UPDATE 1-Australia's Transurban H1 profit slips

Wed Feb 12, 2014 6:31pm EST

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(Adds details throughout, CEO comments)

By Byron Kaye

SYDNEY Feb 13 (Reuters) - Transurban Group, Australia's biggest toll road operator, said on Thursday its first-half net profit fell slightly as maintenance and tolling system costs weighed down a substantial lift in toll revenue.

Net profit for the six months ending December 2013 was A$80.94 million ($73.12 million), a 0.25 percent decline from A$81.1 million in the same period a year ago.

Analysts had expected the company to boost its interim profit from stronger traffic volume after finishing its upgrade to its Hills M2 toll road in Sydney.

But the company said the result was impacted by the cost of running its 495 Express Lanes in Virginia which opened in November 2012, the cost of building new roads to connect the 495 to other roads, and higher overall maintenance costs.

Transurban, which has roads in New South Wales and Victoria states, as well as in the United States, is acquiring assets and upgrading its roads and tolling systems to boost what it says is its most accurate performance measure, toll revenue.

Toll revenue rose 13.1 percent to A$556 million in the half year, Transurban said.

The biggest toll revenue contributor was Melbourne's CityLink road, which increased revenue by 10 percent to A$269.25 million despite a traffic rise of only 2.1 percent because a tolling system upgrade led to "improvements in recovery rates", Transurban said.

The company's free cash, a key measure for analysts to measure the company's cash generation, rose 24.5 percent to A$239.97 Million.

The 495 Express Lanes, which opened midway through the previous comparable period, had a 249.2 percent increase in average daily toll revenue but that road's traffic and revenue "remains below the project case expectations", Transurban said.

"A review of the project has been completed which resulted in downward adjustments to traffic and revenue projections," the company said.

Transurban is linking up with superannuation fund AustralianSuper and state-run Abu Dhabi Investment Authority to bid for Queensland state government-owned Queensland Motorways Ltd, its first foray into that state.

On Thursday, Transurban confirmed that proposed sale, which analysts say could be worth about A$5 billion, was "ongoing".

The company's focus in the full financial year was "to pursue growth opportunities that make sense within our existing footprints," Transurban chief executive Scott Charlton said in a statement issued to the Australian Stock Exchange on Thursday.

Transurban shares were slightly higher in early trade, in line with the overall market.

($1 = 1.1070 Australian dollars) (Reporting by Byron Kaye and Maggie Lu Yueyang; Editing by Sonya Hepinstall and Diane Craft)

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