Pace shares back on rise following earlier doubts

The Saltaire-based company, which supplies the leading pay TV operators with set top boxes and high technology services, saw its shares rise 8.3 per cent last night, a jump of 8.7p to 113.7p. The shares lost 40 per cent of their value following the profits warning in May.

Pace’s chief executive Neil Gaydon said: “Pace is back on track. We’ve done what we said we’d do. We worked hard to sort through the four issues that were raised in May.”

He was referring to the problems uncovered in the May IMS update. These were inventory management issues, the loss-making Networks business, the impact of the Japanese tsunami on the availability of components and reduced profits at Pace Europe.

“Two of these issues have been resolved. Inventory management has been normalised and our Networks business has been re-sized and is now no longer loss-making,” said Mr Gaydon.

“The other two issues require continuing management. The impact of the Japanese tsunami on the supply chain has been largely mitigated, however we are still trying to find alternatives for 10 components and we should have this sorted by 2012. We continue to address issues related to the reduced profitability levels in Pace Europe.”

The company has revised its full year profit guidance to between £91m and £104m.

Analyst Ian Robertson at Seymour Pierce, said: “The inventory issues have been addressed, the networks business has been scaled back and the issues regarding parts supply post the tsunami have been mostly contained.”

Mr Robertson has a price target of 144p on the stock and is keeping his “buy” rating.

Pace, which supplies set-top boxes to Comcast in the United States and Tata Sky in India, reported a pre-tax profit of £42m, on revenue of £725m in the first half of the year.

Analyst Arun George at Altium Securities said: “Confidence in management remains fragile.

“Meeting full year expectations, along with a well defined growth plan from the new chairman’s strategic review, will be the first step towards rebuilding investor confidence.”

Last month Pace appointed respected former Asda boss Allan Leighton as non-executive chairman. Mr Leighton is conducting a strategic review of the business, which will report back to shareholders at the group’s third quarter update in the autumn.

“The strategic review will look at out structure and at business improvements,” said Mr Gaydon.

“It’s too early to say what the conclusion will be, it’s a case of data gathering for now. We’ve grown the business tenfold and this is a chance to stand back and re-evaluate.”