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Revolymer swaps gum for detergent

The Neil Woodford-backed chemicals minnow has shifted its priorities of late. Investors will be hoping revenue will step up a gear too
September 26, 2016

On first glance at Revolymer 's (REVO) half-year figures, the £4.4m "net utilisation of cash resources" - ors cash-burn - looks distinctly like a red flag for a company that ended the period with just £97,000 cash in the bank and £6m in liquid investments. Unpack those outflows, which were up from £1.2m in the same period in 2015, however, and £2m went on June's purchase of fellow polymer-focused peer Itaconix, and were further exacerbated by an absence of research and development tax credits.

IC TIP: Buy at 38p

Fortunately, the company cobbled together gross funds of £5.8m from its institutional backers after the end of the period to cover the cash portion of the acquisition. Subsequently, Itaconix landed the first post-deal sales of its water soluble polymer, CHT, to a large US retailer, which will use the product in a private-label automatic dishwashing detergent. The Aim-traded group will hope additional sales start to pick up soon. That's because prior to these numbers, Revolymer announced the divestment of its nicotine gum business - its sole source of revenues until September - to medicated chewing gum group Alkalon, in return for a 15 per cent minimum stake in the combined entity, rather than cash.

Analysts at Panmure Gordon are forecasting an adjusted pre-tax loss of £4.6m and a loss per share of 6.1p this year, narrowing to losses of £4.1m and 4.7p in the year to December 2017.

REVOLYMER (REVO)

ORD PRICE:38pMARKET VALUE:£29.9m
TOUCH:36-40p12-MONTH HIGH:92pLOW: 35p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:14p*NET CASH:£6.1m^

Half-year to 30 JunTurnover (£000)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2015594-1.6-0.5nil
2016578-2.0-3.1nil
% change-3---

Ex-div: na

Payment: na

*Includes intangible assets of £9.6m, or 12p a share. ^Including investments at hand.