This morning, Transurban (TCL), the Australian and North American toll road operator, delivered a record full-year results with strong revenue growth, traffic levels and profits. The HNW Portfolio has a 5.7% weight to TCL.

 Key Points:

  • Record Profits: Transurban reported profit growth of 7.4% to $2.84 billion for the full year, driven by a 6% increase in toll revenue and no cost growth. This pleasing outcome reflects the low operating costs associated with toll roads, as well as the company’s cost-out program announced last year to eliminate duplicate functions. Around TCL’s assets in Sydney and North America showed the highest average daily traffic growth.
  • NSW Toll Review: This issue that weighed on the stock earlier this year appears to be dissipating. The issue that the government faces is that Transurban and its partners have invested $36 billion in NSW toll roads under strict concession contracts that the NSW government has acknowledged it will need to honour. Implementing dynamic pricing would be challenging due to the varying ownership structures of all roads. Altering these contracts would come at a significant cost to the government.
  • Record Distribution: Transurban delivered another record distribution of $0.65, reflecting a +5% increase from last year.
  • Robust Balance Sheet: Transurban maintains a strong balance sheet, with long-dated debt, an average debt-to-maturity ratio of 6.6 years, and 93% of the debt book interest rate hedged at an average cost of 4.4%. This has allowed TCL to benefit from rising rates in recent years, following the placement of long-dated debt during periods of very low interest rates around 2020.
  • Guidance: TCL announced a full-year distribution of $0.69 per share for FY26, representing a 6% increase over the FY25 distribution. Growth in 2026 will come from inflation and higher traffic, with some of the road disruptions due to new construction in Sydney and Brisbane coming to an end.

Transurban’s command of Sydney’s Roads

Portfolio Strategy: Transurban is the world’s largest toll road concession operator. We are attracted to Transurban due to its high-quality, long-life, and monopolistic infrastructure assets. The company has demonstrated an ability to grow distributions ahead of inflation by both raising tolls and developing existing assets by adding extra lanes to accommodate the additional traffic. TCL’s revenues are generally linked to the greater of +4% or CPI and trades on an attractive and growing dividend yield of 5%.

TCL finished up 2.1% to $14.30