Final Results

Press Release

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

FULL YEAR RESULTS FOR THE 12 MONTHS ENDED 29 JUNE 2013

Strong trading in bus; good progress towards £100m bus profit target; overall results slightly ahead of management expectations

Business overview

• Overall results slightly ahead of management expectations

• Record passenger levels across both bus and rail divisions

• Good progress towards bus operating profit target of £100m by 2015/16

• Sector-leading deregulated passenger revenue growth

• Solid revenue growth in rail

• Shortlisted for Thameslink and Crossrail franchise bid competitions

• Maintained full year dividend at 81.0p

• The new financial year has started well, with trading in line with the Board's expectations

Unless otherwise stated, references to operating profit included throughout this statement exclude amortisation and exception items.

Bus operating profit target of £100m by 2015/16 (Target 100) is excluding amortisation and exceptional items.

* Excludes amortisation and exceptional items.

+ Net debt plus restricted cash.

David Brown, Group Chief Executive, commented:

"I am very pleased with the Group's performance this year. We are reporting a set of good results, slightly ahead of the Board's expectations, and are progressing well towards our bus operating profit target.

"At the core of the Group is our bus division, which has performed exceptionally well in the year, delivering record

operating profit of £78.2m, up 11.4%. Increasing our profits ensures that we can continue to invest in the business and improve service quality for our passengers. Once again, we have invested in our bus fleet, spending £45.3m on 251 new buses in the year. This improves customer satisfaction and helps drive growth in passenger numbers.

"Strong take up of our smartcard, 'the key', has continued with over 400,000 cards now in issue and our advancements in mobile-ticketing (m-ticketing) also helped to grow our bus business, generating over £1m of revenue in less than 12 months.

"As our rail franchises near the end of their original terms, performance has become more challenging as the assumptions set out in the franchise bid no longer reflect the current economic conditions. In line with the franchise bid profile, our payments to the Government in the year increased by £85.9m, despite our rail profits falling by £15.7m. The UK railway system is in good health and makes a net contribution to the Government. Franchising works for both the customer and the taxpayer.

"The new financial year has started well, with trading in line with the Board's expectations. In the bus division, we are on course to deliver our £100m target by 2015/16. This year will build on the excellent progress we have made towards this target, driving revenue through our continually innovative products and marketing, and reducing costs by sharing best practice and cost efficiency initiatives across the division. We have great confidence in our ability to deliver this target. We will also continue to assess acquisition opportunities.

"Following a challenging year in the rail industry, we continue to believe in the fundamental strengths of the UK rail market and look forward to the significant opportunities available to the Group over the coming months and years. We are working hard to submit strong bids for the Thameslink and Crossrail franchises, for which we are shortlisted.

"The Group remains in a good financial position with strong cash generation and a robust balance sheet, underpinning the dividend and allowing flexibility to pursue value adding opportunities."

For further information, please contact:

David Brown, Group Chief Executive and Keith Down, Group Finance Director will be hosting a presentationfor analysts at 9.00am today (5 September 2013) at Investec, 2 Gresham Street, London EC2V 7QP,Tel: +44 (0) 20 7597 5970.

A live audio webcast of the presentation will be available on Go-Ahead's website - www.go-ahead.com.The presentation slides will be added to Go-Ahead's website at around 7:30am today.

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Chairman's statement

This is my first report to shareholders following my appointment as Chairman on 25 April 2013 and I am pleased to be reporting good results for the year ended 29 June 2013. Your Group has strong and experienced management, a clear strategy, good values and high integrity, a strong commitment to high standards of health and safety, and considerable opportunity for the future.

I joined Go-Ahead in 2008, as a Non-Executive Director and Chairman of the Audit Committee, and was appointed Senior Independent Director in 2011. Throughout this time, I have been continually impressed by the dedication of our management and staff across the Group, and their commitment to providing high quality and locally focused bus and rail services. I believe in sound corporate governance and openness and transparency in the Boardroom.

A responsible business

As a leading public transport provider, operating our bus and rail companies in a responsible and sustainable way is integral to our success. By encouraging more passengers to use our services, we are strengthening our business and reducing congestion and pollution through reduced car use. Our services also provide essential links to employment, education and leisure and retail services. I am proud to be Chairman of a Group where our success benefits the economy, society and the environment.

A clear strategy

I am taking over as Chairman at an exciting time for the Group. Our objective is to grow shareholder value whilst at the same time recognising the interests of our passengers, employees and other stakeholders.

Your Group has a clear strategy, focused on growing our strong core UK bus division, for which we have established a target to organically grow bus operating profit to £100m by 2015/16. This will be achieved through a combination of revenue growth and cost efficiencies and demonstrates the confidence we have in our local bus businesses.

During the year, the rail market experienced a period of uncertainty when, in October 2012, the Transport Secretary, Patrick McLoughlin, announced that unacceptable flaws had been uncovered in the Department for Transport's rail franchising procurement process. As a result, the franchising timetable was temporarily paused.

I am pleased that the process is now back on course and I continue to believe in the fundamental strengths of the UK rail industry. The Group is committed to maintaining a well-established and significant presence in this market.

Our rail strategy is to continue to improve the quality and operating performance of our current franchises and, building on our proven track record of successfully operating complex franchises that deliver value for passengers and taxpayers, to win new franchises that bring an appropriate balance of risk and return for our shareholders.

Dividend

The Board is committed to at least maintaining the current dividend per share, recognising its importance to the investment decision of many shareholders. Our target of £100m operating profit for our bus business is particularly important, creating a strong underpin for the dividend in a period of some uncertainty for our rail operations. This commitment is further supported by our robust balance sheet and strong cashflows. The Board is proposing a final dividend of 55.5p per share (2012: 55.5p) to maintain the total dividend for the year at 81.0p (2012: 81.0p). The final dividend is payable on 15 November 2013 to shareholders registered at the close of business on 1 November 2013.

Board effectiveness

As Chairman, I am responsible for ensuring that your Board remains effective. I work closely with David Brown, our Chief Executive, to ensure your Board provides the necessary support to the Executive Team. During the year, we carried out a review of Board effectiveness, using independent consultants. Whilst no areas of material concern were highlighted, a number of areas for improvement were identified, including the need for greater debate around strategy, talent management and a more effective Director appraisal process. The requirement for increased time and focus on key issues in Board discussions was also identified.

To ensure I am fully informed, I have set myself the objective of visiting all of our operating companies in my first year as Chairman. I have also sought the views of our major shareholders, which I welcome.

Board and people

Following my appointment as Chairman, Katherine Innes Ker became Senior Independent Director. Katherine joined the Board in 2010 and is Chairman of the Remuneration Committee and a member of the Audit and Nomination Committees.

Adrian Ewer joined the Board as a Non-Executive Director and Chairman of the Audit Committee with effect from 25 April 2013. Adrian is currently Chief Executive Officer of John Laing plc, a post he has held since 2006. Adrian has a strong consumer focus, a flair for strategy and finance and a wealth of experience of major long term contracts, all of which will enable him to provide an important contribution to the Board.

Rupert Pennant-Rea has confirmed his intention to retire at the next Annual General Meeting on 24 October 2013, following over ten years as a Non-Executive Director. I would like to thank Rupert for his longstanding commitment to the Group.

On behalf of shareholders I would like to thank my predecessor, Sir Patrick Brown, who served as Chairman for over ten years. During that time, he successfully steered the Group through some challenging times and, in my view, he got the big decisions right. I would like to thank Sir Patrick for his significant contribution.

On behalf of the Board, I would also like to thank our 23,500 staff for their continuing dedication and hard work to ensure we remain a strong and successful Group.

Conclusion

Looking ahead, I believe we have the right strategy in place to deliver long term sustainable growth and I look forward to working with the Board and Executive Team to build on the Group's successes.

Group Chief Executive's review

I am very pleased with the Group's performance this year. We are reporting a set of good results, slightly ahead of the Board's expectations, and are progressing well towards our bus operating profit target.

The year began exceptionally well with our bus and rail operations forming an integral part of the Olympic Transport Plan. Our staff made a great contribution to what was a fantastic event for London and the UK.

We had many other successes throughout the year despite facing some challenges in both our bus and rail divisions. Our bus businesses faced significant cost headwinds due to the reduction in Bus Service Operators Grant (BSOG) in April 2012 and increased fuel costs. We also experienced some difficult trading conditions in our rail business, delays to the rail franchising timetable and continued uncertainty about the wider economy.

We managed these challenges well and we start our new financial year with a lot to be optimistic about.

Bus

At the core of the Group is our bus division, which has performed exceptionally well in the year, delivering record operating profit of £78.2m, up 11.4%. Increasing our profits ensures that we can continue to invest in the business and improve service quality for our passengers.

Once again, we have invested in our bus fleet, spending £45.3m on 251 new buses in the year. We pride ourselves on having a young and green bus fleet. Our buses have an average age of 7.4 years and, in the year, we increased our fleet of alternative fuel vehicles to 160, having bought 86 hybrids and introduced the first gas buses.

Our deregulated business delivered strong and consistent revenue growth of 7.9%. This was driven by underlying commercial revenue growth in all companies.

Our high quality services, award-winning marketing and innovative customer facing technology enable us to deliver sector-leading passenger revenue growth.

Performance in our regulated operations was also strong, with revenue growth of 12.0% helped by the successful delivery of Olympic contracts in the first half of the year.

Our locally focused approach enables our dedicated management teams to put customers' needs at the heart of their operations, empowering their teams to deliver the highest standards of customer service.

Target 100

In October 2012, we announced our target to organically grow bus operating profit to £100m by 2015/16. We plan to achieve this through a combination of revenue growth and cost efficiencies.

Over a number of years, we have delivered good and consistent revenue growth in our bus division. However, profit has increased at a slower rate. Our target assumes that cost efficiencies will be achieved alongside consistent revenue growth, with the biggest contribution to operating profit growth coming from the deregulated business.

Although we are committed to investing in our networks and growing our business, this target does not rely on a significant uplift in capital expenditure or network expansion. It is about maximising the fundamental strengths of our existing individual businesses and leveraging synergy benefits by benchmarking and sharing best practice across the Group.

How are we doing?

Initial target projections expected first year (2012/13) operating profit to be in line with the previous year, at around £70m, followed by steady growth through subsequent years. This first year was set to be challenging as we were faced with cost headwinds of around £20m due to the reduction of BSOG and increased fuel costs in our both regulated and deregulated bus divisions.

However, I am very pleased to report growth of 11.4% in bus operating profit to £78.2m this year, around £8m ahead of our original expectations. This has been driven by bus division revenue growth of 10.2% and cost savings of £1.0m. This is an impressive achievement and reinforces my confidence in our ability to achieve the target.

What next?

In order to continue on the journey to achieving operating profit of £100m in 2015/16, we need to develop the good work we have begun in driving revenue growth, restricting cost inflation and identifying cost efficiencies. Our key assumptions for the next three years are as follows:

• average annual deregulated revenue growth of 3.5%;

• average annual regulated revenue growth of 2.5%;

• average annual cost inflation of 2.5-3.0%;

• cost efficiency savings of £10m over the next three financial years;

• no significant mileage growth in the regulated and deregulated business; and

• the impact of IAS 19 (revised) will be absorbed into the target.

These assumptions are on an average annual basis which may vary from year to year.

Why is this achievable?

Revenue growth

We believe the strong and consistent growth in our deregulated business is driven by our high quality, value for money services, supported by a number of push and pull factors, discussed in detail in the market review in our annual report. We work hard to attract passengers to our services using our sector leading approach to marketing and customer facing technology, innovative and flexible products and reliable and convenient services.

Strong take up of our smartcard, 'the key', has continued with over 400,000 cards now in issue. Our advancements in mobile-ticketing (m-ticketing) also helped to grow our bus business, generating over £1m of revenue in less than 12 months. In our regulated business, we remain a well-respected, high quality operator with vast experience of tendering for, and winning contracts.

Assumed deregulated revenue growth of 3.5% is lower than recent historic growth rates in the division, which has consistently achieved annual underlying revenue growth of between 4% and 4.5%. Similarly, our regulated business has historically delivered average annual revenue growth well in excess of 2.5% growth.

Cost efficiencies

Whilst we have always focused on our cost base, we have identified areas where cost efficiency can be improved. We are now better at leveraging our position as a large, leading transport operator by effectively benchmarking and sharing best practice across our businesses. In the year, we achieved cost efficiency savings of £1.0m, driven by procurement, staff productivity, fuel and IT infrastructure. In addition to continuing efficiencies in these areas flowing through into following years, we also expect significant savings to be identified in engineering, shared services and insurance.

Rail

The performance of our rail business has remained solid and in line with the Board's expectations.

Early in the year, we delivered key elements of the Olympic Games Transport Plan and we did this extremely well. Southeastern alone was responsible for transporting one in ten of all spectators. At the busiest times up to 25,000 people an hour travelled between central London and the Olympic stadium on our High Speed Javelin trains. This was a fantastic achievement in challenging circumstances.

We continue to lead the field in the industry when it comes to innovative marketing. London Midland got into the Olympic spirit and launched an innovative campaign to reduce fares by 1% for every gold medal won by Team GB during the London 2012 Games. This award winning campaign resulted in 27,000 new customers signing up to our Customer Relationship Management (CRM) database.

Another great achievement in the year was Southern being named Public Transport Operator of the Year at the London Transport Awards. This is testament to the local management team's commitment and dedication to continued high quality, customer-focused service.

As our franchises near the end of their original terms, performance has become more challenging as the assumptions set out in the franchise bid no longer reflect the current economic conditions. In line with the franchise bid profile, our payments to the Government in the year increased by £85.9m, despite our rail profits falling by £15.7m.

During the year, we were delighted to be shortlisted for the Crossrail franchise and were pleased that the Thameslink, Southern and Great Northern (Thameslink) franchise process was restarted.

We also welcomed the Department for Transport's (DfT) announcement in March, proposing extended end dates for the current Southeastern and London Midland franchises as part of the revised franchising timetable. The suggested revised end dates for Southeastern and London Midland are June 2018 and June 2017 respectively. These extensions offer short term stability for our existing rail operations and we look forward to working with the DfT to agree contract terms.

Operating sustainably

This is the first year we have presented a fully integrated report, with sustainability embedded throughout. At Go-Ahead, this approach is integral to our business. Continual focus is given to this area across the Group and our sustainability performance is a permanent item on the Group Board agenda.

For us, taking a responsible and sustainable approach to running our business means operating our buses and trains safely, reducing the impact of our operations on the environment and being totally focused on our customers' needs, as well as investing in and developing our staff and contributing to our local communities and wider society. This approach leaves us better placed to grow our businesses profitably for our shareholders.

Go-Ahead is leading the way in the transport sector and is widely recognised as a sustainable operator. This year, we were proud to be highly commended in the Sir Mervyn Pedelty Award which recognises companies which have made the most significant improvements to their business's sustainability in recent years.

This year has seen a number of other successes. They include the introduction of our first gas buses to the fleet in East Anglia, the launch of a bus division graduate scheme to bring new talent into the Group, receiving Platinum ranking in Business in the Community's Corporate Responsibility Index and achieving Investors in People status. During the year, we launched Go-Learn, our unique educational programme, and made good progress towards our Driving Energy Further target, with a total reduction in CO2 emissions per passenger journey of 15% since the target was launched in 2008.

Outlook

The new financial year has started well, with trading in line with the Board's expectations.

In the bus division, we are on course to deliver our £100m target by 2015/16. This year will build on the excellent progress we have made towards this target, driving revenue through our continually innovative products and marketing, and reducing costs by sharing best practice and cost efficiency initiatives across the division. We have great confidence in our ability to deliver this target. We will also continue to assess acquisition opportunities both in and outside London.

Following a challenging year in the rail industry, we continue to believe in the fundamental strengths of the UK rail market and look forward to the significant opportunities available to the Group over the coming months and years. Our focus this year will remain on delivering high quality services on our existing franchises as well as working hard to submit attractive bids in the franchise competitions for Thameslink and Crossrail.

As well as thinking about the coming year, we need to look further ahead and consider how the transport industry will evolve and develop so we can respond to those changes and remain at the forefront of passenger transport. Our report 'The Future of Transport', published in partnership with Passenger Focus during the year, looked at how everyday patterns of living and working might change and what the consequences of those changes could be over the next ten to 15 years. Go-Ahead is part of that future and there are exciting opportunities ahead for us.

The Group remains in a good financial position with strong cash generation and a robust balance sheet, underpinning the dividend and allowing flexibility to pursue value adding opportunities.

Finance and business review

The Group has delivered a good performance in the year ended 29 June 2013 and remains in a strong financial position. Revenue for the year was £2,571.8m, up £148.0m, or 6.1%, on last year (2012: £2,423.8m), underpinned by strong passenger revenue growth in our bus and rail businesses.

Overview and highlights

Operating profit was slightly ahead of our expectations at £102.5m (2012: £110.2m), down £7.7m, or 7.0%, with an overall operating margin of 4.0% (2012: 4.5%).

Profit before tax for the year reduced by £8.6m, or 10.2% to £75.9m (2012: £84.5m) and adjusted earnings per share were down 1.6% at 139.6p (2012: 141.9p). The adjusted earnings per share reduced by significantly less than the reduction in profit before tax as a higher proportion of profit was derived from our bus business, which is 100% owned by the Group. This reflects the importance of bus earnings to the Group.

Net debt remains low at £90.9m (2012: £91.0m). Adjusted net debt (net debt plus restricted cash) to EBITDA of 1.87x (2012: 1.80x) is comfortably within our target range of 1.5x to 2.5x.

Summary income statement

Revenue and operating profit by division

Bus

Overall bus performance review

Overall, the performance of our bus operations was strong, with underlying commercial revenue growth in all of our businesses. We continue to provide high quality services and to be innovative in our approach to marketing and customer facing technology. Total bus revenue increased by 10.2%, or £70.2m, to £761.5m (2012: £691.3m), with 4.6% from acquisitions.

The bus division delivered record operating profit of £78.2m (2012: £70.2m), increasing in the year by £8.0m, or 11.4%, largely driven by strong underlying revenue growth in and outside London. Overall profit contribution from acquisitions was £2.1m.

Operating profit margin slightly improved on the prior year at 10.3% (2012: 10.2%), despite significantly higher fuel costs and the reduced Bus Service Operators Grant (BSOG).

Acquisitions

Following a number of acquisitions in 2012, there were fewer value adding opportunities available in 2013. One small acquisition made during the year was the purchase of 11 residual Transport for London (TfL) route contracts in Dagenham, including 45 buses, from First Capital East Limited, for a cash consideration of £0.7m.

During the year, our 2012 regulated bus acquisition in Northumberland Park performed well and is now delivering operating profit margins similar to our other London bus operations.

The focus for our 2012 deregulated acquisitions has been to bring these companies up to Group standards, particularly in the areas of reliability, engineering and health and safety, and we are making good progress. We expect them to contribute to profitability during 2013/14.

New businesses are included within acquisitions data until the first anniversary of each entity becoming part of the Group. Subsequently their results are deemed to be like for like.

Deregulated bus operations

All operating companies reported growth in commercial revenue in the year. Revenue was £337.6m (2012: £312.9m), up £24.7m, or 7.9%. Like for like revenue growth was 4.3%, with 3.6% of total growth from acquisitions. Passenger numbers increased by 3.1%, with acquisitions contributing 2.0% and like for like growth of 1.1%. Strong growth in fare paying passengers was once again partially offset by a weaker concessionary performance.

Operating profit was £37.9m (2012: £35.4m), up £2.5m, or 7.1%. Operating margins remained in line with last year at 11.2% (2012: 11.3%). They showed an improvement in the second half due to cost saving initiatives being delivered ahead of plan, and reduced insurance claim costs.

In the second half of the year, we lapped the 4-7% fare increases introduced in April 2012 in response to the reduction of BSOG. This resulted in a more challenging comparative figure as average fare increases in the current year have been more in line with inflation.

* Contract recovery refers to a loss making contract which began in the first half of 2011/12.

We are committed to delivering high quality services and meeting our passengers' needs. We improved our already high levels of punctuality to 91% during the year (2012: 88%), with some operating companies achieving higher than 95%. Our customer satisfaction scores remained high at an average of 90% (2012: 90%).

Regulated bus operations

Our regulated bus operations in London delivered a very strong performance. Revenue grew by 12.0%, or £45.5m, to £423.9m in the year (2012: £378.4m), of which 6.5% was on a like for like basis and 5.5% was from the Northumberland Park depot, acquired in March 2012. Mileage also grew strongly, up 7.3%, reflecting like for like increases of 2.5% and a contribution from Northumberland Park of 4.8%.

Operating profit was £40.3m (2012: £34.8m), up £5.5m, or 15.8%, including a contribution of £2.2m from the Northumberland Park acquisition. During the year, the operating margin of the Northumberland Park depot was brought in line with the rest of our London business.

Operating margins increased to 9.5% (2012: 9.2%), although when adjusting for revenue associated with Olympic Games contracts of £5.6m and operating profit of £1.6m, the underlying margin was 9.2%, consistent with last year. Incremental fuel costs and the impact of the reduction in BSOG have also been mitigated by strong cost control and Quality Incentive Contract (QIC) payments of £9.9m (2012: £6.8m), up £3.1m.

We continue to perform well in the TfL quality league tables, operating 99.5% of our target mileage before traffic congestion losses (2012: 99.6%).

North America

Our 50:50 joint venture with Cook-Illinois continues to operate two contracts in St Louis, Missouri, running around 120 buses. This operation remains cash generative.

Capital expenditure and depreciation

Capital expenditure for the division was £51.3m (2012: £69.0m), the majority of which related to the purchase of new buses. Investment in our deregulated fleet was higher than in 2012, with a spend of £27.9m (2012: £21.5m) on 157 new buses (2012: 126 buses).

Contract wins in our regulated business required £17.4m (2012: £59.2m) to be spent on 94 new buses (2012: 349 buses), £8.4m (2012: £27.1m) of which related to operating leases for 41 new buses(2012: 176 buses). Investment in our regulated fleet was lower than 2012 spend due to the timing of contract renewals.

In total, we spent £45.3m on new vehicles, including £19.8m on 86 hybrid buses, which will improve fuel efficiency.

We have one of the youngest bus fleets in the sector, with an average age of 7.4 years. Depreciation for the division was £45.7m (2012: £40.6m), reflecting the increase in capital expenditure in the previous two years.

Fuel

Bus fuel hedging prices

Our bus fuel hedging programme uses fuel swaps to fix the price of our diesel fuel in advance. Our aim is to be fully hedged for the next financial year three months before the start of that year, at which point we aim to have also fixed at least 50% of the following year and 25% of the year after that. This hedging profile is then maintained on a quarterly basis.

Bus fuel costs

In 2012/13 we consumed around 127 million litres of fuel at a net cost £93.6m, consisting of:

Overall bus outlook

In deregulated bus, we continue to drive revenue growth through market leading products and purchasing options such as smart media, m-ticketing and other innovations, but also through maintaining a high quality, reliable service.

In regulated bus, we remain focused on delivering high quality and cost efficient services for TfL. We expect mileage in the year to be relatively flat.

Investment in our bus operations will continue, with a total capex spend of around £50m expected in 2013/14.

We will continue to look for value adding acquisitions and will drive profitability from our 2012 acquisitions.

We have made good progress against Target 100 and have great confidence in our ability to achieve this by 2015/16. We expect this to be delivered through continuing deregulated revenue growth, a stable regulated business, keeping costs in line with inflation and achieving £10m of cost savings by 2015/16. The impact of IAS 19 (revised) is now included in the target.

Rail

Rail performance review

The rail division has delivered a solid result in the year, in line with our expectations, despite a challenging premium payment profile.

Southeastern and London Midland achieved strong passenger revenue growth, with a slightly weaker performance in Southern. As anticipated, we saw slower revenue growth in the second half of the year across each of the three businesses, as January 2013 fare increases were lower than last year. Passenger journeys across all companies increased significantly in the fourth quarter due to a change in DfT methodology in Travelcard allocations rather than a significant improvement in underlying performance.

Southern's premium payments to the DfT have increased by £45.8m in the year, reflecting the franchise's challenging bid profile, whilst subsidy receipts in Southeastern and London Midland have decreased by £50.1m and £9.0m respectively. After including revenue support, our contribution to DfT was £12.4m compared to net receipts in 2012 of £73.5m, an overall net increase in contributions of £85.9m.

Revenue

Total revenue increased by 4.5%, or £77.8m, to £1,810.3m (2012: £1,732.5m) consisting of:

Premium payments

Southern's premium payments are included in operating costs.

Operating profit

Operating profit in the rail division was £24.3m (2012: £40.0m). Passenger revenue increased by £110.0m but this was offset by increased premium payments, reduced subsidy receipts and increased operating costs through inflation. Operating margins therefore reduced to 1.3% (2012: 2.3%).

Rail bid costs of £3.2m (2012: £2.1m) were lower than originally expected due to the pause in the franchising programme during the year.

Individual franchise performance

Southern

Passenger revenue growth was 5.6% (2012: 7.9%) and passenger numbers increased by 1.1% (2012: 1.2%) when compared to last year. When adjusting for the impact of the Olympic Games, passenger revenue increased by 5.4% and journeys were up 0.8%.

The Southern franchise continues to face challenging trading conditions but remained profitable during the year. As previously indicated, Southern will receive revenue support in 2013/14 and, in preparation, a cost efficiency programme has been introduced. 

Southeastern

The increase in passenger revenue was 8.0% (2012: 10.1%), with passenger numbers up by 4.7% (2012: 1.3%). Excluding the impact of the Olympic Games, passenger revenue grew by 6.7%, with an increase of 3.1% in the number of journeys taken.

Southeastern remains in 80% revenue support. In March 2014, Southeastern will begin a seven month extension period, continuing on the original contract assumptions, which will not be profitable for the Group. Since the beginning of the franchise we have made significant progress in managing the business to deliver value for passengers, employees and shareholders, and look forward to discussing terms for the planned contract extension to June 2018 with the DFT.

London Midland

Passenger revenue grew by 12.1% (2012: 13.3%) in the year and passenger numbers increased by 2.4% (2012: 7.4%). Passenger revenue and journeys were up 11.5% and 2.1% respectively, when adjusting for the impact of the Olympic Games.

Had it been required, the franchise would have been eligible to receive revenue support throughout the year. However, this was not necessary due to London Midland's strong revenue growth in the year. It is the only franchise of its time not to be in receipt of revenue support. London Midland's management has made good progress in addressing the operational issues the franchise experienced and in ensuring compliance with the DfT measures introduced in December 2012. We are pleased to have been given the opportunity to agree extended contract terms with the DfT to June 2017.

Capital expenditure and depreciation

Rail division capital expenditure was £7.2m (2012: £8.3m), lower than the prior year due to fewer franchise commitments falling within the year. Depreciation for the division was £12.4m (2012: £13.2m).

Rail outlook

We expect like for like rail profitability to be lower in 2013/14 due to Southeastern's unprofitable extension period, the challenging trading conditions in the Southern franchise and higher bid costs.

We will continue to drive revenue through targeted marketing campaigns promoting our value for money fares whilst maintaining our focus on cost efficiencies.

In September 2013, we expect the DfT to issue the Invitation to Tender document for the Thameslink rail franchise. Our bid team are working hard to deliver a strong bid, designed to provide benefits to passengers and value for our shareholders.We are also working on our bid for Crossrail.

We also look forward to working with the DfT in the coming months on agreeing contract terms for the planned extensions of our Southeastern and London Midland franchises.

Other financial items

Earnings per share

Adjusted earnings (net profit after tax attributable to members before amortisation and exceptional items) were £59.8m (2012: £60.8m), resulting in a reduction in adjusted earnings per share from 141.9p to 139.6p.

The weighted average number of shares was 42.8 million (2012: 42.9 million), and the number of shares in issue, net of treasury shares, was 42.8 million (2012: 42.9 million).

Dividend

The Board is proposing a total dividend for the year of 81.0p per share (2012: 81.0p). This includes a proposed final payment of 55.5p (2012: 55.5p) payable on 15 November 2013 to shareholders registered at the close of business on 1 November 2013.

Dividends of £34.7m (2012: £34.7m) paid in the period represent the payment of last year's final dividend of 55.5p per share (2012: 55.5p, being the final dividend for 2011) and the interim dividend in respect of this year of 25.5p per share (2012: 25.5p). Dividends paid to non-controlling interests were £6.0m (2012: £12.0m). Dividend cover remained broadly in line with last year at 1.72x (2012: 1.75x).

Summary cashflow

* Operating profit before interest, tax, depreciation, amortisation and exceptional items.

Cashflow

Cash generated from operations before tax was £126.0m (2012: £167.8m). This is a decrease of £41.8m, largely due to an adverse movement in working capital, primarily reflecting timing of payments in rail. Tax paid of £11.1m (2012: £15.7m) comprised payments on account in respect of the current year's liabilities. Net interest paid of £16.9m (2012: £15.1m) is broadly in line with a charge for the period of £16.3m (2012: £16.0m). Capital expenditure, net of sale proceeds, was £23.8m lower in the year at £56.8m (2012: £80.6m) predominantly due to lower levels of new buses required for London contracts. Dividends paid to shareholders amounted to £34.7m.

The Group did not repurchase any shares (2012: 41,880 shares at a consideration of £0.6m for potential LTIP awards that may vest in the future). No shares were issued in the year (2012: nil).

Capital structure

Significant medium term finance is secured through our £275m revolving credit facility, expiring in February 2016, and our £200m sterling bond, expiring in September 2017. At 29 June 2013 $4.8m, equivalent to £3.2m, of our US$10m facility was utilised.

Our investment grade ratings from Moody's (Baa3, stable outlook) and Standard & Poor's (BBB-, stable outlook) remain unchanged.

Net debt

Net debt at 29 June 2013 of £90.9m (2012: £91.0m) comprises the £200m sterling bond; amounts drawn down against the £275m (2012: £275m) five year revolving credit facility of £133.0m (2012: £135.0m); hire purchase and lease agreements of £3.6m (2012: £6.2m); US dollar facility of £3.2m (2012: £3.5m), partly offset by cash and short term deposits of £248.9m (2012: £253.7m) including £208.7m of restricted cash in rail (2012: £205.0m). There were no overdrafts in use at the year end (2012: £nil).

Adjusted net debt (net debt plus restricted cash) was £299.6m (2012: £296.0m), equivalent to 1.87x EBITDA (2012: 1.80x), comfortably within our target range of 1.5x to 2.5x and well below our primary financing covenant of not more than 3.5x.

Net finance costs

Net finance costs for the year were largely in line with the prior year at £16.3m (2012: £16.0m) including finance costs of £17.9m (2012: £17.8m) less finance revenue of £1.6m (2012: £1.8m).

During the period a credit of £0.1m (2012: £0.7m credit) relating to mark to market interest swaps was released directly to income. The average underlying net interest rate for the period was 4.3% (2012: 4.9%).

Goodwill/amortisation

The charge for the year of £10.3m (2012: £9.7m) represents the non-cash cost of amortising goodwill, intangibles including assets associated with pension accounting for the rail franchises, and computer costs.

Taxation

Net tax for the year was £16.0m (2012: £18.0m), equivalent to an effective rate of 21.1% (2012: 21.3%), below the UK statutory rate for the period of 23.75% (2012: 25.5%), reflecting a £2.2m credit in respect of the impact on deferred tax on the change in statutory rate. Without this adjustment to deferred tax, our tax rate would have been around 24% (2012: 25.7%).

Non-controlling interest

The non-controlling interest in the income statement of £6.2m (2012: £11.0m) arises from our 65% holding in Govia Limited which owns 100% of our current rail operations and therefore represents 35% of the profit after taxation of these operations.

Pensions

Operating profit includes the net cost of the Group's defined benefit pension plans for the year of £35.5m (2012: £34.3m) consisting of bus costs of £4.8m (2012: £4.9m) and rail costs of £30.7m (2012: £29.4m). Group contributions to the schemes totalled £46.9m (2012: £51.1m).

Bus pensions

The net deficit after taxation on the bus defined benefit schemes was £36.7m (2012: £17.3m), consisting of pre-tax liabilities of £47.7m (2012: £22.8m) less a deferred tax asset of £11.0m (2012: £5.5m). The increase in deficit was largely due to an increase in the life expectancy assumptions in the year. The pre-tax deficit consisted of estimated liabilities of £617.3m (2012: £558.7m) less assets of £569.6m (2012: £535.9m). The percentage of assets held in higher risk, return seeking assets was 49% (2012: 45%). In June 2013, after considering the results of the triennial valuation of The Go-Ahead Group Pension Scheme with the Pension Trustees, the Group commenced a formal 60-day consultation process with existing members and their representatives to close the defined benefit section to future accrual and to offer these members the opportunity to join the defined contribution section instead. At the time of writing this report, the Group was still considering the feedback it had received during the consultation period before reaching a final decision.

Rail pensions

As the long term responsibility for the rail pension schemes rests with the DfT we only recognise the share of surplus or deficit expected to be realised over the life of each franchise.

We recorded a pre-tax liability of £nil (2012: £7.7m).

IAS 19 (revised)

IAS 19 (revised) becomes effective for the Group in the financial year ending 28 June 2014. Had the IAS been applied to these financial statements the effect would be a reduction in operating profit before tax for the year of £16.6m (comprising £3.8m in bus and £12.8m in rail), £9.3m of which would be attributable to shareholders. This would have resulted in a reduction of 21.7p to basic earnings per share, of which 6.8p would have related to the bus division. There would have been no effect on the Group's cashflow, credit rating or bank covenants had the revised standard been applied.

The impact of IAS 19 (revised) upon the financial year ending 28 June 2014 is expected to be a reduction in operating profit before tax of £17.9m (comprising £4.5m in bus and £13.4m in rail), £10.3m of which will be attributable to shareholders. This is expected to result in a reduction of 24.0p to basic earnings per share, of which 8.1p relates to the bus division.

The table below shows the expected impact of IAS 19 (revised) on the financial results to 28 June 2014, and the theoretical impact on the results to 29 June 2013 had the standard been adopted.

Key risks

The key risks described in the Group's Annual Report for the year ended 29 June 2013 can be summarised as below. More detail can be found on pages 32-37 of the 2013 Group Annual Report and Accounts, available on our website at www.go-ahead.com

Key risks for 2013 can be summarised as:

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.

Political and regulatory framework Changes in Government or to laws, regulations, policies (e.g. concessionary travel), 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.

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 or win new 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.

Ongoing key risks can be summarised as:

Operational:

Catastrophic incident or severe infrastructure failure An incident, such as a major accident, an act of terrorism, an Act of God, a pandemic or severe failure of rail infrastructure, could result in serious injury, disruption to service and loss of earnings.

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 £8.8m.

Information technology (IT) failure or interruption Prolonged or major failure of IT systems could pose significant risk to the ability to operate and trade.

Supply chain management Our suppliers are key to the successful delivery of our services. One of our key suppliers failing to fulfil contractual obligations could result in disruption to our operations.

Financial:

Increased pension scheme funding required The Group participates in a number of pension schemes. Any funding shortfalls in defined benefit schemes could adversely impact the Group's financial position. During the year, the Group complied with the new auto-enrolment legislation and introduced a new section of the pension scheme. This could result in increased contributions.

Fuel cost Fuel is a significant cost to the Group. Both our bus and rail operations are exposed to fuel cost volatility, primarily diesel for buses and electricity for rail traction. Increased prices could adversely impact our financial position.

Insurance and claims The number and magnitude of claims falling within the Group's self-insured limits could impact the financial position of the Group.

Financing risk Loss of liquidity, credit risk on cash investments and interest rate risk could have a negative impact on the financial position of the Group.

Strategic:

Contract work Our London bus business and a small proportion of our bus operations outside London are reliant on running contracted services. Should we fail to retain existing contracts or win new work this could have an adverse impact on Group profitability.

Competition Loss of business to existing competitors or new entrants to the markets in which we operate could have a significant impact on our business.

Inappropriate strategy or investment Inappropriate strategic or investment decisions could adversely impact on the Group's economic and shareholder value.

Environmental:

Environmental risk Our reputation as a responsible operator is a key strength of our business. A failure to maintain our high standards may negatively impact the Group.

Consolidated income statement

for the year ended 29 June 2013

Consolidated statement of comprehensive income

for the year ended 29 June 2013

Consolidated statement of changes in equity

for the year ended 29 June 2013

Consolidated balance sheet

as at 29 June 2013

Consolidated cashflow statement

for the year ended 29 June 2013

Notes to the consolidated financial statements

for the year ended 29 June 2013

1. Segmental analysis

For management purposes, the Group is organised into four reportable segments: Deregulated Bus, Regulated Bus, Rail and Go-Ahead North America. Operating segments within those reportable divisions are combined on the basis of their long term characteristics and similar nature of their products and services, as follows:

The Deregulated Bus division comprises bus operations outside London.

The Regulated Bus division comprises bus operations in London under control of Transport for London (TfL).

The Rail operation, Govia, is 65% owned by Go-Ahead and 35% by Keolis and comprises three rail franchises: Southern, Southeastern and London Midland. The registered office of Keolis (UK) Limited is in England and Wales.

The Go-Ahead North America division comprises a 50% investment in a US school bus operation. The Group's share of the profit of this division is currently £nil (2012: £nil), and it is therefore not shown separately within the tables below but aggregated within Deregulated Bus.

The information reported to the Group Chief Executive in his capacity as chief operating decision maker does not include an analysis of assets and liabilities and accordingly IFRS 8 does not require this information to be presented. Segment performance is evaluated based on operating profit or loss excluding amortisation of goodwill and intangible assets and exceptional items.

Transfer prices between operating segments are on an arm's length basis similar to transactions with third parties.

The following tables present information regarding the Group's reportable segments for the year ended 29 June 2013 and the year ended 30 June 2012.

Year ended 29 June 2013

At 29 June 2013, there were non-current assets of £2.3m (2012: £3.4m) and current assets of £0.4m (2012: £0.3m) relating to US operations, being made up of equity accounted investments of £nil (2012: £0.7m) and loans of £2.7m (2012: £3.0m) in Go-Ahead North America, a 50:50 joint venture with Cook-Illinois which commenced trading in August 2010. For the year ended 29 June 2013, segment revenue for this venture was £2.2m (2012: £2.4m) and segment profit was £nil (2012: £nil).

During the year ended 29 June 2013, segment revenue from external customers outside the United Kingdom was £2.2m (2012: £2.4m), which related entirely to the Go-Ahead North America joint venture.

Year ended 30 June 2012

2. Group revenue

3. Operating costs (excluding amortisation)

* The total lease and sublease payments recognised as an expense (excluding rail access charges) are made up of minimum lease payments of £408.2m (2012: £375.3m), net of sublease payments of £13.3m (2012: £15.0m) relating to other rail leases.

** The total lease and sublease payments recognised as an expense are made up of minimum lease payments of £847.6m (2012: £781.2m), net of sublease payments of £13.3m (2012: £15.0m) relating to other rail leases.

The fee relating to the audit of the financial statements can be analysed between audit of the Company's financial statements of £0.2m (2012: £0.1m) and audit of subsidiaries' financial statements of £0.4m (2012: £0.4m).

During the year, £0.7m (2012: £0.3m) was also paid to other 'Big 4' accounting firms for a variety of services.

4. Staff costs

The average monthly number of employees during the year, including Directors, was:

The information required by Schedule 5 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 is provided in the Directors' remuneration report.

Long Term Incentive Plans

The Executive Directors participate in The Go-Ahead Group Long Term Incentive Plan 2005 (LTIP). The LTIP provides for Executive Directors and certain other senior employees to be awarded nil cost shares in the Company conditional on specified performance conditions being met over a period of three years. Refer to the Directors' remuneration report for further details of the LTIP.

The expense recognised for the LTIP during the year to 29 June 2013 was less than £0.1m (2012: £0.5m).

The fair value of LTIP options granted is estimated as at the date of grant using a Monte Carlo model, taking into account the terms and conditions upon which the options were granted. The inputs to the model used for the options granted in the year to 29 June 2013 and 30 June 2012 were:

The weighted average fair value of options granted during the year was £10.96 (2012: £11.72).

The following table shows the number of share options for the LTIP:

None of the options were exercisable at the year end and the weighted average exercise price of the options is £nil (2012: £nil).

The weighted average remaining contractual life of the options is 1.53 years (2012: 1.46 years). The weighted average share price of options exercised was n/a (2012: £14.09).

Deferred Share Bonus Plan

From the financial year 30 June 2012, the Executive Directors were able to participate in the Deferred Share Bonus Plan (DSBP). The DSBP provides for Executive Directors to be awarded shares in the Company conditional on the achievement of profit before tax targets that are higher than the profit targets set for the annual performance-related cash bonus. The shares are deferred over a three year period. Refer to the Directors' remuneration report for further details of the DSBP.

The expense recognised for the DSBP during the year to 29 June 2013 was less than £0.1m (2012: £nil).

The fair value of DSBP options granted is estimated as at the date of grant using a Monte Carlo model, taking into account the terms and conditions under which the options were granted. The inputs to the model used for the options granted in the year to 29 June 2013 and 30 June 2012 were:

The weighted average fair value of options granted during the year was £12.32 (2012: n/a).

The following table shows the number of share options for the DSBP:

None of the options were exercisable at the year end and the weighted average exercise price of the options is £nil (2012: n/a).

Directors' discretionary deferred share awards

On 17 November 2009 the Company awarded a total of 6,996 ordinary shares to Directors of the Group. The stock was at no cost to the Directors and restrictions limit the sale or transfer of these shares until they vest, which occurs at the end of a three year period. The shares were held in a trust until they vested. During the year ended 30 June 2012, the shares exercised had vested in full following the retirement of a Director and in accordance with the 'good leaver' provisions of the Plan.

The expense recognised for the Directors' discretionary deferred share awards during the year to 29 June 2013 was £nil (2012: less than £0.1m).

Share incentive plans

The Company operates an HM Revenue & Customs ('HMRC') approved share incentive plan, known as The Go-Ahead Group plc Share Incentive Plan (SIP). The SIP is open to all Group employees (including Executive Directors) who have completed at least six months' service with a Group company at the date they are invited to participate in the plan.

The SIP permits the Company to make four different types of awards to employees (free shares, partnership shares, matching shares and dividend shares), although the Company has, so far, made awards of partnership shares only. Under these awards, the Company invites qualifying employees to apply between £10 and £125 per month in acquiring shares in the Company at the prevailing market price. Under the terms of the scheme, certain tax advantages are available to the Company and employees.

Sharesave Scheme

The Group previously operated an HMRC approved savings-related share option scheme, known as The Go-Ahead Group plc Savings-Related Share Option Scheme 2003 (Sharesave Scheme). The Sharesave Scheme was open to all Group employees (including Executive Directors) who had completed at least six months' service with a Group company at the date they were invited to participate in the scheme. No invitations have been made during the current or prior year and no accounts remain outstanding.

5. Finance revenue and costs

6. Taxation

a. Tax recognised in the income statement and in equity

Tax relating to items charged or credited outside of profit or loss

b. Reconciliation

A reconciliation of income tax applicable to accounting profit before tax and exceptional items at the statutory tax rate to tax at the Group's effective tax rate for the years ended 29 June 2013 and 30 June 2012 is as follows:

c. Deferred tax

The deferred tax included in the balance sheet is as follows:

The deferred tax included in the Group income statement is as follows:

The UK Government has announced its intention to reduce the UK corporation tax rate to 20% by 1 April 2015.

A reduction in the UK corporation tax rate from 24% to 23% came into effect on 1 April 2013. Finance Bill 2013 was substantively enacted on 2 July 2013 and given Royal Assent on 17 July 2013, giving effect to a 21% rate effective from 1 April 2014 and 20% rate effective from 1 April 2015.

As the 21% and 20% rates had not been substantively enacted at the balance sheet date they have no effect on current or deferred tax liabilities in these accounts. However, as the 23% rate was substantively enacted at the balance sheet date, this rate has been applied to the deferred tax liabilities/assets at the year end.

If the reduction to 20% had been enacted by 29 June 2013 the Group's deferred tax liability would have been reduced by a further £6.8m to £45.7m and the deferred tax asset would have been reduced by a further £1.4m to £9.6m.

7. Earnings per share

Basic and diluted earnings per share

The weighted average number of shares in issue excludes treasury shares held by the Company, and shares held in trust for the LTIP and DSBP arrangements.

No shares were bought back and cancelled by the Group in the period from 29 June 2013 to 4 September 2013.

The effect of taxation and non-controlling interests on exceptional items and amortisation is shown below for each of the periods.

Adjusted earnings per share

Adjusted earnings per share is also presented to eliminate the impact of goodwill and intangible amortisation and exceptional costs and revenues in order to show a 'normalised' earnings per share. This is analysed as follows:

Year ended 29 June 2013

Year ended 30 June 2012

8. Dividends paid and proposed

9. Property, plant and equipment

The net book value of leased assets and assets acquired under hire purchase contracts is:

Additions and acquisitions during the year included £nil (2012: £4.5m) of rolling stock and £nil (2012: £0.3m) of plant and equipment under finance leases and hire purchase contracts.

10. Intangible assets