The gradual replacement of traditional TV set-top boxes with internet-connected hubs has been a challenge for Pace (PIC), which develops media devices for cable, satellite and broadband companies such as AT&T and Comcast. But it is also an opportunity, and new products, rigorous cost control and a major acquisition drove adjusted cash profits up a quarter last year to $241m (£157m).
True, Pace's underlying sales slid 5 per cent, as brisk demand for its set-top boxes and media servers was offset by a 36 per cent slump in sales of media gateways. Fortunately, recently acquired Aurora - which modernises broadband providers' networks to manage surging volumes of voice, data and video traffic - came to the rescue with $265m in sales, and also helped Pace widen its operating margin from 7.8 per cent to 9.2 per cent.
The $310m acquisition in January 2014 loaded Pace's balance sheet with debt, and contributed to $7.3m in one-off costs. But excellent cash generation has since cut the group's net debt by two-thirds to $93m. Aurora is also on track to deliver $8m in annual cost savings.
Pace expects sales and adjusted cash profits to rise by 5 and 6 per cent this year, to $2.75bn and $255m, respectively. Accordingly, broker JPMorgan Cazenove hiked its EPS forecast for 2015 by 6 per cent to 63.7¢ (from 63.6¢ in 2014).
| PACE (PIC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 356p | MARKET VALUE: | £1.1bn | |
| TOUCH: | 355-356p | 12-MONTH HIGH: | 487p | LOW: 284p |
| DIVIDEND YIELD: | 1.3% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 212¢* | NET DEBT: | 14% | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2010 | 2.06 | 110 | 26.4 | 3.37 |
| 2011 | 2.31 | 55 | 13.2 | 3.75 |
| 2012 | 2.40 | 80 | 19.4 | 4.50 |
| 2013 | 2.47 | 131 | 31.2 | 5.49 |
| 2014 | 2.62 | 176 | 47.4 | 7.00 |
| % change | +6 | +34 | +52 | +28 |
Ex-div: 4 Jun Payment: 3 Jul *Includes intangible assets of $764m, or 243¢ a share £1=$1.54 | ||||
