ANNUAL REPORT
2021
CONTENTS
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2021: STRONG GROWTH AND
PROFITABILITY CONTINUED
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CEO'S REVIEW
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OPERATING ENVIRONMENT
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BUSINESS REVIEW
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REPORT OF THE BOARD OF DIRECTORS
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KEY FIGURES
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CONSOLIDATED INCOME STATEMENT
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CONSOLIDATED BALANCE SHEET
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CONSOLIDATED CASH FLOW STATEMENT
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CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
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ACCOUNTING PRINCIPLES APPLIED IN THE
CONSOLIDATED FINANCIAL STATEMENTS
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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PARENT COMPANY INCOME STATEMENT
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PARENT COMPANY BALANCE SHEET
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PARENT COMPANY CASH FLOW STATEMENT
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PARENT COMPANY ACCOUNTING POLICIES
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NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS
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BOARD OF DIRECTORS’ PROPOSAL ON
MEASURES RELATED TO THE RESULT
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AUDITOR’S REPORT
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FIVE-YEAR KEY FIGURES
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DEFINITIONS OF KEY FIGURES
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BOARD OF DIRECTORS
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MANAGEMENT TEAM
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SHARES AND SHAREHOLDERS
INCAP IN BRIEF
We are a trusted partner and a full-
service provider in Electr onics
As a global EMS company, we
support customers ranging from
large mulnaonals and mid-sized
companies to small start-ups in their
complete manufacturing value chain.
We offer state-of-the-art technology
backed up by our entrepreneurial
culture and highly qualified
personnel. Our services include
material procurement, prototyping,
producon ramp-up, serial
producon, final assembly, tesng
and logiscs.
We have operaons in Finland,
Estonia, India, the United Kingdom,
Slovakia, and Hong Kong and we
employ approximately 2,500 people.
Incap's share has been listed on
Helsinki Stock Exchange since 1997.
l
RECONCILIATION OF ALTERNATIVE
PERFORMANCE MEASURES
56
58
59
60
3
5
6
7
9
16
17
18
19
20
23
29
40
40
41
42
44
47
49
53
55
Strong Growth and Profitability Continued
3
Incap's revenue grew 59% year on year and amounted to EUR
169.8 million (2020: EUR 106.5 million). The revenue growth was
driven by the high Electronics Manufacturing Services market
demand. Growth was enabled by the mely finalisaon of our
capacity expansions at our Indian factories.
Profitability remained solid. Adjusted operang profit (EBIT) was
EUR 26.8 million (EUR 14.6 million) or 15.8% of revenue (13.7%).
Relave profitability increased especially due to a favourable
product mix and the growing share of services as customers
increased the outsourcing of their operaons. Synergy effects in
common funcons supported the posive development of
profitability as well.
During 2021, Incap focused strongly on the further expansion of
its factory in India. Incap connues to increase the capacity in
India and esmates that the third factory under construcon will
be fully finalised by the end of 2022.
2021
STRONG GROWTH AND PROFITABILITY CONTINUED
|
180
160
140
120
100
80
60
40
20
0
17
18 19 20
21
REVENUE, EUR MILLION
0
30
20
15
10
5
25
17
18 19 20
21
OPERATING PROFIT (EBIT),
EUR MILLION
EARNINGS PER SHARE
(EPS), EUR
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
17
18 19 20
21
„
Our order book is at an
all-time high level, and
we are increasing our
capacity to meet the
growing demand.
4
|
CEO's Review
5
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2021 was a strong year under difficult circumstances. Worsening
component availability and factory close-downs in India required
a lot more planning than usual, but our team showed their
commitment and stepped up to the challenge. I would like to
extend my warmest thanks to all Incap employees.
The last quarter of 2021 was once again a great one with revenue
reaching an all-me high, EUR 51.4 million, even with some
material availability issues. Our full year revenue amounted to
EUR 169.8 million which is 59% more than in 2020.
High market demand and the capacity expansions at our Indian
factories contributed to the growth. We are connuing to
increase the capacity in India and esmate now that the third
factory under construcon will be fully finalised by the end of this
year.
In line with revenue development, our full-year EBIT grew 106%
and amounted to EUR 26.0 million. Increased relave profitability
is partly due to synergy effects in common funcons, but above
all due to a favourable product mix. The share of services in the
mix has grown as customers increased the outsourcing of their
operaons.
Acvity in the market connued on a high level in 2021. The
growing need for electronics manufacturing services is driven by,
for instance, the growth of sustainable energy soluons, the
proliferaon of electric vehicles and the related government
investments in green energy and vehicle charging infrastructure.
In 2021, our corporate responsibility acons concentrated on our
key social, environmental, and economic themes. We pay special
aenon to the energy efficiency of our factories, and in India,
also water management is in focus. One of the key themes is the
wellbeing of our employees and in 2021, we put a lot of effort in
protecng our employees from the coronavirus by for instance
offering vaccinaons. To strengthen our commitment for
sustainable development, we also joined the UN Global Compact
iniave in 2021.
Looking forward, the component availability situaon is sll
difficult, which makes planning increasingly challenging and
requires a lot of extra effort. Tight component availability is
forcing us to keep our inventory levels high, which may impact
our working capital needs.
Having said that, we esmate that we can connue on our growth
path in 2022. Our order book is at an all-me high level, and we
are increasing our capacity to meet the growing demand. We also
connue to evaluate M&A opportunies, concentrang in
companies with a strong cultural fit and good profitability.
In addion to our employees, I want to warmly thank our
customers, partners, and shareholders for their trust in Incap.
OTTO PUKK
President and CEO
CEO'S REVIEW
A STRONG YEAR UNDER DIFFICULT CIRCUMSTANCES
In 2021, market acvity connued on a good level despite the
pandemic. In the longer term, the growth in electronics
manufacturing services is driven by the growing use of
electronics supported with megatrends such as digitalisaon.
The overall demand and market acvity in the electronics
manufacturing services (EMS) industry connued at a good level
despite the coronavirus pandemic and its negave impact on
certain industries and customer segments.
Component availability situaon in the market connues to be
challenging, and the energy crisis in China as well as increased
geopolical tensions in Eastern Europe might make the
development more difficult to foresee. Incap is working closely
with its suppliers and customers to keep adequate inventory
levels to migate the risks.
In the electronics manufacturing services industry, customers
connue to be very price-conscious and expect that their
manufacturing partners connuously increase their efficiency and
stay compeve. Incap sees that the ability to quickly adapt to
changes is a key success factor in the electronics industry today
and in the future. That ability is necessary in developing and
implemenng new products, producon methods and ideas. The
company esmates that long-term market development will be
posive because electronics is increasingly used in new types of
products such as light vehicles and other everyday items.
In the longer term, the growth in electronics manufacturing
services is driven by the growing use of electronics supported
with megatrends such as digitalisaon. The increasing need for
sustainable energy soluons, medical equipment, emerging 5G
and IoT ecosystems and the proliferaon of electric vehicles
contribute to the demand growth. Populaon growth and aging
populaon will also create opportunies in for instance health
care technology. The EMS industry is highly fragmented and offers
potenal for consolidaon.
OPERATING ENVIRONMENT
Operating Environment
6
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7
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BUSINESS REVIEW
Revenue grew 59% year on year and amounted to EUR 169.8
million (2020: EUR 106.5 million). The revenue growth was mainly
related to demand growth. Adjusted operang profit (EBIT) was
EUR 26.8 million (EUR 14.6 million) or 15.8% of revenue (13.7%).
At the end of 2021, the number of personnel in Incap Group was
2,523 (1,902). Of the personnel 78.7% (71.2%) worked in India,
4.3% (5.1%) in Estonia, 7.3% (10.8%) in the United Kingdom, 9.6%
(12.8%) in Slovakia and 0.1% (0.1%) in Finland.
Incap's factory in Kuressaare, Estonia focuses on versale,
technologically advanced, cost-efficient producon. The factory is
located close to the European markets, serving the company's
global customer base.
The factory specialises in prototypes and pre-series, printed
circuit board (PCB) assembly, volume producon, final assembly,
as well as aer-sales services. The services include also
controlled producon ramp-ups and sourcing and purchasing.
Incap's Estonian factory has been operang since 2000 and
covers 7,300 square metres. On 31 December 2021, the factory
employed 108 persons.
ESTONIAN FACTORY
Incap's Tumkur factory in India specialises in the manufacturing of
electronics and box-build products. The focus is on industrial
customers such as automaon, power generaon and
telecommunicaons companies. Customers represent mainly
globally operang electronic device manufacturers, who may be
established in Europe but have producon facilies in Asia. In
addion to the internaonal customers, Tumkur also serves the
Indian market.
The factory produces inverters, UPS devices and PCBs for fuel
dispensers and sustainable energy products. Its services include
PCB assembly and mass producon, final assembly, design and
producon of prototypes, Design For Manufacturing feedback,
tesng, magnec assemblies as well as cable harnesses.
Incap started EMS operaons in India in 2007. On 31 December
2021, 1,986 people worked in the company's Indian factory.
Incap has connued to expand the producon capacity of its
factory in Tumkur. Aer the latest expansion, the factory
premises are now close to 18,000 square meters, and the third
factory currently under construcon will add approximately
8,500 square metres. The project is scheduled to be completed
by the end of 2022.
INDIAN FACTORY
Incap's factory in Newcastle-under-Lyme in the United Kingdom
has been serving the defense, security and space industries for
over 20 years. The customers include global companies operang
in Europe, Asia and North America.
The factory's services include PCB assembly, electromechanical
assembly as well as cable and wire harness assemblies. The
offering also includes maintenance, repair and overhaul services.
The factory has also a separate unit specialising on quick
manufacturing of prototypes and pre-series.
The factory has been operaonal since 1974 and it covers 4,400
square metres. On 31 December 2021, the factory employed 185
people.
FACTORY IN THE UNITED KINGDOM
The customers of Incap's factory in Námestovo, Slovakia, are
global companies operang in Europe and North America. Its
geographical locaon enables effecve service and deliveries to
Western and Central European markets.
The factory's services include special PCB assembly,
electromechanical assembly as well as cable and wire harness
assembly. The factory also has volume producon capacity and a
dedicated hall for automove business.
The Slovakian factory has experience of electronics
manufacturing since 2008. The factory covers 5,200 square
meters, and on 31 December 2021, the factory employed 242
people.
SLOVAKIAN FACTORY
Business Review
„
Full year revenue
amounted to EUR 169.8
million which is 59%
more than in 2020.
Report of the Board of Directors
9
|
REPORT OF THE BOARD
OF DIRECTORS FOR 2021
In 2021, market acvity connued on a good level despite the
pandemic. In the longer term, the growth in electronics
manufacturing services is driven by the growing use of electronics
supported with megatrends such as digitalisaon.
The overall demand and market acvity in the electronics
manufacturing services (EMS) industry connued at a good level
despite the coronavirus pandemic and its negave impact on
certain industries and customer segments.
Component availability situaon in the market connues to be
challenging, and the energy crisis in China as well as increased
geopolical tensions in Eastern Europe might make the
development more difficult to foresee. Incap is working closely
with its suppliers and customers to keep adequate inventory levels
to migate the risks.
In the electronics manufacturing services industry, customers
connue to be very price-conscious and expect that their
manufacturing partners connuously increase their efficiency and
stay compeve. Incap sees that the ability to quickly adapt to
changes is a key success factor in the electronics industry today
and in the future. That ability is necessary in developing and
implemenng new products, producon methods and ideas. The
company esmates that long-term market development will be
posive because electronics is increasingly used in new types of
products such as light vehicles and other everyday items.
In the longer term, the growth in electronics manufacturing
services is driven by the growing use of electronics supported with
megatrends such as digitalisaon. The increasing need for
sustainable energy soluons, medical equipment, emerging 5G
and IoT ecosystems and the proliferaon of electric vehicles
contribute to the demand growth. Populaon growth and aging
populaon will also create opportunies in for instance health
care technology. The EMS industry is highly fragmented and offers
potenal for consolidaon.
BUSINESS ENVIRONMENT
Incap's financial performance developed well in 2021. The strong
revenue growth was mainly driven by increased demand. In 2021,
Incap's revenue increased 59% compared to 2020, amounng to
EUR 169.8 million (EUR 106.5 million).
Full year 2021 operang profit (EBIT) was EUR 26.0 million (EUR
12.6 million). Purchase price allocaon amorsaon and the
acquision related non-recurring costs amounted to EUR 0.8
million (EUR 2.0 million).
Adjusted operang profit (EBIT) was EUR 26.8 million (EUR 14.6
million) or 15.8% of revenue (13.7%).
Personnel expenses grew 22% year on year, amounng to EUR 17.4
million or 10.2% of revenue (EUR 14.3 million, 13.4% of revenue).
Other business expenses amounted to EUR 6.5 million (EUR 4.4
million). Material expenses increased due to increased revenue
and amounted to EUR 127.0 million or 74.8% of revenue (EUR
73.6 million equalling 69.1% of revenue).
Net financial expenses amounted to EUR 0.3 million (EUR 1.1
million). Depreciaon amounted to EUR 3.3 million (EUR 3.3
million).
Net profit for the period totalled EUR 21.1 million (EUR 9.2
million). Earnings per share were EUR 3.60 (EUR 2.02).
REVENUE AND EARNINGS
INVESTMENTS
Incap Group is a trusted partner and full service provider in
Electronics Manufacturing Services. As a global EMS company
Incap supports customers ranging from large mulnaonals and
mid-sized companies to small start-ups in their complete
manufacturing value chain. Incap offers state-of-the-art technology
backed up by an entrepreneurial culture and highly qualified
personnel. At the end of 2021, Incap had operaons in Finland,
Estonia, India, the United Kingdom, Slovakia and Hong Kong. The
company's revenue in 2021 was EUR 169.8 million, and at the end
of 2021, the company employed 2,523 people.
Factory-related investments in 2021 totalled EUR 4.5 million (EUR
2.8 million) and related mainly to the ongoing expansion of the
factory in India.
Total assets in the balance sheet on 31 December 2021 stood at
EUR 129.5 million (EUR 76.4 million). The Group's equity at the end
of the financial period was EUR 62.9 million (EUR 38.6 million).
Liabilies increased to EUR 66.6 million from previous year (EUR
37.8 million). EUR 11.3 million (EUR 9.8 million) were interest-
bearing liabilies. Liabilies increased from the previous year
mainly due to trade payables related to material purchases.
Interest-bearing net debt was EUR 2.0 million (EUR 5.9 million).
The Group's non-current interest-bearing liabilies amounted to
EUR 4.0 million (EUR 6.1 million) and non-interest-bearing liabilies
to EUR 1.6 million (EUR 1.6 million). Current interest-bearing
liabilies were EUR 7.2 million (EUR 3.7 million). Out of the
interest-bearing liabilies EUR 4.6 million (EUR 1.8 million) are
related to the Indian subsidiary. Other interest-bearing liabilies
include EUR 2.9 million (EUR 3.0 million) of bank loans and limits
granted by the company's Finnish bank.
The main covenants of the Group's loans include equity rao and
the Group's interest-bearing debt in relaon to EBITDA, and their
status is reviewed every six months. In the review on 31 December
2021, the target level of interest-bearing debt in relaon to EBITDA
was below 3.0 and that of the equity rao more than 30%. The
company met these covenants, as the actual figure for interest-
bearing debt/EBITDA on the review date was 0.4 and the equity
rao 51.9%.
As for the loans granted by the Indian bank, the company has
commied to follow ordinary covenants and the bank's general
loan condions.
At the end of 2021, the company's financial posion was strong.
Equity rao increased to 51.9% (50.5%) mainly due to solid
profitability. Net gearing was 3.2% (15.3%).
Deferred tax assets include EUR 0.4 million (EUR 0.3 million) which
is related to the parent company's historical confirmed losses and
EUR 0.0 million (EUR 0.1 million) related to the transacon costs of
the rights issue.
The Group's cash posion during the reporng period was good.
On 31 December 2021, the Group's cash and cash equivalents
totalled EUR 9.2 million (EUR 3.9 million) and the company had an
unulised bank facility and credit line amounng to EUR 9.4
million.
The Group's quick rao was 0.8 (1.0), and the current rao was 1.7
(1.8).
Inventories at end of the year totalled EUR 59.5 million (EUR 24.2
million).
Cash flow from operaons was EUR 9.7 million (EUR 4.7 million).
Cash flow was posively impacted by the strong growth of revenue
and profitability.
BALANCE SHEET, FINANCING AND CASH FLOW
At the end of 2021, the number of personnel in Incap Group was
2,523 (1,902). Of the personnel 78.7% (71.2%) worked in India,
4.3% (5.1%) in Estonia, 7.3% (10.8%) in the United Kingdom, 9.6%
(12.8%) in Slovakia and 0.1% (0.1%) in Finland.
At the end of the year, of Incap's personnel 554 were women (444)
and 1,969 were men (1,458). The average age of the personnel was
30 years (32). The average number of personnel was 2,165 (1,424).
The number of permanent personnel totalled 709 (667), and the
number of fixed-term contracts were 1,814 (1,235).
PERSONNEL
At the end of 2021, Incap's Management Team consisted of
President & CEO, Oo Pukk; Director of Operaons, India and Sales
APAC, Murthy Munipalli; CFO An Pynnönen; Director of
Operaons, Estonia, Greg Grace; and Jamie Maughan, Director of
Operaons, U.K. & Slovakia.
The Group has manufacturing operaons in Estonia, India, Slovakia
and the United Kingdom and sourcing operaons in Hong Kong.
Finance and administraon, sourcing, sales, IT, and
communicaons are centrally coordinated by the corporate office
in Finland.
MANAGEMENT AND ORGANISATION
Incap Group's all business units have environmental management
and quality assurance systems. Environmental management system
in all business units complies with ISO 14001:2015, and the quality
assurance system complies with ISO 9001:2015. All business units
have also the ISO 13485/2016 quality cerficaon for the
manufacture of medical devices. The Estonian and Slovakian units
also comply with the Occupaonal health and safety management
system ISO 45001:2018.
QUALITY ASSURANCE AND ENVIRONMENTAL ISSUES
RESEARCH AND DEVELOPMENT
Report of the Board of Directors
10
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ANNUAL GENERAL MEETING 2020
The Annual General Meeng of Incap Corporaon held in Helsinki
on 27 April 2021 adopted the annual accounts for the financial
period ending on 31 December 2020 and resolved to discharge the
members of the Board of Directors and the President and CEO
from liability. The Annual General Meeng resolved in accordance
with the Board's proposal that no dividend will be paid from the
profits of the financial year 2020 and that the profit for the
financial period be recognised in equity.
The Annual General Meeng resolved to authorise the Board of
The development of services and products takes place during the
ordinary course of business and is accounted for as an operang
expense.
As a contract manufacturer Incap manufactures and developes its
customers' products.
Report of the Board of Directors
11
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The Annual General Meeng held on 27 April 2021 resolved that
the number of members of the Board of Directors shall be four (4).
The Annual General Meeng resolved that the present members of
the Board, Carl-Gustaf von Troil, Päivi Jokinen, Ville Vuori and Kaisa
Kokkonen are elected as members of the Board of Directors. In its
constuve meeng aer the Annual General Meeng, the Board
selected Ville Vuori as the Chairman of the Board.
In 2021, the Board convened 17 mes and all Board members
aended in all of the meengs.
The firm of independent accountants Ernst & Young Oy was
elected to connue to act as the company's auditor, with Bengt
Nyholm, Authorised Public Accountant, as the principal auditor.
BOARD OF DIRECTORS AND AUDITOR
Directors to decide to issue new shares and other special rights
entling to new shares of the company in accordance with the
proposal of the Board of Directors. The authorisaon entles to a
maximum quanty of 584,932 new shares, which represents
approximately 10 per cent of the current number of shares.
The new shares may be issued to the company's shareholders in
proporon to their current shareholdings in the company or
deviang from the shareholders' pre-empve 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, implemenng mergers and acquisions or other
restructuring measures aimed at developing the company's
business, financing of investments and operaons or using the
shares as a part of the company's remuneraon and compensaon
system. The Board of Directors would decide upon terms and
scope related to share issues.
Based on the authorisaon, the Board of Directors can, pursuant to
chapter 10, secon 1, of the Companies Act also decide on issuing
other special rights, either against payment or without payment,
entling to new shares of the Company. The subscripon price of
the new shares can be recorded partly or fully to the invested
unrestricted equity reserves or to equity according to the decision
of the Board of Directors. The Board of Directors is further entled
to decide on condions regarding the issuance of shares as well as
the issuance of other special rights entling to shares.
The resoluons are valid for one year from the Annual General
Meeng.
The resoluons of the Annual General Meeng are available in full
on the company's website at hps://incapcorp.com/annual-
general-meeng/
Incap Corporaon is complying with the Corporate Governance
Code of Securies Market Associaon. The company has released a
report on the company's corporate governance in compliance with
the Securies Market Act as a separate document. The report is
also available at the company's website.
The Corporate Governance Code of Securies Market Associaon
is publicly available at the website of Securies Market Associaon
at www.cgfinland.fi.
CORPORATE GOVERNANCE
Incap Corporaon has one series of shares, and the number of
shares at the end of the period was 5,849,327 (31 December 2020:
5,820,224).
In 2021, the share price varied between EUR 17.20 and 80.60 (EUR
8.51 and 19.20). The closing price on 30 December 2021 was EUR
78.50 (18.45). The market capitalisaon on 31 December 2021 was
EUR 459.2 million (107.4). At the end of the year, the company had
4,605 shareholders (3,931). Nominee-registered owners held
20.4% (9.0%) and foreign owners 8.2% (0.7%) of all shares. The
company does not hold any of its own shares.
At the end of 2021, the members of Incap Corporaon's Board of
Directors and the President and CEO and their interest pares
owned a total of 55,638 shares or 1.0% of the company's shares
outstanding (55,638 or 1.0%).
SHARES AND SHAREHOLDERS
In 2021, the company did not receive any shareholder
announcements in accordance with Secon 10 of Chapter 9 of the
Securies Market Act.
FLAGGING NOTIFICATIONS
In 2021, there were no significant related-party transacons.
RELATED-PARTY TRANSACTIONS
In May 2020, Incap's Board of Directors resolved to implement a
long-term share-based incenve scheme for the company's CEO,
Oo Pukk. The incenve scheme's purpose is to support Incap's
strategy and incenvise the CEO in the effecve implementaon of
the post-acquision integraon of AWS Electronics Group. The
company has not previously had a share-based incenve scheme
for CEO Oo Pukk. Any reward payable based on the incenve
scheme is paid out enrely as Incap's new shares.
The earnings period for the CEO's incenve scheme included the
then ongoing and next financial period of the company so that it
ended on 31 December 2021. During the earnings period, the CEO
may earn a performance-based reward amounng up to 5,730
new shares of the company based on the development of the
company's EBIT provided that the CEO is sll in a service
SHARE-BASED INCENTIVES
This non-financial informaon secon of the Report of the Board
of Directors is based on Incap's corporate responsibility program,
which is described in more details in Incap's Corporate
Responsibility Report published in connecon with its Annual
Report 2021.
Incap's corporate responsibility concerns responsibility for its
economic, social and environmental impacts. For Incap, corporate
responsibility means that the company exceeds legal requirements
and considers the needs and expectaons of its stakeholders.
As a basis for its corporate responsibility programme, the company
has defined a Code of Conduct that concerns all its employees and
suppliers. The implementaon of corporate responsibility acons
is supported by the company's quality assurance and
environmental management systems.
Descripon of business operaons
Incap provides contract manufacturing services for electronics
through its factories and organisaon. Incap's services include
procurement of materials, prototyping, producon ramp-up, serial
producon, final assembly, tesng and logiscs. The company's
manufacturing experse also covers the final assembly into a
finished product.
Incap's business covers the markets of Europe, North America, and
the Asia-Pacific region. The company has factories in Estonia,
India, Slovakia, and the United Kingdom, as well as sourcing
operaons in Hong Kong. In addion to the actual from order to
delivery process, Incap's factories are also responsible for making
offers and pricing according to the Group's instrucons. Group
management also coordinates sales and procurement. Incap's
efficient operang model is based on a decentralised organisaon,
where the manufacturing units operate independently and in an
entrepreneurial spirit. The operang model enables faster
decision-making, taking responsibility and agile response to
customer needs and shorter lead mes for customer products.
Respect for human rights and an-corrupon measures
Incap complies with the UN Universal Declaraon of Human
Rights, the UN Global Compact, the Internaonal Labour
Organizaon's (ILO's) Declaraon on Fundamental Principles and
Rights at Work and OECD's Guidelines for Mulnaonal
Enterprises.
Incap does not use forced or child labour and the company
promote equal opportunies and diversity. Incap respects the
freedom of engagement, and the company does not tolerate any
kind of harassment or bullying. Incap's business ethics focus on
fair compeon, zero-tolerance for corrupon and bribery and
prevenon of money-laundering.
As part of Incap's support and respect for human rights, the
company has also implemented a Conflict Mineral Policy. Incap is
commied to ensure that its products and processes do not
contain Conflict Minerals as defined by EU's Conflict Minerals
Regulaon and Secon 1502 of the US Dodd-Frank Act regarding
Conflict Minerals.
In 2021, there were no reported incidents of violaon of the
above-menoned laws, regulaons or principles.
Respect for human and labour rights as well as an-corrupon
principles are included in the Code of Conduct. All Incap's
employees received Code of Conduct training during 2021. Incap
also requires its suppliers to adhere to the principles described in
Incap's Supplier Code of Conduct.
Social responsibility
Incap's social responsibility emphasises the well-being of
employees and fair and ethical behaviour towards all stakeholders.
Incap provides its employees equal opportunies and possibilies
for further development. Incap wants to acvely contribute to the
sustainable development of its local communies.
Incap's Code of Conduct defines the ethical pracces as well as
fundamentals for fair treatment and condions both internally and
towards external stakeholders. It outlines how Incap's employees
are expected to behave in their daily work and sets out the
principles that help them make ethically sound decisions.
Incap strives to provide a safe and healthy workplace for all
employees and takes adequate steps to prevent accidents and
injuries. Incap expects everyone to respect and follow health and
safety laws and regulaons and to report all incidents, near miss
cases, or health and safety risks. The goal is zero hazards. In 2021,
there was one reported work-related injury at Incap's factories
(2020:0).
In 2021, 100% of our workers in Estonia and Slovakia were covered
by the Occupaonal Health and Safety management system
cerfied according to the ISO 45001 Standard. Our Indian and UK
factory operaons are in the process of being cerfied, and our
target is to have these units cerfied during 2022.
Developing personnel, promong career paths and providing
training opportunies play an important role in ensuring
movaon and wellbeing of Incap's employees. Incap arranges a
broad range of training opportunies for its employees ranging
from introductory training to process improvement and
management related training. Due to the coronavirus pandemic,
the opportunies for training connued to be partly limited in
2021.
Environmental responsibility
Incap is commied to operang in an environmentally friendly and
responsible manner. In its operaons, Incap focuses on efficient
and sustainable use of resources and materials, which is achieved
through connuous improvements of recycling rates, waste
management and energy intensity.
To meet this commitment, Incap has implemented an
Environmental Management System (EMS) cerfied in accordance
with ISO 14001 requirements. Incap also complies with all relevant
legal requirements to prevent polluon and reduce consumpon
of natural resources and materials. Incap's aim is to connuously
develop and improve its processes to protect and preserve the
environment.
In 2021, no violaons of environmental laws or regulaons were
idenfied in Incap's operaons.
To ensure efficient use of resources and minimise waste, Incap
opmises the use of all raw materials as part of its manufacturing.
The focus is on improving recycling rates and waste management,
which can be achieved by reducing waste of raw materials and line
NON-FINANCIAL INFORMATION
Report of the Board of Directors 12
|
relaonship with the company at the date of the reward's
payment. Possible reward based on the incenve scheme shall be
paid aer the company's Annual General Meeng in 2022 has
approved the company's annual accounts for the financial year 1
January 2021–31 December 2021. The shares paid as reward shall
not be transferred during a 12-month lock-up period, which begins
from the reward payment.
For the execuon of the incenve scheme, the company's Board of
Directors resolved on the directed share issue to the CEO of the
company without consideraon based on the authorisaon
granted to the company's Board of Directors on the issuance of
shares by the Annual General Meeng of the company on 20 April
2020. The shares are issued subject to meeng the condions of
the incenve scheme.
If the company decides aer the beginning of the performance
period and before paying the reward on issue of company's shares
or on issue opon rights or other special rights entled to
company's shares so that the shareholders have a pre-empve
subscripon right, the amount of the reward shall be increased by
mulplying the number of earned shares by the share issue
mulplier, or in a way resolved by the Board.
Report of the Board of Directors
13
|
rejecons. The recycling rate for hazardous waste in 2021 was
40%, and the recycling rate for non-hazardous waste improved
from the previous year.
Incap strives to improve its energy intensity by reducing its energy
consumpon. This can be achieved by using modern technology
and data, energy-efficient equipment, and through smart material
flow and logiscs. In 2021, the energy intensity of Incap's
operaons decreased and was 43 MWh/MEUR (52 in 2020).
The Risk Management Policy approved by the Board of Incap
Corporaon classifies risks as risks connected to the operang
environment, operaonal risks and damage and funding risks. The
company's risk management is mainly focused on risks that
threaten the company's business objecves and connuity of
operaons. In order to improve its business opportunies, the
company is willing to take on managed risks within the scope of
the Group's risk management capabilies. The company regularly
reviews its insurance policies as part of its risk management
system.
RISK MANAGEMENT
The EU Taxonomy Regulaon, which will progress in phases,
parally entered into force in 2021. The first delegated act, the
Climate Delegated Act, was introduced in 2021 and covers the first
two of the six environmental objecves: climate change migaon
and adaptaon. In 2022, another delegated act will be published,
the Environmental Delegated Act, which addresses four other
environmental objecves.
In the reporng for 2021, the share of turnover, capital expenditure
and operaonal expenditure that is taxonomy-eligible, i.e. in
accordance with the Climate Delegated Act are published. For
2021, no assessment of Taxonomy alignment with detailed
technical screening criteria is required.
As the Taxonomy Regulaon is sll under development, it is
worthwhile nocing that the current regulaon does not cover all
sustainable acvies on the market. In 2022 Incap connues the
work with EU’s taxonomy-related reporng requirements on
climate change migaon and adopon.
Taxonomy Eligible Acvies
Incap has assessed the taxonomy-eligibility of Incap's business
based on the descripons in Annex I (climate change migaon)
and Annex II (climate change adaptaon) of the Climate Delegated
Act as well as NACE codes. The EU Taxonomy Regulaon will enter
into force in stages and is therefore sll unfinished. Incap's
assessment of the taxonomy-eligibility of its operaons may change
with the new guidelines and regulaons entering into force.
Incap is a full-service provider in Electronics Manufacturing Services
providing material procurement, prototyping, producon ramp-up,
serial producon, final assembly, tesng and logiscs. Further
Incap’s services include printed circuit board (PCB) assembly, box-
build final assembly, electromechanical assembly and cable and
wire harness assembly, among other things. Taxonomy eligibility of
Incap’s acvies is assessed based on the final product to which
Incap has delivered a specific soluon.
Incap has idenfied Taxonomy eligible acvies contribung to
climate change migaon and climate change adapon as
following:
l 3.1 Manufacture of renewable energy technologies
l 3.3 Manufacture of low carbon technologies for transport
l 3.5 Manufacture of energy efficiency equipment for buildings
l 4.10 Storage of electricity
l 6.14 Infrastructure for rail transport
l 7.4 Installaon, maintenance and repair of charging staons for
electric vehicles in buildings (and parking spaces aached to
buildings)
l 8.1 Data processing, hosng and related acvies
Turnover, CapEx and OpEx
The Taxonomy states that undertakings should explain how they
have avoided double counng in the allocaon of the amounts of
Taxonomy-eligible turnover, CapEx and OpEx in the numerator of
the relevant KPIs. Incap has classified turnover into separate
eligible acvies once. Turnover allocaon has also been used as a
basis on calculang OpEx and CapEx.
Turnover denominator includes the total external revenue of Incap
Group companies. The turnover KPI numerator includes external
sales of taxonomy eligible acvies. CapEx denominator covers
addions to tangible and intangible assets before depreciaons,
amorzaons and re-measurements or impairments and excluding
goodwill. The CapEx numerator is the Taxonomy-eligible addions
included in the denominator and calculated based on the external
turnover, separately for each eligible acvity.
OpEx denominator covers non-capitalized costs that relate to
research and development, building renovaon measures, short-
term lease, maintenance and repair and any other direct
expenditures relang to the day-to-day servicing of assets of
property, plant and equipment that are necessary to ensure the
connued and effecve funconing on such assets. OpEx excludes
overheads, raw materials, cost of employees operang the
machine, cost of managing research and development projects,
electricity, fluids or reagents needed to operate property, plant and
equipment. The numerator includes Taxonomy-eligible operang
expenditure included in the denominator and maintenance
material, cost of employees repairing machine, cost of employees
cleaning machine and IT dedicated to maintenance. Taxonomy-
eligible OpEx is calculated based on the external revenue,
separately for each eligible acvity.
DISCLOSURE ACCORDING TO THE EU TAXONOMY REGULATION
There have been no significant events aer the reporng period.
SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD
STRATEGY AND TARGETS
Incap esmates that its revenue, operang profit (EBIT) and
adjusted operang profit (EBIT) for 2022 will be higher than in 2021.
The esmates are given provided that there are no major negave
changes in the geopolical or coronavirus pandemic situaon,
OUTLOOK FOR 2022
Incap's growth strategy is based on its entrepreneurial and
customer-driven culture, flexible operaonal model and its deep-
rooted cost management mindset. The company wants to drive
industry consolidaon, benefing from the growth potenal of the
industry while maintaining its cost efficiency and long-term
profitability. To connue its strong track record, the company is
focusing on three strategic cornerstones: growth, profitability and
operaonal excellence.
Report of the Board of Directors
14
|
General risks related to the company's business operaons and
sector include the development of the geopolical situaon and
customer demand, price compeon in contract manufacturing,
success in new customer acquision, availability and price
development of raw materials and components, sufficiency of
funding, liquidity and exchange rate fluctuaons.
Coronavirus pandemic related risks
Development of the coronavirus pandemic and measures taken to
contain it may have a negave impact on Incap's performance in
the short-term. The lockdowns in countries where Incap operates
have been lied and Incap's factories are fully operaonal with
strict safety measures followed to protect the safety and health of
the personnel. However, as the circumstances may change rapidly
with the pandemic, there may sll present a short-term risk on
Incap's business acvies through the general economic
development and development in different industries the
company's customers operate in, the supply chain and logiscs as
well as the health and availability of the personnel.
Risks related to the geopolical situaon
Developments in the geopolical situaon in Ukraine are expected
to lead to increased uncertainty, a slowdown in economic
development and postponement of investment decisions, as well as
disturbances in supply chains and energy availability and to pose
risks to Incap’s operaons. Incap does not have any gas intensive
operaons.
Customer risks
Demand for Incap's services and the company's financial posion
are affected by global economic trends and the fluctuaon among
customer industries. The risks connected with the customer
demand and the solvency of customers are monitored and
evaluated separately for each customer. The management
considers customer relaonship management to be of utmost
importance and is paying special aenon to it.
The company's sales is spread over several customer segments
balancing out the impact of the economic fluctuaon in different
industrial sectors. In 2021, four biggest customers contributed to
69.1% (56.3%) of revenue. Out of the total revenue in 2021, 21
customers (18) exceeded EUR 1 million revenue.
Electronics manufacturing services is a highly compeve industry,
with connuous pressure on cost level management. Incap has
succeeded in increasing the efficiency of its operaons and
managing the costs.
Financial risks
The financial posion of the company is good and the sufficiency of
financing and working capital does not pose a significant risk. The
company did not record any credit losses in 2021.
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 rao. Based on the impairment calculaons
in connecon with the financial statements for 2021, there is no
need for any write-down of the value of the shares in subsidiaries.
Main currencies used in Incap's operaons are Indian Rupee, Brish
Pound and US Dollar. The changes in the exchange rates between
the currencies and the Euro may have a negave impact on Incap's
revenue, result and financial posion.
In a tax audit conducted by Indian tax authories in 2018 regarding
financial period 2015-2016, the deducbility of group costs is being
invesgated. At the end of 2021, the Group had recorded a
provision of EUR 1.6 million in accordance with IFRIC 23 (evaluaon
of uncertain tax posions). The case is sll under preliminary
invesgaon, and if an agreement cannot be seled with a local tax
authority, the company will take the maer to the next level of
authority. Based on the company´s judgment, current level of
provision covers possible tax risk.
SHORT-TERM RISKS AND UNCERTAINTIES
currency exchange rates or in component availability. The
esmates are based on both improved visibility of Incap's
customers' forecasts and the company's own assessments of the
business development.
The parent company's profit for the financial period totals EUR
6,877,283.91. To secure funds for the execuon of the growth
strategy of Incap and due to uncertaines in the global economy
and geopolical situaon, the Board of Directors of Incap
Corporaon proposes that the Annual General Meeng to be held
on 29 April 2022 authorises the Board of Directors to decide on a
distribuon of dividend of a maximum of EUR 0.80 per share from
the profits in accordance with the adopted financial statements of
the financial year 1 January 2021 to 31 December 2021, to be
distributed in one or several instalments at a later stage based on
the Board of Director's assessment. The authorisaon shall be valid
BOARD OF DIRECTORS' PROPOSAL FOR MEASURES RELATED TO PROFIT
unl the commencement of the next Annual General Meeng.
If the Board of Directors decides to exercise the authorisaon, the
company will publish the possible decision on the amount of the
dividend to be distributed separately, and at the same me
confirm the pernent record and payment dates of the dividend
payment.
Distributable funds as of 31 December 2021 amounted to EUR
34,698,670.00 and the number of shares amounted to 5,849,327.
Thus, the maximum amount of dividends to be distributed amount
to EUR 4,679,461.60.
The Annual General Meeng of Incap Corporaon is scheduled to
be held on Friday, 29 April 2022 in Helsinki. The noce to the
Annual General Meeng will be published at a later date.
In Helsinki, 25 March 2022
Incap Corporaon
Board of Directors
ANNUAL GENERAL MEETING 2022
KEY FIGURES
Key Figures 16
|
180
160
140
120
100
80
60
40
20
0
17
18 19 20
21
0
30
20
15
10
5
25
17
18 19 20
21 17
18 19 20
21
18
16
14
12
10
8
6
4
2
0
17
18 19 20
21
70
60
50
40
30
20
10
0
17
18 19 20
21
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
10.0
17
18 19 20
21
2000
1500
1000
500
0
2500
EQUITY RATIO, % INVESTMENTS, EUR MILLION AVERAGE NUMBER OF PERSONNEL
45
40
35
30
25
20
15
10
5
0
17
18 19 20
21
45
40
35
30
25
20
15
10
5
0
50
17
18 19 20
21
17
18 19 20
21
45
40
35
30
25
20
15
10
5
0
-5
RETURN ON INVESTMENT
(ROI), %
RETURN ON EQUITY (ROE), % NET GEARING, %
0
30
20
15
10
5
25
17
18 19 20
21
16
14
12
10
8
6
4
2
0
17
18 19 20
21
PROFIT BEFORE TAX,
EUR MILLION
PROFIT BEFORE TAX,
% OF REVENUE
EARNINGS PER SHARE
(EPS), EUR
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
17
18 19 20
21
REVENUE, EUR MILLION
OPERATING PROFIT (EBIT),
EUR MILLION
OPERATING PROFIT (EBIT),
% OF REVENUE
Consolidated Income Statement
17
|
CONSOLIDATED INCOME STATEMENT
1,000 euros Note 1 Jan-31 Dec 2021 1 Jan-31 Dec 2020
Revenue
3 169,787 106,494
Other operang income
4 200 1,062
Changes in inventories of finished goods and work in progress
5 10,232 723
Raw materials and consumables used
5 127,032 73,617
Personnel expenses
8 17,404 14,315
Depreciaon and amorsaon
7 3,286 3,347
Other operang expenses
6 6,524 4,406
Operang profit
Financial income and expenses
9 -253 -1,086
Profit before tax
Income tax
10 -4,662 -2,290
Profit for the year
Consolidated statement of comprehensive income
Other comprehensive income:
Items that are not transferred to the statement of income
Revaluaon of employee benefits
Items that may be reclassified subsequently to profit or loss
Translaon differences from foreign units
Other comprehensive income, net
Total comprehensive income
Total comprehensive income aributable to:
Equity holders of the parent company
Earnings per share from profit for the year aributable to equity holders of the parent
Basic earnings per share
11
Earnings per share
Diluted earnings per share
11
Earnings per share
Average number of shares:
basic
diluted
CONSOLIDATED BALANCE SHEET
Consolidated Balance Sheet18
|
Note
12
12
13
13
14
15
17
16
17
18
19
24
23
15
24
23
31 Dec 2021
-2,159
1,000 euros
ASSETS
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Other intangible assets
Other financial assets
Deferred tax assets
Other receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity aributable to equity holders of the parent
Share capital
Exchange differences
Unrestricted equity reserve
Retained earnings
Total equity
Non-current liabilies
Non-Interest-bearing liabilies
Interest-bearing liabilies
Deferred tax liabilies
Current liabilies
Trade and other payables
Interest-bearing loans and borrowings
Total liabilies
Total equity and liabilies
31 Dec 2020
-4,629
Consolidated Cash Flow Statement
19
|
CONSOLIDATED CASH FLOW STATEMENT
1,000 euros Note 1 Jan-31 Dec 2021 1 Jan-31 Dec 2020
Cash flow from operaons
Operang profit, in total 25,974 12,594
Adjustmets to operang profit 27 4,530 3,667
Change in working capital -15,757 -7,850
Interest paid -557 -954
Interest received 9 5
Tax paid and tax refund -4,530 -2,752
Cash flow from operaons 9,669 4,709
Cash flow from invesng acvies
Capital expenditure on tangible and intangible assets -4,520 -2,793
Acquisions 2 -650 -6,679
Cash flow from invesng acvies -5,170 -9,471
Cash flow from financing acvies
Share issue 19 10,913
Share issue transacon costs 19 -563
Drawdown of loans 6,886 14,456
Repayments of loans -4,725 -20,693
Right-of-use asset payments 28 -1,356 -1,188
Cash flow from financing acvies 805 2,926
Change in cash and cash equivalents 5,304 -1,836
Cash and cash equivalents at beginning of period 3,899 6,163
Effects of changes in exchange rates 46 -428
Cash and cash equivalents at end of period 18 9,249 3,899
CONSOLIDATED STATEMENT
IN CHANGES OF EQUITY
Consolidated Statement in Changes of Equity20
|
1,000 euros
Share capital
Unrestricted
equity reserve
Translaon
differences
Retained
earnings
Total equity
Equity at 1 January 2021 1,000 21,491 -4,629 20,719 38,580
Total comprehensive income 21,059 21,059
Currency translaon differences 2,470 2,470
Transacons with the owners¹ 694 81 775
Other changes² 9 9
Equity at 31 December 2021 1,000 22,185 -2,159 41,867 62,893
1,000 euros
Equity at 1 January 2020 1,000 11,028 -1,664 11,519 21,883
Total comprehensive income 9,218 9,218
Currency translaon differences -2,965 -2,965
Transacons with the owners¹ 10,463 32 10,494
Other changes² -51 -51
Equity at 31 December 2020 1,000 21,491 -4,629 20,719 38,580
¹ Informaon on transacons with the owners is presented in Note 19
² Informaon on Other changes is presented in Note 19
Share capital
Unrestricted
equity reserve
Translaon
differences
Retained
earnings
Total equity
„
Profitability remained solid.
Adjusted EBIT was 15.8% of
revenue (13.7%).
„
At the end of 2021 the
number of employees at
Incap Group was 2,523
(1,902)
Accounting Principles
23
|
Incap Group financial statements have been prepared in
accordance with Internaonal Financial Reporng Standards in
conformity with the IAS and IFRS standards and SIC and IFRIC
interpretaons in force at the balance sheet date, 31 December
2021. The notes to the consolidated financial statements also
comply with Finnish accounng and company legislaon.
The financial statements in the official compiled version are
presented in unabbreviated form to an accuracy of two decimals.
In the Annual Report, the financial statement data is presented in
thousands of euros.
The preparaon of financial statements in accordance with IFRS
standards requires certain esmates by Group management as
well as for management's judgement in applying accounng
policies. Esmates with greatest impact on the financial
statement figures are presented in the note “Accounng policies
requiring management's judgement and key sources of
esmaon uncertainty.”
BASIS OF PREPARATION
ACCOUNTING PRINCIPLES APPLIED IN
THE CONSOLIDATED FINANCIAL STATEMENTS
Business combinaons are accounted by applying the acquision
method. The acquision costs are recognised as an aggregate of
the consideraon transferred measured at the acquision date
fair value and the amount of any non-controlling interest in the
acquiree. For each business combinaon the group selects,
whether to measure the non-controlling interest in the acquiree
at fair value or at the proporonate share of the acquiree's
idenfiable net assets. Acquision related costs are recognised in
profit or loss in the periods in which they are incurred, and the
services are received.
When the Group acquires a business, it classifies and designates
the liquid assets and liabilies assumed based on the contractual
terms, economic condions and other pernent condions as
they exist at the acquision date.
A potenal conngent consideraon is recognised at the
acquision date fair value. The conngent consideraon classified
as an asset or a liability, meeng the criteria of a financial
instrument in accordance with IFRS 9, is measured at fair value at
each reporng date and changes are recognised in profit or loss.
If the conngent consideraon is not within the scope of IFRS 3, it
is measured in accordance with other applicable IFRS standard. A
conngent consideraon classified as an equity instrument is not
to be remeasured and its subsequent measurement will be
accounted for within equity.
Goodwill is inially measured at acquision cost, which is
proporonate to the amount, for which the aggregate of the
consideraon transferred and the amount of any non-controlling
interest in the acquiree exceed the proporonate share of the
recognised idenfiable net amount of the acquired assets and
liabilies assumed. If the fair value of the acquired idenfiable
net assets exceeds the aggregate consideraon transferred, the
group reassesses whether it has correctly idenfied all of the
acquired assets and liabilies assumed, and reviews the
procedures used to measure the amounts to be recognised at
the acquision date. If the fair value of the net assets, even aer
reassessment, exceeds the aggregate consideraon transferred,
the profit is recognised in profit or loss.
Aer the inial recognion, goodwill is measured at amorsed
cost less any accumulated impairment losses. For the purpose of
impairment tesng, goodwill acquired in a business combinaon
is, from the acquision date, allocated to each of the Group's
cash-generang units, that are expected to benefit from the
combinaon, irrespecve of whether other assets or liabilies of
the acquiree are assigned to those units or groups of units.
When goodwill is allocated to the cash-generang unit and a
poron of the unit's business is disposed, the goodwill
associated with the disposed operaon is included in the
carrying amount of the operaon when determining the gain or
loss on disposal. In these situaons, the goodwill is measured on
the basis of the relave values of the operaon disposed of and
the poron of the cash-generang unit retained.
ACQUIRED BUSINESSES
TRANSLATION OF ITEMS DENOMINATED IN FOREIGN CURRENCY
Separate companies
Transacons denominated in foreign currency are recorded in the
funconal currency using the exchange rate on the date of the
transacon. Balance sheet items denominated in foreign currency
are translated to the funconal currency using the exchange rates
at the balance sheet date.
Gains and losses resulng from transacons denominated in
foreign currency and the translaon of balance sheet items are
recorded in the income statement. Exchange gains and losses
resulng from operaons are recorded under the corresponding
items above operang profit. Exchange gains and losses resulng
from loans denominated in foreign currency are recorded under
financial income and expenses.
Group
Figures relang to the profit and financial posion of Group units are
measured in the main funconal currency of each unit. Incap
Group's financial statements are presented in euros, which is the
funconal and presentaon currency of the Group's parent company.
Goodwill is the proporon of the acquision cost which exceeds
the Group's share of the fair value of the net asset value of a
company at the date of acquision. Other costs directly
aributable to an acquision are also included in the acquision
cost.
Goodwill and other intangible assets with an indefinite useful life
are not amorsed but are tested annually for any impairment.
The tesng involves the allocaon of goodwill to units generang
cash flow and the measurement at cost less impairment losses.
Research and development expenditure is recorded as an
expense in the income statement.
An intangible asset is recorded in the balance sheet only if the
cost of the asset can be determined reliably and it is probable
that the expected future economic benefits that are aributable
to the asset will flow to the enty. Intangible assets are recorded
in the balance sheet at cost and amorsed in the income
statement over their known or esmated useful life.
Incap Group's purchase price allocaon related intangible assets
are amorsed in the following way: customer relaonships over
12 years, orderbook in 1 year and inventory in 6 months.
INTANGIBLE ASSETS
Inventories are measured at the lower of acquision cost or net
realisable value. Cost is determined using the weighted average
cost method. The cost of finished and semi-finished products
comprises raw materials, direct labour expenses, other direct
expenses as well as fixed and variable producon overheads,
based on the normal capacity of the producon facilies.
The net realisable value is the esmated selling price of the asset
less the esmated costs incurred in bringing the product to its
present condion and selling expenses. The company evaluates
annually the inventory realisable and usable value and makes
write-downs if required.
INVENTORIES
The income and expense items in the income statements of foreign
Group companies have been translated to euros using the average
exchange rate during the year, and their balance sheets using the
exchange rates at the balance sheet date. The translaon of the
profit for the financial year using different exchange rates in the
income statement and the balance sheet results in an exchange
difference, which is recorded as translaon differences in the
consolidated statement of comprehensive income. The exchange
differences arising from the eliminaon of the acquision cost of
foreign subsidiaries and equity items accumulated aer the
acquision are recorded as translaon differences in the
consolidated statement of comprehensive income.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are measured at original cost less
accumulated depreciaon and impairment losses. Property, plant
and equipment are depreciated using the straight-line method
over their esmated useful life. The esmated useful lives of
assets are the following:
l Buildings 18–24 years
l Machinery and Equipment 3–10 years
l Motor Vehicles 3–5 years
According to the IFRS16 Leases standard, right-of-use assets are
depreciated on a case by case basis based on the length of each
lease contract period.
The residual value of assets and their useful lives are reviewed at
each balance sheet date and, if necessary, are adjusted to reflect
changes that have occurred in the expectaons for an asset's
economic benefits.
Subsequent costs are included in the carrying amount of an item
of property, plant and equipment only when it is probable that
future economic benefits from the asset will flow to the Group.
Other repair and maintenance expenses are recognised as an
expense as they arise.
Depreciaon of an item of property, plant and equipment ceases
when the asset is classified as for sale in accordance with IFRS 5
Non-current Assets Held for Sale and Disconnued Operaons.
Non-current assets held for sale are measured at the lower by
carrying amount or by the fair value less the selling expenses.
Depreciaons on assets held for sale have been ceased at the
date of classificaon.
Capital gains and losses on the rerements and disposals of
property, plant and equipment are recorded either in other
operang income or expenses.
BORROWING COSTS
Borrowing costs are recognised as an expense in the period in
which they are incurred.
GOVERNMENT GRANTS
Government grants are recognised when there is reasonable
assurance that the grant is received and that the Group will
comply with the aached condions. Government grants are
recognised in profit or loss on a systemac basis over the periods
that the related costs, for which they are intended to
compensate, are expensed. When the grant relates to an asset, it
is recognised in profit or loss on a straight-line basis over the
useful life of the asset.
Currency rates used in financial statements 2021
31 Dec 2021
Average rate
Year-end rate
EUR/INR
87.4898
84.2292
USD/INR
73.9183
74.3025
EUR/HKD
9.1988
8.8333
EUR/USD
1.1326
1.1835
EUR/GBP
0.8600
0.8403
Accounting Principles24
|
Accounting Principles
25
|
IMPAIRMENT
At each balance sheet date, Incap Group assesses whether there
is any indicaon that the value of an asset item may be impaired.
If any such indicaon exists, the asset item is tested for
impairment to assess its recoverable amount. Impairment tesng
is done at the lowest possible unit level which is independent of
other units and whose cash flows can be disnguished from the
other cash flows of the enty.
An impairment loss is recorded when the carrying amount of an
asset item is greater than its recoverable amount. The
recoverable amount is the higher of an asset's net selling price
and its value in use. Value in use refers to the esmated
discounted cash flows obtainable from referred asset item or
cash-generang unit.
An impairment loss is recognised in profit or loss. If an
impairment loss is allocated to a cash-generang unit, it is
allocated first to reduce the carrying amount of any goodwill
allocated to the cash-generang unit and thereaer to the other
assets of the unit pro rata on the basis of the carrying amount of
each asset in the unit. An impairment loss is reversed if the
recoverable amount of the asset has changed since the last
impairment loss was recognised. An impairment loss is not,
however, reversed to an extent greater than what the carrying
amount of the asset would have been without the recording of
the impairment loss.
Incap Group's goodwill is tested annually. An impairment loss
recorded on goodwill is not reversed under any circumstances.
EMPLOYEE BENEFITS
Pension obligaons
Incap Group's pension plans are classified as defined-benefit and
defined-contribuon plans. Payments made for defined
contribuon plans are recognised as an expense in the income
statement for the period which the debit concerns. The
obligaons of defined-benefit plans concerning the Indian unit
are calculated separately for each plan using the projected unit
credit method. Pension costs are recorded as an expense for the
duraon of employees' period of service on the basis of actuarial
calculaons carried out by authorised actuaries.
SHARE-BASED PAYMENTS
Incap Group has applied IFRS 2 Share-based payments to all
share-based payments. Share-based payments are measured at
fair value at the me they are granted and entered as an expense
in the income statement in even instalments during the vesng
period. The expense determined at the moment of granng the
share-based payments is based on Incap Group's esmate of the
number of shares that will vest at the end of the vesng period.
Incap Group updates the esmate of the final share-based
payment at each balance sheet date. Changes in the esmates
are recorded in the income statement. When share-based
payments are paid, the cash payments received on the basis of
share subscripons (adjusted for any transacon expenses) are
recognised in equity and invested non-restricted equity reserve.
The expense from equity-seled share-based payment
transacons is measured with a grant date fair value for rewards
by using an appropriate model. The expense is recognised as an
employee benefit expense and as a corresponding increase in the
equity (other equity funds) within the period when the service is
received, and if applicable, when the selement condions are
fulfilled (within the vesng period). The cumulave expense of
the equity-seled share-based payment transacons at each
reporng date, within the vesng period, reflects the amount
that is based on the Group's best esmate of the share-based
payment arrangements that existed at any me during the
reporng period and are expected to vest. The expense during
the reporng period is recognised in profit or loss, and it reflects
the amount of cumulave change between the beginning and the
end of the period.
Service condions or non-market performance condions are not
recognised in the grant date fair value, but the probability of
meeng the vesng condions is assessed based on the best
available esmate of the total number of equity instruments that
will vest. Market condions are taken into account in the grant
date fair value. All other terms and condions, which relate to the
share-based payment, but which do not include a performance
condion, are considered as non-vesng condions. Non-vesng
condions are included the fair value of the share-based payment
and are recognised immediately as expenses, unless they include
an addional service or performance condion.
The expense is not recognised, if the share-based payment does
not vest due to a failure to fulfil non-market vesng condions.
When the payment involves a market condion or non-vesng
condion, the transacons and rights are considered to be vested
regardless of the fact, whether the market condions or no-
vesng condions are fulfilled if all other vesng condions
and/or performance condions are sasfied.
The Group as lessee
Incap is operang as a lessee. The group leases e.g. office
premises and producon machinery. The lease contracts are
mainly fixed-term agreements for which the lease-term ends
within 5 years of the date of the inial applicaon. For the lease
agreements for which the lease-term can be terminated within
12 months of the date of the inial applicaon, the Group applies
the excepons in the IFRS 16 standard relang to short-term
leases.
Many of the Group's lease contracts include extension and
terminaon opons. In assessing whether to exercise these
opons, the Group applies judgements by considering all the
factors, which have an impact on the economic benefit received
by the Group from extension or terminaon of a contract. Fixed-
term contracts, which have an extension opon to connue on
current contract terms without separate noficaon from the
lessee, are assessed to end at the end-date of the inial fixed
lease term.
The group recognises a right-of-use asset from the lease contracts
and a lease liability from the lease payments. The group ulises
the short-term and low value lease exempons for lease contracts
and recognises these as expenses in other operang expenses.
The lease contracts as presented as depreciaon and interest
expense in profit or loss.
LEASES
FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Incap's financial assets are classified to financial assets at
amorsed cost, financial assets at fair value through other
comprehensive income, and financial assets at fair value through
profit or loss. The classificaon is based on the Group's business
model for holding the financial assets and on the contractual cash
flows characteriscs of the financial assets. Transacon costs are
included to the inial recognion value of the financial assets,
when the financial instrument is not classified to be measured at
fair value through profit or loss. All transacons in relaon to
financial assets are recognised at trade date.
Financial asset is classified to be measured at amorsed cost, if
the business model of holding the financial asset is for collecon
of contractual cash flows, and the cash flows from financial asset
occur on specific dates as specified by the contract terms and
condions, which are solely payments of principal and interest for
remaining principal. Financial assets classified at amorsed cost
by the Group include loan receivables, trade and other
receivables, deposits and cash and cash equivalents. Trade
receivables do not include significant financing components and
they are measured at transacon cost in accordance with IFRS 15.
Financial assets are de-recognised, when the Group's rights to
contractual cash flows expire or when it has transferred
substanally all of the risks and rewards of the ownership of the
financial asset outside the Group.
The Group does not have financial instruments classified to be
measured at fair value.
The Group's financial liabilies are mainly relang to
consideraon payable for business acquisions, trade and other
payables, and bank loans. Financial liabilies are inially
recognised at fair value, which is the amount of cash received less
any directly aributable transacon costs. Aer inial
recognion, the financial liabilies are subsequently measured at
amorsed cost. Financial liabilies are included to both long-term
and short-term liabilies, and they can be interest-bearing or
non-interest-bearing liabilies.
Financial liabilies are de-recognised, when the contractual
obligaon is discharged, cancelled or it expires.
Cash and cash equivalents consist of cash, bank deposits that can
be drawn on demand and other short-term, highly liquid
investments. Items classified as cash and cash equivalents have a
maximum maturity of three months from the date of acquision.
Financial liabilies are inially recognised at fair value based on
the consideraon received.
If the terms of equity-seled share-based payments are modified,
the minimum recognised expense comprises of grant date fair
value based on unmodified terms, provided the specified vesng
condions of the original terms are met. An addional expense,
that increases the total fair value of the share-based payment
arrangement or is otherwise beneficial to the employee, is
recorded at the date of the modificaon. If the share-based
payment transacon is cancelled, the net fair value of the
cancellaon or selement is recognised immediately.
PROVISIONS
Provisions are recognised when the Group has a legal or
construcve obligaon as a result of a past event, it is probable
that a payment obligaon will be realised, and the amount of the
obligaon can be esmated reliably. Provisions are measured at
the present value of the obligaon.
INCOME TAXES
Income tax in the income statement comprises taxes on taxable
income for the period and deferred taxes. Taxes on the profit for
the financial year are calculated on taxable income on the basis of
the tax rate in force in each country. Taxes are adjusted for taxes
for previous periods.
Deferred taxes have been calculated by applying the tax rates in
force by the balance sheet date.
A tax asset is recognised to the extent that it is probable that
taxable profit will be available against which a deducble
temporary difference can be ulised.
REVENUE RECOGNITION
Revenue recognion from the sale of goods is recorded according
to the IRFS 15 standard when the customer obtains control of the
goods in an amount that reflects the consideraon to which the
enty expects to be entled in exchange for those goods. The
company has idenfied only one type of revenue flow. Exisng
customer contracts have no obligaons of aer markeng,
installaon, maintenance, or any other performance obligaons
that customer could benefit on stand-alone basis.
Accounting Principles26
|
DISCONTINUED OPERATIONS
There were no disconnued operaons in the financial years 2021
and 2020.
Accounting Principles
27
|
The increase of credit risk is assessed at each reporng date for
financial assets at amorsed cost. The applied method is
determined based on a potenal increase in the credit risk. When
credit risk has not notably increased, the credit loss provision is
based on a 12-month expected credit losses.
The Group esmates on a case-by-case basis at each reporng
date, whether there is any objecve evidence that its financial
asset or a class of financial asset is impaired. The factors causing
impairment may include i.e. counterparty's economic difficules.
The assessment of the Group's credit loss provision is based on a
lifeme expected credit losses from trade receivables in
accordance with IFRS 9. The Group has not previously recognised
material credit losses. The recognion of expected credit losses
from trade receivables is based on historical credit losses. The
expected credit losses are measured by mulplying the balance of
unpaid trade receivables by the expected credit loss rate for each
ageing category.
IMPAIRMENT OF FINANCIAL ASSETS
ACCOUNTING POLICIES REQUIRING MANAGEMENT'S JUDGEMENT
AND KEY SOURCES OF ESTIMATION UNCERTAINTY
When financial statements are prepared, future scenarios and
assumpons have to be made, the outcomes of which may differ
from the original scenarios and assumpons. Judgement is also
used in applying the accounng policies. In the consolidaon of
business operaons, the Group has used external consultants
when assessing the fair values of property, plant and equipment
and intangible assets. Concerning property, plant and equipment,
Incap has made comparisons with the market prices of similar
products and assessed any impairment resulng from the age and
wear of the assets and other similar factors affecng them. The
determinaon of the fair value of intangible assets is based on
esmates of cash flows related to the assets. It is the view of the
management that the esmates and assumpons used are
sufficiently accurate as a basis for the determinaon of fair value.
The Group furthermore examines any indicaons of impairment
on property, plant and equipment and intangible assets at least at
every balance sheet date.
Esmates made in connecon with the preparaon of the
financial statements are based on the management's best
knowledge at the balance sheet date. The esmates take into
account previous experiences and assumpons which concern
the future, are considered the most probable at the balance
sheet date and are related to the expected development of the
Group's financial operang environment in terms of sales and
cost levels. The management's judgement and esmates have
been used when tesng goodwill and deferred tax assets.
Changes are monitored on a regular basis using internal and
external informaon sources, and potenal changes in esmates
and assumpons are recorded during the financial year when
they are revised, and during all financial years thereaer.
The Group connuously assesses and monitors the amount of
financing required for business operaons so that the Group
would have sufficient liquid assets to finance its operaons and
repay loans that mature. The aim is to guarantee the availability
and flexibility of financing through overdra facilies and other
forms of financing.
In order to evaluate liquidity, Incap has prepared a 12-month cash
flow esmate that is based on the Group's budget for 2022.
Based on the cash flow esmate Incap does have sufficient
working capital for the company's needs for the forthcoming 12
months.
Because the forecasts that form the basis of the cash flow
calculaon have previously deviated from the forecasts, there is
an element of uncertainty associated with them.
Impairment tesng
Incap Group tests goodwill for impairment annually. The tesng is
based on a cash flow esmate prepared on the basis of the
budget and the business plan for forthcoming four-year period
rafied by the management. Discount rate aer taxes, forecast
operang profit before depreciaon and change in working
capital are used as the key factors. The discount rate is comprised
of industry risk, interest on liabilies and country-specific risk.
The discount rate factors are updated annually in connecon with
the tesng using informaon received from the market. On the
basis of the calculaons, there are no indicaons of impairment
of goodwill and other intangible assets with an indefinite useful
life. This has been verified in calculaons concerning recoverable
amount.
The recoverable amounts used in the impairment test
calculaons are determined on the basis of value in use. The cash
flow forecasts are based on the budget for the next financial
period and four-year business plan prepared by the management
and approved by the Board of Directors.
The impairment of other assets is evaluated annually as described
above under Impairment. The recoverable amounts of cash-
generang units have been determined by way of calculaons
based on the value in use. These calculaons require the use of
esmates.
Deferred tax asset
Deferred tax assets and liabilies are recognised using the liability
method for all temporary differences arising from the difference
between the tax basis of assets and liabilies and their carrying
values. Deferred tax is not recognised for non-deducble goodwill
and for differences in investments in subsidiaries to the extent
that they probably will not reverse in the foreseeable future.
Deferred tax assets have been recognised to the extent that is
considered to be possible to ulise against future taxable income.
The deferred tax asset is based on the Board of Directors'
esmate of the company's future development during the next
five years and the resulng imputed taxable profit.
Segment informaon
Incap Group does not have business or geographical segments
which should be reported according to IFRS 8. The risks and
profitability related to the Group's different business and
geographical areas do not differ significantly from each other. The
company's management regularly assesses future changes and,
consequently, the possible formaon of segments.
Applicaon of new or amended IFRS standards
The Group has taken into consideraon the new standards and
interpretaons published during the reporng period by the IASB
and will introduce them in future accounng periods as they
enter into force. The Group esmates that the new standards and
interpretaons will not have a material effect on the Group's
financial statements in coming years.
„
The year 2021 was
marked by high market
demand and the capacity
expansions.
29
|
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. DIVESTED BUSINESSES
The Group had no divested businesses in 2021 and 2020.
2. ACQUIRED BUSINESSES
There were no acquired businesses in 2021.
Incap signed an agreement to acquire the enre share capital of AWS
Electronics Group. The company's figures have been included in Incap
Group's reporng as of 23 January 2020.
AWS Electronics Group is a contract manufacturer of high complexity
electronics and the company has producon facilies in the UK and
Slovakia. The headquarters is based in the U.K. and the company has
been privately owned. The number of personnel was 436 In the
financial year ended on June 30, 2019. The former owners of the
company, Paul Deehan and Adrian Keane, are commied to support
Incap over the transion period.
The acquision balances Incap's customer porolio both in numbers
and industrial segments. New strategic foothold is gained especially
in the U.K. markets and Central Europe and posion strengthened
further in the USA and South-East Asia.
The debt-free purchase price was EUR 15.9 million, and the possible
earn-out will not exceed EUR 1.5 million which is based on 2020
EBITDA of AWS. In connecon with the acquision, Incap paid AWS
Electronics Group's debts and a warrant. The acquision was financed
with a loan of EUR 13 million and paid in cash, with the excepon of
an instalment of EUR 0.7 million to be paid in Incap shares. The
consideraon paid for the transacon consists of a EUR 6.7 million
cash consideraon, the instalment paid in shares and realised
earnout of EUR 0.6 million. The earn-out and the instalment which
will be paid in Incap shares, are booked in parent company´s balance
sheet as current non-interest-bearing loan.
The purchase price has been allocated to idenfied net assets that
include customer relaonships, the order book and the esmated
share of work not included in the balance sheet value of inventories,
based on AWS Electronics Group's EBITDA. Acquired customer
relaonships will be amorsed over 12 years, the order book over 12
months and inventories over 6 months. In the inial calculaons,
earn-out was esmated to realize in EUR 0.6 million. The residual
value of EUR 6.6 million remaining from the preliminary acquision
calculaon has been recognised as goodwill. The goodwill is
generated by expected synergies in, for example, opportunies
related to materials purchases and cross-selling. None of the items
recognised as goodwill are expected to be tax deducble. Leases
were taken into account in accordance with IFRS 16 in the calculaon
of acquired assets and liabilies, and the discounted lease payments
remaining at the me of acquision were recognised in interest-
bearing loans, while corresponding assets were recognised in right-of-
use assets. Incap has booked EUR 0.1 million transacon costs as non-
recurring items.
AWS Electronics Group generated EUR 35.2 million in net sales and a
net profit of EUR 0.8 million from 23 January to 31 December 2020.
AWS Electronics Group's pre-acquision, unconsolidated net sales for
1–22 January 2020 amounted to EUR 2.6 million, and AWS Electronics
Group would have posted a loss of EUR 0.4 million in the same
period, taking into account the planned amorzaon of recognized
items for the period.
Notes to the Consolidated Financial Statements
29
|
Total current assets 15,635
Notes to the Consolidated Financial Statements30
|
AWS Electronics Group's financial reporng is based on The Financial
Reporng standard applicable in the UK and Republic of Ireland (FRS
102). Based on the esmate made in connecon with the acquision,
with the excepon of the accounng of leases, there are no such
differences between the applied accounng standard and IFRS
standards that would cause significant discrepancies in the financial
informaon reported.
A part of the purchase price
The Board of Directors of the Company has on 26 February 2021
resolved, that the sellers of AWS will be paid an equivalent of 600,000
pounds in new shares of the Company in a directed share issue with
payment. The Share Issue will be consummated on 26 February 2021,
by offering a total of 29,103 new shares in the Company to be
subscribed by the sellers of AWS. In the Share Issue, the subscripon
price of one new Incap share is EUR 23.86 and the total subscripon
price of the Share Issue is thus EUR 694,380 (600,000 pounds). The
subscripon price per share is based on the acquision agreement of
AWS' shares and corresponds to the average closing Bid and Ask price
levels of Incap's share at the end each transacon date on Nasdaq
Helsinki during the period 19 – 25 February 2021.
The total subscripon price of the Share Issue shall be recorded in its
enrety to the reserve for invested unrestricted equity of the
Company.
The acquision of AWS was and is sll aligned with the Company's
strategy and as the Share Issue relates to the payment of a part of the
purchase price agreed earlier, therefore the Company has a weighty
financial reason to deviate in the Share Issue from the Company's
shareholders' pre-empve subscripon right, in accordance with
Chapter 9, Secon 4, Subsecon 1 of the Finnish Limited Liability
Companies Act (624/2006, as amended).
The Board of Directors of the Company decided on the Share Issue
based on the authorizaon granted to it by the Annual General
Meeng of 20 April 2020.The number of Incap shares will increase
from 5,820,224 shares to 5,849,327 shares aer the registraon of
the new shares. The new shares of the Company will be applied for
trading together with the other shares of the Company on Nasdaq
Helsinki on 18 March 2021.
The consideraon was decreased on 31 December 2020 to an
amount corresponding the EBITDA condions for the purchase. The
gain amounted to EUR 38,082.65 and was recognized as financial
income in 2020. The actual consideraon paid in 2021 amounted to
EUR 649,766.81 and the loss amounted to EUR 52,482.56 and was
recognized as financial expense in profit or loss.
Auding fees, EY
Notes to the Consolidated Financial Statements
31
|
IFRIC 23 specifies how to reflect uncertainty in accounng for income
taxes. Implementaon of IFRIC 23 standard had an impact on how Group
evaluated uncertaines in years 2016-2019 arising from tax audit
performed by Indian tax authories during 2018. In this case, the
deducbility of group costs are being invesgated. The case is sll under
preliminary invesgaon and if an agreement cannot be seled with a
local tax authority, the company's point of view will be processed. The
Group has recorded a provision of EUR 0.5 million in 2018 and based on
a new evaluaon the Group has made in 2019, an addional EUR 1.2
million provision was booked in accordance with IFRIC 23 (evaluaon of
uncertain tax posions). Therefore the total provision amounts to
approximately EUR 1.6 million. Based on company´s judgment, current
level of provision covers possible tax risk.
When calculang diluted earnings per share, share-based payments and
converble bonds are taken into account in the weighted average
number of shares. Share-based payments have diluve effect when their
subscripon price is lower than the fair value of the share. Fair value of a
share is calculated as the average price of the shares during the period.
Reconciliaon
withholding
Tax charge
siiani tabelite jooned tehtud
Interest income from other
receivables
Informaon on share-based payments is presented in Note 20 Share-
based payments. Informaon on management's emloymeee benefits is
presented in Note 31 Related party transacons.
Notes to the Consolidated Financial Statements32
|
-1,037 -7,186
-7,186-1,037
334
486
1,512
1,705
3,065
4,415
110
313
5,021
6,919
1,513
Notes to the Consolidated Financial Statements
33
|
Recoverable amounts from cash generang units have been defined in
calculaons based on the value in use, and they involve the use of
esmates.
Tesng for impairment is based on a cash flow esmate prepared on
the basis of the budget and the business plan for four forthcoming
years approved by the management. According to the company's
esmate there are no external or internal indicaons of the impairment
of goodwill and other intangible assets with an indefinite useful life.
This has been verified in calculaons concerning recoverable amount.
The goodwill of approx. EUR 0.9 million in the consolidated balance
sheet refers to the Indian subsidiary. In the cash flow esmates, the
revenue in India is esmated to grow 10% annually and operang profit
to be approximately 15%. Growth esmate of residual value is 2%. In
the calculaons of the financial year 2021 in India, a discount rate of
17.45% has been used (12.57% in 2020).
Should the operang profit used in the tesng decrease by
approximately 65.9% or should the discount rate increase by less than
59.46 percentage points, there would be no need for write-down.
Revenue and profitability of the operaons in India have developed
favourably during the past few years and there is esmated to be no
need or risk of any impairment.
In impairment tesng of goodwill, the residual value of future cash
flows is 62% of the cash flows in the calculaons for value in use.
The goodwill of approximately EUR 6.5 million in the consolidated
balance sheet refers to the subsidiaries in UK and Slovakia which was
acquired in January 2020. In the cash flow esmates, the revenue of
subsidiaries in UK and Slovakia is esmated to grow 5% annually and
operang profit to be approximately 5%. Growth esmate of residual
value is 2%. In the calculaons of the financial year 2021, a discount
rate of 16.08 % (12.94% in 2020) has been used.
Should the operang profit used in the tesng decrease by
approximately 33% or should the discount rate increase by less than 5.9
percentage points, there would be no need for write-down. In
impairment tesng of goodwill, the residual value of future cash flows
is 65% of the cash flows in the calculaons for value in use.
Tesng of impairment is described also in the accounng principles
applied in the Consolidated Financial Statements under Impairment of
assets and Impairment tesng.
IMPAIRMENT TEST
Notes to the Consolidated Financial Statements34
|
Deferred tax assets and liabilies are recognized for temporary differences
between the taxable values of assets and liabilies and their book values
according to the debt method. Deferred tax is not recognized on non-
deducble goodwill and retained earnings of subsidiaries to the extent that
the tax will not materialize in the foreseeable future.
Due to the change in esmate in the financial year 2020 in parent
company´s historical losses, total deferred tax assets of EUR 0.34 million has
been recognized in the income statement. Deferred tax assets calculaons
were based on the parent company's 2021 budgeted taxable income. Due to
the change in esmate in the financial year 2021 in parent company´s
historical losses, total deferred tax assets of EUR 0.43 million has been
recognized in the income statement. Deferred tax assets calculaons were
based on the parent company's 2022 budgeted taxable income.
The parent company has confirmed losses as of December 31 2021
amounng to EUR 2.2 million which expire in 2024-2025.
Group has recognized a deferred tax liability of EUR 0.1 million related to
EUR 1.0 million internal dividend payment from India budgeted in 2022. In
other respects, no deferred tax liabilies have been recognized from the
subsidiaries' profits.
Notes to the Consolidated Financial Statements
35
|
20. SHARE-BASED PAYMENTS
Incap Corporaon's Board of Directors has resolved to implement a
long-term share-based incenve scheme for the company's CEO, Oo
Pukk. The incenve scheme's purpose is to support Incap's strategy
and incenvize the CEO in the effecve implementaon of the post-
acquision integraon of AWS Electronics Group. The company has
not previously had a share-based incenve scheme for CEO Oo
Pukk. Any reward payable based on the incenve scheme is paid out
enrely as Incap's new shares.
The earnings period for the CEO's incenve scheme includes the
ongoing and next financial period of the company so that it will end
on 31 December 2021. During the earnings period, the CEO may earn
a performance-based reward amounng up to 5,730 new shares of
the company based on the development of the company's EBIT
provided that the CEO is sll in a service relaonship with the
Company at the date of the reward's payment. Possible reward based
on the incenve scheme shall be paid aer the company's Annual
General Meeng in 2022 has approved the company's annual
accounts for the financial year 1 January 2021 – 31 December 2021.
The shares paid as reward shall not be transferred during a 12-month
lock-up period, which begins from the reward payment.
For the execuon of the incenve scheme the company's Board of
Directors has resolved on the directed share issue to the CEO of the
company without consideraon based on the authorizaon granted
to the company's Board of Directors on the issuance of shares by the
Annual General Meeng of the company on 20 April 2020. The shares
are issued subject to meeng the condions of the incenve scheme.
If the company decides aer the beginning of the performance
period and before paying the reward on issue of company's shares, or
on issue opon rights or other special rights entled to company's
shares so that the shareholders have a pre-empve subscripon right,
the amount of the reward shall be increased by mulplying the
number of earned shares by the share issue mulplier, or in a way
resolved by the Board. The maximum number of shares adjusted by
the share issue in 2020 amounts to 7,640 shares.
Expenses from the share-based incenve plan are recognized during
the earnings period and are presented as employee benefits
expenses and retained earnings in equity. Expenses are based on the
maximum number of shares adjusted by share issue, i.e. 7,640 and
the market value of EUR 14.75 according to May 26, 2020 has been
used as a mulple. Expenses for the period 26 May 2020 – 31
December 2021 amount to EUR 112,690.00 of which EUR 31,784.36
relate to 2020 and EUR 80,905.64 to 2021.
SHARE BASED INCENTIVE PROGRAM
In November 2020, Incap Corporaon carried out a rights issue
offering 1,455,056 shares. Board of Directors approved on November
18, 2020 shareholders primary subscripons made on the basis of the
subscripon rights and the secondary subscripons in accordance
with the terms of the share issue. The shares have been paid in full.
The company received gross income of EUR 10,912,920 from the
share issue, which was booked in equity (invested unrestricted equity
fund).
The Board of Directors of the Company has on 26 February 2021
resolved, that the sellers of AWS will be paid an equivalent of 600,000
pounds in new shares of the Company in a directed share issue. The
amount of EUR 694,397.56 has been recognized in equity (invested
unrestricted equity). Informaon on the purchase price is presented
in Note 2 Acquired businesses.
Notes to the Consolidated Financial Statements36
|
The Group has both defined-contribuon and defined-benefit pension
plans. Defined-benefit pension plans are only employed in the subsidiary
in India. In defined-benefit pension plans, the amount of the pension
benefit at the me of rerement is determined on the basis of certain
factors, such as salary and years of employment.
1,000 euros
effecve loan agreements.
Notes to the Consolidated Financial Statements
37
|
The nature of the Incap Group's business exposes the company to
currency, interest rate, credit and liquidity risks. The objecve of the
Group's financial risk management policy is to minimize the adverse
effects of changes in financial markets on its result and cash flow.
The company's finance administraon idenfies and assesses the risks,
obtains the necessary instruments for hedging the risks and reports to
the President and CEO and the Board of Directors on these risks and
any changes in them. Hedging transacons are carried out in
accordance with the principles approved by the Group's Board of
Directors. Currency forward contracts, currency loans and interest rate
swaps are used in risk management, whenever necessary. The financial
structure of subsidiaries is planned, assessed and controlled with a
view to the management of financial risks.
CURRENCY RISKS
Because the Incap Group operates in the euro zone and Asia, the
company's business involves currency risk. In accordance with its risk
management policy, the company aims to hedge itself from currency
risks with currency opons and currency forward contracts. In the
Estonian company, a part of material purchases are made in USD.
Significant proporon of the purchases India, UK and Slovakia are made
in USD. The respecve transacon posion is taken into consideraon
when calculang the company-specific posion and is hedged in
accordance with the currency risk policy.
The short-term working capital financing liabilies of the Indian
subsidiary are mainly USD-denominated, and the company addionally
has an overdra facility denominated in the Indian rupee.
Incap uses the subsidiary's home currency (Indian rupee, INR) in
invoicing between the parent company and the subsidiary. Therefore,
exposure to transacon risk concerns almost completely the Group's
parent company and the foreign subsidiary is not exposed to
substanal transacon risk. The risk exposure of the parent company's
balance sheet is hedged with forward exchange agreements and
opons when necessary.
In line with the Group's currency risk policy the euro-denominated
investment made in the subsidiary in India has not been hedged.
Parent company acquired in 2020 AWS Electronics Group and the
transacon was completed in Brish pounds which has not been
hedged. Therefore, fluctuaons of Brish pound have an impact on
Group's balance sheet. The currency exchange differences arising from
the investment are presented under exchange differences in the
Group's non-restricted equity. Strengthening of INR exchange rate in
relaon to EUR by 15% increases the Group's equity by EUR 287,070
while weakening of INR exchange rate in relaon to EUR by 15%
decreases the Group's equity by EUR 388,388 compared with the
exchange difference on 31 December 2021.
INTEREST RATE RISK
At the balance sheet date, interest-bearing liabilies in the consoli-
dated balance sheet amounted to EUR 11.3 million (EUR 9.8 million).
Out of the total interest-bearing liabilies, EUR 3.7 million (EUR 4.8
million) is related to IFRS 16 Leases-standard. The weighted average
duraon of the interest-bearing non-current loan at the balance sheet
date is 2.1 years (1.6 years). Bank overdras and factoring limits have
been treated as bullet loans. The Group has not carried out special
hedging measures against interest rate risks during the financial year.
The Group analyses its interest rate exposure by preparing calculaons
of the defined interest rate change on the company's result, when
needed. Calculaons are made only for the loans that have the largest
impact on the overall interest rate exposure. A change of +1%/-1% in
the market interest rates of variable rate loans would change the
Group's annual interest rate expenses by EUR +/- 70 thousand on 31
December 2021.
CREDIT RISK
The principles and responsibilies of credit control are defined in the
Group's documented operang methods. The Group has significant
receivables from several large domesc and global customers. These
customers are well-established, long-standing and creditworthy. When
a new customer relaonship is established, the company assesses the
annual volume generated by the new business, its share in revenue
and the customer's creditworthiness.
No credit losses were recorded during the financial year (no credit
losses in 2020). Incap has not booked any material credit loss
provisions. The Group analyzes constantly the creditworthiness of
current and new customers. During the financial period the Group has
renegoated payment terms for receivables that would otherwise have
been due according to payment terms. Due and renegoated
receivables have no material effect on the Group's financial posion.
The aging structure of trade receivables is presented in Note 17.
LIQUIDITY RISK
The Group connuously evaluates and monitors the amount of
financing required by business operaons, so that it has sufficient liquid
funds to finance operaons and repay due loans. The company strives
to ensure the availability and flexibility of financing by using credit
facilies and other forms of financing. Incap's main sources of financing
are cash flow from operaons, loans from financial instuons.
The company's non-current interest-bearing liabilies on 31 December
2021 amounted to EUR 4.0 million (6.1 million on 31 December 2020)
and non-current non-interest-bearing liabilies to 1.6 million (EUR 1.6
million). Current interest-bearing liabilies amounted to EUR 7.2 million
(EUR 3.7 million). Of this amount, EUR 4.6 million (EUR 1.8 million)
were related to the Indian subsidiary. Other interest-bearing liabilies
amounted to EUR 2.9 million (EUR 3.0 million) and were loans and
credit limits of for the parent company.
25. MANAGEMENT OF FINANCIAL RISKS
1,000 euros
In connecon with the loan in 2020 the company has agreed with
the bank that the covenants related to the loans, credit line and
factoring credit line include equity rao (more than 30.0%) and the
Group's interest-bearing debt in relaon to EBITDA (less than 3.0),
which are reviewed every six months. Bank has the right to
terminate the agreement if the covenant terms are not sasfied.
EBITDA is calculated for the rolling 12 months.
The company met the covenant on both dates 30 June 2021 and on
31 December 2021.
Forthcoming instalments and interests are described in the Note 22.
Based on the cash flow esmate prepared in connecon with the
financial statements, the company esmates that the company's
financing will cover the requirement for the next 12 months.
CAPITAL MANAGEMENT
The aim of the Group's capital management acvies is to support
business operaons with an opmal capital structure and
increasing shareholder value with the goal of generang the best
possible return. An opmal capital structure also guarantees
smaller costs of capital.
The trend in the Group's capital structure is constantly tracked with
net gearing. On 31 December 2021 the Group's interest-bearing
net debt was 2.0 million (EUR 5.9 million at 31 Dec 2020) and the
net gearing was 3.2% (15.3% at 31 Dec 2020). Net gearing is
calculated by dividing net debt by equity. Interest-bearing net debt
equals liabilies less interest-bearing receivables and cash and
bank accounts. On 31 December 2021, the equity rao was 51.9%
(50.5% at 31 Dec 2020).
31 Dec 2021
30 Jun 2021
Interest bearing debt/EBITDA (<3,0)
0.4
0.4
Equity rao (>30%)
51.9%
55.3%
Notes to the Consolidated Financial Statements38
|
(tax provision India)
Notes to the Consolidated Financial Statements
39
|
In addion OP Yrityspankki Oyj credit facility that was raised to EUR 5.0
million (EUR 3.0 million in 2020) and was ulized in 2021 to an amount of
EUR 578.687,96 had business mortgage as collateral. Ulized amount is
included in bank loans. Credit facility was not in use as of 31 December
2020.
55,638
81
1,155
PARENT COMPANY INCOME STATEMENT (FAS)
PARENT COMPANY BALANCE SHEET (FAS)
Parent Company Income Statement Parent Company Balance Sheet |40
|
Parent Company Cash Flow Statement
41
|
PARENT COMPANY CASH FLOW STATEMENT (FAS)
Acquisions
Withdrawal of loans
Non-current tangible and intangible assets are recorded in the
balance sheet at historical cost less depreciaon according to plan
and amorsaon. Investment grants received have been entered
as a credit to the respecve asset item. Depreciaon according to
plan has been calculated according to the straight-line method on
the basis of the useful life of the assets.
Intangible assets
l Goodwill 5–6 years
l Other intangible rights 3–5 years
Trade receivables and payables are not exposed to significant
interest rate or foreign currency risks.
FINANCIAL ASSETS AND
MANAGEMENT OF FINANCIAL RISKS
FOREIGN CURRENCY TRANSACTIONS
Items denominated in foreign currency have been translated at
the average rate stated by the European Central Bank at the
balance sheet date. Exchange differences between sales and
purchases have been allocated as a credit or debit to respecve
items.
In the parent company's financial statements, lease payments for
property, plant and equipment obtained on a finance lease are
included as lease expenses in other operang expenses. Parent
company lease contracts are either of low value or short-term.
LEASES
Employees' pension security including supplementary benefits
has been insured with pension insurance companies. Pension
expenses are recognized as an expense during their year of
accrual.
PERIODISATION OF PENSION EXPENSES
The value of subsidiaries in the parent group is the acquisition
cost plus subsequent investments to strengthen the equity of the
subsidiaries. The value of the shares has a significant impact on
the parent company's equity and therefore for example on equity
ratio.
The impairment testing of shares in subsidiaries has been carried
out on the basis of the situation at the end of December 2021.
The recoverable amounts are determined in calculations on the
basis of the value in use, and the preparation of these calcula-
tions requires the use of judgement.
IMPAIRMENT TESTING OF SHARES IN SUBSIDIARIES
pilt
PARENT COMPANY
ACCOUNTING POLICIES
NON-CURRENT ASSETS
PRINCIPLES OF MEASUREMENT AND PERIODISATION
Parent Company Accounting Policies42
|
„
We are continuing
to increase the
capacity in India and
estimate now that
the third factory
under construction
will be fully finalised
by the end of this
year.
NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS
Notes to the Parent Company Financial Statements44
|
The financial statements of Incap Corporaon have been
prepared in accordance with the Finnish accounng
standards (FAS).
Unrealized unemployment
security deducble
Maintenance expenses for
machinery and properes
Notes to the Parent Company Financial Statements
45
|
FINANCIAL STATEMENTS 31 DECEMBER 2021
GROUP COMPANIES
The Group's equity at the close of the financial period was EUR
62.9 million (EUR 38.6 million in 2020) and the parent company's
equity was EUR 35.7 million (EUR 28.1 million in 2020).
The value of shares in subsidiaries in the parent company is the
acquision cost plus subsequent investments to strengthen the
equity of the subsidiaries. In the financial statements of the
parent company, the value of the Indian subsidiary's shares in the
balance sheet is approximately EUR 8.2 million, the value of the
Estonian subsidiary approximately EUR 4.1 million and the value
of the UK and Slovakia subsidiaries approximately EUR 8.8 million.
The value of the shares in subsidiaries has a significant impact on
the parent company's equity and accordingly on equity rao,
among others. The impairment tesng of subsidiaries has been
carried out based on the situaon at the close of the financial
period 2021. The recoverable amounts used in the impairment
test calculaons are determined on the basis of use value.
The cash flow forecasts are based on the budget for next financial
period and the business plan prepared for the four forthcoming
years by the management and approved by the Board. In cash
flow esmates, the revenue in India is esmated to grow by 10%
annually and EBIT is approximately 15%. In cash flow esmates,
the revenue in Estonia is esmated to grow by 5% annually and
EBIT is 5%. In cash flow esmates, the revenue in UK and Slovakia
subsidiaries which were acquired in January 2020 is esmated to
grow by 5% annually and EBIT is 5%. The residual value is
esmated to grow by 2%.
The discount rate is comprised of industry risk, interest on
liabilies and country-specific risk. The discount rate factors are
updated annually in connecon with the tesng using informaon
received from the market. In the calculaons for the financial
period 2021, the discount rate of 12.88% has been used in India,
9.28% in Estonia and 13.49% in UK and Slovakia.
Should the EBIT used in the tesng decrease by approximately
75% in India, 47% in Estonia or 11% in UK and Slovakia, or should
the discount rate increase by less than 8.6 percentage points in
Estonia, 231.1 percentage points in India or 1.28% in UK and
Slovakia, there would be no need for write-down of shares.
The profitability of the Indian subsidiary is at a good level, thus
there is no need for write-down of shares nor the risk. 67% of the
Estonian subsidiary valuaon consists of residual value.
l
Incap Electronics Estonia OÜ, Kuressaare, Estonia
l
Incap Contract Manufacturing Services Pvt. Ltd., Bangalore,
India
l
Incap Holdings UK Ltd, Newcastle-under-Lyme, UK
l
Incap Electronics Group Ltd, Newcastle-under-Lyme, UK
l
Incap Electronics UK Ltd, Newcastle-under-Lyme, UK
l
Incap Electronics Slovakia, Namestovo, Slovakia
l
Euro-ketju Oy, Helsinki, Finland (dormant)
l
Incap Hong Kong Limited, Hong Kong
Incap Corporaon owns 100% of group companies and all
companies are combined in the parent company consolidated
financial statements.
Notes to the Parent Company Financial Statements46
|
2,879 3,000
1,100 2,300
47
|
BOARD OF DIRECTORS’
PROPOSAL ON MEASURES
RELATED TO THE RESULT
The parent company's profit for the financial period totals EUR
6,877,283.91. To secure funds for the execuon of the growth
strategy of Incap and due to uncertaines in the global economy
and geopolical situaon, the Board of Directors of Incap
Corporaon proposes that the Annual General Meeng to be
held on 29 April 2022 authorises the Board of Directors to
decide on a distribuon of dividend of a maximum of EUR 0.80
per share from the profits in accordance with the adopted
financial statements of the financial year 1 January 2021 to 31
December 2021, to be distributed in one or several instalments
at a later stage based on the Board of Director's assessment.
The authorisaon shall be valid unl the commencement of the
next Annual General Meeng.
If the Board of Directors decides to exercise the authorisaon,
the company will publish the possible decision on the amount of
the dividend to be distributed separately, and at the same me
confirm the pernent record and payment dates of the dividend
payment.
Distributable funds as of 31 December 2021 amounted to EUR
34,698,670.00 and the number of shares amounted to
5,849,327. Thus, the maximum amount of dividends to be
distributed amount to EUR 4,679,461.60.
Ville Vuori
Chairman of the Board
Carl-Gustaf von Troil
Board Member
Päivi Jokinen
Board Member
Kaisa Kokkonen
Board Member
Oo Pukk
President and CEO
Helsinki, 25 March 2022
„
In the longer term, the growth
in electronics manufacturing
services is driven by the
growing use of electronics
supported with megatrends
such as digitalisation.
Auditor's Report
49
|
AUDITOR'S REPORT
To the Annual General Meeng of Incap Oyj
We have audited the financial statements of Incap Oyj (business
identy code 0608849-6) for the year ended 31 December, 2021.
The financial statements comprise the consolidated balance
sheet, income statement, statement of comprehensive income,
statement of changes in equity, statement of cash flows and
notes, including a summary of significant accounng policies, as
well as the parent company's balance sheet, income statement,
statement of cash flows and notes.
In our opinion
l the consolidated financial statements give a true and fair
view of the group's financial posion as well as its financial
performance and its cash flows in accordance with
Internaonal Financial Reporng Standards (IFRS) as adopted
by the EU.
l the financial statements give a true and fair view of the
parent company's financial performance and financial
posion in accordance with the laws and regulaons
governing the preparaon of financial statements in Finland
and comply with statutory requirements.
Our opinion is consistent with the addional report submied to
the Board of Directors.
REPORT ON THE AUDIT OF FINANCIAL STATEMENTS
OPINION
We conducted our audit in accordance with good auding
pracce in Finland. Our responsibilies under good auding
pracce are further described in the Auditor's Responsibilies for
the Audit of Financial Statements secon of our report.
We are independent of the parent company and of the group
companies in accordance with the ethical requirements that are
applicable in Finland and are relevant to our audit, and we have
fulfilled our other ethical responsibilies in accordance with these
requirements.
In our best knowledge and understanding, the non-audit services
that we have provided to the parent company and group
companies are in compliance with laws and regulaons applicable
in Finland regarding these services, and we have not provided any
prohibited non-audit services referred to in Arcle 5(1) of
regulaon (EU) 537/2014. The non-audit services that we have
provided have been disclosed in note 6 to the consolidated
financial statements and in note 4 to the parent company's
financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
BASIS FOR OPINION
Key audit maers are those maers that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period. These maers were addressed
in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these maers.
We have fulfilled the responsibilies described in the Auditor's
responsibilies for the audit of the financial statements secon of
our report, including in relaon to these maers. Accordingly, our
audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement
of the financial statements. The results of our audit procedures,
including the procedures performed to address the maers
below, provide the basis for our audit opinion on the
accompanying financial statements.
We have also addressed the risk of management override of
internal controls. This includes consideraon of whether there
was evidence of management bias that represented a risk of
material misstatement due to fraud.
KEY AUDIT MATTERS
Key Audit Maer
How our audit addressed the Key Audit Maer
Revenue recognion
We refer to the Group's accounng policies and the note 3
The Group's business consists of contract manufacturing of
electronics in the Group's factories. Revenues from the sale of
goods is recognized when the customer obtains control of goods
at a point in me.
Revenue recognion was determined to be a key audit maer
and a significant risk of material misstatement referred to in EU
Regulaon No 537/2014, point (c) of Arcle 10 (2) due to the risk
associated with the mely and accurate recognion of the
revenue.
Our audit procedures to address the risk of material
misstatement in respect of correct ming of revenue recognion
included among others the review of the Group's accounng
policies over revenue recognion and comparison to IFRS
standards. We tested Group's internal controls, where applicable,
over proper ming and amount of revenue recognized. We
examined Group's sales contracts throughout the financial year
and in connecon with the year-end audit. We tested the proper
ming of revenue recognion at year-end.
We evaluated the disclosures in respect of revenue.
Valuaon of inventory
We refer to the Group's accounng policies and the note 16
The value of inventories at 31 December 2021 was 59 million
euros comprising 46 % of total assets. Inventory valuaon was
determined to be a key audit maer and a significant risk of
material misstatement referred to in EU Regulaon No 537/2014,
point (c) of Arcle 10(2) because the valuaon of inventory
involves the use of management judgement related to the risk of
obsolescence inventory and because the value of inventories is
significant to the financial statements.
Our audit procedures to address the risk of material
misstatement in respect of inventory valuaon included
evaluaon of the processes related to valuaon of inventories.
We compared the inventory valuaon principles to IFRS
standards. We tested the valuaon of inventories on a sample
basis at year-end. In our audit procedures to address the risk of
obsolete inventory, we evaluated and tested management's
assumpons and calculaons related to valuaon. We evaluated
the disclosures in respect of inventory.
Valuaon of goodwill
We refer to the Group's accounng policies and the note 13.
At the balance sheet date, 31 December 2021, the amount of
goodwill was 7.5 million euros comprising 6 % of total assets and
12 % of equity. The valuaon of goodwill was a key audit maer
because
l goodwill impairment tesng is complex and involves
judgements,
l impairment tesng is based on future market and economic
growth assumpons; and
l the goodwill is material to the financial statements.
The recoverable amount of the Group's cash-generang units has
been determined based on value in use calculaons, the result of
which may vary significantly as the assumpons included in the
calculaons change. The determinaon of value in use is affected
by several assumpons, such as revenue growth, EBITDA and the
discount rate used in discounng cash flows.
Changes in these assumpons may result in impairment of
goodwill.
As part of our audit procedures related to goodwill, we ulized
our valuaon experts to assist us in assessing the appropriateness
of the assumpons and methods used by management.
Our procedures included parcularly a comparison of the
assumpons used by management with informaon obtained
from external data sources and our own expectaons regarding
the average cost of capital used in discounng cash flows.
In addion, we tested the appropriateness of the calculaons
made by management and the future projecons with the budget
approved by the Board. We also compared the results of goodwill
impairment tests with the company's market value.
In addion, we assessed the adequacy of the disclosures
presented in note 13, such as the sensivity analysis, and
whether somewhat possible change in the key assumpon could
result in impairment of goodwill.
Auditor's Report50
|
Auditor's Report
51
|
The Board of Directors and the Managing Director are responsible
for the preparaon of consolidated financial statements that give a
true and fair view in accordance with Internaonal Financial
Reporng Standards (IFRS) as adopted by the EU, and of financial
statements that give a true and fair view in accordance with the
laws and regulaons governing the preparaon of financial
statements in Finland and comply with statutory requirements. The
Board of Directors and the Managing Director are also responsible
for such internal control as they determine is necessary to enable
the preparaon of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and
the Managing Director are responsible for assessing the parent
company's and the group's ability to connue as going concern,
disclosing, as applicable, maers relang to going concern and
using the going concern basis of accounng. The financial
statements are prepared using the going concern basis of
accounng unless there is an intenon to liquidate the parent
company or the group or cease operaons, or there is no realisc
alternave but to do so.
RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIRECTOR FOR THE FINANCIAL STATEMENTS
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF FINANCIAL STATEMENTS
Our objecves are to obtain reasonable assurance on whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with good auding pracce will always
detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of
the financial statements.
As part of an audit in accordance with good auding pracce, we
exercise professional judgment and maintain professional
skepcism throughout the audit. We also:
l Idenfy and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecng a
material misstatement resulng from fraud is higher than for
one resulng from error, as fraud may involve collusion,
forgery, intenonal omissions, misrepresentaons, or the
override of internal control.
l Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing
an opinion on the effecveness of the parent company's or
the group's internal control.
l Evaluate the appropriateness of accounng policies used and
the reasonableness of accounng esmates and related
disclosures made by management.
l Conclude on the appropriateness of the Board of Directors'
and the Managing Director's use of the going concern basis of
accounng and based on the audit evidence obtained,
whether a material uncertainty exists related to events or
condions that may cast significant doubt on the parent
company's or the group's ability to connue as a going
concern. If we conclude that a material uncertainty exists, we
are required to draw aenon in our auditor's report to the
related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to
the date of our auditor's report. However, future events or
condions may cause the parent company or the group to
cease to connue as a going concern.
l Evaluate the overall presentaon, structure and content of
the financial statements, including the disclosures, and
whether the financial statements represent the underlying
transacons and events so that the financial statements give
a true and fair view.
l Obtain sufficient appropriate audit evidence regarding the
financial informaon of the enes or business acvies
within the group to express an opinion on the consolidated
financial statements. We are responsible for the direcon,
supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding,
among other maers, the planned scope and ming of the audit
and significant audit findings, including any significant
deficiencies in internal control that we idenfy during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements
regarding independence, and communicate with them all
relaonships and other maers that may reasonably be thought
to bear on our independence, and where applicable, related
safeguards.
From the maers communicated with those charged with
governance, we determine those maers that were of most
significance in the audit of the financial statements of the current
period and are therefore the key audit maers. We describe
these maers in our auditor's report unless law or regulaon
precludes public disclosure about the maer or when, in
extremely rare circumstances, we determine that a maer should
not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communicaon.
OTHER REPORTING REQUIREMENTS
We were first appointed as auditors by the Annual General
Meeng on 21 March 2002 and our appointment represents a
total period of uninterrupted engagement of 20 years.
INFORMATION ON OUR AUDIT ENGAGEMENT
The Board of Directors and the Managing Director are responsible
for the other informaon. The other informaon comprises the
report of the Board of Directors and the informaon included in
the Annual Report, but does not include the financial statements
and our auditor's report thereon. We have obtained the report of
the Board of Directors prior to the date of this auditor's report,
and the Annual Report is expected to be made available to us
aer that date.
Our opinion on the financial statements does not cover the other
informaon.
In connecon with our audit of the financial statements, our
responsibility is to read the other informaon idenfied above
and, in doing so, consider whether the other informaon is
materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated. With respect to report of the Board of
Directors, our responsibility also includes considering whether
the report of the Board of Directors has been prepared in
accordance with the applicable laws and regulaons.
In our opinion, the informaon in the report of the Board of
Directors is consistent with the informaon in the financial
statements and the report of the Board of Directors has been
prepared in accordance with the applicable laws and regulaons.
If, based on the work we have performed on the other
informaon that we obtained prior to the date of this auditor's
report, we conclude that there is a material misstatement of this
other informaon, we are required to report that fact. We have
nothing to report in this regard.
th
In Helsinki 28 of March, 2022
Ernst & Young Oy
Authorized Public Accountant Firm
Bengt Nyholm
Authorized Public Accountant
OTHER INFORMATION
Auditor's Report52
|
„
Incap's corporate
responsibility is
supported with quality
and environmental
management systems.
53
|
FIVE-YEAR KEY FIGURES
Five-Year Key Figures
¹ The Board of Directors of Incap Corporaon proposes that the Annual General Meeng authorises the Board of Directors to decide on a
distribuon of dividend of a maximum of EUR 0.80 per share from the profits in accordance with the adopted financial statements of the
financial year 1 January 2021 to 31 December 2021, to be distributed in one or several instalments at a later stage based on the Board of
Director’s assessment. The authorisaon shall be valid unl the commencement of the next Annual General Meeng. If the Board of
Directors decides to exercise the authorisaon, the company will publish the possible decision on the amount of the dividend to be
distributed separately, and at the same me confirm the pernent record and payment dates of the dividend payment.
² Number of shares increased in 2020 due to the acquisiton of AWS Electronics Group that was parally paid in shares and due to the share
issue in November. In 2021 the number of shares decreased due to the actual realized pruchase price paid in shares relang to AWS
acquision.
³ Share issued adjusted number of shares in 2020 based on purchase price in shares relang to AWS acquisiton and share issue in November
2020. Share issue adjusted number of shares in 2021 based on the actual realized purchase price in shares relang to AWS acquision.
„
Incap's growth strategy is
based on its entrepreneurial
and customer-driven
culture and flexible
operational model.
55
|
DEFINITIONS OF KEY FIGURES
Investments
VAT-exclusive working capital acquisions,
without deducon of investment subsidies
=
Average number of employees
average of personnel numbers at the end of each month
=
current assets + inventories
short-term liabilies
Current rao
=
100 x interest-bearing net debt
equity
Net gearing, %
=
Interest-bearing debt - cash and bank accounts
Interest-bearing net debt
=
Quick rao
current assets
short-term liabilies - short-term advances received
=
Return on investment, %
100 x (profit/loss + financial expenses + taxes)
equity + interest-bearing financing loans
=
100 x equity
balance sheet total - advances received
Equity rao, %
=
Return on equity, %
=
100 x profit/loss for the period
average equity during the financial period
PER-SHARE DATA
Total market capitalisaon
closing price for the period x number of
shares available for public trading
=
Price per earnings (P/E) rao
closing price at balance sheet date
earnings per share
=
net profit/loss for the period
average number of shares during the period, adjusted for share issues
Earnings per share
=
equity
number of shares at the end of the period, adjusted for share issues
Equity per share
=
dividend during financial year
number of dividend-earning shares at end of period, adjusted
for share issue
Dividend per share
=
100 x dividend per share
earnings per share
Dividend out of profit, %
=
100 x dividend per share
closing price at balance sheet date
Effecve dividend yield, %
=
Definitions of Key Figures
RECONCILIATION OF ALTERNATIVE
PERFORMANCE MEASURES
Reconciliation of Alternative Performance Measures56
|
Reconciliation of Alternative Performance Measures
57
|
CALCULATION OF ALTERNATIVE PERFORMANCE MEASURES
Alternave
performance measure
Calculaon
Reference to reason to use the measure
Return on investment, %
=
100 x (Net profit/loss + financial expenses + taxes)
(Equity + interest-bearing debt (average at the end of the
reporng period and the end of previous financial year))
The measure provides informaon
on return on investment.
Return on equity, %
=
100 x Net profit/loss
Equity (average at the end of the reporng period and
the end of previous financial year)
The measure provides informaon
on return on equity.
Equity rao, %
=
100 x Equity
Balance sheet total - advances received
The measure indicates how much of the
Group's assets have been financed with debt.
Net gearing, %
=
100 x Interest-bearing net debt
Equity
The measure indicates the Group's
indebtedness.
The measure indicates the total amount
of the Group's external debt funding.
Interest-bearing net debt
=
Interest-bearing debt – cash and bank accounts
Current assets
=
Current receivables + cash and bank accounts
The component used for calculang Quick rao
illustrates the assets required for covering the
Group's current expenses.
Quick rao
=
The measure provides informaon on
the company's liquidity
Current assets
Short-term liabilies – short-term advances received
The measure provides informaon on the
company's liquidity
Current rao
=
Current assets + inventories
Short-term liabilies
Investments
=
VAT-exclusive working capital aqcuisions without
deducon of investment subsidies
The measure provides informaon on the amount
of investments recorded in the Group's balance sheet.
Adjusted operang profit
=
Operang profit before non-recurring costs and
purchase price allocaon (PPA) amorsaon
The measure indicates operang profit
less expenses related to the acquision.
VILLE VUORI
Chairman of the Board as from 15 April 2019
B.Sc. (Eng.), eMBA, born 1973
A non-execuve director, who is independent of the company and company's major shareholders.
CEO of Kemppi Oy. Ville Vuori has acted as President and CEO of Incap Group during 2014–2017.
Before that he worked at Kumera Drives Oy and Skyhow Ltd. as Managing Director and at ABB Group
in several managerial posions.
Board member as from 17 April 2018.
Incap shares (direct ownership and holding of interest pares): –
Opons: –
CARL-GUSTAF VON TROIL
Board member
B.Sc. (Eng.), born 1954
A non-execuve director, who is independent of the company and its major shareholders.
Carl-Gustaf von Troil is a member of the Board at United Bankers and acts as a partner and asset
manager at UB Wealth management. He has acted as Managing Director and Board member in
several companies in banking, investment and property businesses. He is a member of the board
at Oy Konno Ab and in several companies in the United Bankers Group.
Board member as from 31 March 2015. Chairman of the Board 17 April 2018–15 April 2019. Board
member since 15 April 2019.
Incap shares (direct ownership and holding of interest pares): 54,138 pcs
Opons: –
BOARD OF DIRECTORS
PÄIVI JOKINEN
Board member
M. Sc. (Econ), born 1968
A non-execuve director, who is independent of the company and its major shareholders.
Managing director and founding partner at Avant Advisors Oy since 2021.
Previously worked as Vice President in Stora Enso Consumer Board Division and member of the
management team at Kemira and Internaonal Paper Europe.
Member of the Board at Enersense Oyj and European Women on Boards.
Member of the Advisory Council of the private equity company Bocap.
Board member since 17 April 2018.
Incap shares (direct ownership and holding of interest pares): –
Opons: –
KAISA KOKKONEN
Board member
M. Sc. (Econ.), HT-auditor, CBM, born 1962
A non-execuve director, who is independent of the company and its major shareholders.
Kaisa Kokkonen is a finance professional and founder of Akeba Oy established in 2011. Earlier, she has
worked as e.g. CFO at Talentum Oyj and Director of Finance at Hackman Oyj. She has extensive
experience in financial management, corporate governance as well as mergers and acquisions. She was
also a member of the Board of The Finnish Business School Graduates 2015-2020.
Board member since 20 April 2020.
Incap shares (direct ownership and holding of interest pares): 1,500 pcs
Opons: –
Board of Directors58
|
Management Team
59
|
MANAGEMENT TEAM
MURTHY MUNIPALLI
Director, Operaons India & Sales Asia
M.Sc. (Eng.), MBA, born 1964
Joined the company in 2008, serving first as Sales Director and as Managing
Director of the Indian subsidiary. He has worked previously at Spike Technologies
Ltd (presently Qualcomm) and Tata Elxsi Ltd.
ANTTI PYNNÖNEN
CFO
M.Sc. (Econ.), born 1982
Joined the company in 2019. He has previously worked at ABB and at Wärtsilä.
GREG GRACE
Director, Operaons Estonia
BA, born 1971
Joined the company 2018 serving as Director of Business Development of Incap
Estonia. His previous work experience includes management posions in Skano
Group, Coca-Cola HBC Balcs and NSB Kaubanduse AS.
OTTO PUKK
President and CEO of the Group
M.Sc.B.E., born 1978
With the company as from 2015, first as the director for Incap operaons in
Estonia. CEO of the Group as of 18 September 2018. He has served previously at
Ees Energia Technology Industries and ETAL Group, among others.
JAMIE MAUGHAN
Director of Operaons UK & Slovakia and
Managing Director of Incap Electronics UK Limited
HND, born 1972
Jamie joined Incap in January 2020 through the acquision of AWS Electronics
Group. Jamie started his career at Motorola. He has had various roles in electronic
manufacturing and has run several sites.
60
Incap Corporaon has one series of shares, and the number of
shares on 31 December 2021 was 5,849,327. The company's
share capital registered in the trade registry was EUR 1,000,000
on 31 December 2021. The company does not hold any of its own
shares.
Incap Corporaon's shares are listed on the NASDAQ Helsinki
since 5 May 1997. In the Nordic OMX List Incap belongs to the
Mid Cap segment and the industry sector of Incap is
Industrials/Industrial Goods & Services. The company code is ICP,
and the book entry type code is ICP1V.
During the financial year, Incap Corporaon's share price varied
between EUR 17.20 and 80.60. The closing price on 31 December
2021 was EUR 78.50. The market capitalisaon on 31 December
2021 was EUR 459.2 million. At the end of the reporng period,
the company had 4,605 shareholders. Nominee-registered
owners held 20.4% and foreign owners 8.2% of all shares.
The Board of Directors is not aware of any shareholder
agreements concerning the ownership and vong rights of the
company's shares.
SHAREHOLDER AGREEMENTS
At the end of the reporng period, the members of Incap
Corporaon's Board of Directors and the President and CEO and
their interest pares owned a total of 55,638 shares or
approximately 1% of the company's shares and votes. Changes in
the shareholdings of the Board of Directors, the President and the
Group management team are announced as stock exchange
releases available on the company's website at
www.incapcorp.com, secon Investors/News and Releases.
SHAREHOLDINGS OF THE BOARD OF DIRECTORS
AND THE PRESIDENT
SHARES AND SHAREHOLDERS
Shares and Shareholders60
|
Shares and Shareholders
61
|
Largest shareholders on 31 December 2021
Shares, pcs
Percentage of shares and
votes, %
OY ETRA INVEST AB
1,137,333
19.44
JOENSUUN KAUPPA JA KONE OY
513,028
8.77
NORDEA LIFE INSURANCE FINLAND LTD.
512,060
8.75
ILMARINEN MUTUAL PENSION INSURANCE COMPANY
261,308
4.47
MANDATUM LIFE INSURANCE COMPANY LIMITED
187,492
3.21
LAAKKONEN MIKKO KALERVO
127,413
2.18
KAKKONEN KARI HEIKKI ILMARI
102,105
1.75
ETOLA ERKKI
100,000
1.71
ETOLA GROUP OY
90,000
1.54
K22 FINANCE OY
79,006
1.35
10 largest total
3,109,745
53.16
Holding by number of shares on 31 December 2021
Shares, pcs
Shareholders,
pcs
%
Shares and
votes, pcs
%
1 – 100
2,919
63.4
100,843
1.7
101 – 500
1,211
26.3
284,157
4.9
501 – 1000
234
5.1
165,818
2.8
1,001 – 5,000
181
3.9
361,627
6.2
5,001 – 10,000
24
0.5
160,089
2.7
10,001 – 50,000
20
0.4
441,205
7.5
50,001 – 100,000
5
0.1
407,999
7.0
100,001 – 500,000
8
0.2
1,765,168
30.2
500,001 –
3
0.1
2,162,421
37.0
TOTAL
4,605
100.0
5,849,327
100.0
of which nominee-registered
9
1,195,928
20.4
Development of share capital
Date
Change
1,000 euros
Registered on
Share capital,
1,000 euros
31 January 1991
Merger
5,760
26 February 1992
7,862
28 April 1992
Increase
424
25 November 1992
8,286
30 September 1992
Decrease
4,972
02 December 1992
3,314
15 January 1993
Increase
32
11 August 1993
3,347
16 March 1994
Increase
563
21 December 1994
3,910
10 March 1997
Increase
978
21 March 1997
4,889
05 May 1997
Increase
975
05 May 1997
5,864
04 May 1998
Increase
40
04 May 1998
5,904
21 March 2002
Increase
14,583
24 April 2002
20,487
06 April 2016
Decrease
19,487
31 August 2016
1,000
Holding by sector on 31 December 2021
Shareholders, pcs
%
Shares and
votes, pcs
%
Private enterprises
157
3.4
963,953
16.5
Financial instuons
11
0.2
2,634,740
45.0
Public sector enes
1
0.0
261,308
4.5
Households
4,418
95.9
1,506,345
25.8
Non-profit organizaons
3
0.1
2,063
0.0
Foreign ownership
15
0.3
480,918
8.2
TOTAL
4,605
100.0
5,849,327
100.0
Nominee-registered
9
1,195,928
20.4
Nominee-registered holding is not included in the list.
NOTES
Notes62
|
„
Incap estimates that its
revenue, operating profit
(EBIT) and adjusted
operating profit (EBIT)
for 2022 will be higher
than in 2021.
incapcorp.com