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    Swarovski 2019 Financial Statement

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    SWAROVSKI UK LIMITED 00835806 ANNUAL REPORT AND FINANCIAL STATEMENTS: l year ended 31 December 2019 seairno* ° ares AN? COMPANIES HOUSE ) SWAROVSKI UK LIMITED Annual report and Financial Statements. For the Year Ended 31 December 2019 Contents Directors and advisors Strategic report for the year ended 31 December 2019 Directors’ report for the year ended 31 December 2019 Independent auditors’ report to the members of Swarovski UK Limited Income statement for the yéar ended 31 December 2019 Statement of comprehensive income for the year ended 31 December 2019 Statement of financial position as at 31 December 2019 Statement of changes in equity forthe year ended 31 December 2019 Notes to the financial statements for the year ended 31 December 2019 Pages 13 49 10-12 3 14 15 16 17-40 SWAROVSKI UK LIMITED DIRECTORS AND ADVISORS For the Year Ended 31 December 2019 Directors: Solicitors: Secretary: Registered office: Bankers: Registered number: Independent Auditors: Ms H Quinn Mr Milan Bukumirovic DMH Stallard Pegler Way Gainsborough House Crawley, West Sussex RH11 7FZ DWF LLP. 1 Scott Place Manchester M3 3AA Mr Milan Bukumirovic 1 Floor, Building 4 Chiswick Park ‘566 Chiswick High Road London W4 SYE HSBC 9 The Boulevard Crawley West Sussex RH10 1UT (00835806 Emst & Young 1 More London Riverside London SE1 2AF SWAROVSKI UK LIMITED STRATEGIC REPORT For the Year Ended 31 December 2019 ‘The Directors present their Strategic Report of Swarovski UK Limited ("the Company") for the financial year ended 31 December 2019, Principal Activities The principal activity of the Company in the year under review was that of the import and sale of crystal and jewellery items and other cut crystal products and fancy goods. Review of Business Revenue increased to £75.3m (2018: £65. 1m) primarily as a result of the acquisition of the online sales business from Swarovski Crystal Online AG (SCO) in October 2019 and prior acquisition of the ‘Swarovski wholesale distribution and sales business for Sweden, Norway, Denmark, Finland and leeland from Swarovski Benelux BV. Despite an increase in conversion compared to prior year in the Swarovski retail stores that was attributable to the key strategic focus of driving consideration and conversion through customer facing initiatives the significant reduction in footfall and decrease in the size of the independent retailer store network, resulted in revenue increasing overall by 15.7%. ‘The profit before tax of £4.1m (2018 profit before tax: £2.4m) reflects a reduction in distribution costs before exceptional items compared to prior year partly as a result of the review of the Swarovski retail store portfolio from a profitability perspective. At the financial year end an assessment was made of the future possible risk which could result from remaining contractual lease obligations, and an onerous lease provision of £1.6m was recognised. ‘The gross margin decreased to 70% (2018: 72%) primarily as a result of an increase in the cost of importing the Company's products from overseas, During the year the Company acquired the trade of the online sales from Swarovski Crystal Online AG with customers within the UK for a consideration of £2.13 million. Future Outlook ‘The Directors expect the business to grow moderately in the forthcoming year as a result of both consolidation and further expansion under an efficient store portfolio management program, and with continued focus on driving consideration and conversion through consumer facing initiatives and leveraging the opportunities that come with the Swarovski loyalty programs. ‘The Directors have taken sensible precautions with the Swarovski supply chain to mitigate the risks associated with the Brexit process. Key Performance Indicators ‘The management of the Company uses a number of performance indicators (KPIs) to monitor progress, Costs and margins are considered in relation to the relevant sales achieved. The KPI's used are as follows: * Tumover % increase year on year 2019: (15.7)% 2018: (12.3)% * Operating profiv(loss) as a % of turnover 2019: 8.3% 2018: 4.2% ‘© Selling, distribution and administration costs as a % of Turnover 2019: 64.4% 2018: 71.8% SWAROVSKI UK LIMITED STRATEGIC REPORT For the Year Ended 31 December 2019 Key Performance Indicators (continued) Analysis of business performance for the above KPIs has been discussed as part of the Review of Business section. Principal Risks and Uncertainties ‘As with any organisation, the management of the business and the execution of the Company's strategies are subject to a number of risks. The key business risks and uncertainties affecting the Company are considered to relate to consumer confidence and economic performance in the UK. Negative trends in consumer spending and the performance of the UK economy are likely to have an unfavourable impact on the Company's sales performance. ‘As was the case with many retailers, COVID-19 impacted our in-stores sales in 2020, and we expect for there to'be a continued impact into the beginning of 2021. To mitigate the lack of in-store sales multiple actions have been implemented to reduce costs, by utlising government assistance where it has become available, this includes deferring VAT payments, government applications for funds designed to provide income for those employees no longer working in order to preserve their continued employment and obtaining concession on council tax payments for stores. The company will continue to both take appropriate steps to mitigate the impact of COVID-19 and also to apply for any support offered by the UK government into 2021 These risks are mitigated through continual market review, analysis of footfall trends, and monitoring of Key Performance Indicators (KPIs) of the business. Economic Risks In December 2019, a novel strain of coronavirus ("COVID-19") was reported in Wuhan, China. As the epidemic evolved, it continued to spread across Asia, USA, Europe and Africa, COVID-19 has now been found in over 200 countries worldwide and in March 2020 the World Health Organization (‘WHO’) dectared COVID-19 a pandemic. ‘The spread of the COVID-19 outbreak has caused severe disruptions in the UK and global economy and financial markets and could potentially pose widespread business continuity challenges of an as yet unknown magnitude and duration. Many countries, including UK, have reacted by instituting {quarantines, mandating business and school closures and restricting travel. UK Economy has reported a slowdown compared to FY 2019 and as per reported it is currently unknown when it is expected to return to normal due to ongoing Covid-19 pandemic. The Directors are closely monitoring the potential impact of COVID-19 on our financial results and cashflows and have prepared a detailed risk assessment and revised projections for the business. The Directors top priority remains the health and safely of the Company's employees and customers ‘The Directors expect that the most significant impact on our financial results and cashflows resulting from COVID-19 would be in relation to distribution infrastructure due to the mandatory closure of our retail store and outlets. Based on information, advice and guidelines provided by the Government, the Health Service Executive the World Health Organisation and the Swarovski global business continuity management team the Company is taking a number of measures to reduce any potential impact on employees and on the financial results and cashflow, including adjusting capacity to the current demand environment, negotiating new payment terms with suppliers, landlords and retail partners, and utilising any government subsidies that are available when appropriate. Impact of the Covid-19 outbreak {At the date of these financial statements, the spread of the COVID-19 outbreak has caused severe disruptions in the UK and global economy and financial markets and could potentially create widespread SWAROVSKI UK LIMITED STRATEGIC REPORT For the Year Ended 31 December 2019 business continuity issues of an as yet unknown magnitude and duration. Many counties, including the Uk, reacted by instituting quarantines, mandating business and school closures and restricting travel Many experts predict that the outbreak will tigger a period of global economic slowdown or a global recession. In assessing the carrying value of its other non-current assets, the Company has assumed. that, despite a significant short-term impact, long-term market conditions remain unchanged, as the timing of market recovery and the duration of the economic impact remain uncertain We are closely monitoring the potential impact of COVID-19 on our future financial results and cashflows and have prepared detailed risk assessments. The company continues to control spend and ‘monitor ongoing business trading levels. We have a weekly process of reviewing 3 months cash flow forecast on a rolling basis. Our top priority remains the health and safety of our staff and customers across. There is no significant impact in the short to medium term on the going concern as the company has seen a significant increase in the online sales that mitigated the risk faced by the reduction in offine sales due to lockdown, On behalf of the Board of Swarovski UK Limited Mr Milan Bukumirovic - Director 19 February 2021 SWAROVSKI UK LIMITED DIRECTORS’ REPORT For the Year Ended 31 December 2019 The Directors present the Directors’ Report and the audited financial statements of Swarovski UK Limited ("the Company’) for the year ended 31 December 2019. Directors The directors who held office during the year and up to the date of signing the report were as below. Ms Suzy Russell left the business on 30" September 2020 and Mr Milan Bukumirovic joined on the 01" October 2020. Ms H Quinn Ms S Russell ‘Mr Milan Bukumirovie Directors’ Qualifying Third-Party Indemnity Provision ‘The Company maintains Directors’ & Officers’ Liabiity insurance policies on behalf of the directors of the Company. These policies meet the Companies Act 2006 definition of a qualifying third-party indemnity provision and were in place during the financial year and also at the date of approval of the financial statements. Financial Risk Management The Company is exposed to a variety of financial risks that include foreign exchange risk, credit risk, liquidity risk and interest rate risk. These risks are managed jointly by the Company's directors and the Group's finance department in Switzertand, Foreign exchange risk ‘The Company is invoiced in sterling for its European costs of goods, mitigating the exchange rate risk faced by the Company over the shorter term. The Group finance depariment hedges various major currencies in order to mitigate the overall effect of exchange rate variations within the Group. Credit risk ‘The Company has policies in place that require appropriate credit checks on potential customers before sales are made, Customer credit limits are reviewed on a regular basis and accounts suspended when they become overdue. Liquialty risk ‘The Company maintains an appropriate balance of cash and debt facilities with Group companies that is designed to ensure the Company has sufficient available funds for its operations. Cash flow forecasts are prepared to ascertain future cash requirements. . Interest rate risk ‘The Company has an interest-bearing asset which is a cash balance. Surplus funds are placed with the Company's bank's treasury department for periods of time between a day and two months depending (on financial commitments and the rates of interest offered. Interest expense is managed through fixed rate agreements with other Group companies. The Group does not use derivative financial instruments to manage interest costs and as such, no hedge accounting is applied. Brexit ‘The directors have assessed the situation and do not consider that Brexit will impact the going concern of the business and measures have been taken to comply with any new customs regulations. The directors will continue to monitor developments in 2021 to assess the risk if any and plan accordingly SWAROVSKI UK LIMITED DIRECTORS’ REPORT For the Year Ended 31 December 2019 to mitigate any potential impact on the business. Future Developments. ‘The Directors expectations for the company's future outlook is discussed in the Strategic Report. Employees Applications for employment by disabled persons are always fully considered, bearing in mind the respective aptitudes and abilities of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Company continues and the appropriate training is arranged. It is the policy of the Company that the training, career development and promotion of a disabled person should, as far as possible, be identical to that of a person who does not suffer from a disabilty ‘Swarovski UK Limited is fully committed to the benefits of a diverse workforce and values the differences that this diversity brings to the organisation. The organisation will not discriminate because of age, disabilly, gender reassignment, marriage and civil partnership, pregnancy and maternity, race (which includes colour, nationaity and ethnic or national origins), religion or belief, sex or sexual orientation. It will not discriminate because of any other itrelevant factor and will build a culture that values meritocracy, openness, fairness and transparency. There is continued commitment to ensuring gender parity across the UK organisation, and the Directors welcome the opportunity to formally publish related data during the next reporting period as part of the Gender Pay Gap reporting obligations. Consultation with employees or their representatives has continued at all levels, with the aim of ensuring that their views are taken into account when decisions are made that are likely to affect their interests, and that all employees are aware of the financial and economic performance of their business units and of the Company as a whole. Political Donations. ‘There were no political donations in the year to 31 December 2019 (2018: Eni). ‘Overseas Branches ‘The Company does not have any overseas branches, Going concern These financial statements have been prepared on a going concem basis which is supported by forecasts and projections prepared by the directors. The company had positive net asset position of £6.8m, with net current assets of £7.3m including cash at bank of £25m as at 31 December 2019 with no external long-term loans or debt Further, the company had a cash balance of £30,7m as at 31 Dec 2020 with a positive net asset position and the company made a profit before tax during FY 2020. The company holds one outstanding intercompany loan of f4m as at 31st December 2020, with applicable interest at a rate of 2.08%. The legal maturity date of this loan is 17 August 2023, Out of total outstanding amount of €16m a payment of £12m was made in 2020, In addition to the company being able to support itself financially, the directors have also received written confirmation from Swarovski International Holding AG, that it will continue to support the ‘Company for the foreseeable future, and for a minimum period of at least til 22 February 2022 from the date of approval of these financial statements, so as to enable the Company to meet its liabilities as, and when they fall due. In making this assessment the directors have considered the capabilty of parent SWAROVSKI UK LIMITED DIRECTORS’ REPORT For the Year Ended 31 December 2019 company to be able to support Swarovski UK, if required. This was concluded based on discussion by directors of Swarovski UK with those of the parent company over the net asset and cash holding position as of December 2020, the group forecasts and stress testing performed on those forecasts. The parent Support is available, but itis not required as at the date of the signing ofthe financial statements as the company remains to be in strong cash flow position going into 2021 The products line in which the company deals with are sourced from group companies. Since the company deals with products which is the jewellery line under brand name of ‘Swarovsk’, they are procured from within the group and does not have a third party supplier. ‘As from March 2020, the company has benefited from various UK Government business schemes designed to support businesses during the COVID-19 pandemic. These include Government furlough scheme, business rates concession for retail stores and business rates grants. As of the date of these financial statements the company continues to generate revenue and positive cashflow mainly through online sales. The directors have made enquiries of its parent, and its ability to provide support and have received appropriate assurances that itis in a position to provide the necessary support. The directors were confirmed by the Parent company that despite negative impact on economic performance due to lockdowns positive cash flow of 99 Million Euros was reported from operating activities in Q3 (Sept 2020). Further, the Parent company had a Cash balance of 829 Million Euros as of the September 2020.After making the necessary enquiries, and considering stressed scenarios, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements. {As at the date of signing these financial statements, the Covid-19 pandemic is stil ongoing, and the United Kingdom is in varying degrees of lockdown measures. The company continues to control spend and monitor ongoing business trading levels. There is no significant impact in the short to medium term ‘on the going concern as the company has seen a significant increase in the online sales that mitigated the risk faced by the reduction in offline sales due to lockdown Events after the Balance Sheet date In December 2019, a novel strain of coronavirus ("COVID-13") was reported in Wuhan, China. ‘As the epidemic evolved, it continued to spread across Asia, USA, Europe and Africa, COVID-19 has now been found in over 200 countries worldwide and in March 2020 the World Health Organization (‘WHO’) declared COVID-19 a pandemic. At the date of these financial statements, the spread of the COVID-19 outbreak has caused severe disruptions in the global economy and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration Many countries, including UK, have reacted by instituting quarantines, mandating business and ‘school closures and restricting travel. UK Economy has reported a slowdown compared to FY 2019 and as per reported it is currently unknown when it is expected to return to normal due to ‘ongoing Covid-19 pandemic. ‘The spread of the COVID-19 outbreak has caused severe disruptions in the UK and global economy and financial markets and could potentially pose widespread business continuity challenges of an as yet unknown magnitude and duration, Based on information, advice and guidelines provided by the Government, the Health Service Executive the World Health Organisation and the Swarovski global business continuity management team the Company is taking a number of measures to reduce any potential impact ‘on employees and on the financial results and cashflow, including adjusting capacity to the current demand environment, negotiating new payment terms with suppliers, landlords and retail partners, and utilising any government subsidies that are available when appropriate. SWAROVSKI UK LIMITED DIRECTORS’ REPORT For the Year Ended 31 December 2019 The Directors of this Company are closely monitoring the potential impact of COVID-19 on our future financial results and cashflows and have prepared detailed risk assessments and revised projections for the business, including a weekly process of reviewing 3 months cash flow forecasts on a roling basis. The Directors expect that the most significant impact on our financial results and cashflows resulting from COVID-19 would be in relation to distribution infrastructure due to the mandatory closure of our retail store and outlets. However, at the time of approving the financial statements the Directors have not identified a significant impact in the short to medium term on the going concern of the company as they have seen a significant increase in the online sales that mitigated the risk faced by the reduction in store sales due to lockdown. ‘As from March 2020, the company has benefited from various UK Government business schemes designed to support businesses during the COVID-19 pandemic. These include Government furlough scheme, business rates concession for retail stores and business rates grants. As of the date of these financial statements the company continues to generate revenue and positive cashflow mainly through online sales The company holds one outstanding intercompany loan of £4m as at 31% December 2020, with applicable interest at a rate of 2.08%. The legal maturity date of this loan is 17 August 2023. Out of total outstanding amount of £16m a payment of £12m was made in 2020. The Directors have assessed the impact of Covid-19 as a non-adjusting subsequent event. In assessing the carrying value of the non-current assets, the Company has assumed that, despite a significant short-term impact, long-term market conditions remain unchanged, as the timing of market recovery and the duration of the economic impact remain uncertain. There were no other significant events between the Balance Sheet date and the date of signing the financial statements, affecting the company which require adjustment or disclosure in the financial statements. ‘Statement by the directors in performance of their statutory duties in accordance with s172 (1) Companies Act 2006 The Directors of the Company, as those of all UK companies, must act in accordance with a set of general duties. These duties are detailed in section 172 of the UK Companies Act 2006 which is summarised as follows: A director of a company must actin the way they consider in good faith, would be most likely to promote the success of the company for the benefit ofits shareholders as a whole and, in doing so have regard {amongst other matters) to: the likely consequences of any decisions in the long-term; the interests of the company's employees; the need to foster the company's business relationship with suppliers, customers and others; the impact of the company’s operations on the community and environment; the desirabilty of the company maintaining a reputation for high standards of business conduct; and the need to act fairly as between shareholders of the Company.’ ‘As part of their induction, a Director is briefed on their duties and they can access professional advice cn these, if they judge it necessary, from an independent adviser. Itis important to recognise that in an organisation such as ours, the Directors fulfil their duties partly through a group governance framework that delegates day-to-day decision making to employees of the Company. ‘The following paragraphs summarise how the Directors’ fulfil their duties: Risk Management Consideration of risks is an integral part of how Swarovski UK Limited operates on a daily basis and is. Part of any transaction appraisal. SWAROVSKI UK LIMITED DIRECTORS’ REPORT For the Year Ended 31 December 2019 Our people The Company is committed to being a responsible business. Our behaviour is aligned with the expectations of our people, clients, investors, communities and society as a whole. The health, safety and well-being of our employees is one of our primary considerations in the way we do business. For our business to succeed we need to manage our people's performance and develop and bring through talent while ensuring we operate as efficiently as possible. We also ensure we share common values that inform and guide our behaviour with published guidelines, therefore achieving our goals inthe right way. Business Relationships Our strategy prioriises organic growth, itis driven by ensuring the best services to existing loyal clients and bringing new customers into the business. To do this, we need to develop and maintain strong ‘customer relationships. We value our suppliers and build long term partnerships with our key suppliers. Community and Environment ‘The Company's approach is to use our position of strength to create positive change for the people and ‘communities with which we interact. We want to leverage our expertise and enable colleagues to support the communities around us. We actively encourage environmental initiatives and measure our impact on the environment Independent auditors During the year, Emst & Young, Chartered Accountants, were appointed auditors in accordance with Section 384 of the Companies Act 2014 and will continue in office in accordance with Section 383(2) of that Act. Statement of Disclosure of Information to Auditors So far as the Directors are aware, there is no relevant audit information (as defined by Section 418 of the Companies Act 2006) of which the Company's auditors are unaware, and each director has taken all the steps that they ought to have taken as a director in order to make themselves aware of any felevant audit information and to establish that the Company's auditors are aware ofthat information. ‘Statement of Directors’ Responsibilities in Respect of the Financial Statements The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure Framework", and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing the financial statements, the directors are required to ‘= select suitable accounting policies and then apply them consistently; ‘+ state whether applicable United Kingdom Accounting Standards, comprising FRS 101, have been followed, subject to any material departures disclosed and explained in the financial statements; ‘+ make judgements and accounting estimates that are reasonable and prudent; and * prepare the financial statements on the going concern basis’ unless it is inappropriate to presume that the company will continue in business. SWAROVSKI UK LIMITED DIRECTORS’ REPORT For the Year Ended 31 December 2019 The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the ‘Companies Act 2006. ‘The Directors have agreed to electronically sign and file the Financial Statement. On behalf of the Board of Swarovski UK Limited (registered number 00835806) wo Mr Milan Bukumirovic - Director 19 February 2021 SWAROVSKI UK LIMITED INDEPENDENT AUDITOR’S REPORT INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SWAROVSKI UK LIMITED Opinion We have audited the financial statements of Swarovski UK Limited for the year ended 31 December 2019 which comprise the Statement of comprehensive income, statement of financial position, the Statement of changes in equity and the related notest to 26, inclusing @ summary of significant accounting policies The financial reporting framework that has’ been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 101 "Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice) In our opinion, the financial statements: '* give a true and fair view of the company's affairs as at 31 December 2019 and of its profit for the year then ended; * have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and + have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with Intemational Standards on Auditing (UK) (ISAs (UK) and applicable law. Our responsiblities under those standards are further described in the Aucitor's responsibilities for the audit of the financial statements section of our report below. We are independent of the company in accordance with the ethical requirements that are relevant to our audit ofthe financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfiled our other ethical responsibilities in accordance with these requirements. We believe thatthe audit evidence we have obtained is sufcient and appropriate to provide a basis for ‘our opinion. Emphasis of matter - Effects of COVID-19 We draw attention to the note 25 of the financial statements, which describes the economic and social disruption the company is facing as a result of COVID-19 which is impacting consumer demand, supply chains and personnel available for work. Our opinion is not modified in respect of this matter. Conclusions relating to going concern ‘We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require Us to report to you where: ‘+ the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or ‘* the directors have not disclosed in the financial statements any identified material uncertainties that ‘may cast significant doubt about the company's abilty to continue to adopt the going concern basis Of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue. 0 SWAROVSKI UK LIMITED INDEPENDENT AUDITOR'S REPORT Other information The other information comprises the information included in the annual report set out on pages 2 to 7, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information. ‘Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon, In connection with our audit ofthe financial statements, our responsibilty is to read the other information ‘and, in doing so, consider whether the other information is materially inconsistent with the financial ‘statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, Based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard, Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: ‘© the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ‘= the strategic report and directors’ report have been prepared in accordance with applicable legal requirements, Matters on which we are required to report by exception In the light of the knowledge and understanding of the company and its environment obtained in the course Of the audit, we have not identified material misstatements in the strategic report or directors’ report We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: * adequate accounting records have not been kept or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors’ remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit of directors Responsi ‘As explained more fully in the directors’ responsibilities statement set out on page 4, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. {In preparing the financial statements, the directors are responsible for assessing the company's abilty to continue as a going concern, disclosing, as applicable, matters related to going conem and using the going concern basis of accounting unless the directors either intend to liquidate the company or to ‘cease operations, or have no realistic alternative but to do so, " SWAROVSKI UK LIMITED INDEPENDENT AUDITOR'S REPORT Auditor's responsibilities for the audit of the financial statements ur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an ‘audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists, Misstatements can arise from fraud or error and are considered material if, individually or in the ‘aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements, ‘further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilties. This description forms part of our auditor's report Use of our report This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. tow bits of Gordon Cullen (Senior statutory auditor) for and on behalf of Emst & Young LLP, Statutory Auditor London Date: 19 February 2021 7 SWAROVSKI UK LIMITED INCOME STATEMENT For the year ended 31 December 2019 Note Revenue 3 Cost of sales Gross profit Distribution costs ‘Administrative expenses Other operating income 4 Operating profit/ (loss) before exceptional items Exceptional Item - Onerous Lease provision 23, Operating profit(loss) 6 Finance income Finance costs Finance costs —net 7 Profit! (loss) before tax Income tax expense é Profit! (loss) for the financial year 2019 £000 75,273 (22,832) 82,441 (44,395) (3.773) 2,331 6,604 (323) 6,281 34 (2,176) (2.142) (1,279) 2,860 The notes on pages 17 to 40 is an integral part of these financial statements. 2018 £000 65,068 (17,949) 4719 (41,727) (3.774) 2,305 3,923 (1,205) 2,718 1% SWAROVSKI UK LIMITED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2019 Note 2019 £7000 Profil (Joss) for the financial year 2,860 Other comprehensive (expense): Items that will not be reclassified to the income statement ‘Actuarial losses on pensions scheme 7 (368) Current tax in respect of actuarial losses 8 - Total other comprehensive expense for the a year, net of tax Total comprehensive Income/ (expense) for the year: 2,492 ‘The notes on pages 17 to 40 form part of these financial statements. 2018 £000 1,835 (399) (399) 1,436 “4 SWAROVSKI UK LIMITED STATEMENT OF FINANCIAL POSITION As at 31 December 2019 Note 2019 2018 £7000 £000 £000 £000 ASSETS Non-Current Assets Tangible assets 9 7,269 8,746 Right of use assets 10 35,585 ° Intangible assets 1 2,769 636 Trade and other receivables 131,060 4115 46,684 10,497 Current Assets Inventories panacea Trade and other receivables. 13 (29,143 Cash and cash equivalents 3,290 39,637 Total Assets 86,321 36,642 EQUITY AND LIABILITIES Equity Attributable to the Owner of the Parent Called up share capital 15 4,000 4,000 Retained earnings 2.813 2,321 Total Equity 6,813, 6,321 Liabilities Non-Current Liabilities Accruals “4 4,052 Amounts owed to group undertakings 14 16,000 16,000 Lease obligations, 23 (28,284 : Provision for liabilities 2774 47,422 19,823 Current Liabilities Trade and other payables 14 24,434 12,498 ‘Lease obligations 237,652 - 32,086 12,498 Total Liabilities 79,508 32,321 86,321 38,642 Total Equity and Liabilities ‘The financial statements on pages 13 to 40 were approved by the board of directors on 19 February 2021 and signed on its behalf by: Mr M. Bukumirovic, Director, Swarovski UK Limited (Registered ‘number 00835806), 6 SWAROVSKI UK LIMITED ‘STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2019 Balance as at 1 January 2018 Profit for the year Other comprehensive expense for the year Prior year equity adjustment Total comprehensive income for the year Dividends paid Total transactions with owners, recognised directly in equity Balance as at 31 December 2018 Profit for the year Other comprehensive expense for the year Prior year equity adjustment Total comprehensive income for the year Dividends paid Total transactions with owners, recognised directly in equity Balance as at 31 December 2019 Called up Retained share earnings capital £000 £000 4.000 2,888, : 1,835 5 (399) : (3) = 1433 : (2,000) 5 2,000) 100 at : 2,860 - (968) - 4813 : (2,000) : (2,000) B13 The notes on pages 17 to 40 form part of these financial statements. Total equity £000 6,888 1,835 (399) 8) a8 (2,000) (2,000) 32 2,860 (368) 8813 (2,000) (2,000) 313 SWAROVSKI UK LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) For the Year Ended 31 December 2019 4. ACCOUNTING POLICIES General information ‘Swarovski UK Limited is a private company limited by shares and it is incorporated in the United Kingdom. The address of its registered office is 1* Floor, Building 4, Chiswick Park, 566 Chiswick high Road, London W4 SYE. Basis of preparation These financial statements have been prepared in accordance with the Financial Reporting Standard 101,’Reduced Disclosure Framework’ (FRS 101). The financial statements have been prepared under the historical cost convention, in accordance with the Companies Act 2006. The preparation of financial statements in conformity with FRS 101 requires the use of certain ertical accounting estimates. It also requires management to exercise its judgement in the process of applying the company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed within note 2. These policies have been consistently applied to all years presented, unless otherwise stated. Going concern ‘These financial statements have been prepared on a going concern. basis which is supported by forecasts and projections prepared by the directors. The company had positive net asset position of £6.m, with net current assets of £7.3m including cash at bank of £25m as at 31 December 2019 with ‘no external long-term loans or debt. Further, the company had a cash balance of £30.7m as at 31 Dec 2020 with a positive net asset position and the company made a profit before tax of £4.1m during FY 2020. The company holds one outstanding intercompany loan of £4m as at 31st December 2020, with applicable interest at a rate of 2.08%. The legal maturity date of this loan is 17 August 2023. Out of total outstanding amount of £16m a payment of £12m was made in 2020. In addition to the company being able to support itself financially, the directors have also received written confirmation from Swarovski International Holding AG, that it will continue to support the Company for the foreseeable future, and for a minimum period of at least til 22 February 2022 from the date of approval of these financial statements, so as to enable the Company to meet its liabilities as {and when they fal due. In making this assessment the directors have considered the capability of parent Company to be able to support Swarovski UK, if required. This was concluded based on discussion by directors of Swarovski UK with those of the parent company over the net asset and cash holding position, as of December 2020, the group forecasts and stress testing performed on those forecasts. The parent support is available, but its not required as at the date of the signing of the financial statements as the ‘company remains to be in strong cash flow position going into 2021 ‘The products line in which the company deals with are sourced from group companies. Since the company deals with products which is the jewellery line under brand name of ‘Swarovski’ they are procured from within the group and does not have a third party supplier. ‘As from March 2020, the company has benefited from various UK Government business schemes designed to support businesses during the COVID-19 pandemic. These include Government furlough scheme, business rates concession for retail stores and business rates grants. As of the date of these financial statements the company continues to generate revenue and positive cashflow mainly through online sales. ‘The directors have made enquiries of its parent, and its ability to provide support and have received appropriate assurances that itis in a position to provide the necessary support. The directors were confirmed by the Parent company that despite negative impact on economic performance due to lockdowns positive cash flow of 99 Million Euros was reported from operating activities in Q3 (Sept 2020). Further, the Parent company had a Cash balance of 829 Milion Euros as of the September ” SWAROVSKI UK LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) For the Year Ended 31 December 2019 2020. Parent company was in. After making the necessary enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the financial statements. As at the date of signing these financial statements, the Covid-19 pandemic is still ongoing, and the United Kingdom is in varying degrees of lockdown measures. The company continues to control spend ‘and monitor ongoing business trading levels. There is no significant impact in the short to medium term ‘on the going concem as the company has seen a significant increase in the online sales that mitigated the risk faced by the reduction in offiine sales due to lockdown Disclosure exemptions for qualifying entities under FRS 101 FRS 101 sets out a reduced disclosure framework for a ‘qualifying entity’ as defined in FRS 104 which addresses the financial reporting requirements and disclosure exemptions in the financial statements Cf qualifying entities that ctherwise apply the recognition, measurement and disclosure requirements of EU-adopted IFRS. The company is a qualifying entity or the purposes of FRS 101. Note 16 gives details of the company's, holding company and from where its consolidated financial statements prepared in accordance with IFRS may be obtained ‘The Company has taken advantage of the following exemptions: (IFRS 7, ‘Financial Instruments: Disclosures’ (il) The following paragraphs of IAS 1, ‘Presentation of financial statements’ — 104d), (statement of cash flows), = 16 (statement of compliance with all IFRS), — 38A (requirement for minimum of two primary statements, including cash flow statements) Disclosure exemptions for qualifying entities under FRS 101 (continued) = 38B-D (additional comparative information) —111 (cash flow statement information), and = 134-136 (capital management disclosures) (ii) WAS 7, ‘Statement of cash flows, (iv) Paragraph 17 of IAS 24, ‘Related party disclosures’ (key management compensation) (¥) The requirements in IAS 24, ‘Related party disclosures’ to disclose related party transactions entered into between two or more members of a group. Revenue Revenue represents retail sales made and recognised at the point of sale and net sales recognised on delivery of goods, net of returns, relevant vouchers or offers and excluding value added tax. Other income ‘Commission income is recorded on an accrua''s basis. Membership fees relate to fee income in respect of the Swarovski Crystal Society and are recognised over the period to which membership relates, on a straight-line basis. Tangible assets Property, plant and equipment is stated at cost less depreciation. Depreciation on property, plant and equipment is calculated to write off their cost over their useful lives by equal annual instalments, SWAROVSKI UK LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) For the Year Ended 31 December 2019 Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as ‘appropriate, only when itis probable that future economic benefits associated with the item will flow to the company and the cost of the items can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred ‘The estimated useful lives of property, plant and equipment by reference to which depreciation has been calculated are as follows: ‘Showcases and Motor vehicles S years Fixtures, fittings, and IT equipment years ‘Short leasehold property improvements are depreciated over the period of the lease, Property, plant and equipment is reviewed annually for impairment and writen down as necessary when circumstances indicating impairment arise Anasset's carrying amount is written down immediately to its recoverable amount ifthe asset's carrying amount is greater than its estimated recoverable amount. Intangible assets Intangible assets relate to the goodwill arising upon the acquisition of the trade and assets of a group ‘company who previously operated the Nordics. Intangible assets are measured initially at cost Intangible assets with a finite useful ite are amortised, with additional impairment testing carried out on an annual basis. Intangible assets related to online sales rights are considered to have a useful life of three years and will not be amortised on a straight line basis. Impairment of non-financial assets Non-financial assets that are not ready to use are not subject to amortisation and are tested annually for impairment, Assets that are subject to amortisation are reviewed for impairment whenever events cr changes in circumstances indicate that the carrying amount might not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). Prior impairments of non-financial assets (other than goodwil) are reviewed for possible reversal at each reporting date. Financial assets The company classifies its financial assets in the following categories: at amortised cost; and loans and receivables. The classification depends on the purpose for which the financial assets were acquired, Management determines the classification of its financial assets at intial recognition, Financial assets at amortised cost The company classifies its financial assets as at amortised cost only if both the following criteria are met 1. The asset is held within a business model whose objective is to collect the contractual cash flows, and 2. The contractual terms give rise to cash flows that are solely payments of principal and interest 9 SWAROVSKI UK LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) For the Year Ended 31 December 2019 ACCOUNTING POLICIES (continued) Inventoris Inventory is stated at the lower of cost and net realisable value. In general inventory is determined on an average weighted price basis and includes transport and freight costs, and where applicable cost of conversion to current condition. In the case of finished ‘goods, costs include all direct expenditure and related production overhead, Where necessary, provision is made for obsolete, slow moving and defective inventory. ‘Net realisable value comprises the actual or estimated selling price (net of trade but before settlement discounts) less all further costs to completion and less all costs to be incurred in marketing, selling and distribution. Trade and other receivables Trade and other receivables are amounts due from customers for merchandise sold or services performed in the ordinary course of business. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. The company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all rade receivables. To measure the expected credit losses, trade receivables have been grouped based on credit risk characteristics and the days past due. Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the ‘statement of financial position, bank overdrafts are shown within borrowings in current liabilities. Business combinations and goodwill Business combinations are accounted for by applying the purchase method. The cost of a business ‘combination is the fair value of the consideration given and liabilities incurred or assumed plus the costs directly attributable to the business combination, Contingent consideration is intially recognised at estimated amount where the consideration is probable and can be measured reliably. Where (i) the contingent consideration is not considered probable or cannot be reliably measured but subsequently becomes probable and measurable or (i) contingent Consideration previously measured is adjusted, the amounts are recognised as an adjustment to the cost of the business combination. On acquisition of a business, far values are attributed to the identifiable assets, liabilities and contingent liabilities unless the fair value cannot be measured reliably, in which case the value is incorporated in

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