The Watches of Switzerland Group FY 2019

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:

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.

*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:

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:

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:

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.

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)

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:

'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:

3. Revenue (continued)

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.

(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:

6. Earnings Per Share (EPS)

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: