Regenersis

Restructured mobile phone repairer and recycler Regenersis has taken the first step on an intended acquisitive expedition.

Two years into the job, chief executive Gary Stokes, who last year oversaw a striking turnaround from £10.7m losses to £3.9m of pre-tax profits, now wants to consolidate the Essex-based company’s position and ensure its survival. ‘The optimal scale is probably twice the size of where we are now,’ he says.

Towards this aim, the acquisition of Total Repair Solutions (TRS) has been agreed for £6.3m in cash and new shares, funded in part by a £3.3m placing at a discounted 40p. Stokes says that TRS, which generated earnings of £1.4m from £22.5m of sales in the year to March, ‘gives us a stronger position in the UK’.

Although there are a number of new customers, including Hutchinson 3G and BT, there is some overlap in services and Stokes says that by cutting replicated costs ‘I think we can double their EBITDA’. He notes that the deal will be dilutive to earnings in the short term but is optimistic of further deals next year or beyond: ‘This is just a step, not the life-changing transformation that we might target further down the line.’

The board, which has renegotiated the terms of its net £4.3m of debt, also confirmed that the company’s recent trading has continued according to plan, with ‘headline earnings’ in line with expectations for the year to June. However, due to the dilution of the placing, house broker KBC has snipped its earnings forecasts from 11.2p to 9p per share.

Following a recommendation in October’s Growth Company Investor at 83p, the shares had stumbled to a 44p low in July and should therefore have fallen below many an investor's stop-loss level. At the present price, they offer good speculative potential.