You might expect investors to get the hump with Pace's (PIC) cut to revenue guidance today. The pay-TV technologies and set-top box manufacturer had said in July that full-year revenue would be between $2.65 billion and $2.72 billion. That's changed. A combination of challenging economic conditions in certain regions, phasing delays at major customers in North America and delayed decisions by customers, current forecasts indicate that revenue growth will be slightly lower than previously expected.
'Revenue for 2015 is now expected to be circa $2.55 billion, versus $2.62 billion in 2014,' says the company.
But investors seem happy to bat that negative news aside. The shares are actually up a fraction to 361.2p, and here's why. Management have been concentrating on operating efficiency over the past couple of years, streamlining the business and improving profits quality.
It's worked too, which means that despite the implied lower sales this year, adjusted EBITA (earnings before interest, tax and amortisation) is still expect to hit the previous $255 million target (it did $241.1 million in 2014) while free cash flow (FCF) of $185 million to $195 million remains impressive. It implies a FCF yield of 10.6%.
And that's important to Arris Group (ARRS:NDQ), the US peer that is in the middle of buying Pace out. It's the sort of operational metric that saw it up its own cost savings calculations recently, as we reported in yesterday's issue of Shares. And that deal is edging ever closer.
'The recommended combination with ARRIS continues to progress in-line with expectations and, subject to the satisfaction, or where relevant, waiver, of all relevant conditions, the transaction is expected to close in late 2015.'
The deal has already been green-lighted in Germany and South Africa, and the company is confident that US regulators will follow suit soon.
