Full year results from education technology provider Promethean World show just how tough it is in the education sector. Continued pressure on education budgets globally and mounting competition for interactive classroom hardware drove revenue down almost 30% in 2012 to £157m. ‘Adjusted EBITDA’ remained positive at £5.1m (2011: £31.1m), but the £140m H1 goodwill impairment (see Promethean: from bad to even worse) resulted in an operating loss of £166m for the year, compared to a £17.4m profit the year before. By the year-end net cash was just £8m (2011: £22m). The situation would have been even worse were it not for Promethean’s cost cutting programme, which reduced H2 operating costs by almost 38% and full year costs by 19%.
The US, which accounts for 53% of Promethean’s turnover, fared the worst reporting a 36% decline in revenue. But conditions were also tough for Promethean’s International business. International, which includes the UK and Europe, saw a 20% decline in turnover compared to 2011 (18% at constant currency) as austerity measures and a lower volume of large tenders impacted the business.
There will inevitably be comparisons with education-focused RM which reported a slight increase in revenue from continuing operations last week to £286m (see RM enters next phase as Ratcliffe exits), but a direct comparison isn’t easy. RM is now UK-focused and less reliant on hardware than Promethean. Moreover, last year’s results saw the benefit of a peak inflow of revenue from the erstwhile Building Schools from the Future programme, which pushed revenue from RM’s managed services division up over 30% to £81m. Strip out the BSF revenue and the underlying picture is still one of challenging market conditions and declining revenues.
There will be opportunities for growth from the UK education sector, but the market is changing. The growth is likely to come from cloud-based software and services, tablets and apps (PublicSectorViews subscribers should see our UK Education SITS Market Trends and Forecasts report for more). Both RM and Promethean recognise this and are adapting their businesses accordingly. Promethean is building on its software platform and launched tablets and new touch display systems at the BETT show earlier this year. It will take time for these initiatives to bear fruit though and Promethean is braced for market conditions to remain tough in 2013, a 'year of transition' for the business.