Royalty battle puts Pace in red

Pace Micro Technology, which manufactures TV receivers and decoders, this week plunged into the red with a loss of £12.1m down from last year’s pre-tax profit of £18.4m but remained upbeat about future prospects. Turnover was also down from £219.6m to £184m for the year to 30 May, reflecting a 38% fall in sales of […]

Pace Micro Technology, which manufactures TV receivers and decoders, this week plunged into the red with a loss of £12.1m down from last year’s pre-tax profit of £18.4m but remained upbeat about future prospects.

Turnover was also down from £219.6m to £184m for the year to 30 May, reflecting a 38% fall in sales of analogue equipment. While sales to the digital market grew by 41%, the market remained small.

The City had been warned of the losses, but the shares fell 8p to 68p. The company floated in 1996 at 172p.

The firm, based in Shipley, West Yorkshire, claimed that without exceptional items it would have made a profit of around £200,000.

The main provision was £10m, put aside to cover possible royalty payments on sales of set-top boxes. Pace is in negotiations with Npeg-LA, a group of three companies which claim ownership of the technology used in digital transmissions.

A Pace spokesman said the company was hoping to enlist the help of other manufacturers in its battle against the claim, but that the £10m and future forecasts were based on ‘the worst case scenario’.

Pace also filed restructuring charges of £2.3m incurred in the first five months of this year.

The company’s future depends on the success or failure of digital technology. It is about to start production of set-top boxes for satellite broadcaster BskyB and terrestrial digital consortium British Digital Broadcasting, both of which will launch their digital television services this autumn.

While the company is under pressure to keep prices down to encourage take up of the technology and is facing potential royalty payments, it is confident that with falling component prices, it will still be able to reach target margins for the business of 20%.

Pace, which has about 800 employees, is looking to recruit 50 engineers over the next 12 months.