FULL YEAR RESULTS FOR THE YEAR ENDED 27 JUNE 2015

Press release

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

FULL YEAR RESULTS FOR THE YEAR ENDED 27 JUNE 2015

Significant and successful year;good overall performance

Highlights

Financial strength

• Overall profits up 11.1%, slightly ahead of our expectations as a result of a stronger performance in rail

• Record bus profits, up 6.6%

• Improvement in rail profits albeit at historically low margins

• Continued strong free cashflow and robust balance sheet

• Proposed full year dividend up 6.5% to 90.0p in line with our progressive policy

Strategic and operational progress

• Continued progress in bus division with sector-leading customer satisfaction in regional bus operations

• Expect to deliver £100m of bus operating profit in 2016/17, a year later than originally anticipated

• Record passenger numbers in rail division

• Group's net increase in contributions to the DfT in the year was £191.9m, up to £255.9m

• Challenging start in GTR - working closely with industry partners to improve performance and manage contract changes

• Submitted bids for Northern and TransPennine Express rail franchises and shortlisted for the London Overground contract

• Continue to explore selective opportunities in overseas markets

Financial summary:

Notes:

* Excludes amortisation, goodwill impairment and exceptional items

+ Adjusted for the impact of IAS 19 (revised)

David Brown, Group Chief Executive, commented:

"I am pleased with the Group's financial performance in the year; with overall operating profit of £114.7m, slightly ahead of our expectations.

"Through our regional bus operations, Go-Ahead has continued to keep people in cities and towns across the UK moving over the last three decades and we have heavily invested in our operations over this time. In the last five years alone, we have invested over £180m in our regional bus services. This focus on delivering high quality bus operations has improved services for our passengers and we are proud of our high levels of customer satisfaction, which remain the best in the sector at 90%.

"Despite facing a number of headwinds in the year, including lower passenger volumes and congestion in London as a result of infrastructure improvement works, we were pleased to deliver another year of record bus profits. We now expect to deliver £100m of bus operating profit in 2016/17, a year later than originally anticipated. We expect some of the headwinds experienced over the past year to reverse over time and this, along with reduced fuel costs, gives us continued confidence in the prospects for the bus division.

"We continue to play a key role in the delivery of the Government's £6.5bn Thameslink Programme. While an investment programme of this scale will inevitably result in disruption while infrastructure improvements are made, it will ultimately improve services for passengers in the long term. During the year we have worked closely with our industry partners to minimise the impact of this disruption and we will continue to focus our efforts on delivering improvements to services. Overall for rail, the Board's expectations remain unchanged as a stronger performance in Southeastern continues to offset underperformance in GTR.

"During the year, we submitted bids for the Department for Transport's Northern and TransPennine Express rail franchises and were pleased to be shortlisted for TfL's London Overground contract. We look forward to hearing the outcome of these franchise competitions. Overseas, we await the result of a bid submitted in the Singaporean bus market, while our business development team continues to explore other opportunities for the Group, particularly in the German rail market.

"At Go-Ahead we are committed to being a responsible business. Our net increase in contributions to the DfT in the year was £191.9m. Our continuous efforts to improve environmental performance throughout all of our operating companies have contributed to the achievement of our best ever Carbon Disclosure Project score. As a socially responsible organisation, transparency and openness are important to us. Go-Ahead is one of only two FTSE 350 organisations to have been awarded the Fair Tax Mark in recognition of our responsible approach to UK corporation tax. We were also pleased to be recognised by the Prompt Payment Code during the year for our commitment to our suppliers.

"The Group remains in good financial position, with strong cash generation and a robust balance sheet supporting our progressive dividend policy and allowing flexibility to pursue value-adding opportunities. This strong position underpins the Board's decision to propose an increased final dividend for the year, in line with our dividend policy."

ENDS

For further information, please contact:

The Go-Ahead Group

David Brown, Group Chief Executive 020 7799 8971

Keith Down, Group Finance Director 020 7799 8973

Peter Russell, Interim Head of Investor Relations 07775 420 996

Citigate Dewe Rogerson 020 7638 9571

Michael Berkeley/Chris Barrie/Angharad Couch

David Brown, Group Chief Executive and Keith Down, Group Finance Director will be hosting a presentation for analysts at 9.00am today 3 September 2015 at Investec, 2 Gresham Street, London EC2V 7QP.

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 www.go-ahead.com at around 7:30am today.

Chairman's statement

"The effective stewardship of the Group is enhanced by the wealth of experience and range of expertise of its members. Together, we are committed to building a stronger Group for the future and delivering long term sustainable value to our shareholders and improving services for our customers."

dear shareholder

This has been another significant year for Go-Ahead and the Group remains well placed to manage the challenges we face and embrace the opportunities that arise. During the year, our strategy, underpinned by our stable business model, has delivered increased shareholder value.

Performance

The Group delivered good financial results in the year. Our bus division achieved its highest ever operating profit, despite a number of headwinds, and our rail division exceeded the Board's initial expectations.

The first half of the year saw the start of significant new rail contracts, including GTR, the UK's largest franchise. This has faced operational issues and constraints associated with the Thameslink Programme from the outset.

Demanding economic and operating conditions in some of our bus markets have resulted in a more testing trading environment and the Board now expects to achieve the £100m bus operating profit target in 2016/17, a year later than the initial target date.

Dividend

The Group is in a good financial position with strong cash generation and a robust balance sheet, supporting our progressive dividend policy. We are committed to this policy, recognising the importance of the dividend to the investment decision of many of our shareholders.

The Board was pleased to increase the full year dividend by 4.3% in the last financial year and, this year, proposes an increase of 6.5% to 90.0p per share (2014: 84.5p). A final dividend of 63.4p per share (2014: 59.0p) is proposed, payable on 13 November 2015 to shareholders registered at the close of business on 30 October 2015.

The Group's dividend policy is to maintain dividend cover of approximately two times adjusted earnings, on a pre IAS19 (revised) basis.

Governance

Your Board believes that the effective stewardship of the Group is enhanced by the wealth of experience and range of expertise of its members. Together, we are committed to building a stronger Group for the future and delivering long term sustainable value to our shareholders and improving services for customers.

Our long-held view is that open and transparent disclosure is of vital importance and we take our responsibility to present fair, balanced and understandable information very seriously. Once again, our commitment to best practice reporting was recognised at the 2014 Investor Relations Society Awards, reflecting the communication of our investment proposition and our use of digital reporting channels.

We continue to comply with all of the provisions of the UK Corporate Governance Code, as outlined in our corporate governance report on pages 52 to 85 in the Annual Report.

During the year, in accordance with best practice, we initiated a formal tender process for our external auditor. At our AGM in October 2015, the Board will propose that Deloitte LLP will replace Ernst & Young LLP as the Group's statutory auditor. A process of transition from Ernst & Young LLP to Deloitte LLP has been agreed.

Following the year end, we consulted with major shareholders regarding changes to our executive remuneration policy and, in particular, our long term incentive arrangements. The proposed changes, which were developed to increase alignment between our strategy and the way we measure and reward performance, include the introduction of customer satisfaction as a long term performance measure. We know that providing high levels of customer service and a good customer experience is fundamental to our success as a leading transport operator. We believe these changes are a positive step in better connecting the remuneration of executive directors to customer experience.

In July 2015, it was announced that Keith Down, Group Finance Director, would be stepping down from the Board in late 2015 to take up a new external role.

I would like to thank Keith for the significant contribution he has made in his four years with the Group. The process to appoint a successor is well underway. There have been no other changes to the composition of the Board.

Board effectiveness and evaluation

In my role as Chairman, I strive to ensure your Board is highly effective and believe that regular and thorough review and evaluation aid continual development of the Board and its members.

This year the Board made good progress in delivering against its 2014/15 priorities and has clear objectives for the year ahead, which are detailed on page 53 in the Annual Report.

In addition to an internal Board evaluation, led by the Group Company Secretary, in the first half of the year, an independent external evaluation of the Board took place later in the year. Building upon the internal review, the theme of this review was forward-looking and developmental. The review found good Board dynamics, open dialogue and constructive challenge, with a high standard of governance, and made a number of recommendations, including greater top-down consideration of risk and stakeholder management.

Our people are stronger together

Go-Ahead's people are its most valuable asset. During my regular visits to our operating companies, and through my attendance at the Group's management conferences, I am continually impressed by the professionalism and dedication of our teams who are committed to delivering good services for our passengers, from the executive management cascading all through the organisation.

Go-Ahead has always operated within a devolved management structure. We believe this is a real strength for the Group, empowering our people to make local decisions and respond quickly to the changing needs of the passengers and communities we serve. We trust our experienced management teams to run our companies effectively, while having robust processes in place to ensure accountability back to executive directors and the Board.

On behalf of the Board, I would like to thank all of our people who work hard every day to provide good services to our passengers and create value for our shareholders.

A positive contribution

As a commercial organisation, our aim is to generate value for our shareholders while fulfilling our wider responsibilities to other stakeholders. We support economic growth, enabling over one billion passenger journeys each year, carrying millions of people to work, schools and colleges, shops and leisure activities every day. We have over 26,000 UK employees and also make a significant contribution to the economy through the taxes we pay. We are proud to be one of only two FTSE 350 organisations to be certified with the Fair Tax Mark for responsible tax behaviour. Go-Ahead's companies play a key role in the communities they serve and are vital to the future of UK public transport.

Looking forward

The year ahead will bring both challenge and opportunity. We have a strong management team in place and I am confident that together we will create further value by continuing to deliver against the Group's strategic priorities.

As a Group, our focus remains on delivering the best possible experience for our customers and the coming year will see the introduction of new initiatives across our businesses to further enhance the customer experience.

The Group has a stable portfolio of businesses upon which to build and a clear strategy for the future. I look forward to the next stage of Go-Ahead's journey.

Group Chief Executive's review

"Collaboration and partnership working are particular strengths for Go-Ahead. We have always worked closely with our key strategic partners and are continually striving to strengthen these relationships."

Stronger Together

This year, once again, the Group has achieved a considerable amount; making progress towards our longer term goals. We have faced challenges as well as successes. These experiences leave us better placed for the future.

Creating value for our stakeholders

Through our regional bus operations, Go-Ahead has continued to keep people in cities and towns across the UK moving over the last three decades. During this time we have become an integral part of the local communities that we serve and have contributed to economic growth in these areas, working closely in partnership with local authorities. We always strive to improve services for our passengers and are proud of our high levels of customer satisfaction, which remain the best in the sector at 90%.

We believe in investing in our operations to provide high quality services. Over the last five years, we have invested over £180 million in our regional bus services, largely placed with UK-based manufacturing and construction businesses. This investment in our fleet and facilities helps us attract and retain customers by improving accessibility, comfort, convenience and the environmental sustainability of our services. Successive governments have recognised the contribution of the UK's cost-effective and flexible regional bus industry, in which Go-Ahead's businesses play a prominent role.

As the largest operator of buses in London, Go-Ahead plays an important role in delivering the capital's integrated passenger transport network. Running some 2,500 buses every weekday and enabling almost half a million passenger journeys each year, we help to keep London moving.

The rail franchising system brings great value to the UK taxpayer. The industry contributes over £2bn through net premium payments, more than funding the annual maintenance requirements for the national network. In the year, our operations have continued to create value for the UK economy, with our rail operations directly contributing £255.9m, an increase of £191.9m on last year; 10 times the profits generated by our rail division. Over the life of its six year franchise, Southern generated over £600m for the Government through its efficient running of the operation.

In addition to the financial contribution we make, we are also committed to improving services for our passengers. Over the next three years 1,400 new train carriages will be introduced across our rail network, providing more comfortable, reliable and efficient services. We are collaborating with our industry partners to deliver the benefits associated with the £6.5bn Thameslink Programme. Notwithstanding a number of planned infrastructure projects being postponed, such as electrification on certain routes, the Government's £38bn investment plan remains one of the most transforming and ambitious in the history of our country's railway. Increased rail infrastructure investment is essential to improve services and, while an investment programme of this scale will inevitably result in disruption while infrastructure improvements are made, it will deliver considerable benefit in the long term. We understand the disruption this has on passengers and are working closely with Network Rail to minimise the impact of this.

Following the general election in May 2015, the new Government has proposed the introduction of a Bus Bill. At this stage, there is very little clarity on what this may contain, how it may be linked to the Devolution Bill, or the impact it may have on existing bus operators. Go-Ahead continually engages with the Department for Transport (DfT), MPs and other local stakeholders to help inform the debate. The concept of devolution is not unfamiliar to us as we have always operated within a devolved management structure. We believe partnership working brings about the best results for passengers and taxpayers and we continue to work closely with the local authorities in the areas where we operate.

Our performance

I am pleased with the Group's financial performance in the year. Overall, operating profit of £114.7m (2014: £103.2m) exceeded our initial expectations and rose 11.1% from the previous year.

We saw another year of record bus profits with operating profit for the division up 6.6% to £89.0m (2014: £83.5m). This was marginally behind the Board's expectations, as passenger revenue growth in our regional bus operations slowed, particularly in the second half, and Quality Incentive Contract (QIC) revenue declined in our London bus business due to increased congestion and roadworks. As a result, we now believe that we will achieve £100m of bus operating profit in 2016/17, one year later than originally expected.

Our rail division delivered stronger than expected profitability of £25.7m (2014: £19.7m) up 30.5% on the previous year, despite the operational challenges faced during the year. This strong performance was helped by contract management benefits towards the end of the Southern franchise.

Bus

Our regional bus operations delivered operating profit of £46.7m (2014: £41.9m), up 11.5%, and our London business contributed £42.3m (2014: £41.6m), a rise of 1.7% in the year.

While the majority of our regional operations saw growth in passenger journeys, passenger growth in our regional bus business overall was down 1.4% as a result of continuing economic weakness in the north east and the impact of roadworks on our services in Oxford and Brighton. In particular, in Oxford, ongoing long delays due to congestion are deterring bus travel.

In London, we maintained our market share and contract revenue increased in line with our expectations. However, high levels of roadworks and congestion associated with public realm improvements and the cycle super highway in the capital, impacted our QIC revenue significantly, dropping to £4.6m (2014: £9.1m) in the year, predominantly in the second half.

We are currently operating in an environment of low inflation, with low revenue growth and some upward pressure on the cost base. Some headwinds, such as the reduction in QIC revenue and specific issues in some of our regional areas, are impacting our business in the short term. Looking to the future, TfL has stated it expects bus reliability to reach record levels by 2017, which should result in improvements in our QIC revenue. Pressure on some of our regional bus services due to roadworks will ease when infrastructure programmes are completed, presenting us with the potential for revenue growth and an improved operating network for the future. In addition, Government forecasts estimate that inflation will rise at a time when some of our costs, such as fuel, will reduce. All of these factors give us confidence in the prospects for our bus division.

Rail

Under its new direct award contract, Southeastern delivered a strong financial performance in the year to 27 June 2015, with an increase in revenue of 8.5% year on year. This strong performance more than offset the weakness in GTR, which reported a loss in the year due to additional costs incurred as it sought to rectify the issues at the beginning of the contract in September 2014. These issues were quickly identified by GTR's management team and improvement plans were put in place. Investment has been made in temporary rolling stock and permanent drivers, with the largest ever driver training programme in the UK currently underway.

Over the coming years we will be working hard to deliver a comprehensive programme of works, within a complex contractual arrangement, and a franchise which has inevitably changed from the original bid. GTR will employ the normal industry contract remedies to help mitigate these changes over time. We are heavily reliant on third parties, which have their own targets, budgets and deadlines to meet, but we strongly believe that working in partnership is vital to the successful delivery of the Thameslink Programme.

Although this franchise will continue to be challenging and we expect margins to be impacted in the near term, our expectations for the life of the franchise remain unchanged.

London Midland's performance continued to improve throughout the year, with the franchise making a modest contribution to profit. Southern performed in line with our financial expectations and, following the year end, it was successfully integrated into GTR. Integrating two large franchises is an enormous project and I would like to thank everyone involved for their commitment and professionalism through this process.

Exploring opportunities

We have always considered growth prospects in a range of markets, looking for value adding opportunities that complement our portfolio, in line with our measured approach to risk.

During the period, we submitted bids for the DfT's Northern and TransPennine Express rail franchises and were pleased to be shortlisted for TfL's London Overground contract. Over the next two years, there are a number of other UK rail franchise opportunities which we will also consider. We are bidding for contracts in the German regional rail market and have a small bid team based in Berlin. Germany has the largest rail market in Europe and it is amongst the most liberalised. The regional passenger rail market generates annual revenue of around €9.6bn and operates more than 50bn passenger kilometres a year.

We look forward to submitting a second contract bid in the Singaporean bus market, which has many similar features to the London bus market, where we are the largest operator. At almost half the size of the London market, this presents an attractive opportunity for the Group. Annually, over one billion passenger journeys are made on Singapore's bus network. We have gained valuable experience and knowledge of this market through our bidding activity to date.

As with all development activity, we undertake careful analysis to establish which opportunities best complement our portfolio, match our risk appetite and offer attractive returns for our shareholders.

Our people

Our 26,000 people remain the backbone of our business and are vital to our success as a Group. Our employees reward us with hard work and dedication around the clock and in return we strive to make Go-Ahead a great place to work. We understand the importance of reward and recognition in all its forms and also believe in providing opportunities for the development of our people.

As we reported last year, a lot of attention has been placed on succession planning and talent management across the Group. At all levels of the businesses we aim to attract, retain and develop high calibre individuals. We have built on the progress made and throughout the year have developed our talent management and graduate programmes and launched The Academy, which offers online training and learning materials to all our people.

Our local teams are well placed to understand their local markets and individually they bring great value to the Group, but we are stronger together and are consequently greater than the sum of our parts. Our operating companies are encouraged to share what works, coming together to build a stronger Group. Our local managing directors, who are accountable for and take ownership of their businesses, embrace this approach.

Our approach

Our strategy is to increase the profitability of our existing business and to grow the Group to deliver sustainable shareholder value. In order to deliver against our strategy, we ensure the sustainability of our business model for the long term. Corporate responsibility is at the heart of what we do and we avoid short term solutions in all areas of our business. We believe that this approach is the best way to achieve sustainable profitability.

Our approach is underpinned by our strategic priorities of being a leading employer which provides high quality, locally-focused passenger transport services, running our companies in a responsible manner, and with strong financial discipline.

We believe firmly that public transport is best delivered through working in partnership, with strong alliances between operators and local authorities. Collaboration and partnership working are particular strengths for Go-Ahead. We have always worked closely with our key strategic partners and are continually working to strengthen these relationships. Our devolved structure, with local management teams making local decisions, combined with the flexibility inherent in commercial operations, helps us to tailor our services to meet our customers' changing needs. Being a business with a devolved structure makes it natural for us to understand and support the principle of greater local accountability in political structures.

Go-Ahead is an integral part of the UK public transport industry and we believe in offering wider transport solutions. We work closely with our industry partners and believe that together, we can build a better future for UK passenger transport.

We are committed to being a responsible business. Our continuous efforts to improve environmental performance throughout all our bus and rail operating companies have contributed to the achievement of our highest ever Carbon Disclosure Project score. This recognises the ongoing commitment to environmental responsibility and sustainability, which saw the Group being awarded the Carbon Trust Standard triple accreditation for our achievements in carbon, water and waste reduction.

As a socially responsible organisation, transparency and openness are important to us. A fair tax system is to the benefit of everyone and is crucial to support a vibrant economy. We are pleased to be one of only two FTSE 350 organisations to have been awarded the Fair Tax Mark in recognition of our responsible approach to UK corporation tax.

All of our stakeholders are important to us. Demonstrating our commitment to our suppliers, we were pleased to be recognised by the Prompt Payment Code during the year.

Outlook

The new financial year has begun with similar trends to the second half of 2014/15.

We expect to deliver £100m of bus operating profit in 2016/2017, a year later than originally anticipated. We would expect some of the headwinds which we have experienced over the past year to reverse over time and this, along with reduced fuel costs, gives us continued confidence in the prospects for the bus division.

In our rail division, the Board's expectations remain unchanged as a stronger performance in Southeastern continues to offset underperformance in GTR. Our focus will remain on delivering improvements for customers and minimising disruption caused by large scale infrastructure work. We continue discussions with the DfT regarding the extension of the London Midland franchise from March 2016 to October 2017 and hope to agree terms shortly.

We look forward to hearing the outcome of the Northern and TransPennine Express rail franchise competitions, and submitting our bid for TfL's London Overground contract in the autumn. Overseas, we await the outcome of a bid submitted in the Singapore bus market and our business development team continues to explore other opportunities for the Group, particularly in the German rail market.

As a Group, our purpose is to serve our customers. We will continue to invest in our services to improve the experience of every customer that travels with us.

The Group remains in a good financial position, with strong cash generation and a robust balance sheet supporting our progressive dividend policy and allowing flexibility to pursue value-adding opportunities. This strong position underpins the Board's decision to propose an increased final dividend for the year, in line with our dividend policy. 

business review - Bus

Go-Ahead is a leading bus operator in the UK both in and outside London. Around two million passenger journeys are made on our services every day.

Our strategy

Regional bus

Our strategy is to grow our share of the regional UK bus market organically and through value adding acquisitions. We aim to improve operating profit margins by driving revenue growth and achieving cost efficiencies. Our long-standing commitment to delivering high quality and value for money services to our local markets, combined with our leading approach to marketing, smart-ticketing and innovative solutions, will remain key to revenue generation, whilst cost savings will be achieved through benchmarking, sharing best practice and the introduction and development of cost efficiency initiatives.

London bus

Our strategy is to maintain our sector leading performance and market position through strong and effective management, providing high quality and cost efficient operations whilst seeking expansion through additional contract wins and value adding acquisitions. A stable contract base, inflationary revenue growth and cost efficiencies contribute towards London bus strategy.

Our target to organically grow bus operating profit to £100m by 2015/16 is now expected to be achieved in 2016/17.

bus overview

Unless otherwise stated, references made to operating profit throughout this report exclude amortisation, goodwill impairment and exceptional items.

Overall bus performance review

Total bus revenue increased by 2.2%, or £17.3m, to £817.8m (2014: £800.5m). The bus division delivered operating profit of £89.0m (2014: £83.5m), increasing by £5.5m, or 6.6%, in the year, resulting in a rise in operating profit margin of 0.5ppts to 10.9%. This performance was slightly behind the Board's expectations for the year.

Regional bus operations

Regional bus revenue was £359.9m (2014: £350.8m), up £9.1m, or 2.6%, with lower growth in the second half of the year. Overall, our regional bus operations saw similar trends in commercial and concessionary revenue and journey growth in the period. The decline in passenger numbers of 1.4% for the full year and 2.2% in the second half is a result of ongoing weakness in the north east economy, as well as roadworks in Oxford and Brighton significantly impacting our services in those areas, reducing passenger travel.

Operating profit in the regional bus division was £46.7m (2014: £41.9m), up £4.8m, or 11.5%, and operating margins increased to 13.0% (2014: 11.9%). Insurance claim costs improved slightly for the year, with some reversal in the second half, as we continued to focus on accident prevention and minimising claims, including historic incidents. We also saw reduced fuel costs, reflecting a reduction in hedge price. Bid costs of £1.3m were incurred in pursuing opportunities in the Singaporean bus market.

A charge of £4.9m was recorded in the year, relating to impairment of goodwill in our Go East Anglia bus operations.

London bus operations

London bus revenue grew by 1.8%, or £8.2m, to £457.9m in the year (2014: £449.7m). Growth was impacted by the reallocation of the Bus Service Operators Grant (BSOG). Excluding BSOG, London bus revenue growth was 0.6%. Mileage reduced by 0.9% due to contract losses in the first half of the year, with the impact lessened by contract gains in the second half of the year.

Operating profit in the London bus division was £42.3m (2014: £41.6m), up £0.7m, or 1.7%. Operating margins remained broadly similar at 9.2% (2014: 9.3%), down 0.1ppts on prior year margins. As with regional bus, our London operations saw an improvement in insurance claim costs and reduced fuel costs, reflecting the lower hedge price. These improvements helped offset the effect of driver's strike action in the third quarter and reduced Quality Incentive Contract (QIC) payments. At £4.6m (2014: £9.1m), QIC payments were significantly lower than the prior year, impacted by roadworks and congestion in the capital, predominantly in the second half of the year.

We continue to perform well in the Transport for London (TfL) quality league tables. After adjusting for lost mileage due to driver strike action in the third quarter, we operated 99.5% (2014: 99.5%) of our target mileage before traffic congestion losses.

Capital expenditure and depreciation

Capital expenditure for the bus division was £36.1m (2014: £61.3m), of which £25.2m related to the purchase of new vehicles.

Investment of £19.9m (2014: £43.2m) was made in introducing 122 new buses (2014: 244 buses) into our regional bus fleet.

Contract wins in our London bus business led to a spend of £5.3m (2014: £6.6m) on 29 new buses (2014: 23 buses). This was less than the prior year as fewer new vehicles were needed due to automatic two year contract extensions on the basis of performance.

We have a young green bus fleet with an average age of 7.8 years. Depreciation for the division was £45.7m (2014: £45.2m).

Fuel

In the year, the bus division consumed around 128 million litres of fuel at a net cost of £118.4m.

Bus fuel hedging prices

We have continued with our bus fuel hedging programme which uses fuel swaps to fix the price of our diesel fuel in advance. Our policy is to be fully hedged for the next financial year 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. In July 2015 the Board approved an additional purchase to lock in the 2016/17 and 2017/18 fuel costs. in order to create certainty around one of our largest costs. The table below reflects the position after the additional purchase.

At each period end the fuel hedges are marked to market price. The increase in the fuel hedge liability during the year represents the increase in the mark to market value of the fuel hedges during the year.

Overall bus outlook

Although our bus division delivered its strongest ever financial performance in the year, this fell slightly short of the Board's expectations. The new financial year has begun with similar trends to the second half of 2014/15. As a result, we now expect to achieve operating profit of £100m in 2016/17, a year later than originally expected, due to lower than expected revenue growth, in particular due to regional bus performance and lower QIC payments.

We would expect some of these headwinds which we have experienced over the past year to reverse over time and this, along with reduced fuel costs, gives us continued confidence in the prospects for the bus division.

In regional bus, we will continue to drive revenue growth through our sector leading marketing initiatives and sales channels, using smart and m-ticketing to attract a wider market. and further improve the customer experience. We will remain focused on cost efficiency while maintaining the quality and reliability of our services.

In London bus, growth in contract mileage is expected to be 2-3% in the full year, with contract revenue expected to increase accordingly. Ongoing roadworks and congestion in London are expected to result in further year on year reduction in QIC payments.

In 2015/16, we expect total capital expenditure to be around £70m due to the timing of London contract renewals and continued investment in our regional bus services.

We will continue to look for value adding investment opportunities both in and outside our traditional markets.

business review - Rail

Go-Ahead's rail operation is the busiest in the UK, responsible for around 35% of all train passenger journeys

Our rail strategy

Our strategy is to deliver the commitments of our existing franchises while maximising returns for the remainder of the contracts, and securing future franchises through competitive bidding processes.

We are focused on the integration of the Southern and Gatwick Express franchises into the GTR franchise which began in July 2015 and are committed to negotiating favourable new terms for the extension period proposed for London Midland.

The UK rail market offers significant opportunities over the coming years. We have a strong position and a good track record in the industry and we aim to secure the future of rail profitability by exploring these and other opportunities.

rail overview

Unless otherwise stated, references made to operating profit throughout this report exclude amortisation, goodwill impairment and exceptional items.

* Compares the period of operation in the year (14 September 2014 to 27 June 2015) to the comparative period last year when operating as First Capital Connect.

Rail performance review

The rail division has delivered a good result in the year, ahead of the Board's expectations, helped by contract management benefits in the second half. Margins remained at historically low levels.

Overall passenger revenue growth was 7.6% (2014: 6.1%) on a like for like basis, with like for like passenger journey growth of 3.9% (2014: 4.8%).

The Group's net increase in contributions to the DfT was £191.9m (2014: £51.6m increase) with an overall contribution of £255.9m (2014: £64.0m). Southern's core premium payments to the DfT increased by £46.1m in the year while subsidy receipts in Southeastern and London Midland increased by £49.4m and £0.7m respectively. Revenue support decreased by £59.8m for Southeastern and rose by £8.7m in Southern. Under its new direct award contract, which began in October 2014, Southeastern made profit share contributions to the DfT of £23.9m during the year.

The GTR revenue adjustment of £120.9m reflects the difference between passenger revenue and the franchise payment to the DfT, as set out in the bid model.

Revenue

Total revenue increased by 26.1%, or £495.5m, to £2,397.4m (2014: £1,901.9m) consisting of:

* Passenger revenue collected by GTR on behalf of the DfT.

** Represents passenger revenue generated in excess of the management fee payable to

Go-Ahead for operating the franchise, which is remitted to the DfT.

Premium payments

Southern's core premium payments are included in operating costs.

Operating profit

Operating profit in the rail division was up £6.0m at £25.7m (2014: £19.7m), with operating margins increasing marginally to 1.1% (2014: 1.0%).

Rail bid costs of £9.4m (2014: £8.1m) were higher than in the prior year due to increased bidding activity, including around £2m on rail franchise activity in Germany.

Individual franchise performance

Southern

Passenger revenue growth was 7.0% (2014: 6.1%) year on year driven by higher passenger numbers, up 4.1% (2014: 4.1%).

The franchise delivered a stronger than expected profit performance in the year due to contract management benefits before being integrated into GTR in July 2015. Southern continued to receive revenue support until this point.

Southeastern

Southeastern recorded a good trading performance. Overall passenger revenue increased by 8.5% (2014: 5.6%) and passenger numbers rose 3.1% (2014: 5.3%).

The franchise began operating under new contract terms on 12 October 2014, ending its eligibility for revenue support. Under the new contract, Southeastern made a contribution of £23.9m to the Government during the year through a profit sharing mechanism.

London Midland

Passenger revenue grew by 5.4% (2014: 7.4%) in the year and passenger numbers increased by 2.1% (2014: 4.9%) on a like for like basis. London Midland's trading performance improved in the second half of the year.

The franchise will continue to operate within its original contract terms including a seven month extension period to March 2016. Discussions with the DfT are underway regarding a potential direct award contract for London Midland from March 2016 to October 2017.

GTR

The GTR franchise began on 14 September 2014. In the trading period, the franchise reported growth in passenger revenue of 8.8% and passenger journey growth of 6.4% compared with the same period last year. Despite the strong trading performance, operational issues and network changes contributed to the franchise making a small loss in the year.

Capital expenditure and depreciation

Capital expenditure for the rail division was £6.2m (2014: £8.2m) and depreciation was £24.8m (2014: £15.5m).

In 2015/16, capital expenditure is expected to increase to around £20m reflecting investment in GTR and Southeastern.

Rail outlook

This has been a transitional year in rail, with the introduction of GTR and the start of Southeastern's new contract. Looking forward, our local management teams will be focused on delivering benefits for passengers while working with industry partners, such as Network Rail, to minimise the disruption caused by major infrastructure work associated with the Thameslink Programme.

Following the year end, Southern and Gatwick Express were integrated into GTR. This franchise continues to incur incremental costs as a result of operational challenges and changes in its operating network. This may lead to lower margins in the short to medium term but any shortfall in profit is expected to be recoverable over the life of the franchise as normal industry contract remedies are employed to help mitigate these costs over time.

Trading in the Southeastern franchise continues to outperform our expectations and we expect the full year benefit of new contract terms to offset underperformance in GTR.

We continue discussions with the DfT regarding the proposed contract extension for London Midland to October 2017.

Finance review

"The Group once again delivered a good performance in the year ended 27 June 2015 and is in a strong financial position."

Overview and highlights

Revenue for the year was £3,215.2m, up £512.8m, or 19.0%, on last year (2014: £2,702.4m), with growth in both bus and rail. The majority of this increase was attributable to the rail division, predominantly due to the introduction of the GTR franchise on 14 September 2014.

Operating profit was £114.7m (2014: £103.2m), up £11.5m, or 11.1%, on the prior year. This was ahead of the Board's expectations as a result of better than expected performance in our rail division, helped by rail contract management benefits, which more than offset the slight weakness in our bus division. The bus division delivered record profits in the year, making continued progress. The overall operating margin of 3.6% (2014: 3.8%) reduced slightly year on year following the introduction of the GTR franchise, which made a small loss in the year.

Profit before tax excluding amortisation, goodwill impairment and exceptional items for the year increased by £11.7m, or 13.8%, to £96.6m (2014: £84.9m) and adjusted earnings per share rose 1.5% to 150.8p (2014: 148.6p).

Net cash at the year end of £292.9m (2014: net debt £42.7m) reflects £322.4m additional cash, the majority of which is restricted. The higher cash balance is largely due to working capital movements relating to franchise wins and extensions, and the timing of GTR franchise payments. Adjusted net debt (net debt plus restricted cash) to EBITDA of 1.32x (2014: 1.59x) is below our target range of 1.5x to 2.5x.

Summary income statement

* Excludes amortisation, goodwill impairment and exceptional items.

Revenue and operating profit by division

Earnings per share

Adjusted earnings (net profit after tax attributable to members before amortisation and exceptional items) were £64.7m (2014: £63.7m), resulting in an increase in adjusted earnings per share from 148.6p to 150.8p.

The weighted average number of shares was 42.9 million (2014: 42.9 million), and the number of shares in issue, net of treasury shares, was 43.0 million (2014: 42.9 million).

Dividend

The Board is proposing a total dividend for the year of 90.0p per share (2014: 84.5p), a rise of 6.5%, following a 4.3% increase in the interim dividend. This includes a proposed final payment of 63.4p per share (2014: 59.0p) payable on 13 November 2015 to shareholders registered at the close of business on 30 October 2015.

Dividends of £36.7m (2014: £34.7m) paid in the period represent the payment of the prior year's final dividend of 59.0p per share (2014: 55.5p) and the interim dividend in respect of this year of 26.6p per share (2014: 25.5p). Dividends paid to non-controlling interests were £12.8m (2014: £8.6m). Excluding the non-cash impact of IAS 19 (revised), dividend cover was 2.02x (2014: 2.04x).

Summary cashflow

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

Cashflow

Cash generated from operations before tax was £431.4m (2014: £184.3m). This increase of £247.1m is largely due to better than expected profitability and a favourable movement in working capital, primarily reflecting timing of rail payments. £107m is due to the timing of GTR franchise payments, which is expected to reverse in 2015/16. £70m is due to a cash inflow from the start of the GTR franchise, which is not expected to reverse until the end of the franchise. The balance is due to an increase in season ticket cash and the timing of contractual payments. Tax paid of £20.3m (2014: £12.4m) comprised payments on account in respect of the current year's liabilities. Net interest paid of £14.3m (2014: £15.0m) is lower than the charge for the period of £18.1m (2014: £18.3m) after excluding the impact of non-cash interest on pensions and the unwinding of discounting on provisions. Capital expenditure, net of sale proceeds, was £19.4m lower in the year at £47.9m (2014: £67.3m) predominantly due to reduced investment in the regional bus fleet. Investment in the bus division is expected to increase to around £70m in 2015/16 due to the timing of London bus contract renewals and continued investment in our regional bus operations.

During the period, the Group did not repurchase any shares (2014: nil).

Capital expenditure

Expenditure on capital during the year can be summarised as:

Capital structure

1 Not adjusted for the impact of IAS 19 (revised), in line with new 2019 revolving credit facility.

2 Adjusted for the impact of IAS 19 (revised).

Significant medium term finance is secured through our revolving credit facility (RCF) and £200m sterling bond. On 16 July 2014, our RCF was refinanced as the Group entered into a £280m five year facility, replacing the existing £275m facility which was due to expire in February 2016. The new facility has an initial maturity of July 2019 with two one year extension options, one of which was agreed on 1 July 2015, extending the maturity of the facility to July 2020 from that date. The sterling bond is due to expire in September 2017.

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

Net cash/debt

Net cash of £292.9m (2014: net debt £42.7m) comprised the £200m sterling bond; amounts drawn down against the £280m five year RCF of £111.0m (2014: £120.0m); hire purchase and lease agreements of £0.3m (2014: £2.0m) and US dollar facility of £nil (2014: £2.5m), offset by cash and short term deposits of £604.2m (2014: £281.8m) including £537.6m of restricted cash in rail (2014: £217.3m). There were no overdrafts in use at the year end (2014: £nil).

Our primary financial covenant under the 2016 RCF was an adjusted net debt to EBITDA ratio of not more than 3.5x. Adjusted net debt (net debt plus restricted cash) to EBITDA of 1.32x (2014: 1.59x) remains under our target range of 1.5x to 2.5x.

Net finance costs

Net finance costs for the year were slightly ahead of the prior year at £18.1m (2014: £18.3m) including finance costs of £20.5m (2014: £19.8m)

less finance revenue of £2.4m (2014: £1.5m).

The average underlying net interest rate for the period was 4.2% (2014: 4.3%).

Amortisation and goodwill impairment

The amortisation and goodwill impairment charge for the year was £9.1m (2014: £5.8m), of which £4.2m represents the non-cash cost of amortising software costs, franchise bid costs, customer contracts and rail franchise acquisition assets, and £4.9m relates to the impairment of goodwill in our Go East Anglia bus operations.

Exceptional items

Total exceptional items in the year were a charge of £8.8m (2014: £12.1m credit), relating to rail restructuring costs in GTR. These costs reflect reorganisation of the combined GTR franchise which brings Thameslink and Great Northern together with Southern and Gatwick Express under one management structure.

Prior year exceptional items of £12.1m comprised a credit of £15.1m in relation to the closure of the defined benefit pension scheme, and a £3.0m charge in respect of rail restructuring.

Taxation

Net tax for the year was £19.4m (2014: £13.6m), equivalent to an effective rate of 24.7% (2014: 14.9%), above the UK statutory rate for the period of 20.75% (2014: 22.5%). The effective rate was higher than expected due to increased non-deductible items such as goodwill impairment and German bid costs.

The underlying rate, excluding goodwill impairment of £4.9m, is 23.2%. The statutory rate will reduce to 20%, 19% and 18% in 2016, 2017 and 2018 respectively. We expect our effective tax rate to be 1% to 2% above the statutory rate in future years.

Non-controlling interest

The non-controlling interest in the income statement of £7.1m (2014: £7.3m) 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 £68.9m (2014: £53.8m) consisting of bus costs of £2.7m (2014: £6.7m) and rail costs of £66.2m (2014: £47.1m). Group contributions to the schemes totalled £46.2m (2014: £43.2m).

Bus pensions

Under accounting valuations, the net deficit after taxation on the bus defined benefit schemes was £47.6m (2014: £47.8m), consisting of pre-tax liabilities of £59.5m (2014: £59.8m) less a deferred tax asset of £11.9m (2014: £12.0m). The pre-tax deficit consisted of estimated liabilities of £718.7m (2014: £663.3m) less assets of £659.2m (2014: £603.5m). The percentage of assets held in higher risk, return seeking assets was 51% (2014: 50%).

Rail pensions

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

In the year we recorded a pre-tax liability of £nil (2014: £nil).

IAS 19 (revised)

IAS 19 (revised) became effective for the Group in the year ended 28 June 2014.

The impact of the change on profit before tax was a reduction of £20.4m (2014: £14.2m), £12.2m (2014: £8.6m) of which is attributable to equity holders of the parent. This resulted in a reduction in basic earnings per share of 28.4p (2014: 20.1p) and a reduction in adjusted earnings per share of 30.8p (2014: 24.0p), of which 11.7p (2014: 9.6p) relates to the bus division.

The table below shows the impact of IAS 19 (revised) on the financial results to 27 June 2015, and the impact on the results to 28 June 2014.

Key risks

The key risks described in the Group's Annual Report for the year ended 27 June 2015 can be summarised as below. More detail can be found in the 2015 Group Annual Report and Accounts, available on our website at www.go-ahead.com

Key risks for 2015 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 and management's expectations.

Political and regulatory framework

Changes in Government or to laws, regulations, policies (e.g. introduction of a Bus Bill, pressure on concessionary travel or BSOG, restrictions around vehicle specification devolution to TFL), local authority attitudes towards public transport and reductions in the availability of Government financial support could adversely impact the Group's operations and financial position.

STRATEGIC

Sustainability of rail profits

The sustainability of rail profits is dependent on a number of factors. The nature of the current rail franchising model leads to high volatility of earnings; failure to retain, win or successfully mobilise and integrate franchises could impact on the overall profitability of the Group; failure to comply with conditions of rail franchise agreements could lead to financial penalties or even the termination of a rail franchise.

Inappropriate strategy or investment

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

Competition

Loss of business to other modes of transport, existing competitors or new market entrants in our markets could have a significant impact on business, such as new technology based start ups.

OPERATIONAL

Catastrophic incident or severe infrastructure failure

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

Large scale infrastructure projects

Large scale projects on and around the networks on which we operate (such as the Thameslink Programme, HS2, major roadworks) can significantly impact on our ability to run our services reliably, meet contractual obligations, and performance targets, or damage customer reputation.

Labour costs, employee relations and resource planning

Poor employee relations or reduced availability of staff could impact on reputation, revenue, staff morale and our ability to fulfil contract obligations. Labour costs are a high proportion of our cost base. Even relatively small percentage increases in wages could have a material impact on profits. For example, an increase of 1% in staff costs would increase costs by around £11m.

Information technology (IT) failure or interruption or security breach

Prolonged or major failure of the Group's IT systems or a significant security breach could pose significant risk to the ability to operate and trade.

Consolidated Income statement

for the year ended 27 June 2015

Consolidated statement of comprehensive income

for the year ended 27 June 2015

Consolidated statement of changes in equity

for the year ended 27 June 2015

Consolidated balance sheet

as at 27 June 2015

Consolidated cashflow statement

for the year ended 27 June 2015

Notes to the consolidated financial statements

for the year ended 27 June 2015

1. Segmental analysis

The Group's businesses are managed on a divisional basis. Selected financial data is presented on this basis below.

For management purposes, the Group is now organised into three reportable segments: regional bus, London bus and rail. The operations of Go-Ahead North America ceased at the end of July 2014. 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 regional bus division comprises bus operations outside London.

The London bus division comprises bus operations in London under control of Transport for London ('TfL') and also rail replacement and other contracted services in London.

The rail operation through an intermediate holding company, Govia Limited, is 65% owned by Go-Ahead and 35% by Keolis and comprises four rail franchises: Southern, Southeastern, London Midland and GTR. The division is aggregated for the purpose of segmental reporting under IFRS 8 as each operating company has similar objectives, to provide passenger rail services and achieve a modest profit margin through its franchise arrangements with DfT. Each company targets similar margins, has similar economic risks and is viewed and reacted to as one segment by the chief operating decision maker, considered to be the Group Chief Executive. The registered office of Keolis (UK) Limited is in England and Wales.

The Go-Ahead North America division comprised a 50% investment in a US school bus operation. The Group's share of the profit of this division was £nil (2014: £nil), and it was therefore not shown separately within the tables below but aggregated within regional bus until it ceased trading at the end of July 2014.

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 intangible assets, goodwill impiarment 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 27 June 2015 and the year ended 28 June 2014.

Year ended 27 June 2015

At 27 June 2015, there were non-current assets of £nil (2014: £nil) and current assets of £nil (2014: £1.8m) relating to US operations, which were made up entirely of loans in Go-Ahead North America. The US operation ceased trading on 25 July 2014. For the year ended 27 June 2015, segment revenue for this venture was less than £0.1m (2014: £1.7m) and segment profit was £nil (2014: £nil). On termination of the joint venture all outstanding loans were repaid.

During the year ended 27 June 2015, segment revenue from external customers outside the United Kingdom related entirely to the Go-Ahead North America joint venture.

Year ended 28 June 2014

2. Group revenue

This note provides an analysis of Group revenue.

3. Operating costs (excluding amortisation, GOODWILL IMPAIRMENT and exceptional items)

Detailed below are the key amounts recognised in arriving at our operating costs.

1 The total lease and sublease payments recognised as an expense (excluding rail access charges) are made up of minimum lease payments of £531.7m (2014: £423.9m), net of sublease payments of £13.5m (2014: £16.6m) relating to other rail leases.

2 The total lease and sublease payments recognised as an expense are made up of minimum lease payments of £1,021.6m (2014: £885.0m), net of sublease payments of £13.5m (2014: £16.6m) relating to other rail leases.

The fee relating to the audit of the financial statements can be analysed between audit of the Group's consolidated financial statements of £0.1m (2014: £0.2m) and audit of subsidiaries' financial statements of £0.4m (2014: £0.4m).

During the year, £1.5m (2014: £1.8m) was also paid to other 'Big 4' accounting firms for a variety of services.

4. Staff costs

This note shows total employment costs, inclusive of share based payment charges. We have a number of share plans used to award shares to directors and employees. A charge is recognised over the vesting period in the consolidated income statement, based on the fair value of the award at the date of grant. The note also shows the average number of people employed by the Group during the year..

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. In addition, total directors' emoluments are shown in the table below:

Sharesave scheme

Shareholder approval was obtained at the 2013 AGM for the introduction of a new HM Revenue & Customs approved Savings-Related Share Option scheme, known as The Go-Ahead Group plc 2013 Savings-Related Share Option Scheme (the Sharesave scheme) for employees of the Group and its operating companies.

The Sharesave scheme is open to all full time and part-time employees (including executive directors) who have completed at least six months of continuous service with a Go-Ahead Group company at the date they are invited to participate in a scheme launch. To take part, qualifying employees have to enter into a savings contract for a period of three years under which they agree to save a monthly amount, from a minimum of £5 to a maximum (not exceeding £500) specified by the Group at the time of invitation. For the February 2014 launch, the maximum monthly savings limit set by the Group was £50. At the end of the savings period, employees can buy shares at a 20% discount of the market price set at the date of invitation or take their full savings back.

The fair value of equity-settled share options granted is estimated as at the date of grant using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The key assumptions input into the model are future share price volatility, future dividend yield, future risk free interest rate, forfeiture rate and option life.

There are savings-related options at 27 June 2015 as follows:

The expense recognised for the scheme during the year to 27 June 2015 was £0.3m (2014: £0.1m).

The following table illustrates the number and weighted average exercise price (WAEP) of share options for the Sharesave scheme:

The weighted average exercise price at the date of exercise for the options exercised in the period was £17.34 (2014: n/a).

The options outstanding at the end of the year have a weighted average remaining contracted life of 1.83 years (2014: 2.83 years). These options are exercisable at £17.34 (2014: £17.34).

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 Group 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 27 June 2015 was £0.4m (2014: £1.8m).

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 27 June 2015 and 28 June 2014 were:

The weighted average fair value of options granted during the year was £23.49 (2014: £15.63).

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

At the year end, 96,348 options were exercisable and the weighted average exercise price of the options was £26.98 (2014: £23.67).

The weighted average remaining contractual life of the options was 0.66 years (2014: 0.79 years). The weighted average share price of options exercised was £24.11 (2014: £21.32).

Deferred Share Bonus Plan

The Deferred Share Bonus Plan (DSBP) provides for executive directors and certain other senior employees to be awarded shares in the Group conditional on the achievement of financial and strategic targets. 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 27 June 2015 was £0.9m (2014: £0.3m).

The DSBP options are not subject to any market based performance conditions. Therefore the fair value of the options is equal to the share price at the date of grant.

The weighted average fair value of options granted during the year was £25.71 (2014: £16.39).

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

Deferred Share Bonus Plan continued

At the year end, 14,204 options were exercisable and the weighted average exercise price of the options was £26.98 (2014: £23.67).

The weighted average remaining contractual life of the options was 1.54 years (2014: 1.75 years). The weighted average share price of options exercised was £23.96 (2014: £20.19).

Share incentive plans

The Group 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 Group to make four different types of awards to employees (free shares, partnership shares, matching shares and dividend shares), although the Group has, so far, made awards of partnership shares only. Under these awards, the Group invites qualifying employees to apply between £10 and £150 per month in acquiring shares in the Group at the prevailing market price. Under the terms of the scheme, certain tax advantages are available to the Group and employees.

5. Exceptional items

This note identifies items of an exceptional nature that have a significant impact on the results of the Group in the period.

Year ended 27 June 2015

Total exceptional items in the year were £8.8m relating to rail restructuring costs of the GTR franchise which brings Thameslink and Greater Northern together with Southern and Gatwick Express under one management structure.

Year ended 28 June 2014

Total exceptional items in the year were a net gain of £12.1m.

The pension plan curtailment gain of £15.1m arose on closure of the defined benefit scheme. This reduced the Group's exposure to further increasing benefits; current members' existing benefits were preserved but no further benefits will accrue, resulting in an adjustment to the Group's future liabilities. This was non-recurring and non-cash.

Rail restructuring costs were £3.0m. In order to adapt effectively to increasing competitive pressures on the West Coast line, London Midland restructured front line and head office personnel.

6. Finance revenue and costs

Finance revenue comprises interest received from bank deposits. Finance costs mainly arise from interest due on the bond and bank loans..

7. Taxation

This note explains how our Group tax charge arises. The deferred tax section of the note sets out the deferred tax liabilities held across the Group

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 on ordinary activities before taxation, at the statutory tax rate, to tax at the Group's effective tax rate for the years ended 27 June 2015 and 28 June 2014 is as follows:

The normalised tax rate for the year ended 27 June 2015, excluding the impact of goodwill impairment of £4.9m, is 23.2%.

The normalised tax rate for the year ended 28 June 2014, excluding the impact of opening deferred tax rate reduction, is 22.4%.

c. Reconciliation of current tax liabilities

A reconciliation of the current tax liability is provided below:

d. 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:

A reduction in the UK corporation tax rate from 23% to 21% came into effect on 1 April 2014. A further reduction in the UK corporation tax rate from 21% to 20% came into effect on 1 April 2015.

As proposed in the summer Budget 2015, the rates of corporation tax are going to be reduced to 18% in 2020, with an interim reduction to 19% in 2017. These proposals were included in the draft Finance Bill 2015 which was not substantively enacted at the balance sheet date, therefore the currently enacted 20% rate has been applied to deferred tax liabilities/assets at the year end.

If the reduction to 18% had been enacted at the balance sheet date, the Group's deferred tax liability would have been reduced by £4.6m to £41.5m, and the deferred tax asset would have been reduced by £1.2m to £10.7m.

8. Earnings per share

Basic earnings per share is the amount of profit generated for the financial year attributable to equity shareholders divided by the weighted average number of shares in issue during the year. This note also includes adjusted earnings per share, which shows a 'normalised' earnings per share following elimination of the impact of amortisation, goodwill impairment and exceptional items.

Basic and diluted earnings per share

The weighted average number of shares in issue excludes treasury shares held by the Group, 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 27 June 2015 to 2 September 2015.

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 intangible and goodwill amortisation and exceptional items in order to show a 'normalised' earnings per share. This is analysed as follows:

Year ended 27 June 2015

Year ended 28 June 2014

9. Dividends paid and proposed

Dividends are one type of shareholder return, historically paid to our shareholders in April and November.

10. Property, plant and equipment

The Group holds significant investments in land and buildings, bus vehicles and plant and equipment, which form our tangible assets. All assets are depreciated over their useful economic lives.

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

11. Intangible assets

The consolidated balance sheet contains significant intangible assets mainly in relation to goodwill, software, franchise bid costs and customer contracts. Goodwill, which arises when the Group acquire a business and pay a higher amount than the fair value of the net assets primarily due to the synergies the Group expect to create, is not amortised but is subject to annual impairment reviews. Software is amortised over its expected useful life. Franchise bid costs are amortised over the life of the franchise/franchise extension. Customer contracts are amortised over the life of the contract.

Software costs

Software costs capitalised exclude software that is integral to the related hardware.

Franchise bid costs

A part of the Group's activities is the process of bidding for and securing franchises to operate rail services in the UK. Directly attributable, incremental costs incurred after achieving preferred bidder status or entering into a franchise extension are capitalised as an intangible asset and amortised over the life of the franchise/franchise extension.

Rail franchise asset

This reflects the cost of the right to operate a rail franchise, and relates to the cost of the intangible asset acquired on the handover of the franchise assets relating to the Southeastern rail franchise. The intangible asset was being amortised on a straight-line basis over the original life of the franchise.

Customer contracts

This relates to the value attributed to customer contracts and relationships purchased as part of the Group's acquisitions. The value is calculated based on the unexpired term of the contracts at the date of acquisition and is amortised over that period.

Goodwill

Goodwill acquired through acquisitions has been allocated to individual cash-generating units for impairment testing on the basis of the Group's business operations. The carrying value of goodwill is tested annually for impairment by cash-generating unit and is as follows:

The recoverable amount of goodwill has been determined based on a value in use calculation for each cash-generating unit, using cashflow projections based on financial budgets and forecasts approved by senior management covering a three year period which have then been extended over an appropriate period. The directors feel that the extended period is justified because of the long term stability of the relevant income streams. Growth has been extrapolated forward from the end of the three year forecasts over a total period of ten years plus a terminal value using a growth rate of 2.25%-3.0% which reflects the directors' view of long term growth rates in each business, and the long term recurrent nature of the businesses.

The pre-tax cashflows for all cash-generating units have been discounted using a pre-tax discount rate of 8.8% (2014: 8.3%), based on the Group's weighted average cost of capital.

The calculation of value in use for each cash-generating unit is most sensitive to the forecast operating cashflows, the discount rate and the growth rate used to extrapolate cashflows beyond the budget period. The operating cashflows are based on assumptions of revenue, staff costs and general overheads. These assumptions are influenced by several internal and external factors.

The directors consider the assumptions used to be consistent with the historical performance of each unit and to be realistically achievable in light of economic and industry measures and forecasts. Having conducted sensitivity analysis on these calculations, the goodwill of Anglian and Chambers, has been fully impaired during the course of the year following a period of underperformance. Goodwill totalling £4.9m has been impaired, being the goodwill of these two businesses, which are both considered individual cash generating units. The remaining tangible assets have also been reviewed, with no further impairment necessary, having considered the value in use of the assets at the pre-tax discount rate of 8.8%. A 0.5% increase in discount rate or revenue growth falling by 1.0% are considered the most likely to impact recoverable amounts. The change in discount rate would not cause the carrying value of any of the businesses to exceed their recoverable amount, a fall in turnover growth from 2.0% to 1.0% in Plymouth Citybus could cause an impairment of £3.0m unless mitigated through cost controls.

12. Business combinations

This note details acquisition transactions carried out in the current and prior periods..

Year ended 27 June 2015

On 8 December 2014, Plymouth Citybus Limited, a wholly owned subsidiary of the Group, acquired certain tendered contracts, commercial operations and nine buses from Western Greyhound Limited for a cash consideration of £0.4m.

Net assets at date of acquisition:

Acquisition costs of less than £0.1m have been expensed through operating costs.

From the date of acquisition in the year, the acquisition recorded an operating profit of £nil and revenue of £0.9m. Had the acquisition been completed on the first day of the financial period, the impact on the Group's operating profit would have been £nil and the impact on revenue would have been £1.5m.

Year ended 28 June 2014

There were no acquisitions during the year ended 28 June 2014.

13. Assets classified as held for sale

This note identifies any non-current assets or disposal groups that are held for sale. The carrying amounts of these assets will be recovered principally through a sale rather than through continuing use.

At 27 June 2015, assets held for sale had a carrying value of £6.0m, consisting of £2.5m of property, plant and equipment available for sale and £3.5m of bus vehicles awaiting refinancing onto operating leases. Of the property, plant and equipment classified as assets held for sale at 28 June 2014, £1.1m was disposed of during the year ended 27 June 2015.

At 28 June 2014, assets held for sale had a carrying value of £72.4m, of which £68.6m represented a payment on account for new rolling stock in Southern Railway Limited and in respect of which it was expected that a sale and operating leaseback would be completed before 27 June 2015. The remaining £3.8m related to property, plant and equipment available for sale.

14. Inventories

Inventory primarily consists of vehicle spares and fuel and is presented net of allowances for obsolete products..

The amount of any write down of inventories recognised as an expense during the year is immaterial.

15. Trade and other receivables

Trade and other receivables mainly consist of amounts owed by principal contracting authorities and other customers, amounts paid to suppliers in advance, amounts receivable from central government and taxes receivable. Trade receivables are shown net of an allowance for bad or doubtful debts.

Trade receivables at nominal value of £1.1m (2014: £1.0m) were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows:

As at 27 June 2015, the ageing analysis of trade receivables is as follows:

16. Cash and cash equivalents

The majority of the Group's cash is held in bank deposits which have a maturity of three months or less to comply with DfT short term liquidity requirements.

Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective deposit rates. The fair value of cash and cash equivalents is not materially different from book value.

Amounts held by rail companies included in cash at bank and on short term deposit can be distributed only with the agreement of the DfT, normally up to the value of revenue reserves or based on a working capital formula. As at 27 June 2015, balances amounting to £537.6m (2014: £217.3m) were restricted. Part of this amount is to cover deferred income for rail season tickets, which was £172.8m at 27 June 2015 (2014: £123.4m).

Non cashflow movements

During the year ended 27 June 2015 the Group transferred in certain assets and liabilities relating to the handover of the GTR franchise. Initial cash received by the Group as a result of the rail franchise handover is detailed below:

17. Trade and other payables

Trade and other payables mainly consist of amounts owed to suppliers that have been invoiced or accrued, deferred income and deferred season ticket income. They also include taxes and social security amounts due in relation to our role as an employer and amounts owed to central government.

Terms and conditions of the above financial liabilities are as follows:

• Trade payables are non-interest-bearing and are normally settled on 30 day terms

• Other payables are non-interest-bearing and have varying terms of up to 12 months

18. Interest-bearing loans and borrowings

The Group's sources of borrowing for funding and liquidity requirements come from a range of committed bank facilities and a capital market bond. The Group held a dollar loan facility to mitigate the impact of exchange rate movements on joint venture transactions.

Net cash/debt and interest-bearing loans and borrowings

The net cash/debt position comprises cash, short term deposits, interest-bearing loans and borrowings, and can be summarised as:

Year ended 27 June 2015

Year ended 28 June 2014

Analysis of Group net debt

Syndicated loan facility

On 16 July 2014, the Group re-financed and entered into a £280.0m five year syndicated loan facility, replacing the previous £275.0m five year syndicated loan facility. The new loan facility is unsecured and interest is charged at LIBOR + Margin, where the margin is dependent upon the gearing of the Group. The new facility had an initial maturity of July 2019, with two one-year extensions, one of which was agreed on 1 July 2015, extending the maturity of the facility to July 2020 from that date.

As at 27 June 2015, £111.0m (2014: £120.0m) of the facility was drawn down.

£200m sterling 7.5 year bond

On 24 March 2010, the Group raised a £200m bond of 7.5 years maturing on 29 September 2017 with a coupon rate of 5.375%.

Dollar loan

On 26 July 2010, a $10.0m five year facility was entered into for the purposes of financing our Go-Ahead North America joint venture. The joint venture ceased trading on 25 July 2014, and on termination of the joint venture all outstanding loans were repaid and the facility subsequently cancelled. As at 27 June 2015, $nil (2014: $4.3m) or £nil (2014: £2.5m) of this facility was drawn down.

The dollar loan was unsecured and interest was charged at US$ LIBOR + Margin.

Debt issue costs

There are debt issue costs of £1.2m (2014: £0.4m) on the syndicated loan facility.

The £200m sterling 7.5 year bond has debt issue costs of £0.6m (2014: £1.2m).

The Group is subject to two covenants in relation to its borrowing facilities. The covenants specify a maximum adjusted net debt to EBITDA and a minimum net interest cover. At the year end and throughout the year, the Group has not been in breach of any bank covenants.

19. Finance lease and hire purchase commitments

This note details finance lease and hire purchase commitments.

The Group has finance leases and hire purchase contracts for bus vehicles and various items of plant and equipment. These contracts have no terms of renewal or purchase option escalation clauses. Future minimum lease payments under finance leases and hire purchase contracts, together with the present value of the net minimum lease payments, are as follows:

20. Derivatives and financial instruments

A derivative is a security whose price is dependent upon or derived from an underlying asset. The Group uses energy derivatives to hedge its risks associated with fuel price fluctuations. Financial instruments held by the Group include fuel hedge derivatives and finance lease/hire purchase contracts.

a. Fair values

The fair values of the Group's financial instruments carried in the financial statements have been reviewed as at 27 June 2015 and 28 June 2014 and are as follows:

Year ended 27 June 2015

Year ended 28 June 2014