Changes in accounting for rail pension schemes

The Go-Ahead Group plc 4 Matthew Parker Street, London, SW1H 9NP

PRESS RELEASE

29 November 2016

THE GO-AHEAD GROUP PLC

("GO-AHEAD" OR "THE GROUP")

CHANGES IN ACCOUNTING FOR RAIL PENSION SCHEMES AND DISCLOSURE OF ADJUSTED RESULTS

In line with its commitment to transparent reporting and to be consistent with emerging industry practice, The Go-Ahead Group will change the way in which it accounts for rail pensions in its income statement. The first financial statements reported under the new methodology will be the half year results for the six months ending 31 December 2016, due to be announced on 28 February 2017. Prior year comparative figures will be restated accordingly.

The long term contractual responsibility for the rail pension schemes rests with the Department for Transport. Accordingly, the Group's balance sheet only recognises the share of surplus or deficit expected to be realised over the life of each franchise. The current assessment is that there is no surplus or deficit to be recognised and so no asset or liability is provided for. However, the income statement charge has included the full rail pension service cost, although a substantial part of this service charge relates to an estimate of the future cost of benefits, accrued in the current year, but falling beyond the duration of the franchises. Therefore, to better reflect the Group's limited responsibility for rail pensions, the Group is revising its accounting policy under which operating profit will now only recognise the Group's agreed cost for rail pensions, rather than the full service charge previously included. This will be effected by means of a franchise adjustment to the income statement, in line with emerging industry practice.

Relevant restated figures for the financial years 2012/13 to 2015/16 are presented below to show the impact of this change on the income statement. This change in reporting will only affect reported profit and has no impact on cash.

Dividend cover was previously calculated excluding the incremental impact of IAS 19 (revised). In future, the calculation will be based on statutory earnings. Our dividend cover policy remains at around two times earnings. 

No changes will be made to the way in which bus pensions are accounted for and the Group will no longer report financial results for the bus division adjusting for the incremental impact of IAS 19 (revised).

ENDS

For further information, please contact: 

The Go-Ahead Group 

GO-AHEAD 

Go-Ahead is a leading UK public transport operator, providing high quality services in the bus and rail sectors. Employing around 27,500 people across the country, over one billion passenger journeys are undertaken on our services each year. We are committed to operating our companies in a safe, socially and environmentally responsible way and are proud to have been accredited with triple Carbon Trust Standard for reductions in carbon, water and waste. In addition to the travelling public, our customers include the Department for Transport, Transport for London (TfL) and local authorities.

BUS 

Go-Ahead is one of the UK's largest bus operators. With a fleet of around 4,800 buses, we carry around two million passengers every day. Our operations are focused on high density commuter markets. We have a strong presence in London, with around 24 per cent market share, where we provide regulated services for TfL. We operate deregulated services in Oxford, East Anglia, the South East, Southern and North East England. In September 2016, the Group began operating a bus contract in Singapore, on behalf of the Singaporean Local Transport Authority.

RAIL 

The rail operation, Govia, is 65 per cent owned by Go-Ahead and 35 per cent by Keolis. It is the largest rail operation in the UK, responsible for over 30 per cent of all UK passenger rail journeys through its rail franchises: GTR (Govia Thameslink Railway) Southeastern and London Midland.

Disclaimer

Certain statements included in this press release contain forward-looking information concerning the Group's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the sectors or markets in which the Group operates. By their nature, forward-looking statements involve uncertainty because they depend of future circumstances, and relate to events, not all of which are within the Group's control or can be produced by the Group. Although the Group believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Nothing in this press release should be construed as a profit forecast and no part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in The Go-Ahead Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. Except as required by law, the Group undertakes no obligation to update any forward looking statement.