As a result of the decisions made at the General Meeting, Kangaskorpi from Keskisuomalainen and the Laakkonen family will be calling the shots at Ilkka in the future. I believe the latter are involved purely as investors, but Keskisuomalainen’s goals remain a mystery to me. What is certain is that in the future, shareholder power will be exercised by a Board of Directors elected by the General Meeting, and the foolish supervisory board and voting caps will become history—perhaps in a year’s time.
I hope that, at the very least, burning money on “digital kiosk” acquisitions is put on ice, or that we at least wait for proof that the strategy can create shareholder value. Underperformance has been significant so far. Keskisuomalainen might have an interest in the aforementioned business, but hardly while it is loss-making.
Then, of course, there is the Alma ownership. Although Ilkka’s stake is as high as 10%, power in Alma is exercised sovereignly by Otava. Ilkka does not even seem to have a representative on the board at the moment. Based on this, I would assess that the Alma holding is not strategic and could be sold or otherwise divested (e.g., distributed as dividends).
Since Keskisuomalainen and Rebl have been active drivers of change together, I hope they also have a clear shared vision for the next steps. And hopefully, it will also be favorable for the minority shareholder.
Looking at the list based on the current number of shares, the Top 10 (approx. 40% of shares) consist almost entirely of entities that might be more interested in unwinding the Alma ownership on an immediate “cash-in-hand” basis rather than having it trickled down as dividends through Ilkka (with the risk of acquisitions).
-Keskisuomalainen, Rebl, ML-Stable (Laakkonen), Ilmarinen, Mandatum, Elo, Talcom (Tallberg), TS
-Among them, Lehtimiesseura 2% and Lako 2% (Centre Party influencer) are perhaps of a different mold
-The next ten own 1.0%…0.6%, individual owners, many with Ostrobothnian names
This does favor Alma dividends in one form or another, but the fragmented ownership structure and ‘patriotism’ complicate the situation. As well as, of course, the two-tier governance structure, voting caps, etc.
It is also good to remember that the Alma matter does not have to be all or nothing; some kind of partial solution could be a possibility.
Anyway, yesterday’s decision to abolish the high-voting share class—even though it meant a dilution of just over 5%—makes ending the unnecessary hoarding clearly more realistic and closer. But what the aforementioned means in terms of the actual timeline, who knows.
This clownery by incompetent owners and the management representing them really needs to stop. The damages so far are already significant. Alma should be distributed as a dividend, useless marketing kiosks sold for a euro if anyone wants them, the supervisory board scrapped, the board replaced, and all assets returned to owners either through dividends or buybacks. Finally, Kaleva Media should be merged into Ilkka’s listing, so everyone can own as many media houses as they want. As the new listed company replacing Ilkka, Kaleva Media could take on a lot of debt and distribute it to shareholders as dividends.
The profit warning can hardly be considered a surprise, given Ilkka’s chronic underperformance in the sector.
What is interesting, however, is whether this will lead to any corrective action from the major shareholders now that normalizing Ilkka’s governance structure is possible. I would say that it needs to be done at least before the acceleration of international growth according to the new strategy (=burning shareholders’ money) begins.
Roni interviewed Ilkka’s CEO Olli Pirhonen after the Q1 release regarding the results as well as the merger of share classes.
Topics:
00:00 Introduction
00:11 Negative profit warning
01:59 Investments in internationalization
03:17 Profinder in Sweden
03:55 Data and technology services
05:15 Impact of AI
06:07 Customer churn
07:05 Professional services
07:51 Demand outlook
09:38 Seeking cost savings
11:09 Merger of share classes
Who would have believed that the first victim of the Iranian war on the Helsinki Stock Exchange would be the technology company Ilkka Okay, Liana does have an office in Dubai, but explaining the slump in the group’s revenue with the war is once again just burying one’s head in the sand.
Perhaps there simply isn’t any growth to be expected for these technologies that Ilkka bought with big money (such as email marketing). As AI agents conquer every industry and company, maybe some customers are realizing they don’t actually need Ilkka’s technology services for anything.
Soft and tired. I don’t know the digital kiosks Ilkka has scooped up very well, but the numbers tell the essentials. The business is not growing organically and, worst of all, there is no positive bottom line, even after six years of practice. I don’t know, of course, what kind of instructions Pirhonen has received from the board, but the end result cannot be what was desired. The CEO, the strategy, or preferably both should be replaced ASAP.
Now that the “masters of Ostrobothnia” have been greased with gift shares and we’ve reached a one-euro-one-vote situation, the main owners should pull themselves together immediately to get the shop in order. Otherwise, this whole share series show was organized for nothing. Whatever goals Rebl and Keskisuomalainen had and have regarding Ilkka, now is the time to roll up their sleeves. With the current strategy, Ilkka’s net debt-free status will be history in a couple of years.
Couldn’t Ilkka’s ownership in Alma now be pushed to Otava, since they have received permission to return to the buy side and still seem interested? Add a nice little premium to the stake and head over to Uudenmaankatu with an outstretched hand. The ownership of Kaleva Media could go to local newspaper foundations or Keskisuomalainen. Sell the acquired digital businesses to Alma, Keskisuomalainen, or another interested party and take the minor write-downs. Then, essentially, all that’s left is the management team and a few group accountants, who can be handed nice bonuses before turning off the lights. It sounds like vulture investing, but there would be broader benefits to these arrangements. The business operations would find stronger muscles under a larger player, ensuring continuity for the staff amidst the revolution brought by AI. Keskisuomalainen would be a stronger owner for local papers alongside Kaleva Oy. Local newspaper associations and foundations would grow wealthier through the arrangement, which they could then use for their own purposes. Other shareholders would also prosper, which is positive, both in Ostrobothnia and more broadly in Finland.
Otava cannot buy all of Ilkka’s Alma shares, otherwise a mandatory takeover bid would be triggered once the ownership stake exceeds 50%. Otava’s finances could likely not withstand redeeming the entire company from the stock exchange.
But otherwise, I personally warmly support the sale of Alma Media shares owned by Ilkka to Otava, even at a price of 15 euros per share, and the distribution of the resulting proceeds to shareholders. At the same time, they could distribute the remaining excess cash reserves before they buy any more “digital kiosks.”
The rest of Ilkka should undergo a proper efficiency and profitability program. Of course, if a sufficiently willing and wealthy buyer is found, then just sell it off piece by piece.
I agree with the previous commenters. People from Ostrobothnia are supposed to be honest and direct, but in that interview, there was a lot of explaining and talk, yet very little on how the situation will be corrected and, above all, what specific measures will be taken to improve things. I hope the operational side starts to show some backbone. Now would be high time to sell at least the majority, or preferably all, of the Alma shares and distribute them as dividends to shareholders. And simultaneously, actions to bring the core business up to a satisfactory level, please.
Roni has published a company report on Ilkka following Q1
Ilkka’s Q1 performance fell short of our expectations set prior to the profit warning. The year started slowly, and we see risks in the revenue guidance, which indicates growth. We have made downward revisions to our forecasts, leading us to slightly lower the value of continuing operations in our sum-of-the-parts calculation. Consequently, we are cutting our target price to EUR 4.0 and reiterating our Reduce recommendation.
Let’s put the sum of the parts on display: it’s €5.8, of which
Alma Media is €4.4.
Inderes’ target is €4.0.
The value creation capability of the Ilkka setup (tsydeemi) seems questionable, and the shareholder cannot secure their share of the ‘assets’.
Until they can?
Or will the setup and inflation consume them?
There’s something for the shareholder to think about…
Good reminder, Opa! My own investment decision back in the spring (before the news of the share class merger) at a price under 4 euros was based on the fact that if nothing happens, this pays a good dividend (as it just did, 0.25). The so-called core business, which seems poor/vulnerable and poorly managed, should not be making a loss. But sooner or later, one would think the main owners would start steering this company like a listed company, whereby those Alma shares would, one way or another, be distributed to owners as dividends or by other means. Alma’s dividends are already a significant source of income. The company’s management and board really need to get some discipline into the management of operational activities. Fewer excuses, more corrective actions.
Sum of parts is likely the best way to approach Ilkka’s value as an investment. The most interesting part of the calculation is the actual business operations, which Inderes has estimated at a value of ~€32M. The business’s revenue is just under €40M on an annual level. There is no growth and no profit left under the line, so the value could be even lower. Additionally, the underlying technology smells a bit like yesterday’s news, and AI disruption is also a threat. But let’s accept Inderes’s €1.2/share for now.
If Ilkka’s Alma ownership were distributed entirely as a dividend, it would net approximately €3.20/share (excluding Ilkka’s income tax effect). After this, the share price according to the sum-of-parts calculation would be about €1.50, and in reality, perhaps €1.00. At Ilkka’s current share price of €4, there would be a loss of €3.00 to be deducted from other capital gains. So, in this operation, the euro balance per share would be -4 + 3.20 + 1.00 + 0.90 = 1.10. This is how it looks in a standard brokerage account (AOT).
Not a bad investment, I would say. But, but… the scenario is very uncertain. Two or three years of implementing the new “impact built in” strategy could wipe a euro per share off the equation. Furthermore, it is unclear what goals Ilkka’s major shareholders have.
Okay, Liana does have an office in Dubai, but explaining the slump in the group’s revenue with the war is once again just burying one’s head in the sand.