Given the more difficult trading environment faced by digital TV operators globally, the Board of Pace Micro Technology plc gives a further update on trading for the year ending 1 June 2002.
Following our previous statement on 5th March 2002, Pace is now working with ntl to resolve the stated difficulties. Both parties are hopeful of a satisfactory conclusion.
In the US, Pace is making steady headway and has received positive re-assurance from its customers although this does not ensure that the product will be shipped in line with current expectations in this financial year.
Pace is also watching closely whether ITV Digital will emerge from administration but the public battle is unsettling the market. Whilst this operator does not represent more than 2% of Pace's global business, there are some unsold stocks of set top boxes.
The Company's new low cost digital TV adapter has been well received by consumers, retailers and the national media. Whilst the Company previously indicated it could sell 100,000 units of this free to view product by the end of May, supply has been prudently constrained to around half this level due to the current uncertainties that surround digital terrestrial TV services in the UK.
Taken together with the evident financial difficulties and consequent uncertainty generally amongst digital operators, the Board has had to consider a range of possible financial outcomes for the current period. The most likely of which is now a loss from trading operations in the second half of the financial year ending 1 June 2002, compared with a previous expectation of a profit.
The outcome for the financial year is also likely to be impacted by the annual impairment review of certain goodwill and the value of Pace shares held by the employee benefits trust. Management has commenced action to reduce the overall cost base of the business to ensure the Group is best placed to benefit in the next financial year from future market developments whilst maintaining focus on US deployment and the growing European retail market.
The results for the financial year ending 31 May 2003 will depend on the ability of operators to continue to fund their plans for digital roll out; upon the level of demand from consumers subscribing to services or purchasing set top boxes outright and upon Pace's ability to meet their requirements.
Further ahead, the current turbulence in the broadcasting industry may take time to settle, but the Board remains convinced of the excellent growth prospects in digital broadcasting world-wide. Hence it continues to regard the Group's long term prospects with confidence.