Annual Report 2020 002 Prospect
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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 2000, over the past 21 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, Guangzhou and Huizhou, 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 2019, the Company ranked top 50 among top 100 PRC wholesalers, in respect of revenue generated from the 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 the good reputation and high-quality service, in June 2020, the Company was awarded the title "Model Enterprise of Integrity in Guangdong Province" (for nine consecutive years from 2011 to 2019) jointly by Guangdong Enterprise Federation and Guangdong Entrepreneurs Association. It was awarded the title "Contract Abiding and Credit Respecting Enterprise in Guangdong Province" by Guangdong Provincial Market Supervision Administration (for 19 consecutive years from 2001 to 2019). In August 2020, it won the honorary title "Enterprise Having Great Love and Undertaking Responsibility in War against Epidemic" issued by China Health Industry (International) Ecological Conference and the "Golden Ant" Service Award of Chinese logistics industry from 2019 to 2020 issued by China (Guangzhou) International Logistics Equipment and Technology Exhibition Organising Committee. In September 2020, it was appraised as the best pharmaceutical supply chain logistics centre (base) in 2019-2020 and the best pharmaceutical supply chain logistics service enterprise in 2019-2020 by the Pharmaceutical Supply Chain Alliance. It was appraised as one of the top-100 outstanding private pharmaceutical commercial circulation enterprises in China in 2019 by the Pharmaceutical Business Branch of Pharmaceutical Chamber of Commerce of All-China Federation of Industry and Commerce. Contents 001 Corporate Information 002 Chairman's Statement 004 Financial Summary 005 Management Discussion and Analysis 014 Biographies of Directors, Supervisors and Senior Management 018 Corporate Governance Report 029 Directors' Report 039 Board of Supervisors' Report 041 Auditor's Report 045 Consolidated Balance Sheet 047 Balance Sheet of the Parent Company 049 Consolidated Income Statement 050 Income Statement of the Parent Company 051 Consolidated Statement of Cash Flow 052 Statement of Cash Flow of the Parent Company 053 Consolidated Statement of Changes in Shareholder's Equity 055 Statement of Changes in Shareholder's Equity of the Parent Company 057 Notes to the Financial Statements Corporate Information DIRECTORS STRATEGIC DEVELOPMENT COMMITTEE Executive Directors Yao Chuanglong ( 姚創龍 ) (Chairman) Yao Chuanglong ( 姚創龍 ) Zheng Yuyan ( 鄭玉燕 ) Zheng Yuyan ( 鄭玉燕 ) Zhou Tao ( 周濤 ) Lin Zhixiong ( 林志雄 ) AUTHORISED REPRESENTATIVES Non-executive Director Zheng Yuyan ( 鄭玉燕 ) Li Weisheng ( 李偉生 ) 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 Partnership) Guan Jian ( 關鍵 ) LEGAL ADVISERS (also known as Guan Suzhe ( 關蘇哲 )) Chungs Lawyers in association with DeHeng Law Offices SUPERVISORS (as to Hong Kong law) Zhang Ling ( 張玲 ) Shu Jin Law Firm (as to PRC law) Zheng Xiyue ( 鄭禧玥 ) REGISTERED OFFICE AND HEADQUARTERS Lin Zhijie ( 林志傑 ) No. 235, Song Shan North Road, Longhu District, COMPANY SECRETARY Shantou City, Guangdong Province, PRC Lin Zhixiong ( 林志雄 ) PRINCIPAL PLACE OF BUSINESS IN HONG KONG AUDIT COMMITTEE 40th Floor, Dah Sing Financial Centre, No. 248 Queen's Road East, Wan Chi Wai Anthony ( 尹智偉 ) (Chairman) Wanchai, Hong Kong Zhou Tao ( 周濤 ) PRINCIPAL BANKS Guan Jian ( 關鍵 ) (also known as Guan Suzhe ( 關蘇哲 )) China Guangfa Bank Co., Ltd. (Shantou Branch) Industrial and Commercial Bank of China Limited (Shantou Branch) NOMINATION COMMITTEE Zhou Tao ( 周濤 ) (Chairman) H SHARE REGISTRAR Yao Chuanglong ( 姚創龍 ) Computershare Hong Kong Investor Services Limited Guan Jian ( 關鍵 ) (also known as Guan Suzhe ( 關蘇哲 )) Shops 1712-1716, 17th Floor Hopewell Centre, REMUNERATION COMMITTEE 183 Queen's Road East, Wanchai, Hong Kong Zhou Tao ( 周濤 ) (Chairman) Wan Chi Wai Anthony ( 尹智偉 ) COMPANY WEBSITE Lin Zhixiong ( 林志雄 ) www.chmyy.com RISK MANAGEMENT COMMITTEE STOCK CODE Yao Chuanglong ( 姚創龍 ) (Chairman) 2289.HK Lin Zhixiong ( 林志雄 ) Wan Chi Wai Anthony ( 尹智偉 ) 001 CHARMACY PHARMACEUTICAL CO., LTD. Chairman's Statement Dear Shareholders, On behalf of the board (the "Board") of directors (the "Directors") of Charmacy Pharmaceutical Co., Ltd. (stock code: 2289.HK) (the "Company"), I would like to present the audited consolidated results for the year ended 31 December 2020 (the "Reporting Period") of the Company and its subsidiaries (the "Group" or "us" or "we" or "Charmacy"). BUSINESS OVERVIEW The Company is principally engaged in the pharmaceutical distribution business. As part of the pharmaceutical circulation industry, the Company, with its focus on non-tendering markets, mainly distributes western medicine, Chinese patent medicine and healthcare products to downstream distributors and retail terminals such as pharmacies, clinics and private hospitals. It also provides consultation services on pharmaceutical products. As of 31 December 2020, the Company had operated as many as 11,828 products. Founded in 2000, over the past 21 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, Guangzhou ,Guangzhou and Huizhou, 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. 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 ) (www.cmyynet.com) and has developed an APP for customers to place orders online, make inquires and payment and many more. In 2019, the Company ranked top 50 among top 100 PRC wholesalers, in respect of revenue generated from the 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 the good reputation and high-quality service, in June 2020, the Company was awarded the title "Model Enterprise of Integrity in Guangdong Province" (for nine consecutive years from 2011 to 2019) jointly by Guangdong Enterprise Federation and Guangdong Entrepreneurs Association. It was awarded the title "Contract Abiding and Credit Respecting Enterprise in Guangdong Province" by Guangdong Provincial Market Supervision Administration (for 19 consecutive years from 2001 to 2019). In August 2020, it won the honorary title "Enterprise Having Great Love and Undertaking Responsibility in War against Epidemic" issued by China Health Industry (International) Ecological Conference and the "Golden Ant" Service Award of Chinese logistics industry from 2019 to 2020 issued by China (Guangzhou) International Logistics Equipment and Technology Exhibition Organising Committee. In September 2020, it was appraised as the best pharmaceutical supply chain logistics centre (base) in 2019-2020 and the best pharmaceutical supply chain logistics service enterprise in 2019-2020 by the Pharmaceutical Supply Chain Alliance. It was appraised as one of the top-100 outstanding private pharmaceutical commercial circulation enterprises in China in 2019 by the Pharmaceutical Business Branch of Pharmaceutical Chamber of Commerce of All- China Federation of Industry and Commerce. PERFORMANCE FOR THE YEAR 2020 The Group's operating