Set-top box maker off the pace with £50m loss

The set-top box maker Pace Micro Technology revealed yesterday that losses had widened to £50m for the year.

Pace, whose recent history has been littered with profit warnings as its customers slashed their spending, said it feared it might lose market share in the UK because of increased competition from other suppliers.

"The UK will continue to be an important market for Pace, but we may lose some market share due to increased competition at both NTL and Telewest and the numerous suppliers in the free-to-view market," it said. Shares in the company, which gets more than 80 per cent of its revenues from the UK, slumped 5.75p to close at 50p yesterday.

It said that set-top box volumes fell 41 per cent to 1.3 million units in the year, while revenues plunged 53 per cent because of lower average selling prices.

For the year to 31 May, Pace turned out a pre-tax loss of £50m, compared with a loss of £29.5m a year before. Sales were £166.6m, down from £351.8m. It has decided against paying a dividend for the year.

The company was hurt across the board. Sales in the UK dropped 46 per cent to £137.5m, sales in the US plunged 74 per cent to £9.9m, while sales in Europe fell 76 per cent to £9.8m.

Pace has responded to the tough conditions by cutting costs. It has slashed about 300 jobs over the past year and a half, giving it a workforce of just under 600.

There was a £32.5m exceptional fee in the accounts to cover both those restructuring costs and a £21.5m goodwill impairment charge. Despite the grim statement, its chairman Sir Michael Bett said Pace had performed far better in the second half of the year - when it came close to break-even on an underlying basis - than in the first six months.

He added: "The group's improved financial position, combined with new orders in May 2003, gives rise to cautious optimism."

Pace said it had won some new business in Europe and Asia Pacific but warned its US operations would continue to incur losses over the next six months.