Earnings Call: Q2 2020

Jul 13, 2020

Good morning, everyone, and welcome to the presentation of Kinnevik's results for the Q2 of 2020. I'm Georgi Ganev, Kinnevik's CEO and with me today is our CFO, Erika Soderberjonsson our Director of Corporate Communications, Torren Lecien and our Head of Strategy, Sommen Holstern. Before we head into the performance of our companies and the key events in this quarter, let me just say that we have had an unusually busy and eventful first half of the year. As a big part of the world is still in lockdown, the shift towards a more digital world has taken a giant leap forward. In our focus sectors, healthcare services and within consumer services, online food and fashion, we are seeing very strong traction. As much pain and grief as the pandemic has caused, it has also accelerated the digitalization of consumer behavior effectively proving our strategy. And in this quarterly presentation, I'm happy to share with you some clear proof of that. On Page 4, we have summarized the key strategic highlights during the quarter. Our focus on pivoting the portfolio towards early growth has continued at a high pace. In June, we divested a small stake in Zalando, providing us the financial flexibility to continue reallocating capital in a dynamic way. Further to that, our Board has proposed an extraordinary cash dividend of SEK0.07 per share. We have continued to build our healthcare portfolio during the quarter with investment in a new exciting company, Citibank and follow on investments in Cedar and VillageMD. Notably, our healthcare portfolio now makes up 17% of our total portfolio value compared to 3% a year ago. Finally, we have established climate targets in line with the Paris agreement. These targets are ambitious and represent a strong commitment from us, which we believe will be a catalyst of change across our portfolio. Our net asset value was up by almost SEK25 1,000,000,000 or 38% in the quarter. This was driven by multiple expansion in certain sectors, a very strong rebound in Zalando and continued strong performance in our healthcare portfolio listed and private and particularly in Livongo. In the private portfolio, transactions in VillageMD and Cedar provide a support for significant multiple expansion and valuation write ups. On the downside, a continued negative impact from COVID-nineteen had an adverse effect in our travel and emerging market companies. In terms of investment management activities, apart from the transactions already mentioned, we also divested the majority of our ownership in Cliro Group generating 198,000,000 second proceeds to Kinnevik. In the beginning of July, so after the end of the quarter, we also divested our entire stake in Home24, generating net proceeds of €21,000,000 These divestments clearly show our commitment to dynamically reallocating capital within our portfolio. On Page 5, we have provided you with some details on the Zalando transition. The sell down accomplishes 2 important things. Firstly, it significantly strengthens our balance sheet and provides us with ample firepower to execute on our strategy. It gives us flexibility and a strong financial position to execute from. This is valuable in a market that is bound to be highly volatile for some time to come and we see a number of attractive investment opportunities. The transaction also decreases Zalando's weight in our portfolio, which further contributes to the pivot towards early growth. Secondly, following the sell down, the Kinnevik Board proposed an extraordinary cash dividend of SEK1.9 billion total. This honors our commitment to our shareholder remuneration policy and ensures that we remain financially disciplined. The dividend is subject to shareholder approval at an EGM to be held on the 19th August. With the sell down, we have recouped the €902,000,000 that we have invested into Zalando since 2010. The timing of this transaction is to a large degree as a result of Zalando's remarkable performance. Its digital offering and scalable platform strategy puts the company in a very good position to continue to benefit from the digital trend. Moving on to our Healthcare portfolio on Slide 6. During the quarter, we have invested USD25 1,000,000 for an 8% stake in CityBlocks. This investment in base on the thesis which we articulated to you last year, the thesis of the transformational shift in care delivery from fee for service to fee for value. We believe in the power of that model to better manage populations, increase patient satisfaction, improve medical outcomes and lower the cost of care. CityBlocks is an innovative U. S. Risk bearing care provider focused on delivering care to underserved populations with complex health needs. In any population, a small share of the members drives a massively disproportionate amount of health care spend. CityBlocks was founded on the premise that people with multiple chronic conditions can be better served by focusing on preventative and integrated care, particularly if they also struggle with behavioral and social issues. Citiblock partners with insurance companies to specifically manage these high risk complex members. And through their community based care model and custom built technology, Citibank can deliver better health outcomes. This leads to a reduction in costs which creates an opportunity for CityBloc to participate on the upside under value based contracts. CityBloc is already present in 4 U. S. States with material contracts in each and with the opportunity to expand significantly. CityBloc nicely complements our existing healthcare portfolio. Between CityBloc, VillageMD and Babylon Health, I believe we have built a sizable and well diversified position to benefit from the megatrend that is value based care. On Page 7, we have summarized some of the highlights from our follow on investments in Cedar and VillageMD. We invested a further US8 $1,000,000 in Cedar in a Series C round led by leading venture capital firm, Andreessen Horowitz. This funding round was completed at speed and at an attractive price at the peak of COVID-nineteen, underlining the quality of the business. The company will use the funds to fuel further growth and to become the leading healthcare consumer engagement platform. The market opportunity here is enormous and SEDAR has the potential to become one of the leading software companies in the healthcare sector. In July, after the close of the reporting period, we invested US25 $1,000,000 in VillageMD. This was part of an equity funding of USD275 1,000,000 in total. The round was led by VillageMD's existing investor, Walgreens Boots Alliance. Walgreens have committed to invest a total of $1,000,000,000 over 3 years in order to deepen its partnerships with the company. The partnership means that to start with, VillageMD will open 500 to 700 new primary care clinics co located in Walgreens stores in over 30 states in the U. S. This is a transformational partnership for VillageMD, which will allow it to really scale the business and enter new markets in an attractive cost efficient way. By the end of next year, the first phase of the rollout will be done, which may be an opportune time to explore an IPO. Importantly, the funding rounds in Cedar and VillageMD have resulted in a significant increase of our assessed fair value of the companies of over 160% each, excluding our newly invested capital. This really proves the quality and uniqueness of our unlisted portfolio. Erika will go through our fair value assessments of the private portfolio this quarter in more detail in just a moment. But first, on Page 8 is an overview of the value development of our healthcare portfolio since 2016. We made our first investment in the healthcare portfolio healthcare sector about 4 years ago when we invested in Babylon. Since then, we've made 5 more investments and deployed a total of SEK3.5 billion. The unrealized return of the portfolio today is 5.1 times that of our invested capital. This corresponds to an unrealized IRR of around 140 percent and yet we are only at the beginning of our company's growth journeys. Importantly, the success of our healthcare portfolio has strengthened the Kinnevik reputation in the market. It has also improved our access to the best deal flow and created a competitive advantage as we move forward. More broadly, healthcare has grown significantly as a share of our total portfolio. It now accounts for 17% of our portfolio compared to 3% only a year ago. Moving on to some other high performers in our portfolio on Page 9. Malteum and Kolonial saw a surge in demand in March as the pandemic reached Sweden and Norway. Both companies have started a number of initiatives to make sure their new customers are retained for the long run. MatHem opened a second warehouse in Stockholm and changed its core product. Instead of all slots being open at all times, they started releasing delivery slots 2 days in advance. These initiatives have created a better customer experience and they are paying off. However, satisfying the surge in demand has created efficiency challenges over the short term and this has led to elevated fulfillment costs, which has negatively impact margins. Kolonial quickly doubled its capacity by adding a 3rd shift on the picking line and they launched pre packed food boxes in under 48 hours. Demand continues to be high and the company is working hard to retain the new customers. Among other initiatives, Kolonial is investing to improve its core product and to further strengthen the relationship with its customers. Budbee has also benefited from the digital trend and is seeing significantly higher volumes as more people move to online shopping. As a testament to that, 2020 revenues have already surpassed full year revenues for 2019. The company closed a large funding round in the quarter and are now well funded to invest in further growth. I would now like to hand over to Erika to go through the valuations of our unlisted assets and our financial position starting at page 10. Thank you, Georgi. Since the end of the Q1, the effects of the coronavirus pandemic has stabilized somewhat, although the future still remains uncertain. In the Q2 of this year, we believe our portfolio can be largely divided into 3 categories of companies. In the first category are our e commerce businesses, which have experienced a substantial rebound during the quarter. This was driven by a renewed interest in digital services from consumers as well as investors, which has fueled significant multiple expansion well above pre COVID levels. Zalando's share price was up almost 80% during the quarter and GFG was up over 150%. In the second category, you find our more resilient businesses. These companies have seen an either increased or stable demand for its services since mid February when the pandemic started affecting how we live our daily lives. Tele2 belongs to this category and so do our healthcare, online food and last mile companies. Livongo has continued its stellar performance during the quarter with a share price that depreciated over 160%. In the private portfolio, as Georgi mentioned, transactions in VillageMD and SEDAR provided support for significant multiple expansion. Furthermore, our online food and last mile companies continue to see strong demand. Although it's still uncertain how these trends will last over the longer term, they are having a direct effect on our LTM revenue based valuation method. This has led to a write up of 7% of our MatHem investment and 20% write up of our investment in colonial. No. In the 3rd category are primarily our emerging market assets. During the quarter, the pandemic has continued to weigh on the performance of these companies, and we have seen an underperformance across the board. All in all, our net asset value amounted to SEK89.6 billion at the end of June. That is SEK 323 per share and represents an increase in the 2nd quarter of SEK24.7 billion or 38%. The market's substantial upward revision of the values of our listed assets accounted for SEK 23,500,000,000. The fair value of our private portfolio was written up by SEK 1,300,000,000 or 10% during the quarter, With net investments of SEK395 1,000,000, the total increase of the private portfolio amounted to almost SEK1.7 billion in the quarter. This was largely driven by the valuation write ups resulting from the transactions in VillageMD and Cedar. Notably, the transaction in VillageMD resulted in a valuation write up of SEK1.4 billion corresponding to SEK5.2 per Kinnevik share. The publicly traded part of our net asset value traded up by more than 40% in the Q2 compared to the NASDAQ trading up 31% and the OMX is 30%, up 12%. Our share price appreciated by almost 50% on the back of a contracting discount. We saw some significant currency headwinds in the quarter. The Swedish krona was up 6% against the U. S. Dollar and 4% against the euro. The Norwegian krona was the only material currency from the Kinnevik perspective providing tailwind in the quarter. With a large share of our balance sheet in dollar and euro denominated investments, this had a material negative effect on our fair value approximately SEK2.7 billion on the portfolio as a whole and SEK700 1,000,000 on the fair value assessments of the private portfolio. We are, of course, as always, happy to try and answer any questions you may have on our valuations when we move to Q and A. I would, however, like to take the opportunity to highlight pages 24 to 26 in the quarterly report where we have elaborated more on our valuation assessments and methodologies used. Finally, I would also like to mention that with Friday's closing prices of our listed assets, our net asset value was SEK93.7 billion, up 5% so far in the month of July. This was largely driven by a continued very strong performance in Livongo. Now please turn to page 11 for an update on our financial position. The Zalando sell down generated net proceeds of SEK6.7 billion. We also received the 1st tranche of ordinary dividend from Tele2 of SEK516 1,000,000. The 2nd tranche of equal size will be paid out in October this fall. As you know, Tele2's extra dividend was postponed in April due to uncertainties around the effects of the coronavirus. Also, we made investments of SEK395 1,000,000 in the quarter with the majority into City Block. Net of SEK4 1,000,000,000 in commercial paper, bonds and unpaid investments and divestments, we ended the quarter with a net cash position of SEK5.5 billion corresponding to 6.6 percent of our portfolio value. Adjusting for our upcoming extra dividend, our net cash position amounts to SEK 3,600,000,000. In essence, what does Zalando sell down does over the medium to long term is that it provides us with a position of financial strength to execute from. While our 2019, 2023 plan was fully funded already before this transaction, the plan and the development of our financial position is now derisked. This means we are not dependent on the sequencing of certain exits to proceed with our capital allocation plan. Having said that, we do remain focused on active reallocation of our capital in line with our strategy. As Georgi mentioned, following the Zalando sell down, Kinnevik's Board of Directors proposed an extraordinary cash distribution of SEK7 per share or SEK1.9 billion in total. The extra dividend honors our commitment to our shareholder remuneration policy. It ensures our balance sheet remains efficient and that we remain financially disciplined. The size of the cash distribution was determined based on our financial position and net investment forecast. In summary, we have a very strong financial position from which we can execute on our 5 year capital allocation plan. With that, I would like to hand back over to for a comment on our newly established climate targets as well as our key priorities going forward, starting on Page 12. Thank you, Erika. Kinnevik has a holistic approach to value creation and a strategy for sustainable business development, which includes economical, social and environmental aspects. As part of our broader sustainability strategy, we have announced climate targets in line with the Paris agreement for Kinnevik and our portfolio. The emissions from our portfolio is by far the largest part of our footprint. Therefore, we are dedicating substantial resources to provide hands on support to our companies. We are in a strong position to influence and it's our responsibility as active owners to future proof our portfolio for a low carbon economy. Our first target is to achieve net 0 greenhouse gas emissions from Kinnevik's own operations and business travel already this year. The second target is to half the greenhouse gas emissions intensity in our portfolio by 2,030. This means that we expect all of our companies to measure their emissions and set climate targets in line with science. We will continue to report on progress according to our targets on a yearly basis. In addition to building long term sustainable businesses, we have 3 clear priorities as outlined on Page 13. As we have proven this quarter, we remain firmly focused on pivoting our portfolio towards a higher proportion of growth companies in our target sectors and markets. We are also reallocating capital more dynamically and creating a stronger balance in our portfolio across sectors, stages and maturities. It's been a unique first half of the year in many ways. It's been deeply challenging and painful, but also rewarding and exciting. And I'm very proud of all our companies in facing this new reality. And as always, I'm also humble and thankful for the continued support from our shareholders. We are now ready to answer your questions. So operator, please open up for Q and A. Thank Our first question comes from the line of Joakim Gonal of DNB Markets. So you touched upon this, Georgi, with Village but we've seen how both financing rounds and IPO listings have crystallized values from your growth portfolio in an accelerated fashion in the past year. But how should we think about that split, say, valuation uplift from financing rounds versus IPO listings in the humming, say, 12 to 18 months? Joakim, I think it's a brilliant question. It probably depends from company to company and sector to sector. For us to speculate now and to say that we have some kind of general view on that, it's very, very difficult. But of course, if you look at the valuations we have for a company like VillageMD, for instance, with some of its peers with, for instance, One Medical, you'll see that our multiples are actually a bit lower. So that will give you a hint for that particular case, but I don't think that you can draw any general conclusions from that comparison. All right. And another question, you've started to break up in terms of segments, emerging markets into a separate division here. So can you talk about the rationale here? Yes, I can. I mean, we have said for quite some time now that our focus markets or focus geographies are Europe and U. S. And we have a special, let's say, focus on the Nordics where we allow ourselves to invest in somewhat earlier and less mature companies. Apart from that, we don't have the same focus. We have, as you know, a few companies that are purely focusing on emerging markets. And since that is not, let's say, the core geographical market, we think it's better to group them together in the quarterly report. That was the reason for changing that grouping. Very clear. And just a final, perhaps for Erika. But I mean, I really like the granularity here in your value assessments. But in Babylon, I mean, you explained the slight variation decrease by adverse effects, but we've seen a material multiple expansion in the health care IT space, Teladoc, not yet, to say the least, in Q2. So that should well be enough to offset the FX headwinds or how should I think there? I actually hand over that question to Samuel to reply on. Sure. Thanks, Erkki. Hey, Joakim. So yes, the fair value of our Babylon investment is flat in dollars this quarter, but down in SEK due to FX. And we agree with you, COVID-nineteen has sort of clearly driven telemedicine adoption from which Babylon is benefiting. It has also accelerated the sort of commoditization of telemedicine products that are significantly less advanced and sophisticated than Bob Blondes, but that still sort of catered to some of this increased demand we've witnessed during the pandemic. Now in terms of our valuation, this is a company where we have an unrealized IRR of almost 60% since our first investment in 2016. And in this type of hypergrowth business, value growth is not necessarily linear. So you'll recall that our fair value increased massively during 2019. So from a more prudent IFRS and IPEV guidelines perspective, it might be some time before the momentum we're seeing now in Babylon is reflected in our valuation. And as we said in the last quarter, I believe, we are cautious not to revise our value assessments based on extrapolations of the momentum we're witnessing now during the first half year, but we want to await more clearer indications that the disruptive change ongoing within this space now persists also after the pandemic abates. But having said that, Babylon is tracking above an ambitious budget. They've grown its annual run rate revenues by around 5x only during the first half of twenty twenty. So underlying performance is strong. And in relation to Teladoc that you mentioned, Babylon is growing significantly faster, but Teladoc is a more mature business operating at high single digit EBITDA margins. We are not. So on multiples, since we're growing so much faster, it's very dependent on what time frame you're looking at. But in the near term, we are pretty much in line and that we were not a year ago. So that gap has decreased fairly significantly. All right. Thank you for that, Samuel. That's all for me. Thank you. And our next question comes from the line of Birgit Lavalbert of ABG. Please go ahead. Your line is open. Yes. Good morning. I was just wondering if you could provide some additional color around your pipeline for new investments and which target sectors you're seeing the most opportunities in now. Clearly, you've been very successful and done a lot in the Healthcare segment lately. So just wondering if you could give an update here on where you're spending your time. Yes. Hi, Derek. We look for companies in all our focus sectors. So we continue to have a very good traction in the Healthcare segment, albeit we have grown the portfolio from 3% to 17%. We're still looking at attractive opportunities. In financial services, we're also broadening our approach, looking at areas such as InsurTech to give you one example and some security services. Within consumer services, we also see the opportunity for Kinnevik to invest in alternative marketplace models, which means maybe not focusing as much in inventory based e commerce, which we since we already have quite a high exposure to that type of consumer service. So within consumer services, as you remember, we invested some year ago into travel companies and those are the type of subsectors we look at. So where marketplace models can actually disrupt a large sector within consumer services. So that's to give you some kind of idea of what we are looking at. Having said that, we don't want to disclose, of course, any specific companies we are talking to or looking at. But I would like to reiterate the message that we see a number of interesting opportunities. And as we said already last quarter, this dreadful pandemic also brings opportunities, both within our existing portfolio, but also when it comes to our pipeline. Understand. That's very clear. Thanks. Thank you. Our next question comes from the line of Stefan Pirt of Kellett Securities. Please go ahead. Your line is open. Thank you and congratulations to strong set of receipts. I'm coming back to this Babylon valuation, which I don't really understand. You write in the report that you related to a peer group in which Teladoc is included and Teladoc is up close to 200 percent year to date. You also mentioned that Babylon is operating or beating budget expectations and that the valuation is based on 2020 EV sales multiple. And still, it's the 2nd consecutive quarter in which we see a down, a lowering of the value of Babylon and it's completely explained to FX. I really don't get that picture fully. So if you could give some more detail maybe on where the revenue volumes are or something? And also perhaps to give some color into the revaluation of VillageMD in the quarter, how what to base that on and if it's only or completely relating to the recent deal they struck that you announced? Sure. Stefan, Samir. I'll try to give some more details. I think my answer to Joakim was pretty full in terms of what we can say. But in relation to Teladoc, yes, clearly, we've seen how that stock has performed over the short term. Would you take a longer view on sort of value growth and compare that with Babylon over the last 2 years, the picture would be fairly different. So that's what I mean with value growth not being necessarily linear as it is on the stock market. And Babylon is still a smaller company than Teladoc and it's growing significantly faster. And as Babylon starts to sort of mature and become of a scale more closer to Teladoc, it should also trade more in line with its peer group. So we are still closing that gap. It's very narrow now compared to where it's been. And once that gap is closed, it's very more likely that under this regulatory framework within which we value our businesses that you will see value growth in our investment. Maybe if I should add to that as well, Samuel, is that we have Teladoc in the peer group, that's correct. But actually comparing Babylon directly with Teladoc is not really fair. Teladoc is much more of a traditional, I would say, telemedicine company, which has been very successful lately and we've seen that both in terms of increased demand and increased value appreciation in the stock market. But Babylon is building completely something completely different. It's a platform that is, I would say, much more complex but also has a much greater potential long term. So it's about delivering integrated care with large insurance providers such as Prudential in Asia and corporations with complex organizations, large organizations such as Centene in the U. S. And those rollouts are also kind of underpinning our valuation, how those are tracking and the development we'll see on the full range of product development. Having said that, we are happy to see the kind of increased traction we see in Babylon, but we are careful to extrapolate that full potential in, let's say, a 2, 3 years horizon, which obviously that company will be valued at some point. So what Samuel and team is doing is more looking short term on the 2020 revenues, but also acknowledging that we're taking some big bets within Babylon that hopefully then will generate some kind of more significant leaps in terms of valuation going forward. Thanks, Georgi. And Stefan, on Village, as you will recall, under the valuation guidelines, which we apply in our valuations, transaction valuations are not necessarily recognized as a sort of stand alone valuation method. And the second point related to that, it's not necessarily funding rounds as such that, that creates value in our portfolio, but the valuations at which these funding rounds are concluded are clearly a very concrete reference to the value of a business sort of in lieu of companies being traded in the public market. So with that in mind, the valuation at which this first equity tranche is invested, it clearly provides guidance to our calibration of the assumptions that goes into our multiple based valuation. But more importantly, it's the massive growth opportunity that this Walgreens tie up represents that is driving value creation here. And as it relates to that journey, it's sort of just begun. And we are still at a sort of steep discount to 1 medical on multiples. And nevertheless, we sort of believe that VillageMD has a more attractive offering, more attractive financial profile. And the growth outlook is something very special now with the Walgreens partnership. Thank you. And our next question comes from the line of Riana Esteburg of Carnegie. Please go ahead. Your line is open. Thank you. I have a couple of questions. First of all, I was wondering on the clearer transactions, if there have been any other of the shareholders that had the opportunity to take up your offer, which have decided to do so, if you will be able to reduce your stake further? And then also on your other reallocation strategy. Could you say something about how the market is? The stock market has been strong, but what about M and A and disposals? And then on Tele2, the EO dividend, which has been postponed, have you any views on this, on when there could be a decision, how soon that could come? So far, it's just been said that it will be in the second half of this year. And then finally, on your new emissions reduction target, it'd be interesting to hear which companies are your biggest polluters and if you have the same sort of 50% reduction target for all companies or if some of the mature more mature companies have a bigger target, a higher target as just smaller ones grow much faster? Thank you. Thank you, Lena. I will start by handing over the first question to Samuel regarding the Kruger transaction, and then I will continue with question number 2. Sure. So Lena, on the sort of take up in that transaction, that process is very much ongoing. However, we believe that we will be able to exit fully given the sort of demand we've seen from MatHem shareholders thus far. It looks good to hear. Okay. Thank you, Sami. So on the second question regarding M and A potentials during the pandemic. I mean, I think it's very different depending on what sectors and companies you look at. I mean, in some areas, we've seen a surge in demand. And I mean, I think some of our private investments within healthcare demonstrates that. But also in other sectors, this pandemic makes a perfect opportunity to look for consolidations and other type of transactions, which we are currently looking at, discussing with the companies and with other investors as well. So for sure, this crisis brings a lot of opportunities in the M and A sector as well. When it comes to divestments, again, it's depending on what type of sectors and what type of companies we're looking at. We said in the report that we see some headwind in emerging markets. So that has been the case for a while. And there it's less kind of easy to facilitate these transactions and potential M and A projects. Question number 3, was that regarding Tele2 dividend, right? Yes. Yes. We have no further information that the company has disclosed so far. But I think Tele2 is reporting tomorrow, so Yes. So far we know they said they will revisit the question later this year. That's what we know. So we'll see tomorrow if they say something else. Question regarding our climate targets. Yes, I mean, of course, we track this both in terms of kind of maturity and growth pace in our portfolio, but also what type of business it is. We've initiated, let's say, a dialogue with the private companies in our portfolio that is operational heavy on the operational side and creates a larger footprint. I mean, companies, as an example, is like MatHem and Kolonial, obviously, whereas a pure digital company will have less environmental footprint. Our larger companies in the portfolio, Tele2 and Zalando, they run their own climate strategy, very much aligned to our overall targets, which is, of course, very happy I'm happy to see that. And as you perhaps know, Zalando disclosed their new climate targets just after we announced our targets, and they are 100% aligned. So I think that we focus mostly, I would say, on the fast growing companies with a significant footprint that typically comes from a large operations. And of course, these companies are allowed to have even higher ambitions higher targets than what we have set out, but this goes for our entire portfolio. And our next question comes from the line of Luis Meliattis of Bank of America. Please go ahead. Your line is open. Thank you. Good morning and thanks for taking my questions. Firstly, you made a comment on VillageMD saying that by the end of 2021, you might start thinking about an IPO. Could you expand on that? Would that be just starting to think about it and just maybe potentially kicking off the process of an actual IPO might happen in 2022 or is it maybe something that could happen a bit sooner than that? And then secondly, on City Block and VillageMD, I mean, they optically look sort of similar. Obviously, they're targeting different VillageMD seems to be a bit more broader, whereas Viewport seems to be a bit more focused demographic. Is there any potential for you to bring those 2 businesses together or are there any learnings that those two businesses can share? And would you try to open up that channel, I suppose? Thank you. Thank you, Liz. So when it comes to the potential IPO of VillageMD, I mean, this is, as I said, an opportunity to look at this. We basically are just saying that with the rollout after a year or so and there's still a lot more to actually deliver on that partnership that might be a good timing. But of course, that boils down to what's the market sentiment in general and a lot of other factors that we don't know today. So we're just saying that the company is relatively mature. It has a very strong shareholder base. And now on back of this partnership with Walgreens Boots Alliance, we can also secure a long term profitable growth. And those are kind of parameters that I think would fit squarely with an IPO. When it comes to the comparison of CityBlocks and VillageMD, that's correct. Their models remind quite, quite much of each other. The difference is that Selibok is focusing more on these complex and populations with also other challenges such as behavioral health and social issues. So in U. S, that's more of the Medicaid segment rather than Medicare. I think they complement each other from an investment perspective well. And right now, I think Sidvoc is less mature as company and we believe that they have such a great team and such a great vision. So they can grow on its own for quite some time before any consolidation or M and A activities needs to be in place. But I think hypothetically, yes, those two businesses complement each other and time will tell what will happen. When it comes to best practice sharing, of course, I mean, our health care team is working with both of these assets. So we are already making sure that we can learn from both assets from a Kinetic standpoint, but also make sure that, of course, all our founders and the key persons within management are also best practice sharing information that can be shared. So that's hopefully somewhat an answer to your questions. Yes, absolutely. Thank you. Thank you. And we have a follow-up question from Joakim Gonal of DNB Markets. Please go ahead. Your line is open. So can we perhaps talk just a bit about, I mean, Livongo, both operationally and then the share price has been a success as of late. Where would you say that Livongo are now in relation to your own planning, say, a year ago? And perhaps how do you think about Livongo's competitive positioning among people or patients with chronic conditions now that, I mean, it so quickly been able to reach scale and become branded as, say, I mean, the safe choice, if you like, for customers? Thank you, Hakim, for that question. I think, I mean, if we zoom out a bit and we look at Livongo from the first time we invested in the company, we already saw that that team was, I mean, absolutely stellar. And the whole kind of notion around people not being well treated with when they had chronic disease, starting with diabetes, was enough as a thesis for us to invest. During 2018, as you know, we led the next funding round and then we acquired more shares in parallel with the IPO in 2019, still being very bullish on the long term prospects of Livongo. Today, I think, I mean, it's clear that what the company has built is not only a treatment for people with diabetes, but I would say a superior platform that could treat different patients with different chronic conditions. So they expanded into hypertension. They're looking at they're expanded into behavioral health. And of course, these large contracts they have, both with insurance companies and with private businesses, they see the benefit of rolling out these services to their employees because the employees are getting healthier, of course, happier, more loyal to the company. And we see fact based KPIs such as long term blood sugar to glucose measures and so forth that is improving over time. So I think the scale that Livongo has built up is impressive and COVID has only accelerated this digital trend when it becomes more kind of relevant to get to be treated remotely. We believe that although the company has been performing very well for quite some time, we believe that that performance will continue. When it comes to market valuation, multiples and so forth, I think it's a bit more, let's say, I'm more reluctant to comment on that outlook. I think the market will value the company depending on many other factors as well. We are more focusing on the performance And there, I'm still very, very certain that Livongo will continue to deliver strong results for quite some time. All right, Georgi. Thank you for that color. And just finally, I mean, COVID-nineteen market volatility, so I would say, has shown that, I mean, some investors, if we talk about spectrum, I mean, some investors still want human adviser relationships. Do you think that, that could be, so to say, favorable for the incumbents, so the vanguards or the Charles Schwab, who have already so incorporated a bit of hybrid advisory? I mean Betterment have obviously expanded its banking products, but what do you think the impacts would be for Betterment? I don't think that that is basically a conclusion that you can draw. The situation is rather that the Vanguards and the Charles Schwab and the others, the incumbents, if you may, they have one big asset, which is their existing customer base. And to change that customer base into other service, that's the challenging part here. What they have done in the last couple of years is to invest heavily into also automated services like the Betterment one. But we have to remember that Betterment is still the largest independent robot advisers in the world. And we think that the growth that they have shown over the last years is very impressive. But I think the main challenge is that the long term relationship that these incumbents have had with their customers is I mean, that is a moat clearly for challengers. But we've seen that in many industries before as well. And we know that with some kind of patience and continued support, these companies will show that the future is definitely more digital than we think. So I think in the long run, they still have a very good position. And I would just if I also may say, I think if you look at our entire portfolio and the volatility of the markets, the sentiment has changed quite fast from first people being quite skeptical about these high growth digital companies. But we have learned now from this period that the behaviors that we see today is probably part of the new normal and will accelerate, as I said, the future behaviors. And that I think is beneficial across the entire portfolio. Even in sectors where we see some significant headwinds today, I think being digital also in those large sectors such as travel will be beneficial over time. Perfect. Thank you very much, Georgi and the team, and hope you have a great summer. Thank you. Thank you. And we have one further question in the queue so far. That's from the line of Raimo Okurjo of SEB. Please go ahead. Your line is open. Thank you, operator. Good morning, everyone. Thank you for taking my question. Just one question, if I may, on the topic of financing needs in particularly the companies adversely affected by the pandemic. Could you say anything in terms of timing and what you foresee for other travel exposed companies and the emerging markets exposed companies, if you will, in terms of financing needs in the short term here? Hi, Ramiel. Thanks for the question. I mean, as we said last quarter, the companies being mostly impacted are definitely the ones within the travel sector where demand went almost to nil in a couple of weeks. We have been running cost efficiency programs across our entire portfolio, but specifically in these companies, obviously. And I would even say that they are in somewhat of an hibernation mode today, ready to kind of scale up their businesses again when demand returns. So they have been focusing on securing customer accounts long term, which Travel Perk has been very successful in doing on the corporate side. They have been investing quite a lot in product development. So they are even better positioned when demand comes back. But they have also, again, made sure that their cost base has significantly decreased during this period. And I would again go back to kind of the overall thesis that even if you are in a sector that where you see a lot of headwind or you feel a lot of headwind today, over time, to be positioned as a digital company, you will benefit from the structural change in customers going from kind of physical services, using physical services migrating into digital ones. So even though the travel sector would decline over the coming periods coming years, I think this company can still grow and become something. And that is something that long term investor sees. But I, of course, can be very clear as well to say that raising capital in that sector is less kind of is more cumbersome than raising capital within the telemedicine or digital health area right now. But with the right long term investors that see that structural shift over time, we are able to secure enough capital to these businesses as well. That's clear, Georgi. Let me just ask a follow-up, if that's okay. I mean, you've committed some sort of a capital framework also for 2020. How much of sort of the refinancings in existing portfolios will be forward leaning, if you will, such as the one you did in VillageMD? And how much of that will be defensive to secure the liquidity and financing situation in the assets? I think it's difficult to say. What we said is that, I mean, the overall capital allocation framework says that twothree of our capital will be deploying in what we call follow on investments, right? So to the exist in the existing portfolio and 1 third into new opportunities. What we said last quarter that during 2020, it will be a slightly higher share to the existing portfolio due to the pandemic because certain companies would need cash earlier. But over, let's say, 5 year period, this number will be the same anyway. So we will stick to our long term guidance, if you may. And we see that this is just a kind of a smaller change near term, but not of a significant level at all. I don't know if you want to add anything, Erika, on that. No, I think that's fair. Okay. Thank you. Thank you. And we have one further question come through. That's from the line of Johan Sjoberg of Danske Bank. Please go ahead. Your line is open. Thank you. Can I ask you a little bit I heard your explanation on why you're breaking out the assets which are on the total emerging markets and also hear your explanation about your focus there? I interpret this, please correct me if I'm wrong, that these companies, Dayport, Bemak, Victor, Solstad these companies which where you don't see yourself as being long term owners. Is that correct? I mean, our basically focus on strategies sorry, on geographies, that's for new investments, not for the existing portfolio that we have said before. But again, of course, we will be more disciplined, let's say, with capital deploying capital into companies that are off our focus geographies. That is correct. Whether we are long term owners or not, that depends on basically our potential exit as with all assets. So we think it's clearer to group them together since the investments that we will do going forward, they will definitely be in our focus geographies. And I guess also you could include Global Fashion Group into that category? Yes and no. If you look at Global Fashion Group, they have some emerging market exposures, especially Southeast Asia. But a large part of the asset is also in a country like Australia, for instance. And I would argue that we see very similar trends to Russia that we see in other more mature markets when it comes to fashion and the market sorry, market penetration of online services. So I think it's not as black and white as a company like, for instance, BIMA. Okay. And when it comes to your investments into health care services also, I mean, it's a super hot area right now. Could you talk a little bit about the transaction multiples where you are currently investing into, for example, CitiBLOCE? Yes. We will be happy to talk about that because we think that we are going into in these companies at some quite attractive levels. I will hand over to Samuel, but just say also that what I mentioned earlier today is that our success within the health care sector has put us in a position where we actually have an improved deal flow now of incoming opportunities. And we've also built up an extensive network of advisers and people that we trust in the U. S. And that is, of course, very helpful when we do our, let's say, new investments. But Samuel, you could please elaborate further on that. Sure. Considering the similarities between CityBloc and VillageMD that Georgi mentioned earlier, the peer group we benchmarked CityBloc against is the same one as we use for Village. So on a revenue multiple basis, I would say that our entry price in City Block is fairly in line with our entry price in Village during late 2019 on a multiple basis. Okay. Can I also just coming back to earlier comments and questions upon the valuation of the unlisted portfolio? I hear your explanations and I fortunately understand them as well. On the other hand, I mean, it's I think it's part of the trigger or part of the investment there, why to invest into Kinnevik is the unlisted business. And I think this I'm not sure if this prudent valuation approach, which you're doing on or undertaking on the unlisted businesses, is that great, to be honest here? Because I mean, it's not that different from the investment or the levels where you invest into this one. I think it would be good for you, to be honest, to take a little bit more of an aggressive approach upon at least trying to look upon market evaluation because I mean, you're highlighting all the great qualities in your unlisted companies, but it doesn't seem like you really want to put them into figures. And that's I kind of missed that, to be honest. That's well noted, Johan. I think and we elaborated on this at the Capital Markets Day last fall. I think the sort of gold standard here as it relates to our valuations is to provide you guys with basically the data that we have when we make our sort of assessment. And then you guys can opine on a fact based basis on whether or not you guys believe we are right. Having said that, you say you sort of partially understand it. That sort of applies to us as well because as you well understand, we use different lenses when we assess valuations when it's a matter of investment decisions and when it's a matter of putting together an NAV statement. When we make investments, we take a very long view considering we're long term shareholders. When we do our NAV statement, we take a much shorter view. That is due to the regulatory framework. And we believe that within that sort of corridor of what you can argue is a fair value, we prefer to remain prudent. But having said that, I hear you. Yes. That's great. No, I think it's too bad really because I mean, there's I mean, these recent trends that we have been earlier, we noted here. I mean, you're in a full position considering what's trying to happen in your listed portfolio, in your unlisted portfolio, but we don't see that in the actual value of the unlisted, which kind of gets neglected, which I think is a huge shame considering that there's a tremendous, I stress the word tremendous potentially in the unlisted portfolio, which the market kind of doesn't see right now. No, no, I agree with that. Just one sort of quick comment. I mean, clearly, what's happening now, it's not that it's it will not be reflected in our NAV statement. It's just a matter of allowing this to sort of pan out until it does. So it's not that it's going to miss, but it's a matter of having more concrete sort of inputs into our models. Yes. Okay, great. Thanks a lot. Thank you very much for your input. And I'm afraid that we have to close the call now. So thank you very much for listening and for your questions. And as a reminder, we will host our extraordinary general meeting on the 19th of August and report our results for the Q3 2020 on the 15th October. And everyone stay safe now and have a very nice summer. Thank you very much.