Pace

Digital television developer Pace, now the world's number-two provider of set-top boxes, is delivering long-term growth on the back of high-definition (HD) and 3D expansion.

2009 results showed pre-tax profits at the FTSE 250 company, which had faltered somewhat in 2008, soaring fivefold from £13.8m to £69.9m, on sales up 52% to £1.13bn. Strongly cash-generative, Pace closed the period with a net cash balance of £73.5m and proposed a final dividend of 1p per share, to take the total dividend to 1.5p (2008: 0.6p).

West Yorkshire-based Pace says it is enjoying strong demand from payed-for TV operators around the world, with set-top box (STB) volumes having risen 31% to 17.2m last year. The digital ‘switchover’ has been an important driver of demand and is being added to by new demand for HD and 3D technologies, of which Pace is one of the acknowledged market leaders.

City analysts see competition hotting-up this year, but FinnCap’s Paul Cornelius says Pace is positioned ‘extremely well to at least maintain market share’ and suggest upside could come from new products such as MultiDweller and WholeHome. The group is keeping up a strong level of R&D spending, in order to preserve is leadership position and last year delivered a record number of products. In addition, Pace has just completed the 12.5m acquisition of a Paris-based IP and cable gateways specialist Bewan, adding expertise in new areas.

Analyst Alex Jarvis at broker KBC Peel Hunt forecasts £91.3m profits for the current year and 20.6p of earnings. Pace shares, down from their recent five-year high of 241p, are valued at a good third less than the wider electronic sector and are worth buying and stashing away.