• revenue was down 19.3% on the same period a year earlier, totalling EUR 17.0 million (Jan.-Mar. 2006: EUR 21.0 million)
  • operating profit was EUR 1.2 million negative (1.4 million positive)
  • net profit for the report period amounted to EUR 1.3 million negative (1.6 million positive)
  • earnings per share were EUR 0.11 negative (0.13 positive)
  • the telecommunications sector’s demand weakened more than expected, resulting in substantially lower deliveries
  • a Letter of Intent for an acquisition was signed with India-based TVS Electronics
Juhani Hanninen, President and CEO of Incap Corporation: “The telecommunications sector’s demand weakened more than expected during the early part of the year, and we have not been able to generate additional revenue quickly enough to replace the deficit. Our quotation base is at a high level at the moment. Early in the year, we continued our drive to become more international and our investment in the development of Incap’s Asian businesses, which raised our costs and impacted on the quarter’s profitability.”
This Interim Report has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS), but not in compliance with all the requirements of the IAS 34 standard. The accounting policies and calculation methods used in the preparation of the Interim Report are in line with those of the latest financial statements.
Revenue and financial performance in January-March
Incap’s revenue in the first quarter totalled EUR 17.0 million, down 19.3% on the same period last year (Jan.-Mar. 2006: EUR 21.0 million).
Operating profit in January-March was EUR 1.2 million negative (1.4 million positive), or 7.0% negative of revenue (6.6% positive). The result includes non-recurring business development expenses totalling EUR 0.2 million. Operating profit during the same period in 2006 included EUR 0.3 million in other operating income.
In addition to low production volumes, first-quarter profitability was influenced by the fact that the company manufactured mostly material-intensive products. Moreover, inputs into the development of operations, the drive to become international and the start-up of the Indian operations increased costs.
The profit for the comparative period (January-March 2006) includes non-recurring changes in deferred tax assets totalling EUR 0.3 million.
Development of operations
Demand for electronics manufacturing services was, with the exception of the telecommunications sector, at a good level. Demand for telecommunications products fell sharply within a very short period of time. Tendering was brisk and progress was made in the acquisition of new customers. During the report period, Incap started co-operation with Efore and Bevesys, among others. Incap is currently negotiating agreements for the manufacture of several new products for present and new customers, and believes that they will bring revenue already during the second quarter.
Lloyd’s Register Quality Assurance Ltd. granted the Kuressaare facility an ISO13485:2003 certificate which is widely applied to the manufacture of medical devices. The successful audit and the certificate will significantly boost Incap’s potential for increasing the share of medical devices manufacturing out of revenue. Similar audits will be conducted at the company’s facilities in Vuokatti and Helsinki.
Aiming for strong growth and a more international profile
In February 2007, Incap signed a Letter of Intent with TVS Electronics Limited for the acquisition of an electronics contract manufacturing unit in India. Business deal and financing for it is currently being negotiated and the target is to sign the final agreement during the second quarter of the year. The factory to be acquired is located in Tumkur, near Bangalore and mostly manufactures integrated products. The unit conducts circuit board assembly and manufactures power supplies, among other things.
During the report period, Jarmo Ukonaho was appointed as General Manager and Sylvi Kuikka as Business Controller of Incap’s Indian operations. The Indian subsidiary’s management and sales are located in Bangalore.
With this business deal Incap pursues growth and internationalisation in accordance with its strategy. Company aims at strengthening its position as an international partner for world’s leading device manufacturers.
Short-term risks and factors of uncertainty
Incap’s sales are spread over several customer sectors, which hedges the company against sharp seasonal changes. The first-quarter drop in revenue from customers operating in the telecommunications sector, however, occurred extremely quickly, causing financial effects.
In accordance with its strategy, Incap is continuing to balance its customer base so that the loss of a single customer or several customers from the same sector does not expose the company to a major financial risk.
Rapid fluctuations in demand are typical to Incap’s sector, resulting in low market visibility even in the short term. Incap strives to improve its internal flexibility and ability to react, so that changes can be influenced and, if necessary, adapted to quickly.
Financing and cash flow
The Group’s equity ratio remained good at 45% (47%). Interest-bearing net liabilities totalled EUR 11.6 million (6.4 million) and the gearing ratio was 61.2% (34.5%). Net financial expenses were EUR 0.2 million (0.1 million) and depreciation EUR 0.7 million (0.6 million). The Group’s liquidity was satisfactory: the quick ratio was 0.6 (0.9) and the current ratio 1.5 (1.8). Cash flow was EUR 2.6 million negative (0.4 million negative) and the change in cash and cash equivalents was a decrease of EUR 0.4 million (a decrease of 1.4 million). The change in cash flow was influenced by a growth in working capital employed.
The Group’s equity at the close of the report period was EUR 19.0 million (18.5 million). Liabilities totalled EUR 22.9 million (20.8 million), of which interest-bearing liabilities amounted to EUR 11.7 million (7.2 million).
Capital expenditures
The Group’s capital expenditures during the January-March period totalled EUR 0.3 million (EUR 0.4 million), or about 1.8% of revenue (1.8%).
At the beginning of the period under review, the Incap Group had a payroll of 541 employees and at the end of the period it had 525 employees. The average number of personnel was 530 (463).
At the end of the report period, 273 of Incap’s personnel were women and 252 were men. 464 were permanently employed staff and 61 fixed-term employees. There were 6 part-time employment contracts at the end of the period.
The co-determination negotiations started at the Vuokatti factory in 2006 were concluded in January 2007, as a result of which 53 people were laid off from the unit.
Anne Sointu, M.Sc. (Econ.), eMBA, was appointed Incap Group’s
Chief Financial Officer and a member of the Management Team as from 1 January 2007. Prior to joining Incap, Sointu had served as Director of Finance and IT in the Kemppi Group since 1993.
Sami Mykkänen, B.Sc. (Eng.), was appointed Vice President, Manufacturing Services, and a member of the Management Team as from 1 March 2007, replacing Anja Rouhiainen, M.Sc. (Ph.), who held the position temporarily. Mykkänen oversees the operations of all of Incap’s manufacturing units, apart from Ultraprint Oy, and the company’s design unit. Mykkänen was previously employed with Powerwave where he had worked since 1994.
Annual General Meeting
The Annual General Meeting of Incap Corporation was held in Oulu, Finland, on 3 April 2007.
The Annual General Meeting adopted the consolidated and parent company financial statements for 2006 and granted release from liability to the responsible officers. In accordance with the proposal of the Board of Directors, the Annual General Meeting resolved that no dividend be paid for 2006.
The Annual General Meeting authorised the Board of Directors to decide, within one year of this Annual General Meeting, on increasing the share capital through one or more rights issues and on granting stock options, so that the maximum total number of shares subscribed for by means of this authorisation shall be 2,500,000.
The Annual General Meeting elected Jukka Harju, Juha-Pekka Kallunki, Kalevi Laurila, Susanna Miekk-oja and Sakari Nikkanen to seats on the Board of Directors. From amongst its number, the Board of Directors elected Kalevi Laurila as Chairman. Jari Pirinen, LL.M., will continue to serve as Secretary to the Board of Directors.
The firm of independent accountants Ernst & Young Oy was elected as the Group’s auditors, with Rauno Sipilä, Authorised Public Accountant, acting as the principal auditor.
Shares and shareholders
Incap has 12,180,880 shares in issue. The price of the Incap Corporation share varied in the range of EUR 1.89 to EUR 2.67 during the report period, and the closing share price at 31 March 2007 was EUR 2.13. The trade volume was 22% of the shares outstanding.
At the end of the report year the company had 1,123 shareholders. Foreign and nominee-registered owners held 14.9% of all shares. The company’s market capitalisation at 31 March 2007 was EUR 25.9 million.
Share options
The Incap Group currently runs a share option scheme that was introduced in 2004 and that commits key employees to long-term share ownership. There are a total of 630,000 share options, entitling their holders to subscribe for an equal number of shares. The share options are divided into A, B and C warrants.
The share subscription period for warrants 2004A began on 1 April 2007 and will continue through to 30 April 2009. The subscription period for shares to be subscribed for with the warrants will not commence until the average price of the Incap share weighted by two calendar months’ trade volume is at least 3 euros.
Announcements in accordance with Chapter 2, Section 9, of the Securities Market Act on changes in holdings
Ingman Finance Oy Ab announced on 26 January 2007 that its holdings of the share capital and votes of Incap Corporation had exceeded 10%. OKO Bank plc announced on 31 January 2007 that its holdings in Incap Corporation had fallen below 5%.
Outlook for the future
At Incap’s area of business the market outlook is good, with Incap’s customers expecting demand for their own products to have a stable trend in 2007. Due to the drop in deliveries to the telecommunications sector, Incap estimates that revenue during the first half of the year will fall from last year’s figure. Revenue to replace the deficit is being sought from present and new customers, although the agreements that are currently being negotiated or that have been signed will not generate significant revenue during the second quarter yet. Due to the decrease in revenue, the company is expected, as earlier announced, to post a loss for the first half of the year.
Incap will release its January-June Interim Report on Wednesday, 8 August 2007.
Board of Directors
For additional information, contact:
Juhani Hanninen, President and CEO, tel. +358 50 556 7199
Anne Sointu, Chief Financial Officer, tel. +358 40 347 2059
Hannele Pöllä, Director, Communications and Investor Relations, tel. +358 40 504 8296
Incap will arrange a conference for the press and securities analysts today at 10.00 a.m. at the World Trade Center Helsinki, in Meeting Room 1 on the 2nd floor, at the address Aleksanterinkatu 17, FI-00100 Helsinki.
Helsinki Stock Exchange
Principal media
Incap Corporation is a rapidly developing electronics contract manufacturer whose services cover the entire product life cycle from design and manufacture to repair and maintenance services. The company’s main customer sectors are leading equipment suppliers in telecommunications, electrical power technology, the automation and process industries as well as measurement technology, security electronics and health care. In 2006, the Incap Group’s revenue amounted to EUR 89 million and the company currently has a payroll of about 540 employees. Incap’s share is listed on the Helsinki Stock Exchange and is a component of the Nordic Small Cap list within the information technology sector. For additional information, visit
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
Group Key Figures and Contingent Liabilities
Annex 1
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Annex 2
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Annex 3
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Annex 4
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Annex 5