Incap Corporation Stock Exchange Release 5 November 2008
at 8:30 a.m.
* Revenue in January-September increased by approximately 20% on
the same period the previous year, amounting to EUR 68.1 million
(Jan-Sep 2007: EUR 56.7 million)
* Operating profit (EBIT) was EUR 2.4 million negative (EUR 1.7
million negative), or 3.5% negative of revenue (3.0% negative).
* Net profit for the report period amounted to EUR 3.5 million
negative (2.6 million negative).
* Earnings per share (EPS) were EUR 0.29 negative (0.21 negative)
* Profitability was burdened by increased production costs,
non-recurring items for organisational development and personnel
arrangements as well as by delayed revenue growth in India
This unaudited interim financial report has been prepared in
compliance with the recognition and measurement principles of the
IFRS standards. The tables in the report have been prepared in
compliance with the requirements of the IAS 34 standard approved by
the EU. The accounting principles and methods of the interim report
are the same as in the last annual financial statements. Unless
mentioned otherwise, the comparison figures used in the text portion
of the report are the figures for the comparable period during the
previous year. The figures for 2007 include the Indian operations as
of 1 June 2007.
Revenue and earnings in July-September 2008
Revenue during the third quarter was EUR 21.4 million (7-9/2007: EUR
20.6 million) or approximately 4% higher than during the comparable
period in 2007. Compared to the second quarter of the year, revenue
decreased due to the softened demand for telecommunications products
in July-August. Demand for the energy efficiency segment, on the
other hand, developed favourably.
The operating profit was EUR 0.4 million negative (EUR 0.6 million
negative) and as a percentage of revenue it was 2.1% negative (2.8%
negative). The operating profit improved compared to the previous
quarters due to a relative increase in the sales margin and reduced
fixed costs.
Quarterly comparison 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
(EUR thousands) 2008
2008 2008 2007 2007 2007 2007
Revenue 21 395 26 412 20 330 26 304 20 593 19 130 16 982
Operating -442 -600 -1 329 2 025 -578 44 -1 188
profit/loss
Net profit/loss
-800 -1 005 -1 681 1 450 -1 071 -139 -1 342
Earnings per share,
EUR -0.07 -0.08 -0.14 0.12 -0.09 -0.01 -0.11
Revenue and earnings in January-September 2008
Revenue for January-September 2008 was EUR 68.1 million or 20.2%
higher than during the comparable period in 2007 (Jan-Sep 2007: EUR
56.7 million). Many new products entered actual serial production
from the prototype and pre-production stages during the report
period. Discontinued telecommunication sector products were
manufactured for the customer's stock, which increased the revenue.
Operating profit, EUR 2.4 million negative, was slightly weaker than
during the comparable period in 2007 (EUR 1.7 million negative) and
as a percentage of revenue it was 3.5% negative (3.0% negative). The
increases in electronics components and metal material prices had
mainly been transferred to customer prices by the end of the report
period.
The operating profit for the report period includes approx. EUR 1.0
million of non-recurring costs connected with the organisation
changes and the streamlining of the Group structure. During the
comparable period the non-recurring costs amounted to EUR 0.6
million.
Net profit for the report period amounted to EUR 3.5 million negative
(EUR 2.6 million negative). Net profit was particularly affected by
an increase in financing expenses. Earnings per share amounted to EUR
0.29 negative (EUR 0.21 negative), while equity per share stood at
EUR 1.24 (EUR 1.46).
Quarterly comparison 1-9/2008 1-9/2007 1-12/2007
(EUR thousands)
Revenue 68 136 56 706 83 010
Operating profit/loss -2 371 -1 722 303
Net profit/loss -3 486 -2 552 -1 102
Earnings per share, EUR -0.29 -0.21 -0.09
Development of operations
Several new delivery agreements were signed during the report period.
In the field of energy efficiency, collaboration in the manufacturing
of subassemblies for electric motors was increased. The scope of
delivery was also extended in the manufacturing of well-being and
security products. The manufacturing of telecommunications products
increased temporarily as products to be discontinued were
manufactured for the stock of a customer.
The six new customers in India proceeded from prototype and
pre-production runs to volume production. The Indian factory's
production mainly comprises integrated product entities for the
energy technology and industrial electronics. The construction of new
production facilities in Tumkur is proceeding and they are supposed
to be completed during the first quarter of 2009.
The value of inventories increased at the end of the report period
due to components required for final deliveries to customers
operating in the telecommunications sector. When the production of
these products ends, the value of the material inventory is estimated
to decrease by approximately EUR 4 million by the end of the year.
During the report period, the focus of material sourcing was
transferred to India and China, where cooperation with a partner
operating in the area was started. Low-cost sources of supply were
utilised in the procurement of several component groups. In addition,
own resources in strategic sourcing were reinforced in India. Also
the design capacity was enhanced strongly so that Incap today runs a
design team of 12 professionals offering design services in
mechanics, electronics and PCBs to customers globally.
Incap sold the entire share capital of its subsidiary Ultraprint Oy
to the operative management of the subsidiary on 16 July 2008. The
subsidiary's revenue in 2007 amounted to about EUR 1.2 million and it
had 12 employees.
Redefining the strategy
In accordance with the strategy updated in August, Incap pursues
profitable growth by focusing on strongly growing market segments and
developing services particularly for the needs of leading equipment
manufacturers in the fields of energy efficiency and well-being
technology. Incap is already strongly involved in the delivery chain
of these applications.
The definition means that the importance of the telecommunications
sector will decrease remarkably in Incap's operations. The share of
products for the telecommunications sector of revenue will be reduced
significantly at the end of 2008, when volume production for two
customers will end.
As part of the revision of the strategy, Incap has renewed its
organisation, which is divided into three business units: Energy
efficiency, Well-being and Emerging business. Incap's present revenue
is almost evenly distributed among these three units.
Reorganisation programme
In August 2008, Incap launched a reorganisation programme aimed at
strengthening the financial base of the company. The programme
emphasises the improvement of profitability and the working capital
ratio and also the adaptation of the cost structure.
Profitability is to be improved by expanding the service selection,
eliminating low-margin or unprofitable assignments, and further
increasing the role of Indian and Estonian plants in service
production. The capacity of production services will be adapted in
response to demand, the roles of plants will be specialised and fixed
costs will be reduced. The reorganisation programme will be
implemented by the end of 2008.
The implementation of the programme has proceeded according to plans.
Production capacity has been adjusted to match demand in, e.g., the
Vuokatti factory, where the number of personnel has been cut in
accordance with reduced demand. On the other hand, resources were
added in Vaasa and Helsinki for the manufacturing of energy and
well-being technology products. Transfers of products to the Estonian
factory are being carried out in accordance with plans agreed with
the customers. Service capacity is being improved, particularly in
terms of the start-up of new products and customer production
takeover projects and design services.
Low-margin or unprofitable assignments and customer relationships
have been disposed of in a controlled way. Fixed costs are being
reduced in both production units and corporate functions. A marketing
project to gain new customers, particularly among leading energy
efficiency and well-being sector manufacturers and other growing
sectors in Europe, started in September.
Financing and cash flow
The Group's equity ratio was 29.4% (31.2%). Interest-bearing net
liabilities totalled EUR 20.1 million (EUR 22.0 million) and the
gearing ratio was 132.6% (124.3%). Net financial expenses were EUR
1.1 million (EUR 0.9 million) and depreciation expenses were EUR 2.1
million (EUR 2.0 million).
The Group's equity at the close of the period under review was EUR
15.2 million (EUR 17.7 million). Debt totalled EUR 36.4 million (EUR
39.1 million), of which interest-bearing debt amounted to EUR 20.7
million (EUR 23.5 million).
The Group's quick ratio was 0.6 (0.7) and the current ratio 1.5
(1.6). Cash flow from operations was EUR 0.3 million positive (EUR
4.1 million negative) and the change in cash and cash equivalents was
a decrease of EUR 0.3 million (an increase of EUR 1.0 million).
Capital expenditures
The Group's capital expenditures were EUR 1.5 million (EUR 1.1
million) or 2.2% (1.9%) of revenue.
Personnel
At the end of the report period, Incap Group had 755 employees (778),
of whom 166 were officials and 589 were employees. At the end of the
report period, 47% of personnel worked in Finland, 25% in Estonia and
28% in India. In addition, a total of 64 leased employees worked in
the company.
The co-determination negotiations at the Vuokatti unit were concluded
after the close of the report period in October. As a result, 13
people will be made redundant and a total of 67 will be temporarily
laid off in three phases.
Authorisations of the Board of Directors
The Annual General Meeting of 10 April 2008 authorised the Board of
Directors to decide, within one year of the Annual General Meeting,
on increasing the share capital through one or more rights issues and
on granting stock options so that the total number of new shares to
be subscribed for on the basis of the authorisation is a maximum of
4,000,000 shares, from which a maximum of 600,000 shares can be used
in stock options. The Board of Directors has not exercised the
authorisation.
Shares and shareholders
Incap Corporation has one series of shares and the number of shares
is 12,180,880. During the report period, the share price varied
between EUR 0.85 and EUR 1.60, and the closing price of the period
was EUR 0.86 (EUR 1.85). During the report period, the trading volume
was 11% of outstanding shares (30%).
At the end of the report period, the company had 1,071 shareholders
(1,114). Foreign or nominee-registered owners held 3.7% (16.3%) of
all shares. The company's market capitalisation on 30 September 2008
was EUR 11.9 million (EUR 22.5 million). The company does not own any
of its own shares.
Short-term risks and factors of uncertainty concerning operations
The increased uncertainty of general economic trends may have an
impact on Incap's customers' market situation in the future and
thereby on the development of Incap's revenue. However, the customers
have not predicted any significant changes in their demand so far.
The significant decrease in deliveries to customers operating in the
telecommunications sector, which has already been known, will be
realised by the end of 2008, and this is estimated to improve Incap's
financing situation due to a considerable decrease in capital tied up
in inventories. In case the declining revenue from the telecom sector
cannot be replaced by growth in another customers, the already
decided lay-offs may cause non-recurring costs.
The most significant challenge in the near future is Incap's ability
to improve its cost structure and to enforce the turn to operational
profitability. Other short-term uncertainties are connected with the
financing arrangements of the Indian operations, the risks related
with the general turbulence in financing market as well as with the
management of the costs of materials.
The general risks and factors of uncertainty relating to Incap's
operations are described in more detail in the report by the Board of
Directors dated 3 March 2008, and no significant changes have taken
place with regard to these factors during the report period.
Outlook for the rest of 2008
Incap's estimates of its future business development are mainly based
on its customers' estimates. In spite of a significant deterioration
in the global economic outlook, Incap's customers have estimated
their demand to remain at the previously predicted levels, even
though the situation could change quickly should the financial crisis
become critical. On the other hand, of the customers, equipment
manufacturers in energy technology and electrotechnology have
reported that their demand will develop favourably also in 2009 due
to their outstanding orders.
Incap estimates that its revenue in 2008 will increase clearly from
last year's EUR 83.0 million. Profitability is expected to improve
further during the last quarter of the year and operating profit from
operations in 2008 is expected to be on the same level than the
previous year, when it was EUR 2.8 million negative.
In the earlier statement on 6 August 2008, Incap estimated that the
Group's revenue would exceed last year's EUR 83.0 million. Then, the
company further estimated that profitability will improve during the
second half of the year compared to the first half of the year, and
the operating profit from operations in 2008 is expected to be on the
same level as 2007.
Helsinki, 5 November 2008
INCAP CORPORATION
Board of Directors
Additional information:
Sami Mykkänen, President and CEO, tel. + 358 40 559 9047
Eeva Vaajoensuu, Chief Financial Officer, tel. +358 40 763 6570
Hannele Pöllä, Director, Communications and HR, tel. +358 40 504 8296
DISTRIBUTION
NASDAQ OMX Helsinki Oy
Principal media
The company's Web site www.incap.fi
PRESS CONFERENCE
Incap will arrange a conference for the press and financial analysts
today at 10.00 a.m. today at the World Trade Center Helsinki, in
Meeting Room 1 on the 2nd floor at Aleksanterinkatu 17, FI-00100
Helsinki.
ANNEXES
1 Consolidated Income Statement
2 Consolidated Balance Sheet
3 Consolidated Cash Flow Statement
4 Consolidated Statement of Changes in Equity
5 Group Key Figures and Contingent Liabilities
6 Quarterly Key Figures
INCAP IN BRIEF
Incap Corporation is an internationally operating contract
manufacturer whose comprehensive services cover the entire lifecycle
of electromechanical products from design and manufacture to
maintenance services. Incap's customers are leading equipment
suppliers in energy-saving and well-being technology for which the
company produces new competitiveness as a strategic partner. Incap
has operations in Finland, Estonia and India. The Group's revenue in
2007 amounted to EUR 83 million and the company currently employs
approximately 730 persons. Incap's share is listed on the NASDAQ OMX
Helsinki Oy. For additional information, please visit www.incap.fi.
Annex 1
CONSOLIDATED INCOME
STATEMENT
(IFRS)
(EUR thousands, unaudited) 1-9/2008 1-9/2007 Change % 1-12/2007
REVENUE 68 136 56 706 20 83 010
Work performed by the
enterprise and capitalised 0 99 99
Change in inventories of
finished goods and
work in progress 1 190 266 347 -999
Other operating income 30 18 68 3 166
Raw materials and
consumables used 48 245 39 027 24 56 896
Personnel expenses 13 630 11 210 22 15 979
Depreciation and
amortisation 2 125 1 980 9 2 753
Other operating expenses 7 727 6 594 17 9 343
OPERATING PROFIT/LOSS -2 371 -1 722 39 303
Financing income and
expenses -1 115 -851 28 -1 356
PROFIT/LOSS BEFORE TAX -3 486 -2 573 35 -1 053
Income tax expense 0 21 -100 -49
PROFIT/LOSS FOR THE PERIOD -3 486 -2 552 37 -1 102
Earnings per share -0,29 -0,21 38 -0,09
Options have no dilutive
effect
in accounting periods 2007
and 2008
Annex 2
CONSOLIDATED BALANCE SHEET
(IFRS)
(EUR thousands, unaudited) 30.9.2008 30.9.2007 Change % 31.12.2007
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11 496 13 330 -14 12 883
Goodwill 972 1 139 -15 1 326
Other intangible assets 1 370 1 566 -12 1 575
Other financial assets 17 21 -20 21
Deferred tax assets 4 151 4 310 -4 4 223
TOTAL NON-CURRENT ASSETS 18 006 20 366 -12 20 028
CURRENT ASSETS
Inventories 18 833 20 156 -7 14 882
Trade and other receivables 14 069 14 801 -5 18 367
Cash and cash equivalents 615 1 494 -59 944
TOTAL CURRENT ASSETS 33 518 36 451 -8 34 192
TOTAL ASSETS 51 523 56 817 -9 54 220
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
COMPANY
Share capital 20 487 20 487 0 20 487
Share premium account 44 44 0 44
Exchange differences -494 -131 277 -216
Retained earnings -4 876 -2 668 83 -1 188
TOTAL EQUITY 15 161 17 732 -14 19 127
NON-CURRENT LIABILITIES
Deferred tax liabilities 121 126 -4 121
Interest-bearing loans and
borrowings 13 496 15 937 -15 11 188
NON-CURRENT LIABILITIES 13 617 16 063 -15 11 309
CURRENT LIABILITIES
Trade and other payables 15 527 15 422 1 14 294
Current interest-bearing
loans and borrowings 7 218 7 600 -5 9 490
CURRENT LIABILITIES 22 745 23 022 -1 23 784
TOTAL EQUITY AND LIABILITIES 51 523 56 817 -9 54 220
Annex 3
CONSOLIDATED CASH FLOW STATEMENT 1-9/2008 1-9/2007 1-12/2007
(EUR thousands, unaudited)
Cash flow from operating
activities
Net income -2 371 -1 722 303
Adjustments to operating profit 2 101 1 943 -372
Change in working capital 1 601 -3 868 -3 070
Interest paid -1 087 -537 -977
Interest received 104 88 142
Cash flow from operating
activities 348 -4 096 -3 974
Cash flow from investing
activities
Capital expenditure on tangible
and
intangible assets -1 501 -1 250 -1 974
Proceeds from sale of tangible
and intangible assets 101 0 3 118
Acquisition of subsidiary -8 261 -8 261
Sold shares of subsidiary 50
Repayments of loan assets 3
Cash flow from investing
activities -1 347 - 9 511 -7 117
Cash flow from financing
activities
Drawdown of loans 2 453 16 689 14 316
Repayments of borrowings -942 -996 -1 116
Repayments of obligations under
finance leases -805 -1 092 -1 643
Cash flow from financing
activities 706 14 601 11 557
Change in cash and cash
equivalents -293 994 466
Cash and cash equivalents at
beginning of period 944 500 500
Effect of changes in exchange
rates -36 0 -22
Cash and cash equivalents at end
of period 615 1 494 944
Annex 4
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY (IFRS)
(EUR thousands, unaudited)
Retained
Share
Share premium Exchange
capital account differences earnings Total
Equity at 1 January 2007 20 487 44 -131 -206 20 194
Options and share-based
compensation 0 0 0 90 90
Net income and losses
recognised
directly in equity 0 0 0 90 90
Net profit/loss 0 0 0 -2 552 -2 552
Total income and losses 0 0 0 -2 462 -2 462
Equity at 30 September
2007 20 487 44 -131 -2 668 17 732
Equity at 1 January 2008 20 487 44 -216 -1 188 19 127
Options and share-based
compensation 0 0 0 -202 -202
Net income and losses
recognised
directly in equity 0 0 0 -202 -202
Net profit/loss 0 0 -278 -3 486 -3 764
Total income and losses 0 0 -278 -3 688 -3 966
Equity at 30 September
2008 20 487 44 -494 -4 876 15 161
Annex 5
GROUP KEY FIGURES AND CONTINGENT
LIABILITIES (IFRS) 1-9/2008 1-9/2007 1-12/2007
Revenue, EUR millions 68.1 56.7 83.0
Operating profit, EUR millions -2.4 -1.7 0.3
% of revenue -3.5 -3.0 0.4
Profit before taxes, EUR millions -3.5 -2.6 -1.1
% of revenue -5.1 -4.5 -1.3
Return on investment (ROI), % -7.5 -6.1 1.3
Return on equity (ROE), % -27.1 -17.9 -5.6
Equity ratio, % 29.4 31.2 35.3
Gearing, % 132.6 124.3 103.2
Net debt, EUR millions 21.7 22.8 15.8
Net interest-bearing debt, EUR millions 20.1 22.0 19.7
Average number of shares during the
report
period, adjusted for share issues 12180880 12180880 12180880
Earnings per share (EPS), euro -0.29 -0.21 -0.09
Equity per share, euro 1.24 1.46 1.57
Investments, EUR millions 1.5 1.1 1,5
% of revenue 2.2 1.9 1.9
Average number of employees 732 633 678
CONTINGENT LIABILITIES, EUR millions
FOR OWN LIABILITIES
Mortgages 12.1 12.8 12.3
Other liabilities 8.2 9.3 7.4
Annex 6
QUARTERLY KEY FIGURES (IFRS)
7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
2008 2008 2008 2007 2007 2007 2007
Revenue, EUR 21.4 26.4
millions 20.3 26.3 20.6 19.1 17.0
Operating -0.4 -0.6
profit,
EUR millions -1.3 2.0 -0.6 0.0 -1.2
% of revenue -2.1 -2.3 -6.5 7.7 -2.8 0.2 -7.0
Profit before -0.8 -1.0
taxes,
EUR millions -1.7 1.5 -1.1 -0.1 -1.4
% of revenue -3.7 -3.8 -8.3 5.8 -5.2 -0.8 -8.0
Return on -4.1 -4.9
investment
(ROI), % -13.4 23.8 -6.5 1.5 -15.7
Return on equity -18.7 -22.9
(ROE), % -37.0 29.4 -22.5 -2.8 -27.3
Equity ratio, % 29.43 31.2 33.3 35.3 31.2 35.2 45.3
Gearing, % 132.6 120.4 106.5 103.2 124.3 99.5 61.2
Net debt, EUR 21.7 18.0
millions 19.9 15.8 22.8 18.9 12.6
Net 20.1 19.2
interest-bearing
debt,
EUR millions 18.3 19.7 22.0 18.8 11.6
Average number
of shares
during the 12180880 12180880 12180880 12180880 12180880 12180880 12180880
report period,
adjusted for
share issues
Earnings per -0.07 -0.08
share (EPS),
euro -0.14 0.12 -0.09 -0.01 -0.11
Equity per 1.24 1.31
share, euro 1.41 1.57 1.46 1.55 1.56
Investments, EUR 0.3 0.4
millions 0.8 0.4 0.5 0.3 0.3
% of revenue 1.2 1.6 4.1 1.4 2.4 1.5 1.8
Average number 739 724
of
employees 733 794 776 649 530
INCAP GROUP INTERIM REPORT JANUARY-SEPTEMBER 2008: REVENUE INCREASED, OPERATING PROFIT STILL NEGATIVE
| Source: Incap Oyj
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