Shareholder Communication and Governance - The company has reviewed its shareholder communication policy for the year ending December 31, 2023, and believes it has been effectively implemented[8]. - The company emphasizes the importance of timely and accessible information for shareholders and potential investors[2]. - The company is committed to ensuring effective communication with shareholders through various channels, including its website[5]. - The company has implemented corporate governance principles to enhance shareholder value, adhering to all applicable codes[116]. - The board believes that the company has applied the principles of the corporate governance code and complied with all applicable provisions as of December 31, 2023[117]. - The board consists of four executive directors, two non-executive directors, and three independent non-executive directors, ensuring over one-third independence[118]. - The board is responsible for overseeing the company's strategic development and setting appropriate risk management policies[120]. - The company has a robust governance framework to ensure accountability and transparency[120]. - The chairman and CEO roles are separated, with Mr. Lai Chi Tin as chairman and Mr. Lai Ying Fung as CEO[128]. - The independent non-executive directors possess extensive experience in finance, law, and business[118]. - The board is committed to making objective decisions in the best interest of the company[119]. - The company has arranged professional training to update directors' knowledge on securities trading analysis[125]. - The company has confirmed that there are no significant uncertainties regarding its ability to continue as a going concern[118]. - The company has established three committees: the audit committee, remuneration committee, and nomination committee, to oversee specific areas of corporate governance[159]. Environmental, Social, and Governance (ESG) Performance - The report covers the group's performance in environmental, social, and governance (ESG) matters for the period from January 1 to December 31, 2023[14]. - The ESG report is the eighth of its kind and aims to report on the group's policies, measures, and performance in ESG areas[9]. - The report adheres to the mandatory disclosure requirements of the Hong Kong Stock Exchange's ESG reporting guidelines[10]. - The board is responsible for decision-making regarding ESG matters, including reviewing strategies and assessing the effectiveness of ESG management[18]. - The company has established a systematic management framework for ESG-related matters, divided into decision-making, communication, and execution levels[17]. - The report includes key performance indicators for environmental and social aspects, which are essential for monitoring and evaluating the company's sustainability efforts[12]. - The company aims to reduce the environmental impact by encouraging shareholders to access communications electronically[5]. Financial Performance - For the fiscal year ending December 31, 2023, the company's revenue increased by approximately 12.3% to RMB 2,049.8 million, compared to RMB 1,825.9 million in 2022[56]. - The profit attributable to the owners of the parent company rose by about 53.0% to RMB 162.8 million, up from RMB 106.4 million in the previous year[57]. - The pharmaceutical segment's revenue grew by approximately 25.3% to RMB 1,415.7 million, accounting for 69.1% of total revenue, compared to 61.9% in 2022[60]. - The retail pharmacy segment's revenue decreased by 8.9% to RMB 634.1 million, representing 30.9% of total revenue, down from 38.1% in 2022[65]. - The company's gross profit for the year was RMB 1,218.1 million, an increase of RMB 145.8 million or 13.6% from RMB 1,072.3 million in 2022[66]. - The gross profit margin for the pharmaceutical segment remained stable at 69.0%, while the retail pharmacy segment's gross profit margin decreased to 38.0% from 42.4% in the previous year[66][67]. - Other income and gains increased to approximately RMB 51.5 million, up from RMB 33.7 million in 2022, primarily due to government subsidies and interest income[68]. - Research and development expenses rose to approximately RMB 50.0 million, an increase of about 7.8% from RMB 46.4 million in 2022[72]. - The group's net profit margin improved to 7.9% for the year ended December 31, 2023, up from 5.8% in 2022[75]. - As of December 31, 2023, the group's total equity attributable to shareholders was approximately RMB 1,053.3 million, an increase from RMB 1,005.9 million in 2022[77]. - The group had outstanding unsecured borrowings of RMB 22.7 million and HKD 30.0 million as of December 31, 2023, compared to RMB 1.0 million and HKD 39.2 million in 2022[77]. - The group had available undrawn bank financing of RMB 119.3 million and HKD 10.0 million as of December 31, 2023, slightly up from RMB 119.0 million and HKD 1.0 million in 2022[78]. - The group's debt ratio (borrowings to total equity) was 4.8% as of December 31, 2023, compared to 3.6% in 2022[82]. Operational Developments - The company celebrated its 30th anniversary, reflecting on past growth and future development[44]. - The market activities have returned to normal post-pandemic, but the rising prices of traditional Chinese medicine materials have posed operational pressures[44]. - The company optimized procurement processes to mitigate the rising costs of raw materials[44]. - The core products of traditional Chinese medicine have significantly increased market share, with expected performance growth[44]. - The construction of the new Hengsheng factory has been completed, now entering the internal decoration and equipment installation phase[44]. - The National Enterprise Technology Center is playing a leading role, with R&D projects progressing in an orderly manner[44]. - The Yunzhihuan company has entered a positive development track after a year of adjustment[44]. - The company plans to accelerate the construction of a new pharmaceutical plant and continue the secondary development of core products to lay a foundation for future growth[51][60]. - The company aims to enhance its market presence in traditional Chinese medicine and optimize internal management to improve overall operational efficiency[48][49]. - The group plans to expand the production capacity of traditional Chinese medicine to capture more market share, driven by the increasing demand for its products[93]. - The group has completed land bidding for a new factory in Zhongshan, Guangdong Province, to enhance production capacity for its proprietary brand products[99]. - The group's capital commitments amounted to RMB 28.5 million as of December 31, 2023, up from RMB 16.9 million in 2022, primarily related to the purchase of production equipment for the new factory[98]. - There were no significant acquisitions or disposals of subsidiaries, associates, or joint ventures during the reporting period[96]. - The company has expanded its business from pharmaceutical product distribution to operating chain pharmacies and manufacturing pharmaceutical products[105]. Risk Management - The board of directors has established a comprehensive risk management and internal control system to manage risks affecting business objectives, ensuring reasonable assurance against significant misstatements or losses[175]. - The risk management team leads daily risk management activities and submits annual risk management plans for review by the audit committee[180]. - The company has established a risk management organizational structure to effectively manage the risks it faces[176]. - The company has implemented a risk response strategy that includes regular monitoring and evaluation of the effectiveness of risk management practices across all business units[196]. - The internal audit department independently evaluates the adequacy and effectiveness of the group's risk management and internal control systems[197]. - The risk management project team coordinates with various departments to identify and assess risks regularly, ensuring comprehensive risk management reporting[185]. - The risk management team is responsible for tracking the implementation of major risk response plans and measures, reporting to senior management[199]. - The company has a structured process for risk information collection, risk identification, assessment, monitoring, and improvement[188]. - In 2023, the risk management team conducted risk identification and assessment across five dimensions: strategic, market, operational, compliance, and financial[198]. - The board believes that the internal control system is effective and sufficient, adequately controlling various risks that may affect the company's objectives[200]. - The risk management team organized senior management to discuss and determine risk response strategies and specific plans for the top ten identified risks[198]. Management and Leadership - The executive team includes experienced professionals with over 30 years in the pharmaceutical industry, enhancing strategic planning and operational efficiency[105]. - The CEO has been with the company since 2014, focusing on sales strategy and brand management, indicating strong leadership continuity[106]. - The CFO joined the company in 2018 and has since managed various operational functions, showcasing a robust financial management structure[109]. - The management team has a strong background in pharmaceutical production and quality control, enhancing operational efficiency[157][158]. - The company is committed to quality control procedures, ensuring compliance with industry standards[114]. - The company has a strong focus on research and development in traditional Chinese medicine, with key personnel holding relevant qualifications[114]. - The company is actively involved in industry associations, enhancing its influence and networking within the pharmaceutical sector[105]. - The nomination committee held one meeting during the year ending December 31, 2023, to discuss the appointment and succession of directors[166]. - The company secretary has confirmed participation in no less than 15 hours of relevant professional training as required by listing rules[172]. - The company is committed to maintaining adequate resources for its committees to fulfill their responsibilities effectively[150]. - The compensation range for senior management as of December 31, 2023, is between HKD 0 to 500,000 for 2 individuals and HKD 500,000 to 1,200,000 for 4 individuals[165].
中智药业(03737) - 2023 - 年度财报