ALS Limited

Good day and thank you for standing by. Welcome to ALS Limited FY26 Results Briefing. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 and 1 on your telephone. You'll then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the call over to your first speaker today, Mr. Malcolm Dean, CEO and Managing Director. Thank you. Please go ahead.

Thanks, Desmond, and good morning, and thank you, everyone, for joining us today.

It's been a very strong year for ARIS, and we've delivered record results, reflecting our ability to achieve strong growth while staying disciplined on margin performance, cash generation, and capital allocations. As always, I'm joined by Stuart Haddon, 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 fiscal year 27 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 fiscal year 27 plan primarily through strong organic growth. Fiscal year 26 revenue was 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 599 million, up 19.3%, with EBIT margin accelerating by 129 basis points to 18%. But excluding recent acquisitions, the legacy underlying EBIT margin was 19.8%. Underlying impact was up by 25.8% to 381.2 million, a record result for this company. These results for ALS reflect the work of more than 23,000 people across our global network. So 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 but 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. And as planned, we saw strong margin improvement from Nubisan. Environmental growth was strong in our key EMEA and APAC regions But the Americas, especially the United States and the Thames, were a challenge, and we'll come back to that shortly. Cash conversion was 92%, and leverage is very healthy at 1.5 times. So 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 team sleeps 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 26 results. Solid revenue momentum. discipline 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 27 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 381.2. Underlying earnings per share increased by 21.2% to 75.7 cents per share. Leverage at 1.5 times sits comfortably below our preferred target range. But 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 27 dividend of 42.5 cents per share, an increase of 10.1%, equating to a 57% payout ratio of underlying net profit after taxes. So 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 $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% achieving 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 want to be clear about this. There is 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 H225 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 slide 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 discount secured during fiscal year 25. 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 positionated 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 dabbling on an 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. However, the lag between capital raising and field activity has extended beyond the two to three months we have historically seen. And as a result, we are being appropriately cautious in how we reflect that in our fiscal year 27 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 difference factors impacting the margin progression to the reported fiscal year 26 margin of 33%. The margin expansion to 33% was driven by volume-led operating leverage, the cycling through of fiscal year 25 pricing headwinds, mainly impacting H1, and continued cost discipline across the network. In H1, we share with the market that the pricing impact was roughly negative 120 basis points. For the full year, pricing turned into a positive contributor as the discounts from 25 flashed through and the pricing environment firmed. High-performance methods continued 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 represent approximately 25% of minors' revenue. This diversification is structural, and it matters because it reduces our sensitivity to expiration 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. So 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%. So let me walk through each of these businesses. Environmental delivered mid-single-digit organic growth in our largest regions, APAC and EMEA, partially offset by software 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 restated during Q4. The effect of the U.S. government shutdowns have eased, and the outlook is more positive as we enter 27. Starting fiscal year 27, 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 the 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 positioned as strong to continue growing in the upcoming year, as we did in the past three years. 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 no reason. 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. So 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 Nubeson, Westling, and York. The legacy life sciences organic revenue growth was 4%. This was achieved against very strong results 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. Nubisan completed its transformation ahead of schedule, delivering expected exit savings of approximately 25 million euros and margin improvement of around 450 basis points. The focus is now on revenue growth from the improved commercial platform. West Wing performed positively with revenue and earnings performance ahead of the initial business case. And 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. But 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. So now, let me hand over to Stuart that will walk you through the financial review. All right. Thanks, Malcolm, and good morning, good afternoon, everyone.