Digital set-top box maker Pace Micro Technology today announced a "welcome return" to profitability as it marked the end of an era at the Saltaire-based firm.

The hi-tech company's annual results today showed last year's £16.2 million loss had been transformed into a £5.9 million pre-tax profit.

And, at the same time, it announced that David Hood, who founded the business more than 20 years ago, is to step down as a non-executive director.

Today's results showed a growth in turnover to £239.9 million, with growth in the global market - particularly in Asia and continental Europe - achieved on the back of falling average set-top box prices.

It said demand had entered a growth phase with volume shipments of the products up 69 per cent to 2.2 million. Sales to non-UK customers grew by £73 million, 3.5 times higher than a year ago, with exports now accounting for 42 per cent of Pace's total revenues.

The company's results also made reference to an exceptional charge of £1.5 million for costs and legal fees surrounding the ongoing matter with the Financial Services and Markets Tribunal.

However, Pace said it was strictly not allowed to comment on the issue, which is believed to be related to an inquiry by the Financial Services Authority which found that the company broke Stock Market rules.

Pace's biggest growth area came in the European and Asia-Pacific markets which it is expecting to more than make up for an anticipated downturn in the UK, where 53 per cent of households now already have digital television. Pace said it had been "gradually reducing" its efforts in the Freeview market for low-cost set-top boxes which have been encouraged by the Government in the drive to increase the number of digital viewers. It is placing more focus on the higher-spec end of the market including the Sky+ personal video recorder.

Finance director David Brocksom said the company had put in a "lot of hard work" in building up its overseas markets which has led to a string of major deals with broadcasters such as FoxTel and Sky Italia.

Cost savings also helped improve profitability, partly on the back of a reduction in employee numbers from 644 to 594 in the last 12 months. However, he stressed the company was currently recruiting new staff in Saltaire and the growth in business was likely to lead to more engineers being taken on.

Chairman Sir Michael Bett welcomed the results, despite a cautious note about the size of margins. And he predicted a bright future for the business in the next financial year, with revenues and volumes currently "significantly ahead" on the last 12 months.

"The 2003/04 results represent a marked improvement in the group's performance, with Pace reshaping its global business and gaining new customers, most importantly in Europe," he said.

"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