Tungsten’s First Results – Winning Customers, But Still Losing Money (for now)

Tungsten announced its first ‘annual’ results today since the firm was floated in late 2013. The firm acquired OB10, now re-branded as the Tungsten Network, and probably the world's leading e-invoicing solution and services provider, and later also bought FIBI Bank, now Tungsten Bank. That enables the firm to offer supply chain finance in conjunction with the invoicing services.

The results certainly included some impressive metrics.

  • 55% of Fortune 500 and 67% of FTSE 100 now being served by Tungsten Network
  • 20% growth in e-Invoicing: $152bn of e-invoices processed in FY2014, compared to $126bn in the prior year
  • Signed a net eight new buyers to Tungsten Network since acquisition, including recent additions of GE and Caterpillar
  • Increase to 46 countries where Tungsten Network offers legal and tax-compliant e-Invoicing
  • Over 168,000 suppliers now registered to use Tungsten Network

Anything less positive in the results? Well, the revenue of Tungsten Network (on a pro-forma full-year basis) was £19.5m (previous year £17.6m), an increase of 11%. That's not bad, but given a 20% growth in e-Invoicing, might we have expected revenue to rise by a similar amount? Is there a hint of price pressure in those numbers perhaps?

And the company is still making a substantial loss, as the announcement says:

•             Group EBITDA loss of £10.2m (prior period: £9.9m), which includes the results of Tungsten Network for the period since acquisition

•             Post-tax loss for year of £11.0m (prior period: £9.9m) and loss per share of 18.6p (prior period: loss per share of 87.02p)

Now as the e-invoicing and the financing elements grow, there will be substantial economies of scale, so there's no reason why that loss can't be turned round. But it does show that there is still some serious work to be done to make Tungsten as profitable as it clearly could be one day.

All of this was in line with market expectations, so the share price (quoted on the London AIM market) barely moved, drifting a few pence lower in early trading today.

It's still early days for Tungsten, but the potential for linking e-invoicing, supply chain finance, dynamic discounting and perhaps other services to firms that form part of a supplier network is huge. There are plenty of competitors though, from well established ERP-type providers with strong networks (Basware, Ariba) to innovative younger firms such as Crossflow Payments and Tradeshift.

The positive factor though for Tungsten and its investors is the sheer size and potential of this market, so there is room for a number of players to do very well. And, as the evidence shows, the firm already has a very impressive blue-chip customer base. We suspect Tungsten will be one of the winners in this sector, although until it is operating with positive margins and a decent profit margin, there will be some continuing caution from investors.

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