Electronic gadgets and gizmos are taking the world by storm, but not all of these products are in impeccable shape and the less-than-perfect models are often returned for repairs. This is where Regenersis comes in. This Aim-traded company - formerly known as Fonebak - diagnoses what's wrong with the product and fixes it.
- New management team
- Cost cutting
- Potential of set-top box diagnostics
- Fast growth in emerging markets
- Developed markets mature
- Fierce competition
After a series of lacklustre results, turnaround specialist Hanover Investor Management, which owns 15.3 per cent of the equity, staged a boardroom coup in March. This resulted in Hanover's founding partner, Matthew Peacock, becoming executive chairman of Regenersis and, with a team of experienced hands, he has spent the past six months reshaping the company.
Full-year results for 2010-11 showed significant progress. The loss-making business of recycling old mobile phones to emerging markets has been sold, leaving the focus on aftersales care and repair. Also, some £2m of costs will be stripped out of operations by 2012. Regenersis itself has been split into three divisions: advanced solutions (which provides product diagnostics and runs call centres), Regenersis western Europe and Regenersis emerging markets.
Emerging markets have been a fast-growing area for the company, and in 2010-11 divisional revenues rose 25 per cent to £43m. That was largely due to strong growth in Poland and Romania. As a result, growth in underlying revenues from these markets has averaged 40 per cent a year since 2007-08. In addition, Regenersis has begun operating in South Africa and Turkey, mainly at the request of a key client, Blackberry maker RIM, which has the largest market share of mobile phones in those countries.
REGENERSIS (RGS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 76p | MARKET VALUE: | £34.1m | |
| TOUCH: | 74-76p | 12-MONTH HIGH: | 85p | LOW: 42p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 68p | NET DEBT: | 12% | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 105 | 3.89 | 12.50 | nil |
| 2009 | 98 | 3.40 | 9.50 | nil |
| 2010 | 116 | 3.56 | 6.89 | nil |
| 2011 | 124 | 0.26 | -1.90 | nil |
| 2012* | 131 | 7.00 | 12.10 | nil |
| % change | +6 | – | – | – |
Normal market size: 1,000 Market makers: 8 Beta: 0.5 *Arden Partners forecasts (profits and earnings are not comparable with earlier figures) | ||||
Growth in these regions is all the more important because European operations are mature. That said, Mr Peacock says western Europe still offers strong growth in upscale devices, such as tablet computers and internet-enabled TVs.
A new product has just been released which can perform onsite diagnostic testing for set-top boxes, and Virgin Media is the first client. Other clients on Regenersis's books include Nokia, HTC, LG, Samsung and O2. And Mr Peacock says client retention rates are over 90 per cent.
But competition is tight and the upheaval at board level resulted in the loss of a key contract with mobile network Three last June to Oxford-based rival Unipart. Other European rivals include ANOVO of France and Luxembourg-based Elcoteq.
Despite this, Mr Peacock says Regenersis will deliver double-digit percentage growth in revenues over the next two to three years. Analysts at broker Arden Partners, which advises the company, are more restrained. They forecast 6 per cent sales growth in 2012 but, with the business leaner, that still means that underlying pre-tax profits are forecast to grow by 25 per cent to £7m. That filters down to earnings growth of 13 per cent growth and leaves the shares trading at just six times earnings.
