Psion drops 2% after supply chain issues push it into loss

Psion, which supplies a range of rugged hand held computers, has lost nearly 2% after announcing a plunge into the red.

The company, which issued a profit warning in July, reported a half year operating loss of £5.2m compared to a profit of £4.8m in the comparable period last year. It blamed the shortfall on supply chain issues, which delayed shipments of one of its key products. But it launched its new EP10 product into the PDA segment of the rugged handheld markets, and said it had seen strong initial orders for the device in Europe. It has also entered partnership agreements with Verizon Wireless in the US. John Conoley, chief executive, said:

We had a disappointing first half from a financial perspective. However we put in place the building blocks for a successful second half.

The market seems less convinced, with Psion's shares down 1.25p to 65.25. Analyst Peter McNally at Charles Stanley said:

Psion's half year profit in the interim results today are in line with the profit warning announced on July 4. Even though full year consensus earnings per share estimates have been revised down over 65%, we would still not be holders of the company's shares as we are not believers in its main new product, the EP10, a rugged PDA device.
[Psion's] partnership with Verizon in the US could hold some future for the company but we are not convinced that this will be enough to bridge the company beyond what is already expected this year. While estimates for this year have the company just over break-even, we believe investors are valuing the company on 2012 earnings and at 16.8 times, we are still not convinced there is value in the shares.

Simon Strong at Evolution Securities put a neutral rating on the company and cut his target price from 90p to 65p:

We think the guidance set by management for full year revenue growth of 5%-8% is aggressive, particularly in light of a weakening outlook for corporate capital expenditure. T
A competitor in the US, EMS Technologies, was acquired by Honeywell for 1.2 times enterprise value/sales last quarter. There is value in Psion but seeing a route to how this is crystallised is not clear.