Inside information: Sievi Capital initiates a change in strategy to transform into a conglomerate

Sievi Capital Oyj

Sievi Capital Plc
Inside information 15 December 2022 at 08:30 am EET

Inside information: Sievi Capital initiates a change in strategy to transform into a conglomerate
 
The Board of Directors of Sievi Capital has decided to initiate a change in strategy that will transform the company from a private equity investment company into a conglomerate during 2023. The medium-term objective is to become an industrial group built around the KH-Koneet Group’s business and to divest other target companies in line with previous strategy.

Sievi Capital’s target company KH-Koneet Group is one of the leading construction and earth-moving machinery suppliers and rental companies in the Nordic countries. Sievi Capital made the investment in KH-Koneet Group in 2017 and currently holds 90.7% of the company’s shares ⁽¹⁾. During Sievi Capital’s ownership, the company’s net sales have almost quadrupled and its EBITDA has increased nearly 2.5-fold ⁽²⁾. KH-Koneet Group’s net sales were EUR 200.9 million and EBITDA was EUR 13.1 million for the twelve-month period ended 30 September 2022 ⁽³⁾.

In addition, the conglomerate will include Sievi Capital’s other existing target companies Indoor Group (retail of furniture and interior products), Logistikas (logistics services), Nordic Rescue Group (manufacture of rescue vehicles) and HTJ (construction consulting). The development of these target companies will continue in the same way as before, and the aim is to divest them in line with the previous investment strategy.

The change in structure into an industrial group will proceed in stages over the coming years, taking into account the preconditions set by the business. Sievi Capital’s strategy will no longer include making private equity investments in new industries. The development of Sievi Capital’s other target companies will continue in the same way as before, and the aim is to divest them at the optimum stage in terms of value creation. The proceeds from the divestments of target companies in the coming years are intended to be used for acquisitions supporting KH-Koneet Group, the development of other target companies and for dividends.

The change in strategy has no impact on the composition of Sievi Capital’s or its target companies’ management teams or boards of directors, or on the position of employees. Teppo Sakari will continue as KH-Koneet Group’s CEO. The management and staff of Sievi Capital will support KH-Koneet Group in the transition, while developing other target companies in line with the previous investment strategy. Due to the investments required by the strategy change, the Board of Directors of Sievi Capital will not use the dividend authorisation issued by the Annual General Meeting held on 11 May 2022.

Sievi Capital’s largest shareholders Preato Capital AB and Mikko Laakkonen (including his controlled entity ML Stable Oy), as well as Martti Takanen, Johanna Takanen and Juha Takanen, who represent in total 39.6% of the shares and votes in the company, have expressed their support for the change in strategy.

Trading in Sievi Capital shares will continue on the main list of Nasdaq Helsinki Ltd as before.

The Board of Directors of Sievi Capital will propose to the Annual General Meeting to be held on 4 May 2023 that the name and line of business of the company be changed in accordance with the strategy change. The proposals for the new name for the company and amendments to the Articles of Association will be published separately at the latest in the notice of the General Meeting.

With the adoption of the amendments to the Articles of Association related to the change in strategy by the Annual General Meeting, Sievi Capital’s IFRS reporting as an investment entity will cease, because it no longer meets the investment entity exemption under which it has measured subsidiaries at fair value instead of line item by line item consolidation. For this reason, Sievi Capital will report its consolidated financial statements as a conglomerate for the first time in connection with the half-year report 2023.

Sievi Capital’s new strategy and financial targets will be outlined in more detail at the Capital Markets Day during autumn 2023.

¹ Of outstanding shares.
² Change in pro forma net sales and EBITDA for the financial period preceding the year of Sievi Capital’s investment and net sales and EBITDA for the 12-month period ended 30 September 2022. The key figures are consolidated FAS (Finnish Accounting Standards) figures. The figures are unaudited.
³ The key figures are consolidated FAS (Finnish Accounting Standards) figures. The figures are unaudited.

The objective of the change in strategy is to accelerate the growth of the shareholder value and increase transparency

Juha Karttunen, Chair of the Board of Directors of Sievi Capital:

“Sievi Capital has made a fine journey as a private equity investment company since 2012. The company’s strategy has been to invest in unlisted small and medium-sized Finnish companies by using its own balance sheet and to increase the value of the companies as an active owner together with the management and other owners of the target companies. Now is the time to renew the strategy so that the true value of the whole is more transparent and the successful investments and the development of the target companies’ operations are also reflected more clearly in the share valuation.

The Board of Directors has assessed various strategic options and has concluded that a change in strategy from a private equity investment company into a conglomerate based around KH-Koneet Group would significantly increase the shareholder value of the company. The shareholders will decide on changes related to the new strategy in the company’s name and line of business at next spring’s Annual General Meeting. Operating as a conglomerate will enable the development of the business more long-term and bring out the value of the business.”

KH-Koneet Group has solid track of value creation

Sievi Capital’s CEO Jussi Majamaa:

“The entrepreneur-driven KH-Koneet Group has been a success story and an excellent example of how Sievi Capital has helped the target company to grow and prosper. In Sievi Capital’s ownership, KH-Koneet Group has expanded its operations to machine rental and to the Swedish market, where it has quickly gained a significant market position. During the ownership period, the company has almost quadrupled its net sales.

KH-Koneet Group is the star of its sector: it has had above-average profitability and strong growth. The company’s success is supported by an agile, self-managing and well-run organisation, strong customer understanding and excellent customer service, a flexible business model, and a focused acquisition strategy.

The sector offers significant potential for growth both organically and through acquisitions. We believe that in the long term, KH-Koneet Group’s ability to change with the market and the flexibility to react built into the operations will lay down a sustainable foundation for value creation. The growing trend of machine rental, long-term growth of the market in civil engineering, estimated significant investments in infrastructure in the Nordic countries, and the increased need for machines in property maintenance as a result of urbanisation, will provide a good starting point for profitable growth in the future.”

SIEVI CAPITAL’S TARGET COMPANIES

KH-Koneet Group

KH-Koneet Group is one of the leading construction and earth-moving machinery suppliers in the Nordic countries with almost three decades of solid experience. Its brands include Kobelco, Kramer, Wacker Neuson, Yanmar, Dynapac, Ljungby Maskin and Brock. In addition to new machines, there is also a wide range of used machines and equipment. The business also covers the rental of machinery and after-sales services, including maintenance, spare parts and replacement machinery, as well as financial, extended warranty and remote management services. The company offers first-class machinery, equipment and services for earthworks, property maintenance, landscaping and material handling to make the customers' work smoother, safer and more economical. The company’s customers include earthmoving machinery entrepreneurs, construction companies, property maintenance companies and the public sector.

Established in 1996, KH-Koneet Group employs approximately 200 employees in Finland and Sweden. KH-Koneet Group’s net sales were EUR 200.9 million for the 12-month period ended 30 September 2022. Finland accounts for approximately one-half of the net sales and Sweden for one half. EBITDA was EUR 13.1 million ⁽⁴⁾. The company has grown profitably: from 2016 to the 12-month period ended 30 September 2022, the company's net sales grew by an average of 26 per cent per year and the company’s EBITDA by an average of 16 per cent per year ⁽⁵⁾.

The company’s vision is to be a leading machine industry expert and the most desirable partner for customers and personnel, as well as a pioneer in responsible machine trade. Growth and market share are particularly sought in Sweden. 
  
⁴ The key figures are consolidated FAS (Finnish Accounting Standards) figures. The figures are unaudited.
⁵ Average annual growth rate in pro forma net sales and EBITDA for the financial period preceding the year of Sievi Capital’s investment and the net sales and EBITDA for 2022. For the year 2022, the financials are for the 12-month period ended 30 September 2022. The key figures are consolidated FAS (Finnish Accounting Standards) figures. The figures are unaudited.

Indoor Group

Indoor Group’s Asko and Sotka chains are among Finland’s best-known home furniture and interior decoration retailers. In addition to the retail chains, the Group includes the furniture factory Insofa. Asko and Sotka have around 100 stores and an online store in Finland and Estonia. Sievi Capital made the investment in the company in 2017 and holds 58.3% of the company’s shares ⁽⁶⁾.

Indoor Group’s IFRS net sales were EUR 198.7 million and operating profit (EBIT) EUR 3.6 million for the 12-month period ended 30 September 2022. EBITDA based on Finnish Accounting Standards was EUR 7.0 million ⁽⁷⁾.

Logistikas

Logistikas offers local logistics, in-house logistics and immediate-proximity warehousing services, logistics expert services and comprehensive procurement services. The company operates in nine locations in Finland, both at its own logistics centres and at customer premises responsible for in-house logistics. Sievi Capital made the investment in company in 2020 and holds 65.9% of the company’s shares.

Logistikas’ net sales were EUR 29.6 million for the 12-month period ended 30 September 2022. EBITDA was EUR 2.1 million ⁽⁷⁾.

HTJ

HTJ is one of the leading construction consulting companies in Finland and offers expert services in construction management, site supervision, energy and environmental consulting and project management. The company offers a wide range of services to both public and private sector customers. Sievi Capital made the investment in the company in 2021 and holds 91.7% of the company’s shares.

HTJ’s net sales were EUR 21.4 million for the 12-month period ended 30 September 2022. EBITDA was EUR 2.3 million ⁽⁷⁾.

Nordic Rescue Group

Nordic Rescue Group is specialised in rescue vehicles. The group companies include Saurus Oy in Finland and Sala Brand AB in Sweden. Nordic Rescue Group is a leading Nordic company in its field. Sievi Capital made the investment in the company in 2020 and holds 68.1% of the company’s shares ⁽⁶⁾.

Nordic Rescue Group’s net sales were EUR 44.3 million for the 12-month period ended 30 September 2022. EBITDA was EUR -1.6 million ^(7,8).

⁶ Of outstanding shares.
⁷ The key figures are consolidated FAS (Finnish Accounting Standards) figures, excluding Indoor Group for which the key figures are IFRS figures. The figures are unaudited.
⁸ Net sales and EBITDA for Nordic Rescue Group include the rescue lift business, which has ceased in December 2022.

Webcast 15 December 2022 at 1:00 pm

Juha Karttunen, Chair of the Board of Directors of Sievi Capital, and CEO Jussi Majamaa will present the change in strategy in a live webcast on 15 December 2022, starting at 1 pm. The event in Finnish can be viewed at https://sievicapital.videosync.fi/15-12-webcast.
Participants may submit questions during the webcast, which will be answered at the end of the session.

SIEVI CAPITAL PLC
Board of Directors

FURTHER INFORMATION:
CEO Jussi Majamaa, tel. +358 400 412 127

DISTRIBUTION:
Nasdaq Helsinki Ltd
Major media
www.sievicapital.fi/en/

Sievi Capital is a partner for Finnish entrepreneurs. We are on a transformation journey from a private equity investment company into a conglomerate. Our medium-term objective is to become an industrial group built around the business of our target company KH-Koneet Group. Sievi Capital’s share is listed on Nasdaq Helsinki.