Regenersis

Following our advice last month to buy shares in repair specialist Regenersis (RGS) they have not disappointed, with results ahead of market expectations.

Under the successful stewardship of turnaround specialist and chairman Matthew Peacock, the business has undertaken a major strategic review and has identified annual cost savings of £2 million. Restructuring has involved closing its UK and Lille recycling operations, as well as its head office near Oxford. Such moves, together with the loss of a major contract with Hutchison 3G, led to exceptional charges of £4.8m.

Stripping this out, in the year to June, sales increased by 6% to £123.8m as operating profits rose 11% to £6.3m. Net debt fell £200,000 to £3.8m, while a new £15m credit banking facility has been secured.

Now much more streamlined, Regenersis has established a global sales team to chase large multinational clients. It is particularly focused on emerging markets, where it boosted revenues 35% to £43m, as headline profits surged 36% to £5.1m. It has also secured new business with HTC, 02, RIM (in South Africa) and Nokia.

AIM-listed Regenersis has a range of innovative solutions in set-top box repair and repair avoidance. There is also an aftermarket business in cash and cashless payment systems, which in a short space of time has already built up a market-leading position.

Speaking to Growth Company Investor, Peacock said, 'The growth in the middle class population in a number of emerging markets should provide plenty of growth.' He also points to the high-margin and cash-generative nature of much of its business, a situation that should allow Regenersis to return to the dividend list before too long.

Arden Partners forecasts 2012 pre-tax profits of £7m and EPS of 12.1p. We recommended the shares at 85p so, still trading on a low rating and with management well incentivised to perform, our view remains unchanged. Buy.