INCAP GROUP INTERIM REPORT JANUARY-MARCH 2006: REVENUE GROWS AND PROFITABILITY IMPROVES

 
 
  • revenue in January-March was up 4.1% on the same period a year earlier, totalling EUR 21.0 million (Jan.-Mar. 2005: EUR 20.2 million)
  • operating profit was EUR 1.4 million (1.2 million), or 6.6% of revenue (6.1%)
  • net profit for the report period amounted to EUR 1.6 million (0.8 million), or to 7.4% of revenue (3.9%)
  • earnings per share were EUR 0.13 (0.06)
 
This interim report has been prepared in accordance with the recognition and measurement principles of the International Financial Reporting Standards (IFRS). The profit for the report period in 2005 consisted of continuing and discontinued operations.
 
REVENUE AND FINANCIAL PERFORMANCE IN JANUARY-MARCH
 
Incap’s revenue in January-March totalled EUR 21.0 million, topping the figure for the final quarter in 2005 by 5.3% (Oct.-Dec. 2005: EUR 20.0 million) and growing by 4.1% compared to the continuing operations in same period last year (Jan.-Mar. 2005: EUR 20.2 million). The total revenue for January-March 2005 including discontinued operations was EUR 20.9 million.  
 
Operating profit in January-March amounted to EUR 1.4 million, or 6.6% of revenue. Operating profit during the same period in 2005 was EUR 1.2 million (6.1% of revenue).
 
A non-recurring adjustment to rental expenses totalling EUR 0.3 million was booked to other operating income during January-March.
 
Net profit for the report period was EUR 1.6 million (0.8 million), or 7.4% of revenue (3.9%). Earnings per share were EUR 0.13 (0.06) and equity per share was EUR 1.52 (1.00).
 
DEVELOPMENT OF OPERATIONS
 
Demand for Incap’s manufacturing services was at a good level and picked up towards the close of the period. Demand for telecommunications products and measurement technology exceeded expectations. The period also saw a growth in integrated deliveries containing electronics and mechanical fabrication.
 
The prototype fabrication and preproduction manufacturing outsourced by Tellabs was integrated into Incap’s operations according to timetable. Agency agreements were used to boost the efficiency of the acquisition of new customers in the European market area. In March, the annual customer satisfaction survey was carried out, the results of which will be utilised for improving operations and deepening customer relationships.
 
The company modernised its sheet metal mechanical fabrication by investing in a punch press, press brake and planer-type milling machine, among others. All factories have full capability for lead-free production.
 
Research into the possibility of launching operations in India was continued as planned.
 
FINANCING AND CASH FLOW
 
 
The Group’s equity at the close of the report period was EUR 18.5 million (12.2 million). Liabilities decreased to EUR 20.8 million (30.1 million), of which interest-bearing liabilities amounted to EUR 7.2 million (14.6 million).
 
Net financial expenses were EUR 0.1 million (0.2 million) and depreciation EUR 0.6 million (0.7 million). Interest-bearing net liabilities decreased to EUR 6.4 million (14.3 million) and the ratio of net liabilities to equity (gearing) was 34% (117%). The equity ratio improved remarkably to 47% (29%).
 
The Group’s liquid assets at 3 May 2006 amounted to EUR 1.7 million. 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 capital expenditures during the report period totalled EUR 0.4 million (EUR 0.2 million), or about 2% of revenue (1%).
 
PERSONNEL
 
At the beginning of the period under review, the Incap Group had a payroll of 450 employees and at the end of the period it had 482 employees.
 
ANNUAL GENERAL MEETING
 
The Annual General Meeting of Incap Corporation was held on 11 April 2006 in Oulu. The Annual General Meeting adopted the consolidated and parent company financial statements for 2005 and granted release from liability to the responsible officers. No dividend was paid for the 2005 financial year.
 
The Annual General Meeting authorised the Board of Directors to decide on increasing the share capital through one or more rights issues, the floating of one or more issues of convertible bonds and/or granting stock options. The authorisation provides for raising the company’s share capital by a maximum of about 4,092,776 euros, and it is valid up to 11 April 2007.
        
The Annual General Meeting re-elected Seppo Arponen, Juha-Pekka Kallunki, Kalevi Laurila, Timo Leinilä, Sakari Nikkanen and Jorma Terentjeff to seats on the Board of Directors. From amongst its number, the Board of Directors re-elected Jorma Terentjeff chairman.
 
The firm of independent accountants Ernst & Young Oy continues as the Group’s auditors in accordance with the resolution of the Annual General Meeting. The principal auditor is Rauno Sipilä, Authorised Public Accountant.
 
SHARES AND SHAREHOLDERS
 
Incap had 12,180,880 shares in issue. The price of the Incap Corporation share varied in the range of EUR 1.82 to EUR 2.19 during the report period, and the closing share price at 31 March 2006 was EUR 2.08. The trade volume was 17.2% of the shares outstanding.
 
At the end of the report year the company had 1,273 shareholders. The company’s market capitalisation at 31 March 2006 was EUR 25.3 million.
 
OUTLOOK FOR 2006
 
Based on forecasts presented by customers and current estimates for revenue, Incap is expecting its revenue for 2006 to top that of 2005. Predicting future trends is made all the more difficult by fluctuations in demand typical to the industry and short market visibility.
 
Incap will continue to implement measures in accordance with its strategy in order to achieve stronger growth than at present. The company will boost the efficiency of its acquisition of new customers, research the possibility of launching manufacturing operations in Asia, improve its order-delivery process and modernise its production capacity.
 
Relative profitability in 2006 is expected to remain on the same level as last year.
 
 
INCAP CORPORATION
Board of Directors
 
The full report including tables can be downloaded from the enclosed link.