Incap Group President and CEO Otto Pukk

Incap’s first quarter in 2020 started well as we completed the acquisition of AWS Electronics Group, with production facilities in the UK and Slovakia. Through the acquisition we are extending our strategic foothold into the UK and Central Europe and further strengthening our position in the USA and South-East Asia. As a result of the acquisition, we are able to broaden our product offering to our existing customers and enter into new market segments. The acquisition also widens our customer portfolio both in numbers and industrial segments and in the long-term, the acquisition is expected to bring synergy benefits in e.g. material purchasing and cross-selling opportunities. In particular, we expect that the acquisition will open new opportunities between our Indian and the UK operations.

After the good beginning for the year, the COVID-19 outbreak and the resulting pandemic started to have an impact on our operating environment. Governments across the world have taken significant steps to contain the COVID-19 pandemic by restricting the movement of people. Due to the lockdown in India, Incap’s largest factory was closed at the end of March. As a result of the measures announced by the British government to contain the COVID-19 pandemic in the UK, Incap’s factory in Straffordshire continues to operate with reduced capacity. The pandemic has affected our factories in Estonia and Slovakia as well, where the operations have contracted to some extent due to the availability of employees, minor delays in the supply of materials and rescheduling of orders. As we write this report, the restrictions are ongoing and we expect that the impact of the pandemic on our performance will be stronger in the second quarter. While our factory in India remains in partial lockdown, we have started preparations on a small scale to be ready to ramp up to full speed once the lockdown is lifted.

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Reduced operations at our factories resulting from the COVID-19 pandemic had a negative impact on both organic growth and profitability. The profitability was further reduced by the AWS acquisition and the related non-recurring costs and purchase price allocation amortisation. Considering the circumstances, we are satisfied with our EBIT-margin of 8.9 percent. Our revenue grew by 31 percent supported with the AWS acquisition. Excluding the AWS acquisition, our revenue was down by around 17 percent. However, we are seeing an increase in customer contacts and interest in moving electronics manufacturing services closer to our customers’ end-users and the electronics design teams. We believe that the COVID-19 pandemic will further strengthen this trend. Despite these exceptional times, we have not experienced any credit losses. Our flexible operational model supports a steady cashflow, which we are naturally monitoring carefully.

As we move forward, we are committed to following the instructions provided by the local governments and health protection agencies at all our factories as the health and safety of our employees, customers, and partners is our highest priority. We have analysed various scenarios and we continue to monitor closely the situation, while also getting prepared for the uplifting of the restrictions. The ramp-up of activities can be done quickly when the situation changes. To meet the expectations of our customers and the potentially increasing demand, we are working hard to secure the supplies at our factories.

During these extraordinary times, I want to thank our team and all employees who have remained dedicated to maintain the business activities on a good level while at the same time adapting to the governmental policies and all the changes in the operating environment. The visibility is still poor, and it is too early to estimate the impact of the pandemic on our financial performance in 2020. Nevertheless, we are increasingly looking beyond the initial crisis and I believe that our hard work and strong financial position will help us through these tough times. The megatrends and the growth drivers of our industry support us and give us continued trust in the long-term prospects of Incap.