It's been a rough run for SciDev over the last 12 months, at least in terms of the share price which has effectively been cut in half. And, sure, watching revenue drop 5% while costs are bulked up isnt going to do the bottom line any favours either.

But if you think that this was merely a speed bump resultant from a few project delays, and that the longer term growth potential remains, well, it *could* be an opportunity.

Zooming out, revenues have effectively doubled in the last 3 years, and are set to grow a further 20-40% this year -- a figure Sean said they had confidence in because of the some of the delays in FY25 clearing.

At the mid point of FY26 guidance, the revenue picture looks like this:

They now have some important local reference sites in the US and Europe which was previously an impediment to winning work (i led the question there, but Sean really seemed to emphasise the importance of this). And they have a bulked up team to help drive continued momentum, and for which it seems there isnt much further investment needed. Indeed, he mentioned the operational leverage potential a number of times.

Also encouraging to see them remain cash flow positive and bulk up the balance sheet. And it was really good to see them walk away from a European water tech acquisition that they believed would have been highly accretive from a portfolio perspective, but too dilutive given the share price weakness. I though that was a good tell in terms of capital discipline and shareholder focus.

In my experience, small Aussie businesses dealing with very large customers often get pushed around, and contract wins can be sporadic and easily deferred, which can make for a bit of lumpiness -- which always scares the market. But business is never linear, and so I tend to be pretty sanguine about such things. Again, so long as the bigger opportunity remains in tact. The trouble is, it's easy to tell yourself that when there really could be more structural problems at play...

It's hard to get a sense of what a net or operating margin might look like at scale, but I dont think 5% net is an overly bold guess. Sean was a little coy here, but if we go with that in order to get a rough forward and normlised PE, and assume they hit the low end of guidance, well the PE is 10x. If you prefer, the trailing P/S is 0.6x or the forward is around 0.5x. Which hardly seems excessive.

No position as yet, but i'm a sucker for a stock that's been beaten up and where the core business remains in decent shape.

Anyway, the transcript is here: SDV Transcript.pdf and the recording is on the Meetings page.

Here is the chatGPT summary:

Here’s a concise bullet-point summary of the interview with Sean Halpin, CEO of SciDev (ASX: SDV):

Financial Performance & FY25 Results

• FY25 revenue was down 5% to $103.4m, mainly due to delayed contract execution pushing revenue into FY26, not lost business.
• Despite softer top-line results, margins improved, and SciDev remained cashflow positive with a stronger year-end cash position.

Strategic Highlights

• Secured multi-year contracts in mining using MaxiFlox technology.
• Achieved 46% YoY sales growth in proprietary chemicals for US oilfields.
• Made significant PFAS treatment progress, winning first revenue-generating contracts in Europe and North America.
• Building a pipeline in Europe via partnerships (e.g. Swedish Hydro) to avoid heavy upfront investment.

PFAS Opportunity

• US Department of Defense (DoD): secured contracts giving access to five PFAS-contaminated sites, providing critical reference points.
• Europe: targeting multiple sub-markets with a mix of direct contracts (e.g. UK) and channel partners (e.g. Nordics).
• Management views PFAS remediation as a huge long-term growth driver.

Margins & Pricing

• Achieved higher-than-expected gross margins on Swedish projects due to efficient manufacturing partnerships and upfront deposits.
• US PFAS contracts priced leaner to gain reference sites, but none are loss-making.

Operational Capacity

• Operating a hub-and-spoke model: core design and engineering in Sydney with local delivery teams offshore.
• Running lean operations but has invested in regional boots on the ground and increased sales resources to support growth.

Acquisition Strategy

• Walked away from a highly accretive European water-tech acquisition because funding it at a lower share price would have been too dilutive.
• Demonstrates capital discipline; prefers organic growth, but remains open to future M&A if conditions are right.

Outlook & Growth Drivers

• Provided FY26 revenue guidance of $120m–$140m (20%–40% growth), underpinned by:
• Delayed FY25 contracts rolling into FY26.
• Expanding international PFAS opportunities.
• Growing order book and strengthened business development capability.
• Sees significant operating leverage across divisions; expects margin expansion as scale builds.

Culture & R&D

• Strong focus on culture and internal development to retain top talent and build future leaders.
• R&D skewed towards product development and optimisation rather than pure research — constant incremental innovation to improve solutions.

Nice Contract announcement this morning, followed Immediately by a Pause in trading

Disc Hold IRL & SM

Here are some notes from today's meeting with CEO, Sean Halpin.

SciDev is all about water treatment solutions -- be that for materials extraction, construction or site remediation. As with EGL, they also specialise in PFAS removal.

Their chemicals and processes are proprietary and have IP protections, although they do also do more commodity-like solutions to broaden their appeal across the customer base.

They operate two business segments - chemical services (~80% of revenue) and water technologies (~20% of revenue).

The chemical services business provides proprietary chemistry that improves operational efficiency and water usage for heavy industries. The water technologies business remediates legacy contamination issues by removing harmful contaminants from water sources.

Chemicals are the major variable cost for a lot of customers in oil & gas, and SciDev's products can allegedly yield significant savings.

The relationships with customers vary by industry. Mining customers typically have 3-year fixed contracts as SciDev's products are key consumables in their core processes, providing revenue visibility. Oil & gas is more transactional. Water technologies is project-based revenue with build-operate contracts of 6-36 months.

PFAS contamination remediation is a major growth opportunity, and Sean echoed similar sentiments to Jason at EGL. Both have said the opportunity is large enough to accommodate many players --especially in the US and Europe as regulations tighten. Management is taking a disciplined approach, putting resources in place ahead of an expected uptick in demand as regulations advance. If successful, this could be transformative (but, as always, execution is key).

Sean remarked that the business is still sub-scale, but that he didn't expect a lot of increase in fixed costs given the capacity of capital equipment and facilities they currently operate.

SciDev's focus on higher-value proprietary solutions is paying off. Profit margins are expanding - specialty chemicals range from 20-40% gross margin, with water projects up to 90% in some cases. Commodity products are being de-emphasized. This strategic shift, along with operational leverage, is driving strong EBITDA growth and positive free cash flow, despite recent market challenges. The company appears self-funding at this stage.

The business is now cash flow positive, and they have ~$6m in cash available.

The business model has elements of recurring revenue which provides some visibility. Mining customers are on 3-year contracts as SciDev's products are critical to their operations. This 'stickiness' was emphasized. Oil & gas is more transactional but SciDev's unique products foster retention. Water projects are 6-36 month contracts. 

Wise capital allocation is a priority for management. Organic growth is the main focus - investing in the right products, regions and projects. Acquisitions are evaluated opportunistically to accelerate growth, add tech capabilities or build scale in key markets. The company's improved cash generation provides flexibility.

Organizational culture was highlighted as critical to success, especially during this growth phase. Management is working hard to foster shared values, engagement and innovation. The employee share plan aligns incentives. Still, scaling a specialized workforce across regions is an execution risk to monitor.

SciDev appears to have a differentiated offering in a growing market, with multiple levers for growth. The company's recent financial performance is certainly encouraging. Management seems to be taking a thoughtful approach to balancing growth investments with risk management. Key things to watch going forward include: 1) Traction in the PFAS opportunity, especially in new geographies, 2) Maintaining margin improvements and capital discipline as the business scales, 3) Any M&A activity and subsequent integration, and 4) Competitive response.

All told you have a $65m business doing ~$100m (pro-rata) in revenue, with potential for some decent operating leverage. As with EGL, there appears to be some good tailwinds. The company is on a EV/EBITDA of roughly 10x -- which doesn't seem too bad assuming the growth trajectory is maintained.

Widespread contamination of surface water and groundwater due to industrial releases of PFAS or use of PFAS-containing firefighting foams is now a major problem in the United States and globally. An estimated 200 million U.S. residents, nearly two-thirds of the U.S. population, receive municipally provided drinking water that is contaminated with PFAS

Quite staggering!

$350k per site (I think)..... $10bn TAM.... that's a lot of real estate to cover

But can they execute?

SciDev delivers inaugural net profit of A$0.4m

1HFY21 Financial Highlights

~(1HFY20 -A$0.2m)

~ Record half year results;

       ~ sales of A$18.3m (+300% vs 1HFY20  A$6.1m)

       ~ cash receipts from customers of A$15.8m (+290% vs 1HFY20 A$3.8m)

~ Net cash at the end of the period of A$7.1m

~ Strong gross profit margin of 23% (FY20 17%)