MWG.L Regulatory News (MWG)

31 Aug 2007 07:01

Modern Water PLC31 August 2007 31 August 2007 Modern Water plc ("Modern Water" or the "Company"), the water technology investment business, is pleased to announce its interim results for the period to 30 June 2007. Modern Water on course with first results Highlights * Successful flotation in June 2007 raising £30 million before expenses* Business strategy on track* Good progress being made with plans for first commercial desalination plant* Business Development Director appointed post half year end Commenting on today's results, Neil McDougall, Executive Chairman of ModernWater said: "The Group successfully floated on the London Stock Exchange's AIM market inJune. We are in the early days of rolling out our strategy, but have so far madegood progress. I am confident of our ability to deliver our business strategyand the team we have in place to drive this". For further information: Modern Water plcNeil McDougall, Executive Chairman 07740 930303www.modernwater.co.uk HeadLand Consultancy 020 7367 5222Howard Lee or Tom Gough KBC Peel Hunt Ltd, Nominated Adviser and Broker 020 7418 8900Jonathan Marren or Oliver Stratton Report to Shareholders Review of Results This is Modern Water's first set of results since its flotation on AIM in June2007. During the period, Modern Water and its subsidiaries ("the Group") madegood progress in line with its expectations. After accounting for net interestreceivable of £115,000 the Group recorded a loss before taxation of £1,065,000.These results reflect the execution of the Group's business strategy, where muchof the expenditure is related to gearing up the business to support its keyinvestment and development activities. The company has successfully migrated all administrative processes andprocedures to the Company including a stand alone finance function. On 12 June 2007 the company raised £30 million before expenses to provide fundsfor the Group's development and commercialisation strategy. The ongoing researchprogramme for our desalination process continues to make good progress withencouraging results. With sufficient indicative data now in place to complete aretrofit of a desalination plant, Modern Water's key focus is on identifying thefirst commercial applications. We are in discussions with a number of plantowners and operators, principally in the Mediterranean and Middle East and wewill update the market once a deal is finalised. When the first plant is up andrunning we anticipate that there will be strong demand for the technology. Good progress has been made in attracting high quality staff with appointmentsto run Poseidon Water completed. Since 30 June 2007, we have hired a BusinessDevelopment Director who will focus on the deployment, licensing and selling ofthe Group's technology to support implementation of the Group's growth strategy. In line with the Group's strategy to explore new technologies which complimentour strategic focus, we are continuing to look for opportunities to signlicensing agreements with academic and research institutions. This will allow usto review and, where appropriate, invest in technologies where we see potentialin terms of application and return on investment. Business Overview Modern Water was established to source, develop and deploy technology-basedsolutions to meet the growing demand for the economic availability of freshwater and treatment of waste water. Due to significant growth in the world'spopulation, consumption of fresh water and associated shortages are predicted togrow considerably. Modern Water is well positioned to support this growing need. The Group is initially concentrating on two distinct approaches to the watermarket. This is (i) desalination technology, which aims to reduce the cost ofdesalinating sea water as it requires less energy and lower capital expenditurethan conventional desalination processes; and (ii) substitution technology,which allows sea water based domestic waste water to be treated to a sufficientquality to meet European Waste Water Standards. The Group's strategy is to acquire key stakes in appropriate technologies withinthese areas and to date has made investments in Surrey Aquatechnology Limitedand Poseidon Water Limited. The Group also has an investment in Cymtox Limited. Key Activities Surrey Aquatechnology LimitedSurrey Aqua is developing processes for the osmotic treatment of water whichinclude the desalination of seawater for potable water, the treatment of waterproduced from the desalination process and the preparation of water forre-injection for use in the oil industry. The key benefit of this intellectualproperty is to reduce capital costs, footprint and the operating costs usuallyassociated with desalination plants. Manipulated osmosis technology is suitableto be used in the construction of new and integrated into existing thermaldesalination and reverse osmosis desalination plants. Poseidon Water LimitedPoseidon Water's sewage treatment process is designed to be used on waste waterbased on either just seawater or a mixture of fresh water and sea water.Conventional waste water sewage treatment processes predominantly treat wastewater based solely on fresh or potable water. Where they are based on acombination of fresh water and sea water or just sea water, performance issignificantly compromised and they have limited effectiveness. As toiletflushing uses approximately 30 per cent. of all domestic water usage,implementing Poseidon Water's water treatment process can significantly reducethe levels of fresh water required. Cymtox LimitedCymtox exploits a new technology that monitors water toxicity on a continuous,real time basis. It checks a wide range of toxicity and warns of suspiciouschanges. The core technology is based on the well established science ofbioluminescence. Outlook We are in the early days of rolling out our business strategy, but have so farmade good progress. Our overall focus remains on securing a commercialdesalination plant and strong progress has already been made. We continue toexplore investment opportunities in complimentary technology related to theeconomic availability of freshwater and treatment of waste water The Board is confident in the Group's ability to deliver the business strategyand the team we have in place to drive this. CONDENSED CONSOLIDATED INTERIM BALANCE SHEET Note 30 June 2007 £'000AssetsNon-current assetsTangible assets 3 15Intangible assets 3 13,647Investments 3 75-------------------------------------------------------------------------------- Total non-current assets 13,737-------------------------------------------------------------------------------- Current assetsReceivables 101Cash and cash equivalents 30,484--------------------------------------------------------------------------------Total current assets 30,585--------------------------------------------------------------------------------Total assets 44,322-------------------------------------------------------------------------------- EquityCapital and reserves attributable to equity shareholdersof the companyShare capital 4 147Reserves 43,330Retained earnings (298)-------------------------------------------------------------------------------- 43,179 Minority interest 229-------------------------------------------------------------------------------- Total equity 43,408-------------------------------------------------------------------------------- Non-current liabilitiesDeferred income tax liabilities 7 440--------------------------------------------------------------------------------Total non-current liabilities 440-------------------------------------------------------------------------------- Current liabilitiesTrade and other payables 453Borrowings 5 21--------------------------------------------------------------------------------Total current liabilities 474--------------------------------------------------------------------------------Total liabilities 914--------------------------------------------------------------------------------Total equity and liabilities 44,322-------------------------------------------------------------------------------- CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT Period ended 30 June Note 2007 £'000Continuing operationsOperating expenses 6 (1,112)Finance income 115Share of (post tax) losses of associates (68)--------------------------------------------------------------------------------Loss before income tax (1,065)Income tax credit 7 3--------------------------------------------------------------------------------Loss for the period (1,062) Attributable to:- equity shareholders of the company (1,015)- minority interest (47)-------------------------------------------------------------------------------- (1,062)--------------------------------------------------------------------------------All results derive from continuing operations. Pence per shareLoss per share for profit attributable to the equityholders of the company- basic (5.4)- diluted (5.3) CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY Note Attributable to equity holders of the Company Share Merger Retained Minority Total Capital premium reserve earnings Total interest equity £'000 £'000 £'000 £'000 £'000 £'000 £'000Balance at 11 October 2006 - - - - - - - Loss for the period - - - (1,015) (1,015) (47) (1,062)----------------------------------------------------------------------------------------------------------------------Total recognised income for the period - - - (1,015) (1,015) (47) (1,062)----------------------------------------------------------------------------------------------------------------------Proceeds of share issues 4 120 30,548 - - 30,668 - 30,668 Share for share exchange 27 - 12,782 - 12,809 - 12,809 Share based paymentschemes - - - 717 717 - 717 Minority interest atacquisition - - - - - 276 276----------------------------------------------------------------------------------------------------------------------Balance at 30 June 2007 147 30,548 12,782 (298) 43,179 229 43,408---------------------------------------------------------------------------------------------------------------------- CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT Period ended 30 June Note 2007 £'000Cash flows from operating activities: - continuing operations (265)--------------------------------------------------------------------------------Cash flows from operating activities - net (265)-------------------------------------------------------------------------------- Cash flows investing activities: - acquisition of subsidiaries, net of cash acquired 8 (110) - purchases of property, plant and equipment 3 (10) - other investing cash flow - net (75)--------------------------------------------------------------------------------Cash flows from investing activities - net (195)--------------------------------------------------------------------------------Cash flows from financing activities: - net proceeds from issue of ordinary shares 30,948 - repayments of borrowings 5 (4)--------------------------------------------------------------------------------Cash flows from financing activities - net 30,944--------------------------------------------------------------------------------Net increase in cash and cash equivalents less bank overdraft 30,484 Cash and cash equivalents less bank overdraft at start of period - Cash and cash equivalents and bank overdrafts atend of period 30,484-------------------------------------------------------------------------------- NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION 1. General information Modern Water plc ('the company') and its subsidiaries (together, 'the group')invests in, develops and deploys new water technology. During the period, the group acquired control of Surrey Aquatechnology Limited,a company developing desalination techniques and acquired control of PoseidonWater Limited, a company developing techniques for the treatment of waste water.The group also acquired an interest in Cymtox Limited, a company developingwater purity measurement devices. The company is a limited liability company incorporated and domiciled in the UK.The address of its registered office is 24 Cornhill, London EC3V 3ND. The company is quoted on the AIM market of London Stock Exchange plc. This condensed consolidated interim financial information was approved for issueon 30 August 2007. These interim financial results do not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985. 2. Basis of preparation and accounting policies Basis of preparation This condensed consolidated interim financial information for the period from 11October 2006 and ended 30 June 2007 has been prepared in accordance with the AIMRules for Companies of the London Stock Exchange plc and with IAS 34, 'Interimfinancial reporting' as adopted by the European Union. The company wasincorporated on 11 October 2006 and therefore no comparative information ispresented. The accounting policies adopted are consistent with those disclosed in the AIMadmission document of the Group dated7 June 2007. Critical judgements The preparation of the consolidated interim Financial Information has requiredthe application of significant judgement or estimates by management for thefollowing: - The fair value of the shares issued under the Management Share Incentive Scheme (see note 4) was based on the value of other shares issued at that time - The fair value of intangible assets acquired in the period was calculated using a replacement cost basis. The consolidated financial statements of the Company will be prepared under IFRSand the accounting policies described below: Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and entities controlled by the Company (its subsidiaries). Subsidiaries Subsidiaries are all entities over which the Company has the power to govern thefinancial and operating policies generally accompanying a shareholding of morethan half of the voting rights. The existence and effect of potential votingrights are considered when assessing whether the Company controls an entity. Subsidiaries are fully consolidated from the date on which control isestablished by the Company. Intercompany transactions, balances and unrealised gains on transactions betweenGroup companies are eliminated on consolidation. Subsidiaries' accountingpolicies are amended where necessary to ensure consistency with the policiesadopted by the Group. Associates Associates are entities over which the Company has significant influence, butdoes not control, generally accompanied by a shareholding of between 20 percent. to 50 per cent. of the voting rights. The equity method of accounting is used to account for the acquisition of theCompany's associates. The cost of investment in associate undertakings ismeasured at fair value of the assets given, equity instruments issued, andliabilities incurred or assumed at the date of exchange plus costs directlyattributable to the transaction. The Company's investment in associates includesgoodwill identified on acquisition, net of any accumulated impairment losses. The Company's share of its associates' post-acquisition profits or losses isrecognised in the income statement, and its share of post-acquisition movementsin reserves is recognised in reserves. The cumulative post-acquisition movementsare adjusted against the carrying amount of the investment. When the Company'sshare of losses in an associate equals or exceeds its interest in the associate,including any other unsecured receivables, the Company does not recognisefurther losses, unless it has incurred obligations or made payments on behalf ofthe associate. Unrealised gains on transactions between the Company and its associates areeliminated to the extent of the Company's interest in the associates. Unrealisedlosses are also eliminated unless the transaction provides evidence of animpairment of the asset transferred. Accounting policies of associates arechanged where necessary to ensure consistency with the policies adopted by theGroup. Business combinations The purchase method of accounting is used to account for the acquisition of theCompany's subsidiaries. The cost of acquisition is measured at the aggregate ofthe fair value of the assets given, equity instruments issued, and lessliabilities incurred or assumed at the date of exchange plus costs directlyattributable to the transaction. Identifiable assets acquired and liabilitiesand contingent liabilities assumed in a business combination that meet thedefinition under IFRS 3 Business Combinations are initially measured at theirfair values at acquisition date, irrespective of the extent of any minorityinterest. The excess of the cost of acquisition over the fair value of theCompany's share of the identifiable net assets is recorded as goodwill. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Company's share of the net identifiable assets of the acquired subsidiary / associate at the date of acquisition. Goodwill on acquisitions ofsubsidiaries is included in 'intangible assets'. Goodwill on acquisitions of associates is included in 'investments in associates' and is tested for impairment as part of the overall balance. Separately recognised goodwill istested annually for impairment and carried at cost less accumulated impairmentlosses. Impairment losses on goodwill are not reversed. In accordance with IFRS 10; Interim Financial Reporting and Impairment, impairment losses recognised in an interim period on goodwill carried at cost are not reversed ata subsequent balance sheet date. Gains and losses on the disposal of an entityinclude the carrying amount of goodwill related to the entity sold. Goodwill is allocated to cash generating units for the purpose of impairmenttesting. The allocation is made to those cash generating units or groups of cashgenerating units that are expected to benefit from the business combination inwhich the goodwill arose. Property, plant and equipment All property, plant and equipment is shown at cost less subsequent depreciationand impairment. Cost includes expenditure that is attributable to theacquisition of the items. Depreciation on assets is calculated using thestraight-line method to allocate the cost of each asset to its residual valueover its estimated useful life, as follows: Fixtures and fittings - 3 to 5 yearsComputer equipment - 3 to 5 years The asset's residual values and useful lives are reviewed, and adjusted ifappropriate, at each balance sheet date. Subsequent costs are capitalised only when it is probable that they will resultin future economic benefits flowing to the company and when they can be measuredreliably. All other repairs and maintenance expenditure is charged to the incomestatement in the year in which it is incurred. Intangible assets Patents, trademarks and licences Acquired patents, trademarks and licences are initially recognised at historicalcost. They have a finite useful life and are subsequently carried at cost lessaccumulated amortisation. Amortisation is calculated using the straight-linemethod to allocate the cost of patents, trademarks and licences over theirestimated useful economic lives as follows; - Patents - 20 years from application Computer software costs Acquired computer software licences and software development costs arecapitalised and amortised over their estimated useful lives of between three andfive years. Research and development Expenditure on research activities is recognised as an expense in the period inwhich it is incurred. Any internally-generated development intangible asset is recognised only if allof the following are met: - An asset is created that can be identified; - It is probable that the asset created will generate future economic benefits; and - The development cost of the asset can be measured reliably. Where no internally generated intangible asset can be recognised, developmentexpenditure is recognised as an expense in the period in which it is incurred.Internally generated intangible assets are amortised on a straight line basisover three years. Intangible assets identified as a result of a business combination are dealtwith in line with IAS 38, and brought on to the consolidated balance sheet atthe date of acquisition. Impairment of intangible assets and property, plant and equipment Intangible assets that have an indefinite useful life are not subject toamortisation and are tested annually for impairment and whenever events orcircumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortisation are tested for impairment when events ora change in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognised for the amount by which thecarrying amount exceeds its recoverable amount. The recoverable amount is thehigher of the asset's fair value less costs to sell and the value in use. Forthe purposes of assessing impairments, assets are grouped at the lowest levelsfor which there are identifiable cash flows (cash generating units 'CGUs'). Provisions Provisions are recognised when the group has a present obligation as a result ofa past event, and it is probable that the group will be required to settle thatobligation. Provisions are measured at the directors' best estimate of theexpenditure required to settle the obligation at the balance sheet date, and arediscounted to present value where the effect is material. Leases Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. Assets heldunder finance leases are included within property, plant and equipment. Theasset is initially measured at fair value, or if lower, the present value of theminimum lease payments. A corresponding liability is recognised withinobligations under finance leases. The assets are either depreciated using thesame method as similar fixed assets, or the length of the lease, whichever isshorter. Leasing payments are treated as consisting of a capital element andfinance costs, the capital element reducing the obligation to the lesser and thefinance charge being written off to the income statement over the period of thelease. All other leases are classified as operating leases. Payments made underoperating leases are charged to the income statement on a straight line basisover the period of the lease. Financial instruments Financial assets and liabilities are recognised on the Group's balance sheetwhen the Group becomes party to the contractual provisions of the instrument. Trade receivables Trade receivables are initially measured at fair value and are subsequentlymeasured at amortised cost, do not carry any interest, and are reduced byappropriate provisions for estimated irrecoverable amounts. Such provisions arerecognised in the income statement. Cash and cash equivalents Cash and cash equivalents comprise cash in hand and demand deposits, and othershort-term highly liquid investments with maturities of three months or lessthat are readily convertible to a known amount of cash and are subject to aninsignificant risk of changes in value. Trade payables and borrowings Trade payables are not interest-bearing and are initially measured at their fairvalue and subsequently measured at amortised cost. Borrowings are initiallyrecognised at their fair value and subsequently measured at their amortisedcost. Equity instruments Equity instruments are recorded at fair value, being the proceeds received, netof direct issue costs. Financial liabilities and equity Financial liabilities and equity instruments are classified according to thecontractual arrangements entered into. Revenue recognition All revenue in respect of licence income is recognised over the period of thelicence and is stated exclusive of value added tax. Revenue from contracts willbe recognised in accordance with IAS 11; Construction Contracts. Gains on disposal of equity investments represent the surplus over carryingvalue on the disposal of equity investments and are recognised when the right toreceive payment is established. Dividend income is recognised when the right toreceive payment is established. Employee benefits Pension obligations The group does not operate any pension schemes for employees but makescontributions to employee personal pension schemes on an individual basis. Thegroup has no further payment obligations once the contributions have been paid.The contributions are recognised as employee benefit expenses when they are due. Share based payments Share based incentive arrangements are provided to management, certain employeesand certain professional advisors. Share options are valued at the date of grantusing an appropriate option pricing model and are charged to operating profitover the vesting period of the award. The annual charge is modified to takeaccount of options granted to employees who leave the Group during theperformance or vesting period and forfeit their rights to the share options andin the case of non-market related performance conditions, where it becomesunlikely they will vest. Taxation Taxation in the income statement represents the sum of the tax currently payableand deferred tax on items charged or credited to the income statement. The tax currently payable is based on taxable profit for the year. Taxableprofit differs from net profit as reported in the income statement because itexcludes items of income or expense that are taxable or deductible in otheryears and it further excludes items that are never taxable or deductible. Thegroup's liability for current tax is calculated using tax rates that have beenenacted or substantively enacted by the balance sheet date. Deferred tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the financial statements. Deferred tax is measured on a nondiscounted basis using tax rates at the balance sheet date. Deferred tax liabilities are recognised on taxable temporary differences arisingon investments in subsidiaries and associates, and interest in joint ventures,except where the Company is able to control the reversal of the temporarydifference and it is probable that the temporary difference will not reverse inthe foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part of the asset to berecovered. Deferred tax is calculated at the tax rates that are expected to apply in theyear when the liability is settled or the asset is realised. Deferred tax ischarged or credited to the income statement, except when it relates to itemscharged or credited directly to equity, in which case the deferred tax is alsodealt with in equity. Government grants Government grants including non-monetary grants at fair value shall not berecognised until there is reasonable assurance that the Group will comply withthe conditions attaching to them and that the grants will be received. Government grants relating to tangible fixed assets are treated as deferredincome and released to the income statement over the expected useful lives ofthe assets concerned. Other grants are credited to the income statement as therelated expenditure is incurred. 3. Capital expenditure Tangible assets Goodwill Patents Investments Total £'000 £'000 £'000 £'000 £'000------------------------------------------------------------------------------------------------------Opening net book amount at 11 October 2006 - - - - - Acquisition of subsidiary (Note 8) 7 12,079 1,582 - 13,668 Additions 10 - - 75 85Depreciation / amortisation (2) - (14) - (16)------------------------------------------------------------------------------------------------------Closing net book amount at 30 June 2007 15 12,079 1,568 75 13,737------------------------------------------------------------------------------------------------------ Goodwill is not subject to amortisation, but is tested for impairment annuallyat year-end (31 December) or whenever there is any indication of impairment. At30 June 2007, there was no indication of impairment for goodwill. On 14 December the company acquired 17% of the share capital of Cymtox Limitedfor a consideration of £75,000. 4. Share Capital Number of Ordinary Share Total shares shares premium (thousands) £'000 £'000 £'000------------------------------------------------------------------------------------------------------Opening balance 11 October 2006 - - - - Initial funding 75 - 2,249 2,249 Management Share Incentive Scheme 40 - - - Bonus issue 57,108 57 (57) - 1 for 10 consolidation (51,500) - - - 4 for 1 subdivision 17,167 - - - Acquisition of subsidiary (see note 8) 10,763 27 - 27 Placing of shares 25,210 63 29,937 30,000 Placing expenses - - (1,581) (1,581)------------------------------------------------------------------------------------------------------At 30 June 2007 (0.25 pence per ordinary share) 58,863 147 30,548 30,695------------------------------------------------------------------------------------------------------All shares issued were fully paid. Modern Water Incentive Plan The directors' holdings of options over ordinary shares issued under the ModernWater Incentive Plan were as follows Date of Granted Exercised Exercisable Exercisable Exercise grant in period in period from to price Neil McDougall 12.06.07 560,877 - 12.06.08* 12.06.17 119p Simon Humphrey 12.06.07 1,121,753 - 12.06.08* 12.06.17 119p------------------------------------------------------------------------------------------------------- At 30 June 2007 1,682,630 -------------------------------------------------------------------------------------------------------- * The Modern Water Incentive Plan provides options subject to performancecriteria. One third of the options vest on the date 12 months from AIMadmission, one third vest on the date 24 months from AIM admission and one thirdvest on the date 36 months from AIM admission. Each tranche will vest subject tototal shareholder return being at least equal to 10 per cent for the 12 monthspreceding the relevant tranche vesting date. Directors' holdings under the Management Share Incentive Scheme ("MSIS") The directors' holdings of ordinary shares issued under the MSIS were as follows Date of No of Ordinary Subscription subscription Shares price Neil McDougall 1.12.06 &12.03.07 3,363,400 0.1p Simon Humphrey 1.12.06 &12.03.07 1,479,000 0.1p Gerald Jones 1.12.06 200,000 0.1p One third of the MSIS shares are not subject to restrictions. One third of theMSIS shares are subject to restrictions which are lifted on 1 December 2007. Onethird of the MSIS shares are subject to restrictions which are lifted on 1December 2008. 5. Borrowings and loans 30 June 2007 £'000 Non-current -Current 21-------------------------------------------------------------------------------- 21--------------------------------------------------------------------------------Movements in borrowings is analysed as follows: Period ended 30 June 2007Opening amount as at 11 October 2006 -Acquisition of subsidiary (Note 8) 25Repayments of borrowings (4)--------------------------------------------------------------------------------Closing amount as at 30 June 2007 21-------------------------------------------------------------------------------- 6. Operating expenses The following items have been charged to operating expenses during the interimperiod: Period ended 30 June 2007 Fair value of employee share based remuneration 477Other share based payments for services from IP Group plc 240Wages and salaries 130Social security costs 15Depreciation of tangible fixed assets 2Amortisation of intangible assets 14--------------------------------------------------------------------------------- IP Group plc is a significant shareholder of the company. 7. Income taxes During the period there were no taxable profits. At the balance sheet date thegroup had a deferred tax asset in respect of unutilised trading losses. Thisasset has not been recognised as its utilisation is not yet sufficientlycertain. The deferred tax liability of £440,000 at 30 June 2007 arises from taxabletemporary differences on intangibles recognised on business combinations and isexpected to unwind over the useful economic life of these assets. £3,000 hasbeen credited to the Income Statement to 30 June 2007. 8. Business combinations On 14 December 2006 the group acquired 51% of the share capital of PoseidonWater Limited ("Poseidon") for a cash consideration of £425,000. The acquired business contributed revenues of £nil and net losses of £96,000 tothe group for the period from acquisition to 30 June 2007. If the acquisitionhad occurred on 11 October 2006, consolidated revenue and consolidated lossesfor the period ended 30 June 2007 would have been £nil and £100,000respectively. On 30 November 2006 the group acquired 30% of the share capital of SurreyAquatechnology Limited ("Surrey Aqua") for a cash consideration of £535,000. On 12 June 2007 the group acquired the remaining 70% of the share capital ofSurrey Aqua in a share for share exchange with a fair value consideration of£12,809,000 (10,763,000 Modern Water plc shares). The acquired business contributed revenues of £nil and net costs of £15,000 tothe group for the period from acquisition to 30 June 2007. If the acquisitionhad occurred on 11 October 2006, consolidated revenue and consolidated lossesfor the period ended 30 June 2007 would have been £nil and £247,000respectively. Details of net assets acquired and goodwill are as follows: Surrey Aqua 30 November Surrey Aqua Poseidon 2006 12 June 2007 Total Purchase consideration: £'000 £'000 £'000 £'000 - cash paid 425 535 - 960- fair value of shares issued - - 12,809 12,809 --------------------------------------------------------------------------------------Total purchase consideration 425 535 12,809 13,769 - fair value of net identifiable assets acquired (see below) (288) (468) (934) (1,690) --------------------------------------------------------------------------------------Goodwill 137 67 11,875 12,079-------------------------------------------------------------------------------------- The goodwill is attributable to the subsidiaries' potential in their markets andthe synergies expected to arise after acquisition by the group. The assets and liabilities arising from the acquisitions are as follows: Surrey Aqua Surrey Aqua Poseidon 30 November 2006 12 June 2007 £'000 £'000 £'000 £'000 £'000 £'000 Acquiree's Acquiree's Acquiree's carrying amount Fair value carrying amount Fair value carrying amount Fair value Cash and cash equivalents 413 413 622 622 437 437Property, plant and equipment 5 5 - - 2 2Intangibles - 319 - 1,301 - 1,263Receivables - - - - 25 25Payables (59) (59) - - (39) (39)Loan (25) (25) - - - -Deferred tax liability - (89) - (364) - (354)-----------------------------------------------------------------------------------------------------------------------Net identifiable assets 334 564 622 1,559 425 1,334-----------------------------------------------------------------------------------------------------------------------Minority interests 49% (276) 70% (1,091) 30% (400)-----------------------------------------------------------------------------------------------------------------------Net identifiable assets acquired 288 468 934----------------------------------------------------------------------------------------------------------------------- Outflow of cash to acquire business,net of cash acquired:- cash consideration 425 535 -- cash and cash equivalents in subsidiary acquired (413) - (437)-----------------------------------------------------------------------------------------------------------------------Cash outflow/(inflow) on acquisition 12 535 (437)----------------------------------------------------------------------------------------------------------------------- Independent review report to Modern Water plc Introduction We have been instructed by the company to review the financial information forthe period from 11 October 2006 to 30 June 2007 which comprises the condensedconsolidated interim balance sheet as at 30 June 2007 and the related condensedconsolidated interim statements of income, cash flows and changes in equity forthe period then ended and the related notes. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. This interim report has been prepared in accordance with the InternationalAccounting Standard 34, 'Interim financial reporting'. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and, basedthereon, assessing whether the disclosed accounting policies have been applied.A review excludes audit procedures such as tests of controls and verification ofassets, liabilities and transactions. It is substantially less in scope than anaudit and therefore provides a lower level of assurance. Accordingly we do notexpress an audit opinion on the financial information. This report, includingthe conclusion, has been prepared for and only for the company for the purposeof assisting it in meeting the requirements of the AIM Rules and for no otherpurpose. We do not, in producing this report, accept or assume responsibilityfor any other purpose or to any other person to whom this report is shown orinto whose hands it may come save where expressly agreed by our prior consent inwriting. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the period ended 30June 2007. PricewaterhouseCoopers LLPChartered AccountantsGatwick30 August 2007 Notes: a) The maintenance and integrity of the Modern Water plc web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. This information is provided by RNS The company news service from the London Stock Exchange