TIDMTUNG
RNS Number : 9136Z
Tungsten Corporation PLC
23 May 2019
TUNGSTEN CORPORATION PLC
("Tungsten" or the "Company")
23 May 2019
TRADING UPDATE FOR FINANCIAL YEARED 30 APRIL 2019
Highlights(1)
Group results (including Group results (excluding
TNF) TNF(2) )
FY19 FY18 Growth FY19 FY18 Growth
--------- --------- --------- -------
m m m m
------------- --------- --------- ------- --------- --------- -------
Revenue GBP36.0 GBP33.7 7% GBP35.3 GBP33.7 6%
--------- --------- ------- --------- --------- -------
EBITDA GBP0.6 GBP(4.6) n/a GBP2.5 GBP(3.3) n/a
--------- --------- ------- --------- --------- -------
Cash -
net GBP2.8 GBP6.4 (56%) GBP2.8 GBP6.4 (56%)
--------- --------- ------- --------- --------- -------
Transaction
volumes 18.2 17.7 3% 18.2 17.7 3%
--------- --------- ------- --------- --------- -------
Results excluding TNF:
-- First annual EBITDA(3) profit of GBP2.5 million in FY19 (FY18: GBP(3.3) million EBITDA loss)
-- Revenue growth of 6% to GBP35.3 million in FY19 with strong H2-FY19 performance
-- Reduction in adjusted operating expenses(4) by 10% to GBP31.0 million
-- Cash generated in H2-FY19 of GBP0.8 million with net cash of
GBP2.8 million at 30 April 2019 (31 October 2018: GBP2.0
million)
The Company intends to announce its audited FY19 results and
host a conference call with analysts and investors on 22 July 2019.
Details of this call will be announced in due course.
1 Performance figures are unaudited. Audited results for the
financial year ended 30 April 2019 are scheduled for announcement
on 22 July 2019
2 Tungsten announced its intention to divest Tungsten Network
Finance ("TNF") on 30 April 2019
3 EBITDA is defined as operating profit before other income,
depreciation, amortisation, gain or loss on sale, foreign exchange
gain or loss, share-based payments charge and exceptional items
4 Adjusted operating expenses exclude cost of sales, interest,
tax, depreciation, amortisation, gain or loss on sale, foreign
exchange gain or loss, share-based payments charges and exceptional
items
David Williams, Interim Chief Executive Officer & Chief
Financial Officer
"We are pleased to announce that Tungsten achieved its first
annual EBITDA profit in FY19. This demonstrates that the
significant actions taken by the new Board to address
underperformance are starting to have the desired impact.
"Our business is strengthening. In the second half of the year
we generated positive cash flow, and in addition to growing our
revenues we identified and executed numerous cost saving
initiatives which reduced our adjusted operating expenses by 10%(5)
, with a further impact of savings to come in FY20.
"Although revenue growth increased from 2% in the first half of
the year to 6%(6) for the full year, we continue to focus on
increasing the pace of the upward trajectory. We are confident that
through executing the actions identified in our operating review,
including working with an e-procurement partner and expanding our
AR e-invoicing services, we will be able to achieve higher revenue
growth.
"As previously announced, the divestment of our trade finance
subsidiary, TNF, has begun and present indications are that this
process should be concluded in the first half of FY20.
"The combination of the breakthrough to EBITDA profitability on
the back of a new strategy, positive cash flow over the second half
of FY19 and the widening gap between revenue growth and falling
costs positions the company well for the future."
(5) (10% reduction excluding TNF. 7% reduction including
TNF)
(6) (6% growth excluding TNF. 7% growth including TNF)
Trading Update
Revenue
Revenue excluding TNF for FY19 is expected to be GBP35.3
million. This compares with GBP33.3 million in FY18. The inclusion
of the revenue of TNF increases revenue by GBP0.7 million in FY19
(GBP36.0 million revenue including TNF).
In the first half of FY19, Tungsten recorded revenue excluding
TNF of GBP17.2 million, growth of 2% from the first half of FY18.
Revenue excluding TNF of GBP18.2 million in the second half of FY19
represents growth of 11% from the second half of FY18, 6%
sequential growth from the first half of FY19 and 6% annual growth
overall.
Total transaction volumes were 18.2 million, growth of 3% from
FY18, at an effective revenue per transaction of GBP1.93 (FY18:
GBP1.88).
Tungsten added five new accounts payable automation customers in
FY19; including four that will use our e-invoicing solution and one
which will initially use our Workflow tool.
As Tungsten has previously reported, we have identified the
areas of weakness in adding new customers and transactions,
including people, process, products and routes to market. We have
now appointed our first Chief Revenue Officer, Steve Standring, who
will deliver the changed sales strategy, including working with
Data Interconnect, Tungsten's AR e-invoicing partner, and
developing Tungsten's new e-procurement partnership.
Gross margin and expenses
The Company expects to achieve an FY19 gross margin excluding
TNF of 94.6%, a 160 basis point improvement on the FY18 gross
margin of 93.0%. The gross margin including TNF was 94.7% in
FY19.
Adjusted operating expenses excluding TNF are expected to be
GBP31.0 million, a reduction of GBP3.3 million or 10%. This
reflects a range of successful initiatives, including the reduction
in senior management positions, a drive to salaries more in line
with AIM guidelines, the cancellation of superfluous marketing
services and changes to the remuneration policy, resulting in a
reduction in cash bonuses in favour of deferred shares - each have
had a positive impact on EBITDA.
The exclusion of the adjusted operating expenses of TNF improved
the adjusted operating expenses by GBP2.5 million in FY19 (GBP33.5
million adjusted operating expenses including TNF).
Excluded from EBITDA, we expect FY19 one-off costs of GBP1.0
million (FY18: GBP2.4 million). These include adviser fees
primarily relating to the shareholder actions early in the
financial year, contracts identified as onerous in our cost
reduction work and the restructuring costs.
EBITDA
Tungsten's FY19 EBITDA excluding TNF is expected to be GBP2.5
million, a GBP5.8 million improvement on the prior year loss of
GBP3.3 million. Tungsten recorded EBITDA profitability in each of
the last seven months of FY19.
The exclusion of the losses of TNF improved the EBITDA by GBP1.9
million in FY19 (GBP0.6 million EBITDA profit including TNF). The
divestment of TNF is expected within the first half of FY20.
Cash
Tungsten had net cash of GBP2.8 million at 30 April 2019: GBP3.8
million of gross cash less GBP1.0 million of RCF drawings. This
compares to GBP6.4 million of net cash at 30 April 2018. Over the
second half of FY19 net cash grew by GBP0.8 million, with month-end
net cash balances having grown for each of the last four months of
the financial year. Tungsten has a further GBP3.0 million of
undrawn committed RCF availability.
The process to appoint a new CEO is ongoing. In the meantime,
David Williams has taken the role of Interim Chief Executive
Officer.
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.
Enquiries
Tungsten Corporation plc
Tony Bromovsky, Executive Chairman
David Williams, Interim Chief Executive
Officer & Chief Financial Officer +44 20 7280 7713
Panmure Gordon (Nominated Advisor)
Dominic Morley +44 20 7886 2500
Canaccord Genuity Limited (Broker)
Simon Bridges
Emma Gabriel +44 20 7523 8000
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 50 countries, and last year
processed transactions worth over GBP164bn for organisations such
as Alliance Data, Cargill, Deutsche Lufthansa, General Motors,
GlaxoSmithKline, Mondelēz International, Henkel, IBM, Kellogg's and
the US Federal Government.
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END
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