Regenersis PLC (RGS) - Trading Update and Acquisition RNS Number : 5288I Regenersis PLC 26 July 2012 26 July 2012 Regenersis PLC Trading Update and Acquisition Regenersis plc (AIM: RGS) ("Regenersis" or "the Group"), a strategic outsourcing partner to many of the world's leading consumer technology companies, is pleased to provide both an update on trading for the year ended 30 June 2012 and to announce the acquisition of the HDM Group of Companies. Trading Trading for the year ended 30 June 2012 will be in line with market expectations for operating profit, driven by improving operating margins and double digit percentage sales growth. Cash flow management during the course of the year has shown a marked and continued improvement, with net debt at the year-end being substantially lower than market estimates. This strong financial and operational performance has delivered a year-end balance sheet that is well placed to support further corporate activity, additional investment and the prospect of dividend payments. This year brings to an end the substantial restructuring of the UK business. This restructuring recognises the more efficient processes we now follow as a Group and the consolidation of our activities in key areas and markets. Whilst it is anticipated that this restructuring will lead to an exceptional provision for onerous leases and people costs at the 2012 year-end similar to that in FY 2011, our focus on reducing operational overhead costs has resulted in greatly improved operating profits in the UK this year. Developments in the Advanced Solutions business have seen an improved performance in the second half of FY 2012. There has also been good progress, as expected in our new Emerging Market territories although the Emerging Markets Depot Solutions business has remained subdued much like the first half. The Board intends to release its preliminary results announcement on 25 September 2012. Acquisition of HDM The Board is pleased to announce that it has agreed to acquire all of the issued share capital of Plataforma HDM Técnologica S.A. and Plataforma HDM Tecnologica S.A. de C.V and the trade and assets of HDM Plataforma Logística S.L., HDM Soluciones Integrales de Reparacion S.L. and HDM Moviltech Servicio Técnico S.L. together comprising the entire operations of the HDM Group of Companies ("HDM") for an initial consideration of €6.5m on a cash- and debt-free basis. The effective date of exchange is 25 July 2012 and completion is anticipated to occur on 31 August 2012. The key highlights of this acquisition, which is expected to be earnings enhancing in the first year after acquisition (* - see note), are as follows: · The addition of high-quality business in Spain, where HDM has a 20% market share in mobile repair, significantly enhancing Regenersis' European customer proposition · A strong exposure to new Emerging Markets and a platform for further future expansion into Latin America · An opportunity to further cement Regenersis' relationships with existing clients HDM is a leading provider of aftermarket services, including reverse logistics and repair, to network operators and mobile telephone manufacturers in Spain, Mexico and Argentina. HDM's key customers include Telefonica, Samsung and Nokia. In the year to December 2011, HDM generated revenues of €26.2m and net income of €1.2m, with net assets of €12.1m before fair value adjustments as at 31 December 2011. HDM currently employs more than 600 staff across its three facilities. The senior management team, which owns the majority of the shares of HDM, will remain with the business. A year on from the announcement of the Company's new strategy, this acquisition will enhance the progress the Group has already made organically and will be complementary to Regenersis' strategic focus on Emerging Markets. Capped Earn-out and Funding In addition to the €6.5m initial consideration, a capped earn-out will be payable on the 30 September 2015 based on the EBIT achieved in the year to June 2015 as follows: Earn Out Formula Indicative Acquisition Cost FY15 HDM EBIT Multiple FY15 HDM EBIT Initial Earn Out Total Multiple €0-2m 0.0x €2.0m €6.5m €0.0m €6.5m 3.3x €2-3m 4.0x €3.0m €6.5m €4.0m €10.5m 3.5x €3m and above 2.5x €4.0m €6.5m €6.5m €13.0m 3.3x €5.85 million of the initial consideration of will be funded through the Group's existing banking facilities. In addition, 587,571 ordinary shares will be issued to the vendor, in settlement of the remaining €0.65 million of initial consideration payable. Application will be made to the London Stock Exchange for the admission of these shares to the Alternative Investment Market. Matthew Peacock, Executive Chairman of Regenersis, said: "The acquisition of HDM represents a significant step forward for Regenersis and, as our trading update today highlights, we make this acquisition from a position of strength. HDM will enable us to move forward in a number of ways. First, it will enable us to expand deeper in to emerging markets, such as Latin America, where barriers to entry are high, market growth is good and there are few mature competitors. Second, it will further consolidate our already strong position in European mobile telephone repair, delivering to us a major share in the important Spanish market. Third, it will expand our Group's footprint to 12 countries across three continents, further broadening our revenue base and increasing our closeness to clients. We are excited about the growth opportunities now open to us, particularly through our ability to offer an increasingly global service. We expect to realise significant synergies as we seek to leverage our combined relationships and broad product portfolio across new geographies. HDM also brings with it significant management expertise." Enquiries: Regenersis plc +44 (0) 20 7766 8400 Matthew Peacock / Jog Dhody Arden Partners plc (Nomad and Joint Broker) +44 (0) 121 423 8900 Steve Douglas Panmure Gordon (UK) Limited (Joint Broker) +44 (0) 20 7459 3600 Dominic Morley / Charles Leigh-Pemberton FTI Consulting +44 (0) 20 7831 3113 Matt Dixon / Charles Palmer / Jon Snowball * - This statement is not intended to constitute a profit forecast for the current financial period or for any future period. In addition, this statement should not be taken to mean that the earnings per share of Regenersis will necessarily match or exceed the historic reported earnings per share of Regenersis. This information is provided by RNS The company news service from the London Stock Exchange END MSCLLFLDDIIEFIF -0- Jul/26/2012 06:00 GMT
Regenersis PLC RGS Trading Update and Acquisition
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