Investment: Digital TV shifts Pace into the red

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The Independent Online
PACE MICRO TECHNOLOGY, the supplier of television decoders, yesterday appeared to draw a line under its troubled past when it returned to profit and painted a rosy picture of its prospects in the digital television age.

In the half year to the end of November, Pace reported a pre-tax profit of pounds 5.55m, compared to a disastrous loss of pounds 12.5m in the same period last year, on turnover up 14 per cent at pounds 99m.

The figures coincide with the launch of digital television in the UK - the first country in the world to adopt the new standard. Pace is supplying boxes to both British Sky Broadcasting and ONdigital, the rival television groups.

During the period Pace shipped 600,000 boxes, of which 400,000 were digital. However, the more expensive digital boxes accounted for 86 per cent of Pace's revenues.

They were also more profitable. Gross profit margins increased to 25.9 per cent, although Macolm Miller, the chief executive, immediately warned that margins would be squeezed as competitors such as Philips and Sony increased production.

However, Pace is already looking ahead. The company expects to supply 100,000 boxes to both Cable & Wireless Communications and NTL, the cable operators, who are launching their digital offerings this year.

The CWC box, which Pace developed with Cisco, the US giant, could also help Pace win customers in the US.

The results helped Pace's rehabilitation in the City, after a few years of disastrous share price performance. Although the shares yesterday dipped 2p to 91.5p on profit-taking, analysts were upgrading their full-year profit forecasts to pounds 14m.

"They have a leading position in a market that is taking off so you've got to support them," one analyst said. "But you can be sure it's not going to be a smooth ride."