Investor Update

Jun 4, 2019

Hello, and welcome to the Kinnevik Conference Call on the 4th June. Today, I am pleased to present CEO, Georgi Gannel and CFO, Joakim Andersson. Throughout the call, all participants will be in a listen only mode and afterwards, there will be a question and answer session. I will now hand you over to Jordi Gernet. Please go ahead with your meeting. Thank you very much. Good morning, everyone, and welcome. As you may have seen, last night, we announced our intention to exit our shareholding in Millicom. Given that a portion of our divestment plans include a registered offering of shares in Millicom in the United States and as such registration is ongoing, We are unfortunately not able to comment any further on that process. This call does not cover any information related to that U. S. Registration, and we will not be answering any questions concerning that process. And we have issued a separate statement with respect to that process to our shareholders outside the United States. Instead, this call will focus on our anticipated distribution of Millicom shares, our strategic evolution and our intended amendments to Kinnevik shareholder remuneration policy. I would start by taking you through a couple of slides explaining the rationale behind our decision to distribute shares in Millicom to our shareholders and the changes to our shareholder remuneration policy, and then we will move over into a Q and A. So with that said, turning to Slide 3. As you all know, accelerating the private portfolio has been a strategic priority since I took over as CEO 1.5 years ago. And today's announcement reinforces this ambition as we accelerate the shift in our portfolio towards high growth companies. In addition, it significantly strengthens our financial position and capital allocation flexibility. As we intend to give our shareholders the option to become direct shareholders in Millicom, we have also decided to revise our shareholder remuneration policy for 2020 onward. Previously, our objective was to pay an annual dividend growing in line with the dividends received from our investee companies and the cash flow generated from our investment activities. Going forward, Kinnevik will pay an annual dividend equivalent to ordinary dividends received from our investee companies. And furthermore, we will return excess capital generated by our investment activities to our shareholders. If we now turn to Slide 4. Any proceeds, Shinnevik Receipts from the initial phase of the divestment of Millicom shares will enable us to accelerate our investment activities, building on our track record of building world class companies. We have a clear and well proven investment strategy of backing digital consumer facing challenger businesses that address everyday consumer needs. These challengers range from Tele2, meeting Swedish and Baltic consumers' need for connectivity to Betterment, providing low cost personalized advice for savers in the U. S. To EMEA, aggregating all major modes of transport in Europe. Kinnevik is a bold and long term business builder. And when we partner with talented entrepreneurs, they will have an active and engaged shareholder support them in challenging the status quo to make people's lives better and easier. Our focus on fashion and food e commerce, online marketplaces, financial services, health care and TMT enables us to target large sectors in the process of significant technological disruption with the companies I just mentioned have some good examples. And as I touched upon earlier, we are focusing our capital in Europe with a focus on the Nordics, the U. S. And selectively in other markets. Throughout our history, we have accumulated numerous examples of how we have leveraged our experience, expertise and platform to build leading long term sustainable businesses. Some of them remain with us, such as Tele2 and Zalando. Some of them are in very early stage of their growth journey and some we have divested successfully along the way as part of our continuous reallocation of capital and evolution of our portfolio. If you now turn to Slide 5, you will see that the value that we have created with this strategy in the last 30 years through the share price appreciation and dividends, Shinnevik has generated a 30x return to our shareholders, and we are committed to and excited to continue this journey of long term shareholder value creation, adhering to our credo that the only concept is change. Turning to Slide 6. Today's announcements reinforce our ambition to accelerate our investment activities. We will strengthen our financial position and move from a net debt to a net cash position, and we are amending our dividend policy to better reflect our growth focus profile. The distribution will provide our shareholders with opportunity to remain shareholders of Millicom and take part in their continued share price development and dividend streams. We are very excited about our strategy in our growth companies, and I would also like to take this opportunity before I open up with questions to invite you to our Capital Markets Day, which will be held on September 19 in Stockholm. On the day, you will meet several members of the Kinnevik team as well as the founders and entrepreneurs behind many of our companies. Further information will be available on our website in due course. And lastly, before we open up the floor for questions, I would like to remind you that we are not able to comment on the ongoing registered offers offering. We refer any interested party to the press release issued by us last night. So now operator, we're ready to take questions. Thank you. Our first question comes from the line of Magnus Rohrmann from Handelsbanken. Please go ahead. Your line is now open. Thank you. My first question relates to the capital available for investments post this divestment. Will you stick to your gearing target of around 10%, thereby it should imply that you will have around SEK 10,000,000,000 of capital available for new investments? That's Hello, and welcome to the Kinnevik conference call on the 4th June. Today, I am pleased to present CEO, Georgi Gannel and CFO, Joakim Andersson. Throughout the call, all participants will be in a listen only mode And afterwards, there will be a question and answer session. I will now hand you over to Jordi Gernet. Please go ahead with your meeting. Thank you very much. Good morning, everyone, and welcome. As you may have seen, last night, we announced our intention to exit our shareholding in Millicom. Given that a portion of our divestment plans include a registered offering of shares in Millicom in the United States and as such registration is ongoing, we are unfortunately not able to comment any further on that process. This call does not cover any information related to that U. S. Registration, and we will not be answering any questions concerning that process. And we have issued a separate statement with respect to that process to our shareholders outside the United States. Instead, this call will focus on our anticipated distribution of Millicom shares, our strategic evolution and our intended amendments to Kinnevik shareholder remuneration policy. I will start by taking you through a couple of slides explaining the rationale behind our decision to distribute shares in Millicom to our shareholders and the changes to our shareholder remuneration policy, and then we will move over into a Q and A. So with that said, turning to Slide 3. As you all know, accelerating the private portfolio has been a strategic priority since I took over as CEO 1.5 year ago. And today's announcement reinforces this ambition as we accelerate the shift in our portfolio towards high growth companies. In addition, it significantly strengthens our financial position and capital allocation flexibility. As we intend to give our shareholders the option to become direct shareholders in Millicom, we have also decided to revise our shareholder remuneration policy for 2020 onward. Previously, our objective was to pay an annual dividend growing in line with the dividends received from our investee companies and the cash flow generated from our investment activities. Going forward, Kinnevik will pay an annual dividend equivalent to ordinary dividends received from our investee companies. And furthermore, we will return excess capital generated by our investment activities to our shareholders. If we now turn to Slide 4. Edit proceeds, Shinnevik Receipts from the initial phase of the divestment of Millicom shares will enable us to accelerate our investment activities, building on our track record of building world class companies. We have a clear and well proven investment strategy of backing digital consumer facing challenger businesses that address everyday consumer needs. These challenges range from Tele2, meeting Swedish and Baltic consumers' need for connectivity to Betterment, providing low cost personalized advice for savers in the U. S. To Omeo, aggregating all major modes of transport in Europe. Kinnevik is a bold and long term business builder. And when we partner with talented entrepreneurs, they would have an active and engaged shareholder support them in challenging the status quo to make people's lives better and easier. Our focus on fashion and food e commerce, online marketplaces, financial services, health care and TMT enables us to target large sectors in the process of significant technological disruption with the companies I just mentioned have some good examples. And as I touched upon earlier, we are focusing our capital in Europe with a focus on the Nordics, the U. S. And selectively in other markets. Throughout our history, we have accumulated numerous examples of how we have leveraged our experience, expertise and platform to build leading long term sustainable businesses. Some of them remain with us, such as Tele2 and Zalando. Some of them are in very early stage of the growth journey and some we have divested successfully along the way as part of our continuous reallocation of capital and evolution of our portfolio. If you now turn to Slide 5, you will see that the value that we have created with this strategy in the last 30 years through the share price appreciation and dividends, Shinnevik has generated a 30x return to our shareholders, and we are committed to and excited to continue this journey of long term shareholder value creation, adhering to our credo that the only conflict is change. Turning to Slide 6. Today's announcements reinforce our ambition to accelerate our investment activities. We will strengthen our financial position and move from a net debt to a net cash position, and we are amending our dividend policy to better reflect our growth focused profile. The distribution will provide our shareholders with opportunity to remain shareholders of Millicom and take part in their continued share price development and dividend streams. We are very excited about our strategy in our growth companies, and I would also like to take this opportunity before I open up for questions to invite you to our Capital Markets Day, which will be held on September 19 in Stockholm. On the day, you will meet several members of the Kinnevik team as well as the founders and entrepreneurs behind many of our companies. Further information will be available on our website in due course. And lastly, before we open up the floor for questions, I would like to remind you that we are not able to comment on the ongoing registered offers offering. We refer any interested party to the press release issued by us last night. So now operator, we're ready to take questions. Thank you. Our first question comes from the line of Magnus Rohrmann from Handelsbanken. Please go ahead. Your line is now open. Thank you. My first question relates to the capital available for investments post this divestment. Will you stick to your gearing target of around 10%, thereby it should imply that you will have around SEK 10,000,000,000 of capital available for new investments? That's correct. We will stick to our leverage target of 10% Magnus. And this transaction will take us to a net cash position, and we will have a spend in position for doing further investments. So should that imply that you plan some more sizable new investment in the year or 2 to come? As we said earlier, we will focus on larger investments in the near term, but also allow ourselves to go into some more venture like companies in the Nordics. But we also have interesting company in our existing portfolio, meaning that we are ready to follow them when they need capital in their growth journeys. Right. And then on your geographic focus here, I mean, Global Fashion's footprint, do you think that, that fits into the geographic focus that you outlined yourself? I mean, for new investments, we have a strategic geographical focus, as we said, in Europe and U. S. But we also have a very clear growth strategy, and we feel that Global Fashion Group fits very well with that latter part. They have strong positions in their countries, and we remain committed shareholders in that company. Thank you. Thank you. Our next question comes from the line of Derek Lamberty from ABG. Please go ahead. Your line is now open. Yes, good morning. Just trying to interpret your new dividend policy here. So when you say that you will return excess capital generated by investments investment activities, does this mean that you will continue to distribute a large amount when you do big deals such as ABILTO historically? Or should we also interpret this that you will keep more cash in the company to reinvest into new private assets when doing such transactions. Hi, Derek. This is Joakim picking that up. I guess that's a fair interpretation of what we mean with excess capital. So it is simply the capital that we do not see that we will use for the short to mid term period. But the parallel you're drawing to Aviso is probably a relevant one. We wouldn't keep that amount in full probably. And also, you say the ordinary dividends received from the industry companies. So that means that if Tele2, for instance, were to increase its dividend following some of the excesses made of late, those proceeds will not be redistributed, meaning that based on the current dividend this year in Tele2, your DBS would come down from SEK8.25 to about SEK3 per share. Is that the correct interpretation? Yes. So what we're saying is that the ordinary dividends received will be passed through to our shareholders. And on the exact numbers, you also need to keep in mind that Millicom, if we go ahead and distribute our remaining stake in Millicom, then obviously, the shareholders will get that dividend straight out from Millicom. Okay. And looking at new investments, are there any of these target sectors that are of particular interest right now? Or do you also expect to expand the sectors you're looking at? No, Amit. We have our sectors where we think there are enough opportunities. As you know, we invested in Kolonial last year and MatHem this year. So we have broadened kind of the e commerce sector going into food. And that is, of course, very exciting for us and for our shareholders. Apart from that, we have no plans to enter any new sector at this point. We have also, as I said earlier in the call, exciting companies with growth potential in the portfolio today where we want to accrete ownership. Our next question Yes, hello. Just a couple of questions. I know you cannot comment on the process ongoing. But just to understand, is it a regulatory demand to go through this process with announcing the offer and making a prospectus instead of just doing a placement and then announce the remaining to be distributed later on? Secondly, have you evaluated other alternatives for Millicom, including a trade sale? Yes, I'll stop there. Thank you for the question. I mean, we have chosen this transaction structure because we think it's beneficial for all and the best solution for our shareholders. We don't want to comment that transaction further as it's an ongoing transaction. We basically refer to the press release that was issued last night. Okay. Thank you. Our next question comes from the line of Joakim Kugnel from TMB. Please go ahead. Your line is now open. Yes. Good morning, Joachim and Georgi. So just a question here. As we have following the divestment here of Millicom, the NAV should come down considerably. So with that being said, obviously, the unlisted part of the private portfolio will increase, but still it will comprise only, say, a 5th of your total NAV. So with that in regard, how do you look at the possibility to create NAV growth and the, so to say, split coming from listed versus unlisted assets going forward? Hello, good morning. Thank you for the question. I mean, I would say, firstly, the buckets I would like to talk about really is more the growth oriented bucket and the more mature companies rather than, in particular, listed and unlisted. I think that's a more relevant way to describe the portfolio. We have, of course, the ambition to have a well distributed portfolio and a balance between earlier venture companies and more mature in order to create the best opportunities and a good risk profile. Having said so One of these target sectors that are of particular interest right now? Or do you also expect to expand the sectors you're looking at? No, we have our sectors where we think there are enough opportunities. As you know, we invested in Kolonial last year and MatHem this year. So we have broadened kind of the e commerce sector going into food. And that is, of course, very exciting for us and for our shareholders. Apart from that, we have no plans to enter any new sector at this point. We have also, as I said earlier in the call, exciting companies with growth potential in the portfolio today where we want to create ownership. Our next question a couple of questions. I know you cannot comment on the process ongoing. But just to understand, is it a regulatory demand go through this process with announcing the offer and making a prospectus instead of just doing a placement and then announce the remaining to be distributed later on? Secondly, have you evaluated other alternatives for Millicom, including a trade sale? Yes, I'll stop there. Thank you for the question. I mean, we have chosen this transaction structure because we think it's beneficial for all and the best solution for our shareholders, we don't want to comment that transaction further as it's an ongoing transaction. We basically refer to the press release that was issued last night. Okay. Thank you. Our next question comes from the line of Joakim Goel from DNB. Please go ahead. Your line is now open. Yes. Good morning, Joachim and Georgi. So just a question here. As we have following the divestment here of Millicom, the NAV should come down considerably. So with that being said, obviously, the unlisted part of the private portfolio will increase, still it will comprise only, say, a 5th of your total NAV. So with that in regard, how do you look at the possibility to create NAV growth and the, so to say, split coming from listed versus unlisted assets going forward? Hello, good morning. Thank you for the question. I mean, I would say, firstly, the buckets I would like to talk about really is more the growth oriented bucket and the more mature companies rather than in particular listed and unlisted. I think that's a more relevant way to describe the portfolio. We have, of course, the ambition to have a well distributed portfolio and a balance between earlier venture companies and more mature in order to create the best opportunities and a good risk profile. Having said so, our intention, as we've said earlier as well, is to increase the focus on the growth likely to grow over time. Okay. And then be likely to grow over time. Understood. And yes, really looking forward to the Capital Markets Day here in September then. So any clues on what we could expect there? Is it more of a look under the hood of the unless the portfolio there? Thank you. Yes. I think, I mean, the purpose of the Capital Markets Day is twofold. Firstly, we'd like to kind of reiterate our strategy and explain that how we think regarding our portfolio balance, our sectors and so forth to kind of educate and show our shareholders and analysts how we actually will execute on our strategy. And the second kind of opportunity is to invite companies from our portfolio to tell more about their companies and their opportunities. And we've, as you know, received a lot of questions understand more about the development in these companies. So a combination of those 2 is kind of reiterate our strategy and explain how we will execute on it and the opportunity for you guys to meet a lot of our companies and founders. Understood. Just to follow-up on the first question. I mean, since the NAV will come down here with the divestment, would you say that it's from a it's comparatively easier to say, build NAV growth from a lower basis with as you are accelerating the private portfolio now? I mean everything, I think, depends on what kind of return expectations you have on your investments. We believe, as we said before, that within the growth sector, there are definitely great opportunities out there, and there are existing opportunities in our portfolio where we have high expectations. So from that perspective, yes, to redistribute capital and reallocate that into new growth opportunities, we believe there's a good chance to increase the growth, yes. Thank you, Georgi. Thank you. And as there are no further questions registered at this point, I will hand the word back to the speakers for any closing comments. So thank you very much for the questions and for taking the time today to listen in. So on behalf of Kinnevik, I would like to remind you that we have a Capital Markets Day, the 19th September, and you're very welcome to participate then. Thank you very much, and have a nice day. This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.