Pace Micro Technology plc

1

• Pace Micro Technology plc
• Results for the 53 weeks ending 4 June 2005
• 12 July 2005

2
Pace Strategy

• Two years ago Pace established a strategy to
  broaden its customer base and align its business
  with the global payTV market
• As a result Pace
• Continued investment in the US European
  markets, to drive up market shares
• Directed research development focus onto more
  complex products
• Started to develop thinking into new earnings
  streams that will create recurring revenues
• Latest US business wins represent a major step in
  achieving our strategic aim
• Work remains to achieve timely execution on new
  contracts
• This year will put Pace into a strong position
  for continued growth

3
Salient Points

• Shipments increased to 3.4 million set-top boxes
  (2004 2.2 million)
• Turnover 253.3m (2004 239.9m)
• Profit before tax, amortisation of goodwill and
  exceptional items of 8.1m (2004 5.9m)
• Gross margin 20.8 (2004 19.0)
• Net cash position 26.4m (2004 20.4m)
• Adjusted diluted earnings per share 5.8p (2004
  4.5p)

4
Summary Financial Performance
excludes 0.4m exceptional loss on closure of
business
5
Balance Sheet
6
Cash Flow
7
Gross Margin
8
Overheads
For the six month period
To 29 Nov 03
To 29 May 04
To 4 Dec 04
To 4 Jun 05
m
SGA
Overall
Engineering
Excluding goodwill and exceptional items
9
Overheads (IAS adjusted - estimated)
For the six month period
To 29 Nov 03
To 29 May 04
To 4 Dec 04
To 4 Jun 05
m
SGA
Overall
Engineering
Excluding goodwill and exceptional items On
UK GAAP basis
10
Headcount
For the six month period
To 29 Nov 03
To 29 May 04
To 4 Dec 04
To 4 Jun 05
SGA
Overall
Engineering
Tata Elxsi
11
International Accounting Standards (IAS)

• Mandatory for Paces 2005/06 results
• Key areas of impact
• RD capitalise development spend and amortise
  over expected useful life
• Foreign Exchange hedges all outstanding FX
  contracts marked to market at balance sheet date
• Share Options recognise cost of issuing share
  options over vesting period of options
• Goodwill no annual amortisation of goodwill
• Goodwill recycled
• Estimated impact on PBT for 53 week period ended
  4 June 2005
• Estimated impact on balance sheets
• Net assets 29 May 2004
• Net assets 4 June 2005

• IAS impact 2005
• m

0.8
0.9
-0.7
0.6
0.3
1.9
5.6
7.9
12
Business Review
13
Business Highlights

• New record set for digital set-top box shipments
  
• Continued trend of widening geographic customer
  reach
• Delivered on new business wins from 03/04
• Developed many existing operator relationships
  with new PVR and HD contracts
• Success in US with multi-year Comcast agreement
• Managing business costs through new productivity
  outsourcing initiatives
• Investing in engineering capabilities next
  generation technologies to win new business ahead
  of the competition

14
Revenue by Geographic Market
For the six month period
UK solid performance - maturing market US set
to grow on new contract wins EMEA/APAC good
performance
To 29 Nov 03
To 29 May 04
To 4 Dec 04
To 4 Jun 05
m
EMEA
APAC/ROW
UK
North America
15
UK
UK shipments remained constant, with customers
now including BSkyB Ntl Telewest PayTV market
now maturing Paces shipments and revenues
expected to fall in the coming year
SSVC Ntl Ireland
16
EMEA
EMEA shipments increased over 2.5 times to 1.9
million boxes, with shipments to KDG Premiere Sky
Italia Important new contracts announced
with Premiere for PVR HD UPC (part of UGC) for
digital switchover in The Netherlands Expect
revenues to fall lower volumes but more
higher-specification boxes will be shipped so
ASPs will rise e.g. HDPVR
Viasat
17
North America

• Have strategy to develop Paces share of the
  worlds largest market for digital payTV,
  executed through multi-year agreement with
  Comcast
• Set-top box commitment worth between 375m and
  550m over three years
• Development agreement to fund jointly
  non-exclusive future technology
• Licensing of Pace EnginewareTM software
• Continued work with
• Time Warner Cable
• Bright House Networks

18
North America

• Won new business with Canadian operator Videotron
• Targeting more US cable customers with a product
  range that now covers all solutions from all
  digital switchover device to HD PVR
• Continued to supply Canadian telco
• Sasktel with IPTV products
• Deliveries on new business will commence
• end-2005 onwards

19
Technology Focus

• Now taking a more proactive technology position
  growing in-house capability
• Being first to market with new technology
  products builds a more profitable business
• Paces current success in PVR and HD is evidence
  of this
• Investment in multiroom, advanced codecs and
  software development has made important business
  wins such as Comcast possible
• And demand for more sophisticated set-top boxes
  is growing
• Also continuing to investigate new markets for
  opportunities within the Intelligent Home

20
From single point TV ...
TV-led content delivery
Standalone standard definition set-top box
21
. To Multiroom
Thin client
HD
Thin client
HD
Cable Satellite IPTV
Multiroom PVR server
TV-led content delivery
Mobile
22
Improving Paces Competitive Position

• Initiatives to improve efficiency,
  cost-effectiveness and profitability are well
  advanced
• Current work is focused around
• Spending more on technology to remain ahead
• Improving project delivery efficiency within Pace
• Outsourcing to additional engineering partners
• Improving productivity through Tata Elxsi
• Taking on an additional manufacturing and design
  partner
• Leveraging buying opportunities

23
Outlook

• No change in full year business outlook
• Revenues likely to exceed current expectations,
  gross margins lower
• Growth in ASP as box complexity increases
• Deliveries on new contracts start end 2005
• H1 results to be below break-even
• H2 revenues to be significantly ahead of H1
• Execution will be key
• Pace in much improved position