Annual report 2017
JAN 1st – DEC 31st 2017
- Net sales amounted to EUR 16 379 thousand (11 571), a 41.6 percent increase
- EBITDA of EUR 359 thousand (-364) and EBITDA margin of 2.2 percent (-3.1)
- EBIT of EUR 193 thousand (-409) and EBIT margin percent (-3.5)
- Loss after tax of EUR -404 thousand (-664)
- Net cash flow amounted to EUR 453 thousand (-108)
Significant events during the year
- Talkpool acquired the Belgian Tech company Technetix
- Talkpool acquired LCC Pakistan with 1,000 employees and EBITDA of around EUR 1 500 thousand
- European network operators such as Deutsche Telekom, Belgacom, Vodafone and Orange became the fastest growing client segment for Talkpool
- Digicel signed a new 5 years O&M contract and a global 10 years frame agreement with Talkpool
- Talkpool signed its first IoT-as-a-services volume contract with Digicel Haiti
- Talkpool became a Deutsche Telekom entrusted partner for FTTH projects in eastern Germany
- Camouflage signed an important 3,5 years contract with tower company Cellnex in the Netherlands
- Talkpool with partners won the Vinnova IoT project for digital environmental monitoring in Sweden
- Talkpool’s third new share issue in October was substantially over-subscribed
- LCC Pakistan was fully consolidated in the group financials from 1 November 2017
- Talkpool AG acquired another 30% of the shares in Talkpool AB and reached the majority with 55.6%
- Talkpool and Senseair initiated a collaboration within IoT for better indoor environments.
- Talkpool AG and Sigren Engineering AG were awarded an IoT smart building assignment for real estate in Zürich
- Talkpool signed a Letter of Commitment for a Smart City project in Namibia
2017 was a break-through year for Talkpool. Revenues made a giant leap, with monthly sales of EUR 1 million in the beginning of the year more than doubling to over EUR 2 million by the end of the year. Two new network services niche companies were acquired and we laid the groundwork for profitable growth acceleration. Talkpool's mission is to enhance internet communication for people and things through partnership with network providers and operators and through innovative IoT- and blockchain solutions. In 2017 we made serious progress in delivering on this mission as we signed several new fixed- and mobile broadband network services contracts and received volume orders for IoT-as-a-service solutions.
Strong growth over 2017
Over 2017 Talkpool continued to execute on its growth strategy, delivering a year-on-year revenue increase of 42%. Monthly revenue grew during the year from just above USD 1 million in January to record high USD 2.4 million in December. The high growth rates were achieved by a combination of organic and acquired growth.
Growth through M&A turned out successful with the first two acquisitions of Technetix and Camouflage. In addition to the significant financial contribution those acquisitions also added new knowledge, customer segments and geographical regions to Talkpool Group.
Talkpool's successfully completed a secondary offering of approximately SEK 33 million in 2017. In the foreseeable future, no further equity capital raising is foreseen. To finance growth, the Group intends to prioritise debt financing and other financing methods to avoid further share dilution.
Our second acquisition after Camouflage in 2016 was completed in January when we acquired 100% of the shares of Belgium-based Technetix NV from Technetix Group Ltd, a leading global broadband cable network transmission technology provider.
Thanks to the acquisitions of Camouflage and Technetix, Talkpool gained momentum with several European network operators such as Belgacom, Vodafone and Orange. These customers now constitute a new important cornerstone in Talkpool’s global growth strategy. The network operator client segment in Europe, which represented zero revenues in 2016, became one of Talkpool’s fastest growing customer group and biggest opportunity in 2017. Europe generated almost a third of Talkpool’s revenue during the year.
The acquisition of LCC in Pakistan with 1,000 employees and EBITDA of around EUR 1.5 million was a significant event in Talkpool’s history and a giant leap in the company’s growth development. Through the acquisition, Talkpool gained a strong hub in the Middle East and became the leading provider of network services in Pakistan, a market with 200 million inhabitants and forecasted GDP growth north of 5 percent. LCC Pakistan has a long history of good stability and high profitability. The company generated revenues of approximately EUR 10 million in 2016 and has during many years generated surplus cash flow. After consolidating LCC into the Group, we almost doubled revenues, improved EBITDA margins and strengthened our operative cash flow.
The integration of LCC Pakistan that started in November is expected to take approximately half a year. We have started to align LCC Pakistan’s processes, reporting, accounting, management structures and entrepreneurship with Talkpool’s business methods. LCC Pakistan’s result in November and December exceeded our expectations and it added totally EUR 1 621 thousand revenue to the group revenue in Q4. The lengthy and complex financing and acquisition activities did however require a lot of time from the management team and the significant transaction costs hit the net profit in Q4.
The LCC acquisition has accelerated Talkpool’s transformation into a profitable and fast-growing business that stands on its own feet. We have now achieved the first step in our strategic roadmap and through this we have gained the financial and operational stability to increase the investments in the emerging Internet of Things industry. LCC Pakistan will give Talkpool an extra push into this second strategy phase as it is adding an established IoT telecom site solution with an existing customer base.
The Network Services margins were picking up during the year as niche services in Benelux, Germany, Haiti and Pakistan increased their share of the total revenue compared to the legacy services in Africa.
Start of a new year
The fourth quarter of 2017 carried significant extraordinary acquisition financing cost, but only gained partially from the consolidation of LCC Pakistan. The first quarter 2018 report will be the first clean report with all companies consolidated.
Most Talkpool markets have exceeded expectations in the beginning of the year. The LCC Pakistan acquisition opens growth opportunities in the Middle East region, and Talkpool has chosen to start a new market in Saudi Arabia. This organic expansion will be managed from our new hub in Pakistan. We expect large volumes of consulting and IoT orders to turn Saudi into one of Talkpool’s largest and most profitable markets. Talkpool will initially concentrate its efforts in Saudi on providing consulting services before increasingly focusing on IoT. Saud Arabia is planning substantial investments in Internet of Things and the Saudi Vision 2030 includes smart city projects such as the planned city of Neom where Talkpool is already involved in an early stage. The Middle East hosts some of the worlds most advanced smart city projects and I believe Talkpool is well positioned to become technology supplier to these mega projects.
Talkpool also broke new technical ground as it co-founded a consortium called “JoorsChain” together with Joors and TrueChain to develop a blockchain platform to support telecom operators, media and ad-tech in transforming the mobile internet advertising industry. The fundamental idea is to create a modern ecosystem for managing micro-transactions involving several different parties in an easy, efficient and transparent way. There is a vast amount of potential future applications, while the initial focus is advertising management versus mobile users and publishers. Blockchains is a complementary technology to our IoT strategy where we use our network and security expertise. Blockchain technology adds a new dimension to internet and makes it possible to cut out expensive middle men and improve security and transparency for all kinds of transactions. After technical and commercial progress in the past months, it is becoming increasingly likely that Talkpool’s blockchain technology will get a break-through assignment.
2018 has started very positively and we believe that the positive development will continue during the year. Talkpool will continue acquiring TNS and IoT companies as communicated.
This information is inside information that Talkpool AG (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08.50 CET on May 4, 2018.
Erik Strömstedt, CEO
Talkpool provides IoT solutions and telecommunication network services globally. Through its cutting-edge technical expertise, long experience and agile business model, Talkpool offers global telecom vendors and operators high-quality services on short notice no matter the location. Moreover, Talkpool is one of few companies with actual solutions and contracts in place in the exciting IoT-market. Remium Nordic Holding AB is Talkpool’s Certified Advisor. www.talkpool.com