The Watches of Switzerland Group FY 2019

RNS Number : 7566F

Watches of Switzerland Group PLC

17 July 2019

Jewel UK Midco Limited

Preliminary financial statements

For the period ended 28 April 2019

17 July 2019

Continued strong progress driven by luxury watches on debut results

Group financial highlights - for Jewel UK Midco Limited

Revenue and profit given below are shown on a continuing basis^[1].

· Group revenue +22.5% to £773.5 million

- Luxury watch^[2] revenue +28.3% to £631.4 million (82% of total revenue, +4ppts)

- Luxury Jewellery like for like sales +3%

- UK Like for like sales²+10.0%

- US like for like sales² (pro-forma) +7.0%

· Adjusted EBITDA² +17.6% to £68.8 million

· Adjusted operating profit² +33.2% to £51.8 million

· Operating profit +21.6% to £45.5 million

· Profit before tax +181% to £20.1 million

· Balance sheet restructured post-IPO with high yield bonds retired using proceeds of IPO; pro-forma net debt²: Adjusted EBITDA² pre-opening and closing costs 1.8x

Operational highlights

· £33.8m of expansionary capex² in the year, delivering seven new showrooms including 2 flagship showrooms, 11 refurbished, one expanded and two relocated showrooms

· Continued strong growth in UK and US luxury watch markets

· Expansion into underdeveloped luxury watch market in the US on track

· Growing multi-channel offering and e-commerce growth (revenue +18%)

· Actions to reduce incentives on products positively impacted margin

· Celebrated 100 years of partnership with Rolex

· Launched national partnership with the Prince's Trust and a school reach-out programme ("Little Acorns")

Outlook and guidance

Current trading in the first eleven weeks of FY20 is encouraging.

In line with pre-IPO communications, there is a strong pipeline of projects in both the UK and US, including expansions and refurbishments of existing showrooms and the continued roll out of new showrooms.

The market for luxury watches remains robust in our opinion, in line with recent trends in FY19 and continues to be impacted by supply constraints.

The Group remains well-positioned to deliver on its strategic aims and meet the Board's expectations for FY20 with unchanged guidance to that provided at the time of the IPO.

The Watches of Switzerland Group CEO, Brian Duffy, said:

"I am delighted that the Group's five-year transformation has culminated in a successful IPO on the London Stock Exchange in June this year and I would like to thank all our colleagues for their huge contribution to that achievement.

FY19 has been a fantastic year for The Watches of Switzerland Group. We have continued our trajectory of strong, profitable growth in our core markets of the UK and the US with an increase in sales of 23% during the year. Current trading remains encouraging and we are confident of meeting the Board's expectations for the financial year ending April 2020.

We are the UK's leading luxury watch retailer, hold a growing position in the US market, and operate in a highly attractive market in which demand for luxury watches generally outstrips supply. We are well positioned to deliver on our strategy and look forward to achieving continued growth in the year ahead."

About The Watches of Switzerland Group

The Watches of Switzerland Group is the UK's largest luxury watch retailer, operating in both the UK and US, comprising four prestigious brands; Goldsmiths (UK), Mappin & Webb (UK), Watches of Switzerland (UK and US) and Mayors (US), with complementary jewellery offering.

The Watches of Switzerland Group has 128 core showrooms across the UK and US (which includes 20 dedicated mono-brand stores in partnership with Rolex, TAG Heuer, Omega and Breitling) and has a leading presence in Heathrow Airport with representation in Terminals 2, 3, 4 and 5 as well as five online transactional websites.

The Watches of Switzerland Group is proud to be the UK's largest retailer for Rolex, Cartier, Omega, TAG Heuer and Breitling watches.

Mappin & Webb holds Royal warrants as goldsmiths, silversmiths and jeweller to Her Majesty The Queen and silversmiths to His Royal Highness The Prince of Wales. The Mappin & Webb master jeweller has been Crown Jeweller, custodian of the Crown Jewels of Her Majesty The Queen since 2012.

Analyst & shareholder enquiries

The Watches of Switzerland Group

Anders Romberg

Telephone: + 44 (0) 20 7317 4605

Email: investor.relations@thewosgroup.com

Media enquiries

Finsbury

Charles O'Brien

Telephone: + 44 (0) 20 7251 3801

Email: WoS@finsbury.com

Introduction

It has been an exciting year for the Watches of Switzerland Group, culminating in our admission to the London Stock Exchange on 4 June 2019. Our business has been transformed over the last five years, through significant investment in our showrooms and technology infrastructure and a sharp focus on our customer and supplier relationships, together with continued impactful marketing initiatives, all resulting in a market leading proposition. Revenue has more than doubled over the five-year period and grown at a Compound Annual Growth Rate² (CAGR) of 19.8%. This has translated to strong growth in profits and profitability and a unique platform for future growth; Adjusted EBITDA has grown at a CAGR of 30.1% over the same period.

Our listing on the London Stock Exchange represents the beginning of the next stage in our journey.

Group strategy

We are committed to delivering on our key strategic aims which have underpinned the success we have achieved in FY19. The pillars of our strategy can be summarised as follows:

1. Growing revenue and profits through continued investment in and elevation of our showroom portfolio and new showroom opportunities

2. Being a strong partner for our luxury watch brands

3. Delivering exceptional customer service

4. Continuing to develop best in class practices and leverage our scale across merchandising, marketing (including digital marketing, social media and CRM) and retail operations

5. Expanding multi-channel market leadership

This strategy is at the heart of everything we do and we believe it will allow us to continue to achieve sustainable profitable growth into FY20 and beyond.

Our strategy, as outlined above, has allowed us to continue to grow and develop our business, with each of the pillars delivering proven success in FY19.

Region	FY19 revenue £m	FY18 revenue £m	FY19 Like for like growth %	April 2019 number of core showrooms
UK	588.2	541.2	10.0%	107
US	185.3	90.0	7.0%*	21
Total	773.5	631.2	10.0%	128

All revenue and profit results are shown on a continuing basis.

1. Growing revenue and profits through continued investment in and elevation of our showroom portfolio and new showroom opportunities

In FY19 the Group incurred £33.8m in expansionary capex including, but not limited to, the following projects:

· The opening of flagship showrooms in New York in Greene Street Soho (November 19) and Hudson Yards (March 19)

· The relocation and expansion of the Watches of Switzerland flagship in Wynn Las Vegas

· The opening of Breitling and Omega mono-brand stores in Wynn Las Vegas

· The relocation of Mappin & Webb Fenchurch Street to a new location

· The relocation of Goldsmiths Nottingham to a new location

· The expansion of the Rolex presentation in Mappin & Webb Old Bond Street and Watches of Switzerland Cardiff

· The expansion of the showroom and Rolex presentation in Goldsmiths Bullring, Birmingham

· Expansion of Rolex presentation in Goldsmiths Watford, Merryhill and Newcastle

· The opening of 3 TAG Heuer mono-brand stores

Showroom / Project pipeline:

The new project pipeline is in line with pre-IPO communications and includes the following:

· Mayors Miami International refurbishment (April 19)

· Mayors Merrick Park, Miami relocation to new format Mayors showroom (June 19)

· Mayors Lenox Square, Atlanta relocation to incorporate Rolex mono-brand, Audemars Piguet mono-brand store and Mayors showroom (July 19)

· Watches of Switzerland Wynn Encore Boston (July 19)

· Three new UK TAG Heuer mono-brand stores (Autumn 19)

· Heathrow Terminal 3 expansion to include new Rolex room (Jan 20)

· Gatwick North Terminal (August 19)

· Watches of Switzerland Brighton relocation (August 19)

· American Dream New Jersey (in 2020). Rolex anchor

· Broadgate London (Summer 20) Rolex anchor

· Battersea Power Station London (Autumn 20)

· Conversion of Watches of Switzerland Glasgow to a Rolex mono-brand (Autumn 19 / Jan 20)

2. Being a strong partner for our luxury watch brands

We hold strong and long-standing relationships with our key brand partners. We are proud of our collaborations with these key partners across all operational areas of our business. We actively work with our partners to streamline the supply chain and gain efficiencies wherever possible, primarily through the exchange of data (e.g. product trends, forward demand forecasting) which enables effective production planning as well as identifying product development opportunities.

2019 marks the 100 year anniversary of our relationship with Rolex. To commemorate this landmark occasion we have hosted a wide range of events with Rolex, including a major launch event in Newcastle, to allow our customers even greater access to our successful relationship with the world's leading manufacturer of luxury watches.

3. Delivering exceptional customer service

We understand the importance and value of the luxury products we sell. Be it a once in a lifetime luxury watch purchase, an engagement ring, or being trusted to restore a family heirloom, we never 'just sell watches and jewellery'. We maintain a clear customer perspective in all that we do.

Both locally and nationally customer experience is considered and treated as a major point of difference. In our competitive and non-essential marketplace, the way we make our customers feel is always a primary focus. With an emphasis on local reputation, trust and networking, every customer is treated as a potential loyal client for life by our retail professionals.

We provide the ultimate luxury environment for our customers to feel welcome, appreciated and supported throughout their journey.

We continue to provide our colleagues with unparalleled training to develop their brand knowledge and retail expertise, to allow our staff to provide customers with an unrivalled in-store experience.

Supporting the in-store customer journey we offer a range of events tailored to our customers, enabled by our superior CRM capabilities.

4. Continuing to develop best in class practices of merchandising, marketing (including digital marketing, social media and CRM) and retail operations

Merchandising

The Group has significantly improved its merchandising capability in the course of transforming the business, developing the merchandising function into a customer-focused driver of product availability and access. Through our merchandising team, merchandising tools and long-term relationships with brand partners, we seek to ensure that our inventory is current with appropriate inventory depth.

The Group's merchandising capabilities are underpinned by a customer-centric analytical approach which focuses on showroom profiling, productivity, trend analyses, seasonal changes and sales and inventory forecasting through advanced market trend analysis run on SAP software. The capability of our merchandising function enables us to provide feedback to our brand partners on existing inventory to facilitate the aligning of product ranges to customer demands and thereby optimise inventory turns.

Marketing

CRM is a key focus of our strategy and we have a CRM database in the UK of more than 4.8m people of which over 3m are contactable clients. This is used for centralised targeted marketing via e-CRM and direct mail and customer demographic analysis.

A key focus of the centralised marketing activity is Calibre, our industry leading luxury watch publication which showcases the brands we sell and is a platform to share our knowledge and expertise in luxury watches. We produce two printed publications a year for both the UK and US markets, as well as digital monthly newsletters to a database of over 225,000 watch buyers. We also launched our Calibre podcast series, hosted mainly by our CEO with interviews and insight from industry leading figures.

In addition to Calibre, we produce Loop, which showcases our own jewellery ranges across Goldsmiths and Mappin & Webb. Loop is an annual publication mailed to our loyal clients as well as an edited bi-monthly digital newsletter emailed to a broad audience of around 400,000 clients.

In addition to the centralised marketing activity, our showroom colleagues in the UK are also focussed on their own direct client reach to drive footfall with over 157,000 CRM activities² created at the showroom level as well as over 51,000 prospects² added to the customer database for future follow up and contact. To support the showrooms in their outreach to customers over 45 "clientelling" guides were produced in FY19 covering topics such as new product launches, key focus lines or brand guides.

A key component of our CRM strategy in the UK is the hosting of our loyal clients at various events, with over 120 events in FY19, we execute the event programme in the most relevant way to maintain and grow our client relationships.

Social media also continues to be an important part of our strategy as we focus on a content first approach with a social community of over 340,000 across our Group and a monthly reach and impressions of 9.6m and 18.7 million respectively across Goldsmiths, Mappin & Webb and Watches of Switzerland. We focus on acquisition, amplification with our content creation having a renewed focus on creating our own brand assets with a consumer centric and mobile first approach. Our content amplification focuses on YouTube, Global Display Network, Facebook and Instagram to drive reach and awareness and to also to reach a younger audience.

We are actively rolling out our CRM and digital systems to our US business.

We engage with our luxury watch partners on marketing and we have shifted from limited cooperative advertising to broad campaigns that target a wider audience. One of our key focus areas is outdoor advertising with Rolex - particularly in the West London tourist routes and at Heathrow as well as on billboards throughout New York and Florida.

Through an increased focus on Marketing, our total brand awareness has increased from 84% to 93% on Goldsmiths, 35% to 66% on M&W and 46% to 70% on Watches of Switzerland since 2012^[3].

Retail operations

Throughout our retail network there is a high level of accountability and performance management. We strive to ensure a collective alignment, ownership and understanding at all levels within retail to ensure that we continually drive productivity and profitability. The Group maximises performance through Business Planning Reviews with showroom managers every 4-6 weeks and through the monitoring of operational KPIs.

5. Expanding multi-channel market leadership

FY19 saw another year of strong growth for our ecommerce business with revenue +18.0% compared to last year. This was driven through a continuation of improving and evolving our luxury and e-commerce strategies:

· Increasing luxury watch and jewellery brand range availability to become the UK's largest Authorised Retailer, working in closer partnership with key strategic partners to drive performance and efficiency

· Continually pushing the boundaries of multi-channel digital marketing. We embrace and drive forward our capabilities, leveraging rapidly evolving Artificial Intelligence and machine learning technologies to optimise search engine optimisation

· By leveraging the unique capabilities of the Watches of Switzerland Group's showroom estate and learnings of previous years, we are able to work in partnership with key advertising networks to evolve our leading-edge digital marketing strategy, which was not available to us previously

· We continue to enhance our online customer proposition through live video and text pre & post-sales support

· In May 2019 we updated our online customer experience to include 9pm order cut-off, increased next day delivery through DPD and improved luxury packaging

Financial review

Note: The results presented in this section and the table below are the results of the Jewel UK Midco consolidated group, which was acquired by Watches of Switzerland Group PLC as part of a share for share exchange prior to its admission on the London Stock Exchange.

These P&L results also exclude those of the Watch Shop and The Watch Lab businesses, which were transferred to a related entity of the Group in December 2018 following the decision to further focus on the Group's activities in the luxury watch market.

Continuing basis £m	FY19	FY18	%
Luxury watches²	631.4	492.3	+28.3%
Luxury jewellery²	74.7	68.9	+8.5%
Fashion & classic (incl. Jewellery)	34.6	39.5	(12.4%)
Other	32.8	30.5	+7.5%
Revenue	773.5	631.2	+22.5%
Adjusted EBITDA² pre-exceptional items and non-underlying items	78.2	65.6	+19.1%
Showroom opening and closing costs and other non-recurring items	(9.4)	(7.1)	-32.0%
Adjusted EBITDA²	68.8	58.5	+17.6%
Adjusted operating profit²	51.8	38.9	+33.2%

Exceptional items	(6.3)	(1.5)	(321.6%)
Operating profit	45.5	37.4	+21.6%
Net finance cost	(25.4)	(30.2)	+16.1%
Profit before tax	20.1	7.2	+180.8%

Revenue

Revenues grew strongly in FY 2019 to £773.5m, up 22.5% on the prior year and like for like growth was 10.0%. Our revenues are spread geographically across our portfolio of showrooms and online as can be seen in the table below:

Region	£m	%
UK	588.2	76%
US	185.3	24%
Total revenue	773.5

UK revenue has grown by 8.7% to £588.2m, driven by like for like sales growth of +10% (FY18 4.0%). The like for like sales growth contributed £50.8m of revenue in the year. The additional revenue from new showrooms of £1.9m was offset by the loss of revenue from closed showrooms of £5.7m.

US revenue has increased by 106% in the year to £185.3m and, on a pro-forma basis, like for like growth is 7.0%. The annualisation of the Mayors and Wynn showrooms acquired in 2017 contributed an additional £86.8m to revenue in FY19. In FY19, we opened four new showrooms, including two flagship Watches of Switzerland showrooms in New York, which increased revenue by £8.6m.

Revenue by category

The Group continues to increase revenue in the luxury watch sector, with an increase in revenue of 28% in the year. The split of revenue by type is shown below:

2019 £m	UK	US	Total	Mix %
Luxury watches	471.7	159.7	631.4	81.6%
Luxury jewellery	55.8	18.9	74.7	9.7%
Fashion & classic	33.6	1.0	34.6	4.5%
Other	27.1	5.7	32.8	4.2%
Total revenue	588.2	185.3	773.5	100%

2018 £m	UK	US	Total	Mix %
Luxury watches	418.0	74.4	492.4	78.0%
Luxury jewellery	57.0	11.9	68.9	10.9%
Fashion & classic	38.6	0.8	39.4	6.2%
Other	27.6	2.9	30.5	4.9%
Total revenue	541.2	90.0	631.2	100%

Luxury watches now make up 81.6% of our revenue, an increase of 360bps on last year. Certain luxury watches are subject to waiting lists that can last for years and in some cases are sold only to selected clients.

Sales of Fashion & Classic watches reduced in line with our strategy to focus on luxury watches.

Other revenue, primarily servicing and insurance, rose by 7.5%.

By focusing on the luxury end of the watch market, the average selling price (ASP)¹ of luxury watches in the UK has increased by 9.9% in the year.

Average selling price £	FY19	FY18	%
UK luxury watches	3,858	3,509	9.9%
US luxury watches	8,638	8,223	5.0%

Focus on profitable growth

The table below analyses our key costs and margins on a continuing basis:

Continuing operations £m	FY19	FY18	%
Net margin²	290.2	239.5	+21.1%
as % of revenue	37.5%	37.9%	(40bps)

Showroom costs	(172.4)	(145.2)	(18.7%)
as % of revenue	22.3%	23.0%	(70bps)

4-Wall EBITDA²	117.8	94.3	+24.9%
as % of revenue	15.2%	14.9%	+30bps

Overheads	(39.6)	(28.7)	(38.2%)
as % of revenue	5.1%	4.5%	+60bps

Showroom opening and closing costs	(7.5)	(5.2)	(44.2%)
Other non-trading items	(1.9)	(1.9)	-
Adjusted EBITDA	68.8	58.5	+17.6%
EBITDA margin %²	8.9%	9.3%	(40bps)

The profitability broken down between the UK and US is as follows:

£m	UK	US	Total
Revenue	588.2	185.3	773.5

Net margin	220.1	70.1	290.2
Net margin %	37.4%	37.8%	37.5%

4-Wall EBITDA	92.1	25.7	117.8
4-Wall EBITDA %	15.7%	13.9%	15.2%

Our 4-Wall EBITDA in the UK have benefited from the extensive refurbishment programme we have undertaken over the last 5 years. As a result, we have gained share in the luxury watch segment with substantial productivity gains and leverage of our showroom costs. In the US we are in the process of implementing a similar programme for our acquired Mayors and Wynn businesses.

Net margin

Net margin grew in absolute terms by £50.7m in the year, however in relative terms, net margin % decreased by 40bps, principally driven by the increase in mix towards luxury watches along with the effects of a competitive market in jewellery.

The impact of product mix on margin has been mitigated by actions taken by management in relation to the Group's credit offer and a reduction in incentives as discussed in the table below:

Credit offering

In the UK we offer interest-free and interest-bearing credit to our customers, which is provided through a third-party. In the US we also offer both interest-free and interest-bearing credit. 94% of credit is provided by a US based third party with 6% provided internally via a Mayors and Watches of Switzerland proprietary credit card. By switching more customer purchases onto interest bearing credit, we have reduced the costs with our external providers.

Incentives

The luxury products we showcase are in high demand, therefore we have focused on the reduction of incentives to a low level. This not only improves margin, but better represents the prestige of the brands we offer.

Showroom costs

Showroom costs have increased by £27.2m (+18.7%) in the year as result of the new showroom openings and the annualisation of the Mayors business which was acquired in October 2017. The focus on cost control and showroom efficiency, assisted by the closure of non-core stores, has reduced showroom costs as a % of revenue by 70bps to 22.3%.

Overheads

Overheads have increased by £10.9m (+38.2%) in the year as a result of a full bonus payment of £3.1m in FY19 compared to £nil in FY18, increase in head office costs ahead of the IPO and the annualisation of US overheads, including those of Mayors, of £4.2m.

Showroom opening and closure costs

£m	FY19	FY18
Showroom opening costs	6.0	1.8
Showroom closure costs	1.5	3.4
Total	7.5	5.2

Showroom opening costs include the cost of rent, rates and payroll prior to the opening of the showroom, normally during the period of fit out. This cost will vary annually depending on the scale of expansion in the year. We opened eight showrooms, including two flagships, during the FY19 financial year compared to two in FY18.

During the year we closed a total of 13 showrooms (10 being non-core stores) with associated costs including rents, rates and redundancy.

£5.7m of the total showroom opening and closing costs related to the US operations.

Other non-trading items

Other non-trading items are made up of a number of costs which are either non-recurring or not related to trading. These are made up as follows:

£m	FY19	FY18
Non-Executive Board prior to IPO	0.6	-
Redundancy costs	0.4	0.1
Transitional Services Agreement* with the previous owner of Mayors	0.4	0.5
Share-based payments	0.4	0.5
Other one-off legal and professional fees	0.1	0.8
Total	1.9	1.9

(*The Transitional Services Agreement has now ended and all operations are now undertaken by the Group)

Exceptional items

Reported profit for the year was impacted by significant non-underlying and exceptional items as a result of costs incurred in relation to the IPO. A summary of exceptional items is noted below:

Exceptional items £m	FY19	FY18
IPO professional and legal fees	5.9	-
Pension 'GMP' equalisation	0.4	-
Business acquisition	-	1.5
Total exceptional items	6.3	1.5

The legal and professional fees represent those accrued for work performed on the IPO up to the end of FY19.

The Group incurred a one-off charge in relation to the High Court ruling on the equalising of Guaranteed Minimum Pensions (GMP) for the defined benefit pensions of men and women.

In FY18 the Business acquisition costs relate to legal and professional fees for the acquisition of Mayors and Wynn.

Carve-out of Watch Shop and The Watch Lab

Watch Shop, which sells classic and fashion watches online only, and The Watch Lab, which provides a UK network of watch repair branches, were businesses that were not considered core to the ongoing strategy of the Group. These businesses were carved out of the Group in December 2018. The combined revenue of these businesses was £25.4m and operating losses were £18.2m (including £16.9m of impairment) for the year prior to their sale.

Leases and lease length

The average lease term remaining (to the nearest break clause) on our current portfolio of showrooms is 4.1 years. More than half of our leases (by value) will expire, or can be terminated, within the next 4.4 years.

Only eight of our leases expire in more than 10 years at April 2019, the longest expiry being 12.4 years. Our three UK Golden Triangle showrooms have an average of 10.7 years remaining on the lease. We have 14 showrooms in the UK and 4 showrooms in the US where a large proportion^[4] of the rent is variable to revenue, in FY19 we paid £19.8m in turnover linked rent (FY18: £18.9m).

The majority of our showrooms are highly profitable. As at the end of FY19 there are 20 stores that have low levels of profitability and their location and fit-out is inconsistent with our luxury strategy. The average remaining lease term for these stores was 1.7 years at the end of April 2019.

Net debt² and financing

Year-end net debt, excluding capitalised transaction costs, was £240.6m, which was £4.5m lower than the prior year. (Refer to Cash Flow below)

The financing of the Group at 28 April 2019 was made up of:

Type	Amount m
UK Bond - 8.5%	£247.9
UK Revolving Credit Facility - LIBOR +1.75%	£40.0
US Asset Backed Facility - LIBOR +1.25%	$60.0

UK Bond

The Group issued listed bond notes on The International Stock Exchange in April 2018, for a principal value of £265m and between January and April 2019 the Group repurchased bonds with a principal value of £17.1m.

US Asset Backed Facility

The Group has a US Asset Backed Facility which is based on the advance lending rates for inventory, major credit card receivables, private label and corporate accounts receivables up to a maximum borrowing level of $60.0m. The FY19 average borrowing availability was $44.7m. The facility was not drawn down until October 2018 and $35.6m was drawn down at April 2019.

Post year-end refinancing

The net proceeds of the IPO of £139.5m were primarily used to reduce our external debt to a level more appropriate for a publicly listed company. Accordingly, on 4 June 2019 the outstanding principal of the UK bonds were repaid, including an early redemption premium of £21.7m.

We also entered into a new term loan facility on 4 June 2019 at a significantly lower rate of interest. The facilities of the Group are now as follows:

Type	Expiry date	Amount m
UK Term Loan - LIBOR +2.25%	June 2024	£120.0
UK Revolving Credit Facility - LIBOR +2.0%	June 2024	£50.0
US Asset Backed Facility - LIBOR +1.25%	April 2023	$60.0

Following the IPO and refinancing, our net debt, excluding capitalised transaction costs, was £135.4m on 4 June 2019, which represents a net debt: Adjusted EBITDA of 2.0 times.

Finance costs

The interest charge in the year was £25.4m, a decrease of £4.9m on the prior year, mainly due to the write-off of the issue costs following the refinancing activity in FY18 for the Mayors acquisition and the further issue of the listed bond.

Cash flow

Reported basis £m	FY19	FY18
EBITDA (continuing operations)	59.9	51.3
EBITDA (discontinued operations)	(16.4)	2.4
EBITDA²	43.5	53.7
Non-cash exceptional items	16.9	-
Working capital and other	9.6	(2.7)
Cash generated from operations	70.0	51.0
Pension contributions	(0.7)	(0.7)
Interest	(17.4)	(13.3)
Tax	(5.0)	(2.9)
Maintenance capital expenditure² cash flow	(2.2)	(1.5)
Free cash flow²	44.7	32.6
Expansionary capital expenditure² cash flow	(33.8)	(13.3)
Carve-out of discontinued operations	(5.7)	-
Acquisition of Mayors and Wynn	-	(79.1)
Financing activities	(20.2)	80.8
Cash flow	(15.0)	21.0

The net cash outflow (after exceptional items and on a reported basis) for the year of £15.0m was mainly driven by the high levels of capital expenditure of £36.0m, repayment of £17.1m of bond principal and the cash disposed on the carve-out of discontinued operations of £5.7m.

Cash generated from operations increased by £19.0m in the year due to the increased profitability of the business and working capital improvements across inventory and debtor management. The non-cash exceptional item relates to the impairment of goodwill and other assets on the carve-out of the Watch Shop and the Watch Lab businesses.

Following the refinancing in April 18, the interest payable reduced by £0.9m in FY19 but interest paid increased by £3.8m due to an adverse movement in the interest accrual arising from the timing of interest payments.

Capital expenditure (capex)

Total capex in the year was £38.0m^[5] made up of £35.5m of expansionary capex and £2.5m maintenance capex. As noted above, the investment in our showroom portfolio is paramount to our strategy. Over the last five years the Group has invested £45.2m in refurbishing its existing portfolio in the UK and at April 2019 87% of the UK portfolio (excluding non-core stores) had been refurbished within the last five years. This equated to 93% of showrooms based on revenue contribution of the estate renovated. For major 'gold' refurbishments in FY17-FY18 we typically saw an uplift of approximately 30% of revenue post refurbishment.

Capex^[6] - continuing operations £m	FY19	FY18
Expansionary	35.5	12.7
Showroom maintenance	2.0	1.4
IT and technology	0.5	0.5
Total capex	38.0	14.6

Other Areas

Taxation

The effective tax rate for the year was 192.6%, compared to the UK corporation tax rate of 19.0%. The high tax rate was driven by a large amount of non-deductible expenses in relation to the impairment of discontinued operations' intangible assets, IPO costs, depreciation on ineligible items and other non-deductible expenses.

In the US, we recognised a minor tax charge of £80,000 after deducting intercompany interest and significant capital expenditure. In the US, capital expenditure is fully deductible once showrooms have fully opened.

Pension

The Group operates two defined contribution pension schemes and one defined benefit scheme. The defined benefit scheme was closed on 28 February 2002 to new employees. The latest full actuarial valuation was carried out on 6 April 2017 which reflected a technical deficit of £1.7m. As a result, minimum funding contributions of £550,000 per annum are being paid into the scheme until 5 April 2020.

The pension liability for accounting purposes at 28 April 2019 was £3.1m, an increase of £1.7m primarily driven a change in the discount rate. The valuation was updated to include the impact of Guaranteed Minimum Payment equalisation and an exceptional item of £450,000 was recognised in the Income Statement in the year.

Audit tender

Under CMA guidelines, FTSE 350 companies are required to have held a tender for the audit appointment within the last ten years. As a private company, KPMG has been external auditor of the Group for over ten years. Therefore, on Admission, the Audit Committee commenced an audit tender for the financial year ending 26 April 2020, which will be completed in September 2019. KPMG have been invited to re-tender for the audit. Following the audit tender, shareholders will be invited to vote on the appointment and remuneration of the auditor.

Outlook and guidance

FY19 has been a pivotal year, and current trading in the first eleven weeks of FY20 are encouraging.

There is a strong pipeline of projects, including new showroom, expansions and refurbishments.

The Group remains well-positioned to deliver on its strategic aims and meet the Board's expectations for FY20, with unchanged guidance from the time of the IPO.

Guidance for the FY20-22 is as follows:

· Mid-single digit Like for like sales growth in the UK and the US.

· A revenue of £1bn by FY21.

· Expansionary capex in the UK of c£10m-12m p.a., falling to £6m-9m p.a. by FY22, based on our current project pipeline.

· Expansionary capex in the US of c£15m-17m p.a. falling to £7m-10m p.a. by FY22, based on our current project pipeline.

· Other capex at c£5m p.a.

· Broadly stable EBITDA margins, before IFRS 16 adjustments.

· Showroom opening and closing costs in line with longer term averages.

· Accounting tax rate at around 20%, subject to any changes in corporate tax rates.

Market Briefing

A presentation for analysts and investors will be held today starting at 9.00am at One Moorgate Place, EC2R 6EA. A live audiocast will be available at the following link:

https://webcasts.eqs.com/watchesofswitzerland2019071709_en

The dial-in number is +44 (0)330 336 9411; please state that you wish to join the "Watches of Switzerland Full Year Results" conference call and use the following code: 5228850. An audio recording of the event will be available on our corporate website shortly afterwards.

Cautionary Statement

This announcement contains certain forward-looking statements with respect to the financial condition and operational results of The Watches of Switzerland Group. These statements and forecasts involve risk, uncertainty and assumptions because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, WOS has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Registered number: 08306312

JEWEL UK MIDCO LIMITED CONSOLIDATED INCOME STATEMENT
		52 week period ended 28 April 2019			52 week period ended 29 April 2018
	Note	Continuing operations £'000	Discontinued operations £'000	Total Group £'000	Continuing operations £'000	Discontinued operations £'000	Total Group Restated (note 1) £'000
Revenue	3	773,518	25,358	798,876	631,188	55,709	686,897

Cost of sales before exceptional items		(700,945)	(25,139)	(726,084)	(573,837)	(53,990)	(627,827)
Exceptional cost of sales	4	-	(10,007)	(10,007)	-	-	-
Cost of sales		(700,945)	(35,146)	(736,091)	(573,837)	(53,990)	(627,827)
Gross profit before exceptional items		72,573	219	72,792	57,351	1,719	59,070
Gross profit		72,573	(9,788)	62,785	57,351	1,719	59,070

Administrative expenses before exceptional items		(19,414)	(1,498)	(20,912)	(17,114)	(2,453)	(19,567)
Exceptional administrative expenses	4	(6,350)	(6,922)	(13,272)	(1,506)	-	(1,506)
Administrative expenses		(25,764)	(8,420)	(34,184)	(18,620)	(2,453)	(21,073)
Loss on disposal of property, plant and equipment		(1,324)	-	(1,324)	(1,318)	(20)	(1,338)
Operating profit/(loss)		45,485	(18,208)	27,277	37,413	(754)	36,659

Finance costs		(26,413)	(2)	(26,415)	(30,603)	19	(30,584)
Finance income		1,048	-	1,048	354	-	354
Net finance cost		(25,365)	(2)	(25,367)	(30,249)	19	(30,230)

Profit/(loss) before taxation		20,120	(18,210)	1,910	7,164	(735)	6,429
Taxation	5	(6,221)	2,542	(3,679)	(6,883)	853	(6,030)
Profit/(loss) for the financial period		13,899	(15,668)	(1,769)	281	118	399

Earnings Per Share	6
Basic		20.9p	(23.6)p	(2.7)p	0.4p	0.2p	0.6p

JEWEL UK MIDCO LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
		52 week period ended 28 April 2019			52 week period ended 29 April 2018
	Note	Continuing operations £'000	Discontinued operations £'000	Total Group £'000	Continuing operations £'000	Discontinued operations £'000	Total Group Restated (note 1) £'000
Profit/(loss) for the financial period		13,899	(15,668)	(1,769)	281	118	399
Other comprehensive income/(expense):
Items that will be reclassified to profit or loss
Foreign exchange gain/(loss) on translation of foreign operations		5,252	-	5,252	(3,622)	-	(3,622)
Related tax movements		(832)	-	(832)	-	-	-

Items that will not be reclassified to profit or loss
Actuarial (losses)/gains on defined benefit pension scheme	10	(1,797)	-	(1,797)	978	-	978
Related tax movements		273	-	273	(166)	-	(166)

Other comprehensive income/(expense) for the period net of tax		2,896	-	2,896	(2,810)	-	(2,810)
Total comprehensive profit/(loss) for the period, net of tax		16,795	(15,668)	1,127	(2,529)	118	(2,411)

JEWEL UK MIDCO LIMITED CONSOLIDATED BALANCE SHEET
	Note	28 April 2019	29 April 2018 Restated (note 1)
		£'000	£'000
Assets
Non-current assets
Goodwill	7	109,666	118,581
Intangible assets	7	18,063	30,348
Property, plant and equipment	8	101,268	79,772
Deferred tax assets		8,727	6,946
Trade and other receivables		4,544	7,578
		242,268	243,225
Current assets
Inventories		200,271	215,443
Trade and other receivables		35,638	23,130
Cash and cash equivalents		34,538	49,222
		270,447	287,795
Total assets		512,715	531,020

Liabilities
Current liabilities
Trade and other payables		(137,344)	(134,097)
Current tax liabilities		(2,759)	(2,176)
Derivative financial instruments		-	(31)
Borrowings	9	(27,213)	(29,228)
Provisions for other liabilities and charges		(3,312)	(3,773)
		(170,628)	(169,305)
Non-current liabilities
Trade and other payables		(20,318)	(16,298)
Borrowings	9	(239,884)	(255,530)
Post-employment benefit obligations	10	(3,051)	(1,345)
Provisions for other liabilities and charges		(2,275)	(3,485)
		(265,528)	(276,658)
Total Liabilities		(436,156)	(445,963)
Net assets		76,559	85,057


Equity
Share capital		66	66
Retained earnings		75,695	88,613
Foreign exchange reserve		798	(3,622)
Total equity		76,559	85,057

JEWEL UK MIDCO LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
	Share Capital	Share Premium	Accumulated Losses/ (Retained Earnings)	Foreign Exchange Reserve	Total Equity Attributable to Owners
	£'000	£'000	£'000	£'000	£'000
Balance at 30 April 2017	66,308	-	(15,262)	-	51,046
Profit for the financial period - continuing operations	-	-	281	-	281
Profit for the financial period - discontinued operations	-	-	118	-	118
Other comprehensive income for the period net of tax	-	-	812	(3,622)	(2,810)
Share-based payment charge (restated)	-	-	482	-	482
Share issue	-	35,940	-	-	35,940
Share capital reduction	(66,242)	(35,940)	102,182	-	-
Balance at 29 April 2018 (Restated)	66	-	88,613	(3,622)	85,057
Profit for the financial period - continuing operations	-	-	13,899	-	13,899
Profit for the financial period - discontinued operations	-	-	(15,668)	-	(15,668)
Other comprehensive income for the period net of tax	-	-	(1,524)	4,420	2,896
Share-based payment charge	-	-	375	-	375
Dividends paid*	-	-	(10,000)	-	(10,000)
Balance at 28 April 2019	66	-	75,695	798	76,559

*Dividends paid in specie relating to the carve out of the Online & servicing segment (see note 14).

JEWEL UK MIDCO LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS
	52 week period ended 28 April 2019	52 week period ended 29 April 2018 Restated (note 1)
	£'000	£'000
Cash flows from operating activities
(Loss)/profit for the year	(1,769)	399
Adjustments for:
Depreciation of property, plant and equipment	12,026	11,792
Amortisation of intangible assets	4,246	5,253
Impairment of intangible assets	16,929	-
Share-based payment charge	375	482
Guaranteed Minimum Payment equalisation	450	-
Finance income	(1,048)	(354)
Finance costs	26,415	30,584
Loss on disposal of property, plant and equipment	1,324	1,338
Taxation	3,679	6,030
Decrease/(increase) in inventory	1,936	(43)
Decrease/(increase) in debtors	2,658	(4,785)
Increase in creditors	2,811	310
Cash generated from operations	70,032	51,006
Pension scheme contributions	(697)	(695)
Tax paid	(5,012)	(2,888)
Net cash generated from operating activities	64,323	47,423

Cash flows from investing activities
Purchase of property, plant and equipment	(32,775)	(13,322)
Purchase of intangible assets	(3,275)	(1,555)
Cash disposed following carve out of discontinued operations	(5,659)	-
Acquisition of subsidiaries net of cash acquired	-	(79,068)
Interest received	80	354
Net cash outflow from investing activities	(41,629)	(93,591)

Cash flows from financing activities
Net proceeds from listed bond issue	-	255,438
Repurchase of listed bond principal	(17,076)	-
Premium paid on early redemption of listed bond	(198)	-
Net proceeds from new loan	-	107,325
Transaction costs	(718)	-
Repayment of shareholder loan	-	(75,000)
Net repayment of borrowings	(2,099)	(206,500)
Repayment of hire purchase	(199)	(428)
Interest paid	(17,399)	(13,647)
Net cash (outflow)/inflow from financing activities	(37,689)	67,188

Net (decrease)/increase in cash and cash equivalents	(14,995)	21,020
Cash and cash equivalents at the beginning of the period	49,222	28,402
Exchange losses on cash and cash equivalents	311	(200)
Cash and cash equivalents at the end of period	34,538	49,222

Comprised of:
Cash at bank and in hand	34,538	49,222
Cash and cash equivalents at end of period	34,538	49,222

JEWEL UK MIDCO LIMITED

Notes to the Financial Statements

For the 52 week period ended 28 April 2019

1. General information and basis of preparation

The Condensed Consolidated Financial Statements, which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and related notes, do not constitute full accounts within the meaning of s435 (1) and (2) of the Companies Act 2006. The auditor has reported on the Group's statutory accounts for each of the financial periods 52 week period ended 28 April 2019 and 52 week period ended 29 April 2018, which do not contain any statement under s498 (2) or (3) of the Companies Act 2006 and were unqualified. The statutory accounts for the 52 week period ended 29 April 2018 have been delivered to the Registrar of Companies and the statutory accounts for the period ended 28 April 2019 will be filed with the Registrar in due course.

This announcement was approved by the Board of Directors on 16 July 2019.

Accounting policies

Whilst the financial information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS.

The accounting policies adopted in the preparation of the Condensed Consolidated Financial Statements are the same as those set out in the Group's annual financial statements for the 52 weeks ended 29 April 2018, except for the adoption of new standards effective as of 30 April 2018 and a change in segmental reporting definitions. The Group has not adopted early any other standard, interpretation or amendment that has been issued but is not effective. The changes to segmental reporting and new standards have been set out below.

Prior period restatement

IFRS 15 - Revenue from Contracts with Customers

The Group has applied a full retrospective transition as part of the application of IFRS 15. We have, therefore, restated all balances which are affected by the full retrospective application - further disclosure on the impact of this on the financial statements is given within 'New standards, amendments and interpretations'.

Revision of provisional values of assets and liabilities acquired as part of business combinations

During the measurement period, the Group has revised the provisional values of assets and liabilities acquired as part of the Mayors Jewelers and Wynn acquisitions. In line with IFRS 3 'Business Combinations', we have revised the comparative information for 29 April 2018 as required. The Group is now out of the measurement period for both acquisitions and as such, the values stated within note 13 are stated as final.

Share-based payments

The Group has a number of share-based payment arrangements which were not accounted for in prior years. The comparative information has been restated to reflect accounting for these arrangements. Refer to the Consolidated Statement of Changes in Equity for adjustments recognised regarding these arrangements in comparative periods. Recognising these share-based payments increased administration expenses in the Consolidated Income Statement by £482,000 for the period ended 29 April 2018. Consequently, Earnings Per Share reduced from 1.3p to 0.6p in the financial year to 29 April 2018 as a result of this adjustment.

Going concern

The Group regularly reviews market and financial forecasts and has reviewed its trading prospects in its key markets. As a result, it believes its trading performance will demonstrate continued improvement in future periods, and that liquidity will remain strong.

1. General information and basis of preparation (continued)

On 24 May 2019, Watches of Switzerland Group Limited (formerly Jewel UK Newco Limited) (registered number 11838443) purchased the entire share capital of Jewel UK Midco Limited from Jewel Holdco SARL through a share for share exchange. On 30 May 2019, Watches of Switzerland Group Limited re-registered as a Public Limited Company and on 4 June 2019, its shares were admitted for trading on the main market for listed securities of the London Stock Exchange. On 4 June 2019, the Group entered into a new term loan facility consisting of a term loan for £120,000,000 and a revolving credit facility of £50,000,000. The term loan facility expires on 4 June 2024.

The Board has reviewed the latest forecasts of the newly formed Watches of Switzerland Group PLC group, reflecting the impact of the IPO and refinancing and considered the obligations of those Group's financing arrangements. The Board has specifically considered the potential impact of the UK leaving the European Union and given the continued strong liquidity of the Group, the Board has concluded that a going concern basis of preparation of the Group's financial statements is appropriate.

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 Alternative Performance Measures are not defined by IFRS and therefore may not be directly comparable with other companies' alternative performance measures.

The key APMs that the Group uses include: Adjusted EBITDA, Adjusted EBITDA pre-exceptional costs and non-underlying items and Basic EPS adjusted for exceptional items. These APMs are set out in the Glossary including explanations of how they are calculated and how they are reconciled to a statutory measure where relevant. A reconciliation to statutory measures is included in note 2.

Non-underlying costs

The Group has chosen to present Adjusted EBITDA and Adjusted EBITDA pre-exceptional costs and non-underlying items which excludes certain 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. These costs may include the financial effect of non-underlying items which are considered exceptional and occur infrequently such as; restructuring costs, management fees paid to the controlling shareholder and professional costs for non-trading activities. The Group believes that the separate disclosure of these costs provides additional useful information to users of the financial statements to enable a better understanding of the Group's underlying financial performance.

Foreign currencies

The Consolidated Financial Statements are presented in Pounds Sterling (£), which is the Company's functional and presentation currency. The Group includes foreign entities whose functional currencies are not Sterling. On consolidation, the assets and liabilities of those entities are translated at the exchange rates at the balance sheet date and income and expenses are translated at average rates during the period. Translation differences are recognised in other comprehensive income.

Transactions in currencies other than an entity's functional currency are recorded at the exchange rate on the transaction date, whilst assets and liabilities are translated at exchange rates at the balance sheet date. Exchange differences are recognised in the Income Statement.

1. General information and basis of preparation (continued)

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker (CODM), who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer and Chief Financial Officer of the Group. The CODM reviews the key profit measures, 'Adjusted Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)' and 'Adjusted EBITDA pre-exceptional costs and non-underlying items'.

In the current period, the operating segments presented differ from those presented in the 29 April 2018 statutory financial statements. This presentation of segmental reporting represents a change to our historical presentation which has been based on purely geographical revenue streams. The CODM believes that this new segmental reporting better reflects the operations of the Group and the varying commercial strategies within its businesses. Each of the three segments shown operates within a different commercial market and sells to a different customer base than the other two, and each is governed by a separately identifiable strategic growth plan. The CODM believes that segmentation in this manner allows a reader of our financial accounts to better understand the differing commercial drivers within our overall Group performance. Refer to note 2.

New standards, amendments and interpretations

The Group applied IFRS 15 'Revenue from Contracts with Customers' and IFRS 9 'Financial Instruments' for the first time. The nature and effect of the changes as a result of adoption of these new accounting standards are described below.

Several other amendments and interpretations apply for the first time in the period to 28 April 2019, but do not have an impact on the Consolidated Financial Statements of the Group. The Group has not adopted early any standards, interpretations or amendments that have been issued but are not yet effective.

IFRS 15 'Revenue from Contracts with Customers'

IFRS 15 supersedes IAS 11 'Construction Contracts', IAS 18 'Revenue and Related Interpretations' and it applies, with limited exceptions, to all revenue arising from contracts with its customers. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.

IFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

The Group adopted IFRS 15 using the full retrospective method of adoption. The effect of the transition on the current period has not been disclosed as the standard provides an optional practical expedient. The Group did not apply any of the other available optional practical expedients.

The effect of adopting IFRS 15 is as follows:

	52 week period ended 29 April 2018
	£'000
Revenue	1,713
Cost of sales	(1,713)
Gross profit	-
Profit for the financial period	-

The change did not have an impact on total comprehensive loss for the period. There is no impact on the Consolidated Balance Sheet and Consolidated Cash Flow Statement for the periods stated above.

1. General information and basis of preparation (continued)

The adjustment above is to recognise certain items of revenue which were previously netted against related costs within cost of sales. Upon application of IFRS 15, these items were identified as separate contracts with customers and as such were required to be shown gross of the related costs. These items related to commissions receivable from suppliers. There is no overall impact on the gross profit, profit for the financial period and no impact upon the total comprehensive profit for the period.

Revised revenue accounting policy

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 effects of variable consideration and 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 are transferred to the customer. Retail sales are usually settled in cash or by credit 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 also offers customers the option to pay for goods over time via credit agreements. This is discounted using the rate that would be reflected in a separate financing transaction between the Group and its customers at contract inception, to take into consideration the significant financing component.

Sale of goods - online

Revenue from the provision of 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 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.

1. General information and basis of preparation (continued)

IFRS 9 'Financial instruments'

IFRS 9 'Financial Instruments' replaces IAS 39 'Financial Instruments: Recognition and Measurement' for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.

The Group applied IFRS 9 prospectively, with an initial application date of 30 April 2018. The Group has not restated the comparative information, which continues to be reported under IAS 39. There have been no differences arising from the adoption of IFRS 9.

Classification and measurement

Under IFRS 9, debt instruments are subsequently measured at fair value through profit or loss, amortised cost, or fair value through other comprehensive income ('OCI'). 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 assessment of the Group's business model was made as of the date of initial application, 30 April 2018. The assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets.

Financial assets

New classification under IFRS 9

Original classification under IAS 39

Carrying amount under IAS 39 and IFRS 9

£'000

Trade and other receivables*

Amortised cost

Loans and receivables

23,403

Cash and short term deposits

Amortised cost

Loans and receivables

49,222

Financial liabilities	New classification under IFRS 9	Original classification under IAS 39	Carrying amount under IAS 39 and IFRS 9 £'000
Derivatives not designated as hedging instruments	Fair value through profit or loss	Fair value through profit or loss	(31)
Interest-bearing loans and borrowings	Amortised cost	Other financial liabilities	(294,309)
Trade and other payables**	Amortised cost	Other financial liabilities	(133,074)

*Excludes prepayments of £7,305,000 that do not meet the definition of a financial instrument.

**Trade payables excludes property lease incentives of £12,911,000, deposits of £2,618,000 and gift card liabilities of £1,792,000 that do not meet the definition of a financial instrument.

Impairment

The adoption of IFRS 9 has changed the Group's accounting for impairment losses for financial assets by replacing IAS 39's incurred loss approach with a forward-looking expected credit loss (ECL) approach. IFRS 9 requires the Group to recognise an allowance for ECLs for all debt instruments not held at fair value through profit or loss and contract assets. The new methodology for impairment has not had a material impact on the level of provision held for impairment losses.

1. General information and basis of preparation (continued)

Hedge accounting

At the date of initial application, the Group had no existing hedging relationships and have no hedging relationships as at 28 April 2019.

Revised financial instruments accounting policy

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.

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	Classification under IFRS 9
Trade and other receivables (excluding prepayments)	Amortised cost - held to collect as business model and SPPI met
Cash and short term deposits	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 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 expected credit losses (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.

1. General information and basis of preparation (continued)

Financial liabilities

Initial recognition and measurement

The Group has classified its financial liabilities as follows:

Financial liabilities	Classification under IFRS 9
Derivatives not designated as hedging instruments	Fair value through profit or loss
Interest-bearing loans and borrowings	Amortised cost
Trade and other payables (excluding accrued income)	Amortised cost

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	Subsequently measured at fair value. Gains and losses are recognised in the Income Statement
Interest-bearing loans and borrowings	Subsequently measured at amortised cost using the effective interest rated ('EIR') method. The EIR amortisation is included in finance costs in the Income statement
Trade and other payables (excluding accrued income)	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 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.

Standards issued but not yet effective

The new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are disclosed below. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective. The new standards and interpretations effective for periods commencing on or after 1 January 2019 and therefore applicable to the Group for the 52 weeks ending 26 April 2020 are listed below:

- Annual improvements to IFRS Standards 2015-2017 Cycle;

- Amendments to IFRS 9 'Financial Instruments', on prepayment features with negative compensation;

- Amendments to IAS 28 'Investments in Associates', on long term interests in associates and joint ventures;

- Amendments to IAS 19 'Employee Benefits', on plan amendment, curtailment or settlement;

- IFRIC 23 ' Uncertainty over Income Tax Treatments'; and

- IFRS 16 'Leases'

With the exception of the adoption of IFRS 16, the adoption of the above standards and interpretations will not lead to any changes to the Group's accounting policies or have any other material impact on the financial position or performance of the Group.

1. General information and basis of preparation (continued)

IFRS 16 Leases is effective for periods beginning on or after 1 January 2019. The Group will adopt the new financial reporting standard from 29 April 2019. The financial statements for the 52 weeks ending 26 April 2020 will be the first prepared under IFRS 16. The Group has decided to adopt using the modified retrospective transition approach meaning the comparative period will not be restated.

Impact of application of IFRS 16 Leases

IFRS 16 was issued in January 2016 and it replaces IAS 17 'Leases', IFRIC 4 'Determining Whether an Arrangement Contains a Lease', SIC-15 'Operating Leases-Incentives' and SIC-27 'Evaluating the Substance of Transactions Involving the Legal Form of a Lease'. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under IFRS 16 is substantially unchanged from today's accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases.

Transition

The Group will apply the modified retrospective approach and will recognise the lease liability on transition as the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of transition.

The Group has chosen on a lease-by-lease basis to measure the right-of-use asset as either:

· Its carrying amount as if IFRS 16 had been applied since the commencement date, but discounting using the incremental borrowing rate at the date of initial application; or

· An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the Balance Sheet immediately before the date of initial application.

The Group will not restate comparatives and the cumulative effect of initially applying IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings.

Exemptions and Practical Expedients

The Group has elected to apply the following:

· Exclude short-lived leases with a lease of less than one year

· Low-value assets (defined as less than $5,000 at initial cost)

· To rely on its assessment of whether leases are onerous immediately before the date of transition as an alternative to performing an impairment review

· To exclude initial direct costs from the measurement of the right-of-use asset on transition

· To apply hindsight, where appropriate, for instance in determining the lease term.

Significant areas of judgement and estimation

The application of IFRS 16 requires significant estimation and judgement, particularly around the calculation of the incremental borrowing rate and determining the lease term when there are options to extend or terminate early. Each of these have been determined on a lease-by-lease basis on transition. High levels of judgement are also involved in determining whether leases contain 'substantive substitution rights' and therefore whether they meet the definition of a lease under IFRS 16.

1. General information and basis of preparation (continued)

Impact on the Financial Statements

There will be a significant impact on the Balance Sheet on transition as at 29 April 2019. It is expected on a pre-tax basis that a right-of-use asset in the range of £240m and lease liability in the range of £265m will be recognised, along with the derecognition of onerous lease provisions of approximately £4m and other working capital balances (including lease incentives) of approximately £12m, which results in an overall adjustment to retained earnings in the range of £10m.

Operating profit and Adjusted EBITDA increase due to the depreciation expense being lower than the lease expense it replaces. The overall impact on profit before tax and adjusting items depends on the relative maturity of the lease portfolio. Assuming a constant portfolio of leases as at 29 April 2019, it is estimated that for the 52 weeks ended 26 April 2020:

- Profit before tax when applying IFRS 16 is expected to be c.£4m lower than under IAS 17

- Adjusted EBITDA is c.£42m higher due to the removal of rental expense

- Operating profit is c.£7m higher due the fact that depreciation on the right-of-use asset is lower than the rental expense under IAS 17.

The application of IFRS 16 requires a reclassification of cash flow from operations to net cash used in financing activities, however, the impact to the Group is cash flow neutral.

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 defined benefit pension schemes requires management to make judgements as to the nature of benefits provided by each scheme and thereby determine the classification of each scheme. For defined benefit schemes, 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 schemes 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 contribution scheme to movements in key assumptions is set out in note 10.

Net realisable value of inventories

Inventories are stated at the lower of cost and net realisable value, on a weighted average cost basis, which requires the estimation of the eventual sales price of goods to customers in the future. Provisions are recognised where the net realisable value is assessed to be lower than cost. A 20% reduction in the store sell-through of slow moving stock would impact the net realisable value by c. £1,200,000.

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:

1. General information and basis of preparation (continued)

Business combination - Wynn

The Group has determined based on criteria set out in IFRS 3 'Business combinations' that the acquisition of the trade and assets of certain retail stores within the Wynn Hotel, Las Vegas, constitutes a business combination. The Group acquired the inventory, which was held by the previous store owners, the right to sell the goods from agreed locations, trained employees and a Rolex agency. Management have reviewed IFRS 3 and have specifically considered the guidance in relation to inputs, outputs and processes, determining that the purchase agreement constitutes a business combination despite not purchasing the share capital of an entity. As such, the Group has recognised goodwill and other intangible assets which is attributable to the business combination.

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 of 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 be favourable or unfavourable to the underlying result. Further details on exceptional items are provided in note 4.

2. Segment reporting

As explained in note 1, the Group has revised its operating segments for the current period to better reflect the operations of the Group. Under IFRS 8 'Segmental reporting', a full restatement of the financial history is required when primary segments evolve to show these on a consistent basis. The key Group performance measures are Adjusted EBITDA and Adjusted EBITDA pre-exceptional costs and non-underlying items, as detailed below.

Adjusted EBITDA represents profit/(loss) for the period before finance costs, finance income, taxation, depreciation, amortisation and exceptional items presented in the Group's Income Statement (consisting of exceptional administrative expenses and exceptional cost of sales).

Adjusted EBITDA pre-exceptional and non-underlying costs also excludes non-recurring costs such as store pre-opening and closure costs as noted in the table below.

	52 week period ended 28 April 2019
	UK watch & jewellery	US watch & jewellery	Total continuing operations	Online and servicing (discontinued)	Total
	£'000	£'000	£'000	£'000	£'000
Revenue	588,224	185,294	773,518	25,358	798,876

Operating profit	40,779	4,706	45,485	(18,208)	27,277

Depreciation	10,287	1,541	11,828	198	12,026
Amortisation	1,123	1,468	2,591	1,655	4,246
	11,410	3,009	14,419	1,853	16,272

EBITDA	52,189	7,715	59,904	(16,355)	43,549

Exceptional items (note 4)	5,961	389	6,350	16,929	23,279
Non-underlying items
Loss on disposal of property, plant and equipment	1,116	208	1,324	-	1,324
Costs from non-trading activities and management fees	(947)	2,136	1,189	49	1,238

Adjusted EBITDA	58,319	10,448	68,767	623	69,390

Additional non-recurring items
Store pre-opening costs	363	5,625	5,988	-	5,988
Store closure costs	1,442	28	1,470	-	1,470
Other non-trading fees (i)	1,494	433	1,927	-	1,927
Adjusted EBITDA pre-exceptional costs and non-underlying items	61,618	16,534	78,152	623	78,775


Total assets	432,642	80,073	512,715	-	512,715
Total liabilities	(367,538)	(68,618)	(436,156)	-	(436,156)
Non-current assets
Goodwill and intangible assets	99,773	27,956	127,729	-	127,729
Property, plant and equipment	68,491	32,777	101,268	-	101,268
Other non-current assets	2,612	10,659	13,271	-	13,271
Total	170,876	71,392	242,268	-	242,268

2. Segment reporting (continued)

(i) Other non-trading fees relates principally to management fees, transfer pricing adjustments and other non-recurring professional and legal fees.

2. Segment reporting (continued)

	52 week period ended 29 April 2018 Restated (note 1)
	UK watch & jewellery	US watch & jewellery	Total continuing operations	Online and servicing (discontinued)	Total
	£'000	£'000	£'000	£'000	£'000
Revenue	541,195	89,993	631,188	55,709	686,897

Operating profit	34,215	3,198	37,413	(754)	36,659
Add back:

Depreciation	10,665	774	11,439	353	11,792
Amortisation	1,845	629	2,474	2,779	5,253
	12,510	1,403	13,913	3,132	17,045

EBITDA	46,725	4,601	51,326	2,378	53,704

Exceptional costs (note 4)	59	1,447	1,506	-	1,506
Non-underlying costs
Loss on disposal of property, plant and equipment	1,318	-	1,318	20	1,338
Costs from non-trading activities and management fees	1,573	2,771	4,344	28	4,372

Adjusted EBITDA	49,675	8,819	58,494	2,426	60,920

Additional non-recurring costs
Store pre-opening costs	1,700	61	1,761	-	1,761
Store closure costs	3,450	-	3,450	-	3,450
Other non-trading fees (i)	1,367	531	1,898	-	1,898
Adjusted EBITDA pre-exceptional costs and non-underlying items	56,192	9,411	65,603	2,426	68,029


Total assets	365,669	123,943	489,612	41,408	531,020
Total liabilities	(343,654)	(96,854)	(440,508)	(5,455)	(445,963)
Non-current assets
Goodwill and intangible assets	88,489	36,786	125,275	23,654	148,929
Property, plant and equipment	68,325	10,424	78,749	1,023	79,772
Other non-current assets	3,014	13,767	16,781	(2,257)	14,524
Total	159,828	60,977	220,805	22,420	243,225

2. Segment reporting (continued)

Entity-wide revenue disclosures

The period ending 29 April 2018 has been restated, as described further in note 1, to reflect the IFRS 15 transition adjustments:

	52 week period ended 28 April 2019	52 week period ended 29 April 2018 Restated (note 1)
	£'000	£'000
UK watch & jewellery
Luxury watches	471,717	418,030
Luxury jewellery	55,827	56,961
Fashion & classic (incl. jewellery)	33,614	38,646
Other	27,066	27,558
Total	588,224	541,195

US watch & jewellery
Luxury watches	159,729	74,324
Luxury jewellery	18,906	11,929
Fashion & classic (incl. jewellery)	953	818
Other	5,706	2,922
Total	185,294	89,993

Online and servicing (discontinued)
Fashion & classic (incl. jewellery)	22,148	49,921
Other	3,210	5,788
Total	25,358	55,709

Group
Luxury watches	631,446	492,354
Luxury jewellery	74,733	68,890
Fashion & classic (incl. jewellery)	56,715	89,385
Other	35,982	36,268
Total	798,876	686,897

'Other' consists of the sales of gifts, servicing, repairs and insurance.

Information regarding geographical areas, including revenue from external customers and non-current assets is disclosed above.

No single customer accounted for more than 10% of revenue in any of the financial periods noted above.

3. Revenue

The Group's disaggregated revenue recognised under contracts with customers relates to the following categories and operating segments. The period ending 29 April 2018 has been restated, as described further in note 1, to reflect the IFRS 15 transition adjustments:

	52 week period ended 28 April 2019
	Sale of goods	Rendering of services	Total
	£'000	£'000	£'000
UK watch & jewellery	564,926	23,298	588,224
US watch & jewellery	179,692	5,602	185,294
Online and servicing (discontinued)	22,148	3,210	25,358
Total	766,766	32,110	798,876

3. Revenue (continued)

	52 week period ended 29 April 2018 Restated (note 1)
	Sale of goods	Rendering of services	Total
	£'000	£'000	£'000
UK watch & jewellery	515,482	25,713	541,195
US watch & jewellery	87,365	2,628	89,993
Online and servicing (discontinued)	49,921	5,788	55,709
Total	652,768	34,129	686,897

4. Exceptional items

Exceptional items are those 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. 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.

	52 week period ended 28 April 2019	52 week period ended 29 April 2018
	£'000	£'000
Exceptional cost of sales
Impairment of discontinued operation's intangible assets (i)	(10,007)	-

Exceptional administrative expenses
Impairment of discontinued operation's goodwill (i)	(6,922)	-
Professional & legal expenses on business combinations (ii)	-	(1,447)
Revision of estimates of payments to former owners (iii)	22	(59)
Exceptional professional fees for Initial Public Offering (iv)	(5,922)	-
Guaranteed Minimum Pension (GMP) equalisation (v)	(450)	-
Total exceptional items	(23,279)	(1,506)

Tax impact of exceptional items	77	-

(i) Impairment of discontinued operation's goodwill and intangible assets

During the period, the Group carved out the trade and assets of the Watch Shop (including the Watch Hut) and Watch Lab businesses. As part of the exercise, the businesses were valued, see note 7, which indicated that the brand, technology and goodwill relating to the discontinued operations were impaired. The impairment charge is regarded as a non-trading, non-underlying cost.

(ii) Professional and legal expenses on business combinations

Professional and legal expenses on business combinations completed during the periods have been expensed to the Income Statement as an exceptional cost as they are regarded as non-trading, non-underlying costs.

(iii) Revision to estimates of payments to former owners

As part of the consideration for The Watch Lab Limited acquisition, the former owners received an additional pay-out based on the performance of the acquired entities as long as they remained in employment. This is regarded as an exceptional expense as it does not form part of underlying trading costs.

(iv) Exceptional professional fees for Initial Public Offering (IPO)

The Group has incurred exceptional professional costs for services performed as part of the IPO process. These costs are regarded as an exceptional expense as these are only expected to be incurred once and do not form part of underlying trading costs.

4. Exceptional items (continued)

(v) Guaranteed Minimum Pension (GMP) equalisation

On 1 November 2018, the High Court ruled that companies are required to amend the defined benefit pension obligations in order to equalise the GMP obligation for men and women. As such, during the period to 28 April 2019, the Group incurred an additional one-off charge in relation to this ruling. This is regarded as an exceptional expense as it does not form part of the underlying trading costs and is not expected to re-occur.

5. Taxation

The effective tax rate for the period was 192.6% (29 April 2018: 87.3%). The tax rate for the current period varied from the standard rate of corporation tax in the UK due to the following factors:

	52 week period ended 28 April 2019	52 week period ended 29 April 2018
	%	%
UK corporation tax rate	19.0	19.0
Non-deductible expenses	72.8	9.3
Depreciation and amortisation on non-qualifying assets	90.4	9.7
Exchange losses, included in subsidiary computations	-	(7.8)
Group relief	(4.1)	32.0
Impact of change in tax rates	(1.8)	46.2
Other	3.6	(21.9)
Adjustments in respect of prior periods	12.7	0.8
Effective total tax rate on profit before taxation	192.6	87.3

6. Earnings Per Share (EPS)

	52 week period ended 28 April 2019	52 week period ended 29 April 2018
Basic EPS	(2.7)p	0.6p
Basic EPS (continuing operations)	20.9p	0.4p
Basic EPS adjusted for exceptional items (continuing operations)	30.4p	2.7p

Basic EPS is based on the profit/(loss) for the year attributable to the equity holders of the parent company divided by the net of the weighted average number of shares ranking for dividend.

Diluted EPS is not calculated as there are no convertible instruments in issue.

6. Earnings Per Share (EPS) (continued)

The following table reflects the profit data used in the basic and diluted EPS calculations:

	52 week period ended 28 April 2019	52 week period ended 29 April 2018
	£'000	£'000
Profit/(loss) after tax attributable to equity holders of the parent company
Continuing operations	13,899	281
Discontinued operations	(15,668)	118
(Loss)/profit attributable to ordinary equity holders of the parent for basic earnings	(1,769)	399


Profit after tax attributable to equity holders of the parent company (continuing operations)	13,899	281
Add back:
Exceptional administrative expenses (continuing operations), net of tax	6,273	1,506
Profit adjusted for exceptional items for continuing operations	20,172	1,787

The following table reflects the share data used in the basic and diluted EPS calculations:

	52 week period ended 28 April 2019	52 week period ended 29 April 2018
	'000	'000
Weighted average number of ordinary shares for basic EPS	66,308	66,308

Refer to note 16 for details of post-balance sheet events regarding other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these financial statements.

7. Intangible assets

	28 April 2019
	Goodwill	Brands	Technology	Agency agreement	Computer software	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Net book value
At 30 April 2018	118,581	20,401	2,952	2,371	4,624	148,929
Additions	-	-	-	-	3,275	3,275
Transfer from property, plant and equipment	-	-	-	-	185	185
Amortisation	-	(2,084)	(515)	(264)	(1,383)	(4,246)
Impairment	(6,922)	(7,942)	(2,065)	-	-	(16,929)
Carve-out of discontinued operations	(2,950)	(1,430)	(372)	-	(574)	(5,326)
Foreign exchange differences	957	668	-	174	42	1,841
At 28 April 2019	109,666	9,613	-	2,281	6,169	127,729

Impairment of intangibles

During the period ended 28 April 2019, management identified that the recoverable amount of the Watch Shop, Watch Hut and The Watch Lab (together the "Online and servicing" operating segment) had declined due to increasingly difficult market climates. As part of a group reconstruction, these CGUs were carved-out of the Jewel UK Midco Limited Group and passed to a related undertaking outside of the Group.

Management contracted independent third party valuers to value these CGUs. The combined value of the group of Watch Shop and Watch Hut CGUs was valued at £16,562,000 and the group of The Watch Lab CGUs at £4,450,000. The independent valuers used a "fair value less costs to sell" methodology and the market approach to value the businesses. This methodology takes the earnings of the group of CGUs and capitalises this at a multiple that reflects the risks of the group of CGUs and the stream of earnings which it expects to generate in the future. The fair value of the CGUs was determined using level 2 and level 3 inputs. The multiple used to value the Watch Shop and Watch Hut combined business, x5.5, was based upon quoted comparable companies, notably within the watch and jewellery market sectors, and adjusted to consider variations in operations, size, profitability and diversity. For The Watch Lab, comparable transactions in private companies which are broadly similar to The Watch Lab in terms of factors including trading activities, margins and geographic spread (where possible) were used to determine the appropriate multiple of x4.0.

7. Intangible assets (continued)

A total impairment of £16,929,000 has been recognised within the financial statements for the 52 week period to 28 April 2019. This consists of:

	Impairment recognised £'000
Recognised in Exceptional administrative expenses
Goodwill
Watch Hut	1,175
Watch Shop	4,824
The Watch Lab	923
	6,922

Recognised in Exceptional cost of sales
Brand
Watch Shop	7,942
Technology
Watch Shop	2,065
	10,007
Total	16,929

The impairment of the brand and technology has been recognised in Exceptional cost of sales in line with where the amortisation of the intangible assets has been recognised.

8. Property, plant and equipment

	28 April 2019
	Land and buildings	Fittings and equipment	Total
	£'000	£'000	£'000
Net book value
At 30 April 2018	1,891	77,881	79,772
Additions	435	34,845	35,280
Disposals	(9)	(1,315)	(1,324)
Transfer to intangible assets	-	(185)	(185)
Depreciation	(298)	(11,728)	(12,026)
Carve-out of discontinued operations (note 14)	(114)	(973)	(1,087)
Foreign exchange differences	-	838	838
At 28 April 2019	1,905	99,363	101,268

During the period to 28 April 2019, the Group invested significant levels of capital expenditure in the stores based in the US on new store fit outs and refurbishment of Mayors stores.

9. Borrowings

	28 April 2019	29 April 2018
	£'000	£'000
Current
Revolving credit facility	27,103	29,000
Finance lease liabilities	110	228
	27,213	29,228
Non-current
Listed bond	239,884	255,449
Finance lease liabilities	-	81
	239,884	255,530
Total borrowings	267,097	284,758

Borrowings are secured against the assets held by entities within the Group.

9. Borrowings (continued)

On 18 April 2018, Jewel UK Bondco PLC, a subsidiary of Jewel UK Midco Limited, issued a listed bond note on The International Stock Exchange for a principal value of £265,000,000. Interest is payable at 8.5% with the notes maturing in 2023.

During the period to 28 April 2019, the Group repurchased the principal value of £17,076,000 of the listed bond note. A premium was paid of £198,000 which has been recognised within Finance costs.

On 6 June 2019, the Group repurchased the entire outstanding balance on the listed bond and entered into a new term loan and revolving credit facility (refer to note 16).

The listed bond is presented net of capitalised transaction costs. Capitalised transaction costs are amortised using the effective interest rate.

10. Post-employment benefit obligations

	52 week period ended 28 April 2019	52 week period ended 29 April 2018
	£'000	£'000
Opening net pension liability	(1,345)	(2,841)
Current service cost	(23)	(23)
Administration expenses	(102)	(85)
Past service costs and curtailments (note 4)	(450)	-
Interest cost	(31)	(69)
Employer contributions	697	695
Actuarial (losses)/gains	(1,797)	978
Closing net pension liability	(3,051)	(1,345)

The net defined benefit pension liability recognised in the Consolidated Balance Sheet is analysed as follows:

	28 April 2019	29 April 2018
	£'000	£'000
Equities	16,347	16,264
Cash	2	(9)
Fair value of plan assets	16,349	16,255
Present value of benefit obligations	(19,400)	(17,600)
Net pension liability	(3,051)	(1,345)

Financial assumptions

The financial assumptions for the pension scheme and the most recent actuarial valuation have been updated by an independent qualified actuary to take account of the requirements of IAS 19 "Employee Benefits" in order to assess the liabilities of the scheme. The most significant of these are the discount rate and the inflation rate which are 2.55% (29 April 2018: 2.90%) and 3.35% (29 April 2018: 3.20%). The inflation rate reflects the Retail Price Index (RPI) rate.

On 1 November 2018, the High Court ruled that companies are required to amend the defined benefit pension obligations in order to equalise the GMP obligation for men and women. As such, during the period to 28 April 2019, the Group incurred an additional one-off charge of £450,000 in relation to this ruling. This is regarded as an exceptional expense as it does not form part of the underlying trading costs and is not expected to re-occur.

10. Post-employment benefit obligations (continued)

Sensitivity analysis

The impact on the defined benefit obligation to changes in the financial and demographic assumptions is shown below:

	28 April 2019	29 April 2018
	%	%
0.25% increase in discount rate	(4.0)	(4.0)
0.25% decrease in discount rate	4.0	4.0
0.25% increase in salary growth rate	0.1	0.1
0.25% decrease in salary growth rate	(0.1)	(0.1)
0.25% increase in pension growth rate	2.7	2.7
0.25% decrease in pension growth rate	(2.7)	(2.7)
1 year increase in life expectancy	3.0	3.0
1 year decrease in life expectancy	(3.0)	(3.0)

11. Analysis of net debt

	29 April 2018	Cash flow	Non-cash charges	Foreign exchange	28 April 2019
	£'000	£'000	£'000	£'000	£'000
Cash and cash equivalents	49,222	(14,995)	-	311	34,538
Revolving credit facility	(29,000)	2,099	-	(202)	(27,103)
Corporate bonds	(255,449)	17,794	(2,229)	-	(239,884)
Finance lease liabilities	(309)	199	-	-	(110)
Total net debt	(235,536)	5,097	(2,229)	109	(232,559)

12. Related party transactions

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.

During the 52 week period ended 28 April 2019, the Company incurred interest charges of £nil (2018: £11,722,000) on balances owed to Jewel UK Topco Limited. The outstanding balance was repaid during the period ended 29 April 2018 with a cash payment of £75,000,000 and the remaining balance settled via the issue of one additional share. The outstanding balance as at 28 April 2019 was £nil (2018: £nil).

During the 52 week period ended 28 April 2019, the Group made the strategic decision, as part of a group reconstruction, to carve-out the Online and servicing operating segment from the Group and pass it to a related undertaking outside of the Group. The Group passed up £10,000,000 of the investment as a dividend in specie to Jewel Topco Limited with the remaining £11,012,000 being settled in the form of a loan note. The loan note incurs interest at a rate of 8.75% per annum. The balance of the loan note and associated accrued interest as at 28 April 2019 was £11,420,000 (2018: £nil). This balance was waived post period end (refer to note 16).

During the period ended 28 April 2019, the Group received corporation tax group relief of £77,000 (2018: £2,211,000 surrendered) relating to the tax position of the Jewel UK Topco Limited group.

13. Business combinations

On 23 October 2017, the Group acquired 100% of the share capital of Mayors Jewelers, Inc, a group of companies operating as a high street jeweller through 17 retail stores outlets in Florida and Georgia in the United States, for £80,759,000. The business contributed revenue of £81,048,000 and net profit of £3,907,000 to the Group from the date of acquisition to 29 April 2018. The goodwill arising on the

acquisition is attributable to Mayors Jewelers' strong position in this market in addition to employees acquired as part of the business combination and access to new locations.

The following table summarises the consideration paid for Mayors Jewelers and the fair value of assets acquired and liabilities assumed at the acquisition date for each of the applicable periods:

Consideration at 23 October 2017	£'000
Initial cash consideration	80,759
Total consideration (100% holding)	80,759

Recognised values on acquisition
Property, plant and equipment	6,703
Intangible assets	11,086
Inventories	50,749
Trade and other receivables	11,369
Cash and cash equivalents	1,691
Deferred tax assets	10,078
Borrowings	(200)
Provisions for other liabilities and charges	(1,223)
Trade and other payables	(20,973)
Total identifiable net assets	69,280

Goodwill	11,479
Total assets acquired	80,759

Fair value adjustments were made to uplift lease creditors to reflect market value of lease arrangements and to adjust intangible assets to reflect the value of previously unrecognised brand. The brand intangible assets will be amortised over a period of 10 years. The deferred tax assets acquired included an asset of £7,777,000 relating to losses brought forward to be utilised.

Acquisition-related costs of £1,447,000 have been charged to Exceptional expenses in the Consolidated Income Statement for the period ended 29 April 2018.

On 11 December 2017 the Group acquired the trade and assets of certain retail stores within the Wynn Hotel, Las Vegas. The fair value of consideration paid totalled £14,410,000 which was settled by the issue of two promissory notes which have a fair value of £8,572,000 and £5,838,000 to be repaid over 1 and 5 years respectively. The business contributed revenue of £8,945,000 and net profit of £1,442,000 to the group for the period from the date of acquisition to 29 April 2018. The goodwill arising on the acquisition is attributable to the prime location and trained employees acquired as part of the business combination.

13. Business combinations (continued)

The following table summarises the consideration paid for the trade and assets of Wynn Hotel and the fair value of assets and liabilities acquired at the acquisition date for each of the applicable periods:

Consideration at 11 Dec 2017	£'000
Consideration satisfied via the issue of promissory notes	14,410
Total consideration (100% holding)	14,410

Recognised values on acquisition
Property, plant and equipment	456
Intangible assets	2,557
Inventories	8,571
Total identifiable net assets	11,584

Goodwill	2,826
Total assets acquired	14,410

Fair value adjustments were made to adjust intangible assets to reflect the value of previously unrecognised agency agreements. The intangible asset will be amortised over a period of 10 years.

There were immaterial acquisition-related costs in relation to the Wynn Hotel acquisition charged in the Consolidated Income Statement for the period ended 29 April 2018.

Had Mayors Jewelers been consolidated from 1 May 2017, the Consolidated Income Statement for the period would show:

	Mayors Jewelers	Consolidated results for the period	Proforma results
	1 May 2017 to 22 October 2017	52 week period ended 29 April 2018	52 week period ended 29 April 2018
	£'000	£'000	£'000
Revenue	61,618	686,897	748,515
(Loss)/profit for the period	(16)	399	383

Results for the Wynn Hotel acquisition have been excluded from these proforma results because it would be impracticable to include as these stores were not separately accounted for under their previous ownership. However, the Directors do not consider that these have a material effect on the Group results as a whole.

14. Discontinued operations

On 3 December 2018, the Online and servicing segment was carved-out of the Group and passed to a related undertaking outside of the Group. A third party, independent valuation of these businesses was obtained immediately prior to disposal, totalling £21,012,000 for the combined businesses. As this transfer was entirely intra-group, no cash proceeds were generated.

The impact upon the Balance Sheet and Statement of Cash Flows for the historic periods have been presented below:

Cash flows (used in)/from discontinued operations

	52 week period ended 28 April 2019	52 week period ended 29 April 2018
	£'000	£'000
Net cash from operating activities	73	2,571
Net cash used in investing activities	(516)	(652)
Net cash (used in)/from discontinued operations	(443)	1,919

Effect of the disposals on individual assets and liabilities

	As at date of carve out (3 December 2018)	29 April 2018
	£'000	£'000
Goodwill	2,950	9,872
Intangible assets	2,376	13,782
Property, plant and equipment	1,087	1,023
Inventories	16,704	12,839
Trade and other receivables	780	1,059
Cash and cash equivalents	5,659	5,090
Trade and other payables	(8,544)	(5,455)
Deferred tax liabilities	-	(2,257)
Net identifiable assets and liabilities	21,012	35,953

15. Financial instruments

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Trade and other receivables, trade and other payables, cash and cash equivalents, revolving credit facility, finance lease liability	The fair value approximates the carrying amount because of the short maturity of these investments.
Derivative financial instruments	The fair value is determined as the net present value of cash flows using observable market rates at the reporting date.

	28 April 2019		29 April 2018
	Carrying amount	Fair value	Carrying amount	Fair value
	£'000	£'000	£'000	£'000
Corporate bonds	239,884	254,940	255,449	264,285

Hierarchy level	Inputs	Financial instruments
Level 1	Quoted markets in active markets for identical assets or liabilities	Corporate bonds (disclosure)
Level 2	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)	Derivative financial instruments
Level 3	Inputs for the asset or liability that are not based on observable market data (unobservable market data)	Not applicable