Kelsian Group Aktie

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.

Thank you for standing by, and welcome to the Kelsian Group FY '25 Full Year Results Webinar. [Operator Instructions] I would now like to hand the conference over to Graeme Legh, Group CEO. Please go ahead.

Thank you, Ashley, and good morning, everyone, and welcome to the full year results presentation for Kelsian Group Limited for the 12 months ended 30 June 2025. I'm Graeme Legh, Kelsian Group's CEO, and I'm joined this morning by Andrew Muir, Kelsian Group CFO.

I took over the role of group CEO on the first of April of this year, having spent the last couple of years based in the U.S.A. as CEO of our U.S. motor coach business, AAAHI. My journey with what is now the Kelsian Group started back in 2009 and prior to my time in the U.S., our work in Transit Systems, now our Australian bus division, SeaLink and in Kelsian with responsibility for leading the various growth initiatives of our operations over this period. I took over the range from Clint Feuerherdt, who has led the business since 2020 and I have the privilege of working closely with for over 15 years. The transition has gone well and the broader leadership team and I continue to benefit from Clint's knowledge and insights through his ongoing role as a strategic adviser.

I would like to start today by recognizing for his dedication and leadership of trans systems and Kelsian. Clint was instrumental in building the global transportation business we are today and importantly, as CEO for the majority of FY '25, a lot of the credit for the record results we are delivering today since with Clint.. I've been fortunate to step into this role at a very exciting time for our company with our operating divisions continue to perform strongly and well positioned to capitalize on the significant growth opportunities in front of them.

At the group level, we have delivered on a number of strategic priorities this year, including setting clear targets for our capital management, and we continue to progress the open strategic initiatives that will shape the future direction of the group, including the potential divestment of our Australian tourism portfolio from within our Marine and Tourism division. Moving now to the presentation detailing Kelsian's results for FY '25.

Today, I will start by providing an overview of the financial results as well as the strategic and operational highlights from last financial year. I'll then hand over to Andrew, who will provide a detailed run-through of the group's financial statements. and the performance of each of our 3 operating divisions before we provide our outlook for the financial year ahead. Turning to Slide 3 of the presentation.

Kelsian delivered a solid financial result in FY '25. The results are in line with our expectations with underlying EBITDA of $285 million, falling within the guidance range provided at our full year results last August. Importantly, and as I've already mentioned, all operating divisions continue to perform strongly with growth in revenue, EBITDA and EBIT delivered by each of the 3 divisions.

Our business' ongoing commitment to operational excellence, combined with their established market positions and strong reputation has underpinned the high renewal rate of existing contracts driving the organic growth across all divisions. Pleasingly, the FY '25 result was achieved despite the ongoing inflationary environment. The result reflects the fact that most of our public transport contracts include revenue indexation mechanisms, which protect the business from fluctuations in the cost base of our key cost inputs, including wages, fuel and spare parts.

These indexation mechanisms provide a natural hedge against the inflationary pressures we have witnessed over the last few years. These contract revenue indication mechanisms, combined with new and retained contracts allowed the group to deliver record revenues in FY '25, up 9.5% to $2.2 billion. Underlying EBITDA was up 7.4% to $285 million. As [ at ] last year, the expected stronger second half earnings contribution was delivered despite the one-off impact of Cyclone Alfred in Queensland this February. The strong second half reflected the full period of our Bankstown rail replacement service in Sydney, along with the rebound and continued growth of important industrial sector contracts in the U.S. At the EBIT line, the group and NPATA was $94.8 million, up 2.4%.

One of the most pleasing elements of the result was a record net operating cash flow of over $200 million, which, together with the fact that we are nearing the end of our peak capital investment program resulting in leverage of 2.7x underlying EBITDA, down from a peak of 3.2x reported at the first half results. The positive financial results from each of the divisions were combined with the operational excellence that defines our reputation, provides an extremely strong foundation for us to capitalize on the growth opportunities that are presenting themselves across our global platform. Moving to Slide 4 and an overview of our operational and strategic highlights from FY '25.

There were several notable highlights across the group during the period. Firstly, our U.S. operations had a strong second half off the back of services returning to normal for a large industrial sector contract that was temporarily impacted by the bankruptcy and restructure of the project head contractor. In addition, the excellent contract renewal rate across our used business continued, and we finished the year announcing 2 significant new contract wins.

AAAHI represents a highly scalable platform for Kelsian's ongoing growth, and I'm delighted to have handed over the AAAHI leadership to a safe pair of hands in Brent Mainland, our new AAAHI CEO. Brent commenced with us last year enjoyed AAAHI with the benefit of a long and successful career in the U.S. motor coach industry. Brent has hit the ground running and is already proven to be a valuable addition to our leadership team. Turning to our Australian bus operations.

Our Region 6 bus contract in Sydney is the group's largest contract and is due to expire on 30 June 2026. During the second half of FY '25, we have been engaged in discussions with transport for New South Wales regarding a possible 2-year extension to the contract. In June, we were advised that TF&SW was seeking government approval to proceed with the 2-year extension on improved contract terms. This extension comes at the back of the region 6 operations being 1 of the best-performing bus contract in Metropolitan Sydney for service punctuality and reliability.

Staying in Sydney, in September 2024, we commenced operating bus services to replace trains for the Bankstown rail line. This contract contributed strongly in FY '25 and will continue to be a material contributor in FY '26. In Singapore, the reliable and continued operational excellence delivered by our Tower Transit team saw the business achieve performance incentives during FY '25.

The team also made significant strides in driver recruitment achieving robust staffing levels that enable them to deliver a high proportion of in-service revenue mileage. This ability to attract and retain talent puts us in a strong position to start current and future contracts and reinforces our inclusion in the list of Singapore's best employers 2025. In recognition of this strong performance, we were granted 2-year contract extensions for each of our existing public transport contracts and awarded several new serve routes by the Land Transport Authority further expanding our critical role in Singapore's public bus network.

Finally, the record financial result from the Marine and Tourism division was a result of delivering on operational efficiencies, improved asset utilization. Alongside these businesses taking advantage of their inherent operating leverage as Patris numbers continue to improve. Turning now to our strategic achievements during FY '25.

In February, we completed and announced a comprehensive capital management and allocation framework, establishing clear targets and priorities for our future capital management and investment returns. Under the framework, we made a modest revision to the target dividend payout range to 40% to 60% of underlying NPATA. We also set a leverage target of between 2 and 2.5x underlying EBITDA, and we expect to continue to track towards the target range by the end of FY '20 and before the benefit of any potential asset or business sales. During the year, we undertook a detailed analysis of future CapEx spend and confirmed annual net sustaining CapEx of approximately $85 million per annum over the investment cycle.

Finally, for returns and specifically return on invested capital, we set a target of 200 basis points above our pretax weighted average cost of capital to be delivered over the medium term. The Board has also revised management's remuneration structure to align incentives with these targets and delivering appropriate returns to our shareholders. Having set the capital management targets, we then undertook a thorough strategic review of every business unit in the group to identify potential opportunities to improve returns. This was an exhaustive process and the outcome was that a number of bus depots were identified to be sold and leased back and the potential divestment of a portfolio of tourism assets for within the Marine and Tourism division would be pursued.

In the event of a successful sale of the tourism portfolio, the remaining Kelsian business will be a more focused infrastructure like commuter and contracted business delivering essential passenger journeys through our bus, motor coach and marine operations. This will further increase the predictability of the group's earnings base and will lower the future capital intensity of our operations. In the U.K., we closed on the acquisition of the third largest bus operator in Liverpool heightened travel. While a small acquisition, this was strategically important to give us a foothold in the Liverpool region. This region, like many others across regional U.K. is in the midst of structurally changing the way public transport bus services are delivered through the introduction of bus franchising.

Our specialists in helping governments around the world successfully deliver this type of structural change the heighten acquisition positions us as an incumbent operator in this market at the time these changes are being implemented. Finally, I wanted to again highlight Kelsian's strong track record of delivering organic growth over an extended period. This growth is underpinned by a majority of defensive long-term service contracts and in FY '25, 93% of group revenues were contracted or nondiscretionary inmates. Before I hand over to Andrew, on Slide 5, I wanted to update you on our focus on safety and sustainability for our workforce, our customers and our communities.

Each of Kelsian's businesses at its core, is a people business. We employ over 12,800 people and provided 383 million essential journeys for our customers over the last 12 months. The 3 core pillars of our sustainability effort reflects the people-focused nature of our business. Firstly, for our teams. We are committed to creating safe, healthy and inclusive workplaces. The safety of our people and passengers accord to everything we do, and I'm happy to report a 12% reduction in the frequency of total recordable workplace injuries in FY '25.

Of note in this area, it was very pleasing to see our Singapore operations be awarded the operational and Workplace Safety awards at this year's Singapore Public Transport awards. Unfortunately, our lost time injury frequency rate increased slightly during the period, which meant we did not meet our group-wide target to reduce lost time matures. This has resulted in several new initiatives being planned for FY '26 to promote an injury prevention culture from the top of the organization right through to front lines.

Secondly, as one of Australia's largest operators of public transport with a significant international presence, we want to be an enabler of smarter, cleaner transport for the communities we operate within. By collaborating with governments, we continue to support mode shift on to public transport and the move from higher emissions to low or 0 engine public transport assets. In combination, these 2 changes will play an important role in reducing the carbon intensity of the transportation sector.

Kelsian is at the forefront of 0 emission vehicle technology with an impressive 204 zero-emission buses in operation and ongoing bus depot electrification works underway across 3 Australian states. And lastly, we take our role as the essential transport link for the many communities we serve very seriously. We value and are a key component of the communities we operate within and we want to do our part to drive positive change in these communities.

Our connections with many important community organization demonstrates this commitment. Some highlights in this area include our formal partnerships with the Royal Flying Doctor Service and the Quanta Foundation. However, the real contribution in this area comes to countless hours invested by our teams is directly supporting the initiatives that matter for their local community.

I would now like to hand over to Andrew, who will present the detailed run-through of the group's financial results for FY '25 and our divisional performance.

Thanks, Graeme, and good morning, everyone. Kelsian has delivered a very pleasing financial results for the 12-month period ending 30 June 2025, and our results are in line with the earnings guidance we provided at this time last year. We've seen good revenue growth and margin improvement across the portfolio on a first half, second half basis. The business has delivered an additional $20 million of EBITDA in the second half and $17.9 million more than the same half last year, reflecting evidence of the returns being generated from our recent capital investments in bank down rail replacement buses and motor coaches in the U.S.A. in particular. I'll now step through the results in a little more detail over the next few slides.

Slide 7 provides a high-level comparison of the consolidated FY '25 underlying results versus the prior year. The revenue increase of just under 10% was achieved through a combination of the contract indexation mechanisms we have in the majority of our Australian bus contracts, a full period of the Bankstown replacement project in Sydney the ramp-up of a number of contracts in the U.S.A. and growth in the Marine and Tourism business.

Underlying EBITDA and EBIT increased by 7.4% and 11.4%, respectively, compared to the prior year. Underlying EBITDA has been adjusted for several one-off or significant nonrecurring items incurred in the period, which combined totaled $7.8 million on a pretax basis. These included acquisition and due diligence costs, our property-related costs relating to the unsuccessful Melbourne bus franchising tender and costs associated with the upgrade of our finance and HR systems that we flagged at the half.

Overall, I'm pleased to report that the portfolio performed either in line with or better than expectations with the exception of K'gari Fraser Island, where demand remains soft throughout the period and our Region 6 bus contract in Sydney, which continues to face challenging operating conditions, but it is now in its final contracted year under these terms. Higher interest compared to the prior year reflects the higher levels of borrowings supporting the recent peak CapEx program and also higher line fees associated with our larger unsecured borrowing limits.

The low effective tax rate was driven by lower tax rates in overseas jurisdictions and the ongoing benefits associated with marine training incentives, which satisfied the requisite eligibility criteria including eligible training programs. The strong second half performance sees our full year underlying net profit after tax and before amortization, up 2.4% to $94.8 million. Earnings per share and before amortization improved despite the impact of higher depreciation and interest in the period.

We've maintained a fully franked dividend of $0.095 per share, which is the same as last year, and we continue to offer a dividend reinvestment plan for shareholders but with no discounts, the same as the interim dividend. Statutory net profit after tax for the period was $54.5 million compared to $58 million last year. To the cash flow on Slide 8.

The business continues to generate strong operating cash flows underpinned by contracted and nondiscretionary revenues across the portfolio. Gross operating cash flow of $290.8 million was a record, and cash conversion was just under 87%. The decline from the first half, which was over 9% related to some changes in payment team from several large clients in the U.S.A. as contracts were renewed and were normalized in time.

During the year, we invested $165.1 million in new and replacement assets, including vessels, buses, motor coaches and land and buildings. All of this was in line with our previously announced capital program and in line with prior guidance. Proceeds from the sale of assets included $20.3 million from the sale of 3 depots in Western Australia and $7.6 million was realized from the sale of assets. At period end, we finished with cash of just under $183 million. Slide 9 provides a summary of the balance sheet.

At period end, we had net debt of $623 million compared with $707 million at 31 December. This excludes the limited recourse SPV financing of $87 million we have on the balance sheet relating to government-backed contracted assets, more on that shortly. I'm pleased to report that from a leverage perspective, we finished the year with pro forma leverage at 2.7x, down from 3.2x at December excluding SPV government-backed contracted assets. During the period, we proactively reduced the undrawn limits on some of our bank facilities, both performance bonds and unsecured debt lines so we were not paying line fees on those available undrawn limits, which we did not need. All bank covenants were comfortably met, and we remain on track to meet our leverage target guidance range of between 2 and 2.5x by the end of FY '26 excluding any proceeds from the proposed sale of tourism assets.

The main changes to the balance sheet during the period relate to addition of the assets acquired as part of our capital program. accounting disclosure changes in right-of-use assets and liabilities associated firstly with the Hoxton Park bus depot in Sydney, which we acquired and was previously leased; and secondly, the sale and leaseback of 3 bus depos in Western Australia. Finally, we continue to hold $36 million of government-backed contracted assets on our balance sheet, which haven't yet moved into a ring-fenced SPV structure.

Had we been able to move into an SPV structure before 30 June, our leverage would have reduced to 2.6x. We anticipate these will move into SPV structures at the next contract renewal date for these contracts in 2027 and 2028. In the next slide, I wanted to provide a recap of the special purpose limited recourse ring-fenced financing arrangements we have in place to some government clients.

Since July 2023, we have had limited recourse asset financing arrangements in place. whereby Kelsian and warehouses, government-backed contracted bus assets on our balance sheet, along with the corresponding debt for the duration of the relevant government contracts. These SPV facilities provide a cost-effective financing structure and flexibility for governments seeking to improve and upgrade public transport buses and infrastructure. These structures remain of interest to a number of governments in several of our target jurisdictions. Importantly, these limited recourse financing facilities are excluded when we calculate the bank covenants we have with our financiers.

In terms of accounting treatment, the asset value and debt profile are matched and amortized over the term of correct and if the contract is not renewed or lost, the assets and corresponding debt revert to government. This means there's no stranded added risk or financial exposure for Kelsian Group perspective. At 30 June 2025, government back contracted assets totaled $124.4 million and compared with $153.3 million at the same time last year. Turning now to Slide 11, which provides an overview of capital expenditures.

As we shared previously, FY '25 was a year of record investment in the business and brings to an end a period of heightened CapEx spend over several reporting periods. This reflects the increased scale of the business, the capital investment required in new assets off the back of contract wins and extensions as well as the need to continue to refresh the asset base to underpin growth and strategically to position the business for the future.

Major CapEx in the period included expenditure on 2 vessels and landside infrastructure for the new and exclusive 25-year Kangaroo Island service. The strategic acquisition of the HosanPark bus depot in Sydney and the purchase of 16 new buses for the Bankstown replacement project. Offsetting this, we realized $27.6 million from the sale of surplus assets, including 3 depots in WA and the sale of some buses that were replaced in the period.

Our guidance in August 24 for FY '21 CapEx was approximately $185 million. In the period, we actually invested $165.1 million with the underspend due to some timing delays in the construction and delivery of the KI and Southeast Queensland vessels. As a consequence, there will be a carryforward amount of approximately $20 million into FY '26. The I should emphasize that there has been no further cost overruns associated with these delays.

Looking forward to FY '26, we do not have any major vessel replacements or new build underweight and excluding any growth CapEx, there will be a significant step down in CapEx from this year's record levels. In terms of breakdown, we anticipate net sustaining CapEx for the group in FY '26 to be $85 million. We will have the carryforward of the FY '25 underspend of $20 million, and we have committed to growth CapEx of $23 million for the recently announced LNG contract wins in the U.S.A. related motor coaches and leasehold improvements. all of which meet our investment return criteria. Over the next few slides, I'll provide some comments on the individual performances from both a financial and operational perspective. Starting with the Australian bus business on Slide 13.

The division has seen revenue increase by just over 11% and an additional $9 million of EBITDA generated. Although the margins decreased slightly, we've seen an increase in revenue and EBITDA on a half-on-half basis. A key highlight of the period was the Bankstown replacement service in New South Wales, which commenced in September. This project saw us procure 60 new buses and recruit, train and deploy 140 new drivers on time and on budget. This project is performing very well, and at this stage, we anticipate we'll be operating for the majority of FY '26, which is longer than our original expectations.

With a further extension, this project is set to materially exceed our return on investment targets for the investment that we have made in the new fleet. Balancing the encouraging contribution from the Bankstown Rail service, several operational factors, primarily in New South Wales continue to impact the overall performance of the bus business. These included delays in getting our proposed service changes to improve network efficiency approved by government. Congestion-related challenges impacting on-road performance that require time table changes also need to be approved by government.

Delays in the delivery of government-owned and funded replacement EV buses and persistently high levels of accidents due to congestion and new drivers. To combat these challenges, we focus on a number of efficiency programs, which have had a positive impact. Some of the major contributors, including group-wide procurement savings for fuel oil and lubricants as well as a focus on reducing driver overtime penalties and additional driver training.

Our major rail replacement project in Perth is also nearing completion, and this will be replaced in the first half of FY '26 by the bus bridging work we've started for the tram replacement project in Adelaide. This project will run into the new year. On the contract front, during the period, we announced that we'd entered into discussions with transport for New South Wales for a 2-year extension for our Regent contract in Sydney. As many of you would know, this is our largest contract and the one that, from a financial perspective, underperforms the rest of the portfolio. Operationally, though, it's the best performing contract in Sydney.

If the contract extension negotiations are successful, we expect to see an improvement in the economics and contribution for any extension term beyond July 2026. We had our Bunbury and Buffoon contracts in Western Australia renewed for a further 10 years, and our National Resources and Charter team continue to work with clients to renew and expand our existing contracts.

Finally, from a portfolio perspective and excluding Region 6, it's important to note that we have no material contracts up for renewal until 2028. Turning to Slide 14 and the international bus segments.

The division has seen revenue increase by nearly 9% and an additional $8.3 million of EBITDA generated. Nearly all of this additional contribution has come from the business. The slight decline in margin has been a combination of mix of work and the impact of the Channel Islands Jersey contract repricing and the loss of the guarantee contract.

As mentioned previously, the AAAHI business performed very well. Throughout the period, we saw the ongoing recovery in the Golden Pass LNG contract that was delayed in FY '24. There was also the ongoing ramp-up of the Port Arthur LNG contract and late in the period, we announced the successful award and commencement of the CP2 and the Louisiana LNG contracts. There was good news on the renewal front at AAAHI with the renewal and expansion of the capital light busting contract we have with the Colorado Department of Transportation, and we also were successful in securing a new contract with Louisiana State University.

In the textile space, business activities at levels have stabilized, contracts were repriced, and we have not seen any further reduction in the level of services or frequency to our tech clients in California. In Singapore, our 2 contracts with the LTA were extended for an additional 2 years. In addition, the business secured a number of new service routes and also commenced operating from the new Tinga bus interchange which is an expansion of that scope of our existing Bulim contracts. Late in the period, we announced that we secured a new capital-light contract with the Sentosa Development Corporation to provide bus services on the Island Santos. This contract is for 5 plus 5 years and commences in September 2025. This is a significant milestone for the business as it is our first contract outside of the traditional government route service contract in Singapore.

In the U.K., we renewed our contract in Jersey, securing approximately $260 million of revenue over 10 years. And in February, we completed the small acquisition of heightened travel a regional bus operator in Liverpool that provides us with access to buses, drivers, a leasehold depot and a training school. The priority and focus of the U.K. is on the upcoming tenders in Liverpool and the heightened travel acquisition should put us in a good position with the regional U.K. government as the incumbent operator. The Marine and Tourism on Slide 15 .

We were really pleased with the record results from the Marine and Tourism division particularly given some of the challenging operating conditions, primarily weather-related and with the backdrop of the divestment process that was announced earlier this year. A number of fare increases were implemented throughout the year, along with several dynamic pricing initiatives, which have delivered improved returns. This assisted in delivering improved margin in the second half. Several markets continue to see very good levels of activity and growth, Southeast Queensland, Kangaroo Island, Glasson and Towne, but others, primarily K'gari Fraser Island did not perform to our expectations.

The K'gari business experienced reduced occupancy compared to the prior corresponding period, although room rate and revenue per occupied room is relatively stable. The launch of the alumina lightshow in October was a success, and it is expected to support increased visitation to the island as it grade gains greater awareness. To address performance at K'gari, we undertook a resort management strategic review, which resulted in us appointing 1834 hotels to take over the management of operations of the resorts on our behalf. This engagement commenced on 1 August and the benefits will flow in FY '26.

In the Northern Territory, we extended the services funding agreements with the Northern Territory Government for ferry services from Dale into Mandora and Dan with TV Islands for 5 years. The first half was impacted by the total loss of 2 series and the losses we incur as a self-insured operator. The good news is that the business is now benefiting from the new funding arrangement and is trading well. A new Gladstone vessel was delivered during the period to support the recently secured 10-year contract. And in January 2025, the first of 2 new Southern Morton Bay Island vessels were delivered. The remaining investment was anticipated to be delivered in November this year. These new vessels provide increased capacity and will deliver improved operational performance to the services we operate in the region.

The construction of the 2 new Kangaroo Island vessels and work to upgrade the landing infrastructure progressed, but the delivery time line has been delayed due to a number of factors, primarily delays in the South Australian government completing its infrastructure works and delays relating to the vessel builder in Indonesia. The first vessel commence sea trials in September and work on the second vessel was ongoing. Whilst the delay is frustrating, there's been no increase in the total cost of the project.

We are currently working with the South Australian government in relation to modelization plans and new service commencement dates as the business is fast approaching the business, the busy Christmas holiday period, and we would not want to reach any service disruption given the impact this could have on tourism and local businesses and residents who rely on this service. Finally, corporate on Slide 16.

During the period, we commenced work to implement Workday's consolidated platform to manage our global finance and human capital management functions. By consolidated finance and HR onto a single integrated platform, we anticipate enhanced operational efficiencies data accuracy, informed decision-making while driving innovation and cost savings and to provide a globally best-in-class finance and human capital management system to support our current and future workforce.

The software will play a number of redundant and legacy systems across the business. The internal and external third-party costs to implement Workday over the next 3 periods -- 3 years are estimated to be approximately $21 million, with $2.3 million was incurred in FY '25. Accounting standards do not allow us to capitalize these costs and amortize them over the expected life of the new system, so that will be expensed as incurred. Once the rollout is complete, Kelsian will be able to retire over 13 outdated legacy systems and the AI-powered Workday will provide our global businesses with real-time information on every aspect of our finance and HR functions. This information is expected to lead to improved decision-making at the local and corporate levels that will combine with process efficiencies to deliver substantial returns on the investments for the project.

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

Thank you, Andrew. To start on Slide 18, I wanted to highlight the important strategic initiatives that have been delivered or commenced in FY '25 that will provide the foundation for our direction and growth in FY '26 and beyond. Several commitments were made at the back of our FY '24 full year result, which have now been completed. We completed and published the capital management elation framework. The strategic review was completed and opposed divestment of the tourism portfolio was announced in April, and the sale process has commenced.

We announced that leverage levels would peak in FY '25 and today, we are reporting a step down in leverage compared to what was reported as of December 2024. The important changes have been successfully implemented the senior management team with a change in Group CEO; and Brent Maitland transitioning well into the role of AAAHI CEO. And finally, having identified our international bus division as a key driver of organic growth Singapore has successfully added a new contract and clients and the U.S.A. has delivered several meal contract wins. We set out what we were going to do and have delivered on each of these commitments. The job is not done, but the foundations are now in place for our next chapter. Importantly, we know that to be in a position to capitalize on the opportunities available on the horizon, we must narrow our focus. We can't deliver strategically if we don't deliver operationally. I understand this, and that is why I am laser focused on delivering key operational improvements in FY '26.

For the Australian bus division, Sydney is a boring focus with the renegotiation extension of the Region V contract alongside delivering further efficiencies across our Western Sydney contracts being essential for this division's success. For Marine and Tourism, the transition to the new 25-year Kangaroo Island exclusive license will occur in FY '26. The Kangaroo Island service is where it all began for Kelsian 30-odd years ago, and the transition to the new contract will see the preparation, mobilization and ramp-up of operations for the 2 largest vessels ever operated by SeaLink. These vessels will provide the essential transplant link to Kangaroo Island for the next 25 years. I'm also focused on buying efficiencies across our operations.

With the potential divestment during the year ahead, the rightsizing and right skilling of our corporate and shared service function will be a focus. A big part of this is having the right systems to efficiently serve our businesses. And as Andrew has detailed, we are in the process of delivering a new transformational finance and HR system for the group. Strategically, we are focused on getting the potential divestment of the tourism portfolio right.

As I know, a divestment of this magnitude and of many business units that have been part of the group for a long time, is a complex process and comes with both operational challenges and people risk. On the growth side, we will focus on continuing to deliver organic growth. We're going to do this through a capital-light contract opportunities such as contract extensions, expansions and growth by leveraging existing in-house expertise and expanding relationships with existing customers.

There are key structural shifts in target markets like the Southeast Queensland bus market and in regional U.K. that present important opportunities for the group. These opportunities are capital-light in nature, and any contract we will open a new organic growth market for our core public transport business. To give some indication of the scale of 1 of these opportunities, up to 10,000 buses are expected to be franchised across regional U.K. over the next 5 years.

We are also looking at entering new markets New Zealand represents an adjacent market with similar characteristics to our Australian business, and there are open contract opportunities for both bus and ferry services. Finally, we expect further growth from existing and new contracts in the U.S., especially contract servicing industrial clients. $23 million growth CapEx has been invested to support the 2 contract wins announced in late FY '25 with opportunities for further growth in this area over FY '26. Where we find opportunities that require incremental CapEx, we'll look at investments in existing geographies, target investments that deliver appropriate returns and then unlock new strategic benefits for the group.

On Slide 19, we provide an update on the tourism portfolio divestment, which was announced to the market in April. The potential divestment of the tourism portfolio will enable Kelsian to emerge as a more infrastructure-like commuter and contracted business with lower capital intensity and a more stable earnings base. Our plans to go through the proposed investment portfolio in detail again in this presentation. However, I would like to reiterate that assuming value and terms are attractive and determined to be in the best interest of shareholders.

Proceeds from the divestment will be applied in line with our capital management allocation framework to reduce debt and selectively invest in strategic growth opportunities within our bus, motor coach and marine transport businesses. The inbound interest in the tourism portfolio since we now for potential divestment has been encouraging with a mix of both domestic and international parties with interest in both the whole portfolio and certain assets.

In terms of the process, we're in the middle of stage 1 of a 2-stage process, and we'll continue to keep the market informed on material developments as the divestment process progresses. Moving to our outlook for FY '26 on Slide 20.

There was a positive start to the new financial year with the light trading performance being in line with our expectations across all 3 operating divisions. Some of the key operational drivers for the remainder of the year include the Bankstown Rail place contract in Sydney, which we now expect to run for the majority of FY '26. Also in Sydney, we expect further efficiency to be delivered from the contracts we operate in Western Sydney, especially as part of the bus network are improved ahead of the opening of the new Western Sydney Airport later this year.

Elsewhere in the Australian bus division, we have the Adelaide tram replacement bus services, which kicked off earlier this month. For international bus, the new industrial contracts in the U.S.A. will ramp up in FY '26 and be a contributor to ongoing organic growth we continue to expect out of the U.S. As for Kangaroo Island, we're still working with the South Australian government to confirm the exact timing for the mobilization of the new contract. The final mobilization plan will be designed to minimize disruption for residents businesses and tourists, especially as we get close to the peak season for this service, and this will dictate the exact timing of the contract mobilization and transition costs, which will be incurred during FY '26.

In terms of our expectations for our financial performance for FY '26, we expect to deliver underlying EBITDA of between $297 million and $310 million. This guidance is provided on the basis of the business today and does not account for any potential divestment of the tourism portfolio during the period. FY '26 CapEx is expected to be $128 million. And as Andrew has previously broken down, this includes the $20 million of CapEx spend on vessels infrastructure, which has been carried over from FY '25 and the $23 million of committed growth CapEx related to new contracts in the U.S.

We also set out on the slide, our expectations for the key below-the-line items for FY '26. And again, this guidance is ride on the basis of the business as it stands today. Finally, on Slide 21, we set out the Kelsian investment proposition and what I view as the key strengths of our business.

Firstly, we are an operations-focused organization that delivers essential journeys for our customers. Importantly, the potential divestment of the Australian tourism portfolio will further streamline and simplify our operations and make the business more infrastructure like by increasing the predictability of our revenues and cash flows. Our operations are underpinned by predictable long-term contracts with 93% of revenues contracted or nondiscretionary in nature. Our business is truly diversified not only by business type, but also by geography, transport mode, contract type and customer.

Our reputation for operational excellence is our biggest asset and has been the driver of our demonstrated track record delivering organic growth through contract renewals and new contract wins. Our incumbent positions and exclusive contracts with natural hedging of our cost base supports our resilient margins. And finally, we are benefiting from several very tangible global tailwinds and including population growth, urbanization and decarbonization that are expected to underpin growth in our core industry over the longer term.

That brings us to the end of the formal presentation, and I'll now hand back to Ashley, who will manage any questions you have. Andrew and I on the results released today.

[Operator Instructions] Your first question today comes from Allan Franklin with Canaccord Genuity.

Great to see the clean print. Just a query on Singapore and follow on to the sort of '26 guide, just the extent to which you're sort of comfortably within performance incentives in Singapore and then maybe any additional color you can make on what drives the bottom end or the top end of FY '26 EBITDA?

Yes. Thanks, Allan. FY '25 was pretty good in Singapore, and we saw a rebound in the performance incentives we're generating out of that business through the improved operational performance. Expectations for FY '26 is sort of continued measured growth in those performance incentives, not expecting a huge step up, but we continue to do slightly better over the course of FY '26.

And then in terms of the guidance and sort of top and bottom of the range, looking at each of the divisions, probably the key drivers there International bus, really the big one is AAAHI. There's obviously some underlying variability in the AAAHI earnings, but the key driver in terms of what moves the dial there between the top and bottom of the range is really the speed of the ramp-up of the industrial sector client contracts that we operate. including the 2 original contracts and the 2 new contracts we announced in June of FY '25.

For Australian bus, big swing factors there are the Bankstown contract. So we don't know exactly how long that's going to run for during FY '26, but we are expecting it to be a contributor for the majority of the year as we stand at the moment. The other stuff, which is a bit less certain is timing of some of the service improvements approvals from government in terms of change to timetables and putting new timetables in place, along with the speed that government can roll out some of the new zero-emission buses. They have planned in our major networks.

As those buses come in, the brand-new zero-emission buses clearly come in at a much lower operating cost compared to 20-year old diesel buses that they are placing sort of quickly, we can get those in the quicker we can get some of those benefits. And then the other one, as I called out, is really just overall efficiency of our Western Sydney bus contracts, which we're looking to continue to gain further efficiencies over the period. And in [indiscernible] tourism, similar to last year, the performance of K'gari is a pretty big swing factor depending on how occupancy goes and how the new contract with our new manager 1834 goes for the business K'gari.

And then the other big one this year from reintros is the timing of the introduction of the new PI vessels and the transition to the new 25-year license. They're probably the big ones.

Helpful. And just on the U.S., I know you mentioned $23 million of CapEx. If you could just clarify, please, where that is going, if that's more of an existing replacement spend? I'm just trying to layer in how to think about the new contracts, LNG contracts as they roll through the extent to which you might be able to use existing fleets versus expend CapEx into, I guess, $27 million.

Yes. So that -- the $23 million specifically, that is all growth CapEx going directly to the 2 new contracts that we announced in June. So they're not replacement vehicles. They are new additional vehicles designed to service those contracts. That $23 million is over and above the sort of roughly $40 million we expect to spend in international but division on an annual basis. That's part of the sustaining CapEx figure of $85 million that we flagged.

That $40 million allows us to replace fleet in the U.S., but it also does provide some capacity to move vehicles out of the charter business. that are replaced new vehicles to move them to service some of our industrial sector clients as well. So that $40 million does buy us some extra capacity to service those industrial sector on tracks that we have as well.

Helpful. Maybe just one other quick one. Just on the provisioning. I noticed that lifted by $14 million, there's a fair chunk of sort of other provisioning in there, but deferred consideration payables. Do you expect those to get paid out over the coming period?

We're not sure on net debt, Allan. It's the certain performance hurdles that need to be met. So that ultimately depends upon the financial performance and the hurdles required for those.

Your next question comes from Aryan Norozi with Barrenjoey.

Just first one for me. Just at bus business margins, they were 11% in the first -- 11.2% in the first half and 11% in the second half. I mean you've had Bankstown ramping up, which is high margin. You've got these efficiencies that you've rolled through in the second half that you didn't have in the first half. So what's the key driver of that? And looking into fiscal '26, should we expect the 17% margin to be the norm until you reprice Region 6? Or do we expect a step change upwards?

Yes. Thanks, Ary. A big driver of that sort of slight margin compression in the second half was primarily related to the aging of our fleet, there's been some delays from government in terms of the speed that they can roll out the new zero-emission buses, which means we're operating some of the older diesel buses longer than we expected while they get through that backlog and that does have a relatively material impact given the cost to keep some of those older buses in the fleet.

Now we do expect that to start to normalize over the course of FY '26, we should see that margin profile turn around. So in terms of expectations, looking at FY '26, expecting modest improvement in the Australian bus division compared to where we ended where we ended up in the second half.

Right. So still not at the 12% number that you guys sort of to target or should be an improvement on the 11%.

Yes. So we expect it to modest improvement on where it was in the second half. Don't expect it to get to 12%. The big step change, which gets us to where that 12% figure, which you sort of indicated what we expect out of the division as a whole will really come from the revised Region 6 contracts, which kicks off -- only kicks off on the first of July, 2027 -- 2026, sorry.

All right. So 12%. Yes, you need the Region 6 to get you to 12%. And then within guidance, do you factor the cyclone Alfred impact? I mean there was a $3 million sound Alfred impact quarter in the third quarter. I suspect some of that flow through to the fourth quarter, but it's trial as we know it, do you have that fully unwinding? Or do you have a provision for that in the guidance range?

I mean, the variability of the weather obviously goes to the range that we provided. So we certainly got an allowance that the weather is not going to be perfect for the full financial year, so that we don't hopefully have to call out weather as a reason for not getting there. In saying that, it probably doesn't account for very, very extreme things. This year, we're able to get there on the guidance despite the impact of cyclone output, but those things do have a pretty material impact as we saw this year with the $3 million impact to the EBITDA line from [indiscernible]. So there is some allowance there, but that's said with a bit of caution given the current environment.

Great. And last one, you don't disclose the AAAHI, but is it fair to say that EBITDA in that business grew sort of roughly 8% in FY '24 in [indiscernible] terms.

[indiscernible], Andrew?

Yes.

Yes, that's pretty close, Ary.

Next question comes from James Wilson with Macquarie.

ust a couple from me. Are you able to maybe just talk us through the profile of the return that you're expecting to see from these finance and HR investments. Is that something that we should be thinking about perhaps from the second half of FY '27 onward?

Yes. I mean that's where it will start to take effect. So the go-live for the finance part is not until April next year and then the HR system later in October. So there will be some time before those benefits are start to realize, but there are a lot of efficiencies to be gained around duplication, automation of cars, things that are manual -- and as I said, we're getting rid of effectively 13 legacy systems across the portfolio.

Great. And just on the incorporation of ROIC into your longer-term incentive Am I able to just confirm that, that incentive is set in line with your capital allocation target of ROIC being 200 basis points above pretax WACC. And also, can you maybe just give us some color on what that pretax WACC is that you're using for that calculation?

On the first part of that, that is correct. So the incentives that will see the LTI from this year is aligned with the Capital management and allocation framework in terms of the targeted returns. As we sort of step through in quite a bit of detail when we release the capital management allocation from work. We don't intend on closing the WACC upfront, and that remains our position. But obviously, in terms of the performance over the period for those long-term investments, we will disclose the historic WACC that's used to assess how we have gone over the 3-year period.

Your next question comes from Owen Birrell with RBC.

I guess a bit of a follow-up question with regards to that -- the targeted return on invested capital target of 200 basis points above your pretax WACC you've given to sort of update on how that's been progressing over the last sort of 12 months and acknowledging that the sale of the tourism portfolio will assist that target. I was just wondering if you can give us baseline of, I guess, what the current gap between ROIC and WACC is for the portfolio as we end FY '25?

Yes. So I mean, in the presentation in February, we sort of provided the give calculations of how we're going to calculate ROIC going forward. Now as flagged at the time, we weren't expecting any material increase in ROIC for this financial year given the ongoing CapEx spend on vessels that aren't yet in the water, and that has played out. So overall ROIC under those calculations, for the full year, FY '25 ended up pretty much in line with where it was in FY '24, so no real growth there.

In terms of where we stand, relative to WACC as per the previous question, no, we're not going to disclose WACC. So it's a bit hard for us to give specific guidance on that question.

I guess what I am trying to understand is, you've clearly got a tourism portfolio sale in the works, and that's going to materially affect your WACC and your ROIC. Just wondering to, I guess, triangulate when you do make the sale, what the improvement has been at that point. But given we've got no baseline to work off, it makes it very difficult for us to measure you against these targets.

Yes. Also, I mean, I understand the concern, but it's also that goes to one of the reasons we don't want to be sort of getting a running country on WACC because we are expecting the WACC to change if we get the tourism portfolio away. So put us in a difficult position if we've got to provide continuous updates on what we expect or what we think the WACC is. So we don't really want to get in to provide a running commentary on the WACC over the period.

Okay. Understood. And can I ask a second question, if I may. Just on AAAHI, a lot of positive momentum there with the renewals and new contracts. But again, I guess, quite difficult for us to quantify the potential ramp-up as we move into '26. So I just wanted to get a sense as to a broad guide on, I guess, the organic growth coming through that business. Should it be in line with the call it, the 8% to 9% that you've delivered in FY '25. Should we see that same degree of momentum continuing into 26?

Yes. I think that's what we would expect to see from that business for the foreseeable future, especially with the ongoing opportunities in the inductor sector clients with the industrial sector contracts. And there's probably some upside there to do a bit better. The only count of that is to do much better than that is going to require some further growth CapEx in addition to the $23 million we've already spent this year but we do expect that sort of 8%, 9% to be achievable for that business.

Your next question comes from Tim Piper with UBS.

Just a couple of questions. On the depreciation and interest guidance, so starting with interest what you of $59 million, does that kind of assume you move to the top end? I mean, you flagged that you're going to sort of move to within the range, I think, the end of FY '26. Does that kind of assume you get to the top end of that range, middle of the range for gearing. What have you built into that assumption? And then the D&A, I assume is obviously, based on what you've guided to of $128 million of CapEx in '26? Or is there anything else built into that depreciation forecast?

No, that's right insights. It's on the basis as we get to the top end of the range in terms of the interest. And there's nothing else built into depreciation other than the CapEx we've disclosed.

Perfect. Then as we roll to the end of FY '26, obviously, some uncertainty around when Bankstown finishes. But let's say, it's June, July, and then you've got a successful retender in Region 6 at around the same time. What's the kind of balance between those 2 in terms of the earnings banks down dropping out versus Region 6 stepping up. Would that be a net incremental positive to the earnings run rate? Or will Region 6 not fully offset the step-down in Bankstown?

Well, Bankstown have been a pretty material contributor to Tim, I think we've called that out. And the resetting of Region 6 will have a pretty good impact, I think, in terms of bridging that gap. So we're not expecting any big step up, but we're not expecting any big show or either.

Understood. And just one last one. Just on underlying -- sorry, just on one-off costs expected in FY '26. So there's some further one-offs you'll take loading on the IT investments. Are we expecting any sort of tender one-off costs? Are you going to take any one-off costs associated with transition costs on the new KI vessels when they come in? What else might be in that bucket?

No, that's it at the moment, Tim. So just the new HR finance systems. So yes, that's what we're planning or we've got line of sight on at the moment.

So KI will be just taken as an underlying result, nothing sort of push over the line there.

Yes.

Your next question comes from Cameron McDonald with E&P.

Just in terms of the tourism portfolio is, you've said that there's interested parties, domestic and international for the whole or part of the portfolio process is underway. What exactly is the timing on this? And how many parties are actually involved whereabouts are they in their due diligence? And when do you think you'll be in a position that you'll at least get an indicative bid?

As called out in the presentation, so we're in the middle of stage 1 of the process. So we've got good interest and a lot of people in the data room having a look around sign-ups NDAs. We are at the stage of informal MBIOs, but we do expect those to come through in the near term, and then we'll be into Stage 2 the timing of Stage 2, we've obviously got a timetable that we would like to run through. But it is very uncertain depending on who the ultimate parties are will take through to Stage 2. So a bit harder to provide direct guidance on when we're going to have an ex on that. But we certainly expect that during the first half.

Okay. So first half '26 6, you'll at least have some sort of update?

Yes, I think there will be an update definitely in the first half. Now I'm hoping we'll get to get it done by them. But it's just a bit hard to give specific timings, given we don't know how exactly the Phase I process is going to run just yet.

And just -- sorry, how many parties are actually involved?

Multiple. Lots. So we don't want to give the exact number, but there's strong interest.

Okay. Great. And then just in terms of the guidance for next year, the range 4.2% to 8.8% EBITDA growth. You've just done sort of 7.3%. Is there any reason that other than just growing off a slightly higher base, why the bottom end of the range would be sort of significantly below the growth that you've currently got and the momentum in the business?

I mean it just goes to some of the uncertainties that we called out earlier. The big ones being timing of the ramp-up in the U.S. So as we called out, when those contracts were awarded in June we're not expecting material contributions from them over FY '26, but there is a [indiscernible] the exact timing of how those play out.

And then the other one that does have a material impact is around banks down and when that does way, as we've called out, we expect it to run the majority of FY '26. But if that doesn't run for the full period, there is a potential gap there versus what we've delivered this year.

Got it. And then just staying on international bus with Liverpool, what's the timing on the bidding there, please?

So the Tranche 1 and Little pool bids go in, in September, so getting close to its being submitted. So expecting results announced by the end of the calendar year.

And how many buses is Tranche 1 for?

You order about 300 across 2 contracts.

Your next question comes from Jason Palmer with Taylor Collison.

Just one question I had was around the effective tax rate assumptions on the guidance. I think in this year, it was around 19.2%. And I think next year, you guide is 22% to 25%, just maybe if you can take that.

What's your question, sorry, Jason.

Sorry, maybe you can't hear me, okay. The effective tax rate this year was 19.2%. The guidance is 22% to 25%. Just curious to understand what's sort of driving that? And how conservative that is.

Yes. So in the capital management allocation framework, we've got a range that we stated there at 22% to 25%. And where we sit at the moment, we're probably coming in at the low end of that range for FY '26. So that I'm pretty comfortable around that 22% for '26.

Okay. And so is that just a mix change in terms of a greater percentage of earnings relative to the marine tax incentive? Or I mean what's driving that?

Yes. I mean a lot of it comes from international contribution as well, particularly in the U.S. with state and federal in terms of how the mix of earnings and how that's attributable in that position. The marine training incentive is pretty steady. So it's more driven from the international differentials.

Okay. And just for further house keeping in respect to that, and a good portion of growth in the business in the future is being delivered by the U.S. business. Is it fair to assume that your effective tax rate will step up again in '27?

Look, it will be -- we're comfortable in the range. We've got, Jas, 22% to 25%. So I think 22% is a reasonable number to have in '26 and then depending on mix, but it will be in the range, I think the '26 will be the low end.

Next question is the follow-up from Aryan Norozi with Barrenjoey.

So just a quick one. The EBITDA the first half to second half. Should we expect a similar skew to FY '25 when it was 46%, 54%? Or would it be the normal 49-51 that you've historically done? Can you just we get expectations in check the first half reporting?

Yes, correct, it will be the more normal one that you mentioned, Ary, because we won't have the impact of the bankruptcy in the industrial sector contract in the U.S., which drove a big part of the SKU last year. So there will still be a skew, but it won't be as significant as it was in FY '25.

Got you. And then depreciation, so obviously, you've guided $130 million this year. There's a CapEx of roughly $20 million, so they don't start hitting the P&L until partway through FY '26. Just in terms of FY '27 depreciation. Should we expect sort of more than sort of CPI sold growth in depreciation in fiscal '27? Or -- yes, I know it's 2 years away, but just...

I don't think so, Ary. I don't think so, Ary, because we're going to have some assets retire that will be replaced by the new. So there's depreciation dropping off as well. So there's a bit of duplication this period. So just be CPI increases. This is kind of a new base.

And the Kangaroo Island vessel transition costs that Tim sort of alluded to earlier, is that assumed within the guidance range in terms of taking that above the line? And so we shouldn't expect any negative surprise around you guys, I think some sort of integration or transition costs associated with the switch over of the new vessels?

I mean there's definitely going to be transition mobilization costs, but they're not below the line. They're part of the guidance included in the guidance provided.

There are no further questions at this time. I'll now hand back to Graeme Legh for closing remarks.

Thank you, Ashley, and thank you, everyone, for joining today. And I look forward to speaking with a lot of you over the next couple of weeks. Thank you very much for your time.

That does conclude our conference for today. Thank you for participating. You may now disconnect.