Good evening, ladies and gentlemen. Welcome to Chow Tai Fook Annual Results Analyst Presentation for the financial year 2016. Let me introduce the management on stage. They are Mr. Kent Wong, the Managing Director, Mr. Hamilton Cheng, the Finance Director, and Miss Danita On, the Director of Investor Relations and Corporate Communications. Mr. Hamilton Cheng will present annual results, operational highlights, and financial review. Mr. Kent Wong will present our business update. Miss Danita On will present e-commerce, marketing and branding. Finally, Mr. Kent Wong will conclude the presentation with the group's business outlook and strategies. After that, we will have Q&A session. May I invite Hamilton to present. Hamilton, please.
Thank you. Good evening, everyone. First, we have the results highlight. Revenue, we have HKD 56.6 billion, representing a decrease of 12% year-on-year. Same-store sales, Mainland China jewelry segment, a decrease of 10.3%. Hong Kong and Macau, a decrease of 21.7%. Core operating profit, HKD 5.1 billion, a decrease of 24.5%. Net profit or profit attributable to shareholders, HKD 2.9 billion, decrease of 46%. Our EPS, HKD 0.294, and dividend per share, we propose HKD 0.08 as final dividend and HKD 0.22 special dividend. Combining the income, and special dividend, we have HKD 0.16 as regular dividend and HKD 0.64 as special dividend. Altogether, HKD 0.80 for the full year. Operational highlights. In the financial year 2016, we opened 62 POS, a net opening, and Hearts on Fire has entered into a number of CTF retail network.
Together in Mainland China and Hong Kong, we have five Hearts on Fire POS and 136 shop-in-shop or counter-in-shop that is selling Hearts on Fire products. E-commerce in Mainland China has a remarkable growth of more than 50% for the year and contributing more than 2.3% of the retail sales value in Mainland China. Deployment of Smart Tray, we have 95 POS in Mainland China that is using our patented devices.
In Hong Kong and Macau, we have 74 POS. For Mainland China and Hong Kong, together we have 1.46 million members, which contribute 29% of Mainland China retail revenue and 26% in Hong Kong and Macau for the repeat purchase. Financial review. First, we have a summary of income statement. The 12% decrease in revenue was mainly due to a continual weak consumer sentiment and diversion of Mainland tourists to other overseas destinations as U.S. dollar or Hong Kong dollar strengthened.
For the GP margin, when excluded unrealized hedging loss, adjusted GP margin was down by 30 basis points to 28.9%. This is mainly due to the increase in sales of our lower-margin gold products. SG&A, the decrease was not in line with the top line because we have more than half of our expenses are fixed in nature, including the basic salary, rental, and depreciation. Despite that our net profit decreased 46%, our core operating profit, which excludes mainly the unrealized hedging loss and foreign exchange loss, decreased just 24.5% this year. The revenue breakdown. Over the past four years, contribution from our Mainland China business continued to increase and correspondingly, contribution from Hong Kong and Macau market decrease. By product, gem set also increased steadily over the past three to four years.
For gold products, compared to last year, gold products gained 2 percentage points, getting shares mainly from the platinum and karat gold and watches. We have same-store sales growth trend over the past two years. Quarter two, which means July to September last year, was particularly high because of so-called mini gold rush because of the decrease in gold price in that period. While it was normalized in quarter three, that has a performance that is similar to our quarter one. While quarter four, that is January to March this year, was particularly weak because of the further weakening of economic indicators and a poor stock market performance, and also partly because of an increase in gold price. We have analysis of same-store sales growth of our major products by the two market segments.
For both markets, gold products were performing slightly better than gem set over the past year. However, gold products were more volatile. As seen in quarter two and quarter four, the performance was affected by the change in gold price. While the decrease in gem set ASP in Mainland China from HKD 6,600 last year to HKD 6,300 this year, represent a more conservative spending in the market. While the ASP of gem set for Hong Kong was holding up quite well, it is partly because of the consumption shift back to more from the local customers, which in general has a more stable spending power compared to the Mainland tourists. We have seasonality analysis in Mainland China. Like last year, Q4, January to March, used to be our peak season in Mainland China because of the Chinese New Year, Valentine's Day.
However, in this year, the business was distributed quite evenly across all the quarters, or in turn, the quarter four was particularly weak due to the reason that I just mentioned. We have a ramp-up curve for our self-operated stores in Mainland China. Last year, stores aged six to eight years, reached the average same-store sales level, but this year it is slightly behind. This reflect that the maturity for our stores has slightly lengthened in the year. The second point I want to highlight is about the productivity of our new stores opened in the past two years. It was around 65% of the same-store sales level last year, but it is just around 56% this year. Because more of these new stores are opened in the tier 3 and tier 4 cities, where performance were relatively weak in these areas in the year.
We have seasonality in Hong Kong, Macau. Again, the performance in Q3, October to December, is the peak season in Hong Kong because of Christmas and the annual Mega Sale. However, in Q4, again, the strong U.S. dollar, Hong Kong dollar has affected the preference of Mainland tourists, and together with other factors that Q4 performance was particularly weak for both this year and actually last year. We have SG&A analysis. As mentioned, the total spending decreased 5.8%. This is not fully in line with revenue because of some fixed expenses like basic salary, like rental and depreciation. Depreciation was still increasing because the infrastructure projects that we completed in financial year 2015 was now in use in the year. So the expenses of depreciation was increasing.
While for the controllable or favorable expenses, we have lowered significantly for the A&P, because we now largely or widely use the social media and digital platforms, instead of the traditional promotional activities. While for the other SG&A, this comprise mainly of royalty fees payable to the companies like Disney, like Forevermark, and this also comprise diamond certification fees, packing materials, bank charges, utilities, and transportation. These expenses may be fixed in nature or may be affected by factors other than the sales revenue. Therefore, there were some deleveraging effect in the past two years. I will elaborate a bit more on the staff costs and the rental that formed about 2/3 of the total SG&A. For Mainland China, in order to optimize our staff costs and maximize the productivity of our human resources, we have restructured the remuneration package.
Therefore, the fixed portion, in particular for non-sales staff, has increased. Total headcount has decreased 6% year-on-year, and total staff cost maintained at about the same level last year. While for concessionaire fees, the decrease was mainly due to a change in product mix, that we are selling more gold, which incur a lower rate. We also got reduction of rate in certain department stores. For Hong Kong and Macau, because of the weak performance in Hong Kong and Macau, headcount decreased 9% year-on-year, and staff costs decreased nearly 18%. For rental, the increase in rental was mainly due to POS that we opened in financial year 2015, which now got a full year P&L effect. While for those renewed in fiscal year 2016, rental reduction was around 13% compared to the last contract.
We will turn to core operating profit for the two major segments. Compared to the Hong Kong and Macau market, Mainland China relatively has a mild decline in the past two years. So it now became the major profit contributor to the group. Actually, OP margin in Mainland China has increased slightly because of the increase in GP margin, because retail business now got a higher proportion or higher contribution to the revenue compared to last year. Conversely, GP margin of Hong Kong has decreased due to an increase in the proportion of wholesale, which is mainly the trading of diamonds, coupled with the deleveraging effect from the fixed expenses. That is why the OP margin of Hong Kong has decreased. For inventory analysis, we have reduced the inventory level significantly by more than 20% in the year. Therefore, turnover has decreased by more than 40 days.
The cash released from this became the major source of our special dividend for this year. CapEx in this year has reduced substantially because of the lack of certain one-off item last year. We have postponed the development of some of our infrastructure projects. A majority of our CapEx, which is more than 60%, was spent on POS and office maintenance, while the rest are mainly for our Wuhan Jewelry Park and an R&D center in Shenzhen. We expect that for the coming year, CapEx will be around HKD 1.5 billion. We are planning to increase our investment mainly in POS refurbishment and also for the further development in the Wuhan Jewelry Park. For analysis of return on equity, a lower ROE for the year was primarily due to the decrease in net profit margin, while other factors like asset turnover and gearing were pretty stable.
On a normalized or adjusted basis, our ROE should be around 10%-11% for the year. Changes in our capital structure or balance sheet items. The major change was about a significant decrease in inventories and the corresponding increase in cash and bank balances. Net gearing improved to 4%. After payment of our final and special dividend, we would expect that net gearing will return to around low to mid-teens level after the payment of dividends. Lastly, cash flows. Operating cash flows before movements in working capital, which is a proxy for EBITDA, amounted to HKD 5.8 billion, which is around 20% decrease compared to last year. This cash inflow, together with cash release from inventories after the CapEx, gave us more than HKD 10 billion free cash flow.
After the payment of last year's final dividend, interim dividend and special dividend, we still have more than HKD 13 billion cash as at the year-end. So here concludes my part, and Kent shall continue on the business update.
Okay, thank you, Hamilton. Let me share with you about the business update. I think 2016, we have opened 62 doors, net opened, bringing a total of 2,119 store. In Mainland, net addition store 65, mainly targeted at lower-tier cities . We shut down 10 point-of-sale watch store at the year. At the group level, we shut down 220 point-of-sale, represent about 9%-10% of our total store, which is comparatively more than last year, which is about 5% last year. I think this is mostly due to some business location adjustment, mainly because of some department store they shut down or they transfer the model into a shopping mall. In Hong Kong and other markets, we have a net open of three store. I think in Hong Kong, we had a net shutdown of four store in Hong Kong.
Here we illustrate the sales performance and point-of-sale network in Mainland China. Tier 1 cities this year seems to be a better performance than the other tiers of city. By model, I think, as we can see, the shopping mall has contributed the biggest advantage compared to last year. The department store, we have reduced the exposure in market in department store compared with last year. This year we have about 70% of the store allocated in department store, while comparative the previous year was over 80%. We'd like to share in light of economic slowdown in Mainland China. I think in the coming year, we will approach a more selective approach to open new store.
Still, the majority of the store will be opened in tier 3 and tier 4 city regions where we still can see big opportunity. Most important is that we can have much better terms so that we just much more cost-effective open store in lower tier city. To gauge the increasingly affluent and sophisticated customers, we will continue to efforts for those high-spending area, or we would upgrade some of our store into a luxury store, and then that new store lay out progressively. Lastly, we would continue to initiate some new O2O synergy so that we can drive the customer from online to offline. Talking about Hong Kong and Macau markets, still challenged due to the weak performance in 2016.
In light of China, outbound tourist trend is still reducing so that we opened some store, about six stores in Korea and Taiwan in 2016, following with the traveler destination shift to this area. Signaled by a decline of Mainland tourist visitation and weak retail sentiment, Hong Kong and Macau has find a 22% kind of decline in the tourist area especially. UnionPay also has show a decline from 57% last year to 52% this year. In response to the challenging outlook in tourist visitation and weak retail sentiment in Hong Kong and Macau, we would this year continue to consolidate some of the store by shut down some store. We probably expect to close about seven to eight point-of-sale this year. With a softening rental market in 2016, our average rental renewal was down by 13%.
We will continue to negotiate with the landlord, so hope that we can achieve, for the new contract rental, we will have a kind of a 20%-30% cut off. To attract customer traffic, we also organize various kind of activities and promotional event at store level. Lastly, I would like to share with you some update of the newly acquired U.S. brand, Hearts on Fire. In 2016, we successfully expand some Hearts on Fire point-of-sale in Mainland China. Up to date, we have five standalone stores and 118 shop-in-shop in Mainland China, and then 18 in the form of counter-in-shop in Hong Kong and Macau. During 2016 financial year, we are pleased to successfully partner with U.S. high-end department store, Saks Fifth Avenue. Today we have 12 point-of-sale allocated in the store across U.S. and Canada.
We also launched our new "Ignite Something" global campaigns last year, and then we have a very good effect to the consumer. With ongoing effort in building branding development, we are delight to cooperate with Stephen Webster, an international famous British jewelry designer, to launch some Chow Tai Fook product. Here, we would like to share with you some initiative called Smart+ in the mid to long term. This is a way how we can sustain our development. I think we would, I will say, guide some competitive strength, like you have already extensive retail network, brand equity, vertical business model that we have to stay guide and further to enhance the competitiveness.
But we understand in the long run, and I think because of wide use of a smart device, say, mobile device, so that I think we have to continue to invest in different tools in order to enhance our understanding of the customer. Thank you very much. May I pass the e-commerce and marketing brand to Danita?
Thank you, Kent. In fiscal year 2016, our e-commerce business in Mainland China recorded a strong RSV growth of 51.7% and contributed 2.3% of the respective RSV. Average daily online traffic was up by 32.7% to 268,000 unique visitors. The number of followers on our Sina Weibo, Tencent Weibo, and WeChat accounts also increased by 35.3% year-on-year, reaching more than 2.3 million followers. Being one of the leading jewelry brands in mass luxury space, we are dedicated to uplift our image while extending our reach to the younger generation. In April 2016, we unveiled 15 sets of one-of-a-kind auction jewelries to showcase our exquisite craftsmanship. More than 400 selected members and prestigious guests were invited to join the exclusive preview. To gauge the needs of the younger generation, we have launched the Generation Y series to promote fashion diamond jewelry.
The promotional videos launch on various social medias platform has received 2 million views in the first 20 days of launch. During fiscal year 2016, we rode on the popularity of blockbusters such as "Star Wars" and "Batman v Superman: Dawn of Justice" and launched their licensed collections. Following the success of last year, Freely on Silk Road campaigns with over 30,000 applicants and 400 million views, forwards actions recorded on social media. We relaunch it in March this year. The result has proven that our social media as a powerful marketing channel to increase our brand awareness among the younger generation. As of March 2016, we had over 1.1 million members in our customer loyalty program in Mainland China. Members' repeat purchase ratio remained a similar level to last year at around 29% of the respective RSV.
In Hong Kong, Macau, owing to the revision of qualifying membership requirement, the number of members reached 362,000 up 79% year-on-year by the end of March this year with its repeat purchase ratios also increased to 26% in fiscal year 2016. Here, let me pass to Kent and then to talk about the business outlook and strategies.
Okay, thank you. Lastly, I would like to share the business outlook and strategy in 2017. I think, in a whole, mid to long term, we are still optimistic to the market, even though a short-term challenge. With optimization of our retail network, which is, we will consolidate and shut down some low-performance store. However, we will migrate to some other better location. However, Hong Kong, we would select a more conservative approach and more to consolidate some of the store in Hong Kong. So shut down a kind of seven to eight store in Hong Kong. Second, I think effective product management. I think still focus on some gem set jewelry portfolio. Say, like our diamond fashion jewelry, we still can see a positive growth, even a slowed market. Like we roll out some exclusive auction pieces, and some licensed collection.
They are still really attracted to the Generation Y customer. Initiate some what we call Smart+. That is how we can cooperate with some business partner like Ctrip, in order to attract or in order to leverage on the vast customer base whenever they come to Hong Kong or overseas. Smart device like Smart Tray RFID or even some exclusive kind of technology like marking technology, mark in invisible, mark on the diamond or the table. All this we would continue to invest, and we will soon launch into the market, hope that we can attract some other customer. Commitment to invest for sustainable business development.
We are always looking for a long-term success by ongoing investment to strengthen the infrastructure of the company, and also most important to enhance the staff development so that they capable to capture or to face again the new era, so that we have already established our CTF Academy for continued development in the future. Thank you very much.