Promethean continues its struggle through first half

Interim H1 results reflect continued education sales contraction

Interactive education tech vendor Promethean kept up the fight against falling demand from the schools of western Europe and the US but still saw revenue shrink 22.9 per cent for the six months ended 30 June.

Interim results saw the vendor register a net loss globally of £4.1m for the first half of 2012, on revenue of £83.2m. That compares with 2011's first-half positive income of £6m.

Jean-Yves Charlier, chief executive of Promethean, said the vendor's education market was facing major challenges.

"On the one hand, the benefits of classroom technology are increasingly recognised by teachers and educational authorities around the world. At the same time, budgetary pressures are seriously constraining educational spending. This has meant that while the speed of adoption of educational classroom technology has been slower than anticipated, the manner of its evolution has not," Charlier confirmed.

Promethean's international arm – which includes the UK and Ireland, Continental Europe and the rest of the world – saw first-half revenue down 8.9 per cent to £38.5m and profits down to £12.8m from the 2011 first half's £15.8m, mostly driven by competition in emerging markets.

Although the vendor had signed a lucrative contract in Mexico, its US sales, which accounted for 54 per cent of the vendor's total sales, did not experience an expected uptick through the summer and were down 32 per cent. It also suffered additional costs for the first half due to restructuring.

No improvement in the market was anticipated in the near future, so the company had already begun to streamline its organisation, including setting up a shared support centre in Shenzhen, with a view to cutting operating costs 20 to 25 per cent from 2011 levels. Diverse new opportunities, however, would continue to be investigated surrounding education and interactive tech.

"At the same time, we will protect the core strengths, which support our market-leading number one or two slots in the majority of our markets. The cost reductions will benefit our second half, with the full impact felt in 2013. We believe these measures will deliver an underlying profitable cash-positive business by the year end," Charlier went on to say in a statement to investors.

"While there has been some margin pressure from lower volumes and normal price competition in international tenders, the overriding issue is one of falling volumes due to total market demand."

Tola Sargeant, director and analyst at TechMarketView, commented in the research firm's newsletter this morning that Promethean seemed to have gone "from bad to worse" as it felt the full effect of tough budget conditions in the US and Europe.

"Promethean's results underline just how difficult it is for tech companies in the education market at the moment," Sargeant wrote. "Even [Promethean's] broad geographic spread is not enough to protect it from cuts to education budgets in established markets – cuts that tend to have a disproportionate effect on technology investment because schools look to protect teaching and infrastructure spending first."

Its core IWB market is now mature in the UK so Promethean is unsurprisingly betting on one-to-one interactive and collaborative learning devices. "While that is undoubtedly the direction of travel, it is hard to see many schools having spare cash to spend on luxuries like these in the near term," Sargeant noted.