Thanks to Astrix for your words. I have been quite reluctant to comment on the matter from that perspective, but there is certainly some truth to it. The starting points and structures for rapid internationalization, for example, were quite scarce when I started (and one should also consider the capital markets’ attitude toward internationalization and the related investment/decline in profitability). Now we have very purposefully taken actions in line with our strategy to enable this, and the situation is starting to look different. It is clear that our next phase of accelerated growth is a growth story built from different starting points than Admicom’s previous story. That still doesn’t change the fact that there are huge opportunities in the market and contech is a global megatrend. In this market, however, there isn’t (in our view) a “winner (or first one) takes it all” situation—there is still plenty of time to enter all European markets. Where it is then capital-efficient to go is what we are currently evaluating.
There are valid reasons to have differing opinions on dividends, but I believe those dividends still trickle in from Microsoft too…
Adminet (i.e., now Ultima) has been cloud-based (i.e., web-based) from the beginning and was designed for the needs of building services companies. So, in that sense, the technical foundation has been in good shape right from the start.
The challenge (and opportunity) with internationalizing Ultima lies in its numerous integrations with e-infrastructure (currently the Finnish one). Ultima automates banking connections, taxes, employer contributions, collective agreements (TES), etc., etc., etc. — all of which must, of course, be adapted to each country separately. This is provided, of course, that a corresponding e-infrastructure exists in that country. For this reason, Ultima will not be our spearhead into any market; instead, we enter markets through other means and then build a business case for bringing Ultima there once we know the market more deeply.
In this case, we were selected after a lengthy bidding process, but the final contract has not yet been signed (any day now). The products involved are our so-called project management stack, which does not include Ultima, but largely the other products Atte described. The contract itself is a nice win (though not of a size requiring a formal disclosure), but the real opportunity is indeed the expansion into the Nordic markets and to their subcontractors with the support of this customer. We are exploring this possibility further.
This is precisely what it’s about. And we are indeed delivering Tempo to the customer as part of a broader package. We have committed to a certain development roadmap, but those items are features that were already in the plans anyway. So, we aren’t building some customized contraption for the customer’s needs; rather, we are gaining a good partner to help develop the application further. Tempo’s mission is to be a modern web-based scheduling application that covers all the scheduling needs mentioned in this thread—also enabling real-time sharing and editing for all partners.
Big thanks to Petri for the info-packed comments. It’s a pleasure to be a shareholder.
I mean, you can’t really blame the capital markets for the fact that the company can’t find anything to invest in except for a pathetic single-digit growth with a +30% adj. EBIT product and acts like an old-man tech company, paying out dividends instead of internationalizing. One truly has to be a global-level investment genius as an Admicom owner to find a better return for that capital returned as dividends than what would be available for Admicom through investments in the European contech sector.
For example, your competitor Smartcraft pulls in 15–20% organic growth per year, plus a couple of M&A deals and the opening of a new country office. Meanwhile, here at home, we are holding back in potentially the worst construction market in Europe, because it would be a huge risk if the ability to pay dividends were jeopardized for a few years. These comments can, of course, be dodged by cracking jokes about a mega-tech company older than you in years, but growth companies don’t pay dividends or pull under 5% growth; instead, they invest cash flows to grow the company to the next size class. Capital can be returned to the owner once the company is finished.
While I agree with some of what you’re saying, your communication style is quite arrogant. Hiding behind a username, everything is painted in black and white, and then you come in with hindsight to say what was done wrong once again.
So now the only right way is to buy and invest everything available? How much have you actually studied the matter from Admicom’s perspective, and do you have anything concrete to offer? What should be bought and why? Which country should be entered first and why? I assume you have drawn up detailed plans regarding this.
When Admicom eventually expands abroad, do you promise not to heckle with hindsight if there are—as is likely—more bumps in the road than your messages currently indicate?
I suppose people enjoy reading sentences fired off with total confidence, regardless of whether there is any substance behind them. If there is, it would be nice to see it.
Yup, I’d like to remind everyone that this is a forum where investors help investors and the discussion should be encouraging.
Investors should appreciate that Petri puts so much effort into his answers here: few company representatives bother to do so.
So, you can challenge and offer different perspectives, of course, but usually the discussion is better when the tone is respectful towards others. 
Let’s stick to that.
Admittedly, my previous posts were biting in a way that could reasonably be considered objectionable, and I violated the Inderes forum’s “cheerleading” norm. In my defense, I would like to mention that I managed to spark discussion in a half-dead thread where no one had posted for three weeks:
Boring posts rarely spark discussion, which is why I believe these “wake-up” posts should include sections that stir emotions or otherwise provoke a response.
I don’t quite understand why posting behind a pseudonym is so frowned upon today. Cultured people know that this has long traditions in Finland, and even presidents have voiced their opinions under pseudonyms:
https://fi.wikipedia.org/wiki/Liimatainen_(nimimerkki)
Returning to Admicom, you would like me to present concrete justifications for the claim that a product with some of the highest profitability on the stock exchange would also be profitable outside of Finland, in target countries with lower levels of digitalization and better construction markets. I would understand this demand if it were a low-margin service entering an extremely competitive market. In Admicom’s case, the product situation is the opposite, and the industry globally is practically screaming for these solutions. If you were to go to the Revenio thread, for example, and argue that air-puff technology (ilmapuhkuteknologia) might not be worth selling outside of Finland unless posters provide “substance” for their claims, you would be laughed out of there.
This fear of internationalization and its unfortunate slowness is a quintessentially Finnish trait in listed companies. If Admicom were headquartered in Sweden and generated similarly impressive profitability figures, do you think they would think like this: “We probably shouldn’t try to expand into Norway, except maybe by cautiously dipping our toes in the water, because a cod might easily bite off the whole leg and then a great company is ruined. Let’s pay dividends instead and grow moderately.”
Of course, international growth involves all sorts of complications, and if they didn’t occur, the pace wouldn’t be fast enough. I can sincerely promise that your twice-mentioned fear of hindsight is unfounded. From me, you will hear nothing but praise if Admicom stops paying dividends and uses that money to take over Europe and the whole world with its products 
This whole thing reeks of that typically Finnish defense-first tactic where they spend ages fumbling with the puck behind their own goal, setting up “delayed breakouts” in the hope of getting one lucky bounce and a 1-0 win.
I understand wanting to secure the financial position, but paying out dividends doesn’t fit this at all; either you protect the cash reserves properly, or you go greedily hunting for goals.
I definitely agree with Eka’s point: if it’s truly a growth company, then dividends should be secondary. In Finland, the eternal dividend obsession of fossils like Saario and Lindström etc. is just way too deeply rooted.
If the product is actually good, then you get into the offensive zone to score goals; often, the best defense really is a good offense.
The Finnish stock market certainly doesn’t need any more laggards; it needs truly growth-oriented companies, like in Sweden.
I think this dividend discussion is a bit one-sided, as if even a small dividend payout means giving up on growth.
Different businesses have different capital requirements. In the software industry, with any luck, you can achieve efficient growth even with relatively small investments. On the other hand, in capital-intensive industries, the owner’s money is often tied up in production facilities, and if you want more growth, profits must be reinvested in new equipment. Or as farmers sigh when referring to their impressive tractors and combine harvesters: ”there are the profits of my life’s work.”
A dividend is also a signal. Admicom has already cut its dividend from previous years’ levels. Management proposes a dividend to the board, which in turn proposes it to the Annual General Meeting (AGM). To me, a cut dividend signals a desire to keep cash on hand for investments (M&A, etc.), but on the other hand, it suggests that internationalization presents challenges (e.g., product localization) that either cannot be solved efficiently simply by throwing money at developers or that management won’t pour in more cash until there is sufficient certainty of success.
The most destructive thing for shareholders is unprofitable growth, and growth is always about finding the right risk/reward ratio.
It’s rarely worth letting cash sit idle, especially in a Finnish listed company’s account, though Admicom has made excellent acquisitions, so this isn’t a comment directed at the company but a general remark referring to, for example, the “hot potato” of capital allocation at Fortum in years past.
You can always get money from the bank or shareholders if the stars align.
Addition: among growth companies, for example, Revenio and NoHo have paid out significant dividends at the same time, because growth requires less capital or, in NoHo’s case, customers finance the growth.
Good response. And what you wrote is largely the part I agreed with you on, as I expressed in my indignant reply. What bothered me most was the tone of the message. And as a matter of principle, I don’t like black-and-white thinking, either.
Thank you for the answer. To me, however, your answer suggests that internationalization with Ultima requires a significant effort, and your approach is essentially to hope to find a country-specific customer to undertake that effort with. In my experience, this is a difficult task compared to investigating the interfaces and required changes yourselves using one of the easiest countries, so that you can start the marketing yourselves. But this is just my own view.
On the other hand, accounting can be very different in different countries, so just building integration interfaces and connecting to another application could be a good approach.
Although growth in the software industry doesn’t necessarily require large investments in structures, researching country-specific contacts, personnel, marketing, competitive landscapes, etc., does take time and money. It inevitably requires a country-specific local organization, and the price tag resulting from these, combined with software changes, often puts the brakes on.
Thank you everyone for the comments! Criticism, counter-arguments, or disagreement doesn’t bother me as such. It’s actually good that well-founded views are brought here. There are many communication styles, and I value some more than others.
Things have gotten a bit mixed up in the discussion, so let me clarify our thinking a little further:
- On internationalization
- We have previously said that we aim to carry out the first international acquisition by the end of this year. This, of course, requires a suitable target in a suitable market and a reasonable valuation. We will not force the deal just for the sake of it. This market opening allows us to understand market dynamics more deeply with the help of a local team, enabling us to plan the localization of Ultima so that we achieve product-market fit right from the start.
- The above scenario hasn’t changed at all since the turn of the year. A new opportunity arose to open the international playing field through this one large upcoming customer. In this case, the export products would initially be products other than Ultima. In all of these, the gross margin is also in good shape.
- On investments
It’s important to understand that a company like ours can generally make investments in two ways: a) by acquiring another company or business unit, where the acquisition is made from the balance sheet (no direct impact on the income statement). The dividend issue mainly relates to this method of investment, because by paying out too many dividends, funding might no longer be sufficient. However, the dividends distributed by Admicom are moderate enough that no acquisition has been left undone because of their payment. It’s also worth noting that, for example, Smartcraft does not pay dividends, but instead buys back its own shares, which has the same effect from a financial efficiency perspective.
b) the other growth investment is an investment in organic growth, such as opening sales operations in another market and localizing products. This method immediately impacts the company’s key metrics, i.e., it first weakens relative profitability while growth comes with a delay. With stock market capitalism interpreting every quarterly report with a magnifying glass, this approach is somewhat challenging if the market doesn’t understand the dip in profitability. Since there was a reference to the Swedish stock exchange, it should be noted that a large portion of Admicom’s owners are Swedish. Sweden also has a company called Fortnox, which hasn’t managed to go international despite its highly profitable product. Largely for the same reasons that have slowed down Ultima’s internationalization.
Well, actually, to be a bit pedantic, there is a difference here: dividends automatically leave the company, whereas share buybacks stay with the company unless they are cancelled. These shares can be used for acquisitions and/or management incentives if needed.
We are not talking about a “trickle” here; we are talking about a good third of this year’s forecasted EPS (€1.86 EPS, €0.65 dividend) that is being distributed.
If the company is preparing for international acquisitions, shouldn’t this money also be kept in the pocket instead of distributing cash to shareholders?
I am calling for ambition from Admicom and other companies as well; hardly anyone invests in Admicom for the dividends anyway.
It’s also worth remembering that with Admicom’s strong cash flow profile, the company could seek a fairly large amount of leverage from the bank. With a rough net debt/EBITDA ratio of around 3x, they could easily take on some 35–40 MEUR of leverage in the coming years. Given Admicom’s profile, I also estimate that the cost of debt would not be particularly high, even in the current interest rate environment. Relative to this, the dividend I’ve forecasted for this year (just over 3 MEUR) wouldn’t significantly change the big picture if they decided to stash it in the account to wait for acquisitions..
So the company can distribute dividends because it can always go to the bank in the current situation to get a loan to replace the dividends it distributed? I don’t think I quite follow this logic; it sounds very strange to me. I also don’t understand how this maximizes shareholder value when the taxman takes his cut anyway, and one would think a growth company would have smaller and more profitable investments to sink that cash flow into than what an investor on the Helsinki exchange might have.
Could it be related to the fact that the cost of debt is lower than the cost of equity, meaning it’s not worth sitting on that money in one’s own account, but rather financing potential acquisitions with significantly cheaper capital when the need arises?