Interim / Quarterly Report • Oct 26, 2022
Interim / Quarterly Report
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Photo: Adnan Ali (Getty Images)
The emerging market fintech investor
No significant events after the end of the period.
Visit VEF's IR page for our financial reports and other information: vef.vc/investors
The financial result for the quarter reflects a weakening SEK/USD FX rate together with the value of the underlying portfolio remaining essentially flat QoQ (+0.7%). While valuation changes in individual portfolio names were mainly driven by market moves in their respective listed peers, similar to 2Q22, the VEF portfolio delivery on an aggregated level remained strong and broadly on forecast, coupled with some headwinds in certain portfolio currencies.
| Dec 31, 2020 | Dec 31, 2021 | Sep 30, 2022 | |
|---|---|---|---|
| Net asset value (USD mln) | 388.1 | 761.7 | 444.9 |
| Net asset value (SEK mln) | 3,178 | 6,885 | 5,023 |
| Net asset value per share (USD) | 0.47 | 0.73 | 0.42 |
| Net asset value per share (SEK) | 3.83 | 6.61 | 4.79 |
| VEF AB (publ) share price (SEK) | 4.04 | 6.05 | 2.16 |
Net asset value per share (SEK)
VEF – Investors in one of the strongest secular growth trends across some of the world's fastest-growing markets
In 1H22, we were quick to go on the defensive as market mood music changed. First, we strengthened our balance sheet, raising our first sustainability bond. At portfolio level, we overly focused on our size holdings, namely Creditas, Konfío and Juspay (67% of portfolio), ensuring they were in a strong capital position to continue to grow at a healthy clip through to planned break even. We then addressed our NAV mark in our 2Q22 filing, given the sell-off in public markets over that YTD period, and rebased it to a more conservative level.
With our defence in place, 3Q22 was a period where we started to lean back on the front foot. Specifically, we spent increasing time in our core investment ecosystems with VC partners, portfolio companies and pipeline. We were back marketing the VEF story to global investors, off strong underlying trends in our portfolio companies and a rebased NAV. Finally, given the dislocation between VEF's share price and the intrinsic value we see in our portfolio, we decided to launch a share repurchase program. This is the most logical thing we can do with any excess capital today – buy back our portfolio of quality private fintech assets at a deep discount to our NAV, a NAV marked to public market peer valuations. At this juncture, VEF is both a value and a growth stock.
Bottom line, we are in a good place, despite plenty of stress and volatility still in the system. It is a window for conservatism and patience, the upside opportunities will come.
We end 3Q22 with a NAV per share of SEK 4.79, up 11% QoQ and up 3% YoY. Total USD NAV ended the quarter at USD 444.9 mln, broadly flat QoQ and off 20% YoY. The 11% weakening of SEK vs USD QoQ drove NAV growth currency differential.
Following a sharp sell-off in 1H22, publicly traded fintech stocks, delivered a more mixed performance in 3Q22. The global fintech indices we track (baskets of publicly traded fintech benchmark stocks) fell 3% QoQ after falling 54% through 1H22. VEF portfolio company level delivery remained strong and broadly on forecast trend through
quarter, while we saw moderate weakness in key portfolio currencies QoQ versus USD, BRL (-4%) and INR (-3%).
It was this mixed set of inputs which saw our USD NAV remain static QoQ. Within that, our valuation mark for our largest holding Creditas saw a moderate 8% QoQ uplift while Konfío remained flat. Still, challenging market and macro forces led to mark downs in BlackBuck and Finja. The mark down in BlackBuck (-29% QoQ) is in line with the decline in trucking marketplace peer multiples over the period, while we marked our holding in Finja to invested cash level, a move given the strain Pakistan is under and a more conservative outlook for the company in the near term as a result. Juspay, we hold at recent investment round mark, which feels conservative given continued strong underlying performance – our confidence continues to grow for the future valuation creation path this key holding is on.
At the end of 3Q22, we sit on USD 56.3 mln of capital.
In 2Q22 Creditas signed an agreement to acquire Andbank Brazil and announced a top up of its Series F funding round in the process. Post end of 3Q22, the newsflow continued with a first-time release of Creditas financials under IFRS, a positive reporting upgrade and key step on their path to being a public company. In a very clear and value-added release, the company explained key trends YTD and set the narrative for how the business, and most importantly its financials, should positively trend through 2H22 and into 2023, and duly towards IPO. Key summary from the release is worth sharing in this management letter:
compression when rates rise and margin expansion as they fall. Margins also come under more pressure in high growth versus steady state periods. Creditas targets operational margins of 40–45% through cycle and there have been periods in the past when margins have gone well north of this. It is worth noting that in September the Brazilian Central Bank pointed to an end of the interest rate raising cycle as inflation is coming under control in Brazil. Stable SELIC (Brazilian overnight rate) and slower relative growth, coupled with the loan portfolio repricing should move Creditas back towards its targeted 40–45% operational margin.
Bottom line from the release – Creditas is on a path to profitability. This path is clearly related to (i) expanding gross profit related to stabilization of interest rates, portfolio repricing and lower impact of frontloading IFRS provisions, (ii) lower impact of customer acquisition cost as portfolio builds and they get higher efficiency in acquiring customers through their own user base and (iii) operational leverage as they continue growing their revenue base to absorb existing overhead that will grow at a significantly lower pace. At VEF, we remain as confident as ever about Creditas. All eventual new economy winners in emerging markets have to stand up and deliver through difficult points in the cycle and we have seen the Creditas team do that on numerous occasions. The analyst in us
loves the way Creditas's financials and their outlook are set up right now – volume growth + widening margins and falling relative costs – the ball is in their court to execute, something they have a super strong track record of doing.
Members of the team were in São Paulo in September for what is fast becoming Brazil's tech week. It was great to spend more time with portfolio companies, investment partners and potential investees in person, in our most important market. General sentiment was of cautious optimism. Caution driven by global macro and politics. Optimism built on the very real impact technology is having by carving out big portions of the economy and growing transformative businesses. There was also a calming reminder that Brazilian entrepreneurs are well versed in dealing with inflation and interest rate cycles.
It was good to interact first-hand with some of the innovations that continue to drive digital transformation, such as Brazil's public payments infrastructure (PIX). It is already facilitating meaningful transaction volumes and can, by any measure, be deemed a huge success. As a firm we see many similarities and differences with the path ahead for Brazil versus India with these innovations in place.
At VEF we feel a strong connection to the Brazilian tech ecosystem where we have found a rhythm, have integrated well and see opportunities continue to come knocking. This trip reminded us in many ways of our first trip there in 2016 – one of the times of greatest opportunity to plant seeds for the next cohort of VEF portfolio companies.
We also spent time in the Middle East, a region that is evolving fast. Dubai is becoming a major global talent hub, while Saudi opening up, has seen its startup ecosystem evolve at a rapid pace in a short period of time. We like Egypt as a long term investment play for our capital and continue to track the fintech ecosystem there closely.
In the quarter, VEF invested USD 1 mln into Mahaana, Pakistan's first digital wealth management company and
recent graduate of Y Combinator (renowned US startup incubator). This was part of a larger seed round that included SparkLabs, IGI Holdings and Mattias Martinsson (founder of Tundra Fonder). Mahaana's platform allows over 50 million working class Pakistanis to better invest their savings and pensions, in a country where the vast majority of savings are made in cash or sit in low-yield bank accounts. The scale of the opportunity is clear when one looks at the deep success of the savings and pension model in Sweden and the 401(k) in the US. Pakistan lags significantly behind in individual savings rates with only c. 250,000 individual investors, 0.02% of a 200 million+ population.
Founded by Shamoon Tariq, a long-time friend and partner of VEF, he is the perfect founder to build this business in his home country, after years spent in asset management across frontier markets (including Pakistan) with Swedish based Tundra Fonder. It is VEF's third fintech investment into the early-stage scale opportunity market that is Pakistan and allows us to continue our ESG mission of contributing to financial inclusion and well-being in that country. It is yet another great investment fit for our sustainable bond investment mandate.
We hate trading at a discount to NAV. It pains us as VEF business builders and shareholders to see our stock trading at a deep discount to NAV. This discount averaged 46% through 3Q22. We understand the many reasons why an investment company like VEF can trade at a deep discount to NAV at a point like this in the macro/market cycle, but we fundamentally disagree with it. Since our very clear exercise at end of 1H22, when we marked our NAV down significantly to be in line with publicly traded fintech multiples, we have watched the discount persist.
That said, we do love the opportunity that our shares trading at this level presents us to create value by buying back our own stock. In August, our Board determined that it was appropriate, given the current market conditions, VEF's available free cash, the wide discount to NAV at which VEF shares are trading, and the valuation of underlying portfolio positions, to initiate a share buyback program. The program is up to USD 10 mln, and we have bought back 5.8 million VEF shares, (USD 1.3 mln) until the end of 3Q22, at an average price discount to our 2Q22 NAV mark, of 45%. This is the most obvious investment action in our toolbox right now.
Besides the buyback program, we have a number of other initiatives ongoing to address the discount:
All of the above is layered in off a strong fundamental business and investment case that is VEF. We are just working harder in this window to bring that case back front and centre.
We have been debating the differing trends in public versus private markets with our many investors since inception and this is yet another unique window of that evolving debate. YTD public markets have been quick to de-rate, super-efficient in pricing in a higher risk more volatile environment. Within private markets, which is our core investment domain, companies, on average, are not raising fresh capital unless they have to. Many later stage benchmark private companies raised a lot of capital through 2021 and early 2022 and were well placed coming into this window. This is not a market they want to try and raise in. Those that do need capital or want to add an additional capital buffer, are looking internally first. There remains market support for the better quality companies on this front, and generally via convertible structures versus priced rounds.
Another related trend, to preserve cash positions and prolong runway, many are focusing on costs – nearly every fintech has a cost story now, or at least a heightened efficiency drive. This is no longer perceived as a sign of weakness, but more a market norm today. Many are also focusing on core highest margin generating business lines, to the detriment of new product lines or expansion strategies in this window.
We firmly believe that we are entering a positive vintage for fintech investing. We have experienced this first hand in 2015–16 when macro and markets were at a low ebb and we made some of our highest return investments, notably Tinkoff and iyzico (since exited at c. 60% IRRs) and made our initial investment into Creditas. This clearly excites us, and we are readying ourselves for this. That said, while financial headlines and public market share price performance tell us there is blood on the street, that this could be a great through cycle investing window for a permanent capital vehicle like VEF – the reality we see as of today is that while we probably are
close, we are not there yet. On average, we are not seeing quality private fintech on offer at (or below) public market fintech prices – not outside of our own shares.
Hence, we play the patience card, defend our core positions and buy back our own shares.
Post a period of inward focus through 1H22, with a strong defence set up, we were very much back on the front foot in 3Q22, despite a still challenging global backdrop.
We have stress tested and learned, in this window, that we have a quality portfolio that is proving itself through yet another crisis, as is the way in emerging markets. We also have a great set of through cycle investors, who continue to have our back in windows of macro and market dislocation, something we readily acknowledge and respect. From an investment perspective, patience is key at this time, as we await private markets to settle and the right assets to appear at the right price point. It has become a classic window to buy back our own shares.
At VEF, we invest in fintech across the emerging world, riding one of the strongest multi-year secular growth trends in some of the world's fastest-growing markets. Long a portfolio of quality emerging markets fintech holdings, while selectively shopping for new holdings, we are as well-positioned as ever to create long term value for our shareholders.
October 2022, Dave Nangle
VEF's net asset value per share increased by 0.2% in USD over 3Q22, while VEF's share price in SEK decreased by 7%. During the same period, the MSCI Emerging Markets index* decreased by 12% in USD terms.
The Company has investments in money market funds and bonds as part of its liquidity management operations. As at Sep 30, 2022, the liquidity placements are valued at USD 45.5 mln.
| Company | Fair value Sep 30, 2022 |
Net invested amount |
Net investments 2022 |
Change in fair value 3Q22 |
Change in fair value 9M22 |
Fair value Dec 31, 2021 |
Valuation method |
|---|---|---|---|---|---|---|---|
| Creditas | 211,328 | 98,356 | – | 15,391 | -182,795 | 394,123 Calibration 1 methodology |
|
| Konfío | 61,099 | 56,521 | – | 38 | -74,483 | 1 135,582 Mark-to-model |
|
| Juspay | 47,471 | 21,083 | 4,098 | – | 953 | 42,420 Latest transaction 1 | |
| Solfácil | 20,000 | 20,000 | 20,000 | – | – | – Latest transaction 1 | |
| TransferGo | 16,905 | 13,877 | – | -1,221 | -12,366 | 1,2 29,271 Mark-to-model |
|
| Rupeek | 15,195 | 13,858 | 1,873 | 134 | 170 | 13,152 Latest transaction 1,2 | |
| Gringo | 12,250 | 12,250 | 12,250 | – | – | – Latest transaction 1 | |
| JUMO | 8,829 | 14,614 | – | -753 | -9,580 | 18,409 Mark-to-model | |
| Abhi | 7,585 | 1,798 | 448 | – | 5,787 | 1,350 Latest transaction 1 | |
| FinanZero | 7,467 | 5,163 | 991 | -831 | -5,406 | 11,882 Latest transaction 1,2 | |
| BlackBuck | 7,120 | 10,000 | – | -2,880 | -2,880 | 1 10,000 Mark-to-model |
|
| Nibo | 6,683 | 6,500 | – | 7 | -5,877 | 1, 12,560 Mark-to-model |
|
| Magnetis | 6,040 | 6,668 | 1,000 | -2,160 | -5,486 | 1 10,526 Mark-to-model |
|
| Finja | 2,925 | 2,925 | – | -4,427 | -4,426 | 1 7,351 Mark-to-model |
|
| Mahaana | 1,000 | 1,000 | 1,000 | – | – | – Latest transaction 1 | |
| minu | 424 | 450 | – | 63 | -26 | 1 450 Mark-to-model |
|
| REVO | 0 | 6,664 | – | – | -13,235 | 1 13,235 Mark-to-model |
|
| Liquidity placements | 45,540 | 44,300 | -1,000 | 192 | -4,102 | 50,642 | 1 |
| Portfolio value | 477,861 | 336,027 | 40,660 | 3,553 | -313,752 | 750,953 | |
| Cash and cash equivalents | 10,740 | 11,131 | |||||
| Other net liabilities | -43,696 | -356 | |||||
| Total net asset value | 444,905 | 761,728 |
* The MSCI Emerging Markets Index is a free float weighted equity index that consists of indices in 24 emerging economies.
The investment portfolio stated at market value (TUSD) at September 30, 2022.
13%
Creditas announces expansion of Series-F round and released its trading statement for 1H22 Creditas, VEF's largest portfolio holding, announced the expansion of their Series F funding round with a new investment of USD 50 mln as part of a strategic partnership with Andbank. Creditas maintains its positions as a high growth company, posting revenues of BRL 846 mln in 1H21, a 248% YoY increase.
Creditas' outlook remains strong with 1H22 revenues up 248% YoY. We use the calibration methodology to value the company which saw a small uplift in valuation during the quarter of 8%, equal to USD 15.4 mln.
During the quarter we moved from using the calibration methodology to a mark to model-based valuation based on the elapsed time from the latest transaction in the company. The valuation remained flat vs. 2Q22.
Due to the current strain in Pakistan the short-term outlook for Finja is more conservative and Finja is therefore valued at amortized cost at quarter end, which equal a decrease in value of USD 4.4 mln in 3Q22.
JUMO has been certified as a B Corporation. The certification recognizes JUMO's commitment to high standards of social and environmental performance, accountability and transparency.
VEF co-led Mahaana's USD 2.1 mln seed round alongside SparkLabs and IGI Holdings in August. Mahaana's platform will allow over 50 mln working class Pakistanis to better invest their savings and pensions, in a country where the vast majority of savings are made in cash or sit in low-yield bank accounts.
Creditas is building an asset focused ecosystem that supports customers in three essential aspects; living (home), mobility (transport) and earning (salary) by providing fintech, insurtech and consumer solutions. One of LatAm's leading private fintech plays, Creditas is on a clear path towards IPO.
In 4Q21 VEF made a follow-on investment of USD 25 mln into Creditas, in total VEF has invested USD 98 mln into Credits.
Founded in 2020, Gringo is building a "super-app" for drivers in Brazil and currently offers vehicle-documentation related services, credit and insurance solutions. Gringo is focused on improving drivers' vehicle ownership journey, which is currently riddled with pain
In 1Q22, VEF invested USD 12.2 mln into Gringo, leading its USD 34 mln series B round together with Piton Capital which also saw participation from existing investors.
Solfácil is building a digital ecosystem for solar energy adoption in Brazil. It currently offers digital solar panel marketplace and financing solutions on its platform, allowing the Brazilian consumers to finance and own their solar panels.
In 1Q22, VEF invested USD 20 mln into Solfácil, participating in its USD 100 mln Series C round led by QED and also saw participation from SoftBank and existing investors. The round was subsequently extended to USD 130 mln with an additional USD 30 mln contribution from Fifth Wall in 2Q22.
FinanZero is the leading online credit marketplace in Brazil, acting as an independent broker to give millions of customers access to credit from a network of 60 lenders at the best rates and terms in the market in one search.
VEF made its initial investment into FinanZero in 2016, with the latest follow-on investment of USD 1 mln taking place in 2Q22.
Fair value (USD): 47.5 mln
Fair value (USD): 15.2 mln
Share of VEF's portfolio:
3.2%
VEF stake: 2.3%
Share of VEF's portfolio:
9.9%
VEF stake: 9.9%
Share of VEF's portfolio:
VEF stake: 12.3%
Juspay is India's leading payment technology company offering a unifying layer of products and value-added services to merchants, thereby enabling them to improve their conversion rates. Juspay has played a key role in India's payment transformation and is present on 300 mln+ smartphones and processing USD 90 bln+ annualized TPV.
VEF has made a cumulative investment of USD 21 mln into Juspay, investing USD 13 mln leading its broader Series B round and investing USD 8 mln in its series C round.
Rupeek is one of India's leading asset-backed digital lending platform offering low interest rate gold loans to consumers at their doorsteps. Rupeek is building products to make credit accessible to Indian households, which hold over 25,000 tonnes of gold worth c. USD 1.5 tln.
In 4Q21 Rupeek raised USD 34 mln in an investment round led by Lightbox with a participation of USD 5 mln from VEF. In total VEF has invested USD 14 mln into Rupeek. Fair value (USD): 6.7 mln
Share of VEF's portfolio: 1.4%
VEF stake: 20.1%
Nibo is the leading accounting SaaS provider in Brazil, transforming the way accountants and SMEs interact. Nibo service over 350 thousand SMEs through 3,700 accountants on their platform.
Since VEFs initial investment into Nibo in 2Q17 VEF made two follow-on investments in 2019 and 2020 and has in total invested USD 6.5 mln.
BlackBuck is the largest online trucking platform in India digitizing fleet operations for truckers (payments solutions around tolls and fuel) and operating a marketplace matching trucks with relevant loads. BlackBuck represents VEF's first investment in the 'embedded fintech' space.
VEF made its initial USD 10 mln investment into BlackBuck in 3Q21.
Konfío builds digital banking and software tools to boost SME growth and productivity in Mexico through three core offerings: credit, payments and SaaS. VEF has invested a total of USD 56.6 mln in Konfío since 2Q18, most recently
minu is an employee financial wellness company and the market leader for salary-ondemand in Mexico. minu solves the liquidity gap experienced by employees between paychecks by offering instant access to their earned wages ahead of payday. VEF made its initial investment of USD 0.5 mln into minu in 1Q21.
TransferGo provides low-cost, fast, reliable digital money transfer services to migrants across Europe, with customers paying up to 90% less compared by using banks and have their money delivered securely in minutes. VEF first invested in TransferGo in 2Q16 and has invested a total of USD 13.9 mln into
the company.
VEF stake:
17.1%
1.3%
Fair value (USD): 6.0 mln
Magnetis is a digital investment advisor democratizing access to affordable and easyto-use investment management. Magnetis offer customers a simple, digital tool to manage their wealth.
Since 3Q17 VEF has invested USD 6.7 mln into Magnetis with the latest investment of USD 1.0 mln made in 2Q22.
VEF stake: 13.8%
Share of VEF's portfolio: 0.2%
1.8%
Share of VEF's portfolio: 8.8 mln
Fair value (USD): 1.0 mln
Fair value (USD):
VEF stake: 22.0%
| Share of VEF's portfolio: 0.6% |
|---|
Fair value (USD): 2.9 mln
VEF stake: 11.5%
Fair value (USD): 7.6 mln
Share of VEF's portfolio: 1.6%
Total gross investments in financial assets during 9M22 were USD 76.7 mln.
During 1Q22 VEF invested USD 32.2 mln into two new portfolio companies. USD 20.0 mln into Solfácil, Brazil's largest digital solar panel marketplace and financing platform and USD 12.2 mln into Brazilian Gringo and their super-app and one-stop shop for drivers.
During 2Q22 VEF deployed an additional USD 6.6 mln into the current portfolio. Follow-on investments were made into Juspay (USD 4.1 mln), FinanZero (USD 1.0 mln), Magnetis (USD 1.0 mln) in form of a SAFE note, and Abhi (USD 0.5 mln). VEF also took up its right and converted the outstanding SAFE note in Abhi (USD 0,5 mln) to shares in the company. USD 35.0 mln was also invested in liquidity placements during the quarter.
During 3Q22 VEF invested USD 1.0 mln into new portfolio company Mahaana, Pakistan's first digital wealth management company. VEF also deployed an additional USD 1.9 mln into portfolio company Rupeek.
Gross divestments in financial assets during 9M22 were USD 36.0 mln, of which all relates to divestments in liquidity placements.
VEF AB (publ)'s share capital per September 30, 2022, is distributed among 1,106,675,373 shares with a par value of SEK 0.01 per share. For more information on the share capital please refer to Note 5.
Share repurchases
In August VEF announced that the Board of Directors had approved a new share buyback program based on the mandate from the annual general meeting of the Company on May 10, 2022.
The new buyback program allows VEF to buy shares for a maximum of USD 10 mln in total. The purpose of the buyback program is to allow the Company the flexibility to create additional shareholder value and optimize the Company's capital structure as and when deemed appropriate by reducing the Company's share capital. As per the end of 3Q22 the company holds 5,833,961 repurchased shares.
During 9M22, the result from financial assets at fair value through profit or loss amounted to USD -313.8 mln (9M21: 73.9).
Finja is a digital lending platform for SMEs in Pakistan, and also operates a HR platform where companies can manage day-to-day functions such as payroll, invoicing and payments.
VEF has invested a total of USD 2.9 mln into Finja since 2016.
Abhi is a financial wellness company for businesses and their employees in Pakistan, offering earned wage access, invoice factoring and payroll solutions.
VEF led Abhi's Seed round in 2Q21 and has invested a total of USD 1.8 mln into the company, most recently participating in Abhi's Series A with an investment of USD 0.5 mln in 2Q22.
Mahaana is Pakistan's first digital wealth management company, building a platform to allow working class Pakistanis to better invest their savings and pensions in a market where the individual savings rate significantly lags peers.
VEF invested USD 1 mln into Mahaana as part of their seed round in 3Q22, co-leading the USD 2.1 mln round with SparkLabs Group and local strategic partner IGI Holdings.
JUMO is a full technology stack for financial services that enables partner banks to reach millions of new customers with credit and savings products at affordable prices whilst making predictable returns, where more than half of these customers are interacting with a financial institution for the first time.
In 4Q21 JUMO raised USD 120 mln from new and existing investors in a round led by Fidelity Management, Visa and Kingsway. VEF has invested a total of USD 14.6 mln in JUMO since 2015.
During 3Q22, the result from financial assets at fair value through profit or loss amounted to USD 3.6 mln (3Q21: 54.3).
The financial result for the quarter reflects a weakening SEK/USD FX rate together with the value of the underlying portfolio remaining essentially flat QoQ (+0.7%). While valuation changes in individual portfolio names were mainly driven by market moves in their respective listed peers, similar to 2Q22, the VEF portfolio delivery on an aggregated level remained strong and broadly on forecast, coupled with some headwinds in certain portfolio currencies.
The liquid assets of the Group, defined as cash and bank deposits, amounted to USD 10.7 mln on September 30, 2022 (YE21: 11.1). The Company also has placements in money market funds and bonds, as part of its liquidity management operations. As of September 30, 2022, the liquidity placements are valued at USD 45.5 mln (YE21: 50.6).
The parent company, VEF AB (publ) is the holding company of the Group. The net result for 9M22 was SEK 142.5 mln (9M21: 28.7). VEF AB (publ) is the parent of four wholly owned subsidiaries; VEF Cyprus Limited, VEF Fintech Ireland Limited, VEF Service AB (under liquidation) and VEF UK Ltd. VEF AB (publ) is the direct shareholder of three portfolio companies (BlackBuck, Juspay and Rupeek).
Following what was a difficult window for global financial markets in 1H22, 3Q22 showcased a mixed but on average positive quarter for publicly traded fintech stocks. Markets currently have a stronger appetite for profitable stocks compared to growth-oriented assets. Inflation levels remain high and interest rate hikes are very real, collectively creating a low visibility and a risk-off mode environment. During the quarter VEF has traded at a deep discount to the latest reported NAV, similar to many global peers and other listed fintech stocks. On a VEF group level, the financial position remains strong with a solid balance sheet and a USD 56.3 mln cash position at the end of the quarter, expected to be more than sufficient to support current portfolio over the coming twelvemonths period. Importantly, the largest companies in our portfolio remain well funded following recent capital raises in 1H22 and we forecast the majority of our portfolio to continue growing at healthy levels, albeit at a somewhat slower pace to extend runway and financial flexibility. The negative impact on our portfolio is market-related in the short to medium term, affecting the respective valuations which may impact the ability to raise additional capital further on. Across the board, our portfolio companies have launched cost saving initiatives to extend runway and have plans in place to get to break even with the current funding levels.
VEF has one equity holding (REVO), in addition to liquidity placements (Tinkoff bonds) with direct or partial exposure to Russia, equivalent to 2.3% of YE21 NAV.
VEF wrote down the holdings in REVO and Tinkoff bonds to zero in 1Q22. As the situation in Russia remains highly uncertain, the valuations are kept unchanged at zero in 3Q22. Nevertheless, Tinkoff has honoured coupon payments and has followed through with the latest payments as planned in March, June and September 2022.
| Expressed in USD thousands | Note | 9M 2022 | 9M 2021 | 3Q 2022 | 3Q 2021 |
|---|---|---|---|---|---|
| Result from financial assets at fair value through profit or loss | 4 | -313,752 | 73,878 | 3,553 | 54,345 |
| Coupon income | 293 | 292 | 98 | 97 | |
| Other income | 179 | 8 | 15 | 8 | |
| Administrative and operating expenses | -6,127 | -6,230 | -1,426 | -2,213 | |
| Operating result | -319,407 | 67,948 | 2,240 | 52,237 | |
| Financial income and expenses | |||||
| Interest income | – | 62 | – | – | |
| Interest expense | -1,785 | – | -1,091 | – | |
| Currency exchange gains/losses, net | 5,380 | -472 | 3,720 | -463 | |
| Net financial items | 3,595 | -410 | 2,629 | -463 | |
| Result before tax | -315,812 | 67,538 | 4,869 | 51,774 | |
| Taxation | -31 | -14 | -30 | – | |
| Net result for the period | -315,843 | 67,525 | 4,839 | 51,774 | |
| Earnings per share, USD | -0.30 | 0.08 | 0.01 | 0.06 | |
| Diluted earnings per share, USD | -0.30 | 0.08 | 0.00 | 0.06 |
| Other comprehensive income for the period: |
|---|
| Items that may be classified subsequently to profit or loss: |
| Expressed in USD thousands | 9M 2022 | 9M 2021 | 3Q 2022 | 3Q 2021 |
|---|---|---|---|---|
| Net result for the period | -315,843 | 67,525 | 4,839 | 51,774 |
| Other comprehensive income for the period: | ||||
| Items that may be classified subsequently to profit or loss: | ||||
| Currency translation differences | – | -5 | – | 26 |
| Total other comprehensive income for the period | – | -5 | – | 26 |
| Total comprehensive income for the period | -315,843 | 67,520 | 4,839 | 51,800 |
Total comprehensive income for the periods above is entirely attributable to the equity holders of the Company.
| Expressed in USD thousands | Note | Sep 30, 2022 | Dec 31, 2021 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Tangible non-current assets | |||
| Property, plant and equipment | 12 | 102 | |
| Total tangible non-current assets | 12 | 102 | |
| Financial non-current assets | |||
| Financial assets at fair value through profit or loss | 4 | ||
| Equity financial assets | 432,321 | 700,311 | |
| Liquid financial assets | 45,540 | 50,642 | |
| Other financial assets | 21 | 27 | |
| Total financial non-current assets | 477,882 | 750,980 | |
| CURRENT ASSETS | |||
| Tax receivables | 22 | 109 | |
| Other current receivables | 457 | 387 | |
| Prepaid expenses and accrued income | 117 | 138 | |
| Cash and cash equivalents | 10,740 | 11,131 | |
| Total current assets | 11,336 | 11,765 | |
| TOTAL ASSETS | 489,230 | 762,847 | |
| SHAREHOLDERS' EQUITY (including net result for the financial period) | 444,905 | 761,728 | |
| NON-CURRENT LIABILITIES | |||
| Long-term debt | 6 | 43,180 | – |
| Total non-current liabilities | 43,180 | – | |
| CURRENT LIABILITIES | |||
| Accounts payable | 50 | 138 | |
| Tax liabilities | – | 51 | |
| Other current liabilities | 153 | 534 | |
| Accrued expenses | 942 | 396 | |
| Total current liabilities | 1,145 | 1,119 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 489,230 | 762,847 |
| Expressed in USD thousands | Note | Share capital |
Additional paid in capital |
Retained earnings |
Total |
|---|---|---|---|---|---|
| Balance at Jan 1, 2021 | – | – | 388,066 | 388,066 | |
| Net result 9M21 | – | – | 67,525 | 67,525 | |
| Other comprehensive income for the period | |||||
| Currency translation difference | – | – | -5 | -5 | |
| Total comprehensive income for the period | – | – | 67,520 | 67,520 | |
| Transactions domicile change: | |||||
| - Issuance of share capital | 1,006 | – | -1,006 | 0 | |
| - Issuance of LTIP 2019 Plan shares | 14 | – | -14 | 0 | |
| - Issuance of LTIP 2020 Plan shares | 39 | – | -39 | 0 | |
| Transactions with owners: | |||||
| - Directed rights issue | 238 | 97,192 | – | 97,430 | |
| Value of employee services: | |||||
| - Employee share option scheme | – | 5 | 324 | 329 | |
| - Share based long-term incentive program | 10 | 114 | 142 | 266 | |
| Balance at Sep 30, 2021 | 1,307 | 97,311 | 454,993 | 553,611 | |
| Balance at Jan 1, 2022 | 1,308 | 97,440 | 662,980 | 761,728 | |
| Net result 9M22 | – | – | -315,843 | -315,843 | |
| Other comprehensive income for the period | |||||
| Currency translation difference | – | – | – | – | |
| Total comprehensive income for the period | - | - | -315,843 | -315,843 | |
| Value of employee services: | |||||
| - Employee share option scheme | 7 | – | 8 | – | 8 |
| Expressed in USD thousands | Note | Share capital |
Additional paid in capital |
Retained earnings |
Total |
|---|---|---|---|---|---|
| Balance at Jan 1, 2021 | – | – | 388,066 | 388,066 | |
| Net result 9M21 | – | – | 67,525 | 67,525 | |
| Other comprehensive income for the period | |||||
| Currency translation difference | – | – | -5 | -5 | |
| Total comprehensive income for the period | – | – | 67,520 | 67,520 | |
| Transactions domicile change: | |||||
| - Issuance of share capital | 1,006 | – | -1,006 | 0 | |
| - Issuance of LTIP 2019 Plan shares | 14 | – | -14 | 0 | |
| - Issuance of LTIP 2020 Plan shares | 39 | – | -39 | 0 | |
| Transactions with owners: | |||||
| - Directed rights issue | 238 | 97,192 | – | 97,430 | |
| Value of employee services: | |||||
| - Employee share option scheme | – | 5 | 324 | 329 | |
| - Share based long-term incentive program | 10 | 114 | 142 | 266 | |
| Balance at Sep 30, 2021 | 1,307 | 97,311 | 454,993 | 553,611 | |
| Balance at Jan 1, 2022 | 1,308 | 97,440 | 662,980 | 761,728 | |
| Net result 9M22 | – | – | -315,843 | -315,843 | |
| Other comprehensive income for the period | |||||
| Currency translation difference | – | – | – | – | |
| Total comprehensive income for the period | - | - | -315,843 | -315,843 | |
| Value of employee services: | |||||
| - Employee share option scheme | 7 | – | 8 | – | 8 |
| - Share based long-term incentive program | 8 | 10 | 261 | – | 271 |
| Buyback of own shares | – | -1,259 | – | -1,259 | |
| Balance at Sep 30, 2022 | 1,318 | 96,450 | 347,137 | 444,905 |
| Expressed in USD thousands | 9M 2022 | 9M 2021 | 3Q 2022 | 3Q 2021 |
|---|---|---|---|---|
| OPERATING ACTIVITES | ||||
| Result before tax | -315,812 | 67,538 | 4,869 | 51,774 |
| Adjustment for non-cash items: | ||||
| Interest income and expense, net | 1,785 | -62 | 1,091 | – |
| Currency exchange gains/-losses, net | -5,380 | 472 | -3,720 | 463 |
| Depreciations | 91 | 77 | 14 | 27 |
| Result from financial assets at fair value through profit or loss | 313,752 | -73,878 | -3,553 | -54,345 |
| Result from long term receivables | – | -27 | – | -27 |
| Other non-cash items affecting profit or loss | 273 | 234 | 99 | 119 |
| Adjustment for cash items | ||||
| Coupon income | -293 | -292 | -98 | -97 |
| Change in current receivables | -1,864 | -257 | -322 | -211 |
| Change in current liabilities | -293 | 884 | -827 | 691 |
| Net cash used in operating activities | -7,741 | -5,311 | -2,447 | -1,606 |
| Investments in financial assets | -76,660 | -136,712 | -2,873 | -104,269 |
| Sales of financial assets | 36,000 | 49,601 | 3,000 | 13,101 |
| Repayment of short-term loan receivables | – | 2,176 | – | – |
| Coupon income | 293 | 292 | 98 | 97 |
| Interest received | – | 62 | – | – |
| Net cash flow used in operating activities | -48,108 | -89,892 | -2,222 | -92,677 |
| FINANCING ACTIVITIES | ||||
| Proceeds from sustainability bonds | 53,080 | – | – | – |
| Interest paid on sustainability bonds | -908 | – | -908 | – |
| Proceeds from directed rights issue, net | – | 97,430 | – | 97,430 |
| Buybacks of own shares | -1,259 | – | -1,259 | – |
| Proceeds from new share issue through employee options | 10 | 324 | 10 | 10 |
| Net cash flow from/used in financing activities | 50,923 | 97,754 | -2,157 | 97,440 |
| Change in cash and cash equivalents | 2,815 | 7,862 | -4,379 | 4,763 |
| Cash and cash equivalents at the beginning of the period | 11,131 | 4,224 | 15,759 | 7,167 |
| Exchange gains/losses on cash and cash equivalents | -3,206 | -625 | -640 | -469 |
| Cash and cash equivalents at the end of the period | 10,740 | 11,461 | 10,740 | 11,461 |
Alternative Performance Measures (APMs) are financial measures other than financial measures defined or specified by International Financial Reporting Standards (IFRS) and have been issued by ESMA (the European Securities and Markets Authority).
VEF regularly uses alternative performance measures to enhance comparability from period to period and to give deeper information and provide meaningful supplemental information to analysts, investors and other parties.
It is important to know that not all companies calculate alternative performance measures identically, therefore these measurements have limitations and should not be used as a substitute for measures of performance in accordance with IFRS.
Below you find our presentation of the APMs and how we calculate these measures.
| Sep 30, 2022 | Sep 30, 2021 | |
|---|---|---|
| Net asset value, USD | 444,904,568 | 553,610,504 |
| Exchange rate at balance sheet date, USD/SEK | 11.29 | 8.74 |
| Net asset value/share, USD | 0.42 | 0.53 |
| Net asset value/share, SEK | 4.79 | 4.64 |
| Net asset value, SEK | 5,022,913,557 | 4,837,307,583 |
| Share price, SEK | 2.16 | 5.66 |
| Premium/discount(–) to NAV | -54.9% | 21.9% |
| Weighted average number of shares for the financial period 1 | 1,045,419,561 | 860,077,467 |
| Weighted average number of shares for the financial period, fully diluted 1, 2 |
1,045,419,561 | 860,757,292 |
| Number of shares at balance sheet date 1 | 1,048,856,017 | 1,041,789,978 |
| Number of shares at balance sheet date, fully diluted 1, 2 |
1,048,856,017 | 1,042,469,803 |
| 1. Number of shares does not include the 51,985,395 redeemable common shares issued under the 2020, 2021 and 2022 long-term incentive programs as well as the 5,833,961 repurchased shares. |
| Sep 30, 2022 | Sep 30, 2021 | |
|---|---|---|
| Net asset value, USD | 444,904,568 | 553,610,504 |
| Net asset value, SEK | ||
| Net asset value, USD | 444,904,568 | 553,610,504 |
| SEK/USD | 11.29 | 8.74 |
| Net asset value, SEK | 5,022,913,557 | 4,837,307,583 |
| Net asset value/share, USD | ||
| Net asset value, USD | 444,904,568 | 553,610,504 |
| Number of outstanding shares | 1,048,856,017 | 1,041,789,987 |
| Net asset value/share, USD | 0.42 | 0.53 |
| Net asset value/share, SEK | ||
| Net asset value, USD | 444,904,568 | 553,610,504 |
| SEK/USD | 11.29 | 8.74 |
| Net asset value, SEK | 5,022,913,557 | 4,837,307,583 |
| Number of outstanding shares | 1,048,856,017 | 1,041,789,987 |
| Net asset value/share, SEK | 4.79 | 4.64 |
| Premium/discount(–) to NAV | ||
| Net asset value, USD | 444,904,568 | 553,610,504 |
| SEK/USD | 11.29 | 8.74 |
| Net asset value, SEK | 5,022,913,557 | 4,837,307,583 |
| Number of outstanding shares | 1,048,856,017 | 1,041,789,978 |
| Net asset value/share, SEK | 4.79 | 4.64 |
| Share price, SEK | 2.16 | 5.66 |
| Premium/discount(–) to NAV | -54.9% | 21.9% |
Net value of all assets on the balance sheet, equal to the shareholders' equity.
Net asset value/share is defined as shareholders' equity divided by total number of outstanding shares.
Net asset value/share is defined as shareholders' equity divided by total number of outstanding shares multiplied with the USD/SEK exchange rate at balance sheet date.
Traded premium/discount to NAV is defined as the share price divided to the net asset value/share.
Diluted basis considers the total number of outstanding common shares as well as the shares that could be claimed through the conversion of outstanding share options and Series C shares under the long-term incentive programs when the program's conditions has been fulfilled and the shares have not yet been converted.
Total book value of financial assets held at fair value through profit and loss.
Earnings/share is defined as the result for the period divided by average weighted number of shares for the period.
Diluted earnings/share is defined as the result for the period divided by average number of shares for the period fully diluted.
| Expressed in SEK thousands | ||
|---|---|---|
| Expressed in SEK thousands | 9M 2022 | May 28– Sep 30, 2021 |
3Q 2022 | 3Q 2021 |
|---|---|---|---|---|
| Result from financial assets at fair value through profit or loss | 193,599 | 46,073 | 104,522 | 46,073 |
| Coupon income | 2,975 | 836 | 1,049 | 836 |
| Other income | 139 | – | 139 | – |
| Administrative and operating expenses | -40,574 | -13,227 | -10,089 | -13,227 |
| Operating result | 156,139 | 33,682 | 95,621 | 33,682 |
| Financial income and expenses | ||||
| Interest expense | -18,969 | – | -11,931 | – |
| Currency exchange gains/losses, net | 5,328 | -4,988 | 1,917 | -4,988 |
| Net financial items | -13,641 | -4,988 | -10,014 | -4,988 |
| Result before tax | 142,498 | 28,694 | 85,607 | 28,694 |
| Taxation | – | – | – | – |
| Net result for the period | 142,498 | 28,684 | 85,607 | 28,684 |
The Parent Company have no items to account for as other comprehensive income and therefore the net result for the period is equal to the total comprehensive income for the period.
| Expressed in SEK thousands | Note | Sep 30, 2022 | Dec 31, 2021 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Financial non-current assets | |||
| Shares in subsidiaries | 2,348,782 | 2,027,853 | |
| Financial assets at fair value through profit or loss | |||
| Equity financial assets | 787,883 | 592,653 | |
| Liquid financial assets | 514,145 | 457,709 | |
| Other financial assets | 50 | 244 | |
| Total financial non-current assets | 3,650,860 | 3,078,459 | |
| CURRENT ASSETS | |||
| Tax receivables | 178 | 102 | |
| Other current receivables | 5,014 | 3,102 | |
| Other current receivables, Group | 9,368 | 11,028 | |
| Prepaid expenses and accrued income | 1,164 | 1,245 | |
| Cash and cash equivalents | 100,822 | 46,011 | |
| Total current assets | 116,546 | 61,488 | |
| TOTAL ASSETS | 3,767,406 | 3,139,947 | |
| SHAREHOLDERS' EQUITY (including net result for the financial period) | 5 | 3,264,286 | 3,132,572 |
| NON-CURRENT LIABILITIES | |||
| Long-term debts | 6 | 487,500 | – |
| Total non-current liabilities | 487,500 | – | |
| CURRENT LIABILITIES | |||
| Accounts payable | 415 | 995 | |
| Other current liabilities, Group | 3,501 | 2,744 | |
| Other current liabilities | 1,145 | 588 | |
| Accrued expenses | 10,559 | 3,048 | |
| Total current liabilities | 15,620 | 7,375 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 3,767,406 | 3,139,947 |
| of changes in | equity |
|---|---|
| Balance at Sep 30, 2021 | 10,958 | 848,231 | 2,145,620 | 3,004,809 | |
|---|---|---|---|---|---|
| - Share based long-term incentive program | 83 | 999 | – | 1,082 | |
| - Employee share option scheme | – | 44 | – | 44 | |
| Value of employee services: | |||||
| - Proceeds from directed rights issue, net | 2,073 | 847,188 | – | 849,261 | |
| Transactions with owners: | |||||
| - Shareholders contribution | – | – | 2,116,926* | 2,116,926* | |
| - Issuance of LTIP 2020 Plan shares | 333 | – | – | 333 | |
| - Issuance of LTIP 2019 Plan shares | 124 | – | – | 124 | |
| - Issuance of share capital | 8,345 | – | – | 8,345 | |
| Transactions domicile change: | |||||
| Net result May 28–Sep 30, 2021 | – | – | 28,694 | 28,694 | |
| Balance at May 28, 2021 | – | – | – | – | |
| Expressed in SEK thousands | Note | Share capital |
Additional paid in capital |
Retained earnings |
Total |
| Expressed in SEK thousands | Note | Share capital |
|---|---|---|
| Transactions domicile change: | ||
| Transactions with owners: | ||
| Value of employee services: | ||
| Other comprehensive income for the period | ||
| Value of employee services: | ||
| Balance at Jan 1, 2022 | 10,963 | 849,376 | 2,272,233 | 3,132,572 | |
|---|---|---|---|---|---|
| Net result 9M22 | – | – | 142,498 | 142,498 | |
| Other comprehensive income for the period | |||||
| Currency translation difference | – | – | – | – | |
| Total comprehensive income for the period | – | – | 142,498 | 142,498 | |
| Value of employee services: | |||||
| Employee share option scheme | 7 | – | 81 | – | 81 |
| Share based long-term incentive program | 8 | 104 | 2,667 | – | 2,771 |
| Buyback of own shares | – | -13,636 | – | -13,636 | |
| Balance at Sep 30, 2022 | 11,067 | 838,488 | 2,414,731 | 3,264,286 |
* Transfer of all VEF Ltd's assets to VEF AB (publ) due to the redomestication from Bermuda to Sweden.
(Expressed in USD thousand unless indicated otherwise)
VEF AB (publ) was incorporated as a shelf company on December 7, 2020 but changed name to VEF AB (publ) and became active on May 28, 2021. The registered office is at Mäster Samuelsgatan 1, 111 44 Stockholm, Sweden. The common shares of VEF AB (publ) are listed on Nasdaq Stockholm Main Market with the ticker VEFAB. The common shares of VEF AB (publ) replaced the Swedish Depository Receipts representing shares in VEF Ltd. with effect as from July 5, 2021, in connection with the transfer of domicile of the group from Bermuda to Sweden.
As of September 30, 2022, the VEF Group consists of the Swedish Parent Company VEF AB (publ) and four wholly owned subsidiaries; VEF Cyprus Limited, VEF Fintech Ireland Limited, VEF Service AB (under liquidation), and VEF UK Ltd. VEF Cyprus Limited act as the main investment vehicle for the group, holding fourteen of seventeen investments at balance date. VEF AB (publ) holds the remaining three (BlackBuck, Juspay and Rupeek) and act as a service company, together with VEF Fintech Ireland Limited and VEF UK Ltd, providing business and investment support services to the Group.
The financial year is January 1–December 31.
The Parent Company VEF AB (publ) is a Swedish limited liability company, incorporated in Sweden and operating under Swedish law. VEF AB (publ) is the holding company of the Group and directly owns all the companies in the Group. The net result for 9M22 was SEK 142.5 mln (9M21: 28.7). VEF AB (publ) was incorporated on December 7, 2020, and became active on May 28, 2021. The parent company has four employees per September 30, 2022.
This interim report has, for the Group, been prepared in accordance with IAS 34 Interim Financial Reporting and the Swedish Annual Accounts Act. The financial reporting for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act and RFR 2 Accounting for legal entities, issued by the Swedish Financial Reporting Board.
Under Swedish company regulations it is not allowed to report the Parent Company results in any other currency than SEK or EUR and consequently the Parent Company's financial information is reported in SEK and not the Group's reporting currency of USD.
The accounting principles in the 2021 Annual Report sets out the principles for the Group and the Parent company.
For a detailed account of risks associated with investing in VEF and VEF's business, please see the 2021 Annual Report, Note 2.
Related party transactions for the period are of the same character as described in the 2021 Annual Report. During the period VEF has recognized the following related party transactions:
| Operating expenses | Current liabilities | ||||
|---|---|---|---|---|---|
| 9M22 | 9M21 | 9M22 | 9M21 | ||
| Key management and Board of Directors ¹ | 2,533 | 3,125 | – | – |
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry company, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to determine the fair value of an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
Investments in assets that are not traded on any market will be held at fair value determined by recent transactions made at prevailing market conditions or different valuation models depending on the characteristics of the company as well as the nature and risks of the investment. These different techniques may include discounted cash flow valuation (DCF), exit-multiple valuation also referred to as leveraged buyout (LBO) valuation, asset-based valuation as well as forward looking multiples valuation based on comparable traded companies (peer companies). Usually, transaction-based valuations are kept unchanged for a period of twelve months unless there is cause for a significant change in valuation. After twelve months, the fair value for non-traded assets will normally be derived through any of the models described above.
The validity of valuations based on a transaction is inevitably eroded over time, since the price at which the investment was made reflects the conditions that existed on the transaction date. At each reporting date, possible changes or events subsequent to the relevant transaction are assessed and if this assessment implies a change in the investment's fair value, the valuation is adjusted accordingly. The transaction-based valuations are also frequently assessed using multiples of comparable traded companies for each unlisted investment or other valuation models when warranted.
VEF follows a structured process in assessing the valuation of its unlisted investments. VEF evaluates company specific and external data relating to each specific investment on an ongoing basis. The data is then assessed at quarterly valuation meetings by senior management. If internal or external factors are deemed to be significant, further assessment is undertaken and the specific investment is revalued to the best fair value estimate. Revaluations are first reviewed by the Audit Committee and later approved by the Board of Directors in connection with the Company's financial reports.
The fair value of financial instruments is measured by level of the following fair value measurement hierarchy:
• Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
• Level 3 – Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
Investments are moved between levels in the fair value hierarchy when the management finds the best suitable valuation technique has changed and that the current applied technique results in a new classification in the fair value hierarchy compared to the prior period.
As per September 30, 2022, VEF has a liquidity management portfolio of listed corporate bonds and money market funds that are classified as Level 1 investments.
The investments in Creditas, Konfío, TransferGo, JUMO, BlackBuck, Nibo, Magnetis, Finja, minu and REVO are classified as Level 3 investments. The remaining portfolio companies are classified as Level 2 investments. During 9M22, Creditas, Konfío, TransferGo, JUMO, BlackBuck, Magnetis, Finja and minu have been transferred from Level 2 to Level 3. No holdings have been transferred from Level 3 to Level 2.
| 9M22 | 9M21 | |
|---|---|---|
| Opening balance Jan 1 | 25,794 | 158,181 |
| Transfers from Level 2 to Level 31 | 605,712 | – |
| Transfers from Level 3 to Level 21 | – | -110,699 |
| Change in fair value | -310,153 | 6,978 |
| Closing balance Sep 30 | 321,353 | 54,460 |
| Level 1 | Level 2 | Level 3 | Total balance | |
|---|---|---|---|---|
| Financial assets at fair value through profit or loss | 45,540 | 110,968 | 321,353 | 477,861 |
| of which: | ||||
| Liquidity placements | 45,540 | – | – | 45,540 |
| Shares | – | 110.968 | 318,921 | 429,889 |
| Convertible and SAFE notes | – | – | 2,432 | 2,432 |
| Total assets | 45,540 | 110,968 | 321,353 | 477,861 |
| Level 1 | Level 2 | Level 3 | Total balance | |
|---|---|---|---|---|
| Financial assets at fair value through profit or loss | 50,642 | 674,517 | 25,794 | 750,953 |
| of which: | ||||
| Liquidity placements | 50,642 | – | – | 50,642 |
| Shares | – | 649,012 | 24,434 | 673,446 |
| Convertible and SAFE notes | – | 25,505 | 1,360 | 26,865 |
| Total assets | 50,642 | 674,517 | 25,794 | 750,953 |
| Company | Valuation method | Date latest transaction |
|---|---|---|
| Abhi | Latest transaction | 2Q22 |
| FinanZero | Latest transaction | 2Q22 |
| Gringo | Latest transaction | 1Q22 |
| Juspay | Latest transaction | 2Q22 |
| Mahaana | Latest transaction | 3Q22 |
| Rupeek | Latest transaction | 3Q22 |
| Solfácil | Latest transaction | 2Q22 |
Holdings classified as Level 2 investments are valued based on the latest transaction in the company, on market terms. The validity of valuations based on a transaction is inevitably eroded over time, since the price at which the investment was made reflects the conditions that existed on the transaction date. At each reporting date, possible changes or events subsequent to the relevant transaction are assessed and if this assessment implies a change in the investment's fair value, the valuation is adjusted accordingly. The transaction-based valuations are frequently assessed using multiples of comparable traded companies for each unlisted investment or other valuation models. When transaction-based valuations of unlisted holdings are used, no material event is deemed to have occurred in the specific portfolio company that would suggest that the transaction-based value is no longer valid. During 3Q22, the portfolio experienced moderate currency headwinds across the board. The holdings valued on the basis of the latest transactions all demonstrate strong revenue growth profiles and are set to deliver growth broadly in line with their respective business plans on which the latest transaction was based.
In 3Q22, we use the calibration methodology in our portfolio valuation process. The calibration methodology specifically helps us calibrating valuations of companies with recently closed priced investment rounds and where the implied valuation multiple has moved significantly out of sync with our pre-determined comp group based of a sharp decline in public markets. The methodology is a fair tool for reflecting dramatically changing market conditions ahead of moving to full mark-to-model.
Inputs used for the valuation include risk adjusted revenue forecasts, currency moves and the implied revenue multiple paid at the time of the latest transaction relative to a relevant peer group adjusted for market moves in the same peer group as of September 30, 2022. At the end of the third quarter, one company, Creditas, was valued using the calibration methodology.
Konfío, TransferGo, JUMO, BlackBuck, Nibo and minu are all valued on the basis of a twelve-months forward looking revenue multiple while Magnetis is based on a relative multiple to AUM. Finja is valued to the gross invested amount given the strain Pakistan is under resulting in a more cautious outlook for the company in a near term future. REVO's valuation model, in light of the geo-political situation in Russia, was assigned a liquidity discount of 100% in 1Q22, bringing the fair value to zero which remains in 3Q22. Inputs used for each valuation include risk adjusted revenue- and earnings forecasts, local currency moves and listed peer group revenue multiples as of September 30, 2022.
The difference in fair value change between the portfolio companies is dependent on relative revenue forecasts in each company as well as moves in the relevant peer group and moving exchange rates. Peers used in the 3Q22 peer set include a mix of listed emerging- and developed market companies representing accounting SaaS- and BNPL-companies, digitally focused wealth managers, fast growth payments companies and a range of Latin American fintech companies. The NTM multiples across the different peer groups per company and valuation range from 1.4x to 10.1x NTM revenues. As a standard process, the median of each group is used, and in applicable cases VEF will adjust the resulting multiple based on prevailing local market conditions, sector and company specific factors, applying discounts or premiums to reflect the fair value of the company.
Below table summarizes the sensitivity of the assets value to changes in the underlying multiple used for the valuation.
| Company | Valuation method | Peer group range | -15% | -10% | -5% | 0% | +5% | +10% | +15% |
|---|---|---|---|---|---|---|---|---|---|
| Creditas | Calibration methodology | 1.4–3.7x | 180,855 | 191,012 | 201,170 | 211,328 | 221,485 | 231,643 | 241,801 |
| Konfío | Revenue multiple | 1.4–10.1x | 54,049 | 56,399 | 58,749 | 61,099 | 63,449 | 65,799 | 68,150 |
| TransferGo Revenue multiple | 1.9–7.2x | 14,660 | 15,408 | 16,157 | 16,905 | 17,653 | 18,402 | 19,150 | |
| JUMO | Revenue multiple | 1.8–8.6x | 7,632 | 8,031 | 8,430 | 8,829 | 9,228 | 9,627 | 10,026 |
| BlackBuck Revenue multiple | 2.8–5.3x | 6,154 | 6,476 | 6,798 | 7,120 | 7,442 | 7,764 | 8,086 | |
| Nibo | Revenue multiple | 5.4–8.2x | 5,801 | 6,095 | 6,389 | 6,683 | 6,977 | 7,271 | 7,565 |
| Magnetis | AUM multiple | 5.2–74.4% | 5,204 | 5,483 | 5,762 | 6,040 | 6,319 | 6,598 | 6,876 |
| minu | Revenue multiple | 2.4–5.4x | 375 | 391 | 408 | 424 | 441 | 458 | 474 |
| Company | Jan 1, 2022 | Investments/ (divestments), net |
Fair value change |
Sep 30, 2022 | Percentage of portfolio |
|---|---|---|---|---|---|
| Creditas | 394,123 | – | -182,795 | 211,328 | 44.2% |
| Konfío | 135,582 | – | -74,483 | 61,099 | 12.8% |
| Juspay | 42,420 | 4,098 | 953 | 47,471 | 9.9% |
| Solfácil | – | 20,000 | – | 20,000 | 4.2% |
| TransferGo | 29,271 | – | -12,366 | 16,905 | 3.5% |
| Rupeek | 13,152 | 1,873 | 170 | 15,195 | 3.2% |
| Gringo | – | 12,250 | – | 12,250 | 2.6% |
| JUMO | 18,409 | – | -9,580 | 8,829 | 1.8% |
| Abhi | 1,350 | 448 | 5,787 | 7,585 | 1.6% |
| FinanZero | 11,882 | 991 | -5,406 | 7,467 | 1.6% |
| BlackBuck | 10,000 | – | -2,880 | 7,120 | 1.5% |
| Nibo | 12,560 | – | -5,877 | 6,683 | 1.4% |
| Magnetis | 10,526 | 1,000 | -5,486 | 6,040 | 1.3% |
| Finja | 7,351 | – | -4,426 | 2,925 | 0.6% |
| Mahaana | – | 1,000 | – | 1,000 | 0.2% |
| minu | 450 | – | -26 | 424 | 0.1% |
| REVO | 13,235 | – | -13,235 | – | 0.0% |
| Liquidity placements | 50,642 | -1,000 | -4,102 | 45,540 | 9.5% |
| Total | 750,953 | 40,660 | -313,752 | 477,861 | 100.0% |
Per September 30, 2022, a total of 1,000,000 options are outstanding. None to the Managing Director and 1,000,000 to other employees.
| Option grant date | May 16, 2018 | Dec 17, 2019 |
|---|---|---|
| Maturity date | Aug 16, 2023 | Dec 17, 2024 |
| Option price at grant date, SEK | 0.41 | 0.34 |
| Share price at grant date, SEK | 1.97 | 2.95 |
| Exercise price, SEK | 2.35 | 3.69 |
| Volatility | 29.90% | 22.80% |
| Risk free interest rate | -0.13% | -0.29% |
| No. of options granted | 500,000 | 500,000 |
For more information on the option plan, please see Note 8 in the 2021 Annual Report.
During 2Q22, VEF issued sustainability bonds of three years, to the amount of SEK 500 mln, within a frame of SEK 1,000 mln. The bonds carry a floating coupon of 3m Stibor + 725 bps with interest paid quarterly. The bonds are due in April 2025. The bonds are trading on the sustainable bond list of Nasdaq Stockholm and the Open Market of the Frankfurt Stock Exchange.
VEF AB (publ)'s share capital per September 30, 2022, is distributed among 1,106,675,373 shares with a par value of SEK 0.01 per share as set out in the table below. Each share of the Company carries one vote. The common shares trade on Nasdaq Stockholm Main Market, Mid Cap-segment.
The convertible shares of Class C 2020, Class C 2021 and Class C 2022 are held by management and key personnel of VEF under the Company's long-term incentive programs. The Class C shares are redeemable pursuant to the terms set out in VEF's articles of association. The 12,400,000 Class C 2019 shares were converted into common shares on July 15, 2022 increasing the common shares to 1,054,689,978.
As per September 30, 2022, VEF holds 5,833,961 repurchased shares in accordance with the buyback program based on the mandate from the annual general meeting of the Company on May 10, 2022.
| Share class | Number of shares | Number of votes Share capital (SEK) | |
|---|---|---|---|
| Common shares1 | 1,054,689,978 | 1,054,689,978 | 10,546,899.78 |
| Class C 2020 | 33,250,000 | 33,250,000 | 332,500.00 |
| Class C 2021 | 8,312,500 | 8,312,500 | 83,125.00 |
| Class C 2022 | 10,422,895 | 10,422,895 | 104,228.95 |
| Total | 1,106,675,373 | 1,106,675,373 | 11,066,753.73 |
No significant events after the end of the period.
| LTIP 2020 | LTIP 2021 | LTIP 2022 | |
|---|---|---|---|
| Performance measurement period | Jan 2020–Dec 2024 | Jan 2021–Dec 2025 | Jan 2022–Dec 2026 |
| Vesting period | Nov 2020–Dec 2024 Sept 2021–Dec 2025 Aug 2022–Dec 2024 | ||
| Maximum no of shares, Managing Director | 13,300,000 | 3,325,000 | 3,325,000 |
| Maximum no of shares, others | 19,950,000 | 4,987,500 | 7,097,895 |
| Maximum no of shares, total | 33,250,000 | 8,312,500 | 10,422,895 |
| Maximum dilution | 3.17% | 0.79% | 0.99% |
| Share price on grant date, SEK | 3.14 | 4.34 | 2.306 |
| Share price on grant date, USD | 0.36 | – | – |
| Plan share price on grant date, SEK1 | 0.37 | 0.62 | 0.10 |
| Plan share price on grant date, USD1 | 0.04 | – | – |
| Total employee benefit expense excl. bonuses paid and social taxes (USD mln) |
LTIP 2020 2 | LTIP 2021 2 | LTIP 2022 2 |
| 2022 | 0.15 | 0.10 | 0.00 |
| 2021 | 0.20 | 0.02 | – |
| 2020 | 0.03 | – | – |
| Total accumulated | 0.38 | 0.12 | 0.00 |
There are three running and one completed LTIP programs for management and key personnel in the VEF Group. All three running programs, LTIP 2020, 2021 and 2022 are linked to the long-term performance of both the Company's NAV and of the VEF share price. For more information on the LTIPs, please see Note 8 in the 2021 Annual Report.
The difference in common share price and plan share price derive from that plan share price has been calculated using the Monte Carlo method applying the performance criterias applicable in the terms for the long-term incentive programme and the current share price at grant date.
The total IFRS 2 expense does not include subsidy for acquisition and taxes arisen.
The Board of Directors determined on May 10, 2022, that the development of the Company's NAV and share price over the term of LTIP 2019 (Jan 1, 2019, through Dec 31, 2021), meets the so-called stretch level, whereby the Class C 2019 shares held by the participants were converted on July 15, 2022. A total of 12,400,000 Class C 2019 shares were converted.
The Board has approved a long-term share incentive plan ("LTIP 2022") for eight key employees in the Company. LTIP 2022 is a five-year performance-based incentive program. The objective of LTIP 2022 is to encourage the employees to financially commit to the long-term value growth of VEF, and thereby align their interests with those of the shareholders. VEF has compensated the participants with a cash subsidy for the subscription price and the tax effects arising due to the subsidy of the subscription price and benefit.
VEF's financial report for the period January 1, 2022–December 31, 2022, will be published on January 25, 2023.
October 26, 2022
David Nangle Managing Director
For further information, visit www.vef.vc or contact:
Henrik Stenlund CFO Tel +46 8 545 015 50 Email [email protected]
We have reviewed the condensed interim financial information (interim report) of VEF AB (publ) as of 30 September 2022 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.
Gothenburg, Sweden, October 26, 2022
Bo Karlsson Johan Brobäck Authorized Public Authorized Public Accountant Accountant Auditor in charge
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