INTERIM REPORT JANUARY JUNE 2017 - talkpool.comtalkpool.com/wp-content/uploads/2018/01/q2-en.pdf · agile business model, Talkpool offers global telecom ... Camouflage almost doubled

APR 1st – JUNE 30

th 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 30

th 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

INTERIM REPORT JANUARY – JUNE 2017

TALKPOOL INTERIM REPORT JANUARY-JUNE 2017 2

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.

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 strengthen 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 start in 2017 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

3.4 Net sales, MEUR

24% Gross margin

2.5% EBITDA margin


FINANCIAL DEVELOPMENT KEY FIGURES

EUR Q2'17 Q2'16 H1'17 H1'16 FY'16

Sales, € thousand 3 441 2 653 6 896 5 109 11 571

Sales growth in % 29,7% 2,3% 35,0% 5,8% 11,8%

Gross profit, € thousand 840 563 1 510 1 114 2 142

Gross margin 24,4% 21,2% 21,9% 21,8% 18,5%

EBITDA, € thousand 86 -9 -44 75 -364

EBITDA margin 2,5% -0,3% -0,6% 1,5% -3,1%

EBIT, € thousand 67 -20 -80 55 -409

EBIT margin 2,0% -0,8% -1,2% 1,1% -3,5%

NET SALES

April - June

Net sales increased with 30 percent to EUR 3 441 thousand (2 653) compared to the same period last year. Camouflage, acquired in Q4 2016, and Technetix, acquired in Q1 2017, contributed with revenue of EUR 752 thousand. Excluding Camouflage and Technetix, revenue growth amounted to 1.3 percent. The business in Germany related to Deutsch Telecom gained speed in Q2 contributing to a revenue growth of approx. EUR 194 thousand. Haiti continued to deliver stable and reliable revenue.

January - June

For the first half-year 2017 net sales amounted to EUR 6 896 thousand corresponding to an increase of 35 percent compared to last year. Camouflage and Technetix contributed with revenue of EUR 1 338 thousand but also revenue from new contracts in existing business contribute to this growth.

EBITDA AND EBIT

April - June

For Q2 2017 EBITDA is positive with EUR 86 thousand, equivalent to an EBITDA margin of 2.5 percent, compared to an EBITDA of EUR -129 thousand in Q1. This is mainly explained by higher gross profit and an improved gross margin. The newly acquired companies, Camouflage and Technetix, have shown strong gross margins of over 30 percent. Loss making markets Mexico and Germany both reached break even at the end of Q2. EBIT for Q2 was EUR 67 thousand with an EBIT margin of 2.0 percent.

January - June

The EBITDA was EUR -44 thousand for H1 2017, with an EBITDA margin of -1.2 percent.

NET PROFIT/LOSS

April - June

In Q2 2017 the net loss amounted to EUR -116 thousand, mainly caused by higher financial costs and income tax expense. The increase in financial costs is explained by higher exchange losses on cash and bank accounts. The group inter-company loans in USD are revalued at the end of the period, according to applied accounting principles. These valuation differences are mainly unrealized and hence not affecting cash flow.

January - June

For H1 2017 the net loss amounted to EUR -305 thousand.


FINANCIAL POSITION AND CASH FLOW

KEY FIGURES

Q2'17 Q2'16 H1'17 H1'16 FY'16

Solidity 4,5% 32,5% 4,5% 32,5% 21,8%

Adjusted solidity* 19,4% 34,9% 19,4% 34,9% 31,7%

Return on equity -41,6% -4,8% -100,7% -3,7% -52,0%

Net cash/debt, € thousand -1 065 466 -1 065 466 -748

Operating cash flow, € thousand 158 51 167 72 -1 337

BALANCE SHEET AND FINANCIAL POSITION

30 June 2017

As of 30 June 2017 the net debt amounted to EUR -1 065 thousand, with cash amounting to EUR 1 779 thousand (1 626). Guarantor loans amounting to EUR 1 176 thousand, short-term, and an additional loan of EUR 457 thousand, long-term, have increased the net debt. The credit facility decreased in Q2 2017, from EUR -210 thousand as per 31 December 2016 to EUR -84 thousand. The solidity amounts to 4.5 percent as per 30 June 2017, a decrease compared to 31 December 2016. The solidity calculated based on adjusted total assets and equity, as if goodwill was capitalized and amortized, amounts to 19.4 percent.

CASH FLOW AND INVESTMENTS

April - June

The cash flow from operating activities was positive by EUR 158 thousand, despite a negative result for Q2. This is explained by a positive change in working capital for the quarter. During Q2 2017 parts of the outstanding purchase consideration for Camouflage and Technetix, were paid, in total EUR 233 thousand. The total cash flow for Q2 2017 was positive by EUR 1 322 thousand mainly due to increase in borrowings.

January - June

As per 30 June 2017 the operating cash flow was positive by EUR 167 thousand and the total cash flow positive by EUR 1 292 thousand. The change in working capital was positive for the H1 2017. Investing activities mainly relates to purchase consideration paid for Technetix (net of cash taken over) and for Camouflage (booked as liability in 2016). The borrowings increased with EUR 1 629 thousand.


OTHER DISCLOSURES

ACCOUNTING PRINCIPLES

The consolidated interim report is based on uniform accounting principles for all group companies. The parent company, Talkpool AG, is a Swiss company and is governed by Swiss law and accounting principles. The consolidated interim report has been prepared in compliance with the Swiss Code of Obligations (Art. 957 to 963b CO). As per 31 December 2016, the group changed its goodwill accounting from capitalization and amortization to offsetting against equity. The figures from previous quarters have been restated and adjusted accordingly. The effects of the theoretical capitalization and amortization, including any impairment from valuation assessments are shown in section “Change in accounting principle”. For further information regarding applied accounting principles please refer to page 24-27 in the Talkpool annual report 2016.

RISKS

For information regarding risks please refer to page 10-13 in the Talkpool annual report 2016.

EMPLOYEES

At June 30, the number of staff was 247 (249).

SIGNIFICANT EVENTS AFTER THE PERIOD

No significant events after the period.

CERTIFIED ADVISOR

Remium Nordic AB is Talkpool’s Certified Advisor.

AUDITOR’S REVIEW

This interim report has not been audited by the company’s auditors. Chur, 30 June 2017 Erik Strömstedt, CEO, Talkpool AG


SUMMARY OF FINANCIAL REPORTS

CONSOLIDATED INCOME STATEMENT

Apr-Jun Jan-Jun Jan-Dec

EUR 2017 2016 2017 2016 2016

Net revenue from goods and services 3 441 124 2 652 912 6 896 323 5 108 570 11 571 073

Cost of sales -2 601 153 -2 089 479 -5 386 405 -3 994 296 -9 428 625

Gross profit 839 971 563 433 1 509 918 1 114 274 2 142 449

Selling expenses -26 104 -43 597 -56 865 -73 042 -327 454

Administrative expenses -649 247 -578 599 -1 333 878 -1 058 223 -2 261 847

Other operating income & expenses -97 337 38 610 -199 094 72 452 38 250

Operating result 67 283 -20 152 -79 919 55 461 -408 602

Financial net -143 307 -80 989 -195 878 -140 815 -261 448

Profit/loss before income taxes -76 024 -101 141 -275 797 -85 354 -670 050

Income taxes -40 321 17 159 -28 803 19 561 5 717

Net profit/loss -116 344 -83 982 -304 600 -65 793 -664 333

Net income attributable to:

Stockholders of the parent company -144 700 -79 356 -350 528 -61 167 -693 445

Minority interests 28 356 -4 626 45 927 -4 626 29 112

Other information

Average number of shares 2 992 222 2 407 582 2 992 222 1 589 061 2 224 566

Earnings per share (no dilutive effects) -0,05 -0,03 -0,12 -0,04 -0,31

Number of shares, end of period 2 992 222 2 770 000 2 992 222 2 770 000 2 992 222

Earnings per share (no dilutive effects) -0,05 -0,03 -0,12 -0,02 -0,23

As per 31 December 2016, goodwill acquired is no longer capitalized and depreciated, but offset against equity. The figures from previous quarters have been restated and adjusted accordingly. For the effects of the change in accounting principle, please see “Change of accounting principle”.

The registered number of shares at the beginning and the end of the period was 2 992 000.


CONSOLIDATED BALANCE SHEET

June 30 December 31

EUR 2017 2016 2016

ASSETS

Current assets

Cash 1 778 950 1 626 415 486 928

Trade receivables 1 985 004 929 571 2 394 658

Other short-term receivables 521 510 382 045 476 926

Inventories and unvoiced services 2 077 355 1 180 836 1 636 393

Prepayments and accrued income 312 306 279 805 167 061

Total current assets 6 675 125 4 398 672 5 161 965

Non-current assets

Financial assets 628 447 517 895 580 568

Investments in associates and joint venture 85 259 6 790 107 633

Property, plant and equipment 265 978 189 379 253 307

Total non-current assets 979 684 714 064 941 509

TOTAL ASSETS 7 654 809 5 112 736 6 103 474

LIABILITIES AND EQUITY

Current liabilities

Trade payables 1 852 518 1 069 525 1 842 160

Short-term interest-bearing liabilities 1 315 844 332 049 210 024

Other short-term liabilities 840 838 464 095 559 676

Accrued liabilities and deferred income 1 664 090 668 443 1 046 501

Total current liabilities 5 673 290 2 534 112 3 658 360

Non-current liabilities

Long-term interest-bearing liabilities 1 528 080 921 508 1 051 331

Total non-current liabilities 1 528 080 921 508 1 051 331

Total liabilities 7 201 370 3 455 620 4 709 691

Equity

Stockholders' equtiy 348 228 1 661 996 1 332 398

Minority interest in equity of subsidiaries 105 211 -4 880 61 385

Total equity 453 439 1 657 116 1 393 783

TOTAL LIABILITIES AND EQUITY 7 654 809 5 112 736 6 103 474



CONSOLIDATED CASH FLOW STATEMENT


EUR 2017 2016 2017 2016 2016

Operating activities

Net profit/loss -116 344 -83 982 -304 600 -65 793 -664 333

+/– adjustment for items not affecting cash flow

93 956 11 392 139 275 19 585 117 539

+/– increase/decrease of working capital 179 891 124 066 332 649 118 159 -790 127

Net cash flow from operating activities 157 503 51 476 167 324 71 951 -1 336 921

Investing activities

– purchase of property, plant and equipment

-26 654 -81 515 -58 415 -104 073 -175 344

+/– inflow/outflow from change of financial assets

-36 035 - -110 792 - -186 806

– acquisition of subsidiaries (added cash taken over)

-232 570 - -308 436 - -508 475

Net cash flow from investing activities -295 259 -81 515 -477 643 -104 073 -870 625

Financing activities

+ net proceeds from rights issue - 847 613 - 847 613 1 817 006

+/– issuance/repayment of interest-bearing liabilities

1 485 489 51 280 1 629 208 207 761 289 398

Net cash flow from financing activities 1 485 489 898 893 1 629 208 1 055 374 2 106 404

Currency translation effects -26 097 26 387 -26 866 7 748 -7 346

Net change in cash 1 321 636 895 241 1 292 023 1 031 000 -108 488

Cash, beginning of period 457 314 731 174 486 928 595 415 595 415

Cash, end of period 1 778 950 1 626 415 1 778 950 1 626 415 486 927



CHANGES IN EQUITY

EUR

Share capital

Capital reserves

Cumulative foreign

translation adjustment

Retained earnings

Goodwill recognized

Total equity

excl. minority interests

Share of minority interests

Total equity

incl. minority interests

Jan 1, 2016 71 645 158 601 428 660 440 425 -307 093 792 238 - 792 238

Share issue, 24 May 25 652 821 961 - - - 847 613 - 847 613

Net profit/loss - - - -61 167 - -61 167 -4 626 -65 793

Transactions with minority - - - - - - -254 -254

Foreign currency differences - - 83 311 - - 83 311 - 83 311

Jun 30, 2016 97 297 980 562 511 971 379 258 -307 093 1 661 995 -4 880 1 657 115

Jan 1, 2017 107 553 1 939 699 483 705 -253 020 -945 540 1 332 398 61 385 1 393 782

Net profit/loss - - - -350 528 - -350 528 45 927 -304 600

Transactions with minority - - - - - 0 - 0

Goodwill recognized in equity - - - - -662 087 -662 087 - -662 087

Foreign currency differences - - 28 446 - - 28 446 -2 102 26 344

Jun 30, 2017 107 553 1 939 699 512 151 -603 547 -1 607 627 348 229 105 210 453 439



SALES BY COUNTRY


EUR 2017 2016 2017 2016 2016

Haiti 1 310 419 1 581 708 2 740 137 3 089 907 6 333 441

Benelux 752 239 - 1 338 293 - 96 868

Germany 401 583 206 757 751 910 445 464 1 394 592

Mauritius 252 869 204 421 647 135 204 421 1 170 970

Tanzania 251 632 360 655 605 999 708 943 1 166 369

Uganda 137 505 139 150 255 872 273 320 726 138

Botswana 40 424 82 921 190 820 156 029 292 144

Mexico 97 413 42 288 123 226 44 777 89 892

Kenya 8 275 10 939 8 275 161 636 162 918

Other 188 765 24 073 234 656 24 073 137 739

Total net sales by country 3 441 124 2 652 912 6 896 323 5 108 570 11 571 073

Currently the performance of the group is monitored on a country and region basis. The Board of Directors and management assess the business performance from a geographical point of view based on the country of each business operation, independent on legal entities. These segments are the basis of strategic decisions.

CHANGE OF ACCOUNTING PRINCIPLE From 2016, and with previous years restated and adjusted, goodwill is recognized directly in equity at the time of purchase of a subsidiary or an investment in an associated company. The theoretical capitalization of goodwill, based on a useful life of 5 years, would have the following impact on equity and net income:

IMPACT ON INCOME STATEMENT

Apr-Jun Jan-Jun Full-year

EUR 2017 2016 2017 2016 2016

Operating result (EBIT), per income statement 67 283 -20 152 -79 919 55 461 -408 602

EBIT margin, % 2,0% -0,8% -1,2% 1,1% -3,5%

Theoretical amortization of goodwill -78 905 -13 873 -158 946 -28 860 -81 062

Theoretical EBIT after goodwill amortization -11 622 -34 026 -238 866 26 601 -489 664

EBIT margin after goodwill amortization, % -0,3% -1,3% -3,5% 0,5% -4,2%

Net profit/loss, per income statement -116 344 -83 982 -304 600 -65 793 -664 333

Theoretical amortization of goodwill -78 905 -13 873 -158 946 -28 860 -81 062

Theoretical net profit/(loss) after goodwill amortization

-195 250 -97 856 -463 547 -94 653 -745 395


IMPACT ON BALANCE SHEET

June 30 December 31

EUR 2017 2016 2016

Equity as per balance sheet 453 439 1 657 116 1 393 783

Theoretical capitalization of net book value of goodwill 1 275 176 194 758 787 116

Theoretical equity including net book value of goodwill 1 728 615 1 851 873 2 180 899

DEFINITION OF KEY INDICATORS Earnings per share Period net profit/loss in relation to average number of shares for the period EBITDA Earnings Before Interest Tax Depreciation and Amortization EBIT Earnings Before Interest and Tax Solidity Equity in percentage of total assets Return on equity Net profit/loss in relation to equity Net cash/debt Net of interest-bearing liabilities minus cash and bank, excluding tax

receivables/liabilities


FOR FURTHER INFORMATION, PLEASE CONTACT: Erik Strömstedt, CEO Telephone: +41 79 790 60 40 [email protected] Hanna Rubensson, CFO Telephone: +46 73 140 48 40 [email protected]

TALKPOOL Gäuggelistrasse 7 Telephone: +41 81 250 20 20 CH-7000 Chur Mail: [email protected] Switzerland Web: www.Talkpool.com

CALENDAR

Interim report January-September 2017 30 November 2017 Year-end report January-December 2017 30 March 2018

Documents

INTERIM REPORT JANUARY JUNE 2017 - talkpool.comtalkpool.com/wp-content/uploads/2018/01/q2-en.pdf · agile business model, Talkpool offers global telecom ... Camouflage almost doubled