Australian transport services provider Kelsian Group (ASX: KLS) is planning to exit its founding tourism operations which will see a raft of services under the SeaLink brand nationally put on the auction block as the company looks to increase the stability of its revenue base.
Up for sale are ferry services and resorts at some of Australia’s most iconic tourism destinations such as K’gari (Fraser Island) and the Whitsundays in Queensland, Rottnest Island in Western Australia, Bruny Island in Tasmania and a host of Sydney Harbour cruise operations.
The plan, which was announced today, was flagged at Kelsian's annual general meeting last October as part of a strategy to identify new opportunities to improve returns and optimise its business portfolio.
The tourism operations account for about $160 million in annual revenue for Kelsian, or about 8 per cent of the $2 billion revenue achieved in FY24.
The sale also marks a shift away from Kelsian’s business foundations since the company changed its name in 2021 from SeaLink Travel Group. The new name – an anagram of SeaLink - reflects a major diversification of the business in recent years.
Despite a solid performance from the SeaLink tourism division, Kelsian’s latest full-year earnings were boosted by the 2023 acquisition of US motorcoach services group All Aboard America! Holdings, Inc. and growth in its Australian bus services business.
“The management team has undertaken a comprehensive strategic portfolio review, and a sale of the tourism portfolio was assessed to be in the best interests of shareholders,” says Kelsian chair Fiona Hele.
“The divestment of the tourism portfolio will see Kelsian emerge as a more infrastructure like, commuter and contracted business, allowing us to focus on delivering essential journeys through marine, bus and motorcoach transport.
“Many of the continuing businesses are underpinned by defensive long-term government-backed service contracts, with cost base protection, generating even more predictable earnings and cashflows.”
Hele says the divestments of Kelsian's tourism assets will include “market leading tourism centred businesses with established market positions and robust growth potential”.
“We believe this is an appropriate time to consider their ownership and explore opportunities for these businesses to continue to grow with a new owner,” she says.
The assets for sale include Kingfisher Bay Resort, K’gari Beach Resort and K’gari Explorer Tours; SeaLink Sydney Harbour, including Captain Cook Cruises, The Jackson and The Starship Group; Murray Princess; Adelaide Sightseeing; SeaLink Whitsundays, including Red Cat Adventure tours; SeaLink Tasmania; SeaLink Northern Territory; and SeaLink Western Australia, including Captain Cook Cruises, SeaLink Rottnest Island and Swan Valley Tours. The WA sale does not include the Transperth ferry.
Kelsian says will only proceed with the sale if it achieves value from a buyer that is in the best interests of shareholders.
Proceeds from the sale will be used to retire debt, which stood at $933.2 million at the end of December last year.
Kelsian says it may also look at acquisitions within its marine, bus and motorcoach transport businesses.
Once a sale of the tourism assets is completed, Kelsian’s marine division will comprise the SeaLink Kangaroo Island ferry service, Gladstone Ferries, SeaLink South East Queensland which services North Stradbroke Island, Southern Moreton Bay Islands and the Moggill crosx-river ferry services, SeaLink North Queensland which operates Townsville ferry services to Magnetic Island and Palm Island, Transperth ferry services, and Brisbane River City Ferries.
The company says all of these operations have the same “infrastructure like characteristics” of the company’s public bus and motorcoach passenger service businesses in Australia and overseas making them “less sensitive to economic conditions”.
“We recognise that a potential divestment of this scale is significant for Kelsian and for our employees and communities affected by these potential changes,” says the company.
“We are committed to thoughtfully managing the process for potential divestment of the tourism portfolio with support and clear communication to our affected employees and communities.”
Kelsian says the sale plans will not impact the group’s earnings guidance for FY25 which the company announced in March would see underlying EBITDA land between $283 million and $295 million.
Kelsian’s shares were trading 12.5c higher at $2.695 at 11.58am (AEDT).
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