viewTungsten Corp PLC

UPDATE - Tungsten Corp revenues rise 19% but losses widen

One-off acquisition costs and investments dented the bottom line

The electronic invoicing and financing group is getting smarter about its challenges, Rick Hurwitz says


Rising full year revenues were insufficient to offset the heavy cost of investment by electronic invoicing specialist Tungsten Corp (LON:TUNG).

One-off costs and investments weighed on the bottom line, but City analysts reckon the results were slightly better than expected.

The electronic invoicing and financing company reported a £27mln group loss, up from an £11mln loss the prior year, despite a 19% increase in revenue to £23mln. On a ‘per share’ basis the loss widened to a 26.34p from 18.6p in the preceding year.

Rick Hurwitz, Tungsten’s chief executive, said the company is becoming smarter about its challenges.

"Our leadership team is focused on establishing Tungsten as an indispensable partner to organisations in assisting them to optimise their accounts payable, procurement and working capital,” he said.

Tungsten’s key performance indicators (KPI) made for more encouraging reading for investors as the total number of invoice buyers on the group’s network increased around 7.7% to 173 from 124 in 2014.

The volume and total value of transactions on the platform both rose as well; each by around 10%.

In terms of outlook, Tungsten says it expects revenues will continue to grow over the course of the current year and newer products Tungsten Early Payment and Tungsten Analytics are expected to see a faster pace of customer adoption.

It also expects a significant increase in the overall size of the Tungsten Network product, as well as improving margins.

Discussions are ongoing, meanwhile, with a global financial institution over the strategic options for the Tungsten Bank unit.

The company highlighted that it has been through a significant period of investment, which incurred costs, but the majority of these initiatives have now been paid for.

“We expected a loss in the period, reflecting our corporate activities, our expansion of the network and our investment in our Tungsten early payment product,” said David Williams, chief financial officer of Tungsten.

Williams said the Tungsten Network continues to underpin its business and supports the offering of value added services, and saw steady growth during the year.

Other parts of the business are early stage but Rick Hurwitz, in a conference call to investment analysts, said “there is an awful lot to work with here”.

The group's expectations of accelerated growth hinge on “our ability to do more with that existing client,” Hurwitz said.

What Hurwitz called the “onboarding of suppliers” has the biggest impact on our results.

“The good news is – when I talk about the changing nature of our relationship – these buyers have an increasing confidence in giving Tungsten a large part, if not all, of their supplier list,” Hurwitz said, which then leads to Tungsten going about the business of enrolling those suppliers.

“We saw good results in that regard last year, and we're expecting an acceleration in that regard this year,” Hurwitz told analysts.

City broker Shore Capital, in a note, said the financial results were slightly better than the company’s earlier pre-close statement indicated.

“The key long term factor in the company’s results for us is the progress with Tungsten Network Finance which is still very small at this initial stage generating revenue of £120k,” said analyst Peter McNally.

“Despite this taking longer to occur than originally expected, it feels as if the financing side of the business is finally beginning to take shape. 

“Considering the opportunity the company has with the with £121 billion of financing that passed through its network last year, execution is key in the years ahead and the company appears to be spending to ensure this happens faster than the slower than expected rate that has been experienced. 

“Considering the somewhat captive audience the company has with its supplier network that is available for financing and the tendency for it to be recurring, we think there is good potential for high returns once the company builds this business.”

Shares in Tungsten tumbled 18.26p from 88p overnight.

Quick facts: Tungsten Corp PLC

Price: 44.4 GBX

Market: AIM
Market Cap: £55.98 m

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