Running an ASX-listed company for the first time is never easy. For Kelsian Group (ASX: KLS) CEO Clint Feuerherdt, the challenge was on another level. One of Feuerherdt’s first tasks as CEO was inspecting the company’s Vivonne Bay Lodge on Kangaroo Island after it was destroyed in bushfires in January 2020.
Weeks later, Feuerherdt led Kelsian (then known as SeaLink Travel Group) through the start of COVID-19. The pandemic crushed demand for Kelsian’s bus and ferry services, particularly its UK bus operations.
“COVID-19 was immensely stressful,” says Feuerherdt. “Kelsian provides an essential service: we had to keep our buses in the UK running to get doctors and nurses to work. At the same, we had to do everything we could to provide a safe workplace.”
Feuerherdt could never have expected such a tumultuous first year. He joined Kelsian as CEO in early 2020 after the company acquired Transit Systems Group, a Brisbane-based bus operator. Feuerherdt was CEO of Transit Systems for 10 years.
Kelsian approximately tripled in size after its $635-million acquisition of Transit in October 2019. The merger meant Kelsian was now Australia’s largest private operator of metropolitan bus services. Kelsian also had a substantial international footprint through its London and Singapore operations.
To help fund the Transit acquisition, Kelsian raised $154 million through a placement to institutions and an entitlement offer that had a retail component. Oversubscribed by six times, the capital-raising brought several new institutions to Kelsian’s share register.
“We’d developed a transition plan for the first 12 months to bed down the merger,” says Feuerherdt. “But the pandemic threw that planning into disarray. In some ways, the UK’s earlier experience with COVID-19 helped us prepare our Australian and Singapore operations. We were frustrated that Australia wasn’t taking COVID-19 seriously enough at the start because we could see the devastating effects of it in the UK.”
Like most stocks, Kelsian tumbled during the early months of COVID-19. In Feuerherdt’s first three months in the job, Kelsian shed about 40% of its share price. From the March 2020 low, Kelsian rallied for the next 12 months as the market recognised the resilience of its business model and earnings after the Transit acquisition.
Kelsian is among the more remarkable companies to list on ASX in the past decade. The business (then SeaLink) was a microcap when it raised $16.5 million through an Initial Public Offering (IPO) on ASX in 2013 that valued it at $77 million. Back then, the company was best known for its Captain Cook cruises and fleet of craft that ferried holidaymakers to island and other tourism hotspots. In November 2021, SeaLink was renamed Kelsian (an anagram of SeaLink) to reflect the group’s multi-modal operations.
Clint Feuerherdt, CEO of Kelsian Group
Today, Kelsian is capitalised at $1.02 billion [i] and has almost 9,000 employees [ii]. The company delivered more than 240 million customer journeys in FY22 through its 4,134 buses, 114 vessels and 24 light-rail vehicles. Through its London bus joint venture, Kelsian operates 1,250 buses, including 300 electric vehicles. [iii]
From humble beginnings in 1989 when SeaLink provided a ferry service to Kangaroo Island off the South Australian coast, Kelsian is now Australia’s largest land and marine transport/tourism provider – and growing quickly in London and Singapore.
ASX On The Board asked Feuerherdt about Kelsian’s journey and his insights for other transport companies considering an ASX listing. Here is his response:
ASX: Clint, how important has the ASX listing been in Kelsian’s growth?
Clint Feuerherdt: The ASX listing enabled access to capital and helped attract new shareholders. But the main benefit was the listing structure. When I ran Transit Systems, the business was privately owned by three people at different stages of their life. An issue for many family businesses is that when one key shareholder wants to sell, it effectively forces other shareholders to do the same. The ASX listing gave each founding shareholder an opportunity to choose their destiny. They could hold or sell their shares, or buy more.
ASX: The Transit acquisition was a company-defining deal. How did Kelsian communicate the merits of the transaction to the market?
Clint Feuerherdt: We experienced very little concern from the market about the deal. In 2015, Transit Systems sold its ferry operations to SeaLink. At the time, there was talk of putting both businesses together at some stage, so the follow-on acquisition probably wasn’t a surprise to the market. I’d run Transit for a decade and knew its bus and ferry operations (which SeaLink acquired) very well. Fund managers were comfortable with that management continuity. Also, Jeff (SeaLink CEO Jeff Ellison) had announced his intention to retire, so there was an orderly CEO transition event.
The market could see the Transit acquisition massively improved Kelsian’s diversification and risk profile. Also, the deal gave Kelsian a ready-made global footprint. One of the big struggles for Australian companies is taking that first international step. We had an established, successful bus operation overseas. Judging by the response to the capital raising, the market liked the acquisition’s rationale.
ASX: How did the Transit acquisition change Kelsian’s share register?
Clint Feuerherdt: The capital raising was an opportunity to bring new institutions onto the share register. About 30% of Kelsian is still controlled by its founding shareholders. The rest is split between institutions and retail.
We’ve seen more international interest in Kelsian, particularly from investors in Singapore and Hong Kong. There are two main reasons for that. First, having bus operations in Singapore raises Kelsian’s profile among Asian investors. Second, there are not a lot of infrastructure-type stocks left on ASX. Kelsian offers a form of exposure to transport that doesn’t exist elsewhere in this market.
ASX: How did Kelsian’s inclusion in the S&P/ASX 200 Index change things?
Clint Feuerherdt: Certainly, since ASX 200 inclusion the number of investors we talk to at investor conferences has grown. We tend to be talking now to larger domestic and international institutions with a mandate to invest in ASX 200 companies.
The challenge of joining the ASX 200 is that more funds want to take a position on your share register, but need to be able to take a significant position. They don’t sit in the market buying shares; they wait for an event, such as a capital-raising to fund an acquisition, to build critical mass in your shares. Because the funds often only hold 30-40 stocks, you have to find ways to give them a start on your share register.
Kelsian facilitated a block trade (in May 2021, for 6.2 million shares) to free up some equity from founding investors for institutions. Kelsian continues to look at acquisitions to support its global growth. That could provide an opportunity for further capital raisings that bring new investors to the share register.
ASX: Kelsian is doing a lot of good work on sustainability through electric buses and hydrogen-powered vehicles. How does that feed into Kelsian’s narrative on Environmental, Social and Governance (ESG) performance?
Clint Feuerherdt: It’s fortuitous that the market’s interest in ESG is happening at a time when Kelsian is naturally going down that path. Our company is riding the wave of the world decarbonising. Not everyone will be able to buy an electric vehicle (EV) and not every major city will be able to provide enough charging stations for EVs. For many major cities, the only pathway to net zero involves public transport.
Converting public transport to green energy makes it much more attractive for commuters. It’s hard to tell someone to give up their petrol car, only to take a diesel bus to work. By progressively electrifying its bus fleet, Kelsian is helping people feel much more comfortable about commuting to work in a carbon-neutral way. As a result, we’re seeing more interest from ESG-focused funds in Kelsian.
ASX: Do you think we’ll see more transport-related companies list on ASX?
Clint Feuerherdt: I do. In recent years, we’ve seen an evaporation of infrastructure-related businesses on ASX because these assets are so attractive to large infrastructure funds and private capital. Longer term, that creates an opportunity for other transport companies, such as Kelsian, to carve out a bigger niche on ASX and attract the capital that would have normally gone to infrastructure stocks that have been acquired.
ASX: What general advice would you give privately owned transport companies that are considering listing on ASX?
Clint Feuerherdt: If you want to sell out, you are probably better off doing so to a larger transport company or private-equity group. If you want to continue the growth journey with your transport company, an ASX listing is a good way to do that.
In preparing for an ASX listing, you need to appreciate the amount of time required for investor relations. I probably spend a quarter to a third of my time on market communication. Kelsian doesn’t have an internal investor relations (IR) person: I and Kelsian’s Chief Financial Officer (Andrew Muir) deal directly with institutions on IR matters. We try to make ourselves available and provide access to institutions that own Kelsian shares or want to. It’s a balancing act between communicating with the market and having enough time each day to operate and grow the business.
Governance is another huge part of running an ASX-listed company. Kelsian does a lot of work on its ESG performance in areas around the environment, gender diversity and Indigenous reconciliation, for example. These issues are probably on the radar for larger private companies, but really come to the fore when you are an ASX 200 company. Companies have to think a lot about their governance structures before listing.
ASX: What do you enjoy most about leading Kelsian?
Clint Feuerherdt: I’m excited by Kelsian’s growth potential. During COVID-19, Kelsian proved its revenue was resilient. We continue to provide infrastructure-like, essential services through our transport assets. On the cost side, we’re demonstrating the business is resilient to higher inflation because our government contracts to run bus services are linked to rises in the Consumer Price Index. We see much opportunity to grow Kelsian overseas.
Personally, I enjoy leading a company that does a good thing for communities. Delivering public transport in cities, or ferrying people to their holiday destination, is rewarding. We’re a people-focussed business. Through our buses, Kelsian can fundamentally improve cities. If we can save 10 minutes each day on commute times because of better transport linkages, the collective impact on wellbeing is enormous.
I’m also really passionate about Kelsian’s ESG work. There’s so much potential to electrify bus fleets and contribute to decarbonisation. We want to make it easier for more people in more cities to take carbon-neutral public transport to work. We think public transport is at the heart of decarbonisation and we are excited to contribute to that change.
[i] At 17 October 2022
[ii] At 30 June 2022
[iii] Ibid
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