SciDev (ASX:SDV) management said first-half FY26 results fell “well below expectations,” citing disruptions in its energy services segment and higher-than-anticipated losses in its international water technologies operations as the primary drivers of weaker earnings. Managing Director and CEO Seán Halpin and CFO Todd Scott told investors the company has taken “clear and decisive action” to address the issues and expects improving momentum through the second half, while also lowering full-year revenue guidance.
Energy services disruption drives earnings miss
Halpin said the largest impact came from energy services after a single key customer experienced continued disruption to its frack schedule, which removed “most of our excellent sales revenue for the period.” While the company expected conditions to improve as the half progressed, the disruption continued through December.
To reduce reliance on any single account, Halpin said the company added business development resources and targeted key shale formations to broaden its customer base. As an early sign of progress, SciDev reported that the number of customers adopting its proprietary CatChek products grew 75% year-on-year during the period.
International water pivot to channel partners
The second key drag on results was SciDev’s international water technologies business. Halpin said sluggish market development meant the investment-based cost base outpaced revenue as the company established a presence in overseas markets, contributing an EBITDA loss of AUD 1.5 million for the half.
In response, SciDev has shifted from a direct investment approach to a channel partner model, which Halpin said removes up to AUD 3 million in annualized fixed costs from the second half onward. He noted the model has already been successful in Sweden with Swedish Hydro and is intended to maintain and expand market access in the U.S. and Europe while reducing costs.
Financial performance and cost actions
For the first half of FY26, SciDev reported revenue of AUD 47.9 million, down 4% on the prior year. Scott attributed the decline primarily to the completion of a design-and-construct contract in the water business and the frack schedule disruption in energy services.
Underlying EBITDA was AUD 1.1 million. Scott said the result was heavily impacted by the AUD 3.6 million hit from reduced xSlik sales, as well as higher costs in the overseas water business that grew by a further AUD 700,000 over the prior year.
Scott emphasized an improving quarterly trend, with a break-even first quarter followed by a second quarter in which revenues rose 9% sequentially and underlying EBITDA reached AUD 1.1 million. He said cost-reduction initiatives began to take hold, with AUD 700,000 in underlying cost savings achieved in the half and expectations for AUD 1.3 million in lower annualized fixed costs by year-end.
The company also highlighted a reduction in corporate costs. Halpin said SciDev streamlined corporate functions, cutting corporate costs by 19% year-on-year. Scott said the reduction came from leaner headcount, administrative savings, and lower external professional services spend.
Division highlights: process chemistry, APAC water profitability, and recurring revenue
Despite the energy and international water headwinds, management said other parts of the business performed well. Halpin said process chemistry delivered record revenue for the half, while APAC water technologies returned to profitability.
Scott detailed divisional performance:
- Process chemistry: Revenue rose 16% to AUD 14.5 million and EBITDA increased 58%, supported by multi-year tunneling and infrastructure contracts in Australia. Management also said the company re-signed its largest mining customer at slightly improved margins.
- APAC water technologies: Returned to profitability with AUD 200,000 in EBITDA, representing an AUD 800,000 turnaround from a loss in the prior-year half. Scott said revenue declined due to the roll-off of a legacy design-and-construct contract, but the AUD 19.5 million Rum Jungle project contributed its first AUD 1 million in the half and is expected to deliver most of the remainder in the second half.
- Energy services: Results were lower due to reduced X-Floc sales, though the CatChek customer base expanded. Operationally, the company deployed 25 new branded ISO tanks to optimize delivery and reduce distribution costs.
Both executives also underscored the growing share of recurring revenue. Halpin said more than half of revenue now comes from long-term chemistry contracts, operations and maintenance (O&M) agreements, and CatChek sales, improving visibility. Scott put recurring revenue at 54% of total revenues, calling it a key strategic focus.
On the balance sheet, Scott said SciDev had net cash of AUD 4.4 million and AUD 6 million in unutilized debt facilities as of December 31, which he described as leaving the company in a “robust financial position.” Reported operating cash flow was negative AUD 700,000 due to one-off items including restructuring costs and ISO repairs, while underlying operating cash flow was positive AUD 800,000.
Guidance revised; outlook centers on second-half momentum and FY27 growth
SciDev revised FY26 revenue guidance to AUD 100 million to AUD 110 million. Halpin said the change reflects the return of the X-Floc sales opportunity being pushed into FY27, delays in trial conversion and process chemistry, and a $3 million negative foreign exchange impact on forecast U.S. dollar revenue. He added the guidance incorporates downside risk, including potential revenue phasing for Rum Jungle and delays in onboarding new energy services customers scheduled for the fourth quarter.
Even with the downgrade, Halpin said the company expects second-half EBITDA to be higher than the second half of FY25, supported by stronger revenues, higher margins, and group-wide cost reductions. Management expects revenue to build quarter-on-quarter through the second half, with a strong fourth-quarter exit rate “setting us up well for FY27.”
During Q&A, Halpin said CatChek momentum has been driven by a focus on the Permian and Haynesville basins, noting that all of the new CatChek customers added during the half were in the Permian. He said the company would not provide specific pipeline data but described the pipeline as “as healthy as it’s ever been,” aided by performance data and word-of-mouth referrals.
On future water opportunities beyond Rum Jungle, Halpin referenced additional mine rehabilitation projects in the Northern Territory over the next decade, while cautioning that material opportunities for SciDev would depend on whether complex water challenges are part of those scopes. He reiterated confidence in replacing Rum Jungle revenue with other design-and-construct opportunities in mining, citing sole-source design engagements already underway that could convert into construction and O&M contracts in FY27.
Halpin also addressed a question received via text about domestic data center opportunities, describing them as a long-term opportunity that fits SciDev’s model but not a material driver of revenue or earnings for the remainder of FY26 or likely FY27.
About SciDev (ASX:SDV)
SciDev Limited supplies environmental solutions focused on water intensive industries in Australia and the United States. The company offers engineering and process control; specialty chemical fluid formulations; and chemical products for applications, including flocculation, filtration, sludge dewatering, friction reduction, shale inhibition, rheology control, and pipe-on-pipe lubrication. It also provides water treatment technologies, including water treatment for mobile, temporary, and permanent treatment systems; PFAS treatment solutions; and liquid waste treatment services for modular, mobile, and onsite treatment systems.
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