Good evening, ladies and gentlemen. Welcome to the live audio webcast of Analyst and Investor Session on Chow Tai Fook Jewellery Group's Interim Results for the Financial Year 2023. Let me introduce the management team on the call today. They are Mr. Peter Kin Wai Chan, Vice-chairman, Ms. Sonia Cheng, Vice-chairman, Mr. Kent Wong, Managing Director, Mr. Chan Sai-Cheong , Managing Director, Mr. Hamilton Cheng, Executive Director, Mr. Peter Suen, Executive Director, Mr. Bobby Liu, Executive Director, and Ms. Danita On of Investor Relations and Corporate Communications. Mr. Peter Kin Wai Chan will present the interim results highlights. Mr. Hamilton Cheng will talk about financial review. Mr. Chan Sai-Cheong and Mr. Kent Wong will give business updates on Mainland, China and Hong Kong, Macao and other markets respectively. Ms. Sonia Cheng will conclude the presentation with business outlook and strategies.
After that, we will have a Q&A session. This audio webcast will be conducted in English in general. Mr. Chan Sai-Cheong shall present in Mandarin with simultaneous English interpretation. Participants can select floor audio channel or English or Mandarin interpretation in the language bar at the top right corner. Now, may I invite Mr. Kent Wong Siu-Kee to present? Kent, please.
Good evening ladies and gentlemen. I'm pleased to announce our interim results for our fiscal year 2023. Despite the ongoing impact of the pandemic and challenging market conditions, the group's revenue rose 5.3% to HKD 47 billion in the period, supported by favorable store opening momentum in Mainland, China and strength in our differentiated gold products. Revenue of our Mainland business increased 6%, while that of Hong Kong, Macao and other markets was flat year-over-year. Core operating profit declined 2.7% year-on-year to HKD 4.3 billion, mainly due to the increased sales mix for gold products.
Profit attributable to shareholders decreased 6.8% to HKD 3.3 billion as a net foreign exchange loss of HKD 269 million was incurred as renminbi weakened during the period versus a net foreign gain for the same period last year. Basic earnings per share amounted to HKD 0.33. The board has declared an interim dividend of HKD 0.22 per share. Payout ratio approximated 66% in the first half. We expect second half cash flows to improve and the full year payout shall maintain at 70%-80%. We have succeeded in gaining market share in Mainland, China over the last three years, driven by our expansion strategy in lower tier cities and the success of our gold products.
We believe that our current market share is about 10%-11%, lifted from 7%-8% three years ago. We opened a net of 933 Chow Tai Fook Jewellery stores in the Mainland in first half, bringing the total number of Chow Tai Fook Jewellery stores to 6,547 at the end of September. Our new Wonderful Life Collection, which combines traditional gold craftsmanship with T MARK diamonds, has received an overwhelming response from customers since launch in July 2022 and shall support new sales growth for our gem set product category. The group has always operated with integrity and an unwavering commitment to maximizing shareholder value. The group joined the ranks of other blue-chip companies as a constituent stock of the Hang Seng Index in September.
We are also delighted that the group will be included in the MSCI China Index by the end of November. These milestones will support diversification and institutionalization of our shareholder base and improve trading liquidity. During the period, we established the Strategy and Transformation Committee to determine the group's strategic direction. Five key priorities have been formulated to strengthen our competitiveness, enhance the quality of our earnings, and driving sustainable long-term stakeholder value creation, supporting our margin and growth ambitions over the medium term. Now may I turn to Hamilton to go through our financial performance.
Thank you Kent. Good evening everyone. I'll first walk you through some major P&L items and key financial ratios. Despite tough macros, the group's revenue increased 5% to HKD 47 billion in the period, mainly attributable to wholesale and new openings and strength in our gold products. As revenue growth was driven by those lower margin segments, adjusted GP margin contracted by 110 basis points to 22.4%. SG&A expenses were under good control and its ratio improved 20 basis points to 13.8%, even though same-store sales declined. It is also worth noting that there was a one-off bad debt written back of HKD 190 million last year. When such is stripped off, the ratio last year should be 14.4%, which imply an operating leverage benefit of 60 basis points for this period.
Core operating profit dropped 2.7%, mainly due to lower GP margin amid increased gold mix. At constant currency basis, COP would be flat year-on-year. So many challenges and macro headwinds in the period, we believe this is a resilient set of results under such a weak market. Revenue breakdown. New openings and stable replenishment by franchised stores opened over the past two or three years, wholesale revenue in the Mainland expanded by 20% year-on-year, and its share to the Mainland's revenue reached 55%, up by around 6 percentage point from a year ago. By product, thanks to the continual success of Chow Tai Fook HUÁ Collection and our well-executed market penetration strategy in lower tier cities. Revenue of gold products increased promisingly by more than 12% on top of the high base last year.
As a result, gold products contribution to the group's revenue further expanded by nearly 5 percentage points to more than 75%. Gemstone jewelry and watches experienced a decline in revenue during the period, as such, consumption was more related to economic fundamentals such as GDP per capita and disposable income, as well as consumer sentiment. Looking into the past same-store sales growth trend of the two major markets. In Mainland, China, we saw a negative same-store sales growth of 7.8% in the first half, largely due to the pandemic. Same-store sales performance was better in the second quarter as July witnessed a short recovery, yet it worsened again in late August and September until now. Quarter-to-date, same-store sales declined by 21%. During the period, we had an average of 7 or 8% stores under temporary closure.
When excluding these stores, the less affected stores would have a slightly negative to a slightly positive same-store sales growth during the period. In Hong Kong and Macao, the fifth wave of COVID started in February. This led to a depressed same-store sales growth in the fourth quarter of last year. Same-store sales growth was still negative in the first quarter this year, and turned positive in the second quarter, leading to a slight growth in the period. However, when we look at Hong Kong and Macao separately, Hong Kong experienced solid same-store sales growth of 15%, supported by a stable local demand, while Hong Kong dipped by more than 30%, mainly attributable to the tightened pandemic measures, which reduced touristic traffic.
For the quarter to date, same-store sales of Hong Kong and Macao further bounced back by 19%, and we are happy to see business in Macao has also recovered to mid-teens growth. This slide shows the adjusted GP margin movements. As linked, we saw a higher sales contribution from our wholesale business, resulting in a 60 pips impact on GP margin. The change in product mix further lowered the GP margin by 80 pips. These were partially offset by retail like-for-like margin improvement of 30 pips during the period. This chart is not just an analysis of the past, but it also demonstrates our GP margin improvement opportunities going forward. In the coming one to two years, we aim at achieving like-for-like margin improvement, supported by our initiatives on launching premium products and our efforts on discount control.
In medium term, we will seek for mix improvement towards higher margin gem set jewelry. We also assume no further dilution of GP margin caused by our wholesale business, as we aim to have a quality opening strategy going forward. We intend to resume the development of self-operated stores. We expect the room for GP margin improvement will be around 2 to 3 percentage points, such that a GP margin of about 25% will be our medium-term target. SG&A analysis. We implemented stringent cost control measures in this challenging period. The increase in SG&A expenses was very mild and its ratio dropped versus one year ago. On staff cost, the expenses in the Mainland decreased slightly due to lower retail sales. We are strengthening our corporate functions and management capabilities with some professionals and subject matter experts joining the team.
Overall, staff costs remained at a similar level as last year. For leases, concessionary fees decreased because of lower retail sales in Mainland, while rentals stayed largely flat in both Hong Kong and Macao and the Mainland. The increase in depreciation was a natural result of CapEx invested in store openings and production capacity expansion in the past two or three years. A&P expenses rose by over 30% year-on-year, as we resumed some more campaigns versus last two years. Yet the expenses ratio remained relatively low at 0.8%, which used to be around 1% to 1.2% of the group's revenue. For other SG&A, when excluding the bad debts written back last year, the amount would be almost the same.
The operating leverage effect would have been an improvement of about 60 basis points, despite the negative same-store sales in Mainland during the period. This would be good enough to offset the dilutive effect of our wholesale business on GP margin, as demonstrated in the previous slide. Profitability analysis. In Mainland, core operating profit decreased slightly during the period. The reduction in operating margin was mainly due to a lower GP margin resulted from an unfavorable product mix. In medium term, if we could manage to enhance the product mix by restoring the gold mix to 65%-70%, GP margin would expand to about 24%-25%, and operating margin would improve to around 12%-13%. In Hong Kong and Macao and other markets, the decrease in core operating profit and GP margin was also largely due to product mix.
With the reopening of border crossing and normalization of business in medium term, we are expecting a GP margin of around 25%-26%, and OP margin can come back to a mid-high single-digit level. Here are the major items below the COP level. Macroeconomy, capital markets, currencies, and commodities were highly volatile during the period. We have been closely monitoring the related indicators, especially price of diamonds and gold, RMB, and also interest rate, and managing our financial position carefully. During the period, RMB depreciated over 10% versus HKD and led to a Forex loss of HKD 269 million, versus a gain of HKD 47 million for the same period last year. At the same time, gold price dropped around 14%, and our gold loans incurred a mark-to-market gain of over HKD 500 million.
The gain was not as significant relative to the decrease in gold price, as the decrease of gold price in RMB term was much milder, resulting in lesser impact on our Mainland operations. As for finance costs, when we take into a consideration of interest income together, we managed to have a net cost similar to last year's level, despite an interest rate hike during the period. Inventory and CapEx. Inventory balance increased by around 8% versus March level when compared to the same period last year. Turnover period lengthened by half a month, as we have been building inventory reserve for diamonds amid a volatile commodity market. For full year, we will target to restore turnover to last year's level, that is around 270-280 days. CapEx.
Other than recurring items and those for POS openings, additional CapEx were mainly for expansion of production capacities and purchase of our staff dormitory. We are carefully revisiting our budget based on the current market environment, and the full year CapEx is estimated to lower to around HKD 2 billion-HKD 2.5 billion. A summary of cash flows. Operating cash flows, net of leases paid, was nearly HKD 5 billion, similar to last year's level. A negative free cash flows was not uncommon in the first half, as we are normally stocking up for our seasonal cycle. With the prudent inventory management in the second half, we believe full year free cash flows will be around HKD 5 billion-HKD 6 billion. Lastly, capital structure highlights. Net debt increased by more than HKD 6 billion, which was mainly used for inventory and payment of final dividend last year.
Our source of funds were mainly from operating cash flows and bank borrowings. Net gearing ratio was at 50% as of September, but it was a mere single digit if gold loans were excluded. With the improvement in cash flows in the second half, we believe that gearing ratio will be back to 30% or lower. This concludes my part, and I will turn over to Chan Sai-Cheong and Kent for the business update. Thank you.
Thank you Hamilton. In the first half of 2023, with the strong support of franchisees, we opened 933 Chow Tai Fook jewelry stores in Mainland, China. Despite a challenging operating environment in the first half, we're pleased to see improved productivity and sales. About 90% of our retail outlets are franchised stores. As of September, the number of our Mainland stores is estimated to be about 75%. In the first half, new store openings and steady improvement in store productivity drove our retail value of franchise stores up by about 29%. In the first half of 2023, we exceeded our original store opening target. In the second half of the year, we will expand our retail network more prudently and strategically to expand our market share.
We also have a number of stores in the pipeline, and we expect to open 1,200 to 1,300 Chow Tai Fook Jewellery stores throughout the year. In addition, we will continue our efforts to create immersive shopping experience tailor-made for our customers' needs and preferences. We have launched a new premium store to attract young consumers by offering selected products tailor-made for their taste. During the period, we actively strengthened omnichannel marketing and online interactions. In the midst of the pandemic, we have used social media and social platforms such as Little Red Book and Douyin to stay connected and engage our customers to drive greater flow and traffic to our online channels. During the period, e-commerce channels achieved encouraging retail value. Growth of about 15%, with estimated Mainland retail sales remaining at 5% and 13% by volume.
The average selling price on e-commerce channel is about HKD 1,800. We also launched our own online product, which gained popularity on social media. We also have live streaming and short videos on TikTok to exert influence and promote our new products. Our heritage series contains the essence and cultural connotation and traditional Chinese craftsmanship. It's been well-received by the youngsters in Mainland, China. An affirmation affection of young consumers is very important. In the first half, we estimated that the retail value of gold products is about 41%. We vigorously promote inlay jewelry suitable for everyday wear and important occasions to complement and our other gold products. We also launched the new Wonderful Life series, which perfectly combines our traditional gold craftsmanship with our exclusive T MARK.
The four great moments of life described by Song poet Wang Wei, were the design concepts and inspirations, i t is very romantic. The series has been very well-received since its launch in July and will give impetus to the sales of our other new products. HEARTS ON FIRE also achieved impressive results with retail sales growing by 63% year-on-year. Evergreens, Aerial, and Illa have achieved great success with the new products. The continuous regional activities and promotion and publicity projects have increased customers' interest in our products. These results are well reflected in our strong dynamic retail turnover growth. Now I will pass the time to Kent to talk about development in Hong Kong, Macao, and other markets.
Okay thank you Chan Sai-Cheong . For our Hong Kong and Macao and other markets, business in Hong Kong improved with a RSV growth of 12% in the period. However, operation in Macao and duty-free point-of-sale in Hainan were hit by the pandemic. As a result, share of RSV from Hong Kong contribute to around 75% versus 67% a year ago. We closed a net of 4 point-of-sale in Hong Kong during the period, mainly in tourist area such as Mong Kok and Tsim Sha Tsui to enhance operational efficiency. We continue to optimize our network print, guide by data analytics, such as store performance, leasing terms, and pace of visitors growth in the next 12 to 18 months. In other markets, we add two store in Macao and Malaysia during the period.
We will expand our business selectively and as appropriate, focusing on markets with strongest local retail growth potential. I will conclude here and turn over to Sonia to walk through our business outlook and strategies.
Thank you Kent. To conclude, the group is cautiously optimistic about the opportunities ahead, and we will stay vigilant while executing our growth strategies. We remain positive on the mid-to-long-term growth prospects of the Mainland's economy and jewelry market. While we maintain prudent cost control strategies to mitigate short-term challenges, the group's mid-term growth is expected to be driven by a gradual improvement of the economy and consumption. Leveraging on the strong support from our franchise partners, store opening and momentum in the Mainland remains favorable. We will continue to adopt a disciplined approach in expanding our retail network strategically, taking into consideration market share growth and the health of store economics and productivity, while penetrating into the areas where we identify growth. At group level, we will focus on elevating our brand positioning, which better differentiates us to customers with varying consumption of appetites.
In the Mainland, we are well-positioned to target the underserved demand for bridal jewelry in the lower cities and offerings to appeal to the millennials. In Hong Kong and Macao, we expect pent-up demand for bridal jewelry and a gradual easing of the social distancing measures to drive growth in the second half. Encouraged by the marketing campaigns and member exclusive events launched, we continue to pursue these efforts to build momentum to boost sales and deepen connections with customers. Besides, we shall double our efforts to target the premium segment. A more significant recovery of our Hong Kong and Macao business will be dependent on further relaxations on the quarantine requirement and border reopening. In the near term, we will closely monitor our store profitability and exercise disciplined cost management.
We also remain attentive to expansion opportunities in Southeast Asia, such as Singapore, Malaysia, and the Philippines, and stay well-positioned to capitalize on them as they emerge. The group will stay nimble to mitigate market uncertainties, strengthening our competitiveness while pursuing quality growth. To this end, we are focusing on five strategic priorities. Number one, elevating our brand positioning to attract new and younger customers. Number two, optimizing our product portfolio while reducing inventory levels and turnover days. Number three, enhancing operational efficiency to optimize competitiveness and effectiveness. Number four, nurturing a people-first workplace culture and strengthening talent development. Finally, building a data-driven culture and accelerating the use of technology and data analysis to support the business. Striking a balance between caution and confidence, we are well-placed to overcome the challenges ahead with our strategic roadmap for growth and sustainable development. This concludes our presentation today. Thank you.