Modern Water sinks 14% due to China contract slowdown

Shares in Modern Water sank 14% after reporting wider losses and a slowdown in its key Chinese market.The producer of water filtration, desalination and quality monitoring said China saw its weakest growth in 24 years in 2014 as contract negotiations were taking longer than expected.Revenues fell 21.4% to £2.77m while losses widen to £17.72m from £4.8m, driving losses per share down 259.9% to 22.24p.The challenges in China caused lower revenues in the membrane and monitoring divisions.Modern Water also recorded £12.8m of exceptional costs after deciding to record a "significant" non-cash impairment to goodwill in the membrane division due to the time taken to close commercial contracts for forward osmosis, together with other costs associated with the resignation of founder and executive chairman Neil McDougall and the departure of one other member of staff.However, there was encouraging news last year as the group was appointed as the favourite bidder for a wastewater treatment contract worth £22m in Gibraltar, which is expected to generate more sizeable revenues, while its monitoring division was awarded a new contract in the Middle East.Non-executive chairman Robert Clarke said he expects the market in China to "remain challenging", but highlighted that the group's financial position remains debt free.Numis analysts put their previous 'buy' recommendation under review as "with the adjustment in strategy, we find it extremely difficult at this stage to produce a valuation analysis".Shares were down 13.9% to 17.75p on Wednesday at 11:05.