Modern Water (AIM:MWG), the owner of leading technologies for water and wastewater treatment and the monitoring of water quality, announces half-year results for the 6 months ended 30 June 2017

Highlights

Operational

·

First AMBC revenue from India

·

First AquaPak™ revenue from Oman

·

First FO revenue from China

Financial

·

Group revenue increased 37% to £1.56m (H1 2016: £1.14m)

·

Group gross profit increased 15% to £0.67m (H1 2016: £0.58m)

·

Group overheads were reduced a further 4% to £2.08m (H1 2016: £2.18m) in line with management strategy

·

£1.75m (£1.61m net) raised from issue of new shares

·

Cash balance of £1.53m (H1 2016: £2.06m) and debt free

Commenting on the results, Alan Wilson, Chairman of Modern Water, said: 'I am pleased to report that Modern Water's strategy is continuing to build momentum, with Group revenue increasing 37% in the first-half of 2017, delivering a 15% improvement in Gross Profits. It is also pleasing to note that the recent successful fund raise achieved the Board's objectives and we are now able to make further investment in our growth and accelerate our work in developing new products, which are already taking shape in the USA.

The impressive performance of our All Membrane Brine Concentrator (AMBC) in the cleaning of process waste-water for an Indian-based textiles company was widely marketed and has encouragingly resulted in new enquiries from companies in a range of countries and industrial sectors. We are also beginning to see increasing market interest in our other membrane technologies, with sales of licences and products in China, India and Oman.'

-ends-

For further information:

Modern Water plc

+44 (0) 1483 696 000

Simon Humphrey, Chief Executive

WH Ireland Limited

+44 (0) 207 220 1666

Paul Shackleton(Nominated Adviser)

Tavistock

+44 (0) 207 920 3150

Andrew Dunn

James Collins

Notes to editors

Modern Water owns, installs and operates broad based membrane systems using world-leading Forward Osmosis (FO) membrane technologies; supplies packaged seawater Reverse Osmosis (RO) desalination systems; supplies wastewater treatment solutions; and develops and supplies advanced systems for water monitoring. Its shares trade on the Alternative Investment Market of the London Stock Exchange.

Modern Water's patented Forward Osmosis (FO) technology's benefits include lower energy consumption and less environmental impact in a variety of industries. With a sales presence in almost 60 countries, the Group's Monitoring Division includes a leading real-time continuous toxicity monitor and trace metal analysers for monitoring the quality of drinking water.

www.modernwater.com

Chairman's Statement

I am pleased to report that Modern Water's strategy is continuing to build momentum, with Group revenue increasing 37% in the first-half of 2017, delivering a 15% improvement in Gross Profits. We continue to keep a close eye on our operating costs, where overheads were reduced by a further 4%. Overall, the operating loss for the period was reduced by £188k to £1.65m.

The impressive performance of our All Membrane Brine Concentrator (AMBC) in the cleaning process of waste-water for an Indian-based textiles company was widely marketed and has encouragingly resulted in new enquiries from companies in a range of countries and industrial sectors. We are also beginning to see increasing market interest in our other membrane technologies, with sales of licences and products in China, India and Oman.

The refocusing of our Monitoring Division continues to gather pace, with new appointments of a Vice President of Global Sales, and new sales managers located in China and UK & Ireland.

It is also pleasing to note that our successful fund raise achieved the Board's objectives and we are now able to make further investment in our growth and accelerate our work in developing new products, which are already taking shape in the USA. A total of 15.9m new shares were placed in May, which expanded our shareholder base and raised net proceeds of £1.612m.

I would like to take this opportunity to thank our stakeholders for their continued support of the business and of course our employees and advisers for their creativity, hard work and determination in driving Modern Water towards a position of robust and sustainable profitability.

Alan Wilson
Chairman
12 September 2017

Chief Executive's Statement

Membrane Division
· Revenue £0.30m (H1 2016: n/a)
· Gross margin 42% (H1 2016: n/a)

H1 2017 was a milestone period for our membrane division with first time revenues achieved for three separate products in three different geographic markets. It is important to note that our scope for each of these projects is complete and we have been paid in full.

We believe this progress demonstrates that the technologies we have developed are attractive in the geographies and industries we have targeted. As these installations begin to deliver the expected benefits to end customers we believe this will generate further commercial opportunities.

Our first All Membrane Brine Concentrator (AMBC) contract was completed for our Indian partner Advent Envirocare, which expects to have the full plant commissioned before the end of the year. This partnership with Advent continues to develop well and our pilot plant has now been redeployed for another field trial, this time by a multinational agrochemical company.

We have also completed our contract with Hangzhou Water Treatment Technology Development Center Co. Ltd in China, to provide design and engineering services for a seawater desalination plant using our proprietary Forward Osmosis (FO) technology.

During the period, we also delivered, installed and commissioned our first AquaPak™ desalination unit in Oman and are now providing consulting services for a follow-on project. We also have a significant pipeline of tenders awaiting decisions and expect to grow this product line over the next 12 to 18 months.

Our partnership with Bilfinger Deutchse Babcock has also progressed in the first half of 2017 and we are in final negotiations to deploy our pilot Multi Stage Flash (MSF) pre-treatment plant to a desalination facility in the Middle East.

In Gibraltar, the status of our joint venture with Northumbrian Water is unchanged from previous statements. We remain the Government's preferred bidder for its much needed wastewater project and continue to assist in the project's advancement, with little in the way of ongoing costs being incurred by us.

Monitoring Division
· Revenues increased by 11% to £1.26m (H1 2016: £1.14m)
· Gross margin decreased to 43% (H1 2016: 52%)
· Order book increased by 386% to £0.31m (H1 2016: £0.08m)

Equipment sales were a higher proportion of Monitoring revenue in H1 2017 than last year, which explains the decrease in Gross margin. Based on the sales mix so far in H2 and our order book, we expect the full year gross margin to be similar to last year.

The reorganisation of the division's sales and distribution channels continues apace, with the appointment of new sales personnel in the US, South America, China and the UK during the first half of 2017. China in particular is a key focus as we start to develop a permanent local sales presence for the first time. Significant investment has been made in product development and a new online trace metal monitor is due to be launched before the end of the year. It was also exciting to see our Microtox® technology certified by both the Mexican Authorities and Taiwanese Environmental Protection Agencies as the approved method for the determination of acute toxicity in waste water, fresh water, sea and brackish water.

Capital Raise

A £1.75m share placing (£1.61m net of costs) was completed at 11p in May 2017 and was supported by management, new institutional shareholders and high net worth individuals. This, together with the £500k receivables facility in place since December 2016, gives us the resources to reach cash flow breakeven without compromising our investment plans.

Cash at 30 June 2017 was £1.53m.

Outlook

The publicity accompanying our first AMBC sale has generated significant interest for this product in both India and in a number of other geographic and industrial markets. This initial success with the AMBC gives us confidence that our revised strategy of licensing our expertise to industrial partners is the correct one and we expect to announce further partnerships and contracts across the Membrane division before the year end.

Momentum is also building in our, now stand-alone, Monitoring business and again we expect further progress in the second half of 2017.

Following the capital raise, cash has become much less of a constraint, however our focus on driving efficiencies in our operations and managing costs will continue as core elements of our strategy.

Modern Water has an excellent range of technologies, offering important benefits and gaining traction in specifically targeted markets. The prospects for the business are exciting and we will continue to commercialise the technology we have created, without compromising future product development. We therefore look forward with more confidence than at any point in the past three years.

Simon Humphrey
Chief Executive Officer
12 September 2017

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