GO-AHEAD GROUP
THE GO-AHEAD GROUP PLC
('GO-AHEAD' OR 'THE GROUP')
The Go-Ahead Group Annual Report and Accounts
Further to the release of the Group's preliminary financial results on 2 September 2016, The Go-Ahead Group plc announces that it has today published its Annual Report and Accounts for the year ended 2 July 2016.
The full Annual Report and Accounts is available on the Group's website www.go-ahead.com
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 2 September 2016. 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. To view the preliminary announcement, visit the Group website: www.go-ahead.com.
For further information, please contact
The Go-Ahead Group
Peter Russell/Holly Gillis, Investor Relations
07966 941 890 / 07837 612 661
Citigate Dewe Rogerson
Michael Berkeley/Chris Barrie/Eleni Menikou/Toby Moore
020 7638 9571
END
Principal Risks and Uncertainties
External risks | Economic environment Lower economic growth or reduction in economic activity. | |||
Potential impact Reduced revenue as: · Customers make fewer journeys · Customers buy lower priced tickets | Mitigating actions · 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 | Opportunity · Maximise geographic and product diversification opportunities · Two rail contracts will be re-bid over the next two years allowing for a rebasing of target revenue | Change in risk in the year · Economic growth rates for UK have been downgraded following the EU referendum vote · There are variances between geographical areas in the rate of recovery | |
Political and regulatory framework Changes to the legal and regulatory framework, particularly the Bus Services Bill. | ||||
Potential impact · If bus services are franchised, the Group could lose revenue in some areas but has opportunity in others · Change to the rail franchising model · Reduced funding for public transport | Mitigating actions · Limited exposure to local authority funding. Our operations are largely commercial · Actively participate in key industry, trade and government steering and policy development groups · Collaboration and partnership working with local authorities · Prepare for bus franchising · Demonstrate the value delivered by the private sector through investment in services, responding quickly and flexibly to passenger needs | Opportunity · 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 · The Bus Services Bill could provide business opportunities in new markets | Change in risk in the year · Following the EU referendum and changes in government, uncertainty around the outlook for government policy has increased · The Bus Services Bill relating to bus franchising outside of London. The Bill is currently making its way through Parliament | |
Strategic risks | Sustainability of rail profits or loss of franchise Failure to retain two key franchises on acceptable terms and failure to stabilise GTR's business performance. | |||
Potential impact · Rail revenues and profits could fall over the next three years | Mitigating actions · Flexible and experienced management team which responds quickly and expertly to changing circumstances · Shared risk through Govia, which is 65% owned by Go-Ahead and 35% by Keolis · 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 · Recovery plan for GTR | Opportunity · Opportunity to build on rail contract wins in Germany and potentially other European countries | Change in risk in the year · The GTR franchise has seen a difficult year as a result of the impact of major infrastructure projects and industrial action · We are heavily reliant on third parties, which have their own targets, budgets and deadlines to meet · We began operating the London Midland franchise under new contract terms in April 2016 which will run until October 2017 | |
Inappropriate strategy or investment Failure to make appropriate strategic or investment decisions. | ||||
Potential impact · Shareholder value could be lost and the Group could suffer reputational damage | Mitigating actions · 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 · Cautious approach to investment opportunities overseas and outside our core operating areas · The Board has a clear stated risk appetite that governs the acceptable level of risk in pursuit of objectives | Opportunity · Continual focus on and review of strategy ensures the Board is well placed to assess value adding opportunities as they arise | Change in risk in the year · Good strategic progress has been made during the year. Continued focus on delivering profit growth in bus · Go-Ahead has a clear strategy, communicated to all levels of the organisation | |
Competition Competition from existing and new market participants, loss of business to other modes and threats from market disruptors. | ||||
Potential impact · Loss of revenue and profits as well as reputational damage if other offerings appear more customer focused | Mitigating actions · Disciplined and focused bidding in London · 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 | Opportunity · Strategic partnerships 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 | Change in risk in the year · 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 · Technology based start-ups are entering transport markets | |
Operational risks | Catastrophic incident or severe infrastructure failure An incident, such as a major accident, an act of terrorism, a pandemic, or a severe failure of rail infrastructure. | |||
Potential impact · Serious injury to the public, our passengers or our people. Service disruption with financial losses and reputational damage | Mitigating actions · 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 · Work closely with our industry partners, such as Network Rail, which maintains the rail infrastructure | Opportunity · 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 | Change in risk in the year · We have maintained high 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 and major roadworks. | ||||
Potential impact · Reduced capacity decreases resilience and creates congestion causing lower reliability which impacts service levels and contractual performance · Inadequate planning or execution can cause severe disruption | Mitigating actions · Work constructively with industry partners, such as Network Rail, to minimise the impact of any disruption on our passengers · Strong engagement with stakeholders, including our customers, 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 | Opportunity · Investment in railway infrastructure and roads will deliver long term benefits to passengers travelling on our services | Change in risk in the year · 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 We fail to get the effective engagement of our people and trade unions in making change and managing costs. | ||||
Potential impact · Strikes leading to reputational damage · Low levels of morale and engagement lead to inadequate customer service · Service disruption and costs arising from industrial action · Inability to deploy new technology and work practices for the benefit of customers · Wage costs increase or are higher than necessary | Mitigating actions · Work to maintain good relationships with employees and trade unions · Robust and regularly reviewed recruitment and retention policies, training schemes, resource planning and working practices · Experienced approach to wage negotiations · Employee engagement surveys across all businesses to identify issues · Engaging all our people in the new vision, beliefs and attitudes | Opportunity · Through fostering positive employee relations and offering good employment packages we have a motivated and committed workforce, with low staff turnover across all businesses · We are monitoring the impact of changes in the employment market which may affect our ability to retain and recruit staff | Change in risk in the year · Operational challenges on the GTR franchise have been compounded by industrial action and a spike in sickness absence | |
Information technology failure or interruption or security breach Prolonged or major failure of the Group's IT systems or a significant security breach. | ||||
Potential impact · Disruption to trading and/or operational service delivery · Reputation damage and regulatory breach from misuse of data · Financial loss | Mitigating actions · 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 | Opportunity · Ensuring our systems and processes are efficient and reliable strengthens day-to-day operations across the Group | Change in risk in the year · Continued investment in and maintenance of IT systems across the Group · Cyber security certification achieved | |
Directors' statement of responsibilities
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 IFRS 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 cashflows 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 Act 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 Act 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' statement of responsibility 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
- 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 2014
The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy.
Disclosure of information to the auditor
Having made the requisite enquiries, so far as the directors are aware, there is no relevant audit information (as defined by section 418(3) of the Act of which the Group's auditor is unaware and the directors have taken all the steps they ought to have taken to make themselves aware of any relevant audit information and to establish that the Group's auditor is aware of that information.
Related party disclosures and Group undertakings
Our subsidiaries listed below 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. For accounting policies see 'Interests in joint arrangements' in note 2.
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 | 2016 | 2015 |
Trading subsidiaries | |||
Go-Ahead Holding Limited | United Kingdom | 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 |
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 Kingdom | 65 | 65 |
London and South Eastern Railway Limited | United Kingdom | 65 | 65 |
London and Birmingham Railway Limited | United Kingdom | 65 | 65 |
Southern Railway Limited | United Kingdom | 65 | 65 |
Govia Thameslink Railway Limited | United Kingdom | 65 | 65 |
Thameslink Rail Limited | United Kingdom | 65 | 65 |
Govia Limited | United Kingdom | 65 | 65 |
Go-Ahead Scotland Limited | United Kingdom | 100 | 100 |
Go-Ahead Holding LLC | United States of America | - | 100 |
Go-Ahead Verkehrsgesellschaft Deutschland GmbH | Germany | 100 | 100 |
Go-Ahead Holding (Singapore) PTE Ltd | Singapore | 100 | - |
Go-Ahead Loyang PTE Ltd | Singapore | 100 | - |
Jointly controlled entities | |||
On Track Retail Limited | United Kingdom | 50 | 50 |
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.
3 On Track Retail Limited is a start up company and was immaterial to the Group's financial statements.
The above trading subsidiaries have one class of ordinary shares which carry no right to fixed income. With the exception of On Track Retail Limited, whch also have redeemable preference shares.
The registered office of all trading subsidiaries incorporated in the United Kingdom is: 3 Floor, 41-51 Grey Street, Newcastle upon Tyne, NE1 6EE.
The registered office of Go-Ahead Verkehrsgesellschaft Deutschland GmbH incorporated in Germany is: Platz vor dem Neuen Tor 2, D- 10115, Berlin, Germany.
The registered office of trading subsidiaries incorporated in Singapore is: 2 Loyang Way, Singapore 508776.
% equity interest | ||||
Name | Company number | Country of incorporation | 2016 | 2015 |
Dormant subsidiaries | ||||
Eastern Railway Limited | 7164882 | United Kingdom | 100 | 100 |
Go Wear Buses Limited | 2019645 | United Kingdom | 100 | 100 |
Go-Reading Limited | 3158846 | United Kingdom | 100 | 100 |
South Central Limited | 4173713 | United Kingdom | 100 | 100 |
The Go-Ahead Group Trustee Co Limited | 2125799 | United Kingdom | 100 | 100 |
Go-Ahead Property Development Limited | 7128594 | United Kingdom | 100 | 100 |
Go-Ahead XX Limited | 8205871 | United Kingdom | 100 | 100 |
GHI Limited | 4262016 | United Kingdom | 100 | 100 |
Southern Vectis Limited | 2005917 | United Kingdom | 100 | 100 |
Birmingham Passenger Transport Services Limited | 2901263 | United Kingdom | 100 | 100 |
Go Coastline Limited | 2018469 | United Kingdom | 100 | 100 |
Go London Limited | 2849983 | United Kingdom | 100 | 100 |
Go West Midlands Limited | 2490584 | United Kingdom | 100 | 100 |
Levers Coaches Limited | 2524573 | United Kingdom | 100 | 100 |
MetroCity (Newcastle) Limited | 4153866 | United Kingdom | 100 | 100 |
Thames Trains Limited | 3007943 | United Kingdom | 100 | 100 |
Victory Railway Holdings Limited | 3147927 | United Kingdom | 100 | 100 |
Govia Northern Limited | 6537238 | United Kingdom | 65 | 65 |
London & East Midlands Railway Limited | 5814586 | United Kingdom | 65 | 65 |
London and West Midlands Railway Limited | 5537947 | United Kingdom | 65 | 65 |
Abingdon Bus Company Limited | 3151270 | United Kingdom | 100 | 100 |
Reed Investments Limited | 4236536 | United Kingdom | 100 | 100 |
Gatwick Handling Limited | 2984113 | United Kingdom | 100 | 100 |
GH Heathrow Limited | 2813292 | United Kingdom | 100 | 100 |
GH Manchester Limited | 1883900 | United Kingdom | 100 | 100 |
GH Stansted Limited | 1983429 | United Kingdom | 100 | 100 |
Midland Airport Services Limited | 1592083 | United Kingdom | 100 | 100 |
Oxford Newco Limited | 9542008 | United Kingdom | 100 | 100 |
London General Trustee Company Limited | 6953098 | United Kingdom | 100 | 100 |
Go-Ahead Finance Company | 4699524 | United Kingdom | 100 | 100 |
Hants & Dorset Motor Services Limited | 2752603 | United Kingdom | 100 | 100 |
Hants & Dorset Trim Limited | 2017829 | United Kingdom | 100 | 100 |
Solent Blue Line Limited | 2103030 | United Kingdom | 100 | 100 |
Marchwood Motorways (Services) Limited | 2201331 | United Kingdom | 100 | 100 |
Marchwood Motorways (Southampton) Limited | 1622531 | United Kingdom | 100 | 100 |
The Southern Vectis Omnibus Co. Limited | 0241973 | United Kingdom | 100 | 100 |
Tourist Coaches Limited | 3006529 | United Kingdom | 100 | 100 |
Wilts & Dorset Bus Company Limited | 1671355 | United Kingdom | 100 | 100 |
Wilts & Dorset Investments Limited | 4613075 | United Kingdom | 100 | 100 |
Wilts & Dorset Holdings Limited | 2091878 | United Kingdom | 100 | 100 |
Dockland Buses Limited | 3420004 | United Kingdom | 100 | 100 |
Blue Triangle Buses Limited | 3770568 | United Kingdom | 100 | 100 |
Go-Ahead Leasing Limited | 5262810 | United Kingdom | 100 | 100 |
Go-Ahead Sverige AB | Sweden | 100 | - | |
Go-Ahead Norge AS | Norway | 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.
The registered office of all dormant subsidiaries incorporated in the United Kingdom is: 3 Floor, 41-51 Grey Street, Newcastle upon Tyne, NE1 6EE.
The registered office of Go-Ahead Sverige AB incorporated in Sweden is: Mäster Samuelsgatan 20, SE 101 39, Stockholm, Sweden.
The registered office of Go-Ahead Norge AS incorporated in Norway is: Filipstad Brygge 1, NO 0125, Oslo, Norway.
All dormant companies listed above incorporated in the United Kingdom have taken advantage of the UK Companies Act 2006, S480 exemption from audit.
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 (2015: £0.2m).
Joint operations
The Group's joint operations, On Track Retail Limited 'OTR' have their principal place of business in the United Kingdom. The principal activity of OTR is the development and provision of web ticketing applications for the rail industry. The activities of the joint operation are strategically important to the business activities of the Group. The Group owns 50% of the ordinary share capital of OTR.
Compensation of key management personnel of the Group
The key management are considered to be the directors of the parent company.
2016 |
2015 | |
Short term employee benefits | 1.3 | 1.9 |
Long term employee benefits | 1.0 | 2.3 |
Post employment benefits | - | 0.1 |
2.3 | 4.3 |
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 | 2016 | 2015 | |
Govia Limited | United Kingdom | 35% | 35% |
London and South Eastern Railway Limited | United Kingdom | 35% | 35% |
Southern Railway Limited | United Kingdom | 35% | 35% |
London and Birmingham Railway Limited | United Kingdom | 35% | 35% |
Govia Thameslink Railway Limited | United Kingdom | 35% | 35% |
Thameslink Rail Limited | United Kingdom | 35% | 35% |
New Southern Railway Limited | United Kingdom | 35% | 35% |
1 Subsidiary of Govia Limited.
2016 |
2015 | |
Accumulated balances of material non-controlling interest: | ||
Govia Limited | 22.6 | 15.8 |
Total comprehensive income allocated to material non-controlling interest: | ||
Govia Limited | 24.4 | 13.8 |
Go-Ahead Group plc published this content on 09 September 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 09 September 2016 15:11:06 UTC.
Original documenthttp://www.go-ahead.com/en/media/news/2016/the-go-ahead-group-annual-report-and-accounts-2016.html
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