TIDMTUNG
RNS Number : 5900W
Tungsten Corporation PLC
12 December 2019
TUNGSTEN CORPORATION PLC
("Tungsten" or the "Company")
12 December 2019
INTERIM RESULTS FOR THE SIX MONTHSED 31 OCTOBER 2019
GBPm (1) Group results Group results
(including TNF) (excluding TNF)(2)
Unaudited H1-FY20 H1-FY19 H1-FY20 H1-FY19
--------------------------- --------- -------- ---------- ----------
Revenue 18.2 17.6 17.9 17.2
Adjusted EBITDA(3) 1.2 (0.8) 1.8 0.5
Adjusted EBITDA margin(4) 7% (5%) 10% 3%
Operating (loss) / profit (2.1) (1.2) (0.8) 0.1
Transaction volumes(6) 9.6m 9.0m 9.6m 9.0m
H1-FY20 H2-FY19
Net cash(5) GBP1.0m GBP2.8m
--------- -------- ----------
Financial Highlights of Group (excluding TNF)
-- Revenue grew 4% in comparison to H1-FY19 slightly below
management expectations due to timings on conversion of new
sales.
-- Adjusted EBITDA increased strongly to GBP1.8 million from
GBP0.5 million in H1-FY19, including an improved EBITDA margin of
10% (H1-FY19: 3%), as a result of increased sales in the period and
a GBP0.5 million one-off benefit from a reduction in the bad debt
loss provision.
-- Net cash reduced to GBP1.0 million (30 April 2019: GBP2.8
million) due to an anticipated seasonal working capital outflow,
TNF losses and exceptional costs.
-- Recurring and repeatable revenue(8) growth of 7.1% to GBP16.8
million (H1-FY19: GBP15.7 million), representing 94% of total
revenues (91% of total revenues H1-FY19).
Operational Highlights of Group (excluding TNF)
-- New sales billings(9) of GBP1.7 million, in line with management expectations.
-- Sales pipeline has grown 300% since April 2019, with over 200
opportunities for potential new sales billing opportunities.
-- Significant milestone with first Total AR customer signed in
October 2019, one further signed in November and in advanced
discussions with further potential customers expected to sign
during H2-FY20. 300,000 invoices are initially in scope across
these two important deals.
-- Two Total AP customers were signed, one new customer and one
converting from our Workflow product with a volume of approximately
200,000 transactions.
-- One key sale of our AP Analytics product to a current
customer on a one-year deal for GBP0.3 million.
-- Transaction volume increased over H1-FY19 by 7% or 600,000
transactions to 9.6 million in H1-FY20. LTM(10) total transaction
volumes of 18.8 million at 31 October 2019 (17.9 million
transactions for twelve months ended 31 October 2018).
Strategic Highlights
-- We are delivering on our three major new strategic plans as announced on 22 July 2019:
o Driving the network effect: Introducing Total AR. We have
achieved the proof of concept (delivering 100% of a supplier's
outbound invoices) by signing our first Total AR deal.
o Strategic partnerships with e-procurement providers to provide
an additional channel to market. We are targeting signing in
H2-FY20 a major partnership with one of the leading P2P providers
which would allow Tungsten Network to provide e-invoicing as part
of the overall procure-to-pay offer.
o Interconnecting with other platforms to improve automation,
customer services and user experience, which should assist in
boosting turnover, volumes and income. A successful conclusion of
the current proof of concept pilot would be expected to result in
the signing of a major new partnership with a leading P2P vendor
that would give Tungsten's suppliers access to approximately 1,000
new buyers on the partner platform.
-- Trade finance strategy reset: Our new strategy is in place
with the announcement today that we have signed an exclusive
partnership with Orbian, a leading supply chain finance ("SCF")
global provider.
o This will give our customers access to a compelling offering
through a combination of Orbian's state-of-the-art SCF technology
platform and innovative funding products.
o The partnership with Orbian represents the conclusion of the
review of the Tungsten Network Finance business.
o A five-year revenue share agreement replaces the existing TNF
business.
o TNF will be wound down on a managed, orderly basis.
o The Board believe this is the best outcome for Tungsten as it
allows for an ongoing revenue stream rather than a total sale.
FY20 Outlook (excluding TNF)
-- Continued delivery of our FY20 key areas of strategic focus to increase sales momentum.
-- Expect to generate cash over H2-FY20 and return to broadly
the same levels of net cash as of the end of FY19 (GBP2.8
million).
-- Continued strong recurring and repeatable revenue and new
sales billings of at least GBP4 million for H2-FY20 which are in
part recognised in FY20.
-- Slower conversion of sales in H1-FY20 expected to result in
FY20 revenues slightly below expectations.
-- Low double-digit adjusted EBITDA margin expected to be achieved in H2-FY20.
Board Changes
-- Tony Bromovsky reverts to his role as Non-Executive Chairman
with immediate effect following his handover to the new Chief
Executive Officer, Andrew Lemonofides.
-- Duncan Goldie-Morrison will stand down by the end of January
2020 to avoid any potential conflict of interest over the newly
signed partnership with Orbian referenced earlier.
-- A search for a new non-executive director has commenced.
Andrew Lemonofides, Chief Executive Officer
"Since joining in September 2019 I have spent time with key
buyers and suppliers who have given me further confidence in the
Tungsten proposition. Delivering our first Total AR sale is a
significant milestone, as is the announcement of the new trade
finance partnership. These represent an exciting step forward,
delivering tangible benefits to our customers. It is vital that we
increase the momentum of the business, through accelerating the
delivery of each of the strategic goals, as we seek to firmly
reposition the company.
Whilst H1-FY20 revenues were slightly below our expectations due
to timing of conversion of the sales pipeline, which is expected to
reduce our full year revenues, I am confident of an improved sales
performance given the changes to the sales team and an stronger
sales pipeline. Growth of both network connections and ultimately
revenue remains our primary focus, whilst continuing to implement
the findings of the Operating Review. We will continue to further
simplify our processes, increase the speed at which we onboard both
buyers and suppliers to our network and deliver greatly improved
customer satisfaction."
Tony Bromovsky, Non-Executive Chairman
"The progress that has been made delivering each of the
strategic plans vindicates the confidence which the Board has in
the comprehensive transformation plan that was announced in July
2019. The Board remains confident that the business is well
positioned to achieve future growth as it continues to execute on
these important strategic plans.
I would like to thank Duncan Goldie-Morrison for the significant
contribution he has made in the time he has been on the Tungsten
board.
Finally, I would also like to thank the TNF team for their
contribution to making trade finance an important part of our
offering and to specifically thank Prabhat Vira for his leadership
over the past two years and for implementing the current
wind-down."
Analyst Presentation
Tony Bromovsky, Non-Executive Chairman, Andrew Lemonofides, CEO
and David Williams, CFO will today host a conference call at 9.00am
UK time. The dial-in number for the conference call is +44 20 3713
5011 / +1 (571) 317-3116 with the access code 794-672-773 and
available online at https://global.gotomeeting.com/join/794672773
with the password '##meetingPassword'. A presentation will be
available on the Tungsten website at
http://www.tungsten-network.com/uk/about/investor-relations/downloads-reports/.
(1) Tungsten's year-end is 30 April
(2) Tungsten is winding down the business and operations of
Tungsten Network Finance ("TNF"). Results presented exclude TNF and
present the continuing business to aid future comparability. Group
results including and excluding TNF are presented exclusive of
management fees charged by the Group to TNF
(3) Adjusted EBITDA is calculated as earnings before net finance
cost, tax, depreciation and amortisation, impairment of intangible
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) Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue
(5) Net cash is calculated as cash and cash equivalents less drawings under the HSBC RCF
(6) Transaction volumes are measured as the total number of
invoices and purchase orders delivered between a Supplier and
Buyer
(7) Total available liquidity is calculated as net cash plus
available working capital under the HSBC RCF
(8) Recurring revenue represents annual subscription and
maintenance fees on contracts typically ranging from 1 to 3 years
and billed annually in advance. 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
(9) 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
(10) LTM is defined as the last twelve months to the reporting date
Enquiries
Tungsten Corporation plc
Andrew Lemonofides, Chief Executive
Officer
David Williams, Chief Financial Officer +44 20 7280 7713
Panmure Gordon UK Limited (Nominated
Adviser)
Dominic Morley +44 20 7886 2500
Canaccord Genuity Limited (Broker)
Simon Bridges/Andrew Potts +44 20 7523 8000
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
About Tungsten Corporation plc
Tungsten Corporation (LSE: TUNG) aims to be the leading global
electronic invoicing and purchase order transactions network.
Digital invoicing processes enable large businesses to reduce
costs and effectively manage their businesses. They can improve
business agility by creating scalable and repeatable growth
processes, managing their cash effectively and making better
decisions based on a comprehensive analysis of their data.
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 GBP173bn for organisations such
as Caesars Entertainment, Computacenter, GlaxoSmithKline, Kraft
Foods, Mohawk Industries, Mondelēz International, Procter &
Gamble, Shaw Industries, Unilever 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
CEO Business Review
The changes to our strategy and operations have started to
deliver results, notably in the growth of our adjusted EBITDA
excluding TNF from GBP0.5 million in H1-FY19 to GBP1.8 million in
H1-FY20 and a 7.1% growth in the recurring and repeatable revenues
of Tungsten Network.
In July 2019, we reconfirmed our three strategic initiatives
(see below) aimed at transforming our business model and fortunes.
Taken together, these represent a major repositioning of the Group
and these effects are anticipated to be felt in H2-FY20 and
subsequent years.
These initiatives were:
1. Driving the network effect: Introducing Total AR.
2. Strategic partnerships with e-procurement providers to
provide an additional channel to market.
3. Interconnecting with other platforms to improve sales,
automation, customer services and user experience.
In addition, Tungsten decided to undertake a comprehensive
review of the Tungsten Network Finance business. This has
culminated today in the announcement of a new partnership with
Orbian, replacing the TNF business and the resultant decision to
undertake a managed, orderly wind-down of TNF.
We are pleased to report progress in each of these key
initiatives:
1. Driving the network effect: introducing Total AR
Tungsten signed a Total AR (100% supplier's outbound invoices)
contract in October 2019 with Elekta, a global leader in
Radiotherapy headquartered in Stockholm. This has been followed in
November 2019, after the period end, by a further contract with
Wolters Kluwer, the leading global provider of professional
information, software solutions and services.
These new sales will add 300,000 annual invoices to our
transaction turnover and we expect this number to grow further as
we move closer to our target of 100% AR. As a result of our new
ability to rapidly digitise PDFs and emails, we remain on track to
meet our goal of 100% AR with these ground-breaking contracts. We
are building a strong pipeline of additional opportunities.
2. Strategic partnerships with e-procurement providers to
provide an additional channel to market
Tungsten are targeting signing a major partnership with one of
the major P2P providers in the early part of 2020 which would allow
Tungsten Network to provide e-invoicing as part of the overall
procure-to-pay offer. Tungsten Network will deliver its core
expertise of electronic invoicing as part of a wider solution.
3. Interconnecting with other platforms to improve sales,
automation, customer service and user experience
A successful conclusion of the current proof of concept pilot
would be expected to result in the announcement of a major new
partnership to connect with the platform of the same leading P2P
vendor. This would then see a three phase project implemented
throughout 2020. Initially, Tungsten's suppliers would be given
access to approximately 1,000 new buyers on this new network, with
further revenues generated from our new-found ability to digitise
invoices for customers who reside on this new network.
In addition to the above, we are also talking to a number of
other leading vendors to look at how we would achieve similar
interconnection to their platforms over the coming 12 months.
Trade finance strategy reset
We are pleased to announce today that we have entered into a new
strategic partnership agreement with Orbian, a market leader in the
provision of supply chain finance and innovative trade finance
solutions. Orbian has 18 years of experience and has financed $185
billion of receivables.
In signing an exclusive five-year revenue-share partnership with
Orbian we will be able to offer our buyers and suppliers, simple,
effective and low-cost financing products from a market leader. We
remain extremely well placed to analyse global commercial flows
across our enlarged platform and provide finance accordingly.
The partnership with Orbian represents the conclusion of the
review of Tungsten's Network Finance business, which the Board
believes is the best outcome for Tungsten. As a result of our
partnership with Orbian, Tungsten will no longer continue to sell
its loss-making Tungsten Early Payment and Receivables Financing
products.
Customers using these products will be supported through the
exit process and the operation will be wound down between now and
the end of June 2020. As a result, intangible assets with a book
value of GBP0.6 million related to Tungsten Network Finance have
been fully impaired during the period.
The Board continues to believe that the combination of
electronic invoicing and trade finance represents a compelling
proposition with a potential for generating significant
profits.
Duncan Goldie-Morrison is a founder and shareholder in Orbian.
As a result, and in accordance with good corporate governance, he
excluded himself from all Board deliberations on the Orbian
partnership. The Board and Duncan Goldie-Morrison agreed on signing
the Orbian partnership agreement he will step down from the Board
by the end of January 2020 to avoid any potential conflict of
interest.
Sales performance
Our approach to sales and the sales operation has been
reconfigured from the top down. We appointed a new Chief Revenue
Officer, Steve Standring, who has led the transformation of the
sales team. We are investing in 11 new heads to give us greater
capacity to manage and close opportunities across our Total AR and
Total AP platforms. New training has been developed and is being
deployed across all of the sales teams to enhance the available
skill sets and we are managing out underperformers.
The sales pipeline has grown 300% since April 2019, with over
200 opportunities for potential new sales billings. We have focused
on simplifying the organisational structure and made a radical
assessment of the sales personnel, determining development and
capability needs. Teams are now simply aligned by product, driven
by a focused commission plan and supported through rigorous account
planning and pipeline management discipline. The approach is
beginning to show results.
This investment is a critical foundation for future success as
there are strong signs that our messaging around our new strategies
of Total AR and Total AP are resonating strongly with our buyer and
supplier communities.
Over the last 8 months we have seen:
-- Launch of Total AR which brings digitisation of all of a
supplier's outbound invoices to their buyers.
-- A new focus on Total AP, digitising all of a buyer's inbound invoices from their suppliers.
-- Reinvigoration of current AP customers to embrace and adopt the concept of 100% Total AP.
-- New tactical approach to scaling up existing buyers.
-- Focus on largest 6,000 global enterprises that operate shared
service centres through attendance at key trade events and direct
marketing (webinars etc).
Products and technology
As a technology led company, we have invested over GBP1.3
million in H1-FY20 to enable us to accelerate the delivery of our
key platform developments. This includes the three core projects
critical to improving the user experience and driving connection
growth.
Key initiatives delivered in H1-FY20:
-- Customer registration functionality and redesign was
delivered as part of our Customer Portal enhancements. This has
resulted in a 70% reduction in registration drop-outs.
-- The automated supplier campaign management tool improved the
speed at which suppliers can be onboarded and start transacting
electronically.
-- Integration of salesforce.com has enabled the real-time data
exchange between two of our key platforms and provides the
foundation for delivering omni-channel customer support in H2-FY20,
which will continue the transformation of our customer support.
In H2-FY20 we will continue the pace of change as we deliver on
the following key initiatives:
-- Enhanced supplier onboarding will further decrease the time
taken for suppliers to begin transacting on the network.
-- Customer portal user experience will be transformed to
improve usability with a new look and feel, several "ease of use"
enhancements, improved reporting capability and further supplier
connection management options.
Service delivery
A key focus remains the rapid growth of our network, connecting
buyers and suppliers in many-to-many relationships. Growth will
come by ensuring buyers and suppliers have a fast, simple and
effective way to join the network. We have initiated a complete
review of our end-to-end processes resulting in a comprehensive
plan for transforming the customer experience which will become
evident across H2-FY20 as we address key structural inefficiencies
and our onboarding speed.
We are upgrading and automating many of our customer
interactions, through adopting a multi-channel digital approach
that will drive improvements in customer satisfaction. In H1-FY20
we integrated salesforce.com and in H2-FY20 will deliver Customer
Connect which simplifies the online registration process and allows
buyers to directly manage supplier registration requests.
Over H2-FY20 we will also roll out Service Cloud, part of
salesforce.com, building on the successful integration of our
legacy CRM system and Salesforce that was completed in H1-FY20 and
which allows us to manage the resolution of customer issues more
quickly. This will also enable us to provide important new support
channels including live chat and chatbots.
CFO Financial Review
Revenue grew 4% in comparison to H1-FY19 (excluding TNF) to
GBP17.9 million, due to new customers and expanded product sales.
Adjusted EBITDA, excluding TNF, increased by 289% to GBP1.8 million
from GBP0.5 million in H1 FY19, reflecting an EBITDA margin of 10%
(H1 FY19: 3%).
The growth in adjusted EBITDA was as a result of:
-- A 4% growth in sales revenue of GBP0.7 million.
-- A reduction in cost of sales of GBP0.6 million.
Financial performance
Income statement
GBPm Group Group (excl TNF)(1)
--------------------------------- ------------------ ----------------------
H1-FY20 H1-FY19 H1-FY20 H1-FY19
--------------------------------- -------- -------- ---------- ----------
Revenue 18.2 17.6 17.9 17.2
Cost of sales (0.6) (1.2) (0.6) (1.2)
--------------------------------- -------- -------- ---------- ----------
Gross profit 17.6 16.4 17.3 16.0
--------------------------------- -------- -------- ---------- ----------
Gross margin (2) 97.0% 93.2% 96.9% 93.0%
Adjusted operating expenses(3) (16.4) (17.2) (15.5) (15.5)
--------------------------------- -------- -------- ---------- ----------
Adjusted EBITDA (4) 1.2 (0.8) 1.8 0.5
--------------------------------- -------- -------- ---------- ----------
Adjusted EBITDA margin (5) 7% (5%) 10% 3%
Other operating expenses (3.3) (0.4) (2.6) (0.4)
--------------------------------- -------- -------- ---------- ----------
Operating (loss) / profit (2.1) (1.2) (0.8) 0.1
Net finance (costs) / income (0.3) 0.2 (0.3) 0.2
--------------------------------- -------- -------- ---------- ----------
(Loss) / Profit before taxation (2.4) (1.0) (1.1) 0.3
Taxation 0.1 1.0 0.1 1.1
--------------------------------- -------- -------- ---------- ----------
(Loss) / Profit / for the
period (2.3) - (1.0) 1.4
--------------------------------- -------- -------- ---------- ----------
(1) Tungsten is winding down the business and operations of
Tungsten Network Finance ("TNF"). Results presented excluding TNF
to aid future comparability. Group results including and excluding
TNF are presented exclusive of management fees charged by the Group
to TNF
(2) Gross margin is calculated as gross profit as a percentage of revenue
(3) Adjusted operating expenses exclude net finance costs, tax,
depreciation and amortisation, impairment of intangible 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) Adjusted EBITDA is calculated as earnings before net finance
cost, tax, depreciation and amortisation, impairment of intangible
assets, foreign exchange gain or loss, share based payment expense
and exceptional items, and is adjusted to include cash rental
expenses and rental income.
(5) Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue
Management utilises adjusted 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.
Revenue
GBPm H1-FY20 H1-FY19 % Movement(1)
Recurring revenue (2) 9.8 9.2 6.3%
Repeatable revenue (3) 7.0 6.5 8.3%
----------------------------------------- -------- -------- --------------
Total recurring and repeatable revenue 16.8 15.7 7.1%
Other revenue (4) 1.1 1.5 (31.3)%
----------------------------------------- -------- -------- --------------
Tungsten Network total revenue 17.9 17.2 3.8%
TNF revenue (5) 0.3 0.4 (18.6)%
----------------------------------------- -------- -------- --------------
Group revenue 18.2 17.6 3.3%
----------------------------------------- -------- -------- --------------
Recurring revenue % of total Tungsten
Network revenue(6) 55% 53%
Total recurring & repeating revenue
% of total Tungsten Network revenue(7) 94% 91%
----------------------------------------- -------- -------- --------------
(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 that is being wound down but is not treated as an
asset held for disposal
Revenue excluding TNF for the period was GBP17.9 million
(H1-FY19: GBP17.2 million), representing an increase of 3.8%. The
growth in revenue reflected the net benefits of new customer sales,
additional product sales to current customers, and existing
customer price increases. Revenue including TNF for the period was
GBP18.2 million (H1-FY19: GBP17.6 million), representing an
increase of 3.3%.
Total new sales billings excluding TNF in H1-FY20 were GBP1.7
million, representing year-one billings for new services sold to
current and new customers.
Recurring and repeatable Tungsten Network revenue increased by
GBP1.1 million or 7.1% to GBP16.8 million (H1-FY19: GBP15.7
million), while other (one-off) revenues fell by GBP0.4 million or
31.3% to GBP1.1 million (H1-FY19: GBP1.5 million).
This growth in recurring and repeatable revenue primarily
reflects:
-- A combination of one new Total AP sale, the upgrade of one
current customer to our Total AP services, one new Total AR sale,
and a sale of our Tungsten Analytics product, which together
contributed GBP0.3 million in the period.
-- A growth in transactions processed of 7% to 9.6 million
(H1-FY20: 9.0 million) which contributed GBP0.5 million in the
period.
-- New Integrated Solution sales to 300 customers which
contributed GBP0.3 million of revenues in the period.
The decline in other revenues primarily reflects a reduction of
GBP0.4 million in one-off sales compared to H1-FY19, which included
new connections to the Italy Sistema di Interscambio (SdI).
Having started the year with 179 Workflow and e-invoicing
buyers, the additions, losses and merging of four customer
contracts resulted in 174 buyers at the period end.
TNF generated fees of GBP0.3 million in H1-FY20 (H1-FY19: GBP0.4
million).
Revenue by type of customer
Buyer revenue represented 43% of total Tungsten Network revenue
in H1-FY20 (H1-FY19: 42%). Total Buyer revenue grew 6.2% to GBP7.7
million (H1-FY19: GBP7.2 million). This reflected a growth in
recurring and discretionary revenue of 11.8% (GBP0.7 million) and a
fall in one-off revenue of 22.2% (GBP0.3 million).
Supplier revenue represented 57% of total Tungsten Network
revenue in H1-FY20 (H1-FY19: 58%). Total supplier revenue grew 2.8%
to GBP10.2 million (H1-FY19: GBP9.9 million). This reflected a
growth in recurring and discretionary revenue of 4.2%
(GBP0.4million) and a fall in one-off revenue of 56.7% (GBP0.1
million).
Expenses
GBPm H1-FY20 H1-FY19 Difference
---------------------------------------- -------- -------- -----------
Sales & marketing (2.8) (2.9) 0.1
Service delivery (3.8) (3.8) -
Technology & product (5.2) (5.2) -
Finance, administration, Board
& central overheads (3.7) (3.6) (0.1)
---------------------------------------- -------- -------- -----------
Adjusted operating expenses excluding
TNF(1) (15.5) (15.5) -
Cost of sales (0.6) (1.2) 0.6
TNF excluding impairment of intangible
assets (0.8) (1.6) 0.8
Impairment of intangible assets
of TNF (0.6) - (0.6)
Rent adjustment (2) 0.5 - 0.5
Depreciation and amortisation (2) (2.3) (2.0) (0.3)
Foreign exchange gains 0.2 2.2 (2.0)
Share based payment expense (0.4) (0.2) (0.2)
Exceptional items (0.7) (0.5) (0.2)
---------------------------------------- -------- -------- -----------
Statutory operating expenses (20.2) (18.8) (1.4)
(1) Adjusted operating expenses excluding net finance cost, tax,
depreciation and amortisation, impairment of intangible assets,
foreign exchange gain or loss, share based payment expense and
exceptional items, and is adjusted to include cash rental expenses
and rental income.
(2) Cash rent paid and rental income is included in Adjusted
operating expenses to aid comparability to prior periods. For
statutory presentation pursuant to IFRS 16 it is included in
depreciation and amortisation and finance charges, so added back in
this analysis
The Group's statutory expenses grew by GBP1.4 million to GBP20.2
million (H1-FY19: GBP18.8 million).
Excluding foreign exchange gains, which represent the
revaluation at period-end of monetary assets and liabilities
denominated in foreign currencies (primarily intercompany
balances), statutory operating expenses decreased by GBP0.6
million.
Operating expenses
The Group's adjusted operating expenses were flat compared to
H1-FY19.
Other movements in expenses were:
Cost of sales: GBP0.6 million reduction primarily from a one-off
decrease in our loss provision of GBP0.5 million following the
collection of previously provided trade receivable balances.
Tungsten Network Finance expenses: GBP0.8 million decrease in
staff and related costs.
Rent: GBP0.5 million of cash rent included in adjusted operating
expenses in H1-FY20 (H1-FY19: nil). Pursuant to IFRS 16, GBP0.4
million included in depreciation and amortisation in H1-FY20
(H1-FY19: nil) and GBP0.2 million included in finance costs (not
part of operating expenses) in H1-FY20 (H1-FY19: nil).
Depreciation and amortisation: GBP0.3 million increase in
depreciation as a result of the adoption of IFRS 16 (GBP0.5
million) offset by a decrease in software amortisation (GBP0.2
million).
Impairment of internally generated capitalised development:
GBP0.6 million non-cash expense as a result of the decision to
write-off the development work in relation to Tungsten Network
Finance following the decision to wind the business down.
Foreign exchange gains: decrease of GBP2.0 million to GBP0.2
million (H1-FY19: GBP2.2 million), reflecting the fluctuation of
exchange rates between GBP and USD on intercompany balances.
Share based payment expense: GBP0.4 million (H1-FY19: GBP0.2
million) reflecting new share options granted during the
period.
Exceptional items: increased GBP0.2 million to GBP0.7 million
(H1-FY19: GBP0.5 million). These include:
-- GBP0.2 million of redundancy and restructuring costs
-- GBP0.1 million recruitment of a new Chief Executive Officer
-- GBP0.4 million professional fees in respect of the Board's operating review
Loss before tax
The Group generated a loss before tax excluding TNF of GBP1.1
million in the period (H1-FY19: profit of GBP0.3 million). The
decrease of GBP1.4 million reflects a reduction in foreign exchange
gains of GBP2.0 million, offset by GBP0.6 million expense
reductions. Including TNF, the Group generated a loss before tax of
GBP2.4 million (H1-FY19: GBP1.0 million), the key component of the
increase being the reduction in foreign exchange gains.
Taxation
A tax credit of GBP0.1 million (H1-FY19: GBP1.0 million credit)
includes a GBP0.1 million income tax expense and a reduction of
GBP0.2 million in the deferred tax liability relating to the legacy
acquisition of Tungsten Network. The prior period credit includes
the Group's research and development tax credit relating to FY17
and FY18 expenditure. The research and development tax credit
relating to FY19 expenditure is expected to be recognised in
H2-FY20.
The Group has an unrecognised deferred tax asset of
approximately GBP13.2 million that is available for offset against
future tax expenses in the companies in which losses arise.
Funding and liquidity
Cash and cash equivalents at the end of H1-FY20 were GBP2.0
million (H1-FY19: GBP2.0 million; H2-FY19: GBP3.8 million). Net
cash (including borrowings under the revolving credit facility) at
the end of H1-FY20 was GBP1.0 million (H1-FY19: GBP2.0 million;
H2-FY19: GBP2.8 million).
Cash Flow H1-FY20 H2-FY19 H1-FY19
---------------------------------------- ---------- ---------- ----------
Net cash flow from operating activities GBP(0.1)m GBP2.2m GBP(2.5)m
Net cash flow from investing activities GBP(1.3)m (GBP1.3m) GBP(2.0)m
Net cash flow from financing activities GBP(0.4)m GBP1.0m -
Net movement in cash & cash equivalents (GBP1.8)m GBP1.9m GBP(4.5)m
Exchange adjustments - (GBP0.1)m GBP0.1m
Cash and cash equivalents at the GBP3.8m GBP2.0m GBP6.4m
start of the period
Cash and cash equivalents at the GBP2.0m GBP3.8m GBP2.0m
end of the period
---------------------------------------- ---------- ---------- ----------
The H1-FY20 movement in the Group's cash net of drawings was a
GBP1.8 million outflow. This follows a GBP4.5 million outflow in
H1-FY19 and GBP0.9 million inflow (excluding GBP1.0 million
drawings on the RCF) in H2-FY19.
The cash outflow in H1-FY20 reflects the normal seasonality of
cash the first half of each financial year. Tungsten experiences
the impact of two seasonal factors that result in negative working
capital:
-- The settlement of Tungsten Network cash bonuses and other
year-end liabilities, which were paid in H1-FY20 and resulted in a
working capital outflow from trade and other payables of GBP1.3
million; and
-- The renewal of Tungsten Network's Workflow annual maintenance
contracts, which total approximately GBP2 million and which occur
in December of each year.
Excluding cash flows relating to the operations and divestment
of Tungsten Network Finance, the Group had a cash outflow in
H1-FY20 of GBP0.9 million.
Liquidity, including GBP3 million of undrawn revolving credit
facility with a maturity date of July 2021, was GBP5.0 million at
the end of the period (H1-FY19: GBP6.0 million; H2-FY19: GBP6.8
million)
Cash flows from operating activities
Cash used in operating activities was GBP0.1 million, an
improvement of GBP2.4 million (H1-FY19: GBP2.5 million used in
operations ), due primarily to the improvement in adjusted EBITDA
and changes in working capital between the periods.
Cash flows from operating activities H1-FY20 H1-FY19
---------------------------------------- ---------- ----------
Adjusted EBITDA GBP1.2m GBP(0.8)m
Exceptional items: cash element GBP(0.7)m GBP(0.5)m
Decrease in trade and other receivables GBP1.0m GBP0.7m
Decrease in trade and other payables GBP(1.3)m GBP(2.1)m
Other operating cash movements GBP(0.1)m GBP0.2m
---------------------------------------- ---------- ----------
Net cash outflows from operating GBP(0.1)m GBP(2.5)m
activities
---------------------------------------- ---------- ----------
-- A decrease in trade and other receivables of GBP1.0 million
(H1-FY19: GBP0.7 million) reflects continued improvements in cash
collections from customers.
-- A decrease in trade and other payables of GBP1.3 million
(H1-FY19: GBP2.1 million) primarily due to the settlement of cash
bonuses and Tungsten Network Finance related costs.
Cash flows from investing activities
Cash spent on investing activities decreased by GBP0.7 million
to GBP1.3 million (H1-FY19: GBP2.0 million), reflecting the lower
run rate of internally generated software development projects.
This splits GBP0.1 million in relation to property plant and
equipment, and GBP1.2 million in relation to internally capitalised
software development.
Cash flows from financing activities
Cash flow from financing activities of GBP0.4 million in H1-FY20
(H1-FY19: nil) relate to part of the rental payments, pursuant to
IFRS 16.
Loss per share
The basic and diluted loss per share was 1.81p (H1-FY19:
0.02p).
Consolidated income statement for the
Six Months Ended 31 October 2019
Six months Six months
ended ended
31 October 2019 31 October 2018
Note(s) (unaudited) (unaudited)
GBP'000 GBP'000
Revenue 5 18,161 17,575
Operating expenses (20,243) (18,813)
------------------------------------ -------- ---------------------------------- ----------------------------------
Operating loss (2,082) (1,238)
Adjusted EBITDA 1,247 (752)
IFRS 16 rent adjustment 538 -
Depreciation and amortisation 7,8 (2,338) (1,981)
Impairment of intangible assets 7 (609) -
Foreign exchange gain 230 2,151
Share based payment expense 12 (421) (188)
Exceptional items 6 (729) (468)
----------------------------------
Operating loss (2,082) (1,238)
-------- ---------------------------------- ----------------------------------
Finance income 13 1,160 866
Finance costs 13 (1,462) (704)
Net finance (costs) / income (302) 162
------------------------------------ -------- ---------------------------------- ----------------------------------
Loss before taxation (2,384) (1,076)
Taxation 15 97 1,052
Loss for the period (2,287) (24)
------------------------------------ -------- ---------------------------------- ----------------------------------
Loss per share
attributable to the
equity holders of the
parent during the
period (expressed
in pence per share):
Basic and diluted loss per share 14 (1.81) (0.02)
------------------------------------ -------- ---------------------------------- ----------------------------------
Consolidated Statement of Comprehensive Income for the
Six Months Ended 31 October 2019
Six months ended Six months ended
31 October 2019 31 October 2018
(unaudited) (unaudited)
GBP'000 GBP'000
Loss for the period (2,287) (24)
Other comprehensive (loss)/income:
Items that may be reclassified subsequently to
profit or loss
Currency translation differences (236) (2,180)
Total comprehensive loss for the period (2,523) (2,204)
-------------------------------------------------------- ------------------------- ---------------------------
Consolidated Statement of Financial Position
At 31 October 2019
As at
As at 30 April
31 October 2019 2019
Note (Unaudited) (Audited)
GBP'000 GBP'000
------------------------------------------------------------ ------- --------- --- ----------------- ------------
Assets
Non-current assets
Goodwill 7 102,071 102,057
Intangible assets 7 17,606 18,733
Property, plant and equipment 8 1,682 2,506
Right of use asset 8 6,202 -
Trade and other receivables 9 - 187
--------------------------------------------------------------------- --------- --- ----------------- ------------
Total non-current assets 127,561 123,483
--------------------------------------------------------------------- --------- --- ----------------- ------------
Current assets
Trade and other receivables 9 7,136 7,464
Cash and cash equivalents 2,020 3,810
--------------------------------------------------------------------- --------- --- ----------------- ------------
Total current assets 9,156 11,274
--------------------------------------------------------------------- --------- --- ----------------- ------------
Total assets 136,717 134,757
--------------------------------------------------------------------- --------- --- ----------------- ------------
Non-current liabilities
Deferred taxation 1,389 1,533
Provisions 11 1,205 1,568
Lease liabilities 5,576 -
Other payables 250 250
--------------------------------------------------------------------- --------- --- ----------------- ------------
Total non-current liabilities 8,420 3,351
--------------------------------------------------------------------- --------- --- ----------------- ------------
Current liabilities
Trade and other payables 6,391 7,089
Provisions 11 128 158
Lease liabilities 759 -
Borrowings 1,024 1,000
Contract liabilities 10 6,493 6,816
--------------------------------------------------------------------- --------- --- ----------------- ------------
Total current liabilities 14,795 15,063
--------------------------------------------------------------------- --------- --- ----------------- ------------
Total liabilities 23,215 18,414
--------------------------------------------------------------------- --------- --- ----------------- ------------
Capital and reserves attributable to the equity shareholders of the parent
Share capital 553 553
Share premium 188,802 188,802
Merger reserve 28,035 28,035
Shares to be issued 3,760 3,760
Share-based payment reserve 6,687 6,538
Other reserve (9,649) (9,413)
Accumulated losses (104,686) (101,932)
--------------------------------------------------------------------- --- ----------------- ------------
Total equity 113,502 116,343
--------------------------------------------------------------------- --------- --- ----------------- ------------
Total equity and liabilities 136,717 134,757
--------------------------------------------------------------------- --------- --- ----------------- ------------
Consolidated statement of changes in equity for the six months
ended 31 October 2019
Shares Share
to based
Share Share Merger be payment Other Accumulated
(Unaudited) capital premium reserve issued reserve reserve losses Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30
April
2019 as
previously
stated 553 188,802 28,035 3,760 6,538 (9,413) (101,932) 116,343
Adoption of
IFRS 16
(see Note 2) - - - - - - (467) (467)
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Balance as at
1 May
2019 as
restated 553 188,802 28,035 3,760 6,538 (9,413) (102,399) 115,876
Loss for the
period - - - - - - (2,287) (2,287)
Other
comprehensive
expense - - - - - (236) - (236)
Total
comprehensive
expense for
the period - - - - - (236) (2,287) (2,523)
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Transaction
with owners
Share based
payment
expense - - - - 149 - - 149
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Transactions
with owners - - - - 149 - - 149
Balance as at
31 October
2019 553 188,802 28,035 3,760 6,687 (9,649) (104,686) 113,502
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Share
Shares based
Share Share Merger to be payment Other Accumulated Total
(Unaudited) capital premium reserve issued reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as
at 1 May
2018 553 188,794 28,035 3,760 6,442 (7,541) (98,582) 121,461
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Loss for the
period - - - - - - (24) (24)
Other
comprehensive
expense - - - - - (2,180) - (2,180)
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Total
comprehensive
expense for
the period - - - - - (2,180) (24) (2,204)
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Transaction
with owners
Share issued
during
the year - 8 - - - - - 8
Share based
payment
expense - - - - 146 - - 146
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Transactions
with owners - 8 - - 146 - - 154
Balance as at
31 October
2018 553 188,802 28,035 3,760 6,588 (9,721) (98,606) 119,411
--------------- ----------- ---------------- -------------- ------------ ---------------- ----------------- ----------------------- --------------
Consolidated Cash Flow Statement for the
Six Months Ended 31 October 2019
Six months ended
Six months ended 31 October
31 October 2019 2018
Note(s) (unaudited) (unaudited)
GBP'000 GBP'000
Cash flows from operating activities
Loss before taxation (2,384) (1,076)
Adjustments for:
Depreciation and amortisation 7,8 2,338 1,981
Impairment of intangible assets 609 -
Decrease in provision for trade receivables (451) (272)
Finance costs 13 1,462 704
Finance income 13 (1,160) (866)
Foreign exchange gain (230) (2,151)
Share based payment expense 12 421 188
Changes in working capital:
Decrease in trade and other receivables 978 714
Decrease in trade and other payables (1,326) (2,080)
Net interest paid (324) (247)
Net tax (paid)/refund 15 (49) 621
Net cash outflows from operating activities (116) (2,484)
------------------------------------------------------- -------- ---------------------- -----------------------
Cash flows from investing activities
Software development costs 7 (1,178) (1,699)
Purchases of other intangibles 7 - (9)
Purchases of property, plant and equipment 8 (145) (295)
Net cash outflows from investing activities (1,323) (2,003)
------------------------------------------------------- -------- ---------------------- -----------------------
Cash flows from financing activities
Lease payments (363) -
Increase in borrowings 24 -
Decrease in invoice receivables - 2
Proceeds from issues of shares - 8
Net cash (outflow) / inflow from financing activities (339) 10
------------------------------------------------------- -------- ---------------------- -----------------------
Net decrease in cash and cash equivalents (1,778) (4,477)
Cash and cash equivalents at start of the period 3,810 6,418
Exchange adjustments (12) 88
Cash and cash equivalents at the end of the period 2,020 2,029
------------------------------------------------------- -------- ---------------------- -----------------------
Notes to the interim consolidated financial information
1. General information
Tungsten Corporation plc (the Company) and its subsidiaries
(together, the Group) is a global e-invoicing network that offers
trade finance and spend analytics.
The Company is a public limited company, which is incorporated
and domiciled in the UK. The address of its registered office is
Pountney Hill House, 6 Laurence Pountney Hill, London EC4R 0BL,
UK.
The Board of Directors approved this interim report on 11
December 2019.
2. Basis of preparation and accounting policies
These interim consolidated financial statements have been
prepared using accounting policies based on International Financial
Reporting Standards (IFRS and IFRIC Interpretations) as adopted for
use in the EU. They do not include all disclosures that would
otherwise be required in a complete set of financial statements and
should be read in conjunction with the 30 April 2019 ('2019')
Annual Report. The financial information for the half years ended
31 October 2019 and 31 October 2018 does not constitute statutory
accounts within the meaning of Section 434 (3) of the Companies Act
2006 and both periods are unaudited.
The annual financial statements of Tungsten Corporation plc
('the group') are prepared in accordance with IFRS as adopted by
the European Union. The comparative financial information for the
year ended 30 April 2019 included within this report does not
constitute the full statutory Annual Report for that period. The
statutory Annual Report and Financial Statements for 2019 have been
filed with the Registrar of Companies. The Independent Auditors'
Report on the Annual Report and Financial Statements for the year
ended 30 April 2019 was unqualified, did not draw attention to a
matter by way of emphasis, and did not contain a statement under
498(2) - (3) of the Companies Act 2006.
The Group has applied the same accounting policies and methods
of computation in its interim consolidated financial statements as
in its 2019 annual financial statements, except for those that
relate to new standards and interpretations effective for the first
time for periods beginning on (or after) 1 January 2019 and will be
adopted in the 2020 financial statements. New standards impacting
the Group that will be adopted in the annual financial statements
for the year ended 30 April 2020, and which have given rise to
changes in the Group's accounting policies are:
IFRS 16 leases
The group adopted IFRS 16 from 1 May 2019, replacing the
existing guidance in IAS 17 - "Leases" (hereafter - "IAS 17"). IFRS
16 changes the existing guidance in IAS 17 and requires lessees to
recognise a lease liability that reflects future lease payments and
a "right-of-use asset" in all lease contracts within scope, with no
distinction between financing and capital leases. IFRS 16 exempts
lessees in short-term leases or the when underlying asset has a low
value. The Group has elected to apply the practical expedients
permitted by the standard as follows:
-- Not to recognise right-of-use assets and lease liabilities
for leases of low-value assets and operating leases with a
remaining lease term of less than 12 months.
-- Use of a single discount rate to all leases with reasonably similar characteristics.
-- Exclusion of initial direct costs for the measurement of right-of-use asset.
-- The use of hindsight in determining the lease term where the
contract contains option to extend or terminate the lease.
The adoption of IFRS 16 has resulted in the Group recognising
right of use assets and lease liabilities for all contracts of
GBP6.6 million and GBP6.7 million respectively that are, or
contain, a lease. The difference between the right of use assets
and lease liabilities has been recognised as an adjustment to
retained earnings on 1 May, 2019. For leases historically
classified as operating leases, under legacy accounting
requirements the group does not recognise related assets or
liabilities, disclosing instead the total commitment in its annual
financial statements. The Group has elected to apply the modified
retrospective method. Therefore, there will be no impact on any
comparative accounting period (interim or annual), with any leases
recognised on the statement of financial position on the date of
initial application of IFRS 16, being 1 May 2019, as well as any
adjustment to the previously stated equity as a result of any
difference between the right of use assets and related liabilities
recorded. Specifically, lease liabilities have been measured equal
to remaining lease payments discounted using the incremental
borrowing rate at the date of initial adoption. Right of use assets
have been measured as if IFRS 16 had always been applied but using
the incremental borrowing rate at the date of initial application.
The difference between the right of use assets and lease
liabilities recognised upon adoption has been recognised as an
adjustment to retained earnings on 1 May 2019.
Finally, instead of recognising an operating expense for its
operating lease payments, the group now recognises interest on its
lease liabilities and depreciation on its right of use assets. This
has increased the reported Adjusted EBITDA by the amount of its
current operating lease cost, which for 6 months ended 31 October
2019 was approximately GBP0.5 million.
Adjusted Measure of Performance
The Group considers Adjusted EBITDA, which is defined as
operating profit or loss before interest, tax, depreciation and
amortisation, impairment of assets, foreign exchange gain or loss
from operations, share based payment expense and exceptional items
as the most appropriate measure of the Group's underlying
performance. For comparability, Adjusted EBITDA for the current
period also includes an adjustment for the impact of IFRS 16 of
approximately GBP0.5 million.
Exceptional items
Items which are both material and considered by the Directors to
be unusual in nature and size are separately disclosed on the face
of the consolidated income statement.
Going Concern
The consolidated financial statements have been prepared on a
going concern basis. In reaching their assessment, the directors
have considered a period extending at least 12 months from the date
of approval of this half-yearly financial report. This assessment
has included consideration of the forecast performance of the
business for the foreseeable future, the cash and financing
facilities available to the Group, and the repayment terms in
respect of the Group's borrowings.
Principal Risks and Uncertainties
The Group's principal risks and uncertainties remain the same as
those set out in the Tungsten Corporation plc Annual Report and
Accounts for the year ended 30 April 2019.
In summary, the Group is subject to the same general risks as
many other businesses; for example, changes in general economic
conditions, currency and interest rate fluctuations, changes in
taxation legislation, cyber-security breaches, failure of our IT
infrastructure, the impact of competition, political instability
and the impact of natural disasters.
The Board has identified risks in relation to the United
Kingdom's exit from the European Union. Given the range of possible
scenarios it is impossible for us to be specific, however the risk
surrounding foreign exchange rate volatility is considered to be
the most significant. We will continue with our regular risk
mitigation process and will prepare for all likely scenarios until
the outcome becomes clear.
3. Critical accounting estimates and judgements
The preparation of interim financial statements requires
management to make judgements, estimates, and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these interim financial statements, the significant
judgements made by management in applying the group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated financial statements
for the year ended 30 April 2019 except where the implementation of
IFRS 16 requires a different approach to the accounting previously
applied. Significant estimates and judgements that have been
required for the implementation of IFRS 16 are:
-- The determination of whether an arrangement contains a lease.
-- The determination of the incremental borrowing rate used to measure lease liabilities.
4. Financial Risk Management
The Group's activities expose it to a variety of financial
risks, predominantly credit, liquidity and foreign currency
risk.
Risk management is carried out by the Board of Directors. The
interim financial statements do not include all financial risk
management information and disclosures required in the annual
financial statements; they should be read in conjunction with the
group's annual financial statements as at the year ended 30 April
2019. There have been no changes in the risk management department
or in any risk management policies since the year end.
5. Segment information
Management has determined the operating segments based on the
operating reports reviewed by the Board of Directors that are used
to assess both performance and strategic decisions. Management has
identified that the Board of Directors are the Chief Operating
Decision Maker (CODM).
The Board of Directors review the 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 overheads and general corporate
costs). Intersegment revenue from management fees and other
intersegment charges are eliminated.
Six months ended 31 October 2019
Tungsten Tungsten Network
Network Finance Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------------- ------------------ -------------------- -----------------
Revenue 17,864 297 - 18,161
--------------------------------------- -------------- ------------------ -------------------- -----------------
Segment revenue 17,864 297 - 18,161
Adjusted EBITDA - excluding
share-based payment expense/(income) 3,953 (600) (2,106) 1,247
Adjusted EBITDA - including
share-based payment expense/(income) 3,874 (647) (2,401) 826
Depreciation and amortisation (1,844) (87) (407) (2,338)
Impairment of intangible assets - (609) - (609)
Foreign exchange gain 215 15 - 230
Rent adjustment 167 - 371 538
Share based payment income/(expense) (79) (47) (295) (421)
Exceptional items (221) - (508) (729)
Finance income 767 - 393 1,160
Finance costs (942) - (520) (1,462)
--------------------------------------- -------------- ------------------ -------------------- -----------------
Loss before taxation 2,016 (1,328) (3,072) (2,384)
Income tax credit 97
--------------------------------------- -------------- ------------------ -------------------- -----------------
Loss for the period (2,287)
--------------------------------------- -------------- ------------------ -------------------- -----------------
Capital expenditure 1,200 - 123 1,323
Total assets 128,267 203 8,247 136,717
Tol liabilities 11,905 669 10,641 23,215
--------------------------------------- -------------- ------------------ -------------------- -----------------
Six months ended 31 October 2018
Tungsten Tungsten Network
Network Finance Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------------- ------------------ -------------------- -------------------
Revenue 17,210 365 - 17,575
------------------------------------- -------------- ------------------ -------------------- -------------------
Segment revenue 17,210 365 - 17,575
Adjusted EBITDA - excluding
share-based payment
expense/(income) 3,599 (1,203) (3,148) (752)
Adjusted EBITDA - including
share-based payment
expense/(income) 2,878 (1,221) (2,597) (940)
Depreciation and amortisation (1,851) (5) (125) (1,981)
Foreign exchange gain/(loss) 2,219 (66) (2) 2,151
Share based payment income/(expense) (721) (18) 551 (188)
Exceptional items (83) - (385) (468)
Finance income 441 - 425 866
Finance costs (565) (123) (16) (704)
------------------------------------- -------------- ------------------ -------------------- -------------------
Loss before taxation 3,039 (1,415) (2,700) (1,076)
Income tax credit 1,052
------------------------------------- -------------- ------------------ -------------------- -------------------
Loss for the period (24)
------------------------------------- -------------- ------------------ -------------------- -------------------
Capital expenditure 2,004 - - 2,004
Total assets 132,834 257 3,705 136,796
Total liabilities 11,051 572 5,762 17,385
------------------------------------- -------------- ------------------ -------------------- -------------------
6. Exceptional items
Six months ended Six months ended
31 October 2019 31 October 2018
(unaudited) (unaudited)
GBP'000 GBP'000
Restructuring costs (1) 296 -
Board operating review (2) 375 -
Professional advice (3) 58 -
Provision for onerous contracts - 162
Shareholder action costs - 306
Total exceptional items 729 468
--------------------------------------- ------------------ ------------------
(1. Restructuring costs includes the redundancy payments of
GBP0.3 million.)
(2. An operating review committee was initiated by the Board in
the autumn of 2018. This covers a comprehensive review of
Tungsten's market, products, operation and cost base. This
committee has appointed consultants to perform parts of the review
and the total cost incurred in the period was GBP0.4million. This
committee is expected to wind down by end of 2019 calendar
year.)
(3. Professional advice of GBP0.1million was received in respect
of the divestment of TNF.)
7. Intangible assets
Software
Customer development under
Goodwill relationships IT platform Software construction Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ---------------- ------------------------ ---------------- -------------- ---------------------- ------------------
Cost
Balance at 1 May
2019 102,057 11,116 7,194 8,202 3,624 132,193
Additions - - - - 1,178 1,178
Reclassification - - - 1,154 (1,154) -
Exchange
differences 14 1 10 - - 25
Balance at 31
October 2019 102,071 11,117 7,204 9.356 3,648 133,396
-------------------- ---------------- ------------------------ ---------------- -------------- ---------------------- ------------------
Accumulated
amortization and
impairment
Balance at 1 May
2019 - 3,153 6,084 2,166 - 11,403
Charge for the
period - 286 528 889 - 1,703
Impairment - - - 609 - 609
Exchange
differences - - 4 - - 4
Balance at 31
October 2019 - 3,439 6,616 3,664 - 13,719
-------------------- ---------------- ------------------------ ---------------- -------------- ---------------------- ------------------
Net book value
At 31 October 2019 102,071 7,678 588 5,692 3,648 119,677
At 30 April 2019 102,057 7,963 1,110 6,036 3,624 120,790
Pursuant to IAS 36, management is required to perform an annual
impairment review of the goodwill held in the Group. An impairment
assessment was performed as at 30 April 2019 and management is not
required to perform another impairment at the half year unless
there is considered to be a trigger event. Management has
considered whether any impairment indicators exist to trigger a
review in relation to the goodwill of the Tungsten Network cash
generating unit (CGU) and has concluded that there are no such
triggers except for an element of software development, as noted
below.
The Board has agreed a partnership arrangement for the future
provision of financing related services to customers of Tungsten
Network. Accordingly, the operations of Tungsten Network Finance
("TNF"), will be wound down. As a result of this, the net book
value of the intangible assets of TNF, all relating to software,
has been fully written off and a charge of GBP0.6m recognised in
the income statement.
8. Property, plant and equipment
Right-of-use Leasehold Fixtures Computer
assets improvements and fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------------------------------- --------------- -------------- ----------- --------
Cost
Balance at 1 May
2019 - 3,409 278 750 4,437
Impact of IFRS 16 10,091 (1,206) - - 8,885
Additions - 123 16 6 145
Exchange
differences 2 (1) (1) - -
Balance at 31
October 2019 10,093 2,325 293 756 13,467
------------------- --------------------------------- --------------- -------------- ----------- --------
Accumulated
depreciation
Balance at 1 May
2019 - 1,199 183 549 1,931
Impact of IFRS 16 3,459 (435) - - 3,024
Charge for the
period 435 118 29 53 635
Exchange
differences (3) (2) (2) - (7)
Balance at 31
October 2019 3,891 880 210 602 5,583
------------------- --------------------------------- --------------- -------------- ----------- --------
Net book value
At 31 October 2019 6,202 1,445 83 154 7,884
At 30 April 2019 - 2,210 95 201 2,506
9. Trade and other receivables
As at 31 October 2019 As at 30 April 2019
(unaudited) (Audited)
GBP'000 GBP'000
Non-current assets
Loans to employees under EMSS scheme - 187
---------------------------------------------- ----------------------- --------------------
Current assets
Trade receivables 6,836 7,352
Less: IFRS 15 gross down (see note 10) (2,457) (2,783)
Less: loss allowance (490) (941)
----------------------- --------------------
3,889 3,628
Prepayments 1,455 1,619
Contract assets 699 361
VAT receivables 29 123
Corporate tax receivables 52 904
Other receivables 1,012 829
---------------------------------------------- ----------------------- --------------------
Trade and other receivables 7,136 7,464
---------------------------------------------- ----------------------- --------------------
10. Contract liabilities
As at 31 October 2019 (Unaudited)
GBP'000
--------------------------------- ----------------------------------
As at 1 May 6,816
Invoiced during the period 20,365
Released to revenue (17,901)
IFRS 15 gross down (see note 9) (2,457)
Loss allowance (365)
Exchange differences 35
------------------------------------ ----------------------------------
Balance 6,493
------------------------------------ ----------------------------------
11. Provisions
Leasehold property dilapidations Onerous contracts Total
GBP'000 GBP'000 GBP'000
-------------------------- --------------------------------- ------------------ ---------
As at 1 May 2019 1,237 489 1,726
Utilised during the year - (392) (392)
Exchange differences (1) - (1)
---------------------------- --------------------------------- ------------------ ---------
As at 31 October 2019 1,236 97 1,333
---------------------------- --------------------------------- ------------------ ---------
As at As at
31 October 2019 30 April 2019
GBP'000 GBP'000
------------------------------- ----------------- ---------------
Analysis of total provisions:
Non-current 1,205 1,568
Current 128 158
---------------------------------- ----------------- ---------------
Total 1,333 1,726
---------------------------------- ----------------- ---------------
12. Share based payments
Share based payments expenses of GBP114,000 have been recognised
in the consolidated income statement for the six months ended 31
October 2019 (31 October 2018: GBP188,000). The table below sets
out the movement in shares granted under the Company share
schemes:
Employee
Founder Matched UK US
Number Securities Shares Scheme Plan SARs DBSP LTIP Total
As at 1
May
2019 3,760,000 146,055 3,222,650* 3,012,917* 266,248* - - 10,407,870
Granted
during
the
period - - - - - 594,819 1,875,901 2,470,720
Lapsed
during
the
period - (146,055) (138,668) (20,625) (42,595) (17,185) - (365,128)
As at 31
October
2019 3,760,000 - 3,083,982 2,992,292 223,653 577,634 1,875,901 12,513,462
--------- ----------------------- ------------------ ------------------- ------------------- ----------------- --------- ---------- ---------------------
* Restated due to correction of options granted to employees
During the period, and pursuant to the Group's new remuneration
plan, the Company granted options under two new schemes; the DBSP
and LTIP. With the introduction of the DSBP and the LTIP, the
existing UK Share Option Scheme and US Stock Option Plan are
intended to be retired.
Deferred Bonus Share Plan ('DBSP')
The Company has moved from the payment of annual performance
bonuses 100% in cash to a mix of cash and deferred bonus shares
under the DBSP. Bonuses for Executive Directors and Exco members
for FY19 performance were awarded on the basis of 50% cash and 50%
DBSP. 344,819 of the DBSP grants in the period were awarded based
on an assessment against performance criteria for FY19 and will
vest after 12 months.
250,000 of the DBSPs grants in the period were to the new Chief
Executive Officer of Tungsten and will vest over a two year period
(50% vesting on the first anniversary of the grant date and the
remaining 50% will vest on the second anniversary of the grant
date).
Grants under the DBSP are structured as options with a nominal
exercise price and vesting is subject to the grantee's continued
service with the Tungsten group.
Long Term Incentive Plan ('LTIP')
The Group has introduced a new LTIP for Executive Directors and
senior management. The LTIP grants in the period vest after three
years based on clearly defined performance criteria providing for
stretch targets and including revenue growth, EBITDA growth and
increase in share price.
Grants under the LTIP are structured as options with a nominal
exercise price and vesting is subject to the grantee's continued
service with the Tungsten group.
13. Finance Income and Costs
Six months ended Six months ended
31 October 2019 31 October 2018
(unaudited) (unaudited)
GBP'000 GBP'000
Finance income
Interest income on short-term deposits - -
Foreign exchange gains on financing activities 1,160 866
Total finance income 1,160 866
------------------------------------------------------- ----------------------- -----------------------
Finance costs
Interest expense and bank charges (157) (247)
Finance lease costs (169) -
Foreign exchange losses on financing activities (1,136) (457)
Total finance costs (1,462) (704)
------------------------------------------------------- ----------------------- -----------------------
Net finance loss / income (302) 162
------------------------------------------------------- ----------------------- -----------------------
14. Loss per share
Basic 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 period.
Loss per share attributable to the equity holders of the parent
during the period:
Six months ended Six months ended
31 October 2019 31 October 2018
Loss Shares EPS Loss Shares EPS
GBP'000 '000 P GBP'000 '000 P
Basic and diluted loss
per share (2,287) 126,088 (1.81) (24) 126,088 (0.02)
----------------------- --------- ------------------ --------------- -------- ------------------ ---------------
Equity instruments including the Group's various share based
payment plans which could potentially dilute basic earnings per
share in the future have been considered but not included in the
calculation of diluted earnings per share because they are
anti-dilutive for the periods presented. This is due to the Group
incurring a loss on operations for the period (FY19: was also a
loss on operations).
15. Taxation
During the period ended 31 October 2019, a tax credit of GBP0.1
million (31 October 2018: GBP1.1 million) includes a GBP0.1
corporate tax expense and a reduction of GBP0.2 million in the
deferred tax liability relating to the acquisition of Tungsten
Network.
16. Related-party transactions
Related party transaction for the period ended 31 October 2019
are GBPnil (31 October 2018: GBP14,000).
Transactions between Group entities principally relate to
intercompany financing arrangements, which are eliminated on
consolidation.
17. Post balance sheet events
A new strategic partnership with Orbian, a global leader in
Supply Chain Finance was signed in December 2019. The partnership
with Orbian will offer our buyers, and their supply chains, a
simple, effective and low-cost financing product from a market
leader.
As a result of our partnership with Orbian, Tungsten will no
longer continue its loss making Tungsten Early Payment and
Receivables Financing products. Suppliers on Tungsten Network using
these products will be supported through the exit process and the
15 strong staff of Tungsten Network Finance ("TNF") will be
wound-down to nil.
18. Cautionary statement
This document contains certain forward-looking statements
relating to Tungsten Corporation plc ('the Company'). The Company
considers any statements that are not historical facts as
"forward-looking statements". They relate to events and trends that
are subject to risk and uncertainty that may cause actual results
and the financial performance of the Company to differ materially
from those contained in any forward-looking statement. These
statements are made by the directors in good faith based on
information available to them and such statements should be treated
with caution due to the inherent uncertainties, including both
economic and business risk factors, underlying any such
forward-looking information.
Independent review report to Tungsten Corporation plc.
Introduction
We have been engaged by Tungsten Corporation plc (the "Company")
to review the condensed set of financial statements in the
half-yearly financial report for the six months ended 31 October
2019 which comprises the consolidated income statement;
consolidated statement of comprehensive income; consolidated
statement of financial position; consolidated cash flow statement;
consolidated statement of changes in equity; and associated
notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' Responsibilities
The interim financial report, including the financial
information contained therein, is the responsibility of and has
been approved by the directors. The directors are responsible for
preparing the interim financial report in accordance with the rules
of the London Stock Exchange for companies trading securities on
AIM, which require that the financial information must be presented
and prepared in a form consistent with that which will be adopted
in the Company's annual financial statements having regard to the
accounting standards applicable to such annual financial
statements.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly report
based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity', issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
October 2019 is not prepared, in all material respects, in
accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorized to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants & Registered Auditors, London, United
Kingdom
11 December 2019
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127)
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BCBDDSSBBGCB
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