Annual Report 2018 About Us
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ANNUAL REPORT 2018 ABOUT US Charmacy Pharmaceutical Co., Ltd. (stock code: 2289.HK) is principally engaged in the pharmaceutical distribution business. It mainly distributes western medicine, Chinese patent medicine and healthcare products to downstream distributors and retail terminals, as well as provides consultation service on pharmaceutical products. Founded in eastern Guangdong in 2000, over the past 19 years of rapid development, it has become one of the leading pharmaceutical distributors in the Southern China region. The Company adheres to the development strategy of “Intensive Engagement in Guangdong Province and Extensive Coverage across Surrounding Areas”, and has built logistics centers in Shantou, Foshan, Zhuhai and Guangzhou, all equipped with professional transportation teams, and has a highly efficient delivery mechanism of delivering pharmaceutical products three times per day for customers within a radius of 10 kilometers, twice per day for customers within a radius of 50 kilometers and once per day for those within a 250-kilometers’ radius. In addition, the Company has a modern information system that covers the entire supply chain for pharmaceutical distribution, including procurement, sales, warehousing, transportation and delivery. Apart from that, the Company operates its own B2B e-commerce platform “Charmacy e-Medicine” (創美e藥), a platform for customers to place orders online, make inquires and payment and many more. In 2017, the Company ranked 38th among top 100 wholesalers nationally, in respect of principal business. According to the Market Research Report of the Chinese Pharmaceutical Industry (2017) 《中國醫藥行業市場研究報告》( (2017)), in respect of sales scale, the Company ranked 7th among the pharmaceutical distribution businesses in Guangdong Province and second among private enterprises. With its good reputation and quality services, the Company obtained the 2017-2018 “Gold Ant” Service Award 「金螞蟻」( 服務獎) for the Chinese logistics industry, an award conferred by the Organizing Committee of China International Logistics Equipment and Technology Exhibition (Guangzhou) (中國(廣州)國際物流裝備與技術展組委會) in May 2018, and the Company was awarded the “Model Enterprise of Trustworthiness in Guangdong Province “ (廣東省誠信示範企業) (seven consecutive years from 2011 to 2017), the “Top 500 Enterprises in Guangdong Province” (廣東省企業500強), the “Top 100 Private Enterprises” (民營企業100強), the “Top 100 Enterprises of Logistics Industry” (流通業100強) and the “Outstanding Enterprise of Guangdong Province for the 40th Anniversary of Reform and Development”(改革開放40周年廣東省優秀企業), respectively, by the Guangdong Provincial Enterprise Confederation (廣東省企業聯合 會) and the Guangdong Entrepreneur Association (廣東省企業家協會) from June to September 2018. In December 2018, the Company was also awarded the Honorary Certificate of “Excellent Enterprise Developed alongside with China’s Reform and Opening up” (與改革 開放共同成長優秀企業) by the Longhu District Committee of Chinese Communist Party and the Longhu District People’s Government. In February 2019, the Company was honored with the “2018 Enterprise Branding Credit Jingding Award” (2018企業品牌信用金鼎獎) by the Guangdong Credit Association. CONTENTS 2 Corporate Information 3 Chairman’s Statement 5 Financial Summary 6 Management Discussion and Analysis 17 Biographies of Directors, Supervisors and Senior Management 23 Corporate Governance Report 35 Directors’ Report 48 Board of Supervisors’ Report 50 Auditor’s Report 55 Consolidated Balance Sheet 57 Balance Sheet of the Parent Company 59 Consolidated Income Statement 60 Income Statement of the Parent Company 61 Consolidated Statement of Cash Flow 63 Statement of Cash Flow of the Parent Company 65 Consolidated Statement of Changes in Shareholder’s Equity 67 Statement of Changes in Shareholder’s Equity of the Parent Company 69 Notes to the Financial Statements Corporate Information DIRECTORS STRATEGIC DEVELOPMENT Executive Directors COMMITTEE Yao Chuanglong (姚創龍) Yao Chuanglong (姚創龍) (Chairman) Zheng Yuyan (鄭玉燕) Zheng Yuyan (鄭玉燕) Lin Zhixiong (林志雄) Zhou Tao (周濤) Non-executive Director AUTHORISED REPRESENTATIVES Li Weisheng (李偉生) Zheng Yuyan (鄭玉燕) Lin Zhixiong (林志雄) Independent Non-executive Directors Wan Chi Wai Anthony (尹智偉) AUDITOR Zhou Tao (周濤) ShineWing Certified Public Accountants (Special General Guan Jian (關鍵) (also known as Guan Suzhe (關蘇哲) Partnership) SUPERVISORS LEGAL ADVISORS Zhang Ling (張玲) Chungs Lawyers (as to Hong Kong law) Zheng Xiyue (鄭禧玥) Beijing Dentons Law Offices, LLP (Shenzhen) (as to PRC Lin Zhijie (林志杰) law) COMPANY SECRETARY REGISTERED OFFICE AND Lin Zhixiong (林志雄) HEADQUARTERS No. 235, Song Shan North Road, AUDIT COMMITTEE Longhu District, Shantou City, Wan Chi Wai Anthony (尹智偉) (Chairman) Guangdong Province, PRC Zhou Tao (周濤) Guan Jian (關鍵) (also known as Guan Suzhe (關蘇哲)) PRINCIPAL PLACE OF BUSINESS IN HONG KONG NOMINATION COMMITTEE 40/F, Sunlight Tower, Zhou Tao (周濤) (Chairman) 248 Queen’s Road East, Yao Chuanglong (姚創龍) Wanchai, Hong Kong Guan Jian (關鍵) (also known as Guan Suzhe (關蘇哲) PRINCIPAL BANKS REMUNERATION COMMITTEE China Guangfa Bank Co., Ltd. (Shantou Branch) Zhou Tao (周濤) (Chairman) Industrial and Commercial Bank of China Limited (Shantou Wan Chi Wai Anthony (尹智偉) Branch) Lin Zhixiong (林志雄) H SHARE REGISTRAR RISK MANAGEMENT COMMITTEE Computershare Hong Kong Investor Services Limited Yao Chuanglong (姚創龍) (Chairman) Lin Zhixiong (林志雄) COMPANY WEBSITE Wan Chi Wai Anthony (尹智偉) www.chmyy.com STOCK CODE 2289.HK 2 CHARMACY PHARMACEUTICAL CO., LTD Chairman’s Statement Dear Shareholders, and delivery. Apart from that, the Company operates its own B2B e-commerce platform “Charmacy e-Medicine” On behalf of the board (the “Board”) of directors (the (創美e藥) (www.cmyynet.com), a platform for customers to “Directors”) of Charmacy Pharmaceutical Co., Ltd. (stock place orders online, make inquires and payment and many code: 2289.HK) (the “Company”), I would like to present more. In 2016, the Company ranked 38th among top 100 the audited consolidated results for the year ended wholesalers nationally, in respect of principal business. 31 December 2018 (the “Reporting Period”) of the According to the Market Research Report of the Chinese Company and its subsidiaries (the “Group” or “us” or “we” Pharmaceutical Industry (2017) (《中國醫藥行業市場研 or “Charmacy”). 究報告》(2017)), in respect of sales scale, the Company ranked 7th among the pharmaceutical distribution BUSINESS OVERVIEW businesses in Guangdong Province and second among private enterprises. In May 2018, the Company obtained the 2017-2018 “Gold Ant” Service Award 「金螞蟻」( 服 The Company is principally engaged in the pharmaceutical 務獎) for the Chinese logistics industry, , the Company distribution business. As part of the pharmaceutical was awarded the “Model Enterprise of Trustworthiness circulation industry, the Company, with its focus on non- in Guangdong Province “(廣東省誠信示範企業) (seven tendering markets, mainly distributes western medicine, consecutive years from 2011 to 2017), the “Top 500 Chinese patent medicine and healthcare products to Enterprises in Guangdong Province” (廣東省企業500強), downstream distributors and such retail terminals as the “Top 100 Private Enterprises” (民營企業100強), the pharmacies, clinics and private hospitals. It also provides “Top 100 Enterprises of Logistics Industry” (流通業100強) consultation service on pharmaceutical products. As and the “Outstanding Enterprise of Guangdong Province of 31 December 2018, the Company had operated as for the 40th Anniversary of Reform and Development”(改 many as 11,493 products. Founded in 2000, over the 革開放40週年廣東省優秀企業), respectively by the past 19 years of rapid development, it has become one Guangdong Provincial Enterprise Confederation (廣東省企 of the leading pharmaceutical distributors in the Southern 業聯合會) and the Guangdong Entrepreneur Association China region. The Company adheres to the development (廣東省企業家協會) from June to September 2018. In strategy of “Intensive Engagement in Guangdong Province December 2018, the Company was also awarded the and Extensive Coverage across Surrounding Areas”, and Honorary Certificate of “Excellent Enterprise Developed has built logistics centers in Shantou, Foshan, Zhuhai and alongside with China’s Reform and Opening up” (與改革 Guangzhou, all equipped with professional transportation 開放共同成長優秀企業) by the Longhu District Committee teams, and has a highly efficient delivery mechanism of of Chinese Communist Party and the Longhu District delivering pharmaceutical products three times per day for People’s Government. In February 2019, the Company customers within a radius of 10 kilometers, twice per day was honored with the “2018 Enterprise Branding Credit for customers within a radius of 50 kilometers and once Jingding Award” (2018企業品牌信用金鼎獎) by the per day for those within a 250-kilometers’ radius. The Guangdong Credit Association. Company has a modern information system that covers the entire supply chain for pharmaceutical distribution, including procurement, sales, warehousing, transportation PERFORMANCE FOR THE YEAR 2018 The Group’s operating revenue decreased by 3.92% from RMB4,095.84 million in 2017 to RMB3,935.25 million in 2018, while its gross profit increased by 13.30% from RMB209.86 million in 2017 to RMB237.76 million in 2018. The Group’s gross profit margin was up from 5.12% in 2017 to 6.04% in 2018. The Group’s net profit attributable to the shareholders of parent company increased by 1.50%, from RMB44.76 million in 2017 to RMB45.43 million in 2018. ANNUAL REPORT 2018 3 Chairman’s Statement PROSPECT APPRECIATION In recent years,