Pace reveals impact of Thailand floods to cost the company less

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SHARES in TV technology company Pace shot up last night on the news that supply issues resulting from the flooding in Thailand will cost the company far less than initially thought.

The Saltaire-based group had previously forecast an earnings hit of between £22m and £32m in 2012, but reduced this to between £16m and £22m yesterday.

Pace faced supply difficulties after the Thai operations of key hard disk drive suppliers Western Digital and Seagate were brought to a standstill due to widespread flooding.

New chief executive Mike Pulli, the former boss of Pace’s fast growing US business, said: “We’re not through the woods yet, but there is a path through. Our suppliers say that by the third or fourth quarter they will be back to pre-flood levels.”

The market was relieved and the group’s shares closed up 10.5 per cent last night, a rise of 8.5p to 89.5p.

Analyst Alexander Mees at JP Morgan said: “Pace has come through a challenging year with a result that demonstrates a level of resilience in its core markets that positions it to deliver positive earnings growth if it can execute its strategic plan.”

Pace said it expects 2012 revenues to be “broadly flat”, excluding the impact of the hard disk drive supply issues. Pace, which replaced chief executive Neil Gaydon last December after a string of profit warnings, said 2011 pre-tax profits more than halved to £34.7m.

Revenues rose 12 per cent to £1.47bn following three recent acquisitions.

Pace said the supply disruption would be mostly felt during the first half of 2012.

Mr Pulli said the set-top box supplier is working hard to expand its sourcing so it isn’t reliant on one region or producer.

“We are ploughing through to make sure we don’t have a situation like this again,” he said. “In areas where we can be dual supplied, we are sprinting down that path. Anywhere we see a gap, we are looking.”

Mr Pulli said the group will target growth all over the world rather than one particular region, but he identified Eastern Europe and Asia Pacific as markets that Pace needs to attack.

Asked about future trends, he identified ‘TV Everywhere’ as one to watch.

‘TV Everywhere’ allows paying customers to access satellite television wherever they want on whatever device they want to watch it on.

“It allows people to watch content on their portable device, be it a tablet, computer, iPad or cellphone, that’s a pretty powerful proposition,” said Mr Pulli, who recently downloaded a basketball match with American commentary rather than Italian while staying in Italy.

The company declared a final dividend of 1.6p per ordinary share, resulting in a full-year dividend of 2.4p.

Execution Noble analyst Vijay Anand said: “Overall, we think that this set of results should bring relief for Pace investors both on dividends as well as on the impact due to hard disk drive supply shortage.”

Mr Pulli said Pace has a bright future and “a very talented group of people” working for it.

“We need to make sure we drive the company and go back to basics, which for me means making money,” he said. “I know my hard work will result in cash coming back into the company.

“We need to keep the focus on the basics.”

Pace said it expects underlying profit growth of seven per cent this year on the back of efficiency improvements.

Pace had a torrid year in 2011. November’s warning over the Thai floods sent its shares as low as 43p, following on from previous profit warnings relating to a delayed US order and the impact of the Japanese tsunami.

Mr Pulli said a strategic review had shown that Pace’s markets are “large, growing and profit- able”.

ros.snowdon@ypn.co.uk