YONGDA AUTO (03669) announced that based on preliminary assessment of the group's unaudited consolidated management statements for the six months ended June 30, 2025, and other currently available relevant information, due to the intensifying price war in the automotive market and macroeconomic factors, the group has made non-cash, one-time impairments on certain underperforming 4S stores' goodwill, dealership agreement intangible assets, and property and renovation long-term assets, including mainly historical acquisition projects, totaling approximately RMB 3.5 billion after offsetting corresponding deferred tax liability reversals. The impact on the group's consolidated profit for the period and consolidated total equity as of June 30, 2025, is approximately RMB 3.5 billion, while the impact on the group's consolidated profit attributable to company owners for the period and consolidated equity attributable to company owners as of June 30, 2025, is approximately RMB 3.4 billion.
The following explains the related asset impairments and their impact on the group's financial position:
(1) This impairment is a one-time non-cash item - The related asset impairments represent a one-time prudent adjustment at the financial level, involving no cash outflow and not affecting the group's daily operations and business profitability. The company does not expect significant ongoing impairment risks in the future.
(2) Helps optimize financial structure and enhance future profitability - After the related asset impairments, depreciation and amortization pressure on related assets is reduced, with corresponding decreases in future depreciation and amortization expenses, helping to improve the group's overall profitability.
(3) Stable core business operations - In the first half of 2025, the group's after-sales service revenue and gross margin are expected to remain stable compared to the first half of 2024. Excluding the impact of related asset impairments on profit attributable to company owners, the group still achieved adjusted profit attributable to company owners (non-IFRS measure), mainly due to the decline in new car sales gross margin in the first half of 2025, which decreased by no more than 60% compared to the first half of 2024 profit attributable to company owners (without related asset impairment impact). The group's core business operations were not affected by the related asset impairments.
(4) Continued expansion of new energy business - The new energy business is a key development direction for the group, and its development was not affected by the related asset impairments. In the first half of 2025, the group obtained 30 new energy brand authorizations and opened 7 new energy brand outlets. Compared to the first half of 2024, independent new energy vehicle sales (including direct sales of new energy brands) and maintenance revenue increased by approximately 49% and 76% respectively year-over-year, and are expected to become important support for future revenue and profits.
(5) Operational efficiency maintained at good levels - In the first half of 2025, the group's inventory turnover days are expected to be within a reasonable range. Net cash inflow from operating activities was no less than RMB 1.1 billion, representing year-over-year growth of no less than 57% compared to the first half of 2024. Cash flow was not affected by the related asset impairments, demonstrating the group's ability to prudently manage operating funds.
(6) Prudent and stable financial position - The group has a good asset-liability structure. As of June 30, 2025, the group's cash and cash equivalents balance is expected to be no less than RMB 2.3 billion, an increase of no less than RMB 830 million compared to December 31, 2024, representing growth of no less than 56%. The group continues to achieve current asset coverage of current liabilities and long-term interest-bearing debt, and net asset coverage of long-term assets (after deducting deferred tax liabilities and leased property use rights), with coverage ratios of approximately 1.1 times and 1.2 times respectively, basically unchanged from December 31, 2024, and unaffected by the related asset impairments. The impact of related asset impairments on the asset-liability ratio is limited, with the group's asset-liability ratio remaining at reasonable levels. The asset-liability ratio as of June 30, 2025, is expected to be below 60%, basically unchanged from December 31, 2024. This demonstrates the group's stable financial position, strong risk resistance capability, and sustainable development foundation.
(7) Continued shareholder returns - In the first half of 2025, the company cumulatively repurchased 30.86 million shares, spending HK$74.83 million. The company maintains a stable and continuously improving dividend policy, unaffected by the related asset impairments, and expects to distribute interim dividends for the first half of 2025 no less than the same period in 2024, reflecting the company's good cash flow security and emphasis on shareholder returns.
In summary, the related asset impairments represent a one-time financial treatment made by the company based on prudent principles, which does not affect the group's operational stability and future development prospects. The group will continue to focus on new energy and luxury brand core businesses, continuously improve operational efficiency and profit quality, adopt more proactive dividend and share repurchase policies, and create long-term value for shareholders.