CHOW TAI FOOK JEWELLERY GROUP LIMITED 周大福珠寶集團有 … · – 3 – 2015 2014 Note HK$...

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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.

• Revenue fromgem-set jewelleryas apercentageof revenue increasedby5.9% to27.0%inFY2015.

• Grossprofitdecreasedby9.8%toHK$19,072.4millioninFY2015fromHK$21,152.3millioninFY2014.Grossprofitmarginimprovedfrom27.3%inFY2014to29.7%inFY2015.

• ProfitattributabletoshareholdersoftheCompanyamountedtoHK$5,456.0million,adecreaseof25.0%comparedtoHK$7,272.0millioninFY2014.

• BasicearningspersharewereHK54.6cents.

• ProposedfinaldividendisHK15.0centspershare(2).

• Retailnetworkexpandedto2,257POSasat31March2015,withanetadditionof180POSinFY2015.

(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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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

2015 2014Notes HK$ million HK$ million

Revenue 2 64,277.0 77,407.1Costofgoodssold (45,204.6) (56,254.8)

Gross profit 19,072.4 21,152.3Otherincome 453.0 351.7Othergainsandlosses (35.9) 130.2Sellinganddistributioncosts (9,935.8) (10,035.6)Administrativeexpenses (2,408.6) (2,171.6)Otherexpenses (94.7) (38.0)Financecosts (380.5) (222.8)Shareofresultsofajointventure (10.8) (3.2)

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

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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

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CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAt 31 March 2015

2015 2014Note HK$ million HK$ million

Non-current assets Property,plantandequipment 4,442.5 3,054.1 Landuserights 237.9 174.6 Investmentproperties 508.9 – Goodwill 257.8 – Otherintangibleassets 397.2 – Depositspaidforacquisitionofproperty, plantandequipment 294.1 283.6 Interestinajointventure – 10.9 Loanreceivables 39.8 36.5 Deferredtaxassets 860.1 703.1

7,038.3 4,262.8

Current assets Inventories 7 39,797.6 42,543.7 Tradeandotherreceivables 5,785.4 4,872.7 Loanreceivables 4.3 144.5 Convertiblebonds 17.9 21.5 Pledgedbankdeposits 0.4 5.3 Short-termbankdeposits – 500.0 Bankbalancesandcash 8,477.1 9,466.6

54,082.7 57,554.3

Current liabilities Tradeandotherpayables 3,997.9 4,128.3 Amountsduetonon-controllingshareholders ofsubsidiaries 197.3 228.2 Taxationpayable 595.8 1,064.0 Bankborrowings 6,750.6 6,299.6 Goldloans 8,338.3 10,786.8

19,879.9 22,506.9

Net current assets 34,202.8 35,047.4

Total assets less current liabilities 41,241.1 39,310.2

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2015 2014HK$ million HK$ million

Non-current liabilities Retirementbenefitobligations 243.3 225.0 Deferredtaxliabilities 457.0 632.8

700.3 857.8

Net assets 40,540.8 38,452.4

Share capital 10,000.0 10,000.0Reserves 29,429.5 27,173.3

Equity attributable to shareholders of the Company 39,429.5 37,173.3Non-controlling interests 1,111.3 1,279.1

40,540.8 38,452.4

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NOTES

1. BASIS OF PREPARATION

TheGrouphasappliedthefollowingamendmentstoInternationalFinancialReportingStandards(“IFRSs”)andanew interpretation issuedby the InternationalAccountingStandardsBoard (the“IASB”)and IFRSInterpretationCommittee(the“IFRIC”)oftheIASBforthefirsttimeinthecurrentyear:

AmendmentstoIFRS10, IFRS12andIAS27

Investmententities

AmendmentstoIAS32 OffsettingfinancialassetsandfinancialliabilitiesAmendmentstoIAS36 Recoverableamountdisclosuresfornon-financialassetsAmendmentstoIAS39 NovationofderivativesandcontinuationofhedgeaccountingIFRIC-INT21 Levies

TheapplicationoftheaboveamendmentstoIFRSsandthenewinterpretationinthecurrentyearhashadnomaterial impacton theGroup’s financialperformanceandpositions for thecurrentandprioryearsand/oronthedisclosuressetoutintheseconsolidatedfinancialstatements.

TheGrouphasnotearlyappliedthenewandrevisedIFRSsthathavebeenissuedbutarenotyeteffective.

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.

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(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

Revenue Externalsales —Retail 26,768.4 30,508.6 1,931.0 1,593.5 25,961.4 35,076.8 54,660.8 67,178.9 —Wholesale# 9,142.8 10,007.7 – 38.4 473.4 182.1 9,616.2 10,228.2

Segment/grouprevenue 35,911.2 40,516.3 1,931.0 1,631.9 26,434.8 35,258.9 64,277.0 77,407.1Inter-segmentsales* 560.6 853.9 – – 2,922.2 3,685.6 3,482.8 4,539.5

36,471.8 41,370.2 1,931.0 1,631.9 29,357.0 38,944.5 67,759.8 81,946.6

Grossprofit 10,766.4 11,280.1 472.1 443.0 8,282.7 9,634.3 19,521.2 21,357.4Inter-segmenteliminations (68.2) (28.9) – – (380.6) (176.2) (448.8) (205.1)

10,698.2 11,251.2 472.1 443.0 7,902.1 9,458.1 19,072.4 21,152.3Sellinganddistributioncostsand administrativeexpenses (7,040.3) (7,379.2) (456.2) (371.5) (4,847.9) (4,456.5) (12,344.4) (12,207.2)Otherincome,netπ 123.8 206.7 12.0 10.7 24.3 89.6 160.1 307.0

Segmentprofit 3,781.7 4,078.7 27.9 82.2 3,078.5 5,091.2 6,888.1 9,252.1

Interestincome 151.5 133.7Financecosts (380.5) (222.8)

Profitbeforetaxation 6,659.1 9,163.0

* Inter-segmentsalesarechargedatapricemutuallyagreedbybothparties.# Wholesalemainlyrepresentssalestofranchisees.π Amountrepresentsotherincome,othergainsandlosses,otherexpensesandshareofresultsofa

jointventureforeachreportablesegmentwithoutallocationofinterestincomeandfinancecosts.

Segmentprofitrepresentstheprofitgeneratedfromeachsegmentwithoutallocationofinterestincomeandfinancecosts.This is themeasurereported to theCODMfor thepurposesofresourceallocationandperformanceassessment.

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(b) An analysis of the Group’s revenue by products is as follows:


Salesof —Gem-setjewellery 17,378.9 16,332.2 —Goldproducts 34,214.2 47,359.6 —Platinum/karatgoldproducts 9,256.3 10,358.3 —Watches 3,427.6 3,357.0

64,277.0 77,407.1

Noindividualcustomercontributedover10%ofthetotalrevenueoftheGroupinbothyears.

3. PROFIT BEFORE TAXATION


Profitbeforetaxationhasbeenarrivedataftercharging(crediting):

Directors’remuneration 80.4 62.7Staff’sretirementbenefitsschemecontributions 598.7 511.1Staffcosts 3,377.5 3,809.7

4,056.6 4,383.5

Amortisationofotherintangibleassets 24.0 –Amortisationoflanduserights 14.1 13.6Auditors’remuneration —auditrelatedservices 11.0 9.8 —non-auditservices 1.5 0.9Concessionairefees 2,257.1 2,558.5Costofinventoriesrecognisedasexpenses 43,847.5 55,280.3Depreciationofproperty,plantandequipment 730.6 649.8Depreciationofinvestmentproperties 17.5 –Donations(includedinotherexpenses) 72.2 38.0Fairvaluegainofgoldloans(includedincostofgoodssold) (418.0) (467.9)Operatingleaserentalsinrespectofrentedpremises 1,840.0 1,543.3

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4. TAXATION


Thetaxationchargecomprises:

Currenttax: EnterpriseIncomeTax(“EIT”)inMainlandChina 842.8 972.1 HongKongProfitsTax 474.9 694.6 Macaucomplementarytax 82.1 116.7

1,399.8 1,783.4

Under(over)provisioninprioryears: EITinMainlandChina 0.1 44.8 HongKongProfitsTax (1.2) (0.3) Macaucomplementarytax 4.4 –

3.3 44.5

Deferredtaxcredit (307.8) (153.2)

Withholdingtax* 28.0 39.1

1,123.3 1,713.8

* Withholdingtaxmainlyrepresentswithholdingtaxonintra-grouplicenceincomeandinterestincomefromMainlandChina.

HongKongProfitsTaxiscalculatedat16.5%oftheestimatedassessableprofitforbothyears.

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.

Noprovisionfor taxationhasbeenmadefor theoperationinTaiwanas therewasnoassessableprofit forbothyears.

5. EARNINGS PER SHARE

ThecalculationofthebasicearningspersharefortheyearisbasedontheconsolidatedprofitattributabletoshareholdersoftheCompanyfortheyearandonthenumberof10,000,000,000(2014:10,000,000,000)sharesinissueduringtheyear.

Nodilutedearningspershareispresentedastherewerenopotentialordinarysharesduringbothyears.

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6. DIVIDENDS


Dividendsrecognisedasdistributionduringtheyear: 2015Interim—HK13.0cents (2014:2014Interim—HK17.0cents)pershare 1,300.0 1,700.0 2014Final—HK19.0cents (2014:2013Final—HK16.0cents)pershare 1,900.0 1,600.0

3,200.0 3,300.0

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.

7. INVENTORIES


Rawmaterialsfor: Gem-setjewellery 6,705.6 7,431.4 Goldproducts 1,040.5 2,321.2 Platinum/karatgoldproducts 174.6 333.1

7,920.7 10,085.7

Finishedgoods: Gem-setjewellery 14,061.3 11,625.6 Goldproducts 10,723.1 13,215.9 Platinum/karatgoldproducts 3,492.8 3,695.9 Watches 3,447.2 3,859.1

31,724.4 32,396.5

Packingmaterials 152.5 61.5

39,797.6 42,543.7

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MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS REVIEW

In spiteof the challenges in themarket environmentduringFY2015,our team remainedsteadfastinourcommitmenttodeliverthebestproductsandexperiencetoourcustomers.WearepleasedthatFY2015representsayearofprogresstoourteam:

Retail network expansion:Weaddedanetof180POStoournetwork;whileitiscrucialtomaintainourmarket leadership,wewillcontinue topaycloseattention toourPOSstrategyandmakepromptrevisionswhennecessaryduringunpredictableeconomictimes;

2013 2014 During FY2015 2015As at 31 March Total Total Addition Reduction Net Total

POSnetworkMainlandChina 1,731 1,965 294 (135) 159 2,124 JewelleryPOS 1,640 1,828 280 (116) 164 1,992 WatchPOS 91 137 14 (19) (5) 132HongKong,Macau andothermarkets 105 112 27 (6) 21 133Total 1,836 2,077 321 (141) 180 2,257

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;

FirstHeartsOnFirestoreopenedinShanghai,MainlandChina

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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.

ChowTaiFookJewelleryArtCentreopenedinShenyang,MainlandChina

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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.

Lastbutnot least, e-commerce,online-to-offline (“O2O”)andother formsofomni-channelretailingareareaswherewebelieveholdsignificantgrowthpotential.Our“Smart+”initiativeisaperfectexampleofourcommitmentinthisarea;weaimatintegratingtheinterfaceofourdistributionchannelsandclientfacingwindowswiththeInternetandabroaderapplicationofinnovative tools inprovidingcustomersa seamless shoppingexperience.Whilewebelievethatthecoreofourbusinesshasneverbeenchanged,thisinitiativeintendstoexplorewaystoextractO2Osynergyandtohelpusstayconnectedwithourcustomers,especiallytheyoungergenerations,ininteractiveandinnovativeways.

Products

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.

HeartsOnFire“Aerial”Collections

“Bridal”Collections “CTFxLMH”Collection

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ChowTaiFookJewelleryCreativeCentreopenedinShunde,MainlandChina

Branding and Marketing

Tosuccessfullymanageourbrandandcustomerloyaltyisakeytoourlongtermsuccess.Wearecommittedtodedicatingourselvestotheintegrityofourbrandandtostriveforahealthyandqualityrepeatpurchasefromourmembers.

Weaimto leadourbrandingandmarketingactivities inaneffectiveandefficientmanner tomaximiseourbrandexposure.Asweengage in an increasingnumberofO2Omarketingactivities,weseehugepotentialincombiningconventionaladvertisinganddigitalmarketingtoolstoachieveatargetedbrandexposure.

Thisyearourannualhigh-endjewelleryauction“ReflectionsofSiem”hasonceagainbeenagreat success—itcreatesa significantdifferentiator forusat thehigh-endofourproductspectrum.

BridalCollection “ReflectionsofSiem”Collection

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Operations

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.

mHandsscanningRFIDtagsinStock-takingprocess RFID-enabledSmartTraytofacilitatesalesandcollectcustomers’preference

Management

Ourpeople representourmostvaluable resource; it isourpriority toprovide themwith therighttraining.Weneedastaffequippedwiththerightcapabilitiestorealiseourbusinessplan.Wewillcontinuetoemphasiseonstafftrainingandmotivationasthekeycomponentsofourlong-termbusinessdevelopment.

Wearegoing toestablish theChowTaiFookAcademy to furtherhone theexpertiseofourstaff.Throughonlinecourses,classroomworkandon-the-job training, theChowTaiFookAcademydeliverscoursestaughtbyexternalconsultantsandseniorexecutivestodevelopall-rounded,professionalandcapableemployees.

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FINANCIAL REVIEW

Revenue

For the year ended 31 March

57,433.964,277.0

50.7%

52.4%

55.9%

2.1%

2.1%

3.0%

47.2%45.5%

77,407.1

41.1%

(11.4)%

18.3%

(25.0)%

80,000

60,000

40,000

20,000

02013 20152014

YoY change

Hong Kong, Macau and other markets

Mainland China – Watch business

Mainland China – Jewellery business

Revenue by reportable segment

（HK$ million）

80,000

60,000

40,000

20,000

57,433.964,227.0

87.6%

86.8%

85.0%

12.4% 13.2%

77,407.1

15.0%02013 20152014

Revenue by operation model

（HK$ million）

Wholesale

Retail

80,000

60,000

40,000

20,000

57,433.964,277.0

22.9%

61.2%

21.1%

53.3%

27.0%

57.4%

13.4% 14.4%14.5%5.2% 4.3%

77,407.1

5.3%02013 20152014

Revenue by product

（HK$ million）

Platinum/Karat gold products

Watches

Gold products

Gem-set jewellery

Note: Thepercentagescalculatedaresubjecttominorroundingdifferences

TheGroup recordeda revenueofHK$64,277.0million inFY2015 (FY2014:HK$77,407.1million),representingadecreaseof17.0%overlastyear.ThedecreasewasmainlyattributabletohighbaseeffectcausedbythegoldrushinFY2014,slowdownofeconomicgrowthintheGreaterChinaregionandregionalmarketstructuralchanges.

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

RevenueRetail 23,117.9 30,508.6 26,768.4 (12.3)%Wholesale 5,980.6 10,007.7 9,142.8 (8.6)%Total 29,098.5 40,516.3 35,911.2 (11.4)%

Retail Sales Value (“RSV”)Self-operatedPOS 26,969.0 35,558.7 31,013.4 (12.8)%FranchisedPOS 10,674.6 14,044.9 13,811.1 (1.7)%E-commerce 264.8 516.8 663.3 28.3%Others 61.0 200.6 102.7 (48.8)%Total 37,969.4 50,321.0 45,590.5 (9.4)%

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.

Ourretailrevenue,beingsalesfromself-operatedPOS,e-commerceandotherdirectchannels,decreasedby12.3%overlastyear.

Ourwholesale revenue,beingsales recognisedwhen inventoriesaredelivered to franchiseesandrecordedatwholesaleprice,decreasedby8.6%overlastyear.ThedecreaseinwholesalerevenuewashigherthanthatfortheRSVoffranchisedPOS,whichwasmainlyattributabletomoreconservativeapproachofourfranchiseesinstockreplenishment.StartingfromFY2015,our franchiseeswillprogressivelyadopt thenewoptimisedmechanism thatwewould retaininventoryownershipuntilsalestransactionsarecompletedwithretailcustomers,uponwhichwholesalerevenueisrecognisedattheprevailingprice.

E-commerceandothersincludedthesalesofourproductsthroughonlinesalesplatformsandoccasionalsaleseventssuchasjewelleryexhibitionsandweddingexpos.

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Asat31March2015,weoperated30(31March2014:21)e-commerceplatforms,includingourdirectwebsiteChowTaiFookeShopandallmajor third-partymarketplaceplatforms inMainlandChina,namelyTmall.com,JD.com,VIP.com,Suning.com,mei.com,andAmazon.cn.

WithanaveragesellingpriceofaroundHK$1,000,oure-commerceplatformsofferayoungerlineofproductswith lowerentryprices, targeting theyoungercustomerswho forma largeportionofonlineshoppers. In response to theneedsof theyoungergeneration, someofourproducts are supplied exclusivelyonour e-commerce channels, andweareputtingmoreemphasisontherapidlygrowingmobileplatformsinthecomingyear.

RSV by product

DuringFY2015,wecontinued to collaboratewith renowned internationalbrands suchasFOREVERMARK,RioTintoGroupandDisneytooffermorelicensedandpatentedproductsthatareuniqueandexclusive.TheRSVof themwasmainly fromgem-set jewellery,whichshowedan increaseof85.6%over lastyear.Fuelledbya stablevolumegrowth,gem-setjewellerymaintained itsmomentumfrom lastyearand recorded5.2%growth inSameStoreSales,resultinginaremarkableimprovementinproductmix.

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.

ThechartsbelowsetforththebreakdownofourjewelleryproductsRSVandthatforgem-setjewellerybypricerange:

14.6%

51.6%

0.2%

2.4%

24.1%

7.1%

2.6%0.5%

51.9%

14.2%

23.6%

7.2%

RSV by price range – Jewellery products

More than 500,000

100,000–500,000

30,001–99,999

10,001–30,000

Less than 2,000

2,001–10,000

FY2014 FY2015HK$

44.9%

31.6%

1.5%0.7%

14.9%

6.4%

1.0%

1.4%

31.0%

44.0%14.4%

8.2%

RSV by price range – Gem-set jewellery

More than 500,000

100,000–500,000

30,001–99,999

10,001–30,000

Less than 2,000

2,001–10,000

FY2014 FY2015HK$


–19–

RSV performance and POS network by region and tier of cities

The diagrambelow illustrates theRSVperformance of our jewellery POSnetwork inMainlandChinabygeographicalregionandtierofcitiesover thesameperiod lastyear,andthecoverageofourPOSnetworkasat31March2015:

Tier I cities

RSV

POS: 239 9.7%

Western

360 POS

12.2% RSV

Northern

300 POS

11.3% RSV

Central

388 POS

7.2% RSV

Eastern

358 POS

5.7% RSV

Southern

362 POS

9.3% RSV

Northeastern

224 POS

15.0% RSV

RSV

POS: 1,103

Tier II cities

11.3%

RSV

POS: 650

Tier III and others

5.6%

19.6%

17.1%

17.8%10.4%

16.0%

19.1%

11.2% 17.9%

18.1%

18.2%

15.1%

19.5%

FY2015 RSV and POS by region

Eastern

Southern

Western

Northern

Central

Northeastern

POS RSV

59.5%

23.3% 17.2%

12.0%

32.6%

55.4%

FY2015 RSV and POS by tier of cities

Tier I

Tier II

Tier III and others

POS RSV


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.

83.2%

16.8%

29.4%

70.6%

FY2015 RSV and POS by store age

Less than 2 years

More than orequal to 2 years

POS RSV

10.5%

0.8%

30.8%

57.9%53.5%

37.4%

8.7%0.4%

FY2015 RSV and POS by POS operation model

Self-operated(Concessionaire)

Self-operated(Rental)

Self-operated(Self-owned property)

Franchised

POS RSV


NewPOSopeningscontinuedtocontributetoourRSVgrowth.InFY2015,16.8%(FY2014:18.6%)ofourRSVwascontributedbyPOSopenedwithin2years.RSVcontribution fromfranchisedPOShavebeen increased from28.3% inFY2014 to30.8% inFY2015, thanks toourcontinuingeffortincollaboratingwithfranchiseestoopenfranchisedPOSandleveragingonfranchisees’networkandlocalknowledge.

Self-operated POS

TheRSVfromourself-operatedPOSrecordedadecreaseof12.8%whencomparedwiththatof lastyear.WhilenewPOSopeningscontinue tocontribute toour sales,ourSameStoreSalesrecordedadeclineof16.1%.

–21–

150.0%

64.9%

82.2%91.5%

101.3%

136.7%

100.0%

50.0%

0%

Sales per store by store age

FY2015RSV per annum:HK$27.4 million(2)

Less than 2 years(1) 8 years or more6~8 years4~6 years2~4 years

POS —date of opening

4/2013~3/2015

4/2011~3/2013

4/2009~3/2011

4/2007~3/2009

3/2007 orbefore Total

NumberofPOS 298 364 193 176 216 1,247

RatioofannualsalesperstoretoaverageSameStoreSalesperstore

(1) ForPOSofagelessthan1year,salesisadjustedonanannualisedbasis

(2) Includedvalue-addedtax(“VAT”)

TheproductivityforPOSofagelessthan2yearswas64.9%ofthatforSameStoreaverage.WhileproductivityandefficiencyofourPOSimprovedasourPOSrampedup,ittakesaround6-8yearsforanewPOStoreachtheaverageSameStoreSaleslevel.Togetherwithnewstoreprofitability,breakevenpointsandpaybackperiodanalysis,theseareimportantreferencesandindicatorsinformulatingourPOSexpansionplan.

60.0%

40.0%

20.0%

0%

-20.0%

-40.0%

-60.0%

Q1 Q4 Q4Q1 Q2 Q3Q3Q2

Same Store Sales Growth (”SSSG”)

Overall

Gem-set jewellery

Gold products

FY2014 FY2015

–22–

For the year ended 31 March 2014 2015 YoY change

SSSG 18.6% (16.1)% N/ASameStoreSalesvolumegrowth 33.6% (16.0)% N/A

SSSG—Gem-setjewellery 6.4% 5.2% N/ASSSG—Goldproducts 28.9% (23.8)% N/A

HK$ HK$Averagesellingprice(1)—Gem-setjewellery 6,628 6,833 3.1%Averagesellingprice(1)—Goldproducts 3,450 3,396 (1.6)%

(1) AveragesellingpriceonFY2015SameStorebasis,andincludesVAT

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

FY2015 Average quarterly Same Store Sales


TheChinese traditionof jewellerygift-givingduring ceremonial and festive events hasgeneratedsolidevent-drivendemandforourproducts,particularlyinQ4ofourfinancialyearwhen importantholidaysandevents, suchasChineseNewYear,Valentine’sDayandpeakseasonofweddingregistration,happen.

Mainland China — Watch business


Revenue 1,209.9 1,631.9 1,931.0 18.3%RSV 1,339.4 1,864.4 2,259.3 21.2%

–23–

WhiletheincreaseinsalesofourwatchbusinessinMainlandChinawasmainlydrivenbythenetadditionof46POSinFY2014,ourSameStoreSalesdecreasedby4.5%whencomparedto that of the same period last year.The drop in our SSSG reflected a generallyweakconsumersentimentintheluxurymarket,accompaniedbytheimpactofcurrencyfluctuationsinthesecondhalfofFY2015,whichmayhavedrivenconsumptionstooverseasmarkets.


Overview


RevenueRetail 26,041.7 35,076.8 25,961.4 (26.0)%Wholesale 1,083.8 182.1 473.4 160.0%Total 27,125.5 35,258.9 26,434.8 (25.0)%

RSVHongKong 21,308.2 29,362.6 22,329.2 (24.0)%Macau 4,454.6 5,590.7 3,904.1 (30.2)%TaiwanandotherAsianmarkets 122.9 142.9 212.6 48.8%TheUnitedStates – – 17.8 N/ATotal 25,885.7 35,096.2 26,463.7 (24.6)%

ThroughoutFY2015, the salesperformanceofHongKong,Macauandothermarketswasshadowedby thehighbase,generallyweakconsumersentimentandeconomical structuralchanges,resultinginadecreaseof25.0%and24.6%forrevenueandRSV,respectively.

Our retail revenue,beingsales fromself-operatedPOS,e-commerceandotherdirect saleschannels,decreasedby26.0%whencomparedwithlastyear.

Ourwholesalerevenuerecordedanincreaseof160.0%overlastyear.Ourwholesalerevenueincludedoccasionalwholesale todiamondtradersandsales tofranchiseesandretailpartnersofHeartsOnFire,whichwasmainlyrecognisedwheninventoriesaredeliveredtofranchiseesorretailpartnersandrecordedatwholesaleprice.

TheRSVfromTaiwanandotherAsianmarketsincludedsalesfromourself-operatedPOSinTaiwan,franchisedPOSinSingapore,Malaysia,SouthKorea,aswellasthe8HeartsOnFirePOSinTaiwan.

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.

WhileourproductsarealwaysregardedaspopulargiftforweddinginHongKongandMacau,weddingbusinesscontinued tobeoneofourmajor segments, contributingaround41.0%(FY2014:36.0%)ofourRSV.

Thechartsbelowset forth thebreakdownofouroverallRSVand that forgem-set jewellerybypricerange:

38.7%

26.5%

8.7%4.8%

13.5%

7.8%4.4%

7.4%

27.2%

39.9%

13.2%

7.9%

RSV by price range – Jewellery products

More than 500,000

100,000–500,000

30,001–99,999

10,001–30,000

Less than 2,000

2,001–10,000

FY2014 FY2015HK$

22.2%

26.2%

17.2%

1.3%

18.4%

14.7%

1.3%14.7%

24.9%

21.5%20.0%

17.6%

RSV by price range – Gem-set jewellery

More than 500,000

100,000–500,000

30,001–99,999

10,001–30,000

Less than 2,000

2,001–10,000

FY2014 FY2015HK$


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)

12.8%

MACAU

8.8%

Revenue settled by China UnionPayor RMB

56.4%(FY2014: 60.1%)

77.3%

22.7%

28.6%

71.4%

FY2015 RSV and POS by area

Touristic area

Other area

RSVPOS


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.

–26–

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

POS RSV


NewPOSopeningscontinue tocontribute toourRSVgrowth. InFY2015,14.4%(FY2014:20.6%)ofourRSVwascontributedbyPOSopenedwithin2years.

150.0%

83.0% 77.0%

104.7%

85.3%

122.7%

100.0%

50.0%

0%

Sales per store by store age

Less than 2 years(1) 2–4 years 4–6 years 6–8 years 8 years or more

FY2015RSV per annum:HK$248.5 million

POS —date of opening

4/2013~3/2015

4/2011~3/2013

4/2009~3/2011

4/2007~3/2009

3/2007 orbefore Total

NumberofPOS 26 31 11 9 35 112

RatioofannualsalesperstoretoaverageSameStoreSalesperstore

(1) ForPOSofagelessthan1year,salesisadjustedonanannualisedbasis

–27–

HongKongandMacaumarket is relativelymature.Ournewstoresare typically situated intouristicareawhereproductivitycanbeveryhighsinceopening.TheygenerallydonothavethesamerampuppatternasthePOSlocatedinMainlandChina.

20%

0%

-20%

-40%

-60%

-80%

40%

60%

80%

100%

Q1 Q3 Q4 Q4Q1 Q2 Q3Q2

SSSG

Overall

Gem-set jewellery

Gold products

FY2014 FY2015

For the year ended 31 March 2014 2015 YoY change

SSSG 20.2% (32.8)% N/ASameStoreSalesvolumegrowth 40.3% (27.7)% N/A

SSSG–Gem-setjewellery 10.7% (14.6)% N/ASSSG–Goldproducts 26.4% (44.4)% N/A

HK$ HK$Averagesellingprice(1)–Gem-setjewellery 13,782 12,025 (12.7)%Averagesellingprice(1)–Goldproducts 5,372 5,309 (1.2)%

(1) AveragesellingpriceonFY2015SameStorebasis

180.0

160.0

140.0

120.0

100.0

80.0

60.0

20.0

40.0

0.0

31.0%(1)

24.4%

29.4%

24.7%

21.2%

23.2%

23.1%23.0%

Q1

95.0

47.8

Q2

51.0

71.1

Q3

75.861.3

Q4

48.465.2

(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


ForHongKongandMacau, thedemand forourproducts isgenerallyconcentrated inQ3ofourfinancialyear,whichChristmas,ourannualmegasalesandtraditionalweddingseasonfallinto.

–28–

Hearts On Fire

WeacquiredHeartsOnFire,aluxurydiamondcompanyofferingpremiumbridalandfashionjewelleryproducts,on31August2014.

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.

–29–

Gross Profit and Gross Profit Margin

Overview

Ourgrossprofitdecreasedby9.8%fromHK$21,152.3million inFY2014 toHK$19,072.4millioninFY2015,while thegrossprofitmargin increasedfrom27.3%inFY2014to29.7%inFY2015.

Unrealised hedging gain/loss

Due to thedrop inmarketgoldpricenearour financialyearend,we recordedanunrealisedhedginggain forFY2015.The table below set forth the gross profitmargin, unrealisedhedgingloss/(gain)ongoldloansandbullionforwardcontracts,andtheadjustedgrossprofitmarginforFY2013toFY2015:

For the year ended 31 March 2013 2014 2015

Grossprofitmargin 28.4% 27.3% 29.7%Unrealisedhedgingloss/(gain)on goldloansandbullionforward contracts (0.3)% 0.4% (0.5)%Adjustedgrossprofitmargin 28.1% 27.7% 29.2%


Thechartbelowillustrateshowthefluctuationsingoldpriceaffectedourunrealisedhedginggainsorlossesneartheendoffinancialyears:

1,800.00

31/3/2013 31/3/2014 31/3/2015

1,700.00

1,600.00

1,500.00

1,400.00

1,300.00

1,200.00

1,100.00

London gold price

US$ p

er ou

nce

Closing London gold price was higher than the averagegold price of T–120 days, therefore we recordedan unrealised hedging loss in FY2014

Closing London gold price was lower than the averagegold price of T–150 days, therefore we recordedan unrealised hedging gain in FY2015

Average of T-120/150 days(1)

London gold price

(1) AverageofT-120/150daysreferstotheaveragegoldpriceofprevious120or150daysonrollingbasis.Asgold inventories turnoverwas slower inFY2015, averageofT-120daysandT-150dayswasused forFY2014andFY2015respectively.

–30–

Changes in adjusted gross profit margin

Ouradjustedgrossprofitmarginincreasedfrom27.7%inFY2014to29.2%inFY2015.Thebelowdiagramreconcilesthemajorfactorsinthefluctuationsofthegrossprofitmargin:

31.0%

30.0%

29.0%29.2%

27.7%28.0%

27.0%

26.0%

25.0%

+2.3% -1.0%+0.2%

Changes in adjusted gross pro�t margin

Improvement in product mix (1)

Others

Change in gross pro�t margin by product (2)

FY2014 FY2015

(1) Asthegrossprofitmarginforourgem-setjewelleryweregenerallyhigherthanthatofotherproducts,theincreaseingem-setjewellerymixinFY2015ledtoanoverallimprovedgrossprofitmargin

(2) Changeingrossprofitmarginbyproductreferstotheeffectofthechangeingrossprofitmarginfromthesameproductcategoryinthesamesegmentofthesameoperationmodel.Thedecreasewasmainlyduetothepricingpressureamidweakmarketsentiment


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:

0

4,000

8,000

12,000

16,000

(4.6)%

22.8%

8.8%

2013 2014 2015

60.5%

2.8%

36.7%

9,181.0

60.5%

3.0%

36.5%

57.0%

3.7%

39.3%

12,207.2 12,344.4

YoY change

SG&A by reportable segment

Mainland China –Jewellery business

For the year ended 31 March(in HK$ million)

Hong Kong, Macau andother markets

Mainland China –Watch business

5.7%

1.4%

3.7%

0.8%

1.8%

2.7%

5.7%

1.3%

3.3%

0.8%

2.0%

2.7%

6.3%

1.7%

3.5%

1.2%

2.9%

3.6%

(7.5)%

(11.8)%

7.0%

22.1%

12.6%

19.2%

0

16,000

12,000

8,000

4,000

9,181.0

16.0%

12,207.2

15.8%

12,344.4

19.2%

2013 2014 2015

(in HK$ million)

Staff costs

Others

Concessionaire fees

Rental expenses

Depreciation andamortisation

Advertising andpromotion expenses

For the year ended 31 March YoY change

SG&A to revenue ratio

As % of revenue


–31–

Mainland China — Jewellery business

19.1% 19.6%18.2%

10,000

8,000

6,000

4,000

2,000

0

5,553.86.1%

5.9%

2.6%

1.1%

2.0%

0.5%

7,379.27,040.3

6.3%

5.8%

3.6%

1.2%

2.2%

0.5%

5.7%

2.0%

6.8%

1.2%

0.6%

2.8%

(7.8)%

(13.2)%

(3.2)%

2.3%

16.8%

1.3%

2013 2014 2015

(in HK$ million)

As % of respective revenue

For the year ended 31 March YoY change


Staff costs(1)

Others(5)

Concessionaire fees(2)

Rental expenses

Depreciation and amortisation(4)

Advertising and promotion expenses(3)


(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

–32–

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

Staff costs

Others

Concessionaire fees

Rental expenses

Depreciation and amortisation

Advertising and promotion expenses




TheincreaseinSG&AforWatchbusinessinMainlandChinawasgenerallyinlinewiththatofrevenue,whichincreasedby18.3%whencomparedwithsameperiodlastyear.

–33–


ThebreakdownofSG&A,ifexcludedthatrelatedtoHeartsOnFirewhichweacquiredduringtheyear(HK$231.3million),wasasbelow:

5,000

6,000

4,000

3,000

2,000

1,000

3,369.3

12.4%

4,616.6

17.7%

5.5%

5.1%

6.0%

0.1%

0.1%

0.1%

3.1%

0.7%0.4%

2.6%2.6%

0.4%0.6%

3.8%

4,456.4

3.5%

1.0%

6.1%

1.0%

0

12.6%

(13.8)%

(11.8)%

23.8%

65.6%

0.8%

19.6%

2013 2014 2015

(in HK$ million) For the year ended 31 March YoY change

Staff costs(1)

Others

Concessionaire fees

Rental expenses(2)

Depreciation and amortisation(4)

Advertising and promotion expenses(3)




(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

(4) TheincreasewasmainlyduetotheincreasednumberofPOSandtheacquisitionofWorldPeaceCentre

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:


2013

28.4%

16.0%

12.7%

27.3%

15.8%

12.0%

29.7%

19.2%

10.7%

2014 2015

Gross pro�t margin

% of SG&A to revenue

Operating pro�t margin

Overall


–35–


30.9%

19.1%

12.3%

27.8%

18.2%

10.1%

29.8%

19.6%

10.5%

2013 2014 2015

Mainland China – Jewellery business




26.5%

21.3%

5.5%

27.1%

22.8%

5.0%

24.4%

23.6%

1.4%

2013 20152014

Mainland China – Watch business




25.7%

12.4%

13.6%

26.8%

14.4%

12.6%

29.9%

18.3%

11.6%

2013 2014 2015







Netprofit 5,678.4 7,449.2 5,535.8 (25.7)%Profitattributableto shareholdersoftheCompany 5,505.3 7,272.0 5,456.0 (25.0)%

2013 2014 2015 2015 vs 2014For the year ended 31 March HK cents HK cents HK cents YoY change

Basicearningspershare 55.1 72.7 54.6 (25.0)%Dividendpershare Interim 6.0 17.0 13.0 (23.5)% Final 16.0 19.0 15.0(1) (21.1)% Fullyear 22.0 36.0 28.0 (22.2)%

Dividendpayoutratio 40.0% 49.5% 51.3% 1.8pts

(1) Beingproposedby theDirectorsof theCompanyand is subject toapprovalby the shareholders in theforthcominggeneralmeeting


–36–

Return on Equity, Inventory Turnover and Capital Structure

Return on Equity (Net profit/Total equity)

Affected by Affected by Affected by

Asset turnover Equity multiplier (Total assets/Total equity)

13.7%

8.6% 1.1times 1.5times

Operating deleverage Lengthenedinventory turnover

Reduced net gearing

Net profit margin

(FY2014:9.6%)

(Net profit/Revenue) (Revenue/Total assets)

(FY2014:19.4%)

Decreasedby5.7pts

(FY2014:1.3times) (FY2014:1.6times)

contributed1.6pts

ofthedecreaseofROE

contributed2.5pts

ofthedecreaseofROE

contributed0.3pts

ofthedecreaseofROE

OurReturnOnEquity (“ROE”),calculatedbynetprofitdividedby totalequity,was13.7%forFY2015 (FY2014:19.4%), representingadecreaseof5.7percentagepointsover thatofsameperiodlastyear.ThedecreaseinROEwasmainlyduetoadecreaseinnetprofitmarginandassetturnoverratio.

–37–

Inventory balances and turnover period

50,000

40,000

30,000

20,000

10,000

0

27,314.8

2013

57.4%

25.4%8.4%8.8%

42,543.7

2014

44.8%

36.5%

9.5%9.1%

39,797.6

2015

52.2%

29.6%

9.2%8.7%

9.0%

(24.3)%

(10.7)%

(9.0)%

As at 31 March

Gem-set jewellery

Gold products

Platinum/karat gold products

Watches

Packing materials

YoYchange

Inventory balances by product (in HK$ million)

50,000

40,000

30,000

20,000

10,000

27,314.8

39,797.642,543.7

0

80.1%

19.9%

2013 20152014

73.2%

26.8%

76.3%

23.7%

As at 31 March

Finished goods

Raw Materials

Inventory balances by category (in HK$ million)

400

300

200

100

242

321

177 211257

6565

276

640

2013 20152014


Finished goods

Raw Materials

Inventory turnover period (days) by category


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.

Capital structure

TheGroupprincipallymeets itsworkingcapitalandother liquidity requirements throughacombinationofcapitalcontributions, includingcashflowsfromoperations,bankborrowingsandgold loans.Gold loansandbullion forwardcontractsarealsoused tohedgeagainst thefinancialimpactofthepricefluctuationsintheGroup’sgoldinventories.

–38–

TheGroup’sdailyoperationwasmainlyfinancedbyoperatingcashflow,andreliedonshort-termborrowingstosatisfyinventoryfinancingneedsduringpeakseasons,workingcapitalforfutureexpansionplansandunexpectedneeds.TheGrouphasnotexperiencedanydifficultiesinrepayingitsborrowings.

TheGroup’sincomeandexpenditureweremostlydenominatedinHongKongdollar(“HKD”)andRenminbi (“RMB”),while itsassetsand liabilitiesweremostlydenominated inHKD,RMBandUnitedStatesdollar(“USD”).

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

Non-currentassets 4,262.8 11.1% 7,038.3 17.4% 2,775.5 N/A N/A N/AInventories 42,543.7 110.6% 39,797.6 98.2% (2,746.1) N/A N/A N/ABankdepositsandcashequivalents(2) 9,971.9 25.9% 8,477.5 20.9% (1,494.4) HKD,RMB

andUSDVariable

interestrateN/A

Totalborrowings 17,086.4 44.4% 15,088.9 37.2% (1,997.5) Bankborrowings 6,299.6 16.4% 6,750.6 16.7% 451.0 HKDand

RMBVariable

interestrateWithin

12months Goldloans(3) 10,786.8 28.1% 8,338.3 20.6% (2,448.5) RMBand

USDFixed

interestrateWithin

12monthsNetdebt(4) 7,114.5 18.5% 6,611.4 16.3% (503.1) N/A N/A N/AWorkingcapital(5) 35,047.4 91.1% 34,202.8 84.4% (844.6) N/A N/A N/ATotalequity 38,452.4 100.0% 40,540.8 100.0% 2,088.4 N/A N/A N/A

(1) Informationaboutdenominatedcurrency, interest ratestructureandmaturity related to theconditionasat31March2015

(2) Includebankbalancesandcash,pledgedbankdepositsandshort-termbankdeposits.Asat31March2014,theGrouphadHK$500.0millionofshort-termbankdepositswithoriginalmaturityof12months,carryingfixedinterestrateat1.5%perannum

(3) Thedecreaseingoldloanswasmainlyduetothedecreaseingoldproductsinventories

(4) Aggregateofbankborrowingsandgoldloans,netofbankdepositsandcashequivalents

(5) Beingnetcurrentassets

–39–

Cash flows

Thefollowinglistedthemajoritemsincludedinthecalculationforproformafreecashflowandnetincrease/(decrease)inbankbalancesandcash:

2013 2014 2015For the year ended 31 March HK$ million HK$ million HK$ million

Operatingcashflowsbeforemovementsin workingcapital 7,662.6 9,464.9 7,292.1Decrease/(increase)ininventories 2,543.6 (15,072.6) 3,116.9Netchangeingoldloans (705.7) 6,375.8 (2,036.3)Netcashfrom/(usedin)otheroperatingactivities (175.9) 188.2 (2,840.8)Capitalexpenditure (1,174.1) (1,368.3) (2,767.9)

Pro forma free cash flow 8,150.5 (412.0) 2,764.0Netchangeinbankborrowings (8,016.5) 5,296.9 450.0Dividendspaid (1,709.9) (3,349.5) (3,534.0)Netcashoutflowusedinacquisitionof subsidiaries (26.5) – (1,187.7)Othermovements (80.6) (373.6) 518.2

Net increase/(decrease) in bank balances and cash (1,683.0) 1,161.8 (989.5)

Thebelowdiagramreconcilesthemajoritemsinthenetdecreaseinbankbalancesandcash:

9,466.6 8,477.1

0

5,000

10,000

15,000

20,000

25,000 2,764.0

7,292.13,116.9

2,840.82,767.9

2,036.3

3,534.0450.0

518.21,187.7

Operating cash �ows before movements in working capital

Net decrease in gold loans

Capital expenditure

Net cash used in other operating activities

Decrease in inventory balances

Net increase in bank borrowings

As at31 March 2014

Pro forma free cash �ow

As at31 March 2015

Dividends paid

Net cash out�ow used in acquisition of subsidiary

Major cash �ows items for FY2015 (HK$ million)

Other movements

Capital expenditures

TheGroup’scapitalexpenditures incurredduringFY2015amounted toHK$2,767.9million(FY2014:HK$1,368.3million).The increaseover thatof lastyearwasmainlydue tonon-routineprojectssuchastheacquisitionofWorldPeaceCentre,anindustrialbuildinginKwaiChung,andtheconstructionofChowTaiFookJewelleryParkinWuhan.

–40–

FINAL DIVIDEND AND ANNUAL GENERAL MEETING

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.

CORPORATE GOVERNANCE PRACTICES

TheCompanyiscommittedtomaintainingahighstandardofcorporategovernancepracticesandprocedures.Fortheyearunderreview,theCompanyhascompliedwithalltheapplicablecodeprovisionsoftheCorporateGovernanceCode.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

TheCompanyhasadoptedacodeofconduct regardingdirectors’ securities transactionsontermsnolessexactingthantheModelCodeforSecuritiesTransactionsbyDirectorsofListedIssuers as setout inAppendix10 to theListingRules (the“ModelCode”).HavingmadespecificenquiryofallDirectors, theDirectorsconfirmed that theyhadcompliedwith therequiredstandardassetoutintheModelCodeduringFY2015.

REVIEW OF ANNUAL RESULTS

TheAuditCommitteeof theCompanyhas reviewed theaccountingprinciplesandpracticesadoptedbytheGroupandtheconsolidatedfinancialstatementsoftheGroupforFY2015.

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.

–41–

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.

CHOW TAI FOOK JEWELLERY GROUP LIMITED 周大福珠寶集團有 … · – 3 – 2015 2014 Note HK$...

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Transcript of CHOW TAI FOOK JEWELLERY GROUP LIMITED 周大福珠寶集團有 … · – 3 – 2015 2014 Note HK$...