Kinnevik AB

STO:KINV B

Earnings Call Transcript 2018-Q4

[Operator]

Hello, and welcome to the Kinnevik's earnings release 2018. [Operator Instructions] Today, I am pleased to present Georgi Ganev, CEO; and Joakim Andersson, CFO. Please go ahead with your meeting.

[Georgi Ganev, Chief Executive Officer]

Thank you. Good morning, everyone, and welcome to the presentation of Kinnevik's Results for the Fourth Quarter of 2018. I am Georgi Ganev, Kinnevik's CEO; 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're happy to answer any question you may have.Now please turn to Page 4, where we have provided you with a summary of the key highlights for the quarter. My first year as CEO of Kinnevik has been active year of continued transformation for Kinnevik where we have executed on strategically significant merger and made a number of new investments in our focus areas. In the second half of the year, against the backdrop of the volatile equity markets, with particularly weak performance among fashion, e-commerce companies, we saw a significant drop in the share price of Zalando, impacting our net asset value and total shareholder return. Although, very unfortunate, we remain confident in Zalando's strategy and long term growth story.In the fourth quarter, we invested close to SEK 400 million adding one new company, Travelperk to our private portfolio, as well accreting our stake in Livongo. As the merger between Tele2 and Com Hem closed, Kinnevik received the cash payment of SEK 1.2 billion and additional shares in Tele2 corresponding to a value of SEK 3.6 billion. And today, we announced our first investment for this year as we acquire 38 percent of MatHem, Sweden's leading independent pure play online grocery retailer, in SEK 0.9 billion SEK investment. The investment is underpinned by our conviction that the food sector is about to go through more change in the next 10 years than it has in the past 100. I will go into our vision for the food sector and investment in MatHem in more detail later in the presentation.The net asset value was SEK 70.5 billion or SEK 256 per share at the end of the fourth quarter. And with the decrease mainly driven by the weak performance of Zalando, our TMT asset performed well throughout the year, and in particular, Tele2 outperformed European peers with a wide margin. Our net debt position decreased by SEK 1.2 billion SEK because of the cash consideration received from the Tele2/Com Hem merger and the second tranche of Millicom's annual dividend paid out in the quarter. And this also results in a leverage of 4 percent of portfolio value at the end of the year. The Board of Kinnevik recommends an ordinary dividend of SEK 8.25 per share for 2018 which corresponds to a dividend yield of 3.9% to be paid out after AGM which will be held on the 6th of May.Now please turn to Page 5 for an overview of the performance of our large listed companies. Zalando reported third quarter figures in November and a full year numbers are due at the end of February. On the operational side, the fulfillment network ramp up continued in the fourth quarter with the Szczecin site and Poland successfully operating at capacity. This site will serve Zalando deliveries to customers from all 17 European markets, and at the beginning of this year, the fulfillment center outside Stockholm was opened. Equipped with the most advanced automation technology in Zalando's portfolio, cutting lead times in half for all Nordic customers.Millicom made good strategic progress in 2018 with several operations in Africa being divested. Cable Onda in Panama was acquired and service revenue growth in LatAm amounted to 4.3%. And in conjunction with our year-end release, Millicom also communicated growth plans for the LatAm segment, with growth expected to be mid-single digit in the mid-term.Let us now move to Slide 6 where we have highlighted the progress in Tele2 during the year. As you all most probably know, Tele2 to had an extremely busy year as it complete the merger with Com Hem in Sweden and with T-Mobile in the Netherlands and also exercised the put option in Kazakhstan. When the company reported its full year results yesterday, it also updated its guidance for 2019 and for the mid-term as well as the target for the synergies resulting from the Tele2/Com Hem merger. Through the integration process, Tele2 has identified additional cost savings and now aims for an annual run rate of SEK 900 million, double the previous targets. Management also aims to deliver this faster than previously expected. Now within 3 years instead of 5 and a half to be realized by the end of 2019 on a run rate basis.With a reduced geographical footprint, most of Tele2's revenues comes from Sweden with a mature market where growth does not come easy. The goal is to grow the top line slightly faster than in market at reduce cost through the announced synergies and restructuring the future cost reduction programs to deliver higher adjusted EBITDA growth, while keeping CapEx at low levels to deliver attractive cash flow growth which can be distributed to shareholders. And in the mid-term, Tele2 expects growth to be in the lowest any single digits in end user service revenues, coming mainly from innovative offerings.If we now move toward private companies, you will find an overview of the progress in the largest private companies on Page 7. Growth and product development remain a priority for our private companies and we see good growth across the portfolio. I will address the largest company in our private portfolio, Global Fashion Group separately on the next slide. So let us take a look now at some of the companies presented here on this slide.In Quikr, our Indian classified business, revenue growth is picking up and as the strategy of verticalization is showing real results, annualized revenues growing more than 80 percent in 2018 to a run rate of U.S. $ 50 million and 3 out of 5 categories or at or around breakeven. Betterment grew its customer base by close to 30% and launched new Smart Saver products. It was good to note that inflows remained positive in the fourth quarter despite significant volatility on the equity markets and large outflows in the industry at large.In the evaluation section, Joakim will go through in more detail and you will also see that Global Fashion Group has been negatively impacted following in the de-rating of fashion e-commerce. However, if you move to Page 8, we have highlighted the operational performance of Global Fashion Group and that is developed developing in line with plan with healthy growth and a clear improvement in its path to profitability. And in the third quarter, Global Fashion Group showed continued top line growth with net merchandise value increasing by 23 percent on a year on -- on a constant currency basis, and improved also profitability by close to 5 percentage points. The company continued to execute on its growth strategy across its core markets and made further progress with brand, partners and customers.Please now turn to Page 9 where we present our exciting new investments, an investment that is underpinned by a larger vision of capturing the digitalization in the food sector. The Nordic countries have long been held as leaders in innovation. Digital transformation and technical adoption with some of the world's fastest broadband speeds, highest mobile penetration rates and a track record of having created the highest number of Unicorns per capita in the last decade. Yet some of the areas in the same Nordic countries are distanced by the true innovators and food is one such sector.But we believe that that will change as the food sector is about to go through more transformation in next 10 years than it has in the past 100. The strongest trend is that of a shift from offline to online and with our deep understanding of e-commerce and of the digital consumer, we want to be driving this shift. Innovative business models are emerging to capitalize on the trends impacting the food sector. Business models that also have the power to contribute to us limiting the burden on a planet by reducing waste and optimizing transportation. Food, health and sustainability are therefore inextricably linked. We strongly believe in delivering both economic and social value and correspondingly we find the food fits squarely with our investment thesis.Now please turn to Page 10 for an overview of the key attractions associated with online food. Food is a sector with a huge potential giving its significant share of the household spend. Its non-cyclical nature and attractive purchase patterns in terms of frequency, basket size and 0 returns. The high frequency aspect is worth spending some time thinking about, as it enables 2 highly important things for any online retailer, being a native application and regular and recurring access to consumers home.Over time, this will also allow the online grocers to leverage its platform beyond the scope of their own operation, delivering additional products on top of the grocery assortment. Taking MatHem as an example, the partnership with Clas Ohlson is a first step towards efficiently leveraging its position and we expect development to continue.And even if food is moving online it will stay local. The way we grow, package, ship and eat food has changed dramatically and will continue to change at an accelerating pace. Innovation and awareness of what we eat and how that affects our health is increasing and food is correspondingly becoming an integrated part of one's identity, beliefs and desires as well as a tool for managing wellness. And the demand for fresh, organic and locally produced food is also increasing, highlighting the importance of a local knowledge and local sourcing, something that will limit the threat of entry from large international players.If you now turn to Page 11, where we provide some information about the Nordic food markets. Food is one of the largest categories of the average Nordic consumer's wallet and the transition to online has only just begun. The Nordic online grocery market is worth some SEK 12 billion and is nascent in an international context. Online penetration is below 2% across all Nordic countries, compared to 8% in the U.K. and 20% in South Korea. We believe with support from various external sources, that Nordic will catch up. And at a 20% online penetrations, levels already seen internationally, the Nordic online grocery markets would amount to about SEK 150 billion. For us, the question is not if we reach that level, but when we reach it.And if you now please turn to Page 12, you'll see an introduction to MatHem. As I said, we have now today announced that we will invest close to SEK 1 billion in MatHem, Sweden's leading online independent grocery retailer. MatHem is the largest independent player at scale in Sweden and has been a clear pioneer of Nordic online groceries since inception some 10 years back. Entrepreneurship and innovation is that the core of the company and the team continuously works to find new and innovative ways to provide customers with a seamless shopping experience. And we're very excited to be part of this journey, and we see MatHem as the perfect platform from which to build a service that offers consumers more and better choice. A platform that can save consumers more than 90 minutes of time every week is sustainable that helps them over time to understand what they're eating and might even inspire them to improve their eating habits. And all of you on the call that are based in Sweden, please make sure that you use the promotion code on this slide. And we will of course promise you the follow up that you really use this offer today.But that said, I would like to hand over to our CFO, Joakim Andersson at comment on the financial position.

[Joakim Andersson, Chief Financial Officer]

Thank you, Georgi. On Slide 14, we present the key elements of the NAV development in the quarter. The weak share price performance of Zalando had a significant negative impact on our net asset value. Partly compensating for this development, our telecom companies perform strongly with Millicom and Tele2 contributing SEK 2.2 billion and SEK 1.1 billion respectively.The value of our private portfolio decreased during the quarter to SEK 12.9 billion, largely driven by Global Fashion Group being negatively impacted by the general de-rating of fashion e-commerce. The value of GFG amounted to SEK 3.3 billion in Q4 compared to SEK 4.6 billion in the previous quarter, a result of the significant multiple contraction seen among listed peers as well as continue depreciation of both the Russian ruble and the Brazilian real. Since year-end there has been a rebound in both multiples and currencies, which all together, would have had a positive effect of around 15% on the value of GFG. In our total NAV -- in total, our NAV decreased in the fourth quarter by 10% to SEK 70.5 billion or SEK 256 per share. As per yesterday, our NAV was SEK 74.7 billion, equaling a 6% recovery from year-end.Please turn to Page 15 for an overview of our balance sheet. As previously mentioned by Georgi, we invested SEK 392 million during the quarter and welcomed one new company to our portfolio. The finalization of the Tele2 and Com Hem merger together with a second tranche of Millicom's annual dividend, allowed us to delever during the quarter with our net debt position decreasing to SEK 2.9 billion at the end of December, which corresponds to a leverage of 4% of the portfolio value. We remain confident that we have a strong financial position that will enable us to continue to execute on our strategy.Turning to Page 16, you can see that we have left the financial targets unchanged and that the Board of Directors has recommended a dividend for 2018 of SEK 8.25 per share, which would correspond to dividend yield of 3.9%. With that recommendation, Kinnevik would pay a total cash dividend of SEK 2.3 billion for the year on top of the SEK 4.2 billion distributed in kind during the summer. This would also mean that Kinnevik during the last 5 years has returned SEK 10.9 billion in ordinary dividends and SEK 9.2 billion in extraordinary distributions making the total value distributed to shareholders to over SEK 20 billion.Georgi will now take you through the last slide of this presentation on Page 18.

[Georgi Ganev, Chief Executive Officer]

Thank you, Joakim. When I set up my priorities a year ago, focus was on active ownership, increased activity in the private portfolio and an increased focus on the Nordics. And in 2019, we will continue to drive this agenda, but expect number of new investments to be lower than last year and focused slightly more on the larger investments as demonstrated by the investment in MatHem announced today.We will also remain focus on accelerating the key companies in our private portfolio, continuing to support and invest in them as they grow and require more capital, as we are long term shareholders. I would also like to extend my thanks to you, our shareholders, for your continued support. We have an excellent set of growth companies in our portfolio and long term vision for value creation, which we are committed to delivering on. Thank you very much for listening. And let's now open up for some questions.

[Operator]

[Operator Instructions] And we got our first question from the line of Lena Osterberg from Carnegie.

[Lena Osterberg]

My first question is regarding Babylon. I read that they are planning a new financing round. So I was just wondering if you are participating, have plan to anticipate, and if that will be pro Russia participation? And then also maybe on the online grocery market, now that you've made the investment both in Kolonial and MatHem, what's your view on the long term margins here? So far it seems everyone is struggling to make a decent return. And then also maybe, do you see or take into account any synergies between your different investments in online groceries and also maybe, Budbee?

[Georgi Ganev, Chief Executive Officer]

Thank you, Lena. I will answer these questions one by one. If we start with Babylon, I can say that we are very supportive of the company's development. Lately, they have presented some really interesting strategic partnership with the Prudential, for instance, showing that they can leverage their platform also in a licensing deal, so more a B2B2C opportunity then purely the B2C. And that is also some kind of proof point that Babylon has developed a platform that is very valuable for large multi-line healthcare operator around the world. And as you said, there's been a lot of talk about a fund raise, because company is still developing its platform and expanding. And we will not disclose any details from that round. But what I can say is that, Babylon is one of the companies in our portfolio that we are impressed of and we will follow our money and participate in that round. When it comes to online groceries and the margins, I completely understand your question, because those are struggling, the players that we see out there. But looking at this from a bigger perspective, we are certain that it's about scale and automation. And scale, of course, growing so you can have more efficient warehouses. But also when it comes to density, so increase the density in the last-mile logistics. With those 2 aspects, and of course, stronger purchasing power, you will create good margins in this business. If you look at today, the wholesalers that are public so we can follow their margins, such as IKEA, hey have around 4% on the holdco level. But then they also have the local stores that generates another 5%, 6%. So there is margin in this business and we are certain that if you do this right online and combine smart technologists and automation, with good customer experience, you're going to be able to actually compete with other things than just price, but with convenience in higher purchasing average order values. When we look then at your third questions, the synergies, that is absolutely true. So I mean, you can say that we last year did investments in Budbee to more understand the last-mile logistic, especially in the Nordics. We did the investments in Kolonial in Norway that we believe is a very good example of someone that comes quite far when it comes to efficient warehousing and automation. We will use this experience. Even the investment that we made in Karma, that is around food waste, is something that we will learn from and actually use in creating what we think could be the first digital online only grocery payer. But as also said, on this call, we think that this platform can expand beyond food, because if you think about it, you have a relationship with a customer several times a month compared to say a few times a year for other e-commerce players. And you have a relatively high order value and basically 0 returns. And of course, that platform, that last-mile logistics and the relation with the customer can be expanded into other categories and that will also drive the stickiness and also the margin over time.

[Lena Osterberg]

Could I maybe just have one more question on Millicom, the bid that was on the company, if you could say something on that process?

[Georgi Ganev, Chief Executive Officer]

The bid from -- that was talked about in the press, you mean recently?

[Lena Osterberg]

Yes.

[Georgi Ganev, Chief Executive Officer]

Yes. I mean, of course, a bid is not a bid until it is a bid. So at the end of the day, we will take all bids carefully, consider them carefully and we believe that Millicom has a very strong platform right now. As you've seen in the last report, they are growing above 4%. They changed their targets for the mid-term in a more positive way. And of course, when you have a good asset there are always parties that are interested in looking at these assets, so we're used to that. This time it didn't happen for different reasons, but if someone comes again we will always look at the opportunities.

[Operator]

Your next question comes from the line of Victor Höglund from SEB.

[Victor Höglund, Analyst]

Like you said here the acquisition of MatHem, Kolonial, Karma, but also Budbee, more obvious and if you put on the positive hat here you could think that you are seeing the start of a new Comvik, Tele2 emerging kind of the same kind of story, kind of the same kind of challenge here. And like you said, I mean, it's pretty simple to look at the drivers here with larger bucket size, no returns et cetera. And of course, you could add products to consumers and widen the scope, but also suppliers over time. And I was just wondering if you could give a hint here of what type of complementary acquisitions we could see ahead, in what kind of areas, what kind of services. Or is this an organic story you are now launching here or more tie in together so to say. And just your view here if it's going to be an organic run ahead here or if you are -- maybe have a bigger plan than that. And then one more question, if I may, is around dividends here, your Q2 dividends and what -- and that you are now planning to roll up in this area, how should we think about the room for M&A and balance between that and dividends going forward?

[Georgi Ganev, Chief Executive Officer]

Thank you, Victor. I will take the first question and hand over Joakim for the second one. When it comes to future M&As, of course, there's nothing I can disclose that this call. But I can give you an overview of how we think. I mean, first of all, this is really a customer centric approach. As we say it's about owning the household and we believe that that food is the key to that ownership. That's why we do these investments. Over time, you can see that as we're building an infrastructure, as an infrastructure play more or less like a land grabbing. And in order to build that position in the Nordics or anywhere actually, I believe, that you need to be relatively bold and long term. And these are 2 things that you see in Kinnevik and you've seen in the past. So your analogy with Tele2 and Comvik is not actually bad at all. I think this is the kind of journey that we're entering right now. In this ecosystem, definitely, we have talked about last-mile logistics that can be even further improved and more efficient over time. There are definitely a way of expanding the categories, but I also believe very much in handling the customer data in a good way. So analytics will be part of this play to understand the consumer and to be able to offering the right product at the right time. So those are the 3 main, I would say areas, that we will look at. So last-mile logistics improvement, it's about the assortment as such, could be partnership could be acquisition and also how to use the data in a smart way. And it will most probably be a combination of a good organic long term story, but also potential kind of roll ups as you say going forward.

[Joakim Andersson, Chief Financial Officer]

Hey, Victor. The second question on dividend and funding, as you saw the board is recommending a flat dividend from last year SEK 8.25. I think you should see that also in the context of 2 things. One is on the dividends received, the money that we get from Tele2 and Millicom this year. And secondly, also in the context of the dividend in kind that we made during summer amounting to SEK 15 per share, taking the total amount to a fair level and the dividend policy that we have. On the second one, on the funding side of things, we are operating within the leverage target and you saw that leverage came down a bit based on the money we got from Com Hem when the merger closed and we have plenty of headroom within that target for making new investments. And we also see potential, as Tele2 disclosed yesterday we also see potential there in the form of extra money coming out from the Netherlands and the Kazakhstan. So we feel very comfortable about the dividend, the funding.

[Victor Höglund, Analyst]

If you look on the strategy you have outlined for Tele2, you've said that you want to become the connectivity player longer term in a converged world, so to say. And now you are moving into premiere and the Kolonial and Karma resembles around that line that you want to be delivered to the home. Could you see that these 2 down the line somewhere cooperate or boost each other as they seem to have kind of the same positioning approach to the home?

[Georgi Ganev, Chief Executive Officer]

I mean, as I said, it's a very interesting discussion to have, very difficult for me to comment in concrete terms. But I think, the point here is that. We believe very much in understanding the consumer trends. So when we went into e-commerce and fashion, we saw this low penetration of 2% and we could increase that by actually going heavily into that area. That has happened now and today it's a part of our daily life. If we look to food, we see exactly the same trend over time, but with one difference is that, it's closer to the household and the higher frequency. So here you can build an ecosystem where I believe will be very much customer centric and part of everyday's life. That is something that connectivity is as well. If those can be brought together or not, I think that's more speculations, but the investment thesis is basically exactly the same.

[Victor Höglund, Analyst]

In very short terms your view on what the converged telecom operators doesn't necessarily have to be your ordinary telecom services, it could be other things?

[Georgi Ganev, Chief Executive Officer]

I mean, I think, connectivity for me is part of the consumer's life, right? So you could always argue that there are other services related to the home that you could connect and add to that being it home alarm, home automation et cetera that I think is an open field. However, I also believe that there is so much things you can do with a ordinary connections -- teleconnectivity from an operator. So get your basic done in a very efficient way and customer centric is extremely, I would say, interesting per se. But I agree with your kind of point that it can be much wider and so -- since its part of all household, especially now with Com Hem and Tele2 integrated where you own the household with a fixed network. Thank you.

[Operator]

The next question comes from the line of Joachim Gunell from DNB Markets.

[Joachim Gunell, Junior Analyst]

Your -- a listed portfolio companies they cover almost half of the household's consumption now. I just wanted to get an up to date view here that you said that you want to make new and more sizeable investments in 2019 perhaps. Are financial services, healthcare or/and e-commerce markets are still the target sectors or are you widening the scope there?

[Georgi Ganev, Chief Executive Officer]

No, these are targets sectors for sure. So we have, as you say, healthcare, financial services and e-commerce, now spanning into fashion mainly, and I would say food. Then we have our TMT bucket as well with our investment there. We have also said earlier that in the Nordics, we have been more kind of open for other type of ventures if it's closer to our home market. We know the ecosystem here, we know the founders, we know partners et cetera. So we have the ability to reengage those connections that we hadn't done for some years. But I would say that otherwise we would stick to our sectors. What we mean by large investments is that, first of all, some of the companies in our private portfolio will take off now. We mentioned Babylon on the core, but there are others like Betterment, Livongo to mention a few and of course, Global Fashion Group that are becoming sizeable companies with strong underlying development. So that's part of kind of doubling down and follow our money. And when it comes to new investments, we have done a few kind of more of the invest and learn mindset and we can take those learning and step into, let's say, categories like we've discussed right now, food, where we now invest almost SEK 1 billion, which is of course, a larger investment. Actually is the largest new investment in a company since Zalando to give it some perspective.

[Joachim Gunell, Junior Analyst]

Finally, a question just -- I mean do you have any thoughts or message that you want to share here? There were some alleged media details on a potential listing of GFG late last year, so perhaps some comments on the timing there, any flavor on that topic could be helpful.

[Georgi Ganev, Chief Executive Officer]

I mean, as the company has announced, they did last year that they're looking for different funding alternatives that could be a private placement, that could be an IPO, potentially. I've said it before that I believe this company could fit the public market. I mean, what we experienced at the end of last year could, of course, possibly say that this is the worst timing ever. But a good company is always a good company. So I believe that the door is open to see of different kind of -- different ways to move ahead with GFG. We, as the largest shareholder, we will of course be very much involved in such a process.

[Operator]

The next question comes from the line of Johan Sjöberg from Danske Bank.

[Johan Sjöberg, Analyst]

I had a couple questions also. Could you just repeat what you said little bit earlier, Georgi about investment level in 2019? Do you expect fewer investment s in 2019, but do you also expect larger investments?

[Georgi Ganev, Chief Executive Officer]

That is correct. So I mean, during 2018 as you know, we did 10 and that should be seen against a fairly muted pace in 2017 in the numbers of investments. We believe that 2019 will be fewer that we did last year and larger. MatHem, I think, is the first good example of that, but there might be some other larger tickets coming up for 2019. Again, but nothing that we have anything to say about now.

[Johan Sjöberg, Analyst]

But when you invest SEK 0.9 billion in MatHem, you also highlighted that -- this was the biggest investment in -- for Kinnevik except for Zalando. And -- because that -- the reason why I'm asking is that there has been a media rumors about you investing into [ NorthStar ] then would -- and they have been mentioning several billion of Swedish krona into that. Do you -- would you care to comment on that on those rumors at all?

[Georgi Ganev, Chief Executive Officer]

No, I wouldn't comment on those, because they're rumors as you say.

[Johan Sjöberg, Analyst]

But for us to -- when we should anticipate your future investment, I guess, an investment in that sector would be kind of outside euro, so to speak core sector where you really want to focus?

[Georgi Ganev, Chief Executive Officer]

That is correct. We have a strategy. We have a strategy with our sectors, as we just talked about. But also we have a DNA as a company. So I understand that people look at these large big bets and they think that they would perhaps fit with Kinnevik and that might be true. But to comment on your question, no, that will be outside our strategy.

[Johan Sjöberg, Analyst]

I appreciate your delivering on the message when you made off being an early CEO of investing more into the Nordics. Could you say something about your investment organization? I've seen a couple of names popping up in -- that you have recruited. I also would like to hear little bit about your London investments -- all the team there, are they still around there?

[Georgi Ganev, Chief Executive Officer]

Yes. I mean, good question. I think if we start with the Nordics. So we had in the Nordics basically no people on site working with investments. And I hired a person called Andreas Bernström, which is now heading a very small team. One person coming from our London team and one new recruit. So Maxine, she is recruited here -- from Sweden and Tim is a guy that moved from our London team into this Nordics setup. And those people and some others that work, I would say, part of their time from the Nordic team also works with our Nordic investments such as Kolonial and Marc, Tim and others. So that is basically more like a fresh start Kinnevik. If we look at the U.K. team, we've had some movements. So both moving as we said to Sweden, but also senior investment director moving from that team into Global Fashion Group. So I believe in rotation in general. I think it's very good for development of the individual talent and also for the company. And we have still very good people on site in the U.K. team led by Chris Bischoff in our U.K. office.

[Johan Sjöberg, Analyst]

And also can you say something also about -- a little bit about this big change happening also within the group. I meant, Cristina has been leaving the Board of Directors. How that -- what kind of impact that has on your position? I mean, I've read -- I read the article which said that this was not -- should not be viewed as a big change for you guys at Kinnevik management who runs -- basically runs the operations. And also, but there are also been -- I mean, [ too often ] there has been change in terms of ownership in Kinnevik. I would like to hear how much is Cristina now owns of Kinnevik?

[Georgi Ganev, Chief Executive Officer]

I mean, regarding the ownership question, it's not really a question Kinnevik, but it impacted our cap table. So we were basically obliged by the rules to send out the press release. That is more changes in the cap table among kind of the families and so forth and -- rather than sell downs. But again, that's not a question for us. When it comes to Cristina stepping out of the board or stepping down from the board, that will happen in May, she's still is in the board as we speak. That is, of course, it can be seen from 2 perspectives. I mean, I think you cannot under -- overestimate how important the family Stenbeck, including Cristina is for Kinnevik, as a strong owner and she will remain to be our strongest owner controlling 75% of the votes in Kinnevik -- 25 -- sorry, 25% of the votes in Kinnevik. And also today, she has to have basically being a Board Director and being an owner. Going forward, I mean, what I -- the priority for me is to make sure that Kinnevik can still leverage on the DNA that we've always had to be this bold business builder and I'm confident that Kinnevik has never been a one-man band. We have a strong platforms in the companies that we have and I'm very privileged to basically have a board that is strong and will support me delivering that strategy.

[Johan Sjöberg, Analyst]

My final question, when will you start to disclose a little bit of more information on your holding outside Global Fashion Group?

[Georgi Ganev, Chief Executive Officer]

That is basically a question for the companies in there. Some of the early stage companies have been quite reluctant to show data, mainly because competition. But we understand the need for those targets and those KPIs to be disclosed. And I can all say that we will continue to work on that, and hopefully already during 2019, we can start disclosing more from the companies that we believe really have a true potential.

[Johan Sjöberg, Analyst]

I think actually that would be extremely valuable for overall valuation of the stock. I mean, if you look at some of the names, I think, they look super interesting, but if you look at their reported value, I mean its peanuts -- I don't think it is. So I think it will be very, very worthwhile for you to start to disclose those actually.

[Georgi Ganev, Chief Executive Officer]

I mean, I can only echo what you say. We think exactly the same way. I mean the main focus for me and my team right now is basically to make sure that these companies come forward and show by disclosing KPIs, disclosing performance and at clear path of profitability that it can become real businesses. And of course, the unpolished diamonds in the prior portfolio will make the true value creation of Kinnevik as a share.

[Operator]

And the next question comes from the line of Liz Miliatis from BoA.

[Elizabeth Miliatis, Research Analyst]

Just one question on the dividend. How should we look at it going forward, because obviously the dividend was held flat this year? If we have a look at Bloomberg consensus estimates for your listed stocks, it would suggest that there is a dividend gap in 2019, which would perhaps suggest that you guys might need to cut the dividend or perhaps keep it flat. Yes, so how would -- tell us the best way to have a look at the dividends. Should we perhaps move for that dividend gap or assume it potentially remains on hold?

[Joakim Andersson, Chief Financial Officer]

Yes, Liz. It's Joakim picking up that question. So I guess, I mean you heard what I said on the previous question on the dividends. So I think, again, looking at the a SEK 8.25 together with a SEK 15 worth of MTG shares that we sent out during summer gives a total number which is quite decent for this year. But yes, there is a dividend gap. And as I said previous years as well, we have been running with this dividend gap for couple of years now. We are not worried at all. As we've said before, we'll look at it from an overall funding perspective and we operate within this financial target of leverage target that we have set. If you kind of extrapolate to look into the future, we believe there is potential in Millicom and Tele2 that should and could close that gap. But yes, I mean, if we take a step back and think about how we fund ourselves and look back couple of years, this is the model where we fund ourselves and accept that we go up and leverage for some time. And then if it's a BillerudKorsnäs deal or if it's Avito deal or Rocket Internet deal than takes us back to cash or share or reduce the debt. So we use leverage as a buffer as you know and that's something you could say that we are in such a period now.

[Georgi Ganev, Chief Executive Officer]

And I think to add on that Liz, I think when you look at the flat dividend of SEK 8.25, again, what Joakim had said earlier, we need to take the SEK 15 per share in consideration as well from MTG. Thank you.

[Operator]

And the next question comes from the line of Marie Scheja from Nordea.

[Marie Scheja, Analyst]

I have -- you mentioned, Georgi, that prerequisites in the Nordic market is -- are right for the grocery market and -- but still only have 2% online transaction versus U.K. of 8%. What will you say is the main explanation for that number being that low? And what would you think will drive change from now on?

[Georgi Ganev, Chief Executive Officer]

As always, when it come to innovation that has not been the kind of moving that fast that you would expect, there are 2 factors. The lack of true challengers that are driving the shift and the other thing is the incumbency owning the market not moving as fast. I think those are the factors that have been different if we look at Sweden and Nordics compared to other countries like South Korea or U.K. I mean, U.K. have -- they have 8% penetration, but various sources, depending on who you ask basically, say that the ranges within some city area such as London is above 20%. So we think that the consumer is very clear here. We want to save time. We think it's convenient to order these things online and we think that there is a big play to be part of in the Nordics. And being a relatively local market, but still with a kind of advantage of having a centralized platform and efficient last-mile logistics, there is a window of opportunity here. And always when you compare challengers towards the incumbents, that has been the same thing in media, in Telco et cetera. You can always say that's difficult to be a small fish and to beat the large players, but actually some of the large players to have the legacy assets that is making it difficult to drive this change in a profitable way and we believe that this is also true this area.

[Marie Scheja, Analyst]

And also question regarding your definition of -- you say that you -- in 2019 will do few, but larger investments. What is your definition of larger, roughly?

[Georgi Ganev, Chief Executive Officer]

I think the MatHem investment is defined as a large investment. Thank you.

[Operator]

[Operator Instructions] The next question comes from the line of Nizla Naizer from Deutsche Bank.

[Fathima-Nizla Naizer]

I just have 2 final questions. The first one is online groceries and MatHem. I guess, there is a reason why you have decided to step in now when I know several years ago you've also looked at certain online grocery models like Meal-Kits et cetera. But when you look at the market now, have you seen both these companies like MatHem and Kolonial growing at certain rates that -- beyond the penetration that actually proved to you that, yes, it's an inflection point. So if you could give us maybe how fast they were growing or how fast you expect them to grow that would be an interesting element for us to observe. The second is, is MatHem profitable already or is it on that path to profitability. Who are the current shareholders and are they only in Sweden, so some color around the operations would be great. And my second question is online fashion e-commerce. You still got a large exposure with Zalando with Global Fashion Group. How do you view this particular vertical and, for example, Zalando's strategy to expand into some new centers and capacity rather than go after pure profitability. Just give us some color on how you view these particular legacy investments as well?

[Georgi Ganev, Chief Executive Officer]

Okay. Thank you. So 3 questions. We'll start with online groceries and why we think the timing is right now. Yes, you're right, there is some inflection point right now. Without going into the exact growth number of these companies, we've seen that Kolonial have been growing faster than MatHem lately and we know that there are some particular reasons for that, and we think it's a potential of increasing the growth again in MatHem. We also see that consumer is start to kind of understand the advantage and the significant time saving of going online. That is important. But it's more than the offline to online shift. It's also a matter of the importance of food. Of food being part of our lifestyle. We think of how it can actually be used as a tool for wellbeing and also, how it impacts our environment. So there are other factors right now that are becoming even more clear when you do customer service that -- to position a new kind of food online grocery retailer with these parameters would be very efficient and effective. When also it comes to MatHem and Kolonial, I think it's -- we got this question early in the call. Are there synergies in between? Yes, of course. I would argue that there are synergies also between these companies and Budbee, because this all links together. So you need to master the last-mile logistics in order to be efficient and you need to understand how we it can drive this operations very efficient, which we know from our other investments within e-commerce. The shareholder base of the MatHem -- basically the largest shareholder before we came in was investment company Verdane, but we also have in the cap table Clas Ohlson, the retailer, and therefore there is also a very promising partnership between Clas Ohlson and MatHem, how to add and to widen the scope of the products that's being sold. And then, of course, the founders is still shareholders of the company. If I then move to your third question regarding e-commerce. I mean looking at Zalando's position today, it's very strong. They have built up a platform that, I think, is unique within this field, but they still have below 2% -- around 1.5% of the fashion market. And of course, we believe that there is room for growth. So going into growth phase or keeping the growth phase, I think, it's important. And with that said also, the investments in the fulfillment centers going from 3 to 11 needs to be considered when you look at the profitability of the company. I mean, going forward if this company grows -- is growing those fulfillment centers will increase the efficiency in the company. But now in the contrary, in the short term, you see higher CapEx, higher costs. And that will not be the same in a few years, that's our conviction. But having said that, I mean, the trend of e-commerce that people are buying more often, they're using their mobiles and Zalando is capturing that consumer trend, also makes the average order size going down. So of course, that is a sector challenge that you need to cope with. And I think that you can have good and strong customer offerings, value proposition out in the markets that will basically enable the online retailers to -- e-tailers to grow profitably without basically hamper growth if you do this the right way. As we all now, or most of us now, Zalando is having their Capital Markets Day end of February, and of course, we are as eager as you to find out how they will cope with some of these challenges.

[Operator]

The next question comes from the line of Magnus Råman.

[Magnus Råman, Research Analyst]

Magnus Råman, Handelsbanken here. And I'm sorry I came in late to the call, so perhaps this has already been talked about. But moving back to the food retail discussion, I have another question on penetration here. You mentioned U.K. market penetration at 8% and perhaps this is mainly driven by the London area with much higher penetration So when looking at the geography of the Nordics, do you believe that the complexity and cost -- indeed on the distribution side in this region could also be a reason to the much lower penetration seen so far in the Nordics?

[Georgi Ganev, Chief Executive Officer]

It's a fair comment. But I think the -- if you look at Sweden and you take the 3 biggest cities, it's also there you have the biggest purchasing powers. So I think it's not really that different that that makes it. You could actually -- given that the food marketing and even groceries alone, is so vast, we're talking about over SEK 700 billion in total [ and rest ] of market in Nordics. You could limit your geography and still make a very big company out of it. So -- and I think there might be differences of course, but doesn't really change the case.

[Magnus Råman, Research Analyst]

And then on synergies, I mean, you mentioned MatHem, Kolonial and Budbee and synergies in terms of getting the last-mile delivery right. But do you synergy potential also in the backend for these businesses? I mean, shared sourcing, central warehouses and so on?

[Georgi Ganev, Chief Executive Officer]

Of course, I mean, purchasing power is one big question and that's why I think you need to be long term and bold to get into this game, because if you don't have the muscles to become a real player you will have a big disadvantage on purchasing power. So that is, of course. But that can also be achieved with partnerships. As we know, Kolonial they have strong owners that provide them with good agreements when it comes to purchasing and buying. And secondly, when it comes to the backend side, I definitely think that there is room for synergies and best practice sharing. I mean, just looking at the automation system that has been developed today in this field internationally and in the Nordics, we see that you can leverage and scale on the technology and the software that you develop. In Kolonial, they have their own in-house solution that is extremely promising. That of course theoretically could be scaled.

[Magnus Råman, Research Analyst]

Just a final one, I mean, looking at the leading incumbents they all have nationwide coverage of their businesses supported by their store networks. You mentioned here that there is enough market potential in leading cities in the Nordics. But looking out a little bit in time, do you still see that there could be also consolidation between online and offline channel to be able for leading online player to actually becoming omnichannel player with this nationwide coverage in the Nordic region -- regions?

[Georgi Ganev, Chief Executive Officer]

I think definitely that we use the trend offline to online, right, because we describe a shift. But for a consumer there is not this distinction. You want to buy it from the most convenient channel, depending where you are and what you're looking for. So I believe that the omnichannel will be just -- the customer's choice that decides it. But what I've said before when it comes to e-commerce in general is that, to go into physical destinations and in stores from an online position is by far much easier than going the other way around. So if you're scrutinizing the companies all around the world globally, there are very few example, if actually any example of a offline retailer that has successfully become a true omnichannel model and done that transition completely. We see [ trends of it ], we see people that do it quite well. But the other way around, we see quite many examples. So I would argue that building a strong centralized position first and then decide very concretely and specifically where to have physical outposts is a good way forward.

[Magnus Råman, Research Analyst]

On this topic, I mean, could you share just in the food category or the food retail category could you share any other examples in the Amazon Whole Foods that you're thinking specifically in this category?

[Georgi Ganev, Chief Executive Officer]

No. I think the Amazon Whole Foods is the best example of that type of big omnichannel bet. There are other very strong online players today that have not come into that position yet. They're still building up their online presence. Of course, Ocado, but there are also international players, you have Picnic in the Netherlands, Germany. You have other players in Asia, for instance. So there are very strong players on the online grocery side now building up this state-of-the-art last-mile logistics and some impressive automation systems in order to be able to have a working -- I mean, I would say solid business model, delivering good margins over time.

[Operator]

As it appears that there are no further questions, I will hand back to the speakers for closing comments.

[Georgi Ganev, Chief Executive Officer]

Thank you very much. So thank you for listening and for all your questions. And just as a reminder before we end this call, I would like to inform you that we will release our annual report for 2018 on the 29th of March and report results for the first quarter, Q1 of 2019 on the 26th of April. So hope to see you and talk to you then. Thank you very much. Bye-bye.