* revenue was EUR 56.7 million (Jan.-Sep. 2006: EUR 65.3 million)

  * operating profit was EUR 1.7 million negative (3.2 million positive)
  * net profit for the report period amounted to EUR 2.6 million negative (3.6 million positive)
  * earnings per share were EUR 0.21 negative (0.30 positive)
  * revenue developed favourably after the sharp decline in the early part of the year but fell short of the targets
  * costs related to internationalisation burdened the result
Juhani Hanninen, President and CEO of Incap Corporation: “Third-quarter revenue improved on the previous quarters but this was not enough to compensate for the sharp decline in demand for telecommunications products in the early part of the year.
The launch of operations in India was an important milestone in the company’s internationalisation according to strategy, and acquisition of new customers in India has progressed well.
Our crucial objective is to improve profitability and secure positive earnings development next year.”
Accounting policies applicable to the interim report
This interim report has been prepared in compliance with the IAS 34 Interim Financial Reporting standard, and the accounting policies are in line with those of the annual financial statements. The operations of the manufacturing unit in India have been consolidated with the reported figures as of 1 June 2007, and as a result the figures presented in this report are not comparable with those of the corresponding period in 2006.
Revenue and financial performance in July-September
Third-quarter revenue increased by 7.7% on the previous quarter to EUR 20.6 million. This represents a decline of 5.6% on the same period last year.
Operating profit in July-September was EUR 0.6 million negative (0.6 million positive). 

Revenue and financial performance in January-September
Incap’s revenue in January-September was EUR 56.7 million, down approximately 13% on the same period in 2006 (Jan.-Sep. 2006: EUR 65.3 million).
Operating profit in January-September was EUR 1.7 million negative (3.2 million positive), or 3.0% negative of revenue (4.8% positive). The result includes non-recurring expenses totalling approximately EUR 0.6 million associated with business development and implementation of the growth strategy, EUR 0.5 million of which is attributable to India.
Net profit for the report period amounted to EUR 2.6 million negative (3.6 million positive), or 4.5% negative of revenue (5.5% positive). Earnings per share (EPS) amounted to EUR 0.21 negative (0.30 positive), while equity per share stood at EUR 1.46 (1.69).

Development of operations
In the third quarter, Incap’s revenue increased on the previous quarters. A sharp decline in deliveries of telecommunications products at the beginning of the year was reflected in revenue for the entire report period. Third-quarter revenue was reduced by difficulties in the supply of certain components and by the prolonged start-up of certain new products.
New supply agreements with customers in various industries were signed during the report period. The number of new products at prototype and pre-production stages was higher than usual during the third quarter.
The integration of the Indian manufacturing unit acquired in June into the Group was completed on schedule in September, and acquisition of new customers in India has started well.
After the report period, in October, Incap started to investigate the possibility of selling its production and office facilities in Helsinki, Vuokatti and Kempele. Following the possible divestment, Incap would continue operations in the same premises as a leaseholder. If realised, the sale of premises is estimated to have a positive earnings effect.
Short-term risks and factors of uncertainty
Incap’s sales are spread over several customer sectors, which hedges the company against sharp seasonal changes. In accordance with its strategy, the Group will continue 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 significant financial risk.
The acquisition of a new business unit in India has increased the Group’s financing risk and exchange rate risk. Interest rate risk, as well as the exchange rate risk associated with financing and operations, are managed through a financing structure that is balanced between the Group’s main currencies.     
Financing and cash flow
The Group’s equity ratio was 31.2% (43.6%). Interest-bearing net liabilities totalled EUR 22.0 million (12.4 million) and the gearing ratio was 124.3% (60.0%). Net financial expenses were EUR 0.9 million (0.3 million) and depreciation and amortisation expense was EUR 2.0 million (1.7 million). The Group’s liquidity was satisfactory: the quick ratio was 0.7 (0.9) and the current ratio 1.6 (1.7). Cash flow was EUR 4.1 million negative (1.0 million negative) and the change in cash and cash equivalents was an increase of EUR 1.0 million (a decrease of 2.0 million).
The Group’s equity at the close of the report period was EUR 17.7 million (20.6 million). Liabilities totalled EUR 39.1 million (26.7 million), of which interest-bearing liabilities amounted to EUR 23.5 million (12.5 million).
Capital expenditures
The Group’s capital expenditures excluding the business acquisition in India totalled EUR 1.1 million (EUR 5.9 million), or about 1.9% of revenue (9.0%).
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 778 employees. The average number of personnel was 633 (509); 352 employees are based in Finland, 202 in Estonia and 224 in India.
577 were permanently employed staff and 201 fixed-term employees. There were 6 part-time employment contracts at the end of the period.
Shares and shareholders
Incap has 12,180,880 shares on issue. The price of the Incap Corporation share varied in the range of EUR 1.76 to EUR 2.67 during the report period, and the closing share price on 30 September 2007 was EUR 1.85. The trading volume was 30% of outstanding shares.
At the end of the report period the company had 1,114 shareholders. Foreign and nominee-registered owners held 16.3% of all shares. The company’s market capitalisation on 30 September 2007 was EUR 22.5 million.
Share options
The Incap Group currently runs a share option scheme that was introduced in 2004 and 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’ trading volume is at least 3 euro.
Announcements in accordance with Chapter 2, Section 9, of the Securities Market Act on changes in holdings
Ilmarinen Mutual Pension Insurance Company announced that after having purchased convertible bonds on 21 May 2007, its share of Incap’s share capital and votes would exceed 5% if the company exercises the bonds to subscribe for new shares. The OP Bank Group Central Cooperative announced that if mutual funds managed by its subsidiary OP Fund Management Ltd were to exercise the subscription rights associated with their convertible bond purchases in full, the OP Bank Group Central Cooperative’s ownership share would exceed 5%.
Transactions carried out after the report period on 9 and 10 October 2007 increased Etra Invest Oy’s ownership share to 28.6%. Irish Life International announced that it had divested its 9.5% stake through transactions carried out on 10 October.
Outlook for the future
Incap’s customers mostly forecast that their business will develop favourably. However, market visibility is very short. 
Incap expects that revenue in the final quarter of the year will be higher than in the third quarter. The Group’s full-year revenue in 2007 is forecast to be clearly lower than in 2006. Full-year operating profit is estimated to be clearly negative.
Board of Directors
For additional information, please 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
OMX Nordic Exchange Helsinki
Principal media
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 Aleksanterinkatu 17, FI-00100 Helsinki.
Incap Corporation is a fast-growing electronics contract manufacturer whose comprehensive service covers 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, safety electronics and health care. The Incap Group’s revenue in 2006 amounted to EUR 89 million and the company currently employs approx. 750 persons. Incap’s share is listed on the OMX Nordic Exchange Helsinki. For additional information, please visit
1 Consolidated Income Statement
2 Consolidated Balance Sheet
3 Consolidated Cash Flow Statement
4 Consolidated Statement of Changes in Equity
5 Notes to the Interim Report
6 Group Key Figures and Contingent Liabilities

Annex 1
(EUR thousands, unaudited)

Annex 2
(EUR thousands, unaudited)


Annex 3
(EUR thousands, unaudited)

Annex 4
(EUR thousands, unaudited)


Annex 5
Accounting policies applicable to the interim report
This interim report has been prepared in compliance with the IAS 34 Interim Financial Reporting standard, and the accounting policies are in line with those of the annual financial statements. The operations of the manufacturing unit in India have been consolidated with the reported figures as of 1 June 2007, due to which the figures presented in this report are not comparable with those of the corresponding period in 2006.
Acquired operations
Incap Corporation’s subsidiary Incap Contract Manufacturing Services Pvt. Ltd., established in India in April 2007, acquired a business unit manufacturing electronics and integrated equipment from TVS Electronics Limited on 31 May 2007. The number of personnel transferred in the business acquisition was 230, and the company is estimated to receive approximately EUR 6 million in revenue in 2007. The total acquisition price was EUR 8.3 million, paid in cash. In addition to the cash consideration, a total of EUR 0.5 million in consultancy fees and other costs directly associated with the acquisition are included in the acquisition cost. Part of the acquisition cost exceeding the balance sheet value, EUR 1.2 million, was allocated to intangible rights by calculating fair values for the acquired customer base.  TVS Electronics will build new premises in the acquired land area for Incap’s use by the end of 2008, for which an advance payment of EUR 1.0 million has been recognised. The remaining goodwill, EUR 1.0 million, is based on Incap’s improved position in the Asian contract manufacturing market.
The following assets and liabilities were recognised for the acquired object:

There are no temporary tax differences to be recognised on the allocated intangible rights.
Convertible bond
On 21 May 2007 the Group issued 1,250 units of convertible bonds with a nominal value of EUR 5,400 each for a total amount of EUR 6,750,000 for the purpose of financing the business acquisition in India and future investments.  The term of the convertible bond is from 25 May 2007 to 25 May 2012 if the holders of the bonds do not exercise their right to convert the bonds into the parent company’s shares. A bond with a nominal value of EUR 5,400 can be converted into 2,000 shares of the parent company at a conversion rate of EUR 2.70. The conversion period for bond units is from 19 June 2007 to 30 April 2012.  The convertible bond has not been divided into equity and liabilities in the financial statements as the equity component is not substantial at the time of issuance of the bond.

Annex 6