Please be advised that today's conference is being recorded. I'll now like to turn the call over to your first speaker today, Mr. Malcolm Deane, CEO and Managing Director. Thank you. Please go ahead.
Thanks, Desmond. Good morning and thank you everyone for joining us today. It's been a very strong year for ALS, and we've delivered record results reflecting our ability to achieve strong growth while staying disciplined on margin performance, cash generation, and capital allocation. As always, I'm joined by Stuart Hutton, our Chief Financial Officer. We'll speak for around 30 minutes, and then we will open for questions. Four years ago, we set ourselves ambitious FY 2027 targets. I'm pleased to report that we have achieved these targets 12 months early while refining our strategy and focus for the future. What's most pleasing is that we achieved the FY 2027 plan primarily through strong organic growth.
FY 2026 revenue was AUD 3.32 billion, up 10.7%, with strong organic growth of 8.4% at the top end of our guided range, reflecting the breadth of our global operations. Underlying EBIT of AUD 599 million, up 19.3%, with the EBIT margin accelerating by 129 basis points to 18%. Excluding recent acquisitions, the legacy underlying EBIT margin was 19.8%. Underlying NPAT was up by 25.8% to AUD 381.2 million, a record result for this company. These results for ALS reflects the work of more than 23,000 people across our global network. I want to acknowledge that up front because this was a true team effort.
Commodities delivered an exceptional year, led by Minerals at 20.2% organic growth and 33% EBIT margin. We saw increased activity from juniors, with revenue growth in the second half consistent with majors and mids. Life Sciences was mixed, still delivered at 55 basis points margin expansion to 14.6%, led by Food and Pharma. Food delivered 7.2% organic growth, being another strong year for this division. As planned, we saw strong margin improvement from Nuvisan. Environmental growth was strong in our key EMEA and APAC regions, the Americas, especially U.S. and LatAm, were a challenge, we'll come back to that shortly. Cash conversion was 92%, leverage is very healthy at 1.5x . Let me now focus firstly on safety, which remains our top priority at ALS.
Health and safety underpins everything that we do and remains a top priority across every aspect of our business. It's key to protecting our people and building trust with our clients. As shown in the chart on the right, we have delivered a leading safety performance. This reflects the culture our teams live every day across our labs and sites around the world. I am very proud of these results, and it gives me great confidence that the operational discipline behind these safety outcomes is also driving our financial performance. These next slides capture the true strength of our fiscal year 2026 results: solid revenue momentum, disciplined margins, and a strong balance sheet. The 8.4% organic revenue growth was broad-based, with positive contribution from Minerals, Industrial Materials, Food, and Environmental.
Underlying EBIT margin was 18%, but as mentioned before, excluding recent acquisitions, the margin was 19.8%, which exceeds the 19% floor we set for the fiscal year 2027 strategic plan. The return on capital employed improved by 309 basis points to 21.5%. A real step change reflecting both earnings growth and disciplined capital allocation. Underlying net profit after taxes was up 25.8% to AUD 381.2. Underlying earnings per share increased by 21.2% to AUD 0.757 per share. Leverage at 1.5x sits comfortably below our preferred target range. This is by design. It gives us the flexibility to complete the hub lab expansion program, pursue targeted bolt-on M&A, and respond to growth opportunities as they arise.
Based on the group's strong financial performance and maintaining balance sheet strength for the future, the board has declared a combined fiscal year 2027 dividend of AUD 0.425 per share, an increase of 10.1% equating to a 57% payout ratio of underlying Net Profit After Tax. With that overview, let's move now to the operational performance, and we'll start with the division that had the strongest year. Commodities delivered revenue of AUD 1.29 billion, up 18.8%, with organic growth of 17.9% and EBIT margin expanded by 167 basis points to 29.5%. Within Commodities, the Minerals result was outstanding, with 20.2% organic growth and a record year of samples processed.
The Minerals margin improved by 222 basis points to 33%, driven by operating leverage and pricing. Minerals margin on the second half was 34.5%, up from 31.3% achieved in H1, reflecting a step-up in sample volume growth during the second half. Geochemistry recorded 22.7% organic revenue growth, largely driven by higher sample volumes from exploration testing, improved utilization of previous processing capacity investments, and growth in mine site production testing. I wanna be clear about this. There's no equivalent business in these sectors delivering returns at this scale. The combination of our global hub-and-spoke model, high-performance methods, and growing downstream services across mine sites and metallurgy creates a position that is very difficult to replicate.
Metallurgy saw a full-year organic decline of 2.5%, reflecting the normal lag we see between exploration spend and downstream project work. Significantly, H2 delivered positive organic growth against H2 2025 and margin improvement, with a healthy forward pipeline well-diversified across commodities. Industrial Materials also contributed a strong result, with 10.5% organic growth and continued momentum, especially within oil and lubricants and assay and inspection. The next slides provides a clear picture of Geochemistry performance, including the stronger sample volumes we have seen as market conditions improve. During the year, sample flows volumes accelerated strongly, specifically on the second half, with overall year-on-year revenue growth of 22.7% in Geochemistry.
Pricing conditions also improved progressively through the year, with H2 reflecting a healthier pricing environment, a more positive mix, increased junior sample flows, and the cycling through of discounts secured during fiscal year 2025. We saw consistent growth in Australia, Africa, South America, Asia, and the Middle East throughout the entire year, with North America being the highest growing region in the second half. Previous capacity investments positioned ALS to absorb volume growth while maintaining strong service delivery. Our revenue mix continued to favor major miners, providing an earning stability as financing activity for juniors and intermediates increasingly converts into active field programs. Junior financing has recovered strongly, with global juniors and intermediate capital raisings more than doubling on a year-on-year basis. As mentioned earlier, we have seen the first signs of these conversions flowing through into our volumes in H2.
Volumes growth in juniors was keeping pace with majors. The lag between capital raising and field activity has extended beyond the two to three months we have historically seen. As a result, we are being appropriately cautious in how we reflect that in our fiscal year 2027 guidance. The structural drivers remain strong: high commodity prices, the energy transition, critical minerals demand, and resource nationalism. These are multi-year trends, not just peak cycle indicators. Let me now step through the margin profile of the mineral business, which is benefiting from both operating leverage and pricing benefits. The chart at the top left shows the different factors impacting the margin progression to the reported fiscal year 2026 margin of 33%.
The margin expansion to 33% was driven by volume-led operating leverage, the cycling through of FY 2025 pricing headwinds, mainly impacting H1, and continued cost discipline across the network. In H1, we shared with the market that the pricing impact was roughly - 120 basis points. For the full year, pricing turned into a positive contributor as the discounts from 2025 flashed through and the pricing environment firmed. High-performance methods continue to grow at an accelerated rate, and mine site production testing maintained its 20% three-year CAGR. Collectively, new service offerings and downstream activities now represents approximately 25% of Minerals revenue. This diversification is structural, and it matters because it reduces our sensitivity to exploration cycles.
Our client mix continues to skew towards majors, although the second half, we saw the first meaningful uptick of volumes from juniors following successful fundraising activities. With that, we move from Commodities to Life Sciences. Life Sciences represents 61% of the group revenue and continues to be a key growth platform for ALS. Total revenue grew 6%, including organic growth of 2.8% from Environmental, 7.2% from Food, and a slight organic decline in Pharma. The Life Sciences EBIT margin improved by 55 basis points to 14.6%, which is a good result given the headwinds we experienced in Environmental, especially in the Americas. Excluding recent acquisitions, the legacy margin improved to 16.8%. Let me walk through each of these business.
Environmental delivered mid-single-digit organic growth in our largest regions, APAC and EMEA, partially offset by softer conditions in the U.S., especially around the integration process of York and Latin America. It is fair to say that the performance in the Americas was a disappointment. There are market factors at play and some signs of weaknesses in this market, but there were also operational issues within our control, and I take responsibility for those. All York's certifications have been reinstated during Q4. The effect of the U.S. government shutdowns have eased, and the outlook is more positive as we enter 2027. Starting fiscal year 2027, we have appointed a new AGM for this division, Andrea Vallejo, with a clear mandate to continue building the best-in-class global environmental business.
PFAS growth continued to materially outpace the broader portfolio and now represents 6% of Environmental revenue, supported by our global reach and cross-market capabilities. ALS Environmental continues to be a global leader in this space, with the second-largest market share and an operating model that makes us unique and position us strong to continue growing in the upcoming year, as we did in the past three. Food delivered their third consecutive year of strong organic growth at 7.2%, led primarily by Europe. The team has executed extremely well, and I want to acknowledge that consistency. Pharma recorded a slight organic revenue decline of 1.6%, but the real story here is Nuvisan. EBIT grew 123%, and the margin improved approximately 450 basis points since the successful completion of the transformation program.
This is a credit to the team that led those efforts. Let's now take a closer look at the performance of the core Life Sciences business. As I shared earlier, Life Sciences organic revenue was 2.8% for the year. Excluding Nuvisan, Wessling, and York, the legacy Life Sciences organic revenue growth was 4%. This was achieved against a very strong result last year, alongside some market slowdowns and operational challenges, as mentioned before. While we improve margins in recent acquired operations, it's important to reflect on the 32 basis points improvement in the Life Sciences legacy operations, showing the strength of our core Life Sciences business. Nuvisan completed its transformation ahead of schedule, delivering expected exits savings of approximately EUR 25 million and margin improvement of around 450 basis points.
The focus is now on revenue growth from the improved commercial platform. Wessling performed positively with revenue and earnings performance ahead of the initial business case. York, as mentioned before, has been our most significant integration challenge. The business was affected by the loss of certification at specific sites and additional subcontracting costs. During the second half of the year, we have addressed those issues, regained certification, and fast-tracked integration plans execution. I'm not going to make excuses. We bought the business believing we could improve it, and we have not yet delivered on that promise, but we will. Overall, this was a positive result and clear progress on our integrations and transformation plan. Now let me hand over to Stuart that will walk you through the financial review.
Right. Thanks, Malcolm, and good morning, good afternoon, everyone. ALS has delivered a very strong year, with double-digit uplifts in revenues, earnings, and dividends to shareholders. Revenue grew organically by 8.4%, supported by favorable FX and minor scope contribution to achieve 10.7% overall revenue growth. Underlying EBIT increased 19.3%, with group margin up 129 basis points to 18%. Net interest expense decreased from AUD 81.7 million to AUD 69.3 million, reflecting reduced net debt, net debt post the equity raising and improvements in our own internal cash management. Underlying NPAT increased by 25.8% to AUD 381.2 million.
On the back of the performance, the board has declared an FY 2026 final dividend of AUD 0.231 per share, partially franked at 30%, representing a combined full year dividend payout ratio of approximately 57%. Let's now look further into the margin performance. The underlying group margin increased by 147 basis points on a constant currency basis, with positive organic margin growth of 180 basis points offset somewhat by both scope and corporate cost dilution. The commodities margin grew by 186 basis points at constant currency. As Malcolm has pointed out already, operating leverage was a key feature of FY 2026, as well as pricing, with pricing contributing positively in half two following the runoff of historical discounting and firming pricing conditions as the market tightens from higher demand.
Life Sciences grew organically by 73 basis points, but scope dilution attributable to Wessling of 27 basis points led to a 46 basis point improvement at constant currency. There was a group adverse FX impact of approximately 17 basis points. All in all, a very pleasing year as it relates to margin evolution at ALS. Moving to capital management. In May 2025, as all of you know, the group successfully completed an AUD 367 million equity raise, which reinforced the balance sheet and reduced our leverage. Leverage, as reported at the end of FY 2026, was 1.5x . This result is below the lower end of the targeted range of between 1.7x-2.3x and well within lender covenants.
We still view the leverage range of 1.7x-2.3x as being appropriate for ALS as we pursue growth into the future. EBITDA interest cover for loan covenants was 13.2x . Group liquidity remains robust at over AUD 580 million. Moving to capital expenditure. Total CapEx through the year was AUD 263 million. This included approximately AUD 94 million invested into the four major hub laboratories, with each of these projects on track on a combined basis. Base CapEx was approximately AUD 170 million, representing approximately 140% of depreciation and 5% of revenues. We continue to invest to support growth with approximately 80% of that expenditure on growth and 20% on maintenance spend.
Free cash flow generated before CapEx increased by approximately AUD 84 million versus the prior comparable period to AUD 674 million. EBITDA cash conversion was 92%, a very solid and pleasing outcome. Reflecting our continued focus on supply chain management, DSO improved to 50 days, while DPO was back a little bit at 66 days. DPO is okay at that level, but we have opportunity to push it harder as we move forward. The FY 2026 final dividend was AUD 0.231 per share, franked at 30%, representing a 17.3% increase on the prior period. On a combined basis, the FY 2026 dividend was AUD 0.425 a share, an increase of 10% on FY 2025. Looking now to cash.
Free cash flow increased 14% to AUD 674 million, underpinned by the EBITDA cash conversion of 92%, which remains comfortably above our minimum 90% threshold target and reflects both the quality of earnings flowing through to cash and growth in the underlying operations. Net CapEx of AUD 255 million includes the AUD 94 million invested in our four major hub laboratory upgrades previously mentioned. As we look forward to FY 2027, expect base CapEx to be in the order of AUD 170 million as we invest to meet increasing demand and improve efficiencies. In addition, the expected investment on the hub lab program will be approximately AUD 70 million in FY 2027. I'll now turn to leverage.
As noted, leverage reduced to 1.5x at the close of the year, largely due to the equity raise completed in May 2025, sound working capital management, and strong earnings growth. Our improved net debt position provides additional flexibility and scope to complete the hub lab update upgrade program, as well as provide capacity for targeted bolt-on M&A in due course, which Malcolm will cover shortly. The focus remains on solid cash generation as the hub lab CapEx program continues and the integration of the recent acquisitions we have completed. We are targeting improved ROCE through disciplined deployment of capital and steady margin improvement over the medium term, as evidenced by the improvement in ROCE we made this year. With leverage well within our targeted range, we have maintained the flexibility to keep investing for growth.
Let me now move to the balance sheet and the debt position. There is significant capacity and headroom in our available facilities and covenants, with approximately AUD 530 million of undrawn committed bank funding capacity. In addition to the surplus cash held on hand, this provides over AUD 580 million of available liquidity. The weighted average debt maturity is 3.9 years, and the drawn weighted average cost of debt is approximately 3.6%. 90% of our debt is fixed at that level. Post-balance date, the group refinanced its U.S. dollar $50 million one-year revolving term debt facility maturing in May 2026 with a like for like replacement facility maturing in May 2027. The total underlying interest cost on borrowings and leases in FY 2026 was AUD 69 million, down from AUD 82 million in FY 2025.
Underlying interest costs in FY 2027 are expected to be between AUD 65 million and AUD 67 million. Turning to corporate costs. Corporate costs have been well controlled and are in line with the expectations we provided to the market at 2.2% of revenues. This is inclusive of investments being made for additional support in data governance and digital transformation, which includes investments in digital process efficiency, innovation, AI, and also our Lab of the Future program. Our quest to deliver continuous improvement in operating leverage of corporate functions will continue. You should expect corporate costs to be approximately 2.3% of revenue in FY 2027. This is a result of the group continuing to accelerate its digital transformation focus linked to smart labs and digital efficiency, which will still be in an investment phase during FY 2027.
On cybersecurity, while we had already planned to increase our spend in this space, given the recent cyber issue, there will be further investment in cybersecurity-related initiatives during FY 2027. With that, I'll pass back to Malcolm.
Thank you, Stuart. Let me now walk you through our scorecard, which is how we hold ourselves to account. Starting with what went well. At the group level, we exceeded the fiscal year 2027 strategic plan targets by one year. Minerals delivered an exceptional result across every measure. The team maintained margins above 30% for the fifth consecutive year and expanded them to 33%. Industrial Materials grew across all businesses. Food delivered strong, consistent growth with margin improvements. Nuvisan completed its transformation, creating material value to our shareholders. Now, what did not go as expected, as mentioned before, Environmental in the Americas was not performing as expected. With it driven by integration challenges in York and some market-specific challenges in LatAm. I am not satisfied with the Environmental outcome in this region, and it is a priority for fiscal year 2027 under the new leadership.
This scorecard is important to me because it reflects how we run the company. We celebrate the wins, we are honest about the misses, and we act on them. Let's now turn to the considerations on the Middle East conflict. This conflict is creating disruption to certain supply routes that affects our consumables and reagents. We have identified approximately 10% of our cost base as exposed. Supply chain disruptions from the Middle East conflict is creating incremental cost pressure. Our mitigations actions includes diversifying suppliers, increasing safety stocks, and working with clients on cost pass-through. The financial impact to date has been limited, and we estimate the full-year risk at between AUD 5 million-10 million. We are managing this very proactively.
I also want to take this opportunity to address and update you all on the recent cybersecurity event, which we disclosed to the market a couple of weeks ago. As mentioned at the time, ALS identified malicious cyber activity involving certain IT systems. Immediate containment actions were undertaken in line with the incident response procedures. The vast majority of the operations were restored within hours, avoiding business disruptions, with some targeted remediation in specific areas. With operations running back to normal and the containment phase being completed, the investigation is ongoing to determine the extent of any potential impacts to data. To date, no material financial impact is currently anticipated. Now let me shift to something that I'm really excited about.
FY 2026 marks the point where our digital and AI investments started translating into real operating results, faster turnarounds, higher quality, and lower cost per test. Our unified LIMS now covers 80% of group revenues. It powers one of the largest proprietary datasets in the TIC industry, built over 30 years across 450 labs. This is a foundation for the future competitive advantage and is the backbone of everything we're building in AI. In April, we launched our internal AI marketplace, a platform where we build a solution once and scale it everywhere across the group. We have already given private secure GenAI tools to more than 5,000 employees at minimal costs. Every hour saved on routine tasks flow directly into productivity and margins. Automation is where the margin story becomes most concrete.
With labor representing approximately 60% of our cost base, we already have more than 20 robots in production and 115 and counting opportunities in the pipeline. Each of these projects must achieve accelerated paybacks. This is a direct margin lever, and fiscal year 2027 will see the first tangible returns with more material impacts as we scale. Let's move to the outlook for this fiscal year 2027. As we look ahead to fiscal year 2027, the demand environment across both divisions supports continued growth. At a group level, we are targeting mid-to-high single-digit organic revenue growth, with margin expansion continuing at a similar pace to 2026. Starting with Commodities, the outlook for Minerals is strong. We are the market leader. The exploration cycles continues to build, and the pricing environment is constructive.
We are anticipating 13%-15% organic revenue growth for the year. For H1, we have higher visibility and expect 15%-17% organic growth to continue, consistent with the growth uplift we deliver in H2 of 2026. On the second half of 2027, we expect ongoing strong organic growth, though we are being measured in our assumptions giving the evolving geopolitical conditions and some emerging supply chain constraints in the upstream drilling market that may influence the pace of capital deployment by junior miners. The demand signal is clear. It is the timing of conversion we are calibrating around. On margins, we expect to hold H2 fiscal year 2026 Minerals margin of approximately 34.5% to continue into H1 and target a further 30-50 basis points of incremental improvement in H2.
Industrial Materials is expected to deliver high single-digit growth with incremental margin expansion. In Life Sciences, we're targeting improved mid-single-digit organic revenue growth. We expect Environmental to improve in the Americas while maintaining solid delivery in EMEA and APAC. Food will continue to grow at a consistent rate, and Pharma should benefit from improved conditions in the legacy business, while Nuvisan pipeline is expected to continue to convert into new contract revenue as the year progresses, in line with the momentum we experienced in Q4 of FY 2026. That reflects our confidence in the operational progress across the portfolio. Our Lab of the Future initiatives moves into the next phase in 2027, shifting from investments to early delivery. 2027 will see the first tangible returns from our investment in automation, digital infrastructure, and AI, building towards more meaningful impacts over time. Some near-term items to be aware of.
Our procurement actions help manage the supply chain risk from the Middle East conflict with an estimated earnings impact of AUD 5 million-10 million. If the Australian dollar remains at current spot levels, we would expect adverse FX headwinds, with every 1% movement in average FX rates for major currencies against the Australian dollars equating to an estimated annualized impact of AUD 3 million on underlying EBIT and AUD 2 million on underlying NPAT. Both of these are at group level and are independent of the divisional organic growth and margin guidance I just walked you through.
With leverage at 1.5x and over AUD 580 million in liquidity, we have a strong balance sheet to keep investing for organic growth, bring the Sydney and Lima hub projects online in H2, move decisively on inorganic opportunities where strategic fit and return thresholds are met. Let me finish where I started. Four years ago, we set out our fiscal year 2027 strategic plan with clear financial targets. Today, we have delivered those targets one year ahead of schedule. That is a reflection of disciplined execution and the quality of the team across the organization. 12 months ago, we asked investors to back our growth ambitions. The hub lab projects are on track and on budget, the balance sheet flexibility we gain is already working for us. There's still a lot of work to do.
We need to fix the Environmental in the Americas. We need to convert the Nuvisan pipeline into revenue growth, and we need to keep delivering on the hub lab programs. We need to continue building the smart labs capabilities that will drive the next phase of margin improvement. The foundations are really strong. The opportunities are real, and I'm extremely confident in this team's ability to capture them. Before we open for questions, I want to thank every member of the ALS team around the world. Their dedication and commitment makes these results possible, and it is a privilege to be a colleague of yours. Thank you all for your time. I think Stuart and myself will be happy to take your questions.
Thank you. As a reminder, to ask a question, please press star one and one on your telephone and wait for your name to be announced. To cancel your request, you can press star one and one again. Please hold for the first question. Our first question comes from the line of John Purtell from Macquarie. Please go ahead.
Good morning, Malcolm and Stuart. Hope you're both well. Just two questions, please. Look, firstly, on Commodities, just regarding your 2027 guidance, what are you assuming re: the juniors? You mentioned there is some conservatism there, so does that mainly relate to your assumptions around the juniors? The second part is what sort of price increases are you seeing in the market? You obviously talked to sort of 4%-5% last year. Thank you.
Sorry, John. Thanks and hope you're well. That's good. Can you repeat the first question? The second one was I could hear really clearly, but the first one...
Yeah.
-specifically, can you repeat it, please?
Sure, no problem. It was just regarding your question on Commodities regarding your 2027 guidance, what are you assuming regarding the juniors? You mentioned that there is some conservatism there in terms of your guide, and does that relate to the juniors?
Yeah, thank you for that. Let me try to take both questions and obviously Stuart jump in. On the first question on the guidance and what we are assuming for juniors, I think that a couple of interesting points that we mentioned and that we have seen on H2 is we've seen juniors uptick and sampling increase, specifically on Q4, and that's quite interesting. The second point around juniors is that it seems that the markets are still open. If the market are still open and there's not a sudden low stop, sorry, that would increase our confidence on H2.
In terms of guidance on 2027, we thought that it was going to be better to tell the market what we are currently seeing, and that's why we're calling H1 with a high degree of confidence, which I think it's a very strong result as well. We're, as I mentioned before, juniors are around 25%, but we're seeing they are growing at least at the pace of the majors, if not slightly higher in recent weeks. Probably during the year when the confidence levels and we see the markets continue open, we see the drillers continue being able to operate the field season starting in the Northern Hemisphere. I think that confidence on juniors will increase.
On the second question on your price, we always manage price, I think, through the cycles quite successfully. In 2025, we took the decision to adjust our price to ensure market share was appropriate to the levels that we expect for the business. I think that that decision is proving to be the right one, and we're benefiting from those actions. At the beginning of the year, we had a book price adjustment of around 4%-5%, depending on how you measure that, depending on the currency. What we're seeing is that increased sample volumes, inventories on the labs are building quite positively. The price environment as we go throughout the call has firmed, which means that discount levels has been reducing throughout the year.
Stuart, do you wanna add anything?
I think, John, all I'd say, and also like, in terms of mix of client, I know you know this from history. I mean, the juniors because of, I guess their need for speed, in a pricing environment, they are, call it, less discounted than the majors and the mid. Some of that is to do with their speed of desire to get the test done promptly. They'll pay a premium for quicker turnarounds. Also just in general, without being disrespectful to them, the pricing power they have is perhaps less so than the majors and the mids, which is, I would just say, common sense without going into too much detail. More juniors in our mix is from a margin point of view, is a positive thing.
Thank you. Just a second question on Life Sciences, if I may. I think your guidance there at what mid-single digit is a slight pickup on the or is a pickup, I think, on the 2.8% in 2026. What's driving that? Obviously, the margin piece of 30- 50 basis points, it sounds like, Malcolm, you're expecting an improvement from York and LatAm.
Well, I think you got it right, John. I think that the market has been calling a little bit some market conditions that were not favoring for the Environmental business. We think that we need to be better than the context. There were some weather conditions in the Northeast, in the U.S. and in Europe. Overall, we play in a market, and we have to be better than the market. The guidance of the mid-single digit is around recovery in the Americas, especially U.S. and LatAm. Continued strong improvement from APAC and EMEA. On the 30- 50 basis points, yes, I think you are right. It is based also on a recovery of those two regions that you mentioned.
Also there is margin improvements opportunity in other parts of the world as we progress with the LIMS standardization, as we progress with the smart lab Initiatives, as we progress with the digitalization of the business. I would say that throughout the year, we should see some incremental improvement also in the strongest regions as well, while we improve the operating model throughout the year.
Yeah.
Stuart?
John, yeah, just on the other couple of divisions in there. I mean, Food has been a steady performer the last three years, growing at that sort of 5%-7% organically. We wouldn't see any reason why that's not a reasonable expectation. The other positive factor, you know, again, I guess we've been waiting for this day, but we're feeling more optimistic that Pharma, rather than being a drag on organic growth, which it was again this year, albeit small, will move to positive territory in 2027. That all helps to deliver that sort of mid-single digit organic revenue growth guidance for 2027.
Got it. Thank you.
Thanks, John.
One moment...
Thanks, John.
-next question. The next question comes from the line of Rohan Sundram from MST Financial. Please go ahead.
Thank you. Hi, Malcolm and Stuart. I'll just start with a question on the, your Minerals lab capacity. Appreciate you seeing much higher volumes. How would you describe your existing capacity at moment to absorb these volumes?
Hi, Rohan, and thanks for the question. I would describe it as very appropriate to the levels that we're seeing. In 2024, we finished the Perth expansion. We're finishing Lima expansion during this second half of 2027, early second half of 2027. We are always doing incremental capacity. Stuart mentioned that 80% of the CapEx this year was for growth. A big portion of that CapEx went to the Minerals division to ensure that incremental capacity was added as needed. I would comment that is we are very well prepared to continue sustaining the service delivery at the expected growth levels that we're seeing.
That's good. Thank you, Malcolm. Just one last one, just out of curiosity. It sounds as though Middle East is not a big portion of group, and you're not really seeing much material impacts. Are you able to just confirm just how much Middle East is as a portion of revenue for the group? Yeah, thanks.
Middle East is small. Right now in Middle East, we have a JV, which we own 42%. It's less than 1%- 2%. Our business there is primarily a Mineral business with also Life Sciences exposure, Environmental and Food. I think I mentioned that throughout the call. The Middle East has been extremely positive in terms of sample volumes. Year to date, I can tell you that sample volume and positive momentum continues. We haven't seen major disruptions from especially the big part of the business that is Minerals to date. Again, less than 1%- 2%, and we own 42% of that JV.
Thanks, Malcolm.
You're welcome. Thanks for your question.
Thank you for the questions. One moment for the next questions. Our next questions comes from Nicholas Rawlinson from Morgans. Please go ahead.
Hi, Malcolm and Stuart. Thanks for taking my questions, and congrats on a strong result. Just going back to the FY 2025 result. I mean, you guys guided for organic revenue growth in Commodities around 5%. You know, obviously a few things have changed, and you've come out and done 18% for the year, so more than 3x . How are you guys sort of thinking about the upside scenario to your Commodities guidance?
Thanks, Nick. I think that it's a very valid question. You will recall that in H2, we upgraded the guidance. Still we were slightly ahead of the guidance. If you see the sample chart that I think it's on slide 10, and I think you would appreciate that the scale is big enough now, and everybody can read it. You will see that the momentum change in H2, right at the time that we were in November, December, that's where we saw the big swing, especially with North America coming to a party.
To your first question on how are we guiding 2025 compared to where we landed in 2026 and how we're guiding on 2027, I think it's fair to say that when we had the data on H2 of 2026, we updated the market with the latest view that we had. I think it's the same way, Nick. We have visibility on H1 that is, I think is pretty strong. That gives us the confidence of the guidance we gave for the full year. If something changed throughout the year and we have to adjust that, we are well aware of our market obligations, and we'll do it as we did in H1 of last year. That's everything I can comment.
We try to guide the market with the best information we have available. Yes, you have some macro indicators that could help you and try to read how the market will be going. That includes juniors raising. It could include the drillings, but it's also important to understand the contracts that you have secured, the sample flows. That's where we're guiding. That's how we are guiding right now. Stuart, anything else?
Yeah. Nick, I mean, again, we don't wanna over-engineer the famous sample volumes chart. If you can see on that chart that it stepped up right about just after or right about the time we were talking to you in November. You can also see, and again, I'm not gonna say it's plateauing or whatever, it hasn't continued to rise. It's sort of taking a breath, is probably how I'd describe it. That's the visibility we have. You know, all the indicators, the macro indicators, which is the same as they've been the last two years, would suggest that the trajectory should start to move in a northeasterly direction again. At this point, we don't have the visibility of that.
That's why we're being, what I'll describe as appropriately cautious in our guidance, which is exactly the same stance we had at the half year.
Great. That's really helpful. Thanks, guys. Just on the, on the Life Sciences side, I was a little bit surprised that we didn't see any acquisitions come through in that, in that second half. Could you guys just touch on the strategy from here around acquisitions? Like, should we expect that you might make some early in FY 2027?
Great question, Nick, and I ask that to myself as well. I think that the point is we have a very clear shareholders' value creation framework, and we talk to the market the same way we talk internally, and we are only going to pursue acquisitions that hit those return hurdles and are on strategy. We may have expectations during 2026 to close the deal. We obviously scouted the market a lot. We had a lot of opportunities, but if those opportunities will not achieve the return hurdles that we commit, we are not going to over-engineer business cases just to get synergies. The answer is yes, we are going to do as many acquisitions as we can if they are in line with our strategy and with our returns. Where are the areas we are looking?
I think it's very clear and transparent. If you see our strategy, we have two or three buckets that are a priority, and then we have adjacent opportunities. Obviously, those return hurdles increase for those adjacent opportunities. We have a very active pipeline, a very active M&A team. At our level, we would only approve those deals if we can secure that 15% return on capital employed in year five that we have in our shareholders value creation framework. Yes, we're looking for bolt-ons. We know where we wanna buy. We know what type of services, geographies we wanna cover. The answer, can we expect if we can get those numbers to work? Absolutely, yes. We're not gonna build fake synergies just to get to those returns. We wanna firm them and ensure that we can deliver on those.
Stu has another-
Yeah. Nick, I'd say, I mean, again, just I guess as a practical point, I mean, we, you know, we don't wanna belabor the point, but we have been appropriately in integration mode the last 12, 24 months. You know, we've had some, as you know, we've called out today, some of that hasn't gone quite to plan. I think adding additional complexity on top of a platform that we're not comfortable with is not where we wanna be. I think the, you know, we still have got some internal elements to iron out.
I'd also say, look, in terms of there has been, and there is always ongoing activity in Life Sciences, but without being disrespectful to those that have acquired assets, I don't think there's any assets that have transacted that we really wanted to have or had to have. As long as though we've missed opportunities while we've been perhaps more inward than outward looking, but there are, you know, again, I think, which no doubt will be a question that somewhere on this call, there is some renewed activity in the whole TIC space. I guess we are fairly confident there will be more opportunities in the next 12, 24, 36 months that we will look to pursue.
Thanks, Nick.
Guys, just one more from me, if it's okay. I was just hoping if you could touch on Lima, Malcolm. I think you said second half is the start of the second half is when you expect that lab to be up and running. I mean, it's a great growth market. Conditions have probably improved a lot since you guys pressed the button. Yeah, sort of how are you thinking about it? How big is it? Can you give us some sort of parameters?
Yeah. First, I know that you ask about Commodities, but let me say that the first one to be live is gonna be Sydney, which is great also for our Environmental business. Lima, probably we're expecting late October, early November to be ready. Don't put that on writing, but that's the expectations right now. Now that we said it on the call, the team will have to ensure that we deliver on that. In terms of capacity, we love the Latin America region, not because I'm from Argentina, but I think you described it quite well. It's a fantastic growing market opportunity. We're expanding into new geographies and services as well, including mine site.
In terms of returns, it's one of the safest from a Minerals perspective, it has been one of the strongest performances throughout the history of the company. We're very confident. In terms of capacity, we don't have a bottleneck right now, but it will give us a lot of flexibility to continue growing and ensuring that hub location can receive samples all around the region and all around the world, and ensuring, as we always do, that the clients are served on the levels that we expect. We will invite you when it's ready, Nicholas, and I think you're gonna like the size and what we're doing there.
That sounds great to me. All right. Thanks very much, guys. Appreciate it.
Thanks, Nick.
Further questions. One moment for the next question. The next question comes from the line of Jakob Cakarnis from Jarden, Australia. Please go ahead.
Hi, Malcolm. Hi, Stuart. I just wanted to go to slide 30 for the guidance, if I could please. I think, Malcolm, you touched on this in your comments on the outlook, but am I right in understanding that the procurement disruptions and FX are after all of those original guidance items? Yeah, if you could just give us a sense of, I appreciate it's probably worse case scenario but...
Yeah.
-where are you tracking against those procurements? FX, it looks like there's about a 12% delta on the Aussie to your basket of FX? Like, what are you guys budgeting for internally? Appreciate spots where it is, wherever. Yeah, just interested where you guys are budgeting too, please.
Jakob, just on your first point, the answer is yes. The organic growth and margins guidance is before the impact of the Middle East war, which is, you know, it's a risk rather than call it a hard issue. We're just flagging as a risk because there will be some impact, up to us to manage it. On FX, I mean, the guidance we give because it's what we budget, et cetera, we'll leave that to you intelligent people to use whatever rates you wanna use. The guidance we're giving is how we see it. Things do move around. You know, we're in a number of currencies, but the ones that matter the most are the euro, the Canadian dollar, the U.S. dollar, and obviously those against the Aussie dollar.
I can't really say too much about budgets, et cetera. I think I'll let you determine what rates you wanna use, and again, what the average rates were last year, et cetera. You know, if you, if you picked it at today, clearly there's gonna be a headwind from where it was last year. We saw that play out during FY 2026 anyway. In the first half, FX was a tailwind, and in the second half, FX was either neutral or a slight headwind. That headwind has strengthened since the end of the year.
Okay. I think the old rule of thumb used to be if we use the currency debt denominated from slide 22. Is that a rough way to think about it? Just in that pinwheel or the pie chart you've got there, how it's broken down, where your debt is the right FX by sensitivity?
In terms of where the earnings, et cetera are?
Yeah.
Yeah, that's. Like, you can use that as a guide. Yeah, that's probably okay.
All right.
Give or take.
Just across the platform, Malcolm, the opportunity for more efficiencies. Obviously, you did a good job with Nuvisan. You've delivered on the cost out there. There's been some improvement. How do we think about the opportunity potentially in Life Sciences? I guess specifically, obviously, York's had its challenges, but how are you thinking about the portfolio from an optimization perspective, please?
Thanks. I think opportunities are building up as we prove that the technology that we're deploying is effective. As I mentioned in the call, these are still early days, and we see 2027 as a year of consolidation and seeing the first returns, and that's going to be accelerating into 2028 and 2029. Opportunities are improving throughput, routing tasks, building more efficiencies in terms of, I don't know, quality assessment. We see opportunity not only in Life Sciences, we see opportunities across the business. That's why the model that we have is build one scale everywhere because there's a lot of similarities in how to run tests between the Minerals and the Life Sciences portfolio, the Commodities and the Life Sciences portfolio.
For 2027, I think that the opportunities are to fix some of the businesses that underperform. That's a clear improvement area. The best way to make money is not to lose, not because we have lost money, but to improve those margins would be quite important. I think on the main, on the most mature markets is how we replacing the routine tasks with the digitalization strategy that we have in place. Adding to that as we move and accelerate the LIMS consolidation, it's gonna be easier to replicate those efficiencies throughout the network. Right now we are at 80% and we are targeting we said in August last year, in three years from that time, three years to be 90%, +90% in LIMS consolidation.
I think we are on track to deliver that in the main, in the main blocks of the company, in the main businesses of the company.
Thanks, guys.
Thank you for the question.
Thanks.
Thanks.
Thanks, Jakob.
Our next question comes from the line of Nathan Reilly from UBS. Please go ahead.
Morning, gents. Just the Middle East situation. I'm seeing what you're saying or hearing what you're saying in terms of the potential cost impact. I'm just curious from a demand point of view, have you seen that situation or how have you seen that situation impact your business from a demand point of view?
Thanks, Nathan, for the question. To date, we haven't seen impacts on demand. If you're asking on Commodities, I can confirm that we haven't seen an impact on demand, both in the region and globally. I think that that's a risk that is floating. That has not converted into reality. We are seeing still very healthy sample volume growth in line with what we call out for the H1. We haven't seen that dropping. We are actually starting slowly the field season on North America.
In terms of future risk, I think that the geopolitical risk is how long the oil price will be sustained at high prices and the potential impact that will have to junior balance sheets or P&Ls, if you want, more than balance sheets and expected return from their field activities. That could be a risk that could be more translated on the second half, but it's still an unknown what's going to happen with that. I think if these high oil prices sustain more than, I don't know, three to six months, some of those companies will start having some challenges. To date, with information we have seen until late last week, the demand has been pretty strong in every region.
That's what we're seeing right now. As I think mentioned earlier, even in Saudi, our mineral sample volume is still growing at a very healthy pace.
Got it. Thank you. Final question, just in relation to mine site, production-based testing trends, can you just give us an update on how the volumes have been tracking to date? Also, you know, what you're baking in terms of the Minerals outlook or the contribution to the Minerals outlook in the first half?
I will get that question first. I will answer the easy part, and Stuart will try to answer the most complicated one. How we are seeing that business, I think that we have sustained a very healthy growth that kept us in that 20% CAGR for three years. Revenue-wise, we are still winning clients, but as we mentioned, I think throughout the last two years, we have to be very consistent in the targets that we are targeting for those specific sites to ensure that they help in the long-term sustainability margins of the Mineral business. The overall diversification into downstream, though the strategy behind that relies on ensuring that we can keep solid margins throughout the cycle indistinctly where we are up or down. Stuart will answer the second point.
For my benefit, Nathan, just remind me what the second part of the question was. Sorry.
Yeah. I guess I'm just trying to get a sense of how that strategy is contributing to your first half Minerals organic revenue growth guide in terms of the materiality to that guide.
Yeah, sorry. See it as I would say it's in line with that.
Yeah. I think it's consistent with H2.
Yeah.
We have, uh-
It's not-
We have, sorry, several projects that are in construction phase, pre-revenue. We shouldn't expect revenue coming from those projects H1. And as we discussed many times, these projects from securing them to revenue generation may take 6- 12 months. I think for H1 you just need to assume what we're assuming, that it's gonna be in line with H2 of 2026.
Okay. That's good. Thank you.
Thanks, Nathan.
Thank you for the questions. One moment for the next question. The next question comes from the line of Cameron Needham from Bank of America. Please go ahead.
Yeah. Morning, all. Thank you very much for the presentation. Just first one from me on junior sample volumes. Obviously, you've highlighted the uptick in the second half of the year. Can you just give us a sense as to how sticky you feel this uptick is? Like, are a lot of the juniors, you know, booking repeat programs or a lot of this coming through as more sort of one-off campaign work at the moment? Thank you.
It's pretty hard to give you a clear answer on that, Cameron. I think what we would say is, I think what's clear is still a lot of the exploration activity is brownfield rather than pure greenfield, if you wanna refer to it as that. In that sense, you might argue it's slightly more sticky because they've got some history of reserves in the areas they're exploring as opposed to greenfield, which can be, it's clearly higher risk 'cause they don't know. I think in that sense, it's probably more sticky than if it's pure greenfield exploration. You know, juniors by their nature, you know, dependent on funding.
If their brownfield exploration doesn't yield results, well, they stop exploring pretty quickly because like they gotta go and then find other places to explore. There's no real clear answer to that. Hopefully, what I've said gives you some color, but it's very difficult to give you much more detail than that.
Yeah. I think, Cameron, the other part is the service reliability and turnaround time. I think keeping turnaround time to be leading on the market that you're competing is critical for them. That's why, to the question of someone earlier today, I think that Rohan asked the Minerals capacity, ensuring that those hub locations have enough capacity to ensure that every client, majors, intermediates, and juniors are served with reasonable turnaround times better than the market. It's the target, and that's how you're gonna get the repeat programs for the different juniors.
Sure. Very clear. Thank you both. If I may, just a quick second one. Just on group structure, one of your global peers is looking at potential separation. I guess just keen to ask, how do you think about risk and opportunities for ALS with a competitor looking at separating its underlying businesses? I guess just to piggyback onto the back of that, you know, do you feel the current structure with Commodities and Life Sciences under the one roof is still the right one for ALS, or would you consider some kind of separation yourself? Thanks.
That question should go to the CEO of the competitor, not to us. We feel that It's a great question, by the way, Cameron . I think that the current structure of ALS, as I mentioned many times, I think that is the right structure. The reason behind that is what I call maybe it's a stupid term, but it's called silent synergies. How you run a mineral business and how you can improve the other businesses and learning from them is quite a big tailwind for us, we are seeing that flowing through the standardization programs on Life Sciences that we pushed very strongly in the last three years. We believe that the structure that we have right now is good, that adds value to shareholders.
You have areas that we're growing like mine sites that basically touches all the clients. In the TIC space, I would agree with you. It's a very broad definition. It's more important the end markets that you serve and how you serve those end markets. I think we have a pretty good understanding of which are those end markets, how to serve those clients, and what are the cross opportunities within the different sectors. We do believe that the current structure of ALS adds value, especially to shareholders, and I think we're proving that with the growth that we have seen in the last four years, the organic growth that we've seen, and I think that the overall earnings increase that we have again in the last four years.
Why this may be different to other players, that's not for me to answer. If you ask me, I'm quite comfortable with the portfolio that ALS has. We have a very clear strategy where we're gonna play, why we're gonna play. The mode is very clear, we're gonna continue pushing to that.
Cameron, I'd also-
Sure. Very clear. Thanks very much.
To that, I mean, the other thing. Sorry Cameron, I'm just gonna add one other point, which is, you know, we obviously have a portfolio, and we regularly assess that portfolio. What is core, what is close to the core, what is potentially non-core. If we assess one of our businesses and don't clearly, the core is Commodities and Environmental. Outside of that, if there was options to do something different, I mean, we're no different, we're a public company. If someone was to approach us with on those assets, that would be potentially something that we would consider, but would need to be obviously compelling for us to do so.
Sure. Very clear. Thank you very much, both. Appreciate the color.
Thanks, Cameron.
Thank you for the questions. Please hold for the next question. Our next question comes from the line of Nicholas Daish from RBC. Please go ahead.
Thank you, congrats, Malcolm and Stuart. Just a very quick one from me. I noticed CapEx looks like it stepped down quite meaningfully in the second half relative to the first half. I'm just curious on whether there was anything specific that drove that, as it relates to perhaps your lab investment that you're making at the moment or whether it was more sustaining in nature, please.
Yeah, Nick, I would. There's nothing specific. It'll just be a timing issue. You're quite right. I mean, there's in the businesses, there's only so much you can actually do at one point in time. There's no doubt there's some resources that are appropriately being directed to the hub lab upgrade projects. It would purely be timing. There's no other reason why the timing is different first half, second half. I mean, we encourage all our businesses to invest the capital. If you like, if you wanna do it that way or think of it in the first half of the year, you start to get benefits in the second half of the year. Apart from that, there's nothing else that from our side that is structural.
It's really just a timing of when these projects can be implemented.
Got it. I guess building on that, is it fair to say, obviously, the balance sheet delevered during the period, that CapEx dynamic that I just referred to would have assisted that. Given, you know, the challenges you've had integrating York, does it change how you think about using your balance sheet moving forward, given those challenges integrating that business? Is it just a case of, you know, it's a one-off challenge in isolation, and you'll take those learnings into the next opportunities? I suppose my question is ultimately, has it made you rethink how you deploy capital and how you use your balance sheet?
I think, Nicholas, when you do deals, acquisitions, you always learn things. We all like to believe that our integration plans are bulletproof. I think with every integration, the good ones, the ones that didn't go as expected, we always learn things. We always are looking of ways to improving integration to ensure that integration is delivering the business case that we committed to the internally to the board and finally to shareholders. It didn't change where and how we're going to do deals. It changed things of how fast we can do integrations, how to deploy specific resources, human capital, but it doesn't change the strategy.
In this sector, I think that the strategy is we believe that we can have a very strong organic growth and probably ahead of the average of the market. We like organic growth, but they're also important to add specific bolt-ons in specific wide markets that we may have not have a presence, that we want to have the scale to be successful or specific services that we are not delivering within the core businesses. To your question, no, York doesn't change our view on acquisitions. Yes, I think we have to be humble and always improve our integration plans that are not perfect. Things are going, some of the deals went really well, and we also have learnings from those ones.
It's just learnings, refining and improving, but it doesn't change the overall strategy on inorganic growth.
Yeah, sorry. I might not have been clear. I realized that that's always gonna form part of the strategy, such as the sector. I was just curious on the learnings themselves, but it sounds like that's something that you're continuing to work through. Yeah. Thank you for that.
Thank you.
Thanks, Nick.
We will now take the last questions from the line of Niraj Shah of Goldman Sachs. Please go ahead.
Hey, good morning, guys. Couple from me. One, just on Minerals. I appreciate the overlay of conservatism, I guess, given the geopolitical environment. In terms of the 2026 exit rate and the first six weeks of 2027, how does that business, how is it tracking relative to that 15%-17% first half range you quoted? The second one is just, if you could just elaborate on how you think market share in commodities has evolved over the last six months, that'd be useful.
Yeah. Thanks, Niraj. I mean, without getting too much detail, what we've seen, and this is why we've given the guidance we've provided, is what we've seen this year thus far is consistent with how the second half traded. There's no more pretty more to say on that. As I said, if you look at the sample volumes chart, it stepped up in November last year, and it sort of held at that stepped-up level. We haven't, at this point, seen it step up anymore. Indicators would suggest that that could happen, but at this point in time, we're seeing a continuation of what we saw in the second half.
Yeah. On the market share, we always have a very specific target of how we want to expand that business. What I can tell you is that we are on track, both in fiscal year 2025, we probably overachieved the target, which was good. Initial data from 2026 supports that as well. The targets for 2027 is in line with that. We're not going to lose the discipline of ensuring that we provide a very better service that allows us to continue building share globally and in the regions that we have those options.
Thank you.
Thanks, Niraj.
Thank you.
With that, I would now like to hand the call back to management for closing remarks.
Well, thank you very much for your time. I'm sure we're going to follow up with Q&A. I want to thank again the employees of ALS across the world for their extraordinary efforts and commitment to deliver these results. Thank you, everyone, and enjoy the rest of the day.
That concludes today's conference call. Thank you for your participation. You may now disconnect your lines.