Kelsian’s Strategic Shift Risks Earnings Stability Amid Tourism Asset Sale

Solid Financial Performance Anchors Strategic Shift

Kelsian Group Limited (ASX, KLS) delivered a robust financial performance for the 2025 fiscal year, reporting a 9.5% increase in group revenue to $2.2 billion and underlying EBITDA rising 7.4% to $285 million. These results align with the company’s guidance and reflect consistent organic growth across its diversified transport operations.

The company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) growth was supported by strong contract renewals and new wins in key markets including Australia, the United States, Singapore, and the United Kingdom. Notably, 93% of FY25 revenue was contracted or non-discretionary, providing a stable earnings base amid ongoing inflationary pressures.

Tourism Asset Divestment to Refocus Core Business

A central theme of Kelsian’s strategic update at the 2025 Annual General Meeting was the ongoing divestment of its tourism portfolio. This move aims to simplify the group’s structure by shedding non-core, capital-intensive assets, thereby sharpening its focus on core marine, bus, and motorcoach transport services. The Board confirmed strong interest from credible domestic and international parties, although timing and transaction specifics remain confidential.

The divestment is expected to reduce capital intensity and enhance earnings predictability, positioning Kelsian as a more infrastructure-like business with a commuter and contracted services focus. Proceeds from the sale will be redeployed in line with the company’s recently established Capital Management and Allocation Framework, which sets clear targets for leverage, capital expenditure, and return on invested capital.

Leadership and Operational Highlights

The AGM also marked the first address by new Group CEO Graeme Legh, who took over in April 2025 following the departure of Clint Feuerherdt. Legh brings extensive operational experience within Kelsian’s businesses, including leadership of its US motorcoach operations. His early tenure has been characterised by disciplined execution and a focus on operational excellence.

Operationally, Kelsian reported several key contract developments, ongoing negotiations for a two-year extension of its largest Sydney bus contract (Region 6), successful commencement of the Bankstown rail replacement bus service, and contract expansions in Singapore’s public transport network. The company also highlighted progress on the Kangaroo Island Ferry Service, with new purpose-built vessels undergoing sea trials and a revised service commencement date set for June 2026 to ensure a smooth transition.

Commitment to Safety and Sustainability

Kelsian reaffirmed its commitment to safety and sustainability, reporting a 12% reduction in total recordable workplace injuries and ongoing investments in zero-emission vehicle technology. The fleet now includes 204 zero-emission buses, with electrification projects underway across multiple Australian states and Singapore. The company also emphasised its community partnerships, including collaborations with the Royal Flying Doctor Service and the Clontarf Foundation.

Outlook and Guidance

Looking ahead, Kelsian reaffirmed its FY26 underlying EBITDA guidance range of $297 million to $310 million, assuming no material changes in operating conditions or asset structure. The company’s focus will remain on operational improvements in Sydney bus services, capitalising on growth opportunities in existing and new markets, and advancing the tourism portfolio divestment process.

With a strong balance sheet, reduced leverage at 2.7 times EBITDA, and a clear capital allocation strategy, Kelsian appears well-positioned to navigate the evolving transport landscape while delivering shareholder value.