Modern Water, owner of world-leading technologies for the production of fresh water and monitoring of water quality, is targeting China as a key market for its development and for further business expansion.

Announcing its full-year results for the 12 months ended 31 December 2013, Neil McDougall, Executive Chairman of Modern Water, said:

 “Modern Water has progressed significantly during 2013, with both our Membrane Processes and Monitoring divisions completing key steps in their growth strategy. The year began with the highly successful share placing in February before ending positively with the agreement of three new contracts in China, a key market for our development, as part of the UK Government trade mission.”

 “In the Membrane Processes division, we agreed two new contracts in China during the UK Government trade mission to China. The most significant was for an outline contract to provide a FO desalination plant near Shanghai, representing a key milestone in Modern Water’s development in China. Modern Water also successfully completed the first year of its operation and maintenance contract at its largest FO plant, located in Oman.”

“Our Monitoring division performed well, with revenues up on last year. 2013 saw a focus on both expanding our product portfolio and building new routes to market. The latter was best highlighted by the signing of an exclusive distribution agreement with Beijing Green Science & Technology, already a key distribution partner. We also signed a substantial new product development contract with United Phosphorus Inc., a global agrochemical company, to develop and supply a new herbicide testing system. The division enters 2014 in a strong position for further growth, with an impressive line-up of new products and a strong order pipeline."

 Operational highlights during the year include a three way outline deal with Ottomen Estate Resources and Hangzhou Water to work together towards a contract for a Forward Osmosis desalination plant on XuGong Island in China. The contract represents a milestone in Modern Water's development - it will be its first plant in China and demonstrates further scaling up of the company's FO technology. Modern Water said that successful completion of the project would provide it with a strong position from which to compete for further projects in China. According to Modern Water, the selection of its technology for the project has confirmed the Group's position as the world-leading FO technology provider. 

The firm has also signed a distribution agreement for containerised seawater reverse osmosis desalination plants in the Middle East, further developing its relationship with Hangzhou Water, China's largest desalination equipment and construction company. In December 2013, Modern Water was part of a UK Government trade mission to China, led by the UK Prime Minister, David Cameron. The Group said its FO technology is an excellent solution to help China overcome its challenge of providing clean water to the 400 cities that currently face water scarcity. 

In 2012 the Chinese government announced plans to invest US$536bn in environmental protection as part of its current five year plan, making China an important strategic market for monitoring products. In order to maximise sales opportunities across China Modern Water decided to grant Beijing Green Science and Technology an exclusive distribution agreement to cover the sale of its products across mainland China, Hong Kong and Macau.  In return the firm will receive a guaranteed minimum revenue for the next two years. 

Predominantly local workforce employed in overseas markets

During 2013, in order to scale up the level and reach of market activities in both its Membrane Processes and Monitoring divisions, Modern Water refocused its resources and moved towards its strategy of employing a predominately local work force. At 31 December, the Group had entirely locally run operations in its key markets of China and Oman. 

Modern Water is continuing to expand its overseas business, with market activities in both its Membrane and Monitoring divisions scaled up, including the opening of a new office in Shanghai and the signing of distribution agreements in both divisions. The company has also expanded its existing relationships in the Middle East, with the successfully completion of the first year of its operation and maintenance contract at its largest FO plant to date (200m3/d) located in Al Najdah, Oman.

During the year the group has also seen increased interest in the patented saline wastewater treatment technology which has been developed by Poseidon Water Limited (51% owned by Modern Water plc). The company is currently actively pursuing a major project in joint venture with a UK water company.

Neil McDougall said the firm was looking forward to continuing the growth of the company into 2014, targeting new and existing markets and territories.

During the year the placing of 20 million new Ordinary Shares which raised net proceeds of £9.55m significantly increased the Group’s cash position. Funds from the placing allowed Modern Water to continue to pursue opportunities identified by its Membrane Processes division, principally in its strategic markets of China and the Middle East and further commercialise its Forward Osmosis technology. The funds are also being used to grow its Monitoring business by licensing and acquiring innovative, proven products to further leverage its international distribution network.

Modern Water reported a strong financial position with no debt and cash of £11.4m, up from £5.8m cash in 2012. Gross profit was up to £1.7m from £1.4m in 2012, with operating losses reduced to £4.9m from £5.6m in 2012.

In 2014 the Group will focus on making further progress and address additional objectives which were not completed in 2013, including:

• agreement of, and delivery on, final contract for Xugong Island project;
• entry into industrial water market in China;
• progress projects with Kazema in Kuwait; and
• build on opportunities for deployment of waste water technologies.

Modern Water has also recently secured entry into key industry product catalogues, such as the USA BlueBook, which is recognised as the number one source of products and technical support for professional water and wastewater operators in the USA.