TIDMTUNG
RNS Number : 1507Y
Tungsten Corporation PLC
07 September 2020
Embargoed Release: 07:00hrs Monday 7 September 2020
TUNGSTEN CORPORATION PLC
("Tungsten" or the "Company")
RESULTS FOR FINANCIAL YEARED 30 APRIL 2020
Tungsten Corporation plc (AIM: TUNG), a leading provider of
digital financial management products and software solutions,
announces results for the year ended 30 April 2020:
Group results
GBPm FY20 FY19
----------------------------- ------- -------
Revenue 36.8 36.0
Gross profit (1) 35.2 34.1
Adjusted operating expenses
(2) (32.5) (33.5)
Adjusted EBITDA (3) 2.7 0.6
Adjusted EBITDA margin
(4) 7% 2%
Operating loss (25.5) (5.2)
Net cash (5) 3.2 2.8
New sales billings (6) 4.0 4.0
Transaction volumes 19.0 18.2
----------------------------- ------- -------
Financial highlights
-- Group revenue grew 2% to GBP36.8 million; excluding Tungsten
Network Finance(7) (TNF), revenue grew 3% to GBP36.3 million
-- 94% of revenue was repeatable and recurring, up from 92% in FY19
-- Adjusted EBITDA of GBP2.7 million, up GBP2.1 million on FY19;
adjusted EBITDA margin increased to 7%
-- Operating loss of GBP25.5 million predominantly reflects a
non-cash goodwill impairment of GBP23.0 million relating to a
legacy acquisition
-- Positive full year cash generation of GBP0.4 million(8) ; net
cash of GBP3.2 million reflects GBP5.2 million of gross cash offset
by GBP2.0 million of RCF drawdown
Operational highlights
-- Key executive appointments made during the year included new
Chief Executive Officer, Chief Financial Officer and Chief People
Officer. A new Chief Commercial Officer and Chief Sales Officer
were appointed post period end
-- New sales billings of GBP4.0 million; 35% increase in second
half run rate reflecting early benefit from investment in the sales
function
-- Transaction volumes grew 4% to 19.0 million
-- 6 new customer wins; 4 wins to our new Total AR(9) product
-- Launched our new supply chain financing partnership with
Orbian and successful wind down of the TNF portfolio
FY21 trading update and full year outlook
-- Trading performances in Q1
- 3 new customer wins for AP and AR products from large
multinational corporations
- Concluded our largest ever single AP(10) partnership agreement
with a leading US bank; expected to launch later in September
- In conjunction with Orbian, we recently signed an agreement
with a major UK retailer to access their supplier base
-- Despite more challenging market conditions, resulting in
transactions declining 8% in Q1, our current pipeline visibility
and expected new sales performance means the Board still expects to
meet external forecasts for FY21
-- However, revenues and EBITDA would be impacted if transaction
volumes remain at a similar percentage decline to that of Q1 levels
for the remainder of FY21
-- Successfully renewed our GBP4.0 million Revolving Credit
Facility with HSBC until December 2023 on similar terms; GBP2.0
million of the facility remains available for drawdown
Andrew Lemonofides, Chief Executive Officer of Tungsten
Corporation plc, said:
"Tungsten has undergone significant corporate and operational
enhancements this year delivering improved revenue growth and cash
flow generation. Despite the challenges of Covid-19, the business
has produced a solid financial performance which reflects the new
team in place and the focus on improved sales execution, cost
management and the high recurring revenue model.
"Trading performance in Q1 FY21 has been robust despite the
impact of Covid-19 and we have secured further new customer wins
and a strategic partnership agreement to expand our product
offering. Although these are uncertain times, we continue to expect
to deliver growth in FY21 as we benefit from improved sales
performance."
1 Gross profit is calculated as revenue less cost of sales
2 Adjusted operating expenses exclude cost of sales, other
income, interest, tax, depreciation, amortisation, foreign exchange
gains or losses, loss on disposal of assets, share-based payments
charges and exceptional items, and are adjusted to include rental
expenses and rental income
3 Adjusted EBITDA is defined as operating profit before other
income, depreciation, amortisation, goodwill impairment, gain or
loss on sale, foreign exchange gain or loss, share-based payments
charge, exceptional items and is adjusted to include rental
expenses and rental income
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 dr awings 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 Tungsten announced its intention to divest Tungsten Network
Finance, its legacy trade finance division, ("TNF") on 30 April
2019
8. Cash Generation is net increase/(decrease) in cash and cash
equivalents less increase in borrowing less exchange adjustment;
see the Group's consolidated cash flow
9 Total AR is the automating of invoice processing for 100% of
invoices, in an Accounts Receivable department, across all types
and formats
10 Total AP is the automating of invoice processing for 100% of
invoices, in an Accounts Payable department, across all types and
formats
Enquiries
Tungsten Corporation plc
Andrew Lemonofides, Chief Executive Officer
Chris Allen, 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 74% of the FTSE 100 and 71% of
the Fortune 500. It enables suppliers to submit tax compliant
e-invoices in 50 countries, and last year processed transactions
worth GBP195bn 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 300
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.
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.
CEO Statement
Overview
FY20 was a year of transformation for Tungsten in which,
although we reported an operating loss of GBP25.5m, we delivered
revenue and adjusted EBITDA growth whilst also making strong
progress against our key strategic objectives. We had a robust
approach to the Covid-19 crisis which gives us the confidence to
face the challenges and embrace the opportunities ahead of us.
Our continued focus on sales execution has driven good billing
momentum in the second half as we have invested in building out our
capabilities and delivering on our strategic objectives. We
maintained strong expense management and achieved positive cash
generation, which positions the business well for future
growth.
Our purpose
With our market experience and stable suite of products that are
both innovative and global, we help our customers benefit and
succeed in the digital economy by digitising their invoice flows,
enabling invoice processing to be faster and allowing greater
flexibility around cashflow management.
Whilst it is too early to draw definitive conclusions on the
impact of Covid-19, initial indications are that we see Covid-19
providing a potential catalyst to accelerate the need to digitise
invoices as a response to the crisis and also to reflect the new
way of working going forward.
Many organisations have yet to fully digitise their invoice
flows and we are now seeing customers looking at ways to speed up
their digitisation plans as we play our part of being an essential
partner on their journey to best-in-class digital invoice
processing.
Covid-19 response
The Covid-19 crisis has had a limited financial impact on FY20
as it escalated toward the end of our financial year. Our
priorities have been to protect our team members and to protect
their health and well-being; to look after our customers; and to
make our business secure both financially and operationally.
We took a number of swift actions including:
-- Achieving a smooth transition to full remote working across
all our sites; London: Atlanta; Sofia; Kuala Lumpur and Toledo
ahead of formal lockdowns being implemented in each country;
-- We took prudent and early action to preserve liquidity and
reduce discretionary costs which included an immediate Group-wide
pay freeze as well as pausing all non-essential recruitment. We
also decided that we would not pay a management bonus to staff for
FY20; and
-- We formed a Covid-19 team in March and have held regular
management and company wide updates. These meetings will continue
as we work to define our "new operating model" to meet these new
challenges and opportunities
Although the impact of Covid-19 has not been as marked as with
many other organisations, the full effect on the business is still
unfolding.
Our strategic focus areas
In the current rapidly changing environment, we continue to
invest and strengthen the capabilities and skills of our teams to
support the growing needs of our customers around the world,
especially as their own customers (buyers and suppliers) are also
looking to speed up the rate of invoice digitisation. We remain
committed to supporting our customers with solutions which meet the
demands being placed on them and which meet all of the regulatory
requirements.
Our strategy remains one of achieving sustainable growth through
delivering on the four main strategic initiatives that were agreed
at the start of the financial year.
-- Driving the network effect - Total AR
The key objective here is to handle 100% of the outgoing
invoices in all formats. Following launch in July 2019, we signed 4
new deals across the year, proving the concept and customer
requirements. We enter FY21 with a growing pipeline.
-- Strategic partnerships with e-procurement providers
Ensures our service receives the widest possible attention. We
have integrated with the Coupa network and gained CoupaLink
certification. This provides a platform to explore further
opportunities for working with Coupa and their buyers and
suppliers. Additionally, we are exploring partnerships with a
number of other key P2P players.
-- Interconnecting with other leading e-invoice platforms
This is designed to improve the scale and reach for our
customers and in turn boost turnover, volume and income. We have
signed a major partnership with a US Bank which is expected to add
up to 28 new buyers and 40,000 suppliers to our network.
-- Trade Finance Reset
Focused on accessing the considerable Trade flows across our
global platform. Our exclusive partnership with Orbian was
successfully launched in March following two months of technical
integration. Our launch customer signed in April and we are
expecting to advance up to c. GBP100m of finance to this one
customers' suppliers. We have a strong pipeline of further
opportunities for the coming year, from what is proving to be an
exciting profitable revenue stream
Performance
Our core business has performed well over the year, with
transaction volumes growing 4%. 94% of revenue was repeatable and
recurring (up from 92% in FY19) and we had net cash of GBP3.2m
reflecting positive full year cash generated from operations of
GBP4.6m. We had 6 new AP and AR customer wins, 4 of which were with
our new Total AR product. Accounts Payable (AP) is Tungsten
transmitting e-invoices from buyer to supplier, Accounts Receivable
(AR) is the opposite, in which suppliers are sending their invoices
to a number of buyers. In both cases, we look to handle 100% of the
invoice volume to maximise efficiencies and cost savings.
We also successfully wound down our TNF portfolio replacing it
with our new partnership with Orbian where we were able to replace
our legacy approach to Trade Finance for one which sees our systems
integrated and the request for financing made at the point of need.
The flexibility and simplicity of this approach has proved highly
successful with our launch customer and we have high expectations
for the success of this product going forward.
We have a considerable opportunity to continue to work with our
existing customers to build out and fully digitise their existing
invoice flows. In addition, we plan to achieve further success in
bringing new customers to our network, whilst leveraging the
network effect which our global network provides as we look to
connect buyers to their suppliers and in reverse (allowing for the
first time, suppliers to transmit 100% of their outbound invoices
through the Tungsten Network in a variety of formats to their
buyers., making it easy for suppliers to connect to multiple
buyers.
Tungsten has continued to invest in robust and efficient
processes to swiftly onboard new buyers and suppliers to the
network, in addition to providing leading exception handling
processes that seek to maximise the straight through processing of
invoices for customers. This allows them to maximise the potential
savings associated with invoice digitisation.
Expansion of our customer base and network remain key, not only
through our existing and new customer base, but through extending
the offerings we give to our customers, for example Supply Chain
Finance. We also have our Workflow offering and are looking at how
to monetise our data through the provision of analytics.
Foundations for growth
As we continue to execute against our strategic priorities, they
will provide a solid foundation to the growth aspirations that we
have for Tungsten. We have three fundamental pillars of
success:
1. Our global network - this remains a significant
differentiator as the overall network effect is multiplied as more
buyers and suppliers are connected through and transact across the
network. Clearly our goals are around maximising those connections
and interconnecting with other networks to broaden reach.
2. Innovation remains key to our long-term success. This year
the successful launch of our Total AR product and the new Orbian
platform underlined the importance of continuing to innovate. Ahead
of us we need to look both at further augmenting our product set
and also at platform usability as these will become increasingly
important differentiators.
3. Our people are fundamental to our long-term success. Whilst
much of my initial focus was around creating the right
organisational structure, this has been balanced with changing the
culture to one which is more value driven and inclusive. We have
significantly increased the level of internal communication and
engagement, as we seek to show how much we value the contributions
that our team are making and how important they are to our future
success.
An evolving competitive landscape
As we look to leverage our global network effect, we will make
an investment in building out our partner business to provide
greater reach over the coming year. We need to have the capability
to deliver our model both directly and indirectly to allow us to
most effectively meet the increasing demands of our customers.
The changing dynamics of the market mean that network
interconnection and interoperability form the foundation of future
success which we will continue to address through our strategic
initiatives.
Equally with the increasing complexity of the regulatory
frameworks being introduced by individual countries, we remain
heavily focused on building out our compliant network to give
presence in those countries that introduce mandates for invoice
processing to ensure that we continue to offer our comprehensive
service to our customers.
Our people
In this year of transformation, there have been a number of
notable changes since I joined in September 2019. I was keen to
strengthen my leadership team to give the needed focus around
driving both accountability and execution. Chris Allen joined as
our new Chief Financial Officer, in addition to Eric Craig being
appointed as Chief Sales Officer and Ian Kelly as our new Chief
Commercial Officer. All have hit the ground running and have
elevated the commerciality and professionalism within the
business.
The sales team has also been reshaped, to ensure that we had
capable sales professionals focused on delivering the right results
for our customers and able to build the right relationships.
Equally our back office has been transformed as we have sought to
established a more collaborative environment, with everyone, at all
levels, focussed around deliver customer-oriented results.
We also launched our first employee engagement survey, the
results of which were interesting and very encouraging as they
highlighted what a truly passionate and committed team we have. We
have launched a number of initiatives aimed at leveraging this
internal passion and focusing attention around meeting and
exceeding customer needs and expectations.
Enhancing our approach
We have delivered on four new technological steps which further
help our clients integrate and work with the Tungsten Network.
-- The Tungsten Portal used by our Buyers and Suppliers has been
a key focus during the year. We adopted an evolutionary approach
which has been taken to redesign the User Experience focusing on
known customer pain points. During the year we have also delivered
a re-designed supplier onboarding experience along with a new look
and feel to the overall portal.
-- Supplier Connect - one of the key drivers for Tungsten is to
onboard increasing numbers of suppliers, but once on boarded we
want to encourage these suppliers to expand their usage on the
network by increasing their connections to new buyers. We have
introduced exciting new capability "Customer Connect" which allows
our suppliers to connect to buyers using a self-service option
which allows them to transact in minimal time and with minimal
effort. We have seen significant uptake and very positive feedback
from our suppliers since launch.
-- Touchless Campaigns - supplier onboarding is our "white
glove" process which has always been popular with buyers. We have
enhanced this with a "touchless campaigns" capability which allows
buyers to integrate their vendor management solution directly with
Tungsten to enable a touchless onboarding process. This allows a
continual cycle of supplier onboarding as and when new suppliers
are added to the buyer's vendor management system
-- Service Cloud - as part of the rollout of Salesforce.com, the
service platform Service Cloud has been adopted across our
back-office to further enhance the customer journey and visibility
if customer engagement across the business.
With our focus on simplicity and scalability, we have also
launched an updated version of our website, designed to more
effectively position the Tungsten USPs and our product set. We also
appointed Tavistock as our Financial PR agency and have been
working with them to implement a cohesive strategy focused on both
institutional and retail investors, both in Europe and particularly
the US.
We will continue to evolve our offerings across FY21, with an
increase focus on the user experience.
Looking ahead
FY20 was a transformational year for Tungsten. We made
significant progress in further reducing costs and putting the
right sales and support structures in place to drive sustainable
growth over the medium term.
We continue to have a loyal customer base who are keen to work
with us to address many of the challenges which the market is
facing in the post Covid-19 world. Covid-19 if nothing else, has
acted as a catalyst to encourage companies to view their paper
invoice streams as a risk which can be mitigate through the
acceleration of the digitisation of their invoices.
We will continue to work closely with our partners, develop our
network, invest in innovative new revenue streams and in our
people. We will continue to deliver on our four strategic
initiatives to ensure that we remain the leading player in our
industry.
Finally, I would like to thank all of our customers, suppliers
and employees for their dedication and commitment in what has been
a challenging year. I am very proud of the contribution and
achievements of the entire team at Tungsten, who have proved their
ability to be flexible and agile in focusing on delivering to
customer expectations. We have achieved a great deal in a short
time and have built a strong foundation from which to deliver
growth in our business.
As we exit our "transition phase" we are well placed to take
advantage of the opportunities which the "new ways of doing
business" in the post-Covid-19 era will undoubtedly present.
Andrew Lemonofides
Chief Executive Officer
CFO Statement
Income statement
GBPm Group
--------------------------------- ----------------------
Continuing operations FY20 FY19
restated(1)
--------------------------------- ------- -------------
Revenue 36.8 36.0
Cost of sales (1.6) (1.9)
--------------------------------- ------- -------------
Gross profit 35.2 34.1
--------------------------------- ------- -------------
Adjusted operating expenses (2) (32.5) (33.5)
--------------------------------- ------- -------------
Adjusted EBITDA (3) 2.7 0.6
Rent adjustment (4) 1.0 -
--------------------------------- ------- -------------
EBITDA (5) 3.7 0.6
--------------------------------- ------- -------------
Other operating expenses (29.2) (5.8)
--------------------------------- ------- -------------
Operating loss (25.5) (5.2)
Net finance (costs) (0.4) (0.1)
--------------------------------- ------- -------------
Loss before taxation (25.9) (5.3)
Taxation (0.1) 1.4
--------------------------------- ------- -------------
Loss for the year (26.0) (3.9)
--------------------------------- ------- -------------
(1) The 2019 income statement has been restated to amend the
recognition of a deferred tax charge (see note 7) .
(2) Adjusted operating expenses exclude cost of sales, other
income, interest, tax, depreciation, amortisation, impairment of
intangible assets, loss on disposal of assets, foreign exchange
gains or losses, share-based payments charges, and exceptional
items, and is adjusted to include cash rental expenses and rental
income.
(3) Adjusted EBITDA is calculated as earnings before net finance
cost, tax, depreciation and amortisation, impairment of intangible
assets, loss on disposal of assets, foreign exchange gain or loss,
share-based payment expense and exceptional items , and is adjusted
to include cash rental expenses and rental income.
(4) Rent adjustment includes both cash rental expenses and
rental income. The adoption of IFRS 16 results in this expense
falling below EBITDA in FY20.
(5) EBITDA is calculated as earnings before net finance cost,
tax, depreciation and amortisation, impairment of intangible
assets, loss on disposal of assets, foreign exchange gain or loss,
share-based payment expense and exceptional items. The most
directly comparable IFRS measure to segment EBITDA is operating
loss for the period. Management utilises 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 FY20 FY19 % Movement
(1)
Recurring revenue (2) 19.6 19.0 4%
Repeatable revenue (3) 14.4 13.5 5%
------------------------------------------------ ----- ----- -----------
Total recurring and repeatable revenue 34.0 32.5 4%
Other revenue (4) 2.3 2.9 -17%
------------------------------------------------ ----- ----- -----------
Tungsten Network total revenue 36.3 35.4 3%
TNF revenue (5) 0.5 0.6 -17%
------------------------------------------------ ----- ----- -----------
Group revenue 36.8 36.0 2%
------------------------------------------------ ----- ----- -----------
Recurring revenue % of total Tungsten Network
revenue (6) 54% 54% -
Total recurring & repeating revenue % of total
Tungsten Network revenue (7) 94% 92% 2%
------------------------------------------------ ----- ----- -----------
(1) Revenue is shown to the nearest GBP0.1 million. Movement is
calculated on figures to the nearest GBP1.
(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) TNF revenue relates to revenue generated by the trade
finance business announced for disposal but not treated as an asset
held for disposal at the end of FY20.
(6) Recurring revenue is revenue from annual subscription and
maintenance fees as a % of revenue excluding TNF.
(7) Recurring and repeatable revenue is total recurring and
repeatable revenue as a % of revenue excluding TNF.
Revenue excluding TNF for the year was GBP36.3 million (FY19:
GBP35.4 million), representing an increase of 2.6%. The growth in
revenue reflected the net benefits of new customer sales,
additional product sales to current customers and increased
transaction volumes. Revenue including TNF for the year was GBP36.8
million (FY19: GBP36.0 million), representing an increase of
2.1%.
Total new sales billings in FY20 were GBP4.0 million,
representing year one billings for new services sold to current and
new buyers. GBP3.2 million of this was recognised in FY20, with the
balance of GBP0.8 million to be recognised in FY21.
Recurring revenue increased by GBP0.6 million, or 3%, to GBP19.6
million (FY19: GBP19.0 million) due to a combination of six new
sales across our AP and AR solutions, offset by the loss of one AP
buyer.
Repeatable revenue increased by GBP0.9 million, or 7%, to
GBP14.4 million (FY19: GBP13.5 million) due to increased
transaction volumes processed for new and existing customers, as
well as targeted supplier price increases.
Other revenue decreased by GBP0.6 million to GBP2.3 million
(FY19: GBP2.9 million) due to fewer AP and AR sales in the year, as
well as the benefit in FY19 from increased set up fees following
the regulatory changes enforced by the Italian tax authority.
TNF revenue generated fees of GBP0.5 million in FY20 (FY19:
GBP0.6 million), a decrease of GBP0.1 million due to a decrease in
the average outstanding as the business is being wound down.
Revenue by type of customer
Buyer revenue represented 42% of Tungsten Network revenue in the
FY20 (FY19: 43%). Total Buyer revenue was GBP15.3 million (FY19:
GBP15.2 million), reflecting a growth in recurring and
discretionary revenue of 8.6% (GBP1.1 million) and a fall in
one-off revenue of 41.1% (GBP1.0 million).
Supplier revenue represented 58% of Tungsten Network revenue in
the 2020 financial year (FY18: 57%). Total Supplier revenue grew
4.4% to GBP21.0 million (FY19: GBP20.1 million). This reflected a
growth in recurring and discretionary revenue of 4.1% (GBP0.8
million) as well as a growth in one-off revenue of 12.0% (GBP0.1
million).
Expenses
GBPm FY20 FY19 Difference
------------------------------------------ ------- ------- -----------
Sales & marketing (5.8) (7.3) 1.5
Service delivery (7.2) (6.8) (0.4)
Technology & product (10.3) (10.0) (0.3)
Finance, administration, board & central
overheads (9.2) (9.4) 0.2
------------------------------------------ ------- ------- -----------
Adjusted operating expenses (1) (32.5) (33.5) 1.0
Rent adjustment 1.0 - 1.0
Cost of sales (1.6) (1.9) 0.3
Depreciation and amortisation (4.4) (4.1) (0.3)
Loss on disposal of assets (0.6) (2.2) 1.6
Foreign exchange gain/(loss) 0.8 1.7 (0.9)
Share-based payment expense (0.5) (0.2) (0.3)
Exceptional items (1.5) (1.0) (0.5)
Impairment (23.0) - (23.0)
------------------------------------------ ------- ------- -----------
Statutory operating expenses (62.3) (41.2) (21.1)
(1) Adjusted operating expenses exclude cost of sales, other
income, interest, tax, depreciation, amortisation, impairment of
intangible assets, loss on disposal of assets, foreign exchange
gains or losses, share-based payments charges, and exceptional
items, and are adjusted to include cash rental expenses and rental
income.
The Group's adjusted operating expenses reduced by 3% to GBP32.5
million (FY19: GBP33.5 million).
Sales and marketing expenses reduced by GBP1.5 million to GBP5.8
million. This primarily reflects reductions to ineffective
marketing spend in the second half of the financial year and
savings in payroll.
Service delivery expenses increased by GBP0.4m, largely due to
increased staff costs. Technology and product costs increased by
GBP0.3m year-on-year largely due to investment in our technical
operations and development resources. Finance, administration,
board and central overheads reduced by GBP0.2 million, or 2%, to
GBP9.2 million due to savings from professional support and office
costs.
Statutory operating expenses increased by GBP21.1 million to
GBP62.3 million (FY19: GBP41.2 million). Key movements include:
-- Goodwill impairment of GBP23.0 million relating to the
carrying value of the goodwill associated with the OB10 acquisition
in 2013, reflecting unprecedented economic conditions brought about
by the Covid-19 pandemic. This does not reflect a change in the
overall Group's strategic outlook for its longer term future
-- Reduction in the foreign exchange translation gain of GBP0.9
million reflecting the revaluation at year-end of monetary assets
and liabilities denominated in foreign currencies
-- Reduction in loss on disposal of GBP1.6 million related to
the write-off of internally generated intangible assets
-- Share-based payment expense increase of GBP0.3 million due to
the issuance of share options for new senior management
-- Depreciation and amortisation increase of GBP0.3 million due
to the commencement of amortising software development costs
incurred in FY19 and FY20
-- Exceptional items increased by GBP0.5 million primarily due to restructure activity
Loss before tax
The Group generated a loss before tax of GBP26.0 million (FY19:
GBP5.3 million). The reduction primarily reflects the GBP23.0
million impairment charge for goodwill, reflecting unprecedented
economic conditions brought about by the Covid-19 pandemic. This
does not reflect a change in the overall Group's strategic outlook
for its longer term future.
Taxation
There is a tax charge of GBP0.1 million for the year (FY19
restated: credit GBP1.4 million). Last year's tax credit included a
GBP1.5 million research and development tax credit. The rest of the
year-on-year change in the tax credit is due to the offset of the
previously recognised deferred tax liability with a deferred tax
asset.
Loss per share
The basic and diluted loss per share was 20.62p (FY19 restated:
3.11p).
Dividends
The Company has not paid, and does not propose to pay, a
dividend in relation to FY20.
Prior year adjustments
During the year the Group identified a deferred tax liability
that had been incorrectly recorded in 2013 following the
acquisition of OB10 Ltd and the incorrect unwinding of a deferred
tax liability created following the acquisition of Docusphere Inc.,
in 2014. Both liabilities have been offset with an equal and
opposite deferred tax asset which been unwound through the prior
year accounts in line with the historic treatment of the deferred
tax liability.
The Group also identified three liabilities totalling GBP0.9
million that arose in previous years, but which were not recorded
on the 30 April 2019 statement of financial position. The
liabilities reflected a more appropriate revenue recognition policy
from our Web Form supplier revenue, the booking of a compensated
absence accrual and the booking of an additional indirect tax
accrual relating to the Group's global activities. These have
resulted in the restatement of the consolidated statements of
financial position at 30 April 2019 and 30 April 2018 to include
these liabilities. The effect of these items on the 2019 income
statement is not material and so they have no effect on either the
loss for the year or the loss per share in 2019. Further details
are set out in Note 7.
Funding and liquidity
Cash and cash equivalents at the end of FY20 were GBP5.2 million
(FY19: GBP3.8 million). Net cash (including borrowings under the
revolving credit facility) at the end of FY20 was GBP3.2 million
(FY19: GBP2.8 million).
Cash Flow GBPm FY20 FY19
----------------------------------------- ------ ------
Net cash flow from operating activities 4.6 (0.3)
Net cash flow from investing activities (3.0) (3.3)
Net cash flow from financing activities (0.1) 1.0
Net movement in cash & cash equivalents 1.5 (2.6)
Exchange adjustments (0.1) -
Cash & cash equivalents at the start
of the period 3.8 6.4
Cash & cash equivalents at the end
of the period 5.2 3.8
----------------------------------------- ------ ------
The Group had a cash inflow in FY20 of GBP1.5 million, with cash
and cash equivalents at the end of FY20 of GBP5.2 million.
Including borrowings, cash was GBP3.2 million. Liquidity, including
GBP2 million of undrawn revolving credit facility with a maturity
date of July 2021, was GBP7.2 million.
Cash flows from operating activities
Cash generated from operating activities was GBP4.6 million
(FY19: -GBP0.3 million). The improvement on the prior year was due
to lower operating losses and improved working capital,
particularly around invoice billing and cash collection.
Cash flows from investing activities
Cash spent on investing activities decreased by GBP0.3m to
GBP3.0 million (FY19: GBP3.3 million), reflecting a higher mix of
maintenance work as opposed to the development work of our
technology team.
Cash flows from financing activities
Cash flow from financing activities of GBP(0.1)m (FY19: GBP1.0
million) relates to the partial draw down of another GBP1 million
of the revolving credit facility in March 2020, offset by GBP1.1
million of office rental payments. The office rental payments were
included in operating activities prior to the adoption of IFRS
16.
The FY20 movement in the Group's cash, excluding drawings from
the revolving credit facility (RCF), was a GBP0.5 million inflow.
This included a GBP1.8 million outflow in H1-FY20, offset by a
GBP2.4 million inflow in H2-FY20 (GBP3.4 million inflow, less
GBP1.0 million drawings on the RCF).
Capital expenditure
During the year, the Group spent GBP3.0 million on capital
expenditure, being GBP0.2 million in relation to property plant and
equipment, and GBP2.8 million in relation to internally capitalised
software development. This compares to GBP3.3 million in total in
FY19. Our significant internally-generated software development
expenditure was in relation to the development of new functionality
and a more modern look and feel for our customer portal and updates
to our core transaction processing software.
Balance sheet items
Goodwill has reduced by GBP22.9m to GBP76.1m (FY19 restated:
GBP99.0m), reflecting the GBP23.0 impairment charge which is
partially offset by foreign exchange translation movements.
Following the adoption of IFRS16 'Leases' the Group recognised
GBP6.4m right of use assets and GBP7.0m of lease liabilities.
The Group has increased contract liabilities by GBP1.8m to
GBP8.9m.
Related parties
The Group entered into transactions with related parties in the
ordinary course of business, more details of which are disclosed in
Note 25 of the Group's Annual Report.
Going concern
Although the impact of Covid-19 has not been as marked as with
many other organisations, the full effect on the business is still
unfolding. Revenue since the year end has been in line with our
expectations with only limited adverse effects of Covid-19 being
apparent, and the move to remote working has increased the
importance of e-invoicing to our customers and potential customers.
However, we have no experience of a similar crisis and so it is
difficult to predict the extent to which Covid-19 may affect future
revenues. It is not yet clear how long the pandemic will last and
what the medium to long-term effect will be on business
behaviour.
We must therefore prepare the business for varying levels of
sales decline. To that end, we have modelled the effects of
differing levels of sales decline along with the measures we can
take to ensure that the Group remains within its covenants, and we
have prepared cash flow forecasts for a period in excess of 12
months.
We anticipate revenues meeting budget over FY21 but recognise
that there is a risk that the Group will be impacted by reductions
in the number of invoices our customers process and by prospective
customers delaying implementation projects. If sales and settlement
of existing debts are not in line with cash flow forecasts, the
directors have identified cost savings associated with the
reduction in revenues and have the ability to identify further cost
savings if necessary.
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. However, in the
unlikely event that this should occur, the Group will have to
adjust its working capital positions, as well as making significant
reductions in its fixed cost expenses.
Chris Allen
Chief Financial Officer
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 APRIL 2020
Year ended
30 April
Year ended 2019
30 April (restated(2)
2020 )
Note GBP'000 GBP'000
-------------------------------- ---- -------- --- ----------- --------------
Revenue 3 36,812 36,045
Operating expenses (62,356) (41,256)
-------------------------------------- -------- --- ----------- --------------
Operating loss (25,544) (5,211)
EBITDA(1) 3,743 607
Depreciation and amortisation (4,451) (4,103)
Loss on disposal of intangible
assets (612) (2,216)
Impairment of goodwill (23,040) -
Foreign exchange gain 869 1,738
Share based payment expense (534) (244)
Exceptional items (1,519) (993)
--------------
Operating loss (25,544) (5,211)
-------- --- ----------- --------------
Finance income 1,910 1,576
Finance costs (2,321) (1,650)
Net finance costs (411) (74)
-------------------------------------- -------- --- ----------- --------------
Loss before taxation (25,955) (5,285)
Taxation (charge)/credit (47) 1,358
Loss for the year (26,002) (3,927)
-------------------------------------- -------- --- ----------- --------------
Loss per share attributable to the equity
holders of the parent during the year
(expressed in pence per share):
Basic and diluted 4 (20.62) (3.11)
-------------------------------------- -------- --- ----------- --------------
(1) EBITDA is calculated as earnings before net finance cost,
tax, depreciation and amortisation, impairment of intangibles
assets, loss on disposal of assets, foreign exchange gain or loss,
share based payment expense and exceptional items.
(2) The 2019 income statement has been restated to amend the
recognition of deferred tax (see Note 7).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 APRIL 2020
Year ended
30 April
2019
(restated)
GBP'000
------------
Year ended
30 April
2020
GBP'000
--------------------------------------------- ---- ---- ---- ----------- ------------
Loss for the year (26,002) (3,927)
Other comprehensive expense:
Items that may be reclassified subsequently
to profit or loss
Currency translation differences (1,115) (1,872)
Total comprehensive loss for the year (27,117) (5,799)
--------------------------------------------------------------- ----------- ------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 APRIL
2020
Note As at As at As at
30 April 2020 30 April 2019 30 April 2018
(restated(1) ) (restated(1) )
GBP'000 GBP'000 GBP'000
--------------------------------------------- ------- --------- --------------- ---------------- ----------------
Assets
Non-current assets
Goodwill 5 76,088 98,997 98,788
Intangible assets 17,666 18,733 21,549
Property, plant and equipment 1,578 2,506 2,646
Right of use assets 6 5,518 - -
Trade and other receivables 755 775 1,052
------------------------------------------------------ --------- --------------- ---------------- ----------------
Total non-current assets 101,605 121,011 124,035
------------------------------------------------------ --------- --------------- ---------------- ----------------
Current assets
Trade and other receivables 6,199 6,876 7,626
Cash and cash equivalents 5,208 3,810 6,418
------------------------------------------------------ --------- --------------- ---------------- ----------------
Total current assets 11,407 10,686 14,044
------------------------------------------------------ --------- --------------- ---------------- ----------------
Total assets 113,012 131,697 138,079
------------------------------------------------------ --------- --------------- ---------------- ----------------
Non-current liabilities
Provisions 1,160 1,568 1,459
Lease liabilities 6 5,471 - -
Other payables - 250 250
Total non-current liabilities 6,631 1,818 1,709
------------------------------------------------------ --------- --------------- ---------------- ----------------
Current liabilities
Trade and other payables 7,822 7,717 9,235
Provisions 96 158 759
Lease liabilities 6 776 - -
Borrowings 2,006 1,000 -
Contract liabilities 8,868 7,095 6,772
------------------------------------------------------ --------- --------------- ---------------- ----------------
Total current liabilities 19,568 15,970 16,766
------------------------------------------------------ --------- --------------- ---------------- ----------------
Total liabilities 26,199 17,788 18,475
------------------------------------------------------ --------- --------------- ---------------- ----------------
Capital and reserves attributable to the equity shareholders of
the parent
Share capital 553 553 553
Share premium 188,802 188,802 188,794
Merger reserve 28,035 28,035 28,035
Shares to be issued 3,760 3,760 3,760
Share-based payment reserve 7,184 6,538 6,442
Other reserve (5,450) (5,450) (5,450)
Currency translation reserve (5,078) (3,963) (2,091)
Accumulated losses (130,993) (104,366) (100,439)
------------------------------------------------------ --------------- ---------------- ----------------
Total equity 86,813 113,909 119,604
------------------------------------------------------ --------- --------------- ---------------- ----------------
Total equity and liabilities 113,012 131,697 138,079
------------------------------------------------------ --------- --------------- ---------------- ----------------
(1) 2019 and 2018 statements of financial position have been
restated to amend the recognition of deferred tax and deferred
income, include a holiday accrual and include an additional
indirect tax accrual (see Note 7).
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEARED 30 APRIL
2020
Year ended Year ended
30 April 2020 30 April 2019
GBP'000 GBP'000
-------------------------------------------------------------------------- --------------- ---------------
Cash flows from operating activities
Loss before taxation (25,955) (5,285)
Adjustments for:
Depreciation and amortisation 4,451 4,103
Impairment of goodwill 23,040 -
Loss on disposal of intangible assets 609 2,216
Decrease in provision for trade receivables (840) (522)
Finance costs 2,321 1,650
Finance income (1,910) (1,576)
Foreign exchange (gain) (869) (1,738)
Share based payment expense 534 244
Changes in working capital:
Decrease in trade and other receivables 746 2,421
Increase/(decrease) in trade and other payables and contract liabilities 2,112 (1,346)
(Decrease) in provisions (108) (520)
Cash generated from /(used in) operations 4,131 (353)
--------------------------------------------------------------------------- --------------- ---------------
Net interest paid (311) (430)
Net tax refunded 751 473
Net cash inflow/(outflow) from operating activities 4,571 (310)
--------------------------------------------------------------------------- --------------- ---------------
Cash flows from investing activities
Software development costs (2,758) (2,940)
Purchases of other intangibles (5) (9)
Purchases of property, plant and equipment (199) (322)
Net cash (outflow) from investing activities (2,962) (3,271)
--------------------------------------------------------------------------- --------------- ---------------
Cash flows from financing activities
Lease payments - payments of principal (743) -
Lease payments - payments of interest (331) -
Increase in borrowings 1,000 1,000
Proceeds from issues of shares - 8
Net cash (outflow)/inflow from financing activities (74) 1,008
--------------------------------------------------------------------------- --------------- ---------------
Net increase/(decrease) in cash and cash equivalents 1,535 (2,573)
Cash and cash equivalents at start of the year 3,810 6,418
Exchange adjustments (137) (35)
Cash and cash equivalents at the end of the year 5,208 3,810
--------------------------------------------------------------------------- --------------- ---------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30
APRIL 2020
Year ended 30 April 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 30 April
2019 as
previously
stated 553 188,802 28,035 3,760 6,538 (5,450) (3,963) (104,366) 113,909
Adoption
of IFRS 16 - - - - - - - (625) (625)
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- -----------
Balance as
at 1 May
2019 as
restated 553 188,802 28,035 3,760 6,538 (5,450) (3,963) (104,991) 113,285
Loss for
the year - - - - - - - (26,002) (26,002)
Other
comprehensive
expense - - - - - - (1,115) - (1,115)
Total
comprehensive
expense for
the year - - - - - - (1,115) (26,002) (27,117)
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- -----------
Transaction
with owners
in their
capacity
as owners:
Share based
payment
expense - - - - 646 - - - 646
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- -----------
Transactions
with owners - - - - 646 - - - 646
Balance as
at 30 April
2020 553 188,802 28,035 3,760 7,184 (5,450) (5,078) (130,993) 86,813
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 30
APRIL 2020 CONTINUED
Year ended 30 April 2019
Shares Share-based
to payment Currency Accumulated Total
Share Share Merger be reserve Other Translation losses equity
capital premium reserve issued GBP'000 reserve Reserve (restated) (restated)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ---------------------- -------------
Balance as
at 30 April
2018 as
previously
stated 553 188,794 28,035 3,760 6,442 (5,450) (2,091) (98,582) 121,461
Prior year
adjustment
(Note 7) - - - - - - - (1,857) (1,857)
Balance as
at 1 May
2018 restated 553 188,794 28,035 3,760 6,442 (5,450) (2,091) (100,439) 119,604
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ---------------------- -------------
Loss for
the year - - - - - - - (3,927) (3,927)
Other
comprehensive
expense - - - - - - (1,872) - (1,872)
Total
comprehensive
expense for
the year - - - - - - (1,872) (3,927) (5,799)
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ---------------------- -------------
Transaction
with owners
in their
capacity
as owners:
Issue of
treasury
shares to
employees - 8 - - - - - - 8
Share based
payment
expense - - - - 96 - - - 96
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ---------------------- -------------
Transactions
with owners - 8 - - 96 - - - 104
Balance as
at 30 April
2019 553 188,802 28,035 3,760 6,538 (5,450) (3,963) (104,366) 113,909
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ---------------------- -------------
NOTES
1. Basis of Preparation
The financial information set out in this document does not
constitute the Company's statutory accounts for the years ended 30
April 2020 or 2020. Statutory accounts for the years ended 30 April
2019 and 30 April 2020, which were approved by the directors on 6
September 2020, have been reported on by the Independent Auditors.
The Independent Auditors' Reports on the Annual Report and
Financial Statements for each of 2019 and 2020 were unqualified,
did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act
2006.
Statutory accounts for the year ended 30 April 2019 have been
filed with the Registrar of Companies. The statutory accounts for
the year ended 30 April 2020 will be delivered to the Registrar in
due course, and are available from the Company's registered office
at Pountney Hill House, 6 Laurence Pountney Hill, London, EC4R 0BL
and will be available from the Company's website
https://www.tungsten-network.com/about-us/investor-relations/
The financial information set out in these results has been
prepared using the recognition and measurement principles of
International Accounting Standards, International Financial
Reporting Standards and Interpretations adopted for use in the
European Union (collectively Adopted IFRSs). The accounting
policies adopted in these results have been consistently applied to
all the years presented and are consistent with the policies used
in the preparation of the financial statements for the year ended
30 April 2019, except for those that relate to new standards and
interpretations effective for the first time for periods beginning
on (or after) 1 January 2019. The new standard impacting the Group
that has been adopted in the annual financial statements for the
year ended 30 April 2020 is IFRS 16: Leases, further details of
which appear in Note 6 below. Other new standards, amendments and
interpretations to existing standards, which have been adopted by
the Group have not been listed, since they have no material impact
on the financial statements.
2. Going Concern
The Group's 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; and (b)
the level of new sales to new customers. 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 financial
statements. Further information on the Group's borrowings and
available facilities in the Group's Annual Report.
Various sensitivity analyses have been performed to reflect a
variety of possible cash flow scenarios, taking into account the
Covid-19 pandemic, where the Group achieves significantly reduced
revenues for the twelve months following the date of this Annual
Report. Overall, the directors have prepared cash-flow forecasts
covering a period of at least 12 months from the date of approval
of the financial statements, which foresee that the Group will be
able to operate within its existing facilities.
The Covid-19 pandemic has so far had limited impact on our
business and the Board believes that the business is able to
navigate through the impact of Covid-19 due to the strength of its
customer proposition, its balance sheet and the net cash position
of the Group.
However, the rapid emergence of the coronavirus pandemic has
caused significant disruption to many businesses where the
implementation of social distancing measures is not practical or is
deemed ineffective and this had implication for the wider global
economy and specifically to the supply chain within which we reside
- be it our customers willingness to use our services in the
volumes planned prior to the pandemic or where customers will have
the ability to settle their debts to the value of sales already
recorded and to the originally agreed settlement terms. The move to
remote working has increased the importance of e-invoicing to our
customers and potential customers. There is however a risk that the
Group will be impacted by reductions in the number of invoices our
customers process and by prospective customers delaying
implementation projects. If sales and settlement of existing debts
are not in line with cash flow forecasts, the directors have
identified cost savings associated with the reduction in revenues
and have the ability to identify further cost savings if
necessary.
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.
3. 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 three 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), 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 EBITDA which is an adjusted profit measure
which reflects loss before finance income and costs, taxation,
depreciation, amortisation, loss on disposal of assets, foreign
exchange gains and losses, share based payment expense and
exceptional items.
The most directly comparable IFRS measure to segment EBITDA is
operating loss for the period. Management utilises EBITDA to
monitor performance as it illustrates the underlying performance of
the business by excluding items management consider 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.
Year ended 30 April 2020
Tungsten
Tungsten Network
Network Finance Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- --------- ---------- ---------
Segment revenue 36,288 524 - 36,812
EBITDA(1) 8,579 (986) (3,853) 3,740
Depreciation and amortisation (3,599) (87) (765) (4,451)
Loss on disposal of assets 2 (611) - (609)
Impairment of goodwill (23,040) - - (23,040)
Foreign exchange gain 828 40 1 869
Share based payment (expense)/credit (146) 7 (395) (534)
Exceptional items (479) (233) (807) (1,519)
Finance income 1,195 - 715 1,910
Finance costs (1,555) - (766) (2,321)
--------------------------------------- --------- --------- ---------- ---------
(Loss) before taxation (18,215) (1,870) (5,870) (25,955)
Income tax credit (47)
--------------------------------------- --------- --------- ---------- ---------
Loss for the year (26,002)
--------------------------------------- --------- --------- ---------- ---------
As at 30 April 2020
Capital expenditure 2,822 - 140 2,962
Total assets 105,255 193 7,564 113,012
--------------------------------------- --------- --------- ---------- ---------
Total liabilities 14,652 732 10,815 26,199
--------------------------------------- --------- --------- ---------- ---------
(1) EBITDA is calculated as earnings before net finance cost,
tax, depreciation and amortisation, impairment of intangibles
assets, loss on disposal of assets, foreign exchange gain or loss,
share based payment expense and exceptional items.
Year ended 30 April 2019
Tungsten
Tungsten Network Total
Network Finance Corporate (restated)
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- --------- ----------- ------------------ ---------------
Segment revenue 35,371 674 - 36,045
EBITDA(1) 8,115 (1,885) (5,623) 607
Depreciation and amortisation (3,668) (144) (291) (4,103)
Loss on disposal of assets (2,216) - - (2,216)
Foreign exchange gain/(loss) 1,792 (54) - 1,738
Share based payment (expense)/credit (399) (381) 536 (244)
Exceptional items (285) 14 (722) (993)
Finance income 938 3 635 1,576
Finance costs (1,186) (184) (280) (1,650)
--------------------------------------- --------- ----------- ------------------ ---------------
Profit/(loss) before taxation 3,091 (2,631) (5,745) (5,285)
Income tax credit 1,358
--------------------------------------- --------- ----------- ------------------ ---------------
Loss for the year (3,927)
--------------------------------------- --------- ----------- ------------------ ---------------
As at 30 April 2019
Capital expenditure 2,464 836 3 3,303
Total assets 127,470 998 3,229 131,697
Total liabilities (restated) 9,630 909 5,431 15,970
--------------------------------------- --------- ----------- ------------------ ---------------
(1) EBITDA is calculated as earnings before net finance cost,
tax, depreciation and amortisation, impairment of intangibles
assets, loss on disposal of assets, foreign exchange gain or loss,
share based payment expense and exceptional items.
Revenue by category
The Group's revenue by category is detailed below.
Revenue from external customers
----------------------------------
Year ended Year ended
30 April 2020 30 April 2019
GBP'000 GBP'000
-------------------------- ---------------- ----------------
Subscription 18,163 17,305
Maintenance 1,909 1,810
Transaction 11,559 10,889
Archiving 2,781 2,620
Implementation 793 1,317
Professional services 1,083 1,430
Tungsten Network Finance 524 674
Total 36,812 36,045
--------------------------- ---------------- ----------------
The Group's revenue from external customers and non-current
assets by geographical location is detailed below. Revenue by
geographical location is allocated based on the location in which
the sale originated.
Revenue from external customers
-------------------------------------
Year ended Year ended
30 April 2020 30 April 2019
GBP'000 GBP'000
-------------------------- --------------- --------------------
United Kingdom 18,538 18,573
United States of America 15,203 14,596
Rest of Europe 1,674 1,619
Malaysia 1,397 1,257
Total 36,812 36,045
--------------------------- --------------- --------------------
Non-current assets are allocated based on the geographical
location of those assets and exclude other financial assets, loans
receivables and deferred tax.
Non-current assets
--------------------------------
As at As at
30 April 2020 30 April 2019
GBP'000 GBP'000
-------------------------- --------------- ---------------
United Kingdom 97,128 116,793
United States of America 4,255 4,000
Malaysia 222 218
Total 101,605 121,011
--------------------------- --------------- ---------------
4. Earnings per share
Basic and diluted 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.
Loss per share attributable to the equity holders of the parent
during the year:
Year ended 30 April 2020 Year ended 30 April 2019 (restated)
------------------------------------ ----------------------------------------
Loss Shares Loss per share Loss Shares Loss per share
GBP'000 '000 P GBP'000 '000 P
------------------- --------- -------- --------------- ---------- --------- -----------------
Basic and diluted (26,002) 126,088 (20.62) (3,927) 126,088 (3.11)
------------------- --------- -------- --------------- ---------- --------- -----------------
The Group has made a loss in the current and previous years and
therefore the share options are anti-dilutive. As a result, diluted
earnings per share is presented on the same basis for both years
shown.
5. Goodwill & Intangibles
As at 30 April 2020
Goodwill Software
(restated see Note Customer development under
7) relationships IT platform Software construction Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ------------------- --------------- ------------ --------- ------------------ -----------
Cost
Balance at 1 May
2019 98,997 11,116 7,194 8,202 3,624 129,133
Additions - - - 5 2,758 2,763
Reclassification - - - 4,117 (4,117) -
Disposal - - - (837) - (837)
Exchange
differences 131 5 113 16 (5) 260
Balance at 30 April
2020 99,128 11,121 7,307 11,503 2,260 131,319
-------------------- ------------------- --------------- ------------ --------- ------------------ -----------
Accumulated
amortization and
impairment
Balance at 1 May
2019 - 3,153 6,084 2,166 - 11,403
Charge for the year - 560 834 1,837 - 3,231
Impairment charge 23,040 - - - - 23,040
Disposal - - - (225) - (225)
Exchange
differences - 4 104 8 - 116
Balance at 30 April
2020 23,040 3,717 7,022 3,786 - 37,565
-------------------- ------------------- --------------- ------------ --------- ------------------ -----------
Net book value
As at 1 May 2019
(restated) 98,997 7,963 1,110 6,036 3,624 117,730
As at 30 April 2020 76,088 7,404 285 7,717 2,260 93,754
As at 30 April 2019
Software
Goodwill Customer development under Total
restated relationships IT platform Software construction restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ---------- --------------- ------------ ---------- ---------------------- -----------
Cost
Balance at 1 May 2018 98,788 11,109 7,014 2,960 8,556 128,427
Additions - - - 9 2,940 2,949
Reclassification - - - 7,872 (7,872) -
Disposal - - - (2,650) - (2,650)
Exchange differences 209 7 180 11 - 407
Balance at 30 April
2019 98,997 11,116 7,194 8,202 3,624 129,133
------------------------ ---------- --------------- ------------ ---------- ---------------------- -----------
Accumulated amortisation
Balance at 1 May 2018 - 2,575 4,760 755 - 8,090
Charge for the year - 573 1,189 1,838 - 3,600
Disposal - - - (434) - (434)
Exchange differences - 5 135 7 - 147
Balance at 30 April 2019 - 3,153 6,084 2,166 - 11,403
--------------------------------- ------- ------ --------- ------- ------ --------------
Net book value
As at 1 May 2018 (restated) 98,788 8,534 2,254 2,205 8,556 120,337
--------------------------------- ------- ------ --------- ------- ------ --------------
As at 30 April 2019 (restated) 98,997 7,963 1,110 6,036 3,624 117,730
--------------------------------- ------- ------ --------- ------- ------ --------------
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
30 April 2020 30 April 2019
GBP'000 GBP'000
------------------ --------------- ---------------
Tungsten Network 76,088 98,997
Total goodwill 76,088 98,997
------------------- --------------- ---------------
During the year the Group's share price declined and management
are now projecting lower revenue growth than that used in last
year's impairment assessment. The Group has reassessed the
recoverability of goodwill on the Tungsten Network CGU and this
resulted in an impairment of goodwill of GBP23,040,000.
The Group has estimated the recoverable amount of the Tungsten
Network CGU at GBP101.1 million 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 projections used
in the model are based on the Board approved budget which took into
account the anticipated impact of Covid-19 on FY21 performance.
Given the uncertainty involved in predicting the longer-term effect
of the pandemic on the general economy, management developed
expectations of future performance under a range of scenarios with
different levels of future revenue growth. The value in use was
estimated by probability weighting the value in use under each
scenario as summarised below:
Annual Revenue Annual Cost growth Headroom/
growth FY22 to FY25 FY22 to FY25 Value in use (impairment) Probability
Scenario % % GBP million GBP million %
----------------------- --------------------- ---------------------- ------------- -------------- ------------
Upside 10% 4% to 6% 131.7 7.7 12%
Base case 8% 4% to 6% 106.0 (18.0) 50%
Downside 5% 2% 92.6 (31.5) 28%
Severe downside 0% to 3% 2% 63.3 (60.8) 10%
Probability weighted
average 101.1 (23.0) 100%
------------------------ --------------------- ---------------------- ------------- -------------- ------------
The single most likely scenario assumed revenue growth of 8% per
annum over the period (2019: 14.5%). The other key assumptions used
were:
-- Post-tax discount rate of 11% (2019: 12%) equivalent to a
pre-tax discount rate of 13.2%. An increase of 1% in the post-tax
discount rate would result in a GBP10.9 million increase in the
impairment recognised.
-- Long term growth rate of 2.0% (2019: 2.0%). An increase of 1%
in the long term growth rate would result in a GBP10.8 million
reduction in the impairment recognised.
-- Cost growth of 4% pa (2019: 2.6%).
6. IFRS 16 - Leases
The Group adopted IFRS 16, Leases from 1 May 2019. IFRS 16
introduces significant changes to lessee accounting by removing the
distinction between operating and finance lease and requiring the
recognition of a right-of-use asset and a lease liability at
commencement for all leases, except for short-term leases and
leases of low value assets when such recognition exemptions are
adopted. In contrast to lessee accounting, the requirements for
lessor accounting have remained largely unchanged.
The right of use assets relate to leased properties. The
movements in the right-of-use assets were as follows:
GBP'000
---------------------- --------
As at 1 May 2019 6,365
Depreciation (860)
Exchange differences 13
--------------------------- --------
As at 30 April 2020 5,518
--------------------------- --------
The movements in the lease liability were as follows:
GBP'000
------------------------------------ --------
As at 1 May 2019 6,961
Interest charge 331
Payments made on lease liabilities (1,074)
Exchange differences 29
----------------------------------------- --------
As at 30 April 2020 6,247
----------------------------------------- --------
The lease liabilities at 30 April 2020 were as follows:
As at
30 April 2020
GBP'000
-------------------------------------- ---------------
Analysis of total lease liabilities:
Non-current 5,471
Current 776
------------------------------------------- ---------------
Total 6,247
------------------------------------------- ---------------
As at
30 April 2020
GBP'000
-------------------------------- ---------------
Maturity analysis
Year 1 1,081
Year 2-5 3,345
Year 5 onwards 3,004
Total future lease payments 7,430
Total future interest payments (1,183)
------------------------------------- ---------------
Total lease liabilities 6,247
------------------------------------- ---------------
7. PY Adjustments
In 2013 a deferred tax liability was recorded as part of the
acquisition accounting relating to the purchase on OB10 Ltd. This
liability should have been offset immediately by an equal and
opposite deferred tax asset because it was considered likely that
the intangible assets recorded at the acquisition date would give
rise to taxable profits such that the accumulated tax losses held
by OB10 at the time of acquisition would have been utilised. In
2014 a deferred tax liability was recorded as part of the
acquisition accounting relating to the purchase of Docusphere, Inc.
In subsequent years, this liability should have been offset by an
equal and opposite deferred tax asset because of the tax losses the
company had incurred post acquisition for which the Group had a
right of offset against the deferred tax liability.
Consequently, the prior year income statement has been restated
as if the deferred tax liabilities had been offset by deferred tax
assets. The following table summarises the impact of the prior year
adjustment on the income statement and loss per share.
For the year ended 30 April 2019 Loss for the period Basic and undiluted loss per share
GBP'000 pence
-------------------------------------------------------- -------------------- -----------------------------------
As reported (3,350) (2.65)
Increase in tax charge from amortisation of deferred tax
asset (577) (0.46)
As restated (3,927) (3.11)
--------------------------------------------------------- -------------------- -----------------------------------
As at 30 April 2018 the effect in the statement of financial
position is to reduce the carrying value of goodwill by
GBP3,060,000 and reduce the deferred tax liability by GBP2,110,000
and increase accumulated losses at 1 May 2018 by GBP950,000.
As at 30 April 2019 the effect in the statement of financial
position is to reduce the carrying value of goodwill by
GBP3,060,000 and reduce the deferred tax liability by GBP1,533,000
and increase accumulated losses at 1 May 2019 by GBP1,527,000.
In 2020 it was identified that in previous years a compensated
absence accrual had not been made for holiday pay that could be
carried forward and used in future periods. The comparative figures
for 2019 have therefore been restated to correct accrued expenses.
The effect is to increase accrued expenses at 30 April 2019 and 30
April 2018 by GBP297,000 (included in Current liabilities - Trade
and other payables on the statement of financial position) and
increase accumulated losses at 1 May 2018 by GBP297,000.
An amendment was also made in the recognition of deferred
revenue in previous years from Webform suppliers, to ensure revenue
is recognised only when the supplier has used the transaction or
after 12 months if the transaction has not been used. Historically
only the cost to deliver the transaction had been deferred when a
transaction had not been used. The comparative figures for 2019
have therefore been restated to correct contract liabilities. The
effect is to increase contract liabilities at 30 April 2019 and 30
April 2018 by GBP279,000 (included in Current liabilities on the
statement of financial position) and increase accumulated losses at
1 May 2018 by GBP279,000.
Management has also identified an under accrual of indirect tax
exposure relating to the global activities of the Group, of which
an amount of GBP331,000 arose in previous years. The comparative
figures for 2019 have therefore been restated to correct other
taxation and social security. The effect is to increase other
taxation and social security at 30 April 2019 and 30 April 2018 by
GBP331,000 (included in Current liabilities - Trade and other
payables on the statement of financial position) and increase
accumulated losses at 1 May 2018 by GBP331,000.
In the above 3 cases the effect on the 2019 income statement is
not material. These adjustments therefore have no effect on the
2019 loss for the year or on the 2019 basic and diluted loss per
share. A restated statement of financial position as at 30 April
2018 has also been presented.
8. 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.
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END
FR LFMLTMTAMBFM
(END) Dow Jones Newswires
September 07, 2020 02:00 ET (06:00 GMT)
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