Shares of troubled electronic invoicing, analytics and financing companyTungsten(LSE: TUNG) are falling todayafter the company issued itspreliminary results for the year ended 30 April 2015.
The company reported revenue growth of 19% year-on-year to 23.1m,butlosses widened as Tungsten ramped up spending to increase its customer base.
Tungstens group loss after tax widened to 27m, from 11m as reported for the year-ago period. On a per share basis, Tungsten reported a loss of 26.3p compared to a loss of 18.6p as reported for full-year 2014.
Moving in the right direction
Still, Tungstens key performance indicators all moved in the right direction during 2014. The number of buyers using the companyselectronic invoicing network jumped by 39.5% and the number of suppliers using the system increased by 7.7% to 181,000. Whats more, the total value of transactions over the networkticked higher by 10% to 121bn.
Customers are switching on to Tungstens offering, and the group is attracting some big names. For example, yesterday it was announced that Honda Logistics North America, amajor subsidiary of Honda, had selected Tungsten toautomate its accounts payable processes.
But while KPIs are improving,there was little else in todays results release that suggested Tungsten is moving in the right direction.
Along with widening losses, the group reported a cash burn for the year of around 40m.At 30 April 2015, the group had cash balances of 32.6m, which included 19.5m of cash or cash equivalents held in Tungsten Bank, leaving 13.5m for the company to work with. A placing afterthe financial year-end raised 17.5m gross, giving Tungsten an estimated cash balance of 31m. The company entered its last financial year with cash and cash equivalents of 63m.
Burning cash, running out of time
Tungsten has been in and out of the spotlight over the past few months as the companys failure to hit key targets has not gone unnoticed.
And after raising17.5m through a placing during May to support growth, the market had begun to speculate that Tungsten was finally on the road to recovery. However, todays results release highlights the challenges Tungsten still faces.
That being said, Tungstens management has stated that the group was faced with a number of one-off costs throughout 2014, the majority of which have now been incurred and paid for. As a result, Tungsten now has more cash available forinvestment to support growth. With this being the case, Tungstens key metrics should start improving throughout 2015 as the group focuses on customer growth.
Nevertheless, City analysts dont see any reason to get excited about Tungstens prospects just yet. Current City forecasts suggest that the company will report revenue of 32.0m next year and a pre-tax loss of 18.3m, a loss per share of 14.50p. Further losses are expected during 2017. Analysts have pencilled in a pre-tax loss of 5.4m on revenue of 48.9m.
These figures suggest that Tungsten is going to have to consider raising yet more cash in the near future.
The bottom line
Tungsten has failed to live up to the market’s lofty expectations for growth. And for this reason, the market has turned its bank on the company. Moreover, based on Tungsten’s current financial position, it’s difficult to place a value on the group.
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