New TV contracts put Pace on track for revenue rise

Allan Leighton
Allan Leighton
Have your say

PACE, the world’s biggest maker of TV set-top boxes, said it has made a good start to 2014 with strong demand for both existing and new products.

The Saltaire-based company said this gives it confidence that the firm is on track to increase revenues by around nine per cent this year to £1.6bn.

The group has won a number of contracts this year, including BeIn Sports, the leading PayTV provider in the Middle East and North Africa.

BeIn has chosen Pace to supply home media servers and high definition set-top boxes for roll-out across the region.

Media servers are the next generation of clever boxes that link together all the devices in the home such as TVs, iPads, tablets, laptops and smartphones.

This allows content to be viewed on any screen.

Pace, whose customers include Comcast, AT&T and DirecTV, said it has made encouraging progress in the fast growing Indian market, where it will provide next generation set-top boxes to Tata Sky, the leading satellite operator. It has also won a contract for set-top boxes, software and conditional access to E-Digital, a leading regional operator.

In Portugal it has won a contract for set-top boxes for Zon Optimus.

The firm has also won a number of set-top box contracts with a number of long term customers in Europe.

In the other side of its business, software and services, Pace has been awarded a number of contracts with the likes of Foxtel, the largest PayTV provider in Australia, and TDS Telecom, a major telecoms operator in the US.

At the Annual General Meeting yesterday, chairman Allan Leighton told shareholders that revenue in the first four months of 2014 was lower than 2013, reflecting the impact of dual-sourcing of media servers and gateways.

This was in line with expectations.

He said that gross margins are well ahead of the first quarter of 2013 due to the positive impact of improved revenue mix, procurement benefits and the acquisition of US networking specialist Aurora Networks.

Mr Leighton said trading at Aurora, which it bought earlier this year, is ahead of expectations.

“The integration is largely complete and all steps have been implemented to realise the previously stated synergy savings of $4m (£2.4m) in 2014 and $8m (£4.8m) in 2015,” he said.

“Underlying demand has been strong and the trading outlook is positive.

“We expect Aurora to be a significant profit and cash contributor in 2014.”

The group said profits are in line with expectations and it has seen robust cash flow generation.

Analysts at Liberum said in a note: “2014 guidance has been maintained. Revenue was down year on year, as expected, due to dual sourcing in the US.

“Gross margin is ahead of last year and operating expenditure has been further reduced.

“Aurora has been integrated and is tracking ahead of expectations. Pace has been one of the turnaround stories of UK technology as management has drastically cut cost. However, the structural pressures are building and Pace is no longer stand out cheap.”

Pace said it is continuing to drive efficiencies in the core Pace business and it has made a good start in applying the same principles to Aurora in order to drive improvements in the cost of goods, overheads and working capital.

The group said that operating margin for 2014 is expected to be around 8.5 per cent, up from 7.8 per cent last year.

The group will announce its half year results for the six months to June 30 on July 29.