Preliminary Results

28 September 2011

Regenersis plc

Preliminary results for the year ended 30 June 2011

Regenersis plc (LSE: "RGS") ("Regenersis" or the "Group"), a strategic outsourcing partner to many of the world's leading consumer technology companies, is pleased to announce preliminary results for the year ended 30 June 2011, which reflect a positive financial performance driven by the completion of a number of important strategic changes at the Group.

Financial Highlights

·; Group revenue increased 6% to £123.8 million (2010: £116.4 million)

·; Headline operating profit(*) increased 11% to £6.3 million (2010: £5.7 million)

·; Operating cash flow improved to £2.4 million (2010: £2.1 million) despite significant exceptional payments due to the closure of recycling facilities during the year.

·; Reduction in net debt to £3.8 million (2010: £4.0 million).

·; Agreement of a new £15 million credit banking agreement providing greater credit at lower cost to the Group.

Operational Highlights

·; A new Group Board in place in early 2011, strategic review completed and new strategy communicated in June 2011.

·; New reporting segments - Emerging Markets, Western Europe and Advanced Solutions - which better reflect how the business is run.

·; New operations established in Normanton (UK), South Africa and Turkey.

·; Significant contract wins and volume growth delivered with HTC, O2, RIM (in South Africa), Nokia (in Turkey), Hypercom, Telecash, Wincor Nixdorf and Intermec.

·; Loss-making European recycling business sold and UK recycling facility closed to enable clearer focus on growth markets.

Regenersis Plc, Executive Chairman, Matthew Peacock commented:

"The financial results for the year show solid forward momentum, for which I would like to thank all of our employees. The Board is focused on delivering to its strategy and on achieving operational excellence consistently across the whole Group."

(*) Headline operating profit excludes exceptional restructuring costs, amortisation and impairment of acquired intangible assets and share-based payments.

Enquiries:

Regenersis Plc +44 (0) 1865 471 900

Matthew Peacock / Jeremy Wilson

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 / Brett Jacobs

FTI Consulting +44 (0) 20 7831 3113

Matt Dixon / Jon Snowball

About Regenersis

Regenersis is a leading outsourcing partner to many of the world's leading consumer technology companies such as Nokia, Virgin Media, O2, HTC and Wincor Nixdorf. The Group has businesses in seven countries, mainly throughout Europe.

The Group specialises in a range of after-sales services, the largest of which is product repair enabling our clients to deliver excellent service to their customers

The Group also develops technically-driven repair and repair avoidance solutions for set top boxes and more broadly in the media market.

Regenersis Plc Annual Report 30 June 2011

Chairman's Statement

Regenersis is part way through a process of rapid change as I write this first annual Statement as Chairman. The financial results for the year to June 2011 continue to show solid forward momentum, for which I would like to thank all of our employees and clients. In this financial year, the Group grew revenues by 6% to £123.8 million and headline operating profit by 11% to £6.3 million.

While I believe these results show creditable progress there remains significant potential for improvement. The latter part of the financial year was a time of particularly rapid change in the business. Since February your company has had a new Board and, over the last few months, strengthened the executive team. We have conducted both an operational efficiency review (leading to up to £2 million of annualised identified cost reductions) and a strategic review published in June. We expect to see the benefits of these changes coming through in business performance over the next year as we continue to focus operationally on commercial discipline, consistent operational excellence and up-skilling around the business.

Significantly, we believe that the primary operational focus of the business now needs to be geographically led to drive commercial discipline and operating excellence at the facility level. In our view, this is where money is made and lost. Therefore we have changed our three reporting segments to Emerging Markets, Western Europe and Advanced Solutions to reflect this emphasis.

Emerging Markets

Regenersis has delivered another strong year in its Emerging Markets operations, with revenue growth of 25% to £43 million and headline profit improvement of 36% to £5.1 million. Poland and Romania have been the key markets in this segment, which has organically achieved compound annual revenue growth between 2008 and 2011 of more than 40% and increased profit from £0.4 million to £5.1 million. In 2011 we also opened businesses in South Africa and Turkey with significant new client contracts. Going forward we are focusing on both organic and acquisitive routes into new markets.

Western Europe

Western Europe is comprised principally of the UK and Germany. We have removed the erosive effect of recycling activities on our profit and cash flow, by selling our European mobile recycling business in France and closing our UK operations in Thurrock. Going forward, the remaining profitable elements of recycling will be delivered from Glasgow.

Advanced Solutions

Advanced Solutions include our innovative services in set top box repair and repair avoidance, as well as technically driven solutions in other markets. During the year the development of our in-field testing product progressed well, with a successful field trial in the latter part of the financial year of our proprietary technology. This will enable a very significant reduction in the volume of set top boxes flowing back to the depot for repair - to the benefit of all parties including consumers, our clients and ourselves. This type of innovation is at the core of our vision for Advanced Solutions, which should deliver major benefits to clients and superior economics for Regenersis. Again we are pursuing both organic and acquisitive routes to expand our business in this area.

The Board is now focused on realising its new strategy (as described in the Strategy Review announcement in June) and on achieving operational excellence consistently across the whole Group. The new strategy requires us to build on our existing presence, especially in Emerging Markets and in Advanced Solutions, areas in which superior opportunities for shareholder value creation are achievable. The new strategy also emphasises building strong niche positions, which tend to have superior growth and margin characteristics. In 2011 of particular note was our aftermarket business in cash and cashless payment systems, where we have rapidly built a market-leading position.

The strategy is clear and Regenersis has real experience and credibility in its focus areas, but we are only at the beginning of the process of realising the strategy consistently across the Group and making these areas, over time, the large majority of our business.

To properly understand recent historic performance, it is worth noting that, while problems in the recycling part of Regenersis over the last four to five years have undermined and prevented aggregate Group financial performance from developing positively, the performance of the Group's current portfolio of businesses has actually been quite strong over this period. This is despite the backdrop of a credit crunch and recession. During this time, we have added several major blue-chip customers; doubled our volume throughput, and delivered the revenue and profit improvements mentioned above. If the business continues to demonstrate this non-cyclical characteristic it will be a very helpful foundation as we build on the new strategy, even if the general economy is weak or recessionary as many forecasts suggest.

Dividend

In the medium term, the Board aims to re-introduce a dividend and a progressive dividend policy when ongoing and prospective performance allow.

Current trading and outlook

In the period since the year end, current trading has been in line with the Board's expectations and is ahead of the prior year.

Our markets and specific client contracts continue to show growth and present regular opportunities to win significant new business. The Board is targeting double digit revenue growth on steadily improving operating profit margins over the next two to three years.

We expect to increase capital expenditure in the year ending 30 June 2012 supporting specific opportunities for growth such as new facilities in Poland and South Africa. However, we will look to offset this investment in capital expenditure by focusing on operating cash flow including a reduction in the levels of working capital, leading to falling debt levels by the year end, absent other corporate activity such as acquisitions.

Matthew Peacock

28 September 2011

Business and Financial Review

Business Review

During the year to June 2011 there were significant changes to the direction of Regenersis with a new Board and senior management team and the publication in June 2011 of a strategic review. Restructuring has occurred, including the sale of the European recycling facility in Lille, France; the closure of the UK recycling facilities in Thurrock and closure of the Head Office at Eynsham. Against this backdrop the financial performance of the business showed forward momentum with revenue of £123.8 million (2010: £116.4 million, growth 6.4%), headline operating profit of £6.3 million (2010: £5.7 million, growth 10.7%), a headline operating profit margin of 5.1% (2010: 4.9%), and operating cash flow of £2.4 million (2010: £2.1 million), leading to a reduction in net debt at June 2011 to £3.8 million (2010: £4.0 million). Group operating profit fell to £0.5 million (2010: £4.2 million) principally due to exceptional restructuring costs.

New Board and management

During February 2011, three non-executive members of the Board of the Company and the Chief Executive of the Company stepped down from their positions. They were replaced by Matthew Peacock (Executive Chairman), Michael Peacock (Senior Independent Director - no relation to Matthew Peacock), Andrew Lee (Non-executive Director), and Tom Russell (Non-executive Director). This followed the acquisition of a 14.2% stake in the Company's shares by Hanover Investors, a public-market special situations investment firm of which Matthew Peacock is the founder and Tom Russell is also a partner. Subsequently new appointments and changes were made to the Executive management team including the appointment of a new Group Managing Director, and the appointment of Andrew Lee as the Managing Director of our UK operations within Western Europe. The Company is currently seeking to replace Andrew as a Board Director with a new independent Non-executive Director.

Changes to reporting segments

Our reporting segments have been changed to reflect new divisions: Western Europe, Emerging Markets, and Advanced Solutions. These segments replace the previous device-type segments: Mobile Communications; Information Technology; and Media & Entertainment. We believe that the primary operational focus of the business needs to be strongly geographical to drive commercial discipline and operating excellence at the facility level. In particular this includes continuous improvement in cost and quality for existing contracts, and the crucial pre-sale set-up and post-sale implementation phases of new contracts. It is also clear that many clients cut across the device type segments. From an external reporting point of view it is helpful to reveal to investors performance in the most attractive parts of the business - Emerging Markets and Advanced Solutions - which the new strategy is based on.

Emerging Markets

Emerging Markets includes Poland, Romania, Russia (a 50% joint venture), South Africa and Turkey.

Performance during the year was strong with revenue growing 25% to £43 million and headline operating profit growing 36% to £5.1 million. The main areas of growth were Poland and Romania. In Poland, both revenue and profits grew on strong volumes. Regenersis Poland is a local market leader, serving both local demand and volumes off-shored from other countries. This has been recognised by customers who have rationalised their supplier base in favour of Regenersis.

In Romania, operating profit increased as the business gained new customers, and increased volumes from existing customers such as TomTom and UPC, whilst controlling costs tightly.

Our joint venture in Russia has grown its revenue, and generated a small profit, compared with a small loss last year. Also, towards the end of the financial year, the Group opened a new business in Turkey and started work on a new contract in South Africa. The launch of these businesses is going well although there is little financial impact in the year reported.

Western Europe

Western Europe comprises the businesses in UK excluding Advanced Solutions (Glasgow, Huntingdon and Normanton) and Germany (Schloss Holte and Sommerda).

Overall the revenue was down slightly on prior year and headline operating profit declined by 43% to £1.5 million. The main areas of decline were the recycling businesses in UK and Europe, continuing a multi-year trend and reflecting increased competition and structural changes in this marketplace. During the year, revenue in these businesses declined by £7.1 million and headline operating profit declined by £0.6 million. The Group sold the European recycling business in October 2010 and closed the UK business in March 2011, relocating a small volume of profitable business to our Glasgow facility.

The Group opened a new business in Normanton, serving O2, in conjunction with DHL, with repair and other reverse logistics services, in a partnership intended to offer a market-leading, combined forward/reverse logistics service replicable in future across many geographies for the large multi-national telecoms operators. The business made a small loss in the financial year due to start-up costs.

Elsewhere in the UK, part of the Western Europe segment, there were several positive developments. Our Huntingdon site gained an important contract to provide the helpdesk for all LG products in the UK, and was chosen by HTC as its repair facility outsourcer.

In Germany, both the Schloss Holte and Sommerda facilities showed positive growth. Of particular note, we are building a substantial business supporting 'Chip and Pin' providers in logistics, refurbishment, repair and programming, where there are demanding accreditation requirements placed on the Group by the customer. In addition, progress supporting ATM machines and more advanced IT services, such as for the healthcare industry, continues.

Advanced Solutions

The new Advanced Solutions segment is centred initially on our business serving set top box and television segments, based in Glenrothes in Scotland. Profitability increased significantly on a slight decrease in revenues, reflecting an improving business mix and the impact of our proprietary automation technology. We had a successful field trial late in the financial year of our in-field testing product for set-top-boxes, which requires a step change in integration with client operational processes and is taking our business into genuinely new territory. We continued to invest in technology development through the year, and in taking our solutions to media companies in other geographies interested in the potential deployment of our technology.

New strategy

The strategic review by the new Board (released in June 2011) identified significant strengths and opportunities in the Group. The strategy has three main elements:

·; Build our Advanced Solutions business in the avoidance, mitigation, diagnosis and management of the repair cycle. This is high value-added business and in demand from clients, augmenting the traditional model of depot repair. The Group has made significant progress already in this area as explained above. We aim to progress this objective both through internal development and the addition of capabilities by acquisition.

·; Concentrate on Emerging Markets, where our existing business is substantial, high-growth, and has a very strong earnings record, and new markets present attractive opportunities. Our outstanding historical performance in this segment derives from rapidly growing markets, the attractions of low labour costs compared to Western European facilities, and strong technical capabilities in the business. Many other emerging markets also offer high growth, an attractive competitive landscape, and market entry opportunities either organically or via acquisition.

·; Focus on niche product areas, where Regenersis has or can build a high market share with specific clients, brands and device types. Analysis of past performance suggests that this type of business offers higher profit margins and opportunities for organic growth.

We believe the new strategy targets exposure to the most attractive market trends while practically suiting the strengths and assets of the business. The new strategy does not mean our more mature depot solutions business is unimportant. On the contrary, our substantial footprint in Western Europe is important to anchor our multi-geography activities for global clients and to provide the credibility for large multi-nationals to trust us in new territories and with new service offers.

Client development

The year to June 2011 has seen progress in client and contract wins. We are commencing work for RIM (who make Blackberry) as their South Africa repair and reverse logistics provider, where RIM is the market leader in smart phones. We have grown our business with DHL, serving O2, and are looking at further contract opportunities. The Group has also become a reverse logistics and repair partner in the UK for HTC. In all of these cases the new contracts are valuable entry points to clients with large business potential in other geographies. We have commenced work for Nokia in Turkey providing our vendor management service, which runs the repair function for Nokia's retail network on their behalf. Our cash and cashless payment niche, which is an example of exactly the sort of strong niche we want to develop under the new strategy, won significant new business with Hypercom, Telecash, and Wincor Nixdorf.

After a protracted period of negotiation stretching back to 2010, and as announced in May 2011, we did not renew our contract with Hutchison 3G UK, previously serviced from our Inchinnan facility near Glasgow, part of the TRS acquisition in September 2009. We are pursuing other potential new business to fill the capacity. Taking into account both contract wins, the Hutchison 3G loss and volume trends in existing contracts, the business portfolio as a whole at the end of the year significantly improved over the year.

We are currently investing in a new facility in South Africa, due to open in late 2011, to serve clients including RIM and HTC in that territory. We are also investing in a new facility in Poland, where the existing two facilities are now full, which will increase our capacity in this territory by an initial 30%, rising to 60% when required.

In the year to June 2011 the largest client accounted for 16% of the Group's revenue and the top 10 clients represent 69% of Group revenue. Within most of the largest clients, the business is built up from multiple contracts for different geographies and/or types of work, with different durations. 

Market trends

The underlying market for electronic devices continues to be resilient. The Group is present in categories which forecast good growth potential including smart phones (32% forecast annual growth rate 2011-2013), set top boxes (9%), notebook computers (13%), cash and epos (8%), and flat panel and IP TVs (21%). We believe the trend continues to move and point towards increased penetration and scope of outsourcing in aftermarket services.

While it is hard to disentangle market performance from specific contract performance, it appears that, with the exception of the recycling area, our markets have demonstrated uninterrupted growth over the last four years, both through the "credit crunch" and recession and then through the subsequent upturn in 2010.

There is a clear divergence in growth between developed and emerging markets, with emerging markets showing growth rates often two to three times higher in most categories. Regenersis is increasingly weighted towards the latter category in terms of source of profits, with the Emerging Markets segment generating 56% of Group Headline Operating Profit before Corporate Costs.

Supporting the above points we can add the most recent year to the table we showed at the Strategic Update in June 2011, isolating the performance of our Recycling and Emerging Markets operations. This shows the particularly attractive track record of the Eastern Europe operations, now part of the Emerging Markets segment, and the stability of the rest of the Group absent Recycling.

Restructuring: recycling / end-of-life activities

During the year the Group sold its European mobile recycling activities and closed its UK recycling operations in Thurrock, relocating the profitable elements to Glasgow. Recycling activities contributed a headline operating loss of (£0.5 million) in the year to June 2011 (2010: £0.1 million profit). However the remaining recycling business at year end is stable and profitable. With the closure of the majority of these operations during the year and the reduction to a smaller and stable element in Glasgow, this year closes the long-running issue of declines in this business undermining overall Group performance.

Restructuring: cost and efficiency improvements

Cost savings and efficiency gains around the Group are expected to deliver £2 million of savings in the year to June 2012 versus current year. Notably, the Company had corporate costs of £2.7 million in the year. Corporate savings have been identified and actioned, including the closure of the head-office at Eynsham near Oxford and relocation of this function to the operating site at Huntingdon. Overall, these identified savings are allowing reinvestment in rapidly growing facilities and geographies including Poland, Turkey and South Africa, where investments are being made ahead of anticipated sales growth in 2012.

Reorganisation

The organisation has been changed in several important ways during the year. Firstly, the introduction of a Global Sales Team responsible for an integrated approach to large multi-national clients and prospects, which often have activities cutting across the traditional device distinctions (mobile phones, notebook computers, televisions, etc).

Secondly, the establishment of new segments - Emerging Markets, Western Europe and Advanced Solutions - replacing the previous Mobile Communications, Information Technology and Media & Entertainment divisions. The new structure primarily reflects a focus on operational improvement, which requires focus on optimising facilities and implementation activities within specific geographies, where the Group has significant room to improve its performance. It additionally drives focus on the activities of the Group which are most immediately valuable to shareholders due to their high margins and growth rates, in Emerging Markets and Advanced Solutions.

Thirdly, new processes have been established to track and manage performance and risks to performance.

Finally, new incentive arrangements have been implemented which provide upside potential to managers meeting operating profit and cash flow targets, and at the top level a share scheme as detailed in the Remuneration Report, providing management with an interest in share price achievement above the level of 100p in the period ending June 2014. We believe that this reorganisation will increase energy and focus on the new strategy and the underlying drivers of profitable growth around the Group.

Financial Review

Results

Group revenue was £123.8 million, up 6% from 2010 and headline operating profit was £6.3 million, up 11% from 2010. The most significant factor was the growth in revenue and profits in Emerging Markets outweighing the continued decline in the recycling businesses.

Among the divisions, Emerging Markets grew significantly delivering higher revenue and profit. In particular, both Poland and Romania grew through increased volumes from existing customers and through the acquisition of new customers. The Group also launched new businesses in South Africa and Turkey. The impact of this is small in this financial year but is expected to grow.

Western Europe includes the businesses relating to both repair and recycling of mobile phones in UK and the businesses in Germany. The continued decline of recycling reduced the profit achieved here and as stated above, the majority of this business was divested or closed during the year. The year on year decline in recycling, included within the above results, was £7.1 million of revenue and £0.6 million of operating profit.

In Germany, profits grew in both businesses due to new and increased customer volume, particularly in electronic financial transaction machines ('chip and pin').

The Advanced Solutions business grew through new, profitable customers in products such as TVs, despite the core set-top box volumes declining due to the overall market contraction.

The division has continued to develop these advanced solutions and they are generating positive feedback from both new and prospective customers. The Group is confident that these solutions can form the bedrock for future growth in these areas of our business.

Value added

Value added is the measure of revenue less material costs and freight. Effectively, this is the value of services performed by Regenersis. Value added increased by 6% during 2011. Our key aim is to maximise the flow of value added through to operating profit. In this regard, headline operating profit as a % of value added has increased from 9.4% to 9.8% signalling improvements in efficiency and tight control of operating costs.

Exceptional costs

Exceptional restructuring costs totalling £4.8 million were incurred during the year. These were largely due to one off costs incurred in the Glasgow business due to the non-renewal of our contract with Hutchison 3G in the UK, to the closure of our Eynsham head office, to the closure and sale of part of the recycling business and to Board and management changes since the change of leadership in February 2011.

Exceptional costs included a provision of £2.3 million for an onerous lease on the Glasgow premises. The provision reflects management's best estimate of onerous rent and rates on that portion of the building which is currently planned to be vacated for the estimated void period. Although the Group is committed to this course, it is also working to replace the lost volume where possible.

Amortisation of intangible assets

Other costs excluded from headline operating profit were the ongoing amortisation of acquired intangible assets and share-based payments, together with an impairment charge of £0.4 million relating to the specific contract loss in Glasgow.

Net financing charges

The previous loan facility was due to expire in March 2013 but included a reducing limit which could have constrained the ability of the Group to grow. Consequently, during the year, the Group negotiated a new loan facility of £15 million until October 2015 with HSBC. The one-off costs of arranging this facility totalled £0.3 million and are amortised over the expected loan facility period. Aside from this, net financing charges were £0.3 million (2010: £0.4 million) reflecting the lower average net debt and the lower interest rate on the new facility.

Taxation

The total tax charge was £1.0 million (2010: £0.8 million). This includes the de-recognition of a deferred tax asset (£0.5 million) relating to losses prior to the acquisition of TRS by the Group which are less likely to be set against future profits in the Glasgow facility following the non-renewal of our contract with Hutchison 3G.

Earnings per share

Headline earnings per share (before exceptional costs, capitalised customer contract write-off and deferred tax asset de-recognition) increased to 12.26 pence (2010: 10.57 pence). The basic earnings per share is (1.85 pence) (2010: 6.89 pence).

Despite the better trading performance of the Group, retained earnings and basic Earnings Per Share show a reduction to last year due to the exceptional costs, impairment of acquired intangible assets and deferred tax asset de-recognition. The current year EPS calculation also reflects an increased average number of shares during the year due to a 12 month contribution from the 16.5 million shares issued in September 2009 around the acquisition of TRS (prior year, 10 months contribution).

Exchange rates

During the year, although currencies in the overseas economies where we have a presence (notably Germany, Poland and Romania) strengthened relative to sterling, this did not materially alter the Group's reported results. At constant exchange rates, revenue grew by 6.9% (reported exchange rates +6.4%). Similarly, at constant exchange rates, headline operating profit grew by 11.5% (reported exchange rates 10.7%).

The cumulative effect of these exchange rate movements on the Group's net assets is reflected in the Consolidated Statement of Comprehensive Income.

Changes to segmental reporting

In 2010, the Group reported using the Mobile Communications, Media & Entertainment and Information Technology divisions. The current year performance using the prior year divisional split was as follows:

Revenue increased in all divisions. Within Mobile Communications, revenue and profits increased in Poland but this was balanced by the decline in recycling and start-up losses in new contracts in UK and South Africa.

Media and Entertainment grew as the Romania business strengthened, particularly in the repair of set top boxes. Information Technology was also enhanced as the Group became a market leader in Europe in the repair of 'Chip and Pin' machines.

Cash flow

Cash flow from operating activities was improved with a net inflow of £2.4 million (2010: £2.1 million). This positive cash flow was achieved despite the payment of £1.0 million in relation to the settlement of existing client return liabilities associated with the removal of the European recycling business, and payments totalling £1.8 million for other exceptional costs. Overall, net debt improved to the prior year at £3.8 million (2010: £4.0 million).

The above payments were balanced by a slight working capital inflow compared with £3.3 million outflow in 2010. Inventories increased by £2.1 million due largely to new contracts in UK. Receivables increased by £3.1 million (2010: reduction of £2.1 million). This was caused by the build up of debtors relating to new business and by extended credit terms. The cash outflow in inventories and receivables was balanced by an increase in creditors.

Tax paid was £0.6 million as the Group again benefited from losses brought forward and claimed accelerated capital allowances on research and development expenditure.

Interest paid was £0.3 million (2010: £0.6 million) and is in line with prior year after adjusting for the impact of exceptional finance charges.

Capital expenditure was maintained at £1.3 million (2010: £1.3 million). Expenditure on intangible assets was increased further to £1.0 million (2010: £0.7 million) as the Group invested further in its in-field testing technology.

Financial position

The Group has strong financial metrics with interest cover of 26 times (2010: 21 times) and a net debt to EBITDA ratio of 0.5 (2010: 0.5). At 30 June 2011 net debt was £3.8 million, a small improvement on the prior year.

Year end net debt comprised gross borrowings of £7.0 million, all in Sterling (2010: £6.5 million), cash and cash equivalents of £2.9 million (2010: £2.5 million) and the deferred loan facility arrangement costs of £0.3 million (2010: £nil.)

The group replaced its banking facilities during the year and has ample headroom to support growth in 2012 and 2013.

Key performance indicators

The Group has a range of performance indicators, both financial and non-financial, to monitor and manage the business. These measures include the key performance indicators ("KPIs") that are used continually to improve performance and compare against targets set at the individual customer and business unit level as well as for the Group as a whole.

Risks and Uncertainties

Throughout its international operations, Regenersis faces various risks, both internal and external, which could have a material impact on the Group's long-term performance. Regenersis manages the risks inherent in its operations in order to mitigate exposure to all forms of risk, where practical. The Board has identified several specific risks and uncertainties that potentially impact the ongoing business including:

·; Commercial contract risks - Given the potential for onerous terms in customer contracts it is essential that Regenersis continues to contract for business at acceptable rates and with appropriate commercial balance. This also includes consideration of the cash flow impact of each customer contract. The Group has a contract approval scale in which, the key customer contracts will be approved by the Group Board and others approved by different levels of senior management as appropriate.

·; Systems risks - As data management is an essential platform of our service offering, the flexibility and reliability of the systems is critical to the ongoing development of the Group. The systems architecture of the Group is varied given the history of the Group and the fact that the businesses have come together from different sources.

·; Market and economic risks - The Group's activities support a broad range of customer orientated and technology rich products. There is a strong correlation between the volume of consumer sales and the number of service events arising as a result of those sales. The Group has been developing a diversified service capability and expanding capacity in low cost service locations to ensure a balanced portfolio of customers, services and locations.

·; Financing risks - In the continuing difficult financial markets the Group has maintained a prudent approach to the management of cash flow. The Group has recently arranged a new loan facility providing finance until 2015.

·; Customer concentration risks - A number of customers are significant in the context of the Group as a whole. While decreasing, customer concentration remains an issue the Board is conscious of and seeks to reduce further through the development of new customers and the creation of more dependent relationships with its existing customers.

·; Operational risks - In a high volume repair facility, operational efficiency is vital to the profitability of the Group and to customer service. The Group is currently giving this area great focus and has strengthened the operational management where needed.

·; Compliance risks - Some of the Group's business relies on the compliance with and enforcement of legislation consistent with the WEEE Directive. The Group maintains Government approved licenses to manage the collection, treatment and export of electrical waste. In addition, Regenersis handles equipment holding personal data and is mindful of the implications of the Data Protection Act. The Group maintains internal processes to ensure appropriate guidelines are followed.

·; Foreign exchange rate volatility - The widening geographic spread of the Group means that financial results can, increasingly, be affected by movements in foreign exchange rates. The risk presented by currency fluctuations may affect business planning and product procurement costs. The Group is monitoring this risk and will mitigate if it increases in significance.

·; Employee engagement - Staff engagement is essential to the successful delivery of service to customers and longer term the overall business strategy. Considerable effort has been devoted to communicating the business strategy so employees are clear on our business objectives and their role in the strategy. The employee appraisals process and the setting of personal objectives operate within the framework of our corporate objectives. This is then reinforced by the employee incentivisation process.

Cautionary statement

This review has been prepared solely to provide additional information to shareholders to assess the Group's strategy and the potential of that strategy to succeed and should not be relied upon by any other party or for any other purpose. It contains certain forward-looking statements with respect to the financial condition, results, operations and businesses of Regenersis plc.

These statements and forecasts involve risk and uncertainty because they relate to events and depend upon the circumstances that may occur in the future.

There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this review should be construed as a profit forecast.

Matthew Peacock

Executive Chairman

Jeremy Wilson

Chief Financial Officer

28 September 2011

Consolidated Income Statement

for the year ended 30 June 2011

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2011

Consolidated Balance Sheet

as at 30 June 2011

The financial statements were approved by the Board of Directors and authorised for issue on 28 September 2011.

They were signed on its behalf by:

Executive Chairman Chief Financial Officer

Company number: 05113820

Consolidated Statement of Changes to Equity

for the year ended 30 June 2011

Consolidated Cash Flow Statement

for the year ended 30 June 2011

Notes to the Accounts

The audited consolidated financial statements of Regenersis plc for the year ended 30 June 2011 have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006.

The preliminary statement of results was approved by the Board on 28 September 2011. The preliminary statement is derived from but does not represent the full Group statutory financial statements of Regenersis plc and its subsidiaries which will be delivered to the Registrar of Companies in due course. The financial information for the year ended 30 June 2010 has been extracted from the Annual Report and Financial Statements, as filed with the Registrar of Companies. The current auditor, KPMG Audit Plc, has reported on the year ended 30 June 2011 and the year ended 30 June 2010. Their reports were (i) unqualified, (ii) did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying their reports and (iii) did not contain certain statements under section 498(2) and (3) of the Companies Act 2006.

During the financial year, the directors performed a strategic and operational review of the business. Following this review, the reportable segments have been assessed and amended to a geographical basis rather than a business type.

Internal reporting now uses three reporting segments - Emerging Markets, Western Europe and Advanced Solutions which reflect the way the business is managed and reviewed. There has been no aggregation of the operating segments in arriving at the reportable segments.

Emerging Markets include the existing operations in Poland, Romania, Russia, Turkey and South Africa; Western Europe incorporate UK (excluding Glenrothes) and German businesses whilst Advanced Solutions aggregate the Group's businesses promoting techniques in remote diagnostics, automation, mitigation and avoidance.

The Group continues to deliver world class services to its customers in the fields of service and repair of smart phones and other consumer electronic devices, coupled with associated services including customer call centres, warranty management and insurance replacement programmes.

Comparative figures have been restated as a result of this change.

There is one customer in the Emerging Markets segment which accounts for more than 10% of the Group's revenues and this customer had revenue of £19,984,000 (2010: £15,235,000) attributed to it.

Similarly, the Group has one customer in the Western Europe segment from which revenues totalling £13,496,000 (2010: £12,704,000) was derived.

Geographical information

The following geographical information is based on the location of the businesses in the Group:

Redundancies and restructuring costs are incurred following the strategic and operational review carried out by the Directors during the year, whilst onerous lease and dilapidation provisions stem from the loss of a significant customer.

Profit for the year has been arrived at after charging/(crediting):

Key management personnel have been identified as the Board and the Group's Operations Board. Remuneration of key management personnel is as follows:

The exceptional finance charge of £296,000 relates to the renegotiation of the banking facility terms carried out at the time of the TRS acquisition and the banking due diligence to approve the acquisition of TRS.

UK Corporation tax is calculated at 27.5% (2010: 28%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The Group's total income tax charge for the year can be reconciled to the profit per the Consolidated Income Statement as follows:

Factors that may affect future current and total tax charges

On 23 March 2011 it was announced that the UK corporation tax rate will reduce to 23% over a period of 4 years from 2011. The first reduction in the UK corporation tax rate from 28% to 27% (effective from 1 April 2011) was substantially enacted on 20 July 2010, and further reductions to 26% (effective from 1 April 2011) and 25% (effective from 1 April 2012) were substantially enacted on 29 March 2011 and 5 July 2011 respectively.

This will reduce the Group's future current tax charge accordingly and further reduce the deferred tax assets and liabilities (which have been calculated based on a tax rate of 26% substantively enacted at the balance sheet date).

It has not been possible to quantify the full anticipated effect of the announced further 2% rate reduction, although this will further reduce the Group's future tax charge and reduce the deferred tax assets and liabilities accordingly.

The weighted average number of shares employed in both the basic and diluted EPS calculation excludes the 2,150,000 shares issued to the Employee Benefit Trust on 26 June 2007 since they are classified as treasury shares.

In addition, the 675,000 share options exercisable under the Performance Share Plan are included in the weighted average number of shares used to calculate headline diluted EPS.