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Results just in: Transurban Group shoot the lights out

The Transurban Group (ASX: TCL) share price has risen 3.3% this morning following the release of its half-year report to the market.

Here are the highlights from Transurban Group’s result:

  • Full-year distribution guidance increased to 51.5 cents per security
  • Statutory profit came in at $88 million
  • Proportional toll revenue increased by 10.9% to $1.06 billion
  • Average daily traffic increased 4.8%
  • Free cash flow rose to $680 million

Transurban’s Sydney assets, which include the Lane Cove and Cross City tunnels, Hills M2 and stakes in the M5, M7 and North Connex, saw a 3.4% increase in traffic during the half.

CEO Scott Charlton said, “We are looking at further investment opportunities in that market, which will drive growth over the medium-to-longer term and deliver benefits to the road users of New South Wales.”

Melbourne’s CityLink, which is currently undergoing widening improvements, reported a slight decline in average traffic yet revenue increased.

In Brisbane’s extensive network of toll roads, Transurban reported a 31.6% increase in toll revenue. However, excluding the AirportlinkM7, that figure dropped to around 2% growth.

Transurban’s U.S. interests saw traffic, operating profit and revenue increase during the half.

“Our North American assets have exceeded expectations by continuing to deliver double-digit traffic growth across the network,” Mr Charlton said.

Given the strong traffic and operational performance across its networks, Transurban upped its full-year distribution guidance to 51.5 cents.

“We currently have a $9 billion pipeline of development projects, which are all on time and on budget,” Mr Charlton added. “Our balance sheet has capacity to fund our development pipeline, with the Western Distributor the only project in our current pipeline potentially requiring additional equity post financial close.”

Buy, Hold or Sell

Today’s result exemplifies the type of investment return that Transurban should deliver: slow growth over the long term.

Indeed, toll roads should deliver consistent incremental growth. But they rely on many users to be profitable, and can be hamstrung by population growth and the cost of debt to fund projects and developments. In that sense, it is important you do not overpay for shares.

In my opinion there will come a better time to buy into Transurban.

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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any company mentioned. Owen welcomes -- and encourages -- your feedback. You can follow him on Twitter @OwenRask.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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