Transurban’s Mild Surprise

Transurban (TCL) surprised its investors by lifting its full year distribution guidance as the tollroad group delivered a first half net accounting loss of $354 million.

In its half year financial report, released yesterday, Transurban raised its full year distribution guidance to 39.5c from 39c and will pay a first half dividend of 19.5c, compared to 17c a year earlier.

Transurban’s shares rose 19c, or 2%, to a day’s high of $9.45 in early trading yesterday as investors welcomed the unexpected increase in guidance.

But they then sagged in the afternoon, ending down 7 cents at $7.273.

TCL 1Y – Transurban surprises with higher payout

The toll road giant’s first half statutory net loss was caused by costs related to its $7 billion acquisition of Queensland Motorways tollroad portfolio last year, including $384 million of stamp duty.

Excluding that and other costs (totalling $406 million of acquisition costs), Transurban reported an underlying first half profit of $52 million, down 35% on a year earlier, partially due to higher interest costs.

Underlying earnings before interest, taxation, depreciation and amortisation (EBITDA), which measure income relative to the company’s stakes in its tollroad assets, rose 37% to $636 million, excluding costs.

The increase was driven by a 37% jump in toll revenue to $761 million. Toll revenues grew 11% on Transurban’s Sydney roads, and 7.2% on its Melbourne roads.

A 19.5c distribution for each stapled security will be paid for the six months ended 31 December 2014, up from 17c a year ago. The distribution includes a 3.5c fully franked component.

The upgraded distribution guidance for the year ending 30 June 2015 of 39.5c per security is expected to be approximately 100% covered by cash generated by the business (meaning no borrowings).

"This change reflects the strong first half financial performance reported today," the company said yesterday.

Transurban CEO Scott Charlton said in a statement, "We have achieved a number of critical milestones against our strategic objectives during the period, including the completion of the M5 widening in Sydney, the opening of the 95 Express Lanes in Northern Virginia USA, and more recently the financial close of the NorthConnex project in Sydney."

"These projects highlight the value embedded in Transurban’s networks through effective partnering with governments to deliver network enhancements. There remain significant development opportunities in all of our markets."

"Over the medium to longer term, there are opportunities for Transurban to participate in the policy and technology enhancements that are emerging today, which are expected to drive significant changes in transport network management over time. Transurban is well positioned to contribute to the work being undertaken in these areas," Mr Charlton said.

About Glenn Dyer

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.

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