Blow for investors as Pace flags

PACE Micro Technology, Europe's biggest set-top box maker, has dealt a blow to investors, warning that profits will fall short of the target thanks to tough trading in the first few months of 2002.

The stock plunged 169p to 135p in opening trade, wiping £380m from Pace's market value. The share was worth just under 620p at its 12-month peak last year.

Sales for the year ending May would be around £350m, a 'significant shortfall' on expectations, Pace said. Lehman Brothers had expected sales of £515m. The decline would hammer second-half earnings, though Pace still expected to make a profit in that period.

Pace blamed the shortfall on a 'recent substantial reduction in capital expenditure' in the UK cable market, and a slower-than-expected deployment in the US. The difficult trading had been exacerbated by a reluctance among trade credit insurers to increase their exposure, it added.

It predicted significant sales growth next year, citing overseas business and new contract wins.