– 1 – Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. CHOW TAI FOOK JEWELLERY GROUP LIMITED (Incorporated in the Cayman Islands with limited liability) Stock Code: 1929 周 大福珠寶集團有限公司 ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2015 HIGHLIGHTS • Revenue decreased by 17.0% to HK$64,277.0 million in FY2015 compared to HK$77,407.1 million recorded in FY2014. • Overall Same Store Sales (1) recorded a decline of 24.1%, among which jewellery business in Mainland China and Hong Kong and Macau recorded a decline of 16.1% and 32.8% respectively. • Revenue from gem-set jewellery as a percentage of revenue increased by 5.9% to 27.0% in FY2015. • Gross profit decreased by 9.8% to HK$19,072.4 million in FY2015 from HK$21,152.3 million in FY2014. Gross profit margin improved from 27.3% in FY2014 to 29.7% in FY2015. • Profit attributable to shareholders of the Company amounted to HK$5,456.0 million, a decrease of 25.0% compared to HK$7,272.0 million in FY2014. • Basic earnings per share were HK54.6 cents. • Proposed final dividend is HK15.0 cents per share (2) . • Retail network expanded to 2,257 POS as at 31 March 2015, with a net addition of 180 POS in FY2015. (1) “Same Store Sales” for FY2015 is the revenue from the self-operated POS existing as at 31 March 2015 and which have been opened prior to 1 April 2013. Revenue from wholesale and other channel are excluded. (2) The dividend payout ratio for FY2015, including proposed final dividend, is approximately 51.3% on a full year basis.
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CHOW TAI FOOK JEWELLERY GROUP LIMITED 周大福珠寶集團有 … · – 3 – 2015 2014 Note HK$ million HK$ million Profit for the year attributable to: Shareholders of the Company
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– 1 –
Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
CHOW TAI FOOK JEWELLERY GROUP LIMITED
(Incorporated in the Cayman Islands with limited liability)
Stock Code: 1929
周大福珠寶集團有限公司
ANNUAL RESULTS ANNOUNCEMENTFOR THE YEAR ENDED 31 MARCH 2015
HIGHLIGHTS
• Revenue decreased by 17.0% toHK$64,277.0million in FY2015 compared toHK$77,407.1millionrecordedinFY2014.
• OverallSameStoreSales (1) recorded adeclineof 24.1%, amongwhich jewellerybusiness inMainlandChinaandHongKongandMacaurecordedadeclineof16.1%and32.8%respectively.
(1) “Same Store Sales” for FY2015 is the revenue from the self-operated POS existing as at 31 March 2015 and which have been opened prior to 1 April 2013. Revenue from wholesale and other channel are excluded.
(2) The dividend payout ratio for FY2015, including proposed final dividend, is approximately 51.3% on a full year basis.
–2–
ANNUAL RESULTS FOR THE YEAR ENDED 31 MARCH 2015
Theboardofdirectors (the “Board”or “Directors”) ofChowTaiFook JewelleryGroupLimited (the “Company”, “we”or “ChowTaiFook”) is pleased to announce the auditedannual resultsof theCompanyand its subsidiaries (collectively, the“Group”) for theyearended31March2015 (“FY2015”), togetherwithcomparative figures for theyearended31March2014(“FY2014”)asfollows:
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFor the year ended 31 March 2015
Profit before taxation 3 6,659.1 9,163.0Taxation 4 (1,123.3) (1,713.8)
Profit for the year 5,535.8 7,449.2
Other comprehensive (expense) income:Item that will not be reclassified subsequently to profit or loss: —remeasurementofdefinedbenefitscheme (19.0) 28.3
Items that may be reclassified subsequently to profit or loss: —exchangedifferencesarisingontranslation 21.1 262.3 —shareoftranslationreserveofajointventure (0.1) 0.1
21.0 262.4
Othercomprehensiveincomefortheyear 2.0 290.7
Total comprehensive income for the year 5,537.8 7,739.9
–3–
2015 2014Note HK$ million HK$ million
Profit for the year attributable to: ShareholdersoftheCompany 5,456.0 7,272.0 Non-controllinginterests 79.8 177.2
5,535.8 7,449.2
Total comprehensive income attributable to: ShareholdersoftheCompany 5,456.2 7,547.8 Non-controllinginterests 81.6 192.1
5,537.8 7,739.9
Earnings per share — Basic 5 HK54.6 cents HK72.7cents
–4–
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 31 March 2015
ThedirectorsoftheCompanyanticipatethattheapplicationoftheothernewandrevisedIFRSswillhavenomaterial impact on the results and the financial positionof theGroup, and thedisclosuresof theconsolidatedfinancialstatementsoftheGroup.
2. REVENUE AND SEGMENT INFORMATION
Revenue represents thenetamounts receivedand receivable forgoodssold less returnsandnetof tradediscounts.
Information reported to thechiefoperatingdecisionmaker (the“CODM”)whichcomprises executivedirectorsof theCompany,for thepurposesofresourceallocationandassessmentofsegmentperformancefocuseson locationsof theoperations. Inaddition, revenuederived fromeach locationofoperations isfurtheranalysed into those fromretailandwholesalemarketswhen reviewedbyCODM.This isalso thebasisuponwhichtheGroupisarrangedandorganised.Inaddition,thesegment“MainlandChina”isfurtherseparated into jewellerybusiness (includinggem-set jewellerygoldproducts andplatinum/karatgoldproducts)andwatchbusiness forbetter resourceallocationandperformanceassessment.Therefore, theGroup’soperatingandreportablesegmentsunderIFRS8arejewellerybusinessandwatchbusinesslocatedinMainlandChina,andoperationslocatedinHongKong,Macauandothermarkets.NooperatingsegmentsidentifiedbytheCODMhavebeenaggregatedinarrivingatthereportablesegmentsoftheGroup.
–7–
(a) An analysis of the Group’s revenue and results by reportable segment:
Mainland China Hong Kong,Macau and other markets TotalJewellery business Watch business
2015 2014 2015 2014 2015 2014 2015 2014HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million HK$ million
Segmentprofitrepresentstheprofitgeneratedfromeachsegmentwithoutallocationofinterestincomeandfinancecosts.This is themeasurereported to theCODMfor thepurposesofresourceallocationandperformanceassessment.
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(b) An analysis of the Group’s revenue by products is as follows:
Under the Enterprise Income Tax Law (the “EIT Law”) of the People’s Republic of China andImplementationRegulationof theEITLaw, the tax rateof thesubsidiaries inMainlandChina is25%forbothyears.
For certain subsidiariesof theCompany inMainlandChina, they are entitled to the tax incentives inconnectionwiththedevelopmentofthewesternpartofMainlandChina.Theapplicabletaxrateis15%forbothyears.
Macau complementary tax is calculated at themaximumprogressive rate of 12%on the estimatedassessableprofitforbothyears.
Subsequent to the endof the reportingperiod, a final dividendofHK15.0 cents per share, totallingapproximatelyHK$1,500.0million in respectof theyearended31March2015 (2014:HK19.0centspershare,totallingapproximatelyHK$1,900.0million)hasbeenproposedbythedirectorsoftheCompanyandissubjecttoapprovalbytheshareholdersintheforthcominggeneralmeeting.
In spiteof the challenges in themarket environmentduringFY2015,our team remainedsteadfastinourcommitmenttodeliverthebestproductsandexperiencetoourcustomers.WearepleasedthatFY2015representsayearofprogresstoourteam:
E-commerce rising momentum:We ledour e-commercebusiness to continue its strongtrajectoryfromtheyearbeforewithasolidRSVyear-on-yeargrowthof29.3%;
Hearts On Fire to broaden product portfolio:Wecompleted theacquisitionofHeartsOnFire,an internationally-acclaimedbrand, inAugust2014withanaim toenrichourproductofferingstocustomerswithsophisticatedpreference;weopenedthefirstHeartsOnFirestoreinMainlandChinainShanghai;
Collaboration with multinationals and Korean celebrities to maximise brand exposure: WeworkedwithprominentmultinationalpartnerslikeDeBeers,RioTintoGroupandDisneyto jointlyexplorenewfrontiers in jewellery;we launchedexclusivecollectionswithKoreancelebritiesandleverageonthepowerofsocialmediatopromoteourbrand;
Membership programme to reward loyalty:Wecontinuedtostepupoureffortsincustomerrelationshipmanagement,whichhasseenrepeatpurchase,akeyindicatorofcustomerloyalty,steadilyriseoverthepast2–3years;and
Use of technology to understand customers’ preferences and to enhance efficiency:WeintroducedRFID-enableddevicestoourPOS,streamliningstorefrontandbackendproceduresandenablingoursalespeopletofocusonservingourcustomersandprovidingthebest-in-classexperience.
OUTLOOK
In theyearahead,we remaincommitted toabalancedapproachofgrowthand return,withspecificgoalsfurtheroutlinedinfivemainareas:
Market Development
InMainlandChina,weplan toaddanetof150–160POS toournetwork inFY2016.Webelieve roomforexpansion is still significant forus,aswearecurrentlypresent in just484citiesoutofover700 in thecountry.Toensure thatournewadditionswill fully capturemarketpotential,wewillfocusonlowertiercitiesandrelyonlocalexpertiseandprofessionalknowledge to facilitatemarket entry. In addition,wewill be conducting upgrades inapproximately10%ofourexistingPOSto“high-endluxury”or“elegance”styleoverthenextthreeyears inresponse to theevolvingretail landscape.Mostof theupgradeswillhappeninTierIandIIcities,wherecustomerexpectationstendtobehigher.
InHongKongandMacau, theFY2016emphasis is on efficiency,wherewe continue toconsolidateourretailnetworkwhereappropriatetomanageourrentalcosts.
Overseasmarket remains a strategic component inourmarketdevelopmentplans—ourvision remains thatwe be the trusted brandwhereverChinese consumers populate orfrequentlyvisit;wehavesetfootinTaiwan,MalaysiaandSingapore—aswellasournewestregionalmarket:SouthKorea.
Aswe believe one of the biggest challenges in the industry is the evolving customerpreference, themain objective of our product strategies is to stay connectedwith ourcustomers.Market-drivenstrategyandcustomer-orienteddesignarethetwoprimaryelementsinourstrategy.
Ourgoal is tocreateadistinctvalue forourcustomers throughproductdifferentiation.Asmentioned,theHeartsOnFireacquisitionisaconsciousattempttocompletethehighendofour product offer ing spectrum.Wemeet escala t ing customer expectat ion with acomprehensiveagenda;inparticular,weseeroomforgrowthinfashion-orientedcollections,art jewellery and designer collaborations andwe have established theChowTai FookJewelleryCreativeCentreasaresulttofostercreativity.
Weaimto leadourbrandingandmarketingactivities inaneffectiveandefficientmanner tomaximiseourbrandexposure.Asweengage in an increasingnumberofO2Omarketingactivities,weseehugepotentialincombiningconventionaladvertisinganddigitalmarketingtoolstoachieveatargetedbrandexposure.
Asweare avertically integratedbusiness that ranges from rawmaterialsprocurement toretailing,improvingonvariousbusinessprocessestodrivetowardsefficiencyhasalwaysbeenthemainobjective.
Wearecommittedtodevelopingandinvestingininitiativesandtechnologicalknow-howsthatallowformoreefficientdistributionand inventory flow inour retailnetwork.Thisyearwekick-started a2–3year programme tounify and retain inventoryownership to facilitateinventory flow inour retail network.Other short tomedium term initiatives include thelogisticsystemsinLogisticandDistributionCentre,theuseofRFID-technologyinthestock-takingprocessand increasingsteadilyour in-houseproduction ratio throughdevelopment inourproductioncapabilities.Wesee thesemeasuresasnecessary investments forour futuregrowthwhichmay takeyears tobear fruits;however,asmarket leader,westrive tocreatebreakthroughsforourindustryinachievinggreateroperationalefficiency.
Nevertheless,thegrowthof6.4%inoverallsalesofgem-setjewellery(whichisahighmarginproduct and closely correlated to the consumer sentiment), coupledwith a slowdown indemandforgoldproductsresultedinanimprovementinproductmix.Thegem-set jewellerymix forMainlandChina (includingWatchbusiness segment) andHongKong,Macauandothermarkets inFY2015were26.1%and28.4%,respectively,while thoseforFY2014were20.5%and21.8%,respectively.
TherevenuecontributionofthejewellerybusinessinMainlandChinatotheGroup’srevenuecontinuedtoincreasewhichwasmainlyattributabletothenationwidecontinualurbanisation,thegrowingaffluenceofMainlandChinese in termsof increasingdisposable incomepercapitaandtheirgrowingdemandforluxurygoods.
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Mainland China — Jewellery business
Overview
2013 2014 2015 2015 vs 2014For the year ended 31 March HK$ million HK$ million HK$ million YoY change
DuetotheexceptionallyhighbasecausedbythegoldrushfollowingtheunprecedentedslumpininternationalgoldpriceinFY2014,therevenueandRSVofjewellerybusinessinMainlandChinarecordedadecreaseof11.4%and9.4%,respectively,overthesameperiodlastyear.Asthehighbase effect fromgold rush fadedout and customer’s demand for goldproductsgraduallynormalised, thedecrease in sales showedanarrowing trendacrossFY2015.TheRSVexhibited a decreaseof 16.0% in1HFY2015over the sameperiod last year, and adecreaseof3.7%in2HFY2015overthesameperiodlastyear.
TherelativelystablesalesperformanceoffranchisedPOSoverthatofself-operatedPOSwasmainly driven by a steady increase in the percentage of franchisedPOSopenedduringFY2015,whichweremostly located in lower tiercitieswheregrowthpotential liesandaregenerallymoreresilienttoeconomicfluctuations.
WithanaveragesellingpriceofaroundHK$1,000,oure-commerceplatformsofferayoungerlineofproductswith lowerentryprices, targeting theyoungercustomerswho forma largeportionofonlineshoppers. In response to theneedsof theyoungergeneration, someofourproducts are supplied exclusivelyonour e-commerce channels, andweareputtingmoreemphasisontherapidlygrowingmobileplatformsinthecomingyear.
Withover14.0millionofnewlymarriedcouples inMainlandChinaperannum,weddingbusiness continued tobeoneofourmajor sourceof income, contributing around39.2%(FY2014:32.1%)ofourRSV.Wehaveseenan increasingpopularityofgem-set jewellerywithin the segment as a result of our continual investment inmarketing and productdevelopmentinresponsetotheboomingweddingmarket.
In termsofRSVperformanceby region, ourPOS inEastern regionofMainlandChinaperformedbetterthanotherregions,followedbyCentralandSouthernregion.
–20–
In termsofRSVby tierofcities,Tier IIIandothercitiesshowedresiliencewhencomparedwithTierIandIIcities.Inrecentyears,wehavebeenfocusingonPOSexpansioninTierII,IIIandlowertiercitiesinordertoachieveabroadercoverage.Thesecitieswhichexperiencehighereconomicgrowthare ingeneralmore resilient toglobaleconomic fluctuationsandhave seen rapid expansion in their jewellerymarkets.At the same time,wecontinued toupgrade the positioning and branding of ourPOS inTier I and II cities to cater to thesophisticatedcustomersinthesecities.
Although thegold rush inFY2014causedvolatility toouroverallSSSGandgoldproductsSSSG, thegem-set jewellerySSSGwas relativelystableandmaintainedahealthygrowth inFY2015.
15.0
12.0
9.0
6.0
3.0
0.0Q1
7.6
5.1
26.1%(1)
22.3%
22.4%
21.3%23.2%
6.75.4
6.25.1
8.57.3
Q2 Q3 Q4
23.7%
31.6%
29.4%
Average quarterly sales and its contribution to annual sales
FY2014 Quarterly sales contribution to annual sales
FY2015 Quarterly sales contribution to annual sales
(1) Gold rush triggered by the drop of international gold price in Q1 FY2014 caused an unprecedented surge in gold sales, leading to an abnormally high sales contribution of Q1 FY2014
FY2014 Average quarterly Same Store SalesHK$ million
WhiletheincreaseinsalesofourwatchbusinessinMainlandChinawasmainlydrivenbythenetadditionof46POSinFY2014,ourSameStoreSalesdecreasedby4.5%whencomparedto that of the same period last year.The drop in our SSSG reflected a generallyweakconsumersentimentintheluxurymarket,accompaniedbytheimpactofcurrencyfluctuationsinthesecondhalfofFY2015,whichmayhavedrivenconsumptionstooverseasmarkets.
Hong Kong, Macau and other markets
Overview
2013 2014 2015 2015 vs 2014For the year ended 31 March HK$ million HK$ million HK$ million YoY change
ThroughoutFY2015, the salesperformanceofHongKong,Macauandothermarketswasshadowedby thehighbase,generallyweakconsumersentimentandeconomical structuralchanges,resultinginadecreaseof25.0%and24.6%forrevenueandRSV,respectively.
Compared to thatofHongKongandMacau, theRSVofTaiwanandotherAsianmarketsshowed better performance and recorded a growth of 48.8%over last year,whichwasattributable to theHeartsOnFirePOS inTaiwanweacquiredon31August2014, andagenerallyrelativelystableconsumersentimentintheregions.
–24–
TheRSVof theUnitedStates represented the salesgenerated from2HeartsOnFire self-operatedPOS,whichwere located inLasVegas,NevadaandKingofPrussia,Pennsylvania,yetexcludetheretailsalesofretailpartnersofHeartsOnFire.
RSV by product
DuringFY2015,wecontinued to collaboratewith renowned internationalbrands suchasFOREVERMARK,RioTintoGroupandDisneytooffermorelicensedandpatentedproductsthatareuniqueandexclusive.TheRSVof themwasmainly fromgem-set jewellery,whichshowedanincreaseinRSVof7.6%overthesameperiodlastyear.
According to theCommerce andEconomicDevelopmentBureauofHongKong and theMacauStatisticsandCensusService, inFY2015, thenumberofMainland tourists toHongKongandMacauincreasedby12.8%and8.8%comparedtothesameperiodlastyear,to48.1millionand21.1million,respectively.
AlthoughthevisitationofMainlandtouristsshowedpositivegrowth,theportionofovernightvisitorsdecreased from43.6% inFY2014 to41.1% inFY2015.At the same time,wesawnotable change in their spendingpreferenceanddrop in sales contribution from them,asevidencedbyadecrease inportionof revenuesettled throughChinaUnionPayorRenminbi(FY2015: 56.4%,FY2014: 60.1%) and a decrease in the contribution ofRSV from thetouristicarea (including theAirport,CausewayBay,MongKok,Shatin,SheungShui,TsimShaTsui,YauMaTei andMacau),whichdeclined from79.9% inFY2014 to 77.3% inFY2015.
–25–
Hong Kong and Macau
Hong Kong
Macau
Revenue from other settlement method
43.6%(FY2014: 39.9%)
HONG KONG
Number of Mainland tourists in FY2015 (YoY change)
The relativelyweakconsumersentiment inHongKongandMacauwasalso reflected in thedecreaseofcustomertraffic.BasedontheoverheadpeoplecounterswehaveinstalledinsomeofourkeyPOSinthetouristicarea,customertraffichasdecreasedbyaroundone-thirdoverthe same period last year.Nevertheless, thanks to our successfulmarketing and salesstrategies,theconversionratehasshownanimprovement.
WerecentlynoticedachangeofpreferenceinMainlandtouristsforoverseasdestination.ThepossiblechangeininboundtourismfrommainlandersmaypoststructuralchangestotheretailindustryinHongKongandMacauandarouseduncertaintyoverourbusiness.WhileweseektoexpandourfootprintintheregiontocovermorepopulardestinationsofMainlandtourists,wewill also focus on enhancing the operation efficiency of our existing POS andconsolidatingPOStoenhancestoreproductivity.
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85.6%
14.4%
23.2%
76.8%
FY2015 RSV and POS by store age
Less than 2 years
More than orequal to 2 years
POS RSV
96.4%
2.4%1.2%
3.6%1.8%
94.6%
FY2015 RSV and POS by POS operation model
Self-operated (Concessionaire)
Self-operated(Self-owned property)
Self-operated (Rental)(1)
(1) Depending on the terms of individual rental contracts, concessionaire elements might be included
HongKongandMacaumarket is relativelymature.Ournewstoresare typically situated intouristicareawhereproductivitycanbeveryhighsinceopening.TheygenerallydonothavethesamerampuppatternasthePOSlocatedinMainlandChina.
(1) Gold rush triggered by drop of international gold price in Q1 FY2014 caused unprecedented surge in gold sales, leading to an abnormally high sales contribution of Q1 FY2014
Average quarterly sales and its contribution to annual sales
FY2014 average quarterly Same Store Sales
HK$ million
FY2015 average quarterly Same Store Sales
FY2014 quarterly sales contribution to annual sales
FY2015 quarterly sales contribution to annual sales
Approximately50%ofHeartsOnFire’sproducts soldwerebridal collection, 40%wereclassic collection, and 10%were designer collection.Around63.2%ofHeartsOnFirejewellerysalesinFY2015werepricedbetweenUS$1,000andUS$10,000.
Area with Hearts On Fire self-operated POS
Area with Hearts On Fire retail partners location
Hearts On Fire POS operated by Chow Tai Fook management
28Countries around the worldRetail partner locations
524
King of Prussia, Pennsylvania
Las Vegas, Nevada
Taiwan
Shanghai
Nanjing
HeartsOnFireoffers itsproduct toapassionateand loyalcustomerbase through itsglobalindependent retailpartnernetwork, self-operatedstoresandHeartsOnFire’swebsite (www.heartsonfire.com).Wholesale revenue,beingsales to retailpartners,contributed toaround80%ofHeartsOnFire’s revenue,while the remaining20%was retail revenue fromself-operatedstoresandHeartsOnFire’swebsite.ItsmajormarketwasintheUnitedStates,withpresencealsoinLatinAmerica,Caribbean,EuropeandAsia.
Asat31March2015, therewere2and8POSdirectlyoperatedbyHeartsOnFire in theUnitedStatesandTaiwan,and524retailpartnerlocationsin28countriesaroundtheworld.
WhileHeartsOnFirecontinued tobe ledby the foundersandoriginalmanagement team,HeartsOnFirePOS inMainlandChinaandHongKongandMacauwouldbeoperatedbyChowTaiFookmanagement, leveraging theknowledgeandconnections in the regionandenablingmoreefficientdeploymentofresources.
Due to thedrop inmarketgoldpricenearour financialyearend,we recordedanunrealisedhedginggain forFY2015.The table below set forth the gross profitmargin, unrealisedhedgingloss/(gain)ongoldloansandbullionforwardcontracts,andtheadjustedgrossprofitmarginforFY2013toFY2015:
Selling and Distribution Costs and Administrative Expenses
Overall
Our selling and distribution costs and administrative expenses (“SG&A”) increased toHK$12,344.4million(FY2014:HK$12,207.2million),representinganincreaseof1.1%overthesameperiodlastyear.OurSG&AwasmostlyrelatedtoPOSoperations,producthandlingandproductionsupport,andthereforewashighlyrelatedwithnumberofPOSandtotalsalesvolume.Thebelowsetforththebreakdownbynatureandsegmentofsuchexpenses:
(1) Withinour staffcosts,30.3%(FY2014:38.0%)wasperformancebasedanddecreaseddue to thedrop insales,while theremainingportionof thestaffcostswasmostlyfixedinnature,andincreasedinlinewiththeincreaseinnumberofstaff.Thestaffcoststorevenueratioincreasedfrom6.1%inFY2014to6.3%inFY2015,whichwasattributabletotheoperatingdeleverageonthefixedportion
(2) Thedecrease in concessionaire feeswasgenerally in linewith thedecrease inour retail revenue.Theaverage ratioofconcessionaire fees to the revenue for self-operated (concessionaire)POSwas9.4%forFY2015and9.3%forFY2014
(3) While theadvertisingandpromotionexpensesdecreasedby3.2%whencompared to thesameperiod lastyear, theexpenses to revenue ratio increased from2.0% inFY2014 to2.2% inFY2015due tooperatingdeleverage.Webelieve thata stablemarketing investmentwouldhelpus to regainmarket shareas themarketrecovers
(4) Depreciation and amortisation increased correspond to the expansion of ourPOSnetwork and newproductionfacilities
(5) Others inSG&Aincludedpackingmaterials,certification fees, royalty fees to the licensingcompanies,postageandtransportation,utilitiesandoverheadforPOSandoperationscentres.Whiletheratiotorevenueincreasedmainlyduetooperatingdeleverage,suchexpensesincreasedmainlyduetoincreaseinPOSandsalesvolumeofgem-setjewellery
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Mainland China — Watch business
400
600
500
300
200
100
257.9
21.3%
456.2
23.6%
6.8%
7.0%
7.1%
8.8%
8.4%
8.0%
1.2%0.5%1.3%2.7% 3.1%
1.9%0.6%1.8%
371.5
22.8%
3.3%
2.2%
2.2%
0.8%
0
19.3%
12.6%
44.2%
36.2%
35.8%
41.0%
2013 2014 2015
(in HK$ million) For the year ended 31 March YoY change
(1) Withinour staffcosts,43.9%(FY2014:54.8%)wasperformancebasedanddecreaseddue to thedrop insales,while theremainingportionof thestaffcostswasmostlyfixedinnature,andincreasedinlinewiththeincreaseinnumberofstaff
(2) TheincreasewasmainlyduetotheopeningofPOSintouristicareaandtherenewalofrentalcontractsinHongKongandMacau.Outofthe19.6%increaseinrentalexpenses,approximately5.7%wasattributableto theeffectof renewalofPOSrentalcontract,while the remaining incrementwasmainlyattributable tonewPOSopenings
(3) The increase inadvertisingandpromotionexpensescorresponded toourvariousmarketingcampaignsduring theyear, including thecollaborationswithKoreancelebrities to launchexclusivecollectionsandlaunchofHeartsOnFire
Other Income, Other Gains and Losses and Other Expenses
Other incomewasHK$453.0million forFY2015 (FY2014:HK$351.7million), representedanincreaseof28.8%overlastyear,whichwasmainlyattributabletotheincreaseininterestincome,franchiseincome,governmentgrantsandrentalincome.
Othergainsand lossesdecreased fromagainofHK$130.2million inFY2014 toa lossofHK$35.9million inFY2015,whichwasmainlyattributable to thenet foreignexchange lossofHK$12.7millioninFY2015,whiletherewasagainofHK$136.4millioninFY2014.
–34–
Otherexpenses increased toHK$94.7million inFY2015 fromHK$38.0million inFY2014.The increasewasmainlydue to the increase incharitabledonationsand transactioncostsrelatedtotheacquisitionofHeartsOnFireduringtheyear.
Finance Costs and Taxation
Our finance costs increased fromHK$222.8million inFY2014 toHK$380.5million inFY2015.Whiletheinterestratesforbankandgoldloanswasrelativelystable,theincreaseinfinancecostswasmainlyattributed to the relativelyhigherbankandgold loan levelacrossFY2015whencomparedwiththatofFY2014.
Our taxexpensesdecreased fromHK$1,713.8million inFY2014 toHK$1,123.3million inFY2015,andeffectivetaxrateswas18.7%and16.9%forFY2014andFY2015respectively.TheeffectivetaxrateforFY2015waslowerthanthatforFY2014,whichwasmainlyduetooneoffeffectof the reversalofexcessivewithholding taxprovision fordividendpaymentspreviouslyrecognisedbycertainsubsidiariesoftheGroup.
Profitability, Basic Earnings per Share and Dividend
Our operating profit (being earnings before net interest and taxation) decreased fromHK$9,252.1millioninFY2014toHK$6,888.1millioninFY2015,representingadecreaseof25.6%over the sameperiod lastyear.Thecharts and tablesbelowdepict thegrossprofitmargin,SG&A to revenue ratio,operatingprofitmargin,netprofit, profit attributable toshareholders, basic earningsper share, dividendper share anddividendpayout ratio forFY2013toFY2015:
Our inventories decreased by 6.5% fromHK$42,543.7million as at 31March 2014 toHK$39,797.6millionasat31March2015,whichwasmainlyattributable to thedecrease ingoldproducts.
Our inventories turnoverperiod increasedfrom276days inFY2014to321days inFY2015.Thelengthenedinventoryturnoverperiodwascontributedbytheincreaseininventorybalanceofgem-set jewelleryanddecrease in that forgoldproducts,which the turnoverperiod forgem-setjewellerywashigherthanthatofgoldproducts.
As at 31March 2015, inventories amounted toHK$286.9millionwere located in ourfranchisedPOSunderthenewoptimisedmechanism.
The tablebelowset forth the information regardingnon-current assets, inventories,bankdepositsandcashequivalents,bankborrowings,goldloans,netdebt,workingcapitalandtotalequityasat31March2015and2014:
2014%tototal
equity 2015% to total
equity YoY changeDenominated
Currency(1)
Interestratestructure(1) Maturity(1)
As at 31 March HK$ million HK$ million HK$ million
TheDirectors recommended thepayment of a final dividendofHK15.0 cents per share(FY2014:HK19.0centspershare),amountingtoapproximatelyHK$1,500.0million(FY2014:HK$1,900.0million). Such payment of dividendswill be subject to the approval ofshareholdersattheforthcomingannualgeneralmeetingoftheCompanytobeheldonFriday,31July2015andarepayabletoshareholderswhosenamesappearontheregisterofmembersof theCompanyat thecloseofbusinessonTuesday,11August2015.It isexpectedthat theproposedfinaldividendwillbepaidonorabout19August2015.Noticeoftheannualgeneralmeetingwillbepublishedanddespatched to shareholdersof theCompany in themannerrequiredby theRulesGoverning theListingofSecuritiesonTheStockExchangeofHongKongLimited(the“ListingRules”)induecourse.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
TheCompanyhas not redeemed anyof its listed securities during the year.Neither theCompanynor anyof its subsidiaries haspurchasedor sold anyof theCompany’s listedsecuritiesduringtheyear.
MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
TheCompanyhasadoptedacodeofconduct regardingdirectors’ securities transactionsontermsnolessexactingthantheModelCodeforSecuritiesTransactionsbyDirectorsofListedIssuers as setout inAppendix10 to theListingRules (the“ModelCode”).HavingmadespecificenquiryofallDirectors, theDirectorsconfirmed that theyhadcompliedwith therequiredstandardassetoutintheModelCodeduringFY2015.
The figures in respect of theGroup’s consolidated statement of financial position,consolidatedstatementofprofitorlossandothercomprehensiveincomeandtherelatednotestheretofortheyearended31March2015assetoutinthisannouncementhavebeenagreedbytheGroup’sauditor,Messrs.DeloitteToucheTohmatsu,totheamountssetoutintheGroup’saudited consolidated financial statements for the year.TheworkperformedbyMessrs.DeloitteToucheTohmatsu in this respect didnot constitute an assurance engagement inaccordancewithHongKongStandards onAuditing,HongKongStandards onReviewEngagementsorHongKongStandardsonAssuranceEngagements issuedbytheHongKongInstituteofCertifiedPublicAccountantsandconsequentlynoassurancehasbeenexpressedbyMessrs.DeloitteToucheTohmatsuonthisannouncement.
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CLOSURE OF REGISTER OF MEMBERS
Inorder to establish entitlements to attendandvotingat the forthcomingannualgeneralmeeting of theCompany, the register ofmembers of theCompanywill be closed fromWednesday,29July2015 toFriday,31July2015,bothdays inclusive,duringwhichperiodnotransferofshareoftheCompanywillberegistered.AlltransfersofsharesoftheCompanyaccompaniedbytherelevantsharecertificatesandproperlycompletedtransferformsmustbelodgedwith thebranch share registrar and transferofficeof theCompany inHongKong,TricorInvestorServicesLimitedofLevel22,HopewellCentre,183Queen’sRoadEast,HongKongforregistrationnolaterthan4:30pmonTuesday,28July2015.
Inorder toestablishentitlements to theproposed finaldividend, the registerofmembersoftheCompanywillbeclosedfromMonday,10August2015toTuesday,11August2015,bothdays inclusive,duringwhichperiodno transferof shareof theCompanywillbe registered.All transfersof sharesof theCompanyaccompaniedby the relevant sharecertificatesandproperlycompletedtransferformsmustbelodgedwiththebranchshareregistrarandtransferofficeoftheCompanyinHongKong,TricorInvestorServicesLimitedofLevel22,HopewellCentre,183Queen’sRoadEast,HongKongforregistrationnolaterthan4:30pmonFriday,7August2015.
ForandonbehalfoftheBoardDr. Cheng Kar-shun, Henry
Chairman
HongKong,5June2015
As of the date of this announcement, the executive directors are Dr. Cheng Kar-Shun, Henry, Mr. Wong Siu-Kee, Kent, Dr. Cheng Chi-Kong, Adrian, Mr. Cheng Chi-Heng, Conroy, Mr. Chan Sai-Cheong, Mr. Chan Hiu-Sang, Albert, Mr. Cheng Ping-Hei, Hamilton and Mr. Suen Chi-Keung, Peter, the non-executive directors are Mr. Cheng Kam-Biu, Wilson and Mr. Koo Tong-Fat and the independent non-executive directors are Mr. Cheng Ming-Fun, Paul, Dr. Fung Kwok-King, Victor, Mr. Kwong Che-Keung, Gordon, Mr. Lam Kin-Fung, Jeffrey and Dr. Or Ching-Fai, Raymond.