Incap - Interim Management statement

INCAP GROUP INTERIM MANAGEMENT STATEMENT FOR 1 JANUARY - 15 MAY 2014

Incap Corporation
Stock Exchange Release     15(th )May 2014     at 11.30 a.m.

INCAP GROUP INTERIM MANAGEMENT STATEMENT FOR 1 JANUARY - 15 MAY 2014

Incap Group today issues the following Interim Management Statement for the
period from 1(st) Jan 2014 to 15(th) May 2014. Unless otherwise stated, trends
and figures highlighted below refer to the first quarter of year 2014 and the
corresponding period last year.


Revenue developed according to the estimates. EBIT and net loss compared to last
year's figures improved as a result of Turnaround program. Negotiations with
Finnish bank reached a successful end.

Financial highlights in January-March 2014
  * The Group's revenue was EUR 5.5 million, down approximately 51% year-on-year
    (Q1/2013: EUR 10.7 million) due to the decreased manufacturing volumes in
    the company's factories in Europe. The revenue was according to the
    estimate. Incap is expecting the revenue for 2014 to be significantly
    smaller than in 2013 when the revenue amounted to EUR 36.8 million.
  * Despite the decrease in revenue the operating result (EBIT) was improving
    year-on-year (EUR -1.4 million in Q1/2013) being EUR -0.2 million as a
    result of activities improving cost-efficiency.
  * Net profit was also improving remarkably year-on-year (EUR -1.9 million in
    Q1/2013) being EUR -0.4 million.


Incap Group's key figures

 Quarterly      |1-3 / |10-12/|  7-9/|  4-6/|  1-3/|10-12/|  7-9/|  4-6/|  1-3/
 comparison     | 2014 |  2013|  2013|  2013|  2013|  2012|  2012|  2012|  2012 (EUR thousands)|      |      |      |      |      |      |      |      |
----------------+------+------+------+------+------+------+------+------+------
 Revenue        |5,460 | 8,014| 8,206| 9,883|10,654|14,498|15,701|18,378|15,564
----------------+------+------+------+------+------+------+------+------+------
 Operating      | -191 |-3,682|  -331|  -415|-1,432|  -628|   280|    13|  -345
 profit/loss    |      |      |      |      |      |      |      |      |
 (EBIT)         |      |      |      |      |      |      |      |      |
----------------+------+------+------+------+------+------+------+------+------
 Net profit/loss| -374 |-3,990|-1,481|-1,172|-1,885|-4,616|    44|   352|  -711
----------------+------+------+------+------+------+------+------+------+------
 Earnings per   |-0.003| -0.06| -0.03| -0.05| -0.09| -0.23|  0.00|  0.02| -0.04
 share, EUR     |      |      |      |      |      |      |      |      |



Key events of the period

As announced on 2 January 2014 Inission AB did not exercise its option to
combine the operations of Inission AB with Incap Corporation in line with the
respective agreement. As Inission later on indicated to the Board its continued
interest on the merger, the Board of Directors of Incap started evaluating
strategic options for further development of the company's business. The
respective assessment of eventual strategic alliances is on-going.

When evaluating the efficiency of the actions in the Turnaround program, which
was launched earlier in 2013, the Board of Directors noted that the main
objectives of the program were met. The delivery accuracy improved
significantly, the operational efficiency was enhanced both in manufacturing
units and in support functions, the group organisation was streamlined to cover
only essential functions and the production capacity was adjusted to meet with
the actual demand. The organisation structure was renewed and the manufacturing
units now operate as self-sufficient profit centres having full responsibility
of their own operations and sales.

Incap reached in April a new financing agreement with its Finnish bank regarding
the loan instalment plan and the covenants related to financing. The re-
negotiated schedule decreased the loan instalments to a half of the previous
plan during the second half of the year 2014. The financial covenants were
mitigated and include only the EBITDA of the last 6 months. The targeted EBITDA
level on 30 June 2014 is EUR 66,000 and on 31 December 2014 EUR 613,000. Based
on the re-negotiated financing agreement Incap changed the estimate in regard to
the sufficiency of working capital announcing on 10(th) April 2014 that the
company's working capital for next 12 months is on a sufficient level.

Incap held its Annual General Meeting on Thursday 10(th) April 2014. The Annual
General Meeting decided that no dividend will be distributed and that the loss
for the financial year will be recognised in equity. The Annual General Meeting
also decided to change the paragraph of Articles of Association regarding the
number of the Board members so that the minimum number of the members of the
Board will be three (3) and maximum seven (7). The Annual General Meeting re-
elected the previous members of the Board and adopted the proposal of the Board
of Directors to decrease the fees of the members of the Board of Directors.

The company continued to adjust the operations to meet with the customer demand.
As announced on 9 May 2014, the personnel number in the Vaasa factory will be
reduced through termination of job contracts as well as through temporary lay-
offs.

Incap also launched the recruitment of a new permanent CEO in April. The
recruitment process is still in progress and it is estimated to be finalised in
June 2014 at the latest.


Risks and factors of uncertainty


General risks related to the company's business operations and sector include
the development of customer demand, price competition in contract manufacturing,
ability to acquire 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 and the sufficiency of funding.

Based on the successful financing negotiations with the company's Finnish bank,
the financial position of Incap Group has improved. The loan instalments have
been postponed so that the previously estimated instalments for the second half
of the year were decreased to a half. Further, the covenants were re-negotiated
and include now only the EBITDA for the last 6 months. As the company is
tracking plan on the revenue, profitability and working capital the company
estimates that the covenants are met in the next testing date on 30 June 2014.

The Group's equity ratio on 31 March 2014 was 2,9%. The parent company's equity
was EUR 10.2 million, representing 49,6% of the share capital.

Based on April 2014 reporting the parent company's equity is less than one half
of the share capital.  Therefore the Board of Directors of Incap has started the
actions according to the Limited Liability Companies Act: The Board of Directors
will immediately start the preparation to draw up financial statements and
annual report in order to ascertain the financial position of the company. If
according to the balance sheet the equity of the company is less than one half
of the share capital, the Board of Directors shall without delay convene a
General Meeting to consider measures to remedy the financial position of the
company. The extraordinary general meeting shall be held within three months of
the date of the financial statements.



Outlook for 2014

Incap's estimates for future business development are based both on its
customers' forecasts and on the company's own assessments. The business
environment will remain challenging in 2014 as the economic growth worldwide is
forecasted to be low. The company's sector, contract manufacturing, is highly
competitive, and there are major pressures on cost level management. The high-
class service for current customers as well as the acquisition of new customers
is of high importance in reaching the targets for 2014.

Thanks to the improved efficiency gained in the Turnaround program the company's
profitability is expected to improve in 2014 and the actions of the program are
estimated to reflect in the result in full in the latter part of the year 2014.

The company keeps its financial guidance for 2014 unchanged: The company
estimates that the Group's revenue in 2014 will be significantly smaller than in
2013 when the revenue amounted to EUR 36.8 million. The company estimates that
the full-year operating result (EBIT) is positive. In 2013, the result was
negative amounting to EUR -5.9 million.


Fredrik Berghel, President and CEO of Incap Group:"The first months of 2014 have been full of activities to improve our
operations. The factory level has been focusing on daily operations and achieved
good results for example in improving the delivery accuracy and productivity.
Also small but very important savings in daily activities have been found. The
company's top management has been focusing on improving the sufficiency of
funding and the good relationships with customers and other stakeholders. There
still is a lot to do but I am sure that after all the changes and improvements
we are in a good position to reach our targets for this year."



Helsinki, 15(th) May 2014

INCAP CORPORATION
Fredrik Berghel
President & CEO

For additional information, please contact:
Fredrik Berghel, President and CEO, tel. +46 73 202 2210
Kirsti Parvi, CFO, tel. +358 50 517 4569

DISTRIBUTION
NASDAQ OMX Helsinki Ltd
Principal media
The company's home page www.incap.fi

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. The Group's
revenue in 2013 amounted to approximately EUR 36.8 million, and the company
currently employs approximately 470 people. Incap's share has been listed on the
NASDAQ OMX Helsinki Ltd since 1997. Additional information: www.incap.fi.


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