Supplementary Announcement: Regarding the 2024 Annual Report This announcement provides supplementary information to the 2024 annual report, detailing an impairment loss on prepayments for car resale contracts Purpose and Background of Announcement This announcement aims to provide supplementary information for Huayi Financial Holdings Group Limited's 2024 annual report, primarily addressing an impairment loss recognized by a subsidiary for approximately RMB 70.2 million in prepayments to a supplier for car resale contracts - This announcement provides supplementary information to the 2024 annual report of Huayi Financial Holdings Group Limited (the "Company")4 - The supplementary information primarily concerns the recognition of an impairment loss of approximately RMB 70.2 million (equivalent to approximately HKD 75.8 million) on prepayments made by a subsidiary (the "Subsidiary") to an automotive supplier (the "Supplier") under purchase contracts for cars intended for resale5 Overview of Parallel Import Car Sales Business The company has engaged in parallel import car sales in China since August 2017, procuring vehicles from suppliers for resale to end customers, with purchase contracts typically requiring a 10% to 45% non-refundable deposit, totaling 134 contracts, 88.8% of which include resale agreements - The Company has been engaged in the parallel import car sales business segment in China since August 20176 - The business model involves sourcing cars from suppliers and reselling them to end customers, with purchase contracts typically requiring a non-refundable deposit ranging from 10% to 45%6 Number of Purchase Contracts and Resale Status | Contract Type | Quantity (units) | Cars Involved (units) | Proportion | | :--- | :--- | :--- | :--- | | Total Purchase Contracts | 134 | 214 | 100% | | With Resale Contracts | 119 | 171 | 88.8% | | Without End Customers | 15 | 43 | 11.2% | Details and Reasons for Impairment Loss The impairment loss primarily stems from car customs clearance delays, market price competition, and contractual risks, significantly reducing the likelihood of fund recovery, totaling approximately RMB 70.2 million across three prepayment categories, leading the Board to recognize the loss for accurate financial representation - The impairment loss is primarily due to the combined impact of contractual, market, and legal risks, significantly reducing the likelihood of recovering the funds10 - Cars are stranded in bonded ports or warehouses, undeliverable, with customs clearance facing unprecedented delays due to unknown reasons, considered a systemic and industry-wide issue9 Impairment Classification of Prepayments | Category | Description | Prepayment (RMB million) | Proportion of Total Impairment (%) | | :--- | :--- | :--- | :--- | | Category 1 | Without resale contracts, total contract price fully settled | 16.4 | 23.3% | | Category 2 | With resale contracts, total contract price fully settled | 24.3 | 34.7% | | Category 3 | With resale contracts, total contract price partially settled | 29.5 | 42.0% | | Total | | 70.2 | 100% | - The Board decided to recognize the impairment loss to present a true and fair view of the Group's financial position and comply with accounting standards11 Analysis of Purchase Contract Payment Status This section analyzes the payment status of purchase contracts, categorizing prepayments based on resale agreements and settlement status, highlighting issues like customs clearance delays - Category 1 contracts (without resale agreements) have been fully paid, totaling approximately RMB 16.4 million, with cars shipped to bonded ports awaiting resale7 - Category 2 contracts (with resale agreements and fully settled) have been paid, totaling approximately RMB 24.3 million, with cars shipped to bonded ports awaiting customs clearance, and impairment is due to clearance delays8 - Category 3 contracts (with resale agreements but partially settled) have been paid, totaling approximately RMB 29.5 million, with end customers also only partially paying, resulting in an outstanding balance of approximately RMB 61.2 million in receivables9 - Legal ownership transfer of cars requires full payment, customs clearance, National VI emission certification, and payment of customs duties, but relevant cars remain stranded in bonded ports or warehouses due to clearance delays9 Resale Contracts and End Customer Defaults This section details the status of resale contracts, highlighting end customer defaults and the company's legal actions to recover outstanding payments - 119 purchase contracts are accompanied by resale agreements, involving 14 independent end customers12 - As of December 31, 2024, the Subsidiary had received approximately RMB 53.5 million from end customers (as deposits and prepayments for resale contracts)12 - 10 end customers have only partially paid the resale price, and the Company has initiated legal action to recover funds, with approximately RMB 25.9 million (representing 36.9% of the total impairment loss) in non-refundable deposits expected to be forfeited12 Company's Remedial Actions and Future Outlook The company has implemented various measures to address challenges, including legal actions against defaulting customers, engaging customs brokers to expedite clearance, exploring overseas markets for car disposal, and planning expansion into the EU market and collaborations with Chinese manufacturers to overcome obstacles and enhance business performance - The Company has engaged Chinese law firms to issue 13 lawyer's letters and 29 demand notes to defaulting end customers, initiating formal lawsuits against two unresponsive customers in 202513 - Since late 2024, a licensed customs broker has been engaged to handle car customs clearance procedures, with revised clearance policies in April 2025 expected to streamline customs clearance13 - The Company is actively disposing of cars through various channels to other regions, such as South Korea and the Middle East; as of June 30, 2025, 50 cars have been resold, recovering approximately RMB 7.2 million, and 7 cars delivered to end customers, with deposits of approximately RMB 10.1 million treated as partial purchase payments14 - The Company plans to explore more overseas markets, particularly the EU market, and new customers, and has begun discussions with some Chinese manufacturers for export cooperation to enhance the revenue, profit, and operational levels of this business segment14 Board Statement and Information The Board confirms that the information contained in this announcement is accurate and complete, without misleading or fraudulent content, and the supplementary information does not affect other data in the annual report, which will be published on the Hong Kong Stock Exchange and the company website - The Board confirms that the information contained in this announcement is accurate and complete in all material respects, without any misleading or fraudulent content16 - The aforementioned supplementary information does not affect other information contained in the annual report, and all other information in the annual report remains unchanged14 - This announcement will be available for viewing on the website of The Stock Exchange of Hong Kong Limited and the Company's website for at least seven days from the date of publication16
华亿金控(08123) - 2025 - 年度业绩