INCAP GROUP
BUSINESS REVIEW
JANUARY-MARCH 2024
Content | |
Key figures | 3 |
Outlook for 2024 | 4 |
CEO's comments | 5 |
Financial performance | 6 |
January-March 2024 | 6 |
Balance sheet and financing | 6 |
Management and organisation | 7 |
Financial reporting in 2024 | 7 |
Accounting principles for the business review | 8 |
Consolidated statement of comprehensive income | 8 |
Consolidated balance sheet | 9 |
Consolidated cash flow statement | 10 |
Consolidated statement of changes in equity | 11 |
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Incap Group's business review for January-March 2024 (unaudited)
January-March 2024 highlights
- Revenue for the first quarter 2024 amounted to EUR 51.4 million (1-3/2023: EUR 72.2 million). Year-on-year the revenue decreased 29.3%, as expected.
- Excluding the impact of the company's largest customer, revenue grew 38% year-on-year.
- Revenue increased 21.1% compared to the fourth quarter of 2023.
- Adjusted operating profit (EBIT) amounted to EUR 6.2 million (EUR 11.5 million) or 12.1% of revenue (15.8%).
- The adjusted operating profit (EBIT) increased 40.4% compared to the fourth quarter of 2023.
- Operating profit (EBIT) amounted to EUR 6.0 million (EUR 11.3 million) or 11.7% of revenue (15.5%).
- Operating profit (EBIT) increased 62.3% compared to the fourth quarter in 2023.
- Net profit for the period was EUR 4.9 million (EUR 8.4 million).
- Earnings per share were EUR 0.17 (EUR 0.29).
Unless otherwise stated, the comparison figures refer to the corresponding period in 2023. This business review is unaudited.
Key figures
EUR million | 1-3/24 | 1-3/23 | Change | 10-12/23 | Change | 1-12/23 |
Revenue | 51.4 | 72.7 | -29.3% | 42.4 | 21.1% | 221.6 |
Non-recurring items | 0.1 | 0.1 | -33.1% | 0.2 | -61.7% | 1.1 |
Operating profit (EBIT) | 6.0 | 11.3 | -47.0% | 3.7 | 62.3% | 28.2 |
EBIT, % of revenue | 11.7% | 15.5% | 8.7% | 12.7% | ||
Adjusted operating profit (EBIT)* | 6.2 | 11.5 | -46.1% | 4.4 | 40.4% | 30.6 |
Adjusted EBIT*, % of revenue | 12.1% | 15.8% | 10.4% | 13.8% | ||
Net profit for the period | 4.9 | 8.4 | -40.9% | 1.3 | 268.9% | 19.8 |
Equity Ratio | 62.2% | 58.3% | 60.6% | |||
Net Gearing | -5.3% | 14.8% | -7.7% |
*Adjusted operating profit (EBIT) is an alternative performance measure. Adjusted EBIT excludes non-recurring items and purchase price allocation amortisation. Adjusted EBIT provides comparable information between different financial years on operating profit.
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Outlook for 2024
Incap estimates that the company's revenue and operating profit (EBIT) in 2024 will be lower than in 2023.
The destocking exercise with the company's largest customer will impact the revenue and profitability in the first half of 2024. However, Incap's revenue is
estimated to grow quarter to quarter starting first quarter of 2024, improving results over the year.
The estimates are given provided that unexpected events impacting Incap's business environment do not occur, for example, in the availability of components.
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CEO's comments
Incap's year 2024 got off to a great start, as our revenue grew and profitability improved compared to the previous quarter. We are happy to see the continued growth and especially that the factory in India returned to growth as well. We continued to focus on customer acquisition, explored cross-selling possibilities, and participated actively in trade shows.
Our revenue for the first quarter grew 21% quarter on quarter and was EUR 51.4 million. Excluding sales to our largest customer, our revenue grew 38% year on year. With the sales growth, also our profitability started to grow. Our EBIT for the first quarter was EUR 6.0 million or 11.7% of revenue. The EBIT increased by 62.3% compared to the previous quarter.
To respond to the growth trend, we continued increasing the number of employees at our factories in India. However, the largest customer's destocking is still ongoing, and we expect it to continue at least to the end of the first half of the year.
In 2023, we expanded our operations to the US market, and we are very pleased with our acquisition there. The integration of Incap US' operations has continued as planned, the results are very good, and they have also had success in new customer acquisition.
To continue succeeding in the EMS industry, our philosophy is to continuously improve our operations and to keep investing in the latest technology in our factories. In the beginning of the year, we replaced the second SMT production line with advanced SMT machinery at our factory in Slovakia and made some investments at the UK factory as well.
In April, we published our first combined Annual and Sustainability Report and are preparing for reporting in accordance with the CSRD in 2025. We have started the required double materiality analysis and are developing our sustainability programme further. We take a positive view of the tightening legislation related to sustainability reporting, as we believe that uniform rules can develop our industry in an increasingly responsible direction.
Sustainability is an important part of our strategy, and I believe that this work will improve our ability to respond to future opportunities and challenges. We are also happy about being able to support sustainable development in practice. We have for instance in many ways supported young people learning through various technology-related events and donated local schools' equipment for learning physics and mechatronics.
During the remainder of the year, we will keep investing in our factories, focus on new customer acquisition and increasing sales to existing customers. We will also continue pursuing shareholder value creating M&A transactions, supported with our solid financials.
For 2024, we estimate that our revenue and operating profit will be lower than in 2023. The destocking exercise with our largest customer will impact the revenue and profitability first half of the 2024. However, we estimate our revenue will grow quarter to quarter and our results will improve over the year.
Year 2024 has started well for Incap, and I would like to thank our entire team for doing a great job.
Otto Pukk, President and CEO of Incap Corporation
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Financial performance
January-March 2024
In January-March 2024, revenue decreased 29.3% year on year and amounted to EUR 51.4 million (EUR
72.7 million). Revenue was positively impacted by Incap's units in Europe and USA and effective sales work to existing and new customers and negatively by the largest customer's need to reduce their inventory levels.
January-March operating profit (EBIT) decreased 47.0% year on year and amounted to EUR 6.0 million (EUR 11.3 million). Adjusted operating profit (EBIT) was EUR 6.2 million (EUR 11.5 million). Year-on-year
decrease was 46.1%. Adjusted operating profit margin was 12.1% (15.8%) of revenue.
In January-March 2024, Incap did not record credit loss provisions. Provisions for inventory write-offs amounting to EUR 0.2 million were recorded (in January-March 2023, provisions were cancelled for EUR 0.1 million).
Net profit for the period decreased 40.9% year on year and totalled EUR 4.9 million (EUR 8.4 million). Earnings per share were EUR 0.17 (EUR 0.29).
Balance sheet and financing
Total assets in the Group's balance sheet on 31 March 2024 stood at EUR 187.8 million (EUR 168.5 million). The Group's equity at the end of the financial period was EUR 113.2 million (EUR 95.1 million).
Liabilities increased from the comparison period to EUR 74.6 million (EUR 73.4 million). EUR 33.5 million thereof (EUR 19.3 million) were interest-bearing liabilities. Liabilities increased from the comparison period due to the loan related to the acquisition of Pennatronics, Inc. Interest-bearing net debt was EUR -6.0 million (EUR 14.1 million).
The Group's non-currentinterest-bearing liabilities amounted to EUR 30.0 million (EUR 11.2 million) and non-currentnon-interest-bearing liabilities to EUR 2.9 million (EUR 2.2 million). Current interest-bearing liabilities were EUR 3.5 million (EUR 8.1 million). Out of the interest-bearing liabilities, EUR 0.3 million (EUR
3.2 million) are related to the Indian subsidiary. Out of the non-currentinterest-bearing liabilities, a loan of EUR 22.5 million (EUR 4.9 million) granted by the company's Finnish bank is related to the acquisition.
At the end of March 2024, the company's financial position remained strong. Equity ratio increased to 62.2% (58.3%), and net gearing was -5.3% (14.8%).
The Group's cash position during the reporting period was good. On 31 March 2024, the Group's cash and cash equivalents totalled EUR 39.5 million (EUR 5.2 million) and the company had unutilised credit lines amounting to EUR 8.0 million (EUR 5.5 million). Change in inventories had a positive impact in cash position.
The Group's quick ratio was 2.0 (0.9), and current ratio was 3.4 (2.2).
Inventory at end of March 2024 totalled EUR 70.2 million (EUR 83.5 million). Inventory decreased clearly during the first three months of the year compared to March 2023, which was mainly due to improved material availability and Incap´s largest customer´s decision to postpone orders due to overstocking. The value of the inventory was impacted by the acquisition, where the value of the inventory at the end of March 2024 was EUR 8.5 million. Both trade receivables and payables decreased due to the destocking by Incap´s largest customer.
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Management and organisation
David Spehar, Managing Director of Incap Electronics US, Inc., was appointed member of Incap Group's Management Team and Director of Operations, U.S., as of 21 February 2024.
At the end of March 2024, Incap's Management Team consisted of President & CEO, Otto Pukk;
Director of Operations, India and Sales APAC, Murthy Munipalli; Director of Operations, Estonia, Margus Jakobson; Director of Operations, Slovakia, Miroslav Michalik; Director of Operations, U.K., Jamie Maughan; Director of Operations, U.S., David Spehar; and CFO Antti Pynnönen.
Financial reporting in 2024
In 2024, Incap will publish the following financial reports:
- Half-yearreport for January-June 26 July 2024
- Business review for January-September 25 October 2024
In Helsinki, 8 May 2024
INCAP CORPORATION
Board of Directors
For additional information, please contact:
Otto Pukk, President and CEO, tel. +372 508 0798
Distribution:
Nasdaq Helsinki Ltd.
Principal media
www.incapcorp.com
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Accounting principles for the business review
This business review has been prepared in accordance with IFRS recognition and measurement principles, although not all requirements of the IAS 34 Interim Financial Reporting standard have been followed. When preparing the review, the same
principles have been used as in the 2023 financial statements. Unless otherwise stated, the comparison figures refer to the same period in the previous year. This business review is unaudited.
Consolidated statement of comprehensive income
(EUR thousands) | 1-3/2024 | 1-3/2023 | 1-12/2023 |
REVENUE | 51,364 | 72,674 | 221,591 |
Other operating income
Change in inventories of finished goods and work in progress
Raw materials and consumables used Personnel expenses Depreciation and amortisation Other operating expenses
162 | 68 | 423 |
-1,617 | -2,923 | -5,148 |
-32,228 | -49,748 | -148,029 |
-7,599 | -4,602 | -24,029 |
-1,355 | -990 | -4,623 |
-2,739 | -3,183 | -11,969 |
OPERATING PROFIT | 5,988 | 11,297 | 28,216 |
Financial income | 889 | 205 | 944 |
Financial expenses | -548 | -561 | -2,738 |
PROFIT BEFORE TAX | 6,329 | 10,940 | 26,422 |
Income tax | -1,382 | -2,576 | -6,602 |
PROFIT FOR THE PERIOD | 4,947 | 8,365 | 19,820 |
Earnings per share, EUR | 0.17 | 0.29 | 0.68 |
OTHER COMPREHENSIVE INCOME | 1-3/2024 | 1-3/2023 | 1-12/2023 |
Items that will not be transferred to P&L | 0 | 0 | |
(revaluation of employee benefits) | -23 | ||
Items that may be recognised in profit or loss at a | |||
later date: | |||
Translation differences from foreign units | 1,373 | -740 | -2,344 |
Other comprehensive income, net | 1,373 | -740 | -2,367 |
TOTAL COMPREHENSIVE INCOME | 6,320 | 7,625 | 17,453 |
Attributable to: | |||
Shareholders of the parent company | 6,320 | 7,625 | 17,453 |
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Consolidated balance sheet
(EUR thousands) | 31 Mar 2024 | 31 Mar 2023 | 31 Dec 2023 |
ASSETS | |||
NON-CURRENT ASSETS | |||
Property, plant and equipment | 21,853 | 15,811 | 21,625 |
Right-of-use assets | 7,779 | 6,749 | 8,089 |
Goodwill | 8,371 | 7,228 | 8,237 |
Other intangible assets | 5,554 | 3,994 | 5,503 |
Other financial assets | 4 | 4 | 4 |
Deferred tax assets | 1,018 | 341 | 1,012 |
Other receivables | 455 | 675 | 443 |
TOTAL NON-CURRENT ASSETS | 45,033 | 34,800 | 44,914 |
CURRENT ASSETS | |||
Inventories | 70,211 | 83,527 | 71,022 |
Trade and other receivables | 33,054 | 44,953 | 23,864 |
Cash and cash equivalents | 39,455 | 5,200 | 42,550 |
TOTAL CURRENT ASSETS | 142,720 | 133,681 | 137,435 |
TOTAL ASSETS | 187,753 | 168,481 | 182,349 |
EQUITY AND LIABILITIES | |||
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE | |||
PARENT COMPANY | |||
Share capital | 1,000 | 1,000 | 1,000 |
Reserve for invested unrestricted equity | 23,779 | 22,184 | 23,745 |
Exchange differences | -6,458 | -6,227 | -7,831 |
Retained earnings | 94,877 | 78,160 | 89,846 |
TOTAL EQUITY | 113,198 | 95,118 | 106,760 |
NON-CURRENT LIABILITIES | |||
Borrowings | 23,110 | 5,509 | 23,643 |
Lease liabilities | 6,670 | 5,419 | 6,556 |
Deferred tax liabilities | 1,292 | 610 | 1,302 |
Employee benefit obligations | 266 | 227 | 261 |
Other liabilities | 1,619 | 1,619 | 1,619 |
TOTAL NON-CURRENT LIABILITIES | 32,957 | 13,385 | 33,381 |
CURRENT LIABILITIES | |||
Trade and other payables | 37,652 | 51,414 | 37,789 |
Borrowings | 2,261 | 6,825 | 2,271 |
Lease liabilities | 1,198 | 1,310 | 1,603 |
Employee benefit obligations | 55 | 56 | 54 |
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Other liabilities | 432 | 374 | 491 |
TOTAL CURRENT LIABILITIES | 41,598 | 59,978 | 42,208 |
TOTAL LIABILITIES | 74,556 | 73,363 | 75,589 |
TOTAL EQUITY AND LIABILITIES | 187,753 | 168,481 | 182,349 |
Consolidated cash flow statement
(EUR thousands) | 1-3/2024 | 1-3/2023 | 1-12/2023 |
Cash flow from operating activities | |||
Operating profit | 5,988 | 11,297 | 28,216 |
Adjustments to operating profit | 1,512 | 1,270 | 5,107 |
Change in working capital | |||
Change in current receivables | -8,504 | -8,877 | 17,928 |
Change in inventories | 2,136 | 7,607 | 25,911 |
Change in current liabilities | -722 | -4,085 | -23,184 |
Interest and charges paid | -880 | -232 | -1,109 |
Interest received | 161 | 0 | 162 |
Paid tax and tax refund | -1,601 | -3,639 | -8,382 |
Cash flow from operating activities | -1,910 | 3,340 | 44,650 |
Cash flow from investing activities | |||
Capital expenditure on tangible and intangible assets | -794 | -3,063 | -6,875 |
Proceeds from sales of tangible and intangible assets | 0 | 44 | 52 |
Acquisition of a subsidiary less cash acquired | 0 | 0 | -12,478 |
Cash flow from investing activities | -794 | -3,018 | -19,301 |
Cash flow from financing activities | |||
Drawdown of loans | 0 | 867 | 27,445 |
Repayments of borrowings | -559 | -2,922 | -15,853 |
Right-of-use asset payments | -407 | -353 | -1,506 |
Cash flow from financing activities | -965 | -2,408 | 10,086 |
Change in cash and cash equivalents | -3,669 | -2,086 | 35,435 |
Cash and cash equivalents at beginning of reporting period | 42,550 | 7,559 | 7,559 |
Effect of changes in exchange rates | 575 | -272 | -443 |
Cash and cash equivalents at end of reporting period | 39,455 | 5,200 | 42,550 |
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Disclaimer
Incap Oyj published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 07:16:09 UTC.