Transurban Forecasts Record Fiscal Year 2024 Distribution, Names Jablko as CEO

By David Winning

SYDNEY--Toll road owner Transurban signaled a higher distribution in its new fiscal year, shrugging off signs the global economic recovery from the Covid-19 pandemic is sputtering and as motorists grapple with a higher cost of living.

Transurban said it expects a distribution in the 12 months through June, 2024, of 62 Australian cents (US$0.40) per security, up 6.9% on the total payout of A$0.58/security declared for the previous fiscal year.

The guidance was provided alongside a net profit of A$64 million for fiscal 2023, up from A$19 million a year earlier. Analysts had expected an improved result after management in May raised a forecast for its annual distribution to reflect the post-pandemic rebound in traffic and better-than-expected outcomes on financing costs.

Annual proportional toll revenue--the company's preferred measure of the performance of its roads--increased by 26% to A$3.31 billion.

"We've seen strong traffic growth in all markets, resulting in a Transurban Group record of 2.4 million average trips a day for the year," said Chief Executive Scott Charlton, who intends to step down in coming months. "Traffic performance underpinned the record Ebitda result of A$2.4 billion, an increase of almost 30% on the prior year."

Many investors consider Transurban to be one of the more defensive stocks on the Australian Securities Exchange as its tolls are linked to inflation and it has hedging in place. Transurban's securities are up nearly 8% since the start of January, despite interest rates moving higher as the Reserve Bank of Australia tries to bring prices under control.

Still, there are risks that households seeking to save money might use their car less or accept longer journey times than use toll roads. An economic slowdown in markets where Transurban owns toll roads could translate into reduced freight traffic.

In Australia, retail sales data for June offered fresh evidence that the economy is slowing and that consumers are straining under the weight of 400 basis points of interest-rate increases in a little over a year. However, the picture is brighter in the U.S. where economic output has accelerated in recent months on the back of solid consumer spending, and inflation cooled to 3% in June.

So far, those concerns haven't materialized as a negative impact on Transurban's performance or its ability to keep raising payouts to shareholders.

"With positive traffic growth across our key markets, embedded escalation at or above inflation on the majority of revenue and the continued progress on key growth projects, we are well-placed to grow distributions and deliver long-term value," said Charlton.

Transurban named Michelle Jablko as Charlton's successor, with plans for her to take up the role following the company's annual shareholder meetings on Oct. 19. Jablko joined Transurban early in 2021 as chief financial officer.

Transurban is continuing to benefit from more parts of the WestConnex highway in Sydney opening to traffic. The company said its FY 2024 distribution would likely include cash previously held during the construction of WestConnex. Releasing this cash would contribute an estimated 3-4 cents per security.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

August 15, 2023 18:08 ET (22:08 GMT)

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