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Psion, which provides wireless services and equipment to businesses, warned on Monday it could take 18 months for it to gain the benefit of a programme to restructure its supply chain.

The group, which makes rugged hand-held devices used for functions such as warehouse stocktaking, has seen problems with its supply chain in recent months, resulting in higher costs and delayed shipments of products. It has also had to relaunch many products following new European Union legislation that cut the amount of metals in electronic products.

Psion said in March it would re-engineer the supply side of its business, with components and production sourced in China.

As a result of the upheaval, Psion said development costs rose 42 per cent for its interim period to June 30.

Although revenues for the period rose from £78.9m to £93.3m, pre-tax profit shrank from £7.2m to £865,000 as the overall cost of sales rose from £40.2m to £54.2m.

Bill Jessup, acting chief executive, admitted the group had “had some challenges supplying products on time”. He said the group typically had taken 14 to 15 days and hoped to bring the delay down to seven to 10 days.

David Potter, chairman, called the group’s margins “clearly unsatisfactory” and said Psion expected the benefits from re-engineering to have an effect in the second half of the year.

Psion also said Alistair Crawford, chief executive, would step down owing to ill health. The group also hopes to appoint a chief operating officer in the next two months.

Basic earnings per share fell from 2.42p to 0.4p and held the dividend at 1p per share. The shares closed down 4¼p at 114¾p.

FT Comment

It’s not uncommon for fast-growing companies to run into problems with their supply chain but given that Psion has been about for 10 years, in various forms, it’s a disappointment. An ongoing restructuring where the benefits may only be felt 18 months hence will also let down investors. Nonetheless, sales rose by an impressive 18 per cent, new orders touched a record in June and the dividend was held. It suggests Psion will continue to expand. The shares trade on a prospective p/e of 25 times, which seems fair. But given the uncertainties that seems high enough for now. 

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