TIDMTUNG
RNS Number : 0630F
Tungsten Corporation PLC
25 July 2016
TUNGSTEN CORPORATION PLC
("Tungsten", the "Company" or "Group")
FULL YEAR FINANCIAL REPORT
FOR THE TWELVE MONTHSED 30 APRIL 2016
25 July 2016
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
Tungsten Corporation plc (LSE: TUNG), the global e-invoicing,
purchase order services, analytics and financing company, today
announces its results for the twelve months ended 30 April 2016
("FY16").
Financial Highlights
-- Revenue increased 16% to GBP26.1 million (FY15: GBP22.5 million(1) )
-- EBITDA(2) loss decreased to GBP18.7 million, a GBP6.5 million
improvement from prior year (FY15: GBP25.2 million loss(1) )
-- Statutory loss after tax of GBP27.9 million (FY15: GBP27.6
million(1) ), including a GBP6.8 million impairment following
signing of a conditional agreement in December 2015 for the sale of
Tungsten Bank
-- Net cash and cash equivalents ended at GBP9.3 million (30
April 2015: GBP13.1 million), excluding GBP17.8 million of cash in
Tungsten Bank
-- Sale of Tungsten Bank expected to close by 31 October 2016 to
release cash of approximately GBP30 million
-- Successful placing of 22.9 million shares to raise GBP17.5
million of new funding in May 2015
-- Agreed GBP10 million revolving credit facility with HSBC
should Tungsten Bank sale be unexpectedly delayed
Operational Highlights
-- Strengthened board and enhanced executive management team under new CEO Richard Hurwitz
-- 34 existing buyers renewed contracts with weighted average
price increase of 64%. Four further renewals after the year end at
similar increases
-- 11 new buyers signed for contract value of at least GBP1.9 million; 175 total buyers
-- 22,000 net new suppliers added to bring total suppliers to 203,000
-- 1,000 new Integrated suppliers connected to Tungsten Network,
generating aggregate revenue of GBP1 million in first year of
contracts, and a further 24,500 Web Form suppliers added
-- Total invoice volumes increased 9% to 16.1 million (FY15: 14.8 million)
-- Tungsten Network Finance being restarted to allow for
profitable growth of the early payment solution
(1) Restatement of prior year revenue reduces it by GBP0.6m, as
discussed at notes 2 and 3 to the accounts.
(2) EBITDA is defined as operating loss before other income,
depreciation, amortisation, impairments and share-based payments
charge.
Outlook
-- Revenue of at least GBP30 million expected in FY17, with
upside potential reflecting the variability and phasing of new
customer sales and successes of new product and service
initiatives
-- Operating costs to continue to decline in FY17 through a
combination of actions to increase automation, reduce headcount and
implement procurement efficiencies
-- Committed to achieving monthly EBITDA breakeven during
calendar 2017, with precise month dependent on the phasing of new
customer and product sales
-- Expect FY17 EBITDA loss of between GBP12 million and GBP14
million, including expected GBP1.3 million EBITDA loss in Tungsten
Bank prior to sale, a reduction of between GBP6.7 million and
GBP4.7 million from FY16
-- Cash in excess of GBP20 million expected at 30 April 2017
-- Tungsten Network Early Payment financing levels anticipated
to double by end of FY17, with material impact on revenues expected
in FY18
Richard Hurwitz, Chief Executive Officer, commented:
"We are building momentum in our business through our strategy
of focusing on profitable growth and I am encouraged by the
progress we have made in implementing significant organisational
improvements to elevate Tungsten's performance. Evidence of our
progress is displayed in the talent we have attracted, our improved
contract pricing, the value-added new buyers who have joined our
network, the resizing of costs to match our tangible opportunities,
and our strengthened balance sheet. Tungsten Network processes
invoices for 70% of the FTSE 100 and 72% of the Fortune 500 and we
are committed to helping these and other businesses do business
better."
Nick Parker, Non-Executive Chairman, added:
"The year saw a period of significant change as Tungsten's
business strategy was realigned under new leadership. The results
demonstrate the impetus this executive team has brought, with
revenue growth, expense control and cash preservation performing
broadly in line with prior guidance. The Company will continue to
realise network benefits for customers, ensure people and processes
are effective, provide distinctive financing products, and provide
adjacent products and services. The Board is confident the Company
is well positioned for further sustainable growth."
Analyst Presentation
Richard Hurwitz, Chief Executive Officer, and David Williams,
Chief Financial Officer, will today host a conference call and
webcast at 9.00am UK time. To access the webcast please click here.
The dial-in number for the conference call is +44 (0) 20 3003 2666
/ +1 212 999 6659 with the access code 5929655# and a presentation
will be available on the Tungsten Network website.
A replay facility will be available until Friday 5 August 2016.
The dial-in number for the replay facility is +44 (0) 20 8196 1480
/ +1 866 583 1035 with the above access code.
Enquiries
Tungsten Corporation plc
Richard Hurwitz, Chief
Executive Officer
David Williams, Chief Financial
Officer +44 20 7280 7872
Panmure Gordon (Nominated
Advisor)
Fred Walsh/Peter Steel +44 20 7886 2500
Canaccord Genuity Limited
(Broker)
Simon Bridges/Cameron Duncan/Emma
Gabriel +44 20 7523 8000
Neustria Partners (Investors,
Analysts and Media)
Robert Bailhache/Nick Henderson/Charles
Gorman +44 20 3021 2580
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 e-invoicing and purchase order
services platform that brings businesses and their suppliers closer
together with unique technology that revolutionises invoice
processing, maximises efficiency and improves cash flow management.
Delivering trusted connections and streamlined transactions, the
network also provides users with real-time spend analysis and
offers suppliers access to invoice financing through Tungsten
Network Finance, a form of alternative finance for businesses.
Tungsten Network processes invoices for 70% of the FTSE 100 and
72% of the Fortune 500. It enables suppliers to submit tax
compliant e-invoices in 47 countries, and last year processed
transactions worth over $187bn for organisations such as Alliance
Data, Aviva, Cargill, Deutsche Lufthansa, General Motors,
GlaxoSmithKline, Henkel, IBM, Kellogg's and the US Federal
Government.
Trusted, passionate and proven, Tungsten is making the
digitisation of global commerce between buyers and suppliers
faster, easier and smarter.
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.
Chairman's Statement
Tungsten has special operating assets. We have technology,
products, customers and people that are the envy of our peers. We
process invoices for over 70% of the FTSE 100 and the Fortune 500.
However, our financial performance since Tungsten was admitted to
London Stock Exchange's AIM in September 2013 has proved
disappointing for investors and a new approach was required in
order to realise the Company's significant potential.
We had invested heavily in previous years in expanding Tungsten
Network and in building Tungsten Network Finance, including the
acquisition of a regulated bank. However, given the rate of cash
depletion and the operational performance, the Board recognised the
need for a change in approach. The 2016 financial year was
therefore a period of realigning our strategy under the leadership
of Richard Hurwitz with the aim of pursuing profitable growth in
Tungsten Network and a more targeted development of the opportunity
in Tungsten Network Finance.
The sale of Tungsten Bank is an important component of the
execution of our reshaped strategy. Owning a bank proved to be
unnecessary to the achievement of our ambitions, and the costs of
its operation and regulatory burden impeded our progress. A sale of
Tungsten Bank was agreed in December 2015 and on completion the
disposal will help to increase our free cash resources, reduce
operating expenditure and remove operational complexity from our
business.
Tungsten aims to be the world's most trusted business
transaction network by using data intelligently to strengthen the
global supply chain. The four strategic objectives that support
this goal are: elevating our customer engagement by realising
network benefits for them; using end-to-end digital processes to
ensure our people and processes are effective; using our network
and its data to provide distinctive financing products; and
offering our customers valuable adjacent products and services.
The Board believes that the Company is making good headway
against these objectives, achieving favourable price increases in
renewed contracts to reflect the value we generate, realising cost
savings by reducing organisational complexity and removing
operational inefficiencies, refocusing the invoice financing
business, and developing ancillary customer offerings. Our new
focus gives the management team the clarity required to execute the
Company's strategy for the benefit of customers and shareholders.
This puts Tungsten on a stable footing for sustainable future
growth.
Board and Management
I was delighted to accept the role as Chairman of Tungsten at
our Annual General Meeting ("AGM") in September 2015. I took over
from Arnold Hoevenaars, who steered the Company through its
admission to LSE AIM and beyond. Arnold retired from the Board with
our thanks. Lincoln Jopp also retired from the Board at our AGM and
our thanks also go to him.
Tungsten made a number of other changes to its Board during the
course of FY16 to increase its breadth and depth of experience and
improve corporate governance. In particular, we were pleased to
announce the appointment of new Independent Non-Executive
Directors, David Benello and Ian Wheeler, at our AGM. Edi Truell,
Tungsten's founder, stepped down from the Board in March 2016. The
Board of Tungsten would like to thank Edi for his significant
contribution to the creation of Tungsten.
The Board appointed Richard Hurwitz as CEO of Tungsten with
effect from 13 July 2015 to lead the strategic change required in
the business. Rick has built a talented executive management team
around him in order to steer the business through its
transformation.
Tungsten operates in markets with significant growth
characteristics: back-office automation, digitisation, and
alternative financing. We are confident that we have now identified
the strategic priorities to take advantage of this market growth
and have put in place the organisational structure needed to
achieve our targets. We look forward to a year of further progress
and success.
Annual Report & Accounts
Tungsten's Annual Report & Accounts for the twelve months
ended 30 April 2016 will be uploaded to the Company's investor
relations website later today.
The Company's investor relations website address is
www.tungsten-network.com/us/about/investor-relations.
Annual General Meeting
The Annual General Meeting of the Company will be held on 16
September 2016 at 2.00pm UK time at the offices of Ashurst LLP,
Broadwalk House, 5 Appold Street, London EC2A 2HA.
Nick Parker
Chairman
Chief Executive Officer's Review
Strategic Review
The 2016 financial year has been a year of encouraging progress
where we demonstrated momentum in the achievement of our revised
aims. I was appointed CEO in July 2015, so these results represent
a little over nine months of my stewardship. My first act on
becoming CEO was to undertake an in-depth analysis of the business;
what I found both excited and troubled me.
Tungsten is a global business with a loyal blue-chip customer
base and enormous embedded value. Through its predecessor firm,
Tungsten pioneered e-invoicing and remains at the vanguard of
digitising accounts payable processes. But I also found structural
deficiencies and a pressing need for a clearer strategy to produce
profitable growth by leveraging the strengths of our core business.
That strategic realignment is now in place and so is a talented
team of committed individuals that is executing our plans with
confidence and achieving notable early successes.
It was clear that the Company suffered from skills gaps in
certain key areas. To close these gaps, we have made external
appointments of Brian Proffitt as Chief Technology Officer, Guy
Miller as Head of Corporate Development, Connie O'Brien as Chief
Marketing Officer, and Prabhat Vira as President of Tungsten
Network Finance. We have also undertaken internal promotions,
including the appointment of Kevin Wilbur as Head of AP
Automation.
In December 2015, I set out four areas of strategic priority to
achieve profitable growth:
-- Focussing on our core business to provide efficiencies and
further benefits for our customers;
-- Improving operational performance by deploying end-to-end
digital tools to ensure our people and processes provide products
and services to our customers effectively;
-- Further leveraging our network and its data to deliver
distinctive financial products for our customers to support their
working capital needs; and
-- Enhancing the value of the Tungsten Network by providing
value-added adjacent products and services to increase operational
efficiencies across the global supply chain.
I am confident we now have the right executive management team
in place with shared and targeted objectives, performance measures
and incentive structures for the Company to make substantial
further progress in FY17.
Focus on our core
Tungsten Network is growing. Revenues for the year grew 16%,
with total invoice volumes increasing 9% to 16.1 million. By value,
total invoices increased 16% to GBP140 billion. Some 34 of our
e-invoicing buyer customer contracts were renewed at a weighted
average price increase of 64%, demonstrating that customers
recognise the value of our offering. Since the end of our financial
year we have renewed four further buyer customer contracts at
similar price increases. We added 11 new buyers to Tungsten
Network, including Duracell and Sanofi. The global agreement with
Sanofi was signed at the end of FY16 and will therefore contribute
to revenue in FY17. Each buyer brings their own supply chain to add
to our network, and we are working more effectively with new and
current buyers to sign up these suppliers. 22,000 net new suppliers
were added over the year. This is the virtuous circle of the
Tungsten Network: buyers bring suppliers who want to connect with
other buyers.
We want to increase the rate of new business sales within
Tungsten Network. Our pipeline is strong and continues to grow as
we refine and strengthen our customer engagement strategy and
increase our portfolio of products and services. We have revised
our sales strategy to leverage more effectively our strong Tungsten
Network connections and Tungsten Network Workflow customers. We
have also developed partnerships with third parties, and won our
first two buyer customers through PNC Bank which distributes our
e-invoicing platform in the US. We are exploring ways to expand
further in the near future our partnership strategy with PNC and
others.
Notably, we have established a Digital Command Centre to connect
more frequently and materially with our 203,000 suppliers under the
direction of our newly appointed Chief Marketing Officer.
Maintaining a regular dialogue with our network of suppliers
ensures they remain active users as we engage them on the issues
important to their commercial success, serving to strengthen the
network of buyers and suppliers that underpins our growth strategy.
Our Digital Command Centre is deploying advanced digital marketing
capabilities and a host of leading-edge tools to increase the
presence of Tungsten Network in internet search and traffic.
Improved operational performance
Tungsten seeks to grow profitably. Our history is one of a
business where overheads have grown in line with revenues and we
therefore needed to increase efficiency and leverage costs, while
maintaining product and service standards. We have identified and
started to effect the changes required in order to simplify and
rationalise the business: sizing costs to match the tangible
opportunity, removing organisational inefficiencies and maximising
the use of automation tools.
Underpinning operational improvements is a redesign of the
architecture of our core systems. This will be an incremental
process to decouple core system components and will result in
greater stability and flexibility of our systems. This project is
well underway and is expected to be completed over FY17.
These initiatives included:
-- A reorganisation of customer relationship management
resources designed to consolidate all onboarding activities into
separate, dedicated buyer or supplier teams;
-- The first phase of a re-engineering of the technology
platform to deliver a simplified infrastructure that will meet
future capacity requirements and deliver efficiency benefits;
-- Increased use of digital marketing to improve the
identification and conversion of new business leads and existing
customer opportunities into product or service sales;
-- A restructuring of our finance team, including implementing
new enterprise resource planning software that allows us to use a
wider range of accounts payable automation tools and switch to a
shared services environment; and,
-- The introduction of a swathe of upgraded procurement and cost
policies, processes and disciplines to allow more effective
management of the Group's cost base.
Collectively, the initial impact of these measures is
demonstrated in the narrowing of our EBITDA loss by GBP6.5 million
to GBP18.7 million (FY15: GBP25.2 million(1) ).
As we look to the year ahead, we have identified the initiatives
to achieve monthly EBITDA breakeven by the end of FY17, and we will
continue to manage our cost base while making the necessary
investments in technology, products, digital marketing and
operational improvements. However, we will not surrender future
growth for the sake of reaching monthly EBITDA breakeven by the end
of our financial year in April. We will be prepared to achieve this
landmark later in calendar 2017 if we believe to do so is in the
best interests of sustaining long term profitable growth and the
creation of shareholder value.
Distinctive supply chain financing products
Tungsten Network Finance, our invoice financing business,
remains a cornerstone of our strategy. We will pursue this without
Tungsten Bank as we determined that operating a regulated
deposit-taking financial institution is incompatible with the
pursuit of profitable growth and not needed to successfully pursue
our invoice financing opportunity. The sale of Tungsten Bank is
expected to close by the end of H1-FY17. This will release
substantial cash resources of approximately GBP30 million to enable
us to invest in our core business as well as reduce our cost base
and enhance profitability and cash flow.
Tungsten financed over GBP100 million of invoices in FY16 for an
average duration of 34 days at an average gross yield of 6.3%.
However, the revenue generated from this activity was less than
GBP200,000, and the number of suppliers using the product was
limited.
In April 2016, we welcomed Prabhat Vira to Tungsten to lead our
efforts in restarting Tungsten Network Finance to scale up the
level and profitability of financing. Prabhat has previously held
senior positions in banking businesses across the world and at
Tungsten has already started to revise our invoice finance offering
to widen the number of suppliers that can take advantage of it and
make it more flexible and appropriate to our customers' needs.
Following Prabhat's arrival we have commenced the execution of a
revised strategy which includes reaffirming and expanding our
funding arrangement with Insight Investment, redesigning our
product to better meet market needs, segmenting our supplier
customers, improving our pricing model, enhancing the Tungsten
Network portal, streamlining the on-boarding process, investing in
supplier sales and relationship activities and improving the
effectiveness of the back-office technology.
We expect the changes to give us the capability to increase the
volume of invoices financed and the income Tungsten that is able to
earn from the activity. However, we need to complete the execution
of the improvements we have identified to capture an increased
invoice finance opportunity. As a result, we anticipate a steady
increase in financing volumes in FY17, with a more material impact
expected from FY18.
Adjacent products and services
Tungsten and its predecessor companies have been at the
forefront of accounts payable automation for over 15 years. As a
result, 175 of the world's most sophisticated buying organisations
connect with 203,000 of their global suppliers over the Tungsten
Network. We have identified a series of opportunities to leverage
this global connectivity in order to provide our customers with
highly relevant adjacent products and services.
The range of opportunities currently include foreign currency
translation services, e-invoicing for suppliers in China, and
cross-border recovery of value-added taxes on goods and services.
Each of these initiatives is currently at a different stage of
development, ranging from design to trial. We are pursuing each
opportunity with partners, to minimise setup and ongoing costs,
with the potential targeted benefit being a share of revenues
generated. We expect the list of opportunities to fluctuate over
time as some are launched and some are terminated. We are
anticipating only marginal revenues from adjacent products and
services in FY17, with more material contributions targeted from
FY18.
Operational Review
Tungsten Network
Tungsten Network continued to grow in the period, both through
the addition of new buyers and their suppliers to the network, and
through creating additional connections between existing buyers and
suppliers.
Eleven new buyers contracted to join Tungsten Network in FY16.
Total buyers as at 30 April 2016 amounted to 175, of which 124 take
e-invoicing and other associated solutions, and 51 take Tungsten
Network Workflow services. Expanding the solutions that buyers take
is a development focus for FY17.
The new e-invoicing buyers each agreed three- or four-year deals
for total minimum fees over the aggregate contract periods of
GBP1.2 million. This excludes revenues generated from their
suppliers, which are expected to contribute from H2-FY17. The new
Tungsten Network Workflow buyers each agreed deals with total
minimum fees over the aggregate contract periods of GBP0.7
million.
The number of buyers reduced by nine during FY16. This figure
includes three buyers with minimal invoice flow leaving the network
as part of Tungsten's strategy to focus on accounts with growth
potential. Six further buyer contracts were merged, three as a
result of customer mergers and three through the replacement of
local contracts with global agreements. The buyer reductions are
not expected to have a material impact on revenue in FY17.
Buyer revenues represent 39% of total Tungsten Network revenue.
Contracts with 42 buyers that take the e-invoicing service were due
for renewal in FY16. A key focus of the business during the year
was to work with these buyers as part of contract discussions to
demonstrate the value Tungsten Network delivers. Tungsten completed
contract renegotiations with 34 of these buyers, agreeing weighted
average price increases of 64% on a like-for-like basis which
applies to approximately 30% of total invoice volumes. We have also
secured buyer commitments to acquire additional products and widen
the scope of our relationships, and we expect to see the financial
benefit of these initiatives in FY17.
New contracts have been agreed with four of the remaining eight
buyers after the year end at similar rates of price increase with
discussions nearing conclusion with the remaining four buyers.
Due to legacy contractual restrictions we were unable to
renegotiate pricing with an additional 10 buyers, who had their
current contracts extended during the year. We are in discussions
with each of these to agree new terms when the extended contracts
expire.
As part of the review of our business we have segmented our
supplier customers into four categories, reflecting the products
they use and the associated sales channel. These are: Corporate
suppliers; Integrated Solution suppliers; Web Form suppliers, and
Non Electronic suppliers. This segmentation has allowed us to
identify targeted pricing and development opportunities.
A total of 1,000 new Integrated and 24,500 new Web Form
suppliers were added to the network during the period. Around 3,500
supplier accounts were closed, the majority of which had stopped
trading with our buyer customers. The net impact of these changes
was that the total number of suppliers increased 12% to
203,000.
We continue to connect growing numbers of customers to each
other, enhancing the interconnectedness of our network. Through our
newly created Digital Command Centre we will continue to segment
our customer base to actively engage with them.
Growing the number of connected suppliers remains a key factor
in the development of the business. This involves working closely
with our buyer customers to help them identify where they can
further benefit from digitising their accounts payable processes
and then supporting them in the change management required to
deliver this. Many of our buyer customers want to grow in this way
with our support, with the challenge always being the timing of
delivering this growth.
The first phase of a restructuring of the operations of Tungsten
Network was completed in FY16. This included: the reorganisation of
resources into separate teams to focus on the implementation of
buyer customers; the sale, implementation and support of supplier
customers; and the technical operations of Tungsten Network. The
restructuring allows for greater accountability and focus across
these teams. The second phase of the restructuring, to be completed
over FY17, will be to introduce greater process automation and
standardisation across these teams in order to increase their
efficiency.
Tungsten Network Finance
Revenue from Tungsten Network Early Payment was GBP194,000
(FY15: GBP120,000). This comprised GBP14,000 of income from
Tungsten Network Finance and GBP180,000 of income from Tungsten
Bank.
By the end of FY16, 361 suppliers had registered for Tungsten
Network Early Payment (FY15: 188). A total of GBP148.5 million of
invoices were paid through supplier accounts (FY15: GBP41.0
million), of which Tungsten financed GBP102.7 million (FY15:
GBP32.0 million). The average duration of financed invoices was 34
days (FY15: 33 days) and the average gross yield achieved was 6.3%
(FY15: 5.3%).
Shortly prior to the end of the period, in April 2016, Prabhat
Vira was appointed to lead the restructuring of Tungsten Network
Finance and he has already made strong progress.
Tungsten Bank
Following a strategic review, we took the decision to sell
Tungsten Bank. The Board had determined that the benefits of owning
a regulated firm like Tungsten Bank were outweighed by the fixed
costs of operating it, making the retail funding it might provide
for Tungsten Network Early Payment relatively expensive compared
with the Group's alternative funding arrangement with Insight
Investment. A sale agreement was announced in December 2015. The
divestment is progressing to plan and the acquirer is expected to
make its formal change of control application to the relevant
regulatory authorities shortly.
Following the sale, Tungsten will receive approximately GBP30
million in cash. While the sale is expected to complete by the end
of H1-FY17, in the event of unexpected delay we have secured a
GBP10 million revolving credit facility with HSBC to fund any
potential working capital shortfall.
The divestment of Tungsten Bank is expected to produce a net
reduction in run-rate costs of GBP2 million per annum. In FY16,
Tungsten Bank's operating expenses amounted to GBP2.8 million.
Tungsten Network Analytics
Despite positive feedback from our buyer customers, the Tungsten
Network Analytics product remains in development. Pilot users have
continued to react favourably throughout FY16 and we remain
confident that the core tool, offering access to real-time spend
data, can provide our customers with critical information to help
them make better buying decisions. We remain in discussions with
several buyer customers who are interested in buying the tool.
In order to stimulate demand, early in FY17 we will launch a
freemium, or limited feature, version of our Tungsten Network
Analytics tool to all buyer customers. This will give them access
to certain basic data analysis for free, with a paid-for upgrade
available for more advanced services.
We are also using the capabilities that our analytics tool
provides us in other areas of product development. For example, our
value-added tax reclaim product is built on the Tungsten Network
Analytics platform. In addition, as part of the development of
services we offer to our supplier customers, we will launch a form
of Tungsten Network Analytics geared to assist suppliers to make
optimal decisions informed by market level data.
FY17 Priorities
FY17 is a year for delivery. This includes the development of
opportunities to grow with our existing customers and attracting
new customers as the automation of accounts payable increases.
Equally as important is the capture of benefits from the change
underway across the business to achieve the operational excellence
we are targeting to provide outstanding products and services to
our customers in an efficient manner.
We expect to see benefits from our work to clarify our
organisational culture and principles, and invest in our people.
Each member of staff is clear how they contribute to ensuring
smarter, safer connections for our customers through a cross-border
compliant, many-to-many network by providing leading global
e-invoicing, purchase order, analytics and financing services.
We have an executive management team in place to achieve our
strategic objectives, and outstanding talent across the business to
support them. Our immediate aims are to be profitable on a monthly
EBITDA basis and to grow our revenues to at least GBP30 million in
FY17.
We have identified the initiatives to achieve monthly EBITDA
breakeven by the end of FY17, and we will continue to manage our
cost base while making the necessary investments in technology,
products, digital marketing and operational improvements. However,
we will not surrender future growth for the sake of reaching
monthly EBITDA breakeven by the end of our financial year in April.
We will be prepared to achieve this landmark later in calendar 2017
if we believe to do so is in the best interests of sustaining
long-term profitable growth and the creation of shareholder
value.
Following the sale of Tungsten Bank, we expect free cash
resources to be increased by approximately GBP30 million.
We are confident that we have the right strategy in place to
develop the business to achieve profitable growth and a successful
future.
Outlook
Subsequent to the end of our financial year, in June 2016 the UK
electorate voted to leave the European Union. This decision
commences a process expected to take a minimum of two years to
complete. The outcome of the process as regards the structure of
the UK's trade relationships without European Union membership is
unknown. There will be uncertainty over this period and the role
that Tungsten Network plays in supporting businesses to navigate
international trade has never been more important. Over half of
Tungsten's revenues are denominated in currencies other than
sterling. We expect the effect of changes in the value of sterling
on our non-sterling denominated operating expenses to offset
broadly any currency-related movements in reported revenues.
We provide updated guidance on our expectations for trading as
follows:
-- Revenue of at least GBP30 million expected in FY17, with
upside potential reflecting the variability and phasing of new
customer sales and success of new product and service
initiatives
-- Operating costs to continue to decline in FY17 through a
combination of actions to increase automation, reduce headcount and
implement procurement efficiencies
-- On track to achieve monthly EBITDA breakeven in 2017, with
the precise month dependent on the phasing of new customer and
product sales
-- Expect FY17 EBITDA loss of between GBP12 million and GBP14
million, including expected GBP1.3 million EBITDA loss in Tungsten
Bank prior to sale, a reduction of between GBP6.7 million and
GBP4.7 million from FY16
-- Cash in excess of GBP20 million expected at 30 April 2017
-- Tungsten Network Early Payment financing levels anticipated
to double by end of FY17, with material impact on revenues expected
in FY18
Richard Hurwitz
Chief Executive
Chief Financial Officer's Review
Group Overview
After redefining our strategic objectives and putting in place
the plans to achieve them, Tungsten made demonstrable progress in
FY16 towards achieving its near-term target of monthly EBITDA
breakeven.
A restructuring of Tungsten's finance and planning teams has
provided the data and analysis that the business needs to put it on
a path toward achieving profitable growth. This contributed to the
standardisation of buyer pricing, serving to underpin average price
increases of 64% across the 34 buyer customers that renewed
contracts in FY16.
It has also helped to implement the cost disciplines required to
reduce adjusted operating expenses (operating expenses excluding
depreciation and amortisation, impairment and share based payment
expense) from GBP47.8 million in FY15 to GBP44.6 million in
FY16.
A sale of Tungsten Bank was agreed in December 2015. On
completion the disposal will help to reduce our operating
expenditure by approximately GBP2.0 million per annum, being a
GBP3.0 million gross reduction of Tungsten Bank's operating
expenses offset by approximately GBP1.0 million of additional costs
to provide our financing products through Tungsten Network
Finance.
Group revenue was GBP26.1 million (FY15: GBP22.5 million(1) ),
representing an increase of 16%.
Revenue from buyers grew 17.3% to GBP10.1 million (FY15: GBP8.6
million(1) ), reflecting price and volume increases of GBP2.0
million offset by a fall in setup and other one-off fees of GBP0.5
million. Revenue from suppliers grew 15% to GBP15.8 million (FY15:
GBP13.8 million), reflecting a net increase of 22,000 Integrated
and Web Form supplier customers and a change in the structure of
supplier pricing.
Revenue from Tungsten Network Finance, including Tungsten Bank,
was GBP0.2 million (FY15: GBP0.1 million).
Group EBITDA loss was GBP18.7 million (FY15: GBP25.2 million(1)
), reflecting a decrease in adjusted operating expenses by GBP3.2
million to GBP44.6 million (FY15: GBP47.8 million). There has been
significant focus across the business on cost control, resulting in
a reduction in one-off costs and in particular professional fees
associated with the setup of Tungsten Network Early Payment, which
totalled GBP6.6 million in FY15, cost and procurement savings of
GBP1.9 million, and decreased bad debt expense of GBP0.7 million.
These were offset by an increase in staff costs of GBP2.8 million,
reflecting the annualisation of new employee hires over FY15 and
the appointment of additional senior executives to the business,
increased systems costs of GBP2.0 million being primarily the
expense of repurposing operations, and marketing costs of GBP0.6
million.
Group EBITDA loss included GBP4.4 million of one-off costs which
are not expected to recur (FY15: GBP11.3 million). This included
GBP0.5 million of costs related to operational restructuring, and
GBP3.2 million of professional fees, primarily legal and regulatory
fees associated with Tungsten Network Finance.
The Group loss before tax was GBP28.6 million (FY15: GBP27.9
million(1) ). This includes depreciation and amortisation of GBP2.5
million (FY15: GBP2.3 million), impairment in the carrying value of
the investment in Tungsten Bank of GBP6.8 million (FY15: Nil), and
GBP0.5 million of share based expenses (FY15: GBP0.2 million). It
also includes other income of GBP0.3 million following the
settlement in cash of deferred consideration owed on the
acquisition of Image Integration Systems, Inc. which owned the
DocuSphere business.
The Group loss after tax was GBP27.9 million (FY15: GBP27.6
million(1) ) reflecting a tax credit of GBP0.7 million (FY15:
GBP0.3 million), principally relating to non-cash movements on the
unwinding of deferred tax recognised on acquired intangible assets.
The Group has an unrecognised deferred tax asset of approximately
GBP11.2 million that is available for offset against future tax
expenses in the Companies in which losses arise.
Segmental Performance
Tungsten Network
Revenue from Tungsten Network was GBP25.9 million (FY15: GBP22.4
million(1) ), growth of 16%. Tungsten Network revenue can be split
as follows:
Buyers
-- Revenue from 175 buyer customers of GBP10.1 million (FY15:
GBP8.6 million(1) ), including GBP7.4 million from e-invoicing
buyers (FY15: GBP7.2 million(1) ) and GBP2.7 million from buyers
that solely take the Tungsten Network Workflow product (FY15:
GBP1.4 million);
-- Buyer setup and other one-off fees decreased by GBP1.1
million to GBP0.8 million (FY15: GBP1.9 million) reflecting the
significant setup fees from buyers such as GE and Siemens that were
recognised in the prior period;
-- The impact on FY16 revenue of contractual price increases
agreed with current buyers in the current period was GBP0.4
million; and,
-- Revenue from Tungsten Network Analytics in the period was GBP33,000 (FY15: nil).
Suppliers
-- Revenue of GBP15.8 million (FY15: GBP13.1 million), split 80%
Integrated suppliers and 20% Web Form suppliers (FY15: split of
86%/14%).
Other revenue was negligible in FY16 (FY15: GBP0.7 million).
Tungsten Network adjusted operating expenses were GBP36.1
million (FY15: GBP28.3 million). Tungsten Network EBITDA loss for
the period was GBP5.8 million (FY15: GBP5.7 million).
Tungsten Network Finance
Tungsten Network Finance includes the origination and operations
of Tungsten's financing activities, excluding Tungsten Bank.
Revenue from Tungsten Network Finance was GBP14,000 in FY16 (FY15:
nil).
The revenue presented for Tungsten Network Finance is shown net
of the share of Tungsten Network Early Payment fees due under the
arrangement with Insight Investment. Total Tungsten Network Early
Payment fees in FY16 were GBP611,000 (FY15: GBP153,000). These were
split as follows:
Tungsten Network Finance; GBP14,000 (FY15: nil)
Insight Investment; GBP417,000 (FY15: GBP33,000)
Tungsten Bank; GBP180,000 (FY15: GBP120,000)
Tungsten Network Finance adjusted operating expenses were GBP3.8
million (FY15: GBP10.6 million). The decrease primarily reflects
the reduction of one-off setup costs.
Tungsten Bank
Tungsten Bank revenue in FY16 totalled GBP180,000 (FY15:
GBP120,000).
Tungsten Bank's adjusted operating expenses were GBP2.8 million
(FY15: GBP2.3million). The increase primarily reflects increased
compliance costs.
Corporate
The Corporate EBITDA loss was GBP6.6 million (FY15: GBP6.8
million). Tungsten continues to look for opportunities to reduce
its corporate costs.
Cash Flow
The cash outflow from operating activities was GBP21.6 million
(FY15: GBP31.2 million(1) ), compared to EBITDA of GBP18.7 million
(FY15: GBP25.2 million(1) ).
Trade and other receivables grew GBP0.9 million from 30 April
2015. The increase was primarily a result of operational issues
with the introduction of a new credit control system. Process
improvements made over H2-FY16 did not have the expected impact on
debtor balances and subsequent to the year-end personnel changes
were made to the credit control team which the Board expects to
have an impact by the end of H1-FY17.
Trade and other payables decreased by GBP0.7 million from 30
April 2015, primarily reflecting a decrease in accruals for goods
and services provided but not invoiced at the year-end.
Tungsten Network Early Payment invoice receivables held by the
Group increased from GBP6.4 million at 30 April 2015 to GBP7.3
million, resulting in a cash outflow of GBP0.9 million.
There was a cash inflow from the equity fundraising in May 2015
of GBP16.7 million, net of fees.
Liquidity and Going Concern
Cash and cash equivalents were GBP27.0 million at the end of
FY16 (FY15: GBP32.6 million), an outflow of GBP5.6 million.
Excluding the cash held by Tungsten Bank of GBP17.8 million (FY15:
GBP19.5 million), Tungsten had cash available to the Group of
GBP9.3 million (FY15: GBP13.1 million).
The Group expects to complete the sale of Tungsten Bank by the
end of H1-FY17. On completion, the Group will receive the cash on
hand and invoice receivables (respectively GBP17.8 million and
GBP7.3 million as at 30 April 2016) and a goodwill payment of
approximately GBP4.0 million.
Subsequent to the end of the financial year, in July 2016 the
Group agreed a revolving capital facility of GBP10 million with its
principal bank, HSBC. The facility would be utilised to contribute
to the Company's working capital in the event that the sale of
Tungsten Bank is not completed as expected.
Loss Per Share
The basic and diluted loss per share was 22.52p (FY15: 26.92p
loss per share(1) ). On an adjusted basis excluding share-based
payments, other income, impairments and acquisition-related
amortisation, basic and diluted loss per share was 16.85p compared
to 16.73p in FY15.
Post Balance Sheet Event - UK Referendum on European Union
Membership
On 23 June 2016 the UK electorate voted to leave the European
Union. This decision commences a process that is expected to take a
minimum of two years to complete. The outcome of the process is
unknown as regards the structure of the UK's trade relationships
without European Union membership. There will be a resulting period
of uncertainty for the UK economy, with increased volatility
expected in financial markets. This event does not impact the fair
value of assets and liabilities reported at the balance sheet date
of 30 April 2016.
David Williams
Chief Financial Officer
Consolidated income statement
Year Year
Ended Ended
Note 30 April 30 April
2016 2015
GBP'000 (restated)
GBP'000
Revenue 26,083 22,549
Operating expenses (54,358) (50,237)
================================================ ================= ====================
Operating loss (28,275) (27,688)
------------------------------------------------- ----------------- --------------------
EBITDA (18,748) (25,228)
Depreciation and amortisation (2,520) (2,263)
Impairment (6,810) -
Share-based payment expense 8 (478) (197)
Other income 281 -
------------------------------------------------ ----------------- --------------------
Operating loss (28,275) (27,688)
------------------------------------------------- ----------------- --------------------
Finance income 83 108
Finance costs (371) (332)
================================================ ================= ====================
Net finance costs (288) (224)
================================================= ================= ====================
Loss before taxation (28,563) (27,912)
------------------------------------------------- ----------------- --------------------
Taxation 705 302
================================================ ================= ====================
Loss for the year (27,858) (27,610)
------------------------------------------------- ----------------- --------------------
Loss per share (expressed in pence per share):
================================================= ================= ====================
Basic and diluted loss per
share 9 (22.52) (26.92)
------------------------------------------------ ----------------- --------------------
Consolidated statement of comprehensive income
Year Year
Ended Ended
Note 30 April 30 April
2016 2015
GBP'000 (restated)
GBP'000
Loss for the year (27,858) (27,610)
Other comprehensive income:
Currency translation differences 320 1,033
======================================= ================== ===================
Total comprehensive loss for the year (27,538) (26,577)
--------------------------------------- ------------------ -------------------
Items in the statement above are disclosed net of tax.
Consolidated statement of financial position
Registered number: 07934335
As at As at
30 April 30 April
Note 2016 2015
GBP'000 (restated)
GBP'000
Assets
Non-current assets
Intangible assets 4 116,770 128,126
Property, plant and equipment 5 1,924 2,211
Trade and other receivables 539 624
===================================== ================== ====================
Total non-current assets 119,233 130,961
-------------------------------------- ------------------ --------------------
Current assets
Trade and other receivables 8,726 7,783
Invoice receivables - 6,392
Cash and cash equivalents 9,268 32,603
Assets held for sale 6 28,737 -
===================================== ================== ====================
Total current assets 46,731 46,778
-------------------------------------- ------------------ --------------------
Total assets 165,964 177,739
------------------------------------- ------------------ --------------------
Capital and reserves attributable
to the equity owners of the parent
Share capital 553 454
Share premium 188,794 171,875
Shares to be issued 3,760 3,760
Merger reserve 28,035 28,035
Share-based payment reserve 5,419 5,237
Other reserve (4,019) (4,339)
Accumulated losses (76,408) (48,550)
===================================== ================== ====================
Total equity 146,134 156,472
-------------------------------------- ------------------ --------------------
Non-current liabilities
Deferred taxation 3,010 4,006
===================================== ================== ====================
Total non-current liabilities 3,010 4,006
-------------------------------------- ------------------ --------------------
Current liabilities
Trade and other payables 7,490 8,628
Deferred income 8,318 8,633
Liabilities directly associated
with assets held for sale 6 1,012 -
===================================== ================== ====================
Total current liabilities 16,820 17,261
====================================== ================== ====================
Total liabilities 19,830 21,267
====================================== ================== ====================
Total equity and liabilities 165,964 177,739
------------------------------------- ------------------ --------------------
Consolidated statement of changes in equity
Year ended 30
April 2016
Shares Share-based
Share Share Merger to payment Other Accumulated
be
Capital premium reserve issued reserve reserve losses Total
equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at
1 May 2015 454 171,875 28,035 3,760 5,237 (4,339) (48,550) 156,472
Currency
translation
differences1 - - - - - 320 320
Loss for the
year - - - - - - (27,858) (27,858)
============== =============== ============== ============= ============ ================ ============= =============== ==============
Balance as at
30 April 2016 454 171,875 28,035 3,760 5,237 (4,019) (76,408) 128,934
-------------- --------------- -------------- ------------- ------------ ---------------- ------------- --------------- --------------
Transactions
with
owners
Shares issued
during the
year 99 16,919 - - - - - 17,018
Share-based
payment
expense - - - - 182 - - 182
============== =============== ============== ============= ============ ================ ============= =============== ==============
Balance as at
30 April 2016 553 188,794 28,035 3,760 5,419 (4,019) (76,408) 146,134
-------------- --------------- -------------- ------------- ------------ ---------------- ------------- --------------- --------------
1 Agreed to Consolidated statement of comprehensive Income.
Year ended 30
April
2015
(restated)
Shares Share-based
Share Share Merger to payment Other Accumulated
be
Capital premium reserve issued reserve reserve losses Total
equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at
1
May 2014 438 160,127 28,035 3,760 5,040 (5,372) (20,940) 171,088
Currency
translation
differences - - - - - 1,033 - 1,033
Loss for the
year - - - - - - (27,610) (27,610)
============== ========= ============== ============= ============ ================ ============= =============== ==============
Balance as at
30
April 2015 438 160,127 28,035 3,760 5,040 (4,339) (48,550) 144,511
-------------- --------- -------------- ------------- ------------ ---------------- ------------- --------------- --------------
Transactions
with
owners
Shares issued
during
the year 16 11,748 - - - - - 11,764
Share-based
payment
expense - - - - 197 - - 197
============== ========= ============== ============= ============ ================ ============= =============== ==============
Balance as at
30
April 2015 454 171,875 28,035 3,760 5,237 (4,339) (48,550) 156,472
-------------- --------- -------------- ------------- ------------ ---------------- ------------- --------------- --------------
Consolidated statement of cash flows
Year Year
Ended Ended
Note 30 April 30 April
2016 2015
GBP'000 (restated)
GBP'000
Cash flows from operating activities
Loss before taxation (28,563) (27,912)
Adjustments for:
Depreciation and amortisation 2,520 2,263
Impairment charge 6,810 -
Finance costs 371 332
Finance income (83) (108)
Share-based payment expense 478 197
Other Income (281) -
================================================= ================= ====================
Cash generated from operations (18,748) (25,228)
------------------------------------------------- ----------------- --------------------
Changes in working capital:
Increase in trade and other receivables (882) (1,681)
Increase in invoice receivables (937) (6,392)
Increase/(decrease) in trade and other payables (732) 1,639
Net interest received/(paid) (307) 108
================================================= ================= ====================
Net cash outflow from operating activities (21,606) (31,554)
------------------------------------------------- ----------------- --------------------
Cash flows from investing activities
Purchases of property, plant and equipment (255) (825)
Purchases of intangibles (912) (271)
Acquisition of subsidiary, net of cash acquired - (9,573)
================================================= ================= ====================
Net cash outflow from investing activities (1,167) (10,669)
------------------------------------------------- ----------------- --------------------
Cash flows from financing activities
Proceeds of share issue 16,721 11,765
================================================= ================= ====================
Net cash inflow from financing activities 16,721 11,765
------------------------------------------------- ----------------- --------------------
Net decrease in cash and cash equivalents (6,052) (30,458)
Cash and cash equivalents at start of year 32,603 62,646
Exchange adjustments 472 415
================================================= ================= ====================
Cash and cash equivalents at
end of year 27,023 32,603
------------------------------------------------- ----------------- --------------------
Cash and cash equivalents includes cash held across the entities
within Tungsten Group in addition to cash held by Tungsten Bank
which has been reclassified as Assets Held for Sale (Note 15).
Accounting Policies
1. Basis of preparation
The preliminary announcement for the year ended 30 April 2016
was approved by the Board of Directors on 22 July 2016. The
financial information set out above does not constitute the Group's
statutory accounts for the year ended 30 April 2016 but is derived
from those accounts.
The Group's results have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the EU.
2. Prior Period Adjustment
The Group provides services to its buyer customers pursuant to
contracts that are typically three years in length. Where a buyer
is out of contract at a year end and negotiations for a new
contract are ongoing the Group will accrue the revenue up to the
year end on the same terms as the expired contract. This accrued
revenue is then unwound in the subsequent year as a new contract is
agreed and the accrued amounts are invoiced.
Following significant change to people and control processes in
the Group's finance team GBP0.6 million of accrued revenue from
FY14 has been identified as not having been unwound in FY15. In
order to aid comparability of revenue and profitability between
FY15 and FY16, revenue in the comparative year has been reduced by
GBP0.6 million. Accordingly, the EBITDA loss, the retained loss for
the year and equity have been reduced by GBP0.6 million, with a
consequential impact on earnings per share.
3. Segment report
Management have determined the operating segments based on the
operating reports reviewed by the Board of Directors that are used
to assess both performance and strategic decisions. Management has
identified that the Board of Directors is the chief operating
decision maker (CODM).
During the year the operations and management of Tungsten
Network Finance and Tungsten Bank were separated. Each now have
clearly separate management teams and decision making bodies. As a
result, Tungsten Bank is shown as a separate segment in these
accounts.
The Board of Directors reviews financial information for four
segments: Tungsten Network (which includes the e-Invoicing and
spend analytics business of Tungsten Network), Tungsten Network
Finance (which includes the supply chain finance business),
Tungsten Bank and Corporate (which includes overheads and general
corporate costs). Intersegment revenue from management fees is
eliminated below.
Year ended 30 April 2016
Tungsten
Tungsten Network Tungsten
Note Network Finance Bank Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 25,889 14 180 - 26,083
========================== =================== ============ ================ ================= ================
Segment revenue 25,889 14 180 - 26,083
-------------------------- ------------------- ------------ ---------------- ----------------- ----------------
EBITDA1 - excluding
non-cash
share-based payment (5,768) (3,779) (2,594) (6,607) (18,748)
EBITDA - including
non-cash
share-based payments (5,770) (3,779) (2,594) (7,083) (19,226)
Share-based payment 7 (2) - - (476) (478)
Depreciation,
amortisation
and impairment (2,259) (89) (6,810) (172) (9,330)
Finance income 25 - - 58 83
Finance cost (151) (182) (35) (3) (371)
Other income 281 - - - 281
------------------------- ------------------- ------------ ---------------- ----------------- ----------------
Loss before taxation (7,874) (4,050) (9,439) (7,200) (28,563)
Income tax credit 705
========================== =================== ============ ================ ================= ================
Loss for the year (27,858)
-------------------------- ----------------------------------------------------------------------------------------
Capital expenditure 900 31 170 66 1,167
Total assets 127,488 292 28,737 9,447 165,964
Total liabilities 15,853 580 1,021 2,376 19,830
-------------------------- ------------------- ------------ ---------------- ----------------- ----------------
1 EBITDA is calculated as earnings before other income,
interest, tax, depreciation and amortisation.
Year ended 30 April 2015 (restated)
Tungsten
Tungsten Network Tungsten
Network Finance Bank Corporate Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 22,429 - 120 - 22,549
===================================== ============== ============= ============== =============== ===============
Segment revenue 22,429 - 120 - 22,549
------------------------------------- -------------- ------------- -------------- --------------- ---------------
EBITDA1 - excluding non-cash
share-based payments (5,732) (10,578) (2,115) (6,803) (25,228)
Share-based payments - - - (197) (197)
Depreciation and amortisation (1,747) (370) - (146) (2,263)
Finance income (449) (7) - 564 108
Finance cost 5 - - (337) (332)
------------------------------------- -------------- ------------- -------------- --------------- ---------------
Loss before taxation (7,923) (10,955) (2,115) (6,919) (27,912)
Income tax credit 302
===================================== ============== ============= ============== =============== ===============
Loss for the year - - - - (27,610)
------------------------------------- -------------- ------------- -------------- --------------- ---------------
Capital expenditure 15,844 5 - 518 16,367
Total assets 125,572 548 35,780 15,839 177,739
Total liabilities 15,786 2,680 925 1,876 21,267
------------------------------------- -------------- ------------- -------------- --------------- ---------------
4. Intangible assets
Year ended 30 April 2016
Customer Software Software
Goodwill relationships IT licences development Total
Cost GBP'000 GBP'000 platform GBP'000 GBP'000 GBP'000
GBP'000
Balance at 1
May 2015 108,338 11,098 6,712 4,304 331 130,783
Reclassified
as held for
sale (10,280) (10,280)
Additions: - - - 557 355 912
Disposals: - - - (131) - (131)
Exchange
differences 140 5 244 (15) (23) 351
============== ================ ===================== ================ ============== =================== ===============
Balance at 30
April 2016 98,198 11,103 6,956 4,715 663 121,635
-------------- ---------------- --------------------- ---------------- -------------- ------------------- ---------------
Accumulated
amortisation
Balance at 1
May 2015 - 859 1,244 223 331 2,657
Amortisation
charge - 569 987 208 253 2,017
Impairment
charge 6,810 - - - - 6,810
Impairment
reclassified
as held for
sale (6,810) - - - - (6,810)
Exchange
differences - 3 183 (2) 7 191
============== ================ ===================== ================ ============== =================== ===============
Balance at 30
April 2016 - 1,431 2,414 429 591 4,865
-------------- ---------------- --------------------- ---------------- -------------- ------------------- ---------------
Net asset
value 30
April
2015 108,338 10,239 5,468 4,081 - 128,126
============== ================ ===================== ================ ============== =================== ===============
Net asset
value 30
April
2016 98,198 9,672 4,542 4,286 72 116,770
-------------- ---------------- --------------------- ---------------- -------------- ------------------- ---------------
Tungsten Network
The Group has estimated the recoverable amount of the Tungsten
Network CGU using a value-in-use model by projecting cash flows for
the next five years together with a terminal value using a growth
rate. The five-year plans used in the impairment models are based
on Board approved budgets and management's past experience and
future expectations of performance. The cash flow projections are
based on the following key assumptions:
-- Revenue growth from buyers and suppliers using the Tungsten
Network, including Tungsten Workflow and Tungsten Analytics at a
compound annual growth rate of 15%
-- Pre-tax discount rate of 14.4% (2015: 9.7%), being based on
the Group's weighted average cost of capital (WACC)
-- Growth rate used in the annuity of 2.0% (2015: 2.0%). This
does not exceed the long-term expected economic average growth of
the territories in which the Group operates in.
Based on the above assumptions, Tungsten Network exceeded the
carrying value of the CGU by GBP21.3 million
(2015: GBP143.7 million). Had the 2015 pre-tax discount rate of
9.7% been applied then the carrying value would have exceeded the
CGU by GBP131.5 million. The recoverable amount of the Tungsten
Network CGU was particularly sensitive to changes in the compound
annual revenue growth rate. Assuming that there is a reduction in
the compound annual growth rate to 13.1% the recoverable amount
would equal the carrying value of the CGU.
Tungsten Bank
The Group has estimated the recoverable amount of the Tungsten
Bank CGU using a fair value less costs to sell methodology. The
recoverable amount of the Tungsten Bank CGU has been calculated
based on management's best estimate of consideration receivable for
the proposed sale of Tungsten Bank less directly attributable costs
of sale. Accordingly, the Group has recognised an impairment of
GBP6.8 million in the value of Tungsten Bank.
5. Property, plant and equipment
Year ended 30 April 2016
Leasehold Fixtures Computer
improvements and equipment Total
fittings
GBP'000 GBP'000 GBP'000 GBP'000
Cost
Balance at 1 May 2015 2,384 383 2,086 4,853
Additions 18 113 124 255
Disposals - (25) (9) (34)
Exchange differences (36) 92 331 387
=========================== ================= ============== ============== =============
Balance at 30 April 2016 2,366 563 2,532 5,461
--------------------------- ----------------- -------------- -------------- -------------
Accumulated depreciation
Balance at 1 May 2015 568 312 1,762 2,642
Charge for the year 188 35 280 503
Exchange 12 82 298 392
=========================== ================= ============== ============== =============
At 30 April 2016 768 429 2,340 3,537
--------------------------- ----------------- -------------- -------------- -------------
Net Book Value
=========================== ================= ============== ============== =============
At 30 April 2016 1,598 134 192 1,924
=========================== ================= ============== ============== =============
At 30 April 2015 1,816 71 324 2,211
--------------------------- ----------------- -------------- -------------- -------------
6. Assets Held for Sale
Assets Held for Sale relate to Tungsten Bank. The assets held
for sale and liabilities directly associated with assets held for
sale are:
As at 30 As at
April 30 April
2016 2015
GBP'000 GBP'000
Assets classified as held for sale
Intangible assets - balance as at 1 May 2015 10,280 -
Impairment (6,810) -
Trade and other receivables 183 -
Invoice receivables 7,329 -
Cash and cash equivalents 17,755 -
=============================================================================== =============================== ==================
Total assets of the disposal group 28,737 -
------------------------------------------------------------------------------- ------------------------------- ------------------
Liabilities directly associated with assets
held for sale
Trade and other payables 352 -
Deferred taxation 660 -
=============================================================================== =============================== ==================
Total liabilities of the disposal group 1,012 -
=============================================================================== =============================== ==================
Total net assets of the disposal group 27,725 -
------------------------------------------------------------------------------- ------------------------------- ------------------
7. Share capital and share premium
Ordinary shares Share Share
Nominal capital premium
Issued and fully paid Number value GBP'000 GBP'000
Balance as at 1 May 2014 100,000,000 GBP0.004384 438 160,127
Shares issued during the
year 3,529,412 GBP0.004384 16 11,748
============================ =========================================== =========== ========== ===========
Balance as at 30 April 2015 103,529,412 454 171,875
Shares issued during the
year 22,539,985 GBP0.004384 99 16,919
Balance as at 30 April 2016 126,069,397 553 188,794
============================ =========================================== =========== ========== ===========
On 28 May 2015, the Company issued 21,875,985 shares for total
proceeds of GBP17.5 million. Transaction costs of GBP0.8 million
associated with the raising of the share capital have been
recognised against the share premium account.
On 7 January 2016, 664,000 shares of 0.438p were awarded to
Richard Hurwitz pursuant to the terms of his service agreement put
in place following his appointment as the Company's Chief Executive
Officer in July 2015.
8. Share-based payments
A share-based payment expense of GBP0.5 million has been
recognised in the consolidated income statement for the year ended
30 April 2016 (30 April 2015: GBP0.2 million). The table below sets
out the movement in shares granted under the Company share
schemes:
Employee Save
Founder Matched as you Share-based Employee
Number Securities Shares Earn payments Share Total
Shares Options
As at 30 April
2014 3,760,000 - - - - 3,760,000
Granted during the
year - 454,026 261,344 450,515 - 1,165,885
Lapsed during the
year - (33,068) (4,000) - - (37,068)
================== ================== ============ ============= =============== ============== ================
As at 30 April
2015 3,760,000 420,958 257,344 450,515 - 4,888,817
------------------ ------------------ ------------ ------------- --------------- -------------- ----------------
Granted during
the year - - - 115,000 1,064,000 1,179,000
Lapsed during the
year - (169,471) (191,424) (25,515) (153,375) (539,785)
================== ================== ============ ============= =============== ============== ================
As at 30 April
2016 3,760,000 251,487 65,920 540,000 910,625 5,528,032
------------------ ------------------ ------------ ------------- --------------- -------------- ----------------
9. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to the ordinary shareholders by the weighted average
number of ordinary shares in issue during the year.
30 April 30 April 2015 )
Loss 2016 EPS (restated EPS
GBP'000 p Loss p
Shares GBP'000 Shares
Basic and diluted (27,858) 123,715 (22.52) (27,610) 102,582 (26.92)
EPS may be subject to future dilution as a result of the issue
of shares pursuant to the LTIP Securities and SAYE scheme.
10. Related-party transactions
The Group entered into the following transactions with related
parties in the ordinary course of business:
For the For the year
year ended ended
30 April 30 April
2016 2015
GBP'000 GBP'000
Purchase of services 1,094 427
--------------------- ------------ ------------
Canaccord was broker to the Group and acted as the sole book
runner on the placing that took place during the year. Peter
Kiernan held the position of Chairman of European Investment
Banking at Canaccord until June 2015 and
subsequently became a senior advisor to the firm and, as a
consequence of this role, Canaccord is considered a related party
of the Tungsten Group. Mr Kiernan took no part in the negotiation
of the terms of Canaccord's engagement or the terms of the Placing
Agreement for the share placing. The Group received services from
Canaccord totalling GBP0.7 million (2015: GBP0.3 million).
Ice Floe Limited (Ice Floe) is a Guernsey registered financial
advisory company controlled by Edmund Truell. During the year, Ice
Floe provided services to the Group totalling GBP0.3 million (2015:
GBP0.1 million) for the purposes of furthering the management and
strategic development of the Group, all of which were paid in the
year. These services were provided pursuant to the terms of a
consultancy agreement entered into between Ice Floe and the
Company, under which the services of Mr Truell were made available
to the Company. Tungsten terminated its agreement with Ice Floe on
10 November 2015. Based upon legal advice received, the Board does
not believe that any termination payments are likely to be due to
Ice Floe and accordingly no provision for them has been made.
Disruptive Capital Finance LLP (Disruptive) is an investment
partnership controlled by Edmund Truell. During the year,
Disruptive provided consultancy services to the Group totalling
GBP0.2 million (2015: GBPnil) to perform the function of Chief
Technology Officer.
Transactions between Group entities principally relate to
intercompany financing arrangements which are eliminated on
consolidation
Key management personnel
Key management includes Directors - Executive and Non-Executive
- who are responsible for controlling and directing the activities
of the Group. The compensation paid or payable to key management
for employee services is shown below:
For the For the
year ended year
ended 30 April
30 April
2016 2015
GBP'000 GBP'000
Short-term employee benefits 1,763 1,552
Share-based payments 478 197
========================================================= ============================= ============================
Total 2,241 1,749
--------------------------------------------------------- ----------------------------- ----------------------------
Further details of the Directors' remuneration can be found in
the table on page 41 of the Annual Report and financial statements
2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR RIMBTMBJTTRF
(END) Dow Jones Newswires
July 25, 2016 02:00 ET (06:00 GMT)
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