The Transurban Group (ASX: TCL) share price has come under pressure on Thursday following the release of its third quarter update.
At the time of writing the toll road operator’s shares are down 4% to $12.36.
How did Transurban perform during the third quarter?
During the quarter ending March 31, Transurban’s Average Daily Traffic (ADT) decreased by 4.8% on the prior corresponding period.
This was the result of all assets and markets being significantly impacted by the restrictions in movement mandated by governments in response to the COVID-19 pandemic.
While a 4.8% decline in traffic volumes may not seem overly disappointing, it is worth remembering that restrictions only came into place towards the very end of the quarter.
In order to demonstrate how its roads have been impacted, Transurban provided an update on recent traffic trends.
Across the group, traffic volumes were up 1% during the first week of March. They then declined by 2% during the second week of the month. After which, restrictions started to really impact its traffic volumes.
The week commencing March 15 saw a 17% decline, March 22 recorded a 36% decline, and March 29 posted a 48% decline.
This has continued into April, though appears to have found a bottom. Group traffic volumes for the week commencing April 5 were down 47% on the prior corresponding period.
How will this impact its balance sheet?
While the decline in traffic will inevitably lead to lower income, management notes that it has a strong capital position.
And thanks to initiatives during the quarter to raise $2.1 billion and EUR600 million raised from the Eurobond market in April, it has sufficient liquidity to meet its capital requirements and debt refinancing obligations until the end of FY 2021.
Finally, unfortunately for income investors, the company has not spoken about its distribution with this update. Last month Transurban revised its distribution guidance. It advised that it “expects to pay its 2H20 distribution in line with Free Cash excluding Capital Releases.”
Investors are likely to be kept waiting until the end of the financial year before the company reveals its second half distribution.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Transurban Group. 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 Scott Phillips.
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