All right. I think we're starting to get some attendees here, so let's kick off. Welcome to VNV Global presentation for the second quarter and first six months of 2022. I leave it to Per to start things off. Before that, just a reminder, as we do it in this Zoom format, if you want to ask a question, please use the Q&A function here in Zoom, and we will go through them later on. Thanks. Go ahead, Per.
Thanks, Björn, and welcome everyone. I will, I'll just introduce sort of the report and sort of the general themes that have been going on and what's on our mind at the moment. Then Björn will run through the details of our NAV is built up. Those of you who were with us the last quarter will be familiar with the structure. Then I'll sort of round things off, and then we'll go to Q&A. I thought I'd sort of just kick things off in a sort of a numerical way. Yeah, the NAV this end of June is down to SEK 75 a share. That's down some 30% over the quarter.
It's a very sort of large, horrifying, down some $300 million from the last quarter. That $300 million are of course adjustments in the NAV. Björn will go through those in more detail. An NAV now about $850 million, which compared to just under $1.2 billion at the end of March. As you see here, we have, including some liquidity management, we got about $78 million in cash.
That's $71 million in straight cash, but $78 million essentially in cash, which you compare to the $167 million in debt that we have outstanding, which gets us to a net debt situation at the end of this quarter of about $100 million. As of we've sold our shares in Property Finder after the end of the quarter very recently, and so that gets us down to a little bit, well, about $50 million in net debt. Now, the majority of this debt, the bulk of it matures in early 2025 and runs. Important to remember, it runs at a 5% fixed coupon. 5% flat.
That's the nature of the debt, which is important sort of to highlight in times like this. That leaves us with a- which we're obviously trading, excuse me, at about 1/3 of our NAV. NAV about, well, SEK 75 per share at the end of the quarter. We're trading at about 1/3 of that or even less actually because we're down at just below SEK 23 a share.
As we highlight in this report, if you crudely, admittedly crudely, but if you disregard cash and debt, then you're down to a situation where five names, our five largest names, Voi, BlaBla, Swvl, Gett, Booksy, not even Babylon, but those names make up the entire market cap. The remaining 65 names you essentially get for free. Those five names during 2022, we have high visibility. They'll grow at 100% in revenue terms. Now, we know the market now is not in favor of growth. It will be in favor of growth again, but it isn't currently. But still, I think it's a healthy sign that these companies are growing well. They're well-funded. They have good products that are in high demand and run by very good teams.
I humbly say that, you know, volatility is present as we clearly see now quarter-to-quarter. Thankfully, we invest on a sort of 10-year horizon. At least historically we have. We sell when the founders sell, you know that. From quarter- to- quarter, now that the entire portfolio is either listed or valued on the back of a model, taking in input from listed markets, that is, you have some volatility quarter-to-quarter, but these companies are growing well. Across the entire portfolio, you have a price-to-sales at this NAV of 3.0x. Price-to-sales ratio of the entire portfolio at NAV is 3.0x. Obviously then if you take.
If you compare the sales of our portfolio of our part of the companies in our portfolio, then that equivalent sort of multiple is one if you compare it to the market cap that we're trading at. Going through a little bit, what's been going on throughout this quarter. We've been well actively selling our shares in real estate verticals. Now that's not a thematic, it's not a thematic sort of thing that we're doing. Hemnet, of course, we have been selling for a while, because it's been in a natural sort of exit phase for us. Became listed. We're not that close to it. We're not on the board, for example.
We have friends who are on the board, but we're not directly on the board. It also sort of had a return profile that was sort of a little bit lower than the ones that we're looking for when we invest. Certainly in a natural exit phase, summing that up, it's been a good investment with a 50% IRR since we invested into it. Just on that theme, although there's no connection to us being bearish on real estate verticals, it's a very good sort of business model. We have after we closed this quarter also entered into agreement to sell our shares in Property Finder and at double of where we bought them a few years back.
It doesn't sort of add up to the same sort of IRR to write home about that, for example, Hemnet is, but we felt that this was the right thing to do. There is upside in Property Finder over the years to come, but we felt that there's maybe more upside, maybe better risk rewards in the rest of the portfolio and hence the opportunity came to sell, we did it. Now we have cash available in the balance sheet that will allow us to sort of capture the opportunities in this portfolio and beyond. Bye-bye real estate verticals in our portfolio, although entirely not connected.
I think the other big movement that we should talk about or big action that we've been sort of engaged in over this quarter is that we've acquired the entire debt of Gett for about $42 million. We own all the debt outstanding at Gett, and the company is going through a financial restructuring where our debt will be converted into equity. After that financial restructuring, we will be the largest shareholder in the company, increasing our sort of equity participation in the company significantly.
As you'll note from this quarterly report, we're yet to sort of give you the details of exactly how much we owe, and that's just simply because the financial restructuring is not yet complete. It soon will be. In our next quarterly report, we'll be able to be more specific about exactly how much we'll owe, yeah, what valuations are there.
The valuations that we have used for the inputs in this quarterly report comes from the valuation that's used in this financial restructuring, which is done by, as you can imagine, sort of third-party investment banks into, you know, into the debt-for-equity restructuring, which is of course a necessity in all of these sort of situations. Yeah, we've done this because we feel that Gett has interesting upside. Obviously, the enterprise through a debt-for-equity restructuring is attractive, as it usually is. The company sits on some very interesting assets, especially Israel. They completely dominate and in this sort of marketplace for short-distance rides that we're now used to across the world.
For those of you who've been to Israel, you'll know that these, you know, this is as dominating as you'll see some of the Americans are in their home cities. That's really the essence of what we look for, you know, companies that have business model through network effects, assume characteristics of monopolies, really. Very high barriers to entry. That's very present in Gett's position in Israel. It also has a similarly strong position, but within a certain segment of the U.K. market, that's the black cab market. The third asset is a younger, but very interesting B2B product for corporate travel.
Lots of activity around our holding in Gett now, but which will soon result in a company upon financial restructuring, which will be fully funded on financial restructuring, and have no debt, have assets that are generating positive EBITDA and a company which, during the course of this year will be able to be also EBITDA positive at the company level. Very attractive and which we essentially will control, together with the other large shareholders in the company. We can come back to that if there are any questions when we go to the Q&A. Apart from that, I mean, in very general terms, the portfolio is developing well.
It's going in line with budgets. Most of these companies have funded themselves very recently. They have all reduced cash burn, extending the runway of the cash, in, you know, extending their runway to profitability, or decreasing the distance to profitability, but increasing the runway that they can go with this cash that they have. For many of them, all the way to profitability. There remains some companies that will still require funding to get the profitability in our portfolio. As we've written in this report, we have set aside about $40 million, which we think covers all of those needs in our portfolio. Well within the cash pile that we have now, which is just short of $120 million.
There's lots of stability there. In this sort of bleak days, on a quarter-by-quarter basis, of the portfolio, us marking down the value of the portfolio, there are also stuff that's going the other way, inside the portfolio. We have several portfolio companies that have attracted new fundings in private markets, and they've done that at higher valuations than our previous mark. There are examples like Breadfast, HousingAnywhere, Carla, Kavall, Alva, Tise, and also JamesEdition. Within these, you know, especially the parts of the portfolio that are a little bit younger, and that we don't talk so much about today, there's stuff going on that's really sort of reflecting that these companies are developing well.
I thought that maybe suffice as an intro, and I'll hand over to Björn to take us through some more details on the NAV.
Thank you, Per. I'll walk through a few of the main drivers of the NAV during the quarter. Maybe to start off, as Per mentioned, the NAV came in at $849 million for Q2, which is SEK 75.31 per share, down from SEK 95.10 per end of Q1. So - 27% movement in dollars and 21% in SEK, given the FX movements as of late. The main drivers of the NAV movements, of course, are two listed holdings, Babylon and Swvl, that continue to trade down. Babylon was down another 75% during the quarter, and Swvl down 31%.
Among the private holdings, the main driver was us moving Voi from a valuation based on the last transaction of some six months ago to an EV sales multiples model. We moved it to model, as you know, the volatility in the markets made that last transaction, although it's not more than a year old, stale. We moved it to our typical model, which we run in the past, and they had diverged too much. That model gave a valuation which was roughly 31% down compared to that last transaction and our last mark. In the remainder of the portfolio, there were, of course, additional markdowns, again, mainly driven by lower peer multiples across the board.
A few exceptions among the smaller names, as Per just mentioned, were a number of companies such as Breadfast, Carla, Tise, et cetera, closed new rounds at higher valuations compared to our first quarter mark. All in all, fair value change was -$330 million. Given how the market has traded during this last couple of months with compressing valuation multiples and our valuation approach of, you know, peer-listed multiples, looking at the entire portfolio, the implied price-to-sales ratio of the full VNV portfolio now for the Q2 now is less than 3x. Looking at the same type of ratio, but against market cap, it's less than 1x. Based on 2022 forecast figures for the entire portfolio.
As Per mentioned, the big significant investment during the quarter was acquiring the outstanding debt of Gett in the amount of $42 million. We also sold, as Per mentioned, the remaining Hemnet shares for approximately $42 million. All in all, the Hemnet investment was a very successful one. In total, it generated proceeds of $81 million, reflecting a 50% IRR on that initial $10 million investment we did back in 2016. Finally, just to reiterate, after the end of the period, we entered into a definitive agreement to sell our shares in Property Finder at the valuation in line with our Q2 NAV and also our Q1 NAV, or mark for Property Finder of approximately $39 million.
Adjusting for that, our pro forma cash position, including liquidity management investments, amounts to just below $120 million. I'll leave it back to you, Per.
Sure. Just summing up. Thanks, Björn. Some movements within the rankings of our largest holdings. Voi remains the biggest one, but Babylon, on the back of that 75% fall, has fallen out of the top five. That company you get for free at our market cap, which is, I mean, borderline fascinating. The sort of themes that we invest into are about the same mobility, the largest as before. Digital health has fallen a little bit on the back of especially Babylon. Marketplace is still an active part. We develop markets as emerging markets. Still developed markets is three quarters of the portfolio and but we still do some stuff in more emerging markets, to the dark green pictures.
Part of the portfolios are the listed ones. They are decreasing as a percentage of the portfolio, part mostly because they have fallen Babylon most notably, of course, but beyond that also for Hemnet is now out of the portfolio, so there's only two publicly listed names. Voi and BlaBlaCar here are the ones that have given indications of that they are, you know, that they will list at some point. Obviously not, they don't, you know, they don't have to list or raise money for that matter when markets are stressed as they are now. Once this gets more stable, which of course it will, then those are the ones that are not yet dark green. They're not yet listed, but those two are lighter green. So en route for that.
The rest of the portfolio remains private for now. We sort of just wanted to highlight that, you know, and I think we've talked about this in the past, that there are 17 names in the portfolio all in all. They're, you know, the stuff that's listed now that of course is feeling sort of the full force of how this market is pricing growth assets and assets perceived as higher risk with a longer path to profitability than sort of more traditional companies and traditional sectors. There's still some sort of stuff going on to note. Swvl, for example, over this past year is still up 3x from where it's marked, despite being down some 30% in the market over this last quarter.
The same for HousingAnywhere is close to a transaction which has our mark in the name over this past 12 months doubled. There's just lots of activity going on in the smaller part of the portfolio that consists of the other 65 names, so to speak. As before, I mean, I think I've been on about this before, you know, when we talked four years ago, Voi was just nowhere to be seen in the portfolio, right? They were one of these obscure names that we never talked about in the same way that Wasoko or Bokadirekt or HungryPanda or Alva or Tise are today.
In that other part of the portfolio, there's lots of activity. These companies are growing well, the good products that are in demand and they're run by very strong teams and with on the whole very good balance sheets and a long runway with the cash that they have. You know, some of these names will, when we speak a few years down the road, I'm sure be the ones that we talk about only. So good activity there. I think, what we wanted to finish the sort of before we go to Q&A is just to tell you that we will host a Capital Markets Day in real life this year.
These past two years, we've had them on video, on Zoom, which we thought were very good. Now that travel allows us to meet in person, we are gonna host this in real life. This year it'll be in New York so we can meet our investors in the U.S. in face to face, but also these investors will get the opportunity to meet Voi, BlaBla, Swvl, Babylon and Wasoko and maybe some others in real life. There will also be a bunch of guest speakers that I think will be very good. All of this will sort of be streamed, so those of you who can't make it to New York will be able to watch it live on Zoom.
For those of you in the U.S. and especially in New York, you'd be very welcome to join us at the Jefferies offices in Midtown. With that, I think we'll go to Q&A. Björn, do you wanna kick us off?
Yeah, sure. We can start with the first question here. Can you go through a few of the companies that you think will fare better and those who will fare worse in a recession?
In a recession?
In a potential recession.
In a potential recession. Right. I mean, if I flick it through to the portfolio, we've got one that's you know. I mean, I think in general, these companies sort of disrupt, you know, high cost services in a , you know, traditional sense, right? Voi will disrupt sort of taxi rides and other sort of historical ways in a cheaper fashion, as will Swvl, as will Gett, as will Booksy. All of these sort of are you know digital products disrupting high cost sort of alternatives from a more traditional sort of vendor of these products.
I think, you know, in recession, you know, we will as consumers, we will seek, you know, to the lowest cost alternatives where I think the portfolio overall will deliver those, lower cost alternatives. I mean, Wasoko, for example, is a B2B marketplace in Africa, which takes out the middlemen between the Unilevers of this world and the corner stores in Nairobi and elsewhere, making sort of that whole sort of journey much, much cheaper. The same goes for all of these companies. I really think that all of these companies fare well in a recession just by the nature of that they are much more efficiently sort of produced products than their traditional counterparts.
I'd also like to say that because our niche of investing into companies with network effects is also one that gives you a lot of defensibility on the downside because the whole attraction with network effects is that they build very high barriers to entry in a very similar fashion to what you see in natural monopolies. So, you know, natural monopolies, which are, you know, which can set the price and are non-discretionary products like moving around the city or going to the doctor that you just have to have. I think, you know, the nature of that sort of phenomenon also fare very, very well in recession. So it became long-winded answer to this question. Of course, BlaBlaCar stands out.
I mean, in this you know, in this environment where petrol prices are very high, it just makes more sense to share the cost of that petrol of going on a long-distance trip between Paris or Lyon, for example. If it weren't you know, incentive enough at the petrol price on the back of an oil price that was $50 a barrel. If it's $100 a barrel, that incentive has essentially doubled. BlaBlaCar is also the one that sort of stands out and it's feeling you know, an accelerated sort of demand for their product, which makes a lot of sense as a countercyclical sort of phenomenon in the portfolio.
Again, overall, I think the portfolio in marketplaces and in the nature of the barriers to entry they're building and that they're disrupting traditional products should fare, you know, maybe even better in a recession. Long winding answer.
Thank you. Then there's another two-part question here on Voi. Maybe I can start with the first one, which is, what sales multiple is Voi marked at? The answer there is that we don't disclose the exact multiple we use in the models. If you go to Note 3 in the financial report, you can see the starting point of that model. The median peer group multiple that we then further discount in our model. That's a little bit color on that. Then the second question that I leave to you, Per, are there any financing needs for Voi during this year? If we can comment on that.
Yeah, no, I think it has been sort of very evident in the press here and from Voi itself. I mean, they have, like all other companies in the portfolio, have been through a cost-cutting exercise, which has rendered the company in a very good situation, you know, good sort of liquidity in the balance sheet and ample opportunity to sort of extend that runway should they want to become cash flow positive, basically. So no need for financing during the course of this year. Unless something extremely attractive comes up for them to buy, I would say, you know. But then that's a choice.
You know, from a defensive sort of angle, I think it's fair to say that they have the cash they need sort of to go on with the operations as, you know, of Voi as we know it today.
Thank you. We can take a question around Gett here. Maybe you can provide us a bit more color. What is the idea behind buying debt in a software-driven start-up where there are no hard assets, or collateral to claim ownership of if things go south? Seems to me high risk, low reward proposition.
Not referring to Gett specifically, a general question.
I think.
Parentheses.
I agree. Of course, we're not buying this debt to be a lender, which we are not. We are an equity investor, you know, equity provider. A provider of equity sort of risk capital to these companies. We're buying the Gett debt not to remain as a lender, but we're currently sort of in the last inning of a financial restructuring of the company where the debts of the company, which we now own, will be converted to equity where we bear the sort of the full upside and full downside of that company's performance. Yeah, I think in general, it's not opportune for these companies to fund themselves with debt.
There are situations, and there is some debt capital that, you know, open to companies like these, that come at, you know, at first glance, a very high, cost. That of course, if you compare it to the cost of equity, it can sort of on paper make sense. You get into a situation like we are in today and debt is very much frowned upon and becomes tough for some companies to bear. Gett was certainly one of those.
Hence there was an opportunity to acquire that debt at a, I think, a very attractive price, and then as any acquirer of that debt or a debt in a similar situation, to after that convert it into equity, which debt-for-equity restructurings typically make for very good sort of entry points, which we think this will be as well.
Thank you. Another question here. What annual pace of investments seems reasonable, and how do you think about debt to LTV?
Yeah. I mean our framework or sort of the way we work is very opportunistic. We thankfully do not have any pressure to sort of invest at a certain pace or that sort of whole thinking stems very much from the VC industry, which sort of have promised investors to, you know, to invest their capital over a certain number of years. If there are no good investments, we simply don't have to invest anything.
I think the pecking order of the way we look at, you know, at investments is number one to support the parts of our existing portfolio that needs supporting, provided of course that the valuations are okay and that they reflect sort of a business that's doing well and that has the same sort of potential that we, you know, that we thought to have when we invested the first time around, et cetera. Essentially, that the companies are performing well and are on track to sort of disrupt markets in a big way, which is sort of one of the premises of us investing in the first place.
As we've mentioned in the report, we've set aside about $40 million worth of things to cover the existing parts, the existing portfolio's cash needs. That's number one. After that it becomes, you know, very natural to look at our own share price. As you know, over these, you know, as long as I've been with this company for a very long time now, we've always looked at our own stock and if that provides a good sort of entry point into assets that we already like, we use that as an investment opportunity.
We have also during this quarter repurchased shares, which are now going out of circulation and being canceled. That of course gives a boost to the NAV because we buy it at a discount, and now a very large discount. It essentially becomes very tough for any new investment to stack up risk reward wise from buying our own portfolio, which we think has a very large potential to provide very high returns, when especially when it comes at such a large discount. It's only after that opportunity has been exhausted that we, you know, will look at new investments.
There may be the odd one, but it's very immaterial and very small in the grand scheme of things. The most important investments that you'll see us do is sort of supporting the companies in our portfolio alongside other shareholders to fund them so that they can continue their disrupting of some traditional market, you know, and then our own stock price.
Thanks. I can take two questions here on Swvl. The first one is Swvl is making acquisitions, how do they pay for it? Shares or cash? There I can't go into the specifics of the several transactions they have announced, but in general, they have all been shares. They have been paid with shares, and most of them has also been negotiated pre-SPAC completion or around SPAC completion. They pay for them with shares issued at the SPAC price of $10. There are some deferred payments subject to that these companies meet some targets down the road. The other question is, have Swvl switched entirely to B2B and B2B2C?
They have moved focus to that, given this. They announced a cost cutting and portfolio optimization program. They will increase focus on those two verticals as they are more profitable, higher gross margin, et cetera. But they still run their B2C offering in their most mature markets, where they also have, you know, healthy unit economics. But cutting down in other B2C, more expensive areas, currently. We can take another question here on the growth. How fast are Voi, BlaBlaCar growing organically? Also, if we have any color on the organic growth of the entire portfolio. There I can say as Per noted in the management report, so if you look at the five largest holdings.
On average, they grow roughly at 100% year-on-year, 2022 over 2021. Looking at the tail of the portfolio, you know, you get to that similar range, given that, especially if you weighted against the NAV. That's roughly the number.
Another question here, will you commit to not issue shares below NAV in these difficult markets? Or how do you think about that?
As you've seen us sort of do historically, I don't think we have not issued shares below NAV. When we raised equity capital, we've done it, I guess—is it now twice in the past couple of years? We've issued them around NAV, even at a slight premium to NAV. Well, you know, that's okay to do if we have investment opportunities. I think that's a point we all agree upon. If we trade at a large discount to NAV, that route of sort of private placement, raising money in that way is not open.
Because if you need to, for whatever reason, raise money at below NAV, then you have to give everyone the chance to pick up their pro rata of that. Otherwise, it's just not fair. Thankfully, as you've seen us, you know, you've seen the cash pile in the portfolio as of the end of the quarter is $78 million. We've since sold assets for another roughly $40 million at the NAV of the last quarter. We don't, you know. Obviously that we don't, we're not in a situation where we need to raise money at these sort of levels.
Yeah, that's the way we think about equity funding. No need for equity funding now. We have ample cash to do what we need to do in the portfolio and more. No need to sort of tap markets at this sort of very depressed valuation.
Adjacent question to that, I guess. In the report, you mentioned that there is, you know, $40 million to take our pro rata over the coming years in the existing portfolio. Do you see a risk that other investors might not be able to commit, thus forcing you to invest more in relative terms?
You know, we can't obviously force anyone to invest. I think in general, in our portfolio holdings, we share the cap table there with investors that are very like-minded to us and are in sort of similar situations that have access to liquidity and that you know that believe in these companies' ability to you know grow and become profitable and hence you know are provide opportunities that of good risk-reward situations, i.e., fundable. I don't you know although you know that risk is always there, but I think in most of our situations, we're joined by shareholders investors basically that are of a similar mindset.
If we're investing, I think it's fair to expect that the other parts of these different cap tables will also be investing.
Thanks. Another question here around future buybacks. How do you see that going forward?
No, that's always on the table. We have bought back stock leading into the blackout period that's now ended with this report. As per sort of the earlier comments that we made, that is, you know, priority number one is to see that the companies in the portfolio that are good to invest into, which we think is basically all of them are doing well, et cetera, that they are funded. Because if we then need to dilute ourselves at these sort of very low valuations, then of course that will be painful as markets normalize and things go, you know, the valuations will start to pick up again.
We try to be careful not to dilute ourselves at sort of distressed valuations, which I borderline think that we're talking about now. That's number one. Beyond that, it's really the opportunity to buy, you know, something at a third of the price, which we think is, you know, at, you know, the NAV. We think it will provide very high returns going forward. If you can buy the NAV at a third of the price, it's very difficult for any new investments to compare to that, which will essentially come at NAV, right? We buy back stock on a very opportunistic basis. We don't do it sort of in a general sort of fashion. We do it opportunistically.
We never buy on an up day. Now there's been mostly down days, but we have also been active on down days. That continues to be, you know, a present opportunity, I think, is the best way to describe it. Excuse me.
Thank you. I think we'll stop there. If there's questions here that we haven't been able to answer, we'll try to do that offline later on.
Okay. All right. Well, good. Well, thank you for participating, and thank you for all these good questions. Remind me, Björn, we report next on the 20th of October, I believe, right?
Correct.
Correct. There will be an opportunity to talk like this on the 20th of October. Seems like a lifetime away, but it will come quickly. In the meantime, you know where to reach us, so please don't hesitate to get in touch if you have any queries.
Also a reminder on the Capital Markets Day, on the 27th of September in New York. Please reach out if you want to participate. Thanks a lot.
Thank you.