TUNG.L Regulatory News (TUNG)

TUNGSTEN CORPORATION PLC

("Tungsten", the "Company" or "Group")

FULL YEAR FINANCIAL REPORT

FOR THE TWELVE MONTHS ENDED 30 APRIL 2016

25 July 2016

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Tungsten Corporation plc (LSE: TUNG), the global e-invoicing, purchase order services, analytics and financing company, today announces its results for the twelve months ended 30 April 2016 ("FY16").

Financial Highlights

· Revenue increased 16% to £26.1 million (FY15: £22.5 million1)

· EBITDA2 loss decreased to £18.7 million, a £6.5 million improvement from prior year (FY15: £25.2 million loss1)

· Statutory loss after tax of £27.9 million (FY15: £27.6 million1), including a £6.8 million impairment following signing of a conditional agreement in December 2015 for the sale of Tungsten Bank

· Net cash and cash equivalents ended at £9.3 million (30 April 2015: £13.1 million), excluding £17.8 million of cash in Tungsten Bank

· Sale of Tungsten Bank expected to close by 31 October 2016 to release cash of approximately £30 million

· Successful placing of 22.9 million shares to raise £17.5 million of new funding in May 2015

· Agreed £10 million revolving credit facility with HSBC should Tungsten Bank sale be unexpectedly delayed

Operational Highlights

· Strengthened board and enhanced executive management team under new CEO Richard Hurwitz

· 34 existing buyers renewed contracts with weighted average price increase of 64%. Four further renewals after the year end at similar increases

· 11 new buyers signed for contract value of at least £1.9 million; 175 total buyers

· 22,000 net new suppliers added to bring total suppliers to 203,000

· 1,000 new Integrated suppliers connected to Tungsten Network, generating aggregate revenue of £1 million in first year of contracts, and a further 24,500 Web Form suppliers added

· Total invoice volumes increased 9% to 16.1 million (FY15: 14.8 million)

· Tungsten Network Finance being restarted to allow for profitable growth of the early payment solution

1 Restatement of prior year revenue reduces it by £0.6m, as discussed at notes 2 and 3 to the accounts.

2 EBITDA is defined as operating loss before other income, depreciation, amortisation, impairments and share-based payments charge.

Outlook

· Revenue of at least £30 million expected in FY17, with upside potential reflecting the variability and phasing of new customer sales and successes of new product and service initiatives

· Operating costs to continue to decline in FY17 through a combination of actions to increase automation, reduce headcount and implement procurement efficiencies

· Committed to achieving monthly EBITDA breakeven during calendar 2017, with precise month dependent on the phasing of new customer and product sales

· Expect FY17 EBITDA loss of between £12 million and £14 million, including expected £1.3 million EBITDA loss in Tungsten Bank prior to sale, a reduction of between £6.7 million and £4.7 million from FY16

· Cash in excess of £20 million expected at 30 April 2017

· Tungsten Network Early Payment financing levels anticipated to double by end of FY17, with material impact on revenues expected in FY18

Richard Hurwitz, Chief Executive Officer, commented:

"We are building momentum in our business through our strategy of focusing on profitable growth and I am encouraged by the progress we have made in implementing significant organisational improvements to elevate Tungsten's performance. Evidence of our progress is displayed in the talent we have attracted, our improved contract pricing, the value-added new buyers who have joined our network, the resizing of costs to match our tangible opportunities, and our strengthened balance sheet. Tungsten Network processes invoices for 70% of the FTSE 100 and 72% of the Fortune 500 and we are committed to helping these and other businesses do business better."

Nick Parker, Non-Executive Chairman, added:

"The year saw a period of significant change as Tungsten's business strategy was realigned under new leadership. The results demonstrate the impetus this executive team has brought, with revenue growth, expense control and cash preservation performing broadly in line with prior guidance. The Company will continue to realise network benefits for customers, ensure people and processes are effective, provide distinctive financing products, and provide adjacent products and services. The Board is confident the Company is well positioned for further sustainable growth."

Analyst Presentation

Richard Hurwitz, Chief Executive Officer, and David Williams, Chief Financial Officer, will today host a conference call and webcast at 9.00am UK time. To access the webcast please click here. The dial-in number for the conference call is +44 (0) 20 3003 2666 / +1 212 999 6659 with the access code 5929655# and a presentation will be available on the Tungsten Network website.

A replay facility will be available until Friday 5 August 2016. The dial-in number for the replay facility is +44 (0) 20 8196 1480 / +1 866 583 1035 with the above access code.

Enquiries

About Tungsten Corporation plc

Tungsten Corporation (LSE: TUNG) aims to be the world's most trusted business transaction network by using data intelligently to strengthen the global supply chain.

Tungsten Network is a secure e-invoicing and purchase order services platform that brings businesses and their suppliers closer together with unique technology that revolutionises invoice processing, maximises efficiency and improves cash flow management. Delivering trusted connections and streamlined transactions, the network also provides users with real-time spend analysis and offers suppliers access to invoice financing through Tungsten Network Finance, a form of alternative finance for businesses.

Tungsten Network processes invoices for 70% of the FTSE 100 and 72% of the Fortune 500. It enables suppliers to submit tax compliant e-invoices in 47 countries, and last year processed transactions worth over $187bn for organisations such as Alliance Data, Aviva, Cargill, Deutsche Lufthansa, General Motors, GlaxoSmithKline, Henkel, IBM, Kellogg's and the US Federal Government.

Trusted, passionate and proven, Tungsten is making the digitisation of global commerce between buyers and suppliers faster, easier and smarter.

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.

Chairman's Statement

Tungsten has special operating assets. We have technology, products, customers and people that are the envy of our peers. We process invoices for over 70% of the FTSE 100 and the Fortune 500. However, our financial performance since Tungsten was admitted to London Stock Exchange's AIM in September 2013 has proved disappointing for investors and a new approach was required in order to realise the Company's significant potential.

We had invested heavily in previous years in expanding Tungsten Network and in building Tungsten Network Finance, including the acquisition of a regulated bank. However, given the rate of cash depletion and the operational performance, the Board recognised the need for a change in approach. The 2016 financial year was therefore a period of realigning our strategy under the leadership of Richard Hurwitz with the aim of pursuing profitable growth in Tungsten Network and a more targeted development of the opportunity in Tungsten Network Finance.

The sale of Tungsten Bank is an important component of the execution of our reshaped strategy. Owning a bank proved to be unnecessary to the achievement of our ambitions, and the costs of its operation and regulatory burden impeded our progress. A sale of Tungsten Bank was agreed in December 2015 and on completion the disposal will help to increase our free cash resources, reduce operating expenditure and remove operational complexity from our business.

Tungsten aims to be the world's most trusted business transaction network by using data intelligently to strengthen the global supply chain. The four strategic objectives that support this goal are: elevating our customer engagement by realising network benefits for them; using end-to-end digital processes to ensure our people and processes are effective; using our network and its data to provide distinctive financing products; and offering our customers valuable adjacent products and services.

The Board believes that the Company is making good headway against these objectives, achieving favourable price increases in renewed contracts to reflect the value we generate, realising cost savings by reducing organisational complexity and removing operational inefficiencies, refocusing the invoice financing business, and developing ancillary customer offerings. Our new focus gives the management team the clarity required to execute the Company's strategy for the benefit of customers and shareholders. This puts Tungsten on a stable footing for sustainable future growth.

Board and Management

I was delighted to accept the role as Chairman of Tungsten at our Annual General Meeting ("AGM") in September 2015. I took over from Arnold Hoevenaars, who steered the Company through its admission to LSE AIM and beyond. Arnold retired from the Board with our thanks. Lincoln Jopp also retired from the Board at our AGM and our thanks also go to him.

Tungsten made a number of other changes to its Board during the course of FY16 to increase its breadth and depth of experience and improve corporate governance. In particular, we were pleased to announce the appointment of new Independent Non-Executive Directors, David Benello and Ian Wheeler, at our AGM. Edi Truell, Tungsten's founder, stepped down from the Board in March 2016. The Board of Tungsten would like to thank Edi for his significant contribution to the creation of Tungsten.

The Board appointed Richard Hurwitz as CEO of Tungsten with effect from 13 July 2015 to lead the strategic change required in the business. Rick has built a talented executive management team around him in order to steer the business through its transformation.

Tungsten operates in markets with significant growth characteristics: back-office automation, digitisation, and alternative financing. We are confident that we have now identified the strategic priorities to take advantage of this market growth and have put in place the organisational structure needed to achieve our targets. We look forward to a year of further progress and success.

Annual Report & Accounts

Tungsten's Annual Report & Accounts for the twelve months ended 30 April 2016 will be uploaded to the Company's investor relations website later today.

The Company's investor relations website address is www.tungsten-network.com/us/about/investor-relations.

Annual General Meeting

The Annual General Meeting of the Company will be held on 16 September 2016 at 2.00pm UK time at the offices of Ashurst LLP, Broadwalk House, 5 Appold Street, London EC2A 2HA.

Nick Parker

Chairman

Chief Executive Officer's Review

Strategic Review

The 2016 financial year has been a year of encouraging progress where we demonstrated momentum in the achievement of our revised aims. I was appointed CEO in July 2015, so these results represent a little over nine months of my stewardship. My first act on becoming CEO was to undertake an in-depth analysis of the business; what I found both excited and troubled me.

Tungsten is a global business with a loyal blue-chip customer base and enormous embedded value. Through its predecessor firm, Tungsten pioneered e-invoicing and remains at the vanguard of digitising accounts payable processes. But I also found structural deficiencies and a pressing need for a clearer strategy to produce profitable growth by leveraging the strengths of our core business. That strategic realignment is now in place and so is a talented team of committed individuals that is executing our plans with confidence and achieving notable early successes.

It was clear that the Company suffered from skills gaps in certain key areas. To close these gaps, we have made external appointments of Brian Proffitt as Chief Technology Officer, Guy Miller as Head of Corporate Development, Connie O'Brien as Chief Marketing Officer, and Prabhat Vira as President of Tungsten Network Finance. We have also undertaken internal promotions, including the appointment of Kevin Wilbur as Head of AP Automation.

In December 2015, I set out four areas of strategic priority to achieve profitable growth:

· Focussing on our core business to provide efficiencies and further benefits for our customers;

· Improving operational performance by deploying end-to-end digital tools to ensure our people and processes provide products and services to our customers effectively;

· Further leveraging our network and its data to deliver distinctive financial products for our customers to support their working capital needs; and

· Enhancing the value of the Tungsten Network by providing value-added adjacent products and services to increase operational efficiencies across the global supply chain.

I am confident we now have the right executive management team in place with shared and targeted objectives, performance measures and incentive structures for the Company to make substantial further progress in FY17.

Focus on our core

Tungsten Network is growing. Revenues for the year grew 16%, with total invoice volumes increasing 9% to 16.1 million. By value, total invoices increased 16% to £140 billion. Some 34 of our e-invoicing buyer customer contracts were renewed at a weighted average price increase of 64%, demonstrating that customers recognise the value of our offering. Since the end of our financial year we have renewed four further buyer customer contracts at similar price increases. We added 11 new buyers to Tungsten Network, including Duracell and Sanofi. The global agreement with Sanofi was signed at the end of FY16 and will therefore contribute to revenue in FY17. Each buyer brings their own supply chain to add to our network, and we are working more effectively with new and current buyers to sign up these suppliers. 22,000 net new suppliers were added over the year. This is the virtuous circle of the Tungsten Network: buyers bring suppliers who want to connect with other buyers.

We want to increase the rate of new business sales within Tungsten Network. Our pipeline is strong and continues to grow as we refine and strengthen our customer engagement strategy and increase our portfolio of products and services. We have revised our sales strategy to leverage more effectively our strong Tungsten Network connections and Tungsten Network Workflow customers. We have also developed partnerships with third parties, and won our first two buyer customers through PNC Bank which distributes our e-invoicing platform in the US. We are exploring ways to expand further in the near future our partnership strategy with PNC and others.

Notably, we have established a Digital Command Centre to connect more frequently and materially with our 203,000 suppliers under the direction of our newly appointed Chief Marketing Officer. Maintaining a regular dialogue with our network of suppliers ensures they remain active users as we engage them on the issues important to their commercial success, serving to strengthen the network of buyers and suppliers that underpins our growth strategy. Our Digital Command Centre is deploying advanced digital marketing capabilities and a host of leading-edge tools to increase the presence of Tungsten Network in internet search and traffic.

Improved operational performance

Tungsten seeks to grow profitably. Our history is one of a business where overheads have grown in line with revenues and we therefore needed to increase efficiency and leverage costs, while maintaining product and service standards. We have identified and started to effect the changes required in order to simplify and rationalise the business: sizing costs to match the tangible opportunity, removing organisational inefficiencies and maximising the use of automation tools.

Underpinning operational improvements is a redesign of the architecture of our core systems. This will be an incremental process to decouple core system components and will result in greater stability and flexibility of our systems. This project is well underway and is expected to be completed over FY17.

These initiatives included:

· A reorganisation of customer relationship management resources designed to consolidate all onboarding activities into separate, dedicated buyer or supplier teams;

· The first phase of a re-engineering of the technology platform to deliver a simplified infrastructure that will meet future capacity requirements and deliver efficiency benefits;

· Increased use of digital marketing to improve the identification and conversion of new business leads and existing customer opportunities into product or service sales;

· A restructuring of our finance team, including implementing new enterprise resource planning software that allows us to use a wider range of accounts payable automation tools and switch to a shared services environment; and,

· The introduction of a swathe of upgraded procurement and cost policies, processes and disciplines to allow more effective management of the Group's cost base.

Collectively, the initial impact of these measures is demonstrated in the narrowing of our EBITDA loss by £6.5 million to £18.7 million (FY15: £25.2 million1).

As we look to the year ahead, we have identified the initiatives to achieve monthly EBITDA breakeven by the end of FY17, and we will continue to manage our cost base while making the necessary investments in technology, products, digital marketing and operational improvements. However, we will not surrender future growth for the sake of reaching monthly EBITDA breakeven by the end of our financial year in April. We will be prepared to achieve this landmark later in calendar 2017 if we believe to do so is in the best interests of sustaining long term profitable growth and the creation of shareholder value.

Distinctive supply chain financing products

Tungsten Network Finance, our invoice financing business, remains a cornerstone of our strategy. We will pursue this without Tungsten Bank as we determined that operating a regulated deposit-taking financial institution is incompatible with the pursuit of profitable growth and not needed to successfully pursue our invoice financing opportunity. The sale of Tungsten Bank is expected to close by the end of H1-FY17. This will release substantial cash resources of approximately £30 million to enable us to invest in our core business as well as reduce our cost base and enhance profitability and cash flow.

Tungsten financed over £100 million of invoices in FY16 for an average duration of 34 days at an average gross yield of 6.3%. However, the revenue generated from this activity was less than £200,000, and the number of suppliers using the product was limited.

In April 2016, we welcomed Prabhat Vira to Tungsten to lead our efforts in restarting Tungsten Network Finance to scale up the level and profitability of financing. Prabhat has previously held senior positions in banking businesses across the world and at Tungsten has already started to revise our invoice finance offering to widen the number of suppliers that can take advantage of it and make it more flexible and appropriate to our customers' needs.

Following Prabhat's arrival we have commenced the execution of a revised strategy which includes reaffirming and expanding our funding arrangement with Insight Investment, redesigning our product to better meet market needs, segmenting our supplier customers, improving our pricing model, enhancing the Tungsten Network portal, streamlining the on-boarding process, investing in supplier sales and relationship activities and improving the effectiveness of the back-office technology.

We expect the changes to give us the capability to increase the volume of invoices financed and the income Tungsten that is able to earn from the activity. However, we need to complete the execution of the improvements we have identified to capture an increased invoice finance opportunity. As a result, we anticipate a steady increase in financing volumes in FY17, with a more material impact expected from FY18.

Adjacent products and services

Tungsten and its predecessor companies have been at the forefront of accounts payable automation for over 15 years. As a result, 175 of the world's most sophisticated buying organisations connect with 203,000 of their global suppliers over the Tungsten Network. We have identified a series of opportunities to leverage this global connectivity in order to provide our customers with highly relevant adjacent products and services.

The range of opportunities currently include foreign currency translation services, e-invoicing for suppliers in China, and cross-border recovery of value-added taxes on goods and services. Each of these initiatives is currently at a different stage of development, ranging from design to trial. We are pursuing each opportunity with partners, to minimise setup and ongoing costs, with the potential targeted benefit being a share of revenues generated. We expect the list of opportunities to fluctuate over time as some are launched and some are terminated. We are anticipating only marginal revenues from adjacent products and services in FY17, with more material contributions targeted from FY18.

Operational Review

Tungsten Network

Tungsten Network continued to grow in the period, both through the addition of new buyers and their suppliers to the network, and through creating additional connections between existing buyers and suppliers.

Eleven new buyers contracted to join Tungsten Network in FY16. Total buyers as at 30 April 2016 amounted to 175, of which 124 take e-invoicing and other associated solutions, and 51 take Tungsten Network Workflow services. Expanding the solutions that buyers take is a development focus for FY17.

The new e-invoicing buyers each agreed three- or four-year deals for total minimum fees over the aggregate contract periods of £1.2 million. This excludes revenues generated from their suppliers, which are expected to contribute from H2-FY17. The new Tungsten Network Workflow buyers each agreed deals with total minimum fees over the aggregate contract periods of £0.7 million.

The number of buyers reduced by nine during FY16. This figure includes three buyers with minimal invoice flow leaving the network as part of Tungsten's strategy to focus on accounts with growth potential. Six further buyer contracts were merged, three as a result of customer mergers and three through the replacement of local contracts with global agreements. The buyer reductions are not expected to have a material impact on revenue in FY17.

Buyer revenues represent 39% of total Tungsten Network revenue. Contracts with 42 buyers that take the e-invoicing service were due for renewal in FY16. A key focus of the business during the year was to work with these buyers as part of contract discussions to demonstrate the value Tungsten Network delivers. Tungsten completed contract renegotiations with 34 of these buyers, agreeing weighted average price increases of 64% on a like-for-like basis which applies to approximately 30% of total invoice volumes. We have also secured buyer commitments to acquire additional products and widen the scope of our relationships, and we expect to see the financial benefit of these initiatives in FY17.

New contracts have been agreed with four of the remaining eight buyers after the year end at similar rates of price increase with discussions nearing conclusion with the remaining four buyers.

Due to legacy contractual restrictions we were unable to renegotiate pricing with an additional 10 buyers, who had their current contracts extended during the year. We are in discussions with each of these to agree new terms when the extended contracts expire.

As part of the review of our business we have segmented our supplier customers into four categories, reflecting the products they use and the associated sales channel. These are: Corporate suppliers; Integrated Solution suppliers; Web Form suppliers, and Non Electronic suppliers. This segmentation has allowed us to identify targeted pricing and development opportunities.

A total of 1,000 new Integrated and 24,500 new Web Form suppliers were added to the network during the period. Around 3,500 supplier accounts were closed, the majority of which had stopped trading with our buyer customers. The net impact of these changes was that the total number of suppliers increased 12% to 203,000.

We continue to connect growing numbers of customers to each other, enhancing the interconnectedness of our network. Through our newly created Digital Command Centre we will continue to segment our customer base to actively engage with them.

Growing the number of connected suppliers remains a key factor in the development of the business. This involves working closely with our buyer customers to help them identify where they can further benefit from digitising their accounts payable processes and then supporting them in the change management required to deliver this. Many of our buyer customers want to grow in this way with our support, with the challenge always being the timing of delivering this growth.

The first phase of a restructuring of the operations of Tungsten Network was completed in FY16. This included: the reorganisation of resources into separate teams to focus on the implementation of buyer customers; the sale, implementation and support of supplier customers; and the technical operations of Tungsten Network. The restructuring allows for greater accountability and focus across these teams. The second phase of the restructuring, to be completed over FY17, will be to introduce greater process automation and standardisation across these teams in order to increase their efficiency.

Tungsten Network Finance

Revenue from Tungsten Network Early Payment was £194,000 (FY15: £120,000). This comprised £14,000 of income from Tungsten Network Finance and £180,000 of income from Tungsten Bank.

By the end of FY16, 361 suppliers had registered for Tungsten Network Early Payment (FY15: 188). A total of £148.5 million of invoices were paid through supplier accounts (FY15: £41.0 million), of which Tungsten financed £102.7 million (FY15: £32.0 million). The average duration of financed invoices was 34 days (FY15: 33 days) and the average gross yield achieved was 6.3% (FY15: 5.3%).

Shortly prior to the end of the period, in April 2016, Prabhat Vira was appointed to lead the restructuring of Tungsten Network Finance and he has already made strong progress.

Tungsten Bank

Following a strategic review, we took the decision to sell Tungsten Bank. The Board had determined that the benefits of owning a regulated firm like Tungsten Bank were outweighed by the fixed costs of operating it, making the retail funding it might provide for Tungsten Network Early Payment relatively expensive compared with the Group's alternative funding arrangement with Insight Investment. A sale agreement was announced in December 2015. The divestment is progressing to plan and the acquirer is expected to make its formal change of control application to the relevant regulatory authorities shortly.

Following the sale, Tungsten will receive approximately £30 million in cash. While the sale is expected to complete by the end of H1-FY17, in the event of unexpected delay we have secured a £10 million revolving credit facility with HSBC to fund any potential working capital shortfall.

The divestment of Tungsten Bank is expected to produce a net reduction in run-rate costs of £2 million per annum. In FY16, Tungsten Bank's operating expenses amounted to £2.8 million.

Tungsten Network Analytics

Despite positive feedback from our buyer customers, the Tungsten Network Analytics product remains in development. Pilot users have continued to react favourably throughout FY16 and we remain confident that the core tool, offering access to real-time spend data, can provide our customers with critical information to help them make better buying decisions. We remain in discussions with several buyer customers who are interested in buying the tool.

In order to stimulate demand, early in FY17 we will launch a freemium, or limited feature, version of our Tungsten Network Analytics tool to all buyer customers. This will give them access to certain basic data analysis for free, with a paid-for upgrade available for more advanced services.

We are also using the capabilities that our analytics tool provides us in other areas of product development. For example, our value-added tax reclaim product is built on the Tungsten Network Analytics platform. In addition, as part of the development of services we offer to our supplier customers, we will launch a form of Tungsten Network Analytics geared to assist suppliers to make optimal decisions informed by market level data.

FY17 Priorities

FY17 is a year for delivery. This includes the development of opportunities to grow with our existing customers and attracting new customers as the automation of accounts payable increases.

Equally as important is the capture of benefits from the change underway across the business to achieve the operational excellence we are targeting to provide outstanding products and services to our customers in an efficient manner.

We expect to see benefits from our work to clarify our organisational culture and principles, and invest in our people. Each member of staff is clear how they contribute to ensuring smarter, safer connections for our customers through a cross-border compliant, many-to-many network by providing leading global e-invoicing, purchase order, analytics and financing services.

We have an executive management team in place to achieve our strategic objectives, and outstanding talent across the business to support them. Our immediate aims are to be profitable on a monthly EBITDA basis and to grow our revenues to at least £30 million in FY17.

We have identified the initiatives to achieve monthly EBITDA breakeven by the end of FY17, and we will continue to manage our cost base while making the necessary investments in technology, products, digital marketing and operational improvements. However, we will not surrender future growth for the sake of reaching monthly EBITDA breakeven by the end of our financial year in April. We will be prepared to achieve this landmark later in calendar 2017 if we believe to do so is in the best interests of sustaining long-term profitable growth and the creation of shareholder value.

Following the sale of Tungsten Bank, we expect free cash resources to be increased by approximately £30 million.

We are confident that we have the right strategy in place to develop the business to achieve profitable growth and a successful future.

Outlook

Subsequent to the end of our financial year, in June 2016 the UK electorate voted to leave the European Union. This decision commences a process expected to take a minimum of two years to complete. The outcome of the process as regards the structure of the UK's trade relationships without European Union membership is unknown. There will be uncertainty over this period and the role that Tungsten Network plays in supporting businesses to navigate international trade has never been more important. Over half of Tungsten's revenues are denominated in currencies other than sterling. We expect the effect of changes in the value of sterling on our non-sterling denominated operating expenses to offset broadly any currency-related movements in reported revenues.

We provide updated guidance on our expectations for trading as follows:

· Revenue of at least £30 million expected in FY17, with upside potential reflecting the variability and phasing of new customer sales and success of new product and service initiatives

· Operating costs to continue to decline in FY17 through a combination of actions to increase automation, reduce headcount and implement procurement efficiencies

· On track to achieve monthly EBITDA breakeven in 2017, with the precise month dependent on the phasing of new customer and product sales

· Expect FY17 EBITDA loss of between £12 million and £14 million, including expected £1.3 million EBITDA loss in Tungsten Bank prior to sale, a reduction of between £6.7 million and £4.7 million from FY16

· Cash in excess of £20 million expected at 30 April 2017

· Tungsten Network Early Payment financing levels anticipated to double by end of FY17, with material impact on revenues expected in FY18

Richard Hurwitz

Chief Executive

Chief Financial Officer's Review

Group Overview

After redefining our strategic objectives and putting in place the plans to achieve them, Tungsten made demonstrable progress in FY16 towards achieving its near-term target of monthly EBITDA breakeven.

A restructuring of Tungsten's finance and planning teams has provided the data and analysis that the business needs to put it on a path toward achieving profitable growth. This contributed to the standardisation of buyer pricing, serving to underpin average price increases of 64% across the 34 buyer customers that renewed contracts in FY16.

It has also helped to implement the cost disciplines required to reduce adjusted operating expenses (operating expenses excluding depreciation and amortisation, impairment and share based payment expense) from £47.8 million in FY15 to £44.6 million in FY16.

A sale of Tungsten Bank was agreed in December 2015. On completion the disposal will help to reduce our operating expenditure by approximately £2.0 million per annum, being a £3.0 million gross reduction of Tungsten Bank's operating expenses offset by approximately £1.0 million of additional costs to provide our financing products through Tungsten Network Finance.

Group revenue was £26.1 million (FY15: £22.5 million1), representing an increase of 16%.

Revenue from buyers grew 17.3% to £10.1 million (FY15: £8.6 million1), reflecting price and volume increases of £2.0 million offset by a fall in setup and other one-off fees of £0.5 million. Revenue from suppliers grew 15% to £15.8 million (FY15: £13.8 million), reflecting a net increase of 22,000 Integrated and Web Form supplier customers and a change in the structure of supplier pricing.

Revenue from Tungsten Network Finance, including Tungsten Bank, was £0.2 million (FY15: £0.1 million).

Group EBITDA loss was £18.7 million (FY15: £25.2 million1), reflecting a decrease in adjusted operating expenses by £3.2 million to £44.6 million (FY15: £47.8 million). There has been significant focus across the business on cost control, resulting in a reduction in one-off costs and in particular professional fees associated with the setup of Tungsten Network Early Payment, which totalled £6.6 million in FY15, cost and procurement savings of £1.9 million, and decreased bad debt expense of £0.7 million. These were offset by an increase in staff costs of £2.8 million, reflecting the annualisation of new employee hires over FY15 and the appointment of additional senior executives to the business, increased systems costs of £2.0 million being primarily the expense of repurposing operations, and marketing costs of £0.6 million.

Group EBITDA loss included £4.4 million of one-off costs which are not expected to recur (FY15: £11.3 million). This included £0.5 million of costs related to operational restructuring, and £3.2 million of professional fees, primarily legal and regulatory fees associated with Tungsten Network Finance.

The Group loss before tax was £28.6 million (FY15: £27.9 million1). This includes depreciation and amortisation of £2.5 million (FY15: £2.3 million), impairment in the carrying value of the investment in Tungsten Bank of £6.8 million (FY15: Nil), and £0.5 million of share based expenses (FY15: £0.2 million). It also includes other income of £0.3 million following the settlement in cash of deferred consideration owed on the acquisition of Image Integration Systems, Inc. which owned the DocuSphere business.

The Group loss after tax was £27.9 million (FY15: £27.6 million1) reflecting a tax credit of £0.7 million (FY15: £0.3 million), principally relating to non-cash movements on the unwinding of deferred tax recognised on acquired intangible assets. The Group has an unrecognised deferred tax asset of approximately £11.2 million that is available for offset against future tax expenses in the Companies in which losses arise.

Segmental Performance

Tungsten Network

Revenue from Tungsten Network was £25.9 million (FY15: £22.4 million1), growth of 16%. Tungsten Network revenue can be split as follows:

Buyers

· Revenue from 175 buyer customers of £10.1 million (FY15: £8.6 million1), including £7.4 million from e-invoicing buyers (FY15: £7.2 million1) and £2.7 million from buyers that solely take the Tungsten Network Workflow product (FY15: £1.4 million);

· Buyer setup and other one-off fees decreased by £1.1 million to £0.8 million (FY15: £1.9 million) reflecting the significant setup fees from buyers such as GE and Siemens that were recognised in the prior period;

· The impact on FY16 revenue of contractual price increases agreed with current buyers in the current period was £0.4 million; and,

· Revenue from Tungsten Network Analytics in the period was £33,000 (FY15: nil).

Suppliers

· Revenue of £15.8 million (FY15: £13.1 million), split 80% Integrated suppliers and 20% Web Form suppliers (FY15: split of 86%/14%).

Other revenue was negligible in FY16 (FY15: £0.7 million).

Tungsten Network adjusted operating expenses were £36.1 million (FY15: £28.3 million). Tungsten Network EBITDA loss for the period was £5.8 million (FY15: £5.7 million).

Tungsten Network Finance

Tungsten Network Finance includes the origination and operations of Tungsten's financing activities, excluding Tungsten Bank. Revenue from Tungsten Network Finance was £14,000 in FY16 (FY15: nil).

The revenue presented for Tungsten Network Finance is shown net of the share of Tungsten Network Early Payment fees due under the arrangement with Insight Investment. Total Tungsten Network Early Payment fees in FY16 were £611,000 (FY15: £153,000). These were split as follows:

Tungsten Network Finance; £14,000 (FY15: nil)

Insight Investment; £417,000 (FY15: £33,000)

Tungsten Bank; £180,000 (FY15: £120,000)

Tungsten Network Finance adjusted operating expenses were £3.8 million (FY15: £10.6 million). The decrease primarily reflects the reduction of one-off setup costs.

Tungsten Bank

Tungsten Bank revenue in FY16 totalled £180,000 (FY15: £120,000).

Tungsten Bank's adjusted operating expenses were £2.8 million (FY15: £2.3million). The increase primarily reflects increased compliance costs.

Corporate

The Corporate EBITDA loss was £6.6 million (FY15: £6.8 million). Tungsten continues to look for opportunities to reduce its corporate costs.

Cash Flow

The cash outflow from operating activities was £21.6 million (FY15: £31.2 million1), compared to EBITDA of £18.7 million (FY15: £25.2 million1).

Trade and other receivables grew £0.9 million from 30 April 2015. The increase was primarily a result of operational issues with the introduction of a new credit control system. Process improvements made over H2-FY16 did not have the expected impact on debtor balances and subsequent to the year-end personnel changes were made to the credit control team which the Board expects to have an impact by the end of H1-FY17.

Trade and other payables decreased by £0.7 million from 30 April 2015, primarily reflecting a decrease in accruals for goods and services provided but not invoiced at the year-end.

Tungsten Network Early Payment invoice receivables held by the Group increased from £6.4 million at 30 April 2015 to £7.3 million, resulting in a cash outflow of £0.9 million.

There was a cash inflow from the equity fundraising in May 2015 of £16.7 million, net of fees.

Liquidity and Going Concern

Cash and cash equivalents were £27.0 million at the end of FY16 (FY15: £32.6 million), an outflow of £5.6 million. Excluding the cash held by Tungsten Bank of £17.8 million (FY15: £19.5 million), Tungsten had cash available to the Group of £9.3 million (FY15: £13.1 million).

The Group expects to complete the sale of Tungsten Bank by the end of H1-FY17. On completion, the Group will receive the cash on hand and invoice receivables (respectively £17.8 million and £7.3 million as at 30 April 2016) and a goodwill payment of approximately £4.0 million.

Subsequent to the end of the financial year, in July 2016 the Group agreed a revolving capital facility of £10 million with its principal bank, HSBC. The facility would be utilised to contribute to the Company's working capital in the event that the sale of Tungsten Bank is not completed as expected.

Loss Per Share

The basic and diluted loss per share was 22.52p (FY15: 26.92p loss per share1). On an adjusted basis excluding share-based payments, other income, impairments and acquisition-related amortisation, basic and diluted loss per share was 16.85p compared to 16.73p in FY15.

Post Balance Sheet Event - UK Referendum on European Union Membership

On 23 June 2016 the UK electorate voted to leave the European Union. This decision commences a process that is expected to take a minimum of two years to complete. The outcome of the process is unknown as regards the structure of the UK's trade relationships without European Union membership. There will be a resulting period of uncertainty for the UK economy, with increased volatility expected in financial markets. This event does not impact the fair value of assets and liabilities reported at the balance sheet date of 30 April 2016.

David Williams

Chief Financial Officer

Consolidated income statement

Consolidated statement of comprehensive income

Items in the statement above are disclosed net of tax.

Consolidated statement of financial position

Registered number: 07934335

Consolidated statement of changes in equity

1 Agreed to Consolidated statement of comprehensive Income.

Consolidated statement of cash flows

Cash and cash equivalents includes cash held across the entities within Tungsten Group in addition to cash held by Tungsten Bank which has been reclassified as Assets Held for Sale (Note 15).

Accounting Policies

1. Basis of preparation

The preliminary announcement for the year ended 30 April 2016 was approved by the Board of Directors on 22 July 2016. The financial information set out above does not constitute the Group's statutory accounts for the year ended 30 April 2016 but is derived from those accounts.

The Group's results have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU.

2. Prior Period Adjustment

The Group provides services to its buyer customers pursuant to contracts that are typically three years in length. Where a buyer is out of contract at a year end and negotiations for a new contract are ongoing the Group will accrue the revenue up to the year end on the same terms as the expired contract. This accrued revenue is then unwound in the subsequent year as a new contract is agreed and the accrued amounts are invoiced.

Following significant change to people and control processes in the Group's finance team £0.6 million of accrued revenue from FY14 has been identified as not having been unwound in FY15. In order to aid comparability of revenue and profitability between FY15 and FY16, revenue in the comparative year has been reduced by £0.6 million. Accordingly, the EBITDA loss, the retained loss for the year and equity have been reduced by £0.6 million, with a consequential impact on earnings per share.

3. Segment report

Management have 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 is the chief operating decision maker (CODM).

During the year the operations and management of Tungsten Network Finance and Tungsten Bank were separated. Each now have clearly separate management teams and decision making bodies. As a result, Tungsten Bank is shown as a separate segment in these accounts.

The Board of Directors reviews financial information for four 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), Tungsten Bank and Corporate (which includes overheads and general corporate costs). Intersegment revenue from management fees is eliminated below.

Year ended 30 April 2016

1 EBITDA is calculated as earnings before other income, interest, tax, depreciation and amortisation.

Year ended 30 April 2015 (restated)

4. Intangible assets

Year ended 30 April 2016

Tungsten Network

The Group has estimated the recoverable amount of the Tungsten Network CGU using a value-in-use model by projecting cash flows for the next five years together with a terminal value using a growth rate. The five-year plans used in the impairment models are based on Board approved budgets and management's past experience and future expectations of performance. The cash flow projections are based on the following key assumptions:

· Revenue growth from buyers and suppliers using the Tungsten Network, including Tungsten Workflow and Tungsten Analytics at a compound annual growth rate of 15%

· Pre-tax discount rate of 14.4% (2015: 9.7%), being based on the Group's weighted average cost of capital (WACC)

· Growth rate used in the annuity of 2.0% (2015: 2.0%). This does not exceed the long-term expected economic average growth of the territories in which the Group operates in.

Based on the above assumptions, Tungsten Network exceeded the carrying value of the CGU by £21.3 million

(2015: £143.7 million). Had the 2015 pre-tax discount rate of 9.7% been applied then the carrying value would have exceeded the CGU by £131.5 million. The recoverable amount of the Tungsten Network CGU was particularly sensitive to changes in the compound annual revenue growth rate. Assuming that there is a reduction in the compound annual growth rate to 13.1% the recoverable amount would equal the carrying value of the CGU.

Tungsten Bank

The Group has estimated the recoverable amount of the Tungsten Bank CGU using a fair value less costs to sell methodology. The recoverable amount of the Tungsten Bank CGU has been calculated based on management's best estimate of consideration receivable for the proposed sale of Tungsten Bank less directly attributable costs of sale. Accordingly, the Group has recognised an impairment of £6.8 million in the value of Tungsten Bank.

5. Property, plant and equipment

Year ended 30 April 2016