22nd Sep 2015 16:00
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 at www.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%1 for 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 functionsto 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 incorporationand 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
Related Shares:
GOG.L