Quarterly Report • Oct 15, 2020
Quarterly Report
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As the world continues to grapple with the Covid-19 pandemic and its severe effects on a growing number of people and countries, the momentum in our digital businesses remained strong in the third quarter. In addition to a good operational development in many of our companies, global equity markets have also increasingly allocated capital into tech stocks, resulting in significant multiple expansion currently supporting our net asset value development.
Georgi Ganev, CEO of Kinnevik
• We remain focused on re-allocating capital dynamically to ensure our portfolio remains balanced and vibrant. In the quarter, we invested SEK 732m in total, including:
| SEKm | 30 Sep 2020 |
30 Jun 2020 |
31 Dec 2019 |
30 Sep 2019 |
|
|---|---|---|---|---|---|
| Net Asset Value | 107 885 | 89 577 | 73 295 | 92 010 | |
| Net Asset Value per share, SEK | 388.39 | 322.50 | 264.98 | 333.58 | |
| Share Price, SEK | 365.40 | 245.00 | 228.60 | 258.70 | |
| Net Cash/Debt (+/-) | 2 997 | 5 522 | -930 | -825 | |
| SEKm | Q3 2020 |
Q3 2019 |
Q1-Q3 2020 |
Q1-Q3 2019 |
FY 2019 |
| Net Profit/Loss (+/-) | 20 227 | 2 980 | 36 498 | 22 683 | 21 572 |
| Net Profit/Loss per Share (+/-), SEK | 72.84 | 10.75 | 131.63 | 82.13 | 78.02 |
| Change in Fair Value of Financial Assets | 20 283 | 1 949 | 36 260 | 20 886 | 18 972 |
| Dividends Received | - | 1 126 | 516 | 2 015 | 2 907 |
| Dividend Paid | -1 928 | - | -1 928 | -1 169 | -18 819 |
| Investments | 732 | 2 108 | 1 535 | 4 523 | 4 566 |
| Divestments | 250 | 5 908 | 7 179 | 5 967 | 6 186 |
Change in NAV Q/Q
23%
One-Year TSR
85%
Five-Year Annualised TSR
21%
Dear Shareholders, as the world continues to grapple with the Covid-19 pandemic and its severe effects on a growing number of people and countries, the momentum in our digital businesses remained strong in the third quarter. In addition to a good operational development in many of our companies, global equity markets have also increasingly allocated capital into tech stocks, resulting in significant multiple expansion currently supporting our net asset value development. Investment activity remained vibrant, with the announced merger between Livongo and Teladoc as well as two new investments in our focus sectors.
Our net asset value amounted to SEK 107.9bn, or SEK 388 per share, at the end of the third quarter. This is an increase of SEK 20.3bn or 23 percent since the end of the second quarter, adjusted for dividends paid, driven by strong share price performance in Zalando and Livongo as well as broad-based revaluations in our private portfolio fuelled by strong operational performance in our companies and a supportive development in peer group multiples.
In the beginning of October, Zalando raised its full-year 2020 outlook on the back of exceptionally strong and profitable growth in the third quarter. The company expects its platform to grow volumes at higher-than-expected rates with improved full-year profitability. Global Fashion Group also published a trading update showing strong momentum and the company is expected to approach break-even on adjusted EBITDA in 2020. We remain impressed by the strong execution of the management teams of Zalando and Global Fashion Group as they continue to implement their respective strategies and make use of the tailwinds from the accelerated consumer demand for digital offerings.
Our online grocery companies Kolonial.no and MatHem have also seen a significant increase in demand and inflow of new customers due to the accelerated shift to digital consumption. Going This makes us optimistic that the elevated demand will lead to a step change in online penetration that is likely to last.
forward, focusing on customer retention and engagement is key. The companies continue to see strong customer intake, well above levels seen during the same period previous years. Further, MatHem recorded a record number of deliveries in mid-September. We note that recently acquired customers exhibit similar behaviour in terms of retention and purchase frequency as pre-pandemic customers. This makes us optimistic that the elevated demand is a step change in online penetration that is likely to last.
On the other end of the spectra, our travel businesses are in the eye of the Covid-19 storm and the timing of a reversion to some kind of normal remains uncertain. While domestic and leisure travel may improve quicker, we expect a prolonged path to a full recovery. Priorities for both Omio and TravelPerk have been to carefully manage costs to have sufficient runway to weather the crisis, as well as using this time to refocus on developing their technology and improving efficiency.
In the quarter, Livongo and Teladoc announced their intention to merge. We believe that the merger makes strong strategic sense as it combines Teladoc's reach and large customer base with Livongo's robust programs for treating chronic care conditions with high consumer engagement, value-add and retention. Their combined client base has only a 25 percent overlap, and together they will provide healthcare services to more than 70 million people. The merger will generate significant synergies and we are excited to become
the second largest institutional shareholder in the combined new company. The merger is expected to close during the fourth quarter of 2020.
With our recent investment in Common, we have executed on our strategy to broaden our Consumer Services portfolio towards business models that reflect consumer and broader market trends. In this case we have invested in a managed marketplace that improves the user experience and makes it more consistent by standardising the supply-side inventory of a fragmented US home rental market dominated by no-name, sub-scale operators. Real estate owners choose Common as they offer a hassle-free experience, including virtual apartment tours, standardised furniture, and all-inclusive flexible rentals. Renters get to keep the good parts of co-living, while Common takes care of the annoyances and run day-to-day operations without itself assuming lease risk. The service fits perfectly into our notion of providing better choice to the consumer by offering a digital experience for the renter while at the same time providing cost-savings and better returns for real estate owners. We look forward to supporting the Common team on their growth journey, and you can read an interview with the founder and CEO Brad Hargreaves on page 10.
Joint Academy is our first investment in the digital healthcare space in the Nordics and the investment is a result of close cooperation between our Nordic and Healthcare investment teams. Run by a father and son founding team, the father Leif Dahlberg is a professor in orthopaedics and the creator of a treatment for joint pain focused on non-invasive self-management. The son, Jakob Dahlberg, built the treatment program into a di-
Our SEK net cash position at the end of the third quarter
We continue to identify and assess a number of exciting opportunities, both within our existing companies and in new investments. With our strong financial position, we have full flexibility to execute on our investment strategy.
gital solution where patients can manage their osteoarthritis on their own with physiotherapists supporting remotely. With our fundamental belief in the power of digital care to manage chronic conditions and improve patient's lives, we are excited about our investment in Joint Academy. We also believe our experience from similar healthcare models can provide great support to the company. You can read an interview with Jakob Dahlberg on page 13.
Our balance sheet remains strong, also after the extraordinary shareholder dividend of SEK 1.9bn paid in the quarter. We ended the quarter with a net cash position of SEK 3.0bn, corresponding to 2.9 percent of portfolio value. Adjusting for the dividends received from Tele2 in early October, our net cash position amounted to SEK 4.2bn. We continue to identify and assess a number of exciting opportunities, both within our existing companies and in new investments. With our strong financial position, we have full flexibility to execute on our investment strategy.
With no end in sight, and in a world deeply impacted by the pandemic, we are humbled by the hard work and dedication of all our companies as they stretch capabilities to be able to serve their customers with more and better choice. To employees in all our companies I want to extend my warmest gratitude for your tremendous efforts. And to all our shareholders, thank you for your continued support and stay safe!
Georgi Ganev, CEO of Kinnevik
Kinnevik is an industry focused investment company with an entrepreneurial spirit. Our purpose is to make people's lives better by providing more and better choice. In partnership with talented founders and management teams we build challenger businesses that use disruptive technology to address material, everyday consumer needs. As active owners, we believe in delivering both shareholder and social value by building long-term sustainable businesses that contribute positively to society. We invest in Europe, with a focus on the Nordics, the US, and selectively in other markets. Kinnevik was founded in 1936 by the Stenbeck, Klingspor and von Horn families. Kinnevik's shares are listed on Nasdaq Stockholm's list for large cap companies under the ticker codes KINV A and KINV B.
Note: The annualised total shareholder return includes reinvested dividends.
During Q4 2019, Kinnevik distributed its entire SEK 16.5bn shareholding in Millicom to its shareholders.
| Investment (SEKm) | 30 Sep | 30 Jun | 31 Dec | 30 Sep | Total Return |
|---|---|---|---|---|---|
| 2020 | 2020 | 2019 | 2019 | Q1-Q3 2020 | |
| Zalando | 45 334 | 35 641 | 30 814 | 29 222 | 69% |
| Global Fashion Group | 4 465 | 2 340 | 1 945 | 1 772 | 130% |
| MatHem | 1 242 | 1 132 | 889 | 889 | 16% |
| Kolonial.no | 820 | 734 | 686 | 694 | 18% |
| TravelPerk | 451 | 463 | 506 | 531 | -17% |
| Omio | 518 | 466 | 468 | 492 | -11% |
| Qliro Group | - | 43 | 296 | 409 | -23% |
| Other | 637 | 604 | 448 | 452 | 22% |
| Total Consumer Services | 53 467 | 41 423 | 36 052 | 34 461 | 66% |
| Betterment | 1 068 | 1 116 | 1 315 | 1 274 | -19% |
| Other | 1 535 | 1 389 | 1 326 | 1 345 | 8% |
| Total Financial Services | 2 603 | 2 505 | 2 641 | 2 619 | -5% |
| Babylon | 2 470 | 2 515 | 2 808 | 2 950 | -12% |
| Cedar | 608 | 632 | 197 | 206 | 124% |
| Cityblock | 313 | 233 | - | - | 33% |
| Joint Academy | 134 | - | - | - | 2% |
| Livongo | 15 861 | 8 864 | 2 968 | 2 170 | 434% |
| Town Hall Ventures II | 67 | 70 | - | - | -10% |
| VillageMD | 3 434 | 2 363 | 737 | 737 | 244% |
| Total Healthcare Services | 22 887 | 14 677 | 6 710 | 6 063 | 206% |
| Tele2 | 23 724 | 23 208 | 25 440 | 27 504 | -7% |
| Total TMT | 23 724 | 23 208 | 25 440 | 27 504 | -7% |
| Bayport | 795 | 769 | 1 110 | 1 232 | -28% |
| Bima | 574 | 701 | 936 | 1 010 | -40% |
| Millicom | - | - | - | 17 972 | - |
| Quikr | 404 | 463 | 941 | 1 703 | -57% |
| Other | 392 | 335 | 400 | 300 | -3% |
| Total Emerging Markets | 2 165 | 2 268 | 3 387 | 22 217 | -37% |
| Other | - | - | - | 4 | - |
| Total Portfolio Value | 104 846 | 84 081 | 74 230 | 92 868 | 49% |
| Net Cash / (Debt) | 2 997 | 5 522 | -930 | -825 | - |
| Other Net Assets / (Liabilities) | 42 | -26 | -5 | -33 | - |
| Total Net Asset Value | 107 885 | 89 577 | 73 295 | 92 010 | 50% |
| Net Asset Value per Share, SEK | 388.39 | 322.50 | 264.98 | 333.58 | 49% |
| Closing Price, Class B Share, SEK | 365.40 | 245.00 | 228.60 | 258.70 | 63% |
Note: Total return includes investments and divestments. For a split of the unlisted assets, see the next page.
Investment (SEKm) Kinnevik's Ownership Net Invested Amount Fair Value 30 Sep 2020 Q3 2020 Q1-Q3 2020 Budbee 31% 232 400 52 70 Common 9% 184 188 4 4 Karma 20% 68 49 - -19 Kolonial.no 24% 675 820 84 128 MatHem 37% 1 071 1 242 95 171 Omio 6% 557 518 -62 -64 TravelPerk 15% 386 451 -12 -92 Total Consumer Services 3 173 3 668 161 198 Betterment 16% 1 065 1 068 -48 -247 Bread 13% 307 467 90 152 Deposit Solutions 6% 263 258 1 -27 Monese 28% 445 444 2 -31 Pleo 13% 152 366 24 23 Total Financial Services 2 232 2 603 69 -130 Babylon 16% 804 2 470 -45 -338 Cedar 11% 262 608 -24 337 Cityblock 8% 235 313 80 78 Joint Academy 19% 131 134 3 3 Town Hall Ventures II - 74 67 -3 -7 VillageMD 9% 986 3 434 838 2 436 Total Healthcare Services 2 492 7 026 850 2 510 Bayport 21% 467 795 26 -315 Bima 33% 395 574 -142 -379 Quikr 17% 1 036 404 -61 -544 Saltside 61% 205 372 57 40 Other - 86 20 - -50 Total Emerging Markets 2 189 2 165 -120 -1 249
Total Unlisted Financial Assets 10 103 15 462 959 1 329
In assessing the fair value of our unlisted investments, we apply IFRS 13 and the International Private Equity and Venture Capital Valuation Guidelines, whereunder we make a collective assessment to establish the valuation methods and points of reference that are most suitable and relevant in determining the fair value of each of our unlisted investments. Read more in Note 4 on pages 23-25.
Change in fair value and dividends received
| Customer centric last-mile logistics platform speciali sed for e-Commerce businesses |
Number of New Merchants 59 26 |
121 71 |
114 | Marketplace platform that connects consumers with local restaurants and grocery stores that have surplus food |
|---|---|---|---|---|
| Fair Value SEK 400m Kinnevik Stake 31% |
Q3 Q4 201 201 9 9 |
Q1 Q2 202 202 0 0 |
Q3 202 0 |
Fair Value SEK 49m Kinnevik Stake 20% |
that connects consumers with local restaurants and grocery stores that have surplus food
The largest multi-modal travel platform in Europe operating in 15 countries
| Fair Value SEK | 518m |
|---|---|
| Kinnevik Stake | 6% |
Omio has seen business recover to approximately one third of pre-Covid levels, with a stronger recovery amongst EU-based customers and very limited activity from overseas users. The company completed a financing round of convertible debt during the quarter and its key priorities include marketing optimisation and integration with Rome2rio.
The leading solution for businesses to book corporate travel online
| Fair Value SEK | 451m |
|---|---|
| Kinnevik Stake | 15% |
TravelPerk has gained market share in a highly challenging market, however the number of companies that actually transacted during the quarter is around half of pre-Covid levels, primarily oriented towards domestic travel. The company has significantly accelerated product development during the downturn.
Note: The definitions of the KPIs for Zalando and GFG are available on the companies' respective websites. The number of new merchants for Budbee refers to the new live merchants/webshops during the quarter. Number of meals saved for Karma refers to the number of meals bought through Karma's platform during the period.
Sweden's leading independent online grocery retailer, reaching more than half of all Swedish households
Fair Value SEK 1.2bn Kinnevik Stake 37%
The leading online grocery store in Norway, with the ambition to make grocery shopping an effortless activity
Fair Value SEK 820m Kinnevik Stake 24%
Residential brand and tech-enabled managed rental housing marketplace in the US
Fair Value SEK 188m Kinnevik Stake 9%
Multifamily rental revenues in the US exceed USD 250bn annually and are the single largest category of discretionary spend for tenants. Build-torent apartment buildings are typically managed by specialist property managers who are paid a management fee. The sector remains highly fragmented with the 20 largest players accounting for 10% share.
This segment has seen limi-
Interview with Brad Hargreaves, founder and CEO of Common.
Prior to founding Common, I co-founded General Assembly, a bootcamp teaching tech and design skills. When building that company, we saw a huge challenge for students and staff to move to places such as New York and San Francisco. Number of Units Signed September 2020
17,600
Common, founded in 2015, applies a combination of technology and consumer-focused
They really struggled to find affordable, high quality housing and many ended up in sketchy living situations that they found on Craigslist. We saw an opportunity to create a residential brand and operating platform that not only delivers a better experience for the renter but also generates a higher return for the building owner, a win-
What learnings have you brought with you to Common? Like General Assembly, Common is operationally heavy and for both companies we were able to get a real lift from adding technology and brand. Both companies also touch people's lives in a significant way. Common is not a "nice to have" offering, but a product that people live and work in. Paying rent is a huge spend and often the largest share of the consumer wallet. We have brands with a dual objective. It improves the tenant experience through rentals that are all-inclusive and flexible, with virtual walk-throughs and online contracting. At the same time, it can improve operating yields for asset owners by automating more processes and seeing better marketing conversion rates relative to unbranded properties.
on co-living, a segment that also helps address the growing rental affordability gap. Co-living units still account for two-thirds of the over 17,600 units signed – however, the company has broadened its focus to offer its operating platform to a range of different property management use cases.
Common initially focused
a huge opportunity to improve people's lives if we do a good job.
Our first solution was a coliving service allowing the renter to keep the good parts of living with flat mates, i.e. the social environment and the affordability, while letting us take care of the annoyances such as cleaning, shared kitchen and bathroom, rent splitting and utilities. Today, we operate three brands. Common is our millennial and urban oriented brand, Kin is designed for families with kids, and our most recent and fastest growing brand is Noah, which is focused on workforce housing.
These three brands enable us to appeal to different consumers groups. Ultimately, our primary client is the institutional real estate owners. They have multiple types of assets, such as urban assets, suburban residentials and perhaps also hotels. We want to be the operating platform from which they can manage a variety of assets.
We want to be the world's largest residential operator. We think there is a huge opportunity to shape the future of housing, one that is more affordable, more equitable and fully leverages technology to both make operations more efficient as well as improve the experience for the residents. In order to get there, we need to secure the best inventory by building strong relationships with real estate owners. And equally important, we need to be the consumers' first choice and really deliver on our promise to them.
Note: Number of units signed refers to the number of rooms that Common has signed up to manage, many of these are under development.
win.
Fair Value SEK 258m Kinnevik Stake 6%
In August 2020, Teladoc, the global leader in virtual care, and Livongo, the leading Applied Health Signals company, announced their intention to merge. The merger represents a transformational opportunity to improve the delivery, access and experience of healthcare for consumers around the world. The highly complementary organisations will combine to create value across the healthcare ecosystem, enabling clients everywhere to offer high quality, personalized, technologyenabled longitudinal care that improves outcomes and lowers costs across the full spectrum of health.
When the merger has been completed, Kinnevik will become an owner of a 4.5% stake in the combined company and receive USD 143m (SEK 1.3bn) in cash consideration.
The combined company will have expected 2020 pro forma revenue of approximately USD 1.3bn, representing year-over-year pro forma growth of 85%, and pro forma adjusted EBITDA of over USD 120m. The combined company is positioned to execute quantified opportunities to drive revenue synergies of USD 100m by the end of the second year following completion, reaching USD 500m on a run rate basis by 2025.
The transaction is expected to close by the end of Q4 2020, subject to regulatory approval, Teladoc and Livongo shareholder approvals, and other customary closing conditions.
Enrolled patients September 2020
25 k
Swedish digital health company that connects patients with physical therapists to deliver an online evidence-based treatment for chronic joint pain
Fair Value SEK 134m Kinnevik Stake 19%
Joint Academy is a digital health platform founded in 2014 that delivers online, evidence-based treatment for chronic joint pain, specializing in osteoarthritis, monetizing on a per consultation basis. Chronic joint pain is one of the largest cost drivers in medical spend and almost 50% of Americans suffer from it. Osteoarthritis alone is a top five cost driver within chronic conditions costing an estimated USD 185bn per year in the US alone. The condition is treated with pain reducing medication (opioids) and/or expensive and invasive hip/joint replacements.
The company was founded by a father and son team. The father Leif Dahlberg, Chief Medical Officer, is a professor in osteoarthritis and the founder of what is considered the Swedish Gold Standard for treatment of joint pain using a non-invasive self-management program. The son, Jakob Dahlberg, took the program and built it into a digital solution where patients can manage their osteoarthritis on their own with physiotherapists supporting remotely, i.e. an online/telehealth version of the established program.
Joint Academy has enrolled over 25,000 patients with close
to 10,000 active patients per month. On average, Joint Academy patients report a 44% reduction in pain after three months and report reduced levels of pain over the rest of the first year. Almost half of patients who considered joint replacement reports that they no longer need it, and 42% report that they need less pain medication to manage the condition.
Active patients per month September 2020
10 k
Interview with Jakob Dahlberg, co-founder of Joint Academy.
Around 80% of global healthcare costs stem from 15 chronic diseases, and chronic joint pain is the fifth most common. Almost all chronic diseases have some connection to lifestyle choices and are also often mistreated with medication and surgery. Knowing this, and with his leading expertise in chronic joint pain, my father developed a methodology for osteoarthritis care which included meeting a physical therapist regularly, focusing on behavioural change and exercises. The methodology works very well on a clinical level and has been refined over several years with data from thousands of patients. As I was studying Computer Science, I realised that we could digitalise his methodology to make it globally scalable and much more cost efficient.
How does the collaboration with your father work today? He comes from the world of academia and focuses on clinical research, whereas I am more of an entrepreneur and engineer and thus more product focused. We work in close collaboration and our different roles complement each other very well. I think we make a very strong interdisciplinary founding team and the combination of our different skillsets are very valuable in the field of healthcare.
Sweden has some of the best osteoarthritis data and outcomes in the world, much to do with the methodology my father developed. We have a very strong clinical program and evidence to rely on, which we amplify with technology and our own findings. We also have world leading professors and specialists on chronic joint pain on payroll. This contributes to us being able to generate outcomes that exceed those of the face-to-face method and on a clinical level.
ped, focused on medication rather than prevention. The opportunity for us is re-routing patients away from that to a more preventative care model focused on behavioural change, education and exercises.
We want to be the global standard treatment for chronic joint pain. As soon as a person has been diagnosed, or are experiencing hip or knee pain, Joint Academy should be the first line of defence. Our vision is to be implemented with all the major health plans around the world, to work with hundreds of thousands physical therapists and treat millions of patients globally. To get there, we need to contract more payers, onboard more physical therapists and reach a much broader audience of patients globally.
| Credit and financial solutions provider operating in nine countries across Africa and Latin America |
Offers life and health insurance via mobile phones across Africa and Asia |
Online classifieds plat form in India focused on five verticals - Goods, Cars, Bikes, Jobs, Homes and Services |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Fair Value SEK Kinnevik Stake |
795m 21% |
Fair Value SEK Kinnevik Stake |
574m 33% |
Fair Value SEK Kinnevik Stake |
404m 17% |
||||||||
| Operating Income LTM (USDm) | Customers ('000) | ||||||||||||
| 243 | 246 | 250 | 240 | 235 | 520 | 539 | 538 | 545 | 538 | Online classifieds plat form focused on under served frontier markets, operating in Sri Lanka, Bangladesh and Ghana |
|||
| Q2 201 9 |
Q3 201 9 |
Q4 201 9 |
Q1 202 0 |
Q2 202 0 |
Q2 201 9 |
Q3 201 9 |
Q4 201 9 |
Q1 202 0 |
Q2 202 0 |
Fair Value SEK Kinnevik Stake |
372m 61% |
Note: The definitions of Tele2's and Bayport's KPIs are available on the companies' respective websites.
Zalando has launched a new Pre-owned offer catering to customers who want to shop and/or trade in pre-owned articles for credit on Zalando. All pre-owned items are quality-checked and curated into a fresh assortment with Zalando's superior convenience in shipping, payment options and free returns.
By enabling customers to give their fashion items another life directly on the platform, the new Pre-owned offer is an important contribution to Zalando's do.MORE sustainability strategy, supporting the goal of extending the life of 50 million items and eliminating single-use plastics until 2023. Zalando Pre-owned is already live in Germany and Spain and will be rolled out to customers in Belgium, France, the Netherlands and Poland in October 2020.
Torben Hansen, Zalando VP Recommerce, commented: "Interest in pre-owned fashion is high and growing, especially among millennials. At the same time, customers are missing an easy and reliable service that combines it all: effortless trading in items they no longer wish to wear, and an enjoyable online shopping experience for pre-owned fashion. With the launch of Pre-owned, Zalando is the first fashion platform to offer such a seamless solution and tackle these customer needs at scale."
Global Fashion Group (GFG) has launched its first collection from sustainable materials on ZALORA, its Southeast Asian platform. Established under the ZA-LORA Basics label and in collaboration with TENCELTM fibres, the collection aims to encourage customers to shop fashion more consciously and offers 44 styles, including tops, bottoms, dresses, jumpsuits, a hijab and a turban.
TENCELTM fibres originate from the renewable raw material wood, and are certified compostable and biodegradable, thus able to fully revert back to nature. TENCELTM fibres sources raw materials from sustainably managed forests, and their closed-loop production process transforms wood pulp into cellulosic fibres with high resource efficiency and low environmental impact.
ZALORA recently announced its sustainability strategy, the first fashion ecommerce player in Southeast Asia to establish such a comprehensive plan, and the second of GFG's four regions to do so. Throughout 2020 through 2025, ZA-LORA intends to inspire consumers to make sustainable fashion choices while driving a circular fashion movement in the region. Its commitments include minimising the environmental impact and encouraging social and environmental improvement in the supply chain through ethical sourcing.
Giulio Xiloyannis, ZALORA's Chief Commercial Officer, commented: "At ZA-LORA we are committed to promoting sustainability in the region and to shaping a sustainable fashion ecosystem. As part of our sustainability strategy, we strive to offer our customers a large choice of sustainable fashion, beginning with our ZALORA Basics label. This collection made with TENCELTM fibres is the first step for our own in-house labels to make sustainable fashion accessible to our customers, in hopes of educating and inspiring more conscious fashion consumption."
| Investee (SEKm) | Q3 2020 | Q1-Q3 2020 |
|---|---|---|
| Bima | 15 | 17 |
| Budbee | - | 106 |
| Cedar | - | 74 |
| Cityblock | - | 235 |
| Common | 184 | 184 |
| Joint Academy | 131 | 131 |
| MatHem | 15 | 182 |
| Monese | 29 | 92 |
| Omio | 114 | 114 |
| Town Hall Ventures II | - | 74 |
| TravelPerk | - | 37 |
| VillageMD | 232 | 260 |
| Other | 12 | 28 |
| Investments | 732 | 1 535 |
| Home24 | -221 | -221 |
| Qliro Group | -29 | -227 |
| Zalando | - | -6 725 |
| Other | - | -6 |
| Divestments | -250 | -7 179 |
| Net Investments / (Divestments) | 482 | -5 644 |
Over 2019-23, Kinnevik is aiming to systematically invest its capital under a capital allocation framework which entails:
During the third quarter, we invested a total of SEK 732m, of which SEK 416m was deployed into our existing businesses.
Our largest follow-on investment in the quarter was SEK 232m in VillageMD as part of the funding round led by Walgreens Boots Alliance. We also invested SEK 114m into Omio in connection with the company's convertible loan raise.
In the quarter we added two new companies to our portfolio. We invested SEK 184m for a 9% ownership stake in Common, a residential brand and tech-enabled managed rental housing marketplace based in New York. We also made an investment of SEK 131m for an ownership stake of 19% in Joint Academy, a Swedish digital health company specialised in chronic joint pain.
During the quarter, we furthermore divested our entire stake in Home24 for SEK 221m as well as the remainder of our holding in Qliro Group.
Kinnevik held a Capital Markets Day on 19 September 2019, during which we presented our strategy, capital allocation framework 2020-2023 and our priorities going forward. Read more on kinnevik.com.
As at 30 September 2020, Kinnevik had a net cash position of SEK 3.0bn, corresponding to 2.9% of portfolio value. This net cash position was made up of SEK 5.8bn in cash and short-term investments and SEK 2.9bn in senior unsecured bonds with a remaining tenor exceeding 12 months.
In May, Kinnevik received the first tranche of ordinary dividends from Tele2, amounting to SEK 0.5bn, with the second tranche of equal size to be received in October together with an extra dividend of SEK 0.7m. The total dividend from Tele2 during the year thus amounts to SEK 1.7bn of which SEK 1.2bn will be recorded in the fourth quarter.
During the third quarter Kinnevik distributed SEK 1.9bn in an extraordinary cash distribution.
Attractive Returns
Kinnevik's objective is to generate a long term total return to our shareholders in excess of our cost of capital. We aim to deliver an annual total shareholder return of 12-15% over the business cycle.
Given the nature of Kinnevik's investments, our goal is to carry low leverage, not exceeding 10% of portfolio value.
Kinnevik generates shareholder returns primarily through capital appreciation, and will seek to return excess capital generated by its investments to shareholders through extra dividends.
| SEKm | Note | Q3 2020 |
Q3 2019 |
Jan-Sep 2020 |
Jan-Sep 2019 |
FY 2019 |
|---|---|---|---|---|---|---|
| Change in fair value of financial assets | 4 | 20 283 | 1 949 | 36 260 | 20 886 | 18 972 |
| Dividends received | 5 | - | 1 126 | 516 | 2 015 | 2 907 |
| Administration costs | -87 | -120 | -267 | -259 | -391 | |
| Other operating income | 3 | 4 | 9 | 46 | 50 | |
| Other operating costs | -2 | -3 | -2 | -3 | -4 | |
| Operating profit/loss | 20 197 | 2 956 | 36 516 | 22 685 | 21 534 | |
| Financial net | 30 | 24 | -18 | -2 | 39 | |
| Profit/loss after financial net | 20 227 | 2 980 | 36 498 | 22 683 | 21 573 | |
| Tax | 0 | 0 | 0 | 0 | -1 | |
| Net profit/loss for the period | 20 227 | 2 980 | 36 498 | 22 683 | 21 572 | |
| Total comprehensive income for the period | 20 227 | 2 980 | 36 498 | 22 683 | 21 572 | |
| Net profit/loss per share before dilution | 72.85 | 10.80 | 131.67 | 82.26 | 78.11 | |
| Net profit/loss per share after dilution | 72.84 | 10.75 | 131.63 | 82.13 | 78.02 | |
| Outstanding shares at the end of the period | 277 775 037 | 275 829 227 | 277 775 037 | 275 829 227 | 276 604 474 | |
| Average number of shares before dilution | 277 764 887 | 275 829 227 | 277 184 681 | 275 745 394 | 276 160 962 | |
| Average number of shares after dilution | 277 764 887 | 276 305 175 | 277 285 477 | 276 185 984 | 276 483 775 |
The change in fair value of financial assets including dividends received amounted to a profit of SEK 20,283m (3,075) for the third quarter of which a profit of SEK 19,324m (1,617) was related to listed holdings and a profit of SEK 959m (1,458) was related to unlisted holdings. See note 4 and 5 for further details.
Of the SEK 87m (120) in administration costs incurred during the third quarter, SEK 40m (68) pertained to Kinnevik's outstanding long-term incentive programs of which revaluation of options from the long term cash-based incentive program 2017-2022 amounts to SEK 29m (0).
The change in fair value of financial assets including dividends received amounted to a profit of SEK 36,776m (22,901) for the first nine months of the year of which a profit of SEK 35,447m (19,264) was related to listed holdings and a profit of SEK 1,329m (3,637) was related to unlisted holdings. See note 4 och 5 for further details.
Of the SEK 267m (259) in administration costs incurred during the first nine months of the year, SEK 132m (84) pertained to Kinnevik's outstanding long-term incentive programs.
The cost recognized for the 2020 long-term incentive program ("LTI 2020") amounted to SEK 93m and is approximately SEK 40m higher than the illustrative examples outlined in the notice to Kinnevik's 2020 AGM. This is due to an increase in value of the incentive shares that are granted to participants of LTI 2020, stemming from the significant increase in Kinnevik's share price and value of Kinnevik's younger growth businesses during the first months of the performance measurement period between end of March and when LTI 2020 had received approval from Kinnevik's AGM and the Swedish Companies Registrations Office (Sw. Bolagsverket) in June.
Revaluation of options from the long term cash-based incentive program 2017- 2022 amounts to SEK 35m (0) for the first 9 months of the year.
| SEKm | Note | Q3 | Q3 | Jan-Sep | Jan-Sep | FY |
|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | ||
| Dividends received | 5 | - | 1 126 | 516 | 2 015 | 2 907 |
| Cash flow from operations | -102 | -64 | -251 | -159 | -222 | |
| Cash flow from operations before interest net and income taxes |
-102 | 1 062 | 265 | 1 856 | 2 685 | |
| Interest, received | 0 | 0 | 0 | 0 | 0 | |
| Interest, paid | -6 | -5 | -47 | -42 | -49 | |
| Cash flow from operations | -108 | 1 057 | 218 | 1 814 | 2 636 | |
| Investments in financial assets | -760 | -2 838 | -1 472 | -4 443 | -4 586 | |
| Sale of shares and other securities | 250 | 5 908 | 6 981 | 5 967 | 6 162 | |
| Cash flow from investing activities | -510 | 3 070 | 5 509 | 1 524 | 1 576 | |
| Repayment of loan | -1 176 | -960 | -3 410 | -500 | -500 | |
| Borrowing | - | 560 | 1 500 | 4 370 | 1 960 | |
| Dividend paid to equity holders of the Parent company | -1 928 | - | -1 928 | -1 169 | -2 271 | |
| Cash flow from financing activities | -3 104 | 2 070 | -3 838 | 2 701 | -811 | |
| Cash flow for the period | -3 722 | 6 197 | 1 889 | 6 039 | 3 401 | |
| Cash and short term investments, opening balance | 9 498 | 328 | 3 887 | 486 | 486 | |
| Cash and short term investments, closing balance | 5 776 | 6 525 | 5 776 | 6 525 | 3 887 | |
| SUPPLEMENTARY CASH FLOW INFORMATION | ||||||
| Investments in financial assets | 4 | -732 | -2 108 | -1 535 | -4 523 | -4 566 |
| Investments not paid | 0 | 0 | 62 | 100 | 0 | |
| Prior period investments, paid in current period | -28 | -730 | 0 | -20 | -20 | |
| Cash flow from investments in financial assets | -760 | -2 838 | -1 472 | -4 443 | -4 586 |
| SEK m | Note | 30 Sep 2020 |
30 Sep 2019 |
31 Dec 2019 |
|---|---|---|---|---|
| ASSETS | ||||
| Fixed assets | ||||
| Financial assets accounted at fair value through profit and loss | 4 | 104 846 | 92 868 | 74 230 |
| Tangible fixed assets | 49 | 51 | 51 | |
| Right of use asset | 10 | 15 | 11 | |
| Other fixed assets | 230 | 19 | 27 | |
| Total fixed assets | 105 135 | 92 953 | 74 319 | |
| Other current assets | 85 | 46 | 70 | |
| Short term investments | 3 274 | 3 150 | 3 664 | |
| Cash and cash equivalents | 2 502 | 3 375 | 223 | |
| TOTAL ASSETS | 110 996 | 99 524 | 78 276 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity attributable to equityholders of the Parent Company |
107 885 | 92 010 | 73 295 | |
| Interest bearing liabilities, long term | 2 946 | 1 449 | 1 426 | |
| Interest bearing liabilities, short term | - | 5 820 | 3 410 | |
| Non interest bearing liabilities | 165 | 245 | 145 | |
| TOTAL EQUITY AND LIABILITIES | 110 996 | 99 524 | 78 276 | |
| Key Ratios Ratio |
Note | 30 Sep 2020 |
30 Sep 2019 |
31 Dec 2019 |
| Debt/equity ratio | 0.03 | 0.08 | 0.07 | |
| Equity ratio | 97% | 92% | 94% | |
| Net cash/Net debt, for the Group, including net loans to investee companies | 6 | 3 457 | -250 | -456 |
| Net cash/Net debt, for the Group, excluding net loans to investee companies | 6 | 2 997 | -825 | -930 |
| Leverage, excluding net loans to investee companies | - | 0.9% | 1.3% |
| SEK m | Jan-Sep 2020 |
Jan-Sep 2019 |
FY 2019 |
|---|---|---|---|
| Opening balance | 73 295 | 70 503 | 70 503 |
| Profit/loss for the period | 36 498 | 22 683 | 21 572 |
| Total comprehensive income for the period | 36 498 | 22 683 | 21 572 |
| Transactions with shareholders | |||
| Effect of employee share saving programme | 20 | -7 | 39 |
| Dividend in kind | - | - | -16 548 |
| Cash dividend | -1 928 | -1 169 | -2 271 |
| Closing balance for the period | 107 885 | 92 010 | 73 295 |
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the EU. This report was prepared in accordance with the Annual Accounts Act and IAS 34, Interim Financial Reporting. Information in accordance with IAS 34, Interim Financial Reporting is provided in the notes as well as in other places in the interim report. The accounting principles are the same as described in the 2019 Annual Report.
Kinnevik has a model for risk management, which aims to identify, control and reduce risks. The identified risks and how they are managed are reported to the Kinnevik Board of Directors on a quarterly basis.
Kinnevik's financing and management of financial risks is centralised within Kinnevik's finance function and is conducted on the basis of a finance policy established by the Board of Directors. Kinnevik is exposed to financial risks mainly in the form of changes in the value of the stock portfolio, changes in currency and interest rates, and financing risks. Operational risks are managed within each company with an operating business. Kinnevik's exposure to political risks is limited.
The Covid-19 pandemic has impacted Kinnevik's investees in various ways – both short-term negative as well as short- and long-term positive. Kinnevik continues to regularly assess measures taken or considered by our businesses and ourselves to safeguard value and address softening demand, supply chain disruption and a financial environment less conducive to raising capital for investing into future growth.
As a consequence of the Covid-19 pandemic, Kinnevik is looking to commit slightly more capital, or commit it earlier than anticipated, to our existing companies to ensure that they do not compromise more than necessary on their long-term strategic targets, and remain focused on fully serving their customers. Due to our strong financial position, this slightly elevated funding need and the elevated risk pertaining to potential future incoming dividends from our investee companies do not have a material effect on either Kinnevik's 2019-23 capital allocation framework as announced in September 2019, or Kinnevik's ability to create long-term shareholder value through net asset value growth.
For a more detailed description of Kinnevik's risks and uncertainties, as well as risk management, refer to Note 17 for the Group in the 2019 Annual Report.
Related party transactions for the period are of the same character as the transactions described in the 2019 Annual Report.
In assessing the fair value of our unlisted investments, we apply IFRS 13 and the International Private Equity and Venture Capital Valuation Guidelines, whereunder we make a collective assessment to establish the valuation methods and points of reference that are most suitable and relevant in determining the fair value of each of our unlisted investments. While a valuation in a recent transaction is not applied as a valuation method as such, it can typically provide an important point of reference and basis for the valuation of a specific investment, especially as it pertains to Kinnevik's younger investee companies where traditional valuation techniques tend to be less applicable and accurate. For new share issues, consideration is taken to whether newly issued shares have preferential rights, such as liquidation preferences to the company's assets. Valuation methods include forward and trailing revenue and profit multiples, and discounting future expected cash flows. When performing a valuation based on multiples, consideration is given to differences in size, historic and future growth, profitability and cost of equity capital. In its valuations, Kinnevik also considers the strength of a company's financial position, cash runway, and funding environment.
The valuation process for Kinnevik's unlisted holdings is led by a valuation team independently from the respective holding's investment manager. Accuracy and reliability of financial information used in the valuations is ensured through continuous contacts with the management teams of each investee company and regular reviews of their financial and operational reporting. Information and opinions on applicable valuation methods are obtained periodically from our investment managers and well-renowned investment banks and audit firms. The valuations are approved by Kinnevik's CFO and CEO after which a proposal is presented and discussed with the Audit Committee and Kinnevik's external auditors. After their scrutiny and potential adjustments, the valuations are approved by the Audit Committee and included in Kinnevik's financial reports.
Kinnevik's unlisted investee companies adopt different financing structures and may at times issue shares with liquidation preference rights.
Liquidation preferences determine how proceeds from a liquidity event are allocated between shareholders. This allocation may become increasingly complex over time, and Kinnevik's share of proceeds may significantly deviate from its percentage ownership of the investee company's issued equity. Accordingly, an increase or decrease in value of an investee company's equity where liquidation preferences are applicable may result in a disproportionate increase or decrease in the fair value of Kinnevik's shareholding. Liquidation preferences may also entail that the fair value of Kinnevik's investment remains unchanged in spite of the assessed value of a particular investee company as a whole changing materially.
An unlisted investee company's transition into a publicly listed company may also affect the value of Kinnevik's shareholding due to the dismantling of such provisions.
During the first nine months of 2020, the Nordic online grocery market as well as the last-mile logistics market have experienced a surge in demand following the outbreak of the coronavirus. At all three companies, our applied revenue multiples in this quarter remain largely unchanged in spite of continued multiple expansion in the relevant publicly listed peer groups, and our valuations therefore grow solely due to the net effect of achieved revenue growth, upwards revisions of near-term growth outlooks, and cash burn.
The fair value of Kinnevik's 31 percent shareholding in Budbee amounts to SEK 400m, and is based on a total value of Budbee's equity of SEK 1.3bn. The valuation is based on the same nearterm forward-looking multiple relevant at closing of the company's Series B funding round during the second quarter, at a slight premium to forward-looking revenue multiples of a peer group of more mature logistic companies, with references to e-commerce enabling software companies. Budbee continues to perform strongly, and is growing significantly faster than its more mature logistic businesses while retaining healthy gross margins.
The fair value of Kinnevik's 37 percent shareholding in MatHem amounts to SEK 1,242m. The total value of MatHem's equity amounts to SEK 3.3bn, and is based on trailing revenue multiples of a composite peer group of inventoryholding e-commerce retailers and meal kit businesses. The assessed valuation implies a multiple of 1.7x the company's last twelve months' revenues as at 30 June 2020, unchanged from last quarter. The corresponding multiple per 30 September 2020, the relevant date of our valuation assessment, has come down considerably, and corresponds to a 25% discount to our composite peer group's average multiple in consideration of MatHem's earlier stage of profitability compared to the peer group.
The fair value of Kinnevik's 24 percent shareholding and other interest in Kolonial.no amounts to SEK 820m. The total value of Kolonial.no's equity is assessed to amount to NOK 3.0bn and is based on trailing revenue multiples of a composite peer group corresponding to that of MatHem. The assessed valuation implies a multiple of 2.3x the company's last twelve months' revenues as at 30 June 2020, unchanged from last quarter. As for MatHem, the multiple of last twelve months' revenues has come down considerably per 30 September 2020, the relevant date of our valuation assessment, and is in line with our composite peer group's average multiple in consideration of Kolonial's higher growth rates but somewhat earlier stage of profitability compared to the peer group.
The global outbreak of the coronavirus continues to cause significant uncertainty in the travel industry and a sharp reduction in demand. As a result, share prices of online travel agencies fell materially during the first quarter, and have yet to recover to pre-corona levels. We continue to seek to reflect the development in pu-
blic equity markets during the quarter in assessing the fair value of our investees active within the travel sector, whilst taking a conservative approach in forecasting the trajectory of our businesses and the recovery of the travel sector.
The fair value of Kinnevik's 6 percent shareholding and other interest in Omio amounts to SEK 518m, and is based on 2020 revenue multiples of a peer group of online travel agencies such as Trainline, TripAdvisor and Booking. This multiple is applied on a revenue assessment incorporating the current estimated effects of the coronavirus on the underlying travel market. Omio is performing in line with forecasts that were restated in prior quarters, and the company has quickly adapted to the unprecedented crisis for the global travel industry. In the quarter, the company has strengthened its financial position by raising convertible debt to take the company through the current shape of the crisis. Our assessed fair value of the company as a whole amounts to a level where our equity investment no longer fully benefits from downside protection from the preferential terms of our investment in the company's 2018 equity fundraise.
The fair value of Kinnevik's 15 percent shareholding and other interest in TravelPerk amounts to SEK 451m and is based on 2021 revenue multiples of a peer group of online travel booking platforms, such as Amadeus and Serko, and SaaS companies, such as Atlassian and Salesforce, which have a financial profile more similar to that of TravelPerk's. Our assessed value of TravelPerk's equity reflects a slightly more conservative forecast of the recovery of corporate travel compared to the leisure equivalent, and a nearly unchanged revenue multiple in spite of expanding multiples in both peer groups.
The fair value of Kinnevik's 9 percent shareholding in Common amounts to SEK 188m, and is based on forward looking revenue and profit multiples of a peer group consisting primarily of property managers and hospitality franchise brands. The assessed valuation is in line with the capital Kinnevik invested in the company's recent funding round.
| Method & Investee Companies | Fair Value (SEKm) | % of Unlisted |
|---|---|---|
| Financial Assets |
| DCF (Betterment, Bima) | 1 642 | 11% |
|---|---|---|
| P/E (Bayport) | 795 | 5% |
| Trailing EV/Revenue (Online Grocers, Value Based Care) | 6 181 | 40% |
| Forward EV/Revenue | 6 757 | 44% |
| Other | 87 | < 1% |
The fair value of Kinnevik's 16 percent shareholding in Betterment amounts to SEK 1,068m, and is based on a discounted cash flow analysis with references to 2021 revenue multiples of three peer groups consisting of financial technology companies, digital wealth managers, and SaaS business. It is our intention to transition fully into a valuation method based on revenue multiples in the upcoming quarter. The slight decrease in assessed fair value is primarily due to currency headwinds. Betterment's revenues remain in part correlated with the development of the US and global stock market which has continued to be supportive through the third quarter, and we continue to believe that the attractiveness of Betterment's products relative to more expensive and less consumer-centric incumbents increases during periods of market volatility and economic downturns.
The fair value of Kinnevik's 13 percent shareholding in Bread amounts to SEK 467m and is based on forward-looking revenue multiples of a peer group of software, SaaS, payments, and lending companies. The increase in fair value is a result of strong performance on the back of an increased adoption of digital consumer e-Commerce services and expanding peer group multiples, in part offset by currency headwinds.
The fair value of Kinnevik's 6 percent shareholding in Deposit Solutions amounts to SEK 258m and is based on forward-looking revenue multiples of a peer group of SaaS, software licensing, and financial technology companies. The applied revenue multiple remains in line with the previous quarter in spite of expanding multiples across peer groups.
The fair value of Kinnevik's 28 percent shareholding and other interests in Monese amounts to SEK 444m and is based on forward-looking revenue multiples of a peer group of financial brokers and subscription businesses, and still corresponds to the valuation in a funding round during Q3 2018 which was reapplied in a smaller fundraise in the quarter. The fair value of Kinnevik's investment increases as a result of an investment in the quarter and currency tailwinds.
The fair value of Kinnevik's 13 percent shareholding in Pleo amounts to SEK 366m and is based on forward-looking revenue multiples of a peer group of SaaS companies. The slight increase in fair value is primarily a result of the company performing better than expected given the current business environment, and we discount the average peer group multiple in consideration of challenges facing the corporate expenditure industry during the coronavirus crisis.
During the quarter, the IPO of Oak Street Health provided a strong indication of investors' interest in value-based care delivery operators, such as VillageMD and Cityblock. Meanwhile, operators of virtual health and telemedicine services continue to be ascribed material premiums to in-person primary care peers. In valuing our businesses within these sectors, we continue to focus on achieved financial performance in assessing our fair values. As the companies we are invested in are growing at materially higher growth rates than their listed comparables, this entails that we materially but implicitly discount the implied forward-looking multiples compared to peers.
The fair value of Kinnevik's 16 percent shareholding in Babylon amounts to SEK 2,470m, and is primarily based on a set of specific operational future milestones which renders our valuation virtually unchanged in USD terms. We expect further visibility on these milestones in the next quarter, at which point in time we will be looking to reassess our fair value provided such visibility is present. Our valuation corresponds to approximately 21x Babylon's forecasted 2020 revenues, at a slight premium to the average of a peer group of disruptive healthcare and healthcare IT companies, including Teladoc, which have seen moderately positive trading in the quarter. The slight decrease in fair value is primarily a result of currency headwinds.
The fair value of Kinnevik's 11 percent shareholding in Cedar amounts to SEK 608m, and is based on 2021 revenue multiples of a peer group of healthcare software and analytics companies. The Series C funding led by Andreessen Horowitz announced in June, the valuation it was concluded at, and Cedar's performance over the last few months all provided reference points and support for the material upwards revision of the assessed fair value of our investment made in the previous quarter, and the slight decrease in fair value this quarter is solely a result of currency headwinds.
The fair value of Kinnevik's 8 percent in Cityblock amounts to SEK 313m, and is based on trailing revenue multiples of a peer group of different types of care providers and outsourced services companies, including One Medical and Oak Street Health, and incorporates the latest available twelve months' revenues. The increase in fair value in the quarter is solely driven by achieved revenue growth, as our trailing revenue multiple is unchanged from the previous quarter. The applied multiple is at a material discount to the aforementioned comparable companies, considering primarily the recency of the company's funding round and Oak Street Health's IPO.
The fair value of Kinnevik's 19 percent shareholding in Joint Academy amounts to SEK 134m, and is based on near-term forward looking revenue multiples of a peer group of disruptive healthcare and healthcare IT companies, as well as offline physical therapy companies. The assessed valuation is in line with the capital Kinnevik invested in the company's recent funding round.
The fair value of Kinnevik's 9 percent shareholding in VillageMD amounts to SEK 3,434m and is based on trailing revenue multiples of a peer group of different types of care providers and outsourced services companies, including One Medical and Oak Street Health, and incorporates the latest available last twelve months' revenues. The recently announced transaction with Walgreens Boots Alliance and the future outlook for VillageMD provide continued support for an expansion of the revenue multiple applied in prior quarters. Our applied multiple remains at a material discount to the aforementioned comparable companies, considering primarily the recency of both the transaction with Walgreens Boots Alliance and Oak Street Health's IPO.
The fair value of Kinnevik's 21 percent shareholding in Bayport amounts to SEK 795m and is based on 2020 and 2021 price-to-earnings multiples of a peer group of consumer finance companies. The slight increase in fair value is lower than the average share price development of Bayport's peers, as we discount the near-term financial outlook due to the uncertainties caused by the coronavirus crisis.
The fair value of Kinnevik's 33 percent shareholding in Bima amount to SEK 574m, and is based on a discounted cash flow analysis referenced against 2020 revenue multiples of a peer group of insurance technology companies. The assessed valuation corresponds to the valuation in a funding round during the quarter, and the decrease in assessed fair value is solely due to dilution and currency headwinds.
The fair value of Kinnevik's 17 percent shareholding and other interests in Quikr amounts to SEK 404m and is based on near-term forward-looking revenue multiples of a peer group of emerging market online classifieds companies. In the third quarter, our applied multiple has been lowered to reflect the persistent impact of the coronavirus crisis on Quikr's more discretionary consumption verticals in India. The company is performing in line with expectations that were revised in previous quarters, entailing sharp cost reductions as a result of the coronavirus crisis.
The fair value of Kinnevik's 61 percent shareholding and other interests in Saltside amounts to SEK 372m. The valuation of Saltside is based on trailing revenue multiples of a peer group of emerging market online classifieds companies and our assessed value of the company as a whole has increased fairly in line with this peer group's average share price performance in the quarter.
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.
| Change in fair value of financial assets | Q3 | Q3 | Jan-Sep | Jan-Sep | FY |
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Global Fashion Group | 2 125 | - 1 989 | 2 520 | -1 989 | -1 816 |
| Home24 | 7 | 2 | 59 | -251 | -191 |
| Livongo | 6 997 | -420 | 12 893 | -420 | 379 |
| Millicom | - | -1 740 | - | -3 197 | -4 596 |
| Qliro Group | -14 | -89 | -69 | 18 | -95 |
| Tele2 | 516 | 2 063 | -1 717 | 6 332 | 4 268 |
| Westwing | - | -100 | - | -417 | -355 |
| Zalando | 9 693 | 2 763 | 21 245 | 17 174 | 18 766 |
| Total Listed Holdings | 19 324 | 491 | 34 931 | 17 249 | 16 360 |
| Babylon | -45 | 1 429 | -338 | 2 076 | 1 934 |
| Bayport | 26 | -2 | -315 | 60 | -62 |
| Betterment | -48 | 61 | -247 | 121 | 162 |
| Bima | -142 | 14 | -379 | 55 | -58 |
| Bread | 90 | 19 | 152 | 33 | 17 |
| Budbee | 52 | - | 70 | 98 | 98 |
| Cedar | -24 | 11 | 337 | 17 | 8 |
| Cityblock | 80 | - | 78 | - | - |
| Common | 4 | - | 4 | - | - |
| Deposit Solutions | 1 | 4 | -27 | 16 | 11 |
| Global Fashion Group | - | - | - | -155 | -155 |
| Joint Academy | 3 | - | 3 | - | - |
| Karma | - | - | -19 | - | - |
| Kolonial.no | 84 | -4 | 128 | 46 | 35 |
| Livongo | - | - | - | 1 065 | 1 065 |
| MatHem | 95 | - | 171 | - | - |
| Monese | 2 | 9 | -31 | 16 | 25 |
| Omio | -62 | 28 | -64 | 49 | 25 |
| Pleo | 24 | 5 | 23 | 198 | 191 |
| Quikr | -61 | 14 | -544 | -87 | -851 |
| Saltside | 57 | 3 | 40 | 5 | 123 |
| Town Hall Ventures II | -3 | - | -7 | - | - |
| TravelPerk | -12 | -27 | -92 | 186 | 161 |
| VillageMD | 838 | 11 | 2 436 | 11 | 11 |
| Other | - | -116 | -50 | -174 | -128 |
| Total Unlisted Holdings | 959 | 1 458 | 1 329 | 3 637 | 2 612 |
| Total | 20 283 | 1 949 | 36 260 | 20 886 | 18 972 |
| Fair value of financial assets | Class A | Class B | Capital/Votes | 30 Sep | 30 Sep | 31 Dec |
|---|---|---|---|---|---|---|
| shares | shares | (%) | 2020 | 2019 | 2019 | |
| Global Fashion Group | 79 093 454 | - | 40.1/40.1 | 4 465 | 1 772 | 1 945 |
| Home24 | - | - | - | - | 101 | 162 |
| Livongo | 12 653 927 | - | 12.4/12.4 | 15 861 | 2 170 | 2 968 |
| Millicom | - | - | - | - | 17 972 | - |
| Qliro Group | - | - | - | - | 409 | 296 |
| Tele2 | 20 733 965 | 166 879 154 | 27.2/42.0 | 23 724 | 27 504 | 25 440 |
| Westwing | - | - | - | - | 65 | - |
| Zalando | 54 047 800 | - | 21.3/21.3 | 45 334 | 29 222 | 30 814 |
| Total Listed Holdings | 89 384 | 79 215 | 61 625 | |||
| Babylon | 16/16 | 2 470 | 2 950 | 2 808 | ||
| Bayport | 21/21 | 795 | 1 232 | 1 110 | ||
| Betterment | 16/16 | 1 068 | 1 274 | 1 315 | ||
| Bima | 33/33 | 574 | 1 010 | 936 | ||
| Bread | 13/13 | 467 | 331 | 315 | ||
| Budbee | 31/31 | 400 | 224 | 224 | ||
| Cedar | 11/11 | 608 | 206 | 197 | ||
| Cityblock | 8/8 | 313 | - | - | ||
| Common | 9/9 | 188 | - | - | ||
| Deposit Solutions | 6/6 | 258 | 290 | 285 | ||
| Joint Academy | 19/19 | 134 | - | - | ||
| Karma | 20/20 | 49 | 62 | 62 | ||
| Kolonial.no | 24/24 | 820 | 694 | 686 | ||
| MatHem | 37/37 | 1 242 | 889 | 889 | ||
| Monese | 28/28 | 444 | 374 | 383 | ||
| Omio | 6/6 | 518 | 492 | 468 | ||
| Pleo | 13/13 | 366 | 350 | 343 | ||
| Quikr | 17/17 | 404 | 1 703 | 941 | ||
| Saltside | 61/61 | 372 | 207 | 325 | ||
| Town Hall Ventures II | - | 67 | - | - | ||
| TravelPerk | 15/15 | 451 | 531 | 506 | ||
| VillageMD | 9/9 | 3 434 | 737 | 737 | ||
| Other | - | 20 | 97 | 75 | ||
| Total Unlisted Holdings | 15 462 | 13 653 | 12 605 | |||
| Total | 104 846 | 92 868 | 74 230 |
| Investments in financial assets | Q3 | Q3 | Jan-Sep | Jan-Sep | FY |
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Babylon | - | 296 | - | 374 | 374 |
| Bima | 15 | 9 | 17 | 82 | 121 |
| Budbee | - | - | 106 | 46 | 46 |
| Cedar | - | - | 74 | 47 | 47 |
| Cityblock | - | - | 235 | - | - |
| Common | 184 | - | 184 | - | - |
| Deposit Solutions | - | - | - | - | - |
| Global Fashion Group | - | - | - | 632 | 632 |
| Joint Academy | 131 | - | 131 | - | - |
| Karma | 6 | - | 6 | - | - |
| Kolonial.no | 2 | 3 | 6 | 339 | 341 |
| Livongo | - | 825 | - | 825 | 825 |
| MatHem | 15 | - | 182 | 889 | 889 |
| Monese | 29 | - | 92 | 156 | 156 |
| Omio | 114 | - | 114 | - | - |
| Pleo | - | - | - | 85 | 85 |
| Quikr | 2 | 147 | 7 | 147 | 149 |
| Saltside | - | 3 | 7 | 3 | 3 |
| Town Hall Ventures II | - | - | 74 | - | - |
| TravelPerk | - | 98 | 37 | 122 | 122 |
| VillageMD | 232 | 726 | 260 | 726 | 726 |
| Other | - | - | - | 50 | 50 |
| Total Unlisted Holdings | 732 | 2 108 | 1 535 | 4 523 | 4 566 |
| Total | 732 | 2 108 | 1 535 | 4 523 | 4 566 |
| Changes in unlisted assets (level 3) | Q3 | Q3 | Jan-Sep | Jan-Sep | FY |
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Opening balance | 13 772 | 16 471 | 12 605 | 11 939 | 11 939 |
| Investments | 732 | 2 108 | 1 535 | 4 523 | 4 566 |
| Disposals / Exit proceeds | - | -33 | -6 | -95 | - 161 |
| Reclassification | - | -6 351 | - | -6 351 | -6 351 |
| Change in fair value | 959 | 1 458 | 1 329 | 3 637 | 2 612 |
| Closing balance | 15 462 | 13 653 | 15 462 | 13 653 | 12 605 |
| Q3 | Q3 | Jan-Sep | Jan-Sep | FY | |
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Millicom | - | - | - | 476 | 956 |
| Tele2 | - | 1 126 | 516 | 1 539 | 1 951 |
| Total dividends received | - | 1 126 | 516 | 2 015 | 2 907 |
| Of which ordinary cash dividends | - | 1 126 | 516 | 889 | 1 781 |
Kinnevik was in a net cash position of SEK 3,457m as at 30 September 2020, including loans to investee companies and debt for unpaid investments (net debt SEK 456m as at 31 December 2019). Net cash excluding loans to portfolio companies amounted to SEK 2,997m (net debt of SEK 930m as at 31 December 2019).
Kinnevik's total credit facilities (including issued bonds) amounted to SEK 9,030m as at 30 September 2020 whereof SEK 6,000m related to unutilised revolving credit facilities and SEK 2,900m related to bonds.
The Group's available liquidity, including short term investments and available unutilized credit facilities, totalled SEK 11,906m as at 30 September 2020 (SEK 9,056m as at 31 December 2019).
| SEKm | 30 Sep | 30 Sep | 31 Dec |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| Interest bearing assets | |||
| Loans to investee companies | 460 | 575 | 474 |
| Short term investments | 3 274 | 3 150 | 3 664 |
| Cash and cash equivalents | 2 502 | 3 375 | 223 |
| Other interest bearing assets | 229 | 19 | 19 |
| Total interest bearing assets | 6 465 | 7 119 | 4 380 |
| Interest bearing long term liabilities | |||
| Corporate bonds | 2 900 | 1 400 | 1 400 |
| Accrued borrowing cost | -10 | −10 | -11 |
| Other interest bearing liabilities | 56 | 59 | 37 |
| 2 946 | 1 449 | 1 426 | |
| Interest bearing short term liabilities | |||
| Corporate bonds | - | 2 450 | 2 450 |
| Commercial papers | - | 3 370 | 960 |
| - | 5 820 | 3 410 | |
| Total interest bearing liabilities | 2 946 | 7 269 | 4 836 |
| Net interest bearing liabilities (-) / assets (+) | 3 519 | -150 | -456 |
| Net debt/receivables, unpaid investments/divestments | -62 | -100 | 0 |
| Net cash/(Net debt) for the Group, including net loans to investee companies | 3 457 | -250 | -456 |
| Net cash/(Net debt) for the Group, excluding net loans to investee companies | 2 997 | -825 | -930 |
Kinnevik currently has no bank loans outstanding, and its bank facilities when drawn carry variable interest rates. Debt capital market financing consist of commercial paper and senior unsecured bonds. Commercial paper is issued with a maximum tenor of 12 months under Kinnevik's SEK 5.0bn commercial paper program, and senior unsecured bonds are issued with a minimum tenor of 12 months under Kinnevik's SEK 6bn medium term note program. In order to hedge interest rate risks, Kinnevik has entered into a number of interest rate swap agreements whereby it pays a fixed annual interest rate also on bonds with a floating rate coupon. As at 30 September 2020, the average interest rate for the outstanding commercial paper and senior unsecured bonds amounted to 0.9% and the weighted average remaining tenor for all Kinnevik's credit facilities amounted to 2.5 years.
| SEK m | Q3 | Q3 | Jan-Sep | Jan-Sep | FY |
|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2019 | |
| Administration costs | -93 | -114 | -261 | -233 | -344 |
| Other operating income and costs | 2 | -1 | 4 | 1 | 3 |
| Operating loss | -91 | -115 | -257 | -232 | -341 |
| Result from subsidiaries | 417 | -22 | -1 275 | 7 045 | 23 752 |
| Financial net | 0 | -35 | -48 | -65 | -47 |
| Profit/loss after financial items | 326 | -172 | -1 580 | 6 748 | 23 364 |
| Group contribution | - | - | - | - | 122 |
| Profit/loss before taxes | 326 | -172 | -1 580 | 6 748 | 23 486 |
| Taxes | - | - | - | - | - |
| Net profit/loss for the period | 326 | -172 | -1 580 | 6 748 | 23 486 |
| Total comprehensive income for the period | 326 | -172 | -1 580 | 6 748 | 23 486 |
| SEK m | 30 Sep | 30 Sep | 31 Dec |
|---|---|---|---|
| 2020 | 2019 | 2019 | |
| ASSETS | |||
| Tangible fixed assets | 3 | 4 | 3 |
| Financial fixed assets | 31 748 | 68 004 | 50 138 |
| Long term receivables | 24 326 | 28 | 30 252 |
| Short term receivables | 28 | 23 | 148 |
| Short term investments | 3 274 | 3 150 | 3 664 |
| Cash and cash equivalents | 1 801 | 3 344 | 191 |
| TOTAL ASSETS | 61 180 | 74 553 | 84 396 |
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Equity | 52 652 | 56 728 | 56 142 |
| Provisions | 20 | 26 | 20 |
| Long term interest bearing liabilities | 2 911 | 1 405 | 1 400 |
| Short term interest bearing liabilities | - | 5 820 | 3 401 |
| Other short term liabilities | 5 597 | 10 574 | 23 433 |
| TOTAL SHAREHOLDERS' EQUITY AND LIABLITIES | 61 180 | 74 553 | 84 396 |
The Parent Company's liquidity, including short-term investments and unutilized credit facilities, totalled SEK 11,205m (9,254) per 30 September 2020. The Parent Company's interest bearing external liabilities amounted to SEK 2,911m (7,225) on the same date. Investments in tangible fixed assets amounted to SEK 1m (1) during the period.
| of shares | of votes | (SEK 000s) | |
|---|---|---|---|
| Outstanding Class A shares, 10 votes each | 33 755 432 | 337 554 320 | 3 375 |
| Outstanding Class B shares, 1 vote each | 241 718 279 | 241 718 279 | 24 172 |
| Outstanding Class D-G shares (LTIP 2018), 1 vote each | 539 636 | 539 636 | 54 |
| Outstanding Class D-G shares (LTIP 2019), 1 vote each | 695 970 | 695 970 | 70 |
| Outstanding Class C-D shares (LTIP 2020), 1 vote each | 1 065 720 | 1 065 720 | 107 |
| Class C-D shares (LTIP 2020) shares in own custody | 153 080 | 153 080 | 15 |
| Class B shares in own custody | 192 927 | 192 927 | 19 |
| Registered number of shares | 278 121 044 | 581 919 932 | 27 812 |
The total number of votes for outstanding shares amounted at 30 September 2020 to 581,573,925 excluding 192,927 class B treasury shares and 153,080 Class C-D shares from LTIP 2020.
During the year 50,910 class B shares were delivered to participants in the share-based plan from 2017 and 53,933 class B shares were sold to cover the tax for the participants. In addition, and similar to LTIP 2019, a new issue of 1,218,800 reclassifiable, subordinated, incentive shares, divided into two classes, to the participants in Kinnevik's long-term share incentive plan resolved on by the 2020 AGM were registered by the Swedish Companies Registration Office (Sw. Bolagsverket) during June 2020.
Kinnevik applies the Esma Guidelines on Alternative Performance Measures (APM). An APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. For Kinnevik's consolidated accounts, this typically means IFRS.
APMs are disclosed when they complement performance measures defined by IFRS. The basis for disclosed APMs are that they are used by management to evaluate the financial performance and in so believed to give analysts and other stakeholders valuable information. Definitions of all APMs used are found below. Reconciliations of a selection of APMs can be found on Kinnevik's corporate website www.kinnevik.com.
| Debt/equity ratio | Interest-bearing liabilities including interest-bearing provisions divided by shareholders' equity |
|---|---|
| Equity ratio | Shareholders' equity including non-controlling interest as percentage of total assets |
| Internal rate of return, IRR | The annual rate of return calculated in quarterly intervals on a SEK basis that renders a zero net present value of (i) fair values at the beginning and end of the respective measurement period, (ii) investments and divestments, and (iii) cash dividends and dividends in kind |
| Investments | All investments in listed and unlisted financial assets, including loans to portfolio companies |
| Leverage | Net debt divided by portfolio value |
| Net asset value, NAV | Net value of all assets on the balance sheet, equal to the shareholders' equity |
| Net cash/(net debt) | Interest bearing receivables (excluding net outstanding receivables relating to portfolio companies), short-term investments and cash and cash equivalents less interest-bearing liabilities including interest-bearing provisions and unpaid investments/ divestments |
| Net investments | The net of all investments and divestments in listed and unlisted financial assets |
| Portfolio value | Total book value of fixed financial assets accounted at fair value through profit and loss |
| Total shareholder return, TSR | Annualized total return of the Kinnevik B share on the basis of shareholders reinvesting all cash dividends, dividends in kind, and mandatory share redemption proceeds into the Kinnevik B share, before tax, on each respective ex-dividend date. The value of Kinnevik B shares held at the end of the measurement period is divided by the price of the Kinnevik B share at the beginning of the period, and the resulting total return is then recalculated as an annual rate |
The Annual General Meeting will be held on 10 May 2021 in Stockholm. Shareholders wishing to have matters considered at the Annual General Meeting should submit their proposals in writing to agm@ kinnevik.com or to The Company Secretary, Kinnevik AB, Box 2094, SE-103 13 Stockholm, Sweden, at least seven weeks before the Annual General Meeting, in order for the proposal to be included in the notice to the meeting. Further details on how and when to register will be published in advance of the meeting.
In accordance with the resolution of the 2020 Annual General Meeting in Kinnevik, a Nomination Committee has been convened comprising members appointed by Kinnevik's largest shareholders in terms of voting interest.
The Nomination Committee comprises Cristina Stenbeck appointed by Verdere S.à r.l. and CMS Sapere Aude Trust, Hugo Stenbeck appointed by Alces Maximus LLC, James Anderson appointed by Baillie Gifford, Anders Oscarsson appointed by AMF Insurance & Funds, Marie Klingspor and Ramsay Brufer appointed by Alecta. Anders Oscarsson has been appointed Committee Chairman.
Information about the work of the Nomination Committee can be found on Kinnevik's corporate website at www. kinnevik.com.
Shareholders wishing to submit proposals to the Nomination Committee can do so in writing to [email protected] or to the Nomination Committee, Kinnevik AB, P.O. Box 2094, SE-103 13 Stockholm Sweden.
The Year-End Release 2020 will be published on 4 February 2021.
22 April: Interim report Jan-Mar 2021 12 July: Interim report Jan-Jun 2021 20 October: Interim report Jan-Sep 2021
Stockholm, 15 October 2020
Georgi Ganev Chief Executive Officer
This Interim Report has not been subject to specific review by the Company's auditors.
This information is information that Kinnevik AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out below, at 08.00 CET on 15 October 2020.
For further information, visit www.kinnevik.com or contact:
Director Investor Relations Phone +46 (0)70 762 00 50 Email [email protected]
Kinnevik is an industry focused investment company with an entrepreneurial spirit. Our purpose is to make people's lives better by providing more and better choice. In partnership with talented founders and management teams we build challenger businesses that use disruptive technology to address material, everyday consumer needs. As active owners, we believe in delivering both shareholder and social value by building long-term sustainable businesses that contribute positively to society. We invest in Europe, with a focus on the Nordics, the US, and selectively in other markets. Kinnevik was founded in 1936 by the Stenbeck, Klingspor and von Horn families. Kinnevik's shares are listed on Nasdaq Stockholm's list for large cap companies under the ticker codes KINV A and KINV B.
For further information, visit www.kinnevik.com or contact:
Torun Litzén Director Investor Relations Phone +46 (0)70 762 00 50 Email [email protected]
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