Regenersis PLC RGS Trading Update and Acquisition

  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
 
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MSCLLFLDDIIEFIF -0- Jul/26/2012 06:00 GMT