Pace Micro issues fifth warning after US and Europe sales slide
Thursday 28 November 2002
The set-top box maker Pace Micro Technology yesterday issued its fifth profit warning of the year, saying first-half losses would be greater than expected thanks to weak US and European markets.
"Trading conditions within the global digital TV market have been difficult," it said. "Sales in mainland Europe and the US are not yet meeting targets."
Shares in the company fell 7 per cent, or 1.25p, yesterday to close at 17.75p – a far cry from the £12.45 high the stock traded at during the peak of the internet boom in the spring of 2000.
Andrew Wallace, Pace's marketing director, said: "The global market looks as though it's probably come off about 35 per cent in terms of value, so it's lost a third of its value this year, which has posed a challenge to us and every one of our competitors.
"The US and Continental Europe have been very tough, tougher than expected, and that's why we've come out and said you should anticipate our [first-half] losses will be greater than anticipated," he added.
ABN Amro, the company's house broker, is now expecting Pace Micro to turn out a loss of about £15.7m in the six months to 30 November on sales of roughly £80m. Previously, it had been anticipating a loss of about £9m on sales estimated at £95m.
Pace saidits performance in the UK, where it sells to the troubled cable firms NTL and Telewest among others, remained "solid".
To address the downturn, the company said it may take further action to save money and take its cost base "to a level that is commensurate with reduced revenue expectations".
The company has already taken steps, including axeing 180 of its 800 workers and cutting overheads by about £15m a year. Mr Wallace would not rule out further redundancies.
"Where there is change there is opportunity and what we're doing is to ensure we're set up to grasp those opportunities which we're starting to see appearing again," he said. "They won't flow through to profits for quite some time, maybe the back end of next year, maybe the year after, but the point is they are starting to appear again in some markets."
ABN Amro is now forecasting Pace to produce a loss for the year in the range of £15.7m on sales of £225m, compared to its previous estimate of a loss of £2.2m on sales of £190m.
Sue Cox, an analyst at ABN Amro, said: "Pace is very sensitive to revenues now and they fell 33 per cent last year and they're going to fall another 46 per cent this year. There is some light at the end of the tunnel ... we're expecting £10m of cash at the half-year and they're also starting to ship to customer number two in the US."
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