FULL YEAR RESULTS FOR THE YEAR ENDED 28 JUNE 2014

Press Release

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

FULL YEAR RESULTS FOR THE YEAR ENDED 28 JUNE 2014

Significant and successful year;strong performance in both bus and rail divisions

Highlights

Strategic and operational progress

- Won the UK's largest rail franchise, Thameslink, Southern and Great Northern (TSGN)

- Sector leading customer satisfaction of 92% in deregulated bus

- Record passenger numbers in bus and rail

- Shortlisted for Northern and TransPennine Express rail franchises

Delivering financially

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

· Profit before tax and exceptional items increased by 25.4% to £79.1m

· Adjusted earnings per share increased by 26.4% to 148.6p

· Strong free cashflow and reduced net debt despite increased investment in the business

· Proposed full year dividend increased by 4.3% to 84.5p per share in line with progressive policy

Contributing to society

- Only operator in the sector to achieve Carbon Trust triple standard for carbon, waste and water reduction

- First FTSE 350 company to be awarded the Fair Tax Mark

- Continued improvements in fleet quality and underlying environmental performance

Notes:

Unless otherwise stated, references made to operating profit throughout this statement exclude amortisation and an exceptional credit of £12.1m (2013: nil)

* Restated for the adoption of IAS 19 (revised), detailed in note 3 to the financial statements

+ In accordance with our bank covenants adjusted net debt/EBITDA is calculated excluding the impact of IAS 19 (revised)

David Brown, Group Chief Executive, commented:

"Delivering for our customers is a prerequisite to the increasing financial strength of our business. The Group performed very well in the financial year with our bus and rail divisions both delivering strong results, which were significantly ahead of our initial expectations for the year. Overall operating profit was £103.2m, up 19.0% from last year.

"This was a particularly busy and exciting year for Go-Ahead in which we made excellent progress towards our strategic objectives. We remained focused on delivering high quality value for money services for our passengers and strengthened the finances of the business. We continued to make a positive contribution to society through the services we run, careful environmental stewardship and the taxes we pay.

"Both our bus and rail divisions performed well. Record numbers of passengers travelled on our services. Our deregulated bus division achieved a sector leading customer satisfaction score of 92%. Another key achievement in the year was winning the Thameslink, Southern and Great Northern (TSGN) franchise on the basis of both quality for the passenger and value for money to the taxpayer. We are also pleased to be on the shortlists for the Department for Transport's Northern and TransPennine rail franchise competitions and we look forward to submitting strong bids, working collaboratively with industry partners.

"The end of the year marked the halfway point towards our bus operating profit target. We made steady progress towards our target in the year, and remain confident in our ability to achieve £100m of bus operating profit by 2015/16. The Group is in a very good financial position, with strong cash management allowing us to increase investment while reducing our net debt during the year. Our robust balance sheet supports our progressive dividend policy and allows us flexibility to pursue value adding opportunities. The Board's confidence in the Group's performance and prospects has allowed us to propose a full year dividend of 84.5p, an increase of 4.3%, in line with our policy.

"I am proud of our position as a responsible business. Reflecting our commitment to being an environmentally responsible operator, we became the only transport Group to be awarded the Carbon Trust triple standard for achievements in carbon, water and waste reduction during the year. I am also pleased that we have been recognised as the first FTSE 350 company to be awarded a Fair Tax Mark for our open and transparent approach to our tax affairs.

"Together these successes contributed towards us ending the year as a stronger Group with enhanced prospects for the future."

ENDS

For further information, please contact:

David Brown, Group Chief Executive and Keith Down, Group Finance Director will be hosting a presentation for analysts at 9.00am today 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 at around 7:30am today.Go-Ahead will be hosting an investor event in London on 21 October 2014. Details will be made available on the Group's website www.go-ahead.com in due course.

Chairman's Statement

It has been a significant and successful year for Go-Ahead and our shareholders. I am proud of what we have achieved, including securing the UK's biggest rail franchise, delivering a strong financial performance and making further investment in greener buses, all while providing high standards of service to our bus and rail passengers.

We have a clear strategy to increase the profitability of our existing business and to grow the Group to deliver sustainable shareholder value. This strategy, which is underpinned by a stable business model, has delivered increased shareholder value in the year. We have an experienced 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.

Performance

The Group performed well in the year to 28 June 2014. We achieved record profits in our bus business, making steady progress towards our bus operating profit target of £100m by 2015/16, and carried more passengers on our buses and trains than ever before.

Dividend

Over the last few years, the Board has been committed to maintaining the full year dividend, having recognised its importance to the investment decision of many of our shareholders. Reflecting the Board's confidence in the Group's performance and prospects, we now believe that the time is right to resume our policy of progressive dividend growth whilst maintaining dividend cover of approximately two times adjusted earnings, on a pre IAS19 (revised) basis, through the economic cycle. The Board is therefore proposing a final dividend of 59.0p per share (2013: 55.5p), making the total dividend for the year 84.5p per share (2013: 81.0p), an increase of 4.3%. The final dividend is payable on 14 November 2014 to shareholders registered at the close of business on 31 October 2014.

Governance

As a Board, we are committed to the principles of good governance. Through our robust internal framework of systems and controls, we strive to maintain the highest standards of corporate governance.

In common with other public companies, this year we are meeting new standards of disclosure. Our annual report has been considered by the Board, which carefully considered the new requirement to present fair, balanced and understandable information.

We have taken seriously the spirit as well as the letter of the new regulations, which are intended to build trust between business and society through improved levels of transparency and disclosure, in which the UK is undoubtedly a world leader.

We have complied with the provisions of the UK Corporate Governance Code throughout the year ended 28 June 2014 as outlined in our corporate governance report.

With the exception of Rupert Pennant-Rea's retirement at last year's Annual General Meeting, the membership of the Board has been consistent throughout the year.

Board effectiveness and evaluation

My priority as Chairman is to ensure the effectiveness of the Board and I believe our key strength is a positive atmosphere around our Board table with all directors demonstrating mutual trust and confidence, facilitating discussions which are open and frank.

This year the Board made good progress in delivering against its 2013/14 priorities and has clear objectives for the year ahead, which are detailed in our annual report.

During the year, an internal evaluation of Board performance was conducted by the Group Company Secretary. The review sought to build upon and enhance the effectiveness of the Board as a whole, and of individual directors. I am pleased to report that no areas of material concern were highlighted, although a number of areas for improvement were identified. The actions we have taken to enhance the Board's stewardship of the business are set out in our annual report.

Our people are the cornerstone of our success

Last year, I set myself an objective to visit all of the Group's operating companies in my first year as Chairman. Having done so, I can say that without exception these businesses have impressed me with their 'can do' culture and commitment to excellence. The dedication and hard work of our people are the cornerstones of Go-Ahead's success and I would like to thank every one of them for their enduring commitment and professionalism.

During the year, we intensified our focus on the Group's 'people plans' to ensure that we attract, develop and retain the best people. We also made considerable progress in improving the way we manage performance and leadership processes. This has, in turn, strengthened our culture and behaviours across the Group

We recognise that a strong governance framework alone is not enough to achieve our long term ambitions. These can only be achieved through strong leadership, a diverse and well-balanced Board and the right values and culture of our people. Effective leadership development and succession planning are essential for sustainable success, in the Boardroom and through all levels of the organisation. I firmly believe that diversity in all areas at all levels of the Group enhances our success. We are aligned with the aims and objectives of the Davies Report on women on boards which recommends a minimum of 25% female board membership.

Our Nomination Committee searches for candidates from the widest possible pool, making appointments on the basis of merit against objective criteria, including the diversity of skills, experience, background and gender which are necessary for an effective board.

Our role in society

Our aim is to make a positive contribution to the communities in which we operate and wider society. First and foremost, we help people get to the places they want to be; connecting with family and friends, travelling to work or school and accessing retail and leisure facilities. By attracting more people to use our services, we strengthen our business while increasing the role we play in our society. Through the provision of passenger transport we make a fundamental contribution to the economy.

Commitment to transparent investor communications

We have always been proud of our high standards of reporting. Having adopted an integrated approach last year, which provides a more holistic view of the business, we were keen to make further improvements to the quality of our reporting. Examples of improvements made this year include the introduction of commentary and explanations within the financial statements, the alignment and integration of the reporting of the Group's strategic priorities and sustainability areas, as well as providing clearer links between the Group's remuneration policy and our performance and the significant achievements in the year. Our remuneration policy is set out in our annual report.

Go-Ahead places great importance on effective, open and transparent reporting. The annual report is one of our key communications with shareholders and other stakeholders, and we consider its content and form with care.

I am pleased our commitment to good reporting continued to be recognised during the year. Go-Ahead was recognised at the PwC Building Public Trust Awards, receiving the Excellence in Reporting award for FTSE 250 businesses and we were delighted to top the list of the 4,000 publicly traded companies included in GMI Ratings' review of trustworthy accounting and governance behaviour.

Looking forward

We are well equipped as a Group to manage the complexity and challenges in our industry, including the significant changes associated with beginning a major new franchise. Our most important resource is our people who work tirelessly to anticipate and meet the needs of our customers, and I have every confidence in our teams across the business. Following an exciting year for Go-Ahead, we look forward to building on our success in the coming years.

Group Chief Executive's review

This was a particularly busy and exciting year for Go-Ahead. We were awarded the Thameslink, Southern and Great Northern (TSGN) franchise, securing our future in UK rail until at least 2021, and we made good progress towards our bus operating profit target. As a result, Go-Ahead ended the year as a stronger Group with enhanced prospects for the future.

The Group performed very well in the financial year with our bus and rail divisions both delivering strong results, which were significantly ahead of our initial expectations for the year and slightly ahead of the Board's latest expectations. Overall operating profit was £103.2m, up 19.0% from last year.

Bus operating profit of £83.5m supported our strategic target of £100m of bus operating profit by 2015/16. Rail operating profit of £19.7m exceeded our original expectations in a year when all three of our franchises were in the final stages of their original contract terms.

Since 2008, the Group has shown its resilience through the recession in an environment of challenging economic conditions. The economy is showing good signs of recovery in many parts of the country, particularly in the South East where our operations are focused. We will seek to maximise the opportunities which arise from improving market conditions.

I believe in the fundamental strengths of UK public transport. Since privatisation of the rail industry, the number of journeys made on the UK's railways has increased by 73% and more than five billion journeys are made on the UK's buses each year. As a private operator we are experienced in delivering commercial services, meeting the needs of passengers and running our networks efficiently. Overall, the rail industry makes a net contribution to the Government through net premium payments. This demonstrates the success of the rail franchise model and the benefits it brings to the taxpayer. In the year, Southern alone contributed £173.1m to the Government with a total contribution over the life of the franchise of around £430m since 2009. The public transport industry plays an integral part in the UK economy.

Delivering our strategy

Our strategy is to increase the profitability of our existing business and to grow the Group to deliver sustainable shareholder value. This strategy is underpinned by our strategic priorities of being a leading employer that provides high quality, locally focused passenger transport services, running our companies in a responsible manner, with strong financial discipline.

During the year, we delivered against these priorities in a range of areas including achieving the highest bus passenger satisfaction in the sector, increasing the number of hybrid and other alternative fuel vehicles to over 200 and increasing the proposed final dividend.

A sustainable business

Sustainability and corporate responsibility are integral to our strategy and the way we operate at every level of the business. This is our second integrated annual report which aims to present a comprehensive view of the Group. I believe this style of reporting is a natural fit for Go-Ahead as it is a true reflection of the way we run our business.

While our approach to our strategic priorities and sustainability has always been aligned, we have taken steps to improve the reporting of this. Our former five key sustainability areas of Safety, Environment, Passengers, Employees and Communities have now been aligned with our strategic priorities of Society, Customers, Our people and Finance.

Following the year end, we were pleased to be the first UK public transport operator awarded the Carbon Trust's triple accreditation for achievements in carbon, water and waste reduction. This recognises our commitment to running environmentally responsible operations.

A look back over the year

Rail

A significant achievement in the year was our successful bid for the seven year Thameslink, Southern and Great Northern (TSGN) franchise which we will operate through our joint venture, Govia, from 14 September 2014, as GTR (Govia Thameslink Railway). From this date we start operating the Great Northern and Thameslink routes which stretch from Brighton to Bedford and London to Kings Lynn. Our existing Southern franchise, under its current contract, will continue until July 2015 when it is integrated into GTR. Not only does this mean we will retain the routes and customer relationships from the Southern franchise, we will also gain a significant revenue stream from the Great Northern and Thameslink services. GTR is not two existing franchises merging into one; it is the start of a single, wholly new franchise with important objectives to deliver.

Our bid scored highly on both price and quality measures. We believe areas of particular strength were our timetable and train plan, targeted investment in quality and reducing cost where appropriate without impacting on service. Our bid was focused on improving services for passengers and we look forward to delivering benefits to our customers over the coming years.

Other rail franchise bidding activity in the year included Transport for London's Crossrail and Docklands Light Railway franchises. Whilst we were not appointed on either, we gained valuable experience through the bidding processes which is beneficial as we develop our plans for future rail franchise competitions.

We are working hard to deliver value from our existing franchises and are pleased with the good financial performance during the year.

Following a challenging period for London Midland in 2012/13, I am pleased to report improved performance during the year. The franchise delivered the most improved punctuality performance in the London and South East network, having run 86.2% of services on time.

However, this franchise continues to face challenges. During the year, London Midland began a reorganisation of management and administrative staff to reduce costs, resulting in an exceptional charge of £3.0m. This was against a backdrop of reduced subsidy receipts, higher operational costs and increased competition on the West Coast mainline.

Bus

The end of the year marked the halfway point of our target period. We continued to make good progress towards our target to grow bus operating profit to £100m by 2015/16 in the year with bus operating profit up 11.0%. to £83.5m. Deregulated bus contributed more to bus profit than regulated in the year, in line with our projections towards achieving the target.

Our bus operations continue to perform well, driving revenue through initiatives such as smart and mobile-ticketing (m-ticketing) and delivering cost savings. In the year, efficiencies were made in a range of areas including employee productivity and procurement.

Last year, I set out our key assumptions underpinning the target. We are tracking broadly in line with those assumptions and consider them to remain valid as we go into 2014/15. These assumptions are on an annual basis and may vary from year to year.

- Average annual deregulated bus revenue growth of 3.5%

- Average annual regulated bus revenue growth of 2.5%

- Average annual cost inflation of 2.5-3.0%

- Cost efficiency savings of £10m by 2015/16

- No significant mileage growth in the regulated and deregulated business

- Like for like deregulated bus revenue growth of 4.3%

- Like for like regulated bus revenue growth of 7.5%, including a reallocation of BSOG representing 3.7%, not included within the target assumptions

- Cost increases broadly in line with inflation. Some costs increased proportionately with mileage growth.

- Insurance savings of £4.0m and other cost savings of £1.9m in the year, resulting in cumulative cost savings of £6.9m since 2012/13.

- Like for like regulated bus mileage growth of 1.6% and deregulated of 1.8%

Although the target was based on organic growth, we continue to assess acquisition opportunities both in and outside London. With the exception of the purchase of a small number of TfL route contracts in Dagenham, East London, in June 2013, the Group has made no acquisitions since announcing the target.

We remain confident in our ability to deliver our target by 2015/16.

In the year, we invested significantly in our bus operations. We introduced 267 new vehicles to our fleet and upgraded our depot facilities. In February, I was pleased to open a new bus depot in Gateshead. Over 500 Go North East drivers and engineers will operate from our £8.5m facility which will provide a modern working environment for our people and will enable us to improve efficiency by combining two previous sites.

It is only by achieving our profit targets that we are able to reinvest in our networks, improving customer experience, creating opportunities for our people and growing a larger and stronger business which generates superior returns for our shareholders.

Our operational performance

Delivering excellent levels of customer service is important to us and I am impressed by the standards of service across the Group. Our bus division achieved its highest ever passenger satisfaction score which, at 92%, is industry leading and we maintained our high levels of service punctuality.

In the period I was disappointed that rail passenger satisfaction scores dipped in two of our three franchises. This has been an unusual year in terms of performance with Southeastern, for example, delivering its best ever customer satisfaction score of 84% in the first half of the year, followed by one of its lowest scores of 72% in the second half. This illustrates the extent to which our services can be impacted by factors outside our control, such as flooding and landslips, and infrastructure maintenance. We are committed to improving performance and delivering good quality service for our passengers. Through our joint performance board with Network Rail, we have taken steps to address these issues and I am confident that improvements will be made.

Working in partnership

Collaboration and partnership working is a particular strength for Go-Ahead. We have always worked closely with our key strategic partners and in the year we further strengthened these relationships. We also place great importance on our relationships with Government, TfL and local authority partners.

The complex nature of the rail industry requires collaborative working between train operating companies, infrastructure companies and suppliers. There are times when we take on activities not traditionally considered part of the operator's role, such as large station management, train procurement and project management of major refurbishments. During the year, the DfT benefited from our expertise in rolling stock procurement to deliver new trains. This is becoming an increasingly valuable partnership.

In bus, I am pleased with the progression of our business-to-business relationships during the year. Two of our bus companies already have schemes in place with local businesses and during 2014/15 all our other deregulated bus companies will launch schemes to provide local companies with travel plans for their employees.

Innovation and technology

We continue to lead the way in the industry with our online journey planning and ticketing solutions. We understand that our customers use our services to facilitate their daily lives and our aim is to continue to improve the convenience of choosing public transport. Acknowledging the growing demand for mobile apps and other means of providing up to date information on the move, we are constantly developing our approach in this field, always remaining focused on customers' needs. Seven in ten people in the UK now have a smartphone and the appetite for mobile technology is demonstrated by UK consumers buying more via smartphones than the rest of Europe.

We have been developing smartcards and m-ticketing solutions for a number of years now and our efforts in this area are going from strength to strength. Since the launch of our first smartcard in 2011 around 550,000 people have switched to 'the key', which is used across all of our large bus operations. In less than two years, over 130,000 people have downloaded our m-ticketing bus app to their mobile phones.

In October 2013, we launched an initiative enabling rail passengers to travel from stations served by Southern into central London, tapping in and out with 'the key'. Working with TfL in this industry first, we will be extending this to allow customers to use our smartcard on London Underground services, with a pilot scheme planned for later this year. This is just the start of our plans to drive integrated transport, enabling passengers to move from bus to train to tube seamlessly, using one Go-Ahead product.

Adding to our suite of digital tools for customers we introduced our rail app, 'On Track', in January 2014, delivering highly personalised real-time information and journey planning at the touch of a button. The locally branded app was designed with the help of passengers and rail user groups. In addition to planning journeys, passengers can buy tickets and even claim compensation if their train is delayed. In the first three months alone 100,000 people downloaded 'On Track' and take up has continued to grow, with close to 150,000 people now using the app.

Ticketing and journey planning solutions are not the only areas where we seek to innovate; we also strive to develop the technology we use on our buses and trains to make them more efficient and reduce the impact they have on the environment. In 2012, we announced our pilot scheme using flywheel technology. This has been a great success and has directly contributed to us securing two London bus contracts. Over the next two to three years we have plans to introduce flywheel systems to 500 additional buses, resulting in over 10% of our fleet being powered by this leading edge technology. This significant investment is part of our longstanding commitment to reduce carbon emissions in the towns and cities we serve, as well has helping to control fuel costs. In the year, we continued to work with local authorities to address their targets around air quality and emissions.

Our people

Our people are the key to our success. I am proud to be Chief Executive of a business with such dedicated individuals and teams working to develop themselves and also the Group and its prospects.

We are committed to developing our people and this year we have placed more focus on this priority than ever before. We have great people in the business today but we need to plan for tomorrow. We have detailed plans in place across our businesses designed to ensure we are attracting, retaining and developing high calibre individuals.

We have succession plans from the Board through all levels of the business, and are using our leadership development programme to identify and develop individuals with potential across the Group.

During the year, I was pleased to launch a Sharesave scheme for our employees, enabling them to share directly in the Group's success, to which we all contribute.

The nature of our industry means that we face challenges at all levels of the business every day and we believe our local teams are best-placed to respond to them. During the year, we continued to build on our organisational capabilities. We have the benefit of being a large organisation at the same time as having autonomous business units making local decisions.

I have great trust in all our local management teams across the business. I am delighted to have appointed such an experienced management team to lead GTR, particularly as many have been internal promotions from existing Group companies.

Outlook

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

We are entering an exciting period for the Group. There is a lot of hard work ahead of us and also a lot to look forward to. It has been a very good year and I am confident we will continue to achieve more success going forward.

We remain confident in our ability to deliver our £100m bus operating profit target by 2015/16. We are already an efficient business and there are no 'easy wins' for us so we are introducing innovative technology, such as the flywheel, and further improvements in our business practices to deliver cost savings. We will continue to invest in our marketing activity, improving customer service, and delivering quality value for money offers to drive passenger numbers and subsequently revenue.

The coming year promises a great deal of activity in our rail division. Following a short mobilisation period, GTR will run its first service on 14 September 2014. In the following months our focus will be on the successful delivery of the franchise commitments, working closely with industry partners such as Network Rail and train manufacturer Siemens, and preparing for the integration of our existing Southern franchise into GTR.

Following the success of the TSGN bid, our experienced bid team continues to work on forthcoming opportunities. These include the Northern and TransPennine Express franchises which we were pleased to be shortlisted for in partnership with Keolis, following the year end. We look forward to submitting our bids in spring 2015.

We hope to agree terms with the DfT shortly for the extension of Southeastern from October 2014 to June 2018 and we continue discussions with the DfT regarding the proposed extension of the London Midland franchise from March 2016 to June 2017.

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 both within and outside our traditional markets. This strong position underpins the Board's decision to propose an increased final dividend for the year, the first such increase since 2007/08.

Business review - Bus

Bus overview

* On a like for like basis, adjusting for the impact of the Olympic Games.

Overall bus performance review

Overall, the performance of our bus operations was our strongest yet, with increased commercial and concessionary revenue and good cost control, particularly around insurance claims. Total bus revenue increased by 5.1%, or £39.0m, to £800.5m (2013: £761.5m).

The bus division delivered record operating profit of £83.5m (2013: £75.2m), increasing in the year by £8.3m, or 11.0%, resulting in an increase in operating profit margin of 0.5ppts to 10.4%.

Deregulated bus operations

All our deregulated bus operations saw revenue growth in the period, helped by consistent passenger journey growth and initiatives such as increased purchasing options for passengers, including smart and mobile-ticketing (m-ticketing).

Revenue was £350.8m (2013: £337.6m), up £13.2m, or 3.9%. Excluding the impact of the Olympic Games, revenue growth was 4.3%, underpinned by passenger journey growth of 1.9% and mileage growth of 1.8%. The increase in mileage was due to investment in our services and commercial contract wins. The increase in passenger numbers was driven by growth in both fare paying and concessionary passengers.

Operating profit was £41.9m (2013: £36.4m), up £5.5m, or 15.1%, and operating margins increased to 11.9% (2013: 10.8%). We made good progress towards Target 100 and, despite lower cost savings in the second half of the year compared to the first, overall cost savings of £2.9m since 2012/13 remain on target. Cost of claims improved slightly as we continued to focus on accident prevention and minimising claims. This, combined with underlying growth and lower capital costs, more than offset increased fuel costs, resulting from a higher hedged price, and slightly higher pension costs, relating to the closure of the final salary pension scheme.

Providing high quality passenger services is one of our strategic priorities. During the year, we maintained our consistently high levels of punctuality at 90.0% (2013: 91.2%), with some operating companies achieving higher than 96%. Our customer satisfaction score of 92% (2013: 90%) is the highest in the sector and surpasses those of many leading companies in other industries including retail and leisure.

In the year, we continued to focus on providing largely commercial services, with only around 10% of our deregulated revenue generated from contracts that could be exposed to changes in local authority policies and budgets. Over time, our geographic focus in the South has helped to protect us from the challenges of the wider economic environment.

Regulated bus operations

Our regulated bus operations in London delivered a very strong performance. Revenue grew by 6.1%, or £25.8m, to £449.7m in the year (2013: £423.9m). Excluding the impact of the Olympic Games, revenue growth was 7.5%, of which 3.7% related to the reallocation of Bus Service Operators Grant (BSOG) from costs to contract revenue. Mileage was up 1.1%, or 1.6% when excluding the impact of the Olympic Games. This was helped by increased rail replacement work, particularly in the first half of the year.

Operating profit was £41.6m (2013: £38.8m), up £2.8m, or 7.2%. Operating margins increased to 9.3% (2013: 9.2%), up 0.4ppts on prior year margins adjusted for the impact of the Olympic Games of 8.9%. Reduced claims costs and contract growth have more than offset incremental fuel costs and reduced Quality Incentive Contract (QIC) payments, which, although still strong at £9.1m (2013: £9.9m), were lower, as anticipated, than the prior year when performance improved due to restrictions on roadworks around the Olympic Games period.

We continue to perform well in the Transport for London (TfL) quality league tables, operating 99.5% (2013: 99.5%) of our target mileage before traffic congestion losses.

North America

During the year our 50:50 joint venture with Cook-Illinois continued to operate two contracts in St Louis, Missouri, running around 120 buses.

These contracts came to an end following the year end on 25 July 2014. This operation was cash generative during the contract term.

Capital expenditure and depreciation

Capital expenditure for the division was £61.3m (2013: £51.3m), of which £49.8m related to the purchase of new vehicles, including £5.6m on 18 hybrid buses, which will improve fuel efficiency and reduce carbon emissions.

Investment in our deregulated fleet was higher than in 2013, with expenditure of £43.2m (2013: £27.9m) on 244 new buses (2013: 157 buses).

Contract wins in our regulated business required £6.6m (2013: £17.4m) to be spent on 23 new buses (2013: 94 buses). Investment in our regulated fleet was less than in the prior year as requirements for new vehicles were lower as a result of continued success in gaining automatic two year contract extensions on the basis of performance.

We have a young, green bus fleet with an average age of 7.5 years.

Depreciation for the division was £45.2m (2013: £45.7m).

Fuel

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.

After the year end the Board approved an additional purchase to increase the hedging profile for 2015/16 to 100%, taking advantage of low commodity costs and favourable exchange rates. As a result, we have fixed costs at 45.8ppl for 2015/16.

* Assuming hedging is completed at the latest transaction price.

Bus fuel costs

In 2013/14 we consumed around 127 million litres of fuel at a net cost of £112.9m. From 1 October 2013, the allocation of part of BSOG was devolved to local authorities and TfL. The amount of BSOG received directly from central Government has reduced to around £20m (2013: £44.0m).

Overall bus outlook

We continue to make steady progress against Target 100 and are confident in our ability to achieve this by 2015/16. We expect this to be delivered through continuing deregulated revenue growth, a stable performance in our regulated business, keeping costs in line with, or below, inflation and progressing toward £10m of cost savings by 2015/16. The impact of IAS 19 (revised) is included in the target.

In deregulated 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. We will remain focused on cost efficiency while maintaining the quality and reliability of our services.

In regulated bus, contract mileage is expected to be broadly flat in the year and we anticipate a slight year on year reduction in QIC payments.

In 2014/15, we expect total capital expenditure to be around £40m as we continue to invest in our services. We will continue to look for value adding investment opportunities both in and outside our traditional markets.

Business review - Rail

Rail overview

* On a like for like basis, adjusting for the estimated impact of the Olympic Games.

Rail performance review

The rail division has delivered a good result in the year, significantly exceeding our initial expectations, despite a challenging premium payment profile.

Overall passenger revenue growth was 5.4% (2013: 7.6%). When adjusted for the impact of the Olympic Games this was 6.1%, slightly lower than last year (2013: 6.9%), due in part to lower fare increases in January 2014 than the prior year. Passenger journey data across all companies was impacted by a change in Travelcard allocations, inflating growth rates as well as an increase in shorter, lower yield journeys. Total passenger journey growth was 4.0% (2013: 2.8%) or 4.8% when adjusting for the impact of the Olympic Games (2013: 2.0%).

The Group's net increase in contributions to the DfT was £51.6m (2013: £85.9m increase) with an overall contribution of £64.0m (2013: £12.4m). Southern's core premium payments to the DfT increased by £29.8m in the year whilst subsidy receipts in Southeastern and London Midland decreased by £44.5m and £2.5m respectively, a total increase in net core premium of £76.8m. Revenue support increased by £15.8m for Southeastern. Southern, which became eligible to receive revenue support during the year, was paid £9.4m in the period.

Revenue

Total revenue increased by 5.1%, or £91.6m, to £1,901.9m (2013: £1,810.3m) consisting of:

Premium payments

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

Operating profit

Operating profit in the rail division was up £8.2m at £19.7m (2013: £11.5m), with operating margins increasing to 1.0% (2013: 0.6%) but remaining at historically low levels.

Rail bid costs of £8.1m (2013: £3.2m) were higher than in the prior year due to increased bidding activity, including £5.9m for our successful bid for the Thameslink, Southern and Great Northern (TSGN) franchise, which we will operate as GTR (Govia Thameslink Railway). The remaining costs were in respect of our unsuccessful Crossrail bid and the bidding activity associated with our bid for Docklands Light Railway, which was not submitted, due to our partners, Colas UK, withdrawing from the process ahead of the bid submission date.

Individual franchise performance

Southern

Passenger revenue growth was 5.8% (2013: 5.6%) year on year driven by growth in passenger numbers of 3.9% (2013: 1.1%). When adjusting for the impact of the Olympic Games, passenger revenue increased by 6.1% (2013: 5.4%) and journeys were up 4.1% (2013: 0.8%).

Southern is now in receipt of revenue support at the maximum 80% level.

Southeastern

Overall passenger revenue increased by 4.3% (2013: 8.0%), with passenger numbers up 3.8% (2013: 4.7%). Excluding the impact of the Olympic Games, passenger revenue grew by 5.6% (2013: 6.7%), with an increase of 5.3% (2013: 3.1%) in the number of journeys taken. Southeastern was impacted by a revenue recognition adjustment in the fourth quarter, but otherwise traded in line with our expectations.

In March 2014, Southeastern began a seven month extension period, continuing on the original contract assumptions.

The franchise continues to receive revenue support at the 80% level.

London Midland

Passenger revenue grew by 6.8% (2013: 12.1%) in the year and passenger numbers increased by 4.5% (2013: 2.4%). Passenger revenue and journeys rose 7.4% (2013: 11.5%) and 4.9% (2013: 2.1%) respectively, when adjusting for the impact of the Olympic Games.

As previously reported, the rate of passenger revenue growth in the London Midland franchise began to slow during the year as a result of increased competition on the West Coast main line.

During the year, London Midland carried out a reorganisation of management and administrative staff to reduce costs. This resulted in an exceptional charge of £3.0m in the year.

The franchise has been awarded a seven month extension which will run to March 2016, continuing on its original contract terms.

London Midland is no longer making revenue share payments to the DfT.

Capital expenditure and depreciation

Capital expenditure for the rail division was £8.2m (2013: £7.2m), slightly higher than the prior year. Depreciation for the division was £15.5m (2013: £12.4m).

Capital expenditure for 2014/15 is expected to increase to around £25m reflecting the start of the GTR franchise and assuming the start of Southeastern's planned extension to June 2018 in October 2014.

Rail outlook

We are entering a transitional year in rail. On 14 September 2014, we will begin operating the Great Northern and Thameslink routes of the GTR franchise. We anticipate a margin of around 3% from the beginning of the franchise.

We continue discussions with the DfT regarding the planned extension of the Southeastern franchise to June 2018 and we hope to agree terms shortly. The seven month extension period, which is expected to run to 12 October 2014, will continue to be loss making.

London Midland is not expected to contribute to Group profit in 2014/15. We look forward to working with the DfT in the coming months to agree contract terms for the planned extension to this franchise to June 2017.

The full benefits of GTR and the planned extension of Southeastern will not be realised until 2015/16. Southern will continue on its original contract terms until July 2015 when it will be incorporated into the GTR franchise and London Midland will also remain on existing terms in 2014/15. We expect the same level of bid costs as in 2013/14. Therefore, we expect rail profits to be broadly similar to 2013/14.

Finance review

Overview and highlights

The Group delivered a strong performance in the year ended 28 June 2014 and is in a good financial position. Revenue for the year was £2,702.4m, up £130.6m, or 5.1%, on last year (2013: £2,571.8m), with growth in both bus and rail.

Operating profit was significantly ahead of the Board's initial expectations for the year and slightly ahead of our latest expectations at £103.2m (2013: £86.7m), up £16.5m, or 19.0%. The overall operating margin of 3.8% (2013: 3.4%) was driven by stronger performance in both bus and rail. The bus division delivered record profits in the year, making good progress towards Target 100, our 2015/16 £100m bus operating profit target.

Profit before tax excluding amortisation and exceptional items for the year increased by £15.3m, or 22.0% to £84.9m (2013: £69.6m) and adjusted earnings per share were up 26.4% at 148.6p (2013: 117.6p).

Net debt at the year end reduced significantly to £42.7m (2013: £90.9m) reflecting higher profits, positive working capital inflows and slightly lower than expected capital expenditure. Adjusted net debt (net debt plus restricted cash) to EBITDA (adjusted for the impact of IAS 19 (revised)) of 1.45x (2013: 1.87x) remains close to our target range of 1.5x to 2.5x.

Summary income statement

* Excludes amortisation 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 £63.7m (2013: £50.4m), resulting in an increase in adjusted earnings per share from 117.6p to 148.6p.

The weighted average number of shares was 42.9 million (2013: 42.8 million), and the number of shares in issue, net of treasury shares, was 42.9 million (2013: 42.8 million).

Dividend

The Board is proposing a total dividend for the year of 84.5p per share (2013: 81.0p), an increase of 4.3%, reflecting the Board's confidence in the Group's performance and prospects. This includes a proposed final payment of 59.0p per share (2013: 55.5p) payable on 14 November 2014 to shareholders registered at the close of business on 31 October 2014.

Dividends of £34.7m (2013: £34.7m) paid in the period represent the payment of the prior year's final dividend of 55.5p per share (2013: 55.5p) and the interim dividend in respect of this year of 25.5p per share (2013: 25.5p). Dividends paid to non-controlling interests were £8.6m (2013: £6.0m). Excluding the non-cash impact of IAS 19 (revised), dividend cover was 2.04x (2013: 1.72x).

Summary cashflow

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

Cashflow

Cash generated from operations before tax was £184.3m (2013: £126.0m). This is an increase of £58.3m, largely due to better than expected profits and a favourable movement in working capital, primarily reflecting timing of payments in rail. Tax paid of £12.4m (2013: £11.1m) comprised payments on account in respect of the current year's liabilities. Net interest paid of £15.0m (2013: £16.9m) is lower than the charge for the period of £18.3m (2013: £17.1m) after excluding the impact of non-cash interest on pensions and the unwinding of discounting on provisions. Capital expenditure, net of sale proceeds, was £10.5m higher in the year at £67.3m (2013: £56.8m) predominantly due to greater investment in the deregulated fleet. Investment in the bus division is expected to reduce to around £40m in 2014/15 due to the timing of regulated bus contract renewals.

The Group did not repurchase any shares (2013: nil) and no shares were issued in the year (2013: nil).

Capital expenditure

Expenditure on capital during the year can be summarised as:

Capital structure

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

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

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. The sterling bond is due to expire in September 2017.

At the year end, $4.3m, equivalent to £2.5m, of our $10m dollar facility was utilised. This is expected to be repaid following the sale of our US school bus vehicles following the end of the contracts in July 2014.

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

Net debt

Net debt of £42.7m (2013: £90.9m) comprised the £200m sterling bond; amounts drawn down against the £275m five year RCF of £120.0m (2013: £133.0m); hire purchase and lease agreements of £2.0m (2013: £3.6m); US dollar facility of £2.5m (2013: £3.2m), partly offset by cash and short term deposits of £281.8m (2013: £248.9m) including £217.3m of restricted cash in rail (2013: £208.7m). There were no overdrafts in use at the year end (2013: £nil).

Our primary financial covenant under the 2016 RCF was an adjusted net debt to EBITDA ratio of not more than 3.5x. Under this facility we adjusted for the effects of IAS 19 (revised) of £15.6m (2013: £15.8m) giving a restated net debt to EBITDA ratio of 1.45x (2013: 1.87x). Under the 2019 RCF no adjustment is made. Had this been in place at the year end our covenants would have been 1.59x (2013: 2.07x)

Net finance costs

Net finance costs for the year were slightly ahead of the prior year at £18.3m (2013: £17.1m) including finance costs of £19.8m (2013: £18.7m) less finance revenue of £1.5m (2013: £1.6m). This now includes £2.0m of pension interest, previously allocated under operating profit (2013: £0.8m), with £1.2m in bus and £0.8 in rail.

The average underlying net interest rate for the period was 4.3% (2013: 4.3%).

Amortisation

The amortisation charge for the year of £5.8m (2013: £6.5m) represents the non-cash cost of amortising software costs, franchise bid costs, customer contracts and rail franchise acquisition assets.

Exceptional items

Total exceptional items in the year were £12.1m. (2013: £nil).

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

Rail restructuring costs were £3.0m. Against a backdrop of reduced subsidy receipts, more challenging trading conditions and higher operational costs, London Midland carried out a reorganisation to reduce the number of management and administrative staff, in order to reduce costs.

Taxation

Net tax for the year was £13.6m (2013: £13.1m), equivalent to an effective rate of 14.9% (2013: 20.8%), below the UK statutory rate for the period of 22.5% (2013: 23.75%). This primarily reflects a £6.8m credit (2013: £2.1m credit) in respect of the impact on deferred tax due to the change in statutory rate. Without this adjustment to deferred tax, our tax rate would have been around 22.4% (2013: 24.1%). The statutory rate is expected to be 20.75% in 2014/15, reducing to 20% in 2015/16. We expect our effective tax rate to be around 1% above the statutory rate in future years.

Non-controlling interest

The non-controlling interest in the income statement of £7.3m (2013: £3.8m) 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 £53.8m (2013: £51.3m) consisting of bus costs of £6.7m (2013: £7.8m) and rail costs of £47.1m (2013: £43.5m). Group contributions to the schemes totalled £43.2m (2013: £46.9m).

Bus pensions

Under accounting valuations, the net deficit after taxation on the bus defined benefit schemes was £47.8m (2013: £36.7m), consisting of pre-tax liabilities of £59.8m (2013: £47.7m) less a deferred tax asset of £12.0m (2013: £11.0m). The pre-tax deficit consisted of estimated liabilities of £663.3m (2013: £617.3m) less assets of £603.5m (2013: £569.6m). The percentage of assets held in higher risk, return seeking assets was 50% (2013: 49%).

During the year, the Group completed negotiations to close the Go-Ahead Group Plan defined benefit scheme to future accruals which took effect on 31 March 2014. The full year cost for the bus scheme was £8.7m (2013: £8.6m). Without the scheme closure the full year costs would have been over £10.5m. Future cash contributions are expected to be lower.

An asset backed funding arrangement is now in place which gives pension scheme trustees an interest in some Group properties. This combined with the scheme closure is expected to eliminate the actuarial deficit on the scheme. The actuarial valuation applies different assumptions to the valuation of assets and liabilities from those used in the accounting valuations.

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 (2013: £nil).

IAS 19 (revised)

IAS 19 (revised) became effective for the Group in the year under review. The impact of the change on profit before tax was a reduction of £14.2m, £8.6m of which is attributable to equity holders of the parent. This resulted in a reduction in basic earnings per share of 20.1p and a reduction in adjusted earnings per share of 24.0p, of which 9.6p relates to the bus division.

Having applied the revised standard to the financial statements for the year ended 29 June 2013, the effect is a reduction in profit before tax of £12.8m, £7.5m of which is attributable to equity holders of the parent. This has resulted in a reduction in basic earnings per share of 17.5p and a reduction in adjusted earnings per share of 22.0p, of which 6.8p relates to the bus division.

The table below shows the impact of IAS 19 (revised) on the financial results to 28 June 2014, and the impact on the restated results to 29 June 2013.

The complete restatement of prior period comparatives is set out in note 1 to the financial statements

Key risksThe key risks described in the Group's Annual Report for the year ended 28 June 2014 can be summarised as below. More detail can be found on pages 34-37 of the 2014 Group Annual Report and Accounts, available on our website at www.go-ahead.com

Key risks for 2014 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, win or successfully mobilise 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.

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

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.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 £9.3m.Information technology (IT) failure or interruption Prolonged or major failure of IT systems could pose significant risk to the ability to operate and trade.

Consolidated income statement

for the year ended 28 June 2014

* Restated for adoption of IAS19 (revised) as explained in note 1.

Consolidated statement of comprehensive income

for the year ended 28 June 2014

* Restated for adoption of IAS19 (revised) as explained in note 1.

Consolidated statement of changes in equity

for the year ended 28 June 2014

* Restated for adoption of IAS19 (revised) as explained in note 1.

Consolidated balance sheet

as at 28 June 2014

* Restated for adoption of IAS19 (revised) as explained in note 1.

Consolidated cashflow statement

for the year ended 28 June 2014

* Restated for adoption of IAS19 (revised) as explained in note 1.

Notes to the consolidated financial statements

for the year ended 28 June 2014

1. Restatement of prior period comparatives

The following tables show restated prior period comparative figures for the reportable divisions and for the Group for the financial year ended 29 June 2013. The restatement reflects the retrospective adjustment from the adoption of the changes in IAS 19 'Employee Benefits' (revised) which applies to financial years beginning on or after 1 January 2013. The key impact on the Group from the revised standard removes the assumptions for expected return on plan assets and discounting of scheme liabilities and replaces them with one single discount rate for the net deficit, as discount rates are typically lower than returns on assets this reduces the credit in the income statement for returns on scheme assets and therefore increases the net pension charge. The actual benefit and the cash contributions for these plans are not impacted by the revised standard.

The adoption of IAS 19 (revised) has also resulted in the derecognition of the rail pension intangible asset, which was created to offset the pension deficit recognised at the outset of the franchise. The effect of the increased IAS 19 (revised) pension costs is to increase the estimate of the deficit at the end of the franchise and thereby reduce the post franchise adjustment liability to £nil.

Subsequent to the introduction of IAS 19 (revised) in the interim statements to 28 December 2014, the Group has reviewed annual reports of peer groups and other FTSE 350 companies and restated defined benefit pension scheme net interest expense from operating costs into finance costs. 

Consolidated income statement

Consolidated statement of comprehensive income

Consolidated balance sheet

* To remove the rail pension liability of £7.7m previously recognised at the year ended 30 June 2012.

2. 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 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 (2013: £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 28 June 2014 and the year ended 29 June 2013.

Year ended 28 June 2014

At 28 June 2014, there were non-current assets of £nil (2013: £2.3m) and current assets of £1.8m (2013: £0.4m) relating to US operations, being made up of equity accounted investments of £nil (2013: £nil) and loans of £1.8m (2013: £2.7m) in Go-Ahead North America, a 50:50 joint venture with Cook-Illinois which commenced trading in August 2010. For the year ended 28 June 2014, segment revenue for this venture was £1.7m (2013: £2.2m) and segment profit was £nil (2013: £nil).

During the year ended 28 June 2014, segment revenue from external customers outside the United Kingdom was £1.7m (2013: £2.2m), which related entirely to the Go-Ahead North America joint venture.

Year ended 29 June 2013 restated

3. Group revenue

This note provides an analysis of Group revenue.

4. Operating costs (excluding amortisation 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 £423.9m (2013: £408.2m), net of sublease payments of £16.6m (2013: £13.3m) relating to other rail leases.

2 The total lease and sublease payments recognised as an expense are made up of minimum lease payments of £885.0m (2013: £847.6m), net of sublease payments of £16.6m (2013: £13.3m) 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 £0.2m (2013: £0.2m) and audit of subsidiaries' financial statements of £0.4m (2013: £0.4m).

During the year, £1.8m (2013: £0.7m) was also paid to other 'Big 4' accounting firms for a variety of services.

5. 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 28 June 2014 as follows:

The expense recognised for the scheme during the year to 28 June 2014 was £0.1m (2013: n/a).

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

The weighted average share price at the date of exercise for the options exercised in the period was n/a (2013: n/a).

The options outstanding at the end of the year have a weighted average remaining contracted life of 2.83 years (2013: n/a). These options are exercisable at £17.34 (2013: n/a).

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 28 June 2014 was £1.8m (2013: £0.1m).

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 28 June 2014 and 29 June 2013 were:

The weighted average fair value of options granted during the year was £15.63 (2013: £10.96).

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

At the year end, 76,489 options were exercisable and the weighted average exercise price of the options is £23.67 (2013: £nil).

The weighted average remaining contractual life of the options is 0.79 years (2013: 1.53 years). The weighted average share price of options exercised was £21.32 (2013: n/a).

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 28 June 2014 was £0.3m (2013: less than £0.1m).

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 £16.39 (2013: £12.32).

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

Deferred Share Bonus Plan continued

At the year end, 866 options were exercisable and the weighted average exercise price of the options is £23.67 (2013: nil).

The weighted average remaining contractual life of the options is 1.75 years. The weighted average share price of options exercised was £20.19 (2013: £nil).

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.

6. 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 28 June 2014

Total exceptional items in the year were £12.1m.

The pension plan curtailment gain of £15.1m arose on closure of the defined benefit scheme. This reduces the Group's exposure to further increasing benefits; current members' existing benefits are preserved but no further benefits will accrue, resulting in an adjustment to the Group's future liabilities. This is 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 are restructuring front line and head office personnel.

Year ended 29 June 2013

There were no exceptional items in the year ended 29 June 2013.

7. Finance revenue and costs

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

8. Taxation

This note explains how our Group tax charge arises. The deferred tax section of the note also sets out the 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 before tax and exceptional items at the statutory tax rate to tax at the Group's effective tax rate for the years ended 28 June 2014 and 29 June 2013 is as follows:

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:

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

9. 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 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 28 June 2014 to 3 September 2014.

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 items in order to show a 'normalised' earnings per share. This is analysed as follows:

Year ended 28 June 2014

Year ended 29 June 2013

10. Dividends paid and proposed

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

11. 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:

Additions and acquisitions during the year included £nil (2013: £nil) of rolling stock and £nil (2013: £nil) of plant and equipment under finance leases and hire purchase contracts.

12. Intangible assets

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

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 is 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 8.3% (2013: 9.3%), based on the Group's weighted average cost of capital, plus an appropriate risk premium for the business of 0.0-2.0% (2013: 0.0-2.0%).

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. We have conducted sensitivity analysis on our calculations and except for Anglian, no reasonable change in key assumptions would cause the unit carrying amount to exceed its recoverable amount. Using a 8.3% pre-tax discount rate, Anglian has headroom of £1.2m. An increase in discount rate of 0.7% or a reduction of cashflows of 14% would be required to reduce the headroom in this business to £nil.

13. Business combinations

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

Year ended 28 June 2014

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

Year ended 29 June 2013

On 22 June 2013, London General Transport Services Limited, a wholly owned subsidiary of the Group, acquired 11 residual TfL Route contracts, including 45 buses, from First Capital East Limited's operation in Dagenham for a cash consideration of £0.7m.

Net assets at date of acquisition:

Acquisition costs of £nil have been expensed through other operating costs.

14. 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 28 June 2014, assets held for sale, had a carrying value of £72.4m, of which £68.6m (2013: £nil) represents a payment on account for new rolling stock in Southern Railway Limited and in respect of which it is expected that a sale and operating leaseback will be completed before 27 June 2015. The remaining £3.8m (2013: £2.8m) relates to property, plant and equipment available for sale.

15. Inventories

Our inventory primarily consists of vehicle spares and fuel and is presented net of our allowance for obsolete products.

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

16. Trade and other receivables

Our trade and other receivables mainly consist of amounts owed to us 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 £1.0m (2013: £1.2m) were impaired and fully provided for. Movements in the provision for impairment of receivables were as follows:

As at 28 June 2014, the ageing analysis of trade receivables is as follows:

17. 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 enable us to meet our 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 28 June 2014, balances amounting to £217.3m (2013: £208.7m) were restricted. Part of this amount is to cover deferred income for season tickets which was £123.4m at 28 June 2014 (2013: £118.2m).

18. Trade and other payables

Our trade and other payables mainly consist of amounts we owe 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.