Hot Features
Premium
Register for real-time alerts, custom portfolio, and market movers
Pace plc (LSE:PIC), the world leader in TV set-top boxes, set the pace for the LSE today with its share price surging 15.72% to 132.50 pence by the noon hour, following the release of its interim management statement for the six months ending 30 June 2012. The stock hit a new high for the past twelve months, surpassing its previous high of 116.00 on 13 July. This is especially good news for a company whose share price fell 59.00 pence in one day to 94.30 on 09 May 2011, and sank even further to 44.70 by 25 November 2011. The share price has, however, been regaining ground since November and has remained above the 100.00 mark for over a month.
What Goes Down . . .
Last May the company released an interim report for the period covering 1 January to 9 May 2011. The news was rather foreboding for shareholders. The company downgraded profitability expectations due to effects of the Japanese tsunami, diminished demand for Pace Networks products, the European economic slowdown, and, primarily, a significant, intentional inventory buildup of raw materials and finished goods intended to ensure quicker deliver of customer orders. At that time, the board announced that it would take action to increase second half performance.
On 17 November 2011, the company released another interim management statement indicating continued expectations of lackluster results until the results of the company’s in-depth strategic review plans could be implemented. Flooding in Thailand had added to supply-chain issues. Shareholders had to be concerned when they read the line that said, “. . . we will remain within our banking covenants,” despite positive long term speculation. There was additional foreshadowing when the board said that “sharpened focus was required (to be) achieving operational excellence.”
On 6 January 2012 the company announced the elimination of the COO position and the immediate resignation from the company and the board of former COO, David McKinney. Operational and procurement responsibilities were taken over by CEO Mike Pulli. This move put an exclamation point on the impact of the increased inventories.
. . . Can Come Up
The interim report issued this morning for the six months ending 30 June 2012 clearly stated that “Pace is becoming a more profitable and efficient company,” with a 13.5% reduction in operating expenses and a 19.5% increase in inventory turns as a result of tighter inventory controls. Cash generation was nearly four times higher than the same period last year, leading the board to raise their profitability expectations for the full year. In accordance with the numbers coming in within expectations, including an underlying operating margin over 7%, the company increased the interim dividend by 15% to 1.44c.
Whilst the share price has yet to regain its pre-2011 heights in excess of 200.00p, it is well on its way. Pace has been trading above its 90-day moving average for 6 of the last 7 months. And investors seem to be taking note.
Company Spotlight
Pace plc was founded in 1982. By 1985 it introduced the first, truly low-cost modems. In 1987 it introduced its first analogue satellite TV converters. Today it is a leading supplier to cable, satellite, telephone, and IPTV providers around the world. By staying ahead of the technology curve, Pace has become the world leader in marketing set-top boxes, being the preferred supplier for thirty per cent of the top 100 pay-TV providers. The company is the number one provider of residential gateways in the US. Pace has been listed on the London Stock Exchange since 1996.
