Transurban Group (OTCPK:TRAUF) Half Year 2019 Results Earnings Conference Call February 11, 2019 5:30 PM ET
Adam Watson - CFO
Scott Charlton - CEO
Henry Byrne - Group Executive Corporate Affairs
Jessica O'Brien - General Manager, Investor Relations and Strategic Projects
Conference Call Participants
Anthony Moulder - CLSA
Rob Koh - Morgan Stanley
Owen Birrell - Goldman Sachs
Ian Myles - Macquarie
Paul Butler - Credit Suisse
Nathan Lead - Morgans Financial
Thank you for standing by, and welcome to the Transurban Group's Half-Year Results. All participants are in a listen-only mode. There will be a presentation, followed by question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to Mr. Scott Charlton, CEO. Please go ahead.
Great. Thank you and thanks, everyone, for joining us on the call this morning for our half-year results. As usual, I'm joined today by Adam Watson, our company's CFO. And together, we're going to take you through the presentation we've lodged with the ASX this morning.
We have on the call as well, Henry Byrne, our Group Executive Corporate Affairs; and Jessica O'Brien, our General Manager of Investor Relations and Strategic Projects. So you've got the same team as always.
Now, today's presentation should be a little bit shorter. We plan on taking about 20 minutes. We'll just talk for 20 minutes and we'll open up then for about 40 minutes of questions. And again, if we can't get to your question, please contact to the IR team or as we make the rounds, we'd be more than happy to get to the details of everyone's questions.
So let's turn then to the highlights page. Hopefully, everyone has the pack in front of them. We're turning to Page 4. And I'll start out by saying that obviously that 2018 was a very active year and transformational year for Transurban, given everything that we did. And it relied on significant support from our investor base and we appreciate that support as we balance, as always, we talk about short term distribution growth but creating long-term value.
And we don't take this support for granted and we look forward to reporting back to you on the progress of these acquisitions and developments over the coming periods, many of which will be delivered in the next two years, and we'll get to a bit more detail on that.
But I'll begin with our performance highlights for the half. Time savings for our customer, which is obviously, a key performance indicator on us providing value has this period, saved our customers on average, about 376,000 hours each workday across our markets, and that's an increase of almost 15% since FY '18.
So I guess, it continues to show that our improved performance, our additional capacity in the network is providing benefits to our customers. And those benefits have translated into increased traffic growth which was up 2.7% despite some significant disruption caused by the Gateway Upgrade North project in Brisbane, as well as the Logan Enhancement Project and then NorthConnex and WestConnex in Sydney. And again, we'll go through that in more detail.
Obviously, after the WestConnex project, we pivoted the company with a continued focus on cost and now looking at our delivery. And we were able to achieve underlying cost growth on our existing assets of 2.7%, which was a big decline from previous growth periods. And if you look at it and take out the impact of foreign exchange, it was only 1.5%.
And EBITDA increased by almost 10% to just over $1 billion, but that includes obviously, the uplift as well from the acquisition of WestConnex, A25 and the two additional M5 stakes that we acquired.
And I'll go through today talking at various points about some of the recent changes we've made to fees and processes to support our customers. We believe it's - we've been on this journey for almost three years with our digital platforms and consolidation of systems, consolidation of brands and consolidation of fees across the eastern seaboard.
And then we believe it was the right thing to do for both our customers and the long-term sustainability of the company, but it's impacted EBITDA by approximately $10 million in the half.
FY '19 will encompass the full impact of this fee reduction and revenue will be rebased from FY '20 going forward. Adam will cover the debt highlights but it's been a big six months. We've raised over $8 billion of debt at an average interest rate of 4%, while maintaining a weighted average maturity of greater than nine years, so we still see great support in the market.
Our FY '19 distribution guidance has been reaffirmed at $0.59 per security and we're continuing to target mid single digit percentage growth in FY '20 as first advised during our WestConnex entitlement issue.
Turning to some more of the highlights on Slide 5. There have been a number of operational development and delivery highlights for the period. Obviously, achieving financial close on WestConnex in September was a big milestone for the company and we're now focused on delivery and integration. We're very pleased that NorthConnex tunneling is now complete, with paving mechanical and electrical works underway and opening expected in 2020.
The integration of our A25 asset in Montreal is now substantially complete and traffic and revenue are ahead of both our expectations. And also in North America, we announced the 495 Northern extension project in partnership with the Virginia government just very recently. This project will extend the express lanes 3.2 kilometers toward the Maryland border and will significantly reduce congestion in the area and add value to our existing 495 asset.
In Melbourne, the West Gate Tunnel project is progressing well with over 3.4 million hours worked to date. And as part of that project, we've just taken delivery of a 4,000 ton tunnel boring machine which, if you compare it to the Metro tunnel boring machines, kind of makes it look like toys.
But it's not a competition but we're pretty pleased with our tunnel boring machines. And it's one of two machines that will be used on the project tunneling 24 hours a day, seven days a week.
And I was on site last week and it's impressive to see the activity that's occurring and we've excavated now 60% of the Northern Portal box, and the largest crane in the southern hemisphere has been assembled on site to assemble the TBM and other equipment on the project.
Importantly, as always, we continue to strive for improvements in road safety across our portfolio. We've again engaged third parties in Monash University Accident Research Center to measure our safety performance relative to other like roads. And in this period, in New South Wales, our roads are 78% safer; in Victoria, they are 72% safer; and in Queensland, they are 44% safer.
Some more highlights on Page 6. We now have over 8 million customers across Australia and North America and we're constantly looking for ways to improve their experience and offer value on our roads. Again, during the half, we saved our customers in Australia approximately $10 million in fee reductions and process improvements.
But also and very importantly, we made it easier for customers to avoid the state enforcement processes where the very large fees and fines occur. So in turn, we're saving our customers more than $100 million annually in state enforcement penalties.
Also pleasingly, in October, we established what we call LinktAssist to support customers facing hardships. So we have a dedicated hardship team in place and we look forward to continuing to update you on our progress in that area.
And also, everyone will be aware in October when we released our sustainability report and it outlines a lot of our initiatives. And I encourage you, if you get a chance, you can look at that on the website.
And finally, if people would have maybe noticed, if you are a Roam customer in New South Wales, we acquired that Roam platform and transferred over the weekend to Linkt, and you'll continue to see our New South Wales customer base grow and is transitioning to that retail brand, which provides enhanced customer offerings compared to the previous service. So we're very pleased about that.
On Page 7, we thought it was important just to remind everyone given the current environment that we're in an increasing public expectation that we continue to assess how we create value for all our stakeholders, not just our security holders and identify areas where we can improve and create synergies across value for all parties.
Obviously, the big issue for our customers is travel time savings, road safety and continuing to develop efficient transport networks for the wider community, job creation, the community programs.
And we'll continue to identify and progress these top initiatives to contribute to all of our stakeholder groups, whilst importantly, it's providing a sustainable investment proposition for our investors.
So then turning to Slide 8. I think these next two slides are really where we're going to focus on our investors and stakeholders and what Transurban is going to do for the next couple of years. So as we said, it's been an incredibly active past 18 months, but we're now focusing on three key priorities to ensure that we can create a sustainable platform for our business going forward.
First is obviously, will be the key, will be the delivery of the nine projects across Australia and North America that are to be completed in the next five years. We have an experienced team, with almost 400 Transurban employees directly responsible for monitoring and progressing this pipeline.
Secondly, as always, maximizing the operational performance. It's always been important to us and we'll continue to look for opportunities with cost and revenue to drive asset performance.
As an example, we're looking to increase travel time reliability through extensions to incident response behind our concession boundaries, as we've done here in Melbourne along the West Gate Freeway and over the West Gate Bridge.
And finally and probably just as importantly is enhancing customer and community outcomes, and this is really taking the friction out of doing business with transaction and make it easier for our customers to interact with us, but also providing information so they can make informed choices and feel empowered when they use the roads. And reducing fees has been an important part of this element and there are additional initiatives planned for the near future.
And then moving to Slide 9, I think this sort of sums up what we've - one of the big achievements we've had over the last 18 months, is putting this pipeline in place. So we have nine development projects to be delivered over the next five years. And I think when I started at Transurban, we had seven assets with Transurban and we have nine projects to be now delivered over the next five years.
And importantly, once each of these roads open, there's an increasing cash flow for the group and this will contribute to ongoing distribution growth, and you can see the cash flows of these nine projects progressively building up on the slide over the next five years.
In addition though, and this is why we talk about creating long-term value, these projects also help extend out the life of our business. With the average concession for the group remaining close to 30 years for the next 5 years despite the passage of time as these assets come online.
And in the next two years, the M4 East and the new M5 and M5 East will be operational, meaning 85% of the WestConnex construction that Transurban is managing will be complete. So I think these are pretty - an important slide to see there and as I said, five of these projects coming online in their cash flows in the next two years.
Now turning to the markets, we'll do a quick summary on Page 11. I should point out that if you're looking at the pack on Page 11, Page 10 where it's the market update slide, if you'll notice, it's actually a picture of the NorthConnex tunnel.
You'll see the final pavement there in one of the ramps, you'll see the mech and elec starting to go up in the ceilings. So that tunnel is really starting to take shape and we're pleased with how that's now progressing.
Back to Slide 11. In Sydney, travel time savings have been close to almost 200,000 hours each day for our customers, and traffic grew 2.1% during the period despite some of the impacts by large vehicles declining and that's due to the tunneling being completed on the M4 East and the M5 West in NorthConnex.
So less heavy vehicles using our assets, but as the M4-M5 ramps up and the Rozelle Interchange ramps up and some of the other projects, we expect some of those heavy vehicles to come back.
Average daily traffic on the newly acquired M4 was 1.5%, which was in line with our expectations as construction on the M4 East continues and there is still disruption and that will open shortly in the next -- by the end of this financial year.
We've increased our interest in the M5 West to 65% which assists in our strategic operation of the M5 and lead up to transfer the WestConnex. And we're looking into customer and community.
We have launched a new trip compare tool online which we have in Victoria which compares a tolled route to a free alternative and provides information to make informed choice based on price, travel time and fuel savings. And we're looking to roll out a similar tool in Queensland next.
Specifically on WestConnex on Slide 12, as we move into construction and integration, we're pleased that we still have yet to identify any material issues since financial close.
Again, we look forward to the new M4 East tunnel opening in this quarter four this financial year, and that's going to provide customers with a much-needed alternative to the heavily congested Parramatta Road.
You can also see a picture there of the new M5 where excavation works have been completed and construction's now commenced on stage 3a which is the new M4-M5 link.
Also in September, the New South Wales Government announced it was progressing the Sydney Gateway project which connects to WestConnex as a toll-free road. And the Gateway will expand capacity and improve connections from WestConnex into Port Botany and Sydney Airport.
And we understand the government is continuing to advance planning for the Western Harbour Tunnel which connects into the other side of WestConnex. So everything is progressing as per, I guess, our investment thesis.
So turning to Melbourne on Slide 5 - Slide 14, seeing strong traffic growth of 4.6% post the CTW widening. In particular, we are pleased that the large vehicles are seeing a benefit and we've seen particularly strong traffic there, a 7.2% increase despite obviously, increase in the toll multiplier.
The revenue increase of 5.6% has been impacted by again, the reduction to customer fees and improved processes that were rolled out as part of the transition to Linkt in July. And that again will have made its way fully through the system by the end of this financial year.
We're continuing to make improvements to the toll collection process, whereby we have been given more time to work with customers before they progress to the state enforcement process.
Again, keeping our customers out of trouble and reducing the number of customers who fall into enforcement, again, saving significant money for our customers but also reducing the burden for government.
Turning to Brisbane, average daily traffic increased 5.3%. This was significantly impacted by the final construction of the Gateway Upgrade North Project and ongoing works in the Logan Enhancement Projects. The other roads, excluding those two projects, traffic growth was strong at 4.1% but obviously, Gateway and Logan are the major components of our assets there.
We're now very pleased that all the lanes are open on the Gateway Upgrade Project as of January and new lanes for Logan Enhancement will start to open from April this year. So by the time we get through the full year this year and going into 2020, the disruption should be gone.
Toll revenue growth of 1.7, again, was impacted by customer fee reductions with full impact of the changes because they've started in Queensland earlier are now in effect. But we do expect importantly, with the completion of GUN and LEP and our new O&M project which we have finalized transitioned in the first half this year, that we expect a material increase in the Brisbane EBITDA margin in FY '20.
The Inner City Bypass upgrade was completed in August and that means customers are also benefiting from improved travel time savings and connectivity to Legacy Way where traffic increased by 8% for the second quarter.
We're also trialing some new use of incident response motorcycles in Brisbane where they can then tend to incidents quicker in peak periods to get traffic moving again and help our customers.
In North America, total revenue grew by almost 43% and includes the A25 acquisition. Excluding this, total revenue growth was 12.6%. Despite the government shutdown, total revenue in the Greater Washington Area for January is looking robust and the 95 has been performing extremely well even with the government shutdown. Traffic growth in Montreal has been strong at almost 6% and pleasingly has continued to exceed our investment case.
Development in the Greater Washington Area is progressing with financial close on the Fredericksburg Extension expected in the second half of FY '19. We have construction prices in and they are within our bounds and we're just going through the final financing arrangements, and the 395 Express Lanes is now over 50% completed.
We continue to work with our government partner in Virginia and as I mentioned earlier, we're pleased to be able to advance a proposal for the 495 extension which will significantly reduce congestion in the area and take our operations to the Maryland border.
Turning to Slide 21. We remain committed to growing Transurban in the long term but obviously in the short term, in a very focused way. As discussed, our current priority is our pipeline to deliver, to increase our operational performance and provide additional benefits to our customer community.
However, just to be clear, there still are a number of embedded development opportunities on our existing assets that will likely be attractive over time, and we've outlined a few of these on the left.
But in addition, there are a select amount of opportunities adjacent to our projects that may be of interest, including the Maryland Express Lanes and the Western Harbour Tunnel in Sydney. But you can see, this is a greatly reduced list compared to previous periods as again, we focused on delivering our existing pipeline.
So with that being said, I'll now pass over to Adam who'll walk through our financial results for the period.
Thank you, Scott. And as usual, I'll start with an overview of our statutory results. We'll then move onto what we believe again is a solid set of proportional results with ongoing earnings growth, our cost discipline, growth in free cash and we'll also talk about the strengthening of the balance sheet during the period.
And as usual again, we've also provided a lot of detail on the back of the investor presentation and the supplementary information including some more detail around the CapEx numbers that support our development pipeline. So you'll find them towards the back of the presentation.
So on Slide 23, you'll see that our statutory revenue at $1.29 billion; our EBITDA at just under $1 billion; and our net profit, $145 million. So our total revenue increase of $167 million, as you can see on the slide, includes a $52 million increase from the existing assets and $115 million coming from the recently acquired assets, largely being the A25 and also our additional interest in the M5 West, which we previously equity accounted and now we consolidate so we bring those numbers onto our statutory results.
The $145 million statutory net profit for the half was lower than last year. And as you can see on the bullet points to the right of that number, largely as a result of the stamp duty and integration costs associated with the WestConnex acquisition. So you can see almost $300 million of stamp duty associated with that transaction.
You'll also see a non-cash gain following the consolidation of the M5 from 18th of September. So again, switching from equity accounting to consolidation under these accounting standards will require to revalue that asset and bring the movement in the fair value against the book value through the P&L.
And you'll also see from a depreciation perspective, that the M5 investment has also had an impact, again having to now bring the depreciation and amortization of the M5 onto the P&L from a statutory perspective.
We also do have high depreciation as a result of the new investments that we've made, such as A25 and CTW. And you can see that there's some movements there with respect to tax, noting that last year, we had a nonrecurring benefit coming through from the restructure in the USA. And we also had a similar benefit this year, not to the same degree, with respect to a higher carrying value for Legacy Way.
You'll also see on those results that we've called out the significant items but I'll go through those very briefly through the proportional results. So on Slide 24 again, the proportional results, we believe, provide a better and clearer representation of how we're performing from a financial perspective.
And you can see there, the total revenue, as Scott mentioned before, increased 9.3% during the period, an increase of $54 million from our existing assets as well as a $56 million increase from our new investments.
It included both the A25 and M4 from the WestConnex acquisition as well as the 15% additional equity we acquired in the M5. Obviously, a part year contribution, given the timing of those transactions.
We also note and forgive me if I'm repeating but Scott mentioned before that our fee revenue, which forms part of our total revenue did decline by about $10 million during the half. Again, as a result of the work that we've been doing and undertaking over the last few years to reduce phasing and improve our processes for customers.
Headline costs are reported there at 10.5% but again, largely driven by our recent acquisitions. So I'll take you through the cost slide in a moment but our underlying cost growth was 2.7% and as Scott mentioned before, 1.5% if you exclude the impact of foreign exchange during the period.
And pleasingly, our EBITDA has increased 9.8% for the half, and group EBITDA margin remaining consistent at around 75%. Now to ensure our investors can clearly assess the underlying performance of the business, we've also called out a number of significant items. You can see them both at the statutory results and the proportional results during the period.
And again, they came from the three main sources of firstly, the A25 which were the integration costs of the A25; stamp duty and integration costs relating to the WestConnex acquisition; and also, we had stamp duty payable on the acquisition of the additional 15% interest in the M5.
Moving on to Slide 25, where we take you through the EBITDA margins. And again, pleasingly, every market increased its EBITDA margin when compared to the full year, albeit we do note when you compare that to the first half of '18, Melbourne was slightly lower than the corresponding period. But again, that was owing to the lower fee revenue as we've mentioned earlier.
It's also worth noting that the lower fee revenue and I think Scott mentioned this before, but it will have an impact on margins through the second half of this year and normalizing in FY '20.
You can see the Sydney margins are now inclusive of the M4 and we're able to hold them up high. And our Brisbane margins continue to perform in line with expectations.
And again, as Scott said before, we will expect a noticeable improvement once the disruption due to the Gateway Upgrade North and the Logan Enhancement Projects finish. And also, we see the benefit of our recent operations and maintenance restructuring initiatives.
And finally but not least, the North American margins again continued to grow, which we are pleased by, including and supported by the recent acquisition of the A25.
So moving to Slide 26 with the cost bridge. There's a fair bit of detail in there but I'll just call out a couple of items. Again, the headline number, showing a 10.5% increase was heavily influenced by the inclusion of the new assets to our cost base, so again, the A25, the M4 and the M5.
We also had the impact of a non-cash adjustment to our maintenance provision which in the main, impacted our U.S. business. That's that $6 million impact there. That will translate through the second half as well, but we don't expect that to recur from FY '20 and going forward.
So stripping out these so you can get -- to get a comparable cost base, you can see a 2.7% increase year-on-year. And again, if you excluded foreign exchange, we've got a 1.5% increase during the period. We're obviously happy with that. It's a low underlying growth rate and then as Scott mentioned before, reflects our ongoing focus on operational efficiency. And again, we expect that to continue through to the second half.
Moving to Slide 27, another busy chart but again, it's been a very busy period. You can see a headline growth in free cash of 23% during the period to $715 million, which is a 92.4% coverage for the interim distribution, which is within our target range.
Our underlying free cash growth was around 15% for the half. Again, largely on the back of our EBITDA growth as well as our ability to be able to continue to raise debt at attractive rates. We do note that there was a small working capital timing benefit during the period but even if you exclude that working capital benefit, we delivered an 11% increase in underlying cash flow, again, which we're happy about.
We do highlight a couple of prior period benefits and we constantly highlight those to give you some more clarity around the underlying results. Most notably, the timing different with respect to the receipt of M5 distributions.
And in short, in FY '18 or in the -- we effectively received all of the M5 dividend in the first half. Whereas in FY '19, we'll be receiving M5 distribution phased throughout the year both in the first and second halves.
Included in the first half '19 cash flow, you can see the $98 million NorthWestern Roads Group capital release. And as we've flagged before and consistent with what we've had previously, this was a pre-agreed, upfront arrangement with respect to the NorthConnex transaction, and this release followed completion of tunneling and was also coupled with the achievement of necessary credit metrics and hurdles and also confirmation from the rating agencies.
We have discussed on a number of occasions, that capital releases will continue to play an important part in our distributor profile and capital strategy, as it represents a prudent way to be reimbursed for the upfront equity funding that we apply to major developments upon meeting certain milestones.
Future capital releases are planned to support Transurban's equity funding of major developments including NorthConnex, WestConnex and our North American investments over time as well as Transurban Queensland.
And in fact, for Transurban Queensland, we have a scheduled capital release coming in calendar 2019 of a similar size to what we've just reported here for NorthWestern Roads Group, which we're aiming to receive in the first half of this calendar year which would therefore form part of the FY '19 free cash flow.
And in the longer term, we expect to see continual growth and free cash driven by solid underlying earnings, ongoing capital releases and the step-up in cash flows as new assets come online, as Scott mentioned before.
So finally for me on Slide 28, the treasury summary. It has been a very busy period but again, we believe it's put us in a solid position to deliver our committed project pipeline and again, further strengthen our balance sheet.
We raised $4.8 billion of equity during the period through an entitlement offer and a placement which was to fund our 25% share of WestConnex. And again, we do certainly thank our investors for their ongoing support in this regard.
And we've also had a lot of support from our debt investors. We've raised $8 billion of debt during the period, $6.1 billion of which was for the WestConnex assets to refinance their existing debt and effectively ensure that we can fund the balance of the construction program for WestConnex.
I note that we also assumed additional debt from WestConnex through the acquisition and this was largely the CapEx facilities that are there to support the new M5. So again, we all have the debt facilities in place now to fund the remaining construction program for WestConnex.
As noted, when we acquired that asset or that portfolio of assets, our longer term plan is to refinance these CapEx facilities over time and replace them with longer term capital markets debt. And we did raise $1.6 billion in the Capital Markets during the period for the M7 and the A25.
And we continue to see and receive strong support from our diverse investor base with this new capital markets debt raised across an average tenure of 10 years and at an average interest rate of 4.5%, which is below our previous average.
It's important to note that all of our new debt raised during the period was raised at interest rates below the previous average for any debt that we refinanced. And credit metrics remain within target, including our FFO to debt there at 8.6%.
So we will continue to actively manage our balance sheet as evidenced by the minimal amount of refinancing to be done during the remainder of this year and again, ensure that we've got a strong balance sheet moving forward.
So with that, I'll pass you back to Scott
Thank you, Adam. So looking at the outlook at the summary slide on Page 30 and obviously, there's a lot of supplementary information I'm happy to discuss. But importantly again, our distribution guidance has been maintained at $0.59 per share for FY '19. And as we put forward in the WestConnex entitlement issue, the board and the companies continuing to target mid-single digit percentage growth for FY '20.
That ongoing distribution growth will be supported by cash flows from the completion of our nine development projects over the next five years, which will also contribute to maintain our average concession length.
And again, I'll remind, I guess, our thesis is, we're always looking to grow our short term distributions but we want to make sure we're creating long-term sustainable value.
Again, as I said, after the WestConnex transaction, we have pivoted into these three priority areas that we're working on delivering our non-committed projects over the next five years.
And again, five of them in the next two years, so you'll obviously get a chance to judge management on how we've done in the near term, to be able to maximize performance of our assets through continued operational improvements and use of technology and other initiatives that we have planned for.
And then to continue to enhance our customer and community offerings, again, demonstrating our commitment not only to you, our investors, but also to all of our stakeholders.
So with that being said and to wrap it up, I would like to thank all of our employees, our contractors and all of our stakeholders who've contributed to what has been a great result, and putting Transurban in a fantastic position for platform delivery over the next couple of years which will set trends up for the long-term growth and hopefully, get along to bigger and better things.
And finally again, we appreciate and very humbled by the support we've had from our security holders, particularly over the last 18 months for our capital raisings and major projects, and we'll do our best to deliver on our promises.
And so with that being said, we'll now open for questions.
Thank you. [Operator Instructions] Your first question comes from Anthony Moulder from CLSA. Please go ahead.
Good morning, all. Maybe if I can start with Adam, the first question. Capital releases, good to hear that you've given some visibility for the timing of those with 2Q at a similar level for that which we received in the first half. Can you - is that the only one that you'll expect through 2019 and this half in particular?
It is, Anthony. It is the only one during 2019. We do expect capital releases to come through, as you know, over the next few years. In fact, next several years with FY '20 also including capital releases similar to what we've received or we will receive in FY '19.
Just again with - Anthony, it's always with the capital releases. I think it's very - and I think as Adam made the point, they were all set up at a point where we're doing the development of the projects and then understanding again, trying to manage the distribution growth in the short-term versus carrying the long-term value. So all consistent with the original sort of investment cases to make sure we can manage by the first priorities.
Scott, the fee reduction of $10 million announced this half, I agree that it's the right thing to do, given as you called out, I think Queensland started this process a bit earlier or assumed a smaller impact in second half '19 from that.
Yes, it's not. There's still some flowing through but yes, lesser impact on Queensland. But the biggest impact we've had on Queensland is finishing GUN was quite a bit chaotic with traffic. LEP, the major disruption has occurred in that last sort of three months of the year and that will start coming off as some lanes are opening.
So we have a couple of things coming on in FY '20. So we'll get the truck toll multiplier on LEP because that will be finished, GUN will be opened, we get the full benefits of the O&M starting to flow through of the restructure and then the fees will be writing off, and that's why we see a material improvement in the margin in 2020.
I should say that the fee reduction is the right thing to do and something that we've planning for years. I have to say it's bigger than we forecast and that our processes and our initiatives have worked better than we had anticipated, which is a great thing for our customers, so we're really pleased. But it has had a bigger impact on fee reduction than we had forecast, but that's a good result.
Sure. And settling traffic in the second quarter seemed to slow quite a bit from the first quarter. That could be modeling error on our part, but can you comment on what you're seeing in that underlying traffic trend for Melbourne in particular?
Yes, look, we've seen some strong growth particularly on the Western Lane. The Southern Lane because of some of the issues down Monash and other issues hasn't been as strong but we've seen strong growth on the Western Lane.
I don't know if there's any particular issue. I wouldn't say your model's wrong at all, Anthony. I wouldn't say that but yes, I don't think there's any particular issue.
And lastly, I guess, here we are in February, these are December quarter statistics. Have you seen a similar growth profile in the first 1.5 months of calendar '19 to what you saw in the December quarter?
Yes, look, obviously, the quarterly results are out there, our results here. But going forward I think what we saw was we had some other issues. Besides the disruption in Brisbane, we had the wettest October in parts of Sydney on record. So I think what we've seen is very similar sort of numbers coming through. And in fact, in the U.S., it's a bit stronger.
And we're starting to hopefully see some rebound in Brisbane after GUN so -- but obviously, with CityLink, given the size of the asset and the numbers, that growth rate will have to slow down as we get through the ramp-up. And then there is some timing issues around truck movements and other things on WestConnex. So overall, it was pretty similar, I guess, is the answer.
All right, perfect. Thank you very much.
Thank you. Your next question comes from Rob Koh from Morgan Stanley. Please go ahead.
Good morning, everybody. Can I ask question, possibly over simplifying things, just about the interrelationship between the timing of capital releases and dividends? So as hypothetical as the NorthConnex capital release had been delayed a few months and was looking like it was going to come in, in the second half, that would have taken you - your cash cover below the bottom end of the 90 to 110 type range. And would that have then led to a dividend reduction? Or do you just kind of look through it?
Yes, I mean it's always a board decision, Rob. But I think the philosophy is over -- as we've said over time, we want to make sure we've got 100% cash coverage of our distribution, so it's just a matter of a few months or a timing issue.
My personal view is the board would have just looked through, paid the distribution and covered it and explain and be transparent as Adam has been and to say that we're going to do another capital release from TQ in the second half.
So I think the most - we reaffirm the guidance. We have the cash to cover it for the year. So yes, I think my personal view is the board would have just looked through it.
And the important thing, Rob, is that these capital releases, as we have said many times, they're pre-agreed. The amount's pre-agreed. The process is pre-agreed. So we know it's through our own internal modeling and the -- we require the engagement with the rating agencies and with the state.
We know when they're available. Yes, there is sometimes some timing differences, might be a month or so. But materially, we know that we will be entitled to those capital releases, so there's a high degree of certainty there.
But the other side of that, Rob, is that we're not going to refinance or do a capital release to make a particular period -- particularly, if it doesn't make sense in a financial or a value perspective.
So if we're better off to hit a certain market at a certain time or to roll another bit of debt off so we don't have to pay early prepayment penalties, we're not going to hit a certain date just to make a capital release for a distribution. We're going to provide value in what we do. And I think we would just look through it if there was any small timing differences.
Yes, great. Thanks for the color, much appreciated and no complaints in terms of the approach and the transparency. Okay. Can I just ask, on Slide 9, where you're referring to the average concession life remaining being greater than 30 years, can I just clarify, are you using like a revenue weighting to get that average concession life or...
Yes. So it's a revenue. It is a bit hard because as one revenue ramps up on a road then, obviously, that road becomes more - contributes more to the portfolio. So it's on a revenue - proportional revenue basis.
So what we've said is it remains around that 30 years -- can be just above 30 years, just below 30 years. But even though time is marching forward because these new assets are going to come on and start adding revenue, they're going to continue to maintain that concession life around 30 years which, again, we think is part of that creating long-term value.
And what it also means is we'll be able to grow our distributions. Even if the portfolio is not expanding, we'll be able to grow our distributions for a significant period, longer than previously.
Okay, sounds good. All right. Just a question on the fee reductions. So just you, I guess, have been proactive on that for many years. I guess, the other side of it is potentially, with less customers going through the enforcement procedures, you might actually be able to improve collections. And I know that's not the driver. But are you able to comment on when you might be able to see that or if that's less of a factor?
No, that's always - there's two sides to this. So if we can stop people from going to the enforcement process and we can make interacting with Transurban easier and then that means we will - hopefully, our plan is to collect more toll revenue over time, so have less non-arrangement travel or less leakage through the system. So that is absolutely the other side of this, but that comes in over time.
First, we have, again, aligned all our fees and processes and made it simpler, and we're a lot more proactive now at contacting our customers around when their credit cards might be expiring or when we see something happening with their details or something that we think we can alert them to do something proactive to see if we can help them.
So yes, longer term, that will - that should translate into a better experience but also more toll revenue. But in the short-term period, it's meant we've taken a hit on the fees.
Yes, yes. Understood, okay. I guess just the final question for me, if you can indulge me, just is there any update that you can share on the West Gate Tunnel revenue legislation, i.e. the legislation for the CityLink?
It's our stated policy to put their legislation forward on the CityLink concession extension and the West Gate Tunnel. But the timing of when they choose to do that is up to them.
So we just have to - as a partner, we just rely on them to put it forward when they think it's best to put it forward. But it's the timing of their choosing.
Okay. Sounds good. Thanks very much. That’s all from me.
Thank you. Your next question comes from Owen Birrell from Goldman Sachs. Please go ahead.
Thank you. A couple questions from me, just looking at North America first, obviously, very strong growth in your tolling revenues and EBITDA margins on the back of some stable traffic numbers.
I'm just wondering, was there anything particular during the period that drove that strong demand? And where should we see that, I guess, normalized going forward?
Yes. So two things in North America. Obviously, the addition of A25, so without the A25, the revenue growth was about 12.5%, and EBITDA growth was about 8.5%, which is still strong. So the A25, when we get through this year, obviously, that'll normalize. And the A25 had traffic growth in the order of almost 6% so, again, above our expectations, which is great, so we're really pleased with that asset.
So -- and we have disruption with the 395 and some of the works we're doing around the Greater Washington Area, but we still seem to get a good outcome overall. You'll see in the detailed numbers, the 495 was a bit soft for the half. Part of that was the government shutdown. It's more impacted than the 95 by the government shutdown.
And as well, there was Hurricane Florence that I don't know if you recall, and there was a few other events that occurred during the first half that affected 495 more than I-95. That being said, I-95 has outperformed our expectations even with the government shutdown and had strong performance in January and, so far, in February. So the I-95 has made up for more than the 495 position.
So again, it's -- in North America, take the A25 out of it, if you look at just the Greater Washington Area, it's about revenue and EBITDA growth, not about the traffic growth because we're trying to maximize the tolls.
And that's the great thing about these three extensions that will come online: the 395, the Fredericksburg and the Maryland border extension, because they'll both add significant value, not only for additional toll points but for the entire trip, for those people looking to use the Express Lanes.
So it's - there will be continued, I guess, ramp-up as those new sections come online. And one of them will come online at the end of this financial year with the 395, which we look forward to. But I'm not sure I really answered your question, but I've given you a bit more color, sorry.
No, that's good color. And just one, the 395 extension, it is a number of years away, but you note that it hits the border of Maryland. Is there any opportunities on the other side that you're exploring at this moment?
Yes. Well, if you look at Page 19 where it's got the map, so the 395, which is at the top of I-95, which connects into, basically, the Pentagon, that will be finished in October or the last of -- toward the end of this year. So that will open toward the end of this year.
And like you said, the 495 Express Lane, 495 going to the border of Maryland is sort of 5 years away, assuming we get through the process there. We didn't get still an MOU and a development agreement. I'd say we won that, it's not fully committed, but we've been through this process many time with Virginia, and we're comfortable we'll get there.
You see the orange on the other side, which is the Maryland side. And currently, the government is reviewing an Express Lane potential rollout and procurement process. We'll see what the process looks like. Obviously, we're interested. It connects to our network in almost every way, but we'll have to see what their procurement methodology is and how they proceed during this year.
So that is one of the few areas, as we've said, we might look at development activities, Maryland and Western Harbour Tunnel. Otherwise, we're pretty focused on just delivering what we have.
What is the time lines for that - those Express Lanes?
Well, there was supposed to be something last year, and then there was supposed to be something in the first half. It's kind of -- it's gone back and forth through a lot of machinations, so I don't think there's anything definitive at this point in time.
Okay. And look, just another question, I guess, around margins again on Brisbane this time. You mentioned that you expect the EBITDA margin to pop back post Gateway North and Logan disruptions coming out.
Just wondering if you can give a sense of the, I guess, the timing and how quickly do you think the margins will come back. But also, is there anything structurally different about the Brisbane market that means you can't get your EBITDA margins up to somewhere like Sydney or Melbourne?
No, we've had a couple of issues. When we originally made the investment we didn't forecast LEP in there, which was when we put a bunch of capital, we've disrupted the road and then we'll get a nice increase for that investment when the truck toll multiplier goes up after we complete LEP, so that has impacted us.
And then we've taken a substantial fee hit in Brisbane with the restructure of the fees and everything, and we think that's the right thing to do. And that's cost us more than 1% in the EBITDA margins in a timing sense, but that will come back to us over time. I think it's always important to discuss that when we talk about, obviously, about EBITDA margin on one side versus our investment case.
So when we made the original investment in QML, our assumption around CPI would have been higher, but our assumption around interest rates would have been a lot higher as well. So if you can look at our investment thesis into QML, we're doing much better than our original investment.
And particularly, the cash that we've been able to distribute out of QML has been higher than we forecast because on one side, CPI has been lower, which affects our EBITDA margin. But obviously, interest rates have been significantly lower than we had forecast at this time, which has given us benefit and cash flow but doesn't come through the margins.
So - and then the O&M arrangements that we put in place this year and we had the final hits on transferred cost and other things, that will be finalized this year. So again, we expect a couple of good years of significant margin improvement in Brisbane as the benefits of our restructuring and everything sort of come through and finalized.
So I think the fundamental thing with EBITDA margin has partly been CPI but we got the benefit on the interest side, but we still see recovery over the next year or two.
And I guess a follow-on question to Adam. Transurban Queensland has given you a very strong stream of capital releases sort of averaging sort of 160-odd million per year. How much longer can that continue? Are you guys trying to bump up against sort of the headroom constraints there?
So for Transurban Queensland, we've got capital releases program for quite some time. And again, it was all negotiated with the Brisbane City Council and the state government as part of the acquisition of Transurban Queensland, as part of Legacy Way and as part of the acquisition of AirportLink. So they will continue to progress over time.
As Scott mentioned, the margins will -- and have been planned for some time and will continue to increase, so it will generate more cash flow, and the credit metrics, therefore, continue to improve.
So they are the reasons why we want to ensure that we're maximizing the value out of those assets, and we pre-agreed them with the state. So in short, it will all continue for some time.
Okay. That’s it from me. Thanks.
Thank you. Your next question comes from Ian Myles from Macquarie. Please go ahead.
Good morning, guys. Nice result. First question is you told these cash flows in these capital releases, I think you've mentioned multiple times here that these are an agreed program. Is it possible for you to give us some color on exactly how much, in a sort of a cumulative basis, the pre-agreed amounts are by the individual roads because it seems quite - it's just kind of very difficult to sit there and look at the quality of the numbers wherein these pre-released numbers are coming through. And you're telling it's pre-released, but we ever get told what amounts these have been agreed to?
So - look, we always need to be careful in terms of not providing guidance. But you take something like the NorthWestern Roads Group, it was -- with NorthConnex, it was in the announcement at the time that we've got the capacity there to increase the level of gearing in that asset over time, noting that the funding of NorthConnex through the development of that asset is largely via shareholder loan notes, which is effectively upfront equity funding by us and our partners.
So you've got some flags out there for something like the NorthWestern Roads Group. So for some -- some of the other assets like Transurban Queensland and WestConnex, effectively what we do when we're investing in those businesses is that we effectively model out for the life of the concessions the value that we think we're going to create from those assets and what the impact is on the credit metrics.
And as you know, these assets improve their credit metrics on a daily basis on the assumption that you've got a fixed debt level and you've got growing cash flow, so we schedule that over time.
I think the main thing in the short term or the medium term is that we funded these assets with equity, a lot of equity. And I think what you can look at is, as they come online and then once they get through a ramp-up period sort of two to three years, you do expect that over that period of time that each of these assets, whether it's WestConnex, NorthConnex, and if you look at Queensland, we had Legacy Way and we had a few other things like LEP and other things that are going to come online, that, that is the normal process.
So there is some timing issue, I think, as Rob mentioned, about exactly when they come online, when the cash flow comes online. But because there's a whole portfolio of them, we can manage that. But I think the most important thing is you can look at that five year schedule that we gave you, when those assets come online, there's the capability as soon as cash flow starts.
And then, usually, as you know, after two or three years and the cash flow stabilizes, you'd expect us to be able to distribute some of that equity that we had to raise upfront to effectively fund the majority of those projects from equity.
I guess I'm just intrigued because you used the word pre-agreed amounts. So that's why I'm saying if they're pre-agreed amounts, some color on those pre-agreed amounts will be quite useful as opposed to a refinancing because the roads' credit quality has actually improved?
Yes. When we say pre-agreed amounts, we have an investment case, we have an agreement with the government, we have agreement with our shareholders, we have agreement with our partners on how the investment case works. So when we say in pre-agreed amounts, it's basically so we don't need the authority from any other party to go through the process. That's how the investment case works.
Timing may move around a little bit. But there are sort of maximum amounts that we set, and we have to make judgments at the time for the benefit of each asset, what the markets look like, what will be the most efficient financing.
So it is pre-agreed that we have maximum amounts. And we've been able to manage that I think, and Adam and the team, quite well. It's not quite as black and white. We always make judgments on where we are. And just because we have a pre-agreed maximum amount and the market doesn't look attractive or we decide to use some of that money to reinvest back into the asset because we want to do additional enhancements, we make -- made that decision at the time.
So to give you a forward-looking statement for three or five years that says here's the money, and then we decide in three years' time that we're going to reinvest into a new ramp some of that money instead of distribute it, that's a decision that we will make at the time.
Okay. On the M5, you talked about phasing of dividends. Is phasing 50-50? Or is it like two thirds, one third?
No, it's - and again, it's not a pre-scripted, pre-agreed arrangement. It's -- it can be quarterly, can be 6 monthly, it depends on timing of maintenance spend or timing of interest payments or what have you.
So again, there's discretionary - discretion there in terms of the timing. All I'm saying is that last year, it was all paid in the one amount -- in the 1 month and this year, it will be spread out through both halves.
Okay. CityLink, someone else thought -- or asked the question about traffic, so it's nothing particular. But I looked at my notes last year and it said the December last year was pretty weak growth because of the Swan Street breach impact. And now we come to December this year, we've actually had pretty weak growth against the pcp. Is there any color?
Is it - this just a general wholesale slowing of your network? And are you seeing the effects of what's been occurring in New South Wales really hit home in Victoria?
So you - so I would just - let me clarify, are you saying 3.7% growth is slow?
Well, it is relative to September and the June quarter of 4.7%, 5.5% and you've got the benefit of the road openings.
Yes, it's still, I mean, up a big number and still significant. Like I said, Western Link has grown quite strongly. We've seen some issues more on Southern Link. But the truck traffic has been very strong. So I don't think it's anything - I don't think, at any point, it's anything in particular. I'm happy to try and give some more color, but we've been watching it.
There is been some issues on Southern Link. We've had three fires on the tunnels in the last sort of few months when we only had one fire in like 10 years. Now our guys had done a fantastic job, and no one's been hurt. And disruptions have been minimized, and the systems have worked exceedingly well. But there is just been a few things like that, but I don't see anything sustained in terms...
And just mathematically, and remembering that last year, for the last quarter, we had -- CTW was online whereas it wasn't in the first quarter. So we're always going to have the first quarter this year result -- sorry, the December quarter this year result at -- growing at a slower pace than the full half just because of the comps.
Yes, yes. Okay. We'll take that offline. But what - at a broader level, the slowing traffic in South Wales, are you starting to see that bottom out and that it's in sort of a new pace? Or is it still a generalized slowing coming through the economy on you?
Not that there's a general slowing of the economy. New South Wales is a bit tougher to read. I think we really have to get through the full year. There is just so many factors affecting New South Wales with levels of disruption.
As I said the truck impact on some of the roads, because we had very strong truck through all the movement of all the spoil and through all the different tunnels being done, there's some weird comps there.
There's a variety of things impacting New South Wales. The October was the wettest month on record for a lot of things. And I don't want to use weather as an excuse. There's just a lot of noise around New South Wales where there's less noise around the other markets. So it's too early, I think, to -- for us to make that call.
If I look at what's happening going forward, with still the big strong infrastructure spend and the stuff that's still to come online and, obviously, one of the big points here will be the opening of the M4 East and then that impact on the M4, I just think it's too early to make some calls like that.
Okay. And then on the M4 East itself, on M4, shall I say 1.4%. Does that more reflect that the road is ramped very quickly and now it's just waiting for the connection to come on for another surge?
And the other thing is you talked about sort of the end of your financial year pre-opening levels as you're driving past some of the weekend [ph] levels. It sounds a lot pretty good on the services now. So is it possible that can actually open more likely in the fourth quarter?
Well, no, sorry, it'll - yes, the M4 will open in the financial year fourth quarter. Yes, it'll open before June definitely. But the exact timing - with these things, when you commission things and do things, we - it's never an exact science. But again, because of the nature of the contract and the arrangements, we're covered for any late opening.
We'd looked at the images, and it is significantly progressed, and major parts of it are complete. So it's down to those last - that last push to get all the commissioning and everything done.
So we're, again, pleased with the project. But whenever it opens, we're covered for the outcome. And then that will have a big impact. Back to your issue on the M4. I'm not sure the M4 has finished ramp-up.
There's been a few other changes in the network, including some things on Parramatta Road and some other adjustments that are being made just prior to the opening of the M4 East and some other things around the network which, again, it's a bit of noise and we're trying to understand the exact outcomes and implications.
All I can say is, sitting here today, that our forecast on WestConnex and our budgets and distribution and everything, we're still running along our investment case and happy with the investment and don't see any issues at this point in time.
All right. Thanks, Scott.
Thank you. Your next question comes from Paul Butler from Credit Suisse. Please go ahead.
Good morning. At the risk of laboring the point, I just had a question on the releases. So for the second half, you're expecting a $100 million-odd release from the Queensland asset. Can you just cover what the hurdles are for that release?
Again, it's just your typical hurdles around credit metrics, working with the rating agencies and ensuring you've met certain requirements with the state, all of which we have done. So we just need to work through the process and, again, take a prudent approach to capital markets and debt markets and all of those sorts of things.
I think in summary, there's no hurdles other than just making sure we're comfortable with the process and the markets, and we're getting value for money, which -- and the markets are still -- as Adam said, I mean the markets are still quite attractive. We're still looking at longer terms and lower rates than all the debt that's rolling off.
So then debt that rolls off in the next two years is still at higher rates than our average rate, so still very attractive markets. Anytime we can refinance or finance for longer terms, we'll take these rates.
And then you also said that in FY '20, you expect capital releases of a similar magnitude. Which projects do these relate to?
Well, again, there's a range of projects. You can obviously see on the chart that we'll be coming off of NorthConnex and certain other assets, so it comes from a couple of different sources.
So I think that's the thing, going back to sort of we've got 5 projects starting to roll off in FY '20, which will start generating significant cash across the group.
Okay. And it's releases out of a number of those?
Okay. And then just on NorthConnex, so you obviously said you expect that to open in 2020. Can you give us a better idea of exactly when in 2020 that might be?
It'll be after the first of January but before the 30th of December. Look, we -- again, these next 6 months is very important, and we've moved past tolling, which is great. So we're now paving and starting in Mckinlay [ph] So a lot of the final timing of the schedule, we're probably able to update you more in the full year result because the progress that's made over the next six months is, obviously, critical. And we've made some great strides on the program to date.
So the issue for us, whether it's three months late, six months late, nine months late, we're covered on the arrangements and LDs and other things that we need to do financially. But it's very difficult for us to give a definitive outcome because there's a target program, a turnout program.
There is three or four different programs that the parties are trying to hit. It'll be what it will be, and we fully expect it to be in FY '20. And we fully expect whatever the timing to be that it will be within Transurban's investment case and budget and - yes, and that we have protected the company.
Okay. Now in Sydney, we've got Northwest Metro opening up later this year. Is that going to have a material impact on M2 traffic? How do we sort of think about that?
Yes, look, I can only sort of talk about what's happened in the past rather than maybe what's - what that's going to do. What we have typically seen, I guess, in similar situations that the mode changes between different public transport modes. So those people that had used the bus system and other systems will potentially switch to the metro system to make it more convenient.
Now that could potentially help them the M2. But yes, there will be potentially some mode shift. But typically, the mode stays the same, the mode share between public and private transport. It just shifts between the public transport modes. So at this point, we don't envision a material impact.
Okay. Thank you very much.
Thank you. Your next question comes from Nathan Lead from Morgans Financial. Please go ahead.
Thanks for your presentation. I just got a couple of questions. The first one, just to the debt you raised against the A25 in the first half of '19, there was CAD 250 million that sat at the holdco level. As I understand, there's no financing going on there, no sort of capital works. Can you just sort of talk about what is happening with that bit of cash in the context of the capital release framework?
Look, basically, what we did there was when we acquired the asset -- and again, that's the sorts of things that you have to get agreed with the state. But we had an opportunity to ensure that there was more debt in the vehicle, from our perspective, to be able to match the - have the liability match the asset from a hedging perspective. So we raised it effectively at the corporate level and then put it in at the asset level for the A25.
So no, it wasn't a capital...
No, it wasn't a capital...
It wasn't a capital release. And it's just a way to most efficiently use the structure.
Doesn't that mean that the capital comes back up to the corporate level?
Yes, in a way. But again, it's not as a - it's not a capital release as a result of an ongoing development program. It was just something that we're able to do on day one of the acquisition.
Right. Okay. The cash in the balance sheet, the $1.7 billion you got there, could you just walk us through as to how much of that is tied or dedicated to certain things: distributions, CapEx, et cetera, how much you got is excess cash?
Yes, so look, we don't manage year-to-year obviously, we manage it throughout the year. Yes, they have to cover your distributions. Yes, they cover the capital program. There's actually a page in the back of the deck, which we go through what the capital contributions we have to make through the period are. The biggest of which at the moment is the West Gate Tunnel Project, so we're spending sort of circa $100 million a month.
So obviously, we provide adequate liquidity generally, but the majority of the fund is there to pay the West Gate Tunnel Project and the other contributions to the other projects.
Okay. A25, obviously, the traffic going better than you are expecting. When do you expect to get the step-up in the peak and off-peak tolls coming through?
Look, it's not - look, you see we provided the measurement there. It's probably going to happen in the short term, but it's something that we're working on. We're also working on some other customer initiatives, back-office initiatives.
And obviously, we're now engaging with the -- with Quebec and Montreal around maybe some other enhancements around the road, which is positive. But I don't see it in the short term, but we'll keep you updated as it develops.
Are you referring that this is a trigger within the tolling escalation? Isn't it when you hit a particular level of traffic that the toll step up?
Yes, there is. But we don't expect it to occur over the couple of years or so.
Okay. Just one final one for me. I suppose it works into the framework for thinking about capital releases. What sort of debt service cover ratios do you guys sort of think about in the last 10 years of asset life when you're amortizing a debt? Is the M5 a good example?
To be clear, it's - the debt amortization is not really to do with the coverage ratios, it's to do with an agreement with the state. So effectively, almost every one of our concession agreements has an arrangement where you - well, not almost every concession agreement has an arrangement where you have to hand it head back to the state debt-free.
So In the last 8 to 10 years, you have a debt amortization profile that you need to meet. So we've done that, obviously, with the M5. Some assets have a requirement to do very minor amortizations going a little bit further out in the concession life, but the one that we're doing at the moment is the M5, so it doesn't...
My ED's prescriptive in that there's amortization now under the concession. But I just, at a high level, just assume 11 - 10 or 11 years out, it's just like a straight-line amortization. I think this is the simplest way to do it.
Thank you very much.
Because we've gone over a bit of time, so apologies for that. But if anyone has any follow-up questions, the IR team, Jess or Henry or Adam and I, and we'll get around and hopefully try to see as many people as possible. Thank you very much for your time and your questions, and we look forward to seeing everyone on the road. So thank you very much.