Blackfriar: The week of woe looks set to continue for Pace board

It may well face a hostile reception at the group’s AGM this morning. One of the main issues on the agenda is the proposed pay rises for the top brass.

The week started off badly at the Saltaire-based company when the board received news that operating profits over the past few months had been so below expectations it would have to issue a profits warning.

This sent the shares down 40 per cent to 93p on Tuesday – wiping a massive £190m off the company’s value in just one day.

Last night they picked up five per cent to close the day at 98p. Chairman Mike McTighe did his bit for the company, buying 20,000 shares at 96p.

The group also received a boost when founder and major shareholder David Hood came out strongly in favour of chief executive Neil Gaydon.

But he expressed dissatisfaction with Tuesday’s announcement and here lies the rub.

Why didn’t the board suspect anything was amiss when the group announced annual results in March?

This is the second time this year Pace’s board has messed up with the City.

In March it upset the market with the surprise announcement that it would miss revenue forecasts in 2011.

The group failed to mention that shortfall was due to a major order from a key US customer being pushed back to 2012. This came out at the analysts’ meeting, landing the company in hot water.

With Pace losing so much of its value, there is inevitable talk of an opportunistic bid.

Analyst Ian Robertson at Seymour Pierce said private equity firms could look at Pace at this kind of valuation.

While WH Ireland analyst Eric Burns said he thought the five per cent increase in share price yesterday is probably due to investors thinking the stock has been oversold, bid rumours are also likely to support the price.

But in terms of a trade buyer he said there are no obvious candidates.

“If anything, the European and US electronics players have been divesting these sorts of business not acquiring them, witness Philips selling their set top business to Pace and also Motorola trying to hive off its business last year.”

He believes that private equity is a long shot. Given the current uncertainty, it doesn’t necessarily fit the classic private equity model.

In a rare note of humour in this sorry tale, Mr Robertson summed up the market’s frustration with Pace over the reasons it gave for the profits warning: “Some of the reasons are credible and sensible, but there are others which look a bit like: ‘The dog ate my homework’,” he said

Market lore has it that bad news comes in three and one commentator said this week that investors should brace themselves for more unpleasant news later in the year.

If Pace’s top brass are to keep their jobs, there better not be another blunder.

n Finally the wheels are starting to turn on green investment.

The confirmation this week that the energy department has submitted three clean power projects from the region for European funding shows the seriousness with which Yorkshire and the Humber is perceived as a place for green investment.

Preceding this was engineering giant Siemens’ decision in January to locate its wind farm factory in Hull. But wind alone cannot solve the UK’s energy crisis, which stems from our reliance on aging nuclear power plants and dirty coal power stations.

Government is latching on to the idea that our reliance on coal cannot be solved in time to meet strict emissions rules; instead, the solution is to clean up our power stations.

Carbon capture and storage (CCS), although unproven, seems the best way to deal with carbon dioxide emissions from big single source emitters.

The Humber, with its abundance of power plants and factories and its proximity to the saline aquifers and depleted oil and gas caverns of the North Sea, makes it the ideal place to build CCS projects.

Therefore, it’s no surprise that three of the 12 renewable power projects submitted to the European Investment Bank by the Department of Energy and Climate Change are from the Yorkshire and Humber region.

Power stations planned for Selby, Hatfield and Killingholme will compete for about 4.5bn euros (£3.9bn) of European Union cash.

It’s unlikely all three will be successful, as the European Commission will only pick a maximum of three projects from each member state.

But at least one looks likely to win funding.

Ultimately, the vision is for the Humber’s big polluters to eventually be linked via a carbon pipeline.

But Government needs to prove its commitment to CCS before investors will risk their money.