Pace profit 'reflects global trend'

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Set-top box maker Pace Micro Technology has swung back to full-year profit, posting a £3.8m pre-tax profit in the year to May against a £50m loss last time. Earnings before tax, goodwill and exceptional items reached £5.9m from a £16.2m loss in 2003.

Turnover rose 44% to £239.9m from £166.6m, driven by what Pace said was a new momentum in the global digital pay-TV market caused by reductions in set-top box average selling prices. Accordingly, shipments rose 69% on the year to 2.2m set-top boxes. The company's shares surged 21% on the news, closing up 10 at 58p.

Sales to non-UK customers accounted for 42% of total revenues, up from 17% in 2003, while volumes multiplied seven times in Europe and by a factor of three in the Asia-Pacific region. Pace won five new customers spanning the two regions: Sky Italia and Viasat in Scandinavia, Premiere and KDG in Germany; Foxtel in Australia.

US demand for Pace boxes has grown as the market for high definition television (HDTV) begins to stimulate competition between cable and satellite operators. Chief executive John Dyson said the group would target new entrants to the European market as France, Spain and Germany "restart their pay-TV strategy".

Production of the boxes at Pace's manufacturing sites in China and Romania has hit a new peak at 10,000 a day.

In the UK, shipments fell 10% to one million as Pace geared down its sales efforts in the low-margin Freeview market. Pace said BSkyB - which buys Sky+ and standard Digiboxes from the company - continued to be its largest UK customer. Falling set-top box prices have had an impact on Pace's profit margins, which slipped to 19% from 20.9% in 2003, but the company has trimmed overheads from £50.9m to £39.8m to offset the decline.

The company will set aside £1.5m to cover possible costs relating to an investigation by the Financial Services Authority, which has found against Pace and Mr Dyson over allegations that it breached stock market rules on disclosure. Pace is appealing to the Financial Services and Markets Tribunal. Dyson said: "I am not permitted to discuss the appeal in any way."

Pace have also announced that founder David Hood, who retains a 19.6% stake in the business, would step down as a non-executive director after the company's annual meeting in September. Hood founded Pace more than 20 years ago. Pace said he wished to retire from the board to spend more time on other business interests.

Lovelace Consulting  |  13.07.2004

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