• net turnover was up 9% on the same period a year earlier and was EUR 20.9 million (Jan.-Mar. 2004: EUR 19.2 million)
  • profitability was on a par with the same period of last year and operating profit was EUR 0.56 million (0.59 million), or 3% of net turnover
  • earnings per share were EUR 0.03 (0.04)
  • the aluminium machining and plating business was sold on 1 April 2005
  • within electronics manufacture, a new assembly line went into operation in February
Net turnover was EUR 20.9 million, up 9% on the same period a year earlier (Jan.-Mar. 2004: EUR 19.2 million). Compared with the last quarter of 2004, net turnover declined by 4%.
Operating profit in January-March was EUR 0.6 million (0.6 million). Compared with the last quarter of 2004, operating profit increased by 36%. Earnings per share for the period were EUR 0.03 (0.04).
The market situation remained stable at the level of the latter part of 2004. Demand for products used in the telecommunications sector picked up in February-March, and the increase in demand was met by adding electronics assembly capacity. There was also rising demand in the electrical power industry.
Earnings during the period were affected by the predominant share of materials-intensive products within Incap’s production. In addition, the quarter was still burdened by the losses incurred in aluminium machining and plating.
The start-up of works to expand the Kuressaare unit was postponed and the new production facilities are scheduled for completion during first half of 2006.
A new SMD assembly line and an optical quality inspection device went into operation at the Vuokatti unit in February. It was decided to modernise the machinery for sheet metal fabrication at the unit in Helsinki, and a modern punch press with integrated laser cutting was ordered. The additional capacity in Helsinki is scheduled to come on stream in June 2005.
The new chemical milling line that was purchased last summer for the subsidiary that manufactures flexible circuit boards and chemically milled products has proved efficient, and demand for the RFID applications has grown steadily.
The aluminium machining and plating operations in Kempele and Ruukki were sold to Maricomp Ruukki Oy and Maricoat Ruukki Oy, which belong to the Maricap Group. The operations were transferred on 15 April 2005 after the close of the report period. The purchasing companies will continue aluminium machining and plating in the present leased premises in the Ruukki Industrial Park, where the machining operations in Kempele will also be moved. The 69 employees who worked in Incap’s machining and plating operations transferred to the employ of the purchasing companies under the terms of their existing employment contracts.
The net turnover target in 2005 of the transferring operations was about EUR 5 million. The non-recurring write-downs made in the 2004 financial statements are estimated to be sufficient, and the divestment will not result in a need to make further write-downs.
In the negotiations on the deal, broad-based co-operation was agreed that will ensure the machining and plating services which Incap’s customers will require in the years ahead.
With the divestment of the aluminium machining and plating operations, the number of Incap’s locations was reduced to five. So Incap now has the units that focus on electronics and assembly in Vuokatti and Kuressaare, the units specialised in sheet-metal mechanics and assembly in Vaasa and Helsinki as well as the head office functions and manufacture of chemically milled products in Kempele.
After the recent structural reorganisation the company’s resources now can be channelled towards implementing its growth strategy. Growth in net turnover will be sought both by increasing co-operation with present customers and by acquiring new customers mainly in Scandinavia and central Europe. The range of services offered will be developed among others within design services. Demand for these services is growing strongly and resources in this area will enable Incap to strengthen its co-operation with customers in other service segments as well.
In line with its strategy, Incap is concentrating on technically demanding products that are manufactured in medium-sized and small series. In these products it is possible to achieve a relatively better level of profitability than in mass-produced articles that are manufactured in large series. 
Incap is pushing ahead with the energetic development of its service capability, with an emphasis on realising the targets for enhancing its materials management function. 
The Group’s liquidity was satisfactory: the quick ratio was 0.9 (0.8) and the current ratio 1.5 (1.6). Cash flow from operations was EUR 0.6 million (0.6 million) and the change in cash flows was a decrease of EUR 0.1 million (decrease of 0.4 million).
Consolidated shareholders’ equity amounted to EUR 12.1 million at the close of the report period (13.4 million). Liabilities totalled EUR 26.1 million (23.8 million), of which interest-bearing liabilities amounted to EUR 10.3 million (12.3 million).
Net financial expenses were EUR 0.1 million (0.2 million) and depreciation EUR 0.4 million (0.7 million). Net debt decreased to EUR 9.0 million (10.9 million) and the gearing ratio was 83% (86%). Interest-bearing net debt amounted to EUR 10.0 million at the close of the report period (11.4 million). The equity ratio was satisfactory: 32% (36%). The Group’s liquid assets at 22 April 2005 amounted to EUR 3.0 million, of which EUR 0.9 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.
The Group’s capital expenditures in the report period totalled EUR 0.2 million (EUR 0.1 million), or about 1% of net turnover (1%).
At the beginning of the report period the Incap Group had a payroll of 544 employees and at the end of the year it had 532 employees. The number of laid-off staff decreased from 19 employees at the beginning of the year to 16 employees at 31 March 2005. The divestment of the aluminium machining and plating operations will cut the Group’s total number of staff by 69 employees as from 16 April.
The Annual General Meeting of Incap Corporation was held on 31 March 2005 in Oulu. The Annual General Meeting adopted the consolidated and parent company financial statements for 2004 and granted release from liability to the responsible officers. No dividend was paid for the 2004 financial year.
The Annual General Meeting authorised the Board of Directors to decide on increasing the share capital through one or more rights issues and/or the floating of one or more issues of convertible bonds and/or the granting of stock options such that the authorisation provides for raising the company’s share capital by a maximum of 4,092,775.68 euros (not an exact figure).
The clause in the Articles of Association concerning the number of the members of the Board of Directors was amended in line with the Corporate Governance recommendation and the number of ordinary members of the Board of Directors was set at from five to seven.
The Annual General Meeting re-elected Seppo Arponen, Kalevi Laurila, Timo Leinilä, Sakari Nikkanen and Jorma Terentjeff to seats on the Board of Directors. Juha-Pekka Kallunki was elected a new member. From amongst its number, the Board of Directors re-elected Jorma Terentjeff chairman.
The Annual General Meeting re-elected as the company’s auditor the independent firm of accountants Ernst & Young Oy, with Rauno Sipilä, Authorised Public Accountant, acting as principal auditor.
The Incap Group will publish its first interim report according to IFRS standards for the January-March period of 2006. Information on the effects on the financial figures of the transition to IFRS will be presented during 2005.
The number of shares is 12,180,880. The price of the Incap Corporation share varied in the range of EUR 2.07 to EUR 1.68, and the share price at the close of the period was EUR 1.75. Share turnover was 5%.
At the end of the report year the company had 1,036 shareholders. The company’s market capitalisation at 31 March 2005 was EUR 21.3 million.
The outlook for the general market situation is largely positive, but customers’ estimates of the trend in demand for their products are still cautious.
Incap estimates that its net turnover for 2005 will increase on the previous year despite the disposal of its machining and plating operations. It is believed that the Group’s profitability will improve on the result posted a year earlier.
Incap’s Interim Report for January-June 2005 will be published on Thursday, 4 August 2005.
Board of Directors
Juhani Hanninen
President and CEO
The full report including tables can be downloaded from the enclosed link.