Tungsten Corporation PLC AGM Statement / Trading Update (4781B)

TIDMTUNG

RNS Number : 4781B

Tungsten Corporation PLC

21 September 2018

TUNGSTEN CORPORATION PLC

("Tungsten" or the "Company")

21 September 2018

TRADING UPDATE FOR THREE MONTHS ENDED 31 JULY 2018

Highlights(1)

-- Revenue of GBP8.6 million in Q1-FY19, 4% year-on-year constant currency growth; five new accounts payable customer sales and a strong pipeline of new opportunities

-- Sustained lower run-rate of adjusted operating expenses, with GBP8.5 million incurred in Q1-FY19, down 13% from GBP9.8 million in the same quarter of FY18

   --     EBITDA loss(2) of GBP0.5 million, an improvement of GBP1.6 million compared with Q1-FY18 

-- Adequate working capital, with net cash of GBP3.9 million at 31 July 2018 and GBP4 million revolving credit facility with HSBC

-- On track with FY19 trading guidance, with constant currency revenue of at least GBP37.5 million, stable gross margin and adjusted operating expenses, and an EBITDA profit

-- Following the Q1-FY19 period end, Anthony Bromovsky and Duncan Goldie-Morrison appointed to the Tungsten Corporation Board of Directors

Richard Hurwitz, Chief Executive Officer

"Tungsten is making headway towards its revenue goals for FY19, building an expanding pipeline of opportunities and achieving good momentum in bookings derived from these sales activities. As we previously indicated, the weight of our FY19 revenue growth is expected to materialise in the second half of the financial year as these sales are closed."

Trading Update

Revenue and sales progress

Unaudited revenue of GBP8.6 million in the three months to 31 July 2018 ("Q1-FY19") was 4% higher than the same period in the prior year on a constant currency basis and in line with the Board's expectations. Tungsten Network's total transaction volume was 4.5 million in Q1-FY19, compared with 4.4 million in the same period in FY18, while average revenue per invoice increased from GBP1.85 to GBP1.93.

In the first quarter we closed five new accounts payable sales to customers of Tungsten Network, which are expected to add GBP0.45 million of revenue over FY19. In particular, these included Nice-Pak International, a longstanding user of Tungsten Network to send invoices to its customers. Through the further development of its relationship with us as a user of our early payment facilities, Nice-Pak has now also chosen to use Tungsten Network for the receipt of invoices from its own supply chain.

The other four new accounts payable deals include a further sale of our core e-invoicing products, sales of our work flow product and two sales of our new Italy Sistema di Interscambio (SDI) connectivity product.

Contracts with 39 of our accounts payable customers are due for renewal in FY19. We have renewed the five contracts due in Q1-FY19 at rates equal to or better than previous contracts. The revenue impact from non-renewals in FY19 is expected to be less than GBP0.1 million.

We continue to work closely with our accounts payable customers to on-board an increasing number of their suppliers onto Tungsten Network including, amongst others in Q1-FY19, those of GE, Procter & Gamble and IKEA.

Average Tungsten Network Finance ("TNF") outstandings grew from GBP43.4 million in April 2018 to GBP60.9 million in July 2018. We are making good progress in growing the number of members of Tungsten Network using our TNF products and expect this continue over the course of FY19.

Gross margin, adjusted operating expenses and EBITDA

Gross margin in Q1-FY19 was 93.3%, broadly in line with the same period in the prior year.

As previously communicated, the phasing of EBITDA will reflect the evolution of revenue growth. Adjusted operating expenses in Q1-FY19 were GBP8.5 million, GBP1.3 million (13%) lower from the same period in the prior year. With the associated revenues, this resulted in a narrowed EBITDA loss of GBP0.5 million compared with a loss of GBP2.1 million in the same period in the prior year.

Cash flow

Cash at the end of Q1-FY19 was GBP3.9 million. The movement from our year-end in April 2018 was GBP2.5 million, reflecting the EBITDA loss, capital expenditure (including software development costs) of GBP0.9 million and a working capital unwind from the payment of employees' annual bonus. As previously reported, the Group has a GBP4 million revolving credit facility with HSBC which is undrawn.

Board and organisational update

Tony Bromovsky and Duncan Goldie-Morrison joined the Board of Tungsten in August 2018. The Board and management team continue to seek opportunities to increase revenue growth rates and make the organisational modifications required to support these outcomes. In Q1-FY19 this included changes to our sales organisation to provide greater alignment with the needs of our customers. The Board remains resolutely focussed on the aim of increasing shareholder value from the operation of the Tungsten Network and will take the steps necessary to achieve this objective.

Current trading and outlook

Over recent months we have brought to market a series of new or enhanced services, including Italian SDI connectivity, purchase order delivery and acknowledgement, enhanced invoice data capture, e-billing, payment receipts and accounts receivable analytics.

We have made particular progress with opportunities in Italy, with the impending requirement for all domestic invoices to be passed through an intermediary approved by the Italian SDI. In addition to two sales made, we have had commitments from six customers to use Tungsten Network for the collection of invoices from the SDI and two further customers for both the delivery to and collection from the SDI. Our pipeline of further opportunities with high-volume customers in Italy remains strong and we expect further commitments over the coming months.

Our teams are now focussed on closing sales. The pipeline of new accounts payable automation sales is well developed, with four customers at the contracting stage. In total, 20 new sales qualified opportunities became active during the quarter. Pipelines are developing for our new products, which together with the new customers are expected to result in an acceleration in revenue growth over the second half of FY19. As a result, we continue to expect revenue of at least GBP37.5 million on a constant currency basis, weighted to the second half of the year, and stable gross margin and adjusted operating expenses, resulting in an EBITDA profit for the full year, with the phasing toward this outturn reflecting the evolution of revenue growth.

Tungsten intends to disclose its unaudited interim results for the six months to 31 October 2018 ("H1-FY19") on 13 December 2018.

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.

1 Performance figures are unaudited.

2 EBITDA loss is defined as operating loss from continuing operations before other income, depreciation, amortisation, share-based payments charge, and exceptional items.

Enquiries:

 
 Tungsten Corporation plc 
  Richard Hurwitz, Chief Executive Officer 
  David Williams, Chief Financial Officer        [phone] 
 Panmure Gordon (Nominated Advisor) 
  Dominic Morley                               [phone] 
 Canaccord Genuity Limited (Broker) 
  Simon Bridges/Emma Gabriel                   [phone] 
 Neustria Partners 
  Robert Bailhache/Nick Henderson/Charles 
  Gorman [email]                               [phone] 
 

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 48 countries, and last year processed transactions worth over GBP164bn 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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September 21, 2018 02:00 ET (06:00 GMT)