Pace shares down 40% after tsunami hits trading

Shares in the West Yorkshire based firm, which makes satellite and cable TV boxes, were down 40% after it said profits for the full-year would be between 150 million US dollars (£97 million) and 170 million US dollars (£110 million). Analysts had expected profits of around £126 million.

The company said its costs had increased because it stockpiled parts to ensure it was able to meet orders in a tighter supply chain environment, a situation which has been made worse by the tsunami and earthquake in Japan.

Its European business saw its profitability dip and it has closed its Pace Networks division as a standalone business as a result of insufficient demand.

The poor profits performance came despite a 24% increase in revenues in the first quarter of 2011 helped by a strong performance in the Americas.

Chief executive Neil Gaydon said: “It is clear from today’s statement that despite revenues and product shipments being on track, we have made a disappointing start to the financial year with our profitability.”

The group’s margins should return to their target in the second-half but would not be able to make up for the poor performance in the first-half, he added.

Today’s update comes two months after shares dropped more than 10% when the company said a major order from a US customer had been postponed until 2012.

Ian Robertson, an analyst at Seymour Pierce, said today’s update “does not make for good reading”.

He added: “This is not a disastrous statement but it is a further hit to management and company credibility.”

The company posted a 1.7% increase in pre-tax profits of £71.1 million in the year to December 31, as revenues increased 17.4% to £1.33 billion.

Pace said revenues were boosted after it expanded its share of the pay-TV market but in Europe revenues declined by 14% to £367 million after BSkyB brought its set-top box supply in-house.

Pace employs around 1,200 staff in countries including the US, India and China.