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Transurban continues distribution growth trend

Glenn Freeman  |  09 Aug 2016Text size  Decrease  Increase  |  

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Transurban announces $1.9 billion in toll revenue and a 45.5 cents per share distribution for fiscal 2016, while projecting an 11 per cent rise in distributions for fiscal 2017.


Roads infrastructure company Transurban Group (ASX: TCL) on Tuesday announced a distribution of 23 cents a share for the second half of fiscal 2016, including a 3.5-cent a share fully franked component.

This brings total full-year distributions to 45.5 cents a share, up from 40 cents a share in fiscal 2015.

Viewed over an eight-year period, this shows compound annual earnings growth of more than 10 per cent since fiscal 2009.

Development, operation, maintenance

Transurban's core business is toll motorways, 14 of which are in Australia and two of which are in the United States. Toll revenue grew 17.5 per cent across the business in fiscal 2016.

The weighted average concession length across Transurban's portfolio is 37 years. Its internal rate of return of 14.4 per cent, when averaged across the portfolio, "justified a positive reassessment of its moat rating from narrow to wide," said Carolyn Holmes, Morningstar's head of equities, in a July research note.

The company holds concessions in these roads, which grant it the right to operate them and collect tolls for a pre-determined period of time.

In Australia, these assets are in the nation's three largest cities, including Sydney's M7 and M5; Melbourne's CityLink; and Brisbane's Airportlink M7 and Legacy Way.

Its offshore toll roads, 495 and 95 Express Lanes, are both located in the Greater Washington Area (GWA).

2016 revenue

Proportional toll revenue for fiscal 2016 totalled $1.9 billion, up 17.5 per cent from $1.6 billion in fiscal 2015.

Of the total $290-million increase in revenue, $209 million is attributed to traffic growth, toll price escalation and fee revenue across existing assets, and $81 million in new revenue from Brisbane's Legacy Way, Sydney's Airportlink M7 and GWA's 95 Express Lanes.

Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 37.5 per cent to $1.39 billion for the year, from just over $1 billion in fiscal 2015.

In terms of toll revenue contribution, Sydney ranked the highest at 41.1 per cent, followed by Melbourne (33.9 per cent), Brisbane (16.1 per cent) and GWA (8.9 per cent).

Toll revenue for fiscal 2016 increased across each of these networks by 13.9 per cent, 7.3 per cent, 18.1 per cent, respectively, in Sydney, Melbourne and Brisbane.

This metric grew by 107.8 per cent in GWA, albeit from a low base, where the average dynamic toll prices increased 26 per cent and 21 per cent across both assets.

Key activities undertaken during fiscal 2016 included: the integration of Sydney's Airportlink M7; implementation of a new GLIDe tolling system; the rollout of intelligent transport systems on CityLink and the Eastern Distributor; In-sourcing of GWA's tolling back office system; and the transition to a new CityLink maintenance model.

Transurban forecasts 50.5 cents a share in distributions during fiscal 2017, a projected 11 per cent increase on fiscal 2016.

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Glenn Freeman is Morningstar's senior editor.

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