TUNG.L Regulatory News (TUNG)

TUNGSTEN CORPORATION PLC 

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

For Immediate Release

24 May 2016

Pre-Close Trading Update

Tungsten Corporation plc (LSE:TUNG), the global e-invoicing, purchase order services, analytics and financing company, today announces the following trading update for the financial year ended 30 April 2016 (FY16).

Unaudited preliminary results

Revenues for the period are expected to be in excess of £26 million, broadly in line with guidance at the time of the Company's Capital Markets Day on 9 February 2016 and representing an increase of at least 12.5% on the prior year. The timing of the completion of new buyer contracts impacted FY16 revenues, the most significant of which closed at the end of April, four months later than previously envisaged. Tungsten's focus on pricing discipline is expected to benefit revenues in the current financial year (FY17).

As expected in previous guidance, Tungsten's EBITDA loss for FY16 is anticipated to be less than £15 million, excluding one-off items, or less than £19 million if one-off items are included.

Unaudited cash balances at 30 April 2016 were £9.1 million, excluding cash in Tungsten Bank. The cash balance is £1.1 million in excess of the Board's expectations and represents an average monthly net cash outflow of £1.1 million during the six months to 30 April 2016.

Tungsten has started FY17 with clear strategic goals developed following the Company's leadership transition in July 2015. The newly enhanced management team is focused on implementing the steps required for the Company to become cash flow positive by the end of FY17 and will provide updated revenue and profit guidance at the time of its final FY16 results announcement on 25 July 2016.

Rick Hurwitz, Chief Executive Officer, commented:

"Tungsten's performance during FY16 demonstrates the Group's encouraging momentum. I am confident we are on track to execute the operational goals we expect to accelerate our achievement of profitable growth. We have improved existing contract pricing, engaged new buyers, reduced our cost base and recruited talented executives. We start the new financial year with a clear strategic plan and a focus on developing deep customer relationships and improved operational performance."

Tungsten Network

Tungsten Network added 11 new buyers during FY16. The new buyers, including Sanofi, Duracell and Ventura Foods, purchased a range of Tungsten Network's accounts payable automation products, including work flow, e-invoicing and associated services. Total buyers as at 30 April 2016 amounted to 175, reflecting a reduction of six buyers arising from the merging of contracts (principally as a result of customer mergers) and three buyers with minimal invoice flow leaving the network. The reductions are not expected to have a material impact on revenue in FY17.

Tungsten completed contract renegotiations with 34 buyers in FY16, agreeing weighted average price increases of 64% on a like-for-like basis. The Company has 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. A further eight buyer contracts were due for renegotiation in FY16 of which we have agreed commercial terms on five at similar price increases. We remain in discussions on the remaining three.

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

We ended FY16 with 203,000 suppliers on Tungsten Network, an increase of 22,000, or 12%, from FY15. We continue to connect growing numbers of suppliers to each other, enhancing the interconnectedness of our customer network.

Tungsten processed 16.1 million invoices in FY16, an increase of 9% from the prior year. E-invoicing volumes grew by 11% to 15.4 million as we continued to reduce the number of paper invoices processed, which declined by 29% to 0.7 million. The value of invoicing over the Network grew by 20% to £123 billion.

Tungsten Network Finance

Over FY16 Tungsten financed invoices for 79 suppliers totalling over £100 million for an average duration of 36 days at an average gross yield of 6.1%. This compared with £32 million for 38 suppliers in FY15. Unaudited Tungsten Network Finance revenues for FY16 were £0.2 million (FY15: £0.1 million).

The Board's belief in the opportunity of creating an attractive supply chain finance offering is unwavering and Prabhat Vira was appointed President of Tungsten Network Finance in April 2016. Prabhat has substantial experience in building financial operations across the world and is leading a transformation of the Group's financing offering, operations and funding.

Funding

Tungsten's cash position at 30 April 2016 was £26.9 million, comprising £17.8 million of cash or cash equivalents held in Tungsten Bank and £9.1 million freely available to the rest of the Group. Tungsten Bank's cash balances are reduced to the extent that it has purchased invoice receivables from Tungsten's suppliers, which at 30 April 2016 totalled £7.3 million. As envisaged when we announced the sale of Tungsten Bank last December, we expect the process to be completed by the end of the first half of FY17. The Group expects to finalise the terms of a credit facility prior to the announcement of its final results in order to provide stand-by facilities to bridge any unexpected delay in the sale of Tungsten Bank.

In the unlikely event that the sale is not completed as scheduled, the Board continues to intend to deregulate Tungsten Bank in order to access the £25 million of capital on its balance sheet.

Final results

Tungsten will announce its final results for the year ended 30 April 2016 on Monday 25 July 2016 when management will host a conference call for investors and analysts 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 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. The network also provides users with real-time spend analysis through the Analytics product and offers access to Early Payment through Tungsten Network Finance, a form of alternative finance for businesses.

Tungsten serves 56% of the Fortune 500 and 67% of the FTSE 100. 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.