Talkpool Interim report January – June 2017

APR 1st – JUNE 30th 2017

• Net sales amounted to EUR 3 441 thousand (2 653), a 29.7 percent increase

• EBITDA of EUR 86 thousand (-9) and EBITDA margin of 2.5 percent (-0.3)

• EBIT of EUR 67 thousand (-20) and EBIT margin 2.0 percent (-0.8)

• Loss after tax of EUR -116 thousand (84).

• Cash flow from operating activities amounted to EUR 158 thousand (51)

JAN 1st – JUNE 30th 2017

• Net sales amounted to EUR 6 896 thousand (5 109), a 35.0 percent increase

• EBITDA of EUR -44 thousand (75) and EBITDA margin of -0.6 percent (1.5)

• EBIT of EUR -80 thousand (55) and EBIT margin -1.2 percent (1.1)

• Loss after tax of EUR -305 thousand (-65).

• Cash flow from operating activities amounted to EUR 167 thousand (72)

APRIL - JUNE HIGHLIGHTS

• Talkpool acquired LCC Pakistan with 1,000 employees and EBITDA of around EUR 1.5 million

• Talkpool’s Group EBITDA went from an operative loss of EUR -130 thousand in Q1 2017 to a profit of EUR 86 thousand in Q2 2017

• Talkpool’s new growth-through-M&A Strategy proved successful as the newly acquired companies Camouflage and Technetix contributed significantly to the positive financial development

• European network operators such as Deutsche Telekom, Belgacom, Vodafone and Orange became the fastest growing client segment for TalkPool

• TalkPool became a Deutsche Telekom entrusted partner for FTTH projects in eastern Germany

• Talkpool Mexico’s investments in staff hiring, training and tools paid off as the company reached break even

• Talkpool AG and Sigren Engineering AG were awarded an IoT smart building assignment for real estate in Zürich

CEO COMMENTS

The positive Q2 report comes as no surprise. The positive trends in terms of revenue, profits and cashflow continue. Talkpool reports an EBITDA profit (of EUR 86 thousand) for the first time since its IPO. The newly acquired companies Camouflage and Technetix are developing well at the same time as Talkpool continues its positive organic development.

The revenue growth continues and many of our markets developed well, with additional contracts and increasing orders. In addition to the positive organic development of our business, the newly acquired companies Camouflage and Technetix performed well in Q2. Camouflage almost doubled revenues from Q1 to Q2 and more than six-folded its profit. Camouflage was in the closing phase of an important operation & maintenance contract in June. It is a long term contract, similar to the one in Haiti, with recurring orders and a revenue stream that is valuable for the financial stability and growth of the company. Technetix in Belgium continued with solid revenue in Q2, in line with Q1, and managed to more than double the profit compared to Q1. The positive order trend from European network operators such as Deutsche Telekom, Belgacom, Vodafone and Orange continued in Q2. 

Growth through M&A

The acquisition of LCC in Pakistan that has 1,000 employees and EBITDA of around EUR 1.5 million for latest financial year, is a significant event in Talkpool’s history and a giant leap in the company’s growth development. After consolidating LCC into the Group, we are expecting to double revenues, improve EBITDA margins and reach a positivestrengthen our operative cashflow. We’re planning to develop LCC Pakistan into the company hub for the Middle East.

The LCC acquisition accelerates 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.

Growth through M&A has turned out successful with the first two acquisitions of Technetix and Camouflage. In addition to the significant financial contribution those acquisitions also add new knowledge, customer segments and geographical regions to Talkpool Group. The added value will become even more obvious as LCC Pakistan is added to the group. Furthermore, know- how is also being gained by analzying the market and the different acquisition target companies. Based on this success we will continue on our acquisition path for both network services and IoT.

Organic growth in many regions

Talkpool Mexico had a slow startofin2017 Q1 with very little project activities due to a combination of seasonality and the Trump effect, but in Q2 the market started moving again and Talkpool Mexico’s investments in staff hiring, training and tools started to pay off.

Our activities in Germany also continued to gain speed in Q2. Talkpool is now an established provider of broadband network design and project management services to Deutsche Telekom in the big government-sponsored fiber build-out in Germany. The federal government in Germany plans to roll out a gigabit internet service across the country by 2025. The EUR 100 billion project will focus on bandwidth, security and response times. The development, including virtual reality and the internet of things, will bring huge data growth and the need for more bandwidth, reliable real-time transmission and intelligent networks.

Haiti and Tanzania continued to deliver stable and reliable revenue and profits and the outlook is good in both countries. Digicel in the Caribbean issued a request for quotation for the operation and maintenance in Haiti and other major markets in the region and Talkpool is very well positioned to extend the contract for the existing region and expand into new areas.

IoT

Talkpool AG and Sigren Engineering AG were awarded an IoT smart building assignment for real estate in Zürich, Switzerland that hosts a large search engine company and other prime tenants. The project is considered strategically important. The sales of Talkpool´s IoT temperature and humidity sensors continued to develop very well and the new partner contract with Avnet Silica will contribute very positively to this trend.

The IoT market has not developed as expected and until now we have not had any major break through although we are well positioned in the market and have many good customer relations and prospects. We will continue investing in in-house R&D and organic growth, in particular in the key verticals Smart Building and Environmental Supervision. Based on the successful acquisitions in the Network Services area we think that growth through M&A is the way forward in the area of IoT as well and Talkpool is looking at interesting targets. 

Continuous efforts improve profitability

Talkpool managed to generate a net sales growth from EUR 2 653 thousand in Q2 2016 to EUR 3 441 thousand in Q2 2017 which corresponds to a of 29,7 percent increase. The large increase is mainly explained by the acquisition of Camouflage and Technetix, contributing with net sales in profitable niche network services areas of approximately EUR 752 thousand in Q2 2017. In addition to this, the investments made to fuel the growth in Mexico and Germany showed result and revenue continued to steadily increase throughout the quarter.

Thanks to reductions in cost of sales, Talkpool increased the gross profit with approximately 25 percent compared to Q1 2017 and 49 percent compared to Q2 2016. The focused and conscious efforts to reduce SG&A costs continued to bear fruit in Q2. In spite of being in the middle of Talkpool’s biggest acquisition ever, we managed to reduce the SG&A costs with another 6.5 percent in Q2 compared to Q1.

In Q2 2017 EBITDA turned positive with EUR 86 thousand compared to an EBITDA of EUR -129 thousand in Q1. This is mainly explained by lower costs of sales and SG&A costs. The newly acquired companies, Camouflage and Technetix, even reached gross margins of over 30 percent. Also the previously loss making growth markets Mexico and Germany both left “the red zone” and reached break even at the end of Q2. EBIT for the group in Q2 reached EUR 67 thousand. Although EBITDA and cashflow turned positive in Q2, net earnings remained below zero. The net loss amounted to EUR -116 thousand mainly due to unusually high exchange losses on cash and bank accounts. The cash flow from operating activities was positive despite a negative result for Q2 and the total cash flow for Q2 2017 was positive by EUR 1 322 thousand mainly due to increase in borrowings.

Q3 started off well as Camouflage signed the important operation & maintenance contract and Talkpool and its partners were awarded the prestigiuos IoT project for environmental monitoring in West Sweden where Talkpool will have a prominent role.

Erik Strömstedt, CEO

 
 
 
 
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This information is such information as TalkPool is required to disclose under the EU Market Abuse Regulation and the Securities Market Act. The information was provided by the contact person below for publication on 16 august 2017 at 13:30 CET.

THIS IS TALKPOOL 
Talkpool builds, maintains and improves telecommunication networks 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.

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