Hi Atte, my previous message was poorly phrased. I should have been more careful when writing it, but that’s water under the bridge.
I wrote a question on February 18th regarding inorganic growth. You responded to it like this:
Regarding acquisitions, I will also state the following: “Additionally, we revised our long-term growth forecast to 1% (prev. 2-2.5%), which is backed by a few factors. Firstly, Aallon Group’s organic growth has been weaker than our expectations for some time. In our estimation, this is partly affected by customer churn related to acquisitions, regarding which our previous assumptions have been too optimistic.”
So, you begin the answer with the sentence ‘regarding acquisitions I state the following’ and in the next one, you state that you have revised the long-term growth forecast to 1%. When I wrote the previous message, I genuinely thought you meant growth that includes acquisitions. If you had written about organic growth and not referred to acquisitions at the beginning, I probably would have understood better. It may be that others understood, but I didn’t that time.
By the way, you never answered my actual question about inorganic growth. Would you have time to answer it if I put it at the end of this message again?
Why does this matter then? A long-term investor who invests in Aallon Group as a serial acquirer (sarjayhdistelijä) knows that most of Aallon’s expected growth comes from serial acquisition. If the company were to grow organically by, say, 1-2% in the long term, the remaining part of the 15-20% (the company’s own target) must come through serial acquisitions. Inderes forecasts the company up until 2029. The revenue and EBIT forecasts do not include inorganic growth. (And of course, inorganic growth also has a cost; companies don’t come for free).
Atte, how should a long-term investor best utilize those forecasts that go many years into the future when they go wrong year after year (they are too low)? When a serial acquirer is modeled as something other than a serial acquirer? At the very least, the right way hasn’t been to look directly at the Inderes forecast, say, three years ahead. The forecast is surely quite accurate if Aallon stops serial acquisitions permanently today. But since they won’t stop, the forecast misses the mark.
It is true that, for example, in Boreo and Relais, future acquisitions are not forecasted either. However, in their analysis, serial acquisition is at the center. The investor remains well aware of what the company’s growth is about. In Aallon’s “comprehensive report” (pitkä raportti), or even in the latest reports, I can’t even find the word “serial acquirer” (sarjayhdistelijä) using the search function. Of course, the same thing can be said in other ways and with different words. There is talk of an acquisition strategy in the comprehensive report. But as a whole, I think inorganic growth is clearly more on the margins in Aallon’s analyses compared to Boreo and Relais. Aallon’s performance with serial acquisitions has been good, if not excellent. In my opinion, the company’s performance deserves to be talked about more. Perhaps then the market might also eventually understand what Aallon is about? (I’ll leave the AI concerns aside in this message; they are a separate topic).