HONG KONG, Oct. 23, 2023 /PRNewswire/ — Highway Holdings Limited (Nasdaq: HIHO, "the Company" or "Highway Holdings") today reported results for the second quarter of fiscal year 2024 and the six months ended September 30, 2023.
Reflecting the significantly negative impact of the post-COVID boom and bust cycle on Highway Holdings’ customers’ demand levels, which was made worse by the compounding effect of the ongoing Russia/Ukraine war and global inflation, net sales for the second quarter of fiscal year 2024 were $1.3 million, compared with $3.0 million in the year ago period. While still able to maintain profitability, the negative operating environment led to a reduction in net income for the second quarter of fiscal year 2024 to $213,000, or $0.05 per diluted share, compared with a net income of $396,000, or $0.10 per diluted share in the year ago period. The Company cautions that the net income comparison should not be viewed by investors as an accurate measure of normalized operations because the year ago period benefitted from reduced rental expenses provided by the Chinese government and some salary subsidies provided by the Hong Kong government to the Company. In addition, the second quarter of fiscal year 2024 benefitted from the reversal of approximately 80% of a bad debt reserve following the collection of amounts that had been outstanding for almost two years.
Net sales for the first half of fiscal year 2024 were only $2.7 million, compared with $6 million in the year-ago period. Net loss for the first half of fiscal year 2024 was $125,000, or $0.03 per diluted share, compared with net income of $783,000 or $0.19 per diluted share in the year-ago period.
Roland Kohl, chairman, president and chief executive officer of Highway Holdings, noted, "We are experiencing an extremely difficult operating environment, with pressure across all points of our business. We took action to reduce costs where opportunities existed, which helped us to reduce our expenses. In addition, we benefitted from a one-time reversal of previously taken provisions for potential bad debts. The combination of the negative impact of the COVID boom and bust cycle, demand reduction related to the ongoing Russia/Ukraine war, global inflation, and severe supply constraints, however, had too great a negative impact on customer demand and ultimately our topline revenue. Despite the incredibly challenging environment, we have recently started to see some positive signs. In particular, we expect to benefit from a resumption in demand from one of our larger customers, Playmaji, Inc., which owns the Polymega game console business. Playmaji recently announced that it has entered into a partnership with, and has received a minority investment from Atari. Based on discussions with Playmaji, a return to full production in Q3 2023 is anticipated, with regular deliveries to customers and distributors to continue thereafter. Importantly, the improved situation allowed the customer to pay us in full all outstanding owed amounts that were held on record for approximately two years, which resulted in the above-noted reversal of a bad debt reserve."
"We are cautiously optimistic that we have come through the worst part of this cycle. We believe that we have a healthy balance sheet that will enable us to emerge successful over the long-term as the business environment further improves. We are fully committed to building value for the Company and our shareholders, as we continue to build on our track record of success over the long-term."
Select Additional Financial Results:
Gross profit for the second quarter of fiscal year 2024 was $383,000 compared with $1,099,000 a year ago mainly due to the decline in sales. Gross profit as a percentage of sales for the second quarter of fiscal year 2024 was 29.0 percent, compared to 36.1 percent in the year ago period. Gross profit for the first half of fiscal year 2024 was $760,000 compared with $2.1 million in the year ago period. Gross profit as a percentage of sales for the first half of fiscal year 2024 was 28.5 percent compared with 35.9 percent in the year ago period. The Company noted these comparisons are not very meaningful due to the production, supply chain, logistics and overall business disruptions related to the COVID boom and bust cycle, and the above noted non-recurring salary and rental benefits the Company received in the year ago period, which benefits the Company did not receive in the current fiscal year period.
Selling, general and administrative expenses for the second quarter of fiscal year 2024 decreased to $272,000 from $716,000, reflecting the above-noted bad debt provision reversal, combined with the Company’s major cost cutting actions. The year ago period included the above mentioned benefits of reduced rental expenses provided by the Chinese government and some salary subsidies provided by the Hong Kong government to the Company, which did not repeat in the current second quarter of fiscal year 2024.
Net income for the second quarter of fiscal year 2024 reflects a currency exchange gain of $14,000 compared to a $6,000 gain in the year ago period. The Company reported a currency exchange gain of $31,000 for the first half of fiscal year 2024, compared with a $24,000 gain in the year ago period.
The Company had interest income of approximately $53,000 for the second quarter of fiscal year 2024, and interest income of approximately $93,000 for the first half of fiscal year 2024 due to the increase in interest rates.
The Company’s balance sheet remains strong, with $12.3 million dollar of total assets and cash and cash equivalents in excess of $7.0 million, or approximately $1.62 per diluted share. The cash and cash equivalent amount exceeded all of its short- and long-term liabilities by approximately $2.4 million. Total shareholders’ equity at September 30, 2023, was $7.7 million, or $1.80 per diluted share.
About Highway Holdings Limited
Highway Holdings is an international manufacturer of a wide variety of quality parts and products for blue chip equipment manufacturers based primarily in Germany. Highway Holdings’ administrative offices are located in Hong Kong and its manufacturing facilities are located in Yangon, Myanmar, and Shenzhen, China. For more information visit website www.highwayholdings.com.
Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements which involve risks and uncertainties, including but not limited to economic, competitive, governmental, political and technological factors affecting the company’s revenues, operations, markets, products and prices, and other factors discussed in the company’s various filings with the Securities and Exchange Commission, including without limitation, the company’s annual reports on Form 20-F.
(Financial Tables Follow)
HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Statement of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
Six Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net sales
$1,322
$3,043
$2,669
$5,984
Cost of sales
939
1,944
1,909
3,835
Gross profit
383
1,099
760
2,149
Selling, general and administrative expenses
272
716
1,049
1,403
Operating income
111
383
(289)
746
Non-operating items
Exchange gain /(loss), net
14
6
31
24
Interest income
53
15
93
19
Gain/(Loss) on disposal of assets
13
6
13
6
Other income/(expenses)
6
0
6
5
Total non-operating income/ (expenses)
86
27
143
54
Net income before income tax and non-controlling
interests
197
410
(146)
800
Income taxes
3
(8)
6
(5)
Net income before non-controlling interests
200
402
(140)
795
Less: net gain attributable to non-controlling
interests
(13)
6
(15)
12
Net income attributable to Highway
Holdings Limited’s shareholders
213
396
(125)
783
Net Gain/ (loss) per share – Basic
$0.05
$0.10
$(0.03)
$0.19
Net Gain/ (loss) per share – Diluted
$0.05
$0.10
$(0.03)
$0.19
Weighted average number of shares outstanding
Basic
4,219
4,072
4,345
4,046
Diluted
4,235
4,165
4,345
4,158
HIGHWAY HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Balance Sheet
(Dollars in thousands, except per share data)
(unaudited)
Sept 30,
(audited)
Mar 31,
2023
2023
Current assets:
Cash and cash equivalents
$7,051
$6,952
Accounts receivable, net of doubtful accounts
667
1,886
Inventories
1,563
1,413
Prepaid expenses and other current assets
308
406
Income tax recoverable
3
3
Total current assets
9,592
10,660
Property, plant and equipment, (net)
336
401
Operating lease right-of-use assets
2,125
2,514
Long-term deposits
201
213
Long-term loan receivable
95
95
Investments in equity method investees
–
–
Total assets
$12,349
$13,883
Current liabilities:
Accounts payable
$362
$928
Operating lease liabilities, current
563
573
Other liabilities and accrued expenses
1,857
1,991
Income tax payable
540
568
Dividend payable
32
1
Total current liabilities
3,354
4,061
Long term liabilities :
Operating lease liabilities, non-current
1,139
1,482
Deferred income taxes
101
107
Long terms accrued expenses
17
17
Total liabilities
4,611
5,667
Shareholders’ equity:
Preferred shares, $0.01 par value
–
–
Common shares, $0.01 par value
44
41
Additional paid-in capital
12,150
12,003
Accumulated deficit
(3,960)
(3,396)
Accumulated other comprehensive income/(loss)
(493)
(444)
Non-controlling interest
(3)
12
Total shareholders’ equity
7,738
8,216
Total liabilities and shareholders’ equity
$12,349
$13,883
Source : HIGHWAY HOLDINGS REPORTS SECOND QUARTER FISCAL YEAR 2024 RESULTS
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