Incap - Interim Management statement

Incap Group Interim Management statement for 1 January - 7 May 2015

Incap Corporation
Interim Management Statement             7 May 2015 at 10.30 a.m. (EET)



INCAP GROUP INTERIM MANAGEMENT STATEMENT FOR 1 JANUARY - 7 MAY 2015


Good performance continued. Revenue and result increased. Company is proposing
to extraordinary general meeting to grant an authorisation for share issue.

The information in this Interim Management Statement of Incap Group refers to
the continued operations of the company without the factory in Vaasa, which was
divested in December 2014. The figures of this Statement describe the
development during the period of January-March 2015 and the corresponding period
in the year 2014, unless otherwise stated. The figures are unaudited.

Key figures in January-March 2015

  * The Group's revenue was EUR 5.9 million, increasing approximately 52% year-
    on-year (1-3/2014: EUR 4.0 million).
  * The operating profit (EBIT) amounted to EUR 0.5 million (1-3/2014: EUR -0.2
    million), growing both on the comparison period and the previous quarter,
    excluding non-recurring items recorded for the last quarter.The improvement
    resulted mainly from comprehensive actions to increase the efficiency.
  * Net profit for the period improved and amounted to EUR 0.6 million (1-
    3/2014: EUR -0.4 million).


                             | 1-3/| 1-3/| 4-6/| 7-9/|10-12/| 1-12/
 (EUR thousand)              | 2015| 2014| 2014| 2014|  2014|  2014
                             |     |     |     |     |      |
-----------------------------+-----+-----+-----+-----+------+------
                             |     |     |     |     |      |
-----------------------------+-----+-----+-----+-----+------+------
 Revenue                     |5 908|3 897|4 258|4 732| 5 613|18 499
-----------------------------+-----+-----+-----+-----+------+------
 Operating profit/loss (EBIT)|  541| -202|   58|  238|   967| 1 061
-----------------------------+-----+-----+-----+-----+------+------
 Profit/loss for the period  |  603| -385| -252|  143|   645|   151



Key events of the period 1 January - 7 May 2015

The Group's revenue developed favourably thanks to the launch of new customers'
production and the increased volumes for established customer relationships. The
revenue increased by approximately 52% on the comparison period in the year
2014 and by approximately 5% on the preceding last quarter of 2014. The
performance in the Indian operations continued strong.

Order intake has grown in both factories of the company. There is free
manufacturing capacity both in India and especially in Estonia, and the company
continues enhanced activities to increase the production volumes. The delivery
accuracy stayed on a good level and the customers have given positive feedback
on the operational efficiency.

The company's profitability improved further. The operating profit (EBIT) in
January-March 2015 amounted to approximately EUR 0.5 million, improving
remarkably from the loss in the comparison period in 2014 (1-3/2014: EUR -0.2
million). The operating profit remained lower than in the preceding quarter due
to the non-recurring items of approximately EUR 0.5 million recorded in the
profit for October-December 2014. Profit per share for January-March 2015 was
EUR 0.01. Incap Group's equity ratio improved compared with the corresponding
period in 2014 and was on 31 March 2015 approximately 19.0% (31 March
2014: 2.9%).

The cash position of the company continued challenging. To improve the financing
position the company agreed in February 2015 with the Finnish bank upon new
conditions and instalments of loans. The loan covenants include EBITDA and
equity ratio, and their status is reviewed every six months until 30 June 2018.
The first review of covenants is taking place on 30 June 2015, when the target
level of EBITDA for the preceding six months is EUR 0.5 million and that of the
equity ratio 7.5%. One of the conditions in the new instalment program is that
the company launches a share issue to strengthen the equity of the company, and
for this purpose the company has convened the extraordinary general meeting to
grant a respective authorisation to the company's board of directors.

The General Meeting held on 31 March 2015 resolved to reduce the share capital
of the company from the present EUR 20,486,769.50 to cover the losses and to
transfer funds to unrestricted equity reserves.
After the implementation of necessary steps the new share capital of the company
would be EUR 1,000,000 and the unrestricted equity reserve EUR 6,958,257.44. The
parent company's equity would accordingly exceed the level set in the Companies
Act, chapter 20, section 23. Covering the losses will clarify the parent
company's balance sheet structure and improve the ratio between the company's
equity and share capital.

Because the respective decision of the Annual General Meeting was not entered
into the trade register within the obligatory period of one month, the decision
of the General Meeting has become void. Due to this, a new decision on the
reduction of the share capital will be taken in the next Annual General Meeting
in 2016, or in an extraordinary general meeting, in case there is a reason to
organise such a meeting based on any other issue.

Short-term risks and factors of uncertainty concerning operations

General risks related to the company's business operations and sector include
the development of customer demand, price competition in contract manufacturing,
successful acquisition of new customers, availability and price development of
raw material and components, sufficiency of funding, liquidity and exchange rate
fluctuations. Of these, the most significant risks at the moment are the
development of revenue, liquidity and sufficiency of funding.

Based on the cash flow estimate prepared in connection with the financial
statement for 2014, the company estimated that the company's working capital
will not cover the requirement for the next 12 months. According to the
company's estimate, approximately EUR 1.5-2 million of additional working
capital is needed and the need for working capital concerns the company's
European functions. The working capital will, however, be sufficient for the
next 12 months if the following criteria are met:

  * Repatriation of profits from India to the parent company succeeds as planned
    and/or
  * The company succeeds in acquiring new customers and the company's cash flow
    from operations develops positively and/or
  * The intended share issue is realised according to plan.
The management of the company is confident that the cash flow from operations
will develop favourably and the share issue is realised as planned and trusts
that the company is able to fulfil its obligations.

Outlook for 2015

Incap's estimates for future business development are based both on its
customers' forecasts and on the company's own assessments.

Due to the general economic uncertainty it is very hard to estimate the
development of customer demand. Many customers are indicating growth in demand
in 2015 but give reservations regarding their own volumes.

The electronics manufacturing volumes in Incap's factory in Kuressaare have
grown steadily already for more than six months now. The development in Indian
operations has been strong. After the stabilisation of the financial position
the company is now able to serve the customers even better and to strengthen
their trust in the company as a manufacturing partner. Based on this the revenue
is expected to continue the favourable development. Due to the improved
efficiency the profitability of the company is estimated to improve further in
2015.

The company repeats its previous guidance given on 18 February 2015 and
estimates that the Group's revenue and operating profit (EBIT) in 2015 are
higher than in 2014, when the revenue was EUR 18.5 million and the operating
profit (EBIT) EUR 1.1 million.

Ville Vuori, President and CEO of Incap Group:"In autumn last year we initiated actions to create organic growth. We
reorganised our sales operation, developed our offering and redefined our
customer promise. Effects of the actions are becoming visible now: our revenue
has grown properly in the beginning of the year, we have gained new customers
and the present customers have given us new projects.

We have implemented new working methods to increase the operational efficiency.
Even though part of the related development projects will be completed only
during the latter half of this year we can already now see a remarkable
improvement in the company's profitability. After the on-going projects are
accomplished in a disciplined manner, our both factories are able to increase
their production volumes with greater flexibility.

We have anchored a very lean organisational structure, enabling fast decision-
making and allowing a clear role to everybody. This enhances the satisfaction of
both our own personnel and our customers. Above all it enables short reaction
times and flexibility in the customer interface. This is the very core of our
operational model.

Growth and improved profitability have increased the confidence of all our
stakeholders in our company. To ensure the sufficiency of financing we are today
proposing to the extraordinary general meeting to grant an authorisation to
arrange a share issue. With the financing gained in the share issue we shall
secure the growth of our operations, for which we have now laid a very solid
base."

INCAP CORPORATION
Board of Directors


For additional information, please contact:
Ville Vuori, President and CEO, tel. +358 400 369 438
Kirsti Parvi, CFO, tel. +358 50 517 4569

Distribution:
NASDAQ OMX Helsinki Ltd
Principal media
The company's home page www.incapcorp.com

INCAP IN BRIEF
Incap Corporation is an international contract manufacturer whose comprehensive
services cover the entire life-cycle of electromechanical products from design
and sourcing to actual manufacture and further to maintenance services. Incap's
customers are leading suppliers of high-technology equipment in their own
business segments, and Incap increases their competitiveness as a strategic
partner. Incap has operations in Finland, Estonia, India and China, and the
company currently employs approximately 420 people. Incap's share is listed on
the NASDAQ OMX Helsinki Ltd. Additional information: www.incapcorp.com.



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