A return to the growth path of temporary layoffs is a prerequisite for profitability.
Well, I guess what theyâre really trying to say is that things are going poorly because Finnish companies arenât yet investing enough in AI, but letâs hope and believe that the investments will eventually come and weâll be ready when they do. Temporary layoffs will likely allow them to keep the experts on board. Permanent layoffs would drive expertise away, and there has been a lot of investment in employeesâ AI skills recently, so they donât want to let that investment go to waste.
Yeah, a CEO change would probably be appropriate by now. Theyâve reacted too slowly to profitability issues. The stock has fallen about 55% in a year to near ATL levels, even though revenue is only down about 15%. There are good chances for a profitability leap, even though demand has contracted.
00:00 Start
00:12 Q1 highlights
01:33 Revenue development by region
02:54 Reacting with change negotiations
04:24 Cost structure and efficiency measures
06:54 Recipe for improving sales
07:34 Meeting guidance
09:24 What would make the CEO increase his ownership?
I havenât seen or heard from this CEO before, but based on his body language in the Inderes interview, he gave off a rather subdued and defeated impression of himself.
E: Itâs exhausting to see these CEOs who, year after year, complain about the market or AI but donât adapt their operations accordingly to improve profitability.
That question about what would get a CEO to invest in the company they lead is excellent.
With the share price having dropped, the CEO of Siili, for example, after years in the position, currently has a holding of less than 50,000 euros in the company (at least in direct shareholdings).
Since the CEOâs total compensation is likely around 300,000 euros per year, the holding is only a sixth of the annual total compensation and a third of the net annual income.
In my opinion, that shareholding should be significantly larger. It should be consistently large enough that a 20% daily drop is actually felt in the wallet. If such a drop only represents the loss of one monthâs salary, the stake is not sufficient for a CEO.
The CEO, the management team, and the board should all move to the buying side.
I listened to the interview, so I didnât pay attention to body language. But the way those sales were commented on hit my ears like tinnitus It also sounded like theyâve been offering AI to existing customers, but the customers havenât bought into it. Maybe one day theyâll learn to sell results to the customer, whether those are, for example, the customerâs growing revenue or decreasing costs.
Here is a company report from Joni following Siiliâs Q1
We reiterate our Accumulate recommendation for the stock and lower the target price to EUR 3.4 (prev. EUR 4.8), reflecting significantly lowered forecasts. Siiliâs Q1 was clearly weaker than expected, as revenue fell sharply and profitability was in the red. The market situation has remained challenging and Siiliâs AI strategy is not yet producing the required results. Thus, there is a clear need for cost efficiency in the company, and we expect the company to issue a profit warning for the current year. Despite several challenges, if one expects the company to have sustainable business in the future, the valuation of the stock is attractive (2027e EV/EBITA and P/E 9x and 7x applying a 3% EBIT margin).
Quoted from the report:
To put it slightly bluntly, in terms of the story and the numbers, the stock is currently at a point where you either expect the company to return to cautiously sustainable business (positive view) or you expect the company to be a chronic loser in the sector also in the long term (sell). We also consider it possible that ownership or structural arrangements will be made in the company to unlock the undervaluation.
@Karhu_Hylje@TitoK I was also wondering why the CEO isnât ready to put skin in the game for the company he leads, especially when the company is trading at about 0.57x book value. In my estimation, once the market situation normalizes, the company should be able to achieve at least a 5% return on equity (ROE).
Siili really faces the risk (similar to Vincit, for example) that they wonât be able to adapt to the AI disruption, because the core of these firms is IT consulting and software development, which is exactly the âvalley of death.â Everyone talks loudly about their AI investments, but the truth may be quite different from the rhetoric. In this situation, you must have, for instance, excellent industry expertise or clear IP value. Traditional consulting is in its death throes as AI replaces it. Witted is then the exception in the terrible IT consulting landscape, because it specializes in freelancer operations, unlike the others who operate based on salaried staff..
Here are Joniâs comments regarding the change of CEO at Siili.
Siili Solutions announced on Monday that the companyâs CEO, Tomi PienimĂ€ki, is stepping down and the Board of Directors has appointed Markku Savusalo, previously the Director of the Digital Engineering business unit, as acting CEO. In our view, the change of CEO did not come as a surprise as such, as Siiliâs operational performance has been weak for some time and the strategy has not yet yielded the desired results. The appointment does not cause any changes to our forecasts.
What I mainly remember about the CEO is a limp handshake. I donât know if he was just having a bad day, but the value add for Siili was clearly insufficient.
Someone here compared Siili and Vincit with each other, and it might not be a coincidence that they also share some history regarding past CEOs.
It also sounded like theyâve been offering AI to existing customers, but the customers havenât bought into it. Maybe one day theyâll learn to sell results to the customer, whether those are, for example, the customerâs growing revenue or decreasing costs.