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 +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
Neustria Partners
Robert Bailhache/Nick Henderson/Charles
Gorman [email] +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 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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END
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