SF Intra-city Realised Profitability in 2023, Demonstrating High-Quality and Healthy Growth

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Net Profit from Continuing Operations Reached RMB 64.9 Million
Multi-scenario Business Model Driving
Business Integration and Healthy Operation

Results Highlights

• Revenue amounted to approximately RMB12,387.4 million, steadily increased by 21.1% year-on-year, and the total order volume increased by over 30% year-on-year;
• Gross profit and gross profit margin from continuing operations continuously improved. Gross profit reached approximately RMB 794.7 million, representing a significant increase of 93.5% year-on-year; and gross profit margin substantially increased 2.4 percentage points to 6.4%;
• Net profit and net profit margin from continuing operations were approximately RMB 64.9 million and 0.5%, respectively;
• Net profit and net profit margin attributable to owners of the Company was RMB50.6 million and 0.4%, respectively. The Group successfully achieved a business turnaround and achieved steady profit growth.
• Revenue from the intra-city delivery service was approximately RMB 7,387.3 million, increased by 12.8% year-on-year;
• Revenue from last-mile delivery service significantly increased by 35.9% to approximately RMB 5,000.2 million;
• The scale of active consumers has been expanding to about 20.5 million by the end of 2023;
• Revenue from intra-city delivery for consumers was approximately RMB 2,167.6 million;
• For the year ended on 31 December 2023, the scale of annual active merchants on the platform reached 470,000, showing significant growth in the scale of merchants served;
• Net cash generated from operating activities was RMB 266.3 million for the Reporting Period. As of December 31, 2023, the cash and cash equivalents and short-term financial investments were RMB 1,901.7 million and RMB 516.8 million. The net cash flow turned positive, reflecting our excellent business quality and operational resilience.

HONG KONG, March 26, 2024 /PRNewswire/ -- Hangzhou SF Intra-city Industrial Co., Ltd. ("SF Intra-city" or the "Group"; Stock Code: 9699.HK), the largest third-party on-demand delivery service provider in China, announced its audited annual results for the year ended 31 December 2023 (the "Reporting Period"). During the Reporting Period, the Group achieved satisfactory annual result. SF Intra-city's revenue from continuing operations experienced steady growth, increasing by 21.1% to RMB 12,387.4 million, and the total order volume increased by over 30% year-on-year; gross profit recorded a strong year-on-year growth of 93.5% reaching as high as RMB 794.7 million; gross profit margin substantially increased by 2.4 percentage points to 6.4%. The Group's net profit from the continuing operations was RMB64.9 million, and net profit margin substantially improved to 0.5% year-on-year.

SF Intra-city recorded net cash generated from operating activities of RMB266.3 million for the year of 2023. As of December 31, 2023, the Group's cash and cash equivalents and short-term financial investments were RMB 1,901.7 million and RMB 516.8 million, respectively, indicating a healthy cash flow and strong capital position.

The management of SF Intra-city said, "It is very motivating for the Group to become the forerunner in the industry to realize annual profitability in 2023, underscoring our fruitful results achieved after years of efforts. This can be attributed to our multi-scenario business model leading to a growth of order density and optimization of business structure. SF Intra-city leveraged economies of scale and network effects to attract high-value orders with differentiated services, adopted technologies in driving a comprehensive planning and deployment, optimized the efficiency of delivery networks and pursued continuous streamlining of management to optimize operation quality, kept improving resource utilization to enhance efficiency and productivity. Adhering to our development concept of "high-quality, efficient, and multi-scenario", the Group strives to fulfill its mission of "bringing enjoyable lifestyle to your fingertips" and deepening the third-party on-demand delivery service.

Expanded clientele in all aspects for Intra-city delivery services, further extended our reach to markets of lower-tier cities and counties, seek for in-depth co-operation scenarios

During the Reporting Period, revenue from intra-city delivery grew by 12.8% to RMB 7,387.3 million. The steady revenue growth was mainly attributable to: (i) robust demand for food delivery services, with consumers expanding the habit of on-demand delivery into retail consumption scenarios and non-food delivery scenarios maintained steady growth with a year-on-year revenue increase of 21.2% to RMB2,929.0 million in 2023; (ii) our integrated capabilities in logistics infrastructure, enabling us to provide professional and high-quality on-demand delivery services to different types of customers, deepen cooperation with key account ("KA") customers, and expand the scale of active merchants and consumers; (iii) our focus on lower-tier cities and counties, significantly strengthening our penetration in county areas, from which county-level revenue rose by 147% year-on-year in 2023; (iv) active exploration of new business landscapes in local lifestyle service in conjunction with major traffic platforms and deepened cooperation scenarios; (v) our hour-level delivery network effectively meeting the speed-up requirements of intra-city express delivery; and (vi) the instrumental adoption of proactive pricing strategy to strengthen our production competitiveness.

The scale of active merchants expanded, achieving a revenue of approximately RMB 5,220 million from intra-city delivery services for merchants

SF Intra-city empowers merchants with an open and inclusive on-demand delivery network and professional, efficient, and comprehensive delivery solutions. In 2023, the revenue from intra-city delivery service for merchants reached RMB 5,219.7 million, representing a year-on-year growth of 12.3%.

In terms of merchant cooperation, the scale has significantly increased, with improvements in structure and deeper collaboration with brands. In 2023, the scale of annual active merchants on the platform reached close to 470,000, with over half of the new stores coming from lower-tier cities and counties. Among them, the growth momentum of KA customers was strong, with revenue from newly contracted customers achieving high double-digit growth and enhancing business stability, given the increasing proportion of chain customers. Throughout the year, the Group has established collaborations with brand merchants such as CHAGEE (霸王茶姬), Molly Tea (茉莉奶白), Taobao Groceries (淘寶買菜), and Nepstar (海王星辰).

Regarding scenario expansion, leveraging our multi-scenario capabilities, the Group optimized the services around key categories. By focusing on key industries, major holidays, heated events, and emerging scenarios, the Group aimed to enhance capabilities to offer differentiated service. In 2023, income from tea and beverage delivery increased by 75% year-on-year, and retail categories such as pharmaceuticals, beauty, maternity and baby products, pets, and jewelry achieved high double-digit year-on-year growth in revenue.

Regarding coverage, SF Intra-city focused on strengthening the construction of intra-city delivery networks in lower-tier markets. During the Reporting Period, the Group has covered more than 1,000 counties nationwide, reaching a county coverage rate of 60%. With deepened development and stable operation in the covered county areas, the revenue scale of such regions in 2023 expanded by 147% from the corresponding period of last year.

As one of the most widely and deeply connected third-party on-demand delivery service providers on the accessible platform for collaborating with local lifestyle service vendors, the Group actively grasps the trend of diversified traffic by promoting the co-construction of ecosystems with various major local lifestyle service platforms: (i) Douyin, (ii) Alibaba, (iii)WeChat and (iv) Didi Fast Delivery, providing intra-city courier services nationwide and further expanding our multi-faceted user service ecosystem. Currently, the Group continues exploring opportunities and experimenting with different new collaborative scenarios alongside multiple strategic partners. By harnessing high-quality and efficient on-demand delivery experiences, the Group aims to contribute to the thriving new ecosystem of local lifestyle services.

SF Intra-city rapidly expanded and densified our nationwide delivery network, leading to a growth in business districts and order density. In 2023, the Group strengthened operational efficiency in business districts around the stores of our top customers, effectively solving pain points such as peak order overload, excessively long waiting times for meals, and idle personnel during off-peak hours. Both parties could manage to achieve cost reduction and efficiency improvement. Our number of profitable business districts also increased. In 2023, the overall average delivery distance increased, with a fulfillment in-time rate of approximately 95%. The average delivery time of orders within 3 kilometers was 22 minutes.

The Group also collaborated with participants in the SF Holding Group's ecosystem to create an integrated supply chain solution for customers, combining "front-end warehousing + mid-end trunk + intra-city on-demand delivery". Customers can choose their logistics products more efficiently by integrating our resources and capabilities within the SF Holding Group. The integrated solution helps us collectively expand the customer base and enhance customer loyalty. In 2023, the Credit Customers that the Group served together with SF Holding Group brought an external incremental revenue of RMB 252.0 million, representing a year-on-year growth of 32.5%.

Revenue from intra-city delivery to consumers increased to approximately RMB 2,170 million year-on-year

For consumers, SF Intra-city is committed to creating an industry-leading and professional on-demand fulfillment service. Our "Deliver for Me, Fetch for Me, Purchase for Me, and Solve for Me" services cover personal life and work scenarios such as daily errands, medical healthcare, and business agency, reinforcing the brand image of "SF Intra-city, the first choice for urgent delivery of valuable items". In 2023, the revenue from intra-city delivery for consumers grew by 14.2% year-on-year to RMB2,167.6 million.

During the Reporting Period, the Group has enhanced our understanding of consumers, strengthened service capabilities in central business districts (CBDs) and office areas, ensuring quality pickup and delivery experiences and delivery safety by standardizing rider appearance, equipment, language, and delivery operations. The order volume recorded from the business scenario increased by 27% year-on-year. Through channel partnerships, the Group increased touchpoints with intra-city express delivery users, allowing consumers to choose "hourly delivery" services on the user interface when placing orders to meet the need for accelerating timeliness.

SF Intra-city actively optimized brand promotion and channel marketing strategies, covering target customer groups through various means such as new user acquisition activities, discount promotions, community operations, and city events, improving customer acquisition efficiency and new user conversion rates. As the user base expands, the Group pays more attention to improving service quality, implementing refined user operations, and optimizing the membership system to promote the retention and repurchase rates of core individual users. The scale of active consumers expanded, reaching over 20.5 million by the end of 2023.

Last-mile delivery service increased by 35.9% to approximately RMB5,000 million

The revenue from our last-mile delivery service increased by 35.9% year-on-year to RMB5,000.2 million in 2023, mainly benefiting from (i) leveraging our hour-level and minute-level flexible delivery network to meet the need of traditional logistics services acceleration and deepen collaboration in diversified delivery scenarios, recording a surge in revenue from services including "parcels collection", "delivery within half a day", and "delivery within an hour"; (ii) the steady increase in cooperation scale with major customers as the Group solidify their delivery network capabilities; and (iii) a year-on-year increase in delivery volume during peak periods such as the Spring Festival, the "618" and "Double 11" Shopping Festivals, reaching a new peak in by fully utilizing our role as the flexible delivery capacity. Our flexible network helps clients address challenges between unbalanced orders and delivery networks during peak order periods, ensuring a seamless and steady fulfillment process. This capability has simultaneously expedited various logistics processes and supported personalized services. Through deepening network integration, the Group assists logistics service providers in improving fulfillment efficiency while reducing operational costs.

Advancing digital operations and AI decision-making intelligence to achieve collaborative response in core processes

SF Intra-city is committed to advancing digital operations and AI decision-making intelligence at various stages of our business. Our City Logistics System ("CLS") has achieved collaborative response in the three core processes, including intelligent business planning and marketing management, integrated rider dispatch and intelligent order distribution, and intelligent operational optimization.

Building on our technological capabilities, the Group further promotes the "SF Intra-city Delivery Cloud" (豐配雲) SaaS real-time logistics system, providing a one-stop intra-city logistics solution for delivery service providers and brands with their delivery teams. The core functions of the "SF Intra-city Delivery Cloud" system cover various aspects of intra-city on-demand delivery, effectively adapting to the fulfillment requirements of different types of merchants. It empowers delivery service providers and brands to efficiently manage all-channel orders and processes, contributing to efficiency improvement and cost savings. Based on customer feedback, businesses using the "SF Intra-city Delivery Cloud" service can significantly increase order pick-up and on-time delivery rates.

SF Intra-city is exploring the commercial application of smart logistics and unmanned delivery technology. In 2023, the Group tested and achieved significant progress in the delivery schemes and operational models of drones and unmanned vehicles in urban business districts, campuses, industrial parks, and other enclosed areas. The Group will accelerate deployment with the long-term goal of making unmanned delivery an effective supplement to the existing rider network, enhancing efficiency and providing users with a different interactive experience.

Looking ahead, the management of SF Intra-city commented, "The Group will actively seize market opportunities in the continuous penetration of diversified traffic, local retail development, accelerated intra-city logistics, and the ongoing expansion of third-party on-demand delivery services. The Group is committed to expanding on a large scale, covering various scenarios, providing excellent services, and establishing a solid network to enhance medium-to long-term revenue and profit potential. The Group will also continue to invest part of the profit margins brought by operational efficiency improvements and cost reductions into business development and lean operations to form a virtuous cycle of operations. SF Intra-city will also adapt to evolving consumer trends, focusing on serving customers, industries, and society, creating more flexible income opportunities, and creating broader value for our customers and shareholders."

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About Hangzhou SF Intra-city Industrial Co., Ltd. (Stock code: 9699.HK)

SF Intra-city focuses on the emerging opportunities of intra-city on-demand delivery services. Since 2019, SF Intra-city has operated as an independent legal entity to capture the growth opportunities arising from the new consumption trends. SF Intra-city adopts a multi-scenario business model, providing full coverage of delivery scenarios for all types of products and services. The Company's extensive service coverage, ranging from mature scenarios such as food delivery to growth scenarios such as local retail, local e- commerce and local services, has enabled it to respond to the evolving customer needs resulting from the development and upgrade of the local consumer market. For more details, please visit the Company's website: https://ir.sf-cityrush.com/en/investor-relations/.

SOURCE SF Intra-city