Fifth alert at Pace after BSkyB jolt

TELEVISION gadgetry group Pace Micro Technology's shares plunged today, nearly halving in a matter of minutes after its fifth profits warning in 10 months.

Shares in Pace Micro, which specialises in set-top boxes for pay-TV, traded at more than 300p before the first in the series of alerts last September but crashed 34 1/2p to 38p at one stage today. That values the company at just £90m. They later recovered some ground to 42 1/2p.

The latest warning came as Pace was forced to admit that, after months of negotiations, BSkyB has nailed the company to the floor over the terms of its agreement to produce the latest sitting-room gizmo, the personal video recorder, with Pace forced to sell them to BSkyB for less than they cost to make.

The personal video recorder is the latest innovation from the US. Resembling a DVD player, it has the capacity to record up to 40 hours of television. Smart technology enables it to record a whole series of future programming at one command, and it is predicted to be the next revolution in personal television.

TiVo is Britain's main provider of personal video recorders but Pace has the exclusive contract to make the Sky+ recorder that is being marketed to BSkyB's subscribers. About 25,000 were sold in the six months to March but BSkyB is refusing to release latest take-up figures. They cost £300 to buy and a further £40 to install with a £10-a-month charge after that.

In a statement announcing the latest production agreement, Pace admitted: 'In a departure from its usual trading terms, for the period 1 June 2002 to 31 March 2003 and for a limited number of units, Pace will invoice an amount on shipment that is below the product cost.'

It said the agreement would take £8m off profits in the current financial year to the end of May 2003. House broker ABN Amro is now forecasting profits to come in at £12m. Pace, under chief executive Malcolm Miller, also said the agreement would take £1.7m off profits in the financial year just closed - consensus forecasts reckon profits for 2001-02 of £14.5m in figures that will be announced soon.

Pace marketing chief Andrew Wallace said the agreement meant Pace would take a share in future Sky+ monthly revenues and the deal would be profitable for the company from 1 April when shipments on usual trading terms kick in. A spokesman for BSkyB said: 'We and Pace have had a series of mutually beneficial deals.'