Transurban's profit on the up

AUSTRALIA'S largest toll-road owner, Transurban, has highlighted its "defensive nature" after reporting steady growth from its motorways in Sydney and Melbourne.

By InvestSMART · 8 Feb 2012

By InvestSMART ·
8 Feb 2012

Comments

AUSTRALIA'S largest toll-road owner, Transurban, has highlighted its "defensive nature" after reporting steady growth from its motorways in Sydney and Melbourne.

The owner of Sydney's Lane Cove Tunnel and Melbourne's CityLink reported a 27 per cent rise in net profit to almost $97 million for the six months to December. Toll revenues rose 6 per cent to $474 million.

Investors have seen Transurban as a relative safe haven in the midst of large financial stocks, such as Macquarie Group, warning of a bleaker outlook. Transurban's pre-tax earnings rose 7.5 per cent to $390 million for the half, which was higher than Goldman Sachs analysts had expected.

Shares in Transurban rose early yesterday before closing down 3? at $5.49.

"While they have had a fair chunk of roadworks, they have delivered steady growth in this environment," a senior research analyst at Legg Mason, Andrew Chambers, said yesterday.

"There weren't too many surprises [in the first-half earnings]."

Transurban's chief executive, Chris Lynch, said the latest result highlighted the "true defensive nature" of the toll-road owner "in the face of economic headwinds".

Mr Lynch said Transurban was set for a "strong second half" which would provide the free cash flow needed to deliver on its guidance for distributions of at least 29? a share for the full year.

Large shareholders have pressured Transurban in recent years to focus on its existing assets including the M5 and Westlink M7 motorways in Sydney rather than pursue acquisitions.

Brisbane's failed Clem7 tunnel is expected to be put up for sale by receivers in the next year, while Sydney's Cross City Tunnel could also be put on the market given its financial position.

While Transurban remained "open to look at other opportunities", Mr Lynch said "there is nothing there that is overly exciting at the moment" for it to run the rule over.

The former BHP executive handed in his resignation last week after he decided the "time was right" to pursue the "next stage" of his career, which is expected to include seats on more company boards.

Mr Lynch, who joined Rio Tinto's board last year, will leave in July.

Transurban will pay an interim distribution of 14.5? a share on February 14. The payout includes a fully franked component of 3.5?.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What did Transurban report in its latest half‑year results?

Transurban reported a 27% rise in net profit to almost $97 million for the six months to December. Toll revenues increased 6% to $474 million and pre‑tax earnings rose 7.5% to $390 million, a result that beat Goldman Sachs analysts' expectations.

Why do investors call Transurban a ‘defensive’ toll‑road investment?

Transurban’s CEO described the company as having a “true defensive nature,” pointing to steady traffic and revenue growth from its Sydney and Melbourne motorways even amid broader economic headwinds. Investors have treated the toll‑road owner as a relative safe haven compared with some large financial stocks facing a bleaker outlook.

What guidance did Transurban give on dividends and distributions?

Transurban said it was set for a strong second half that should provide the free cash flow to meet its guidance for distributions of at least 29c a share for the full year. The company will pay an interim distribution of 14.5c a share on February 14, which includes a fully franked component of 3.5c.

How did the market react to Transurban’s announcement?

Shares in Transurban rose early on the trading day but then closed down about 3% at $5.49, reflecting mixed short‑term market sentiment despite the solid results.

Is Transurban planning to buy more toll assets or focus on existing roads?

Major shareholders have pushed Transurban to focus on its existing assets — such as the M5 and Westlink M7 in Sydney — rather than pursue acquisitions. The company remains open to opportunities but said there is nothing currently “overly exciting” to run the rule over.

Which toll‑road assets might become available that could interest Transurban?

The article notes that Brisbane’s failed Clem7 tunnel is expected to be put up for sale by receivers within the next year, and Sydney’s Cross City Tunnel could also be marketed because of its financial position. These are potential opportunities in the market.

What leadership changes were announced at Transurban?

Transurban’s chief executive, Chris Lynch, handed in his resignation and will leave in July. He said the timing was right to pursue the next stage of his career, which is expected to include additional company board roles; he joined Rio Tinto’s board last year.

What should everyday investors watch after Transurban’s results?

Investors should monitor Transurban’s second‑half performance and free cash flow, confirmation that the company meets its distribution guidance, any developments around potential asset sales like Clem7 or Cross City Tunnel, and how management transition is handled — all of which can affect future revenue and dividend reliability.