Kelsian Group Stock

Thank you for standing by, and welcome to the Kelsian Group FY '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Graeme Legh, Group CEO. Please go ahead.

Thank you, [ Mel ], and good morning, everyone and welcome to Kelsen Group Limited's Full Year Results Presentation for the 12 months ended 30 June 2026. I'm Graeme Legh, Kelsian Group's CEO, and I'm joined this morning by Andrew Muir, Kelsian Group's CFO. Today, I'll begin with an overview of the group's record results for FY '26 and the key strategic, operational and sustainability achievements that have been delivered during the year.

Andrew will take you through the detailed group financial performance and the results from each of our operating divisions. I will then discuss the outlook for FY '27 and provide details of our growth pipeline and priorities.

FY '26 was an important year for Kelsian. We delivered another record result, strengthened the balance sheet, advance the streamlining of our operating portfolio, continued the disciplined execution of our growth priorities, and positioned our operations to capitalize on the growth pipeline across our markets.

Before turning to the FY '26 results, I want to provide an overview of the Kelsian Group's global operations and the key characteristics of our business, which is set out on Slide 3. Kelsian is a leading multi-modal transport operator connecting people and places across Australia, the United States, Singapore, the United Kingdom, and the Channel Islands. To give you a sense of our operating scale, at 30 June, we employed 13,300 people and operated more than 6,300 buses and 120 vessels for more than 100 operating locations. Over the year, our services delivered $384 million essential customer journeys. In Australia, we're the largest multi-modal bus and ferry operator with significant contracted bus operations across all mainland capital cities and a portfolio of contracted marine services.

In the U.S., we are the second largest motor coach operator with operations spanning 7 states across the South and Southwest of the country. In Singapore, we're the third largest public transport bus operator, and in the U.K., we have an established operating platform, bringing bus franchising expertise to the regional U.K. bus market.

A key feature of the portfolio is the quality of the revenue base. More than 90% of group revenues contracted or non-discretionary in nature, primarily backed by government and high-quality corporate customers. The combination of our proven operational capabilities, our scale, long-term customer relationships and predictable, resilient revenues provides a strong platform for our disciplined growth into the future.

Turning to Slide 5. I'm very pleased today report another record result for Kelsian. Group revenue increased by 8.8% in FY '26 to $2.403 billion, with growth across all geographies. Underlying EBITDA increased by 10.8% to $315.8 million, which after adjusting for the delayed Kangaroo Island and mobilization costs is at the top end of our updated FY '26 EBITDA guidance range of between $303 million and $312 million.

Underlying EBIT was up 14.5% to $155.7 million, and underlying net profit after tax and before amortization was up 17.2% to $111.1 million. The result demonstrates the resilience of our business model. The majority of FY '26 revenue was contracted and contractual indexation mechanisms provided important protection against inflationary pressures and the significant volatility in fuel prices witnessed in the second half of the period.

Growth was supported by both new contract wins and existing contract growth, including from employee shuttle service contracts in the United States. The full year contribution from the Bankstown rail replacement bus services increased service levels and contract indexation from our bus public transport contracts and improved performance in Marine and Tourism.

Importantly, the earnings result, again, translated into strong cash generation and a stronger balance sheet. Net operating cash flow was $220.1 million, up 7.3% and leverage reduced to 2.46x, meaning we are now within our target leverage range of between 2x to 2.5x underlying EBITDA. Over the 3-year period to June 2026 underlying EBITDA has grown at a compound annual rate of approximately 25%.

After one-off costs associated with acquisitions, the Tourism portfolio divestment, and the implementation of the new group finance system statutory net profit after tax was $53.5 million, up 16.6%.

Moving to Slide 6. FY '26 was a year of strong operational execution and meaningful strategic progress. Operationally, the United States continued to perform strongly with the ramp-up of new and existing industrial contracts, solid growth in corporate and technology employee transport services and a pleasing charter contribution.

In Australia, operating performance of our key urban public transport contracts improved as service changes we implemented and the impact of depot electrification and government fleet replacement delays became more manageable. These initiatives help offset the higher repairs and maintenance costs associated with operating older diesel vehicles.

The mobilization of the new Kangaroo Island ferry contract has been delayed with commencement in now scheduled for October 2026. Approximately $3.5 million of mobilization costs for this new service were not incurred in FY '26 and will now be incurred in FY '27. In Australian bus, we signed a 2-year extension of our Sydney Region 6 bus contract from 1 July 2026 on improved terms and successfully commenced the Ipswich and Logan services in Queensland. Both provide us with a stronger operating platform as we enter FY '27.

In the United Kingdom, the award of Liverpool bus contracts commencing in January 2027 and validated our strategy of establishing operating presence ahead of regional U.K. bus franchising. We also acquired South Wales Transport positioning Kelsian for the pipeline of franchise opportunities expected across Wales. In July, we were awarded new long-term ferry contracts in Auckland and entered into an agreement to acquire Belaire Ferries, establishing a strategic platform for further growth in New Zealand. Across the group, our focus remains on operational excellence, disciplined capital management, and growth that meets our capital management and allocation framework returns.

Alongside the FY '26 results, today, we've also released an update on the proposed Tourism portfolio divestment from within our SeaLink, Marine and Tourism division. In February, we announced the Journey Beyond had agreed to acquire the identified Tourism portfolio operations for total cash consideration of $161 million. The transaction was subject to ACCC and FIRB approvals and other customary conditions. Since the announcement in February, the ACCC has been assessing the potential divestment of 2 transactions. The main Tourism portfolio and separately, the SeaLink operations to Rottnest Island in WA.

Kelsian and Journey Beyond have agreed that SeaLink Rottnest will no longer form part of the Tourism portfolio. Having removed SeaLink Rottnest from the transaction perimeter, we are confident we have a compelling case for ACCC approval of the remaining tourism transaction. SeaLink Rottnest is a profitable, stand-alone commuter ferry business with a strong brand and from Kelsian perspective, it is business as usual for our WA Marine operations team.

Kelsian has significant Marine operations outside of the Tourism portfolio, and we now intend to continue to operate SeaLink Rottnest alongside our transport commuter ferry operation and the other retained ferry operations around Australia and soon-to-be in New Zealand. We continue to work with Journey Beyond to satisfy the acquired regulatory approvals for the remaining Tourism portfolio, which accounts for more than 90% of the original transaction value and we still expect this transaction to complete in the first half of FY '27. Post completion, Kelsian will be a more focused global commuter and contracted transport business delivering bus, motor coach, and marine transportation services.

Before handing it to Andrew, I want to acknowledge the important role Kelsian plays with the many local communities we serve and in enabling cleaner, more accessible, and more connected cities. Kelsian is a people business. Our employees provide important transport services that connect communities every day and a thank you to our people and passengers remains our highest priority. We continue to work with our government and corporate partners to improve service quality, support mode shift to public transport, and accelerate the transition to lower emission fleets and infrastructure.

In FY '26, the group delivered improved safety outcomes for our workforce with a 24% improvement in lost time injury rates and a 23% improvement in total recordable injury rates. It was pleasing to see the improvement in these key injury frequency measures while maintaining our focus on continuing improvement to deliver stronger safety outcomes across the group. We now operate 454 zero-emission buses across Australia, and our Australian bus scope line intensity reduction target remains on track.

There was 0 significant spills to the environment across our operations, and we exceeded our target for female Board representation. We also directed $4.2 million to indigenous suppliers and continued our partnership with the Royal Flying Doctor Service. Overall, our services played a critical role connecting communities, delivering more than 384 million essential customer journeys during the year.

I will now hand to Andrew. He will take you through the group's detailed financial performance and the results from each of our operating divisions.

Thanks Graeme, and good morning, everyone. I'm really pleased with the record full year financial results that Kelsen delivered with revenue growth across all divisions and group margin expansion.

Revenue increased by 8.8% to just over $2.4 billion. Key drivers were the ramp-up of new and existing contracts in the United States, the full year contribution from the Bankstown rail replacement project in Sydney, the benefits of the contract indexation mechanisms we have in our long-term contracts with government, and service growth across the group.

Underlying EBITDA was $315.8 million, up 10.8% and margins improved. The margin improvement reflected growth in key USA employee shuttle contracts, the Bankstown rail replacement contribution in Sydney, and fuel mitigation strategies in the non-contracted operations. Below EBITDA, depreciation increased, reflecting the expanded USA motor coach fleet , new vessels coming into service in the Marine business, and the broader asset base supporting recently commenced contracts.

The effective rate of tax was 20.1% and slightly below our expectations for an effective tax rate of between 22% and 25%. This was due to international tax rate differentials and the benefits of shipping -- exempt shipping income in Australia. Underlying EBIT was $155.7 million, up 14.5%. Underlying NPATA was $111.1 million, up 17.2%, and earnings per share before amortization increased 16.8% to $0.49 per share.

Statutory NPAT of $63.5 million was an improvement of 16.6% on the prior year. Included in the statutory results were one-off costs associated with several small acquisitions completed in the period. Costs associated with the divestment of the tourism portfolio and implementation costs of the new global group finance system. Combined, the totaled $14.5 million after tax. Reflecting the strength of the result and cash generation of the business, the Board has declared a fully franked final dividend of $0.10 per share, an increase of $0.05 per share taking the full year dividend to $0.18 per share.

Turning to Slide 11. Cash generation remains the strength of the business and continues to be well-supported by long-term contracts and a high proportion of contracted or non-discretionary revenue. Gross operating cash flow was just under $300 million and net operating cash flow increased by 7.3% to $220.1 million. Cash conversion was just over 91%, underpinned by the predictable and defensive nature of our contracted earnings.

Investing cash flow was $136.6 million and reflected a combination of sustaining maintenance expenditure and targeted growth investments, particularly in the United States and U.K. as well as the 2 new Kangaroo Island vessels and associated infrastructure. I'll provide some more details on the split of capital expenditure on Slide 13.

The group ended the year with $176.3 million of cash reserves, providing strong liquidity and flexibility as we move into FY '27. The business is generating meaningful cash while funding growth CapEx and increased dividends and continuing to bring leverage lower as earnings grow.

Slide 12. Leverage reduced from 2.7x a year ago to 2.46x at 30 June 2026 and is now within our target leverage range of between 2 and 2.5 times. The reduced leverage has been underpinned by earnings growth, strong operating cash generation, and disciplined capital expenditure. In relation to our borrowings, it's important to distinguish between Kelsian's corporate borrowings and special purpose vehicle debt on our balance sheet attached to government-backed contracted assets because the economic risk of these is quite different.

Limited recourse SPV debt funds government contracted assets. It's a ring-fenced from the rest of the Kelsian Group, is serviced by the associated contract cash flows. It amortizes with the assets and importantly, is excluded from our covenant leverage calculation. In addition, a small component of our corporate debt relates to government-backed contracted assets that are expected to be recovered at the end of the relevant contract or moved into an SPV structure.

At 30 June, we had $32.3 million of government-backed contracted assets on the Kelsian's balance sheet, pending transfer into the SPV wingspan structure. Excluding those contracted government-backed assets and the associated earnings leverage would have been 2.37x at year-end. The key point for investors is that this financing structure supports government fleet investment including the rollout of electric buses, while materially reducing stranded assets and residual value risk for Kelsian.

We remain focused on maintaining a strong balance sheet while retaining flexibility to invest where opportunities meet our return hurdles. With leverage back inside the target range, we retain the flexibility to take advantage of organic and inorganic growth opportunities we see across the group.

Turning to capital expenditure. Total net CapEx in FY '26 was $133 million after taking into account proceeds of $8 million from asset sales. The largest chunk of CapEx investment was in the International Bus Division, principally relating to new and secondhand motor coaches to support the ramp-up of new and existing contracts in the United States, buses for the new Liverpool contract, which commences in January, plus new buses in Jersey, which we anticipate will move into an SPV structure.

Marine and Tourism CapEx was $31.6 million, reflecting the Kangaroo island vessels and infrastructure expenditure and vessels in Southeast Queensland. $15 million has been carried forward into FY '27 because of the revised delivery timetable for the new Kangaroo Island boats in infrastructure. Australian bus capital investment was $14.9 million comprising motor coaches in the resources sector of our business, replacement buses for Stradbroke Island and electrical charging infrastructure.

FY '27 forecast CapEx is approximately $123 million, including $85 million of sustaining maintenance CapEx, the carryforward of $15 million from FY '26, and approximately $23 million of committed growth CapEx in various operating divisions. Any additional growth CapEx will remain subject to meeting our strategic and investment return hurdles.

Turning now to the divisional performance and starting with Australian Bus on Slide 15. Revenue growth was underpinned by contract indexation and the full year contribution from Bankstown rail replacement services. The division delivered an improved margin despite inflationary pressures and fuel volatility. The contractual indexation mechanisms provided effective protection against fuel price movements and other inflationary cost pressures and the operating improvement initiatives implemented during the period improved performance.

Sydney operations improved and stabilized over the year as network service changes were implemented and the impact of depot electrification and government fleet replacement delays became more manageable. We signed a 2-year extension of the Region 6 contract in Sydney, which commenced on 1 July 2026 on improved terms, providing a stronger foundation for FY '27.

The Bankstown rail project continued to make a meaningful contribution for all of FY '26 and is now expected to wind down during the first half of FY '27. The division also successfully commenced the Ipswich and Logan contract during the year, representing Kelsian's first competitively tendered fast contract in Queensland and establishing an important platform for future growth in state.

To Slide 16. International Bus was the strongest divisional contributor to group growth, with revenue increasing 17.4% and underlying EBITDA increasing 28.1% led by the United States as a key contributor to the FY '26 results. AAAHI achieved strong revenue and margin growth as new industrial employee shuttle contracts commenced and ramped up much faster than expected and existing contracts expanded. During the period, we leased 2 additional depots in the Gulf region to support the larger fleet and improve maintenance capability and vehicle availability.

Corporate and technology employee shuttle activity continued to grow, including a new data center contract, while charter activity was supported by major events, including the FIFA World Cup. The USA pipeline of new and existing industrial contracts remain strong. We continue to see opportunities to grow with existing clients and opportunities for new work across LNG, energy, data center, and major infrastructure markets.

Singapore delivered another stable result. The Sentosa contract commenced successfully during the year, and the Bulim contract expanded with additional services, supported by strong operational and maintenance performance. In the U.K., our strategy was validated by the award of Liverpool City school bus contracts commencing in January 2027 and the acquisition of South Wales Transport also provides local capability and incumbency ahead of significant regional bus franchising pipeline.

For Marine and Tourism. Marine and Tourism delivered revenue growth despite subdued consumer confidence and fuel price volatility with yield management, surcharges, and operational initiatives helping to protect earnings. The business also managed the uncertainty associated with the proposed divestment of the Tourism portfolio as well. Performance benefited from contracted ferry demand, improved utilization of new vessels and yield management. Elevated fuel costs impacted the non-contracted part of M&T but was mitigated through targeted surcharges, fare adjustments, and operational efficiency initiatives.

The team has continued preparation for the launch of the new Kangaroo Island vessel contract. Service commencement is now scheduled for October 2026, and our focus is on a safe and reliable transition while maximizing returns from the increased capacity, frequency, and improved customer value proposition.

Post divestment, the retained Marine businesses have similar infrastructure like characteristics to our public transport bus contracts. Revenue from the division will be less sensitive to changes in economic conditions, and will be backed by long-term high-quality service contracts with lower capital intensity.

Finally, turning to corporate costs. The increase during the year related to several items. These included the performance of our captive insurance structure and elevated claims activity for bus accidents, the recognition of non-cash long-term incentive expense and continued investment in cybersecurity. The key corporate milestone was the successful go-live of the global Workday finance system on 1 July 2026, supporting stronger governance, controls, data visibility, and process consistency across the group.

The platform standardizes processes, strengthen governance and control, and provides a more scalable finance environment for the group. Work on the Workday HR implementation has commenced and is scheduled to go-live in the first half of FY '28. The anticipated FY '27 implementation cost for Workday HR are $12 million. While implementation costs have affected near-term earnings, the new platform is expected to deliver efficiency, governance, and controls over time, as more than 13 legacy systems are retired and data and processes are standardized and automated across the group.

The successful finance go-live establishes a stronger platform for governance, control data visibility, and process consistency as the group continues to grow. I'll now hand back to Graeme to discuss growth and the outlook for FY '27.

Thanks, Andrew. Turning to Slide 20. The foundations are in place for another strong result in FY '27. In FY '26, our focus on operational execution delivered another record result. We strengthened the balance sheet, and we continue to build a significant growth runway across several geographies.

Our key focus areas are continuing to drive operational efficiencies, contract extensions, new contract wins, delivering service growth, and capitalizing on growth opportunities in the United States and the United Kingdom. Specifically, we will transition and mobilize the new Kangaroo Island contract prepared for the New Zealand ferry contracts commencing in July 2027 and continue the orderly separation of the Tourism portfolio from the retained Marine operations.

In terms of guidance for FY Underlying EBITDA is expected to be between $320 million and $335 million, assuming no significant deterioration in the operating environment. Guidance is inclusive of the $3.5 million of mobilization costs for Kangaroo Island, which due to delays, will now be incurred in FY '27. Importantly, because the Tourism portfolio transaction remains subject to regulatory approvals and the timing of completion is not yet known, FY '27 guidance includes the contribution from the Tourism portfolio for the full year, assuming no change to the operating portfolio. We will update guidance when there is sufficient visibility on completion and the financial impact of the transaction. I'm also pleased to report that the group has commenced the new financial year strongly, with July trading being in line with expectations.

Slide 21 brings the growth strategy together under 3 complementary pillars all anchored in disciplined capital allocation, a focus on our core strengths and sustainable shareholder returns. First, we will protect and grow our core markets across Australia, the U.S., the U.K., and Singapore, by retaining and expanding contracted bus and marine services, improving the performance of existing networks, and leveraging our customer relationships, operational capability, efficiencies of our scale, and our track record.

Second, we will selectively grow our international platforms and enter attractive new markets. The immediate priorities are continued growth in the U.S., execution of the U.K. bus franchising opportunity, and expansion in New Zealand, targeting long-term contracted earnings in markets with strong fundamentals.

Third, we will pursue targeted strategic opportunities, including bolt-on acquisitions in our existing geographies that enhance capability scale or geographic reach while recycling capital from non-core assets where appropriate. Across all 3 pillars, underwriting and returns discipline remains central and all growth must meet our strategic and financial hurdles and support long-term value creation.

Slide 22 sets out an important structural tailwinds supporting the long-term outlook for Kelsian. Investment in better public transport creates a reinforcing cycle of improved services, higher patronage, and further network investment. With households increasingly focused on transport affordability, governments are investing in more frequent, reliable, and accessible public transport as part of broader cost of living, congestion, and sustainability objectives.

We are seeing tangible evidence of that policy support. New South Wales is investing $452 million to expand bus services. Victoria is enhancing its urban bus network, and Western Australia has announced additional investment in ferry services and electric buses. Governments are investing in service frequency, infrastructure, and technology at the same time as households are increasingly focused on transport affordability in the context of ongoing cost of living pressures.

The opportunity exists to convert that investment and affordability support into sustained passengers growth through improved frequency, connectivity, and customer experience. Better frequency, reliability, and connectivity can attract and retain passengers. Higher patronage then supports stronger asset utilization, more efficient network planning, and the case for further investment into public transport services and infrastructure. The broader system benefits are also important. Reduced congestion, lower emissions, more affordable transport, and reduced pressure on road capacity. Kelsian is well-placed to participate in this cycle as a trusted operating partner with scale, local relationships, and a strong track record of mobilizing and improving complex transport networks.

Turning to Slide 23. The United States is 1 of our most attractive growth markets, and we believe the platform we have established provides strong foundations for the next phase of our growth. We are positioned across high-growth sectors, including industrial, corporate and technology employee shuttle services. In particular, major investments in energy, data centers, and infrastructure are supporting sustained demand for workforce transportation. AAAHI is already the second largest motor coach operator in the United States, but the market remains highly fragmented with more than 87% of operators running fewer than 25 coaches. That creates a significant opportunity to scale from our established platform.

Our customer base also supports recurring organic growth. Since the acquisition in June 2023, we have maintained a 100% renewal track record for key contracts while expanding services with a number of important existing customers. The growth pathway is, therefore, multi-dimensional. New contract wins, expansion with existing customers, entry into adjacent geographies and end markets, and disciplined bolt-on M&A where it strengthens our capability, scale, or geographic reach and meet our return requirements.

The U.K. represents 1 of the group's most significant capital-light organic growth opportunities. The tender pipeline is building progressively across multiple regional authorities with more than 2,000 buses currently anticipated to be franchised in the next 12 months and an estimated addressable market of approximately 10,000 buses over the next 3 to 5 years.

Our recently announced Liverpool contract wins provide important early validation of the strategy. The contract commenced in January '27 and together with our operating platforms in Liverpool and Wales, strengthen our local capability, our relationships, and our incumbency credentials. The opportunity is attractive because the franchise model can provide long-term contracted earnings without requiring the same level of balance sheet capital as a traditional asset-heavy expansion. We'll remain selective and disciplined, focusing on markets where our operating capability, local position, and customer proposition gives us a clear strategic advantage and where returns meet our investment hurdles. Our objective is not simply to build scale, it is create a high-quality defensible regional platform that can compound through successive franchise opportunities.

In closing, FY '26 demonstrates the quality and resilience of Kelsian's business model and the progress we have made in positioning the group for its next phase. We delivered record earnings and strong cash generation, reduced leverage into our target range, and continue to simplify the portfolio. At the same time, we are well-placed for the next phase of growth with credible growth platforms in the United States, the U.K., and New Zealand, while retaining strong positions across our Australian markets. The priorities for FY '27 are clear: deliver operationally, progress and complete the Tourism portfolio divestment, maintain capital discipline, and convert the best opportunities in our growth pipeline into sustainable earnings and long-term shareholder returns.

Finally, on behalf of the Board and the management team, I would like to thank our people right across the group for their commitment to the transport services they provide to our customers and communities every day. And with that, I will now hand back to Mel who will facilitate any questions for Andrew and I. Thank you.

Thank you. [Operator Instructions] And your first question comes from Cameron McDonald with E&P.

Questions from me. Just in terms of the Tourism portfolio and the slight change to that. You've previously guided that the portfolio generated about $24 million, $25 million of EBITDA. If we're adjusting our expectations to now keep Rottnest, what's the adjustment to the group earnings that we should be expecting off the back of that?

Thanks, Cameron. Look, the Rottnest portfolio is pretty much in line -- Rottnest business story is pretty much in line with the rest of the portfolio in terms of its contribution. So I think it -- you can see that we've outlined the difference in the total consideration and the contribution that was expected from Rottnest, which is slightly under 10%, and that's similar from an earnings perspective.

Okay. Awesome. And then just on 2 questions on AAAHI, if I can. The -- you've called out some benefits from the World Cup. Can you quantify that so that we have an understanding of what the potential headwind next year actually looks like with that?

I mean it was certainly a few million dollar benefit directly out of the World Cup. Now whether that's a direct headwind or not is to be seen. We certainly plan on getting utilization out of those assets that were used by the World Cup. But it was a nice bonus in FY '26 with that peak in demand in that June period, which is typically when we see our charter services start to wind down for the year. So repeating that size and opportunity at that time of the year is probably more difficult looking into FY '27 than it was -- that was delivered in FY '26.

Okay. And then just staying on AAAHI, you've got some good growth in that contract market and corporate market. When are you starting or have you started turning your mind to more public transport type services and contracts?

We certainly have. That's a focus, and we've had a pretty good track record delivering on those contracts since we bought the business in 2023, having renewed all of our existing relationships with some key state transport authorities in Texas, Colorado, and New Mexico. So they certainly remain a focus, and we continue to go after them.

They probably do get a bit round out in the grand scheme of things when you compare them to the contribution that comes from those significant industrial sector clients in the Gulf area. That's probably why it all gets to be round out, but we certainly have not lost focus on the opportunity in the transit world in the U.S. for the AAAHI business.

Are there any contracts coming up that you'd potentially be interested in bidding on either in the existing states or new sort of adjacent states?

So our focus at the moment is very much within our existing geography. And there's a pretty steady pipeline of ongoing opportunities. The nature of the U.S. business is that the contract size is probably smaller than we see in Australia and the contract term is not quite as long. So it's really an ongoing cycle of bidding for those opportunities. But our focus at this stage is on bidding for opportunities where we've got existing or adjacent operations as opposed to bidding in new cities where we don't have a presence.

Your next question comes from Aryan Norozi with Jarden.

Before I get into my question, just a clarification on the last question, please. When you said the World Cup is a few million dollar benefit for this year, is it -- was that to the EBITDA line? Or are you talking the revenue line?

That was at EBITDA. I mean, just to clarify, though, we're not expecting that to completely drop out. There will certainly be utilization from those assets this year. It's just whether we get that sort of peak in utilization at that exact same period like we had the benefit from FIFA this year.

So maybe $2 million or $3 million EBITDA, but not all of that winds out. There's obviously we're going to replace some of the it. Is that the message?

Yes. Correct. Correct. It doesn't just drop to 0.

Yes. Perfect. Just on my question. Just in terms of -- can you just talk through the -- maybe for this year, what the incremental EBITDA contribution was from sort of the LNG projects that you've won ramping up? And the incremental benefit into FY '27, please, just in terms of finishing to annualize because, obviously, first half 2016 was ramp-up mode, second half more normal of '26, and then FY '27 is probably the full run rate for those 2 contracts.

Yes, that's probably right, Ary. So -- I mean, obviously, a big component of the growth delivered in the international bus segment, which was, I think, 28% growth in EBITDA, a big proportion of that was driven by the ramp-up in those industrial sector contracts. Now they probably ramped up or they did ramp up faster than expected during FY '26 and we got a bigger earnings contribution out of those contracts than we expect it -- when we're sitting here at this time last year. What that means for FY '27 is the growth rate, we're certainly expecting to moderate out of those contracts.

There is still further growth to come, but the rate of growth is going to be at a much lower level than what was witnessed over the course of FY '26. We do expect those new contracts to both reach full capacity at some point in FY '27, but that is dependent on the EPCs, the prime contractors and their ability to continue to hire. So a bit beholden to how quickly they can hire the construction workforce as to how quickly we get to that full capacity. But sitting here today, we would expect to get the full capacity for both those contracts at some point during FY '27.

Got you. And like back of the envelope based on my just rough calc, like that should be another -- the LNG ramp-up in '27 or '26 would be another $5 million to $6 million of EBITDA. Is that roughly in the ballpark of how -- am I thinking about that the right way?

Yes. I mean roughly, probably not quite that high, but roughly, that's probably not a million miles away from the mark.

Got you. And then last one, just in terms of oil prices, obviously, you've delivered a very strong result despite oil prices going up 50%, 60% from a few months ago. To what extent are you factoring headwind -- net EBITDA headwind from oil prices into guidance for FY '27? And to what extent is that realistic versus just obviously provisioning for some uncertainty, rightly so.

Yes. So I think the result really demonstrates how limited the impact of oil prices is on our business as a whole. To deliver this result in an environment where we've seen oil prices move to the extent they have, given we're a very significant user of diesel, I think, demonstrates the market, how well our contracts protect us from movements in things like fuel price when you look at the group as a whole.

Now there are pockets of our business that are more exposed to oil prices. The big 1 of that is in the Marine and Tourism division where we don't have that contractual protection in a number of our operations. And we certainly saw some headwinds in the final quarter of FY '26 in those operations, both from higher input prices for our operation in diesel, but also more generally, just in terms of reduce demand given higher cost of living pressures on the consumer side.

Now we're expecting that to continue for those parts of Marine and Tourism business. So looking at that division on its own, there is certainly some headwinds there as we look towards FY '27 but I think from a group perspective, we remain very comfortable that, as a whole, our business is well-protected from changes in oil prices for any further change in oil prices moving forward.

Got you. And sorry, very last one, if I can sneak 1 in. Just the Aussie bus EBITDA margins, they stepped up in the second half to about 11.5%, and the first half was 11%. So you're making progress there. How do we think about the ramp-up into FY '27? Should there be a further step-up progressively in first half 2017 above the 11.5% and then second half further improves? Or is 11.5%, probably the run rate steady state for the business in FY '27, please?

Yes. I think 11.5% is probably pretty good. Look, we want to keep pushing and we -- there still is improvement to be made out of that business, but it is probably more incremental, and it is probably driven by delivering on some of the growth initiatives that the government has out there in terms of investment into the bus network. As those growth services come in, they come in at a higher margin than the baseline business, which over time gives us further incremental margin expansion. But I think looking at second half FY '26 to first half FY '27, not expecting any big changes either up or down from where that margin was...

For the previously mentioned issues -- so the previous mentioned issues like the congestion and the EV delays that sort of -- this margin reflects the resolution of that. So we shouldn't be factoring any benefits from that flowing through?

Yes. So I think -- I mean, I think there's still probably room to play out on the congestion side where we did get -- did make material improvement in the second half of FY '26 was on resolution of some of the delayed electrification projects that -- with some of our major state governments. So they have acknowledged those delays. They've started compensating us for the maintenance cost of maintaining the aging diesel fleet. And alongside that, some big projects, particularly in Sydney, are now nearing completion or have completed, which have allowed a significant number of new electric vehicles in the service, which come with lower costs and obviously flow through to the bottom line and are driving some of that margin expansion that we saw in the second half of FY '26.

Your next question comes from Owen Birrell with RBC.

Congratulations on a pretty solid result. Just wanted to ask, I guess, a further question or follow-up question on AAHI. Very, very strong revenue results during the period and obviously very strong EBITDA margin for the international group. I'm wondering if you can give us a sense of what the EBITDA margins expanded by in the U.S. alone, so that we can sort of split out what that U.S. business did versus Singapore and U.K.

I mean we don't split it out, but I think it's fair to say, Singapore and the U.K. were pretty much in line with previous periods. So the incremental earnings and margin coming out of that international bus division were driven by changes in the U.S. or improvements in the U.S.

Okay. That's understood. And can I ask on the CapEx guidance that you've provided, I think $7 million for the U.K. Is that all for the Liverpool buses? Or is there anything else in there for some of the other regions or the proposed tenders that are coming through over the next sort of 6 to 12 months?

Yes, there's the Liverpool buses, so there's some further buffers we need to buy for those school bus contracts. And there's some further capital, we think, for some new contract -- small contract wins in the U.K.

Can I ask, you mentioned that the buses for Liverpool, the Liverpool contract in Jersey will be moved into an SPV structure. I noted that the SPV debt balance has reduced almost about $10 million. Just wondering you've -- what is -- firstly, what's come out of the SPVs. But also, is it fair to assume that, that $7 million is going back into SPVs?

Yes. So the majority -- it's only for Jersey where the SPV structure will likely to take effect. So there'll be some assets transferred into the SPV structure for Jersey. And then on the remaining portfolio, it's the normal amortization that exists on those assets.

Okay. And just 1 final 1 for me just on the CapEx theme. You've called out $11 million for U.S. CapEx. Is it fair to assume that's all organic growth? Or is there anything in there for any potential bolt-ons?

No, yes, all organic growth.

Okay. And in terms of potential bolt-ons, is there any things that are obvious at the moment? Or is it very much sort of a wait and see?

I mean, I think there are certainly some attractive opportunities in the U.S. that we're keeping a very close eye on. But as we stand at the moment, there's no huge time pressure for us to rush out and do anything in the U.S. So the overall focus remains getting an outcome on the Tourism portfolio. But we're certainly keeping a close eye on the key targets in the U.S. And if there is a need to act or anything sooner rather than later, we think we're in a position where we can do that.

Your next question comes from Allan Franklin with Canaccord.

Just hoping to get a bit of color. I know you referenced the LNG side of things ramped up better than expected over the course of the year. If you were sitting here last year versus now, just sort of frame perhaps what didn't go as well as expected, what underperformed during the year, just sort of bridge that gap between what could have been low end of guide coming to this point?

Is that in AAHI specifically or...

No, sorry, just broadly across the group, just sort of noting we obviously have hit above guide, probably carried by LNG and perhaps KI pushing back. But, yes, looking back what perhaps didn't work, didn't perform in FY '26 that then you hope carries forward stronger?

Yes. I mean I think if you go back to this time last year, I think certainly, at least in the first half, Australian bus underperformed where we expected. We continue to see that margin deterioration in the first half when we were sort of hoping that we've seen the worst of it at the back end of FY '25. Now pleasingly, we managed to turn that around or the guys mentioned turn that around due to some changes in the second half. So I think we got that back on track. But over the full year, probably was a bit under where we were expecting just purely on that margin side given some of those cost base pressures around maintaining older vehicles and operating performance associated with congestion and other things around the network.

So that was certainly 1 of them. And then Marine and Tourism, I mean, Marine and Tourism came off a very, very strong FY '25, and it started FY '26 very positively, but there was certainly some impacts from March onwards as we started to feel the impact of oil price movements and what that did to sort of consumer sentiment, particularly for the more tourism-exposed parts of Marine and Tourism.

So I think Marine, Tourism, we're pretty pleased. We actually got a better result than FY '25 and FY '26. But if you go back to March this year, that could have actually done a fair bit better if the world hadn't changed back in March. So they're probably the 2 areas. I think it's fair to say, internationally, U.K. and Singapore did as expected, both had pretty solid performances and then the U.S. was the one where we certainly did better than expected given the faster ramp-up of those 2 new LNG contracts.

And then just perhaps looking into that FY '27 guide, yes, I appreciate we've touched on AAHI in bit of detail so far. But perhaps where are the conservative -- the sort of cautious elements within that FY '27 guide, I assume it sort of sits within M&T again, given how we sort of came through the fourth quarter? I assume there's levels of conservatism around Bankstown and redeploying those assets. Is that sort of fair?

Yes. I mean you pretty much hit the nail in the head there, Allan. So Marine and Tourism we sort of called out, had a bit of pretty soft final quarter of FY '26 and with probable expectations are that probably continues, barring sort of some material external shifts. So that's probably the 1 area. Australian bus, pretty comfortable where the margin got to. But we are expecting, as we called out in the presentation, some further growth in some of our key markets off the back of some announcements of government about investments into our bus networks.

Now the timing of that growth is a bit uncertain. And earlier that happens, the better for us, both in terms of the incremental margin from the growth services. But the change of the network gives us a chance to find efficiencies across the entire network. So the more of the year we've got that to play with, the better. So the timing of those growth services does have a bit of an impact.

And then in the U.S., as flagged in 1 of the earlier questions, we are a bit beholden to the EPCs, the prime contractors in terms of the further ramp-up from our industrial contracts, how quickly they can employ their construction workforce really drive how quickly we get to the full complement of buses operating on those contracts. So that is a bit uncertain. And some of the guidance range takes that into account in terms of that potentially taking a bit longer than we might expect.

Super helpful. Just 1 other 1 on corporate costs. Any sort of color and sort of look forward on that, noting, call it, $40-odd million for the year. Are we thinking that $12 million is expensed and on top of that? Or what are the gives and takes for corporate, please?

Yes. So the $12 million is on top of that, Owen. So that's below the line. And corporate costs will be pretty stable now at these sorts of levels.

Your next question comes from James Wilson with Macquarie.

Just on the U.K., can you sort of speak to us about maybe the materiality that earnings of the contract wins over there? And also any other U.K. opportunities that are on your immediate radar? I'm conscious you've just acquired a regional bus operator in the region?

Yes. Look, I mean, I think, we announced the -- in the announcement of the Liverpool contracts. You can see the scale of them. So from a group perspective, these initial contract wins are not material and are not going to move the dial. But what they do, though, is build credibility for the team. We are now, from what I understand, 1 of only 3 companies to have won 1 of the franchise contracts in regional U.K. So making us 1 of those 3 as the market continues to go through the structural change, and we continue to see the consolidation of the operators in regional U.K. into the various franchise networks.

That's what we want to be part of. So that's why that initial contract win was so important. So we've got a seat at the table, both with the authority where we won those contracts in Liverpool. But also when we go to the other authorities around regional U.K. and have the ability to point to a contract win in Liverpool. So to give them confidence that we can do the job just as well, and hopefully better, than some of the big incumbent U.K. regional bus operators.

So that's the real benefit of the contracts that have been announced. And as Andrew mentioned, we think we're in a good spot for further contract wins off the back of those contracts that were announced in Liverpool. In terms of other upcoming opportunities, we try to put it out -- in 1 of the slides, to give a bit more color, but there is a significant wave of opportunities really over the next 6 months and certainly over the next 12 months with at least 2,000 buses going through our franchise process were it to Tranche 2 of Liverpool. So the contracts that we were awarded were part of Tranche 1. There's a separate Tranche 2 in Liverpool, which is about 650 buses in South Yorkshire and West Yorkshire. They started their processes and there's about 700 buses across Yorkshire.

And then the Midland and Wales would be the next ones off the bat. And there's another close to 1,000 buses across those 2 that are going to be in the market in the next 12 months. So a very significant pipeline for us to participate in. And we think, given our presence in those markets and incumbency position, particularly in Liverpool and in Wales, we're in a good spot to continue to pick up more contracts.

[Operator Instructions] We are showing no further questions at this time. And that does conclude our conference for today. Thank you for participating. You may now disconnect.

Thank you for standing by, and welcome to the Kelsian first half FY '26 results briefing. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded.

I'd now like to welcome Graeme Legh, Group CEO, to begin the conference. Graham, over to you.

Thank you, Pauly, and good morning again, everyone. Firstly, I would like to again apologize for the delay in commencing this morning, but also like to welcome you to the belated half year results presentation for Kelsian Group Limited for the 6-month period ending 31 December, 2025.

Today, I'll provide an overview of the results and also talk to the important transaction that has been announced this morning in relation to our Tourism Portfolio, which was identified for divestment last year.

I'm joined this morning by our Group CFO, Andrew Muir, who I'll hand to shortly to run through the detailed financial performance for the period and our divisional results before I conclude with an update on our outlook for the remainder of FY '26.

If we move into the presentation and the first half results overview on Slide 3. I'm delighted to be delivering a record result today for the 6-month period to 31 December, 2025, along with an upgrade to our earnings guidance for FY '26. Pleasingly, the record result was delivered through revenue and earnings growth from all operating divisions.

For the group, revenue was up 10.6% to $1.186 billion. The strong revenue was driven by the expansion of key contracts on top of the revenue indexation mechanisms embedded in our public transport contracts. These mechanisms provide a natural hedge against inflationary pressures and reinforce the defensive characteristics of our contracted earnings.

The group delivered improved earnings margins with underlying EBITDA up 16.4% to $153.8 million, EBIT up by an impressive 26.5% to $75.3 million and net profit after tax and before amortization, up 32.2% to $52.5 million.

This earnings result and the group's margin expansion was driven by significant growth across key employee shuttle contracts in the U.S. The ongoing contribution of the Bankstown rail replacement bus service in Sydney and strong trading from across the Marine & Tourism portfolio.

The business continues to generate strong cash flows with net operating cash flow increasing by 26.1% to $83.1 million during the period. Leverage at the end of the period was 2.7x underlying EBITDA, and we remain on track to reach our target leverage range by the end of FY '26.

The result this period demonstrates the defensive nature of our business with our diversified portfolio of long-term transport service contracts, providing predictable earnings and cash flows.

On the back of the trading performance in the first half, we are upgrading our earnings guidance for the full year. Underlying EBITDA for FY '26 is now expected to be between $303 million and $312 million up from the $297 million to $310 million range set at our full year results presentation last August. I'll come back to discuss outlook in more detail later in the presentation.

Turning to the strategic and operational highlights for the period set out on Slide 4. Alongside our half year results, we have also today announced that we have entered binding agreements for the sale of our Tourism Portfolio to Journey Beyond for total cash consideration of $161 million. We first announced the intention to divest the portfolio of Tourism assets in April 2025, and we have since run a competitive process, solicitating interest from multiple domestic and international parties.

Today's announcement is a culmination of this process, and we'll now work through the required regulatory approvals with completion targeted for the first half of FY '27. I'll provide further details about the divestment announced later in the presentation.

From a strategic perspective, several other notable outcomes were delivered across our operations. Within the Australian Bus division, we continue to work towards finalizing the 2-year contract extension for our Sydney Region 6 contract.

The extension period will commence on 1 July, 2026 and will be characterized by revised contract terms alongside a step change in the shift towards a zero-emission bus public transport network in Sydney with Transport Minister for New South Wales to add more than 190 new electric vehicles to the Region 6 fleet.

Another highlight was the Queensland government's decision to award Transit Systems the contract to deliver new bus services in the Ipswich and Logan areas, our first franchise bus contract in Queensland. Services commenced in November 2025 and are expected to expand over time, including the introduction of new electric buses to be operated from a new state-owned depot. Queensland remains a key long-term growth market for the division, and we look forward to continuing to strengthen our position in the state.

In the U.K., we completed the acquisition of South Wales Transport. Founded in 2004, the business has a strong reputation for service reliability and deep regional expertise across the South Wales region. We intend to leverage Kelsian's global best practice in bus franchising to position this business for the upcoming contract opportunities in Wales.

The Marine & Tourism division was successfully reawarded to Moggill and Southern Moreton Bay Island ferry services following tender processes, reflecting the strength of our operational performance and longstanding partnerships in the region.

Operationally, we saw continued momentum and service growth across our employee shuttle contracts in the U.S. To support this growth, we are investing further in the Gulf Coast region and have leased 2 new depots to support our operations, including associated facilities and workshops.

We also continue to deploy new growth capital to increase the fleet size in this region. This investment will support our expanding footprint and ensure we continue to provide safe and reliable services as the scale of our operation increases.

A highlight of the half was the operational performance from across the Marine & Tourism portfolio. This improved performance was driven by several efficiency measures being successfully implemented and the ongoing enhancement of our yield management solutions.

The Bankstown rail replacement bus services were operated successfully throughout the period and will now continue at least until the end of the financial year. There is already strong interest from our government clients in leasing the 60 buses that were acquired for this project when the Bankstown services come to an end.

There were continued operational challenges across our Sydney bus operations. These relate to delays in the electrification of depots, which has consequences for our repairs and maintenance costs as we continue to run aging diesel fleets. The need for investment to improve service in Sydney has been recognized by the New South Wales government and a program of improvements is now being implemented. The initial stage of these improvements was successfully delivered in September.

I will now hand to Andrew, who will provide a detailed run-through of the financial results for the period.

Thanks, Graeme, and good morning, everyone. Kelsian has delivered a record financial result for the 6-month period ended 31 December, 2025. Pleasingly, we've seen good revenue growth and margin improvement across the group.

Underlying EBITDA increased by 16.4% and underlying EBIT increased by 26.5% compared to the prior year. Taken together, these results demonstrate the resilience of our multiyear contracted revenue base and the operating scale benefits coming through the portfolio.

Let me now walk through the key drivers in more detail. Slide 6 provides a high-level comparison of the consolidated first half results for FY '26 compared with the 6 months to December 2024. The revenue increase of just over 10% was achieved through a combination of the impact of contract indexation mechanisms we have in the majority of our Australian bus contracts, a full period of the Bankstown rail replacement project in Sydney, which began in September 2024, the ramp-up of a number of existing and new contracts in the U.S.A. and good growth in the Marine & Tourism business.

Overall, portfolio performance was strong and the group delivered an additional $21.6 million in EBITDA compared to the same half last year. The effective tax rate was at the lower end of guidance, reflecting the geographic earnings mix and ongoing marine training incentives consistent with prior periods.

Underlying net profit after tax and before amortization for the half was up 32.2% to $52.5 million. Earnings per share and before amortization of $0.193 increased by 31.9% compared to the prior year, reflecting both earnings growth and operating discipline. We've maintained a fully franked interim dividend of $0.08 per share, which is the same as last year, and we continue to offer a dividend reinvestment plan for shareholders with no discount.

Statutory net profit after tax for the period increased by 62% to $32.4 million. There were several one-off abnormal items in the period totaling $3.4 million on a post-tax basis. These are primarily associated with the implementation of our global Finance & HR platform.

To the cash flow on Slide 7. The quality of earnings remains strong, underpinned by contracted and nondiscretionary revenues across the portfolio, with a cash conversion of nearly 95%, translating to gross operating cash flow of $126 million in the period.

During the half, we invested $78.3 million (sic) [ $78.4 million ] in new and replacement assets, including vessels, buses, motorcoaches and land and buildings. This expenditure remains in line with our previously announced capital program and guidance. At period end, we finished with a healthy cash reserves of $141.9 million.

Turning to the balance sheet on Slide 8. At period end, we had net debt of $664.9 million. This excludes the limited recourse SPV financing of $83.8 million relating to government-backed contracted assets. More on that shortly.

From a leverage perspective, we finished the period with pro forma leverage at 2.7x, down from 3.2x at December 2024, excluding SPV government-backed contracted assets and all bank covenants are comfortably met.

The main changes to the balance sheet during the period relate to assets acquired as part of the capital program and the accounting changes in right-of-use asset and liability associated with leasehold properties in the USA and WA and operating leases for motorcoaches in the USA.

We continue to hold approximately $33.5 million in government-backed contracted assets on our balance sheet, which haven't yet moved into a ring fenced SPV structure. We anticipate they will move into the SPV structure at the next contract renewal date. Excluding these from our leverage calculation, leverage reduces to 2.56x. Finally, we remain on track to be within our target leverage range by 30 June, 2026.

Turning briefly to the special purpose limited recourse arrangements on the next slide. Since July 2023, we have utilized limited recourse asset financing arrangements, whereby Kelsian warehouses, government-backed contracted bus assets on balance sheet, along with the corresponding debt for the duration of the relevant government contract.

These SPV facilities effectively enable unlimited scalability for governments across the globe seeking to improve and upgrade public transport buses and infrastructure. Importantly, these limited recourse financing facilities are excluded when we calculate our bank covenants.

Structurally, the asset value and debt profile are matched and amortized over the contract term, and if the contract is not renewed, the assets and corresponding debt revert to government. As a consequence, there is no residual risk or financial exposure from a Kelsian Group perspective. At 31 December, 2025, government-backed contracted assets totaled $117.3 million of which $83.8 million are in the ring fenced financing structure.

Turning now to capital expenditure on Slide 10. Net capital expenditure during the period totaled $76 million. This comprised growth CapEx of $78.3 million, offset by proceeds of $2.3 million from routine asset sales and disposals. This was in line with expectations.

Key investments in the period included ongoing expenditure on new vessels and land site infrastructure for our Kangaroo Island ferry service, the final payment for the second South East Queensland vessel, which was delivered and commenced services during the half and growth CapEx of $23 million for the purchase of new motorcoaches for the 2 LNG contract wins in the USA.

Full year FY '26 CapEx is now expected to be $135 million. This includes carryforward of $20 million from FY '25 that we flagged at the full year results in August and an additional $7 million of growth CapEx to meet the demand and increased scope of services we are experiencing and providing to clients in the USA.

Turning now to a brief overview of divisional performance, starting with the Australian Bus division on Slide 12. Revenue growth in the period was underpinned by the contract indexation mechanisms we have in our government contracts. We continue to benefit from the contribution from the Bankstown Rail project, which we anticipate will continue to operate at least for the remainder of FY '26.

During the period, we saw the completion of the level crossing replacement work in Perth. This was in part replaced by a tram replacement project in Adelaide. The Adelaide tram project commenced in August and ended in July this year.

The Bus division's margin was impacted by a small number of largely temporary factors, primarily in South Australia and New South Wales. These included delays in service change approvals and higher repairs and maintenance costs associated with an aging diesel fleet, reflecting the later-than-expected delivery of government-funded electric replacement buses.

Importantly, underlying operational performance remains stable, and we expect a progressive improvement in the second half. While congestion continues to affect reliability and drive performance penalties, these issues are expected to moderate as service changes are implemented. Margins were also affected by the non-cash accounting impact arising from depot sale and leaseback arrangements we had in WA.

In Sydney, negotiations are on track to commence a 2-year extension of our Region 6 contract effective 1 July, 2026. This is our largest contract and historically delivered lower margins relative to the divisional average. The extension provides improved pricing certainty and operational stability and something we are really looking forward to.

In Queensland, we were awarded a new contract to operate bus services in the Ipswich and Logan area. This is our first contestable contract win in this market where both buses and depots are provided by government. This contract commenced in November 2025, and although small, it provides us with an important foothold from which to expand.

Finally, our natural resources and charter team was awarded a new 5-year contract to operate zero-emission buses for South32 in the Pilbara.

Overall, turning now to Slide 13, the International Bus segment with operations in the USA, Singapore and the U.K. Overall, the International segment delivered very strong revenue growth, costs were well managed, margins improved and underlying EBIT increased by more than 130%.

In the USA, the AAAHI business performed very well. The performance reflects our ability to scale rapidly in complex project environments while maintaining disciplined cost control. Throughout the period, we saw good levels of activity on both the Golden Pass and Port Arthur LNG projects, along with the commencement and ramp-up of the CP2 and Louisiana LNG contracts, which we announced in June.

These contracts are multiyear in nature with potential extension options. To support this growth, we acquired a combination of new and used motorcoaches to operate on these new contracts.

To further support our position in the region, we procured 2 new leasehold depot locations, one in Texas and one in Louisiana. This will assist with the ongoing maintenance of the expanded fleet and improved motorcoach availability.

In the corporate and tech shuttle space, business activity levels have improved and service frequency and volumes have also increased. In Singapore, we commenced operating the new capital-light contract with the Sentosa Development Corporation to provide bus services on the island of Sentosa. This contract is for 5 years and commenced in September 2025. Operationally, the business continues to receive performance incentives, albeit at low levels.

In the U.K., we completed the small acquisition of South Wales Transport, a regional bus operator in Swansea, Wales. South Wales Transport provides us with access to buses, drivers and leasehold depot. We are confident this acquisition will further strengthen our relationship with this regional U.K. government client.

From a tendering perspective, the priority and focus of the U.K. team is on the upcoming tenders in Liverpool. Although, we were unsuccessful in Tranche 1 of the Liverpool tender, we remain competitively positioned for a number of upcoming school bus contracts and Liverpool Tranche 2.

To Marine & Tourism on Slide 14. We are delighted with the results from the Marine & Tourism division. The division delivered very good top line growth and a 15.7% increase in EBIT. The strong operating performance supported the value case as the divestment process progressed, demonstrating the quality and earnings potential of these assets.

All business units performed in line with or ahead of our expectations, and it was pleasing to see the improved performance from our Sydney, K'gari and Northern Territory businesses. Once again, a number of fare increases were implemented throughout the half and the dynamic pricing initiatives we have in place contributed to improving returns.

During the period, we had a number of our larger fleets go through their scheduled out-of-water maintenance. And as a result, the business incurred nearly $4 million of additional repairs and maintenance costs compared with the previous period.

The construction of the new -- 2 new Kangaroo Island vessels and work to upgrade the landing infrastructure progressed during the period, and we are focused on preparations for the revised mobilization plan and service commencement in the middle of the year.

Finally, we took delivery of the second of 2 Southern Moreton Bay Island vessels in November, and this immediately provided increased capacity and improved operational performance to the region.

For corporate costs on Slide 15. The increase in corporate costs reflects several factors, a number of which are one-off in nature. First, the underperformance of our captive insurance structure has seen us recognize approximately $2.5 million due to claims performance and elevated claims activity generally.

We've continued to invest further in cybersecurity enhancements across the group, and we also recognized a higher non-cash expense associated with Kelsian's long-term incentive program.

Finally, there were implementation costs associated with the Workday Global Finance and HR platform. While the Workday implementation costs impact short-term earnings, the AI-enabled platform is expected to support margin stability and cost discipline over time through efficiency, governance and control benefits, process standardization and the retirement of 13 legacy platforms across the group.

I'll now hand back to Graeme to talk about growth, strategy and outlook.

Thanks, Andrew. Before we look at the specific outlook for the group for the rest of FY '26, I would like to provide some further details on the important announcement we made today, that we have entered binding agreements with Journey Beyond to divest the Tourism Portfolio.

As detailed on Slide 17, we are happy to announce that all operating businesses identified as part of the Tourism Portfolio last year will be sold to Journey Beyond for total cash consideration of $161 million.

After running an extensive sale process, it is pleasing to reach a significant milestone today, and we will now commence seeking the required regulatory approvals, including from the ACCC and FIRB with expectations that transaction completion will occur in the first half of FY '27.

The operations that make up the Tourism Portfolio contributed $23.7 million of EBITDA for the 12 months to 31 December, 2025. And on a pro forma basis, the expected net transaction proceeds would have brought the group's leverage into the target range of between 2x and 2.5x underlying EBITDA.

I would like to take this chance to thank our great people that make up our tourism teams. I acknowledge it has been a difficult period for you, and I would like to thank you for your professionalism and the dedication you have shown in continuing to deliver brilliant experiences for our customers every day.

In addition to the transaction with Journey Beyond, a number of other tourism assets, including 2 properties will be sold to separate parties. The additional proceeds from these transactions is expected to be approximately $3 million.

Following the sale of the Tourism Portfolio, Kelsian will emerge as a streamlined global commuter and contracted transport business, delivering essential passenger journeys through our bus, motorcoach and marine operations.

On Slide 18, we set out details of what the divestment will mean for our retained marine operations. The retained marine businesses have similar infrastructure-like characteristics to our bus public transport contracts. Revenue from the division will be less sensitive to changes in economic conditions and will be backed by long-term, high-quality service contracts. And the retained marine operations will have a lower capital intensity. Details of the business units that will make up our Retained Marine division are set out in the table on this slide.

Turning to Slide 19 and the solid foundation we now have to deliver sustainable long-term growth. The growth pipeline is significant, and we have positioned ourselves in each of our markets to capitalize on the opportunity in front of us. Our operational excellence is our greatest asset and provides a platform from which we plan to continue our long track record of delivering organic growth through contract extensions, service expansions and new contract wins.

In Australian Bus, contract extensions and service growth opportunities will be pursued. Our state government clients have acknowledged that patronage levels have grown and congestion has worsened, leading to them making new investments into bus services and service quality that we have not seen since before the COVID pandemic.

In addition, new contract opportunities will be pursued in existing markets and in new markets, including the Newcastle contract in New South Wales and bus contracts in Wellington, New Zealand.

Our International Bus division has material growth opportunities in each of our 3 markets. The organic growth opportunity for employee shuttle contracts in the U.S. remains significant and historically elevated.

In the U.K., we now own 2 small regional operators, which gives us a solid foundation from which to bid for the very significant pipeline of franchise opportunities with some 10,000 buses to be contracted over the next 3 or 5 years. The management team we have in the U.K. is awaiting the outcome of contracts we bid for in Liverpool and is actively working on the next round of franchise opportunities in Liverpool and in West Yorkshire.

In Singapore, a further LTA bus contract is in the market with bids due later this half for a 400-bus contract that will commence operations in 2027.

Our Marine division continues to deliver improved performance from our investments in yield management and in high-capacity vessels, and we expect this to continue with the delivery of the new larger Kangaroo Island vessels later this year. We are also actively pursuing new contract ferry opportunities with the outcome of Auckland Transport's ferry service tender expected before the end of FY '26.

Looking forward, we will continue to focus on capital light organic growth opportunities while also selectively pursuing investments that both meet target returns and bring a strategic advantage for our operations.

So the outlook for the remainder of FY '26 and our guidance update as set out on Slide 20. January 2026 trading was in line with expectations with continued strong performance delivered by the International Bus division. January is always a key trading month for the Marine & Tourism division, and it performed in line with expectations.

Looking forward to the remainder of the second half, in general, we expect the key trends and drivers of performance we saw in the first half to continue. We will continue to see expansion of our employee shuttle contracts in the U.S. and the Bankstown rail replacement bus services will now operate at least -- until at least the end of the financial year.

The operational challenges across the Sydney bus contracts will continue, albeit some improvement is expected as additional services are added to networks and more electric vehicles are introduced. We expect to incur approximately $4 million of mobilization costs as the new Kangaroo Island vessels come online. The outcome of new growth contract opportunities in New Zealand and the U.K. are expected to be announced prior to the end of the financial year.

The separation of the divested Tourism Portfolio from the Retained Marine division will commence as we work towards completion of this transaction in the first half of FY '27.

As for our earnings guidance, as flagged in the introduction, off the back of the strong first half result and the solid momentum heading into the second half, our guidance range for underlying EBITDA for FY '26 has been revised upwards with full year EBITDA expected to fall between $303 million and $312 million.

So in conclusion, I'm very pleased to deliver the record result for the half today alongside the update on the Tourism Portfolio divestment. Both of these outcomes set us up well as we look ahead to the remainder of the financial year and beyond.

Before we take questions, I would like to say a few words about Neil Smith, who announced his retirement from the Kelsian Board yesterday. Neil is one of the founders of our Transit Systems and Tower Transit businesses. From humble beginnings in Perth back in 1995, Neil built the dominant Australian bus public transport operation and then took the success offshore, taking Tower Transit into the U.K. and Singapore.

Neil's unrivaled passion for buses and public transport has driven the culture of our bus operations, and this passion has certainly had an impact on my career within the industry. I've had the privilege of working with Neil for the last 16 years. Throughout that time, I've benefited enormously from his deep knowledge across all aspects of public transport, his drive to solve the transport problems of our major cities and his wise and measured professional guidance.

On behalf of the Board and all of our employees, I would like to sincerely thank Neil for what he has done for all of us over the last 30 years.

Andrew and I will now take your questions.

[Operator Instructions] Your first question comes from the line of James Wilson at Macquarie. James your line is open. And I'll return James to the queue. He might be on mute, and I will go with the next question.

We have Allan Franklin of Canaccord Genuity.

Obviously, great to see the asset sale. Maybe just sort of in that vein on the asset sale, just when we're thinking about the remaining assets within Australian Bus, how do we think about the seasonality of these assets moving forward, if there's any sort of draw outs? Is there any scope for KI to push out later with those mobilization costs?

Yes, Allan, there's not a lot of seasonality in that remaining portfolio. Obviously, the Kangaroo Island services sort of peaks over holiday periods. But the rest of the remaining portfolio is very stable sort of from a seasonality perspective.

And just on KI, any sort of risk that gets pushed further out, or do we think that, that $4 million hit is a clean hit in the second half '26 and then we get clean operations thereafter?

Yes, that's what we're currently working towards, Allan. And that $4 million is included in our guidance.

Yes. Just on the U.S. or International Bus, just to sort of clarify, majority, if not all, of that sort of uplift in EBITDA coming out of the U.S. Is that a fair assumption to work from? And then just looking into the second half, how are you feeling about the lead into the key charter work period? Are there any items you'd like to call out on the second half cost of the depots, as an example, that might weigh on profitability?

Yes, that's correct assuming the majority of the uplift in International Bus in the U.S., but Singapore also had some positive trading in the half. But yes, the majority of the improvement is out of the U.S.

Looking into this half, very comfortable with how things are tracking in the U.S., our underlying charter businesses are performing well, really just kicking off the really busy months as we speak and heading into the warmer months over there. And initial indications are everything is looking pretty good on the charter front for the second half.

Yes. And I mean I assume that the depot costs are obviously rolled into the guide. Is that a headwind into FY '27 at all? Or is it not material?

No, they're not -- they are rolled into the guidance, but it's certainly not a material cost.

[Operator Instructions] And your next question comes from the line of Aryan Norozi of Jarden.

Just first one, so I think in fiscal '25, you guided to abnormal costs from the Finance and HR systems of $9 million. And then in the present today, you said you incurred $5 million. Are you now taking that cost above the line versus below before?

No, that's all below the line, [ Ari ].

Okay. So out of the $21 million of cost -- sorry.

So there was $5 million incurred in the half.

Yes. Okay. So out of the $20 million of corporate costs, sort of $6 million -- about a $5 million step up year-on-year.

Yes.

How do we think about how that steps down into second half '26 and then moving forward? Does that fall by $3 million, $4 million sort of costs you called out?

Yes. So the $2.5 million for the self-insurance costs is kind of the main driver of that. So the performance of our captive in Singapore, which we don't expect to repeat. And then there's some other costs we've invested in and around IT, which are one-off in nature. So there's sort of $3.5 million in those -- between those.

Great. And can you give us some color around how much of the $85 million of sustaining CapEx is now ex new sort of sold assets or divested assets?

Yes. I mean we'll provide a full update on all of that, Ari. Yes. But I don't have that number to hand at this point in time.

So I think that...

That's fine -- yes, I'm sorry.

Sorry, I was going to say, I mean I think the key thing there is if you look at the retained marine businesses that we set out on the slide, they are either businesses where we've recently invested significantly in the fleet or businesses that are capital light with the assets provided by our government clients. So there will be a material step down in the capital intensity of the Marine division moving forward.

Got you. And then last one, just on the U.S. LNG part of the business. So obviously, CP2 and LALNG sort of ramping up this year -- this financial year. Assuming you can't recycle buses, because Golden Pass potentially continues for longer. How much more CapEx do you need to incur to get you to the full manpower or run rate of buses and to deliver full run rate of earnings?

Yes. So as we flagged in the presentation, there was the $23 million of growth CapEx that we announced last period, plus another $7 million that we expect to incur this period in growth CapEx. Now that gets us to what we need based on what we know today. Our view is there is further upside in those projects if they ramp up faster than expected or the client puts on more people than they originally thought.

So we feel comfortable with what we've got in the contracted pipelines, but potential further upside with new things coming online in relation to those existing contracts.

So these contracts do $30 million plus revenue per annum at full run rate and good margins. So you've now got enough buses to deliver that AUD 30 million per annum revenue in FY '27 onwards, you don't need to invest more growth to deliver the full run rate of earnings?

Yes. So as we sit today, we're happy with the outlook that we've got, acknowledging that these projects do move pretty fast, and we do think there's potential more upside, which would be in addition to what we've allowed for in the CapEx at the moment.

And that does conclude our Q&A session for today. I would like to hand back to Graeme for closing remarks.

Thanks, Pauly. Thank you, everyone, for joining us and for your time today. Again, I sincerely apologize for the delay. I know it's a bit frustrating on a very busy day for everyone, but I appreciate those of you who stuck around and got there. So thank you very much for joining us. Thank you.

This concludes today's conference call. Thank you for joining us. You may now disconnect.