Financial Performance - Turnover for the year ended December 31, 2018, was HK$4,127.1 million, a decrease of 20.8% from HK$5,211.0 million in 2017[9] - Gross profit decreased by 25.1% to HK$2,061.0 million, down from HK$2,753.0 million in the previous year[9] - Operating loss increased to HK$786.6 million, compared to a loss of HK$688.8 million in 2017, reflecting a 14.2% increase in losses[9] - Loss attributable to shareholders rose by 35.4% to HK$994.4 million, up from HK$734.2 million in 2017[9] - Gross margin decreased to 49.9%, down from 52.8% in the previous year, a decline of 2.9 percentage points[9] - Basic loss per share for 2018 was HK$60.3 cents, compared to HK$44.5 cents in 2017[16] - The Group's turnover decreased by 20.8% to HK$4,127.1 million in 2018, down from HK$5,211.0 million in 2017, primarily due to a 26.2% reduction in the number of stores[32] - The Group's gross profit fell to HK$2,061.0 million in 2018, compared to HK$2,753.0 million in 2017, resulting in a gross margin decrease to 49.9% from 52.8%[32] - Operating loss increased to HK$786.6 million in 2018, compared to HK$688.8 million in the previous year, with a loss attributable to shareholders of HK$994.4 million[32] Cash and Liquidity - Cash and bank balances decreased by 25.4% to HK$363.0 million, down from HK$486.3 million in 2017[11] - Bank loans increased by 23.1% to HK$192.3 million, compared to HK$156.3 million in the previous year[11] - The Group maintained a net cash position of HK$170.7 million as of December 31, 2018, down from HK$330.0 million in 2017, sufficient to support its downsized operations[32] - The current ratio declined to 2.1 times, down from 2.5 times in the previous year, a decrease of 16.0%[11] - The net decrease in cash and bank balances was HK$123.3 million, compared to HK$503.2 million in the previous year[64] Business Environment and Challenges - The retail sales growth in China slowed to 9.0% in 2018 from 10.2% in 2017, impacting consumer confidence[21] - The challenging business environment hindered the progress of the company's business transformation and intensified competition[21] - Future prospects are challenged by global economic uncertainty and China's economic slowdown, prompting the Group to innovate its business model[23] - The Group faced challenges in 2018 due to global economic uncertainty and China's economic slowdown, impacting its business transformation efforts[79] Strategic Initiatives - The Group implemented remedial measures including the closure of inefficient stores, resulting in streamlined operations and reduced operating costs[23] - Stringent inventory management was conducted, leading to the liquidation of aged inventory at substantial discounts, which temporarily pressured turnover and gross profit[23] - The Group is focusing on product upgrades, brand revamps, and enhancing customer relationship management to adapt to changing consumer preferences[23] - The Group plans to enhance product research and development, particularly in trendy and comfortable athleisure shoes, while broadening its product range[23] - The Group will streamline its organizational structure and internal processes while implementing stringent cost control measures[26] - The Group's strategy included closing underperforming stores and increasing market penetration through trendier shopping malls to adapt to changing consumer preferences[32] Corporate Governance - The Company has been committed to high standards of corporate governance practices as essential for business success and sustainability[117] - The Company complied with all applicable code provisions in the Corporate Governance Code for the year ended December 31, 2018, with some deviations explained in specific sections[119] - The Board will continue to enhance corporate governance practices to align with statutory and professional standards[120] - The Board consists of executive directors with extensive experience in the footwear distribution business and independent non-executive directors with appropriate professional qualifications and management expertise[129] - The Board has established three committees: Audit Committee, Nomination Committee, and Remuneration Committee to assist in overseeing the Group's affairs[154] Operational Efficiency - The Group's operating expenses decreased by HK$594.9 million or 17.1% to HK$2,890.2 million from HK$3,485.1 million in the previous year[61] - The Group's employee benefits expense for the year was HK$752.3 million, down HK$80.9 million or 9.7% from HK$833.2 million in 2017, mainly due to a reduction in headcount[73] - The Group aims to streamline its organizational structure and optimize internal processes to enhance management efficiency[98] Market Position and Brand Recognition - Daphne ranked first in the "China Brand Power Index 2018" for the eighth consecutive year in the "Women's Shoes" category, reflecting strong brand awareness and customer loyalty[75] - In the "China Net Promoter Score 2018," Daphne secured the second position in the "Women's Shoes" category, indicating a good brand reputation among consumers[76] E-commerce and Digital Strategy - The e-commerce business maintained profitability and increased its contribution to the Group's turnover, with an improved operating profit margin despite a slowdown in the online retail market[53] - The Group adopted new information technology solutions to enhance the integration of online and offline shopping experiences as part of its "New Retail" strategy[53] - E-commerce operations will collaborate closely with product design and supply chain departments to launch products that meet online customer demands[92] Risk Management - The Board has conducted a review of the effectiveness of the risk management and internal control systems of the Group during the year[190] - An internal audit department has been established to conduct risk management and internal audits, reporting findings and recommendations to the Audit Committee[190]