mktra2005
pace micro technology plc
victoria road  saltaire  shipley
west yorkshire  bd18 3lf  england
tel 44 01274 532000   
fax 44 01274 532010
wwwpacemicrocom
bringing technology home
pace micro technology plc
report  accounts
2005
pace micro technology plc report  accounts 2005
registered in england no 1672847
pace fb cover  25705  1058 am  page 1 contents
1 highlights
4 chairman’s statement
7 chief executive’s review
17 finance director’s review
21 product review
25 report of the directors
32 remuneration report
40 statement of directors’ responsibilities
41  independent auditors’ report
42 financial statements
48 notes to the financial statements
67 five year record
68 directors secretary and advisers
69 shareholder information
70
pace micro technology plc report  accounts 2005
notes
financial highlights
•
turnover for the year 53 weeks of £2533m 2004 £2399m
•
profit before tax amortisation of goodwill and exceptional items of £81m 2004 £59m
•
full year gross margin of 208 2004 190
•
significant gross margin improvement from 168 in the first half to 266 in the second 
half reflecting the improved mix of pace products to higher margin products together with
increased service and engineering revenues 
•
adjusted diluted earnings per share stated before exceptional items and amortisation of 
goodwill of 58p  2004 45p
•
net cash position £264m 2004 net cash £204m
•
volume shipments increased to 34 million settop boxes 2004 22 million
pace fb cover  25705  1058 am  page 2 business highlights
•
further penetration of the us market achieved
with multiyear agreement with comcast corporation
the us’s largest provider of cable entertainment
and communications
•
development of existing customer relationships 
through new product announcements with premiere
in germany and foxtel in australia
•
additional new business signed including upc in
the netherlands and galaxy in hong kong
•
capitalising on strengths of engineering and
technology teams to develop competitiveness and
leadership in the settop box market and explore 
diversification opportunities
•
continued focus on productivity and performance 
improvement
02
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 1 pace is one of 
the world’s most
successful
developers of 
digital settop 
box technology
major pace customers
•
bskyb  operator of the uk’s largest digital platform
•
comcast  the us’s largest provider of cable entertainment and communications products
and services
•
foxtel  australias leading subscription television provider
•
kabel deutschland kdg  germany’s largest cable network operator
•
ntl  telewest  the uk’s leading providers of broadband communications
•
premiere  germany’s largest digital tv operator and only national paytv broadcaster
•
sky italia  the largest pay television provider in italy
•
sky new zealand  new zealands main paytv operator
•
time warner cable  owns and manages cable systems serving 109 million subscribers in
27 us states
•
viasat  the largest commercial tv operator in northern europe
pace technology has been installed in over 20 million homes worldwide since the company was
founded in 1982 pace is the world’s largest dedicated developer of digital settop box technology
and the largest supplier of settop boxes in europe
pace develops innovative settop box solutions and services for digital television broadcasters and
operators on satellite cable terrestrial and telecommunications platforms at the company’s
headquarters in saltaire and at bases in the us and france pace has a worldleading engineering
team the team’s expertise spans the digital spectrum from basic digital tv through to interactive
services and the latest innovations in personal video recorder and high definition technology
digital technology is constantly evolving pace is always working on new and innovative solutions that
will exploit the full potential of digital television to excite endusers and create new business
opportunities for the company’s diverse customer base
our vision
we will be the world’s best supplier of products and services for the digital home
major customers
03
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 2 chairman’s statement
the board of pace micro technology plc established a strategy two years ago to
broaden its customer base and to align its business to the global paytv market  the
overall aim was to broaden the geographical spread of pace’s sales from an over
dependence on a maturing uk market and in particular to obtain a much improved
position in the us market which represents an estimated 40 of the global paytv
market  in order to fulfil this strategy we have been investing in the us market at the
same time as focusing research and development on more complex products such
as the personal video recorder pvr and products for high definition hd tv
with the announcement of the agreement with comcast in may 2005 pace is well
positioned to meet these strategic aims although there remains considerable work to
be done during the course of this year to deliver on the contractual requirements this
work makes predicting the results for this year harder than ever however we are
confident that by the end of this year the business will be in a strong position for
continued growth
the pace board is therefore delighted to report a further improvement in pace’s result
for the year ended 4 june 2005  
we have achieved this improvement by delivering on a range of new contracts won in the previous year and a series of new
business wins most importantly in the us due to our leadership in higher value settop box technologies used in pvr and
hdtv at the same time we have continued to manage the level of business costs several new initiatives to improve
productivity and extend our outsourcing activities are now under way as the management team recognises there is still
significant room and opportunity for performance improvement
results 
profit before tax amortisation of goodwill and exceptional items improved to £81m 2004 £59m on turnover of £2533m
2004 £2399m with profit before tax of £71m 2004 £39m  basic earnings per share were 54p 2004 37p before
goodwill amortisation and exceptional items adjusted earnings per share were 59p 2004 46p and adjusted diluted
earnings per share were 58p 2004 45p
the board has decided not to recommend a dividend 2004 nil
trading review
during the period pace set a new record for settop box shipments with volumes increasing by 55 to 34 million to
improve margin performance pace has limited its role in the low margin market for freetoair settop boxes and shifted the
balance of shipments towards higher specification highermargin products for paytv operators as a result and with the
addition of more service and engineering revenues the group increased annual gross margins for the year as a whole to
208 2004 190 from 168 in the first half underlying product margins for the year were similar to the prior year
the trading environment continues to be highly competitive and the management team is driving initiatives to improve
efficiency and costeffectiveness these initiatives which involve significant changes to how we manage our engineering
development process have associated implementation costs and gave rise to some exceptional costs in the year there will
be further such costs in the year ahead in addition we have expanded pace’s team of outsourced software engineers at
tata elxsi in bangalore india and engaged an additional large scale manufacturing partner with design capabilities to
complement our existing successful relationship with solectron 
04
pace micro technology plc report  accounts 2005
sir michael bett cbe
chairman
ra section 1  25705  831 am  page 3 united kingdom
in the uk europe’s most mature digital tv market bskyb continues to be an important customer as their sky pvr service
expands  we also made shipments to our cable customers ntl and telewest and won new business with a number of
smaller companies total uk shipments remained constant at 1 million boxes and represented circa 40 of total revenues
emea
shipments into continental europe increased to 19 million boxes 2004 07m largely due to our successful sky italia
relationship pace was the lead supplier in sky italia’s digital upgrade programme which took place in the first half of the
financial year and volumes were substantially lower in the second half as the upgrade programme completed  
pace’s relationship with premiere in germany expanded with new orders for pvr and europe’s first high definition settop
box for commercial deployment  in scandinavia and germany we also continued to work with viasat for which we now
provide a pvr and for kdg  the year ended with another important customer win at ugc owners of cable operator upc
pace was selected as a key vendor to supply settop boxes for upc’s digital rollout in the netherlands
asia pacific
in asia pacific pace’s largest customer was foxtel in australia which continued to purchase our cable and satellite settop
boxes and launched iq a new pvr service for which pace was sole launch supplier elsewhere we maintained our long
term relationship with sky new zealand and are now working with them on pvr in addition to establishing a number of new
relationships with operators in markets as diverse as pakistan china and hong kong total shipments remained at 350000
units
north america
in the us we continued to invest heavily as we have done over the last five years  settop box shipments reduced slightly
to 138000 units 2004 162000 but the region’s contribution objective was met due to increased engineering revenues
more importantly we have won new business with comcast the world’s largest and most important digital tv operator  the
agreement includes a settop box order with a total purchase value of between 375 million and 550 million a joint
development agreement whereby pace and comcast will work together on new technology projects and a licence for
comcast to use pace’s engineware™ software platform in the north american market  
this agreement demonstrates that important operators now perceive pace as a technology partner that can add value it
puts us at the centre of the world’s largest paytv operator in the world’s most technologically advanced paytv market  we
have also shipped product to our other us cable customers time warner cable and bright house our canadian iptv
customer sasktel and won business with canadian cable operator videotron 
future technologies
we continue to invest in technology development so that we can win the more profitable business ahead of the competition
for example our longterm investment in multiroom and home networking technologies – distributing television around the
home to multiple tvs – is beginning to excite our markets  multiroom and home networking is expected to become an
important longterm goal for advanced operators as it supports high value customer retention and revenue expansion  
next year we will increase our focus on the new advanced coding standards the growth of next generation mobile and high
definition pvr platforms as well as expanding our work on alternative delivery platforms such as internet protocol television
iptv  at the same time we will continue to investigate new markets in which we can apply our technological skills for new
opportunities within the intelligent home  
financial review
overheads have increased due to the investment required to support pace’s new business wins  selling general and
administrative expenditure excluding operating exceptional items and goodwill amortisation rose to £209m 2004 £185m
and engineering development expenditure rose to £240m 2004 £213m  as a percentage of revenue total overheads
excluding operating exceptional items and goodwill amortisation were 177 2004 166
the group continued its policy of providing for all current claims relating to the alleged use of the intellectual property of
others and was able as in previous years to release part of the overall provision in the year ended 4 june 2005 the level
of releases exceeded new provisions by £08m 2004 £06m
05
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 4 the period has benefited from a tax credit of £48m relating to the agreement of a prior year tax computation with the uk
revenue and customs  at the end of the year we have approximately £12m of uk tax losses of which £8m is recognised
in the form of a deferred tax asset  in future years when uk tax losses are utilised the group will again bear uk corporate
tax charges
in january 2005 pace agreed to pay a civil penalty of £450000 in relation to a settlement with the financial services
authority fsa without admitting the fsas conclusions  an exceptional provision of £15 m was made in the year ending
29 may 2004 to cover costs in relation to this matter and following insurance recoveries and the payment of the penalty
there has been a £02m release of the provision in the period 
net assets at 4 june 2005 excluding goodwill increased to £530m 2004 as restated £401m  net current assets were
£610m 2004 £541m  net cash balances at the year end were £264m 2004 £204m  
stocks at the year end amounted to £101m 2004 £100m comprising £23m of raw materials and work in progress and
£78m of finished goods the stock turnover rate was over 20 times based on year end stock levels 2004 19 times
debtors of £558m 2004 £647m included insured balances of £368m 2004 £385m  the trade debt collection period
was 8 weeks 2004 11 weeks 
international accounting standards
in the last year pace commenced an analysis of the impact of international accounting standards ias which the european
commission requires all eulisted public companies to adopt  pace’s 2006 accounts will be presented under the ias format
which for the year under review would have provided an improvement to profit before tax of £19m the principal ongoing
impact of ias for pace is the requirement under ias38 to capitalise engineering development expenses with subsequent
amortisation as product shipments are made  
board appointments
two new nonexecutive board members were appointed during february  the first marten fraser was the senior partner
at pricewaterhousecoopers nottingham and the second pat chapmanpincher is a founding partner of the cavell group
bob lambourne a pace nonexecutive director since 1996 has decided to retire from the board at the agm and our thanks
go to bob for his commitment and diligence over the last nine years    
outlook
looking forward pace’s full year business outlook is in line with expectations revenues are likely to exceed current
expectations although gross margins will be lower than last year 
in the uk a market that is becoming increasingly mature we expect units and revenues to fall revenues in continental
europe and apac are also expected to fall although with a lower number of more complex units being shipped average
selling prices will rise in the us we continue to focus our efforts on building our relationships with comcast time warner
and bright house as well as developing increasingly good relationships with other important operators
there will be an uneven split of revenues between the first and second halves of the year as deliveries on our new us and
european business start at the end of calendar 2005 and grow in 2006 as a result second half revenues for the next year
are expected to be significantly ahead of first half revenues with first half results expected to be below breakeven the new
business pace will deliver on during the course of next year includes a substantial range of new products and the outcome
for the year is dependent on good execution of these contracts 
pace is now in a much improved position and the board is enthusiastic about the company’s current and future
opportunities and is confident in the ability of pace’s employees to deliver upon them
sir michael bett
chairman
12 july 2005
06
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 5 chief executive’s review
the last 12 months have been a year of active transition for pace  
following a series of new customer announcements in europe and australia made in the previous year our company has
continued to grow we have significantly reinforced our position in the market with a succession of further business wins
crucially we have made important inroads into the us market the world’s largest market for digital paytv technology by
winning new business with comcast communications  
we continue to work with the world’s most successful and innovative paytv operators ranging from bskyb in the uk to
customers in the us and foxtel in australia to ensure we are in the best possible shape to capitalise on the opportunity
these substantial customers present we have also taken on new organisational challenges to make our business more
efficient and responsive 
markets
the global market for digital settop box products continues to grow  during 2004 over 45 million digital settop boxes were
shipped worldwide with the market predicted to grow by a further 29 to over 58 million settop box shipments during
2005 and to 132 million by 2010
1
 within this market pace has been assessed as the world’s fifth largest supplier
2
– our
ongoing aim is to be one of the top three  
our focus though is not just on the total number of settop boxes we ship but also the type of products we create and the
companies we deliver them to  in the last year our attention has once again totally returned to the paytv market moving
away from less profitable ‘freetoair’ markets 
settop box demand from the paytv sector has also been typified by a growing demand for more ‘added value’ products
such as personal video recorder pvr products and a significant increase of interest in high definition hd technology
outside of the us  not only are these more profitable products for pace to develop capitalising on our engineering
capabilities they are more attractive to paytv operators as they help retain customers and increase average revenue per
user arpu  
07
pace micro technology plc report  accounts 2005
we have made important inroads 
into the us market the world’s
largest market for digital paytv
technology by winning new
business with comcast
john dyson
chief executive
1
source strategy analytics digital tv devices forecast april 2005
2
source strategy analytics november 2004
ra section 1  25705  831 am  page 6 08
pace micro technology plc report  accounts 2005
enroute to being 
the best settop 
box supplier in 
the world
ra section 1  25705  831 am  page 7 09
pace micro technology plc report  accounts 2005
emea
our european focus last year was primarily on the continent as the major operators continued their transitions to digital
catching up with developments in the uk led by bskyb bskyb has set the standard in europe since it launched digital in
1998 and remains an important pace customer for standard digital settop boxes and the sky pvr for which it now has
770000 subscribers
3
 we have also continued to work with both of our ukbased cable operators ntl and telewest 
in addition we won new business with ntl ireland and ssvc a registered charity that provides radio and television services
to british armed forces around the world british troops are now using pace settop boxes to watch tv in military bases and
hm ships in diverse locations from the falkland islands to norway from belize to the gulf and afghanistan
relationships with all of our customers in continental europe deepened importantly we made some significant steps
forward with premiere germany’s largest digital tv operator  we began to ship an entrylevel satellite settop box for this
operator in may 2004 since then we have gone on to supply a cable settop box which was the first to achieve network
certification from both premiere and our second german customer kdg the country’s largest cable operator  we also made
two important new product announcements with premiere the first was for a satellite pvr for shipment in summer 2005
with the second for a high definition settop box which will be used to deliver europe’s first mpeg4 high definition paytv
service from november this year 
elsewhere in europe we continued our successful relationships with sky italia in italy and viasat in scandinavia  sky italia
was one of our most important customers during the first half of the year as it continued to work through its major launch
phase which involved replacing settop boxes for a large number of existing subscribers as with all paytv operators its
rate of growth fell back after the launch phase to a more ‘normal’ level of rollout 
we are keeping a close watch on other large operators in continental europe and the middle east and believe we are in a
strong position to win more business in this region as more markets move to digital over the next two to three years 
relationships with all of our
customers in continental europe
deepened importantly we made
some significant steps forward
with premiere germany’s largest
digital tv operator
3
bskyb results to 31st march 2005
ra section 1  25705  831 am  page 8 north america
we have turned a very significant corner in the us following our contract announcement with comcast at the end of may
over the last five years we have invested approximately £35 million in our us operations confident that as this is the world’s
largest paytv market we would be able to recoup our investment over the longerterm this is what is now beginning to
happen the comcast contract is significant for pace on a number of fronts importantly it includes a major commitment to
purchase pace settop boxes which is worth between 375 million and 550 million to us over the next three years  
comcast will also licence our engineware
tm
software for the north american market via a oneoff payment that has now
been made engineware was a fundamental development to pace’s us cable settop box strategy and leverages our
substantial experience of the wide variety of technologies used in settop box deployments to create new middleware
performing core settop box processing functions for comcast engineware is useful on a number of fronts and will
support their implementation of the emerging us middleware standard ocap
4
 our investment in one common software
architecture will enable pace engineers to provide solutions rapidly across a wide range of emerging and current hardware
architectures from simple zappers to highend pvrs
finally as part of the agreement pace and comcast will jointly fund future technology development to be carried out by a
dedicated pace development team this element of the agreement is very exciting for pace as it places us at the centre of
the world’s largest paytv operator and offers us an opportunity to be at the forefront of their development activities  
the first box that we will deliver as part of the comcast agreement is the high definition tdc775 otherwise known as tahoe
this highly sophisticated box is part of our growing range of new products for this market which includes a new ‘all digital’
platform that has been designed to support us cable operators as they push for all digital networks the range now
includes through the product development work we have done for comcast settop boxes that can operate on motorola
networks which has expanded our us market reach
it is difficult for any nonus company to break into the us particularly when as in our sector there are some very powerful
and wellestablished local suppliers during our time in the us we have seen other nonus settop box companies come
and go breaking into the us takes time skill persistence and a longterm vision we’ve always believed that pace’s
experience of markets outside of the us would bring a new and fresh perspective to the us market which we have been
able to demonstrate over the last few years and have taken to a new level with our comcast announcement  
we should not let our comcast agreement overshadow our other successes in north america we continue to work with
time warner and bright house shipping our wellestablished dc551 high definition settop box which has been our main
us box for the last two years we have added to the dc551hd customer list with videotron who will be using this and our
standard definition dc511 for its illico digital tv service in canada additionally in canada we won new business with
sasktel a company we have worked with on an exclusive basis since 2002  sasktel is now using pace’s db240 ip settop
box as they grow their tv over dsl service which is the largest of its kind in north america 
10
pace micro technology plc report  accounts 2005
4
open cable applications platform a middleware software  
layer specification designed by cablelabs in the us
ra section 1  25705  831 am  page 9 asia pacific
asia pacific is an opportunity market we already have some important customers in this region through our longterm
relationship with sky new zealand with which we have now signed a new agreement to supply settop boxes for new
zealand’s first pvr service more recently we have worked with foxtel which used pace settop boxes to launch its new
digital service in australia 
foxtel is australia’s leading subscription television provider and recently celebrated its onemillionthservice subscriber we
began deliveries of our first foxtel settop boxes in may 2004 and provide products for its satellite and cable networks this
relationship was strengthened during the year with the launch of the foxtel iq pvr in march pace was sole supplier for this
important launch and not only is foxtel iq the first pvr to reach the australian market the cable variant is the world’s first
cablebased dvb pvr foxtel and sky new zealand are more great examples of how pace can work with an important
digital television operator moving from service launch through to next generation technologies supporting a customer’s
delivery and growth strategies  
we are also now seeing some limited traction in other far eastern markets following an intensive 18 months during which
we have invested considerable energies in developing relationships and business models for the region  for example a
new product range that meets the pricing and service needs of asian operators has been launched and we have developed
a licensing approach to support sales into china as a result we have been able to announce our first new asian customer
– galaxy in hong kong – who will use our asian cable platform
pace engineering and technologies
in my report on our successes across pace’s global markets one theme is clear the importance of the pace engineering
team and their technological leadership 
pace’s strength lies in our ability to develop new technologies for the paytv industry and it is important that our inhouse
engineering teams are totally focussed on what happens next not only is this ultimately what our customers want – a
visionary partner that supports them in achieving their goals – it also creates a more profitable company for our shareholders
over the years pace has proven the value of being first to market with new technologies and in today’s increasingly
competitive market it is vital we take ‘first mover advantage’ 
11
pace micro technology plc report  accounts 2005
in my report on our successes across
pace’s global markets one theme is
clear the importance of the pace
engineering team and their
technological leadership
ra section 1  25705  831 am  page 10 12
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 11 last year the work of our engineers and technologists has crystallised on two fronts the first relates to how we deliver
current and immediate next generation products to our customers by making them as costeffective as possible so that we
retain and grow their business pace has always been good at reengineering existing products to reduce the component
count and make them easier to manufacture  
however this is no longer enough if we are to continue as a frontrunner in the competitive marketplace and on the second
front we began to reassess our own business model to improve development processes and increase our use of outsource
partners this approach is starting to free up more of our inhouse engineering expertise to concentrate on what really sets
us apart from the competition the development of higher value higher specification products and technologies that excite
the market help retain existing customers and win new business for example we have been able to build our position in
high definition developing a high definition pvr for comcast and europe’s first mpeg4 high definition settop box for
premiere  
with high definition now gaining ground and pvr becoming an essential part of many operators’ business strategies it is
vitally important we anticipate the next set of industry trends which we believe will be all about extending the ‘delivery pipe’
for paytv services to this end we are growing our technology team which is concentrating its energies around four key
themes core settop box technology home networking bandwidth efficient channel access and mobile devices 
many of the concepts we are now working on have been around for some time today a confluence of component pricing
more effective technologies and standards alongside a growing consumer awareness and demand for new digital tv
services means that the work we are now doing will put pace in a strong position for the next stage of market evolution at
the same time we recognise the importance of looking for new technology opportunities outside of the immediate paytv
market pace is highly skilled in the fundamental technologies that will drive the intelligent home of the future and we are
actively seeking out new market opportunities for the group that will include the opportunity to gain recurring revenues
intellectual property
intellectual property ip is important to pace on a number of fronts and in the last year we have revitalised our ip programme
on the business front we are able to use it as a form of currency in business negotiations for example as a defensive
measure when challenged by other ip owners in the course of our daytoday business effective use of pace ip in this type
of royalty negotiation can help make us more competitive and costeffective and is an important strand of our wider business
improvement activity
an active ip recognition scheme also creates an environment that encourages innovation and provides an opportunity for
staff to register their ideas and be rewarded we relaunched our inhouse ip award programme this year as the david hood
innovation awards to recognise david’s significant contribution to the company and raise the programme’s profile  
today our ip portfolio is small but growing with 48 patents granted and over 160 applications pending our patents are
mostly digital settop box technology specific which will add future value to pace as our portfolio continues to grow
13
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 12 14
pace micro technology plc report  accounts 2005
today a confluence of component pricing more
effective technologies and standards alongside a
growing consumer awareness and demand for
new digital tv services means that the work we
are now doing will put pace in a strong position
for the next stage of market evolution
ra section 1  25705  831 am  page 13 15
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 14 people
as we move ahead with the changes i have outlined to our business the investment we make in our people becomes even
more important the skills of the pace team are recognised worldwide from the way we build customer relationships to our
technical expertise and postdelivery support  
to develop our people so that they can participate in our current business transformation we have continued to invest in
training and several major programmes took place during the year the developing leadership focus programme was
aimed at managers throughout the organisation to help them understand the strategic context for our change programme
and their role within it to support more specific skills development we have developed sales and product management
training programmes and a series of technical training programmes for our engineers in addition we supported
communications skills with crosscultural training for those working directly with our new asian partners and team meeting
training for managers 
we ended the year with just over 600 employees slightly up on last year with most of our additional new recruits being
engineers with specialist skills for the development of our next generation products 
our next steps
pace has made some very important steps forward in the last year we made a very clear and dramatic mark on the us
market with our comcast announcement and grew our business elsewhere in the world by developing existing customer
relationships and winning new business at the same time we have reasserted our technology leadership with new products
and concepts from hd pvr to multiroom and mobile paytv
looking ahead into the next year we need to focus on the delivery of our new contracts and improve our cost performance
through the work we are now doing on improving our business structure and processes pace can look ahead to the future
with more assurance than has been possible in the last few years
john dyson
chief executive
12 july 2005
16
pace micro technology plc report  accounts 2005
pace has made some very
important steps forward in the
last year pace can look ahead to
the future with more assurance
than has been possible in the 
last few years
ra section 1  25705  831 am  page 15 finance director’s review
results for the period
in the 53 weeks ending 4 june 2005 pace shipped 34m units 2004 22m and generated revenues of £253m 2004
£240m from sales of settop boxes and associated engineering consultancy and support services revenue
overall the group recorded a profit before taxation goodwill amortisation and exceptional items of £81m 2004 59m
reorganisation costs accounted for operating exceptional charges of £03m 2004 £nil there was a £02m release of the
£15m provision set up last year in respect of the reference to the financial services and markets tribunal the loss of £04m
on closure of a business treated as a nonoperating exceptional item was caused by the writing off of goodwill previously
written off directly to reserves on the original acquisition of a subsidiary in italy this write off required under frs10 on the
final liquidation of the subsidiary concerned does not affect the reserves of the group
after goodwill amortisation of £06m 2004 £06m and all exceptional items the group recorded a profit before taxation of
£71m 2004 £39m
overheads
the group’s overheads primarily relate to staff and engineering expenditure at the yearend our total headcount was 621
2004 594 which includes 365 people in engineering 2004 347 but excludes 120 outsourced engineers at tata elxsi in
india 200447 the total engineering spend represents 53 2004 54 of total overheads before goodwill and
exceptional items reflecting the importance of research and development to pace
17
pace micro technology plc report  accounts 2005
the group ended the year with net
cash balances of £264m due to our
growing profitability continued control
of working capital and our outsourced
manufacturing strategy 
david brocksom
finance director
ra section 1  25705  831 am  page 16 taxation
the group’s tax charge has benefited from a credit of £48m being the release of the remainder of a provision made in
2002 this release follows final agreement with the uk revenue and customs in respect of a repayment received in 2002
in the uk at the end of the year the group has accumulated tax losses of approximately £12m of which £8m ie £24m
at a 30 tax rate are provided as deferred tax assets and £4m remains unrecognised the group will start to incur a normal
uk tax charge and will start to pay uk tax again once available tax losses both provided for and unprovided for are
utilised in addition to the uk where all of the commercial risk in our product strategy is taken the group has an exposure
to us french and other overseas jurisdictions this has resulted in a charge of £02m in the year  
cash flow and banking facilities
the group ended the year with net cash balances of £264m 2004 net cash of £204m due to our growing profitability
continued control of working capital and our outsourced manufacturing strategy which has allowed the group to grow the
business without a large consumption of working capital
the group has renegotiated new banking facilities to replace the existing facilities which were due to expire in the normal
course in september 2005 in view of the improved cash and trading position the group has decided to maintain
uncommitted facilities which will be available to 30 september 2006 the group is not anticipating any significant use of
such facilities
balance sheet
intangible fixed assets
the intangible fixed assets represent goodwill from the purchase of pace europe in 2001 the balance net of amortisation
and prior year provisions was £89m 2004 £94m
18
pace micro technology plc report  accounts 2005
ra section 1  25705  1029 am  page 17 investments
the group has investments in two unquoted companies vegastream limited and intamac limited these investments
which after provisions made in earlier years total £07m provide some exposure for the group to developments in voip
voice over internet protocol and to the digital home security and control industries
net tangible fixed assets
the net balance of £62m 2004 £70m primarily represents plant and machinery associated with test and engineering
development equipment together with computer equipment and leasehold improvements the downward trend in our net
tangible fixed assets over the last two years largely reflects our switch to outsourced manufacturing
stocks
stocks totalled £101m 2004 £100m finished goods rose to £78m 2004 £46m reflecting both stocks held for resale
and stocks in transit to customer delivery raw materials and consumables continued to decline to £23m 2004 £54m a
feature of the outsourced manufacturing arrangements although the group continues to buy strategic components for
onward delivery to our manufacturers
debtors
debtors have fallen to £558m 2004 £647m due to the decrease in new customer shipments particularly towards the
yearend group debtor days have reduced from 77 days to 56 days we have continued with a credit insurance
programme which provides cover against higher levels of exposure in respect of the majority of our trade debtor customers
trade debtors were £448m at the year end which included insured balances of £368m 2004 £385m however as
expected it has not been possible to gain insurance cover for some of our customers or on all of the exposure to those
customers covered
creditors
creditors have fallen to £317m 2004 £414m largely a feature of the decreased levels of trading in the last quarter  group
creditor days have reduced from 40 days to 37 days significant elements of the creditor balance relate to the group’s main
subcontract manufacturer payments in respect of critical component supplies and accruals for outstanding royalty
payments in addition to accruals for royalties the group maintains as a provision balances for royalties under negotiation
see below
provisions
provisions have decreased to £146m 2004 £207m primarily due to the tax agreement see above and part utilisation
of the royalties and onerous lease provisions these have been offset by a net increase in the warranty provision itself a
feature of the increased level of trading coupled with an increase in some warranty periods
19
pace micro technology plc report  accounts 2005
ra section 1  25705  1029 am  page 18 foreign exchange
the majority of the group’s production costs are designated in us dollars the group endeavours to obtain as much of its
income as possible in us dollars but a significant proportion of income is currently received in sterling or euros
the group does not take a view or attempt to speculate on how the foreign exchange markets will move currencies are
only purchased and sold in accordance with forecast cash flow to minimise downside risk  the group has a policy of
hedging progressively against movements in the value of foreign currencies in respect of specific cash receipts and
payments expected over the next 6 months
as the group’s sales into the us grow the net exposure of the group to the us dollar will lessen with such income forming
a hedge against us dollar expenses and reducing the need for foreign exchange contract hedging however the exposure
of the group to the income in euros will remain
yearend rates used in the accounts are 181£1 2004 183£1 and €148£1 2004 €15£1 
international accounting standards ias
to date pace has prepared its accounts in compliance with uk generally accepted accounting principles uk gaap  eu
regulations require pace to adopt ias in its financial statements for the year ending 3 june 2006 this requires adjustment
to be made to the opening position of the comparative period 29 may 2004 together with a restatement of the results for
the period ended 4 june 2005  
the group has undertaken a detailed review of the impact of ias on its published financial statements  based on the current
standards in place the key areas of impact on the group’s accounts are in relation to the need to revalue marktomarket
financial instruments the capitalisation and subsequent amortisation of research and development expenditure the
charging of a value related to share option grants and the prohibition against amortisation of goodwill on business
combinations the net impact of adopting ias would be to increase the net asset position at 29 may 2004 by £56m and
the profit before tax for the 53 weeks ending 4 june 2005 would increase by £19m the net asset postion at 4 june 2005
would increase by £79m
further detail on the key areas of impact are disclosed in note 32 to the financial statements
david brocksom
finance director
12 july 2005
20
pace micro technology plc report  accounts 2005
the net impact of adopting ias
would be to increase reported
profit before tax for the year
ended 4 june 2005 by £19m
ra section 1  25705  1029 am  page 19 product review
pace is a world leader in the development of digital settop box technology through our vision engineering expertise and
our ability to deliver a service that excites the paytv marketplace 
our business is focussed on the biggest and best paytv operators in the world as working together we can drive the
industry forward in the last year we have raised our game again by correctly anticipating the next set of market demands
and developing new products and technologies ahead of the competition for example our work in high definition hd
personal video recorders pvr and engineware™ software has resulted in a strategically important agreement with
comcast that has placed us at the centre of their development programme
platform experience
pace has delivered in excess of 16 million digital settop boxes on all commercial digital platforms cable internet protocol
television iptv satellite and terrestrial 
we have worked with many of the world’s leading paytv operators leading the development of digital settop box
technology from the front and our list of industry firsts is extensive we launched the world’s first digital mpeg2 dvb 
settop boxes for commercial deployment on cable satellite and terrestrial platforms in the 1990s we were the first to
integrate docsis eurodocsis and davic cable modems for twoway interactive services into commercially deployed
digital settop boxes and in the last 12 months we launched the world’s first mobile personal video recorder for 
paytv pvr2go and demonstrated our first satellite mpeg4 high definition settop box
our aim is always to create the best but most costeffective product for our operator customers which we are achieving
on a number of fronts the pace product range has been designed to support paytv operators across a full range of service
needs it starts with basic selfinstall ‘zapper’ boxes for multichannel tv and then includes boxes with a return channel
allowing the settop box to communicate with the broadcaster for interactive television to the latest developments in
personal video recorders pvr and high definition hd concepts  
we also continue to standardise our settop box architectures across broadcast platforms to provide a costeffective yet
proven and rapid route to market and by pushing the boundaries of digital home entertainment to support the operators’
growth and customer retention strategies  
21
pace micro technology plc report  accounts 2005
our strategy of focusing on winning
business with the world’s most
successful paytv operators on the
basis of our advanced technology
solutions and vast experience is
working
neil gaydon
worldwide sales and marketing director
ra section 1  25705  1029 am  page 20 technology trends
today many consumers are familiar with the concept of multichannel digital television with an electronic programme guide
epg to change channels access interactive services and perhaps if they are on cable vod videoondemand content
a growing number of consumers are living with the benefits of pvr
1
technology such as pausing live tv and their own
personalised tv channel in the last year pace has continued to deliver pvr to bskyb and announced new pvr contracts
with comcast foxtel premiere and viasat we expect more operators to follow as a growing number of consumers get
used to watching what they want when they want  
high definition is now being added to this mix taking viewing quality to a new level  we have been shipping high definition
products into us cable since 2002 and will ship our first european high definition settop boxes to premiere in germany later
this year  high definition is gaining real momentum outside of the us and within europe high profile sporting events such as
the 2006 football world cup and wimbledon will provide a stimulus to demand
as consumers get accustomed to pvr in the living room they want to access stored tv content elsewhere in the home it
is uneconomic and technologically clumsy to put a big pvr box in every room so we are now investing in ‘multiroom’ our
multiroom concept turns the living room pvr into a server which is linked through coaxial cable or the existing inhome
powerline
2
network to distribute content and pvr functionality to smaller more costeffective boxes or ‘thin clients’ around
the home 
paytv operators are excited by the work we are doing on this front as multiroom provides them with an opportunity to
expand their revenues and retain their most valuable customers we can also see an attitude shift amongst consumers
3
 a
growing number particularly the ‘pvr generation’ have a growing appetite not just to move away from schedule driven tv
to watching what they want when they want but now increasingly where they want pvr2go which we launched at ibc
in amsterdam last september picks up on this trend and extends the opportunity for pvr services beyond the traditional
homeviewing environment users can download protected tv content onto a 40 gbyte hard drive to view on a handheld
screen anywhere that they choose on the train in the car on holiday 
many of these ideas have been around for some time but have been waiting on the right equipment sufficient bandwidth
and the right technology to ensure the right quality and service standards can be achieved pace’s opportunity lies in creating
the right devices and we are making a significant investment in our technology team  
22
pace micro technology plc report  accounts 2005
1
also know as pdr personal digital recorder and dvr digital video recorder
2
powerline is a means of carrying data such as tv over existing mains wiring in home 
3
pace analysis of major market research reports and industry trends
ra section 1  25705  1029 am  page 21 at the same time we must ensure pace is at the forefront of the underlying technologies and standards that act as the
enablers for our work for example advanced video codecs and new compression standards continue to grow in importance
and will be vital for the longterm success of high definition digital television today is delivered using the mpeg2
compression standard but with high definition using four times as much broadcast space next generation codecs such as
mpeg4 h264 and other concepts such as dvbs2 will enable operators to maximise their bandwidth capabilities
we are also looking at smart concepts that will enable our operator customers to better exploit their existing network
infrastructure and pace settop box portfolio dsg
4
for example a concept we launched last year enables cable operators
to exploit the full potential of outofband communications which most importantly makes simultaneous use of the highest
bandwidth broadband possible to deliver extra revenue generating services such as online gaming additionally we are
looking at new opportunities to deliver the cable tripleplay service of voice video and data  our latest concept on this front
is a new embedded multimedia terminal adapter or emta to meet a growing demand for ipbased voice services 
environmental issues 
pace is not just a leader in settop box design and digital tv technologies it is also at the forefront of managing the
environmental challenges that face our industry   
environmental considerations have grown in importance over the last five years with the majority of pace’s products now
conforming to voluntary energy efficiency standards  pace continues to make a proactive contribution to standards regimes
worldwide helping drive them in a way that is achievable and realistic while still delivering environmental benefits  for
example pace engineers continue to play an active role in developing the european commission’s code of conduct on
energy efficiency of digital tv service systems and setting the minimum energy performance standards for settop boxes  
23
pace micro technology plc report  accounts 2005
4
docsis settop box gateway
ra section 1  25705  1029 am  page 22 within the code of conduct standby power has become an important issue and all of pace’s nonus boxes are designed
to meet the european standard and in many cases exceed them for example in the last year we have reduced standby
power consumption on one of our pvr platforms by 14 significantly within the european requirement the code of
conduct is closely linked to the forthcoming european directive for energy using products eup which will require consumer
electronics manufacturers to carry out a total environmental impact lifecycle analysis 
all of our us products continue to be designed to the energy star standard even though it was suspended in respect of 
settop boxes during the year pace is actively participating in consultation on a new energy star standard for settop boxes
as well as advising on energy efficiency legislation in australia
our environmental team has also been working on the implementation of two new european directives weee and rohs
weee waste from electrical and electronic equipment sets goals for the recycling of electrical goods and was planned to
come into effect this year  however the uk and several other european countries are still to launch their schemes and have
announced delays to the directive’s implementation  pace’s environmental team is well prepared but until regional schemes
are launched it will be difficult to identify the overall process and cost issues  
the restriction of hazardous substances directive rohs will come into force next year the main implication for our
industry is that we will no longer be able to use lead solder and five other restricted substances in the manufacture of
electronic products pace has made excellent progress on this front and of the ten new projects initiated this year over 95
of the components are already rohs compliant 12 months before the eu deadline we are now working with our outsource
partners to ensure they understand and can work to the european standard and so that we can establish a common and
costeffective pace rohs system
the way ahead
pace has consistently proven the value of a forward thinking product range that can meet the needs of paytv operators
worldwide pace has the industry and engineering knowhow skills service network and partners to develop products ahead
of the market for today and tomorrow in the last year this has manifested itself in a series of important new product launches
and business wins worldwide  
neil gaydon
worldwide sales and marketing director
12 july 2005
24
pace micro technology plc report  accounts 2005
ra section 1  25705  1029 am  page 23 report of the directors
the directors present their report to shareholders on pages 25 to 31 together with the audited financial statements for the 53 week period
ended 4 june 2005 prior year 52 weeks ended 29 may 2004 
principal activities
the group’s principal activities are the development design and distribution of digital receivers and receiver decoders which provide a
gateway for the reception of digital television and the receptiontransmission of interactive services telephony and highspeed data the
group also provides engineering design support services and software applications to its settop box customers each of these services
may be delivered over satellite cable terrestrial and ip network transmission systems
business review and financial results
a review of the group’s activities developments and the financial results for the year is presented in the chairman’s statement the chief
executive’s review and finance director’s review on pages 4 to 20 the consolidated profit and loss account for the 53 weeks ended 4
june 2005 is set out on page 43 the profit before tax was £71 million 2004 £39 million 
dividend
no interim dividend was paid during the year the directors do not recommend the payment of a final dividend 2004nil
share capital
changes in the company’s share capital during the year ended 4 june 2005 are set out in note 21 to the financial statements
significant shareholdings
the company has been notified in accordance with sections 198 to 208 of the companies act 1985 of the following significant shareholdings
as at 11 july 2005
number of shares  of issued share capital
david hood and related family trusts 44486957 196
barclays plc 8862917 39
legal  general investment management limited 8575949 38
robert fleming and related family trusts 8880178 39
pace micro technology plc employee benefits trust 7343104 32
directors
the names of the current directors of the company are shown below other than as described all those listed held office throughout 
the year
sir michael bett cbe
sir michael aged 70 joined the board in february 2000 and was appointed chairman in march 2000 he is also nonexecutive chairman
of compel group plc and a nonexecutive director of ordnance survey his previous career in the private public and charity sectors has
included being chairman of cellnet group deputy chairman of bt and managing director of btuk he is a former president of the chartered
institute of personnel and development chairman of save the children fund and chairman of the independent review of armed forces
manpower pay and conditions of service in july 2000 he retired as first commissioner for the civil service currently he is prochancellor
of aston university
25
pace micro technology plc report  accounts 2005
ra directors section  25705  842 am  page 1 david brocksom
david aged 44 was appointed finance director in february 2004 previously group finance director of avesco plc he has also held a
number of other senior financial roles including group finance director at telecine cell group plc and group finance director at westport
group plc he qualified as a chartered accountant with price waterhouse
patricia chapmanpincher
pat aged 57 was appointed as a nonexecutive director in february 2005 she has over 30 years’ experience in the communications
industry from senior roles in multinational internet and telecoms companies to participating in technology company startups a founding
partner of the cavell group which specialises in operational consultancy ip and wireless technologies she is also chairman of vegastream
limited and a nonexecutive director of sportev limited
john dyson
john aged 57 was appointed chief executive on 1 may 2003 after assuming the role of acting chief executive in january 2003 prior to
this he was finance director joining the company in november 1997 he is also a nonexecutive director of xp power plc prior to his
employment at the company he was vice president of finance europe for lsi logic corporation other previous appointments included
positions as finance director of case group plc and norbain plc
robert fleming
rob aged 48 joined the company in 1983 and became operations director in 1984 with responsibility for production and distribution with
effect from february 1999 he assumed responsibility for the engineering function within the group and became a nonexecutive director of
the company in may 2001 he is chief executive of the franklyn group limited a care home group
marten fraser
marten aged 59 was appointed as a nonexecutive director in february 2005 he was previously senior partner at pricewaterhouse
coopers nottingham where he worked in the audit and business advisory services department and prior to this he was the partner in
charge of the east midlands practice of price waterhouse
neil gaydon
neil aged 45 is worldwide sales and marketing director and was appointed as an executive director in june 2002 he has been with the
company since 1995 and spearheaded the development of the company’s us business between 1999 and december 2003 as president
pace americas prior to this he was regional sales director emea and head of new business development and product marketing for the
company
robert lambourne
bob aged 53 was appointed as a nonexecutive director in june 1996 and was appointed senior independent director in february 2000
he is a nonexecutive director of abacus group plc and a director of a number of private companies he was an executive director of rmc
group plc from 1997 to 2003 an executive director of hepworth plc from 1991 to 1997 and finance director of foseco plc from 1987 to
1990
michael mctighe
mike aged 51 was appointed a nonexecutive director in june 2001 he has held a number of directorships and is currently chairman of
a number of private equitybacked companies and in addition is a director of london metal exchange holdings ltd and a nonexecutive
director of alliance  leicester plc mike also advises a number of private equity partnerships previously he was chairman  ceo of carrier1
international sa and before that executive director  chief executive global operations of cable  wireless plc prior to these experiences
mike spent 5 years with philips of the netherlands 5 years with motorola and 10 years with ge
during the year the following persons also held office as directors
david hood retired 8 september 2004
marvin jones retired 31 december 2004
sir michael bett and neil gaydon will retire by rotation at the annual general meeting of the company and offer themselves for reelection
pat chapmanpincher and marten fraser having been appointed by the board subsequent to the date of the last annual general meeting
will hold office until the forthcoming annual general meeting and will then offer themselves for election at that meeting details of the executive
directors’ service contracts and the nonexecutive directors’ letters of appointment are disclosed on page 34
report of the directors continued 
26
pace micro technology plc report  accounts 2005
ra directors section  25705  842 am  page 2 report of the directors  continued 
payment to suppliers
it is the policy of the group to agree terms and conditions for its business transactions with suppliers payment is made in accordance with
those terms subject to the other terms and conditions being met by the supplier the group does not follow any code or standard on
payment practice creditor days at the end of the year for the group were 37 days 2004 40 days and for the company were 43 days 2004
44 days
research and development
the directors regard it as fundamental to the future success of the group to engage in a substantial ongoing programme of research and
development of new products spending £240 million 2004 £213million during the year
donations
during the year the group donated £37000 2004 £35442 to charitable causes no political donations were made further details of the
charitable and communityrelated activities of the group are given on page 30
corporate governance
the directors believe that the company has complied throughout the year with the combined code–principles of good governance and
code of best practice as revised and adopted by the financial reporting council the board confirms that it has established the procedures
necessary to implement the guidance internal control guidance for directors on the combined code published by the internal control
working party of the ica and that there is an ongoing process for identifying evaluating and managing the significant risks faced by the
company 
board of directors
the group is controlled through the board of directors which comprises three executive and six nonexecutive directors who bring a wide
range of skills and experience to the board biographical details of all directors are to be found on page 26 the chairman sir michael bett
is mainly responsible for the running of the board ensuring together with the company secretary that it receives timely and clear information
appropriate to enable it to discharge its duties the responsibilities of the chief executive john dyson focus on running the group’s business
and implementing group strategy the chief executive is assisted in managing the business on a daytoday basis by the executive
committee as further described below all the designated nonexecutive directors are deemed by the board to be independent apart from
rob fleming who was an executive director of the company within the last five years in addition the board has designated bob lambourne
as the senior independent director all directors have access to the advice and services of the company secretary and are able to take
independent professional advice at the company’s expense in the furtherance of their duties if necessary all directors in accordance with
the combined code submit themselves for reelection at least once every three years new directors receive a programme of tailored
induction on joining the board and all directors are offered the opportunity to continually update their skills and knowledge
the board has a formal schedule of matters specifically reserved to it and normally meets monthly it is responsible for overall group strategy
acquisition and divestment policy approval of major capital expenditure projects and consideration of significant financing matters it reviews
the strategic direction of the group and conducts formal strategy reviews together with other senior executives within the group at least once
a year  the chairman holds meetings with the nonexecutive directors without the executive directors being present at least twice during
the year
each year the board undertakes a formal review and evaluation of its performance including the performance of its committees and individual
directors  this is conducted by written feedback in standardised form from each director to the chairman and in respect of performance
evaluation of the chairman to the senior independent director
the board has established the following committees each of which has written terms of reference specifying its authority and duties and
copies of which are publicly available on the company’s website wwwpacemicrocom
•
the audit committee is comprised of independent designated nonexecutive directors pat chapmanpincher marten fraser mike
mctighe and is chaired by bob lambourne sir michael bett served on the committee during the year before resigning in april
2005 the committee has primary responsibility for making recommendations on the appointment reappointment or removal of the
auditors and receives and reviews reports from management and from the auditors relating to the interim and annual accounts and
the control systems in use throughout the group meetings are held by the committee with the auditors without executive
management being present at least once a year and the committee reviews arrangements by which staff may in confidence raise
concerns about possible improprieties including  review of the group whistleblowing policy
•
the executive committee is chaired by john dyson as chief executive the committee generally meets monthly and ensures that
the strategy plans and policies previously agreed or delegated by the board are implemented
27
pace micro technology plc report  accounts 2005
ra directors section  25705  842 am  page 3 the executive committee comprises the three executive directors together with the following senior executives
anthony dixon director of legal services
john eaglesham acting director of engineering
david gillies director of technology
callum gordon director of organisation planning business process
steve owens director of commercial operations
maggie pedder director of personnel
•
the remuneration committee is comprised of independent designated nonexecutive directors marten fraser bob lambourne
mike mctighe and is chaired by pat chapmanpincher sir michael bett was chairman of the committee during the year before
resigning in april 2005 the committee is responsible for setting the remuneration of the executive directors and other members of
the executive committee including making recommendations regarding the grant of share options the members of the committee
have no personal interest other than as shareholders in the matters to be decided no potential conflicts of interest arising from
crossdirectorships and no daytoday involvement in the running of the business
•
the nominations committee is comprised of nonexecutive directors sir michael bett pat chapmanpincher marten fraser rob
fleming and bob lambourne together with chief executive john dyson and is chaired by mike mctighe its purpose is to consider
and make recommendations to the board regarding the appointment of new directors
board and committee meetings attendance
audit remuneration nominations 
board committee committee committee
total meetings 11 4 2 2
sir michael bett 10 2 2 1
david brocksom 11 na na na
pat chapmanpincher 3 1 1 1
john dyson 11 na na 2
robert fleming 10 na na 1
marten fraser 3 1 1 1
neil gaydon 9 na na na
bob lambourne 10 4 2 1
mike mctighe 8 3 1 2
director since february 2005 and has attended all meetings since appointment
directors’ remuneration
the remuneration committee reviews the performance of the executive directors and other members of the executive committee as a
prelude to recommending their annual remuneration bonus awards and award of share options to the board for final determination the final
determinations are made by the board as a whole but no director plays a part in any discussions concerning their own remuneration
the remuneration report of the directors to shareholders is set out on pages 32 to 39 and includes the remuneration policy of the company
and details of directors’ incentive payments and the related performance criteria
authority to purchase own shares
at the annual general meeting in 2004 the company was authorised by shareholders to purchase up to 22677124 of its own ordinary
shares representing 10 per cent of its issued share capital as at 6 august 2004 the company did not utilise this authority during the year
the authority for the company to purchase its own shares expires at the conclusion of the annual general meeting in 2005 and a resolution
to renew it will be proposed at that meeting
accountability and audit
a detailed review of the performance of the group’s business is contained in the chief executive’s statement and the finance director’s
review these statements together with the chairman’s statement and the report of the directors are intended to present a balanced
assessment of the group’s position and prospects the directors’ responsibility for the financial statements is described on page 40 and the
responsibilities of the auditors are described on page 41
report of the directors continued 
28
pace micro technology plc report  accounts 2005
ra directors section  25705  842 am  page 4 29
pace micro technology plc report  accounts 2005
report of the directors  continued 
internal controls
overall responsibility for the group’s system of internal control rests with the board of directors the board has delegated certain of its
powers to the audit committee to review the effectiveness of the systems of control and to receive reports from the auditors and from the
management relating to the interim and annual accounts and the control systems in use throughout the group
during the year and up to the date of this report the board carried out a review of the effectiveness of the group’s internal controls the
reviews were undertaken in accordance with the joint working group’s guidance under the following headings and were aimed at clearly
identifying the systems already in place and the action plans necessary to improve areas of control weakness
•
the control environment subject to those powers and limits of authority reserved by the board and to the group policies and guidelines
they have established the conduct of the business of the group is delegated within a clearly defined organisational structure and
approved level of authority the board has also adopted a code of business ethics which has been incorporated into the employee
handbook issued to all employees
•
risk assessment the directors and senior managers are responsible for identifying and monitoring sources of potential business risk
and financial risk and for taking such preventative and protective actions as they consider necessary to manage effectively such risks
during the year a risk assessment review of the group’s business has been conducted in conjunction with the executive committee the
board has received and considered this review as part of an annual risk and control assessment
the group’s systems are designed to identify and manage rather than eliminate significant business risks including the risk of failure to
achieve business objectives and can only provide reasonable not absolute assurance against material misstatement or loss business risks
are identified evaluated and managed through functional line management reporting to divisional meetings monthly executive committee
meetings and board meetings as appropriate each member of the executive committee is required to highlight and report on any significant
business risks identified within their sphere of responsibility
the key business risks associated with the timely completion of longterm development projects and ongoing business risks including
alleged infringement of third party intellectual property rights are managed by crossfunctional teams of senior employees business
continuity plans addressing physical risks to the group’s development sites are reviewed and updated at least annually
companywide initiatives have been maintained including continuous improvement and the pace quality committee review process with a
view to attaining the highest standards in quality and reliability
•
financial control and information systems the group’s strategic direction is reviewed regularly by the board and plans budgets and
performance targets are reviewed and approved at least annually directors receive monthly summaries of financial results which compare
actual performance with targets together with detailed management reports that identify the reasons for variances and the progress
achieved business planning documents are revised on a regular basis in line with actual and expected performance
•
control procedures financial control procedures have been developed for all of the main business functions and have been documented
in a procedures manual authorisation limits for purchases and capital expenditure are clearly specified and procedures are in place for
minimising exposure to potential weaknesses in the receipt handling and despatch of goods the group’s saltaire premises have
received accreditation for bsi iso 9001 2000 and this has been extended to include the boca raton site in florida
•
monitoring systems monitoring of the internal control systems is carried out by designated employees on a periodic basis pursuant to
a programme agreed by finance and quality departments  the audit committee considers annually whether there is a need to appoint
a dedicated internal auditor and has determined that having regard to the monitoring systems referred to above there is no current
business requirement for such an appointment
although no system of internal financial control can provide absolute assurance against material misstatement or loss the group’s systems
are designed to provide the directors with reasonable assurance that transactions are authorised and completely and accurately recorded
that assets are safeguarded and that material errors irregularities and actions contrary to group policies and directions are either prevented
or promptly discovered
going concern
the directors having taken account of the group’s net cash resources available bank facilities and the factors referred to in note 1 to the
financial statements and having reviewed the group’s budget and forecasts for the year to 3 june 2006 consider that the group has
adequate resources to continue in operational existence for the foreseeable future accordingly they continue to adopt the going concern
basis in preparing the financial statements
ra directors section  25705  842 am  page 5 30
pace micro technology plc report  accounts 2005
report of the directors continued 
corporate social responsibility
employment policies
the directors recognise the importance of the group’s employees to its success and future development and are committed to providing an
environment that will attract motivate and reward high quality employees the group continues to invest in a range of internal and external
initiatives to promote employee development this commitment has been acknowledged by investors in people iip recognition
employees are kept informed of matters affecting them as employees and factors affecting the performance of the group through employee
meetingsbriefings and a company newsletter pacesetter in the uk meetings of the employee consultation work group an elected forum
for the discussion of work related issues are held with members of the executive committee at least four times per year
the group welcomes applications for employment from all sectors of the community and is striving to promote equality of opportunity in
employment regardless of age sex sexual orientation disability or ethnic origin it is the group’s policy that training career development and
promotion opportunities should be available to all employees in the event that an employee becomes disabled the group makes reasonable
adjustments where any aspect of premises or working practices puts such a disabled employee at a substantial disadvantage compared with
a nondisabled employee
health and safety
the group has an established health and safety committee which conducts quarterly review meetings with group safety representatives
regarding health and safety issues relevant to the group’s business other safetyrelated committees also conduct periodic reviews of specific
work practices these actions complement the health and safety executive’s working well together initiatives implemented by the company
the company health and safety officer has reported to the board regarding health and safety matters at least twice during the year
site inspections and individual ergonomic risk assessments have been conducted in the uk by safety representatives and this has resulted
in several local workplace health and safety improvements generic and detailed risk assessments chemical assessments and safe systems
of work guidance are maintained for the benefit of employees on the company’s intranet site
the importance of ongoing health and safety awareness training for managers and safety representatives is recognised as part of this
process safety representatives have had refresher training and during the year a further three health and safety representatives have
successfully completed the iosh managing safely course
the number of uk workplace accidents during the year was 18 200427 none of which were reportable to the health  safety executive a
report concerning health and safety aspects of the groups business and copies of specific group safety policy documents can be obtained
from the company secretary
charitable and community support
the group has an established charitable donations committee comprising employees based at the group’s premises in the uk the usa
and france the committee which meets once a month considers all requests for charitable and community project assistance within a
financial budget and criteria approved by the board on an annual basis
the group’s support through the committee is focused on the local geographical area of pace’s premises in saltaire bracknell grenoble and
boca raton in florida as well as charitable and community initiatives of group employees the corporate charity policy is to support local
charities of benefit to the local area and people living close to each group site
during the year 169 requests for support were considered by the committee 138 of these satisfying the criteria and receiving financial support
amounting to £37000 the participation of employees of the group in community and charitable activities outside work hours has been
encouraged with the provision of funds to match individual sponsorship raised
further details of the charitable and community donations made during the year and criteria for awards made by the charitable donations
committee can be obtained from the company secretary
ra directors section  25705  842 am  page 6 environmental management
during the year the company commissioned its third independent environmental report prepared by consultants atkins environmental
services the company has achieved certification to the international management standard iso 14001 at its saltaire and florida sites and
the group environmental policy has been applied to all pace sites worldwide
pace continues to work with the us environmental protection agency on the energy star standard for stbs which sets low power usage
performance criteria for electrical products the company is also a signatory to the european code of conduct on energy efficiency of digital
tv service systems and is committed to ensure that products are designed to minimise energy consumption pace is also in consultation
with the australian greenhouse office about legislation for minimum energy performance standards of stbs in australia
the company has developed systems to monitor the proportion by weight of its products that is recyclable and procedures to ensure that
each product is checked for certain hazardous materials in each case in anticipation of expected requirements of forthcoming eu regulations
in addition procedures have been implemented to require that the packaging the company specifies in the design process is recyclable the
company is preparing for compliance with new environmental legislation including regulations to be implemented pursuant to the waste  from
electrical and electronic equipment weee directive and the restriction of hazardous substances rohs directive
the company has developed supplier assessment and approval procedures to evaluate the environmental performance of its suppliers and
subcontractors using the supplier assessment and approval process the company intends to influence environmental awareness of its
subcontractors and component vendors during the year the company set environmental targets and achieved the following outcomes in
respect of its chosen measures of environmental impact
objective 2002 2003 20042005
co2 emission tonnes 4170 3000 2371 2115
electricity kwh 47 million 35 million 31 million 37 million
gas kwh 21 million 21 million 18 million 14 million
water m3employee 206 247 221 210
the company is a member of the yorkshire wildlife trust and during the year participated in the yorkshire and humber regional index of
environmental engagement this scheme is administered by business in the community and ranks companies in terms of their environmental
performance in the 2005 index the company was ranked 9th 2004 index 12th
a copy of the group’s environmental policy statement and the environmental report referred to above can be obtained from the company
secretary
auditors
kpmg audit plc held office as auditors during the year a resolution for the reappointment of kpmg audit plc will be proposed at the
forthcoming annual general meeting
relations with shareholders
the board has continued to establish and maintain relationships with institutional shareholders and communicates with investors through the
group’s web site wwwpacemicrocom shareholders are welcome to participate at the annual general meeting on 6 september 2005 at
which the board will be available for questions
annual general meeting
the annual general meeting of the company will be held on 6 september 2005 at the offices of citigate dewe rogerson 26 finsbury square
london ec2a 1sh full details of the business to be transacted at the meeting will be set out in the notice of annual general meeting
by order of the board
anthony j dixon
company secretary
12 july 2005
31
pace micro technology plc report  accounts 2005
report of the directors  continued 
ra directors section  25705  842 am  page 7 remuneration report
the directors present their report to shareholders on pages 32 to 39 regarding remuneration matters in respect of the 53 week period ended
4 june 2005
remuneration committee
the remuneration committee the committee is responsible for setting the individual remuneration of the executive directors and other
members of the executive committee within the framework of the remuneration policy described below which is set by the board
the directors who were members of the committee at any time during the period ending 4 june 2005 were patricia chapmanpincher who
acted as chairman of the committee from 21 april 2005 sir michael bett who acted as chairman of the committee prior to 21 april 2005
marten fraser bob lambourne and mike mctighe for guidance the committee makes use of surveys of executive pay and knowledge of
market rates the committee was assisted in its consideration of remuneration matters by maggie pedder director of personnel of the
group pinsent masons legal advisers to the company also advised the committee regarding certain share option related issues
remuneration policy
the board believes that it is necessary to ensure that the remuneration packages of the executive directors remain competitive in order to
attract retain and motivate executive directors and senior managers of a high calibre and to reward them for performance the policy is for
a significant proportion of executive directors’ total remuneration to be capable of being earned from variable performancebased incentives
through annual bonuses and share options the objective of this policy is to provide rewards and incentives that reflect corporate and
individual performance and align management’s objectives directly with those of the group
the board’s policy in relation to nonexecutive directors continues to be to pay fees that are competitive with the fees paid by comparable
quoted companies nonexecutive directors’ fees are determined by the board as a whole within the limits set out in the company’s articles
of association nonexecutive directors are not eligible for performance bonuses or pension contributions and do not participate in the share
option schemes
the main components of senior executive remuneration derived from the remuneration policy including performancerelated elements are
set out below following the appointement during the year of a new chairman of the committee the committee proposes to undertake a
full review of senior executive remuneration including remuneration of executive directors during the coming year in conjunction with external
advisers
salary
basic salary for each executive director is determined by the committee taking into account the performance of the individual and
information from independent sources on the rates of salary for comparable jobs in setting senior executives’ salaries the committee also
takes into account pay and employment conditions in the group as a whole
performance bonus
the company established a nonpensionable performancerelated bonus scheme for the executive directors and other key members of
management for the year ending 4 june 2005 which was based on the successful achievement of corporate and individual objectives the
corporate objectives were linked to the interests of shareholders and the key measure therefore was the profitability of the group for the full
financial year achievement of the bonus was dependent on the group’s pretax profits before certain exceptional items and goodwill
amortisation exceeding £6 million with the capacity to earn additional bonus increments upon achievement of higher profit targets up to a
ceiling of £15 million in addition a number of individual personal objectives were set for each director and manager which were aligned with
the objectives of the group for the year the performance bonuses awarded to each of the executive directors in respect of the year ending
4 june 2005 are shown on page 35 a similarlystructured performancerelated bonus scheme for the executive directors and other key
senior executives is in effect in respect of the current financial year but with new pretax profit targets set in july 2005 in each year the
maximum bonus achievable by the executive directors in the event that all corporate and individual targets are met is 100 of basic salary
32
pace micro technology plc report  accounts 2005
remuneration report
ra directors section  25705  842 am  page 8 benefits in kind
each executive director is entitled to benefits such as the provision of a fully expensed company car plus fuel or cash alternative private
medical insurance permanent health insurance and life insurance in line with market practice neil gaydon who was based in the usa for
part of the financial year was in addition entitled to a nonpensionable overseas living allowance payment of rental on a family home in the
usa educational and associated expenses in respect of his children and international private medical insurance with effect from june 2004
these additional benefits ceased to be payable when neil gaydon returned to be based at the group head office in saltaire
pension contributions
in the year ending 4 june 2005 contributions were paid into the executive directors’ pension schemes at rates determined by the board
contributions have continued to be paid during the current year at the rate of 15 of each director’s basic salary subject to inland revenue
limits the group does not operate any defined benefit schemes
share option schemes
the board believes that share ownership encourages employees to contribute further towards improvements in the group’s performance
to this end the following share option schemes have previously been established under which employees including executive directors may
obtain ordinary shares
•
a regular savings scheme the “sharesave scheme” which is open to directors and employees of the group and under which
options granted at an initial discount of up to 20 against the quoted market price are normally exercisable on completion of a
threeyear saye contract
•
an all employee share ownership plan “aesop” in terms prescribed by the legislation authorising such schemes no shares have
yet been issued under the aesop
•
an inland revenue approved discretionary scheme the “approved scheme” under which all employees including fulltime
directors of the company or any subsidiary who do not have and have not had within the previous twelve months a material interest
in the company and are not within two years of retirement are eligible to participate participation is at the discretion of the board
acting in accordance with the recommendations of the committee under the approved scheme options are granted at the
prevailing quoted market price and may usually be exercised between three and ten years from the date of the grant
•
an unapproved discretionary scheme 1996 “1996 unapproved scheme” which is similar to the approved scheme although
certain rules of the approved scheme are not included eg the exclusion of employees who have a material interest in the
company no options have been granted under this scheme since the adoption of the 2000 unapproved scheme
•
a discretionary unapproved scheme 2000 “2000 unapproved scheme” adopted by the group at the extraordinary general
meeting of the company on 17 july 2000 which is open to all employees and fulltime directors on the same basis as the 1996
unapproved scheme under the 2000 unapproved scheme options are granted at the prevailing quoted market price and become
exercisable “vest” as to 25 each anniversary after the grant over a fouryear period under this scheme basic options may be
granted up to a limit such that unvested options may not exceed four times annual remuneration for a category of up to 55 key
employees there is the ability to award options “super options” above the limit for basic options in the case of up to 40 senior
employees whose contribution is judged to be of key importance super options may be granted up to a limit such that unvested
super options may not exceed four times annual remuneration in the case of members of the executive committee and up to five
other key employees the relevant limit is eight times annual remuneration in the case of the chief executive the relevant limit is
ten times annual remuneration
33
pace micro technology plc report  accounts 2005
remuneration report  continued 
ra directors section  25705  842 am  page 9 in granting options under the approved scheme and the 1996 and 2000 unapproved schemes the board may include objective
performance targets or other conditions as it thinks fit and has included such performance conditions based on growth in earnings per share
eps of 15 above the retail prices index rpi over a threeyear period in all grants under the approved scheme and 1996 unapproved
scheme until july 2000 under the 2000 unapproved scheme performance conditions of 6 per annum and 20 per annum compound
above rpi have been applied to the grant of basic options and super options respectively thereunder the remuneration committee
believes that eps is the most appropriate measure of the group’s underlying financial performance in order to assess whether the
performance conditions have been met the committee will utilise the eps derived from the audited financial statements of the group
in addition separate share option schemes have been established for the benefit of the group’s us and french employees within the
authority given by shareholders at the extraordinary general meeting of the company held on 17 july 2000 both such schemes operate
within the overall limit on issue of new shares of 10 of the company’s issued share capital applicable to all the group’s employee share
schemes the pace americas sharesave plan is based on the sharesave scheme rules and is designed to satisfy the us internal revenue
service requirements for such savingforshares plans the pace micro technology plc french share option scheme 2001 is based on the
uk approved scheme rules and satisfies the french statutory requirements which provide favourable tax treatment for such schemes
the company’s authority from shareholders to make new grants under the discretionary schemes and its current sharesave schemes will
expire over the next year accordingly at the company’s annual general meeting on 6 september 2005 the company will seek new authority
from shareholders for a new sharesave scheme and a new us sharesave plan together with new approved and unapproved discretionary
option schemes
service contracts
company policy is that in normal circumstances executive directors’ notice periods should not exceed one year each of the executive
directors has a service contract with the company each of these agreements is terminable by the company on twelve months’ prior written
notice or by the relevant director on not less than six months’ prior written notice at the option of the company each agreement may be
terminated forthwith subject to the company paying to the director a sum equivalent to 12 months’ salary and pension contributions the
remuneration committee considers that compensation payments on termination of employment should depend on individual circumstances
it is the company’s policy to honour its obligations with regard to directors’ service agreements and where the employment of a director is
terminated in accordance with the aforementioned contractual process the company will pay the sum specified in the relevant service
agreement as payable
the service agreement of john dyson was entered into on 10 october 1997 and subsequently amended on 1 january 2003 and 2 may
2003 the service agreement of neil gaydon was entered into on 28 november 2001 and subsequently amended on 21 december 2001
14 january 2003 22 november 2003 and 1 june 2004 the service agreement of david brocksom was entered into on 13 november 2003
and became effective on 9 february 2004 subsequently amended on 1 june 2004 each of the aforementioned service agreements was
amended on 1 june 2005 to give effect to the group salary review save for the notice periods referred to in the above paragraph these
contracts have no unexpired term
each of the nonexecutive directors is appointed under a letter of appointment which is terminable at any time by the company without
contractual notice in addition each of the nonexecutive directors has a letter of indemnity issued by the company which provides an
indemnity in respect of liabilities incurred in the course of their office to the extent permitted by the company’s articles of association and
the provisions of section 310 of the companies act 1985
the company maintains directors’ and officers’ liability insurance in respect of senior employees including the directors the consent of the
board is required in the event that an executive director wishes to accept an external appointment it has been the practice of the company
to permit a director to retain nonexecutive fees arising from any such appointment john dyson receives fees of £12000 per year as 
a nonexecutive director of xp power plc
34
pace micro technology plc report  accounts 2005
remuneration report  continued 
ra directors section  25705  843 am  page 10 the auditors are required to report on the information disclosed on pages 35 to 37
directors’ remuneration
total directors’ remuneration in respect of qualifying services for the year ending 4 june 2005  was as follows
2005 2004
£000 £000
fees 200 211
salaries benefits in kind and termination payments 675 593
performancerelated bonuses 85 
pension contributions 73 52
1033 856
the remuneration of individual directors in respect of qualifying services for the year ending 4 june 2005 is set out in the table below 
salaries performance    benefits  total  pension
and fees  bonus in kind remuneration contributions
2005 2004 2005 2004
executive directors £000 £000 £000 £000 £000 £000 £000
david brocksom 147 20 9 176 45 23 7
john dyson 273 39 5 317 272 31 30
neil gaydon 202 26 39 267 276 19 15
622 85 53 760 593 73 52
nonexecutive directors
sir michael bett 65   65 62  
pat chapmanpincher 5  5   
robert fleming 29   29 26  
marten fraser 9  9   
david hood 9  9 26  
marvin jones 26   26 44  
bob lambourne 30   30 27  
mike mctighe 27   27 26  
822 85 53 960 804 73 52
remuneration referable only to period of the financial year since date of appointment to the board or up to date of retirement
a summary of the benefits in kind provided to the executive directors is contained on page 33
35
pace micro technology plc report  accounts 2005
remuneration report continued 
ra directors section  25705  843 am  page 11 directors’ interests in shares and share options
the interests of directors holding office at the yearend and those of their immediate families in the ordinary share capital of the company at
4 june 2005 and at the beginning of the year or date of appointment if later are set out below
4 june 2005 30 may 2004 or date of appointment
shares shares
beneficial non under option beneficial non under option
beneficial beneficial
sir michael bett 343300   343300  
david brocksom 14000  349635   250000
pat chapmanpincher             
john dyson 191586  1392221 191586  1501655
robert fleming 8850990 29188  8850990 29188 
marten fraser      
neil gaydon 7462  917720 7462  837720
bob lambourne 14500   14500  
mike mctighe 20000   20000  
there were no changes in the directors’ interests in the ordinary share capital of the company between 4 june 2005 and 11 july 2005
36
pace micro technology plc report  accounts 2005
remuneration report continued 
ra directors section  25705  843 am  page 12 share options
details of the options over the ordinary shares of 5p each in the company held by the directors who held office during the year were as follows
number of options
at 29 may 2004 granted      expired at 4 june exercise exercise period
2005 price from to
david brocksom
approved scheme          38461   38461 780p 160207 150214
2000 unapproved scheme 211539   211539 780p 160205 150214
2000 unapproved scheme         80000  80000 510p 170805 160814
sharesave scheme                19635  19635   480p 011007 310308
john dyson
approved scheme        8000   8000 3750p 240704 230711
1996 unapproved scheme      259434  259434  530p 171100 161104
1996 unapproved scheme      150000   150000 2000p 070702 060709
2000 unapproved scheme      17492   17492 8575p 170701 160710
2000 unapproved scheme    500000   500000 200p 210104 200113
2000 unapproved scheme       500000   500000 370p 020504 010513
2000 unapproved scheme          150000  150000 510p 170805 160814
2000 super options  32507   32507 8575p 170701 160710
sharesave scheme            14000   14000 180p 011005 310306
sharesave scheme       7448   7448 145p 010406 300906
sharesave scheme         9633   9633 355p 011006 310307
sharesave scheme         3141   3141 600p 010407 300907
neil gaydon
approved scheme             3498   3498 8575p 170703 160710
1996 unapproved scheme     75000   75000 640p 240901 230908
1996 unapproved scheme  75000   75000 2000p 070702 060709
2000 unapproved scheme   93252   93252 3750p 240702 230711
2000 unapproved scheme     7023   7023 200p 210104 200113
2000 unapproved scheme         80000  80000 510p 170805 160814
2000 super option             56748   56748 3750p 240702 230711
2000 super option        492977   492977 200p 210104 200113
sharesave scheme      14000   14000 180p 011005 310306
sharesave scheme        7448   7448 145p 010406 300906
sharesave scheme      9633   9633 355p 011006 310307
sharesave scheme                       3141   3141 600p 010407 300907
no options were exercised by any of the directors during the year or during the previous financial year
the midmarket price of shares in the company on 3 june 2005 the last dealing day before the financial year end was 5825p the lowest and highest
closing midmarket prices of shares in the company during the year were 32p and 635p respectively
information concerning the performance conditions attached to the above options is contained on page 34
37
pace micro technology plc report  accounts 2005
remuneration report  continued 
ra directors section  25705  843 am  page 13 employee trusts
the company has established the pace micro technology plc employee benefits trust which is capable of acquiring shares in the
company in the market and using them for the purposes of satisfying new share options granted under the company’s share option
schemes no shares were acquired by the trust during the year
during the year no options under the company’s share option schemes were exercised and satisfied by shares transferred by the trust
the company has established the pace quest qualifying employee share trust which is capable of acquiring shares in the company
either through purchases in the market or allotment and of using any such shares for the purposes of satisfying options under the
company’s sharesave scheme no shares were acquired by the quest during the year
during the year 144005 options under the company’s sharesave scheme were exercised and were satisfied by shares transferred by the
quest
38
pace micro technology plc report  accounts 2005
remuneration report continued
ra directors section  25705  843 am  page 14 performance graph
set out below is a performance graph showing the total shareholder return of the company for the five financial years of the company ending
4 june 2005 compared to the total shareholder return of the ftse electronics and electrical equipment sector index which is considered by
the board to be an appropriate benchmark index against which to compare the company’s performance having regard to the principal
activities of the group
by order of the board
anthony j dixon
company secretary
12 july 2005
remuneration report  continued
100
80
60
40
20
0
2000                                 2001                                 2002                                2003                                 2004                                2005
pace micro technology plc              ftse electronics  electrical equipment
39
pace micro technology plc report  accounts 2005
ra directors section  25705  1151 am  page 15 the following statement which should be read in conjunction with the independent auditors’ report set out on page 41 is made for the
purpose of clarifying the respective responsibilities of the directors and auditors
the directors are required by company law to prepare financial statements for each financial year which give a true and fair view of the state
of affairs of the company and the group and of the profit or loss for that period in preparing those financial statements the directors are
required to
•
select suitable accounting policies and then apply them consistently
•
make judgements and estimates that are reasonable and prudent
•
state whether applicable accounting standards have been followed subject to any material departures which are disclosed and
explained in the financial statements and
•
to prepare the financial statements on the going concern basis unless it is not appropriate to presume that the group will continue
in business
the directors are responsible for ensuring that proper accounting records are maintained which disclose with reasonable accuracy at any
time the financial position of the company to enable them to ensure that the financial statements comply with the companies act 1985 the
directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to
prevent and detect fraud and other irregularities
40
pace micro technology plc report  accounts 2005
statement of directors’ responsibilities
ra directors section  25705  843 am  page 16 independent auditors’ report to the members of pace micro
technology plc
we have audited the financial statements on pages 43 to 64 we have also audited the information in the directors remuneration report that is
described as having been audited
this report is made solely to the companys members as a body in accordance with section 235 of the companies act 1985 our audit work has
been undertaken so that we might state to the companys members those matters we are required to state to them in an auditors report and for no
other purpose to the fullest extent permitted by law we do not accept or assume responsibility to anyone other than the company and the
companys members as a body for our audit work for this report or for the opinions we have formed
respective responsibilities of directors and auditors
the directors are responsible for preparing the annual report and the directors remuneration report as described on page 40 this includes
responsibility for preparing the financial statements in accordance with applicable united kingdom law and accounting standards our responsibilities
as independent auditors are established in the united kingdom by statute the auditing practices board the listing rules of the financial services
authority and by our professions ethical guidance
we report to you our opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the
directors remuneration report to be audited have been properly prepared in accordance with the companies act 1985 we also report to you if in
our opinion the directors report is not consistent with the financial statements if the company has not kept proper accounting records if we have
not received all the information and explanations we require for our audit or if information specified by law regarding directors remuneration and
transactions with the group is not disclosed
we review whether the corporate governance statement on pages 27 to 29 reflects the company’s compliance with the nine provisions of the 2003
frc code specified for our review by the listing rules and we report if it does not  we are not required to consider whether the board’s statements
on internal control cover all risks and controls or form an opinion on the effectiveness of the group’s corporate governance procedures or its risk and
control procedures
we read the other information contained in the annual report including the corporate governance statement and the unaudited part of the directors
remuneration report and consider whether it is consistent with the audited financial statements we consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the financial statements
basis of audit opinion
we conducted our audit in accordance with auditing standards issued by the auditing practices board an audit includes examination on a test
basis of evidence relevant to the amounts and disclosures in the financial statements and the part of the directors remuneration report to be audited
it also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements and
of whether the accounting policies are appropriate to the groups circumstances consistently applied and adequately disclosed
we planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements and the part of the directors remuneration report to be audited are free
from material misstatement whether caused by fraud or other irregularity or error in forming our opinion we also evaluated the overall adequacy of
the presentation of information in the financial statements and the part of the directors remuneration report to be audited
opinion
in our opinion
• the financial statements give a true and fair view of the state of affairs of the company and the group as at 4 june 2005 and of the profit of the
group for the fifty three week period then ended and
• the financial statements and the part of the directors remuneration report to be audited have been properly prepared in accordance with the
companies act 1985
kpmg audit plc
chartered accountants
registered auditor
leeds
12 july 2005
41
pace micro technology plc report  accounts 2005
58653 pace repaccs 4169  25705  827 am  page 41 42
pace micro technology plc report  accounts 2005
financial statements 2005
contents
43  financial statements
48  notes to the financial statements
67  five year record
68  directors secretary and advisers
69  shareholder information
58653 pace repaccs 4169  25705  827 am  page 42 for the fifty three week period ended 4 june 2005
note 2005 2004
£000 £000
turnover 3 253326 239949
cost of sales 200704 194425
gross profit 52622 45524
net operating income and charges
before operating exceptional items 5 45452 40350
operating exceptional items 6 145 1500
total operating income and charges 45597 41850
operating profit 7025 3674
nonoperating exceptional item loss on closure of business 23 360 –
net interest receivable and similar income 7 410 206
profit on ordinary activities before taxation 4 7075 3880
tax credit on profit on ordinary activities 10 4717 4186
retained profit for the financial year 23 11792 8066
basic earnings per ordinary share 11 54p 37p
diluted earnings per ordinary share 11 53p 36p
adjusted basic earnings per ordinary share 11 59p 46p
adjusted diluted earnings per ordinary share 11 58p 45p
the accompanying accounting policies and notes form an integral part of these financial statements
in both the current and preceding year the group had no acquisitions or discontinued operations
consolidated profit and loss account
43
pace micro technology plc report  accounts 2005
58653 pace repaccs 4169  25705  827 am  page 43 at 4 june 2005
note 2005 2004
as restated – note 2
£000 £000 £000 £000
fixed assets
intangible 12 8872 9436
tangible 12 6185 7010
investments 13 674 –
15731 16446
current assets
stocks 14 10135 10006
debtors 15 55836 64724
– due within one year 51827 60912
– due after more than one year 4009 3812
cash at bank and in hand 26647 20705
92618 95435
creditors amounts falling due within one year 16 31666 41378
net current assets 60952 54057
total assets less current liabilities 76683 70503
creditors amounts falling due after more than one year 17 205 246
provisions for liabilities and charges 20 14627 20748
net assets 61851 49509
capital and reserves
called up equity share capital 21 11349 11339
share premium account 22 35677 35647
profit and loss account 23 14825 2523
total equity shareholders’ funds 61851 49509
these financial statements were approved by the board of directors on 12 july 2005 and were signed on its behalf by
sir michael bett  nonexecutive chairman
john dyson  chief executive
consolidated balance sheet
44
pace micro technology plc report  accounts 2005
58653 pace repaccs 4169  25705  827 am  page 44 at 4 june 2005
note 2005 2004
as restated – note 2
£000 £000 £000 £000
fixed assets
tangible 12 4956 5530
investments 13 10074 15139
15030 20669
current assets
stocks 14 9300 7200
debtors 15 54685 64501
– due within one year 50676 60689
– due after more than one year 4009 3812
cash at bank and in hand 26744 19201
90729 90902
creditors amounts falling due within one year 16 34233 42446
net current assets 56496 48456
total assets less current liabilities 71526 69125
provisions for liabilities and charges 20 14627 20748
net assets 56899 48377
capital and reserves
called up equity share capital 21 11349 11339
share premium account 22 35677 35647
profit and loss account 23 9873 1391
total equity shareholders’ funds 56899 48377
these financial statements were approved by the board of directors on 12 july 2005 and were signed on its behalf by
sir michael bett  nonexecutive chairman
john dyson  chief executive
company balance sheet
45
pace micro technology plc report  accounts 2005
58653 pace repaccs 4169  25705  827 am  page 45 consolidated cash flow statement
46
pace micro technology plc report  accounts 2005
for the fifty three week period ended 4 june 2005
note 2005 2004
£000 £000
net cash inflow from operating activities 25 11208 14165
returns on investments and servicing of finance 26 343 136
taxation 1378 391
capital expenditure and financial investment 26 3559 2665
acquisitions and disposals 26 674 4936
cash inflow before financing 5940 7091
financing 26 2 204
increase in cash in the year 5942 7295
reconciliation of net cash flow to movement in net funds
note 2005 2004
£000 £000
increase in cash in the year 5942 7295
cash flow from decrease in debt 38 34
movement in net funds in the year 5980 7329
net funds at start of year 20406 13077
net funds at end of year 27 26386 20406
58653 pace repaccs 4169  25705  827 am  page 46 consolidated statement of total recognised gains and losses and
reconciliation of movements in shareholders’ funds
47
pace micro technology plc report  accounts 2005
for the fifty three week period ended 4 june 2005
consolidated statement of total recognised gains and losses
2005 2004
£000 £000
profit for the year 11792 8066
currency translation differences on foreign currency net investments 150 473
total recognised gains relating to the year 11942 7593
prior year adjustment as explained in note 2 2436
total recognised gains since last annual report 9506
reconciliation of movements in shareholders’ funds
2005 2004
as restated
– note 2
£000 £000
retained profit for the year 11792 8066
other recognised gains and losses relating to the year 150 473
issue of ordinary share capital 40 247
write back to profit and loss account of goodwill previously written off directly to reserves 360 –
net addition to equity shareholders’ funds 12342 7840
equity shareholders’ funds at start of year originally £51945000 before prior year adjustment of £2436000 49509 41669 
equity shareholders’ funds at end of year 61851 49509
58653 pace repaccs 4169  25705  827 am  page 47 notes
48
pace micro technology plc report  accounts 2005
1 accounting policies
the following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial
statements
basis of preparation
the financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention
financial position and market conditions
the performance of the group has continued to improve in this period unit volumes and turnover have increased and the geographical diversity
continues to widen however pressure on selling prices continues and the net profit margin remains low
the risks in the digital broadcasting industry involve the application of new and evolving technologies and the nature of pace’s activities which
are characterised by large individual sales orders for goods and engineering or support services to a limited range of customers is unchanged
some customers are incurring losses as they implement their business plans and others continue to review the timing and nature of their plans
these factors particularly in the context of the level of net profitability increase both the volatility of the business and the sensitivity of the
judgements required to prepare the financial statements in making these judgements a consistent approach has been applied using all available
information
the group ended the period with net cash balances of £264m and has uncommitted banking facilities in an amount of £20m which are available
until 30 september 2006
the board has built the above circumstances into their working capital forecasts and has modelled various business scenarios based on these
the board has concluded that it is appropriate to confirm the going concern basis of preparation for the financial statements
financial year end
the annual financial statements are drawn up to the saturday nearest to 31 may the current year’s financial statements are for the 53 weeks
ended 4 june 2005 and the previous year’s financial statements are for the 52 weeks ended 29 may 2004 the annual financial statements for
the next period will be for a 52 week period ending 3 june 2006
basis of consolidation
the group financial statements consolidate those of the company and of its subsidiary undertakings note 13 drawn up to 4 june 2005 unless
otherwise stated the acquisition method of accounting has been adopted under this method the results of the subsidiary undertakings acquired
or disposed of in the year are included in the consolidated profit and loss account from the date of acquisition or up to the date of disposal
turnover
turnover represents the amounts derived from the sale of goods and the provision of services to third party customers occurring in the period
stated exclusive of value added tax and net of trade discounts and rebates revenue on the sale of goods is recognised when substantially all of
the risks and rewards in the product have passed to the customer which is usually upon delivery to the customer turnover in respect of services
rendered including engineering consultancy and support and software services is recognised over the period over which they are performed in
relation to the level of work undertaken project milestones achieved and any future obligations remaining
depreciation
depreciation is calculated to write down the cost less estimated residual value of all tangible fixed assets by equal annual instalments over their
expected useful lives the periods generally applicable are
long leasehold properties period of lease
short leasehold properties period of lease
plant and machinery 1  10 years
motor vehicles 4 years
research and development
research and development expenditure is charged to the profit and loss account in the year in which it is incurred
stocks
stocks are stated at the lower of cost and net realisable value
58653 pace repaccs 4169  25705  827 am  page 48 notes continued
49
pace micro technology plc report  accounts 2005
deferred taxation
deferred tax is recognised without discounting in respect of all timing differences between the treatment of certain items for taxation and
accounting purposes which have arisen but not reversed by the balance sheet date except as otherwise required by frs 19 deferred tax
deferred tax assets are recognised only to the extent that they are expected to be recoverable and it is more likely than not that there will be
suitable taxable profits from which the future reversal of the underlying timing differences can be deducted
goodwill
purchased goodwill both positive and negative arising on consolidation in respect of acquisitions before 31 may 1998 when frs 10 goodwill
and intangible assets was adopted was written off to reserves in the year of acquisition when a subsequent disposal occurs any related
goodwill previously written off to reserves is written back through the profit and loss account as part of the profit or loss on disposal
purchased goodwill representing the excess of the fair value of the consideration given and associated costs over the fair value of the
separable net assets acquired arising on consolidation in respect of acquisitions since 31 may 1998 is capitalised positive goodwill is
amortised to nil by equal annual instalments over its estimated useful life normally 20 years
on the subsequent disposal or termination of a business acquired since 31 may 1998 the profit and loss on disposal or termination is
calculated after charging the unamortised amount of any related goodwill
in the company’s financial statements investments in subsidiary undertakings are stated at cost less provision for any impairment in value
accounting for employee share schemes
consistent with the treatment outlined in uitf 38 ‘accounting for esop trusts’ the material assets liabilities income and costs of the pace
micro technology plc employee benefits trust are consolidated in these financial statements until such time as the company’s own shares
vest unconditionally with employees the consideration paid for the shares is deducted in arriving at shareholders funds see note 2 the
company has taken advantage of the exemption available under uitf no17 revised 2000 accounting for employee share schemes in
respect of the 20 discount against the quoted market price for the sharesave schemes and discounts for equivalent overseas schemes
asset impairment
intangible and tangible fixed assets are tested for impairment when an event that might affect asset values has occurred an impairment loss
is recognised to the extent that the carrying amount cannot be recovered either by selling the asset or by the discounted future earnings from
operating the assets in each of the five years following an impairment review where an intangible fixed asset has been written down to a
recoverable amount based on value in use the cash flows achieved are compared with those forecast and adjustments to the carrying value
are made as necessary
foreign currencies
transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction assets and liabilities denominated
in foreign currencies are translated at the rates of exchange ruling at the balance sheet date
exchange differences of a trading nature are dealt with in the profit and loss account exchange differences on the restatement of the net
investment in overseas subsidiaries and the difference between the profit and loss account translated at the average rate and the closing rate
are recorded as movements on reserves
financial instruments are used to reduce certain exposures to fluctuations in foreign exchange rates if the instrument is used to hedge a
trading exposure then any gain or loss is dealt with in the profit and loss account in the period in which the trading exposure itself is accounted
for any gain or loss on an instrument used to hedge an exposure on the net investment in overseas subsidiaries is recorded as a movement
on reserves
pension contributions
the pension costs charged to the profit and loss account represent the amount of the contributions payable to various defined contribution
schemes during the year
leased assets
assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and depreciated over their expected useful
lives the interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the profit
and loss account over the period of the lease
all other leases are regarded as operating leases and the payments made under them are charged to the profit and loss account on a straight
line basis over the lease term
2 prior year adjustment
at 4 june 2005 the pace micro technology plc employee benefits trust and quest held shares in the company which cost £21421000
2004 £21450000 these shares are held to satisfy options granted to employees
in line with the requirements of uitf abstract no 38 “accounting for esop trusts” such amounts have been reclassified to show the
company’s purchases of own shares as deductions from the profit and loss account reserve in arriving at shareholders’ funds the previous
treatment was to classify such amounts net of impairment provisions as assets in fixed asset investments the comparative figures in the
financial information have been restated to reflect this change with a resulting impact on the balance sheets as follows
29 may 2004  
£000
decrease in investments and net assets 2436
net decrease in profit and loss account reserve and shareholders’ funds 2436
there is no impact on the profit and loss account for the year ended 29 may 2004 resulting from the above restatement
58653 pace repaccs 4169  25705  827 am  page 49 notes continued
50
pace micro technology plc report  accounts 2005
3 turnover
the geographical analysis of turnover which arises from the sale of goods and the provision of software hardware and other consultancy services
to third party customers is as follows
turnover by destination 2005 2004
£000 £000
united kingdom 106269 138275
continental europe 98095 56812
far east and australasia 24547 19986
north america 23531 22252
rest of the world 884 2624
253326 239949
by origin                                                                                turnover                profit before taxation                 net assets
as restated – note 2
2005 2004 2005 2004 2005 2004
£000 £000 £000 £000 £000 £000
united kingdom 249848 226786 8134 3526 58425 42932
continental europe 2915 11826 706 192 3265 5336
far east and australasia 563 1357 353 162 161 1241
253326 239949 7075 3880 61851 49509
the groups principal activities are the development design and distribution of digital receivers and receiver decoders for the reception of digital
television and the receptiontransmission of interactive services telephony and high speed data the group also provides engineering design
software applications and support services to multiple service operators broadcasters telecommunications companies and retail markets
worldwide each of these services may be delivered over satellite cable terrestrial and ip network transmission systems
4 profit on ordinary activities before taxation is stated after charging
2005 2004
£000 £000
group auditors’ and their associates’ remuneration
 audit services 175 192
 taxation services 52 44
 other services 36 35
company auditors’ and their associates’ remuneration
 audit services 168 176
amortisation of goodwill 564 564
depreciation of tangible fixed assets
 owned 4419 5317
other operating lease rentals
 land and buildings 1387 1421
 motor vehicles 146 192
loss on disposal of tangible fixed assets 1 317
58653 pace repaccs 4169  25705  828 am  page 50 notes continued
51
pace micro technology plc report  accounts 2005
5 net operating expenses
2005 2004
£000 £000
research and development expenditure 23976 21330
administrative expenses – before operating exceptional items 21476 19020
administrative expenses – operating exceptional items see note 6 145 1500
total administrative expenses 21621 20520
45597 41850
6 operating exceptional items
2005 2004
£000 £000
releasecost regarding reference to financial services and markets tribunal 180 1500
restructuring and reorganisation costs 325 –
145 1500
previously the company was party to a reference to the financial services and markets tribunal in the prior year the board considered it
appropriate to make an exceptional charge within administrative expenses for costs associated with this reference
following the settlement of the matter in the current period the net costs incurred net of insurance recoveries have been offset against the
provision established
the restructuring and reorganisation charges relate to an ongoing restructuring programme within the group
7 net interest receivable and similar income
2005 2004
£000 £000
bank interest payable and other similar charges 318 117
bank interest receivable 728 323
410 206
8 remuneration of the directors
the remuneration share options and pension entitlements of the directors are disclosed in the remuneration report on pages 32 to 39
9 staff numbers and costs
the average number of employees were 2005 2004
research and development 347 354
administration 118 112
sales and marketing 51 62
manufacturing and operations 79 70
595 598
staff costs £000 £000
wages and salaries 24871 23682
social security costs 2968 2877
other pension costs 903 857
redundancy costs 313 –
29055 27416
58653 pace repaccs 4169  25705  828 am  page 51 notes continued
52
pace micro technology plc report  accounts 2005
10 tax credit on profit on ordinary activities
the tax credit is based on the profit for the year and comprises  2005 2004
£000 £000
current tax
adjustments in respect of previous periods 4760 8214
overseas tax chargecredit 240 44
total current tax credit 4520 8258
deferred tax
origination and reversal of timing differences note 15 197 4072
tax credit on profit on ordinary activities 4717 4186
reconciliation of total current tax credit  2005 2004
£000 £000
profit on ordinary activities before tax 7075 3880
profit on ordinary activities multiplied by standard rate of corporation tax 30 2123 1164
effects of
expenses not deductible for tax purposes including amortisation of goodwill 785 1312
accelerated capital allowances 116 57
tax losses utilised in period 1637 1826
research and development tax credit 975 782
overseas tax not at 30 60 31
adjustments to tax charge in respect of previous periods 4760 8214
current tax credit for period 4520 8258
no tax credit has been taken in respect of the exceptional items included within the above tax charges
58653 pace repaccs 4169  25705  828 am  page 52 notes continued
53
pace micro technology plc report  accounts 2005
11 earnings per ordinary share
2005 2004
basic and diluted earnings per share pence pence
basic earnings per share before amortisation of goodwill and exceptional items 59 46
effect of amortisation of goodwill 02 02
effect of exceptional items 03 07
basic earnings per share 54 37
the calculation of basic earnings per share is based on profit for the year of £11792000 2004 £8066000 divided by the weighted average
number of ordinary shares in issue of 219164009 2004 218497203 excluding shares held by the quest and employee benefits trust
adjusted earnings per share before amortisation of goodwill and exceptional items is disclosed to indicate the underlying profitability of the
group and is based on profit of £12861000 2004 £10130000
2005 2004
£000 £000
earnings before amortisation of goodwill and exceptional items 12861 10130
effect of amortisation of goodwill 564 564
effect of exceptional items 505 1500
profit for the year 11792 8066
2005 2004
number of shares million million
weighted average number of ordinary shares in issue during the year 2192 2185
dilutive effect of options outstanding 46 68
diluted weighted average number of ordinary shares in issue during the year 2238 2253
diluted earnings per ordinary share varies from basic earnings per ordinary share due to the effect of the notional exercise of outstanding
share options
58653 pace repaccs 4169  25705  828 am  page 53 notes continued
54
pace micro technology plc report  accounts 2005
12 fixed assets
short
long leasehold tangible
intangible leasehold land and plant and motor fixed assets
goodwill buildings buildings machinery vechicles total
group £000 £000 £000 £000 £000 £000
cost
at 30 may 2004 35685 600 4450 24029 30 29109
exchange adjustments – 7 3 1 – 11
additions – – 186 3408 – 3594
retirement of assets see below – – – 10834 – 10834
disposals – – 6 253 – 259
at 4 june 2005 35685 607 4633 16351 30 21621
amortisationdepreciation
at 30 may 2004 26249 209 3445 18415 30 22099
exchange adjustments – 8 3 7 – 4
provided in the year 564 23 441 3955 – 4419
retirement of assets see below – – – 10834 – 10834
disposals – – 6 246 – 252
at 4 june 2005 26813 240 3883 11283 30 15436
net book amount at 4 june 2005 8872 367 750 5068 – 6185
net book amount at 29 may 2004 9436 391 1005 5614 – 7010
company
cost
at 30 may 2004 – – 4117 21011 30 25158
additions – – 179 3041 – 3220
retirement of assets see below – – – 10834 – 10834
disposals – – 6 106 – 112
at 4 june 2005 – – 4290 13112 30 17432
depreciation
at 30 may 2004 – – 3228 16370 30 19628
provided in the year – – 370 3420 – 3790
retirement of assets see below – – – 10834 – 10834
disposals – – 6 102 – 108
at 4 june 2005 – – 3592 8854 30 12476
net book amount at 4 june 2005 – – 698 4258 – 4956
net book amount at 29 may 2004 – – 889 4641 – 5530
during the year a review has been carried out to remove from the fixed asset registers fully written down fixed assets which are no longer
being used adjustments have been made to both cost and accumulated depreciation as a consequence there is no profit or loss impact
from such adjustments
58653 pace repaccs 4169  25705  828 am  page 54 notes continued
55
pace micro technology plc report  accounts 2005
13 fixed asset investments
other
investments
group £000
cost at 30 may 2004 625
additions 674
cost at 4 june 2005 1299
provision at 30 may 2004 and 4 june 2005 625
net book value at 4 june 2005 674
net book value at 29 may 2004 –
intra shares
group in group other
loans undertakings investments total
company £000 £000 £000 £000
cost at 30 may 2004 65945 6139 45 72129
additions – – 674 674
liquidation of subsidiaries – 101 – 101
cost at 4 june 2005 65945 6038 719 72702
provision at 30 may 2004 56945 – 45 56990
movement in period 5638 – – 5638
provision at 4 june 2005 62583 – 45 62628
net book value at 4 june 2005 3362 6038 674 10074
net book value at 29 may 2004 9000 6139 – 15139
additions in the period relate to a further investment in vegastream limited together with a trade investment in intamac limited
at 4 june 2005 the company had a beneficial interest in the equity of the following subsidiary undertakings
percentage country of country of class of share
holding incorporation operation capital held
eurl new com immobilier 100 france france ordinary
pace advanced consumer electronics limited 100 uk uk ordinary
pace asia pacific limited formerly pace asia limited 100 hong kong hong kong ordinary
pace distribution gmbh 100 germany germany ordinary
pace distribution overseas limited 100 uk uk ordinarypreference
pace micro technology hk limited 100 hong kong hong kong ordinary
pace micro technology australia pty limited 100 australia australia ordinary
pace micro technology support services limited 100 uk usa ordinary
pace micro technology asia pacific limited 100 hong kong hong kong ordinary
sci les 9 tilleuls 100 france france ordinary
pace europe sas  100 france france ordinary
pace micro technology gmbh 100 germany germany ordinary
 denotes company owned by pace micro technology hk limited
 denotes company owned by pace europe sas
 denotes company owned by pace distribution overseas limited
each of the subsidiary undertakings listed above have been consolidated in the group’s financial statements
58653 pace repaccs 4169  25705  828 am  page 55 notes continued
56
pace micro technology plc report  accounts 2005
14 stocks
group                            company
2005 2004 2005 2004
£000 £000 £000 £000
raw materials and consumable stores 2354 5388 2287 3328
finished goods 7781 4618 7013 3872
10135 10006 9300 7200
15 debtors
group                            company
2005 2004 2005 2004
£000 £000 £000 £000
amounts falling due within one year
trade debtors 44785 57042 44364 56329
amounts owed by subsidiary undertakings – – – 932
other debtors 5017 2686 4680 2616
prepayments and accrued income 2025 1184 1632 812
51827 60912 50676 60689
amounts falling due after more than one year
deferred tax 4009 3812 4009 3812
55836 64724 54685 64501
deferred tax assets have been recognised to the extent they are regarded as recoverable in accordance with frs 19 the following table
outlines the recognised and unrecognised deferred tax assets
recognised asset          unrecognised asset
2005 2004 2005 2004
group and company £000 £000 £000 £000
accelerated capital allowances 1598 1714 – –
trading losses 2411 2098 1219 3763
4009 3812 1219 3763
16 creditors amounts falling due within one year
group                            company
2005 2004 2005 2004
£000 £000 £000 £000
bank loans and overdrafts note 18 56 53 – –
trade creditors 22259 32256 23300 33098
amounts owed to subsidiary undertakings – – 2350 –
corporation tax 49 587 647 1050
social security and other taxes 1821 2300 1949 2715
other creditors 830 938 535 865
accruals 6651 5244 5452 4718
31666 41378 34233 42446
58653 pace repaccs 4169  25705  828 am  page 56 notes continued
57
pace micro technology plc report  accounts 2005
17 creditors amounts falling due after more than one year
group
2005 2004
£000 £000
bank loans note 18 205 246
18 borrowings
borrowings consist mainly of bank loans and overdrafts group                                         company
2005 2004 2005 2004
£000 £000 £000 £000
within one year 56 53 – –
after one and within two years 56 53 – –
after two and within five years 149 160 – –
after five years – 33 – –
261 299 – –
the banking facilities of £20 million 2004 £20 million are available until 30 september 2006 on an uncommitted basis the facility is secured
by a fixed and floating charge over the assets of pace micro technology plc and its subsidiary undertakings
19 derivatives and other financial instruments
short term debtors and creditors that meet the definition of a financial asset or liability respectively have been excluded from all the following
frs 13 analysis other than the currency risk exposures as permitted by frs 13
a  interest rate risk profile of financial assets
floating rate interest free total
currency £000 £000 £000
at 4 june 2005
sterling 24022 3 24025
us dollar 1517 – 1517
euro 686 1 687
other 417 1 418
total 26642 5 26647
at 29 may 2004
sterling 12778 6 12784
us dollar 5525 – 5525
euro 2526 – 2526
other 169 – 169
20998 6 21004
the interest rates on sterling us dollar euro and other floating rate financial assets are linked to the relevant bank base rates
b  interest rate risk profile of financial liabilities
floating rate interest free total
currency £000 £000 £000
at 4 june 2005
euro 261 – 261
261 – 261
at 29 may 2004
euro 299 – 299
299 – 299
the interest rate on euro floating rate financial liabilities is linked to the relevant bank base rate
58653 pace repaccs 4169  25705  828 am  page 57 notes continued
58
pace micro technology plc report  accounts 2005
19 derivatives and other financial instruments continued
c  currency exposures
the table below shows the group’s currency exposures that give rise to the net currency gains and losses recognised in the profit and loss
account such exposures comprise the monetary assets and monetary liabilities of the group which are not denominated in the operating or
functional currency of the operating unit involved
net foreign currency monetary assetsliabilities
us dollar euro other total
functional currency of group operation £000 £000 £000 £000
at 4 june 2005
sterling 7577 11782 107 4312
euro 166 – – 166
total 7411 11782 107 4478
at 29 may 2004
sterling 12051 11106 363 1308
euro 1017 – 60 957
total 11034 11106 423 351
d  gains and losses on hedges
the majority of the group’s production costs are denominated in us dollars the group endeavours to obtain as much of its income as
possible in us dollars but a significant proportion of income is currently received in sterling or euros the group’s policy is to hedge forward
progressively against movements in the value of foreign currencies in respect of cash receipts and payments expected over the next 6
months
outstanding foreign currency hedge contracts
sell buy average
currency currency value rate maturity
at 4 june 2005 euro sterling £1m 14374 june 2005
euro us dollar 73m 12636 june  august 2005
at 29 may 2004 sterling us dollar 29m 17983 june  august 2004
euro us dollar 784m 11973 june  october 2004
the unrealised loss on the above contracts in the current year amounted to £149249 2004 £1092000 of which £36467 2004 £87000
was matched against monetary assets and liabilities denominated in the respective currencies and recognised in the profit and loss account
e  fair value
set out below is a comparison by category of book values and fair values of the financial assets and liabilities the fair values are estimated
by discounting the future cash flows to net present values using the prevailing market rates
2005 2005 2004 2004
book value fair value book value fair value
£000 £000 £000 £000
primary financial instruments held or issued
to finance the group’s operations
cash and other liquid funds 26647 26647 20705 20705 
bank loans and overdrafts 261 261 299 299
derivative financial instruments held
to hedge the currency exposure
foreign exchange hedge contracts 36 36 87 87
58653 pace repaccs 4169  25705  828 am  page 58 notes continued
59
pace micro technology plc report  accounts 2005
20 provisions for liabilities and charges
royalties onerous warranties corporation total
under negotiation contracts tax
£000 £000 £000 £000 £000
group and company
at 30 may 2004 7864 1828 5696 5360 20748
net creditcharge for the year 816 – 7037 5360 861
utilised 608 802 5572 – 6982
at 4 june 2005 6440 1026 7161 – 14627
the owners of patents covering technology allegedly used by the group have indicated claims for royalties relating to the group’s use
including past usage of that technology whilst negotiations over these liabilities continue they are not concluded the directors have made
provision for the potential royalties payable based on the latest information available having taken legal advice the board considers that
there are defences available that should mitigate the amounts being sought the group will vigorously negotiate or defend all claims but in
the absence of agreement the amounts provided may prove to be different from the amounts at which the potential liabilities are finally
settled
the directors consider that to disclose the amounts unused following the negotiation of royalty claims during the year would be seriously
prejudicial to other royalty claims currently under negotiation in litigation or dispute accordingly the directors have aggregated amounts
released unused with additional provisions made in order to arrive at the net credit for the year shown above
21 share capital
2005 2004
number £000 number £000
authorised
ordinary shares of 5p each 300000000 15000 300000000 15000
allotted called up and fully paid
ordinary shares of 5p each 226978749 11349 226771249 11339
during the year the company allotted ordinary shares as follows
number nominal consideration
value
£000 £000
employee share option scheme 158 pence 182500 9 29
employee share option scheme 425 pence 25000 1 11
207500 10 40
58653 pace repaccs 4169  25705  828 am  page 59 notes continued
60
pace micro technology plc report  accounts 2005
21 share capital continued
the company has granted options which are subsisting including directors’ options and options granted prior to listing of the
company in respect of the following presently unissued ordinary shares of 5p each
number of ordinary price per share
shares subject to option exercise period pence
36629 25 june 1999 to 24 june 2006 1900
35000 19 august 2000 to 18 august 2007 425
505000 7 july 2002 to 6 july 2009 2000
547673 11 january 2003 to 10 january 2010 5995
107741 17 july 2003 to 16 july 2010 8575
243058 17 july 2001 to 16 july 2010 8575
25205 29 january 2004 to 28 january 2011 6100
162915 29 january 2002 to 28 january 2011 6100
275000 24 july 2005 to 23 july 2011 3750
886031 24 july 2002 to 23 july 2011 3750
245969 24 july 2004 to 23 july 2011 3750
46663 18 january 2003 to 17 january 2012 3570
60013 18 january 2005 to 17 january 2012 3570
1167184 22 october 2003 to 21 october 2012 1575
484616 22 october 2005 to 21 october 2012 1575
150000 22 october 2006 to 21 october 2012 1575
50000 26 august 2007 to 25 august 2013 510
190000 26 august 2004 to 25 august 2013 510
100000 26 january 2004 to 25 november 2013 580
100000 3 february 2005 to 2 february 2014 750
25000 17 august 2008 to 16 august 2014 510
170000 17 august 2005 to 16 august 2014 510
62500 7 october 2007 to 6 october 2014 480
87500 7 october 2005 to 6 october 2014 480
73619 11 january 2008 to 10 january 2015 4075
26381 11 january 2006 to 10 january 2015 4075
170385 6 february 2006 to 5 may 2006 326
6033882
the pace micro technology plc employee benefits trust has granted options over existing shares and the quest has acquired shares to
satisfy certain sharesave options details of these additional options are shown in note 23
22 share premium account
group and company £000
at 30 may 2004 35647
premium on allotments 30
at 4 june 2005 35677
the shares allotted during the year are listed in note 21
58653 pace repaccs 4169  25705  828 am  page 60 notes continued
61
pace micro technology plc report  accounts 2005
23 profit and loss account
£000
group
at 30 may 2004 – as previously reported 4959
prior year adjustment note 2 2436
as restated 2523
retained profit for the year 11792
write back to profit and loss account of goodwill previously written off directly to reserves see note below 360
exchange differences 150
at 4 june 2005 14825
£000
company
at 30 may 2004 – as previously reported 3827
prior year adjustment note 2 2436
as restated 1391
retained profit for the year 8482
at 4 june 2005 9873
following the liquidation of pace italy srl the cumulative total of goodwill written off directly against group profit and loss reserves in respect
of this acquisition of £360000 has been written back to the face of the profit and loss account in line with the requirements of frs10
goodwill and intangible assets there was no other financial impact arising from the finalisation of the closure of this entity in the current
period no goodwill remains written off directly to reserves
own shares held
the following amounts have been deducted from the profit and loss account reserves of the group and company as required by uitf38
see prior year adjustment note 2
at 4 june 2005 the pace micro technology plc employee benefits trust and quest held 7662333 2004 7806338 shares in the
company which cost £21421000 2004 £21450000 these shares are held to satisfy options granted to employees
the pace micro technology plc employee benefits trust has granted options to employees including directors’ options over ordinary shares
of 5p each as follows
number of ordinary price per share
shares subject to option exercise period pence
839350 24 september 2001 to 23 september 2008 640
670919 26 january 2002 to 25 january 2009 845
317500 7 july 2002 to 6 july 2009 2000
3174 20 march 2003 to 19 march 2010 9450
135570 17 july 2001 to 16 july 2010 8575
556112 29 january 2002 to 28 january 2011 6100
148000 24 july 2002 to 23 july 2011 3750
1000000 21 january 2004 to 20 january 2013 200
500000 2 may 2004 to 1 may 2013 370
2155734 26 august 2004 to 25 august 2013 510
250000 16 february 2005 to 15 february 2014 780
1310000 17 august 2005 to 16 august 2014 510
7886359
58653 pace repaccs 4169  25705  828 am  page 61 notes continued
62
pace micro technology plc report  accounts 2005
23 profit and loss account continued
the quest has acquired shares in the company either through purchase in the market or by allotment for the purpose of satisfying the
grant of options under the following sharesave schemes
number of ordinary price per share
shares subject to option exercise period pence
6990 1 april 2005 to 30 september 2005 2690
2514000 1 october 2005 to 31 march 2006 180
1333819 1 april 2006 to 30 september 2006 145
1222385 1 october 2006 to 31 march 2007 355
404920 1 april 2007 to 30 september 2007 600
202229 1 october 2007 to 31 march 2008 480
496094 1 april 2008 to 30 september 2008 320
6180437
24 profit for the year
the parent company has taken advantage of section 230 of the companies act 1985 and has not included its own profit and loss account
in these financial statements the group profit includes a parent company profit of £8482000 2004 £6060000
25 reconciliation of operating profit to net cash inflow from operating
activities
2005 2004
£000 £000
operating profit 7025 3674
goodwill amortisation 564 564 
depreciation 4419 5317 
loss on disposal of tangible fixed assets 1 317
increasedecrease in stocks 129 5961 
decreaseincrease in debtors 9152 11540 
decreaseincrease in creditors 9063 10728
decrease in provisions for liabilities and charges 761 856
net cash inflow from operating activities 11208 14165 
58653 pace repaccs 4169  25705  828 am  page 62 notes continued
63
pace micro technology plc report  accounts 2005
26 analysis of cash flows for headings netted in the cash flow statement
2005 2004
£000 £000
returns on investments and servicing of finance
interest received 728 152
interest paid 385 16
net cash inflow for returns on investments and servicing of finance 343 136 
capital expenditure and financial investment
purchase of tangible fixed assets 3594 2747 
sale of tangible fixed assets 6 2
exercise of employee share options 29 80
net cash outflow for capital expenditure and financial investment 3559 2665 
acquisitions and disposals
settlement of deferred consideration in respect of previous acquisitions – 4374 
net cash disposal with subsidiary – 562
acquisitions of trade investments 674 –
net cash outflow for acquisitions and disposals 674 4936
financing
issue of ordinary share capital 40 247
repayment of subsidiary asset loans 38 43
net cash inflow from financing 2 204
27 analysis of change in net funds
at 30 may cash at 4 june
2004 flow 2005
£000 £000 £000
cash at bank and in hand 20705 5942 26647
debt due within one year 53 3  56
debt due after one year 246 41 205
20406 5980 26386
28 capital commitments
group and company
2005 2004
£000 £000
contracted but not provided for 997 1086
58653 pace repaccs 4169  25705  828 am  page 63 notes continued
64
pace micro technology plc report  accounts 2005
29 pensions
the company contributes to several defined contribution group personal pension plans which all executive directors and employees are
entitled to join at 4 june 2005 contributions of £nil 2004 £nil were outstanding
30 leasing commitments
the following annual lease commitments are due within one year in respect of leases expiring
group company
2005 2004 2005 2004
£000 £000 £000 £000
land and buildings
between two and five years 1584 1638 1584 1638
in five years or more 315 334 – –
1899 1972 1584 1638
other
within one year 25 34 25 34
between two and five years 125 96 125 96
150 130 150 130
2049 2102 1734 1768
31 contingent liabilities
the european union has finalised the waste electrical and electronic directive which makes producers of electrical goods including settop
boxes financially responsible for specified collection recycling treatment and disposal of past and future electronic products the directive
must now be approved and implemented by individual european governments such implementing legislation together with the directive the
“weee legislation” under the weee legislation producers of electrical and electronic equipment are to be financially responsible for such
matters with effect from 13 august 2005 as it is likely that implementation of weee legislation will vary significantly between individual
european member states it is not currently possible to estimate the company’s existing liability or future expenses resulting from such weee
legislation the company will continue to assess its potential financial impact as the european union and its individual member states clarify
specific requirements and policies
the company has been informed of a potential claim from a former customer relating to the supply of settop boxes in 20002001 to a
maximum liability of £75m the directors believe that they have good defences to such claim and that in the absence of any liability no
provision has been made
58653 pace repaccs 4169  25705  828 am  page 64 notes continued
65
pace micro technology plc report  accounts 2005
the following information does not form part of the audited financial statements
32 international financial reporting standards “ifrs”
to date the group has prepared its accounts in compliance with uk generally accepted accounting principles “uk gaap”  eu
regulations require the group to adopt ifrs in its financial statements for the year ending 3 june 2006 as outlined below adjustments are
required to be made to the opening position of the comparative period 29 may 2004 together with a restatement of the results for the
period ended 4 june 2005  
the rules for the first time adoption of ifrs are set out in ifrs 1 in general a company is required to determine its ifrs policies and apply
those retrospectively to determine its opening balance sheet under ifrs these ifrs policies are based on the standards expected to be
effective at the date of implementation
the following summarises the significant areas of financial impact to arrive at the ifrs adjusted amounts
any adjustments referred to below are unaudited and included for illustrative purposes only
a  research and development costs
uk gaap  research and development costs were expensed through the profit and loss account as and when they were incurred
ifrs as required by ias 38  certain development costs as defined by specific criteria must be capitalised as intangible assets broadly
these criteria will apply where the relevant spending can be reliably identified with development work rather than research and is likely to
generate future earnings spending will then be capitalised until the commencement of sales volumes related to the specific project at
which point the amounts capitalised will be amortised over the deemed useful economic life estimated to be in a range of between 6 and
18 months  amounts held on the balance sheet will be reassessed regularly in an “impairment test” under ias 36 to ensure that the
recorded value is supported by the estimated value of the related future earnings
financial impact  an intangible asset of £6634000 will be recognised on the balance sheet at 29 may 2004 net operating expenses for
the period ended 4 june 2005 will decrease by £816000 as the net result of capitalising and amortising relevant amounts in the period
leaving an intangible asset of £7450000 at 4 june 2005
b  share based payments
uk gaap  no account is taken of the fair value of share based payments granted to employees
ifrs as required by ifrs2  ifrs2 requires the fair value of share based payments granted to employees since 7 november 2002 to be
charged to the income statement the fair value is calculated using an optionpricing model and is charged to income over the relevant
vesting periods adjusted to reflect the actual and expected levels of vesting
financial impact  a charge in the period to 4 june 2005 of £744000 would be required to be recognised in respect of share options
granted after 7 november 2002 and not vested by 31 january 2005
c  treatment of hedging for foreign exchange
uk gaap  financial derivatives employed to hedge future transactions particularly in respect of foreign exchange were “hedge”
accounted that is to say profit was recorded at the achieved exchange rate blending together any transactions executed at spot rates
and settlement of maturing forward contracts held in the hedge book unrealised losses and gains on the ongoing contracts within the
hedge book were disclosed within the notes to the accounts
ifrs as required by ias32 39  the aggregate value of all the group’s outstanding derivatives will be shown as one asset on the balance
sheet which will be “markedtomarket” each year to reflect its fair value in the profit and loss account net finance costs will record the
net gain or loss on both realised derivative transactions and unrealised markedtomarket adjustments
financial impact  an adjustment to reduce net assets at 29 may 2004 of £1005000 has been made to reflect the unrealised losses at that
date with an adjustment of £113000 made to reduce net assets at 4 june 2005 a corresponding adjustment has been made to the profit
and loss account for the period ended 4 june 2005
d  goodwill and business combinations
uk gaap  goodwill arising from business combinations has been carried as an intangible asset and amortised over its useful economic
life
ifrs as required by ifrs3  ifrs3 prohibits the amortisation of goodwill arising in respect of business combinations instead it requires
goodwill to be carried at cost annual impairment tests are required to be performed
financial impact  the value of goodwill has been frozen at 29 may 2004 accordingly the profit and loss amortisation charge of £564000
taken in the period to 4 june 2005 would not be required under ifrs
in addition the entry writing off goodwill previously written off against reserves of £360000 and written off again in the current year profit
and loss account upon the finalisation of the liquidation of pace italia srl is not required to be made under ifrs
58653 pace repaccs 4169  25705  828 am  page 65 notes continued
66
pace micro technology plc report  accounts 2005
32 international financial reporting standards “ifrs” continued
income statement reconciliation
the following table outlines the main adjustments outlined above as a result of adopting ifrs compared to uk gaap on the group profit
before tax for the fiftythree week period ended 4 june 2005
£000
profit before tax for period to 4 june 2005 – as disclosed under uk gaap 7075
adjustment for development expenditure capitalised and amortised 816 
share based payments adjustment 744 
adjustment for off balance sheet foreign exchange potential liabilities 892
removal of goodwill amortisation in period 564
removal of adjustment in respect of goodwill previously written off against reserves adjustment 360
profit before tax for period to 4 june 2005 – under ifrs 8963 
opening net asset position
the following table outlines the main adjustments to be made to the opening net asset position of the group at 29 may 2004
£000
net assets at 29 may 2004 – as disclosed under uk gaap 49509
capitalised development expenditure 6634 
adjustment for off balance sheet foreign exchange contracts marked to market 1005
net assets at 29 may 2004 – under ifrs 55138 
net asset position at 4 june 2005
the following table outlines the main adjustments to be made to the opening net asset position of the group as 4 june 2005
£000
net assets at 4 june 2005 – as disclosed under uk gaap 61851
capitalised development expenditure 7450
adjustment for off balance sheet foreign exchange contracts marked to market 113
removal of goodwill amortisation in period 564
net assets at 4 june 2005 – under ifrs 69752
58653 pace repaccs 4169  25705  828 am  page 66 five year record
67
pace micro technology plc report  accounts 2005
2005 2004 2003 2002 2001
£000 £000 £000 £000 £000
turnover 253326 239949 166597 351794 523641 
profitloss before tax 7075 3880 48577 12010 38068
profitloss before exceptional items and tax 7580 5380 17554 10427 42597
profitloss after tax 11792 8066 48031 34842 24460
diluted epslps 53p 36p 213p 80p 111p
diluted epslps before exceptional items and goodwill amortisation 58p 45p 68p 29p 135p
net assets excluding goodwill 52979 40073 31590 61704 69495
  the comparatives for financial year 2001 have been restated to reflect the impact of adoption of frs19 deferred tax
 the comparatives for financial years 2001 to 2004 have been restated to reflect the impact of uitf38 accounting for esop trusts
58653 pace repaccs 4169  25705  828 am  page 67 directors secretary and advisers
68
pace micro technology plc report  accounts 2005
directors
all of victoria road
saltaire  shipley
west yorkshire bd18 3lf
sir michael bett nonexecutive chairman
john howard dyson chief executive
david graham brocksom finance director
neil gaydon worldwide sales 
marketing director
patricia chapmanpincher nonexecutive director
robert arthur fleming nonexecutive director
marten charles fraser nonexecutive director
robert ernest lambourne nonexecutive director
robert michael mctighe nonexecutive director
company secretary
anthony john dixon
registered and auditors
head office kpmg audit plc
victoria road 1 the embankment
saltaire  shipley neville street
west yorkshire bd18 3lf leeds ls1 4dw
registered number 1672847
registrars principal bankers
lloyds tsb registrars barclays bank plc
the causeway po box 190
goringbysea  worthing barclays house
west sussex bn99 6da 6 east parade
leeds ls1 2ux
stockbrokers
hoare govett limited
250 bishopsgate
london ec2m 4aa
credit suisse first boston
20 columbus courtyard
london e14 4da
58653 pace repaccs 4169  25705  828 am  page 68 shareholder information
annual general meeting
the company’s annual general meeting will be held at 1130 am tuesday 6 september 2005 at citigate dewe rogerson 26 finsbury square
london ec2a 1sh
lloyds tsb registrars
enquiries regarding shareholdings change of address or other particulars should be directed in the first instance to the company’s registrars
lloyds tsb registrars the causeway worthing bn99 6da on 0870 600 3970 they also provide a range of online shareholder information
services at wwwshareviewcouk where shareholders can check their holdings and find practical help on transferring shares or updating their
details
multiple accounts on the shareholder register
if you have received two or more copies of this document this means that there is more than one account in your name on the shareholder register
this may be caused by either your name or address appearing on each account in a slightly different way  for security reasons the registrars will
not amalgamate the accounts without your consent if you would like any multiple accounts combined into one account please
write to lloyds tsb registrars at the address given above
unsolicited mail
the company is obliged by law to make its share register available upon request to the public and to other organisations which may use
it as a mailing list resulting in shareholders receiving unsolicited mail shareholders wishing to limit the receipt of such mail should write to the
mailing preference service dma house 70 margaret street london w1w 8ss or call 44 0 20 7291 3310 for an application form or visit
wwwmpsonlineorguk
results
announcement of 2006 interim results – early january 2006
preliminary announcement of 2006 yearend results – mid july 2006
pace website
shareholders are encouraged to visit our website wwwpacemicrocom which has a wealth of information about the company
69
pace micro technology plc report  accounts 2005
58653 pace repaccs 4169  26705  1009 am  page 69


Summary:
 chief executive’s review
the last 12 months have been a year of active transition for pace  
following a series of new customer announcements in europe and australia made in the previous year our company has
continued to grow we have significantly reinforced our position in the market with a succession of further business wins
crucially we have made important inroads into the us market the world’s largest market for digital paytv technology by
winning new business with comcast communications  
we continue to work with the world’s most successful and innovative paytv operators ranging from bskyb in the uk to
customers in the us and foxtel in australia to ensure we are in the best possible shape to capitalise on the opportunity
these substantial customers present we have also taken on new organisational challenges to make our business more
efficient and responsive 
markets
the global market for digital settop box products continues to grow  during 2004 over 45 million digital settop boxes were
shipped worldwide with the market predicted to grow by a further 29 to over 58 million settop box shipments during
2005 and to 132 million by 2010
1
 within this market pace has been assessed as the world’s fifth largest supplier
2
– our
ongoing aim is to be one of the top three  
our focus though is not just on the total number of settop boxes we ship but also the type of products we create and the
companies we deliver them to  in the last year our attention has once again totally returned to the paytv market moving
away from less profitable ‘freetoair’ markets 
settop box demand from the paytv sector has also been typified by a growing demand for more ‘added value’ products
such as personal video recorder pvr products and a significant increase of interest in high definition hd technology
outside of the us  not only are these more profitable products for pace to develop capitalising on our engineering
capabilities they are more attractive to paytv operators as they help retain customers and increase average revenue per
user arpu  
07
pace micro technology plc report  accounts 2005
we have made important inroads 
into the us market the world’s
largest market for digital paytv
technology by winning new
business with comcast
john dyson
chief executive
1
source strategy analytics digital tv devices forecast april 2005
2
source strategy analytics november 2004
ra section 1  25705  831 am  page 6 08
pace micro technology plc report  accounts 2005
enroute to being 
the best settop 
box supplier in 
the world
ra section 1  25705  831 am  page 7 09
pace micro technology plc report  accounts 2005
emea
our european focus last year was primarily on the continent as the major operators continued their transitions to digital
catching up with developments in the uk led by bskyb bskyb has set the standard in europe since it launched digital in
1998 and remains an important pace customer for standard digital settop boxes and the sky pvr for which it now has
770000 subscribers
3
 we have also continued to work with both of our ukbased cable operators ntl and telewest 
in addition we won new business with ntl ireland and ssvc a registered charity that provides radio and television services
to british armed forces around the world british troops are now using pace settop boxes to watch tv in military bases and
hm ships in diverse locations from the falkland islands to norway from belize to the gulf and afghanistan
relationships with all of our customers in continental europe deepened importantly we made some significant steps
forward with premiere germany’s largest digital tv operator  we began to ship an entrylevel satellite settop box for this
operator in may 2004 since then we have gone on to supply a cable settop box which was the first to achieve network
certification from both premiere and our second german customer kdg the country’s largest cable operator  we also made
two important new product announcements with premiere the first was for a satellite pvr for shipment in summer 2005
with the second for a high definition settop box which will be used to deliver europe’s first mpeg4 high definition paytv
service from november this year 
elsewhere in europe we continued our successful relationships with sky italia in italy and viasat in scandinavia  sky italia
was one of our most important customers during the first half of the year as it continued to work through its major launch
phase which involved replacing settop boxes for a large number of existing subscribers as with all paytv operators its
rate of growth fell back after the launch phase to a more ‘normal’ level of rollout 
we are keeping a close watch on other large operators in continental europe and the middle east and believe we are in a
strong position to win more business in this region as more markets move to digital over the next two to three years 
relationships with all of our
customers in continental europe
deepened importantly we made
some significant steps forward
with premiere germany’s largest
digital tv operator
3
bskyb results to 31st march 2005
ra section 1  25705  831 am  page 8 north america
we have turned a very significant corner in the us following our contract announcement with comcast at the end of may
over the last five years we have invested approximately £35 million in our us operations confident that as this is the world’s
largest paytv market we would be able to recoup our investment over the longerterm this is what is now beginning to
happen the comcast contract is significant for pace on a number of fronts importantly it includes a major commitment to
purchase pace settop boxes which is worth between 375 million and 550 million to us over the next three years  
comcast will also licence our engineware
tm
software for the north american market via a oneoff payment that has now
been made engineware was a fundamental development to pace’s us cable settop box strategy and leverages our
substantial experience of the wide variety of technologies used in settop box deployments to create new middleware
performing core settop box processing functions for comcast engineware is useful on a number of fronts and will
support their implementation of the emerging us middleware standard ocap
4
 our investment in one common software
architecture will enable pace engineers to provide solutions rapidly across a wide range of emerging and current hardware
architectures from simple zappers to highend pvrs
finally as part of the agreement pace and comcast will jointly fund future technology development to be carried out by a
dedicated pace development team this element of the agreement is very exciting for pace as it places us at the centre of
the world’s largest paytv operator and offers us an opportunity to be at the forefront of their development activities  
the first box that we will deliver as part of the comcast agreement is the high definition tdc775 otherwise known as tahoe
this highly sophisticated box is part of our growing range of new products for this market which includes a new ‘all digital’
platform that has been designed to support us cable operators as they push for all digital networks the range now
includes through the product development work we have done for comcast settop boxes that can operate on motorola
networks which has expanded our us market reach
it is difficult for any nonus company to break into the us particularly when as in our sector there are some very powerful
and wellestablished local suppliers during our time in the us we have seen other nonus settop box companies come
and go breaking into the us takes time skill persistence and a longterm vision we’ve always believed that pace’s
experience of markets outside of the us would bring a new and fresh perspective to the us market which we have been
able to demonstrate over the last few years and have taken to a new level with our comcast announcement  
we should not let our comcast agreement overshadow our other successes in north america we continue to work with
time warner and bright house shipping our wellestablished dc551 high definition settop box which has been our main
us box for the last two years we have added to the dc551hd customer list with videotron who will be using this and our
standard definition dc511 for its illico digital tv service in canada additionally in canada we won new business with
sasktel a company we have worked with on an exclusive basis since 2002  sasktel is now using pace’s db240 ip settop
box as they grow their tv over dsl service which is the largest of its kind in north america 
10
pace micro technology plc report  accounts 2005
4
open cable applications platform a middleware software  
layer specification designed by cablelabs in the us
ra section 1  25705  831 am  page 9 asia pacific
asia pacific is an opportunity market we already have some important customers in this region through our longterm
relationship with sky new zealand with which we have now signed a new agreement to supply settop boxes for new
zealand’s first pvr service more recently we have worked with foxtel which used pace settop boxes to launch its new
digital service in australia 
foxtel is australia’s leading subscription television provider and recently celebrated its onemillionthservice subscriber we
began deliveries of our first foxtel settop boxes in may 2004 and provide products for its satellite and cable networks this
relationship was strengthened during the year with the launch of the foxtel iq pvr in march pace was sole supplier for this
important launch and not only is foxtel iq the first pvr to reach the australian market the cable variant is the world’s first
cablebased dvb pvr foxtel and sky new zealand are more great examples of how pace can work with an important
digital television operator moving from service launch through to next generation technologies supporting a customer’s
delivery and growth strategies  
we are also now seeing some limited traction in other far eastern markets following an intensive 18 months during which
we have invested considerable energies in developing relationships and business models for the region  for example a
new product range that meets the pricing and service needs of asian operators has been launched and we have developed
a licensing approach to support sales into china as a result we have been able to announce our first new asian customer
– galaxy in hong kong – who will use our asian cable platform
pace engineering and technologies
in my report on our successes across pace’s global markets one theme is clear the importance of the pace engineering
team and their technological leadership 
pace’s strength lies in our ability to develop new technologies for the paytv industry and it is important that our inhouse
engineering teams are totally focussed on what happens next not only is this ultimately what our customers want – a
visionary partner that supports them in achieving their goals – it also creates a more profitable company for our shareholders
over the years pace has proven the value of being first to market with new technologies and in today’s increasingly
competitive market it is vital we take ‘first mover advantage’ 
11
pace micro technology plc report  accounts 2005
in my report on our successes across
pace’s global markets one theme is
clear the importance of the pace
engineering team and their
technological leadership
ra section 1  25705  831 am  page 10 12
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 11 last year the work of our engineers and technologists has crystallised on two fronts the first relates to how we deliver
current and immediate next generation products to our customers by making them as costeffective as possible so that we
retain and grow their business pace has always been good at reengineering existing products to reduce the component
count and make them easier to manufacture  
however this is no longer enough if we are to continue as a frontrunner in the competitive marketplace and on the second
front we began to reassess our own business model to improve development processes and increase our use of outsource
partners this approach is starting to free up more of our inhouse engineering expertise to concentrate on what really sets
us apart from the competition the development of higher value higher specification products and technologies that excite
the market help retain existing customers and win new business for example we have been able to build our position in
high definition developing a high definition pvr for comcast and europe’s first mpeg4 high definition settop box for
premiere  
with high definition now gaining ground and pvr becoming an essential part of many operators’ business strategies it is
vitally important we anticipate the next set of industry trends which we believe will be all about extending the ‘delivery pipe’
for paytv services to this end we are growing our technology team which is concentrating its energies around four key
themes core settop box technology home networking bandwidth efficient channel access and mobile devices 
many of the concepts we are now working on have been around for some time today a confluence of component pricing
more effective technologies and standards alongside a growing consumer awareness and demand for new digital tv
services means that the work we are now doing will put pace in a strong position for the next stage of market evolution at
the same time we recognise the importance of looking for new technology opportunities outside of the immediate paytv
market pace is highly skilled in the fundamental technologies that will drive the intelligent home of the future and we are
actively seeking out new market opportunities for the group that will include the opportunity to gain recurring revenues
intellectual property
intellectual property ip is important to pace on a number of fronts and in the last year we have revitalised our ip programme
on the business front we are able to use it as a form of currency in business negotiations for example as a defensive
measure when challenged by other ip owners in the course of our daytoday business effective use of pace ip in this type
of royalty negotiation can help make us more competitive and costeffective and is an important strand of our wider business
improvement activity
an active ip recognition scheme also creates an environment that encourages innovation and provides an opportunity for
staff to register their ideas and be rewarded we relaunched our inhouse ip award programme this year as the david hood
innovation awards to recognise david’s significant contribution to the company and raise the programme’s profile  
today our ip portfolio is small but growing with 48 patents granted and over 160 applications pending our patents are
mostly digital settop box technology specific which will add future value to pace as our portfolio continues to grow
13
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 12 14
pace micro technology plc report  accounts 2005
today a confluence of component pricing more
effective technologies and standards alongside a
growing consumer awareness and demand for
new digital tv services means that the work we
are now doing will put pace in a strong position
for the next stage of market evolution
ra section 1  25705  831 am  page 13 15
pace micro technology plc report  accounts 2005
ra section 1  25705  831 am  page 14 people
as we move ahead with the changes i have outlined to our business the investment we make in our people becomes even
more important the skills of the pace team are recognised worldwide from the way we build customer relationships to our
technical expertise and postdelivery support  
to develop our people so that they can participate in our current business transformation we have continued to invest in
training and several major programmes took place during the year the developing leadership focus programme was
aimed at managers throughout the organisation to help them understand the strategic context for our change programme
and their role within it to support more specific skills development we have developed sales and product management
training programmes and a series of technical training programmes for our engineers in addition we supported
communications skills with crosscultural training for those working directly with our new asian partners and team meeting
training for managers 
we ended the year with just over 600 employees slightly up on last year with most of our additional new recruits being
engineers with specialist skills for the development of our next generation products 
our next steps
pace has made some very important steps forward in the last year we made a very clear and dramatic mark on the us
market with our comcast announcement and grew our business elsewhere in the world by developing existing customer
relationships and winning new business at the same time we have reasserted our technology leadership with new products
and concepts from hd pvr to multiroom and mobile paytv
looking ahead into the next year we need to focus on the delivery of our new contracts and improve our cost performance
through the work we are now doing on improving our business structure and processes pace can look ahead to the future
with more assurance than has been possible in the last few years
john dyson
chief executive
12 july 2005
16
pace micro technology plc report  accounts 2005
pace has made some very
important steps forward in the
last year pace can look ahead to
the future with more assurance
than has been possible in the 
last few years
ra section 1  25705  831 am  page 15