LONDON (Alliance News) - Modern Water PLC saw its shares fall Wednesday morning, after it reported a much wider loss for 2014 as it booked a big impairment in its membrane division and said both of its units had been hit by a slowdown in China.
The company, which owns technology for producing fresh water and monitoring water quality and is in the early stages of rolling out its products commercially, reported a pretax loss of GBP17.7 million for 2014, compared with the GBP4.8 million loss it reported in 2013.
It booked a GBP12.8 million exceptional charge including an impairment that mainly reflected uncertainty over the size and timing of contract revenue and cashflow in the membrane division as well as costs associated with the resignation of its former executive chairman and the departure of one other member of staff.
Excluding those exceptional costs, its loss before interest, tax, depreciation and amortisation widened to GBP4.5 million, from GBP4.0 million in 2013, as revenue declined to GBP2.8 million, from GBP3.5 million.
"Disappointingly, the slow-down in China - a key market for both our Membrane and Monitoring divisions - has affected revenues in both divisions, and we expect the market in China to remain challenging," interim Non-Executive Chairman Robert Clarke said.
Modern Water repositioned its membrane processes division during 2014 as a membrane systems specialist, believing its offering of a wide variety of water treatment products would provide it with a more predictable flow of opportunities with industrial customers which could help mitigate the lumpy and elongated nature of municipal contracts in the Middle East and China.
"In view of the time that it is taking to close commercial contracts in the Membrane division, and the market capitalisation of Modern Water PLC at the year end, the directors have decided to record a significant non-cash impairment to goodwill and intangibles in the Membrane Division,2 the company said.
It said its monitoring division should benefit in 2015 from orders that were deferred from 2014, as well as the availability of new products, notably its Continuous Toxicity Monitor whose delayed release adversely impacted 2014. However, it reiterated that it expects China to remain challenging.
Modern Water remains debt free, although it ended 2014 with cash reserves of GBP6.8 million, fown from GBP11.4 million at the end of 2013.
Modern Water shares were down 12.6% at 18.02 pence Wednesday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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