Incap Group Financial Report: ‘Satisfactory Performance’ Despite COVID-19 Pandemic


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Incap Corporation released its half-year financial report for January-June 2020.

April–June 2020 highlights

  • Due to the COVID-19 pandemic and the related lockdowns, Incap’s factory in India was closed at the end of March 2020 and restarted in May 2020.
  • The closure of the factory and other effects of the pandemic had a negative impact on the organic revenue growth and the profitability.
  • The overall market demand continued on a good level.
  • The revenue of the second quarter amounted to EUR 22.6 million, showing an increase of 21% (4-6/2019: EUR 18.7 million).
  • Excluding revenue from AWS Electronics Group acquired in January 2020, the revenue decreased organically by 31%. 
  • Adjusted EBIT was EUR 2.8 million (EUR 2.9 million), corresponding to 12.2% of revenue (15.5%).
  • AWS Electronics Group acquisition related purchase price allocation (PPA) amortisation amounted to EUR 0.7 million (EUR 0.0 million) and non-recurring costs were EUR 0.0 million (EUR 0.0 million).
  • Operating profit (EBIT) was EUR 2.1 million (EUR 2.9 million), a decrease of 27%, corresponding to 9.3% of revenue (15.5%). 
  • Net profit for the period was EUR 1.2 million (EUR 2.1 million), a decrease of 46%.

January–June 2020 highlights

  • Acquisition of AWS Electronics Group with production facilities in the UK and Slovakia was completed in January 2020.
  • Revenue in January-June 2020 amounted to EUR 46.9 million, an increase of 26% (1–6/2019: EUR 37.2 million). 
  • Excluding revenue from AWS Electronics Group acquired in January 2020, the revenue decreased organically by 24%
  • Adjusted EBIT was EUR 5.4 million (EUR 5.7 million), corresponding to 11.6% of revenue (15.5%).
  • AWS Electronics Group acquisition related purchase price allocation (PPA) amortisation amounted to EUR 1.1 million (EUR 0.0 million) and non-recurring costs were EUR 0.1 million (EUR 0.0 million).
  • The Group’s operating profit (EBIT) was EUR 4.3 million (EUR 5.7 million), a decrease of 26%, corresponding to 9.1% of revenue (15.5%). 
  • Net profit for the report period was EUR 2.7 million (EUR 4.3 million), a decrease of 37%. 
  • Earnings per share were EUR 0.62 (EUR 0.99). 

Outlook for 2020
As a result of uncertainty relating to the COVID-19 pandemic, Incap withdrew its outlook for 2020 on 24 March 2020. Incap has now updated its outlook for 2020:

Following the acquisition of AWS Electronics Group in January 2020, Incap estimates the revenue for 2020 to be significantly higher than in 2019. Considering the impact from the acquisition of AWS Electronics Group, the one-time integration and transaction costs, the PPA amortization, as well as the pandemic related factory closure, the operating profit (EBIT) is estimated to be approximately on the same level as in 2019.

The estimates and forecasts contain significant uncertainty related to the COVID-19 pandemic. The estimates are given provided that there are no major changes in currency exchange rates or in component availability and they are based both on Incap’s customers' forecasts and the company's own assessments of the business development. 

Incap Group’s CEO Otto Pukk
As expected the COVID-19 pandemic had a negative impact on our operations in the second quarter of the year. Due to the lockdown and the factory close in India, our revenue decreased organically. However, I am satisfied that in the difficult circumstances the demand for our services continued on a good level and we managed to ramp up the operations at the Indian factory quickly after the lockdown was lifted. Despite our personnel working extra shifts to catch up with the backlog, part of the deliveries were delayed to the third quarter of the year. 

Due to the pandemic and the related restrictions, our factory in the UK operated with somewhat reduced capacity during the second quarter. Our factory in Slovakia suffered from the decline in the automotive sector while our factory in Estonia has been operating in the second quarter almost normally. Excluding the effect from the AWS Electronics Group acquisition related purchase price allocation amortisations, our profitability continued on a good level, despite the negative impact from the closure of the factory in India and other pandemic related effects.

The overall demand for our services has continued on a good level, although the pandemic has put pressure on some customer segments. Especially the automotive sector was affected by the pandemic, but has since then started to slowly recover. We have been successful in new customer acquisition this year and have seen high activity among customers in Europe with a good number of requests for quotations. As a result of the pandemic, many customers are reviewing their manufacturing arrangements and we can see more interest moving manufacturing closer to the home markets and R&D activities. Despite the challenges caused by the pandemic for the global supply chain, we have managed to find solutions to secure the availability of components and ensure the smoothness of the logistics.

Following the AWS acquisition in January this year, the number of customers has increased significantly. Our four biggest customers contributed to 50.8% of revenue in the first half of 2020, while in 2019 their share was 80.6%. With this change, we can see also that the customer base is more balanced and the variations in the activity of different customers compensate each other well and smooth out our business.

After the acquisition and throughout the pandemic, we have focused on securing the business and serving customers well. Considering the circumstances, the business is developing well at the acquired units in UK and Slovakia. Integration of the acquired units continued according to plan during the second quarter, despite the COVID-19 pandemic. Our main focus in the integration has been on capturing synergies in cross-selling and sourcing.

The investment in new manufacturing capacity in India is also back on track after the slowdown caused by the pandemic and the lockdown. We expect the factory expansion to be finalised still this year. 

My warmest thanks under these unusual times goes to our personnel who has shown great resilience and flexibility. We have taken very strict measures to protect our personnel from the spread of the virus and this has required special efforts from all our employees. It has been a tough time and uncertainty relating to recovery from the COVID-19 pandemic still remains high. However, following the AWS acquisition, we expect our revenue for 2020 to be significantly higher than in 2019. Considering the impact from the acquisition of AWS Electronics Group, the one-time integration and transaction costs, the PPA amortization, as well as the pandemic related factory closure, our operating profit (EBIT) is estimated to be approximately on the same level as in 2019. 

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