Incap Group Interim report January-March 2010: profitability was burdened by structural change
(Thomson Reuters ONE) -
Incap Corporation Stock Exchange Release 5 May 2010 at 8:30 a.m.
INCAP GROUP INTERIM REPORT JANUARY-MARCH 2010: PROFITABILITY WAS BURDENED BY
STRUCTURAL CHANGE
* Incap decided to close down operations in Vuokatti factory and to centralise
company's European electronics manufacturing in Estonia - in order to get
out of overlapping and to increase efficiency of operations
* Revenue in the first quarter stood at EUR 13.4 million, or 27% lower than
during the comparable period in the previous year (1-3/2009: EUR 18.5
million)
* Operating profit (EBIT) was EUR -1.7 million (EUR -0.5 million)
* Planned cost savings from structural change did not reflect in full in the
result of the period
* Earnings per share were EUR -0.16 (EUR -0.08)
* Directed share issue carried out after the review period was subscribed in
full
This unaudited interim report has been prepared in accordance with international
financial reporting standards (IFRS). Unless otherwise stated, the comparison
figures refer to the same period the previous year.
Sami Mykkänen, the President and CEO of Incap Group: "The market situation
continued to be difficult, with the first months of the year being more quiet
than usual for a number of customers. Demand for both electric power and
well-being products remained at a low level."
"Our primary objective is to improve profitability. The centralisation of
electronics production at the Kuressaari plant is making good progress towards
our goal of completing the production transfer in the autumn. The structural
change is aimed at achieving significant cost savings which start realising
towards the end of the year."
"We have seen positive indications that the number of quotations is increasing
with intensive negotiations over the manufacture of new products and the new
customer relationships. We can increase our manufacturing capacity quickly
according to demand with no need for further investments. I trust that, as the
market situation improves, our business volumes will increase while the
negotiations held over the manufacture of new products will result in concrete
orders."
Revenue and net profit during January-March 2010
Revenue in the first quarter stood at EUR 13.4 million, or 27% lower than during
the comparable period in 2009 (1-3/2009: EUR 18.5 million).
The operating profit was EUR -1.7 million (EUR -0.5 million), comprising -12% of
the revenue (-3%).
Quarterly comparison 1-3/ 10-12/ 7-9/ 4-6/ 1-3/
(EUR thousands) 2010 2009 2009 2009 2009
Revenue 13,436 17,746 16,613 16,928 18,479
Operating profit/loss -1,670 -3,666 -314 -472 -518
Net profit/loss -1,899 -3,926 -810 -1,035 -949
Earnings per share, EUR
-0.16 -0.32 -0.07 -0.08 -0.08
The slow recovery of the general market situation was not yet reflected in the
total demand for Incap services. The order volumes of some of the largest
customers in well-being products were clearly lower than in the previous year.
The demand from customers in the energy efficiency industry was lower than
normal in Europe. The revenue of the Indian unit was clearly higher than in the
corresponding period last year, as expected.
Decrease in revenue had the most impact on profitability. Cost structure could
not be adapted according to decreased revenue in the same time scale, because
the product transfers required partial overlapping in the operations of
electronics factories in Vuokatti and Kuressaare.
The availability of specific components and materials declined in the global
market, causing additional challenges for the procurement organisation and
creating pressure for an increase in component prices.
Operations were adjusted through temporary lay-offs in all of the company's
functions. Accordingly, personnel expenses over the review period were about EUR
0.2 million lower than during the corresponding period last year. We continued
our savings measures and reduced other operating expenses by EUR 0.1 million.
Inventories stood 11% lower compared to the previous year and amounted to EUR
13.1 million (EUR 14.7 million). Compared with the end of the year 2009, the
amount of inventories increased by EUR 1.7 million (31 December 2009: EUR 11.4
million), which was mainly caused by the electronics manufacturing reserve
stocks established for product transfers.
The change in the production structure proceeded according to the company's
strategy. Cooperation negotiations at the Vuokatti plant were completed in March
as it was decided that the company's European electronics production will be
centralised to the Estonian plant during 2010. Centralised production will
improve operational efficiency and is aimed at achieving cost savings of EUR 3
million in 2011, compared with 2009. After closing the Vuokatti plant, Incap's
Finnish functions cover mechanics manufacturing and product assembly operations
in Helsinki and Vaasa.
Net financing costs dropped to EUR 0.2 million (EUR 0.4 million) because the
Indian rupee strengthened during the review period. Depreciation stood at EUR
0.7 million (EUR 0.7 million) Losses before tax amounted to EUR 1.9 million (EUR
0.9 million). The loss for the period was EUR 1.9 million (0.9 million).
Return on investment was -22% (-5%) and return on equity was -138% (-30%).
Earnings per share were EUR -0.16 (EUR -0.08).
Balance sheet
The balance sheet total fell by EUR 4.0 million to EUR 40.8 million. The Group's
equity at the close of the period under review was EUR 4.5 million (EUR 6.4
million at the end of 2009, and EUR 12.3 million on 31 March 2009). Liabilities
stood at EUR 36.3 million (EUR 33.3 million at the end of 2009, and EUR 32.6
million on 31 March 2009), of which EUR 22.1 million comprised interest-bearing
liabilities (EUR 21.3 million at the end of 2009, and EUR 19.9 million on 31
March 2009). Of liabilities, current liabilities took up EUR 25.5 million (EUR
22.2 million at the end of the year, and EUR 20.8 million on 31 March 2009). The
parent company's equity decreased to EUR 11.1 million, comprising 54% of the
share capital. The directed share issue carried out after the review period,
i.e. a total of 2,000,000 new shares, was subscribed in full.
The Group's equity ratio was 11.1% (27.4% on 31 March 2009). Interest-bearing
net liabilities totalled EUR 21.7 million (EUR 18.6 million) and the gearing
ratio was 477% (151%).
Financing and cash flow
The Group's quick ratio was 0.5 (0.6) and the current ratio 1.0 (1.3). Cash flow
from operations was EUR -0.3 million (EUR 0.8 million) and the change in cash
and cash equivalents showed a decrease of EUR 0.1 million (an increase of EUR
0.8 million).
Capital expenditures
Investment cash flow amounted to EUR 0.05 million (EUR 0.2 million).
Personnel
At the end of the review period, Incap Group employed 774 people. The average
number of personnel was 734 (728). Compared with the end of 2009, the number of
personnel was reduced by nine employees. At the end of the review period,
approximately 39% of the personnel worked in Finland, 23% in Estonia and 38% in
India.
The 2009 option programme
The criteria set for the option programme directed at the President and CEO, and
the other management team in 2009 were not met in 2009 with regard to operating
profit and working capital. In March 2010, the Board of Directors adjusted the
option programme's distribution principles, emphasising the fulfilment of each
personal objective, and decided to distribute 25,000 B-options to the President
and CEO, and a total of 100,000 C-options to the management team members.
The 2004 option programme
The subscription period of option rights 2004B expired after the review period
on 30 April 2010. Option rights were not used for subscriptions, because the
target share price was not realised according to the terms.
Annual General Meeting
Incap Corporation's Annual General Meeting was held in Helsinki on 13 April
2010, after the review period. The Annual General Meeting confirmed the
consolidated financial statements over the financial period ended on 31 December
2009. Following the Board of Directors' decision, the Annual General Meeting
decided that no dividend would be paid and the loss for the accounting period
(EUR 3,825,364.89) be left in equity.
The AGM discharged the Board members and the President and CEO from liability.
Kari Häyrinen, Kalevi Laurila, Susanna Miekk-oja and Lassi Noponen were
re-elected as Board members, and Raimo Helasmäki was elected as a new member. In
the new Board's organisation meeting, Kalevi Laurila was elected as Chairman and
Susanna Miekk-oja as Deputy Chairman.
Ernst & Young Oy, Authorised Public Accountants, was selected again as the
company's auditor after a competitive bidding.
The Annual General Meeting amended the Articles of Association in accordance
with the Corporate Governance code so that the notice of a meeting is to be sent
no later than 21 days before the AGM date, instead of 17 days before the AGM
date as prescribed in the current Articles of Association.
The Annual General Meeting authorised the Board to decide upon an increase in
share capital by one or more new issues within one year from the Annual General
Meeting so that the aggregate number of shares subscribed on the basis of the
authorisation will be no more than 1,500,000 shares.
Directed share issue
The Annual General Meeting held after the financial period on 13 April 2010
decided, according to the Board of Directors' proposal, upon increasing the
share capital through a directed share issue where a maximum of 2,000,000 new
shares were, deviating from the pre-emptive right of the current shareholders,
offered to the company's Board of Directors, President and CEO, management team
members, and those of the current shareholders who, at the beginning of the
offering on 13 April 2010, held at least 100,000 shares in the company.
The subscription price of the shares subscribed in the offering was EUR 0.64
which was the volume-weighted average price of the company's share on the
Helsinki Stock Exchange in March 2010.
The Board of Directors approved the subscriptions in its meeting held after the
review period on 3 May 2010. The Board of Directors, President and CEO and
management team members subscribed a total of 9.4% of new shares. Seven of the
biggest shareholders subscribed a total of 1,812,200 new shares. As a result,
all of the shares offered, i.e. a total of 2,000,000 shares, were subscribed.
The new shares comprise 16.4% of the company's all shares prior to the share
issue.
Shares and shareholders
Incap Corporation has one series of shares and the number of shares is
12,180,880. During the review period, the share price varied between EUR 0.60
and EUR 0.75 (EUR 0.43 and 0.68). The closing price for the period was EUR 0.67
(EUR 0.47). During the review period, the trading volume was 15% of outstanding
shares (3%).
At the end of the review period, the company had 1,158 shareholders (1,018).
Foreign or nominee-registered owners held 0.9% (3.1%) of all shares. The
company's market capitalisation on 31 March 2010 was EUR 8.0 million (EUR 5.7
million). The company does not own any treasury shares.
Short-term risks and factors of uncertainty concerning operations
The risks and factors of uncertainty relating to Incap's operations are
described in more detail in the report by the Board of Directors dated 23
February 2010. No significant changes have taken place with regard to these
factors during the review period.
The most significant short-term risks are connected with the volume of business,
financial arrangements and the costs of materials.
The development of customer-specific revenue is the most significant factor
affecting the company's result. The successful acquisition of new customers also
plays an important part in the future earnings development.
In contract manufacturing, the management of material costs has a great impact
on competitiveness. As a result, the availability of materials and changes in
market prices have an influence on Incap's delivery capacity and costs.
The company's financing is influenced by the trends in the general financial
market and the company's future earnings development. The company's financial
capacity is ensured by efficient working capital management while different
financing options are being investigated to secure financing.
The parent company's equity decreased to EUR 11.1 million over the review
period, comprising 54% of share capital. The directed share issue carried out
after the review period was subscribed in full, strengthening the company's
financial position.
Outlook for the rest of 2010
Incap's estimates on future business development are based on its customers'
forecasts and the company's own assessments. The operating environment is
estimated to remain challenging in 2010. Even though there are signs of recovery
on the market, the general financial situation is estimated to remain uncertain
in the near future.
By the end of 2010, the company has implemented most of the strategic
restructuring, which was initiated in autumn 2008 and creates a basis for
profitable international business operations.
Incap will repeat its previous guidance according to which the company estimates
that its revenue in 2010 will increase from EUR 70 million in 2009. The Group's
full-year operating profit (EBIT) in 2010 is expected to be clearly higher than
in 2009 (EUR -5.0 million).
INCAP CORPORATION
Board of Directors
For additional information, please contact
Sami Mykkänen, President and CEO, tel. +358 40 559 9047
Eeva Vaajoensuu, Chief Financial Officer, tel. +358 40 763 6570
Hannele Pöllä, Director of Communications and Human Resources, tel. +358
40 504 8296
DISTRIBUTION
NASDAQ OMX Helsinki Oy
Principal media
The company's website: www.incap.fi
PRESS CONFERENCE
Incap will arrange a conference for the press and financial analysts on 5 May
2010 at 10:00 a.m. at the World Trade Center Helsinki, in Meeting Room 4 on the
2nd floor at Aleksanterinkatu 17, FI-00100 Helsinki.
ANNEXES
1 Consolidated Income Statement
2 Consolidated Balance Sheet
3 Consolidated Cash Flow Statement
4 Consolidated Statement of Changes in Equity
5 Group Key Figures and Contingent Liabilities
6 Quarterly Key Figures
INCAP IN BRIEF
Incap Corporation is an internationally operating contract manufacturer whose
comprehensive services cover the entire lifecycle of electromechanical products
from design and manufacture to maintenance services. Incap's customers are
leading equipment suppliers in energy-efficiency and well-being technology, for
which the company produces competitiveness as a strategic partner. Incap has
operations in Finland, Estonia and India. The Group's revenue in 2009 amounted
to around EUR 70 million, and the company currently employs approximately 780
people. Incap's shares are listed on the NASDAQ OMX Helsinki Oy. For additional
information, please contact www.incap.fi
Annex 1
CONSOLIDATED INCOME STATEMENT (IFRS)
(EUR thousands, unaudited) 1-3/2010 1-3/2009 Change % 1-12/2009
REVENUE 13,436 18,479 -27 69,767
Work performed by the enterprise and
capitalised
Change in inventories of finished goods and
work in progress 629 -26 -2,475 -1,499
Other operating income 56 55 2 342
Raw materials and consumables used 9,581 12,506 -23 45,654
Personnel expenses 3,629 3,831 -5 16,132
Depreciation and amortisation 722 700 3 2,869
Other operating expenses 1,857 1,988 -7 8,924
--------------------------------------------------------------------------------
OPERATING PROFIT/LOSS -1,670 -518 222 - 4,970
Financing income and expenses -229 -429 -47 -1,780
--------------------------------------------------------------------------------
PROFIT/LOSS BEFORE TAX -1,899 -947 100 -6,750
Income tax expense 0 -2 -100 29
--------------------------------------------------------------------------------
PROFIT/LOSS FOR THE PERIOD -1,899 -949 100 -6,721
Earnings per share -0.16 -0.08 100 -0.55
Options have no dilutive effect
in accounting periods 2009 and 2010
OTHER COMPREHENSIVE INCOME 1-3/2010 1-3/2009 Change % 1-12/2009
PROFIT/LOSS FOR THE PERIOD -1,899 -947 100 -6,721
OTHER COMPREHENSIVE INCOME:
Translation differences from foreign -119
units -7 35 19
--------------------------------------------------------------------------------
Other comprehensive income, net -7 35 -119 19
TOTAL COMPREHENSIVE INCOME -1,906 -914 108 -6,702
Attributable to:
Shareholders of the parent company -1,906 -914 108 -6,702
Minority interest 0 0 0
Annex 2
CONSOLIDATED BALANCE SHEET
(IFRS)
(EUR thousands, unaudited) 31 Mar. 2010 31 Mar. 2009 Change % 31 Dec. 2009
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 9,690 10,759 -10 10,247
Goodwill 1,033 974 6 977
Other intangible assets 960 1,253 -23 1,008
Other financial assets 14 15 -6 14
Deferred tax assets 4,203 4,153 1 4,156
--------------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 15,900 17,155 -7 16,402
CURRENT ASSETS
Inventories 13,083 14,740 -11 11,381
Trade and other receivables 11,444 11,585 -1 11,261
Cash and cash equivalents 415 1,388 -70 661
--------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 24,943 27,713 -10 23,303
TOTAL ASSETS 40,842 44,868 -9 39,706
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
COMPANY
Share capital 20,487 20,487 0 20,487
Share premium account 44 44 0 44
Exchange differences -466 -442 5 -459
Retained earnings -15,523 -7,806 99 -13,629
--------------------------------------------------------------------------------
TOTAL EQUITY 4,542 12,283 -63 6,443
NON-CURRENT LIABILITIES
Deferred tax liabilities 70 99 -29 70
Interest-bearing loans and
borrowings 10,777 11,649 -7 10,999
--------------------------------------------------------------------------------
NON-CURRENT LIABILITIES 10,847 11,748 -8 11,069
CURRENT LIABILITIES
Trade and other payables 14,137 12,544 13 11,925
Current interest-bearing loans
and borrowings 11,316 8,293 36 10,269
--------------------------------------------------------------------------------
CURRENT LIABILITIES 25,453 20,837 49 22,194
TOTAL EQUITY AND LIABILITIES 40,842 44,868 -9 39,706
Annex 3
CONSOLIDATED CASH FLOW STATEMENT 1-3/2010 1-3/2009 1-12/2009
(EUR thousands, unaudited)
Cash flow from operating activities
Net income -1,670 -518 -4,970
Adjustments to operating profit 728 713 4,342
Change in working capital 883 1,034 2,929
Interest paid -247 -409 -1,812
Interest received 9 11 40
------------------------------------------------------------------------------
Cash flow from operating activities -297 832 529
Cash flow from investing activities
Capital expenditure on tangible and
intangible assets -51 -296 -1,064
Proceeds from sale of tangible
and intangible assets 0 120 17
Acquisition of subsidiary 0 0 0
Loans granted -1 0 -9
Shares of subsidiaries sold 0 0
Repayments of loan receivables 1 1 2
------------------------------------------------------------------------------
Cash flow from investing activities -51 -175 -1,054
Cash flow from financing activities
Drawdown of loans 965 1,940 5,683
Repayments of borrowings -450 -1,558 -3,868
Repayments of obligations under finance leases -258 -252 -1,255
------------------------------------------------------------------------------
Cash flow from financing activities 257 130 560
Change in cash and cash equivalents -91 787 35
Cash and cash equivalents at beginning of period 661 641 641
Effect of changes in exchange rates -142 -41 -17
Changes in fair value (cash and cash equivalents) -13 0 2
Cash and cash equivalents at end of period 415 1,388 661
Annex 4
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY (IFRS)
(EUR thousands, unaudited)
Retained
Share
Share premium Exchange
capital account differences earnings Total
Equity on 1 Jan.
2009 20,487 44 -478 - 6,864 13,189
Change in
exchange
differences 35 35
Options and
share-based
compensation 7 7
--------------------------------------------------------------------------------
Net income and
losses recognised 35 7 42
directly in
equity
Net profit/loss -949 -949
--------------------------------------------------------------------------------
Total income and
losses 35 -943 -907
Equity on 31 Mar.
2009 20,487 44 -442 -7,806 12,283
Equity on 1 Jan.
2010 20,487 44 -459 -13,629 6,443
Change in
exchange
differences -7 -7
Options and
share-based
compensation 5 5
Other changes
--------------------------------------------------------------------------------
Net income and
losses recognised
directly in
equity -7 5 -2
Profit or loss
for the period -1,899 -1,899
--------------------------------------------------------------------------------
Total income and
losses -7 -1,895 -1,901
Equity on 31 Mar.
2010 20,487 44 -466 -15,523 4,542
Annex 5
GROUP KEY FIGURES AND CONTINGENT
LIABILITIES (IFRS) 31 Mar. 2010 31 Mar. 2009 31 Dec. 2009
Revenue, EUR million 13.4 18.5 69.8
Operating profit, EUR million -1.7 -0.5 -5.0
% of revenue -12.4 -2.8 -7.1
Profit before taxes, EUR million -1.9 -0.9 -6.7
% of revenue -14.1 -5.1 -9.7
Return on investment (ROI), % -21.5 -4.9 -15.9
Return on equity (ROE), % -138.3 -29.8 -68.5
Equity ratio, % 11.1 27.4 16.2
Gearing, % 477.3 151.1 319.8
Net debt, EUR millions 24.4 19.6 21.3
Net interest-bearing debt, EUR millions 21.7 18.6 20.6
Average number of shares during the
report
period, adjusted for share issues 12,180,880 12,180,880 12,180,880
Earnings per share (EPS), euro -0.16 -0.08 -0.55
Equity per share, euro 0.37 1.01 0.53
Investments, EUR million 0.1 0.1 1.1
% of revenue 0.4 0.6 1.5
Average number of employees 734 728 751
CONTINGENT LIABILITIES, EUR millions
FOR OWN LIABILITIES
Mortgages 12.0 12.0 12.0
Other liabilities 2.9 7.8 4.6
Nominal value of currency options EUR 842.4
thousands 455.5 0
Fair values of currency options, EUR -0.2
thousands -4.1 0
Annex 6
QUARTERLY KEY FIGURES (IFRS)
1-3/ 10-12/ 7-9/ 4-6/ 1-3/
2010 2009 2009 2009 2009
Revenue, EUR million 13.4 17.7 16.6 16.9 18.5
Operating profit, EUR
million -1.7 -3.7 -0.3 -0.5 -0.5
% of revenue -12.4 -20.7 -1.9 -2.8 -2.8
Profit before taxes, EUR
million -1.9 -4 -0.8 -1.0 -0.9
% of revenue -14.1 -22.3 -4.9 -6.1 -5.1
Return on investment
(ROI), % -21.5 -47.3 -4 -2.1 -4.9
Return on equity (ROE), % -138.3 -160 -27.5 -33.9 -29.8
Equity ratio, % 11.1 16.2 24.6 26.4 27.4
Gearing, % 477.3 319.8 173.8 164.9 151.1
Net debt, EUR millions 24.4 21.3 20.6 19.7 19.6
Net interest-bearing
debt, EUR millions 21.7 20.6 18.1 18.6 18.6
Average number of share
issue-adjusted shares
during the financial
period 12,180,880 12,180,880 12,180,880 12,180,880 12,180,880
Earnings per share (EPS),
euro -0.16 -0.32 -0.07 -0.08 -0.08
Equity per share, euro 0.37 0.53 0.86 0.92 1.01
Investments, EUR million 0.1 0.1 0.4 0.5 0.1
% of revenue 0.4 0.6 2.2 2.9 0.6
Average number of
employees 734 776 770 732 728
[HUG#1411788]
Incap Group Interim Report Jan-Mar 2010: http://hugin.info/120192/R/1411788/364117.pdf
Unternehmensinformation / Kurzprofil:
Datum: 05.05.2010 - 07:31 Uhr
Sprache: Deutsch
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