Economics & trade
Talkpool Year-End Report January - December 2022
Oct1st – Dec 31st, 2022
Jan 1st – Dec 31st, 2022
October - December key developments
- All-time high quarterly Group Revenue of EUR 6 786 thousand
- All-time high quarterly Group Net Earnings of EUR 1 324 thousand
- Nordic Proptech all-time high revenue of EUR 1 790 thousand
- Talkpool Germany all-time high revenue of EUR 920 thousand
- Full repayment of the Nord SEK 24 million Bond loan
- Repayment of loans with NPTIS shares generated EUR 900 thousand profit
- Sale of Talkpool Netherlands with a total ROI of 320%
- Total debt reductions of EUR 3 500 thousand
- Total extraordinary gains of EUR 1 300 thousand
- Total yearly interest cost reductions of EUR 500 thousand
- Focus on debt reduction and financing through asset realization
- Talkpool Pakistan overachieved revenue and earnings budgets
The fourth quarter of 2022 was one of the most important in Talkpool’s history. Not only can Talkpool report an all-time high group revenue of EUR 6 786 thousand. The company also has the pleasure to report a net profit of EUR 1 324 thousand, which is by far the highest quarterly profit in Talkpool’s history. The unaudited annual accounts show an all-time high revenue of EUR 25 478 and a net profit of EUR 986 thousand which is also an all-time high, and the first full year consolidated net profit after tax since Talkpool’s IPO.
Even more importantly, Talkpool made a giant leap in reducing debt and securing financing. Financial costs were also reduced significantly when costly loans where repaid and substantial gains were achieved as assets were realised.
In October Talkpool AG signed a share purchase agreement for the sale of its shares in Talkpool Netherlands. Talkpool acquired the Dutch company, specialized in camouflaging mobile antenna sites, in October 2016 and developed the business towards tower and mobiles site implementation and maintenance services. In 2021 the revenue had grown from EUR 900 thousand in 2016 to EUR 3 730 thousand with 11% EBITDA. The transaction had a value of about EUR 1 300 thousand, which makes Talkpool’s return on investment, including sales and operational profits since the acquisition exceed 320%. Talkpool AG used the proceeds partially to repay loans and partially to provide working capital.
In December Talkpool AG paid back the outstanding bond loan of SEK 24 000 thousand plus interest to Nord in good order. Talkpool performed a cash payment of SEK 7 million, that equals slightly more than half of the payment Talkpool AG received from management buyouts in the Netherlands and Tanzania. The remaining amount was repaid in Nordic Prop Tech Investment Services shares at a post-value of SEK 86.3 million.
In total annual costs were reduced by approximately 1.0 million Euros while loans amounting to approximately 3.0 million were repaid to the lenders and assets worth of 3.8 million Euros were sold.
These transactions were a first step in Talkpool’s medium-term strategy to deleverage and concentrate on growth areas which offer an attractive bottom line. The extraordinary events also contribute to strengthening the year-end balance sheet and profit/loss account.
Despite the slowdown of the global economy, Talkpool AG continued to receive sizable requests for services and orders from the USA and Germany, which see a significant demand in 5G and Glass Fibre services.
Talkpool intends to maximise cashflow through further cost-cuts, continuing amortizing loans and rejecting cashflow-negative projects.
The mentioned asset sales combined with the focus on cash and profit margins lead to lower growth going forward. Talkpool’s shareholding in the Swedish business with its technology and growing recurring revenues was reduced to approximately 19% in Q4.
Some of the missing top-line will be compensated by rapid growth in the German network planning business, which had over 60% organic growth of revenue and staff in 2022. Investments in recruitment, staff competence development and software tools to increase the fibre network planning capacity and quality were done without service delivery interruption or earnings reduction. On the contrary operational costs were reduced through reorganisation and outsourcing. The underlying market demand for broadband network services in Germany continued to grow and hence the potential for a continued stable and profitable growth for Talkpool with current and future customers is high.
Pakistan is the world's fifth-most populous country, with a population of almost 243 million people. Talkpool’s Pakistan operations has continued to operate with high service quality, strengthening its position as Pakistan’s market leader in telecom network services while generating similar or higher profit margins compared to previous years. In Q4 Talkpool Pakistan overperformed its targets despite the political and financial challenges in country.
An SPA for the sale of Talkpool’s shareholding in Pakistan and Saudi Arabia was signed in Q1, but later not honoured by the buyer, ZT Group. Due to the challenges with the sale of the Pakistani entity, we started a process of finding buyers for alternative valuable assets to deleverage the balance sheet of Talkpool AG. Having succeeded with that, we will now revisit the idea of selling the shareholding in Pakistan.
The proceeds will be used to fuel a new growth phase in Talkpool Group with investments in organic growth as well as acquisitions of communication high tech companies, primarily in Europe and the USA. If a sale can be achieved before August 1, Talkpool is considering using its option to buy back shares in Nordic Proptech in Sweden.
The growth pace in the USA was lowered when the expected proceeds from the sale in Pakistan did not materialise. Ongoing projects continued whereas the mobilisation of resources for new projects was held back. We built relations to several new customer accounts in the USA throughout the year, and we will take care of strategic and profitable opportunities as far as the financing capacity admits.
In addition to the sale of shareholdings in Talkpool Netherlands and Nordic Proptech, with the purpose to realize valuable assets, the planned divestment of non-strategic businesses in development countries continued.
The high inflation continued to create challenges in several countries. High energy prices are increasing the operational costs for Talkpool and its customers, but it is also creating new opportunities for energy saving solutions for real estate owners, telecom operators and tower companies.
The IoT solutions sales in Sweden soared in the fourth quarter and revenue reached an all-time high of
EUR 1 910 thousand as the demand for Nordic Proptech’s energy saving solutions and electrical car charging stations increased.
The primary market driving use cases are still submetering in real estate and smart metering by utility companies. Using smart meters for these applications allows for strengthened control of water management systems, including the detection of leakages and the invoicing service.
The sale of the energy optimization solution, developed together with AI partner Myrspoven, gained speed again also outside of the Nordic countries. Promising discussions with interesting customers made good progress.
Outside of Sweden Talkpool’s market units, on the US and European markets, were pursuing local IoT opportunities and initial smaller orders started materialising.
1st Quarter 2023
In January a 2-year convertible loan with 8% annual interest rate and an option to convert the loan to shares at SEK 6 per share valuation was launched. Four convertible loan contracts, totalling approximately EUR 430 thousand were signed in February and the funds have been fully received. Talkpool’s Chairman Magnus Sparrholm and CEO Erik Strömstedt contributed with more than half of the loan amount. The received cash from the convertible loan will mainly be used to amortize other loans according to existing agreements.
In March Talkpool AG signed an agreement to pay back a convertible loan of EUR 700 thousand plus interest to Matthias Winter. The whole amount will be repaid in Nordic Prop Tech Investment Services shares at a post-value of SEK 86.3 million. This transaction reduces the remaining debts and financial costs of Talkpool significantly and generates a capital gain of EUR 218 thousand.
After a period of focus on deleveraging and strengthening the company financially, the management and the board of Talkpool are now looking ahead, creating the strategy for an exciting future for Talkpool. See you there!