Interim Report January – March 2020
JAN 1st – MAR 31st 2020
- Net sales amounted to EUR 4 881 thousand (5 583), a 12.5 percent decrease
- EBITDA of EUR 4 thousand (-88) and EBITDA margin of 0.1 percent (-1.6)
- EBIT of negative EUR 93 thousand (-199) and EBIT margin of negative 1.9 percent (-3.6)
- Net earnings after tax of negative EUR 527 thousand (-354)
JANUARY - MARCH KEY DEVELOPMENTS
- COVID-19 had limited financial impact in Q1, but is affecting the 2020 forecasts
- Turnaround plan showing first results, further cost cuts in the markets necessary
- Financial overperform by Switzerland, Haiti, Germany, Netherlands and Tanzania
- 8% reduction of Group SG&A and 27% reduction of SG&A in HQ
- Remaining EUR 1,8M of the EUR 2,0M convertible loan from M. Winter paid in February
- 0,6M directly invested in IoT-activities in Talkpool AB
- Major Smart Building contract signed with leading real estate company Atrium Ljungberg
- Smart Construction-as-a-Service contract signed with major construction company NCC
- IoT solutions and Smart Network Services sales push in Europe and the Middle East initiated
- Talkpool Mexico dismantled and prepared for divestment or closure
CEO COMMENTS
The positive trend observed at the end of 2019 sustained into the new year and the first financial effects of the restructuring plan and strategy revamp showed in the first quarter of 2020. The COVID-19 outbreak emerged already in the middle of March the full effect of the improvements was dampened.
Network Services
Switzerland, Haiti, Germany, Netherlands and Tanzania all overperformed in Q1. Germany and Netherlands both performed very well in February and March, but the biggest positive surprise was Talkpool Tanzania, with revenue exceeding budget with 40%, Gross Margin exceeding budget with 50% and EBITDA 8 times higher than expected. A number of new opportunities and orders from existing and new customers involving different consulting- and service projects for the whole of 2020 emerged throughout the quarter. Talkpool Tanzania we have also implemented a new staffing model with 20% inhouse staff and 80% subcontractors, which will result in higher flexibility and better margins.
Having said that, we saw a clear adverse impact on our business worldwide caused by the COVID-19 outbreak. The insecurity about the effects of the virus made several of our customers put their investments and orders on hold and this reduced revenues in Q1 and clouded the outlook for Q2 and Q3 for Talkpool.
After a turbulent 2019 in Haiti, the situation in country stabilized towards the end of the year. The overhaul of the local operations triggered by the difficulties reinforced the company and made it fit for the future. A new experienced country manager took over from January 1 and accelerated the cost saving and efficiency programs further. Slowly but surely this was also reflected in the earnings that were moving up from an historically low level. The expected order volumes from Digicel did however not materialize, which is partly a remaining precaution effect of last year’s challenges and a first COVID-19 effect during the second half of March.
Talkpool Pakistan, employing close to 1000 staff in over 50 different projects, continued to deliver high quality services to over 20 satisfied customer accounts throughout Q1. Revenue and operating earnings exceeded expectations despite the radical lock down in March stalling Talkpool’s field activities with up to 30%. A clear trend in Network Services in Pakistan is the build out of solar power capacity on cell sites and in solar parks. Operators are looking for alternate energy solutions to save operational cost, and solar has become very popular. Talkpool has been invited to several tenders involving solar solutions lately and one of the most interesting is a deployment of a large solar park. The idea is to generate low cost electricity at large solar power plants while using existing power lines for the transmission of power to the targeted cell sites, data centers and office locations. The technology is called wheeling and is expected to save operators multimillion dollars per year, but it will also offer alternative sources of income. This trend fits well with Talkpool’s revamped Network Services strategy shifting towards helping customers saving energy and reducing CO2 emission on one hand, but also assisting them in increasing their sales.
Energy management and environment control are also important pillars in our new Smart Network Services strategy using IoT technology to gather information about the health and the efficiency of the equipment by collecting real time data about temperature, humidity, power consumption, fuel levels etc. Based on this data we can achieve 100% site asset visibility and increase the uptime of the network, minimize the operating costs and maximize asset utilization by analyzing and controlling the conditions on site. Adding Artificial Intelligence, we can read out patterns and predict events, which helps our customers to control and optimize the use of their equipment and prevent faults.
We have already received a request for a “Smart Towers” solution from a major tower company in the Middle East and our Smart Network Services offering fits the customer requirements quite well.
In Q1 Talkpool’s operations in Mexico was dismantled and the company was prepared for divestment or closure.
IoT
The remaining Euro 1,8 million of the Convertible loan from the Swiss investor Mr. M. Winter hit TP AG’s bank account in February as planned, and this gave Talkpool Group a healthy cash injection. Particularly important was the Euro 0,6 million that was directly invested in the development and delivery of Smart Building solutions.
Smart Buildings is the most important IoT market segment for Talkpool. The proof-of-concept and pilot installations done together with some of Scandinavia’s market leading companies throughout the past years, were converted to full scale solutions with signed frame agreements during the period. In early 2020 Talkpool announced that framework agreements were successfully negotiated with both NCC, one of the largest construction companies in the Nordics, and Atrium Ljungberg, one of Scandinavia’s largest real estate companies.
A Smart Construction-as-a-Service IoT contract was signed with NCC in March. NCC, with high competence in sustainability and digitalization, strengthens its IoT position by deploying Talkpool’s offering of wireless LoRaWAN sensors, data collection and data processing. The smart sensors provide a cost-efficient way to ensure the building quality, by monitoring temperature and humidity in roof constructions or other sensitive construction elements.
This includes measurements that will optimize building construction time, cost, evaluation of new building concepts as well as long term quality assurance. NCC is one of the largest Nordic construction companies, with revenues of 58 billion SEK in 2019. Their construction projects range from a wide variety of buildings, such as multi-family housing, commercial buildings, swimming halls, hospitals and more.
In February Talkpool signed a significant framework agreement with Atrium Ljungberg, for the supply of end-to-end solutions for smart buildings. The agreement initially covers a five-year period and includes solution deployment, measurement value collection, data integration, technical support and system monitoring. Solutions are used for sub metering, energy efficiency and environmental certification of properties. Atrium Ljungberg owns and manages a large number of properties in Sweden. At present, its real estate properties include approximately 1’200’000 square meters of rentable area with a value of SEK 49 billion. Most of the properties are located in Stockholm, but the company also own properties in Uppsala, Gothenburg and Malmö.
Talkpool is a market leading manufacturer of IoT sensors. Talkpool’s latest devices measure the air quality parameters of temperature, humidity, CO2 and particulate matter, and are based on LoRaWAN technology. Apart from strengthening the offering towards the end-customers, Talkpool’s sensor devices are also quickly making a name for themselves in the international marketplace for LoRaWAN products. Over 500 companies worldwide are working with LoRaWAN technology. In their various roles, from network operator to distributor and from system integrator to software producer, they often find a need for sensor devices. Talkpool’s value proposition is unique in this market, as the sensor devices offering combines high quality and high security aspects with scalability by design. Over the past years valuable partnerships have been established with ecosystem actors all over the world.
2nd Quarter 2020
The worldwide Corona outbreak did initially not seem to have too much impact on Talkpool’s business. Step by step we are however seeing effects on several levels in our business.
Customer investments have been postponed, projects are delayed or put on hold, the lock downs in many countries are limiting both our own and partner staff from moving freely and deliver services in a normal manner.
The outlook for the rest of the year has been clouded by COVID-19 and the financial forecasts have been adjusted accordingly.
However, most internet providers and telecom operators have experienced an increase in data traffic during the crisis and reliable telecom and internet communication access will become increasingly important going forward. Combined with the planned massive 5G deployments over the coming years and the increased interest in technical solutions in the health- and environment areas is highly likely to have a positive effect on the demand for Talkpool’s IoT solutions and smart value-added Network Services.
In April Talkpool received a small SEK 200’000 loan with agreement to convert to 9090 shares, hence corresponding to a price of 22.00 SEK per share. The loan conversion offer was provided by Swedish investor Tobias Schön. Following approvals by Talkpool’s general assembly and board of directors on the 15th of May 2020 the Swiss investor, granting Talkpool AG a €2 million convertible loan in December 2019, agreed to a conversion to a price of SEK 15 per share into 1’448’946 TALK shares as agreed in March 2020. The conversion shall be executed before the end of June 2020.
In May technology leader and LoRa founder Semtech recognized Talkpool’s success in the area of Smart Building Solutions: “The flexibility of LoRa devices and the LoRaWAN protocol enables the development of applications for smarter and simpler management. Talkpool’s innovative applications bring ease of use to customers and create effective cost-saving solutions for a quick ROI.”, said Marc Pegulu, Vice President of IoT in Semtech’s Wireless and Sensing Products Group. Read Semtech’s press release highlighting Talkpool’s expansion into the IoT market here: https://www.semtech.com/company/press/semtechs-lora-devices-conserve-energy-and-help-prevent-damage-in-real-estate
Talkpool expects revenues growth and reaching monthly black numbers before the end of 2020 despite major dampening caused by the Corona crisis.
For more information contact:
Erik Strömstedt, CEO Talkpool
Phone: +41 81 250 2020
erik.stromstedt@talkpool.com
About Talkpool
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. FNCA Sweden AB, +46(0)8-528 00 399 info@fnca.se, is Talkpool’s Certified Advisor. www.talkpool.com
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 10.00 CET on May 20, 2020.
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