RNS Number : 8583Z

Go-Ahead Group PLC

22 September 2015

The Go-Ahead Group plc

(the 'Group')

Annual Report and Accounts / Annual General Meeting

The following documents have today been submitted to the National Storage Mechanism and will shortly be available for inspection atwww.hemscott.com/nsm.do:

1. Annual Report and Accounts for the year ended 27 June 2015

2. Notice of Annual General Meeting 2015

3. Notification of Annual General Meeting and Annual Report and Accounts 2015

4. Form of Proxy

In accordance with DTR 6.3.5(3), the Annual Report and Accounts for the year ended 27 June 2015 and the Notice of Annual General Meeting 2015 are also available on the company's website: www.go-ahead.com.

The Group's 2015 Annual General Meeting will be held at the Hilton Newcastle Gateshead, Bottle Bank, Gateshead, NE8 2AR on Thursday 22 October 2015 at 11:00 hours.

A condensed set of The Go-Ahead Group plc financial statements and information on important events that have occurred during the year and their impact on the financial statements were included in the Group's preliminary announcement on 3 September 2015. That information together with the information set out below which is extracted from the Annual Report and Accounts constitute the requirements of DTR 6.3.5 which is to be communicated via an RIS in unedited full text. This announcement is not a substitute for reading the full Annual Report and Accounts. Page and note references in the text below refer to page numbers in the Annual Report and Accounts. To view the preliminary announcement, visit the company website: www.go-ahead.com.

Principal Risks and Uncertainties

The Group's risk and governance framework allows the Board to understand the Group's most significant risk exposures and manage them accordingly within agreed levels of risk appetite and tolerance. Go-Ahead takes a conservative view of risk and attempts to minimise its exposure to undue risk. This is reflected in the Group's strategy.

Potential impact
Mitigating action
Potential opportunities
Overall Change in risk in the year
External
Economic environment
Negative impact on the Group's businesses, largely through a reduction in demand for services. In rail, franchise bids make economic assumptions years into the future. A weaker economy can lead to under performance against bid targets and management's expectations
Continue to focus our operations in more resilient geographical areas
Local management constantly assesses the needs of local markets and tailors services and products accordingly
Focus on driving volumes through innovative and targeted marketing
Generate customer loyalty through initiatives such as smart-ticketing
Proactive cost control
A more challenging economic environment encourages modal shift, as motorists seek value for money alternatives to the private car
Improvements in the economic environment can lead to increased employment and discretionary spending in shops and leisure facilities, which can result in more journeys being taken on public transport
Economic growth rates for the quarter ended June 2015 were 2.6%1for the UK. There are variances between geographical areas in the rate of recovery. For example, unemployment in north east England was around 7.7% compared to close to 5.6% in the rest of the UK1
1 Office for National Statistics.
Political and regulatory framework
Changes in Government or to laws, regulations, policies (e.g. introduction of a Bus Bill, pressure on concessionary travel or BSOG, restrictions around vehicle specification devolution to TFL), local authority attitudes towards public transport and reductions in the availability of Government financial support could adversely impact the Group's operations and financial position
Limited exposure to local authority funding. Our operations are predominantly commercial and do not require local authority funding
Actively participate in key industry, trade and Government steering groups
Maintain close relationships with key industry partners and stakeholders
Continually engage with all stakeholders to influence policies impacting the industry
Use internal initiatives across the business to offset the impact of external issues
Demonstrate the value delivered by the private sector through investment in services, responding quickly and flexibly to passengers' needs
Changes in law, regulation or funding could positively impact the Group, potentially leading to increased funding or more flexibility for operators. For example, the potential introduction of local authority contract schemes outside London may increase our ability to bid for contracts in new areas
The political and regulatory framework provides us with the opportunity to influence decisions through close dialogue with the Government, local authorities and other key parties
Following the general election, uncertainty around the composition of the government has reduced. We engage with the new Government and play a role in helping to shape new policies. We also continue to engage with major political parties with a view to influencing policies impacting on the industry and Go-Ahead
The new Government has announced its intention to introduce a Bus Bill relating to bus franchising outside London. Details of this Bill are not yet known
Following a fourth consultation, proposals for a bus contract scheme in Tyne & Wear are being considered by the Quality Contracts Scheme Board. Its conclusion is expected to be announced in autumn 2015
Strategic
Sustainability of rail profits
The sustainability of rail profits is dependent on a number of factors. The nature of the current rail franchising model leads to high volatility of earnings; failure to retain, win or successfully mobilise and integrate franchises could impact on the overall profitability of the Group; failure to comply with conditions of rail franchise agreements could lead to financial penalties or even the termination of a rail franchise
Flexible and experienced management team which responds quickly and expertly to changing circumstances
Experienced permanent bid team well placed to produce compelling bid submissions
Shared risk through Govia, which is 65% owned by Go-Ahead and 35%by Keolis
Element of protection through revenue support arrangements on some contracts. Not all contracts are exposed to revenue risk
Willingness to invest in performance improvements
Work constructively with industry partners, such as Network Rail, to deliver long term economic and infrastructure benefits
Significant resource and financial investment in bidding for new franchises
Regular Board review of rail performance, and Board approval of overall rail bidding strategy
Compliance with franchise conditions closely monitored
Clear mobilisation and integration plans
The DfT's rail franchise competition timetable is well underway. Several rail franchises are due to be awarded in the next three years, presenting growth opportunities for the Group
We continue to bid for new franchises, including Northern and TransPennine Express, and are shortlisted for London Overground
For contracts where we take revenue risk, there may be the opportunity for increased earnings if the economic climate is stronger than assumed in a franchise bid
The GTR franchise has seen a difficult start as a result of inherited operational issues, the impact of major infrastructure projects and network changes
We are heavily reliant on third parties, which have their own targets, budgets and deadlines to meet
We began operating Southeastern under new contract terms in October 2014 which will run until June 2018
Discussions continue with the DfT regarding the proposed extension of the London Midland franchise to October 2017
Inappropriate strategy or investment
Inappropriate strategic or investment decisions could adversely impact on the Group's economic and shareholder value
Comprehensive strategic discussions with main Board and advisors
Extensive valuation and due diligence, supported by external expertise
Maintain strong financial discipline when assessing viability of opportunities
Minimum return on capital requirements of all investment opportunities
Cautious approach to investment opportunities overseas and outside our core operating areas
Continual focus on and review of strategy ensures the Board is well placed to assess value adding opportunities as they arise
Good strategic progress made during the year. Continued focus on delivering profit growth in bus. Future of rail secured to 2021 through the GTR franchise
Go-Ahead has a clear strategy, communicated to all levels of the organisation
Competition
Loss of business to other modes of transport, existing competitors or new market entrants in our markets could have a significant impact on business, such as new technology based start ups
Work hard to maintain our good reputation with our customers
Provide convenient, value for money services offering cost effective alternatives to the private car
Adapt to changing customer requirements and technological advancements
Foster close relationships with stakeholders to ensure we are meeting requirements including service quality and price
Work in partnership with local authorities and other operators
Promote multi-modal travel, improving the overall door-to-door experience for passengers
Remain at the forefront of promoting and introducing inter-operable ticketing schemes
Focus on customer needs and expectations, including more channels for ticket purchase and journey planning
Strategic partnerships, such as our joint-operator scheme with Stagecoach and the local authority in Oxford, may provide opportunities and aim to improve the passenger experience and perception of public transport as a whole
Increased competition in the market encourages innovation which improves the customer experience
The reduction in oil price, leading to lower fuel prices for motorists, could result in passengers taking more trips in private cars rather than choosing public transport
We are becoming increasingly experienced in developing inter-operable schemes, with initiatives launched in Go North East and Brighton since January 2015
Technology based start ups are entering transport markets
Operational
Catastrophic incident or severe infrastructure failure
An incident, such as a major accident, an act of terrorism, a force majeure, a pandemic or severe failure of rail infrastructure, could result in serious injury, disruption to service and loss of earnings
Rigorous, high profile health and safety programme throughout the Group
Appropriate and regularly reviewed and tested contingency and disaster recovery plans
Thorough and regular staff training
Close relationship and work closely with our industry partners, such as Network Rail, which maintains the rail infrastructure, particularly on large infrastructure projects like the Thameslink Programme and London Bridge redevelopment
The threat of such an event requires our staff to be well trained and prepared at all times. Continuous review of processes and procedures can identify areas for operational improvement and improve overall safety on our networks
We have maintained good levels of safety performance, demonstrating our continuing efforts to minimise this risk
Large scale infrastructure projects
Large scale projects on and around the networks on which we operate (such as the Thameslink Programme, HS2, major roadworks) can significantly impact on our ability to run our services reliably, meet contractual obligations, and performance targets, or damage customer reputation
Work constructively with industry partners, such as Network Rail,
to minimise the impact of any disruption on our passengers
Strong engagement with stakeholders to enable effective communication
Good relationships with local authorities and industry bodies, such as the DfT
Communicate effectively with customers during structural change programmes and during disruption
Investment in railway infrastructure and roads will deliver long term benefits to passengers travelling on our services
During the year, bus services in Oxford and Brighton have been significantly impacted by roadworks
Our rail operations have been impacted by works associated with the £6.5bn Thameslink Programme, particularly around London Bridge
Congestion due to roadworks in London has reduced our income from Quality Incentive Contracts
Labour costs, employee relations and resource planning
Poor employee relations or reduced availability of staff could impact on reputation, revenue, staff morale and our ability to fulfil contract obligations. Labour costs are a high proportion of our cost base. Even relatively small percentage increases in wages could have a material impact on profits. For example, an increase of 1% in staff costs would increase costs by around £11m
Ensuring Go-Ahead is viewed as an employer of choice
Robust and regularly reviewed recruitment and retention policies, training schemes, resource planning and working practices
Experienced approach to wage negotiations and fostering good relationships with employees and trade unions
Employee engagement surveys across all businesses to identify issues
Through fostering positive employee relations and offering good employment packages we have a motivated and committed workforce, with low staff turnover and absenteeism rates across all businesses
We have developed our 'people plans' during the year, with particular focus on leadership development, performance management and succession planning
We are monitoring the impact of changes in the employment market which may affect our ability to retain and recruit staff
Information technology (IT) failure or interruption or security breach
Prolonged or major failure of the Group's IT systems or a significant security breach could pose significant risk to the ability to operate and trade
Process standardisation and continued investment in best practice systems, including 'light sites' and 'load bearing' servers
Clear and tested business continuity plans
Proactive approach to cyber security issues
Ensuring our systems and processes are efficient and reliable strengthens day-to-day operations across the Group
Continued investment in and maintenance of IT systems across the Group
Cyber security certification achieved in June 2015
Read more about our case study on page 35

Directors' Statement of Responsibility

The following statement is extracted from page 87 of the Annual Report and Accounts and is repeated here for the purposes of Disclosure and Transparency Rule 6.3.5 to comply with Disclosure and Transparency Rule 6.3. This statement relates solely to the Annual Report and Accounts and is not connected to the extracted information set out in this announcement or the Preliminary Announcement:

The directors are responsible for preparing the Annual Report and the Group financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the directors to prepare Group financial statements for each financial year. Under that law, the directors are required to prepare Group financial statements under IFRSs as adopted by the European Union. Detailed below are statements made by the directors in relation to their responsibilities, disclosure of information to the Group's auditors, going concern and management's report on internal control over financial reporting.

Financial Statements and Accounting Records

Under Company Law the directors must not approve the Group financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group at the end of the financial year and of the profit or loss of the Group for that period.

In preparing the Group financial statements, the directors are required to:

• present fairly the financial position, financial performance and cash flows of the Group;

• select suitable accounting policies in accordance with IAS 8: Accounting

Policies, Changes in Accounting Estimates and Errors and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

• make judgements and estimates that are reasonable;

• provide additional disclosures when compliance with the specific requirements in IFRS as adopted by the European Union is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's financial position and financial performance;

• state whether the Group financial statements have been prepared in accordance with IFRS as adopted by the European Union.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group, and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for the system of internal control, for safeguarding the assets of the Group and, hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are also responsible for preparing the strategic report, directors' report, including the directors' remuneration report and the corporate governance report, in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's corporate website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' Responsibility Statement under the Disclosure and Transparency Rules

The Board confirms to the best of its knowledge:

• The financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and

• The strategic report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that they face.

Directors' Statement under the UK Corporate Governance Code

• The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

Related Party Disclosures and Group Undertakings

Our subsidiaries are located across the country and each contributes to the profits, assets and cashflow of the Group. The Group has a number of related parties including joint ventures, pension schemes and directors.

The consolidated financial statements include the financial statements of The Go-Ahead Group plc and the following Group undertakings:

% equity interest
Name
Country of incorporation
2015
2014
Trading subsidiaries
Go-Ahead Holding Limited
United Kingdom2
100
100
Go North East Limited
United Kingdom
100
100
Go Northern Limited
United Kingdom
100
100
London General Transport Services Limited
United Kingdom
100
100
London Central Bus Company Limited
United Kingdom
100
100
Dockland Buses Limited
United Kingdom
100
100
Blue Triangle Buses Limited
United Kingdom
100
100
Go-Ahead London Rail Replacement Services Limited
United Kingdom
100
100
Metrobus Limited
United Kingdom
100
100
Brighton & Hove Bus and Coach Company Limited
United Kingdom
100
100
The City of Oxford Motor Services Limited
United Kingdom
100
100
Go South Coast Limited
United Kingdom
100
100
Hants & Dorset Transport Support Services Limited
United Kingdom
100
100
Plymouth Citybus Limited
United Kingdom
100
100
Konectbus Limited
United Kingdom
100
100
Thames Travel (Wallingford) Limited
United Kingdom
100
100
Carousel Buses Limited
United Kingdom
100
100
Hedingham and District Omnibuses Limited
United Kingdom
100
100
Anglian Bus Limited
United Kingdom
100
100
HC Chambers and Son Limited
United Kingdom
100
100
Aviance UK Limited
United Kingdom
100
100
New Southern Railway Limited
United Kingdom1
65
65
London and South Eastern Railway Limited
United Kingdom1
65
65
London and Birmingham Railway Limited
United Kingdom1
65
65
Southern Railway Limited
United Kingdom1
65
65
Govia Thameslink Railway Limited
United Kingdom1
65
65
Thameslink Rail Limited
United Kingdom1
65
65
Govia Limited
United Kingdom1
65
65
Go-Ahead Leasing Limited
United Kingdom
100
100
Go-Ahead Scotland Limited
United Kingdom
100
100
Go-Ahead Holding LLC
United States of America
100
100
Go-Ahead Verkehrsgesellschaft Deutschland GmbH
Germany
100
100
Jointly controlled entities
Go-Ahead North America LLC
United States of America
-
50
On Track Retail Limited
United Kingdom
50
n/a

1 The rail companies are 65% owned by The Go-Ahead Group plc and 35% owned by Keolis (UK) Limited and held through Govia Limited.

2 Held by The Go-Ahead Group plc. All other companies are held through subsidiary undertakings.

Name
Country of incorporation
2015
2014
Dormant subsidiaries
Eastern Railway Limited
United Kingdom
100
100
Go Wear Buses Limited
United Kingdom
100
100
Go-Reading Limited
United Kingdom
100
100
South Central Limited
United Kingdom
100
100
The Go-Ahead Group Trustee Co Limited
United Kingdom
100
100
Go-Ahead Property Development Limited
United Kingdom
100
100
Go-Ahead XX Limited
United Kingdom
100
100
GHI Limited
United Kingdom
100
100
Southern Vectis Limited
United Kingdom
100
100
Birmingham Passenger Transport Services Limited
United Kingdom
100
100
Go Coastline Limited
United Kingdom
100
100
Go London Limited
United Kingdom
100
100
Go West Midlands Limited
United Kingdom
100
100
Levers Coaches Limited
United Kingdom
100
100
MetroCity (Newcastle) Limited
United Kingdom
100
100
Thames Trains Limited
United Kingdom
100
100
Victory Railway Holdings Limited
United Kingdom
100
100
Govia Northern Limited
United Kingdom1
65
65
London & East Midlands Railway Limited
United Kingdom1
65
65
North London Orbital Railway Limited
United Kingdom1
65
65
Abingdon Bus Company Limited
United Kingdom
100
100
Reed Investments Limited
United Kingdom
100
100
Gatwick Handling Limited
United Kingdom
100
100
GH Heathrow Limited
United Kingdom
100
100
GH Manchester Limited
United Kingdom
100
100
GH Stansted Limited
United Kingdom
100
100
Midland Airport Services Limited
United Kingdom
100
100
Oxford Newco Limited
United Kingdom
100
100
London General Trustee Company Limited
United Kingdom
100
100
Go-Ahead Finance Company
United Kingdom
100
100
Hants & Dorset Motor Services Limited
United Kingdom
100
100
Hants & Dorset Trim Limited
United Kingdom
100
100
Solent Blue Line Limited
United Kingdom
100
100
Marchwood Motorways (Services) Limited
United Kingdom
100
100
Marchwood Motorways (Southampton) Limited
United Kingdom
100
100
The Southern Vectis Omnibus Co. Limited
United Kingdom
100
100
Tourist Coaches Limited
United Kingdom
100
100
Wilts & Dorset Bus Company Limited
United Kingdom
100
100
Wilts & Dorset Investments Limited
United Kingdom
100
100
Wilts & Dorset Holdings Limited
United Kingdom
100
100

1 The rail companies are 65% owned by The Go-Ahead Group plc and 35% owned by Keolis (UK) Limited and held through Govia Limited.

Transactions with other related parties

The Group meets certain costs of administering the Group's retirement benefit plans, including the provision of meeting space and office support functions
to the trustees. Costs borne on behalf of the retirement benefit plans amounted to £0.2m (2014: £0.2m).

During the year ended 27 June 2015, the Group disposed of its 50% interest in Go-Ahead North America (2014: 50%), a 50:50 joint venture with Cook-Illinois, and received repayment of all loan capital, leaving a residual investment value of £nil (2014: £1.8m). During the year, £1.8m (2014: £0.3m) of loans were repaid to the Group by Go-Ahead North America.

Compensation of key management personnel of the Group

The key management are considered to be the directors of the Group.

2015
£m
2014
£m
Short term employee benefits
1.9
2.0
Long term employee benefits1
2.3
2.0
Post employment benefits
0.1
0.1
4.3
4.1

1 The long term employee benefits relate to LTIP and DSBP.

Material partly owned subsidiaries

Financial information of subsidiaries that have material non-controlling interests is provided below:

Proportion of equity interest held by non-controlling interests:

Country of incorporation
and operation
2015
2014
Govia Limited
United Kingdom
35%
35%
London and South Eastern Railway Limited1
United Kingdom
35%
35%
Southern Railway Limited1
United Kingdom
35%
35%
London and Birmingham Railway Limited1
United Kingdom
35%
35%
Govia Thameslink Railway Limited1
United Kingdom
35%
35%
Thameslink Rail Limited1
United Kingdom
35%
35%
New Southern Railway Limited1
United Kingdom
35%
35%

1 Subsidiary of Govia Limited.

2015
£m
2014
£m
Accumulated balances of material non-controlling interest:
Govia Limited
15.8
14.6
Total comprehensive income allocated to material non-controlling interest:
Govia Limited
13.8
11.0

The summarised financial information of these subsidiaries is provided below. The information is based on amounts before inter-company eliminations:

Summarised income statement of Govia Limited and its subsidiary companies for the year ended 27 June 2015 and 28 June 2014:

2015
£m
2014
£m
Revenue
2,397.4
1,901.8
Operating costs
(2,355.1)
(1,867.5)
Intangible asset amortisation
(0.8)
(2.4)
Exceptional items
(8.8)
(3.0)
Finance revenue
2.3
1.4
Finance costs
(2.9)
(1.5)
Profit on ordinary activities before taxation
32.1
28.8
Tax expense
(11.8)
(7.9)
Profit for the year from controlling operations
20.3
20.9
Total comprehensive income
39.4
31.5
Attributable to non-controlling interests
13.8
11.0
Dividends paid to non-controlling interests
12.8
8.6

Summarised balance sheet of Govia Limited and its subsidiary companies as at 27 June 2015 and 28 June 2014:

2015
£m
2014
£m
Current assets - inventories, trade and other receivables, cash
843.7
626.1
Non-current assets - property, plant and equipment, intangible assets, deferred tax
25.0
36.0
Current liabilities - trade and other payables, provisions
(815.7)
(611.6)
Non-current liabilities - provisions
(8.0)
(8.8)
Total equity
45.0
41.7
Attributable to:
Equity holders of the parent
29.2
27.1
Non-controlling interest
15.8
14.6

These balance sheet amounts are shown before intercompany eliminations.

Summarised cashflow information of Govia Limited and its subsidiary companies for the year ended 27 June 2015 and 28 June 2014:

2015
£m
2014
£m
Operating
324.9
41.6
Investing
45.5
10.1
Financing
(39.3)
(26.1)
Net increase in cash and cash equivalents
331.1
25.6

For further information please contact:

Carolyn Ferguson

Group Company Secretary

0191 232 3123


This information is provided by RNS

The company news service from the London Stock Exchange

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