Pace expects 2012 profit hit as review completes
TV set-top box business Pace has said it had completed a strategic review of the business which has found that a “sharpened focus” is required across the group.
Pace reported the results of its long-awaited strategic review as it also warned that 2012 operating profits will be impacted because of supply chain issues.
The review was called following a profits warning and the subsequent appointment of former Asda boss Allan Leighton as chairman earlier this year.
Pace has also been hit by flooding at its Thai manufacturing facility, which is a major supplier of hard disk-drives to the Saltaire-based business – an episode that will also hit profits.
Pace warned this morning that operating profit is expected to be hit by between £22m and £32m in 2012 as its hard disk-drive suppliers remain uncertain on capacity and pricing.
It said it was seeking alternative suppliers, working with customers and aggressively managing working capital to negate the impact.
Pace’s shares were trading down 15% in early trading this morning at 51.18p.
Announcing the findings of the strategic review this morning, Pace said its goal had been to discover what actions could be taken to “further develop a distinctive, scalable and profitable business that was well positioned within attractive markets”.
The review found that although Pace operates in growing and profitable markets, a “sharpened focus” was required, especially in areas including achieving excellence in its operations to match the group’s scale, building on its position as a world leading set-top box and residential gateway company, and accelerating the deployment of Pace’s acquired and developed software and services across its markets.
It also found that up to 9% operating margin, combined with better profitability, was a realistic medium term objective
Chief executive Neil Gaydon said: “In common with the broader consumer electronics industry, the immediate impact to our business of the Thailand flooding is significant, requiring diligent management.
“Looking beyond this short term supply chain issue, the strategic review gives us a clear roadmap to increased operating profit and enhanced quality of earnings.”
In a separate interim management statement for the period from July 1 to yesterday, Pace said 2011 full year group operating profit, including the impact of the Thai floods on its operations, would be below its previous guidance at around £89m, £6m lower than anticipated.
Revenues for its full year are expected to be £1.5bn.
Pace said with the exception of the hard disk-drive supply issue, volume and revenues were in-line with expectations, but there will be an impact to cash through lost profit and increased working capital.
Net debt at the year end is expected to be between £203m and £210m.
Pace also said today a consultation was underway on a proposed reorganisation of its Pace Europe business.
