And with me today is our CFO, Joakim Andersson, and our Director of Corporate Communications, Torun Litzén. We will start by taking you through a presentation of the results released this morning, and after that, we are happy to answer any questions you may have. Please now turn to page four, where we have provided you with a summary of the key highlights for the quarter. In the first quarter, we saw solid operational performance in our companies and a strong recovery in Kinnevik's net asset value. Zalando announced an ambitious plan to become the starting point for fashion in Europe, and Millicom made one of the largest acquisitions in the company's history in Central America. In addition to the investment in MatHem that we made in February, we made follow-on investments in Kolonial.no and Budbee, both in the Nordics.
This is in line with our strategy to double down in our private companies, where we see strong performance. Our net asset value at the end of the quarter was SEK 84.3 billion, rebounding by 20% compared to the end of previous year and corresponding to SEK 306 per share. Our net debt position increased by SEK 1.1 billion to SEK 4 billion, mainly due to the investment in MatHem, resulting in leverage of 4.5% of portfolio value by the end of the quarter. Please turn to page five for an overview of the performance of our large listed companies. Our large public assets all had solid starts to the year. Zalando presented its 2018 full-year results at the end of February and hosted a capital markets day to present its strategic priorities going forward.
It was rewarding to see the company making a strong comeback in the fourth quarter, growing revenues by 25% with a 7% EBIT margin. In the beginning of April, Zalando also updated the market of its first quarter EBIT, expecting an adjusted EBIT in the single-digit million EUR. This is clearly above market expectations and further supports the rebound in the Zalando share price, which has almost doubled since the beginning of the year. I will go through the highlights of their strategic update on the next slide, but first, let us look at how our TMT companies performed in the quarter. Millicom delivered solid KPIs and organic growth in line with full-year targets. In particular, the significant investments made in Colombia and Bolivia over the past several years are now beginning to produce faster revenue growth and rising levels of profitability.
Also, the recently acquired Cable Onda in Panama is performing very well. Tele2 had yet another very strong quarter with the underlying EBITDA growing by 8%, driven mainly by cost reductions. Since the merger with Com Hem, Tele2 has introduced several new growth drivers such as cross-selling mobile into the fixed consumer base through Com Hem Mobile, selling fixed into the mobile consumer base and reducing churn through FMC benefits, and refocusing the B2B business on profitable growth. The company has also started executing on the planned cost reductions, making progress toward the ambitious synergy targets. Now, let us turn to page six for an update on Zalando's strategic priorities. Zalando's management is set on one clear goal, to become the starting point for fashion and thereby reaching gross merchandise value of EUR 20 billion by 2023, 2024.
To achieve this, Zalando aims to deepen its relationships with customers by tailoring its offering and focusing on building an even better shopping experience for its most loyal customers. The company also clarified its ambitions with its partner program, where brands can sell directly to customers through Zalando's platform. In 2018, more than 250 partners were integrated with Zalando's partner program, accounting for about 10% of gross merchandise value, and Zalando aims to increase this share to 40% by 2023, 2024. Zalando also announced that Cristina Stenbeck is proposed to return as chairman of the supervisory board at the company's AGM in May. This is excellent news for both Zalando, Kinnevik, and both companies' shareholders. With Cristina at the helm of Zalando's supervisory board, she will support Zalando to see through their bold vision.
The board will focus on long-term value creation, including an efficient capital allocation framework, continued creativity and innovation, building deep partnerships, and investing in Zalando's platform strategy. Let us turn to page seven. With Millicom's acquisitions in Panama, Costa Rica, and Nicaragua, the company is now firmly positioned as the leading fixed mobile convergent provider in the region. This position is important because strong FMC capabilities have previously proven to be a catalyst for performance improvements, driving net promoter score and revenues per user. Millicom also expects to achieve significant synergies from cross-selling mobile services to cable customers and vice versa, as well as increasing revenues due to reduced churn. Let us turn to page eight for an overview of the performance of our private companies. Growth, strategic partnerships, and product development remain priorities for our private companies.
I will touch on Global Fashion Group separately, so let us look at the performance of some of the other companies in the private portfolio first. Quikr generated just over $60 million in annualized cash revenue by the end of March, with an annual growth rate slightly under 70%. Having now demonstrated its ability to achieve group-level profitability, Quikr will now reinvest in initiatives to improve user experience and accelerate growth. Over the last year, Quikr has seen its managed rental marketplace grow over four times to become the largest such business in the country. The company also strengthened its position in the used goods segment with acquisition of Zefo, a transactional marketplace. Our micro-insurance company, Bima, is growing its customer base at a yearly rate of 20%.
Bima is focusing on broadening its product platform. Its mHealth product won the prize for best mobile innovation for health and biotech at the GSMA GLOMO Awards of 2019. It is also worth highlighting Livongo, where the member base grew to over 160,000 members after another record-setting year, expanding the client base to more than 650 clients. Livongo is also broadening its product range and reported positive results from its first major clinical study of its hypertension management platform. The company launched the first cellular-enabled blood glucose monitoring system powered by Amazon Alexa, allowing members to ask any of their Alexa-enabled devices to provide their blood glucose readings and health tips. This is innovation at its finest and a great example of how technology can help people to live a healthier life. Let us now turn to page nine to have a look at the Global Fashion Group's performance.
As you have seen in our NAV, the value of Global Fashion Group rebounded by almost 25% following the re-rating of fashion e-commerce on the public markets. I would, however, like to focus on positive operating momentum in the company that we now see after a year under the new leadership of Christoph Barchewitz and Patrick Schmidt. In 2018, GFG delivered accelerating top-line growth with full year net merchandise value grown by 22.5% to EUR 1,453 million on a constant currency basis and adjusted EBITDA margin of -4.3% for the full year. That is an improvement by 4.6 percentage points compared to the year before. What we see here is a great combination of increased growth and improved profitability. GFG also announced that it has sold its 47% stake in Namshi in the Middle East to the majority shareholder, Emaar Malls, for EUR 114 million.
Together with the closing cash position at the end of Q4 2018 of EUR 105 million, Global Fashion Group had a solid financial position to support future growth. Please turn to page 10 for an update on investment activity in the quarter. Last year, we invested in 10 new companies across our focus sectors, and our largest investment this quarter was Mathem, which I spoke at length about when we reported in February, including the presentation of our food vision. Our ambition is to support our new companies and over time increase our stakes as they grow and perform. In line with this strategy, we have invested further capital in two of our Nordic companies, Budbee and Kolonial.no. Since our initial investment in 2018, Budbee has tripled its numbers of deliveries in Sweden and expanded to Finland and Denmark.
With additional capital raised, Budbee is planning to continue its geographic expansion into the Netherlands, and we look forward to continuing to support the Budbee team on its exciting next steps. Our commitment to invest another NOK 300 million in Kolonial.no is supported by the excellent progress we have seen in the company since our initial investment some nine months ago. Kolonial.no has successfully completed installation of their proprietary warehouse automation solution and returned to a strong growth trajectory. We continue to see significant upside in the market opportunity, and we have a strong conviction in the team's ability to execute on it. I would now like to hand over to you, Joakim, for an update on our financial position.
Thank you, Georgi. On slide 12, we present the key contributors to the NAV development in the quarter, which was led primarily by strong share price performance in Zalando and Tele2 and the valuation uplift of Global Fashion Group. Our NAV increased by 20% over the quarter to SEK 84.3 billion, and NAV per share increased to SEK 306. As per yesterday, our NAV was up a further 8% to SEK 91.3 billion or SEK 331 per share. The value of our unlisted portfolio increased by SEK 2.3 billion and ended the quarter at SEK 14.2 billion. This increase was driven both by the investment in Mathem of SEK 889 million and the change in fair value quarter on quarter by SEK 1.3 billion.
The value of our ownership in Global Fashion Group increased by SEK 785 million to SEK 4.1 billion based on a sales multiple of 0.7x the full year 2018 revenues. Compared to the 0.5x at the end of the year, following the significant rebound of listed fashion retailers on the public market during the quarter. Please turn to page 13 for an overview of our balance sheet. On the left-hand side of the slide, you can see a breakdown of the SEK 1 billion we invested in the quarter, the majority of which went into MatHem. On the right-hand side, you will note that we ended the quarter in a net debt position of SEK 4 billion, which corresponds to a leverage of 4.5%, which is well within our policy of staying below 10%.
This quarter, we will, subject to AGM approval, pay out the first tranche of our annual dividend, SEK 4.25 per share. This is estimated to happen around the 14th of May. The remaining SEK 4 will be paid out in November. With these remarks, I would now like to hand over to you, Georgi, to sum it up.
Thank you. To sum up, we continue to execute in line with our strategic priorities with a long-term view, and an investment strategy supported by strong conviction in our portfolio companies and their teams. It was very rewarding to see the strong recovery in our largest public and private assets in the quarter. I very much look forward to continuing to execute on our strategy, and I hope to meet many of our shareholders on May 6th, when we will host our annual general meeting in Stockholm and tell you more about how we aim to continue to create value for our shareholders. Thank you for listening, and now let's open up for questions. Operator, please go ahead.
Thank you. Ladies and gentlemen, if you have a question for the speaker, please press 01 on your telephone keypad. The first question is from Joachim Gunell from DNB Markets. Please go ahead.
portfolio. In conjunction with the Q4 call, you'd mentioned that we'd hopefully see some progress in 2019.
Joakim, we missed you there. Can you please repeat the question?
Absolutely. Can you hear me now?
Yes, now we can hear you.
Perfect. What efforts could we expect for this year in terms of increasing the market's understanding of the values that could crystallize from your new digital winners in the private portfolio? In conjunction with the Q4 call mentioned that we'd hopefully see some progress in 2019.
Yeah, that's correct, Joakim. Again, we are also looking to find more proof points and numbers, KPIs in our private assets. We still have the view that during 2019, we will definitely be able to demonstrate how value is being created in the private portfolio. We'll have to come back to that more specifically when we have more information, but our ambition remains the same. During 2019, we will show you more.
Lovely. Okay. Given that you're obviously focusing on accelerating your winners, as we see in this quarter, I guess it would be affirmed to us here that you assume that you will continue to deploy more capital into your winners, so to say. Of this, which holdings would you say are close to another financing round? We talked about Babylon in Q1. Also, we note there's some impressive figures here for Betterment. They should be taking market shares among the independent U.S. players. Perhaps to follow up then on Babylon and Betterment in terms of capital need.
First of all, maybe I can answer the question by saying that the capital need is very much related to the strategy of the company. Sometimes companies pivot into new business areas, new verticals, and then of course, there might be a need for capital raise. If we believe in that, let's say change or updated strategy, we will be there as long-term investors. We also know that there are companies that have a quite long journey still in order to reach profitability, and you mentioned a few of those, or one of those. Babylon is currently looking to raise money, and as a large shareholder in that company, we will be supportive.
Understood. Just to follow up on Babylon, if you could put some flavor on it. Financial Times, I believe, wrote that Babylon had revenues of approximately $10 million for 2018. With the Prudential, Canon, and Samsung deals here in the numbers, are the revenue impact for those deals in 2019?
Unfortunately, we can't disclose any other revenue targets. As you say, looking at Babylon's business model, you have the B2C services and you have the more platform services, B2B2C, which is driven by agreements like Prudential. With those agreements, we believe in a growth of the revenue in the coming years, a significant growth, I should add. We have no more, let's say, numbers than what has been disclosed so far. Maybe important to say that even though the value of these contracts can be high, the numbers will be seen in the company's revenue as the products are being rolled out.
Understood. Two more questions. Perhaps this one's for Joakim. You made some minor changes to the fair values of the Bayport, Betterment, and Babylon, supported by, as you call them, complementary valuation methods. What are these?
As you know, we look at both the latest transaction value, and when they are kind of outdated or getting old, we also do a supplemental valuations based on multiples or DCFs. That has been the case on these companies.
Clear. Just a final question here. As your financial objectives state that you will make buybacks if the shares trade at a significant discount, only when there's enough cash position. Currently trading at a considerably higher discount than you have done in the past five years, still you're slightly more geared now. Can you just provide some updated flavor on your view on buybacks at this stage? The reason why I'm asking is obviously that it would signal to the market that could be a pretty efficient way to allocate capital for your shareholders, I assume.
Yeah, absolutely. If you read the policy, there are three criteria, and one of them is clearly not met, being the one where we say that we should be in a substantial net cash position. Buybacks is not really on the agenda as of now.
Very clear. Thank you very much.
Thank you.
Hi, next question we have from Magnus Råman from Handelsbanken.
Yes, hi.
Please go ahead.
Thank you, Magnus Roman, Handelsbanken here. I'd like to turn the attention to your ambitions in the Nordic grocery retail market. Do you see any potential synergies between the two companies you have an ownership in now, for example, in the back end in terms of shared sourcing, IT development, and so forth?
Yes. Hi, Magnus. We definitely see potential with synergies among the countries in the Nordic space. It's not a coincidence that we have been looking at these leading players in both markets. It's too early to say how we will extract those synergies, but one thing is for clear already now to understand the potential in efficient automation in the warehouse that we have been experiencing in Kolonial.no helps us to understand the potential also in MatHem. Going further, of course, there will be discussions like joint procurement. There could be definitely positive scaling in technology, et cetera. We have not taken any decisions yet since these are pretty recent acquisitions. Of course, the potential is there, and that was what we had in mind from the start.
Excellent. When you look at the market and the players, do you identify any potential further investments apart from follow-up investments in these two companies to further strengthen this push that you are making?
Of course, now we have taken these bets in Norway and Sweden. We think that the grocery market, as we laid out last quarter, is so substantial. We're talking about EUR 73 billion, EUR 74 billion in the Nordics only. I think the market is really vast and creates a lot of potential. As we also said, when we have this high-frequency online business where you meet customers up to once a week, of course, you can expand that into other products and create a platform. It could be other type of parcels, could be other type of services. That expands the food vision into something more equivalent to a platform vision. We also believe that the Nordics could be interesting from that perspective because it's a region where you can almost ring-fence and create this platform in order to see it more like an infrastructure play.
That's something that we've been thinking about, capturing the home in the Nordics is something that we are very keen to explore even further. It's also aligned with our views looking at the merger between Tele2 and Com Hem moving into the home at a greater extent.
Highly interesting. Maybe also I could just ask you a more specific financial question there on post the April investments in Kolonial.no, if you can make any comment on the ownership change there and possibly, I guess half of the investment could be converted to shares in the future, but the estimated ownership level post the investment?
Unfortunately, it's not easy to say today since our investment is now partly convertible and there are other kind of options, opportunities, and so forth in the cap table today, so we don't know how they will be exercised. It's too early to say, but one thing is clear, we will go up from our current 14.5% ownership to something higher.
A quarter of the company or somewhere around there?
It's difficult to say today, Magnus, because it's dependent on other shareholders and how they will react.
Sure
as we've said before, we kind of aim to have a large stake of the company, I would say, north of 20%, and that's also how we see our development in Kolonial.no.
Great. Thank you. Just finally, a question on GFG. You mentioned the presentation here that the good positive operational momentum that you see in the company and the solid financial position after the divestment of the residual holding in Namshi. Are there any other advantages for the group to go public near-term that you see now that it doesn't seem to be needing any further cash contributions in the foreseeable future?
I think the interest of GFG has been increasing over the last year, generally, I would say. Of course, that's an opportunity to allow new shareholders then to this company. We believe that a company that is a clear market leader or has the chance to become the clear market leaders in these markets with a good healthy growth is always attractive as a candidate on the public stock market. That has not been decided yet, as company communicated already last year, we are evaluating different options. Even though the company has a strong cash position now, we have much higher ambitions for the growth and the long-term potential of GFG. In one way or another, capital injection, I would say, would allow the company to continue its growth trajectory. That's basically the view right now that we have.
Right. A possible listing would likely entail a broadening of the ownership in the company. I got it right?
It's too early for me to say, but that would be at least an option. The point we make-
Sure. Thank you very much
The point we make in this report, Magnus, is that with a strong cash position as the Namshi put option, we're not in a situation where the company has to go public, but it's an alternative.
Right.
I think that is a very good position to be in.
I think that's right. Thank you.
Thank you, Magnus.
Hi. The next question is from Lena Österberg, Carnegie.
Lena, are you there?
Hello. Do you hear us, Lena?
Yeah, I am. Sorry. I am. I didn't hear it was my name. Sorry. Yes. I have a follow-up question on Kolonial.no. Could you maybe say something about how much of the warehouse you've automated or what has been done? Also if you have any first experience in efficiency improvements, any metrics that you could provide us with? Also, as I understand it, they just have one warehouse today, and how many of Norway's households can you serve from that warehouse?
Okay. When it comes to the investment in Kolonial.no, before we did our first investment and deployed capital in 2018, we were very intrigued by the plan they had when it comes to automation. The company has developed a proprietary system, which is a combination of, I would say, software and hardware and how to automate the central warehouse. Post our investment, this project was launched and was basically completed by end of last year with very positive results. There's always some fine-tuning after you have implemented this, but the significant uplift in efficiency measured in UPH, so units per hour, is really exciting. It tells us something that you can improve the profitability at large, implementing these kind of system at a relatively low, I would say, CapEx need. That's the interesting piece with their system. It's not a fully 100% automated warehouse.
It's a combination of finding the best possible way of combining conveyor belts and so forth in the warehouse with a clever and efficient software. The numbers has not been released so far by the companies, I can't disclose any more figures. I would like to maybe postpone that question to a later session with the company, hopefully during 2019. When it comes to the reach, you're right. There's one warehouse now, and you can of course have long-haul shipments from a major city to smaller city. We believe that in the future, you might actually need one warehouse or at least a hub around the three to four largest cities in the Nordic countries
In Sweden as an example, it will be one most probably in Stockholm, Gothenburg and Malmö. You can reach Mälardalen out of the Stockholm warehouse, you have the West Coast by Gothenburg and the south in Malmö. That's the type of infrastructure rollout plan that we see. It's not decided yet how it will look in Norway exactly, but I would assume right now that the picture will look more or less the same over time.
Okay. Could you maybe say something? You said very small CapEx. What's very small? The CapEx we've seen from the other retailers has been very big for their warehouses.
I would say the difference is significant. It's more to one-tenth of the investments that I've seen in other solutions.
Okay. Thank you.
Thank you, Lena.
Thank you. As a reminder, if you want to ask a question, please press 01 on your 30 participants. All right, the next question is from Johan Sjöberg from DNB.
Hello. Thank you. I have three questions. First of all, I would like you to, if you could, talk a little bit about how you are thinking in terms of your financial target of 12%-15% total return over a business cycle. Could you say something about how you think about the total returns within the listed holdings and in your unlisted holdings, i.e., what type of returns target you're looking for when you're making an unlisted investment? Thank you.
Hey, Johan. I'll take that. Yeah, the methodology that we're using is that we do a kind of bottom-up approach where we look at all the individual assets in our portfolio, think about the cost of capital in what region, and then sum it up or consolidate that into total portfolio minimum required return. I would prefer not go into all the details in all the companies, but obviously more mature companies in more developed markets such as Germany and the Nordics obviously has a lower cost of capital, and then by that also is obviously lower than the 12%-15%. It depends on where these companies operate, the newer companies where they operate and stage.
If you take an average, if you look at your unlisted holdings, it's 85% roughly of your portfolio is listed. I guess your return requirements in that is probably much lower compared with the unlisted.
Yeah
As an average when you're looking at your unlisted portfolio.
No, yeah.
What type of.
No, you're right. In the listed portfolio, the target is probably somewhere between 7% and 12%, and the unlisted is probably more in 12%-20%, 25%.
Okay, good. Thank you. My second question to you, Georgi here. You made a lot of investments or at least a number of investments during your time as CEO. In terms of exits, there have not been that many. Could you say a little bit about your When you look at the unlisted portfolio, you talked about GFG here, but do you see are there other candidates which could potentially, without naming anyone, but do you see exit candidates in your unlisted portfolio right now? Could you say something also about a little bit, I understand that the price tag has come up also for your investments, but I guess that also that means that the price tags have come up for potential exits from your portfolio as well. Could you say something a little bit about your exit strategy in the unlisted as an average?
Yes.
Yes. First of all, there are two different type of exits. We, of course, will look at our portfolio continuously and see companies that are maybe not performing as our expectations and where we have tried to change that development but not succeeded. We might be the wrong owner for those assets. I think you need to be fair to yourself and conclude that sometimes as well. Basically companies that do not fit into our strategic roadmap. We have done several exits during 2018 that we've not been talking too much about, but smaller divestments kind of to prune our portfolio. That's one kind of bucket of divestments. [Lineal] being one example. I think that what you're asking is not really that, you're asking about companies with larger exit potentials or significant exit potentials. There-
Yes
It's too early to say. What I said when I joined a bit more than a year ago is that I will scan the entire portfolio for the potential winners. We have been talking about a few brands from time to time, we will follow these and see how we believe that they will perform with additional capital. Of course, we will come back to divestments in those exits in those companies as well. I think it needs to take a bit more time before we understand the full potential.
Got it. When I look at your page 11, your quarter report upon the unlisted holdings, I sum that up to 17 holdings which you are naming. How many are there in total in this? You have a lot of others, so to speak.
Yeah.
How many unlisted holdings do you hold in total?
Yeah, we don't have a specific number there, but there are some more in the portfolio. It's likely to assume that some of them also are on the list, one of the buckets that Georgi mentioned.
Candidates that we might look to exit.
Are we talking about 40, 50 companies in total here?
No, it's not. Say a handful maybe.
Okay. Out of these 17, which you were mentioning, Georgi here, without naming anyone, how many of these would you say are future winners? I can guess a few, how many, just a rough figure here, out of these 17, how many are, as you see, "Hey, we want to stick around with this company for quite some time.
I would say, like Joakim said, if we have a handful in the other that we would like to prune, there's most probably a handful in the other category as well, where we see the great potential.
Okay.
We all choose to say that we will find the next Zalando in the coming years.
No
Easier to say. What we believe is that there are five companies perhaps in this portfolio that we truly believe can move the needle for Kinnevik, one and definitely all together. That's what we mean by companies that are potential winners.
That's fantastic. I think I asked that last time. I think it would be extremely useful and very good for your perception of you as a sharer, if you were to start to provide some details about these fives. That's just a pure thought from my side here.
It makes a lot of sense. As we said, we said that in the end of Q4 with ambition to do it under 2019. That remains.
Actually, that's great. My second or my last, you've seen discount obviously come up here to pretty high levels. We saw the discount increasing during the Q4 when you had this big turbulence in Zalando as well. Now Zalando is back, but the discount is not back, so to speak. What I hear from investors, they are a little bit worried about the portfolio. The concentration of your listed holdings within the three big ones, basically translating to 85% of your total portfolio. How do you think about the portfolio optimization going forward? Could you share some thoughts about that, please?
We share the same kind of view, of course. That's facts that the public asset stands for 85%. Of course, when one of those shares is volatile, it has an impact also for Kinnevik. However, we have to remember that these companies have been growing because they have been very successful, not to mention Zalando the least. It was maybe not the plan from the start to have one company representing almost 40% of the portfolio. That's kind of a luxury problem.
Absolutely.
We can't say now what we think to do about it, of course. Over time, take it in the long-term perspective. The idea has always been to reallocate capital into new potential winners, as we have said in this call. That will also happen. It has happened in the past for Kinnevik, and it will happen in the future. Right now, we are more busy with making these company performing and be a good active owner than trying to alter the portfolio concentration in the short term.
Got it. Thanks for your answers.
Thank you.
Thank you.
Thank you, sir. There are no further questions at this moment. Please go ahead, Victor.
Okay. Thank you very much. Thank you for the questions. Thank you for listening. As a reminder, just to finish off this call, we release our report for the second quarter on 19th of July. Thank you very much. Have a nice day.