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


Summary:
 4
pace micro technology plc  report  accounts 2004
during the period pace has been
very successful in expanding its
revenues against a background of
a new momentum in the global
digital paytv market caused by
reductions in settop box average
selling prices asps
chairman’s statement
in the year ended 29 may 2004 pace made a welcome return to profitability following progressive improvements in
performance instigated by the management team over the last 18 months 
during the period pace has been very successful in expanding its revenues against a background of a new momentum
in the global digital paytv market caused by reductions in settop box average selling prices asps the 200304
results represent a marked improvement in the group’s performance with pace reshaping its global business and
gaining new customers most importantly in europe the board recognises that net margins need to be improved
which is being addressed by maintaining a rigorous approach to the management of all business costs the board
believes it is right to maintain its business priority to grow market share whilst addressing these challenges
results
profit before tax amortisation of goodwill and exceptional items improved to £59m 2003 loss £162m on turnover
of £2399m 2003 £1666m after taking into account goodwill amortisation of £564k and an exceptional charge of
£15m profit before tax was £39m 2003 loss £501m basic earnings per share were 37p 2003 loss per share
220p before goodwill amortisation and exceptional items adjusted earnings per share were 46p 2003 loss per
share 68p and adjusted diluted earnings per share were 45p 2003 loss per share 68p
trading review
pace’s core market – digital settop boxes for paytv operators worldwide – has entered a growth phase and pace has
this year increased its volume shipments by 69 to 22 million settop boxes up from 13 million last year we are also
seeing a significant shift in the shape of the group’s business sales to nonuk customers have grown by £73m
representing a 35 times increase over last year to 42 of our total revenues up from 17 of total revenues in 2003
overall turnover increased 44 in the year the decline in asps has made it possible for more digital tv operators to
launch and extend their services thereby generating the growth in demand as a consequence of competition and
some component price increases gross margin for the year declined to 190 2003 209 stated before exceptional
items we have sought to balance the impact of competition on our asps through strong overhead management and
an increased use of outsourced services coupled with continued efforts to reduce product cost we also benefited
from the weakness of the us dollar in the second half
sir michael bett cbe
chairman 5
pace micro technology plc  report  accounts 2004
our europe and asia pacific regions made the most significant contribution to volume growth growing by factors 
of seven and three times respectively in these regions we have won five major new customers sky italia viasat in
scandinavia premiere and kdg in germany and foxtel in australia sky italia and foxtel have quickly become
important customers following successful and high profile service launches we expect these regions to contribute
strongly in the coming year 
the uk as one of the most advanced and mature digital tv markets remains important to pace although uk
shipments fell 10 to approximately 1 million boxes as pace has been gradually reducing its efforts in the low margin
freeview market revenues improved slightly due to changes in product mix bskyb has continued the promotion of its
sky personal video recorder pvr which combined with ongoing deliveries of the standard digibox makes it our
largest customer in this region our uk cable customers continue to be important to us although they have moved to
dual source supply
our us shipments have grown  up three times to 162000 units  as pace began to benefit from the demand for high
definition television and to establish credibility with individual local networks  high definition tv which offers us
consumers a significant improvement in picture quality is stimulating competition between cable and satellite operators
for digital customers  however further performance improvements and new product launches are required to move
our us operations into profitability  pace engineers are now well advanced in their work on the groups first settop
box for networks based on motorola conditional access technology which will expand our market opportunity in
addition they are well into development of our first high definition pvrs suitable for deployment on all us networks
we have continued to utilise solectron’s manufacturing facilities in romania and china and have now started to
outsource engineering projects to tata elxsi in india these together with ongoing improvements to our engineering
performance are enabling us to manage significantly more projects than before without a commensurate increase 
in cost
board changes
as david hood has decided not to stand for reelection as a nonexecutive director at the annual general meeting on
8 september 2004 he will retire from the board on that date
david founded pace over twenty years ago and he has made a valuable contribution to the board as a nonexecutive
director for the last six years he is stepping down to dedicate more time to his other business interests and the board
would like to thank him for the exceptionally important contribution he has made 
financial review
we have cut overheads with nonengineering expenditure excluding goodwill amortisation down from £238m in 2003
to £185m and engineering development down due to the improvements mentioned in the above paragraph to
£213m 2003 £271m as a percentage of revenue total overheads excluding exceptional items and goodwill
amortisation fell to 166 2003 305
the taxation credit for the year resulted mainly from agreement with the uk inland revenue in respect of certain prior
year issues
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 29 may 2004
the level of releases exceeded new provisions by £06m 2003 £18m 
we expect revenues to be ahead of last year and volumes
to be significantly ahead of last year with more new
business being won 6
pace micro technology plc  report  accounts 2004
net assets at 29 may 2004 excluding goodwill increased to £425m 2003 £341m net current assets were £541m
2003 £479m net cash balances at the yearend were £204m 2003 £131m 
stocks at the yearend amounted to £100m 2003 £160m comprising £54m of raw materials and work in progress
and £46m of finished goods the stock turnover rate was over 19 times based on yearend stock levels 2003 8
times debtors of £647m 2003 £572m included insured balances of £385m 2003 £342m the trade debt
collection period was 11 weeks 2003 12 weeks
pace’s improved cash position came from the reduction in the levels of stock held and improvement in the working
capital position overall offset by the final earnout payment of £44m made in respect of a prior year acquisition 
as previously announced the company is a party to a reference to the financial services and markets tribunal the
company is unfortunately prohibited under the financial services and markets act 2000 from providing any further
information regarding this reference until the matter is resolved the board considers it appropriate to make an
exceptional charge of £15m for costs including legal fees associated with this reference
outlook
in the uk digital tv is now in 53 of households and over two thirds of these households have paytv we expect
growth in penetration to continue but at a slower rate pace has good relationships with all of the uk’s digital paytv
operators and has led the introduction of higher specification products such as pvr however with steady unit sales
and declining asps we expect to see an overall reduction in uk revenues in 200405 
by contrast continental europe and asia pacific represent our biggest opportunities for growth in the next year and
beyond as more paytv operators go digital and others progress to higher specification pvr platforms
in the us we continue to focus our efforts on building our relationships with comcast and time warner as well as
developing increasingly good relationships with other important operators next year revenues will increase albeit
working from a relatively low starting point and we aim to grow our market share especially in the second half of the
financial year 
we enter the year with good order cover however the market remains extremely competitive some component prices
are increasing and the continuing volatility in the us dollar exchange rate provide an additional element of
unpredictability and pressure on gross margins to mitigate these factors management is concentrating on tight
control of costs as well as the successful introduction of new pvr and high definition products pace has established
a strong position in these technologies overall for the 200405 financial year we expect to see further improvements
in our performance with revenues ahead and volumes significantly ahead of last year
sir michael bett
chairman
12 july 2004