Moneyextra Sharedealing

Promethean plc

Unaudited preliminary results for the financial year ended 30 June 2008

Key Highlights:

- Promethean plc had pro forma net assets of £68.8 million (138 pence per share) a reduction of 6% during the year (see note for reconciliation of pro forma balance sheet).

- Despite the increasingly difficult environment and as previously reported, Promethean successfully realised its investment in DLG during the year to June 2008 and achieved a gross IRR of 102% and a money multiple of 2.9 times.

- New investments of £16.3 million made during the year to 30th June 2008.

- Majority of portfolio companies performed in line with plan during the year, however increasing level of provisions against certain investments reflects the challenging economic environment. 

For further information, please contact:

Promethean Investments LLP

Sir Peter Burt                         020 7479 7660 pburt@prometheaninvestments.com

Michael Biddulph                   020 7479 7664 mbiddulph@prometheaninvestments.com

Fairfax I.S. plc

Paul Richards / James King    020 7598 5368

Copies of the press release and other corporate information can be found at:

http://www.prometheanplc.com

CHAIRMAN'S STATEMENT

Introduction 

Promethean's year-end of 30th June now seems a long time ago. The economic picture has been deteriorating since January 2008 but the turmoil in financial markets over the past two months has been both dramatic and unprecedented, at least in my lifetime.

The global financial markets seem to have come perilously close to complete collapse before massive government intervention in so many countries. Despite the injection of billions of Pounds, Dollars, Euros and Swiss Francs, the economic outlook remains very unclear. I expressed concern about the outlook last year and sadly my fears have been more than realised.

However, all storms, even hurricanes eventually pass and I expect that new opportunities will emerge, probably later rather than sooner. But in reading our commentary on the performance of our investments, it is important to recognise that the comments refer to the period up to 30th June.  

Overall, I think that we have had a relatively satisfactory year. Although pro forma NAV has fallen by 6% over the course of the year to June 2008, this reflects the difficult economic environment where we have thought it prudent to revalue some of our investments. Given the deteriorating economic climate, we decided in June not to proceed in raising a second fund. A decision was also taken during the year to separate out the management of Promethean India plc (renamed Elephant Capital). This was concluded in September 2008. Our financial services investments, TIS Group and Enterprise Group, had contrasting years. TIS had a record year but the current year is likely to prove more challenging. However, management are well aware of the potential difficulties ahead.  Enterprise on the other hand has been caught in a perfect storm, with volumes collapsing in its core markets of mortgages and secured loans. But Enterprise's management has reacted with commendable speed and have cut costs dramatically including reducing their own salaries in order to minimise cash outflow. At the same time, they have expanded the range and scope of their business, moving into the price comparison market where they have gained a number of customers. I think Enterprise is in an excellent position to do well when anything approaching normality eventually returns to the market. At present, the hatches have been well battened down to ride out the storm.

Intermediactive has gone from strength to strength. It is a well managed company focussed on delivering a good service to its customers and its financial results confirm how well they have done that. Cambria Automobiles has had an exciting year. Its acquisition of Summit Motors has significantly changed the scale of the business and Mark Lavery and his colleagues have successfully reinvigorated that business.  UK car sales have fallen sharply this year with consequent troubles throughout the sector but we anticipate that as a result, there may well be opportunities to expand the business further. In the meantime, the focus is on improving day-to-day performance.

Our two investments in quoted companies have suffered from the overall fall in the UK stock market. But I remain optimistic that their underlying performance is improving, albeit in the case of Media Square, from a very low base.

It is said that every cloud has a silver lining and certainly there are no shortage of economic clouds at present. But the silver lining is that there will be opportunities in the coming months or years and we hope that we shall be able to profit from those opportunities.

In conclusion, I thank my colleagues at Promethean for their hard work and contribution. My thanks also go to the three non-executive directors, Martin Negre, Mike Pappas and Liz Tansell. Both they and our full time staff have worked hard under sometimes trying circumstances and I am very grateful to them. My thanks go also to Gaurav Burman, one of Promethean's original partners, who has stepped down to work fulltime on Elephant Capital. Without Gaurav, Promethean would not have been created and I am grateful to him for his contribution over the past three years. We wish him and the team at Elephant Capital well in the future.

Sir Peter Burt

INVESTMENT MANAGER'S REVIEW

The Investment Manager

Promethean Investment Fund LP is managed by Promethean Investments LLP ('the Manager' or 'Promethean'). Promethean is a limited partnership of which the Company is a Member with its senior executives.

Overview

At 30 June 2008 the Company had pro-forma net assets of £68.8 million equivalent to 138 pence per share (30 June 2007: £73.2 million equivalent to 146 pence per share) and had a portfolio of seven investments (June 2007: 7 investments). During the year Promethean's pro-forma NAV reduced by 6% or £4.4 million. This comparison is distorted by the fact that the pro forma NAV comparison figure for 30 June 2007 reflected an uplift in DLG's valuation based upon its imminent sale which actually took place in October 2007. The pro forma NAV has also been impacted following the downward revaluation of our investment in Enterprise Group and the falls in the share prices of our two quoted investments.

Overall, the decrease in pro forma NAV over the 12 month period to 30 June 2008 of 6% compares to a decrease in the FTSE All-Share Index of 15.9%.

The successful sale of our investment in DLG generated a gross IRR of 102% and a gross money multiple of 2.9 times cost. The realisation resulted in gross sale proceeds in cash of £46.2 million. During the year the Manager also realised the Company's investment in Amazing Global Technologies for £130,000 after fully providing for the investment at the half year. There were no further material realisations during the year. As a result of the realisations, a carried interest distribution of 6.4 pence per share was made in October 2007 to those shareholders who were allocated a portion of carried interest in the original share placing. This distribution is reflected in the Group's profit attributable to minority interest. 

New investments during the year totalled £16.3 million of which £8.0 million was a follow-on investment in Cambria Automobiles, £1.1 million in a follow-on investment in Media Square plc and the balance in new investments in IFG plc (£6.3 million) and Atlas Acquisition Holdings Corp (£0.9 million). More details on these investments are included below.

The majority of the current portfolio continues to trade in line with plan although inevitably there are signs of stress due to the deteriorating economic environment. In particular, we increased the provision against our investment in Enterprise Group given the significant drop in UK mortgage volumes in recent months. The value of our listed investments in Media Square plc and IFG plc have also suffered following further falls in the UK stock market since the year end. The impact of the fall in the share prices of these two investments after 30 June 2008 on the Company's pro forma NAV would have resulted in a further reduction as at 30 October 2008 to 129 per share . This represents a reduction of 6.5% on the pro forma NAV per share of 138 pence as stated in the pro forma balance sheet as at 30 June 2008.

Fundraising

As noted in the Chairman's statement, the Manager decided to postpone the fundraising programme for a second UK focussed fund using a conventional limited partnership structure. The fundraising environment has worsened significantly over the last 6 months and the Manager does not anticipate the fundraising environment to improve in the short-term.

Investment Strategy

The Company was established in order to execute a value activist investment strategy in both public and private business, building a concentrated portfolio of investments in which it can act as a catalyst for change and value creation.

All investments, whether in public or private companies, are preceded by extensive due diligence to assess the risks and opportunities in any one investment. This includes an overview of the target's market, management, business model, financial track record and prospects, and the likely realisation strategy.

Portfolio

As at 30 June 2008, the portfolio was as follows:

*Note: The valuations are in accordance with IFRS / IPEVCA guidelines. Valuation of listed investments is based on the closing bid price as at 30 June 2008. The valuation of private companies also includes accrued interest on loan notes which is disclosed separately on the balance sheet and explains the difference in totals to the pro forma balance sheet.

Portfolio Review

Atlas Acquisition Holdings Corp.

In January 2008, Promethean plc invested £0.9 million as a founder shareholder in Atlas Acquisition Holdings Corp., a newly formed blank check company listed on the American Stock Exchange (alternatively known as a SPAC - Special Purpose Acquisition Company). Atlas was established to effect a merger, capital stock exchange, asset or stock acquisition, exchangeable share transaction, or other similar business combination with an operating business which is not limited to any particular industry or geography. The CEO and Chairman of Atlas is Jim Hauslein, who built up Sun Glasses Hut, the US based retailer.

Promethean plc subscribed for 575,000 ordinary shares at US$0.004 a share and 1,750,000 warrants at US$1 per warrant in Atlas Acquisition Holdings Corp, when it completed its public offering on 30 January 2008.

Cambria Automobiles

Cambria Automobiles was formed to purchase underperforming car dealerships with a strategy of improving the operational performance and increasing the scale of the group. Promethean initially invested in Cambria in July 2006 and further investments have been made including the most recent to support the acquisition of the trade and assets of Summit Motors Limited in December 2007. This acquisition together with a further 5 dealerships were acquired during the year and Cambria now has 24 dealerships in the Group.  

The new and used car market in the UK is currently experiencing a major downturn with sale volumes significantly lower than in previous years. Cambria's management have done well in integrating the recent acquisitions and increasing the value of these businesses. One benefit of the worsening economic environment is that Cambria is seeing an increased flow of new acquisition opportunities.

Enterprise Group

Enterprise Group has three subsidiaries:

• Enterprise Finance Limited: is a master broker and packager of loans for other brokers and appointed representative networks;

• Enterprise Broker Services Limited: is a packager of sub-prime mortgages for directly authorised brokers and financial advisory networks; and

• Enterprise Debt Solutions Limited: is a recently established debt management and Individual Voluntary Arrangement ('IVA') business.

Promethean invested £8.5 million in May 2007. Its investment comprised £7.0 million in 6% secured loan notes and £1.5 million in ordinary equity. The equity shareholding initially was 30% with a ratchet adjusting the percentage up or down depending on the Enterprise Group's performance in the year to 31 March 2009.

Enterprise has been severely impacted by the slow down in the UK mortgage market. Despite making significant progress in rolling out its new technology platform, EDGE 2 and successfully increasing its market share, Enterprise's financial performance inevitably has suffered. As a result, the Manager has decided to increase the provision against this investment by £5.0 million given the high degree of uncertainty over future UK mortgage volumes and the impact this will have on Enterprise's core business. 

IFG plc

IFG plc is a listed financial services company that the Manager identified as being undervalued and which offers significant value potential. IFG operates corporate and trustee services; SIPP trustee and administration services and IFA and property intermediary services.

The Company has acquired a minority shareholding in the business and the Manager continues to discuss opportunities for improving the value of the business with the management of IFG. Recent stock market falls have reduced IFG's share price but the Manager remains confident about the longer term value of the business. This investment is valued at the closing bid price at 30 June 2008 of 1.79 Euros per share. On 30 October 2008 the closing bid price was 0.92 Euros per share.

InterMediactive Group

InterMediactive ('IMA') is a telecoms services business. IMA has developed a number of successful products across voice (fixed line and mobile), interactive TV, 3G and online platforms and provides network services and resells minutes to other businesses and operates its own communities via non-geographical telephone numbers.

Promethean invested £8.5 million in May 2007 and acquired a 75% shareholding in IMA. Promethean's investment comprised £7.7 million of 12% unsecured loan notes and £800,000 of ordinary equity.

IMA has performed well under Promethean's ownership and exceeded its budgeted profit in its last financial year (year end 31 January 2008). In addition, the business has generated significant levels of free cash and the subsequent de-gearing of IMA's balance sheet has enabled the Manager to increase the carrying valuation of its equity investment this year.

The Manager has begun to explore strategic options for this business but given the poor economic environment and the slow down in M&A activity, it is unlikely that an exit will be achieved in the short to medium term.

Media Square

Media Square plc ('MSQ') is a listed marketing services and communications group. MSQ has grown by acquisition and operates from offices in Europe, the USA, Africa and the Far East. MSQ had approximately eighty subsidiaries many of which were subscale but some of which appear to have considerable potential.

Media Square has embarked on a three year turn around programme under the new management team led by Roger Parry and there is significant progress still to be made. This investment is valued at the closing bid price at 30 June 2008 of 62.5 pence per share. On 30 October 2008 the closing bid price was 25 pence per share.

TIS Group

TIS Group Limited ('TIS') is the UK's leading market maker and provider of services to the assigned with-profit endowment policies market, supplying Traded Endowment Policies ('TEPs') and ongoing policy valuation and management services to major institutional TEP funds, some of which are publicly quoted. TIS includes Absolute Assigned Policies Limited ('AAP'), which is regulated by the FSA and is the UK market leader in the acquisition and sale of TEPs, and the largest UK manager of TEP assets, with approximately £750 million of funds under management.

In June 2007, Promethean invested £10.0 million in the business for a 51% stake. Promethean's investment comprised £9.95 million of 16% unsecured loan notes and the balance in ordinary equity. Additional funding of £52.5 million was provided by HBOS plc and by the vendors who retained a vendor loan note and part equity ownership in the company. HBOS plc has an option to acquire 2% of TIS' equity from Promethean on exit. Following the purchase of ordinary equity from employees who have subsequently left the business, Promethean increased its equity ownership to 57% for a nominal cost.

In the last financial year to June 2008, TIS performed well and increased its revenue and operating profits versus the previous year. Cash generation was also healthy and the business generated significant free cash flow after debt service costs.

As outlined in the Interim results, the possibility of floating TIS on AIM was explored during the last quarter of 2007. This was postponed due to the poor state of the stock market and the initial impacts of the credit crunch. These two factors have worsened during the last six months and it is very unlikely that a flotation will occur in the short to medium term.

Outlook

The Manager remains cautious in light of the economic turmoil that has accelerated in recent months and the potential impact this will have on certain portfolio companies. However, the Manager is hopeful that the weakening environment will continue to offer good investment opportunities at pricing levels that are significantly lower than in previous periods. The environment for exits will remain difficult in the short to medium term and the Manager remains committed to improving the value of the current portfolio in order to drive shareholder value.

PRO FORMA CONSOLIDATED BALANCE SHEET     

The pro forma consolidated balance sheet for Promethean PLC has been drawn up on the basis that all investments (whether Promethean derives control or otherwise) are accounted for as non-controlled investments and, therefore, no financial statements of any investee companies are consolidated into this pro forma balance sheet of the Company - all investments are shown as 'Investments'. The Manager believes this provides the best comparability with other private and public equity investment companies. 

As at 30 June 2008, the difference between the net assets of this pro forma balance sheet and the net assets of the consolidated balance sheet shown in the audited financial statement is £(0.6) million. 

PRINCIPLES OF VALUATION OF UNLISTED INVESTMENTS   

Investments are stated at amounts considered by the directors to be a reasonable assessment of their fair value, subject to the overriding requirements of prudence, 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 BALANCE SHEET DATE

As at 30 October 2008 the closing bid price for Media Square plc was 25 pence per share and if applied to the valuation of the Company's investment as at the balance sheet date, would result in a reduction in the value of the investment of £1.3 million or 2.6 pence per share on a pro-forma NAV basis.

As at 30 October 2008 the closing bid price for IFG plc was 0.92 Euros per share and if applied to the valuation of the Company's investment as at the balance sheet date, would result in a reduction in the value of the investment of £3.1 million or 6.2 pence per share on a pro-forma NAV basis. 

The impact of these post balance sheet movements in the share prices of Media Square plc and IFG plc after 30 June 2008 on the Company's pro forma NAV per share would result in an unaudited NAV per share as at 30 October of 129 pence per share. This represents a reduction of 6.5% versus the pro forma NAV per share of 138 pence as stated in the unaudited pro forma balance sheet as at the 30 June 2008.

During September 2008, Promethean plc also announced the successful restructuring of Promethean India plc (renamed as Elephant Capital plc). Following the restructuring, Elephant Capital now operates as an independent entity with its own operational infrastructure and is no longer managed by Promethean Investments LLP. Promethean plc no longer has any economic interest in Elephant Capital plc.

Promethean Investments LLP

3 November 2008

  Promethean plc

Preliminary and unaudited Group and Pro forma Balance Sheets

As at 30 June 2008

  Promethean plc

Preliminary and unaudited Group Statement of changes in equity

For the year ended 30 June 2008

The results in respect of the 12 months to 30 June 2008 have been taken from the company's full accounts which have not yet been reported on by the company's auditors.

The comparative figures in respect of the year ended 30 June 2007 have been taken from the company's full accounts which contain an unqualified audit report.

These accounts do not constitute full accounts.

  NOTES TO THE ACCOUNTS

Reconciliation of the pro-forma balance sheet to the Group balance sheet. 

The table below is a reconciliation as at 30 June 2008 of the pro-forma balance sheet to the Group balance sheet. The centre column removes the consolidated investee companies and the associated consolidation adjustments.

The pro-forma balance sheet has been presented as the directors believe that as an investment company the pro-forma balance sheet provides information that is relevant for comparison to other investment companies that are not required to consolidate investee companies and it is used by the directors for monitoring the performance of Promethean plc.

Investee companies are required to be consolidated where the Group is deemed to have a controlling stake.

GENERAL INFORMATION

The financial information contained in this preliminary statement does not constitute statutory accounts as defined in section 9 of the Companies Act 1982.

The figures set out above have not been reported upon by the independent auditor.

The full annual report and financial statements for the year ended 30 June 2008 will be filed with the Registrar of Companies in the Isle of Man.

The Annual General Meeting of the Company will be held at the offices of The Company Secretary, Promethean plc, 3rd Floor, Exchange House, 54-62 Athol Street, Douglas, Isle of Man IM1 1JD, on 19 December 2008 at 12:00 pm.

Copies of the annual report will be sent to Shareholders shortly and will be available from: The Company Secretary, Promethean plc, 3rd Floor, Exchange House, 54-62 Athol Street, Douglas, Isle of Man IM1 1JD and Promethean Investments LLP, 5-6 Argyll Street, London W1F 7TE.

EVENTS AFTER THE BALANCE SHEET DATE

As at 30 October 2008 the closing bid price for Media Square plc was 25 pence per share and if applied to the valuation of the Company's investment as at the balance sheet date, would result in a reduction in the value of the investment of £1.3 million or 2.6 pence per share on a pro-forma NAV basis.

As at 30 October 2008 the closing bid price for IFG plc was 0.92 Euros per share and if applied to the valuation of the Company's investment as at the balance sheet date, would result in a reduction in the value of the investment of £3.1 million or 6.2 pence per share on a pro-forma NAV basis. 

The impact of these post balance sheet movements in the share prices of Media Square plc and IFG plc after 30 June 2008 on the Company's pro forma NAV per share would result in an unaudited NAV per share as at 30 October of 129 pence per share. This represents a reduction of 6.5% versus the pro forma NAV per share of 138 pence as stated in the unaudited pro forma balance sheet as at the 30 June 2008.

During September 2008, Promethean plc also announced the successful restructuring of Promethean India plc (renamed as Elephant Capital plc). Following the restructuring, Elephant Capital now operates as an independent entity with its own operational infrastructure and is no longer managed by Promethean Investments LLP. Promethean plc no longer has any economic interest in Elephant Capital plc.