Transurban share price slumps despite revenue lifting to $3.4b

The company upped its final dividend by 12% and tips its full-year payouts to grow by 29% in FY23.

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Key points

  • The Transurban share price is trading lower today, falling 5% to $13.19 on the back of the company's full-year earnings
  • It boasted higher revenue, EBITDA, and costs for the period, revealing a 26-cent final dividend
  • The toll road operator also noted it expects to offer 53 cents of dividends this financial year – that would represent a 29% year-on-year increase

The Transurban Group (ASX: TCL) share price is in the red after the company dropped its financial year 2022 (FY22) earnings this morning. The company has also announced a major change to its board.

The S&P/ASX 200 Index (ASX: XJO) toll road operator's stock opened at $14.29 this morning – 2.5% lower than its previous close. It has since fallen further to trade at $13.19, marking a 5.12% slide.

Transurban share price on watch as dividend grows

Here are the key takeaways from the company's FY22 earnings from continuing operations:

  • Total revenue from ordinary activities came to $3.4 billion – an 18% improvement on that of FY21
  • Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $1.9 billion – a 3.5% improvement
  • $19 million after-tax profit – a 107.8% improvement
  • Costs deepened by 10.9%, coming in at $862 million
  • Average daily traffic (ADT) on the company's assets came in at around 2 billion – around 0.5% lower
  • Revealed 26-cent per share final dividend, bringing its full-year payouts to 41 cents – a 12% improvement

The company saw traffic exceed pre-pandemic levels to reach a new record high in the final quarter. ADT reached 2.34 billion in the June quarter, bringing in $769 million of revenue.

It ended the period boasting $3.9 billion in liquidity with $355 million in capital releases generated last financial year.

The company also made note of its in-built inflation protection, with 68% of its FY22 revenue linked to Consumer Price Index (CPI) escalations.

What else happened in FY22?

The major news from Transurban last financial year was its acquisition of the remaining 49% stake in the WestConnex. The company bought the asset from the NSW Government for $11.1 billion in September, undergoing a capital raise to do so.

The Transurban share price slipped 1.3% following a trading halt implemented on the back of the news.

Only the company's Brisbane assets outperformed in FY22 compared to FY19, with ADT lifting 3.3% on that measure and 2.8% year-on-year despite an extreme rainfall event in February and March.

Its assets in Melbourne, Sydney, and North America saw ADT slump 23.8%, 1.5%, and 5%, respectively, compared to that of FY19. Though, ADT increased 14.6% year-on-year in Melbourne and 22.1% in North America, while it dropped 13.9% year-on-year in Sydney.

What did management say?

Transurban CEO Scott Charlton commented on the company's earnings, saying:

Over FY22, Transurban has continued to demonstrate the resilience of our business model through inbuilt inflation protection.

In Sydney, we have progressed to the third stage of the NSW Government's Unsolicited Proposals process on the M7-M12 integration and delivery proposal, which will support projected growth in Western Sydney. In Melbourne, we have made significant progress in construction of the West Gate Tunnel with around 40% of the twin tunnels now excavated.

What's next?

Transurban believes it will offer shareholders 53 cents per share in dividends this financial year, representing a 29% increase on those of last financial year.

It also noted it expects its cost growth to lift in FY23 due to higher corporate and operational costs, recovery in traffic volumes and new asset costs, and the potential early-stage development projects could bring unexpected bills.

The company also released non-earnings-related news today. It announced its chair of 12 years, Lindsay Maxsted, will step down from the top job on its board after its October annual general meeting.

Thanking Maxsted for his service to the company, Charlton said:

Lindsay's active approach and deep understanding of the business have been instrumental in creating opportunities that will underpin distributions to our security holders and growth opportunities for decades to come.

Maxsted will be succeeded by Craig Drummond. Drummond has sat on the Transurban board since July 2021 and previously held leadership positions at Medibank Private Ltd (ASX: MPL), Bank of America Merrill Lynch, and Goldman Sachs JBWere.

Transurban share price snapshot

The Transurban share price has lifted by around 1% since the start of 2022.

It is also currently 2% higher than it was this time last year.

For comparison, the ASX 200 has fallen 6% year to date and 5% over the last 12 months.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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