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Promethean World Plc  -  PRW   

Notice of AGM and posting of Annual Report

Released 07:00 08-Apr-2013

RNS Number : 6284B
Promethean World Plc
08 April 2013
 



Promethean World Plc
("Promethean" or "the Company")

Annual Report and Annual General Meeting

 

Promethean World Plc (LSE: PRW) released its preliminary announcement of annual results for the year ended 31 December 2012 on 27 February 2013 (the "Preliminary Announcement").

 

Further to the Preliminary Announcement, the Company can now confirm that the Annual Report 2012, Notice of Annual General Meeting 2013 and Form of Proxy have been mailed to shareholders. These documents (with the exception of the Form of Proxy) are now available on the Company's website www.prometheanworld.com in the Investors section. 

 

The Company's Annual General Meeting will be held at 11.30 a.m. on 8 May 2013 at the offices of Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London EC2M 5SY.

 

Copies of the Annual Report 2012, Notice of Annual General Meeting 2013 and Form of Proxy will shortly be available for inspection at the National Storage Mechanism website: http://www.hemscott.com/nsm.do 

 

The appendix to this announcement contains additional information which has been extracted from the Annual Report 2012 for the purposes of compliance with the Disclosure and Transparency Rule 6.3.5 and should be read together with the Preliminary Announcement. This announcement should be read in conjunction with and is not a substitute for reading the full Annual Report 2012. 

 

 

Enquiries 

Promethean                                                                         

Neil Johnson, CFO                                                                     + 44 (0) 1254 290749

Citigate Dewe Rogerson Consultancy                                      + 44 (0) 207 638 9571

Anthony Carlisle                                                                         + 44 (0) 7973 611 888

 

 

Appendix

 

Statement of Directors' responsibility

 

As set out above, the following responsibility statement is repeated here solely for the purpose of complying with Disclosure and Transparency Rule 6.3.5.  This statement relates to and is extracted from page 47 of the Annual Report 2012.  Responsibility is for the full Annual Report not the extracted information presented in this announcement or the Preliminary Announcement.

 

The Directors are responsible for preparing the Annual Report and the Group and parent company financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare Group and parent company financial statements for each financial year. Under that law they are required to prepare the Group financial statements in accordance with IFRS as adopted by the EU and applicable law and have elected to prepare the parent company financial statements on the same basis.

 

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 their profit or loss for that period. In preparing each of the Group and parent company financial statements, the Directors are required to:

 

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

• state whether they have been prepared in accordance with IFRS as adopted by the EU; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company's transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

 

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that complies with that law and those regulations.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Each of the Directors whose names and positions are set out on pages 26 to 27 confirms that, to the best of their knowledge:

 

•    the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

•    the Directors' Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

 

Approved by the Board and signed on its behalf by

 

Jim Marshall

Chief Executive Officer

 

 

 

Principal risks and uncertainties

 

Promethean is subject to a number of risks and uncertainties, not all of which are under the direct control of the Group. The principal risks and uncertainties that the Board believes have the potential to affect Promethean are summarised below, along with descriptions of the key mitigating actions that are in place.

 

Strategic and market risks

 

Global economic conditions

 

Economic slowdown and austerity measures in Promethean's major markets, particularly the US and Europe, have led to greater uncertainty as to the level and timing of future funding for education technology.

 

Promethean's key market remains the K-12 education sector, which is funded predominantly by local, state, regional or national public bodies whose own resourcing is affected by general macroeconomic factors through their impact on economic stability, tax revenues and accessibility of credit.

 

Mitigating actions

Management have responded to lower levels of demand during 2012 by undertaking a reorganisation of the business to reduce the operating cost base of the Group, whilst remaining responsive to market opportunities.

 

Promethean engages with education bodies and customers in order to seek to understand their current expectations and future requirements. Business plans are flexed to reflect changes in the forward views of a range of internal and external sources.

 

Market maturity/adoption rates

 

Promethean's business performance is dependent upon the rate of adoption of its core interactive technology, presently interactive display systems and learner response systems, in the worldwide K-12 market. As key markets mature, the rate of adoption will slow which could result in lower levels of demand in those markets.

 

Mitigating actions

Promethean has increased its product range and therefore potential revenue streams with, for example, the launch of its collaborative learning solution (ActivTable), its strategic partnerships to develop interactive teaching resources, its learner response software (ActivEngage) and its formative assessment software (ActivProgress).

 

Technology and innovation

 

Developing and bringing to market new products and resources is complex, costly and time consuming with no certainty of a sustainable revenue stream at the end of the process. Delays in launching a new product could lead to Promethean losing "first mover" advantage or missing the seasonal sales cycle for a particular year.

 

Display and interactive technologies in a range of applications continue to develop rapidly and there is a risk that Promethean may fail to identify and react quickly enough to disruptive technological developments or disruptive applications of existing technologies.

 

Mitigating actions

During 2012, Promethean has combined its three product teams 'Interactive Display and Collaborative Systems', 'Learner Response Systems and Assessment' and 'Community and Content', into a combined 'Equipment and Software Solutions' team. This will enable a greater concentration of hardware and software expertise to further develop, and integrate, products and services.

 

Promethean continues to invest a substantial proportion of its revenue in research and development projects and monitors trends and innovations in the marketplace.

 

Competition

 

Promethean operates in highly competitive markets and encounters aggressive price competition across the range of its products and services.

Some of the Group's current and potential competitors have significantly greater resources than Promethean, which may allow them to respond to technological or market changes more rapidly than Promethean is able to.

Other competitors may bring to market either low cost, lower specification products as a means to enter the global marketplace for interactive technologies or introduce technology, such as tablet devices, that compete for a share of education technology budgets. The interactive projector and interactive flat panel also provide possible alternatives to the interactive whiteboard. 

 

Mitigating actions

Promethean competes on the technology, functionality, quality and reliability of its products, its after‑sales support offer and its online community and content offer in the form of Promethean Planet.

Promethean also continues to invest in its award-winning software, ActivInspire, which is a key differentiator versus other lower cost hardware providers.

Promethean's interactive whiteboards and other products are available in various specifications to suit the needs of different markets and Promethean undertakes a variety of marketing offers and promotions to offer enhanced value to customers. Whilst every effort is made to maintain margins, tactical pricing decisions are made on a case-by-case basis, particularly in markets where the Group is seeking to secure market share.

Promethean continues to invest in innovative new technologies such as interactive tables, formative assessment software and other core research and development projects. Promethean's learner response software (ActivEngage) is designed to run on tablet, PC and mobile devices.

Promethean continues to evaluate strategic partnerships to widen its range of products and services. The Board believes that these partnerships will provide an opportunity to create a competitive advantage for the Group. In 2013, Promethean will be launching its own branded tablet device.

 

Indirect sales model

 

Promethean's business model is built on developing and maintaining an effective network of third party distributors and resellers in the markets in which the Group operates. This indirect model means that Promethean's sales performance is highly dependent on the efforts of its distributors and resellers in generating leads, managing them through to completion and providing high levels of service in their installation of Promethean's products and after‑sales support. Competition for the services of good quality distributors and resellers in a number of Promethean's new markets is keen and may provide a challenge as the Group expands the range and nature of the solutions it sells (e.g. software licenses as well as hardware products).

 

Promethean's business dynamics and the adverse conditions in some of its key markets may impact the retention of third party distributors.

 

Mitigating actions

Channel management teams are in place to manage relationships with business partners and the Group operates an accreditation scheme for its directly contracted distributor partners that includes training in Promethean's products and services, including installation.

 

Promethean also operates a reseller accreditation scheme to ensure that appropriate levels of product knowledge, technical competence and service performance can be achieved by partners with no direct contractual relationship.

 

Promethean's Partner Portal, an intranet style service, provides business partners with access to a wide range of information and assistance in areas such as sales and marketing techniques.

 

Formal business plans are agreed with larger business partners and channel managers monitor progress and set improvement plans where appropriate.

 

Sectoral and geographical concentration of revenue

 

Promethean's business has historically been dependent upon adoption and eventual replacement of interactive learning technology, mainly in the form of interactive whiteboards, in the K-12 education sector.

 

The Group's North America business segment generated 52.7% of overall Group revenue in 2012, principally from the US where the impact of uncertain economic conditions on the level of education budgets and intense competition for market share present an ongoing threat that has had a significant impact on overall Group revenue.  

 

Mitigating actions

Promethean's product portfolio has been widened to include a collaborative learning solution (ActivTable), lesson content, formative assessment software and learner response system software (ActivEngage).

Promethean has a staff presence in 18 jurisdictions and has an established International sales division with the aim of growing Promethean's presence in markets outside the US and Europe.

 

Whilst Promethean is an education-focused business, the Group also sells its solutions into the business and government training sectors.

 

Expansion into new geographical markets

 

The Group intends to continue expanding into new geographical markets. This expansion brings with it a variety of risks, including:

 

·      difficulties in securing the services of reputable distributors or resellers of adequate size, financial stability and scalability;

·      compliance with foreign laws and regulations, including tax policies and transfer pricing regulations;

·      trade restrictions and procedures affecting marketing, certification, licensing or pricing of products;

·      complex and costly public tender and procurement requirements;

·      lower per capita budgets for education technology and price expectations;

·      differing technology standards or end‑user requirements;

·      adverse tax consequences; and

·      logistical challenges of servicing new markets, including disruption of the transportation and shipping infrastructure and fluctuations in freight costs. Emerging markets bring further risks including political, economic or financial instability, under developed legal and regulatory systems and inadequate infrastructure.

 

Mitigating actions

A thorough due diligence and on‑boarding process is in place for evaluation and induction of new distribution partners.

 

Any key new contracts issued are checked with local lawyers before being issued and clearly state the requirement for distribution partners to comply with relevant laws and other regulations.

 

The Group Legal team provides advice about trade restricted countries or zones and these are avoided for marketing and sales activities.

 

Local partners are engaged to assist on complex tender requirements.

 

Promethean offers both low cost and premium solutions to accommodate variations in per capita budgets.

 

Non-UK/US investments are undertaken after having taken appropriate advice such that the investment is structured to be both cost effective and compliant with local tax and business regulations.

 

A significant proportion of shipments are on an ex-works basis from Promethean's China factory, which reduces the logistical challenges and impact of fluctuations in freight costs by transferring this risk to Promethean's distribution partners.

 

Risk factors are monitored and factored into quarterly reviews of strategy and business forecasting.

 

 

Operational risks

 

Product availability and quality and product-related liabilities

 

Accurate forecasting of sales volumes and product/configuration mix are essential to maintaining optimal product availability while minimising the risk of obsolescence and write‑offs.

 

Any significant failure of Promethean's or suppliers' quality control processes may result in significant costs and management's attention may be diverted, to the detriment of business operations.

 

Mitigating actions

Sales forecasts are flexed by manufacturing planners based on historical experience and stock turns for most products are closely monitored.

 

Suppliers of key components undergo rigorous quality management assessments, components are inspected for defects and failure rates are closely monitored. All products undergo extensive testing and certification and the Group has robust and proven procedures to manage quality issues as and when they arise.

 

The Group maintains insurance against damage and consequential loss to third party property and provisions are made against the expected cost of future warranty claims.

 

Intellectual property rights

 

The success of Promethean's products depends in part on the Group's ability to protect and defend its rights over current and future intellectual property in the form of technologies, processes or products.

 

The Group may also be unable to adequately protect itself from intellectual property infringement or effectively enforce its rights in certain jurisdictions.

 

Any claims that Promethean's products or processes infringe the intellectual property rights of others could, regardless of the merit or ultimate resolution of such claims, lead to significant legal costs, negative publicity and diversion of management and technical personnel.  

 

Mitigating actions

Promethean has numerous patents either granted or pending, which cover certain technology related to its products. It also owns trademark registrations in respect of its key brands covering a wide range of territories. However, not all elements of Promethean's product and service offering can be fully protected by intellectual property rights.

 

The Group has in place systems to safeguard against infringement of other parties' intellectual property rights and maintains insurance cover against such claims.

 

People and culture

 

Attracting, retaining and motivating suitable high calibre personnel is critical to the long‑term success of Promethean's business. Competition for such individuals, particularly qualified technical personnel, is intense and is expected to remain so in the short to medium term.

 

With business performance in 2012 being impacted by adverse market conditions, there is risk that staff attrition rates may increase in the future.  

 

Mitigating actions

Promethean aims to provide remuneration packages and working conditions that will attract and retain personnel of the required calibre.

 

Business disruption

 

Promethean's manufacturing facility in Shenzhen, China comprises two co‑located but independent units that could be affected by natural disasters, infrastructure failures and other natural or man‑made events for which the Group may not be fully insured.

 

Promethean also relies on third party suppliers for components and certain finished products.

 

The Group is heavily reliant on information technology systems for management of key processes and effective communication both internally and externally.

 

Mitigating actions

A business continuity risk assessment of the Shenzhen facility has been formally completed and is regularly updated.

 

A policy of dual‑sourcing for critical components is in place.

 

Recovery plans for Promethean's core IT systems are in place and, in the event of loss of use of one of the Group's office buildings, employees would be relocated or instructed to work from home via remote access.

 

Promethean maintains insurance cover against business disruption, including cover for loss of profits.

 

Ethical business practices

 

Promethean's competitors may operate according to business customs and practices that are acceptable locally in certain countries but are prohibited by laws and regulations applicable to Promethean or by its corporate policies and procedures.

 

The Group is also exposed to the risk of misconduct and/or poor business practices on the part of its employees, distributors and resellers, which may lead to reputational damage.

 

Mitigating actions

The Board is committed to high ethical standards and Promethean has in place relevant policies and procedures.

 

Undertakings regarding compliance with relevant laws, regulations and Promethean's policies on ethical matters are included in Promethean's standard distributor and reseller contracts. Breach of such regulations is specifically identified as grounds for termination of these contracts.

 

Unethical behaviour by Promethean employees is not tolerated and, where identified, is dealt with under Promethean's disciplinary procedures.

 

During the year, Promethean has rolled out an online training programme to over 200 employees identified as being most exposed to ethics-based risks, designed to raise awareness and test understanding of the Group's Code of Ethics and global anti-bribery legislation.

 

 

Financial risks

 

Credit defaults

 

Promethean is exposed to credit default risk through the credit lines it extends to its distributors and resellers.

 

The general economic climate also increases the risk that Promethean's distributors and resellers may experience financial difficulties, leading to disruption of Promethean's business, lost or deferred sales and/or increased bad debt costs.

 

Mitigating actions

Promethean sets limits on the amount of credit it extends based on assessment of individual customers' financial stability and trading history as provided by credit reference agencies. All trade receivable exposures are overseen by the Global Credit Manager and, where suitable insurance cover is available, the Group seeks to insure against credit risk.

 

Liquidity and capital structure

 

Promethean may be unable to access sufficient funds to meet its short‑term working capital requirements and/or finance investing activities.

 

Promethean utilises credit from suppliers in managing its working capital.  Certain of those suppliers extending credit may themselves use credit insurance to mitigate their risk. A change in the credit rating of Promethean could therefore impact the availability of credit from suppliers, resulting in  increased working capital levels.

 

Mitigating actions

The Group undertakes regular cash flow forecasting over short, medium and long‑term horizons and seeks to maintain appropriate cash reserves.

 

Bank facilities are maintained and kept in place so they are available when required and compliance with covenants on existing facilities is routinely monitored to ensure facilities continue to be available.

 

Active and open dialogue with both existing and prospective investors and other funding providers is maintained.

 

Promethean maintains open and regular dialogue with its suppliers and credit insurers.

 

Exchange rates

Promethean generates substantial revenues in US Dollars and Euros. Fluctuations in exchange rates, particularly between Pounds Sterling and the US Dollar and Euro, may affect the Group's reported results when such transactions are translated into Pounds Sterling for financial reporting purposes.

 

Promethean has historically priced its products in US Dollars in many markets even though distributors/resellers may price the products in local currency. Such pricing may prove uncompetitive if local currencies fall in value against the US Dollar, which may compel Promethean to reduce prices in those markets.

 

Mitigating actions

The Group purchases the majority of its raw materials and incurs a substantial proportion of its operating costs in US Dollars, thereby offsetting a proportion of US Dollar sales and reducing net foreign exchange exposure. Net exposures are reviewed over a rolling twelve-month period.

 

Promethean also uses hedging contracts, primarily to protect against the cash flow impacts of currency exchange rate risks but also to mitigate the profit and loss effect. These may not fully offset any financial impact arising from currency variations.

 

 

Regulatory risks

 

Public sector procurement, anti-bribery and anti-corruption regulations

 

Sales to public sector purchasing authorities are generally subject to a range of regulations, requirements and limitations relating to the conduct of business relationships and the formation of purchasing contracts. The exact nature of these requirements and limitations varies extensively between jurisdictions.

 

Despite setting and regularly communicating high ethical standards, Promethean is exposed to the risk that individual employees or associated parties may act improperly and in contravention of regulations such as the UK Bribery Act 2010 (UKBA) or the US Foreign Corrupt Practices Act (FCPA).

Penalties on conviction under such legislation are potentially severe for both the Group and individual officers and directors.

 

Mitigating actions

Internal policies require all employees to ascertain what rules and regulations apply to any transaction with another party and to ensure that these are observed.

 

The Group has developed and rolled out a training programme to increase awareness and understanding of its approach to bribery and corruption including UKBA and FCPA.

 

The Group publishes its policies and procedures on its intranet and employees are required to comply with the relevant policies when undertaking their duties. The Group operates a confidential whistle-blowing process, enabling employees and others to report potential wrongdoing

 

Environmental regulations

 

Promethean's European activities require it to comply with directives of the European Parliament including Directive 2002/95/EC on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment (RoHS) and Directive 2002/96/EC on Waste Electrical and Electronic Equipment (WEEE). The Group is also subject to environmental regulation in the US, China and elsewhere.

 

Mitigating actions

Promethean has in place systems to monitor compliance with European directives and other regulations. Environmental management systems in the Group's UK operations are ISO14001 accredited.

 

Liability for information on websites

 

The law relating to liability of online services companies for information carried on, or disseminated through, their services is complex due to the number of legal jurisdictions involved. Claims based on the nature and content of information disseminated could be made against the provider of an online network, such as Promethean, under the laws of the UK or other jurisdictions.  

 

Mitigating actions

Website terms and conditions seek to exclude or limit Promethean's responsibility for online material.

 

All forums incorporate a reporting system for offensive and other inappropriate material.

 

 

 

Related party transactions

 

The Annual Report 2012 contains the following statements in note 30 to the consolidated financial statements regarding the details of certain related party transactions.

 

Transactions with key management personnel

 

Loans to Directors

At 31 December 2012 and 31 December 2011, there were no loans outstanding to Directors.

 

Key management personnel compensation

In addition to their salaries, the Group also provides non-cash benefits to Directors and Executive Officers and contributes to a post-employment defined contribution plan on their behalf.

 

Key management personnel compensation comprised: 

 


Group

2012

£000

2011

£000

Short-term employee benefits

3,120

5,096

Post-employment benefits

172

161

Termination benefits

1,410

-

Share-based payments

746

206


5,448

5,463

 

Key management includes both Executive and Non-Executive Board Directors and other members of the Group's Senior Management Team (SMT). In 2012, six SMT members left the business and four new SMT members were appointed. As at 31 December 2012 there were 15 key management (2011: 17).

 

Key management personnel and Director transactions

 

Certain Directors, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of these entities.

 

A number of these entities transacted with the Group in the reporting period. The terms and conditions of the transactions with Directors and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm's length basis.

 

The aggregate value of transactions and outstanding balances relating to these related party transactions were as follows:

 


Transaction value sale/(purchase)

Transaction value sale/(purchase)

Balance outstanding debtor/(creditor)

Balance outstanding debtor/(creditor)

Group

Year ended

2012

£000

Year ended

2011

£000

Year ended

2012

£000

Year ended

2011

£000

Whitebirk Finance Limited

(120)

(120)

-

-

 

Whitebirk Finance Limited, a company owned by Tony Cann, owns and leases Promethean House to the Group.

 

In December 2011 the Group entered into heads of terms with Whitebirk Finance Limited to vacate Promethean House.

 

Pursuant to the heads of terms, on 15 February 2012 the Group entered into a deed of variation with Whitebirk Finance Limited. In consideration for a payment of £350,000 the landlord agreed that the lease term be shortened to a revised term compatible with the relocation timetable and in consideration for a payment of £150,000 that all dilapidation liabilities will be settled in full.

 

Given the prevailing market conditions in the Group's key trading markets and the failure to agree lease terms in respect of the proposed new head office it was subsequently agreed that the Group would remain in Promethean House and a new lease be granted to Promethean Limited on substantially the same terms as the former lease. Upon execution of the new lease £380,000 was repaid to the Group with the £120,000 balance being retained by Whitebirk Finance Limited as advance payment for the first year's rent. No dilapidations payment was made to Whitebirk Finance Limited.

 

The UKLA were consulted in relation the aforementioned arrangements and independent advice was sought by the Group from Knight Frank LLP as to the reasonableness of the amount and terms agreed.

 

Other Group related-party transactions

 

In the ordinary course of business, goods are manufactured in China and supplied to the UK for sale on to either the Group's sales and distribution offices in the US, France and Germany or directly to external customers. All transactions and outstanding balances with these related parties are priced on an arm's length basis and are to be settled in the ordinary course of business. None of the balances are secured.

 

Company related-party transactions

 

The Company transacts and has outstanding balances with certain of its subsidiaries. Amounts due from subsidiaries and amounts due to subsidiaries are disclosed in the notes to the financial statements.

 

No interest is charged on amounts due from Group entities.

 

No dividends were received from subsidiaries in the year (2011: £10m).

 

 

 

Forward-looking statements

 

This document contains forward-looking statements which are made by the directors in good faith based on information available to them at the time of approval of this document. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing, anticipated costs savings and synergies and the execution of the Company's strategy, are forward-looking statements. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including a number of factors outside the Company's control. Any forward-looking statements speak only as of the date they are made, and the Company gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regard thereto or any changes to events, conditions or circumstances on which any such statement is based.


This information is provided by RNS
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Notice of AGM and posting of Annual Report - RNS