Good morning, everyone. Welcome, and thank you for joining our webcast and call on the results of the Watches of Switzerland Group for the half year to October 2022. Our agenda for the presentation is as follows: I will present an overview of the group's performance and results. Philippa Jackson, our new Executive Director of HR, will then provide an update on the progress of the Xenia Client Experience Program, which is helping further differentiate our proposition with clients and supporting our growth plans. Kesah Trowell, Head of ESG, will run through our ESG program and the areas we are focusing on within our business to ensure we make a positive difference. Ruth Benford, Executive Director of Marketing, will present an update on the status and activities of the Watches of Switzerland Group Foundation.
Craig Bolton, President of UK and Europe, will then take you through our UK and Europe showroom projects. David Hurley, President of North America and Deputy CEO, will provide a similar update on our US showroom projects. Bill Floydd, our CFO, will then present the financials. It will be back to me for a summary, following which we will open the lines for Q&A. We are very pleased with our strong first half performance with the ongoing market share gains in both the UK and the US. Our UK and US businesses achieved strong growth, resulting in group revenue growth of 31% at reported rates and 23% at constant currency. EBIT GBP 87 million was +29%, achieving an EBIT margin of 11.3%, which was down 20 bips versus last year.
That was due to the GBP 5 million prior year benefit on the business rates holiday. ROCE, 27.6%, up 450 basis points versus the prior year comparison. In terms of showroom openings and refurbishments, we were extremely busy, opening 20 showrooms in the half, with Battersea being a standout project. We have successfully launched our business in Europe. We're trading in line with expectations. We continue to attract and retain the best talent in the industry. We now have over 2,800 colleagues who are doing a fantastic job with an engagement score from those colleagues of 86%.
As at the end of the half year, our group has contributed cumulatively now GBP 4.5 million to the Watches of Switzerland Group Foundation. The trustees of the foundation have now donated GBP 2.7 million to our chosen charity partners. The holiday season is now fully underway with Q3 trading in line with expectations. In this chart, we show our calculated total addressable market, based on the estimated retail equivalent of Swiss watch export values. The market value, as you can see in the graph on the right, clearly reduces in 2020 due to the impact of COVID watch factory closures in Switzerland, and then recovers in 2021, and on an LTM basis is now approximately 10% ahead of pre-COVID 2019.
Of the TAM of GBP 23 billion, the largest market is Europe, 23%, then US 17%, and the UK 7%, all markets that we serve. Our unique model is proven and driving sales and market share gains in all target markets. The luxury concierge team in the UK has now grown to 35, and the team are delivering great client service and super high conversion. We are growing our luxury concierge team in Fort Lauderdale to support our growing US online business. CRM and focused client reach out is our key marketing strategy. We continue to upgrade our leading online businesses. SAP is at the core of our ERP and POS systems. We are driving awareness and direct store and online traffic with impactful marketing, and our Xenia program has taken client experience to another level.
Looking at the sales trends in more detail, the rapid growth of our U.S. business means that the U.S. sales in the half are now 41% of the Group sales compared to last year of 29% and FY 2019 total year of 24%, underlying the continued momentum we are delivering in what is a growing market. Our sales in the half were 96% to domestic clients in the U.K. and U.S. compared to 67% in fiscal year 2019, which, coupled with our track record of strong sales growth, underscores the strength and resilience of our category as the supply-demand dynamics meant that we were able to successfully shift our client base towards greater domestic sales as tourism dropped off during the pandemic.
Luxury watches represented 87% of sales in the half. Our top eight luxury watch brands represented 78% of sales, underlying the diversified portfolio of world-class luxury brands we retail. I'll now hand over to Philippa.
Thank you, Brian. Good morning. I'm Philippa Jackson, Executive Director, HR. I would like to update you on our elevated client experience program, Xenia, which we have launched across all of our showrooms. Exceptional client experience through welcoming and expert service is at the heart of everything that we do and is one of the things that sets us apart. 12 months ago, we made the decision to become involved with the Ritz-Carlton to establish our benchmark for luxury service. Looking back, this was a pivotal moment in our decision-making to take the benefits of five-star hospitality and to bring them to showroom level. What better partner than the Ritz-Carlton, who bring the gold standard of hospitality, as well as awards and accolades from well-respected institutions such as J.D. Power.
We work closely with Antonia Hock, who is universally recognized as a worldwide expert in luxury, and it's worth noting that none other than Steve Jobs chose the Ritz-Carlton to partner with to design client experience in Apple stores. From there, we launched our Xenia program through impressive and orchestrated global events and conferences, which many of our colleagues participated in. This set the bar high early and effectively brought to life our vision. We created great training programs and embedded the Xenia standards in our everyday practices. Excellence has become our day job, and we are seeing the benefit of this in our results as we measure what is happening in our showrooms through our KPIs. Let's look at these results in more detail. Our client consultation score has shot up from 65%-95%.
The first impression metric has moved from 71 to 94. If we look more closely at our mystery shop scores, our wow pillar is at 82%. Walk-in fact-finding and welcome is now at 93%. Finally, a metric which confirms the dedication of our colleagues is our expertise, control, and passion, and this is now being delivered at up to 95% of occasions. There is a lot to be proud of in these scores, but we are not complacent or standing still. We have plans to further deepen Xenia as we continue to drive excellence and consistency across our group. I will now hand you over to Kesah.
Thanks, Philippa. First of all, I'd like to introduce myself. I'm Kesah Trowell, Head of ESG. I'm going to give you a brief update about our recent ESG initiatives. Sustainability is at the core of our corporate strategy and brought to life through our purpose to wow clients while caring for our colleagues, our communities, and our planet. Our priorities are to collaborate with stakeholders to ensure the highest level of environmental stewardship across all of our activities, to minimize our greenhouse gas and waste footprint, and to embed circularity into our business model and celebrate it in our product range. 2022 has been a foundation year, as we disclosed our full value chain emissions for the first time.
We set near-term emissions reduction targets in line with what climate science says is necessary to limit global warming to 1.5 degrees, we've submitted them to the SBTI for validation. We continue to develop our climate transition plans and implement carbon reduction initiatives, we're monitoring our progress through participation in external benchmarking and indices, including reporting through the CDP questionnaire on climate change for the first time. Well-made mechanical timepieces can be passed down for generations, traded in, or resold. Most can be repaired indefinitely, many materials in the manufacturing process are recyclable. Yet, the luxury watch industry continues to innovate with a focus on responsible sourcing, circular design, production, and packaging.
As well as actively promoting eco-friendly and socially responsible advancements, we're introducing exciting new brands, such as ID, a watch manufacturer with a production chain based entirely on sustainable development and the integration of materials with a lower carbon footprint. This includes groundbreaking biodegradable packaging from Notpla, a winner of this year's Earthshot Prize. We continue to see strong growth in the sale of pre-owned watches and are increasing our repairs and servicing capacity. This includes a new 6,000-sq ft repairs and services center in Leicester, which is due to open in April 2023. This project alone will allow us to more than double the number of highly skilled and accredited watchmakers over the next two to three years, creating work opportunities and supporting the local economy while helping us to keep more watches at their highest utilization and value for as long as possible.
Supplier engagement is fundamental to understanding the impact of the products we sell and the services we use, as well as strengthening our resilience and achieving our sustainability goals. We are updating our supplier standards, leveraging the global supply chain management, EcoVadis. We've entered into a long-term partnership with the Slave-Free Alliance to raise awareness of exploitation and prevent risks in relation to human rights from occurring in our operation and supply chain. We remain absolutely committed to continuous improvement and transparency. The steady progress we're making right across ESG as we strive for best practice is reflected in our most recent rating agency scores, such as ISS, who last week gave us the highest available quality score for environmental disclosure. We welcome our recent inclusion in the MSCI index. With that, I'm now gonna hand over to Ruth Benford.
Thanks, Kesah Trowell. I am Ruth Benford, executive marketing director for the Watches of Switzerland Group and also trustee for the Watches of Switzerland Group Foundation. I'm pleased to say, as at the end of half one, the company has made cumulative donations of GBP 4.5 million to the foundation. Out of that, we have currently allocated GBP 2.7 million to our charitable causes, which focuses on supporting those in need in the communities where we work in both the U.K. and the U.S. We have a fantastic board of trustees who all work hard to support the foundation, including David Gandy, John Hannah, Terence Parris, Mary Portas, and Jonathan Joseph, as well as both Brian Duffy and myself in the company. In the U.S., we also have great support from our colleagues Sherry Ingold and Lori Nelson.
We are pleased to consider some of our partnership with charities to be long-term strategic partnerships. I wanted to highlight some of those today. We have developed partnerships with five food banks, including the support of a mobile pantry project in Newcastle, the creation of a regional distribution center in Leicester, and the relocation of the Euston Foodbank. The foundation also supports six city center hubs. In total, we have donated GBP 915,000 to support food banks in the U.K. We have also donated $375,000 to support food banks in the U.S., including Feeding South Florida and Las Vegas and New York food banks. The Fuel Bank Foundation is another one of our strategic partners. To date, we have donated GBP 500,000 to provide relief from crisis fuel poverty for those in need.
We also work closely with The Prince's Trust. We have donated GBP 400,000 through the foundation. In the U.K., we have donated monies towards core education programs. In the U.S., we are supporting their Enterprise Challenge program, a program for young people which develops and encourages their entrepreneurial spirit. Another U.S. strategic partner is Habitat for Humanity, whose mission is to build strength, stability, and self-reliance through shelter. We have donated $294,000 to buy materials to support the building of houses, with the remainder going to support housing affected by recent hurricanes. Our final strategic partner is Crisis, who we have made a GBP 300,000 donation to. Last December, we supported their Christmas campaign. This year we have supported the funding of clinical psychologists to help people on their journey out of homelessness.
In terms of other charitable support, through the Watches of Switzerland Group, we were also pleased to be the headline sponsors of The Prince's Trust Palace to Palace bike ride, and we raised GBP 100,000 with 100 colleagues and brand partners riding. Our colleagues are also so keen to give back to our communities. In total, our colleagues have given over 300 hours in volunteering. Overall, we believe that as a business becomes successful, it has a responsibility to make sure it gives back to those in need, and we are pleased and proud of the work we have achieved through the Foundation to date. I will now hand you over to Craig Bolton.
Many thanks, Ruth. Good morning, everyone. My name is Craig Bolton. I am the president for the UK and Europe, I would like to update you on the significant showroom development program we have been executing here in the UK and also in Europe. Half one in fiscal year 2023 has been a busy period for showroom development, both new developments and refurbishments, having opened 14 new showrooms and refurbished a total of six within the first six months. It has also been a busy period for us in developing a pipeline of major projects for FY 2024 and beyond. The most significant development during half one was our opening in the iconic Battersea Power Station. The development has been years in completion and serves as a great shopping destination, coupled with amazing food and beverage in a fantastic historical setting.
We've opened in the mall with a flagship Watches of Switzerland showroom anchored by Rolex and Cartier, plus four monobrand boutiques with our brand partners OMEGA, Breitling, TUDOR, and TAG Heuer, all performing in line with our expectations. We have continued the rollout of our Goldsmiths luxury design, recently completing our most significant development to date in Meadowhall Shopping Center, Sheffield. The images here show the extent of the transformation from what was our previous design to the new concept. The new showroom is anchored by a large Rolex-branded room, along with large branded areas for Cartier, IWC, Hublot, and Panerai. This development also allowed us to open new monobrand boutiques for OMEGA and Breitling within the same mall. The new Goldsmiths concept is transforming how our clients experience our brand and products, which is supporting our revenue growth.
We have continued the rollout into half two with Brent Cross and Cribbs Causeway opening in November. We will continue with further refurbishments in the balance of fiscal year 2023 and fiscal year 2024. The expansion of our U.K. monobrand boutique division continued as well. In half one, we opened nine new boutiques, our latest being two new boutiques in Canary Wharf and our first Longines boutique in the U.K. opened in Glasgow late November. As previously announced, we have signed the lease and progressed the design work for our new Rolex boutique on Old Bond Street. This will be a significant development for fiscal year 2024, with a major focus on delivering a world-class retail client experience alongside delivering the very best in hospitality. In Europe, half 1 saw us open four new monobrand boutiques.
In Copenhagen, we opened boutiques with Omega and Breitling, and in Stockholm, we opened two boutiques with Breitling, one on the High Street and one in the Mall of Scandinavia. Most recently, on the 2nd of December, we opened our first Omega monobrand boutique in the city of Stockholm, and have recently signed a lease to open a new TAG Heuer boutique in the Mall of Scandinavia in 2023. I'm also pleased to announce our intention to enter the German market in fiscal year 2024. We have built great teams in Copenhagen and Stockholm, and all boutiques are performing in line with expectations, and we are very pleased with our entry into these markets. The dynamics within the markets have been interesting too. We are finding real brand enthusiasts in the market with a high propensity to become collectors.
This is mirrored in the average selling price, where to date it is some way ahead of our main markets in the U.K. and the U.S. The client feedback on our showrooms, service, team, and product selection has been extremely positive. I look forward to updating you further as we progress our expansion. Now I would like to hand over to my colleague, David Hurley, in the U.S. Thank you.
Thanks, Craig, good morning, everybody. I'm David Hurley, President of our North America business and Deputy CEO of The Watches of Switzerland Group. We opened our expanded Mayors showroom in Boca Raton at the end of FY22. Anchored by Rolex, we also feature shop in shops for Hublot, OMEGA, Ulysse Nardin, Grand Seiko, and IWC. In Q2 this year, opposite that showroom, we also opened up boutiques for Breitling and TAG Heuer. We've now renovated eight of our Mayors showrooms, with a further six to be renovated by 2025. Next up will be Dadeland. Our American Dream showroom is on track to open end of Q4, adjacent to a new Gucci boutique and opposite Hermès. We're also delighted to be announcing today our third multi-brand showroom in New York at One Vanderbilt.
Adjacent to the Grand Central Terminal, where over 750,000 people travel through every day, this 93-floor building is anchored at the top by The Summit experience, which is already proving to be a must-visit location for tourists visiting New York. The traffic to this showroom will be further boosted by the Long Island Rail Road Grand Central Hub, scheduled to open later this month. One Vanderbilt will be anchored by Cartier and OMEGA, and we're planning to open this showroom in Q3 of next year. Lastly, we were delighted to host an exhibition of the GPHG Award winners, commonly known as the Watch Oscars, at the start of December in our SoHo flagship. This video shows a little bit of what we did to promote the exhibition.
Thank you, David. Good morning, everyone. I am Bill Floydd, CFO for the group, and I will now take you through the financials in what has been another strong period for the group. Starting with the financial KPIs, revenue growth for the half was 31% on a reported basis and 23% on a constant currency basis. Across both geographies, growth was broad-based across the watch brands. In the U.S., the team delivered 60% growth on a constant currency basis, and excluding acquisitions, it was 44%. In the U.K., revenue growth was 8%. We are confident that we're continuing to take market share in both regions. Adjusted EBIT grew by 29% to GBP 87 million, with a combination of strong sales and continued focus on the cost base, both contributing to the growth.
Margin was down by 20 basis points because we lapped a year that had benefited from GBP 5 million of business rates relief in the UK. That headwind to the year-on-year comparatives has now annualized. I'm very pleased with the return on capital employed performance, which increased from 23.1% to 27.6% as we continue to deliver strong payback from our capital investment program. I'll now take you through some of the other highlights on the income statement. This is presented on a pre-IFRS 16 basis and excludes exceptional items. The reconciliations to the statutory numbers are included in the RNS. Net margin for the half was in line with last year, reflecting a stable product mix. The 50 basis point reduction in adjusted EBITDA margin reflects the UK business rates relief in FY 2022.
On a consistent basis, FY 2022 comparative would have been 13.3%. Financing costs increased by half a million pounds, reflecting the increase in interest rates during the year to date. The effective tax rate was 21.6%, exceeding the standard U.K. rate due to the mix of profitability coming from the U.S. In the full year, I expect the effective tax rate to be around 21.5%-22% as profitability becomes more weighted to the U.S. We will also have the impact of one month of the U.K. corporation tax rate at 25%, so our blended U.K. corporation tax rate for the year is 19.5%. Adjusted EPS increased to 27.8 pence, growth of 28%.
Moving to the balance sheet, which is presented here on an IFRS 16 basis, the key items of note are the increase in goodwill and intangibles driven by the acquisition of the New Jersey store, the increase in PPE going from our ongoing showroom investment program, and the increase in right of use assets and lease liabilities due to the expansion of the showroom network. Inventory increased by 25% to GBP 384 million. I will outline the key changes on the next slide. Net debt increased from GBP 14 million at year-end to GBP 26 million at the end of the half. I'll take you through the key points there when we get to the cash flow. I've set out for you here the key changes in the inventory profile since the year-end.
The impact of the New Jersey acquisition was 2%, and product for new showrooms was 4%. On the underlying business across watches, jewelry, and pre-owned, in a business that has grown 23% on a constant currency basis, we have increased inventory levels by 14% ahead of the holiday period. We continue to believe that better ranging and product availability will help to drive sales growth, and we have seen better supply on many brands than we did last year. On many brands, we would hold higher inventory if it were available. It is also important to remember that there is no obsolescence risk in inventory and very low cost of storage. The last point to note here is the impact of currency. On cash flow, adjusted EBITDA was GBP 104 million.
The working capital outflow of GBP 27 million represents the inventory build less than associated offset in trade payables. The increase in tax payments is partially a timing impact, as the scale of the U.S. business now requires us to make payments on account as we go through the year, and also reflects the fact that we have now exhausted our U.S. tax losses. I'm expecting full year free cash flow conversion to be in line with last year's conversion of 69%. We continue to invest heavily in the showroom expansion and refurbishment program, with multiple new showrooms delivered across all regions, including the expansion into Europe, with five boutiques now open in Scandinavia. The corporate office relocation remains on track, with the likely move date around the end of the financial year. The M&A spend on the New Jersey showroom was GBP 21 million.
The purchase of own shares to satisfy expecting vesting of LTIP grants for all schemes to FY 26, and therefore the scale of this outflow is substantially one-off in nature, and I would expect a much more modest sum annually going forward. Net debt increased GBP 12 million from year-end, with favorable movements in foreign exchange of GBP 3 million and includes the GBP 18 million additional borrowing during the period. Today, we are reiterating the updated guidance that we gave last month when we released our Q2 trading update. Guidance is based on the visibility that we have for availability of key brands, reflects confirmed showroom openings, excludes M&A, and is based on an H2 average rate of $1.20 to the pound.
We are maintaining the guidance of EBITDA margin expansion of 0 to 50 basis points, with the second half not having the headwind of the UK business rates holiday, but with some inflationary pressure in the cost base, notably people costs and IT, as we continue to invest in the group infrastructure. We expect the tax rate to increase slightly because of the increasing geographic mix towards the U.S. The CapEx range of GBP 70 million-GBP 80 million includes investment in a new corporate HQ in Leicester, having significantly outgrown the existing facility, with key highlights of the showroom investment program being five stores in the Battersea development, American Dream, the Goldsmiths luxury refurbishments, and our expansion into Europe. Trading in the first six weeks of Q3 is in line with our expectations and underpins our guidance for the full year.
We are now 18 months into the long-range plan and have continued to deliver ahead of our targets. Growth in the first half of FY23 at 31% is on top of the 40% delivered in FY22. We will remain confident that our category is strongly differentiated through the innovation being brought by our brand partners, the scale of our existing business, our expansion into Europe, our multi-channel approach, the showroom development plan in both the U.S. and the U.K., and the M&A pipeline all giving us confidence that we will be able to deliver the plan.
As we enter 2023, we have commenced our process to refresh and update the plan for FY 26 and extend the plan period by two years to FY 2028. With that, I'll hand you back to Brian for his closing remarks.
Thank you, Bill, thank you to all my colleagues who presented today. To summarize the Watches of Switzerland model continues to drive incremental sales and market share gains. We continue with our investment-led growth strategies, UK, US, Europe, with a strong pipeline of projects. The Xenia program is positively impacting on client relations and sales conversions. We are attracting and retaining colleagues. The Watches of Switzerland Group Foundation is fully engaged in working well with chosen partners. We are progressing on our ESG commitment and programs. We now have 188 well-invested showrooms across the UK, US, and now Europe, with over 2,800 colleagues. Current trading is in line with expectations, we remain confident in our guidance. We will now move to Q&A with Bill and myself.
Thank you. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. Please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. If you wish to cancel your request, just press star two. Again, it is star one to ask a question. Our first question comes from Karina Nugent of Goldman Sachs. Please go ahead.
Thank you very much for taking my questions. My first one is on the current trading environment. You've been very clear that Q3 trading to date has been in line with your expectations. I remember you saying back at the full year results that, you know, the guidance that you've put out embeds a degree of caution, particularly as you go into the second half of the fiscal year. Does that mean that more cautious scenario that you were thinking about is actually playing out? Are you seeing any changes in consumer behavior and any differences between kind of high-end versus low-end spending, particularly within the core watch category? My second question is more longer-term in nature.
You know, we've had recent news though on Rolex and their work in the secondary market and authentication. Can you talk about how you think that might impact WatchHouse going forward? I see you're opening a repair and servicing center next year. How big do you think secondhand could be as a part of your business over the medium to long term? Thank you.
Thanks for your question. Yeah, yes, our trading is in line with the expectations that we had, and therefore implicitly in that is the fact that we are experiencing, you know, market conditions less bullish than they were in the first half. Pretty much as we predicted, overall. In terms of you said, you know, changing consumer behavior, high-end, low-end, within the core watch category, the answer is not really. There's no sort of discernible trend, consumer trend within watches. The jewelry category, which is obviously smaller for us, it's, you know, less than 8% of our business. It is a bigger percentage in this quarter, obviously, with Christmas, but still, relatively modest.
That's, you know, got more, you know, impact on traffic and so on, and consumer sentiment. We're maybe seeing an impact so far in Christmas in that category. Even taking that into account and what we're experiencing with everything else that we're doing. There's other things, you know, the amount of traffic in London and New York is up versus what it was before. Airport business is up. There's a mixed list of things that are going on. When we put it all together, it leaves us to say that, you know, that we're okay for the guidance that we've issued previously.
On your question on certified product or pre-owned product, we think it's a very, very positive move for Rolex, overall for the industry. We're very positive about it. We've been interacting with Rolex for the best part of the last year on this subject. We are looking to get active in their, the program as quickly as we practically can. We're working through with Rolex, their quantity of products that we have or that we regularly, you know, bring in. So we're very positive about it. It will bring, I think discipline and credibility to the pre-owned category. It will mean that authorized retailers are clearly advantaged in the category because this option is only available to authorized retailers.
We can sell the product online, which, you know, wasn't the, obviously isn't the case with the new Rolex. We haven't put a value on it yet. Genuinely, we haven't. It's not that we're not saying what it is, but we are working our way through what is something new and exciting. As soon as we have figured out the full impact of it, of course we'll update you accordingly.
Thank you. We will now move to our next question from Jon Cox from Kepler. Please go ahead.
Yeah. Good morning, gents. Jon Cox, Kepler Cheuvreux here. A couple of questions for you. Just back to what my colleague was saying, you know, in terms of more recent trading. I wonder if this is more prevalent in the UK. It's interesting you rolled Europe into the UK. I know it's early doors as it were. At the moment, I guess that Europe would have added maybe a point or so to the UK. Your growth is maybe around 7% or so. I know the medium range plan is higher than that. You know, just versus the US, that looks, you know, obviously very, very robust there.
Can you sort of try and strip out the impact of M&A in the US and maybe the new store openings versus just renovations? That might just be, you know, helpful for us. That's the first question. Second, just on Europe. You're talking about the average ticket is far higher than the UK and the US, which is pretty a pretty interesting comment. I wonder if you can just elaborate on that and what it may mean in terms of payback on the openings there. As an add, can you just remind me how much you're roughly when you open a store versus a renovation, the difference in the, in the cost profile. I wonder if you can just remind me on that.
A couple of questions, one on the free cash flow. Obviously, a lot of stuff going out in terms of working capital. Just wondering what you think will happen there in the second half of the year. Will that just unwind, or will you continue to build that inventory as you've mentioned? Lastly, on the tax side, you know, you've alluded to higher U.K. taxes coming up and also obviously selling more into the U.S. Should we expect for FY 24 a tax rate maybe closer to 25%? Thanks very much.
Okay. Thanks, Jon. A lot of questions there, some of which we can, some and some we'll have to give you our best shot and overall. Europe in the half year, wasn't 1% overall. You know, the openings, we've only just recently opened in Copenhagen. We just opened OMEGA in Stockholm. We're a bit later on the openings than we originally had planned, but since the stores have been open, they've been trading in line with the expectations that we had, which were reasonably ambitious. We are trading in line and we're very pleased with the experience.
Then just jumping ahead, we are pleasantly surprised at the appetite for higher priced products in the market. Again, it's very early days. You know, Kade mentioned in his piece on the video. It's a positive surprise. It's like confirmation of our analysis of the market that there's the money and the interest there in these markets if you know, clearly give a beautiful store presentation and great client service. We hadn't predicted that the average price point would be as positive as it's so far been. Too early to say that as a result we're, you know, calling the trend any differently.
We haven't split out Europe, obviously time goes on, we eventually will. We're managing it as all part of one division, UK and Europe together. The underlying same trending you saw in UK, US. I think it's fair to say that there's definitely more gloom around in the UK overall. The US does seem to be handling this, you know, period of, you know, high inflation, and, you know, impacting the economy certainly than we've been able to do in the UK.
Given that we have responded to, you know, predicted kind of macro conditions impacting consumer sentiment, I think it is fair to say that's more of an obvious issue in the U.K. than it is in the U.S. Added to which, you know, other factors in the U.K. have been rail strikes and whatever, you know, economic. There's quite a bit of disruption overall in the U.K., all of which we've taken into account and concluded that, you know, we're okay in our guidance overall. Yeah, in terms of acquisition in the U.S., I think we disclosed so, we were 60% constant currency growth in the U.S. If we take out the acquisitions, it's 44%.
If we don't ever take out the impact of, you know, refunds and and whatever, and, you know, like model grand openings. We have a lot of activity going on. We have a lot of, you know, programs and projects. It's very, very difficult to say what would you call like for like. It's never been anything that we've focused on at all. Acquisitions, fair enough, we are reporting the number before and after acquisition, but everything else we don't report on. There's questions on cash flow and tax as well.
Yeah, John, a couple you picked up on the cash flow. On the working capital, yeah, I'm expecting that to come back in the second half of the year. We're guiding to free cash conversion around the 70% level that we achieved last year. On the tax, we're not giving guidance on future years at this point, but, you know, you're aware of the tax rates globally and can work that out. We'll be giving full year guidance for or guidance for next year as we get to the end of this financial year.
Great. Thank you.
No problem.
Well, our next question comes from Kathryn Parker from Jefferies. Please go ahead.
Good morning, Brian, Bill. Thank you for taking my questions. My first question is on the opening of your third store in New York. I wondered if you could share any more details on the timeline and possibly the size of the store, and what attracted you to this location in particular? My second question is on the confirmation on entry to Germany, in Craig's section. Are you able to share maybe what type of store you're opening? Is it a mono-brand or multi-brand? Any further details on that. Finally, I just wondered if you could give us an update on the refurbishment program in both the U.K. and the U.S. How many stores have been done and how many are still remaining? Thank you.
Thanks, Kathryn. We love this location that we're opening, and it's a brand new building, number one Vanderbilt. It's effectively connected to Grand Central Station. That's where we get three-quarters of a million people daily, effectively passing this location. This amazing new building that's been built is up to the best part of 100 stories. On the top of it, they have a tourist attraction called the Summit, where you can go. It's really very, very well done. It's obviously glass all round. You see all over the East River. You see all over Manhattan. It's fantastic. Then you can actually take a glass elevator and go another few floors up the...
if you can stomach it, overall. It's a great tourist attraction. It's hugely passing commuter traffic. You probably know all the traffic that comes in from Connecticut in particular. We love it, and we love the space that's there. It's not a huge store. It's around 3,000 square. It will be anchored, as we said, with Cartier and Omega. Other luxury watch brands have been agreed as well, and we're still working on us choosing, you know, one final brand that would occupy a key space there. It'll also have our pre-owned presentation in our watch shop. Very positive on it. We're signed up for it, which is why we wanna announce it, obviously.
Our goal would be to get it open in calendar 2023, which means it's gotta be open by October. That's our goal. You know, I don't see there being anything obvious that would slow us down on this. The space is there, the gray box. We're getting things worked on with the landlord, of course. Then we're, our brand partners are developing their furniture as well. Very positive about it. Firm statement for Watches of Switzerland and Manhattan. High visibility and we think good traffic and business as well.
Kathryn, on the refurbs, in the UK, we've already opened two in the half. We've got three more to come. There's one in Mayors, which is Dadeland coming up in the second half. In terms of your question of, when will we be done? I wouldn't think about it like that. This is kind of an ongoing program that when we've finished going around once, we'll go around again. It's really important that we keep the client experience at a really high level across the estate. I think the level of spend we're making an investment we're putting in this year, you should see it as an ongoing investment to keep the estate where it needs to be.
Thank you. We will now take Alan. Please go ahead. Kathryn, your line is still open.
Thank you. I was just going to say, I had another question on Germany. If you could give more detail on the entry to the country. Thank you.
My apologies. I did note it and then managed to ignore it, so my apologies. It's a monobrand store that we're opening up, I think, may in Berlin. You know, we've been pretty clear in saying that we're looking at Europe and particularly Northern Europe, you know, to be more specific geographically. Looking at all of the appropriate shopping environments to do our thing. And, you know, we have a lot of, you know, encouragement support from our brand partners in what we're looking at doing. We're looking multi-brand, we're looking mono-brand, we're looking for acquisition opportunities. It just so happens, and we've always said we will announce, you know, whenever we've done a deal.
Given I don't think we'd normally put a big highlight in one monobrand that's opening. Given that it is a new geography, overall a new country, we thought we would just mention it. Relatively small, but our ambitions in Northern Europe, yeah, remain very strong and positive. Our experience so far, as I mentioned, Scandinavia is very encouraging.
Great. Thanks very much.
No problem.
Our next question comes from Kate Calvert, from Investec. Please go ahead.
Good morning, everyone. Three from me, please. The first one is on the U.K. The profits are down, obviously year-on-year, and you highlighted the GBP 5 million of rates. Could you talk us through the impact of opening Europe on the numbers? I mean, is it quite small in the context of things? Also, are you expecting Europe to be loss-making on a full year basis? The second question is also slightly connected and on the U.K. The GBP 5.4 million of U.K. showroom opening costs, does this include Battersea within that? Or should we expect quite a significant amount more for Battersea opening in more the second half? My final question is back to Germany.
Could you give us an idea of how big the German monobrand opportunity is given, I think Germany is Rolex's second largest market in mainland Europe? Thanks so much.
They'll pick up the UK related ones. We have got European start-up costs in the UK and Europe disclosure. You know, we need to invest in the right level of backup to make those store openings a success. There is a bit of a headwind in there. But you know, it's not massive. In terms of the full year, I'm expecting it to be there or thereabouts on break even. We're, you know, not hung up on that in the short term. The important thing is that we build the right platform for us to grow across the medium term. In terms of Battersea showroom opening cost, that's in the first half.
There will obviously be more showroom opening costs in the second half, but that's related to the other stores we've got and Battersea is in there. You know,
Sorry, you've got some Battersea in H2?
No, no. Battersea is in H1.
It's all in H1. Okay, cool. Thanks. Sorry, Brian.
Yeah, sorry. As Joanna, we haven't. We genuinely haven't done a number. We've said to you in the long range plan that we did in summer of 2021 what our range of and ambitions were in Europe overall. We've never broken that down by country. The process we go through is, you know, we look at the market, we look at where we believe brands are underrepresented. We look at them with our property consultants and, you know, opportunities for addressing that. We get back to our brand partners and kind of one by one, we move on. I think Germany is a good market. There are some very good retailers in Germany.
Certain brands, brand partners we believe are underrepresented there overall. We are quite actively looking for, and discussing, negotiating specific opportunities around the country. Generally, we don't have a number to say, overall, but as we do projects, we'll update you accordingly.
Can I ask a question a different way? Perhaps given the logic in terms of size of population of Germany versus the U.K., would it be logical to assume that you could get a similar number to what you got in the U.K. at the moment or even more?
I think that honestly, I mean, who knows, we clearly have a huge presence here, but we've been at it for a 100 years or so, you know. There's opportunity in the U.S., like you've seen the pace and the way we've gone about executing it. There's opportunity in Europe that's some respects more complicated than the U.S. We deal with centralized organizations that cover the entire market. Of course, in Europe is a mosaic of structures and countries and whatever. What I'm delighted about, I must say, is that the way our team prepared for entering the European market. We have all of our systems and POS in Danish and Swedish and now German.
We've done a great job of recruiting and, you know, we bring teams over here for training and our teams in the UK then go over and help, you know, in the early phases and direct training within the store. I think it's all worked really, really well. I think in terms of how we execute, I feel very good. I feel good about the market opportunity that's there. You know, we've got to find the spaces, we've got to find the deals, we've got to negotiate the support with our brand partners. It all takes time and as with everything else, as we close on deals and specifics, we'll update you.
Clearly, when we do the long-range plan, we'll, as opposed to when we did it in 21, we've now got actual experience of Europe, and, we'll hopefully have more, by then. You know, we'll give you an update on the, on our ambitions then.
Super. Thanks. Have a good Christmas, everyone.
Thank you. As a reminder, to ask a question, please signal by pressing star one. We have a follow-up question from Jon Cox from Kepler. Please go ahead.
Yeah, thanks. Thanks very much. Just a bit of a question on the European expansion and, you know, you're expanding mono brand stores. They're not necessarily Rolex at the moment. You know, what happens as you go into Europe? Do you actually have to acquire dealerships or will Rolex turn around and say, "Okay, we're gonna offer you something in, you know, some city somewhere." Or will it be more you have to do M&A of dealerships in Europe to get Rolex on board to, you know, roll out the model in the way maybe you've done in the UK with a multi-brand store, you know, with the Rolex as the anchor and, you know, then start to add mono brand stores onto the side of it and stuff.
Yeah. You know, if you look at our experience in the U.S., which obviously is a blueprint for how we're then gonna approach Europe, most of the representation of Rolex has been through acquisition. New York was different. New York was completely new stores that we opened. Since then we identified an opportunity and agreed with Rolex that we'd open up a multi-brand, you know, with a major featuring on Rolex in Cincinnati. But the majority of it has come through acquisition. I think in New York we don't see opportunities obviously like we did see in Manhattan. I think it's likely that even more of the representation would be dependent upon acquisition.
Do you find that hinders, I'm just talking about the sort of organic rollout with the new stores that your strategic partners, you know, which are, you know, great brands, but maybe not quite as, you know, coveted as, you know, Rolex, Patek and AP?
Yeah. I mean, I think it definitely you've got different timings, you've got different, you know, constituent parts and the monobrand option. Also, you know, some multi-brand options as well, you know, I think we could travel. I know we could get agreement and execution quicker. Everything else takes time. You know, listen, we're working on it all, and I do think, you know, looking at our US experience is a good reference to build what you think we could do in Europe. What we said in Europe is that by fiscal year 26, it would be between 5% and 8% of the total. That included our assumptions on acquisition and monobrand and some element of e-com, and so on.
You know, I think that remains your best indicator from us at this point and we'll update you on it all early next year when we do our plan through to fiscal 28.
Just on sort of M&A generally, with the, I think in the cash flow statement, I must admit I wasn't aware of that acquisition. I just see it in the into the cash flow statement. You've done now GBP 66 million odd of the minimum GBP 150 million. Do you have much more you may do already this year, or is it gonna be more spread out, or is it gonna be more front-loaded, just compared to the original midterm plan?
Yeah, I mean, we're ahead of schedule, I think it's fair to say, and, you know, hopefully we'll remain ahead of schedule. In all these deals, they ain't over till they're over, you know, and, you know, we've gotta be patient and considerate to vendors when we clearly have to, you know, interact and with the brands as well. They all do take time. We are, to your point, ahead of that schedule at this point and, you know, we make no secret of the fact that we're active, with various potential deals at various stages of likelihood.
Great. Thanks very much.
No problem.
Thank you. There are no further questions in the phone queue. I'd like to hand the call back over to Scott Bannerman for any webcast questions. Over to you, Scott.
No, thanks for that, Sergei. We've had a few questions in from the webcast. The first question is from Melania Grippo from BNP Paribas. Good morning. You confirmed your FY 2023 guidance. Which are the risks that you face? What concerns you most? Rolex pre-owned project, are you joining the project? Can you please expand on why you expect it to be positive for the brand sales? What kind of profitability this could generate?
Melania Grippo, CPO, I've mentioned earlier, yes, that we are enthusiastic about it. We think it's great. We haven't genuinely got numbers on it yet. Obviously, we're working through some options. We still have some, you know, questions that we need answering, particularly on capacity and speed of throughput. Rolex are examining, authenticating all of the products and guaranteeing them, and that takes up, you know, obviously a flow through. We're just working out all of those logistics at this point. We think it's great and it gives a big advantage in this category to authorized retailers like us and others.
It gives, I think, a great deal of credibility, and confidence to consumers to know that they're buying a Rolex that's been certified by the company, being Rolex, being guaranteed by them, and then retailed by an authorized retailer like us. Very, very positive about it overall. You know, risks and opportunities wherever in the guidance, we're okay on supply. We will get confirmation of calendar year supply in January. Believe we're always conservative in our estimation, and our supply for the remainder of this calendar year, we're totally confident of as we've been. I think we've been appropriately conservative on our expectations for the first four months of next year. We're also confident of our ability to gain market share. We've been doing it.
We have external, you know, evidence and confirmation of our market share gain. We've continued to invest and support our businesses at every level, store investment, marketing, technology and client experience and are therefore gaining share overall. Our consumer is less affected by the cost of living aspects overall. I think the category in that sense will be less impacted. It's, you know, but it's not without risk, of course, if there was a massive downturn in consumer confidence and so on. I guess everybody would be expected. We are anticipating that consumer confidence and therefore consumer discretionary spend is gonna be negatively impacted, and we've built that into our assumptions at this point.
As I mentioned earlier, probably more UK than US, but I think certainly most markets. You know, we try and be as thoughtful on our guidance as we can and with the best part, you know, just over four months to go. We're feeling confident enough to make the statement that we're confirming our guidance.
That's great. Thank you for that, Brian. Next question is from Richard Taylor from Barclays. With the inventory increase, within inventory increase, thank you for your detailed breakdown. In addition to what you have disclosed, how much is from pre-owned watches within the inventory, and how are these watches valued? I was thinking about this against the recent decline in secondary market values and what you pay when acquiring pre-owned inventory.
Thanks, Richard. On pre-owned, that is included in the numbers, obviously. It's a relatively small component of the increase in the like-for-like inventory. I would find that the biggest inhibitor to growing the pre-owned part of the business is the availability of inventory and bringing that in. I don't have concerns around, you know, are we at risk on inventory valuations on pre-owned. We buy them at a discount. They're valued at cost in the balance sheet. And, you know, we make a decent markup on them. It's less than the overall margin, but it's still good margin. I'm very comfortable with where we sit on pre-owned inventory valuation.
I just add to that, Richard. We haven't seen any pressure on pricing or margins on pre-owned. you know, it's been a good ongoing business for the UK and US.
That's great. Thank you very much. We've no further questions, at the moment, so I'd like to pass back to Brian for any closing remarks.
Okay. Thanks, Scott. Thanks, everybody, for joining us. A big thanks to my colleagues for putting together the presentation, the video you all looked at earlier. Thanks for your questions, everybody. You've helped us get through it. There's a lot of moving parts, but we feel pretty good trading so far in this quarter and what we're experiencing Christmas. Not without its challenges, but I think we've anticipated most of them and clearly incorporated them into our thinking. Our colleagues are doing a tremendous job as they always do. This is a really hard working time for them at Christmas, but they're all on it with their usual enthusiasm and professionalism. I think they're doing a fantastic job.
To everybody that's on the call, just wishing everybody a happy Christmas and a good New Year, and we'll look forward to speaking to you again when we give our quarterly update post-January. Thanks, everyone.