Atlas Arteria (ASX:ALX) share price driven lower by FY20 report

The share price of Atlas Arteria Group (ASX: ALX) is being driven lower after the toll road business announced its FY20 result.

Atlas Arteria is a global owner, operator and developer of toll roads. It has operations in France, the US and Germany.

FY20 result

The toll road business reported that its underlying net profit after tax fell by 61% to $69.6 million. However, the statutory net loss after tax declined 468% to $55.8 million due to a number of notable items.

Those items included a $143.9 million impairment of the Dulles Greenway, a $13.8 million non-cash foreign exchange gain and a final management fee of $2.1 million paid to Macquarie Group Ltd (ASX: MQG).

The France APRR toll road group total traffic (in vehicle kilometres travelled terms) saw a decline of 21% to 19,413 million during the year. APRR toll revenue fell 17.1% to €2.1 billion, earnings before interest, tax, depreciation and amortisation (EBITDA) fell 20.2% to €1.55 billion and net profit declined 28.2% to €628.3 million.

The Warnow Tunnel saw a 7.7% drop in total traffic to 4.56 million. Toll revenue fell 6.5% to €12.7 million and EBITDA dropped 11.6% to €9.1 million.

In the US, the Dulles Greenway saw a 42.7% drop in total traffic to 10.2 million. Toll revenue declined 42.3% to US$51.6 million and EBITDA sank 47.9% to US$38.4 million.

Atlas Arteria said that traffic in all jurisdictions was impacted by COVID-19 movement restrictions but recovered strongly in Europe as restrictions eased, while traffic at Dulles Greenway remained subdued.

Distribution

After paying a $0.11 per security distribution for the first half of FY20, it has given guidance of $0.13 per security for the second half of FY20.

Strategic objectives

The business said that it successfully increased its ownership interest in APRR from 25% to just over 31%, increasing the share of profits and enhancing the governance rights.

Atlas Arteria also said that it has reached contractual close for a new capital structure at the Warnow Tunnel in February 2021, which diversifies the sources of cashflow. Management said that the new arrangements are more capable of supporting the ongoing success of the business and allow for an optimised cash management strategy, resulting in the company having the ability to distribute free cash to Atlas Arteria, rather than being “swept” to lenders.

It also opened up the US market as a future source of institutional capital through a buyback of US retail securityholders.

Atlas Arteria share price movements

Atlas Arteria shares have been sliding in recent times. After almost reaching $7 in November 2020, the Atlas Arteria share price has dropped 20% since then.

Commentary from the CEO

Atlas Arteria CEO Graeme Bevans spoke of the business’ financial position for whatever comes next:

Although we are still in uncertain times, Atlas Arteria’s balance sheet is very well positioned. Our corporate costs will be higher in 2021 with increases in insurance costs a particular driver and some investment in capability to unlock value from our existing businesses. We currently have no corporate debt, ample liquidity, strong cash flows from APRR and Warnow Tunnel and are well placed to face the uncertainties of 2021 and pursue growth opportunities as they arise.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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