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2009-11-04 07:30:00 CET 2009-11-04 07:38:54 CET REGULATED INFORMATION Incap - Interim report (Q1 and Q3)INCAP GROUP INTERIM REPORT JANUARY-SEPTEMBER 2009: RESULT IMPROVED DESPITE DECREASE IN REVENUEIncap Corporation Stock Exchange Release 4 November 2009 at 8:30 a.m. * Revenue in January-September was approximately EUR 52.0 million, down approximately 24% from the same period the previous year (Jan-Sep 2008: EUR 68.1 million) * The focus of manufacturing activities shifted from telecommunications products to energy efficiency and well-being technology products in accordance with the strategy * Operating profit (EBIT) improved from the same period the previous year, amounting to EUR 1.3 million negative (EUR 2.4 negative) * The improvement of efficiency and adjustment of cost structure were continued in accordance with the reorganisation programme * Prerequisites for future business growth were built in selected business areas in energy and well-being * Net profit for the report period amounted to EUR 2.8 million negative (3.5 million negative). This unaudited interim report has been prepared in accordance with international financial reporting standards (IFRS). Unless otherwise stated, the comparison figures refer to the same period the previous year. Sami Mykkänen, the President and CEO of Incap Group: "The overall demand for Incap's services remained fairly steady despite the general economic recession. However, there was much customer-specific fluctuation in delivery volumes. The decrease in revenue was mainly due to a controlled winding down of the high-volume manufacturing of telecommunications products. Profitability developed in the positive direction, and operating result improved each quarter of the year. Increased operational efficiency according to the reorganisation programme is beginning to show in the result. The strategy selected last year has proven to be successful, and we can move on to developing profitable growth supported by it. In the selected business segments - energy efficiency and well-being technologies - the future prospects are good and the growth potential especially in Asia is of great interest to us. One step in this direction was concentrating product design activities on India, where we serve our customers globally. " Revenue and earnings in July-September 2009 Revenue during the third quarter totalled EUR 16.6 million, or approximately 22% less than in the same period the year before (7-9/2008: EUR 21.4 million). Despite the holiday season and production shutdowns, revenue remained at nearly the same level as during the second quarter. The demand for well-being technology products in particular was good. Operating profit (EBIT) for July-September, EUR 0.3 million negative, was better than during the previous quarters of the year and the corresponding period the year before (EUR 0.4 million negative). Net profit for the third quarter was EUR 0.8 million negative, the same as a year before (EUR 0.8 million negative) despite the decrease in revenue. Net profit was burdened by an increase in financing costs compared to the corresponding period last year. Earnings per share were EUR 0.07 negative (EUR 0.07 negative). Revenue and earnings in January-September 2009 Revenue for January-September was EUR 52.0 million, or about 24% lower than during the comparable period the year before (Jan-Sep 2008: EUR 66.1 million). The decline in revenue was the predicted decrease in manufacturing of telecommunications products by approximately EUR 12 million compared with the same period the previous year. Revenue also declined due to cutting down on small or unprofitable customer accounts at the beginning of the year in order to improve profitability. The recession did not have a significant impact on the demand for Incap's services. Revenue from well-being technology products increased considerably compared with the year before, while the demand in the energy efficiency sector decreased somewhat in Europe. Deliveries from the Indian unit increased, but revenue in euros remained at last year's level due to exchange rate differences. Operating loss was clearly reduced with operating profit amounting to EUR 1.3 million negative (EUR 2.4 million negative), representing 2.5% negative (3.5% negative) of revenue. The reorganisation programme was continued and cost savings were achieved in personnel and material costs and administrative expenses among others. Fixed costs for the period were approximately EUR 2.2 million lower than for the same period the previous year. Net profit for the report period amounted to EUR 2.8 million negative (EUR 3.5 million negative). In particular, the net profit was burdened by net financing costs, which were approximately EUR 0.4 million higher than during the corresponding period the year before. Earnings per share amounted to EUR 0.23 negative (EUR 0.29 negative), while equity per share stood at EUR 0.86 (EUR 1.24). Quarterly comparison 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ (EUR thousands) 2009 2009 2009 2008 2008 2008 2008 Revenue 16,613 16,928 18,479 25,789 21,395 26,412 20,330 Operating -314 -472 -518 -1,241 -442 -600 -1,329 profit/loss Net profit/loss -810 -1,035 -949 -1,915 -800 -1,005 -1,681 Earnings per share, -0.07 -0.08 -0.08 -0.16 -0.07 -0.08 -0.14 EUR Development of operations in January-September 2009 Incap developed its capacity for future growth in the company's business. The new production facilities in India were inaugurated during the period. The updated capacity of the plant will improve Incap's competitiveness significantly, as globally operating customers require their partner to provide local service near their main markets. In order to improve the efficiency of its service capacity, Incap concentrated its product design in India and aims to double the number of designers to over 30 persons during next year. The Indian design team also serves customers located in Europe and the United States. All plants continue developing production-related manufacturability design in order to decrease product manufacturing costs. The acquisition of new customers was expanded to China, where the company launched sales cooperation with a local partner. The aim is to secure new customers in Asia, mainly for Incap's Indian plant. In addition, the partner is surveying the overall market situation and Incap's business opportunities in China. The development of materials management and procurement continued. The value of inventories fell from EUR 16.2 million at the turn of the year to EUR 14.7 million at the end of September. The structural change in Incap's manufacturing capacity proceeded as planned. The operation of the Helsinki plant will focus on assembly and product integration in the future, and the manufacturing of certain high-volume sheet-metal parts is being transferred to Vaasa. Incap is investigating the possibilities of centralising the company's European electronics manufacturing in Estonia so that some of the products manufactured at the Vuokatti plant would be transferred to the Kuressaari plant and another party would be sought to continue some of the business activities in Vuokatti. The transfer of some products is already underway, and negotiations have been begun on other transfers with customers. Preliminary negotiations on a possible business transaction are currently underway. Strategy The strategy that Incap selected last year has proven to be successful. Incap will focus on contract manufacturing of energy efficiency and well-being products where outlook on growth is favourable thanks to global mainstream trends. The company aims to be a leading manufacturing and technology partner for customer accounts in these sectors, providing them with life-cycle services of electromechanics and product entities. The company sees considerable growth potential for its services in Asia. Incap develops its services according to the needs of its key customers. In sales and marketing, special focus will be on active management of customer relationships, expanding the service portfolio with existing customers and systematic acquisition of new customers. Incap will reinforce its product design activities that serve the customers globally. Incap will continue measures aimed at improving profitability. The main emphasis in the improvement of efficiency will be on developing materials functions, completing the change in production structure, and productisation of services. Financing and cash flow The Group's equity ratio was 24.6% (29.4%). Interest-bearing net liabilities totalled EUR 18.1 million (EUR 20.1 million) and the gearing ratio was 174% (133%). Net financial expenses stood at EUR 1.5 million (EUR 1.1 million) and depreciation and amortisation expense at EUR 2.1 million (EUR 2.1 million). Trade receivables continued to decline compared with the beginning of the year as well as the end of the second quarter, and no credit losses arose during the report period. The Group's equity at the close of the period under review was EUR 10.4 million (EUR 15.2 million). Debt totalled EUR 32.0 million (EUR 36.4 million), of which interest-bearing debt amounted to EUR 19.3 million (EUR 20.7 million). The Group's quick ratio was 0.6 (0.7) and the current ratio 1.3 (1.3). Cash flow from operations was EUR 1.9 million positive, or considerably better than for the corresponding period the previous year, when it was EUR 0.3 million. The change in cash and cash equivalents was an increase of EUR 0.5 million (a decrease of EUR 0.3 million). Capital expenditures The Group's capital expenditures during the period amounted to EUR 1.0 million (EUR 1.5 million), of which the majority was connected with the operation of the Indian subsidiary. Personnel Incap Group employed 773 people at the end of September 2009 (727 people at the beginning of the year). Of the personnel, 43% worked in Finland, 34% in India and 23% in Estonia. The number of personnel increased in India, where there were over 50 employees more at the end of September than at the beginning of the year. In addition to Incap employees, there were 59 employees hired from staffing agencies at the end of September. Operations and capacity were adjusted to the demand, and at the end of September, 34 people were temporarily laid off. After the report period in October, the personnel of Group services and the plants in Helsinki and Vaasa were temporarily laid off for a week in December 2009 and for a week in January 2010. In addition, the personnel can be temporarily laid off based on monthly review until the end of May 2010 so that the maximum total duration of the temporary layoff is 64 working days. At the Vuokatti plant, the white-collar personnel were laid off for three weeks while the statutory negotiations with regard to the blue-collar workers will continue in November. Shares and shareholders Incap Corporation has one series of shares, and the number of shares in 12,180,880. During the period under review, the share price varied between EUR 0.43 and EUR 0.99, and the last closing price of the period was EUR 0.69. During the period under review, the trading volume was 19.7% of outstanding shares. At the end of the period under review, the company had 1,145 shareholders. Foreign or nominee-registered owners held 2.8% of all shares. The company's market capitalisation on 30 September 2009 was EUR 8.4 million. The company does not own any of its own shares. Short-term risks and factors of uncertainty concerning operations The risks and factors of uncertainty relating to Incap's operations are described in more detail in the report by the Board of Directors dated 24 February 2009, and no significant changes have taken place with regard to these factors during the report period. The most significant short-term risks are connected with the volume of business, profitability as well as financing arrangements. Incap's sales are spread over several customer sectors, which hedges the company against sharp seasonal changes. However, market visibility is very limited. The company's financial position is influenced by the trends in the general financial market and the company's future earnings development. Incap aims at ensuring the company's liquidity by efficient working capital management and investigates different financing options in order to enhance the financial position. As one action to ensure its liquidity, Incap signed an agreement on factoring concerning its trade receivables in Finland with a financing company after the close of the report period. Outlook Incap's estimates of the future business development are based on its customers' forecasts and the company's own assessments. Due to the continued uncertain economic situation, customers' views of the future market development are still cautious. Some device manufacturers in the electric power industry have predicted a slight decline in demand. Incap expects that its revenue in 2009 will be approximately EUR 70 million. The operating profit for the latter half of the year will be better than during the first half of the year. Full-year operating profit (EBIT) is estimated to be clearly better compared with 2008. According to Incap's previous estimate on 5 August 2009, the Group's revenue in 2009 would be lower than in 2008, when it totalled EUR 93.9 million. Operating profit for the latter half of the year was estimated to be better than during the first half of the year. Full-year operating profit (EBIT) was estimated to be clearly better compared with 2008 (EUR 3.6 million negative). INCAP CORPORATION Board of Directors For additional information, please contact: Sami Mykkänen, President and CEO, tel. +358 40 559 9047 Eeva Vaajoensuu, Chief Financial Officer, tel. +358 40 763 6570 Hannele Pöllä, Director of Communications and Human Resources, tel. +358 40 504 8296 DISTRIBUTION NASDAQ OMX Helsinki Ltd Principal media The company's website: www.incap.fi PRESS CONFERENCE Incap will arrange a conference for financial analysts, investors, and the press on 4 November 2009 at 10:00 a.m. at the World Trade Center Helsinki, in Meeting Room 1 on the 2nd floor at Aleksanterinkatu 17, FI-00100 Helsinki. The presentation material will be available on the company's website the same day. 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 life-cycle of electromechanical products from design and manufacture to maintenance services. Incap's customers are leading equipment suppliers in energy-efficiency and well-being technology, for which the company produces competitiveness as a strategic partner. Incap has operations in Finland, Estonia and India. The Group's revenue in 2008 amounted to around EUR 94 million, and the company currently employs approximately 770 people. Incap's shares are listed on the NASDAQ OMX Helsinki Ltd. For additional information, please visit our website, www.incap.fi. Annex 1 CONSOLIDATED INCOME STATEMENT (IFRS) (EUR thousands, unaudited) 1-9/2009 1-9/2008 Change % 1-12/2008 REVENUE 52,021 68,136 -24 93,925 Work performed by the enterprise and capitalised Change in inventories of finished goods and work in progress -301 1,190 -125 791 Other operating income 281 30 826 53 Raw materials and consumables used 34,050 48,245 -29 66,672 Personnel expenses 10,725 13,630 -21 18,722 Depreciation and amortisation 2,146 2,125 1 2,823 Other operating expenses 6,383 7,727 -17 10,165 OPERATING PROFIT/LOSS -1,304 -2,371 -45 -3,612 Financing income and expenses -1,488 -1,115 33 -1,810 PROFIT/LOSS BEFORE TAX - 2,792 -3,486 -20 -5,422 Income tax expense -3 0 21 PROFIT/LOSS FOR THE PERIOD - 2,795 -3,486 -20 -5,401 Earnings per share -0.23 -0.29 -21 -0.44 Options have no dilutive effect in report periods 2008 and 2009 OTHER COMPREHENSIVE INCOME 1-9/2009 1-9/2008 Change % 1-12/2008 PROFIT/LOSS FOR THE PERIOD - 2,795 -3,486 -43 -5,401 OTHER COMPREHENSIVE INCOME: Translation differences from foreign units 20 -271 -107 -262 Other comprehensive income, net 20 -271 -124 -262 TOTAL COMPREHENSIVE INCOME -2,775 -3,757 -26 -5,663 Attributable to: Shareholders of the parent company - 2,775 -3,757 -26 -5,663 Minority interest 0 Annex 2 CONSOLIDATED BALANCE SHEET (IFRS) (EUR thousands, unaudited) 30.9.2009 30.9.2008 Change % 31.12.2008 ASSETS NON-CURRENT ASSETS Property, plant and equipment 10,225 11,496 -11 11,250 Goodwill 954 972 -2 969 Other intangible assets 1,069 1,370 -22 1,311 Other financial assets 14 17 -17 16 Deferred tax assets 4,136 4,151 0 4,148 TOTAL NON-CURRENT ASSETS 16,398 18,006 -9 17,693 CURRENT ASSETS Inventories 14,675 18,833 -22 16,153 Trade and other receivables 10,262 14,069 -27 14,444 Cash and cash equivalents 1,136 615 85 641 TOTAL CURRENT ASSETS 26,074 33,518 -22 31,239 TOTAL ASSETS 42,472 51,523 -18 48,932 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT COMPANY Share capital 20,487 20,487 0 20,487 Share premium account 44 44 1 44 Exchange differences -458 -494 -7 -478 Retained earnings -9,644 -4,876 98 -6,864 TOTAL EQUITY 10,430 15,161 -31 13,190 NON-CURRENT LIABILITIES Deferred tax liabilities 99 121 -18 99 Interest-bearing loans and borrowings 11,363 13,496 -16 12,977 NON-CURRENT LIABILITIES 11,463 13,617 -16 13,077 CURRENT LIABILITIES Trade and other payables 12,678 15,527 -18 15,731 Current interest-bearing loans and borrowings 7,901 7,218 9 6,935 CURRENT LIABILITIES 20,579 22,745 -9 22,666 TOTAL EQUITY AND LIABILITIES 42,472 51,523 -18 48,932 Annex 3 CONSOLIDATED CASH FLOW STATEMENT (EUR thousands, unaudited) 1-9/2009 1-9/2008 1-12/2008 Cash flow from operating activities Net income -1,304 -2,371 -3,612 Adjustments to operating profit 2,162 2,101 2,760 Change in working capital 2,688 1,601 3,702 Interest paid -1,642 -1,087 -1,640 Interest received 32 104 143 Cash flow from operating activities 1,936 348 1,353 Cash flow from investing activities Capital expenditure on tangible and intangible assets -961 -1,501 -1,699 Proceeds from sale of tangible 177 and intangible assets 0 101 160 Loans granted -8 0 Shares of subsidiaries sold 0 50 50 Repayments of loan receivables 2 3 1 Cash flow from investing activities -790 -1,347 -1,488 Cash flow from financing activities Drawdown of loans 2,135 2,453 1,753 Repayments of borrowings -1,896 -942 -838 Repayments of obligations under finance leases -886 -805 -1,063 Cash flow from financing activities -647 706 -148 Change in cash and cash equivalents 499 -293 -283 Cash and cash equivalents at beginning of period 641 944 944 Effect of changes in exchange rates -7 -36 -20 Changes in fair value (cash and cash equivalents) 3 Cash and cash equivalents at end of period 1,136 615 641 Annex 4 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS) (EUR thousands, unaudited) Retained Share Share premium Exchange capital account differences earnings Total Equity on 1 January 2008 20,487 44 -216 -1,188 19,127 Change in exchange differences -278 -278 Options and share-based compensation -202 -202 Net income and losses recognised directly in equity -278 -202 -480 Net profit/loss - 3,486 -3,486 Total income and losses -278 -3,688 -3,966 Equity on 30 September 2008 20,487 44 -494 -4,876 15,161 Equity on 1 January 2009 20,487 44 -478 -6,864 13,189 Change in exchange differences 20 20 Options and share-based compensation 15 15 Net income and losses recognised directly in equity 20 15 35 Net profit/loss -2,795 -2,795 Total income and losses 20 -2,780 -2,760 Equity on 30 September 2009 20,487 44 -458 -9,644 10,430 Annex 5 GROUP KEY FIGURES AND CONTINGENT LIABILITIES (IFRS) 30.9.2009 30.9.2008 31.12.2008 Revenue, EUR millions 52.0 68.1 93.9 Operating profit, EUR millions -1.3 -2.4 -3.6 % of revenue -2.5 -3.5 -3.9 Profit before taxes, EUR millions -2.8 -3.5 -5.4 % of revenue -5.4 -5.1 -5.8 Return on investment (ROI), % -5.3 -7.5 -8.6 Return on equity (ROE), % -31.6 -27.1 -33.4 Equity ratio, % 24.6 29.4 27.0 Gearing, % 173.8 132.6 146.1 Net debt, EUR millions 20.6 21.7 20.7 Net interest-bearing debt, EUR millions 18.1 20.1 19.3 Average number of shares during the report period, adjusted for share issues 12,180,880 12,180,880 12,180,880 Earnings per share (EPS), euro -0.23 -0.29 -0.44 Equity per share, euro 0.86 1.24 1.08 Investments, EUR millions 1.0 1.5 1.8 % of revenue 1.9 2.2 1.9 Average number of employees 743 732 735 CONTINGENT LIABILITIES, EUR millions FOR OWN LIABILITIES Mortgages 12.0 12.1 12.0 Other liabilities 6.3 8.2 8.8 Nominal value of currency options, EUR thousands -12.4 0 0 Fair values of currency options, EUR thousands 460.7 0 0 Annex 6 QUARTERLY KEY FIGURES (IFRS) 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 2009 2009 2009 2008 2008 2008 2008 Revenue, EUR millions 16.6 16.9 18.5 25.8 21.4 26.4 20.3 Operating profit, EUR millions -0.3 -0.5 -0.5 -1.2 -0.4 -0.6 -1.3 % of revenue -1.9 -2.8 -2.8 -4.8 -2.1 -2.3 -6.5 Profit before taxes, EUR millions -0.8 -1.0 -0.9 -1.9 -0.8 -1.0 -1.7 % of revenue -4.9 -6.1 -5.1 -7.5 -3.7 -3.8 -8.3 Return on investment (ROI), % -4 -2.1 -4.9 -11.1 -4.1 -4.9 -13.4 Return on equity (ROE), % -27.5 -33.9 -29.8 -47.4 -18.7 -22.9 -37.0 Equity ratio, % 24.6 26.4 27.4 27.0 29.43 31.2 33.3 Gearing, % 173.8 164.9 151.1 146.1 132.6 120.4 106.5 Net debt, EUR millions 20.6 19.7 19.6 20.7 21.7 18.0 19.9 Net interest-bearing debt, EUR millions 18.1 18.6 18.6 19.3 20.1 19.2 18.3 Average number of share issue-adjusted shares during 12,180 12,180 12,180 12,180 12,180 12,180 12,180 report period ,880 ,880 ,880 ,880 ,880 ,880 ,880 Earnings per share (EPS), euro -0.07 -0.08 -0.08 -0.16 -0.07 -0.08 -0.14 Equity per share, euro 0.86 0.92 1.01 1.08 1.24 1.31 1.41 Investments, EUR 0.4 millions 0.5 0.1 0.3 0.3 0.4 0.8 % of revenue 2.2 2.9 0.6 1.3 1.2 1.6 4.1 Average number of 770 employees 732 728 743 739 724 733 |
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