TIDMTUNG
RNS Number : 4767X
Tungsten Corporation PLC
30 April 2019
TUNGSTEN CORPORATION PLC
("Tungsten", the "Company" or "Group")
30 April 2019
INITIAL RESULTS OF THE OPERATING REVIEW
Tungsten Corporation today announces the results of its
Operating Review. Details of the progress, key steps and decisions
taken over the last six months by the new Board's Operating Review
Committee, working in close collaboration with the management team,
are set out below.
Tungsten is undergoing a period of fundamental change in regard
to strategy, operations, governance and culture. As our plans bear
fruit, we will publish an update on the further progress of the
Operating Review in October 2019.
Strategic direction
We have now commissioned extensive market research and employed
a number of specialist consultants to better understand the
marketplace and our customers.
Demand for our pure high quality e-Invoicing services remains
strong, as our competition focuses on all purpose commoditised
procure-to-pay solutions that are weak on e-Invoice process and
full legal/tax compliance. We believe that our existing strategy to
become the de-facto e-Invoicing standard is within our grasp.
Nonetheless, the present appraisal of our strengths and
weaknesses has led to a number of major new initiatives in the way
we position ourselves in the P2P market and the manner in which we
capture the global flow of invoices. These will have the effect of
enlarging our footprint and maximising our product flexibility -
without diminishing our core mission.
New Initiatives:
Procure-to-pay ("P2P")
Over the last five years, Tungsten's market has evolved.
Invoicing is now often sold as part of a wider procure-to-pay
solution, led by procurement commissioners. Tungsten therefore
intends to offer our compliant invoicing service by partnering with
a leading e-procurement technology provider. The best of breed
combination of this provider's e-procurement capabilities, and
Tungsten Network's market leading cross border compliant
e-Invoicing platform will provide a compelling integrated
cloud-based offering.
This approach will allow Tungsten to participate in the
significant numbers of opportunities that call for the full suite
of integrated P2P services.
Tungsten has signed a Memorandum of Understanding with the above
e-procurement company and expects to proceed to a full partnership
in a matter of months.
Supplier AR e-Invoicing
Tungsten's traditional and successful model has been to focus on
the automation of invoices with the accounts payable ("AP")
department of the Buyer. The onboarded Buyer has in turn mandated
the enrolment on to our network of what has often been thousands of
its own chosen Suppliers.
Our new and unique Supplier AR e-Invoicing product will now
target the reverse flow opportunity; for the first time, we are
approaching the biggest Suppliers on our network, and some who are
not yet on it, to process 100% of the invoices they send out to
their Buyers on and off our network.
By partnering with Data Interconnect Limited, an e-billing
provider with an Order-to-Cash solution, with whom we have now
signed a Memorandum of Understanding, we can deliver every kind of
invoice to Buyers wherever they may be.
Offering to be a Supplier's digital post box for 100% of
outgoing invoices is a highly attractive proposition to a customer
struggling to deliver invoices and collect payment across multiple
jurisdictions and myriad invoicing networks or delivery
systems.
To enhance the service we intend to expand our ability to
interoperate with other invoicing networks. We anticipate that this
new approach to AR e-Invoicing will help grow transaction volumes
more quickly than our existing model. We have set up a new sales
team solely to focus on this service and identified our top
Suppliers who will be initially targeted with this product.
Board and management
During the last six months, we have completely reconstituted our
Board, which now has a new focus, momentum, diversity and relevant
technology industry experience. The Board Committees adhere to best
practices pursuant to the QCA's Corporate Governance Code.
Three members of the management team have moved on to other
challenges: the Chief Executive, Chief Marketing Officer and the
Head of Corporate Development. We have identified a field of first
class external candidates for the CEO role, the marketing function
is being restructured, and future M&A work will be resourced on
a case-by-case basis.
We hope to make an announcement in relation to the appointment
of a new CEO in the coming months. In the meantime, as previously
announced, Tony Bromovsky has moved from Non-Executive to Executive
Chairman and David Williams, the CFO, is overseeing day to day
operations through the Executive Committee.
Global country compliance expansion
Tungsten's ability to provide our customers with a global tax
and legally compliant invoicing network of 48 countries remains one
of our key differentiators and an important part of our value
proposition to our customers.
As of 1 May 2019, with the addition of Bahrain and all the
French Overseas Territories, this network will increase from 48 to
50 countries. We are currently progressing plans in Latin America,
Vietnam, Japan and China, certain of which include commercial
partnerships. By the end of FY20 (April 2020), we plan to have more
than 54 countries on our network.
This further expansion of our global country compliance
capabilities will support existing Buyers on our network who
already source in these new countries; it will bestow our full
proprietary tax and legal validation on invoices emanating from
these geographical additions to our global network. We anticipate
significant transaction growth across our network from these
important global trade locations.
We also anticipate that tax driven government mandated digital
platforms will now occur with increasing frequency. This global
trend mandates companies trading in a particular jurisdiction to
have all their invoices approved on a government portal prior to
payment, and it plays to our core strengths.
In January 2019, Italy was the first European country to do this
and we became one of a very small group of officially approved
intermediaries, enabling Tungsten to benefit from a wave of new
Buyers and Suppliers transacting across both Tungsten's and the
Italian Government platforms to comply with the new law.
We look forward to deploying the technology integration lessons
learnt in Italy over the past year as other countries follow
suit.
Sales: New routes to market
The Operating Review Committee considers that previous
underperformance has been due to failures in leadership and a lack
of clear targets and purpose.
- The Company is addressing shortcomings in customer facing leadership, and in structural and organisational deficiencies, to improve the quality and quantity of our pitches, to access more senior levels at prospects and customers, and to propose new invoice release campaigns to Buyers from their Suppliers and therefore drive higher numbers of transactions.
- For our sales teams to be fit for purpose they must have the
tools to differentiate our offer, build our sales pipelines and
manage the sales cycles more effectively. In May 2019 we will host
our first global sales conference, bringing together all Tungsten
sales and client relationship managers, to ensure they are fully
equipped and trained to deliver success in all our new
strategies.
- We are also taking steps to increase the size of our New Buyer
Salesforce and generally recruit in this area.
The success of this will be demonstrated in the growth of
e-Invoice transactions across our network. There is, as usual, no
silver bullet, rather a host of inter-connected measures that are
being taken as fast as possible.
Product development
In addition to the expansion of services through the P2P and AR
Supplier e-Invoicing partners referenced above, we have launched
significant upgrades to our Purchase Order and Workflow
products.
From May 2019, we will now offer monetised Purchase Order
services as a standalone adjacent service to e-Invoice
transactions. Suppliers will now for the first time be able to
acknowledge, decline or even convert purchase orders into invoices
with a few clicks. We are confident of good uptake of this
service.
We have also released a major new version of our Workflow
product, version 5.0, which manages the document flow in a company.
This will now be based on modern intuitive user experience. This is
already seeing good uptake from the current customer base.
Our previously announced collaboration with Mastercard for their
MastercardTrack product is benefiting from further integration work
and a number of major Buyers are showing interest.
Technology
Tungsten already boasts a reliable core technology
infrastructure that has now migrated to the AWS Amazon cloud. There
are a plethora of further significant technology projects scheduled
for completion in the coming year, representing an ongoing annual
investment of c. 30% of group turnover. These include general
platform improvements, data archiving, API, connectivity and
Invoice Status Service enhancements. Ultimately it is about
delivering a better experience to our customers.
Customer portal
We have listened to our customers and are now delivering
incremental user experience improvements as part of a complete
redesign of our customer portal. This includes faster, easier
customer registration, sign-in, assisted first invoice despatch and
better reporting.
Supplier onboarding
We are improving the speed and ease of onboarding new Suppliers
onto the Tungsten Network. While Tungsten's ability to onboard
Suppliers helps to differentiate us from competitors, our current
onboarding process can sometimes too slow and complicated. Over the
next year, our development teams will deliver solutions to speed up
Supplier enrolment, activate Suppliers who are registered but not
using the network, identify to Buyers those Suppliers still sending
paper or pdf invoices, and continuously register new Suppliers as
old ones fall away; this last measure to effectively reduce
attrition rates.
We will also launch a self-service onboarding route for
Suppliers, including machine learning technology to introduce new
ways for Suppliers to integrate with the Tungsten Network. A key
conclusion of the Operating Review is that a step change in Tech
functionality will be a key driver of customer satisfaction, as
well the speed and numbers of Suppliers onboarding at the behest of
Buyers.
Cost base
The Operating Review also examined the cost base of the
business, identifying superfluous services, waste, duplication, and
best practice in order to reduce expenditure, while acknowledging
the bottom line gains from further automation. These include:
-- A reduction in the footprint of our London office, through
the sublet of two floors. The work to achieve this is expected to
commence in May 2019, and once the vacant space is subsequently
let, we anticipate an annual benefit of c. GBP0.5 million.
-- A new and more effective marketing plan, based less on
internet targeting and campaigning and more on leveraging global
client goodwill. We will support this by increasing our critical
online presence and media profile. The net effect of these changes,
as we reduce ineffectual expenditure, is expected to reduce
marketing spend by up to GBP0.5 million.
-- The remuneration package for our next CEO will no longer
include generous expatriate benefits and will be based on AIM best
practice guidelines for this position.
-- A new remuneration plan is changing the focus from
predominately cash payments to now include deferred shares, thereby
aligning senior executives more with shareholders. This also has
the associated benefit of reducing cash outflows.
-- Our FY20 technology programme will result in a higher level
of automation, including customer onboarding which in turn will
reduce the current high number of expensive support tickets.
-- Taken together these savings are significant; funds thus
saved will be redeployed to critical front end impact areas such as
sales and marketing.
Remuneration plan
The Remuneration Committee of the Board has met at least monthly
since October 2018 to identify the shortcomings of prior
remuneration arrangements and propose solutions. A new plan, based
on advice from Aon and following consultations with shareholders,
is founded on defining clear targets and KPIs for every employee.
We will replace the granting of share options, whose benefits can
be counter-productive, with deferred shares.
The Company will also offer current option holders the
opportunity to convert to deferred shares, based on a detailed
formula.
We have also set up a three year LTIP plan for management, with
stretching targets.
Tungsten Network Finance
The Board has concluded that, whilst Trade Finance is an
important service to be able to offer to our clients, its provision
is non-core. Accordingly, Tungsten has appointed an M&A
corporate finance firm to advise and handle this divestment. An
information Memorandum will be finalised shortly and a list of
interested parties has been prepared.
We intend to continue to provide our customers with a suite of
different types of trade finance through a divested TNF via a
controlled access agreement. With this in place, we hope to provide
an even better service based on the most competitive pricing and
range of products.
Tungsten intends to release an unaudited pre-close trading
update for FY19 on 23 May 2019. Tungsten's final results for FY19
are scheduled for release on 22 July 2019.
For further information please contact:
Tungsten Corporation plc
Tony Bromovsky, Executive Chairman
David Williams, Chief Financial Officer +44 20 7280 7713
Panmure Gordon (Nominated Adviser)
Dominic Morley +44 20 7886 2500
Canaccord Genuity Limited (Financial Adviser
and Broker)
Simon Bridges / Emma Gabriel +44 20 7523 8000
About Tungsten Corporation plc
Tungsten Corporation (LSE: TUNG) aims to be the world's most
trusted business transaction network by using data intelligently to
strengthen the global supply chain.
Tungsten Network is a secure business transaction network that
brings businesses and their Suppliers closer together with unique
technology that revolutionises invoice processing, maximises
efficiency and improves cash flow. Delivering trusted connections
and streamlined transactions, the network also provides users with
real-time spend analysis and offers access to trade finance through
Tungsten Network Finance.
Tungsten Network processes invoices for 74 percent of the FTSE
100 and 71 percent of the Fortune 500. It enables Suppliers to
submit tax compliant e-Invoices in 48 countries, and last year
processed transactions worth over GBP164bn for organisations such
as Alliance Data, Cargill, Deutsche Lufthansa, General Motors,
GlaxoSmithKline, Mondelēz International, Henkel, IBM, Kellogg's and
the US Federal Government.
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.
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END
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