Transurban profits in fast lane despite slow growth

Transurban has revealed slowing growth because of weaker economic conditions but is still confident.

Transurban announced a $500 million capital raising to scoop up the remaining chunk of its M5 West road in Sydney.

Toll road giant Transurban is betting on financial stimulus measures such as rate cuts and tax rebates to boost momentum after warning weaker economic conditions and easing construction activity resulted in slightly lower than expected growth over the past financial year.

The transport operator, which announced a $500 million capital raising to scoop up the remaining chunk of its M5 West road in Sydney, delivered a modest 2 per cent increase in average daily traffic across its toll network in Sydney, Melbourne, Brisbane and the US.

While growth in Melbourne was healthy, with average daily traffic up 3.1 per cent, Sydney lifted by 1.6 per cent with Brisbane just 0.4 per cent higher. Truck traffic fell 2.2 per cent in Sydney but jumped 5.5 per cent in Melbourne and 2.3 per cent in Brisbane.

Transurban chief executive Scott Charlton said the figures illustrated mixed momentum in the economy.

“I don’t want to say there’s massive weakness in the economy because we’re seeing growth in our traffic, which is a positive sign. But is it as high as we forecast? Maybe not,” Mr Charlton told The Australian after delivering the company’s annual results.

Transurban closely tracks employment rates as a key economic indicator and says it still sees underlying infrastructure growth and stimulus measures boosting economic activity.

“We think cities should perform well given the amount of infrastructure activity and other stimulus being supported across the different industries including interest rates and tax rebates,” Mr Charlton said.

“If there was some massive change in employment that might make a difference but I don’t think anyone is suggesting that. We are at record low unemployment rates and the RBA is trying to push that even lower to move to wage inflation. As long as there are decent employment numbers people have to travel to and from work.”

Transurban said it would also consider teaming up with the investment giants that bankrolled its $9.3 billion WestConnex deal for the prospective $14bn Western Harbour Tunnel project in Sydney. The Sydney-based company formed a consortium with AustralianSuper, the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority sovereign wealth fund to win WestConnex and said, while it is early in the process, it may look to reunite with the giants for the Western Harbour Tunnel development being assessed by the NSW government.

“Clearly it depends on the procurement method the government picks but we have partners we’ve worked consistently with who are in our WestConnex deal. People like AustralianSuper, the Canadians and ADIA. They’re the same partners we have on the Queensland Motorway, M7 and NorthConnex and likely would be similar partners on that project.”

Transurban, which last year paid $9.3bn for a majority stake in Sydney’s WestConnex motorway project, said yesterday it would buy the remaining 34 per cent of the M5 West for $468m from IFM Investors and Utilities Trust of Australia, giving it full ownership.

The company won a concession on the M5 until 2060 as part of the WestConnex deal. A underwritten $500m share placement at an offer price of $14.70 and a non-underwritten $200m security purchase plan will be issued to fund the M5 West deal and for general corporate purposes.

Transurban saw its annual statutory net profit fall by 63 per cent to $170m, compared with $468m a year ago, while revenue jumped 26 per cent to $4.16bn.

Proportional earnings before interest, taxation, depreciation and amortisation rose 12.3 per cent to $2bn after removing acquisition costs. Proportional toll revenue rose 10.3 per cent to $2.58bn in line with forecasts.

The transport operator expected to deliver shareholders an annual dividend of 62c.