INCAP GROUP INTERIM REPORT JANUARY-SEPTEMBER 2009: RESULT IMPROVED
DESPITE DECREASE IN REVENUE
(Thomson Reuters ONE) - Incap Corporation Stock Exchange Release 4 November 2009 at 8:30a.m. * Revenue in January-September was approximately EUR 52.0 million, down approximately 24% from the same period the previous year (Jan-Sep 2008: EUR 68.1 million) * The focus of manufacturing activities shifted from telecommunications products to energy efficiency and well-being technology products in accordance with the strategy * Operating profit (EBIT) improved from the same period the previous year, amounting to EUR 1.3 million negative (EUR 2.4 negative) * The improvement of efficiency and adjustment of cost structure were continued in accordance with the reorganisation programme * Prerequisites for future business growth were built in selected business areas in energy and well-being * Net profit for the report period amounted to EUR 2.8 million negative (3.5 million negative).This unaudited interim report has been prepared in accordance withinternational financial reporting standards (IFRS). Unless otherwisestated, the comparison figures refer to the same period the previousyear.Sami Mykkänen, the President and CEO of Incap Group: "The overalldemand for Incap's services remained fairly steady despite thegeneral economic recession. However, there was much customer-specificfluctuation in delivery volumes. The decrease in revenue was mainlydue to a controlled winding down of the high-volume manufacturing oftelecommunications products.Profitability developed in the positive direction, and operatingresult improved each quarter of the year. Increased operationalefficiency according to the reorganisation programme is beginning toshow in the result.The strategy selected last year has proven to be successful, and wecan move on to developing profitable growth supported by it. In theselected business segments - energy efficiency and well-beingtechnologies - the future prospects are good and the growth potentialespecially in Asia is of great interest to us. One step in thisdirection was concentrating product design activities on India,where we serve our customers globally. "Revenue and earnings in July-September 2009Revenue during the third quarter totalled EUR 16.6 million, orapproximately 22% less than in the same period the year before(7-9/2008: EUR 21.4 million). Despite the holiday season andproduction shutdowns, revenue remained at nearly the same level asduring the second quarter. The demand for well-being technologyproducts in particular was good.Operating profit (EBIT) for July-September, EUR 0.3 million negative,was better than during the previous quarters of the year and thecorresponding period the year before (EUR 0.4 million negative). Netprofit for the third quarter was EUR 0.8 million negative, the sameas a year before (EUR 0.8 million negative) despite the decrease inrevenue. Net profit was burdened by an increase in financing costscompared to the corresponding period last year. Earnings per sharewere EUR 0.07 negative (EUR 0.07 negative).Revenue and earnings in January-September 2009Revenue for January-September was EUR 52.0 million, or about 24%lower than during the comparable period the year before (Jan-Sep2008: EUR 66.1 million). The decline in revenue was the predicteddecrease in manufacturing of telecommunications products byapproximately EUR 12 million compared with the same period theprevious year. Revenue also declined due to cutting down on small orunprofitable customer accounts at the beginning of the year in orderto improve profitability.The recession did not have a significant impact on the demand forIncap's services. Revenue from well-being technology productsincreased considerably compared with the year before, while thedemand in the energy efficiency sector decreased somewhat in Europe.Deliveries from the Indian unit increased, but revenue in eurosremained at last year's level due to exchange rate differences.Operating loss was clearly reduced with operating profit amounting toEUR 1.3 million negative (EUR 2.4 million negative), representing2.5% negative (3.5% negative) of revenue. The reorganisationprogramme was continued and cost savings were achieved in personneland material costs and administrative expenses among others. Fixedcosts for the period were approximately EUR 2.2 million lower thanfor the same period the previous year.Net profit for the report period amounted to EUR 2.8 million negative(EUR 3.5 million negative). In particular, the net profit wasburdened by net financing costs, which were approximately EUR 0.4million higher than during the corresponding period the year before.Earnings per share amounted to EUR 0.23 negative (EUR 0.29 negative),while equity per share stood at EUR 0.86 (EUR 1.24).Quarterly comparison 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/(EUR thousands) 2009 2009 2009 2008 2008 2008 2008Revenue 16,613 16,928 18,479 25,789 21,395 26,412 20,330Operating -314 -472 -518 -1,241 -442 -600 -1,329profit/lossNet profit/loss -810 -1,035 -949 -1,915 -800 -1,005 -1,681Earnings per share, -0.07 -0.08 -0.08 -0.16 -0.07 -0.08 -0.14EURDevelopment of operations in January-September 2009Incap developed its capacity for future growth in the company'sbusiness. The new production facilities in India were inauguratedduring the period. The updated capacity of the plant will improveIncap's competitiveness significantly, as globally operatingcustomers require their partner to provide local service near theirmain markets.In order to improve the efficiency of its service capacity, Incapconcentrated its product design in India and aims to double thenumber of designers to over 30 persons during next year. The Indiandesign team also serves customers located in Europe and the UnitedStates. All plants continue developing production-relatedmanufacturability design in order to decrease product manufacturingcosts.The acquisition of new customers was expanded to China, where thecompany launched sales cooperation with a local partner. The aim isto secure new customers in Asia, mainly for Incap's Indian plant. Inaddition, the partner is surveying the overall market situation andIncap's business opportunities in China.The development of materials management and procurement continued.The value of inventories fell from EUR 16.2 million at the turn ofthe year to EUR 14.7 million at the end of September.The structural change in Incap's manufacturing capacity proceeded asplanned. The operation of the Helsinki plant will focus on assemblyand product integration in the future, and the manufacturing ofcertain high-volume sheet-metal parts is being transferred to Vaasa.Incap is investigating the possibilities of centralising thecompany's European electronics manufacturing in Estonia so that someof the products manufactured at the Vuokatti plant would betransferred to the Kuressaari plant and another party would be soughtto continue some of the business activities in Vuokatti. The transferof some products is already underway, and negotiations have beenbegun on other transfers with customers. Preliminary negotiations ona possible business transaction are currently underway.StrategyThe strategy that Incap selected last year has proven to besuccessful. Incap will focus on contract manufacturing of energyefficiency and well-being products where outlook on growth isfavourable thanks to global mainstream trends. The company aims to bea leading manufacturing and technology partner for customer accountsin these sectors, providing them with life-cycle services ofelectromechanics and product entities. The company sees considerablegrowth potential for its services in Asia.Incap develops its services according to the needs of its keycustomers. In sales and marketing, special focus will be on activemanagement of customer relationships, expanding the service portfoliowith existing customers and systematic acquisition of new customers.Incap will reinforce its product design activities that serve thecustomers globally.Incap will continue measures aimed at improving profitability. Themain emphasis in the improvement of efficiency will be on developingmaterials functions, completing the change in production structure,and productisation of services.Financing and cash flowThe Group's equity ratio was 24.6% (29.4%). Interest-bearing netliabilities totalled EUR 18.1 million (EUR 20.1 million) and thegearing ratio was 174% (133%). Net financial expenses stood at EUR1.5 million (EUR 1.1 million) and depreciation and amortisationexpense at EUR 2.1 million (EUR 2.1 million). Trade receivablescontinued to decline compared with the beginning of the year as wellas the end of the second quarter, and no credit losses arose duringthe report period.The Group's equity at the close of the period under review was EUR10.4 million (EUR 15.2 million). Debt totalled EUR 32.0 million (EUR36.4 million), of which interest-bearing debt amounted to EUR 19.3million (EUR 20.7 million).The Group's quick ratio was 0.6 (0.7) and the current ratio 1.3(1.3). Cash flow from operations was EUR 1.9 million positive, orconsiderably better than for the corresponding period the previousyear, when it was EUR 0.3 million. The change in cash and cashequivalents was an increase of EUR 0.5 million (a decrease of EUR 0.3million).Capital expendituresThe Group's capital expenditures during the period amounted to EUR1.0 million (EUR 1.5 million), of which the majority was connectedwith the operation of the Indian subsidiary.PersonnelIncap Group employed 773 people at the end of September 2009 (727people at the beginning of the year). Of the personnel, 43% worked inFinland, 34% in India and 23% in Estonia. The number of personnelincreased in India, where there were over 50 employees more at theend of September than at the beginning of the year. In addition toIncap employees, there were 59 employees hired from staffing agenciesat the end of September.Operations and capacity were adjusted to the demand, and at the endof September, 34 people were temporarily laid off. After the reportperiod in October, the personnel of Group services and the plants inHelsinki and Vaasa were temporarily laid off for a week in December2009 and for a week in January 2010. In addition, the personnel canbe temporarily laid off based on monthly review until the end of May2010 so that the maximum total duration of the temporary layoff is 64working days. At the Vuokatti plant, the white-collar personnel werelaid off for three weeks while the statutory negotiations with regardto the blue-collar workers will continue in November.Shares and shareholdersIncap Corporation has one series of shares, and the number of sharesin 12,180,880. During the period under review, the share price variedbetween EUR 0.43 and EUR 0.99, and the last closing price of theperiod was EUR 0.69. During the period under review, the tradingvolume was 19.7% of outstanding shares.At the end of the period under review, the company had 1,145shareholders. Foreign or nominee-registered owners held 2.8% of allshares. The company's market capitalisation on 30 September 2009 wasEUR 8.4 million. The company does not own any of its own shares.Short-term risks and factors of uncertainty concerning operationsThe risks and factors of uncertainty relating to Incap's operationsare described in more detail in the report by the Board of Directorsdated 24 February 2009, and no significant changes have taken placewith regard to these factors during the report period.The most significant short-term risks are connected with the volumeof business, profitability as well as financing arrangements. Incap'ssales are spread over several customer sectors, which hedges thecompany against sharp seasonal changes. However, market visibility isvery limited.The company's financial position is influenced by the trends in thegeneral financial market and the company's future earningsdevelopment. Incap aims at ensuring the company's liquidity byefficient working capital management and investigates differentfinancing options in order to enhance the financial position. As oneaction to ensure its liquidity, Incap signed an agreement onfactoring concerning its trade receivables in Finland with afinancing company after the close of the report period.OutlookIncap's estimates of the future business development are based on itscustomers' forecasts and the company's own assessments. Due to thecontinued uncertain economic situation, customers' views of thefuture market development are still cautious. Some devicemanufacturers in the electric power industry have predicted a slightdecline in demand.Incap expects that its revenue in 2009 will be approximately EUR 70million. The operating profit for the latter half of the year will bebetter than during the first half of the year. Full-year operatingprofit (EBIT) is estimated to be clearly better compared with 2008.According to Incap's previous estimate on 5 August 2009, the Group'srevenue in 2009 would be lower than in 2008, when it totalled EUR93.9 million. Operating profit for the latter half of the year wasestimated to be better than during the first half of the year.Full-year operating profit (EBIT) was estimated to be clearly bettercompared with 2008 (EUR 3.6 million negative).INCAP CORPORATIONBoard of DirectorsFor additional information, please contact:Sami Mykkänen, President and CEO, tel. +358 40 559 9047Eeva Vaajoensuu, Chief Financial Officer, tel. +358 40 763 6570Hannele Pöllä, Director of Communications and Human Resources, tel.+358 40 504 8296DISTRIBUTIONNASDAQ OMX Helsinki LtdPrincipal mediaThe company's website: www.incap.fiPRESS CONFERENCEIncap will arrange a conference for financial analysts, investors,and the press on 4 November 2009 at 10:00 a.m. at the World TradeCenter Helsinki, in Meeting Room 1 on the 2nd floor atAleksanterinkatu 17, FI-00100 Helsinki. The presentation materialwill be available on the company's website the same day.ANNEXES1 Consolidated Income Statement2 Consolidated Balance Sheet3 Consolidated Cash Flow Statement4 Consolidated Statement of Changes in Equity5 Group Key Figures and Contingent Liabilities6 Quarterly Key FiguresINCAP IN BRIEFIncap Corporation is an internationally operating contractmanufacturer whose comprehensive services cover the entire life-cycleof electromechanical products from design and manufacture tomaintenance services. Incap's customers are leading equipmentsuppliers in energy-efficiency and well-being technology, for whichthe company produces competitiveness as a strategic partner. Incaphas operations in Finland, Estonia and India. The Group's revenue in2008 amounted to around EUR 94 million, and the company currentlyemploys approximately 770 people. Incap's shares are listed on theNASDAQ OMX Helsinki Ltd. For additional information, please visit ourwebsite, www.incap.fi.Annex 1CONSOLIDATED INCOME STATEMENT (IFRS)(EUR thousands, unaudited) 1-9/2009 1-9/2008 Change % 1-12/2008REVENUE 52,021 68,136 -24 93,925Work performed by the enterpriseand capitalisedChange in inventories offinished goods andwork in progress -301 1,190 -125 791Other operating income 281 30 826 53Raw materials and consumablesused 34,050 48,245 -29 66,672Personnel expenses 10,725 13,630 -21 18,722Depreciation and amortisation 2,146 2,125 1 2,823Other operating expenses 6,383 7,727 -17 10,165OPERATING PROFIT/LOSS -1,304 -2,371 -45 -3,612Financing income and expenses -1,488 -1,115 33 -1,810PROFIT/LOSS BEFORE TAX - 2,792 -3,486 -20 -5,422Income tax expense -3 0 21PROFIT/LOSS FOR THE PERIOD - 2,795 -3,486 -20 -5,401Earnings per share -0.23 -0.29 -21 -0.44Options have no dilutive effectin report periods 2008 and 2009OTHER COMPREHENSIVEINCOME 1-9/2009 1-9/2008 Change % 1-12/2008PROFIT/LOSS FOR THEPERIOD - 2,795 -3,486 -43 -5,401OTHER COMPREHENSIVEINCOME:Translation differencesfrom foreign units 20 -271 -107 -262Other comprehensiveincome, net 20 -271 -124 -262TOTAL COMPREHENSIVEINCOME -2,775 -3,757 -26 -5,663Attributable to:Shareholders of theparent company - 2,775 -3,757 -26 -5,663Minority interest 0Annex 2CONSOLIDATED BALANCE SHEET (IFRS)(EUR thousands, unaudited) 30.9.2009 30.9.2008 Change % 31.12.2008ASSETSNON-CURRENT ASSETSProperty, plant and equipment 10,225 11,496 -11 11,250Goodwill 954 972 -2 969Other intangible assets 1,069 1,370 -22 1,311Other financial assets 14 17 -17 16Deferred tax assets 4,136 4,151 0 4,148TOTAL NON-CURRENT ASSETS 16,398 18,006 -9 17,693CURRENT ASSETSInventories 14,675 18,833 -22 16,153Trade and other receivables 10,262 14,069 -27 14,444Cash and cash equivalents 1,136 615 85 641TOTAL CURRENT ASSETS 26,074 33,518 -22 31,239TOTAL ASSETS 42,472 51,523 -18 48,932EQUITY ATTRIBUTABLE TO EQUITYHOLDERS OF THE PARENTCOMPANYShare capital 20,487 20,487 0 20,487Share premium account 44 44 1 44Exchange differences -458 -494 -7 -478Retained earnings -9,644 -4,876 98 -6,864TOTAL EQUITY 10,430 15,161 -31 13,190NON-CURRENT LIABILITIESDeferred tax liabilities 99 121 -18 99Interest-bearing loans andborrowings 11,363 13,496 -16 12,977NON-CURRENT LIABILITIES 11,463 13,617 -16 13,077CURRENT LIABILITIESTrade and other payables 12,678 15,527 -18 15,731Current interest-bearingloans and borrowings 7,901 7,218 9 6,935CURRENT LIABILITIES 20,579 22,745 -9 22,666TOTAL EQUITY AND LIABILITIES 42,472 51,523 -18 48,932Annex 3CONSOLIDATED CASH FLOW STATEMENT(EUR thousands, unaudited) 1-9/2009 1-9/2008 1-12/2008Cash flow from operating activitiesNet income -1,304 -2,371 -3,612Adjustments to operating profit 2,162 2,101 2,760Change in working capital 2,688 1,601 3,702Interest paid -1,642 -1,087 -1,640Interest received 32 104 143Cash flow from operating activities 1,936 348 1,353Cash flow from investing activitiesCapital expenditure on tangible andintangible assets -961 -1,501 -1,699Proceeds from sale of tangible 177and intangible assets 0 101 160Loans granted -8 0Shares of subsidiaries sold 0 50 50Repayments of loan receivables 2 3 1Cash flow from investing activities -790 -1,347 -1,488Cash flow from financing activitiesDrawdown of loans 2,135 2,453 1,753Repayments of borrowings -1,896 -942 -838Repayments of obligations under financeleases -886 -805 -1,063Cash flow from financing activities -647 706 -148Change in cash and cash equivalents 499 -293 -283Cash and cash equivalents at beginning ofperiod 641 944 944Effect of changes in exchange rates -7 -36 -20Changes in fair value (cash and cashequivalents) 3Cash and cash equivalents at end ofperiod 1,136 615 641Annex 4CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (IFRS)(EUR thousands, unaudited) Retained Share Share premium Exchange capital account differences earnings TotalEquity on 1 January 2008 20,487 44 -216 -1,188 19,127Change in exchangedifferences -278 -278Options and share-basedcompensation -202 -202Net income and lossesrecogniseddirectly in equity -278 -202 -480Net profit/loss - 3,486 -3,486Total income and losses -278 -3,688 -3,966Equity on 30 September2008 20,487 44 -494 -4,876 15,161Equity on 1 January 2009 20,487 44 -478 -6,864 13,189Change in exchangedifferences 20 20Options and share-basedcompensation 15 15Net income and lossesrecogniseddirectly in equity 20 15 35Net profit/loss -2,795 -2,795Total income and losses 20 -2,780 -2,760Equity on 30 September2009 20,487 44 -458 -9,644 10,430Annex 5GROUP KEY FIGURES AND CONTINGENT LIABILITIES (IFRS) 30.9.2009 30.9.2008 31.12.2008Revenue, EUR millions 52.0 68.1 93.9Operating profit, EUR millions -1.3 -2.4 -3.6 % of revenue -2.5 -3.5 -3.9Profit before taxes, EUR millions -2.8 -3.5 -5.4 % of revenue -5.4 -5.1 -5.8Return on investment (ROI), % -5.3 -7.5 -8.6Return on equity (ROE), % -31.6 -27.1 -33.4Equity ratio, % 24.6 29.4 27.0Gearing, % 173.8 132.6 146.1Net debt, EUR millions 20.6 21.7 20.7Net interest-bearing debt, EURmillions 18.1 20.1 19.3Average number of shares during thereportperiod, adjusted for share issues 12,180,880 12,180,880 12,180,880Earnings per share (EPS), euro -0.23 -0.29 -0.44Equity per share, euro 0.86 1.24 1.08Investments, EUR millions 1.0 1.5 1.8 % of revenue 1.9 2.2 1.9Average number of employees 743 732 735CONTINGENT LIABILITIES, EUR millionsFOR OWN LIABILITIESMortgages 12.0 12.1 12.0Other liabilities 6.3 8.2 8.8Nominal value of currency options,EUR thousands -12.4 0 0Fair values of currency options, EURthousands 460.7 0 0Annex 6QUARTERLY KEY FIGURES (IFRS) 7-9/ 4-6/ 1-3/ 10-12/ 7-9/ 4-6/ 1-3/ 2009 2009 2009 2008 2008 2008 2008Revenue, EURmillions 16.6 16.9 18.5 25.8 21.4 26.4 20.3Operating profit,EUR millions -0.3 -0.5 -0.5 -1.2 -0.4 -0.6 -1.3 % of revenue -1.9 -2.8 -2.8 -4.8 -2.1 -2.3 -6.5Profit before taxes,EUR millions -0.8 -1.0 -0.9 -1.9 -0.8 -1.0 -1.7 % of revenue -4.9 -6.1 -5.1 -7.5 -3.7 -3.8 -8.3Return on investment(ROI), % -4 -2.1 -4.9 -11.1 -4.1 -4.9 -13.4Return on equity(ROE), % -27.5 -33.9 -29.8 -47.4 -18.7 -22.9 -37.0Equity ratio, % 24.6 26.4 27.4 27.0 29.43 31.2 33.3Gearing, % 173.8 164.9 151.1 146.1 132.6 120.4 106.5Net debt, EURmillions 20.6 19.7 19.6 20.7 21.7 18.0 19.9Net interest-bearingdebt, EUR millions 18.1 18.6 18.6 19.3 20.1 19.2 18.3Average number ofshareissue-adjustedshares during 12,180 12,180 12,180 12,180 12,180 12,180 12,180report period ,880 ,880 ,880 ,880 ,880 ,880 ,880Earnings per share(EPS), euro -0.07 -0.08 -0.08 -0.16 -0.07 -0.08 -0.14Equity per share,euro 0.86 0.92 1.01 1.08 1.24 1.31 1.41Investments, EUR 0.4millions 0.5 0.1 0.3 0.3 0.4 0.8 % of revenue 2.2 2.9 0.6 1.3 1.2 1.6 4.1Average number of 770employees 732 728 743 739 724 733http://hugin.info/120192/R/1352377/327207.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 04.11.2009 - 07:31 Uhr
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