Pace raises forecast as hard-disk supply issues ease
(Reuters) - British TV decoder maker Pace Plc (PIC.L) raised its full-year earnings forecast as margins improved and the supply disruptions that marred the company's profit in the first half abated, sending its shares up 16 percent.
Pace, which supplies set-top boxes to broadcasters, said full-year operating margin would be greater than its previous forecast of 7 percent.
Pace had faced supply constraints following flooding at the Thai operations of its hard drive supplier, Western Digital Corp (WDC.O), but the worst seems to be over.
The company said it expects the supply disruptions to hurt its full-year earnings before interest, tax, depreciation and amortization for the year by $27 million. It had earlier forecast an impact of between $25 million and $35 million.
Pace, which reported revenue of $2.31 billion last year, expects revenue to be flat this year. With revenue having fallen 15 percent to $1.01 billion in the first half, the company's outlook implies strong revenue growth in the second half.
Much of that revenue growth will be driven by next-generation media servers the company launched in the United States this year, W.H. Ireland analyst Eric Burns said.
Media servers connect TV and internet broadband content with any screen at customers' homes, including smartphones, laptops, set-top boxes and tablets.
For the first half, the company's pretax profit fell 27 percent to $21.4 million as the company lost revenue as a result of the supply disruption.
However, operating margins improved to 7.8 percent, excluding the hit from the supply issues, from 5.8 percent last year.
Operating expenses fell 13.5 percent to $133.6 million.
The main story here is the new management proved itself in the first half, managed to get the operating expenses reduction that they set as a target and became very cash generative, Jefferies analyst Roosmarijn Cornelissen said.
Yorkshire, Northern England-based Pace replaced its chief executive of 16 years in December after a string of profit warnings and the new management's efforts at turning the business around appear to be bearing fruit.
Shares of the company, the top percentage gainer on the London Stock Exchange on Tuesday, were up 15 percent at 132.25 pence at 1100 GMT.
(Reporting by Shilpa Hinduja and Abhishek Takle in Bangalore; Editing by Don Sebastian and Brenton Cordeiro)
- Obama and Castro shake hands, Zuma humiliated at Mandela memorial |
- Google bus blocked in San Francisco gentrification protest
- Thai PM urges protesters to take part in election |
- Reporter allowed to keep sources secret in Colorado theater shooting
- U.S. regulators seek to curb Wall St. trades with Volcker rule