Pace results reassure after May's shock profit warning

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Pace, the set top box maker, seems to have regained some equilibrium after a shock profit warning in May.

Then it said full year profits would fall short of expectations, partly due to the Japanese earthquake disrupting component supplies, and saw some 40% knocked off its shares.

In its half year figures, it appears to have reassured the market that things have not got any worse. It said it was on track to meet the revised guidance it gave in May, which is a relief given its track record. Helped by acquisitions, half year revenues rose 21% to $1.18bn but organic growth fell 3.5%. Six month profits dropped from $73.3m a year ago to $68.4m. Since the May shocker, it said it had resolved its issues with inventories, re-sized its network business so it is no longer loss-making, and mitigated the component problems caused by the disaster in Japan. At Pace Europe, acquisition benefits are coming through more quickly than expected, and it is conducting a strategic review it hopes will be completed by the time of the third quarter update. Charles Brennan at house broker RBS said:

The outlook comments are brief and reiterate the comments from the May statement for full year profits of $150m-$170m. We think an outcome in the lower half of the range looks most likely but our confidence in management achieving this risen on the back of these numbers. In terms of recommendation, the new chairman is in the process of conducting a strategic review. This may well give investors reason to pause.

Espirito Santo said the results were in line with its expectations, although a weak performance at the core Pace business had more than offset a good outcome from its 2Wire division:

Nevertheless, given the first quarter profit warning, the first half performance and the re-iteration of full year guidance is re-assuring.

And Alex Jarvis at Peel Hunt summed it up:

Overall, a steadier ship – but the process of rebuilding confidence is likely to take at least another six months.

As a consequence Pace shares are up 11.2p at 116.2p at the moment. Before the May warning they stood at 152.9p.

Nick Fletcher

guardian.co.uk © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds

Tania Branigan 26 Jul, 2011

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Source: http://www.guardian.co.uk/business/marketforceslive/2011/jul/26/pace-results-reassure
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