Good evening, ladies and gentlemen. Welcome to Chow Tai Fook interim results analyst presentation for the financial year 2017. Let me introduce the management on stage. They are Mr. Kent Wong, the Managing Director, Mr. Hamilton Cheng, the Finance Director, and Ms. Danita On, the Director of Investor Relations and Corporate Communications. Mr. Hamilton Cheng will present the interim results, operational highlights, and financial review. Mr. Kent Wong will present our business update. Ms. 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 the Q&A session. Now, may I invite Hamilton to present. Hamilton, please.
Thank you. Good evening, everyone. First, we will have our results highlights, some key figures. Our revenue, top line, recorded HKD 21.5 billion, a decrease of 23.5% year-on-year because of the relatively high base during the second quarter last year, and also a continual weak consumer sentiment. Same-store sales in Mainland China, a decrease of 20.9%, and same-store sales in Hong Kong and Macau was down by 25.7%. Core operating profit, which excluded the unrealized hedging gain or loss on gold loans and net foreign exchange loss, was down by 29.5% year-on-year to HKD 1.7 billion. Profit to shareholders, HKD 1.2 billion, a decrease of 21.5% year-on-year. Basic EPS at HKD 0.122 in this period. The board declared an interim dividend of 6%, representing about 50% payout ratio compared to the EPS. We also declared a special dividend of HKD 0.15 per share.
Altogether, it is HKD 0.21 for this period. Here we will have our operational highlights for this period. In this period, we opened a net of seven POSs, bringing the total number of POSs to 2,326 as at end of September. We continued to expand the presence of HEARTS ON FIRE in our Chow Tai Fook network. During the period, we opened a net of two POSs and 31 POSs or 31 shop-in-shop or counter-in-shop in Mainland China, Hong Kong and Macau. The second one, the e-commerce business in Mainland China, we call it a steady growth. It grew by 22.5% in retail sales value and contributed 7.4% of our retail sales volume in Mainland China. Here, during the period, we also launched a new product, a new diamond brand.
This is based on our vertically integrated business model, and we have our new diamond brand, which is called the CHOW TAI FOOK T MARK, that can tell the customers from the mining sourcing down to the products that are delivered to the customers, and Kent will elaborate more on this. Lastly, regarding our store image. This period, we also have a new image and also display approach that has already in nearly half of our POSs in Mainland China. We will turn to our income statement summary. The decrease in revenue during this period was mainly due to the continual weak consumer sentiment over the region, in particular Hong Kong and Macau. However, our gross margin has improved quite a bit. It is 380 basis points.
The major reason is because of an unrealized hedging gain recorded during the period while we had unrealized hedging loss in the same period last year. Also, during the period, we also enhanced the product mix and the like-for-like margin, both for our gems and jewelry and gold products. SG&A, we managed to lower the SG&A by 14.6% year-on-year. However, the ratio was still up a bit because of the operating deleverage. That said, our profitability remained pretty stable as the improvement in adjusted GP margin has mitigated most of the impact from operating deleveraging. Our core operating profit dropped only 70 basis points to 7.9%. We have our revenue analysis. By reportable segment, we can find that Hong Kong and Macau segment recorded a weakness that some of the shares was low to the other segment. Mainland China jewelry segment also recorded quite a big decrease.
That is 23.9%. However, our underlying retail sales value was only down about 16%. The difference between the change of revenue and the retail sales value was mainly due to the renminbi devaluation, and also due to the change of our recognition policy for our wholesale revenue. Because since two years ago, for the sales to our franchisees who joined the new program, we will recognize the wholesale revenue at the time when the franchisees sell the products to the end customers. But in the past, under the old system, we recognized sales upon delivery of our products to franchisees. The revenue breakdown by product. During the period, the major change was about gold products, because of the strengthening of gold price in this period, that has some impact on the demand for the gold products.
Also, in the same period last year, during July and August last year, there was a mini gold rush due to the decrease of gold price. We will come to the same-store sales growth trend over the past six quarters. Generally, Mainland China jewelry business consistently deliver a better performance than our Hong Kong Macau segment. The same-store sales growth also showed a sequential improvement in the first quarter, the June quarter, in both segments. But the momentum weakened in the second half, which was mainly due to the tough comps that we have a higher base in the September quarter last year. During this period, same-store sales growth in both segments was wrecked mainly by a decline in the volume of products that we sold.
However, the ASP, the average selling price, has been holding up quite well with a year-on-year increase across the markets. So we may turn to some further analysis about the products. Average selling price showed an encouraging sign of recovery in both gem set and gold products in both segments. In particular, the gem set jewelry ASP in Hong Kong and Macau rose for the first time after years of decline since our financial year 2012. Here we have our SG&A analysis. We managed to trim our SG&A expenses by 14.6% to HKD 4.9 billion, with all components recording a year-on-year decrease. However, operating deleverage persisted in this period as the nature of basic salary, rental, and depreciation remained largely fixed. So the SG&A ratio edged up to 23%.
For some particular item, like our A&P, reduced considerably by more than 40% as more of these activities are scheduled to take place in the second half. For the full year, we expect an A&P ratio will remain at a similar level, that is 1.2% of the top line, similar to last year. Other SG&A, we have included in other SG&A are the diamond certification fees, royalty fees paid to the licensing company, and also expenses of packing materials, office sundries, utilities, and overhead for POS and our office. Some of these expenses are variable in nature, but quite some of those were fixed in nature. So, the decrease of such expenses were not fully in line with the top line. For the major part of our expenses, including the staff costs, concessionaire fees, and rental, these contribute nearly 70% of our total spending.
I will have some further analysis. First is Mainland China. In Mainland China, the staff costs decreased by 11.8% to nearly HKD 1 billion. This is generally in line with the decline of headcount in Mainland China during this period. While for concessionaire fees in absolute amount, there was a decrease of 22.4%. The slight increase in the expense ratio, that is a 20 basis point increase, was mainly due to an increase in sales of gem-set jewelry, which normally incur higher rates. Then we have our Hong Kong, Macau, and other markets. Staff costs dropped by 12.4% due to less average headcount, which mainly through attrition as well as the decrease in variable staff costs amid the slide in sales. Rental expenses was down by almost 10% during the period as we consolidated our POS in Hong Kong, Macau, and benefited from the rental renewal reduction.
Our rental expenses ratio further expanded by 170 basis point due to the operating deleverage, although the magnitude of increase has leveled. For the contracts we renewed during the period, the average rental reduction was around 14%. That is an average of around 30% for the street-level stores and around a flat for the shopping malls. We expected, in average, to have around a 20%-30% reduction for the full year, compared to the last contract terms. Then we have a recap of the core operating profit and profitability for the two major segments. In general, our Mainland China jewelry business is becoming more and more relevant to the group's operating profits, as Hong Kong and Macau segments further weaken. There was a divergent trend of profitability in Mainland China and Hong Kong during the period, and I will further elaborate about this.
For Mainland China, the adjusted GP margin rebounded by 450 basis point. This is mainly due to an improvement on the like-for-like GP margin of gem-set jewelry and gold products. Also, we have also enhanced the mix that we are selling more gem-set items in Mainland China, and also the retail wholesale mix has also improved. As the improvement in adjusted GP margin was more than to cover the operating deleverage, core operating profit margin in Mainland China improved by 250 basis point to 13%. For Hong Kong, Macau, the adjusted GP margin was dragged by an increase in wholesale revenue or trading of diamonds, which are the thin margin business. Also, the trade mix in Hong Kong, Macau has also lowered the GP margin, as we are selling a bit more gold products.
There is also a like-for-like margin contraction, in particular, for the gem-set items in Hong Kong. Coupled with the relatively higher fixed cost structure, the core operating profit margin in Hong Kong, Macau has lowered from 8% last year to 2.7% this year. We will turn to the inventory analysis. Inventory balance was slightly up compared to the beginning of the financial year. Inventory turnover lengthened accordingly as our sales declined. However, we expect that for the full year, inventory balances should be similar to last year's level, and inventory turnover days should be back to around 300-320 days. We will have CapEx. We slightly lowered the CapEx in this period compared to the same period last year.
For the full year, we still maintain our plan of about HKD 1.5 billion for the whole year, which are mainly incurred for POS refurbishment and also our infrastructure projects like that in Wuhan and Guangdong. We will have our changes in capital structure. The major change was on bank deposits and cash equivalents. That was down HKD 4.6 billion compared to the March balance.
This is mainly due to dividend payment of HKD 3 billion for the final and special dividend for last financial year, and also the repayment of some bank loans. Gold loans, however, has increased a bit following the increase of gold inventories. We have maintained our hedging ratio at quite a stable level of 70%. As at end of September, net gearing ratio stood at 16.7%. After the payment of the interim and special dividend we declared, the net gearing ratios show increase to around 25%.
Here is a summary of our movements in cash flow. Operating cash flow before movements in working capital amounted to HKD 2.5 billion, which was 6% down year-on-year compared to the same period last year. The major changes for the increase in inventory and after the other changes in working capital and also CapEx, we have a free cash flow of about HKD 800 million for this period. The other changes, as just mentioned, are mainly for the repayment of bank loans and also the dividends, bringing the balance of bank and cash to about HKD 8.4 billion as at end of September. Here concludes my part, and I will pass to Kent for the business update.
Okay. Thank you, Hamilton. I would like to share with you our retail network update. In 2017's first half, a net open of seven store and bringing a total of 2,326 store as of 30 September. In Mainland China, we opened 107 jewelry store, while closing 94 jewelry store in the same period, in a continuing consolidation and restructuring of traditional distribution channel, such as department store. In Hong Kong and Macau and other markets, we had a net closing of four point of sales, and six point of sale were closed in Hong Kong and Macau, while there were two openings in Malaysia and Korea. We would like to illustrate our performance of retail sales value and distribution of point of sale networks of Mainland China.
And we can see tier one cities continue to show more resilience in its retail sales value performance, thanks to a relatively stable fundamentals and consumer sentiment. By operation model, our self-operate point of sale in shopping mall demonstrate a better RSV performance due to stronger customer traffic as well as new openings. On the contrary, RSV performance of our self-operate standalone store was relatively weaker as there were fewer support on promotional activities compared to department store and shopping mall. Here, a summarize of our strategy. One, point of sale network management. We remain sensitive in new opening and keep a target of 50- 60 net open in the full year. Net closures in department store shall continue due to the changing retail landscape. Second, enhancing shopping experience, our key focus.
New in-store display segment according to customers' emotional needs and themes have been rolling out progressively. As of September, there were over 950 point of sale surface with this new look, and the revamp shall complete by the coming one to two year. Further, we upgrade some point of sale to high-end luxury and elegant style to drive gemset sales and uplift shopping experience. Hong Kong and Macau retail environment remain challenged and RSV drop continue in the first half year. Other market exhibit a more resilient RSV performance, and we add two point of sale in Malaysia and Korea to grab the opportunity from mainland outbound tourists. In Hong Kong and Macau, RSV of tourist area declined 32% year-on-year due to reducing consumer traffic and a general change in purchase behavior of mainland tourists.
In this connection, share of RSV settled in renminbi or UnionPay declined from 55% last year to 45% this year. Given the challenge that we are facing in Hong Kong and Macau and other markets, here summarize our strategy. In Hong Kong point of sale management, we closed six store and all of them are located in tourist area, especially Tsim Sha Tsui and Causeway Bay. We expect more closure in the second half, and the full-year closure will be around seven to eight store. We will also explore any business opportunity put in in the global business market. In terms of rental management, average rental renewal was down by 14% in the first half year. Second half renewal reduction will be more prominent as few bigger store at street level are due to renew.
In full year, we expect the average renewal rental reduction will be about 20%-30%. Consumer engagement, as in to tap the relatively stable local clientele. Event at store level will be organized from time to time to attract and engage consumers. Here, let me also give you some update on HEARTS ON FIRE . As of September this year, there were seven point of sale and 148 shop-in-shop or corner-in-shop in Mainland China and 90 in Hong Kong and Macau. To evaluate our design offering with greater variety, we collaborate with Stephen Webster, an international well-known British jewelry designer, and launched the White Kites collection this year. As highlight of Hamilton's We, being a pioneer in setting industry practice, we unveiled our Chow Tai Fook exclusive T MARK this August. This is an absolutely differentiated product that takes the advantage from our vertical integrated model with state-of-the-art technology.
The new 4T standard, a class of its own, is essentially a breakthrough from the current 4C by enabling customer to track the history and life cycle of a natural diamond journey from the source to the consumer. Each T MARK diamond carries a unique serial number, a resonance of the diamond from procurement to manufacturing, which empower the customer to give the assurance that the diamond is all natural, conflict-free, and not being swapped. Here, I would like to show you some video chat about our new initiative. Okay, thank you. We do not only bring in a product innovation to our customer, but also a whole new experience. Our experimental zone or in-store merchandise display device give a customer a differentiated look and feel. In addition, our consumers can access the diamonds through a mobile apps, okay?
By information such as T MARK serial number, important date in the diamond history, or the GIA certificate, or all the specimen they want to keep in record. Here, I conclude my part, and would like to pass to Danita to go on to e-commerce.
Thank you, Kent. After a few year of tremendous growth in our Mainland China e-commerce business, its retail sales value normalized to 22.5% during first half 2017, contributing to 2.8% of China jewelry RSV and approximately 7.4% of its respective retail sales volume. Average daily online traffic was approximately 250,000 unique visitors. The number of followers on our Sina, Tencent, Weibo, and WeChat account reached 2.7 million. Leveraging on our extensive retail network and the inventory mobility brought about by our centralized pooling mechanism, we collaborated with Tmall during first half. Orders from Tmall would be distributed efficiently to our nearby POS and enable direct delivery to the Tmall customers. We believe it is a win-win situation as it does not only shorten the delivery time but fully achieve O2O interactions by taking advantage of our strong retail network to establish a direct relationship between our stores and online customers.
We strive to maintain our unique brand proposition and further enhance our brand equity in virtue of our assets in our marketing. Our auction dinner is a highlighted event for our high jewelry series. This year, 13 sets of unique jewelry masterpieces were auctioned over the last weekend, and around 440 selected high-tier members and guests were invited to join. In mass luxury segment, our brand new store image display and enhancement on product assortment are underway to create a shopping environment which matches customers' emotional needs. In first half, we also further collaborated with Disney in launching the licensed Disney Tsum Tsum collection. We also opened our POS at Shanghai Disneyland Resort. In order to target the younger generation, celebrities and populous key opinion leaders were engaged to maximize our brand exposures and sales opportunities online. Here is our update on our customer loyalty program.
As of September 2016, we had approximately 1 million members in Mainland China. Members' repeat purchase ratio was stable at 28% of our mainland RSV. In Hong Kong and Macau, members' repeat purchase ratio was 44.6% in first half. Following the revision of our membership requirement of our basic member last year, the number of members reached 463,000. I shall turn over to Kent to discuss the business outlook and strategies. Thank you.
Okay, thank you. Let me brief our business outlook and strategy. One, I think optimization upon the sales. Mainly, we will continue to consolidate Hong Kong and Macau in the coming second half year, and then remain very selective even in China to open the store. Second, improvement of customer experience. I think continue to revamp our new image in the other store. Second, I think, especially in Mainland China, in the second half of the year, we opened some what we call segmentation store. Segmentation target to specific customer, like targeting wedding couple. We would have a new store called SOINLOVE by Chow Tai Fook. We target the wedding. We will have another store called MONOLOGUE, with new image, target to the young millennial fashion jewelry. So this is our store segmentation project in the coming year.
At the end of the day, I think hope we can continue to deploy our Smart Tray initiative to understand customer preference and uplift shopping experience. Third, enhancements on product offering. T MARK will be our company exclusive diamond brand, so we will continue to launch the project. Second, refresh our gemstone jewelry, houseware and fine collection, and fashion jewelry in a select store. Enrich product portfolio by licensed and proprietary collection. Lastly, investment for sustainable business development continue to invest in IoT and to further strengthen our efficiency along the value chain. Dynamic training and development provided to staff at all level, we continue to invest. Thank you. This is the end of my presentation.