Pace has held off from its H1 dividend payout but expects a recovery by the end of the fiscal year.
Pace Micro, Europe’s largest manufacturer of set-top boxes, has held off its interim dividend payout to share holders. Pace’s H1 results have been affected by the current instability within the pay-TV industry but the company says that a full year dividend will be considered if the company recovers in H2.
Pace has suffered loss of earnings as pay-TV operators have cut back and concentrated on their own finances as opposed to continued roll out of digital TV services. H1 saw a worrying 61% fall in turnover to $134 million. However, with orders anticipated from Time Warner in H2, Pace hopes to break even by the end of the fiscal year.
In H1, Pace moved into the red in continental Europe, despite its number one position. The company has found continental European markets challenging, as operators and broadcasters alike focus on clearing their balance sheets rather than investing in new kit. However, digital TV’s low penetration levels in much of continental Europe should provide long-term opportunities for future growth.
The UK has Europe’s most advanced digital television (DTV) market, with the highest penetration of DTV services. However, demand for digital set-top boxes has also declined sharply, with revenues down 66% because of the severe financial problems faced by cable operators NTL and Telewest.
Nonetheless, in H1, Pace continued to dominate with its share of more than half the UK market and while satellite still accounts for around 70% of digital households, growth will increasingly be driven by the uptake of digital cable and terrestrial services. In particular, Pace is likely to benefit from the success of the Freeview digital terrestrial service in the UK, which will lead to sustained demand for Pace’s low-cost ‘digital TV adapter’.
Pace Micro needs to stick with its strategy of being first to market with new technological solutions, such as hard disk functionality. The company should remember that so long as it focuses on digital set top boxes, it has an edge over its competitors, such as Nokia, whose main focus is on other operations. With this in mind, Pace should be able to ride the storm.
Related research: Datamonitor: Digital and interactive TV markets in Europe to 2006 (DMTC0866 available end of January)
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