pace micro technology plc
annual report  accounts 2004
technology
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1 highlights
4 chairman’s statement
7 chief executive’s review
17 finance director’s review
21 product review
25 report of the directors
27 corporate governance
30 corporate social responsibility
32 remuneration report
40 statement of directors’ responsibilities
41 independent auditors’ report
42 financial statements
48 notes to the financial statements
64 five year record
65 directors secretary and advisers
designed and created inhouse by the pace micro technology design studio 
printed by taylor bloxham corporate and financial leicester and london
pace is registered in england and listed on the london stock exchange with offices
in the uk usa france germany and hong kong
revenue contribution by
geographic market 2003 to 2004


Summary:
 7
pace micro technology plc  report  accounts 2004
chief executive’s review
we have taken important steps forward in the last 12 months to deliver on our vision to be the best settop box supplier
in the world our financial performance has improved there is a new energy in our markets and we have won good
new business in the face of strong competition
global markets
pace is a global player in the settop box market one of the world’s top six players
1
 a gap has developed between
the top six players and the rest of the competition we aim to become one of the top three players in the world market
for paytv products 
with our range of digital settop box products and both depth and breadth of engineering expertise pace is a strong
contender we have realigned our product range to capitalise on the trend being set by our paytv operator customers
for a combination of lowcost boxes and higher specification products for personal video recorder pvr and high
definition hd services 
we have won some of the most substantial contracts on offer in the last 18 months and increased our market share
particularly in continental europe to develop our sales activity we have recently appointed three new regional
directors this includes a newly created role for asia pacific to capitalise on the opportunities we expect to arise in this
territory 
the competitive nature of our markets and downward trend in average selling prices has resulted in margin pressures
which we are responding to through innovations in our engineering and manufacturing processes and new business
strategies including outsourcing
uk
the uk led by regional director graham north continues as one of the world’s most successful markets for digital
tv both in terms of the number of digital households and in terms of its use of technological innovation total digital
household penetration is now at 53
2
with two thirds taking digital paytv 
sky digital bskyb’s paytv satellite platform is the market leader with pace supplying digiboxes and sky pvrs sky
has been particularly successful with sky reporting a cumulative total of 322000 customers at its third quarter results
to 31 march 2004 the majority of the sky installations reported will have used pace products although as expected
a second source supplier has recently been brought on line we have worked closely with bskyb evolving our product
range making ongoing improvements to the products of today and creating new ideas for the future 
at the same time the uk cable industry has been revitalised the cable companies are investing in new plans and
orders which for pace has included business with ntl in ireland 
we have taken important steps
forward in the last 12 months
to deliver on our vision to be
the best settop box supplier in
the world
1  
enders analysis 2003 shipments
2  
ofcom digital television update to q1 2004
john dyson
chief executive 8
pace micro technology plc  report  accounts 2004
solutions
worldwide
delivering customer 9
pace micro technology plc  report  accounts 2004
digital terrestrial dtt has been less successful for pace freetoair dtt has been a great success for viewers and
programme providers and has made an important contribution to the uk’s plans for a complete switch to digital
however as the boxes are relatively easy to develop the settop box market has seen a multitude of suppliers leading
to very low manufacturing margins pace’s strengths lie in the more complex engineering development required for
paytv operators which is where our sales and engineering efforts are now concentrated
continental europe
after several years of ‘digital lethargy’ in many european countries the digital tv market has now started to expand
and we have promoted laurie crofts as the new regional director sky italia owned by news corporation and telecom
italia launched its digital satellite service in july 2003 it has rapidly become an important pace customer reinforcing
pace’s business links with news corporation group affiliates
in germany pace has won business with operators such as premiere germany’s largest digital tv operator and kdg
the largest cable network operator both of which selected pace’s new lowcost platform for highprofile launches in
scandinavia we took on more new business with viasat part of the modern times group viasat has operations
throughout northern europe and is using pace products to roll out digital paytv services in sweden norway denmark
and finland 
as with every other market we work in existing and potential customers are engaging us in serious discussions for the
implementation of pvr this in addition to the opportunities we see in countries that have recently joined the european
union gives us confidence in our expectation of continued growth
us
the us accounts for around 40
3
of the world’s digital settop box market and is a crucial market for pace earlier in
the year we brought in a new us regional director mike pulli who has a strong background in digital development
and systems to build on the important foundations we have laid in this market us cable operators or multiple service
operators msos as they are known run cable networks that utilise conditional access technology provided by one
of two usbased companies quite often through acquisition msos have settop box requirements for both types of
technology on their networks which pace is now wellplaced to provide 
we have established our share of the us market with shipments of standard definition sd and more importantly high
definition hd settop boxes our high definition product the dc550 has now been shipped to time warner cable
comcast and bright house networks our us operations taking into account the engineering resource required for
the development of new products such as our next generation hd boxes cost us approximately £5m last year 
we are finalising the development and introduction of our first settop box for operators utilising motorola technology
one of the two main us conditional access systems on their networks this will be an important step for us and follows
some disappointing delays in bringing the product to market
we are also working on our first high definition personal video recorder hd pvr hd pvr is important on two counts
firstly it will become the cornerstone of our us product range secondly the experience we are gaining as one of the
us’s high definition pioneers will also put us ahead in other parts of the world where hd has moved up the agenda of
many major paytv operators
in germany pace has won business with operators such
as premiere germany’s largest digital tv operator and
kdg the largest cable network operator
3  
ims research 2003 10
pace micro technology plc  report  accounts 2004
asia pacific
asia pacific has been the focus of a new sales and marketing drive which is being led by the newly promoted regional
director sandy barblett to take advantage of the opportunities emerging in this very diverse territory for many years
our most important customer has been sky new zealand to which we have now added foxtel australia’s leading
subscription television provider foxtel launched its service using pace settop boxes in march and like sky italia 
has become an important customer in a very short period of time we are supplying foxtel with satellite and 
cable products
to grow our business elsewhere in asia we have adapted the lowcost platform initially created for europe putting
pace expertise into a settop box priced at a level this market can afford we are also exploring alternative business
strategies talking to partners about opportunities in china and with asian tv manufacturers who want digital terrestrial
units for integrated digital televisions idtvs
digital broadband media
digital broadband media dbm describes our internet protocol tv iptv activity reflecting how the technology can
deliver advanced content and services not just for telecommunications operators but for cable satellite and terrestrial
operators too today our main involvement is with two telecommunications customers – sasktel in canada and
chunghwa telecom in taiwan however dbm through the new video codecs will grow in importance for all types of
operators over the next two to three years we have begun to restructure our product roadmaps and will continue to
evolve them over the next 12 months in response to the new interest that we are seeing
electronic programme guides
epgs from the sky italia and
viasat digital tv services 11
pace micro technology plc  report  accounts 2004
pace technologies
engineers make up the majority of pace employees their skills and expertise are vital to pace’s success and that of our
customers with digital tv on an upward trend the engineers have taken on more challenges so that our customers
can maximise their investment in pace’s settop box technology 
many of the operators investing in digital tv want to build a critical mass of customers as quickly as they can low
cost boxes tempt subscribers and investment even in countries with a strong freetoview lineup or no paytv
competition 
basic services create the subscriber base pvr  hd make tv a ‘must keep’ product almost every customer we meet
has pvr in its business strategy to reduce churn and encourage customers to spend more we already have a strong
reputation in pvr and hd through work for customers such as bskyb in the uk and time warner cable and comcast
in the us demand for pvr and hd products is set to accelerate in europe for example analysts expect the 2006
winter olympics will drive hd takeup in the us strong competition between satellite and cable is stimulating a
demand for new products and features that will be replicated worldwide
we believe the next product trend will be for hd pvrs and our first platform is already in development we are adding
new features too such as hdmi for our secondgeneration hd products in the us hdmi highdefinition multimedia
interface is the latest in display connectivity making the pace box ideal for the growing interest in home cinema
systems hdmi also protects digital content from unapproved redistribution 
with hd and dbm in mind we have also put ourselves at the forefront of advanced video coding avc through
emerging technologies such as mpeg4 part 10 h264 and windows media 9 vc9 the new codecs use
bandwidth more efficiently substantially reducing the amount required to deliver high definition content on all digital tv
platforms not only is this more costefficient it is particularly significant for telecommunications companies more of
whom can now reach their subscribers with videobased services pace is not alone in defining and driving the demand
for pvr and hd settop boxes we have established partnerships on all fronts from defining roadmaps with our
operator and broadcaster customers to design work with our silicon partners 
the decisions we make on our future technology roadmaps are crucial for pace to continue as a worldclass player to
strengthen our position we have created a new technology team who ‘live’ at least 18 months into the future they are
looking at how we develop existing technologies incorporate new trends and the opportunities for our technology in
new sectors already in design are multiroom – how to distribute tv around the home mobile pvr devices and home
media centres 
for today
and tomorrow
innovating 12
pace micro technology plc  report  accounts 2004
with digital tv on an upward trend the engineers have
taken on more challenges so that our customers can
maximise their investment in pace’s settop box technology
today the ultimate product in the
range is pvr exemplified through our
sky product
our entry level series are targeted at
operators who want costeffective
product solutions whilst benefiting
from pace’s digital expertise
in the us we have developed some of
our most advanced cable products
including the ground breaking dc550
high definition box
bskyb3100 sky pvr
dc550hd
ds210 13
pace micro technology plc  report  accounts 2004
environmental considerations continue to grow in importance all of our new products are designed to standards set
by the european commission’s code of conduct on energy efficiency of digital tv service systems or energy star in
the us pace is at the forefront of this field and customers will be able to benefit from our knowledge base as individual
countries move to voluntary or mandatory energy efficiency regimes 
our environmental teams are also considering the implications of two new european directives the weee directive on
waste from electrical and electronic equipment sets recycling goals for electrical goods and becomes effective in 2005
in the longer term the benefits from what can be reclaimed in the process may exceed the cost of recycling however
it is possible that some costs may be imposed over a transitional period to deal with the installed base that belongs to
all suppliers the second leadfree legislation or more accurately the restriction of hazardous substances directive
rohs will come into force in 2006 under this directive we will no longer be able to use lead solder and other
hazardous substances in the manufacture of printed circuit boards we have almost completed our first box with
alternative components to verify the process whilst there is work to be done on extended life trials it looks promising
that these changes will not add significantly to cost
market recovery and growing demand for pace products has prompted us to consider how we can expand our
engineering capabilities without significantly increasing costs smart reuse of hardware and software platforms is
important as is our use of software outsourcing we have made significant progress with outsourcing in the last 12
months using tata elxsi in bangalore india tata has extended our engineering capability freeing up engineers at our
sites in saltaire boca raton and grenoble to expand their skills in pvr and hd technologies
intellectual property
our patent portfolio continues to grow with 37 granted patents and 194 pending patent applications paces granted
patents address both the utility and practical development of the settop box as well as enhancements that can give
viewers far greater control over when and how they watch tv
people 
in the last 10 years pace has become a centre of expertise in digital settop box technology in all disciplines from
engineering through to manufacturing and marketing the people we employ are at the heart of everything we have
achieved and i thank them for their hard work and commitment in making pace the company it is today
we ended the year with 594 employees a reduction of 50 on the previous yearend the headcount reduction includes
the transfer of staff in the vegastream management buyout we have additional engineers employed indirectly through
tata elxsi our outsource partner in india
there have also been some changes to our board david brocksom joined us in february from avesco plc to take up
the vacant position of finance director existing board member neil gaydon was promoted from president pace
americas to worldwide sales and marketing director in january taking on responsibility for all sales regions marketing
global technology strategy and product management finally david hood the founder of pace has decided to retire
from the board at the forthcoming agm 14
pace micro technology plc  report  accounts 2004
foundation of
our business
people are the step on
the way
through the new business we have won and with
revenues now coming from a wider range of customers
we have taken another important step on the way
15
pace micro technology plc report  accounts 2004
another global competitiveness
our outsourced manufacturing strategy is another vital element of our ability to compete in global markets pace
customers want ‘best in class’ products at the lowest cost of ownership we have continued to build our relationship
with solectron our global outsource partner pace uses a solectron facility at timisoara in romania and this year saw
the two millionth box come off their production lines a new facility came on line in shenzhen china enabling us to
build more costeffective products for asia pacific and the americas we are now working with solectron to expand
our manufacturing capability at both of these plants to deliver on our increased volume expectations for 200405 
we have used our continuous improvement ci programme to great effect enhancing all aspects of group activity 
i have been an enthusiastic supporter of ci for many years and have experienced the benefits it can bring our ci
programme was relaunched in september 2003 and over 60 projects have been completed ranging from small
improvements in office organisation to others that have delivered companywide financial benefits ci has been
particularly well used to improve quality and respond to issues raised in our annual customer satisfaction survey
the future
in the last 12 months pace has won important new business and demonstrated how the group can respond to the
challenges we are now seeing in the digital tv market
looking ahead we will continue to capitalise on the strengths of our engineering teams to develop the group’s
competitive position and bring new customers to market our sales teams aim to maintain our business in the uk
grow business in europe and the us and satisfy new opportunities in asia pacific however we do recognise that there
is still significant room and opportunity for performance improvement 
future growth will be driven by the ability of digital tv providers to develop their respective businesses make profits
from the move to digital and our ability to deliver on their needs
through the new business we have won and with revenues now coming from a wider range of customers we have
taken another important step on the way 
john dyson
chief executive
12 july 2004
16
pace micro technology plc  report  accounts 2004