Traffic across the roads boosted by big construction and end to WFH
Toll road operator weighs in on the controversial back-to-the-office order in NSW as it flags bigger dividend.
The boss of toll road operator Transurban says NSW’s directive for the state’s public servants to return to the office could see a lift in traffic on its road networks.
Transurban controls nearly all of Sydney’s toll roads, including key M4, M5 and M2 motorway arteries.
“We don’t know exactly how it’ll be implemented, because that’s the government, not us,” Transurban chief executive Michelle Jablko told The Australian.
She said traffic on roads around Australia was being boosted by big construction projects under way, although a softening in housing construction was affecting travel in some places.
Traffic trends showed the number of people returning to the office was still below pre-Covid numbers in Melbourne and Sydney.
“Brisbane is pretty much back where it was before Covid changed behaviour,” Ms Jablko said.
“Sydney is now probably three quarters of the way back to where it was and Victoria is still probably a bit slower – it’s two-thirds of the way back to where it was.”
Transurban on Thursday flagged a dividend increase after posting a $326m statutory net profit for the FY24, up 414 per cent.
Proportional earnings before interest, tax, depreciation and amortisation – the figure analysts watch – increased to $2.63bn, up 7.5 per cent.
While full-year profit was roughly in line with market expectations, Transurban shares were weaker on growing concerns about what the NSW government’s recent review of tolls might mean for further earnings.
An independent toll review by the former chair of the competition regulator, Allan Fels, has recommended sweeping changes, such as a move to per-kilometre tolling.
“The report came out … saying they should take back control of these roads and reduce bills for drivers, so that’s a third-party factor that’s going to impact Transurban that they can’t do anything about except try and restructure their toll roads,” Bell Direct analyst Grady Wulff said.
“So that’s one thing to keep in mind when looking into full-year 2025.”
Ms Wulff also flagged concerns with the company’s net debt position, particularly in light of the fact that the NSW government review could lead to lower revenue.
“Group net debt increased from $24bn in FY23 to $25.86bn in FY24. That’s a significant number that investors do need to account for when they’re looking at a company like a toll road provider.”
This is Ms Jablko’s first year as the CEO of Transurban, and she faces a challenge balancing the desires of shareholders for increased profits against the rising angst of heavily tolled Australians who are already struggling with the cost of living crisis.
Ms Jablko said Transurban, which owns all 11 private toll roads in NSW, was “making sure we are part of the solution” to the struggles commuters face paying increased tolls to get from A to B in Sydney.
However, she stopped short of saying she would agree to per-kilometre tolling.
“We aren’t starting with a blank sheet of paper,” she said, referring to the fact that her company already has agreed contracts with the state government based on inflation-linked toll increases.
Transurban will announce measures it believes will help the NSW commuting public in coming months, in response to the Fels report.
Citigroup analyst Suraj Nebhani described the result as “only slightly below consensus”, and wrote in a note that he expected Transurban shares to trade in line with the overall market.
“It was a really good result,” Ms Jablko said.
“What was important to us was maintaining momentum.”
Transurban has forecast a distribution of 65c for the year ending June 30, 2025, after previously flagging a dividend of 62c a share for the 2024 financial year.
The group saw average daily traffic rise 1.7 per cent and full year proportional revenue increase 6.7 per cent to $3.54bn.
In the meantime, the immediate pathways to growth for Transurban will come from projects such as Victoria’s West Gate Tunnel Project, which the company said was now 80 per cent completed. In Queensland, Transurban is working with the state government in widening the Logan Motorway, southeast of Brisbane.
In NSW, the Rozelle Interchange opened late last year, completing the 33km WestConnex project, though the opening was marred by challenges around Anzac Bridge.
Transurban also has operations in North America, and its Fredericksburg Extension construction was completed during the year.
Transurban shares closed down 1 per cent at $12.75.
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