Melbourne tolls offset Sydney's falling traffic

HIGHER tolls on Melbourne's CityLink have helped Transurban offset falling traffic on its Sydney Hills M2 expressway and increase its payout to security holders.

But at odds with the optimism seeping into financial markets, its chief executive, Scott Charlton, said there remained lingering "softness" within the economy, pointing out that while traffic numbers were "resilient" they remained subdued.

"These are great assets and they are resilient in the downtimes, but I'm still not quite as bullish as the rest of the market," he said.

"I think there's still some softness around the economy. We're quite comfortable with our position, but we're still not seeing the traffic growth [at] where it was pre-GFC days."

Transurban reported a net profit of $81.1 million for the six months to December. This was down from $96.6 million on last year, though the previous period benefited from an infrastructure bond adjustment of $33.4 million.

The toll road operator increased its like-for-like half-year earnings by 7 per cent to $416.9 million.

Overall toll revenue in the six months to December was $397.7 million, up 3.1 per cent on the same period in the previous corresponding period.

Transurban owns Melbourne's CityLink and the M2 and Lane Cove Tunnel in Sydney. It also holds a major stake in Sydney's Eastern Distributor and a 50 per cent interest in Sydney's M7 and M5.

Mr Charlton said CityLink would continue to benefit from the southern link upgrade which opened about a year ago. Its Sydney traffic had been disrupted by upgrades on the M2, due to be finished by the middle of the year.

Mr Charlton said traffic from its 495 Express Lanes in Virginia in the United States, which opened in November, had "disappointed with some of the early ... numbers", but he hoped for improvement by the end of the year.

"It's the biggest change to the network since 1960s, [so] it's going to take some time for some adjustment," he said.

Favoured by pension and sovereign wealth funds for its promise of stable long-term returns, Transurban declared an interim distribution of 15.5¢ per stapled security, up from 14.5¢. It expects to pay 31¢ per security for the year.

The company's free cash flow, closely watched by analysts as a guide to future distribution payments, rose 4.6 per cent to $192.8 million, below some analyst expectations.

Shares in Transurban closed 6¢ higher at $6.16 on Tuesday.