Shares digital

Electronics recycling specialist Regenersis (RGS:AIM) has returned to profit for the first time since early 2006, aided by restructuring. The company changed its name from Fonebak in February, eager to put behind it trading problems and significant debt pressures.

Regenersis works with the equipment manufacturers, telecom network operators and retailers to manage their environmental liabilities. Customers include Apple, Toshiba and DSG International (DSGI).

The EU Waste Electrical and Electronic Equipment (WEEE) Directive has made manufacturers and retailers responsible for safe disposal of their products. Electrical items are not allowed to be put in landfill, so they either have to be refurbished or sent to special waste units. Regenersis has contracts to repair these products and repackage them for secondary markets.

It made £1.6 million pre-tax profit in the second half of 2007, compared with a £473,00 loss a year earlier. A facility in Romania, previously running at a loss, will be expanded after manufacturer Sony Ericsson accredited the site for repair work.

Net debt has been reduced to £3.9 million from a peak of £16.5 million in February 2007 by revising working capital requirements. Cash generation has doubled to £7.9 million.

Non-profitable contracts have been scrapped and new sales channels have been opened, primarily through the acquisition of CRC in January 2007. This has extended Regenersis’ coverage of electrical items beyond mobile phones, adding such items as laptops, MP3 players and PDAs.

As an additional revenue stream, Regenersis charges clients to remove personal information from used electrical items, such as if someone has forgotten to delete confidential details like names and addresses.

‘Some of our competing recyclers just get old phones and sell them into markets like China without any care that personal details on the handset may end up in the wrong hands,’ says chief executive Gary Stokes. ‘We make sure the product is cleaned up thoroughly, so the retailer or manufacturer can uphold their brand standards once the item is resold.’

The company is the biggest recycler of mobile phones in the UK, but only has 2% market share.

Around 800,000 second-hand phones were sold on Ebay in 2007, according to Stokes. Regenersis will shortly launch an online trading platform, matching up buyers and sellers of used handsets.

Prior to the half-year results, shares in the company had fallen 30% to 54.5p since October. The return to profit and director dealings pushed the stock up to 61p. Stokes and chief financial officer David Kelham last week spent £3,250 each on shares.

Shares says: A full recovery looks possible but there is still apathy among consumers to recycling electrical items, which works against Regenersis.