Our total profit after tax for the six months to 31 December 2018 was down 11.3% to $147.2 million, while underlying profit after tax increased 2.9% to $136.9 million.

Revenue increased 11.5% to $370.6 million. A 5.8% increase in aeronautical revenue was driven by passenger growth and increasing aircraft movements, partly offset by our second successive year of a reduction in some of our aeronautical tariffs. Our significant investment in infrastructure over recent years has enabled a 24.6% increase in retail income, primarily driven by an expanded retail area in the international terminal. In addition, continued passenger growth and a strong performance from the Strata Lounge have also contributed to the retail growth during the period. Investment property rental income increased 14.6% during the period due to the development of new properties and growth in the existing portfolio.

Operating expenses increased 13.6% to $93.5 million, in part due to greater asset management, maintenance and airport operations. Staff costs increased by 9.2% as a result of the ongoing expansion of our business, with additional headcount largely driven by a number of contract roles that were transitioned over to permanent positions in support of the airport development and delivery team, including a number of added specialist roles within operations. These changes took place within an increasingly competitive recruitment market.

Our earnings before interest expense, taxation, depreciation, fair value adjustments and investments in associates (EBITDAFI) increased 10.8% to $277.1 million.

Our total share of the underlying profit from associates was $4.2 million for the first six months of the 2019 financial year, down 62.5% following the sale of our interest in North Queensland Airports in 2018.

The underlying profit share from Queenstown Airport decreased 4.5% to $2.1 million due to one-off expenses relating to long-term master planning, as well as increased depreciation and amortisation costs. While occupancy at the Novotel Hotel remained strong during the period, higher operating costs have resulted in a decrease in Auckland Airport’s share of underlying profit by 4.5% to $2.1 million. Our total share of the underlying profit from associates was significantly down on the prior period, which is largely attributable to the sale of our interest in North Queensland Airports in 2018.

The interim dividend for the 2018 financial year is up 2.3% to 11.00 cents per share. It will be imputed at the company tax rate of 28% and paid on 5 April 2019 to shareholders who are on the register at the close of business on 22 March 2019. Our performance in the six months to 31 December 2018 means that underlying earnings per share have continued to increase, up 2.1% to 11.4 cents per share.

Underlying profit

Reconciliation of underlying profit to reported profit

6 months to 31 Dec 2018 6 months to 31 Dec 2017
Reported
profit
$M
Adjustments
$M
Underlying
profit
$M
Reported
profit
$M
Adjustments
$M
Underlying
profit
$M
EBITDAFI per Income Statement 277.1 - 277.1 250.1 - 250.1
Share of profit of associates 1 4.3 (0.1) 4.2 4.4 - 4.4
Share of profit of associate held for sale 1 - - - 6.7 0.1 6.8
Derivative fair value (decreases) increases 2 0.2 (0.2) - (3.0) 3.0 -
Investment property fair value increases 3 11.1 (11.1) - 41.5 (41.5) -
Depreciation (50.0) - (50.0) (40.7) - (40.7)
Interest expense and other finance costs (40.1) - (40.1) (38.6) - (38.6)
Taxation expense 4 (55.4) 1.1 (54.3) (54.5) 5.6 (48.9)
Profit after tax 147.2 (10.3) 136.9 165.9 (32.8) 133.1

The table above shows how we reconcile reported profit after tax and underlying profit after tax for the six-month periods ended 31 December 2018 and 31 December 2017. The following adjustments have been made to show underlying profit after tax for the six-month periods ended 31 December 2018 and 31 December 2017:

  • We have reversed out the impact of revaluations of investment property and associates in the first six months of the 2019 and 2018 financial years. An investor should monitor changes in investment property over time as a measure of growing value. However, a change in one particular period can be too short for the purposes of measuring performance. Changes between periods can be volatile and, consequently, will have an impact on comparisons. Finally, the revaluation is unrealised and, therefore, is not considered when determining dividends in accordance with the dividend policy.
  • We recognise gains or losses in the income statement arising from valuation movements in interest rate derivatives that are not hedge accounted and where the counter-party credit risk on derivatives has an impact on accounting hedging relationships. These gains or losses, as in the case of investment property, are unrealised and derivative gains or losses are expected to reverse out over their lives.
  • To be consistent, we have adjusted the revaluations of investment property and financial derivatives that are contained within the share of profit of associates in the first six months of the 2019 and 2018 financial years.
  • We also allow for the taxation impacts of the above adjustments in the first six months of the 2019 and 2018 financial years.