Watches of Switzerland Group plc

Good morning, everyone. Thanks for joining us. Our presentation this morning will commence with me, Group CEO, Brian Duffy. I'll be taking you through our first half highlights, talking about our growth initiatives in the first half. I'll then be followed by our CFO, Anders Romberg. He'll give you more detail and colour on the numbers. Then me again to give you a bit more background on our growth pillars and where we stand. And then we'll open things up for your questions. So the top line numbers for the first half year that ended in October are sales $845 million for the half. We were up 10% in constant currency for the group, driven by a very strong performance in the US, plus 20% in US dollars. UK was decent at plus 5% when we adjust for the store closures that we had last year. All in all, a good half year in terms of sales. In terms of profits, EBIT came in 6% ahead of last year at 69 million, the currency. Our leverage is 0.6% EBITDA leverage to debt. Our free cash flow, 48 million, was 71% better than last year. Our expansionary capex, 37 million, following all of our projects that I'll be talking more about in detail as we go through. We completed our 25 million buyback, 14 million actually going through in the first half of this year. At Rocky, we were up 80 bits at 17.3. So our pillars of growth and much delivered our first half year numbers. Showroom investment, both new projects and refurbishment of our existing network. We spent 37 million in total. We completed eight projects in the half year. We've already done six projects in the start of the second half, obviously getting ahead of the holiday period. We apply disciplined hurdles in terms of payback when you look at all of these investments. And as usual, we have a strong pipeline going forward. Certified pre-own has been a really strong business for us. We're strong both in the UK and in the US. Rolex Certified Pre-Owned has become our number two brand in both the UK and the US. Knowing Rolex Certified Pre-Owned is also going well and clearly well established in this growing category. Ecom, we're delighted with the Ecom results that we've had in the half year, up 17% in constant currency. We had a good gear a year growth in the UK and then very high levels of growth in the US where we're coming from a smaller base and having invested in resources in the US, both a localised team and a conversion to Shopify platform. So very confident about e-commerce and the prospects that we have for growth. luxury branded jewelry clearly our number one focus is roberto coin in the us where we had a very strong half year at the plus 16 percent in wholesale and everything about roberto we love there's been a great response to the campaign that we've done with dakota johnson uh we'll be opening three boutiques november december and uh and january and we've launched a new website on on shopify Here in the UK, Mappan & Webb Luxury Jewellery Boutique in Manchester, St. Anne's area, we got opened successfully. In terms of acquisitions, our focus clearly in the last year has been on Roberto Coyne and Hedinki in the US, both going well, both really well positioned for growth. And of course, we continue with our discussions and opportunities on further acquisitions in the US market. Client-centric excellence, something that we've always done, the Watchers of Switzerland group. The opening of Rolex Bond Street last March really gave us the opportunity of stepping up our focus on clients. We did an extensive training with our team there that allowed us to redefine our Xenia program and our Xenia 2.0. And it's working very, very well in Bond Street. We have a net promoter score, as you can see, of 94.5%, which is very, very high. And we're now taking this program and applying it through all of our store network. Additionally, we stepped up our events program, both here in the UK and in the US, really focusing on our top clients and collectors and more about that later in the presentation.

Thank you, Brian, and good morning, everyone. I'm Anders Romberg, CFO for the group, and I'll now take you through the financials. Starting with the income statement, this is presented on a pre-IFRS 16 basis and excludes exceptional items. The reconciliation to the statutory numbers are included in the R&S. Our revenue was up 10% versus last year in constant currency, or 8% at reported rates, driven by strong U.S. performance. Net product margin for the half was 90 basis points down versus last year, reflecting adverse product mix and a reduction in brand margins due to U.S. tariffs. Our adjusted EBIT for the half was 69 million, or plus 6% compared to last year at constant currency, or 4% at reported. This gave an adjusted EBIT margin of 8.1%, down 30 basis points from last year, due to the net margin rate decline as just mentioned. This was partially offset by leveraging showroom costs and overheads. The affected tax rate was 27.5% for the half, a reduction to last year, driven by lower levels of non-tax deductible items. Our adjusted EPS was 19.6p, an increase of 8% mark. Statutory profit before tax of $61 million increased by 50% on last year, as prior year's statutory profit was impacted by non-cash impairments, with statutory basic EPS improving by 57%, or 6.9 pence per share, benefiting from the share buyback program, which completed this year. Looking at the breakdown of sales in the half, the U.S. was the biggest growth driver. U.S. retail was up 21% in constant currency, with robust demand across brands and categories, supported by the expansion of our showroom network. In the half, sales was driven by good volume growth as well as some pricing, on average about 4%. We're pleased with the performance of RobotoCoin wholesale, with sales growth of 16% in constant currency. There's been a positive market response to new products and the advertising campaign that we launched at the start of the year. UK sales grew by 2%, but was impacted by the showroom closures we made around year-end last year. Adjusting for showroom closures, UK grew at 5%, a resilient performance in a challenging market underpinned by the stability of the luxury watch segment and the success of our flagship boutiques. Across both markets, our e-com business continued to do really well and grew by 17% in cost and currency. The Rolex certified pre-owned program is doing well and is now the group's second largest brand in terms of revenue. The first half adjusted EBIT came in at 69 million or plus 6% of last year at constant currency. Adjusted EBIT margin was 8.1%, which is 30 basis points down on prior year, due to product margin rate decline, partially offset by leverage of fixed cost. The US, including RobertoCoin wholesale, is the major growth area, and on 48% of group sales, it represents 59% of adjusted EBIT. US retail had product margin contraction due to US tariffs, but this was offset by leveraging the fixed cost base. In the UK, product margin was impacted by adverse product mix with limited leverage on cost base. RobertoCoin Wholesale had an increase in marketing costs due to the production of our new advertising campaign. Product margin remains stable over the half. As shown, RobertoCoin Wholesale is quite a treaty for the group's profitability. We've delivered strong free cash flow in the period of 48 million, which was up 71% from prior year. Free cash flow conversion was 53%, and I'm expecting the free cash flow conversion for the year to come in between 65 and 70%. Adjusted EBITDA was 91 million, an improvement of 4% year-on-year. In constant currency, it was up 7%. The working capital outflow of 30 million represents the season of build of stock for the holiday season. We expect the working capital bill to unwind in the second half in line with seasonal trends. We continue to invest in the showroom expansion and refurbishment program, which drives long-term sustainable sales growth. In the first half, our expansionary capex was 37 million, and our full-year expectation is between 65 and 70 million. The final payment for the Roberto Koinink acquisition was also made in the half. and we completed our 25 million share buy back program. Our balance sheet shows continuous strength. Inventory increased to 503 million, an increase of 5% versus last year, reflecting the higher average unit cost of stock from gold prices and US tariffs. Undervining terms continues to improve. It's important to remember that there is no obsolescence risk in inventory and very low cost of storage. The reduction in payables is driven by timing of supply payments, Our net debt was 112 million at the end of the half, a reduction of 8 million from prior year. This gives the net debt to adjusted EBITDA leverage of 0.6 times, excluding leases. Just a reminder of our capital allocation policy, which we set to optimize capital deployment for the benefit of all stakeholders, focusing on long-term growth. We continue to prioritize growth in our business through investment in our showroom expansion, We expect to spend between 65 and 70 million in this fiscal year, with 37 million spent in the first half. Second list. Strategic acquisitions are a key pillar of our growth strategy. Acquisition must deliver return on investment in line with our disciplined financial criteria within an appropriate platform. We'll continue to maintain balance sheet flexibility and to be optimistic for investment in acquisitions and showroom developments. Surplus capital above and beyond the requirements for these investments will be returned to shareholders. We were pleased to complete the 25 million share buyback program in the period. The second half of the year has started well. We're trading in line with our expectations and are well-placed as we enter the holiday trading period. Today we are reiterating our full-year guidance of 6-10% revenue growth at constant currency, with an adjusted EBIT margin percentage flat to 100 basis points down on last year. As noted previously, capital expenditure is expected to be between 65 and 70 million. Our guidance reflects that FY26 is a 53-week year. It includes visibility of supply of key brands. and it reflects confirmed showrooms, refurbishments, openings, and closures, but it excludes uncommitted capital projects and acquisitions. With that, I'll hand you back to Ryan.

Thank you, Anders. Just again, the headlines of our growth drivers for our business, showroom investments, certified pre-owned, e-com, luxury branded jewelry, focus on acquisitions, and clearly a focus on our clients. in terms of showroom investment looking firstly at the second half of last fiscal year that clearly benefits this this full year the centerpiece of our program for the for the last fiscal year was obviously the opening up the flagship rolex boutique on bond street it's been a great success it's exceeding our expectation and the client feedback about it is absolutely fantastic four floors of retailing one of certified pre-owned we have a service area and then two floors of regular retailing the team are fantastic the client feedback really couldn't be any better looking at some of the other projects that we did in tampa florida we relocated to an enlarged space and it really is the best space in the malls between lv and tiffany and a wonderful presentation of Rolex and the other brand partners that we have there. Our better age store in Colorado and the ski resort of Vail, we again took the store next door, allowing us to expand the presence of everyone there, including Rolex, as you can see, beautiful Alpine design. And the bottom there, you can see Lennox in Atlanta, Atlanta, Georgia. This was previously a multi-brand space for us with a very nice Rolex shopping shop. We were so successful with Rolex that we agreed to convert the entire space to a Rolex boutique, now 3,000 feet. It's fabulous and really doing great. We love the town of Atlanta. And I'll show you later what we did with the brands that we effectively displaced in the multi-brand. Top right is Jacksonville, Florida. We had come out of Jacksonville because of the location wasn't ideal. It took us a bit of time to get back in again, but it was worth the wait, as you can see from that store top right that we opened in February. Bottom right is our first venture into Texas. We love Texas as a market and as a state. We had bought a store that didn't have Rolex or Cartier or other top brands and we now do in this wonderful execution that we have of the Watches of Switzerland that opened back in March. Looking then at the first half of fiscal year 26, we opened this beautiful house in Manchester on King Street. It's spectacular. It's a joint venture with our partners from RPA. We refurbished and expanded in Goldsmiths, Kingston. The next one along is the oldest Rolex retailer in the world in Newcastle and Blackett Street. which we refurbished and expanded the retail space in July 25, and it's spectacular. The multi-brand in Mayles in Atlanta, which we displaced with the Rolex Boutique, we effectively opened a multi-brand directly opposite, as you can see here, in August 25. Also in August, Muffin & Web Cambridge, we expanded. In September 25, Maryhill in Birmingham, again we expanded. The new luxury jewellery boutique in St Anne's opened in September, as did a relocation of a goldsmith in Peterborough. So in the second half, we've been very busy with the opening in the last week of October in Southdale, Minneapolis. Beautiful store, doing well. We relocated our store in Sarasota, Florida in November. Back here in the UK, Goldsmith Oxford, we expanded and converted in November 25. Mapping and Wet Birmingham actually opens this week, an expansion and a conversion. What I'm left also opening this week is the new multi-brand space in Terminal 5 in Heathrow, directly adjacent to where Rolex currently is. I'd mentioned already the monobrand stores for the Bertel Koi, one opening in November in Hudson Yards, New York, December, in fact, this week in Las Vegas, and then Miami will open in January. Then in my hometown of Glasgow, we are doubling the space of the Rolex boutique. Work is underway and that should open hopefully early summer 26th. And then bottom right will be the new Terminal 5 location for Rolex. Work is underway here again in terms of design and planning and our hope is to get this open also for summer of 26. It clearly is a multiple in terms of size and impact versus where we are today. So that will be spectacular. Certified Pre-Owned continues to do very, very well for our business. We're now well established in this category. We've managed margin well throughout this time and we're two years into the program. We're in all of our Rolex stores in the US. We're in 26 showrooms in the UK. And as we continue with our various projects, we will be in all stores in the UK. So a lot more to come from Rolex certified pre-owned. Ecom, we feel very good about the decisions that we've made. uh we're up 17 as a group overall um we have a new website on that we can vary all of our websites to shopify in the us watch those switzerland's up and running on shopify and river to coin up and running in shopify and the other face here will will happen in the months ahead within pre-owned we can offer a rolex certified pre-owned as you see here which clearly is an important destination for our Rolex shoppers. You can also see Cartier here which is our best-selling brand online both UK and US and then in the middle you can see a Houdinki exclusive that we made available online in the US. We've also added other brands as we've gone and there's a lot more to come from an e-com business both here in the UK and particularly in the US. We love everything about the brand. You see here some great images of Dakota Johnson, the campaign that we launched in summer and really only kicked in in the fall and holiday season that we're in now. But great response to the campaign, both from end clients and from our wholesale customers. We've been working with the teams in the U.S. about expanding our space in the Bertha coin and store, both in top department stores and in top independent stores. And that's going very well. Our designers and architects in the U.S. worked with our teams in Italy to come up with a new showroom and shop and shop designs, which look great. We've expanded the presence of Roberto Coyne in our mail stores, which I'll show you shortly. We have the new website and we're also working on opportunities of product merchandising. So a lot of growth initiatives for Roberto Coyne. This is to show you how RobertoCoin was presented on the left hand side in the Mares stores. It was a great success in Mares. It was very productive and going very well. But having now moved it to the space you can see on the right, it clearly is a huge elevation of the brand. We've actually increased productivity and we've more than doubled sales. So this is good, clearly, for our business overall, but it's also good as examples that we can now take to our wholesale partners and look to introduce shopping shops in other stores. One of our stores that we are in the process of opening, top left is Hudson Yards New York, which is open, has been open for two weeks, all going well. The right hand side is the Forum Shops in Caesars in Las Vegas. will open this week. Bottom left is Miami Design Center, which will open in January. This is the website that looks fantastic. Very, very user friendly, very easy to navigate, very easy to find your product or to find out information on the brand. Great videos both of Dakota Johnson and great videos from Roberto himself about his inspiration and background and product clearly. And there's been a fantastic response to this new website. The luxury branded jewellery boutique in St Anne's we opened in September. We had a great event in October as you can see from the image on the left. It's a fantastic location, listed building and a great response from our clients. On the left you can see how the Rolex store looks already for Christmas time and Bond Street looks really spectacular and continues to trade very well and ahead of our expectations. We've been doing wonderful events there, the highlight of which was an event with Roger Federer. He really was a fantastic ambassador of Rolex, really spending time with our clients and a great representative of the brand and our clients were thrilled to be there. You can see the scores that we're getting from our client feedback, 94.5%. promoter score and of the clients that respond to our questionnaire 98% say that we either met or exceeded their expectations. By far the majority say we actually exceeded the expectations. Other events that we've done throughout the country with Rolex and you can see they are pretty spectacular. Our clients love to be there and it really is all part of our client excellence and client centric focus that we have. Other events, we launched fairly quietly the One More Piggy House in Manchester with our partners at AB leading up to this event that we had in October. The space is so perfect for the hospitality. and events, as you can see, and a really great evening. An example here of us taking over the Aventura store with Roberto Coyne, bringing our top jewelry clients along. It was a hugely successful event, and it served sales teams or sales colleagues in the U.S. really at their best. And another event in New York, in Soho, where we launched the Porsche exclusive product. We did it with Ben Clymer, effectively hosted the evening, and we had none other than Orlando Bloom there, who's a great enthusiast both for watches and for Porsche, so a really great combination. But it was a fantastic event, and we really had the control. The number of people that were coming, huge interest in it, and a really great example of us using new partners and connections with Hedinki. So overall, we have strong momentum across the group. It was a standout performance in the US at plus 20. Our model is clearly working. Our approach to our clients, our design of stores, and our training of our grade teams. Our registration of interest lists continue to grow with high conversion overall, so no change on that. Certified pre-owned, clearly well established in line with the ambitious expectations that we had presented to the market before. E-commerce, very strong U.S. investments that we've made are clearly driving a very strong sales performance in the U.S. Great progress with RobertoCoin, a lot more to come. Great progress also with our friends at Hedinki, and we're in the process of developing some important growth initiatives with them that you'll hear more about in Fiscal 27. A guide delivery, strong delivery of our catalogue of projects with a lot more in the pipeline. We're well positioned for the holiday season. We're off to a good start with the five weeks of November now behind us and we'd be happy to reiterate our guidance. So we'll now pass over for your questions.