Watches Of Switzerland Group Plc · LSE:WOSG
Watches Of Switzerland — The Watches of Switzerland Group — FY2019 Earnings Presentation
33 slides from Watches Of Switzerland's earnings presentation, Jul 17, 2019
Slide 1: Full Year results
Full Year results 17 July 2019 52 weeks ended 28 April 2019 for the former group parent, Jewel UK Midco Limited 1
Slide 2: Agenda
Agenda CEO update Brian Duffy, CEO FY19 financial results and FY20 outlook Anders Romberg, CFO Operational review, summary and outlook Brian Duffy, CEO Q&A 2
Slide 3: CEO update
CEO update 4 A Xi “ a. “ly is "B » oy on tS MiVSRERS = Meppin§ Webb = GOLDSMITHS. »=——s MAYORS
Slide 4: Transformation and IPO a springboard for further growth
Transformation and IPO a springboard for further growth Business Highlights • Five-year business transformation culminating in successful IPO in June • Continued strong growth in UK market • Expansion into US market on track • Digital presence and capabilities driving customer engagement • Further p
Slide 5: FY19 – another year of strong growth for the Group
FY19 – another year of strong growth for the Group Revenue +22.5% on prior year UK Like for like sales +10.0% for to £774m the year 4-wall EBITDA Margin +30bps to Adjusted EBITDA +17.6% 15.2% to £69m Expensive debt retired using proceeds of IPO During the year the Watch Shop and Watch Lab businesses
Slide 6: Leading position in thriving global luxury watch market
Leading position in thriving global luxury watch market We operate in resilient, growing luxury watch Leading position in UK market markets • 35% share of UK luxury watch market in 2018 • Jan-Apr 19 value growth in exports of Swiss watches • Outpaced market growth >3,000 CHF +7%, full year 2018 valu
Slide 7: Financial results and FY20 outlook
Financial results and FY20 outlook Anders Romberg - CFO 7
Slide 8: FY19 financial highlights
FY19 financial highlights Revenue +22.5% on UK luxury watch sales Adjusted EBITDA Like for Like sales prior year +12.8% on prior year +17.6% +10.0% for the year to £774m to £472m to £69m Capital roll out Post-IPO debt Cash from operations programme remains restructure complete +£19m to £70m on-track
Slide 9: Financial Overview
Financial Overview Revenue by category (£m) FY 18 FY 19 4.9% 4.2% Luxury Watches 492 631 4.5% Luxury Jewellery 69 75 6.2% Fashion & Classic (incl. Jewellery) 39 35 9.7% 10.9% Other 31 33 Revenue 631 774 Growth % 23.9% 22.5% LFL Growth % 4.0% 10.0% Net Margin 240 290 81.6% 78.0% Margin % 37.9% 37.5%
Slide 10: Revenue by geography
Revenue by geography Pro-forma US LFL growth is +7% (£11m) LFL growth in the UK +10.0% (£51m) Overall growth +106% (£95m). In local currency, growth Overall growth +9% (£47m) was +96% Luxury watches as % of total revenue +4ppts to 86% Luxury watches as % of total revenue +3ppts to 80% (Note: All US
Slide 11: Margin
Margin • Net margin grew in absolute terms by £51m (+21%) year on year, however in relative terms gross margin % fell by 40bps to 37.5% • Decrease principally driven by the increase in product mix towards luxury watches and a favourable impact of pricing increases in FY18 • Partially offsetting thes
Slide 12: Operating costs
Operating costs Improved store efficiency, helped by closures of non-core stores, has driven a reduction in store operating costs relative to revenue. (£m) FY18 FY19 Store Costs (145) (172) Store Costs as % of Revenue 23.0% 22.3% Overheads have increased year on year due to the payment of a full bon
Slide 13: Cash flow
Cash flow (£m) FY18 FY19 Adjusted EBITDA (P&L) 59 69 Exceptional and other costs (4) (7) (Increase)/decrease in inventory - 2 (Increase)/decrease in debtors (5) 3 Working capital generated a net cash inflow in Increase/(decrease) in creditors - 3 FY19 due to improved stock turns and debtor Tax paid
Slide 14: Capex payback
Capex payback In the year we opened seven showrooms; three in the UK and four in the US as well as refurbishing and expanding a number of existing stores. Full appraisals are performed for all projects are monitored against internal payback hurdles of 2.5 years (3 years for flagship stores) to cover
Slide 15: Summary balance sheet
Summary balance sheet (£m) April 18 April 19 Non-current assets Goodwill 119 110 Intangible assets 30 18 Pre-IPO balance sheet PPE 80 101 Other 15 13 Current assets Inventories 215 200 Trade and other receivables 23 36 Year on year NWC investment Cash and cash equivalents 49 35 largely flat despite
Slide 16: Net debt – post IPO refinancing
Net debt – post IPO refinancing Debt refinancing performed simultaneously with the IPO (£m) April 19 Post-refinance Bond notes (248) - Other borrowings (27) (38) Term loan - (120) All high-yield bond debt was Total borrowings (275) (158) repaid and replaced with Cash and cash equivalents 35 23 £120m
Slide 17: Reaffirming our IPO Guidance
Reaffirming our IPO Guidance FY20 UK Mid-single digit LfL growth Sales Growth US Mid-single digit LfL growth UK £10-12m p.a. Major Property Capex US £15-17m p.a. Broadly stable margins. Post FY 2019, store opening EBITDA Margin and closing costs in line with longer term averages Accounting tax charg
Slide 18: Operational review, summary and outlook
Operational review, summary and outlook Brian Duffy - CEO 18
Slide 19: Our strategy for sustainable profitable growth
Our strategy for sustainable profitable growth Growing revenues and profits through our showroom portfolio and new 1 showroom opportunities 2 Being a strong partner for our luxury watch brands 3 Delivering exceptional customer service Continuing to develop best in class practices of merchandising, 4
Slide 20: Growing revenues and profits through our showroom portfolio and new showroom opportunities
1. Growing revenues and profits through our showroom portfolio and new showroom opportunities 21 107 US showrooms UK showrooms Proven strategy and model Showroom enhancement programme New flagship stores • 93% of UK showrooms new or • 7 new showrooms opened in FY19, • Sales CAGR of 19.8% over last r
Slide 21: Investment in and elevation of our existing showroom portfolio
1. Investment in and elevation of our existing showroom portfolio Continued investment and elevation of our showroom portfolio 21
Slide 22: Travel retail
1.1 Travel retail Compelling growth opportunity Proven track record Unrivalled travel experience in growing sector • Leading retailer positions at • Excellent range and assortment • Proven track-record at Heathrow Heathrow terminals 2, 3, 4 and 5. positions WoS Group well for • Sophisticated logisti
Slide 23: Expansion of mono-brand concept
1.2 Expansion of mono-brand concept 13 mono-brand stores UK (excluding airport showrooms) 4 mono-brand stores US Brands benefit from WoS Group scale, Showroom optimisation driving growth Exciting growth opportunity resources, and exposure • Model store concept drives good • Brand elevation and growt
Slide 24: Investing in new store opportunities
1. Investing in new store opportunities Exciting pipeline of new projects • US expansion – Boston Wynn June 2019 at the Wynn Encore Boston Harbour Resort; complete New York golden triangle with American Dream opening in 2020 at Meadowlands, New Jersey • US refurbishment programme including Miami Int
Slide 25: Being a strong partner for our luxury watch brands
2. Being a strong partner for our luxury watch brands Long-standing relationships • Luxury watches 82% of sales, + 4ppts • UK luxury watches average selling price + 10% to £3,858 • Highly motivated, knowledgeable employees • Our scale gives us unique customer insights and sales data Brand elevation
Slide 26: Rolex partnership
2.1 Rolex partnership 100 years of shared values and vision • In 2019 we are delighted to celebrate the 100 year anniversary of our partnership with Rolex, the world’s leading luxury watch brand. • To commemorate this landmark occasion we have hosted a number of celebratory events, including a gala
Slide 27: Growing awareness of WoS
2.2 Growing awareness of WoS 2012 2019 Total Awareness Total Awareness HNW 46% 70% 78% 35% 66% 70% 84% 93% 97% Source: Pragma Watch and Jewellery survey 2012 Source: ID Insight Consulting Consumer Brand Research for The Watches of Switzerland Group June 2019 27
Slide 28: Delivering exceptional customer service
3. Delivering exceptional customer service Highly trained, experienced sales colleagues delivering best in class in-store experience, supported by CRM outreach and VIP events CRM is a key differentiator Staff training • Store colleagues focussed on • Teams undertake significant training both their o
Slide 29: Continuing to develop best in class practices of merchandising, marketing and retail operations
4. Continuing to develop best in class practices of merchandising, marketing and retail operations • Active data collection and trend analysis drives the product range, resulting in higher productivity and stock turns • Technologically advanced and scalable systems • High level of accountability and
Slide 30: Expanding multi-channel market leadership
5. Expanding multi-channel market leadership Strong growth Highly complementary channel Significant opportunities ahead • E-commerce Sales +18% • Drives traffic to stores • UK online market leader • 44% CAGR in online luxury • Store network supports • US market for authorised multi- watches consumer
Slide 31: People and CSR
People and CSR • We are delighted to announce our Group-wide partnership with the Prince’s Trust • Colleagues from across the Group have been invited to participate in a wide-range of fund-raising activities, from charity bike rides, to providing employment skill mentoring programmes • In addition,
Slide 32: Summary and outlook
Summary and outlook FY19 has been a pivotal year for the Group Uncertain economic environment but luxury watch demand remains strong, with WoS well-positioned within that market Current trading in first eleven weeks post year-end is encouraging Remain well-positioned to deliver on our strategic aims
Slide 33: on eo MiVSRERS = Meppin§ Webb = GOLDSMITHS. »=——s MAYORS
on eo MiVSRERS = Meppin§ Webb = GOLDSMITHS. »=——s MAYORS ‘GROUP
The Watches of Switzerland Group — FY2019 Earnings Presentation on 6ix