Transurban Group (ASX: TCL) shares are sliding today following the release of the company's half-year results for FY2021 (H1 FY21). In early trade, the Transurban share price is down 1.65% to $13.14.
Let's take a look at what's impacting the toll road giant's shares.
Why is the Transurban share price in negative territory?
The Transurban share price is sinking this morning after the company announced significant losses across all key metrics.
According to its release, Transurban delivered an expected weak performance as COVID-19 heavily impacted traffic levels.
For the period ending 31 December, the company reported total revenue of $1,423 million. This reflected a 21.9% decrease on the prior corresponding period (pcp) caused primarily by a drop in toll revenue and construction revenue. Government-mandated restrictions limited passenger movement on road networks with average daily traffic down 17.8% over the first half.
In addition, tunnelling works hit a roadblock with spoil disposal issues at Transurban's West Gate Tunnel Project. After a project scheduling review, the company advised it does not expect to meet the 2023 completion target.
Earnings before interest, tax, depreciation and amortisation (EBITDA) sank to $792 million, representing a 21.5% fall on H1 FY20. While reduced traffic resulted in lower revenue, the group softened the blow with an additional $43 million received from the opening of new road assets and favourable changes in foreign exchange rates.
The group recorded a net loss of $414 million for the period compared to a $65 million profit during the pcp.
The Transurban share price is heading south after the board declared an interim dividend of 15 cents to be paid to eligible shareholders on 16 February. This will be funded through the company's free cash in H1 FY21, which stood at $467 million on 31 December.
Management commentary
Transurban CEO Scott Charlton spoke about the significant headwinds on the company's toll road networks. He said:
Transurban was significantly impacted as a result of COVID-19 during the first half of FY21, particularly in Melbourne and the Greater Washington Area where the virus and associated government restrictions were most severe. Pleasingly, traffic in Melbourne improved significantly through the half, with traffic in December down 19% compared to 66% in August, when restrictions were at their peak.
In markets where restrictions have lifted, for example Brisbane and Sydney, we have seen traffic largely recover to pre-COVID-19 levels, however it will remain sensitive to government responses and economic conditions.
Furthermore, Mr Charlton commented on the group's projects which have run into technical and commercial issues. He added:
We are progressing towards tunnelling commencement, however at this stage disposal sites participating in the D&C subcontractor led tender process would not be ready to accept tunnelling spoil soon enough to enable a 2023 completion. We remain committed to working with project parties to deliver this much-needed project for the Victorian community as quickly as possible.
A review of the Transurban share price
Over the past 12 months, the Transurban share price has shed close to 20% driven by poor trading conditions. Its shares hit a multi-year low of $9.10 in March, before rebounding to around the $13 mark.
Based on the current Transurban share price, the company commands a market capitalisation of around $36.5 billion.
