TIDMPRW
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:
2012 2011
Group GBP000 GBP000
------------------------------ -------- --------
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 Transaction Balance outstanding Balance outstanding
value sale/(purchase) value sale/(purchase) debtor/(creditor) debtor/(creditor)
------------------- ----------------------- ----------------------- -------------------- --------------------
Year ended Year ended Year ended Year ended
2012 2011 2012 2011
Group GBP000 GBP000 GBP000 GBP000
------------------- ----------------------- ----------------------- -------------------- --------------------
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 GBP350,000 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
GBP150,000 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 GBP380,000 was repaid to the
Group with the GBP120,000 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:
GBP10m).
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
The company news service from the London Stock Exchange
END
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