Good afternoon, ladies and gentlemen. Welcome to the investor presentation of Sa Sa International Holdings Limited annual results for the year end March 31, 2018. Before the presentation, let me introduce the company representative on stage. Dr. Simon Kwok, SBS, JP, Chairman, and CEO.
Hello.
Dr. Guy Look, CFO and Executive Director.
The agenda today will begin with Dr. Kwok going through the annual results highlights, followed by Dr. Look walking us through the financial performance, business review, and outlook in detail. There will be a Q&A forum afterwards. We will now invite Dr. Kwok to go through the annual results highlights for us. Dr. Kwok, please.
Good afternoon, ladies and gentlemen. Welcome to Sa Sa's annual results investor presentation for the year ended 31 March 2018. Driven by the ongoing recovery of local consumption and the robust growth of mainland tourist arrivals, the group's turnover, supported by a strong results performance in the fourth quarter, increased by 6.2% year-on-year to HKD 8,017 million. Leveraging our strenuous efforts to control costs and improve operations, our profit for the year increased by 34.7% to HKD 440 million. In our core market of Hong Kong and Macau, our overall sales growth was driven by the favorable local consumption environment and strong consumer sentiment, a higher employment rate and sustained economic development in the third and fourth-tier cities of mainland China, and the strength of the renminbi.
Following the consolidation and relocation of our Hong Kong warehouses in October last year, our performance gathered momentum towards the end of the fiscal year, resulting in much better performance in the second half than in the first half of the year. Retail sales grew by a dynamic 18.6% in the fourth quarter, the highest quarterly growth rate within the fiscal year. We saw overall gains in the purchasing power of customers in our Hong Kong and Macau markets, which was reflected in increased store traffic, the growing number of transactions, and higher average sales value per transaction. Over the year, we expedited new product launches to enrich our broad spectrum of product mix catering to the market, and we achieved a better balance between sales growth and gross profit margin. Towards the end of the second half, the group launched more high-volume, trendy products to successfully drive traffic.
This led to an increase of over 11.8% in gross profit, while compromising gross profit margin with a decrease of 0.4%. In line with our effective store strategy, we relocated to some new stores at premium locations in tourist districts and away from second-line locations. The aim of this was to adjust rents, enhance brand exposure, drive customer traffic, and generate sales growth. Due to faster sales growth in the second half of the year, the group's rental-to-sales ratio recorded a notable decline for the full year. We consolidated and relocated our Hong Kong warehouses during the year, which has gradually improved our logistics and inventory management. By process optimization, we have achieved significant improvements in efficiency of the entire logistic operation and cost control regime. This also strengthened our information technology system to optimize the checkout process, strengthen interactions with customers, and offer them an enhanced shopping experience.
In the mainland China market, we stabilized the local management team while boosting overall operational efficiency. To strengthen cost and efficiency management, we closed non-performing stores in isolated locations, while at the same time opening new stores in key city clusters within close proximity. Facing both challenges and opportunities brought about by the rapid development of e-commerce, the group is starting to adjust our internal structure by merging the online team of the category management and product development function with that of the main team running the Hong Kong and Macau physical stores. We also began to consolidate online and offline customer data in order to establish an integrated VIP database and to collect and analyze customer behavior, all of which strategies are driving forces for new retail.
These measures are helping us to attract customers and to provide them with one-stop personalized product recommendations and targeted promotions to enhance customer loyalty. In the meantime, we continue to collaborate with renowned e-commerce platforms in mainland China, thereby expanding our customer base. In addition to optimizing our mobile app to improve customer experience, we also optimized operation of the free trade zone warehouse in mainland China and increased output efficiency via the cross-border e-commerce B2C direct mailing services. These initiatives enabled us to meet customers' growing demands in regard to delivery time and to achieve a reduction in our overall logistic costs.
During the year, we decisively terminated our loss-making retail business in Taiwan in order to concentrate our resources to enhance operations in our mainland China, Hong Kong, Macau, Singapore, and Malaysia markets, as well as our e-commerce business. In the overseas markets, we faced challenges in Malaysia and Singapore. In particular, the uncertain political climate in Malaysia before and after the general election, and the subsequent major reform initiatives weakened consumer sentiment. In both markets, we will focus on continuous improvement with a readiness to capitalize on market trends of products and customers' consumption preferences to enhance the group's competitiveness and drive sales. The buoyant local and regional economy benefited property sales and investment during the year, while stimulating the momentum of local consumption and contributing to the group's faster sales growth. Benefiting from various favorable factors, we are optimistic about the operating environment in the next fiscal year.
When the Hong Kong-Zhuhai-Macau Bridge and Guangzhou-Shenzhen-Hong Kong Express Rail Link are officially launched, the Greater Bay Area is expected to form a one-hour living circle of cities and towns in close proximity to each other. This circle will generate an abundant flow of people and considerable consumption potential from a population of more than 68 million across nine mainland cities with two special administrative regions, including Hong Kong. This ever close integration will undoubtedly drive further economic development in the Greater Bay Area. As an international hub of finance, services, and retail industries, Hong Kong is expected to benefit from the area's robust economic development. Product strategy is a key to boosting store traffic. The group will continue to strategically optimize our product portfolio and accelerate the launch of high-volume trendy products to attract traffic.
Our overall aim is to achieve better balance between sales growth against gross profit margin to maximize contributions to the group's turnover and profits. Benefiting from the new retail trend and our core flexibility, Sa Sa will continue to seize market opportunities for development of e-commerce business going forward. We believe that the ongoing integration of our online and offline business will strengthen our interaction with customers, provide them with better service, and deliver a more intimate shopping experience. Leveraging the enhanced capabilities of our new warehouse, we will continue to strengthen warehouse management and automation to provide overall logistic efficiency. Digital innovation and automation will be among our key focus areas for improvement.
Measures to be taken include enhancement of our POS system, implementation of the CRM project to integrate online and offline customer big data from our mainland China, Hong Kong, and Macau markets, and the launch of a new e-commerce solution to enhance the group's competitiveness. We remain firmly committed to enhancing the shop experience of our customers and to generating sustained returns for our shareholders. I am now going to give the floor to Guy, who will explain in detail Sa Sa's financial and operational performance for the year. Thank you.
Ladies and gentlemen, welcome to Sa Sa International Holdings Limited's annual results presentation for the year end of 31st March 2018. For those without a seat, I do apologize for your discomfort. There is not much we can do right now. I do apologize. It is a sign of good times, I suppose.
Let's go through what we have today for you. First of all, we have the group's financial performance, then our business review by market, then the outlook and the way forward. As you all know, we have now terminated our Taiwan retail operations, and as such, our presentation today will cover only the continuing operations. Taiwan would be excluded unless we mention otherwise. Our turnover increased by 6.2% to HKD 8,017.6 million. Gross profit up by 7.4% to HKD 3,373.9 million. Profit for the year from continuing operations improved by 35.8% to HKD 465.2 million. We incurred a loss in Taiwan of HKD 25.1 million, and after taking that off, the profit for the year amounted to HKD 440.1 million. Earnings per share, excluding Taiwan, amounted to HKD 0.154, and including Taiwan, amounted to HKD 0.146 per share.
Our return on equity improved by 3.2% to 19.1%, and gross profit margin improved by half percent to 42.1%, whereas our net profit margin improved by 1.3% to 5.8%. We are proposing a final dividend per share of HKD 0.11, and to commemorate our 40th anniversary, also proposing an additional HKD 0.03 per share, making a total final dividend of HKD 0.14 a share and a total annual dividend of HKD 0.175 per share, representing a payout ratio of 121%. Hong Kong and Macau accounted for 84.3% of the group turnover. Mainland China accounted for 3.7%. Singapore accounted for 2.7%, and Malaysia 4.5%, and e-commerce wrapped it off with 4.8%. We have a strong financial position. We increased our cash by HKD 89.1 million to HKD 166.1 million. Included in that is an investment of HKD 70 million into the relocation and consolidation of our Hong Kong warehouse.
Our cash generated from operating activities increased by HKD 391.5 million to HKD 748.2 million, allowing us to increase our cash balance by HKD 396.7 million to HKD 1,365.4 million. This cash position continued to improve into April and in fact, May. At the end of April, we have HKD 1,394.9 million, and at the end of May, we have approximately that as well. We moved on to business review by market. Our sales growth has been recovering throughout the year. The performance particularly showed good signs of growth in the second half. Retail sales improved from a first half growth of 2.2% to second half growth of 13% to give us full year improvement of 8%. On a same store basis, we improved from a decline of 2.1% in the first half to a growth of 9.1% in the second half, giving us a full year growth of 3.9%.
Number of transactions has been the most notable growth driver in the second half. As you can see, the first half saw a decline of 1.1% in transactions, in the second half, a growth of 8.5%, and a growth of 3.8% for the full year. The improvement in volume, as mentioned earlier, has been driving sales growth. The black line denotes the change in mainland tourist arrival in Hong Kong. As you can see, there's a clear and strong underlying current of growth in their arrival. This is due to the wealth effect of third and fourth-tier city residents in China and the strong renminbi. The pink line denotes transactions at Sa Sa by the mainland tourists. Our transaction volume has been growing again and outperforming mainland tourist growth in the fourth quarter.
This follows the completion of our warehouse relocation and having put more weight on trendy products. In mainland China, we have achieved consistent improvements in the last three years. While the average number of stores has not grown, in fact, has dropped by one. The consolidation process has allowed us to improve our retail sales. As a result, sales improved from a decline of 3.9% last year to 5% growth this year. Total operating loss has reduced from HKD 12.9 million to HKD 8.9 million. The improvements in China is due to stabilization of management team, closure of underperforming stores in remote cities, and opening of new ones in major cities and nearby areas. The building of clusters of stores and management team in well-managed provincial capitals. In doing so, improving overall store management effectiveness.
The reduction of supply chain delivery time by nearly half and reduction of logistic cost by a third has certainly contributed to improvement in the bottom line. e-commerce operations. We focused on core competence and profitability for the year. As a result, our gross profit margin is up, logistic cost down, and the weighted average delivery time reduced from 10 days to seven.
Our sales, while has declined by 19.3% because of our focus on core competence and profitability, our net loss has reduced by HKD 38.8 million to HKD 28.3 million. In other markets, we have focused on Singapore and Malaysia. The average number of store in Singapore has reduced by two. But because of a same-store growth of 8.7%, we have been able to drive up the top line by 1.9%. This is because of stabilized management team in Singapore, and resulting in significant performance improvement in second half.
In Malaysia, the average number of stores increased by four to 73, and sales has grown by 6.1%. On a same store basis, we declined marginally by 1.2% because of a rather difficult operating environment. There have been many new malls diluting traffic to existing malls. The political uncertainty before and after the election has affected consumer sentiments. But we're in a strong position to adapt to market changes. For Taiwan, we have closed all our stores by now. Looking ahead, there are clear signs of sustained growth in Hong Kong, Macau. In the short and medium term, we see strong and improving local consumer sentiment, and according to WeChat, Hong Kong is still the most popular travel destination for Mainland China travelers.
Because of the wealth effect of third and fourth-tier cities residents, and the strength of renminbi driving outward bound travel and consumption, we stand here to benefit. In the longer run, the Greater Bay infrastructure development will be in service later this year, and Hong Kong, Macau economies will benefit from the Greater Bay strategic developments. Retail will certainly enjoy major benefits as the economies grow in the Greater Bay Area. We will continue to develop our store network and scale in the Greater Bay Area and increase the number of stores in residential areas, transport hubs, and near the mainland border. We would also increase size of stores with high traffic. We would invest in technologies and adopt new retail practices for better customer experience. This involves improving our POS and adopt in-store technologies, implementing new e-commerce solution, and integrating our online and offline customer database.
We would improve logistics effectiveness and efficiency for both online and offline operations. We will continue to improve product offerings to maximize market share and gross profit dollar. In Mainland China, the new retail phenomena is boosting consumption and improving the prospect of both online and offline retail. The weaker rental market offers wider choices of stores with lower costs, a favorable condition for our expansion of store network. We will expand cautiously in regions with strong management to build critical mass in existing clusters. In the Greater Bay Area, we target to open about 4 new stores in Mainland in this year, and confirmed to be located in Dongguan, Zhuhai, and Jiangmen. We would adopt new technologies to enhance in-store customer experience and improve product offerings to draw traffic. We stand to benefit from improving logistics function and integration of online, offline customer database.
For e-commerce, we would invest in technology to integrate our online, offline customer database using the Salesforce SaaS solution and use business intelligence for better customer experience. We would implement new e-commerce solution and optimize our backend infrastructure for mobile app. We would collaborate with other well-known third-party e-commerce platforms, acquire new customer database, and increase exposure at reasonable costs. We will enhance our operating efficiency by improving logistic function. We are starting to integrate our category management and product development teams to improve new product launches, inventory management, and coordination. In the other markets, in Singapore, we would improve incentives to boost staff morale and effectiveness and improve store display and space to enhance shopping experience and broaden young customer base. We would open more stores in suburban centers and launch mobile app.
In Malaysia, consumer sentiment has been affected by political uncertainties before and after election and new government's innovation. We plan to establish online elements to increase competitiveness. In Taiwan, we are exploring avenues to distribute house brand products through third-party retail networks. For brand management and product development strategies, we would strategically offer trendy and popular products with high volume on a timely basis, fill our product gaps by function and price points, and strengthen makeup product portfolio and display. We would strengthen house brands through digital media. We would build closer partnerships with buyers and utilize big data and provide multiple touch points and personalized products and services to customers. Thank you very much.