Transurban Group (ASX: TCL) has just released its full-year FY20 results, with toll road traffic and revenues declining (as expected) due to COVID-19.
What did Transurban report?
Average daily traffic (ADT), which is an important measure for Transurban since it is a key driver of revenue, fell by 8.6%, while proportional (read underlying) toll revenue dropped by 3.4% $2.49 billion. This was driven by a $214 million decrease in toll revenue across existing Australian and North American networks as a result of COVID-19 restrictions.
Proportional EBITDA before significant items decreased by 6.4% to $1.89 billion. EBITDA margin fell 3.1 percentage points to 72.3%.
ADT fared the worst in Melbourne, down 11.9% to 750,000 transactions in FY20 compared to prior corresponding period. ADT in Brisbane was the least affected, falling 5.3%. In terms of revenue, Sydney saw an increase in its proportional toll revenue, which rose 2.8%. This was driven by the opening of the new M4 tunnels in July 2019 and additional ownership interests in the M5 West. On the flip side, North America suffered a 13.9% drop in proportional toll revenue.
Turning to expenses, the company decreased its total costs by 18.2% to $1.78 billion. However, this was largely due to a $432 million reduction in construction costs.
Three projects were completed during FY20. A further two assets joined the portfolio in July 2020, with the WestConnex M8 opening to traffic and tolling commencing on the M5 East in Sydney.
On the bottom line, Transurban reported a statutory loss of $153 million, which compares to a statutory profit of $170 million achieved in FY19.
What next?
There was no distribution announcement from Transurban this morning since it already declared a distribution of 16 cents per stapled security back in June. Looking forward, the company simply stated that the FY21 distribution is expected to be in line with free cash, excluding capital releases.
Commenting on traffic levels across Transurban’s portfolio, CEO Scott Charlton said: “Pleasingly we have seen clear signs of improvement in most of our markets as government restrictions have been eased. However, as evidenced by recent declines in traffic in Melbourne, we expect traffic to remain sensitive to government responses.”
The company said its performance will remain sensitive to future government responses and overall economic conditions. Nonetheless, it will continue to balance opportunities with strong investment-grade credit metrics and distributions for security holders.
Summary
Transurban shares have dropped a little over 1% this morning, meaning shares have fallen around 8% year-to-date. The company’s traffic is on the road to recovery (bar Melbourne) and Transurban has proven itself to be a reliable performer over a number of years.
However, there’s still a lot of uncertainty in the air and you could argue that toll roads are a relatively discretionary service. Plus, it remains to be seen whether the pandemic will have a long-term impact on workplace dynamics, with more people potentially working from home.
There are other ASX dividend shares I would prefer to own, such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which Rask Media’s Jaz Harrison recently wrote about here.
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