UPDATE 1-Set-top box maker Pace says margins well ahead of last year

(Corrects paragraph 2 to say Pace (Other OTC: PCMXF - news) expected revenue to increase by about 9.3 pct, not 12.5 pct, in 2014)

* Says on track to meet full-year rev growth target

* Shares rise as much as 5 percent

April 24 (Reuters) - British set-top box maker Pace Plc said its gross margins were "well ahead" of last year and that it was on track to meet its full-year revenue growth target of about $2.7 billion, sending its shares up as much as 5 percent.

Pace said last month it expected revenue to increase by about 9.3 percent in 2014, while its operating margin would be about 8.5 percent, up from 7.8 percent in 2013.

The company, which supplies decoders to television operators such as Sky Deutschland AG (Other OTC: SKDTY - news) and AT&T Inc (NYSE: T - news) , said in a trading update on Thursday that its gross margins benefited from an improved revenue mix and the acquisition of Aurora Networks earlier this year.

Pace shares were up 2.6 percent at 408.5 pence at 0914 GMT, making the stock one of the top percentage gainers on the FTSE-250 Midcap Index.

The Yorkshire, northern England-based company, said new customer wins had helped it make progress in the middle eastern, Indian and European markets.

The company, whose customers also include Comcast and DirecTV (Frankfurt: DIG1.F - news) , received more than half its revenue from North America in 2013.

"It is start of the year for these guys. Nothing has come out of the woodwork to suggest that there has been a slowdown with key customers ... The margin expansion is still there and integration of Aurora can support better synergies than first expected," Jefferies analyst Lee Simpson told Reuters.

Pace acquired U.S.-based network gear maker Aurora Networks Inc last October for $310 million in cash to diversify its products to cable customers.

Pace said the integration activity and trading of Aurora in the period were ahead of expectations. (Reporting by Tasim Zahid and Noor Zainab Hussain in Bangalore; Editing by Ted Kerr and Gopakumar Warrier)