Transurban is witnessing booming traffic across its toll roads, surpassing pre-pandemic levels

Transurban boss Scott Charlton says it can withstand severe economic downturns with his average customer spending less than $7 a week on tolls, only a small part of the household budget.

Transurban chief executive Scott Charlton says it can withstand severe economic downturns with his average customer spending less than $7 a week on tolls, and that through tougher economic times his urban toll roads have performed better than overseas intercity roads.

The toll road operator had done well in previous recessionary conditions, Mr Charlton added, and in fact during the global financial crisis every Sydney toll road continued to grow apart from the Eastern Distributor.

Speaking after the company’s annual general meeting in Melbourne on Thursday Mr Charlton reflected on the latest unemployment data which remained steady at 3.5 per cent and that although the jobless rate would eventually climb it didn’t pose a threat to Transurban’s profit trajectory.

“Nobody expects unemployment to remain this low but I don‘t think anyone expects it to get to huge numbers either, so we are pretty confident that we can weather the storm and that our customers will continue to find value in the roads.”

Even entrenched working from home trends among Australian workers or a hybrid model of work shouldn’t see fewer cars on Transurban roadways and less revenue in its coffers as drivers use their cars for other trips other than commuting to and from the office.

“What is really interesting is when we did our research and our survey is what we’re finding is for those people who are choosing to use more flexibility and working from home … maybe only two, three days a week in the office …these people, or a lot of those people, are choosing to then drive private vehicles because they’re not commuting every day and I guess they’re not spending money on public transport every day so that is more discretionary income spent on parking or other options.

“So what we found in our research is a significant number of people coming out of Covid have chosen to use private vehicles as opposed public transport and again if you look at our roads it’s around less than 20 per cent of our roads are actually used for commuting, so they use them for a lot of different reasons.”

Mr Charlton said toll roads represented a very small part of a household budget with his average customer spending $6.70 a week, helping to make it more resilient to a souring economic outlook and putting it on a better footing than some overseas toll roads that link cities.

“In some of the tougher economic times the urban toll roads tend to do better than some of the overseas ones which tend to be more intercity roads like some of the European and US roads.”

The resilience of the Transurban network, which includes Melbourne’s CityLink, 10 roads in Sydney as well as tolls in Brisbane and Washington, US, shone through when Transurban issued its September quarter update before the start of its AGM.

Transurban booked record daily traffic numbers in the September quarter for its portfolio of toll roads, from Melbourne to Washington, to surpass pre-Covid levels as motorists hit the road to go back to work, travel to the airport or send freight to ports.

Group average daily traffic (ADT) rose 4.9 per cent against the September quarter of 2021, with Sydney traffic up 106.9 per cent, Melbourne up 70.7 per cent, Brisbane up 13.2 per cent and North America up 3.1 per cent. Sydney and Brisbane toll roads recorded their strongest quarterly ADT result to date, with increases in large vehicles, weekend travel, airport related corridors and commuting. And it wasn’t only its local roads enjoying more traffic, as in the greater Washington area interstate and weekend travel supported an increase in September quarter traffic as well.

Traffic in Melbourne continued to improve, particularly as more employees return to their workplaces after the relaxation of mask rules and lifting of the Victorian Government’s work-from-home recommendation in early September, Transurban said.

Transurban also reaffirmed its fiscal 2023 distribution guidance which was expected to be 53c per share, representing roughly 30 per cent growth on 2022.

In his CEO address, Mr Charlton said traffic across its key toll roads continued to build and in many areas was now surpassing pre-pandemic levels, especially in Queensland where tourism was bouncing back despite disruptions caused by poor weather conditions.

“Sydney traffic continues to grow and is 18.2 per cent above pre-pandemic levels, despite four times the average monthly rainfall in July, which impacted people’s movements,” he said.

“In the US, traffic levels on the 95 Express Lanes continue to rebound as government employees return to their workplaces. Traffic has increased by more than 13 per cent on pre-pandemic levels and this has also been supported by strong weekend and interstate travel.”

Highlighting Transurban’s balance sheet strength, particularly at a time when soaring inflation is proving a costly headwind for many businesses, Mr Charlton reminded shareholders that 68 per cent of Transurban’s portfolio had revenue embedded Consumer Price Index escalations. This was already seeing price increases for its toll roads, although at various times across its portfolio.

Chairman Lindsay Maxsted, who passed the reins to new chairman Craig Drummond at the end of the AGM, also spoke to the issue of executive remuneration after Transurban received a 25.74 per cent vote against the remuneration report last year to give it a first strike. Changes had been made to senior executive pay and performance hurdles.

Transurban later avoided a second strike after it was revealed that there was just over a 5 per cent vote against the item.

Before the vote took place Mr Maxsted said all proxy advisers had recommended voting in favour of the remuneration report.

Shares in Transurban ended down 14c at $12.54.

Transurban has booked record daily traffic numbers in the September quarter for its portfolio of toll roads, from Melbourne to Washington. Picture: Luis Enrique Ascui/Bloomberg