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The quarter in brief
Jul 1st - Sep 30th Jan 1st - Sep 30th 2023
This information is inside information that Talkpool AG 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 Friday the 17th of November 2023.
This is Talkpool
Talkpool has discontinued its growth path by selling and closing many businesses. The company has discontinued its pioneering role in Internet of Things (IoT) and its attempt to develop its own software and hardware. Instead, Talkpool intends to partner with Original Equipment Manufacturers to distribute, integrate and maintain technology that enhances telecommunication infrastructure.
Talkpool has global geographical reach and experience, but it has reduced its geographical focus to western Europe. Competences include network planning, project management, optimization and maintenance of fixed and mobile telecom networks. After a turnaround period that has taken several years, a smaller, more focused and profitable business is now emerging.
CEO Comments
23 years after founding Talkpool, I now get a chance to write my first CEO comments
Before leaving for summer holidays to Käringön, I was informed that our business in Belgium had stabilised. Our KBC account manager confirmed that our credit lines were intact and would stay open. Contrary to made agreements, KBC closed all our bank accounts without any warning in July. This made it impossible for our clients to pay us and we couldn't pay our employees. This triggered an unnecesary alleged bankruptcy. I believe the bankruptcy process hasn't been finalised, but Talkpool has written off all assets in Belgium; I believe approximately EUR 300 thousand in Q3 after having written of the same amount at the end of last year.
The negative extraordinary impact from the presumed bankruptcy in Belgium has been fully compencated by a equally large positive extraordinary impact in Q3 from a part of the USD 220 thousand settlement that was signed and initiated in Q3 and that is expected to be finalised before the end of the year.
My dream of making Talkpool into a technology powerhouse that makes buildings smart came to an end when the majority stake in Nordic Propeye was sold during the past year. The option to repurchase the Swedish shares expired on the 1st of August 2023.
Talkpool has within a year reduced its net debt by approximately EUR 4 million, from over EUR 6 million in mid-2022 to EUR 2.1 million in mid-2023. I believe Talkpool will be able to amortize all debt before the end of next year. It's healthy to keep some debt, and the cashflow pressure resulting from the amortizations is hurting operations, so I prefer to stop short from reducing dept to zero.
Talkpool has three main companies; the headquarters based in Switzerland's oldest city Chur, the reliable German business is based in the lovely eastern city Leipzig and the Pakistani business based at the foot of Kharakorum (Himalaya), about 300km southwest from the world's second highest mountain. Whereas the German and Swiss businesses are closely intertwined, the Pakistani entity is entirely stand-alone.
The country of Pakistan is in the midst of a severe financial crisis. Talkpool's cash-strapped headquarters with an anorectic management structure offers almost no support to the Pakistani business and it's not allowed to pay cash out from Pakistan. As the largest and most solid network services provider in Pakistan, we've been more relilient than our competitors, but the PKR currency deflation, fuel price hike and import stop has resulted in much reduced operational profits.
Nevertheless, the Pakistani company expects to generate a modest net profit this year while repaying most of its debt and starting a new high-tech business involving artificial intelligence and drones. After selling Swedish (Nordic Propeye) shares at a valuation over twice Talkpool's traded valuation, I'm now trying to sell Pakistani shares at a valuation of almost twice that of Talkpool.
I'm impressed by the efficiency mastered by our German management, project managers, planners and administration. The German board has decided to hire a German manager and to start an innovation initiative to grow and strengthen this important German business.
Our Swiss company has discontinued all work that require cash and sales efforts have stopped while costs have been reduced to a minimum.
The positive profit margin development in Q3 is part of a trend that has lasted for more than a year and that I believe will continue into next year. The speed of margin improvement peaked in the third quarter despite consolidating negative development from Pakistan into the group results.
4th Quarter
I'm planning to spend the remainder of this year working on the Pakistan share sale, recovering withholding tax to former bond holders, attending the mess in Belgium, launching a share buy-back scheme and changing structures that suits the new strategy. This will allow us to enter into next year with a positive drive, putting troubles behind us so that we can spend most time developing the business.
Changes can lead to progress and mistakes have more than once lead to groundbreaking innovations. I hope the recent CEO change (despite the turmoil) can lead to positive developments and perhaps also unexpected innovations.
Financial development
Key figures
Q3 23 Q3 22 Jan-Sep 23 Jan-Sep 22 FY 2022
Sales, € thousand 3'749 5'794 11'333 18'693 25'498
Sales growth in % -35.3% -0.6% -39.4% 5.2% 4.1%
Gross profit, € thousand 1'104 1'321 2'926 4'386 6'466
Gross margin 29.4% 22.8% 25.8% 23.5% 25.4%
EBITDA, € thousand 564 24 1'158 389 999
EBITDA margin 15.0% 0.4% 10.2% 2.1% 3.9%
EBIT, € thousand 530 -82 1'050 75 603
EBIT margin 14.1% -1.4% 9.3% 0.4% 2.4%
Sales and gross margin
July - September
Net sales decreased to EUR 3 749 thousand compared to (EUR 5 794 thousand) in the same quarter last year.
The gross margin increased to 29.4 percentage mainly driven by the performance of the subsidiary in Germany.
January - September
Net sales decreased to EUR 11 333 thousand (18 693) mainly due to sales and closure of businesses in the Netherlands, Sweden and Belgium but also due to substantially decreased revenues in Pakistan and USA.
The gross margin increased by 2.3 percentage points to 25.8 percentage.
EBITDA
July - September
EBITDA for the period increased to EUR 564 thousand compared to EUR 24 thousand in the third quarter 2022.
January - September
EBITDA for the period increased to EUR 1 158 thousand compared to EUR 389 thousand in the same period last year.
Net profit/loss
July - September
The net earnings in Q3 2023 amounted to EUR 307 thousand, and this can be compared to negative EUR 154 thousand in the 3rd quarter of 2022.
January - September
The net earnings in the first nine months of this year amounted to EUR 711 thousand. This is over EUR 1 million better than the negative EUR 324 thousand in the same period 2022.
Financial position and cash flow
Key figures
Q2 23 Q3 22 Jan-Sep 23 Jan-Sep 22 FY 22
Equity ratio -14.2% -32.3% -14.2% -32.3% -14.3%
Return on equity -30.1% 2.6% -71.3% 5.5% -92.2%
Net cash/debt, € thousand -2'163 -5'277 -2'163 -5'277 -3'186
Operating cash flow, € thousand 60 1'238 1'429 434 107
Balance sheet and financial position
30 September 2023
As of 30 September, cash amounted to 807 thousand. Net debt was EUR 2 163 thousand, a 59% reduction compared to the same quarter in 2022. The goal to deleverage and shrink the balance sheet through repayment of loans and sale of assets has been clearly achieved.
Cash-flow and investments
January - September
The cash flow from operating activities over the first nine months of the year 2023 amounted to EUR 1 429 thousand. Repayment of two loans through shares in Nordic Propeye in the first quarter are the main investment activity during the period.
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 governed by Swiss law and Swiss 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 accounting method for this equity deduction is explained in the "changes in equity" chart on page 10 in this report. For further information regarding applied accounting principles please refer to last year's annual report.
Significant events after the period
No significant events after the period.
Certified advisor
Erik Penser Bank is Talkpool's Certified Advisor.
Auditor's review
The company's auditors have not audited this report.
Chur, 17 November 2023
Magnus Sparrholm
Chairman & interim CEO of Talkpool AG
Summary of financial reports
Consolidated income statement
Jul - Sep Jan - Sep
EUR 2023 2022 2023 2022 2022
Net revenue 3'749'405 5'793'934 11'333'163 18'693'043 25'497'641
from
goods and
services
Cost of sales -2'645'287 -4'473'367 -8'407'563 -14'307'367 -19'031'310
Gross profit 1'104'117 1'320'567 2'925'600 4'385'676 6'466'331
Selling -76'626 -301'056 -265'713 -937'605 -1'246'994
expenses
Administrative -548'968 -1'100'840 -1'717'676 -3'390'156 -4'554'320
expenses
Other 51'314 -615 107'888 16'804 -62'222
operating
income &
expenses
Operating 529'836 -81'944 1'050'100 74'719 602'795
result
Financial net -54'963 -24'082 85'118 -144'912 1'222'846
Profit before 474'874 -106'026 1'135'218 -70'193 1'783'228
income
taxes
Income taxes -168'265 -47'994 -423'714 -254'064 -543'091
Net 306'608 -154'020 711'504 -324'258 1'240'137
profit/loss
Net income
attributable
to:
Stockholders 307'926 -121'984 729'226 -255'908 1'222'802
of the
parent company
Minority 1'318 32'036 17'722 68'350 17'335
interests
Other
information
Average number 6'778'097 6'778'097 6'778'097 6'778'097 6'6778'097
of
shares
Earnings per 0.05 -0.02 0.11 -0.04 0.18
share
(no dilutive
effects)
Number of 6'778'097 6'778'097 6'778'097 6'778'097 6'778'097
shares,
end of period
Earnings per 0.05 -0.02 0.11 -0.04 0.18
share
(no dilutive
effects)
Consolidated balance sheet
EUR Sep 30 Sep 30 December 31
2023 2022 2022
ASSETS
Current assets
Cash 807'384 1'518'366 1'526'855
Trade receivables 1'069'226 2'242'280 1'447'271
Other current 1'708'842 2'383'335 1'607'669
receivables
Inventories and 1'293'819 2'168'046 1'157'331
unvoiced services
Prepaid expenses and 188'021 399'228 187'291
accrued income
Total current assets 5'067'291 8'711'256 5'926'416
Non-current assets
Other financial assets 26'340 417'671 27'964
Investments in 481'874 9'178 1'138'490
associates and
financial assets
Intangible assets 113'082 770'607 159'538
Property, plant and 659'796 1'054'326 854'116
equipment
Total non-current 1'281'092 2'251'783 2'180'107
assets
TOTAL ASSETS 6'348'383 10'963'039 8'106'524
LIABILITIES AND EQUITY
Current liabilities
Trade payables 957'338 1'801'050 1'312'880
Current interest 1'124'323 3'790'403 2'944'471
-bearing liabilities
Other current 575'153 1'876'602 778'023
liabilities
Accrued expenses and 2'385'870 3'491'912 2'176'155
deferred income
Total current 5'042'685 10'959'967 7'211'530
liabilities
Non-current liabilities
Non-current interest 1'845'930 3'004'636 1'768'654
-bearing liabilities
Provision 363'249 541'805 426'281
Total non-current 2'209'179 3'546'441 2'194'935
liabilities
Total liabilities 7'251'864 14'506'407 9'262'660
Equity
Stockholders' equity -1'022'126 -4'652'488 -1'325'888
Minority interest in 118'645 1'109'120 169'752
equity of subsidiaries
Total equity * -903'481 -3'543'368 -1'156'136
TOTAL LIABILITIES AND 6'348'383 10'963'039 8'106'524
EQUITY
* As per 31 December 2016, goodwill acquired is no longer capitalized and depreciated,
but offset against equity. The accounting principle for how this leads to a negative equity in Talkpool is shown in the chart "Changes in equity" on page 10.
Consolidated cash flow statement
Jul - Sep Jan - Sep
EUR 2023 2022 2023 2022 2022
Operating
activities
Net 306'608 -154'020 711'504 -324'258 1'240'137
profit/loss
+/- adjustment 35'888 -329'756 782'508 -172'788 -1'087'168
for items not
affecting cash
flow
+/- -282'328 1'721'500 -65'235 930'942 -46'257
increase/decrea
se of
working
capital
Net cash flow 60'168 1'237'724 1'428'777 433'896 106'712
from operating
activities
Investing
activities
Investments in -28'627 -90'141 - -18'198 -206'645
property,
plant and
equipment
Sale/divestment - - 302'325 - -
of property,
plant and
equipment
Investments in - -27'592 - 27'463 -53'763
intangible
assets
Sale/divestment 4'318 - 46'456 - -
of
intangible
assets
Inflow/outflow -6'208 -200'248 1'459 -102'899 102'966
from change
of financial
assets
Dividends paid - - - -59'835 -59'835
to minority
Sale of - - - - 1'277'762
subsidiaries
Acquisition of - - - - -
subsidiaries
Net cash flow -30'517 -317'981 350'240 -153'469 1'060'485
from investing
activities
Financing
activities
Net proceeds - - - - -
from share
issue
Net Issuance -174'133 -339'436 -2'399'652 -275'051 -1'012'753
(repayment) of
interest
-bearing
liabilities
Net cash flow -174'133 -339'436 -2'399'652 -275'051 -1'012'753
from financing
activities
Currency -73'500 -94'931 -98'836 3'666 -136'914
translation
effects
Net change in -217'982 485'375 -719'471 9'041 17'530
cash
Cash, 1'025'365 1'032'991 1'526'855 1'509'324 1'509'324
beginning of
period
Cash, end of 807'384 1'518'366 807'384 1'518'366 1'526'855
period
Changes in equity
EUR Share Capital Cumulative Retained Retained Total Share of Total
capital reserves foreign earnings earnings - equity minority equity
translation Goodwill excl. interests incl.
adjustment recognized minority minority
interests interests
Jan 1, 2022 275'735 11'884'533 -679'229 -6'298'132 -8'761'977 -3'579'070 1'089'935 -2'489'135
Net loss - - - -324'258 - -324'258 68'350 -255'908
Transactions - - - - 497'801 497'801 - 497'801
with
minorities
Foreign - -216'748 -1'030'214 - - 1'246'962 -49'165 1'296'127
currency
differences
Sep 30, 2022 275'735 11'667'785 -1'709'443 -6'622'390 -8'264'176 -4'652'488 1'109'120 -3'543'368
Jan 1, 2023 275'735 8'383'131 -1'773'186 -5'075'333 -3'136'239 -1'325'889 169'752 -1'156'136
Net profit - - - 729'226 - 729'226 -17'722 711'504
Foreign - - 310'332 - -735'795 -425'463 -33'385 -458'848
currency
differences
Sep 30, 2023 275'735 8'383'131 -1'462'854 -4'346'104 -3'872'034 -1'022'126 118'645 -903'481
As per 31 December 2016, goodwill acquired is no longer capitalized and depreciated,
but offset against equity. The chart above shows how this accounting method leads to a negative equity in Talkpool.
Definitions of key indicators
Earnings Period net profit/loss in relation to average
per share number of shares for the period
EBITDA Earnings Before Interest, Tax, Depreciation and
Amortization
EBIT
Earnings Before Interest and Tax
Equity
ratio Equity in percentage of total assets
Return on Net profit/loss in relation to equity
equity
Net of interest-bearing liabilities minus cash
Net and bank, excluding tax receivables/liabilities
cash/debt
Further information
Magnus Sparrholm, Chairman and interim CEO
Telephone: +41 79 758 15 48
Erika Loretz, Group Reporting
Telephone: +41 79 333 59 71
Talkpool
Gäuggelistrasse 7 Telephone: +41 81 250 20 20
CH-7000 Chur Mail:
Switzerland Web: www.talkpool.com
Financial calendar
Year-end report January - December 2023………………………12 Mar 2024