Happy days at Pace

Chris Forrester

You could sense the smile on CEO Neil Gaydon’s face as he unveiled set-top box maker Pace’s results showing tripled first-half pre-tax profits. Those pre-tax profits surged to £31m in the half-year to June 30, up from £10.5m the previous year. But while the headline numbers were undoubtedly good there were some concerns over margins.

Overall revenues grew to £526.5m, helped by the complete incorporation of Royal Philips’ set-top box interests acquired just over a year ago on April 21 2008. The comparable numbers for the six months ended June 30 2008 were £231.1m. The gross margin this past half-year was 17.2%, while the gross margin for the previous period stood at 21%.

Pace has more than 100 pay-TV customers spread around the world, and it seems many of them are embracing HDTV. Shipped volumes of boxes showed considerable demand, at 8.5m units (2.8m), with Gaydon reporting that integration of Pace France (the former Philips-owned assets) were now settling down and delivering operational improvements.

“We are extremely pleased with our half year results as the Pace Group continues to consistently deliver against its customer, technology and product strategies. We signalled significant upgrades to management’s expectations for the full year and with strong half year results we are firmly on track,” said Gaydon.

Gaydon said that “the Americas” now accounts for 47.6% of the company’s revenues, and that it is building up a new business base in Latin America.

“Pace is taking full advantage of the growing global demand for our products and technologies in digital pay-TV markets, which, when coupled with our scale and excellent operational execution is enabling us to grow operating margins. The 6.5% adjusted operating margin achieved in the first half of 2009 puts us on track for our 8% medium term target.

“We expect our strong performance to continue during the second half, and with good order visibility we are confident in our ability to deliver against management’s expectations for the full year,” he added.

As to guidance for this current half-year, the company says to expect Pace’s average selling prices will increase in the second half of 2009 when compared to the first half as a result of the shift in product mix, while margin performance will remain at a similar level to the first half. “Given these conditions and good order visibility, the Board remains confident that Pace is on track to meet management expectations for the full year 2009.”