The directors present the strategic report together with the audited financial statements for the year ended 31 December 2019.
The directors actively monitor the key performance indicators (KPI’s) of the subsidiary undertakings and feel that turnover, gross margins and EBITDA are important indicators of the performance of the UK group’s business. The directors also monitor the net assets or liabilities and working capital of its key trading subsidiaries, Rotary Watches Limited (“RWL”) and Rotary Overseas Limited (“ROL”) and with reference to these KPI’s and forecasts for the UK subsidiaries, the directors consider the carrying value of its investments therein.
For the year ended 31 December 2019 Rotary Watches Limited and Rotary Overseas Limited recorded losses and net liabilities.
The company closed the year with net assets and net currents assets of £4.9 million (2018: £4.9 million).
The UK group continues to have the financial support of its ultimate parent company, Citychamp Watch & Jewellery Limited, a company listed on the Hong Kong Stock Exchange and has plans in place to further cut costs whilst continuing to negotiate with major customers and suppliers to maintain or improve margins in both the UK and international markets, wherever possible, and to continue trading as a going concern.
The market for wrist watches remains highly competitive and sensitive to the fortunes of the economy. The company seeks to manage the risk of losing customers to key competitors within its chosen sectors of the UK watch market through continued promotion of the brand and further productivity efficiencies to enhance the service levels enjoyed by its customers.
The impact of Brexit on the group will have little effect on sales and supplies in the perspective of key contracts and border crossing costs.
Financial risk management
Liquidity risk
The company manages its cash and borrowing requirements in order to maximise interest income and minimise interest expense, whilst ensuring the company has sufficient liquid resources to meet the operating needs of the business.
The company monitors cash flow as part of its day to day control procedures. The Board considers cash flow projections on a monthly basis that look forward for a period of not less than twelve months and ensures that appropriate facilities, either external or from the parent company, are available to be drawn upon as necessary
2019 proved to be a challenging year, with demand dampened by the impact of Brexit on consumer confidence. In the view of this uncertainty, we continued to cut our costs and improve margin wherever possible.
We continue the implementation of our diversification strategy in terms of markets overseas, with a shift in emphasis to developing new markets over the next three years and building our product portfolio to accommodate the demands of this strategy.
In addition, we will continue to rationalise our resources to save costs and to examine sharing resources within the CWJ group to develop further savings and improved operational efficiencies.
In May 2019, the Dreyfuss Group Limited, paid off the UK group external bank facilities at both the parent and trading subsidiaries level after receiving a loan from the ultimate parent company, Citychamp Watch & Jewellery Limited, a company listed on the Hong Kong Stock Exchange .
The company is reliant on the financial support of its ultimate parent company in the context of non-recall of existing intercompany loans and further ongoing support to fund operations so as to enable the company to meet its obligations as they fall due. As stated in note 2.2, these events or conditions, indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern.
Covid-19
In March 2020, the Covid-19 outbreak was declared a pandemic by the World Health Organization. The directors have considered the effects of this on the trading performance and position of the company subsequent to the year end. The directors are of the opinion that the company can continue to operate as a going concern for the foreseeable future and have adopted the going concern basis in preparing the annual report and financial statements.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2019.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The results for the year are set out on page 7.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
Kingswood LLP were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
Basis for opinion
Material uncertainty relating to going concern
We draw attention to note 2.2 to the financial statements which indicates that the company is reliant on the financial support of its ultimate parent company to enable it to meet its obligations as they fall due. As stated in note 2.2 , these events or conditions indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the directors' r eport for the financial year for which the financial statements are prepared is consistent with the financial statements ; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' r esponsibilities s tatement, 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 ability to continue as a going concern, disclosing, as applicable, matters related to going concern 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.
Our 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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities . 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.
The Income Statement has been prepared on the basis that all operations are continuing operations.
The Dreyfuss Group Limited is a private company limited by shares incorporated in England and Wales. The registered office is 8th Floor Elm Yard, 13-16 Elm Street, London, WC1X 0BJ. The Dreyfuss Group Limited is the holding company for the trading companies: Rotary Watches Limited, Rotary Overseas Limited, Fabrique de Montres Rotary S.A. and Rotary Watches LLC.
The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements , including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group . T he company has therefore taken advantage of e xemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash f low and related notes and disclosures ;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income ;
The company is a subsidiary company and is exempt from the requirement to prepare group accounts by virtue of section 401 of the Companies Act 2006. These financial statements therefore present information about the company as an individual undertaking and not about its group.
The financial statements of the company are consolidated in the financial statements of Citychamp Watch & Jewellery Group Limited . These consolidated financial statements are available from Hong Kong Stock Exchange through its website www.hkex.com.hk.
As at the year end the company's subsidiaries were loss making with net liabilities. The company and its subsidiaries relies on the financial support of its ultimate parent company, Citychamp Watch & Jewellery Group Limited.
The company has received written confirmation from its ultimate parent company confirming that it will not recall existing loans and will continue to provide financial support in relation to the company and its subsidiaries' working capital requirements.
Taking into consideration the impact of Covid-19 and having reviewed the cash flow forecasts, for the period of not less than 12 months from the date of approval of these financial statements, and having made appropriate enquiries of the ultimate parent company with regards to their intention and financial means to provide the ongoing financial support, as specified in the written confirmation received, the directors have concluded that it is appropriate to prepare the financial statements on a going concern basis. Notwithstanding this intention, there is no contractual certainty that such support will be made available. This represents a material uncertainty that may cast significant doubt about the company's ability to continue as a going concern.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of Comprehensive Income.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate, which is an approximation of the amount that the company would receive for the asset if it were to be sold at the reporting date.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade payables or receivables, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration, expected to be paid or received. However if the arrangements of a short term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in case of an out right short term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.
Functional and presentation currency
Items included in the financial statements for the company are measured using the currency of the primary economic environment in which the entity operates (‘’the functional currency’’). The financial statements are presented in ‘sterling’, which is the company’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of Comprehensive Income within 'finance income or costs'. All other foreign exchange gains and losses are presented in the Statement of Comprehensive Income within 'other operating income'.
In preparing these financial statements, the directors have had to make the following judg e ments:
Determine whether there are indications of impairment of loans and investments. Factors taken into consideration in reaching such a decision include the financial position and current and expected future performance of the underlying subsidiaries and support otherwise provided by the ultimate parent company.
Audit fees of £2,500 (2018 - £2,500) were borne by Rotary Watches Limited a subsidiary of The Dreyfuss Group Limited.
Details of the company's subsidiaries at 31 December 2019 are as follows:
All companies incorporated in England and Wales have the same registered address as The Dreyfuss Group Limited, 8th Floor Elm Yard, 13-16 Elm Street, London, WC1X 0BJ. The two Switzerland incorporated entities registered addresses are Leopold-Robert 88 CH-2300 La Chaux-de-Fonds Switzerland. Rotary Watches LLC registered address is 400 Garden City Plaza, Garden City, NY, 11530-3317. The Dreyfuss Group (Shenzhen) Co Ltd registered address is Room 701 Haosheng Commercial Centre, Dongbin Road, Nanshan District, Shenzhen, 518052 China.
The bank loans and overdrafts were secured by a fixed and floating charge over all assets of The Dreyfuss Group Limited (the company) and its subsidiaries, Rotary Watches Limited and Rotary Overseas Limited . All bank loans and overdrafts were repaid in May 2019.
Financial assets measured at amortised cost comprise intercompany receivables.
Financial liabilities measured at amortised cost comprise bank loans and intercompany payables.
The company’s reserves are as follows:
The called up share capital represents the nominal value of the shares issued.
The share premium account includes the premium on issue of equity shares, net of any issue cost.
The capital redemption reserve contains the nominal value of own shares that have been acquired by the company and cancelled.
The capital reserve represents capital contributions made to the company.
The profit and loss account represents cumulative profits or losses, net of dividends paid and other adjustments.
There have been 2 significant events since the year end:
The UK’s exit from the European Union
On the 1st January 2021 the UK officially exited the European Union and was no longer a member of the Single Market. This change primarily impacted our exports to the EU with the additional logistical requirements needed to clear shipments through customs.
Currently the group does not import products from EU suppliers and so exiting the EU has not impacted our supply chain which is predominantly based outside the EU.
The financial impact has been minimal due to EU customers making up less than 10% of the group’s annual turnover and we continue to trade with EU based customers.
Covid-19
The biggest challenge that has affected business this year is the Global Coronavirus Pandemic that began to gather pace at the end of 2019 which continued throughout 2020 and into 2021. During that period the group has continued to operate effectively by moving head office functions to home working and carefully adapting the working environment and working practices within the warehouse to safeguard the health and wellbeing of colleagues.
The initial economic impact was on the supply chain but as the virus has spread around the globe, this is having a major impact on our customers as markets close, society comes to a virtual standstill and the Global economy has fallen into recession.
This biggest issue the UK group has faced are the National Lockdowns and the impact this has had on the UK’s spending habits. This is especially so as the UK Market accounts for over 80% of our turnover the majority of which is through High Street retailers. To reduce the impact of the closure of High Street retailers, some of whom may never reopen, we have increased our online presence through our own Website and that of Amazon and the Amazon Market Place.
Positively the UK is successfully achieving its Vaccine roll out programme with the news that the majority of restrictions in place will be lifted during Q2 2021 and the positivity and hope this offers, does show a light at the end of the tunnel.
In accordance with FRS 102 paragraph 33.1A, the company has taken the exemption from disclosing related party transactions with entities that are part of The Dreyfuss Group Limited. The company has also taken exemption from disclosing transactions with entities which are wholly owned subsidiaries of Citychamp Watch & Jewellery Group Limited, the ultimate controlling party.
The company's immediate parent company is International Volant Limited, a company incorporated in Hong Kong. The ultimate controlling party is Citychamp Watch & Jewellery Group Limited, a company incorporated in Cayman Islands and listed in Hong Kong Stock Exchange, by virtue of its shareholding in International Volant Limited. Citychamp Watch & Jewellery Group Limited is the parent company of the smallest and the largest group in which the results of the company are consolidated. The financial statements of Citychamp Watch & Jewellery Group Limited are available from Hong Kong Stock Exchange through its website www.hkex.com.hk.