7th Sep 2007 07:01
Go-Ahead Group PLC07 September 2007 7 September 2007 THE GO-AHEAD GROUP PLC ("Go-Ahead" or "the group") PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2007 Go-Ahead is one of the UK's leading providers of passenger transport servicesoperating in the bus, rail and aviation sectors. Employing approximately 25,000staff across the country, over 875 million passenger journeys are undertaken onits services each year. In addition to the travelling public, customers includeTransport for London, BAA, major airlines, local authorities and the Departmentfor Transport. HIGHLIGHTS • Revenue increased to £1,826.9m (2006 - £1,463.6m) • Operating profit before amortisation, exceptional items and tax rose to £118.1m (2006 - £97.8m) • Profit before amortisation, exceptional items and tax increased by 19.8% to £110.1m (2006 - £91.9m) • Profit before tax increased by 13.4% to £94.8m (2006 - £83.6m) • Adjusted earnings per share before amortisation and exceptional items increased to 140.7p (2006 - 118.4p) • Final dividend of 47p per share is proposed, taking the total dividend to 70p, an increase of 25% (2006 - 56p) • Bus division continues to grow organically and by acquisition • Excellent performance in the rail division • Award of London Midland rail franchise commencing on 11 November 2007 • Gatwick Express to be incorporated into the Southern franchise from May 2008 • Challenging year for aviation services division Commenting on Go-Ahead's strategy and prospects, Chairman, Sir Patrick Brown said: "This has been a record year for the group and the new financial year hasstarted in line with the board's expectations. Our aim is to continue with ourstrategy which combines organic and acquisitive growth with financial disciplineand improving returns to shareholders. We are well positioned to make furtherprogress in the new year." For further information, please contact: The Go-Ahead GroupKeith Ludeman, Group Chief Executive 7 September: 0207 067 0700Nick Swift, Group Finance Director Thereafter : 0208 929 8650 / 0191 232 3123 Weber Shandwick Financial 020 7067 0700Richard Hews/ Stephanie Badjonat/ Hannah Marwood An analysts' presentation will be held at 9.30am at Weber Shandwick Financial'soffices, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS. Copies of thepresentation will be available on the Company's website: www.go-ahead.com Photography taken at Victoria Station of Keith Ludeman and Nick Swift can bedownloaded at www.fovea.tv Notes to Editors BUS The group's bus division operates over 3,500 buses, providing over 540 millionpassenger journeys and covering around 238 million vehicle kilometres each year.Operations fall into four main geographical areas: deregulated services in thenorth east, the West Midlands, south east and southern England and regulatedservices for TfL in London. The newest additions to this division are DocklandsMinibuses and Blue Triangle, acquired during this financial year, which operateas part of our London bus operations, and Marchwood which operates inSouthampton. RAIL The group's rail division operates a fleet of around 630 trains which provideover 280 million passenger journeys. Concentrated in the south east of Englandboth our Southern and Southeastern franchises operate a mix of suburban commuterand mainline routes throughout south London, Kent, Surrey and Sussex. TheSoutheastern franchise will include the operation of new high speed trains ondomestic services on the Channel Tunnel Rail Link into St Pancras from 2009.From May 2008, the Gatwick Express will be included in the Southern franchise.Go-Ahead will operate the West Midlands franchise, to be known as LondonMidland, from November 2007. AVIATION SERVICES The group's aviation services division undertakes a wide range of supportservices for national and international airlines. Services provided includecargo handling, passenger check-in, baggage handling, information desks,executive lounges, ground handling and customs clearance. In the last year services covered around 44 million passengers as well as over 450,000 aircraft movements. The division includes Meteor Parking which is the second largestparking company in the UK, managing over 65,000 parking spaces predominantly atBAA airports, with a range of customers, including BAA, local authorities,retail outlets, NHS trusts, hotels and rail stations. Well known brands includePink Elephant, Park 1 and eparking. PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE 2007 CHAIRMAN'S STATEMENT This has been a record year for the group. Revenue increased to £1,826.9m (2006 - £1,463.6m) and operating profit* rose to£118.1m (2006 - £97.8m). Profit before tax* increased by 19.8%, from £91.9m to£110.1m. Adjusted earnings per share increased to 140.7p (2006 - 118.4p). The board proposes a final dividend of 47.0p per share payable on 23 November2007 to shareholders on the register at the close of business on 2 November2007. Together with the interim dividend of 23.0p, the total dividend of 70.0prepresents an increase of 25.0% year on year and results in a dividend cover* of2.0 times. Returns to shareholders were further supplemented during the year bythe share buy back programme, with 2.4 million shares purchased, at a cost of£55.6m. The bus division performed strongly, both in the regulated operations in Londonand in deregulated services elsewhere. In London, we negotiated a number ofcontract extensions, increased services to match the western extension of thecongestion charging zone, and won some significant route contracts from ourcompetitors. We expanded our operations into East London with the acquisition ofDocklands Minibuses in September 2006 and Blue Triangle at the end of June 2007.We continue to provide first class performance, often featuring at the top ofthe TfL quality tables and earning bonuses under the Quality Incentive Regime.Our deregulated bus operations also enjoyed a good year, with lower costs andbuoyant revenue leading to higher operating profits across most of ourbusinesses. By buying Marchwood Buses in October 2006, we extended the Go SouthCoast operations into the Southampton area. Our decentralised philosophy acrossthese deregulated operations, supporting local brands for local communities,allows us to tailor our services to meet the specific needs of our customers. The group's rail division did particularly well in the year. It benefited from afull year's contribution from the Southeastern franchise, which startedoperations on 1 April 2006 and has since performed strongly. During the year,our Southern business secured its existing franchise to September 2009 and wonthe contract to operate the Gatwick Express from May 2008 as part of the DfTBrighton Main Line Route Utilisation Strategy. In June 2007, we won a thirdfranchise, this time to run the new West Midlands rail network. It will bebranded London Midland and operations will commence on 11 November 2007. Ourgoal in the rail division is to provide the highest quality of service combinedwith financial discipline. This has consistently led to strong passenger growth,well controlled costs, and higher operating profits. The aviation services division has had a difficult year. Security disruption atall UK airports, particularly Heathrow and Gatwick, led to unrecoverable costincreases. This coincided with bad weather and the loss of some contracts, whichled to a significant fall in profit. Overall, our strategy centres on a highquality of customer service, which enabled the division to win some valuablecontracts towards the end of the year. The new contract with British Airways forthe provision of ground handling services at Aberdeen, Edinburgh, Glasgow andManchester airports should help the division to recovery. The board started the year with Keith Ludeman, former chief executive of ourrail division, taking over as group chief executive. The group is fortunate to have a successor to Christopher Moyes of such ability and wide experience of the bus and rail industries. At the end of the financial year, Ian Butcher, our group finance director, retired after 11 years with the group, and was succeeded by Nicholas Swift, who joined us on 17 July 2007. I thank Ian for his outstanding contribution to the group, and all of our employees for making the past year such a success. The year has also been a sad one for the group. Martin Ballinger and ChristopherMoyes, both former chief executives, passed away. From the beginnings of thebuy-out of The Northern General Transport Company from the National Bus Company,they built the group into the dynamic company of today. We miss them, and theirwisdom and humanity. "Si monumentum requiris, circumspice." The new financial year has started in line with the board's expectations. Ouraim is to continue with our strategy which combines organic and acquisitivegrowth with financial discipline and improving returns to shareholders,including renewal of the authority for the share buy back programme at theforthcoming annual general meeting. We are well positioned to make furtherprogress in the new year. * Before amortisation and exceptional items Sir Patrick BrownChairman6 September 2007 OPERATING AND FINANCIAL REVIEW SUMMARY 2007 2006 £m £m Revenue 1,826.9 1,463.6Operating profit * 118.1 97.8 Profit before tax* 110.1 91.9Profit before tax 94.8 83.6 Cash flow generated from operations 191.2 116.9 Earnings per share - basic 124.2p 108.1pEarnings per share - adjusted* 140.7p 118.4pDividends paid and proposed 70.0p 56.0p * Before exceptional items and amortisation The group has delivered significant growth this year. Revenue increased by£363.3m, or 24.8%, to £1,826.9m. Operating profit* was £118.1m, up £20.3m or20.8% compared to last year. Profit before tax* increased by £18.2m, or 19.8%,to £110.1m. Our bus division delivered a strong set of results for the year, increasingrevenue by £54.0m to £514.0m and operating profit* by £9.1m to £55.8m. Growth inoperating profit came from both the regulated operations in London andimprovement in most of the deregulated bus businesses. The largest part of the group's revenue and operating profit growth was from therail division. Here, revenue increased by £326.4m to £1,071.3m and operatingprofit* was up £23.6m to £66.1m. The increase consisted of the full year benefitfrom changes in franchises held by the group last year, and improved like forlike performance, led by passenger income growth. Results for the aviation services division were disappointing. Revenue fell by£17.1m to £241.6m. Operating profit* fell £12.4m to a loss of £3.8m, including£1.3m of restructuring costs. Most of the reduction was in the ground handlingbusiness, but cargo and car parking were also below last year. Cash flow from operations remained strong at £191.2m, or 161.9% of operatingprofit*. Cash conversion is a key strength of the business. Adjusted earnings per share increased by 18.8%, reflecting the rise in profitbefore tax* less an increase in the profit attributable to the 35% minorityinterest in our rail operations. OutlookOur bus operations are expected to continue to improve in the new year. Earningsfrom rail are anticipated to reduce due to lower government subsidies andongoing cost pressures, partly offset by the new London Midland franchisestarting in November. The aviation services division needs to restoreprofitability and should benefit from recently won contracts. Overall, we expectto make further progress in the year to June 2008. DIVISIONAL REVIEW Bus 2007 2006 £m £m Revenue 514.0 460.0Operating profit* 55.8 46.7Margin 10.9% 10.2% Revenue growth Regulated 11.6% 5.5% Deregulated 12.0% 19.4% Volume growth Regulated - miles operated 8.4% 1.3% Deregulated - passenger journeys 6.8% 12.2% * Before exceptional items and amortisation Our bus operations performed strongly in the year. Revenue grew by £54.0m, or11.7%, to £514.0m, and operating profit* increased by £9.1m, or 19.5%, to£55.8m. Margins improved by 0.7 percentage points to 10.9%. Passenger and revenue growth more than offset cost increases primarily due topayroll and engineering materials. Insurance costs reduced by 27% as a result ofcontinued focus in this area. Overall, fuel costs were similar to last yeardespite increases in volume consumption generated by operating 6% more miles.Acquisitions accounted for approximately £6.8m of the increase in revenue and£1.4m of the increase in operating profit*. Operating profits* improved in bothour regulated and deregulated bus operations. Regulated bus operationsThis was another good year for our regulated bus operations in London where thegroup grew to become the largest operator of local bus services under contractto TfL. Regulated revenue increased by 11.6%, benefiting from an 8.4% increasein the number of miles operated. This reflects the net addition of a number ofnew contracts associated with the western extension of the congestion chargingzone which added 17 peak vehicles, rail replacement services, and theacquisition of Docklands Minibuses in September 2006. A key part of the success of our London bus division is the delivery ofexcellent operating performance. Our London Central and London Generaloperations frequently top the TfL quality league tables. Mileage operated(before losses due to traffic) was 99.6% of the scheduled route maximum for theyear and excess waiting time for passengers averaged one minute. This resultedin a new record level of quality incentive bonuses, reaching £13.0m this yearcompared to £11.9m last year. These high levels of performance allowed us toextend most of the eligible contracts from five to seven years, many of whichentailed additional resources, summing to a further 16 peak vehicles overall. Wage inflation was partly offset by productivity improvements during the year,with a strong focus on reducing absenteeism. Engineering material costs were up£2.6m overall reflecting the increasing age profile of the fleet. This requiredus to both refurbish buses entering a second contract term, and incurmaintenance cost for vehicles falling outside of extended warranty packages.Investment in the bus fleet continued, with 66 new, environmentally friendly,Euro-4 compliant buses acquired during the year. At Metrobus, with the garage redevelopment programme complete, the managementteam focused on improving service quality and operating profit. Performance onTfL contracts improved significantly and, coupled with significant additionalrail replacement work, the business delivered better operating profits. By theend of the year Metrobus had also topped TfL quality league tables. Deregulated bus operationsOur deregulated bus operations enjoyed a good year. Revenue growth totalled12.0% and passenger journeys increased by 6.8%. The growth in passenger journeys was due to a significant increase in the numberof passengers benefiting from free concessionary travel, particularly in our GoNorth East, Go South Coast and Brighton & Hove operations. Fare payingpassengers increased in Oxford, Go South Coast and Brighton & Hove. Our Go North East operations performed well during the year, and we are startingto see the benefits of the significant changes underway in this operation. Thenew commercial strategy has comprehensively restructured the local bus network,generating operating cost savings, by focussing on a core commercial network.Routes are clustered into a hierarchy, with the highest level of investmentbeing channelled into the busiest routes. The restructuring has been supportedby a significant investment in the bus fleet, with 50 new buses replacing 70older vehicles and with a number undergoing refurbishment. The routes werestrongly marketed with distinctive route branding, coupled with improvements inservice quality. Total mileage operated improved to 99.8% in the year, withpunctuality above 95% - the best levels achieved in the group. In Brighton and Hove, we continued to deliver improvements in operating profit*.Service levels were enhanced driven by increased passenger growth, high profileservice development and strong operating performance on busy Metro services. Weinvested in a new fleet of double decker buses for Metro 25 and extended to a 24hour operation. Our Oxford based business, which includes high frequency coach services from thecity to central London, Heathrow and Gatwick, enjoyed a good year. Patronageincreased following a comprehensive network review, supported by investment in11 new Mercedes Citaro buses and 10 new Volvo coaches. These vehicles are Euro 5compliant, reducing emissions ahead of the standard becoming mandatory in 2009.Oxford won the Corporate Social Responsibility (CSR) category at the 2006 UK BusAwards. Passenger convenience was enhanced through the introduction of a smartcard ticketing system during the year, which has proved very successful to date. We have made progress in our new West Midlands operations, although thefinancial results were poor, in part due to start-up and restructuring costscontinuing to impact during the year. The business was established through twoacquisitions in 2006 and has been through a significant amount of change. Thesenior management team was replaced and virtually all aspects of the businesswere comprehensively overhauled. A new commercial strategy was put together torefocus the business on a core commercial network, and this began to be rolledout towards the end of the year. The operations, engineering and finance teamswere reorganised and are now close to achieving the standard of service qualityachieved elsewhere within the group. Relationships with local authorities havebeen transformed. We remain committed to establishing the group as a highquality bus operator in the West Midlands, and will look for synergies with ournew rail business as the year progresses. Our Go South Coast business benefited from both a full year contribution fromtwo acquisitions and a rationalisation of management and administrativefunctions. This led to a strong underlying improvement in operating profit*.Hants and Dorset Trim was relocated to new and expanded premises at Eastleigh.The Southampton based Marchwood operations were acquired in October 2006 andwere integrated into the Go South Coast operation. Both businesses areperforming well. Network restructuring, coupled with investment in new buses andstrong marketing, has generated strong passenger growth on the Isle of Wight,and in the Bournemouth, Poole and Southampton/Eastleigh conurbations. Thebusiness also includes a substantial coaching operation, which has benefitedfrom new business such as serving cruise ships berthed at Southampton. Metrobus deregulated operations, based at Crawley, achieved record levels ofservice quality and made a significant contribution to overall profitability. OutlookWe expect our bus operations to make further progress in the new year. Our aimis to maintain our leading position in the regulated London market, strengthenedby TfL contract wins of Route 24 and 453 from other operators, and the retentionof Routes 36 and 436 with additional volume. The acquisition of Blue Triangle inEast London in June 2007 further increases our market position north of theThames. We also intend to improve our deregulated services, with benefitsflowing from a cessation of one-off costs at Go West Midlands and Go North East,and further restructuring at Go South Coast. The policy of investing in new,environmentally friendly buses, network development and strong marketing willcontinue. RisksOperating profits are highly sensitive to the cost of fuel, with a 1 pennyincrease in fuel cost per litre adding around £1m to our costs. At the end ofJune 2007, approximately half of our fuel requirements were hedged for 2007/08.Other principal risks include an adverse outcome to 2007/08 concessionary farenegotiations, industrial relations, political risk arising from legislativechange, terrorism, competitor behaviour and the loss of significant regulatedcontracts. Rail 2007 2006 £m £m Revenue 1,071.3 744.9Operating profit * 66.1 42.5Margin 6.2% 5.7% Passenger income growth** Southern 14.1% 7.1% Southeastern 12.4% n/a Volume growth** Southern 9.1% 2.8% Southeastern 7.0% n/a * Before exceptional items and amortisation ** Southeastern compares the three months to 30 June 2007 against the first three months of ownership to 1 July 2006 The rail division has had an excellent year. Revenue grew by £326.4m, or 43.8%,to £1,071.3m, and operating profit* increased by £23.6m, or 55.5%, to £66.1m.The margin improved by 0.5 percentage points to 6.2%. The net impact of changes to the franchises held by the group accounted forapproximately £284.0m of the increase in revenue and £13.2m of the increase inoperating profit*. The prior year includes the last nine months of theThameslink franchise, which finished on 31 March 2006, and the first threemonths of the Southeastern rail franchise which started on 1 April 2006. Thecurrent year includes bid costs charged to the income statement of £3.0m for newfranchises, compared to £1.4m last year. SouthernOperating performance reached record levels during the year. The publicperformance measure (PPM) showed that close to 90.0% of our trains arrived ontime during the year. The performance regime, including compensation for delayscaused by Network Rail, delivered increased income of £5.8m compared to lastyear. Our customer satisfaction rating was 81.0% for the year, up slightly from80.0% last year. Ongoing security improvements included additional CCTV camerason trains, and enhanced security at stations. Passenger income increased by 14.1% compared to last year. Most of the increasewas due to a rise in passenger journeys of 9.1% to over 135 million in the year,reflecting both the strong economic conditions and improved performance. At suchlevels, capacity remains a challenge for the industry. For our part, wecontinued to introduce new carriages into service and optimised train formationsby use of passenger loading data information supplied from equipment on ourrolling stock. Ticket price increases averaged 5.0% in accordance with the termsof the franchise. Operating cost rises were largely confined to labour and electricity. Labourcost increases arose from routine wage negotiations and increased pensioncontributions, with the number of employees remaining relatively constantthrough the year. The cost of traction electricity, excluding the exceptionalsettlement which is described further below, was around £3.3m above last year.Engineering costs were slightly below last year. The depot refurbishment inSouthern, completed in 2006, provides superb facilities to maintain the newtrain fleet to a high standard. The net subsidy received from the DfT declines each year under the terms of thefranchise and was approximately £5.1m below last year. The franchise is alsosubject to a profit sharing regime with the DfT. The strong financialperformance this year triggered the maximum 80% threshold, resulting in anincreased payment due to the DfT. SoutheasternOur Southeastern operations also enjoyed improved operating performance, withPPM punctuality levels at close to 90.0% for the year. Performance regimepayments, primarily from Network Rail, were some £5.0m above the levels assumedin the franchise plan. Passenger satisfaction ratings were 74.0% for the year. We set ourselves an ambitious programme of change and improvement for thisfranchise, against a government subsidy which declines to a small premium overthe course of the franchise. We are still at a relatively early stage of thefranchise, but are pleased with progress. Our stated aim is to provide a growingrailway for a growing region. This programme includes investment in new traintimetables to optimise performance and to provide extra journeys. Elsewhere, thecompany is working hard to improve station facilities and to improve the qualityand cleanliness of the existing train fleet. Carriages are being fitted withenhanced security and on board passenger information, whilst reliabilityimprovements are being made to mid-life rolling stock. Passenger journeys reached 147 million in the year. The last three months ofthis year compared to the first three months of ownership last year showed anincrease in passenger income of 12.4% and in passenger journeys of 7.0%. Priceincreases averaged approximately 6% for the same period, based on an RPI + 3%pricing regime. Operating costs were below the franchise plan for the year, with a reduction inlease costs offsetting increases in traction electricity and higher labourcosts. The lease cost savings arose from the delay of modifications to rollingstock. No payments were made in the year under the revenue sharing arrangementoperated with the DfT. OutlookThe passenger market is assumed to remain buoyant for the next year. However,DfT subsidies to the two franchises are scheduled to reduce significantly in thenew financial year. This, together with ongoing cost pressure, is expected tooffset the benefit from the London Midlands franchise, leading to an anticipatedreduction in operating profit* next year. In Southern, we will be implementing the Brighton Main Line Route UtilisationStrategy, which includes the integration of the Gatwick Express into our networkfrom May 2008. We will also be preparing to tender for the next franchiseperiod, due to start in October 2009. Our Southeastern operations will look to progress our improvement plans across awide range of performance and customer satisfaction areas. Work is underway tointroduce enhanced timetables, including the high speed services into Kent, in2009. The first of the new high speed trains arrived in August from Japan. In November 2007, our new London Midland franchise begins operations, combiningthe operations of Silverlink County with the West Midlands regional services ofCentral Trains. RisksKey risks to the division include the potential loss of the Southern franchisein September 2009, the impact of terrorist incidents, or severe disruptionaffecting the network. Aviation Services 2007 2006 £m £m Revenue 241.6 258.7Operating (loss)/profit* (3.8) 8.6Margin (1.6)% 3.3% Revenue growth General handling (1.8)% (2.9)% Cargo 4.6% 10.4% Car parking (21.3)% (7.0)% Volume growth General handling - aircraft turnarounds (4.8)% (5.8)% Cargo - tonnes 0.8% 6.8% Car parking - transaction volume (23.7)% (3.1)% * Before exceptional items and amortisation The aviation division experienced a difficult year. From August 2006, newsecurity measures introduced in response to terrorist threats caused delays anddisruption, and led to unrecoverable cost increases which were most acute atLondon Heathrow Airport. Revenue decreased by £17.1m across the division, or 6.6%, to £241.6m, andoperating profit* decreased by £12.4m to a loss of £3.8m, which includesrestructuring costs of £1.3m. General HandlingThe general handling operations accounted for the majority of the reduction inoperating profit*. Aircraft turnarounds were 4.8% below last year, with the impact of lostcontracts at Heathrow and three regional airports more than offsetting growthunder existing contracts. The new British Airways contracts started in June 2007and had minimal impact on the turnarounds for the year. The value per turnaroundimproved by 3.0%, although this is heavily influenced by airport and contractmix. Net revenue reduced by 1.8%, including weather related decreases inde-icing income. The year also saw a significant rise in operating costs. Labour costs were wellin excess of last year and included additional employees to service a change inaircraft type by two carriers as they responded to competitive pressures.Security disruption through the year resulted in further cost increases. Cargo operationsResults for the cargo operations were also challenging. Revenue growth of 4.6%was supported by an increase in cargo tonnage of 0.8%. Good underlying growth atHeathrow was partly offset by the withdrawal of a significant carrier fromGatwick. As with ground handling, labour operating cost increases were significant inresponse to the new security measures, leading to an overall reduction in theoperating profit* for the year. Meteor car parkingIt was also a difficult year for our Meteor car parking operations. The decline in the level of transactions and revenue was largely due to changesto our contracts with airport operators from a concession basis to a managementfee structure. This resulted in less involvement in the sales process and adifferent treatment of income. Our strategy remains to continue to operate anddevelop a wide range of airport related activities, balanced with parking andsecurity business outside the sector. This was enhanced in December 2006 withthe acquisition of PAS Direct, a provider of valet parking at Gatwick airport,and the acquisition in February 2007 of Nikaro, a specialist nationwidekeyholding and alarm response business. OutlookThe aim of this division is to translate its reputation for excellent levels ofquality and customer service into restored profitability. Ground handling shouldbenefit from the new British Airways contracts at Aberdeen, Edinburgh, Glasgowand Manchester airports. Our cargo operations have recently won a significantnew contract at Gatwick with American Airlines and will further expand throughthe commissioning of a large new cargo facility at Heathrow. Our car parkingoperations should benefit from a full year of operating profit contribution fromacquisitions. RisksThe division operates in a highly competitive environment. Key risks include theloss of significant contracts and disruption due to events such as terrorism. ADDITIONAL FINANCIAL MATTERS Operating profit before depreciation, amortisation and exceptional items /EBITDAOperating profit before amortisation and exceptional items was £118.1m (2006 -£97.8m) and the depreciation charge for the year was £44.6m (2006 - £38.0m),giving an EBITDA before exceptional items of £162.7m (2006 - £135.8m). Exceptional itemsThe exceptional item of £6.9m represents the net settlement cost, after profitshare, incurred in relation to traction electricity (EC4T) negotiations for ourtwo rail franchises. This one-off compensation settlement allows the franchisesto move onto new supply terms for EC4T with Network Rail. There were no other exceptional items in the year (2006 - £3.2m). Furtherdetails of the exceptional items in 2006 are provided in the notes to thefinancial statements. Goodwill and intangible asset amortisationThe £8.4m (2006 - £5.1m) charge for the year primarily represents the non cashcost of amortising goodwill and intangibles, including assets associated withpension accounting, relating to the rail franchises. Other items include theamortisation of non-rail intangibles and computer software costs. The main reason for the increase against last year is the impact of a full yearof ownership of the Southeastern franchise. InterestThe net finance cost for the year increased to £8.0m (2006 - £5.9m), largely dueto the increase in net debt during the year. The average net interest rate was5.9% for the year and the proportion of net debt held at fixed interest rateswas 64.7% (2006 - 51.0%) at the end of the year. PensionsPensions have been accounted for in accordance with IAS19, including a franchiseadjustment to recognise that our obligations under the rail schemes are limitedto the term of the franchise. The net pension cost of the group's defined benefit pension plans for the yearwas £24.3m (2006 - £18.2m), consisting of a service cost of £31.9m (2006 -£23.3m) less a net financing benefit of £6.3m (2006 - £3.6m) and a franchiseadjustment of £1.3m (2006 - £1.5m). The rail related charge increased to £18.8m(2006 - £10.9m) due to a full year of Southeastern. The non rail cost reduced to£5.5m (2006 - £7.3m) due to a higher assumed rate of expected return on assets. The net deficit before taxation on the non rail defined benefit schemes reducedfrom £87.5m at the end of last year to £24.5m, reflecting the strong equitymarkets at the end of the year. Of the non-rail scheme assets 67.8% were held inequities at the year end (2006 - 69.5%). The net deficit on the rail schemes was £2.3m (2006 - £16.3m). The nature ofthese schemes means that we only recognise the share of surplus or deficitexpected to be funded/benefited from over the franchise period, and consequentlywe have not recognised any individual scheme surplus in the financialstatements. An additional cash contribution of £2.5m was made to the non rail schemes justbefore the year end in June 2007, with a further £7.5m paid in early July 2007. TaxationThe effective tax rate for the year was in line with our half year expectationsat 24.9% (2006 - 23.2%). The principal reason for the reduced rate compared tothe UK tax rate of 30% relates to the effective management of asset financearrangements. The reduction also includes a one-off decrease of approximately 2%for the change in the deferred tax rate to 28% from 1 April 2008. Due to thereduction in the pension deficit described above, deferred tax assets reduced by£22.5m. Minority interestThe minority interest in the income statement of £12.6m (2006 - £10.5m) arisesfrom our 65% holding in Govia Limited, which owns 100% of the rail operations,and therefore represents 35% of the profit after tax from these operations. DividendsThe total dividend for the year of 70p consists of the interim dividend paid of23p and a proposed final dividend of 47p. This represents a total increase of25.0%, resulting in a dividend cover (based on adjusted eps) of two times inline with our stated objective. We will look to continue our policy ofprogressive dividend growth whilst maintaining dividend cover of approximatelytwo times earnings through the cycle. Cash flowCash generated from operations before taxation was £191.2m, an increase of£74.3m against £116.9m last year. This increase consists of additional operatingprofit before depreciation, amortisation and net cash from a reduction inworking capital of £41.5m. The majority of this reduction related to thereversal of temporary funding requirements last year for the new rail franchiseand timing of payments to the DfT. Net cash flow used in investing activities was £71.9m, similar to last year at£76.9m. Capital expenditure, net of sale proceeds, totalled £53.7m compared to£67.9m last year, including new bus expenditure of £28.8m (2006 - £50.2m). Thecash used to purchase businesses totalled £22.9m (2006 - £11.6m). Dividends paid to parent company shareholders totalled £28.9m (2006 - £25.3m),and to minority interests totalled £14.7m (2006 - £15.1m). We continued with ourshare buy back programme, investing £55.6m (2006 - £52.6m) to buy back 2.4million (2006 - 3.2 million) of our own shares at an average price of £22.69(2006 - £16.30) per share. At 30 June 2007, we held a total of 5.0 millionshares in treasury, representing 9.8% of the issued share capital. Balance sheetNet debt increased by £5.7m, from £138.8m to £144.5m. Bank loans and loan noteswere £223.0m and hire purchase and finance leases totalled £50.1m. This waspartly offset by cash and short term deposits of £128.6m, which includedrestricted rail cash deposits of £92.7m. Excluding the restricted cash, adjusted net debt was £237.2m, equivalent to 1.46 times EBITDA before exceptional items (definedabove). Our aim is to move to an adjusted net debt to EBITDA ratio of 1.5 times to 2.5 times through the cycle. Net assets totalled £147.6m at the end of the year compared to £109.3m at 30June 2006. The increase primarily reflects the profit attributable to equityholders of the parent of £58.6m and actuarial gains of the pension scheme of£75.0m, less acquisition of own shares of £55.6m and dividends paid of £43.6m. PRINCIPAL GROUP RISK FACTORS Our business, financial condition and results of operations will be influencedby a range of factors, many of which are beyond our control. In addition tospecific risks noted in the divisional reviews above, these risks include, butare not limited to: political and regulatory change; reduction in publicfunding, including an adverse outcome to concessionary bus fare negotiations;disruption or incidents, including those due to accidents or terrorism; adversechanges in the economy and levels of employment; competitor behaviour; loss ofsignificant contracts or franchises; increase in costs, including labour,pensions and fuel; financial risks and adverse changes in tax legislation. CONSOLIDATED INCOME STATEMENTfor the year ended 30 June 2007 2007 2006 Notes £m £m GROUP REVENUE 2 1,826.9 1,463.6 Operating costs (excluding amortisation and exceptional items) (1,708.8) (1,365.8) ---------- ----------Group operating profit (before amortisation and exceptional items) 2 118.1 97.8 Goodwill and intangible asset amortisation (8.4) (5.1)Exceptional items 3 (6.9) (3.2) ---------- ----------Group operating profit (after amortisation and exceptional items) 102.8 89.5 Finance revenue 6.1 4.9Finance costs (14.1) (10.8) ---------- ----------Profit on ordinary activities before taxation 94.8 83.6 Analysed as: ---------- ---------- Before amortisation and exceptional items 110.1 91.9 Amortisation and exceptional items (15.3) (8.3) ---------- ---------- Tax expense 4 (23.6) (19.4) ---------- ----------Profit for the year from continuing operations 71.2 64.2 ========== ========== Attributable to: Equity holders of the parent 58.6 53.7 Minority interest 12.6 10.5 ---------- ---------- 71.2 64.2 ========== ========== Earnings per share from continuing operations - basic 5 124.2 108.1p - diluted 5 122.6 107.0p - adjusted 5 140.7 118.4p Dividends paid (pence per share) 6 61.0p 51.0pFinal dividend proposed (pence per share) 6 47.0p 38.0p CONSOLIDATED BALANCE SHEETas at 30 June 2007 Notes 2007 2006 £m £mASSETSNon-current assetsProperty, plant and equipment 447.3 425.2Intangible assets 129.4 118.8Trade and other receivables 1.8 1.7Deferred tax assets 11.9 32.2 ---------- ---------- 590.4 577.9 ---------- ----------Current assetsInventories 9.3 10.0Trade and other receivables 171.7 179.3Cash and short-term deposits 128.9 90.2Financial assets 0.7 - ---------- ---------- 310.6 279.5 Assets classified as held for sale 0.9 0.3 ---------- ----------TOTAL ASSETS 901.9 857.7 ========== ==========LIABILITIESCurrent liabilitiesTrade and other payables (365.3) (337.1)Interest-bearing loans and borrowings (42.5) (61.9)Current tax liabilities (14.0) (6.6) ---------- ---------- (421.8) (405.6)Non-current liabilitiesInterest-bearing loans and borrowings (230.4) (167.1)Retirement benefit obligations 9 (26.8) (103.8)Deferred tax liabilities (66.3) (57.6)Other liabilities (7.7) (6.1)Provisions (1.3) (8.0) ---------- ---------- (332.5) (342.6) Liabilities directly associated with assets classified as held for sale - (0.2) ---------- ----------TOTAL LIABILITIES (754.3) (748.4) ---------- ---------- NET ASSETS 147.6 109.3 ========== ==========CAPITAL & RESERVESShare capital 8 65.4 65.6Reserve for own shares 8 (80.6) (67.1)Revaluation reserve 8 24.0 12.4Hedging reserve 8 0.5 -Other reserves 8 1.6 1.6Capital redemption reserve 8 0.2 -Retained earnings 8 130.7 93.1 ---------- ----------Total shareholders' equity 141.8 105.6 Minority interest 8 5.8 3.7 ---------- ----------TOTAL EQUITY 147.6 109.3 ========== ========== CONSOLIDATED CASH FLOW STATEMENTfor the year ended 30 June 2007 2007 2006 Notes £m £m Profit for the year 71.2 64.2Net finance costs 8.0 5.9Tax expense 4 23.6 19.4Depreciation of property, plant and equipment 44.6 38.0Amortisation of goodwill and intangible assets 8.4 5.1Loss / (profit) on sale of property, plant and equipment 0.6 (1.3) Share based payments 2.0 0.7Difference between pension contributions paid and amounts recognised in the income statement (2.0) 5.4Movement in provisions (6.7) -Decrease in inventories 0.8 0.5Decrease/(increase) in trade and other receivables 11.0 (31.6)Increase in trade and other payables 29.7 10.6 ---------- ----------Cash flow generated from operations 191.2 116.9 Taxation paid (11.5) (15.3)Net receipt on transfer of rail franchises - 7.9 ---------- ----------Net cash flows from operating activities 179.7 109.5 ---------- ----------Cash flows from investing activitiesInterest received 6.0 5.2Proceeds from sale of property, plant and equipment 3.7 3.0Purchase of property, plant and equipment (57.4) (70.9)Purchase of intangible assets (1.2) (3.5)Purchase of subsidiaries 7 (22.9) (11.6)(Overdraft)/cash acquired with subsidiaries (0.1) 0.9 ---------- ----------Net cash flows used in investing activities (71.9) (76.9) ---------- ---------- Cash flows from financing activitiesInterest paid (14.1) (10.6)Dividends paid to members of the parent (28.9) (25.3)Dividends paid to minority interests (14.7) (15.1)Proceeds from issue of shares - 4.3Payment to acquire own shares 8 (51.6) (52.6)Repayment of borrowings (136.7) (81.5)Proceeds from borrowings 188.8 147.3Proceeds from finance lease and hire purchase 21.2 13.5Payment of finance lease and hire purchase liabilities (23.4) (18.4)Repayment of loan notes 10 (0.2) (0.1) ---------- ---------- Net cash outflows on financing activities (59.6) (38.5) ---------- ---------- Net increase/(decrease) in cash and cash equivalents 48.2 (5.9) Cash and cash equivalents at 1 July 2006 10 80.4 86.3 ---------- ----------Cash and cash equivalents at 30 June 2007 10 128.6 80.4 ========== ========== CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the year ended 30 June 2007 Notes 2007 2006 £m £mIncome and expense recognised directly in equity Share based payments 2.0 0.7Actuarial gains on defined benefit pension plans 75.0 16.9Revaluation of land and buildings 11.6 12.4Recognition of IAS39 asset 0.7 -Tax recognised directly in equity 4 (23.0) (6.5) ---------- ----------Net income recognised directly in equity 66.3 23.5 Profit for the year 71.2 64.2 ---------- ----------Total recognised income and expense for the year 137.5 87.7 ========== ========== Attributable to: Equity holders of the parent 120.7 77.5 Minority interest 16.8 10.2 ---------- ---------- 137.5 87.7 ========== ========== NOTES TO THE PRELIMINARY ANNOUNCEMENTfor the year ended 30 June 2007 1. ACCOUNTING POLICIES The accounting policies used in the preparation of these results are consistentwith those used in the 2007 Annual Report. 2. SEGMENTAL ANALYSIS The group's primary reporting format is business segments and its secondaryformat is geographical segments. The operating businesses are organised andmanaged separately according to the nature of the products and servicesprovided, with each segment representing a strategic business unit that offersdifferent products and serves different markets. Business segmentsThe following tables present revenue and profit information regarding the group's business segments for the years ended 30 June 2007 and 1 July 2006. Year ended 30 June 2007 Aviation Bus Rail services Unallocated Total £m £m £m £m £m Segment revenue 520.2 1,073.4 244.8 - 1,838.4Inter-segment revenue (6.2) (2.1) (3.2) - (11.5) --------- -------- --------- --------- ---------Group revenue 514.0 1,071.3 241.6 - 1,826.9 ========= ======== ========= ========= ========= Group operating profit (before amortisation and exceptional items) 55.8 66.1 (3.8) - 118.1 Goodwill and intangible amortisation (0.7) (7.5) (0.2) - (8.4)Exceptional items - (6.9) - - (6.9) --------- ------- --------- --------- ---------Segment result 55.1 51.7 (4.0) - 102.8 --------- ------- --------- ---------Net finance costs (8.0) ---------Profit before tax and minority interest 94.8Tax expense (23.6) --------- Profit for the year 71.2 ========= Year ended 1 July 2006 Aviation Bus Rail services Unallocated Total £m £m £m £m £m Segment revenue 474.6 748.5 263.7 - 1,486.8Inter-segment revenue (14.6) (3.6) (5.0) - (23.2) --------- ------- --------- --------- ---------Group revenue 460.0 744.9 258.7 - 1,463.6 ========= ======= ========= ========= ========= Group operating profit (before amortisation and exceptional items) 46.7 42.5 8.6 - 97.8 Goodwill and intangible amortisation (0.5) (4.4) (0.2) - (5.1)Exceptional items 0.1 (1.8) (1.5) - (3.2) --------- ------- --------- --------- ---------Segment result 46.3 36.3 6.9 - 89.5 --------- ------- --------- ---------Net finance costs (5.9) ---------Profit before tax and minority interest 83.6Tax expense (19.4) --------- Profit for the year 64.2 ========= 3. EXCEPTIONAL ITEMS 2007 2006 £m £m Redundancy and reorganisation costs - (3.8)Property relocation costs - (0.6)Profit on sale of properties - 1.2EC4T (6.9) - ---------- ---------- (6.9) (3.2) ========== ========== EC4T is electricity purchased by the train companies to operate electric trainsfrom Network Rail. During the year our TOC's have negotiated a new basis fordetermining the cost of electricity going forward. In return for agreeing torevise the terms of the related track access agreements to reflect this newbasis, Network Rail required the group to make a one-off compensation paymentduring the year. This cost has been identified as an exceptional item, given thesize of this payment and the fact that it was made to secure a fundamentalchange to the basis on which the group is charged for EC4T. The redundancy and re-organisation costs in 2006 were as a result of significantre-organisations in the aviation division and the South Coast bus operations,plus actual and planned redundancies following the handover of the Southeasternrail franchise. Property relocation costs were costs incurred during the major depotrestructuring programme at Metrobus in 2006. The profit on sale of properties related to disposals of various bus depots in2006. 4. Taxation (a) Tax recognised in the income statement and in equity 2007 2006 £m £m Current tax charge 19.1 19.2Adjustments in respect of current tax of previous years - (1.3) --------- --------- 19.1 17.9Deferred tax relating to origination and reversal of temporary differences 6.9 2.2Impact of deferred tax rate change 30% to 28% (1.7) -Previously unrecognised deferred tax of a prior period (0.7) (0.7) --------- ---------Tax reported in consolidated income statement 23.6 19.4 ========= ========= Tax relating to items charged or credited to equity 2007 2006 £m £m Corporation tax on share based payments (0.1) (3.2)Deferred tax on share based payments (1.4) 1.5Tax on actuarial gains on defined benefit pension plans 23.1 5.0Tax on IAS39 asset 0.2 (0.1)Revaluation of land and buildings 1.2 3.3 --------- ---------Tax reported in equity 23.0 6.5 ========= ========= (b) Reconciliation A reconciliation of income tax applicable to accounting profit before tax at thestatutory tax rate to tax at the group's effective tax rate for the years ended30 June 2007 and 1 July 2006 is as follows: 2007 2006 £m £m Profit on ordinary activities before taxation 94.8 83.6 ========= ========= At United Kingdom tax rate of 30% (2006 - 30%) 28.4 25.1Adjustments in respect of current tax of previous years (0.7) (2.0)Expenditure not allowable for tax purposes 1.1 0.4Goodwill amortisation 0.8 0.7Differences re: tax efficient financing (4.3) (4.8)Deferred tax rate change 30% to 28% (1.7) - --------- ---------Tax reported in consolidated income statement at effective tax rate of 24.9% (2006 - 23.2%) 23.6 19.4 ========= ========= 5. EARNINGS PER SHARE Basic earnings per share 2007 2006 Net profit attributable to equity holders of the parent (£m) 58.6 53.7Weighted average number of shares in issue (£'000) 47,188 49,674 ---------- ---------Basic earnings per share (pence per share) 124.2 108.1 The weighted average number of shares in issue excludes treasury shares held bythe company, and shares held in trust for the directors' Long Term IncentivePlan. Diluted earnings per share 2007 2006 Net Profit attributable to equity holders of the parent (£m) 58.6 53.7Weighted average number of shares in issue (£'000) 47,188 49,674Effect of dilution:Dilutive potential ordinary shares under share option schemes (£'000) 601 491 ---------- ----------Adjusted weighted average number of shares (£'000) 47,789 50,165 Diluted earnings per share (pence per share) 122.6 107.0 The dilution calculation assumes conversion of all potentially dilutive ordinaryshares. Adjusted earnings per share Adjusted earnings per share is also presented to eliminate the impact ofgoodwill and intangible amortisation and non-recurring exceptional costs andrevenues in order to show a 'normalised' earnings per share. This is analysed asfollows: 2007 Profit for the Exceptional year items Amortisation Total £m £m £m £m Profit before taxation 94.8 6.9 8.4 110.1Less: Taxation (23.6) (2.1) (1.7) (27.4)Less: Minority Interest (12.6) (1.7) (2.0) (16.3) --------- ---------- ---------- ---------Adjusted profit attributable to equity holders of the parent 58.6 3.1 4.7 66.4 ========= ========== ========== ---------Adjusted earnings per share (pence per share) 140.7p --------- 2006 Profit for the Exceptional year items Amortisation Total £m £m £m £m Profit before taxation 83.6 3.2 5.1 91.9Less: Taxation (19.4) (0.9) (0.3) (20.6)Less: Minority Interest (10.5) (0.5) (1.5) (12.5) --------- ---------- ---------- ---------Adjusted profit attributable to equity holders of the parent 53.7 1.8 3.3 58.8 ========= ========== ========== ---------Adjusted earnings per share (pence per share) 118.4p --------- From 1 July 2007 to 31 August 2007 the group bought back and cancelled 1,120,000shares. 6. DIVIDENDS PAID AND PROPOSED 2007 2006 £m £mDeclared and paid during the yearEquity dividends on ordinary shares:Final dividend for 2006: 38p per share (2005 - 33p) 18.1 16.4Interim dividend for 2007: 23p per share (2006 - 18p) 10.8 8.9 ---------- ---------- 28.9 25.3 ========== ========== 2007 2006 £m £mProposed for approval at AGM (not recognised as a liability as at 30 June)Equity dividends on ordinary shares:Final dividend for 2007: 47p per share (2006 - 38p) 21.6 18.8 =========== ========== 7. BUSINESS Combinations On 18 September 2006, London General Transport Services Limited, a wholly ownedsubsidiary of the group, acquired 100% of the share capital of DocklandsMinibuses Limited, a small independent London bus operator, for a total cashconsideration of £2.8m, including expenses. Docklands Minibuses Limited operatesa fleet of approximately 30 vehicles on four TfL contracts. Docklands is acompany incorporated within the United Kingdom with a principal activity of buspassenger transport. On 24 October 2006, Solent Blue Line Limited, a wholly owned subsidiary of thegroup, acquired 100% of the share capital of Marchwood Motorways (Southampton)Limited and Marchwood Motorways (Services) Limited (Marchwood Buses), anindependent bus and coach operator in the Southampton conurbation, for a totalcash consideration of £3.7m, including expenses. Marchwood Buses operates afleet of approximately 51 vehicles and is a franchisee of Solent Blue Line.Marchwood Motorways (Southampton) Limited and Marchwood Motorways (Services)Limited are companies incorporated within the United Kingdom with a principalactivity of bus passenger transport. On 21 December 2006, Meteor Parking Limited, a wholly owned subsidiary of thegroup, acquired 100% of the share capital of PAS Direct Limited and PAS GatwickLimited (PAS) providers of valet parking services at Gatwick airport, for atotal cash consideration of £1.5m, including expenses. PAS operates under twoprincipal brands, PAS and Boomerang, and will be integrated with Meteor'sexisting valet parking business at Gatwick. PAS Direct Limited and PAS GatwickLimited are companies incorporated within the United Kingdom with a principalactivity of aviation services. On 26 February 2007, Meteor Parking Limited, a wholly owned subsidiary of thegroup, acquired 100% of the share capital of Nikaro Limited, a company providingnational specialist keyholding and alarm response services, for a totalconsideration of £2.4m, including expenses and deferred consideration of £0.3m.Nikaro will operate alongside Meteor's existing security services businessextending both the geographic coverage and range of services provided. NikaroLimited is a company incorporated within the United Kingdom with a principalactivity of security services. On 28 June 2007, London General Transport Services Limited, a wholly ownedsubsidiary of the group, acquired 100% of the share capital of Blue TriangleBuses Limited, a small independent bus operator in East London, for a total cashconsideration of £12.8m, including expenses. Blue Triangle operates a fleet ofapproximately 60 vehicles on a variety of contracts. Blue Triangle is a companyincorporated within the United Kingdom with a principal activity of buspassenger transport. The above acquisitions have been accounted for as acquisitions in accordancewith IFRS3. The acquisition balance sheets have been adjusted to reflectprovisional fair values and the goodwill arising has been capitalised as anintangible asset. Intangible assets acquired represent customer contracts of £3.9m. Management believes that the goodwill represents future growth opportunities andcreated value to the group in respect of non-contractual relationships, customerloyalty, and an assembled workforce, for which the recognition of a discreteintangible asset is not permitted. A property valuation has been completed. 8. STATEMENT OF CHANGES IN EQUITY Share Reserve Revalu- Hedging Other Capital Retained Total Minority Total capital for own ation reserve reserve redemption earnings equity interests shares reserve reserve £m £m £m £m £m £m £m £m £m £m At 3 July 2005 61.3 (14.5) - - 0.6 - 53.3 100.7 8.6 109.3Total recognised income and expense - - 12.4 - - - 65.1 77.5 10.2 87.7Dividends - - - - - - (25.3) (25.3) (15.1) (40.4)Arising on shares issued for acquisitions - - - - 1.0 - - 1.0 - 1.0Arising on shares issued for share options 4.3 - - - - - - 4.3 - 4.3Acquisition of own shares - (52.6) - - - - - (52.6) - (52.6) ------ ------- ------- ------- ------- ------- ------- ------ ------- ------At 1 July 2006 65.6 (67.1) 12.4 - 1.6 - 93.1 105.6 3.7 109.3 Total recognised income and expense - - 11.6 0.5 - - 108.6 120.7 16.8 137.5Dividends - - - - - - (28.9) (28.9) (14.7) (43.6)Acquisition of own shares - (55.6) - - - - - (55.6) - (55.6)Share cancellation (0.2) 42.3 - - - 0.2 (42.3) - - -Reserve transfer - (0.2) - - - - 0.2 - - - ------ ------- ------- ------- ------- ------- ------- ------ ------- ------At 30 June 2007 65.4 (80.6) 24.0 0.5 1.6 0.2 130.7 141.8 5.8 147.6 ====== ======= ======= ======= ======= ======= ======= ====== ======= ====== Share capital Share capital represents proceeds on issue of the company's equity, both nominalvalue and share premium. Reserve for own shares The reserve for own shares is in respect of 5,003,926 ordinary shares (9.8% ofshare capital), of which 101,696 are held for directors bonus plans. Theremaining shares were purchased in order to enhance shareholders' returns andare being held as treasury shares for future issue in appropriate circumstances.During the year ended 30 June 2007 the company has repurchased 2,425,000 shares(2006 - 3,204,000 shares) for a consideration of £55.6m (2006 - £52.6m).Following purchase 1,715,000 shares were cancelled. Other reserve The other reserve represents the premium on shares that have been issued to fundor part fund acquisitions made by the group. This treatment is in line withSection 131 of the Companies Act. Hedging reserve The hedging reserve records the movement in value of fuel price derivatives,offset by any movements recognised directly in equity. Capital Redemption Reserve The redemption reserve reflects the nominal value of cancelled shares. 9. PENSIONS Funding position of the group's pension arrangements Rail Non-rail 2007 2006 2007 2006 £m £m £m £mEmployer's share of pension scheme: Liabilities at the end of the year (652.0) (571.7) (404.5) (418.8)Assets at Fair Value 651.8 532.0 380.0 331.3 ------- -------- ------- -------Gross deficit (0.2) (39.7) (24.5) (87.5)Franchise adjustment (2.1) 23.4 - - ------- -------- ------- -------Pension scheme liability (2.3) (16.3) (24.5) (87.5) ------- -------- ------- ------- Pension cost for the financial year Rail Non-rail 2007 2006 2007 2006 £m £m £m £m Service cost 24.4 15.5 7.5 7.8Interest cost on liabilities 20.5 10.8 22.5 19.7Expected return on assets (24.8) (13.9) (24.5) (20.2)Interest on franchise adjustments (1.3) (1.5) - - ------- -------- ------- -------Pension cost 18.8 10.9 5.5 7.3 ------- -------- ------- ------- 10. ANALYSIS OF NET DEBT Hire Purchase Cash and cash /Finance Loan equivalents Loans leases notes Total £m £m £m £m £m 2 July 2005 86.3 (104.0) (45.1) (0.6) (63.4)Cash flow (5.0) (65.8) 4.9 0.1 (65.8)Non-cash movements - - (5.6) - (5.6)Acquisitions (0.9) (0.7) (2.3) (0.1) (4.0) ---------- --------- ----------- --------- --------1 July 2006 80.4 (170.5) (48.1) (0.6) (138.8)Cash flow 48.3 (52.1) 2.2 0.2 (1.4)Acquisitions (0.1) - (4.2) - (4.3) ---------- --------- ----------- --------- --------30 June 2007 128.6 (222.6) (50.1) (0.4) (144.5) ---------- --------- ----------- --------- -------- In 2006 the group transferred in certain assets and liabilities relating to theSoutheastern franchise. The £5.6m non-cash flow movement above is the transferin of debt. 11. STATUTORY ACCOUNTS The board approved the preliminary statement covering the year ended 30 June2007 on 6 September 2007. The financial information set out above does notconstitute the group's statutory accounts for the years ended 1 July 2006 and 30June 2007. The financial information is derived from the group financialstatements for the year ended 30 June 2007. The group financial statements onwhich the auditors have given an unqualified audit report does not contain astatement under section 237(2) or (3) of the Companies Act 1985. The financialstatements for the year ended 30 June 2007 will be sent to the shareholders anddelivered to the Registrar of Companies in due course. They will also beavailable at the registered office of the company, 3rd Floor, 41-51 Grey Street,Newcastle upon Tyne, NE1 6EE during normal business hours or on the company'swebsite, www.go-ahead.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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