The ‘holy grail’ of a $40bn market

Liquid detergents are enormously popular. But they have one serious drawback. This penny share thinks it has the answer – and it could be a game-changer. Tom Bulford reports.

Eureka! An announcement last week promises that we can all look forward to clean clothes!

Now you are probably thinking that your clothes are already pure and fragrant and that your washing machine does a pretty good job in this respect. If you use washing powder, that may be so. But recent years have seen a trend towards liquid detergents. They are easier to use and take up less space in the kitchen cupboard. And importantly, they use less of that precious commodity – shelf space in supermarkets.

What few of us realise is that liquid detergents do not contain that crucial cleansing agent, bleach. This is because bleach is not stable in liquid formulations. Your laundry might not be getting as clean as you would hope. But one promising UK business believes it has the answer.

The quest for the holy grail

Tests of Revolymer‘s (AIM: REVO), ‘Revcap’ encapsulation technology have shown that bleach can be stabilised in liquid laundry detergents. Revolymer believes that this offers the potential for big improvement in the performance of mass market liquid laundry products. Revolymer’s chief executive Roger Pettman has described it as the “holy grail” for the $40bn global laundry market.

This could be a very important breakthrough for Revolymer. The company has emerged from work done at Bristol University by Dr Pettman and Professor Terence Cosgrove in the field of polymers and now has 30 staff in Deeside, North Wales. Polymers are chemical compounds with many repeating structural units typically connected by covalent chemical bonds. In the natural world they are found in starch, cellulose and rubber, while man-made polymers include teflon, polyurethane and various types of plastic.

 

It’s another example of how advanced chemistry, centred on Britain, is making entirely new things possible. Revolymer is not an isolated example. In fact, there’s a new industry that’s built on this type of dizzying chemistry and science. And the markets are starting to wake up to the story.

Pettman and Cosgrove have been working to alter the structure of polymers in order to give them certain desirable properties. In particular, they have focused on two core areas of polymer technology application: moisture management and encapsulation with controlled release.

The company came on to AIM in July of last year, raising £25m from new investors and achieving a stock-market value of £53m. Today that value has halved to £26m, which is scarcely more than the £22m of cash in the balance sheet at the end of December. Clearly Revolymer has not lived up to expectations so far – and that has much to do with chewing gum…

A new strategy into the FMCG market

Most of the excitement around last year’s stock-market flotation was to do with non-stick chewing gum. By giving chewing gum ‘cuds’ (the bit you spit out) a moisture content, Revolymer claimed that “spontaneous removal through normal street cleaning and pedestrian traffic would improve from 30% to 70%”.

In addition to this, Revolymer had developed a better tasting type of nicotine gum for those trying to give up smoking. To help this along, Revolymer had set up its own manufacturing business.

Now it has had a change of heart. Private label sales of nicotine gum in Canada have run into a patent infringement challenge from rivals. 2012 sales of Revolymer’s Rev7 non-stick gum in the United States amounted to just £153,000. So Revolymer has “concluded that the likely future quantum of these sales no longer justifies a continued physical presence” – and has closed down the operation.

This leaves it to pursue a licensing strategy, and the market is waiting for it to sign a deal with one of the many large companies in the global FMCG (fast moving consumer goods) market. Revolymer reckons that it has plenty of “shots on goal”.

Amongst these are applications that could improve plastic food wrappers, making them more robust and better able to preserve the shelf life of their contents. It also sees opportunities to improve the feel and texture of personal care products such as lip balm, deodorants, hair and oral care. But it is the ability to put all those active cleaning ingredients into liquid detergents that could herald a breakthrough.

The big beasts of the industry are likely to look at this very closely. Adding Revolymer’s cash to its estimated value of future revenues, broker Panmure Gordon has a price target of 93p. If Revolymer manages to strike a licensing agreement for its liquid detergent polymers, the share price could hit that target in quick time.

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