TUNG.L Regulatory News (TUNG)

Embargoed Release: 07:00hrs Friday 27 November 2020

TUNGSTEN CORPORATION PLC

("Tungsten" or the "Company")

TRADING UPDATE

Tungsten Corporation plc (AIM: TUNG), a leading provider of digital financial management products and software solutions, provides an update on current trading ahead of its interim results release on 14 December 2020.

As stated on 7 September 2020 in the Company's Full Year Results, Tungsten experienced challenging market conditions due to COVID-19 in Q1 FY21, resulting in a transaction volume decline of 8%. The announcement also stated that if transaction volumes remained at a similar percentage decline to that of Q1 levels for the remainder of FY21, revenues and adjusted EBITDA would be impacted. This trend has continued into Q2 FY21 resulting in a transaction volume decline of approximately 7% in H1 FY21. The current expectation is that transaction volumes will remain at lower levels for the remainder of FY21.

In H1 FY21 new business momentum has been positive with Tungsten securing 4 new customer wins however the Company is experiencing a longer sales conversion cycle which is conservatively expected to continue for the remainder of the current financial year. As a consequence of the transaction volumes in H1 FY21 and the continued expectation of lower transaction volumes in H2 FY21, together with a longer sales conversion cycle, the Company expects FY21 revenues to be similar to FY20. We expect to announce in the forthcoming interim results revenues of £18.0m excluding TNF.

Underlying adjusted EBITDA is now expected to be not less than £3.2m, materially lower than previous guidance. Adjusted EBITDA has been 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 were brought forward during H1 FY21 to reduce the Group's cost base, which will help improve the Group's underlying profitability going forward. The actions taken have had a short-term negative impact on cash in H1 FY21 but are expected to deliver annualised savings from FY22 of circa £4m.

As a result of the reduced revenue and adjusted EBITDA the Company's net cash balance at the end of FY21 is anticipated to be similar to the balance as at 31 October 2020 of £1m. This represents cash of £3m less £2m drawn on the RCF. As of today, £2m remains undrawn on the facility which expires in December 2024. This balance includes the impact of current year exceptional costs as well as the cash costs of prior year restructuring activities.

As part of the interim results preparation the Company shall also be reassessing the carrying value of goodwill for any impairment as a result of its revised guidance.

The Company expects the macro economic environment to remain challenging over the coming months but it does anticipate that, with the gradual easing of COVID-19 restrictions, transaction volumes will begin to return to pre-COVID levels during FY22.

Andrew Lemonofides, Tungsten's Chief Executive, commented:

"Tungsten has faced a difficult and unpredictable market in 2020. In spite of these challenges and the decline in transaction volumes, we have won new customer relationships and we expect to deliver broadly similar revenues to FY20. This performance is underpinned by the investments that we have continued to make in our sales and product capabilities, coupled with our operational gearing following our cost base reductions in H1.

It is disappointing that our profitability is going to be materially lower that we expected this year, however the Company remains focused on improving efficiency and converting its pipeline of opportunities to drive growth in sales."

Enquiries

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 £195bn 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 300 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.