TIDMTUNG
RNS Number : 3560V
Tungsten Corporation PLC
13 December 2021
Embargoed Release: 07:00hrs Monday, 13 December 2021
TUNGSTEN CORPORATION PLC
('Tungsten' or the 'Company')
INTERIM RESULTS FOR THE SIX MONTHSED 31 OCTOBER 2021
Tungsten Corporation plc (AIM: TUNG), a leading provider of
digital financial management products and software solutions,
announces the following unaudited interim results for the six
months ended 31 October 2021:
Group results
GBPm H1--FY22 H1--FY21
--------------------------------
Revenue 18.3 18.0
Gross profit (1) 16.9 16.7
Adjusted operating expenses
(2) 13.9 15.9
Adjusted EBITDA (3) 3.0 0.8
Adjusted EBITDA margin
(4) 17% 5%
Operating profit/(loss) 0.8 (29.9)
Operating profit/(loss)
excluding goodwill impairment 0.8 (3.7)
Net cash (5) 1.9 1.0
New sales billings (6) 1.3 2.1
Total contract value
(7) 0.9 1.9
Transaction volumes 9.4m 9.0m
-------------------------------- --------- ---------
Financial highlights
-- Group revenue increased by 2% to GBP18.3 million and by 5% on a constant currency basis.
-- 94% of revenue was repeatable and recurring in line with H1-FY21.
-- Gross profit was GBP16.9 million, an increase of GBP0.2 million from H1-FY21.
-- Adjusted EBITDA of GBP3.0 million, up GBP2.2 million from
H1-FY21, with an increase of gross profit of GBP0.2 million and a
reduction in operating expenses of GBP2.0 million, driven by staff
cost savings of GBP1.8 million arising from FY-21 restructuring
activities.
-- Statutory operating profit of GBP0.8 million versus a loss of
GBP29.9 million in H1-FY21, with H1-FY21 including a GBP26.2
million impairment charge.
-- Net cash of GBP1.9 million, a GBP0.9 million increase from
H1-FY21, primarily driven by reduced costs
-- Provision booked of GBP1.3 million to exceptionals relating
to post period end settlement of an employment claim made against
the Company initiated in FY-20.
Operational highlights
-- 13 upsells with TCV of GBP722k (18% increase v H1-FY21) .
-- Transaction volumes of 9.4 million, an increase of 5%.
-- One new customer Accounts Receivable ("AR") win with Total
Contract Value ("TCV") of GBP0.2 million.
-- New sales billings of GBP1.3 million (H1-FY21 GBP2.1 million).
-- Appointment of new CEO and new Chief Sales Officer.
-- Account Payable ("AP") supplier churn(8) reduction of 4% to 8%.
-- Significantly improved Buyer retention. In H1-FY22 we lost 2
AP Buyers with annual recurring revenue of GBP54k (1% of Buyer ARR)
against loss of 14 AP Buyers with annual recurring revenue ("ARR")
of GBP207k in H1-FY21 (2% of buyer ARR).
-- Second customer contract signed to provide supply chain
financing through our Orbian partnership for an existing customer
with current annual invoices totaling GBP6.7 billion across the
Tungsten Network
-- To date, two new buyers are live with our partnership with a
leading US bank, representing potential new invoice volumes to
Tungsten of around 185,000 annually.
Current Trading and FY22 outlook
-- Customer wins in H1 were behind our expectations as a result
of some prolonged customer decisions and changes in the sales team,
however we are confident of securing further new customer wins for
the remainder of the year.
-- Whilst upsells and new customer wins to 31 October 2021 will
contribute revenue of GBP512k for FY22, the continued weakening of
the US$ in FY22 versus FY21 is expected to have an impact on our
underlying year on year growth rates. (H1-FY21 average rate was
1.28 with H1-FY22 average rate at 1.38).
-- Continued to exert tight control on the cost base which
combined with the delayed planned GBP1 million investment in our
tech development and compliance functions will lead to cost savings
in FY22, we expect to commence this investment in Q4-FY22.
-- Partnership signed post period end with Amazon Business in
Europe and the US to support outbound AR supplier invoicing to
buyers on and off network.
-- Whilst we are committed to an additional cash spend of GBP1.5
million relating to settlement of a FY-2020 employment claim
against the Company, through cost control and temporary head count
savings referred to above we expect to mitigate the cash impact in
H2-FY22 and do not expect to increase our current draw down of
GBP2m under the facility.
Paul Cooper, Chief Executive Officer of Tungsten Corporation
plc, said:
"We are encouraged by progress made in the period with some
significant strategic wins across our portfolio and partnership
offerings. Our focus on product and technology innovation has
continued to enhance the experience of customers and partners
across our digital ecosystem. The Tungsten team remain committed to
supporting global enterprises realise tangible operational
efficiency in uncertain economic times, and ensuring robust risk
management as invoicing regulation continues to proliferate across
the globe."
1 Gross profit is calculated as revenue less cost of sales.
2 Adjusted operating expenses exclude cost of sales, net finance
cost, tax, depreciation and amortisation, impairment of goodwill,
impairment of intangible assets, impairment of right of use assets,
impairment of leasehold improvements, loss on disposal of assets,
foreign exchange gain or loss, share-based payment expense and
exceptional items and is adjusted to include lease payments.
3 Adjusted EBITDA is calculated as earnings before net finance
cost, tax, depreciation and amortisation, impairment of goodwill,
impairment of intangible assets, impairment of right of use assets,
impairment of leasehold improvements, loss on disposal of assets,
foreign exchange gain or loss, share-based payment expense and
exceptional items and is adjusted to include lease payments
4 Adjusted EBITDA margin is defined as Adjusted EBITDA divided
by revenue.
5 Net cash is calculated as cash and cash equivalents on the
balance sheet less drawings under the HSBC Revolving Credit
Facility.
6 New sales billings represents implementation, subscription,
licence, transaction and professional services fees to be billed in
the period from new sales made in that period. Implementation and
subscription fees are recognised to revenue over the 6 months and
12 months respectively from billing month. Subscription licence and
transaction fees are recognised in the month sold. Professional
services fees are recognised on work completion milestones.
7 Total contract value ('TCV') is defined as annual recurring
revenue and one off implementation revenue contracted with a new
customer or an upsell with an existing customer.
8 H1-FY22 AP Supplier churn % represents the loss of AP
Suppliers in the year to 31 October 2021 divided by the number of
AP Suppliers as at 31 October 2020.
Investor Meet Company presentation
Paul Cooper, Chief Executive Officer and Ian Kelly, Chief
Financial Officer, will provide a live presentation relating to the
interim results via the Investor Meet Company platform today at
11:00am. Those who wish to attend the event will be required to
register in advance, and is open to all existing and potential
shareholders. Please follow the link to register your
attendance:
https://www.investormeetcompany.com/tungsten-corporation-plc/register-investor
Enquiries
Tungsten Corporation plc
P aul Cooper , Chief Executive Officer
Ian Kelly, Chief Financial Officer +44 20 7280 6980
Canaccord Genuity Ltd (Nominated Advisor
& Broker)
Simon Bridges
Andrew Potts +44 20 7523 8000
Tavistock Communications Financial PR
& IR
Heather Armstrong
Jos Simson
Katie Hopkins +44 20 7920 3150
About Tungsten Corporation plc
Tungsten Corporation (AIM: TUNG) is the world's largest,
compliant business transaction network. A leading global electronic
invoicing and purchase order transactions network, Tungsten's
mission is centred on enabling a touchless invoice process allowing
businesses around the globe to gain maximum value from their
invoice process.
Tungsten processes invoices for 60% of the FTSE 100 and 68% of
the Fortune 500. It enables suppliers to submit tax compliant
e-invoices in 54 countries, and last year processed transactions
worth GBP220 billion for organisations such as Caesars
Entertainment, Computacenter, GlaxoSmithKline, Kraft Foods, Mohawk
Industries, Mondelēz International, Procter & Gamble, Shaw
Industries, Unilever and the US Federal Government.
Founded in 2000 and headquartered in London, Tungsten has
offices in the US, Bulgaria and Malaysia, employing over 200
people.
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.
This announcement contains inside information for the purposes
of article 7 of the Market Abuse Regulation (EU) 596/2014 as
amended by regulation 11 of the Market Abuse (Amendment) (EU Exit)
Regulations 2019/310. With the publication of this announcement,
this information is now considered to be in the public domain.
CEO Business Review
Overview
The first half of FY22 has seen encouraging progress for
Tungsten against a backdrop of gradual global economic recovery.
Within the overall performance, it's fair to say there have been
mixed results. Much improved profitability has been driven by
steadily recovering transaction related revenues, strong retention
and growth of existing customer contracts, optimised pricing
contributions and careful cost management. Whilst new deal bookings
have been lower than prior year, important strategic wins in the
period included our first Total AR customer win in the insurance
sector, a significant existing AP Buyer signing a new contract
under our Supply Chain Finance partnership with Orbian and two
buyers joining the network under the partnership we have with a
leading US bank. We continue to build our pipeline and focus on
closing new business opportunities through consultative engagements
focused on customer centric outcomes.
Our purpose
Our purpose is to partner with enterprise customers to transform
finance processes and maximise strategic business value across the
supply chain. As individuals, companies and governments around the
world continue to respond to the impact of the COVID-19 pandemic,
the importance of this purpose, and our value to business
continuity, has never been clearer. We remain committed to helping
global business leaders capture opportunities to emerge stronger
through business challenges and transformation.
The market
The pandemic continues to provide both opportunities and
challenges. Businesses continue to adapt admirably to the ongoing
lockdowns, shortages and delays in the supply chain, rising
commodity rises and anticipated inflationary pressures. These
market conditions have fuelled a higher prioritisation of digital
initiatives in most organisations to realise operational strength
and efficiency.
The number of countries implementing or making significant
changes to existing regulatory requirements for compliant invoicing
continues to accelerate. These requirements utilise increasingly
sophisticated technology tools and e-invoicing portals (or
gateways) to maximise visibility of every supply chain step and
minimise tax and invoice fraud.
Market trends clearly create exciting drivers that align to the
established strength of the Tungsten network and compliance
expertise.
Performance
Despite challenges around new customer wins driving a reduction
in new sales billings of GBP0.8 million from H1-FY21 to GBP1.3
million, we are pleased to report revenue growth of 5% on a
constant currency basis.
Adjusted EBITDA of GBP3 million for H1-FY22, was up GBP2.2
million from H1-FY21, primarily driven by staff cost savings of
GBP1.8 million arising from FY-21 restructuring activities.
Whilst not quite yet at pre-covid 19 levels of transactions
volumes we have also seen an increase in transaction volumes of 5%
to 9.4 million for H1-FY22.
We continue to make significant progress on reducing churn and
are pleased to report that our churn % for integrated suppliers has
reduced by 4% to 8%, whilst the annual recurring revenue buyer
churn impact has reduced from GBP207K in H1-FY21 (2% of buyer ARR),
to GBP54K in H1-FY22 (1% of buyer ARR).
In H1-FY22 we were informed by NTT that it will terminate the
contract announced in April 2021, but we shall continue to deliver
the Integrated Supplier Services that were previously in place.
This decision was not due to performance but based on a change in
NTT's procurement strategy. The decision has no impact on FY22
revenues and no material impact for FY23.
Strategic execution
As we entered FY22, we recognised that a coordinated and aligned
cross-functional strategy with tight focus and impeccable execution
will determine success in the year. It is clear that the following
strategic pillars have contributed positively to the performance in
H1 and remain critically relevant moving forward.
- Driving Core AP e-invoicing growth
As one of the electronic invoicing pioneers, we will continue to
leverage our extensive experience and passion for digitisation in
Accounts Payable ("AP") environments to deliver business critical
outcomes for customers. Our current AP buyer base offers
significant opportunities for expansion into wider geographies,
business units and spend categories and we have closed 13 upsells
of which 12 are AP and representing an 18% growth in TCV booking
value against the first half of last year.
- Riding the wave of compliance and opening the network
Tungsten continues to invest and stay at the forefront of
regulatory changes within global markets and provide trusted
advisory for customers and partners. With e-invoicing solutions in
both accounts payable to accounts receivable, we have expertly
addressed the distinct compliance requirements from both
perspectives. We address this complexity on behalf of our customers
in 54 countries and will expand this footprint as further mandates
emerge. In H1, our transaction volumes have now more than doubled
since government gateways were introduced in Germany, Italy and
India. We also focused our efforts on supporting customers in
preparation for major mandate updates in Greece, Saudi Arabia,
Italy and Mexico.
We continue to grow our interoperability partner base to access
numerous compatible networks in order to enlarge our transactional
footprint exponentially. This ability to seamlessly transact with
other networks underpins the growth plans for our Total AR and
Total AP solution. We have added six interoperability partners
since the start of the financial year.
- Drive full suite capabilities through partnerships
We have established a number of partnerships to drive capability
and scale to support customers with solutions that meet their
strategic needs. We have a number of go to market partnerships in
place and are targeting further for the remainder of the year to
open up new client opportunities. We also have partnerships that
extend our portfolio into supply chain finance and payments. We
have continued to see strong interest within our existing customer
base for supply chain finance and have signed a second significant
Tungsten AP Buyer under this partnership with Orbian and continue
to progress our payments partnership with FIS Worldpay in line with
our overall strategy of integrating invoicing and payments.
- Total AR as growth engine
We continue to strengthen the Total AR e-invoicing proposition
to handle 100% of outgoing invoices in all formats, having signed
another AR customer deal in H1. The pipeline mix of Total AR
opportunities is also increasing reflecting the momentum building
with this differentiating solution set. The recent AR partnership
announced with Amazon Business is a further vindication of this
strategy. We look forward to further success in driving the network
effect through Total AR growth and were very pleased to secure a
customer win in H1, our first in the insurance sector.
Our people
The Tungsten team continue to successfully navigate remote
working requirements required in a number of our global locations.
The emerging opportunities to return to our workplaces and engage
with colleagues and customers is being embraced
enthusiastically.
I am delighted to be at Tungsten Network, joining the team as
Chief Executive Officer on 9 June 2021, and having spent over two
decades in the Technology industry.
Andy Reid joined Tungsten as our new Chief Sales Officer in
September 2021 having built his career in various fintech sales and
leadership roles. We are very excited about the knowledge, energy
and proven track record that Andy possesses in driving successful
engagements with strategic global clients at an executive
level.
Tungsten has implemented LinkedIn Learning, giving colleagues
access to over 16,000 courses to support on-going development.
Learning paths have been established for key skills and roles
across the organisation to underpin a culture of continuous
improvement.
Current Trading and FY 22 outlook
Customer wins in H1 were behind our expectation as a result of
some prolonged customer decisions and changes in the sales team,
however we are confident of securing further new customer wins for
the remainder of the year.
Whilst upsells and new customer wins to 31 October 2021 will
contribute revenue of GBP512k for FY22, the continued weakening of
the US$ in FY22 versus FY21 is expected to have an impact on our
underlying year on year growth rates. (H1-FY21 average rate was
1.28 with H1-FY22 average rate at 1.38).
Continued to exert tight control on the cost base which combined
with the delayed planned GBP1 million investment in our tech
development and compliance functions will lead to cost savings in
FY22, we expect to commence this investment in Q4-FY22.
We were pleased to sign a partnership post period end with
Amazon Business in Europe and the US to support automated invoice
processing for joint customers.
Looking forward
The tireless efforts of the whole team delivering an improved
experience for all customers on the Tungsten Network has bolstered
the platform for continued growth. Sharp focus remains on the
strategic execution of our product, technology and partner roadmap
to deliver increased value and innovation to all stakeholders on
our evolving digital ecosystem.
Paul Cooper
Chief Executive Officer
CFO Financial Review
Income statement
GBPm Group
------------------------------------------------ ------------------
HY-FY22 HY-FY21
------------------------------------------------ -------- --------
Revenue 18.3 18.0
Cost of sales (1.4) (1.3)
------------------------------------------------ -------- --------
Gross profit 16.9 16.7
------------------------------------------------ -------- --------
Adjusted operating expenses (1) (13.9) (15.9)
------------------------------------------------ -------- --------
Adjusted EBITDA (2) 3.0 0.8
Rent adjustment(3) 0.5 0.5
------------------------------------------------ -------- --------
Adjusted (excluding lease payments) EBITDA (4) 3.5 1.3
Other operating expenses (2.7) (31.2)
------------------------------------------------ -------- --------
Operating profit/(loss) 0.8 (29.9)
Net finance costs (0.2) (0.6)
------------------------------------------------ -------- --------
Profit /(loss) before taxation 0.6 (30.5)
Taxation charge - -
------------------------------------------------ -------- --------
Profit/(loss) for the period 0.6 (30.5)
------------------------------------------------ -------- --------
1 Adjusted operating expenses exclude cost of sales, net finance
cost, tax, depreciation and amortisation, impairment of goodwill,
impairment of intangible assets, impairment of right of use assets,
impairment of leasehold improvements, loss on disposal of assets,
foreign exchange gain or loss, share-based payment expense and
exceptional items and is adjusted to include lease payments.
2 Adjusted EBITDA is calculated as earnings before net finance
cost, tax, depreciation and amortisation, impairment of goodwill,
impairment of intangible assets, impairment of right of use assets,
impairment of leasehold improvements, loss on disposal of assets,
foreign exchange gain or loss, share-based payment expense and
exceptional items and is adjusted to include lease payments.
3 Rent adjustment equates to lease payments.
4 Adjusted (excluding lease payments) EBITDA is calculated as
earnings before net finance cost, tax, depreciation and
amortisation, impairment of goodwill, impairment of intangible
assets, impairment of right of use assets, impairment of leasehold
improvements, loss on disposal of assets, foreign exchange gain or
loss, share-based payment expense and exceptional items. The most
directly comparable IFRS measure to Adjusted (excluding lease
payment) EBITDA is operating profit/(loss) for the period.
Management utilises Adjusted (excluding lease payments) EBITDA to
monitor performance as it illustrates the underlying performance of
the business by excluding items management considers to be not
reflective of the underlying trading operations of the Group, or
adding items which are reflective of the overall trading
operations, as applicable.
Revenue
GBPm HY-FY22 HY-FY21 % Movement
(1)
Recurring revenue (2) 9.3 9.8 (5)%
Repeatable revenue (3) 7.9 6.9 14 %
---------------------------------------------- -------- -------- -----------
Total recurring and total repeatable revenue 17.2 16.7 3 %
Other revenue (4) 1.1 1.3 (11)%
---------------------------------------------- -------- -------- -----------
Total revenue 18.3 18.0 2 %
---------------------------------------------- -------- -------- -----------
Recurring revenue % of total revenue (5) 51% 54%
Total recurring and total repeatable revenue
% of total revenue (6) 94% 93%
---------------------------------------------- -------- -------- -----------
1 Revenue is shown to the nearest GBP0.1 million. Movement is
calculated on figures to the nearest GBP1 thousand.
2 Recurring revenue represents annual subscription and
maintenance fees on contracts typically ranging from 1 to 3 years
and billed annually in advance.
3 Repeatable revenue represents transaction-based fees from
contracted customers, typically billed at the point of usage or at
the end of the month of usage.
4 Other revenue represents implementation, modification and
professional services fees, billed either in advance or on
completion of project stages.
5 Total recurring revenue percentage is revenue from annual
subscription and maintenance fees as a percentage of total
revenue.
6 Total recurring and total repeatable revenue percentage is
total recurring and total repeatable revenue as a percentage of
total revenue.
Revenue for the period was GBP18.3 million (H1--FY21: GBP18.0
million), representing an increase of 2% and an increase of 5% on a
constant currency basis, driven by increased transaction volumes
and price increases implemented in H2-FY21.
Recurring revenue of GBP9.3 million decreased from GBP9.8
million in H1-FY21, driven by adverse FX of GBP0.4 million, churn
of GBP0.5 million (including GBP0.2m buyer churn impact of FY-21
leavers) and partially offset by GBP0.4 million of revenue from new
customer wins. As a result, recurring revenue has reduced from 54%
(H1-FY21) of revenues to 51% of revenues.
Repeatable revenue increased by GBP1.0 million to GBP7.9 million
(H1--FY21: GBP6.9 million) driven by price increases implemented in
H2-FY21 and increased transaction volumes which increased by 0.4
million to 9.4 million, and represented 43% of revenues, an
increase from 39% of revenues in H1-FY21.
Revenue by type of customer
38% of Tungsten network revenue was generated by our buyer
customers in H1--FY22 (H1--FY21: 42%). Total buyer revenue was
GBP7.0 million (H1--FY21: GBP7.5 million). This reflected a decline
in recurring revenue of GBP0.5 million, which was driven by FX and
buyer churn referred to above.
Supplier revenue represented 61% of Tungsten revenue in H1--FY22
(H1--FY21: 57%). Total supplier revenue grew 9% to GBP11.2 million
(HY20: GBP10.3 million), with the increase driven primarily by the
price increases referred to earlier implemented in H1-FY21 and
increased transaction volumes.
Expenses
GBPm H1--FY22 H1--FY21 Difference
--------------------------------- --------- --------- -----------
Adjusted operating expenses (1) (13.9) (15.9) 2.0
Rent adjustment 0.5 0.5 -
Cost of sales (1.4) (1.3) (0.1)
Depreciation and amortisation (2.1) (2.3) 0.2
Impairment of goodwill - (26.2) 26.2
Foreign exchange gain/(loss) 0.6 (0.8) 1.4
Share-based payment expense - (0.1) 0.1
Exceptional items (1.2) (1.8) 0.6
--------------------------------- --------- --------- -----------
Statutory operating expenses (17.5) (47.9) 30.4
--------------------------------- --------- --------- -----------
1 Adjusted operating expenses exclude cost of sales, net finance
cost, tax, depreciation and amortisation, impairment of goodwill,
impairment of intangible assets, impairment of right of use assets,
impairment of leasehold improvements, loss on disposal of assets,
foreign exchange gain or loss, share-based payment expense and
exceptional items and are adjusted to include lease payments.
The Group's statutory operating expenses reduced by GBP30.4
million to GBP17.5 million (H1--FY21: GBP47.9 million). H1-FY21
included a non-recurring charge of GBP26.2 million for impairment
of goodwill associated with the OB10 acquisition in 2013.
Statutory operating expenses excluding impairment of goodwill,
were GBP17.5 million (H1-FY21: GBP21.7 million) which represents a
decrease on H1--FY21 of GBP4.2 million primarily due to a GBP1.4
million positive swing from H1-FY21 on foreign currency gains on
intercompany balances denominated in USD, a decrease in exceptional
items of GBP0.6 million and a GBP2.0 million reduction in operating
expenses. The exceptional item charge of GBP1.2 million relates to
the settlement of an employment claim.
Operating expenses
The Group's Adjusted operating expenses reduced by 13% to
GBP13.9 million (H1--FY21: GBP15.9 million). This is primarily
driven by staff cost savings of GBP1.8 million arising from FY-21
restructuring activities.
Earnings/(loss) before tax
The Group generated a profit before tax for the period of GBP0.6
million (H1--FY21: GBP30.5 million loss). The basic earnings per
share was 0.50p (H1--FY21: 24.18p loss per share). The diluted
earnings per share was 0.50p (H1--FY21: 24.18p loss per share).
Funding and liquidity
Cash and cash equivalents at the end of H1--FY22 were GBP3.9
million (H1--FY21: GBP3.0 million). Net cash (including amounts
drawn down under the revolving credit facility) at the end of
H1--FY22 was GBP1.9 million (H1--FY21: GBP1.0 million),
representing an increase of GBP0.9 million which was driven by
reduced costs.
Cash Flow GBPm H1--FY22 H1--
FY21
--------------------------------------------- --------- ------
Net cash flow from operating activities 1.8 0.1
Net cash flow from investing activities (1.2) (1.7)
Net cash flow from financing activities (0.8) (0.8)
Net movement in cash & cash equivalents (0.2) (2.3)
Cash & cash equivalents at the start of the
period 4.1 5.2
Exchange adjustments - 0.2
Cash & cash equivalents at the end of the
period 3.9 3.0
--------------------------------------------- --------- ------
Cash flows from operating activities
Cash generated from operating activities increased to GBP1.8
million (H1-FY21: GBP0.1 million) primarily due to the above
mentioned reduction in operating expenses.
Cash flows from investing activities
Cash spent on investing activities decreased by GBP0.5 million
to GBP1.2 million (H1--FY21: GBP1.7 million) driven by timing of
investment spend (to commence towards end of FY22) and reduced cost
IT headcount.
The Group has a GBP4.0 million revolving credit facility with an
expiry date of December 2023. As at 31 October 2021, a total of
GBP2.0 million was drawn down on this facility and all covenants
tests were met during the period.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group remain
broadly consistent with the Principal Risks and Uncertainties
reported in Tungsten's 30 April 2021 Annual Report.
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 31 OCTOBER 2021
31 October 31 October
2021 2020
(unaudited) (unaudited)
Note GBP'000 GBP'000
------------------------------------- ---- ------ --- ------------- -------------
Revenue 4 18,286 18,013
Operating expenses (17,465) (47,905)
------------------------------------------- ------ --- ------------- -------------
Operating profit/(loss) 821 (29,892)
Adjusted (excluding lease payments)
EBITDA(1) 3,535 1,367
Depreciation and amortisation (2,064) (2,287)
Impairment of goodwill - (26,160)
Foreign exchange gain/(loss) 568 (881)
Share-based payment expense (29) (65)
Exceptional items 5 (1,189) (1,866)
-------------
Operating profit/(loss) 821 (29,892)
------ --- ------------- -------------
Finance income 836 1,069
Finance costs (1,018) (1,664)
Net finance costs (182) (595)
------------------------------------------- ------ --- ------------- -------------
Profit/(loss) before taxation 639 (30,487)
Taxation charge (11) (4)
Profit/(loss) for the period 628 (30,491)
------------------------------------------- ------ --- ------------- -------------
Earnings/(loss) per share attributable
to the equity holders of the parent
during the period (expressed in pence
per share):
Basic 6 0.50 (24.18)
------------------------------------------- ------ --- ------------- -------------
Diluted 6 0.50 (24.18)
------------------------------------------- ------ --- ------------- -------------
1 Adjusted (excluding lease payments) EBITDA is calculated as
earnings before net finance cost, tax, depreciation and
amortisation, impairment of goodwill, impairment of intangible
assets, impairment of right of use assets, impairment of leasehold
improvements, loss on disposal of assets, foreign exchange gain or
loss, share-based payment expense and exceptional items. The most
directly comparable IFRS measure to Adjusted (excluding lease
payments) EBITDA is operating profit/(loss) for the period.
Management utilises Adjusted (excluding lease payments) EBITDA to
monitor performance as it illustrates the underlying performance of
the business by excluding items management considers to be not
reflective of the underlying trading operations of the Group, or
adding items which are reflective of the overall trading
operations, as applicable.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 31 OCTOBER 2021
31 October 31 October
2021 2020
(unaudited) (unaudited)
GBP'000 GBP'000
------------- -------------
Profit/(loss) for the period 628 (30,491)
Other comprehensive (expense)/income: -
Items that may be reclassified subsequently -
to profit or loss
Currency translation (810) 1,135
Total comprehensive loss for the period (182) (29,356)
--------------------------------------------------------------- ------------- -------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note As at 31 October 2021 As at 30 April 2021
(unaudited) (audited)
GBP'000 GBP'000
-------------------------------- --------------- -------- ------------------------ ----------------------
Assets
Non-current assets
Goodwill 7 49,649 49,616
Intangible assets 7 16,385 16,895
Property, plant and equipment 8 655 693
Right of use assets 8 3,300 3,585
Trade and other receivables 781 687
------------------------------------------------- -------- ------------------------ ----------------------
Total non-current assets 70,770 71,476
------------------------------------------------- -------- ------------------------ ----------------------
Current assets
Trade and other receivables 4,941 4,720
Cash and cash equivalents 3,915 4,117
------------------------------------------------- -------- ------------------------ ----------------------
Total current assets 8,856 8,837
------------------------------------------------- -------- ------------------------ ----------------------
Total assets 79,626 80,313
------------------------------------------------- -------- ------------------------ ----------------------
Non-current liabilities
Provisions 9 1,160 1,160
Lease liabilities 4,376 4,712
Total non-current liabilities 5,536 5,872
------------------------------------------------- -------- ------------------------ ----------------------
Current liabilities
Trade and other payables 5,742 6,776
Provisions 9 1,639 363
Lease liabilities 741 731
Borrowings 1,969 1,964
Contract liabilities 7,845 8,367
------------------------------------------------- -------- ------------------------ ----------------------
Total current liabilities 17,936 18,201
------------------------------------------------- -------- ------------------------ ----------------------
Total liabilities 23,472 24,073
------------------------------------------------- -------- ------------------------ ----------------------
Capital and reserves attributable to the equity
shareholders of the parent
Share capital 555 554
Share premium 188,973 188,866
Merger reserve 28,035 28,035
Shares to be issued 3,760 3,760
Share-based payment reserve 5,581 5,796
Other reserve (5,450) (5,450)
Currency translation reserve (2,056) (1,246)
Accumulated losses (163,244) (164,075)
------------------------------------------------- ------------------------ ----------------------
Total equity 56,154 56,240
------------------------------------------------- -------- ------------------------ ----------------------
Total equity and liabilities 79,626 80,313
------------------------------------------------- -------- ------------------------ ----------------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSED
31 OCTOBER 2021
Six months ended 31 October 2021
Share-based
payment
reserve
-------- ---------- --------- -------- ---------- ------------ ------------ ---------
Shares GBP'000
to Currency
Share Share Merger be Other translation Accumulated Total
capital premium reserve issued reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- ---------- --------- -------- ------------ ---------- ------------ ------------ ---------
Balance as
at 1 May
2021 (audited) 554 188,866 28,035 3,760 5,796 (5,450) (1,246) (164,075) 56,240
Profit for
the period - - - - - - - 628 628
Other
comprehensive
expense - - - - - - (810) - (810)
Total
comprehensive
(expense)/income
for the period - - - - - - (810) 628 (182)
------------------ -------- ---------- --------- -------- ------------ ---------- ------------ ------------ ---------
Transaction
with owners
in their
capacity
as owners:
Issue of
shares 1 107 - - (107) - - - 1
Forfeited
vested
share-based
payments - - - - (137) - - 137 -
Share-based
payments
exercised
below fair
value at
grant - - - - - - - 66 66
Share-based
payment expense - - - - 29 - - - 29
------------------ -------- ---------- --------- -------- ------------ ---------- ------------ ------------ ---------
Transactions (215
with owners 1 107 - - ) - - 203 96
Balance as
at 31 October
2021
(unaudited) 555 188,973 28,035 3,760 5,581 (5,450) (2,056) (163,244) 56,154
------------------ -------- ---------- --------- -------- ------------ ---------- ------------ ------------ ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSED
31 OCTOBER 2020
Six months ended 31 October 2020
Share-based
payment
reserve
-------- ---------- --------- -------- ---------- ------------ ------------ -----------
Shares GBP'000
to Currency
Share Share Merger be Other translation Accumulated Total
capital premium reserve issued reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- ---------- --------- -------- ------------ ---------- ------------ ------------ -----------
Balance as
at 1 May
2020
(audited) 553 188,802 28,035 3,760 7,184 (5,450) (5,078) (130,993) 86,813
Loss for
the period - - - - - - - (30,491) (30,491)
Other
comprehensive
income - - - - - - 1,135 - 1,135
Total
comprehensive
expense for
the period - - - - - - 1,135 (30,491) (29,356)
--------------- -------- ---------- --------- -------- ------------ ---------- ------------ ------------ -----------
Transaction
with owners
in their
capacity
as owners:
Issue of
treasury
shares to
employees - 37 - - (59) - - 22 -
Share based
payment
expense - - - - 70 - - - 70
--------------- -------- ---------- --------- -------- ------------ ---------- ------------ ------------ -----------
Transactions
with owners - 37 - - 11 - - 22 70
Balance as
at 31 October
2020
(unaudited) 553 188,839 28,035 3,760 7,195 (5,450) (3,943) (161,462) 52,527
--------------- -------- ---------- --------- -------- ------------ ---------- ------------ ------------ -----------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 31 OCTOBER 2021
31 October 2021 31 October 2020
(unaudited) (unaudited)
GBP'000 GBP'000
-------------------------------------------------------------------------- ---- ---------------- ----------------
Cash flows from operating activities
Profit/(loss) for the period before taxation 639 (30,487)
Adjustments for:
Depreciation and amortisation 2,064 2,287
Impairment of goodwill - 26,160
(Decrease)/Increase in provision for trade receivables (53) 137
Finance costs 1,018 1,664
Finance income (836) (1,069)
Foreign exchange (gain)/loss (568) 881
Share-based payment expense 29 65
Changes in working capital:
(Increase)/decrease in trade and other receivables (144) 508
(Decrease)/increase in trade and other payables and contract liabilities (1,581) 5
Increase/(decrease) in provisions 1,276 (25)
-------------------------------------------------------------------------------- ---------------- ----------------
Cash generated from operations 1,844 126
Net tax paid (37) -
Net cash inflow from operating activities 1,8 07 126
-------------------------------------------------------------------------------- ---------------- ----------------
Cash flows from investing activities
Software development costs (1,124) (1,688)
Purchases of property, plant and equipment (60) (55)
Net cash outflow from investing activities (1,184) (1,743)
-------------------------------------------------------------------------------- ---------------- ----------------
Cash flows from financing activities
Lease payments - payments of principal (373) (411)
Lease payments - payments of interest (132) (172)
Net interest paid (300) (175)
Proceeds from borrowings - 2,000
Repayment of borrowings - (2,000)
Increase in borrowings - (4)
Proceeds from issue of shares 1 -
Net cash outflow from financing activities (804) (762)
-------------------------------------------------------------------------------- ---------------- ----------------
Net decrease in cash and cash equivalents (181) (2,379)
Cash and cash equivalents at start of the period 4,117 5,208
Exchange adjustments (21) 169
Cash and cash equivalents at the end of the period 3,915 2,998
-------------------------------------------------------------------------------- ---------------- ----------------
NOTES TO THE INTERIM FINANCIAL INFORMATION
1. General information
Tungsten Corporation plc (the 'Company') and its subsidiaries
(together, the 'Group') is a global e--invoicing network that
offers trade finance and spend analytics.
The Company is a public limited company, which is incorporated
and domiciled in the UK. The address of its registered office is
Pountney Hill House, 6 Laurence Pountney Hill, London EC4R 0BL,
UK.
The Board of Directors approved this interim report on 12
December 2021.
2. Basis of Preparation
These interim consolidated financial statements have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act of 2006 and
in accordance with International Financial Reporting Standards
('IFRS'). They do not include all disclosures that would otherwise
be required in a complete set of financial statements and should be
read in conjunction with the 30 April 2021 Annual Report. The
financial information for the half years ended 31 October 2021 and
31 October 2020 does not constitute statutory accounts within the
meaning of Section 434 (3) of the Companies Act 2006 and both
periods are unaudited.
The annual financial statements of Tungsten Corporation plc (the
'Group') are prepared in accordance with IFRS. The statutory Annual
Report and financial statements for 2021 have been filed with the
Registrar of Companies. The Independent Auditor's report on the
Annual Report and financial statements for the year ended 30 April
2021 was unqualified, did not draw attention to any matters by way
of emphasis and did not contain a statement under 498(2) - (3) of
the Companies Act 2006.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 30 April 2021 annual financial statements, except for those
that relate to new standards and interpretations effective for the
first time for periods beginning on (or after) 1 January 2021 and
will be adopted in the 2022 financial statements. There are deemed
to be no new and amended standards and/or interpretations that will
apply for the first time in the next annual financial statements
that are expected to have a material impact on the Group.
3. Going Concern
The interim consolidated financial statements have been prepared
on a going concern basis. The ability of the company to continue as
a going concern is contingent on the ongoing viability of the
Group. The Group meets its day-to-day working capital requirements
through its cash balances and also has a bank facility that it can
use. The current economic conditions continue to create
uncertainty, particularly over (a) foreign exchange rates; (b) the
level of new sales to new customers; and (c) the continued impact
of Covid-19. The Group's forecasts and projections, taking account
of reasonably possible changes in trading performance, show that
the Group expects to be able to operate within the level of its
current cash resources and bank facilities. Having assessed the
principal risks and the other matters discussed in connection with
the going concern statement, the Directors considered it
appropriate to adopt the going concern basis of accounting in
preparing its consolidated interim financial statements.
Various sensitivity analyses (including downside and severe
downside scenarios) have been performed to reflect a variety of
possible cash flow scenarios where the Group achieves significantly
reduced revenues, and loss of significant contracts for the twelve
months following the date of this Interim Results Report. Overall,
the Directors have prepared cash-flow forecasts covering a period
of at least 12 months from the date of approval of the Interim
Results Report, which foresee that the Group will be able to
operate within its existing facilities.
While the Directors have no reason to believe that customer
revenues and receipts will decline to the point that the Group no
longer has sufficient resources to fund its operations, should this
occur, the Group may need to seek additional funding beyond the
facilities that are currently available to it, as well as making
significant reductions in its fixed cost expenses.
4. Segmental Analysis
The Executive Committee has been identified as the Chief
Operating Decision-Maker (CODM), reviewing the Group's internal
reporting on a monthly basis in order to assess performance and
allocate resources.
The CODM reviews financial information for two segments:
Tungsten Network (which includes the e-invoicing and spend
analytics business of Tungsten Network), and Tungsten Corporate
(which includes Tungsten Corporation plc and Tungsten Corporation
Guernsey's overheads and general corporate costs). Intersegment
revenue from management fees and other intersegment charges are
eliminated below.
The CODM analyses the financial performance of the business on
the basis of segment Adjusted EBITDA which is an adjusted profit
measure which reflects earnings before net finance cost, tax,
depreciation and amortisation, impairment of goodwill, impairment
of intangible assets, impairment of right of use assets, impairment
of leasehold improvements, loss on disposal of assets, foreign
exchange gain or loss, share-based payment expense and exceptional
items.
The most directly comparable IFRS measure to Adjusted (excluding
lease payments) EBITDA is operating profit/(loss) for the period.
Management utilises Adjusted (excluding lease payments) EBITDA to
monitor performance as it illustrates the underlying performance of
the business by excluding items management considers to be not
reflective of the underlying trading operations of the Group, or
adding items which are reflective of the overall trading
operations, as applicable.
Six months ended 31 October 2021
Tungsten
Network(2) Corporate Total
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ---------- --------
Segment revenue 18,286 - 18,286
---------------------------------------- ------------ ---------- --------
Adjusted (excluding lease payments)
EBITDA(1) 6,504 (2,969) 3,535
Depreciation and amortisation (1,735) (329) (2,064)
Foreign exchange gain 563 5 568
Share-based payment credit/(expense) 27 (56) (29)
Exceptional items (1,189) - (1,189)
Finance income 519 317 836
Finance costs (697) (321) (1,018)
---------------------------------------- ------------ ---------- --------
Profit/(loss) before taxation 3,992 (3,353) 639
Taxation charge (11) - (11)
---------------------------------------- ------------ ---------- --------
Profit/(loss) for the period 3,981 (3,353) 628
---------------------------------------- ------------ ---------- --------
As at 31 October 2021
Capital expenditure 1,226 - 1 226
Total assets 74,488 5,138 79,626
Total liabilities 16,348 7,124 23,472
---------------------------------------- ------------ ---------- --------
1 Adjusted (excluding lease payments) EBITDA is calculated as
earnings before net finance cost, tax, depreciation and
amortisation, impairment of goodwill, impairment of intangible
assets, impairment of right of use assets, impairment of leasehold
improvements, loss on disposal of assets, foreign exchange gain or
loss, share-based payment expense and exceptional items. The most
directly comparable IFRS measure to Adjusted (excluding lease
payments) EBITDA is operating profit/(loss) for the period.
Management utilises Adjusted (excluding lease payments) EBITDA to
monitor performance as it illustrates the underlying performance of
the business by excluding items management considers to be not
reflective of the underlying trading operations of the Group, or
adding items which are reflective of the overall trading
operations, as applicable.
2 The Tungsten Network Finance segment has been discontinued and
any assets and liabilities have been included within the Tungsten
Network segment.
Six months ended 31 October 2020
Tungsten
Network Corporate Total
GBP'000 GBP'000 GBP'000
-------------------------------------- --------- ---------- ----------
Segment revenue 18,013 - 18,013
---------------------------------------- --------- ---------- ----------
Adjusted (excluding lease payments)
EBITDA(1) 3,465 (2,098) 1,367
Depreciation and amortisation (1,902) (385) (2,287)
Impairment of goodwill (26,160) - (26,160)
Foreign exchange loss (882) 1 (881)
Share-based payment credit/(expense) 39 (104) (65)
Exceptional items (1,273) (593) (1,866)
Finance income 795 274 1,069
Finance costs (987) (677) (1,664)
---------------------------------------- --------- ---------- ----------
Loss before taxation (26,905) (3,582) (30,487)
Taxation charge (4) - (4)
---------------------------------------- --------- ---------- ----------
Loss for the period (26,909) (3,582) (30,491)
---------------------------------------- --------- ---------- ----------
As at 31 October 2020
Capital expenditure 1,743 - 1,743
Total assets 75,987 7,318 83,305
Total liabilities 17,912 7,866 25,778
---------------------------------------- --------- ---------- ----------
1 Adjusted (excluding lease payments) EBITDA is calculated as
earnings before net finance cost, tax, depreciation and
amortisation, impairment of goodwill, impairment of intangible
assets, impairment of right of use assets, impairment of leasehold
improvements, loss on disposal of assets, foreign exchange gain or
loss, share-based payment expense and exceptional items. The most
directly comparable IFRS measure to Adjusted (excluding lease
payments) EBITDA is operating profit/(loss) for the period.
Management utilises Adjusted (excluding lease payments) EBITDA to
monitor performance as it illustrates the underlying performance of
the business by excluding items management considers to be not
reflective of the underlying trading operations of the Group, or
adding items which are reflective of the overall trading
operations, as applicable.
2 The Tungsten Network Finance segment has been discontinued and
any results, assets and liabilities have been included within the
Tungsten Network segment.
5. Exceptional Items
31 October 31 October
2021 2020
(unaudited) (unaudited)
GBP'000 GBP'000
------------------------------------ ---- -------------- -------------
Settlement of employment claim 1,189 -
Restructuring and redundancy costs - 1,340
Board operating review - 408
Professional advice - 118
Total exceptional items 1,189 1,866
------------------------------------------ -------------- -------------
The exceptional item charge of GBP1.2 million relates to the
settlement of an employment claim.
6. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the
profit/loss attributable to the ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period.
Diluted earnings/loss per share is calculated by dividing the
profit/loss attributable to the ordinary shareholders by the
weighted average number of ordinary shares in issue during the
period and the weighted average diluting effect of share
options.
Loss per share attributable to the equity holders of the parent
during the period:
31 October 2021 (unaudited) 31 October 2020 (unaudited)
--------------------------------------- ------------------------------------
Profit Shares Earnings per share Loss Shares Loss per share
GBP'000 '000 pence GBP'000 '000 pence
--------- -------- -------- ------------------- --------- -------- ---------------
Basic 628 126,335 0.50 (30,491) 126,097 (24.18)
--------- -------- -------- ------------------- --------- -------- ---------------
Diluted 628 126,849 0.50 (30,491) 126,097 (24.18)
--------- -------- -------- ------------------- --------- -------- ---------------
The Group has made a loss in the prior year and therefore the
share options are anti-dilutive. As a result, diluted earnings per
share is presented on the same basis for the prior period.
7. Goodwill & Intangible assets
Software
Customer development under
Goodwill relationships IT platform Software construction Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Cost
Balance at 1 May 2020 99,128 11,121 7,307 11,503 2,260 131,319
Additions - - - 130 1,558 1,688
Exchange differences (134) (5) (115) (20) (7) (281)
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Balance at 31 October
2020 98,994 11,116 7,192 11,613 3,811 132,726
Additions - - - 52 846 898
Reclassification - - - 2,776 (2,776) -
Disposal - - - - (99) (99)
Exchange differences (246) (9) (213) (38) (19) (525)
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Balance at 30 April 2021 98,748 11,107 6,979 14,403 1,763 133,000
Additions - - - - 1,124 1 ,124
Exchange Differences 60 3 52 10 - 1 25
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Balance at 31 October
2021 98,808 11,110 7,031 14,413 2,887 134,249
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Accumulated amortisation
and impairment
Balance at 1 May 2020 23,040 3,717 7,022 3,786 - 37,565
Charge for the period - 277 281 1,123 - 1,681
Impairment charge 26,160 - - - - 26,160
Exchange differences - (4) (115) (11) - (130)
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Balance at 31 October
2020 49,200 3,990 7,188 4,898 - 65,276
Charge for the period - 273 - 1,148 - 1 ,421
Impairment charge - 100 - - - 100
Exchange differences (68) (9) (212) (19) - (308)
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Balance at 30 April 2021 49,132 4,354 6,976 6,027 - 66,489
Charge for the period - 273 3 1,367 - 1,643
Exchange Differences 27 2 52 2 - 83
Balance at 31 October
2021 49,159 4,629 7,031 7,396 - 68,215
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Net book value
As at 30 April 2021 49,616 6,753 3 8,376 1,763 66,511
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
As at 31 October 2021 49,649 6,481 - 7,017 2,887 66,034
-------------------------- ---------- --------------- ------------ --------- -------------------------- --------
Impairment testing is carried out at cash-generating unit (CGU)
level on an annual basis. The following is a summary of the
goodwill allocation for each reporting segment:
As at As at
31 October 2021 30 April 2021
(unaudited) (audited)
GBP'000 GBP'000
------------------ ----------------- ---------------
Tungsten Network 49,649 49,616
Total Goodwill 49,649 49,616
------------------ ----------------- ---------------
During the period, the Group has achieved lower revenues than
anticipated at the year end, whilst maintaining strong EBITDA
growth. Therefore, we have conducted an impairment review of our
goodwill and concluded that the carrying value is supported and
impairment was not required. Goodwill at 31 October 2021 was
GBP49.6 million (30 April 2021: GBP49.6 million).
The recoverable amount of the Tungsten Network CGU which was
established as GBP78.1 million at 31 October 2021 (FY21: GBP79.3
million) using a value-in-use model projecting cash flows for the
next five years together with a terminal value using a growth rate.
This is against a carrying value of GBP70.0 million (FY21: GBP70.8
million) giving headroom of GBP8.1 million (FY21: GBP8.5
million).
We used four scenarios to calculate the value-in-use ranging
from up to 12% growth in our upside scenario, up to 8% growth in
our base case scenario and included a risk of much smaller growth
(up to 3% and up to 0%) in our downside and severe downside
scenarios. In addition, costs growth has now been set at 4% for the
upside scenario, 2% for the base case scenario, 1.5% for the
downside scenario and 0% for the severe downside scenario. Pre-tax
discount rate of 14.2% (FY21: 14.5%) and long-term growth rate of
2.0% (FY21: 2.0%) were used.
An increase of 0.5% in the pre-tax discount rate would result in
a GBP3.5 million reduction in value in use to give headroom of
GBP4.6 million. A decrease of 1.0% in the long term growth rate
would result in a GBP6.5 million reduction in value in use to give
headroom of GBP1.6 million.
Reasonable possible changes in key assumptions, both
individually and in combination, have been considered. These are
applied to the base case scenario and include reducing revenue
growth by 3% to 0.5% in FY23 and 5% FY24 to FY26; and reducing long
term growth rate by 1%.
While, under the base case scenario, the recoverable amounts are
estimated to exceed the carrying value by GBP8.1 million, the
recoverable amounts would be below the carrying amounts when
applying the reasonable possible changes below: reduction of
revenue growth rate against the base case by 3.0%; and reduction of
revenue growth rate against the base case by 3.0% and reducing long
term growth rate to 1%.
For all other reasonable possible changes in key assumptions, no
impairment arises.
8. Property, plant and equipment
Right of use Fixtures Computer
assets Leasehold improve-ments and fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------------- ------------------------- -------------- ----------- --------
Cost
Balance at 1 May 2020 9,853 2,342 298 795 13,288
Additions - - 1 21 22
Exchange differences 2 - (4) (7) (9)
---------------------------- ------------- ------------------------- -------------- ----------- --------
Balance at 31 October 2020 9,855 2,342 295 809 13,301
Additions 32 - - 2 34
Disposals (372) (215) (13) - (600)
Exchange differences (119) (17) (9) (29) (174)
---------------------------- ------------- ------------------------- -------------- ----------- --------
Balance at 30 April 2021 9,396 2,110 273 782 12,561
Additions 42 46 - 14 102
Disposals - - - (76) (76)
Exchange differences 15 - 2 3 20
---------------------------- ------------- ------------------------- -------------- ----------- --------
Balance at 31 October 2021 9,453 2,156 275 723 12,607
---------------------------- ------------- ------------------------- -------------- ----------- --------
Accumulated depreciation
Balance at 1 May 2020 4,335 958 233 666 6,192
Charge for the period 421 111 20 54 606
Exchange differences (21) - (4) (5) (30)
---------------------------- ------------- ------------------------- -------------- ----------- --------
Balance at 31 October 2020 4,735 1,069 249 715 6,768
Charge for the period 397 117 12 40 566
Impairment of assets 1,121 544 - - 1,665
Disposals (372) (215) (12) - (599)
Exchange differences (70) (12) (7) (28) (117)
Balance at 30 April 2021 5,811 1,503 242 727 8,283
Charge for the period 327 61 9 24 421
Disposals - - - (73) (73)
Exchange differences 15 - 2 4 21
Balance at 31 October 2021 6,153 1,564 253 682 8,652
---------------------------- ------------- ------------------------- -------------- ----------- --------
Net book value
At 30 April 2021 3,585 607 31 55 4,278
---------------------------- ------------- ------------------------- -------------- ----------- --------
At 31 October 2021 3,300 592 22 41 3,955
---------------------------- ------------- ------------------------- -------------- ----------- --------
9. Provisions
Leasehold property dilapidations Onerous contracts Other Total
GBP'000 GBP'000 provisions GBP'000
GBP'000
-------------------------- --------------------------------- ------------------ ------------ ---------
As at 1 May 2020 1,236 20 - 1,256
Additions 1 - 362 363
Utilised during the year (76) (20) - (96)
As at 31 October 2020 1,161 - 362 1,523
--------------------------- --------------------------------- ------------------ ------------ ---------
As at 30 April 2021 1,161 - 362 1,523
--------------------------- --------------------------------- ------------------ ------------ ---------
Additions - - 1,480 1,480
Utilised during the year - - (204) (204)
--------------------------- --------------------------------- ------------------ ------------ ---------
As at 31 October 2021 1,161 - 1,638 2,799
--------------------------- --------------------------------- ------------------ ------------ ---------
As at As at
31 October 2021 30 April 2021
GBP'000 GBP'000
------------------------------- ----------------- ---------------
Analysis of total provisions:
Non-current 1,160 1,160
Current 1,639 363
----------------------------------- ----------------- ---------------
Total 2,799 1,523
----------------------------------- ----------------- ---------------
The provisions for dilapidations include the estimated costs of
removal of installed assets under lease contracts, which includes a
provision for the London office of GBP1,160,000 (FY21:
GBP1,160,000) which is expected to be utilised in FY29 and for the
Malaysia office of GBP1,000 (FY21: GBP1,000) expected to be
utilised in FY22. Other provisions relate to on-going legal
matters.
10. Cautionary Statement
This document contains certain forward-looking statements
relating to Tungsten Corporation plc (the 'Company'). The Company
considers any statements that are not historical facts as
'forward-looking statements'. They relate to events and trends that
are subject to risk and uncertainty that may cause actual results
and the financial performance of the Company to differ materially
from those contained in any forward-looking statement. These
statements are made by the Directors in good faith based on
information available to them and such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
Independent review report to TUNGSTEN CORPORATION plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 October 2021 which comprises consolidated
statement of comprehensive income; consolidated statement of
financial position; consolidated cash flow statement; consolidated
statement of changes in equity; and associated notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
October 2021 is not prepared, in all material respects, in
accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London
10 December 2021
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IR FFDFWEEFSEIE
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