Good evening, ladies and gentlemen. I'm Heidi, MC of today's event. Welcome to the Investor and Analyst Presentation of Chow Tai Fook Jewellery Group Limited to discuss our annual results of the financial year 2025. To begin, let me introduce the management team who will be leading today's presentation. They are Mr. Conroy Cheng, Vice Chairman; Ms. Sonia Cheng, Vice Chairman; Mr. Kent Wong, Managing Director; Mr. Hamilton Cheng, Executive Director. Joining us in the front row are other key members of our management team. They are Ms. Karen Yip, Chief Financial Officer; Ms. Annie Wong, Chief Operating Officer; Ms. Theresa Loi, Chief People Officer; and Mr. Patrick Cheng, Chief Digital Officer. Participating online is Mr. Alan Cheng, Chief Brand Officer. Also, Ms. Danita On of Investor Relations and Corporate Communications is attending in person in the front row too. This hybrid event will be conducted primarily in English.
We'll be providing simultaneous interpretation services for any content or questions answered in Mandarin. For on-site participants here at Hong Kong CEC requiring translation assistance, please raise your hand, and a headset will be provided to you. Online participants have two options available. You can select English or Mandarin interpretation in the language bar located at the top right corner of the webcast platform. Now, I would like to hand the time over to your first presenter, Ms. Sonia Cheng.
Good afternoon, ladies and gentlemen. Thank you for joining us as we share highlights of our annual results for the financial year 2025. 2025 marked a pivotal year in our history as we celebrated our 95th Anniversary and embarked on our brand transformation journey. The year presented both challenges and opportunities to our business, with a complex business landscape characterized by macroeconomic uncertainties and external factors, most notably record gold prices, which impacted consumer sentiment and jewelry spending. Our revenue saw a decline of 17.5% to HKD 89.7 billion. Yet, with an improved product mix alongside disciplined cost and capital management, our operating profit grew 9.8% to over HKD 14.7 billion. We achieved an increase in gross profit margin of 550 basis points to 29.5%, and operating profit margin also expanded by 400 basis points to 16.4%.
Profit attributable to shareholders was HKD 5.9 billion, a decline of 9%, primarily due to the increase in operating profit being offset by the loss arising from the revaluation of gold loan contracts amid volatility in gold prices during the financial year. The board has proposed a final dividend of HKD 0.32 per share, bringing the total dividend for the financial year to HKD 0.52 per share, representing a payout ratio of 87.8%. These results reflect our continued dedication to achieving higher value growth and strengthening our long-term competitiveness, underpinned by our diligent execution of the five strategic priorities. At the start of FY 2025, we embarked on an exciting brand transformation journey. Let me share some of our significant milestones achieved as we continue our journey towards our centenary in 2029. Our brand transformation made substantial progress during the year.
We continue to stay focused on our product optimization strategy, introducing successful new signature collections that cater to diverse customer preferences and ensure emotional resonance. During the year, we unveiled five new image stores in mainland China and Hong Kong. The premium store format, featuring a rebranded image and redefined retail experience, elevated our brand desirability, allowed us to improve the product mix and achieve higher store productivity. This demonstrated the success of our retail network optimization and validated the positive impact of our five strategic priorities. On top of these positive changes from our strategic initiatives, we have also launched the Chow Tai Fook Jewellery Sustainability 2049 blueprint during the year. The blueprint integrates sustainability into our business operations and production processes, focusing on environment, people, and industry, fostering a more sustainable future for both the group and the communities.
Our commitment to a sustainable future has also earned us recognition as the only jewelry company in Asia-Pacific to be named a regional top-rated ESG company in the Sustainalytics ESG Risk Rating. The CTF Rouge Collection was launched in April last year to commemorate our 95th anniversary. Designed by Nicholas Liu, our Creative Director of Hai Jewellery, the collection prominently features the auspicious Chinese symbol for good fortune, Fuk, blending innovation and heritage to appeal to consumers seeking timeless yet contemporary designs. The Chow Tai Fook Palace Museum Collection, launched in collaboration with the Palace Museum in Beijing in August 2024, draws inspiration from the museum's imperial artifacts and treasures. This collection exemplifies our ability to seamlessly fuse cultural heritage with contemporary approaches to design. Both collections achieved approximately HKD 4 billion in retail sales value over the year, exceeding our expectations.
Supported by the performance of these collections, revenue from fixed-price gold products surged by 105.5% year-on-year, and their RSV mix within the mainland gold products category expanded significantly to 19.2% from 7.1% a year ago. This also drove the group's gross profit margin improvement, underlining the effectiveness of our product optimization strategy. As an industry leader, Chow Tai Fook Jewellery is reshaping the jewelry shopping experiences with the launch of our new image stores, a central part of the brand's transformation initiative. The new image stores unveiled in FY 2025 offer customers an immersive and personalized experience, featuring interactive displays, bespoke customer service, and stunning in-store environments. Recent openings include Hong Kong, Shenzhen, Wuhan, Xi'an, and Shanghai. The new store format has successfully boosted sales volumes of higher average selling price products and led to an improved product mix.
This, in turn, has yielded higher store productivity than the average during the first few months after opening. This achievement highlights the success of our brand transformation as we deliver bespoke experiences tailored to our discerning customers. Our new five-story store in Shanghai, which celebrated its grand opening last month, has become a new landmark on East Nanjing Road since its debut with a unique blend of modern aesthetics. Notwithstanding the market uncertainties, we are set for an exciting and promising year ahead. We will continue to enhance retail experience by strategically opening new image stores at selected prime locations. The rollout is central to rejuvenating our brand, enhancing the experience of our customers, and sustaining our market leadership as we approach our centennial celebration in 2029. With regards to product optimization, we also have a robust pipeline for the period ahead, with plans to unveil further differentiated signature collections.
Building on the success of CTF Rouge Collection, we also proudly introduced the new CTF Joie Collection in April 2025, featuring the Hei motif. Joie, meaning happiness, embodies the tenacious spirit of Chow Tai Fook Jewellery in preserving and taking pride in Chinese traditions. Let me take this opportunity to show you a video about this collection. I'm also excited to announce the launch of our new Hai Jewellery Collection tomorrow. The collection aims to meet the rising demand for exclusiveness among our high-value customers, reshaping how Hai Jewellery fits into contemporary life. Meticulously designed by Nicholas Liu, each creation draws inspiration from China's rich cultural legacy, masterfully weaving time-honored traditions with contemporary innovation. These are set to become timeless treasures that reflect extraordinary artistry and the brand's rich heritage. Now, may I turn over to Kent to present our business highlights?
Thank you, Sonia. Partner sales optimization at Chow Tai Fook is about continually refining the retail store network to maximize profitability, productivity, and market leadership. This involves closing underperforming stores, selectively opening new stores in high-potential locations, and focusing on operational excellence to ensure sustainable growth and an exceptional customer experience. As of March this year, we had approximately 6,300 Chow Tai Fook Jewellery stores in the mainland, with approximately 75% under the franchise model. Higher TCD showed a stronger performance than lower TCD in the year, mainly due to the popularity of the fixed-price products. These positive results align with our strategy to roll out new image stores in higher TCD to capture the existing demand. We continue to strategically open stores in promising locations, such as high-end shopping malls. This yields encouraging results over the past year. I will share further details in the upcoming slides.
Let's take a deep drive on our average quarterly sales. Despite store closures in the second half of the year, our same-store sales contribution remains resilient, accounting for approximately 58% of annual same-store sales. This contribution is at a higher end compared to normal seasonality and surpasses the percentage of the same period last year, highlighting the overall effectiveness of our store's optimization efforts. This chart shows the ramp-up of our sales operating and franchise stores in mainland. The progressive and healthy ramp-up of our newer stores strengthens the stability of our store's networks. The average RSV of stores aged less than two years achieved approximately 89% of overall mainland same-store RSV, the highest level seen in recent years. Furthermore, these newer stores achieved monthly sales slightly above HKD 1 million, a notable improvement from the HKD 0.9 million generated by stores in FY 2024 of the same age.
In addition, as monthly productivity of these newer stores was approximately double that of the store closed on average, this mitigates the negative effect of store closures. Despite the challenge of the demand end due to volatility of gold price, RSV of our mainland e-commerce grew by 3.6% in the year, driven by our in-house livestream studio and enhanced social media promotion. E-commerce contributed 6% to retail sales value and 14% to volume of our mainland business. ASV of e-commerce increased to HKD 2,500. During the year, we established our in-house livestreaming studio, and it significantly elevated our average sales per live session. For instance, in FY 2025, we secured the number one position in the livestreaming jewellery sales on Tmall during COVID-19.
Moreover, we enhanced customer engagement and created best sellers across multiple social media platforms, leveraging the resources of our own livestreaming studio and key opinion sales to amplify our reach. Now, let's turn to Hong Kong, Macau, and other markets. As of March, we maintained 87 Chow Tai Fook Jewellery stores in Hong Kong and Macau, positioning us favorably to drive quality earning growth. We remained vigilant in monitoring business developments to capture opportunities while ensuring margin resilience. Meanwhile, e-commerce sales surged by 91% in the market, driven by customer positive reception to our revamped brand's website. The new feature and streamlined design have created a seamless online shopping experience for our customers. The successful launch of Ki-IP Collection also played a critical role in driving this remarkable growth. In other markets, RSV grew by over 9% during the year, driven mainly by activities in Singapore, Malaysia, and Thailand.
During the year, we opened a net of three Chow Tai Fook Jewellery stores in Thailand, Malaysia, and Japan. As part of our broader brand transformation journey, we are embarking on a dynamic phase of international growth, driven by our two-pronged strategy, which focuses on revitalizing key existing markets as well as expanding our presence in high-potential new territories for sustainable growth. In existing markets, we continue to enhance the retail experience by upgrading and relocating stores. For instance, we will unveil new image stores in Singapore and Canada in FY 2026, while a broader program of store upgrades is underway. Additionally, we are optimizing merchandising and focusing on high-value customers to enhance store productivity, and we also cultivate talent to drive retail excellence.
At the same time, we are set to kick off our strategic expansion in high-growth Southeast Asian markets and prime locations to capture the rising local demand for Chinese gold jewellery and the spending of outbound Chinese tourists. This concludes my part of today. May I pass to Hamilton for financial review?
Thank you, Kent. Good evening, everyone. Let me begin with key P&L items and ratios. As Sonia highlighted earlier, despite the challenging year, we are encouraged by the results of our brand transformation, with significant milestones achieved and steady progress towards quality earnings. We demonstrated resilience in profitability and margins exceeding our guidance we had provided. With an improved product mix comprising higher-margin products and higher gold price, gross profit increased by 2% to HKD 26.5 billion. Its margin expanded by 550 basis points to 29.5%. Disciplined cost management further boosted our financial performance. Our operating profit rose by 10% to HKD 14.7 billion, and the operating margin expanded 400 basis points to 16.4%, underscoring our laser focus on earnings quality. Looking now at revenue breakdown by segment, the mainland business contributed approximately 83% of the group's revenue. Within the mainland segment, share of wholesale revenue remained stable at approximately 57%.
Hong Kong, Macau, and other markets contributed around 17% of our overall business. We are encouraged to see sequential improvements in both reportable segments during the second half, thanks to the stabilization of gold prices, our brand transformation, and product optimization initiatives. By product, the high volatility in gold price led to a revenue decline for weight-based gold products. However, fixed-price gold products stayed robust, with revenue surging 106% in the year. Its contribution to the group's revenue expanded year on year, thanks to the success of our signature products, including Hwa, CTF Rouge, and Chow Tai Fook Palace Museum Collections. Further, within gem-set platinum and carat gold jewellery, diamond inlaid gold products sustained high popularity among customers, with revenue more than doubling year on year.
Our fixed-price product categories, including gold and gem-set platinum and carat gold jewellery, collectively accounted for approximately 29% of the group's revenue this year versus 19% a year ago. These strong results reinforce our confidence in the long-term potential of our product optimization initiatives. On same-store basis, ASV remains steady across product categories in both mainland and Hong Kong, Macau. In mainland, same-store sales declined by 19% in self-operated stores, while franchise stores saw a smaller 14% drop. In Hong Kong and Macau, same-store sales was down by 26% in the year. Encouragingly, quarter-to-date performance indicated a significant narrowing of same-store sales decline in the mainland, while Hong Kong and Macau have rebounded positively. Given current observations, we expect this momentum to continue, supporting our expectation that the group's same-store sales growth will turn positive at some point in fiscal year 2026. Here illustrates the movements in GP Margin.
During the year, the group's GP Margin expanded by 550 basis points to 29.5%. Key movements to note are: first, light-for-light margin improvement at retail level, which contributed 350 basis points, mainly attributable to the gold price surge. Second, product mix improvement, particularly with the higher contribution of our fixed-price gold products, leading to a 210 basis points expansion in GP Margin. The group closely managed our SG&A expenses during the year, resulting in a 6% year-on-year reduction, while A&P rose by 13% due to initiation of more promotional events to support our brand transformation. All other key expense items recorded a year-on-year decline. Other SG&A primarily include bank charges for sales transaction settlement, royalty fees for licensed products, certificate expenses, and utilities. Overall, it stayed relatively flat during the year, as the drop in sales-related items was offset by the increase in royalty fees for selected new collections.
We shall elaborate on staff costs and leases in the coming slides. For staff costs, we remain committed to investing in and retaining talent for the group's long-term growth. During the year, we revised staff remuneration packages to attract and retain talent and made key strategic hires essential for driving sustainable business growth. As a result, the fixed component increased year-on-year across both markets, while variable components declined. Together with the impact of sales decline, the variable component declined by approximately 28% in both markets. Moving on to concessionaire fees and leases. In the mainland, concessionaire fees together with lease expenses declined by 16%, in line with the decline in retail revenue. Concessionaire fees ratio rose to 7.9% amid the shift of sales mix towards higher-margin products, yet with higher concessionaire rates. In Hong Kong, Macau, lease expenses fell by 5%.
Its ratio to revenue increased by 90 basis points to 5% due to revenue drop. The lease expenses and cost ratio were manageable. We will continue to closely monitor store profitability and cost effectiveness in the coming year. Now, turning to profitability analysis. The group's profitability showed resilience, and its operating profit grew nearly 10% in the year. Operating profit growth accelerated in both segments during the second half, thanks to the stabilizing trend of revenue decline and effective cost control. Operating margin in mainland improved 380 basis points to 16.8%, while the margin in Hong Kong, Macau, and other markets expanded by 550 basis points to 14.6% in the year. The improvement in Hong Kong, Macau, and other markets was more significant, driven by GP margin expansion.
The segment benefited from a lower average cost of gold inventory due to softer sales in the first half, leading to more substantial like-for-like margin expansion in retail compared to mainland. Here is a summary of reconciliation of operating profit and profit before taxation. A key item contributing to the difference is the gold loan revaluation loss of HKD 6.2 billion versus HKD 3.8 billion a year ago. This was driven by a 41% surge in spot international gold price in fiscal year 2025, compared to a 12% increase in the prior financial year. Despite challenging macro conditions, we managed to minimize forex loss and reduce finance costs in the year. Looking now at inventory and CapEx. During fiscal year 2025, we continued to exercise prudent inventory and CapEx management. The inventory balance has been reduced by 14% to HKD 55 billion through stringent procurement and recycling of aging stock.
Due to the relatively weak sales of weight-based gold products and gem-set jewellery in the year, the inventory turnover period was lengthened by 34 days year-on-year. However, it showed a significant improvement from 457 days in the first half. For fiscal year 2026, we expect the inventory turnover period will be similar to last year's level. We will continue to optimize our inventory and keep our inventory turn healthy. CapEx for the year was controlled at HKD 578 million. We expect CapEx spent at approximately 1% of revenue in the coming year. Now, let's turn to our cash flows. Thanks to the resilient operating profits in the year, the group continued to generate robust operating and free cash flows. Operating cash flow net of leases paid in the year amounted to HKD 16 billion, up by approximately 8% from last year.
A reduction in inventory contributed a net cash inflow of approximately HKD 8 billion. Pro forma free cash flows amounted to HKD 21 billion in the year. We are confident that robust generation of cash flows from our business will continue to support our ability to deliver steady business growth and sustainable returns to our shareholders. Now, for some capital structure highlights. We prudently managed our capital structure to enhance financial stability while balancing shareholders' return. Our cash balance remained healthy at HKD 7.6 billion, similar to last year's level. We successfully lowered our financial leverage to strengthen our financial health and effectively manage associated risk amid macro uncertainty during the year. Bank borrowings decreased to HKD 3.8 billion, and gold loans were reduced to approximately HKD 16 billion. Hedging ratio at year-end was around 55% versus 69% a year ago. A net gearing ratio was 44%.
When excluding gold loans, which serve as a hedging instrument, the group would be in a healthy net cash position. Given the ongoing macroeconomic uncertainties, we will maintain our disciplined and prudent approach in managing both our capital structure and gearing ratio. Lastly, the return on equity offers a key indicator to management and investors of the focus on enhancing our earnings quality. The return ratio reached 21.9% in the year, representing a sustained improvement against our five-year historical average of around 18%. Given the strategies we've put in place, we expect the ROE to be sustainable in the coming year. Now, I would like to turn over to Conroy for market outlook and conclusion. Thank you.
Thank you, Hamilton.
We are encouraged by the continued progress in our brand transformation strategy and the positive impact it has brought to our financial and operational performance in FY 2025 and FY 2026 to date. Building on this momentum, our strategic initiatives, together with the relatively lower comparables, shall further support our business fundamentals and recovery trajectory, marking FY 2026 as a year set for quality growth. At the same time, amidst the external volatility and uncertainty, we are closely examining government policies and initiatives to boost consumption, tracking gold price movements, and assessing the operating landscape in countries earmarked for international expansion to inform our business decisions. We will continue to rigorously uphold financial discipline in cost and capital management to achieve high earnings quality. Looking ahead, our unwavering commitment to brand transformation will sharpen the group's competitiveness, bolster long-term growth prospects, and increase total shareholder returns sustainably.
This concludes our presentation for today. Thank you.