Kinnevik AB

STO:KINV B

Earnings Call Transcript 2017-Q4

[Georgi Ganev, Chief Executive Officer]

Good morning, everyone, and welcome to the presentation of Kinnevik's result for the fourth quarter and full year 2017. My name is Georgi Ganev, and this is my first quarterly report as Kinnevik's CEO. With me today is our CFO, Joakim Andersson and our Director of Corporate Communications, Torun Litzen. We will be taking you through a presentation of the results released this morning, and after that we are happy to answer any questions you might have.I would, however, like to start by giving you some reflections on my first weeks here at Kinnevik. It's been a very busy month with 2 of the biggest transactions announced in our portfolio for many years. These are, of course, the announced merger of the Tele2 and Com Hem, as well as the combination of MTG's Nordics businesses with TDC Group, both of which I will come back into later in the presentation.With the high pace and exciting developments in our companies, being back at Kinnevik feels a lot like coming home. I started my career in the Kinnevik Group at Tele2 almost 16 years ago. Kinnevik has gone through significant changes since then, but the culture and the entrepreneurial spirit is unmistakable and is strong as ever.Now turning to Page 4. We have provided you with a summary of the key highlights for the quarter. Our companies finished the year with a strong fourth quarter, reporting healthy growth and a solid profitability across the board. Their efforts to improve the customer experience is really paying off and coming through in their share prices, particularly in our e-commerce and telecom assets, as reflected in the 6% quarterly increase in our NAV. The most noteworthy development in the quarter on the investment management side was the investment in BIMA of SEK 106 million. Our NAV increased by SEK 5 billion, ending the quarter just north of SEK 90 billion. And our balance sheet remains strong with a leverage of 1%.Our total shareholder return for the full year of 2017 is 31%, which is well over the guidance in our financial targets. And as of yesterday, our NAV was at SEK 91.1 billion, up 1% from quarter-end, as overall positive share prices' reactions following our listed companies' reports were offset by the recent corrections in the global financial markets. For the fiscal year of 2017, the Board of Directors is recommending an ordinary dividend of SEK 8.25 per share, which corresponds to a yield of 3%.On Page 5, we have laid out the performance of our large public companies in more detail. Zalando had a strong finish to the year and delivered on its full year revenue and margin guidance, despite somewhat challenging conditions in the beginning of the fourth quarter. As previously stated, Zalando's key focus is to gain market share through continued investments, a strategy that we fully support. The detailed financial result for the fourth quarter and full year will be released on 1st of March.Millicom reported continued positive revenue growth in Latin America in the fourth quarter, driven by the accelerated transitions to high-speed data services, both mobile and fixed. The company has made significant progress on its twofold business reconfiguration strategy in the last year and that has come through clearly in the share price, which is up 42% for the year. Millicom is entering 2018 with a positive momentum and well positioned to continue delivering shareholder value and is recommending an ordinary dividend of USD 2.64 per share for the last year.Tele2 yet again managed to meet or exceed the market's highly set expectations for the quarter and for the full year. The company's free cash flow of SEK 2.5 billion for the year covers in the full proposed dividend of SEK 4 per share for 2017.MTG delivered record sales in the fourth quarter with contributions from Nordic and International Entertainment, as well as MTGx. MTGx reported the first-ever quarterly operating profit, marking an important milestone for the business. The proposed dividend of SEK 12.50 per share for 2017 represents 95% payout ratio of net income.Com Hem's continued focus on customer satisfaction resulted in yet another quarter of strong volume growth in the Com Hem segment. And as previously communicated, the board proposed a 50% increase in dividend for 2017, that is SEK 6 per share, alongside their ongoing share buyback program.On Page 6 and 7, I would like you to give an overview of the 2 significant transactions that were announced in January of this year, starting now with the Tele2, Com Hem merger. On 10th of January, Tele2 and Com Hem announced the intention to combine their operations to create a leading integrated connectivity player in Sweden. Kinnevik is excited and fully support -- supportive of this transaction and we are convinced that the 2 companies complement each other well and will be stronger and better equipped for the future together.And in a world where the consumer expects to have fast and reliable connectivity, both at home and on the move, and where data consumption continues to grow explosively, it will be crucial to be able to offer seamless high-quality connectivity and digital services. As you can see on the slide, the new company will have strong market shares in mobile and fixed broadband in Sweden and will be the leading digital TV provider in the Swedish market.Financially, we expect the combination to create added value for all shareholders. Improved revenue growth and realization of synergies, both on the cost and revenue side, will create significant capacity for attractive shareholder remuneration and strong cash conversion. In addition, becoming the largest shareholder in the combined company, Kinnevik will also receive approximately SEK 1.3 billion in cash following completion of the transaction. Kinnevik has committed to vote in favor of the merger at respective company's general meeting and commits to participate in the European Commission's merger control procedure.Let's now flip to Page 7 for the second large transaction announced this year. On 1st of February, MTG announced the intention to combine their Nordic Entertainment and Studios businesses with TDC Group, Denmark's largest telecommunications company. Together, MTG Nordics and TDC will provide a fully converged connectivity and content offering in Denmark and Norway with a pan-Nordic footprint of fixed line and mobile telephony, broadband Internet access, TV distribution and streaming services. TDC will issue new shares to finance the combination of MTG, will -- and the combination of MTG, will distribute those shares to its shareholders upon closing of the transaction. As a result, Kinnevik is expected to become a 5.6% shareholder in the TDC Group.Kinnevik has committed to vote in favor of the combination and the distribution at the general meeting in MTG. And we are convinced that this is the right step for MTG. With TDC, MTG Nordics is creating Europe's first fully convergent media and communications provider with the ability to reach more than 10 million Nordic households. At the same time, the remaining MTG can focus on the development of its global digital entertainment verticals within e-sports, online gaming and digital video content.Now moving on to Page 8, where we have summarized the key developments in our private companies during the quarter. This was another quarter of growth across our private companies, all well positioned to leverage that development in their respective markets, whilst making clear progress in their path to profitability.Global Fashion Group continued to show a stable growth in both active customers and revenue in the third quarter of 2017 and further improved its margin compared to last year. And as announced previously in January, GFG appointed new leadership in the form of Kinnevik's former Investment Director, Christoph Barchewitz; and Patrick Schmidt, CEO of The Iconic, who became co-CEOs on the 1st of February. This appointment is a true testament to Kinnevik's commitment to active ownership, and I also look forward to continuing to develop GFG, as I will join the board and work together with Christoph and Patrick in this next chapter of the company.Quikr saw over 50% increase in traffic with online platforms during 2017. And replies per-listing is stabilizing at a high level following [ a period ] of continuous growth. The company also announced the acquisition of the 2 businesses from India's largest mortgage lender, one of them a real estate brokerage. The acquisition will enable Quikr to participate more deeply in transactions by acting as an agent for either the buyer or the seller in real estate transactions.Betterment continues to grow assets under management, which, since our first investment in Q1 2016, has grown from USD 4 billion to over USD 12 billion. This year alone, Betterment has grown its assets under management by 83% and number of customers by 51%. The company launched a number of product innovations during the year and continued to develop its platform beyond a single digital product to a multi-plan advice offering, which were the key drivers of the growth.BIMA attracted global insurance company Allianz as a new strategic partner in a financing round, which I will come back to later on the next page.Babylon's digital service, GP at hand, reached over 30,000 applications since the launch in November, and it's already one of the largest GP practices in the U.K. At the end of December, Babylon had close to 1.3 million registered users and is providing thousands of triages and appointments per day, awarding the company sector-leading use ratings.Livongo is rapidly growing its membership base with 2.5x more members at the end of December compared to the beginning of the year. The company made strong progress in sales to health insurance plans, signing or expanding contracts with 5 of the largest plans in the U.S. This provides Livongo access to over 1/3 of all members of the top 200 health insurance plans in the U.S.Now please turn to Page 9 for details on the financing in BIMA. First, to recap. BIMA is the leading insurtech player in the emerging markets, using mobile technology to provide insurances on health services to customers across Asia-Pacific, Latin America and Africa. And in December, BIMA closed a fundraising of USD 107 million and successfully attracted global insurance company Allianz as a new strategic partner and core shareholder. One of the key transactions -- attractions of BIMA from Allianz perspective was the significant growth opportunities inherent in its business model, as well as the company's strong partnerships with mobile operators who have a combined customer base of 1.3 billion people. For BIMA, the partnership with Allianz provides operational knowledge and capabilities, as well as a long-term source of capital. The transaction values BIMA to USD 260 million, which is a 78% uplift compared to Kinnevik's recorded fair value per Q3 in 2017.And for the next sections of the presentation, Kinnevik's financial position and [ to sum up ] 2017, I would like to hand over to our CFO, Joakim Andersson, who also was the acting CEO under 2017. Go ahead, Joakim.

[Joakim Andersson, Acting CEO & CFO]

Thank you, Georgi. So on Page 11, we have outlined the fourth quarter changes in valuation of our largest private companies. The total value remained overall stable and amounted to SEK 11.7 billion. The fair value of Kinnevik's shareholding in Global Fashion Group amounted to SEK 5.2 billion, implying an average multiple of 1.3x the company's last 12 months' net revenues, which corresponded to a 45% discount to the peer group, which is comparable to the multiple and discount applied in the third quarter. As mentioned by Georgi, the fair value of our shareholding in BIMA increased by SEK 307 million during the quarter as a result of the financing round, led by Allianz, which was completed in December.In the valuation of Home24, we are applying a multiple of 1.1x to company's last 12 months' net revenues, which corresponds to a 40% discount to a group of listed e-commerce peers. It is worth noting that the peer group for Home24 and Westwing has been updated during the quarter and the discounts applied have been updated to reflect the relative growth and profitability of Home24 and Westwing compared to those peers. In addition, as discussed in previous quarters, the changes in fair value of Kinnevik's stake in Home24 are disproportionately affected by liquidation preferences.On Page 12, we have shown the key contributors to the strong NAV development in the quarter, which was mainly driven by strong performance in Zalando, Tele2 and MTG. As Georgi mentioned, our NAV increased by 6% from SEK 85.7 billion to SEK 90.6 billion and NAV per share increased from SEK 311 to SEK 329 in the fourth quarter. As per yesterday, our NAV is up by 1% to SEK 91.1 billion or SEK 331 per share during the current year.Please turn to Page 13 for a look at our financial position. Our investment activity was low in the quarter and as such, our net debt position increased only marginally from around SEK 900 million in the third quarter to SEK 1.1 billion at the end of December, which corresponds to a leverage of 1%. I would particularly like to highlight on this page the total shareholder return, which amounted to 31% for the full year 2017 and 21% for the last 5 years, a development, which I'm sure you can appreciate, we are very proud of.Now turning to Page 15, we have summarized the highlights of our strategy execution in the past year. Our key priorities for 2017 was to grow and protect value in our large listed companies and to drive sustainable growth in our private assets, with our largest portfolio companies, Zalando and Millicom, contributing to close -- close to SEK 7 billion each to our NAV development through share price increases of 22% and 42%, respectively. This objective has clearly been achieved. We are very proud of how they have executed their respective strategies during the year and are pleased to see that their hard work is coming through, creating shareholder value.Our Nordic TMT companies are all in great shape, delivering on their plans. The transactions announced in January involving Tele2, Com Hem and MTG are strong indicators of our belief in TMT convergence, and we see continued great opportunities for these companies.As already highlighted, our private companies are and were during 2017 focusing on growth whilst making clear progress on their path to profitability. Kinnevik's commitment to sustainability is an area which we are particularly proud of and during 2017, we have spent significant time and resources on implementing tailored sustainability road maps for all large companies. We have worked closely with our companies to follow up on sustainability performance and in setting priorities for 2018.2017 was a year of many large transactions with total investments of SEK 4.8 billion and total divestments of SEK 5.3 billion. We invested in 2 new companies, Com Hem and Livongo, and showed our continued commitment to businesses we believe in; Betterment, Babylon and BIMA. We also made full exits from our ownership in Rocket Internet and Lazada.To summarize, 2017 was a very good and active year for Kinnevik. Our aim is to deliver an annual total shareholder return of 12% to 15% over the business cycle, to carry low leverage not exceeding 10% of the portfolio value and to pay a growing annual dividend. As you can see, we have achieved and exceeded all 3 financial targets this year.Compared to '16, we have outlined the key contributors to our NAV development during 2017. Translating our company's progress over the year into asset value developments, our NAV increased by SEK 18.2 billion or 25% from SEK 72.4 billion to SEK 90.6 billion. We paid out SEK 2.2 billion in dividends and received SEK 2.3 billion from our investee companies, including the proceeds from the sale of assets in Black Earth Farming.Turning to Page 17. You can there see that the Board of Directors has recommended a dividend for 2017 of SEK 8.25 per share, which would correspond to a dividend yield of 3%. That brings our total dividend paid to SEK 2.3 billion for the year and a total of SEK 10.6 billion ordinary dividends paid during the last 5 years. Our financial targets remain unchanged.That concludes this section, and I would like to hand it back to you, Georgi, for the 2018 key priorities on Page 19.

[Georgi Ganev, Chief Executive Officer]

Thank you, Joakim. And as Joakim has run through our financials and strategic development in 2017, it's quite clear that I'm taking over as CEO with Kinnevik in a very strong position. Active ownership is part of Kinnevik's unique DNA, in my mind central in building successful businesses for the long term. By active ownership, I mean our ongoing commitment and engagement with our companies to support their strategic direction. We can leverage our understanding of global macro trends and shift in consumer behavior across multiple digital sectors across the globe to support our companies in reaching their full potential.To continue to intensify this commitment and engagement with our companies is a key priority going forward. And to accelerate the development in our private portfolio, we need to identify the winners in which we want to invest and commit our time and resources. We also need to have the conviction to stick to our bets and continue to invest and support these companies to make sure that they have the ability to represent a significant growth driver and share of our overall asset value. Also, we will continue to make new investments in our target sectors and companies that we believe are the winners of tomorrow.Sweden and the Nordics represent Kinnevik's home markets, where we have started and built some of our largest and most successful companies. With our legacy and our successful investment history, not the least in the past 10 years, I'm convinced we can do more to leverage our position in our home markets. The Nordics have strong fundamentals and is a very attractive market in the sectors we target, and we will be intensifying our efforts to invest in the region.A month in the job with 2 groundbreaking transactions having been announced in January, I could not be more excited to be at the helm of Kinnevik. Thank you very much for listening. And let's now open up for questions. We also have Chris Bischoff, Senior Investment Director, on the line for any detailed questions on our private portfolio. Operator, please go ahead.

[Operator]

[Operator Instructions] The first question comes from Derek Laliberte of ABG.

[Derek Laliberte, Lead Analyst]

So we are seeing an increased risk now that the MTG and TDC deal will not go through. So how does this affect the likelihood, or does it in any way jeopardize the Tele2 and Com Hem deal, because hasn't the -- your strong control in the local TV market, there's been an issue?

[Georgi Ganev, Chief Executive Officer]

Okay. As we said when the Tele2 and Com Hem merge was announced, we are very supportive to that deal. I mean, we see these strong consumer trends, and we believe in convergence between fixed and mobile. We also said that we will be committed to have a dialog with the companies and the commission in order how to solve the regulatory uncertainties. I mean, this deal with MTG and TDC, our opinion is that we will solve that regulatory uncertainty, but it's not depending on that deal. We stick to our commitment on the Tele2-Com Hem merge, and we will make sure to do our utmost to make that deal happen.

[Derek Laliberte, Lead Analyst]

And could you sort of paint a picture on what you are seeing with this convergence trends between fixed and the mobile and content, sort of how the future consumer product or whatever, would look like, or is this to a large degree mainly a churn reduction measure and synergies to be achieved?

[Georgi Ganev, Chief Executive Officer]

I mean, if we go back to the DNA of Kinnevik, we have always been in the forefront of, I would say, not only identify consumer trends, but actually to capitalize on them. And we've done that in the TMT sector before, we've done that within e-commerce, for instance. We have new potential digital winners in our portfolio. When we look at the TMT sector as of today, we are -- we have a conviction and a vision that what we see now is basic consumers asking for the best connectivity, whether it's fast -- fixed or mobile. They don't want to care about if it's the technology, but they want to be connected on the move and at home. They also want the access to great content; local content, as well as global content. So we think that these 2 deals that were announced during January, both represent value creation according to those trends. So let me just first answer that, that we see that they can create value standalone. Now it happens to be that one deal basically can solve the regulatory uncertainty in another, but again, it's not really depending, it's not correlating in such a way that the Tele2, Com Hem deal is fully dependent on the MTG, TDC deal. When it comes to convergence, we see basically that this is consumer-driven, so we also believe that it creates value within this sector. We need also to support structural mergers and acquisitions in order for this to happen. Will this be a straight path to, let's say, consolidation? No, I don't think so. We will, of course, be an active owner in driving this and we will do what we can in order for this to happen.

[Derek Laliberte, Lead Analyst]

Okay. That's very clear. And finally, this increased focus on the Nordic region. Will this mean any organizational changes that you would ramp up sort of investment -- organization locally in Stockholm or will you run it as before?

[Georgi Ganev, Chief Executive Officer]

I mean, as I said during the presentation, I just feel that with the strong legacy and heritage that Kinnevik has in terms of brand, connection and also the fact that, that Nordic represents a very interesting region in terms of innovation within the tech sector, we should be able to capitalize more on that position. Myself being more of a Nordic profile, I think that would help. What it means for the organization, what it means for the focus, I don't want to go into too much detail today. We will definitely not focus less on, let's say, our global markets. We are a global investment company, we play across 6 continents as of today, we have a strong investment team based in London. So those opportunities will continue. But what I'm saying is that we, maybe, have not capitalized on our position and our legacy in the Nordic regions. So that is basically my focus going forward. But exactly how that would look like, I don't want to basically go into today.

[Operator]

The next question comes from Marie Scheja of Nordea.

[Marie Scheja, Analyst]

I have a question regarding the unlisted assets. You don't mention any divestments, but several holdings in the valuation table of unlisted financial assets have disappeared, such as Konga, which I assume is divested, but also Linio and Metro. So could you please clarify if you have changed your reporting method or if anything else has happened there?

[Georgi Ganev, Chief Executive Officer]

Yes, I hand over that to Joakim.

[Joakim Andersson, Acting CEO & CFO]

Yes. I mean, what we are highlighting, we acknowledge that we can't highlight details on all our companies on one page. So we are sometimes moving out -- up or down companies. So they are -- some companies are now in the Other category on Page 11 on the presentation. And you rightly mentioned Konga, so that's one of them, and then there are others as well. So the change in value as well on this quarter is spread over probably a handful of companies, so we see some write-downs, including Konga.

[Marie Scheja, Analyst]

But have you divested any -- either Linio or Metro? Or is that fully transferred into the Other post?

[Joakim Andersson, Acting CEO & CFO]

Transferred into -- I mean, there are companies we have divested over the quarter, but the ones you mentioned, no, they are just included in the Other line.

[Operator]

The next question is from Magnus Råman of Handelsbanken.

[Magnus Råman, Research Analyst]

And firstly congratulations Georgi for your first quarterly presentation. I have a question on Zalando. You mentioned in the report here that Zalando's profitability is a strength in light of all the investment this has taken -- the company's taking. But I mean, looking at the prospect for the coming year, I think it's fair to assume that investments will continue to be high. And are you satisfied with the 4% [ or ] 5% margin even over the long term?

[Georgi Ganev, Chief Executive Officer]

I mean, as we say -- thank you, Magnus -- as we say, we fully support the strategy of, let's say, continuous growth and the capture of market share. So that is the main, let's say, strategy of Zalando, which we fully support. So that I think is extremely important to say that with that strong position that Zalando has that will continue. Of course, we want to see profitable growth rates, so it will always be a balance between growth and profitability. But to prioritize growth in this phase of the company, we think it's completely right.

[Magnus Råman, Research Analyst]

Right. And then coming back to your Nordic focus that you mentioned. Certainly, we have seen several divestments in -- of non-Nordic assets in your listed holdings -- telco holdings in recent years. But I mean, looking at this going forward, should it mainly be expectations of new investments in the Nordics or could there also -- with the coming financial concentration to the Nordics, could that also entail other measures than only new investments?

[Georgi Ganev, Chief Executive Officer]

I think these 2 deals that were announced after the period, they both represent, let's say, high activity in the Nordics for sure. But when I'm talking about increased focus in Nordic regions, I mainly refer to new potential investments. So I think that with our network, with our brand and with our long-term interest, I'm sure that we can be very strong and attractive growth investors for a lot of these companies that are, let's say, created in the Nordic region.

[Magnus Råman, Research Analyst]

All right. And then just a final one, perhaps this one is for you, Joakim, regarding the BIMA funding round. Can you help us understand how you could maintain your ownership level whilst you were not leading this funding round with the primary?

[Joakim Andersson, Acting CEO & CFO]

Of course. I mean that -- it was a mix of primary and secondary included in that SEK 100 million transaction. So some existing shareholders sold shares and we invested and picked that up to defend or maintain the #1 position in the [ cap level ].

[Operator]

The next question is from Victor Hoglund of SEB.

[Victor Höglund, Analyst]

Just -- sorry for going back again here, but on MTG and TDC and then Tele2-Com Hem, I understand it's hard to answer the question, but could you just elaborate a bit? Do you have -- should we interpret it as you have plans to -- backup plans in place to meet regulatory demands or [ MiFID ]? How does your process work here?

[Georgi Ganev, Chief Executive Officer]

I mean, I think, first of all, let me just say that these 2 transactions, again, maybe I'm underlying or repeating myself here, but there were no any tactical plays from Kinnevik's side. They are linked to a conviction where this business is going and this industry is going. But we also said that in the announcement of Tele2-Com Hem that we will be committed to have this dialog with the commission and the companies. So to give you -- answer to you, yes, of course, we will see more alternatives than just the MTG and TDC deal. What that is in terms of plan B, C, D, it is not something I am going to, let's say, disclose today.

[Victor Höglund, Analyst]

Understand. And just taking that view on convergence into account when you say you're going to focus on the Nordics, should we see that, that maybe you'll start to add more? Do you see a potential for you to buy companies, or enter to investments related to other areas of the home? Could it be that kind of growth legs you see in the Nordics or is that -- is it other things, maybe MTGx-related gaming companies or any comments on what areas you are seeing?

[Georgi Ganev, Chief Executive Officer]

I mean, we have our sector strategy, and we will be focused around these sectors. So that's a start for sure. Exactly what type of companies we will look at and what stages they should be in, I mean, I think it's again too early for me to be that detailed after 1 month in my new job. But for sure, again, I believe that we have more to contribute with as long-term strategic investor with, let's say, conviction where this industry is going. So there could be, I think, many kinds of opportunities that we'll look at.

[Operator]

The next question is from Joachim Gunell of DNB Markets.

[Joachim Gunell, Junior Analyst]

One just follow-up question on the most recent one. You mentioned the key priorities going into 2018 is to accelerate the private portfolio and increase the Nordic focus. Are we here seeing that you -- are these 2 combined, so to say, are you looking to grow the share of unlisted holdings or can you elaborate a bit more on that in the Nordic region?

[Georgi Ganev, Chief Executive Officer]

Yes. I mean, of course. I think if we look at our private portfolio, we have many interesting companies there, where we will continue to, let's say, doubling down on, because we have a very, let's say, clear view where this digital business is going. So we will take up with them and basically be committed long-term shareholders. And it's also about sourcing new opportunities and there we also will, let's say, look more, as I said, in the Nordics. We will continue to look opportunistically in all markets based on our sector strategy. But the base of that work the coming years, we will definitely select some new winners where we'll be long-term shareholders of. So it's a combination.

[Joachim Gunell, Junior Analyst]

Alright. Okay, going forward. Regarding the portfolio refinement we're seeing here, where you're already are done signing the winners and exiting the non-core holdings, how much more divestments would you say that you have in the pipeline and when do you expect to have a reduced number of holdings to an extent where you feel satisfied? And also if you can comment a bit on how many holdings as a whole do Kinnevik now have in their portfolio?

[Georgi Ganev, Chief Executive Officer]

I mean, we don't have a, let's say, set target for that. It's definitely something we will look more case-by-case. I mean, our, let's say, strategy is to be long-term investors and grow these [ companies ] over time if they are positioned in the right way and if they're basically having the management, the position and what it takes to deliver. And of course that you can't do with too many companies, so it will be a selection over time. It doesn't mean that a company, let's say, is performing bad because we are divesting it, but it's a natural thing of our strategy to look at these companies, and when we believe it's a good exit. I don't know if you want to add on that, Joakim.

[Joakim Andersson, Acting CEO & CFO]

No, no, I agree with you. As we've said before, we don't have any specific target number -- targeted number for how many companies we should have in the portfolio. As you know, we have been on a journey, where we have been cleaning up and reducing the number from the 50-ish that we had some years ago and down to where we are now. I mean, probably, yes, we don't have any numbers in mind, so...

[Georgi Ganev, Chief Executive Officer]

But maybe we can, just to be clear that we are in a position now where we feel that we have a manageable portfolio and we are in a very strong financial position to look at new investments and to increase the focus of some of the investments that we have in the portfolio, but -- and of course, during the coming years, there will be both new investments and divestments as a natural part of the business.

[Joachim Gunell, Junior Analyst]

All right. And one final question then. Regarding Global Fashion Group, now that Christoph will join as co-CEO and with you, Georgi, on the board, what will -- we have, of course, talked about the profitability trajectory here and what will be the key strategic priorities for you?

[Georgi Ganev, Chief Executive Officer]

I mean, first of all, I have not joined the board yet, so I'm starting to learn about the company. What I see is, of course, a huge potential. Otherwise, we wouldn't have been so clear with this company as we are. We're basically seeing the same trends as we saw with Zalando. So the huge shift from offline to online sales, which is very familiar to me given my, let's say, previous job, and this is something that we will continue to work on. GFG today is, as you know, a set of different companies and in some markets we see very good progress. The Iconic in Australia being one of those. And we need to look further what we can do to improve as a group. But right now, the general, let's say, the big trends, they are very clear. It's the offline to online shift, and I think we have the knowledge [ as an ] investment company to basically capitalize on our previous, let's say, journeys and be able to drive this to become a very successful company.

[Operator]

The next question comes from Johan Sjoberg of Danske Bank.

[Johan Sjöberg, Analyst]

Could you tell us a little bit more about the -- just continuing on the GFG topic here, could you tell us a little bit about the management changes taking place in GFG, the reason behind that? And also what you -- if you look at the past, or basically looking at your value of the company compared with what you have invested into it also, you are behind, so to speak. It's not been a great investment so far. Could you tell us a little bit about what do you think has been -- gone not wrong maybe, but rather what you can do better in Global Fashion Group, please?

[Georgi Ganev, Chief Executive Officer]

Yes. I mean, maybe I will let Joakim talk a bit about the previous investments and the value of those. But before we go into those details, let me just say that when we see something, a big trend, and we have a conviction that this is the way that, let's say, the world and consumers are going, it's very seldom a straight path to success. And again that's where Kinnevik comes in with a long-term strategy. So we are -- we have a vision that's very much aligned with the other shareholders of GFG and the management that this is a great company, well positioned for future profitable growth. That's basically the first thing I would like to say. When it comes to management change, I mean, Christoph Barchewitz, being with Kinnevik for many years and has been working closely with GFG, and we believe that the combination of Christoph, with that experience and his background, with Patrick Schmidt that has been the CEO of Iconic in Australia, let's say, one of the most successful companies within the GFG Group, that combination is basically a great management team for this next chapter in the company's history. And of course, myself with my e-commerce background and also being more of an operator, I look forward to be part of that journey and working actively together with Patrick and Christoph and the rest of the team. Joakim?

[Joakim Andersson, Acting CEO & CFO]

Yes. And maybe to comment on the background and where we are with GFG now. I think, as you know, we have said before as well that these companies were started in 2010, 2011, with, call it, the Zalando model in mind, going after other regions or parts of the world, which were more emerging and fast-growing, perhaps, than what Western Europe is. So what we have realized, as you also know, is that those regions where we are with GFG has been a bit -- probably a bit more difficult than we thought from the beginning. But it is a longer journey than the Zalando journey because of the complexity and because of the nature of those markets. So that, again, I mean, plays well into the strength of Kinnevik and the long-term view of Kinnevik. We are behind on the invested capital compared to the fair value. But again, it's a long-term bet, and we think they are in a better and better shape.

[Johan Sjöberg, Analyst]

I appreciate your answers. Could you say something also about the prioritization -- priorities, rather, when it comes to growth versus profitability in Global Fashion Group? Where do you stand there now? Will you see a change here going forward?

[Georgi Ganev, Chief Executive Officer]

I think as I said with Zalando, we believe that these companies are definitely into a growth phase, that is important. We see a strong growth now in the third quarter of GFG, which, of course, makes us very confident that they have a strong position. So growth is very important. However, in GFG case, since we have, let's say, a negative EBITDA margin, we need to improve that margin over time, which is also going in the right direction. In the quarter, we see more than 2.3 basis points -- sorry, percentage points increase in the profitability. So it's going definitely in the right direction. So improvement of profitability is important, but not -- let's say, not by slowing the growth.

[Johan Sjöberg, Analyst]

Got it. And also just a follow-up or a question on your forthcoming new investments here. There was -- your previous CEO had Kinnevik 3.0 almost about 1.5 years ago, talking a lot about the new segments within health care and also financials. You have seen a number of investments here, which you continue to reinvest in, in this quarter as well. But now you're turning more towards the Nordics. Would you say that should we -- is this a big change now, should we not expect these investment trends -- rather new investments to continue on a global scale, but more focused towards the Nordic region? Is that how we should read it?

[Georgi Ganev, Chief Executive Officer]

No, I don't think we should read it that we'll stop doing anything that we have done, let's say, during the last year. We have our sector strategy, we have this across continents. We are very committed to those that we have in the portfolio that we see as the next [ stage show ] winners. What I'm saying is that we have not maybe capitalized as much as we could have in the Nordic region. So without basically going into more details why that was the case and so forth, that is not really my position to do right now as the CEO -- new CEO of Kinnevik. I just feel that we can do more in the Nordic regions, not because we have an office here, but because this region is proved to, let's say, have a good innovation within the tech sector. So more focus in the Nordics means that we should not lose opportunities here, but we will continue to execute according to our sector strategy across the other markets as well.

[Johan Sjöberg, Analyst]

I appreciate and I think that is a good strategy also, because, I mean, I don't think that so much really has happened since this presentation, the Kinnevik 3.0. I think we have -- it's still a very low level of the total portfolio, which has been invested into those regions, so I like that. But would you also say that -- I mean, should we expect -- I understand you're still just a month into your work, there's been a lot of things happening in your listed portfolio. But should the unlisted portfolio come more in focus going forward here, would you say?

[Georgi Ganev, Chief Executive Officer]

That is something you can expect, yes. I believe that we can do much more in the private portfolio. I mean, on the other side, we have seen a great development in our public portfolio. So, of course, the relation within -- between private and public does not only have to do with the increase of NAV in the private portfolio, but actually how the public portfolio is performing. And I don't think that we can only look at that relation. We need to see how we are able to develop our private portfolio. So compare that, let's say, in absolute valuation is maybe more relevant going forward.

[Operator]

The next question is from Elizabeth Miliatis of Bank of America.

[Elizabeth Miliatis, Research Analyst]

A quick question from me on the TDC, MTG deal. Are there any concerns that that will -- any concerns of risks that, that might not go ahead, given the more recent indicative bid from the consortium? I know it's been rejected, but is there any concerns that the deal won't go ahead?

[Georgi Ganev, Chief Executive Officer]

I mean, we always have concerns for these deals from a regulatory perspective or other perspectives as well. So that, of course, is something that is not unusual or that we wouldn't expect this to be, as I said, a straight path to, let's say, the end goal. However, we believe so much in this -- let's say, these trends that I've been talking about, and I feel confident that the shareholders of these companies also will understand the value creation opportunities that those -- these deals standalone can give. This is what the board has said of TDC. I don't want to comment the, let's say, last day's speculations and news that we have read. This is not a tactical play from Kinnevik. We have our conviction and we will stay focused to that.

[Elizabeth Miliatis, Research Analyst]

Okay, sure. And then a question on Quikr, specifically. It seems that the number of responses have sort of slowed this quarter. I think it was 10.4 million relative to last year's Q4 of 10.3 million. You look at the growth, in Q3-on-Q3, it was quite high at around almost 30%, I believe. Is there anything that's driving that slowdown, what's happening there, and is there anything that Kinnevik can do to turn that around?

[Georgi Ganev, Chief Executive Officer]

I think that's a perfect question for Chris. Chris, can you come in, please?

[Christopher Bischoff, Senior Investment Director]

Absolutely. Thank you for the question. I think when you look at this data, we obviously just give you responses and there's obviously a bigger picture behind that. So traffic was up, so, obviously, response -- listings were actually down on the quarter, so responses per listing were up. We reduced marketing spend. But I think the key point to think of is the cash-in was about 40% higher quarter-on-quarter and month-on-month -- month -- December-to-December 100% up and 70% up quarter 4 '16 versus quarter 4 '17. And cash burn was obviously the lowest level ever for the business. And so we're really driving this business, both in terms of top line revenue and reduction in cash burn. So I'd attribute it to a reduction in marketing spend. We obviously adjusted our valuation as well. You would have seen in the quarter. But that was primarily due to a review of the cost of equity of the business rather than any change in the view of the business plan.

[Operator]

Thank you. At this time, there are no further questions. Please go ahead, speakers.

[Georgi Ganev, Chief Executive Officer]

Okay. Then thank you very much for calling in and listening to the presentation, and have a nice day.