I would now like to hand the conference over to Todd Scott, Chief Executive Officer. Please go ahead.
Good morning, everyone, and thank you for joining us. FY 2026 was a year of contrasting performances for SciDev. Water Solutions delivered record revenues and earnings, but at the same time, we experienced a significant setback in Energy Services following the loss of a major contract. Just as importantly, we took decisive action to address underperforming areas of the business and strengthen the balance sheet. Today, I will take you through the key outcomes from the year, the progress we have made executing the strategic reset outlined at the Investor Day, and why we believe SciDev now enters FY 2027 in a stronger position with a clearer strategy, a leaner cost base, and a growing pipeline of opportunities. The simplest way to think about FY 2026 is that it was a year of two halves.
The first half reflected the impact of the Energy Services contract loss and ongoing losses in our international Water Technology operations. The second half demonstrated the benefits of actions we took to address issues of cost and performance. Across the year, we reduced our cost base by AUD 4 million, exited loss-making international operations, tightened capital expenditure and working capital management, and improved overall financial discipline. While full-year revenue and earnings were below FY 2025 levels, we finished the year with higher net cash, improved liquidity, and significantly stronger second half performance. Most importantly, we believe the business today is materially better positioned than it was 12 months ago. There were several highlights across the business.
Within Water Solutions, we secured the AUD 19.5 million Rum Jungle contract, won a new chemistry contract with Newmont Boddington that commences in FY 2027, and established a presence in Water Solutions for the data center market, leading to our first contracts announced earlier this month. In Energy Services, we established a new master services agreement with a tier one service provider and generated our first revenues under that relationship. Strategically, we exited direct operations in the U.S. and U.K. Water Technology business and moved to a channel partner model, removing a source of ongoing losses. Financially, recurring revenue increased from 30% to 38% of total revenue, net cash increased to AUD 6.8 million, and second half underlying EBITDA more than doubled compared to the first half. This slide demonstrates why we are increasingly confident about the direction of the business.
Revenue in the second half was lower as the lost xSlik volumes were no longer present. However, despite lower revenue, underlying EBITDA increased from AUD 1.1 million to AUD 2.5 million and margins expanded significantly. That improvement was driven by three factors. First, the execution of the Rum Jungle project. Second, the benefits of the cost reduction program, and third, improved quality of revenues across the portfolio. Importantly, we delivered positive operating cash flow in the second half, consistent with the commitment we gave to investors at the half-year result. For us, the key takeaway is that the recovery is not dependent on revenue growth alone. The underlying profitability and cash-generating capability of the business improved materially during the year. I will now spend a few minutes on the financial performance of the businesses before asking John to cover off on balance sheet and cash flow in more detail.
When analyzing the FY 2026 result, it is important to understand that almost all of the earnings decline can be attributed to two specific factors. The first was the loss of the xSlik contract within Energy Services. The second was continued losses in international Water Technologies prior to the exit from those operations. Outside of those two items, almost every part of the business improved. Water Solutions delivered record EBITDA of AUD 4.2 million, increasing earnings by AUD 3.6 million compared to the prior year. Corporate costs declined by approximately AUD 1.6 million, and recurring revenues increased significantly. That gives us confidence that the actions taken during FY 2026 address the core drivers of underperformance rather than simply cutting costs around the edges. This waterfall summarizes the year quite well. The strongest contributor was Water Solutions, where revenue growth, engineering project delivery, and stronger chemistry performance delivered record earnings.
We also generated meaningful savings through the corporate cost reduction program. Those positives were more than offset by Energy Services contract losses and the losses associated with international operations. Looking forward, the key point for investors is that the negative drivers are largely known and addressed while the positive drivers continue into FY 2027. The composition of SciDev is changing. Water Solutions is now our largest contributor to earnings and has become a centerpiece of our growth strategy. Across mining, infrastructure, and data centers, we are building a broader integrated platform that combines our engineering, chemistry, and optimization capabilities. Energy Services remains an important earnings driver. However, the future growth profile will increasingly reflect the expansion of Water Solutions. That diversification is intentional. It creates a broader earnings base, reduces concentration risk, and gives us exposure to several attractive end markets. Water Solutions was the standout performer in FY 2026.
Revenue increased 13% to AUD 48.3 million, and underlying EBITDA reached a record AUD 4.2 million. Process Chemistry benefited from infrastructure projects and mining contract renewals, while Water Technologies was driven by a solid base of O&M contracts, the Rum Jungle project, as well as stronger sales from our HydraIQ water quality monitoring systems. Beyond the numbers, what excites us most is the strategic position we have established. We are building an integrated water solutions platform around engineering, chemistry, digital optimization capabilities, which includes HydraIQ and OptiFlox.
We are also beginning to establish a meaningful position in data centers, a market where the team has extensive previous experience and where we see significant long-term growth potential. Energy Services faced a challenging year following the loss of the Premium xSlik contract. Despite that, the business remained profitable and generated AUD 4.8 million of EBITDA. One particularly encouraging outcome is the continued strength of CatCheck.
CatCheck now accounts for more than half the segment revenue and continues to demonstrate resilience and competitive differentiation. We are also making progress with new partnerships and product development initiatives, including enhanced oil recovery applications, CatCheck variants, and advanced delivery systems. While the market remains challenging, we are focused on rebuilding growth through partnerships, product innovation, and expansion to attractive basins. At this point, I will hand over to our Interim CFO, John Gardiner, to discuss the balance sheet, cash flow, recurring revenue profile of the business.
Thank you, Todd. The key priority throughout FY 2026 was improving capital discipline and strengthening the balance sheet. The result of those efforts is evident here. We finished the year with net cash of AUD 6.8 million and total available liquidity of AUD 13.8 million. Operating cash flow improved significantly during the second half, supported by stronger earnings from Jungle milestone receipts and more disciplined working capital management.
At the same time, capital expenditure was reduced and remains well below reported depreciation because of the long-lived nature of many of our assets. The balance sheet today provides sufficient flexibility to support organic growth opportunities while maintaining a conservative risk profile. The other important trend is the continued improvement in earnings quality. Recurring revenue increased to 38% of total revenue in FY 2026. This revenue comes primarily from long-term operating and maintenance contracts, build-own-operate assets, and multiyear chemistry agreements.
If CatCheck revenues were included, that proportion would be even higher. Growing recurring revenue remains a strategic priority because it improves visibility, enhances earnings quality, and creates a stronger platform for long-term shareholder value creation. I will now hand back to Todd to discuss strategy and outlook.
Thanks, John. As we move into strategy and outlook, the message is straightforward. Our objective is not to be everything to everyone. Instead, we are concentrating resources on markets where we have a genuine right to win and where our combination of engineering, chemistry, and optimization capabilities creates differentiation. The progress made through FY 2026 gives us confidence that this strategy is already starting to gain traction. We have deliberately focused on a smaller number of attractive markets where we have established customer relationships, proven delivery capability, and transferable expertise.
Mining, infrastructure, utilities, and data centers sit at the center of our Water Solutions strategy. Supporting those markets is an integrated platform of engineering solutions, chemistry, and optimization services. Recent wins, such as the Newmont Boddington Gold Copper Mine and our first data center agreements, provide early evidence that this platform approach is resonating with customers. The market opportunity remains significant.
Today, we estimate the Australian Water Solutions market opportunity across the priority sectors at approximately AUD 2.2 billion. By 2040, that opportunity is forecast to exceed AUD 6 billion, with data centers representing the fastest-growing segment. The key point is not just market size. It is that these markets are becoming increasingly driven by water scarcity, water quality, recycling, treatment, and regulatory requirements, all areas where SciDev possesses demonstrated expertise.
At the Investor Day in June, we outlined a five-point plan. Today, we are able to demonstrate meaningful progress against every component. We have diagnosed the cause of underperformance, we have exited non-core loss-making activities, we have reduced costs, we have strengthened the balance sheet, and we have begun rebuilding a path to sustainable growth. While there is still work ahead, we are pleased with the progress achieved in a relatively short period of time. Looking ahead, our priorities are clear.
First, deepen relationships with tier one mining customers by expanding the range of services we provide. Second, establish a meaningful position in the Australian data center market. Third, gain stability in the Energy Services businesses through new partnerships and targeted product development. These initiatives leverage existing capabilities with customer relationships, giving us confidence they represent practical and achievable growth opportunities.
As we enter FY 2027, we are encouraged by the opportunities ahead. In Water Solutions, we have the Newmont Boddington contract commencing, continued project activity in mining, and the first revenues from our major data center customers. In energy, we continue to focus on our strategic partnerships, new products, and selected geographic expansion. While market conditions remain mixed, particularly in Energy Services, the overall pipeline across mining and data centers provides increasing confidence in the growth outlook. Before we conclude, I would like to acknowledge our leadership team shown here.
The progress achieved during FY 2026 is a result of the tremendous effort from the team from all parts of the business. Their work has positioned SciDev for the next phase of growth. To conclude, FY 2026 was a year of decisive action and strategic repositioning. Although the headline financial result reflects a challenging period, the underlying trends are encouraging. We have a stronger balance sheet, a lower cost base, improving earnings quality, record Water Solutions performance, and a growing pipeline in attractive end markets. Most importantly, we believe SciDev is now focused on the areas where we have the strongest competitive advantages and the greatest opportunity to create long-term shareholder value. Thank you for your time this morning. Myself and my management team would now be happy to take your questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on speakerphone, please pick up the handset to ask your question. Our first question comes from James Tracey with Blue Ocean Equities. Please proceed with your question.
Hi, Todd. Thanks for taking my question. I am hoping you could provide a bit more color on the data center contracts that you have won. At the last Investor Day, you outlined the data center strategy. You did not have any contracts at that stage. You have won two since then. I guess I am wondering how significant the clients are that you are working with, and how you see the opportunity and how those work with those clients could evolve over the medium term. Thank you.
Thanks, James. Appreciate the question, and certainly it is a market that we are just as excited about ourselves as I think the market is, our investors are. In context, data centers is a market that we were not even engaged with 6 months ago. So the fact that we have signed two contracts already is really encouraging for us. In terms of the customers themselves, they are, how I say, household names.
Unfortunately, we cannot disclose because of client confidentiality, the names that we are working with, but they are certainly names that you would know and understand. The two different projects that we are working on are relatively different, but both meaningful. The one engagement we had was early stage consulting work for a very large data center that is in the process of being approved. They are going through that process and would be a very meaningful project if it gets across the line.
The other bit of work we are doing has been one of our engineers, where she has been embedded into the client to really help with all the work that they are doing. As you can imagine, these data center clients have a significant amount of work going on, and particularly in the water space, a large problem they need solutions for. So we are encouraged by all that. That is a bit of color. I am very lucky to have Ronan Duffy with me here in the room that can give a bit more detail on that and what he is seeing in the pipeline, and what he thinks this might lead to going forward.
Yeah. Thanks, Todd. I suppose, hi, James. Good question. What we are seeing in the market is there is an awful lot of development in feasibility stage. We are supporting our clients in this, where we are looking at full site water management plans, access to resources on the site and off the site, and then dealing with small projects like wastewater treatment, mobile plants. We sort of cover the construction side of the delivery of the development, and also then the operational side, which could be down to the small project of admin water, potable water, and wastewater supply equipment. We are also dealing with fire suppression and storage of water for that. And then also the other big thing on remote sites we are seeing is requirement for commissioning water, which is ultra-pure standard that they do not have access to on site.
We're designing plants and helping with, I suppose, how we deliver that for the client. Even if it's an air-cooled site, we are seeing a lot of scope for us to support our clients in that space. There's a lot of work in the feasibility side. We're also engaged with soon to do some desktop reviews of their safety water management plans, and also how they are delivering their current design, and then looking at even existing plants and how we can optimize the current water that they're dealing with and give them a decent quick turnaround on the payback of that.
With our HydraIQ systems that we have developed and trademarked, we are ticking all these boxes, and supporting our clients really well. I think the market is showing us really positive signs. Our pipeline is growing really quickly. We're getting really early engagement, which gives me great confidence that we will be successful in winning projects as they develop through the DA process.
Thanks, Ronan. Just on that topic, it sounds like most of these data center projects are in the planning stage or the feasibility stage. How would you anticipate that the addressable opportunity for you evolves as some of those projects go from planning to construction to operation? What would the typical metrics kind of look like on a typical data center?
I suppose what we're doing is, and this is the good part for me, is we have the early engagement piece. We have seconded one of our engineers into one of the major companies to help them through the feasibility stage. We're then seeing desktop reviews and even auditing what they're planning to do within that feasibility stage. We then are moving into, we can deliver to the construction and operation of that data center development, and then we're also capable of delivering the O&M ongoing operation of that facility or multiple facilities. We're sort of in really early engagement, and then we'll be there even post-development completion to operate and maintain the water treatment equipment.
Yeah. I guess the other question on this topic is, there are data centers in Australia and to date, there hasn't been much water treatment done for those data centers. What's different with, I guess, the data centers that you're looking at now?
It's the chip type. Obviously, the chip type's running at a higher temperature. It's drawing more load. The old traditional chips were about 35 kW. Now, the new versions are up to 90 kW. Everybody's looking at a hybrid cooling technology, whether it's cool air, whether it's liquid to chip, and also adiabatic. I suppose from my perspective, we're seeing a lot of engagement in that hybrid model. Also, just to comment, we're also seeing work existing sites where trade licenses have changed, and we're getting inquiries coming through on looking at existing sites and how to optimize their water use, and then meet changing criteria on discharge.
I guess regulation is becoming a bit more stringent as community concern rises around some of these issues.
Exactly. Yeah. Look, the plan for everybody we're talking to is to be in recycled water 100%. That's the plan.
Got it. All right. Thanks, Ronan. Thanks, Todd.
Thank you, James.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. Also, if you wish to ask a question on the webcast, please hit the blue hand on the top right corner. Your next question comes from James Tracey with Blue Ocean Equities. Please proceed with your question.
Thanks again. Just switching topics slightly back to the core business. One observation that I have had of the market from looking at competitors is that, because of the conflict in Iran, there has been big increases in commodity prices, chemical commodity prices for the first time in many years. I am wondering, do you have the ability to pass that on to your customers? In which case, could that provide a benefit to your revenue growth? Possibly, what is the impact on margins there of that, if you are seeing that?
To a degree. We certainly have the ability to pass that on to our customers. I think for new contracts, certainly, that goes into the pricing. We've a very, on the mining chemistry side of things, a very good relationship with Nouryon, who goes to great lengths to allow us to get volumes that will benefit ourselves and them. And similar story on the Energy Services chemical side. I'll let Chris speak more to that in a moment. But it is a volatile space. I think one thing we've seen is that our customers, certainly in Energy Services, have been very mindful and very conscious of, particularly around commoditized chemistry, around the margins and the prices that they're paying during the recent volatility. We've been able to, I guess, hold in margins more easily in CatCheck.
But on the Energy Services side of things, that's been a part of the challenges that we faced with that commodity chemistry in pressure reducers. Chris, if you're on the line, maybe you can speak to that.
Yeah, sure. Thanks, Todd. And, thanks for the question, James. Yes, I would agree with what Todd said. But just to echo a bit more. Part of what we're seeing is certainly some of the raw components that we deal with, especially when it deals with ocean freight. We've seen certainly an increase there. We have been able, because that is measured on a worldwide industry, we've done a really good job of being able to pass along most of those increases to our clients to a part where at times we have seen a margin percentage or two growth. As Todd mentioned, some of the more domestic or commodity products that are produced here within the U.S., those products have moved a bit with the increase in oil prices and some of those things that we have been seeing throughout the market.
Those prices have since cooled just a little over, say, the last two or three months. We expect them to cool a little bit more throughout the rest of the year. But we've all been able to manage at least the gross profit target that we've been looking for. Certainly not been able to grow much on that gross profit line with the friction reducer or more commodity type products. Thank you.
Thank you, Chris.
Thanks, Todd.
If there's no other questions on the line.
There are no.
Yeah, I think we have a few questions on the Q&A module, Heath.
There are no further phone questions at this time.
Thank you. Thank you very much. Our company secretary is also jumping in, joining us today. Heath Roberts, if you could read out some of those questions on the line, that would be great.
Yeah, will do, Todd, and good morning, everyone. Righty-ho. Questions in the screen, I am going to approach it this way. There is a number of them that are about data centers, but I think James Tracey's questions and the comprehensive answers given, that dialogue pretty much answers everything I can see in the screen. I am not going to put these questions again. Next, there is a question, Todd, about recurring revenue. Recurring revenue seems to be growing. That is good. Tell us a bit how you are going to keep that momentum going.
Thank you. Great question. A large portion of the recurring revenue that we have in our books comes from chemistry sold into the mining industry. When we look at the Newmont Boddington contract win that we announced recently, a couple months ago, that is AUD 2 million a year of chemistry that will go into that recurring revenue number. I do expect that to increase in 2027 over 2026. Proportionally as total revenues, we will see where that lands. Ultimately, we want higher revenues overall.
Of course, the greater composition of recurring revenues within that is always a benefit. But that number will bounce around if you get a large D&C project. If we were to get, say, for example, a large D&C project in the data center space, that would skew that recurring revenue as a percentage. But we are trying to always build that base up as high as we can of gross revenues. Great question. Thank you for that.
Thank you, Todd. Next question. In June, the company reported contracted revenue for FY 2027 and talked about the pipeline. Can you update us on how those metrics are looking? Have they changed much since that June assessment?
Relative to the contracted FY 2027 number, again, the Newmont Boddington Mine project will add to that base, AUD 2 million a year of revenues. In terms of the pipeline, that has not changed materially. I think the biggest compositional driver in there is at the time, we did not have as much visibility on the data center space. That is firming and certainly more to be developed there. But on the next time we turn those numbers, we will see a larger portion of that pie that will go into the data center market, which will expand the future opportunities that we have there.
Thank you. Thank you, Todd. The next question notes the revenue drop for Energy Services in the second half as compared to first half in FY 2025 generally. The question then follows, tell us a bit about how you see Energy Services moving forward. What is the course forward? Does it stay a smaller business? Do you grow? What is the future like?
Yeah. Honestly, it was a tough year for Energy Services, as I am sure Chris will agree. The first half versus second half drivers was largely, as we articulated, the xSlik contract that was unfortunately lost. There were a meaningful amount of revenues that were still in the first half, so relative to the second half, that was a more difficult period. How we build it up from here, how do you run that business in a difficult environment? I think firstly, we are mindful that it is a cyclical business, and when you have difficult times like this, you need to make sure that your cost base is set to sustain yourself in the trough as we are seeing it right now.
In terms of the forward-looking outlook, we have got a great set of products there, whether it is CatCheck, whether it is the other end flow surfactants that we are building, the enhanced oil recovery product lines. They are actually all very attractive to our customer base. The challenge we have as a smaller company is distribution, getting our products out there. That is why we have been really focused on using tier 1 service providers that have more distribution breadth than we do to be able to get those products out there. For us, it is obviously a lower cost way to grow the business also. I will ask Chris to also elaborate on that in terms of the market is there, it is just how do we get in front of the right people? Chris, if you can elaborate, please.
Yeah, sure. Thanks, Todd. Great question. Yeah, so as we continue to attack the market, one of the things that we have done is put together an extremely tightly focused target list. We understand, as Todd mentioned earlier, that focusing on tier one service companies as well as other tier one companies that will continue to push through what we consider the troughs of the market that we experienced about a year ago, are who we certainly want to align with as we go forward. We are seeing some gain of traction as this drifts forward. We expect to see more as we go deeper into our H1 financial year this year, and certainly into H2 next year as well.
Some of the technology that is also being developed here in the lab is going to be fit for purpose for the market as we continue to see other technology evolution for how we frack a well and the additional longer laterals and those kind of things. That is basically just fit for purpose in certain geographical areas and certain geologies. So the team has done a really good job of that. That is now being pushed out commercially to our client base and being well-received.
Thank you, Chris.
You bet.
All right. Look, last question. Are you in a position to talk about rev for FY 2027, Todd?
I'm sorry, could you say that one more time?
Sorry. Are we in a position to talk about rev for FY 2027?
We're not going to be giving guidance, certainly at this early stage of the year. What we're going to be doing more so is keeping our investors more informed as we go along through updates, be that quarterly or at each information news point that we have. Just with the nature of the business, to be able to give guidance that's so far forward-looking, it's really challenging. We want to keep you informed, but do it in a way that is easier to manage expectations. We'll be updating more at the quarter and more at more frequent news points.
Excellent. Thanks, Todd. That's it.
Thank you very much. Thank you very much for your continued interest and support for SciDev. We're building a much stronger business here. I'm really excited about the future we have. The management team I have is sensational. Just the support I get from them is outstanding. There's a lot of exciting things to look forward to. Thank you for your time, and look forward to speaking with you again in the future. Thank you, operator. You can now close the call.
This does conclude our conference for today. Thank you for participating. You may now disconnect.