Grant Thornton loses Modern Water audit to Jeffreys Henry

Jeffreys Henry LLP has replaced mid-tier Grant Thornton as auditor at AIM listed Modern Water plc, a water technology group, which is going through a major restructure following balance sheet tensions. Sara White reports

The latest audit loss reflects Grant Thornton’s long-term strategy to pull out of the listed audit tender market first announced in 2017. 

Modern Water plc is an AIM listed water technology group with a market capitalisation of £3.27m and reported revenue of £4.2m for year end December 2018. The global water crisis monitoring specialist listed a year after it was first set up in 2006 by IP Group plc to develop and commercialise intellectual property (IP) and technologies related to water treatment. It employs 40 staff across two divisions in the UK, US, Japan and China.

In the auditors’ report for year end 31 December 2018, Grant Thornton warned of ‘material uncertainty in relation to going concern’.  The annual audit fee was £85,000 for year end 2018, up nearly 20% from £66,000 the previous year.

A major restructuring of the business has been underway since last August, with two subsidiaries liquidated while last month [March 2020] it signed a three-year revenue sharing manufacturing agency agreement with Integumen plc to subcontract the production of consumables for the business, which had previously been manufactured in-house.

In a statement on the London Stock Exchange, Modern Water said this would allow it to ‘fulfil outstanding orders’ and ‘enables the company to fulfil an order backlog of approximately $665,000 which it is not currently able to meet’.

Last August, the company announced a significant restructuring and changed its focus to the membrane technology area of the business. At the time, it put a number of subsidiary businesses into liquidation, including Modern Water Services Limited and Cogent Environmental Ltd. 

As a result it lost a number of contracts previously held by these entities, including a joint venture agreement with Northumbrian Water for the Gibraltar Wastewater Project, which had been delayed for years as it was ‘the subject of lengthy delays after the initial appointment of the joint venture as preferred bidder in 2014’. Part of this restructure also included the sell-off of the assets of Modern Water Inc, the US-based monitoring division.

Jeffreys Henry LLP is a member firm of Morison KSi, a global network of over 9,000 accounting, tax and business advisory professionals.

By Sara White

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