US Tax Changes Drive Transurban
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Ignore Transurban’s profit soaring 280% for the six months to the end of December.
It wasn’t as some media reports claimed, solely due to motorists in Sydney, Melbourne and Brisbane paying more to the toll road group for using its roads.
While that played a part, much of the big rise was one off boost to earnings from President Donald Trump’s tax cuts from $105 million in previously unrecognised deferred tax assets.
Total toll revenue, including Transurban’s roads in the United States, jumped 9.6% to $1.1 billion, and construction revenue was up 69% to $462 million.
Transurban’s proportionate earnings before interest, taxation, depreciation and amortisation (EBITDA) - which measure income relative to its ownership stakes in its toll road assets - rose 11.6% to $911 million.
The company’s profit for the half year rose from $88 million in 2016 to $311 million - a 280% jump.
Transurban said in its presentation to investors that net profit rose $243 million thanks to the US tax benefit and “favourable movements in finance costs”. It said that without the non-recurring income tax benefits, net profit would have been $252 million.
Average daily traffic on Transurban Sydney’ roads - the Cross City Tunnel, Eastern Distributor, M2, M5, M7 and Lane Cove Tunnel - grew 2.9% in the first half of the financial year, it said on Tuesday, while revenue from those toll roads increased jumped an inflation beating 9.8% to $476 million.
In Melbourne, average daily traffic fell 1% due to the CityLink Tulla widening project, but revenue soared 14.2% to $388 million as it lifted tolls as part of the deal to pay for that project.
In Brisbane, traffic and revenue both grew a more modest, but still higher than inflation 3.5%.
Transurban chief executive Scott Charlton said the company had a strong pipeline of new projects across all regions, with the NorthConnex in Sydney more than half finished and on track, and construction underway on the West Gate Tunnel Project.
"In the past five years, Transurban has invested more than $16 billion into improving urban road networks across Australia and the Greater Washington Area to give people more transport choices," he said.
Transurban said all projects in its $11 billion development pipeline were on time and on budget. Construction has started on the company's biggest project, Melbourne's $5.5 billion West Gate Tunnel.
The tollroad company raised $1.9 billion of equity in December to pay for the development of the West Gate Tunnel and yesterday said another equity issue would “most likely be required” if it succeeded in buying 51% of Sydney’s WestConnex motorway from the NSW government.
The sale of the motorway, which is under construction, is expected to be completed this year.
Transurban will pay an interim dividend of 28 cents, in line with analysts’ expectations, up 12% from the 25 cents a year earlier.
The company reaffirmed guidance for a full-year dividend of 56 cents, up almost 9% on a year earlier. That means 28 cents a security for the second half. The securities eased 2 cents to $11.32.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.