Talkpool Interim Report, January - June 2021

 
April ­– June key developments

• Group Revenue grew with 10% from Q1, EBITDA 8-folded and Net Profit reached EUR 19 thousand
• IoT Revenue reached 22% of total Revenue and both Swedish IoT companies were profitable
• Talkpool’s shares were introduced and started trading on the Frankfurt Stock Exchange
• The formal merger of the two IoT companies Talkpool AB and Home Solutions in Sweden was initiated
• Andreas Göth was appointed new CEO of Home Solutions
• Talkpool communicated its new business plan and financial targets for 2025 in a Grand Master Plan II
• The sale of Netmore shares and conversion of stock improved cash flow in Talkpool AB with SEK 7,5m
• Loans to a total value of SEK 8’535’136 were converted into 398’367 shares
• An IoT service agreement was signed with Profi Fastigheter for energy optimization, submetering and billing
• Talkpool, Redytel, Netmore and Senseair formed an indoor air quality alliance based on the success in Spain
• Talkpool Pakistan won a 2-year drive test project with China Mobile Pakistan
   

CEO Comments

In the second quarter the result of Talkpool’s turnaround program was manifested through positive net earnings. Whereas Corona still affected business, all market units managed to deliver high quality solutions and services while generating positive net earnings.

The important integration of newly acquired Home Solutions in the group and the merger with Talkpool AB gained in attention and speed. Home Solutions moved to new modern offices in Gävle and a new CEO was identified. All together that marks the start of a new era for Home Solutions, and for Talkpool’s IoT business.

IoT solutions and services generated 22% of the total revenue in Talkpool Group during the second quarter. Most of this stem from the Home Solutions and Talkpool AB smart buildings business in the Swedish market.

In May Talkpool communicated its new Grand Master plan with the company’s revamped high-level strategy and new financial targets for the years 2021 to 2025. The plan is stating that Talkpool will develop into a leading technology provider of services for sustainable buildings and telecom sites based on smart IoT solutions. Thanks to improving market conditions, sales-focus and sustainable technology, the business is expected to grow rapidly in coming years. Talkpool set a target of 48 million Euros revenues for 2025 with a corresponding EBITDA margin of 11%-14%.

An increasing interest from German speaking investors in Talkpool lead to a decision to allow for trading of the Talkpool share on the Frankfurt Stock Exchange. Talkpool expects increased demand and elevated liquidity in its stock. No issue of new Talkpool shares is planned at this moment

Network Services

The Pakistani business has seen a turnaround during the Covid lockdown, largely due to the hiring of several new senior salespeople while increasing efficiency. Margins have improved steadily in 2021 and we expect the trend to continue based on the solid sales pipeline. Since the takeover of LCC Pakistan in 2017, sales have remained stable at around one billion PKR in local currency, but the revenue in EUR has dropped due to currency devaluations.  As a further step in Talkpool’s explicit strategy to divest business in development countries and re-focus on Europe and America, Talkpool’s Board of Directors is evaluating the divestment of Talkpool Pakistan.

In Germany the planning and construction of new cellular sites and towers for 5G was initiated. Two different major American tower companies are supporting existing Telefonica/O2 and the new fourth operator 1&1 in building their new 5G Cellular sites. The 5G network deployment in Germany will create a massive demand for services within civil works, as well as radio networks and fiber broadband networks. Talkpool has already gained from the increasing demand through existing customers and several requests for proposals from existing and new customers, which is a good indication of what is about to come. Talkpool has a long history of delivering advanced radio- and fiber network services in Germany, and the rest of the world, and we are now gearing up for the new 5G high tech system deployment in Germany. The convergence of Network Services and IoT in 5G is one of the key drivers in Talkpool’s new digitization strategy and we expect the opportunities with operators and tower companies in Germany, the rest of Europe and the US to fuel the demand for smart towers solutions and services.

The negotiations with Deutsche Telekom as well as new customers in Germany progressed well and new agreements are expected in Q3. In preparation for higher order volumes, hiring processes are ongoing and negotiations with several potential partners and subcontractors are in progress.

The 5G network expansions in the US is also creating a high demand for network expertise and services and Talkpool is in discussions with customers about reactivating its US company and supply requested services.

The 5G roll outs also continued to generate more niche work and opportunities for Camouflage in the Netherlands in designing and installing camouflaging constructions for both rooftop sites and towers. Furthermore, the tower build success continued with a total of 10 new sites for Cellnex and 3 for new customers built in Q2.

The sustainable trend to repair faulty communication equipment continued to fill our Belgian repair shop’s books with several new orders.

The Swiss headquarters received new orders from several African countries managed from Tanzania network like the modernization for Ericsson in the Seychelles and Technical consulting for Nokia in Tanzania.

IoT

Thanks to the acquisition of NPTIS/Home Solutions, and a positive development in IoT sensors and solutions sales in Talkpool AB, Talkpool’s smart buildings IoT business generated a total revenue of EUR 1.4m in Q2 which made up 22% of Talkpool’s total during the quarter. This means that we have reached a critical mass and a significant footprint in the Swedish IoT market. In a market where a global shortage of electrical components due to Covid is hampering the production and delivery capacity of many telecom and IT companies Talkpool has, thanks to well dimensioned stocks, secured all deliveries in its order books, and no bottlenecks are foreseen.

In Q2 Talkpool’s and Home Solution’s management continued to spend significant time on the integration of NPT in Talkpool and the merger of the two Swedish IoT entities. Andreas Göth was appointed new CEO for NPT and the new merged company. Andreas has long experience from the IoT business and in his latest role as the CEO for QleanAir, a company specialized in indoor air quality control, he took the company from a small Swedish operation with one product, to an international air cleaning company with presence on three continents. In Dec 2019 Andreas took QleanAir through a successful IPO on Nasdaq First North Premier Growth Market in Stockholm. We are convinced that Andreas is the right person to take Talkpool’s Swedish IoT business on a rapid growth journey and spin off the company when the time is right.

Based on positive initial results from the pilot projects in Spain and other locations, Talkpool, Redytel, Netmore and Senseair decided to form an indoor air quality alliance with the aim to provide solutions that can prevent the spread of Covid 19 and support a safe reopening of society. The projects in Spain and Sweden have so far improved the awareness and information about air quality levels and the risk of infection and actions have been taken to mitigate the risks.

In April Talkpool signed an agreement with Swedish real estate company Profi Fastigheter for the delivery of solutions for connecting smart properties and the services energy optimization, submetering and billing together with associated sensors and systems. Work is currently ongoing to connect about twenty of the company's properties in Stockholm and Gothenburg.

In Q2 the Niot deal was finalized and the migration of the Niot Network to Netmore’s network was initiated. The Netmore shares that Talkpool received when selling NIOT were sold at a higher-than-expected valuation. Talkpool originally built and owned the IoT network as there was no network available for LoRa-based IoT solutions at that time. Meanwhile, Netmore and other companies offer suitable networks, and Talkpool prefers to buy the connections from a network operator.

Grand Master Plan II

The second phase of Talkpool’s grand master plan explains how Talkpool in the years 2021 until 2025 will develop into a leading technology provider of services for sustainable buildings and telecom sites. Fueled by improving market conditions, increased sales-focus and sustainable technology, the business is expecting to grow rapidly in coming years. Talkpool sets a target of 48 million Euros revenues for 2025 with a corresponding EBITDA margin of 11%-14%.

The network services provided by Talkpool are required for connecting and managing things such as sensors, phones, and computers. Talkpool shall continue to provide network services, from planning to installation, management, optimization and repair of telecommunication sites and equipment.

Talkpool’s IoT solutions make real estate infrastructure smarter and more sustainable. The efforts are focused on buildings and telecom network sites. New technologies such as artificial intelligence shall make client infrastructure smarter and resource usage more efficient.​

The requirement for measuring and optimizing usage of natural resources such as water, energy and air is expected to grow quickly in coming years. Talkpool will increase individual metering (consumption measurement) from 50’000 homes in early 2021 to several hundred thousand of apartments and businesses in 2025 while up-selling services for:​

​Air - creating a healthier and more sustainable in-door climate​

Energy - optimising local power management including solar & batteries​

Water - reducing consumption, detecting leaks, avoiding mold, and improving quality​

The tenants and owners of buildings managed by Talkpool shall feel substantial improvements in living standards and environment. Talkpool will continue to improve its solutions while investing in additional sales resources to reach double-digit organic growth.​

In addition to developing own solutions for buildings and telecom sites, Talkpool will integrate products and solutions made by other companies. We will come up with solutions to client problems, from design to integration of the different IoT building blocks. We will provide financed end-to-end solutions that allow our clients to charge for their service rather than selling the product.​

In short, we will:

• Make buildings and networks greener, healthier, and more efficient by using internet technology​

• Strengthen existing markets, mainly in Europe, by up-selling proven products​

We will enter a phase of rapid growth and increased transparency fueled by sustainable technology and environmental awareness. We plan to increase profit margins while growing fast and outperform markets as a listed company. We believe in thinking differently and challenging the status quo. We are building a green organization that will help clients make better decisions based on real-time data.

Targets for year 2025

Of total 25 million Euros (m€) revenues in 2021, the network business is expected to generate 80% (20m€) and the building business is expected to reach 20% (5m€). Talkpool forecasts faster growth for the buildings business in coming years, but networks continue being largest business throughout 2025. Much of Talkpool’s business is recurring and the company is striving to further increase recurring revenues.

 
The industry outlook until 2025 is favorable. Smart building technology implementation is expected to speed up in coming years driven by increased environmental focus, technology advances and more sustainable handling of natural resources. The network industry is resurging from decades of price pressure with increased geopolitical interest in networks and new digitisation technology such as 5G and fiber.

Talkpool has a history of building mobile telecommunication networks in many countries all around the world. Europe is becoming increasingly important to Talkpool, and the European markets are expected to surpass 50% of Talkpool’s overall revenues in 2022. As hub for the smart building IoT business, Sweden expects a combination of in-country growth accompanied by exporting smart buildings technology to other markets, partly though in-house sales in markets and partly through integrators. Germany has the highest growth potential and profit margin forecast based on high demand for digitisation of German infrastructure. Benelux has established an efficient franchise in several niches and has recently launched a “sandy grounds” network tower innovation. Other markets, managed from Talkpool’s headquarters, are expected to almost double from 2021 until 2025. We expect moderate growth in the Middle East, driven by providing Pakistani resources to other countries, mainly Saudi Arabia.

Most of Talkpool’s growth is expected to be organic, but further acquisitions are part of the strategy. Acquisitions of network companies are possible, but acquisition efforts are mainly focused on smart building companies. Metering companies that measure consumption of water and electricity in Talkpool’s markets represent potential acquisition targets. Technology companies specialising on either air, water or electricity are also in Talkpool’s acquisition strategy. In this context, Talkpool will focus on businesses with proven technology that can be sold as a service to existing clients. Finally, Talkpool commits to expanding its number of metering clients from fifty thousand in year 2021 to several hundred thousand by 2025.

 
2nd Quarter 2021

The civil unrest in Haiti, that started in spring, escalated as Haitian president Moïse was assassinated on July 7. The massive earthquake, reaching 7,2 on the Richter scale, and the recent tropical storms put the Haitian people and Digicel’s communication infrastructure to the test.  During more than 15 years Talkpool has supported Digicel Haiti through many difficult times and we will continue standing by their side and support them and the Haitian people with the recovery and restoration of the vital communication infrastructure this time as well. We have done it several times before and we will do it again.  Immediately after the earthquake Talkpool’s hardworking staff managed to restore the network in the south in only two days. When the storm hit again, we mobilized our teams a second time and they are still out there fighting when this is being written. Haiti is still one of Talkpool’s most important markets and we have no intentions to exit this market.

Despite COVID lockdowns and a hard hit on the Pakistani rupee Talkpool’s Pakistani business unit currently operating as LCC Pakistan is showing good progress with its recent business wins. The company has after the Covid lockdown managed a turn around and business has gained momentum, mainly by hiring several new senior sales staff while increasing efficiency. In competition with several strong competitors, Talkpool in Pakistan has signed a network testing contract with one of the largest mobile network operators in the country worth around EUR 700,000 per year. Talkpool has also won a major contract for the installation of network devices with a device manufacturer worth EUR 200,000. In addition, Talkpool has won digitization orders worth EUR 100,000, which will be ramped up in August 2021. In addition, Talkpool Pakistan is running several tests on digitization solutions which, if successful, can lead to major orders before the end of the year.

In August Talkpool Germany has won new framework agreements for network planning and documentation, worth EUR 1.025 million. The term extends into the 3rd quarter of 2023. Talkpool is thus further expanding its market presence and range of services in Germany. This now extends far beyond the planning and documentation of classic copper cable house connections to network planning and documentation of fiber optic house connections for private households, schools, offices and 5G sites.

The market driver of this positive development is the advancing digitization of the economy and the energy industry, as well as the pandemic side effects of Corona. Home office, which has been introduced in many places, has led to an immense increase in bandwidth requirements for video conferencing, secure remote access to company resources and homeschooling. There is currently no sign of an end to this development.

For more information, please contact:

Erik Strömstedt, CEO Talkpool
Tel: +41 81 250 2020
erik.stromstedt@talkpool.com

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. Talkpool offers end-to-end IoT solutions for smart buildings and cities with focus on environmental control, energy saving and damage prevention. Erik Penser Bank, +46 8 463 80 00, www.penser.se, is Talkpool's Certified Advisor. For more information 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 August 25, 2021

Tags: