The Transurban Group (ASX: TCL) share price is suffering today. It’s down 4% after reporting its FY22 result.
Transurban is a large toll road operator in Australia, with a growing presence in North America.
Today, the business revealed its FY22 result and gave FY23 distribution guidance.
Transurban FY22 result
Here are some of the highlights from the toll road operator’s report:
- Toll revenue went up 2.5% to $2.32 billion
- Total revenue increased 18% to $3.4 billion (the extra revenue was mainly construction revenue)
- EBITDA (EBITDA explained) was flat at $1.68 billion
- It generated a net profit after tax from continuing operations of $16 million, an improvement from a loss of $287 million in FY21
Transurban said that the change in average daily traffic (ADT) across the portfolio was minus 0.5%. However, proportional revenue increased 5.7% and free cashflow rose 19.8%.
During the year, Sydney ADT decreased by 13.9% and was lower than FY19 by 1.5%, or 15.8% when excluding new assets.
Melbourne ADT increased 14.6% for the year, but was down 23.8% against FY19.
Brisbane ADT went up by 2.8%, and was up 3.3% against FY19.
In North America, ADT increased by 22.1%, though it was down 5% compared to FY19.
There were positive signs in the fourth quarter of FY22. Transurban said that fourth quarter traffic reached a new high and exceeded pre-COVID levels, driven by “new asset capacity and increased mobility and travel”.
For investors wondering how inflation is hurting the business, don’t worry. Transurban said that inflation-linked toll escalations are providing protection in this rising inflation environment. Management of its balance sheet has helped limit near-term interest rate exposure. These factors are probably helping the Transurban share price at the moment.
FY22 distribution and FY23 expectation
During FY22, Transurban paid a distribution of 41 cents per share, which included a final distribution of 26 cents per share.
This represented distribution growth of 12% year on year.
Transurban provided guidance that it expects to pay a distribution of 53 cents per share in FY23. This would be growth of 30% compared to FY22.
Outlook for the Transurban share price
The business continues to make progress on its projects. For example, in Melbourne it has made “significant” progress in construction of the West Gate Tunnel, with around 40% of the twin tunnels now excavated.
Management said that the traffic performance and project delivery, together with the strength of its balance sheet provide a “meaningful base” for generating free cash over the medium to long term.
However, FY23 cost growth is expected to be more than FY22’s growth due to corporate and operational costs, a 5% increase in costs due to recovered traffic volumes and new asset costs, as well as the potential for additional costs relating to early-stage development projects.
I’m not sure whether Transurban shares are worth jumping on if interest rates are going to stay higher for longer. But, inflation does help in the short-term.
The distribution yield for FY23 is expected to be 3.8%, which isn’t exactly very high. I have my eyes on other ASX dividend shares.
