Annual Report 2017 About Us
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ANNUAL REPORT 2017 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, the Company established Guangdong Charmacy in 2011, acquired Zhuhai Charmacy and Guangzhou Charmacy in the first half of 2017, and set up Shenzhen Charmacy in early 2018, striving for intensive engagement in Guangdong and extensive coverage across surrounding areas. The Company 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 procurement orders online. In 2016, the Company ranked 37th among top 100 wholesalers nationally, in respect of principal business. According to the Market Research Report of the Chinese Pharmaceutical Industry (2016) 《中國醫藥行業市場研究報告》( (2016)), in respect of sales scale, the Company ranked 7th among the pharmaceutical distribution businesses in Guangdong Province and second among private firms. With its good reputation and quality services, the Company obtained the 2017 “Gold Ant” award 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 2017; in November 2017, the Company won the title “Top-10 Business with the Highest Innovation Value” (十佳創新價值企業) under the 2016-2017 Gold Award for Pharmaceutical Supply Chain Businesses (2016-2017年度 醫藥供應商鏈金質獎), conferred by the Pharmaceutical Logistics Association under the China Federation of Logistics and Purchasing (中 國物流與採購聯合會醫藥物流分會); and in December 2017, the Company was recognized as a “Headquarters Enterprise of Shantou City” (汕頭市總部企業) by Shantou People’s Government. CONTENTS 2 Corporate Information 3 Chairman’s Statement 5 Financial Summary 6 Management Discussion and Analysis 20 Biographies of Directors, Supervisors and Senior Management 26 Corporate Governance Report 38 Directors’ Report 51 Board of Supervisors’ Report 53 Auditor’s Report 58 Consolidated Balance Sheet 61 Balance Sheet of the Parent Company 64 Consolidated Income Statement 66 Income Statement of the Parent Company 68 Consolidated Statement of Cash Flow 70 Statement of Cash Flow of the Parent Company 72 Consolidated Statement of Changes in Shareholder’s Equity 74 Statement of Changes in Shareholder’s Equity of the Parent Company 76 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) Ng Wing Shan (吳詠珊) 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) Li & Partners (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) JOINT COMPANY SECRETARIES REGISTERED OFFICE AND Lin Zhixiong (林志雄) HEADQUARTERS Ng Wing Shan (吳詠珊) No. 235, Song Shan North Road, Longhu District, Shantou City, AUDIT COMMITTEE Guangdong Province, PRC Wan Chi Wai Anthony (尹智偉) (Chairman) Zhou Tao (周濤) PRINCIPAL PLACE OF BUSINESS Guan Jian (關鍵) (also known as Guan Suzhe (關蘇哲)) IN HONG KONG 18/F, Tesbury Centre, NOMINATION COMMITTEE 28 Queen’s Road East, Zhou Tao (周濤) (Chairman) Wanchai, Hong Kong Yao Chuanglong (姚創龍) Guan Jian (關鍵) (also known as Guan Suzhe (關蘇哲)) PRINCIPAL BANKS China Guangfa Bank Co., Ltd. (Shantou Branch) REMUNERATION COMMITTEE Industrial and Commercial Bank of China Limited (Shantou Zhou Tao (周濤) (Chairman) Branch) Wan Chi Wai Anthony (尹智偉) Lin Zhixiong (林志雄) H SHARE REGISTRAR Computershare Hong Kong Investor Services Limited RISK MANAGEMENT COMMITTEE Yao Chuanglong (姚創龍) (Chairman) COMPANY WEBSITE Lin Zhixiong (林志雄) www.chmyy.com Wan Chi Wai Anthony (尹智偉) STOCK CODE 2289.HK 2 CHARMACY PHARMACEUTICAL CO., LTD Chairman’s Statement Dear Shareholders, a modern information system that covers the entire supply chain for pharmaceutical distribution, including On behalf of the board (the “Board”) of directors (the procurement, sales, warehousing, transportation and “Directors”) of Charmacy Pharmaceutical Co., Ltd. (stock delivery. Apart from that, the Company operates its own code: 2289.HK) (the “Company”), I would like to present B2B e-commerce platform “Charmacy e-Medicine” (創美e the audited consolidated results for the year ended 藥) (www.cmyynet.com), a platform for customers to place 31 December 2017 (the “Reporting Period”) of the procurement orders online. In 2016, the Company ranked Company and its subsidiaries (the “Group” or “us” or “we” 37th among top 100 wholesalers nationally, in respect or “Charmacy”). of principal business. According to the Market Research Report of the Chinese Pharmaceutical Industry (2016) 《中( BUSINESS OVERVIEW 國醫藥行業市場研究報告》(2016)), in respect of sales scale, the Company ranked 7th among the pharmaceutical distribution businesses in Guangdong Province and The Company is principally engaged in the pharmaceutical second among private firms. In May 2017, the Company distribution business. As part of the pharmaceutical obtained the 2017 “Gold Ant” award for the Chinese circulation industry, the Company, with its focus on non- logistics industry, an award conferred by the Organizing tendering markets, mainly distributes western medicine, Committee of China International Logistics Equipment and Chinese patent medicine and healthcare products to Technology Exhibition (Guangzhou) (中國(廣州)國際物流 downstream distributors and such retail terminals as 裝備與技術展組委會); in November 2017, the Company pharmacies, clinics and private hospitals. It also provides won the title “Top-10 Business with the Highest Innovation consultation service on pharmaceutical products. As of Value” (十佳創新價值企業) under the 2016-2017 Gold 31 December 2017, the Company had operated as many Award for Pharmaceutical Supply Chain Businesses as 11,230 products. Founded in eastern Guangdong in (2016-2017年度醫藥供應商鏈金質獎), conferred by the 2000, the Company established Guangdong Charmacy Pharmaceutical Logistics Association under the China Pharmaceutical Co., Ltd.* (廣東創美藥業有限公司) Federation of Logistics and Purchasing (中國物流與採購聯 (“Guangdong Charmacy”) in 2011, acquired Zhuhai 合會醫藥物流分會); and in December 2017, the Company Charmacy Hengxiang Pharmaceutical Limited* (珠海創美 was recognized as a “Headquarters Enterprise of Shantou 恒祥醫藥有限公司) (“Zhuhai Charmacy”) and Guangzhou City” (汕頭市總部企業) by Shantou People’s Government. Charmacy Pharmaceutical Limited* (廣州創美藥業有限 公司) (“Guangzhou Charmacy”) in the first half of 2017, and set up Shenzhen Charmacy Pharmaceutical Limited* PERFORMANCE FOR THE YEAR 2017 (深圳創美藥業有限公司) (“Shenzhen Charmacy”) in early 2018, striving to deliver full coverage across the Pearl The Group’s operating revenue grew by 11.61% from River Delta. The Company has built logistics centers in RMB3,669.78 million in 2016 to RMB4,095.84 million in Shantou, Foshan, Zhuhai and Guangzhou, all equipped 2017, while its gross profit increased by 15.46% from with professional transportation teams, and has a highly RMB181.76 million in 2016 to RMB209.86 million in 2017. efficient delivery mechanism of delivering pharmaceutical The Group’s gross profit margin was up from 4.95% in products three times per day for customers within a radius 2016 to 5.12% in 2017. The Group’s net profit attributable of 10 kilometers, twice per day for customers within a to the shareholders of parent company declined by radius of 50 kilometers and once per day for those within 20.72%, from RMB56.46 million in 2016 to RMB44.76 a 250-kilometers’ radius. In addition, the Company has million in 2017. * For identification purpose only. ANNUAL REPORT 2017 3 Chairman’s Statement PROSPECT APPRECIATION In respect of market size, the Chinese pharmaceutical Lastly, I would like to take this opportunity to express circulation industry has been growing rapidly in recent my utmost gratitude to the management and staff of the years. Frequent rollout of medical reform policies has Company for their development and contribution. I would brought both fresh opportunities and challenges to the also like to express my gratitude to all our Shareholders for industry. Among such policies are the “Two-Invoice their trust and support. System” and the separation of medical institutions from pharmaceutical business, which help the pharmaceutical Charmacy Pharmaceutical Co., Ltd. circulation industry to make steady improvement in respect of industrial concentration. In addition to increasingly