Tungsten : Trading Update

TUNGSTEN CORPORATION PLC

('Tungsten' or the 'Company')

4 June 2018

TRADING UPDATE FOR FINANCIAL YEAR ENDED 30 APRIL 2018

Highlights¹

· Achieved monthly EBITDA² breakeven during H2-FY18

o Operated profitably over January to April 2018 period

o FY18 EBITDA loss narrowed to £4.6 million from £11.8 million in FY17

· Revenue of £33.7 million in FY18, 9% growth on a constant currency basis

· Established lower adjusted operating expenses base of £36.0 million, down from £40.8 million in FY17

· Gross margin of 93.1%, a 30 basis point improvement from 92.8% in FY17

· Adequate working capital, with net cash of £6.4 million at 30 April 2018

· Accelerating Tungsten Network Finance outstanding balances, with daily average of £43.4 million in April 2018, up from £14 million in April 2017

Richard Hurwitz, Chief Executive Officer

'We have brought Tungsten to an inflection point. We have completed the transition away from legacy infrastructure, enabling us to significantly reduce capital expenditure in the new financial year. Our business has operated profitably on an EBITDA basis and our trade financing activities are growing rapidly.

'Our focus now will be to capitalise on the operating leverage that we have created in order to generate positive cash flow and drive returns for our shareholders. Our aim is to achieve this by providing value to existing and new customers through our efficiency-enhancing, digital platform while innovating to deliver new services competitively.'

Trading Update

Revenue

Revenue for FY18 is expected to be £33.7 million. On a constant currency basis this revenue would have been £34.1 million, up 9% year on year (FY17: £31.2 million). Whilst this represented a record revenue year for Tungsten, revenue growth was behind the Company's previous guidance, due primarily to longer sales cycles than expected in H2-FY18.

Tungsten added eight new accounts payable automation customers in FY18. This included the addition of two new multinational customers, one in the media industry and Conagra Brands in the packaged food industry, to which Tungsten will provide its range of accounts payable automation services internationally. Due to signing these two sales towards the end of the financial year, a significant proportion of the revenue will be recognised in FY19, rather than in FY18.

Total transaction volumes were 17.7 million and revenue per transaction was £1.90, each an increase of 4% year-on-year (FY17: 17.1 million and £1.82 respectively).

In April 2018 Tungsten Network Finance achieved daily average outstandings of £43.4 million, growth of 210% from the average of £14.0 million over the same month a year earlier and each performance metric that we monitor reflects improvement.

Gross margin and operating expenses

The Company expects to achieve an FY18 gross margin of 93.1%, a 30 basis point improvement on the FY17 gross margin of 92.8%.

The phased completion of technology projects and tight financial control, are expected to contribute to a reduction in adjusted operating expenses to £36.0 million in the full year, a decrease of 12% year on year. The Company has continued to focus on improving its legacy infrastructure and progressing its transformation programme. The transition of systems and resulting productivity improvements have enabled the Company to reduce the unit cost of invoice processing by over 20%, while increasing the average speed of processing a transaction ninefold, including an improvement at peak demand periods of 40x.

Excluded from EBITDA, we expect FY18 one-off costs of £2.2 million in relation to the transformation programme. These were below our expectations for one-off costs of £3.0 million due to the sublet of an onerous property.

EBITDA

Tungsten's FY18 EBITDA loss is expected to be £4.6 million, a £7.2 million improvement on the prior year loss of £11.8 million. Although revenue growth was behind the Company's previous guidance, due primarily to longer sales cycles than expected in H2-FY18, the improvements in gross margin and adjusted operating expenses resulted in a positive impact on EBITDA.

A critical milestone in the turnaround of Tungsten was reached in the second half of the financial year ended 30 April 2018 ('H2-FY18'). Over the first four months of the calendar year 2018, the Company reported profitably on an EBITDA basis for the first time. The reporting of EBITDA breakeven over this period represents the culmination of a little over two years of remediation during which annual revenue has increased by 46% and annual adjusted operating expenditure decreased by 21%.

The sales pipeline is well developed, although the nature of Tungsten's business is such that the level of conversion and the timing of sales on a monthly basis is unpredictable. While FY19 operating expenses are unlikely to exceed the levels of FY18, the ability to generate positive EBITDA in any month over FY19 will continue to depend on the quantum and timing of sales conversions as well as discretionary investment decisions in areas such as developing new products.

Cash

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.

1 Performance figures are unaudited. Audited results for the financial year ended 30 April 2018 are scheduled for announcement on 23 July 2018.

2 EBITDA loss is defind as operating loss from continuing operations before other income, depreciation, amortisation, share-based payments charge, and exceptional items.

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 supply chain 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 customers access to financing through Tungsten Network Finance.

Tungsten Network processes invoices for 67% of the FTSE 100 and 76% of the Fortune 500. It enables tax compliant e-invoicing in 48 countries, and last year processed transactions worth over £160 billion for organisations such as Alliance Data, 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 faster, easier and smarter.