TIDMTUNG
RNS Number : 4678I
Tungsten Corporation PLC
14 December 2020
Embargoed Release: 07:00hrs Monday 14 December 2020
TUNGSTEN CORPORATION PLC
("Tungsten" or the "Company")
INTERIM RESULTS FOR THE SIX MONTHSED 31 OCTOBER 2020
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:
Group results
GBPm H1-FY21 H1-FY20
(restated)
----------------------------- -------- -----------
Tungsten Network Revenue 18.0 17.9
TNF Revenue - 0.3
-------- -----------
Revenue 18.0 18.2
Gross profit (1) 16.7 17.6
Adjusted operating expenses
(2) 15.9 16.6
Adjusted EBITDA (3) 0.8 1.0
Adjusted EBITDA margin
(4) 5% 5%
Operating loss (29.9) (2.1)
Operating loss excluding
goodwill impairment (3.7) (2.1)
Net cash (5) 1.0 1.0
New sales billings (6) 2.1 1.7
Transaction volumes 9.0m 9.6m
----------------------------- -------- -----------
Financial highlights
-- Group revenue reduced by 1% to GBP18.0 million: excluding
Tungsten Network Finance (TNF), revenue grew 1% to GBP18.0 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 GBP16.7 million, a decrease of GBP0.9
million from H1-FY20; primarily driven by a non-recurring bad debt
collection of GBP0.5 million in H1-FY20, a GBP0.2 million increase
in commissions in the current period and a GBP0.2 million increase
in set up costs of newly acquired Total AR and AP customers.
-- Adjusted EBITDA of GBP0.8 million, down GBP0.2 million from
H1-FY20, with reduction in gross profit being to a large part
offset by a reduction in operating expenses of GBP0.7 million. The
annualised run rate of recent restructuring activities and cost
savings are GBP4.0 million.
-- Operating loss of GBP29.9 million increased by GBP27.8
million from H1-FY20. This predominantly reflects a non-cash
goodwill impairment of GBP26.2 million relating to the carrying
value of goodwill associated with the OB10 acquisition in 2013,
increased FX costs of GBP1.1 million (reflecting the fluctuation of
exchange rates between GBP and USD on intercompany balances) and an
increase in exceptional costs of GBP1.3 million primarily due to
restructuring activities to deliver the GBP4m cost savings.
-- Net cash of GBP1 million broadly in line with H1-FY20, with
GBP2.0 million remaining undrawn and available under the RCF which
matures in December 2023.
Operational highlights
-- New sales billings at GBP2.1 million up GBP0.4 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 GBP1.3 million and annual recurring revenue of GBP0.3
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.
FY21 outlook
-- 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 GBP3.2million,
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
GBP4 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 GBP1million. This
represents cash of GBP3 million less GBP2 million drawn on the RCF.
As of today, GBP2 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."
1 Gross profit is calculated as revenue less cost of sales
2 Adjusted operating expenses exclude cost of sales, adding back
rent adjustment for rental expenses and rental income , interest,
tax, depreciation, amortisation, foreign exchange gains or losses,
loss on disposal of assets, share-based payments charges, goodwill
impairment and exceptional items
3 Adjusted EBITDA is defined as operating profit adding back
rent adjustment for rental expenses and rental income and before
other income, depreciation, amortisation, goodwill impairment, gain
or loss on sale, foreign exchange gain or loss, share-based
payments charge, and exceptional items
4 Adjusted EBITDA margin is defined as adjusted EBITDA divided
by revenue
5 Net cash is calculated as cash and cash equivalents on the
balance sheet less dr awings under the HSBC Revolving Credit
Facility
6 New sales billings represents implementation, subscription,
licence, transaction and professional services fees to be billed in
the period from new sales made in that period. Implementation and
subscription fees are recognised to revenue over the 6 months and
12 months respectively from billing month. Subscription licence and
transaction fees are recognised in the month sold. Professional
services fees are recognised on work completion milestones
7 Tungsten announced its intention to divest Tungsten Network
Finance, its legacy trade finance division, ("TNF") on 30 April
2019
8. Cash Generation is net increase/(decrease) in cash and cash
equivalents less increase in borrowing less exchange adjustment;
see the Group's consolidated cash flow
9 Total AR is the automating of invoice processing for 100% of
invoices, in an Accounts Receivable department, across all types
and formats
10 Total AP is the automating of invoice processing for 100% of
invoices, in an Accounts Payable department, across all types and
formats
Enquiries
Tungsten Corporation plc
Andrew Lemonofides, Chief Executive Officer
Ian Kelly, Interim Chief Financial Officer +44 20 7280 6980
Canaccord Genuity Ltd (Nominated Advisor
& Broker)
Simon Bridges
Andrew Potts +44 20 7523 8000
Tavistock Communications Financial PR
& IR
Heather Armstrong
Jos Simson
Katie Hopkins +44 20 7920 3150
About Tungsten Corporation plc
Tungsten Corporation (AIM: TUNG) is the world's largest,
compliant business transaction network. A leading global electronic
invoicing and purchase order transactions network, Tungsten's
mission is centred on enabling a touchless invoice process allowing
businesses around the globe to gain maximum value from their
invoice process.
Tungsten processes invoices for 74% of the FTSE 100 and 71% of
the Fortune 500. It enables suppliers to submit tax compliant
e-invoices in 50 countries, and last year processed transactions
worth GBP195bn for organisations such as Caesars Entertainment,
Computacenter, GlaxoSmithKline, Kraft Foods, Mohawk Industries,
Mondelēz International, Procter & Gamble, Shaw Industries,
Unilever and the US Federal Government.
Founded in 2000 and headquartered in London, Tungsten has
offices in the US, Bulgaria and Malaysia, employing over 200
people.
Forward looking statements
This document contains forward-looking statements that may or
may not prove accurate. For example, statements regarding expected
revenue growth and trading margins, market trends and our product
pipeline are forward-looking statements. Phrases such as "aim",
"plan", "intend", "anticipate", "well-placed", "believe",
"estimate", "expect", "target", "consider" and similar expressions
are generally intended to identify forward-looking statements.
Forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause actual
results to differ materially from what is expressed or implied by
the statements. Any forward-looking statement is based on
information available to Tungsten as of the date of this statement.
All written or oral forward-looking statements attributable to
Tungsten are qualified by this caution. Tungsten does not undertake
any obligation to update or revise any forward-looking statement to
reflect any change in circumstances or in Tungsten's
expectations.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
CEO Business Review
Overview
In H1 FY21 new business momentum has continued, with us
delivering 24% YonY growth in New Sales Billings. Tungsten secured
4 new customer wins (3 new AP deals and 2 AR deals) in H1 FY21
(compared to 5 wins across the full previous year). We are seeing
our pipeline further strengthen and we are actively listening to
and adapting our offerings quickly to customer needs. We are
continuing to be nimble and flexible in a challenging world.
Our purpose
With our significant knowledge of the market and our customers,
coupled with our innovative and globally relevant suite of
products, we continue to be integral to our customers succeeding
and benefiting in the digital economy. Tungsten provides an
end-to-end solution, digitising invoice flows, enabling faster and
more automated invoice processing and allowing greater flexibility
and transparency around cashflow management.
Our potential market continues to grow as organisations have yet
to fully digitise their invoice flows. We are working with many of
our existing customers to define ways to speed up their
digitisation plans, as we play our part of being an essential
partner on their journey to best-in-class digital invoice
processing.
COVID-19 response
The COVID-19 pandemic has led to challenging market conditions
globally, and we have experienced a 7% decline in transaction
volumes across H1 FY21.
The current expectation is that transaction volumes will remain
at a lower level for the remainder of FY21, although we remain
cautiously optimistic in the mid-term that these will rebound.
In light of the unprecedented market conditions, we have
undertaken the following in H1 FY21:
- We accelerated planned cost savings which will deliver an
annualised benefit of c. GBP4 million from FY22.
- Preserved liquidity and reduced discretionary spend,
postponing salary increases and freezing non-essential
recruitment.
- As we look to exit the various lockdown restrictions in FY21,
it is clear that we will move to a "new operating model" which we
have included within our broader "Tungsten Ways of Working"
plan.
Foundations for growth
We continue to execute against our strategic priorities, which
will provide a solid foundation to the growth aspirations that we
have for Tungsten. We have three fundamental pillars of
success:
1. Our global network - this remains a significant
differentiator as the overall network effect is multiplied as more
buyers and suppliers are connected through, and transact across the
network. Clearly our goals are around maximising these connections
and interconnecting with other networks to broaden our reach.
2. Innovation remains key to our long-term success. We will
continue augmenting our product set and also focusing on platform
usability as these become increasingly important
differentiators.
3. Our people are fundamental to our long-term growth. Whilst
much of our initial focus was around creating the right
organisational structure, this has been balanced with changing the
culture to one which is more value driven and inclusive.
Our strategic focus areas
In the current rapidly changing environment, we have continued
to invest and strengthen the capabilities and skills of our teams
to support the growing needs of our global customers' base,
especially as their own customers (buyers and suppliers) are also
accelerating the rate of invoice digitisation. We remain fully
focused and committed to actively supporting our customers and
providing them with solutions that meet their strategic demands and
regulatory requirements.
Our strategy remains one of achieving sustainable growth through
delivering on the four main strategic initiatives agreed at the
start of the financial year.
- Driving the network effect - Total AR
The key objective here is to handle 100% of outgoing invoices in
all formats. In H1 FY21 we have signed a further two Total AR
deals, continuing the momentum in this new product area.
- Strategic partnerships with e-procurement providers
Ensures our service receives the widest possible attention.
Having integrated with the Coupa network and gained CoupaLink
certification we are exploring partnerships with a number of other
key P2P players.
- Integrating with other leading e-invoice platforms
This is designed to improve the scale and reach of our customer
base, in turn increasing turnover, volume and income for Tungsten.
Our major partnership with a US bank is expected to add up to 28
new buyers and 40,000 suppliers to our network, is nearing
completion of the integration phase and is scheduled to "go live"
in January 2021.
- Trade Finance Reset
Focused on accessing the considerable trade flows across our
global platform, our exclusive partnership with Orbian has
continued to provide opportunities. Our launch customer who signed
in April 2020, has now expanded the offering to its full supplier
base. We have a strong pipeline of further opportunities for the
coming year, primarily from our existing customer base.
Performance
Despite the reduction in transaction volumes, our core business
has continued to perform well and we have seen further momentum in
new sales billings which underlines the investment that has been
made in our new sales capabilities.
In H1 FY21 we had 5 new wins. Of this, 3 were Accounts Payable
wins where Tungsten transmits e-invoices from buyer to supplier,
and 2 were Accounts Receivable which is the opposite, in which
suppliers send their invoices to a number of buyers. One customer
purchased both Accounts Payable and Accounts Receivable. In both
cases, we look to handle 100% of the invoice volume to maximise
efficiencies and cost savings. These wins show that in H1 we
exceeded the number of new wins secured in the whole of FY20. This
performance stems from the investments we made in our salesforce,
and with the growing opportunity in the pipeline we anticipate
further growth in H2 FY21 as this momentum continues.
Tungsten has continued to invest in streamlining the onboarding
of new buyers and suppliers to the network, in addition to maximise
the straight through processing of invoices for customers. This
allows our customers to maximise the potential savings associated
with invoice digitisation.
Expansion of our customer base and network remain key, not only
through our existing and new customer base, but through extending
our offering, for example Supply Chain Finance. We also have our
Workflow offering and are examining how to monetise our data
through the provision of analytics.
An evolving competitive landscape
As we look to leverage our global network effect, we will make
investment in building out our partner business to provide greater
reach over the coming year. We need to have the capability to
deliver our sales model both directly and indirectly to allow us to
most effectively meet the increasing demands of our customers.
The changing dynamics of the market mean that network
interconnection and interoperability form the foundation of future
success which we will continue to address through our strategic
initiatives.
Equally with the increasing complexity of the regulatory
frameworks being introduced by individual countries, we remain
heavily focused on building out our compliant network to give
presence in those countries that introduce mandates for invoice
processing to ensure that we continue to offer our comprehensive
service to our customers.
Our people
In H1 FY21 our leadership team continues to grow and I welcomed
Ian Kelly who stepped into the Interim CFO role, having previously
held this role earlier in the year before moving to our newly
created Chief Commercial Officer role.
As a result of Ian's move to head Finance, Eric Craig, our Chief
Sales Officer moved to become our Chief Commercial Officer,
allowing us to utilise his extensive commercial skills, whilst
retaining important links into our sales organisation and our
customer base. David Hazard joined as our new Global Head of Sales,
with Marisa Teh joining to lead Product and Business Development,
and Miriam Weidner to lead Marketing.
Our "Tungsten Ways of Working" initiative was launched to allow
ongoing support to be provided to our employees, helping them with
practical and emotional support as we adapted to the new working
environments under COVID-19.
Looking ahead
Although we and our customers have been impacted by the COVID-19
pandemic, we are cautiously optimistic in the mid-term that
business volumes will return to normalised levels in FY22.
We will continue to work closely with our partners, develop our
network, invest in innovative new revenue streams and in our
people. We will continue to deliver on our four strategic
initiatives to ensure that we remain the leading player in our
industry.
Finally, success in the coming periods is focused on execution
as we seek to deliver on our plans. Operational excellence clearly
underpins our route to future success and with the right senior
team now in place, Tungsten is well placed to capitalise on the
opportunities being presented.
Andrew Lemonofides
Chief Executive Officer
CFO Financial Review
Income statement
GBPm T ungsten Group
--------------------------------- --------------------
Continuing operations HY-FY21 HY-FY20
Restated
(1)
--------------------------------- -------- ----------
Revenue 18.0 18.2
Cost of sales (1.3) (0.6)
--------------------------------- -------- ----------
Gross profit 16.7 17.6
--------------------------------- -------- ----------
Adjusted operating expenses (2) (15.9) (16.6)
--------------------------------- -------- ----------
Adjusted EBITDA (3) 0.8 1.0
Rent adjustment (4) 0.5 0.5
--------------------------------- -------- ----------
EBITDA (5) 1.3 1.5
--------------------------------- -------- ----------
Other operating expenses (31.2) (3.6)
--------------------------------- -------- ----------
Operating loss (29.9) (2.1)
Net finance (costs) (0.6) (0.3)
--------------------------------- -------- ----------
Loss before taxation (30.5) (2.4)
Taxation - (0.1)
--------------------------------- -------- ----------
Loss for the period (30.5) (2.5)
--------------------------------- -------- ----------
(1) HY-FY20 income statement is restated to reclassify GBP0.2m
of costs between Adjusted operating expenses and Other operating
expenses and to reverse prior deferred tax credit of GBP0.1m booked
in the period to 31 October 2019. (see note 14) .
(2) Adjusted operating expenses exclude cost of sales, other
income, interest, tax, depreciation, amortisation, impairment of
intangible assets, loss on disposal of assets, foreign exchange
gains or losses, share-based payments charges, goodwill impairment
and exceptional items.
(3) Adjusted EBITDA is calculated as earnings adding back rent
adjustment for rental expenses and rental income and before net
finance cost, tax, depreciation and amortisation, impairment of
intangible assets, loss on disposal of assets, foreign exchange
gain or loss, share-based payment expense, goodwill impairment and
exceptional items.
(4) The HY-FY19 adoption of IFRS 16 includes rent cost in
depreciation; this adjustment is to create visibility of the cash
cost of our rent expense and rental income.
(5) EBITDA is calculated as earnings before net finance cost,
tax, depreciation and amortisation, impairment of intangible
assets, loss on disposal of assets, foreign exchange gain or loss,
share-based payment expense, goodwill impairment and exceptional
items. The most directly comparable IFRS measure to segment EBITDA
is Operating loss for the period.
Management adopts EBITDA to monitor business underlying
performance since items considered non-indicative of its run-rate
operations are excluded, as appropriate.
Revenue
GBPm HY-FY21 HY-FY20 % Movement
(1)
Recurring revenue (2) 9.8 9.8 -
Repeatable revenue (3) 6.9 7.0 (1)%
---------------------------------------- -------- -------- -----------
Total recurring and repeatable revenue 16.7 16.8 (1)%
Other revenue (4) 1.3 1.1 18%
---------------------------------------- -------- -------- -----------
Tungsten Network total revenue 18.0 17.9 1%
TNF revenue (5) - 0.3 n/a
---------------------------------------- -------- -------- -----------
Group revenue 18.0 18.2 (1)%
---------------------------------------- -------- -------- -----------
Recurring revenue % of total Tungsten
Network revenue (6) 54% 55%
Total recurring & repeating revenue %
of total Tungsten Network revenue (7) 93% 94%
---------------------------------------- -------- -------- -----------
(1) Revenue is shown to the nearest GBP0.1 million. Movement is
calculated on figures to the nearest GBP1.
(2) Recurring revenue represents annual subscription and
maintenance fees on contracts typically ranging from 1 to 3 years
and billed annually in advance.
(3) Repeatable revenue represents transaction-based fees from
contracted customers, typically billed at the point of usage or at
the end of the month of usage.
(4) Other revenue represents implementation, modification and
professional services fees, billed either in advance or on
completion of project stages.
(5) TNF revenue relates to revenue generated by the trade
finance business announced for disposal but not treated as an asset
held for disposal at the end of FY19.
(6) Recurring revenue is revenue from annual subscription and
maintenance fees as a % of revenue excluding TNF.
(7) Recurring and repeatable revenue is total recurring and
repeatable revenue as a % of revenue excluding TNF.
Revenue excluding TNF for the period was GBP18.0 million
(H1-FY20: GBP17.9 million), representing an increase of 1%. The
growth in revenue reflected the net benefits of new customer sales
in H2-FY20 and H1-FY21 (including the impact of new customer set up
fees in H1-FY21) but was offset by a decline in transactional
volumes and revenue associated with COVID-19. Revenue including TNF
for the period was GBP18.0 million (H1-FY20: GBP18.2 million),
representing a decrease of 1%.
Total new sales billings increased by GBP0.4 million to GBP2.1
million (H1-FY20: GBP1.7 million), representing year one billings
for new services sold to both existing and new buyers. On an
underlying basis excluding the impact of transaction revenue
(including the impact of COVID-19), this represents an increase of
GBP0.8 million in comparison to H1-FY20.
Recurring revenue of GBP9.8 million remained in line with
H1-FY20, demonstrating strength in visibility of revenue streams
from long term contracts.
Repeatable revenue decreased by GBP0.1 million to GBP6.9 million
(H1-FY20: GBP7.0 million) due to the decline in our transactional
revenue and volumes. Transaction volumes reduced by 0.6 million to
9.0 million (H1-FY20: 9.6 million).
Other revenue increased by GBP0.2 million to GBP1.3 million
(H1-FY20: GBP1.1 million) due to set up fees associated with the
new AP/AR deals won in H2-FY20 and H1-FY21.
Our TNF business was wound down in H2-FY20 (revenue in H1-FY20:
GBP0.3m million) and all revenue generated by the Orbian
partnership will be recognised as part of Group revenue going
forward. Partnership revenue represents 1% of Tungsten network
revenue in H1-FY21.
Revenue by type of customer
42% of Tungsten network revenue was generated by our Buyer
customers in H1-FY21 (H1-FY20: 43%). Total Buyer revenue was GBP7.5
million (H1-FY20: GBP7.7 million). This reflected a decline in
recurring revenue of GBP0.2 million.
Supplier revenue represented 57% of Tungsten revenue in H1-FY21
(H1-FY20: 57%). Total Supplier revenue grew 1% to GBP10.3 million
(HY20: GBP10.2 million).
Expenses
GBPm H1-FY21 H1-FY20 Difference
--------------------------------- -------- -------- -----------
Adjusted operating expenses (1) (15.9) (16.6) 0.7
Rent adjustment 0.5 0.5 -
Cost of sales (1.3) (0.6) (0.7)
Depreciation and amortisation (2.3) (2.3) -
Impairment (26.2) (0.6) (25.6)
Foreign exchange (loss)/gain (0.8) 0.2 (1.0)
Share-based payment expense (0.1) (0.4) 0.3
Exceptional items (1.8) (0.5) (1.3)
Statutory operating expenses (47.9) (20.3) (27.6)
(1) Adjusted operating expenses includes adjustment for rental
expenses and rental income and excludes cost of sales, other
income, interest, tax, depreciation, amortisation, impairment of
intangible assets, loss on disposal of assets, foreign exchange
gains or losses, share-based payments charges, goodwill impairment
and exceptional items.
The Group's statutory expenses grew by GBP27.6 million to
GBP47.9 million (H1-FY20: GBP20.3 million). This increase is
primarily due to a GBP26.2 million further impairment to goodwill
associated with the OB10 acquisition in 2013. Whilst significant
operational progress has been made with the with strategic plan
during the period, as referenced in our trading update of 27(th)
November 2020, COVID-19 has had a negative impact on trading
performance, therefore we have conducted an impairment review of
our goodwill and concluded that a further impairment was required.
Goodwill at 31st October 2020 was GBP49.8 million (30(th) April
2020: GBP76.1 million).
Statutory expenses, excluding impairment, were GBP21.7 million
which represents an increase on H1-FY20 of GBP2 million primarily
due to GBP0.8 million of foreign exchange losses on intercompany
balances denominated in USD and an increase in exceptional items of
GBP1.3 million (of which GBP1.1 million reflects restructuring
activities).
Operating expenses
The Group's adjusted operating expenses reduced by 4% to GBP15.9
million (H1-FY20: GBP16.6 million). This is primarily due to a
reduction in travel and expense spend of GBP0.5 million due to the
impact of COVID-19 and other staff cost savings from the wind-down
of TNF partially offset by increased staff costs with investment in
the sales team and a new senior management team. We have recently
implemented plans to deliver annualised savings of GBP4 million
from FY22 onwards, but we expect to utilise a portion to re-invest
in the business to help drive future growth and efficiencies.
Other movements in expenses were:-
Cost of sales increased by GBP0.7 million to GBP1.3 million
(H1-FY20: GBP0.6 million)
-- Increase in bad debt of GBP0.3 million due to a one-off
decrease in H1-FY20 in our loss provision following collection of
previous provided receivables
-- Increase of GBP0.2 million in commissions
-- Increase in AR costs of GBP0.2 million due to launch of new AR customers.
Share based payment expense decreased by GBP0.3 million to
GBP0.1 million (H1-FY20: GBP0.4 million) due to a reduced number of
vesting options and the unwinding of prior charges for forfeited
options awarded to employees and executives departing the business
due to restructuring activity.
Loss before tax
The Group generated a loss before tax of GBP30.5 million
(H1-FY20: GBP2.5 million). The basic and diluted loss per share was
24.18p (H1-FY20 restated: 1.97p).
Prior period and year adjustments
At the year ended 30 April 2020, prior year adjustments were
made to the Group accounts for deferred tax, deferred income,
employee holiday costs and indirect tax accruals. The impact of
these in the period to 31 October 2019 was to increase Loss for the
period by GBP0.2 million. See note 14 to the interim financial
statements for further detail.
Funding and liquidity
Cash and cash equivalents at the end of H1-FY21 were GBP3.0
million (H1-FY20: GBP2.0 million). Net cash (including amounts
drawn down under the revolving credit facility) at the end of
H1-FY21 was GBP1.0 million (H1-FY20: GBP1.0 million).
Cash Flow GBPm H1-FY21 H1-FY20
(restated)
-------------------------------------------- ---------- ------------
Net cash flow from operating activities [1] - -
Net cash flow from investing activities GBP(1.7)m GBP(1.3)m
Net cash flow from financing activities GBP(0.6)m GBP(0.5)m
Net movement in cash & cash equivalents GBP(2.3)m GBP(1.8)m
Exchange adjustments GBP0.1m -
Cash & cash equivalents at the start of the GBP5.2m GBP3.8m
period
Cash & cash equivalents at the end of the GBP3.0m GBP2.0m
period
-------------------------------------------- ---------- ------------
The Group had a net cash outflow of GBP2.3 million during the
period. Tungsten experiences the impact of seasonality in some of
its billing with the renewal of its workflow annual maintenance
contracts, which total approximately GBP2.0 million, occurring in
December each year.
Cash flows from operating activities
Cash used in operating activities was flat year on year despite
absorbing the impact of exceptional cash costs of GBP1.0 million
relating to restructuring activities from towards the end of FY20
and in H1-FY21.
Cash flows from investing activities
Cash spent on investing activities increased by GBP0.4 million
to GBP1.7 million (H1-FY20: GBP1.3 million), with increase driven
by various initiatives within our service improvement programme
which was initiated to allow Tungsten to drive automation and
improved experience for our customers whilst at the same time
reducing customer support tickets/volumes.
Cash flows from financing activities
Cash flow from financing activities at GBP0.6 million was a
marginal increase to last year (H1-FY20: GBP0.5 million) due
chiefly to lease payments on the Group's property portfolio.
Principal Risks and Uncertainties
The principal risks and uncertainties facing the Group remain
broadly consistent with the Principal Risks and Uncertainties
reported in Tungsten's 30 April 2020 Annual Report. Since the 2020
Annual Report, the Board has been monitoring and mitigating the
effects of the following international events on the Group's
business:
COVID-19
COVID-19 has been declared a global pandemic, spreading globally
and enforcing restrictions on people movements and curtailing
international travel. This continues to have a widespread impact
economically and several industries have been heavily impacted.
This has resulted in impacts on certain industries and a more
general need to consider whether budgets and targets previously set
are realistic considering these events.
As stated in our trading update of 27(th) November 2020, the
COVID-19 pandemic has impacted our business with a decline in
transactional volumes of 7% in H1-FY21 and a lengthening of the
sales conversion cycle. We continue to monitor the situation
closely and maintain a sufficient cash position, including GBP2
million of available revolving credit facilities, to weather any
further impacts. The Board and executive leadership team will
continue to closely monitor the impact of COVID-19 on the
business.
Brexit
The United Kingdom ('UK') formally left the European Union
('EU') on 30 January 2020. The period from when the UK voted to
exit the EU on 23 June 2016 and the formal process initiated by the
UK government to withdraw from the EU, or Brexit, created
volatility in the global financial markets. The UK enters a
transition period, being an intermediary arrangement covering
matters like trade and border arrangements, citizens' rights and
jurisdiction on matters including dispute resolution, taking
account of The EU (Withdrawal Agreement) Act 2020, which ratified
the Withdrawal Agreement, as agreed between the UK and the EU. The
transition period is currently due to end on 31 December 2020 and
ahead of this date, negotiations are ongoing to determine and
conclude a formal agreement between the UK and EU on the
matters.
As the Group operates subsidiaries in many countries, there are
several channels available to us to continue business with the same
customers, should the need arise, with little to no effect from
Brexit changes. As such, the Directors currently deem that the
effects of the UK's current transitional period outside the EU and
the impact of ongoing discussions with the EU will not have a
significant impact on the Group's operations due to the global
geographical footprint of the business and the nature of is
operations. We do not consider it likely that the Group will be
significantly impacted as the Group is not an importer or exporter
of goods across EU borders. However, the Directors and senior
leadership team are closely monitoring the situation to be able to
manage the risk of any volatility in global financial markets and
impact on global economic performance due to Brexit.
CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHSED 31 OCTOBER
2020
31 October 31 October
2020 2019
(unaudited) (unaudited)
(restated(2)
)
Note GBP'000 GBP'000
--------------------------------- ---- -------- --- ------------- --------------
Revenue 4 18,013 18,161
Operating expenses (47,905) (20,307)
--------------------------------------- -------- --- ------------- --------------
Operating loss (29,892) (2,146)
Adjusted EBITDA(1) 821 996
R ent adjustment 546 538
Depreciation and amortisation (2,287) (2,338)
Impairment of intangible assets - (609)
Impairment of goodwill (26,160) -
Foreign exchange (loss)/gain (881) 230
Share based payment expense (65) (421)
Exceptional items 5 (1,866) (542)
--------------
Operating loss (29,892) (2,146)
-------- --- ------------- --------------
Finance income 6 1,069 1,160
Finance costs 6 (1,664) (1,462)
Net finance costs (595) (302)
--------------------------------------- -------- --- ------------- --------------
Loss before taxation (30,487) (2,448)
Taxation charge (4) (47)
Loss for the period (30,491) (2,495)
--------------------------------------- -------- --- ------------- --------------
Loss per share attributable to the equity
holders of the parent during the period
(expressed in pence per share):
Basic and diluted 7 (24.18) (1.97)
--------------------------------------- -------- --- ------------- --------------
(1) Adjusted EBITDA is calculated as operating loss before other
income, depreciation, amortisation, goodwill impairment, gain or
loss on sale, foreign exchange gain or loss, share based payments
charge and exceptional items.
(2) The income statement is restated to reclassify GBP0.2m of
costs between Operating expenses and Exceptional items, and to
reverse prior deferred tax credit of GBP0.1m booked in the period
to 31 October 2019. (see Note 14).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX
MONTHSED 31 OCTOBER 2020
31 October 31 October
2020 2019
(unaudited) (unaudited)
(restated
(2) )
GBP'000 GBP'000
------------- -------------
Loss for the period (30,491) (2,495)
Other comprehensive expense:
Items that may be reclassified subsequently
to profit or loss
Currency translation differences on
translation of foreign operations 1,135 (236)
Total comprehensive loss for the period (29,356) (2,731)
--------------------------------------------------------------- ------------- -------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note As at 31 October 2020 As at 30 April 2020
(unaudited) (audited)
GBP'000 GBP'000
-------------------------------------------- ------- --------- ---------------------- --------------------
Assets
Non-current assets
Goodwill 8 49,794 76,088
Intangible assets 8 17,656 17,666
Property, plant and equipment 9 1,413 1,578
Right of use assets 9 5,120 5,518
Trade and other receivables 735 755
----------------------------------------------------- --------- ---------------------- --------------------
Total non-current assets 74,718 101,605
----------------------------------------------------- --------- ---------------------- --------------------
Current assets
Trade and other receivables 10 5,589 6,199
Cash and cash equivalents 2,998 5,208
----------------------------------------------------- --------- ---------------------- --------------------
Total current assets 8,587 11,407
----------------------------------------------------- --------- ---------------------- --------------------
Total assets 83,305 113,012
----------------------------------------------------- --------- ---------------------- --------------------
Non-current liabilities
Provisions 1,160 1,160
Lease liabilities 11 5,088 5,471
Total non-current liabilities 6,248 6,631
----------------------------------------------------- --------- ---------------------- --------------------
Current liabilities
Trade and other payables 12 8,960 7,822
Provisions 71 96
Lease liabilities 11 748 776
Borrowings 2,002 2,006
Contract liabilities 13 7,749 8,868
----------------------------------------------------- --------- ---------------------- --------------------
Total current liabilities 19,530 19,568
----------------------------------------------------- --------- ---------------------- --------------------
Total liabilities 25,778 26,199
----------------------------------------------------- --------- ---------------------- --------------------
Capital and reserves attributable to the equity shareholders of
the parent
Share capital 553 553
Share premium 188,839 188,802
Merger reserve 28,035 28,035
Shares to be issued 3,760 3,760
Share-based payment reserve 7,195 7,184
Other reserve (5,450) (5,450)
Currency translation reserve (3,943) (5,078)
Accumulated losses (161,462) (130,993)
----------------------------------------------------- ---------------------- --------------------
Total equity 57,527 86,813
----------------------------------------------------- --------- ---------------------- --------------------
Total equity and liabilities 83,305 113,012
----------------------------------------------------- --------- ---------------------- --------------------
CONSOLIDATED CASH FLOW STATEMENT
31 October 2020 31 October 2020
(unaudited) (unaudited)
(restated)
GBP'000 GBP'000
-------------------------------------------------------------------------- ---- ---------------- ----------------
Cash flows from operating activities
Loss before taxation (30,487) (2,448)
Adjustments for:
Depreciation and amortisation 2,287 2,338
Impairment of goodwill 26,160 -
Impairment of intangible assets - 609
Decrease/(increase) in provision for trade receivables 137 (451)
Finance costs 1 ,664 1,462
Finance income (1,069) (1,160)
Foreign exchange loss/(gain) 881 (230)
Share based payment expense 65 421
Changes in working capital:
Decrease in trade and other receivables 508 978
Increase/(decrease) in trade and other payables and contract liabilities 5 (1,262)
Decrease in provisions (25) -
-------------------------------------------------------------------------- ---- ---------------- ----------------
Cash generated from operations 126 257
Net interest paid(1) (175) (155)
Net tax paid - (49)
Net cash (outflow)/inflow from operating activities ( 49) 53
-------------------------------------------------------------------------------- ---------------- ----------------
Cash flows from investing activities
Software development costs (1,688) (1,178)
Purchases of property, plant and equipment (55) (145)
Net cash (outflow) from investing activities (1,743) (1,323)
-------------------------------------------------------------------------------- ---------------- ----------------
Cash flows from financing activities
Lease payments - payments of principal (411) (363)
Lease payments - payments of interest(1) (172) (169)
Increase in borrowings (4) 24
Net cash (outflow) from financing activities (587) (508)
-------------------------------------------------------------------------------- ---------------- ----------------
Net decrease in cash and cash equivalents (2,379) (1,778)
Cash and cash equivalents at start of the year 5,208 3,810
Exchange adjustments 169 (12)
Cash and cash equivalents at the end of the period 2,998 2,020
-------------------------------------------------------------------------------- ---------------- ----------------
(1) An amount of GBP169,000 in the period to 31 October 2019 was
previously included in Net interest paid.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSED
31 OCTOBER 2020
Six months ended 31 October 2020
Share-based
payment
reserve
----------- ------------- ------------- ------------ ----------------- ------------ ----------------------- -----------
Shares GBP'000
to Currency
Share Share Merger be Other translation Accumulated Total
capital premium reserve issued reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- -----------
Balance as
at 30 April
2020 553 188,802 28,035 3,760 7,184 (5,450) (5,078) (130,993) 86,813
Loss for
the period - - - - - - - (30,491) (30,491)
Other
comprehensive
expense - - - - - - 1,135 - 1,135
Total
comprehensive
expense for
the p eriod - - - - - - 1,135 (30,491) (29,356)
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- -----------
Transaction
with owners
in their
capacity
as owners:
Issue of
treasury
shares to
employees - 37 - - (59) - - 22 -
Share based
payment
expense - - - - 70 - - - 70
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- -----------
Transactions
with owners - 37 - - 11 - - 22 70
Balance as
at 31 October
2020
(unaudited) 553 188,839 28,035 3,760 7,195 (5,450) (3,943) (161,462) 52,527
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHSED
31 OCTOBER 2020
Six months ended 31 October 2019
Share-based
payment
reserve
----------- ------------- ------------- ------------ ----------------- ------------ ----------------------- ----------
Shares GBP'000
to Currency
Share Share Merger be Other translation Accumulated Total
capital premium reserve issued reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- ----------
Balance as
at 30 April
2019 553 188,802 28,035 3,760 6,538 (5,450) (3,963) (104,366) 113,909
Adoption of
IFRS 16 [2] - - - - - - - (625) (625)
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- ----------
Balance as
at 1 May 2019
as restated 553 188,802 28,035 3,760 6,538 (5,450) (3,963) (104,991) 113,284
Loss for the
period - - - - - - - (2,495) (2,495)
Other
comprehensive
expense - - - - - - (236) - (236)
Total
comprehensive
expense for
the period - - - - - - (236) (2,495) (2,731)
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- ----------
Transaction
with owners
in their
capacity
as owners:
Share based
payment
expense - - - - 149 - - - 149
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- ----------
Transactions
with owners - - - - 149 - - - 149
Balance as
at 3 1
October
2019
(unaudited
and restated) 553 188,802 28,035 3,760 6,687 (5,450) (4,199) (107,486) 110,702
--------------- ----------- ------------- ------------- ------------ ------------ ----------------- ------------ ----------------------- ----------
NOTES TO THE INTERIM 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 13(th)
December 2020.
2. Basis of Preparation
These interim consolidated financial statements have been
prepared using accounting policies based on International Financial
Reporting Standards (IFRS and IFRIC Interpretations) issued by the
International Accounting Standards Board ("IASB") 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 2020 Annual Report.
The financial information for the half years ended 31 October 2020
and 31 October 2019 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 statutory Annual Report and Financial
Statements for 2020 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 2020 was
unqualified, did not draw attention to any matters 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 30 April 2020 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 2020 and
will be adopted in the 2021 financial statements. There are deemed
to be no new and amended standards and/or interpretations that will
apply for the first time in the next annual financial statements
that are expected to have a material impact on the Group.
3. Going Concern
In March 2020, the World Health Organisation declared a global
pandemic due to the COVID-19 virus that has spread across the
globe, causing different governments and countries to enforce
restrictions on people movements, a stop to international travel,
and other precautionary measures. This has had a widespread impact
economically and a number of industries have been heavily impacted.
This has resulted in supply chain disruption in certain industries,
uncertainty over cash collection from certain suppliers, and a more
general need to consider whether budgets and targets previously set
are realistic in light of these events.
In carrying out the going concern assessment, the Directors have
considered several scenarios, taking account of the possible
impacts of the pandemic, in relation to revenue forecasts for the
next 12 months. A material downside scenario assumed that current
agreed contractual minimum revenues will be maintained over the
period, there will be no uplift for repeatable (including
transaction volumes)/recurring revenues, and that non-recurrent and
non-repeatable revenue will reduce by 50%. In such a scenario, the
Group has identified cost reductions which could be implemented, to
help mitigate the impact on cash outflows. The forecasts do contain
assumptions over revenue and the directors' ability to execute cost
containment measures, which are reasonable uncertainties given the
current economic environment but are not deemed to be evaluated
above this level.
In reaching their going concern assessment, the Directors have
considered the foreseeable future, a period extending 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, as noted above, the cash and financing
facilities available to the Group. Considering all this analysis,
the Directors are satisfied that, even if this downside scenario
were to occur, the Group has sufficient cash resources over the
period. As such, the interim condensed consolidated financial
information has been prepared on a going concern basis.
4. Segmental Analysis
The Executive Committee has been identified as the Chief
Operating Decision-Maker (CODM), reviewing the Group's internal
reporting on a monthly basis in order to assess performance and
allocate resources.
The CODM reviews financial information for three segments:
Tungsten Network (which includes the e-invoicing and spend
analytics business of Tungsten Network), Tungsten Network Finance
(which includes the supply chain finance business), and Tungsten
Corporate (which includes Tungsten Corporation plc and Tungsten
Corporation Guernsey's overheads and general corporate costs).
Intersegment revenue from management fees and other intersegment
charges are eliminated below.
The CODM analyses the financial performance of the business on
the basis of segment ADJUSTED EBITDA which is an adjusted profit
measure which reflects loss adding back rent adjustment for rent
expense and rent income and before finance income and costs,
taxation, depreciation, amortisation, loss on disposal of assets,
foreign exchange gains and losses, share based payment expense and
exceptional items.
The most directly comparable IFRS measure to segment EBITDA is
operating loss for the period. Management utilises 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.
Six months ended 31 October 2020
Tungsten
Tungsten Network
Network Finance Corporate Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ----------------- ------------------ ----------------- ---------------
Segment revenue 17,999 14 - 18,013
--------- --------- --------- ---------
Adjusted EBITDA(1) 3,332 (38) (2,473) 821
Depreciation and amortisation (1,902) - (385) (2,287)
Impairment of goodwill (26,160) - - (26,160)
Foreign exchange loss (881) (1) 1 (881)
Rent adjustment 171 - 375 546
Share based payment credit/(expense) 45 (6) (104) (65)
Exceptional items (1,281) 8 (593) (1,866)
Finance income 795 - 274 1,069
Finance costs (987) - (677) (1,664)
--------------------------------------- ----------------- ------------------ ----------------- ---------------
Loss before taxation (26,868) (37) (3,582) (30,487)
Taxation charge (4) - - (4)
--------------------------------------- ----------------- ------------------ ----------------- ---------------
Loss for the period (26,872) (37) (3,582) (30,491)
--------------------------------------- ----------------- ------------------ ----------------- ---------------
As at 31 October 2020
Capital expenditure 1,743 - - 1,743
--------------------------------------- ----------------- ------------------ ----------------- ---------------
Total assets 75,936 51 7,318 83,305
--------------------------------------- ----------------- ------------------ ----------------- ---------------
Total liabilities 17,640 272 7,866 25,778
--------------------------------------- ----------------- ------------------ ----------------- ---------------
(1) Adjusted EBITDA is calculated as operating loss adding back
rent adjustment for rental expenses and rental income and before
other income, depreciation, amortisation, goodwill impairment, gain
or loss on sale, foreign exchange gain or loss, share based
payments charge and exceptional items.
Six months ended 31 October 2019
Tungsten Tungsten
Network Network Corporate Total
(restated) Finance (restated) (restated)
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ---------- ------------------ --------------
Segment revenue 17,864 297 - 18,161
--------- --------- --------- ---------
Adjusted EBITDA (2) 3,837 (600) (2,241) 996
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 expense (79) (47) (295) (421)
Exceptional items (164) - (378) (542)
Finance income 767 - 393 1,160
Finance costs (942) - (520) (1,462)
---------------------------------- ------------ ---------- ------------------ --------------
Profit/(loss) before taxation 1,957 (1,328) (3,077) (2,448)
Taxation charge (3) (47) - - (47)
---------------------------------- ------------ ---------- ------------------ --------------
Profit/(loss) for the period 1,910 (1,328) (3,077) (2,495)
---------------------------------- ------------ ---------- ------------------ --------------
As at 30 October 2019
Capital expenditure 1,200 - 123 1,323
---------------------------------- ------------ ---------- ------------------ --------------
Total assets (restated) 125,207 203 7,980 133,390
---------------------------------- ------------ ---------- ------------------ --------------
Total liabilities (restated) 11,334 669 10,685 22,688
---------------------------------- ------------ ---------- ------------------ --------------
(2) Adjusted EBITDA is calculated as operating loss adding back
rent adjustment for rental expenses and rental income and before
other income, depreciation, amortisation, goodwill impairment, gain
or loss on sale, foreign exchange gain or loss, share based
payments charge and exceptional items.
(3) Taxation charge now includes the unwinding of deferred tax
credit initially booked in the period to 31 October 2019. (See note
14)
5. Exceptional items
31 O ctober 3 1 October
2020 2019
(unaudited) (unaudited)
(restated)
GBP'000 GBP'000
------------------------------------ ---- -------------- -------------
Restructuring and redundancy costs 1 ,340 237
Board operating review 4 08 247
Professional advice 118 58
Total exceptional items 1,866 542
------------------------------------------ -------------- -------------
6. Finance income and costs
3 1 October 2020 31 October
(unaudited) 2019
(unaudited)
GBP'000 GBP'000
------------------------------------------------- ---- ----------------- --------------
Finance income
Foreign exchange gains on financing activities 1,069 1,160
------------------------------------------------------- ----------------- --------------
Total finance income 1,069 1,160
------------------------------------------------------- ----------------- --------------
Finance costs
Interest expense and bank charges ( 175) (157)
Interest expense on lease liabilities ( 172) (169)
Foreign exchange losses on financing activities ( 1,317) (1,136)
------------------------------------------------------- ----------------- --------------
Total finance costs ( 1,664) (1,462)
------------------------------------------------------- ----------------- --------------
Net finance costs ( 595) (302)
------------------------------------------------------- ----------------- --------------
7. Earnings per share
Basic and diluted loss per share is calculated by dividing the
loss attributable to the ordinary shareholders by the weighted
average number of ordinary shares in issue during the period.
Loss per share attributable to the equity holders of the parent
during the period:
31 October 2020 31 October 2019
------------------------------------ -----------------------------------
Loss Shares Loss per share Loss Shares Loss per share
GBP'000 '000 P GBP'000 '000 P
------------------- --------- -------- --------------- -------- -------- ---------------
Basic and diluted (30,491) 126,097 (24.18) (2,495) 126,088 (1.97)
------------------- --------- -------- --------------- -------- -------- ---------------
8. Goodwill & Intangibles
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 98,997 11,116 7,194 8,202 3,624 129,133
Additions - - - 5 2,758 2,763
Reclassification - - - 4,117 (4,117) -
Disposal - - - (837) - (837)
Exchange differences 131 5 113 16 (5) 260
------------------------- ----------- --------------- ------------ --------- ----------------------- ---------
Balance at 30 April 2020 99,128 11,121 7,307 11,503 2,260 131,319
Additions - - - 130 1,558 1 ,688
Exchange Differences (134) (5) (115) (20) (7) ( 281)
------------------------- ----------- --------------- ------------ --------- ----------------------- ---------
Balance at 31 October
2020 9 8,994 1 1,116 7 ,192 1 1,613 3 ,811 1 32,726
------------------------- ----------- --------------- ------------ --------- ----------------------- ---------
Accumulated
amortisation and
impairment
Balance at 1 May 2019 - 3,153 6,084 2,166 - 11,403
Charge for the period - 560 834 1,837 - 3,231
Impairment charge 23,040 - - - - 23,040
Disposal - - - (225) - (225)
Exchange differences - 4 104 8 - 116
------------------------- ----------- --------------- ------------ --------- ----------------------- ---------
Balance at 30 April 2020 23,040 3,717 7,022 3,786 - 37,565
Charge for the period - 277 281 1,123 - 1 ,681
Impairment charge 26,160 - - - - 26,160
Exchange Differences - (4) (115) (11) - ( 130)
Balance at 31 October
2020 49,200 3 ,990 7 ,188 4 ,898 - 65,276
------------------------- ----------- --------------- ------------ --------- ----------------------- ---------
As at 30 April 2020 76,088 7,404 285 7,717 2,260 93,754
------------------------- ----------- --------------- ------------ --------- ----------------------- ---------
As at 31 October 2020 49,794 7 ,126 4 6 ,715 3 ,811 67,450
------------------------- ----------- --------------- ------------ --------- ----------------------- ---------
Impairment testing is carried out at cash generating unit (CGU)
level on an annual basis. The following is a summary of the
goodwill allocation for each reporting segment:
As at As at
31 October 2020 30 April 2020
(audited)
GBP'000 GBP'000
------------------ ----------------- ---------------
Tungsten Network 49,794 76,088
Total Goodwill 49,794 76,088
------------------ ----------------- ---------------
Whilst significant operational progress has been made with the
strategic plan during the period, as referenced in our trading
update of 27(th) November, COVID-19 has had a negative impact on
our current trading performance, therefore we have conducted an
impairment review of our goodwill and concluded that a further
impairment was required in the current period. Goodwill at 31(st)
October 2020 was GBP49.8 million (30(th) April 2020: GBP76.1
million).
The recoverable amount of the Tungsten Network CGU which was
hitherto established as GBP101.1 million at 30 April 2020 using a
value-in-use model projecting cash flows for the next five years
together with a terminal value using a growth rate, is now revised
to GBP73.9 million.
We used four scenarios to calculate the value in use ranging
from up to 12% growth in our upside scenario, up to 8% growth in
our base case scenario and included a risk of much smaller growth
(up to 3% and 0.5%) in our downside and severe downside scenarios.
In addition, costs growth has now been set at 2%. All other key
assumptions, relating to post tax discount rates and long terms
growth rates remain unchanged from the year end.
9. Right of use assets, 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
[3] 9,824 (1,205) - - 8,619
Additions - 123 16 6 145
Exchange differences 2 (1) (1) - -
--------------------- --------------------------------- --------------------- -------------- ----------- --------
Balance at 31
October 2019 9,826 2,326 293 756 13,201
Additions - 17 1 37 55
Disposals - - (1) (4) (5)
Exchange differences 27 (1) 5 6 37
--------------------- --------------------------------- --------------------- -------------- ----------- --------
Balance at 30 April
2020 9,853 2,342 298 795 13,288
Additions - - 1 21 22
Exchange differences 2 - (4) (7) (9)
--------------------- --------------------------------- --------------------- -------------- ----------- --------
Balance at 31
October 2020 9,855 2,342 295 809 13,301
--------------------- --------------------------------- --------------------- -------------- ----------- --------
Accumulated
depreciation
Balance at 1 May
2019 - 1,199 183 549 1,931
Impact of IFRS 16 3,459 (434) - - 3,025
Charge for the
period 435 118 29 53 635
Exchange differences (3) (2) (2) - (7)
--------------------- --------------------------------- --------------------- -------------- ----------- --------
Balance at 31
October 2019 3,891 881 210 602 5,584
Charge for the
period 425 77 20 61 583
Disposals - - (1) (3) (4)
Exchange differences 19 - 4 6 29
Balance at 30 April
2020 4,335 958 233 666 6,192
Charge for the
period 421 111 20 54 606
Exchange differences (21) - (4) (5) (30)
Balance at 31
October 2020 4,735 1,069 249 715 6,768
--------------------- --------------------------------- --------------------- -------------- ----------- --------
Net book value
At 30 April 2020 5,518 1,384 65 129 7,096
--------------------- --------------------------------- --------------------- -------------- ----------- --------
At 31 October 2020 5,120 1,273 46 94 6,533
--------------------- --------------------------------- --------------------- -------------- ----------- --------
10. Trade and other receivables
31 October 3 1 October
2020 2019
(unaudited) (audited)
GBP'000 GBP'000
--------------------------------------- ------------- ------------
Trade receivables 6,650 6,221
Less: reclass to contract liabilities (3,038) (2,374)
Less: loss allowance (238) (102)
------------- ------------
Net trade receivables 3,374 3,745
Prepayments 1,440 1,547
VAT Receivables - 123
Contract assets 364 393
Corporate tax receivables 119 104
Other receivables 292 287
--------------------------------------- ------------- ------------
Trade and other receivables 5,589 6,199
--------------------------------------- ------------- ------------
11. Lease liabilities
Total
GBP'000
------------------------------------ ---------
Balance at 1 May 2019 [4] 6,961
Interest charge 169
Payments made on lease liabilities (532)
Balance at 31 October 2019 6,598
Interest charge 162
Payments made on lease liabilities (513)
Balance at 30 April 2020 6,247
Interest charge 172
Payments made on lease liabilities (583)
Balance at 31 October 2020 5,836
---------------------------------------- ---------
Non-current 748
Current 5,088
Balance at 31 October 2020 5,836
---------------------------------------- ---------
12. Trade and other payables
3 1 October 31 October
2020 2019
(unaudited) (audited)
GBP'000 GBP'000
-------------------------------------------- ------------- -----------
Trade creditors 2 ,927 2,255
Accrued expenses 4,553 4,140
Social security and other taxation payable 1,030 976
Other payables 450 451
-------------------------------------------- ------------- -----------
Trade and other payables 8,960 7,822
-------------------------------------------- ------------- -----------
13. Contract liabilities
31 October 31 October
2020 2019
(unaudited) (audited)
GBP'000 GBP'000
----------------------------------------- ------------- -----------
As at 1 May 8 ,868 7,095
Invoiced during the period 2 8,969 41,468
Released to revenue ( 18,325) (37,577)
Amounts invoiced in advance not yet due (11,392) (2,374)
Loss allowance (243) (25)
Exchange differences (128) 281
----------------------------------------- ------------- -----------
Contract liabilities 7,749 8,868
----------------------------------------- ------------- -----------
14. Prior Period (H1, FY20) Adjustments
A deferred tax credit of GBP144,000 was recognised in the Income
Statement for the period to 31 October 2019, as part of the tax
treatment of some historic acquisitions. This credit is being
reversed as the Group should have adopted an alternative accounting
treatment at the time of the acquisition.
A further adjustment of GBP10,000 and another for GBP54,000 are
made for compensated absence accrual and for indirect taxation
respectively. The background and history to all these is fully
discussed in the Group's Annual Report and Accounts 2020 on page
106.
The following table summarises the impact of these prior period
adjustments on the income statement and loss per share.
For the period ended 31 October 2019 Loss for the period Basic and undiluted loss per share
GBP'000 pence
-------------------------------------------------------- -------------------- -----------------------------------
As reported (2,287) (1.81)
Increase for absence accrual ( 10) (0.01)
Increase for indirect taxes ( 54) (0.04)
Increase in tax charge from unwind of deferred tax
credit (14 4 ) (0.11)
As restated (2,495) (1.97)
--------------------------------------------------------- -------------------- -----------------------------------
15. 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
2020 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 interim financial information.
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.
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.
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 2020 is not prepared, in all material respects, in
accordance with the rules of the London Stock Exchange for
companies whose shares are admitted to trading on AIM.
BDO LLP
Chartered Accountants & Registered Auditors, London, United
Kingdom
13 December 2020
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
[1] Lease payments are reclassified from operating activities to
financing activities.
[2] Disclosed on page 81 of the Annual Report and Accounts 2020
where the impact of adopting IFRS 16 on the Group's Statement of
financial position is outlined. It includes a net adjustment of
GBP158,000 to the position initially published at 1 October
2019.
[3] Disclosed on page 96 of the Annual Report & Accounts
2020.
[4] Disclosed on page 101 of the Annual Report & Accounts
2020.
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END
IR FFAESDESSESE
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