Incorporated in the Cayman Islands with limited liability Stock Code: 6123 2018 ANNUAL REPORT CONTENTS Corporate Information 2 Chairman’s Statement 3 Management Discussion and Analysis 4 Biographies of Directors and Senior Management 11 Directors’ Report 14 Corporate Governance Report 33 Independent Auditor’s Report 45 Consolidated Statement of Profit or Loss 49 Consolidated Statement of Profit or Loss and Other Comprehensive Income 50 Consolidated Statement of Financial Position 51 Consolidated Statement of Changes in Equity 53 Consolidated Statement of Cash Flows 56 Notes to the Consolidated Financial Statements 58 Five-Year Financial Summary 144 Glossary 145 CORPORATE INFORMATION EXECUTIVE DIRECTORS HEADQUARTERS AND PRINCIPAL PLACE Mr. Lam Chun Chin, Spencer (Chief Executive Officer) OF BUSINESS IN HONG KONG Mr. Li Xianjun Unit 18, 1st Floor, Sino Industrial Plaza 9 Kai Cheung Road NON-EXECUTIVE DIRECTORS Kowloon Bay Mr. Yu Huijiao (Chairman) Hong Kong Mr. Su Xiufeng Mr. Zhu Rui COMPANY’S LEGAL ADVISER AS TO Mr. Lin Kai HONG KONG LAW INDEPENDENT NON-EXECUTIVE Chiu & Partners DIRECTORS PRINCIPAL SHARE REGISTRAR AND Mr. Li Donghui Mr. Xu Junmin TRANSFER OFFICE IN CAYMAN ISLANDS Mr. Chung Kwok Mo John Conyers Trust Company (Cayman) Limited Cricket Square COMPANY SECRETARY Hutchins Drive Ms. Wong Pui Wah, PO Box 2681 HKICPA (non-practising), FCCA Grand Cayman KY1-1111 Cayman Islands AUTHORISED REPRESENTATIVES (for the purpose of the Listing Rules) HONG KONG BRANCH SHARE Mr. Lam Chun Chin, Spencer REGISTRAR AND TRANSFER OFFICE Ms. Wong Pui Wah Tricor Investor Services Limited Level 22 AUTHORISED REPRESENTATIVE Hopewell Centre (for the purpose of the Companies Ordinance) 183 Queen’s Road East Ms. Wong Pui Wah Hong Kong AUDIT COMMITTEE PRINCIPAL BANKER Mr. Chung Kwok Mo John (Chairman) The Hongkong and Shanghai Banking Mr. Lin Kai Corporation Limited Mr. Li Donghui HSBC Main Building REMUNERATION COMMITTEE 1 Queen’s Road Central Hong Kong Mr. Xu Junmin (Chairman) Mr. Yu Huijiao Mr. Chung Kwok Mo John AUDITOR Deloitte Touche Tohmatsu NOMINATION COMMITTEE Mr. Yu Huijiao (Chairman) COMPANY’S WEBSITE Mr. Li Donghui www.ytoglobal.com Mr. Xu Junmin STOCK CODE CORPORATE GOVERNANCE COMMITTEE 6123 Mr. Lam Chun Chin, Spencer (Chairman) Mr. Li Xianjun Mr. Li Donghui Mr. Xu Junmin Mr. Chung Kwok Mo John REGISTERED OFFICE Cricket Square Hutchins Drive PO Box 2681 Grand Cayman KY1-1111 Cayman Islands 2 YTO Express (International) Holdings Limited CHAIRMAN’S STATEMENT ACHIEVEMENT OF COMPREHENSIVE UPGRADE AND BREAKTHROUGH THROUGH INTEGRATION AND SYNERGY In the year of 2018, although global economic development has been negatively impacted by the trade war, the Company was still capable of achieving impressive results which was mainly benefitted from the excellent performance of our fellow employees as well as the deep integration of the Group’s resources and the development breakthroughs in our new business (international express). Our results successfully maintained a stable growth and the operating quality has been continuously enhancing. The operating profit has recorded a significant increase than last year with a year-on-year growth of about 25%. In 2018, the cross-border e-commerce business maintained a rapid growth. According to the General Administration of Customs of the PRC, the gross amount of import and export commodities retailed through the Custom’s cross-border e-commerce management platform amounted to RMB134.7 billion, representing a year-on-year increase of 50%. Thanks to the opportunities brought by the vigorous development of the cross-border e-commerce business, we are grateful to see our Company has achieved breakthroughs in our new business (international express). During the past year, the Company emphasized on implementing the “Belt and Road” initiative and continuously promoting the business development in countries alongside, of which the outcomes of business expansion in Southeast Asian regions are particularly fruitful. LOOKING TO THE FUTURE Being an important platform of the commencement of the Group’s international business, we will continue to follow the global development strategies promoted by the Group, namely “going global with the “Belt and Road” initiative”, “going global with the cross-border e-commerce business” and “going global with the Chinese enterprises”, so as to put efforts in developing as a world’s leading integrated logistic service provider covering businesses such as international freight forwarding, international express and supply chain management. We will deeply integrate the Group’s quality customer base through integration and synergy, and assist “Made in China” to go global. We will deeply integrate YTO Express Airlines and the Madrid-Yiwu railway resources in central Europe, so as to further convert our key resources into competitiveness, thus provide more diversified and quality international logistic services to customers. We will proactively implement the “Belt and Road” initiative and seize the historical development opportunities. In view of the huge demands of regions alongside towards infrastructure construction, trades and logistics, we will further expand the construction of logistic routes in countries along the Belt and Road routes, in particular we are seeking breakthroughs in the international express market of emerging economies such as Southeast Asia. Leveraging on the current overseas networks and team base, we will achieve upgrades and breakthroughs of the Company’s businesses and brands through three major development strategies, namely “international express + freight forwarding”, “internet + freight forwarding” and “supply chain + forwarding”. We consider the cross-border e-commerce business as the new development driver of international logistics. We will continue to expand the business of international package express delivery through the Group’s extensive distribution networks and technological experiences, so as to launch the full-chain international express products with the best price-performance ratio and form the business model driven by “international express + freight forwarding”. We are increasing the inputs to information technology and focusing on the internet-based upgrade so as to establish a new model of “internet + forwarding”, therefore we can provide customers with a more convenient and all-controllable international logistic service experience. With the deepening of Chinese brands and manufacture industry in the global supply chain, we will leverage on the international supply chain service capability in sectors like costumes and electronics which we have accumulated over years, and gradually establish the international supply chain service capability in the specialized niche markets such as aviation materials, medicines and automobile component parts, in order to continue to strengthen our competitive edges in the international “supply chain + freight forwarding” services. THANK YOU I hereby would like to express my gratitude and appreciation to our Shareholders for their confidence and supports, our each member of the Board for their valuable opinions as well as our management team and fellow employees for their efforts and contributions. Under the proper strategic guidance of the Group, I am looking forward to the full commitment of all staff members and striving for achieving the vision of “The World is Within Your Reach”. Yu Huijiao Chairman Hong Kong, 28 March 2019 Annual Report 2018 3 MANAGEMENT DISCUSSION AND ANALYSIS BUSINESS REVIEW The Board announces the audited annual results of the Group for the FY2018. During the FY2018, there was growth in the air freight business and such growth was due to the increase in demand for air freight services and new customers on board. This has enhanced the positive financial results during the FY2018. Financial Results The Group recorded revenue of about HK$4,462.8 million during the FY2018 (FY2017: about HK$3,670.5 million), representing an increase of about 21.6%. Gross profit amounted to about HK$595.0 million during the FY2018 (FY2017: about HK$571.8 million), representing an increase of about 4.1%. Gross profit margin during the FY2018 was about 13.3% (FY2017: about 15.6%). Net profit was about HK$105.7 million during the FY2018 (FY2017: about HK$101.0 million), representing an increase of about 4.7% while the net profit attributable to owners of the Company increased by about 6.8% to about HK$104.2 million during the FY2018 (FY2017: about HK$97.5 million). The increase in profit was mainly due to (a) the contribution of air freight business revenue and profits to the Group from Best Loader Logistics Company Limited (“Best Loader HK”) and 翼尊國際貨運代理（上海）有限公司 (“Best Loader Shanghai”) which were acquired by the Group in mid of 2017; (b) the discontinuation of contract logistics business in the USA during the fourth quarter of 2017 which has not contributed profit to the Group; (c) the increase in demand for air freight services brought by customers in the air freight segment; (d) the decrease in provision of doubtful debts and bad debts and increase in reversal of provisions of doubtful debts in respect of outstanding trade receivables which amounted to about HK$5.5 million and about HK$5.0 million respectively; and (e) the business segment of international express and parcel services, which contributed about HK$25.4 million profit to the Group during the FY2018 with an increase of about HK$23.2 million profit to the Group. Segmental Analysis The Group’s core businesses are air and ocean freight