Interim Report January - September 2020

JUL 1^st – SEP 30^th 2020

• Net sales amounted to EUR 5 112 thousand (5 186), a 1.4 percent decrease
• EBITDA of EUR 282 thousand (-274) and EBITDA margin of 5.5 percent (-5.3)
• EBIT of EUR 172 thousand (-405) and EBIT margin of 3.4 percent (-7.8)
• Net earnings after tax of EUR 58 thousand (-418)

JAN 1^st – SEP 30^th 2020

• Net sales amounted to EUR 14 883 thousand (16 339), an 8.9 percent decrease
• EBITDA of EUR 486 thousand (-310) and EBITDA margin of 3.3 percent (-1.9)
• EBIT of EUR 183 thousand (-644) and EBIT margin of 1.2 percent (-3.9)
• Net earnings after tax of negative EUR 733 thousand (-1 572)

 
JULY - SEPTEMBER KEY DEVELOPMENTS

• Our turn around target to reach net profit in the second half of 2020 was achieved in September
• Talkpool’s IoT sales showed a clear recovery from the low levels in Q2
• A moderate overall sales growth was achieved despite closing two markets and Corona delays
• The positive effects of our turn around project continued to show in lower SG&A and financial costs
• In the Netherlands, Haiti, Tanzania and Switzerland EBITDA clearly exceeded budget
• Group EBIT almost doubled compared to Q2
• A general pick up of customer negotiations and delivery project activities during the quarter
• Continued travel and service delivery challenges due to COVID-19 restrictions and sickness
• New IoT Strategy in place, focusing on the digitisation of buildings
• As a part of the new IoT Strategy Talkpool started identifying new acquisition candidates

   
CEO COMMENTS

After a Q2 marked by COVID-19 challenges, business started recovering in Q3. The uncertainty about the future and budget restrictions still hampered business decisions and investments in many customer accounts. Furthermore, Talkpool closed its non-profitable entities in Uganda and Mexico. In spite of these market challenges and internal problems with staff health, Talkpool managed to continue on a positive path in Q3 with increasing revenue and profit.

One of the financial targets set in our turn around program was to reach net profit during the second half of 2020 through business restructuring and consequent cost saving activities. Thanks to hard work by our staff this important break-even target was reached already in September.  This was an important milestone and the start of a new growth phase for Talkpool.

For the new growth phase Talkpool has been working hard on the development of a new sharpened strategy.
The IoT- as well as the Network Services strategy have been revised and merged into a common overall digitization strategy for buildings and communication network infrastructure. Our end-to-end solutions for energy optimization, indoor climate control and damage prevention in both business areas will be based on a common cloud-based platform. Talkpool aims at consolidating the market for building digitization through the acquisition of and partnering with selected IoT and Smart Network Services companies.
 

Network Services

The Network Services business has remained mission-critical to keep economies moving through COVID-19. Providing business-critical connectivity, securing work-from-home arrangements and keeping individuals and societies connected and informed has become indispensable. Many telecom operators have benefitted from a surge in the traffic of data and voice. As a result, the telecom sector is performing well compared to other infrastructure sectors. In contrast to many other industries, the telecommunication sector has been generally exempted from major COVID-19-related restrictions. Some telecom companies have been strengthened by the spike in data traffic and increased use of broadband services, as more people are working from home and rely on video conferencing.

Although many operators in developing countries have been permitted to carry out construction of new network infrastructure, the lack of materials and equipment, particularly those imported from China slowed down the new construction in general. And even though some operators have continued to expand to meet the increasing data demand, others have been forced to limit growth and investments in the short term to preserve cash.

Network Operations and Maintenance services projects have not been very affected by COVID-19 as they are crucial to maintain the network availability and service quality on a high level. Thanks to this Talkpool’s important recurrent revenue stream from O&M projects around the world has remained largely uninterrupted, which was reflected in the Q3 result.

Talkpool’s restructured O&M-based operations in Haiti performed well in Q3 and showed high efficiency and service delivery quality. Thanks to disciplined cost reduction, Q3 had the highest EBITDA in a long time.

Talkpool’s TowerCo centric operations in the Netherlands with key customer Cellnex, one of the leading telecom infrastructure operators in Europe, continued to show a stable and high performance. In September, Talkpool Netherlands overperformed its EBITDA budget with 81%

Talkpool Germany followed its positive trend from Q2 with good order intake and high planning resource utilization generating solid operational earnings. Extra business development efforts were made to boost sales in Germany and customer discussions progressed well.

The group wide restructuring efforts continued to show clear results in Q3. Group SG&A costs as well as group Finance costs were reduced with another 10% in Q3. Both cost categories have been reduced with 25% since the beginning of the year, and this helped us to reach break-even in September.

In July, a leading network operator and a leading mobile equipment vendor, both with headquarter in northern Europe, awarded engineering consultancy work to Talkpool in Pakistan. The work was ramped up during the summer and we initially estimated a combined contract value of approximately 300’000 Euros this year. These clients have so far awarded more work to Talkpool than initially expected. Furthermore, we’ve signed a MoU for a 20-year contract that, if executed, would lead to approximately Euro 400’000 additional profits per year from 2021.

In September Talkpool signed a Sales Purchase Agreement (SPA) with Marsk Tech Ltd for the sales of Talkpool Network Services Limited in Uganda. The SPA is effective from January 1, 2020. This transaction allows Talkpool to focus on digitization in its key markets in Europe and the Middle East and Marsk Tech can grow network services business in its key eastern African markets.

The Network Services and IoT Strategies revamping work was intensified in July and the first versions were presented to the board in August. We’ve decided what we’re NOT going to continue doing and we’ve started to discontinue activities and specialize more. Within Network Services Talkpool has managed to build a strong reputation as a reliable provider of Managed Services for Telecom infrastructure. In the new Network Service Strategy we will leverage on this market position and our upgraded inhouse IoT solution for remote telecom infrastructure monitoring to form our future as a Smart Network Services and Solutions provider.

IoT

In Q3 Talkpool experienced a clear pick up in the IoT sales activities and revenue as the Atrium Ljungberg Sickla project among others entered into an intense delivery phase. The Sickla order was a call-off from the frame agreement signed between Talkpool and Atrium Ljungberg in February covering pre-studies, project management, installation and delivery of sensors/meters, connectivity, data collection, integration, technical support and system monitoring.

Talkpool’s cooperation with Myrspoven in developing Smart Building solutions for energy savings and improved air quality to prime real estate companies became even more relevant during Q3 as COVID-19 continued to spread around the world. Being able to improve health and wellbeing through the control of indoor air quality has become more important than ever to real estate owners and tenants. Many opportunistic tech companies claim to have COVID-19 preventing products, but very few can offer commercially installed and proven B2B solutions like the ones from Talkpool and Myrspoven.

In our new IoT strategy we have decided to fully focus our efforts on Smart Buildings. IoT technology for real estate is one of the most promising verticals in IoT. Talkpool has proven success with numerous existing “proptech” products, resources and customer projects. Talkpool will leverage on its strong position in commercial buildings sub metering, energy optimisation and damage prevention to become a one stop shop for smart-buildings-as-a-service, offering a complete eco-system for the digitisation of buildings.

The strategy review has also identified Talkpool’s core “DNA” and a path to increased synergies between the two business units. We are convinced to have found our sweet spot in the area of maintenance and optimization of Buildings and Infrastructure for both telecom customers and real estate owners with the help of wireless IoT solutions.

4^th Quarter

Early November Klövern AB, one of Swedens largest real estate companies, placed a follow up order for energy and climate optimisation of 100’000 m2 office space in Stockholm with Talkpool and Myrspoven.

Talkpool and Myrspoven have developed a unique solution that optimises air quality, energy consumption and other building parameters and after a successful trial phase, Klövern has now signed a 5-year contract for 10 buildings in northern Stockholm, Sweden. Talkpool provides sensors, connectivity and data handling, and Myrspoven provides Artificial Intelligence-based HVAC control. Klövern’s vision is to create attractive and sustainable environments for future enterprise, individuals and society.

The project is expected to result in improved indoor climate and generate energy savings worth approximately SEK 1.8 million per year. The indoor air quality control will also help preventing the spread of Covid -19 in the buildings. Information about the Covid-19 impact of the solution can be found on https://talkpool.com/indoor-air-quality-and-iot-lessons-from-covid-19/

Talkpool’s new Strategy is based on the digitization of buildings. Automatic consumption measurement of water and electricity has become standard in the developed part of the world. The companies that used to have inspectors that visited homes to manually read the annual consumption have installed meters that measure consumption real-time. Although the costs for the field forces have disappeared, many metering companies continue to invoice amounts to the homes that are much higher than the costs. As a complement to Talkpool’s installation of meters in customer buildings, Talkpool intends to acquire metering companies with a solid installed based and annual recurring revenues.

Talkpool has found a first acquisition target and this is the catalyst for a new growth phase in which Talkpool is the digitization partner to many building owners. The first target measures consumption of water and electricity in approximately 50’000 homes all over Sweden. The company has during the past 20 years connected many homes, initially mainly from HSB real estate, to individually measure and invoice (IMD) actual water and electricity consumption real-time instead averaging or estimation of consumption. This has grown to become Sweden’s third largest IMD-metering company.

The company has prepared a strategy to up-sell other digitisation services such as indoor air quality, alarms and sustainable environmental services to its 50’000 existing home customers. Talkpool believes it can deploy its existing smart building technology to service the clients in an efficient manner.

The acquisition target provides a strong customer base, 20 years of experience and track record in residential properties automation and a strong sales organisation. Talkpool contributes with leading edge technology knowledge, own IoT products and prime commercial real estate customers to the co-operation. Together the two companies will merge to a market leading high-tech Smart Building company with a strong sales force offering a complete eco-system for the digitisation of buildings.

Approximately half of the EUR 2.5 million revenues are recurring from measurements of the installed base with high profit margins and the remaining half of the revenues stem from low margin projects of installing new meters. A price of SEK 25 million (Eur 2.4m) in cash subject to due diligence, before signing a Sales Purchase Agreement in December 2020, has been agreed.


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 08.30 CET on November 18, 2020.
 

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