Our 2017–18 financial performance Net Profit After Tax (NPAT) of $74.5 million, and 11.1 per cent return on equity, were both ahead of forecast. This is a positive financial result which is underpinned by the reset cost base delivered in prior years and a continued focus on driving business improvements.
Income and expenses
Airways revenue increased by 3.4 per cent to $1.08 billion due to continued growth in the international sector, particularly from north-east Asia with the addition of new routes between Australia and China. In contrast, domestic airways revenue remained relatively flat, due to the ongoing impact of reduced mining activity and tightening of capacity.
Expenses of $1.0 billion were 2.3 per cent lower than the previous year, mainly due to staff costs which were $46.4 million lower, due to the impact of restructuring activities in the previous year. This was partially offset by an increase in supplier costs of $33.0 million due to additional site testing planned under our Per- and Poly-fluoroalkyl substances (PFAS) management program.
Capital investment and gearing
In 2017–18, we invested $125 million in our capital program. Funding was derived from operating cash flows and existing borrowings. At 30 June 2018, our gearing level of 40 per cent was within our medium‑term target range of 40 per cent to 50 per cent.
Airservices strong financial performance is projected to continue through 2018–19 with revenue growth across a more efficient cost base driving returns. Pricing will continue to be held at current rates with revenue growth driven by the expansion of international services particularly across North Asia. Revenues from domestic airline operations are not expected to grow significantly however following consecutive years of contraction some signs of improvement across this market are emerging.
Some expenditure growth is forecast over the next 12 months to fund the expansion of air traffic control and aviation rescue and fire-fighting services for new regional east coast locations and parallel runways operations. However, with the improved efficiency and cost effectiveness these services will be funded within current pricing arrangements with no pricing increases forecast into the future.