Tungsten Corporation plc (AIM: TUNG), a leading provider of digital financial management products and software solutions, announces the following unaudited interim results for the six months ended 31 October 2020:
Tungsten Network Revenue
Gross profit (1)
Adjusted operating expenses (2)
Adjusted EBITDA (3)
Adjusted EBITDA margin (4)
Operating loss excluding goodwill impairment
Net cash (5)
New sales billings (6)
· Group revenue reduced by 1% to £18.0 million: excluding Tungsten Network Finance (TNF), revenue grew 1% to £18.0 million and grew 2% excluding the impact of FX.
· 93% of revenue was repeatable and recurring, compared to 94% in H1-FY20.
· Gross profit was £16.7 million, a decrease of £0.9 million from H1-FY20; primarily driven by a non-recurring bad debt collection of £0.5 million in H1-FY20, a £0.2 million increase in commissions in the current period and a £0.2 million increase in set up costs of newly acquired Total AR and AP customers.
· Adjusted EBITDA of £0.8 million, down £0.2 million from H1-FY20, with reduction in gross profit being to a large part offset by a reduction in operating expenses of £0.7 million. The annualised run rate of recent restructuring activities and cost savings are £4.0 million.
· Operating loss of £29.9 million increased by £27.8 million from H1-FY20. This predominantly reflects a non-cash goodwill impairment of £26.2 million relating to the carrying value of goodwill associated with the OB10 acquisition in 2013, increased FX costs of £1.1 million (reflecting the fluctuation of exchange rates between GBP and USD on intercompany balances) and an increase in exceptional costs of £1.3 million primarily due to restructuring activities to deliver the £4m cost savings.
· Net cash of £1 million broadly in line with H1-FY20, with £2.0 million remaining undrawn and available under the RCF which matures in December 2023.
· New sales billings at £2.1 million up £0.4 million versus H1-FY20, maintaining the momentum seen in H2-FY2020.
· 5 new wins (3 Accounts Payable ("AP") and 2 Accounts Receivable ("AR") products - one customer has taken both AP and AR) from large multinational corporations delivering total contract value of £1.3 million and annual recurring revenue of £0.3 million.
· Concluded our largest ever single AP partnership agreement with a leading US bank, expected to launch in Q4-FY21. This has the potential to deliver e-invoicing volumes of up to 2.5 million invoices from up to 28 new AP buyers, who in turn could release up to 40,000 new AP suppliers onto our platform.
· Key executive appointments made during the period were of Ian Kelly as interim Chief Financial Officer, a Product and Business Development Officer and a Chief Marketing Officer.
· Executed the first agreement under the partnership with Orbian with a major UK retailer, securing access to their supplier base.
· Transaction volumes of 9.0 million, down 0.6 million versus H1-FY20 primarily due to impact of COVID-19.
· In H1 FY21 new business momentum continued with Tungsten securing 4 new customer wins. However the Company is witnessing longer sales conversion cycle which is conservatively expected to continue for the remainder of the current financial year. As a consequence of this, coupled with a decline in transaction volumes, the Company now expects FY21 revenues to be similar to FY20.
· As per our trading update of 27 November 2020, underlying adjusted EBITDA is now expected to be not less than £3.2million, impacted by the lower transaction volumes, product mix of new sales, our new Total AR contracts requiring increased set-up costs, as well as additional costs related to our investment in the sales team.
· Planned actions to reduce operating costs were actioned during H1-FY21, which will serve to improve the Group's future underlying EBITDA. Although this had a short-term negative impact on cash, the programme is expected to deliver annualised savings of £4 million from FY22 onwards, but we expect to utilise a portion to re-invest in the business to help drive future growth and efficiencies.
· As a result of the reduced revenue and adjusted EBITDA the Group's net cash balance at the end of FY21 is anticipated to be similar to the balance as at 31 October 2020 of £1million. This represents cash of £3 million less £2 million drawn on the RCF. As of today, £2 million remains undrawn on the facility which expires in December 2023. This balance includes the impact of current period exceptional costs as well as the cash costs of prior period restructuring activities.
Andrew Lemonofides, Chief Executive Officer of Tungsten Corporation plc, said:
"Tungsten has faced a challenging and unpredictable market in 2020 due in part as a result of COVID-19. In spite of this, we have continued to grow the pipeline and win new customer relationships and we expect to deliver broadly similar revenues to FY20. We continue to invest in our sales and product capabilities, whilst maintaining financial rigour in relation to our cost base, in order that we continue to improve efficiency and are well placed to convert the sales pipeline."