Atlas Arteria (ALX) This morning, the Transurban of Eastern France, Atlas Arteria, released their full-year 2023 results. Similar to Transurban, given the regular traffic and revenue updates, there were few surprises, and the result showed the resilience of ALX’s business. The HNW Growth Equity Portfolio currently holds a 3% & the HNW Income a 4% weight in ALX.

Key Points:

  • Profits Up: Profits increased by 7% to $256.3 million for the full year of 2023, driven by inflation-linked toll escalation and increased traffic on their flagship APRR Dulles Greenway (see below). ALX continue to benefit from a weakening AUD to the EUR and USD.
  • French Tax Update: As of January 1, 2024, a new tax has been applied to companies operating long-distance transport infrastructure with annual revenues above €120 million and profit margins above 10%. This tax would apply to ALX’s flagship APRR toll-road system but would break the concession contracts signed by the government. ALX is using all appropriate means to uphold APRR’s legal and contractual rights, with ALX not paying the tax until they have sat down. While not wanting to pay this additional tax, Atlas does sympathize with the French government in that toll road operators (who sensibly took advantage of 4,000-year lows in interest rates to term out their debt) have benefited from higher inflation rates.
  • Dividends: The full-year dividend of $0.40 is in line with a record dividend in 2022.
  • Balance Sheet: ALX’s balance sheet remains strong with $300 million in cash and only $70 million in debt to be serviced over the coming year.
  • Guidance: Management did not provide any concrete guidance but did provide guidance for the full-year 2024 distribution of $0.40. January traffic was weaker due to French farmers blocking traffic over increased regulation. This is likely to be offset by French railway strikes in February, which have historically forced traffic onto ALX’s roads. Swings and roundabouts.

Portfolio Strategy: ALX exposes the Portfolio to desirable monopoly assets and enjoys mandated price increases that protect our dividends against the ravages of inflation.  While CV19 hit mobility and toll road revenue, traffic and revenue have rebounded far more quickly than the market expected. ALX is an under-researched stock that offers an attractive valuation, trading on a 7.3% dividend yield.

ALX finished down 1% to $5.40