Release Date: February 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue grew by 44.9% to $982.7 million, driven by the acquisition of All Aboard America Holdings, Inc. and new Sydney contracts.
- Underlying EBITDA increased by 63.5% to $130.5 million, showcasing the benefits of scale and higher-margin businesses.
- Kelsian Group Ltd (ASX:KLS, Financial) successfully transitioned large and complex bus contracts in Sydney, demonstrating operational excellence.
- The company operates the largest zero-emission bus fleet in Australia, positioning itself as a leader in sustainable transport.
- Net operating cash flow increased by 63.3% to $60.3 million, reflecting strong and predictable cash flow generation from contracted revenue.
Negative Points
- Depreciation increased by 117.6% to $55.7 million, due to the acquisition of bus assets and the resetting of the asset base for AAAHI.
- The marine and tourism business faced subdued tourism demand, particularly on K'gari, Fraser Island, due to cost-of-living pressures and poor weather.
- Higher labor costs and KPI penalties impacted the Australian bus business, although these issues are now being resolved.
- Interest expenses rose due to higher levels of borrowings and higher interest rates on unhedged portions of debt.
- The company incurred one-off costs associated with M&A activities and abnormal items, totaling $2.7 million pre-tax.
Q & A Highlights
Q: Can you discuss the seasonality impacts on revenue and EBITDA for the Australian and Singapore bus segments in the second half?
A: In the Australian bus segment, we experienced additional overtime and KPI penalties in the first half, which have now abated. Mobilization costs for new Sydney contracts also impacted the first half. In Singapore, overtime persisted, and performance bonuses were missed due to staff shortages, but these are now back online. The marine and tourism segment typically sees stronger performance in the first half, but weather impacted December results.
Q: What is the expected EBITDA margin for the Australian bus segment in the second half?
A: We expect improvement in the second half, with margins in the mid-11% range, up from 10.8% in the first half, but not yet back to the 12.8% level.
Q: How is depreciation expected to trend in FY25 given the significant CapEx in FY24?
A: Depreciation is expected to be around $100 million in FY25, slightly lower than FY24, due to some assets being fully depreciated.
Q: What impact will the new contract assets and SPVs have on finance expenses?
A: The SPVs will result in lower finance expenses in the second half, as they enjoy lower interest rates compared to corporate rates.
Q: Can you provide details on the AAAHI contribution and growth expectations?
A: AAAHI continues to perform strongly, with growth in existing contracts and new opportunities in the industrial and tech sectors. We expect low double-digit revenue growth to continue over the next 12-18 months.
Q: How are labor availability and turnover trends impacting operations?
A: Labor availability issues have been resolved, and turnover has normalized to pre-COVID levels. We are now focusing on maintaining a stable and experienced workforce.
Q: What are the expected impacts of the new rail replacement contract in Sydney?
A: The new contract will require 60 additional buses and 110 new staff members. It is expected to come at a higher margin than base-level work and will help optimize labor utilization.
Q: How is the marine and tourism segment performing, and what are the expectations for the second half?
A: The segment saw softness in November and December due to weather and consumer sentiment. However, bookings for February and Easter are strong, and we expect the second half to be slightly softer than the first half but stable.
Q: What is the status of the Melbourne and Manchester contract tenders?
A: We are tendering for multiple contracts in Melbourne, with outcomes expected by July. In Manchester, the evaluation is ongoing, with results expected in the next few months. The size of the contracts varies, and we are well-positioned to win a significant portion.
Q: How are price increases in the marine and tourism segment being managed?
A: Most operations have preferred operator status, allowing us to implement fare increases with minimal impact on demand. We are confident in our ability to pass on price increases to customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
