INCAP CORPORATION STOCK EXCHANGE RELEASE 9 May 2007, 9 a.m.
INCAP GROUP INTERIM REPORT JANUARY-MARCH 2007: NEW CUSTOMERS WERE
ACQUIRED TO REPLACE DECREASED DELIVERIES TO THE TELECOMMUNICATIONS
SECTOR
* revenue was down 19.3% on the same period a year earlier,
totalling EUR 17.0 million (Jan.-Mar. 2006: EUR 21.0 million)
* operating profit was EUR 1.2 million negative (1.4 million
positive)
* net profit for the report period amounted to EUR 1.3 million
negative (1.6 million positive)
* earnings per share were EUR 0.11 negative (0.13 positive)
* the telecommunications sector's demand weakened more than
expected, resulting in substantially lower deliveries
* a Letter of Intent for an acquisition was signed with India-based
TVS Electronics
Juhani Hanninen, President and CEO of Incap Corporation: "The
telecommunications sector's demand weakened more than expected during
the early part of the year, and we have not been able to generate
additional revenue quickly enough to replace the deficit. Our
quotation base is at a high level at the moment. Early in the year,
we continued our drive to become more international and our
investment in the development of Incap's Asian businesses, which
raised our costs and impacted on the quarter's profitability."
This Interim Report has been prepared in accordance with the
recognition and measurement principles of International Financial
Reporting Standards (IFRS), but not in compliance with all the
requirements of the IAS 34 standard. The accounting policies and
calculation methods used in the preparation of the Interim Report are
in line with those of the latest financial statements.
Revenue and financial performance in January-March
Incap's revenue in the first quarter totalled EUR 17.0 million, down
19.3% on the same period last year (Jan.-Mar. 2006: EUR 21.0
million).
Operating profit in January-March was EUR 1.2 million negative (1.4
million positive), or 7.0% negative of revenue (6.6% positive). The
result includes non-recurring business development expenses totalling
EUR 0.2 million. Operating profit during the same period in 2006
included EUR 0.3 million in other operating income.
In addition to low production volumes, first-quarter profitability
was influenced by the fact that the company manufactured mostly
material-intensive products. Moreover, inputs into the development of
operations, the drive to become international and the start-up of the
Indian operations increased costs.
The profit for the comparative period (January-March 2006) includes
non-recurring changes in deferred tax assets totalling EUR 0.3
million.
Comparison by Jan.-Mar. Oct.-Dec. Jul.-Sep. Apr.-Jun. Jan.-Mar.
report period 2007 2006 2006 2006 2006
(EUR thousands)
Revenue 16 982 24 014 21 810 22 486 21 038
Operating -1 188 -331 599 1 163 1 396
profit/loss
Net profit/loss for -1 342 -376 728 1 320 1 553
the report period
Earnings per share, -0.11 -0.03 0.06 0.11 0.13
EUR
Development of operations
Demand for electronics manufacturing services was, with the exception
of the telecommunications sector, at a good level. Demand for
telecommunications products fell sharply within a very short period
of time. Tendering was brisk and progress was made in the acquisition
of new customers. During the report period, Incap started
co-operation with Efore and Bevesys, among others. Incap is currently
negotiating agreements for the manufacture of several new products
for present and new customers, and believes that they will bring
revenue already during the second quarter.
Lloyd's Register Quality Assurance Ltd. granted the Kuressaare
facility an ISO13485:2003 certificate which is widely applied to the
manufacture of medical devices. The successful audit and the
certificate will significantly boost Incap's potential for increasing
the share of medical devices manufacturing out of revenue. Similar
audits will be conducted at the company's facilities in Vuokatti and
Helsinki.
Aiming for strong growth and a more international profile
In February 2007, Incap signed a Letter of Intent with TVS
Electronics Limited for the acquisition of an electronics contract
manufacturing unit in India. Business deal and financing for it is
currently being negotiated and the target is to sign the final
agreement during the second quarter of the year. The factory to be
acquired is located in Tumkur, near Bangalore and mostly manufactures
integrated products. The unit conducts circuit board assembly and
manufactures power supplies, among other things.
During the report period, Jarmo Ukonaho was appointed as General
Manager and Sylvi Kuikka as Business Controller of Incap's Indian
operations. The Indian subsidiary's management and sales are located
in Bangalore.
With this business deal Incap pursues growth and internationalisation
in accordance with its strategy. Company aims at strengthening its
position as an international partner for world's leading device
manufacturers.
Short-term risks and factors of uncertainty
Incap's sales are spread over several customer sectors, which hedges
the company against sharp seasonal changes. The first-quarter drop in
revenue from customers operating in the telecommunications sector,
however, occurred extremely quickly, causing financial effects.
In accordance with its strategy, Incap is continuing to balance its
customer base so that the loss of a single customer or several
customers from the same sector does not expose the company to a major
financial risk.
Rapid fluctuations in demand are typical to Incap's sector, resulting
in low market visibility even in the short term. Incap strives to
improve its internal flexibility and ability to react, so that
changes can be influenced and, if necessary, adapted to quickly.
Financing and cash flow
The Group's equity ratio remained good at 45% (47%). Interest-bearing
net liabilities totalled EUR 11.6 million (6.4 million) and the
gearing ratio was 61.2% (34.5%). Net financial expenses were EUR 0.2
million (0.1 million) and depreciation EUR 0.7 million (0.6 million).
The Group's liquidity was satisfactory: the quick ratio was 0.6 (0.9)
and the current ratio 1.5 (1.8). Cash flow was EUR 2.6 million
negative (0.4 million negative) and the change in cash and cash
equivalents was a decrease of EUR 0.4 million (a decrease of 1.4
million). The change in cash flow was influenced by a growth in
working capital employed.
The Group's equity at the close of the report period was EUR 19.0
million (18.5 million). Liabilities totalled EUR 22.9 million (20.8
million), of which interest-bearing liabilities amounted to EUR 11.7
million (7.2 million).
Capital expenditures
The Group's capital expenditures during the January-March period
totalled EUR 0.3 million (EUR 0.4 million), or about 1.8% of revenue
(1.8%).
Personnel
At the beginning of the period under review, the Incap Group had a
payroll of 541 employees and at the end of the period it had 525
employees. The average number of personnel was 530 (463).
At the end of the report period, 273 of Incap's personnel were women
and 252 were men. 464 were permanently employed staff and 61
fixed-term employees. There were 6 part-time employment contracts at
the end of the period.
The co-determination negotiations started at the Vuokatti factory in
2006 were concluded in January 2007, as a result of which 53 people
were laid off from the unit.
Management
Anne Sointu, M.Sc. (Econ.), eMBA, was appointed Incap Group's
Chief Financial Officer and a member of the Management Team as from 1
January 2007. Prior to joining Incap, Sointu had served as Director
of Finance and IT in the Kemppi Group since 1993.
Sami Mykkänen, B.Sc. (Eng.), was appointed Vice President,
Manufacturing Services, and a member of the Management Team as from 1
March 2007, replacing Anja Rouhiainen, M.Sc. (Ph.), who held the
position temporarily. Mykkänen oversees the operations of all of
Incap's manufacturing units, apart from Ultraprint Oy, and the
company's design unit. Mykkänen was previously employed with
Powerwave where he had worked since 1994.
Annual General Meeting
The Annual General Meeting of Incap Corporation was held in Oulu,
Finland, on 3 April 2007.
The Annual General Meeting adopted the consolidated and parent
company financial statements for 2006 and granted release from
liability to the responsible officers. In accordance with the
proposal of the Board of Directors, the Annual General Meeting
resolved that no dividend be paid for 2006.
The Annual General Meeting authorised the Board of Directors to
decide, within one year of this Annual General Meeting, on increasing
the share capital through one or more rights issues and on granting
stock options, so that the maximum total number of shares subscribed
for by means of this authorisation shall be 2,500,000.
The Annual General Meeting elected Jukka Harju, Juha-Pekka Kallunki,
Kalevi Laurila, Susanna Miekk-oja and Sakari Nikkanen to seats on the
Board of Directors. From amongst its number, the Board of Directors
elected Kalevi Laurila as Chairman. Jari Pirinen, LL.M., will
continue to serve as Secretary to the Board of Directors.
The firm of independent accountants Ernst & Young Oy was elected as
the Group's auditors, with Rauno Sipilä, Authorised Public
Accountant, acting as the principal auditor.
Shares and shareholders
Incap has 12,180,880 shares in issue. The price of the Incap
Corporation share varied in the range of EUR 1.89 to EUR 2.67 during
the report period, and the closing share price at 31 March 2007 was
EUR 2.13. The trade volume was 22% of the shares outstanding.
At the end of the report year the company had 1,123 shareholders.
Foreign and nominee-registered owners held 14.9% of all shares. The
company's market capitalisation at 31 March 2007 was EUR 25.9
million.
Share options
The Incap Group currently runs a share option scheme that was
introduced in 2004 and that commits key employees to long-term share
ownership. There are a total of 630,000 share options, entitling
their holders to subscribe for an equal number of shares. The share
options are divided into A, B and C warrants.
The share subscription period for warrants 2004A began on 1 April
2007 and will continue through to 30 April 2009. The subscription
period for shares to be subscribed for with the warrants will not
commence until the average price of the Incap share weighted by two
calendar months' trade volume is at least 3 euros.
Announcements in accordance with Chapter 2, Section 9, of the
Securities Market Act on changes in holdings
Ingman Finance Oy Ab announced on 26 January 2007 that its holdings
of the share capital and votes of Incap Corporation had exceeded 10%.
OKO Bank plc announced on 31 January 2007 that its holdings in Incap
Corporation had fallen below 5%.
Outlook for the future
At Incap's area of business the market outlook is good, with Incap's
customers expecting demand for their own products to have a stable
trend in 2007. Due to the drop in deliveries to the
telecommunications sector, Incap estimates that revenue during the
first half of the year will fall from last year's figure. Revenue to
replace the deficit is being sought from present and new customers,
although the agreements that are currently being negotiated or that
have been signed will not generate significant revenue during the
second quarter yet. Due to the decrease in revenue, the company is
expected, as earlier announced, to post a loss for the first half of
the year.
Incap will release its January-June Interim Report on Wednesday, 8
August 2007.
INCAP CORPORATION
Board of Directors
For additional information, contact:
Juhani Hanninen, President and CEO, tel. +358 50 556 7199
Anne Sointu, Chief Financial Officer, tel. +358 40 347 2059
Hannele Pöllä, Director, Communications and Investor Relations, tel.
+358 40 504 8296
PRESS CONFERENCE
Incap will arrange a conference for the press and securities analysts
today at 10.00 a.m. at the World Trade Center Helsinki, in Meeting
Room 1 on the 2nd floor, at the address Aleksanterinkatu 17, FI-00100
Helsinki.
DISTRIBUTION
Helsinki Stock Exchange
Principal media
INCAP IN BRIEF
Incap Corporation is a rapidly developing electronics contract
manufacturer whose services cover the entire product life cycle from
design and manufacture to repair and maintenance services. The
company's main customer sectors are leading equipment suppliers in
telecommunications, electrical power technology, the automation and
process industries as well as measurement technology, security
electronics and health care. In 2006, the Incap Group's revenue
amounted to EUR 89 million and the company currently has a payroll of
about 540 employees. Incap's share is listed on the Helsinki Stock
Exchange and is a component of the Nordic Small Cap list within the
information technology sector. For additional information, visit
www.incap.fi.
ANNEXES
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Group Key Figures and Contingent Liabilities
Annex 1
CONSOLIDATED INCOME STATEMENT (IFRS)
(EUR thousands, unaudited)
Jan.-Mar. Jan.-Mar. Change % Jan.-Dec. 2006
2007 2006
REVENUE 16 982 21 038 -19 89 347
Other operating income 1 332 -100 383
Changes in inventories of
finished goods and work
in progress 150 341 -56 1 409
Raw materials and
consumables used 11 652 14 258 -18 61 634
Personnel expenses 3 898 3 810 2 16 245
Depreciation,
amortisation and
impairment losses 659 563 17 2 284
Other operating expenses 2 112 1 684 25 8 149
OPERATING PROFIT/LOSS -1 188 1 396 -185 2 828
Financial income and
expenses -165 -94 76 -505
PROFIT/LOSS BEFORE TAXES -1 352 1 302 -204 2 323
Income taxes 10 251 -96 902
PROFIT/LOSS FOR THE
REPORT PERIOD -1 342 1 553 -186 3 225
Earnings per share -0,11 0,13 -185 0,26
Share options do not have
a dilutive effect during
the 2006 and 2007
financial years
Annex 2
CONSOLIDATED BALANCE SHEET (IFRS)
(EUR thousands, unaudited)
31 Mar. 31 Mar. Change 31 Dec.
2007 2006 % 2006
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 11 162 7 534 48 11 571
Intangible assets 538 431 25 495
Deferred tax assets 4 310 3 800 13 4 310
Other non-current receivables 15 15 - 15
TOTAL NON-CURRENT ASSETS 16 025 11 779 36 16 391
CURRENT ASSETS
Inventories 15 579 13 499 15 14 626
Trade and other receivables 10 274 13 238 -22 13 994
Cash and cash equivalents 62 799 -92 500
TOTAL CURRENT ASSETS 25 915 27 536 -6 29 120
TOTAL ASSETS 41 940 39 315 7 45 511
EQUITY AND LIABILITIES
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
OF THE PARENT
Share capital 20 487 20 487 - 20 487
Share premium account 44 44 - 44
Retained earnings -1 518 -1 997 -24 -206
TOTAL EQUITY 19 013 18 534 3 20 325
NON-CURRENT LIABILITIES
Deferred tax liabilities 137 289 -53 147
Interest-bearing loans and borrowings 6 000 5 252 14 6 806
CURRENT LIABILITIES
Trade and other payables 11 086 13 305 -17 15 620
Interest-bearing loans and borrowings 5 704 1 936 195 2 613
TOTAL LIABILITIES 22 927 20 782 10 25 186
TOTAL EQUITY AND LIABILITIES 41 940 39 315 7 45 511
Annex 3
CONSOLIDATED CASH FLOW STATEMENT (IFRS)
(EUR thousands, unaudited)
Jan.-Mar. 2007 Jan.-Mar. 2006 Jan.-Dec. 2006
Cash flow from operating
activities
Operating profit -1 188 1 396 2 828
Adjustments to
operating profit 647 575 1 996
Change in working
capital -1 979 -2 338 -1 420
Interest and other
payments made -129 -78 -411
Interest received 2 13 22
Cash flow from operating
activities -2 647 -432 3 015
Cash flow from investing
activities
Investments in property,
plant and equipment and
intangible assets -290 -344 -1 547
Gains on the sale of
property, plant and
equipment and intangible
assets - - 15
Cash flow from investing
activities -290 -344 -1 532
Cash flow from financing
activities
Proceeds from borrowings 3 205 - -
Repayments of borrowings -418 -457 -1 235
Repayments of
obligations under
finance leases -288 -181 -1 961
Cash flow from financing
activities 2 499 -638 -3 196
Change in net cash -438 -1 414 -1 713
Cash and cash
equivalents at beginning
of period 500 2 213 2 213
Cash and cash
equivalents at end of
period 62 799 500
Annex 4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)
(EUR thousands, unaudited)
+-------------------------------------------------------------------+
| | Share | Share | Retained | Total |
| | capital | premium | earnings | |
| | | account | | |
|---------------------------+---------+---------+----------+--------|
| | | | | |
|---------------------------+---------+---------+----------+--------|
| Equity at 1 January 2006 | 20 487 | 44 | -3 566 | 16 965 |
|---------------------------+---------+---------+----------+--------|
| Option and share-based | - | - | 135 | 135 |
| compensation | | | | |
|---------------------------+---------+---------+----------+--------|
| Net income (loss) | - | - | 135 | 135 |
| recognised directly in | | | | |
| equity | | | | |
|---------------------------+---------+---------+----------+--------|
| Result for the report | - | - | 3 225 | 3 225 |
| period | | | | |
|---------------------------+---------+---------+----------+--------|
| Total income and expense | - | - | 3 360 | 3 360 |
| for the report period | | | | |
|---------------------------+---------+---------+----------+--------|
| Equity at 31 December | 20 487 | 44 | -206 | 20 325 |
| 2006 | | | | |
|---------------------------+---------+---------+----------+--------|
| | | | | |
|---------------------------+---------+---------+----------+--------|
| Equity at 1 January 2007 | 20 487 | 44 | -206 | 20 325 |
|---------------------------+---------+---------+----------+--------|
| Option and share-based | - | - | 30 | 30 |
| compensation | | | | |
|---------------------------+---------+---------+----------+--------|
| Net income (loss) | - | - | 30 | 30 |
| recognised directly in | | | | |
| equity | | | | |
|---------------------------+---------+---------+----------+--------|
| Result for the report | - | - | -1 342 | -1 342 |
| period | | | | |
|---------------------------+---------+---------+----------+--------|
| Total income and expense | - | - | -1 312 | -1 312 |
| for the report period | | | | |
|---------------------------+---------+---------+----------+--------|
| Equity at 31 March 2007 | 20 487 | 44 | -1 518 | 19 013 |
+-------------------------------------------------------------------+
Annex 5
GROUP KEY FIGURES AND CONTINGENT LIABILITIES (IFRS)
Jan.-Mar. 2007 Jan.-Mar. 2006 Jan.-Dec.
2006
Revenue, EUR millions 17.0 21.0 89.3
Operating profit, EUR -1.2 1.4 2.8
millions
% of revenue -7.0 6.6 3.2
Profit before taxes, EUR -1.4 1.3 2.3
millions
% of revenue -8.0 6.2 2.6
Return on investment (ROI), % -15.7 22.5 10.5
Return on equity (ROE), % -27.3 35.0 17.3
Equity ratio, % 45.3 47.1 44.7
Gearing, % 61.2 34.5 43.9
Net debt, EUR millions 12.6 6.7 10.7
Interest-bearing net debt, 11.6 6.4 8.9
EUR millions
Average number of share 12180880 12180880 12180880
issue-adjusted shares during
report period
Earnings per share (EPS), -0.11 0.13 0.26
euros
Equity per share, euros 1.56 1.52 1.67
Investments, EUR millions 0.3 0.4 7.1
% of revenue 1.8 1.8 8.0
Average number of employees 530 463 521
CONTINGENT LIABILITIES (EUR 31 Mar. 2007 31 Mar. 2006 31 Dec. 2006
millions)
FOR OWN LIABILITIES
Mortgages 6.0 8.6 6.0
Other liabilities 9.2 8.4 10.2
INCAP GROUP INTERIM REPORT JANUARY-MARCH 2007: NEW CUSTOMERS WERE ACQUIRED TO REPLACE DECREASED DELIVERIES TO THE TELECOMMUNICATIONS SECTOR
| Source: Incap Oyj
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