Toll road owner and operator Transurban Group (ASX: TCL) has announced its earnings results for the half-year ended 31 December 2015 today, reporting a strong lift in revenues for the period.
During the six months, Transurban's revenues grew 9.5% to almost $1.06 billion. Rather than focusing on revenue however, Transurban believes that proportional toll revenue provides a more accurate representation of the group's performance, and this rose a far more impressive 19.3% to $960 million.
The proportional toll revenue figure excludes any revenue from minority interests in Transurban's controlled roads. It also includes the company's interests in non-controlled assets, which are those assets that are controlled by other entities.
As we saw in the group's traffic results from the December quarter, Transurban is benefiting from a ramp-up in traffic on its roads combined with higher toll charges for trucks (which will increase again at the beginning of 2017). The growing population in Sydney and Melbourne is certainly helping the company, as is an increase in revenue from its 95 Express Lanes in North Virginia, US.
What is also pleasing to see from that earlier report is that revenues are growing at a faster pace than average daily traffic (up 8.4%). That highlights the company's pricing power with vehicle owners happy (or at least, willing) to pay more to gain access to those roads.
Here are some of the other highlights from the report:
- Free cash rose by 22% to $461 million
- Proportional EBITDA (earnings before interest, tax, depreciation and amortisation) excluding significant items, up 14.6% to $729 million
- $11 billion of committed and planned projects to improve customers' trips in Melbourne, Sydney, Brisbane and Northern Virginia
Transurban's CEO, Scott Charlton, said that one of the key factors underpinning the strong results was the company's "continued focus on improving the efficiency of its networks for customers." If it can continue to improve customers' driving experiences, and get them to their destinations faster and more hassle-free, it's likely that even more drivers will make use of the roads in the future.
While it is generating solid growth, Transurban also offers investors a decent dividend yield. While it is only partially franked, it increased its full-year distribution guidance to 45.5 cents per share, which is a 13.8% increase on the financial year 2015 dividend. Shareholders will receive 22.5 cents per share for the first-half.
Indeed, Transurban isn't a risk-free investment. For instance, it is capital intensive in nature while there is also the risk that it could be denied the opportunity to undertake new acquisitions by market regulators. In saying that however, its ongoing growth, and the growth of its dividends over time, make it seem like a reasonable investment opportunity for long-term investors.
