Good afternoon, everyone. Welcome to Sa Sa investor presentation announce its annual result for the year end, March 31st, 2016. Before the presentation, let me introduce the company representative on stage, Dr. Simon Kwok, BBS, JP, the Chairman and CEO.
Hello.
Dr. Guy Look, CFO and Executive Director.
Hi, everyone. Welcome.
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, as well as the outlook in detail. There will be a Q&A section forum afterward. Now let me hand over to Dr. Kwok.
Good afternoon, ladies and gentlemen. Welcome to Sa Sa's annual results investors presentation for the year end of March 31, 2016. Over the past few years, the overall retail market has evolved rapidly. Internet disruption and fast-developing product trends have changed the behavior of consumers who now expect a seamless shopping experience and a higher level of service than ever before. During the past year, we, like other market players, have been striving to adapt to these latest market developments. Adding to the challenge, the downturn in the Hong Kong tourism industry and in local consumption sentiment have adversely impacted the retail sector, and as a result, Sa Sa recorded a weaker financial performance. The group's turnover decreased by about 12.8% year-on-year to HKD 7,845.9 million. Profit also declined by 54.3% to HKD 383.5 million.
The group added four new stores to our retail network, bringing the total number of our stores to 291 as at the end of the financial year. In Hong Kong and Macau, we have experienced a number of challenges, including cyclical economy weakness, the Hong Kong dollar at cyclical high, changes in the travel patterns and consumption behavior of tourists, Hong Kong's political situation, and the one-visit-one-week policy. As a result, the number of mainland Chinese tourist arrivals has been decreasing, leading to a drop of our sales in the Hong Kong and Macau markets. In response, we have implemented stringent controls over our rental costs. However, it takes time for the rental market to adapt to changes in the retail market, and our rental costs have continued to rise over the past year.
This rise in rental costs and our increased focus on sales promotions have impacted both our growth and net profits. Nevertheless, our guiding philosophy is that there are always opportunities in hard times. We will realign our business operations and implement our store opening and network consolidation strategy more cautiously, introduce new store formats, and add more online elements to cater to the lifestyle and shopping experience that customers now prefer. We will also adapt our management structure and resources to ensure effective execution in accordance with Sa Sa's most recent strategic thinking and to respond to market changes with flexibility and agility. During the year, we opened the trendy and stylish Sa Sa Boutique and Shine store formats to attract customers who are increasingly attracted to lifestyle concepts and brands.
These initiatives will help to broaden our client base, particularly of younger customers, while also increasing our market penetration and market share. In terms of product strategy, we will streamline our product portfolio and improve our sourcing process. This will enable us to introduce popular new products at a faster pace, and therefore strengthen our agility in the markets. In order to adapt to the important and evolving mainland China market, we have reformed the management team, accelerated O2O business development to tap growth in the market in line with government directions, and launched our trendy and innovative boutique store format, incorporating an O2O in-store element. In our overseas markets, we have successfully restructured our management team and operations and are beginning to reap the benefits of integrating the Singapore with the Malaysian team.
We will continue fine-tuning our strategic development in response to different markets in order to strengthen our overseas operations and achieve growth in market share. As for our online business, we will place greater emphasis on digital marketing and strive to enhance customer engagement. We will integrate our online and offline CRM, leveraging on the strength of our customer base and offline business, to further develop our online business and to provide a more comprehensive shopping experience for our existing customers. This will help us not only in retaining customers, but also in acquiring new ones. Looking ahead, the market environment will continue to be difficult and challenging.
However, I firmly believe that with the group's financial robustness, flexibility, and resilience, we will be able to turn difficulties into opportunities and maintain our competitiveness in hard times, remain firmly committed to enhancing the shopping 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 fiscal year of 2015 to 2016. Thank you.
Good afternoon, everyone. Welcome to Sa Sa International Holdings Limited's annual results presentation for the year end of 31st March 2016. Our agenda today covers group financial performance, business review by market, and outlook and the way forward. First of all, our financial performance. Our group turnover decreased by 12.8% to HKD 7,845.9 million. Profit for the year decreased by 54.3% to HKD 383.5 million.
Earnings per share decreased by 54.5% to HKD 0.134 a share. Gross profit margin decreased by 2.3% to 42.6%, and net profit margin decreased by 4.4% to 4.9%. We are declaring a final dividend comprising of HKD 0.09 of basic dividend and also HKD 0.055 of special dividend, which together with the HKD 0.09 of interim dividend already paid, would make a total of HKD 0.235 per share, representing a payout ratio of 176%. Very much like the interim dividend, we would give our shareholders the option to choose to receive script instead of cash with a 5% discount against markets. In terms of geographical mix, Hong Kong and Macau represented 80.5% of our group turnover. Mainland China, 3.9%. Singapore, 2.8%. Malaysia, 3.9%. Taiwan, 3.3%. And our online business, sasa.com, 5.6%.
Despite slower sales and a weaker profitability, we have been able to maintain a pretty solid financial performance in terms of financial position. Net cash and bank balance stood at HKD 1,079 million as at 31st March 2016. A small reduction of HKD 84.7 million compared to last year. This is because of a lower CapEx and very stringent management of our inventory, allowing us to generate more cash than we did for profits. Then we move on to business review by markets. In the Hong Kong and Macau market, sales decline accelerated in the second half. As a result, sales declined by 14.2% for the year, and on the same store basis, by 11.8%. Mainland tourist transactions decline accelerated in the second half, giving rise to a 6.1% decrease in transactions for the second half and 4.4% reduction for the full year.
As for locals, their basket size weakened significantly in the second half, giving rise to a 11.4% decline in average sales per transaction in the second half and a 10.2% reduction in basket size for the full year. The reduction in mainland customer transactions for us has been pretty much in line with the decrease in the number of tourist arrivals in Hong Kong. In fact, we are still a little bit better off than that because while our transactions decreased by 14.4% in the fourth quarter, the arrival figure actually tells us that the arrival declined by 15.1%. This is because of a strong Hong Kong dollar and substantially strengthened tourist facilities and convenient travel policies in other destinations, which has affected our own competitiveness.
This decline of tourist arrivals started in the second quarter of the year ended 2015-2016, directly affecting our transaction volume and it accelerated from there. The lower basket size reflects changes in visitor demographics and overall consumption behavior. As for local residents, you can see that they are increasingly traveling overseas. The graph shows the year-on-year change in departures through airports. You can see that in the fourth quarter, it went up to 17.6%. In fact, for the full financial year, the air traffic grew by 13.6% year-on-year, we believe due to the cyclical Hong Kong dollar strength. This, together with the weaker economy, has affected the basket size, especially in the second half, and is manifested by a shift to lower-priced products. In China, our store contribution and recurring results continue to improve despite sales weakness. Sales declined by 9.6%, partly because of fewer stores.
As a result, recurring loss decreased from HKD 23.4 million to HKD 19.9 million. As you can see in the table, there has been a non-recurring loss in respect of one-off inventory provisions that turned this improvement in losses to a further decline as compared to last year, giving us a total loss of HKD 32.7 million. We have had mixed performances in other markets primarily due to operational performances that have been affected by management changes.
We have put through management changes in all of these markets, Malaysia being the first to see the benefit of these changes with a sales improvement of 8.9%. For Singapore, sales decreased by 2%, and for Taiwan, sales decreased by 7.9%. As for our e-commerce business, sales increased by 6.2%. We put more focus on the China market, which actually grew by 26%, but this performance has been offset by decline in other markets.
We have implemented various measures in the PRC during the year, including the launching of our new mainland China website and mobile site. Also driving sales through emphasis on flash sales, getting attention from the market, and also increasing our marketing capability to drive traffic. In terms of brand management, our house brand mix has declined. The consumer preference has turned away from our traditional strength on higher priced products from Europe and from the U.S. towards lower priced Asian products. The house brand mix accordingly has declined from 43.3% to 41%. We move on to outlook and the way forward. There are, of course, challenges in the market, including cyclical economic weaknesses in mainland China and Hong Kong, cyclical Hong Kong dollar strength, changes in mainland tourist demographics and customer preferences, increasing competition, one-visit-one-week permits, and political situation in Hong Kong, and anti-mainland tourist sentiment.
Opportunities would include Hong Kong location still having this geographical advantage. We expect that infrastructure completion in time will increase our traffic. Fundamentals in Hong Kong are still strong for retail, and retail and other operating costs are rental and other operating cost are adjusting. We believe that Hong Kong competitiveness will return. We believe also adaptation to consumer behavior would offer us vast potential to drive new sales. In light of the market situation, we are going through a process of store consolidation. We would consolidate stores in traditional tourist locations in response to market circumstances to enhance profitability. We would only consider rental reversion with a minimum of 40%-50% reduction in traditional tourist locations for stores at the street level.
We would also add residential stores to capture market share of locals and also stores in New Territories districts near the mainland border. We are having some new store formats now being launched to attract new customers. They are there to suit consumer preferences for lifestyle. Our cutting edge and trendy shops would attract younger customers and male consumers. We would offer new concepts and diverse product range by offering trendy products from Korea, Japan, and Taiwan. We would improve our visual merchandising, interactivity, and product trial to enrich shopping experience. We would enhance our cost efficiency and productivity because they are smaller and the CapEx is actually lower for these stores. There is a comparison of these formats on this slide. Whereas for the traditional Sa Sa stores, they would average out at about 1,500 sq ft net.
The new stores, Sa Sa Boutique and Shine, will each have less than 1,000 sq ft. As such, they can go into locations we have previously not been able to enter, including, for instance, MTR stations. Of course, the number of SKUs offered will be much less than the 10,000 SKUs that the traditional stores offer. By stocking the top 20% and also bringing in a lot of new trendy products and fast rotation, we believe will more than compensate for a relatively lower number of SKUs. Also in terms of customer segmentation, the design of these stores, they are to attract younger customers, hopefully because they like the design and also they like the shopping experience a bit more. Because obviously with fewer products, the shopping experience would actually be better. Shine, in particular, is gender neutral.
In time, hopefully, we will catch some more male customers. We believe that shopping experience enhancement would provide opportunities for growth. We would adapt marketing approach and customer service to match customer journey changes. This would involve increasing online exposure and interactivity, improving in-store interactivity and O2O integration, launching a new app to entice visitors to Hong Kong stores to buy online, improve store display, and upgrade our CRM to tap potential of digital media and O2O shopping experience. In China, we would improve our management and operations. We would continue to build management team and structure, enhance matrix reporting, improve our control process, compliance, and improve standards of reports. We would roll out boutique stores with trendy and innovative formats and speed up our O2O business development to match government directions.
This would involve supplementing our Chinese stores with an O2O section, which will broaden our product offerings on the whole. We would operate free trade zone stores and also free trade zone warehouse to reduce fulfillment time and costs. We would enhance training for salesperson and adjust commission system for online purchase. We would have engaged certain product strategies, including introducing more fast-moving items to build traffic, introducing well-known and good quality brands, and developing close relationship and collaboration with key suppliers on new product launches. We would also leverage on Hong Kong resources to introduce new brands. In the Singapore, Malaysia, and Taiwan markets, we believe that team building and products are the keys. In Malaysia market, fundamentals are strong. We are working on team building and succession planning, and we continue to build store network and product portfolio. We would target the Malay population to build customer base.
In Singapore, we would restructure our management team, improve product portfolio to drive sales, and merge with Malaysia for cost control. For Taiwan, we would revamp our Taiwan operations and restructure our management team. In the area of category management and product development strategies, we would have better usage of business and market intelligence to speed up the introduction of trendy products, streamline our procedures to shorten the time to market for new products, introduce well-known and good quality trendy brands exclusively to satisfy market preference for Asian products, and reduce SKU and improve product display. Thank you.