Transurban toll road traffic responding to coronavirus restriction easing

Transurban suburban traffic on its sprawling toll road network rapidly bounced back as COVID-19 restrictions eased.

Transurban said its US toll road in Washington was recovering slower and tolls at its Canadian A25 road had been reinstated after suspension during the worst of the virus.

Transurban has seen suburban traffic on its sprawling toll road network rapidly bounce back as COVID-19 restrictions ease, but city roads remain sluggish due to the staggered return of office workers.

The toll road giant said average daily traffic on its toll roads for the week of June 14 fell 9 per cent in Sydney, 31 per cent in Melbourne and 14 per cent in Brisbane. Meanwhile North America was still down 43 per cent for the same week.

Still, that marked a rapid recovery after the three main Australian cities saw traffic tumble between 50-65 per cent in the week starting April 12 when tougher lockdown measures were in place.

Within Sydney, Melbourne and Brisbane the recovery still hinges on the location of its toll roads.

Those sweeping through Sydney suburbs including the M5 West and the M7 connecting the north and western parts of the city fell 6 per cent and 8 per cent respectively for the month of June to date. Those crossing into the city including Melbourne’s CityLink remained off 32 per cent for the same period with Sydney’s Eastern Distributor down 26 per cent and Brisbane’s Clem7 lower by 29 per cent.

Transurban said while more workers would return to city offices from July, the outlook and the risks of a second coronavirus wave made the outlook uncertain.

“I still think we’ll struggle to get back to pre-Covid traffic levels in the near term particularly with the restrictions and working from home and the impacts on the wider economy,” Transurban chief executive Scott Charlton said on Monday. “I don’t expect it to go above the pre-Covid levels anytime in the near term.”

The operator will pay out an interim dividend of 16c per share for the past six months with the newly declared dividend taking the total distribution for the 2020 financial year to 47c per share. The utility group said it anticipated FY21 distribution in line with free cash, excluding capital releases.

The dividend and earnings outlook will partly hinge on the strength of the economic recovery, Macquarie said, noting the FY21 shareholder payout from cashflow will see a dividend cut relative to FY19.

“The pace of recovery and the impact of the current second wave of COVID-19 will heavily influence the dividend outcome,” Macquarie analyst Ian Myles said.

“Vital to the earnings is return to work in the cities. This is starting in July, which will add to the traffic growth, albeit a full resumption of office work is likely to be elongated. Air travel is likely to be limited in the first half of the 2021 financial year, which will influence assets like ED, Airportlink and CityLink. It remains the risk to FY21 earnings outlook, that it will take longer to reach the new normal.”

Transurban said its US toll road in Washington was recovering slower and tolls at its Canadian A25 road had been reinstated after suspension during the worst of the virus.

It has taken the builders of its troubled West Gate Tunnel in Melbourne to the Supreme Court with mediation to start in July with CPB Contractors and John Holland.

Transurban said in early May the toll road had been delayed until 2023 after an escalating dispute over the handling of contaminated soil derailed the timeline, dealing a blow to Victorian Premier Daniel Andrews who had insisted the project would be delivered in 2022.

The Andrews government said it intends to hold Transurban to its contractual obligations and impose penalties for any late completion of the West Gate Tunnel project, despite conceding the COVID-19 pandemic had caused additional delays.

The project was already running behind schedule amid a conflict between Transurban, its builders CPB and John Holland and the state government over the disposal of contaminated soil.

Transurban shares fell 4.1 per cent on Monday to $14.54.