From a private equity investment company to a conglomerate: Nordic KH Group completed a unique transition to IFRS reporting

KH Group Oyj, formerly Sievi Capital, was one of the first Finnish listed companies to undergo a historic transformation in its IFRS reporting - from an investment company to a conglomerate. This transition began in the summer of 2023. Due to the lack of existing documentation and guidelines for an IFRS conversion project of this kind, the project team was highly motivated to develop innovative solutions within the framework of IFRS reporting requirements.

At the outset, the company had five portfolio companies, of which only one reported under IFRS. Due to the transition to a conglomerate structure, it was essential to bring the remaining four companies in line with the same reporting standard. While the portfolio companies recognised the benefits of unified reporting and consolidation, they were also concerned about the significant - and partly unclear - additional workload the change would entail. It was clear from the beginning that the implementation would be both challenging and demanding. 

A project team of experienced finance professionals

NIS was tasked with forming a project team for this demanding assignment and chose to collaborate with Backo, an organisation specialised in IFRS services. A consulting team with broad expertise and experience in financial management - from listed companies as well as the external audit sector - was selected for the project. The four-person team consisted of Ville Nikulainen and Anssi Airaksinen from NIS, along with Ville Jakonen and Sakari Valjakka from Backo. Together, they operated as a unified team towards the client.

The project also involved key stakeholders, including the former Sievi Capital finance and group management, as well as the CFOs of the portfolio companies. From the outset, representatives from all five portfolio companies were part of the project team, which helped ensure a holistic approach and improved communication between the companies.

“The timeline for the transition to a conglomerate structure was defined based on the reporting date of the next quarterly results following the Annual General Meeting. For the project to succeed, it was crucial to stay on schedule and within budget. In addition, maintaining a high level of quality was a fundamental requirement for a listed company”, says Ville Nikulainen regarding the project conditions.

As this was the first time the conglomerate implemented IFRS reporting, close collaboration with the audit firm was critical to the project’s success. Thanks to this cooperation, different parts of the IFRS conversion were completed in time for the consolidated reporting material to be approved by the auditors well ahead of the publication of the interim report.

A well-planned schedule ensured a successful reporting transformation

Although the reporting change initially seemed like a very extensive undertaking, the additional workload it created proved to be manageable in practice.

“We prioritised the most critical objectives of the project and, for example, chose not to force all reporting changes into the strict project timeline. Some changes were deliberately postponed to the year-end closing phase”, says Anssi Airaksinen.

Ville Jakonen and Sakari Valjakka from Backo agree on the importance of prioritisation in such a comprehensive transformation. They also highlight other factors that contributed to the project’s success:

“In a unique project like this, experts with an entrepreneurial mindset in financial management, problem-solving, and effective collaboration play a crucial role. In addition, careful planning, hard work, and the ability to ask for help at the right time are essential.”

Following the completion of the project, a Group Financial Controller was appointed at the parent company, who now utilises the guidelines developed by the project team in their day-to-day work.

KH Group Oyj 

KH Group is a conglomerate consisting of four business areas that are leading players in their respective industries, spanning B2B products, B2B services, and consumer retail. The strategic shift implemented in 2023 aims to focus on the operations of KH-Koneet, a supplier of construction equipment. KH Group’s shares are listed on the Helsinki Stock Exchange.

www.khgroup.com