(PTH) Promethean

Promethean plc

Unaudited preliminary Results for the 12 months ended 30 June 2011

8 December 2011

Promethean plc (the "Company" or the "Group") today announces its unaudited preliminary results for the twelve months ended 30 June 2011.

Financial highlights:

- Net assets as at 30 June 2011 were £30.3m (67.1 pence per share)

- NAV per share has decreased by 2.9% or 2.0 pence per share when compared to prior year NAV per share of 69.1 pence.

- To date, a total of 88 pence per share has been returned to continuing shareholders (including carried interest distributions paid to eligible shareholders).

Extracts from the Company's Report and Accounts for the year end 30 June 2011 ("R&A") are set out below, hard copies of which have been posted to Shareholders today. The R&A will be available on the Company's website shortly.

The Company's annual general meeting will be held at the offices of The Registered Agent, Promethean plc, 3rd floor, Exchange House, Athol St, Douglas, Isle of Man, IM1 1JD, on 30 December 2011 at 9:30 a.m. The notice of general meeting is contained in the R&A.

- End -

Enquiries:

Sir Peter Burt

Promethean Investments LLP              +44 (0) 207 479 7660

Tom Durie / Gillian McCarthy                  

Fairfax I.S. PLC                                    +44 (0) 207 598 5368 

Chairman's Statement

Introduction

General market uncertainty together with banks' and investors' consequent aversion to risk is making exits from investments both challenging and slower to complete as well as having an adverse effect on realisable value.  At the time of writing, the broader continuing negative impact of the Eurozone crisis on the economy means that we are seeking to realise our portfolio at a particularly adverse time in the cycle.

Despite these difficulties and the economic strains, our investments have continued to show good underlying performance although in the case of Cambria and of IFG, this has not necessarily been reflected in their share prices.  Indeed, Cambria, whose share price at the June year end was 39 pence per share has suffered subsequently from stock market volatility with the price of 28 pence per share at the close of trading on 5 December 2011. In IFG's case the withdrawal by the bidder in September from the takeover has had the inevitable impact on the IFG share price. Promethean sold its holding in IFG subsequent to the year end. More detail on both Cambria and IFG are given in the Manager's Report.

On the plus side, TIS' management has done an excellent job of stabilising the earnings of the business. The Manager has increased the investment value reported at December 2010 by £3.7m to £5.9m. At present the Manager is working with the TIS management on a potential exit from the investment.

January Loan Services continues to make solid progress despite the current turmoil within the UK mortgage market. The Manager has increased the valuation to £0.5m at the year end.

In summary, it has continued to be a challenging environment for the business although we have made some positive steps in spite of some unpredictable events.

Following a number of discussions with shareholders during the year, it is evident that there is some confusion regarding the management fees paid to the Manager. The management fee payable to the Manager was voted on and agreed at the 2009 AGM.  In the calendar year to December 2011, the management fee due to the Manager is £875,000. As at 30 June 2011, the Manager had drawn down fees totalling £291,000 and indicated that total fees for the year to 31 December 2011 will not exceed £617,350, representing a reduction of £257,650 on the agreed fee. The highest paid member of the Manager received £120,488 for the year to 30 June 2011.

As you will be aware, after the year end, the Board received notices requisitioning an Extraordinary General Meeting with resolutions seeking to replace the majority of the Board on two separate occasions. Attempts to avoid the cost and disruption of calling an EGM were unsuccessful and the EGM was duly called on 30 September 2011, all resolutions were defeated as announced to the Market. The Company incurred costs of approximately £280,000 in dealing with this matter. The Board and the Manager have reiterated their commitment to realising the remaining portfolio as efficiently as possible, as agreed with shareholders at the 2009 AGM.

As always, the Board and I are available to speak to any shareholders who have any queries or who would like further information.

Sir Peter Burt

Chairman

8 December 2011

 Investment Manager's Review

Promethean Investments Fund LP ("Promethean") is managed by Promethean Investments LLP (the "Manager"). Promethean is a limited partnership that holds the Group's investments and of which the Company is a Member along with its senior executives.

Overview

For the last 12 months the Manager has been looking to position the portfolio to allow timely exits. The environment's volatility has meant this process has been slower than anticipated.   The Manager's approach has been to try to focus on an exit route for particular businesses within the portfolio then develop and execute that route. In almost all cases due to market conditions these exits  are taking longer than anticipated to achieve.

To date, a total of 88 pence per share has been returned to continuing shareholders (including carried interest distributions paid to eligible shareholders).

Portfolio

As at 30 June 2011, the portfolio was as follows:

Notes:

(1)   The cost of Cambria Automobiles plc reflects the original cost of the investment less the cost of the in specie capital return and carried interest distributions made on 1 April 2010.  

(2)   The cost of InterMediactive Group has been reduced to zero as the remaining investment reflects the carrying value of the vendor loan notes only following the sale of InterMediactive on 1 April 2010.

(3)   The cost of January Loan Services Limited reflects the amount of the secured loan notes held by Promethean in Enterprise Group that were offset to reflect the assets retained by January Loan Services Limited. 

(4)   The valuations are in accordance with IFRS / IPEVCV guidelines. Valuation of listed investments is based on the closing bid price as at 30 June 2011. The valuation of private companies also includes accrued interest on loan notes which is disclosed separately on the statement of financial position.

Portfolio Review

Cambria Automobiles plc

The Manager and the Board of Cambria Automobiles plc have been in discussions regarding the early release of the lock up deed that prevents the sale or distribution of the Cambria shares held by Promethean on or before 30 June 2012. The discussions are continuing but have so far not led to a mutually agreeable conclusion.

Cambria recently announced their trading results for the year to 31 August 2011. For the fourth successive year, Cambria had achieved an increase in underlying profit before tax, to £4.9m, an increase of £0.7m on the previous year. Net assets increased 21.9% in the year to £19.5m from £16.0m.

 While the outlook for the UK automotive market for the next 12 months remains challenging, the Cambria business remains well positioned in the sector with a strong management team, led by Mark Lavery, who are keen to take advantage of the current economic environment to extend their successful buy and build strategy. The Manager believes that the automotive market turmoil will continue for the foreseeable future and see this as a good opportunity for the business to build upon its excellent results to date.

The Manager's primary goal is to create an environment where the Board of Cambria are able to maximise the return to all shareholders in the business and will continue to support them in that goal. The Manager believes that the EGM action impacted the Cambria share price and the business and while that process was outside the Manager's hands, we will take all steps necessary to ensure that any future exit happens in a controlled manner in order to enhance and protect value for both Cambria and Promethean shareholders.

This investment is valued at the closing bid price at 30 June 2011 of 39 pence per share. On 5 December 2011 the closing bid price was 28 pence per share.

IFG Group plc

Promethean sold its stake in IFG Group plc ("IFG") in November 2011 for £3.8m. This resulted in a realised loss on the cost of the investment of £2.5m. Gross dividends received over the period of investment amounted to £0.5m.

InterMediactive Group

Promethean holds loan notes in InterMediactive ("IMA") which were part of the deferred consideration received on its sale. Although the notes are not due for early repayment, the Manager is in continuing discussions with IMA's management team about a prepayment of the outstanding amounts. These discussions may result in an early prepayment of the loan notes and a settlement of the deferred consideration on mutually acceptable terms.

January Loan Services Limited

The business has grown over the last year and is forecast continued growth in 2012. The business is highly dependent on a small but talented management team. The banking crisis has led to a complete shake up in the mortgage market in the UK with many of the largest players failing (including Enterprise Group). This has led to a significant opportunity to build the next generation of large mortgage brokers and lenders. January Loan Services is already recognised as an industry leader in its chosen space of secured loans and bridging finance and the Manager is confident it will only continue to cement this position over time. Promethean holds a 30% minority stake of the company with January management being the majority shareholders.

Media Square plc

Media Square plc ("MSQ") is a listed marketing services and communications group. As per the EGM Circular, Promethean has been looking to actively exit this investment.

MSQ recently updated the Market with its interim results for the six month period ended 31 August 2011. Despite reporting satisfactory  results with a headline EBITDA of £1.1m, down £0.1m from the corresponding period in 2010, the group acknowledged it remained constrained by the level of debt and associated funding costs within the group.

This investment is valued at the closing bid price at 30 June 2011 of 3.75 pence per share. On 5 December 2011 the closing bid price was 0.7 pence per share, however, due to MSQ's lenders not committing to additional funding, shares were suspended on 8 December 2011.

TIS Group

The Manager has written up the investment in TIS from £2.2m reported in December 2010, to £5.9m. This is to reflect the stabilisation of the business which resulted in slightly higher profits for the year.

Promethean believe that there may be an opportunity to exit TIS during Q1 of 2012. However, Promethean has no ability to force an exit from TIS without the consent of the vendor loan note holders who are not due repayment until 2014. To facilitate an early exit, Promethean is asking shareholders to authorise an exit where some of Promethean's interest in TIS is given up.

Outlook

If all goes according to plan the Manager would anticipate exiting IMA, Cambria, Media Square and TIS in calendar year 2012. The process to exit these transactions has been under consideration from before the EGM requisition last summer.  However the market environment is extremely uncertain and nothing can be taken for granted.

 Principles of valuation of unlisted investments    

Investments are stated at amounts considered by the directors to be a reasonable assessment of their fair value, where fair value is the amount at which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.

All investments are valued according to one of the following bases:

§  Cost (less any provision required)

§  Earnings multiple

§  Sale price

§  Price of recent transaction or

§  Net assets    

Investments are only valued at cost for a limited period after the date of acquisition, otherwise investments are valued on one of the other bases described above, and generally the earnings' multiple basis of valuation will be used unless this is inappropriate, as in the case of certain asset-based businesses.

When valuing on an earnings' multiple basis, profits before interest and tax of the current year will normally be used, depending on whether or not more than six months of the accounting period remain and the predictability of future profits. Such profits will be adjusted to a maintainable basis, taxed at the full corporation tax rate and multiplied by an appropriate and reasonable price/earnings multiple. This is normally related to comparable quoted companies, with adjustments made for points of difference between the comparator and the company being valued, in particular for risks, earnings' growth prospects and surplus assets or excess liabilities.

Where a company has incurred losses, or if comparable quoted companies are not primarily valued on an earnings' basis, then the valuation may be calculated with regard to the underlying net assets and any other relevant information, such as the pricing for subsequent recent investments by a third party in a new financing round that is actively being sought, then any offers from potential purchasers would be relevant in assessing the valuation of an investment and are taken into account in arriving at the valuation.

Where appropriate, a marketability discount may be applied to the investment valuation, based on the likely timing of an exit, the influence over that exit, the risk of achieving conditions precedent to that exit and general market conditions.

When investments have obtained an exit (either by listing or trade sale) after the valuation date but before finalisation of Promethean's relevant accounts, (interim or final), the valuation is based on the exit valuation subject to an appropriate discount to take account of the time period between valuation and exit dates.

In arriving at the value of an investment, the percentage ownership is calculated after taking into account any dilution through outstanding warrants, options held by third parties or other investors and performance related mechanisms.

Principles of valuation of listed investments    

Investments are valued at bid-market price or the conventions of the market on which they are quoted, subject if appropriate, to marketability discounts where formal restrictions on trading exist.

Events after the Reporting Period

As at 5 December 2011 the closing bid price for Cambria Automobiles plc was 28 pence per share, resulting in a decrease in the value of the investment of £3.1m or 8.1 pence per share on a NAV basis.

As at 5 December 2011 the closing bid price for Media Square plc was  0.7 pence per share, resulting in a decrease  in the value of the investment of £0.1m or 0.2 pence per share on a  NAV basis. However,  due to Media Square's lenders not committing to additional funding,  shares were suspended on 8 December 2011.

As stated above, Promethean realised its investment in IFG for £3.8m in November 2011. This resulted in a further reduction in the carrying value of the investment at 30 June 2011 of £3.1m or 6.9 pence per share.

The impact of the share price movements in Cambria and MSQ and realisation of IFG post the statement of financial position date would result in an unaudited NAV per share as at 5 December 2011 of 51.9 pence per share. This represents a decrease of 22.7% versus the pro forma NAV per share of 67.1 pence as stated in the audited statement of financial position as at 30 June 2011.

On 30 September 2011, the Company held an EGM that had been requisitioned by Laminvest N.V. (a registered holder of 22.1% of the ordinary share capital of the Company) and Knox D'Arcy (which is not a registered shareholder). All four resolutions were rejected.

Promethean Investments LLP

8 December 2011