Pace founder steps down as group returns to profit

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The Independent Online

Pace Micro, the digital television set-top box maker, said yesterday it had swung back into the black and proclaimed a new era of growth in the global market for digital television.

Pace Micro, the digital television set-top box maker, said yesterday it had swung back into the black and proclaimed a new era of growth in the global market for digital television.

The news sent shares in Pace, which has been dogged by several profit warnings and an investigation by the Financial Services Authority (FSA) into possible listing rules breaches, up 20.8 per cent to close at 58p.

Pace reported a pre-tax annual profit of £5.9m from a loss of £16.2m last year, thanks to cost cutting and improved sales.

It also announced that its founder was stepping down from the group. David Hood, who created Pace 20 years ago and has a 20 per cent stake in the business, has been a non-executive director for six years.

He said yesterday said he wanted to focus on his other business interests, which include an aviation company and an online search engine.

He leaves after the group has been restored to profitability, which Sir Michael Bett, chairman, yesterday said was sustainable.

Sir Michael said: "We are delighted to return to profitability, which reflects a new growth phase of the global digital pay-TV market. With a good order book and continued stringent management controls, we are confident of continued progress in the current year."

The price of set-top boxes has fallen sharply in the past two years, crippling Pace's margins and allowing competition to enter the market. A digital box is now £109, compared to £128 in 2003. But winning new customers in Europe and Asia, such as Sky Italia and Australia's Foxtel, helped lift turnover at the group by 44 per cent to £239m.

The UK and US markets, however, are already slowing as most homes now already have digital television installed. In the UK, 53 per cent of households have digital television and shipments here fell 10 per cent last year. To replace this decline in the UK and US, Pace is driving demand for high definition television screens and personal recording equipment of digital television.

The company said its biggest growth opportunities were in Continental Europe and Asia, where digital television was only starting to be deployed in big volumes.

Pace is still in the midst of fighting a ruling - so far a confidential one - from the FSA that is understood to involve its former chief executive Malcolm Miller and current chief executive and former finance director, John Dyson. The company said it had set aside £1.5m to cover costs arising from the tribunal to appeal the ruling.

The company said it had reduced overheads by 22 per cent to £40m over the past year, which helped to offset a 1 per cent drop in its margins. It also said its net cash position had improved by 35 per cent to £20.4m.

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