ON THE face of it, there’s a lot to like about HaloSource. The AIM-listed tiddler has invented a low-tech water purification system that is both cheap and highly effective. Its potential client base runs into billions of people, from the ultra poor forced to drink dirty water to the mega posh who insist their liquids be filtered every which way. In 2009 America’s Environmental Protection Agency even registered its filter of polystyrene beads bathed in bacteria-killing bromine as the first novel water sanitation technology in 15 years.
Bromine is much more effective at killing germs than chlorine and doesn’t affect the taste. So, next stop, global domination. Or not.
HaloSource has been a disaster since it listed at 135p a share five years ago. On Friday it closed at 15.5p — a drop of nearly 90% from its debut. Under the rosiest scenario, the loss-making developer is two years from breakeven.
Before you dismiss this as yet another science project destined to wither in the AIM weeds, though, consider a few factors.
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One is Neil Woodford. The star fund manager, who left Invesco Perpetual last year to set up shop on his own, is a big fan. In November he backed a £7m fundraising to replenish the shrinking balance sheet. His support goes back years. Before he left, Invesco was HaloSource’s biggest shareholder. Woodford Investment now owns a fifth of the company.
HaloSource has supply deals with five companies in the drinking water markets of China, India and Brazil. One of these partners, though unconfirmed, is thought to be Unilever.
Last year sales jumped from $16m (£11m) to $21m, an increase of nearly a third, while it cut its annual loss from $12m to $7.9m. Liberum Capital, the bank that floated HaloSource, slapped a 40p price target on the stock last month.
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With a genuinely useful invention and serious backers, HaloSource looks like the perfect punt — just as it did five years ago. But it’s a lot cheaper now.