2007-11-07 08:01:40 CET
2007-11-07 08:01:40 CET
REGULATED INFORMATION
Incap - Quarterly report
INCAP GROUP INTERIM REPORT JANUARY-SEPTEMBER 2007: REVENUE INCREASED IN THE END OF THE PERIOD, PROFITABILITY TO BE IMPROVED
INCAP CORPORATION STOCK EXCHANGE RELEASE 7 November 2007, 9 a.m.
* revenue was EUR 56.7 million (Jan.-Sep. 2006: EUR 65.3 million)
* operating profit was EUR 1.7 million negative (3.2 million
positive)
* net profit for the report period amounted to EUR 2.6 million
negative (3.6 million positive)
* earnings per share were EUR 0.21 negative (0.30 positive)
* revenue developed favourably after the sharp decline in the early
part of the year but fell short of the targets
* costs related to internationalisation burdened the result
Juhani Hanninen, President and CEO of Incap Corporation:"Third-quarter revenue improved on the previous quarters but this was
not enough to compensate for the sharp decline in demand for
telecommunications products in the early part of the year.
The launch of operations in India was an important milestone in the
company's internationalisation according to strategy, and acquisition
of new customers in India has progressed well.
Our crucial objective is to improve profitability and secure positive
earnings development next year."
Accounting policies applicable to the interim report
This interim report has been prepared in compliance with the IAS 34
Interim Financial Reporting standard, and the accounting policies are
in line with those of the annual financial statements. The operations
of the manufacturing unit in India have been consolidated with the
reported figures as of 1 June 2007, and as a result the figures
presented in this report are not comparable with those of the
corresponding period in 2006.
Revenue and financial performance in July-September
Third-quarter revenue increased by 7.7% on the previous quarter to
EUR 20.6 million. This represents a decline of 5.6% on the same
period last year.
Operating profit in July-September was EUR 0.6 million negative (0.6
million positive).
Comparison by 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
quarter (EUR 2007 2007 2007 2006 2006 2006 2006
thousands)
Revenue 20,593 19,130 16,982 24,014 21,810 22,486 21,038
Operating -578 44 -1,188 -331 599 1,163 1,396
profit/loss
Net profit/loss for -1,071 -139 -1,342 -376 728 1,320 1,553
the period
Earnings per share, -0.09 -0.01 -0.11 -0.03 0.06 0.11 0.13
EUR
Revenue and financial performance in January-September
Incap's revenue in January-September was EUR 56.7 million, down
approximately 13% on the same period in 2006 (Jan.-Sep. 2006: EUR
65.3 million).
Operating profit in January-September was EUR 1.7 million negative
(3.2 million positive), or 3.0% negative of revenue (4.8% positive).
The result includes non-recurring expenses totalling approximately
EUR 0.6 million associated with business development and
implementation of the growth strategy, EUR 0.5 million of which is
attributable to India.
Net profit for the report period amounted to EUR 2.6 million negative
(3.6 million positive), or 4.5% negative of revenue (5.5% positive).
Earnings per share (EPS) amounted to EUR 0.21 negative (0.30
positive), while equity per share stood at EUR 1.46 (1.69).
Comparison by report period 1-9/2007 1-9/2006 1-12/2006
(EUR thousands)
Revenue 56,706 65,334 89,347
Operating profit/loss -1,722 3,159 2,828
Net profit/loss for the period -2,552 3,601 3,225
Earnings per share, EUR -0.21 0.30 0.26
Development of operations
In the third quarter, Incap's revenue increased on the previous
quarters. A sharp decline in deliveries of telecommunications
products at the beginning of the year was reflected in revenue for
the entire report period. Third-quarter revenue was reduced by
difficulties in the supply of certain components and by the prolonged
start-up of certain new products.
New supply agreements with customers in various industries were
signed during the report period. The number of new products at
prototype and pre-production stages was higher than usual during the
third quarter.
The integration of the Indian manufacturing unit acquired in June
into the Group was completed on schedule in September, and
acquisition of new customers in India has started well.
After the report period, in October, Incap started to investigate the
possibility of selling its production and office facilities in
Helsinki, Vuokatti and Kempele. Following the possible divestment,
Incap would continue operations in the same premises as a
leaseholder. If realised, the sale of premises is estimated to have a
positive earnings effect.
Short-term risks and factors of uncertainty
Incap's sales are spread over several customer sectors, which hedges
the company against sharp seasonal changes. In accordance with its
strategy, the Group will continue 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 significant financial risk.
The acquisition of a new business unit in India has increased the
Group's financing risk and exchange rate risk. Interest rate risk, as
well as the exchange rate risk associated with financing and
operations, are managed through a financing structure that is
balanced between the Group's main currencies.
Financing and cash flow
The Group's equity ratio was 31.2% (43.6%). Interest-bearing net
liabilities totalled EUR 22.0 million (12.4 million) and the gearing
ratio was 124.3% (60.0%). Net financial expenses were EUR 0.9 million
(0.3 million) and depreciation and amortisation expense was EUR 2.0
million (1.7 million). The Group's liquidity was satisfactory: the
quick ratio was 0.7 (0.9) and the current ratio 1.6 (1.7). Cash flow
was EUR 4.1 million negative (1.0 million negative) and the change in
cash and cash equivalents was an increase of EUR 1.0 million (a
decrease of 2.0 million).
The Group's equity at the close of the report period was EUR 17.7
million (20.6 million). Liabilities totalled EUR 39.1 million (26.7
million), of which interest-bearing liabilities amounted to EUR 23.5
million (12.5 million).
Capital expenditures
The Group's capital expenditures excluding the business acquisition
in India totalled EUR 1.1 million (EUR 5.9 million), or about 1.9% of
revenue (9.0%).
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 778
employees. The average number of personnel was 633 (509); 352
employees are based in Finland, 202 in Estonia and 224 in India.
577 were permanently employed staff and 201 fixed-term employees.
There were 6 part-time employment contracts at the end of the period.
Shares and shareholders
Incap has 12,180,880 shares on issue. The price of the Incap
Corporation share varied in the range of EUR 1.76 to EUR 2.67 during
the report period, and the closing share price on 30 September 2007
was EUR 1.85. The trading volume was 30% of outstanding shares.
At the end of the report period the company had 1,114 shareholders.
Foreign and nominee-registered owners held 16.3% of all shares. The
company's market capitalisation on 30 September 2007 was EUR 22.5
million.
Share options
The Incap Group currently runs a share option scheme that was
introduced in 2004 and 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' trading volume is at least 3 euro.
Announcements in accordance with Chapter 2, Section 9, of the
Securities Market Act on changes in holdings
Ilmarinen Mutual Pension Insurance Company announced that after
having purchased convertible bonds on 21 May 2007, its share of
Incap's share capital and votes would exceed 5% if the company
exercises the bonds to subscribe for new shares. The OP Bank Group
Central Cooperative announced that if mutual funds managed by its
subsidiary OP Fund Management Ltd were to exercise the subscription
rights associated with their convertible bond purchases in full, the
OP Bank Group Central Cooperative's ownership share would exceed 5%.
Transactions carried out after the report period on 9 and 10 October
2007 increased Etra Invest Oy's ownership share to 28.6%. Irish Life
International announced that it had divested its 9.5% stake through
transactions carried out on 10 October.
Outlook for the future
Incap's customers mostly forecast that their business will develop
favourably. However, market visibility is very short.
Incap expects that revenue in the final quarter of the year will be
higher than in the third quarter. The Group's full-year revenue in
2007 is forecast to be clearly lower than in 2006. Full-year
operating profit is estimated to be clearly negative.
INCAP CORPORATION
Board of Directors
For additional information, please 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
DISTRIBUTION
OMX Nordic Exchange Helsinki
Principal media
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 Aleksanterinkatu 17, FI-00100 Helsinki.
INCAP IN BRIEF
Incap Corporation is a fast-growing electronics contract manufacturer
whose comprehensive service covers 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, safety
electronics and health care. The Incap Group's revenue in 2006
amounted to EUR 89 million and the company currently employs approx.
750 persons. Incap's share is listed on the OMX Nordic Exchange
Helsinki. For additional information, please visit www.incap.fi
ANNEXES
1 Consolidated Income Statement
2 Consolidated Balance Sheet
3 Consolidated Cash Flow Statement
4 Consolidated Statement of Changes in Equity
5 Notes to the Interim Report
6 Group Key Figures and Contingent Liabilities
Annex 1
CONSOLIDATED INCOME STATEMENT (IFRS)
(EUR thousands, unaudited)
1-9/2007 1-9/2006 Change % 1-12/2006
REVENUE 56,706 65,334 -13 89,347
Manufacture for own use 99 0
Changes in inventories of
finished goods and work in
progress 266 1,800 -85 1,409
Other operating income 18 335 -95 383
Raw materials and
consumables used -39,027 -45,465 -14 -61,634
Personnel expenses -11,210 -11,762 -5 -16,245
Depreciation, amortisation
and impairment losses -1,980 -1,655 20 -2,284
Other operating expenses -6,594 -5,429 21 -8,149
OPERATING PROFIT/LOSS -1,722 3,159 -155 2,828
Financial income and
expenses -851 -323 163 -505
PROFIT/LOSS BEFORE TAXES -2,573 2,836 -191 2,323
Income taxes 21 765 -97 902
PROFIT/LOSS FOR THE PERIOD -2,552 3,601 -171 3,225
Earnings per share (EPS)
calculated from profit
attributable
to equity holders of the
parent:
Earnings per share,
undiluted (EUR), continuing
operations -0.21 0.30 -170 0.26
Earnings per share, diluted
(EUR), continuing
operations -0.21 0.30 -170 0.26
Average number of shares:
-undiluted 12,180,880 12,180,880 12,180,880
-diluted 12,193,466 12,192,208 12,199,034
Annex 2
CONSOLIDATED BALANCE SHEET (IFRS)
(EUR thousands, unaudited)
31 Dec
30 Sep 2007 30 Sep 2006 Change % 2006
ASSETS
NON-CURRENT ASSETS
Goodwill 1,139 164 595 164
Other intangible assets 1,566 318 392 331
Property, plant and equipment 13,330 11,177 19 11,571
Non-current receivables 9 0 0
Deferred tax assets 4,310 4,310 0 4,310
Other non-current investments 12 15 -20 15
TOTAL NON-CURRENT ASSETS 20,366 15,983 27 16,391
CURRENT ASSETS
Inventories 20,156 15,021 34 14,626
Trade and other receivables 14,801 16,088 -8 13,994
Cash and cash equivalents 1,494 179 735 500
TOTAL CURRENT ASSETS 36,451 31,288 17 29,120
TOTAL ASSETS 56,817 47,271 20 45,511
EQUITY AND LIABILITIES
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
Share capital 20,487 20,487 0 20,487
Share premium account 44 44 0 44
Translation differences -131 0 0
Retained earnings -2,668 87 -3,167 -206
TOTAL EQUITY 17,732 20,619 -14 20,325
NON-CURRENT LIABILITIES
Deferred tax liabilities 126 284 -56 147
Non-current interest-bearing
liabilities 15,937 7,463 114 6,806
NON-CURRENT LIABILITIES 16,063 7,747 107 6,953
CURRENT LIABILITIES
Current interest-bearing
liabilities 7,600 5,079 50 2,613
Trade and other payables 15,422 13,827 12 15,620
CURRENT LIABILITIES 23,022 18,906 22 18,233
EQUITY AND LIABILITIES 56,817 47,271 20 45,511
Annex 3
CONSOLIDATED CASH FLOW STATEMENT (IFRS)
(EUR thousands, unaudited)
1-9/2007 1-9/2006 1-12/2006
Cash flow from operating activities
Operating profit -1,722 3,159 2,828
Adjustments to operating profit 1,943 1,112 1,996
Change in working capital -3,868 -5,064 -1,420
Interest and other payments made -537 -248 -411
Interest received 88 25 22
Cash flow from operating activities -4,096 -1,016 3,015
Cash flow from investing activities
Investments in property, plant and -1,250 -1,330 -1,547
equipment and intangible assets
Gains on the sale of property, plant 0 15 15
and equipment and intangible assets
Acquisition of subsidiary -8,261 0 0
Cash flow from investing activities -9,511 -1,315 -1,532
Cash flow from financing activities
Proceeds from borrowings 16,689 2,950 0
Repayments of borrowings -996 -936 -1,235
Repayments of obligations under finance -1,092 -1,717 -1,961
leases
Cash flow from financing activities 14,601 297 -3,196
Change in net cash 994 -2,034 -1,713
Cash and cash equivalents at beginning of 500 2,213 2,213
period
Cash and cash equivalents at end of 1,494 179 500
period
Annex 4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)
(EUR thousands, unaudited)
Share Share premium Retained Total
capital account earnings
Equity on 1 January 2006 20,487 44 -3,566 16,965
Option and share-based - - 53 53
compensation
Net income (loss) recognised - - 53 53
directly in equity
Result for the report period - - 3,601 3,601
Total income and expenses for - - 3,654 3,654
the report period
Equity on 30 September 2006 20,487 44 87 20,619
Equity on 1 January 2007 20,487 44 -206 20,325
Option and share-based - - 90 90
compensation
Translation differences - - -131 -131
Net income (loss) recognised - - -41 -41
directly in equity
Result for the report period - - -2,552 -2,552
Total income and expenses for - - -2,593 -2,593
the report period
Equity on 30 September 2007 20,487 44 -2,799 17,732
Annex 5
NOTES TO THE INTERIM REPORT
Accounting policies applicable to the interim report
This interim report has been prepared in compliance with the IAS 34
Interim Financial Reporting standard, and the accounting policies are
in line with those of the annual financial statements. The operations
of the manufacturing unit in India have been consolidated with the
reported figures as of 1 June 2007, due to which the figures
presented in this report are not comparable with those of the
corresponding period in 2006.
Acquired operations
Incap Corporation's subsidiary Incap Contract Manufacturing Services
Pvt. Ltd., established in India in April 2007, acquired a business
unit manufacturing electronics and integrated equipment from TVS
Electronics Limited on 31 May 2007. The number of personnel
transferred in the business acquisition was 230, and the company is
estimated to receive approximately EUR 6 million in revenue in 2007.
The total acquisition price was EUR 8.3 million, paid in cash. In
addition to the cash consideration, a total of EUR 0.5 million in
consultancy fees and other costs directly associated with the
acquisition are included in the acquisition cost. Part of the
acquisition cost exceeding the balance sheet value, EUR 1.2 million,
was allocated to intangible rights by calculating fair values for the
acquired customer base. TVS Electronics will build new premises in
the acquired land area for Incap's use by the end of 2008, for which
an advance payment of EUR 1.0 million has been recognised. The
remaining goodwill, EUR 1.0 million, is based on Incap's improved
position in the Asian contract manufacturing market.
The following assets and liabilities were recognised for the acquired
object:
EUR millions Fair value Balance sheet value
before consolidation
Property, plant and equipment 1.8 1.8
Advance payment for building 1.0 1.0
Customer contracts and associated 1.2
customer relationships (incl. in
other intangible assets)
Inventories 2.1 2.1
Trade and other receivables 2.6 2.6
Total assets 8.7 7.5
Trade and other payables -1.4 -1.4
Net assets 7.3 6.0
Acquisition cost 8.3
Goodwill 1.0
There are no temporary tax differences to be recognised on the
allocated intangible rights.
Convertible bond
On 21 May 2007 the Group issued 1,250 units of convertible bonds with
a nominal value of EUR 5,400 each for a total amount of EUR 6,750,000
for the purpose of financing the business acquisition in India and
future investments. The term of the convertible bond is from 25 May
2007 to 25 May 2012 if the holders of the bonds do not exercise their
right to convert the bonds into the parent company's shares. A bond
with a nominal value of EUR 5,400 can be converted into 2,000 shares
of the parent company at a conversion rate of EUR 2.70. The
conversion period for bond units is from 19 June 2007 to 30 April
2012. The convertible bond has not been divided into equity and
liabilities in the financial statements as the equity component is
not substantial at the time of issuance of the bond.
Annex 6
GROUP KEY FIGURES AND CONTINGENT LIABILITIES (IFRS)
1-9/2007 1-9/2006 1-12/2006
Revenue, EUR millions 56.7 65.3 89.3
Operating profit, EUR millions -1.7 3.2 2.8
% of revenue -3.0 4.8 3.2
Profit before taxes, EUR millions -2.6 2.8 2.3
% of revenue -4.5 4.3 2.6
Return on investment (ROI), % -6.1 14.7 10.5
Return on equity (ROE), % -17.9 25.5 17.3
Equity ratio, % 31.2 43.6 44.7
Gearing, % 124.3 60.0 43.9
Net debt, EUR millions 22.8 10.4 10.7
Interest-bearing net debt, EUR 22.0 12.4 8.9
millions
Average number of share 12,180,880 12,180,880 12,180,880
issue-adjusted shares during report
period
Earnings per share (EPS), euros -0.21 0.30 0.26
Equity per share, euros 1.46 1.69 1.67
Investments, EUR millions 1.1 5.9 7.1
% of revenue 1.9 9.0 8.0
Average number of employees 633 509 521
CONTINGENT LIABILITIES (EUR 30 Sep 2007 30 Sep 2006 31 Dec 2006
millions)
FOR OWN LIABILITIES
Mortgages 12.8 8.6 6.0
Other liabilities 9.4 9.4 10.2
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