Huayu Expressway Group Limited Announces Supplemental Details on Share Placing Under General Mandate

Key Highlights

• The Company is conducting a placing of up to 58,500,000 new shares under its general mandate.
• Purpose of the placing is to address urgent liquidity and working capital needs, particularly for its Hong Kong operations.
• The Group faces substantial capital commitments in the PRC, especially regarding the construction of a winery and operating centre, totaling RMB138.9 million to be settled by June 2026.
• Existing bank balances and cash stood at RMB119.2 million as at 30 June 2025, but these funds are insufficient to fully cover capital commitments.
• Company expects to drawdown its banking facility to settle these commitments and will repay bank borrowings in stages (RMB6.5 million due by June 2026, RMB6.5 million due by December 2026).
• Net current assets (RMB493.9 million) and net assets (RMB1,052.4 million) are largely comprised of illiquid assets, mainly inventories of unsold wine and liquor (RMB397 million as at 30 June 2025).
• Sales of these inventories have been slow due to continued contraction in the PRC consumer market, impacting the Company’s cash flow and liquidity position.
• As at 31 December 2025 (unaudited), bank balances and cash decreased by approximately 3%, inventories reduced by only 4%, and capital commitments reduced by 20%—indicating persistent liquidity pressure.
• Over 80% of cash is held in PRC banks, making it difficult to access funds for Hong Kong operations due to foreign exchange controls.

Important and Price-Sensitive Information for Shareholders

• Liquidity Warning: The Company faces genuine and significant liquidity challenges, especially for Hong Kong operations, due to slow inventory turnover and regulatory restrictions on cash movement.
• Fundraising Necessity: The placing is considered necessary and appropriate to strengthen liquidity and ensure sufficient financial resources are available for capital commitments and operational needs.
• No Other Fundraising Plans: Apart from this placing, the Company does not have any other plans to raise funds in the next 12 months.
• Completion Risk: The placing is subject to fulfillment of conditions set in the Placing Agreement and may or may not proceed. Shareholders are urged to exercise caution.
• Potential Impact on Share Price: Given the Company’s liquidity situation, slow sales of inventories, and reliance on new funding, the outcome of the placing could significantly affect the Company’s share price and investor confidence.

Detailed Financial and Operational Position

The Group’s liquidity is constrained by both operational factors and regulatory issues:

• Inventory levels remain high and are not easily convertible to cash, with unsold stocks of wine and liquor products totaling RMB397 million as at mid-2025.
• Consumer market contraction in China has slowed sales, meaning that revenue from these inventories may take longer to materialize than previously expected.
• Cash balances have declined, and a substantial portion is locked in PRC banks, limiting their utility for Hong Kong office needs, particularly for sales and marketing in Hong Kong and overseas markets.

In response, the Company is taking a prudent approach to treasury management by increasing liquidity through the share placing, which is intended to support Hong Kong operations and fulfill capital commitments related to its PRC projects.

The Board underscores that the completion of the placing is not guaranteed and subject to conditions in the Placing Agreement. Shareholders should monitor developments closely as failure or delay in securing these funds could exacerbate liquidity issues and impact the share price.

Board Statement

The announcement was authorized by the Board, led by Chairman Chan Yeung Nam, and includes both executive and independent non-executive directors. This supplemental disclosure does not change any previously announced information except as detailed above.

Conclusion

Investors and shareholders should note the Company’s current liquidity challenges, its reliance on the proposed share placing, and the potential risks if the placing does not proceed. These factors represent material information that could affect the Company’s share value and should be considered in any investment decision.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult their financial advisors before making any investment decisions based on this announcement. The placing is subject to conditions and may not proceed. The Company and its directors accept no responsibility for any losses arising from reliance on the information herein.

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