INCAP GROUP INTERIM REPORT JANUARY-SEPTEMBER 2005:

 
  • Net turnover was up 7.4% on the same period a year earlier and totalled EUR 57.9 million (Jan.-Sept. 2004: EUR 54.0 million)
  • Operating profit doubled over the previous year and was EUR 2.4 million (1.2 million), or 4.1% of net turnover (2.2%)
  • Profit before extraordinary items was EUR 2.0 million (0.7 million)
  • Earnings per share before extraordinary items were EUR 0.14 (0.06)
  • A total of EUR 2.7 million from the disposal of businesses and deferred tax assets was booked to extraordinary income
  • A Memorandum of Understanding was negotiated with Tellabs Oy concerning the outsourcing of Tellabs’s prototype fabrication and preproduction manufacturing to Incap
 
 
NET TURNOVER AND FINANCIAL PERFORMANCE IN JULY-SEPTEMBER
 
The third quarter’s net turnover of EUR 16.6 million was, as expected, lower than that of the previous quarters and roughly equal to net turnover during the same period last year despite the disposal of the machining and plating operations (July-Sept./2004: EUR 16.8 million).
 
Operating profit in July-September was EUR 0.8 million, almost triple the figure reported for the same period a year earlier (0.3 million).
The operating profit margin on net turnover was 4.7%.
Earnings per share were EUR 0.04 (0.01). A total of EUR 1.9 million of deferred tax assets was booked to extraordinary income for the third quarter.
 
 
 
 
NET TURNOVER AND FINANCIAL PERFORMANCE IN JANUARY-SEPTEMBER
 
Net turnover in January-September was EUR 57.9 million, up 7.4% on the same period a year earlier (Jan.-Sept. 2004: EUR 54.0 million).
 
Operating profit doubled over the same period a year earlier, amounting to EUR 2.4 million (1.2 million). The operating profit margin on net turnover was 4.1% (2.2%).
 
Earnings per share were EUR 0.14 (0.06) and equity per share was EUR 1.32 (1.12). The Group’s equity ratio was 47% (35%) and total assets were EUR 33.9 million (38.5 million).
 
 
 
 
DEVELOPMENT OF INCAP’S OPERATIONS
 
Net turnover grew over the previous year due to good demand for telecommunications equipment and healthcare technology. The deliveries of components used in generators and electric engines also grew.
 
The good result for the first three quarters can be attributed to the improvement in operational efficiency. The disposal of the machining and plating businesses in April improved the Group’s operating result from May onwards.
 
A Memorandum of Understanding was negotiated with Tellabs Oy in September concerning the outsourcing of Tellabs’s prototype fabrication and preproduction manufacturing to Incap. The goal is to sign the actual agreement as soon as possible so that the business operations would transfer to Incap by the end of November.
 
Incap’s Estonian unit operated with full capacity, and the operations in Estonia will be further enlarged. The new production facilities due for completion in the spring of 2006 will triple the size of the current facilities. The first construction phase for the new factory will see the completion of 3,700 square metres of total space.
 
The Helsinki unit’s new sheet metal machining centre and punch press with integrated laser cutting were put into operational use according to the planned schedule. The equipment will improve the efficiency of the machining of demanding products, thus contributing to the improvement in the unit’s profitability.
 
Incap will also in the future focus on developing its service capability particularly in the technically demanding high mix – low volume solutions, which are well-suited to the company’s way of working. Incap’s strengths – flexibility, rapid reaction, skill and the ease of dealing with the company – provide a superior competitive edge in this sector.
 
Incap will continue to develop its service concept. Design services will be diversified both by increasing the company’s own resources and by networking with expert partners. Controlled and profitable growth will also be helped by investments into the training of personnel and development of know-how.
 
FINANCING AND CASH FLOW
 
The Group’s liquidity was good: the quick ratio was 1.4 (0.7) and the current ratio 2.3 (1.5). Cash flow from operations was EUR 3.3 million (0.5 million negative) and the change in cash flows was an increase of EUR 1.9 million (decrease of 0.9 million). Loan repayments totalled EUR 4.0 million.
 
Consolidated shareholders’ equity amounted to EUR 16.0 million at the close of the financial period (13.6 million). Liabilities totalled EUR 17.8 million (24.9 million), of which interest-bearing liabilities amounted to EUR 7.1 million (12.8 million).
 
Net financial expenses were EUR 0.3 million (0.4 million) and depreciation EUR 1.1 million (2.1 million). Interest-bearing net debt totalled EUR 4.8 million (12.5 million) and the gearing ratio was 30% (92%). The equity ratio rose to 47% (35%).
 
The Group’s liquid assets at 21 October 2005 amounted to EUR 4.7 million, of which EUR 3.5 million consisted of unused credit facilities. The company estimates that available funds will suffice, in accordance with the liquidity plan that has been drawn up, at least for the next 12 months.
 
CAPITAL EXPENDITURES
 
The Group’s capital expenditures in the report period totalled EUR 0.7 million (0.3 million), or about 1.1% of net turnover (0.5%).
 
PERSONNEL AND MANAGEMENT
 
At the beginning of the report period the Incap Group had a payroll of 544 employees and at the end of the period it had 432 employees. There were no laid-off staff at the close of the report period. The reduction in staff resulted mainly from the disposal of the aluminium machining and plating businesses.
 
ADOPTION OF IFRS STANDARDS (IAS)
 
The Incap Group will go over to reporting in accordance with the IFRS standard in its 2005 financial statements. The main implications for Incap from the adoption of IFRS will be in the booking of finance lease agreements (IAS 17), inventories (IAS 2), deferred taxes (IAS 12) and discontinued operations (IFRS 5). The comparative figures for the 2004 opening balance sheet and the 2004 financial accounts will be published in mid-November.
 
VALID AUTHORISATIONS OF THE BOARD OF DIRECTORS
 
The Board of Directors has current authorisations, granted by the Annual General Meeting on 31 March 2005, to decide on increasing the share capital, floating convertible bonds and/or the granting of stock options such that the company’s share capital is raised by a maximum of about 4,092,775.68 euros.
 
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 2.07 to EUR 1.65, and the share price at the close of the period was EUR 1.91. The trade volume was 16% of the shares outstanding.
 
At the end of the report period, the company had 1,084 shareholders (976 at the beginning of the year). The company’s market capitalisation at 30 September 2005 was EUR 23.1 million.
 
OUTLOOK FOR THE REST OF THE YEAR
 
Given the quick fluctuation in the business and the short market visibility, it is difficult to forecast the earnings trend.
 
On the basis of customers’ projections, Incap estimates its net turnover in the final quarter to be higher than in the third quarter. In line with an earlier estimate, net turnover for the whole year is expected to be slightly higher than in 2004 despite the disposal of the machining and plating operations. Operating profit for the entire year is estimated to grow over 2004.
 
 
INCAP CORPORATION
Board of Directors
 
 
Juhani Hanninen
President and CEO
 
The full report with tables can be downloaded from the link below.