Spain
Nordics
US
2019
2020
2021
2022
Where we operate
Source: Company estimates based on Swiss watch export data from the Swiss Watch Federation
18
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 19
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS M A R K E T R E V I E W
continued
TH E U K M A R K E T
UK MARKET HIGHLIGHTS
LUXURY SWISS WATCH EXPORTS TO THE UK
5
CALENDAR YEAR 2022
RANKING IN GLOBAL
MARKETS FOR SWISS
WATCH EXPORTS
£2.9bn
ESTIMATED 2022 LUXURY
WATCH RETAIL SALES
(2021: £2.3bn)
The UK is the fifth largest market
globally for Swiss luxury watch
exports. The Group estimates retail
sales of luxury watches amounted
to £2.9 billion in calendar year 2022
(£2.3 billion in 2021).
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 2022, Swiss
watch exports to the UK increased by a
CAGR of 7.8%.
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
Phillippe, OMEGA, Cartier, Breitling,
TAG Heuer and TUDOR.
5%
8%
CHF million
CHF 500-3,000
CHF 3,000+
1,200
1,000
800
600
400
200
0
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
+7.8% (+7.2%1)
+5.6%
+9.8% (+8.7%1)
Watches of Switzerland Group
National groups
Independent jewellers
Luxury department stores
Corporate boutiques2
CAGR 2000 to 2022
CAGR 2000 to 2010
CAGR 2010 to 2022
Source: Swiss Watch Federation
1 CAGR shown through 2021.
UK LUXURY WATCH MARKET 2022
5%
8%
20%
45%
22%
Watches of Switzerland Group
National groups
Independent jewellers
Luxury department stores
Corporate boutiques2
45%
20%
Source: GFK and Company estimates
2 Directly operated by the brands.
22%
20
Watches of Switzerland, Battersea Power Station, London
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 TH E U S M A R K E T
US MARKET HIGHLIGHTS
LUXURY SWISS WATCH EXPORTS TO THE US
1
CALENDAR YEAR 2022
RANKING IN GLOBAL
MARKETS FOR SWISS
WATCH EXPORTS
$8.2bn
ESTIMATED 2022 LUXURY
WATCH RETAIL SALES
(2021: $6.4bn)
CHF million
3,500
CHF 500-3,000
CHF 3,000+
2,800
2,100
1,400
700
0
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
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 in 2021. The Group estimates
retail sales of
luxury watches
reached $8.2 billion in calendar year
2022 (2021: $6.4 billion).
CAGR 2000 to 2022
CAGR 2000 to 2010
CAGR 2010 to 2022
Source: Swiss Watch Federation
1 CAGR shown through 2021.
+4.4% (+3.3%1)
-0.3%
+8.4% (+6.7%1)
is
led by Rolex
The US market
with strong market positions of Cartier,
Patek Phillippe, Audemars Piguet,
OMEGA, TUDOR, Breitling, Officine
Panerai and TAG Heuer. Additionally
there are also relatively strong market
positions
independent
smaller
brands such as MB&F, Bovet and H.
Moser & Cie.
for
US retail distribution is in the process of
consolidation towards larger showroom
formats in major shopping centres and
retail investment from the Watches of
Switzerland Group and others has
increased. The US market is predominantly
domestic, although domestic tourism (e.g.
to Florida or Las Vegas) is significant. In
recent years Rolex, Patek Philippe and
other brands have been rationalising
distribution, reducing the number of
agencies to a smaller number of higher
quality retailers.
Watches of Switzerland, Hudson Yards, New York
21
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS M A R K E T R E V I E W
continued
TH E EU RO PE A N M A R K E T
LUXURY SWISS WATCH EXPORTS TO EUROPE
CHF million
4,000
CHF 500-3,000
CHF 3,000+
3,000
2,000
1,000
0
2000
2005
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
CAGR 2000 to 2022
CAGR 2000 to 2010
CAGR 2010 to 2022
Source: Swiss Watch Federation
1 CAGR shown through 2021.
+4.2% (+3.5%1)
+5.1%
+3.4% (+2.0%1)
PR E- OW N E D WATC H M A R K E T
PRE-OWNED AND ONLINE MARKETPL ACE KEY PL AYERS
Watchfinder & Co.
Bucherer
WatchBox/Govberg
Hodinkee
Acquired by Richemont in 2018
Crown & Caliber
Acquired by Hodinkee in 2021
Bob’s
Watches
Analog:Shift
Acquired by the Watches of
Switzerland Group in 2020
The Watches of
Switzerland Group
Chrono24
eBay
Auction Houses
ROLEX SUBMARINER NO-DATE PRICE EVOLUTION SINCE 1970 ($)
S
U
e
h
t
n
i
e
c
i
r
p
l
i
a
t
e
R
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
+ 7 % C A G R
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 20,
luxury watch sales per capita lag the
UK market.
Consumer prices in Europe are largely
harmonised in Euro and also in Pound
Sterling and Swiss Franc. Certain markets
(Paris, Milan, Munich, Amsterdam,
Vienna, Barcelona and Switzerland) have
high levels of tourist sales.
We believe the pre-owned market
is a positive development for the
retail 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
and for collectors given nearly 95%1
of watches are no
in
production. The pre-owned market
today has a dependence on product
sold at prices above retail due to
unavailability and scarcity.
longer
The market is made up of pre-owned
(purchase or trade-in watches to sell
on) and online marketplace players.
During the year, Rolex launched the
Rolex certified pre-owned programme
offering the opportunity to purchase
from its official retailers pre-owned
watches that are certified as authentic
and guaranteed by the brand. The
Watches of Switzerland Group
is
working in partnership with Rolex to
launch this programme in FY24 in the
UK and US.
1970
1975
1980
1988
1992
1996
2006
2008
2010
2012
2014
2020
2022
1 Source: BCG, Luxury Preowned Watches,
Source: STIFEL, Swiss watch industry export primer (30 August 2022)
Your Time Has Come (March 2023)
22
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
LUX U RY J E W E L L E RY M A R K E T
luxury watch business
Our
is
complemented by a strong luxury
jewellery offering.
The global luxury jewellery market has
seen global trends towards the branded
component of the market.
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.
200%
180%
160%
140%
120%
100%
80%
JEWELLERY DEMAND: CUML . YOY %
2015
US
UK
2016
EU
US CAGR 2015 to 2022
UK CAGR 2015 to 2022
2017
2018
2019
2020
2021
2022
+9.3%
+2.1%
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
2018
2019
2020
2021
2022
US
UK
EU
RoW
Source: Metals Focus, Refinitiv GFMS, ICE Benchmark Administration, World Gold Council
A F TE R- SA L ES A N D S E RV I C I N G
The Group believes after-sales and
servicing complements the first-
hand market for luxury watches and
is critical in protecting and prolonging
the life and value of the products.
The market is primarily supported by
traditional multiple and
independent
retailers and brand in-house resources.
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.
After-sales and servicing has not kept
pace with the growth in new watch sales.
in
The Group continues to
expanding its capacity to repair and
service timepieces in both the UK and US.
invest
After-sales and servicing contributes to
the circular economy; refer to page 88
to learn more.
23
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R B U S I N E S S M O D E L
H OW TH E G RO U P C R E ATES VA LU E
DRIVEN BY
OUR PURPOSE
To WOW our clients while
caring for our colleagues, our
communities and our planet.
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 our international
scale, fully integrated technology
and impactful marketing.
The Group operates in the UK,
US and Europe.
HOW WE CREATE VALUE
BR AND PARTNERSHIPS
We collaborate with our long-standing brand partners to
elevate and expand their distribution and partner on-demand
forecasting, product launches, showroom projects, online,
clienteling, marketing, events and learning and development
for our colleagues.
CLIENT EXPERIENCE
Our showroom colleagues provide expertise and knowledge to
ensure an exceptional client experience through extensive
learning and development.
During the year we embedded our industry-leading Xenia
Client Experience Programme throughout the business, refer
to page 36 for further details.
SHOWROOM ENVIRONMENT
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.
MULTI-CHANNEL
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 and collect, appointment system
and the Luxury Watch and Jewellery Virtual Boutique.
MARKETING
We deliver impactful marketing focused on digital
communications, Client Relationship Management, 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 page 29 for
more details.
SCALE
High barriers to entry created through national coverage in the
UK with a portfolio of 146 showrooms in the UK and Europe
and a growing and significant presence in the US with 47
showrooms (at 30 April 2023).
INPUTS
BR AND PARTNERSHIPS
Our strong and long-standing relationships
with the most recognised and prestigious
luxury watch and jewellery brands. These
relationships have been forged over many
years and also include new relationships with
developing brands.
Please see pages 26 to 27 for more details
on the prestigious brands we partner with.
COLLEAGUES
The Watches of Switzerland Group is
committed to building a great place to work
by giving people every reason to join, grow
and stay with our Group. We recognise the
many benefits a diverse and inclusive
workforce can bring and embrace all talent.
CLIENTS
We offer the greatest choice of brands and
products in the world of luxury watches and
jewellery. We aim to make our clients feel
welcome through unintimidating, inviting,
browsable, modern and luxurious
environments in our showrooms and online.
DESTINATION SHOWROOMS
Our clients purchase our products through
our retail network of directly operated
showrooms. These include multi-brand
showrooms, a presence in travel retail, online
and a growing portfolio of mono-brand
boutiques in partnership with our brands.
FINANCIAL INVESTMENT
Watches of Switzerland Group PLC is listed
on the London Stock Exchange. Through
focused investment we drive growth, generate
shareholder value and ensure the long-term
sustainable future of the Group.
24
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
OPER ATIONAL EXCELLENCE
Technology: Our fully integrated 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.
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 investment opportunities.
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 return on investment, aiming to
deliver long-term sustainable earnings growth whilst retaining financial
capability to invest in our business and to execute our strategic priorities.
COLLEAGUES AND COMMUNITIES
We aim to develop and grow our colleagues through significant
investment in training and development. This is supported by promoting
an open and inclusive environment through listening to our colleagues.
In the last financial year, the Group launched The Watches of
Switzerland Group Foundation which supports a number of causes,
with an emphasis on helping poor and vulnerable people out of poverty.
For more details refer to pages 76 to 81.
PLANET AND PRODUCT
100% of our UK properties are powered by renewable energy and in
FY23, our near-term emissions reduction targets, consistent with limiting
warming to 1.5°C, were approved by the Science Based Targets initiative.
This year also saw the UK launch the world's first fully circular luxury
Swiss watch. We continued investment into our repairs and servicing
business and grew sales of pre-owned luxury watches by strong double
digits vs FY22.
We also began a programme of supply chain engagement and partnered
with the Slave-Free Alliance to help mitigate the threat of modern slavery.
VALUE CREATED
£1,543m
FY23 REVENUE
£165m
ADJUSTED EBIT1
27.9%
FY23 RETURN ON
CAPITAL EMPLOYED1
£239m
CASH GENERATED
FROM OPERATIONS
146
UK AND EUROPE
SHOWROOMS
AT 30 APRIL 2023
47
US SHOWROOMS
AT 30 APRIL 2023
193
TOTAL SHOWROOMS
AT 30 APRIL 2023
2,800+
NUMBER OF COLLEAGUES
£1.5m
PAID BY THE GROUP TO THE
WATCHES OF SWITZERLAND
GROUP FOUNDATION
1
This is an Alternative Performance Measure. Refer to the Glossary on pages 230 to 232 for
definition and reconciliation to statutory measures where relevant.
25
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R B R A N D PA RT N E R S H I P S
LUXU RY WATC H ES
We have developed strong, long-standing and collaborative partnerships with the most
prestigious luxury watch brands over the years. We constantly strive to represent our brand
partners in the best possible way to our clients, working together to identify distribution
opportunities, partner on-demand forecasting and product development, and collaborating
closely on all showroom projects, across our online platform, clienteling initiatives and
marketing activities. We also collaborate on training our colleagues with our brand partners
to ensure we have experts across all brands within our business. For more details please refer
to Our Brand Partnership Brand Book 2023.
Founded in 1905 in London by Hans Wilsdorf, Rolex
watches are crafted from the finest raw materials and
assembled with scrupulous attention to detail.
Utilising over 180 years of experience and perpetuating the
tradition of Genevan watchmaking, Patek Philippe has always been
at the forefront of the luxury watch industry.
O U R B R A N D PA RT N E R S H I P S
Audemars Piguet is the oldest fine watchmaking manufacturer
still in the hands of its founding families (Audemars and Piguet).
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.
Widely regarded as the inventor of the first watch designed to
be worn on the wrist, Cartier was established in Paris in 1847
and is arguably one of the most recognisable Maisons in the
world.
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.
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 pilots.
Since its founding in 1926, TUDOR has endeavoured to produce
the best possible watches at the best possible price. This mission,
bold then as it is now, is inspired by the vision of the brand's founder
Hans Wilsdorf.
26
O U R B R A N D PA RT N E R S H I P S
27
O U R B R A N D PA RT N E R S H I P S
LUXU RY J E W ELLERY
At the Watches of Switzerland Group, our brands Mappin & Webb, Goldsmiths, Mayors and
Betteridge offer their very own collections of jewellery all steeped in a rich history and heritage,
making our showrooms and websites the destination for fine luxury jewellery. We are also
privileged to partner with the best luxury jewellery brands in the world, including FOPE,
BVLGARI, Roberto Coin, Messika, Jenny Packham, Gucci, Mikimoto and Birks.
O U R S T R AT E G Y
D ELI V ER I N G O U R STR ATEGY
Within the framework of our seven strategic priorities, we made significant progress during FY23 through
elevated levels of investment and focus on further developing our client-centric business model.
1. G ROW R E V E N U E , PRO F IT A N D
R E T U R N O N C A PITA L E M PLOY E D
2 . E N H A N C E STRO N G B R A N D
PA RTN E R S H I P S
WHAT IT MEANS
– Exceeding on our Long Range Plan, which sets out our strategy for the five-year
period from FY22 to FY26:
– Drive revenue across our existing markets, the UK and the US, and generate
incremental revenue from entrance into Europe
– Generate further operational leverage driven by the US, the UK and ongoing
geographical mix evolution
– Generate strong free cash flow conversion to support growth leading to
enhanced Return on Capital Employed (ROCE)
– Consistent, sustained capital investment and selective acquisitions to support growth
WHAT IT MEANS
Our strong and long-standing relationships with the most recognised and prestigious
luxury watch and jewellery brands have remained a point of distinction. Many of
these relationships have been forged over many years, but also include new
relationships with some exciting brands.
3. D E L I V E R A N E XC E P TI O N A L
C L I E NT E X PE R I E N C E
4 . D R I V E C L I E NT AWA R E N ES S A N D
B R A N D I M AG E TH RO U G H M U LTI M E D I A
W ITH I M PAC TF U L M A R K E TI N G
WHAT IT MEANS
WHAT IT MEANS
Our Xenia Client Experience Programme is an opportunity to create a unique
Creative, effective and relevant marketing content targeted towards a broad
differentiator to our competition. Everything we do is driven by our client experience
aspirational audience, to support our showrooms and showcase our breath of range
and our colleagues who are either serving a client or serving someone who is. Our
and expertise. We adopt a multi-channel marketing approach to maximise awareness,
three Xenia pillars of Know Me, WOW Me and Remember Me enable all colleagues to
invest in performance marketing to drive sales both online and offline, and work with
focus on how we make our clients feel throughout every interaction with our brands.
brand partners on co-op marketing campaigns, clienteling and events.
HOW WE PERFORMED IN FY23
– Group revenue growth of 25% at reported rates (+19% at constant currency) vs
FY22, Adjusted EBIT of £165 million (+27% vs FY22) and ROCE of 27.9% (+50bps
vs FY22)
– Five new showrooms at the new iconic Battersea Power Station in London, a
Watches of Switzerland multi-brand showroom anchored by Rolex; and four
mono-brand boutiques in partnership with OMEGA, TAG Heuer, Breitling
and TUDOR
HOW WE PERFORMED IN FY23
– Attended multiple watch and jewellery events, including Watches and Wonders
Geneva, Geneva Watch Days, Vicenza Jewellery show and JCK in Las Vegas.
Opportunity to connect with the brands in person and view their exciting
new products
– Investment in client events included hosting of high-end jewellery events in London,
Manchester and Glasgow in the UK and across several Mayors and Betteridge
showrooms in the US
HOW WE PERFORMED IN FY23
HOW WE PERFORMED IN FY23
– Embedded Xenia across our showrooms – please refer to page 36 for more details
– Continued focus on performance marketing with market-leading digital campaigns
– Our Luxury Watch and Jewellery Virtual Boutique continues to bridge the gap
across Google, optimised for multi-channel return
between online and showrooms, offering unparalleled client service under a truly
– Our presence on social media continues to be an important channel to inspire,
multi-channel approach. We increased resource this year allowing more clients
engage and target a new, younger audience:
access and improving turnaround time on enquiries
– In the UK total campaign impressions (including search and shopping) were
– In the UK, we hosted 169 events and entertained 7,500+ clients across showrooms
4.4 billion
from Brighton to Gleneagles with some of our key brand partners and across our
– 9 showrooms refurbished in the Goldsmiths Luxury concept
– Increased our collaboration with brands on all aspects of co-operative marketing,
own branded jewellery
– 26 new mono-brand boutiques in the UK, US and Europe in partnership with
OMEGA, TAG Heuer, Breitling, TUDOR, Longines, Grand Seiko and Hublot
– Watches of Switzerland showroom acquisition in the US, anchored by Rolex,
in New Jersey in June 2022
including digital communication, events and advertising
– Working with the brands on significant training programmes for our colleagues
– Watches of Switzerland hosted a three-day exhibition of the 2022 Grand Prix
d’Horlogerie de Gèneve (GPHG) award-winning watches at Soho, New York
– In the US, we hosted 98 events and entertained 5,000+ clients across showrooms
from Las Vegas to Greenwich with some of our key brand partners, in addition to
our own branded events for Watches of Switzerland and jewellery
OBJECTIVES FOR FY24
– Continue to deliver on our Long Range Plan objectives
– Invest in our showroom portfolio with an exciting pipeline including:
– Watches of Switzerland multi-brand showroom in American Dream, New Jersey
opened in May
– Expansion of the mono-brand portfolio with boutiques planned across the UK,
US and Europe
OBJECTIVES FOR FY24
– Continue to grow our brand partners' equity, through network elevation, full price
selling and excellence in merchandising and retail
OBJECTIVES FOR FY24
into the support teams
– Continue to embed Xenia across our showrooms, all our processes and launch
– Continue to drive awareness through a multi-channel strategy with bold,
– Develop strategic joint business plans focused on distribution, product launches,
– Further expansion and centralisation of processes into the Luxury Watch and
– Ongoing investment in performance marketing to drive sales both online
training and marketing
Jewellery Virtual Boutique in the UK and US
– Increased collaboration with both local market brand management, and relevant
– Continue to elevate and widen our client event programme
– Devise and implement localised marketing plans to support all new showrooms
global teams
– Refurbishment and expansion of Mayors Dadeland, Florida opened in May
– Launched our first new contemporary showroom concept for Mappin & Webb
– Ensure a high level of transparency and integrity in our business practices
– Strengthen partnerships with our brands on our ESG agenda
in York in June
– Continued roll out of Goldsmiths Luxury showroom format
– Watches of Switzerland multi-brand showroom at One Vanderbilt, New York
due to open in January 2024
LINK TO KPIs
1 2 3 4 5 6 7 8 9 12
LINK TO KPIs
5 8 9 12
LINK TO KPIs
8 9
LINK TO KPIs
9
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 6 8 9 10
Read more on pages 116 to 121
1 3 5 6 7 8 9
Read more on pages 116 to 121
1 2 3 4 5 6 7 8 9 11
1 3 4 6 8 9
Read more on pages 116 to 121
Read more on pages 116 to 121
– In the US total campaign impressions (including search and shopping) were
1.0 billion
– Investment in print media and outdoor advertising with our key brand partners,
along with bursts of activity to support our Watches of Switzerland Group
exclusives and new agencies
– Investment in local activations; ensuring each new or refurbished showroom has a
localised support plan to help drive awareness and footfall
– Extensive PR activity in the US
OBJECTIVES FOR FY24
impactful content creation
and offline
and refurbishments
– Continue to focus on PR activations in the US to drive brand awareness
28
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
KEY PERFORMANCE INDICATORS
PRINCIPAL RISKS AND UNCERTAINTIES
1
2
3
4
5
6
Revenue
Operating profit/EBIT
Adjusted EBIT
Basic EPS
Adjusted EPS
Return on Capital Employed
7
8
9
10
11
12
Cash generated from operations
Average selling price
Number of showrooms
Colleague Engagement Survey
ESG – Carbon emissions
ESG – Circularity
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
3. D E L I V E R A N E XC E P TI O N A L
C L I E NT E X PE R I E N C E
4 . D R I V E C L I E NT AWA R E N ES S A N D
B R A N D I M AG E TH RO U G H M U LTI M E D I A
W ITH I M PAC TF U L M A R K E TI N G
WHAT IT MEANS
Our Xenia Client Experience Programme is an opportunity to create a unique
differentiator to our competition. Everything we do is driven by our client experience
and our colleagues who are either serving a client or serving someone who is. Our
three Xenia pillars of Know Me, WOW Me and Remember Me enable all colleagues to
focus on how we make our clients feel throughout every interaction with our brands.
WHAT IT MEANS
Creative, effective and relevant marketing content targeted towards a broad
aspirational audience, to support our showrooms and showcase our breath of range
and expertise. We adopt a multi-channel marketing approach to maximise awareness,
invest in performance marketing to drive sales both online and offline, and work with
brand partners on co-op marketing campaigns, clienteling and events.
HOW WE PERFORMED IN FY23
– Embedded Xenia across our showrooms – please refer to page 36 for more details
HOW WE PERFORMED IN FY23
– Continued focus on performance marketing with market-leading digital campaigns
– Our Luxury Watch and Jewellery Virtual Boutique continues to bridge the gap
between online and showrooms, offering unparalleled client service under a truly
multi-channel approach. We increased resource this year allowing more clients
access and improving turnaround time on enquiries
– In the UK, we hosted 169 events and entertained 7,500+ clients across showrooms
from Brighton to Gleneagles with some of our key brand partners and across our
own branded jewellery
– In the US, we hosted 98 events and entertained 5,000+ clients across showrooms
from Las Vegas to Greenwich with some of our key brand partners, in addition to
our own branded events for Watches of Switzerland and jewellery
across Google, optimised for multi-channel return
– Our presence on social media continues to be an important channel to inspire,
engage and target a new, younger audience:
– In the UK total campaign impressions (including search and shopping) were
4.4 billion
– In the US total campaign impressions (including search and shopping) were
1.0 billion
– Investment in print media and outdoor advertising with our key brand partners,
along with bursts of activity to support our Watches of Switzerland Group
exclusives and new agencies
– Investment in local activations; ensuring each new or refurbished showroom has a
localised support plan to help drive awareness and footfall
– Extensive PR activity in the US
OBJECTIVES FOR FY24
OBJECTIVES FOR FY24
– Continue to deliver on our Long Range Plan objectives
– Continue to grow our brand partners' equity, through network elevation, full price
OBJECTIVES FOR FY24
– Continue to embed Xenia across our showrooms, all our processes and launch
OBJECTIVES FOR FY24
– Continue to drive awareness through a multi-channel strategy with bold,
selling and excellence in merchandising and retail
into the support teams
impactful content creation
– Develop strategic joint business plans focused on distribution, product launches,
– Further expansion and centralisation of processes into the Luxury Watch and
– Ongoing investment in performance marketing to drive sales both online
Jewellery Virtual Boutique in the UK and US
and offline
– Increased collaboration with both local market brand management, and relevant
– Continue to elevate and widen our client event programme
– Devise and implement localised marketing plans to support all new showrooms
and refurbishments
– Continue to focus on PR activations in the US to drive brand awareness
– Invest in our showroom portfolio with an exciting pipeline including:
– Watches of Switzerland multi-brand showroom in American Dream, New Jersey
– Expansion of the mono-brand portfolio with boutiques planned across the UK,
training and marketing
global teams
– Refurbishment and expansion of Mayors Dadeland, Florida opened in May
– Launched our first new contemporary showroom concept for Mappin & Webb
– Ensure a high level of transparency and integrity in our business practices
– Strengthen partnerships with our brands on our ESG agenda
– Continued roll out of Goldsmiths Luxury showroom format
– Watches of Switzerland multi-brand showroom at One Vanderbilt, New York
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 KPIs
8 9
LINK TO KPIs
9
1 2 3 4 5 6 7 8 9 11
1 3 4 6 8 9
Read more on pages 116 to 121
Read more on pages 116 to 121
29
1. G ROW R E V E N U E , PRO F IT A N D
R E T U R N O N C A PITA L E M PLOY E D
2 . E N H A N C E STRO N G B R A N D
PA RTN E R S H I P S
– Exceeding on our Long Range Plan, which sets out our strategy for the five-year
Our strong and long-standing relationships with the most recognised and prestigious
WHAT IT MEANS
luxury watch and jewellery brands have remained a point of distinction. Many of
these relationships have been forged over many years, but also include new
relationships with some exciting brands.
WHAT IT MEANS
period from FY22 to FY26:
– Drive revenue across our existing markets, the UK and the US, and generate
incremental revenue from entrance into Europe
– Generate further operational leverage driven by the US, the UK and ongoing
geographical mix evolution
– Generate strong free cash flow conversion to support growth leading to
enhanced Return on Capital Employed (ROCE)
– Consistent, sustained capital investment and selective acquisitions to support growth
HOW WE PERFORMED IN FY23
HOW WE PERFORMED IN FY23
– Group revenue growth of 25% at reported rates (+19% at constant currency) vs
– Attended multiple watch and jewellery events, including Watches and Wonders
FY22, Adjusted EBIT of £165 million (+27% vs FY22) and ROCE of 27.9% (+50bps
Geneva, Geneva Watch Days, Vicenza Jewellery show and JCK in Las Vegas.
Opportunity to connect with the brands in person and view their exciting
– Five new showrooms at the new iconic Battersea Power Station in London, a
new products
Watches of Switzerland multi-brand showroom anchored by Rolex; and four
– Investment in client events included hosting of high-end jewellery events in London,
mono-brand boutiques in partnership with OMEGA, TAG Heuer, Breitling
Manchester and Glasgow in the UK and across several Mayors and Betteridge
vs FY22)
and TUDOR
showrooms in the US
– 9 showrooms refurbished in the Goldsmiths Luxury concept
– Increased our collaboration with brands on all aspects of co-operative marketing,
– 26 new mono-brand boutiques in the UK, US and Europe in partnership with
including digital communication, events and advertising
OMEGA, TAG Heuer, Breitling, TUDOR, Longines, Grand Seiko and Hublot
– Working with the brands on significant training programmes for our colleagues
– Watches of Switzerland showroom acquisition in the US, anchored by Rolex,
– Watches of Switzerland hosted a three-day exhibition of the 2022 Grand Prix
in New Jersey in June 2022
d’Horlogerie de Gèneve (GPHG) award-winning watches at Soho, New York
opened in May
US and Europe
in York in June
due to open in January 2024
LINK TO KPIs
1 2 3 4 5 6 7 8 9 12
1 2 3 4 6 8 9 10
Read more on pages 116 to 121
LINK TO KPIs
5 8 9 12
1 3 5 6 7 8 9
Read more on pages 116 to 121
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
O U R S T R AT E G Y
continued
5. L E V E R AG E B EST I N C L A S S
O PE R ATI O N S
6 . E X PA N D O U R
M U LTI - C H A N N E L L E A D E R S H I P
7. CO NTI N U E TO A DVA N C E
TH E ESG AG E N DA
WHAT IT MEANS
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.
IT Systems
Our fully integrated IT systems are based on a single SAP platform powering
showroom point of sale, Client Relationship Management, reporting solutions, live
inventory availability and operations. This single platform enables rapid expansion
capabilities in new markets or through acquisitions.
WHAT IT MEANS
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.
WHAT IT MEANS
We take responsibility and accountability for the impact of our decisions and activities
on the environment and society and are committed to operating transparently,
ethically and sustainably. This includes caring for our colleagues and contributing to the
sustainable development and wellbeing of our local communities, while building climate
resilience and preserving resources.
HOW WE PERFORMED IN FY23
Merchandising
– Improved product availability across the majority of our brands and showroom
HOW WE PERFORMED IN FY23
Multi-brand Showrooms
– Watches of Switzerland showroom acquisition, anchored by Rolex, in New Jersey in
productivity
June 2022
– Extended the level of SKUs we have for key brands for our ecommerce platform,
– Significant enhancements to our Watches of Switzerland flagship Regent Street
to ensure we have the full range of products available by brand
multi-brand showroom
Retail Operations
– Deployed hosts within the showrooms and additional technology in-store to help
– Reopened our newly refurbished and expanded Watches of Switzerland
multi-brand showroom at Canary Wharf in November 2022
support the client experience journey
– Dedicated Operation Managers and Hospitality Teams in flagship showrooms,
supporting these large and complex operations
– Expanded our Luxury Watch and Jewellery Virtual Boutique in both the UK and US
IT Systems
– Entering new markets of Sweden, Denmark and the Republic of Ireland,
demonstrated the flexibility of our international systems template
– Continuing to refresh and expand our in-store technology, ensuring showroom
teams have the best technology to hand in support of every client transaction
Online
– Continued to leverage our market-leading position in the UK and accelerate our
market share in the US, through our competitive advantage in digital marketing and
omnichannel excellence
Mono-brand Boutiques
– Developed and enhanced the channel, opened 26 new mono-brand boutiques,
bringing our global network to a total of 80 boutiques (UK: 51, US: 23, Europe: 6)
as at 30 April 2023
Travel Retail
– Travel retail in the UK continues to improve as traffic recovers and all airport
showrooms have now reopened
OBJECTIVES FOR FY24
– Continued refurbishment and expansion of showroom network including:
OBJECTIVES FOR FY24
– Ongoing investment in elevating and upgrading the existing network as well as
– Refurbishment and expansion of Mayors Dadeland, Florida opened in May
– Launched our first new contemporary showroom concept for Mappin & Webb
in York in June
– Continued roll out of Goldsmiths Luxury showroom format
– Plans to further embed Xenia across the showroom network
– Relocation, renovation and expansion of our offices and distribution centres in the
UK and the US as well as our servicing and repair hubs in the UK
opening in new, strategic locations
– Growing sector leadership online with a focus on luxury watches and jewellery
with continual improvement of user experience
– Working closely with our brand partners to further develop our multi-channel
partnerships
LINK TO KPIs
2 3 4 5 6 7 8 9 12
LINK TO KPIs
9
LINK TO PRINCIPAL RISKS AND UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND UNCERTAINTIES
1 2 3 4 6 7 8 10 11
Read more on pages 116 to 121
1 3 4 6 8 10
Read more on pages 116 to 121
30
HOW WE PERFORMED IN FY23
– 81% colleague engagement score
– Continue to close our mean gender pay gap
– 11% of colleagues progressed their careers through promotion
– Our near-term greenhouse gas (GHG) emissions reduction target in line with
a 1.5°C pathway verified by the Science Based Targets initiative
– Responded to CDP questionnaire on climate change for first time, scoring a ‘C’
– Grew our After Sales and Servicing business by 20% year-on-year
– Increased sales of pre-owned watches by high double digits year-on-year
– Evolved Modern Slavery Statement and published new ESG Partner Standards
– As at June 2023, the Watches of Switzerland Group scored an ISS Quality Score ‘1’
for Environment and received an MSCI ESG Rating of AAA
OBJECTIVES FOR FY24
– Maintain colleague engagement and inclusion
– Reduce Scope 1, 2 and 3 GHG emissions year-on-year
– Improve our CDP score year-on-year
– Continue to enhance our approach to modern slavery and human rights
– Year-on-year increase in watches kept in circulation through repair, servicing
and / or resale, measured by % of new watches sold
– Ongoing supplier engagement with our ESG Partner Standards and due diligence
– Achieving Key Performance Indicators in line with our Modern Slavery Roadmap
– Equipping colleagues with the training and resources they need to help clients make
more informed purchasing decisions
– For more details on our Sustainability Strategy, commitments and targets refer to
pages 56 to 61
LINK TO KPIs
10 11 12
1 2 6 9 10 11
Read more on pages 116 to 121
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
5. L E V E R AG E B EST I N C L A S S
O PE R ATI O N S
6 . E X PA N D O U R
M U LTI - C H A N N E L L E A D E R S H I P
7. CO NTI N U E TO A DVA N C E
TH E ESG AG E N DA
WHAT IT MEANS
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.
WHAT IT MEANS
We take responsibility and accountability for the impact of our decisions and activities
on the environment and society and are committed to operating transparently,
ethically and sustainably. This includes caring for our colleagues and contributing to the
sustainable development and wellbeing of our local communities, while building climate
resilience and preserving resources.
HOW WE PERFORMED IN FY23
– 81% colleague engagement score
– Continue to close our mean gender pay gap
– 11% of colleagues progressed their careers through promotion
– Our near-term greenhouse gas (GHG) emissions reduction target in line with
a 1.5°C pathway verified by the Science Based Targets initiative
– Responded to CDP questionnaire on climate change for first time, scoring a ‘C’
– Grew our After Sales and Servicing business by 20% year-on-year
– Increased sales of pre-owned watches by high double digits year-on-year
– Evolved Modern Slavery Statement and published new ESG Partner Standards
– As at June 2023, the Watches of Switzerland Group scored an ISS Quality Score ‘1’
for Environment and received an MSCI ESG Rating of AAA
OBJECTIVES FOR FY24
– Maintain colleague engagement and inclusion
– Reduce Scope 1, 2 and 3 GHG emissions year-on-year
– Improve our CDP score year-on-year
– Continue to enhance our approach to modern slavery and human rights
– Year-on-year increase in watches kept in circulation through repair, servicing
and / or resale, measured by % of new watches sold
– Ongoing supplier engagement with our ESG Partner Standards and due diligence
– Achieving Key Performance Indicators in line with our Modern Slavery Roadmap
– Equipping colleagues with the training and resources they need to help clients make
more informed purchasing decisions
– For more details on our Sustainability Strategy, commitments and targets refer to
pages 56 to 61
LINK TO KPIs
10 11 12
LINK TO PRINCIPAL RISKS AND UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND UNCERTAINTIES
1 2 6 9 10 11
Read more on pages 116 to 121
31
WHAT IT MEANS
Merchandising
competitive advantage.
Retail Operations
IT Systems
Dynamic inventory management optimises stock availability, enhances showroom
productivity and in the UK, allows for nationwide coverage, giving us a key
We aim to continually drive productivity and profitability, with a high level of
accountability and performance management.
Our fully integrated IT systems are based on a single SAP platform powering
showroom point of sale, Client Relationship Management, reporting solutions, live
inventory availability and operations. This single platform enables rapid expansion
capabilities in new markets or through acquisitions.
HOW WE PERFORMED IN FY23
Merchandising
productivity
HOW WE PERFORMED IN FY23
Multi-brand Showrooms
June 2022
– Improved product availability across the majority of our brands and showroom
– Watches of Switzerland showroom acquisition, anchored by Rolex, in New Jersey in
– Extended the level of SKUs we have for key brands for our ecommerce platform,
– Significant enhancements to our Watches of Switzerland flagship Regent Street
to ensure we have the full range of products available by brand
multi-brand showroom
Retail Operations
– Deployed hosts within the showrooms and additional technology in-store to help
support the client experience journey
Online
– Reopened our newly refurbished and expanded Watches of Switzerland
multi-brand showroom at Canary Wharf in November 2022
– Dedicated Operation Managers and Hospitality Teams in flagship showrooms,
– Continued to leverage our market-leading position in the UK and accelerate our
supporting these large and complex operations
market share in the US, through our competitive advantage in digital marketing and
– Expanded our Luxury Watch and Jewellery Virtual Boutique in both the UK and US
IT Systems
– Entering new markets of Sweden, Denmark and the Republic of Ireland,
demonstrated the flexibility of our international systems template
– Continuing to refresh and expand our in-store technology, ensuring showroom
teams have the best technology to hand in support of every client transaction
– Refurbishment and expansion of Mayors Dadeland, Florida opened in May
– Launched our first new contemporary showroom concept for Mappin & Webb
in York in June
– Continued roll out of Goldsmiths Luxury showroom format
– Plans to further embed Xenia across the showroom network
– Relocation, renovation and expansion of our offices and distribution centres in the
UK and the US as well as our servicing and repair hubs in the UK
– Developed and enhanced the channel, opened 26 new mono-brand boutiques,
bringing our global network to a total of 80 boutiques (UK: 51, US: 23, Europe: 6)
– Travel retail in the UK continues to improve as traffic recovers and all airport
omnichannel excellence
Mono-brand Boutiques
as at 30 April 2023
Travel Retail
showrooms have now reopened
OBJECTIVES FOR FY24
opening in new, strategic locations
– Growing sector leadership online with a focus on luxury watches and jewellery
with continual improvement of user experience
– Working closely with our brand partners to further develop our multi-channel
partnerships
OBJECTIVES FOR FY24
– Continued refurbishment and expansion of showroom network including:
– Ongoing investment in elevating and upgrading the existing network as well as
LINK TO KPIs
2 3 4 5 6 7 8 9 12
1 2 3 4 6 7 8 10 11
Read more on pages 116 to 121
LINK TO KPIs
9
1 3 4 6 8 10
Read more on pages 116 to 121
S U STA I N A B I L IT Y
Our strategy is underpinned by our
sustainability pillars
PEO PL E
Join, grow and stay with our Group
Read more on page 62
PL A N E T
Build climate resilience and preserve resources
Read more on page 82
PRO D U C T
Enable circularity in watches and jewellery through
repairs, servicing and our pre-owned business and
improve traceability and sourcing standards
Read more on page 106
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
O U R S T R AT E G Y I N AC T I O N
EU RO PE A N E X PA N S I O N
We are delighted to have commenced our entry into the European market with the opening of six
mono-brand boutiques in Sweden, Denmark, and the Republic of Ireland in FY23. Our European expansion
programme continues into FY24 with two further showrooms opened in the first quarter.
LINK TO STR ATEGY
This year we opened six mono-brand boutiques in Europe in partnership with
OMEGA, Breitling and TAG Heuer: three in Stockholm, Sweden; two in Copenhagen,
Denmark; and one in Dundrum, Dublin, in the Republic of Ireland.
Early trading in Europe has been in line with our expectations with improving
ongoing momentum. The average selling price of OMEGA and Breitling in our
boutiques is higher than our Group average, outperforming both the UK and US.
We have been pleased to observe a good level of watch enthusiasts and collectors
driving a high level of repeat purchases. The quality of our showrooms and client
experience via mystery shops is ahead of the competition.
We enter FY24 with ongoing momentum having recently opened two additional
mono-brand boutiques in partnership with TAG Heuer; one in Berlin, Germany
and one in the Mall of Scandinavia, Stockholm in June.
We continue to see significant opportunity in Europe where the luxury watch
market is under-invested and under-potentialised. Our expansion into Europe will
take place through a combination of continued showroom openings alongside
acquisitions and ecommerce. The Group anticipates that sales in Europe will
contribute between 5–8% of Group revenue by FY26.
TAG Heuer mono-brand boutique, Dundrum, Dublin, Republic of Ireland
“We have made good progress as we establish our presence
in the European market through the targeted roll-out of our
proven model. We opened our first six European mono-brand
boutiques in FY23 and consumers are responding well to the
elevated showroom experience we offer.”
CR AIG BOLTON
PRESIDENT OF UK & EUROPE
32
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
Top: Breitling mono-brand boutique, Østergade 61, Copenhagen, Denmark
Bottom: OMEGA mono-brand boutique, Biblioteksgatan 3, Stockholm, Sweden
33
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y I N AC T I O N
continued
J E W ELLERY
The Watches of Switzerland Group has a long history across its showroom fascia of jewellery
curation and creation. Our luxury jewellery category remains a key focus, leveraging our strong
heritage, unparalleled market coverage, product expertise and client base.
LINK TO STR ATEGY
Our ambition is to play a leading role in retailing luxury jewellery brands. We strive
to apply the market-leading luxury watch model to the luxury jewellery category
through providing a unique quality of jewellery brand choice in a dedicated
specialised luxury format supported by best-in-class client service.
In FY23, our luxury jewellery category represented 7% of Group sales with almost
one out of every two clients that we serve buying a piece of jewellery with us today.
We are proud to currently carry over 40 luxury jewellery brands across our UK
and US showrooms including BVLGARI, CHANEL, Messika, FOPE, Gucci,
Buccellati, Chopard and Roberto Coin as well as our four own brands: Mappin &
Webb, Goldsmiths, Mayors and Betteridge.
The Group has a long-standing history of retailing luxury jewellery across our
showroom fascia, the oldest in the UK, being Mappin & Webb (1775) and Betteridge
(1897) in the US. Our heritage is matched by our unparalleled expertise and
craftmanship. Mappin & Webb holds royal warrants for the British Crown and has
been silversmiths to all of the UK’s sovereigns since 1897.
Our Mappin & Webb London Jewellery Workshop and Studios, under the
leadership and supervision of Mark Appleby, The Crown Jeweller, and his very
experienced team of outstanding jewellery craftsmen, recently worked on King
Charles’ coronation restoring the Crown Jewels as well as modifying the three
most famous crowns that were worn on the coronation day.
During the year we added nine new luxury jewellery brands including 886 by Royal
Mint which is heavily focused on sustainability. We also expanded our product
selection from icon to designer brands across luxury and fine segment pieces. We
are elevating our own jewellery brands by introducing more GIA certified and
quality stones, higher carat weight of gold and creative designs.
We have also enhanced the visibility of the category across our retail network
through new luxury showroom design concepts. In the UK, we continued with the
rollout of Goldsmiths Luxury as we elevate the Goldsmiths brand position with a
luxurious new showroom concept. Cumulatively, sixteen showrooms have now
been refurbished in the new concept.
In the US, we opened our first BVLGARI mono-brand boutique last year and we
continue to enhance our Mayors showrooms and most recently, in May 2023,
re-opened Mayors Dadeland, Florida following a significant refurbishment and
expansion. Elevating our showrooms allows us to extend brand line-up and Mayors
Dadeland now includes our second CHANEL branded space. Going forward, we will
continue to refurbish and expand our showroom network. In June 2023, we launched
our first new contemporary showroom concept for Mappin & Webb in York.
Across all showrooms, we have continued to focus on elevating our luxury offer and
positioning through design, product selection, full price selling, training and visual
merchandising. We have significantly reduced discounting activity across our Betteridge
showrooms. We have also secured additional square feet at both the Greenwich and
Aspen showrooms to further extend the space and brand line-up in the future.
Client experience and events continue to form a critical part of our strategy in both
the UK and US to build and strengthen relationships. We also continue to focus on
campaigns to reinforce our marketing messages and journeys offline and online.
In the US, we debuted a ground-breaking Mayors advertising campaign titled 'To
Catch the Shimmer'. In the UK, showroom activations have provided numerous
opportunities for client engagements.
34
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
35
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y I N AC T I O N
continued
X EN I A
Following the successful launch of our Xenia Client Experience Programme in October 2021, the
focus in FY23 has been on embedding the Xenia Client Experience Programme into our
organisation as we continue to deliver world-class client experiences.
LINK TO STR ATEGY
Xenia is our elevated Client Experience Programme, which has been introduced
throughout the Watches of Switzerland Group. It is at the heart of everything we
do, but is especially important when it comes to providing exceptional experiences
for our clients – both external and internal.
We further measure our client experience success through emotional drivers
where we achieved an outstanding over 90% connection with our clients in
emotional forces ‘Status’, ‘Certainty’ and ‘Fair Treatment’. Our UK Net Promoter
Score (NPS) also remains consistently world class at over 80%.
Our Xenia initiative is based on three pillars: Know Me; WOW Me; Remember Me
and provides the universal standard for all our retail and support services. Xenia is
based on the power of ‘WOW’ and is how we can build an advantage over our
competitors. The opportunity to ‘WOW’ starts before the client steps through
the door of one of our showrooms and our retail teams strive to go above and
beyond to deliver an exceptional client experience.
We launched the Xenia initiative last fiscal year – holding a conference in Miami for
our US colleagues and London for our UK colleagues. To support us on our
journey, we engaged The Ritz-Carlton Leadership Centre, who have been
instrumental in supporting global brands in the development of their client
experience. This was a pivotal moment in our decision-making to take the benefits
of 5-star hospitality and bring them to showroom level. From there, we designed
and delivered the new Watches of Switzerland Group Global Standards which we
cascaded throughout April 2022 to all retail colleagues.
This year the focus has been on embedding our Xenia standards into our
organisation. This has been achieved through investment in training and leadership.
In addition, continually assessing our client experience and satisfaction across
multiple touch points in the UK and the US in line with Xenia principles.
In the UK, our Voice of the Client survey provides us with valuable real-life feedback
about clients’ experiences. 90% of our surveyed clients rate their interactions with
our showroom colleagues as either 9 or 10 out of 10 in their feedback. 7 out of 10
surveyed clients felt their visits went above and beyond their expectations, which is
an essential pillar of our client experience ethos.
We carry out multiple mystery shop programmes to measure the consistency in
delivering on our Xenia client experience principles and brand standards for luxury
service. Results from these programmes show than on over 93% of occasions our
clients are made to feel at ease before the consultation had commenced. Clients
are engaged with the showroom teams demonstrating expertise, confidence, and
passion in over 90% of occasions. Also, the emotional connection was sparked for
8 out of 10 clients during their initial visits, with a conscious effort to build a
personal rapport with the client, and exceptional first impressions made by our
colleagues in these situations.
We continue to enhance and improve our clients' online journey, with 9 out of 10
clients from our online mystery shop programme rating our website ‘very easy to
use’ and ‘very easy to complete their purchase’ with three quarters feeling the
product information and imagery was ‘excellent’.
We actively promote reviews through Trustpilot for online clients. In the UK
our Trustpilot scores average is 4.5 out of 5.0, and our organically generated
Google Reviews have achieved an average rating of 4.5 out of 5.0 across all our UK
fascia brands.
In the US, we actively track Google reviews using Podium software in our
boutiques, where we have achieved an excellent 4.9 out of 5.0 rating, and our US
Trustpilot scores average 4.7 out of 5.0.
The success of these measures is at the core of the delivery of our Client Experience
Programme as we continue to evolve in line with our clients' changing needs. Our
clients remain at the centre of everything we do.
“We have developed a reputation for delivering world class
luxury client service. Xenia represents the latest in our continual
pursuit to elevate the client experience ever further, taking
inspiration from the world of luxury hospitality.”
BRIAN DUFFY
CEO
36
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
37
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS O U R S T R AT E G Y I N AC T I O N
continued
PR E- OW N ED
We are delighted with the performance of our pre-owned business in FY23, as we embed pre-owned across our
business and continue to invest in the category. We are looking forward to working in partnership with Rolex as
we launch the Rolex certified pre-owned programme in FY24 in both the UK and US.
LINK TO STR ATEGY
The pre-owned watch market is continuing to attract significant interest as a result
of growing buyer interest and a shortage of models from brands like Rolex, Patek
Philippe, Audemars Piguet, OMEGA, Cartier and Vacheron Constantin.
The Watches of Switzerland Group gives clients the opportunity to purchase pre-
owned timepieces either in our showrooms or online across our showroom fascia
both in the UK and US. In September 2020, the Group purchased Analog:Shift, a
US seller in pre-owned timepieces, and together we provide authenticity, trust and
value to a largely unregulated segment of the industry.
In FY23, our pre-owned business grew strong double digits vs FY22. During the
year we have focused on further embedding pre-owned across our business as we
continue to invest in the category.
In both the UK and US, we have expanded into new doors more than doubling our
showroom footprint in the US to 23 showrooms in FY23, as well as taking the
business online through our online platforms. The significant pace of growth reflects
our commitment to offering high-quality, unique timepieces that appeal to collectors
and enthusiasts as we continue to attract new customers.
We also completely designed our 'Sell My Watch' journey online to improve the
intake of pre-owned watches, enabling us to meet increased client demand.
In both the UK and US, we continue to invest in expanding our capacity to repair
and service timepieces. This includes a new 6,000 square foot Repairs and Servicing
Centre in Leicester which will open in FY24. This project alone will allow us to
more than double the number of highly skilled and accredited watchmakers we
employ across our Group.
During the year, we partnered with Goop, the Gwyneth Paltrow owned, lifestyle
and wellness brand, in the US on several exclusive pre-owned timepieces generating
over 1 million media impressions across digital and social advertising.
During the year Rolex launched the Rolex certified pre-owned programme, offering
the opportunity to purchase from its official retailers pre-owned watches that are
certified as authentic and guaranteed by the brand. The Watches of Switzerland
Group is working in partnership with Rolex to launch this programme in FY24 in the
UK, US and online with full marketing support to raise awareness for both buy in
and sell out, and will be supplemented by our Virtual Watch and Jewellery Boutique.
Our ambition in our Long Range Plan is to support circularity by extending the life
of luxury watches, measured by the number of watches repaired, serviced or
re-sold as a percentage of the number of new watch sales.
38
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
39
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
H OW TH E G RO U P M E A S U R ES
PER F O R M A N C E
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.
In line with our heightened focus on ESG, an additional metric focusing on the circularity of luxury watches has been introduced in FY23. To ensure APMs are balanced
between Financial and Non-Financial performance, 4-Wall EBITDA % has been removed. 4-Wall EBITDA % is disclosed in the Financial Review section on page 45,
whilst Adjusted EBIT continues to be a KPI for the Group.
FINANCIAL PERFORMANCE
REVENUE
OPER ATING PROFIT/EBIT
ADJUSTED EBIT
BASIC EPS
ADJUSTED EPS
RETURN ON
CAPITAL EMPLOYED
CASH GENER ATED
FROM OPER ATIONS
AVER AGE SELLING PRICE
D E F I N IT I O N A N D PU R P O S E
Revenue is stated exclusive of sales
taxes and is measured in accordance
with IFRS 15 ‘Revenue from contracts
with customers’.
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
Operating profit before exceptional
items and IFRS 16 impact. This is a
measure of profitability that excludes
one-off exceptional items and IFRS 16
adjustments to allow for comparability
between years.
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.
Growing profit is a key pillar of our
business strategy.
This measure was linked to the
Executive performance target for the
FY23 annual bonus. Further detail can
be found in the Remuneration
Committee Report on page 163.
DEFINITION AND PURPOSE
Basic Earnings Per Share adjusted for
exceptional items as disclosed in note 4
to the Financial Statements. This measure
is reconciled to statutory measures in
note 9 to the 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 Adjusted EPS is a key pillar
of our business strategy.
This measure is linked to the Executive
performance target for the LTIP
incentives. Further detail can be found
in the Remuneration Committee
Report on page 163.
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 pages 230 to 232.
ROCE demonstrates the efficiency with
which the Group utilises capital, and is a
key pillar of our business strategy.
This measure is linked to the Executive
performance target for the LTIP
incentives. Further detail can be found
in the Remuneration Committee Report
on page 163.
DEFINITION AND PURPOSE
Cash generated from operations is
DEFINITION AND PURPOSE
Average selling price (ASP) represents
defined under IAS 7 ‘Statement of Cash
revenue generated (including
Flows’. This is a direct measure of cash
generation from the operations of the
business excluding financing, investing,
tax and defined benefit pension
contributions.
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.
PERFORMANCE (£ MILLION)
PERFORMANCE (£ MILLION)
PERFORMANCE (£ MILLION)
PERFORMANCE (p)
PERFORMANCE (p)
PERFORMANCE (%)
PERFORMANCE (£ MILLION)
FY23
FY22
FY21
1,542.8
1,238.0
905.1
FY23
FY22
FY21
178.6
142.1
81.9
FY23
FY22
FY21
165.1
130.3
77.6
FY23
FY22
FY21
51.2
42.2
21.1
FY23
FY22
FY21
52.7
41.8
23.8
FY23
FY22
FY21
27.9
27.4
19.7
FY23
FY22
FY21
239.2
186.6
169.8
Revenue grew by 25% to deliver
another record year. This is in line
with market guidance given.
Further details on the revenue
performance in the year can be
found in the Financial Review on
pages 45 to 49.
Operating profit grew by 26% in the
year, ahead of revenue growth. This is in
line with market guidance given.
Further details on profit performance in
the year can be found in the Financial
Review on pages 45 to 49.
Adjusted EBIT increased by 27% on the
prior year, ahead of revenue growth
demonstrating good cost management.
This is in line with market guidance given.
Further details on profit performance in
the year can be found in the Financial
Review on pages 45 to 49.
Basic EPS has grown from 42.2p to
51.2p in the year, reflecting the increase
in profitability in the year.
For further detail please refer to note 9
in the statutory accounts on page 204.
FY23 Adjusted EPS increased by 26%
relative to the prior year, reflecting the
increase in profitability during the year.
For further detail please refer to note 9
in the statutory accounts on page 204.
ROCE has increase by 50bps to 27.9%
in the year. The increase largely reflects
the increase in Adjusted EBIT and
demonstrates improved capital efficiency.
Cash generated from operations
increased by £52.6 million.
Further details on cash flow
performance in the year can be found in
the Financial Review on pages 45 to 49.
PERFORMANCE
UK and Europe (£)
6,284
5,523
5,940
1,453
1,318
1,208
Luxury
watches
Luxury
jewellery
US ($)
Luxury
watches
Luxury
jewellery
12,006
11,476
12,818
6,830
6,099
5,221
FY23
FY22
FY21
The total luxury watches and luxury
jewellery ASP has increased in all
geographies due to pricing and the mix
of products sold.
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 KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
LINK TO KEY PRINCIPAL RISKS
LINK TO KEY PRINCIPAL RISKS
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
AND UNCERTAINTIES
AND UNCERTAINTIES
AND UNCERTAINTIES
1 2 3 4 8 9
1 2 3 4 8 9 10
1 2 3 4 8 9
1 2 3 4 8 9 10
1 2 3 4 8 9 10
1 2 8 10
1 2 8 10
1 2 8
4 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
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 IT I O N A N D PU R P O S E
Revenue is stated exclusive of sales
taxes and is measured in accordance
with IFRS 15 ‘Revenue from contracts
with customers’.
DEFINITION AND PURPOSE
Statutory measure under IFRS
representing Profit/Earnings Before
Interest and Taxation.
Growing profit is a key pillar of our
Growing revenue is a key pillar of our
business strategy.
business strategy.
OPER ATING PROFIT/EBIT
ADJUSTED EBIT
BASIC EPS
ADJUSTED EPS
RETURN ON
CAPITAL EMPLOYED
CASH GENER ATED
FROM OPER ATIONS
AVER AGE SELLING PRICE
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
Operating profit before exceptional
items and IFRS 16 impact. This is a
measure of profitability that excludes
one-off exceptional items and IFRS 16
adjustments to allow for comparability
between years.
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.
Growing profit is a key pillar of our
business strategy.
This measure was linked to the
Executive performance target for the
FY23 annual bonus. Further detail can
be found in the Remuneration
Committee Report on page 163.
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
Basic Earnings Per Share adjusted for
exceptional items as disclosed in note 4
to the Financial Statements. This measure
is reconciled to statutory measures in
note 9 to the 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 Adjusted EPS is a key pillar
of our business strategy.
This measure is linked to the Executive
performance target for the LTIP
incentives. Further detail can be found
in the Remuneration Committee
Report on page 163.
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 pages 230 to 232.
ROCE demonstrates the efficiency with
which the Group utilises capital, and is a
key pillar of our business strategy.
This measure is linked to the Executive
performance target for the LTIP
incentives. Further detail can be found
in the Remuneration Committee Report
on page 163.
PERFORMANCE (£ MILLION)
PERFORMANCE (£ MILLION)
PERFORMANCE (£ MILLION)
PERFORMANCE (p)
PERFORMANCE (p)
PERFORMANCE (%)
PERFORMANCE (£ MILLION)
FY23
FY22
FY21
1,542.8
1,238.0
905.1
FY23
FY22
FY21
178.6
142.1
81.9
FY23
FY22
FY21
165.1
130.3
77.6
FY23
FY22
FY21
51.2
42.2
21.1
FY23
FY22
FY21
52.7
41.8
23.8
FY23
FY22
FY21
27.9
27.4
19.7
FY23
FY22
FY21
239.2
186.6
169.8
Revenue grew by 25% to deliver
another record year. This is in line
with market guidance given.
Further details on the revenue
performance in the year can be
found in the Financial Review on
pages 45 to 49.
Operating profit grew by 26% in the
Adjusted EBIT increased by 27% on the
Basic EPS has grown from 42.2p to
year, ahead of revenue growth. This is in
prior year, ahead of revenue growth
51.2p in the year, reflecting the increase
line with market guidance given.
Further details on profit performance in
the year can be found in the Financial
Review on pages 45 to 49.
demonstrating good cost management.
This is in line with market guidance given.
Further details on profit performance in
the year can be found in the Financial
Review on pages 45 to 49.
in profitability in the year.
For further detail please refer to note 9
in the statutory accounts on page 204.
FY23 Adjusted EPS increased by 26%
relative to the prior year, reflecting the
increase in profitability during the year.
For further detail please refer to note 9
in the statutory accounts on page 204.
ROCE has increase by 50bps to 27.9%
in the year. The increase largely reflects
the increase in Adjusted EBIT and
demonstrates improved capital efficiency.
Cash generated from operations
increased by £52.6 million.
Further details on cash flow
performance in the year can be found in
the Financial Review on pages 45 to 49.
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.
PERFORMANCE
UK and Europe (£)
Luxury
watches
Luxury
jewellery
US ($)
Luxury
watches
Luxury
jewellery
6,284
5,523
5,940
1,453
1,318
1,208
12,006
11,476
12,818
6,830
6,099
5,221
FY23
FY22
FY21
The total luxury watches and luxury
jewellery ASP has increased in all
geographies due to pricing and the mix
of products sold.
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 KEY PRINCIPAL RISKS
LINK TO KEY PRINCIPAL RISKS
LINK TO KEY PRINCIPAL RISKS
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
AND UNCERTAINTIES
AND UNCERTAINTIES
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
1 2 3 4 8 9
1 2 3 4 8 9 10
1 2 3 4 8 9
1 2 3 4 8 9 10
1 2 3 4 8 9 10
1 2 8 10
1 2 8 10
1 2 8
41
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
DEFINITION AND PURPOSE
Number of showrooms at the end
of the financial year. This metric
demonstrates the Group’s size
and scale.
COLLEAGUE
ENGAGEMENT SURVEY
DEFINITION AND PURPOSE
Strong engagement is an important
indicator of culture, retention,
productivity and ultimately business
performance. In line with our
commitment to complete an annual
Company-wide Colleague Engagement
Survey, our most recent survey was
completed in January 2023.
ESG – CARBON EMISSIONS
ESG – CIRCULARITY
DEFINITION AND PURPOSE
Supporting circularity of luxury watches,
measured by the number of watches
repaired, serviced or resold as a
percentage of the number of new
watch sales. This new metric aligns
to our ESG pillars.
DEFINITION AND PURPOSE
The Board has a commitment to achieve
net-zero emissions by 2050.
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).
In FY23, the Science Based Targets
initiative (SBTi) have provided external
validation of our near-term emissions
reduction target.
PERFORMANCE
COLLEAGUE ENGAGEMENT (%)
PERFORMANCE (tCO 2e)
PERFORMANCE
193
171
154
146
131
124
Total
UK and
Europe
US
47
40
30
FY23
FY22
FY21
FY23
FY22
FY20
81%
86%
85%
Total
UK and
Europe
US
1,828
1,875
1,906
2,038
1,723
3,866
3,598
3,307
FY23
FY22
FY21
44%
45%
36%
1,401
FY23
FY22
FY21
Scope 1 and 2 intensity ratio
(tCO2e per £'000 revenue)
FY23
0.0025
FY22
FY21
0.0029
0.0037
Absolute carbon emissions have
increased in line with increased
showroom numbers, however our
intensity ratio is reducing in line with
initiatives in place. Further detail can be
found in the Environmental, Social and
Governance section on page 104.
This indicator pertains to our goal to
extend the life of luxury watches. FY23
was in line with the prior year, and we
intend to increase circularity
year-on-year.
In the UK and Europe, the Group
opened 21 showrooms and closed
six. In the US, the Group opened
six showrooms and acquired
one showroom.
Our 193 showrooms includes 80
dedicated mono-brand boutiques.
Colleague engagement in the year
was measured at 81%, a slight
decrease from 86% in the prior year,
but significantly higher than the average
for the retail sector.
Further detail can be found in the
Environmental, Social and Governance
section on page 71.
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO STR ATEGY
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
LINK TO PRINCIPAL RISKS AND
UNCERTAINTIES
LINK TO KEY PRINCIPAL RISKS
AND UNCERTAINTIES
1 2 4 11
4 11
7 8 9 11
8 9 11
42
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
43
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS F I N A N C I A L R E V I E W
4 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 “I am pleased to report an increase in Group
profitability, delivering leverage and strong
cost control in an inflationary environment.”
ANDERS ROMBERG
CFO
The Group’s Consolidated Income Statement is shown below which is presented
including IFRS 16 ‘Leases’ and includes exceptional items.
REVENUE
Revenue by geography and category
All growth rates in this report are calculated on unrounded numbers.
Income Statement – post-IFRS 16 and
exceptional items (£million)
Revenue
Operating profit
Net finance cost
Profit before taxation
Taxation
Profit for the financial period
Basic Earnings Per Share
52 weeks
ended
30 April
2023
52 weeks
ended
1 May
2022
1,542.8
1,238.0
178.6
(23.8)
154.8
(33.0)
121.8
51.2p
142.1
(15.9)
126.2
(25.2)
101.0
42.2p
YoY
variance
25%
26%
(50)%
23%
(31)%
21%
21%
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 on pages 230 to 232.
Income Statement – pre-IFRS 16 and
exceptional items (£million)
Revenue
Net margin1
Showroom costs
4-Wall EBITDA1
Overheads
EBITDA
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
52 weeks
ended
30 April
2023
52 weeks
ended
1 May
2022
1,542.8
1,238.0
576.3
(279.2)
297.1
(84.1)
213.0
(11.6)
201.4
(36.3)
165.1
(5.9)
159.2
52.7p
470.6
(226.7)
243.9
(73.3)
170.6
(8.4)
162.2
(31.9)
130.3
(3.7)
126.6
41.8p
YoY
variance
25%
22%
(23)%
22%
(15)%
25%
(40)%
24%
(13)%
27%
(55)%
26%
26%
1
Refer to the Glossary on pages 230 to 232 for definition and reconciliation to statutory measures
where appropriate.
52 weeks ended
30 April 2023
(£million)
Luxury watches2
Luxury jewellery3
Other/services
Total revenue
52 weeks ended
1 May 2022
(£million)
Luxury watches2
Luxury jewellery3
Other/services
Total revenue
UK and
Europe
749.6
67.8
72.5
889.9
UK and
Europe
663.9
72.4
73.3
809.6
US
586.5
51.4
15.0
Total
1,336.1
119.2
87.5
Mix
87%
7%
6%
652.9
1,542.8
100%
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%
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.
Group revenue increased by 25% (19% on a constant currency basis) to
£1,542.8 million.
UK and Europe revenue increased by 10% during the year, through a combination
of continued strong demand, benefits from pricing, investment in the showroom
portfolio, new showrooms and strong clienteling activity by the Group. Consumer
appetite for products remained strong and, in many instances, well above the levels
that the Group is able to supply. Our showroom colleagues continued to build
strong client relationships through Xenia, our elevated Client Experience
Programme, backed up by strong digital marketing campaigns and offline marketing
events to showcase product. Clients continue to have the option to choose their
experience through in-person appointments or online through the Luxury Watch
and Jewellery Virtual Boutique.
During the year, the UK opened five showrooms at the iconic Battersea Power
Station in London (one multi-brand showroom and four mono-brand boutiques)
and a further ten mono-brand boutiques in the UK. Six showrooms were closed
giving a net increase of nine in the UK. In the year, 12 refurbishments were
completed enhancing our existing estate to further elevate the partner brands we
display in those showrooms and advance our client experience. Tourist sales
remain very low, but there has been consistent performance improvement at
airports. The Group also opened its first six mono-brand boutiques in Europe
(three in Sweden, two in Denmark and one in the Republic of Ireland).
45
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 52% year-on-year (35% on a constant currency basis) and
the US business made up 42% of the Group’s revenue in FY23 (FY22: 35%).
Underlying growth (+27% excluding acquisitions at constant currency) was strong
across all locations with continued consumer appetite for high demand and other
products. Key locations in Florida (Mayors), Las Vegas (Wynn Resort), and New
York all delivered significant growth. This was accomplished through a quality
product offering, superior client experience and backed up by strong marketing
campaigns which had significant reach across offline and online channels.
During the year, the US opened six mono-brand boutiques and completed the
acquisition of one showroom in New Jersey. The acquired showroom is now branded
Watches of Switzerland and features Rolex, TUDOR, Cartier and a significant luxury
jewellery offering. The Group also annualised the acquisition of five showrooms from
the previous year (three under the Betteridge brand and two showrooms now
branded Watches of Switzerland). Our US ecommerce platform has continued to
grow, and sales of vintage and pre-owned luxury watches have been encouraging.
Group revenue from luxury watches grew by 28% and made up 87% of revenue in
line with the prior year. Pre-owned revenue grew by strong double digits, with
pricing and margin maintained.
Group luxury jewellery revenue grew by 10%. UK luxury jewellery sales declined
by 6% versus the prior year, where FY23 saw a more competitive market
environment including discounting. Luxury jewellery revenue in the US showed
strong underlying growth and was further supported by the prior year acquisition
of the Greenwich Betteridge showroom and the opening of our first BVLGARI
mono-brand boutique. The US focused on the sale of full price items and the
elimination of discounting in the year.
Other/services revenue, consisting of servicing, repairs, insurance services and the
sale of fashion and classic watches and other non-luxury jewellery grew by 6%.
Group ecommerce sales increased 3% compared to the prior year.
PROFITABILIT Y
Income Statement – pre-IFRS 16 and exceptional items (£million)
Net margin
Showroom costs
4-Wall EBITDA
Adjusted EBITDA
Adjusted EBIT
Profitability as a % of revenue
52 weeks ended
30 April 2023
52 weeks ended
1 May 2022
YoY variance
37.4%
18.1%
19.3%
13.1%
10.7%
38.0%
18.3%
19.7%
13.1%
10.5%
(60bps)
20bps
(40bps)
–
20bps
Net margin as a % of revenue was 37.4% in the year. This was 60bps lower than the prior year driven by product mix and higher costs of Interest Free Credit due to
interest rate rises in the UK and US, partly mitigated by reduced promotional discounts on jewellery.
Showroom costs increased by £52.5 million (+23%) from the prior year, to £279.2 million. This reflects the opening of new showrooms and the annualisation of prior
year openings. Showroom costs as a percentage of revenue reduced by 20bps from 18.3% to 18.1%, reflecting leverage of costs. Showroom payroll costs increased by
£18.7 million including the impact of new showrooms, commission on additional revenue, and annual pay rises to colleagues. Property related costs increased from FY22
by £20.4 million, driven by our increased showroom portfolio and the reintroduction of UK business rates following their suspension during the pandemic (+£5.0 million
versus FY22). Variable showroom costs increased in line with revenue.
Overheads increased by £10.8 million (+15%) due to additional investment in headcount, IT costs and marketing events to support growth.
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
refurbishments are taking place. This cost will vary annually depending on the scale of expansion in the year. Total costs for the year were £11.6 million versus £8.4 million
in FY22, reflecting the increased number of refurbishments and openings undertaken.
4 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Exceptional items
Exceptional items are defined by the Group as those which are significant in magnitude
or are linked to one-off events which are expected to be infrequent in nature.
Exceptional items (£million)
Legal expenses on business acquisition
Reversal of showroom impairment
Amortisation of capitalised transaction costs
IPO costs
Total
52 weeks to
30 April 2023
52 weeks to
1 May 2022
0.9
(0.7)
0.7
–
0.9
0.5
(0.4)
–
1.5
1.6
Costs associated with the acquisition of new showrooms are treated as exceptional
as they are regarded as non-trading, non-underlying costs.
During FY23 the estimated ‘value-in-use’ recoverable amounts were reassessed
taking into account FY23 performance and the latest discounted cash flow for each
showroom. As a result of improved trading, an impairment reversal has been
made at the year end, where the original impairment had been made through
exceptional items.
After the year end, on 9 May 2023, the Group entered into a new financing
arrangement by way of a £225.0 million multicurrency revolving loan facility. On this
date the existing £120.0 million UK Term Loan and Revolving Credit Facility of £50.0
million were extinguished. The capitalised transaction fees in relation to the existing
facilities have been accelerated through exceptional items.
IPO costs of £1.5 million in the prior year related to IPO-linked share-based
payments. The shares vested and were settled in the prior year, and there will be no
further costs of this nature.
Adjusted EBIT and statutory operating profit
As a consequence of the items noted above, Adjusted EBIT was £165.1 million, an
increase of £34.8 million (+27%) on the prior year.
After accounting for exceptional costs of £0.2 million and IFRS 16 adjustments of
£13.7 million, statutory operating profit (EBIT) was £178.6 million, an increase of
26% on the prior year.
Finance costs
Net finance costs (£million)
Pre-IFRS 16 finance costs,
excluding exceptionals
IFRS 16 interest on lease liabilities
Total net finance costs,
excluding exceptionals
52 weeks ended
30 April 2023
52 weeks to
1 May 2022
5.9
17.2
23.1
3.7
12.2
15.9
Interest payable on borrowings increased in the year, reflecting higher market
lending rates.
The IFRS 16 interest on lease liabilities increased by £5.0 million due to recent
additions to the lease portfolio and increased discount rates used for new leases.
Taxation
The pre-IFRS 16 effective tax rate for the year was 21.4%. This is higher than the
UK tax rate of 19.5% largely as a result of higher taxes chargeable on US profits
(26.5% including federal and state taxes). The effective tax rate reported under
IFRS 16 was 21.4%.
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 cash1/(debt1)
Other
Net assets
30 April 2023
1 May 2022
200.4
154.4
359.1
356.0
19.8
(219.6)
(410.4)
16.4
(6.8)
469.3
183.2
112.5
293.6
302.6
22.3
(201.4)
(340.6)
(14.1)
3.2
361.3
1
Refer to the Glossary on pages 230 to 232 for definition and reconciliation to statutory measures
where appropriate.
47
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS F I N A N C I A L R E V I E W
continued
The prior year balances have been restated to reflect the finalisation of the
provisional fair values of Betteridge Jewelers, Inc., Gotthelfs Acquisition Corp., and
Vail Village Jewelers, Inc. (‘Betteridge’). The net impact was a reduction in inventory
and deferred tax asset, with the corresponding entry to the goodwill balance.
Goodwill increased as a result of the US acquisition in the year, which gave rise to
£18.2 million of goodwill, in addition to a £0.5 million adverse exchange impact. A
further £2.7 million of computer software additions were made in the year as part
of ongoing IT developments, offset by amortisation of £3.2 million.
Net debt and financing
Net cash on 30 April 2023 was £16.4 million, an increase of £30.5 million since 1
May 2022, driven by £145.8 million of free cash flow1 offset by £67.5 million of
expansionary capex, £24.9 million relating to acquisitions and £21.3 million for the
purchase of own shares to satisfy management incentives.
Net debt post-IFRS 16 was £394.0 million. The value comprises the pre-IFRS net
cash of £16.4 million and the £410.4 million lease liability.
During FY23 the Group had the following financing facilities in place:
Property, plant and equipment increased by £41.9 million in the year. Additions of
£75.0 million were offset by depreciation of £32.3 million, and a loss on disposal
of £0.8 million.
Facility
Expiring
Including software costs, which are disclosed as intangibles, capital additions
(including accruals) were £77.7 million in the year of which £73.0 million (FY22:
£41.0 million) was expansionary. Expansionary capex relates to new showrooms,
relocations or major refurbishments (defined as costing over £0.25 million). In the
year, the Group opened 27 new showrooms, and refurbished 13 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 £65.5 million in the year, to £359.1 million.
Additions to the lease portfolio along with lease renewals or other lease changes
(including impairment reversal of £0.2 million) were £117.1 million. This has been
offset by depreciation of £50.3 million and an adverse foreign exchange impact of
£1.3 million.
Lease liabilities increased by £69.8 million in the year. The portfolio changes noted
above increased the lease liability by £112.9 million. Interest charged on the lease
liability was £17.2 million along with a favourable exchange impact of £1.1 million.
Lease payments were £59.2 million, giving a lease liability balance of £410.4 million.
Inventory levels increased by £53.4 million (+18%) compared to the prior year. New
showrooms and acquisitions accounted for £28.0 million of the increase. The
balance of £25.4 million is a like for like increase in showroom inventory that
supports the sales growth, and is reflective of price increases on a number of
brands, in addition to an increase in average product prices. The inventory
obsolescence risk remains low.
Trade and other receivables decreased by £2.5 million compared to FY22. Overall
the balance remains relatively low and represents prepayments, rebate receivables,
rent deposits and other ad hoc receivables such as property contributions.
Trade and other payables increased by £18.2 million compared to FY22. The
increase principally relates to an increase in the inventory trade payable aligned
with the increased inventory in the year. The increase is also as a result of higher
operational liabilities in line with the business expansion.
Other includes taxation balances, defined benefit pension and capitalised
finance costs.
Amount
(million)
£120.0
£50.0
UK Term Loan – UK SONIA + CAS + 1.75% to +2.80%
June 2024
UK Revolving Credit Facility (RCF) – UK SONIA + CAS
+1.50% to +2.55%
June 2024
US Asset Backed Facility (ABL) – US LIBOR +1.25%
to +1.75%
April 2023
$60.0
The US ABL facility expired in April 2023. On 4 June 2019, the Group entered into
a facility consisting of a UK Term Loan for £120.0 million and a UK RCF of £50.0
million. The UK Term Loan was fully drawn as at 30 April 2023.
After the year end, on 9 May 2023, the Group signed a new five-year £225.0 million
multicurrency revolving loan facility with lenders. The new facility will use UK
SONIA +1.50% to +2.55%. The existing facilities were repaid and extinguished on
this date.
CASH FLOW
Cash flow (£million)
Adjusted EBITDA1
Share-based payments
Working capital
Pension contributions
Tax
Cash generated from operating activities
Maintenance capex
Interest
Free cash flow1
Free cash flow conversion1
Expansionary capex
Acquisitions
Purchase of own shares
Exceptional items – legal expenses on business
acquisitions
Cash flow
52 weeks ended
30 April 2023
52 weeks to
1 May 2022
201.4
3.5
(22.5)
(0.7)
(26.6)
155.1
(4.6)
(4.7)
145.8
72.4%
(67.5)
(24.9)
(21.3)
(0.9)
31.2
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
1 Refer to the Glossary on pages 230 to 232 for definition and reconciliation to statutory measures
where appropriate.
4 8
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Free cash flow increased by £33.7 million to £145.8 million in the year to 30 April
2023 and free cash flow conversion was 72.4% compared to 69.1% in the prior year.
RETURN ON CAPITAL EMPLOYED (ROCE)1
Strong cash flow from trading (Adjusted EBITDA increased by £39.2 million), was
offset by a £22.5 million adverse working capital movement, driven by the inventory
increase in the year as noted above.
ROCE1
52 weeks to
30 April 2023
52 weeks to
1 May 2022
27.9%
27.4%
Tax cash payments increased to £26.6 million in line with the higher profit generated
in the year.
Expansionary capex of £67.5 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.
£21.3 million of own shares were purchased in the year to satisfy employee share
incentive schemes.
FY23 ROCE is 27.9%, an increase of 50bps in comparison to the prior year. This is
as a consequence of Adjusted EBIT increasing by +27%, compared to the increase
in average capital employed of 24%.
1 Refer to the Glossary on pages 230 to 232 for definition and reconciliation to statutory measures
where appropriate.
SHOWROOM PORTFOLIO
As at 30 April 2023, the Group had 193 showrooms, the movement in showroom numbers is included below:
UK multi-brand
showrooms
UK mono-brand
boutiques
Europe
mono-brand
boutiques
Total UK and
Europe
US multi-brand
showrooms
US mono-brand
boutiques
Total US
Total Group
1 May 2022
Openings
Acquisitions
Closures
30 April 2023
93
1
–
(5)
89
38
14
–
(1)
51
–
6
–
–
6
131
21
–
(6)
146
23
–
1
–
24
17
6
–
–
23
40
6
1
–
47
171
27
1
(6)
193
49
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 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
matters, respect for human rights, anti-bribery, corruption and fraud matters.
ENVIRONMENT
Key matters
Taking action on
climate change
Relevant policies and procedures
Our ESG Partner Standards set out our net-zero goals and the actions we need to take within our
value chain to achieve them. We report in line with the recommendations of the Task Force on
Climate-related Financial Disclosures.
Further information
See pages 83 to 105
Reducing our impact on
the environment
Our Environment Policy, Vendor Code of Conduct and ESG Partner Standards promote the efficient
use of resources and energy in our supply chain and ensures a Group-wide commitment to continual
improvement and compliance with environmental legislations and regulations.
See pages 83 to 89
Providing sustainable solutions
Our Modern Slavery Statement includes key performance indicators, which includes a target to
increase our suppliers mapped onto EcoVadis, the global sustainability ratings platform.
See page 108
COLLEAGUES
Key matters
Encouraging colleagues to raise
matters of concern
Investing in our people and
a diverse workforce
Relevant policies and procedures
Where colleagues have concerns about suspected wrongdoing, misconduct or malpractice connected
to the Group they can report such concerns on a confidential and anonymous basis, and without fear
of retaliation, using our Whistleblowing Policy and procedures.
Our Diversity & Inclusion Policy was reviewed during the year and ensures that colleagues are treated
fairly and equally and that diversity and inclusion is embraced. We also offer learning and development
opportunities to equip colleagues with the skills and experience they need to succeed and grow in
their roles.
Further information
See page 111
See pages 64 to 66
Providing our colleagues with a safe
working environment
During the year, the Board approved an updated Health & Safety Policy. We are committed to
maintaining safety standards that comply with legislation and enable colleagues to be confident that
their workplace is safe.
See page 72
SOCIAL MATTERS
Key matters
Developing responsible supply chains
Relevant policies and procedures
Our Vendor Code of Conduct and ESG Partner Standards include measures that we take to ensure
that products are sourced responsibly and that adequate standards are maintained throughout our
supply chain.
Further information
See pages 83 to 89
Promoting a healthy corporate culture
Our values underlie the way we conduct business and recognise we will only continue to be successful if we
grow profitability and conduct our business in a way which impacts all of our stakeholders in a positive way.
See pages 71 to 72
Business standards of behaviour
Our Code of Ethics ensures that all business is conducted in a fair and ethical manner with the highest
levels of integrity and professional standards globally.
See page 111
ANTI-BRIBERY, CORRUPTION AND FR AUD
Key matters
Prevention of bribery,
corruption and fraud
Promoting ethical supply chains
Relevant policies and procedures
Our Anti-Bribery, Corruption & Fraud Policy outlines the behaviours and principles required of
colleagues to prevent any form of bribery, corruption or fraud.
Our Vendor Code of Conduct defines the principles and standards we expect suppliers to understand
and adhere to. This is supported by external audits of suppliers to ensure the highest standards of
product resourcing/quality and respect for human rights in our supply chain.
RESPECT FOR HUMAN RIGHTS
Key matters
Relevant policies and procedures
Approach to human rights
and modern slavery
Approved annually, by the Board, our Modern Slavery Statement sets out the steps that we take to
ensure, as far as possible, that slavery and trafficking do not exist in our supply chain or in any part of
our business.
Further information
See page 111
See page 83
Further information
See page 108
A description of our business model can be found on pages 24 to 25
Where Principal Risks have been identified in relation to any of the matters listed above, these can be found on pages 116 to 121
Our Non-Financial Key Performance Indicators can be found on page 42
Find out more in our Governance section on our corporate website thewosgroupplc.com
50
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 S E C T I O N 17 2 S TAT E M E N T
H OW W E EN G AG E W ITH
O U R STA K EH O LD ER S
Our key stakeholders are all those parties with an interest in the outcome of our Group’s actions. To deliver our
strategy in line with our Purpose, we need to understand the priorities of our stakeholders and how to engage
with each of them effectively. The Board considers the parties listed here to be those which are identified as most
likely to be affected by its principal decisions.
STAKEHOLDER MAPPING
COLLEAGUES
COMMUNITIES
CLIENTS
IN V ESTORS
BR AND PARTNERS
& OTHER SUPPLIERS
The Board believe that in order to maximise value and deliver long-
term success it is critical that we understand who our key stakeholders
are in order to build relationships, to engage in proactive and
constructive dialogue, and to ensure we deliver on what is important
to them. To that end, engagement with all our stakeholder groups
plays a vital role in delivering against 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 the factors listed in Section 172
(1) (a) to (f). The Board therefore considers the views of each of its
stakeholders as part of the decision-making process.
51 51
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS S E C T I O N 17 2
continued
COLLEAGUES
CLIENTS
BR AND PARTNERS
& OTHER SUPPLIERS
WHY WE ENGAGE
WHY WE ENGAGE
WHY WE ENGAGE
At the Watches of Switzerland Group, we are
committed to giving our colleagues every reason
to join, grow and stay with our Group.
Our colleagues care about:
– Job security and future prospects with learning and
development opportunities to progress their
careers with us
– Regular and relevant communications and having
the opportunity to engage with management
– Fair compensation and benefits
– Being part of a diverse, equitable and inclusive
workplace
– Taking a position on the environment, sustainability
and giving back to the community
Our clients are central to all we do. Building
relationships and understanding their needs so that
at those important moments in life when they want
to purchase watches and jewellery. We engage with
our clients to:
– Provide our expert knowledge and advice
– Ensure we always give them a memorable
experience
– Provide an exceptional client experience through
Xenia, our Client Experience Programme
– Ensure we provide a major point of experience
which differs from our peers
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 maintain and continue to develop long-standing
partnerships through:
– Offering the full range of brand partner products
to our clients
– Long-term collaboration on all areas of our business
– Ensuring and developing a socially and
environmentally responsible supply chain
– Ongoing meetings and dialogues including
clienteling events
HOW WE ENGAGE
HOW WE ENGAGE
HOW WE ENGAGE
– Through development reviews, and regular
performance discussions
– Annual Colleague Engagement Surveys,
understanding what matters and development
of action plans
– Feedback from the Diversity Council
– Colleague representation at the local and global
Listening Forum meetings
– Having an innovative, accessible and collaborative
two way communication platform
– Presentations by Board members and Senior
Management, providing business updates and cascades
with the opportunity for questions and discussions
– Ensuring all colleagues have sight of vacancies and
opportunities within the Group
– Encouraging participation in charitable activities
through fundraising and volunteering
– Continue to embed Xenia, our Client Experience
Programme in retail and throughout the Support
Centre
– Regular top to top meetings locally and in brand
partner head offices in Switzerland
– Regional and local brand partner and supplier
– 1-1 clienteling between showroom colleagues and
events
clients to engage on product launches and
services
– Providing memorable client experiences and
WOW moments
– Supporting clients with their buying journeys,
both in showrooms and online with the Luxury
Watch and Jewellery Virtual Boutique
– Engaging through multiple social media platforms
– Continuing with strong client event programmes
throughout the UK and US
– Ongoing dialogue, including the launch of
exclusive ranges and expanding the mono-brand
boutique channel
– Actively identifying distribution opportunities
across new markets and new territories
– Collaborating to provide our colleagues with
extensive training
– Range planning through sharing market trend
data, defining product assortment and providing
long-term planning data at micro and macro level
– Engaging when something does go wrong through
– Collaboration with strategic ESG initiatives,
our Client Recovery Team
including Vendor Code of Conduct and our new
ESG Partner Standards
MONITORING THE IMPACT OF OUR
ENGAGEMENT
MONITORING THE IMPACT OF OUR
ENGAGEMENT
MONITORING THE IMPACT OF OUR
ENGAGEMENT
– Receiving feedback from the Designated Non-Executive
– Our UK Voice of the Client shows 91% of
Director for Workforce Engagement and Senior
Management from each colleague Listening Forum
surveyed clients, rate interactions with retail
colleagues as 9 or 10 out of 10
– Efficient and timely flow of product into the
showrooms, including limited editions, exclusives
and first to market
– Monitoring our survey results and performance against
targets (this year with a score of 81%)
– Closing the gender pay gap from prior years
– Meeting the prescribed FTSE 350 Women Leaders
Review gender balance targets early, and being ranked in
the top 20
– Meeting the Parker Review ethnicity targets early
– Our client experience success is measured through
emotional drivers with an over 73% connection
– Our UK Net Promoter Score (NPS) is world
class at over 80%
– Our website is rated 9 out of 10 by clients from ‘very
easy to use’ and ‘very easy to complete a purchase’
– Our UK and US Trustpilot, for online clients, scores an
average 4.5 and 4.7, out of 5.0, respectively
– Our UK and US Google Reviews score an
average 4.5 and 4.9 out of 5, respectively
– Our US client service team averages a two-hour
response turnaround time on digital engagement
– Continual dialogue with clients to ensure
alignment with client behaviour
– Expanding our business by assessing and
improving market share, and developing our
brand representation
– Through uptake to our Supply Chain
Management system, EcoVadis
– 100% of our key watches and jewellery suppliers
have accepted the terms of the Vendor Code of
Conduct or have an equivalent standard
– All new and existing suppliers receive our ESG
Partner Standards
52
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 “Engagement with all of
our stakeholders plays a
vital role in delivering our
Group strategy. The Board
considers all stakeholders
as part of our decision-
making process.”
IAN CARTER
CHAIR OF THE BOARD
INVESTORS
COMMUNITIES
WHY WE ENGAGE
WHY WE ENGAGE
Continuous engagement with investors helps us to
understand their views and priorities, it builds trust
and helps secure ongoing support. In turn, investors
rely on us to protect and manage investments in a
responsible and sustainable way that generates value
for them. We engage with our investors to:
– Achieve sustainable growth and superior returns in
the share price
– Ensure current and potential investors
understand our business, Long Range Plan and
strategic objectives
– Promote the strong and robust corporate
governance framework that exists
– Promote the Environmental, Social and Governance
framework and strategy which is in place
One of our core values is that we care for our
communities by engaging and actively supporting
those in need. Both The Watches of Switzerland
Group Foundation for the UK and the US and the
Company support a range of causes including
partnerships with The Prince’s Trust, Crisis, Habitat
for Humanity and the Fuel Bank Foundation as well
as a network of foodbanks in large city centres
where colleagues and clients live.
HOW WE ENGAGE
HOW WE ENGAGE
– Meetings and calls between major shareholders
and the Chair and Remuneration Committee
Chair on governance and remuneration matters
– Hosting Investor Days with guided showroom
tours in the UK and in the US along with other
in-person events
– Annual General Meeting
– Ongoing dialogue between investors and the
CEO and CFO including investor roadshows
– Stock Exchange announcements, press releases and
results briefings
– Participation in investor conferences
– We support The Watches of Switzerland Group
Foundation to drive positive change within the
communities we operate
– Donated £1.5 million to the Foundation
(£6 million donated since formation)
– Donations to other charities in particular,
headline sponsor for the Prince's Trust Palace to
Palace Bike Ride and sponsor of the annual
Prince's Trust Changemaker award
– Developing volunteering programmes in the UK
and the US
– Being signatories to British Retail Consortium’s,
‘Better Jobs’ Diversity & Inclusion Charter
– Being members of HRH Prince of Wales
Responsible Business Network, Business in the
Community and the Race at Work Charter
– Encourage participation in charitable activities
through fundraising and volunteering
MONITORING THE IMPACT OF OUR
ENGAGEMENT
MONITORING THE IMPACT OF OUR
ENGAGEMENT
– Reports from the Chair and other Non-Executive
Through regular feedback particularly focusing on:
Directors who have direct dialogue with
shareholders
– Analysts and broker feedback provided to the
Board
– Corporate brokers provide written feedback on
market reaction and investor views
– Updates from the ESG Committee
– Updates from the UK and US Foundation
– Direct feedback from charities
– Feedback from the local and global Listening
Forums
– Corporate brokers attended, in person, three
– An increase of in 13% colleague volunteering
scheduled Board meetings
hours compared to FY22
– The Director of Investor Relations & Corporate
Affairs participated in over 178 investor meetings
and events.
53
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 5 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 EN V I RO N M ENTA L ,
SOC I A L A N D
GOV ER N A N C E (ESG)
C O N T E N T S
56 Our Sustainability Strategy
58 ESG Governance
62 People
– Attract and Retain Talent
– Build and Organisation Fit for the Future
– Leverage Our Unique Culture
– The Watches of Switzerland Group Foundation
82 Our Planet
– Caring for Our Planet
– Task Force on Climate-related Financial Disclosures
106 Caring About our Products
– Bribery, Corruption, Taxation and Health & Safety
55
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
O U R S U STA I N A B I LIT Y STR ATEGY
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.
ESG is an inextricable part of how we do business and environmental and social factors are considered in
every decision-making process, at every level of our business.
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OUR PURPOSE
To WOW our clients while
caring for our colleagues,
our communities
and our planet.
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By being true to ourselves
and honest and
transparent with our
colleagues, our clients and
our brand partners
WE TREAT
EVERYONE WITH
RESPECT
By working together to
cultivate a secure and
supportive workplace,
with equal opportunities
and respect
WE DO THE RIGHT
THING, ALWAYS
WE CARE FOR OUR
COMMUNITIES
WE PROTECT
OUR PL ANET
WE ADVOCATE FOR
OUR INDUSTRY
By making the right
decisions for the benefit
of our colleagues,
stakeholders and
wider society
By actively engaging in
our community and
supporting those in need
By working with our
industry and other
stakeholders to minimise
our impact on the
environment
By proactively promoting
the interests and
responsibilities of the
luxury watch and
jewellery sectors on
our markets
56
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 OUR STRATEGIC PILLARS
PEO PL E
PL A N E T
PRO D U C T
GOALS
– Give our people every reason to join,
grow and stay with our Group through
attracting and retaining talent, building an
organisation fit for the future and leveraging
our unique culture
– Support our local communities
GOALS
– Achieve net-zero carbon by 2050
– Preserve natural resources
GOALS
– Improve our traceability and sourcing standards
and highlight the sustainable attributes of our
watches and jewellery
– Support circularity in watches and jewellery
through repairs, servicing and our pre-owned
business
TARGETS & COMMITMENTS
– Participate in annual engagement survey and
deliver progress year-on-year
– Measure diversity and inclusion and deliver
TARGETS & COMMITMENTS
– Reduce Scope 1 and 2 GHG emissions by 50%
and Scope 3 emissions by 42% by 2030 from a
FY20 baseline
TARGETS & COMMITMENTS
– Continuous improvement against Key
Performance Indicators in our Modern
Slavery Statement
progress year-on-year
– Improve our global CDP score year-on-year
– Year-on-year increase in the number of
– External accreditation by Great Place to Work
by 2026
watches repaired, serviced or resold, as a
percentage of the number of new watch sales
SUPPORTING UN SDGS
SUPPORTING UN SDGS
SUPPORTING UN SDGS
We continue to grow our business, while reducing our impact on the environment, investing in our people and supporting good causes
In May 2022, we responded to the CDP questionnaire
on climate change for the first time and achieved a 'C'
score, indicating a strong performance.
In November 2022, we were included in the MSCI index,
which is widely recognised as the leader for global equity
benchmarks. As of June 2023, the Watches of Switzerland
Group received an MSCI ESG Rating of AAA.
In June 2022, we participated in the Business in the
Community (BITC) Responsible Business Tracker for
the first time, allowing us to benchmark and track our
progress in line with the United Nations Sustainable
Development Goals. We are set to participate again in
September 2023.
In March 2023, our near-term carbon emissions
reduction target was verified by the Science Based
Targets initiative (SBTi).
The SBTi commended the Group’s 1.5°C-aligned target,
currently the most ambitious near-term target
designation available through the SBTi process.
PARTNERSHIPS TO ACHIEVE
THE UNITED NATIONS SUSTAINABLE
DEVELOPMENT GOALS
Our business strategy is aligned with the United Nations
(UN) Sustainable Development Goals and we support
the principals of UN Global Compact, which aims to
prioritise and mobilise efforts to drive business action
to achieve the Goals by 2030.
We also support the aims of the Watch & Jewellery
Initiative 2030, to create a fully sustainable watch and
jewellery industry that is resilient to climate change,
preserves natural resources and fosters inclusivity.
We are active members of the British Retail Consortium
and the UK Government’s All-Party Corporate
Responsibility Group, as well as the responsible business
network, BITC. Through our business and now The
Watches of Switzerland Group Foundation, we also
enjoy long-standing partnerships with charities including
The Trussell Trust and The Prince’s Trust.
In August 2022, we partnered with the international
social enterprise, Slave-Free Alliance, and are directly
benefitting from their expert advice and support to
strengthen our approach to human rights and deliver
our modern slavery roadmap.
We strongly encourage all supplier partners to align with
relevant, well-recognised sustainability certifications and
standards, such as the Responsible Jewellery Council
Code of Practices, or undertake an EcoVadis
sustainability assessment.
The use by Watches of Switzerland Group PLC of any MSCI ESG Research LLC or its affiliates (“MSCI”) data, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a
sponsorship, endorsement, recommendation, or promotion of WOSG by MSCI. MSCI services and data are the property of MSCI or its information providers, and are provided ‘as-is’ and without warranty.
MSCI names and logos are trademarks or service marks of MSCI.
57
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 GOV ER N A N C E
APPROACH
Guided by our Purpose and our Value to do the right thing, always, we operate a
responsible and ethical business by aspiring to best practice and understanding
stakeholder expectations, then making sure we reflect this in our business decisions.
The Board is committed to delivering continuous improvements across our
environmental and social activities through collaboration, innovation and directly or
indirectly investing in initiatives which benefit our colleagues, clients and local
communities, while adding value for supplier partners and investors.
Our ESG risk register ensures a systematic approach to ESG risk management, which
allows us to formally monitor our risk profile and manage changes at the appropriate
levels while mitigating or removing risks to our business operations 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 on Climate-related Financial Disclosures (TCFD) Statement on pages 91 to 105.
MATERIALIT Y ASSESSMENT
In March 2023, we reviewed our materiality assessment in line with current and
emerging trends and incorporated key findings from recent external assessments,
such as investor rating agency reports.
This approach builds on our FY22 assessment, when we invited stakeholder groups
to participate in a survey to help identify key material issues and support the
development of our Sustainability Strategy.
The result is a simplified matrix, which we have used to inform the further
development of our Sustainability Strategy and approach. We have mapped this
information against our ESG risk framework for full transparency.
After climate change was identified as a material issue to our business and society,
we took steps to engage relevant stakeholders, understand and assess our value
chain impacts, as well as identify key risks and opportunities to our business, along
with financial, operational and reputational impacts. Our findings are reported
within our TCFD disclosure on pages 91 to 105.
We will continue to assess the materiality of ESG issues in line with the ‘double
materiality’ requirements within the Corporate Sustainability Reporting Directive
(CSRD) and plan to re-engage stakeholder groups early in 2024 following a programme
of work to increase stakeholder understanding of environmental and social impacts.
ESG GOVERNANCE
The Group is committed to the highest standards of environmental and social
governance and our Board governance structure can be found on page 132.
The Board has overall responsibility for sustainability and meeting frequency, and is
supported by the dedicated ESG Committee, chaired by Rosa Monckton MBE,
Non-Executive Director.
Our ESG Committee meets a minimum of three times a year, plus one meeting
dedicated to training, and plays an active role in the development and delivery of
the Group’s Sustainability Strategy by considering best practice, ratifying key
decisions, and providing accountability against KPIs in relation to our three strategic
pillars of People, Planet and Product.
The ESG Committee is supported by an ESG Steering Group, which is comprised
of members of senior management, each with formal operational responsibility for
the management of environmental, social and governance issues. The ESG Steering
Group is chaired by our CFO, Anders Romberg, and driven by our experienced
Head of Sustainability and ESG, Kesah Trowell.
The ESG Steering Group aims to meet once a month and exists primarily to help
mitigate risk, oversee the development of a progressive Sustainability Strategy and
ensure its successful delivery across the Group.
STAKEHOLDER PRIORITIES
ESG GOVERNANCE
BOARD
Corporate
Governance
Human Rights and
Modern Slavery
Minimisation of
environmental
impacts during
product lifestyle
Mitigation of the
impacts of climate
change
Products with
environmental or
social benefits
Client information
and protection
15%
15%
25%
25%
15%
15%
24%
11%
10%
24%
11%
10%
Corporate
Governance
Human Rights
and Modern
Slavery
Minimisation of
environmental
impacts during
product lifestyle
Mitigation of
the impacts
of climate
change
Products with
environmental
or social
benefits
Client information
and protection
58
ESG COMMITTEE
Chaired by Non-Executive
Director, Rosa Monckton MBE
REMUNERATION
COMMITTEE
AUDIT AND RISK
COMMITTEE
ESG STEERING GROUP
Chaired by CFO
Anders Romberg
TR ADING BOARD
Attended by
Senior Management
KEY COLLEAGUE LEADS & EXPERTS
Coordinated by Kesah Trowell, Head of Sustainability and ESG
PEOPLE
WORKING
GROUP
Led by Executive
Director of HR,
Philippa Jackson
PLANET
WORKING
GROUP
Led by CFO,
Anders Romberg
PRODUCT
WORKING
GROUP
Led by Executive
Director, Global
Buying and
Merchandising,
Eric Macaire
GOVERNANCE
WORKING
GROUP
Led by Company
Secretary &
General Counsel,
Laura Battley
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 GOVERNANCE OF CLIMATE-REL ATED RISKS AND OPPORTUNITIES
As part of our continual improvement and in acknowledgement of the serious
threat posed by climate change, we regularly review our processes to ensure the
management of climate-related risks and opportunities is optimised across our
Group and value chain.
Climate-related risks and opportunities identified over the short, medium and
long-term are presented to the Audit & Risk Committee and ESG Committee on
an ongoing basis by key representatives from our ESG Steering Group. This process
ensures materiality is properly assessed at varying levels of our business and the
appropriate action is taken.
The Board, led by Ian Carter, has overall responsibility for climate-related issues
and stays informed on current best practice in climate governance by maintaining
dialogue with peers, policy makers, investors and other key stakeholders and works
to ensure material climate-related risks, opportunities and strategic decisions are
transparently reported to stakeholders.
The CEO, Brian Duffy, has overall operational responsibility for our Climate
Strategy,
leveraging
including the mitigation of climate-related risks and
opportunities identified as a result of a changing climate.
The below Governance framework is in place to ensure climate-related risks and
opportunities are understood, managed and regularly reported, and that they are
integrated into the Group's core business strategy, risk management processes and
investment decisions.
CLIMATE GOVERNANCE FR AMEWORK
BOARD
Chaired by Ian Carter and attended by CEO Brian Duffy
Overall responsibility for climate-related policy, mitigation of key climate-related risks and leveraging opportunities
ESG COMMITTEE
AUDIT & RISK COMMITTEE
Chaired by Non-Executive Director, Rosa Monckton MBE
– Approves Climate Strategy and related targets
– Reviews key climate-related risks and opportunities
– Oversees mitigation strategies
– Ensures appropriate action to meet goals and KPIs
– Ensures adequate resource and funding is in place.
Chaired by Non-Executive Director, Robert Moorhead
– Considers climate-related risks as part of the review of principal
and emerging risks
– Oversees compliance and progress on reporting
– Reviews internal controls and provides accountability
ESG STEERING GROUP
TR ADING BOARD
Chaired by CFO, Anders Romberg
– Defines climate-related goals, targets and KPIs over short, medium and
long-term and monitors progress
Chaired by CEO, Brian Duffy
– Agrees environmental goals, targets and KPIs
– Embeds actions to manage climate-related risks and opportunities into core
– Ensures actions to manage identified climate risks and opportunities are
business strategy
embedded into Group risk management processes, core business strategy
and financial decision-making
PL ANET WORKING GROUP
KEY COLLEAGUE LEADS & EXPERTS
PRODUCT WORKING GROUP
Led by CFO, Anders Romberg
– Supports delivery of actions to meet goals
& targets
– Identifies opportunities to increase climate
resilience and leverage opportunities
– Champions positive behaviour changes
– Embeds climate change culture & mindset
Coordinated by Kesah Trowell, Head of
Sustainability and ESG
– Identifies climate-related risks and opportunities
and assesses how they impact the business and
value chain in the short, medium and long-term
– Develops action plans to deliver environmental
targets, and tracks progress against targets
Led by Eric Macaire, Executive Director Global
Buying and Merchandising
– Supports delivery of actions to meet goals
and targets
– Identifies opportunities to collaborate across
value chain to increase climate resilience and
create shared value
– Establishes and reviews effective mitigation and
– Advocates climate resilience for our industry
controls to manage climate risks
– Day-to-day delivery of climate goals and management
of climate-related risks and opportunities
ALL COLLEAGUES
Help achieve goals and feed back areas for improvement
59
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continued
K E Y H I G H LI G HT S
P EO P L E
P L A N E T
P RO D U C T
At the Watches of Switzerland Group, we are committed to
giving our colleagues every reason to join, grow and stay with
our Group. FY23 has been a year of investment into colleagues
and our People Strategy evidenced by international expansion,
stronger capability for the future and investment into the
working environment. As we continue to grow our business,
we remain committed to our purpose and values, which
underpins our strong culture.
Read more from page 62
In line with our Purpose, we continue to monitor and improve
our environmental performance against industry standards
and best practice. This year, we began a supply chain
engagement programme with the aim of achieving shared
goals, and increased our repairs and servicing capacity to
support a more circular economy.
Read more from page 82
We care about the watches and jewellery we sell, how they are
made and who makes them, which is reflected in our
responsible sourcing programme. In FY23, we developed new
ESG Partner Standards outlining our approach to social and
environmental stewardship, which provide guidance around
the common practices we expect throughout our global
supply chain and in all our dealings, in addition to full compliance
with all relevant national and international legislation.
Read more from page 106
6 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 HIGHLIGHTS FOR FY23
– Colleague engagement score of 81% with 90%
participation
– 22% increase in US participation in 401k retirement plan
– All UK colleagues paid above real living wage and all
US colleagues paid above state minimum
– Global EAP support for all colleagues in UK and
Europe and launched in US this year
– Ranked #15 in the FTSE 250 Women Leaders Review
– Donated £1.5 million in FY23 to The Watches
of Switzerland Group Foundation to support
local communities
81%
COLLEAGUE ENGAGEMENT
SCORE OF 81% WITH 90%
PARTICIPATION
– Near-term science-based emissions targets verified
by the SBTi
– Publicly disclosed through CDP questionnaire on
climate change for the first time
– Grew our After Sales and Servicing business by 20%
year-on-year
– High double digit growth of pre-owned watches sales
– As at May 2023, rated ‘1’ for ISS Environmental
Quality Score
100%
UK PROPERTIES POWERED BY
RENEWABLE ENERGY
– Exclusive UK launch of the first truly ‘circular’
luxury Swiss watch
– Enhanced our Vendor Code of Conduct
– Entered three-year partnership with the
Slave-Free Alliance
– Continued our factory audit programme
– New Executive Director, Global Buying
and Merchandising
1st
FULLY CIRCULAR LUXURY
SWISS WATCH LAUNCHED
61
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continued
O U R PEO PLE
62
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 I NTRO D U C TI O N
At the Watches of Switzerland Group, we have created an inclusive culture which gives our
colleagues every reason to join and develop long-term careers within our Group. FY23 has
been another year of investment into our people who are the key to our success.
As a purpose-led business, our values are at the centre of everything we do.
OUR PURPOSE
To WOW our clients while caring for our
colleagues, our communities and our planet.
OUR VALUES
WE EARN TRUST
& CONFIDENCE
WE TREAT EVERYONE
WITH RESPECT
WE DO THE RIGHT
THING, ALWAYS
WE CARE FOR OUR
COMMUNITIES
WE PROTECT
OUR PLANET
WE ADVOCATE FOR
OUR INDUSTRY
OUR PEOPLE STR ATEGY
We are committed to our goal of giving our colleagues ‘every reason to join, grow and stay’ with our Group and
each of our supporting strategies is underpinned with clear tactics and measures set over a three-year horizon.
GOAL
To give colleagues every reason to join,
grow and stay with our Group.
STR ATEGIES
ATTRACT AND
RETAIN TALENT
BUILD AN ORGANISATION
FIT FOR THE FUTURE
LEVERAGE OUR
UNIQUE CULTURE
63
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continued
AT TR AC T A N D R E TA I N TA LENT
Attracting, retaining and developing talent is a strategic priority and this year, the focus has been on diversity
and inclusion, retention and the ongoing development of our teams.
SUPPORTING UNITED NATIONS
SUSTAINABLE DEVELOPMENT GOALS
FY23 PERFORMANCE HIGHLIGHTS
– Over 2,800 colleagues employed globally
– Mean UK gender pay gap has closed further
to 21% from 25% in FY22
– 10% colleagues promoted in the last 12 months
globally, more than double last year
– In the US, 58% leadership positions
internally filled
– 90% of new starters satisfied with UK
hiring experience
FY24 AREAS OF FOCUS
– Ethnic and gender diversity in succession
pipeline
– Launch of new management development
programme
– Implementation of a comprehensive
performance management process in US
– Develop global 6 Sigma capability
DIVERSIT Y AND INCLUSION
Respect is a core value in our Company. We work together to cultivate a secure
and supportive workplace with equal opportunities and inclusion at the centre. We
actively promote diversity of thought and opinions and we recruit, develop and
promote colleagues from different backgrounds. This approach is underpinned by
our Diversity and Inclusion Strategy below.
WE ARE BUILDING A MERITOCR ACY WHICH IS SUPPORTED BY
INCLUSION
81% inclusivity score in
FY23
GENDER BALANCE
All leadership teams
are gender balanced
REPRESENTATION
Teams represent the
national identity
and the race/ethnic
mix of the markets
in which they operate
STR ATEGIC PILL ARS TO DEVELOP OUR MERITOCR ACY
CARE
Leaders visibly
champion
diversity and
inclusion
RESPECT
Strengthen our
inclusive culture
HARNESS
The power of
our brands
and
communities
EQUIP
End to end
policy and
process
alignment
“Our goal is to attract and grow a
team of highly trained and engaged
colleagues who are well respected
for their expertise and committed
to developing their careers with the
Watches of Switzerland Group.”
BRIAN DUFFY
CEO
6 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Progress against our strategy to date:
– Inclusion: 81% of our global colleagues agree in our annual Colleague
Engagement Survey that they ‘work in an environment where everyone can
feel included, respected and accepted for who they are’.
– Gender balance: Our percentage of females on our Executive Team and
their direct reports is 52%, which has improved from 46% in 2022 and gives
us gender balance at the senior levels of the organisation. We define gender
balance as at least 40% male or female at leadership team level.
– Representation: We have also achieved the target for ethnic diversity at
Board level as set out in the Parker Review.
We know that our future leadership team will be achieved by strong succession
planning today. We have increased our focus on succession this year through
identifying ‘mission critical roles’ across our business and we continue to review
diversity within the pipeline.
We are pleased with the progress of our Diversity Council and in the last year, we have
included members from the US and Europe which has resulted in membership of over
35 colleagues. The Group has supported better diversity and inclusion education in the
workplace, better benefits for colleagues and regularly provides content on our
internal social media pages. Following the success of the Diversity Council, the US has
formed a US Diversity Council which has eight active members, and focuses on
increasing awareness and education of diversity and inclusion within the US business.
We actively support reverse mentoring programmes and sponsorship of our
colleagues. In the last year, we have updated our induction processes to include
mandatory training on diversity and inclusion.
COLLEAGUE GENDER STATISTICS AS AT 30 APRIL 2023
Board
4 (57%)
Executive Team
5 (62%)
Executive Team and
their direct reports
20 (48%)
UK FTE – Retail
638 (46%)
UK FTE – Support
304 (43%)
3 (43%)
3 (38%)
22 (52%)
748 (54%)
397 (57%)
UK FTE – Total
942 (45%)
US FTE – Retail
234 (50%)
US FTE – Support
28 (31%)
US FTE – Total
262 (47%)
1,145 (55%)
232 (50%)
61 (69%)
293 (53%)
MALE
FEMALE
81%
OF OUR GLOBAL COLLEAGUES AGREE THAT
THEY 'WORK IN AN ENVIRONMENT WHERE
EVERYONE CAN FEEL INCLUDED, RESPECTED
AND ACCEPTED FOR WHO THEY ARE'
65
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
ATTR ACTION AND RETENTION
In line with our strategy, we have refocused our teams on talent attraction and
retention. We have over 2,800 colleagues globally and our highly skilled colleagues
and strong reputation as an employer means that our people are highly attractive
to other employers. Our choice is to continue to train our colleagues to the highest
standards and give them every reason to stay and grow with our Group. Our key
areas of focus are:
– Highest quality product and brand training
– Excellence in recruitment for line managers
– Comprehensive onboarding programmes in all regions focused on building an
emotional connection and loyalty for the Watches of Switzerland Group
We have thorough recruitment processes which are designed to give internal and
external candidates a positive experience whilst complying with quality and
procedural obligations. We use a preferred supplier list to source talent and this is
reviewed annually.
We continue to face strong competition in a tough employment market meaning
that colleague experience is a priority. We have already taken action in our UK
annual pay review to increase pay in retail and enhance our benefits packages and
have confirmed our approach to hybrid working this year to support work-life
balance. In the US, we have also implemented a 'Stay Survey' with all colleagues
when service anniversaries are acknowledged. Our commitment to development is
demonstrated by our new Career Conversations toolkit which was piloted this
year and will be further rolled out in FY24. All new starters in the US received a
customised and personalised new hire process designed to teach operational skills
and develop key relationships with internal partners and external brand partners.
We have improved our leaver processes and continue to focus on colleague
retention. In the US, we have implemented a digital leaver survey with all voluntary
leavers in addition to the personal exit interviews conducted with leaders.
90%
OF NEW UK COLLEAGUES
EMPLOYED WERE SATISFIED WITH
THEIR RECRUITMENT EXPERIENCE
(Q4 FY23)
LEARNING AND DEVELOPMENT
Careers are a shared responsibility between our colleagues, their line manager and
our Group. We see career progression as less about climbing a ladder, but more
about movement within a matrix and we offer the benefits of a multi-functional,
large scale, global organisation with careers to match. We value both people
leaders and technical expertise and support our colleagues with a range of blended
learning such as face-to-face programmes and easy to access e-learning through
our learning management system.
Key highlights of our focus on Learning and Development for our broad leadership
team include:
– 62% of participants on our UK internal leadership 'Evolve' Programme were
promoted within 12 months of completing the course
– Re-launch of Great Line Manager programme – 12 month programme for UK
retail line management
– Global coaching programme: 97 managers trained (UK), 104 managers trained (US)
– Participation in external leadership programmes for female and ethnic future leaders
6 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 “The Watches of Switzerland Group
continues to provide me with
great experience supporting my
development in the luxury sector,
offering opportunities for growth,
and promoting work-life balance.”
CELYNE ESCUDERO
DIGITAL ENQUIRIES AMBASSADOR
LUXURY WATCH AND JEWELLERY
VIRTUAL BOUTIQUE
67
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continued
B U I LD A N O RG A N I SATI O N
F IT F O R TH E F U T U R E
We recognise that one of the key differentiators to our future success is our people. Therefore
we continue to focus on building the right skills and capabilities for the future as well as rewarding
and recognising our colleagues today.
SUPPORTING UNITED NATIONS
SUSTAINABLE DEVELOPMENT GOALS
FY23 PERFORMANCE HIGHLIGHTS
– Investment in global buying capability
– Fully compliant with Real Living Wage in
the UK
– 30,000+ elearning hours globally
– 184 UK colleagues are JET qualified
– 63 US colleagues enrolled in the GIA
(Gemological Institute of America) Program
and 50 received their Advanced Jewellery
Professional Certification
FY24 AREAS OF FOCUS
– Building global and local capability
– Further enhance our technical capability
– Evolution of reward and recognition
– High performance culture
GLOBAL AND LOCAL CAPABILIT Y
Our Long Range Plan sets out the skills and capabilities we need to build for the
future and we continue to attract high calibre talent despite market pressures. As
a result of our growth, headcount has increased in all regions over FY23 fuelled by
our ambitious mono-brand boutique expansion.
We regularly review our operating model and the capability requirements against
our Long Range Plan and this year, have invested in global buying and merchandising
capability, ecommerce and digital skills as well as new leadership for our People and
Organisation Team. In May 2023, we re-appointed Anders Romberg as CFO
following the departure of Bill Floydd.
TECHNICAL CAPABILIT Y
Our commitment to frontline client experience capability is evidenced through our
strategic approach to Xenia Client Experience, which is a global programme
underpinned by a comprehensive training schedule. This year, our priority has been
to deepen capability in retail whilst broadening Xenia into our support teams, with
clear accountability through the Senior Management. Teams in new showrooms
are given a 12-week comprehensive onboarding and training programme.
In addition, we continue to build excellence in retail through our bronze and silver
academies and we are proud of the depth of our training in product, brand and
client experience.
Increasing our jewellery proposition remains a priority and we continue to develop
our teams' product knowledge to support our jewellery strategy. The learning
journey starts in our induction which includes an introduction to jewellery,
highlighting its significance. The next step is our bronze academy which introduces
key terminology and understanding of diamonds and coloured gemstones. There is
also the opportunity to progress onto our silver academy which develops
knowledge further. In addition, we offer colleagues the opportunity to complete
Jewellery Education and Training (JET) qualifications awarded by the National
Association of Jewellers. These qualifications are fully funded by the Watches of
Switzerland Group. This year, to support our jewellery strategy we have piloted
the GIA applied jewellery professional diploma. The learning has been successful
and we have plans to expand this training further.
During the year, we have continued to support our teams, with jewellery focused
workshops and all of our UK colleagues, in recently refurbished Goldsmiths Luxury
showrooms, attended a specific jewellery workshop to maximise Xenia in action.
– 184 UK colleagues are JET qualified
– 65 enrolled in JET in FY23
– GIA pilot completed in UK with plans to expand further in FY24
– 67 US colleagues are enrolled in the GIA Program and 40 received their
Advanced Jewellery Professional Certification
HIGH PERFORMANCE CULTURE
We have signature processes in place to support performance at the highest levels.
Our annual development performance review process in the UK achieved an 86%
completion rate in retail in FY23. This process ensures objective setting occurs and
87% of colleagues confirmed in our Colleague Engagement Survey they feel
committed to the Company’s goals.
6 8
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 REWARD AND RECOGNITION
The Watches of Switzerland Group is a business built on relationships. It is
important to us that our colleagues are engaged, healthy, happy and motivated
to make our aspirations a reality. In return, we provide high levels of support
and reward to our valued people. We have built a far-reaching and competitive
benefits package, which has been enhanced further. In conjunction with
feedback from colleagues, we have improved our offer in the following ways
over the course of the last year:
– We comply with the UK Real Living Wage recommendations in the UK
– Enhanced UK maternity pay from 1 April 2023
– Improved health benefits in the US to include Group accident, critical
illness, hospital indemnity, voluntary life insurance, identity protection
and pet insurance
– UK Compassionate Leave Policy broadened to include bereavement leave
– Colleagues participation in our Sharesave Scheme
– A comprehensive Employee Assistance Programme is available globally
– The US experienced a 22% increase in participation in the US 401K
Retirement Plan resulting in 82% of the US population now enrolled
– Our VibE and Brilliance recognition platforms are appreciated by
colleagues across the UK with over 44,000 recognitions given in FY23.
In the US, the Celebrating Success programme is used to recognise
individual and team achievements
Commission, bonus
opportunity for all
Health benefits
Extra holiday purchase
scheme and birthday
off (UK)
Colleague SAYE share
save scheme
Recognition policies
A COMPREHENSIVE
GROUP BENEFITS
PACK AGE
There are a wealth of ways
to reap the rewards of
working at the Watches of
Switzerland Group
Discount scheme off luxury
products and brand incentives
Pension contribution
Free 24/7 confidential
Employee Assistance
Programme
Free wellbeing tools
and support
Paid time off including
holiday and sick pay
44,000+
RECOGNITIONS IN THE UK ON
OUR VIBE AND BRILLIANCE
PLATFORMS
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“The boutique is like a second family
to me, the unity and diversity gives
me a sense of home and I love
my team.”
DJEMS JOSEPH
SALES ASSOCIATE
BVLGARI, MONO -BR AND BOUTIQUE,
AVENTUR A MALL , FLORIDA
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continued
LE V ER AG E O U R
U N I Q U E C U LT U R E
We are proud of our culture at the Watches of Switzerland Group which is underpinned by our Purpose and
values. We are focused on the wellbeing and health of our colleagues and create working environments in
which everyone can thrive. Our move to our new UK Support Centre offices in May 2023 and our US offices
later in FY24, is a catalyst for enhancing our culture even further.
SUPPORTING UNITED NATIONS
SUSTAINABLE DEVELOPMENT GOALS
FY23 PERFORMANCE HIGHLIGHTS
Group engagement survey results
– Response rate 90%
– Engagement score 81%
– 86% of colleagues say our values are
important to them
Other results
– Launch of the Watches of Switzerland Group
Support Fund
FY24 AREAS OF FOCUS
– Engaging colleagues through integration
and change
– Better balance and flexibility in retail
– Better communication across the Group
– Clearer career progression and opportunity
85%
OF COLLEAGUES SAY THEY ARE
PROUD TO WORK FOR THE WATCHES
OF SWITZERLAND GROUP
PURPOSE, VALUES AND ENGAGEMENT
Colleague engagement is measured in our annual Colleague Engagement Survey. This
year, our survey took place in January 2023 and we were pleased with the results
which were high in a tough external economic climate. As a purpose-led business, we
were pleased to see that following the launch of our new values in FY22, 86% of
colleagues feel that our values are important to them. Other results are as follows:
Colleague engagement
Group score
I would recommend this Company as a great place to work
I feel committed to the Company goals
I am proud to work for this Company
Working here makes me want to do the best work I can
I feel a strong sense of belonging to this Company
78%
87%
85%
82%
71%
The role of line manager is critical to engagement and we continue to focus on
building skills through our newly launched Great Line Manager Programme in the
UK. In addition, we engage with colleagues through our regional Listening Forums
chaired by members of our Senior Executive team and co-chaired by Rosa
Monckton, Designated Non-Executive Director for Wider Workforce Engagement.
In April 2023, we held our Global Listening Forum with 35 representatives from
across the Company. Rosa Monckton reported back to the Board in May 2023. As
a result of the feedback received through the year, a number of enhancements to
UK and US benefits packages were launched in FY23 including enhanced maternity
leave in the UK and better health benefits in the US.
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Our new Support Centre at Carlton Park, Leicester
WORKING ENVIRONMENT AND WELLBEING
COLLEAGUE REL ATIONS AND HEALTH & SAFET Y
The working environment for our colleagues continues to be of paramount
importance to us as does wellbeing. Key highlights of activity in this area have been:
– Low colleague accident rate of 1.5 in 200,000 hours globally
– 81% of colleagues in the Group confirm that their manager cares about their
health and wellbeing as reported in our Colleague Engagement Survey
– Sickness absence <1% in the UK
– 32 mental health first aiders across the UK, US and Europe
Our key areas of focus throughout FY23 have been:
We place a high regard in treating our colleagues fairly and have well established
procedures to ensure we listen to our colleagues on issues that matter to them and
which also enable colleagues to raise grievances and concerns, both informally and
formally. Key highlights for this year include:
– Four Listening Forums per region and one Global Listening Forum in April
2023, in both the US, UK and Europe
– One Global and two UK Diversity Council meetings held throughout the year
in both the US, UK and Europe
– Newly formed UK employee relations team with oversight of all employee
– Engaging colleagues in move to new UK Support Centre in Leicester
relations policies, practices and procedures
– Building future talent attraction campaigns to maximise potential of new premises
– US Listening Forums conducted quarterly along with a new US Diversity
– Mental Health First Aid Training was introduced to US leadership and management
Council. Both groups represent all colleagues across the US
– RAID training (violent crime and safety) re-implemented in March 2023
On the few occasions we have needed to enter into redundancy conversations, for
example due to the ending of a showroom lease, we make every effort to retrain
and redeploy colleagues, and we offer other career opportunities wherever
possible. Such conversations take place in the spirit of our values of Respect and
Trust and we ensure consultation discussions are transparent and supportive.
We continue to review our expansion into Europe and are aware of works council
obligations. We abide by the relevant collective bargaining agreement in
the Netherlands.
Health and safety
Our revised Health & Safety Policy was approved by the Board and published this
year. 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 a third party provider.
72
81%
OF COLLEAGUES IN THE WATCHES
OF SWITZERLAND GROUP CONFIRM
THAT THEIR MANAGER CARES ABOUT
THEIR HEALTH AND WELLBEING
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 “Ideas are encouraged and shared
throughout the business meaning
we are all able to move forward
together and be proud of our
collective achievement.”
BOYD ANDERSON
SHOWROOM MANAGER
WATCHES OF SWITZERL AND,
MANCHESTER , UK
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continued
SUPPORT CENTRES
The move to Carlton Park, our new UK Support Centre in Leicester is driven
through our need for space and the fact that we had outgrown our previous
building and it was no longer fit for purpose. The investment into a new building is
a message to current and future colleagues that the working environment in our
Support Centre should be of an equal standard to that of showrooms. The space
enables better collaboration for the day-to-day and also offers a comprehensive
training suite and creative spaces to learn and grow.
Our colleagues were consulted throughout the whole process including selecting
the location, the design concept and implementation, through to a fully consulted
transition plan from our old offices to new. Key highlights include:
– Collaboration space for 500 colleagues
– Green space for wellbeing
– Access to gym and nursery on-campus (at discounted rates)
– Good transport links
To support this and to deliver flexibility to colleagues, we have confirmed our
approach to offer flexible working practices as follows:
Types of contract
UK
Hybrid working
We offer flexible working for all support colleagues
Part time
19% of our workforce are part time workers
In addition, we have engaged with our colleagues through surveys to understand
what is important to them in a new office environment.
As a result, we have agreed corporate rates for the on campus nursery and gym.
Our new building also includes a multi-faith room and a private room for
nursing mothers.
The US offices will include a wellness room, gym access and expanded training and
development resources and facilities.
In retail, we have continued to consider and improve our colleagues' work
environment through our showroom refurbishment plans.
Colleagues desks in our new Support Centre, Carlton Park
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Top: Colleague collaboration area, Carlton Park
Bottom: Colleague team lounge, Carlton Park
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TH E WATC H ES O F SW IT ZER L A N D
G RO U P F O U N DATI O N
At the Watches of Switzerland Group, we are passionate about supporting the
communities in which we operate. It is a vital cornerstone of our culture, based on our
ingrained caring spirit and a dedication to giving back.
SUPPORTING UNITED NATIONS
SUSTAINABLE DEVELOPMENT GOALS
FY23 PERFORMANCE HIGHLIGHTS
– The development of four strategic partners
in the UK and four in the US
– The Foundation donated £940k to UK
charities in FY23
– The Foundation donated $671k to US
charities in FY23
– 700+ hours of colleague volunteering across
the UK and US which is a +13% increase
from last year
– £100,000 raised by Group colleagues as part
of The Prince’s Trust Palace to Palace Bike Ride
FY24 AREAS OF FOCUS
– Maximising the partnership and opportunity
with our strategic partners
– Continuing to ensure our donations create
maximum impact
– Engaging and communicating to our internal
colleagues the work of The Watches of
Switzerland Group Foundation
– Continuing to develop our colleague
volunteering programme
– 8 paid hours for volunteering per US colleague
We have long been committed to philanthropic endeavour, building strong
partnerships with charities like The Prince’s Trust which spans a period of
10 years. However, in 2021 we made things official, launching The Watches
of Switzerland Group Foundation and gaining charitable status in November
of that year.
The Foundation brings most of the Group’s charitable activities under one umbrella
and has so far received a total of £6 million in donations from the Watches of
Switzerland Group to support three pillars: the prevention or relief of poverty; the
advancement of education; and the relief of those in need by reason of youth, age,
ill-health, disability, financial hardship or other disadvantage. This focus has led us to
confirm key strategic partners in both the UK and US to help us support the
Foundation’s UN SDG goals and purpose pillars.
UK Strategic Partners
US Strategic Partners
The Prince’s Trust
Local Food Banks
The Prince’s Trust
Habitat for Humanity
Fuel Bank Foundation
Feeding South Florida
Crisis
New York, Florida and Las Vegas Foodbanks
The Foundation has donated a total of £2.9 million to date, with a total of £1.5
million donated in FY23. It is amazing to see how the money is positively impacting
our local communities. Through the strengthening of our relationships with our key
partners, we have been able to re-engage our workforce with volunteering which
had been impacted by the pandemic, as well as focus our funding on more deeply
impactful initiatives, that have truly been transformational for our strategic partners.
The UK Foundation is lucky to have a board of trustees brimming with drive and
talent, including retail guru Mary Portas, model and fashion expert David Gandy,
BAFTA-nominated actor John Hannah, radio presenter Johnathan Joseph
(otherwise known as DJ Spoony) and sports, brands and diversity expert Terence
Parris. They are joined on the board of trustees by our Group CEO, Brian Duffy
who acts as the Chair and Ruth Benford, Executive Director, Marketing.
Our trustees meet on a quarterly basis for half a day, and have committed to an engagement calendar with our strategic partners for FY24. In FY23 John Hannah and
Johnathan Joseph took part in the Palace to Palace Bike Ride for The Prince's Trust.
TRUSTEES OF THE FOUNDATION
Brian Duffy
Watches of Switzerland
Group CEO. Chair of the
Foundation
Ruth Benford
Watches of Switzerland
Group Executive
Director of Marketing
Mary Portas
Retail consultant and
broadcaster
David Gandy
Model and fashion expert
John Hannah
BAFTA-nominated actor
Terence Parris
Sports, brands and
diversity expert
Johnathan Joseph
Also known as DJ Spoony
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Colleagues volunteering at Leicester Food Bank
Colleagues completing The Prince’s Trust Palace to Palace Bike Ride where we raised £100,000 for The Prince’s Trust
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The Prince’s Trust
Crisis
Foodbanks
The Fuel Bank
Foundation
Habitat for Humanity
Prince & Princess
of Wales Hospice
COMMUNIT Y IMPACT HIGHLIGHTS:
The Foundation's
continued funding for
The Trust’s education
programmes has directly
supported over 5,240
young people to date with
a further 1,000 helped
through the Young
Person's Relief Fund. This
includes the funding for
Prince’s Trust USA’s first
education programme pilot
across New York which is
pivotal to the charity's
growth in the region.
The Foundation
supported the funding of
Crisis general services,
Christmas Appeal and
their clinical psychologists
service. Our funding has
supported Crisis to
successfully end
homelessness for over
2,700 service users, and
directly funded 22% of
service users who were
supported by a clinical
psychologist.
Funding has made a
significant impact to
the Foundation's local
Foodbank partners across
the UK and US supporting
new initiatives such as:
partnering with schools to
fund new school jumpers,
new vans for donation
collections, the opening
of a regional distribution
centre and the pilot of a
mobile pantry.
The Foundation's funding
has helped support
thousands of people
through the Winter fuel
crisis. Foodbank partners
continue to benefit from
the Foundation's Fuel
Bank network initiated
in FY21.
Habitat for Humanity
works together with
families, local communities,
volunteers and partners
from around the world so
that more people are able
to live in affordable and
safe homes. We supported
new build projects for
families across New York,
Atlanta and Westchester.
With the Foundation's
funding since 2021, the
Hospice has been able
to launch a short stay
service for young adults.
Providing 11 weeks of
short break stays to
young adults.
6,240
YOUNG PEOPLE HELPED
THROUGH COMBINED
PROGRAMMES
2,700
SERVICE USERS HELPED
BY OUR FUNDING
168,346
PEOPLE FED THROUGH
OUR SUPPORT OF
FOODBANKS*
17,370
HOUSEHOLDS ABLE TO
'SWITCH THE LIGHTS
BACK ON'
3
11
HOUSING PROJECTS
SUPPORTED
WEEKS OF SHORT
BREAK STAYS FOR
YOUNG ADULTS
* Statistics include totals through Leicester South, Newcastle, Glasgow and Euston Foodbanks and Feeding South Florida
The Foundation's continued support of our strategic charity partners has had a
significant impact on their beneficiaries and our local communities. The Foundation's
strategic foodbank partners reported an increased demand of their services as a
result of the cost-of-living crisis with a 37% rise across the UK and over 30% in the
US. The Prince’s Trust reported that 53% of young people from the poorest
backgrounds have lowered their expectations and aspirations for their future as the
result of the cost-of-living crisis, and young people’s overall confidence and
happiness towards money is lower than the Global Financial Crisis of 2008.
In FY23, the Foundation’s funding has continued to provide vital support to its key
partners, helping to tackle poverty, improve education and opportunities and
support those in times of desperate need.
Combined with our financial support, the Group's dedicated and passionate
colleagues have also donated their time to support key initiatives in their local
communities across the UK and US. Over 130 colleagues have delivered over 700
hours of volunteering. In the US, a national Volunteering Program has been
launched which will allow flexibility in scheduling and prioritising volunteer hours
with leadership support.
Following the successful re-engagement with volunteering in the UK, and initial roll
out in the US we will explore how we further develop volunteering for both US,
UK and Europe colleagues in FY24.
THE PRINCE’S TRUST
The Prince’s Trust continues to be a key education partner, helping the Foundation
to improve access to quality education in our communities. Since launching our
Group-wide partnership in 2019 (prior to the formation of the Foundation), 6,240
young people have been reached, through a combination of education programmes,
the Young People Relief Fund, and the launch of their brand new Education hub. In
addition to the funding from the Foundation, the Group has continued to support
the Trust through its sponsorship of the Young Changemaker Award at The
Prince’s Trust Awards, and as headline sponsor for the Palace to Palace Bike Ride.
Having previously supported the launch of The Prince’s Trust USA, the Foundation
was delighted to have been able to fund the charity’s first Education Programme
pilot in New York City ‘The Enterprise Challenge’. The programme runs in
partnership with City Year, an education non-profit organisation, and is an inter-
schools competition promoting entrepreneurship, and raising aspirations and
confidence. This year, in support of The Prince’s Trust USA wider fundraising
events we sponsored a table at The Prince’s Trust New York Gala Dinner.
700+
TOTAL NUMBER OF GROUP
VOLUNTEERING HOURS
Prince's Trust Support - Impact
2,240
3,000
HELPED THROUGH
EDUCATION PROGRAMMES
HELPED THROUGH
EDUCATION HUB
1,000
HELPED THROUGH
RELIEF FUND
78
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 CRISIS
Last year, the Foundation began its partnership with Crisis by supporting the Crisis
at Christmas campaign with an initial donation of £25,000, helping Crisis support
over 500 guests with somewhere safe to stay over Christmas. The Foundation
subsequently approved a proposal to support Crisis’ recruitment of Clinical
Psychologists with the aim to end homelessness and increase social mobility. Crisis
Clinical Psychologists' provide intensive specialist support to a small cohort of
members with complex trauma and sit within Crisis’ wider wellbeing offer
supporting people on their journey out of homelessness. In FY23 the Foundation
has supported the funding of Crisis general services, Christmas Appeal and their
Clinical Psychologists' service by donating £125,000. In this period Crisis supported
2,700 people through their clinical psychologist’s service, the Foundation’s donation
accounts for 22% of those supported. In total, 38% of these service users
successfully moved out of homelessness.
FUEL BANK FOUNDATION
In 2022, the Foundation launched its strategic partnership with the Fuel Bank
Foundation to complement the Foodbank programme. Initially supporting 12
centres, we expanded our support to ten additional centres in FY23 and donated
a further £300,000. 95% of those supported by the Fuel Bank Foundation reported
having to choose between heating or eating this Winter. Funding has supported
17,370 people to turn their lights and/or heating 'back on', of which approximately
6,900 were children. 91% of users reported being able to better cope financially,
and 61% reported an improvement in mental wellbeing.
Prince’s Trust USA, Enterprise Challenge students supported by The Watches of Switzerland Group Foundation
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THE FOODBANK PROGR AMME
Funding has enabled the Foodbank programme to have greater international reach
and impact over the last year. In the UK, the Newcastle Foodbank were able to
establish their first community pantry allowing service users to do a weekly shop
(instead of an emergency food parcel) for as little as £5. Since its launch in 2023, the
pantry has served 93 returning adults and 52 children. The Foundation's funding has
also supported the purchase of a van to support the mobility of the project.
Following the Blakelaw pilot of the pantry, Newcastle Foodbank has plans to
expand this service to four other communities in Newcastle. Funding has allowed
the Euston Foodbank to relocate to significantly larger premises to better support
their local community. In FY23, the Foodbank saw a 69% increase in food parcels
distributed compared with the previous year. In their new location, the Foodbank
is able to host community partners such as a community kitchen, and has been able
to add a clothes donation service to their hub which has been a need amongst their
service users.
Leicester South Foodbank has seen a 27% increase in need compared to the last
financial year. With funding, last year, it moved to a new location which also acts as
the Leicester distribution centre supporting 17 other foodbanks in the area.
Funding has also supported the salary of a debt advisor which has maximised
£150,000 of financial gains for its beneficiaries. As Leicester Foodbank is local to
our Support Centre, they have also benefited from technology donations such as
TVs, conference meeting technology and volunteering by our colleagues.
THE FOODBANK PROGR AMME US
In the wake of the pandemic, unemployment and food insecurity soared. In 2022, the
Foundation expanded its support of foodbanks to the US supporting Feeding South
Florida, Three Square Meals in Las Vegas and the New York Foodbank. In FY23 the
Foundation donated over $500,000 to US foodbank networks and connected
colleagues with volunteering opportunities such as delivering meals to those in need.
The donation of $176,000 to Feeding South Florida had significant impact to local
communities in the region, supporting eight foodbanks across South Florida, and feeding
28,554 people. The Group's volunteers help in distributing groceries to foodbank clients
or supporting their mission with social media support. In FY24 the Group will strengthen
its volunteer support through the roll out of the US volunteering programme.
HABITAT FOR HUMANIT Y
Habitat for Humanity works together with families, local communities, volunteers
and partners from around the world so that more people are able to live in affordable
and safe homes. In FY23 the Foundation donated $294,000 to sponsor three house
builds for families in Miami, Atlanta and Westchester. In March 2023 our colleagues
in Florida supported one of the local builds by providing volunteers to help finish
building the home. We are hoping to strengthen our partnership with Habitat for
Humanity over the next year by providing more volunteers and vital funding through
the Foundation to provide safe homes for those who need them.
US City Centre Hub Partners
Donation Amount
Habitat for Humanity International
$294,000
UK Strategic Partners
Euston Foodbank
Glasgow SE Foodbank
Leicester South Foodbank
Manchester Central Foodbank
Newcastle West End Foodbank
Total
Donation Amount
£90,000
£50,000
£50,000
£50,000
£50,000
£290,000
US Strategic Partners
Feeding South Florida
Three Square Meals (Las Vegas Foodbank)
New York Foodbank
Total
Donation Amount
$176,500
$50,000
$50,000
$276,500
UK City Centre Hub Partners
Donation Amount
Birmingham Central Foodbank
Bristol – inHope (Bristol) Ltd.
Cardiff Foodbank
Edinburgh Northwest Foodbank
Kingston Deo Community Church
Liverpool – St Andrew’s Community Network
Total
£25,000
£25,000
£25,000
£25,000
£25,000
£25,000
£150,000
“We are so grateful for Watches of Switzerland Group Foundation’s
engagement with Habitat. Not only did they provide a generous
and life changing donation towards the construction of a
Habitat home, but the enthusiasm and love from the people who
volunteered was contagious. We could not be more thankful.”
MAUREEN L . RUGGIERO
CHIEF DEVELOPMENT OFFICER , HABITAT FOR HUMANIT Y
PRINCE & PRINCESS OF WALES HOSPICE
The FY22 donation to the Prince & Princess of Wales Hospice has continued to
support its young patients through a short stay service for young adults.
OTHER CHARITIES
The Foundation also made smaller donations to charities selected by the trustees.
Through this we have donated a total of £75k to Melanoma UK, UK Children’s
Cancer and St Mary’s Church Primrose Kitchen.
8 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 The Watches of Switzerland Group CEO, Brian Duffy, presenting and judging at The Prince’s Trust Enterprise Challenge in Glasgow
“Our partnership with the Foundation not only enables us to help people
in their time of crisis, but also creates opportunities to sustain and
develop services that make a meaningful difference to people’s lives in
their time of need.”
JOHN MCCORRY
NEWCASTLE FOODBANK
“We are honoured that The Watches of Switzerland Group
Foundation has chosen to be our founding Corporate
Partner as we expand The Prince’s Trust Enterprise
Challenge Program to the United States.”
VICTORIA GORE
CEO, PRINCE’S TRUST USA
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O U R PL A N E T
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 C A R I N G F O R O U R PL A N E T
Both our impact on the environment and the impact of the environment on our
business, are fundamental considerations in all our decision-making processes.
We are taking action to achieve net-zero carbon emissions by 2050, while operating
to the highest levels of environmental stewardship and safeguarding against risk.
SUPPORTING UNITED NATIONS SUSTAINABLE
DEVELOPMENT GOALS
FY23 PERFORMANCE HIGHLIGHTS
– Near-term emissions reduction target verified by the
Science Based Targets initiative (SBTi)
– Participated in CDP for the first time
– 84% of Group properties powered by LED lighting
– 100% of UK properties powered by renewable energy
– Grew After Sales and Servicing business by 20%
– Increased Group sales of pre-owned watches by high
double digits
– Exclusive UK launch of first fully circular luxury Swiss
watch, ID Genève
– Conducted a Climate Scenario Analysis of our supply chain
– Published new ESG Partner Standards
FY24 AREAS OF FOCUS
– Continuous improvement in carbon reduction and energy
efficiency through procurement decisions, showroom
design, facilities management, transportation and by
switching to clean energy sources
– Reducing our use of natural resources and using water
more efficiently
– Minimising waste through avoidance, recycling and adopting
circularity within our business model and operation
– Helping clients make more sustainable choices by
promoting innovation and advancements in sustainable
design and packaging
– Support circularity by extending the life of watches and
jewellery through repairs and pre-owned
– Streamlining our business processes and leveraging
technology to minimise environmental impacts and
improve transparency and disclosure
OUR APPROACH
BUSINESS IMPACTS
We understand our business and supply chain have the potential to negatively
impact our planet through the mining of metals and gemstones, the production and
retailing of products, energy use, transportation, water and waste.
We are minimising these impacts and improving our overall environmental
performance by engaging stakeholder groups, encouraging positive behavioural
changes, and by participating in eco-friendly initiatives to build climate change
resilience and protect biodiversity.
ENVIRONMENT POLICY
Our Group Environment Policy 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.
The Policy applies to all Watches of Switzerland Group operations worldwide and
every colleague and contractor we work with. It refers to legislative compliance,
environmental awareness and engagement, transparent dealings, the conservation
of resources, supplier collaboration, climate change and managing risk.
In March 2023, we updated our Vendor Code of Conduct to include requirements
in relation to environmental management and the prevention, mitigation and
control of serious environmental and health impacts resulting from our supplier
partners' operations including, but not limited to, raw material usage, energy use
and greenhouse gas emissions, water, waste, chemical and hazardous substance
use, air quality and biodiversity.
Our Vendor Code of Conduct is supported by new ESG Partner Standards, which
are designed to engage supplier partners with our environmental goals and identify
areas for collaboration to achieve them.
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CLIMATE ACTION
The Group is committed to building climate resilience and achieving net-zero GHG
emissions by 2050. We are taking prioritised action to reduce our emissions in line
with what the latest climate science says is necessary to meet the goals of the Paris
Agreement and pursue efforts to limit warming to 1.5°C. In March 2023, our near-
term emission targets were verified by the Science Based Targets initiative (SBTi),
which is a global body and collaboration between CDP, the UN Global Compact,
World Resources Institute (WRI) and the World Wide Fund for Nature (WWF).
Public Commitments
Scope 1 and 2
Scope 3
Near-term SBTs aligned to 1.5°C under
Paris Climate Agreement
Net-zero
50% reduction in absolute emissions
by 2030 from a FY20 base year
42% reduction in absolute emissions
by 2030 from a FY20 base year
2050
2050
Since our FY20 baseline year, we have reduced our Scope 1 and 2 emissions by
6.3%, due to a series of energy efficiency initiatives combined with the closure of a
number of older, less efficient showrooms.
To calculate our Scope 3 emissions, we use spend-based activity data and average
emission factors derived from the Comprehensive Environmental Data Archive
(CEDA). To ensure our reporting is as accurate as possible, we used the latest
CEDA Global (version 6) to calculate our FY23 emissions.
Updating our CEDA emission factors resulted in a significant reduction in our
Scope 3 emissions inventory, requiring us to recalculate and restate our emission
figures. This is reflected in our FY20 baseline, which decreased by over 50% from
221,527 tCO2e to 111,582 tCO2e.
While we cannot claim this reduction is due to our own carbon reduction initiatives,
we are committed to reducing our Scope 3 emissions through collaboration with
supplier parters to collect primary data and making necessary improvements to
build climate resilience. In FY24, we will work with the SBTi to rebaseline our
science-based targets in line with best practice.
The table on page 104 provides a detailed breakdown of our Scope 1, 2 and 3
greenhouse gas (GHG) emissions by activity, calculated with reference to the
GHG Protocol.
OUR EMISSIONS REDUCTION TARGETS
Scope 1 and 2 emissions
Scope 3 emissions
by
50%
by 2030
by
42%
by 2030
TOTAL GROSS
SCOPE 1 and 2 (TCO2E)
FY20
BASE YEAR
FY23
TOTAL GROSS
SCOPE 3 (TCO2E)
FY20
BASE YEAR
FY23
Estimated ‘direct’ emissions
resulting from our owned/
controlled sources and from
the generation of purchased
electricity, heating and cooling.
4,128 tCO2e
3,866 tCO2e
Estimated ‘indirect’ emissions
resulting primarily from
‘Purchased Goods and Services’.
111,582 tCO2e
188,374 tCO2e
8 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
SUPPLY CHAIN ENGAGEMENT
We recognise supply chain engagement is key to helping us achieve our climate
ambitions and address areas of public concern, such as supporting biodiversity and
ensuring robust traceability mechanisms.
In FY23, we began a supply chain engagement programme, to help us better
understand the environmental impact of the products we sell and services we use,
while supporting the achievement of our near-term goal to reduce Scope 3 carbon
emissions by 42% by 2030.
We partner with EcoVadis, the global sustainability ratings platform which is aligned
to SASB global sustainability standards, and advocate the use of its user-friendly
carbon action module. Desk research carried out by the Group early in FY23
indicated more work needed to be done to engage and support supplier partners
in completing a full EcoVadis Sustainability and Carbon Assessment, and this was a
key consideration in the development of our new ESG Partner Standards.
Our ESG Partner Standards explain our net-zero goals and the actions we need to
take within our value chain to achieve them. Supplier partners are encouraged to
join us in setting targets to achieve net zero in line with a 1.5°C trajectory and
proactively share emissions data directly, publicly through platforms such as CDP
or with selected stakeholders via EcoVadis. Supplier partners are also asked to align
with well-recognised sustainability certifications relevant to the product or service
they provide.
Our brand partners are highly active in reducing their impact on the environment
and continue to introduce more sustainable processes and materials into their
product designs. We support the aims of the Watch & Jewellery Initiative 2030 and
are actively engaging brands with the shared aim of gaining primary data to reduce
Scope 3 emissions, which are currently estimated to make up over 97% of our
Group carbon footprint.
ENERGY MANAGEMENT
We strive to use energy in the most efficient, cost effective and responsible way
possible and comply with all relevant local and international environmental laws
and regulations.
Our energy management system includes enhancing data collection and
implementing energy efficient technologies such as LED lighting and motion sensors
throughout our estate to reduce energy waste. We always invest in the most
efficient and reliable Heating, Ventilation, and Air Conditioning (HVAC) systems,
which are regularly serviced in line with manufacturer’s guidelines and temperatures
are regulated. We use R32 refrigerant gas and R410 A, where there is no alternative.
When searching for new retail premises and negotiating leases, we prefer locations
with green building certifications such as BREEAM or LEED.
We continue to work with new and existing landlords with the goal of powering all
properties within our control from renewable energy sources by 2025 and at the
time of this report, the Group was assessing eligibility for participation in the
Climate Group’s RE100 initiative.
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. Our energy use and GHG emissions are reported
on page 104.
Properties
within our
control
LED Lighting
Renewable
Energy
FY22
FY23
2025
UK
82%
100%
US Group
41%
0%
70%
77%
UK
90%
US Europe Group
Target
51% 100%
100%
0%
0%
84%
77%
100%
100%
Our efforts to conserve energy and reduce GHG emissions are reviewed annually
and supported by colleague awareness initiatives and training programmes.
In FY24, we will develop and implement a policy for the more efficient use of
energy in line with ISO 50001 international energy management certification
requirements. The purpose of this policy will be to formalise and build on work
already done to optimise energy use across our Group and further reduce costs
and GHG emissions.
CARLTON PARK SUPPORT CENTRE
Energy efficiency is a priority within our UK Support Centre Estates
Redevelopment Programme and this is evident within our new Carlton Park
Support Centre.
In addition to standard energy efficient technologies, the building has been
fitted with a Variable Refrigerant Flow (VRF) system, which uses heat pumps
to provide hot water. This VRF system is estimated to reduce energy use by
58% and cut CO2 emissions by 75% by 2030.
In FY24, we intend to install solar panels at this Support Centre, which are
estimated to prevent approximately 75 tonnes of CO2 emissions* from
entering our atmosphere and will result in over £3.2 million in energy savings
by 2048.
* 2020 CO2 grid factors
8 5
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continued
BUILDING MANAGEMENT
Maintaining strong relationships with our landlords is fundamental to the smooth
running of our showrooms and achieving our environmental goals.
Our in-house facilities management team proactively engages landlords to ensure
our properties are fully accessible, well maintained, are energy efficient and have
the appropriate fire, gas and electrical safety certifications in place.
In keeping with our historic brand image, our property portfolio includes a small
number of older premises that require particular attention in order to operate at
optimum performance.
All sites are subject to regular, internal and independent audits to ensure
conformance with all relevant national and international laws, as well as our own
environmental standards.
WATER
Maintaining a reliable and hygienic water supply requires a significant amount of
energy, and at the same time, climate change and extreme weather conditions are
increasingly impacting the predictability of water availability.
Our water usage is relatively low as a retailer, however, we promote water-saving
measures across our Group and continue to take steps to reduce our freshwater
intensity, for example, our new Carlton Park Support Centre is equipped with
water efficient washroom facilities, which reduces the amount of water required to
wash and flush by up to 50%.
Water meter data is used to identify sites with excessive water use and to resolve
problems and we continue to work with experts to gather baseline data to further
reduce water use.
Through our new ESG Partner Standards, we ask supplier partners to minimise
water waste and conduct industrial wastewater quality testing and/or monitoring
as required by local law. No incidents of non-compliance with water quality or
quantity permits, standards, or regulations were reported in FY23.
WASTE MANAGEMENT
We recognise the benefits of effective waste management systems to conserve
natural resources, reduce costs and support a more circular economy, and are
committed to achieving zero waste to landfill across our Group, through avoidance,
recycling and reuse.
Across our Group, we have waste management arrangements in place with
landlords and certified waste management companies to ensure the responsible
collection, transportation, monitoring, disposal and recycling of waste.
In FY23, we continued our efforts to streamline our waste management processes
and improve data collection, to more accurately quantify our waste volumes and
gain a better understanding of the types of materials recycled and resources
diverted from landfill.
The majority of our shopping centre landlords report low or nil waste to landfill
volumes. However, shared waste management facilities made it difficult for us to
accurately record and monitor waste streams and volumes. Therefore, in February
2023, we issued weighing scales to all UK showrooms and launched an initiative
requiring colleagues to separate, weigh and record all waste.
Not only is this initiative having a positive impact on reducing waste, colleagues
have welcomed the opportunity to play an active part in protecting our planet and
report that they are now more conscious about what they dispose of, and how.
WASTE INTENSIT Y
FY23
FY22
FY21
Waste in
Tonnes
% to
Landfill
Waste in
Tonnes
% to
Landfill
Waste in
Tonnes
% to
Landfill
UK
US
Europe
Total
Intensity
ratio (sq ft)
889
210
53
1,152
0.0017
1
1
1
1
1
n/a
375
59
n/a
434
268
38
n/a
306
0.0008
0.0006
1
1
n/a
WASTE ELECTRONIC AND ELECTRICAL EQUIPMENT (WEEE) REGULATIONS
We strive to deliver continuous improvements to our recycling and sustainability
programme and comply with the Waste Electronic and Electrical Equipment
(WEEE) Directive, which forms part of our Group policy and procedures. We
enable and encourage 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. Due to the mechanical
nature of the majority of our watches and the small size of watch batteries, the
volume of WEEE we handle is low.
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 partner with licensed contractors who operate an infrastructure of ISO
9001, ISO 14001 and OHSAS accredited hazardous waste treatment sites.
TR ANSPORTATION AND LOGISTICS
We are working to reduce carbon emissions as a result of downstream
transportation, business travel and colleague commuting. These journeys can take
place by road, rail, sea and air.
In the UK, 81% of our fleet are now electric or hybrid and we do not currently
operate company cars in the US or Europe. To encourage the wider use of personal
electric vehicles, an initial 20 charging points have been installed at our new Carlton
Park Support Centre and we plan to install them at more sites across the Group.
8 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 UK
58%
Electric or hybrid
company fleet
FY22
FY23
2030
FY23
2030
US Group
UK
US Europe Group
Target
UK
US Europe Group
Target
n/a
58% 83%
n/a
n/a
83%
100%
Recyclable packaging (own brand)*
66% 100%
n/a
71%
100%
Our Travel Policy requires colleagues to apply sound judgement before arranging
business travel. Air travel is limited to journeys 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.
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 Support Centre sites are also equipped with showering facilities
and cycle parking.
Our Watch and Jewellery Luxury Virtual Boutique provides clients with an online
concierge service, without them having to travel. In FY23, to further support a
cleaner, greener, online experience, we doubled the number of home deliveries
made by EVs in the UK.
FY22
FY23
2030
UK
13%
US Group
UK
US Europe Group
Target
0%
0% 22%
0%
0%
17%
100%
Home deliveries by
eco-friendly vehicles
Through our new ESG Partner Standards, we encourage supplier partners to
continually improve the efficiency of their transportation and logistics and
participate in joint industry initiatives, such as EV100, which is a global initiative
committed to accelerating the transition to electric vehicles. The Group’s vehicle
fleet is considered too small to join this initiative.
PACK AGING
We understand packaging has a direct impact on the environmental footprint of
products and support the implementation of circular economy principles in
packaging design and production to help reduce waste, conserve resources and
minimise pollution.
While high quality, durable packaging is necessary to protect the products we sell,
we are working with supplier partners to limit excess packaging and introduce
more sustainable materials wherever possible.
Within our operation, we seek to use materials that are sustainably sourced,
recyclable and easily separated. Our principal packaging suppliers operate to ISO
9001 and ISO 14001 quality standards, and in the UK, we are fully compliant with
The Producer Responsibility Obligations (Packaging Waste) Regulations 2007,
through the registered compliance scheme.
* Excludes small magnets and foam which must be separated before recycling.
We are continually looking for ways to make it easier for clients to be greener,
including printing reminders to recycle on packaging and gift boxes. Where
appropriate, we also ask clients if they would like to reuse presentation boxes to
minimise any ‘end-of-life’ environmental impact.
The majority of our branded watch boxes are considered part of the product itself
and kept as storage, however, we continue to see innovations in packaging design,
and this is exemplified by one of the newest additions to our product range. ID
Genève use fully recyclable, biodegradable and compostable materials in their
packaging. For more information, see page 89.
BIODIVERSIT Y AND OUR IMPACT ON NATURE
We consider biodiversity and the impact on nature as a factor when procuring
products and services, as well as in the design and modification of showrooms,
offices, equipment, and processes.
We will not tolerate any harsh or inhumane treatment of animals and all suppliers
must conform to relevant international laws and have processes in place to protect
endangered species and habitats.
In FY23, we updated our Vendor Code of Conduct to include a specific requirement
for supplier partners to prevent, mitigate and control any impacts from their
operations on biodiversity. Our new ESG Partner Standards go further, asking
supplier partners to share relevant data and report progress in relation to preserving
resources and the rehabilitation of impacted ecosystems. We also highlight our goal
to offer more socially and environmentally preferable product options.
Clients can choose from a growing number of more socially and environmentally
preferable options, including watch straps and packaging made from a variety of
waste materials, including recycled stainless steel, plastic, rubber and cloth and we
are seeing biodegradable options made from organic matter, such as mushrooms,
seaweed and green waste.
We source hard woods or hard wood veneers within items such as jewellery boxes
and watch cases from reputable, sustainably managed sources and only use certified
timber in new showroom, workshop and office designs.
Our new Carlton Park Support Centre site in the UK includes 32 acres of
maintained woodlands and green space, that are home to a variety of plant life and
insects. We are in talks with a local beekeeper and hope to introduce bees in FY24
to further support our local ecosystem and biodiversity of plant and animal life.
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continued
SUPPORTING A CIRCUL AR ECONOMY
We are committed to promoting innovation and advancement in circular design,
while extending the life of watches and jewellery through repairs, servicing, and our
pre-owned business.
In the US, we have three students undergoing accelerated watchmaking training in
partnership with the Lititz Watch Technicum under the Swiss American
Watchmakers Training Alliance (SAWTA) certification program, founded primarily
for Rolex-funded US watchmaking schools.
In FY23 we grew our After Sales and Servicing business by 20% year-on-year, and
achieved high double digit growth of pre-owned watch sales.
To continue to meet demand, we are increasing our repairs and servicing capacity
to include a new 6,000sq ft Repairs and Servicing Centre in Leicester, which is due
to be operational in FY24. This Repairs Centre is being designed and equipped to
the highest Swiss standards and will allow us to accommodate a further 14,000
repairs over the next three years, while providing additional repairs and servicing
support for our strategic brand partners.
Specialist Roles
Accredited
Watchmakers
Technicians,
Administrators and
Polishing experts
FY22
FY23
YOY
UK
35
15
US Group
20
12
55
27
UK
37
23
US Europe Group
Increase
26
16
–
–
63
39
+8
+12
This year also saw a significant investment into the development of a new client-
facing repairs system aimed at improving our client journey, by allowing them to
receive updates and track their repairs. Phase 1 of this system is set to be trialled in
UK showrooms in summer 2023.
Parallel to this, we continue to grow our team of highly skilled and accredited
watchmakers; creating work opportunities and supporting local economies, while
helping us to keep more watches at their highest utilisation and value for as long
as possible.
In FY23, we sponsored three students to study at the British School of Watchmaking
and are in the process of preparing in-house candidates at our Manchester Service
Centre for the FY24 intake. We also have a longer term aspiration to develop a
formal Group-wide apprenticeship scheme.
We have ambitious plans for our pre-owned business and have advanced our
development with Rolex Certified Pre-Owned, which will launch in FY24 Q1 in the
US and Q2 in the UK. This is in addition to our Watches of Switzerland Group
pre-owned business, which is already well established.
In the US, our pre-owned watch business, Analog:Shift, is a key contributor to
achieving our circularity goal to keep products at their highest use and value for as
long as possible, which is further boosted by our Susan Caplin and Betteridge
businesses, which specialise in restoring vintage jewellery.
8 8
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 FOCUS ON CIRCUL AR DESIGN
In March FY23, we celebrated the exclusive UK launch of the first
truly eco-innovative luxury watch.
ID Genève’s circular model is founded on the principles of the
circular economy. It is driven by design, and based entirely on the
reuse of materials, the elimination of waste and pollution and the
regeneration of nature.
To extend the life cycle of the watch for as long as possible, the design
is classic and modular, making it easy to be serviced and repaired by
any reputable watchmaker. All materials are circular, with a lower
carbon footprint than the industry average and the manufacturing
process is powered by solar energy. The brand also makes every effort
to reduce transportation, sourcing all materials within a small radius.
ID Genève also partners with three British eco-innovative start-ups,
who provide the first industrially compostable straps and packaging
made from mycelium, green waste and wine residue. The most
notable packaging supplier is Notpla, who won an Earthshot prize in
December 2022 for developing the first packaging to be made of fully
soluble seaweed that can be used as a plant fertilizer.
Our UK launch of ID Genève was a big success, attracting a diverse
range of clients and exceeding sales expectations. Our US launch
took place early in FY24 and was also very well received.
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continued
9 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 TA S K F O RC E O N C LI M ATE-
R EL ATED F I N A N C I A L D I SC LOS U R E
Protecting our planet is a core component of our Group Purpose and is embedded into our
decision-making processes. In recognition of the serious threat to our business strategy and
operation posed by climate change, the Board considers it as a principal risk.
We fully support the recommendations of the Financial Stability Board’s
Task Force on Climate-related Financial Disclosures (TCFD) and continue
to develop our Sustainability Strategy to ensure potential impacts are
identified and managed in a structured, transparent and measurable way.
Since our last disclosure, we have reviewed our financial risk boundaries to ensure
a consistent approach across our Group and have further integrated key risks and
opportunities identified during an initial quantitative Climate Scenario Analysis
(CSA) of our direct operations into our financial planning process. We have also
responded to the CDP (formerly the Carbon Disclosure Programme) questionnaire
on climate change for the first time and carried out a supply chain mapping exercise
followed by a quantitative CSA and a series of workshops, to identify, manage and
mitigate material climate-related supply chain risks and identify opportunities.
We are committed to reducing absolute Scope 1 and 2 greenhouse gas (GHG)
emissions 50% by 2030 from a FY20 baseline. We also commit to reducing absolute
Scope 3 GHG emissions by 42% within the same timeframe. In March 2023, these
near-term targets to help achieve net-zero by 2050 were verified by the Science
Based Targets initiative (SBTi), who commended our ambitious 1.5°C aligned target
- currently the most ambitious designation available through the SBTi process.
A net-zero target, with verified near-term targets, provides us with a clearly defined
pathway to reduce GHG emissions, help prevent the worst impacts of climate
change and future-proof business growth.
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continued
COMPLIANCE STATEMENT
In meeting the requirements of the Listing Rules 9.8.6R (8) and 14.3.27 R, we have concluded that we fully align with the TCFD reporting recommendations for the
accounting period ending 30 April 2023.
In the table below we set out details of the TCFD reporting recommendations against the eleven disclosure requirements. In assessing alignment, we referenced the
guidance documents referred to in the Listing Rule guidance notes, taking into account the 2021 TCFD all sector guidance.
TCFD Disclosure
Summary of disclosure
Governance
a. Describe the Board’s
oversight of climate-related
risks and opportunities
The Board, led by the Chair, Ian Carter, has overall responsibility for managing climate-related risks, as
well as ensuring our strategy creates value and achieves our Purpose: to WOW our clients, while
caring for our colleagues, our communities and our planet.
Our Board considers climate-related issues when reviewing and guiding our strategy, setting Company
performance objectives and agreeing annual budgets, including major capital expenditures, such as the
transition to electric or alternative fuel vehicles and roll-out of LED lighting in our showrooms.
The ESG Committee, chaired by Independent Non-Executive Director, Rosa Monckton MBE,
addresses climate-related issues three times a year, supported by a dedicated training session. As a
Board Committee, it ensures our main Board has supporting information and context when making
strategic decisions in relation to key climate-related issues. Such issues are officially reported to the
main Board as and when key decisions are required, for example, the approval of our Sustainability
Strategy, associated targets and supporting documents, such as our Environment Policy, Vendor Code
of Conduct and ESG Partner Standards.
The Committee monitors performance against climate-related goals and targets, using frameworks
such as the CDP questionnaire on climate change, and challenges our ESG Steering Group on progress.
The Committee also ensures the Group has an effective risk management system in place, with key
climate-related risks being principally governed between both our ESG Committee and Audit & Risk
Committee, which meets on a quarterly basis.
More information
See Climate Governance
framework on page 59
See our Principal Risks and
Uncertainties on page 116
to 121
b. Describe management’s role
in assessing and managing
climate-related risks and
opportunities
Brian Duffy, CEO, has overall operational responsibility for our Climate Strategy and the mitigation of
related risks.
See Climate Governance
framework on page 59
Anders Romberg, CFO, has day-to-day operational responsibility for identifying and addressing
climate-related risks and opportunities and chairs a monthly ESG Steering Group. This Steering Group
reports into the ESG Board Committee on a quarterly basis and is comprised of senior leaders who
each have responsibility for assessing and managing climate-related risks and opportunities against KPIs
aligned to our ESG pillars of ‘People, Planet and Product’.
The ESG Steering Group is advised by Kesah Trowell, Group Head of Sustainability and ESG, who has
significant experience in climate-related matters. It ensures all operational matters in respect to our
Sustainability Strategy are fully embedded into our wider business strategy and operation, through
weekly engagement with our Trading Board and ad hoc, as required. Our Finance Team also plays a
key role in ensuring climate-related risks and opportunities are embedded into our core business
strategy, by making sure they are considered within our budget planning and approval processes.
Each ESG pillar is supported by Working Groups, which include senior operational managers who are
assisted with input from the Group Head of Sustainability and ESG and external consultants. These
Working Groups meet every four to six weeks and are chaired by ESG Steering Group members.
Our Planet Working Group has responsibility for developing and implementing the Group's Climate
Strategy, which includes reducing Scope 1 and 2 carbon emissions resulting from buildings and logistics,
energy and waste management.
Our Product Working Group is responsible for developing and executing our Supply Chain Engagement
Strategy for managing the environmental and ethical impacts of products within our value chain,
including the impact of raw material extraction, manufacturing, packaging and transportation.
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 TCFD Disclosure
Summary of disclosure
a. Describe the climate-related
risks and opportunities the
organisation has identified
over the short, medium,
and long term
Strategy
We consider climate-related risks and opportunities across the short (<5 years), medium (5-10 years)
and long term (>10 years) and these time horizons were considered according to our sector, the life span
of our assets, the type of the climate-related risks we face and the geographies in which we operate.
The severity of the impacts we experience is determined by the extent to which the world warms.
We therefore considered impacts for possible scenarios:
– 1.5°C above pre-industrial levels, in line with what the latest climate science says is necessary to
avoid the worst physical impacts of climate change but increased transition risk.
– Below 2°C above pre-industrial levels, in line with gradually increasing stringency of climate
policy to limit the physical impacts of climate change.
– 2-3°C disorderly transition above pre-industrial level, where the transition to a low carbon
economy is delayed increasing the risk associated with the transition.
– 4°C above pre-industrial levels, which is our current warming pathway if the world does not
take climate action, potentially bringing the most extreme physical impacts of climate change.
In FY23, we assessed our financial risk boundaries to determine which climate-related risks and
opportunities should be incorporated into our financial planning processes. This was completed
through quantification of the risks and opportunities, alignment with the Group risk register, and
integration into the FY24 budget and long range planning process.
We consider risks in terms of both impact and probability. Impact refers to the severity of the
consequences that may arise from a risk event, while probability refers to the likelihood or chance of
the risk event occurring within the considered climate scenarios. Likelihood is dependent on the
scenario considered and is determined through the outputs of the scenario modelling.
More information
Climate-related risks
and opportunities were
identified in FY22. A
review of our financial
boundaries took place
in FY23 to ensure full
alignment across the
business and full
integration into the
financial planning process
has taken place
b. Describe the impact of
climate-related risks and
opportunities on the
organisation’s businesses,
strategy, and financial planning
Following a strategic review in FY23, we assigned financial impacts to identified climate-related risks
and opportunities, before integrating them into the FY24 budget and long range planning process.
More information on
pages 98 to 101
Our strategic review process also focused on target setting and issues such as energy efficiency and
supply chain transparency which resulted in plans being incorporated into our long-term strategy and
standard business processes.
We have since progressed a number of strategic opportunities, such as futureproofing our Support
Services Redevelopment Programme. More information about this can be found on page 72.
In FY23, the impacts of climate-related risks on our supply chain were assessed and final risk scores
were assigned based on:
– Exposure to the hazard, derived through modelling the likelihood of the hazard in low and
high-carbon scenarios.
– Vulnerability, assessing the potential impact of the hazard and mitigation actions through
interviews and discussions with key suppliers and internal stakeholders.
The table on pages 98 to 100 includes identified high rated risks. All identified risks will be publicly
disclosed within our response to the 2023 CDP questionnaire on climate change.
c. Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario
The Group recognises the importance of taking steps to ensure our assets and business strategy is
resilient to the inevitable effects of a changing climate.
More information on
page 98 to 101
To test the robustness of our business strategy, we conducted a qualitative and quantitative climate
scenario analysis of our business operation in FY22 and on our supply chain in FY23, considering an
orderly (1.5°C and 2°C ), disorderly (2-3°C ) and business as usual (4°C ) scenario up to 2050. This
analysis enabled us to identify key climate-related risks and opportunities faced by the Group and
where in our operations we may be vulnerable. These risks are reviewed on an annual basis.
As a result of our analysis, we have enhanced our business processes, for example, we now assess
climate-related risks when negotiating leases and our procurement process includes encouraging
suppliers to aspire to the objectives of the Paris Climate Agreement to limit global warming to 1.5°C.
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TCFD Disclosure
Summary of disclosure
a. Describe the organisation’s
processes for identifying and
assessing climate-related risks
Risk Management
In FY23, we established more detailed risk classification frameworks, which our climate risks and
opportunities now sit within. The Group defines risk as uncertainty around the organisation’s ability
to achieve its objectives and execute its strategy effectively. As a principal risk, key climate-related risks
are identified and assessed following the same established framework as other significant risks
impacting the business.
Stakeholder consultation and qualitative climate scenario analysis are used, as well as an analysis of
existing and emerging regulatory requirements, to identify key physical and transition climate-related
risks and opportunities affecting our business operation.
We take the necessary mitigation or adaptation actions to prepare for identified climate-related risks,
depending on the severity of the risk. Similarly, where opportunities associated with physical or
transitional risks are identified, we work to leverage them.
More information
See our Climate Risk
Management process on
pages 98 to 100
b. Describe the organisation’s
processes for managing
climate-related risks
The Group has embedded a robust risk management process across all principal risks. Identified risks
are incorporated into our Group risk register and risks classified as major or severe are escalated to
the Board, whereas minor and moderate risks are handled by the appropriate committee or risk
owners.
See our Principal Risks and
Uncertainties on page 116
to 121
c. Describe how processes for
identifying, assessing, and
managing climate-related risks
are integrated into the
organisation’s overall risk
management
The Group identifies, assesses, and manages climate change as a principal risk through our overall risk
management approach.
We consider climate-related 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).
See our Climate Risk
Management process on
page 98 to 100
a. Disclose the metrics used by
the organisation to assess
climate-related risks and
opportunities in line with its
strategy and risk management
process
Identified risks are mitigated through our risk management process.
Metrics and targets
After completing our quantitative CSA in 2023, we have mapped our supply chain risks to proposed
metrics, which allow us to track the progress against these risks.
See Metrics and Targets
on page 102
In May 2023, we hosted a workshop with internal stakeholders to review and approve additional
metrics to monitor our supply chain risks such as extreme weather events, extraction of raw materials,
introduction of carbon prices and electric vehicle legal requirements.
Over the next reporting year, the Group will focus on collecting data against these metrics and
assigning data owners.
b. Disclose Scope 1, Scope 2,
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related
risks
The Group reports Scope 1, 2 and 3 GHG emissions, which are calculated in line with the GHG
Protocol methodology. Our figures are externally assured and reported over a three-year period
within our Annual Report and Accounts. The methodologies used to calculate our metrics are also
reported. As well as the absolute figure, we report our intensity ratios, which allow us to understand
the impact of our growing business.
c. Describe the targets used by
the organisation to manage
climate-related risks and
opportunities and
performance against targets
In March 2023, the SBTi validated our emissions reduction targets to achieve net-zero by 2050 in line
with a 1.5°C trajectory. The Group commits to reduce absolute Scope 1 and 2 GHG emissions 50%
by FY30 from a FY20 baseline. The Group also commits to reduce absolute Scope 3 GHG emissions
42% within the same time frame. These targets are underpinned by a series of goals to help us manage
risks and opportunities and these are reported on pages 98 to 101.
Our GHG emissions are
reported on page 104
See Metrics and Targets
on page 102
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 CLIMATE GOVERNANCE
We have strong governance processes to ensure the materiality of climate-related
risks and opportunities is properly assessed at varying levels of our business and the
appropriate action is taken.
Our Climate Governance framework on page 59 is in place to ensure related risks
and opportunities are understood, managed and reported – and that they are
integrated into our core business strategy, risk management processes and
investment decisions.
THE WATCHES OF SWITZERL AND PLC GROUP BOARD
The Board has overall responsibility for managing climate-related risks as well as
ensuring our strategy creates value.
It stays informed on current best practice in climate governance by maintaining
dialogue with peers, policy makers, investors and other key stakeholders and works
to ensure material climate-related risks, opportunities and strategic decisions are
identified, addressed and transparently reported to stakeholders.
The Board considers climate-related issues when reviewing and guiding our
strategy and agreeing annual budgets, including major capital expenditures, such as
energy reduction initiatives. In addition, our Remuneration Committee sets the
organisation's performance objectives and considers the achievement of ESG
targets in line with the Group’s ESG bonus underpin.
The CEO has overall operational responsibility for our Climate Strategy, including
the mitigation of related risks and realising opportunities. Our CEO is key to
overseeing the successful delivery of our business strategy and operation, while
also sitting on our Board.
We recognise the ESG agenda continues to evolve rapidly and have introduced
climate training for Board members to ensure they have sufficient knowledge for
effective decision-making.
ESG COMMITTEE AND AUDIT & RISK COMMITTEE
Climate-related risks and opportunities identified through climate scenario analysis
and stakeholder consultation over the short, medium and long term, are reported
to the ESG Committee and Audit & Risk Committee by key representatives from
the ESG Steering Group, which is chaired by our CFO.
Our ESG Committee monitors performance, challenges our ESG Steering Group
on progress against goals and targets, and ensures the Group has an effective risk
management system in place. Key climate-related risks are principally governed
through our Audit & Risk and ESG Committees.
ESG Steering Group
The ESG Steering Group exists primarily to oversee the development and
successful delivery of a progressive Sustainability Strategy and mitigate against risk.
It meets each month and has responsibility for assessing and managing climate
related risks and opportunities against KPIs aligned to our sustainability pillars of
People, Planet and Product. This Steering Group ensures all operational matters in
respect to our Sustainability Strategy are fully embedded into our wider business
strategy and operation, through regular engagement with our Trading Board and
dedicated ESG Working Groups. The Steering Group is also responsible for
ensuring management is well-informed and takes actions to tackle climate-related
issues through ESG Working Groups and the Head of Sustainability and ESG. Our
Finance Team also play a key role in ensuring climate-related risks and opportunities
are embedded into our core business strategy, by making sure they are considered
within the budget, planning and approval processes.
ESG Working Groups
Our ESG Working Groups are led by senior leaders from our ESG Steering Group
and are aligned to our ESG pillars. They are comprised of senior operational
managers and supported by input from external consultants. These Working
Groups meet each month or more frequently as required.
Our Planet Working Group has responsibility for developing and implementing the
Group's Climate Strategy, while our Product Working Group is responsible for
developing and executing our Supply Chain Engagement Strategy.
As part of our continual improvement and in acknowledgement of the serious
threat posed by climate change, we regularly review our processes to ensure the
management of climate-related risks and opportunities is optimised across our
Group and value chain.
STR ATEGY
The Group considers climate change to be a principal risk and as such, our approach
to mitigating and managing associated risks and leveraging opportunities is
incorporated into our core business strategy.
We use the following time horizons across the short, medium, and long term,
which are agreed by the Board and in line with time horizons used when considering
wider strategic and business planning.
Impact Time Horizon
Year from;
Year to
Short-term
Medium-term
Long-term
FY24
FY29
FY34
FY28
FY33
FY34+
Duration
<5 years
5-10 years
>10 years
The timeframes were defined according to the Retail sector and the nature of the
climate-related risks we face, such as physical risks, ensuring business continuity,
changing consumer preferences, regulatory changes and reputation. We also
considered the long life span of our assets, our infrastructure and the geographies
in which we operate.
Our risk classification scoring is as follows:
Financial impact
1
2
3
4
5
Negligible
Minor
Moderate
Major
Severe
EBIT impact
< 1% of EBIT
1 - 5% of EBIT
Probability
Rare
Unlikely
5 - 10% of EBIT
Moderate
10 - 20% of EBIT
Likely
> 20% of EBIT
Almost certain
The financial impact of a risk includes any potential control and mitigation costs
incurred to manage the risk and the cost of repair/replacement programmes or loss
of revenue if the risk were to be realised.
Climate-related risks and
opportunities identified
during a CSA of our
business operations
Risks
Opportunities
Extreme weather events
disrupting key sites
Energy efficiency initiatives
across our property portfolio
Increased energy
requirements
Legal requirement for
electric or alternative fuel
fleet in the UK
Changing consumer
preferences
Procuring renewable energy
Transition to an electric or
alternative fuel fleet
Promoting the longevity of
well-made watches and
jewellery
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continued
Our Climate Scenario Analysis considered the following scenarios using data from publicly available third party sources, 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
*Below 2°C scenario has been used which is also a low carbon scenario.
NGFS Below 2 degrees
IPCC SSP1 RCP2.6
NGFS Delayed Transition
IPCC SSP2 RCP4.5
NGFS Current Policies
IPCC SSP5 RCP8.5
Following our qualitative CSA, we conducted a quantitative CSA for our direct
operations to quantify the potential financial impact, as well as other business
impacts, such as consumer sentiment and impacts to our value chain in relation to
key risks.
SUPPLY CHAIN ANALYSIS
During FY23, we engaged with internal and external stakeholders through a series
of workshops, to discuss, determine and consider climate-related risks and
opportunities that could have a material impact on our supply chain.
Additionally, the assessment allowed the Group to identify risk hotspot locations
to inform mitigation actions. The following physical risks were analysed in the
quantitative CSA:
Key logistics routes, storage sites and warehouses within our supply chain were
identified and the impacts of risks caused by the identified hazards were assessed
in both a low carbon and high carbon scenario up to 2040.
– Extreme weather events disrupting offices and distribution centres
– Increased office and showroom energy requirements for heating and cooling.
To assess the exposure of our sites to extreme weather events and increased
energy requirements for heating and cooling, we considered the following indicators:
– Fluvial flooding
– Hurricane flooding
– Days exceeding 35°C and 38°C
– 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 were reported in our Annual Report and Accounts 2022, and have
enabled the Group to identify climate-related risk areas within our operations and
implement adaptive measures as described in the risk table on pages 98 to 100,
allowing us to strengthen the resilience of our strategy to climate-related risks
and opportunities.
The impact of carbon pricing on energy consumption and direct emissions was also
considered. Although this risk was identified as a medium risk in the qualitative
CSA, further assessment showed a low risk. Understanding the impact of carbon
pricing allows us 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.
Climate-related risks
identified during a mapping
exercise and CSA of our
supply chain
Risks
Opportunities
Improve business
continuity and planning
Build climate-related
clauses into relevant
contracts
Extreme weather events
disrupting logistics, caused
by hazards including:
– Extreme precipitation
at two logistics sites in
the UK
– Extreme heat at one
logistics site in the US
– Cyclones and
hurricanes at one
logistic site in the US
– Raw material
extraction (minerals
and agriculture)
disrupted.
– Extreme heat at a
stainless steel mining
location in China
Introduction of carbon
pricing
Legal requirement for
electric or alternative fuel
fleet in the UK
96
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 The results of our supply chain quantitative CSA have highlighted the robustness
and resilience of the Group’s supply chain management when faced with value chain
climate-related risk, in both a low and high carbon scenario and we have found that
the overall impact to the Group’s operations is low for the risks analysed so far.
CLIMATE-REL ATED RISKS
Our commitment to reach net-zero emissions and manage emerging risks
associated with extreme weather and increasing temperatures presents physical
and transitional risks, as well as opportunities, to our business.
From a logistics perspective, the Group has flexibility to work with various suppliers
across all geographies it operates within, in order to fulfil door-to-door deliveries
and web orders should one supplier be impacted by potential climate risks. In the
UK, this includes leveraging a relationship with an alternate logistics partner to fulfil
deliveries directly to showrooms should a supplier be impacted by a climate-related
risk. Past global events such as the pandemic, where the Group’s operations were
not significantly impacted, have demonstrated the resilience of our logistics
operations and ability to adapt to change.
From a financial perspective there would be little to no impact in either scenario
due to the ability to swiftly switch suppliers, which is built into our business
continuity plan. This has also been considered in the budget timelines looking ahead
12 months and long range, with some of these costs being budgeted into increased
insurance premiums. In some instances, switching logistics partners would result in
a cost saving, due to the premium delivery services of one of our suppliers.
There are also contractual and legal processes in place to mitigate the impact of
climate-related risk from our suppliers, including long-term purchase agreements
and minimum quantity contracts, enabling us to keep large stock in our warehouses.
Regarding transition risks, we have also considered the reputational risk of our
suppliers not transitioning to EVs. This will only impact us if this slow uptake
hinders the Group’s decarbonisation goals.
Furthermore, our analysis found that the Group’s own suppliers have well-
established climate risk mitigation actions in place.
Engagement with key suppliers is in progress to understand how vulnerable they are
to disruption of raw material extraction due to extreme heat, as well as carbon
pricing across the area they operate in for stainless steel. This engagement will allow
the Group to understand the resilience of the supplier against both climate hazards.
In FY24, 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 focussing on developing longer-term climate mitigation and adaptation planning.
Risks are prioritised using impact ratings of Low, Medium, or High, and are
determined by combining the likelihood of the risk arising, with the potential impact
of the risk, should it happen. This impact scoring is in line with the Group’s risk
register where the materiality of each risk is considered.
We consider 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 presented within the transition
to a low carbon economy (resource efficiency, energy source, products and
services and market opportunity).
When assessing risks, we consider all our geographies. We have a relatively small
number of operational sites (offices, showrooms and distribution centres) across
the UK, US and Europe, however, risks are likely to vary across different regions
and site types.
The process for identifying and assessing climate-related risks and opportunities is set
out in our Climate Governance framework on page 59. The risks could potentially
result in changes to the demand for our products, our operational costs, the
regulatory environment, and present a physical risk to our showrooms in addition to
supply chain risks. The risks are composed of a combination of interrelated elements
that could impact the Group.
The table on pages 98 to 101 includes all High rated risks we have identified pre-
mitigation, which is where we are focussing our adaptive initiatives. While Medium or
Low risks considered are not reported in this table, all identified risks will be publicly
disclosed within our response to the CDP questionnaire on climate change in July
2023. All identified climate-related risks and opportunities will be reviewed bi-annually.
To achieve our emissions reduction targets, active holistic management of all climate
-related risk components is important. Emission reduction pathways consider the
direct and supply chain impacts on biodiversity and the impact that the changing
climate may have on the viability of initiative selection.
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CLIMATE-REL ATED RISKS REL ATED TO OUR DIRECT OPER ATIONS
Risk Type
Risk Category
Scenario
Short
Medium
Long
Time horizon
ACUTE PHYSICAL
Cyclone, hurricane, typhoon
High
Physical
1.5°C
Detail
In the US (particularly Florida) hurricanes are an annual occurrence
which could disrupt the ability to receive products and distribute
them around the country.
Mitigation
We have insurance policies in place to cover financial losses, either
partially or fully and based on international spread and our
showroom presence. Physical controls are also in place. Suppliers
are able to send products directly to showrooms.
ACUTE PHYSICAL
Flood (coastal, fluvial, pluvial, groundwater)
High
Physical
1.5°C
Magnitude
of Impact:
post-
mitigation
Minor
Likelihood
of Impact:
post-
mitigation
Likely
Financial
impact
1-5% of EBIT
Magnitude
of Impact:
post-
mitigation
Minor
Likelihood
of Impact:
post-
mitigation
Likely
Financial
impact
1-5% of EBIT
Detail
Increased extreme rainfall could lead to flash flooding and increased
fluvial flooding.
Specific considerations made in relation to pluvial flooding at key
distribution locations.
Mitigation
Showrooms are generally leased for <10 years, so this has not been
identified as a material ‘stranded assets’ risk linked to gradual
sea-level rise. As leases expire, we carry out a case-by-case review
and have the option of relocating showrooms to areas with less risk.
Risk assessments carried out at key distribution locations indicated a
low risk with supplier ability to send products directly to
showrooms if required.
CHRONIC PHYSICAL
Changing temperature
High
Physical
1.5°C
Magnitude
of Impact:
post-
mitigation
Negligible
Likelihood
of Impact:
post-
mitigation
Moderate
Financial
impact
< 1% EBIT
Detail
A changing climate and extreme weather events are likely to
increase energy consumption associated with heating and cooling.
Mitigation
Continued engagement with landlords to ensure the most up to
date and efficient energy processes are in place.
Investment in the most efficient and reliable HVAC systems which
are regularly serviced.
Temperatures are set and automatically switch off at night when
colleagues leave the premises at night.
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
Risk Type
Risk Category
Scenario
Short
Medium
Long
Time horizon
High
Transition
n/a
LEGISL ATIVE
The UK Government’s ban on the sale of new petrol and diesel cars
comes into effect from 2030 with the sale of hybrids being outlawed
from 2035.
Although the Group has a small fleet of vehicles in the UK, there is a
risk that the changes in regulations may impact our direct operation
and supply chain logistics.
Detail
New policies and regulations are expected to be implemented over
the next decade with a shift towards a low carbon economy, resulting
in a need for the Group to prepare and plan for resulting changes.
Mitigation
– Governance structure in place to identify upcoming legislative
changes and act early
– We are transitioning to a 100% EV or alternative fuel fleet across
our Group
– In the UK, 81% of our fleet is now EV or hybrid and we have a target
of transitioning to a fully electric fleet by 2025. Our new UK Support
Centre has 20 EV charge points with capacity for a further 20
– Through our ESG Partner Standards, we ask supplier partners
to continually improve the efficiency of their transportation and
logistics to reduce pollution and emissions and participate in joint
industry transportation initiatives such as EV100
LEGISL ATIVE
Cost of non-compliance with environmental legislation
High
Transition
n/a
Magnitude
of Impact:
post-
mitigation
Negligible
Likelihood
of Impact:
post-
mitigation
Almost
certain
Financial
impact
< 1% EBIT
Detail
Head of Sustainability and ESG along with governance structure
in place to ensure the Group avoids any non-compliance.
Mitigation
The cost of non-compliance would be significant, however,
regulatory requirements are closely monitored by our Head of
Sustainability and ESG and supported by strong governance
processes. External expertise is used as required when opening
showrooms in new jurisdictions.
Magnitude
of Impact:
post-
mitigation
Negligible
Likelihood
of Impact:
post-
mitigation
Unlikely
Financial
impact
<1% EBIT
9 9
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continued
CLIMATE-REL ATED RISKS REL ATED TO OUR DIRECT OPER ATIONS
Risk Type
Risk Category
Scenario
Short
Medium
Long
Time horizon
REPUTATION
Growing expectations for responsible conduct from stakeholders,
including investors, lenders and clients
High
Transition
n/a
Magnitude
of Impact:
post-
mitigation
Negligible
Likelihood
of Impact:
post-
mitigation
Likely
Financial
impact
< 1% EBIT
Magnitude
of Impact:
post-
mitigation
Negligible
Likelihood
of Impact:
post-
mitigation
Likely
Financial
impact
1- 5% of
EBIT
Detail
Growing expectations for responsible conduct from stakeholders,
including investors, lenders and clients.
Mitigation
– Growth of our pre-owned business
– In line with our new ESG Partner Standards, our goal is to achieve
full traceability of products
– We have begun to highlight the sustainable attributes of the
products we sell and services we offer, and in March 2023
launched the first watch to be born from the circular economy,
ID Genève. Supplier partners must agree with the terms of our
Vendor Code of Conduct, or have its own equivalent, and comply
with all international laws and regulations
– We conduct third party on-site audits help us to safeguard the
integrity and reputation of our business operation and partnerships
ACUTE PHYSICAL
Hazard: Extreme Heat
Logistics Hub, Memphis, Tennessee (third party)
High
Physical
<2°C
4°C
Detail
Flexibility and ease of switching suppliers in case of outage is built
into our business continuity plan.
Due to the nature of our product, delays at suppliers’ distribution
centres would not have a significant impact on our operations as the
Group has strong client relationships and communications in place
for such delays.
Mitigation
The third party supplier site has implemented various mitigation
actions to limit disruption from extreme heat following a critical
incident involving a worker, including the deployment of tower
breezers, water fountains, ice machines and distribution of 120,000
water bottles for workers a day.
A new supplier building is being constructed that can withstand
extreme heat and maintain a constant working temperature of
50-80 degrees Fahrenheit. The hub also has the flexibility to transfer
items between buildings to ensure the continuity of deliveries.
10 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 CLIMATE-REL ATED OPPORTUNITIES
While we recognise these risks, the opportunity around the transition to a low carbon economy is also significant. Key opportunities identified during our qualitative CSA
are detailed below:
Opportunity
Risk Category
Type
Short
Medium
Long
Time horizon
DOWNSTREAM
Marketing on the prolonged lifetime of watches
and jewellery to encourage clients to retain and
repair watches and jewellery instead of disposing
of them
High
Transition
Products and
services
Detail
Marketing to retain and repair products instead
of disposing.
Financial planning
considerations
10 - 20% of EBIT
Explanation of financial impact figure
– To realise this opportunity, we are committed to showcasing the
sustainable attributes of the products we sell and services we offer
DIRECT OPER ATIONS
Energy efficiencies in showrooms, offices and
distribution centres
High
Transition
Detail
Use of lower-emission sources of energy.
Financial planning
considerations
<1% of EBIT
– We are increasing our repairs and servicing capacity to include
a new 6,000 sq ft Repairs and Servicing Centre in Leicester to
provide additional repairs and servicing support for our strategic
brand partners
– We have ambitious plans for our pre-owned business in FY24,
with the launch of a new Rolex certified pre-owned business
– We are promoting the sale of pre-owned watches in the UK and US
– We continue to grow our team of highly skilled and accredited
watchmakers
Energy source
Explanation of financial impact figure
– In line with our mitigation strategy, 100% of UK stores within our
control are powered by renewable electricity with Renewable
Energy Guarantees of Origin (REGOs)
– In the US, more showrooms are rented from landlords with
inclusive energy contracts, meaning visibility of the sourcing of
energy is more challenging. Continued engagement with landlords
is key to meeting targets in this area
– 92% of properties across our Group use LED lighting and this
is standard in all new properties
DIRECT OPER ATIONS
Use of renewable energy in showrooms and offices
High
Transition
Resource
efficiency
Detail
Use of lower-emission sources of energy.
Financial planning
considerations
<1% of EBIT
Explanation of financial impact figure
– The Variable Flow System (VRF) with heat pumps is estimated to
reduce energy consumption in our Leicester Support Centre by 58%
per annum. Solar panels will cut carbon emissions by an estimated
51% and result in substantial cost savings over the long-term
– 100% of UK properties are now powered with renewable energy
SUPPLY CHAIN
Proactive collaboration with suppliers to reduce
energy
High
Transition
Resource
efficiency
Detail
Use of lower-emission sources of energy.
Financial planning
considerations
<1% of EBIT
Explanation of financial impact figure
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
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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
CLIMATE RISK MANAGEMENT
The Group defines risk as uncertainty around the ability to achieve its objectives
and execute its strategy effectively. In FY22, we reclassified climate change as a
principal risk to better manage associated risks and opportunities.
METRICS AND TARGETS
The Group is committed to achieving net-zero emissions by 2050 and in March
2023, our near-term emissions reduction target was verified by the Science Based
Targets initiative (SBTi).
The Group has embedded a robust risk management process across all principal
risks which is outlined on pages 112 to 114.
Our risk management framework helps identify, assess, manage, and monitor risks
to within the risk appetite set by the Board, while taking advantage of opportunities
as they are presented. Management is responsible for minimising the adverse
exposure to the Group and its stakeholders.
To identify and assess climate-related risks within our business operation, we
conducted a qualitative climate scenario analysis in FY22 and the results are
reported within the strategy section of our TCFD disclosure. The classification of
climate risks identified is outlined in the strategy section of our disclosure and is in
line with the Group’s risk register, with the materiality of each risk being considered.
Further details can be found on page 95.
In FY23, we established more detailed risk classification frameworks and financial
boundaries, which our climate risks and opportunities now sit within.
Since our last disclosure in FY22, we also carried out a mapping exercise of our
supply chain, followed by a quantitative CSA and a series of workshops with
internal and external stakeholders, to identify, manage and mitigate climate-related
supply chain risks.
Climate risks are monitored on an ongoing basis, which allows us to capture any
changes and adapt fluidly.
Public Commitments
Scope 1 and 2
Scope 3
Near term SBTs aligned to 1.5°C
under Paris Climate Agreement
Net-zero
50% reduction in absolute emissions
by 2030 from a FY20 base year
2050
42% reduction in absolute emissions
by 2030 from a FY20 base year
We responded to the CDP questionnaire on climate change for the first time in
May 2022 and scored a C. We have an ambition to improve our CDP score each
year, 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.
The Group has implemented several emission reduction initiatives across our
operations and value chain as part of its strategy to achieve net-zero carbon
emissions before 2050 which are reported on pages 84 to 89 of this report.
Risk
Extreme weather events disrupting offices
and distribution centres
Increased energy requirements
Legal requirement for fleet and company
cars to be Electric Vehicles (EVs)
Changing consumer preferences
Scope
Group
Group
Group
Group
Group
Metrics to monitor risks
Improve our CDP score year-on-year
Transition to 100% renewable energy wherever possible (including landlord energy supplies) by 2025
Transition to 100% LEDs in all showrooms and warehouses within our control by 2025
Transition to EV or alternative fuel fleet by 2030
Year-on-year increase in watches kept in circulation through repair, servicing and / or resale,
measured by % of new watches sold
50% of product suppliers aligned with relevant, well recognised sustainability standards or
certifications by 2025
Own brand packaging recyclable by 2030
The below table summarises the metrics the Group will use to monitor our supply chain risks going forward.
Risk
Metrics
Extreme weather events disrupting offices and
distribution centres
Raw material extraction (minerals and agriculture)
disrupted
Monitoring the cost of extreme weather damage across supplier sites on an annual basis
Keeping watches in circulation through repairs, servicing and our pre-owned business
Carbon price introduced
Reduction in Scope 1, 2 and 3 intensity metrics
Legal requirement for fleet and company cars to use
electric or alternative fuel
Increase client deliveries by electric and alternative fuel vehicles
102
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 The timeline below summarises progress and key steps taken by the Group on our journey to fully align to the TCFD recommendations.
TCFD PROGRESS ROADMAP
FY21
– ESG Committee established, responsible for risk
identification and management
– Disclosure of our first voluntary TCFD 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 of our operation against
multiple scenarios
FY22
– Increased climate change to a principal risk
– Board Chair given overall responsibility for
climate-related issues
– Measured Scope 3 emissions for the first
time
– Committed to setting a near-term
science-based targets through the Science
Based Targets initiative (SBTi)
– Scope 1,2 and 3 emissions externally
FY23
– Near-term SBT was externally verified by
the SBTi
– Financial boundaries and planning process
verified
defined
– Responded to CDP questionnaire on
climate change for first time and scored a C.
– Conducted a quantitative CSA on key
climate-related risks across our value chain
– Supply Chain Engagement Strategy initiated
to help manage and mitigate our value chain
emissions
– Continued to implement EcoVadis, to help
manage our value chain emissions
– Embedded ESG into our budgeting and
planning process
FY24+
– We will explore identified 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
– We will study the impact of carbon pricing to
identify risks directly linked to our Scope 1 and 2
emissions and understand the cost surrounding
potential market, policy and technological changes
to facilitate the transition to a low carbon economy
– We will continue to engage with supplier partners
to reduce Scope 3 emissions
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continued
EMISSIONS TABLE
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)
Total Gross Emissions (tCO2e)
Revenue (£'000)
Scope 1 & 2 Intensity Ratio (tCO2e per £'000 revenue)
Scope 3 Intensity Ratio (tCO2e per £'000 revenue)*
Scope 3 Intensity Ratio (tCO2e per sq ft) *
Total Emissions Intensity Ratio
(tCO2e per £'000 revenue)
Total Emissions Intensity Ratio (tCO2e per sq ft)
UK
Europe
133
–
FY23
US
126
Total
259
UK
Europe
263
–
FY22**
US
83
FY20 Baseline**
Total
346
UK
264
US
64
Total
328
1,687
8
1,912
3,607
1,611
1
1,640
3,252
2,344
1,456
3,800
1,820
8
2,038
3,866
1,874
1
1,723
3,598
2,608
1,520
4,128
9,311,919
111,711 5,218,844 14,642,474
8,595,086
5,620 4,757,151 13,357,857
10,281,037 3,969,453 14,250,490
85,316
22,150
619
2,214
24
–
2,025
–
106
542
2,896
7
27
2
–
23
–
–
57,212
9,394
473
2,786
8
–
730
–
32
143,070
34,440
1,099
5,027
34
1,781
2,778
7
138
92,760
16,984
649
2,569
10
–
1,628
–
64
24
40,551
133,335
67,200
24,492
–
–
–
–
–
–
–
–
7,824
639
1,595
2
–
573
–
16
24,808
1,288
4,164
12
1,067
2,201
8
80
8,616
606
1,901
7
–
4,565
392
1,065
–
–
–
70
–
6
112,454
3,497
70,635
188,374
114,664
24
51,200
166,963
79,718
30,946
192,240
170,561
1,318
426
1,744
91,692
13,181
998
2,966
7
917
1
76
111,582
115,710
0.0051
0.1377
0.2253
0.1428
0.2336
Emission Intensities
UK and Europe
US
Total
UK and Europe
US
Total
UK
US
Total
FY23
FY22
FY20 Baseline**
889,858
0.0021
652,928 1,542,786
0.0031
0.0025
809,601
0.0023
428,383 1,237,984
585,473
225,039
810,512
0.0040
0.0029
0.0045
0.0068
0.1221
0.2843
0.1246
0.2901
0.1349
0.3067
0.1378
0.3133
* Calculated as Group Figure.
** The FY22 and FY20 Baseline Scope 3 figures have been updated, refer to page 105 for full details.
Methodology
The Group's approach to calculating and reporting its greenhouse gas (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 Group uses five external data sources for emissions factors, being:
1. UK Government GHG conversion factors for company reporting (2022 Department for Business,
Energy & Industrial Strategy (BEIS) condensed set, full set and methodology). These are used to convert
our car fleet mileage to kWh and tCO2e, and our electricity, gas and refrigerant usage to tCO2e.
2. US Environmental Protection Agency (EPA) (eGRID) emissions factors for greenhouse gas inventories
for US electricity generation (eGRID 2023) and US EPA GHG equivalencies calculator to convert
therms to tCO2e for gas usage.
3. Manufacturers’ emissions factors for cars, uplifted for the UK real-world factor (2022 BEIS Government
GHG conversion factors for company reporting).
4. European Environment Agency GHG emission intensity for conversion of electricity kWh to tCO2e for
Germany, Denmark and Sweden.
5. Sustainable Energy Authority of Ireland conversion factors for conversion of Ireland electricity kWh to tCO2e.
All Scope 3 emission calculations follow the guidelines and methodologies that are outlined in the Greenhouse
Gas 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.
Emission Conversion Factors from the BEIS and the EPA have been used. For US operations, emission factors
from the International Energy Agency have also been used for the estimation of emissions relating to T&D losses.
See below more information regarding the methodology and data sources that were used for the Scope 3
calculations.
(1) Spend-based emission factors from the Environmentally Extented Input Output CEDA Global version
6 database have been employed for the emission calculations due to limited primary activity data.
(2) Well-To-Tank (WTT) and Transmission and Distribution (T&D) emissions have been calculated using
the BEIS and IEA emission factors for the Group's electricity, natural gas and fuel used in company
owned vehicles.
(3) Emissions related to the Group's office and stores waste disposal activity. Emissions calculations have
taken into consideration % of waste landfilled and % of waste diverted from landfill. BEIS emission
factors have been used.
(4) Business travel emission 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 the Group's Quartz and Smart watches that
require electricity for the charging of their battery.
(7) Emissions relating 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 energy consumption data for FY23 have been independently assured
through a limited assurance engagement conducted in accordance with International Standard on
Assurance Engagements (ISAE) 3410 'Assurance Engagements on Greenhouse Gas', by BDO LLP.
10 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 CEDA AND EMISSIONS REBASELINING
Our Scope 3 emissions include calculations using spend-based activity data and
average emission factors. Emission factors are derived from the Comprehensive
Environmental Data Archive (CEDA), an environmentally extended input-output
(EEIO) database published by VitalMetrics. In 2023, we updated our emission
factors from CEDA version 5 to CEDA Global (version 6) to ensure the most
up-to-date data is reflected in our calculation.
The main change between the two versions was the update of the database’s
baseline economic data from 2014 to 2018.
The change of the CEDA emission factors has resulted in a material variance of
more than 5% to our Scope 3 emissions inventory. This change has impacted the
emissions values of Category 1, Category 2 and Category 4; all of which have been
calculated using the updated CEDA emission factors.
As such, following the guidelines of our restatement policy we have proceeded with the
recalculation and restatement of our previous emission figures for all three categories.
Our Scope 3 Category 1, 2 and 4 emissions for the baseline year FY20 and our most
recent year FY22 have been restated using CEDA Global (version 6) emission factors.
Looking ahead we will be collaborating with our suppliers to collect primary
emissions data and seeking to include them in our emissions inventory. We aim to
move away from spend-based calculations, reducing uncertainty and hence looking
to prove and claim credible emissions reductions.
10 5
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
O U R PRO D U C T S
10 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 C A R I N G A B O U T O U R PRO D U C T S
We care about the products we sell, how they're made and who makes them and support the aims
of the Watch & Jewellery Initiative 2030 to create a fully sustainable watch and jewellery industry
that is resilient to climate change, preserves natural resources and fosters inclusivity.
SUPPORTING UNITED NATIONS SUSTAINABLE
DEVELOPMENT GOALS
FY23 PERFORMANCE HIGHLIGHTS
– Updated our Vendor Code of Conduct and developed new
ESG Partner Standards
– Partnered with international non-profit organisation, the
Slave-Free Alliance and undertook an independent review
of our response to the risk of modern slavery
– Updated Modern Slavery Statement with enhanced
commitments
– Mapped our supply chain, conducted a climate risk assessment
and identified key climate-related supply chain risks
– Independently audited 9% of our watch and jewellery
supplier partners
– Exclusive launch of the first truly ‘circular’ luxury watch,
ID Genève
– New Executive Director, Global Buying and Merchandising
FY24 AREAS OF FOCUS
– Ongoing supply chain engagement with our ESG Partner
Standards
– 50% of primary brand partners and suppliers aligned
with relevant, well recognised sustainability standards
or certifications
– Aligning independent audits with new Vendor Code of
Conduct and increasing number of audits
– Continuing to map supplier partners onto our Supply
Chain Management System, EcoVadis
– Progressing our Modern Slavery Roadmap
– Equipping colleagues with training and resources to help
clients make more informed purchasing decisions
RESPONSIBLE SOURCING
We want to help clients make more sustainable choices by promoting the
sustainability of well-made watches and jewellery, highlighting innovation
and advancements in circular design, and growing our range of products
with positive environmental and social attributes.
We have a duty of care to ensure our supply chain operates responsibly and that
everyone we do business with respects and protects the lives of workers, their
communities, and the environment.
Collaboration with supplier partners is key to achieving our goals and mitigating
negative impacts from a changing climate, so in FY23, we began a supply chain
engagement programme aimed at strengthening relationships with suppliers who
adopt our social and environmental principles and strive to continuously improve
their performance for our mutual long-term benefit.
In January 2023, we welcomed Eric Macaire to our business in a newly created role
as Executive Director, Global Buying and Merchandising. Eric is working closely
with our brand partners to develop our global product strategy, further strengthen
relationships and help us to deliver our Purpose.
OUR BUSINESS IMPACTS
We partner with circa 2,000 Tier 1 suppliers, including over 100 watch and
jewellery suppliers worldwide.
We acknowledge the watch and jewellery industry has an increased risk of human
rights violations within its precious metals, diamonds and gemstones mining supply
chains. There is also the potential for negative environmental impacts as a result of
mining processes.
The Group predominantly operates in countries where high social standards apply
and contracts with reputable supplier partners, however, we continue to exercise
due diligence in all our interactions and strive to go beyond basic risk management
and compliance, by integrating human rights and environmental considerations into
all our decision-making processes.
VENDOR CODE OF CONDUCT
Our Vendor Code of Conduct ('Code') 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 laws and legislation. All active suppliers must
read, sign and adhere to our Code, or publish an equivalent commitment.
Following a review in FY23, we enhanced our Code to align with our Purpose and
introduced training to equip relevant colleagues with the knowledge and skills they
need to help uphold the principles of our Code.
Anyone with genuine suspicions about the contravention of our Code is encouraged
to report their concerns through our confidential global Whistleblowing process,
which uses an independent reporting facility, available in multiple languages.
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continued
ESG PARTNER STANDARDS
In FY23, we developed new ESG Partner Standards, which support our Vendor
Code of Conduct and provide comprehensive guidance in relation to the common
practices we expect throughout our global supply chain and in all our dealings.
These Standards are designed to help us proactively engage new and existing
supplier partners with our Purpose and strategic goals, while encouraging
collaboration and helping to ensure the products we sell and services we use, meet
the highest environmental and social standards and performance criteria.
ALIGNMENT WITH WELL-RECOGNISED CERTIFICATIONS
We strongly encourage all supplier partners to align with relevant, well-recognised
sustainability standards and certifications, which includes the Responsible Jewellery
Council (RJC) for watch and jewellery providers. The RJC is a registered not-for-
profit company and the world’s largest standards authority for responsible jewellery.
At the time of this report, 35% of our watch and jewellery suppliers are accredited
members of the RJC and, as such, are subject to rigorous independent audits to
ensure compliance with the RJC’s exacting standards of business practice.
We also encourage membership of trade initiatives, such as the Watch & Jewellery
Initiative 2030, which aims to support the industry in building climate resilience,
preserving resources and fostering inclusiveness.
PRODUCT INFORMATION
In line with our goal to help clients make more informed purchasing decisions and
protect clients from any negative consequences or disappointment, we encourage
supplier partners to provide detailed, accurate information about a product’s
features, origins, materials and any potential health and safety risks.
Our ESG Partner Standards detail our requirement for supplier partners to comply
with internationally accepted standards and existing obligations under consumer
protection law and safety legislation.
HUMAN RIGHTS AND MODERN SL AVERY
We are committed to ensuring nobody involved in the production, distribution or
sale of our products is a victim of any form of modern slavery and have measures
in place to identify, assess and mitigate potential labour and human rights abuses
across our value chain.
Our Vendor Code of Conduct includes specific requirements founded on the
conventions of the International Labour Organisation, which are guided by
international human rights principles and encompassed by the Universal Declaration
of Human Rights.
To further demonstrate our commitment to minimising the risk of encountering
human rights issues within our operation and supply chain, in August 2022, we
entered into a three-year partnership with Slave-Free Alliance (SFA).
This international social enterprise, owned by global anti-slavery charity ‘Hope for
Justice’, is supporting our business by reviewing policies, processes, and due
diligence, as well as enhancing training on human rights and labour standards.
In September 2022, key-decision makers and colleagues in roles with an increased
risk of exposure to instances of modern slavery, attended a bespoke training
workshop hosted by the SFA, and in October, we used international Anti-Slavery
Day to launch a wider colleague engagement programme to increase awareness
and understanding of this issue.
In December 2022, the SFA carried out a comprehensive gap analysis of our
operations and in FY24 we will work with them to implement their recommendations,
to further build our resilience to modern slavery and labour exploitation.
There have been no violations reported in relation to human rights by our Group
businesses in FY23. More information on our commitment and approach to human
rights can be found in our Modern Slavery Statement, which is available at
thewosgroupplc.com.
10 8
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 DUE DILIGENCE AND FACTORY AUDITS
The Group is committed to going beyond basic risk management and compliance
within our supply chain to protect human rights and minimise our impact on
the environment.
To manage and monitor supply chain performance and compliance, colleagues with
a responsibility for sourcing are trained to assess environmental and social risks and
identify collaborative opportunities.
We use leading global supply chain management system, EcoVadis, to support
greater transparency and due diligence. The EcoVadis IQ technology helps us map,
monitor and manage sustainability risks within our supply chain using smart
automation and analytics.
Risks are calculated using factors such as the type of goods or service supplied,
geographic location, and criticality to our business and reputation. Partners
deemed ‘High Risk’ may be subject to an on-site independent audit and Corrective
Action Plan.
FACTORY AUDITS
On-site audits help us to safeguard the integrity and reputation of our business
operation and partnerships.
Any supplier partner not exempted from an onsite assessment in the qualification
process, may be asked to undergo an audit to support compliance with our terms.
Audits are carried out by specialist independent auditors with expert knowledge
of local laws and practices. They assess facilities against over 200 indicators
consistent with our terms and conditions and produce a report with a Low to
Critical Risk classification.
The majority of our watch supplier partners operate in countries where high social
standards apply, therefore manufacturers identified as High Risk are primarily
jewellery providers operating in Asia.
In FY23, we audited an initial nine of our 112 watch and jewellery suppliers and
implemented six Corrective Action Plans. On receiving audit reports, we contact
supplier partners directly and allow 30 days for any identified risks to be resolved.
FY23 FACTORY AUDITS
To review
Facilities Audited
After Corrective Action
Total Factories
Audited
Low Risk
Intermediate
Risk
High Risk
Critical Risk
Corrective
Action Plans
Completed
Delisted / not
approved
9
3
9
1
n/a
3
n/a
2
n/a
6
6
0
0
Corrective actions are only resolved when the facility can evidence that the action has been satisfactorily remedied, which can be through the sharing of documentation,
real-time video evidence, an onsite assessment by a trained colleague or a follow-up independent audit.
We are committed to building strong, long-term relationships with all of our partners and will always collaborate to resolve issues, wherever possible. However, if we
find evidence of a serious breach of our terms, we will not hesitate to terminate our contract, make a public disclosure and notify the relevant authorities.
We are in the process of realigning our audit schedule with our revised Vendor Code of Conduct and ESG Partner Standards, and in FY24, we will increase the
total number of supplier partner facilities we audit to 20%. Supplier partners who are accredited members of the RJC are also subject to third party audits as part of
their RJC accreditation.
10 9
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continued
ANIMAL WELFARE
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 (CITES).
We are growing our range of more socially and environmentally preferable product
options, including straps made from vegan friendly materials.
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 by implementing the OECD 5-Step framework which
includes embedding strong management systems, identifying risks, independent
third party audits and transparency.
SUSTAINABLE ACCESSORIES: WOLF
WOLF watch winders, watch cases and travel
rolls are crafted from vegan leather, comprising
recycled plastics and apple leather. Their gift
boxes and packing materials are plastic-free
and made using FSC paper and recyclable
corrugated and cardboard. The company also
uses ocean freight to transport their products,
which is almost fifty times cleaner than by air.
In 2022, WOLF engaged with Positive Luxury
‘Butterfly Mark’
to
attain
accreditation which is an independent, globally respected trust mark awarded
to luxury brands, retailers and suppliers that meet the highest standards of
verified ESG performance.
coveted
a
SUPPLY CHAIN MANAGEMENT
In addition to the EcoVadis IQ technology, which is helping us to identify and
monitor sustainability risks within our supply chain, the EcoVadis system can
facilitate full sustainability assessments of any supplier partner registered through
the platform. Assessments are carried out in line with the Sustainability Accounting
Standards Board (SASB) standards and supplier partners receive a bespoke
scorecard containing details of how their business performs against key sustainability
criteria, as well as guidance on areas for improvement.
In July 2022, we engaged a small number of supplier partners in relation to
participating in a sustainability assessment through EcoVadis. Their feedback
highlighted a need to provide supplier partners with comprehensive information
about our environmental and social goals, as well as a guide to what they could
expect from an assessment. This review led to the development of our ESG
Partner Standards, which provide an overview of the key EcoVadis themes. For
more information see page 83.
The Group is set to participate in an EcoVadis sustainability and carbon performance
assessment in FY24 and will continue to encourage supplier partners to do the
same, in line with our goal to partner with suppliers aligned with relevant well
recognised standards and certifications and further strengthen our supply chain
due diligence.
SANCTIONS
The Group complies with all relevant national and international law and legislation,
which includes all UK Government sanctions and requirements, as well as those
imposed by the US Department of the Treasury and its Office of Foreign Assets
Control and we require our suppliers to do the same.
We continue to cease trade in diamonds, coloured gemstones and precious metals
such as gold, silver and platinum from sanctioned Russian sources.
FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
Our Vendor Code of Conduct and ESG Partner Standards set out our expectations
in relation to freedom of association and collective bargaining and requires
employers to adopt an open attitude towards trade unions and their activities. It is
the Group's policy that 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
An increasing number of our watch suppliers are using recycled gold in their
production processes. 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.
110
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 B R I B ERY, CO R RU P TI O N , TA X ATI O N
A N D H E A LTH A N D SA F E T Y
ANTI-BRIBERY, CORRUPTION & FR AUD
The Board has overall responsibility for the Anti-Bribery, Corruption & Fraud
Policy, which is regularly reviewed by Senior Management and the Audit & Risk
Committee. The Policy reinforces the Board's commitment 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. The Policy sets out
the Group’s protocols in relation to hospitality and gifts.
The Group’s Company Secretary & General Counsel has day-to-day responsibility for
the Policy and reports to the Chair of the Audit & Risk Committee and to the Board
as required. Colleagues are required to complete mandatory elearning annually.
During the year, the Policy was renamed the Anti-Bribery, Corruption & Fraud
Policy (formerly Anti-Bribery & Corruption Policy) and amended to provide
additional clarity and reinforcement of the Company’s aversion to and strict
protocols regarding fraudulent transactions. The Policy was also revised to provide
greater understanding of the protocols surrounding the receiving and giving of gifts
and hospitality. Additional review procedures concerning the gifts and hospitality
register are now in place.
CODE OF ETHICS
During the year, the Board reviewed the Code of Ethics, which can be found on the
corporate website thewosgroupplc.com. The Code of Ethics was further expanded
to support changes made to the governance framework of the Company. This
included; (i) incorporating changes made to the Anti-Bribery, Corruption & Fraud
Policy; (ii) inclusion of the Competition Compliance; (iii) Environment Policy; (iv)
Conflicts of Interest; and (v) Diversity & Inclusion Policy.
ANTI-MONEY L AUNDERING AND SANCTIONS
The Company has an Anti-Money Laundering (AML) Policy which was reviewed by
the Board during the year. The Policy was updated to take into account the trading
status of the Group. The Policy enforces a strict regime in the prevention of anti-
money laundering. The externally facing Group Policy is supported by operational
and local territory specific business policies.
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 all operations and does not operate in any tax havens or use
any tax avoidance schemes.
The Board reviewed the Corporate Criminal Obligations (CCO) Policy which sets
out the Group’s zero tolerance approach to tax evasion; no changes were necessary
from the prior year when the Policy was introduced. 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 are
included in the annual review undertaken by the Senior Accounting Officer. During
the year training was delivered to relevant colleagues, including those in Support
and Retail, and the Directors were provided with awareness documentation, as it
is recognised this is an important part of the legislation. Further information on our
Tax Strategy and CCO Policy 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 26 days to pay in the six-
month period to the end of FY23.
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, INFORMATION SECURIT Y AND CYBER SECURIT Y
We have a responsibility to protect client and colleague personal data and use it
appropriately, both electronic and physical information, from unauthorised access,
processing, modification or destruction in line with all relevant international law
and legislation. We have a dedicated Group Data Protection Officer reflecting the
importance that is placed on this subject matter.
There a number of Group policies relating to data protection, information security
and cyber in place within the Group and all colleagues are required to complete
comprehensive data protection, information security and cyber training, on an
annual basis. Regular phishing tests are also sent to all colleagues. All data protection
policies and procedures are regularly monitored to ensure improvements are
implemented wherever necessary. Further information on how we govern these
associated risks can be found on page 118. The Company's controls and maturity
of the information security and cyber security function are annually audited by an
external provider.
The Company has not experienced any security breaches, including any third party
information breaches, over the last three years and no fines or penalties have
been incurred.
HEALTH & SAFET Y
The Company has a Group Health & Safety Policy which was reviewed and updated
by the Board during the year. Further information on the Company's health &
safety activities can be found on page 72.
WHISTLEBLOWING
It is important for the business to have an open and transparent work culture. We
aim to conduct our 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 & Risk Committee receives a summary of all
protected whistleblowing reports for communication to the Board.
During the year, the Board reviewed the Group’s Whistleblowing Policy, and
agreed some minor enhancements to the wording of the policy to ensure that the
protocols on colleague retaliation were clarified and implemented.
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 acknowledges 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, which provides a global facility where all colleagues
can raise their concerns confidentially, with the option of maintaining anonymity.
Colleagues are required to complete mandatory elearning training annually.
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R ECOG N I S I N G E F F EC TI V E
R I S K M A N AG E M E NT
“Effective risk management is essential in supporting the delivery
of the Group’s strategic objectives, achieving stakeholder value,
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.
The Audit & Risk 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.
Risk is inherent in both the Group’s operations and strategic decision-making. These
risks and uncertainties could impact the delivery of strategic and operational
objectives. Effective risk management helps support the successful delivery of the
Group’s 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 objectives
(the Board’s risk appetite), and challenging management’s implementation of effective
systems of risk identification, assessment, prioritisation, and management.
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.
R I S K M A N AG E M E N T P RO C E S S
Climate-related risks follow the same framework as all other risks impacting the business. Additional information relating to the Group’s
TCFD disclosures, including risk management compliance, governance, strategy, and TCFD related risks, can be found on pages 91 to 105.
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
1
IDENTIFY
– Risk registers are completed by
each business function, identifying
the risks in their areas of control
– The Audit & Risk Committee and
Board identify key risks to the
Group’s strategic priorities
3
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
2
ASSESS
– The likelihood of risk occurrence
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 Trading Board, the Board and
the Audit & Risk Committee,
– 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,
assessed with a target risk position
agreed to reflect the level of risk
that the business is willing to accept
and the lessons learned drive
further mitigation
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
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 through 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
– Emerging risks: risks with a future
potential impact from external or
internal opportunities or threats
– Risk ownership: each risk has a named
owner
Risks are categorised into one of six
categories:
– Likelihood and impact: globally applied
scoring scale
– 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
– Financial
– Operational
– Client
– People
– Regulatory
– ESG
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
– Agrees how the principal risks should be managed or mitigated and over
what timeframe to reduce the likelihood of their incidence or the
magnitude of their impact
– Determines the nature and extent of the principal and emerging risks
– Establishes clear internal and external communication channels on the
faced by the Group and those risks which the business is willing to take
in achieving its strategic objectives (determining its 'risk appetite')
identification of risk factors
– 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 & RISK 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 and emerging 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 assess risk within their business functions and implement
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 showrooms and at other locations
– Provides an objective compliance and monitoring overview
– Identifies non-compliance with key business processes
INTERNAL AUDIT TEAM
Provides assurance to the Audit & Risk Committee through independent reviews of agreed risk areas
– Facilitates updates to the corporate and business function risk registers
– Ensures that principal risk topics are scheduled for regular review by
in 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 & Risk Committee
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 R I S K A P PE TITE
THE UK CORPORATE GOVERNANCE CODE
REQUIRES COMPANIES TO DETERMINE
THEIR RISK APPETITE
Risk appetite is an expression of the amount and types of risk that the Group 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 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 in relation to business strategy, as evidenced through
our growth in the UK, US, and European markets.
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I D E NTI F I C ATI O N , E VA LUATI O N A N D
M A N AG E M E NT O F TH E G RO U P ’ S R I S K S
The 2018 UK Corporate Governance Code (the 'Code') states that the Board is responsible for determining the nature and extent of the principal risks
it is willing to take in achieving its strategic objectives and that it should maintain sound risk management and internal control systems.
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 pages 28 to 31) 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.
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 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 portfolio,
IT systems, colleagues and marketing may be 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 has adapted its strategy to take advantage of online
trading, client appointments and introduced the Luxury Watch
and Jewellery Virtual Boutique to maximise sales
– The Group has diversified its operations through the expansion
of mono-brand boutiques and ecommerce platforms. The
Group operates in the UK and US, and recently entered into
the European market. There is international market
diversification reducing reliance on one territory
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
STR ATEGIC PRIORITIES
Grow revenue, profit and
Return on Capital Employed
Leverage best in class operations
Enhance strong brand partnerships
Expand our 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 partner 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
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.
How we manage or mitigate the risk
– The Group provides the ultimate luxury environment for its
Change in risk
No change
clients to feel welcome, appreciated and supported
– Our Xenia Client Experience Programme further elevates our
Links to strategy
The increased number of registration of interest (RoI) watches
could adversely impact the perceived client experience.
The Group faces competition and any failure by the Group
to compete effectively could result in a loss of market share
or the ability to retain supplier agencies. Long-term consumer
attitudes to diamonds, gold and other precious metals and
gemstones could be affected by a variety of issues, including
concern over the source of raw materials, the impact of mining
and refining of minerals on the environment, labour conditions in
the supply chain, and the availability and perception of substitute
laboratory-created
products, such as cubic zirconia and
diamonds. Equally, longer term consumer attitudes to more
technologically advanced watches, such as 'smart watches' could
reduce consumer demand for luxury watches.
client experience proposition (refer to page 36)
– Exceptional training is provided for our showroom colleagues,
and other client facing colleagues, to allow them to provide the
best client service, along with in-depth product knowledge
– The CRM database allows the Group to engage with the client
on their journey from a potential to a loyal client
– The Group continues to invest in and develop its product
offering to improve the value offered to consumers, retailers,
and manufacturers
– Competitor activity is monitored in detail, enabling strategic
decision-making on key market positions
– 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
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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 talent to manage its
business, and the departure of such colleagues or the failure to
recruit and retain suitable personnel could adversely affect the
Group’s business.
Client experience is an essential element in the success of the
Group’s business, where many clients prefer a more personal face-
to-face experience and have established personal relationships
with the Group’s retail colleagues. An inability to recruit and retain
suitably qualified colleagues, especially with specialised knowledge
of luxury watches and jewellery, would have a material impact on
the Group.
Change in risk
The labour market
remains dynamic,
increasing the Group’s
risk relating to the
ability to recruit and
retain suitably qualified
colleagues.
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 Company’s recognition programmes are in place to
incentivise and motivate colleagues
– The Group operates a share save scheme for all colleagues to
participate in the growth of the Group
– A wide range of training and development programmes are
available to colleagues
– The Colleague Engagement Survey provides an insight into
what colleagues feel would make the Group an even better
place to work
– The Group continually reviews the remuneration and benefits
packages for all colleagues
– A focused project group has been established, with an objective
to monitor and reduce retail labour turnover, particularly in the
first year of employment
– We utilise a two-way engaging communications platform,
Workplace, globally. This social channel underpins Group
communications to colleagues
DATA PROTECTION AND CYBER 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 the UK, US, and European markets, the
regulatory environment surrounding these areas is considered
more complex.
Security breaches and failures in the Group’s IT infrastructure and
networks, or those of third parties, could compromise sensitive
and confidential information and affect the Group’s reputation.
How we manage or mitigate the risk
– Dedicated Group Data Protection Officer in place
– Significant investment in systems development and security
programmes
– Systems vulnerability and penetration testing is carried
out regularly
– The Group Data Protection Committee meets regularly to
review related processes and emerging risks
– Information security and data protection policies, procedures,
and training in place
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.
– Strict access rights are in place to limit access to data and
reports to limited people
– Regular communication with all colleagues on the risk of
'phishing' emails and alerts of identified examples
Change in risk
A heightened risk
across all organisations.
Links to strategy
– Security Information and Event Management (SIEM) tools have
been introduced across the Group’s technology estate
– Our Virtual Private Network (VPN) security controls have
been enhanced considering the increased requirement for use
through working from home arrangements
– Enhanced password security measures have been introduced
globally to decrease the likelihood of a breach
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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 continues to expand 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 our 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 has in place action plans to effectively deal with the
impact of a pandemic on business operations
How we manage or mitigate the risk
– The Group actively monitors both regulatory developments in the
Change in risk
Expansion into new
UK, US and Europe and compliance with existing obligations
territories
Links to strategy
– Clear Group policies and procedures are in place, including, but
not limited to, anti-bribery, corruption and fraud,
whistleblowing, and data protection
– Mandatory induction briefings and training for all colleagues on
regulation and compliance
– Experienced in-house legal team with external expertise sought
as needed
– The established culture and values foster open, honest
communication
– Operational activities have been amended, and continue to be
updated, to comply with guidance provided by the Government
to prioritise the safety of colleagues and clients
– Regulatory compliance reviews form part of the rolling Internal
Audit plan
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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, with planned further expansion in 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,
European 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.
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 current
economic environment
and high inflation rates
in both the UK, US,
and Europe.
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
– Excellent client experience is a key priority of the Group
– The Group undertakes regular client engagement to
understand and adapt the product, offer, and showroom
environment
– The use of impactful, digital-led marketing, along with an
in-depth knowledge of products, makes the Group an authority
in the markets it serves
FINANCIAL AND TREASURY
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.
How we manage or mitigate the risk
– In May 2023, the Group successfully refinanced, entering into a
new £225.0 million multicurrency revolving loan facility with a
five-year term
Change in risk
No change
Links to strategy
– The Group’s net cash position, available funding and cash flow
projections are regularly monitored by management and the
Board
– Exchange and interest rates are regularly reviewed to
determine if hedging should be put in place
The Group is exposed to foreign exchange risk and profits may
be adversely impacted by unforeseen movements in foreign
exchange rates.
– 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
Significantly reduced trading over an extended period, due to a
pandemic, could impact the business’s ability to operate within
committed credit facilities.
forecast and trading
12 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
CLIMATE CHANGE
Principal risk description
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.
increasing cost of energy and potential regulatory
The
mechanisms on direct carbon emissions, may impact business
financials and profit if the Group cannot transition to a more low
carbon business model.
The Group’s reliance on premium raw materials, which are a
finite resource, increases its exposure to resource scarcity, and
the potential increase 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.
STR ATEGIC PRIORITIES
Grow revenue, profit and
Return on Capital Employed
Leverage best in class operations
Enhance strong brand partnerships
Expand our 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 Board has overall responsibility for managing climate-
Change in risk
No change
Links to strategy
related risks, as well as ensuring our strategy creates value and
achieves our Purpose to WOW clients, while caring for
colleagues, our communities and our planet
– Climate-related issues are addressed on a regular basis by the
ESG Committee, which is chaired by Independent Non-
Executive Director, Rosa Monckton
– The ESG Committee challenges our ESG Steering Group on
progress against goals and targets
– Key climate-related risks and opportunities are governed via
our Audit & Risk Committee along with the accuracy and
compliance with ESG-related disclosures, including TCFD
– The ESG agenda continues to evolve rapidly and climate training
has been introduced for Board members to ensure they have
sufficient knowledge for effective decision-making
– The CEO has overall operational responsibility for Climate
Strategy and the mitigation of related risks
– The CFO has day-to-day operational responsibility for
climate-related risks and opportunities and chairs a regular ESG
Steering Group, which reports into the ESG Committee
– The Group has a dedicated Head of Sustainability and ESG,
who has significant experience in relation to climate change
– The ESG Steering Group is responsible for assessing and
managing climate-related risks and opportunities against KPIs
aligned to our ESG pillars of ‘People, Planet and Product’ and
ensuring all operational matters in respect to our ESG Strategy
are fully embedded into our business strategy and operation
– Each ESG pillar is supported by Working Groups, which include
senior operational managers, with input from external consultants
121
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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
GO I N G CO N C ER N
The Directors consider that the Group has, at the time of approving the
Group Consolidated 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 £170.0 million in available
committed facilities, of which £120.0 million was drawn down. Net cash at this date
was £16.4 million with liquidity headroom (defined as unrestricted cash plus
undrawn available facilities) of £171.6 million. The $60.0 million US Asset Backed
Loan (ABL) expired in April 2023, and the main UK bank facility of £170.0 million
was due to expire in June 2024. Subsequent to the period end, on 9 May 2023, the
Group signed a new five-year £225.0 million multicurrency revolving loan facility
with lenders. The existing facilities were repaid and extinguished on this date. As a
result, the going concern assessment has been carried out using the new £225.0
million facility now in place.
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.
The new £225.0 million facility covenants are in line with those previously used,
notably on a pre-IFRS 16 basis and excluding share-based payment costs. Net debt
to EBITDA is defined as the ratio of total net debt at the reporting date to the last
12 month 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. At 30 April 2023 the
Group comfortably satisfied the covenant tests with net debt to EBITDA being less
than 3 and the FCCR exceeding 1.6.
The budget aligns to the Guidance given on page 12. Under this budget, the Group
has significant liquidity and comfortably complies with all covenant tests to
31 October 2024.
– Reverse stress-testing of cash flows during the going concern period was
performed. This determined what level of reduced EBITDA and worst case
cash flows 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
– The realisation of material risks detailed within the Principal Risks and
Uncertainties on pages 116 to 121 and environmental risks highlighted
on pages 98 to 100.
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
In assessing whether the going concern basis of accounting is appropriate, the
Directors have reviewed various trading scenarios for the period to 31 October
2024 from the date of this report. These included:
– The budget approved by the Board in May 2023. The budget assumes that the
more challenging trading environment of the second half of FY23 will continue
into the first half of FY24.
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 2024. For
this reason, the Board considers it appropriate for the Group to adopt the going
concern basis in preparing the Group Consolidated Financial Statements.
Further key assumptions include:
– A continued strong luxury watch market in the UK, US and Europe
– Revenue forecast supported by expected luxury watch supply
– Increased cost base in line with macroeconomic environment and
environmental targets
122
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 V I A B I LIT Y STATEM ENT
In accordance with Provision 31 of the UK Corporate Governance Code
2018 (the Code), 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 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 (pages 24 to 25), strategy (pages 28 to 31) and
its principal risks and mitigating factors (pages 116 to 121). In addition, the Board
regularly reviews the financial position of the Group, its liquidity and financial forecasts.
The Group’s Long Range Plan was endorsed by the Board in April 2021. FY22 and
FY23 significantly outperformed this Long Range Plan. The FY24 budget has been
used as the base for the first year of the viability assessment period, and the Long
Range Plan is used for the outer years. The budget aligns to the Guidance given on
page 12.
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
On 9 May 2023 the Group signed a new five-year £225.0 million multicurrency
revolving loan facility with lenders. The existing facilities were repaid and
extinguished on this date. As a result, the viability assessment has been carried out
using the new £225.0 million facility now in place.
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 testing remains on a pre-IFRS 16 basis and excludes share-based payment
costs. Net debt to EBITDA is defined as the ratio of total net debt at the reporting
date to the last 12 month 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. At 30 April
2023 the Group comfortably satisfied the covenant tests with net debt to EBITDA
being less than 3 and the FCCR exceeding 1.6.
During the three-year viability period, the Group anticipates that it will comfortably
comply with the net debt to EBITDA and FCCR covenants at each six-month
interval from October 2023 to April 2026.
ASSESSMENT OF VIABILIT Y
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 level of inflation and the
cost-of-living crisis, together with a number of environmental matters.
During the normal cycle of strategic planning, budgets and forecasts are approved
by the Board at the end of each financial 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 116 to 121. 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 to be remote
– Severe but plausible scenarios of a 10% reduction in sales against the budget
(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 non-compliance has been evaluated and
would not result in a breach of the facility covenants
Whilst global economic factors could impact the Group, the 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 have 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
12 July 2023
123
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 124
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 2
CO R P O R ATE
GOV E R N A N C E
R E P O RT
C O N T E N T S
126 Corporate Governance At a Glance
128 Chair’s Introduction
130 Board of Directors
132 Corporate Governance Statement
143 Board and Committees Effectiveness and Evaluation
144 Nomination Committee Report
148 Audit & Risk Committee Report
154 ESG Committee Report
156 Remuneration Committee Report
Chair’s Statement
Fairness, Diversity and Wider Workforce Considerations
At a Glance
Summary Remuneration Policy
172 Directors’ Report
125
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS
Balance of the Board
2
5
Non-Executive Directors
Executive Directors
C O R P O R AT E G OV E R N A N C E R E P O RT
CO R PO R ATE GOV ER N A N C E
AT A G L A N C E
COMPLIANCE WITH THE CODE
The Watches of Switzerland Group PLC Board
is collectively responsible for promoting the
long-term success of the Group and establishing
the Company’s purpose and values, culture and
setting strategy. We believe this can only be
achieved through effective governance and by
ensuring that the interests of each of our
stakeholders remain at the core.
We apply the principles and supporting
the 2018 UK Corporate
provisions of
Governance Code covering: Board leadership;
Company purpose; division of responsibilities;
composition; audit; risk and internal control;
and remuneration.
Board Members By Gender
For further information please see pages 133
to 143.
You can find our Corporate Governance
Statement on page 132.
3
COMPOSITION, SUCCESSION & EVALUATION1
Balance of the Board
Board Members By Gender
Director Tenure
Board Members by Ethnicity
2
3
5
1
1
4
4
2
Non-Executive Directors
Executive Directors
Male
Female
Director Tenure
Board Members by Ethnicity
0–1 year
1–3 years
More than 3 years
1
1
6
White
Mixed/Multi Ethic background
4
4
2
6
White
Mixed/Multi Ethic background
6/8
Male
Female
“We believe that good governance
provides the framework for
stronger value creation and lower
risk for stakeholders.”
IAN CARTER
CHAIR
0–1 year
1–3 years
More than 3 years
1 As at the date of this report.
BOARD EXPERIENCE
BOARD SKILLS
Information technology
Internal audit and risk
International experience
Retail experience
ESG
Culture and stakeholders
Corporate finance
126
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 BOARD AND COMMITTEE ATTENDANCE
Director
Ian Carter
Brian Duffy
Bill Floydd
Tea Colaianni
Rosa Monckton¹
Robert Moorhead
Chabi Nouri²
Board
Audit & Risk
Remuneration
Nomination
ESG
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
6
6
6
6
6
6
6
6
6
6
6
5
6
6
n/a
n/a
n/a
4
4
4
4
n/a
n/a
n/a
4
3
4
4
3
n/a
n/a
3
3
3
n/a
3
n/a
n/a
3
2
3
n/a
3
n/a
n/a
3
3
3
n/a
3
n/a
n/a
3
2
3
n/a
3
3
n/a
3
3
3
3
3
3
n/a
3
2
3
3
1 Rosa Monckton was unable to attend one of the Board meetings due to having COVID-19. Rosa had received the papers in advance of the meeting and had provided comments to the Chair in advance of the
meeting. Rosa also received the minutes of the meeting.
2 Chabi Nouri was appointed to the Audit & Risk Committee with effect from 1 July 2022.
MATTERS RESERVED FOR THE BOARD
Below is a summary of the key matters reserved for the Board. The full document can be viewed on the corporate website thewosgroupplc.com
STR ATEGY & MANAGEMENT
C APITAL ALLOC ATION AND STRUCTURE
– Overall leadership of the Company
– Annual budgets and business plans
– Changes relating to the Group’s capital or material corporate structure
– Major capital projects or property leases
– The Group’s purpose, values and strategy, ensuring an alignment with
– Significant acquisitions or disposals
the Group’s culture
– Extension of the activities into new areas or territories and cessation
of operations of material parts
– Changes to the Group’s management and control structure
FINANCIAL REPORTING , RISK AND CONTROL
CORPOR ATE GOVERNANCE
– Financial results and announcements relating thereto
– Policies and procedures to ensure independence and effectiveness
of internal and external audit functions
– Dividend policy and dividend payment recommendations
– External Auditor appointment or removal
– Establishing procedures to manage risk and oversee the internal
control framework
– Delegation of authorities, including the division of responsibilities
between the Chair of the Board and the CEO and Delegated Levels
of Authority
– Policies and practices to ensure consistency with the Company’s
purpose, values and strategy
– Material Group policies and statements and any major changes
– Review of the Group’s overall corporate governance arrangements
STAKEHOLDER ENGAGEMENT
PEOPLE AND LE ADERSHIP
– Matters requiring shareholder approval
– Board and Committee constitutions and Committee Terms
– Circulars and significant shareholder communications
– Ensuring effective engagement and participation from stakeholders
– Description of stakeholder interests and how they were considered in
of Reference
– Appointment or removal of directors and the Company Secretary
– Non-Executive Director fees
the Board’s decision-making process in the Annual Report and Accounts
– Ensuring the Board and its Committees have a combination of skills,
experience and knowledge
127
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
C H A I R' S I NTRO D U C TI O N
IAN CARTER
C H A I R
“The ESG Committee has
made substantial progress in
developing and overseeing the
Group’s ESG Strategy.”
IAN CARTER
CHAIR
Welcome to the Corporate Governance Report, which I am pleased to
present on behalf of the Board for the financial year ended 30 April 2023.
The report that follows, in conjunction with the other Committee reports,
provides details of our robust governance and risk management, our effective
engagement with stakeholders and compliance with the principles and provisions
of the Corporate Governance Code 2018.
The Board believes that effective governance leads to better decision-making and
that the robust framework should be embedded within every level of the
organisation. As a result of the prior year’s externally facilitated Board Evaluation
recommendations, and to ensure our governance framework continues to evolve,
a number of activities were carried out during the year. This included a Group
stakeholder review, a directors’ skills survey and a governance mapping exercise of
the key meetings and decision-making forums below the Board and its Committees.
As previously announced, we appointed Chabi Nouri, as a Non-Executive Director
and member of the ESG Committee with effect from 1 May 2022. Having
considered the composition and balance of the Board, including all aspects of
diversity, including the range and balance of skills, experience and background, as
well as succession planning priorities, the Nomination Committee recommended
Chabi’s appointment. Particular consideration was given to her international
experience and expertise in the luxury watch and jewellery markets. Chabi was
subsequently appointed to the Audit & Risk Committee given her extensive
financial experience. Chabi’s skill set has proved exceptionally valuable to Board
discussions and to her roles on the Committees.
During the year, the Nomination Committee held a dedicated session on Senior
Management succession and talent mapping in order to strengthen and promote
key positions as appropriate.
The Board also considers succession at senior leadership level and throughout the
organisation. Given the global growth of the organisation and the clear separation
of the UK, US and European markets last year, two new roles were created,
President UK & Europe and President North America & Deputy CEO. Both
individuals are flourishing in their new roles and changes made to the organisation’s
structure have proved to be effective. At the same time, a new Group role,
Executive Director Global Buying and Merchandising, was created. This role has a
global remit and is accountable for managing our product strategies and representing
our interests with our brand partners and other suppliers. Eric Macaire was
appointed to this role and to the Trading Board. Eric joins us with considerable
international experience particularly in leading global strategies for watches and
jewellery and I am pleased to welcome Eric to the Group.
For further information on the Nomination Committee please see the report from
pages 144 to 147. For a wider understanding of the skills and experience of the
Board see the biographies on pages 130 to 131.
Anders Romberg rejoined the Group as CFO with effect from 12 May 2023, when
Bill Floydd stood down from the Board, as a result of challenges with his travel
commitments. We would like to thank Bill for his valuable contribution to the
Group and we wish him well for the future.
128
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Rosa’s feedback, along with the annual Colleague Engagement Survey, helps us to
ensure that our colleagues’ perspectives are considered by the Board and
Committees during their decision-making process.
More information on the Board’s decision-making, as well as the interests of each
of its stakeholders, can be found on pages 51 to 53 and 136 to 137.
ANNUAL GENER AL MEETING
I look forward to engaging with you at the forthcoming AGM which is scheduled to
take place on 31 August 2023, commencing at 3.30pm 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
communicated to shareholders and made available on our corporate website
thewosgroupplc.com.
FOCUS FOR FY24
The Board continues to recognise the value of having strategic debate in the
boardroom and regularly reviews the Group’s performance and capital expenditure
proposals against its long-term strategic objectives. The Board discusses the
presentations, questioning and challenging the Executive Directors on their
assumptions and conclusions.
The Board looks forward to continuing to support both the UK and the US
Foundations and serving the communities within which our businesses and
colleagues are based.
IAN CARTER
CHAIR
12 July 2023
DIVERSIT Y AND INCLUSION
Another area of focus and importance considered by the Board during the year
was diversity and inclusion. The Board recognises the importance of these matters
both in the boardroom and throughout the organisation. This includes the benefits
of recruiting leaders who represent a diversity of gender, ethnicity, cognitive
strengths and socio-economic, educational, and professional backgrounds to
reflect the diverse communities we serve and society as a whole. The importance
of diversity and inclusion has been promoted both at Board level and down
throughout the organisation and is an integral part of the Group’s values.
The last decade has seen a change at the top of many British companies, with the
FTSE Women Leaders Review being at the forefront of increasing the number of
women on FTSE 350 boards and senior leadership teams. Whilst the new
recommendations of the FTSE Women Leaders Review encourage compliance by
the end of 2025, the Company already meets these recommendations.
I am also pleased to report that the Board has met 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.
Significant headway has been made to progress the Group’s Diversity & Inclusion
Strategy during the year. Additional information on diversity in the boardroom can
be found in the Nominations Committee Report on page 146 and on the activities
being carried out through the organisation can be found in the People Strategy on
pages 64 to 65.
Our succession planning and future recruitment continue to consider diversity as
set out in our Board Diversity & Inclusion Policy, which can be found on our
corporate website thewosgroupplc.com.
ESG
I am pleased to report that our ESG Committee has made substantial progress in
developing and overseeing the Group’s ESG Strategy which was endorsed by the
Board in March 2023. Achievable targets and metrics have been set and work has
begun on addressing them. The Board understands the importance of doing
business the right way and operating in a sustainable manner. ESG has now become
increasingly important amongst stakeholders and companies face unprecedented
risks if they fail to attend to relevant ESG issues. Driving forward the Group’s ESG
Strategy continues to be one of the Board’s key priorities.
STAKEHOLDER CONSIDER ATIONS
During the year, the Board held one of its Board meetings in the US – the first visit
since the Company’s IPO in 2019. This visit was the perfect opportunity to meet
with colleagues and other key stakeholders, particularly given the growth of the US
business which now represents over 40% of the Group’s revenue. Further
information on the US Board trip can be found on 135.
Rosa Monckton continues as our Designated Non-Executive Director for
Workforce Engagement, providing information to the Board on key areas of
interest and concern from our colleagues. Rosa’s attendance at the Listening
Forums, both UK and US specific, as well as our Global Listening Forum ensures
that the Board remains increasingly visible amongst our colleagues. After each
Forum, Rosa reports back to the Board on her findings.
129
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS B OA R D O F D I R E C TO R S
E X PER I EN C ED LE A D ER S
G U I D I N G O U R F U T U R E
A P P O I N T E D
B I O G R A P H Y
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
ANDERS ROMBERG
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
12 May 2023
senior positions
Ian brings over 30 years of international
and retail experience, having held a
number of
at
consumer-facing and luxury companies.
Ian currently serves as a non-executive
director with Servpro Industries, LLC,
owned by Blackstone, where he is the
Chair of the Audit Committee. Ian
joined Hilton International as CEO in
London in 2005 becoming an integral
part of the 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. Ian has significant
experience as a non-executive director
having served on a number of boards in
the UK and the US, including Burberry
Group PLC and Chair of the Del Frisco
Restaurant Group, listed in the US.
Brian has served on several boards
across the fashion, retail and sports
sectors and has been the CEO of the
Group since 2014. Brian 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.
Brian is the Chair of The Watches of
Switzerland Group Foundation and
was appointed as the Chair of the
Prince’s Trust Retail, Leisure and
Hospitality Fundraising Leadership
Group in January 2023.
transforming
taking
Anders was reappointed to the Board
in 2023 as Chief Financial Officer.
Anders was previously the CFO at the
Watches of Switzerland Group from
the
to 2022,
2014
business globally and
the
Company
from private to public.
Before this Anders was with at Ralph
Lauren serving as Chief Financial
Officer and Chief Operating Officer for
Europe, Middle East and Africa, and
Chief Operating Officer for Asia Pacific.
He has previously held senior finance
roles at Gillette and Duracell.
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. Ian has considerable
experience in the understanding of
matters of a strategic nature. He also
has significant experience as a non-
executive director.
acumen
Brian brings to the Board significant
international experience,
retail and
financial
in-depth
and
understanding of the global luxury watch
and jewellery sector. Brian’s corporate
experience is relevant to the governance
of a listed company and includes culture
and stakeholder considerations.
Anders brings to the Board extensive
experience at senior management
level of accounting and operational
matters, including IT and cyber, and
has extensive experience
the
in
international luxury retail sector.
C O M M I T T E E M E M B E R S H I P
Nomination (Chair)
Remuneration
ESG
ESG
130
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
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 R C E E N G AG E M E N T
7 May 2019
7 May 2019
7 May 2019
1 May 2022
Tea 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 she
chairs the Remuneration Committee)
and SD Worx NV. Tea is the Founder
and Chair of WiHTL – Diversity in
Hospitality, Travel and Leisure and
Diversity in Retail (DiR).
luxury
Rosa has over 20 years’ experience in
the
jewellery and watch
sectors, and was appointed as a Non-
Executive Director
in 2014. Her
experience includes setting up Tiffany
& Co in the UK, 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 has significant experience in the
retail sector and was appointed as a
Non-Executive Director
in 2018.
Robert currently serves as Chief
Financial Officer and Chief Operating
Officer of WH Smith PLC, and was
previously
at
Specsavers Optical Group and Finance
and IT Director at World Duty Free
Europe Limited. Robert is an ICAEW
Chartered Accountant.
Finance Director
Chabi has over 20 years’ experience in
the luxury jewellery and watch sectors
and was appointed as a Non-Executive
Director in 2022. Chabi has particular
experience in the jewellery sector for
marketing and merchandising, being
responsible for Cartier’s creative and
fine jewellery collections and serving
as the Chief Marketing Officer of
Piaget, appointed as head of the
company in 2017. Chabi is currently a
non-executive director of Lucid
Group, Inc, an automotive and luxury
consumer goods business listed on the
US Stock Exchange and a Private
Equity Partner with Mirabaud Asset
Management. Chabi is a Swiss citizen
and a graduate of the University of
Fribourg. Chabi is a member of the
Young Presidents’ Organization.
Yes
Yes
Yes
Yes
DWF Group PLC
SD Worx NV
Team Domenica
WH Smith PLC
Tea brings to the Board a wealth of
experience in HR strategy governance
and consumer facing industries and
has particular regard to diversity,
equity and inclusive matters. Tea has
significant experience as a non-
executive director including extensive
and
all
current experience of
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 and
watch industry. Rosa’s ESG experience
includes diversity and inclusion initiatives
and a deep understanding of the charity
sector, this enables Rosa to carry out
her role as Chair of the ESG Committee.
Robert brings to the Board extensive
experience in the retail sector as well
as recent relevant and up to date
financial and information technology
and cyber experience which enables
him to carry out his role as Chair of
the Audit & Risk Committee.
Mirabaud Asset Management.
Lucid Group, Inc
Chabi brings to the Board significant
international experience of the luxury
watches and jewellery retail industry.
Chabi has relevant experience and
acumen in strategic matters.
Nomination
Audit & Risk
Remuneration (Chair)
ESG
Nomination
Audit & Risk
Remuneration
ESG (Chair)
Nomination
Audit & Risk (Chair)
Remuneration
ESG
Audit & Risk
ESG
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C O R P O R AT E G OV E R N A N C E R E P O RT
CO R PO R ATE GOV ER N A N C E STATEM ENT
CORPOR ATE GOVERNANCE
STATEMENT 2023
This Corporate Governance Statement explains
key features of 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
transparency
openness,
throughout the business, through our actions
and conduct, policies and communications.
integrity
and
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
Disclosures required by the Disclosure Guidance and Transparency Rules DTR 7.2.6 with regard to share capital
are presented in the Directors’ Report on page 172. Disclosures required by DTR 7.2.8 relating to diversity
policy are presented in the Nomination Committee Report on page 146. Information concerning diversity and
ethnicity as required under Listing Rule 9.8.6R(10) can be found on page 140 and in the Nomination Committee
Report on page 146.
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
Purpose, values and culture
Environmental, Social and Governance
Page
112
174
174
173
174 to
175
63
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 2018 issued by the
Financial Reporting Council (FRC) in July 2018. 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 126 to 175, including the various Board Committee Reports (on pages 144 to 171), 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 2023
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
12 July 2023
LAURA BATTLEY
COMPANY SECRETARY
12 July 2023
UK CORPORATE GOVERNANCE CODE 2018
1
DIVISION OF
RESPONSIBILITIES
2
BOARD LEADERSHIP
& COMPANY PURPOSE
READ MORE:
Page 133
READ MORE:
Page 138
3
COMPOSITION,
SUCCESSION &
EVALUATION
READ MORE:
Page 140
4
AUDIT, RISK
MANAGEMENT &
INTERNAL CONTROL
5
REMUNER ATION
READ MORE:
Page 142
READ MORE:
Page 142
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
GOV ER N A N C E F R A M E WO R K
The Board believes that it facilitates the operation of an open and straight forward culture without complex hierarchy and over-delegation of responsibilities. The
structure of the Board and its governance framework is set out below.
SHAREHOLDERS
BOARD
The Board of Directors is headed up by the Chair.
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.
BOARD COMMITTEES
The Terms of Reference for each Committee are documented and agreed by the Board. They are annually reviewed and where necessary updated and are available
on the corporate website thewosgroupplc.com.
Their key responsibilities are set out below.
NOMINATION COMMITTEE
Undertakes an annual review of
Board appointments, the talent
pipeline and succession planning.
Ensuring that the membership and
composition of the Board, including
the combination of skills and
diversity, remains appropriate.
AUDIT & RISK 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 ensures
the necessary resources and access
to information are 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, oversees
any ESG strategic goals, targets and
Key Performance Indicators.
Nomination Committee Report
on pages 144 to 147
Audit & Risk Committee Report
on pages 148 to 153
Remuneration Committee Report
on pages 156 to 171
ESG Committee Report
on pages 154 to 155
EXECUTIVE DIRECTORS
The Executive Directors are the CEO and the CFO who are responsible for the day-to-day operational running of the business.
Further information on their respective roles and responsibilities can be found on page 134.
TR ADING BOARD
The CEO has delegated authority for the day-to-day management of the business to operational management comprising other Executive Directors, the Company
Secretary & General Counsel and senior leaders who have responsibility for their respective areas.
The Trading Board meets weekly and considers key business matters including weekly trading, capital expenditure and business reviews whilst also focusing on risk
management of the business areas, Xenia development, people matters, strategy preparation and implementation, merchandising and specific areas of training, such as,
competition compliance.
KEY STEERING GROUPS, SUB COMMITTEES & WORKING GROUPS
Underneath the Trading Board, there are a number of key steering groups made up of Senior Management and other colleagues, who are tasked with delivering
key projects or ensuring compliance and the monitoring of risks within important business areas including; ESG; Cyber; Data; Europe; Xenia; and Health &
Safety. There are also a number of functional working groups which support the Steering Groups. For further information on the ESG Governance Framework
see page 58.
133
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
KEY ROLES AND RESPONSIBILITIES
There is a clear division of responsibilities between the Chair and the CEO, which is set out in writing and has been agreed by the Board. This can be found at our
corporate website at thewosgroupplc.com.
The Board biographies are included on pages 130 to 131.
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
Chief Executive Officer
Chief Financial Officer
Senior Independent Director
Non-Executive Directors
Designated Non-Executive
Director for Workforce
Engagement
Company Secretary & General
Counsel
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
– Management of the day-to-day operations of the Group
– Develops the Group’s strategic objectives for consideration and approval by the Board
– Implements the strategy approved by the Board
– Leads the Trading Board and Senior Management
– Manages the Company and the Group
– Ensures effective and ongoing communication with investors
– Manages all aspects of the Group’s financial affairs
– Works with the CEO to develop and implement the Group’s strategic objectives
– 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 investors
– 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 investors if they have concerns which the normal channels through the Chair, CEO or other Directors have
failed to resolve
– Are all independent, experienced and influential individuals from a diverse range of industries, backgrounds and countries
– Provide constructive contribution and challenge to the Executive Directors regarding the development of the strategy
– 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
– Gauges the views of 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 colleagues
– Ensures the Board takes appropriate steps to evaluate the impact of proposals and developments on colleagues and
considers what steps should be taken to mitigate any adverse impact
– Supports the Board and its Committees with their responsibilities and ensures information is made available to Board
members in a timely fashion
– Supports the Chair 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 investors and organises the AGM
134
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 GOV ER N A N C E I N AC TI O N
BR AND DEEP DIVE
Consideration of stakeholder views/interests
The Watches of Switzerland Group has established, strong and long-standing
relationships with our brand partners. We offer the most prestigious and
recognised luxury watch and jewellery brands.
We create value by collaborating with our long-standing brand partners to
elevate and expand their distribution and partner on-demand forecasting,
product launches, showroom projects, online clienteling, marketing events and
elearning and development for our colleagues.
The Board plays a critical role in ensuring that the strategic objectives are delivered,
enabling the Group to expand, grow and develop. This is aided by considering the
interests of the Group’s key stakeholders, including brand partners.
Although the Directors, on our Board, possess a wealth of luxury experience, it is
recognised that a deeper understanding of our product offering, our brand
partner relationships and their respective business models will provide additional
strategic oversight and will add value to, and enhance, Board discussions.
Considerations of the interests of key stakeholders, including brand partner
relationships, and a greater understanding of products helps the Board to make
better informed decisions regarding our Group Strategy.
To develop further the Non-Executive Directors’ skills and experience and to
gain a better understanding of the luxury watch industry, and brand partners, a
detailed presentation was provided to the Board, by Mark Toulson, Global Head
of Watch Buying, our resident leading watch industry expert with 17 years
experience and a member of our Senior Management team, outside of scheduled
Board meetings.
As part of the deep dive session, the Board considered product offerings and
how they support the Long Range Plan and the Group’s strategic objectives.
Further considerations included an overview of strategic brand partners, and the
risks associated with the products.
The Board also considered the history of Swiss watches, design features, trends
and the increasingly important and innovative sustainability developments that
the brand partner is working towards both solely and in collaboration with the
Group as part of the ESG Strategy.
As the Group continues to expand, this brings new risks and demands, the
development of the Board’s knowledge will help ensure a better understanding
of key stakeholder needs.
US BOARD TRIP
During the year, for the first time since the IPO in 2019, the Board met in the US,
not only for its scheduled Board meeting, but also to conduct a comprehensive
market review and meet with key stakeholders.
1. Colleagues – the Board conducted a number of boutique and showroom
visits (both watches and jewellery), meeting retail colleagues and gaining a
greater understanding of the differences between UK and US retail and client
experiences. The Board also met with Support Centre colleagues both in the
Fort Lauderdale offices, and Analog:Shift in New York, including a number of
members of the senior leadership both informally and formally.
2. Clients – the Board received an update on Xenia, our unique Client
Experience Programme, and how it had been embedded into the US
business. The Board considered how the Group differentiates itself through
Xenia, and the visit gave the Board the opportunity to view the Xenia
experience first-hand.
3. Brand partners – the Board considered an overview of the relationships
with key brand partners in the US, from the CEO and the President North
America & Deputy CEO. The Board conducted a number of showroom and
boutique visits and was able to visit new projects not yet opened, including
the Watches of Switzerland American Dream and One Vanderbilt. The
Board also conducted a brand deep dive and received an in-depth
presentation from the CEO of Grand Seiko, followed by a visit to the newly
opened Grand Seiko mono-brand boutique.
4. Investors – the Board considered US investor relations strategy having
particular regard to the differences in the expectations of UK and European
investors as compared with US investors.
5. Communities – the Board received an update on the evolution of The
Watches of Switzerland Group US Foundation and the volunteering
opportunities which had been introduced to colleagues. The Board met with
the US representative of the US Foundation, Lorrie Nelson, Regional Vice
President, to learn more about the volunteering and enthusiasm of colleagues
in embracing the Foundation and other charitable initiatives which were
being embarked upon.
6. Circular economy – the Board met the management team of Analog:Shift
to gain a better understanding of the pre-owned business model and was
able to review a wide range of pre-owned timepieces. The management
team provided details on the history of the business and the Board considered
how it linked to the Group’s ESG Strategy.
7. Post-acquisition integration – the Board visited the recently acquired
Betteridge business in Greenwich, Connecticut, meeting colleagues,
understanding integration successes and challenges, including cultural
differences. The Board gained insight into how the Group’s purpose and
values had been embedded within the Betteridge business and how the
Xenia Client Experience Programme was being actioned. The Board
considered the key areas of integration and lessons learned for consideration
for future acquisitions. The Board also considered potential growth
opportunities for the jewellery business in the US.
8. Market review – the Board visited two competitor stores to review the
differences in terms of client experiences, showroom design and product
offering. David Hurley, President North America & Deputy CEO presented
to the Board a comprehensive overview of the US market.
9. Infrastructure
integration – the Board considered the current
infrastructure and the changes required to support future growth in the US.
This included, people, organisational structure, systems and physical
infrastructure, such as the corporate offices, expansion of pre-owned and
the distribution centre.
135
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
B OA R D K E Y A R E A S O F F OC U S
I N F Y 23
Link to
Strategy
Relevant stakeholders
considered
Strategy
Performance
Approved strategy at the Board Strategy Day, considering progress
against the Long Range Plan and prioritising areas of focus
Considered key strategic matters, including emerging trends, client
behaviour and future expectations, and brand relationships
Received reports from the CEO and CFO, including progress against
strategic objectives, from each business area, on trading, business
performance, financing and strategy implementation
Approved the renewal of the Group financing arrangements
Approved various US business development activities, including
showroom developments, acquisitions, and various other projects
including the new Fort Lauderdale Support Office move in the US
Reviewed regular updates on business performance by market, and
territory including brand performance
Received progress updates for the showroom portfolio development,
including refurbishment of the showrooms, luxury Goldsmiths elevation
and expansion of the mono-brand boutiques
Received an update on the Group’s approach to marketing as part of the
multi-channel strategy
Finance
Approved the FY24 Group budget, business plan and material capital
expenditure projects
Scrutinised, on an ongoing basis, performance against budget
and forecasts
Reviewed capex and payback on showroom refurbishments, showroom
openings and acquisitions
Leadership, people,
values and culture
Approved a new global People Strategy and changes to the Leadership
Team to support delivery of the Long Range Plan and strategic priorities
Considered culture and reviewed the purpose and values as part of the
new People Strategy outcomes
Reviewed the outcome of the externally facilitated Board Evaluation
and progress against the action plan
Received feedback from colleagues including the Listening Forums and
the Colleague Engagement Survey and considered proposed action plans
Considered succession planning for the Board and Senior Management
Received updates from Diversity Council meetings. Approved
and enhanced Board Diversity & Inclusion Policy
Approved the Group’s Diversity & Inclusion Strategy
Approved the annual Gender Pay Gap Report
Environment and
community
Approved the ESG Strategy, key metrics and targets
Considered sustainable product ranges as part of the Group’s ESG Strategy
Reviewed and approved the annual Modern Slavery Statement
Agreed the continued support of The Watches of Switzerland Group
Foundation and the continued funding of various other charity initiatives
Considered the proposed ESG priorities
Received updates on climate change, the Group’s carbon road map, the
Group’s new targets and net-zero ambitions
136
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
S T R AT E G I C P R I O R I T I E S
S TA K E H O L D E R S
Grow revenue, profit and
Return on Capital Employed
Leverage best in class operations
Clients
Enhance strong brand partnerships
Expand our multi-channel leadership
Colleagues
Investors
Communities
Deliver an exceptional client service
Continue to advance the ESG agenda
Brand partners and other suppliers
Drive client awareness and brand image
Link to
Strategy
Relevant stakeholders
considered
Governance and
corporate
responsibility
Risk management
and internal controls
Agreed the evolution of the Audit Committee to the Audit & Risk Committee
Considered the composition and effectiveness of the Board
Approved the appointment of Chabi Nouri to the Audit & Risk Committee
Approved new and updated Group policies, including Competition
Compliance, Code of Ethics, Anti-Bribery, Corruption & Fraud and
Anti-Money Laundering
Considered the annual review of principal and emerging risks, including
any changes to the risk profile
Approved the Group’s risk appetite
Approved a revised methodology to calculate Group risks to enhance
the identification process
Approved the effectiveness of the Group’s systems of internal control
and risk management framework
Conducted a review of Group’s cyber security programme and maturity
assessment, including risks and mitigation
Renewed the terms of the 2024 Insurance Renewal programme, and
approved enhanced cover for the Directors & Officers Liability Policy
Stakeholder
engagement
Brand partners and other suppliers:
– Regular updates on brand performance, relationship, supply and
engagement
– Attended a product review for luxury watches, market trends, new
lines and exclusives and how they support the Long Range Plan and
strategic objectives
Investors
– Received regular Investor Relations Updates
– External presentations from corporate brokers
– Received feedback following meetings with investors, particularly in
relation to the new and ongoing Remuneration Policy
Colleagues:
– Received feedback from the Designated Non-Executive Director for
Workforce Engagement, Senior Management and colleague Listening
Forums
– Received feedback from the Diversity Council
Clients:
– Received feedback from President of UK & Europe and President of
North America & Deputy CEO on clienteling, exhibitions and events
– Reviewed updates on how Xenia is being further embedded into retail
– Received statistics on client surveys and online media surveys, all
showing improvements from prior years
137
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
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 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, their membership, responsibilities
and activities, during the year, are detailed on pages 130 to 131.
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, thewosgroupplc.com. Further details regarding the role and activities of
the Board can be found on pages 136 to 137.
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’s purpose and values can be found on page 01.
The Company Secretary & General Counsel ensures that as the Board makes
decisions, the impact on any of the stakeholder groups is considered. During the
year, given the expansion of the Group and evolution of stakeholders and their
interests, the Board reviewed its key stakeholders via a ‘mapping exercise’ to
support strategic focus (including ESG strategy), ensure the interests of each of
those stakeholders are appropriately considered as part of Board decision-making;
and to better manage risks.
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 Strategy Day
and a number of ad hoc meetings were held to cover approvals which arose outside
of the scheduled meetings.
The Board travelled to the US for one of the scheduled Board meetings and further
details can be found on page 135. Additionally, the Board held a meeting in one of
the London showrooms and it is the intention of the Board to hold a meeting,
during FY24, in the new Support Centre in Leicester.
The table on page 127 indicates the number of scheduled Board and Committee
meetings, and attendance, during the financial year.
During the year, the Non-Executive Directors held three meetings 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 skills, 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 UK Corporate Governance Code 2018 (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. As
part of succession planning considerations, and following the prior year Board
Evaluation recommendations, the Nomination Committee facilitated a skills survey,
the results of which can be found on page 126. The results of the survey were
considered as part of the Board Evaluation and will be used to assist future succession
planning reviews and to assess and identify any suggested areas of training or
increased awareness.
INFORMATION AND SUPPORT
The Board discharges its responsibilities through an annual programme of Board
meetings. Papers and presentations are given to the Board (and its Committees) to
focus its oversight on key areas of the business. This information helps to facilitate
effective decision-making and input, and aids the Board’s oversight and awareness
of business performance or routine good governance practices operated by the
Company. A selection of principal decisions taken by the Board and how the
interest of relevant stakeholders were taken into account are set out in summary
on pages 136 to 137.
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 documents in advance, for consideration and approval.
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 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 considered culture, particularly during
the purpose and values discussion and debate which took place as part of the
approval of the People Strategy.
The Board recognises the importance of ensuring a positive and supportive culture
throughout the Group which it believes can lead to organisational resilience and
superior performance. We monitor this through direct and indirect colleague
engagement activities and discussions with the Executive Directors, the Executive
Director HR and other members of Senior Management. For further information see
further information in the People Strategy on pages 62 to 81.
138
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Through the following activities we ensure the Company’s culture aligns with its
purpose and values:
– Dedicated time at Board meetings for culture and workforce matters
– Reviewing the results of the Group’s Colleague Engagement Survey
– Monitoring the levels and nature of whistleblowing reports
– Monitoring colleague turnover and retention
– Reporting by Internal Audit on fraud and compliance breaches to the Audit &
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 colleagues, clients, and the communities in which we operate, as well as
our brand partners and other suppliers and investors, all of whom we are
accountable to. 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.
Risk Committee
Further details on the key stakeholders identified can be found on page 51.
– Engaging with colleagues directly during showroom and Support Centre visits
– Reviewing the Group’s key policies and HR initiatives
– Introduction of policies that support colleagues’ health and wellbeing such as
proactive wellbeing programmes, effective absence management systems and
early access to occupational health for colleagues who have health problems
– Being updated on the Diversity Council meetings
During the year, we continued with our colleague engagement activities, including
the Group’s UK, US and Global Listening Forums. These forums bring together
colleague representatives, Executive Directors and our Designated Non-Executive
Director for Workforce Engagement. In creating these forums we have ensured
that we have proportionate representation from all areas of our business and
territories, in which we operate. Topics discussed included: Workplace, our internal
communications platform; we held a ‘you said-we did’ review which demonstrated
the impact of the Listening Forums on items such as colleague training and benefits;
and an overview of the most recent Colleague Engagement Survey results.
The Board takes responsibility for all the Group policies which are applicable to our
colleagues, and further information can be found on page 111.
STAKEHOLDER ENGAGEMENT
Our S172(1) Companies Act 2006 Statement includes details on how the Board
has had regard to the need to foster the Company’s business relationships and
includes a Statement of Engagement with Colleagues. More information about the
Board’s engagement with its colleagues, clients, brand partners and other suppliers,
communities and investors can be found on pages 51 to 53 and in the People
Strategy on pages 62 to 81.
Understanding the views of the Company’s stakeholders is a key priority for the
Board and the business as a whole. It helps to focus the Company’s resources,
engagement and reporting activities by addressing those issues that matter most to
the Group’s businesses and to the Company’s wider stakeholders. Fostering strong
business relationships is an intrinsic part of the Company’s long established and
successful compounding strategy and a key consideration in all decision-making.
Whilst the Board has previously identified its key stakeholders, and regularly
considers methods of engaging and managing each of those stakeholders whilst
making decisions, the FY22 externally facilitated Board Evaluation recommended a
stakeholder mapping exercise and discussion be conducted. The exercise should
consider how the growing range of stakeholders (as a result of global expansion)
was being managed. During the year, led by the Chair, the Board reviewed this
matter. This exercise also helped the Board with strategic focus, decision-making
and the identification of risks which may adversely affect the business.
ENGAGING WITH INVESTORS
We welcome the opportunity to engage with our investors. The Chair has overall
responsibility for ensuring that the Company has appropriate channels of
communication with all of its investors and is supported in this by the Executive
Directors, the Director of Investor Relations & Corporate Affairs, the Senior
Independent Director, the Company Secretary & General Counsel and members
of the Senior Management team.
We are in frequent contact with investors through a scheduled programme of
communications and engagements.
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. 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, Trading
Updates, RNS newswires, corporate press releases and in-person meetings.
Engagements include various investor meetings attended, as appropriate, by the
Chair, CEO, CFO, the Senior Independent Director, who is also the Chair of the
Remuneration Committee, the Director of Investor Relations & Corporate Affairs
and the Head of Sustainability and ESG. A summary of meetings and communications
with investors is provided at each Board meeting.
During the year, the Company’s corporate brokers provided regular feedback to
the Board and attended three meetings. The CEO, CFO and the Director of
Investor Relations & Corporate Affairs provide information to the Board, at each
meeting, on topics such as share price performance and macro economic
conditions. Feedback is also provided to the Board on the views of investors
following individual meetings, including relating to the following:
– Particular elements of the Company’s strategy and operations; progress on
specific projects, financial performance, product development and risks
– ESG issues that affect our stakeholders, such as the environment, climate change,
working conditions and relationships with brand partners and other suppliers
– Governance issues, particularly on remuneration, but also succession planning,
board diversity and expertise and independence
– Capital allocation plans for the future
– Progress against the Long Range Plan
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continued
COMPOSITION, SUCCESSION & EVALUATION
COMPOSITION
The Board is comprised of a Non-Executive Chair, two Executive Directors, the
Senior Independent Director and three independent Non-Executive Directors,
and is supported by the Company Secretary & General Counsel.
At the start of the year, the Board appointed a new Non-Executive Director, Chabi
Nouri, with effect from 1 May 2022.
Biographical details of the current Directors of the Company as at the date of this
report are set out on pages 130 to 131. Full details of Directors who have served
throughout the year can be found on page 173.
Following the end of the financial year, Anders Romberg rejoined the Group as
CFO with effect from 12 May 2023 when Bill Floydd stood down from the Board.
DIVERSIT Y AND INCLUSION
The Company is committed to having a Board comprising directors from different
backgrounds, with diverse and relevant experience, perspectives, skills and knowledge.
We believe 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.
The Company is pleased to report that as at 30 April 2023, the Board met the targets
set out in FTSE Women Leaders Review and the Parker Review and, has also met the
targets under the UK Listing Rules 9.8.6. There is no change to gender mix and
ethnicity representation following the change in CFO role, effective 12 May 2023.
Further information on the Company’s targets can be found in the Nomination
Committee Report on page 146.
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 2023, the Nomination Committee reviewed the Board Diversity & Inclusion
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, particularly to extend the Policy to make greater reference to
diversity, focusing on action beyond the boardroom including senior leadership and
whole organisation diversity and the development of a robust pipeline as well as
plans for succession. The amended Policy was approved by the Board in May 2023
and the Policy can be found on our corporate website, thewosgroupplc.com.
We are fully committed to building an inclusive culture and workforce, and our
Diversity & Inclusion Strategy continues to support this aim. We believe that by
treating our colleagues with respect and trust, supported by our Company purpose
and values, we will build a more diverse, fair, inclusive Group, which will underpin
our strategy and management decisions, actions and behaviours. It is essential the
Company continues to hold itself accountable and we have set ourselves clear goals
to help us realise our ambitions.
The Company collects both gender and ethnicity data direct from the Board
members and executive management annually on a self identifying basis in a
questionnaire. The data is used for statistical reporting purposes and is provided
with consent. Board members and executive management are asked to identify
their gender and ethnicity as set out in the table below.
Board and Senior Management diversity
The following tables set out the information required under the UK Listing Rule 9.8.6R(10) as at 30 April 2023. The information included, supports the statements made
in the Nomination Committee Report which can be found on page 146.
For the purposes of the below table, executive management is defined in the UK Listing Rules. In the absence of an executive committee the Watches of Switzerland
Group has defined executive management as the CEO and his direct reports.
Gender on a self identifying basis
Men
Women
Not specified/prefer not to say
Ethnicity on a self identifying basis
White British or other White (including minority-white groups)
Mixed/Multiple Ethnic Groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/ prefer not to say
Number of
Board members
Percentage of
the Board
Number of senior positions
on the Board (CEO, CFO,
SID and Chair)
Number in Executive
Management
Percentage of Executive
Management
4
3
–
57.1%
42.9%
–
3
1
–
5
3
–
62.0%
38.0%
–
Number of
Board members
Percentage of
the Board
Number of senior positions
on the Board (CEO, CFO,
SID and Chair)
Number in Executive
Management
Percentage of Executive
Management
6
1
–
–
–
–
4
–
–
–
–
–
85.7%
14.3%
–
–
–
–
14 0
7
1
–
–
–
–
87.5%
12.5%
–
–
–
–
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 SUCCESSION PL ANNING
The Nomination Committee continues to review succession plans for both Board
and Senior Management each year. During the year the Nomination Committee
held a separate session which focused specifically on the succession planning for
Non-Executive Directors. Further information on our approach to succession
planning and Board appointments can be found in the Nomination Committee’s
Report on pages 145 to 146.
The Board reviews annually the bench strength and skill set 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
During FY23, following the FY22 externally facilitated Board Evaluation, the Board
conducted an internal Board Evaluation. The Chair and the Company Secretary &
General Counsel worked together on producing a questionnaire, which reflected
the workings of our Board and took into consideration the findings and
recommendations of the previous external 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 principles
and in accordance with the provisions of the Code and associated guidance.
It is the Board’s policy to conduct a Board Evaluation exercise on an annual basis.
In line with the Code, the Board’s policy is to conduct an externally facilitated
review, at least, once every three years.
Further information on the Board effectiveness and evaluation can be found on page 143.
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 of the Board 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 record set out on page 127. 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 130 to 131.
As set out in the Nomination Committee Report on page 147, 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 & Risk 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 & Risk Committee Report on page 148 for details of the review process.
See pages 24 to 25 in the Strategic Report for the description of our Business
Model. See page 122 and 123 for the Going Concern and Viability Statement.
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.
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 & Risk 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.
Directors are required to give notice of any potential situational and/or transactional
conflicts, which are then considered by the Board and, if deemed appropriate,
authorised accordingly. A Director is not however, permitted to participate in such
considerations or to vote in relation to their own conflicts.
Following the last review, the Board concluded that any potential conflicts have been
appropriately authorised, that no circumstances existed which would necessitate that
any prior authorisation be revoked or amended and that the authorisation process
continued to operate effectively.
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 and there are no overboarding concerns for any of the Directors.
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 monthly financial information
comprising sales analysis which is accompanied by narrative. 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 governance and
regulatory trends or updates. 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, and the Board Evaluation questionnaire also
focused on the needs of the directors with regard to training. Technical briefings
are provided in response to any training requirements.
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continued
Training topics for FY23 included corporate governance updates, director duties, ESG
considerations, and Market Abuse Regulations, including the specific requirements for
Persons Discharging Managerial Responsibilities and Inside Information.
Following Chabi Nouri’s appointment, a full and extensive induction was put together,
which included meetings with Senior Management, advisers and external stakeholders.
Further detail of the induction programme of Chabi can be found on page 147.
Notwithstanding Anders Romberg’s previous tenure, a comprehensive reinduction
has been prepared, particularly covering key developments since his departure.
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.
The Board, assisted by the Audit & Risk Committee, has carried out a review of the
effectiveness of the system of risk management and internal controls during FY23
and for the period up to the date of approval of the Consolidated Financial Statements
contained in the Annual Report and Accounts. Every functional senior manager has
completed an annual ‘control certificate’, to confirm the effectiveness of internal
control within their respective area. All Senior Managers who completed the ‘control
certificate’ were asked to disclose any known control failures, instances of non-
compliance with legislation or regulatory requirements, instances of identified fraud
or serious control breakdown, or any other relevant matters they are aware of, that
may need to be considered by the Board in making the required disclosure.
To gain assurance over the design and operation effectiveness of controls, and to
confirm that accurate statements had been provided, sample tests were conducted,
by Internal Audit, to determine whether controls are effective in mitigating risks.
In conclusion, based on the work performed, the Board is satisfied with the adequacy
of the Group control framework and the Board confirms that no significant
weaknesses or failings were identified as a result of the review of effectiveness.
AUDIT, RISK MANAGEMENT AND INTERNAL CONTROL
The Audit & Risk 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. 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.
2. 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.
3. 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.
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 Chair of the Board, Executive Directors and Senior Management
– Reviewing workforce remuneration and related policies
Refer to page 148 for details on the work of the Audit & Risk Committee.
Refer to page 156 for further details on the work of the Remuneration Committee.
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 pages 113 to 114.
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.
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 B OA R D E VA LUAT I O N
B OA R D A N D CO M M IT TEE EF F EC TI V EN ES S
A N D E VA LUATI O N
FY22 EXTERNAL INDEPENDENT BOARD EVALUATION
As reported last year, and in accordance with the Corporate Governance Code 2018 (the ’Code’), towards the end of FY22 the Company undertook an externally
facilitated Board Evaluation. 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.
The review concluded that the Board was showing the characteristics of an effective board and the governance framework was developing well. 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 and to develop the Board further with some key areas of focus. These strengths form a solid foundation. However, some areas still require
development, regardless of how the role of the Board develops.
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 covered the priorities detailed below.
Key Priorities Identified from FY22 Evaluation
Progress Made during FY23
Enhance Non-Executive Directors’ level of knowledge
of the business
Further understanding of the Board’s purpose and aims
Evolution of the Board agenda and presentations
Elevated visibility of the Group’s People Strategy
Further focus on non-executive succession planning
Deep dive sessions outside of Board meetings on brand partners, including product updates
Increased interaction with Senior Management, with greater attendance and presenting at Board
and Committees
Understanding the purpose of the Board is considered on an ongoing basis
A stakeholder mapping review was undertaken to ensure the Board considers its growing range of
stakeholders during the decision-making process
Annual review of the Matters Reserved for the Board and the Roles and Responsibilities of the Chair
and the CEO
The structure and balance of the papers was amended
Agendas were made more thematic and reflective of strategic objectives and drivers
Approved a new People Strategy
People information included within the CEO Report at each Board meeting
Board and Nomination Committee considered Senior Management succession planning
New Executive Director HR, who regularly attends Board meetings
The Nomination Committee considered non-executive succession in December 2022
The Board’s composition was reviewed following the appointment of Chabi Nouri, as a
Non-Executive Director in May 2022
FY23 BOARD EVALUATION
Towards the end of FY23, the Chair of the Board, alongside the Company Secretary & General Counsel, agreed the proposed approach for an internal Board Evaluation
with the Nomination Committee. A performance evaluation questionnaire, collated by the Chair of the Board and the Company Secretary & General Counsel was sent
to all members of the Board to gain an insight into how well the Board is performing; this also included areas for comments and training suggestions.
The Board was reminded that it should regularly assess its effectiveness, the adequacy of matters reserved to it, and how well it acts as a forum for discussion and
communication. Regular assessments may identify areas in which the Board and its processes might be more effective, or may highlight skills and/or knowledge gaps in
the Board which may lead to a request for additional development (continuing education).
The Senior Independent Director conducted an independent assessment of the Chair of the Board and provided feedback to the Nomination Committee.
The review concluded that the Board operates effectively and efficiently and is well engaged. All Board members actively contribute at meetings and the Board is well
chaired, operating effectively and that improvements continue to be made year-on-year. The following areas were identified for further development:
– Further evolution of Board agendas and presentations
– Continued enhancement of the Board’s knowledge, relating to products, brands and ESG climate reporting
– Review of jewellery strategy
– Review method of presentation of the business performance measures
– Increased focus on the principal risks of information security and cyber security
– Further succession planning for the Board and Senior Management
An action plan has been developed, progressed and will be monitored throughout FY24 by the Nomination Committee
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N O M I N ATI O N CO M M IT TEE R EPO RT
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 and independence 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
D E A R S H A R E H O L D E 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 Company Secretary & General Counsel acts as Secretary to the Nomination
Committee, and by invitation, the CEO, 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. The Terms of Reference were reviewed during the year,
as is normal practice, and minor stylistic changes were made which included a
clarification of the definition of the Group’s Senior Management to ensure
consistency with the Board Diversity & Inclusion Policy and the new diversity
reporting requirements.
The Terms of Reference can be found in full at thewosgroupplc.com
The Nomination Committee’s Terms of Reference require that the Committee
meets at least twice a year. During the year, the Nomination Committee met three
times, with an additional ad hoc meeting relating to the appointment of Chabi Nouri.
Full details of Nomination Committee meeting attendance can be found on page 127.
BOARD CHANGES
Towards the end of FY23, the Board became aware of Bill Floydd’s concerns
regarding the travel commitments being greater than he had expected when he
embarked on the role in January 2022 and that in the long-term this may not be
sustainable for him. It was subsequently decided that it was in the best interests of
the Company and Bill that he would leave the business.
At the same time the Board had become aware that Anders Romberg, who had
served as the CFO from 2014 to 2022, was looking to return to a comparable role
having spent some time away from business. Anders is highly regarded and has an
excellent track record of financial leadership at the Group.
On 3 May 2023 it was announced Anders would rejoin the Company on that day
and be appointed to the Board and as CFO on 12 May 2023. Bill resigned his
directorship and CFO role on the same date.
Having extensively discussed and assessed the options available to the Company
and taking into consideration that a comprehensive search had been conducted in
relation to the hiring of Bill, the Committee decided that launching a formal search
for Bill’s successor was not necessary. In addition to Anders’ extensive experience
of working in the Group since 2014, throughout the transformation period from
private to public, Anders has extensive knowledge and a deep understanding of the
dynamics of the luxury watch and jewellery markets and the business of the Group.
14 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 KEY ACTIVITIES DURING THE YE AR
– Recommended that for three of the Non-Executive Directors, their
three-year tenure be extended
– Recommended to the Board that Chabi Nouri be appointed to the
Audit & Risk Committee
– Conducted a comprehensive review of executive and non-executive
directors succession planning and the Senior Management talent pool
– Considered the skills, diversity and expertise as well as the backgrounds
of each of the Board members, when reviewing the future needs of
the Board
– Discussed and agreed an action plan following the FY22 Board Evaluation
– Reviewed external appointments for the Non-Executive Directors to
assess whether any appointment is significant or causes any conflicts
– Reviewed the Committee’s Terms of Reference and confirmed they had
been adhered to
– Reviewed the Company’s Conflicts of Interest Register
– Reviewed and recommended to the Board, the updated Board Diversity
& Inclusion Policy
– Agreed, with the Board, the process for the FY23 internal Board Evaluation
– Recommended to the Board the appointment of the CFO
“The Board Diversity & Inclusion
Policy has been extended to
reflect the Board’s commitment
to diversity and inclusion,
not only at Board level, but
throughout the organisation.”
IAN CARTER
CHAIR OF THE NOMINATION COMMIT TEE
When considering Anders’ appointment, the Nomination Committee took into
consideration the balance of skills, knowledge, independence, diversity and
experience already on the Board. It was concluded that Anders 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.
Further details on Anders’ skills and experience can be found on page 130.
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 focuses on
recent Board and Committee activity, stakeholder engagement, brand partnerships,
investor relations and a tailored session on corporate governance.
The induction programme for Non-Executive Directors is facilitated and
implemented by the Chair of the Company, and the Company Secretary & General
Counsel with input from the CEO. Detailed information on Chabi Nouri’s induction
can be found on page 147.
induction programme
A comprehensive
for Anders was embarked on,
notwithstanding his comprehensive knowledge of the business. The programme
included meeting with Senior Management, new colleagues, a comprehensive
handover from the Board members and the outgoing CFO, and training and
updates on changes to regulatory reporting requirements and corporate
governance updates, since his retirement.
SUCCESSION
The Committee plays a vital role in promoting effective Board and leadership
succession, making sure it is fully aligned to the Group’s strategy.
Succession planning is the process of identifying the critical positions within our
organisation and developing action plans and pipelines to fill them, thereby
minimising the risk to the business of key roles being vacant. The Committee
continues to ensure that succession planning for business-critical roles is proactively
reviewed and the diverse pipeline continues to develop.
During the year, and as a result of the FY22 external Board Evaluation
recommendations, the Committee discussed as a priority non-executive director
succession. The Committee considered the composition of the Board, particularly
following the appointment of Chabi Nouri in May 2022.
Additionally, the Committee held a comprehensive review of succession for
Executive Directors and Senior Management. The Committee is committed to
building skillsets for future succession plans. Greater exposure and involvement
with key stakeholders of the Group has been undertaken by the President of UK &
Europe and the President of North America & Deputy CEO, both of which were
two new roles created at the start of the financial year. Additionally, the Committee
oversaw the development of the new senior management leadership structure and
the creation of a new role, Global Group Buying and Merchandising.
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As part of our succession planning, the Committee considers the current skills,
experience and tenure of the Directors, and assesses future needs against the
Group’s strategic objectives. The Committee considered talent reviews,
consistently assessing potential performance and closely monitoring the successors’
development plans to improve the quality and diversity of our succession plans
taking into consideration the future growth strategy of the business.
In order to conclude the Board’s composition and succession planning discussions,
the Chair requested the collation of ‘skills data’, which would be converted into a
skills matrix to help identify the Board’s requirements as the strategy of the Group
evolves and as part of general Board planning. At the same time gender and
ethnicity data for Board members was captured, the details of which can be found
on page 126.
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 takes into
consideration all regulations and best practice, including the FTSE Women Leaders
Review, as well as the Parker Review.
The FTSE Womens Leaders Review makes a number of recommendations including
the following targets (i) 40% of FTSE 350 board and leadership positions should be
held by women by the end of 2025; and (ii) FTSE 350 companies should have at
least one woman appointed as Chair, Senior Independent Director, CEO or CFO
by the end of 2025.
The key recommendation of the Parker Review is that each FTSE 250 board should
have at least one director from an ethnic background by 2024. There are also a
number of other recommendations around the roles of the Nomination
Committee, search process and procedures for new appointments, succession
planning and talent development.
The Board Diversity & Inclusion Policy includes the targets set by the FTSE
Womens Leaders Review and the Parker Review. The Committee is required to
review, annually, the Board Diversity & Inclusion Policy as well as measurable
objectives for achieving diversity on the Board. In May 2022, the Committee
reviewed the Board Diversity & Inclusion Policy and made recommendations to the
Board for amendments to reflect both the current status of the Board and also the
Board’s aims to maintain its current targets. The changes also reflected the new
requirements introduced by the FCA and DTR 7.2.8AR on board diversity policies.
The Board Diversity & Inclusion Policy was expanded to make greater reference to
diversity, focusing on action beyond the boardroom, including Senior Management
and the need to consider wider diversity characteristics including sexual orientation,
socio-economic background and disability (in addition to the aspects of age, gender,
or educational and professional backgrounds).
Under the Listing Rule 9.8.6, new reporting requirements have been introduced
which requires the Company to include a statement as to whether they have
complied with the following targets on board diversity as at a chosen reference
date within its accounting period; (i) at least 40% of the individuals on its board of
directors are women; (ii) at least one of the board senior positions, the Chair, CEO,
Senior Independent Director or CFO is held by a woman; and (iii) at least one
individual on its board of directors is from a minority ethnic background.
The Board has chosen to align its diversity reporting reference date with the
Company’s financial year end and proposes to maintain this alignment for future
reporting periods. As required under LR 9.8.6 R(10), further details in respect of
the three targets outlined above as at 30 April 2023, are disclosed in the tables on
page 140.
The Company is pleased to report that as at 30 April 2023 the Board met the
targets set out in FTSE Women Leaders Review and the Parker Review and, has
also met the targets set out in LR 9.8.6.
The Committee is satisfied that the focus on diversity and inclusion by the Board and
Senior Management and the Company’s diversity strategy underpinned by its targets
means that any risks around continuing to meet externally set targets are mitigated.
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. When
considering succession planning, the Nomination Committee is advised by the CEO
as to the internal pipeline of Board capable candidates and the evolvement of the
pipeline to appropriately reflect the importance of diversity to their organisation.
The Board recognises and considers the importance of diversity not just at Board
level but through the organisation and we have a number of programmes and
initiatives in place within the organisation to help develop a diverse talent pipeline,
including diversity induction training, learning and development, mentoring and
sponsorship. In FY23, the Board approved the new Group People Strategy. Further
information on our workforce initiatives on diversity and inclusion can be found on
pages 64 to 65.
EFFECTIVENESS AND COMPOSITION
The FY23 Board Evaluation was based upon an internal questionnaire and further
details of the progress from the FY22 evaluation and the process for FY23 can be
found on page 141. The performance of this Committee was evaluated as part of
the annual Board Evaluation process. The Board review concluded that the
Committee functions effectively.
The Nomination Committee will be responsible for overseeing an action plan to be
put in place following recommendations from the FY23 Board Evaluation.
As part of the annual evaluation of the effectiveness of the Board, and its
Committees, the Committee considers the diversity and the composition to
ensure it is appropriate to discharge its duty effectively and to manage succession
issues. 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 Committee’s responsibilities effectively.
14 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 173, the Board is recommending the election or re-election to
office of all Directors at our 2023 AGM.
In June 2022, the Committee considered the reappointment terms of Tea Colaianni,
Robert Moorhead and Rosa Monckton as their first three-year term expired.
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
12 July 2023
DIRECTOR INDUCTION PROGR AMME – CHABI NOURI
Following her appointment, Chabi undertook a tailored and comprehensive
induction and familiarisation programme, suited to the needs of the individual
and implemented by the Chair of the Board, the Company Secretary &
General Counsel, with input from the CEO. An outline of the induction
process is set out below.
– A comprehensive introduction to:
– Corporate Governance Code matters and governance trends
– Legal and regulatory guidance and reporting:
– Directors’ duties (including s172)
– Share dealing, insider dealing and Market Abuse Regulations
– FY22 Board Evaluation and action plan
– Overview of the Schedule of the Matters Reserved for the Board
– The Group structure
– The Group’s purpose and values
– Introductions to the Company’s key external advisers, including the
External Auditor, and a training session from the Company’s
corporate solicitors
– Recent Board and Committee meetings considerations, including
minutes and matters arising from the meetings
– Introduction to the Trading Board with follow-on deep dive sessions as
required to further develop understanding of key areas
– Visits to showrooms in the UK
– As part of the US Board trip Chabi met a number of key colleagues,
brand partners and participated in a specific session on the US market
review and US competition compliance
– Briefing sessions on the key financial areas of the organisation including:
– The Long Range Plan, budget, strategy and operational compliance
– Stakeholder perceptions and key issues raised by, for example,
investors, regulators and industry groups
– Provided with details of the Directors’ and Officers’ Liability Insurance
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AU D IT & R I S K CO M M IT TEE R EPO RT
ROBERT MOORHE AD
CHAIR OF THE AUDIT COMMITTEE
MEMBERS
Robert Moorhead (Chair)
Tea Colaianni
Rosa Monckton
Chabi Nouri
KEY RESPONSIBILITIES
Financial reporting:
– Monitor the integrity of the Financial Statements of the Company
and Group
– 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 on Climate-related
Financial Disclosures (TCFD)
Internal control and risk management:
– Carry out a robust assessment of the Group’s emerging and
principal risks on an annual basis, including environmental risks and
opportunities
– 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 and consider the
impact they have on independence
– Review and monitor the External Auditor’s independence and objectivity
– Conduct any External Audit tender process and making
recommendations to the Board about the appointment,
reappointment and removal of the External Auditor
– Approve the remuneration and terms of engagement of the
External Auditor
– Ensure the External Auditor has full access to Company colleagues
and records
– Invite challenge by the External Auditor, giving due consideration
to the points raised
Other:
– Engaging with shareholders on the scope of the External Audit,
where appropriate
D E A R S H A R E H O L D E R
I am pleased to introduce the Audit & Risk Committee Report for the
financial year ended 30 April 2023. During the year, the Audit & Risk
Committee changed its name to the Audit & Risk Committee to reflect the
Committee’s role in managing risk. The Committee continued to play a key
role in the development of the Group’s governance framework and
its activities included reviewing and monitoring the integrity of financial
information, the Group’s system of internal controls and risk management,
internal and external audit processes 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. The Committee
also worked alongside the ESG Committee having regard to ESG risk
management and TCFD reporting.
COMMITTEE COMPOSITION
All members of the Audit & Risk 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 2018 (the ‘Code’) and the Committee
has competence relevant to the sector in which the Group operates. Details of the
Audit & Risk Committee members’ experience can be found on pages 130 to 131. 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. Chabi Nouri, Non-Executive Director, was appointed to the Audit & Risk
Committee on 6 July 2022.
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.
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 on page 127. The Committee
reviews its Terms of Reference annually, recommending any suggested changes
through to the Board.
In addition to changing the name the opportunity was taken to add some clarity
and enhancements to the Terms of Reference. These included:
– Reference to working alongside the ESG Committee when reviewing
environmental, social and governance risks and opportunities
– Defining the major findings of any relevant internal investigations in relation to
control weaknesses, fraud or misconduct
– Clarifying disclosures associated with the recommendations of the Task Force
on Climate-related Financial Disclosures
COMMITTEE EFFECTIVENESS
During FY23 an internal Board Evaluation, of the Board and the Board Committees
was undertaken. The results of which concluded that the Audit & Risk Committee
functions effectively, provides the right degree of challenge, and interacts well with
the Board and other Committees. Details of how the evaluation was conducted can
be found on page 141.
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
ACTIVITIES UNDERTAKEN BY THE AUDIT & RI SK COMMIT TEE
Financial reporting:
– Monitored the integrity of the Group’s FY23 year end Results Announcement,
Annual Report and Accounts, and the FY23 Half Year Statement
Internal and external audit:
– Reviewed the effectiveness of the external audit process, taking into
consideration relevant UK professional and regulatory requirements
– Assessed and recommended to the Board that the Annual Report and
Accounts are fair, balanced, and understandable, including Alternative
Performance Measures (APMs)
– Invited challenge by the External Auditor, giving due consideration to the
accounting, financial control, and audit issues reported by the External
Auditor as a result of their work
– Assessed the Going Concern and Viability Statement having reviewed
– Reviewed the Internal and External Auditor independence and objectivity
supporting papers from management including the consideration of the
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 on Climate-related Financial Disclosures (TCFD)
FY23 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, including environmental risks
and opportunities
– 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
including approving the policy on non-audit services
– Agreed the External Auditor engagement letter and recommended the
External Auditor remuneration 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,
without management present
– Ensured the External Auditor had full access to Company colleagues
and records
Making recommendations to the Board about the reappointment
of the External Auditor:
– Reported to the Board on how the Committee has discharged its
responsibilities with respect to external audit
– Reviewed the impact of the 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
Other:
– Reviewed the Committee’s Terms of Reference and approved amendments
– Considered the recommendations of the FY22 Board Evaluation and the
– Received deep dive presentations on principal risk areas of cyber security
consideration of risk matters
– Monitored mandatory elearning completion statistics for key compliance
areas such as Health & Safety and Anti-bribery and Corruption
and data governance
– Received updates and recommendations on reforms to the Department
for Business, Energy & Industrial Strategy (BEIS) proposals for Audit and
Corporate Governance reform
– Reviewed and approved the Group’s Whistleblowing Policy and 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. The Committee recommended to the Board for
approval the Anti-Bribery, Corruption & Fraud Policy which includes the
gifts and hospitality protocols. The Committee also recommended to the
Board for approval the Anti-Money Laundering Policy which had been
updated to reflect the fact that the UK business was no longer classified a
‘High Value Dealer’ for HMRC
– Considered the Group’s systems and framework of controls designed to
detect and report fraud
– Reviewed the Group’s Treasury Policy
– Approved the Group Tax Strategy and received management reports on
the tax affairs of the Group
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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
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 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
the FY24 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 that 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
pages 122 to 123.
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. The Committee
also reviewed management’s assessment of whether any prior impairments should
be reversed given current trading.
Given management has continued to report on the performance of the business on
a pre-IFRS 16 (IAS 17) basis within its 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.
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.
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 the approach taken by
management is sufficiently robust in relation to the recognition of revenue.
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.
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.
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.
Annual Report and Accounts – fair, balanced, and understandable
assessment
At the request of the Board, the Committee has considered whether, in its opinion,
the FY23 Annual Report and Accounts, 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
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 – The Annual Report and Accounts are drafted by Senior Management with
overall co-ordination 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 &
Risk Committee prior to consideration by the Board
Following its review, the Committee advised the Board that the Annual Report and
Accounts, 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.
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:
– Each business function conducted risk assessments based on identified
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
– The Committee oversaw a revised methodology to determine the risk impact
– 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
– Climate-related physical and transition risks and opportunities, that could
impact the business in the future under different climate scenarios, have been
considered and incorporated into the risk management framework
– 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 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 plan and assesses
the quality of Internal Audit reports, along with management’s actions relating to
findings and the closure of recommended actions.
Each year, a carefully targeted Internal Audit plan is 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 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:
– Attended all Audit & Risk Committee meetings and provided reports and
verbal updates to the Committee
– Had direct access to all Committee members and met with the Committee
Chair and Committee members separately
– Met with the Audit & Risk 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
– Met privately with the Committee without management being present
The assessment of the Internal Audit team covered the Internal Audit findings and
reporting, Internal Audit delivery including the Internal Audit plan and whether
Internal Audit has sufficient, appropriate resources. In reviewing the effectiveness
of Internal Audit, the Audit & Risk Committee considered:
– The results of internal audits and reporting thereof
– Ongoing communication between the Head of Internal Audit & Risk and the
Audit & Risk Committee, including the private sessions held
– Self-assessment by the Head of Internal Audit & Risk
– Questionnaires and feedback from key stakeholders including Senior Management
Following assessment by the Committee during the year, the Audit & Risk 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 that reviews
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 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 & Risk Committee has also met with the external audit partner to review
the audit scope and audit findings.
The Committee had regular open communication with the External Auditor as
well as the Group’s management.
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continued
Auditor independence and objectivity
During the year, the External Auditor reported to the Committee on their independence from the Group.
The Company’s independence and objectivity are safeguarded by:
– A policy being in place which limits the nature of non-audit services
– The External Auditor’s own internal processes to approve requests for non-audit work to the External Auditor
– Monitoring changes in legislation related to auditor independence and objectivity
– Rotation of the lead audit partner after five years
– Independent reporting lines from the External Auditor to the Committee
– Restrictions on the employment by the Group of employees of the External Auditor
The Committee and the Board are satisfied that EY has adequate policies and safeguards in place to ensure that the External 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 External 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.
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
Policy
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 interim financial statements
– 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
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 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.
The Auditor is prohibited from performing these services
for the Company or any subsidiary within the Group.
Non-audit services provided by EY during the financial year ending 30 April 2023 were limited to the Half Year Review. Fees in relation to these services were £63,050
(FY22: £54,000).
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, in June 2019, the Audit & Risk 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 FY23 represents EY’s fourth year as the Company’s External Auditor. Under UK legal
requirements, the Company may retain EY as its External Auditor for 20 years.
152
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 30 April 2023.
EXTERNAL AUDITOR EFFECTIVENESS
It is the Committee’s responsibility to assess the effectiveness of the external audit,
including audit quality. The Committee assessed the External Auditor’s effectiveness
in September 2022 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 Auditor’s risk assessment and audit plan
The Committee discussed EY’’s risk assessment and detailed audit plan in response
to those risks. The proposed approach and planned scope of the audit were also
reviewed including the proposed materiality. The Committee was satisfied that the
audit plan was robust and covered the financial reporting risks. The Committee
also considered the balance of work completed between the UK, US and European
components along with recent acquisitions.
Proposed level of audit fees
The Committee reviewed and approved the proposed audit fees, which included a
detailed breakdown of those fees. This review also considered the level of
resources, senior leadership involvement and the use of specialist teams where
appropriate. The Committee satisfied itself that the agreed amount represented
fair value in order to deliver the quality and scale of audit sought.
Evaluation of the FRC’s Audit Quality Inspection and Supervision
Report on Ernst & Young LLP
The Committee reviewed the FRC’s Audit Quality Inspection and Supervision
Report for Ernst & Young LLP and also compared the results of the Auditor to
other audit firms. EY presented to the Audit & Risk Committee their feedback on
the findings and planned actions to respond to each of those findings. The
Committee was satisfied with the outcome of this review.
The Committee also considered how the Auditor had responded to its previous
assessments of audit quality.
Feedback from management and the Committee members
The Committee considers it important to gather feedback from management,
particularly those who are in direct contact with the audit team. Management and
Audit & Risk Committee members completed a questionnaire and the results were
reviewed by the Committee. The questions covered the following areas:
The Committee considered the External Auditor’s use of professional scepticism
throughout the audit by examining areas in which the External Auditor had
challenged Senior Management’s assumptions. Particularly in relation to the key
areas of judgement around the significant financial reporting areas, noted above,
and the number and nature of accounting and control observations raised.
Based on these reviews, the Committee concluded that 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.
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.
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 the 2024 financial year and the Directors will be
proposing the reappointment of EY at the forthcoming AGM.
ROBERT MOORHEAD
CHAIR OF THE AUDIT & RISK COMMITTEE
12 July 2023
– Mindset and culture
– Skills, character and knowledge
– Quality control
– Judgement
The feedback received was positive in all areas. Each year the External Auditor
meets with management to review the audit process, obtain feedback and make
recommendations for improvement in the following year’s audit.
Interaction with the External Auditor
Throughout the year, the Committee worked closely with EY and was able to
gather a good insight into the overall quality of the audit process and the
performance of key individuals within the audit team. This interaction included
private sessions with the External Auditor without management present and
regular meetings between the Audit & Risk Committee Chair and the Audit
Partner. The Committee also considered the quality of the reporting provided by
the External Auditor throughout the audit process. This included the robustness
and perceptiveness of the Auditors in handling key judgements, responding to
questions from the Committee and in their commentary where appropriate on the
systems of internal control.
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continued
ESG CO M M IT TEE R EPO RT
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 including, Sustainability Strategy activities
and performance
– Overseeing the ESG goals, targets and KPIs and provide
accountability for their successful delivery
– Monitoring the Company’s Sustainability Strategy to ensure that
it is embedded into core business operations, stakeholders are
engaged with it and progress against achieving related goals,
targets and KPIs is monitored
– Make sure the Company monitors current and emerging ESG
trends and adheres to relevant international standards and legal/
regulatory/governance requirements
– Provide guidance and monitor actions and initiatives taken to
prevent, mitigate and manage risks related to ESG matters which
may have a materially adverse impact on the Company and its’
stakeholders
– In collaboration with the Audit & Risk Committee, review key
climate-related risks and opportunities and oversee mitigation
strategies
– Receive reports and recommendations from the ESG Steering
Group, key management stakeholders and subject matter experts
– Make recommendations to the Board in relation to the required
resourcing and funding of ESG related activity
– Oversee the Company’s public disclosures, regarding the
Company’s ESG strategy activities and performance, and review and
monitor the Company’s non-financial reporting with respect to
ESG matters
D E A R S H A R E H O L D E R
It is my pleasure to present the ESG Committee Report for the financial
year ended 30 April 2023.
I am delighted with the significant progress we are making across ESG, which is
reflected in our MSCI ESG Rating of AAA, which was awarded in June 2023 following
our inclusion into this leading global equity benchmarking index in November 2022.
During FY23, the ESG Committee continued to challenge and advise Senior
Management on ESG matters and support the successful delivery of the Company’s
Long Range Plan and strategic initiatives. Additionally, the Committee focused on
ensuring the Company’s Purpose to WOW clients, while caring for colleagues,
communities and the planet, remains at the core of its’ business strategy and is
considered in every decision-making process.
This report outlines the Committee’s activities in support of these aims and how we
have discharged the responsibilities delegated to the Committee by the Board.
I am joined on the ESG Committee by Ian Carter, Chair of the Board, and a majority
of independent Non-Executive Directors, comprising Tea Colaianni, Robert
Moorhead and Chabi Nouri. Brian Duffy, the Company’s CEO, is also a member of
the Committee and plays an instrumental role in integrating ESG matters into the
Company’s business strategy and Long Range Plan.
Biographies of Committee members, including details of their skills and experience,
can be found on pages 130 to 131.
The Company Secretary & General Counsel acts as Secretary to the ESG
Committee and other Senior Management and/or external advisers may attend by
invitation, as appropriate, for all or part of meetings. This includes the CFO, the
Head of Sustainability and ESG and the recently appointed Executive Director,
Global Buying and Merchandising.
ROLE
The ESG Committee is a 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 and providing
accountability against goals, targets and KPIs.
The Committee supports the Audit & Risk Committee, playing an important role in
monitoring climate-related goals and ensuring actions are taken to mitigate and manage
identified risks and opportunities, by making sure they are embedded in the Company’s
risk management processes, financial decision-making and core business strategy.
The ESG Committee is responsible for ensuring that the Company’s Sustainability
Strategy is aligned with stakeholder expectations and best practice, and that it is
both inspiring and achievable. We will continue to monitor the Company’s
performance and review our approach to environment, social and governance
matters in FY24 to further enhance the Company’s brands, create new business
opportunities, help reduce costs, engage stakeholders and ultimately build a
successful business that is sustainable over the long-term.
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 is reviewed on
an annual basis. In accordance with the Terms of Reference, the Committee met
three times, during FY23, plus one meeting which was dedicated to training on climate
issues and reporting regulations, and attendance records can be found on page 127.
The full Terms of Reference can be found at thewosgroupplc.com
PROGRESS
As previously reported, the Sustainability Strategy framework was agreed during
FY22. This framework was developed further during FY23, with revised targets
154
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 KEY FOCUS/ACTIVITIES DURING THE YE AR
– Reviewed the ESG Committee Terms of Reference and recommended
them to the Board for approval
– Approved and recommended to the Board, the Company’s
Sustainability Strategy and monitored progress against goals, metrics
and targets in relation to the three strategic pillars of People, Planet
and Product
– Benchmarked the Company’s performance against sustainability rating
agency reports along with the CDP questionnaire on climate change
and approved an improvement plan across ESG
– Received external training from third party environmental experts,
EcoAct, to stay up to date with best practice in relation to the
governance of climate-related risks and opportunities
– In conjunction with the Audit & Risk Committee, reviewed the
Company’s progress against recommendations by the Task Force on
Climate-related Financial Disclosures (TCFD)
– Reviewed and approved a Supply Chain Engagement Strategy, including
the development and dissemination of new ESG Partner Standards
– Reviewed the Company’s supply chain management due diligence
procedures, including third party factory audits
– Approved activity to highlight the sustainable attributes of luxury
watches and jewellery
– Reviewed the Company’s non-financial reporting with respect to
ESG matters
– Key documents recommended to the Board for approval included the
Modern Slavery Statement, Supply Chain Policy, Environmental Policy,
Vendor Code of Conduct and Supplier Engagement Standards
“An ESG Steering Group was
established to strengthen the
governance of ESG matters and
to 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
and metrics being presented to the ESG Committee and approved. At the Board
Strategy Day held in March 2023, these targets and metrics were incorporated into
the Sustainability Strategy framework within the revised strategic pillars of People,
Planet and Product and were subsequently approved.
As well as monitoring the robustness of the Group’s ESG governance frameworks, the
Committee scrutinises the development and implementation of changes in processes
and practices and ensures compliance with legislative and regulatory standards.
The ESG Committee is supported by an ESG Steering Group, chaired by the CFO.
The Steering Group is made up of members 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.
The Committee closely monitors best practice and benchmarks the Company’s
ESG performance against peers to drive continual improvement. One of the ways
we are measuring our environmental performance is through the CDP questionnaire
on climate change, which we participated in for the first time in May 2022.
Further details on our approach to ESG and our Sustainability Strategy can be
found on pages 56 to 61.
STAKEHOLDER ENGAGEMENT
The ESG Committee welcomes feedback from all stakeholders to ensure their
interests are represented in the ongoing development of the Company’s
Sustainability Strategy and approach to ESG matters.
Colleagues choose to share their thoughts through a variety of channels, including
Colleague Listening Forums, which I attend, ‘Workplace’ - the interactive digital Group
engagement platform, the annual Colleague Engagement Survey or directly via email.
The Company responds to sustainability rating agency questionnaires received on
behalf of investors and facilitates meetings and roadshows to enable Investors to
ask questions. During the year, the Group Head of Sustainability ESG and Director
of Investor Relations and Corporate Affairs met with key investors and their
feedback was largely positive, particularly in relation to the direction of the
Sustainability Strategy and enhanced reporting.
The Head of Sustainability and ESG regularly updates the ESG Committee with key
external drivers and stakeholder sentiment and it is also kept up to date with
supplier engagement activities to support the promotion of shared sustainability
goals and ensure due diligence. In FY23, the Company focused on engaging supplier
partners with the Company Purpose and strategic goals. This led to the development
of comprehensive ESG Partner Standards, which were approved by the ESG
Committee in March 2023 and form the basis of ongoing supplier engagement. All
watch and jewellery suppliers have received the ESG Partner Standards and in FY24
the Company will continue to engage all supplier partners with these standards.
OUTLOOK
As we enter FY24, the ESG Committee continues to hold itself accountable for the
successful delivery of the Company’s Sustainability Strategy and remains absolutely
committed to operating transparently in its role to safeguard against risk and
support sustainable business practices across the Group for the benefit of all.
Further information on the work of the Committee and the progress being made
by the Group can be found on pages 56 to 61.
ROSA MONCKTON MBE
CHAIR OF THE ESG COMMITTEE
12 July 2023
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continued
R EM U N ER ATI O N
CO M M IT TEE R EPO RT
TE A COL AIANNI
CHAIR OF THE REMUNERATION COMMITTEE
Members
Tea Colaianni (Chair)
Ian Carter
Rosa Monckton
Robert Moorhead
Independent
No. of meetings
attended
3/3
3/3
2/3
3/3
Rosa Monckton was unable to attend one of the Committee
meetings due to COVID-19. Rosa received the papers in advance of
the meeting and had provided comments to the Chair beforehand.
Section
Chair’s Statement
Fairness, Diversity and Wider Workforce
At a Glance
Summary of Directors’ Remuneration Policy and
Implementation for FY24
Annual Report on Remuneration
Page
156
159
162
164
166
The Remuneration Committee’s Terms of Reference at:
thewosgroupplc.com
D E A R S H A R E H O L D E R
On behalf of the Remuneration Committee, I am pleased to present the
Group’s Remuneration Committee Report.
FY23 business performance highlights
FY23 was another record year of revenue and profitability for the Group and our
strong FY23 performance is testament to our proven business model.
Notwithstanding the economic backdrop, following two years of exceptional
performance, we have paved the way for our continued success as we deliver on
our Long Range Plan objectives. We are confident in our goals to maintain our
leadership position in the UK, become the clear leader in the US and capitalise on
our growth potential in Europe. Some key highlights from FY23 are as follows:
– Revenue increased +25% to £1,542.8 million
– Adjusted EBIT 1 increased +27% to £165.1 million
– Operating profit increased +26% to £178.6 million
– Return on Capital Employed1 increased by 50 bps from 27.4% to 27.9%
I would like to thank all colleagues for their continued hard work and dedication
this year.
KEY COMMITTEE ACTIVITIES IN FY23
In addition to its usual activities, key areas of focus for the Committee in FY23
have been:
– Enhancing the ESG underpin on the annual bonus to ensure that it is
sufficiently robust and measurable
– Agreeing the remuneration for the new CFO and the leaving arrangements
for the outgoing CFO
Further detail on how the Committee spent its time in FY23 can be found on
page 158.
APPLICATION OF THE REMUNER ATION POLICY IN FY23
I have summarised below the application of the Remuneration Policy in FY23.
Base salary/fee increases in FY23
The annual salary review process took place in October 2022, in line with our
normal review timing. The overall salary budget for the Group was set with the
focus being on providing the largest increases to those colleagues on the lowest
incomes. The UK salary review saw an increase of 5% for our lowest paid colleagues
and an increase of 3% for mid-level managers. The salary review in the US saw an
increase of 3% for both Support Centre and Retail colleagues.
The Committee also reviewed the salary levels for Senior Management and, where
appropriate, some salary adjustments were approved.
The CEO and CFO elected not to receive an increase in base salary. The CEO’s
base salary has not increased since he joined the Company in 2014.
Chair and Non-Executive Director fees were also reviewed in December 2022.
There has been no increase in respect of the individual fee components.
Annual bonus outturn for FY23
The Executive performance target for the FY23 annual bonus was based on
Adjusted EBIT1. Reflecting strong performance in the year, actual Adjusted EBIT1
achieved was £165.1 million, which is mid-way between ‘target’ and ‘maximum’
performance resulting in a outcome of 75% of maximum.
1
This is an Alternative Performance Measure. Refer to Glossary on pages 230 to 232 for definitions
and reconciliation to statutory measures.
156
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 As disclosed in last year’s report, the Remuneration Committee assessed the
appropriateness of the FY22 annual bonus outcome in light of broader factors including
performance against ESG goals and the experience of our colleagues, clients and
shareholders in the year. The factors considered by the Committee when determining
the FY23 bonus outcome were:
– ESG – We made good progress in establishing our ESG Strategy and building
the governance framework around this strategy such as the ESG Partner
Standards and our commendation for near-term carbon strategy by the
Science Based Targets institute (SBTi)
– Colleagues – We have maintained strong engagement with our colleagues.
Both our engagement score and inclusion score for the year were 81%. We
have also taken steps to protect and support lower paid employees in light of
the cost-of-living crisis as outlined on page 158
– Clients – We have retained strong levels of client satisfaction through
mystery shops and showroom reviews and have a strong NPS of over 80%
– Communities – We have continued our support of The Watches of
Switzerland Group Foundation and increased volunteering hours by 13%
Overall, the Committee considered that progress against our ESG Strategy has
been robust and the shareholder and wider stakeholder experience has remained
strong and concluded that the proposed FY23 bonus payout is appropriate.
Therefore, no discretion to reduce the outcome was exercised and the Executive
bonus will pay out at 75% of maximum. The CEO intends to donate £250,000 of
his annual bonus to The Prince’s Trust.
Full details on the performance outturn against the targets are shown in the ‘At a
Glance’ section on page 162.
LTIP awards vesting in FY23
For the LTIP grants awarded in September 2020, we introduced a Return on
Capital Employed (ROCE) measure, whereby 20% of the award vests by reference
to a three-year average ROCE. The remaining 80% of the award vests by reference
to a three-year cumulative Adjusted EPS performance measure.
The performance targets were set taking into account internal and external
expectations of performance at the time. The business has delivered strong
performance over the three-year performance period, resulting in Cumulative
Adjusted EPS of 118.3p and three-year average ROCE of 25.0%, therefore 100% of
the LTIP award is due to vest in September 2023. The award will be subject to a
24-month holding period.
FY24 IMPLEMENTATION OF REMUNER ATION POLICY
Board changes
As announced on 3 May 2023, Bill Floydd stepped down as CFO with effect from
12 May 2023 and is due to remain in employment with the Company until
3 November 2023, during which time he will be available to support a handover to
our returning CFO, Anders Romberg. Bill will continue to receive his base salary,
benefits and pension allowance until he ceases employment with the Company. Bill
was in employment for the full financial year and will receive the cash portion of his
FY23 annual bonus. He will not receive the deferred share portion of the FY23
annual bonus. Bill remains eligible to retain his deferred shares awarded in respect
of the FY22 annual bonus, which is due to vest in July 2025, and the second tranche
of his buy-out award, which was performance tested by his previous employer, and
is due to vest in October 2023. Bill will comply with our post-employment
shareholding guideline policy for a period of two years following stepping down
from the Board. He will not be eligible for any bonus for FY24 and will forfeit his
outstanding LTIP awards (granted on 17 February 2022 and 14 July 2022) along
with his final outstanding buy-out award which was due to vest in December 2023.
Further details on Bill’s leaving arrangements can be found on page 169 and on our
Company website thewosgroupplc.com.
Anders Romberg, who previously served as the Group’s CFO for seven years from
2014 to January 2022, was reappointed as CFO effective from 12 May 2023.
Anders was appointed on a remuneration package in line with Bill’s and within the
limits set out in the Company’s Remuneration Policy. Anders chose to opt out of
the 3% pension allowance and car allowance. The key elements of his remuneration
package are set out below:
– Base salary: £380,000
– Annual bonus opportunity: 125% of base salary
– LTIP opportunity: 175% of base salary
Base salary/fee increases for FY24
Salary reviews for all colleagues in the Support Office are scheduled to take place
in October 2023 and the Retail colleague review will be in April 2024. 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 in December 2023.
Annual bonus for FY24
The annual bonus will be determined in line with the normal cycle. For FY24, the
annual bonus will continue to be based 100% on Adjusted EBIT.
Reflecting the focus throughout the Group on achieving the Company’s ESG
objectives, the Committee has enhanced the underpin introduced last year to
ensure that it is sufficiently robust and measurable. At year end, the Committee will
review a dashboard setting out performance against our five main ESG pillars: Net-
Zero, Circular Economy, Responsible Resourcing, People and Communities. The
main areas of focus for FY24 are anticipated to be:
– Colleague engagement
– Diversity and inclusion metrics
– Delivery of Modern Slavery metrics
– Continued support of The Watches of Switzerland Group Foundation
– Volunteering hours
– Scope 1 and 2 emissions
– Scope 3 emissions
– Keeping luxury watches in circulation through repairs, servicing and pre-owned sales
This ESG dashboard will inform the Committee’s decision of whether or not to
apply a downwards adjustment of up to 10% to the formulaic FY24 annual bonus
outcome in order to take into account the wider ESG performance of the Group.
Key factors considered by the Committee will be disclosed retrospectively in next
year’s report, in line with best practice.
LTIP awards to be granted in FY24
The Committee has determined that LTIP grants will be made in line with the
normal cycle of being awarded following the announcement of the FY23 results.
No changes are proposed to the LTIP award levels and these will continue to be
200% of base salary for the CEO and 175% of base salary for the CFO. 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. ROCE is a Key Performance Indicator (KPI) and measures
the efficiency with which the Group is able to utilise its capital. Strong ROCE
performance combined with continued growth in earnings is critical in ensuring the
successful execution of our long-term strategy and growth ambitions.
The Company is currently reviewing the Long Range Plan and the targets for FY24
will therefore be determined later in the year, so that they remain appropriate in
the context of our long-term strategic ambitions. The targets will be disclosed as
part of the RNS detailing the Executive Directors awards.
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continued
ENVIRONMENTAL , SOCIAL AND GOVERNANCE CONSIDER ATIONS
Wider workforce considerations and helping our employees with the
cost-of-living crisis
The Watches of Switzerland Group always strives to be an organisation that is
inclusive, rewarding and fair to all colleagues. It is the unwavering commitment from
our colleagues that has driven our strong performance throughout the financial
year. During this time, the Committee has been acutely aware of the challenges our
colleagues have been facing because of the current inflationary environment. As a
result, the overall salary budget for the Group was set with the focus being on
providing the largest increases to those colleagues on the lowest incomes. The UK
Support Centre salary review saw an increase of 5% for our lowest paid colleagues
and an increase of 3% for mid-level managers. This year, and following our Retail
colleague pay review in April 2023, we are proud to state that we pay the Real
Living Wage to all colleagues in the UK and above state minimum in all US states.
Following the success of our first colleague Listening Forums in the UK and US at
the start of 2021, we again held Listening Forums in FY23. At these forums we
gather views on a wide range of issues, including remuneration. Specifically, at the
Listening Forum held in September 2022, attended by Rosa Monckton in her
capacity as the Designated 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, we
improved our maternity pay in the UK to support new families. In the UK, we also
launched the Watches of Switzerland Group Support Fund, which provides
financial support by way of a loan for those most impacted by the cost-of-living
crisis. This has been utilised by a number of our colleagues and we are pleased to
have provided assistance and support to those who requested help. We will
continue to monitor this area and make adjustments as necessary.
Engagement with shareholders
I would like to take this opportunity to thank our shareholders for their support for
our Directors’ Remuneration Report and our new Directors’ Remuneration Policy
at our 2022 AGM which received over 97% and 98% of votes cast in favour
respectively. We have engaged with shareholders and their representatives in
recent years as we have developed our approach to remuneration at the Group and
have always received valuable insight and feedback.
HOW THE REMUNER ATION COMMITTEE SPENT ITS TIME IN FY23
In conclusion
The remainder of the Remuneration Report is split into four parts:
Fairness, diversity and wider workforce considerations
This section contains both discussions on the Company’s initiatives in employee
and stakeholder engagement as well as mandatory disclosures on areas such as the
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.
At a Glance section
The ‘At a Glance’ section provides a summary of the payments made to the
Executive Directors during FY23.
Summary of Directors’ Remuneration Policy
This section summarises the Directors’ Remuneration Policy approved by
shareholders at the 2022 AGM, along with details of how we propose to implement
the Policy during FY24.
Annual Report on Remuneration
This section summarises remuneration decisions during the past year. This includes
details of annual bonus and long-term incentive awards granted and vesting during
the year.
I hope that you will find this year’s report clear, transparent and informative. If you
wish 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 AGM on 31 August 2023 to
answer any questions.
On behalf of the Remuneration Committee and the Board.
TEA COLAIANNI
CHAIR OF THE REMUNERATION COMMITTEE
12 July 2023
The following sets out the main items considered by the Remuneration
Committee during the year.
Key agenda items
– Agreeing remuneration of new CFO and leaving arrangements for the
outgoing CFO
– Approving a robust ESG underpin for the FY24 annual bonus
– Approving the Directors’ Remuneration Report for FY22
– Approving the formulaic outcomes under the FY22 bonus, taking into
account the considerations of wider stakeholders
– Reviewing and approving the performance measures for the FY23 bonus
plan to ensure alignment with strategic objectives and shareholder interests
– Granting awards under the LTIP and measures for the FY23 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 wider workforce remuneration
– 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.
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
FA I R N ES S , D I V ER S IT Y A N D W I D ER
WO R K F O RC E CO N S I D ER ATI O N S
As part of our commitment to fairness, openness and inclusivity, as in previous years, we have included this dedicated section to provide more information on our
communication with colleagues, our remuneration principles and wider workforce pay conditions.
COMMUNICATIONS WITH EMPLOYEES
We have a number of channels where colleagues’ 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 Colleague Engagement Surveys. We are committed to giving our colleagues a voice and they have always
had the opportunity to interact with our Directors. We have a dedicated Designated Non-Executive Director for Workforce Engagement, Rosa Monckton, responsible
for gathering our colleagues’ views and presenting these to the Board.
How we engaged with colleagues in FY23
Regional Listening Forum
meetings and our Global
Listening Forum
Consultation with our
Listening Forum members
and other colleague groups
Engagement surveys and
understanding what
matters to our colleagues
Innovative and accessible
communication portals
including Workplace
Colleague engagement
and input to new office
environment and new
ways of working
Visits to showrooms by the
Chair of the Board and
other Board members
Rosa Monckton, our Designated Non-Executive for Workforce Engagement, is co-Chair of the UK and Global Listening Forums. We held four regional Listening Forums
and one Global Listening Forum in April 2023, all of which are attended by Senior Management including David Hurley, President North America & Deputy CEO, and
Craig Bolton, President UK & Europe.
REMUNER ATION COMMITTEE REPORT
A process was introduced in 2020, which enables the Remuneration Committee to, annually, carry out its oversight and review of wider workforce pay and policies and
to ensure that they are designed to support the Company’s desired culture and values. When conducting its review, the Remuneration Committee 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 employees
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 the approach to the remuneration
of the Executive Directors and Senior Management is consistent with that applied to the wider workforce.
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.
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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 PLC
Alignment with remuneration
principles
The Group’s remuneration 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
Salaries are set to reflect the market value of the role, and to aid recruitment and retention. Remuneration for all UK colleagues is
above the Real 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 normally awarded annually following the Company’s main pay review and are typically between 2% and 3%.
This year, our Support Centre pay review delivered the largest increases to those on the lowest incomes and the UK salary review
saw an increase of 5% for our lowest paid colleagues and an increase of 3% for mid-level managers. The UK retail pay review
focused on entry level salaries which we increased to ensure that we pay Real Living Wage to all colleagues. Colleagues who were
not impacted by new starter rates in retail received a 4.5% increase. Typically, the Executive Directors will receive no more than
the same percentage increase as the wider workforce. The US saw pay increases of 3% to Support and Retail colleagues.
From time to time, ad hoc pay reviews are conducted in order to make market or inflationary adjustments and ensure the
Company’s targeted living wage differential is maintained.
Annual variable pay
All Watches of Switzerland Group colleagues are entitled to earn variable pay linked to stretching performance targets:
Annual Bonus Plan
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 1. As outlined on page 157 we have enhanced the ESG
underpin that will apply to the annual bonus for FY24.
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 and Europe or the US operations, 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 employee.
Bonuses to eligible colleagues are normally paid in July.
Sales commission plans
A range of plans exist for our retail team members which reflect the size and complexity of the showrooms. Targets can be based
on individual objectives for larger showrooms or team-based objectives for smaller showrooms. The majority of these plans are
paid monthly and biannually.
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
18
200%
175%
20 - 80%
LTIP
1 This is an Alternative Performance Measure. Refer to Glossary on pages 230 to 232 for definitions and reconciliation to statutory measures.
16 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Element of remuneration
Overview of practice at the Watches of Switzerland Group PLC
Pension
Benefits
The Company operates a UK defined contribution pension arrangement, which all UK employees 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. The CEO and our returning CFO appointed from 12 May 2023
(Anders Romberg) waive their employer pension contributions.
Arrangements for US employees vary depending on territory. In some locations the Company offers a 3% 401k employer match
and in other locations a 2% match is offered. We offer an employer pension in all countries in Europe excluding Germany.
We offer a suite of benefits across the Group, which are designed to be appropriate for different roles and functions and countries.
These include health insurance (for all US colleagues and some UK and Europe colleagues), and in the UK, season ticket loans, a
cycle to work scheme, a Health Cash Plan and enhanced maternity pay. Life cover is offered to varying degrees depending on grade
and region.
We operate an Employee Assistance Programme (EAP) in the UK, US and Europe. This is intended to help employees deal with
any personal problems that may adversely impact their work performance, health and/or wellbeing and financial support.
All of our employees are entitled to staff discounts, subject to the rules of the relevant schemes.
All-employee share schemes
Our colleagues are able to participate in our employee sharesave schemes in the UK and US which operates every two years.
A summary of the Company’s general policies is as follows:
Policy
Reward
Recognition and
celebration
Development
opportunities
Equal opportunities
and diversity
initiatives
Description
We have an ethical pay policy, whereby we ensure that our pay rates are ahead of the Real Living Wage in the UK. 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.
Our award-winning UK recognition programme, VibE, provides all colleagues with the ability to recognise and celebrate achievements across the
employee population instantly via a digital platform. Workplace, our internal community based social platform, provides Company news, and
enables our colleagues to recognise and celebrate achievements across the Group.
We are proud of our wide range of training and development programmes in the UK, US and Europe, and we work closely with our brand
partners to ensure that our colleagues are true experts in our category. Our elearning modules make learning and personal development
accessible to all.
The Company is committed to an active Diversity & Inclusion Policy from recruitment and selection to 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, as well as the provision of equal opportunities for the training and career
development of all colleagues. Further details of this are shown on page 66.
GENDER PAY
UK legislation requires employers with more than 250 employees to disclose information on their gender pay gap on an annual basis. We have published our sixth
disclosure of the pay gap based on amounts paid in the April 2022 payroll. The bonus gap was based on incentives paid in the year to 31 March 2022.
The mean gender pay gap at the Group is 21%, compared to 25% last year. The median bonus gap at the Group is 40%, compared to 32% last year. Whilst there is still
a way to go, we are encouraged by the result. 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.
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AT A G L A N C E
REMUNER ATION PRINCIPLES
Our reward strategy is designed to support and reinforce our purpose and values, and to reward all of our colleagues for delivering against our strategic objectives. The
remuneration principles that we have developed across the Group are cascaded throughout the organisation.
Current Directors’ Remuneration Policy
Fixed
Salary
Reflects the value of the individual, their role, skills, experience and contribution to the business
Benefits
Aligned with all other colleague arrangements
Pension
Alignment of employer pension contributions with the wider workforce at 3%. The CEO and our newly appointed CFO waive their
pension contribution.
Variable
Annual Bonus Plan
Incentivises achievement of annual objectives and aligns Director and shareholder interests by delivering one-third in deferred shares
LTIP
Provides alignment with shareholders and motivates key individuals to achieve long-term targets and deliver sustainable performance
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. Our FY23 performance against our KPIs is also shown below:
REVENUE
£1,542.8m
FY22: £1.238.0M
OPERATING PROFIT
£178.6m
FY22: £142 .1M
KPIs
ADJUSTED EBIT
£165.1m
FY22: £130.3M
ADJUSTED EPS
52.7p
FY22: 41.8P
RETURN ON CAPITAL EMPLOYED
27.9%
FY22: 27.4%
CASH GENERATED FROM OPERATIONS
£239.2m
FY22: £186.6M
BONUS PL AN
Performance condition: 100% based on Adjusted EBIT
Reflects the successful delivery of a number of KPIs:
Revenue, Adjusted EBIT1 subject to an ESG underpin,
which can reduce the bonus up to 10% taking into
account progress against our ESG Strategy
LTIP
Performance conditions: Adjusted EPS (80%) and
Return on Capital Employed (20%)
Reflects the successful delivery of a number of KPIs
over the longer term: Revenue, Adjusted EBIT 1,
Adjusted EPS1, Return on Capital Employed1
1 This is an Alternative Performance Measure. Refer to Glossary on pages 230 to 232 for definitions and reconciliation to statutory measures.
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THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
REMUNER ATION IN RESPECT OF FY23
Total compensation
Brian Duffy (CEO)
Salary:
Taxable benefits:1
Annual bonus:2
£500,000
£24,893
£562,500
LTIP:3
£2,554,329
– Value at grant:
£1,000,000
– Share price appreciation: £1,554,329
Pension:4
Total:
–
£3,641,722
Bill Floydd (CFO)
Salary:
£380,000
Taxable benefits:1 £37,837
Annual bonus:2
£237,500
LTIP:3
–
Pension:4
Total:
£11,400
£666,737
1 Taxable benefits include one or more of private healthcare, accommodation when attending different offices, company car (including private fuel) or a car allowance.
2
3
In the current year, the CEO earned £375,000 in cash and £187,500 in deferred shares, and the CFO earned £237,500 in cash only.
The FY21 LTIP award vested at 100% of maximum and a two-year holding period applies following vesting. Of the total amount, £1,554,329 for the CEO reflects the share price appreciation in the period since
grant. There was no discretion exercised in respect of the awards. The FY21 LTIP award has been valued based on the three month average share price to year end of £8.17.
4 No Director has a prospective entitlement to receive a defined benefit pension.
For further detail refer to page 166.
ANNUAL BONUS OUTCOMES IN FY23 (AUDITED)
Performance
condition
Adjusted EBIT
Weighting
100%
Threshold
performance
required (20% of
max bonus)
Target performance
required (50% of
max bonus)
Maximum
performance
required (100% of
max bonus)
Actual
performance
Percentage of
maximum
performance
achieved
Bonus value achieved
Brian Duffy
Bill Floydd
£153
£161
£169
£165m
75%
£562,500
(112.5% of salary)
£237,500
(62.5% of salary)
For further detail refer to page 167.
LTIP OUTCOMES IN FY23
The LTIP awards granted in FY21 were based 80% on three-year cumulative EPS and 20% on three-year average ROCE performance.
As a result of EPS and ROCE performance over the three-year performance period, 100% of the LTIP award is due to vest in September 2023. A two-year holding period
will apply following vesting.
Performance condition
Cumulative Earnings Per Share
ROCE
Weighting
80%
20%
Threshold performance
required (20% of max
LTIP)
Target performance
required (60% of max
LTIP
Maximum
performance required
(100% of max LTIP)
Actual
performance
Vesting level
63.2p
15.5%
66.5p
16.0%
69.8p
16.5%
118.3p
25.0%
100%
100%
For further detail of the performance outcomes refer to page 167.
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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
S U M M A RY R EM U N ER ATI O N PO LI C Y
The below table sets out a summary of our Remuneration Policy for Executive and
Non-Executive Directors, as approved by shareholders at the AGM on 1
September 2022, as well as its proposed implementation for FY24. Our full
Remuneration Policy can be found in our Annual Report and Accounts 2022.
The Policy has been tested against the six factors listed in Provision 40 of the UK
Corporate Governance Code 2018 (the Code):
These features 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
Clarity
– The Remuneration Policy sets out clearly the basis for any payments and the
– Aligning any reward to the agreed strategy of the Company
– Focusing the Long Term Incentive Plan on sustainable performance over the
terms of the incentive arrangements operated
longer term
– 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
Simplicity
– The incentive plans are in line with standard UK market practice and therefore
should be familiar to all stakeholders
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
– 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
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
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 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
Alignment to culture
– A key tenet of the Group’s culture is a focus on ensuring long-term sustainable
performance. This is reflected in the type of performance conditions used in
the incentive plans
SUMMARY REMUNER ATION POLICY FOR EXECUTIVE DIRECTORS
Operation and opportunity
Implementation for FY24
Element
Fixed pay
Base salary
Set at a level which is market competitive to
attract and retain Executives and at a level
which reflects an individual’s experience, role,
competency and performance.
Benefits
Pension
Market standard benefits including (but not limited
to) company car, private health insurance and life
insurance.
Maximum value of the employer pension
contribution allowance is in line with the majority
employee contribution (currently 3% of salary).
The Executive Directors elected not to receive a salary increase with effect from October
2022 with the salary budget focused on providing increases to lower paid workers.
Base salary levels for FY24 are therefore:
– CEO: £500,000 (no change)
– CFO (Anders Romberg from 12 May 2023): £380,000 (no change from previous incumbent)
Salary reviews for all colleagues will take place in FY24. To the extent that there are increases, the
Executive Directors will receive no more than the same percentage increase as the wider workforce.
The returning CFO has chosen to waive his car allowance.
The CEO and the new CFO have chosen to waive their employer pension contributions.
16 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Element
Operation and opportunity
Implementation for FY24
Variable pay
Annual Bonus
Plan
– Maximum opportunity of 150% of salary
No change to maximum opportunity.
(CEO) and 125% of salary (CFO)
– 20% of the maximum bonus pays out for
threshold performance, with 50% paying out
for on-target performance and 100% paying
out for maximum performance
– 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
– Measures may include financial or non-financial
measures, however at least 50% of the awards
will be linked to financial measures
For FY24, the annual bonus will be based 100% on Adjusted EBIT .
Reflecting the focus throughout the Group on achieving the Company’s ESG objectives, the
Committee has enhanced the underpin introduced last year to ensure that it is sufficiently
robust and measurable. At year-end the Committee will review a detailed dashboard setting
out performance against our five main ESG pillars: Net-Zero, Circular Economy, Responsible
Resourcing, People and Communities. The main areas of focus for FY24 are anticipated to be:
– Colleague engagement
– Diversity and inclusion metrics
– Delivery of Modern Slavery metrics
– Continued support of The Watches of Switzerland Group Foundation
– Volunteering hours
– Scope 1 and 2 emissions
– Scope 3 emissions
– Keeping luxury watches in circulation through repairs, servicing and pre-owned
This detailed ESG dashboard will inform the Committee’s decision of whether or not to apply
a downwards adjustment of up to 10% to the formulaic FY24 annual bonus outcome in order
to take into account the wider ESG performance of the Group. Key factors considered by the
Committee will be disclosed retrospectively in next year’s report, in line with best practice.
Long Term
Incentive Plan
– Maximum opportunity of 200% of salary
No change to maximum opportunity.
(CEO) and 175% of salary (CFO).
– A two-year holding period will apply following
the three-year vesting period.
– Where material changes are made to LTIP
performance conditions, it would be the
Committee’s intention to consult with
shareholders.
The LTIP Awards will continue to be based 80% on three-year cumulative Adjusted EPS and
20% on three-year average ROCE.
The Company is currently reviewing the Long Range Plan and the targets for FY24 will
therefore be determined later in the year, so that they remain appropriate in the context of
our long-term strategic ambitions. The targets will be disclosed as part of the RNS detailing
the Executive Directors awards.
Shareholding
requirements
– 200% minimum shareholding requirement which
can be built up within five years of appointment.
No change.
– Executive Directors required to hold 100% of
their pre-cessation shareholding requirement
for 24 months from the date they step down
from the Board.
SUMMARY REMUNER ATION POLICY FOR NON-EXECUTIVE DIRECTORS (NED)
Element
Operation and opportunity
Implementation for FY24
Company
Chair and
Non-
Executive
Director fees
– Non-Executive Directors are paid an annual
The Chair and NED fees were not increased during the year. Fees for FY24 are therefore as follows:
fee and additional fees for Chairship of
committees, the role of Senior Independent
Director and membership of Committees
Chair
NED base fee
– Fees reflect responsibilities and time
Commitments for the role
Senior Independent Director fee
Committee Chair fee
– The Chair does not get any additional fees for
Committee membership
Audit & Risk Committee, Remuneration Committee, ESG
Committee membership fee
£190,000 (no change)
£50,000 (no change)
£10,000 (no change)
£10,000 (no change)
£5,000 (no change)
Nomination Committee membership fee
£2,500 (no change)
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continued
A N N UA L R EPO RT O N R EM U N ER ATI O N
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 FY23. 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
benefits1
£
Bonus2
£
LTIP3
£
Pension4
£
Other5
£
Total fixed
remuneration
£
Total variable
remuneration
£
Total
£
Executive Directors
Brian Duffy
FY23
500,000
24,893
562,500
FY22
500,000
23,281
750,000
2,554,329
1,000,000 *
1,554,329**
3,274,071
999,999 *
2,274,072**
–
–
n/a
3,641,722
524,893
3,116,829
n/a
4,547,352
523,281
4,024,071
Bill Floydd
FY23
FY22
Non-Executive Directors6
Ian Carter
Tea Colaianni
Robert Moorhead
Rosa Monckton
Chabi Nouri7
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
FY22
*Value at grant ** Share price appreciation
380,000
126,667
190,000
190,000
82,500
81,667
72,500
71,667
72,500
70,833
59,167
n/a
37,837
5,989
8,688
6,752
1,349
–
–
–
–
–
4,693
n/a
237,500
158,333
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
0
0
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11,400
3,800
–
48,891
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
n/a
n/a
n/a
n/a
n/a
n/a
n/a
666,737
343,680
198,688
196,752
83,849
81,667
72,500
71,667
72,500
70,833
63,860
n/a
429,237
136,456
198,688
196,752
83,849
81,667
72,500
71,667
72,500
70,833
63,860
n/a
237,500
207,224
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1
2
3
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.
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 75% of maximum for all Executive Directors. In the current year, the CEO earned £375,000 in cash and £187,500 in shares and the CFO earned £237,500 in cash only.
The FY21 LTIP award vested at 100% of maximum and a two-year holding period applies following vesting. Of the total amount, £1,554,329 for the CEO reflects the share price appreciation in the period since
grant. There was no discretion exercised in respect of the awards. The FY21 LTIP award has been valued based on the three-month average share price to year end of £8.17. The value of the FY20 LTIP award
which vested in FY22 has been updated to reflect the share price on the date of vest of £8.84.
4 No Director has a prospective entitlement to receive a defined benefit pension.
5
Other remuneration in FY22 consisted of share awards granted to Bill Floydd to compensate him for the forfeited position of awards granted by his previous employer. The value shown is 3,443 restricted shares based
on a share price of £14.20, being the closing share price on 31 December 2021, the last trading day before his appointment.
6 Non-Executive Director fees are in respect of Committee meetings. There has been no increase in respect of any of the individual fee components.
7 Chabi Nouri was appointed to the Board with effect from 1 May 2022 and to the Audit & Risk Committee from July 2022. She received fees of £nil in respect of FY22.
16 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
ANNUAL BONUS OUTCOMES IN FY23 (AUDITED)
The maximum bonus opportunity for the CEO and CFO for FY23 was 150% and 125% of salary respectively. Two-thirds of the bonus award is 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 FY23 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)
Target performance
required (50% of
max bonus)
Maximum
performance
required (100% of
max bonus)
Actual
performance
Percentage of
maximum
performance
achieved
Bonus value achieved
Brian Duffy
Bill Floydd
£153
£161
£169
£165m
75%
£562,500
(112.5% of salary)
£237,500
(62.5% of salary)
As disclosed in last year’s report, the Remuneration Committee assessed the appropriateness of the FY22 annual bonus outcome in the light of factors including ESG
performance and the experience of our colleagues, clients and shareholders in the year. The factors considered by the Committee when determining the FY23 bonus
outcome were:
– ESG – We make made good progress in establishing our ESG Strategy and building the governance framework around this strategy such as the ESG Partner
Standards and our commendation for near-term carbon strategy by the SBTi
– Colleagues – We have maintained strong engagement with our colleagues. Both our engagement score and inclusion score for the year were 81%. We have also
taken steps to protect and support lower paid colleagues in light of the cost-of-living crisis
– Clients – We retained strong levels of client satisfaction through mystery shops and showroom reviews and have a strong NPS of over 80%
– Communities – We have continued our support of The Watches of Switzerland Group Foundation and increased volunteering hours in the Group by 13%
Overall, the Committee considered that progress against our ESG strategy has been robust and the shareholder and wider stakeholder experience has remained strong
and concluded that the proposed bonus payout was appropriate and therefore no discretion to reduce the outcome was exercised. The CEO intends to donate £250,000
of his annual bonus to The Prince’s Trust. The CFO, who stepped down from the Board from 12 May 2023, will receive the cash portion of the bonus only (up to two-
thirds of the maximum bonus opportunity). He was not deemed to be eligible to receive the deferred shares portion (one-third) of the bonus.
LONG -TERM INCENTIVE OUTCOMES IN FY23
In September 2020, the Company granted the CEO a long-term incentive award of 200% of salary. The award was subject to performance to the end of FY23. Details
of the three-year cumulative EPS and three-year average ROCE 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 Earnings Per Share
ROCE
Weighting
80%
20%
Threshold performance
required (20% of max
LTIP)
Target performance
required (60% of max
LTIP
Maximum
performance required
(100% of max LTIP)
Actual
performance
Vesting level
63.2p
15.5%
66.5p
16.0%
69.8p
16.5%
118.3p
25.0%
100%
100%
Anders Romberg was treated as a good leaver in January 2022. Anders was previously awarded an LTIP in 2020 which was pro-rated when he retired in February 2022.
As reported in the Annual Report and Accounts 2022 the pro-rated portion (i.e. 90,386 shares) will now vest in line with the performance conditions outlined above.
167
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
LONG -TERM INCENTIVES AWARDED IN FY23 (AUDITED)
The table below sets out the details of the long-term incentive awards granted in FY23, where vesting will be determined according to the achievement of performance
conditions that will be tested based on performance to the end of FY25.
Name
Brian Duffy
Award
type
Basis on which
award made
Nil-cost options Annual – 200% of salary
Face value
of award
£999,996
Shares
awarded
133,244
Bill Floydd
Nil-cost options Annual – 175% of salary
£664,996
88,607
Percentage of award
vesting at threshold
performance (%)
Maximum percentage
of face value that
could vest (%)
20%
20%
100%
100%
Performance
conditions
EPS (80%)
ROCE (20%)
EPS (80%)
ROCE (20%)
The awards for Brian Duffy and Bill Floydd were granted on 14 July 2022; the face value is calculated with reference to a share price of £7.505, being the closing share
price on 13 July 2022.
Awards are based 80% on three-year cumulative Adjusted EPS (pre-exceptionals and pre-IFRS 16 adjustment) and 20% on three-year average ROCE over the period
FY23 to FY25. 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)
ROCE is defined in the Glossary on pages 230 to 232.
The LTIP awards granted in July 2022 to Bill Floydd lapsed at the date of his resignation as an Executive Director. Further information can be found below.
DEFERRED SHARE AWARDS GR ANTED IN FY23 (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
Bill Floydd
Award
type
Basis on which
award made
Face value
of award
Nil-cost options
Deferral of FY22 bonus
£249,999
Nil-cost options
Deferral of FY22 bonus
£52,775
Shares
awarded
33,311
7,032
The awards for Brian Duffy and Bill Floydd were granted on 14 July 2022; the face value is calculated with reference to a share price of £7.505, being the closing share price
on 13 July 2022. The awards will vest on 14 July 2025.
DIRECTORS’ SHARE INTERESTS (AUDITED)
Shares held directly
Shareholding requirement
Current
shareholding
Beneficially
owned
Deferred
shares not
subject to
performance
conditions
LTIP vested
but not yet
exercised
LTIP interests
subject to
performance
conditions
LTIP interests
not subject to
performance
conditions
% Salary1
Shareholding
requirement met?
7,696,999
7,696,999
907
907
58,744
7,032
69,700
24,447
22,125
8,904
–
69,700
24,447
22,125
8,904
–
–
–
–
–
–
370,370
–
–
–
–
–
–
551,901
170,779
–
1,772
–
–
–
–
–
–
–
–
–
–
200%
n/a
n/a
n/a
n/a
n/a
n/a
Yes
n/a
n/a
n/a
n/a
n/a
n/a
Name
Executive Directors
Brian Duffy
Bill Floydd
Non-Executive Directors
Ian Carter
Tea Colaianni
Robert Moorhead
Rosa Monckton MBE
Chabi Nouri
1 Subject to being appointed for five years.
There have been no changes to shareholdings between 30 April 2023 and the date of this report.
The market price of shares at 28 April 2023 was £8.31 and the range during FY23 was £6.57 to £10.37.
16 8
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
LEAVING ARR ANGEMENTS FOR BILL FLOYDD (AUDITED)
Bill Floydd stepped down as CFO and as an Executive Director of Watches of
Switzerland Group PLC with effect from 12 May 2023. Bill is currently due to
remain in employment with the Company until 3 November 2023, during which he
will be available to support a handover to the new CFO. His leaving arrangements
were as follows:
– Fixed pay – Bill will continue to receive his base salary, benefits and pension
allowance until he ceases employment with the Company. Bill will not receive
any loss of office payments. Fees incurred in relation to his termination of
employment will be paid up to a limit of £11,000
– FY23 annual bonus – Bill will receive the cash portion of his FY23 bonus. The
amount is included in his single figure of remuneration for FY23. He will not
receive the deferred share portion of the FY23 annual bonus
– FY24 annual bonus – Bill will not be eligible for a bonus in respect of FY24
– FY22 deferred bonus shares – Bill was granted an award over 7,032 shares on
14 July 2022 in respect of the deferred portion of his FY22 annual bonus. Bill will
remain eligible to receive these shares and they will continue to vest on 14 July
2025, subject to the terms of the plan
– Buy-out award – On joining the business, Bill was granted an award over 1,722
shares to replace the second tranche of the 2017/18 LTIP award which Bill forfeited
on leaving his previous employer. Bill will remain eligible to receive these shares
which have already been performance tested and will therefore vest on 1 October
2023. The buy-out award over 1,721 shares that vested in October 2022 will
remain subject to a holding period until 1 October 2023. Bill will forfeit his
outstanding buy-out award of 35,392 due to vest in December 2023
– LTIP awards – Bill will forfeit his outstanding LTIP awards granted on 17
February 2022 and 14 July 2022
– Post-employment shareholding guidelines – Bill will comply with our post-
employment shareholding guideline policy for a period of two years following
stepping down from the Board. As part of his terms of appointment, Bill must
retain 100% of his shareholding as at 12 May 2023 (907 shares), the date he
stepped down from the Board, until 12 May 2025. Bill will also be required to
retain any shares that vest from the Watches of Switzerland Group share plans
in this period
REMUNER ATION AND ALIGNMENT WITH PERFORMANCE
CEO pay ratio
Our CEO to employee pay ratios for FY20 to FY23 are set out in the table below:
Financial year
Method used
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
FY23 (reported) Option A
FY22 (reported)
Option A
FY21 (reported)
Option A
FY20 (reported)
Option A
FY20 (excluding
one-off IPO award)1
Option A
158:1
206:1
61:1
317:1
25:1
136:1
174:1
51:1
262:1
21:1
101:1
128:1
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 Annual Report and Accounts 2019) and subsequently
finalised early in FY20 and as such, it was included in the FY20 single total figure of remuneration.
Details of salary and total pay and benefits as required under the regulations are set
out below:
CEO base salary (£’000): £500,000
CEO total pay and benefits (£’000): £3,641,722
Employee figures (£’000)
25th percentile employee
50th percentile employee
75th percentile employee
Salary
22.4
24.3
32.4
Total pay and
benefits
23.1
26.9
36.2
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 employees at the 25th, 50th and
75th percentiles. We have determined the individuals at the 25th, 50th and 75th
percentiles as at 30 April 2023, the last day of the financial year.
The CEO pay ratio gap has decreased during the year due to the lower level of
bonus payout for FY23 (75% of maximum) compared to the FY22 where the bonus
paid out in full. The value of the LTIP vesting in respect of FY23 is also lower due to
the lower share price appreciation over the performance period.
In addition, we expect the ratios could be fairly volatile for the following reasons:
– The CEO’s pay is made up of a greater proportion of incentive pay than for
employees generally, and this leads to a higher degree of variability in his overall
pay each year
– LTIPs are provided in shares, and therefore a change in share price over the
three years magnifies the impact of a long-term incentive award vesting in any
given year
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.
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:
– Annual basic salary
– Private medical insurance value
– Car or car allowance
– Employer pension contribution (noting that the CEO and current CFO waive
their employer pension contribution)
– Bonus and commission earned in the year in question
– LTIP value
– Management incentive plan value.
For FY23, the CEO received an annual bonus of 75% of maximum i.e. 112.5% of
salary and an LTIP award, which was granted in September 2020, and vested at 100%
of maximum. See page 167 for further information on the factors considered by the
Remuneration Committee when determining FY23 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 employee’s
contracted hours and the proportion of the year they were employed.
169
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
PERCENTAGE CHANGE IN DIRECTORS’ REMUNER ATION
The table below shows how the percentage change in each Director’s salary/fees, taxable benefits and annual bonus from FY20 to FY23 compares with the average
percentage change in each of those components of pay for the UK-based employees 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.
Year-on-year changes in pay for Directors compared to the average UK employee increase:
FY20 to FY21
FY21 to FY22
FY22 to FY23
Salary/fees
Taxable
benefits
Annual
bonus
Salary/fees
Taxable
benefits
Annual
bonus
Salary/Fees
Taxable
benefits6
Annual
bonus
Name
Executive Directors
Brian Duffy
Bill Floydd3
Anders Romberg4
Non-Executive Directors
Ian Carter5
Tea Colaianni
Robert Moorhead
Rosa Monckton MBE
Chabi Nouri7
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/a5
4.3%2
n/a
(0.6)%
n/a
4.3%
n/a
0%
6.9%
200.0%
403.0%
(25.0)%
50.0%
(30.4)%
(27.7)%
(30.4)%
n/a
n/a
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%
0%
1.0%
1.2%
2.4%
28.7%
100%
0%
0%
100.0%
9.1%
100.0%
(14.4)%8
n/a
n/a
n/a
n/a
n/a
n/a
(48.3)%
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. The increases shown are as a result of the annualisation of his remuneration.
4 Anders Romberg retired as CFO and as an Executive Director of the Board with effect from 1 January 2022.
5
6
7 Chabi Nouri was appointed as an independent Non-Executive Director with effect from 1 May 2022. The increases shown are as a result of the annualisation of her remuneration.
8 Reduction in taxable benefits is due to a move to a hybrid and electric car fleet.
9 Changes in pay for the Non-Executive Directors relate to the introduction of the ESG Committee part way through FY22. There have been no increases in Non-Executive Director fees over the year.
Ian Carter was appointed as Chair of the Board on 1 November 2020.
Increase in Non-Executive Director fees is due to an additional fee being paid for membership of the ESG Committee and for chairing the ESG Committee.
TOTAL SHAREHOLDER RETURN
The graph 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.
CEO REMUNER ATION 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,
this table shows remuneration from FY20, the first financial year when the
Company was listed. We will add to this table each year until a full ten-year history
is shown:
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
Watches of Switzerland Group PLC
FTSE 350 General Retailers
2021
2022
2023
FTSE 250 (ex. Investment Trusts)
Financial year
FY23 – Brian Duffy
FY22 – Brian Duffy
FY21 – Brian Duffy
FY20 – Brian Duffy
(excluding one-off IPO award)1
Single figure of
remuneration
% of max annual
bonus earned
% of max LTIP
awards vesting
£3,641,722
£4,547,352
£1,221,337
£6,512,387
(£512,388)
75%
100%
100%
0%
100%
100%
n/a
n/a
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.
170
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
REL ATIVE 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 1 May 2022 to the financial year ended 30 April 2023.
Relative importance of the spend on pay
Colleague remuneration
Distribution to shareholders
FY23
£m
143.9
£0
FY22
£m
119.9
£0
% change
20.0%
0.0%
The Company has not paid a dividend or carried out a share buyback in the current
year nor the previous year.
ROLE OF THE REMUNER ATION COMMITTEE
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.
The Committee’s responsibilities are to:
– Determine Remuneration Policy for the Company Chair, Executive Directors, the
Company Secretary and other members of the Senior Management as designated
– Determine remuneration packages for the Company Chair, Executive
Directors, the Company Secretary and other members of the 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 employees
– 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.
WHO SUPPORTS THE COMMITTEE?
Internal
Internal support is provided by the Company Secretary & General Counsel and the
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.
External
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 for FY23 were £67,500, 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.
APPROVAL OF THE DIRECTORS’ REMUNER ATION REPORT
The FY23 Directors’ Remuneration Report will be subject to a shareholder vote at the 2023 AGM. The table below sets out the actual voting in respect of resolutions
regarding remuneration at previous Annual General Meetings.
Approve the 2022 Directors’ Remuneration Report
(2022 AGM)
Approve the 2022 Directors’ Remuneration Policy
(2022 AGM)
Votes for
188,426,596
% for
Votes against
% against
Total votes
Votes withheld
97.38%
5,071,294
2.62% 193,685,453
187,563
189,914,532
98.15%
3,583,126
1.85% 193,685,453
187,795
TEA COLAIANNI
CHAIR OF THE REMUNERATION COMMITTEE
12 July 2023
171
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS D I R E C TO R S ' R E P O RT
WATC H ES O F SW IT ZER L A N D
G RO U P PLC
Registered number: 11838443
Topic
STATUTORY INFORMATION
Section of the report
Strategic Report
Page
8 to 121
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 Directors present their report,
together with the audited Consolidated
Financial Statements of the Group and
of the Company, for the year ended 30
April 2023. 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
referenced in the table opposite and
together form the Directors’ Report.
POST BAL ANCE-SHEET EVENT
On 9 May 2023 the Group signed a
new five year £225.0 million Revolving
Credit Facility (RCF) with lenders.
The existing facilities were repaid and
extinguished on this date.
Important events impacting the business
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 9.8.6(10)
Topic
Diversity & Ethnicity
INFORMATION REQUIRED BY LR 9.8.4(R)
Topic
Directors’ interests in shares
Going concern
Long-term incentive schemes
Note 22 of the Consolidated Financial Statements
Nomination Committee Report
Environment, Social and Governance
Environment, Social and Governance
Environment, Social and Governance
Risk Management
Strategic Report
Section of the report
Corporate Governance Report
Nomination Committee 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
218
146
108
104
104
113
51
Page
140
146
Page
168
122
165
Page
132
Page
12
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
Section of the report
Section 172(1) Statement
Board activity
How the Group provides colleagues with information
on matters of concern to them as colleagues
Environment, Social and Governance
How the Group consults with and considers
colleague feedback
How the Directors have had regard to
colleagues’ interests
Environment, Social and Governance
Environment, Social and Governance
Board activity
Non-Financial Information Statement
Non-Financial Information Statement
Business relationships
Information
Section of the report
Foster the Company’s business relationships
Section 172(1) Statement
Principal decisions affecting suppliers, clients and others
taken by the Company during the financial year
Section 172(1) Statement
Board activity
Page
51
136
71
71
71
136
50
Page
51
51
136
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.
172
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
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.
AGM
The 2023 AGM of the Company will be held at 3.30pm on 31 August 2023, 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
Anders Romberg – Appointed 12 May 2023
Tea Colaianni
Robert Moorhead
Rosa Monckton MBE
Chabi Nouri
Bill Floydd – Resigned 12 May 2023
Full biographies of the current Directors can be found on pages 130 to 131.
Details of the current Directors’ beneficial and non-beneficial interests in the
shares of the Company are shown on page 168. Details of share awards are found
in the Remuneration Report on page 168.
APPOINTMENT AND REMOVAL OF A DIRECTOR
The appointment, reappointment and replacement of Directors is governed by the
Articles, the UK Corporate Governance Code (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 2022 AGM, all members of
the Board stood for election or re-election and were duly elected. Anders Romberg
is offering himself for election at the 2023 AGM, which is the first AGM following
his appointment. All the other Directors are offering themselves for re-election.
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
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 168. 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.
(iii) Ordinary resolution if the Director chooses to seek re-election at a general
In preparing the Annual Report and Accounts, the Directors are required to:
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.
– 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
173
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 130 to 131
confirms that, to the best of their knowledge:
– That the Group Financial Statements, which have been prepared in accordance
with UK adopted international accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit of the Group
– That the Annual Report and Accounts 2023, including the Strategic Report,
includes a fair review of the development and performance of the business and
the position of the Company and undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties that they face
– That they consider the Annual Report and Accounts 2023, taken as a whole, is fair,
balanced and understandable and provides the information necessary for shareholders
to assess the Company’s position, performance, business model and strategy
COMPANY SECRETARY
Laura Battley is the Company Secretary of the Watches of Switzerland Group PLC
and its trading 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 30 April 2023 was as follows:
Allotted, called up and fully paid ordinary
shares of £0.0125 each
2023 number
of shares
2023
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.
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 2022 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).
174
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 The authority shall, unless varied, revoked or renewed, expire at the end of the
Company’s 2023 AGM or, if earlier, at close of business on 30 November 2024. To
date, the Directors have not exercised any of the powers conferred by this resolution.
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 113 to 114 and note 22 of the Consolidated
Financial Statements.
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.
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 2022. 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
not to pro-rate would only be used if there were a business case which would be
fully explained to shareholders.
Notifiable interest
BlackRock Inc
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
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.
The £225 million multicurrency revolving loan facility entered into on 9 May 2023,
includes certain customary mandatory prepayment and cancellation events,
including mandatory prepayments on a change of control of either Watches of
Switzerland Group PLC or Jewel UK Midco Limited if a lender so requests after a
period of negotiations.
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 the date of this report, 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.
Voting Rights
% of capital disclosed
22,737,693
9.48
Nature of holding as per
disclosure
– Indirect interest 8.29%
– Securities Lending 0.20%
– CFD 0.99%
19,611,533
12,052,654
12,026,252
11,876,662
11,948,369
7,374,274
7,696,999
8.19
– Indirect interest 8.19%
5.03
5.02
4.96
4.99
3.08
– Indirect interest 5.03%
– Indirect interest 5.02%
– Indirect interest 4.94%
– Direct interest 0.02%
– Direct interest 4.99%
– Direct interest 3.02%
– Indirect interest 0.06%
3.21
– Direct interest 3.21%
TR ANSACTIONS WITH REL ATED PARTIES
Refer to note 23 on page 222 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 2 to 121 and the Directors’ Report on pages 172 to 175 and the Corporate Governance Report were approved by the Board on 12 July
2023. Approved by the Board and signed on its behalf.
LAURA BATTLEY
COMPANY SECRETARY
12 July 2023
175
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 176
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 3 F I N A N C I A L
STATE M E NT S
C O N T E N T S
178 Independent Auditor’s Report
184 Consolidated Income Statement
185 Consolidated Statement of Comprehensive Income
186 Consolidated Balance Sheet
187 Consolidated Statement of Changes in Equity
188 Consolidated Statement of Cash Flows
189 Notes to the Consolidated Financial Statements
224 Company Balance Sheet
225 Company Statement of Changes in Equity
226 Notes to the Company Financial Statements
230 Glossary
233 Shareholder Information
177
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS I N D E P E N D E N T AU D I TO R ’ S R E P O RT TO T H E M E M B E R S O F
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 30
April 2023 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 30
April 2023 which comprise:
Group
Consolidated Income Statement for the
52-week period then ended
Consolidated Statement of
Comprehensive Income for the 52-week
period then ended
Consolidated Balance Sheet as at
30 April 2023
Parent Company
Balance Sheet as at 30 April 2023
Statement of Changes in Equity for the
52-week then ended
Related notes C1 to C9 to the Financial
Statements including a summary of
significant accounting policies
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 26 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.
– 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 new financing
arrangements, which were signed post year end, 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 for the 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 new facility agreement signed post year end;
– Assessing the Group’s severe but plausible 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.
This included challenging the assumptions and whether the quantum of the
impact of the downside scenarios are sufficiently severe;
– Challenging whether the scenarios modelled appropriately consider the
Group’s principal risks and uncertainties;
– 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 performing an independent
reverse stress test, assuming no sales growth in the going concern period, to
determine the level of further sales reduction before liquidity or covenants
are breached and assessing the likelihood of this scenario occurring;
– Performing a suite of procedures, including management enquiry to identify
events or conditions beyond the period of assessment that may cast significant
doubt on the entity’s ability to continue as a going concern; 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 is 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.
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.
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 2024.
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 2024, and which includes details of facilities available, forecast covenant
calculations, and the results of management’s downside sensitivity scenarios;
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.
178
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 showrooms.
– 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
-0.8%
Other
procedures
0.5%
Other
procedures
Audit scope
– We performed an audit of the complete financial
information of 5 (2022: 5) components.
– The components where we performed full or specific
audit procedures accounted for 100.8% of Profit before
tax and exceptional items (2022: 98.7%), 99.5% of Revenue
(2022: 99.8%) and 96.0% of Total assets (2022: 97.9%).
100.8%
Full scope
components
Total assets
Key audit matters
– Inventory valuation;
99.5%
Full scope
components
4.0%
Other
procedures
96.0%
Full scope
components
Involvement with component teams
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 showroom 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 showroom.
Materiality
– Revenue recognition including the risk of management
override; and
– Showroom impairment/reversal of impairment due to
changes in circumstances.
– Overall Group materiality of £7.8m (2022: £6.4m)
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 company 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, changes in the business
environment, the potential impact of climate change and other factors such as
recent Internal Audit results 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 18 (2022: 14) reporting components of the Group, we
selected 5 (2022: 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 (2022: 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
100.8% (2022: 98.7%) of the Group’s Profit before tax and exceptional items,
99.5% (2022: 99.8%) of the Group’s Revenue and 96.0% (2022: 97.9%) of the
Group’s Total assets.
Of the remaining 13 components that together represent -0.8% of the Group’s
Profit before tax and exceptional items, none are individually greater than 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.
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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
Stakeholders are increasingly interested in 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 showroom
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 91 to 94 in the required Task Force on Climate-related Financial Disclosures
and on pages 116 to 121 in the Principal Risks and Uncertainties. They have also
explained their climate commitments on page 102. All of these disclosures form
part of the “Other information”, rather than the audited Financial Statements. Our
procedures on these unaudited 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, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate
change on the Group’s business and any consequential material impact on its
Financial Statements.
The Group has explained in note 1 how they have reflected the impact of climate
change in their Financial Statements including how this aligns with their commitment
to the aspirations of the Paris Agreement to achieve net-zero emissions by 2050.
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 2024 nor the viability of the Group over the next three years.
Our audit effort in considering the impact of climate change on the Financial
Statements was focused on evaluating management’s assessment of the impact of
climate risk, physical and transition, their climate commitments, the effects of
material climate risks disclosed on pages 98 to 100 and the significant judgements
and estimates disclosed in note 1 and whether these have been appropriately
reflected in asset values where these are impacted by future cash flows, being the
impairment testing following the requirements of UK adopted international
accounting standards. As part of this evaluation, we performed our own risk
assessment, supported by our climate change internal specialists, to determine the
risks of material misstatement in the Financial Statements from climate change
which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their
assessment of going concern and viability and associated disclosures. Where
considerations of climate change were relevant to our assessment of going concern,
these are described above.
Based on our work we have not identified the impact of climate change on the
Financial Statements to be a key audit matter or to impact a key audit matter.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, 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.
Risk
Inventory valuation – £356.0m of
inventory (FY22 £302.6m)
Refer to the Audit & Risk Committee Report
(page 148); Accounting policies (page 192);
and note 14 of the Consolidated Financial
Statements (page 211)
The Group sells luxury goods, which
have a high carrying value and are subject
to changing consumer trends.
applies
judgement
Management
to
anticipate saleability of on-hand inventory
and to evaluate liquidation of slow moving
and discontinued inventory.
There is greater risk on the valuation of
products where margins tend to be
lower, more variable and impacted by
changes in the consumer landscape such
as jewellery.
There further remains an ongoing risk on
the estimation involved in the accounting
for in year supplier price increases.
Key observations communicated to
the Audit & Risk Committee
Based on our procedures we
consider the valuation of inventory
to be materially appropriate.
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 enquired of key members of finance and the merchandising team to understand
inventory levels, ageing and plans for discontinuation.
– We assessed management’s judgements and assumptions used in determining the
inventory provision to challenge if they were appropriate and supportable. We
understood the sensitivity of these assumptions to change.
– We assessed the level of provisioning by specific brand and compared this to
performance in the year and stock turn. We directed greater attention to products
likely to be impacted by cost-of-living challenges.
– We inspected the value of inventory sold at less than cost during the period and
challenged management on whether a provision was required for the amounts that
remain on hand at year end.
– In assessing the reasonableness of management’s methodology, we have considered
the historical level of provisioning and subsequent utilisation and releases to determine
the accuracy of prior provisions. This included assessing the nature and valuation of
adjustments made to inventory in respect of acquisitions where the initial accounting
period was provisional.
– 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.
– For the UK and US full scope components (98.7% 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.
18 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Risk
Revenue recognition including the
risk of management override –
£1,542.8m Revenue (FY22 £1,238.0m)
Refer to the Audit & Risk Committee Report
(page 148); Accounting policies (page 190);
and note 2 & 3 of the Consolidated Financial
Statements (pages 196 to 198)
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 due to material misstatements
as a result of fraudulent or erroneous
financial reporting.
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.
Showroom impairment – £0.3m net
impairment reversal (FY22 £0.4m
impairment reversal)
Refer to the Audit & Risk Committee Report
(page 148); Accounting policies (page 192);
and Note 4 & 11 of the Consolidated
Financial Statements (pages 199 and 207)
Cash generating units (‘CGU’) should be
reviewed for indicators of impairment at
each reporting period end.
Forecasts and discount rates used in
impairment are
assessing showroom
judgemental and involve estimates of
future trading which involves uncertainty.
In particular, there is a risk in relation to
showrooms 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.
Key observations communicated to
the Audit & Risk 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
material
misstatements were identified.
cards
no
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, budget and post year end to identify areas that warrant
further investigation.
– For the UK and US full scope components (99.5% of Group revenue), we utilised data
analytic procedures to test the entire population of postings from Revenue to Cash,
correlating the cash conversion of sales.
– Using data analytical tools, we 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 to other audit procedures.
– We challenged the provision for returns by assessing actual returns since period end.
– We challenged the gift card deferred revenue through agreeing to a third party
confirmation and assessing historical redemption rates on aged unused gift cards.
– For a sample of deposits we confirmed the existence by agreeing the receipt of the
deposit to the bank statement. We also tested 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 assessed the ageing of deposits in the UK and US to challenge why these haven’t
been released.
– We tested the completeness of deposits through use of data analytics procedures on
showroom margins and by testing a sample of deposit releases to revenue in the period.
– We understood and assessed the design effectiveness and implementation of controls
over the impairment indicator review and impairment test.
– We 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 challenged the showroom 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 for the industry, inspecting post year
end results 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 validated impairment test input data and arithmetical accuracy of the model.
– We assessed the process for allocating forecast cashflows to individual showrooms.
– 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 assessed the adequacy of the disclosures in the Financial Statements in respect of
the impairment and impairment reversal. This included assessing the disclosure on the
reasonable possible changes in assumptions.
Based on our procedures over
showroom
no
material misstatements were
identified.
impairment
We consider
the showroom
impairment recognised to be
materially stated and appropriately
disclosed in underlying results.
We consider
the showroom
impairment reversal recognised
to be materially stated and
appropriately
in
exceptional items, consistent with
where the original impairment
charge was recorded.
disclosed
Management have appropriately
analysis
sensitivity
included
disclosures in note 11 to the
Financial Statements to reflect the
level of estimation uncertainty.
181
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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 £7.8 million (2022: £6.4 million), which
is 5% (2022: 5%) 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 £9.5 million (2022: £9.3
million), which is 2% (2022: 2%) of Equity due to the main purpose of the entity being
an investment holding company which does not trade.
OTHER INFORMATION
The other information comprises the information included in the Annual Report
and Accounts set out on pages 1 to 233, 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 and Accounts.
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.
STARTING BASIS
Profit before tax – £154.8m
ADJUSTMENTS
– Impairment reversal - (£0.7m)
– Acquisition related costs £0.9m
– Accelerated amortisation of capitalised
transaction costs £0.7m
MATERIALIT Y
– Totals £155.7m Profit before tax and exceptional
items
– Materiality of £7.8m (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% (2022: 75%) of our planning materiality, namely £5.8m (2022: £4.8m). We have
set performance materiality at this percentage as we did not anticipate a significant
level of audit differences following our FY22 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 £1.2m to £5.8m (2022: £1.0m to £4.8m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit & Risk Committee that we would report to them all
uncorrected audit differences in excess of £0.39m (2022: £0.32m), 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.
We have nothing to report in this regard.
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 122;
– 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
page 123;
– 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
page 123;
182
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 – We assessed the susceptibility of the Group’s Financial Statements to material
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 & Risk 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 & Risk Committee we were
appointed by the Company on 17 October 2019 to audit the Financial
Statements for the year ending 26 April 2020 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals
and reappointments is four years, covering the years ending 26 April 2020 to
30 April 2023.
– The audit opinion is consistent with the additional report to the Audit &
Risk 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
12 July 2023
– Directors’ statement on fair, balanced and understandable set out on page 150;
– Board’s confirmation that it has carried out a robust assessment of the emerging
and principal risks set out on page 116;
– The section of the Annual Report and Accounts that describes the review of
effectiveness of risk management and internal control systems set out on page
151; and
– The section describing the work of the Audit & Risk Committee set out on
pages 148 to 153.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement set out on pages
173 to 174, 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 General
Data Protection Regulation (GDPR), health and safety and employee matters.
– We understood how Watches of Switzerland Group PLC is complying with
those frameworks by making enquiries of management, Internal Audit, those
responsible for legal and compliance matters and the Company Secretary &
General Counsel. We confirmed our enquiries through our review of Board
minutes, papers provided to the Audit & Risk Committee and correspondence
received from regulatory bodies.
183
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
Revenue
Cost of sales
GROSS PROFIT
Administrative expenses
Exceptional administrative expenses
Exceptional reversal of impairment of assets
OPER ATING PROFIT
Finance costs
Finance income
Exceptional finance costs
NET FINANCE COST
Profit before taxation
Taxation
Profit for the financial period
EARNINGS PER SHARE
Basic
Diluted
52 week period
ended
30 April 2023
£m
1,542.8
52 week period
ended
1 May 2022
£m
1,238.0
Note
2,3
(1,324.1)
218.7
(1,056.7)
181.3
4
4
7
7
4
8
9
9
(39.9)
(0.9)
0.7
178.6
(24.0)
0.9
(0.7)
(23.8)
154.8
(33.0)
121.8
51.2p
50.9p
(37.6)
(2.0)
0.4
142.1
(16.0)
0.1
–
(15.9)
126.2
(25.2)
101.0
42.2p
42.0p
18 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 (expense)/income:
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS
Foreign exchange (loss)/gain on translation of foreign operations excluding deferred tax
Related current tax movements
ITEMS THAT WILL NOT BE RECLASSIFIED TO PROFIT OR LOSS
Actuarial movements on defined benefit pension scheme
Related deferred tax movements
Other comprehensive (expense)/income for the period
Total comprehensive income for the period
The notes on pages 189 to 223 are an integral part of these Consolidated Financial Statements.
Note
8
19
8
52 week period
ended
30 April 2023
£m
121.8
52 week period
ended
1 May 2022
£m
101.0
(3.1)
0.1
(3.0)
0.3
(0.1)
0.2
(2.8)
119.0
11.0
(1.2)
9.8
1.4
(0.2)
1.2
11.0
112.0
18 5
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
30 April 2023
£m
1 May 2022
£m
10
10
11
12
8
19
13
14
13
15
16
12
17
16
8
12
18
19
17
20
20
20
20
182.8
17.6
154.4
359.1
6.2
0.1
2.1
722.3
356.0
2.6
17.7
136.4
512.7
1,235.0
(218.7)
(4.9)
(47.4)
(1.8)
(272.8)
(0.9)
(3.0)
(363.0)
(120.0)
–
(6.0)
(492.9)
(765.7)
469.3
3.0
147.1
(2.2)
(18.4)
337.0
2.8
469.3
165.1
18.1
112.5
293.6
9.3
–
2.7
601.3
302.6
0.6
19.6
105.9
428.7
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
ASSETS
NON-CURRENT ASSETS
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Post-employment benefit asset
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 prior period balances have been restated, in line with IFRS 3 ‘Business combinations’, to reflect the finalisation of the provisional fair values of Betteridge Jewelers,
Inc., Gotthelfs Acquisition Corp., and Vail Village Jewelers, Inc. (‘Betteridge’). Further detail is disclosed within note 24.
The notes on pages 189 to 223 are an integral part of these Consolidated Financial Statements.
The Consolidated Financial Statements were approved and authorised for issue by the Board and were signed on its behalf by:
L A ROMBERG
CHIEF FINANCIAL OFFICER
Date: 12 July 2023
18 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 2 May 2021
Profit for the financial period
Other comprehensive income, net of tax
Total comprehensive income
Purchase of own shares
Share-based payment charge (note 21)
Tax on items credited to equity
Tax on vested shares moved to current tax
Total other transactions
Balance at 1 May 2022
Profit for the financial period
Other comprehensive income, net of tax
Total comprehensive income
Purchase of own shares (note 20)
Share-based payment charge (note 21)
Share-based payments
Tax on items credited to equity
Tax on vested shares moved to current tax
Total other transactions
Share
capital
£m
3.0
–
–
–
Share
premium
£m
147.1
–
–
–
Merger
reserve
£m
(2.2)
–
–
–
Other
reserves
£m
–
–
–
–
Retained
earnings
£m
106.4
101.0
1.2
102.2
Foreign
exchange
reserve
£m
(4.0)
–
9.8
9.8
Total equity
attributable to
owners
£m
250.3
101.0
11.0
112.0
–
–
–
–
–
3.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
147.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2.2)
–
–
–
–
–
–
–
–
–
(6.7)
–
–
–
(6.7)
(6.7)
–
–
–
(14.5)
–
2.8
–
–
(11.7)
–
3.2
(1.1)
3.6
5.7
214.3
121.8
0.2
122.0
–
3.5
(2.8)
(0.5)
0.5
0.7
–
–
–
–
–
5.8
–
(3.0)
(3.0)
–
–
–
–
–
–
(6.7)
3.2
(1.1)
3.6
(1.0)
361.3
121.8
(2.8)
119.0
(14.5)
3.5
–
(0.5)
0.5
(11.0)
Balance at 30 April 2023
3.0
147.1
(2.2)
(18.4)
337.0
2.8
469.3
187
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 property, plant and equipment
Reversal of impairment of property, plant and equipment – exceptionals
Reversal of impairment of right-of-use assets – exceptionals
Gain on lease disposal
Loss on disposal of property, plant and equipment
Gain on lease modifications
Share-based payment charge
Finance income
Finance costs
Exceptional finance costs
Taxation
Increase in inventory
Decrease/(increase) in debtors
Increase in creditors, provisions and pensions
Cash generated from operations
Pension scheme contributions
Tax paid
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
Total net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of own shares
Payment of capital element of leases
Payment of interest element of leases
Interest paid
Interest received
Net cash outflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Exchange (losses)/gains 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
18 8
52 week period
ended
30 April 2023
£m
52 week period
ended
1 May 2022
£m
Note
121.8
101.0
11
12
10
11
11
12
12
11
12
21
7
7
4
8
19
11
10
24
20
12
12
15
15
32.3
50.3
3.2
0.4
(0.5)
(0.2)
–
0.8
(1.3)
3.5
(0.9)
24.0
0.7
33.0
(51.5)
1.5
22.1
239.2
(0.7)
(26.6)
211.9
(75.0)
(2.7)
7.1
(70.6)
(24.9)
(95.5)
(21.3)
(42.0)
(17.2)
(5.6)
0.9
(85.2)
31.2
105.9
(0.7)
136.4
120.7
15.7
136.4
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
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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
The budget aligns to the Guidance given on page 12. Under this budget, the Group
has significant liquidity and comfortably complies with all covenant tests to 31
October 2024.
– Reverse stress-testing of cash flows during the going concern period was
performed. This determined what level of reduced EBITDA and worst case
cash flows 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
– The realisation of material risks detailed within the Principal Risks and
Uncertainties on pages 116 to 121 and environmental risks highlighted on
pages 98 to 101
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 potential 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 2024. For
this reason, the Board considers it appropriate for the Group to adopt the going
concern basis in preparing the Consolidated 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 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 2024 nor the viability of the Group over the
next three years (refer to the Viability Statement on page 123).
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.
The presentational format of Exceptional Items has changed since the prior period.
Exceptional items are no longer presented in a columnar format in the Consolidated
Financial Statements.
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 146 UK and Europe based showrooms, and 47 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), with a complementary jewellery offering.
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.
BASIS OF PREPAR ATION
The Consolidated Financial Statements include the financial statements of the
Company and its subsidiary undertakings made up to 30 April 2023. A subsidiary is
an entity that is controlled by the parent. The financial year represents the 52
weeks to 30 April 2023 (prior financial year 52 weeks to 1 May 2022). 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
Consolidated 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 £170.0 million in available
committed facilities, of which £120.0 million was drawn down. Net cash at this date
was £16.4 million with liquidity headroom (defined as unrestricted cash plus
undrawn available facilities) of £171.6 million. The $60.0 million US Asset Backed
Loan (ABL) expired in April 2023, and the main UK bank facility of £170.0 million
was due to expire in June 2024.
Refinancing
On 9 May 2023 the Group signed a new five-year £225.0 million multicurrency
revolving loan facility with lenders. The existing facilities were repaid and
extinguished on this date. As a result, the going concern assessment has been
carried out using the new £225.0 million facility now in place.
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. The new
£225.0 million facility covenants are in line with those previously used, notably on a
pre-IFRS 16 basis and excluding share-based payment 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. At 30 April 2023 the Group comfortably satisfied the
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
2024 from the date of this report. These included:
– The budget approved by the Board in May 2023. The budget assumes that the
more challenging trading environment of the second half of FY23 will continue
into the first half of FY24. Further key assumptions include:
– A continued strong luxury watch market in the UK and US
– Revenue forecast supported by expected luxury watch supply
– Increased cost base
environmental targets
in
line with macroeconomic environment and
189
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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’ APMs.
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 pages 230 to 231, including explanations of how they are calculated
and how they are reconciled to a statutory measure where relevant.
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
Pounds 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
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 netted 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.
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 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, Share Saving Schemes, and Free Share Awards.
19 0
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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
Consolidated 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.
191
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)
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.
The impact of climate change on asset lives has also been considered in the period.
Asset lives are not affected by climate actions taking place.
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 the
smallest identifiable group of assets that generate independent cash flows which
are monitored by management and the CODMs. The Group consider this to be an
individual showroom location or office. 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.
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 amount 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 amount 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.
192
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023
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. Where the Group has an unconditional right to a
refund, it recognises an asset measured as the amount of the surplus at the balance
sheet date that is has a right to receive as a refund.
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 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.
The Group does not hold any derivative instruments in either the current or prior
period.
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.
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
Interest-bearing loans and
borrowings
Trade and other payables
(excluding accrued income)
Subsequently measured at fair value. Gains
and losses are recognised in the Consolidated
Income Statement
Subsequently measured at amortised cost
using the EIR method. The EIR amortisation is
included in finance costs in the Income
Statement
Subsequently measured at amortised cost
Derecognition
A financial liability is derecognised when the obligation under the liability is
discharged, cancelled or expires. When an existing financial liability is replaced by
another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is
treated as the derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognised in the
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.
193
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)
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 discount lease payments to their present value, using its Incremental
Borrowing Rate (IBR) at the lease commencement date. 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 2.1% to 7.4%.
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 the 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.
NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS
The following standards, amendments and interpretations were applicable for the
period beginning 2 May 2022 and were adopted by the Group for the 52-week
period ended 30 April 2023. They have not had a significant impact on the Group’s
profit for the year, equity or disclosures:
– Reference to the Conceptual Framework – Amendments to IFRS 3
– Property, Plant and Equipment: Proceeds before Intended Use – Amendments
to IAS 16
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 1 May 2023 onwards, which the Group has adopted early:
– Classification of Liabilities as Current or Non-current and Non-current Liabilities
with Covenants – Amendments to IAS 1
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 1 May 2023 onwards, which the Group has not adopted early:
– IFRS 17 ‘Insurance Contracts’
– Definition of Accounting Estimates – Amendments to IAS 8
– Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice
Statement 2
– Deferred Tax related to Assets and Liabilities arising from a Single Transaction –
Amendments to IAS 12
IFRS 17 ‘Insurance Contracts’ applies to the Group in relation to the reinsurance of
contracts to Aurum Insurance (Guernsey) Limited. A materiality assessment is
taking place, however it is not anticipated that the standard will have a material
impact on the Group’s Consolidated Financial Statements.
The adoption of other standards and amendments noted 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.
Significant estimates
Estimates and underlying assumptions are reviewed by management on an ongoing
basis, with revisions recognised in the period in which the estimates are revised and
in any future period affected.
The areas involving significant risk resulting in a material adjustment to the carrying
amounts of assets and liabilities within the next financial period are as follows:
Post-employment benefit obligations
The Group’s accounting policy for 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 19.
194
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 2.1% to 7.4%.
Substantive substitution rights (IFRS 16)
The Group has applied judgement to three (2022: 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.
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.£3.4m.
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 strategic plan period,
the long-term growth rate to be applied beyond this period and the risk-adjusted
pre-tax discount rate used to discount those cash flows. The key assumptions
relate to sales growth rates and 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. This includes
unavoidable future costs such as price increases, together with the cost of mitigating
climate risks, and consideration of quantified climate-related risks on future cash
flows. 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 11.
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.
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.
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.
195
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 Chief Operating Decision Makers (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 finance costs and exceptional impairment) on a pre-IFRS 16 basis. UK
and Europe operating segments are aggregated into one reporting segment, which is reflective of the management structure in place.
52 week period ended 30 April 2023
UK and Europe
£m
US
£m
Corporate
£m
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 finance costs
Exceptional finance costs (note 4)
Exceptional reversal of impairment of assets (note 4)
Exceptional administrative costs (note 4)
Profit before taxation for the financial period
889.9
330.0
(153.6)
(47.8)
(7.3)
121.3
(23.2)
98.1
652.9
246.3
(125.6)
(30.9)
(3.4)
86.4
(13.1)
73.3
Total
£m
1,542.8
576.3
(279.2)
(84.1)
(11.6)
201.4
(36.3)
–
–
–
(5.4)
(0.9)
(6.3)
–
(6.3)
165.1
13.7
(23.1)
(0.7)
0.7
(0.9)
154.8
* 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 UK and
Europe segment.
196
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 52 week period ended 1 May 2022
UK and Europe
£m
US
£m
Corporate
£m
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 finance costs
Exceptional reversal of impairment of assets (note 4)
Exceptional administrative costs (note 4)
Profit before taxation for the financial period
809.6
306.8
(145.3)
(41.7)
(5.3)
114.5
(23.2)
91.3
428.4
163.8
(81.4)
(22.6)
(3.1)
56.7
(8.7)
48.0
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
* 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 UK and
Europe segment.
Entity-wide revenue disclosures
UK AND EUROPE
Luxury watches
Luxury jewellery
Other/services
Total
US
Luxury watches
Luxury jewellery
Other/services
Total
GROUP
Luxury watches
Luxury jewellery
Other/services
Total
52 week period
ended
30 April 2023
£m
52 week period
ended
1 May 2022
£m
749.6
67.8
72.5
889.9
586.5
51.4
15.0
652.9
1,336.1
119.2
87.5
1,542.8
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
‘Other/services’ 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.
197
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 AND EUROPE
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
GROUP
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Total
30 April 2023
£m
1 May 2022
£m
121.6
5.0
100.2
244.0
470.8
61.2
12.6
54.2
115.1
243.1
182.8
17.6
154.4
359.1
713.9
121.6
4.8
68.7
191.0
386.1
43.5
13.3
43.8
102.6
203.2
165.1
18.1
112.5
293.6
589.3
The prior period balances have been restated, in line with IFRS 3 ‘Business combinations’, to reflect the finalisation of the provisional fair values of Betteridge Jewelers,
Inc., Gotthelfs Acquisition Corp., and Vail Village Jewelers, Inc. (‘Betteridge’). Further detail is disclosed within note 24.
3. REVENUE
The Group’s disaggregated revenue recognised under contracts with customers relates to the following categories and operating segments:
UK and Europe
US
Total
UK and Europe
US
Total
52 week period ended 30 April 2023
Sale of goods
£m
855.4
641.2
1,496.6
Rendering of
services
£m
34.5
11.7
46.2
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
Total
£m
889.9
652.9
1,542.8
Total
£m
809.6
428.4
1,238.0
198
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 IMPAIRMENT OF ASSETS
Reversal of impairment of property, plant and equipment (note 11)(i)
Reversal of impairment of right-of-use assets (note 12)(i)
Total exceptional reversal of impairment of assets
EXCEPTIONAL ADMINISTR ATIVE EXPENSES
Professional and legal expenses on business combinations(ii)
EXCEPTIONAL ITEMS FOR IPO
Share-based payment in respect of the Chief Executive Officer(iii)
Total exceptional administrative costs
EXCEPTIONAL FINANCE COSTS
Amortisation of capitalised transaction costs(iv)
Total exceptional items
52 week period
ended
30 April 2023
£m
52 week period
ended
1 May 2022
£m
0.5
0.2
0.7
0.4
–
0.4
(0.9)
(0.5)
–
(0.9)
(0.7)
(0.9)
(1.5)
(2.0)
–
(1.6)
(i) Reversal of impairment of property, plant and equipment and right-of-use assets
During FY23 the estimated ‘value-in-use’ recoverable amounts were reassessed taking into account FY23 performance and the latest discounted cash flow for each showroom. As a result of improved trading of
showrooms previously impaired through exceptional items, an impairment reversal of £0.7m has been made at the year-end.
(ii) 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.
(iii) 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.
(iv) Amortisation of capitalised transaction costs
On 9 May 2023 the Group entered into a new financing arrangement by way of a £225.0 million multicurrency revolving loan facility. On this date the existing £120.0 million UK Term Loan and UK RCF of £50.0
million were extinguished. The capitalised transaction fees in relation to the existing facilities have been accelerated through exceptional items.
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.
19 9
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 of property, plant and equipment (note 11)
Amortisation of intangible assets (note 10)
Depreciation of right-of-use assets (note 12)
Impairment of property, plant and equipment (note 11)
Reversal of impairment of property, plant and equipment – exceptional items (note 11)
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
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 21)
Share-based payments social security costs
Pensions costs – defined contribution schemes (note 19)
Pensions costs – defined benefit scheme (note 19)
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 23.
20 0
52 week period
ended
30 April 2023
£m
(32.3)
(3.2)
(50.3)
52 week period
ended
1 May 2022
£m
(27.6)
(2.5)
(40.6)
(0.4)
0.5
0.2
(972.2)
(2.2)
(0.6)
(0.1)
(0.7)
–
0.4
–
(774.4)
(0.9)
(0.5)
(0.1)
(0.6)
52 week period
ended
30 April 2023
£m
126.2
10.4
3.5
0.5
3.1
0.2
143.9
52 week period
ended
1 May 2022
£m
104.7
8.6
3.2
1.1
2.1
0.2
119.9
52 week period
ended
30 April 2023
2,010
103
665
2,778
52 week period
ended
1 May 2022
1,756
94
583
2,433
52 week period
ended
30 April 2023
1,898
99
646
2,643
52 week period
ended
1 May 2022
1,604
91
558
2,253
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 7. FINANCE COSTS AND INCOME
FINANCE COSTS
Interest payable on long-term borrowings
Interest payable on short-term borrowings
Amortisation of capitalised transaction costs
Interest on lease liabilities (note 12)
Net interest expense on net defined benefit liabilities (note 19)
Total finance costs
FINANCE INCOME
Bank interest receivable
Net foreign exchange gain on financing activities
Total finance income
52 week period
ended
30 April 2023
£m
52 week period
ended
1 May 2022
£m
(5.6)
(0.4)
(0.8)
(17.2)
–
(24.0)
0.9
–
0.9
(2.9)
(0.1)
(0.7)
(12.2)
(0.1)
(16.0)
–
0.1
0.1
Total net finance cost excluding exceptional items
(23.1)
(15.9)
On 4 June 2019, the Group entered into a facility consisting of a Term Loan for £120.0m and a RCF of £50.0m. Interest on the Term Loan, which was fully drawn as at 30
April 2023, was 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 RCF 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 RCF ranges from 1.50% to 2.55% based on the leverage of the Group. The Term Loan facility is unsecured and is cross guaranteed by
subsidiary entities.
Short-term borrowings consist of the RCF noted above and a $60.0m asset backed lending (ABL) facility held in US Dollars. The ABL facility expired in April 2023 and
during the period, interest was charged at US LIBOR plus the margin which ranged from 1.25% to 1.75%. At 30 April 2023 amounts outstanding on the UK revolving
credit facility totalled £nil (2022: £nil).
After the period end, on 9 May 2023, the Group signed a new five-year £225.0 million multicurrency revolving loan facility with lenders. The existing facilities were repaid
and extinguished on this date.
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
201
52 week period
ended
30 April 2023
£m
52 week period
ended
1 May 2022
£m
13.0
16.5
(1.8)
0.2
27.9
5.7
(0.5)
(0.1)
5.1
33.0
14.2
7.0
(0.4)
0.2
21.0
5.8
(1.5)
(0.1)
4.2
25.2
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 19.5% (2022: 19%)
Non-deductible expenses
Super-deduction on fixed assets
Overseas tax differentials
Current/deferred tax rate difference on current year movements*
Adjustments due to deferred tax rate change**
Adjustments in respect of prior periods
Tax expense reported in the Income Statement
52 week period
ended 30 April 2023
£m
52 week period
ended 1 May 2022
£m
154.8
126.2
30.2
1.4
(1.9)
4.6
0.9
(0.5)
(1.7)
33.0
24.0
1.3
(0.7)
2.4
–
(1.5)
(0.3)
25.2
*This relates to an increase in the current year deferred tax movement as compared to the estimate included in FY22.
**The deferred tax rate change arose due to the blended US state tax increasing in FY23 (to 7.0% from 4.3%). In FY22 the difference arose due to the increase in the UK rate of corporation tax (to 25% from 19%).
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
52 week period
ended
30 April 2023
£m
52 week period
ended
1 May 2022
£m
0.1
(1.2)
(0.1)
–
(0.2)
(1.4)
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.
The deferred tax is made up of:
Deferred tax assets
Deferred tax liabilities
Total
Accelerated capital allowances
Non-trade tax losses
Pension benefit obligations
Trade 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)
202
30 April 2023
£m
6.2
(3.0)
3.2
30 April 2023
£m
(9.8)
1.2
–
2.7
5.5
4.0
(2.5)
2.1
3.2
1 May 2022
£m
9.3
(0.4)
8.9
1 May 2022
£m
(3.3)
1.2
0.1
2.1
4.7
3.7
(2.7)
3.1
8.9
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 The material amounts are explained below:
(i)
The Group has a deferred tax liability for property, plant, equipment and computer software (advanced capital allowances) due to bonus depreciation in the US and
the availability of the super deduction in the UK, reducing the tax value of the assets.
(ii) Non-trade tax losses not utilised as they arise are available for offset against non-trade income in future years.
(iii) The defined benefit pension scheme is in surplus. The surplus will be taxed in future years as it is recovered. In FY22 the Company contributions exceeded the
amounts charged to pension scheme assets during the year.
(iv) The trade 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 US goodwill that is deductible for tax purposes and as such the tax value reduces in value compared to the book
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 2 May 2022
RECOGNISED IN THE INCOME STATEMENT:
Accelerated capital allowances
Pension benefit obligations
Movement on unused tax losses
Non-trade losses 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
Balance at 30 April 2023
52 week period
ended
30 April 2023
£m
52 week period
ended
1 May 2022
£m
8.9
(6.5)
–
0.6
–
0.8
0.8
0.2
(1.0)
(0.1)
(0.5)
3.2
14.4
(2.4)
(0.2)
(2.0)
(0.3)
0.7
(0.3)
(0.4)
0.7
(0.2)
(1.1)
8.9
The prior period balances have been restated, in line with IFRS 3 ‘Business combinations’, to reflect the finalisation of the provisional fair values of Betteridge Jewelers,
Inc., Gotthelfs Acquisition Corp., and Vail Village Jewelers, Inc. (‘Betteridge’). Further detail is disclosed within note 24.
Non-trade losses available in future years have no expiry date and have been fully recognised. They will be fully utilised against future non-trade profits as and when they
arise. In addition to the deferred tax items above, the Group has additional unrecognised gross non-trading tax losses of £4.2m (2022: £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.
203
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
30 April 2023
52 week period
ended
1 May 2022
51.2p
51.5p
52.7p
50.9p
51.2p
52.3p
42.2p
42.6p
41.8p
42.0p
42.4p
41.6p
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 reversal of impairment of assets, net of tax
Exceptional administrative expenses, net of tax
Exceptional finance costs, 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
30 April 2023
£m
52 week period
ended
1 May 2022
£m
121.8
101.0
(0.6)
0.7
0.6
122.5
2.7
125.2
(0.4)
1.5
–
102.1
(2.0)
100.1
52 week period
ended
30 April 2023
52 week period
ended
1 May 2022
‘000
237,641
237,641
1,713
239,354
‘000
239,483
239,483
1,119
240,602
The weighted average number of shares takes into account the weighted average effect of changes in own shares during the period. There have been no transactions
involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these Consolidated Financial Statements.
20 4
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 10. INTANGIBLE ASSETS
COST
At 2 May 2022
Acquired on business acquisition (note 24)
Additions
Foreign exchange differences
At 30 April 2023
ACCUMULATED AMORTISATION AND IMPAIRMENT
At 2 May 2022
Charge for the period
At 30 April 2023
NET BOOK VALUE
At 30 April 2023
At 1 May 2022
COST
At 3 May 2021
Additions
Acquired on business acquisition (note 24)
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
Goodwill
£m
165.1
18.2
–
(0.5)
182.8
–
–
–
182.8
165.1
Goodwill
£m
135.4
–
26.7
–
3.0
165.1
–
–
–
–
–
165.1
135.4
30 April 2023
Brands Agency agreement Computer software
£m
£m
£m
14.0
–
–
–
14.0
2.9
0.6
3.5
10.5
11.1
2.8
–
–
–
2.8
1.3
0.3
1.6
1.2
1.5
1 May 2022
10.5
–
2.7
–
13.2
5.0
2.3
7.3
5.9
5.5
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
8.8
2.2
–
(0.6)
0.1
10.5
3.7
1.8
(0.6)
0.1
5.0
5.5
5.1
Total
£m
192.4
18.2
2.7
(0.5)
212.8
9.2
3.2
12.4
200.4
183.2
Total
£m
157.4
2.2
28.9
(0.6)
4.5
192.4
6.8
2.5
(0.6)
0.5
9.2
183.2
150.6
The prior period balances have been restated, in line with IFRS 3 ‘Business combinations’, to reflect the finalisation of the provisional fair values of Betteridge Jewelers,
Inc., Gotthelfs Acquisition Corp., and Vail Village Jewelers, Inc. (‘Betteridge’). Further detail is disclosed within note 24.
The Brand category is formed of intangible assets recognised on the business combinations of Mayors Jewelers, Analog:Shift LLC, and Betteridge.
As at 30 April 2023, the Mayors Jewelers’ brand had a remaining useful economic life of 25 (2022: 26) years, the Analog:Shift brand had a remaining useful economic life
of 2 (2022: 3) years, and the Betteridge brand had a remaining useful life of 9 (2022: 10) years.
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 30 April 2023, the Agency agreements had a remaining useful economic life of 5 (2022: 6) years.
20 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
10. INTANGIBLE ASSETS (CONTINUED)
Impairment tests for goodwill
As noted within the accounting policies (note 1), 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).
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. Goodwill relating to the Watches of Switzerland (US) CGU consists of a number of US acquisitions which trade
as Watches of Switzerland.
A summary of the groups of CGUs and allocation of goodwill held by the Group is presented below:
Heritage (UK)
Watches of Switzerland (US)
Betteridge (US)
Mayors Jewelers (US)
The Wynn Resorts (US)
Analog:Shift (US)
Total
30 April 2023
£m
121.6
24.0
21.9
12.1
3.0
0.2
182.8
1 May 2022
£m
121.6
6.3
21.9
12.1
3.0
0.2
165.1
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. The UK used a long-term growth rate of 2.0% (2022: 2.0%) and a pre-tax discount
rate of 13.7% (2022: 11.3%), and the US used a long-term growth rate of 2.0% (2022: 2.0%) and a pre-tax discount rate of 13.0% (2022: 11.4%). Using these assumptions,
no sales growth was required to support the asset values.
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 ongoing uncertainties in the global
economy, 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.
20 6
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 11. PROPERTY, PL ANT AND EQUIPMENT
COST
At 2 May 2022
Additions
Disposals
Foreign exchange differences
At 30 April 2023
ACCUMULATED DEPRECIATION
At 2 May 2022
Charge for the period
Impairment
Reversal of impairment – exceptional items
Disposals
Foreign exchange differences
At 30 April 2023
NET BOOK VALUE
At 30 April 2023
At 1 May 2022
COST
At 3 May 2021
Additions
Acquired on business acquisition (note 24)
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
Land and buildings
£m
2.7
–
(0.2)
–
2.5
1.8
0.1
–
–
(0.2)
–
1.7
0.8
0.9
Land and buildings
£m
3.3
–
–
(0.6)
–
2.7
1.8
0.3
0.1
–
(0.4)
–
1.8
0.9
1.5
30 April 2023
Fittings and
equipment
£m
202.4
75.0
(12.4)
(0.6)
264.4
90.8
32.2
0.4
(0.5)
(11.6)
(0.5)
110.8
153.6
111.6
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
Total
£m
205.1
75.0
(12.6)
(0.6)
266.9
92.6
32.3
0.4
(0.5)
(11.8)
(0.5)
112.5
154.4
112.5
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
111.6
92.2
112.5
93.7
Expenditure on assets in the course of construction at 30 April 2023 was £39.0m (2022: £12.8m). The cost of assets which continue to be used that have a £nil net book
value (excluding impaired assets) total £23.7m (2022: £14.6m).
207
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, a CGU is defined as the smallest identifiable group of assets that generate independent cash flows which are monitored by management
and the Chief Operating Decision Makers (CODMs). The Group consider this to be an individual showroom location or office. 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
rates. 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 13.7% in the UK and 13.0% 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 10.9% in the UK to
10.8% in the US.
During the period, the Group recognised an impairment charge of £0.4m relating to property, plant and equipment. Also during the period, the Group recognised an
impairment reversal of £0.5m through exceptional items in relation to property, plant and equipment and right-of-use assets 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 and increased costs.
At 30 April 2023 all showroom asset values are supported by 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 12). 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 £0.8m. A 2.0% increase in the discount rate would increase the impairment charge by £0.5m. 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 £1.3m. 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 are the 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 2 May 2022
Additions
Lease surrenders and breaks
Reversal of impairment – exceptional items
Depreciation
Leases renewed during the period
Lease modifications and expansions
Foreign exchange differences
At 30 April 2023
Properties
£m
Other
£m
292.8
101.0
(9.6)
0.2
(49.9)
14.7
10.1
(1.3)
358.0
0.8
0.7
–
–
(0.4)
–
–
–
1.1
Total
£m
293.6
101.7
(9.6)
0.2
(50.3)
14.7
10.1
(1.3)
359.1
20 8
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Right-of-use assets (continued)
At 3 May 2021
Additions
Lease surrenders and breaks
Depreciation
Leases renewed during the period
Lease modifications and expansions
Foreign exchange differences
At 1 May 2022
Set out below are the carrying amounts of lease liabilities and the movements during the period:
Lease liabilities
At 2 May 2022
Additions
Lease surrenders and breaks
Interest
Leases renewed during the period
Lease modifications and expansions
Payments
Foreign exchange differences
At 30 April 2023
Lease liabilities
At 3 May 2021
Additions
Lease surrenders and breaks
Interest
Leases renewed during the period
Lease modifications and expansions
Payments
Foreign exchange differences
At 1 May 2022
Properties
£m
Other
£m
253.2
32.2
(0.2)
(40.4)
36.9
3.0
8.1
292.8
0.5
0.6
(0.1)
(0.2)
–
–
–
0.8
Properties
£m
Other
£m
(339.9)
(98.6)
10.4
(17.2)
(14.3)
(9.7)
58.8
1.1
(409.4)
(0.7)
(0.7)
–
–
–
–
0.4
–
(1.0)
Properties
£m
Other
£m
(300.9)
(31.6)
0.3
(12.2)
(35.3)
(3.0)
52.7
(9.9)
(339.9)
(0.5)
(0.6)
0.1
–
–
–
0.3
–
(0.7)
Total
£m
253.7
32.8
(0.3)
(40.6)
36.9
3.0
8.1
293.6
Total
£m
(340.6)
(99.3)
10.4
(17.2)
(14.3)
(9.7)
59.2
1.1
(410.4)
Total
£m
(301.4)
(32.2)
0.4
(12.2)
(35.3)
(3.0)
53.0
(9.9)
(340.6)
20 9
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 on lease disposal
Reversal of impairment of right-of-use assets
Gain on lease modifications
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
30 April 2023
£m
(50.3)
(17.2)
–
0.2
1.3
(0.7)
(7.0)
(73.7)
52 week period
ended
1 May 2022
£m
(40.6)
(12.2)
0.1
–
0.8
(0.4)
(7.0)
(59.3)
Rental expense for contracts not in the scope of IFRS 16 totalled £3.5m (2022: £3.2m). 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 30 April 2023 are £67.9m (2022: £56.8m). This relates to payments of £42.0m
(2022: £40.8m) of lease principal, £17.2m (2022: £12.2m) of lease interest, £8.0m (2022: £3.4m) of variable lease payments and £0.7m (2022: £0.4m) 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
30 April 2023
£m
63.1
67.9
63.4
59.7
57.4
192.4
503.9
1 May 2022
£m
58.5
56.1
53.8
47.3
43.6
139.8
399.1
As at 30 April 2023, 11 (2022: 10) leases have cash flows that exceed ten years. The value of undiscounted cash flows greater than ten years totals £15.7m (2022: £14.5m).
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 £7.9m (2022: £4.5m).
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 53.8% 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 £82.1m (2022: £51.1m) 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 are not included within the maturity analysis above.
Impairment of right-of-use assets
The Group has incurred a net impairment reversal of £0.2m (2022: £nil) 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.
210
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 13. TR ADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Allowance for expected credit losses
Prepayments
Total
30 April 2023
1 May 2022
Current
£m
6.6
5.5
(0.3)
11.8
5.9
17.7
Non-current
£m
–
2.1
–
2.1
–
2.1
Current
£m
5.1
9.0
(0.2)
13.9
5.7
19.6
Non-current
£m
–
2.7
–
2.7
–
2.7
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
Balance at period end
14. INVENTORIES
Finished goods
Work in progress
Inventories
30 April 2023
£m
0.2
0.1
–
0.3
30 April 2023
£m
352.3
3.7
356.0
1 May 2022
£m
0.2
0.1
(0.1)
0.2
1 May 2022
£m
300.8
1.8
302.6
The prior period balances have been restated, in line with IFRS 3 ‘Business combinations’, to reflect the finalisation of the provisional fair values of Betteridge Jewelers,
Inc., Gotthelfs Acquisition Corp., and Vail Village Jewelers, Inc. (‘Betteridge’). Further detail is disclosed within note 24.
15. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Cash in transit
Cash and cash equivalents
30 April 2023
£m
120.7
15.7
136.4
1 May 2022
£m
95.4
10.5
105.9
Included in cash and cash equivalents is restricted cash of £14.8m (2022: £13.8m). Restricted cash is defined as cash controlled by the Group but which is not freely
useable by the Group in day-to-day operations. £14.1m (2022: £9.6m) 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 30 April 2023, the Group has £0.7m (2022: £4.2m) held in escrow, whereby the cash
is restricted, relating to a business combination.
16. TR ADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Accruals and deferred income
Total
30 April 2023
1 May 2022
Current
£m
(128.6)
(14.0)
(76.1)
(218.7)
Non-current
£m
–
–
(0.9)
(0.9)
Current
£m
(112.4)
(7.2)
(80.5)
(200.1)
Non-current
£m
–
–
(1.3)
(1.3)
Trade payables do not bear interest and are generally settled within 30 to 60 days. Accruals and deferred income do not bear interest.
211
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
17. PROVISIONS
Dilapidations
Movement of dilapidations provision
Opening balance
Charged to Income Statement
Utilised
Balance at period end
30 April 2023
1 May 2022
Current
£m
(1.8)
(1.8)
Non-current
£m
(6.0)
(6.0)
Current
£m
(1.0)
(1.0)
Non-current
£m
(4.1)
(4.1)
52 week period
ended
30 April 2023
£m
(5.1)
(3.0)
0.3
(7.8)
52 week period
ended
1 May 2022
£m
(3.3)
(2.1)
0.3
(5.1)
The dilapidations provision comprises obligations for showroom or office 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.
18. BORROWINGS
NON-CURRENT
Term Loan
Associated capitalised transaction costs
Total borrowings
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
30 April 2023
£m
1 May 2022
£m
(120.0)
–
(120.0)
(120.0)
1.4
(118.6)
1 May 2022
£m
105.9
(120.0)
(14.1)
1.4
(12.7)
(340.6)
(353.3)
Cash flow Non-cash changes1
£m
–
–
–
£m
31.2
–
31.2
Foreign exchange
£m
(0.7)
–
(0.7)
30 April 2023
£m
136.4
(120.0)
16.4
–
31.2
59.2
90.4
(1.4)
(1.4)
(130.1)
(131.5)
–
(0.7)
1.1
0.4
–
16.4
(410.4)
(394.0)
1 Non-cash charges are principally a release of capitalised finance costs and lease liability interest charges, additions and revisions.
Cash and cash equivalents consist of cash at bank and in hand of £120.7m (2022: £95.4m) and cash in transit of £15.7m (2022: £10.5m).
On 9 May 2023 the Group signed a new five-year £225.0 million multicurrency revolving loan facility with lenders. The existing facilities were repaid and extinguished on
this date.
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 2022 and April 2023 were fully met.
212
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 19. POST-EMPLOYMENT BENEFIT OBLIGATIONS
Defined contribution schemes
The Group operates two (2022: 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 (2022: 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 30 April 2023, the pension charge for the period represents contributions payable by the Group to these schemes and amounted to £3.1m (2022:
£2.1m). 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 in 2023. The Group is expecting to make total contributions of approximately £0.7m in the 52-week period ended 28 April 2024.
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 (2022: nil) 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 30 April 2023 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
Other comprehensive income
The components of the net defined benefit expense recognised in other comprehensive income are as follows:
Actuarial gains due to liability financial assumption changes
Experience adjustment
Loss on scheme assets greater than discount rate
Actuarial gain recognised in other comprehensive income
213
52 week period
ended
30 April 2023
£m
(0.2)
(0.2)
52 week period
ended
1 May 2022
£m
(0.2)
(0.2)
(0.2)
(3.1)
(3.3)
(0.2)
(2.1)
(2.3)
52 week period
ended
30 April 2023
£m
5.1
(0.5)
(4.3)
0.3
52 week period
ended
1 May 2022
£m
1.6
–
(0.2)
1.4
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
19. POST-EMPLOYMENT BENEFIT OBLIGATIONS (CONTINUED)
Balance Sheet valuation
The net defined benefit pension amount recognised in the Consolidated Balance Sheet is analysed as follows:
Diversified Growth Funds
Liability Driven Investment (LDI)
Cash
Fair value of scheme assets
Present value of benefit obligations
Net pension asset/(liability)
Scheme obligations
Changes in the present value of defined benefit pension obligations are analysed as follows:
Opening defined benefit obligation
Interest cost
Actuarial gains 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 on pension scheme assets
Employer contributions
Benefits paid
Administrative expenses
Closing scheme assets
30 April 2023
£m
9.6
4.4
(0.2)
13.8
(13.7)
0.1
1 May 2022
£m
18.0
–
(0.1)
17.9
(18.5)
(0.6)
52 week period
ended
30 April 2023
£m
(18.5)
(0.6)
4.7
0.7
(13.7)
52 week period
ended
1 May 2022
£m
(20.6)
(0.4)
1.7
0.8
(18.5)
52 week period
ended
30 April 2023
£m
17.9
0.5
(4.4)
0.7
(0.7)
(0.2)
13.8
52 week period
ended
1 May 2022
£m
18.0
0.4
(0.2)
0.7
(0.8)
(0.2)
17.9
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
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. During the period, 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.
All asset transfers took place during the period.
Principal assumptions
The IAS 19 (accounting) valuation of the defined benefit obligation was undertaken by an external qualified actuary as at 30 April 2023 using the projected unit credit
method. The principal actuarial assumptions used in the valuation were as follows:
Discount rate
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
30 April 2023
4.75%
3.20%
2.60%
3.15%
100.0%
1 May 2022
3.00%
3.70%
3.10%
3.60%
100.0%
214
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Life expectancy at age 65 (years):
Male
Female
30 April 2023
1 May 2022
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 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 2021 (2022: CMI 2020) series with a long-term trend towards 1.0% (2022: 1.0%) per annum.
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 16 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 (2022: 0.2% per annum).
The rate of consumer price inflation (CPI) is set at 0.6% lower (2022: 0.6% lower) than the assumption for retail price inflation, reflecting the long-term expected gap
between the two indices.
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
20. EQUITY
As at 1 May 2022
Purchase of own shares
Share-based payments
As at 30 April 2023
30 April 2023
£m
0.6
(0.6)
(0.3)
0.3
(0.4)
0.4
1 May 2022
£m
0.8
(0.8)
(0.6)
0.6
(0.6)
0.6
Nominal value
£
0.0125
–
–
0.0125
Shares
239,570,297
–
–
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)
(14.5)
2.8
(18.4)
Share capital
239,570,297 ordinary shares of £0.0125 nominal value.
Share premium account
This reserve represents the amount of proceeds received for shares in excess of their nominal value of £0.0125 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
During the period the Group purchased £14.5m of own shares to satisfy employee share incentive schemes. The total cash outflow, including shares purchased and
accrued in the prior period, was £21.3m. 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.
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continued
21. SHARE-BASED PAYMENTS
During the period to 30 April 2023, the Group operated five (2022: six) 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.
Long Term Incentive Plan (LTIP)
The LTIP is a discretionary executive share plan under which the Board may grant options over shares in Watches of Switzerland Group PLC, subject to Adjusted EPS
and Return on Capital Employed (ROCE) performance conditions. 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 2 May 2022
Granted
Exercised
Forfeited
Outstanding at 30 April 2023
Exercisable price
Exercisable at 30 April 2023
Average fair value at grant
30 April 2023
1,958,038
413,589
(315,041)
(189,924)
1,866,662
£nil
606,454
£4.37
1 May 2022
1,794,125
402,739
–
(238,826)
1,958,038
£nil
nil
£4.27
Deferred Bonus Plan (DBP)
The DBP is a discretionary bonus plan under which the Board may issue one-third of a bonus in the form of conditional share awards in Watches of Switzerland Group
PLC. The annual 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 2 May 2022
Change in FY21 number of shares granted*
Change in FY22 number of shares granted*
Granted*
Exercised
Forfeited
Outstanding at 30 April 2023
Exercisable price
Exercisable at 30 April 2023
Average fair value at grant
30 April 2023
247,455
–
53,611
106,056
(20,872)
(7,643)
378,607
£nil
12,863
£8.24
1 May 2022
160,039
(32,886)
–
126,252
–
(5,950)
247,455
£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.
216
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Save As You Earn (SAYE) (UK)/Employee Stock Purchase Plan (ESPP) (US)
The Company operates a SAYE scheme for UK, and ESPP scheme for 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 (or US equivalent at the time of invitation) 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:
Outstanding at 2 May 2022
Granted
Forfeited
Outstanding at 30 April 2023
Exercisable price
Exercisable at 30 April 2023
Average fair value at grant
30 April 2023
480,636
–
(113,377)
367,259
£nil
nil
£10.80
1 May 2022
–
485,698
(5,062)
480,636
£nil
nil
£10.80
FY22 Free share issue
During FY22 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. The UK shares are administered through a Share Incentive Plan. The US shares are issued under the LTIP and subject to the Employee
Benefit Trust. The Trust results are consolidated by the Group.
Details of the share options outstanding are as follows:
Outstanding at 2 May 2022
Granted
Forfeited
Outstanding at 30 April 2023
Exercisable price
Exercisable at 30 April 2023
Average fair value at grant
30 April 2023
112,050
–
(19,350)
92,700
£nil
nil
£12.66
1 May 2022
–
120,850
(8,800)
112,050
£nil
nil
£12.66
Former Chief Financial Officer Buy-out award (CFO)
Two buy-out share options were granted to the former CFO when joining the Group to replace those in place at his previous employment. The awards were translated
into Group shares at the share price on the date of joining. Performance conditions for the first award have been met and have been part exercised in the period.
Details of the share option movements are as follows:
Outstanding at 2 May 2022
Granted
Exercised
Lapsed
Outstanding at 30 April 2023
Exercisable price
Exercisable at 30 April 2023
Average fair value at grant
30 April 2023
38,835
–
(1,721)
(35,392)
1,722
£nil
nil
£14.20
1 May 2022
–
38,835
–
–
38,835
£nil
nil
£14.20
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continued
21. SHARE-BASED PAYMENTS (CONTINUED)
Charged to the Consolidated Income Statement
The amounts recognised in the Consolidated Income Statement within administrative expenses (excluding employer’s national insurance) in relation to these schemes
were as follows:
LTIP
DBP
Former CFO
SAYE/ESPP
Free shares
CEO – exceptional expenses (note 4)
52 week period
ended
30 April 2023
£m
52 week period
ended
1 May 2022
£m
1.9
0.7
(0.1)
0.7
0.3
–
3.5
1.9
0.7
0.1
0.1
0.1
0.3
3.2
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
30 Apr 2023
£7.51
nil
0.00%
3.72%
3 yrs
LTIP
1 May 2022
£9.42
nil
0.00%
0.61%
3 yrs
2 May 2021
£3.20
nil
0.00%
0.57%
3 yrs
26 Apr 2020
£2.70
nil
0.00%
0.78%
3 yrs
30 Apr 2023
£8.32
nil
0.00%
3.71%
4 yrs
DBP
1 May 2022
£7.51
nil
0.00%
0.66%
4 yrs
2 May 2021
£9.42
nil
0.00%
0.57%
4 yrs
SAYE/ESPP
CFO
1 May 2022
£10.80
nil
0.00%
0.05%
UK 3 yrs
US 2 yrs
1 May 2022
£14.20
nil
0.00%
0.41%
2 yrs
The Group did not enter into any share-based payment transactions with parties other than employees during the current period.
22. 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 Loan (net of capitalised transaction costs)
Trade and other payables**
Lease liability (IFRS 16)
Total financial liabilities
30 April 2023
£m
1 May 2022
£m
13.9
136.4
150.3
(120.0)
(193.8)
(313.8)
(410.4)
(724.2)
16.6
105.9
122.5
(118.6)
(174.3)
(292.9)
(340.6)
(633.5)
* Excludes prepayments of £5.9m (2022: £5.7m) that do not meet the definition of a financial instrument.
** Trade payables excludes customer deposits of £7.9m (2022: £12.4m) and deferred income of £17.9m (2022: £14.7m) that do not meet the definition of a financial instrument.
218
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Fair values
At 30 April 2023, 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 30 April 2023 and 1 May 2022.
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
(2.9)
(192.9)
(63.1)
(258.9)
30 April 2023
Between one and
five years
£m
(120.0)
(0.9)
(248.4)
(369.3)
Greater than five
years
£m
–
–
(192.4)
(192.4)
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)
Total
£m
(122.9)
(193.8)
(503.9)
(820.6)
Total
£m
(127.5)
(174.3)
(399.1)
(700.9)
As at 30 April 2023, 11 (2022: 10) leases have cash flows that exceed ten years. The value of undiscounted cash flows greater than ten years totals £15.7m (2022: £14.5m).
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.
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continued
22. FINANCIAL INSTRUMENTS (CONTINUED)
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
30 April 2023
£m
(0.6)
0.6
52 week period
ended
1 May 2022
£m
(0.6)
0.6
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.
30 April 2023
£m
5.7
0.5
0.2
0.2
6.6
1 May 2022
£m
3.5
0.6
0.3
0.7
5.1
220
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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
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
30 April 2023
Sterling
£m
US Dollar
£m
7.4
91.2
98.6
(120.0)
(108.7)
(258.2)
(486.9)
6.3
44.0
50.3
–
(84.6)
(138.6)
(223.2)
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
0.2
1.2
1.4
–
(0.5)
(13.6)
(14.1)
Other
£m
–
2.1
2.1
–
–
(2.1)
(2.1)
Total
£m
13.9
136.4
150.3
(120.0)
(193.8)
(410.4)
(724.2)
Total
£m
16.6
105.9
122.5
(118.6)
(174.3)
(340.6)
(633.5)
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
(Increase)/decrease
in rate
(5%)
5%
Effect on profit after tax
52 week period ended
30 April 2023
£m
(2.3)
2.5
Effect on profit after tax
52 week period ended
1 May 2022
£m
(1.5)
1.6
Capital risk
The capital structure of the Group consists of debt, as analysed in note 18, 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.
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continued
23. REL ATED PARTY TR ANSACTIONS
Key management personnel compensation
Total compensation of key management personnel in the period to 30 April 2023 amounted to £2.8m (2022: £3.6m).
Compensation 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
30 April 2023
£m
1.7
1.1
2.8
52 week period ended
1 May 2022
£m
1.8
1.8
3.6
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.
24. BUSINESS COMBINATIONS
Bernie Robbins Jewelers, Inc.
On 22 June 2022, the Group acquired the trade and assets of one showroom from Bernie Robbins Jewelers, Inc. for a cash consideration of £21.2 million. Goodwill
recognised relates to future cash flows from the showroom, and the acquisition further advances the US expansion strategy.
The business contributed revenue of £10.5m from the 22 June 2022 acquisition date to 30 April 2023.
The following table summarises the consideration paid for the acquisition, and the provisional fair value of assets acquired at the acquisition date:
Total cash consideration
Initial assessment of values on acquisition
Inventories
Trade and other payables
Right-of-use assets
Lease liabilities
Total identifiable net assets
Goodwill
Total assets acquired
£m
21.2
3.1
(0.1)
1.9
(1.9)
3.0
18.2
21.2
An amount of £0.7 million is held with a third party on retention. This will be paid by the Group within 12 months of the acquisition date. The values stated above are
the initial assessment of the fair values of assets and liabilities on acquisition. These will be finalised in H1 FY24.
The contribution to revenue and profit before tax, if this business combination had occurred on the first day of the period, and since the acquisition date, is not material
to the results of the Group and therefore has not been disclosed separately.
Acquisition-related costs have been charged to exceptional items in the Consolidated Income Statement for the 52-week period ended 30 April 2023, as disclosed in
note 4 to these Financial Statements.
222
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 Acquisitions completed in the 52-week period to 1 May 2022
During the prior period the Group acquired the trade and assets of a number of showrooms in the US. 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’).
Total cash consideration
Final assessment of values on acquisition
Inventories
Property, plant and equipment
Trade and other receivables
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
–
(0.2)
1.7
(1.7)
3.4
–
5.8
9.2
13.0
2.5
2.9
(2.4)
5.4
(5.4)
16.0
2.2
20.9
39.1
Total
£m
48.3
16.3
2.8
2.9
(2.6)
7.1
(7.1)
19.4
2.2
26.7
48.3
In the prior 52-week period ended 1 May 2022, the businesses contributed revenue of £32.5m from the date of acquisition to 1 May 2022 and contributed a net profit
of £5.7m. 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.
During the 52-week period to 30 April 2023, the fair value of assessment of the above entities was completed. The net impact was a reduction in inventory and deferred
tax asset, with the corresponding entry to the goodwill balance. All adjustments are not material at an individual line level. The assessment of values on acquisition is now
final, and consideration held on retention at the end of the prior period has been settled.
25. CONTINGENT LIABILITIES
There are a number of contingent liabilities that arise in the normal course of business, which if realised, are not expected to result in a material liability to the Group.
26. POST-BAL ANCE SHEET EVENTS
On 9 May 2023 the Group signed a new five-year £225.0 million multicurrency revolving loan facility with lenders. The existing facilities were repaid and extinguished on
this date. Further detail can be found in note 18.
No further post-balance sheet events have been identified.
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STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS 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
Other reserves
Retained earnings
Total equity
Note
C2
C3
C4
C6
C6
C6
30 April 2023
£m
1 May 2022
£m
471.9
471.9
1.4
0.4
1.8
(0.8)
1.0
2.7
0.3
3.0
(6.7)
(3.7)
472.9
468.2
3.0
147.1
(18.4)
341.2
472.9
3.0
147.1
(6.7)
324.8
468.2
The Company’s profit after tax was £15.7m (2022: profit of £2.2m). The profit in year is a result of a dividend received which allowed repayment of management
recharges from subsidiary entities, and enabled the purchase of own shares.
The Financial Statements were approved and authorised for issue by the Board and were signed on its behalf by:
L A ROMBERG
CHIEF FINANCIAL OFFICER
Date: 12 July 2023
The notes on pages 226 to 229 form part of these Financial Statements.
Company number: 11838443
224
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 2 May 2021
Profit for the financial period
Purchase of own shares
Share-based payments
Balance at 1 May 2022
Profit for the financial period
Purchase of own shares
Share-based payments charge
Share-based payments
Balance at 30 April 2023
Share capital
Share premium
Other reserves
Retained earnings
£m
3.0
–
–
–
3.0
–
–
–
–
3.0
£m
147.1
–
–
–
147.1
–
–
–
–
147.1
£m
–
–
(6.7)
–
(6.7)
–
(14.5)
–
2.8
(18.4)
£m
319.7
2.2
–
2.9
324.8
15.7
–
3.5
(2.8)
341.2
Total equity
attributable to
owners
£m
469.8
2.2
(6.7)
2.9
468.2
15.7
(14.5)
3.5
–
472.9
During the period the Company purchased £14.5m of own shares to satisfy employee share incentive schemes. 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. For further detail refer to note C6.
225
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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 30 April 2023 and the
comparative information presented in these Financial Statements for the 52-week period ended 1 May 2022.
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 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 22 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 23 in the Group Financial Statements 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.
226
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 C2. FIXED ASSET INVESTMENTS
The Company had the following subsidiaries as at 30 April 2023:
Entity
Jewel UK Midco Limited*
Principal activity
Intermediate holding company England and
Jewel UK Bidco Limited
Intermediate holding company England and
Wales
Watches of Switzerland Operations
Limited
Aurum Acquisitions Limited
Intermediate holding company England and
Wales
Intermediate holding company England and
Wales
Watches of Switzerland Company
Limited
Goldsmiths Finance Limited
Retailer
Non-trading
Mappin & Webb Limited
Trading
Goldsmiths Limited
Dormant
WoS Dormant 1 Limited
Dormant
WoS Dormant 2 Limited
Dormant
Aurum Insurance (Guernsey) Limited**Captive insurance company
Watches of Switzerland Limited
Dormant
Aurum Pension Trustees Limited
Pension trustee company
Watches of Switzerland Group USA
Inc
Watches of Switzerland (Nevada) LLC Retailer
Holding company
Watches of Switzerland Retailer (A/S)
LLC
Watches of Switzerland LLC
Retailer
Retailer
Watches of Switzerland (A/S) LLC
Retailer
Mayors Jewellers LLC
Retailer
Mayors Jewellers Florida LLC
Retailer
Retailer
Retailer
Retailer
Retailer
Watches 60 Greene Inc.
WOSG (Ireland) Limited
Watches of Switzerland Group
(Denmark) Aps
Watches of Switzerland Group
(Sweden) AB
Watches of Switzerland Group
(Netherlands) BV
Watches of Switzerland Group
(Finland) OY
Watches of Switzerland Group
(Norway) AS
WOSG (Germany) GmbH
Country of
incorporation Registered office
Type of share held by
the Group
Ordinary
Proportion of
ordinary shares held
by Group companies
100%
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
3340 NW 53rd Street, Suite 402, Fort
Lauderdale, Florida 33309
3340 NW 53rd Street, Suite 402, Fort
Lauderdale, Florida 33309
3340 NW 53rd Street, Suite 402, Fort
Lauderdale, Florida 33309
3340 NW 53rd Street, Suite 402, Fort
Lauderdale, Florida 33309
3340 NW 53rd Street, Suite 402, Fort
Lauderdale, Florida 33309
3340 NW 53rd Street, Suite 402, Fort
Lauderdale, Florida 33309
3340 NW 53rd Street, Suite 402, Fort
Lauderdale, Florida 33309
3340 NW 53rd Street, Suite 402, Fort
Lauderdale, Florida 33309
Suite 3, One Earlsfort Centre, Lower Hatch
Street, Dublin 2, D02 X288, Ireland
Store Kongensgade 68, 1264 København K,
Denmark
Grey Advokatbyra AB Birger Jarlsgatan 14,
Stockholm, 114 34, Sweden
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
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
England and
Wales
Guernsey
England and
Wales
England and
Wales
USA
USA
USA
USA
USA
USA
USA
USA
Ireland
Denmark
Sweden
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%
100%
100%
Non-trading
Netherlands Herikerbergweg 88, 1101CM, Amsterdam,
Ordinary
Dormant
Non-trading
Non-trading
Finland
Norway
Germany
Netherlands
Oy Vanha Kaarelantie 33 A 01610, Vantaa,
Finland
Nydalsveien 28 0484, Oslo, Norway
Maximiliansplatz 17, 80333, Munchen,
Germany
Ordinary
Ordinary
Ordinary
*
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.
227
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
C2. FIXED ASSET INVESTMENTS (CONTINUED)
All subsidiary undertakings are included in the 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
Amounts owed by Group undertakings are unsecured and repayable on-demand.
C4. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Amounts owed to Group undertakings
Other creditors
Amounts owed to Group undertakings are unsecured and repayable on-demand.
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
30 April 2023
£m
471.9
1 May 2022
£m
471.9
30 April 2023
£m
1.4
1 May 2022
£m
2.7
30 April 2023
£m
(0.8)
–
(0.8)
1 May 2022
£m
–
(6.7)
(6.7)
30 April 2023
£m
1 May 2022
£m
1.4
0.4
1.8
(0.8)
–
(0.8)
2.7
0.3
3.0
–
(6.7)
(6.7)
228
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 1 May 2022
Purchase of own shares
Allocation of own shares
As at 30 April 2023
Share capital
239,570,297 ordinary shares of £0.0125 nominal value.
Nominal value
£
0.0125
–
–
0.0125
Shares
239,570,297
–
–
239,570,297
Share capital
£m
3.0
–
–
3.0
Share premium
£m
147.1
–
–
147.1
Other reserves
£m
(6.7)
(14.5)
2.8
(18.4)
Share premium account
This reserve represents the amount of proceeds received for shares in excess of their nominal value of £0.0125 per share.
Other reserves
During the period the Group purchased £14.5m of own shares to satisfy employee share incentive schemes. 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 21 in the Consolidated Financial Statements.
C9. CONTINGENT LIABILITIES
At the date of signing the accounts, the Company has provided cross guarantee arrangements to Barclays Bank PLC, BNP Paribas London Branch, Citibank N.A. London
Branch, Fifth Third Bank National Association, HSBC UK Bank PLC, Lloyds Bank PLC, National Westminster Bank PLC and Northern Bank Limited Trading as Danske
Bank in respect of the obligations of certain fellow subsidiary undertakings in relation to the £225m multicurrency revolving loan facility.
229
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS G LOS SA 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
FY23
1,542.8
(972.2)
5.7
576.3
(279.2)
297.1
FY22
1,238.0
(774.4)
7.0
470.6
(226.7)
243.9
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 (Adjusted 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 Earnings Before Interest, Tax, Depreciation and Amortisation
(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 (Adjusted EPS)
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 (Adjusted PBT)
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 Financial
Statements)
Net finance costs
IFRS 16 lease interest
Adjusted profit before tax
FY23
165.1
(23.1)
17.2
159.2
FY22
130.3
(15.9)
12.2
126.6
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
FY23 Group Revenue (£)
FY23 US Revenue ($)
FY23 US Revenue (£) @ FY23 Exchange rate
FY23 US Revenue (£) @ FY22 Exchange rate
FY23 Group Revenue (£) at Constant currency
FY23 Exchange rate
FY22 Exchange rate
(£/US$ million)
1,542.8
785.4
652.9
581.4
1,471.3
£1 : $1.203
£1: $1.351
230
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 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 Group’s Consolidated Financial Statements.
Net (debt)/cash
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 18 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
Net interest paid
Lease payments (IFRS 16)
Acquisition of business combinations
Exceptional costs – legal expenses on business
acquisitions
Expansionary capex
Free cash flow
Free cash flow conversion
Free cash flow divided by Adjusted EBITDA.
FY23
31.2
85.2
(4.7)
(59.2)
24.9
0.9
67.5
145.8
FY22
26.5
55.7
(2.7)
(53.0)
44.1
0.5
41.0
112.1
Why used
Measurement of the Group’s ability to convert profit into free cash flow.
Reconciliation to IFRS measures
Free cash flow of £145.8 million divided by Adjusted EBITDA of £201.4 million
shown as a percentage.
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 £165.1m 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
FY23
882.6
(231.6)
651.0
591.4
FY22
741.3
(209.4)
531.9
475.9
Expansionary capital expenditure/capex
Expansionary capital expenditure relates to new showrooms, offices, 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.
231
STRATEGIC REPORT | GOVERNANCE REPORT | FINANCIAL STATEMENTS G LO S S A RY
continued
IFRS 16 Adjustments
The following tables reconcile from pre-IFRS 16 balances to statutory post-IFRS 16
balances.
FY23 Consolidated Income Statement
FY22 Consolidated Income Statement
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
Pre-IFRS 16
183.2
113.8
–
302.6
31.1
(232.7)
–
(14.1)
(7.1)
376.8
IFRS 16
adjustments
–
(1.3)
293.6
–
(8.8)
31.3
(340.6)
–
10.3
(15.5)
Post-IFRS 16
183.2
112.5
293.6
302.6
22.3
(201.4)
(340.6)
(14.1)
3.2
361.3
£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
1,542.8
576.3
(279.2)
297.1
(84.1)
213.0
IFRS 16
adjustments
–
–
56.2
56.2
–
56.2
(11.6)
201.4
7.1
63.3
Exceptional
items
–
–
–
–
(0.9)
(0.9)
–
(0.9)
Statutory
1,542.8
576.3
(223.0)
353.3
(85.0)
268.3
(4.5)
263.8
(36.3)
(49.6)
0.7
(85.2)
165.1
(5.9)
159.2
52.7p
13.7
(17.2)
(3.5)
(0.2)
(0.7)
(0.9)
(1.2)p
(0.3)p
178.6
(23.8)
154.8
51.2p
£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
FY23 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 cash
Other
Net assets
Pre-IFRS 16
200.4
159.9
–
356.0
29.4
(259.0)
–
16.4
(15.3)
487.8
IFRS 16
adjustments
–
(5.5)
359.1
–
(9.6)
39.4
(410.4)
–
8.5
(18.5)
Post-IFRS 16
200.4
154.4
359.1
356.0
19.8
(219.6)
(410.4)
16.4
(6.8)
469.3
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
232
THE WATCHES OF SWITZERLAND GROUP PLC ANNUAL REPORT AND ACCOUNTS 2023 S H A R EH O LD ER I N F O R M ATI O N F O R WATC H ES O F
SW IT ZER L A N D G RO U 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
Jefferies International Limited, 100 Bishopsgate, London, EC2N 4JL
Financial PR
Headland PR Consultancy LLP, Cannon Green, 27 Bush Lane, London, EC4R 0AA
FINANCIAL CALENDAR
Q1 FY23 Trading Update:
AGM:
H1 FY23 Results:
10 August 2023
31 August 2023
December 2023
Q3 FY23 Trading Update:
February 2024
Financial year end:
April 2024
ANNUAL GENER AL MEETING
The AGM will be held at 3.30pm on Thursday 31 August 2023 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.
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