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Tungsten Corp PLC (TUNG)

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Thursday 23 May, 2019

Tungsten Corp PLC

Trading Update

RNS Number : 9136Z
Tungsten Corporation PLC
23 May 2019
 

TUNGSTEN CORPORATION PLC

 

("Tungsten" or the "Company")

 

23 May 2019

 

TRADING UPDATE FOR FINANCIAL YEAR ENDED 30 APRIL 2019

 

Highlights1

 


Group results (including TNF)

Group results (excluding TNF2)


FY19

FY18

Growth

FY19

FY18

Growth


m

m


m

m


Revenue

£36.0

£33.7

7%

£35.3

£33.7

6%

EBITDA

£0.6

£(4.6)

n/a

£2.5

£(3.3)

n/a

Cash - net

£2.8

£6.4

(56%)

£2.8

£6.4

(56%)

Transaction volumes

18.2

17.7

3%

18.2

17.7

3%

 

Results excluding TNF:

·    First annual EBITDA3 profit of £2.5 million in FY19 (FY18: £(3.3) million EBITDA loss)

·    Revenue growth of 6% to £35.3 million in FY19 with strong H2-FY19 performance

·    Reduction in adjusted operating expenses4 by 10% to £31.0 million

·    Cash generated in H2-FY19 of £0.8 million with net cash of £2.8 million at 30 April 2019 (31 October 2018: £2.0 million)

The Company intends to announce its audited FY19 results and host a conference call with analysts and investors on 22 July 2019. Details of this call will be announced in due course.

1 Performance figures are unaudited. Audited results for the financial year ended 30 April 2019 are scheduled for announcement on 22 July 2019

2 Tungsten announced its intention to divest Tungsten Network Finance ("TNF") on 30 April 2019

3 EBITDA is defined as operating profit before other income, depreciation, amortisation, gain or loss on sale, foreign exchange gain or loss,  share-based payments charge and exceptional items

4 Adjusted operating expenses exclude cost of sales, interest, tax, depreciation, amortisation, gain or loss on sale, foreign exchange gain or loss, share-based payments charges and exceptional items

 

 David Williams, Interim Chief Executive Officer & Chief Financial Officer

 

 

"We are pleased to announce that Tungsten achieved its first annual EBITDA profit in FY19. This demonstrates that the significant actions taken by the new Board to address underperformance are starting to have the desired impact.

 

"Our business is strengthening. In the second half of the year we generated positive cash flow, and in addition to growing our revenues we identified and executed numerous cost saving initiatives which reduced our adjusted operating expenses by 10%5, with a further impact of savings to come in FY20.

 

"Although revenue growth increased from 2% in the first half of the year to 6%6 for the full year, we continue to focus on increasing the pace of the upward trajectory. We are confident that through executing the actions identified in our operating review, including working with an e-procurement partner and expanding our AR e-invoicing services, we will be able to achieve higher revenue growth.

 

"As previously announced, the divestment of our trade finance subsidiary, TNF, has begun and present indications are that this process should be concluded in the first half of FY20.

 

"The combination of the breakthrough to EBITDA profitability on the back of a new strategy, positive cash flow over the second half of FY19 and the widening gap between revenue growth and falling costs positions the company well for the future."

 

5 10% reduction excluding TNF. 7% reduction including TNF

6 6% growth excluding TNF. 7% growth including TNF

 

Trading Update

 

Revenue

Revenue excluding TNF for FY19 is expected to be £35.3 million. This compares with £33.3 million in FY18. The inclusion of the revenue of TNF increases revenue by £0.7 million in FY19 (£36.0 million revenue including TNF).

 

In the first half of FY19, Tungsten recorded revenue excluding TNF of £17.2 million, growth of 2% from the first half of FY18. Revenue excluding TNF of £18.2 million in the second half of FY19 represents growth of 11% from the second half of FY18, 6% sequential growth from the first half of FY19 and 6% annual growth overall.

 

Total transaction volumes were 18.2 million, growth of 3% from FY18, at an effective revenue per transaction of £1.93 (FY18: £1.88).

 

Tungsten added five new accounts payable automation customers in FY19; including four that will use our e-invoicing solution and one which will initially use our Workflow tool.

 

As Tungsten has previously reported, we have identified the areas of weakness in adding new customers and transactions, including people, process, products and routes to market. We have now appointed our first Chief Revenue Officer, Steve Standring, who will deliver the changed sales strategy, including working with Data Interconnect, Tungsten's AR e-invoicing partner, and developing Tungsten's new e-procurement partnership.

 

Gross margin and expenses

The Company expects to achieve an FY19 gross margin excluding TNF of 94.6%, a 160 basis point improvement on the FY18 gross margin of 93.0%. The gross margin including TNF was 94.7% in FY19.

 

Adjusted operating expenses excluding TNF are expected to be £31.0 million, a reduction of £3.3 million or 10%. This reflects a range of successful initiatives, including the reduction in senior management positions, a drive to salaries more in line with AIM guidelines, the cancellation of superfluous marketing services and changes to the remuneration policy, resulting in a reduction in cash bonuses in favour of deferred shares - each have had a positive impact on EBITDA.

 

The exclusion of the adjusted operating expenses of TNF improved the adjusted operating expenses by £2.5 million in FY19 (£33.5 million adjusted operating expenses including TNF).

 

Excluded from EBITDA, we expect FY19 one-off costs of £1.0 million (FY18: £2.4 million). These include adviser fees primarily relating to the shareholder actions early in the financial year, contracts identified as onerous in our cost reduction work and the restructuring costs.

 

 

EBITDA

Tungsten's FY19 EBITDA excluding TNF is expected to be £2.5 million, a £5.8 million improvement on the prior year loss of £3.3 million. Tungsten recorded EBITDA profitability in each of the last seven months of FY19.

 

The exclusion of the losses of TNF improved the EBITDA by £1.9 million in FY19 (£0.6 million EBITDA profit including TNF). The divestment of TNF is expected within the first half of FY20.

 

Cash

Tungsten had net cash of £2.8 million at 30 April 2019: £3.8 million of gross cash less £1.0 million of RCF drawings. This compares to £6.4 million of net cash at 30 April 2018. Over the second half of FY19 net cash grew by £0.8 million, with month-end net cash balances having grown for each of the last four months of the financial year. Tungsten has a further £3.0 million of undrawn committed RCF availability.

 

The process to appoint a new CEO is ongoing. In the meantime, David Williams has taken the role of Interim Chief Executive Officer.

 

 

Forward looking statements

 

This document contains forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and trading margins, market trends and our product pipeline are forward-looking statements. Phrases such as "aim", "plan", "intend", "anticipate", "well-placed", "believe", "estimate", "expect", "target", "consider" and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. Any forward-looking statement is based on information available to Tungsten as of the date of this statement. All written or oral forward-looking statements attributable to Tungsten are qualified by this caution. Tungsten does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in Tungsten's expectations.

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

Enquiries

 

Tungsten Corporation plc

Tony Bromovsky, Executive Chairman

David Williams, Interim Chief Executive Officer & Chief Financial Officer

 


 

+44 20 7280 7713

 

Panmure Gordon (Nominated Advisor)

Dominic Morley


+44 20 7886 2500

 

 

Canaccord Genuity Limited (Broker)

Simon Bridges
Emma Gabriel


+44 20 7523 8000

 

 

 

About Tungsten Corporation plc

Tungsten Corporation (LSE: TUNG) aims to be the world's most trusted business transaction network by using data intelligently to strengthen the global supply chain.

Tungsten Network is a secure business transaction network that brings businesses and their Suppliers closer together with unique technology that revolutionises invoice processing, maximises efficiency and improves cash flow. Delivering trusted connections and streamlined transactions, the network also provides users with real-time spend analysis and offers access to trade finance through Tungsten Network Finance.

Tungsten Network processes invoices for 74 percent of the FTSE 100 and 71 percent of the Fortune 500. It enables Suppliers to submit tax compliant e-invoices in 50 countries, and last year processed transactions worth over £164bn for organisations such as Alliance Data, Cargill, Deutsche Lufthansa, General Motors, GlaxoSmithKline, Mondelēz International, Henkel, IBM, Kellogg's and the US Federal Government.


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