Pace heads for World Cup glory as set-top box sales ready to soar

The Saltaire-based company told shareholders at its Annual General Meeting that the decision to broadcast the matches in both High Definition and 3D formats will result in first half results being ahead of the second half.

Chief executive Neil Gaydon said: "Pace is confident for the full year because of the pull-forward in orders caused by the World Cup. The first half will be stronger than the second. The World Cup is a great thing for High Definition TV, which is gaining momentum."

Analysts believe Pace will ship 20 million boxes this year, up from 17 million in 2009.

Pace, whose customers include BSkyB, Comcast Corp and Canal+, said it expects to see a combination of solid volume growth and modestly lower average selling prices, due to its product mix, leading to mid-single digit revenue growth.

Analysts expect Pace to report a 17 per cent rise in adjusted pre-tax profits to 89.2m. They see revenues rising five per cent to 1.19bn in the year to December 31.

Mr Gaydon said: "We are saying that's about right, we might do a bit better than that. We have to see, after the pull-forward for the first-half, what orders look like for the second."

He said early orders for the second half were "looking fine".

Chairman Mike McTighe told shareholders: "We entered 2010 in a strong operating and financial position with our pay TV markets continuing to be positive and with good demand for the group's products."

Pace employs around 1,200 staff in countries around the world including the US, India and China. Strong demand for High Definition technology has driven demand across all of Pace's markets.

Pace added that a further drive on costs had boosted margins, while the company is also keeping a tight rein on its supply chain to ward off the risk of component shortages.

Seymour Pierce analyst Ian Robertson held forecasts unchanged, but said the stock looked "too cheap".

"Our investment case is based upon a re-rating of the stock as the market appreciates that Pace is now less susceptible to individual customer or technical issues than it once was and should be capable of delivering on forecasts," he added.

The group has recently won several new customer contracts, which included Astro selecting it for Malaysia's first High Definition service.

It has also won new contracts for a second generation set-top box for BT Vision in the UK and a new range of Freeview High Definition products in the UK.

It has also announced another new partner for Pace Networks, Space TV, to lead the rollout of MultiDweller across Africa.

Last month the group announced plans to buy French company, Bewan Systems, which will boost its technological capability to combine internet services with cable television.

Mr Gaydon said: "Pace's vision is to become a world leader in converged digital TV entertainment. As payTV operators develop converged home entertainment services, advanced residential gateways will become increasingly important.

"Bewan will further diversify Pace Group's technology and product offering, helping deliver on our convergence vision."

Pace's products will be used as customers start to launch 3D services.

Mr Gaydon said: "3D has just started but there are two issues: the first is that you have got to get yourself a new TV to watch it properly. Secondly, until the technology changes you need to wear glasses. High Definition has taken 10 years to become more mainstream. 3D will probably follow the same pattern."

The number two player

Pace has overtaken Technicolor to become the second biggest maker of set-top boxes in the world. It is now second only to US-based market leader Motorola.

Pace has expanded rapidly since its purchase of Phillips' Set-Top Boxes and Connectivity Solutions businesses two years ago.

The company sold around 17 million set-top boxes last year to TV companies including Comcast, DirecTV and Canal+. Pace works across satellite, cable, IPTV and terrestrial platforms.

Strong demand for High Definition television helped it to post a 405 per cent rise in 2009 pre-tax profits to 69.9m as revenues grew 52 per cent to 1.13bn.

The group has a strong balance sheet with net cash of 73.5m.