INTERIM REPORT JANUARY-JUNE 2002

 

The official interim report for January-June also covers the January-February data of Incap Furniture Ltd, which was differentiated from the group on 1 March 2002, and the May-June consolidated data of JMC Tools Oy, which was purchased in April. Pro forma figures are presented to illustrate the development of the current business operations during the reporting period. The combined pro forma profit and loss account of Incap-JMC was drawn up based on the assumption that the shares of Incap Furniture Ltd were sold and the shares of JMC Tools Oy were purchased at the beginning of the pro forma period on 1 January 2002. The principles of compiling the official and pro forma consolidated figures are described in more detail in connection with the tables.

 

Merger of Incap Group and JMC Tools Group

 

The new shares issued by Incap Corporation's ordinary annual general meeting to the shareholders of JMC Tools Oy were all subscribed on 19 April 2002, and JMC Tools Oy thereby became Incap Group's subsidiary. The boards of the companies signed the merger agreement on 3 May 2002, and the merger has been scheduled to take place on 31 December 2002. The utilization of the synergies to be derived from the integration of the business operations of Incap-JMC and the marketing of a comprehensive range of services to the group's clientele operating on several business sectors has already begun.

 

Group's financial development

 

Incap Group's official net turnover in January-June was EUR 39.6 million, or less by 14% compared to the corresponding period a year previously (EUR 46.0 million in January-June 2001). Operating profit was EUR 0.1 million (EUR 8.3 million), or about 0.3% (4%) of the net turnover. The group's loss before extraordinary items was EUR 0.3 million (profit EUR 8.1 million), and the loss of the reporting period was EUR 6.6 million (profit EUR 5.7 million). The removal of Incap Furniture subgroup's assets and liabilities from the official consolidated accounts resulted in a book loss of EUR 6.1 million in the consolidated profit and loss account.

 

The official group's earnings per share were EUR -0.15 (EUR 1.63) and equity per share EUR 1.87 (EUR 7.08). The group's solvency ratio was 43,0% (43,1%). The balance sheet total was EUR 52.9 million (EUR 57.7 million).

 

Incap-JMC's pro forma net turnover in January-June 2002 was EUR 33.8 million and operating loss EUR 2.4 million. Net turnover during the second quarter was EUR 17.0 million and operating loss EUR 1.2 million. Pro forma earnings per share were EUR -0.90 and  equity per share EUR 1.86.

 

The balance sheet total on 30 June was EUR 52.9 million and the pro forma solvency ratio 42.9%.

 

Incap-JMC's business development

 

Incap-JMC provides services in the manufacturing of electronic, mechanical and high-frequency components. In the telecommunication sector, especially the demand for high-frequency components continued to decline during the second quarter. The other customer sectors enjoyed a more stable market situation and their demand was higher.

 

The operations of the merged companies were organized during the second quarter, and more resources were allocated to the development and marketing of both comprehensive service packages and design services. The efforts to adjust the operations to meet the demand were simultaneously continued by improving the efficiency of processes. In order to retain its operating capacity and its level of expertise, the company had to selectively modify costs, which contributed to the accumulated losses.

 

The comparable net turnover of the electronics sector (electronic and mechanical manufacturing services without high-frequency components) during the reporting period was EUR 31.1 million (EUR 29.5 million in January-June 2001), and operating profit was EUR 0.4 million (EUR 1.1 million), or about 1% of net turnover (4%).

                        

Investments

 

The group's total investments during the reporting period amounted to EUR 0.4 million (EUR 3.3 million), which accounts for about 1% (7%) of the net turnover. Incap-JMC invested EUR 0.3 million, or 0.8% of the pro forma net turnover. The company's capacity was under-utilized, and there was no need for major investments.

 

Financing

 

The group's quick ratio was 0.8 (1.0) and current ratio 2.0 (1.8). Net gearing ratio was 72.2% (50.2%) and solvency ratio 42.9% (43.1%).

 

Personnel and management

 

At the end of the reporting period, Incap Group was employing 640 (904) persons. Figures for the reference period include 266 persons employed by Incap Furniture Ltd. The employment contract of President and CEO Kari Saarinen terminated on 21 March 2002, after which Eija Jansson-Tervonen served as acting president. On 2 April 2002, Seppo Ropponen took over as new President and CEO for Incap. He was also appointed President for JMC Tools Oy on 10 April 2002.

 

To adopt the operations to market demand during the second half of the year co-operative negotiations have been initiated.

 

Shares and shareholders

 

The market price of Incap Corporation's shares ranged from EUR 2.56 to 5.63 during the reporting period. The company has a total of 12,180,880 shares, of which 6.5% changed hands during the reporting period. At the end of the period, the company had 587 shareholders. The company's market value at the end of the reporting period was EUR 39.8 million.

 

A total of EUR 0.105 million was paid as dividend during the reporting period.

 

At the end of the reporting period, the board of directors held an authorization to raise the share capital by a maximum of EUR 1,180,679.24.

 

Notifications in accordance with Securities Market Act 9:2

 

During the reporting period, out of the voting rights and share capital of Incap Corporation, the proportion of JMC Finance Oy has exceeded 15%, the proportion of Finnvera plc has dropped below 15%, the proportion of Jorma Terentjeff has exceeded 10%, the proportions of funds controlled by Teknoventure Oy and Eqvitec Partners Oy and the proportion of Pohjola Group plc have exceeded 5% and the proportion of Conventum Ltd. has dropped below 5%.

 

Prospects

 

Incap-JMC's net turnover in 2002 is expected to be close to the 2001 level. The profit for the third quarter is expected to be lower than in the second quarter due to one-time cost items. Profitability is expected to increase during the last quarter of the year, thanks to the on-going measures to improve efficiency and the synergies to be derived from the merger.

 

The full report including tables can be downloaded from the enclosed link.