Watches Of Switzerland Group Plc · LSE:WOSG
Watches Of Switzerland — The Watches of Switzerland Group — H1 FY2020 Earnings Presentation
73 slides from Watches Of Switzerland's earnings presentation, Dec 10, 2019
Slide 1: FY20 Half Year results
FY20 Half Year results 10 December 2019 26 weeks ended 27 October 2019
Slide 2: Agenda
Agenda CEO update Brian Duffy, CEO FY20 H1 financial results and FY20 full year outlook Anders Romberg, CFO Operational review, summary and outlook Brian Duffy, CEO Q&A 2
Slide 3: Introduction and highlights
Introduction and highlights Brian Duffy - CEO 3
Slide 4: WoS Group has delivered a very satisfactory first half year as a listed business
WoS Group has delivered a very satisfactory first half year as a listed business Business Highlights • We have delivered strong revenue growth of 17.3%, (15.9% at constant currency) underpinned by LFL sales growth of +10.3% (UK +11.0%, US +7.5%) • Continued strong demand for luxury watches in both t
Slide 5: H1 FY20 – a strong start to the financial year
H1 FY20 – a strong start to the financial year Revenue +17.3% on prior year Operating cash flow +32.5% to £428.7m Like for like sales +10.3% to £49.6m (+15.9% in constant currency) Adjusted EBITDA +23.5% Adjusted EBIT +23.0% 4-wall EBITDA Margin +80bps to to £41.2m to £31.1m 15.7% (margin 9.6% +50 b
Slide 6: Key messages
Key messages • Strong broad based performance, ahead of the market trend despite continued challenges on key product supply • ‘One of a kind’ proposition drives traffic, conversion and ASP through • Showroom design • Multichannel presence • Exceptional customer service • IT infrastructure • Marketin
Slide 7: Acquisition
Acquisition Acquisition of 4 stores from Fraser Hart (Westfield Stratford, Brent Cross, Kingston and York) Transaction expected to complete in January 2020 Transaction will be accretive in FY20 and FY21 Purchase price of £31.7m, subject to working capital on completion, will be paid in cash from exi
Slide 8: Westfield Stratford
Westfield Stratford • Expand luxury watches • Remove jewellery • Remove fashion & classic watches 8
Slide 9: Brent Cross
Brent Cross • Expand luxury watches • Remove jewellery • Remove fashion & classic watches 9
Slide 10: Kingston
Kingston • Expand luxury watches • Replace Fraser Hart jewellery with Mappin & Webb • Remove fashion & classic • Potential expansion/relocation 10
Slide 11: York
York • Expand luxury watches • Replace Fraser Hart jewellery with Mappin & Webb • Remove fashion & classic • Potential expansion/relocation 11
Slide 12: H1 Financial results and FY20 outlook
H1 Financial results and FY20 outlook Anders Romberg - CFO 12
Slide 13: H1 FY20 financial highlights
H1 FY20 financial highlights Revenue +17.3% on prior year UK luxury watch US luxury watch revenue +13.1% on Adjusted EBITDA to £428.7m revenue +50.7% on prior year +23.5% (+15.9% at constant prior year to £101.4m to £264.1m to £41.2m currency) 91.3% of total Like for Like sales +10.3% 83.1% of total
Slide 14: Financial overview
Financial overview (£m) HY 20 HY 19 Revenue by Category Luxury Watches 365.5 300.7 Luxury Jewellery 31.5 32.3 4.0% 4.7% 3.4% 4.2% Fashion & Classic (incl. Jewellery) 14.7 15.5 7.3% 8.8% Other 17.0 16.9 Revenue 428.7 365.4 Growth % 17.3% LFL Growth % 10.3% Net Margin 160.6 136.6 85.3% 82.3% Margin %
Slide 15: Revenue by geography
Revenue by geography UK Revenue (£m) US Revenue (£m) UK LfL Growth UK Total Growth US LfL Growth US Total Growth +11.0% +10.6% +7.5% +42.1% 10.2 111.1 9.4 1.7 0.3 317.6 21.3 304.1 2.1 79.6 Like-for-Like New Stores Relocations / Refurbishments Closed Stores Total Like-for-Like New Stores Relocations
Slide 16: Net product margin
Net product margin Net Product Margin Continued improvement Negatively impacted by from initiatives reducing increase in product mix incentives and one-off towards luxury watches benefits from reduction in Interest-Free Credit +0.7% 37.5% 37.4% +0.0% (0.6)% H1 19 Pricing Mix Discounts / Rebates / H1
Slide 17: Operating costs
Operating costs • Showroom costs increased in the year mainly due to the (£m) HY20 HY19 % Change Showroom Costs 93.1 82.0 13.5% impact of new showrooms Showroom Costs as % of Revenue 21.7% 22.4% (0.7%) • Continued leverage improvements as a % of revenue Overheads 23.8 17.7 33.9% assisted by cost con
Slide 18: Summary balance sheet (pre-IFRS 16)
Summary balance sheet (pre-IFRS 16) (£m) October 19 October 18 Non-current assets Further investment in PPE Goodwill 109.8 109.8 through showroom investment Intangible assets 17.2 16.4 PPE 105.3 89.5 programme Other 13.6 14.1 Current assets Inventories 220.7 212.6 Trade and other receivables 22.8 30
Slide 19: Refinancing
Refinancing • Net IPO proceeds of £148.4m used to reduce external debt • On 4th June 2019 the outstanding principal of the UK bonds were repaid, including an early redemption premium of £21.7m. • New term loan facility in place • Cost of borrowing reduced from 8.5% to 3.1% New Facilities Expiring Am
Slide 20: Cash flow (before IFRS 16)
Cash flow (before IFRS – 16) • Inventory: new showroom openings and seasonable (£m) HY20 HY19 build for Christmas Adjusted EBITDA (P&L) 41.2 33.4 Exceptional costs paid (2.1) (0.6) (Increase)/decrease in inventory (20.1) (6.0) • Debtors: planned reduction of in-house credit in the (Increase)/decreas
Slide 21: Net debt bridge
Net debt bridge Net Debt (£m) 3.1x 1.1x 240.6 24.3 8.9 0.9 92.1 15.7 2.1 6.0 (148.4) (41.2) (16.7) Apr-2019 Primary Issuance Refinancing EBITDA Change in WC Tax Capex Exceptionals Interest FX and Other Oct-2019 Net Debt Movements Net Debt Net Leverage Net debt reduced by £148.5m in HY20 Net proceeds
Slide 22: Guidance FY20
Guidance FY20 FY20 Guidance Current guidance IPO guidance Revenue – like for like sales +8%-9% Mid-single digit 5 Total revenue In line with market consensus n/a EBITDA³ margin (before pre- Increase of 20 to 40bpts from FY19 Broadly stable opening and closing costs) Pre-opening and closing costs £4m
Slide 23: Operational review
Operational review Brian Duffy - CEO 23
Slide 24: Our strategy for sustainable profitable growth
Our strategy for sustainable profitable growth Investment in and elevation of our showroom portfolio and new showroom opportunities Being a strong partner for our luxury brands Delivering exceptional customer service Continuing to develop best in class practices of merchandising, marketing and retai
Slide 25: Execution of our 1st half store investment plans
Execution of our 1st half store investment plans UK H1 US H1 New: New: • Gatwick North (August 2019) • WoS Encore Boston (June 2019) • National Watch Service Centre in Manchester Relocations: Relocations: • Mayors Merrick Park, Coral Gables • WoS Brighton • Mayors Lenox Square, Atlanta – incorporate
Slide 26: Continued strong pipeline of store investment projects
Continued strong pipeline of store investment projects UK US New: New: • Goldsmiths Edinburgh Fort (Nov 19) • American Dream (now expected Autumn 20) • Fope jewellery boutique on Old Bond Street (Nov 19) • 4 locations, 11 mono-brand boutiques with TAG, Omega and • 4 TAG mono-brands in Watford, Oxfor
Slide 27: Expansion of mono-brand concept
Expansion of mono-brand concept 5 mono-brand boutiques to open in UK during FY20 (1 relocated during H1) 11 mono-brand boutiques in US during FY20 Showroom optimisation driving Brands benefit from WoS Group scale, Exciting growth opportunity growth resources, systems and exposure • New model store c
Slide 28: Expansion of Travel Retail
Expansion of Travel Retail • New Heathrow contract awarded for 5 years in T3 on existing terms • T3 expanded showroom planned for Summer 20 • Formal participation in T2 tender process for new expanded showroom • Tender for Gatwick South 28
Slide 29: Watches of Switzerland Group: One of a kind
Watches of Switzerland Group: One of a kind
Slide 30: The Watches of Switzerland Group – Store Design Philosophy
The Watches of Switzerland Group – Store Design Philosophy High Visibility Location Impactful Windows Luxurious Hospitality All Store Intrigue / Open Welcoming Consistency / Inviting Cohesiveness Modern Brand Presence / Adapted to Browsable Non-Intimidating Rolex Active Credibility Environment Newne
Slide 31: WoS New Bond Street
WoS New Bond Street SAN SERLANC Moppin @ Webb GOLDSMITHS = MAYORS 31
Slide 32: WoS Regent Street
WoS 155 Regent Street To July 2014 32
Slide 33: WoS Regent Street
WoS 155 Regent Street To July 2014 33
Slide 34: WoS Knightsbridge
WoS Knightsbridge WATCHES 9 Mappin & Webb GOLDSMITHS MAYORS 34
Slide 35: WoS Knightsbridge
WoS Knightsbridge To June 2016 35
Slide 36: WoS Manchester
WoS Manchester From MAYORS 7) = E = w (a) a ° oO
Slide 37: WoS Manchester
WoS Manchester To October 2017 37
Slide 38: GS Bullring
GS Bullring MASSER Moppin & Webb GOLDSMITHS = MAYORS 38
Slide 39: GS Bullring
GS Bullring To June 2018 Mappin & Webb GOLDSMITHS = MAYORS
Slide 40: WoS Wynn Las Vegas
WoS Wynn Las Vegas Mappin & Webb GOLDSMITHS MAY ) RS
Slide 41: WoS Wynn Las Vegas
WoS Wynn Las Vegas To November 2018 41
Slide 42: WoS Wynn Las Vegas
WoS Wynn Las Vegas To November 2018 42
Slide 43: WoS Greene Street, Soho NY
WoS Greene Street, Soho NY November 2018 43
Slide 44: WoS Greene Street, Soho NY
WoS Greene Street, Soho NY November 2018 44
Slide 45: WoS Greene Street, Soho NY
WoS Greene Street, Soho NY November 2018 45
Slide 46: WoS Hudson Yards, NY
WoS Hudson Yards, NY November 2018 46
Slide 47: WoS Hudson Yards, NY
WoS Hudson Yards, NY March 2019 47
Slide 48: WoS Hudson Yards, NY
WoS Hudson Yards, NY March 2019 48
Slide 49: 1st Half Projects
Ist HALF PROJECTS Mappin & Webb GOLOSMITHS MAYORS
Slide 50: Mayors Merrick Park
Mayors Merrick Park MASSER Moppin & Webb GOLDSMITHS = MAYORS 50
Slide 51: Mayors Merrick Park
Mayors Merrick Park To June 2019 51
Slide 52: Mayors Merrick Park
Mayors Merrick Park To June 2019 52
Slide 53: Mayors Lenox Square
Mayors Lenox Square From GOLDSMITHS MAYORS
Slide 54: Mayors Lenox Square
Mayors Lenox Square To July 2019 54
Slide 55: Mayors Lenox Square
Mayors Lenox Square July To 2019 55
Slide 56: Mono-brand boutiques
Mono-brand boutiques [2 =< \) @ TAGHeuer Bb ® TAGHeuer = a —— Kn SERLARIE Mappin & Webb GOLDSMITHS MAYORS 56
Slide 57: Customer Experience
The WoS team Welcome Expertise Enthusiasm Non-Judgemental Customer Customer Experience CRM Experience Brand Teamwork Assistance Representation 57
Slide 58: Marketing activity
Marketing activity Online Visitors Digital Events Total across all websites: Average Monthly Numbers UK 100 events in last 12 months 2.15m per month Paid Search Impressions 42m LCA Impressions 3m Display Banners & Personalised Podcasts Retargeting (GDN) 39m CRM 5.1m database, 3m contactable 46k down
Slide 59: Sneaker and watch pairings
Sneaker and watch pairings 59
Slide 60: Launch event
Launch event 60
Slide 61: Social media
Social media Sneakertime Performance: 4th November to 2nd December Total reach: 2.9m Total Engagements: 26k Total video plays: 433k 61
Slide 62: Nas / Haute Living event
MAYORS 7) = E = w (a) a ° oO Nas / Haute Living event 62
Slide 63: Nas / Haute Living event
6 3 Nas / Haute Living event >. —, @n! 1 @seths G@haute: ni ay . Mappin & Webb GOLDSMITHS M \) ) RS 63
Slide 64: Bremont / Ronnie Wood
Bremont / Ronnie Wood BREMONT Ro BREMONT LMTEERESE —— Moppin ® Webb GOLDSMITHS ——- MAYORS 6a
Slide 65: The Watches of Switzerland Group profile / awareness
The Watches of Switzerland Group profile / awareness 2012 2019 Total Awareness Total Awareness HNW 46% 70% 78% 35% 66% 70% 84% 93% 97% 65
Slide 66: Revenue impact of store investment
Revenue impact of store investment YEAR 1 YEAR 2 YEAR 3 (+ %) (+ %) (+ %) Average 26.4 38.6 48.6 66
Slide 67: Watches of Switzerland Group USA
Watches of Switzerland Group USA 67
Slide 68: Mayors / Wynn
Mayors / Wynn Acquired / Integrated / Improved Store Design / Build Florida HQ Marketing Best in Class Systems / Processes Learning & Development Management / Staff Retention / Motivation 68
Slide 69: New York
New York Soho / Hudson Yards opening Management staff recruitment Learning & development Marketing 69
Slide 70: Watches of Switzerland Group USA
Watches of Switzerland Group USA $m Last Twelve 285,456 Months Revenue Est. Market Share 9.5% 70
Slide 71: Mappin & Webb Goldsmiths Mayors
Mappin & Webb GOLDSMITHS MAYORS
Slide 72: IFRS 16 “Leases”
IFRS 16 “Leases” IFRS 16 If IFRS 16 impact on Balance Sheet £(m) Oct 19 Pre-IFRS 16 IFRS 16 Adjustments Oct 19 Reported • IFRS 16 “Leases” has been applied for the first time in FY20 Right-of-use assets - 240.2 240.2 P,P&E 105.3 (2.0) 103.3 • WoS Group used the modified transitional approach and has
Slide 73: Earnings Per Share
Earnings Per Share Adjusted EPS (before EPS (after exceptional exceptional items and items but before IFRS 16 HY20 IFRS 16 adjustments) adjustments) Statutory EPS (incl. IFRS 16) Profit after tax £21.2m (£7.2m) (£8.1m) Weighted average number of ordinary shares 228,090,719 228,090,719 228,090,719 EP
The Watches of Switzerland Group — H1 FY2020 Earnings Presentation on 6ix