– net turnover in the January-September period was EUR 45.2 million
–  the operating result for the January-September period improved by 68% compared with the corresponding period of the previous year and amounted to EUR -1.7 million
– the trend in third-quarter net turnover matched expectations, with net turnover amounting to EUR 15.3 million
–  the third-quarter operating result saw an improvement of 15% compared with the previous quarter
–  in the review period, net turnover was highest in September, increasing the capacity utilisation rate of all the units.
Comparison figures used in the report
In the text part of this Interim Report, the comparison figures for 2002 are pro forma figures comprising the divisions according to the Group’s present structure. The accounting policy for the pro forma figures is described in Annex 9. The comparison with the official figures is presented in Annexes 1, 2, 3 and 7. The official comparison figures comprise the Incap Group’s Electronics business sector for January-September 2002 as well as the Furniture business sector for January-February 2002 and the JMC Tools Group for May-September 2002.
Net turnover and financial performance in July-September
Net turnover in July-September increased by 5% compared with the previous quarter, amounting to EUR 15.3 million and representing growth of 16% compared with the corresponding period of the previous year (July-Sept./2002: EUR 13.2 million).
Operative performance in the third quarter was positive. The operating result improved by 15% on the previous quarter but remained EUR 0.5 million in the red. The result includes a total of EUR 0.7 million in non-recurring costs related to provisions for personnel arrangements and extraordinary depreciation and value adjustments of fixed assets.
Compared with the corresponding period of 2002, the operating result rose by 84%. Earnings per share were EUR 0.06 negative (0.28 negative).

Net turnover and financial performance in January-September
Consolidated net turnover in January-September was EUR 45.2 million, down 4% on the net turnover in the same period of 2002 (Jan.-Sept./2002: 47.1 million). 
The Group reported an operating loss of EUR 1.7 million, i.e. a 68% improvement on the same period of 2002 (operating loss: 5.5 million). The operating result includes a total of EUR 1.0 million in non-recurring costs.
Earnings per share in the report period were EUR 0.19 negative (0.52 negative) and equity per share was EUR 1.33 (1.60). The Group’s equity ratio was 38.9% (42.2%) and total assets were EUR 41.7 million (46.2 million).

Development of operations
Demand for telecommunications network products picked up in the third quarter and, after the quiet first half of the year, deliveries of measurement technology equipment also recovered significantly. In the review period, net turnover was highest in September, increasing the capacity utilisation rate of all the units.
In response to the continuously tight price competition, the electronics manufacturing in the Estonian unit was increased. Furthermore, the Group started up assessments of how to more extensively tap into Baltic opportunities.
A re-evaluation of the strategic focus areas commenced in September. The goal in the upcoming months is to improve profitability, such as by upgrading the efficiency of materials management processes and increasing the capital turnover rate. Net turnover growth is sought mainly by firming up and expanding co-operation with the Group’s present customers.
The quality project of the Kempele and Ruukki factories is progressing according to plan with the aim of achieving ISO9001/ISO14001 certificates – of the same type as those of the other factories – for the quality and environmental systems of these units in January 2004.
The results of the customer satisfaction survey carried out in the summer showed positive development in all subareas of customer service, compared with the corresponding study performed in 2002. According to the results, customers view understanding customers’ needs, ease of transacting business and the professional expertise of employees as Incap’s particular strengths.
The Group’s liquidity was satisfactory: the quick ratio was 0.7 (0.7) and the current ratio 1.6 (1.9). Cash flow from operations was EUR 3.3 million (3.6 million negative), and the change in cash flows was an increase of EUR 1.0 million (decrease of 0.3 million). Net financial expenses came to EUR 0.6 million (0.8 million). Net debt totalled EUR 14.0 million (EUR 17.6 million) and the gearing ratio was 80.7% (82.9%). The equity ratio was 38.9% (42.2%).
Cash flow from operations was positive. The Group’s liquid assets at 31 October 2003 amounted to EUR 3.4 million, of which EUR 1.4 million consisted of unused credit facilities. The company estimates that available funds will suffice at least in accordance with the liquidity plan that has been drawn up for the next 12 months.
Capital expenditures
The Group’s gross capital expenditures in the report period totalled EUR 0.4 million (0.4 million), or about 0.8% of net turnover (0.8%).
Research and development
Spending on research and development amounted to EUR 1.4 million, or 3% of net turnover (EUR 1.4 million, 3% of net turnover). The respective expenditure has been booked to expenses for the period.
At the beginning of the report period, the Incap Group had a payroll of 589 employees and at the end of the report period it had 561 employees. At the end of September, 47 employees had been laid off (84 employees at the start of the year).
Share and share price trend
The number of shares is 12,180,880. The price of the Incap Corporation share varied in the range of EUR 0.87 to EUR 1.66 during the report period, and the share price at the close of the period was EUR 1.39. Share turnover during the report period was slightly over 7%. At the end of the report period, the company had 676 shareholders, or about 23% more than at the beginning of the year. The company’s market capitalisation at 30 September was EUR 16.9 million.
Valid authorisations of the Board of Directors
At the close of the report period, the Board of Directors had an authorisation, granted by the Annual General Meeting, to increase the share capital by a maximum of EUR 4,092,775.68.
As President and CEO acted Seppo Ropponen until 7 July, after which Rauni Nokela, Vice President, Finance and Administration, served as acting President. Juhani Hanninen, M.Sc. (Eng.), was appointed as the Group’s new President and CEO as from 1 September. Tuula Ylimäki, M.Sc. (Econ.), was appointed as the Group’s Chief Financial Officer, as from 1 October.
The company’s new organisation was made public at the end of September and came into force on 1 November. The overhaul of the organisation is aimed at improving customer service, streamlining the operating practices of the different production units, shifting the operational focus to extensive integrated deliveries and improving the efficiency of materials management, which is essential to profitability. In the new structure, the production and development of all the company’s manufacturing services have been grouped together in the Manufacturing Services Unit. Marketing and sales functions related to the care of customer relations comprise a single entity. The development of material functions was centralised in its own organisational unit, with Ari Turunen appointed as its head as from 1 November.
The Group’s management team comprises Juhani Hanninen (President and CEO), Hannele Pöllä (Communications and Investor Relations), Petri Saari (Sales and Marketing), Timo Sonninen (Manufacturing Services), Ari Turunen (Materials Management) and Tuula Ylimäki (Finance and Administration).
Outlook for the future
Although tentative signs of a recovery are evident in demand, customers remain very restrained in their forecasts.
Incap’s fourth-quarter net turnover and operative performance are expected to be better than in the previous quarters of the year. The company is presently assessing the need for potential further structural arrangements and if these prove to be necessary, the result in the last quarter may remain negative. However, operative performance is anticipated to be in the black in the last quarter.
Full-year net turnover is expected to be roughly on the previous year’s level. The operating result is anticipated to be significantly better than the pro forma result for 2002.
The financial statement bulletin for 2003 will be published on Wednesday, 25 February 2004.
Board of Directors
Juhani Hanninen
President and CEO
The full report including tables can be downloaded from the enclosed link.
Helsinki Exchanges
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For additional information, contact:
Juhani Hanninen, President and CEO, tel. +358 50 556 7199
Tuula Ylimäki, Chief Financial Officer, tel. +358 40 347 2025
Hannele Pöllä, Director, Communications & IR, tel. +358 40 504 8296