Tungsten Corporation plc
Annual report and financial statements 2018
2 01 8
CREATING THE WORLD’S
MOST TRUSTED BUSINESS
TRANSACTION NETWORK
STRATEGIC REPORT
INSIDE THIS
REPORT
Strategic report
Spotlight on 2018
Our business model
Chairman's statement
The Tungsten Network
Our solutions
The top 5 causes of friction
Chief Executive’s review
Our talented people
Chief Financial Officer’s review
Key performance indicators
Risk management
Governance
Introduction to governance
Board of Directors
Leadership team
Composition and independence
of the Board
Audit Committee report
Nomination and Remuneration
Committee report
Directors’ remuneration report
Directors’ report
Statement of Directors responsibilities
Financial statements
Independent auditors’ report
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
Notes to the consolidated
financial statements
Parent Company balance sheet
Parent Company statement
of changes in equity
Parent Company statement
of cash flows
Notes to the Parent Company
financial statements
Shareholder information
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12
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92
FINANCIAL HIGHLIGHTS
Group revenue
£33.7m
2018
2017
£m
Group EBITDA1 loss
+8%
33.7
31.3
£4.6m
4.6
2018
20172
Statutory loss for the year2
£m
Cash
£11.9m
2018
2017
-5%
11.9
12.5
£6.4m
6.4
2018
2017
£m
-61%
11.8
£m
-63%
17.5
KEY PERFORMANCE METRICS
• 0.6 million transactions added to increase total volume to
17.7 million (FY17: 17.1 million)
• Average revenue per invoice increased from £1.82 to £1.90
• Adjusted operating expenses3 reduced by 12% to £36.0 million
•
(FY17: £40.8 million)
In April 2018, Tungsten Network Finance average outstandings
of £43.4 million (April 2017: £14.0 million)
OPERATIONAL HIGHLIGHTS
• Reported monthly Group EBITDA breakeven over Jan-Apr 2018;
Tungsten Network FY18 EBITDA of £2.3 million
• 8 new AP customers, 35 contracts renewed at mean 38% rate
rise; launch of e-billing to target AR customers
• Transitioned to new technology platform; capex savings
of £3.5 million, annual cost savings of £0.9 million
1 EBITDA excludes other income, interest, tax, depreciation, amortisation, foreign exchange gain
or loss, discontinued operations, share-based payments charges and exceptional items.
2 Restated – please refer to Note 2.
3 Adjusted operating expenses excludes cost of sales, other income, interest, tax, depreciation,
amortisation, foreign exchange gain or loss, discontinued operations, share-based payments
charges and exceptional items.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 TUNGSTEN
NETWORK
BY NUMBERS 1 8
18 years of connecting companies to enable
tax-compliant e-invoicing
Tungsten Network is a
business transaction platform
that removes friction from the
global supply chain.
3 0 0 K
300k members of Tungsten Network
2 5%
25% reduction in accounts receivable costs
for customers
1
£ 1 64
BN
£164bn transacted in FY18
4 8
48 tax and regulatory compliant countries
6 0%
60% reduction in calls chasing payment
status for customers
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 2
ENHANCED CUSTOMER
PROPOSITION
IMPROVED OPERATIONAL
INTEGRITY
SPOTLIGHT
ON 2018
2018: Positioned for Growth 1 0 0%
100% of invoices sent through a single
service provider
3 0 0 K
300k customers
Data-driven business
The manner in which we structure, store
and process data is integral to Tungsten
Network’s operations. Our people support
300,000 customers and need fast, easy access
to the data and systems to succeed in their
individual roles.
The European Union’s General Data
Protection Regulation also necessitated
a full review of the customer data we hold
to ensure that every aspect of our internal
processes that touches personal data
complies with the regulation.
Thanks to the work we have done to
restructure how we hold data, our sales and
enrolment staff are now able to access a
single customer view with a comprehensive
dataset, allowing them to easily tailor their
customer interactions. As a result our ability
to track prospective customers throughout
the sales cycle has been enhanced. Combined
with the implementation of a new data-driven
telephony system, our sales and support
teams now operate cohesively to optimise the
customer experience.
We have also rolled out a new internal
support system, Salesforce Service Cloud,
which has allowed us to create a deep
internal knowledgebase and improve internal
support. This will be the blueprint for an
external rollout in FY19.
Changing how we think of customers
Tungsten Network’s customer proposition
used to focus on the delivery of a compliant
e-invoice from 'Supplier' to 'Buyer' and this
was reflected in our suite of products and
services. To do broaden our offering and the
value we bring to our customers’ businesses,
Tungsten Network has established the
capacity to handle not only incoming invoices
but also a range of outbound documents.
Our newly-launched e-billing product, enables
accounts receivable departments worldwide
to send all their outbound invoices through
Tungsten Network as a single service
provider and have them delivered in the
preferred format of the recipient, regardless
of whether their customers are members of
Tungsten Network. In addition, our enhanced
invoice data capture product enables
Tungsten Network to process invoices sent
to our customers from those of their supplier
chain who are also not members of Tungsten
Network, removing barriers that limit the
growth of our network and therefore the
value we can create for our customers.
We have also enhanced our purchase order
services. When a customer sends a purchase
order via Tungsten Network, their supply
chain can now approve or reject it within our
portal, as well as simply convert it into an
e-invoice. We have also launched accounts
receivable analytics, affording customers
competitive insight into the transaction data
they send via Tungsten Network.
Launched Accounts Receivable Analytics
in 2018
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT TRANSITION FROM LEGACY
TECHNOLOGY
£ 7 . 2M
£7.2m investment in technology
Stable and secure
Technology underpins everything we do.
Over the course of 2017 and 2018 we
transformed our technology infrastructure
in order to deliver a platform that is stable
and secure for our customers, while being
scalable and sustainable for Tungsten
Network.
This year we had two large projects running
concurrently: first to migrate our datacentre
hosting from a traditional server environment
to a cloud environment; and the second to
migrate our core network database to a new
technology base.
Our datacentres are no longer in a fixed
hosted location, but rather in a more agile
environment that allows us to be responsive
to the needs of our customers and our
people. It has also brought with it significant
performance improvements and cost savings.
We have also migrated our core technology
infrastructure to a new system architecture.
The new architecture is easy to scale and
allows us to quickly process fluctuating
transaction volumes, performing comfortably
even at peak times.
3
OUR STRATEGIC OBJECTIVES
01
Focus on
our core
= See pg 14
02
Improve operational
performance
= See pg 15
03
Distinctive invoice
financing
= See pg 15
04
Expand adjacent
services
= See pg 16
OUR BUSINESS MODEL
Our resources and relationships
Resilient, secure
and scalable
digital platform
Customer led,
experienced and
diverse workforce
Global network
of collaborating
customers
Expert in global
tax compliance
Strong partnerships
ngage
d e
n
a
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t o m er facing
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Our goal is to be
the world’s most
trusted business
transaction network
a
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d
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l
a
n
n
i
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g
>
s
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o
i
t
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e a
nd cross-sell
P a
<
I nternal op
e r a n d build
n
t
r
Minimise carbon
footprint
Control and optimise
cash flow
Reduce AP costs
Remove friction from
global trade
Improve tax
collections
The value we create
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
4
STRATEGIC REPORT
Investment
The Board remains active in identifying
inorganic opportunities to expand. Ensuring
that any such opportunities will both
accelerate our growth and add to shareholder
value is central to our strategic framework
for assessing any opportunity.
Our people
Tungsten Network is dependent on its
dedicated and skilled people who work
tirelessly on behalf of our customers. The
Board and I offer all of our colleagues
continued sincere and heartfelt thanks
for their ongoing efforts and commitment
through a period of intense change.
I would also like to thank my fellow Board
members for their sustained and significant
contributions during the last year.
Annual General Meeting
The Company’s Annual General Meeting will
be held at 2pm on 21 September 2018 at the
offices of Ashurst LLP, Broadwalk House, 5
Appold Street, London EC2A 2HA. We look
forward to welcoming our shareholders to
the event.
Dividend
The Company has no distributable reserves
to declare a dividend.
The year ahead
Tungsten Network must continue to grow
revenues and manage its costs in order to
transition into accelerated profitability and
cash generation. The Board believes that it
and its management team has positioned the
Company to achieve this and have the skills
to deliver. Tungsten Network is positioned
for success.
Nick Parker
Non-Executive Chairman
23 July 2018
Welcome to our FY18 annual report. On behalf
of the Board we are pleased to report on the
progress made in the delivery of our strategic
plan and the next phase in the development
of Tungsten Network. FY18 was an important
year of operational execution, with significant
progress made on completing transformational
changes to our infrastructure and our operating
model, resulting in a business that can now
grow revenues more rapidly and profitably.
New Board Appointments
The Board of Tungsten Corporation Plc is
pleased to invite Anthony Bromovsky and
Duncan Goldie-Morrison to join the Board
as Non-Executive Directors. Their formal
appointments will be confirmed as soon as
possible, subject to satisfactory completion
of regulatory checks. A further announcement,
including relevant details for Tony and Duncan,
will be made at that time.
The existing Board of Tungsten Corporation
Plc looks forward to welcoming Tony and
Duncan as colleagues and to working
with them to capitalise on the exciting
opportunities Tungsten enjoys for profitable
growth.
Strategy
The four strategic objectives that were set
out in early 2016 remain the focus of the
business. These are to:
• Focus on the core automation business to
provide efficiencies and further benefits
for customers;
Improve operational performance by
deploying end-to-end ownership and
digital tools to ensure people and
processes provide products and services
to customers effectively;
•
• Further leverage the Network and its data
to deliver distinctive financial products for
customers to support their working capital
needs; and
• Enhance the value of Tungsten Network by
providing value-added adjacent products
and services that help customers achieve
their income thresholds as they participate
in the global supply chain.
We continue to demonstrate progress in
the execution of each strategic objective.
Increasing numbers of customers are joining
and doing more business with each other over
Tungsten Network. Our transaction processing
and internal infrastructure have been rebuilt
so that we now process our customers’
transactions faster and at lower cost. We have
moved from a single product line e-invoicing
business to a multi-product platform, including
e-billing, purchase order services, invoice
financing and off-network solutions such as
invoice data capture and workflow. Finally, but
not least, we have grown our trade finance
customers, products and revenues. Tungsten
Network is now a company positioned for
accelerated growth.
CHAIRMAN’S
STATEMENT
Tungsten Network has been
stabilised and its turnaround
is largely complete. 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.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 5
PHASES OF TUNGSTEN’S
TRANSFORMATION
2016
STABILISATION
Development of a succinct, cohesive strategy.
Included identifying how to take advantage
of customer and market opportunities, taking
control of and restructuring the operating cost
base, relaunching Tungsten Network Finance
and identifying product adjacencies.
Concluded with the sale of Tungsten Bank
in December 2016.
2017
ACHIEVE
PROFITABILITY
Focus on new customer acquisition and new
product sales into our existing customer base
while continuing with the success of pricing our
services to reflect the value that we provide.
Continued reshaping of the cost base through
increased automation and the relocation
of resources, and developing an ROI based
approach to investment.
2018
PROFITABLE
GROWTH
Transaction growth through new and current
customer expansion. Increase in revenue per
invoice through the introduction of a deeper
range of products, including opportunities for
inorganic product expansion.
Meaningful contribution to profits from Tungsten
Network Finance.
Continued evolution of the cost base through
execution of automation and efficiency
programmes thereby releasing funds for
further investment in sales, marketing and
new products.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 6
OFF
NETWORK
K
R
O
W
T
E
N
N
O
ARAccounts Receivable
PO delivery
PO acknowledgement
PO convert (e-invoice)
Invoice sending
Invoice status updates
Trade finance
Currency conversion
OFF
NETWORK
THE
TUNGSTEN
NETWORK
At Tungsten Network, we aim
to revolutionise the payment
process through the use
of unique technology that
brings companies closer
together, maximises efficiency
and improves cash flow
management.
CUSTOMER TESTIMONIAL
Andrew Brown,
Managing Director, Trade Engine Ltd.
WORKING WITH
TUNGSTEN NETWORK
HAS BEEN FANTASTIC
“Trade Engine Ltd. began using the Tungsten
Network platform for e-invoicing in January
2017, having secured a contract with a
major Utility Company. We chose Tungsten
Network in order to provide us with a robust
and transparent purchase-to-payment
process for our work under this contract, and
furthermore, because we were then able to
utilise Tungsten Network’s Early Payment
facility.
Working with Tungsten Network has been
fantastic, and made a real and measurable
difference to our business. Our suppliers are
all paid within 14-21 days of their completion
of any job and the whole process is far more
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT
7
Other Networks
Analytics
Archiving
Tungsten NetworkTN
Rules
Validation
Tax
Compliance
Invoice
data capture
E-billing
PO upload
PO acknowledgement
Workflow
Invoice delivery
Invoice status updates
APAccounts Payable
manageable than it was previously. Tungsten
Network’s e-invoicing platform gives us real-
time information about the status of each
invoice and purchase order, avoids us having
to send remittance advice, and helps with our
accounting. Their staff are always hands-on,
helpful and proactive.
We have gone on to secure larger contracts
with the same utility company and have
developed a strong reputation and gained
additional clients within our industry over
the past 18 months. I believe this is due to
the standard and predictability of our delivery,
which is in turn due to the fact that we are
able to operate a quick and transparent
process for our entire supply chain. We
would not have been able to achieve this
without Tungsten Network.”
TUNGSTEN NETWORK FINANCE PRODUCTS
Small
Funding
size
Large
Target
market
MICRO
SUPPLIERS*
SME
SUPPLIERS
MID-
MARKET
SUPPLIERS
LARGE
CORPORATE
SUPPLIERS
LARGE
CORPORATE
BUYERS
Product
Line of credit
Term loan
(one to five
years)
Tungsten
Network
Early Payment
Structured
receivables
finance
Supply chain
finance
Dynamic
discounting
Structured
Tungsten
Network
Early Payment
Receivables
finance
Pool-based
receivables
* £50,000 to £750,000 annual value of invoices on Tungsten Network.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 8
OUR
SOLUTIONS
Helping the global supply
chain operate more
efficiently and securely.
PURCHASE ORDER
SERVICES
Before an invoice exists, companies
agree what is traded and on what
terms through a Purchase Order.
Tungsten Network facilitates the
delivery, acknowledgment, variation
and conversion of Purchase Orders
into invoices.
• Control over purchases
• Ability to acknowledge, amend, accept or
reject
• Visibility of status
• Speed of receipt of order
• Conversion into an invoice
• Tighter collaboration with customers
WORKFLOW
Workflow automates accounts payable
processes, providing an audit of
purchasing from the point of order to
payment. It optimises procure-to-pay
to achieve business goals.
• Automated three-way matching
• Straight-through processing
• End-to-end visibility
• Exception management
ANALYTICS
Analytics give visibility into purchases
that leads to better informed spending.
Tungsten Network analytics improve
procurement controls, ensures
compliance and reduces costs.
• Actionable insights
• Better business decisions
• Easy to get started
• Simple and secure
• Customised reports
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT 9
VIEWPOINT
Theresa Lacey
VP Product Management
DEVELOPMENT OF
E-BILLING
Since joining Tungsten Network I’ve been
developing a product roadmap that enhances
our strengths as an e-invoicing pioneer
and overcomes our weaknesses. One that
amplifies our Network, not just in terms of
volume, but also in terms of the value we
deliver to our customers.
We want to give our customers more ways to
transact with us by increasing the range of
both the documents we can process and the
ways in which we can process them. Then we
can stop viewing our customers as simply
“Buyers” or “Suppliers”, and enable them to
use Tungsten Network to successfully service
their entire business.
The launch of our e-billing product is a
crucial aspect of delivering on that vision.
By allowing customers to engage with
companies that are off-Network, we are
breaking down the traditional barriers to
digital automation our customers face.
The new service complements Tungsten
Network’s e-invoicing solution, providing
companies a unique opportunity to digitally
automate their accounting processes on both
sides of the ledger.
INVOICING SERVICES
Eliminating friction from accounts
payable or accounts receivable
processes through e-invoicing and
invoice data capture increases the
efficiency and accuracy of accounting
teams. This includes enabling straight-
through processing of invoices through
an automated match with a purchase
order.
• Automation of critical process
• Reduction of fraud
• Legal and tax compliance
• Reduction in cost
• Confirmed invoice delivery
• Visibility of invoice status
• Secure invoice archiving
TRADE FINANCE
With a range of trade finance products
designed for organisations large or
small, customers on Tungsten Network
can take control of their working
capital by taking advantage of early
payments or sponsor financing.
• Deepens supply chain liquidity
• On or off balance sheet
• Maximises working capital
• Flexible cash management
• Easy to enrol
• Easy to use
• Get paid early
E-BILLING
E-billing enables members of Tungsten
Network to send digital invoices to
100% of their customers through a
single service provider. This reduces
the cost of getting paid, increases
visibility and gives control over their
working capital position.
• Automation of critical process
• Reduction days sales outstanding (DSO)
• Visibility of outbound invoice data
Improved customer management
•
Increased control over working capital
•
• Faster payments
• Legal and tax compliance
• Reduction in cost
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 10
THE TOP 5
CAUSES OF
FRICTION
49%*
Friction constrains cash flow
throughout the global supply
chain. Tungsten Network’s
business transaction platform
removes this friction, allowing
companies to better control
their working capital. 0 1
HIGH PROPORTION OF
PAPER INVOICES RECEIVED
Paper is the primary source of friction in the
global supply chain. Paper invoices carry the
risk of loss, fraud or human error, and cost
on average 150% more to process than an
e-invoice.
By switching to a digital invoicing process,
customers on Tungsten Network are able to
mitigate these risks and enhance their audit
capabilities. With no hardware or software to
install, customers can exchange invoice data
in their desired format with ease.
To read more about our key findings from our
2017 Global Study on P2P Friction and how
we are planning for a frictionless future, go to:
tungsten-network.com/procure-to-pay-
friction-report/
* Percentage of respondents who selected this cause of friction
as one of their top 5 causes of friction in the 2017 Global study
on P2P friction.
TOO MANY NON-PURCHASE
ORDER BACKED INVOICES
Matching invoices to the goods or services
purchased can be extremely difficult.
Particularly if invoices are received in several
different formats in several different places
and there is no purchase order number.
Our customers are able to send purchase
orders directly through our platform, where
their vendors can acknowledge receipt and
convert them into e-invoices. We can also
implement invoicing rules for our customers,
requiring invoices to be matched to a
purchase order before they can be sent.
02
48%*
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT 11
LACK OF AUTOMATED
APPROVAL
Manual checking of invoices leaves
companies exposed to the risks of human
error and fraud and causes delay.
Tungsten Network validates invoices at the
point of submission against the company
requirements of the recipient. Incorrect
invoices are identified before they ever enter
the system.
03
HIGH VOLUME OF SUPPLIER
ENQUIRIES REGARDING
INVOICE OR PAYMENT
STATUS
If invoices are sent in paper or PDF they can
be difficult to track. This leaves accounts
receivable departments with no visibility
of the status of their invoice and requires
accounts payable to respond to vendor
enquiries.
Tungsten Network’s invoice status service
tracks invoices from the point of submission
through to payment. Customers can view the
status of their invoices through their portal
account.
47%*
43%*
0 4
LACK OF AUTOMATED
EXCEPTIONS
Incorrect invoices have to be reissued,
delaying payments and straining business
relationships. Invoice exceptions can
significantly impact cash flow as they extend
payment terms in an uncontrolled manner.
Tungsten Network validates invoices at
the point of submission against global tax
compliance standards. This stops invoice
exceptions from ever occurring.
05
43%*
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 12
STRATEGIC REPORT
CHIEF
EXECUTIVE’S
REVIEW
We have brought Tungsten
Network to an inflection point.
We are now a diversified,
multi-product business
focussed on profitable growth.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 13
OUR STRATEGIC
OBJECTIVES
Our goal is to be the world’s most trusted
business transaction network, using data
intelligently to strengthen the global supply
chain. In early 2016 we identified four
strategic priorities to achieve this goal and
this year we made great progress in each
of them.
01
Focus on our core
Elevate our customer
engagement by driving
network benefits.
= See pg 14
02
Improve operational
performance
Use end-to-end digital processes
to ensure that our people and
processes deliver effectively.
= See pg 15
03
Distinctive invoice financing
Leverage our Network and
its data to deliver innovative
financing products.
= See pg 15
04
Expand adjacent services
Increase the value we
provide to customers through
adjacent services.
= See pg 16
In early 2016, after conducting a detailed
evaluation of the Group, I set out Tungsten
Network’s strategic objectives and introduced
its new management team. We had identified
four areas of strategic emphasis: focus on
amplifying our core network effect, improve
operational performance, offer distinctive
invoice financing and expand to adjacent
services both on and off-Network. I outlined
a profile of the development of the Tungsten
Network’s turnaround citing three distinct
phases to be delivered over the course of a
five-year plan.
We saw the stages of our development
consisting of: first, stabilising the business;
second, achieve profitability by remediating
our customer proposition, operating model
and legacy infrastructure; and, third,
accelerating profitable growth. With the
reporting of EBITDA profitability at the end of
FY18, the Company enters its growth phase.
Half way through the five-year programme,
we are now at the inflection point where
developing business and doing great things
for our customers has become our primary
focus.
When I was appointed Chief Executive
Officer I assumed responsibility for turning
a distressed business around. The business
was in a downward spiral operationally
and without a clear strategy. It was losing
key customers and the staff turnover rate
was high. Vital systems were defective and
management disciplines and processes were
weak or non-existent in many areas.
What has followed has been a fundamental
rebuilding of Tungsten Network. The Board
now represents an experienced, engaged,
independent governing body. A committed
management team of high-calibre executive
talent is in place. They in turn have filled
skill gaps and reorganised the company for
effective delivery of our strategy.
Over FY18 we made significant progress in
repairing core systems and transitioning from
an expensive, legacy operational environment.
These changes allow the Company to process
invoices at 25% less cost per invoice and 9x
faster throughput, including 40x faster at
peak production periods.
We have restored Tungsten Network’s
fundamental value and innovative spirit.
We have moved from being a pure play
e-invoicing company to a multi-product one
and as a result have been able to change the
way we think about our 300,000 customers,
which offers us multiple ways of initiating
business development. Today we have more
to offer our customers than ever before and
our people are focussed and motivated.
With our expanded range of products
Tungsten Network can now consider our
customers not as 'Buyers and Suppliers'
but 'Network members’, each of which faces
friction in both their accounts payable and
accounts receivable processes. Therefore this
year we put in place the systems needed to
offer a comprehensive service for handling
outbound transactions to serve accounts
receivable departments, significantly
expanding Tungsten Network’s addressable
market.
We have also improved our off-Network
services with intelligent data capture and
workflow software that lets Tungsten
Network support its customers earlier in their
digital journey. These two services enhance
what we can do for our customers, have had
the result of increasing average contract
values and revenue per transaction and are
further complemented with our trade finance
and foreign exchange products.
This has been a breakout year for our trade
finance activities, which were relaunched in
January 2017. Since then Tungsten Network
Finance has in aggregate supported the
extension of more than £300 million of
funding to the global supply chain. We did
so with a capital-light funding model, with
low operating costs and from a broader
range of finance solutions. Daily average
invoice outstandings in April 2018 grew
94% compared with October 2017, while
that month was up 60% on the level of
outstandings six months previously. The
sequential six-month increase in outstandings
in April 2017 was 17%.
The Board of Tungsten wish to take this
opportunity to acknowledge the vision set by
Edi Truell when he founded the Company. We
are pleased that the Company is now well
placed to deliver upon that vision. While this
has required a fundamental rebuild of the
operational systems and processes, we are
now leveraging the proprietary trade flows
of the Network. I should like to thank the
current Tungsten Network Finance team for
their successful execution of our plans.
Over the past two years we have instituted
tight financial control across the business
and moved to a more effective, lower cost,
shared service centre approach. Additionally,
we have renegotiated vendor and customer
contracts, which has helped us to decouple
our cost growth from rising revenues. We
have successfully filled many needed skill
gaps at the Company, whilst continuing
to reduce our operating expenditure base
each year.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 14
STRATEGIC REPORT
CHIEF
EXECUTIVE’S
REVIEW CONT.
These new sales contributed revenue of
£0.9 million in FY18 and have an aggregate
contract value over three years of £2.3
million. Half of this contract value will
be derived from two new multinational
customers, one in the media industry and
Conagra Brands in the packaged foods
industry, to which Tungsten Network 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.
Group revenue
33.7m
2018
2017
2016
£m
33.7
31.3
25.9
Pricing was renegotiated for 35 customers
of our accounts payable automation products
at an average increase of 38%, contributing
additional revenues of £0.7 million. A further
11 customers had contracts that allowed
for renewal at the same price and nine
customers that contributed total revenues
of £0.2 million have chosen not to renew
their contracts.
Total transacted invoice value
bn
164bn
2018
2017
2016
164
155
133
our core
0 1Focus on
Through the successful introduction of
expanded services (strategic focus number
four, below), our core Tungsten Network has
been strengthened. We can now process
more types of transactions for our customers,
including e-invoicing, purchase orders,
e-billing and invoice data capture. During the
year, we processed 17.7 million transactions,
an increase of 0.6 million from the prior year.
This number excludes over 5 million purchase
orders that Tungsten Network processes
as part of its e-invoicing product, but do not
provide a separate revenue stream. By value
the invoices processed totalled £164 billion,
an increase of £9 billion.
Total invoice volume
£m
17.7m
2018
2017
2016
17.7
17.1
16.1
We aim to grow the value we provide our
customers through increasing the number of
transactions that we process for them. This
includes offering them additional services and
adding digital connections to more of their
trading partners. In FY18 we had 300,000
customers on Tungsten Network.
Total customers
300k
2018
2017
2016
k
300
251
203
Our customers included 187 users of our
accounts payable automation products. We
made sales of our range of accounts payable
product solutions to eight new customers
in FY18, including six that will use our core
e-invoicing products and two that will use our
invoice data capture service.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Our aim had been to maintain our annual
adjusted operating expenses at approximately
£40 million. Achieving our current run rate
of £36.0 million in accordance to adjusted
operating expenses, it is a significant
improvement on this and while we have
further opportunities to rationalise our cost
base, our priority for FY19 is revenue growth.
As we demonstrate that we can achieve
consistently positive EBITDA we may choose
to make incremental increases to our sales
and marketing costs in order to achieve
accelerated revenue growth.
Adjusted operating expenses
£m
£36.0m
2018
2017
2016
36.0
40.8
40.1
operational
performance
0 2 Improve
We now have an operating cost base that can
be leveraged to support profitable growth in
Tungsten Network. This has been achieved
over a three-year period through taking a
systematic approach to identifying the drivers
of cost in our business and how to do more
for less.
Our adjusted operating expenses in FY18
decreased by £4.8 million, or 12%, from the
prior year, even as revenues grew by 8%. This
reflected savings and efficiencies identified
across each area of the business, including
a reduction in staff and contract costs of
£2.2 million (staff costs £1.1 million and
contract costs £1.1 million) and a reduction
in technology systems costs of £1.8 million.
Tungsten Network can now operate in
a more effective and efficient manner. We
can process more transactions for our
customers quicker and cheaper, and our
sales teams can use more functionality of
Salesforce to help identify, manage and
close sales opportunities.
To achieve our new cost base, we had
to spend in two areas. Firstly, we made
increased investments in our internally
generated software in FY18, growing
expenditure in this area from £3.5 million
in FY17 to £7.2 million in FY18, primarily on
the improvements to our core transaction
network, further rollout of Salesforce and
enhancement in customer interfaces. Now
that we have largely completed the transition
away from legacy infrastructure we are able
to significantly reduce capital expenditure in
the FY19.
The second area of additional spend was
in exceptional items amounting to £2.4
million. This was necessary expenditure in
order to change from the Company’s legacy
technology, decrease our physical footprint
and make people changes. We do not plan to
incur significant exceptional items from our
operations in FY19.
15
Distinctive
invoice
financing
0 3
Since relaunching our Tungsten Network
Finance business in January 2017, Tungsten
Network has funded over £300 million of
invoices to help companies across the United
Kingdom and the United States manage their
working capital. Over that time, on a daily
average basis, monthly invoice outstandings
grew from £11.4 million in December 2016
to £43.4 million in April 2018, with a peak of
£64.0 million in June 2018.
To achieve this, we have rebuilt our
technology infrastructure and repositioned
the operational model and as a result we have
grown its user base, funding partnerships
and range of products. Tungsten Network
now benefits from funding partnerships with
Insight Investments, BNP, Orbian, Funding
Circle, Lending Club and BlueVine in order to
offer a range of trade finance solutions that
have enabled us to grow our suite of products
to meet the diverse financing needs of more
of the customers of Tungsten Network.
Tungsten Network Finance now offers four
distinct trade finance solutions that meet
different market needs: invoice discounting
through the Tungsten Network Early
Payment facility in its portal; flexible lines
of credit; receivables financing and supply
chain finance. Leveraging the connectivity
that comes from joining Tungsten Network,
both SME and large customers are matching
working capital needs with a flexible user
experience, removing the friction that impacts
cash flow.
Since the relaunch, 129 Tungsten Network
customers have taken early payment. On
average, Tungsten Network Early Payment
users currently finance over half of the
e-invoices that they issue digitally via
the Tungsten Network portal. Tungsten
Network Finance has recently expanded
its geographical reach beyond the United
Kingdom and the United States, to include
Canada, Ireland and the Netherlands, with
finance available in GBP, USD and EUR. This
geographical expansion will continue over the
course of 2018, with work already underway
to make the product available in more
countries in Europe and the Americas.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 16
CHIEF
EXECUTIVE’S
REVIEW CONT. 0 4Expand
adjacent
services
Tungsten Network has transitioned from a pure
play e-invoicing company to offering a diversified
range of products that automate accounts
payable and accounts receivable processes.
For accounts payable teams we can deliver
purchase orders to their supplier chain and
send an acknowledgment back. Their suppliers
can send invoices over Tungsten Network,
which we validate against local compliance
requirements and match to purchase orders,
and we can digitise invoices received in paper
or PDF. In addition, our workflow software
allows for the automation of approval.
For accounts receivable teams our new
e-billing product delivers all invoices to their
customers, regardless of whether they are
sent over Tungsten Network, including by
paper and PDF. Our invoice status service
allows visibility over the receipt, approval
and payment status of invoices. Our suite
of products for both accounts payable and
accounts receivable teams is complemented
by analytics functionality and digital archiving.
We will continue to add greater functionality
to Tungsten Network, including the digital
automation of more documents. Of focus in
the coming years are the opportunities in Italy
arising from a legal requirement effective
January 2019 for all invoices to be digitally
stamped. Tungsten Network intends to
become an approved intermediary, allowing
us to do more for our over 5,000 current
Italian customers and to take advantage of
opportunities to grow this number.
We will pursue further opportunities to expand
our services, through product development,
partnerships and, at a future date, corporate
activity, while maintaining our focus on cost
discipline and profitable growth.
Over the first three years of my tenure we
have grown revenue by 50%, at a CAGR of
14.5%. Though FY18 was a record revenue
year for Tungsten Network, growth was behind
the Company’s previous guidance at 9% on
a constant currency basis, due primarily to
longer sales cycles than expected in H2-FY18.
In part, these were a function of a delay to
significant new customer contracts and the
later than expected availability of a new
product. Resolution of these factors is expected
to improve sales performance in FY19 and the
order book and sales pipeline remain strong.
FY19 Priorities
Our focus in FY19 is to take advantage of
the opportunities that we have created to
accelerate revenue growth and generate
sustainable profits. We will give these
initiatives the same execution attention that
allowed us to successfully remediate the
internal operations of this business and
decouple its cost base from revenue growth.
We will do this by retaining a focus on
understanding what our customers want
and delivering it to them. This will lead to an
acceleration of new business sales and an
increase in customer retention. We will work
with our customers to connect them to more
of their trading partners and help automate
more of their processes with our wider
range of products, with a particular focus
on e-billing and the emerging opportunity
in Italy.
To support the effective management of our
working capital we have secured a £4 million
revolving credit facility with HSBC.
Outlook
With the operational transformation largely
complete and a distinct set of growth
initiatives in place, the Board is optimistic
about the prospects for Tungsten Network.
The disciplined delivery of the strategic plan
the executive team is implementing provides
for greater certainty of business outcome,
building confidence among stakeholders
and keeping Tungsten Network on a
sustainable path toward increasing returns
for shareholders.
• Revenue of at least £37.5m on a constant
currency basis, weighted to the second
half of the year. The Board believes that
this accelerated growth can be achieved
through Tungsten Network’s core
e-invoicing products, new products and
continued expansion of Tungsten Network
Finance; and
• Stable gross margin and adjusted
operating expenses resulting in EBITDA
profit for the full year, with phasing
reflecting the evolution of revenue growth.
Richard Hurwitz
Chief Executive Officer
23 July 2018
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT OUR PEOPLE Tungsten Network promotes transparency,
equality and opportunities for progression
and development, so that we have the right
people in the right job at the right time.
Our size, quality of people, diverse locations
and numerous areas of expertise all present
opportunities for Tungsten Network’s
employees to achieve their potential at
Tungsten Network.
The Company firmly believes in equality of
opportunity for all employees and candidates.
We are committed to making full use of the
talents and resources of all our employees
based on individual merits, incorporating an
inclusive approach to employment policy and
practice.
TUNGSTEN NETWORK
EMPLOYEES GLOBALLY
Perrysburg
USA
30
London
UK
140
22
Atlanta
USA
Rest of the
world
09
14
Sofia
Bulgaria
99
Kuala
Lumpur
Malaysia
Headcount
United Kingdom
United States
Malaysia
Europe
Other
Board (Male/Female)
Senior Managers (Male/Female)
Others (Male/Female)
Cost
Employees
Contracted/External
Total
Total/Revenue
17
30
Languages we speak
84%
Permanent staff
385
Dedicated and skilled employees
FY17
142
67
107
20
1
7 (7/–)
8 (7/1)
FY18
140
52
99
22
1
6 (6/–)
8 (7/1)
322 (179/143)
300 (156/144)
FY17 (£'000)
FY18 (£'000)
20,720
4,604
25,324
81%
19,645
3,873
23,518
70%
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 18
OUR
PEOPLE CONT.
Focus on internal promotions
THE PEOPLE AT TUNGSTEN
NETWORK MAKE IT A
REALLY EXCITING PLACE
TO WORK.
I HAVE ALWAYS FELT THAT
TUNGSTEN NETWORK HAS
BEEN ABLE TO HELP ME
DEVELOP.
Robert Cook,
Global Accounts Payable Marketing
Manager
David Hazel,
Data Analysis & Technical Operations
Analyst
Having been with Tungsten Network for three
years I have already had the opportunity to
work in a variety of departments, including
Supplier Sales, Technical Operations,
Analytics, Finance and Tungsten Network
Finance. I even had the opportunity to work
abroad for a year in Sofia. I have always felt
that Tungsten Network has been able to help
me develop and that there are opportunities
to progress in the company. Not only have I
gained wider knowledge of the company but
I have been able to develop myself hugely
in such a short period of time, which is
fundamental at the early stage of my career.
I was recently promoted to Global Accounts
Payable Marketing Manager after working for
two and half years in the supplier enrolment
team. This new role has given me the
opportunity to widen the application of my
marketing knowledge and expand it across
the entire Tungsten Network business. This
is a great opportunity for me to develop my
skills further and use my knowledge to drive
marketing programs across the business.
Since joining Tungsten Network in 2015, I
have been able to get involved in a number
of different projects and teams that has
given me a detailed view of how the business
works. That has allowed me to progress
through various roles within the company
from the Campaign Manager role I started in
back in 2015 to my current role. The people
that work at Tungsten Network make it a
really exciting place to work because of their
passion for success and commitment to
providing world-class solutions to customers.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT 19
37
Internal promotions/role changes
I’VE MET COUNTLESS
TALENTED INDIVIDUALS,
AND MY COLLEAGUES
MAKE TUNGSTEN
NETWORK A FANTASTIC
PLACE TO WORK.
IF YOU HAVE THE RIGHT
ATTITUDE AND WORK
HARD, THOSE EFFORTS
WILL BE RECOGNISED.
Daniel Tammadge,
Solutions Architect
I have been with Tungsten Network since
September 2014, where I was initially
employed as a Software Developer. Since
joining the Company I have had the
opportunity to work dynamically in a large
team, and have seen my hard work rewarded
with opportunities to take on increased
responsibility and grow my role within the
development team.
Recently a new Solutions Architect position
became available, and I was pleased with
how encouraging my managers were
when I was applying for the new role.
It is heartening to know that if you have
the right attitude and work hard, that those
efforts will be recognised. I’m now excited to
take on the new challenge and continue to
develop my career at Tungsten Network.
Ashley Infantino,
Global Accounts Receivable Marketing
Manager
Since joining Tungsten Network in 2015, I
have had the opportunity to take advantage
of a culture of promoting from within. I began
my time as a Marketing Coordinator, and
have been promoted twice, most recently
moving into the Global Accounts Receivable
Marketing Manager role.
My manager has been dedicated to my
success both within Tungsten Network and
beyond. As an example, when the opportunity
to relocate to the London office came about,
I was offered the role which has allowed me
to be in the heart of our business. Not only
am I able to experience another country and
culture, but I have the ability to nurture and
build relationships with my colleagues and
the Leadership Team. I’ve met countless
talented individuals, and my colleagues
make Tungsten Network a fantastic place
to work. My time at Tungsten Network has
been challenging, but ultimately rewarding,
and I am excited for the future.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 20
STRATEGIC REPORT
CHIEF
FINANCIAL
OFFICER’S
REVIEW
We have continued to produce
simultaneous revenue growth
and cost control. We have
reduced the EBITDA loss by
82% over the past three years.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 21
m
17.7
17.1
£
1.90
1.82
KEY PERFORMANCE
INDICATORS
Total transaction volume
17.7m
2018
2017
Revenue per invoice
£1.90
2018
2017
Adjusted operating expenses
£m
£36.0m
2018
2017
Average TNF outstandings
£43.3m
2018
2017
14.0
36.0
40.8
£m
43.3
Accounts receivable automation revenue
represented 56% of total Tungsten Network
revenue in the 2018 financial year (FY17: 56%)
and grew 8% to £18.8 million. This was split
£15.9 million from our Integrated Solution
product (FY17: £14.3 million) and £2.9 million
from our Web Form product (FY17: £3.1
million). Revenue from renewing Integrated
Solution customers grew by 9% to £8.5
million (FY17: £7.8 million) as higher levels of
customers were retained on the Network.
Tungsten Network Finance generated fees
of £342,000 in FY18 (FY17: £152,000), with
a run rate of £1.6 million, based on actual
performance in early FY19. However, as some
recent revenue has been one-off in nature,
additional customer sales will be required to
sustain this level.
Tungsten Corporation’s management uses
gross profit and gross margin as a KPI to
monitor business performance. Gross profit
is calculated as revenue less direct cost of
sales. Gross margin is calculated as gross
profit as a percentage of revenue. In FY18
gross profit increased by £2.4 million to
£31.4 million (FY17: £29.0 million). Gross
margin in FY18 was 93.1%, a 30 bps
improvement from FY17 at 92.8%.
Group EBITDA loss was £4.6 million (FY17:
£11.8 million), a reduction of 61%. The
improvement of £7.2 million reflects a £2.4
million increase in revenue and a reduction
of £4.8 million in operating expenses.
EBITDA
The Group continued its operational
transformation programme in FY18, with
a focus on moving Tungsten Network’s
technology infrastructure into a cloud
environment and rebuilding the core
transaction processing system. The
combination of these initiatives reduce
technology costs by £1.8 million from FY18
onwards, with additional savings expected
from lower expenditure on changing or
enhancing systems. The result is a reduction
in the cost to process each transaction
by 25% and a significant improvement
in processing times.
Adjusted operating expenses2
£m
Group overview
Tungsten Corporation Plc has continued to
produce simultaneous revenue growth and
cost reduction reflecting the transformation
of our infrastructure and operating models.
In FY18 Tungsten Corporation Plc added more
customers, processed more transactions and
provided more services. This was achieved
while implementing significant infrastructure
change and demonstrating cost control,
reflected in a reduction of 12% in adjusted
operating expenses.
Revenues
Group revenue was £33.7 million (FY17:
£31.3 million), representing an increase of
8% at actual exchange rates. At constant
exchange rates revenue grew by 9%. The
growth in revenues reflected the benefits of
new customer sales, additional product sales
to current customers, and existing customer
price increases.
Accounts payable automation revenue
represented 44% of total Tungsten Network
revenues in the 2018 financial year (FY17:
44%). Tungsten Network added eight new
accounts payable automation customers
in FY18 to customers that have purchased
our range of on-Network and off-Network
products, including six that purchased
the core e-invoicing services. These new
customers contributed £0.9 million to FY18
revenue.
The contracts of 58 of Tungsten Network’s
accounts payable automation customers
were scheduled to renew in FY18. These
customers contributed £3.4 million of
revenue in aggregate in FY17. Pricing was
renegotiated for 35 of these customers at
an average increase of 38%, contributing
additional revenue of £0.7 million. A further
11 customers had contracts that allowed
for renewal at the same price and nine
customers that contributed total revenue of
£0.2 million have chosen not to renew their
contracts. There are three contracts that
remain outstanding and are expected to be
renewed in FY19.
HIGHLIGHTS
Group revenue
2018
2017
20161
£m
33.7
31.3
25.9
2018
2017
20163
Gross margin
%
EBITDA4 loss
2018
2017
2016
14.6
93.1
92.8
92.7
2018
2017
20165
11.8
36.0
40.8
40.1
£m
1 Excludes £0.2m revenue from Tungsten Bank, now presented
as discontinued operation.
2 Adjusted operating expenses defined as operating expenses
from continuing operations excluding cost of sales and before
depreciation, amortisation, exchange gain or loss, share-based
payments charge and exceptional items.
3 Excludes £2.8m adjusted operating expenses of Tungsten Bank,
now re-presented as discontinued operation.
4 EBITDA defined as earnings from continuing operations before
other income, interest, tax, depreciation, amortisation, foreign
exchange gain or loss, share-based payments charge and
exceptional items.
16.2
5 Excludes £2.6m EBITDA loss from Tungsten Bank, now
presented as discontinued operation.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 22
CHIEF
FINANCIAL
OFFICER’S
REVIEW CONT.
Constant currency
Revenue FY18
Revenue FY17
Change at constant exchange rate
Change at actual exchange rate
Cost of sales FY18
Cost of sales FY17
Change at constant exchange rate
Change at actual exchange rate
Tungsten
Network
Tungsten
Network
Finance
£33.4m
£0.3m
£31.1m
£0.2m
9%
8%
(£2.3m)
(£2.3m)
4%
–
50%
50%
–
–
n/a
n/a
Corporate
Group
–
–
n/a
n/a
–
–
n/a
n/a
£33.7m
£31.3m
9%
8%
(£2.3m)
(£2.3m)
4%
–
Adjusted operating expenses1 FY18
(£28.7m)
(£1.6m)
(£5.7m)
(£36.0m)
Adjusted operating expenses1 FY17
(£33.1m)
(£1.8m)
(£5.9m)
(£40.8m)
Change at constant exchange rate
Change at actual exchange rate
(12%)
(13%)
(11%)
(11%)
(3%)
(3%)
(6%)
(12%)
EBITDA2 FY18
EBITDA2 FY17
Change at constant exchange rate
Change at actual exchange rate
£2.4m
(£1.3m)
(£5.7m)
(£4.6m)
(£4.2m)
(£1.7m)
(£5.9m)
(£11.8m)
157%
157%
24%
24%
3%
3%
61%
61%
1 Adjusted operating expenses exclude cost of sales, other income, interest, tax, depreciation, amortisation, foreign exchange gains
or losses, discontinued operations, share-based payments charges and exceptional items.
2 EBITDA exclude other income, interest, tax, depreciation, amortisation, foreign exchange gains or losses, discontinued operations,
share-based payments charges and exceptional items.
Staff and contractor costs were reduced
by £2.2 million to £24.6 million (FY17: £26.8
million). Staff costs have been managed
across the business through the transfer
of functions to lower cost locations and a
reduction in permanent headcount in the
technology team. Other costs were also
reduced, including travel and expenses
and the use of professional advisers.
As a result of some of the changes made to
the business the Group incurred exceptional
items of £2.4 million. They include onerous
contracts in respect of replaced legacy
technology of £1.1 million and a lease
provision of £0.5 million, which represents
the future amounts owed in respect of a
former property in the United States, net of
amounts due under a sub-lease signed in
H2-FY18. The Group incurred restructuring
costs due to contract termination and other
redundancy costs of £0.6 million. Also
included within exceptional items is the
settlement of disputes between the Company,
Disruptive Capital Advisory Limited and the
Company’s former Chief Executive Officer
Edmund Truell, through the issuance of
convertible loan notes worth £0.25 million.
Loss before tax:
The Group loss before tax from continuing
operations was £12.7 million (FY17: loss of
£12.7 million). This reflects:
• Depreciation and amortisation
of £2.8m (FY17: £2.8m);
• Net foreign exchange loss on operating
items of £1.5 million (FY17: gain £2.3
million). The comparative has been
reclassified from finance income and
finance costs to operating expenses as
this loss relates to exchange differences
generated on operating transactions;
• Share-based payment expense
of £0.6m (FY17: £0.4m); and
• Net finance costs of £0.6 million
(FY17: £0.1 million).
The net finance costs represented £0.2 million
of net losses on the revaluation of intercompany
loans to overseas subsidiaries (FY17: net gain
of £0.6 million) plus £0.4 million of interest
expenses and bank charges (FY17: £0.6 million).
Loss for the year:
The statutory Group loss for the year was
£11.9 million (FY17: £12.5 million). A tax credit
of £0.8 million (FY17: £0.4 million) includes a
reduction of £0.5 million in the deferred tax
liability relating to the acquisition of Tungsten
Network.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT
23
Cash flow
Cash and cash equivalents at the end of FY18
were £6.4 million (FY17: £17.5 million).
FY18 Cash Flow
Net cash outflow from operating
activities
Net cash outflow from investing
activities
Net cash inflow from financing
activities
Net decrease in cash & cash
equivalents
Exchange adjustments
Cash and cash equivalents at the
start of the year
Group
(£8.0m)
(£7.6m)
£4.3m
(£11.3m)
£0.2m
£17.5m
Cash and cash equivalents at the
end of the year
£6.4m
The cash outflow from investing activities was
£7.6 million (FY17: inflow of £25.4 million).
The comparative includes an inflow from the
sale of Tungsten Bank of £29.7 million, with
the remaining variance primarily due to an
increase in expenditure on capitalised software
development costs to £7.2 million (FY17: £3.5
million). In FY18 Tungsten Corporation Plc
increased its investment in its core transaction
network, with rollout of Salesforce as a core
tenet of internal systems and in its customer
interfaces. The significant majority of this
expenditure was on contractors engaged
specifically for these projects on contracts that
have now ended.
Tungsten Corporation Plc stopped using its
own cash resources to finance Tungsten
Network Early Payment invoices in FY18,
resulting in an inflow of £4.3 million.
Loss per share
The basic and diluted loss per share was
9.45p (FY17: 9.91p).
The Group has an unrecognised deferred tax
asset of approximately £14.8 million that is
available for offset against future tax expenses
in the companies in which losses arise.
The cash outflow from operating activities was
£8.0 million (FY17: £10.9 million). This included:
Net assets
Net assets decreased by £9.9 million to £121.4
million during the year (FY17: £131.3 million)
due to the Group’s statutory loss of £11.9
million and currency translation differences
of £1.4 million, offset by a movement in the
share-based payment reserve of £0.6 million.
David Williams
Chief Financial Officer
23 July 2018
• An outflow generated from operations
of £5.8 million (FY17: £12.3 million)
• An outflow from trade and other
receivables of £1.8 million (FY17:
£0.2 million inflow)
• An inflow from trade and other payables
of £0.03 million (FY17: £2.0 million outflow)
• Net interest paid of £0.4 million
(FY17: £0.4 million)
• An inflow from discontinued operation
£nil million (FY17: £3.6 million)
The outflow from trade and other receivables
was primarily due to an increase in trade
receivables of £1.5 million, reflecting the
increase in revenue and in particular
the timing of two new accounts payable
automation sales at the end of the period.
The inflow from trade and other payables
of £0.03 million reflects an increase in trade
payables primarily resulting from capital
projects undertaken over FY18.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 24
RISK
MANAGEMENT
Tungsten Corporation Plc
is proud to operate the
world’s largest compliant
e-invoicing network and
to be the trusted partner
to hundreds of thousands
of global enterprises.
Principal risks and uncertainties
Tungsten Corporation plc is proud to operate
the world’s largest compliant e-invoicing
network and to be the trusted partner to
hundreds of thousands of global enterprises.
Our customers expect us to proactively manage
and predict the risks and uncertainties that are
inherent in business.
Risk management at Tungsten Corporation plc
starts at the Board, but is delivered throughout
the Group.
The Audit & Risk Committee continually
monitors and promotes the highest
standards of integrity, financial reporting,
risk management and internal control.
The Executive Directors and the senior
management team oversee the management of
the business utilising a wide range of controls,
including financial, operational and compliance
oversight, together with risk management.
They ensure that the risk management strategy
is implemented throughout the business.
Tungsten Corporation Plc has dedicated
compliance and cyber security teams. Amongst
other things, these teams are accountable for
the maintenance of the appropriate controls
and processes to sustain Tungsten Corporation
Plc’s certification under both ISO 27001
(information security management) and ISAE
3402 (controls at a service organisation). The
Security Committee is chaired by the Chief
Financial Officer and includes other members
of the senior management team as well as
key personnel from the business who are
responsible for delivery.
All significant sales opportunities are subject
to technical and contractual review by senior
members of our legal, financial, commercial
and technology teams. There are strict internal
controls applied to the development of our
systems, products and services. In order to
assist with the management of risks, the
Group continues to recruit individuals who
are expert in our markets, technology and
support disciplines. The Group has a
delegation of authorities that clearly sets
out the approval required for key activities,
including those restricted to the Board and
the Executive Directors.
The disclosure of the key risks and
uncertainties in the table below reflects the
approach of the Company to also look for the
opportunities presented when addressing such
risks. This is not an exhaustive list of all the
risks faced by the Company.
Tungsten Network considers these risks in
accordance with the governance procedures
set out on page 31.
Risk
Strategic
Impact
Mitigation
Direction of change
The Company is stable and is demonstrating progress in executing its business strategy.
The business model fails to meet its strategic
objectives.
• Failure to achieve targets for revenue,
profit and earnings
• Damage to reputation
Tungsten Network works with some of the
world’s biggest companies. There is a risk
that Tungsten Network may fail to win and/
or retain contracts on satisfactory terms and
conditions with the existing as well as new
targeted customers and markets.
• Failure to meet our growth plans
• Failure to achieve targets for revenue,
profit and earnings
• The strategy is regularly reviewed and challenged by the Executive Committee and Board
• The strategy forms the basis of the annual business planning process
• Performance targets are aligned to strategy
• Strategy is regularly and effectively communicated to all staff
• Active management in place to spread revenues across all customers. No one customer accounts for significant revenue or concentration
• Structured contracts approval process with clearly defined selection criteria to ensure contracts are taken on or renewed only where
Tungsten Network can provide a good service and manage any risks involved
• Continual review and development of the client relationship management structure and function to improve services to the existing
• A process is in place to continuously listen and respond to customers to enhance their experience of using Tungsten Network’s products
of revenue
customer base
and services
Failure to invest in enhancements to the
infrastructure and operating systems leading
to loss of advantage over our competitors
and failure to meet the expectation of our
customers.
• Failure to meet our growth plans
• Failure to achieve targets for revenue,
profit and earnings
• Products and services become unavailable
• Damage to reputation
• The governance frameworks are key to ensuring successful implementation of all aspects of the planned enhancements and changes
• Detailed approval and planning process prior to project commencement
• The Executive Committee and Board review and challenge the status/progress of key change programmes and projects
• Experts in infrastructure projects and change programmes have been hired to achieve successful implementation
• Post-implementation reviews are undertaken once a project is completed so that lessons can be learned
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT 25
The disclosure of the key risks and
uncertainties in the table below reflects the
approach of the Company to also look for the
opportunities presented when addressing
significant risks. This is not an exhaustive
list of all the risks faced by the Company.
Tungsten Network considers these risks in
accordance with the governance procedures
set out on page 31.
RISK MANAGEMENT
FRAMEWORK
Tungsten Network’s customers and other
stakeholders expect the highest standards
of risk management. To facilitate this and
evidence assurance, the risks from the
risk register are discussed, debated and
challenged, firstly by the Executive Committee
and then by the Audit Committee before the
principal risks are presented to the Board.
Key risks and their likelihood
IDENTIFY
MEASURE
MANAGE
MONITOR
REPORT
3
1
2
5
10
4
6
7
8
9
11
12
13
Low
1. Anti-fraud, bribery and corruption
2. Concentration on major customers
3. Failure of critical vendors
Stable
High
4. Compliance with local tax, legal and
11. Data protection and cyber security
including GDPR
12. IT system enhancements
13. Change to business execution
regulatory regimes
5. Political, including the impact of the UK
leaving the EU
6. Commercial failure of products
7. Complexity of operational processes
8. Change to business execution
9. Retention of key personnel
10. Availability of sufficient liquidity to
meet growth expectations
Risk
Strategic
Direction of change
The Company is stable and is demonstrating progress in executing its business strategy.
The business model fails to meet its strategic
• Failure to achieve targets for revenue,
objectives.
profit and earnings
• Damage to reputation
Tungsten Network works with some of the
world’s biggest companies. There is a risk
that Tungsten Network may fail to win and/
or retain contracts on satisfactory terms and
conditions with the existing as well as new
targeted customers and markets.
• Failure to meet our growth plans
• Failure to achieve targets for revenue,
profit and earnings
Impact
Mitigation
• The strategy is regularly reviewed and challenged by the Executive Committee and Board
• The strategy forms the basis of the annual business planning process
• Performance targets are aligned to strategy
• Strategy is regularly and effectively communicated to all staff
• Active management in place to spread revenues across all customers. No one customer accounts for significant revenue or concentration
of revenue
• Structured contracts approval process with clearly defined selection criteria to ensure contracts are taken on or renewed only where
Tungsten Network can provide a good service and manage any risks involved
• Continual review and development of the client relationship management structure and function to improve services to the existing
customer base
• A process is in place to continuously listen and respond to customers to enhance their experience of using Tungsten Network’s products
and services
Failure to invest in enhancements to the
infrastructure and operating systems leading
to loss of advantage over our competitors
and failure to meet the expectation of our
customers.
• Failure to meet our growth plans
• Failure to achieve targets for revenue,
profit and earnings
• Products and services become unavailable
• Damage to reputation
• The governance frameworks are key to ensuring successful implementation of all aspects of the planned enhancements and changes
• Detailed approval and planning process prior to project commencement
• The Executive Committee and Board review and challenge the status/progress of key change programmes and projects
• Experts in infrastructure projects and change programmes have been hired to achieve successful implementation
• Post-implementation reviews are undertaken once a project is completed so that lessons can be learned
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 26
RISK
MANAGEMENT
CONT.
Risk
Impact
Technological & Operational
Direction of change
There are several multi-year projects to upgrade the underlying systems and infrastructure
as well as improve operational processes. The majority have been completed, however, these
changes can be significant and critical to the success of the business. Therefore, the overall
level of technological and operational risk facing Tungsten Network remains high.
Mitigation
Tungsten Network has a highly
developed and complex operational
and IT infrastructure, which
is constantly developed and
upgraded. A major incident as a
result of an internal
or external event could impact
the ability of the Company to
provide products and services
to its customers.
The Tungsten Network has a
highly developed and complex
IT infrastructure. There is a risk
of information security breach
including cyber-attacks leading
to loss of confidentiality, integrity
or availability of data.
• Products and services become unavailable
• Customer claims for losses. Loss of customers
• Damage to reputation
• Failure to meet our growth plans
• Products and services become unavailable
• Customer claims for losses. Loss of customers
• Damage to reputation
• Failure to meet our growth plans
Tungsten Network is constantly
developing and upgrading many
aspects of its technology software
and hardware. As a result, there
is a risk of failure or inefficiencies
in its operations, systems and
infrastructure.
• Products and services become unavailable
• Customer claims for losses. Loss of customers
• Damage to reputation
• Failure to meet our growth plans
• Additional costs if projects not delivered on time or
within budget or if additional work required
• Uninsured loss claims from customers
• Loss of customers
• Damage to reputation
• Financial penalties
• Products and services become unavailable
• Customer claims for losses. Loss of customers
• Damage to reputation
• Failure to meet our growth plans
Tungsten Network processed
17.7 million transactions and over
5 million purchase orders in FY18
and holds a significant volume of
customer data. There is a risk of a
data breach.
Tungsten Network uses market-
leading external IT vendors to
support its businesses including
software upgrades. There is a risk
of failure/closure of a vendor
which could impact the ability
of the Company to provide
products and services
to its customers.
• The strategy is regularly reviewed and challenged by the Executive Committee and Board
• The strategy forms the basis of the annual business planning process
• Performance targets are aligned to strategy
• Strategy is regularly and effectively communicated to all staff
• Documented up-to-date disaster recovery and business continuity plans which are regularly tested. Use of multiple hosting centres
• IT recovery plans include website resilience and penetration tests
• Ongoing, real-time technology defence mechanisms in place
• Continuous monitoring of IT systems availability
• Governance frameworks in place to ensure appropriate management of the risks and mitigants
• New employees with the appropriate skills have been recruited and, where required, third party experts are used to review and validate both the
planning and execution of programmes of work
• Mitigating cyber-attacks is of paramount importance to the Company to ensure customer confidence in the security and availability of our
products and services
• Well-defined IT security procedures in place
• Documented up-to-date disaster recovery and business continuity plans, which are regularly tested. Use of multiple hosting centres
• Comprehensive review of procedures and controls as part of the annual International Standards for Assurance Engagements (“ISAE”) 3402
Assurance Reports on Controls at a Service Organisation
• Comprehensive review of procedures and controls as part of the annual independent ISO 27001 certification, the international standard describing
best practice for an Information Security Management System
• Training and employee awareness programmes in place
• Processes in place to improve operational performance
• Documented up-to-date disaster recovery and business continuity plans which are regularly tested. Use of multiple hosting centres
• IT recovery plans include website resilience and penetration tests
• New employees with the appropriate skills have been recruited and, where required, third party experts are used to review and validate both
the planning and execution of programmes of work
• Continuous monitoring of IT systems availability
• Continuing to enhance our technological and operational capabilities through investment in high quality staff and IT functionality
• Oversight of satisfactory completion of improvements and enhancements by Executive Committee
• Processes in place to ensure adherence to data protection and security awareness policies
• Training and employee awareness programmes in place
• No issues raised under the independent review of procedures and controls as part of the annual ISAE 3402 Reports
• Prior to appointment, key vendors are subject to due diligence check and assessed for financial viability
• The relationship with and financial position of key vendors are reviewed on a regular basis
• Key vendors required to have ISO 27001 certification. Only leading vendors are engaged
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT Risk
Impact
Mitigation
27
Technological & Operational
Direction of change
There are several multi-year projects to upgrade the underlying systems and infrastructure
as well as improve operational processes. The majority have been completed, however, these
changes can be significant and critical to the success of the business. Therefore, the overall
level of technological and operational risk facing Tungsten Network remains high.
Tungsten Network has a highly
developed and complex operational
• Products and services become unavailable
• Customer claims for losses. Loss of customers
• Damage to reputation
• Failure to meet our growth plans
and IT infrastructure, which
is constantly developed and
upgraded. A major incident as a
result of an internal
or external event could impact
the ability of the Company to
provide products and services
to its customers.
The Tungsten Network has a
highly developed and complex
IT infrastructure. There is a risk
of information security breach
including cyber-attacks leading
to loss of confidentiality, integrity
or availability of data.
• Products and services become unavailable
• Customer claims for losses. Loss of customers
• Damage to reputation
• Failure to meet our growth plans
Tungsten Network is constantly
developing and upgrading many
aspects of its technology software
and hardware. As a result, there
is a risk of failure or inefficiencies
in its operations, systems and
• Products and services become unavailable
• Customer claims for losses. Loss of customers
• Damage to reputation
• Failure to meet our growth plans
• Additional costs if projects not delivered on time or
within budget or if additional work required
infrastructure.
• Uninsured loss claims from customers
• Loss of customers
• Damage to reputation
• Financial penalties
• Products and services become unavailable
• Customer claims for losses. Loss of customers
• Damage to reputation
• Failure to meet our growth plans
Tungsten Network processed
17.7 million transactions and over
5 million purchase orders in FY18
and holds a significant volume of
customer data. There is a risk of a
data breach.
Tungsten Network uses market-
leading external IT vendors to
support its businesses including
software upgrades. There is a risk
of failure/closure of a vendor
which could impact the ability
of the Company to provide
products and services
to its customers.
• The strategy is regularly reviewed and challenged by the Executive Committee and Board
• The strategy forms the basis of the annual business planning process
• Performance targets are aligned to strategy
• Strategy is regularly and effectively communicated to all staff
• Documented up-to-date disaster recovery and business continuity plans which are regularly tested. Use of multiple hosting centres
• IT recovery plans include website resilience and penetration tests
• Ongoing, real-time technology defence mechanisms in place
• Continuous monitoring of IT systems availability
• Governance frameworks in place to ensure appropriate management of the risks and mitigants
• New employees with the appropriate skills have been recruited and, where required, third party experts are used to review and validate both the
planning and execution of programmes of work
• Mitigating cyber-attacks is of paramount importance to the Company to ensure customer confidence in the security and availability of our
products and services
• Well-defined IT security procedures in place
• Documented up-to-date disaster recovery and business continuity plans, which are regularly tested. Use of multiple hosting centres
• Comprehensive review of procedures and controls as part of the annual International Standards for Assurance Engagements (“ISAE”) 3402
Assurance Reports on Controls at a Service Organisation
• Comprehensive review of procedures and controls as part of the annual independent ISO 27001 certification, the international standard describing
best practice for an Information Security Management System
• Training and employee awareness programmes in place
• Processes in place to improve operational performance
• Documented up-to-date disaster recovery and business continuity plans which are regularly tested. Use of multiple hosting centres
• IT recovery plans include website resilience and penetration tests
• New employees with the appropriate skills have been recruited and, where required, third party experts are used to review and validate both
the planning and execution of programmes of work
• Continuous monitoring of IT systems availability
• Continuing to enhance our technological and operational capabilities through investment in high quality staff and IT functionality
• Oversight of satisfactory completion of improvements and enhancements by Executive Committee
• Processes in place to ensure adherence to data protection and security awareness policies
• Training and employee awareness programmes in place
• No issues raised under the independent review of procedures and controls as part of the annual ISAE 3402 Reports
• Prior to appointment, key vendors are subject to due diligence check and assessed for financial viability
• The relationship with and financial position of key vendors are reviewed on a regular basis
• Key vendors required to have ISO 27001 certification. Only leading vendors are engaged
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 28
RISK
MANAGEMENT
CONT.
Approval of the Strategic
Report :
Richard Hurwitz
Chief Executive Officer
23 July 2018
Risk
Financial
Impact
Mitigation
Direction of change
The level of financial risk facing Tungsten Network is stable as revenues have grown and
losses decreased, reducing the cash requirements of the Group.
Inability to finance the Group
businesses
• Failure to continue in business or meet liabilities
• Failure to meet our growth plans
Tungsten Network may be subject
to non-payment by its customers.
• Failure to meet our growth plans. Ability to invest
or develop
• Litigation costs
Exposure to foreign exchange
fluctuations, resulting in a material
impact on profit or cash balances.
• Failure to meet our growth plans
• Failure to achieve targets for revenue, profits
or earnings
People
Direction of change
There has been a high turnover of staff at all levels as a result of changes to the business
strategy. Many new high calibre people have joined the Group, and continuous succession
planning has resulted in a reduction in the level of risk
Inability to retain, develop and
motivate a highly skilled and
knowledgeable senior
management team.
• Failure to implement the strategy and achieve the
business’ targets
• Over-reliance on key senior personnel to lead the business
• Loss of knowledge/skills within the senior
management team
Inability to attract, retain, develop
and motivate the best people with
the appropriate capabilities to
create a high quality, diverse and
flexible workforce.
• Failure to maintain satisfactory customer service levels
• Loss of knowledge/skills within the business
• Over reliance on key personnel
Regulatory/Political/Environmental/Social
Direction of change
Although the markets in which we operate and their legal and political environments are
constantly evolving, the overall level of regulatory/political risk facing Tungsten Network has
not changed materially and remains stable. Implementation of the General Data Protection
• Financial loss as a result of restricted access to the markets
• Damage to reputation. Regulatory censure
• Increased compliance costs
Tungsten Network has customers
in 192 countries around the
world. Our business model and
our services are affected by legal,
political and regulatory changes
that restrict access to markets
and customers. These changes
include implementation of the EU
General Data Protection Regulation
(“GDPR”) in May 2018 and the UK’s
exit from the European Union.
Tungsten Network has a
negative impact on the physical
environment, social environment or
communities in which it operates
• Damage to environment or communities
• Damage to reputation
• The Directors regularly stress test the business model to ensure the Group has adequate working capital
• Robust procedures to monitor the effective management of cash and debt including cash reports and cash forecasting
• A cash mitigation plan exists in the event that liquidity falls below expected levels
• The Group has secured a revolving credit facility with its Bank
• Ongoing project to review whole credit management processes
• Credit monitoring process in place to address aged debtors
• Credit analytics reporting in place
• Tungsten Network reports in and holds the majority of its cash balances in British Sterling
• Revenues and costs for its other major currencies of US Dollar and the Euro are materially equal
• Currency exposure is forward managed and hedging products considered where appropriate
• Succession planning for all members of executive management is part of the Board agenda
• Competitive remuneration packages with oversight by the Remuneration Committee, including equity based long-term incentives
• Strategies for senior management retention
• Training and development, customer relationship, leadership, social responsibility and communications programmes
in place to actively engage and retain employees
• Competitive remuneration packages with oversight by the Remuneration Committee
• Focus on creation of a culture and values to attract and motivate our people
• Recruitment strategy and succession planning in place including active encouragement of promotion from within
• Comprehensive documented policies relating to business conduct, financial crime, bribery, corruption and whistleblowing in place
• Oversight and monitoring including reporting of any deviations and exceptions to the Executive Committee
• Strategy to ensure that business model remains flexible and responsive to change and is regularly reviewed
• Horizon scanning by the Executive Committee for upcoming potential changes including product/diversification strategy to reduce impact
• An extensive programme is in place to ensure GDPR compliance. Program elements include:
1. Engaging with external advisers to assist in assessing Tungsten Network’s readiness for the GDPR
2. Established a cross-company steering and working group, led by our Compliance and Assurance team
3. Leveraging our current industry best practices such as IS027001 certification and Cyber Essentials certifications, as part of readiness
preparations for GDPR
4. Acquiring the latest best-of-breed proportionate technology for data discovery and classification
5. Training for all of our internal staff, including software development teams in secure coding and privacy through design
6. Active program of rolling out GDPR compliant processes and policies
7. Updating contract terms with customers and vendors to make GDPR compliant
• Tungsten Network‘s products benefit the environment through the elimination of paper
• Tungsten Network’s office footprints are assessed for their impact on the environment and “green” options implemented where practical
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018STRATEGIC REPORT
Impact
Mitigation
29
• The Directors regularly stress test the business model to ensure the Group has adequate working capital
• Robust procedures to monitor the effective management of cash and debt including cash reports and cash forecasting
• A cash mitigation plan exists in the event that liquidity falls below expected levels
• The Group has secured a revolving credit facility with its Bank
• Ongoing project to review whole credit management processes
• Credit monitoring process in place to address aged debtors
• Credit analytics reporting in place
• Tungsten Network reports in and holds the majority of its cash balances in British Sterling
• Revenues and costs for its other major currencies of US Dollar and the Euro are materially equal
• Currency exposure is forward managed and hedging products considered where appropriate
• Succession planning for all members of executive management is part of the Board agenda
• Competitive remuneration packages with oversight by the Remuneration Committee, including equity based long-term incentives
• Strategies for senior management retention
• Training and development, customer relationship, leadership, social responsibility and communications programmes
in place to actively engage and retain employees
• Competitive remuneration packages with oversight by the Remuneration Committee
• Focus on creation of a culture and values to attract and motivate our people
• Recruitment strategy and succession planning in place including active encouragement of promotion from within
Regulation (“GDPR”) on 25 May 2018 has resulted in increased risk for all businesses in the area of data protection. This has previously been flagged
as a high risk area, and remains so, although this as a result of the potential implications of non-compliance with the new GDPR regime rather than
Tungsten’s state of GDPR readiness.
• Comprehensive documented policies relating to business conduct, financial crime, bribery, corruption and whistleblowing in place
• Oversight and monitoring including reporting of any deviations and exceptions to the Executive Committee
• Strategy to ensure that business model remains flexible and responsive to change and is regularly reviewed
• Horizon scanning by the Executive Committee for upcoming potential changes including product/diversification strategy to reduce impact
• An extensive programme is in place to ensure GDPR compliance. Program elements include:
1. Engaging with external advisers to assist in assessing Tungsten Network’s readiness for the GDPR
2. Established a cross-company steering and working group, led by our Compliance and Assurance team
3. Leveraging our current industry best practices such as IS027001 certification and Cyber Essentials certifications, as part of readiness
preparations for GDPR
4. Acquiring the latest best-of-breed proportionate technology for data discovery and classification
5. Training for all of our internal staff, including software development teams in secure coding and privacy through design
6. Active program of rolling out GDPR compliant processes and policies
7. Updating contract terms with customers and vendors to make GDPR compliant
• Tungsten Network‘s products benefit the environment through the elimination of paper
• Tungsten Network’s office footprints are assessed for their impact on the environment and “green” options implemented where practical
Risk
Financial
Direction of change
The level of financial risk facing Tungsten Network is stable as revenues have grown and
losses decreased, reducing the cash requirements of the Group.
Inability to finance the Group
businesses
• Failure to continue in business or meet liabilities
• Failure to meet our growth plans
Tungsten Network may be subject
to non-payment by its customers.
• Failure to meet our growth plans. Ability to invest
or develop
• Litigation costs
Exposure to foreign exchange
fluctuations, resulting in a material
impact on profit or cash balances.
• Failure to meet our growth plans
• Failure to achieve targets for revenue, profits
or earnings
People
Direction of change
There has been a high turnover of staff at all levels as a result of changes to the business
strategy. Many new high calibre people have joined the Group, and continuous succession
planning has resulted in a reduction in the level of risk
Inability to retain, develop and
motivate a highly skilled and
knowledgeable senior
management team.
• Failure to implement the strategy and achieve the
business’ targets
• Over-reliance on key senior personnel to lead the business
• Loss of knowledge/skills within the senior
management team
Inability to attract, retain, develop
and motivate the best people with
the appropriate capabilities to
create a high quality, diverse and
flexible workforce.
• Failure to maintain satisfactory customer service levels
• Loss of knowledge/skills within the business
• Over reliance on key personnel
Regulatory/Political/Environmental/Social
Direction of change
Although the markets in which we operate and their legal and political environments are
constantly evolving, the overall level of regulatory/political risk facing Tungsten Network has
not changed materially and remains stable. Implementation of the General Data Protection
• Financial loss as a result of restricted access to the markets
• Damage to reputation. Regulatory censure
• Increased compliance costs
Tungsten Network has customers
in 192 countries around the
world. Our business model and
our services are affected by legal,
political and regulatory changes
that restrict access to markets
and customers. These changes
include implementation of the EU
General Data Protection Regulation
(“GDPR”) in May 2018 and the UK’s
exit from the European Union.
Tungsten Network has a
negative impact on the physical
environment, social environment or
communities in which it operates
• Damage to environment or communities
• Damage to reputation
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
30
GOVERNANCE
on the Board. We currently have a globally
diverse board and workplace which reflects
our customers and our markets.
Responsibility for the overall leadership of
the Group and setting the Group’s values and
standards sits with the Board.
Build Trust
During the year Tungsten Corporation Plc has
undertaken a number of investor relations
activities. These include investor roadshows,
participation at investor conferences and
attending other events where investors
have the opportunity to meet and talk to the
Executive Directors. Investors are actively
encouraged to attend our AGM and each
member of our Board see this as an important
event in the annual calendar to meet and talk
to shareholders.
During the year the Board has continued to
review governance and the Group’s corporate
governance framework. We reviewed our
governance against the new QCA Code in June
2018 and will do so annually, as required by
AIM Rule 26.
Nick Parker
Non-Executive Chairman
23 July 2018
Dear Shareholder,
The principles of Corporate Governance
As Chairman, my role includes upholding
the highest levels of integrity, probity and
corporate governance throughout the
Company and particularly at Board level.
It therefore gives me great pleasure to
introduce our Governance statement.
As a Board we recognise the importance of
high standards of corporate governance and
their importance and support to our strategic
goals and long term success. The Company
is listed on AIM and is therefore required
from September 2018 to provide details of
a recognised corporate governance code
that the Board of directors have decided to
apply. We have, since our admission to AIM
in October 2013, measured our governance
policies and structure against the Quoted
Companies Alliance corporate governance
code for small and mid-sized companies 2013
(the QCA Code) as we consider that the QCA
Code is more applicable for small and mid-
sized companies. We continue to apply this
code and its replacement The QCA Corporate
Governance Code that was published in April
2018 (the New QCA Code). We believe we
apply the ten principles of the New QCA Code.
The policies and procedures put in place at
the time of admission to AIM gave us a firm
foundation for our governance structures
and we continue to build on and evolve
these each year.
Deliver growth
The Board has collective responsibility for
setting the strategic aims and objectives of the
Group. These growth aims are articulated in
the CEO’s statement in the Annual Report and
on our website along with our business model.
In the course of implementing these strategic
aims the Board takes into account the
expectations of the Company’s shareholder
base and also its wider stakeholder,
environmental and social responsibilities.
The Board also has responsibility for the
Group’s internal control and risk management
systems and structures. Our risk management
process is embedded into the business and
starts at the Board but is delivered throughout
the Group.
Dynamic Management Framework
As Chairman, I consider the operation of the
Board as a whole and the performance of
the directors individually regularly. During
FY17 we undertook a formal external Board
evaluation process as part of our aim to
seek continuous improvement as a Board.
This process is described more fully in
our governance report. As we have done
with previous appointments to the Board,
future appointments will consider diversity,
including gender. Any such appointments
must compliment the current balance of skills
CHAIRMAN’S
GOVERNANCE
OVERVIEW
Tungsten has evolved as a
vibrant and agile technology
business that helps accelerate
global trade by operating a
secure network connecting
some of the world’s largest
organisations to their
supply chains.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 31
OUR BOARD AND
COMMITTEE STRUCTURE
Chairman
Nick Parker
Key objectives
Chairing the Board meetings,
upholding the highest levels
of integrity, probity and
corporate governance.
Chief Executive Officer
Richard Hurwitz
Key objectives
Leadership, operation and
governance of the Board,
setting the agenda of the
Board.
Tungsten Corporation Board of Directors
Nick Parker
Key objectives
Chairing the Board meetings,
upholding the highest levels
of integrity, probity and
corporate governance.
Audit Committee
Chair: Peter Kiernan
Nomination and
Remuneration Committee
Chair: Nick Parker
Ad hoc Committees
Key objectives
Oversight and review of
financial and operational
risk management, audit
and internal control
issues.
Key objectives
Oversight and
review of Board and
senior management
appointments and
succession planning.
= See pg 40
= See pg 42
OUR GOVERNANCE
PRINCIPLES
LEADERSHIP
Executive Committee
Key objectives
To focus on strategy, financial
performance, succession
planning, business growth,
organisational development
and support of Group-wide
policies.
TRANSPARENCY
Business units and operational staff
RESPECT
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 32
BOARD OF
DIRECTORS
Board sector
experience
Governance
Technology
Financial
Marketing
Business
development
Public sector
Committee key
A Audit
Committee
NR Nomination and
Remuneration
Committee
Member
Chairman
Nick Parker
Non-Executive Director
Peter Kiernan
Senior Independent Director
Year appointed
2015
Year appointed
2012
Key strengths
• Over 40 years’ experience in
corporate finance advisory roles
• Public sector strategy
• Start-up and turnaround experience
Key strengths
• 35 years’ experience spanning
investment banking and other
professional services and as a
Non-Executive Director
Previous experience
• Peat, Marwick, Mitchell & Co. –
Chartered Accountant
• S.G. Warburg & Co. Ltd. – Director
• UBS Warburg – Managing Director
• Goldman Sachs – Managing
Director
• Lazard – Managing Director and
Head of UK Investment Banking
• Canaccord Genuity – Chairman
of European Investment Banking
• Bell Pottinger – Senior Adviser
• Heidrick & Struggles, UK Board
Practice – Senior Adviser
External commitments
• London First – Non-Executive
Director
• Listrac Holdings Limited –
Non-Executive Director
• OMERS Private Equity Europe –
Senior Adviser
• Egon Zehnder – Senior Adviser
Committee
A
NR
Previous experience
• PricewaterhouseCoopers LLC –
Partner & various roles, 1968-2002
• Scottish Executive – Head of
Performance & Innovation,
2004-2007
• Continental Farmers Group PLC –
Chairman and Co-founder,
2001-2013
• Pension Insurance Corporation
PLC – Co-founder and Director,
2006-2015
• The College of Optometrists –
Trustee, 2000-2009
• Project Scotland – Trustee,
2005-2007
• European Academy of Optometrists
– Treasurer, 2009-2012
• Tungsten Bank plc – Non-Executive
Director
External commitments
• The Wastepack Group Limited –
Non-Executive Director
• Cuvva Limited – Non-Executive
Director
• Farmstar Polska (UK) Limited –
Non-Executive Director
• Chimney Group AB – Non-Executive
• LIVR Limited – Non-Executive
Director
Director
Committee
A NR
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 33
Richard Hurwitz
Chief Executive Officer
David Benello
Independent
Non-Executive Director
Ian Wheeler
Independent
Non-Executive Director
David Williams
Chief Financial Officer
Year appointed
2015
Year appointed
2015
Year appointed
2015
Year appointed
2015
Key strengths
• Proven track record of building and
successfully exiting high growth
companies
• Extensive experience and success
with talent development
• General management and capital
raising in the financial and
technology industries globally
• Strategic transformations
• Private investment
Previous experience
• Pictometry International –
Chief Executive Officer, 2010-2013
• Bancorp Services –
Managing Partner and Chief
Executive of the firm's Broker-
Dealer 1996-2004
• Bridge Information Systems,
(Europe) Senior Executive Officer
and Head of non-US Institutional
equity and derivatives trading.
1989-1996
• National Association of Corporate
Directors Board Leadership Fellow.
• Chairman of the Compensation
Committee Manning & Napier, Inc
(NYSE:MN,) 2011-2015
External commitments
• Chairman of the Nominating
and Governance Committee at
Symbility Solutions (TSE.V:SY)
Key strengths
• Responsible at Tungsten for
Finance, HR, Procurement,
Facilities and Investor Relations
• Over 20 years’ proven track record
• Strong financial control & reporting
disciplines
• Executed significant organisational
change and rationalisation
programmes
Previous experience
• Ernst & Young – Corporate Finance
• FTI Consulting –
Public & Private advisor
• Various – senior
management roles
Key strengths
• Over 25 years’ industry experience
• Advisory roles in middle-market
buyouts, growth buyouts and
growth capital investment
• Proven experience in transactional
platforms in the travel technology
industry.
Previous experience
• Amadeus IT Group – Group
Vice President of Marketing &
Distribution and various
External commitments
• Travel Technology Firms (various)
– Non-Executive Director
• Vitruvian Partners –
Industry Advisor
Committee
NR
Key strengths
• Strong experience in the Industrial,
High Tech/Telecom and Insurance
sectors
• Wealth of knowledge in Strategy
• Experience in International
Business
Previous experience
• Telecom Italia SpA – Lead
Independent Director
• McKinsey & Company
– Director Emeritus
External commitments
• V-Nova International Ltd -
Chairman
• Telekom Malaysia –
Independent Non-Executive
Director
• Sirti SpA – Independent Non-
Executive Director
• Association of International
Certified Professional Accountants
– Board Member
• King’s College London
Mathematics School – Chairman
Committee
A
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 34
LEADERSHIP
TEAM
Alec Holmes
Senior Vice
President,
Service Delivery
Alec joined the firm
in 2001 and leads
Tungsten Network’s
Service Delivery Team
which includes Service
Delivery Management,
Campaign Management,
Supplier Onboarding,
Implementation and
Support. Alec oversees
teams in London,
Atlanta, Kuala Lumpur
and Sofia.
Richard Hurwitz
Chief Executive
Officer
Patrick Clark
General Counsel
David Williams
Chief Financial
Officer
Patrick leads the
legal and compliance
function and also
serves as Company
Secretary for Tungsten
Corporation Plc. Prior
to joining Tungsten
Network, Patrick was a
Partner and Head of the
UK Telecoms Practice
at the law firm Taylor
Wessing, specialising in
providing commercial
and regulatory advice
to clients in the
technology, media and
telecoms sector. He
also previously worked
at Alcatel-Lucent as
Lead Corporate Counsel
for North Europe.
As CEO of Tungsten
Corporation Plc, Rick
leads a high-performing
team directing
Tungsten Network’s
growth. Rick is also a
member of Tungsten
Corporation Plc’s Board
of Directors. Rick has
30 years of experience
transforming operations
and developing growth
strategies for financial
services and technology
companies. Prior to
Tungsten Network, he
was CEO of Pictometry
International, where
he led a strategic
transformation that
positioned the firm
for success in the
changing geospatial
industry. Previously, he
was a partner at Aegis
Investment Partners, a
private investment firm,
a Managing Partner
with Bancorp Services
and the CEO of Bridge
Information Systems’
European operations.
David joined Tungsten
Corporation in 2003
and is now CFO. David
is also a member of
Tungsten Corporation
Plc’s Board of Directors.
At Tungsten, David is
responsible for Finance,
Human Resources,
Procurement, Facilities
and Investor Relations.
Prior to joining
Tungsten Network,
David served as a
finance executive with
multiple firms. He
also spent five years
at FTI Consulting,
advising organisations
in both the public
and private sector
on corporate finance
and restructuring.
Previously, he was
with the Corporate
Finance division of
Ernst & Young. David
received his training as
a Chartered Accountant
while at Arthur
Andersen and is a
Fellow of the ICAEW.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 35
Connie O’Brien
Chief Marketing
Officer
Guy Miller
Head of
Corporate
Development
Martyn Arbon
Chief Technology
Officer
Prabhat Vira
President,
Tungsten
Network Finance
Kevin Wilbur
Senior Vice
President,
AP Automation
As CTO, Martyn
is responsible for
delivering a fast,
efficient, digital, end-
to-end experience for
our customers. Before
joining Tungsten
Network in 2018, Martyn
held senior technical
leadership roles at
Oracle, StepStone,
Lumesse and Investis.
Starting his career as
a software developer,
Martyn brings detailed
technical knowledge
from both contributor
and leadership
perspectives, and over
the last 15 years has
led multi-disciplined
and organisationally-
dispersed technology
teams.
Prabhat joined
Tungsten Network in
2016 with responsibility
for offering our clients
innovative supply chain
financing alternatives
that utilise our data and
technology. Prabhat
brings to Tungsten
Network deep trade
finance expertise
and broad global
business experience.
He joined from HSBC,
where he was Global
Head of Strategic
Transformation
(Trade & Receivables
Finance), and, earlier,
Regional Head of
Trade & Receivables
Finance. Previously,
he held leadership
roles in structured
finance, commodities
finance and corporate
banking for Royal Bank
of Scotland and ABN
AMRO.
Kevin is responsible for
the enterprise sales,
account management,
and implementation
efforts that ensure our
customers’ success.
With more than 25
years of experience of
leading teams within
fast paced, high growth,
global technology
and financial services
companies, Kevin
has strong insight
into the power of
electronic invoicing
and procurement
analytics to transform
supply chains, and is
responsible for the
expansion of digital
invoicing, workflow and
analytics capabilities
across Tungsten
Network’s global
customer base.
As CMO, Connie
leads our Digital
Command Centre and
is responsible for the
Tungsten Network
brand and ensuring
the firm is at the
forefront of the digital
transformation of
the purchase-to-pay
process, with a focus
on how we engage
with our customers
through automated,
scalable, dynamic
and personalised
experiences. Connie
joined Tungsten
Network from Affinion
Group, an international
membership and
loyalty company where
she was Chief Digital
Officer. She has 30
years’ experience
positioning brands
with over 20 of those
years implementing
marketing strategies
for businesses, and
has led campaigns
for brands including
GlaxoSmithKline, P&G,
Kraft Foods, AXA, John
Hancock, AT&T, Vonage
and Verizon.
Guy is responsible for
building new products
and services adjacent to
our existing e-invoicing
and invoice financing
businesses. He is also
responsible for other
corporate development
initiatives, and for M&A.
Guy has significant
experience in strategy,
corporate development
and M&A. Most of
his career has been
spent in investment
banking, including two
years with a leading
independent corporate
finance advisory firm
preceded by eight
years at Royal Bank of
Scotland in financial
institutions, capital
markets and M&A. Guy
had previously spent
nine years at Citigroup
and Schroders, a
predecessor business,
in a range of investment
banking roles
working with financial
institutions and fintech
firms. Immediately prior
to joining Tungsten
Network he was an
advisor to a major
private equity fund.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 36
COMPOSITION
AND
INDEPENDENCE
OF THE
BOARD
The composition of the Board has been
structured to ensure that no one individual
can dominate its decision-making processes.
The Board consists of six Directors: the Non-
Executive Chairman, two Executive Directors,
and three Non-Executive Directors. All of
the Non-Executive Directors are considered
by the Board, and regularly demonstrate,
that they are independent. Notwithstanding
that Peter Kiernan holds LTIP Securities, the
Board considers him to be independent in
character and judgement he is accordingly
the Senior Independent Director.
Details of each Director’s experience and
background are given in their biographies
on pages 32 and 33. The skill-set and
experience of Board members is relevant
for the current position of the Company and
covers areas including finance, capital raising,
financial services, banking, pension industry,
marketing, network platforms and general
management.
Appointments to the Board and re-election
The Board has delegated the tasks of
reviewing Board composition, searching
for appropriate candidates and making
recommendations to the Board on
candidates to be appointed as Directors
to the Nomination and Remuneration
Committee. Further details on the role
of the Remuneration and Nomination
Committee may be found on page 42.
With regard to re-election of Directors,
the Company is governed by its Articles of
Association (‘Articles’). Under the Articles, the
Board has the power to appoint a Director
during the year but any person so appointed
must stand for election at the next Annual
General Meeting. At each Annual General
Meeting, one-third (or the number nearest
to one-third) of the Directors must retire from
office and, if willing, may offer themselves
for re-election.
Richard Hurwitz and Peter Kiernan will retire
and stand for re-election at the next AGM. The
Board considers that both Directors offering
themselves for re-election continue to make a
valuable contribution to the deliberations and
continue to demonstrate commitment.
Division of responsibilities
Chairman and Chief Executive
The division of responsibilities between the
Chairman and Chief Executive have been
agreed and approved by the Board.
A summary of the main responsibilities of
each role is given below:
Role of the Chairman
• Upholding the highest levels of integrity,
probity and corporate governance
throughout the Company, particularly at
Board level
• Chairing the Board meetings, setting the
Board agenda and ensuring the Directors
receive accurate, timely, and clear
information to enable the Board to make
sound decisions, monitor effectively and
promote the success of the Company
• Facilitating the effective contribution of
and active engagement of all the Directors
and ensuring constructive relationships
between the Non-Executive Directors and
the Executive Directors
• Considering succession planning and
ensuring the composition of the Board
meets the needs of the business
• Ensuring the appropriate balance is
maintained between the interests of
shareholders and other stakeholders
• Ensuring the developmental needs
of the Directors are identified and that
these needs are met to enable Directors
to update their skills and knowledge
of the Group in order to carry out their
duties as Directors
• Ensuring the performance of the Board,
Audit Committee and individual Directors
are evaluated once a year and acting on
the results of the evaluation
• Ensure effective communication with
shareholders and other stakeholders and
ensure the Board is aware of the views of
the shareholders
• Chairing the AGM and other general
meetings of the Company
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 37
Role of the Chief Executive
• Running of the business of the Group
within the authorities delegated to him
by the Board
• Ensuring implementation across the
Group of the policies and strategy agreed
by the Board
• Leading the development of the Group’s
future strategy, including identifying and
assessing opportunities for the growth of
its business, and putting in place the long-
term capital to support such development
• Reviewing the performance of the
businesses, managing and holding
to account the Executive and senior
management teams
• Ensuring the Chairman is kept
appraised in a timely manner of the
issues facing the Group and of any
events and developments
• Ensuring the market and regulators
are kept appraised in a timely manner
of any material events and developments
• Ensuring that all major transactions
are conducted with the commercial
interests of the Group at the forefront
of negotiations, commensurate with the
need to always treat customers fairly
Senior Independent Director
Peter Kiernan is the Senior Independent
Director (SID). The SID’s role is to act as a
sounding board for the Chairman and serve
as an intermediary for the other Directors
when necessary. The SID will meet other Non-
Executive Directors without the Chairman
present at least once a year to appraise the
Chairman’s performance, taking into account
the views of executive Directors.
The SID is also available to shareholders
should they wish to discuss concerns they
have failed to resolve through the normal
channels of Chairman, Chief Executive Officer
or Executive Directors or for which such
contact is inappropriate.
Non-Executive Directors
Each of the Non-Executive Directors has
entered into a letter of appointment with the
Company. The appointment of each of the
Non-Executive Directors is stated to be for
a fixed term, expiring after 12 months of the
date of renewal or appointment. The Non-
Executive Directors’ letters of appointment
set out the duties of the Director and
commitment expected. They are expected to
commit around 24 days per annum to their
role. Key elements of the Non-Executive
Director’s role are to constructively challenge
and help provide the Board with effective
leadership in relation to the Company’s
strategy, performance, risk and people
management, and ensuring high standards
of financial probity and corporate governance.
Development, information and support
The Directors are encouraged to attend
training and continuing professional
development courses as required. Updates
are given to the Board on developments in
governance and regulations at each Board
meeting. An induction programme is provided
for any Directors joining during the year.
Patrick Clark is the Company Secretary and
supports the Chairman in ensuring that the
Board receives the information and support
it needs to carry out its roles. Directors’
induction.
When Directors join the Board they
receive an induction covering topics such
as the operation of the Board, Directors’
responsibilities, insider dealing, AIM Rules
and governance documents. Each Director
also receives an induction pack including all
of the key company documents.
Conflicts of interest
Under the Articles, the Directors may
authorise any actual or potential conflict
of interest a Director may have and may
impose any conditions on the Director that
are felt to be appropriate. Directors are
not able to vote in respect of any contract,
arrangement or transaction in which they
have a material interest and they are not
counted in the quorum.
A process has been developed to identify
any of the Directors’ potential or actual
conflicts of interest. This includes declaring
any new conflicts before the start of each
Board meeting.
Performance evaluation
The Chairman considers the operation of the
Board and performance of the Directors on
an ongoing basis as part of his duties and will
bring any areas of improvement he considers
are needed to the attention of the Board.
A formal external Effectiveness Review of the
Board and its Committees was undertaken
during the year. Independent Audit were
engaged to carry out the Board review.
The process took the format of a number
of interviews by Independent Audit with each
of the Directors individually and members
of the Senior Management. Independent
Audit also attended and observed a Board
meeting and the meetings of the Board
Committees. Independent Audit then
presented their findings to the Board and
facilitated a discussion around their findings.
Overall it was found that the Board had many
strength’s and were well placed to contribute
to the Company’s continued development.
A number of practical enablers were
suggested to improve the efficiency of the
meetings and to achieve a more consistently
value-adding role. Further suggestions and
actions included the need for diversity and
succession planning as well as developing
the senior management team further.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 38
COMPOSITION
AND
INDEPENDENCE
OF THE
BOARD CONT.
How the Board operates
The Board meets at regular intervals and
met six times during the year under review.
Directors also have contact on a variety
of issues between formal meetings. There
is also regular contact with the Senior
Management.
The Board has regular formal Board
meetings, with a standing agenda focussing
on key business and governance issues.
During the year Board meetings have
included presentations from Senior
Management responsible for the various
parts of the Tungsten Network business,
giving the Board greater visibility and
understanding over the Company’s business
and the steps being taken to execute its
strategy.
An agenda and accompanying detailed
papers; including reports from the Executive
Directors and other members of senior
management, are circulated to the Board
in advance of each Board meeting. All
Directors have direct access to senior
management should they require additional
information on any of the items to be
discussed. A calendar of matters to be
discussed at each meeting is prepared to
ensure that all key issues are captured.
All Directors are expected to attend all
meetings of the Board and any committees
of which they are members, and to devote
sufficient time to the Company’s affairs
to fulfil their duties as Directors. Where
Directors are unable to attend a meeting,
they are encouraged to submit any comments
on paper to be considered at the meeting to
the Chairman in advance to ensure that their
views are recorded and taken into account
during the meeting.
Directors are encouraged to question and
voice any concerns they may have on any
topic put to the Board for debate. The Board
is supported in its work by Board Committees,
which are responsible for a variety of tasks
delegated by the Board. There is also an
Executive Committee composed of the CEO
and CFO and representatives from senior
management whose responsibilities are to
implement the decisions of the Board and
review the key business objectives and
status of projects.
Attendance at Board and Committee
meetings by the Directors is shown below.
In addition, there was one ad hoc Board
meeting to approve a transactional issue
called at short notice and four board
committee meetings to approve full and
interim accounts and share option awards.
The main activities of the Board
during the year
There are a number of standing and
routine items included for review on each
Board agenda. These include the CEO’s
report and operations reports, financial
reports, consideration of reports from the
Board Committees, Governance, Risk and
compliance and investor relations updates.
In addition key areas put to the Board for
consideration and review included:
• Strategy presentations
• Presentations from various parts
of the business
• Consideration of financing structures
• Approval of annual report and
financial statements
• Review of Budget and Business Plan
• Going concern and cash flow
• Briefings and review of conflicts of interest
• Review of AGM business
• Outcomes from the External
Board Evaluation
• Disclosure policy
Board meetings
Nick Parker
Richard Hurwitz
David Benello
Peter Kiernan
Danny Truell1
Ian Wheeler
David Williams
1 Resigned from the Board on 24 May 2017.
Board
meetings
Audit
Committee
Nomination and
Remuneration
Committee
6/7
7/7
7/7
7/7
0/1
6/7
7/7
3/3
–
3/3
3/3
–
–
–
3/3
–
–
3/3
–
2/3
–
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 39
Shareholders
The Board is committed to maintaining
regular and clear communication with its
shareholders. The Board receives regular
reports on investor relations matters.
The Directors are keen to build a mutual
understanding of objectives with its
institutional shareholders and a regular
dialogue with institutional investors has
been maintained throughout the year.
The Directors also encourage
communications with private shareholders
and encourage their participation in the
Company’s Annual General Meeting. The
Company uses its corporate website
(www.tungsten-network.com) to communicate
with institutional shareholders and
private investors. It contains the latest
announcements, press releases, published
financial information, current projects and
other information about the Company.
The Annual Report and financial statements
is a key communication document and is
also available on the Company’s website.
This year’s Annual General Meeting of the
Company will be held on 21 September 2018.
The Notice of Annual General Meeting will
be available on the Company’s website at
www.tungsten-network.com. The Notice
of Annual General Meeting will be sent
out at least 21 days before the meeting.
Separate resolutions are provided on each
issue so that they can be given proper
consideration.
Financial and business reporting
The Board seeks to present a fair, balanced
and understandable assessment of the
Group’s position and prospects in all half-
year, final and any other ad-hoc reports and
other information as may be required from
time to time. The Board receives a number
of reports, including those from the Audit
Committee, to enable it to monitor and clearly
understand the Group’s financial position.
A Disclosure Policy is in place to ensure
that price-sensitive information is identified
effectively and all communications with the
market are released in accordance with
expected time scales. The Board considers
that this Annual Report and financial
statements, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the Company’s performance,
business model and strategy.
Anti-fraud, bribery and corruption
The Group’s anti-corruption procedures state
that the Company and its subsidiaries intend
to conduct business in an honest and ethical
manner. A zero-tolerance approach is taken
to bribery and corruption and the Company
is committed to acting professionally, fairly
and with integrity in all its business dealings
and relationships wherever it operates and to
implementing and enforcing effective systems
to counter bribery and corruption.
Whistleblowing
The Company has a whistleblowing
procedure under which staff may report any
suspicion of fraud, financial irregularity or
other malpractice to any Executive Director.
An amended policy, recommended by the
Audit Committee was adopted by the Board
during the year.
The Board Committees
There are two Board Committees, the
Audit Committee and the Nomination
and Remuneration Committee. These are
composed of the Chairman and two Non-
Executive Directors.
Each Board Committee has approved Terms
of Reference setting out their responsibilities.
The Terms of Reference were approved and
reviewed by the Board during the year and
are available on the Company’s website
www.tungsten-network.com. Details of the
operation of the Board Committees are set
out in their respective reports below. All
of the Board Committees are authorised
to obtain, at the Company’s expense,
professional advice on any matter within their
Terms of Reference and to have access to
sufficient resources in order to carry out their
duties.
External Advisers
The Board seeks advice on various matters
from its Nomad, Panmure Gordon & Co, its
brokers and corporate finance advisers,
Canaccord Genuity, and its lawyers, Ashurst
LLP, and Shepherd and Wedderburn
LLP. As noted above, during the year it
engaged Independent Audit to carry out an
effectiveness review. The Board also uses the
services of an external company secretarial
provider, Prism Cosec.
Accountability
The Company has in place a system of
internal financial controls commensurate
with its current size and activities, which is
designed to ensure that the possibility of
misstatement or loss is kept to a minimum.
These procedures include the preparation
of management accounts, forecast variance
analysis and other ad-hoc reports. There are
clearly defined authority limits throughout
the Group, including those matters that are
reserved specifically for the Board.
Risks throughout the Group are considered
and reviewed on a regular basis. Risks are
identified and mitigating actions put into place
as appropriate. Principal risks identified are
set out in the Strategic report on pages 24
to 29. Internal control and risk management
procedures can only provide reasonable
and not absolute assurance against
material misstatement. The internal control
procedures were in place throughout the
financial year and up to the date of approval
of this report.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 40
AUDIT
COMMITTEE
REPORT
Members of the Audit Committee
The Committee consists entirely of
Non-Executive Directors. The Chairman,
Peter Kiernan, has extensive financial
experience and is a Chartered Accountant.
• Peter Kiernan (Chairman)
• David Benello
• Nick Parker
The Audit Committee meets as often as it
deems necessary but in any case at least
three times a year, with meetings scheduled
at appropriate intervals in the reporting and
audit cycle.
Although only members of the Committee
have the right to attend meetings, standing
invitations are extended to the Chief Financial
Officer who attends meetings as a matter
of practice. Other non-members generally
attend all or part of any meeting as and when
appropriate. The external auditors attend
most meetings and also have the opportunity
to meet in private with the Committee on
each occasion. In addition, the Chairman of
the Audit Committee has regular contact with
the external auditors throughout the year,
typically meeting at least once before each
Audit Committee meeting.
• To consider and make recommendations
to the Board, to be put to shareholders
for approval at the Annual General
Meeting, in relation to the appointment,
reappointment and removal of the
Company’s external auditors
• To oversee the relationship with the
external auditors including approval of
their remuneration, approval of their
terms of engagement, annual assessment
of their independence and objectivity
taking into account relevant professional
and regulatory requirements and the
relationship with the auditors as a whole,
including the provision of any non-audit
services
• To meet regularly with the external
auditors and at least once a year, without
any Executive Director or other member
of management present to discuss any
issues arising from the audit
• To review and approve the Audit Plan and
review the findings of the audit
The main activities of the Audit Committee
during the year
The principal areas of focus for the
Committee included the following items:
• Review of the audit plan, process
and scope
Duties
The main duties of the Audit Committee are
set out in its Terms of Reference and include
the following:
• To monitor the integrity of the financial
statements of the Company, including its
annual and half-year reports
• Review of internal controls and risk and
risk matrix process
• Review of significant issues from the
audit report
• Going concern and impairment review
• Approval of management
representation letter
• To review and challenge where necessary
• Review of the independence of the
Auditors, review of Auditors’ fees and
engagement letter
• Review of the Group’s Insurance
programme
• Annual review of the Audit Committee
Terms of Reference
any changes to, and consistency of,
accounting policies, whether the Company
has followed appropriate accounting
standards and made appropriate
estimates and judgements, taking into
account the views of the external auditors,
the going concern assumption and all
material information presented with the
financial statements
• To keep under review the effectiveness
of the Company’s internal control
systems (including financial, operational
and compliance controls and risk
management) and to review and
approve the statements to be included
in the Annual Report concerning internal
controls and risk management
• To review the adequacy of the Company’s
compliance, whistleblowing and
procedures for detecting fraud
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 41
Internal audit
Following a review by the Audit Committee
in the context of the sale of Tungsten Bank, it
was concluded that an internal audit function
is not necessary at this time.
Audit process
The external auditors prepare an Audit Plan
for their review of the full year and half year
financial statements. The Audit Plan sets out
the scope of the audit, areas to be targeted
and audit timetable. This plan is reviewed and
agreed in advance by the Audit Committee.
Following their review the auditors presented
their findings to the Audit Committee for
discussion. Significant issues considered
by the Audit Committee from the audit
process included impairment of goodwill
and intangible assets and going concern.
Peter Kiernan
Chairman of the Audit Committee
23 July 2018
Role of the external auditors
The Audit Committee monitors the
relationship with the external auditors,
PricewaterhouseCoopers LLP, to ensure
that auditors’ independence and objectivity
are maintained. As part of its review the
committee monitors the provision of non-
audit services. The engagement of the
external audit firm to provide non-audit
services to the Group can impact on the
independence assessment, and the Group
has a policy for the approval of any such
non-audit services. The policy specifies
services which cannot be carried out by the
external auditors and sets the framework
within which non-audit services may be
provided. All requests to utilise the external
auditors for non-audit services must be
reviewed by the Finance Director and,
above a certain limit, must be approved
by the Audit Committee. The breakdown of
fees between audit and non-audit services
is provided in Note 8. The Committee also
has a formal policy on its responsibilities in
relation to the external auditors. This policy
includes recommendations on appointment,
tendering, scope and remuneration as well
as the assessment of external auditors’
independence. The PricewaterhouseCoopers
audit partner was rotated for the year ended
30 April 2015.
The Committee assesses the independence
of the external auditors and the effectiveness
of the external audit process before making
recommendations to the Board in respect of
their appointment or reappointment.
In assessing independence and objectivity, the
Committee considers the level and nature of
services provided by the external auditors’
as well as the confirmation from the external
auditors that it has remained independent
within the meaning of the APB Ethical
Standards of Auditors.
The Committee’s assessment of the external
auditors’ independence took into account
the non-audit services provided during the
year. The Committee concluded that the
nature and extent of the non-audit fees did
not compromise the independence of the
auditors.
Having reviewed the auditors’ independence
and performance the Audit Committee is
recommending that PricewaterhouseCoopers
LLP be reappointed as the Company’s
auditors at the next Annual General Meeting.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 42
NOMINATION
AND
REMUNERATION
COMMITTEE
REPORT
Members of the Nomination and
Remuneration Committee
The Committee consists of Non-Executive
Directors as follows:
• Nick Parker (Chairman)
• Peter Kiernan
Ian Wheeler
•
The Committee meets at least five (5) times
a year and at such other times during the
year as is necessary to discharge its duties.
Although only members of the Committee
have the right to attend meetings, other
individuals, such as the Chief Executive and
external advisers, may be invited to attend
for all or part of any meeting.
Duties
The main duties of the Nomination and
Remuneration Committee are set out in its
Terms of Reference and include the following:
•
Remuneration:
• Setting the remuneration policy for the
Executive Directors and the Company’s
Chairman, including pension rights and
compensation payments
In determining such policy, to take into
account relevant legal and regulatory
requirements, and the provisions and
recommendations of the QCA Code, the
QCA’s Remuneration Committee Guide
and associated guidance
• Recommending and monitoring the
level and structure of remuneration for
senior management
• When setting the remuneration policy for
Executive Directors, to review and have
regard to pay and employment conditions
across the Group
• To review the appropriateness and
relevance of the remuneration policy
• To appoint and determine the terms
of reference for any remuneration
consultants who advise the committee
• To approve the design of and determine
the targets for any schemes of
performance related remuneration and
approve the total remuneration paid under
such schemes
• To review the design of all share incentive
plans for approval by the Board
• To determine the policy and scope of
pension arrangements for Executive
Directors and other designated
senior executives
• To oversee any major changes in
employee benefits structure throughout
the Group
Nomination:
• To keep under review the leadership
needs of the organisation, both executive
and non-executive, with a view to ensuring
the continued ability of the organisation to
compete effectively in the marketplace
• To keep up to date and fully informed
about strategic issues and commercial
changes affecting the Company and the
market in which it operates
• To be responsible for identifying and
nominating for the approval of the Board,
candidates to fill Board vacancies as and
when they arise
• To formulate plans for succession for both
Executive and Non-Executive Directors and
in particular for the key roles of Chairman
and Chief Executive
• To assess the reappointment of any
Non-Executive Director at the conclusion
of their specified term of office having
given due regard to their performance
and ability to continue to contribute to the
Board in light of the knowledge, skills and
experience required
• To assess the re-election by shareholders
of any Director having due regard to their
performance and ability to continue to
contribute to the Board in light of the
knowledge, skills and experience required
and the need for progressive refreshing of
the Board
The main activities of the Nomination and
Remuneration Committee during the year
• Consideration of Executive Directors’
bonuses and criteria for the year and
review MBO outcomes
• Review of Executive Directors’
remuneration
• Approval of award of shares under the
Company share option plans schemes
• Preparation for review of total
remuneration packages of the
Executive Directors
• Succession planning
• Consideration of continuing training needs
for Directors
• Board balance and diversity discussions
• Re-election of Directors at the AGM
• Review of Terms of Reference
• Review of Board composition for
Group companies
• Report from the external advisers
conducting the Board effectiveness review
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 43
Diversity
The Group has in place anti-discrimination
policies and encourages the promotion of
women into senior management positions.
This will widen the pool of executives
from which to make senior appointments.
The Board believes that appointments to
the Board should be made relative to a
number of criteria, including diversity of
gender, background and personal attributes,
alongside the appropriate skill set, experience
and expertise. All appointments take these
criteria into account. We currently have a
globally diverse Board and employees which
reflects our global business.
Nick Parker
Chairman of the Nomination and
Remuneration Committee
23 July 2018
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 44
DIRECTORS’ REMUNERATION REPORT
The following disclosures are made to support the Board’s goals of working towards best
practice governance standards as an AIM company and to promote transparency about
how our Directors are rewarded.
The Nomination and Remuneration Committee
The Board has delegated certain responsibilities for executive remuneration to the Nomination and Remuneration Committee. Details of the
Nomination and Remuneration Committee, its remit and activities are set out on page 42.
The Nomination and Remuneration Committee is, among other things, responsible for setting the remuneration policy for Executive Directors
and the Chairman and recommending and monitoring the level and structure of remuneration for senior management.
Remuneration policy
In formulating remuneration policy for the Executive Directors the Nomination and Remuneration Committee considers a number of factors
designed to:
• have regard to the Director’s experience and the nature and complexity of their work in order to pay a competitive salary, in line with
•
•
comparable companies, that attracts and retains Directors of the highest quality;
reflect the Director’s personal performance as scored against quantifiable targets; and
link individual remuneration packages particularly equity awards, to the Group’s long-term performance and continued success of the Group
through the award of annual bonuses and share-based incentive schemes.
The objective of the remuneration policy is to promote the long-term success of the Company, having regard to the views of shareholders
and stakeholders.
Executive Directors
Current components of the Executive Directors remuneration are base salary, annual bonus and share-based incentive schemes.
Base salary
Base salary is reviewed annually by the Remuneration Committee. There was no increase in salary for 2017 or 2018.
Annual bonus
The Remuneration Committee has agreed performance conditions for the annual bonuses of the Executive Directors based on the achievement
of certain financial and operational KPIs. Each Executive Directors has performance conditions relating to the profitable growth of the Group and
the increase in volume of invoices processed by Tungsten Network. Each Executive Director has additional performance conditions relevant to
their own areas of responsibility.
Other benefits
A range of benefits may be provided including private medical insurance, life assurance, long term disability insurance, general employee
benefits and travel and related expenses. The Nomination and Remuneration Committee also retains the discretion to offer additional benefits
as appropriate, such as assistance with relocation, tax equalisation and overseas tax advisory fees.
Service agreements and termination payments
Details of the Executive Directors’ service agreements are set out below.
Director
Richard Hurwitz
David Williams
Date of contract
1 January 2016
17 March 2015
Unexpired term
Rolling contract
Rolling contract
Notice period by Company
Notice period by Director
6 months
12 months
6 months
6 months
Richard Hurwitz’s executive service agreement provides that in the event that either (i) the Company terminates his service contract without
cause, or (ii) he resigns within six months of a change of control, he will be entitled to receive 18 months’ salary and bonus.
The Executive Directors may be put on gardening leave during their notice period, and the Company can elect to terminate their employment
by making a payment in lieu of notice of up to the applicable notice period.
Employees’ pay
Employees’ pay and conditions across the Group are considered when reviewing remuneration policy for Executive Directors.
Non-Executive Directors
The remuneration payable to Non-Executive Directors (other than the Chairman) is decided by the Chairman and Executive Directors.
Fees are designed to ensure the Company attracts and retains high calibre individuals. They are reviewed on an annual basis and account
is taken of the level of fees paid by other companies of a similar size and complexity. Non-Executive Directors do not participate in any annual
bonus, share options or pension arrangements. The Company repays the reasonable expenses that Non-Executive Directors incur in carrying
|out their duties as Directors.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 45
Terms of appointment
The terms of appointment for the Non-Executive Directors are shown below.
Director
David Benello
Peter Kiernan
Nick Parker
Ian Wheeler
Date of letter of appointment
24 September 2015
16 October 2014
13 May 2015
24 September 2015
Term
12 months
12 months
12 months
12 months
Notice
N/A
N/A
N/A
N/A
Annual remuneration report
The annual remuneration report sets out details of Directors’ remuneration payments during the year and information in respect of share
awards and Directors’ shareholdings.
Directors’ remuneration table
Director
Executive Directors
Richard Hurwitz2
David Williams
Non-Executive Directors
David Benello3
Peter Kiernan
Nick Parker
Ian Wheeler3
Danny Truell
Annual
performance
bonus1
£’000
Base salary
£’000
Pensions
£’000
Benefits in
kind
£'000
Expatriate
costs
£’000
411
210
65
80
100
65
15
418
60
–
–
–
–
–
41
19
–
–
–
–
–
15
2
–
–
–
–
–
404
–
–
–
–
–
–
Total
FY2018
£’000
1,289
291
65
80
100
65
15
Total
FY2017
£’000
945
236
60
80
138
60
60
Notes:
1 Bonuses paid in FY18 relates to performance in FY17. Bonuses for FY18 performance will be paid in FY19.
2 Remuneration consists of:
a. Base salary: $550,000, translated to £411,000 in FY18 (£424,000 in FY17)
b. Annual performance bonus of up to 100% of base salary: £418,000 in FY18 (£339,000 in FY17)
c. Pension contribution at 10% of base salary: £41,000 in FY18 (£43,000 in FY17)
d. Benefits in kind: Health care, £15,000 in FY18 (£16,000 in FY17); and
e. Expatriate costs: £404,000 in FY18 (£123,000 in FY17). FY18 expatriate costs comprise accommodation, flights and travel and tax equalisation costs. Tax equalisation costs for the period were £312,000
and were higher in FY18 than in previous years due to timing of tax payments on share award made in January 2016. In addition, a significant element of this amount will be recovered in future tax
periods. Accordingly, equalisation costs will reduce for FY19 and subsequent years.
3 Annual fee of £60,000 unchanged from FY17 to FY18. £65,000 received in FY18 due to the timing of payments in the year.
Share option schemes (audited)
Awards held
as at Director
Rick Hurwitz
David Williams
Number
of options
held as at
1 May 2017
1,190,000
430,000
Awards granted
during the year
Date of grant
Option price
Awards exercised
during the year
Balance as at
30 April 2018
Vesting and
exercise period
400,000
200,000
3 August 2017
3 August 2017
58.6p
58.6p
Nil
Nil
1,590,000
See below
630,000
See below
The Company’s UK Scheme and US Plan, further described on page 76 provides recipients with the ability to purchase vested options at the
option grant price.
Each option grant vests in four tranches over four years from date of grant and is exercisable for 10 years from date of grant.
Share options are awarded in recognition of performance over the financial year under assessment.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 46
DIRECTORS’ REMUNERATION REPORT continued
Directors’ interests in the share capital of the Company (audited)
Director
Executive Directors
Richard Hurwitz
David Williams1
Non-Executive Directors
David Benello2
Nick Parker2
Peter Kiernan
Danny Truell
Ian Wheeler
Number of ordinary
shares held on
1 May 2017
Acquired/disposed
during the year
Number of ordinary
shares held on
30 April 2018
Percentage of issued
share capital is issue on
30 April 2018
714,000
103,200
250,000
800,000
194,699
1,247,802
–
–
–
–
–
–
–
–
714,000
103,200
250,000
800,000
194,699
1,247,802
–
0.57%
0.08%
–
0.2%
0.63%
0.15%
0.99%
–
1 Represents 3,200 shares held by his son and 100,000 shares held in his SIPP.
2 Shares held in respective SIPPs.
LTIP
Pursuant to the LTIP, in FY2013 Peter Kiernan, along with certain former Directors and other individuals, acquired interests in the B ordinary
shares (the ‘LTIP Shares’) and C ordinary shares (the ‘LTIP Securities’) of Tungsten Corporation Guernsey Limited, a subsidiary of the Company.
The LTIP Shares were all exchanged into ordinary shares of the Company as part of the admission process.
The LTIP Securities are exchangeable into ordinary shares of the Company once the price per ordinary share of the Company has reached
(for any 20 trading days out of 30 successive trading days, the last of such days falling not less than five and not more than 10 years following
admission) a closing price equal to the price resulting from applying an equivalent of a compound rate of return from the date of the admission
to the adjusted issue price equal to 8.25% per annum accrued daily and compounded quarterly.
Director
David Benello
Richard Hurwitz
Peter Kiernan
Nick Parker
Ian Wheeler
David Williams
Danny Truell
Number of shares
held as at
1 May 2017
Acquired/ (disposed)
during the year
Number of shares
held as at
30 April 2018
–
–
72,915
–
–
–
526,400
–
–
–
–
–
–
–
–
–
72,915
–
–
–
526,400
Nick Parker
Chairman of the Nomination and Remuneration Committees
23 July 2018
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE
47
DIRECTORS’ REPORT
The Directors of Tungsten Corporation Plc present their report for the year ended 30 April 2018. Particulars of important events affecting the
Company and its subsidiaries and likely future developments may be found in the strategic report on pages 24 to 29.
Directors
Biographical details of the Directors currently serving on the Board and their dates of appointment are set out on pages 32 and 33.
The directors of the company who were in office during the year and up to the date of signing the financial statements were:
Executive Directors
Rick Hurwitz
David Williams
1 Resigned from the Board 24 May 2017.
Non-Executive Directors
David Benello
Peter Kiernan
Nick Parker
Danny Truell1
Ian Wheeler
The Company’s approach to the appointment and replacement of Directors is governed by its Articles of Association (together with relevant
legislation) and takes into consideration any recommendations of the New QCA Code.
Subject to any restrictions in its Articles of Association and the Companies Act 2006, the Directors may exercise any powers which are not
reserved for exercise by the shareholders.
Results and Dividend
Results for the year ended 30 April 2018 are set out in the consolidated income statement on page 55. The Company has no distributable
reserves to declare a dividend for the year ended 30 April 2018.
Change of Control/Significant Agreements
Should the Company be subject to a change of control, the following represents the likely effects on significant agreements:
• The LTIP Securities will become exchangeable into ordinary shares in Tungsten, with a value equal to 15% of the increase in the actual
market capitalisation of Tungsten since admission, subject to:
1. The value of Tungsten having risen by over 8.25% per annum since admission (the ‘Threshold Price’); and
2a. Where the change of control results from, or triggers, an offer to holders of the ordinary shares of the Company, that offer being
at an equivalent price per ordinary share of the Company equal to (or greater than) the Threshold Price; or
2b. Where the change of control results from, or in, the removal of either of Danny Truell or Edmund Truell (the Founders) from the Board
of the Company, and the Threshold Price having been previously reached for any 20 trading days out of 30 successive trading days
• Richard Hurwitz’s executive service agreement provides that in the event that he resigns within six months of a change of control he will
entitled to receive 18 months’ salary and bonus
Other than the above the Company does not have any agreements with any Non-Executive Director, Executive Director or employee requiring
compensation for loss of office resulting from a change of control.
Articles of Association
Any amendments to the Articles of Association of the Company may be made by Special Resolution of the shareholders.
Share capital
Details of the Company’s share capital are set out in Note 17 to the consolidated financial statements. The Company’s share capital consists of
one class of ordinary shares that do not carry rights to fixed income. As at 30 April 2018, there were 126,069,397 ordinary shares of £0.00438p
each in issue. Ordinary shareholders are entitled to receive notice and to attend and speak at general meetings.
Each shareholder present in person or by proxy (or by duly authorised corporate representatives) has, on a show of hands, one vote. On a poll,
each shareholder present in person or by proxy has one vote for each share held.
Other than the general provisions of the Articles (and prevailing legislation) there are no specific restrictions of the size of a holding or on the
transfer of the ordinary shares.
The Directors are not aware of any agreements between holders of the Company’s shares that may result in the restriction of the transfer
of securities or on voting rights. No shareholder holds securities carrying any special rights or control over the Company’s share capital.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 48
DIRECTORS’ REPORT continued
Authority to purchase own shares
The Company was authorised by shareholder resolution at the 2017 Annual General Meeting to purchase up to 10% of its issued share capital.
A resolution will be proposed at the forthcoming Annual General Meeting and authority sought to purchase up to 10% of its issued share capital.
Under this authority, any shares purchased must be held as treasury shares or, otherwise, cancelled resulting in a reduction of the Company’s
issued share capital.
No shares were purchased by the Company during the year.
Directors’ Interests
The number of ordinary shares of the Company in which the Directors are beneficially interested at 30 April 2018 is set out in the Directors’
Remuneration Report on pages 44 to 46.
Director Indemnities and Insurance
In accordance with the Companies Act 2006 and the Company’s Articles of Association, the Company has purchased Directors’ and Officers’
Liability Insurance which remains in place at the date of this report. The Company reviews its insurance policies on an annual basis in order
to satisfy itself that its level of cover remains adequate.
The Directors are also indemnified under the Articles of Association of the Company.
Significant shareholders
As at 19 July 2018, the latest practicable date prior to publication, Tungsten is aware of the following holdings of significant shareholders in
the Company (as defined in the AIM Rules). These figures are based on its most recent analysis of shareholders as at 19 July 2018, and other
notifications to the Company. For clarity, shareholdings are shown separately from holdings in financial instruments, where disclosed.
Odey Asset Management
Mr Edmund Truell3
Indus Capital Partners
Artemis Investment Management
AXA Investment Management (Paris and London)6
Hadron Capital
TBF Global Asset Management
Invesco Perpetual Asset Management
Majedie Asset Management
Shareholdings as at
19 July 2018
Financial instruments
notified
Total
Shares
18,470,234
15,717,599
10,497,278
8,110,000
7,639,606
6,816,485
4,929,688
4,655,349
4,019,212
%
14.65
12.47
8.33
6.43
6.06
5.41
3.91
3.69
3.19
Number1
939,3142
–4
%
Holdings
0.74
19,409,548
–
15,717,599
761,1745
0.60
11,258,452
–
–
–
–
–
–
–
–
–
–
–
–
8,110,000
7,639,606
6,816,485
4,929,688
4,655,349
4,019,212
%
15.39
12.47
8.93
6.43
6.06
5.41
3.91
3.69
3.19
1 Total voting rights, or share equivalent.
2 969,314 shares equivalent held via CFD’s, reported to the Company on 6 June 2018.
3 Edmund Truell’s holdings disclosed above represent both his direct and indirect holdings including investments via Disruptive Capital Investments Limited ("DCIL")
4 DCIL previously notified the Company of its interest in relation to 6,000,000 shares that are subject to a Loan Facility entered into with Equities First Holdings LLC (“EFH”) in October 2016 (“the Loan
Shares”), as most recently reported to the Company on 19 April 2018. The Company has subsequently made requests under section 793 of the Companies Act 2006 to both DCIL and EFH in relation to
the Loan Shares. In response to such request, DCIL has notified the Company that it does not have voting rights in relation to the Loan Shares until such shares are returned to DCIL under the Loan
Facility. The Loan Facility will mature on 11 January 2020, although can be terminated earlier in the event of a cash offer for the Company. EFH has confirmed that it currently only holds 254,318 of the
Loan Shares, although DCIL has a contractual right to re-acquire 6,000,000 equivalent shares in the Company from EFH on maturity of the Loan Facility.
5 761,174 share equivalent held via swaps, expiring on 17 May 2018, reported to the Company on 5 May 2018. Included for full disclosure, as no subsequent update notified to the Company.
6 AXA London shareholding 5,239,606 (4.16%), AXA Paris 2,400,000 (1.90%) holdings combined for purposes of this table.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 49
Financial risk management
The Company’s objectives and policies on financial risk management including information on the exposure of the Company to credit risks,
liquidity risks and capital management risks are set out in Note 22 to the financial statements and in the managing Group Principal Risks and
Uncertainties Section on pages 24 to 29.
Political donations
The Company has made no political donations during the year.
Going concern statement
The Group going concern assessment is based on forecasts and projections of anticipated trading performance. The assumptions applied are
subjective and management applies judgement in estimating the probability, timing and value of underlying cash flows.
The Directors confirm that they have a reasonable expectation that the Group will have adequate resources to continue in operational existence
for the next 12 months from approval of these financial statements and accordingly these financial statements are prepared on a going concern
basis.
Independent Auditors
PricewaterhouseCoopers LLP has expressed their willingness to continue in office as auditors and a resolution seeking to reappoint them will be
proposed at the forthcoming Annual General Meeting.
Annual General Meeting
The Company’s Annual General Meeting will be held at 2pm on 21 September 2018 at the offices of Ashurst LLP, Broadwalk House,
5 Appold Street, London EC2A 2HA. Details of the venue and the resolutions to be proposed are set out in a separate Notice of Meeting which
accompanies this report.
This report was approved by the Board of Directors of Tungsten Corporation PLC and signed by order of the Board:
Patrick Clark
General Counsel and Company Secretary
23 July 2018
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 50
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the
Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and
Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and Parent Company and of the profit or loss of the Group and Parent Company for that period.
In preparing the financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union have been followed for the Group;
• financial statements and IFRSs as adopted by the European Union have been followed for the Company financial statements, subject to any
material departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the Group and Parent Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Parent Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and Parent Company and enable them
to ensure that the financial statements comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the
IAS Regulation.
The Directors are responsible for the maintenance and integrity of the Parent Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group and Parent Company’s performance, business model and strategy.
Directors’ confirmations
In the case of each Director in office at the date the Directors’ Report is approved:
• so far as the Director is aware, there is no relevant audit information of which the Group and Parent Company’s auditors are unaware; and
•
they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information
and to establish that the Group and Parent Company’s auditors are aware of that information.
Patrick Clark
General Counsel and Company Secretary
23 July 2018
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018GOVERNANCE 51
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF TUNGSTEN CORPORATION PLC
Report on the audit of the financial statements
Opinion
In our opinion, Tungsten Corporation plc’s group financial statements and parent company financial statements (the “financial statements”):
• give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 April 2018 and of the group’s loss and the
group’s and the parent company’s cash flows for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and,
as regards the parent company’s financial statements, as applied in accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the group and parent company statements of
financial position as at 30 April 2018; the group income statements and statements of comprehensive income, the group and parent company
statements of cash flows, and the group and parent company statements of changes in equity for the year then ended; the accounting policies;
and the notes to the financial statements.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our audit approach
Overview
Materiality
Audit scope
• Overall group materiality: £727,500 (2017: £952,000), based on 5% of 3 years’ average loss before tax
from continuing operations.
• Overall parent company materiality: £660,500 (2017: £940,000), based on 1% of total assets.
• Five financially significant components audited by one central team in London.
• Obtained 88% coverage of the revenue balance.
• Obtained 100% coverage of the goodwill balance.
Key audit matters
Impairment of goodwill and indefinite life intangible assets for the Group (Group).
•
• Directors’ going concern assessment for the Group and parent company (Group and parent).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the directors made subjective judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence
of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 52
INDEPENDENT AUDITORS’ REPORT
continued
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill and indefinite life intangible assets
for the Group
As stated in note 12 to the consolidated financial statements,
management has estimated the recoverable amount of the Tungsten
Network Cash Generating Unit (CGU) using a value-in-use model by
projecting cash flows for the next five years together with a terminal
value using a perpetuity growth rate.
The total amount of goodwill and indefinite life intangible assets on the
Group balance sheet as at 30 April 2018 is £123.4m.
The trading performance of the Group was lower than expected during
the year ended 30 April 2018, and in addition the share price at the
year end meant that market capitalisation was significantly lower than
the net assets of the Group.
The directors’ annual impairment assessment took these factors into
account, and concluded that there was headroom over the carrying
value. The key assumptions in this assessment included the forecast
future revenue growth, the discount rate, the perpetuity growth rate,
corporate overheads allocated and cost growth.
Accordingly there is a significant risk that the goodwill and indefinite
life intangible assets balance is not supported by the future cash flows
of the business.
Our audit procedures comprised the following:
Tested that the methodology built into the model produced by
management to assess impairment addressed the requirements of the
financial reporting framework, and re-performed the calculations;
Evaluated the accuracy of prior years’ forecasts in light of past
performance and actual results achieved to assess the quality and
reliability of management’s forecasts for the Tungsten Network CGU;
Challenged management over the reasonableness of the key
assumptions inherent in the model;
Agreed information, in particular forecast financial information, to
budgets and forecasts approved by senior management; and
Used a valuations expert to assess the appropriateness of the
discount rate assumption.
the revenue growth rate for the first five years;
We also performed sensitivity analysis around the key drivers of the
cash flow forecasts, being:
•
• perpetuity growth rate;
•
•
•
the cost growth rate for the first five years;
the allocation of corporate overheads; and
the discount rate.
Having ascertained the extent of change in those assumptions that
either individually or collectively would be required for the goodwill
to be impaired for the CGU, we considered the likelihood of such a
movement in those key assumptions arising.
We did not identify any issues with management’s key assumptions
based on our evaluation of supporting evidence, together with
management’s and our own sensitivity analysis performed.
We also considered the appropriateness of the related disclosures
in note 12 to the financial statements. We found that the disclosures
appropriately describe the key judgements and sensitivities in the
directors’ assessment.
Directors’ going concern assessment for the Group
and parent company
As stated in note 2 to the consolidated financial statements, the Group
and parent company going concern assessment is based on forecasts
and projections of anticipated trading performance.
We evaluated the directors’ assessment of going concern, including
the associated forecast future cash flows based on the most recent
approved budgets and forecasts. Our work included the following:
read management’s paper to the Board in support of the going
•
concern basis of preparation.
The assumptions applied are subjective and management applies
judgement in estimating the probability, timing and value of underlying
cash flows.
In the year to 30 April 2018 the business continued to be loss-making
and the trading performance of the Group was lower than expected.
On 20 July 2018 management negotiated new additional funding
through a £4m revolving credit facility with HSBC which management
concluded will allow the business to continue to operate for
a minimum of 12 months from the approval of these financial
statements.
• assessed the appropriateness of the Group’s cash flow forecasts
in light of the accuracy of previous forecasts against actual results.
• considered the nature of the mitigating actions that management
could take in order to improve cash flow to check that they were
within management’s control.
• sensitised the forecasts using a revenue forecast lower than
currently budgeted.
• examined the terms of the £4m revolving credit facility.
We did not identify any issues with management’s key assumptions
based on our examination of supporting evidence.
Our conclusions in respect of going concern are set out below.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS 53
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the group and the parent company, the accounting processes and controls, and the industry in
which they operate.
The Group has three segments being Tungsten Network, Tungsten Network Finance and Corporate. Tungsten Network operates from the UK,
US, Malaysia and other European countries. There are five financially significant components being: Tungsten Network Limited (UK), Tungsten
Network Finance Limited (UK), Tungsten Corporation plc (UK), and Tungsten Network Inc. (US), together with the consolidation adjustments
which we considered to be a significant component as they are included as a separate component in the Group consolidation. The determination
of our scoping was based upon obtaining sufficient coverage of each financial statement line item, which varies depending on the risk
assessment. All of the work was performed by the Group engagement team.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Overall group materiality
£727,500 (2017: £952,000).
660,500 (2017: £940,000).
How we determined it
5% of 3 years’ average loss before tax from
continuing operations.
1% of total assets.
Rationale for benchmark applied
Based on the benchmarks used in the annual
report, a 3 years’ average loss before tax from
continuing operations is a generally accepted
auditing benchmark and accounts for the
fluctuating losses of the Group year on year.
The parent company is a holding company
for the Group which does not trade, therefore
total assets is considered the most applicable
benchmark and is a generally accepted
auditing benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between £385,000 and £660,500. Certain components were audited to a local statutory audit
materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £36,300 (Group audit)
(2017: £47,600) and £33,000 (Parent company audit) (2017: £47,000) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which ISAs (UK) require us to report to you when:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the
group’s and parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from
the date when the financial statements are authorised for issue.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s and parent company’s
ability to continue as a going concern.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We
have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain
opinions and matters as described below.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
54
INDEPENDENT AUDITORS’ REPORT
continued
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the
year ended 30 April 2018 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 50, the directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors
are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
•
the parent company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Brian Henderson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 July 2018
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS CONSOLIDATED INCOME STATEMENT
Revenue
Operating expenses
Operating loss
EBITDA1
Depreciation and amortisation
Foreign exchange (loss)/gain
Share based payment expense
Exceptional items
Operating loss
Finance income
Finance costs
Net finance costs
Loss before taxation
Taxation
Loss for the year from continuing operations
Loss for the year from discontinued operation
Loss for the year
55
Note
4
5
5
6
7
9
9
Year ended
30 April
2018
£’000
33,663
(45,746)
(12,083)
(4,647)
(2,813)
(1,547)
(647)
(2,429)
Year ended
30 April
2017
£’000
31,269
(43,917)
(12,648)
(11,784)
(2,801)
2,342
(405)
–
(12,083)
(12,648)
1,864
(2,468)
(604)
3,022
(3,068)
(46)
(12,687)
(12,694)
10
768
433
(11,919)
(12,261)
–
(230)
(11,919)
(12,491)
Loss per share from continuing and discontinued operations attributable to the equity holders of the parent during the year (expressed in
pence per share):
Basic and diluted
From continuing operations
From discontinued operation
11
11
(9.45)
–
(9.45)
(9.73)
(0.18)
(9.91)
1 EBITDA is calculated as earnings before other income, interest, tax, depreciation and amortisation, foreign exchange gain or loss, share based payment expense and exceptional items
The notes on pages 60 to 81 are an integral part of these consolidated financial statements.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 56
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
Loss for the year
Other comprehensive income/(loss):
Items that may be reclassified subsequently to profit or loss
Currency translation differences
Total comprehensive loss for the year
Items in the statement above are disclosed net of tax.
The notes on pages 60 to 81 are an integral part of these consolidated financial statements.
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
(11,919)
(12,491)
1,423
(2,709)
(10,496)
(15,200)
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Trade and other receivables
Total non-current assets
Current assets
Trade and other receivables
Invoice receivables
Cash and cash equivalents
Total current assets
Total assets
Capital and reserves attributable to the equity shareholders of the parent
Share capital
Share premium
Merger reserve
Shares to be issued
Share-based payment reserve
Other reserve
Accumulated losses
Total equity
Non-current liabilities
Deferred taxation
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Provisions
Deferred income
Total current liabilities
Total liabilities
Total equity and liabilities
57
As at
30 April
2018
£’000
As at
30 April
2017
£’000
Note
12
13
14
14
15
16
17
17
18
10
19
20
19
21
123,397
2,646
464
118,452
1,856
469
126,507
120,777
10,320
2
6,418
16,740
8,790
4,304
17,498
30,592
143,247
151,369
553
188,794
28,035
3,760
6,442
(7,541)
(98,582)
553
188,794
28,035
3,760
5,815
(8,964)
(86,663)
121,461
131,330
2,110
1,459
3,569
8,857
759
8,601
18,217
21,786
2,630
–
2,630
9,529
–
7,880
17,409
20,039
143,247
151,369
The notes on pages 60 to 81 are an integral part of these consolidated financial statements.
The consolidated financial statements on pages 55 to 81 were authorised for issue by the Board of Directors on 23 July 2018 and were signed
on its behalf by:
Richard Hurwitz
Chief Executive Officer
David Williams
Chief Financial Officer
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
Shares
to be
issued
£’000
3,760
–
–
Share-based
payment
reserve
£’000
Other
reserve
£’000
Accumulated
losses
£’000
Total
equity
£’000
5,815
(8,964)
(86,663)
131,330
–
–
1,423
–
1,423
–
(11,919)
(11,919)
58
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Year ended 30 April 2018
Balance as at 1 May 2017
553
188,794
28,035
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
–
–
–
–
–
–
Currency translation differences
Loss for the year
Balance as at 30 April 2018 excluding
transactions with owners
Transaction with owners
Share based payment expense
Transactions with owners
553
188,794
28,035
3,760
5,815
(7,541)
(98,582)
120,834
–
–
–
–
–
–
–
–
627
627
–
–
–
–
627
627
Balance as at 30 April 2018
553
188,794
28,035
3,760
6,442
(7,541)
(98,582)
121,461
Year ended 30 April 2017
Balance as at 1 May 2016
553
188,794
28,035
Share
capital
£’000
Share
premium
£’000
Merger
reserve
£’000
–
–
–
–
–
–
Shares
to be
issued
£’000
3,760
–
–
Share-based
payment
reserve
£’000
Other
reserve
£’000
Accumulated
losses
£’000
Total
equity
£’000
5,419
(6,255)
(74,172)
146,134
–
–
(2,709)
–
(2,709)
–
(12,491)
(12,491)
Currency translation differences
Loss for the year
Balance as at 30 April 2017 excluding
transactions with owners
Transaction with owners
Share based payment expense
Transactions with owners
553
188,794
28,035
3,760
5,419
(8,964)
(86,663)
130,934
–
–
–
–
–
–
–
–
396
396
–
–
–
–
396
396
Balance as at 30 April 2017
553
188,794
28,035
3,760
5,815
(8,964)
(86,663)
131,330
The notes on pages 60 to 81 are an integral part of these consolidated financial statements.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS CONSOLIDATED STATEMENT
OF CASH FLOWS
Cash flows from operating activities
Loss before taxation from continuing operations
Loss before taxation from discontinued operation
Adjustments for:
Depreciation and amortisation
Decrease/(increase) in provision of trade receivables
Finance costs
Finance income
Foreign exchange loss/(gain)
Share based payment expense
Provision for onerous contracts and legal fees
Cash used in operations
Changes in working capital:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net interest paid
Discontinued operation
Net cash outflow from operating activities
Cash flows from investing activities
Capitalisation of software development costs
Purchases of other intangibles
Purchases of property, plant and equipment
Discontinued operations
Net cash (outflow)/inflow from investing activities
Cash flows from financing activity
Decrease/(increase) in invoice receivables
Net cash inflow/(outflow) from financing activity
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of the year
Exchange adjustments
Cash and cash equivalents including cash held in disposal group at the end of the year
Cash held in the disposal group
Cash and cash equivalents at the end of the year
The notes on pages 60 to 81 are an integral part of these consolidated financial statements.
59
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
Note
5
14
9
9
4
18
19
12
12
13
(12,687)
(12,694)
–
(230)
2,813
271
2,468
(1,864)
1,547
647
1,014
2,801
(262)
3,068
(3,022)
(2,342)
405
–
(5,791)
(12,276)
(1,796)
30
(394)
–
268
(2,039)
(428)
3,615
(7,951)
(10,860)
(7,223)
(3,570)
(70)
(330)
–
(7,623)
(503)
(266)
29,713
25,374
4,302
4,302
(4,304)
(4,304)
(11,272)
17,498
192
6,418
–
10,210
27,023
865
38,098
(20,600)
16
6,418
17,498
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
60
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
1. General information
Tungsten Corporation plc (the Company) and its subsidiaries (together, the Group) is a global e-invoicing network that also offers supply chain
financing and spend analytics.
The Company is a public limited company, which is incorporated and domiciled in the UK. The address of its registered office is
Pountney Hill House, 6 Laurence Pountney Hill, London EC4R 0BL, UK.
2. Accounting policies
(a) Basis of preparation
The consolidated financial statements of Tungsten Corporation plc have been prepared in accordance with International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and with the Companies Act 2006
applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention. The
consolidated financial statements have been prepared on a going concern basis. Further detail is included within the Report of the Directors.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. The assumptions applied are
subjective and management applies judgement in estimating the probability, timing and value of underlying cash flows as disclosed in Note 3.
Comparatives
Comparative figures have been reclassified to conform with the current year’s presentation so that they appropriately reflect the nature of the
balances and transactions.
In particular foreign exchange gains of £3.4 million and foreign exchange losses of £1.1 million have been reclassified respectively from finance
income and finance expenses to operating expenses as they relate to exchange differences generated on operating transactions.
(b) New standards, amendments and interpretations adopted:
The accounting policies adopted are consistent with those of the previous financial year. There were no new IFRSs or interpretations, effective for the
first time for the year beginning on or after 1 May 2017, have had a material impact on the group or parent company.
(c) New standards, amendments and interpretations issued but not yet effective in 2017/18 and not early adopted:
As at the date of authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective
(and in some cases had not yet been adopted by the EU). The group has not applied these standards and interpretations in the preparation of these
financial statements.
• Amendment to IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’ on depreciation and amortisation;
• Amendment to IAS 10, ‘Consolidated financial statements’ and IAS 28, ‘Investments in associates and joint ventures’;
•
•
• Amendments to IFRS 9, ‘Financial instruments’, regarding general hedge accounting;
• Amendments to IAS 1, ‘Presentation of financial statements’ on the disclosure initiative; and
•
IFRS 15 ‘Revenue from contracts with customers’;
IFRS 9 ‘Financial instruments’;
IFRS 16 ‘Leases’.
The Group has adopted IFRS 15 Revenue from contracts with customers and IFRS 9 Financial instruments as of 1 May, 2018 (mandatory application),
with full retrospective application.
IFRS 15 ‘Revenue from Contracts with Customers’. This standard deals with revenue recognition and establishes principles for reporting useful
information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s
contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use
and obtain the benefits from the good or service. Variable consideration is included in the transaction price if it is highly probable that there will be
no significant reversal of the cumulative revenue recognised when the uncertainty is resolved. The standard replaces IAS 18, ‘Revenue’, and IAS 11,
‘Construction contracts’, and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018, and earlier
application is permitted. Tungsten has carried out a review of existing contractual arrangements as part of the implementation process. The directors
anticipate there will be no material impact for revenue, based on the outputs of that contract review in the context of IFRS 15’s five step revenue
recognition model. Under the existing accounting policy, revenue is recognised in the period in which the customer transacts. The classification
and measurement of revenue is largely unchanged following the adoption of IFRS 15. No material impact on profit for future periods is expected.
IFRS 9 ‘Financial Instruments’. This standard addresses the classification, measurement and recognition of financial assets and financial liabilities.
It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the
mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost; fair value through other
comprehensive income; and fair value through profit or loss. The basis of classification depends on the entity’s business model and the contractual
cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss
with the irrevocable option at inception to present changes in fair value in other comprehensive income, not recycling. An expected credit losses
model replaces the incurred loss impairment model used in IAS 39. For financial liabilities, there are no changes to classification and measurement,
except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss.
IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright-line hedge effectiveness tests. To qualify for hedge accounting,
it requires an economic relationship between the hedged item and hedging instrument, and for the ‘hedged ratio’ to be the same as the one that
management actually uses for risk management purposes. Contemporaneous documentation is still required, but it is different from that currently
prepared under IAS 39. There is an accounting policy choice to continue to account for all hedges under IAS 39. IFRS 9 is effective for accounting periods
beginning on or after 1 January 2018. The classification and measurement basis for the Group’s financial assets and liabilities is largely unchanged by
adoption of IFRS 9. No material impact on profit for future periods is expected.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS 61
2. Accounting policies continued
(d) Basis of consolidation
Subsidiaries are those entities over which the Company has the power to govern the financial and operating policies generally accompanying an
interest of more than one half of the voting rights. Subsidiaries are consolidated from the date on which control is transferred to the Company
(acquisition date) and are de-consolidated from the date that control ceases. The financial statements of subsidiaries are prepared for the same
reporting year as the Company, using consistent accounting policies.
Inter-company transactions, balances, income and expenses on transactions between Group companies are eliminated. Profits and losses
resulting from inter-company transactions that are recognised in assets are also eliminated.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
(e) Revenue services rendered
Revenue is the total amount receivable by the Group for services provided less VAT and trade discounts.
The Group recognises revenue in respect of e-invoicing related services over the period the services are provided. Where buyer transactions are
paid for but not processed, such revenue is deferred according to contractual terms representing the anticipated period for transactions being
processed. Management reviews the historical record of transactions used under each contract and relevant estimates to determine whether the
deferral period for the revenue recognition is appropriate or any changes to the existing deferral period are required. In relation to transaction
fees for which no revenue is received, management assesses the expected usage of any unutilised transactions to determine the amount of
deferred revenue to be recorded.
Revenue is recognised as follows:
Transaction fees are recognised in the period in which the customer transacts. If there is evidence that transactions sold will never be utilised,
the revenue is recognised immediately in the income statement.
Initial fees, annual subscriptions and income from other e-invoicing related services are recognised over the period that the service is provided.
Deferred revenue is recognised to the extent that revenue has been invoiced to customers but not recognised in accordance with the above.
Deferred revenue is discounted where the time value of money is material.
(f) Employee benefits defined contribution plans
The Group pays contributions to publicly or privately administered pension plans. The Group has no further payment obligations once the
contributions have been paid. Contributions are recognised in the income statement as an employee benefit expense in the period when they are
due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
Share-based payments
The Group issues equity-settled and cash-settled share-based awards to certain employees. The fair value of share-based awards is determined
based on the Black-Scholes model at the date of grant and expensed, based on the Group’s estimate of the shares that will eventually vest,
over the vesting period with a corresponding increase in equity. At each balance sheet date, the Group revises its estimates of the number of
options that are expected to vest based on service and other non-market performance conditions. The amount expensed is adjusted over the
vesting period for changes in the estimate of the number of shares that will eventually vest, save for changes resulting from any market-related
performance conditions.
Equity-settled share-based payments are recognised as an expense in profit or loss with a corresponding credit to share option reserve.
Cash-settled share-based payments are recognised as an expense in profit or loss with a corresponding credit to liabilities.
(g) Foreign currency translation
The functional currency of the Company is pounds sterling as that is the currency of the primary economic environment in which the Company
operates. The Group’s presentation currency is pounds sterling.
Transactions and balances
Foreign currency transactions are translated into sterling using the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the consolidated income statement.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated income
statement within finance income or costs. All other foreign exchange gains and losses are presented in the consolidated income statement
within ‘operating expenses’.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 62
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
2. Accounting policies continued
(g) Foreign currency translation continued
Group companies
The results and financial position of all the Group entities that have a functional currency other than sterling are translated into sterling
as follows:
• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet.
•
Income and expenses for each income statement presented are translated at average exchange rates unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at
the rate on the dates of the transactions.
All resulting exchange differences are recognised in other comprehensive income. None of which has the currency of a hyperinflationary economy.
The following rates were applied for £1:
United States Dollar
Euro
Mexican Peso
Bulgarian Lev
Malaysian Ringgit
Swiss Franc
Closing rates
Average rates
As at
30 April
2018
1.3776
1.1357
As at
30 April
2017
1.2949
1.1883
As at
30 April
2018
1.3411
1.1295
As at
30 April
2017
1.2877
1.1816
25.6437
24.3665
24.7332
24.9938
2.2212
5.3998
1.3604
2.3224
5.6233
1.2883
2.2089
5.5080
1.2974
2.3119
5.4841
1.2782
(h) Finance income and costs
Finance costs comprise interest payable on borrowings, interest expense on unwinding of discount on deferred income, direct issue costs and
foreign exchange losses. Finance income comprises interest receivable on funds invested, and foreign exchange gains. Interest income and
expenses are recognised on a time apportioned basis, using the effective interest method.
(i) Exceptional items
Items which are both material and considered by the Directors to be unusual in nature and size are separately disclosed on the face of the
consolidated income statement.
(j) Current and deferred income tax
Income tax for the years presented comprises current and deferred tax. Income tax is recognised in profit or loss except to the extent that it
relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet
date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes.
The following temporary differences are not provided for: the initial recognition of goodwill; the initial recognition of other assets or liabilities
that affect neither accounting nor taxable profit; nor differences relating to investments in subsidiaries to the extent that they are unlikely to
reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset
can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except for deferred income tax
liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference
will not reverse in the foreseeable future.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS 63
2. Accounting policies continued
(k) Business combinations
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary
is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the
Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets.
Acquisition-related costs are expensed as incurred.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair
value of the contingent consideration that is deemed to be an asset or liability are recognised in the income statement. Contingent consideration
that is classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
(l) Property, plant and equipment
Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment losses. Cost includes
the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use. When parts
of an item of property, plant and equipment have different useful lives, those components are accounted for as separate items of property, plant
and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement.
Leased assets
Leases under which the Group assumes substantially all the risks and rewards of ownership of an asset are classified as finance leases.
Property, plant and equipment acquired under finance leases are recorded at fair value or, if lower, the present value of minimum lease
payments at inception of the lease, less depreciation and any impairment.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are
included in the other long-term payables. The interest element of the finance cost is charged to the income statement over the lease period
so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Dilapidations
The estimated cost of dilapidations is recognised in leasehold improvements and provisions when the obligation arises and the liability can be
reliably estimated. Under the lease agreement, the lessee is obliged to remove assets that it has installed in the leased property. The asset is
depreciated in line with the lease term.
Depreciation
Depreciation is charged to the consolidated income statement on a straight-line basis over the estimated useful lives of each part of an item of
property, plant and equipment. The property, plant and equipment acquired under finance leases are depreciated over the shorter of the useful
life of the asset and the lease term. The estimated useful lives are as follows:
• Leasehold improvements: depreciated over term of lease
• Fixtures and fittings: 25% on cost
• Computer equipment: 20% to 50% on cost
The residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
(m) Intangible assets
Goodwill
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of the non-controlling interest
over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised immediately in profit or loss.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment.
The carrying value of goodwill is compared to the recoverable amount of the cash generating unit to which the goodwill has been allocated,
which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not
subsequently reversed.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 64
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
2. Accounting policies continued
(m) Intangible assets continued
Non-financial assets purchased or acquired in a business combination
Customer relationships and the IT platform purchased or acquired in a business combination are recognised at fair value at the acquisition date.
The customer relationships and IT platform have finite useful lives and are carried at cost less accumulated amortisation.
Amortisation on the assets is calculated using the straight-line method over their estimated useful lives as follows:
Customer relationships
IT platform
Estimated
useful lives
(years)
20
5-7
It is technically feasible to complete the software product so that it will be available for use
Software
Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly
attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets
when the following criteria are met:
•
• Management intends to complete the software product and use or sell it
• There is an ability to use or sell the software product
•
• Adequate technical, financial and other resources to complete the development and to use or sell the software product are available
• The expenditure attributable to the software product during its development can be reliably measured
It can be demonstrated how the software product will generate probable future economic benefits
Development costs for incomplete software are recognised as software development under construction in the balance sheet and are not
amortised as these assets are not yet available for use.
Development costs for completed software are recognised as software in the balance sheet. Software costs are amortised over their estimated
useful lives, which does not exceed seven years.
Other development expenditures that do not meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Software licence
costs are amortised over their estimated useful lives, which does not exceed five years.
(n) Financial instruments
Non-derivative financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents,
loans and borrowings, and trade and other payables.
Trade and other receivables
Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method, less any impairment losses.
Invoice receivables
Invoice receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective
interest method, less any impairment losses.
Trade and other payables
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the
effective interest method.
Investments in debt and equity securities
Investments in debt and equity securities are stated at amortised cost less impairment. Financial instruments held for trading or designated
upon initial recognition are stated at fair value, with any resultant gain or loss recognised in profit or loss.
Other investments in debt and equity securities held by the Group are classified as being available-for-sale and are stated at fair value, with any
resultant gain or loss being recognised directly in equity (in the other reserve), except for impairment losses and, in the case of monetary items
such as debt securities, foreign exchange gains and losses. When these investments are derecognised, the cumulative gain or loss previously
recognised directly in equity is recognised in profit or loss.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS 65
2. Accounting policies continued
(n) Financial instruments continued
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part
of the Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow statement.
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-
bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
Derivative financial instruments and hedging
At 30 April 2018 and 30 April 2017, the Group had no derivatives in place for cash flow hedging purposes.
(o) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject
to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
(p) Trade and other receivables
Trade and other receivables are stated initially at fair value and subsequently at their amortised cost less provision for impairment. A provision
for impairment of receivables is recognised when there is evidence that the Group will not be able to collect all amounts due according to the
original terms of the receivables. The movement in the provision from the previous reporting period is recognised in the income statement.
Subsequent recoveries of amounts previously written off are credited against ‘operating expenses’ in the consolidated income statement.
(q) Trade and other payables
Trade and other payables are initially stated at fair value and subsequently measured at amortised cost.
(r) Provisions
A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the
obligation will have to be settled, and the amount of the obligation can be reliably estimated. Provisions are measured at the present value
required in order to cover the obligation. The present value factor used in the calculation of the present value is selected so that it represents
the market insight into the time value of money and liability-related risks at the time of the assessment.
(s) Leases
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
(t) Share capital
Ordinary shares are classified as equity.
3. Critical accounting estimates and judgements
The preparation of the financial statements requires management to make judgements and estimates that affect the application of policies and
reported amounts of assets and liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant impact on the financial statements are highlighted below.
Revenue recognition
The Group recognises revenue in respect of e-invoicing related services over the period the services are provided. Where buyer transactions are
paid for but not processed, such revenue is deferred according to contractual terms representing the anticipated period for transactions being
processed. Management reviews the historical record of transactions used under each contract and relevant estimates to determine whether the
deferral period for the revenue recognition is appropriate or any changes to the existing deferral period are required. In relation to transaction
fees for which no revenue is received, management assesses the expected usage of any unutilised transactions to determine the amount of
deferred revenue to be recorded.
Going concern
The Group going concern assessment is based on forecasts and projections of anticipated trading performance.
The assumptions applied are subjective and management applies judgement in estimating the probability, timing and value of underlying
cash flows.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 66
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
3. Critical accounting estimates and judgements continued
Deferred taxation
The determination of the Group’s deferred tax assets involves judgements for determining the extent of its recoverability at each balance sheet
date. The Group assesses recoverability with reference to Board approved forecasts of future taxable profits. These forecasts require use of
assumptions and estimates.
Impairment of goodwill and other intangible assets
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment.
The carrying value of goodwill is compared to the recoverable amount of the cash generating unit to which the goodwill has been allocated,
which is the higher of value in use and the fair value less costs of disposal (Note 12). Any impairment is recognised immediately as an expense
and is not subsequently reversed.
An impairment loss on other intangible assets is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
4. 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).
The Board of Directors reviews financial information for three 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), and Tungsten Corporate
(which includes overheads and general corporate costs). Intersegment revenue from management fees and other intersegment charges are
eliminated below.
Year ended 30 April 2018
Segment revenue
EBITDA1 – excluding non-cash share based payment expense
EBITDA1 – including non-cash share based payment expense
Depreciation and amortisation
Foreign exchange gain/(loss)
Share based payment expense
Exceptional items
Finance income
Finance costs
Loss before taxation
Income tax credit
Loss for the year
Capital expenditure
Total assets
Total liabilities
Tungsten
Network
£’000
33,321
2,340
2,340
(2,304)
(1,319)
–
(1,946)
1,379
(1,457)
(3,307)
Tungsten
Network
Finance
£’000
342
Corporate
£’000
Total
£’000
–
33,663
(1,300)
(1,300)
(5,687)
(6,334)
(57)
(169)
–
(118)
74
(276)
(452)
(59)
(647)
(365)
411
(735)
(4,647)
(5,294)
(2,813)
(1,547)
(647)
(2,429)
1,864
(2,468)
(1,846)
(7,534)
(12,687)
7,492
138,039
16,339
–
852
223
122
4,356
5,224
768
(11,919)
7,614
143,247
21,786
1 EBITDA is calculated as earnings before other income, interest, tax, depreciation and amortization, foreign exchange gain or loss, share based payment expense and exceptional items
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS 67
Tungsten
Network
£’000
31,117
(4,251)
(4,251)
(1,409)
2,559
–
1,869
(2,239)
(3,471)
Tungsten
Network
Finance
£’000
152
Corporate
£’000
Total
£’000
–
31,269
(1,682)
(1,682)
(5,851)
(6,256)
(11,784)
(12,189)
(93)
(1,299)
(2,801)
39
–
43
(284)
(256)
(405)
1,110
(545)
2,342
(405)
3,022
(3,068)
(1,977)
(7,246)
(12,694)
433
(12,261)
(230)
(12,491)
3,737
133,849
14,960
–
5,064
460
602
4,339
12,456
151,369
4,619
20,039
4. Segment report continued
Year ended 30 April 2017
(Excluding discontinued operation)
Segment revenue
EBITDA – excluding non-cash share based payment expense
EBITDA – including non-cash share based payment expense
Depreciation, amortisation and impairment
Foreign exchange gain/(loss)
Share based payment expense
Finance income
Finance costs
Loss before taxation
Income tax credit
Loss for the year from continuing operations
Loss for the year from discontinued operation
Loss for the year
Capital expenditure
Total assets
Total liabilities
Geographical information
The Group’s revenue from external customers and non-current assets by geographical location is detailed below. Revenue by geographical
location is allocated based on the location in which the sale originated.
United Kingdom
United States of America
Rest of Europe
Malaysia
Total
Revenue from external customers
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
16,737
14,361
1,510
1,055
14,712
14,273
1,320
964
33,663
31,269
Non-current assets are allocated based on the geographical location of those assets and exclude other financial assets, loans receivables
and deferred tax.
United Kingdom
United States of America
Malaysia
Total
Non-current assets
As at
30 April
2018
£’000
As at
30 April
2017
£’000
122,235
115,715
4,112
160
4,996
66
126,507
120,777
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
68
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
5. Operating expenses
Staff costs
Professional support
Office accommodation and services
IT costs
Marketing costs
Travel and entertainment
Exceptional items
Amortisation
Depreciation
Foreign exchange loss/(gain)
Other operating expenses
Total operating expenses
6. Employee benefit expenses
Wages and salaries
Social security costs
Other pension costs
Share based payments
Total employee benefit expenses
Number of employees
The average monthly number of people employed:
Tungsten Network
Tungsten Network Finance
Corporate
Total average headcount
Refer to Note 24 for details of remuneration in respect of key management.
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
19,645
20,720
Note
6
7
12
13
Note
24
5
6,659
2,411
4,069
2,154
1,262
2,429
2,075
738
1,547
2,757
7,821
2,331
5,830
2,598
1,703
–
2,451
350
(2,342)
2,455
45,746
43,917
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
16,342
17,495
1,509
1,147
647
1,701
1,119
405
19,645
20,720
Year ended
30 April
2018
Year ended
30 April
2017
299
13
19
331
294
14
19
327
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
7. Exceptional items
Provision for onerous contracts
Restructuring costs
Loan notes
Total exceptional items
69
Year ended
30 April
2018
£’000
1,587
592
250
2,429
Year ended
30 April
2017
£’000
–
–
–
–
The Group incurred a number of exceptional items during the year as a result of the restructuring of the Group.
They are mainly technology contract termination costs of £1.1 million, onerous lease provision of £0.5 million which reflects future amounts
owed on a property in the US, restructuring costs due to contract termination and other redundancy costs.
A three-year loan note of £0.25 million was issued in March 2018 as a settlement of disputes between the Company, Disruptive Capital Advisory
Limited (“DCAL”) and the Company’s former Chief Executive Officer Edmund Truell. DCAL has the option to convert the loan note to 373,134
shares in Tungsten, calculated using the share price of £0.67 per share on 16 March 2018, the date of agreement. Although the option should be
fair valued to determine the best estimate of the liability, given the share price of £0.59 as at 30 April 2018 and that DCAL did not exercise the
option at the reporting date, a liability of £0.25 million has been recognised.
8. Auditors’ remuneration
During the year the Group (including overseas subsidiaries) obtained the following services from its auditors and their associates:
Audit of the parent company and the consolidated accounts
Audit of the subsidiaries financial statements
Audit-related assurance services
Taxation compliance services
E-invoicing/archiving support
All other non-audit services
Total auditors’ remuneration
9. Finance income and costs
Finance income
Interest income on short-term deposits
Foreign exchange gains on financing activities
Total finance income
Finance costs
Interest expense and bank charges
Foreign exchange losses on financing activities
Total finance costs
Net finance costs
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
75
86
33
69
322
152
737
43
86
32
79
199
65
504
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
9
1,855
1,864
(403)
(2,065)
(2,468)
(604)
4
3,018
3,022
(642)
(2,426)
(3,068)
(46)
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
70
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
10. Taxation
Income tax comprises the following:
Current tax
Research and Development tax credits
Deferred tax
Origination and reversal of temporary differences
Total income tax credit for tax year
Tax credit reconciliation
Loss before tax
Loss before tax multiplied by the rate of corporation tax in the UK 19%
Items not deductible for tax purposes
Research and Development tax credits
Origination and reversal of temporary differences
Tax losses for which no deferred income tax asset was recognised
Total income tax credit
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
(267)
(284)
(501)
(768)
(149)
(433)
(12,687)
(12,924)
(2,411)
(2,456)
536
(267)
(501)
1,875
(768)
237
(284)
(149)
2,219
(433)
The standard rate of Corporation Tax in the UK changed from 20% to 19% with effect from 1 April 2017. Further reductions to the tax rate have
been announced which will reduce the rate to 17% by 1 April 2020. These changes are expected to be enacted separately each year.
Deferred tax
Deferred tax liability was recognised during the acquisition of subsidiaries in 2014. The deferred tax liability movement for the year is as follows:
As at 1 May 2017
Credited to income statement
Exchange difference
As at 30 April 2018
As at 1 May 2016
Credited to income statement
Exchange difference
As at 30 April 2017
£’000
(2,630)
501
19
(2,110)
£’000
(3,010)
452
(72)
(2,630)
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through
future taxable profits is considered more likely than not. The Group has unrecognised deferred tax assets of £14.8m (2017: £12.9m)
in respect of losses that can be carried forward against future taxable income for the period between one-year and an indefinite period of time.
No deferred tax related to components of Other Comprehensive Income.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
71
11. Loss per share
Basic and diluted loss per share is calculated by dividing the loss attributable to the ordinary shareholders by the weighted average number of
ordinary shares in issue during the year.
Loss per share from continuing and discontinued operations attributable to the equity holders of the parent during the year:
Basic and diluted
Continuing operations
Discontinued operation
Loss per share
12. Intangible assets
As at 30 April 2018
Cost
Balance at 1 May 2017
Additions
Reclassification
Exchange differences
Balance at 30 April 2018
Accumulated amortisation
Balance at 1 May 2017
Charge for the year
Exchange differences
Balance at 30 April 2018
Net book value
As at 30 April 2017
As at 30 April 2018
Loss
per share
p
(9.73)
(0.18)
(9.91)
Total
£’000
124,583
7,293
–
(389)
Year ended
30 April 2018
Loss
£’000
Shares
’000
Loss
per share
p
Year ended
30 April 2017
Loss
£’000
Shares
’000
(11,919)
126,069
(9.45)
(12,261)
–
–
–
(230)
126,069
126,069
(9.45)
Goodwill
£’000
Customer
relationships
£’000
IT platform
£’000
Software
£’000
Software
development
under
construction
£’000
102,049
11,116
7,188
–
–
(201)
–
–
(7)
101,848
11,109
–
–
–
–
2,007
572
(4)
2,575
–
–
(174)
7,014
3,694
1,172
(106)
4,760
660
70
2,236
(6)
3,570
7,223
(2,236)
(1)
2,960
8,556
131,487
430
331
(6)
755
–
–
–
–
6,131
2,075
(116)
8,090
102,049
101,848
9,109
8,534
3,494
2,254
230
2,205
3,570
8,556
118,452
123,397
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 72
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
12. Intangible assets continued
As at 30 April 2017
Cost
Balance at 1 May 2016
Additions
Disposals
Exchange differences
Balance at 30 April 2017
Accumulated amortisation
Balance at 1 May 2016
Charge for the year
Disposals
Exchange differences
Balance at 30 April 2017
Net book value
As at 30 April 2016
As at 30 April 2017
Goodwill
£’000
Customer
relationships
£’000
IT platform
£’000
Software
£’000
101,668
11,103
6,956
–
–
381
–
–
13
–
(109)
341
102,049
11,116
7,188
–
–
–
–
–
1,431
573
–
3
2,414
896
–
384
2,007
3,694
1,908
503
(1,760)
9
660
1,020
982
(1,599)
27
430
Software
development
under
construction
£’000
Total
£’000
–
121,635
3,570
–
–
4,073
(1,869)
744
3,570
124,583
–
–
–
–
–
4,865
2,451
(1,599)
414
6,131
101,668
102,049
9,672
9,109
4,542
3,494
888
230
–
3,570
116,770
118,452
Impairment testing is carried out at cash generating unit (CGU) level on an annual basis. The following is a summary of the goodwill allocation
for each reporting segment:
Tungsten Network
Total goodwill
As at
30 April
2018
£’000
As at
30 April
2017
£’000
101,848
102,049
101,848
102,049
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 plan 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 at least 12%
• Pre-tax discount rate of 11.75% (2017: 11.75%), being based on the Group’s weighted average cost of capital (WACC)
• Growth rate used in perpetuity of 2.00% (2017: 2.00%)
• Corporate overhead of £3.5 million
• Cost growth of 2.50%
Based on the above assumptions, Tungsten Network exceeded the carrying value of the CGU by £12.2 million (2017: £69.7 million).
The recoverable amount of the Tungsten Network CGU was sensitive to the compound annual revenue growth rate, discount rate and cost
growth rate. In the event that the compound annual growth rate is 11.4%, discount rate is 12.6% or cost growth rate is 3.7%, the recoverable
amount would equal the carrying value of the CGU.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
73
Total
£’000
2,367
1,534
(2)
158
4,057
511
738
(1)
163
1,411
1,856
2,646
Total
£’000
5,461
266
(3,394)
34
2,367
3,537
350
(3,390)
14
511
Leasehold
improvements
£’000
Fixtures
and fittings
£’000
Computer
equipment
£’000
1,823
1,367
–
4
220
37
–
7
3,194
264
373
537
–
4
914
1,450
2,280
70
46
–
10
126
150
138
324
130
(2)
147
599
68
155
(1)
149
371
256
228
Leasehold
improvements
£’000
Fixtures
and fittings
£’000
Computer
equipment
£’000
2,532
212
(2,444)
24
324
2,340
159
(2,442)
11
68
2,366
8
(552)
1
1,823
768
156
(552)
1
373
1,598
1,450
563
46
(398)
9
220
429
35
(396)
2
70
134
150
192
256
1,924
1,856
13. Property, plant and equipment
As at 30 April 2018
Cost
Balance at 1 May 2017
Additions
Disposals
Exchange differences
Balance at 30 April 2018
Accumulated depreciation
Balance at 1 May 2017
Charge for the year
Disposals
Exchange differences
Balance at 30 April 2018
Net book value
At 30 April 2017
At 30 April 2018
As at 30 April 2017
Cost
Balance at 1 May 2016
Additions
Disposals
Exchange differences
Balance at 30 April 2017
Accumulated depreciation
Balance at 1 May 2016
Charge for the year
Disposals
Exchange differences
Balance at 30 April 2017
Net book value
At 30 April 2016
At 30 April 2017
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 74
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
14. Trade and other receivables
Non-current assets
Loans to employees under EMSS scheme
Trade and other receivables
Current assets
Trade receivables
Less: impairment loss provision
Prepayments
VAT receivables
Accrued income
Other receivables
Trade and other receivables
As at
30 April
2018
£’000
464
464
As at
30 April
2018
£’000
7,458
(1,463)
1,754
450
691
1,430
10,320
As at
30 April
2017
£’000
469
469
As at
30 April
2017
£’000
6,185
(1,192)
1,492
348
503
1,454
8,790
15. Invoice receivables
The invoice receivables represent outstanding Early Payment invoices that were financed by the Group and our funding partners. Tungsten
purchases invoices from approved suppliers on the Tungsten Network, which are then sold to a funding partner.
During the year, most of the outstanding financed invoices were settled.
16. Cash and cash equivalents
Cash at bank
Cash and cash equivalents
17. Share capital and share premium
Issued and fully paid
Balance as at 1 May 2016
Shares issued during the year
Balance as at 30 April 2017
Shares issued during the year
Balance as at 30 April 2018
As at
30 April
2018
£’000
6,418
6,418
Share
capital
£’000
553
–
553
–
As at
30 April
2017
£’000
17,498
17,498
Share
premium
£’000
188,794
–
188,794
–
Ordinary
shares
Number
Nominal
value
126,069,397
£0.004386
–
–
126,069,397
£0.004386
–
–
126,069,397 £0.004386
553
188,794
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
75
18. Share based payments
Founder Securities Scheme
In May 2012, the Group established Founder Securities Scheme. The Founder Securities are designed to encourage the subscribers to use their
best efforts to grow the Company within five to ten years. The Founder Securities have been treated as equity settled share based payments and
are considered to have vested at time of grant as there are no service conditions attaching to them.
Employee Matched Share Scheme
The Employee Matched Share scheme is part of Tungsten’s plans to encourage share ownership among its employees, and incentivise and align
their interests with existing shareholders. As part of the scheme’s terms, any participating employee is required to acquire Tungsten shares
in the market at an arm’s length price and hold them for the same period as the life of the option. The Employee Matched Share scheme was
treated as equity settled share-based payments and the fair value of the outstanding options was determined using a Black-Scholes option
pricing model.
Save As You Earn Scheme
The Save As You Earn Scheme is approved by HM Revenue & Customs and it was offered to eligible employees participating in the scheme who
have committed to contribute between £5 and £500 per month over a three-year period. At the end of that contracted period, their accumulated
funds can then be withdrawn from the scheme as cash or used to exercise the options at the contracted price.
The Tungsten Board formally approved these options on 4 August 2014 at an exercise price of £2.25. The SAYE Scheme comprises equity-settled
share-based payment transactions with options vesting on the third anniversary of the grant date. The fair value of the outstanding options,
EMSS and SAYE awards were determined using a Black-Scholes option pricing model.
UK Scheme and US Plan
All outstanding options issued under the UK Scheme and US Plan are subject to the same terms:
• Options to be granted at an option price equal to fair market value at grant.
• 25% will vest on each anniversary of the date of grant for option with 4 years term; 33.33% will vest on each anniversary of the date of grant
for option with 3 years term.
• The options have a 10 year term from grant date to the final expiry date.
• On an exit event involving a sale or change of control of Tungsten Corporation plc, any unvested options are accelerated and can be exercised
in full.
Share Appreciation Rights (SARs)
In July 2015, the UK Scheme was amended to bring the vesting terms in line with the US plan and to allow for the grant of SARs to employees
based outside of the UK and US, notably in Malaysia and continental Europe.
SARs are “phantom options”, whereby the beneficiary is issued with a certificate that allows them to call on the Company to pay them the
increase in price between the option issue price and the market price, thereby representing the same economic benefit as options issued under
the UK Scheme and US Plan, but without involving the issue of shares. Where applicable, the SARs are subject to the same rules as options
issued under the UK Scheme and US Plan.
The following option grants have been made under the UK Scheme, US Plan and SARs:
Grant date
21 January 2015
23 July 2015
07 January 2016
15 April 2016
26 July 2016
19 September 2016
16 December 2016
03 August 2017
Vesting period
Issue price (P)
UK Scheme
US Plan
SARs
Total
Number of shares granted
1-4 years
1-4 years
1-4 years
1-4 years
1-4 years
1-3 & 1-4 years
4 years
1-3 & 1-4 years
237.75
67.50
39.00
58.00
43.45
62.70
53.45
58.60
515,000
735,150
–
–
440,000
270,850
100,000
300,000
–
955,000
58,000
1,064,000
–
–
100,000
300,000
647,201
466,693
72,169
1,186,063
995,000
1,510,000
125,000
–
–
–
2,505,000
125,000
1,047,250
1,426,750
99,000
2,573,000
4,064,601
4,514,293
229,169
8,808,063
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 76
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
18. Share based payments continued
The fair value of the outstanding options, EMSS and SAYE awards were determined using a Black-Scholes option pricing model using the
following assumptions:
Risk-free interest rate
Expected dividend yield
Expected volatility
Vesting period
Employee
Matched
Share
2.15%
-
Save As
You Earn
2.15%
–
UK Scheme
0.8%-2.0%
–
US Plan
0.8%-2.0%
–
SARs
0.8%-2.0%
–
43.3%
43.3%
50.25%-76.94%
50.25%-76.94%
50.25%-76.94%
4.5 years
3 years
4 years
3-4 years
4 years
Market value of underlying shares
£0.61
£0.61
Share price on the valuation date
The risk-free interest rate was based on the UK Gilt rates on date of grant of each of the share schemes. No dividends were expected.
The expected equity volatility for the EMSS and SAYE schemes and other employee share options has been based on the historic volatility
data since the Company’s admission to AIM in October 2013.
Share based payment expenses of £0.6m have been recognised in the consolidated income statement for the year ended 30 April 2018
(30 April 2017: £0.4m). The table below sets out the movement in shares granted under the Company share schemes:
Number
As at 1 May 2016
Granted during the year
Lapsed during the year
As at 30 April 2017
Granted during the year
Lapsed during the year
As at 30 April 2018
19. Provisions
As at 1 May 2017
Additions
Utilised during the year
As at 30 April 2018
Analysis of total provisions:
Non-current
Current
Total
Founder
Securities
3,760,000
–
–
Employee
Matched
Share
251,487
–
Save As
You Earn
65,920
UK Scheme
645,875
US Plan
748,750
–
1,767,201
2,276,693
SARs
56,000
72,169
Total
5,528,032
4,116,063
(62,047)
(34,320)
(171,102)
(17,793)
–
(285,262)
3,760,000
189,440
31,600
2,241,974
3,007,650
128,169
9,358,833
–
–
–
–
1,047,250
1,426,750
99,000
2,573,000
(5,357)
(28,000)
(538,475)
(42,238)
(31,750)
(645,820)
3,760,000
184,083
3,600
2,750,749
4,392,162
195,419 11,286,013
Leasehold
property
dilapidations
£’000
–
1,204
–
1,204
Onerous
contracts
£’000
–
1,843
(829)
1,014
As at
30 April
2018
£’000
1,459
759
2,218
Total
£’000
–
3,047
(829)
2,218
As at
30 April
2017
£’000
–
–
–
The provisions for dilapidations include the estimated costs of removal of installed assets under the lease contracts, which includes a provision
for the London office of £1.0m and the Malaysia office of £0.2m.
The provisions for onerous contracts include settlement of provision for early termination system support contracts of £0.6m and
an estimated loss of sub-leased on one of the office lot in US at £0.4m.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS 20. Trade and other payables
Trade payables
Social security and other taxes
Accrued expenses
Other payables
Trade and other payables
21. Deferred income
As at 1 May
Invoiced during the year
Released to revenue
Impairment provision
Exchange differences
As at 30 April
77
As at
30 April
2017
£’000
2,548
351
6,592
38
9,529
As at
30 April
2017
£’000
8,318
30,770
As at
30 April
2018
£’000
3,125
366
5,039
327
8,857
As at
30 April
2018
£’000
7,880
34,188
(33,663)
(31,251)
(284)
480
8,601
(412)
455
7,880
22. Financial instruments, risk management and exposure
The Group’s activities expose it to a variety of financial risks, predominantly credit, liquidity and foreign currency risk. Risk management
is carried out by the Board of Directors. The Group uses financial instruments to provide flexibility regarding its working capital requirements
and to enable it to manage specific financial risks to which it is exposed.
Transactions are only undertaken if they relate to actual underlying exposures and hence cannot be viewed as speculative.
(a) Credit risk
Cash and cash equivalents are held with reputable financial institutions.
The fair value of trade and other receivables and invoice receivables (financial assets) approximates their carrying value. As at 30 April
2018, total trade and other receivables and invoice receivables of £1.5m (2017: £2.7m) were past due but not impaired. With respect to these
receivables that are neither impaired nor past due, there are no indications as at the reporting date that the counter-parties will not meet their
payment obligations.
The overdue analysis of these receivables is as follows:
Current and not impaired
Less than 1 month overdue
Between 2-3 months overdue
Over 3 months overdue
Total past due but not impaired
Individually determined to be impaired
Total trade and other receivables
Less impairment loss provision
Total trade and other receivables
As at
30 April
2018
£’000
8,832
651
397
440
1,488
1,463
11,783
As at
30 April
2017
£’000
6,078
752
590
1,370
2,712
1,192
9,982
(1,463)
(1,192)
10,320
8,790
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
78
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
22. Financial instruments, risk management and exposure continued
(a) Credit risk continued
The following represents the Group’s maximum exposure to credit risk related to uncollateralised balances:
Cash and cash equivalents
Trade and other receivables
Invoice receivables
Total
Below credit ratings were obtained from Moody’s Corporation’s website:
Cash and cash equivalents
AAA
AA
A
B
Total
(b) Liquidity risk
Non-derivative financial assets and liabilities
As at 30 April 2018
Cash and cash equivalents
Trade and other receivables1
Invoice receivables
Trade and other payables
Net position
1 Excludes prepayments
As at 30 April 2017
Cash and cash equivalents
Trade and other receivables1
Invoice receivables
Trade and other payables
Net position
1 Excludes prepayments
Carrying
amount
£‘000
6,418
8,566
2
Total
contractual
cash flows
£‘000
6,418
8,566
2
Less than
3 months
£‘000
6,418
8,126
2
(8,857)
(8,857)
(8,857)
6,129
6,129
5,689
Carrying
amount
£‘000
17,498
7,298
4,304
Total
contractual
cash flows
£‘000
17,498
7,298
4,304
Less than
3 months
£‘000
17,498
6,338
4,304
(9,529)
(9,529)
(9,529)
19,571
19,571
18,611
As at
30 April
2018
£’000
6,418
10,320
2
As at
30 April
2017
£’000
17,498
8,790
4,304
16,740
30,592
As at
30 April
2018
£’000
–
2,925
2,719
774
As at
30 April
2017
£’000
5,000
11,870
315
313
6,418
17,498
3 to 12
months
£‘000
1 to 5
years
£‘000
–
440
–
–
440
–
–
–
–
–
3 to 12
months
£‘000
1 to 5
years
£‘000
–
960
–
–
960
–
–
–
–
–
The Group aims to mitigate liquidity risk by carefully selecting acquisitions and creditors. This is managed via authorisation limits operating up
to Group Board level. Cash flow forecasting is performed in the operating entities of the Group and aggregated by Group finance. Group finance
monitors rolling forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet operational needs.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
79
22. Financial instruments, risk management and exposure continued
(c) Foreign currency risk
The Group operates in a number of territories in the world but principally in the US and Europe and is exposed to foreign exchange risk for
movements between the US Dollar, the Euro and Sterling. The Group’s subsidiaries conduct the majority of their business in their respective
functional currencies; therefore there is limited transaction risk. Foreign exchange risk arises mainly from net investments in foreign operations.
This exposure is reduced by funding the investments as far as possible with borrowings in the same currency. The Group applies hedge
accounting principles to net investments in foreign operations and the related borrowings.
(d) Capital risk management
The aim of the Group is to maintain sufficient funds to enable it to meet working capital requirements, make suitable investments and
incremental acquisitions while minimising recourse to external funders and/or shareholders. Capital managed by the Group at 30 April 2018
consists of cash and cash equivalents and equity attributable to equity holders of the parent. The capital structure is reviewed by management
through regular internal financial reporting and forecasting.
The Group considers the following balances as a part of its capital management:
Share capital and premium
Accumulated reserves1
Total
1 Reserves include shares to be issued, merger reserve, share-based payments reserve, other reserves and accumulated net losses
In addition, the Group considers the availability of cash balances of the Group as part of its assessment of capital.
23. Commitments
Operating leases
The table below sets out the future minimum lease commitments:
Less than 1 year
Between 1 and 5 years
After 5 years
Total operating leases
As at
30 April
2018
£’000
As at
30 April
2017
£’000
189,347
189,347
(67,886)
(58,017)
121,461
131,330
As at
30 April
2018
£’000
1,036
3,574
3,788
8,398
As at
30 April
2017
£’000
1,021
3,345
4,562
8,928
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
80
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS continued
24. Related-party transactions
The Group entered into the following transactions with related parties in the ordinary course of business:
Purchase of services
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
34
95
The Witz Company is controlled by Richard Hurwitz. Richard Hurwitz has elected not in participate in the Group’s pension scheme and in
accordance with his executive service agreement is entitled to a cash allowance of the equivalent of 10% of his salary, part of which is paid to
The Witz Company. During the year ended 30 April 2018, the Group paid a total costs of £34,000 (2017: £31,000).
Transactions between Group entities principally relate to intercompany financing arrangements which are eliminated on consolidation.
Key management personnel
Key management includes Directors – Executive and Non-Executive – who are responsible for controlling and directing the activities of the
Group. The compensation paid or payable to key management for employee services is shown below:
Short-term employee benefits
Share-based payment expense
Total
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
1,905
219
2,124
1,579
174
1,753
For further details with respect to Directors’ remuneration, please refer to the Directors’ Remuneration Report on pages 44 to 46.
25. Subsequent event
On 20 July 2018 Tungsten Network Limited, an indirect wholly owned subsidiary of Tungsten Corporation plc, signed a revolving credit facility
with HSBC UK Bank plc. Details are as follows:
Currency: British Pounds
Amount: £4.0 million
Rate: LIBOR plus 3.5%
Term: 3 years
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
26. Subsidiary undertakings of the Group
The full listing of subsidiary companies in the Group is shown below.
Subsidiary
Nature of business
Tungsten Corporation Guernsey Limited
Intermediate holding company
Tungsten Network Limited
Electronic invoice delivery
Tungsten Network Inc
Electronic invoice delivery
Tungsten Network Sdn Bhd
Electronic invoice delivery &
shared services office
Tungsten Network GmbH
Electronic invoice delivery
Tungsten Network (Schweiz) GmbH
Shared services office
Tungsten Network S.A.P.I de CV
Electronic invoice delivery
Tungsten Network EOOD
Shared services office
Tungsten Network Private Limited
Electronic invoice delivery
Image Integration Systems, Inc
Software
Tungsten Network Finance Limited
Intermediate holding company
Tungsten Purchaser UK Limited
Invoice acquisition
Tungsten Account Trustee Limited
Trustee services
Tungsten Investment Management Limited Investment management
Tungsten Purchaser (US), Inc
Invoice acquisition
Tungsten Purchaser (Canada) Ltd
Invoice acquisition
81
Registered office
Country of
incorporation
% of ordinary
shares held
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Pountney Hill House,
6 Laurence Pountney Hill,
London, EC4R 0BL
Pountney Hill House,
6 Laurence Pountney Hill,
London, EC4R 0BL
1040 Crown Pointe Parkway,
Suite 350, Atlanta GA 30338
Level 8 Symphony House,
Block D13 Pusat Dagangan Dana 1,
Jalan PJU1A/46,
47301 Petaling Jaya,
Selangor Darul Ehsan
Guernsey
UK
USA
Malaysia
Postfach 1114
D-21262 Jesteburg,
Hamburg
Confidas Treuhand AG,
Gubelstrasse 5,
6301 Zug
Bosque de Ciruelos 180,
Piso Principal,
Bosques de las Lomas,
11700 Mexico, D.F.
38, Damyan Gruev Str.,
1606 Sofia,
Bulgaria
Germany
Switzerland
Mexico
Bulgaria
India
USA
UK
UK
UK
UK
USA
Unit No.216, 2nd Flr. Sq.,
One, C-2, Dist. Ctr. Saket,
New Delhi, South Delhi, Delhi,
India, 110017
885 Commerce Drive,
Suite B, Perrysburg,
Ohio 43551
Pountney Hill House,
6 Laurence Pountney Hill,
London, EC4R 0BL
Pountney Hill House,
6 Laurence Pountney Hill,
London, EC4R 0BL
Pountney Hill House,
6 Laurence Pountney Hill,
London, EC4R 0BL
Pountney Hill House,
6 Laurence Pountney Hill,
London, EC4R 0BL
2711 Centerville Road,
Suite 400, City of Wilmington 19808,
County of New Castle,
State of Delaware
855-2 Street SW,
Suite 3500,
Calgary, Alberta, T2P 4J8,
Canada
Canada
100
Tungsten Corporation Guernsey Limited is directly held by Tungsten Corporation plc, all other subsidiaries listed above are indirectly held
through Tungsten Corporation Guernsey Limited.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 82
PARENT COMPANY BALANCE SHEET
Registered number: 07934335
Assets
Non-current assets
Investments in subsidiaries
Property, plant and equipment
Intangible assets
Trade and other receivables
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Capital and reserves attributable to the equity shareholders
Share capital
Share premium
Shares to be issued
Share-based payment reserve
Other reserve
Accumulated losses
Total equity
Non-current liabilities
Provision
Total non-current liabilities
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
Note
5
6
7
8
As at
30 April
2018
£’000
As at
30 April
2017
£’000
162,040
162,040
2,160
–
1,065
1,490
601
1,070
165,265
165,201
8
74,267
580
74,847
62,170
12,613
74,783
240,112
239,984
553
553
188,794
188,794
3,760
1,401
(5,450)
(35,627)
3,760
774
(5,450)
(33,141)
153,431
155,290
1,000
1,000
85,681
85,681
86,681
–
–
84,694
84,694
84,694
240,112
239,984
9
10
The loss attributable to shareholders dealt with in the financial statements of the Company was £2.5m (2017: loss of £3.1m).
The notes on pages 85 to 91 are an integral part of these financial statements.
The financial statements on pages 82 to 91 were authorised for issue by the Board of Directors on 23 July 2018 and were signed on its behalf by:
Richard Hurwitz
Chief Executive Officer
David Williams
Chief Financial Officer
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
83
PARENT COMPANY STATEMENT
OF CHANGES IN EQUITY
Year ended 30 April 2018
Balance as at 1 May 2017
Loss for the year
Movement for the year
Share
capital
£’000
553
–
–
Share
premium
£’000
Shares
to be issued
£’000
188,794
3,760
–
–
–
–
Share-based
payment
reserve
£’000
774
–
627
Other
reserves
£’000
Accumulated
losses
£’000
Total
equity
£’000
(5,450)
(33,141)
155,290
–
–
(2,486)
(2,486)
–
627
Balance as at 30 April 2018
553
188,794
3,760
1,401
(5,450)
(35,627)
153,431
Year ended 30 April 2017
Balance as at 1 May 2016
Loss for the year
Movement for the year
Currency translation differences
Share
capital
£’000
553
–
–
–
Share
premium
£’000
188,794
Shares
to be issued
£’000
3,760
–
–
–
–
–
–
Balance as at 30 April 2017
553
188,794
3,760
Share-based
payment
reserve
£’000
379
–
395
–
774
Other
reserves
£’000
Accumulated
losses
£’000
Total
equity
£’000
(5,453)
(30,075)
157,958
–
–
3
(3,066)
(3,066)
–
–
395
3
(5,450)
(33,141)
155,290
The notes on pages 85 to 91 are an integral part of these consolidated financial statements.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
84
PARENT COMPANY STATEMENT OF CASH FLOWS
Cash flows from operating activities
Loss before taxation
Adjustments for:
Depreciation
Share-based payment expense
Finance income
Finance costs
Loss on disposal of business unit
Cash used in operations
Changes in working capital:
Increase in trade and other receivables
Increase in trade and other payables
Net interest paid
Net cash outflows from operating activities
Cash flows from investing activities
Capitalisation of software development costs
Purchases of property, plant and equipment
Net proceeds from disposal of a subsidiary
Investment in subsidiary
Net cash (outflows)/inflows from investing activities
Cash flows from financing activities
Bank charges associated with loan facility
Net cash outflows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of the year
Exchange adjustments
Cash and cash equivalents at the end of the year
The notes on pages 85 to 91 are an integral part of these consolidated financial statements.
Year ended
30 April
2018
£’000
Year ended
30 April
2017
£’000
Note
6
4
(2,486)
(3,066)
452
647
(11)
1,265
–
(133)
138
405
(1)
1,485
230
(809)
(11,491)
(20,770)
968
(1,238)
7,368
(0)
(11,894)
(14,211)
–
(122)
–
–
(601)
(1)
28,594
(1,150)
(122)
26,842
–
–
(210)
(210)
(12,016)
12,421
12,613
(17)
580
195
(3)
12,613
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
85
NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS
1. General information
Tungsten Corporation plc (the Company) is a holding company and provider of central and management functions. The company is a public
company limited, which is incorporated and domiciled in the UK. The address of its registered office is Pountney Hill House, 6 Laurence Pountney
Hill, London EC4R 0BL, UK.
2. Accounting policies
(a) Basis of preparation
The Company financial statements of Tungsten Corporation plc have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the EU), the Companies Act 2006 that applies to companies reporting
under IFRS, and IFRS Interpretations Committee (IFRS IC). The consolidated financial statements have been prepared under the historical
cost convention.
(b) New standards, amendments and interpretations adopted:
The accounting policies adopted are consistent with those of the previous financial year. There were no new IFRSs or interpretations, effective
for the first time for the year beginning on or after 1 May 2017, have had a material impact on the Company.
(c) New standards, amendments and interpretations issued but not yet effective in 2017/18 and not early adopted:
As at the date of authorisation of these financial statements, the following standards and interpretations were in issue but not yet effective
(and in some cases had not yet been adopted by the EU). The Company has not applied these standards and interpretations in the preparation
of these financial statements.
• Amendment to IAS 16, ‘Property, plant and equipment’ and IAS 38, ‘Intangible assets’ on depreciation and amortisation;
• Amendment to IAS 10, ‘Consolidated financial statements’ and IAS 28, ‘Investments in associates and joint ventures’;
•
•
• Amendments to IFRS 9, ‘Financial instruments’, regarding general hedge accounting;
• Amendments to IAS 1, ‘Presentation of financial statements’ on the disclosure initiative; and
•
IFRS 15 ‘Revenue from contracts with customers’;
IFRS 9 ‘Financial instruments’;
IFRS 16 ‘Leases’.
The Company has adopted IFRS 9 Financial instruments as of 1 May, 2018 (mandatory application), with full retrospective application.
IFRS 9 Financial instruments
The main impact of adopting IFRS 9 is likely to arise from the implementation of the impairment expected loss model regarding intercompany loan
and balances. The Company have some balances due from its subsidiaries. However, there is no impairment provision to be recognised on the
ground that they are repayable on demand.
IFRS 16 Leases
IFRS 16 introduces a single accounting model for a lessee and eliminates the distinction between finance lease and operating lease. Lessee is now
required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value.
The Company is currently assessing the impact of this standard and to adopt this standard on the required effective dates.
(d) Critical accounting estimates and judgements
The preparation of the financial statements requires management to make judgements and estimates that affect the application of policies
and reported amounts of assets and liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will by definition, seldom equal the
related actual results. The estimates and assumptions that have a significant impact on the financial statements are highlighted below.
Going concern
The Company going concern assessment is based on forecasts and projections of anticipated trading performance. The assumptions applied are
subjective and management applies judgement in estimating the probability, timing and value of underlying cash flows.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 86
NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS continued
2. Accounting policies continued
(e) Significant Accounting Policies
The accounting policies adopted are consistent with those of the previous financial year.
Share-based payments
The Company issues equity-settled and cash-settled share-based awards to certain employees. The fair value of share-based awards is
determined based on the Black-Scholes model at the date of grant and expensed based on the Group’s estimate of the shares that will
eventually vest, over the vesting period with a corresponding increase in equity. At each balance sheet date, the Group revises its estimates
of the number of options that are expected to vest based on service and other non-market performance conditions. The amount expensed
is adjusted over the vesting period for changes in the estimate of the number of shares that will eventually vest, save for changes resulting
from any market-related performance conditions.
Equity-settled share-based awards are recognised as an expense in profit or loss with a corresponding credit to the share-based payment
reserve. Cash-settled share-based awards are recognised as an expense in profit or loss with a corresponding credit to liabilities.
Further details on the share-based payments can be found in Note 18 to the consolidated financial statements of this Annual Report and
financial statements.
(f) Tangible assets
Tangible assets are stated at cost less accumulated depreciation. Depreciation is charged to profit or loss on a straight-line basis of the
estimated useful lives of each item of tangible asset. Depreciation commences when an asset is brought into use over the following estimated
useful lives:
• Leasehold improvement: depreciated over the term of lease
• Fixture and fittings: 25% on cost
• Computer equipment: 50% on cost
Dilapidations
The estimated cost of dilapidations is recognised in leasehold improvements and provisions when the obligation arises and the liability can be
reliably estimated. Under the lease agreement, the lessee is obliged to remove assets that it has installed in the leased property. The asset is
depreciated in line with the lease term.
(g) Provisions
A provision is recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that the
obligation will have to be settled, and the amount of the obligation can be reliably estimated. Provisions are measured at the present value
required in order to cover the obligation. The present value factor used in the calculation of the present value is selected so that it represents
the market insight into the time value of money and liability-related risks at the time of the assessment.
(h) Trade and other receivables
Trade and other receivables are stated initially at fair value and subsequently at their amortised cost less impairment losses.
(i) Trade and other payables
Trade and other payables are initially stated at fair value and subsequently measured at amortised cost.
(j) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months or less and bank overdrafts.
(k) Employee benefits defined contribution plans
The Company pays contributions to publicly or privately administered pension plans. The Company has no further payment obligations once the
contributions have been paid. Contributions are recognised in the income statement as an employee benefit expense in the period when they are
due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(l) Share capital
Ordinary shares are classified as equity.
(m) Investments in subsidiary undertakings
Investments in subsidiary undertakings are stated at cost less provisions for impairment. Investments are reviewed for impairment if there are
indicators that the carrying value may not be recoverable.
(n) Foreign currency translation
The accounting policy for foreign currency translation is the same as that for the Group and is set out on page 61 and 62.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS 87
3. Loss for the year
As permitted by the exemption in Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part
of these financial statements. The loss attributable to shareholders dealt with in the financial statements of the Company was £2.5m
(2017: loss of £3.1m).
4. Employee benefit expenses
Wages and salaries
Social security costs
Other pension costs
Share-based payments
Total employee benefit expenses
Number of employees
The average number of people (including Executive Directors) employed:
Corporate
Total average headcount
Year ended
30 April
2018
£’000
2,314
Year ended
30 April
2017
£’000
2,501
220
153
647
284
178
405
3,334
3,368
Year ended
30 April
2018
Year ended
30 April
2017
19
19
19
19
Refer to Note 24 in the consolidated financial statements for details of remuneration in respect of key management. The share-based payments
expense includes expenses relating to cash-settled share options. Cash-settled share-based awards are recognised as an expense in profit or
loss with a corresponding credit to liabilities (see Note 2).
5. Investments in subsidiaries
Balance as at 1 May
Additions
Disposal
Balance as at 30 April
The Company’s subsidiaries is the same as that for the Group and is set out on page 81.
2018
£’000
2017
£’000
162,040
189,756
–
–
1,150
(28,866)
162,040
162,040
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements
88
NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS continued
6. Property, plant and equipment
As at 30 April 2018
Cost
Balance at 1 May 2017
Additions
Balance at 30 April 2018
Accumulated depreciation
Balance at 1 May 2017
Charge for the year
At 30 April 2018
Net book value
At 30 April 2017
At 30 April 2018
As at 30 April 2017
Cost
Balance at 1 May 2016
Additions
Disposals
Balance at 30 April 2017
Accumulated depreciation
Balance at 1 May 2016
Charge for the year
Disposals
At 30 April 2017
Net book value
At 30 April 2016
At 30 April 2017
Leasehold
Improvements
£’000
Fixtures
and fittings
£’000
Computer
equipment
£’000
1,800
1,122
2,922
364
433
797
1,436
2,125
90
–
90
36
19
55
54
35
1
–
1
1
–
1
–
–
Leasehold
Improvements
£’000
Fixtures
and fittings
£’000
Computer
equipment
£’000
1,800
–
–
1,800
240
124
–
364
1,560
1,436
91
1
(2)
90
24
13
(1)
36
67
54
43
–
(42)
1
42
1
(42)
1
1
–
Total
£’000
1,891
1,122
3,013
401
452
853
1,490
2,160
Total
£’000
1,934
1
(44)
1,891
306
138
(43)
401
1,628
1,490
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS 7. Intangible assets
As at 30 April 2018
Cost
Balance at 1 May 2017
Transferred to another group company
Balance at 30 April 2018
Accumulated depreciation
Balance at 1 May 2017
Charge for the year
At 30 April 2018
Net book value
At 30 April 2017
At 30 April 2018
As at 30 April 2017
Cost
Balance at 1 May 2016
Additions
Balance at 30 April 2017
Accumulated depreciation
Balance at 1 May 2016
Charge for the year
At 30 April 2017
Net book value
At 30 April 2016
At 30 April 2017
89
Software development
under construction
£’000
601
(601)
–
–
–
–
601
–
Software development
under construction
£’000
–
601
601
–
–
–
–
601
The costs of software development under construction transferred to a subsidiary, Tungsten Network Limited. These costs will generate future
economic benefits to Tungsten Network Limited upon its completion.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 90
NOTES TO THE PARENT COMPANY
FINANCIAL STATEMENTS continued
8. Trade and other receivables
Non-current assets
Loans to employees under EMSS scheme
Lease deposit
Trade and other receivables
Current assets
Amounts owed by group undertakings
VAT
Other receivables
Invoices receivable
Prepayments
Trade and other receivables
As at
30 April
2018
£’000
477
588
As at
30 April
2017
£’000
482
588
1,065
1,070
As at
30 April
2018
£’000
73,716
50
249
–
252
As at
30 April
2017
£’000
61,363
140
286
113
268
74,267
62,170
The lease deposit was reclassified to non-current from current in the year.
The amounts owed by Group undertakings are due from Tungsten Network Limited and Tungsten Network Finance Limited as at 30 April 2018.
These are non-interest bearing and are repayable on demand.
9. Provisions
At 1 May 2017
Addition
At 30 April 2018
Analysis of total provision:
Non-current
Total
Leasehold
property
dilapidation
£’000
–
1,000
1,000
As at
30 April
2018
£’000
1,000
1,000
As at
30 April
2017
£’000
–
–
The provision for dilapidations include the estimated costs of removal of installed assets under the lease contract for the London office.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS
10. Trade and other payables
Trade and other payables
Taxation and social security
Accrued expenses
Amounts owed to Group undertakings
Trade and other payables
91
As at
30 April
2018
£’000
546
264
1,158
83,713
85,681
As at
30 April
2017
£’000
84
104
2,191
82,315
84,694
The amounts owed to Group undertakings are due to Tungsten Corporation Guernsey Limited and Tungsten Network Inc as at 30 April 2018. This
includes a loan of £42 million from Tungsten Corporation Guernsey Limited. The loan is on a five year term and bearing an interest based on
monthly GBP LIBOR. The amounts owed to Tungsten Network Inc. are non-interest bearing and are repayable on demand.
11. Commitments
Operating leases
The table below sets out the future minimum lease commitments:
Less than 1 Year
Between 1 and 5 years
After 5 years
Total
As at
30 April
2018
£’000
650
2,600
3,629
6,879
As at
30 April
2017
£’000
650
2,600
4,279
7,529
12. Related-party transactions
No related party transactions have been entered into during the year with the Company.
Key management personnel
Key management includes Directors – Executive and Non-Executive. There were no key management personnel in the Company apart
from the Directors. The compensation paid or payable to key management for employee services is set out in Note 24 to the consolidated
financial statements.
13. Capital management
The aim of the Company is to maintain sufficient funds to enable it to meet working capital requirements, make suitable investments and
incremental acquisitions while minimising recourse to external funders and/or shareholders. Capital managed by the Company at 30 April 2018
consists of cash and cash equivalents and equity attributable to equity holders of the parent. The capital structure is reviewed by management
through regular internal financial reporting and forecasting.
The Company considers the following balances as a part of its capital management:
Share capital and premium
Accumulated reserves1
Total
1 Reserves include shares to be issued, share-based payments reserve, other reserves and accumulated net losses.
In addition, the Company considers the availability of cash balances of the Company as part of its assessment of capital.
As at
30 April
2018
£’000
As at
30 April
2017
£’000
189,347
189,347
(35,916)
(34,057)
153,431
155,290
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Strategic reportGovernanceFinancial statements 92
SHAREHOLDER INFORMATION
Nominated adviser
Panmure Gordon & Co
1 New Change
London
EC4 9AF
UK
Broker
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
UK
Registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
UK
0371 384 2030*
Overseas helpline +44 (0)121 415 7047
* Lines open 8.30am to 5.30pm, Monday to Friday.
Registered office
Tungsten Corporation plc
Pountney Hill House
6 Laurence Pountney Hill
London
EC4R 0BL
UK
Tungsten Corporation plc is a public limited company incorporated and domiciled in the UK, with registered number 07934335.
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018FINANCIAL STATEMENTS Design and Production
www.carrkamasa.co.uk
TUNGSTEN CORPORATION PLC // ANNUAL REPORT AND FINANCIAL STATEMENTS 2018 Tungsten Corporation plc
Pountney Hill House
6 Laurence Pountney Hill
London EC4R 0BL
UK
E: info@tungsten-network.com
T: +44 20 7280 7807
www.tungsten-network.com