Pace ships 17.2 million set-top boxes in 2009

Tuesday, March 2nd, 2010
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  • Record operating performance, driven by
    • Strong demand from pay TV operators in all global markets – volume shipments up 31% to 17.2m set-top boxes (2008: 13.1m)
    • Focus on execution delivering continued operating benefits
    • Synergies following the Pace France acquisition
    • Now ranked global number two set-top box provider to the pay TV industry
  • Launched a number of market leading products, including
    • New HD, HD PVR and industry first hybrid PVR products for customers that included Astro, Comcast, Viasat, Sky Germany, BT Vision, Net Brazil, Cablevision and UPC Broadband
    • First commercial whole home solution launched in US market
    • Networks business developing to plan, shipping to first two customers plus partner programme
  • Agreement to purchase Bewan Systems SA, a Paris-based IP and cable gateways specialist

Pace plc (LSE:PIC), the leading independent developer of digital TV technologies for the global pay TV industry, announces its results for the year to 31 December 2009.

Results Overview

Pace entered 2010 having delivered eight consecutive periods of growth, reporting revenues of £1,133.4m (2008: £745.5m); adjusted profit before tax of £76.5m (2008: £28.5m) and significantly increased profit before tax to £69.9m (2008 £13.8m). Strong cash generation saw Pace close the period with a net cash balance of £73.5m (2008: £37.7m): the Group has been able to continue managing the business from its own cash and is well-positioned to consider potential acquisitions to broaden its capability in digital TV technologies. Growth in revenues and profitability was matched by a growth in shipments with 17.2m (2008: 13.1m) set-top boxes delivered to customers across all global markets.

Pace has over 100 pay TV operator customers and in the last 18 months has created one of the world’s most diverse set-top box businesses in terms of customers, products and markets. In 2009 revenues were well balanced across all geographies and, due to rigorous execution against strategy, the Group added new customers and grew market share with existing customers. The Group leveraged its leadership in HD, commenced shipments to Comcast in the US and won Cablevision (Argentina), Net Brazil, Sky Germany and Astro as new HD customers, in addition to announcing the first customers for MultiDweller® and launching an industry first whole home product.

The underlying trend in all of Pace’s geographic markets is one of considerable growth in demand, with HD a key driver. Pace is an industry leader in HD and in 2009 was one of the global top two in terms of HD box shipments into the pay TV market. By the end of 2009 only 4% of global TV households had made the switch to HD.

HD is just one of the significant changes that are taking place in TV; HD along with PVR, hybrid, on demand content, broadband, whole home TV and now 3D are creating tremendous consumer demand. Pace, in addition to its leadership in HD and PVR, has established itself at the forefront of hybrid technology and is already shipping this new product type to major pay TV customers. Global penetration for most of these product or service developments is still only single digit so there is a great deal to play for.

Overall 2009 shipments into Europe and the rest of the world accounted for 51% of revenues. Pace continues to be the leader in Europe having delivered 6.2m set-top boxes into Europe (2008: 4.7m). A further 1.3m boxes were shipped into the Rest of the World region (2008: 1.1m).

Pace is now a major player in the Americas, which accounted for 49% of revenues on shipments of 9.7m boxes (2008: 7.3m). South America, with a mainly HD-ready customer base, is one of the fastest growing digital TV markets and has been a significant developing market for Pace. In North America Pace began deliveries of HD boxes to Comcast following on from the shipment of high volume, lower margin, digital converters (DTA) that it continues to roll out to the wider cable market. Importantly, as part of the Group strategy to position Pace at the heart of convergence in the digital TV home, it introduced its first commercial whole home system to a series of US cable operators to widespread industry acclaim.

Whole home, and the new generation of hybrid set-top boxes that combine broadcast and broadband content to add video delivery via the internet (known as OTT or over-the-top services), are cornerstone technologies for the converged digital TV home. Pace’s capability in the development of converged solutions will be enhanced by the acquisition of Bewan Systems the Paris-based IP and cable gateways specialist. The consideration for the acquisition, part of which is subject to achievement of earn out targets, will be payable in cash and not exceed €12.5 million. The transaction is expected to be completed during the second quarter of 2010. For Pace, as pay TV operators develop converged home entertainment services, advanced residential gateways will become increasingly important both as standalone devices and integrated into set-top box products that drive whole home networks.

Pace’s products will also be used as customers start to launch 3D services during 2010. This will add an exciting new dimension to the TV viewing experience and demand further product and technology developments that Pace will develop to realise the full visual potential of 3D.

The first two customers for Pace’s MultiDweller® technology were also announced: Canal Digital and Quadriga. Canal Digital, the leading television distributor in the Nordic market, will use MultiDweller to enhance its pay TV operations across Scandinavia, in particular using the platform to target hard-to-reach towns and regions where it is currently un-economic to upgrade to digital and high definition. Quadriga, a strategic business partner to many of the world’s leading hotels, selected MultiDweller as part of its next-generation technology to deliver a unique, tailored portal for TV in guest rooms. MultiDweller has been designed to overcome a number of challenges associated with difficult-to-reach subscriber networks and is highly suited to hospitality markets. The Group’s world class engineering team has developed and delivered more products in 2009 than in any prior year, which speaks to Pace’s growing efficiency, operational structure and business model. Pace’s operating structure has allowed it to achieve maximum growth without a proportionate increase in overheads. Pace has good customer order visibility and the team worked well in 2009 to anticipate, manage and plan for any problems within the supply chain, using a range of operational tools available to the business.

The benefits of the Pace France acquisition both in terms of the added scale and associated cost savings has continued and it is now a fully operational and profitable part of the Group. A series of operational efficiencies has been delivered with significant synergies.

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