Transurban Group (TCL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Transurban Group FY '26 Results Call. [Operator Instructions] I would now like to hand the conference over to Craig Stafford, General Manager, Strategy and Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining us for the Transurban's 2026 Full Year Results Briefing. Transurban acknowledges the traditional owners of the lands throughout Australia, and we pay respect to Elders past and present. We acknowledge our roads and infrastructure are built on country. And with deep respect, we incorporate the voices of First Nations people in our approach supporting access to mobility across communities. We're joined today by our CEO, Michelle Jablko; and CFO, Henry Byrne. And together, they'll take you through the presentation that we lodged with the ASX this morning. We realize it's a busy day today. The presentation should take around 20 minutes, and then we'll have plenty of time for Q&A. I will now hand over to Michelle to get us started.

Thanks, Craig, and good morning to everyone on the call. Let's start with the outcomes we've delivered this year. We adapted quickly to the shifting environment. You've seen in our monthly update since April, the traffic faced some headwinds from broader macro conditions and geopolitical impacts on fuel. Despite that, our roads showed good resilience, especially commercial traffic. Importantly, we didn't sit back and wait for conditions to improve. We leaned in and controlled what we could control, driving better cost performance, strengthening margins and growing distributions in line with guidance by 6.2%, 98% covered by free cash. And we're continuing to strike the right balance by finding smarter, more efficient ways to run the business and grow distribution sustainably and most importantly, invest in our customers and longer-term growth prospects. This has given us the confidence to announce FY '27 distribution guidance of $0.72 per security, which I'll comment more on later. Let's move on to traffic. Our assets are holding up relatively well with overall traffic growing 2.2% to 2.6 million daily trips and commercial traffic grew by 6.6%, notwithstanding concerns around fuel security in March and April. And as you'll see in today's numbers, we've seen a broader improvement in June and July. Looking briefly at traffic across our markets. In Sydney, construction impacts are abating, and we expect this to continue to improve as other new roads open over the next couple of years. In Melbourne, freight traffic grew 3.9% on CityLink supported by an almost 5% increase in port container movements. And in Brisbane, strong economic activity is showing up on our roads, with freight growing 4.9% in line with container growth. North America continued to outperform this year with traffic up 3.5% and revenue up 14%, driven by the clear value customers see in our Express Lanes. Let me now shift to our performance against our strategic priorities. We've achieved a lot this year. If we look back only a few years, we were facing into a number of challenges. You were concerned about New South Wales toll reform that it could end in dispute, destroy value and stall any growth in our existing assets. We had a cost base that was too high and rising interest rates meant both customers and investors were demanding more from us. So we did what we said we were going to do. It started with a fundamental shift, taking a customer-first approach. The outcomes on New South Wales toll reform are the best example of that in action. Alongside this, we delivered 3 major projects connecting new people and places and adding over 144 lane kilometers of new roads for our customers. We had to be patient. We deliberately took time to reset our relationships. Now we have new growth opportunities emerging, and there is still significant value to unlock from our existing assets and the nearly 12 million customers we serve. In the meantime, we got to work delivering as much value as possible from the business we have today. We improved our dynamic pricing in the U.S. in line with customer value, which drove a double-digit step change in earnings and a 26% increase in free cash flow. And we demonstrated strong cost discipline for the third consecutive year. There's more opportunity and more to do on all these fronts, but our approach is creating a new blueprint for the future. I want to touch briefly on toll reform because it was a significant milestone. We supported the New South Wales government to reach a solution that is a genuine win for motorists, a win for the state and is enabling a proposed new road widening, all while protecting the value of your investment. The proposed solution includes a range of measures that deliver meaningful cost of living relief for drivers, especially those in Western Sydney. And some of these improvements are already in place, like switching off late fees and moving to digital toll notices. We've demonstrated we can work constructively with governments to improve customer outcomes. And that's the broader lesson from toll reform. When industry and government work together with a shared focus on customers and where contracts are respected, we can deliver better outcomes for all parties. What you're seeing now are 2 big cultural shifts inside Transurban, and both of these are right for the times. The first is putting the customer at the heart of our strategy for long-term growth. The second is reallocating our capital and our efforts from within to invest where it matters towards our customers' digital innovation and further efficiency. We're putting our effort where it will deliver the most value. We're investing on the road for safer journeys, and we're being deliberate about where we invest in technology like AI. For example, our AI-driven chatbot now handles the majority of chat queries. Customer satisfaction is 4.5 out of 5, and it's reduced escalations to our team by more than 60%. And our rewards program is going from strength to strength with more than 2 million members growing at a rate of 50 new members an hour. It's delivering real value like our $0.26 per liter fuel offer for regular travelers. At the same time, we're driving productivity across the business, and seeing more and more opportunity to do so, continuing to free up capital to reinvest in our customers and support distribution growth. We've delivered 3 major projects this year, saving drivers an additional 40,000 hours every workday. The Northern Extension project on the 495 is delivering faster, more reliable journeys in Greater Washington. And in Australia, the M7-M12 integration project is already making it easier for freight heading to the new Western Sydney Airport. Customers have taken to the M7 and the 495 quickly with traffic up 11% and 22%, respectively, for July compared to the prior year. In Melbourne, truck volumes on the West Gate Tunnel are responding to the strong value proposition. And importantly, there are 90% fewer trucks on local streets. As we've mentioned before, the ramp-up profile of the West Gate Tunnel has remained flat since February, but the fundamentals remain solid with population growth in Melbourne's West, well placed to support the project over the longer term. And ultimately, these 3 projects will continue to deliver for decades. Some of our strongest growth opportunities sit within our existing portfolio. That's things like capacity enhancements, which help relieve congestion pinch points. We're able to identify opportunities to create more value for customers and communities. For example, with around 120 lane miles, our proposed bidirectional project will more than double the existing capacity of the 95 Express Lanes, allowing us to address congestion on 1 of the country's busiest corridors. So along with the active discussions we're having about projects in Brisbane and Sydney, we have a very tangible pipeline of growth ahead. I acknowledge that these projects can take some time to work through, to get them right, and we always respect government processes. We're approaching growth with discipline and patience, and these are exactly the kinds of projects that deliver long-term value for everyone. Looking further ahead, we know our underlying growth drivers are strong. Population in our existing markets will support new opportunities over time. For example, Southeast Queensland's population is expected to grow to around 6 million people over the next 2 decades. We're also keeping a close eye on shifts in government policy that may create long-term opportunities, including road user charging in Australia and New Zealand. In New Zealand, we participated in their market sounding process to help explore what a modern customer-focused system could look like. In Australia, we're partnering with major freight operators to test real-world RUC technology. Our goal is to work with governments to make sure any new system is simple and seamless for motorists. And as always, we're continuing to monitor government's infrastructure priorities. We know not everything will be on the table and even investments we're not directly involved in can support growth on our assets. In the U.S., we're focused on disciplined capital allocation and active portfolio management. We have a growing set of opportunities in Virginia, and we've also been exploring new partnerships elsewhere to build longer-term optionality where it makes sense for us. That's why we made the strategic decision to bid in Nashville, while choosing to pass on bidding in Atlanta and to sell the A25 in Montreal. So the opportunity ahead is significant, but our approach remains disciplined and customer-focused. With that, I'll hand over to Henry to take you through the financial results.

Thanks, Michelle, and good morning, everyone. We've set out our statutory results on Slide 14, showing profit after tax of $432 million. I'll move to the next slide where we've set out our proportional results. The business has delivered another strong result in FY '26, supported by continued growth on all key metrics. Free cash increased to $2.1 billion, up 5.1% on FY '25, which enabled distributions of $0.69 per security that were 98% free cash covered. Proportional toll revenue increased 6.7% to almost $4 billion and that was supported by resilient traffic growth and inflation-linked pricing in our Australian markets and also strong revenue growth in our U.S. business, where we continue to see strong customer demand for the Express Lanes there. Good cost discipline was once again a feature of our result with proportional operating costs, including new assets growing below inflation at 3.3%. This contributed to operating EBITDA growth of 7.5% and an 80 basis point improvement in operating EBITDA margin to 75.7%. In relation to costs, as Michelle outlined a moment ago, we continue to see opportunities to drive further efficiency into the business while continuing to invest in our assets and customer offerings, and I'll talk more about the cost outlook shortly. Looking at the balance sheet. Corporate liquidity remains strong at $3.7 billion, and our weighted average cost of debt only marginally increased to 4.8% despite approximately $8 billion in new issuance and refinancing during the period at both the corporate and the asset level. Taken together in a year marked by macroeconomic volatility, these outcomes demonstrate the resilience of the portfolio and they position us well to support future growth opportunities while continuing to deliver long-term security holder value. Turning to Slide 16, we've set out the movement in free cash from FY '25 to FY '26. You can see the EBITDA growth translating into approximately $215 million of additional free cash generation during the year. This outcome reflects the strong operating leverage where revenue growth has again outpaced cost growth. Higher finance costs offset some of that benefit with proportional net finance costs up by $113 million, driven primarily by West Gate Tunnel moving into its operational phase and the funding cost of that project ceasing to capitalize. And this increase in interest costs also reflects the refinancing activity and the additional debt funding of growth initiatives across the portfolio as well. Interest income was also lower as average cash balances reduced compared to the prior period, while tax payments increased modestly. As we've discussed over recent years, we've been working particularly hard on the U.S. business, which is delivering strong operational and financial performance. We're seeing that flow through meaningfully to the bottom line with its EBITDA contribution growing approximately 100% over the past 3 years, which is equivalent to a 26% compound annual growth rate. And I think it's worth noting that these are our longer-stated concessions going out to 2087, which points to the significant value that's been created here. Overall, free cash flow for the year grew 5.1% to more than $2.1 billion. Turning to the proportional results. Operating EBITDA increased from $2.85 billion to $3.06 billion, delivering growth of 7.5% for the year. And you can see the operational performance translating into EBITDA in the waterfall we presented here. Beyond the growth within the existing portfolio, you can see the marginal growth being delivered by the new assets and capacity brought online, including West Gate Tunnel, the 495 Extension and the M7 widening. Looking at costs in more detail on Slide 18, the results again demonstrates our focus on discipline and cost management. We guided you to an FY '26 cost growth below inflation, excluding new assets, and have delivered total proportional operating cost growth of 0.7% on that basis. This is the third year in a row we've delivered this kind of cost discipline, and we've been able to do this while continuing to invest in targeted ways into the business. Road operating costs were higher during the year, reflecting volume-related tolling costs and escalation in the incident response and maintenance contracts. Maintenance costs also increased as we undertook additional pavement works across a number of the assets in line with our asset life cycle models. And more broadly, we continue to invest in maintenance across the portfolio and look for opportunities to optimize how we're delivering this across the group. Additionally, we continue to invest in development activities in a targeted way, which supports the emerging growth pipeline that Michelle has mentioned. And then offsetting some of these areas where costs increased was our active management of the corporate cost base and overheads, which reduced by 6%. And this is allowing us to reinvest into the areas that Michelle spoke to earlier, and we continue to see opportunities to refine how we're allocating the capital and resources within the business to drive more value. By way of example, we continue to refine the mapping of core business processes and identified pain points which we're looking to address. We're also continuing to benefit from having consolidated our operational teams at an enterprise level, and there's more we can do to leverage this for better outcomes, including streamlining our customer-facing processes, technology systems and corporate processes. Turning to our funding summary. We finished the year with approximately $3.7 billion of corporate liquidity, providing substantial flexibility to support both distributions and future growth opportunities. As you can see from the maturity profile, we have a well-diversified debt book with no material concentration of refinancing risk in any single year. The balance sheet continues to provide capacity to support investments, both within our existing portfolio and in future growth opportunities as they emerge. And importantly, we've demonstrated consistent access to debt capital markets through a range of market conditions, reflecting the quality of the portfolio and the strength of our credit profile. Turning to Slide 20, we highlight the great outcomes our treasury team have delivered over a number of years. We also provide a bridge to net finance cost for FY '26 and some considerations for FY '27. The chart on the left shows how stable our funding costs have been during a period of significant volatility in the interest rate environment. Over the last 6 years, Australian 10-year swap rates have increased by around 400 basis points, as you can see. Yet the weighted average cost of debt across our business has only increased by around 40 basis points. That outcome reflects the disciplined execution of our long-term funding strategy. The fact that approximately 88% of the debt book remains interest rate hedged, we don't take currency risk, and the maturity profile is staggered has helped limit exposure to short-term interest rate movements. Looking at FY '26, finance costs increased as the interest on the debt associated with the West Gate Tunnel ceased to capitalize. You can also see the finance costs from new debt issuance and refinancing activity here as well. And for FY '27, we do expect a continuation of higher funding costs as debt matures over time. You've heard us speak to approximately 20 basis points increasing every 6 months, and we still believe that, that rule of thumb holds in relation to our weighted average cost of funding as we look out over the next year. Finally, Slide 21 sets out our capital allocation framework. And this is a framework that has remained unchanged for a number of years now and shows how we think about distribution growth and investment in the portfolio. The starting point is growth from the existing portfolio through traffic growth, pricing outcomes and operational performance, driving growth in EBITDA and free cash, which in turn supports sustainable distribution growth to security holders. At the same time, the growth in earnings expands balance sheet capacity, enabling us to reinvest in attractive opportunities where we can create long-term value. During FY '26, growth in traffic revenue, EBITDA and free cash contributed to a 6.2% increase in distributions per security, as we've mentioned, and we continue to enhance portfolio flexibility through active capital management, including the divestment of our remaining interest in the A25. And we also turned off the DRP, which is a further reflection of the capital discipline we've sought to achieve. Looking forward, we see a good pipeline of opportunities emerging across our markets. The strength of our balance sheet, combined with disciplined capital allocation gives us flexibility to pursue those opportunities. In summary, the business continues to generate strong underlying earnings growth, expand margins, grow free cash and maintain a strong funding position, and those foundations leave us well positioned to grow distributions and invest in the growth opportunities that we see emerging. I'll now hand back to Michelle for closing remarks.

Thanks, Henry. So to wrap up, this year has been about turning strategy into outcomes. We've delivered 3 major projects, arrived at a positive solution for New South Wales toll reform, and strengthen customer value, all while keeping costs below inflation for the third year in a row. And we continue to build fresh opportunities for future growth. That's why we're pleased to provide FY '27 distribution guidance of $0.72 per security, with free cash coverage of the distribution expected to be slightly less than 95%. We're not changing our overall distribution approach, but we think it is right for this year. FY '27 is a transitional year as we adjust to the M5 West ownership changes, with capacity on other new Sydney roads still a year or 2 away. We've been leaning into that for some time, driving better performance in the business, and we see more opportunities ahead. The work we're doing and our strong fundamentals gives us confidence in the outlook, and we're committed to delivering sustainable value for our customers and security holders. I'd like to thank our people for their commitment and contribution over the past year and thank our securityholders for your continued support. We will now open up for questions.

[Operator Instructions] The first question today comes from Matt Ryan from Barrenjoey.

Just had a question on the free cash coverage and the movements that you're thinking about, I guess, the M5 change should be pretty well understood, but I'm just more interested in what you baked in for traffic movements as well as anything else that you think is worth calling out?

Why don't I get Henry to start, and then I'll jump in as well.

Yes, you'll see in the presentation materials today, we have pointed the fact that we've observed reasonably good traffic on the network in recent times. And so there's an expectation that if we continue to hold that then you'll see sort of coverage in line with where we're guiding to today, and that sort of reflects the underlying performance of the business. And then I think, as Michelle has sort of indicated a number of times in her comments a moment ago, we remain reasonably confident in the broader outlook of the business because of everything that we have going on within the business, including how we are continuing to work on the broader efficiency within the business. And we've obviously given some pretty clear cost guidance for the year ahead as well, which would again be the fourth year in a row where we've delivered that kind of outcome. And so in broad terms, I think, Matt, we would see this as a year where if we continue to see the kind of volumes we're seeing, then we'll have a reasonably well-covered distribution. And then as we look out beyond that, we remain reasonably confident.

And maybe just circling back to the volatility that you highlighted a few months ago. Do you have any sense of what was driving that? And I guess, again, interested in how you've gone forecasting the next 12 months in light of that and whether there's any data that you might be able to point to that might be able to suggest that, that was a little bit of an anomaly.

Maybe if I start and then Henry, you jump in. So what we've done over recent months has been very transparent and give you monthly traffic data. So you could see it real time as essentially as we're seeing it. We definitely saw around Easter with fuel security being a concern. You saw the impact of that then. June and July have been better than that. And -- so that's sort of the current basis of trajectory, if you like. I think to Henry's point, we've been leaning into all of this and controlling what we can control, and we remain confident in the outlook because if you sort of take together the underlying fundamentals, whether that's Western Harbour Tunnel opening in 2028, whether that's contracted price increases as they come through all the work we're doing on the business when you take all of that into account, we're confident in the outlook.

And maybe I'd add...

And maybe Henry will add...

Yes. Just a brief comment, maybe the broader observation that Michelle and I have been making is we have a broad portfolio, and you can see parts of the portfolio are actually doing really well. We've obviously called out the U.S. business again. And you can see some very strong growth that we continue to observe there. So we'll see the benefits of a large diversified portfolio underpinning the kind of resilience that we see as we look out in terms of volumes.

The next question comes from Rob Koh from Morgan Stanley.

Apologies if you've covered this. I've joined your call late. But just looking at your opportunity set here, and I noticed NZ is still in there. I guess, I think Acciona won that Northland corridor PPP. And can you just maybe update us on how you're thinking about the NZ toll market?

Thanks, Rob. We didn't bid on that one. So the focus on New Zealand has been very much about how we bring the customer focus and digital focus in alongside the infrastructure. So we're focused on things that make sense for us. What we did focus on this year in New Zealand was around road user charging. So there were some market soundings around that, which we participated in thinking about it through the digital tools that would be available for customers. So that's very much been the focus.

And then, I guess, just following on from the last question about traffic. I think you said June, July is looking a little better. Can you maybe comment on the Victorian toll data and for young players like us, if there's any kind of cautionary tales or any interpretation nuance we should be aware of with that data?

Maybe we'll come back to you on the data itself and if there are any nuances. But what I'd say more broadly on Melbourne is there has been a change in traffic patterns in Melbourne, I think you've seen that on CityLink as well as West Gate. And some of that's the broader macro and some of that's just changed. Yes. I'll pass to Henry. I think he's going to add something.

Yes. I think you might be referring to the data being released by the Victorian Government on broader parts of the network, that does show exactly what Michelle is describing, broad background networks -- network volumes have been down as we look out over a longer-term horizon going back a number of years. And that data is a factor that has played out not just on CityLink, but obviously, as a factor playing into the numbers that we've seen on West Gate Tunnel. Look, it's a continued watch point for us. Obviously, over time, we would expect these kind of network volumes to grow, but it's just a question of timing here in terms of broader background recovery and the drivers that go into that around population and employment in particular.

And other parts of the portfolio probably performed a bit better than we would have expected for reasons going the other way in those cities.

All right. And then I have to ask about Slide 55. If I'm comparing your cash tax kind of expectations versus this time last year, I guess, correct me if I'm wrong, TQ's come forward a little bit, which I presume is because of the good traffic you're seeing there. And then THL has -- you've kind of pushed that out like 3 or 4 years. Is that a function of the New South Wales agreement? Or what's driven the cash tax at THL and TQ, please?

Yes. TQ is really just a marginal movement, but THL is a more significant movement, Rob. That's something we've been flagging now for a while. It just reflects the West Gate Tunnel and the capital expenditure there. So we've worked through that now and we're at a point where we've got clarity on the kind of impact to the timing for that broader THL consolidated group. And we've reflected that in the diagram there. So we're saying that's pushed out by a few years, I guess, from where we were previously projecting that.

The next question comes from Andre Fromyhr from UBS.

Probably 1 for Henry. Just wondering if you could help us bridge the finance costs into next year in sort of a similar structure to what you've shown in your slides today. So if I'm understanding correctly, it looks like sort of 130-odd million stepping up from the West Gate Tunnel full year run rate. There's also going to be an impact, I'm assuming, from M7-M12 completion and then you've got sort of the general drift in your average rates. I think you called out 20 bps per half, so is the likely step-up in your cash finance costs going to be materially higher, even closer to $180 million per annum or something once you pull those things into FY '27?

Look, it is correct to say there will be an increase in cost and the West Gate Tunnel is the lion's share of that, and you've correctly called out the number we've highlighted today. So we've obviously been talking about that -- sorry, $180 million number for a while. So I think there's been quite a bit of transparency on that, and we will see that full amount flow through to the P&L next year and hit that finance cost line. And then the other elements will also continue to have a more marginal impact, but they will increase. So in aggregate, you will see that sort of quantum of increase that will be in the dimensions you're describing there.

Okay. And then just a follow-up on the growth opportunities. I guess the pack indicates that you didn't participate in the I-285. I'm curious to understand if there are any particular dynamics around that assets or the tender process itself as to what made that not attractive?

Thanks, Andre. So probably the most important point is the emerging opportunity in Virginia, and particularly the growing size of the bidirectional project, which is much bigger than initially envisaged and emerging opportunity there. And clearly, that's right in our wheelhouse and will always be our first focus. As we look further afield, it was about creating optionality where it makes sense for us. And we decided that Nashville was probably a bit more aligned with us than Atlanta.

Okay. And then 1 more, if you don't mind. Coming back to the question about the payout ratio for next year. I understand, Michelle, the points you made around FY '27 being, I guess, a transition year. Is the intention though, with the target range of 95% to 105% that you would, sort of, have some years below, some years over 100% and sort of smooth it out through the cycle? Or is this year in particular 1 where you absorb that as you transition, but then you sort of come back to more mid-range.

Yes. As I mentioned in my speech, we set the range for a reason if you go back a couple of years, so that some years might be a bit better than 100%, in which case we put a bit away for the future. Some years could be a bit less. As you've highlighted, Andre, this is a bit of a transition year. And given how we feel about the outlook we felt, this was the right approach. But you should sort of expect through the cycle, you'd be in and around the middle of the range. It just might vary year-on-year.

The next question comes from Anthony Moulder from Jefferies.

Focus on growth, and we took back to growth. The timing of some of these projects, Virginia as an example, financial close by 2029. And then presumably a few years to build that project? And should we start thinking about more in 2033 contribution to cash flows from some of these projects, the bigger projects within the pipeline, please?

Yes, I'll take that, Anthony. Yes, look, that is the right way to be thinking about it if we're putting in place these agreements around the end of this decade, and then it will take a few years to build. It becomes more of an early 2030s prospect in terms of when the earnings will start to hit the free cash. Obviously, the kind of value creation is there at the time [ we win ] these deals. And so that's an important part of the equation, which is why we then lay out the capital allocation framework the way we do.

And gives us the right ability to balance the distribution and the growth in the near term as well.

Which is a function of cost growth or lack of, I guess, so that has remained a very strong component of the free cash flow. You've said that I think you're further closer to the start of that process as far as further cost reductions or efficiencies. How much further can they go as far as lowering the cost base of the business, please?

It's something we're working on quite hard, but I'll get Henry to answer.

Yes. You've heard us, Michelle and I say, for a number of years now, we think this is a multiyear story and our view remains unchanged on that. So notwithstanding the fact that we've delivered a third year of clear cost discipline within the business as we look out over the next couple of years, we still see significant further opportunities.

And maybe just to add to that, something I mentioned in my -- when I was speaking a few moments ago is, we're continuing to invest in the business, whether that's some of those longer-term growth prospects or investing in our customers today because we think that's the right thing to do for these times. But we're doing that within a cost base that we're managing very well.

Understood. And lastly, if I could on West Gate Tunnel, obviously, the ramp-up profile is slower than expected, slower than you would have forecast. It looks like truck traffic has continued to improve on that road. Is it really just the cars that are diverting away from West Gate Bridge into the West Gate Tunnel that is causing the concern as far as what the delay as far as the ramp-up profile?

Do you want to start, Henry? And I'll...

Sure. No, look, that is right. In terms of the vehicle mix profile, trucks have been reasonably strong, whereas the car traffic hasn't been there and the volumes that we'd anticipated. The broader observation, which Michelle made earlier is background network volumes in Victoria have been weaker. And that has obviously flowed through to our West Gate Tunnel. But I think your observation is also correct in terms of 1 of the kind of use cases for road users, which is an alternative to the West Gate Bridge. It's -- we've always seen it as a bit of a pressure release valve to the West Gate Bridge. But with background network volumes down, the pressure on the bridge hasn't been as great as perhaps it would have been.

The next question comes from Justin Barratt from CLSA.

I just wanted to come back and look at your operational cost base on Slide 18. I appreciate your guidance for FY '27. I guess is it fair to assume, based on your prepared comments that most of the efficiencies in the '27 will come from that overhead bucket again?

Henry, why don't you start and I'll...

Yes. Look, we -- it is fair to say that the maintenance costs are increasing within the business. We've been saying that for a number of years. And the work we're doing there is not to reduce maintenance costs, but to look to optimize our practices to moderate the pace of the increase. And so that is an area where we think it's important to continue to invest in the networks, and we will continue to do that. Road operating costs, when you look at that segment, there are some different things going on. We have naturally escalating incident response and maintenance contracts. These are large multiyear contracts. We do see opportunities to drive efficiency when we come to renegotiate those, but they happen on a multiyear horizon. So it's a little longer dated in terms of our ability to get after those, but we absolutely are when they become available. But then within that line, you will see some of the benefit of toll reform come through through the toll notice type costs, which we've been able to take out. So there will be some moderation that comes to that line as a result of the toll reform that we've agreed in principle with the New South Wales government. Then the overhead line is the 1 here where clearly we see further opportunities. And that goes to the point Michelle made a moment ago, which is that we -- this is about looking for ways to drive further efficiency in how the business is being run, but continue to ensure that as we do that, we're allocating the capital and resources into the areas which are going to continue to drive value. And we do think about it more in terms of efficiency and resource allocation for value rather than just cost out.

Yes. And maybe just to add to that. Road operating -- in terms of Road operating costs, as I said, we're investing more into our customers. But we're trying to be more efficient in the way we do it. The digitization of toll notices is a good example of that and we're continuing to look at ways to make those processes more efficient. Maintenance, I think will continue to go up for some time. And then it's a matter of finding the people and the resource and the cost from elsewhere in the business to put into those areas.

The 1 other comment I might make is the numbers we're presenting here have a new asset costs in there. So we've been able to effectively absorb the new assets and still stay within the below CPI guidance, which was obviously a little ahead of where we thought we were going to be when we gave that guidance. And so that remains the case in terms of how we've been positioned it for next year.