Aspocomp’s Interim Report January 1-March 31, 2023: Net sales at the level of the comparison period, the order book strengthened significantly from the turn of the year

Aspocomp Group Plc, Interim Report, April 20, 2023, at 8:00 a.m. EEST


FIRST QUARTER 2023 HIGHLIGHTS

• Net sales EUR 8.9 (9.0) million, decrease of 1%
• Operating result EUR 0.3 (0.8) million, 3.8% (8.9%) of net sales
• Earnings per share EUR 0.04 (0.11)
• Operative cash flow EUR 1.6 (0.7) million
• Orders received EUR 13.7 (13.0) million, increase of 5%
• Order book at the end of the review period EUR 19.1 (20.5) million, decrease of 7%
• Equity ratio 72.9% (66.9%)

OUTLOOK FOR 2023

Inflation and interest rates, the risk of recession and the uncertainties posed by Russia’s war of aggression will affect the operating environment of the company and its customers in the financial year 2023. The cycle of the Semiconductor Industry segment is expected to return to growth in the second half of the year.

Aspocomp reiterates the guidance that was published on March 16, 2023. Aspocomp estimates that its net sales for 2023 will increase from 2022 and its operating result for 2023 will be at the same level as in 2022. In 2022, net sales amounted to EUR 39.1 million and the operating result to EUR 4.5 million.


CEO’S REVIEW

"The net sales for the first quarter of 2023 amounted to EUR 8.9 million, i,e., nearly at the level of the comparison period. The development of net sales was mainly affected by the slowdown of the semiconductor cycle, but also by other uncertainties in the operating environment that slowed down investment decisions in various industries. Orders received increased by 5% to EUR 13.7 million, as a result of which our order book strengthened significantly from the turn of the year and amounted to EUR 19.1 million. We consider the turnaround seen in the order book as the first signal that the semiconductor cycle will pick up again in the second half of 2023, in line with our previous estimate.

Aspocomp’s market situation varied somewhat by customer segment in the first quarter. The Semiconductor Industry segment’s net sales growth continued, although clearly at a slower rate than in the first quarter of 2022. The Automotive segment’s net sales turned to growth as the component shortage eased. In the Industrial Electronics segment, the challenges of the operating environment, such as the development of inflation and the fear of a deepening recession, hindered investment decisions. This was also reflected in the demand for Aspocomp’s products. In the Security, Defense and Aerospace customer segment, we continued to engage in proactive sales work, but due to long order cycles, the segment’s net sales did not yet return to growth during the first quarter.

Aspocomp’s operating result for January-March decreased to EUR 0.3 (0.8) million, 3.8 percent of net sales. The changes in product mix during the quarter and especially the smaller than usual share accounted for by quick-turn deliveries weakened the operating result. In addition, higher personnel costs related to preparations for the company’s growth and one-time wage increases resulting from the outcome of collective bargaining negotiations weighed on the result. We transfer cost increases resulting from changes in the business environment to our product prices.

Inflation and interest rates, the risk of recession and the uncertainties posed by the Russian war of aggression affect the operating environment of the company and its customers in the financial year 2023. The cycle of the Semiconductor Industry segment is expected to return to growth in the second half of the year. We reiterate the guidance that was published on March 16, 2023, and estimate that Aspocomp’s net sales for 2023 will increase from 2022 and its operating result for 2023 will be at the same level as in 2022. In 2022, net sales amounted to EUR 39.1 million and the operating result to EUR 4.5 million.”


NET SALES AND EARNINGS

January-March 2023
First-quarter net sales amounted to EUR 8.9 (9.0) million. Net sales decreased by 1 percent compared to the previous year due to the slowdown of the semiconductor cycle and other uncertainties related to the operating environment, which slowed down investment decisions in various industries.

The Semiconductor Industry customer segment’s net sales increased by 31% to EUR 3.7 (2.8) million during the first quarter. The collapse of the semiconductor cycle can be seen as a slowdown in growth, as the segment’s net sales quadrupled in the comparison period.

The Industrial Electronics customer segment’s net sales decreased by 52% to EUR 0.8 (1.7) million during the first quarter due to the continuous slowing effect of inflation and the threat of recession on customer investments.

The Security, Defense and Aerospace customer segment’s net sales decreased by 7% to EUR 1.4 (1.5) million. In the segment, the number of customer contacts increased, but the order cycles are long, and the results are visible with a delay.

The Automotive customer segment’s net sales increased by 18% to EUR 2.0 (1.7) million. The Automotive segment’s sales turned to growth as the component shortage eased.

The Telecommunication customer segment’s net sales decreased by 21% to EUR 1.1 (1.3) million. The net sales of the customer segment remained low due to the timing of the customers’ product development projects.

The five largest customers accounted for 61% (53%) of net sales. In geographical terms, 85% (90%) of net sales were generated in Europe and 15% (10%) on other continents.

The operating result for the first quarter amounted to EUR 0.3 (0.8) million. The changes in product mix during the quarter and especially the smaller than usual share of quick-turn deliveries weakened the operating result. In addition, higher personnel costs related to preparations for the company’s growth and one-time wage increases resulting from the outcome of collective bargaining negotiations weighed on the result.

First-quarter operating result was 3.8% (8.9%) of net sales.

Net financial expenses amounted to EUR 0.0 (0.0) million. Earnings per share were EUR 0.04 (0.11).

INVESTMENTS

Investments during the review period amounted to EUR 0.4 (0.9) million. The company has continued its investments to increase capacity in line with its strategy, but the installation of equipment has been slowed down in part due to delays in material and component deliveries. The investments were focused on upgrading the capacity of the Oulu plant, improving automation, and increasing production efficiency.

In 2017, Aspocomp launched an investment program amounting to a total of EUR 10 million to further strengthen its position as a strategic partner to leading companies in the semiconductor, automotive, defense and aerospace, and telecommunications (5G) industries. The second phase of investments was launched in the spring of 2020, when the company was granted a total of EUR 1.35 million in development support by the ELY Center, corresponding to about 25 percent of its total cost. The ongoing second phase of the investment program aims in particular to increase the capacity of the Oulu plant, improve automation and increase production efficiency. In this current program, which will run until the end of the third quarter of 2023, all of the new equipment will be installed in the existing Oulu plant building and no additional plant space will be built.


CASH FLOW AND FINANCING

January-March 2023 cash flow from operations amounted to EUR 1.6 (0.7) million. Cash flow increased due to the decrease in trade receivables.

Cash assets amounted to EUR 2.4 (2.2) million at the end of the period. Interest-bearing liabilities amounted to EUR 2.8 (4.1) million. Gearing was 2% (9%). Non-interest-bearing liabilities amounted to EUR 5.4 (5.8) million.

At the end of the period, the Group’s equity ratio amounted to 72.9% (66.9%).

The company has a EUR 2.0 (2.0) million credit facility, which was not in use at the end of the review period. In addition, the company has a recourse factoring agreement, of which EUR 0.0 (0.0) million was in use.


PERSONNEL

During the review period, the company had an average of 156 (141) employees. The personnel count on March 31, 2023, was 156 (140). Of them, 99 (88) were blue-collar and 57 (52) white-collar employees.


ANNUAL GENERAL MEETING, THE BOARD OF DIRECTORS AND AUTHORIZATIONS GIVEN TO THE BOARD

The decisions of the Annual General Meeting held on April 26, 2022, the authorizations given to the Board of Directors by the AGM and the decisions relating to the organization of the Board of Directors have been published in separate stock exchange releases on April 26, 2022.

Aspocomp’s Annual General Meeting 2023 will be held on Thursday, April 20, 2023, at 10:00 a.m. (Finnish time).


SHARES

The total number of Aspocomp’s shares at March 31, 2023 was 6,841,440 and the share capital stood at EUR 1,000,000. The company did not hold any treasury shares. Each share is of the same share series and entitles its holder to one vote at a General Meeting and to have an identical dividend right.

A total of 339,202 Aspocomp Group Plc. shares were traded on Nasdaq Helsinki during the period from January 1 to March 31, 2023. The aggregate value of the shares exchanged was EUR 2,518,546. The shares traded at a low of EUR 6.14 and a high of EUR 8.30. The average share price was EUR 7.42. The closing price at March 31, 2023 was EUR 6.50, which translates into market capitalization of EUR 44.5 million.

The company had 4,243 shareholders at the end of the review period. Nominee-registered shares accounted for 1.5% of the total shares.


SHARE-BASED LONG-TERM INCENTIVE SCHEME

The Board of Directors of Aspocomp Group Plc decided on the establishment of a share-based long-term incentive scheme for the company’s top management and selected key employees on July 20, 2022. The objectives of the Performance Share Plan are to align the interests of Aspocomp’s management with those of the company’s shareholders and thereby promote shareholder value creation in the long term as well as to commit the management to achieving Aspocomp’s strategic targets.

The Performance Share Plan consists of annually commencing individual performance share plans. The commencement of each new plan is subject to a separate decision of Aspocomp’s Board of Directors. Each plan comprises a performance period followed by the payment of the potential share rewards in listed shares of Aspocomp. The payment of the rewards is conditional on the achievement of the performance targets set by the Board of Directors for the respective plan.

The performance period of the first plan, PSP 2022-2024, covers the period from the beginning of July 2022 until the end of the year 2024. Eligible for participation in PSP 2022-2024 are approximately 20 individuals, including the members of Aspocomp’s Management Team.

The share rewards potentially payable thereunder will be paid during the first half of the year 2025. The performance measures based on which the potential share rewards under PSP 2022-2024 will be paid are cumulative EBIT and the total shareholder return of Aspocomp’s share (absolute TSR).

If all the performance targets set for the first plan, PSP 2022–2024, are fully achieved, the aggregate maximum number of shares to be paid as a reward based on this plan is approximately 92,000 shares (referring to gross earnings before the withholding of the applicable payroll tax).

On February 15, 2023, Aspocomp Group Plc’s Board of Directors decided on the commencement of a new performance period in the share-based long-term Performance Share Plan (PSP) for the company’s senior management and selected key employees. Aspocomp originally announced the launch of the long-term incentive plan in a stock exchange release on July 20, 2022.

The next plan within the PSP structure, PSP 2023-2025, commenced as of the beginning of 2023 and the share rewards potentially earned thereunder will be paid during H1 2026. The payment of the rewards is conditional on the achievement of the performance targets set by the Board of Directors for the plan. The performance measures based on which the potential share rewards under PSP 2023-2025 will be paid are cumulative EBIT and the total shareholder return of Aspocomp’s share (absolute TSR). Eligible for participation in PSP 2023-2025 are approximately 20 individuals, including the members of Aspocomp’s Management Team.

If all the performance targets set for PSP 2023–2025 are fully achieved, the aggregate maximum number of shares payable as a reward based on this plan is approximately 91,000 shares (referring to gross earnings before the withholding of the applicable payroll tax). The maximum value of the rewards payable to the participants based on PSP 2023-2025 is limited by a cap which is linked to Aspocomp’s share price development.


SHAREHOLDERS’ NOMINATION BOARD

Aspocomp’s Annual General Meeting held on April 26, 2022, decided on the appointment of the Shareholders’ Nomination Board. Based on the company’s list of shareholders dated September 1, 2022, the three largest shareholders were defined, who appointed the following members to the Nomination Board:

- Päivi Marttila, appointed by Etola Group and Erkki Etola
- Kyösti Kakkonen, appointed by Joensuun Kauppa ja Kone Oy
- Mikko Montonen, representing himself.

The Nomination Board submits proposals regarding the company’s Board members and their fees to the 2023 Annual General Meeting. The proposals were announced in the AGM notice on March 16, 2023.


ASSESSMENT OF SHORT-TERM BUSINESS RISKS

In accordance with its goal, the company has systematically expanded its services to cover the PCB needs of its customers over the entire life cycle and thereby has successfully balanced out variations in demand and the order book. A major share of Aspocomp’s net sales is still generated by quick-turn deliveries and R&D series, and thus the company’s order book can vary significantly.

Risks affecting the operating environment
Russia’s war against Ukraine and the sanctions imposed on Russia in response are not expected to have a significant direct impact on the company. Aspocomp has no business operations and no direct customers or suppliers in Russia, Belarus or Ukraine. However, the changed operating environment may affect our sourcing and logistics chains.

The geopolitical situation and the COVID-19 pandemic have increased the risks related to customers’ global supply chains. Weak economic development, inflation and rising interest rates cause uncertainty in the operating environment and may affect customer demand. Cyber risks and disruptions in information systems can affect production. Disturbances in the labor market can also affect production and delivery capacity.

Dependence on key customers
Aspocomp’s customer base is concentrated; approximately half of sales are generated by five key customers. This exposes the company to significant fluctuations in demand.

Market trends
Although Aspocomp is a marginal player in the global electronics market, changes in global PCB demand also have an impact on the company’s business. Competition for quick-turn deliveries and short production series will accelerate as the market for PCBs weakens and continues to have a negative impact on both total demand and market prices.

Aspocomp’s main market area comprises Northern and Central Europe. In case Aspocomp’s clients would transfer their R&D and manufacturing out of Europe, demand for Aspocomp’s offerings might weaken significantly.


ANNUAL GENERAL MEETING 2023

Aspocomp’s Annual General Meeting 2023 is scheduled for Thursday, April 20 at 10:00 a.m. (Finnish time).


PUBLICATION OF FINANCIAL RELEASES FOR 2023

Aspocomp Group Plc.'s financial information publication schedule for 2023 is:


Half-year report 2023: Thursday, July 20, 2023 at around 9:00 a.m. (Finnish time)

Interim report January-September 2023: Thursday, November 9, 2023 at around 9:00 a.m. (Finnish time)

Aspocomp's silent period commences 30 days prior to the publication of its financial information.



Espoo, April 20, 2023


ASPOCOMP GROUP PLC
Board of Directors



Some statements in this stock exchange release are forecasts and actual results may differ materially from those stated. Statements in this stock exchange release relating to matters that are not historical facts are forecasts. All forecasts involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performances or achievements of the Aspocomp Group to be materially different from any future results, performances or achievements expressed or implied by such forecasts. Such factors include general economic and business conditions, fluctuations in currency exchange rates, increases and changes in PCB industry capacity and competition, and the ability of the company to implement its investment program.


ACCOUNTING POLICIES AND CHANGES IN ACCOUNTING POLICES

The reported operations include the Group’s parent company, Aspocomp Group Plc. All figures presented for the review period are unaudited. This interim report has been prepared in accordance with IAS 34 (Interim Financial Reporting), following the same accounting principles as in the annual financial statements for 2022; however, the company complies with the standards and amendments that came into effect as from January 1, 2023.

R&D
R&D costs comprise general production development costs. These costs do not fulfill the IAS 38 definition of either development or research and are therefore booked into plant overheads.

Further information
For further information, please contact Mikko Montonen, President and CEO,
tel. +358 40 5011 262, mikko.montonen(at)aspocomp.com.



Aspocomp – heart of technology

A printed circuit board (PCB) is used for electrical interconnection and as a component assembly platform in electronic devices. Aspocomp provides PCB technology design, testing and logistics services over the entire lifecycle of a product. The company’s own production and extensive international partner network guarantee cost-effectiveness and reliable deliveries.

Aspocomp’s customers are companies that design and manufacture telecommunication systems and equipment, automotive and industrial electronics, and systems for testing semiconductor components for security technology. The company has customers around the world and most of its net sales are generated by exports.

Aspocomp is headquartered in Espoo and its plant is in Oulu, one of Finland’s major technology hubs.

www.aspocomp.com

Attachment

• Aspocomp Interim Report Q1 2023