Promethean World of pain

Promethean World, which has been an unmitigated disaster for investors who backed its 2010 flotation, sunk to a new low on Thursday after another profit warning.

Promethean World, which has been an unmitigated disaster for investors who backed its 2010 flotation, sunk to a new low on Thursday after another profit warning.

The supplier of education technology, which issued a profit warning in June, said the trading environment in its key markets remain "challenging", with demand during the key buying season in the US lower than it has been in recent years.

The group is pinning its hopes on a delayed big order, which it now expects to come through in the fourth quarter of 2012. Meanwhile, revenues for both the North America and International sales regions in the third quarter were well below last year's levels.

Third quarter revenue for the group was £40.0m, two-fifths below the £68.0m seen in the third quarter of last year. In the first nine months of the year group revenue was down three-tenths year-on-year at £123.2m.

As at the end of September, Promethean had a net cash position of £5.8m, but this was down from £8.5m at the end of June. The group expects it will still have a net cash balance at the year end.

With the top line heading south at a rate of knots the group is focusing on cost reduction, and it now expects savings will be at the upper end of its earlier range of 20 to 25% overall operating cost reductions.

"For 2013, the group expects that market conditions will continue to remain difficult. Promethean is resizing its cost base to reflect these realities, with the aim of remaining an underlying profitable cash positive business whilst protecting its core investments in R&D [research & development]," the group said.

Shares were down 6.75p to 17p at 11:00 on the day of the profit warning, a far cry from the 210p at which shares opened on the first day of trading back on March 12th 2010.

Peel Hunt has responded to the profit warning by slashing its sales forecast for the current year to £160m from £172m, while next year's sales forecast has been hacked to £147m from the previous estimate of £163m. The broker expects Promethean to make a loss of £3.5m, versus previous expectations of a loss of £2.3m.

According to Digital Look, the consensus forecasts for the current year are for sales of £172.5m and a loss before tax of £1.75m, but those figures look certain to change after the latest profit warning.

JH

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