Kelsian Group (ASX:KLS) reported a record first-half result for the six months ended 31 December 2025 and upgraded its full-year earnings guidance, citing revenue indexation in contracted operations, growth in U.S. employee shuttle contracts, and improved performance across marine and tourism.
Record first-half results and margin expansion
Group CEO Graeme Legh said the record outcome was delivered through both revenue and earnings growth. Revenue rose 10.6% to AUD 1.186 billion, which management attributed to expansion of key contracts as well as contract indexation mechanisms in Australian bus operations. Legh said these indexation mechanisms provide a “natural hedge” against inflation and support the defensive nature of the group’s contracted earnings profile.
Interim net profit after tax increased 62% to AUD 32.4 million, and the company maintained its fully franked interim dividend at AUD 0.08 per share, consistent with the prior year. Management also noted it continues to offer a dividend discount plan.
Cash flow, capex, and leverage
Net operating cash flow increased 26.1% to AUD 83.1 million during the period, with CFO Andrew Muir reporting cash conversion of nearly 95%, translating to gross operating cash flow of AUD 100 million. Kelsian ended the half with AUD 141.9 million of cash.
Capital investment remained in line with the group’s previously announced program. Kelsian invested AUD 78.3 million in new and replacement assets, including vessels, buses, and motor coaches. Net capital expenditure totaled AUD 76 million after AUD 2.3 million of routine asset sale proceeds. Full-year FY2026 capex is now expected to be AUD 135 million, including an additional AUD 7 million of growth capex to meet expanding demand in the U.S.
Net debt at 31 December was AUD 664.9 million, which included AUD 83.8 million of financing relating to government-backed contracted assets. Pro forma leverage finished at 2.7x, down from 3.2x at December 2020, and management said all bank covenants were “comfortably met.” Muir also discussed the group’s limited-recourse SPV funding model for government-backed contracted bus assets, under which assets and corresponding debt revert to government if contracts are not renewed, which he said leaves “no residual risk or financial exposure” to Kelsian.
Divestment of tourism portfolio
Alongside the half-year results, Kelsian announced it has entered binding agreements to sell its tourism portfolio to Journey Beyond for total cash consideration of AUD 161 million. Legh said the process followed the company’s April 2025 announcement that it intended to divest tourism assets and involved interest from multiple domestic and international parties.
Completion is expected in the first half of FY2027, subject to regulatory approvals including the ACCC and FIRB. Management said the tourism portfolio contributed AUD 23.7 million of EBITDA in FY2025, and on a pro forma basis expected net transaction proceeds imply a multiple of between 2.0x and 2.5x underlying EBITDA. Kelsian also said two tourism-related properties will be sold to separate parties, with additional proceeds expected to be about AUD 3 million.
Following the transaction, Legh said Kelsian will be a more streamlined “global commuter and contracted transport business,” with retained marine operations expected to be less sensitive to economic conditions and supported by long-term service contracts.
Operational update across divisions
Australian bus: Kelsian said performance was underpinned by contract indexation mechanisms and continued contribution from the Bankstown rail replacement bus service, which management expects to operate at least for the remainder of FY2026. The division faced operational challenges including delays tied to electric bus and depot timelines and higher repairs and maintenance costs associated with aging diesel fleets. Management said the New South Wales Government has recognized the issue and is implementing improvement programs. Kelsian is also working toward finalizing a two-year extension for the Sydney Region 6 contract effective 1 July 2026, with revised terms and a shift toward a zero-emission fleet. The company also highlighted a new Queensland contract to deliver bus services in Ipswich and Logan, with services commencing in November 2025 using a new state-owned depot.
International bus (U.S., Singapore, U.K.): The international segment delivered strong revenue growth, improved margins, and underlying EBIT growth of more than 130%. Management said the majority of group uplift was driven by the U.S., with good activity levels across LNG-related and charter work, as well as growth in corporate and technology shuttle volumes. Kelsian has leased two new depots (Texas and Louisiana) to support Gulf Coast expansion and is deploying growth capital to increase fleet size. In Singapore, the company commenced a five-year “capital light” contract on Sentosa. In the U.K., Kelsian completed the acquisition of South Wales Transport and said it remains focused on upcoming tenders, noting it was unsuccessful in tranche one of the Liverpool tender but sees opportunities in Liverpool tranche two and school bus contracts.
Marine and tourism: Management said the Marine and Tourism division delivered strong top-line growth and EBIT, supported by pricing initiatives and enhanced yield management. Kelsian noted additional repair and maintenance costs tied to scheduled out-of-water maintenance for parts of the fleet. The company also discussed continued investment in new Kangaroo Island vessels and landside infrastructure, and said it took delivery of the second South Moreton Bay Island vessel in November.
Guidance raised; second-half factors
On the back of first-half momentum, Kelsian upgraded FY2026 underlying EBITDA guidance to a range of AUD 303 million to AUD 312 million. Management said January trading was in line with expectations, led by continued strength in the international bus division.
Legh outlined several themes for the second half, including continued expansion of U.S. employee shuttle contracts, the Bankstown rail replacement services running through the full financial year, and some expected improvement in Australian bus operational challenges as more services are added and additional electric vehicles are introduced. He also flagged AUD 4 million of mobilization costs as new Kangaroo Island vessels come online and noted separation work associated with the divested tourism portfolio ahead of expected completion in FY2027.
In Q&A, management said it was comfortable with U.S. tracking into the second half and characterized depot-related costs as not material and already included in guidance. When asked about corporate cost step-ups, the company cited underperformance in a captive insurance structure (including about AUD 2.5 million linked to claims experience) and one-off investments around IT systems, including Workday implementation, which management said should support efficiency and governance over time.
Legh also closed the call by recognizing the retirement of Neil Smith, a founder of Transit Systems and Tower Transit, and credited him with shaping the culture and expansion of the group’s bus operations.
About Kelsian Group (ASX:KLS)
Kelsian Group Limited provides land and marine transport and tourism services in Australia, the United States, Singapore, and the United Kingdom. It operates through Marine & Tourism, Australian Bus, and International Bus segments. The Marine & Tourism segment operates vehicle and passenger ferry services, barging, coach tours and package holidays, lunch, dinner, charter cruises, and accommodation facilities. The Australian Bus segment operates metropolitan public bus services on behalf of governments in Sydney, Melbourne, Perth, Adelaide, and Darwin; regional and remote bus services; and charter bus services in the Northern Territory.
