Ferret's Stock to Watch: CDS TECHNOLOGIES LTD08:23, Thursday, 16...

Ferret's Stock to Watch: CDS TECHNOLOGIES LTD
08:23, Thursday, 16 June 2005

A COMPANY FOCUSED ON SUSTAINABLE SOLUTIONS TO WATER RE-USE

Sydney - Thursday - June 16: (RWE Aust Business News)
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OVERVIEW
********

Every day we read about the water crisis and how to overcome the
lack of water in our dams.

Of course this is not over the whole of Australia but it is
enough to make it a major topic of concern and debate over how we can
solve this dilemma.

One company that is contributing significantly to producing
solutions to this serious problem is CDS Technologies Ltd (CDX).

Its business strategy is to focus on solutions to the problem of
sustainable water re-use and environmental protection from pollution in
sewer overflows and stormwater.

These are areas where the company's products and integrated
solutions have good fit and provide value to its clients.

The company attracted attention earlier in the week after
reporting the conclusion of a litigation case in the US.

CDX's US subsidiary, CDS Technologies Inc, and Stormwater
Management Inc have jointly announced that they have been able to settle
the patent litigation filed by Stormwater.

The terms of settlement do not require CDS Technologies Inc to
make a financial settlement, and settlement is made without any admission
of liability by CDS.

With water restrictions set to become a permanent fixture in many
parts of Australia, and the cost of potable water rising to reduce
demand, ways of achieving a reliable and cheap water supply are quickly
becoming the water industry's 'Holy Grail'.

CDS has succeeded in establishing a proven new process whereby
even raw sewage can be treated to a Class A standard if required -
suitable for unrestricted public access.

The commercialisation of this CDS process followed the success of
two Victorian Government Funded 'Smart Water' Trials, focusing on
recovering water from the sewer for later re-use applications.

These trials were conducted at two sites in Melbourne, with water
quality parameters for both influent and effluent being measured by an
independent laboratory.

Treating up to 500,000 litres per day, the CDS process was able
to satisfy Victorian EPA guidelines for Class A water re-use.

Furthermore, the ongoing treatment costs of the plants were shown
to range between 25-40c/kL - under half the current price of potable
water.

Re-named 'ReAqua', this innovative non-membrane process involves
a number of steps, combining both the physical separation of solids using
CDS's unique screening technology, followed by high-rate chemical and
biological processes.

The dual-stage physical separator virtually eliminates all solids
and particulate BOD.

This is followed by 'submerged aerated filters' (SAFs) which
inject air and biologically degrade the remaining soluble BOD.

The final stages involve passing the water through a fine sand
filter and then through a UV disinfection process to eliminate any
remaining bacterial load.

The system is also modular, meaning that a fit-for-purpose system
can be installed to provide the level of treatment required.

SHARE PRICE MOVEMENTS
*********************

Shares of CDS yesterday rose 5c to $2.10. Rolling high for the
year has been $3.10 and low $1.85. Dividend is 3c a share to yield 1.43
per cent. The company has 35.3 million shares on issue and a market cap
of $72.5 million.

In the December half year, profit after tax was $1.1 million
($1.7 million same period prior year) after providing for tax on US
profits now that past year's tax losses have been utilised, with an
adverse impact of $325,000.

Management is confident that the strong revenue growth in the
first half of the year will continue through to the end of this financial
year, enhanced by the acquisition of 40 per cent of the issued shares in
Triwater, which for accounting purposes will be consolidated as a
subsidiary.

Profit before tax is forecast to increase significantly against
the $4.3 million result for 2003/2004.

However, profit after tax will not increase to the same extent,
recognising that in 2003/2004 the tax charge was favourably affected by
the recognition of previously unbooked US tax losses realising a $1.4
million one-off tax benefit.

In the year to June 2004 the CDS group reported total revenues
exceeding $62 million, even with an Australian dollar that had
significant increases against the pound and US dollar.

Overall growth was up 15 per cent when exchange rates were not
included.

The last six months earnings should be enhanced by the complete
acquisition of of Triwater Australia Pty Ltd.

Triwater is a specialist wastewater technology provider based in
Sydney, with an operating division in Adelaide.

It is the joint venture partner of CDS's UK subsidiary Copa Ltd,
which continues to operate successfully.

CDS will merge its existing Australian Stormwater operations with
Triwater, which will result in the Australian operation's revenues
exceeding $20 million in the 2005/06 financial year.

Mr Ray Anderson, Triwater's managing director, will become
managing director of the merged entity.

As consideration for the acquisition, CDS will issue 1,406,770
shares to Triwater shareholders, to be held in escrow until September 1,
2006.

BACKGROUND
**********

CDS Technologies Limited is a publicly listed company on the
Australian Stock Exchange being incorporated in 1994, and listed in
February 1997.

The company is a worldwide organisation with offices in Australia
(CDS Pty Ltd), the USA (CDS Technologies Inc.) and the UK (Copa Ltd). The
company also has licensees in Italy, Japan, Korea, Malaysia, New Zealand
and Singapore.

Products such as the non-blocking CDS Gross Pollutant Trap (GPT)
and Gross Solids Separator (GSS) are world-class solutions to wet weather
flow problems and have been installed by major water authorities.

This strategy ensures that the company's business is aligned with
those countries that have both the will to address the environmental
consequences of wet weather flows and have allocated the resources to do
it.

The US and UK water authorities, in particular, are being driven
by their respective environmental agencies to clean up discharges under
their control.

Japan and Korea are following closely behind, with both these
countries already showing strong interest in CDS pollution control
products.

ENDS

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I don't hold CDX