Kinnevik increases dividend, envisages challenging year ahead

Following a successful 2014 during which Kinnevik’s Net Asset Value (NAV) grew 29 percent to 84.4 billion Swedish krona (10 billion dollars), the company witnessed another growth year owing to the strong operating performance of Zalando, Tele2 and Avito. While its NAV remained stable, the company increased dividend per share and share price by 3 percent to 7.25 Swedish krona (0.86 dollar) and 262 Swedish krona (31.17 dollars), respectively.

“We ended 2015 with stronger digital brands, an exciting pipeline of new opportunities and a committed leadership team. Whilst the sharp drop experienced by the equity markets during January 2016 has led to an 18 percent decline in our NAV as of February 10, we are confident of Kinnevik’s ability to continue to deliver long term shareholder value,” said Lorenzo Grabau, Chief Executive Officer of the company.

Kinnevik Q4 and FY15 financial highlights

Kinnevik’s NAV increased by 2 percent to 83.5billion Swedish krona (9.9 billion dollars), or 301 Swedish krona (35.81 dollars) per share in the fourth quarter. A 6 percent growth in the value of its ecommerce and marketplaces businesses was offset by a 3 percent decline in communication investments, with Millicom down 7 percent and Tele2 up 4 percent.

In 2015, within technology-led markets, Kinnevik’s investee companies executed plans to transform and adapt their business model to capture a larger share of the opportunities created by ubiquitous mobile broadband. Zalando was at the forefront of this transformation, investing in innovative products, infrastructure and talent in order to strengthen its position as the leading European online fashion platform. Despite its increased investments intended to re-accelerate revenue growth to approximately 34 percent, the company reported an EBIT margin of between 3-4 percent.

Global Fashion Group, despite the sharp drop in many emerging market currencies, the company delivered excellent revenue growth. Rocket Internet, a company known as an incubator and business builder, became a fully established multi stage internet investor, raising over 1.5 billion euros (1.6 billion dollars) through a secondary public equity offering. Quikr, the largest and broadest horizontal classifieds businesses in India, continued on its path towards monetisation. Quikr launched five category-specific businesses on top of its core horizontal platform and strengthened its position in the highest revenue categories.

Business segments review

Zalando operates online fashion stores in 15 European markets. In its first year as a public company, Zalando significantly accelerated its growth, made important long-term investments, and remained profitable. Zalando showed continued growth with fourth quarter revenues rising 30-31 percent and adjusted EBIT of 61-78million euros (68-88 million dollars) during the quarter, in line with prior management guidance. Zalando’s full-year 2015 revenues amounted to 2,955-2,962million euros (3,335-3,343 million dollars) with a 3.3-3.9 percent adjusted EBIT margin.

GFG, a leading emerging markets fashion e-commerce company with operations across five regions and 27 countries, reported strong growth during the first nine months with 61percent GMV growth in euro terms despite currency and macro headwinds. Gross margin expanded to 33 percent as GFG continued on its clear path towards profitability. Growth in mobile traffic drove higher revenues and customer engagement. Jabong and Zalora now generate more than half of its revenues from mobile in the third quarter.

Rocket Internet is a global internet platform that incubates and develops e-commerce and other consumer-oriented online companies. It has a network of companies in 110 countries outside US and China. In the first nine months of 2015, Rocket Internet’s Proven Winners demonstrated continued strong performance with an average weighted net revenue and GMV growth of 120 percent compared to the same period the previous year.

Launched in 2012, Lazada is the leading online shopping and selling destination for assorted merchandise in South East Asia, with presence in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Lazada further solidified its market leadership in South East Asia, supported by its cross-border marketplace model which now represents more than 75 percent. Mobile remains a key driver of growth and generated more than half of total GMV during the third quarter.

Linio is an online shopping and selling destination in Spanish speaking Latin America, with presence in Argentina, Chile, Colombia, Ecuador, Mexico, Panama, Peru and Venezuela. Linio strengthened its position as the leading player in the Latin American general merchandise vertical, with a solid GMV growth of 94 percent, largely driven by high marketplace growth and significant expansion of the international assortment.

Konga achieved record breaking Yakata (Black Friday) sales with a GMV increase by 100 percent year-on-year.

Declares dividend and udates guidance

For 2015, the Kinnevik Board of Directors recommends a dividend of 7.75 Swedish krona per share, corresponding to a 3 percent dividend yield based on the closing price for the year of 262 Swedish krona and of 4 percent based on the share price as at February 10, 2016.

Based on our current pipeline of investment opportunities and the state of the capital markets, in 2016, the company expects to make net investments (gross investments net of sale of assets) of 2-3 billion Swedish krona (0.2-0.3 billion dollars). Based on its current portfolio composition, Kinnevik aims for an annual total shareholder return of 13 percent over the cycle. It expects 2016 to remain a challenging year for the valuations of its companies, especially for those exposed to emerging market currencies.