New chairman Leighton signals change of Pace

By This Is Money
Updated: 10:03 EDT, 31 May 2011

Pace is parachuting in ex-Royal Mail chairman Allan Leighton in a bid to turn around the firm following a series of setbacks.

Allan Leighton: New Pace chairman has a string of other jobs, including a role at BSkyB

Mr Leighton, also a former boss of Asda, will take over from current chairman Mike McTighe when he retires this summer.

But he has already announced plans to conduct a strategic review of the TV set-top box maker, which has had a troubled few months.

In May, its shares tumbled after it warned profits this year would be well below City forecasts because of component supply problems related to the Japanese tsunami.

A few days later, some 39% of shareholders rebelled against the firm's remuneration report at its annual meeting. Pace chief executive Neil Gaydon pocketed £938,000 in pay and bonuses last year, against £818,000 in 2008.

And in March, the company failed to announce a delay to a major US contract in its annual results, instead mentioning it at a meeting with analysts - an apparent breach of stock market discloure rules.

Mr Leighton, who is also a non-executive director of satellite broadcaster BSkyB, one of Pace's major customers, said his task was to help Pace develop as a 'great technology company' but without the 'bumps'.

As part of the terms of his appointment, he has agreed to buy £200,000 worth of Pace shares.

He has also been granted options over a further 600,000 shares at prices of 145p and 190p and which depend on Pace's performance over the next four years.

Apart from the Pace and BSkyB jobs, his other roles at present include being deputy chairman of department store Selfridges and chairman of budget clothing chain Peacocks.

Mr McTighe, who has been on the Pace board for 10 years and chairman for the past five, commented: 'It's terrific that we are appointing someone of Allan's calibre as the next chairman of Pace.'

He said that despite recent setbacks Pace was well positioned for the long term.

Shares in Pace rose 3%, or 3.2p, to 118.1p in trading today.

Pace, which has its head office in Saltaire, West Yorkshire, employs around 1,200 staff in countries including the US, India and China.

View from the City

The City's reaction to Pace's woes in recent months has been scathing, with many analysts saying a boardroom shake-up was needed to repair relations with investors.

Today, Ian Robertson of broker Seymour Pierce commented: 'Allan Leighton has an impressive track record as a manager. That said, we are concerned as to whether he have enough time given his extensive other commitments at Loblaw, Pandora, Selfridges, British Sky Broadcasting and Peacocks.

'We note that there are potential conflicts of interest with respect to the British Sky Broadcasting role - it owns Amstrad for a start.

'We are also concerned whether he actually knows anything about Pace. The statement refers to his view that 'there is a 'greater technology company' in there'. We hope he doesn't enter the company under the impression that the most important things is technology. It is not. The key factor is delivering the product on time.'

Mr Robertson added that although Mr McTighe's recent record had been disappointing and with hindsight there were 'some clear mistakes', he was leaving Pace in a far better position than when he took on the chairmanship.

Investment bank Espirito Santo said: 'The appointment of Allan Leighton as the new non-executive chairman is a positive step, in our view. Given the recent disappointing updates along with Pace's poor investor communication, a change of leadership is welcome.'

It suggested a number of possible outcomes to the pending strategic review – an outright sale, changes to the senior management team, and revisiting the firm's medium-term targets.

'While this implies uncertainty, it is worth noting that Allan is being incentivised on share price performance,' the bank noted.