Incap Reports 26% Revenue Growth in 2016

Estimated reading time: 18 minutes

Personnel

At the end of 2016, Incap Group had a payroll of 514 employees (468). 85% (87%) of the personnel worked in India, 14% (13%) in Estonia and 0.4% (0.4%) in Finland. At the end of the year, 106 of Incap’s employees were women (96) and 408 were men (372). Permanently employed staff totalled 205 (192) and the number of fixed-term employment contracts was 309 (275). The company had one part-time employment contract at the end of the period (1). The average age of the personnel was 31 years (29).

Management and organisation

The duties of CEO of Incap were carried out by Ville Vuori (B.Sc. Eng., eMBA, born 1973). At the end of the report period the Group’s Management Team included besides the CEO Ville Vuori also the local Managing Directors: Murthy Munipalli in India and Otto Pukk in Estonia.

The company’s organisation structure is lean. Along with the expansion of its operations the company gave up the outsourced services in the management of finance and administration and appointed Elina Liippola as CFO and member of Management Team as from 1 January 2017. Tilistar Oy continues acting as Incap’s outsourced financial department. The Group’s factories in Estonia and in India operate as independent cost centres, which are responsible besides for the actual order-delivery process also for the quotations and pricing.

Annual General Meeting 2016

The Annual General Meeting of Incap Corporation was held in Helsinki on 6 April 2016. A total of 20 shareholders participated in the meeting, representing approximately 52.9% of all shares and votes in the company. The Annual General Meeting adopted the financial statements for the financial period ended 31 December 2015 and decided, in accordance with the proposal of the Board of Directors, that no dividend be distributed for the financial period and that the loss for the financial period (EUR 772,720.93) be recognised in equity.

The Annual General Meeting resolved to reduce the share capital of the company from EUR 20,486,769.50 by EUR 19,486,769.50 to cover the losses and to transfer funds to the unrestricted equity reserve. The losses accumulated during previous financial periods were covered by decreasing the unrestricted equity reserve by EUR 16,804,218.62, the share premium account by EUR 44,316.59 and the share capital by EUR 11,118,952.29.  After covering the losses the remaining share capital will further be decreased by EUR 8,367,817.21 transferring the funds to the unrestricted equity reserve.

After the measures the new share capital of the company is EUR 1,000,000 and the unrestricted equity reserve EUR 8,367,817.21. The parent company’s equity thereby exceeded the level set in the Companies Act, chapter 20, section 23. Covering the losses clarified the balance sheet structure of the parent company and improved the ratio between the company’s equity and share capital. The creditor protection procedure was required in the Companies Act. The reduction of share capital was recorded in the Trade Register on 31 August 2016.

The Annual General Meeting further resolved on the reduction of the quantity of company’s shares by way of issuing new shares and by redemption of company’s own shares, in such a way that after the procedure each current 50 shares of the company shall correspond to one share of the company. The arrangement took place soon after the Annual General Meeting on 8 April 2016. The purpose of the reduction of the quantity of company’s shares was to improve the trade conditions and the reliability of the price formation of the shares. The key ratios per share for the report period as well as other periods presented in this report have been adjusted accordingly.

Authorisation of the Board of Directors

The Annual General Meeting held on 6 April 2016 authorized the Board of Directors to decide to issue a maximum of 440,000 new shares either against payment or without payment. The new shares may be issued to the company’s shareholders in proportion to their current shareholdings in the company or deviating from the shareholders’ pre-emptive right through one or more directed share issue, if the company has a weighty financial reason to do so, such as developing the company’s equity structure, implementing mergers and acquisitions or other restructuring measures aimed at developing the company’s business, financing of investments and operations or using the shares as a part of the company’s remuneration and compensation system, to the terms and scope decided by the Board of Directors. If the authorization is used to the maximum number of new shares, new shares would represent 9.5% of all shares and votes in the company.

The Board has not exercised the authorisation, which is valid until 6 April 2017.

Board of Directors and Auditor

Olle Hulteberg acted as the Chairman of the Board of Directors of Incap Corporation. The Annual General Meeting held on 6 April 2016 re-elected Fredrik Berghel, Olle Hulteberg, Susanna Miekk-oja, Rainer Toiminen and Carl-Gustaf von Troil to the Board of Directors.

The Board convened 15 times in 2016 and the average attendance rate of Board members was 90.7%.

The firm of independent accountants Ernst & Young Oy continued to act as the company’s auditor, with Bengt Nyholm, Authorised Public Accountant, appointed as the principal auditor.

Report on Corporate Governance

Incap Corporation is complying with the Corporate Governance Code of Securities Market Association, which is valid as from 1 January 2016 and is publicly available at the website of Securities Market Association at www.cgfinland.fi. The company will release a report on the company’s corporate governance in compliance with the Securities Market Act as a separate document in connection with the publication of the Report of the Board of Directors and the Annual Report in week 12/2017. The report is available at the company’s website.

Shares and shareholders

Incap Corporation has one series of shares, and the number of shares at the end of the period was 4 365 168 (31 December 2015: 218,228,070).

The number of shares was reduced as decided by the Annual General Meeting by way of issuing new shares and by redemption of company’s own shares, in such a way that after the procedure each current 50 shares of the company shall correspond to one share of the company. As a result of the measures the number of the company’s shares was decreased from 218,228,070 shares to 4,365,168 shares. The new total number of shares was recorded in Trade Register on 9 April 2016 and the trade with the new number of shares started in Nasdaq Helsinki on 11 April 2016.

During the financial period, the share price varied between EUR 8.65 and 4.95 (EUR 0.03 and 0.20). The closing price for the period was EUR 5.46 (EUR 0.16). The market capitalisation on 31 December 2016 was EUR 23.8 million (EUR 34.3 million). At the end of financial period, the company had 2,861 shareholders (2,806). Nominee-registered or foreign owners held 38.2% (41.9%) of all shares. The company does not hold any of its own shares.

At the end of the financial period 2016, the members of Incap Corporation’s Board of Directors and the President and CEO and their interest parties owned a total of 1,289,737 shares or approximately 29.5% of the company’s shares outstanding.

Announcements in accordance with Section 10 of Chapter 9 of the Securities Market Act on a change in holdings

The company had no announcements in accordance with Section 10 of Chapter 9 of the Securities Market Act during the financial period.

Risk management

The Risk Management Policy approved by the Board of Incap Corporation classifies risks as risks connected to the operating environment, operational risks and damage and funding risks. The company’s risk management is mainly focused on risks that threaten the company’s business objectives and continuity of operations. In order to improve its business opportunities, the company is willing to take on managed risks within the scope of the Group’s risk management capabilities. The company regularly reviews its insurance policies as part of its risk management system.

Short-term risks and factors of uncertainty concerning operations

General risks related to the company’s business operations and sector include the development of customer demand, price competition in contract manufacturing, successful acquisition of new customers, availability and price development of raw material and components, sufficiency of funding, liquidity and exchange rate fluctuations.

As a result of the improved profitability the company’s financing position is good and the sufficiency of financing and working capital are at the moment posing no remarkable risk.

Based on the cash flow estimate prepared in connection with the financial statement, the company estimates that the company’s working capital will cover the company’s requirement for the next 12 months.

In the definition of the volumes of internal transactions the actual value added and the so-called “arm’s length” principle are considered. After the cumulative losses in India were covered during the latter half of 2015, it is possible to repatriate profits also through dividends.

The value of the shares in subsidiaries in the parent group has a significant impact on the parent company’s equity and therefore on, for example, equity ratio. Based on the value calculations in connection with the financial statements for 2016 there is no need for any decrease of the value of the shares in subsidiaries. However, based on the company’s estimate there is a risk connected with the valuation of the shares of the Estonian subsidiary because of the previous unprofitable operations of the subsidiary. There is no such risk in the valuation of the subsidiary in India. 

Demand for Incap’s services and the company’s financial position are affected by global economic trends and the fluctuation among customer industries. Even though the business environment in 2017 is estimated to continue challenging, the general financial development is considered to have no remarkable negative effect on the demand or the solvency of the customers. The customer relationship management is of utmost importance in a challenging market situation and the management is paying special attention to this.

The company’s sales are spread over several customer sectors balancing out the impact of the economic fluctuation in different industrial sectors. In 2016, there were three customers in the Group with a revenue exceeding 10% of the total revenue of the Group. The combined revenue of these three customers was approximately 73% of the Group’s revenue.

The company’s operating segment, electronics manufacturing services, is highly competitive and there are major pressures on cost level management. The company has succeeded in increasing the efficiency of its operations and in lowering the costs. Furthermore, the company’s production is located in countries with competitive levels of wage and general costs.

The most significant exchange rate risk of the company is related to the Indian subsidiary. A remarkable part of the Group’s operations is located in India. The fluctuation in the exchange rates between Indian Rupee and Euro may have a remarkable effect on revenue and result.

The Indian subsidiary of the company had a tax audit in the report period. As a result, the tax authorities do not approve the depreciations made on the capitalized customer contracts during accounting periods 2008/2009-2012/2013 and the transfer costs during the accounting period 2011/2012. The estimated tax effect with eventual increases is amounting to a total of EUR 0.4 million. The company has raised a complaint on these tax issues and is presenting the tax debt in the off balance sheet liabilities in the balance sheet.

Page 2 of 3

• < Previous Page
• Next Page >