Research note


Talkpool: First comment, LCC performing in line

This afternoon, Talkpool published their fourth quarter report of 2017. Talkpool’s sales were in line with our expectation of EUR 6.12m. EBITDA amounted to EUR 0.33m, which was just slightly below our estimate of EUR 0.40m. The deviation in EBITDA can mainly be explained by problems in Mauritius. However, the biggest takeaway from the report is that LCC seems to be exceeding Talkpool’s expectations.

Talkpool finished the year with strong increase in sales and margins, if excluding the Mauritius. Leaving out Mauritius, Talkpool reported a strong gross margin of 22.7 %, which is in-line with our estimates of 23 %. We believe that LCC contribute with a gross margin in the region of 21-24 %, also in-line with our expectation. The management commented that the integration of LCC has exceeded their expectations, and we will take their word for it. Talkpool’s companies in Benelux (Technetix and Camouflage) continued to show strong growth. The sales in the Benelux region have now increased 82 %, compared to Q1’17.

The most interesting takeaway from the report is that the integration of LCC seems to be performing well and that Talkpool will increase their focus on this region forward. The integration of LCC was our biggest concern as Talkpool acquired a company with 1000 employees. Now, we believe the integration risk has decreased significantly.

In addition, Erik Strömstedt (CEO) commented that the interest in their IoT-solutions are increasing and that Talkpool has developed the world’s first “smart floor” IoT-module. Talkpool also stated that they are currently doing proof of concept with the major insurance companies in Sweden. We believe that Talkpool is well positioned in the smart city solutions within IoT. We will elaborate about Talkpool’s IoT transformation in the coming update.

In our preview we commented on the problematics of the delayed fiber project in Mauritius, and the problems seems to continue. Going forward, we believe that Talkpool will not generate any sales in Mauritius.

All in all, we find the report as positive since LCC delivered in-line with our expectations and the delay in Mauritius should be seen as a one-time deviation. We will take a closer look at the numbers and follow up with a more detailed research update within the few next days.

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