Portfolio news 2008
Modern Water plc - Final results for the 12 months ended 31 December 2007
29 Feb 2008
Modern Water plc, the water technology investment business,
announces Final Results for 12-month period ended 31 December
Modern Water moves ahead after successful first six months as a
- Successful first six months as a PLC since IPO in June
- Agreement signed to locate commercial proving plant in
- Gibraltar plant due to be operational by mid 2008
- High level of interest in our technology from the Gulf,
Australasia and the Mediterranean region
- Cash balances of £29 million at 31 December 2007
Commenting on today's results, Neil McDougall, Executive
Chairman of Modern Water plc, said: "We are delighted to
reflect on a successful first six months as a publicly listed
company during which the Modern Water management team has been
steadily delivering on the business plan. There has been a high
level of interest in our desalination technologies and we are
pleased to announce that we have agreed to install a proving plant
in Gibraltar. This plant is due to be operational by mid 2008 and
is a major break-through that will enable us to demonstrate the
significant advantages of our desalination technology, including
lower energy, capital and operational costs."
For further information:
Modern Water plc
Neil McDougall, Executive
Dudley White or Tom
020 7367 5222
KBC Peel Hunt Ltd
Jonathan Marren or Oliver
020 7418 8900
It is with great pleasure that I make my first full report as
Executive Chairman of Modern Water plc. The past year has been an
exceptional one. The company was founded at the end of 2006. In
June 2007, we raised £30 million on admission to the AIM
market of the London Stock Exchange, and we were delighted that the
share offer was well oversubscribed. Following admission, the
management team has been steadily delivering against its plans
whilst successfully laying important commercial and technical
foundations for future growth.
With the lack of availability of fresh water becoming ever more
acute we anticipate that there will continue to be growing demand
for water and water-related products. With expectations that by
2025 two-thirds of the world's population will live in countries
that are classified as water-stressed, our portfolio of
technologies will revolutionise the provision of fresh water.
Sustainability and environmental responsibility lie at the heart
of our business. Our technology has a positive impact on the
environment as it reduces energy use by desalination plants and
lowers the consumption and disposal of hazardous chemicals. Our
processes reduce or eliminate the harmful emissions of salt brine
seen in traditional desalination plants. We are also developing an
exciting renewable and emission-free form of energy.
Since admission to AIM, a core focus has been the commercial
roll out of our technology. I am pleased to report that there has
been a very high level of interest internationally, particularly
for our desalination technology. This has been most marked in the
Gulf, Australasia and the Mediterranean region.
I am delighted to announce, as part of this roll out, we have
agreed to locate the first manipulated osmosis desalination proving
plant in a commercial environment in Gibraltar. This is an
important step and gives us the opportunity to demonstrate the
significant advantages of our desalination technology, including
lower energy, capital and operational costs and higher output.
We continue to monitor other water-related technology, with a
particular focus on areas complementary to our existing products.
As a result in September we made an investment in Stonybrook
Purification, a company that is developing a new generation of
Ongoing investment in intellectual property has resulted in a
recent patent grant approval for hydro-osmotic power, which
generates power by mixing water with different levels of salinity.
This is a natural extension of our work in desalination and
represents a potentially important new revenue stream.
To support the roll out of our technologies we have continued to
build a strong management team. We have made a range of impressive
appointments in all key areas, with particular focus on sales and
technical support. We are delighted to continue to attract high
calibre staff who are well respected in the water and desalination
sectors. I would like to take this opportunity to thank all of our
staff who have helped to ensure that the first period as a quoted
company has been such a success.
We expect that the high level of interest in our ground-breaking
technologies will continue, and that the foundations and key
relationships we have put in place will grow into successful
long-term partnerships. The board looks forward to continuing this
positive growth in 2008.
29 February 2008
The group has continued to grow following our admission to AIM
on 12th June 2007. Based in new offices, with our key executive
team of technical and business development professionals, we are
confident that we have solid foundations from which to rapidly grow
Availability of fresh water and the treatment of wastewater
remain at the forefront of the environmental agenda. The serious
issues facing the developed world are now being recognised and the
importance of sustainable solutions to these issues is increasingly
The company is experiencing continuing interest in its
technology offering within its target markets. We believe our
technology provides significant benefits over current technology.
We are continuing to invest in developing further applications for
our core manipulated osmosis technology to ensure we retain our
We have seen significant market interest from developers for the
implementation of all our technology offerings on a single
The company has announced the first contract for a manipulated
osmosis desalination plant in a commercial environment. The proving
plant will be located next to the existing desalination plant in
Gibraltar and will use the same feedwater, producing 100m3/day of
This is an important project for us and will enable us to
illustrate the efficiency of our technology against traditional
desalination methods. This showcase has attracted significant
interest and will be an important part of our marketing
During the year the company made a number of investments in
technology. The initial investments in Poseidon Water, Cymtox and
Surrey Aquatechnology were completed prior to the AIM
On completion of the AIM listing, Modern Water acquired the
balance of Surrey Aquatechnology shares to take the company to 100%
In November 2007, Modern Water purchased an additional 20% of
Cymtox to take the shareholding to 37%. Cymtox is continuing to
make significant progress in the development of its commercial
In line with our strategy to invest in new complementary
technologies, in September 2007 the company made an investment in
Stonybrook Purification. Stonybrook, a spinout from Stonybrook
University, is developing a membrane platform that enables water
treatment systems to process more water to a higher standard,
faster and at a lower cost.
The company continues to sponsor research on further
applications for our osmotic technology, led by Professor Sharif
and his team at the University of Surrey. This work has resulted in
a number of new patent applications.
One area of successful research has been in the use of
manipulated osmosis for generating power. This will allow power to
be generated from the brine output of existing desalination plants.
In the future this will allow power to be generated where there are
fresh and sea water resources. Development of this technology is
continuing and we are reviewing suitable locations for a large
scale proving plant.
Good progress has been achieved in securing the patents for the
company's own technology.
The osmotic energy patent has been granted by the European
Patent Office. The company has also received other individual
country patent approvals for the manipulated osmosis process,
including the sole right to use the technology in South Africa.
In addition, as part of Modern Water's drive to gain access to
leading research, the company has agreed to join the Questor Group,
which provides Modern Water with valuable links to Queens
University Belfast, Dublin City University and Stevens Institute of
Technology. Other members of the Questor Group include BP, Shell
People and premises
In terms of headcount, the company is growing rapidly.
Appointments have focused on technical and business development
professionals, reflecting our increasing focus on the roll out and
commercialisation of our technologies, attracting impressively high
calibre people. Recruitment is ongoing as the business
continues to grow, and our key executive team is now in place to
drive the company forward.
Following the completion of our IPO, the company finalised the
development of its stand alone IT and accounting systems, and moved
to its current offices in Guildford.
Corporate Social Responsibility
The company is committed to the improvement and sustainability
of the environment in which we operate. As a team, we are aware of
our responsibility to conduct business and develop the company with
a focus on environmental accountability. As the company grows, our
intention is to place increased emphasis on our corporate social
responsibility for the long term benefit of the planet. To this
end, we are working towards ensuring that all the paper we print on
is from sustainable sources. The inks used in our annual report
vegetable-based and we recycle all waste paper and card at our UK
Lack of fresh water availability is becoming an increasingly
pressing threat. Our range of technologies provide environmentally
sound solutions to address this global issue. The technology we
have developed for osmotic power generation is renewable and
complements other renewable energy sources, such as solar and wind.
The process allows for sustainable desalination whilst
significantly reducing energy consumption. Our technology greatly
impacts upon the reduction of long term damage to the planet caused
by the use of fossil fuels. Our application of renewable energy in
the treatment of water for industrial and domestic use will ensure
this process is both sustainable and energy efficient.
Risks and uncertainties
The risks inherent in the operation of the company are well
understood and control measures have been established to ensure
that risks are adequately controlled both in terms of frequency and
consequences. Risks are reviewed by the board on a regular basis.
Treasury risks are described in more detail in the financial
review. Other risks reviewed include business controls, management
structure and recruitment programmes, corporate and capital
structure and the security of company assets such as intellectual
property and patents.
The financial position of the company is strong, having raised
£30 million at IPO. At the year-end, cash balances were in
excess of £29 million after funding the acquisition of two
subsidiaries, two further investments and the infrastructure to
support business development.
The major accounting policies to note are those that deal with
intangible assets and share based payments. The company has adopted
IFRS and as such is required to value intangible assets acquired as
part of a business combination. The resulting appraisal values the
group's intangible assets at over £13 million. The company is
also required to place a value on share-based payments. This
amounted to a non-cash charge on the consolidated group income
statement of £1.3 million out of a total loss of £1.7
The company is entirely equity funded which is appropriate
during the current pre-revenue, development phase. As the company
develops income generating investments the capital structure will
be reassessed on a project by project basis.
Treasury risk and policy
The company is subject to the following risks:
- Risks associated with variable interest rates.
- Credit risks associated with having cash on deposit.
- The risk of not having cash on deposit available at short
The company has adopted a low risk approach to treasury
management appropriate to manage all the above risks. Cash balances
are invested in term deposit accounts, with maturity dates to suit
projected liquidity requirements. A variety of institutions are
used in consultation with the company's financial advisers.
The major cash inflow was the raising of total capital of
£32 million comprising £30 million from the IPO and the
remainder from the initial investors. Cash out includes transaction
costs from the above (£1.6 million) and operating costs
(£1.4 million), the majority of which relate to the rapid
growth of the company. Cash investments totalling £350,000
have been made in four companies.
It has been an exciting and challenging period in the
development of Modern Water. The foundations are now in place to
allow the company to continue its rapid growth.
29 February 2008
The full text of this announcement is available on
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