The Kelsian Group Ltd (ASX: KLS) share price is having a terrible start to the week.
In morning trade, the travel and transport company's shares dropped as much as 26% to a 52-week low of $3.71.
Why is the Kelsian share price crashing into the rocks?
Investors have been hitting the sell button today after the SeaLink owner released an update on its expectations for FY 2024.
Interestingly, the company is expecting to report a result that exceeds analyst forecasts. Its indicative unaudited results are as follows:
- Revenue up 42.2% to $2,016.8 million
- Underlying EBITDA up 63.9% to $265.4 million
- Underlying net profit after tax before amortisation up 32.3% to $92.6 million
- Statutory net profit after tax up 176.2% to $58 million
Commenting on its results, Kelsian's CEO, Clint Feuerherdt, said:
The indicative FY24 unaudited result represents a very strong performance for the business, reflecting the first full year contribution of AAAHI [All Aboard America! Holdings, Inc.] which underpinned increased revenue and EBITDA margin; revenue growth from the new Sydney contracts; improved margin in the second half for the Australian bus business, and the continued benefits of our broader contracted revenue base and indexation mechanisms in the majority of our public transport contracts.
So why the selling?
The selling down of the Kelsian share price appears to have been driven by news that the company is planning a big capital expenditure spend.
Capital expenditure in FY 2025 is expected to be between $180 million to $190 million. These funds will be put towards several strategic initiatives, further investment to improve and upgrade its expanded bus and ferry fleet, and new assets to support continued growth in the medium and longer term. This includes the strategic property acquisition of Hoxton Park bus depot, Sydney.
Management then expects its FY 2026 capital expenditure for the core asset base of the business to be approximately $100 million to continue the maintenance and reinvestment in core assets.
Commenting on the company's capital expenditure plans, Feuerherdt said:
The growth momentum across all areas of our business, in particular in the Australian bus and AAAHI businesses, supports this investment to underpin multiple years of growth in the medium and longer term. The Board and management recognise the solid foundation for growth and are investing accordingly to capitalise on it.
Following today's decline, the Kelsian share price is now down by 40% over the past 12 months.
