Good morning, ladies and gentlemen. My name is Fiona Hele, and I am the Chair of Kelsian Group Limited. On behalf of the board of directors, I thank you for joining us here today at the U City Function Centre, and I welcome those listening online. I am also pleased to welcome those shareholders here today who are also previous board members. The company secretary has confirmed a quorum for the meeting, and so I do declare the meeting open.
I would like to acknowledge that today we meet in the traditional country of the Kaurna people of the Adelaide Plains and pay respect to elders past and present. We recognize and respect their cultural heritage, beliefs, and relationship with the land.
In person today in Adelaide, I have got the following directors to the left of myself. From far left, Jackie McArthur, Terry Sinclair, Diane Grady, Caroline Elliott, and Terry Dodd. I have got Graeme Legh, our Group Chief Executive Officer, and Kelsian joint company secretaries Michelle Evans and Andrew Muir are also present. We have also got, thank you, Nigel Stevenson from Ernst & Young, our external auditor, who will be here to answer questions as required in the meeting.
On behalf of the board, I thank you for joining us and for your continued interest and support of Kelsian. This morning, I will reflect on the considerable progress made during financial year 2026 and the strong position in which Kelsian has entered this financial year. FY 2026 was an important year for Kelsian. We delivered another record financial result, strengthened our balance sheet, and took a significant step in reshaping our portfolio. The strength of the result was evident in our cash generation. Net operating cash flow reached AUD 220.1 million, while leverage reduced to 2.46x at 30 June, within our target range. The board declared a fully franked dividend of AUD 0.10 per share, bringing the full-year dividend to AUD 0.18 per share.
Importantly, our results demonstrated the resilient nature of Kelsian's earnings, particularly in the second half of the year when we delivered a strong financial performance despite businesses globally experiencing continued inflationary pressures and significant fuel price volatility. These results reflect the essential nature of the services we provide, the indexation mechanisms protecting a large portion of our fuel and wage costs, the strength of our contracted operations, and above all, the commitment and professionalism of our people. While we are pleased with this progress, we recognize that strong financial performance alone is not enough. Our focus remains on translating our operational strengths into improved returns on capital and sustainable long-term value for our shareholders.
The completion of the sale of our tourism portfolio to Journey Beyond on 30 September was an important milestone in this journey. The divestment positions Kelsian as a more global commuter and contractor transport business with lower capital intensity, less exposure to discretionary consumer spending, and a greater proportion of earnings supported by long-term government and corporate contracts. This divestment has brought considerable change for our people. On behalf of the board, I sincerely thank our marine and tourism teams for their contribution to Kelsian and for the patience and professionalism they demonstrated throughout this transition. Their work has been an important part of Kelsian's development, and we are extremely grateful for it.
This transaction has strengthened our balance sheet and provides us with greater flexibility. However, it does not change the discipline with which we deploy capital. Our capital management and allocation framework provides a clear basis for decision-making on leverage, dividends, investment returns, and the deployment of surplus capital. We will continue to assess opportunities against their strategic merit, risk profile, and potential to generate attractive returns.
Turning now to Kangaroo Island, I acknowledge that the delays have been frustrating for the KI residents, and I am thankful for the patience and understanding they have shown us. I am delighted to share that Wanggami commenced services this morning, I think at 5:30 A.M. this morning, and it was very smooth, I hear, alongside Sealion 2000. Her sister vessel, Ruwi, is on her way to Australia as we speak. Terry Dodd has just advised me that it is currently, and he showed me on the map, it is north of the Lombok Strait, just northwest of Bali, so it is well and truly on her way.
Safety remains our highest priority and underpins every aspect of our operations. During FY 2026, we achieved significant improvements in both our lost time injury frequency rate and our total recordable injury frequency rate. The board remains focused on safety, leadership, and effective controls to manage critical risks and accountability throughout the business. Kelsian operates in inherently high-risk transport and marine environments. Every day, our people carry significant responsibility for the safety of our passengers, employees, and other users of public roads and waterways. Serious transport incidents remain our most significant health and safety risk.
Tragically, a passenger died in June 2026 following an incident involving our Australian bus operations. Our thoughts remain with the passenger's family and all those affected. An independent review is underway, and we will carefully consider its findings. Safety remains our key priority, and we continue to focus on enhancing our controls, systems, and practices. The board has withheld the safety component of short-term incentive awards pending the outcome of this independent review.
Turning to remuneration, we have listened carefully to feedback and made changes to strengthen the alignment between executive rewards and long-term shareholder outcomes. Our financial measures focus executives on earnings growth and capital allocation decisions that deliver strong risk-adjusted returns. Half of any final short-term incentive award is deferred into equity. Return on invested capital now sits along earnings growth and relative shareholder returns in the long-term incentive plan. Minimum shareholder requirements also apply to directors and executives. We continue to review and benchmark our remuneration approach to ensure it supports our strategy, reflects shareholder interests, and enables us to attract and retain talent.
During FY 2026, the board undertook extensive benchmarking against comparable organizations. We will continue to review our approach to ensure it remains appropriate, competitive, and aligned with our strategy and shareholder interests. Alignment with shareholders also matters around the board table, and all Kelsian directors do own shares in the company. Good governance ensures the board continues to focus on the company's changing needs while maintaining the right mix of corporate history, experience, and skills.
I am delighted today to be announcing that Graeme Legh has been appointed to the Kelsian board, in addition to his ongoing role as Group Chief Executive Officer. During the past 19 months, Graeme has led Kelsian through the delivery of record FY 2026 results and the tourism portfolio divestment. His depth of experience and knowledge of the business will be valued to the board, and I am confident he will make a significant contribution.
Neil Smith resigned from the board in February 2026. Neil was a founder of Transit Systems, which Kelsian acquired in 2020, and he played an instrumental role in building the international bus and marine operator that Kelsian is today. I welcome Neil, who is in the room today, and on behalf of the board, I sincerely thank him for his significant contribution over the past 16 years, and we wish him all the best in his retirement.
We regularly review the board's mix of skills and succession plan to reflect the needs of a more focused international company. Last year, Terry Dodd announced that he would not seek another term beyond this year, and a search for a new director is well advanced and we will update shareholders at the appropriate time. Alongside board renewal, our oversight throughout FY 2026 continued to cover strategic and operational matters, including operational risk, cyber resilience, implementation of the new global finance platform, and the opportunities and risks associated with climate change. These matters are important in protecting the business today whilst ensuring we are equipped to address the challenges and capitalize on the many opportunities ahead of us.
As Australia's largest multimodal transport provider, Kelsian plays an important role in supporting the transition to lower emissions transport and encouraging greater use of public and shared transport. During FY 2026, we continued to work closely with our government customers and industry partners to expand our zero-emission bus fleet. We also supported depot electrification projects in New South Wales, South Australia, Western Australia, and Victoria, providing the infrastructure needed to deploy and operate these buses. These initiatives are particularly important at a time when households are increasingly focused on transport affordability.
Governments are responding by investing in more frequent, reliable, and accessible public transport to help ease cost of living pressures, reduce congestion, and support sustainability goals. Importantly, this shift towards public transport supports Kelsian's long-term growth outlook. Government investment can create a reinforcing cycle. Better services attract more passengers, supporting further investment in transport networks. Through our partnerships with government and industry, Kelsian is well-positioned to contribute to and support this transition.
Despite delivering record financial results, our share price has been disappointing. I understand and I share this frustration. The board recognizes that our success must be measured not just by our operational achievements and financial results, but by the value we create for those who invest in Kelsian. Our engagement with investors following the results was constructive, and it was encouraging to receive the positive feedback on our operating performance, improved cash generation, and strengthened balance sheet. Our responsibility is to turn these achievements into stronger shareholding returns and build lasting value for our shareholders. The board and management remain focused on delivering against our commitments, improving return on invested capital, and pursuing growth with discipline. We recognize that confidence must be earned through consistent performance and clear communication, and we remain committed to delivering on this.
In closing, I would like to thank Graeme and his leadership team for their hard work and commitment in a demanding yet transformative year. Thank you to my fellow directors for their contribution, diligence, and support. Most importantly, I thank Kelsian's people. Across our global operations, you continue to deliver safe, reliable transport solutions to passengers, customers, and communities every day. You have continued to do so through a period of considerable change, and your contribution has been fundamental to our success.
To our shareholders, thank you for your continued support and interest in Kelsian. After a year of change, we have taken an important step towards a more focused commuter and contracted transport business. Kelsian enters FY 2027 with strong operational momentum, a strengthened balance sheet, and a substantial pipeline of organic growth and acquisition opportunities. I will now hand over to Graeme, who will discuss this in more detail.
Thank you, Fiona, and good morning, everyone. I would like to start by reflecting on the significant progress Kelsian has made over the past two years and why that progress gives me confidence in our future. When we announced the portfolio review in October 2024, we set out to improve the performance of our core operations, strengthen our balance sheet, and establish a disciplined framework for sustained future growth. Today, I am pleased to report back on the significant progress delivered against each of these priorities.
We undertook the review of our portfolio to ensure our operating businesses were aligned to our strategy and delivered appropriate returns. The review led to the tourism portfolio divestment, which we completed at the end of September. Kelsian is now a more focused commuter and contracted transport business with lower capital intensity, reduced exposure to discretionary consumer spending, and a more stable earnings base. We are committed to strengthen the balance sheet. Through earnings growth, strong cash generation, and disciplined CapEx, by June 30 of this year, we have brought leverage within our targeted range of between 2x and 2.5x underlying EBITDA. This was achieved before completion of the tourism portfolio divestment, and the receipt of these proceeds has since further strengthened our financial flexibility.
We also committed to greater discipline and transparency in how we make investment decisions. We introduced our capital management and allocation framework, setting clear targets for leverage, dividends, capital expenditure, and investment returns. Within our core operations, we said we would focus on efficiency and operational excellence. In Australian bus, we have improved returns from our Sydney contracts and secured an extension for our Region 6 services.
We said our international platforms would provide opportunities for growth. In the United States, we have delivered exceptional growth from both new and existing customers, supported by investment in fleet, depots, and local management capability. In Singapore, we have secured contract extensions and expanded our core public transport operations. We have also diversified by winning and transitioning the new Sentosa services. In the U.K., we are one of only a handful of operators to be awarded bus franchise contracts as a significant regional bus market undergoes a structural shift to a contracted bus public transport model. And in New Zealand, we have secured long-term Auckland ferry contracts, providing an entry into an attractive and adjacent market.
We have also continued to invest in the long-term capability of the business, including in new corporate systems. Taken together, these achievements put Kelsian in a much stronger position to grow. We have a more focused portfolio, a stronger balance sheet, and established operating platforms in markets where we see substantial opportunities. Our responsibility now is to convert these opportunities into sustainable earnings growth and improve returns on capital. We plan to pursue that growth with ambition and discipline to deliver long-term shareholder value.
Before turning to the FY 2026 result, I want to provide some background setting out the scale of our operations and the key characteristics of our business. Kelsian is a leading multimodal transport operator connecting people and places across Australia, the United States, Singapore, the United Kingdom, and the Channel Islands. As at 30 June 2026, we employed 13,300 people and operated more than 6,300 buses and 120 vessels. Over the last 12 months, our services delivered 384 million customer journeys.
In Australia, we're the largest multimodal bus and ferry operator. In the United States, we're the second-largest motorcoach operator. In Singapore, we're the third-largest public transport bus operator. In the U.K. and Channel Islands, we have established a platform from which to pursue regional bus franchising opportunities. Our operating capability, scale, and long-term customer relationships provide the strong foundation from which to continue our growth.
Turning to our financial performance for the 12 months ending 30 June 2026, representing another record result for Kelsian. Group revenue increased by 8.8% to AUD 2.4 billion, with growth achieved in all geographies. Underlying EBITDA increased by 10.8% to AUD 315.8 million, which, after adjusting for the delayed Kangaroo Island mobilization costs, was at the top of our FY 2026 guidance range. With this result, over the last three years, underlying EBITDA has grown at a compound annual rate of approximately 25%. Underlying EBIT was up 14.5% to AUD 155.7 million, and underlying net profit after tax and before amortization was up 17.2% to AUD 111.1 million.
The result demonstrates the resilience of our business model. The majority of FY 2026 revenue was contracted, and contractual indexation mechanisms provide important protection against inflationary pressures, including the significant volatility in fuel prices witnessed in the second half of the period. Growth was supported by new contract wins and existing contract growth, including in the United States, the full-year contribution from the Bankstown rail replacement services in Sydney, contract indexation, 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 AUD 220.1 million, up 7.3%, and leverage reduced to 2.46x within our target range. 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 AUD 63.5 million, up 16.6%.
FY 2026 was a year of operational execution and meaningful strategic progress. 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 stronger charter contribution. In Australia, operating performance in our key urban public transport contracts improved as service changes were implemented and the impact of depot electrification and government fleet replacement delays became more manageable. These initiatives helped offset the higher repairs and maintenance costs associated with operating older diesel vehicles.
We signed a two-year extension of our Region 6 contract in Sydney on improved terms and successfully commenced the Ipswich and Logan services in Queensland. In the U.K., the award of Liverpool bus contracts validated our strategy of establishing an operating presence ahead of regional 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 platform for further growth in New Zealand. Across the group, our focus remains on operational excellence, disciplined capital management, and growth that meets our investment return hurdles.
As Fiona has emphasized, safety remains our highest priority. It is also fundamental to the quality of the service we provide and the confidence our customers place in us. The improvement in our workplace injury frequency measures in FY 2026 is encouraging. Our responsibility is to keep strengthening safety leadership and the controls that protect our people, passengers, and other road and waterway users. We must apply that focus consistently across every operation. We continue to work with our government and corporate partners to improve service quality, support mode shift to public transport, and enable the transition to lower-emission fleets and infrastructure.
As at June 30, we operated 454 zero-emission buses across Australia, and our Australian bus Scope 1 emissions intensity reduction target remains on track. We directed AUD 4.2 million to Indigenous suppliers during the year and continued our partnership with the Royal Flying Doctor Service. These partnerships reflect the contribution our businesses make to the communities in which we operate.
Our capital management allocation framework provides the discipline for our next phase of growth. It starts with cash generation and the investment needed to maintain safe, reliable operations. Following the divestment of the tourism portfolio, our average annual net sustaining CapEx requirement has reduced from approximately AUD 85 million to AUD 73 million. Our leverage target remains between 2x and 2.5 x underlying EBITDA, and our dividend payout ratio is 40%-60% of underlying net profit after tax and before amortization.
All growth investments must be aligned with our strategy, accretive to earnings per share before amortization, and deliver returns above our pre-tax cost of capital within three years. At the group level, we are targeting a return on invested capital of at least 200 basis points above our pre-tax cost of capital over the medium term.
Today, we are reporting our progress against these targets we set out in the framework, with our recent initiatives and financial performance driving improvements against all key measures. Importantly, as at June 30, leverage was within our target range, and the tourism portfolio divestment has further strengthened that position. We also continue to make steady progress improving the group's return on invested capital, with this measure now central to how we assess performance and prioritize investment decisions.
We have made a solid start to FY 2027, with first quarter trading in line with our expectations. It was pleasing to successfully complete the tourism portfolio divestment on September 30, concluding the sale process we first announced in April 2025. The sale delivered gross cash proceeds of AUD 149.9 million. We have retained the Rottnest Island ferry operation in W.A., which was previously included in the sale perimeter. Kelsian will continue to operate the Rottnest services alongside our contracted Transperth ferry operations in W.A.
With the divestment complete, Kelsian is a more infrastructure-like contracted people transport business with lower capital intensity and a more stable earnings base. Moving forward, our focus and resources will be our core bus, motorcoach, and marine transport businesses.
We also continue to progress the new opportunities that will commence in FY 2027. In the U.K., mobilization is underway for the Liverpool bus contracts, and we have been nominated as preferred bidder for contracts in West Yorkshire, with services scheduled to commence in the second half of FY 2027. In New Zealand, preparations are progressing for the Auckland ferry contracts commencing in July 2027, with the acquisition of Auckland's Belaire Ferries expected to complete in the coming weeks. This service will give Kelsian its first operations in New Zealand, an attractive and adjacent market for contracted public transport services. In the United States, we continue to see strong momentum in industrial employee transportation, with growth in FY 2027 from both existing and new contracts.
Given the start to this financial year, today we reiterate the earnings guidance provided on the 30th September for underlying EBITDA of between AUD 295 million and AUD 310 million, assuming no significant deterioration in the operating environment.
Turning now to important updates for Kangaroo Island and the commencement of our new long-term agreement for the KI ferry service. Under this new contract, SeaLink is delivering two new vessels and associated landside infrastructure that will support this critical transport link for the next 25 years. I recognize that the delays in the construction and delivery of the new vessels have been frustrating for both the KI community and Kelsian shareholders.
Despite these delays, I am pleased to be able to confirm that the new infrastructure works and ramp upgrades were completed successfully during the three-day service shutdown last week. One of the existing vessels recommenced services utilizing the new infrastructure on Friday, and the first of the two new vessels successfully commenced operating full passenger services today. The second new vessel departed Indonesia this past weekend and is expected to arrive in Australia by mid-November, with its entry into service to follow the required preparations and approvals.
The new and identical vessels will deliver greater operating flexibility and provide a significant improvement in customer experience, with a more spacious, comfortable, and accessible journey between the island and the mainland. The purpose-built vessels are 10 meters longer and 2 meters wider than the existing vessels, offering around 65% more vehicle lane capacity per sailing. The roll-on, roll-off design and new shore infrastructure support faster, safer turnarounds and more daily sailings. The additional capacity will support demand growth over the life of the contract.
Delivering a project of this scale has not been without its challenges, but the commitment, determination, and collaboration of our team has been instrumental in reaching this point. Our focus now is completing the transition to the expanded ferry service safely while continuing to deliver a reliable and efficient service for Kangaroo Island.
As I noted earlier, the capital management allocation framework guides our future investment and capital management decisions with clear targets for leverage, return on invested capital expenditure, and dividend payouts. The proceeds from the tourism portfolio divestment will be applied in line with the framework and directed to where they best grow and optimize shareholder value. We see a compelling opportunity to build on the businesses we know, grow with our customers, and scale our international platforms.
At the FY 2026 results, we outlined our three complementary growth pillars. The first is to protect and grow our core markets, retaining contracts, improving service quality, and expanding with existing customers provide the foundation for sustainable growth. The second is international growth, scaling the established platforms we have in the United States and the U.K. and building our presence in New Zealand. These are markets where our experience and local capability give us a credible basis to compete and grow. The third is to pursue strategic opportunities, including selective bolt-on acquisitions that provide a strategic advantage, add capability, scale, or geographic reach, and meet our return requirements.
Across all three pillars, the objective is the same: growth that improves earnings per share, cash generation, and return on invested capital. For each of our three growth pillars, there are several near-term initiatives that we are focused on. Starting with our core markets, the Australian bus business has secured important contract extensions, and we continue to focus on service improvements, operational efficiency, and delivering growth services. There are also meaningful opportunities to expand. We have submitted a tender for bus services in Wellington and are pursuing a new tender opportunity in Queensland. In Melbourne, tenders covering around 40% of the city's bus contracts, representing approximately 800 buses, are in the market, providing a significant organic growth opportunity.
In the United States, the immediate opportunity is to build on the strong momentum in industrial employee shuttle services. We continue to grow our services for our existing clients and are actively pursuing new contracts. These large industrial projects require reliable mass transport solutions and our established facilities, fleet, and local relationships position us well to capitalize on the ongoing investment into LNG, energy, infrastructure, and data center projects.
In regional U.K., the shift to bus franchising is opening markets in which we can apply our proven operating expertise and skills from our long track record of successfully delivering contracted public transport bus services. The Liverpool contract wins and preferred bidder status for contracts in West Yorkshire are important first steps, with mobilization of these contracts underway and services commencing in FY 2027. In New Zealand, the awarded Auckland ferry contracts and planned acquisition of Belaire Ferries provide the initial platform from which to build.
Alongside organic growth, we continue to explore targeted acquisitions that strengthen our existing platforms. Further acquisitions in the United States are being explored. Although AAAHI is the second-largest motorcoach operator, the market remains fragmented, providing scope for selective acquisitions to add local capability, customer relationships, and improve our geographic reach. Outside the U.S., in our other existing markets, we continue to identify and pursue strategic acquisitions that will enhance our position for key identified growth opportunities. Our approach will be disciplined. Any acquisitions must have a clear strategic purpose and meet our stated return requirements. We have an attractive pipeline across the three growth pillars. Our task is to convert the right opportunities into profitable services while continuing to improve the performance of the businesses we operate today.
To conclude, I believe Kelsian is well-positioned for the next phase of its development. This confidence is grounded in both our proven capabilities and in the opportunities we're actively pursuing, growing in the United States, competing for regional bus franchises in the U.K., and adding to our contracted operations across Australia, Singapore, and New Zealand. We have a more focused commuter and contracted transport portfolio, supported by long-term government and corporate customers, with the divestment reducing our exposure to discretionary consumer spending and lowering sustaining capital requirements of the portfolio.
Our defensive earnings have protections from fuel price movements and other inflationary pressures through direct contract indexation mechanisms or cost recovery arrangements. The FY 2026 result demonstrated how these protections support the resilience of the business. We operate established platforms in our existing markets with their scale, local expertise, and customer relationships supporting further growth. Our markets offer strong organic growth with a pipeline of contract opportunities across all three operating divisions, and we're also actively exploring several attractive acquisition opportunities.
The last two years have shown how we execute against our stated priorities. Now we plan to build on that progress, retain and improve the core business, deliver on the contracts already won, and convert our pipeline into sustainable growth in earnings and returns. I'm confident in our people, our operating platforms, and the opportunities ahead, and I look forward to continuing to report to you on our progress.
Finally, I would like to thank the board and also thank all of our people across the group for their dedication and the service they provide to our customers and communities every single day. To our shareholders, thank you for your continued support. I'll now hand back to Fiona to continue with the meeting.
Thanks, Graeme. We'll now move on to the formal part of the meeting. The notice of meeting was distributed to all members on September 25, 2026 and lodged with the ASX on the same date. A copy is available on the Kelsian website. As Chair of the meeting, I will take the notice of meeting as read. The notice of meeting provides details of the motions to be put to this meeting, and I will give shareholders the opportunity to ask questions and comment on each motion.
Today, we'll be voting on all resolutions by conducting a poll. I'll go through the voting instructions again at the end of the meeting, and where members have a reasonable opportunity to speak. On entry, you each will have been issued with a card, a pink card that entitles you to vote on resolutions one to six and to ask questions, an orange card that entitles you to ask questions but not to vote, or a white card for visitors who cannot vote or speak at the meeting. Only holders of the pink cards are entitled to vote. The poll for each resolution will be open during each item, and the polls will be conducted for all resolutions at the end of the meeting.
I have been advised by our share registry that all proxies received have been checked, and I declare them valid for the meeting. The proxy votes for each resolution will be displayed on the screen for information. A summary of proxies and voting outcomes will be lodged with the ASX once finalized. As Chair of the meeting, I will vote all directed proxies in accordance with directions given by shareholders. I am also holding open proxies as Chair of the meeting. These will be voted in favor of resolutions one to six where I have been duly authorized to do so. Any directed proxies not voted at the AGM automatically default to the meeting chair, and I will vote those as directed.
In accordance with the company's constitution, each shareholder entitled to attend and vote at the meeting is entitled to a direct vote on a resolution. I will provide an opportunity for questions and comments in respect of each of these items as we are introduced. We will also outline proxies received for each resolution as they are put to the meeting.
Shareholders and proxyholders will also be able to ask general questions relevant to the AGM near the end of the meeting. At the appropriate time, please raise your pink or orange card to indicate that you have a question or comment you wish to make. When I acknowledge you, please wait for a microphone to be brought to you, state your name, and put your question or comment to the meeting. I do ask that you keep your questions short and to the point, and each member should restrict themselves to no more than two questions per shareholder or proxyholder to enable as many shareholders to participate as possible. We will endeavor to answer as many questions as possible in the time allocated, but reserve the right to rule out questions not relating to the meeting or out of order.
There are seven items of business on the agenda, with six of those items containing resolutions as listed in the notice of meeting and before the meeting today. The first item of business before the meeting is to receive and consider the financial report, the Directors' report, and the Auditors' report for the year ended 30 June 2026. No vote is required for this item. The financial statements have been made available through our website and lodged through the ASX.
Now is the right time to ask questions about the business or anything contained in the financial report, the Chair's report, and the Group CEO report. We also have Nigel Stevenson here from Ernst & Young, our external auditors. Nigel is able to answer any questions that relate to the conduct of the audit, the independence of the auditor, Kelsian's accounting policies, and the preparation and content of the Auditor's report. If you have any questions on the Remuneration Report, could you hold them to the next item, please. I now invite any questions you may have on the financial statements or the company's operations, and please raise your pink or orange card to indicate. James, thank you.
Yeah. Does it work? Good morning, Chair. My name's James Hahn, and along with my colleagues Greg O'Connell and Tony Greco, we represent the Australian Shareholders' Association. Today, we represent 16 shareholders with 138,000 shares. Thank you for meeting with us and discussing issues that we brought up.
For the general meeting's information, I have a couple of following questions. I had three, but I think you've answered one. As a background, I will just say from our observation, Kelsian is in a competitive business environment operating in five different regulatory environments, Australia, U.K., U.S., Singapore, and the Channel Islands, and three transport industry domains, buses, motorcoach, and marine. Necessary skills for the board and operating business include government procurement, industrial relations, service performance, route economics, franchising, and the list goes on.
The first question I had, but I think has been adequately answered, is how do you determine the capital allocation and pricing of each different contract in each precinct to maintain profit above weighted average cost of capital? If you wish to say more on that, you can, but we're okay with the statement of 2% being the target for this coming year. How are the skills required by both the board and the Kelsian organization identified, tracked, managed, and developed to ensure opportunities can be identified, won, and executed for the long-term benefit of the company, including customers and shareholders?
Basically, what we're asking is how do you guys identify the skills that are required and then go about putting them into your organization? Because we see it as having a fairly high level of complexity. Just a quick question if the Chair wishes to answer it. What have been your major challenges in the past 12 months? For example, divesting tourism business division, renewing the board, or changing the company's management, which is an acknowledgment that you guys have basically been through the wringer. So feel free to make comment on that.
Thanks, James, and welcome. It's good to see you again, and Greg and Tony. I think you've actually answered the questions you asked, but I will have a bit of a go, and I might hand to Graeme because I know you heard from me last week, so you might want to hear from Graeme's perspective.
I'll talk to the board, and I did mention in my address that obviously with the diversity of thinking, it's really important to pull together a board that has a lot of different cross-section of skill sets, international and local experience, industry experience, and the list goes on. My role as Chair, I work closely with the board to make sure we've got a really clear succession plan in place and to make sure that we feel that we are getting enough refreshment of the board. I do feel really comfortable that we have had some really solid refreshment and some great additions to the board, and I am really comfortable that we have got a good board moving forward for the next stage of Kelsian.
In terms of attracting those people, obviously, I was clear to say that today we have got a recruitment process in place where we have done a global search, and we look forward to announcing something at the right time about our next board director.
I might hand to Graeme around the retracting of talent globally. I think that was another question.
Thanks, Fiona. I think it is clearly a very important issue for us. At the end of the day, we are a people business. Most of our operations are moving people, but we also employ 13,300 people across soon to be five different countries, and that does come with its challenges. I think the important way to understand our approach to how we manage that is we do consider ourselves a decentralized business. What I mean by that is we do actively try to empower our people who are on the ground in each of those jurisdictions to be able to make the decisions and find the solutions to the problems that they have in their individual market.
Our job centrally is not an easy job, but our focus is making sure we are working to have the right people on the ground in those locations who have the capability, capacity, and knowledge to make the right decisions for their local environment. Which means we are not trying to solve the problems of five different countries and three different sub-industries that we operate in centrally in the one location here in Adelaide. Our focus is very much decentralizing and empowering our important people in each of those markets, to make sure they do what is right for the challenges that they face.
Thank you for that. I was just looking to just suggest what was your greatest challenges for the year.
That's where I thought you answered it very well. Obviously, one of the biggest challenges we had was finalizing the divestment. Things beyond our control made it take a lot longer than we wanted, and it did put enormous pressure on the team. I expressed my gratitude to the team that really put a lot of work in to make sure that we continue to deliver safe and reliable services, whilst knowing that a lot of them were transferring to a different company. So we're very grateful for that.
Probably the other one, and I'm sure Graeme would feel the same, is obviously the frustration we had around the second vessel. Again, that was something that was very challenging, but we have got a great outcome, and we're really pleased that the vessel is on its way. Any other questions from anyone else on the floor?
Okay, I might keep moving if that's all right. Are there any other questions for our auditor? No. The notice of meeting also invited shareholders to submit questions to the auditor in relation to the audit or accounting policies. No written questions have been received at this stage.
I'll now move to the next agenda item. A resolution for adoption of the Remuneration Report is required to be considered and voted on in accordance with Section 250R of the Corporations Act. The Remuneration Report is set out in the 2026 annual report and details the company's remuneration framework, the remuneration outcomes for key management personnel, including directors and senior executives. The vote on the Remuneration Report is advisory only and does not bind the directors or the company. However, the board will take the outcome of the vote into consideration when reviewing the remuneration practices and policies of the company. I also refer you to additional comments that I made in my address about the significant progress we have made over the last few years.
Moving to resolution one as shown on the screen, the details of valid proxy votes received in respect of this resolution are shown. Is there anyone who wishes to speak in relation to this motion, James?
I don't think I need the microphone. It's customary for Australian Shareholders' Association to declare how they vote at the meeting if there's a voting item. So we are voting for all of the motions at this time.
Thanks, James. As detailed on the notice of meeting, the board recommends that shareholders vote in favor of this resolution, and the meeting chair intends to vote undirected proxies in favor. Voting exclusions apply for this resolution, and these were outlined in the notice of meeting. I now call for a poll to be held on resolution one. The poll will be held at the end of this meeting, together with other resolutions being put to vote.
Resolution two is a re-election of Caroline Elliott as a Director of the company. Information about Caroline is set out in the notice of meeting, and Caroline is considered by the board to be an independent Director. I now move resolution two for re-election of Caroline Elliott, as shown on the screen, and I invite Caroline to say a few words to shareholders regarding her re-election as a Kelsian Director.
Thank you, Fiona, and good morning, shareholders. It has been a privilege to serve on the Kelsian board, and I welcome the opportunity to stand for re-election. I bring financial, commercial, and operational experience, having spent much of my executive career leading businesses through growth, acquisitions, and change, as well as serving on boards across a range of industries. As Chair of the Kelsian Finance and Audit Committee, my focus is on rigorous oversight of financial reporting and on supporting the board's scrutiny of financial performance, capital management, and investment decisions. The establishment of a separate Safety and Risk Committee when I joined the board has enabled more focused oversight of these responsibilities by the committee. The capital management and allocation framework, implemented in 2025, provides an important foundation for assessing investment opportunities.
Following the recent divestment of the tourism portfolio, Kelsian has greater capacity to pursue growth opportunities across its core bus operations, particularly in the U.S., alongside U.K. bus franchising and organic growth in Australia. For me, the focus is on making sure we are financially disciplined in how we pursue these opportunities. We need to deploy capital in a way that delivers sustainable earnings per share growth and returns above our investment hurdles. We must also assess the quality and durability of those earnings, the risks we are taking, and the implications for the group's balance sheet. As committee Chair, I have also overseen the scoping and implementation of Workday, a new global finance platform, which went live on the 1st of July this year. Its implementation was a significant undertaking. The focus now is on ensuring the platform delivers the intended improvements in financial controls, reporting, and efficiency.
During my first year on the board, I served on the Safety and Risk Committee and have more recently joined the Remuneration Committee. Both are important areas of governance, particularly in a business of Kelsian's size and complexity, where safety, leadership, and accountability are critical to performance. My executive experience has taught me that having a good strategy is only part of the equation. Having the right people, systems, accountability to deliver on that strategy are equally important. As a Director, I see my responsibility as testing assumptions, challenging where appropriate, and holding management accountable for delivering results. I remain committed to ensuring Kelsian delivers on its growth opportunities through disciplined execution, strong governance, particularly in relation to safety, and a continued focus on shareholder returns. I would welcome your support for my re-election. Thank you.
Thanks, Caroline. Is there anyone who wishes to speak in relation to this motion or has questions for Caroline? No. Details of valid proxy votes received for this resolution are shown on the screen. The board, other than Caroline who makes no recommendation, recommends that shareholders vote in favor of re-electing Caroline Elliott as a director, and the meeting chair intends to vote undirected proxies in favor of this resolution. I now call for a poll to be held on this resolution, which will be held at the end of this meeting, together with other resolutions being put to vote.
Resolution three is the re-election of Jacqueline McArthur as a director of the company. Information of Jackie is set out in the notice of meeting. Jackie is considered by the board to be an independent director. I now move resolution three for re-election of Jacqueline McArthur, as shown on the screen, and I invite Jackie to say a few words.
Thank you, Chair. Good morning, everyone. I'm Jackie McArthur, and I joined the board in 2024, and I put myself up for re-election today. I've spent most of my career in supply chain and logistics and transport, and a few other industries, mainly in leading large and complex multinational businesses, both in Australia and overseas. Since becoming a director, I've served on several ASX boards. I'm currently on the boards of Cleanaway, Orora, and I chair Strait Link. All of these experiences have shaped my pragmatic and commercially-focused approach to strategy, operations, and people, and this is particularly relevant to Kelsian. You saw in Graeme's presentation, more than 13,000 employees globally, delivering over 380 million customer journeys in the last year alone. That's why I love this company. It's truly exciting.
At Kelsian, I chair People, Culture, and Remuneration, and over the past two years, we've been a busy committee and a busy board. We've made significant changes to executive pay to align executive reward both with performance and shareholder outcomes. I've also been an active contributor to the Safety, Risk and Sustainability Committee, bringing all of my practical experience to bear.
Looking ahead, I believe there are two priorities that are critical to delivering shareholder value. The first is something you've heard a lot about today, ongoing and continued disciplined capital allocation. Secondly, ensuring that our growth strategy delivers not only great financial performance but also is underpinned by strong operational performance. I believe that given my experiences, both in executive career and as a director, that I can be a strong contributor to the board on these priorities. I am committed to Kelsian delivering on its potential and hope you both share in my excitement for the future and that you support my re-election to the board today. Thank you very much.
Thanks, Jackie. Is there anyone who wishes to speak in relation to this motion or has questions for Jackie? Details of valid proxy votes received for this resolution are shown on the screen. The board, other than Jackie McArthur, who makes no recommendation, recommends that shareholders vote in favor of electing Jackie McArthur as a director, and the meeting chair intends to vote undirected proxies in favor of this resolution. I now call for a poll to be held on this resolution, which will be held at the end of this meeting, together with other resolutions being put to vote.
Moving on to special business. Resolution four is an ordinary resolution for the approval of grant of FY 2027 performance rights to the Group Chief Executive Officer. The purpose of the issue of the FY 2027 performance rights is to appropriately remunerate Mr. Legh and to encourage him to have greater involvement in the achievement of the company's objectives. The board considers that the grant of these performance rights creates alignment between Mr. Legh and shareholders, whilst ensuring that he does not enjoy the full benefits of share ownership, such as dividend and voting rights, unless and until these performance rights vest. Performance rights have been selected as they are a cash effective and shareholder aligned mechanism of incentivizing the Group CEO in a manner that is not overly dilutive.
Further information on this resolution was provided in the notice of meeting. Voting exclusions apply for this resolution, and these were outlined in the meeting. I now move resolution four, as shown on the screen, and is there anyone who would like to have a question or queries on this motion? No? Okay. Details of valid proxy votes received for this resolution are shown, and the board recommends that shareholders vote in favor of this resolution, and the meeting chair intends to vote undirected proxies in favor. I now call for a poll to be held on this resolution, which will be held at the end of this meeting, together with other resolutions being put to vote.
Moving to the next item. Resolution five is an ordinary resolution for the approval of grant of restricted rights to the Group Chief Executive Officer. Consistent with current short-term incentive arrangements, these restricted rights form part of the short-term component of the Group CEO's remuneration arrangements in satisfaction of the deferred component of his FY 2026 STI award. As described in the Remuneration Report, the actual FY 2026 outcomes were determined based on performance hurdles aligned to the strategic objectives of the company and its operating business units.
Outcomes of two of the STI objectives were awarded on a conditional base, and the associated restricted rights are included in the total number for which shareholder approval is sought. Offer of the relevant number of restricted rights reflecting the amounts awarded on a conditional basis will only be made once the conditional amounts become payable by the company. In the event that the conditional amounts do not become payable, these rights will be canceled.
Further information on this resolution was also provided in the notice of meeting. Voting exclusions apply for this resolution, and these were also outlined in the notice of meeting. I now move resolution five, as shown on the screen. Is there anyone who wishes to speak on this motion? Details of valid proxy votes received for this resolution are shown. The board recommends that shareholders vote in favor of this resolution, and the meeting chair intends to vote undirected proxies in favor. I now call for a poll to be held on this resolution, which will be held at the end of this meeting, together with other resolutions being put to vote.
Resolution six is an ordinary resolution for the approval of the insertion of proportional takeover provisions into Kelsian's constitution. The notice of meeting includes details for this item, but in summary, reinsertion of the proportional takeover provisions into the constitution will provide shareholders with the choice of considering whether to accept a proportional takeover bid for what might become control of the company. If Clause 25 is reinserted and a proportional takeover bid is approved by shareholders under this clause, each shareholder will have the right to make a separate decision whether that shareholder wishes to accept a proportional takeover bid for their own shares.
The new Clause 25 is substantially the same form as the expired Clause 25 included in the company's constitution at the time of its admission into the ASX in 2013. The full text of Clause 25 is in the notice of meeting in Annexure A. I confirm that as at this date, the board is not aware of any proposal for any person to acquire or increase the extent of a substantial interest in the company from its current level. I now move resolution six as shown on the screen. Is there anyone who wishes to speak in relation to this motion?
Details of valid proxy votes received as shown on the screen. The board recommends that shareholders vote in favor of this resolution, and the meeting chair intends to vote undirected proxies in favor. I now call for a poll to be held on this resolution, which will be held at the end of this meeting, together with other resolutions being put to vote.
Now that we have finished the itemized business of the meeting, I will address any general questions that relate to this AGM. If there are no questions, we will now move on to the poll on resolutions one through to six. The share registry, Boardroom Limited, has been engaged to conduct a review of the poll papers and procedures before a determination of the results on any resolution are made. I appoint Stacey Spence of Boardroom Limited as a Returning Officer. Once all poll results are determined, I will arrange for the results of all the polls to be announced and advised via the ASX shortly after this meeting.
As a reminder, on entry you will have been given a pink, orange, or white card. The persons entitled to vote on the polls for resolutions one through six are all shareholders, representatives, and attorneys of members, and proxy holders who hold pink voting cards. If you are attending the meeting in more than one of those capacities, for example, as a shareholder and also as a proxy holder, you should have been issued multiple voting cards. Detailed on the reverse of your voting card are the resolutions being put to the poll, and relevant instructions are also printed on the reverse of your card. Please ensure that you print your name where indicated and sign the voting card. Unfortunately, unsigned voting cards are not valid. If you have any questions or require any assistance, please raise your hand with your pink card.
When you have finished filling in your voting cards for resolutions one through six, please place them in one of the poll boxes provided by Boardroom Limited. It appears that most people have completed voting. Would shareholders please raise your hand with your pink card if you require more time to complete or lodge your cards? Thank you for voting on the resolutions.
There being no further business which may be properly brought forward, this now concludes the formalities. As Chair of the meeting, I declare the meeting closed. The results of the polls will be lodged with the ASX and will also be available on the company's website. Thank you for coming today or for being online, and thank you for your interest in Kelsian and your attendance today. Thank you.