Quarterly Report • Apr 28, 2014
Quarterly Report
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Value development of net asset value 2009-2014 (SEKm)
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Investment AB Kinnevik (publ) Skeppsbron 18 P.O. Box 2094 SE-103 13 Stockholm, Sweden
Reg no 556047-9742 Phone +46 8 562 000 00 Fax +46 8 20 37 74 www.kinnevik.se
This interim Management Statement is prepared in accordance with Nasdaq OMX's "Guidelines for preparing interim management statements" from 1 January 2014. The figures in this statement refer to the first quarter 2014 unless otherwise stated. Figures shown within brackets refer to the comparable periods in 2013.
The positive trend displayed in 2013 continued during the first quarter of 2014. We have seen a sharp increase in the use of smartphones in all markets in which we operate. This provides a strong platform for growth for many of Kinnevik's companies, not only established holdings such as Millicom and Tele2, but also our younger, fast-growing holdings.
E-commerce also displayed remarkably strong growth, even in mature markets where e-commerce is already a natural part of many people's lives. A recent report from the UK industry association IMRG revealed that the growth rate in the first quarter of 2014 was the highest rate reported since 2011.
Kinnevik's major e-commerce holding Zalando is still a young company with the potential to deliver much more. However, Zalando has gone from strength to strength, achieving record-fast customer and sales growth. A long-term approach to ownership will be needed to guide such a company along the way as it navigates through a relatively new and fast-changing industry. However, we know where the road is headed and our high expectations for the e-commerce sector in general – and Zalando in particular – continue to be met.
We made a few investments during the first quarter, including an investment in the Indian company Quikr – India's largest platform for online classifieds, with more than 30 million visitors per month. This is a prime example of Kinnevik's strategy of investing in growth industries in rapidly developing regions. India's total e-commerce market is expected to grow from SEK 13 billion to nearly SEK 120 billion within the next four years.
We also increased our ownership stake in the Russian company Avito, which continues to display strong growth while at the same time delivering favourable operating profit. Both Avito and Quikr are also good examples of Kinnevik's focus on technology-driven consumer companies founded and operated by entrepreneurs.
In February, MTG clearly demonstrated its ability to manage and develop a major event such as the TV broadcast of the Winter Olympic Games. The coverage of the Sochi Games, which marked a major success for Sweden, received praise from many experts and viewers.
This is my final interim report as CEO and President of Kinnevik, a company that I love and that has achieved a strong trend for its shareholders for many years. Lorenzo Grabau will now take over and I am confident that he is the best person to advance the company. This is a natural step and Kinnevik has ensured its own promising future in recent years through its systematic aim of being an investment company on the front line when it comes to its core areas of communication, e-commerce & marketplaces, financial services, and entertainment.
Mia Brunell Livfors CEO and President
Kinnevik is currently invested in four consumer-centric sectors: Communications, E-commerce & Marketplaces, Entertainment, and Financial Services. While we concentrate on these sectors, we also look at businesses in other areas that fit our investment criteria. Approximately two-thirds of our investments by value are in the Communications and Entertainment sectors and these tend to be larger, more established businesses reflecting their later stage of development. Approximately one-third of our investments by value are in the E-commerce & Marketplaces and Financial Services sectors, and these tend to be younger, challenger businesses that are investing heavily to build market-leading positions in a short timeframe.
Kinnevik's holdings as of 31 March 2014 (figures within brackets refer to 31 March 2013)
| SEK m | Proportional part of | Change compared to Q1 2013 | |||
|---|---|---|---|---|---|
| Jan-March 2014 | Revenue | EBIT | Revenue | EBIT | |
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| Total sum of Kinnevik's proportional part | 9 743 | 612 | 9% | -16% |
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| Book value 2014 |
Fair value 2014 |
Fair value 2013 |
Fair value 2013 |
Total return | |
|---|---|---|---|---|---|
| SEK m | 31 Mar | 31 Mar | 31 Mar | 31 Dec | 2014 |
| .JMMJDPN | |||||
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| Total Communication | 35 782 | 35 782 | 35 039 | 34 079 | |
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| Total E-commerce & Marketplaces | 20 819 | 20 916 | 15 034 | 20 909 | |
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| Total Entertainment | 5 150 | 5 150 | 4 658 | 5 675 | |
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| Total Financial Services & Other | 2 509 | 2 667 | 5 804 | 2 610 | |
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| Total Equity/Net asset value | 65 929 | 66 183 | 57 088 | 65 527 | |
| Net asset value per share | 238.66 | 205.94 | 236.29 | ||
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The Board of Directors in Millicom, Tele2 and MTG have proposed to the Annual General Meetings in May that dividends be approved according to the table to the right.
(Publ) Reg no 556047-9742 Phone +46 8 562 000 00 Fax +46 8 20 37 74 www.kinnevik.seDIVIDEND AND CAPITAL STRUCTURE The guidance for investments in 2014 is SEK 2-3bln compared to the SEK 2.4bln invested in 2013. The Kinnevik balance sheet is strong and the net cash position at the end of March 2014 was SEK 2.0bln. Kinnevik's focus on growth assets which are still not cash flow positive means that in any individual year, the company needs to strike a balance between the level of investment and the growth in dividend paid to shareholders. Going forward, the growth in dividend should therefore not be expected to be at the same rate as in previous years.
| listed holdings | SEKm | |
|---|---|---|
| .JMMJDPN | 64% QFS TIBSF | |
| 5FMF | 4&, QFS TIBSF | |
| .5( | 4&, QFS TIBSF | |
| Total expected dividends to be received from listed holdings |
1 383 | |
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| Investment (SEK m) | Capital/ Votes, % |
Estimated fair value |
Change in fair value Q1 2014 |
|---|---|---|---|
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| Total | 35 782 | 1 703 | |
| Return Communication | 1 year | 5 years | |
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| Key data (USD m) | Q1 2014 | Q1 2013 | Full year 2013 |
|---|---|---|---|
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Millicom continued to deliver growth across all regions and business units during the first quarter. Organic revenue growth amounted to 8.5% in local currency, compared to the first quarter of 2013. The EBITDA margin for the first quarter was 34%, demonstrating Millicom's financial discipline while investing in growth opportunities.
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| Key data (SEK m) | Q1 2014 | Q1 2013 | Full year 2013 |
|---|---|---|---|
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Tele2 displayed good progress during the first quarter with operational improvements in several markets. Marketing efforts in the Netherlands and Sweden contributed to lower EBITDA contribution. The growth profile within mobile services was maintained in the quarter, with a 3% mobile end-user revenue growth. The EBITDA-margin for the first quarter amounted to 19%.
$Q1 \cdot 2014$
| Return E-commerce & Marketplaces | 1 year | 5 years |
|---|---|---|
| Average annual return (IRR) | 23% | 29% |
Equity interest as per 31 March 2014
E-Commerce & Marketplaces makes up 32% of Kinnevik's holdings. The Kinnevik online investments are mainly focused around e-commerce and marketplaces. E-commerce is one of the strongest global growth trends in the world economy, and it is based on a permanent shift in consumer behaviour.
Fair value as per 31 March 2014
For more information >
| Investment (SEK m) | Direct | Indirect via Rocket Internet |
Total $3$ ) | Accu- mulated invested amount |
Direct | Indirect via Rocket Internet |
Change in fair value and dividends Total received in Q1 |
|
|---|---|---|---|---|---|---|---|---|
| Zalando | 36% | ÷, | 36% | 7916 | 12 14 3 | $\overline{\phantom{a}}$ | 12 14 3 | $\overline{7}$ |
| Avito | 32% | 32% | 434 | 2 1 8 6 | 2 186 | $-109$ | ||
| Quikr | 16% | 16% | 254 | 254 | 254 | |||
| Bigfoot I with portfolio companies |
27% | 8% | 35% | 1567 | 1567 | 168 | 1735 | $-25$ |
| Dafiti | 27% | 430 | ||||||
| Lamoda | 29% | 724 | ||||||
| Jabong | 26% | 273 | ||||||
| Namshi | 14% | 42 | ||||||
| Bigfoot II | 30% | 10% | 39% | 930 | 411 | 411 | $-23$ | |
| Zalora | 29% | |||||||
| The Iconic | 29% | |||||||
| Zando | 15% | |||||||
| Jumia | 15% | |||||||
| BigCommerce with portfolio companies |
14% | 12% | 26% | 606 | 566 | 7 | 573 | 24 |
| Lazada | 17% | |||||||
| Linio | 19% | |||||||
| Namshi | 10% | |||||||
| Home24 | 22% | 11% | 33% | 791 | 694 | 8 | 702 | 15 |
| Mobly | 28% | |||||||
| Westwing | 14% | 7% | 21% | 175 | 219 | 81 | 300 | 22 |
| Wimdu | 29% | 12% | 41% | 364 | 358 | 29 | 387 | $-1$ |
| Rocket Internet with other portfolio companies 1) |
mixed | mixed | mixed | $-1503$ | 404 | 911 | 1 3 1 5 | $-18$ |
| Konga | 46% | 46% | 114 | 156 | 156 | |||
| Other unlisted companies | mixed | mixed | mixed | 426 | 170 | $\overline{\phantom{a}}$ | 170 | $-54$ |
| Total unlisted investments | 12 074 | 19 128 | 1 204 | 20 332 | $-162$ | |||
| CDON Group | 25,1% | $\overline{\phantom{a}}$ | 25,1% | $646^{2}$ | 584 | 584 | $-202$ | |
| Total investments within E- commerce & Marketplaces |
12720 | 19712 | 1 204 | 20916 | $-364$ |
1) Invested amount includes net invested amount in Rocket Internet GmbH after dividends received.
Fair value includes cash balance in Rocket Internet GmbH.
2) The value of dividends received from MTG when shares distributed, and share purchases and new issues made thereafter.
3) The shareholdings in Rocket Internet with portfolio companies have not been adjusted for employee stock option plans.
| Investment (SEK m) | Q1 2014 |
|---|---|
| "WJUP | |
| 2VJLS | |
| 0UIFS | |
| Total | 382 |
In the first quarter, Kinnevik acquired warrants in Avito from the company's founders, whereby Kinnevik's ownership in Avito increased by 0.9 percentage points on a fully diluted basis. The warrants were transacted between existing owners of the company at an equity value of SEK 11.7bln (USD 1.8bln) and corresponded to 1.7% of the company on a fully diluted basis.
In March, Kinnevik invested SEK 254m (USD 39.3m) in the context of a total raise of USD 90.0m in Quikr Mauritius Holding Pvt Ltd ("Quikr"), which operates the Indian classified platform Quikr.com. Quikr's principal current investors include Matrix Partners, Nokia Growth Partners, Norwest Venture Partners, Omidyar Network, Warburg Pincus and eBay Inc. Quikr is a leading horizontal classifieds platform in India with more than 30 million unique visitors and 100 million visits per month. Individuals and businesses access Quikr to sell, buy, rent or find products and services in a variety of categories such as electronics, cars, bikes, real estate, services, jobs, education and entertainment.
At the end of the first quarter, investments in E-commerce & Marketplaces were valued at a total of SEK 20,916m, to be compared with an accumulated invested amount (net after dividends received) of SEK 12,720m. The assessed change in fair value recognized in the consolidated income statement in the first quarter amounted to a loss of SEK 325m (loss of SEK 364m including change of assessed value of subsidiaries when calculating net asset value), as specified in the table on the previous page. The sales multiples for the companies' listed peers decreased during the quarter, following an increase during 2013, why also the sales multiples applied in Kinnevik's valuation of its unlisted companies as per 31 March 2014 have been lowered compared to previous quarter.
| Company | 31 March 2014* |
31 Decem ber 2013* |
Adjusted multiple** |
|---|---|---|---|
| ;BMBOEP | :FT | ||
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Zalando: A continued strong sales growth compensated for the impact from a lower sales multiple, resulting in an unchanged equity value of EUR 3.9bln as assessed fair value in Kinnevik's accounts as per 31 March 2014.
Avito: In spite of a continued strong sales growth, the decrease in market sales multiples applied in Kinnevik's valuation resulted in a negative change in fair value of SEK 109m in the first quarter. The valuation resulted in a company equity value of SEK 6.9bln at the end of March compared to SEK 7.2bln as at 31 December. When determining the assessed fair value of Avito, Kinnevik has considered the transaction made in Avito shares in beginning of February 2014, but considered that the size of the trade (1.7% of the total capital in the company) has been too small to be applied on Kinnevik's shareholding in Avito. If the transaction price had been applied as fair value in Kinnevik's financial statements, the book value of Kinnevik's shareholding would have been SEK 1.4bln higher as per 31 March 2014.
A number of Kinnevik's E-commerce & Marketplaces portfolio companies have issued new shares to external investors at price levels that exceed Kinnevik's recognized assessed fair values. Since the newly issued shares have higher preference over the portfolio companies' assets in the event of liquidation or sale than Kinnevik's shares have, Kinnevik do not consider these price levels as a relevant base for assessing the fair values in the accounts. The latest transactions that have been made with higher preference than Kinnevik's shareholdings, have been made at levels that, applied to Kinnevik's shareholdings, is approximately SEK 6bln higher than Kinnevik's book value as per 31 March 2014.
For further information about valuation principles and assumptions, please see Note 3.
$Q1 \cdot 2014$
$\mathbf{a}$
Kinnevik's proportional part of the unlisted companies' revenue grew by 43% year-on-year and reached SEK 2,108m $(1,476)$ for the first quarter. Revenue growth is strongest in the second and fourth quarter which is explained by seasonal variations within the shoes- and fashion industry. Due to the strong growth, short operating history and the fact that all start-up costs are taken to the P&L, most of the unlisted companies within Kinnevik's online portfolio are still unprofitable. However, the larger companies in the portfolio are well capitalised and can afford continued investments until they reach break-even. Kinnevik's proportional part of the companies' cash position amounted to SEK 4,472m at 31 March 2013.
| SEK m | 01 | Q2 | Q3 | 04 | FY2012 | Q1 | Q2 | Q3 | Q4 | FY2013 | u 2014 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenue | 767 | 967 | 1079 | 529 | 4 3 4 2 | 1476 | 766 | 1702 | 2 3 0 4 | 7 2 4 7 | 2 1 0 8 |
| Y on Y growth | 104% | 90% | 63% | 54% | 73% | 43% | |||||
| EBIT | $-224$ | $-318$ | $-345$ | $-258$ | $-1146$ | $-327$ | $-285$ | $-309$ | $-136$ | $-1057$ | $-266$ |
| EBIT margin | $-31%$ | $-34%$ | $-33%$ | $-17%$ | $-27%$ | $-22%$ | $-16%$ | $-18%$ | $-6%$ | $-15%$ | $-13%$ |
| Y on Y EBIT margin improvement | 9 pp | 18 pp | $15$ pp | 11 pp | $12$ pp | 9 pp | |||||
| Fair value as per 31 March 2014 | 20 332 | ||||||||||
| Net proportional part of cash balance 31 March 2014 | 4 4 7 2 | ||||||||||
The table above is a compilation of the unlisted E-commerce & Marketplace holdings' reported revenues, operating result and cash balance multiplied by Kinnevik's ownership share at the end of the reporting period, thereby showing Kinnevik's proportional share of the companies' revenues, operating result and cash balance.
Revenues and operating results reported by the companies have been translated at constant exchange rates (average rate for the first quarter of 2014) from each company's reporting currency into Swedish kronor. For companies that have not yet finalized the results for March 2014, the figures are based on Kinnevik's forecasted numbers. The proportional share of revenues and operating result has no connection with Kinnevik's accounting and is only additional information.
$Q1 \cdot 2014$
Zalando operates online fashion shops in 15 European markets. The company is today the largest standalone pure online fashion player by net sales in Europe. Key drivers for Zalando's success include its expertise in fashion, retail and technology.
For more information >
Avito is the largest online classified platform in Russia in terms of visitors and number of ads, distancing itself from its competitors.
For more information >
Rocket Internet is a company that incubates and develops e-commerce and other consumer-oriented online companies. Kinnevik works closely with the management of Rocket Internet in order to foster companies and develop them into leading Internet players.
For more information >
Lamoda, Dafiti, Jabong, Namshi, The Iconic, Zalora, and Zando are shoe and fashion e-commerce companies active on emerging markets in Latin America, Africa, and South East Asia. The shoes and fashion segment in e-commerce is attractive for several reasons: it is a relatively large part of a household budget, it is a sector with high gross margins and the products offered are easy to package and ship - enabling efficient logistics with attractive delivery terms and returns. It is important to improve customers' freedom of selection, and make the purchasing process simple and smooth in order to satisfy customers, which is why Kinnevik's holdings in this sector all offer leading ranges of products and logistics solutions on their respective markets
| Revenue* (EUR m) | 2013 | 2012 | Growth |
|---|---|---|---|
| Lamoda | 120.3 | 37.3 | 223% |
| Dafiti | 136.8 | 72.3 | 89% |
| Jabong | 50.4 | 14.4 | 250% |
| Namshi | 10.7 | 3.1 | 244% |
| Zalora | 30.0 | 8.2 | 265% |
| The Iconic | 36.3 | 20.1 | 81% |
| Zando | 3.8 | 1.8 | 106% |
With continued strong growth in 2013, the shoes and fashion companies are also focusing on improving unit economics as well as operational excellence.
* Revenues for 2012 and 2013 are translated to EUR from local currency at constant exchange rates (average rate for Q1 2014). 2013 figures are preliminary and unaudited.
Kinnevik's holdings in general e-commerce, Lazada, Linio, Jumia, and Konga, all hold market leading positions in several emerging markets in South East Asia, Latin America, and Africa. Just as in shoes and fashion e-commerce, to be successful in general e-commerce it is important to increase customers' freedom of selection, and make the purchasing process smooth and simple. Lazada, Linio, Jumia and Konga all offer leading delivery solutions and range of goods in their respective markets.
| Revenue* (EUR m) | 2013 | 2012 | Growth |
|---|---|---|---|
| Lazada | 53.5 | 7.7 | 593% |
| Linio | 36.8 | 4.6 | 700% |
| Jumia | 21.0 | 1.9 | 986% |
| Konga | 4.7 | 0.2 |
Home24 and Westwing are e-commerce companies in the home décor segment active in Europe, CIS, and Latin America. The growth of online purchasing in this segment is a global megatrend. Home décor differs from other ecommerce segments by having a relatively lower purchase frequency, but also a higher average order value. Due to the characteristics of the products, attractive delivery solutions for customers are essential for simplifying purchases, and improving customer satisfaction. Home24 and Westwing are complementing business models, Home24 offers a wide assortment of furniture and home décor, while Westwing's inventory is carefully curated, focusing on desian-conscious customers.
| Revenue* (EUR m) | 2013 | 2012 | Growth |
|---|---|---|---|
| Home24 | 89.9 | 52.4 | 72% |
| Westwing | 106.8 | 44.6 | 140% |
Quikr, Saltside, Wimdu, Foodpanda, Pricepanda, and Yell are all companies operating online marketplaces in emerging markets in Asia. Africa. CIS, and Latin America. The business model is attractive due to the high profitability that can be achieved once a market leading position has been established. A leading position creates high barriers of entry for competitors, while also improving customer experience. Economies of scale are substantial, as the model does not require the companies to hold inventory and tie up capital when arowing.
For more information >
CDON Group is a leading e-commerce company with some of the most well-known and appreciated brands in the Nordic area
| Key data (SEK m) | Q1 2014 | 01 2013 | Full year 2013 |
|---|---|---|---|
| Revenue | 1133 | 1 032 | 4 4 4 1 |
| Operating profit. EBIT | Ω | $-4$ | -48 |
| Net profit | -4 | $-17$ | -67 |
Excluding divested operations and non-recurring items.
CDON Group saw a promising start to 2014, delivering a growth of 10% compared to the first quarter of 2013, a positive operating profit in the seasonally weak first quarter and an improvement in cash flow of almost SEK 159m compared to the first quarter of 2013.
* Revenues for 2012 and 2013 are translated to EUR from local currency at constant exchange rates (average rate for Q1 2014), 2013 figures are preliminary and unaudited
$Q1 \cdot 2014$
| Investment (SEK m) | Capital/ Votes % |
Estimated fair value |
Change in fair value 01 2014 |
|---|---|---|---|
| Modern Times Group MTG | 20.3/48.0 | 4 0 7 8 | $-420$ |
| Metro | 100/100 | 987 | N/A |
| Other | 85 | ||
| Total | 5 1 5 0 | $-413$ | |
| Return Entertainment | 1 year | 5 years | |
| Average annual return (IRR) | 15% | 13% |
Entertainment makes up 8% of Kinnevik's holdings. Kinnevik's media companies have operations in a total of 40 markets and a has the largest broadcasting footprint in Europe in MTG, and 18.3 million daily readers in Metro. Both MTG and Metro are leading international media companies founded by Kinnevik.
For more information >
Modern Times Group MTG is a leading international entertainment broadcasting group with the largest geographical fooprint of TV- and radio operations in Europe.
For more information >
| Key data (SEK m) | 01 2014 | 01 2013 | Full year 2013 |
|---|---|---|---|
| Revenue | 3597 | 3 209 | 14 073 |
| Operating profit, EBIT | 301 | 454 | 1738 |
| Net profit | 159 | 334 | 1 168 |
Net sales grew by 13% at constant exchange rates during the first quarter of 2014 compared to the first quarter of 2013. Operating income was lower than the first quarter of 2013 following investments in the Olympics coverage, new channel launches, and MTGx.
Metro is published in over 150 major cities in 23 countries across Europe, Asia, North and South America. Metro's global readership is approximately 18.3 million daily readers.
For more information >
| Full year | |||
|---|---|---|---|
| Kev data (SEK m) | 01 2014 01 2013 | 2013 | |
| Revenue | 256 | 302 | 1 2 9 9 |
| Operating profit/loss, EBIT | -94 | -18 | 10 |
| Net profit/loss | -90 | $-18$ | -18 |
Revenue decreased SEK 46m year-on-year, mainly as a result of lower advertising income in Sweden and Hong Kong as well as the disposal of the newspaper in Russia. The operating loss increased as a result of weaker advertising markets in Europe and SEK 58m in losses on sale of the newspapers in Hong Kong and Canada.
| Investment (SEK m) | Capital/ Votes, % |
Estimated fair value |
Change in fair value Q1 2014 |
|---|---|---|---|
| #BZQPSU | |||
| .JMWJL#JNB | |||
| 4FBNMFTT | |||
| 0UIFS 'JOBODJBM TFSWJDFT | - | ||
| Total Financial Services | 1 192 | -63 | |
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| Total Financial Services & Other | 2 667 | -99 |
| Return Financial Services & Other | 1 year | 5 years |
|---|---|---|
| "WFSBHF BOOVBM SFUVSO *33 |
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Kinnevik invested SEK 87m into Financial Services in the first quarter of 2014, of which SEK 64m in Milvik/Bima and SEK 23m in Bayport. At the end of the quarter, investments in financial services companies were valued at a total of SEK 1,192m.
When determining fair value of the unlisted companies Bayport and Milvik/Bima as per 31 March, transactions where the companies have raised equity from new as well as existing owners have been used as basis. For Milvik/Bima the assessed fair value has been based on an equity valuation of the entire company of USD 40m. In the first quarter 2014 Bayport closed a new equity issue at a post-money valuation of USD 431m for the entire company, which has served as the basis for Kinnevik's valuation.
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| Note | 2014 Jan-Mar |
2013 Jan-Mar |
2013 Jan-Dec |
|
|---|---|---|---|---|
| Change in fair value of financial assets | 3 | 866 | -1 580 | 3 052 |
| Dividends received | 0 | - | 5 828 | |
| Revenue | 334 | 370 | 1 541 | |
| Cost of goods sold and services | -193 | -222 | -753 | |
| Selling- and administration costs | -266 | -205 | -1 106 | |
| Share of profit/loss of associates accounted for using the equity method |
2 | 3 | 15 | |
| Other operating income | 7 | 58 | 96 | |
| Other operating expenses | -59 | -7 | -105 | |
| Operating profit/loss | 691 | -1 583 | 8 568 | |
| Financial net | -4 | -28 | -114 | |
| Profit/loss after financial net | 687 | -1 611 | 8 454 | |
| Tax | -4 | -10 | -25 | |
| Net profit/loss for the period | 683 | -1 621 | 8 429 | |
| Of which attributable to: | ||||
| Equity holders of the Parent company | 694 | -1 616 | 8 468 | |
| Non-controlling interest | -11 | 5 | -39 | |
| Net profit/loss per share before dilution | 2,50 | -5.83 | 30.54 | |
| Net profit/loss per share after dilution | 2,50 | -5.83 | 30.51 | |
| Average number of shares before dilution | 277 318 298 | 277 183 276 | 277 264 289 | |
| Average number of shares after dilution | 277 568 302 | 277 520 045 | 277 578 260 |
The change in fair value of financial assets amounted to SEK 866m (loss of 1,580) for the first quarter of which SEK 977m (loss of 1.291) was related to listed holdings and a loss of SEK 111m (loss of 289) was related to unlisted holdings, see note 3 for further details.
Other operating expenses includes a negative result of SEK 58m from divestments of Metros's operations in Hong Kong and Canada.
| CONDENSED SEGMENT REPORTING (SEK M) |
2014 Jan-Mar |
2013 Jan-Mar |
||||
|---|---|---|---|---|---|---|
| Operating subsidiaries |
Investment operation |
Total | Operating subsidia ries |
Investment operation |
Total | |
| Change in fair value of financial assets | 866 | 866 | -1 580 | -1 580 | ||
| Revenue | 334 | 334 | 369 | 1 | 370 | |
| Cost of goods sold | -193 | -193 | -222 | -222 | ||
| Selling- and administration costs | -214 | -52 | -266 | -168 | -37 | -205 |
| Share of profit/loss of associates accounted for using the equity method |
2 | 2 | 3 | 3 | ||
| Other operating income and expenses | -52 | -52 | 49 | 2 | 51 | |
| Operating profit/loss | -123 | 814 | 691 | 31 | -1 614 | -1 583 |
Operating subsidiaries includes Metro, Vireo Energy, Rolnyvik, Saltside Technologies, Duego Technologies, AVI, and G3 Good Governance Group.
The lower operating result within operating subsidiaries compared to previous year is mainly explained by the above mentioned negative result of SEK 58m from divestments of operations within Metro, a positive one-off effect of SEK 44m in other operating income in the first quarter of 2013, as well as increased costs for expansion within newly established businesses.
| Note | 2014 31 Mar |
2013 31 Mar |
2013 31 Dec |
|
|---|---|---|---|---|
| ASSETS | ||||
| Fixed assets | ||||
| Intangible fixed assets | 740 | 914 | 805 | |
| Tangible fixed assets | 320 | 274 | 343 | |
| Financial assets accounted at fair value through profit and loss | 3 | 62 835 | 58 773 | 61 575 |
| Other fixed assets | 144 | 97 | 113 | |
| Total fixed assets | 64 039 | 60 058 | 62 836 | |
| Other current assets | 595 | 618 | 599 | |
| Short-term investments | 4 | 2 675 | 13 | 3 502 |
| Cash and cash equivalents | 4 | 521 | 414 | 465 |
| TOTAL ASSETS | 67 830 | 61 103 | 67 402 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES | ||||
| Shareholders' equity attributable to equityholders of the Parent Company |
65 929 | 56 893 | 65 276 | |
| Shareholders' equity attributable to non controlling interest | 35 | 90 | 43 | |
| Interest-bearing liabilities, long-term | 4 | 1 253 | 1 215 | 1 231 |
| Interest-bearing liabilities, short-term | 4 | 4 | 2 004 | 20 |
| Non interest-bearing liabilities | 609 | 901 | 832 | |
| TOTAL EQUITY AND LIABILITIES | 67 830 | 61 103 | 67 402 | |
| KEY RATIOS | ||||
| Debt/equity ratio | 0.02 | 0.06 | 0.02 | |
| Equity ratio | 97% | 93% | 97% | |
| Net cash/(net debt), including debt unpaid investments | 1 841 | -2 763 | 2 435 |
| Note | 2014 Jan-Mar |
2013 Jan-Mar |
2013 Jan-Dec |
|
|---|---|---|---|---|
| Cash flow from operations | -97 | 33 | -121 | |
| Investments in shares and other securities, including subsidiaries | -658 | -54 | -2 088 | |
| Sale of shares and other securities, including subsidiaries | -5 | 63 | 3 894 | |
| Dividends received | - | - | 5 828 | |
| Other | -5 | -10 | -107 | |
| Cash flow from investing activities | -668 | -1 | 7 527 | |
| Change in interest bearing liabilities | 4 | -44 | -2 011 | |
| Dividend paid to equityholders of the Parent Company | - | - | -1 803 | |
| Other | -10 | -15 | -79 | |
| Cash flow from financing activities | -6 | -59 | -3 893 | |
| CASH FLOW FOR THE PERIOD | -771 | -27 | 3 513 | |
| Cash and short term investments, opening balance | 3 967 | 454 | 454 | |
| Cash and short term investments, closing balance | 3 196 | 427 | 3 967 | |
| SUPPLEMENTARY CASH FLOW INFORMATION | ||||
| Investments in financial assets accounted to fair value | 3 | -469 | -362 | -2 288 |
| Current period investments, paid after period end | 25 | 308 | 200 | |
| Prior period investments, paid in current period | -214 | - | - | |
| Investments in shares and other securities | -658 | -54 | -2 088 |
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the EU. This statement has been prepared in accordance with NasdaqOMX's "Guidelines for preparing interim management statements" from 1 January 2014. Kinnevik will in the future prepare reports in accordance with the Annual Accounts Act and IAS 34, Interim Financial Reporting for the interim period January-June and for the full year.
From 2014 Kinnevik applies the three new standards; IFRS 10 Consolidated Financial Standards, IFRS 11 Joint Arrangements and IFRS 12 Disclosures of Interests in Other Entities, as well as amended IAS 27 and IAS 28. Kinnevik has made the assessment that it does not have de facto control over any company where it owns less than 50% of the shares or controls less than 50% of the votes. Therefore the new standards have no effect on Kinnevik except for additional supplementary disclosures.
From the first quarter 2014 Kinnevik has changed the format for the income statement. The changed format is assessed to give a more relevant view on Kinneviks' financial development. Comparative figures have been recalculated.
The Kinnevik Group's accounting is distributed on two accounting segments - which is consistent with management's internal structure for controlling and monitoring the Group's operations - from 2014:
tOperating subsidiaries – all the Group's operating subsidiaries.
tInvestment operation – shares and securities in all other companies, that are not subsidiaries, and other financial assets. This includes change in fair value of financial assets, dividends received and the administration costs of the Parent company.
Other accounting principles and calculation methods applied in this report are the same as those described in the 2013 Annual Report.
The Group's financing and management of financial risks is centralized within Kinnevik's finance function and is conducted on the basis of a finance policy established by the Board of Directors. The Group's operational risks are primarily evaluated and managed within the particular business area and then reported to the Kinnevik Board.
The Group has established a model for risk management, the aims of which are to identify, control and reduce risks. The identified risks and how they are managed are reported to the Kinnevik Board on a quarterly basis.
Kinnevik is exposed to financial risks mainly in respect of changes in the value of the stock portfolio, changes in market interest rates, exchange rate risks, liquidity and refinancing risks and counterparty risks.
The Group is also exposed to political risks since the companies Kinnevik has invested in have a substantial part of their operations in emerging markets such as Latin America, Sub-Saharan Africa, Russia and Eastern Europe.
For a more detailed description of the Company's risks and risk management, refer to the Board of Directors' report and Note 26 of the 2013 Annual Report.
Kinnevik's unlisted holdings are valued using IFRS 13 and the International Private Equity and Venture Capital Valuation Guidelines, whereby a collective assessment is made to establish the valuation method that is most suitable for each individual holding. Firstly, it is considered whether any recent transactions have been made at arm's length in the companies. For new share issues, consideration is taken to if the newly issued shares have better preference to the company's assets than earlier issued shares if the company is being liquidated or sold. For companies where no or few recent arm's length transactions have been performed, a valuation is conducted by applying relevant multiples to the company's historical and forecast key figures, such as sales, profit, equity, or a valuation based on future cash flows. When performing a valuation based on multiples, consideration is given to potential adjustments due to, for example, difference in size, historic growth and geographic market between the current company and the group of comparable companies.
Work to measure Kinnevik's unlisted holdings at fair value is performed by the financial department and based on financial information reported from each holding. The correctness of the financial information received is ensured through continuous contacts with management of each holding, monthly reviews of the accounts, as well as internal audits performed by auditors engaged by Kinnevik. Prior to decisions being made about the valuation method to be applied for each holding, and the most suitable peers with which to compare the holding, the financial department obtains information and views from the investment team, as well as external sources of information. Information and opinions on applicable methods and groups of comparable companies are also obtained periodically from well-renowned, valuation companies in the market. The results from the valuation is discussed firstly with the CEO and the Chairman of the Audit Committee, following which a draft is sent to all members of the Audit Committee, who analyze and discuss the outcome before it is approved at a meeting attended by the company's external auditors.
Below is a summary of the valuation methods applied in the accounts as per 31 March 2014:
| Company | Valuation method | Valuation assumptions |
|---|---|---|
| Zalando | Valuation based on sales multiples for a group of comparable companies. The peer group includes, among others, Amazon, Asos, CDON and Yoox. |
Last 12 months historical sales has been multiplied with a sales |
| The average sales multiple for the peer group has been reduced due to Zalando's lower profitability. |
multiple of 1.9. The entire com pany has been valued at EUR 3.9bln. |
|
| Value in transactions in the company's shares during the second half of 2013 (sale of secondary shares as well as directed new share issue) have also been consi dered when establishing fair value in the accounts. |
||
| Avito | Valuation based on sales multiples for a group of comparable companies. The peer group includes, among others, Rightmove, 58.com and Trade Me Group. |
Last 12 months historical sales has been multiplied with a sales multiple of 12.0. The entire com pany has been valued at SEK 6.9bln. |
| Quikr | Latest transaction value. | USD 240m for the entire com pany. |
| Bigfoot I, Bigfoot II, BigCommerce, Home24, Wimdu och Westwing |
Valuation based on sales multiples for a group of comparable companies. The peer group includes, among others: |
Applied sales multiples for last 12 months historical sales: - Bigfoot I: 1.3-1.9 |
| - for Bigfoot I, Bigfoot II and BigCommerce: Amazon, Asos, CDON and Yoox; - for Home24: Amazon, CDON, Williams-Sonoma and Bed, Bath & Beyond; - for Wimdu: HomeAway, Priceline, Expedia and Tripadvisor; and - for Westwing: Groupon, Vipshop and Zulily. |
- Bigfoot II: 1.4-1.6 - BigCommerce: 1.2-1.3 - Home24: 1.1 - Wimdu: 2.8 - Westwing: 1.3 |
|
| The average sales multiple for the peer group has been reduced to reflect factors such as lack of profitability and early e-commerce market. |
||
| For the holding companies Bigfoot I, Bigfoot II and BigCommerce, the underlying operating businesses (e.g. Dafiti and Lamoda) have been valued separately. |
||
| The valuations also consider what preference the owned shares have in case of liquidation or sale of the entire company. |
||
| Rocket Internet | Portfolio companies valued as per above, cash balance and other assets as per Rocket financial statements. |
N/A |
| Bayport | Latest transaction value. | USD 431m for the entire com pany. |
| Milvik/Bima | Latest transaction value. | USD 40m for the entire company. |
| Other portfolio com | Fair value corresponds to cost. | N/A |
panies
For the companies in the table above that are valued based on sales multiples (i.e. Zalando and Avito as well as direct and indirect ownership in Bigfoot I, Bigfoot II, Home24, BigCommerce, Westwing and Wimdu), an increase in the multiple by 10% would have increased estimated fair value by SEK 1,608m. Similarly, a decrease in the multiple by 10% would have decreased estimated fair value by SEK 1,637m.
'When establishing the fair value of other financial instruments, methods that in every individual case are assumed to provide the best estimation of fair value have been used. For assets and liabilities maturing within one year, a nominal value adjusted for interest payments and premiums is assumed to provide a good approximation to fair value.
Information is provided in this note per class of financial instruments that are valued at fair value in the balance sheet, distributed in the levels stated below:
Level 1: Fair value established based on listed prices in an active market for the same instrument.
Level 2: Fair value established based on valuation techniques with observable market data, either directly (as a price) or indirectly (derived from a price) and not included in Level 1.
Level 3: Fair value established using valuation techniques, with significant input from data that is not observable in the market.
| 2014 1 Jan– 31 Mar |
2013 1 Jan– 31 Mar |
2013 Full year |
|
|---|---|---|---|
| Millicom | 700 | -1 608 | 2 932 |
| Tele2 | 1 003 | -501 | -6 003 |
| Communication | 1 703 | -2 109 | -3 071 |
| Zalando | 7 | -203 | 2 626 |
| Avito | -109 | 127 | 1 273 |
| Bigfoot I with portfolio companies 1) | 1 | -48 | 56 |
| Bigfoot II 1) | -24 | -152 | -442 |
| BigCommerce with portfolio companies 1) | 24 | -9 | -60 |
| Home 24 1) | 15 | -24 | -75 |
| Westwing 1) | 2 | -5 | 44 |
| Wimdu 1) | - | -11 | 10 |
| Rocket Internet with other portfolio companies | -24 | -2 | 147 |
| CDON Group | -202 | -48 | -7 |
| Konga | - | 22 | 22 |
| Other | -15 | 3 | - |
| E-commerce & Marketplaces | -325 | -350 | 3 594 |
| MTG | -420 | 455 | 1 456 |
| Other | 7 | -15 | -14 |
| Entertainment | -413 | 440 | 1 442 |
| Bayport | 1 | 25 | 251 |
| Milvik/Bima | 4 | - | -3 |
| Seamless | -68 | 25 | 127 |
| Transcom | 4 | 127 | 276 |
| BillerudKorsnäs | - | 88 | 552 |
| Black Earth Farming | -39 | 171 | -119 |
| Other | -1 | 3 | 3 |
| Financial Services & Other | -99 | 439 | 1 087 |
| Total | 866 | -1 580 | 3 052 |
| - of which traded in an active market, level 1 |
977 | -1 291 | -786 |
| - of which fair value established using valuation techniques, level 3 |
-111 | -289 | 3 838 |
1) Direct shareholding only.
| 31 March 2014 listed companies |
|||||
|---|---|---|---|---|---|
| Class A shares |
Class B shares |
2014 31 Mar |
2013 31 Mar |
2013 31 Dec |
|
| Millicom | 37 835 438 | - | 24 915 | 19 674 | 24 215 |
| Tele2 | 18 430 192 | 117 065 945 | 10 867 | 15 365 | 9 864 |
| Communication | 35 782 | 35 039 | 34 079 | ||
| Zalando | 12 143 | 6 076 | 12 136 | ||
| Avito | 2 186 | 1 050 | 2 196 | ||
| Quikr | 254 | - | - | ||
| Bigfoot I with portfolio companies 1) | 1 567 | 1 431 | 1 535 | ||
| Bigfoot II 1) | 411 | 726 | 435 | ||
| BigCommerce with portfolio com panies 1) |
566 | 415 | 544 | ||
| Home 24 1) | 694 | 730 | 679 | ||
| Westwing 1) | 219 | 152 | 217 | ||
| Wimdu 1) | 358 | 334 | 358 | ||
| Rocket Internet with other portfolio companies |
1 608 | 3 308 | 1 632 | ||
| CDON Group | 24 959 410 | - | 584 | 616 | 786 |
| Konga | 156 | 63 | 156 | ||
| Other | 81 | 81 | 97 | ||
| E-commerce & Marketplaces | 20 827 | 14 982 | 20 771 | ||
| MTG | 4 461 691 | 9 042 165 | 4 078 | 3 497 | 4 498 |
| Other | 96 | 148 | 164 | ||
| Entertainment | 4 174 | 3 645 | 4 662 | ||
| Bayport | 860 | 611 | 836 | ||
| Milvik/Bima | 114 | 49 | 46 | ||
| Seamless | 3 898 371 | - | 124 | 90 | 192 |
| Transcom | 247 164 416 | 163 806 834 | 510 | 358 | 505 |
| BillerudKorsnäs | - | - | - | 3 250 | - |
| Black Earth Farming | 51 811 828 | - | 298 | 627 | 337 |
| Other | 146 | 122 | 147 | ||
| Financial Services & Other | 2 052 | 5 107 | 2 063 | ||
| Total | 62 835 | 58 773 | 61 575 | ||
| - of which traded in an active market, level 1 |
41 375 | 43 477 | 40 397 | ||
| - of which fair value established using valuation techniques, level 3 |
21 460 | 15 296 | 21 178 |
1) Direct shareholding only.
| 2014 1 Jan– 31 Mar |
2013 1 Jan– 31 Mar |
2013 Full year |
|
|---|---|---|---|
| Zalando | - | - | 855 |
| Avito | 98 | - | - |
| Quikr | 254 | - | - |
| Bigfoot I with portfolio companies | 32 | - | - |
| Bigfoot II | - | 170 | 169 |
| BigCommerce with portfolio companies | -2 | 138 | 317 |
| Westwing | - | 24 | 38 |
| Rocket Internet with other portfolio companies | - | - | 576 |
| CDON Group | - | - | 129 |
| Konga | - | 20 | 114 |
| Other | - | 1 | 20 |
| E-commerce & Marketplaces | 382 | 353 | 2 218 |
| Other | - | - | 10 |
| Entertainment | - | - | 10 |
| Bayport | 23 | - | 35 |
| Milvik/Bima | 64 | 3 | 3 |
| Other | - | 6 | 22 |
| Financial Services & Other | 87 | 9 | 60 |
| Total investments | 469 | 362 | 2 288 |
| - of which traded in an active market, level 1 |
- | - | 129 |
| - of which fair value established using valuation techniques, level 3 |
469 | 362 | 2 159 |
| 2014 1 Jan– 31 Mar |
2013 1 Jan– 31 Mar |
2013 Full year |
|
|---|---|---|---|
| Opening balance | 21 178 | 15 185 | 15 185 |
| Investments | 469 | 362 | 2 159 |
| Reclassifications | - | 49 | 49 |
| Change in fair value | -111 | -289 | 3 838 |
| Disposals | -78 | -7 | -68 |
| Exchange gain/loss and other | 2 | -4 | 15 |
| Closing balance | 21 460 | 15 296 | 21 178 |
Kinnevik's total interest bearing assets amounted to SEK 3,219m as at 31 March 2014. The short term deposits of SEK 2,675m were made mostly in Swedish money market funds with high credit quality with no restrictions on accessibility. The total amount of outstanding interest-bearing liabilities was SEK 1,257m and consequently Kinnevik was in a net cash position of SEK 1,962m as at 31 March 2014 (SEK 2,727m at 31 December 2013).
Kinnevik's total credit facilities (including issued bonds) amounted to SEK 7,171m as at 31 March 2014 whereof SEK 5,800m related to a revolving credit facility and SEK 1,200m related to a bond. The utilization of the credit facilities was SEK 1,240m as at 31 March 2014.
The Group's available liquidity, including short-term deposits and available credit facilities, totaled SEK 9,128m at 31 March 2014 (SEK 9,897m at 31 December 2013).
| 2014 31 Mar |
2013 31 Mar |
2013 31 Dec |
|
|---|---|---|---|
| Interest-bearing long-term assets | |||
| Other interest bearing assets | 23 | 8 | 11 |
| 23 | 8 | 11 | |
| Interest-bearing short-term assets | |||
| Short-term investments | 2 675 | 13 | 3 502 |
| Cash and cash equivalents | 521 | 414 | 465 |
| 3 196 | 427 | 3 967 | |
| Total interest-bearing assets | 3 219 | 435 | 3 978 |
| Interest-bearing long-term liabilities | |||
| Liabilities to credit institutions | 28 | 0 | 20 |
| Capital markets issues | 1 200 | 1201 | 1 200 |
| Accrued borrowing cost | -21 | -23 | -25 |
| Other interest bearing liabilities | 46 | 37 | 36 |
| 1 253 | 1 215 | 1 231 | |
| Interest-bearing short-term liabilities | |||
| Liabilities to credit institutions | 4 | 1 211 | 20 |
| Capital markets issues | - | 794 | 0 |
| 4 | 2 004 | 20 | |
| Total interest-bearing liabilities | 1 257 | 3 219 | 1 251 |
| Net interest bearing assets/liabilities | 1 962 | -2 784 | 2 727 |
The outstanding loans carry an interest rate of Stibor or similar base rate with an average margin of 1.8% (1.8%). All bank loans have variable interest rates (up to 3 months) while financing from the capital markets vary between 1 to 12 months for the loans under the commercial paper program and 5 years fixed for the outstanding bond (as per date of issue).
As per 31 March 2014, the average remaining tenor was 2.9 years for all credit facilities including the bond (but excluding two unutilized extension options for one year each related to the Group's SEK 5.800m credit facility).
At 31 March 2014 the Group had not provided any security for any of its outstanding loans.
The Annual General Meeting will be held on 12 May 2014 at 10.00 am at Hotell Rival, Mariatorget 3 in Stockholm. Further details on how and when to register are published on Kinnevik's website, www.kinnevik.se.
The Board of Directors has proposed a cash dividend of SEK 7.00 (6.50) per share to be paid to the shareholders.
| Reporting dates for 2014: | |
|---|---|
| 18 July | Interim Report January-June |
| 24 October | Interim Management Statement January- |
| September |
Stockholm, 28 April 2014
Mia Brunell Livfors President and Chief Executive Officer
This Interim Management Statement has not been subject to specific review by the Company's auditors.
Investment AB Kinnevik is a leading, long-term oriented, investment company based in Sweden. Kinnevik primarily invests in consumer centric businesses that provide innovative and value-added technology-enabled services. Our main areas of focus are the Communications, e-Commerce, Entertainment and Financial Services sectors. We own significant stakes in over 50 companies that operate in more than 80 countries across five continents, with a particular emphasis on growth markets. The Kinnevik Group employs more than 90 000 people around the world.
Kinnevik actively supports the companies in which it invests and plays an influential role on their respective Boards. Kinnevik was founded in 1936 by three Swedish families who continue to play a leadership role in the ownership of the Company and in the pursuit of its entrepreneurial ventures. Kinnevik's shares are listed on Nasdaq OMX Stockholm's list for large cap companies under the ticker codes KINV A and KINV B.
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