Hong Kong SAR same store sales up 19.8% Group’s loss narrows by 26.7% YoY HONG KONG SAR - Media OutReach - 17 November 2022 - Sa Sa International Holdings Limited ("Sa Sa" or the "Group", stock code: 0178) announced its interim results for the six months ended 30 September 2022 (the "period"). In the first half of the financial year, the Group's turnover amounted to HK$1,550.5 million, representing a decrease of 2.9% over the six months ended 30 September 2021 ("previous period"), largely attributable to Covid-19 outbreaks in Mainland China and a spike in cases in the Macau SAR, which prompted lockdowns in affected cities and towns, disrupting our business operations. Thanks to the improved gross profit margin in the core markets of the Hong Kong and Macau SARs, as well as the effective implementation of cost reduction plans, loss for the period narrowed significantly by 26.7% to HK$133.2 million compared to the same period last year. Excluding the provision for impairment made in accordance with HKAS 36 that applied to retail store assets (including right-of-use assets and property, plant and equipment), subsidies for the Covid-19 pandemic from local governments and temporary rental concessions, the Group's loss during the period narrowed by 10.3% to HK$171.7 million compared to the previous period. Cash outflow from operating activities was merely HK$33.1 million, thanks to enhanced inventory management and zero-based budgeting practices. Sa Sa has taken proactive measures to significantly adjust its cost structures and management practices, aiming for sustainable profitability. On the revenue side, the Group continued to expand revenue earning potential by reinvigorating its product categories and enhancing online-merge-offline ("OMO") strategies. On the cost side, it consistently managed inventory and lease rentals. Barring any further escalation in the Covid-19 pandemic restrictions in Sa Sa's core markets, the Group anticipates these measures to take effect by the end of the current financial year, and any relaxation of the pandemic restrictions will provide upside to the Group's plan. Basic loss per share for the first half amounted to 4.3 HK cents (2021/22: 5.9 HK cents). In view of the challenging and uncertain operational environment in the markets where we operate, the Board does not recommend the payment of an interim dividend (2021/22: Nil). Business Review In the Hong Kong SAR, local consumers were still the main source of customers as tourist and visitor arrivals from Mainland China remained low in the city during the period. The Group took advantage of the improving consumer sentiment by refreshing its product mix and launching effective theme-based promotions that have led to a year-on-year increase of 19.8% in same store sales in the Hong Kong SAR. Retail sales grew 8.0% despite a net reduction of five stores to 71 in the Hong Kong SAR during the period. Moreover, the Group successfully capitalised on the opportunities brought about by the government's Consumption Voucher Scheme launched in April and August to bolster local consumer spending. As a result, the Group has been able to sustain the sales momentum, with same store sales growth for the second quarter remaining in solid double-digits. As for the Macau SAR, the Group's sales performance was impacted by a sharp spike in Covid-19 infection cases since late June 2022, which led to the first citywide lockdown in July 2022 and subsequently a significant decline in the number of tourists. The Group's sales in the Macau SAR, of which 56.1% came from Mainland China tourists, decreased by 37.7% while same store sales dropped by 33.4% compared to the previous period. Gross profit margin of Hong Kong and Macau SARs increasing to 39.3% On a combined basis, retail sales in the Hong Kong and Macau SARs decreased by 8.7% to HK$966.8 million in the first half, while same store sales went up 0.8%. Gross profit margin for the period in the Hong Kong and Macau SARs increased by 0.5 percentage points to 39.3%. This, coupled with effective operating cost control measures, narrowed the Group's loss in this market to HK$82.3 million, a significant reduction of HK$40.5 million (or 33.0%) as compared to the previous period. The Group has continued to streamline its store network based on store economics, balancing lease rentals with the Group's ability to retain and service customers in regional clusters. During the period, there was a net reduction in the total number of Sa Sa's retail stores in the Hong Kong and Macau SARs of five to 80, with all five net closures in the Hong Kong SAR. Sa Sa has continued to negotiate temporary rental concessions for certain retail stores to alleviate the rental costs where tourist footfall is yet to return. The Group is steadfast in its lease rental...