Trading and Strategic Update

28 June 2011

Regenersis plc

Trading and Strategic Update

Regenersis (the "Company") is pleased to provide an update on trading and to announce the results of its Strategy Review.

Trading

Trading for the year ending 30 June 2011 has progressed well and the Board expects revenue and operating profit for the 2011 financial year to be slightly ahead of current market expectations.

Strategy

As a result of the Strategy Review, the Board believes that it has now identified a business plan through which the Company can target double digit sales growth on steadily improving operating profit margins over the next three years. The Strategy Review has shown that significant strengths exist across the Regenersis business in terms of client relationships, operational strength and opportunity in certain geographies and technical expertise.

As a result of the review's findings, the key pillars of the new strategy are:

·; Build our advanced solutions business

o The avoidance, mitigation, diagnosis and management of the repair cycle is both high value-added and in-demand from clients.

o This augments the traditional model of depot repair.

o The Company has made significant progress already in this area.

o The strategy includes internal development and the addition of capabilities by acquisition.

·; Concentrate on Emerging Markets

o The Company's existing business in Eastern Europe is a substantial, high growth business with a strong earnings record.

o This strong performance derives from rapidly growing markets, the attractions of low labour costs compared to Western European facilities, and strong technical capabilities in the business.

o Many other emerging markets also offer high growth, an attractive competitive landscape, and market entry opportunities either organically or via acquisition.

·; Niche Product Focus

o Concentrate sales growth where Regenersis' market share is high

o Focus on specific clients, brands and device types

o Offers higher profit margins and opportunities for organic growth

This goes hand in hand with a tightening of operating discipline and uniformity across the Group, an element of which has already begun.

Operations

The new management team is improving efficiency and sales performance. Recent operational changes to promote these objectives include the appointment of a new Group Managing Director, new Managing Director of UK Mobile, and new Group Sales Director.

As a consequence we expect cost savings and efficiency gains totaling £2 million in 2012 versus 2011, including previously announced Central Costs reductions, allowing reinvestment in overheads during the year in new or rapidly growing facilities and geographies such as Poland and South Africa. These investments are being made ahead of anticipated sales growth in these businesses.

The keys to improving our sales performance are the delivery of consistently excellent performance to our existing clients, and the development and deployment of a well integrated and professional sales proposition. These goals are reflected in the reorganization and upskilling of the management team detailed above.

Historical Performance Revisited

The Company is implementing a new segmented reporting format for the preliminary results for the financial year ending 30 June 2011. At this stage the Company is providing a re-segmentation of its previous results which helps to explain the Board's confidence in the new strategy and outlook and understand two specific factors of note to shareholders:

(1) The Group has a strong business in Eastern Europe with attractive growth, profitability and cash conversion.

(2) The Group's business in recycling mobile handsets, which originated from Fonebak Plc prior to its merger with CRC in 2007, has been in rapid decline since 2007. In summary, this business reduced in profitability by £2.6 million and consumed £7.9 million of operating cash flow over the two years to 30 June 2010, with further significant impacts in the year to 30 June 2011. As of the current year end (30 June 2011) this business is small, stabilized and no longer expected to be a negative contributor to Group profit growth and cash flow.

This is unaudited management information. Rest of Group comprises all operations other than Recycling, Eastern Europe, and Central Costs.

Financial Outlook

The Board is targeting double digit sales growth on steadily improving operating profit margins over the next three years.

The Board expects cost savings and efficiency gains totaling £2 million in 2012 versus 2011, including previously announced Central Costs reductions, allowing reinvestment in overheads during the year in new or rapidly growing facilities and geographies such as Poland and South Africa. These investments are being made ahead of anticipated sales growth in these businesses.

The Board expects to increase capital expenditure significantly in the year ending 30 June 2012, supporting specific opportunities for growth such as new facilities in Poland and South Africa. However the Board 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.

As previously reported, the Company has secured a £15 million banking facility with HSBC until October 2015, replacing the Group's previous banking arrangements.

As a result of the recently announced loss of the Company's contract with Hutchison 3G, the Board has resolved to make a one-off provision of £2.3 million in the current financial year related to the expected costs of exiting lease commitments on a substantial portion of the Company's site in Glasgow following the wind down of this contract.

Incentive shares

Following consultation with shareholders, the Company is implementing new incentive and performance arrangements, via the award of conditional rights to acquire Ordinary Shares to Hanover Investors ("Hanover"), and the establishment of a similar scheme for the benefit of employees. Hanover is classed as a related party as Matthew Peacock, Executive Chairman and Tom Russell, Non-Executive Director of Regenersis are partners of Hanover. Hanover owns 6,692,108 Ordinary Shares in the Company.

Hanover will be entitled to be issued a number of Ordinary Shares (or a cash alternative at the Company's discretion) equal to up to 6.3% of the growth in shareholder value achieved by the Company in the period ending 30 June 2014, above a base value of 75 pence per share (to be adjusted in future in the event of capital raises and distributions). This is subject to conditions set by the Remuneration Committee, with provisions for early vesting in the event of a takeover of the Company or the share price increasing above 150 pence for a 30 day period. As part of these agreements Hanover will provide, under the terms of a service agreement, business and strategic planning advice to Regenersis.

Other employees may be granted entitlements under this new scheme by the Company. The Board has resolved to limit the total dilution under all existing and new share option and similar incentive arrangements to 12% of outstanding shares.

Announcing the positive progress and new strategic direction Regenersis' Executive Chairman, Matthew Peacock commented:

 "I am delighted that our Board has identified considerable potential in the Group going forward. Significant strength across the Regenersis business exists, both in terms of client relationships and technical expertise. My Board colleagues and I are confident that the new structure and focus set out today will enable us to convert these strengths into sustainable growth in more profitable markets. After a period of consolidating these important changes in the next six months, I believe we will begin to see the clear benefits of our new growth strategy."

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