Earnings Call: H1 2021

Dec 17, 2020

So good morning, everyone. Thanks for joining us for the presentation of the Watchfield Switzerland Group Half Year Results for the half year to October 2020. My name is Brian Duffy. I'm the CEO of the group. And just looking at our agenda for the presentation, I'll do an overview of the group performance. I'll be followed by Craig Bolton, who will give an update on the UK performance. David Hurley will then join us from New York to give an update on the U. S. Business. And then our CFO, Anders Ronberg, will review the financial results in some more detail and also a review of our guidance for the year. After our presentation, we'll be open to take any questions that you may have. If you look at the half year overall, we're very happy with what we've achieved. Our strategies are clearly working, and we see no reason to change them at all. Our performance overall for the half year was a reduction in sales year on year of 2.6 percent. That was minus 7.4% in the UK and a positive 11% in the U. S. And that came from a strong second quarter, and you will recall that we updated the market after 10 weeks of the second quarter when we were traveling at plus 20% year on year. We actually finished at plus 21.5 percent year on year in constant currency. So the last 3 weeks were even stronger, particularly in the UK, and that plus 21.5 percent is achieved by over 14% growth in the UK and over 42% growth in the U. S. So very, very strong Q2 for us overall. We clearly have been impacted by the pandemic. We've been dealing with lockdowns. U. K. And U. S, we've been dealing with hugely subdued international business of tourists and at the airports. And of course, we've been dealing with much reduced traffic into our shopping centers. And we've achieved these numbers despite all these headwinds. Overall, we estimate that we lost something like £80,000,000 of revenue directly as a result of all that we've had to contend with because of COVID-nineteen. We achieved our good results. There are 2 main areas of focus. 1 has been our activity on digital. Overall. The other has just been the great spirit and performance of our teams. In terms of digital activity, big spend in digital marketing, a lot of social media support, CRM systems have been hugely valuable. And the most recent lockdown in the UK, the click and collect facilities have worked really well, remote selling, appointment taking, a whole variety of things that we've been doing that we were able to do because of the technology that we've invested in, the resources and Overall, it Overall, it's slightly flattered by the timing of month end. Anders, again, we'll talk to in his section. But whatever way you look at it, it was a very positive period for cash generation and for cash management overall. Very, very proud of the performance of our teams. They really are inspirational, both in our support centers and out there in the stores. We were very proud to be able to fulfill our commitment of looking after our teams in terms of maintaining full employment, maintaining full salary, and our teams certainly have repaid that favor with a great spirit that they've shown and performance that they've delivered overall. So happy with the first half, and we think we're very, very well positioned for future growth. On this slide, we're showing you the year on year sales performance, the year on year profit performance. As mentioned in the previous slide, our sales year on year were down 2.6%. We delivered total sales in the first half year of £414,000,000 In terms of profits, our adjusted EBIT for the first half is a total of £41,500,000 Therefore, in terms of profitability, we've actually increased our profitability from 7.3% to 10%. Some of the reasons for that are temporary one off relating to this year and others are ongoing cost reductions that we've managed to negotiate, particularly in areas of rent and occupancy costs. However, overall, looking at what was a strong quarter 2, what has been for the 1st 7 weeks a strong quarter 3, where we're delivering year on year growth in double digit. Again, Anders will talk through the detail. And looking at profitability we achieved in the first half all leads us to review our guidance for the year and to take us both our sales up and our profitability up. And again, Anders will go through the detail. Looking at where our sales came from, and clearly, the U. S. Becomes a bigger and bigger proportion of our total sales. And we see the U. S. In the first half now representing 29% of our total. We also want to call out the great performance that we've had in online, our online business, which is all based in the UK at this point, 65% up in prior year and our online share of our total group sales increasing from 4.3% to 7.3%. Looking at it from a product standpoint, then clearly, the penetration of watches continues to increase, now representing 87.4% of our total sales. The most remarkable thing to look at here on this chart is the split of clientele. If we look at last year's first half, we can see that over 33% of our sales came from international business, be that tourist business, landside or airport travel business. This year, this year's first half, it was around 7.5%. So a huge deficit that we had to overcome, which we did by pivoting our business towards our domestic clientele, both in the U. S. And particularly in the U. K, where we can see that domestic client sales from the U. K. Last year making up 40% of our sales, this year making up 63.6% of our sales. So a huge pivot and a tremendous job done by our teams. I mentioned digital, and for an old fashioned marketeer like me, these numbers are just astonishing to look at what you can achieve in terms of getting messages out through the Internet these days and through various digital mechanisms. And we can see that our social media activity on Facebook and Instagram allowed us to talk to 42,000,000 people per month. That's an astonishing number. Effectively, it's 2 thirds of the population of the country here in the UK. Our digital campaign impressions and advertising that we've done and then amplified several times The Internet resulted in us talking to 1,000,000,000 people, again, just unbelievable numbers. And of those, 10,700,000 people effectively clicking through to our sites and many, many more people going to our stores. There's no question at all that our success in digital marketing has been driving a good deal of our great performance that we've done. In the U. S, our emphasis is different on marketing, where we spend our budget is different. We are new in terms of Watch Out of Switzerland at least we are new to the U. S. Market and therefore we are following our strategy of really getting our name out, really building our awareness and also building our image. So a great deal of our budget and activity goes behind events and collaborations such as you can see here. I did ask that David will talk about that we had with $0.50 And amazingly, when you look at the PR value of everything that we've done, again, we're looking at 1,000,000,000 people effectively in a half year hearing about our group in one way or another in the U. S. Market overall. I'm sure there's an interest in what Brexit might mean to us. It will mean less to us than it might mean to others. First of all, we are pretty confident that there won't be any disruption in our supply chain. Most of our product comes from outside the EU from Switzerland, of course, and we check with all of our major suppliers and we're not expecting any disruption from a supply viewpoint. We have a number of EU citizens within our team of colleagues. We've been working with them for the last year, in fact, longer, to make sure that all of their administration documentation and everything is done and complete, so that they can remain in the country and we don't expect any problems from that. The hugely subdued amount of international business that we are doing today means that any exchange rate that might result from an exchange rate movement following the implementation of Brexit will mean much less to us because simply we have much less international business currently overall. We have no transactional exposure from a foreign exchange viewpoint. We buy everything for the U. K. In sterling, everything for the U. S. In terms of luxury watches, at least in dollars. So no transactional exposure overall. And finally, the proposed and the planned removal of duty free sales from the U. K. Firstly, I would say, I think it's a big mistake overall of the government. We've obviously made representations on this. I personally think it's something that once the reality as experience could well change in the future. But in the meantime, again, given the hugely subdued international business that we have, we're not expecting that the removal of the duty free sales will have a significant impact on our sales going forward. Finally, I just love this image here of our teams, and this is how they look when you get into stores, there's some amount of positivity and happiness. They love what they do. They bring great positivity to the whole experience with their clients. If there's ever been a down day and there hasn't been many that we might have had here, just spending a little time in our stores, you come out inspired and invigorated again. And how these people have looked after themselves, looked after their colleagues and pretty much looked after the company has been a true inspiration to us all. So a great deal of the thanks and appreciation of the good results we're reporting certainly should be enjoyed by this great team. And with that, I'll now pass over to Craig. So good morning. My objective in the next few minutes is to update you on the key initiatives we have here in the U. K. I will weave in the impact of COVID-nineteen and our actions to mitigate it. The top of the chart shows you how we've been impacted since March of this year. Certainly, our first half year has either been impacted by full lockdown, restricted trading or country wide lockdowns as in the most recent case. Headwinds have remained strong throughout, particularly with vastly reduced footfall and a significant reduction in tourism business in London and the airports. We remain focused on the opportunities though, in particular these four key focus areas, which I will cover now. Throughout this period, our focus remained on our people, maintaining 100% of their salaries, looking after their well-being, finding new ways to engage with them and encouraging them to stay engaged with the business, completing over 25,000 e learning modules. Our focus in parallel was to ensure we maintained a level of continuous trading. Our teams used the very best of our CRM tools to drive sales. Lockdown 1 and Lockdown 2 both benefited from our team's pre selling luxury watches. Only difference in Lockdown 2 was we had Mann Stores and our clients could use our click and collect facility to collect their watches. Our online business continued its excellent year on year growth during the first half. Sales spiking during lockdowns, but also showing significant year on year growth even when the stores reopened. We were ambitious too with our product buys, meaning we have the best availability of core bestsellers and newness in the market. Both our online business and stores were supported by our extra investment in digital marketing. We had 2 key focus areas: online focus during lockdown periods, both digital and more traditional channels, plus a full multichannel campaign during more normal trading periods. We have invested significantly more in digital marketing this year, started earlier and achieving much greater reach. Like our marketing, our customer experience was enhanced by developments in technology, by personal appointment launched in July of this year, allowing much greater flexibility for our clients to interact with our business. We now have near 40% of our business managed through this service, achieving high levels of conversion versus traditional walk in business. Customer events were largely held in stores pre COVID. We have now developed these into virtual events, proven to be a huge hit with our clients and very successful in achieving a pipeline of future sales. Most recently, this was further supported by the launch of our Luxury Watches virtual boutique, allowing clients to speak directly to our experts from online inquiries and has already shown improved conversion to sales. Investment in our estate remains a top priority for us. There's no slowdown in our capital program. If anything, we are looking for opportunities to fast track plans. As updated in quarter 1 review, we had completed these excellent MONO brand stores, all trading well ahead of expectations. Most recently, we've opened further significant stores, the most significant of which was our new flagship store opened in Broadgate, 6,000 square feet across 2 floors with a Rolex Lounge, multiple luxury watch shop in shops including Audemars Piguet and Cartier, plus a separate Amiga boutique. The 1st 2 weeks trading have been well ahead of expectations. Worcester Switzer Knightsbridge expansion and a full refit reopened on the 2nd December, including a new Rolex Lounge with visibility on Brompton Road as well as a full refit of both floors and new brands added. Our Monobrand boutiques continue to develop with the relocation and opening of our Amiga boutique and Brightland boutique in the Bluewater Mall, both fantastic expressions of the brands and trading well. Our last store opening pre Christmas will be the new Brightland Monobrand store in Cardiff opening later this month. Monobrand store development remains a key strategic objective for our group. FY 2021, we'll see our store numbers reach 26, and we believe there's opportunity to double this number again within the next 2 years, and plans are formulated now for FY22. As updated previously, following the purchase of the 4 Fraser Hart stores, we rebranded them pending full refurbishments. Early FY 2022, we have planned 3 of the 4 ex Fraser Heart stores to be fully refurbished. In the case of Mappleware Kingston, this store has also been expanded. Mappleware York is planned for expansion and relocation and will complete when a suitable location is found. All stores will benefit from full brand finishes and increase in luxury brand portfolio. Launched in FY 2022 is the elevation of the Goldsmiths brand. You can see on the screen the current luxury finish for our Rolex showrooms. To briefly show you the new design, colorways and branding on the slide, we have taken the best of what we know from the U. K. Brands in Watcher Switzerland and Macklin and Webb, but also our learnings from the rebranding of our Meyer stores in the United States. The new design will start to roll out early in FY 2022 with all Rolex stores being fully refurbished within 3 years, taking opportunities to expand footprints where possible. Our remaining luxury stores will also benefit from the new rebranding as we continue with their refurbishments. So in summary, our people are highly motivated, committed, dedicated and energized. We continue to trade very well and make market share gains. Our teams continue to deliver an excellent customer experience supported by technical advancements such as by appointment service. And we continue to elevate our estate, expanding where possible and accelerating our program of refits and new store openings. Thank you. Good morning. So our focus in the U. S. Remains consistent with the overall group. The health and safety of our colleagues and clients is a priority above all else. Our clients have been reassured by the controls we've put in place and the ability to choose how they interact, whether it's in person or virtual appointments, researching and shopping online or a combination of. And we continue to provide great customer experiences and events, some of which I'll go through today. We've maintained our CapEx program. And as part of that, we'll have opened 8 new MONO brand stores by the end of this calendar year. We began to ramp up our investment in e commerce, utilizing the overall group campaign across search, display and YouTube with the support of our brand partners. And we continue to generate significant press and PR through compelling marketing. So a few slides on some of those customer experiences and events. The Tudor Blackblade Blue was one of the most successful timepieces released this year, We held an Instagram Live on day of launch with Brian and Nick Sullivan, the editor of Esquire, to discuss their love of Tudor. We partnered with Grand Seiko and Chef Marimoto, known as The Iron Chef, with a virtual dinner for our clients, delivering fresh fish from his restaurant and then having an interactive sushi making demonstration. And we celebrated the acquisition of Analog Shift with the founder, James Lambda. We're delighted to have them as the official vintage and pre owned resource for the group. And it wasn't all virtual. We also held a series of in person events. We opened mayor's cafes adjacent to 4 of our stores and hosted our clients with about 20 days of 1 on 1 appointments. At the start of December, we offered our clients the opportunity to see the full breadth of the Patek Philippe assortment. Over 50% of the clients who attended have not purchased the Patek fleet before, and the vast majority of these clients were under 40 years old. Nobody from the U. S. Was able to go to Geneva Watch Days, so we brought them to our clients in New York. We were the only destination in the U. S. Where watch lovers could get to see all of these new releases in person. The Grand Sacred Nature of Time pop up store opened in July on Spring Street in SoHo. Originally only scheduled to last for 3 months, its performance has exceeded expectations, and we've extended it into 2021. As I said earlier, we'll have opened 8 mono brands by the end of the year in partnership with Omega, Brightline and Tag Heuer in high traffic malls such as King of Prussia and Roosevelt Field. And our e commerce launch continues with the support of our brand partners with Cartier being the latest brand to go transactional. In terms of marketing, we had a great private event with 50 Cent in our SoHo flagship, generating over 100,000,000 press and PR impressions. And for the holidays, we've worked with the Berlin based artist Olivia Steel to design bespoke neon signage for all of our U. S. Watches in Switzerland stores, creating show stopping windows and certainly something unique in the watch world. We've also announced a major new jewelry campaign for Mayors in Women's Wear Daily. All of our jewelry partners have participated and will roll out at the start of January. And we were delighted that the actress and entertainer, Taraji Henson, wore our Only at Mayer's Roberto Coin collection in 4 of her 8 looks while hosting the American Music Awards. So the U. S. Market remains fragmented, but we are generating strong momentum and remain focused on the opportunities to drive future growth. And we'll do that through continuing our refer program to new projects, replicating the success we've enjoyed in e commerce in the U. K, and we still believe there are still further opportunities for acquisitions within the U. S. Market. Thank you. So thank you, David. We're very pleased with the results of our first half. Sales in the half were impacted by significant disruption due to store closures, mainly impacting our Q1. In addition to this, traffic at the airports and tourism reduced the weight of these channels from about 33% last year to 7.4% this year. During this entire period, our ecom business has performed really very well, trading up 65% on the last year. In spite of these headwinds, we're pleased to report sales being down only 3 0.4% in the half or 2.6% in constant currency. As previously reported, our sales in the Q1 were down 27.6 percent on last year. During the Q2, sales picked up, and we closed at plus 19.8% versus prior year or 21.5% in constant currency. Our top line performance was driven by strong performance in luxury watches, while luxury jewelry has held up better than we had planned. Our product margin was down in the half because of higher penetration of luxury watches and mix within this segment. Continued good leverage on store costs, which came in at 17.4% on sales versus last year's 21.7 percent. Shifting sales from turnover based locations like the air site to fixed rent locations in the U. K. As well as the U. S. Improved productivity has increased the leverage. We also benefit from the rates holiday in the U. K. And the furlough support. Overheads were well controlled, but up 2.3% on last year. Our adjusted EBITDA came in at CHF 52,200,000 versus CHF41,200,000 last year or an improvement of 26.5 percent, and margin improved to 12.6% from last year's 9.6%, so excellent. However, we've estimated that half year revenues were adversely impacted by the disruptions experienced by about SEK 80,000,000, which would have put the growth rate pretty much at the run rate that we had when we entered into the pandemic. On that basis, we've tried to calculate an illustrative adjusted EBITDA margin, and that came out at about 11.1% versus the reported 12.6%. We came to this by taking out any impact of the government support in the first half and adding back the product margin from the lost sales as well as all variable costs associated with this sales increase. Our first half EBIT was €41,500,000 versus €31,100,000 last year, so all in all, a very good first half. We continue to pursue our strategy to invest for future growth. Some of our planned capital projects have been delayed as a result of the pandemic. So in the first half, we spent SEK 9,000,000 of CapEx versus SEK 15,700,000 in the first half of last year. We expect to catch up our capital plan through the balance of the fiscal year. The increase in goodwill is related to the acquisition of the Fraser Hart stores in March of 2020. These stores have been trading ahead of our expectations since opening up. Our inventory levels in the half were essentially flat versus last year. We successfully reduced our inventory of luxury jewelry as part of the repositioning of the range at Neiers, while increasing our holding of luxury watches. We have closed our in house credit program in the U. S, which has been scaled back over the last year as previously mentioned. In the half, we exited an amount of SEK 1,300,000 of recourse from the incumbent provider at a profit of SEK 400,000 versus what we had on the books. Post closure of the half, we also managed to sell off the remaining balance to a third party at no gainloss. So today, all of our receivables to clients are 100% outsourced. Trade payables were mainly driven by timing of stock intake customer deposits. We closed the first half with a net debt of 22.2% versus the same period last year at 92 $1,000,000 At the start of the year, our net debt was $129,700,000 so quite a good performance during the half. Our free cash flow improved by SEK72,000,000 versus last year and came in at SEK 116,000,000. Our free cash flow conversion was 222.6 percent in the half, which we expect to see more normalized during the balance of the year. As a reference, last year, the equivalent was 107.1%. Working capital improvement was the main driver of the cash flow benefit in the first half. Last year contains the interest for the final payment of the pre IPO debt structure. Our expansion capital was below our original plan in the first half, but we do expect to catch up on projects through the balance of the year. At the half, none of our RCF and ABL facilities were drawn. Our liquidity headroom at the end of the first half was $229,900,000 and we're closed at a leverage of 0.25 dollars We are in a very good position to support growth through either expansions and or acquisitions for the future. Having a look at our financial KPIs, we're very pleased that they're all moving in the right directions. If you look at our return on capital employed, measured on an LTM basis, it improved by 140 basis points to 17.2% due to an improved LTM EBIT of SEK 14.8 billion compared to the increase in average capital employed of SEK 5.1 billion. Free cash flow improved, as mentioned before, by CHF 72,000,000. So we're very pleased with that, and it puts us in a great position, as I said before, for further expansion and acquisitions. Our 4 wall EBITA improvement in both the U. K. And the U. S. Is very encouraging. The most pleasing part has been to see the improved leverage in the U. S. As we drive higher productivity. In the U. K, the reduced level of leases based on turnover is a great win. Our adjusted EBITDA at 52.2 percent were up 26.5% on last year in times like we experienced is very good. And now to current trading. Our Q3 has had a positive and stronger than anticipated start, albeit the trend has slowed down somewhat versus the second quarter as a result of our stores being closed in England for 4 weeks. Group revenue for the 1st 7 weeks has been plus 11.9 percent in constant currency or 11.2 percent reported. We generated higher conversion, which more than offset lower traffic across both the U. K. And the U. S. U. K. Sales at plus 7.7%, reflecting optimization of the business through ecom, CRM, clienteling, digital channels and a new click and collect service. We also opened up our new flagship in Broadgate and our refurbished store in Knightsbridge. U. S. Sales came in at plus 22.7% for the 1st 7 weeks in constant currency, and this is the result of a continued strong momentum in Mayers in Florida and Georgia, with a moderated trend in Las Vegas where we can see less tourism than what we've seen in the Q2. As a result of a stronger than expected first half performance and a better start to our Q3, we're upgrading our guidance today. On a pre IFRS 16 53 week basis, we're now expecting revenue to come in between €900,000,000 €925,000,000 for the year, with an EBITA EBIT margin improvement of 1.5 to 2 points on last year. Depreciation and amortization is expected to come in between €28,400,000 30,400,000 on last year, while our tax rate is expected to land between 20% and 21.5%. Net debt at the end of the fiscal year is projected come in between €60,000,000 €80,000,000 Our guidance assumes that the strong luxury watch market will remain in the U. K. And in the U. S. But we don't expect any significant change in current footfall trends. So we're remaining pretty conservative on that. We do expect to see some further disruption coming through in January, February due to the virus situation that we're all faced with. And we do expect the current level of consumer demand to remain throughout the balance of the fiscal year. We have not expected any improvement in airport traffic or for that matter in tourism in the UK and limited domestic tourism in the U. S. Our tax rate is expected to come in slightly lower because of better utilization of some carry forward losses. Our guidance on depreciation has gone up as a result of us reassessing the useful life of some of our store assets, which has triggered a SEK 5,400,000 write off as a one off this fiscal year. The group intends to repay the furlough support received from the U. K. Government during FY 2021, subject to no further significant disruptions. So now I'm going to hand over to Brian for some closing remarks. Thank you. So thank you, everybody, again for joining us. My thanks to David and Craig and Anders for their presentations. A particular thanks to our team for delivering on what I think was a very, very good first half overall. And now we're very happily move on to your questions. Our first question comes from Edward Orban from Morgan Stanley. Your line is now open. Yes, good morning, guys. Congratulations on the results and congratulations for repaying the further money. So two questions for me. Number 1, you are obviously, as you mentioned, Brian, to a certain extent supply constraint. So if you could give us an update of what you're expecting from the main brands you sell in terms of supply next year? And also you mentioned that some of the you are opening some mono brand franchise stores for the likes of Omega and Tiger Europe. With the crisis, I guess, a number of brands, retail stores have done loss making. So what's the willingness of some of these brands to move to a more capital light model? And also to how and to what extent can you operate mono brand stores better than the brands themselves? Thank you. Good morning, Edward. Thanks for your question. Obviously, we as we regularly report to market, a big part of our businesses is supply constrained and therefore supply driven. And we have good visibility of supply from those constrained brands through to the end of the year, a good indication of where we will be for the remainder of the year. So we don't disclose any of the specifics obviously, but simply to say that clearly our guidance has taken into account the indications that we've had overall in supply and that's a big influence on how we're calling the year overall. Monobrands, we really believe and we have a good formula for mono brands. We're doing generally smaller stores and might have been the case in the past that gives the obvious economy there on rent and CapEx and staffing and so on, but also sharing back a house where we can do adjacent monobrands that gives another efficiency overall. And it's we're ahead in the UK. We have at this stage, Craig, 26 mono brands in the U. K. Even during this period of disruption and lockdown or whatever, they continued to perform well, including the new ones that we just opened in the Q1. And we now started on that venture in the U. S. Literally a couple of weeks open overall. And once again, despite reduced traffic, we're happy with the initial experience. So, psychiatry, we really believe in. To your last point, we do obviously, all we do is retail and that we've been doing it for a long, long time, gives us obvious expertise in area of systems and customer service and recruitment and training and store build and all of that. So we can bring all that to bear working with our partners, I think, to do what they obviously believe is an efficient BTO proposition for them. Thank you. And if I can just have a follow-up on what you said on real estate. Given the retail real estate crisis that we are facing today in the UK and elsewhere, to what extent could you see your rent coming down as a percentage of sales in the medium term? And if so, how material could that be potentially? Thank you. Thanks again, Edward. We have reduced our occupancy costs this year. We particularly reduced it by contrary to what may be happening with other tenants in retail. Our direction was to get out of turnover rents. We generally in the UK had a formula of fixed rents plus a reasonably significant top up on turnover. And the success that we've had over the years meant that we would actually pay more in turnover rents than fixed. So we had progressively been getting out of reducing these turnover rents with now in the circumstances sat down with all of our like landlords and generally we've got out of all turnover rents. We also have a reduced business at the airport and which again is entirely commission or turnover rent based. So we do we haven't actually quoted the number in terms of the year on year savings, but we have reduced our occupancy costs and obviously for the future as well as this fiscal year. Okay. Thank you. Thank you. Our next question comes from Richard Taylor from Barclays. Your line is now open. Yes. Good morning, team. Appreciate loss of this year with the existing estates amid reduced footfall and lockdowns and so on. But looking into next year, any update please on the pipeline for the U. S. Estate in terms of white space, but also potential M and A? And then secondly, interested in any comments you have on analog shift. Realize it's very small at the moment, but how you may intend to develop that business and address any opportunities in the pre owned market? Thank you. Okay. Hi, Rajit. We've obviously the formula or the format we've been using in terms of communication about the U. S. Market has been that we point to a lot of growth opportunities that are there that does include white space and new developments and the potential acquisition and the growth of e com that all offering very attractive prospects of growth for us. But until we've got and mono brands, I should throw into that list as well. But until we have agreed deals, we aren't informing the market yet. We are going to change that position. We're actually working through. We've now had the U. S. Market study in some depth. We can therefore be more specific about where we see the opportunities. And as a result, we're working our way through a longer term plan and we will update the market with an overall market share objective that we'd have over the next 3, 4, 5 years. We'll probably do that with our year end numbers. In the meantime, we've obviously not announced anything beyond what you knew of already. The American Dream project has obviously been a victim from a timing standpoint and from the pandemic of our expectation. Now in fact, David, do you want to say what the latest expectation is on American Dream? So I think the latest expectation on the part of American Dream is that they're talking about opening prior to the end of the calendar year. I will say that the non luxury component has opened up and only with a limited number of stores to start off, I think about 75 stores in total, they're hoping to have about 100 by the end of this calendar year. And the traffic and sales have been very strong. So we still very much believe in the project, but obviously the luxury section has been delayed just because of the virus. So as we're obviously working on opportunities constantly in the U. S. Market and as and when things become finalized, we'll look forward to bring us to market and communicating. And as I say, we will do more of a general target from a market share standpoint in the U. S. And in the U. K. Those developments clearly happening in the U. K. Where we start from a much higher base. AnalogShift, we've loved since we met the guys, since we met James Landon, who was there, the founder of AnalogShift, real expertise on vintage product and just out and out watch lovers. So we're delighted to bring them into our fold. It's an important element of building both vintage and the pre owned business, which is disproportionately important on the e commerce market in the U. S. And we're starting all of this together with, as David mentioned in the presentation, we've just put all the brands online, Cartier being the latest in the U. S. And one of the spending behind that and driving some good momentum. And the plan is to fully utilize analog shifts position, reputation and following to generally drive traffic onto our website and then specifically to use it to expand on pre owned and vintage. So small acquisition overall in terms of value, but we think it will make a big contribution going forward to our overall business in the U. S. Okay. Thanks very much. Our next question comes from Greg Lawless from Shaw Capital. Your line is now open. Good morning, guys. Well done. And just a quickly on really on the I wonder if you could give a little bit of a flavor about the regional split in the UK in the first half. Obviously, London footfall down significantly because of the absence of tourists. Just wondering if you could provide any color there. Just on the business rates and the furlough money, wondered if you could just potentially quantify the kind of benefit there, please? Thank you. So the way our business clearly has changed significantly is pivoting away from international to domestic. That regionally results and us having a bigger regional increase in business than London because London was very disproportionately had the international. And it just goes to prove, as we've said all along, that we have huge demand out there for a lot of the products that we sell, Rolex in particular. And we now have happier customers who have waited a little less to get their hands on a Submariner or a Nautilus or whatever that we've had in our waiting list. So that's where it's come from and the best measure of it is what we've given to say that our international business last year over 33% this year, more like 7.5%. And that's a big shift overall in terms of client mix. We effectively now have 93% domestic U. K, U. S. And I think it's been a general move overall in retail. Your second question was on the furlough money. So I mean our position on the furlough money is that we're fully eligible for it. Clearly, we found a great source of comfort and a great project when it was announced by the Chancellor. And we all were very concerned about the future, how long would the lockdowns last and so on. So having the furlough money back in March was a great comfort and it did help us do what we wanted to do, which was look after our teams, keep them employed, keep them fully paid. As the year has gone on and particularly as we look at the start of the quarter 3, it's quite clear to us that within this year, we don't effectively need the furlough money and therefore, we're doing what we consider to be the right thing and returning it. We haven't quoted exactly the number, but if you look at the contribution of the follow in the first half, it's there in the detail. It was at 3,300,000 dollars Thanks. And just on the business rates, you obviously had the benefit this year, just kind of thinking for next year and the outwards, what sort of benefit have you had, please? As for business rates, obviously, we're taking advantage of that in the first half. And we think certainly we're not planning to pay that back. We are non essential. So obviously, we've been closed to the extent we'll not be to refund that. And the holiday itself obviously commenced in April of last year and will end on March, as far as we know, unless the Chancellor will announce anything further. The total value in the year? The total value for the year is $11,000,000 $11,000,000 Thanks very much. Thanks, guys. I appreciate that. Well done and Merry Christmas. Cheers. Great. Thanks, Greg. We have a question from Kate Calvert from Investec. Your line is now open. Morning, everyone. Hope you can hear me. 3 from me. The first question is that I know the brands are quite big, but I would appreciate any thoughts on next year in terms of supply and timing of new product launches given the trade fairs have been canceled. And obviously, we had much later launches of new product this year. I don't know if you've got any insight on how that might happen. The other 2 are more accounting ones. In terms of the €80,000,000 of lost group sales, could you split that between the UK and the U. S? And the final one is in terms of the €3,900,000 dollars of U. S. Government PPP. You talked about it being a loan which converts into a grant. Can you sort of tell us how that will pay out and how we can how that's being accounted for? Okay. Good morning, Kate. We could hear you perfectly well. Thanks for your questions. We don't and we typically wouldn't have specific visibility on supply from key brands for next year. We actually have meetings in January as usual, at which we'll learn the first indications about supply. I mean, I think it's safe to say that the brands are producing more for next year than last because we're assuming that there won't be a break in production. And obviously, there was lockdown in Switzerland impacting March, April and even in some cases into May. So the year on year production overall should be higher, but on the other hand, what's going to happen with worldwide sales. Generally, the UK and the U. S. Markets have done well and which is great since the international markets that we're doing business and then we think they will be well supported from a supply standpoint as we go into fiscal year 'twenty two. We'll obviously reflect that in the guidance that we give for fiscal year 'twenty two. New products should be positive overall to your point. I think the brand has done a great job of introducing new products in the second half of last year, doing all remotely through Zoom and Instagram and various other digital mechanisms. But quite a lot was postponed. So I think next year you're going to have a full year of what was intended for next year plus the carry forward of this. You even have specific brand situations, for example, with Omega, who had new products associated with the Olympics, which clearly have been delayed by a year and the Bond movie, which has now been delayed by a year. So there are specifics that will positively build into next year's numbers. The fair again is being canceled. So it won't happen as scheduled in Geneva. There won't be a physical watch fair, but for sure the brands with experience that they've had this year will be doing all these presentations remotely and maybe locally, they'll be doing them directly. Although we are seeing, we think it's going to be a good year for production overall and it's going to be a good year for new products within that. If Anders is €80,000,000 on sales? Yes. The breakdown of it is approximately €55,000,000 U. K. 25 U. S. So that's the split that we come up on based on some of the traffic and so forth that we're seeing coming through. And then the second question that you had, Kate, was regarding the PPP in the U. S. It was a scheme that was put in place by the U. S. Government to ensure that rents were paid and people kept their employment. And it was conditional in the sense that you had to use any grant that for any loan that you were given to cover those cost basis over a certain period of time, which was 12 months. We achieved that within the first half. So we booked it in the first half and then it converted to Grant. Perfect. Thank you. And Merry Christmas everyone. Thanks, Keay, and to you. We have a question from Rogerio Fujimori from Stifel. Your line is now open. Thank you for taking my question. I was wondering if you could talk about recent trends for average selling prices for watches in the UK and in the U. S. With the clientele mix shift to domestic clients? And any thoughts on the outlook for price mix in the second half? Thank you. It's a good question. Our average selling prices increased quite significantly in the half and overall in the group. Overall in the group, we were up 7% on luxury watches. We were up 16% actually in average selling price. In the U. S, we were up more like 5%. In the U. K, we did have the impact of pricing. There was a Rolex price increase coming in at the start of January. So that specifically flowed through to ASP and the balance of it effectively comes from mix overall, but it certainly talks to the overall health of the market that's there. We don't ever assume pricing going forward. There's lots of things can influence it, including exchange rate, including costs that are getting covered in Switzerland. For example, the price of gold may have an influence since that's clearly gone up significantly and plays a big part as a precious metal and a lot of what we sell. So we'll see. We haven't assumed any price increase at this stage and we would probably be assuming any when we certainly any that we don't know about when we give the guidance. But I think it's fair to say, I think if you look to the history of this market, then there's been an average increase in average selling price of 3% for more or less the last 20 or 30 years. I think it's safe to assume that, that will continue. And a good thing to look at is what may be happening to the cost basis in Swiss francs. That's very helpful. Thank you. Merry Christmas. You're welcome. Thanks. We have a follow-up question from Kate from Investec. Your line is now open. Hi, guys. Sorry about that. Yes, just one on pricing of watches globally, given we're at sort of sterling $1.35 $1.36 how do watch prices compare in the UK versus Europe and the U. S. At the moment? The pricing in the U. S. Is higher on average and that is because when the brands look at their global pricing strategy, they look at it in Europe and they actually don't include the sales tax in the U. S. So surprisingly, it's slightly higher in the U. S. But the differential definitely reducing obviously as the dollar comes down and sterling is recovering. Sterling euros probably quite comparable. Now you are less fixated with the key, I must say, since international obviously a much smaller proportion of our business that we've been looking at. So the differential, we were favorable by a few percentage points versus the euro price in general, but probably a bit closer now. And we in terms of retail price would still be cheaper than the U. S. Perfect. Thanks very much. We currently have no further questions. So if you'd like to continue. Well, if there are no further questions, I thank everybody for joining us. Wish everybody a happy Christmas, happy holidays. And I think we all look forward to a better 2021 than the world experience in 2020. But we obviously have a couple of tough months to get through before they can look forward to that. But in the meantime, thanks for your support of the business. Thanks for your questions this morning and hope everybody has a good holiday season. Thank you.