LONDON Revenues at Pace Micro Technology plc for the year ended June 3 dropped to �£178.1million from �£253.3million reflecting a drop in volume shipments of set-top boxes from 3.4mllion to 2.2million.
As a result the company made a loss before tax and exceptional items �£15.6million compared with a profit �£9.1million in 2005 with exceptional items taking another �£11.9million due to a charge against U.S. products, restructuring costs and impairment of trade investment.
“As previously announced, the full year results reflect delays emanating from new product introduction in the U.S., a position that is now being resolved as shipments have started to flow through,” said Mike McTighe, Pace Micro Technology's Chairman.
“The board believes that with shipments to the U.S. underway, a strong performance of the business in EMEA and Asia Pacific, and the implementation of a new lower cost, but more effective organisational structure, Pace is turning an important corner. Pace is in the final stage of field trials on the SD PVR for U.S. cable. As the trials complete and shipments start, expected in the near future, inventory commitments will be realised and the group will benefit from its leading technological and market position,” added McTighe
“The new chief executive officer Neil Gaydon and his team have initiated a number of significant organisational changes to resolve former execution issues, improve margin performance, reduce costs and ensure Pace is best placed to grow its business.”
The company believes that the global market for digital set-top boxes remains strong and Pace’s customer base within this market includes some of the world’s largest and most influential payTV operators. Since the year-end, the group says it has made important progress in the U.S. Shipping its first satellite product, an HD MPEG-4 personal video recorder (PVR), to DirecTV, the world’s largest satellite payTV operator.
Pace’s HD PVR for US cable networks has also received approval from a number of other operators and shipments have started to some of these, with approvals from other operators imminent. Pace’s standard definition (SD) PVR for US cable networks is in the final stage of field trials with Comcast.
Over the last two months, the group structure has been reshaped to improve customer focus, with a combined sales, product and engineering team for each customer group. The company says this approach is more efficient as management layers have been greatly reduced while at the same time allowing new talent to come to the fore. It has also enabled a headcount reduction of over 10%, greater transparency and accountability, and a marked reduction in the number of contractors.
To increase working capital in order to raise inventory to support the roll out of product into the U.S. the company's borrowings have risen to �£6.1million while in 2005 it had �£26.4million in cash.
The company accepts that it has had a disappointing year, with delivery delays on a number of new and highly complex set-top box products. The year was further characterised by industry-wide difficulties in the development by third parties of silicon and software for the new MPEG-4/H.264 compression standard. This, combined with delays in Pace’s own software development, held back rollout of the group’s advanced HD products. It has embraced this new compression standard as it will be the industry’s core technology for the next 10-15 years and Pace is now at the forefront of this change.