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Tungsten Corp PLC Falls Over 15% After Reporting Larger Losses

Shares of troubled electronic invoicing, analytics and financing company Tungsten (LSE: TUNG) are falling today after the company issued its preliminary results for the year ended 30 April 2015. 

The company reported revenue growth of 19% year-on-year to £23.1m, but losses widened as Tungsten ramped up spending to increase its customer base. 

Tungsten’s 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, Tungsten’s key performance indicators all moved in the right direction during 2014. The number of buyers using the company’s electronic invoicing network jumped by 39.5% and the number of suppliers using the system increased by 7.7% to 181,000. What’s more, the total value of transactions over the network ticked higher by 10% to £121bn.

Customers are switching on to Tungsten’s offering, and the group is attracting some big names. For example, yesterday it was announced that Honda Logistics North America, a major subsidiary of Honda, had selected Tungsten to automate its accounts payable processes.

But while KPI’s are improving, there was little else in today’s 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 after the 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 company’s failure to hit key targets has not gone unnoticed. 

And after raising £17.5m through a placing during May to support growth, the market had begun to speculate that Tungsten was finally on the road to recovery. However, today’s results release highlights the challenges Tungsten still faces.

That being said, Tungsten’s 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 for investment to support growth. With this being the case, Tungsten’s key metrics should start improving throughout 2015 as the group focuses on customer growth. 

Nevertheless, City analysts don’t see any reason to get excited about Tungsten’s 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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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.