Leaner, fitter Regenersis sharpens focus on Latin America with HDM

ONE of Scotland’s largest electronics industry employers yesterday swooped on a Spanish peer in a takeover deal that will give it access to fast-growing markets in Latin America.

Regenersis, which employs around 800 people at its sites in Glenrothes and Inchinnan, repairs electronic gadgets for companies including Apple, John Lewis and Vodafone.

The Aim-quoted firm is paying €6.5 million (£5.1m) for HDM Group, which has 600 staff in Argentina, Mexico and Spain. Under the deal, HDM’s management team, which owned most of the company before the sale, will stay with the firm.

HDM already has a 20 per cent share of the mobile phone repair market in Spain, and analysts said the deal made sense for Regenersis because it would allow the company to enter emerging markets without the normal start-up costs.

Analysts said Regenersis may win further work from existing clients as it moves into new countries with HDM, which lists Nokia, Samsung and O2-owner Telefonica among its clientele.

In a trading update ahead of its full-year results, Regenersis said it will post “greatly improved operating profits in the UK this year” following a major restructuring last year which saw about 200 jobs being axed north of the Border.

The Inchinnan plant – previously the TRS mobile phone repair business founded by Richard Emanuel – lost a big contract with mobile phone network 3 last year, sparking a review of how the site is used.

The company said the restructuring would add exceptional fees – such as redundancy costs and “onerous leases” – but that its debts would be lower than expected at the end of the year.

Overall, trading for the year to 30 June will be “in line with market expectations for operating profit, driven by improving operating margins and double-digit percentage sales growth” said the group, which operates in 12 countries.

Regenersis said: “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.”

Paul Jones, an analyst at house broker Panmure Gordon, said: “A focus on cost reductions has resulted in greatly-improved profits and the acquisition of HDM should drive profitability even further as exposure to emerging markets increases.”

Matthew Peacock, executive chairman at Regenersis, added: “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.”

Peacock was installed in the hot seat last year when activist investor Hanover took a stake in the company, which last month it increased to 22.8 per cent.

Hanover Investors has a track record of forcing change at businesses that it believes are under-valued and has invested in companies including broadcaster STV.

Continuing to build its stake despite a strong share-price rise suggests Hanover believes further significant gains are in the pipeline from its turnaround strategy. Glasgow-based asset manager Ignis has also been buying into the company.

Hanover typically looks to double or triple its initial investment in a company within three years.