Revolymer undergoes simultaneous acquisition and divestment in first half

22nd Sep 2016 10:23

(ShareCast News) - Revolymer rejigged its portfolio of businesses to increase its focus on the chemicals space and getting its products to market more quickly despite its finite cash resources.With those aims in mind, management executed three key transactions, acquiring Itaconix, a world leader in polymers from itaconic acid, divesting its nicotine gum business and tapped investors for fresh equity.The transactions were carried out after the end of the first half of the year, ending on 30 June, which saw a notable reduction in the company's liquidity on hand.Itaconix, a privately-owned business based in New Hampshire, USA, was purchased for an initial consideration of $7m. Out of the total, $3m was paid in cash and $4m in new ordinary shares.North Wales-based Revolymer felt Itaconix's proprietary itaconic acid polymerisation technology, existing products and customers were complementary to the company, which will enable them to accelerate growth of both businesses.A further $6m were payable in ordinary shares subject to meeting certain milestones out to 2020.Significantly, just after period-end the firm raised £5.8m via placing of 15.68m ordinary shares to fund the combined business and cover the cash element of the acquisition.Following that transaction, on 19 September the AIM-listed outfit also divested its nicotine gum business to Alkalon in exchange for a 15% stake in the combined entity, with might incerase to 20% if certain milestones were met within nine months of the transaction.Executives at Revolymer felt the combination offered the potential to grow in existing and additional territories and benefit from economies of scale in manufacturing and marketing.Also after period end, Revolymer renewed and expanded its contract to supply its nicotine gum to a Canadian retailer.The group's revenue for the six months to 30 June reduced slightly to £578,000 from £594,000. Gross profit on the other hand improved to £60,000 from £12,000 in 2015 including £43,000 of deferred income released due to the termination of a confectionery gum licence.Administrative expenses increased to £2.1m from £1.7m, reflecting an increase in the non-cash share based payment charge to £59,000 from a credit balance of £370,000 in the previous period. It also reflects a non-cash foreign exchange gain of £461,000 related to the acquisition of Itaconix, which closed before the EU referendum result.The firm incurred a loss after taxation for the half year period of £1.8m, versus the £0.3m lost in the comparable period of 2015.Cash, cash equivalents and short term investments at the period end were £6.1m, against £12.0m one year ago, reflecting a net utilisation of cash resources by the business of £4.4m compared to £1.2m in the previous period. The increase was primarily due to the upfront component of the acquisition of Itaconix of £2.0m.Looking forward, "highly focused on addressing the key commercial challenge of getting the company's products to market as quickly as possible with finite cash resources, in order to deliver revenues and progress towards sustainable profitability in the medium-term," the company said in a statement.The share price rose 0.53% to 38.20 at 1057 BST on Thursday.