Sitowise - The Smart City Company

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Sitowise Considers Initial Public Offering and Listing on Nasdaq Helsinki.

Sitowise, an expert and digital company in the built environment, is planning to list on the Nasdaq Helsinki stock exchange. Sitowise employs over 1,900 experts from various fields whose task is to design more sustainable and smarter living environments.

The company, which has grown rapidly and profitably in recent years, currently operates in Finland, Sweden, Estonia, and Latvia. The aim of the planned IPO is to support the implementation of the company’s growth strategy.

The planned IPO is expected to consist of a share issue by the Company of approximately EUR 75 million (gross proceeds) and a share sale in which certain Sitowise shareholders will sell their shares.

The proceeds from the share issue are intended to be used to repay Sitowise’s current debts and to support its growth strategy, including financing acquisitions.

The Group’s net sales in 2020 were approximately EUR 160 million and the Company employs over 1,900 experts. Sitowise has strong employee ownership; in addition to its largest owner Intera Fund III Ky, the Company has over 200 employee-owners.

The Company offers consulting services for projects of various sizes and is involved in over 10,000 projects annually.

Sitowise has grown strongly both organically and through acquisitions. The Company’s net sales grew by an average of 12.9 percent per year between 2018 and 2020. At the same time, Sitowise has been able to maintain high profitability: its adjusted EBITA margin was 10–13 percent between 2018 and 2020, and during the same period, the operating profit margin was 7–11 percent.

Sitowise’s revenue and adjusted EBITA margin development, along with low capital expenditures, have led to a strong operating cash flow, reflected by a strong cash conversion ratio of over 80 percent between 2018 and 2020. A strong cash conversion ratio, in turn, creates good conditions for continued strong growth, acquisitions, and/or dividend distribution.

Sitowise’s Board of Directors has set the following financial targets for Sitowise in connection with the planned listing:
• Growth: Annual revenue growth of over 10 percent, including acquisitions;
• Profitability: Adjusted EBITA margin of at least 12 percent;
• Indebtedness: Net debt to adjusted EBITDA ratio of no more than 2.5x, except temporarily in connection with acquisitions
• Dividend policy: Sitowise aims to distribute 30–50 percent of its net profit as dividends.

Sitowise’s net sales for the financial year ended December 31, 2020, were approximately EUR 160 million, and adjusted EBITA was approximately EUR 20.6 million, corresponding to an adjusted EBITA margin of approximately 12.9 percent.
“Sitowise Press Release”

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Introductory Webcast already TODAY at 11:15 AM

Sitowise will organize a Finnish-language webcast event today, March 3, 2021, at 11:15 AM, concerning its planned listing. The company and its plans will be presented by Sitowise’s Chairman of the Board Eero Heliövaara, CEO Pekka Eloholma, and CFO Heidi Karlsson. After the presentation, it will be possible to ask questions to the company’s representatives.
The event can be followed as a webcast broadcast at: SITOWISE SUUNNITTELEE LISTAUTUMISTA NASDAQ HELSINGIN PÖRSSILISTALLE

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Funds managed and advised by Capital World Investors, Didner & Gerge Fonder, Evli-Rahastoyhtiö Oy,
Keskinäinen Eläkevakuutusyhtiö Ilmarinen, Lannebo Fonder AB and Paradigm Capital Value Fund
(together “Anchor Investors”) have collectively, subject to certain conditions, committed to subscribe
shares for approximately 76 million euros in the planned IPO, assuming that the total
valuation of the company’s share capital after the share issue is a maximum of 288 million euros.

At least not at a quick glance does it seem particularly cheap (cf. Kreate).
Of course, there is also growth in this case…
I need to examine it more closely.

Edit. I didn’t mean to compare it to Kreate’s case, other than that it was screamingly cheap.
Below is a comparison to those competitors:

AFPöyry 2021: EV/sales 1.2 / EV/EBIT 13.8 / PE 19.6
Sweco 2021: EV/sales 2.3 / EV/EBIT 22.9 / PE 27.7
Sitowise 2020: EV/sales 1.8 / EV/EBIT 18.8 / PE 22.5

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Direct comparables are AF Poyry and Sweco.

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As well as, for example, Ramboll, FCG Finnish Consulting Group and WSP Finland.

The IPO price probably doesn’t matter, it will be oversubscribed many times over anyway. Just recently, that Swedish rag trade was oversubscribed 22 times.

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No, in principle I’m not interested in paying down the company’s debts. However, I need to take a closer look at the operations and numbers when I have more time.

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Skip it at that valuation level. If the valuation had been 160M, meaning a proper IPO discount, I would have participated. But it seems that the anchor investors alone are enough, so there’s a premium in the pricing right off the bat.

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Here are a few purchases from this year;

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Now there’s a company page: Sitowise Group - osake - Inderes
and today’s press conference: https://www.inderes.fi/fi/videot/sitowise-tiedotustilaisuus-332021-klo-1115

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I’ve been through a few M&A deals… 50 acquisitions in 10 years, meaning something has been bought almost every other month.

Regarding the EBITA margin, it was said that the company would be one of the most profitable in the industry by that measure… at least according to the presenter.

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Debt reduction, IPO, capital-light (defensive?) design and consulting firm. You’d think that’s a good basis for continued growth.

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I guess Sweco is the only competitor on the stock exchange? Looks like a tough league..

Sweco’s course has gone quite okay for the last 10 years :smiley:

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This is a good example of how there are surprisingly many stock exchange-ready companies in Finland that one has never heard of. Sitowise is at least a new acquaintance for me..

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The strategy, which combines responsible construction and the opportunities of digitalization, seems reasonably good. There are some doubts about the Wise portion’s support for renovation, etc. The numbers look good. It’s difficult to assess that valuation. Given that there are 6 big players behind it, surely the value has been set correctly?

It will be interesting to see what the IPO price is.

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:grinning:
Someone asked when Sitowise would be listed…
The CEO said that first, a decision to go public needs to be made… now they are only planning
Well, actually, the formality is missing

Apparently, the offering is 100 MEUR+, of which 75 MEUR would be raised for the company

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At the end of the press conference, the chairman estimated that €8.20 might be in the right range.

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Thanks! I didn’t have time to watch it to the end.

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You’re welcome. I, on the other hand, missed the first 45 minutes, almost all of it :flushed: Well, luckily they’ll be releasing a recording of the event soon.

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I know a couple of companies that SitoWise (or Sito/Wise) acquired a few years ago, and my understanding is that they paid for the acquisition partly with their own shares, which could be sold once the company went public. The condition was to work for the company until then. At least one of these individuals retired and, as I understand it, was left empty-handed from that agreement. They didn’t wait for a possible IPO.

This is partly second-hand information and, of course, doesn’t affect the company’s future. But how many similar departing individuals are still working at the company who will leave after the IPO? The CEO didn’t answer my question in the presentation about how the owners of previous companies will be committed to the company in the future. He just said that personnel will be committed and hopefully a lot of shares will be subscribed from the employee offering, or something similar.

I’ve gotten the impression that the company has grown too aggressively in recent years, and this has already led to a shortage of skilled professionals. Apparently, for this reason, the IPO has also “had to” be postponed.

Perhaps the IPO market is so hot now that it’s worth doing it now, even if growth targets haven’t been met.

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Sweetlakes is a small software workshop with a few coders, seemingly focused mostly on mobile apps. Their website says it all (they’re looking for a new React developer to join their existing 7 coders). Somehow, I get the impression that they’re trying to showcase their digital expertise, even though they’re still in the very early stages. I didn’t watch the intro. For me, these consulting firms are too people-dependent for growth; scalability is weak.

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