Pace: Recovery road
November 14, 2012
Pace plc has released its Interim Management Statement for July 2012 to November 2012.
It says revenues in the period were in line with management expectations and ahead of last year, driven largely by the launch of and strong demand for next generation Media Server products in North America. It expects revenue in H2 2012 to be around $180 million (16 per cent) higher than 2011. It also says it is up to speed on its ‘transformation’ to more of a services provider.
“The Pay-TV market continues to show resilience despite the uncertain economic conditions and previously feared disruptive threats from new OTT market entrants. Our major customers have performed well with sustained consumer demand and strong profitability.
In the period, we have made good progress on the execution of our Strategic Plan, which was laid out in November 2011:
Transform Core Economics:
• Completed recovery from the Hard Disk Drive (HDD) supply issues, with no impact to revenue or EBITA in H2 2012.
• Continued focus on operational efficiency has resulted in the rationalisation of development facilities in India from four sites to one which will deliver overhead savings in 2013.
• The rationalisation of our Electronics Manufacturing Services (EMS) partners is progressing well and negotiations are at an advanced stage to move to two primary EMS partners by the end of H1 2013.
• Cash generation in the period has been strong and further debt reduction has been achieved.
Leadership in Pay-TV hardware:
• In the US, demand has been strong for Media Server products including the XG1 for Comcast’s new X1 service and DIRECTV’s Genie™ Advanced Whole-Home HD DVR. Further Media Server design wins and a strong global pipeline confirm Pace’s role in leading the evolution of the device in the home for service providers.
• Pace was confirmed as a licensee of the Comcast Reference Development Kit (RDK) and was instrumental in the launch of the first product (XG1 Media Server) on this platform.
• Building on our global partnership with TiVo that was announced in H1 2012, Pace is now ready to launch field trials with an integrated solution porting TiVo’s software to Pace’s set-top boxes and gateways, which will enable us to pursue significant worldwide opportunities during 2013.
Widen out into software, services and integrated solutions:
• The need for operators to support consumers within the increasingly complex connected home environment is driving strong demand for our Management Systems software and services, with wins in Europe, Asia Pacific and a strong global pipeline.
• Our integrated STB solution is gaining further traction in the growing Indian cable market and we now have five operators deploying this solution.
• Our Latens Conditional Access business reached the significant milestone of being deployed on 2 million STBs across the world, and achieved two significant wins in Asia in the period.
Outlook
The outlook for the remainder of the year has improved;
• 2012 revenues now expected to be flat on 2011 actuals (2 per cent underlying growth before the impact of HDD supply disruption).
• No impact from the HDD supply disruption on revenue or EBITA in H2 2012 (previously expected to be $4 million impact on EBITA).
• Operating margin for 2012 will be greater than 7 per cent (before the impact of HDD supply disruption).
• Strong cash flow generation will continue, with net debt now expected to be below $200 million at the end of the year.
Commenting on the announcement, Mike Pulli, CEO, said: “We continue to make good progress in executing our strategy and becoming a more profitable, cash generative company with a broader commercial opportunity.
We have made significant steps in transforming our supply chain and the continued focus on operational improvement will deliver further operational savings in 2013. The demand we are seeing for our innovative next generation Media Server products underpins our strong revenue growth in H2 2012. Our widening out strategy continues to build momentum with wins and deployments across the globe. As a result we have further invested in these growth areas.
We are confident about our trajectory and remain firmly focused on execution in the remainder of the year and beyond.”