Good afternoon, ladies and gentlemen. Welcome to the investor presentation of Sa Sa International Holdings Limited Annual Results Year 2018/19. Before the presentation, let me introduce the company representative on stage, Dr. Simon Kwok, SBS, JP, Chairman and CEO.
Hello, everyone.
Dr. Guy Look, CFO and Executive Director.
Welcome, everyone.
The agenda today will begin with Dr. Kwok going through the annual results highlights, followed by Guy Look walking us through the financial performance, business review, and outlook. There will be a Q&A forum afterward. Please be reminded to mute your mobile phone and not to have audio recording during the presentation. At the online front, we have arranged a live audio webcast for overseas participants today. Please feel free to enter your proposed questions throughout the presentation. We will now invite Dr. Kwok to go through the annual results highlights with us. Dr. Kwok, please.
Good afternoon, ladies and gentlemen. Welcome to Sa Sa's Annual Results Investor Presentation for the year ended 31st March 2019. Throughout the past year, the external environment was impacted by strong headwinds. Competition in the industry has intensified, and customer expectations for products and shopping experiences have become ever higher. To cope with these challenges, the group has continued to make concerted efforts to adjust its strategy to the market. Leveraging our strenuous efforts, the group's turnover increased by 4.5% to HKD 8,376 million for the year. Profit increased by 7% to HKD 417 million on the back of our stringent control on rental and logistics costs, and after discontinued operations in Taiwan were taken into account. In our business performance in the core markets of Hong Kong and Macau, there was a significant difference between the first half and the second half of the fiscal year.
During the first half of the year, effective product strategy enabled us to achieve encouraging results. However, the Sino-U.S. trade war triggered the depreciation of the renminbi in the second half, with customers becoming more prudent in consumption. Furthermore, the implementation of the E-Commerce Law of the People's Republic of China in mainland China this year and fierce competition in the industry offset the majority of our gains from the first half of the year. As a result, we recorded growth of only 4.9% in sales for the fiscal year. Although the launch of the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong Express Rail Link and the Hong Kong-Zhuhai-Macau Bridge boosted the number of visits by the mainland tourists to Hong Kong, the inflow consisted mainly of sightseeing trippers. This did little to stimulate the group's overall sales in Hong Kong.
Nevertheless, we believe that the state policy of fostering the development of the Guangdong-Hong Kong-Macau Greater Bay Area and improving its infrastructure will boost the economy in the area. This, in turn, will strengthen Sa Sa's long-term development. Due to adjustments to our product portfolio in the first half of the year and slower growth in sales of our house brand products in the second half, gross profit margin decreased by 1.3 percentage points to 40.4% during the year. We have taken measures to adopt a more balanced approach in adjusting our product portfolio to meet the changes in the market. Although growth in overall sales has not yet resumed, the effectiveness of the measures undertaken has gradually been reflected in our performance. We have also applied stringent cost controls in other areas. Rent edged up by a mere 0.5% upon renewal of leases.
During the year under review, we have enhanced the efficiency of our logistics in general, consolidating our warehouses in Hong Kong and improving the space utilization and the management of logistics and inventory. The group has piloted a mobile payment system at some of its retail stores to shorten the time of queuing at checkouts. We also plan to fully replace our POS system with a new one by the end of the fiscal year 2020 to enhance customers' overall shopping experience. In the mainland China market, we optimized our store network and opened new stores in the Greater Bay Area and some other key cities beyond that area. We also restructured our product sourcing team and adjusted our product portfolio. As a result, sales performance gradually improved in the second half of the year. E-commerce is playing an important role in our new retail model.
We have been developing an integrated customer database where customer data collected at our brick-and-mortar stores in Hong Kong, Macau, and mainland China, as well as from our e-commerce business, is consolidated, laying the foundation for targeted digital marketing. To achieve the expected goals of the integrated customer database, the group has to overcome a number of challenges, including the restructuring of our business units, changing work processes, and commission reward system for frontline staff. The group is committed to making this initiative work through dedication, patience, and expertise. We will also continue to explore opportunities to collaborate with various renowned e-commerce platforms and to improve logistics. All these measures will give us a cost advantage.
In the overseas markets, to interact more closely with customers and strengthen customer loyalty, the group will launch a click and collect service in Malaysia and Singapore to provide customers with a more convenient and pleasant shopping experience. Looking towards the future, we expect the retail market to remain challenging, especially the impact of the Sino-U.S. trade conflict, which may lead to a slowdown in global economic growth. The group will adjust its strategy according to the market environment. On the positive side, the central government has introduced a number of measures to stabilize the economy and has implemented various new policies and launched infrastructure projects to foster the development of the Greater Bay Area. These are expected to generate significant opportunities for the group. Last month, Sa Sa was included in Hang Seng's Stock Connect Greater Bay Area Index series.
The Greater Bay Area is one of the group's key development regions. We will continue to capitalize on state policy for the Bay Area in order to enhance the group's competitive advantages. The group will continue to enrich its product portfolio and offer more high-end brand products in order to strengthen the linked sales of products under our own brands and boost turnover. Meanwhile, we will make use of big data to study and analyze customer preferences so that we can introduce more new and promising products. The new retail model is the core of our strategic development in the medium to long term. Sa Sa will capitalize on the integrated customer database and press on with digital innovation and automation to provide customers with a completely seamless online-to-offline shopping experience.
Many challenges lie ahead, but we are ready for them with our solid financial foundation, flexibility and adaptability. We will continue to maintain our competitive advantages and work for good returns to our shareholders. Now I pass the floor to Guy Look, who will explain Sa Sa's financial and operational performance for the year.
Thank you. Good afternoon, ladies and gentlemen. Welcome to Sa Sa International Holdings Limited's annual results presentation for the year ended March 31, 2019. Our agenda today covers financial performance, business review, and outlook and future plans. First of all, our group's financial performance. Our turnover increased by 4.5% to HKD 8,375.9 million. Gross profit increased by 1.3% to HKD 3,417.8 million, and profit for the year increased by 1.5% to HKD 472.1 million. If we include discontinued activities, then profits increased by 7% to HKD 470.8 million.
Earnings per share increased by 5.2% to HKD 0.154, and return on equity improved by 1.2 percentage points to 18.9%. We are proposing a final dividend of HKD 0.09, which together with an interim dividend already paid of HKD 0.07, would make a total annual dividend payable per share of HKD 0.16, representing a payout ratio of 105%. In respective sales mix, Hong Kong, Macau represents 84.7%, while e-commerce contributed 4.7%, Malaysia 4.6%, mainland China 3.4%, and Singapore 2.6%. The group has a strong financial position. Cash in bank stood at HKD 1,140.6 million, a reduction of HKD 224.8 million. This is more than enough for our day-to-day operations and for our expansion. CapEx decreased by HKD 34.5 million to HKD 131.6 million. Please note last year we had a one-off CapEx for our warehouse relocation. Then we move on to business review.
Top- line growth in Hong Kong and Macau increased by 4.9%, whereas same- store growth increased by 3%. Transaction volume, average ticket size, and retail sales increased by 10.7%, 7%, and 18.5% in the first half. On the back of high growth from mainland tourist arrivals and new trendy products boosting volume of both mainland tourist and local customers. In the second half, transaction volume, average ticket size, and retail sales declined by 2.8%, 3%, and 5.8%. A number of factors affected our second half, including the Sino-U.S. trade war, which resulted in a weakened renminbi, weaker stock and property market impacting consumer sentiment. There was also a high base effect in the last quarter of last year, increasing the base against which we compare against. In fact, the second half of the current year declined on the basis of that and gave us a high base to compete against.
Daigou activities curtailed by central government affected us in the fourth quarter, and this also coupled with intensified competition from pharmacies all affected our performance. In mainland China, sales declined by 1.9% and same- store sales by 1.1%. We worked on our house brands in China, and the fruit of all this work started emerging in the second half. As a result, gross profit percentage, gross profit dollar, and store contribution all improved during this period, despite slightly negative same-store sales. The improved performance in the second half would be due to house brand issues gradually having been resolved through the reorganization of sourcing team and adjustment to product portfolio. As a result, sales of house brand products picked up from the third quarter, and retail sales and same-store sales picked up in the fourth quarter.
We opened a new warehouse in Wuhan, speeding up the delivery of products in Central and Western China, increasing our overall efficiency. A total of 16 shops currently operate in eight mainland cities in the Greater Bay Area, and we opened five during the last financial year, located in Dongguan, Jiangmen, Zhuhai, and Huizhou. In mainland China, recurring losses increased by HKD 2.4 million to HKD 13.5 million, and total operating loss increased by HKD 4.9 million to HKD 13.8 million. As mentioned earlier, our house brand sales improved in the second half. In fact, it drove our full-year gross profit percentage to rebound. As a result, the second-half losses contracted, but this was not enough to bring about a full-year improvement against last year. For our e-commerce operations, sales increased by 2.2%, and in mainland China, sales increased by 10.6%.
Third-party platforms have been the major growth driver, accounting for nearly 60% of our total sales. During the year, we focused our resources on our own website and mobile app, in terms of constructing new e-commerce engine and order management system. This distracted our efforts to drive sales, and as a result, this took a backseat. Recurrent losses and total losses both reduced during this period. Recurring losses reduced by HKD 4.8 million to HKD 24.8 million, and total operating loss reduced by HKD 1.8 million to HKD 26.5 million. We gradually phased in cross-border e-commerce mailing channels during the year, resulting in substantial savings in goods detention at customs, shortened delivery time, and a reduction of logistic costs from 15.3% to 10.9% of sales. In Malaysia, sales increased by 4.8% and same-store sales by 0.7%.
We increased our penetration of the Malay market, and we took actions to attract Malay customers, including changes to our customer loyalty program, targeted campaigns, and launching suitable makeup products. In Singapore, sales increased by 4.1%, and same-store sales declined by 0.2%. Our same-store sales declined due to a weaker local economy in the second half. We will launch a click-and-collect service to drive sales in this current financial year. We move on to outlook and future plans. In Hong Kong and Macau, we have a sustainable business development strategy involving product portfolio strategy to balance our product portfolio to support stable and sustained growth. Recognizing that our growth, while very fast, was more dependent on trendy products the previous year. We would embrace the digital world using big data to understand customer needs, formulate better product strategies, and improve customer experience and sales.
We will capitalize on development in the Greater Bay Area, which has favorable policies and infrastructure development that will improve economy and consumer sentiment. We will provide customer-centric and seamless customer experience. In Hong Kong and Macau, we will balance our product portfolio to support stable and sustained growth. Balancing between gross profit margin, which is dependent on product mix, and our gross profit contribution, which is more dependent on sales growth. Our product and sales channel strategies would include usage of big data to improve product portfolio management, to balance our product portfolio, to launch product faster, and to improve linked sales and enhance our gross profit percentage. We will enhance the sales effectiveness of sole agent products through the active expansion of wholesale distribution channels and target greater market penetration and revenue.
We have continuous efforts in eliminating low productivity SKUs, and dedicate more shelf space for new and high- productivity products and lower our inventory costs. In Hong Kong and Macau, we will capitalize on development opportunities in the Greater Bay Area. The GBA development plan, unveiled on February 18, 2019, involves Hong Kong becoming an international tourism showcase and hub for multi-destinations in the region and function as a core to build GBA branding with joint efforts to attract global tourists. GBA potential is fast. The high-speed rail link and bridge are only two out of 36 infrastructure projects, and Hong Kong's population of 7 million is only 1/10 of the 17 million in GBA. The National Economic Research Institute predicts that in 2050, the GBA population will increase from the current 5% of China's total population to 10%.
In the area of store network, we will open stores in target areas to fill gaps based on evolving demographics, changes in visitor arrivals via different entry points, and competitive landscape. We will manage rental cost and improve competitiveness of the store network. We will organize physical network and online operations to provide customers with seamless shopping experience online and offline. In Hong Kong and Macau, we will strive to manage changes to provide seamless shopping experience. This involves using one single centralized cloud customer database, consolidating customer database from Hong Kong and Macau stores, mainland China stores, and e-commerce operations. We have completed phase one of this work, involving the integration of the existing customer database from three business units. Next steps will include uploading transaction data, capturing new customers, identifying customers, and organizing different business units to serve each unique customer.
All these will help to increase customer loyalty and repeat purchases. We will adopt technology to improve customer experience. One of our efforts would be a new POS system to increase store capacity to handle higher traffic, shorten checkout time, and enable self-checkout and other IoT experiences. In the warehouse operations, we will enhance handling capacity and flexibility, shorten delivery time, and optimize cost-effectiveness. Our mainland China stores role to provide seamless shopping experience is to serve returning mainland customers of Hong Kong and Macau stores. Our China stores will improve their product offerings and work closely with local suppliers to introduce more popular new products to boost traffic. We will improve our store productivity and cost-effectiveness by recruiting and training more talented frontline staff and improve commission system. We will continuously optimize our store network and open stores in areas with high strategic value.
GBA is one of the key development regions. We have a brand-new CRM system to foster repeat purchases, target new members, and collect data for analysis. For our e-commerce operation, their role in seamless customer experience is the online element. We will further develop third-party platforms to fully leverage the strength of current and new platforms and to expand our customer database and drive sales. We will launch a new WeChat mini program to enable identification of customers and to facilitate new retail operations. We target to launch a new e-commerce engine and order management system to be completed this financial year. In the area of products, our strategy is to use big data to develop our strategy and to coordinate online off-line operations.
In Singapore and Malaysia, we will launch a click-and-collect service in this new financial year to cater the growing trend of online shopping, strengthen core competitiveness, and increase customer loyalty and repeat purchases. We will focus on product portfolio management, effectively introduce popular new products, improve our store display, enhance store productivity, and engage in attractive marketing activities to increase the exposure of Sa Sa and its product brands and acquire new customers. We will continue to attract both Malay and Chinese customers as we plan to appoint Malays as brand or product spokesperson. This concludes our presentation. Thank you.