Atlas Arteria share price up 5% despite earnings hit

The Atlas Arteria share price is rising today despite a massive hit to earnings caused by coronavirus-induced government restrictions.

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The Atlas Arteria Group (ASX: ALX) share price is trading higher this morning following the release of the company's HY20 results. At the time of writing, the Atlas Arteria share price is up 5.18% from yesterday's closing price of $6.37.

The group owns, operates and develops toll roads globally which have been significantly impacted by COVID-19 related government restrictions. 

Half year results

Traffic was heavily impacted by government restrictions during the first half of 2020. As a result, net profit after tax (excluding notable items) decreased 90% on the prior corresponding period (pcp) to $9.1 million. 

After notable items, statutory net loss from operations after tax was $123 million, mainly driven by impairments of $152 million. However, the impact of the impairment was reduced somewhat by foreign exchange and income tax benefits leading to the $123 million loss. The boards of Atlas Arteria and Atlas Group decided to impair their investments in Dulles Greenway, located in north Virginia, United States.

Toll revenue fell nearly 32% to $49.61 million, from $72.76 million in the pcp. 

Additionally, the final distribution for 2019 was cancelled and the cash has been used to repay the existing debt facility.

Outlook

Traffic has somewhat recovered in Europe following the easing of government restrictions. As a result, from mid-May, traffic rebounded strongly in France and Germany after restrictions were lifted there. However, traffic on Dulles Greenway continues to be impacted by lower commuter travel.

Atlas Arteria CEO, Graeme Bevans, said:

While traffic in all markets was impacted by government mandated movement restrictions, traffic in France, our key market, has rebounded strongly since lockdown restrictions were eased.

Although we are still in uncertain times, Atlas Arteria's balance sheet has never been stronger. The corporate balance sheet had around $216 million in liquidity following receipt of the $75 million from the security purchase plan in early July. With no corporate debt, we have ample liquidity, strong cash flows from improving traffic at APRR, and we are well placed to pursue growth opportunities as they arise.

Additionally, following the cancellation of the company's 2H19 distribution in May 2020, it has reinstated distribution guidance for 1H20 of 11 cents per security. This is as a result of the business cash flows Atlas Arteria expects from APRR, a motorway located in France. However, the distribution is dependant on business performance. 

Currently, the Atlas Arteria share price is trading at $6.70 which is more than 5% up on yesterday's closing price. The Atlas Arteria share price is down 21.5% from its 52-week high of $8.54.

Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. 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 Scott Phillips.

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