Full Year Results

Press Release

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

FULL YEAR RESULTS FOR THE 12 MONTHS ENDED 30 JUNE 2012

A strong performance; results in line with management expectations

Business overview

• Highest ever passenger levels across both bus and rail

• Largest ever investment in bus fleet of £80m

• Best in class London bus operations; cost efficient and high quality operator

• Record profits in deregulated bus driven by sector leading passenger growth

• Robust rail performance with good revenue growth in all franchises

• Five value adding bus acquisitions and shortlisted for the new Thameslink franchise

• Underlying operating profit growth; prior year included £13m of one-off rail contract management benefits

• Strong cash management and robust balance sheet

• Maintained full year dividend at 81.0p; cover strengthened

• Despite the challenging economic environment, the new financial year has started well and trading is in line with the Board's expectations

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

* Excludes amortisation and exceptional items.

+ Net debt plus restricted cash.

David Brown, Group Chief Executive, commented:

"Over the last year, Go-Ahead has made significant progress in building a stronger Group and delivering on our strategic goals. Most recently, I am really proud of the key role our staff played in helping to deliver a highly successful transport network for the London 2012 Olympic Games.

"Against a challenging economic backdrop, we have continued to drive growth across our bus and rail companies and carried a record number of passengers on our services. The year also saw the Group's largest ever investment in our bus fleet and the roll-out of "the key" smartcard across our bus operations outside London.

"Our deregulated bus business performed exceptionally well in the year, delivering record operating profit and sector leading passenger growth and our London bus operations remain best in class. In line with the Group's strategy to grow our core bus division, we acquired four value-enhancing deregulated businesses, strengthening our portfolio of resilient operations in the South. In our regulated business, we moved into North London with the acquisition of the Northumberland Park depot.

"Overall, the Group's rail division performed well during the period, with strong operational performance across all three franchises and good passenger revenue growth, particularly in London Midland. Southern has started to be impacted by the economic environment, as the bid model assumed stronger economic growth rates than are currently being experienced.

 "Our three rail franchises carry almost a third of all rail passengers in England. We have significant experience of successfully managing complex commuter franchises and delivering industry leading projects and will be using this expertise to deliver a strong bid for the new Thameslink franchise.

"Despite the challenges facing the economy, the new financial year has started well and trading is in line with the Board's expectations. We operate in a market that has many fundamental strengths and we are well placed to benefit from the growing need for a sustainable and efficient public transport system."

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 (6 September 2012) at Investec, 2 Gresham Street, London EC2V 7QP, Tel: +44 (0) 20 7597 5970.

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

Chairman's statement

The Group has delivered another strong performance. In the year to 30 June 2012, we carried a record 1.1 billion passengers on our bus and rail services and achieved sector leading growth in our core bus operations.

This is a significant achievement and demonstrates the effectiveness of the Group's long standing strategy of providing high quality and locally focused passenger transport services. For us, quality means meeting the expectations of our passengers across all elements of the journey from safety, comfort, and value for money to reliability, availability of information and ease of buying a ticket.

Innovative marketing campaigns combined with our efforts to make travelling on our services more convenient and cost efficient through the roll out of smart-ticketing have helped to drive organic growth. In addition, the rising cost of motoring, together with other pressures on household budgets, has encouraged more people to take advantage of the good value offered by our services.

Revenue for the year was £2,423.8m, 5.5% ahead of last year (2011: £2,297.0m) underpinned by strong passenger revenue growth in deregulated bus and rail and new contract wins in London bus. Operating profit was £110.2m (2011: £115.1m). Excluding the £13.0m of one-off rail contract management benefits last year, underlying operating profit was up £8.1m.

Business development and acquisitions

In addition to growing the Group organically, we acquired a number of value enhancing bus businesses during the second half of the year.

Complementing our existing commercial bus operations in the south of England, we acquired four deregulated businesses. We also strengthened our position in the London bus market by expanding into a new operating area through the acquisition of a depot and associated contract routes in North London.

In rail, we are delighted to be on the shortlist for the new combined Thameslink, Southern and Great Northern franchise (Thameslink) and our highly experienced rail development team are working hard to deliver a strong bid, designed to create value for shareholders, passengers and tax payers.

Shared value and a sustainable approach

As a public transport provider, our growth benefits the economy, society and the environment and we are proud of the role we play in creating shared value. More passengers using our services means fewer car journeys on the road, less congestion and pollution and improved social inclusion. Public transport plays a crucial role in building a successful economy by providing essential access to labour markets, businesses and education.

For Go-Ahead, running our businesses sustainably is integral to our success. Delivering safe, reliable and value for money services helps us to grow passenger numbers. At the same time, ensuring our buses and trains are energy efficient helps us to protect the environment and reduce operating costs. We work hard to build strong relationships with our local communities so that we can play a wider role as a responsible citizen in the towns and cities in which we operate.

Our efforts to operate responsibly were recognised this year when Go-Ahead achieved the highest transport operator rating in Britain in the Government's new Carbon Reduction Commitment league table. Ranking companies on their energy efficiency performance, our score placed us in the top 5% of more than 2,000 companies. We were also delighted to be named the tenth best company in the world for our sustainability performance by EIRIS, a leading global provider of independent research into the ethical performance of companies.

As a result of acquisitions made in the financial year, the average number of employees increased by around 800, bringing the Group total up to 23,000. I would like to thank our staff for their continuing dedication and hard work to ensure we remain a strong and successful Group.

Robust corporate governance

Our Board of Directors has a broad range of experience and expertise and is committed to the principles of best practice in corporate governance. During the year, we implemented a number of improvements identified from the evaluation of the Board the previous year and have endeavoured to maintain and improve the overall effectiveness of the Board. We have also kept under review the advancement of Lord Davies' recommendations on gender diversity and recognise the importance that diversity, including gender diversity, can bring to our business.

I am delighted to welcome Nick Horler as independent Non-Executive Director to the Board.

Nick was appointed in November 2011 to replace Rupert Pennant-Rea who, having served on the Board for more than nine years, can no longer be considered as independent. Nick brings a valuable insight into Go-Ahead's development of social networks and digital marketing which is required to attract new passengers, as well as practical experience of a regulated industry. Rupert will continue to serve on the Board as a non-independent Non-Executive Director. Rupert has been succeeded by Andrew Allner as Senior Independent Director and by Katherine Innes Ker as Chairman of the Remuneration Committee.

Dividends

The Board remains committed to maintaining the dividend per share as we recognise its importance to the investment decision of many shareholders. This commitment is supported by our robust balance sheet and strong cashflows. The Board is proposing a final dividend of 55.5p per share (2011: 55.5p) to maintain the total dividend for the year at 81.0p (2011: 81.0p). The final dividend is payable on 16 November 2012 to registered shareholders at the close of business on 2 November 2012.

Conclusion

As Go-Ahead enters the next phase of its development, I am confident the Group will continue to deliver value for our passengers, employees and shareholders. We are a high quality operator with leading market positions in the bus and rail sectors and are well placed to benefit from the growing need for a sustainable and efficient public transport system.

Group Chief Executive's review

Against a challenging economic backdrop, we have continued to drive growth across our bus and rail companies. Our local market focus and commitment to improving the passenger experience have attracted more people to our convenient and value for money services. During the year, we further strengthened our position in the UK bus market through five acquisitions and were delighted to have been shortlisted for the new combined Thameslink rail franchise.

We operate in a market that has many fundamental strengths. Higher motoring costs, increasing road congestion and a recognition amongst all major political parties that investment in public transport is vital to the economy, society and environment are drivers for long term growth.

Bus

At the core of the Group is our bus division which consists of commercially run businesses outside of London (deregulated) and our London business where we run tendered services on behalf of Transport for London (regulated).

Deregulated

Our deregulated bus business performed exceptionally well in the year, delivering record operating profit and sector leading passenger growth. This is a significant achievement and is driven by our high quality, locally focused services and by tailoring our marketing and products to match the changing needs of our customers.

The majority of our operations are based in the South of England in vibrant urban areas and along commuter growth corridors where demand for public transport is strong. In line with our strategy to grow our core commercial bus business we acquired four value-enhancing bus businesses from independent operators, adding to our portfolio of resilient operations in the South. These businesses provide a strong platform from which we can drive continued growth through capital investment, commercial expertise and synergies. We believe that public transport is about local markets and we therefore recognise the importance of maintaining the strong local brands of the companies that we acquire.

Although our presence is significant in the bus market outside of London, our overall market share is relatively small. We therefore believe there is long term potential for us to strengthen our deregulated business and we continue to seek value adding acquisitions across the country.

We are committed to investing in our fleet to provide an attractive alternative to the private car. During the year we spent over £20m on 125 new buses and placed a £10m order for an additional 45 carbon efficient hybrid buses. In an industry first, we launched "the key" smartcard across our deregulated business making travelling on our services more convenient and cost effective.

The popularity of "the key" has grown significantly and it is now the most comprehensive and widely used smartcard ticketing system in Britain, outside of the Oyster card in London. We will continue to invest in the development of smart-ticketing as we believe it enhances long-term growth. In addition to making travel more convenient for our passengers, smart-ticketing enables us to develop a valuable customer marketing database. We have already made significant progress and are excited about the opportunities ahead.

As a result of increasing fuel costs and following the Government's decision to reduce funding through the Bus Service Operators Grant, it was necessary to target cost efficiencies and increase fares to offset the impact. In line with the industry, our local management teams increased fares on some of our routes between 4% and 7% in April 2012, whilst continuing to promote value for money products. We were pleased that passenger numbers continued to rise during the fourth quarter. Reductions in Government funding reinforces our view that focusing on our core commercial operations is the right business model.

Listening to our passengers and acting on their feedback is key to our business. We are the only major transport group to conduct an annual independent customer satisfaction survey across our bus companies. This year our score averaged an impressive 90%, rated the best in the sector by Passenger Focus.

Regulated

We are the largest bus operator in London operating around 150 routes for Transport for London. Our business is sector leading, driven by our ability to provide high quality and cost efficient services. During the year, like-for-like mileage operated increased by 3.9%, reflecting new contract wins.

Our operating profit margins remain best in class despite tougher targets driving down quality incentive contract payments, demonstrating the strength of our management teams and our constant process of seeking improved operating efficiencies. Running frequent and punctual bus services in the busy and congested capital is a complex business and we have been successfully operating in the London market for over 20 years.

In March 2012, we were pleased to acquire Northumberland Park depot in North London from FirstGroup, providing a new area of operation for the Group and demonstrating our long-term confidence in the London bus market. We are making good progress in aligning the performance of Northumberland Park depot with our other market leading London operations.

Along with providing our normal London bus services, we were delighted to have been awarded contracts to provide transport for the 2012 Olympic Games and played a key role in transporting officials and athletes to the spectacular opening and closing ceremonies and the sailing event in Weymouth.

Rail

Our rail division operates the Southern (including Gatwick Express), Southeastern (including High Speed) and London Midland franchises through our 65% owned subsidiary Govia.

Our rail operations performed well during the year, with operating profit ahead of last year on an underlying basis. Last year included £13.0m of one-off rail contract management benefits.

Southeastern has made significant progress in managing the business to deliver value for passengers, employees and shareholders. During the year, the franchise achieved the highest ever customer satisfaction and punctuality scores on the south eastern network since records began.

Most recently, Southeastern's Javelin rail service played a key role in the transport plan for the Olympics and Paralympics, transporting spectators from St Pancras to the Olympic Park in just seven minutes. An estimated one in ten of all ticket holders travelled at least part of their journey on a Southeastern service and punctuality over the Games was an impressive 96%. I am really proud that we were able to demonstrate the high quality of our staff and services at this historic event.

Overall, Southern performed well in the year, although as previously highlighted in June, the economic environment has started to present challenges. The bid model, which was put together in 2009, assumed stronger underlying economic growth rates than are currently being experienced.

London Midland achieved particularly strong underlying growth over the year and recently scored its highest ever customer satisfaction rating of 87%. Passenger journeys were up 7.4%, benefitting from award winning marketing campaigns aimed at driving off-peak demand. As a result of this excellent performance London Midland remains the only franchise of its time that is not in receipt of revenue support.

The European Foundation for Quality Management (EFQM) and Recognised for Excellence (R4E) programme is now embedded within all three of our rail franchises to assist us in identifying opportunities for continuous improvement in management, operation and service delivery. R4E 5 is the highest achievable rating and we were delighted that Southeastern and London Midland attained this level.

As the rail industry seeks to evolve and work together more closely, Southeastern and Southern have formed alliances with Network Rail. One of the outcomes of the alliance, in order to enhance customer experience and provide better industry value for money, saw Southern take full ownership of the day-to-day management of Gatwick Airport station from Network Rail. London Midland, in partnership with key industry players, has been working on an innovative project to increase capacity on the West Coast Main Line by modifying trains to enable them to run at a maximum speed 110mph. Once in operation, the trains will create faster services into London Euston as well as increasing capacity on one of the most intensively used networks in Europe.

We continue to raise awareness of our value for money fares through targeted marketing campaigns and by driving passengers to our online sites to ensure that they receive the best fares available. During the financial year we generated £80m of revenue online, an increase of 60% compared to the prior year. We now have over two million rail passengers on our Group database who receive regular updates about relevant offers.

We were delighted to have been shortlisted to bid for the new Thameslink rail franchise. This franchise will be the largest in the UK with annual passenger revenues of £1billion and is expected to run for seven years.

Our three rail franchises carry almost a third of all rail passengers in England. We have significant experience of successfully managing complex commuter franchises and delivering industry-leading projects such as High Speed 1. We will be using this expertise to deliver a strong bid on an appropriate risk reward basis. We look forward to receiving the Invitation to Tender document expected in October 2012 which will include the detailed structure of the franchise. The announcement of the winning bid is due in May 2013.

We are entering a busy period for the UK rail industry. Over the next four years, 12 franchise contracts will be tendered, presenting significant growth opportunities for the Group.

Decentralised structure and local focus

Underpinning Go-Ahead's strategy of running high quality transport services is our local market focus and decentralised structure and this approach has served the Group well over its 25 year history. Whilst many of the areas in which we operate have common features, they each have their own unique characteristics. Our local management teams have in-depth knowledge of the markets they operate in and this has helped us meet the recent economic challenges.

Whilst our local managers have the autonomy they need to successfully run their businesses, our devolved business model is supported by a robust corporate governance framework that incorporates frequent and stringent checks on the performance of each company by the Executive Directors. We also seek to maximise the benefits of operating together as one large organisation. For example, we have made significant progress in centralising procurement which has reduced costs by around £30m over the last four years. This year we launched internally focused 'Better Together' forums to help our companies capitalise on the shared knowledge and experience within the Group in order to drive growth and efficiencies.

Sustainability

For Go-Ahead, sustainability is about operating our trains and buses safely, reducing the impact of our operations on the environment and being totally focused on our customers' needs. It also means developing our staff and enriching our local communities. By following these values we believe we are better able to grow our business profitably for our shareholders.

As a public transport provider many aspects of operating responsibly are integrated into the day-to-day running of our bus and rail services but we also recognise the importance of setting longer term targets and objectives. Our number one priority is ensuring the safety and security of our passengers, our people and the general public. We continually strive to improve our already high safety performance and have made good progress this year against our safety key performance indicators.

We are committed to reducing our CO2 emissions per passenger journey by 20% by 2015 through our Driving Energy Further programme. Investment, innovation, a focus on consistently measuring our performance, together with the commitment of our employees to reduce energy use, means we have achieved a 14% reduction to date with a 2% improvement in the year.

Our 23,000 employees are key to the Group's success. I am continually impressed by the extent to which our people display a genuine commitment to providing a high quality service, to the health and safety of their passengers and colleagues, and to seeking ways of improving the passenger experience and the environmental performance of their business.

During the year, we introduced new performance management processes designed to reward individual performance, supported by talent planning, leadership reviews, behavioural frameworks and common values across the Group. We spent £10m on training our staff to further develop their skills and performance and were delighted that Southeastern achieved the impressive Gold Investors In People accreditation.

In addition, we undertook our first annual employee survey across the Group's head office and our three rail franchises to understand levels of employee engagement and identify ways of making Go-Ahead a better place to work. The results were encouraging, showing staff in our train companies are more engaged than the UK rail industry average. We plan to roll the survey out across our deregulated bus companies next year.

Supporting local communities is a key element of our sustainability strategy. Our bus and rail companies provide essential transport links to the workplace, schools and universities and to key services and leisure activities. This year we invested in 'Go Learn', a free education resource for teachers designed to help educate young people about the value of public transport in our daily lives. In total, we spent £200,000 on charitable giving and investment and entered into new three-year charity partnerships with Railway Children and Transaid.

Outlook

Despite the challenges facing the economy, the new financial year has started well and trading is in line with the Board's expectations.

We will continue to work hard to attract more passengers by providing high quality, value for money services combined with innovative marketing and products. We will also seek to drive the business forward by leveraging the benefits of Group scale, targeting further cost efficiencies and carefully assessing all potential growth opportunities.

We expect to deliver another strong result in bus, even with significant cost headwinds arising from the reduction in BSOG and increased fuel costs. In rail, we anticipate a robust performance despite higher bid costs and a weaker performance in Southern, due to the impact of the economic climate on the franchise bid profile.

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

Finance and business review

Overview and highlights

The Group has delivered a strong performance in the year ended 30 June 2012 and remains in a good financial position. Revenue for the year was £2,423.8m, £126.8m, or 5.5% ahead of last year (2011: £2,297.0m) underpinned by strong passenger revenue growth in our deregulated bus and rail businesses and additional contract wins in regulated bus.

Operating profit was £110.2m (2011: £115.1m), down £4.9m, or 4.3%, with an overall operating margin of 4.5% (2011: 5.0%). Underlying operating profit increased by £8.1m, as the prior year included £13.0m of one-off rail contract management benefits.

Profit before tax for the year reduced by £0.3m, or 0.4% to £84.5m (2011: £84.8m) and adjusted earnings per share were up 5.0% at 141.9p (2011: 135.2p), the increase being primarily driven by a reduction in the effective tax rate to 21.3% (2011: 26.2%).

Net debt remains low and in line with our expectations at £91.0m (2011: £69.8m). Adjusted net debt to EBITDA of 1.80x remains comfortably within our target range of 1.5x to 2.5x.

Our bus business was strengthened through five acquisitions in the second half of the year for a total cash consideration of £29.3m.

Summary income statement

* Excludes amortisation and exceptional items.

Revenue and operating profit by division

Bus

Overall bus performance review

Overall, the performance of our bus operations was robust with underlying passenger growth in all of our deregulated businesses, reflecting high quality services, marketing and passengers seeking value for money alternatives to the private car. Total bus revenue increased by 7.6%, or £48.9m, to £691.3m (2011: £642.4), with 2.4% from acquisitions.

The bus division delivered record operating profit of £70.2m, increasing in the year by £3.1m or 4.6% (2011: £67.1m), largely driven by strong underlying revenue growth in and outside London. Contribution from acquisitions was £1.0m.

Operating profit margin was broadly in line with the prior year at 10.2% (2011: 10.4%).

Acquisitions

We have made a number of value adding acquisitions in 2012. New businesses are included within acquisitions data until the first anniversary of each entity becoming part of the Group. Subsequent to this point their results are deemed to be like-for-like.

2011/12 acquisitions

Deregulated

On 3 March 2012, we purchased Carousel Buses Limited, a bus operation with around 50 buses based in Buckinghamshire, for a cash consideration of £3.1m.

Essex-based operator Hedingham and District Omnibuses Limited was acquired on 2 March 2012 for £4.3m. The company operates around 90 buses.

Anglian Bus Limited, which operates around 70 buses in Suffolk and Norfolk, was acquired by the Group on 23 April 2012 for a cash consideration of £4.4m.

H.C.Chambers & Son Limited, was purchased on 2 June 2012, operating around 30 buses on the Essex/Suffolk border. The company was purchased for a cash consideration of £3.2m.

Regulated

On 30 March 2012 our Go-Ahead London operation purchased Northumberland Park bus depot in North London from FirstGroup for a cash consideration of £14.3m. Around 130 buses operate from the depot.

2010/11 acquisition

Deregulated

Thames Travel (Wallingford) Limited, a high quality operator based in Oxfordshire, was acquired on 24 May 2011. The operation has performed well since its acquisition, overseen by management at Oxford Bus Company.

Capital expenditure and depreciation

Capital expenditure for the division was £69.0m (2011: £35.7m), the majority of which related to the purchase of new buses. Investment in our deregulated fleet was £21.5m on 126 buses. Contract wins in our regulated business required £59.2m to be spent on 349 new vehicles, £27.1m of which related to operating leases for 176 new buses. We have one of the youngest bus fleets in the sector with an average age of 7.4 years. Depreciation for the division was £40.6m (2011: £38.1m), reflecting the increase in capital expenditure.

Deregulated bus operations

All operating companies reported growth in commercial revenue in the year. Revenue was £312.9m (2011: £290.9m), up £22.0m, or 7.6%, including acquisitions of 2.9%. Passenger numbers increased by 4.5%, of which 1.7% related to acquisitions. Strong growth in fare paying passengers was partly offset by a weaker concessionary performance.

Operating profit was £35.4m (2011: £33.7m), up £1.7m, or 5.0% and operating margins remained largely in line with last year at 11.3% (2011: 11.6%). Contribution from acquisitions was £0.5m in the year.

As reported at the half year, operating profit was slightly impacted by costs relating to the implementation of a contract. However, necessary management action has been taken and the contract was breaking even by the end of the financial year. Overall, the contract suffered a £1.5m loss in the year.

We have seen a continuing trend of passengers taking advantage of our value for money period passes and smartcards. In the short term, this reduces the average yield per journey whilst enhancing long term growth prospects for the Group.

As reported in April, we increased fares by between 4% and 7% across our business as a result of the Government's decision to reduce funding through the Bus Service Operators' Grant (BSOG), and increased fuel costs. The improved yield is in line with our expectations.

We are committed to delivering high quality services and meeting our passengers' needs. We maintained our high levels of punctuality at over 88% during the year (2011: 90%) with some operating companies achieving higher than 95%. Our customer satisfaction scores remained high at an average of 90% (2011: 91%).

Regulated bus operations

Our regulated bus operations in London delivered a very strong performance. Revenue grew by 7.6%, or £26.9m, to £378.4m (2011: £351.5m) in the year, of which the Northumberland Park depot acquisition represented 1.9%. Mileage also grew strongly, up 5.6%, reflecting new contract wins. The acquisition accounted for 1.7% of the additional mileage.

Operating profit was £34.8m, (2011: £33.4m) up £1.4m, or 4.2%, including a contribution of £0.5m from the Northumberland Park depot, acquired in March 2012. We are already making good progress in aligning the performance of this depot with our other London operations.

Operating margins have declined to 9.2% (2011: 9.5%), due to Quality Incentive Contract (QIC) payments being down £1.2m, to £6.8m (2011: £8.0m), and the reduction in BSOG in April 2012.

We continue to perform well in the TfL quality league tables, operating around 99.6% of our target mileage before traffic congestion losses (2011: 99.6%).

North America

Our 50:50 joint venture with Cook-Illinois continues to operate two contracts in St Louis, Missouri, running around 120 buses. Our investment in the joint venture is through a combination of debt and equity and totals £3.7m (US$5.8m), provided primarily through a US$10m revolving credit facility held in the UK. Although the result for the year was a break even position, this operation remains highly cash generative. We maintain strong financial discipline in this highly competitive market. No further contracts were secured in the 2012 bidding round.

Overall bus outlook

We expect to deliver another strong performance despite significant cost headwinds of around £20m due to the reduction in BSOG and increased fuel costs. We expect to offset the impacts through revenue growth, contribution from new acquisitions, the full year benefit of contract wins in London and cost efficiencies across the division.

In deregulated bus, we will continue to drive organic growth by offering value for money services which provide an attractive alternative to the private car and by further developing smart-ticketing and targeted marketing. Our new businesses will continue to benefit from Group capital investment, commercial expertise and synergies.

In regulated bus, we will remain focused on delivering high quality and cost efficient services for TfL and expect mileage growth for the full year to be over 6%, with growth of over 11% in the first half. We will continue to align the performance of the Northumberland Park depot with our other sector leading London operations.

We expect our newly acquired businesses to make a positive contribution to next year's performance and we continue to seek further value adding opportunities.

Rail

Rail performance review

The rail division performed well in the year and delivered operating profit in line with our expectations.

Southeastern and London Midland achieved strong passenger revenue growth, with a slightly weaker performance in Southern. Overall, as anticipated we saw similar revenue growth in the second half of the year with higher yield and lower passenger growth. Southern's premium payments have increased by £52.7m in the year, reflecting the franchise's challenging bid profile. Whilst, subsidy receipt receipts in Southeastern and London Midland have decreased by £64.3m and £13.8m respectively.

Revenue

Total revenue increased by 4.7%, or £77.9m, to £1,732.5m (2011: £1,654.6m), consisting of:

Premium payments

Southern's premium payments are included in operating costs.

Operating profit

Operating profit in the rail division was £40.0m (2011: £48.0m). When excluding the £13.0m of one-off contract management benefits in the previous year, underlying profit was up £5.0m. Operating margins therefore slightly reduced to 2.3% (2011: 2.9%).

Capital expenditure and depreciation

Rail division capital expenditure was £8.3m (2011: £18.4m), lower than the prior year due to fewer franchise commitments falling within the year. Depreciation for the division was £13.2m (2011: £11.1m).

Individual franchise performance

Southern

Passenger revenue growth was 7.9% (2011: 8.6%) and passenger numbers increased by 1.2% (2011: 2.3%) when compared to last year.

The current economic environment presents challenges going forward as the bid model in 2009 assumed stronger underlying economic growth rates at this stage in the franchise. At the year end the franchise was delivering revenue around 2% below the bid assumptions.

Delivering high quality services to our passengers is a priority for us. Our punctuality levels slightly improved in the year, with a public performance measure (PPM) of 89.9% (2011: 89.4%). Southern's National Passenger Survey (NPS) customer satisfaction rating remained high at 80% (2011: 82%).

Southeastern

The increase in full year passenger revenue was 10.1% (2011: 8.4%), with passenger numbers up by 1.3% (2011: 5.0%) compared with last year.

Southeastern remains in 80% revenue support, generating revenue of around 85% of that set out in the bid. We expect the franchise to require this level of support for the remainder of the franchise term. We have made significant progress in managing the business to deliver value for passengers, employees and shareholders.

The franchise has delivered record breaking operational performance with 91.3% (2011: 89.0%) of our trains arriving on time. The spring NPS showed a customer satisfaction score of 81% (2011: 82%) for Southeastern.

London Midland

Passenger revenue grew by 13.3% (2011: 8.6%) in the year and passenger numbers increased by 7.4% on (2011: 7.2%).

Despite becoming eligible to receive revenue support in the first half of the year, this has not been required by London Midland due to its strong performance in the year, generating over 99% of revenue set out in the bid. It is the only franchise of its time not to be in receipt of revenue support, which is a testament to the excellent management of the franchise.

London Midland operational performance was strong with PPM of 90.1% (2011: 89.7%). It achieved its highest ever customer satisfaction score of 87% (2011: 83%) in the latest survey.

Rail outlook

We expect to deliver a robust performance in rail next year despite expected bid costs of £6.0m and a slightly weaker performance in Southern, due to the impact of the economic climate on the franchise bid profile. Whilst we continue to take action to mitigate these impacts, Southern becomes eligible for revenue support in September 2013, should it be required.

We continue to raise awareness of our value for money fares, through targeted marketing campaigns and by driving passengers to our online sites to ensure they receive the best fares available. We will also continue the roll-out of smart-ticketing across our services to make travelling by train even more convenient for our passengers.

In October 2012, we expect the DfT to issue the Invitation to Tender document for the Thameslink rail franchise which will include the detailed structure of the franchise. Our permanent bid team are working hard to deliver a strong bid, designed to provide benefits to passengers and value for our shareholders.

We are entering a busy period for the UK rail industry. Over the next four years 12 franchises will be tendered, presenting significant growth opportunities for the Group.

Other financial items

Earnings per share

Adjusted earnings (net profit after tax on continuing operations attributable to members before amortisation and exceptional items) were £60.8m (2011: £58.0m) resulting in an increase in adjusted earnings per share from 135.2p to 141.9p. The increase is primarily driven by a reduction in the effective tax rate to 21.3% (2011: 26.2%).

The weighted average number of shares remained at 42.9 million (2011: 42.9 million), as did the number of shares in issue, net of treasury shares (2011: 42.9 million).

Dividend

The Board is proposing a total dividend for the year of 81.0p per share (2011: 81.0p). This includes a proposed final payment of 55.5p (2011: 55.5p) payable on 16 November 2012 to registered shareholders at the close of business on 2 November 2012.

Dividends of £34.7m (2011: £23.8m) paid in the period represent the payment of last year's final dividend of 55.5p per share (2011: 30.0p, being the final dividend for 2010) and the interim dividend in respect of this year of 25.5p per share (2011: 25.5p). Dividends paid to non-controlling interests were £12.0m (2011: £4.8m). Dividend cover was strengthened in the year, up to 1.75x (2011: 1.67x).

Summary cashflow

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

Cashflow

Cash generated from operations before tax was £167.8m (2011: £137.9m), an increase of £29.9m, primarily due to a favourable movement in working capital. Tax paid of £15.7m (2011: £24.9m) comprised payments on account in respect of the current year's liabilities. Net interest paid of £15.1m (2011: £12.1m) is largely in line with charge for the period of £16.0m (2011: £17.5m). Capital expenditure, net of sale proceeds, was £25.6m higher in the year at £80.6m (2011: £55.0m) predominantly due to improvement to our fleet through increased purchase of new buses. Dividends paid to parent company shareholders amounted to £34.7m.

The Group repurchased 41,880 of its own shares at £0.6m (2011: 58,632 shares at £0.8m) for potential LTIP awards that may vest in the future. No shares were issued in the year (2011: nil).

Capital structure

Significant medium term finance is secured through our £275m revolving credit facility, expiring in February 2016 and our £200m sterling bond, expiring in September 2017. At 30 June 2012 $5.5m, equivalent to £3.5m, of our US$10m facility was utilised.

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

Net Debt

Net debt at 30 June 2012 of £91.0m (2011: £69.8m) is comprised of the £200m sterling bond, amounts drawn down against the £275m (2011: £275m) five year revolving credit facility of £135.0m (2011: £84.0m); hire purchase and lease agreements of £6.2m (2011: £5.5m); US dollar facility of £3.5m (2011: £3.9m), partly offset by cash and short term deposits of £253.7m (2011: £228.6m) including £205.0m of restricted cash in rail (2011: £189.7m). There were no overdrafts in use at the year end (2011: £5.0m). The increase in net debt is primarily attributable to increased acquisition spend in the year.

Adjusted net debt, (net debt plus restricted cash) was £296.0m (2011: £259.5m), equivalent to 1.80x EBITDA (2011: 1.58x), comfortably within our target range of 1.5x to 2.5x and well below our primary financing covenant of not more than 3.5x.

Net finance costs

Net finance costs for the year were lower than the prior year at £16.0m (2011: £17.5m) including finance costs of £17.8m (2011: £19.0m) less finance revenue of £1.8m (2011: £1.5m). During the period a credit of £0.7m (2011: £nil) relating to mark to market interest swaps was released directly to income. The average underlying net interest rate for the period was 4.9% (2011: 5.5%).

Goodwill/amortisation

The charge for the year of £9.7m (2011: £10.5m) represents the non-cash cost of amortising goodwill, intangibles including assets associated with pension accounting for the rail franchises and computer costs.

Exceptional items

Exceptional costs for the year were £nil (2011: £2.3m). The comparative £2.3m consisted of accelerated depreciation of £3.0m in respect of articulated London buses which were phased out in November 2011, the release of onerous bus leases of £0.3m and the release of rail reorganisation liabilities of £0.4m

Taxation

Net tax for the year of £18.0m (2011: £9.8m) includes underlying tax on ordinary activities of £21.7m (2011: £22.8m), equivalent to an effective rate of 21.3% (2011: 26.2%) below the UK statutory rate for the period of 25.5% (2011: 27.5%) reflecting a £3.7m credit in respect of the impact on deferred tax on the change in statutory rate.

Non-controlling interest

The non-controlling interest in the income statement of £11.0m (2011: £12.0m) arises from our 65% holding in Govia Limited which owns 100% of our current rail operations and therefore represents 35% of the profit after taxation of these operations.

Pensions

Operating profit includes the net cost of the Group's defined benefit pension plans for the year of £34.3m (2011: £37.0m) consisting of bus costs of £4.9m (2011: £5.2m) and rail costs of £29.4m (2011: 31.8m). Company contributions to the schemes totalled £51.1m (2011: £44.1m).

Bus pensions

The net deficit after taxation on the bus defined benefit schemes was £17.3m (2011: £44.3m), consisting of pre tax liabilities of £22.8m (2011: £59.9m) less a deferred tax asset of £5.5m (2011: £15.6m). The decrease in deficit was largely due to an increase in asset values, primarily in our liability driven investing portfolio. The pre tax deficit consisted of estimated liabilities of £558.7m (2011: £529.7m) less assets of £535.9m (2011: £469.8m). The percentage of assets held in higher risk, return seeking assets was 45% (2011: 46%).

A triennial valuation of the Go-Ahead Group Pension Scheme is currently underway and, whilst the Group and the Pension Trustees are still considering the results of the valuation, it is likely that the life expectancy assumption for pensioners and non-pensioners will increase by one or two years thereby increasing the scheme deficit by approximately £30m in respect of this assumption alone.

Rail pensions

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

As reported previously, the rail pension schemes follow the Government's change from Retail Price Index (RPI) to Consumer Price Index (CPI). This change is expected to reduce the income statement charge by around £5m per annum over the remaining lives of the franchises beginning in the 2012/13 financial year. Until agreed with trustees as part of the December 2010 triennial valuation discussions, we have not assumed any corresponding reduction in cash contributions. On this basis, we record a pre-tax liability of £7.7m (2011: £17.0m), representing the discounted value of the additional cash contributions of around £5m per annum over the remaining lives of the franchises. If the future cash contributions were to be agreed in line with the income statement charge, this liability would no longer be required and both the income statement charge and the cash contributions would reduce over the remaining lives of the franchises.

IAS 19 (revised)

IAS 19 (revised) becomes effective for the Group in the financial year ended 30 June 2014. Had the IAS been applied to these financial statements the effect would be a reduction in operating profit before tax for the year of £14.6m, £7.7m of which would be attributable to equity holders of the parent. This would have resulted in an 18.1p reduction to basic earnings per share and adjusted earnings per share, of which 4.8p would have related to the bus division. There would have been no effect on cash, credit rating or bank covenants had the revised standard been applied.

The table below shows the impact on profit had the changes been affected in the year.

Key risks

The key risks described in the Group's Annual Report for the year ended 30 June 2012 can be summarised as below.More detail can be found on pages 30-33 of the 2012 Group Annual Report and Accounts, available on our website at www.go-ahead.com

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 underperformance against bid targets.

Political and regulatory framework - Changes to law, regulations, local authority attitudes towards public transport and further reductions in the availability of government financial support could adversely impact the Group's operations and financial position.

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

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 a high volatility of earnings; failure to retain or win new franchises could impact greatly on the overall profitability of the Group; failure to comply with conditions of rail franchise agreements could lead to financial penalties or even the termination of a rail franchise.

Ongoing key risks can be summarised as:

Operational:

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

Labour costs and employee relations - Poor employee relations or reduced availability of staff could impact on reputation, revenue and staff morale. Labour costs are a high proportion of our cost base. Even relatively small percentage increases in wages could have a material impact on profits For example, an increase of 1% in staff costs would increase costs by £8.3m.

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

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

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

Financial:

Increased pension scheme funding required - The Group participates in a number of pension schemes. Any funding shortfalls in defined benefit schemes could adversely impact the Group's financial position.

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

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

Strategic:

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

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

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

Consolidated income statement

for the year ended 30 June 2012

Consolidated statement of comprehensive income

for the year ended 30 June 2012

Consolidated statement of changes in equity

for the year ended 30 June 2012

Consolidated balance sheet

as at 30 June 2012

Consolidated cashflow statement

for the year ended 30 June 2012

Notes to the consolidated financial statements

for the year ended 30 June 2012

1. Segmental analysis

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

The Deregulated Bus division comprises bus operations outside London.

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

The Rail operation, Govia, is 65% owned by Go-Ahead and 35% by Keolis and comprises three rail franchises: Southern, Southeastern and London Midland.

The 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 (2011: £nil), and it is therefore not included within the tables below.

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 30 June 2012 and the year ended 2 July 2011.

Year ended 30 June 2012

At 30 June 2012, there were non-current assets of £3.4m (2011: £4.1m) and current assets of £0.3m (2011: £nil) relating to US operations, being made up of equity accounted investments of £0.7m (2011: £0.7m) and loans of £3.0m (2011: £3.4m), in Go-Ahead North America, a 50:50 joint venture with Cook-Illinois which commenced trading in August 2010. For the year ended 30 June 2012, segment revenue for this venture was £2.4m (2011: £2.3m) and segment profit was £nil (2011: £nil).

During the year ended 30 June 2012, segment revenue from external customers outside the United Kingdom was £2.4m (2011: £2.3m), and related entirely to the Go-Ahead North America joint venture.

Year ended 2 July 2011

2. Group revenue

3. Operating costs (excluding amortisation and exceptional items)

* The total lease and sublease payments recognised as an expense (excluding rail access charges) are made up of minimum lease payments of £375.3m (2011: £378.2m) net of sublease payments of £15.0m (2011: £20.8m) relating to other rail leases.

** The total lease and sublease payments recognised as an expense are made up of minimum lease payments of £781.2m (2011: £762.4m) net of sublease payments of £15.0m (2011: £20.8m) relating to other rail leases.

The fee relating to the audit of the financial statements can be analysed between audit of the Company's financial statements of £0.1m (2011: £0.1m) and audit of subsidiaries' financial statements of £0.4m (2011: £0.5m), inclusive of discontinued operations.

During the year, £0.3m (2011: £0.2m) was also paid to other 'Big 4' accounting firms for a variety of services.

4. Staff costs

Year ended 30 June 2012

Year ended 2 July 2011

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

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

Long term incentive plans

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

The expense recognised for the LTIP during the year to 30 June 2012 was £0.5m (2011: £0.4m).

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 to30 June 2012 were:

The weighted average fair value of options granted during the year was £11.72 (2011: £11.83).

Awards made before July 2011 were subject to performance conditions based on the Group's relative Total Shareholder Return ("TSR") performance measured against two comparator groups (the transport sector comparator group and a group comprising the FTSE 250 excluding investment trusts). Following the acquisition of Arriva plc on 31 August 2010, the transport sector now comprises only three companies. Accordingly the previous policy of having a relative TSR versus a transport peer group is no longer feasible. Therefore new financial and strategic performance conditions have been introduced, in addition to the continued use of a revised relative TSR comparator group for awards madeafter July 2011.

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

None of the options were exercisable at the year end and the weighted average exercise price of the options is £nil (2011: £nil).

The weighted average remaining contractual life of the options is 1.46 years (2011: 1.33 years). The weighted average share price of options exercised was £14.09 (2011: n/a).

Deferred share bonus plan

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

There were no shares awarded in the year to 30 June 2012.

Directors' discretionary deferred share awards

On 17 November 2009 the Company awarded a total of 6,996 ordinary shares to Directors of the Group. The stock was at no cost to the Directors and restrictions limit the sale or transfer of these shares until they vest, which occurs at the end of a three year period. The shares are held in a trust until they vest. The expense recognised for the Directors' discretionary deferred share awards during the year to 30 June 2012 was less than £0.1m (2011: less than £0.1m).

The shares exercised, vested in full during the year ended 30 June 2012, following the retirement of a Director, and is in accordance with the 'good leaver' provisions of the Plan.

The share price at the date of exercise for the options exercised was £15.55.

Share incentive plans

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

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

Sharesave Scheme

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

5. Finance revenue and costs

6. Taxation

a. Tax recognised in the income statement and in equity

* Includes the one-off impact of releasing a £7.8m deferred tax liability to the income statement in the year ended 2 July 2011. This relates to the agreement of tax efficient financing by HMRC.

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 30 June 2012 and 2 July 2011 is as follows:

Year ended 30 June 2012

Year ended 2 July 2011

c. Deferred tax

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

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

The UK Government has announced its intention to reduce the UK corporation tax rate to 22% by 1 April 2014.

A reduction from 26% to 25% was substantively enacted on 5 July 2011 and was intended to be effective from 1 April 2012. However, a further reduction to 24% was announced in the Budget on 21 March 2012 and substantively enacted on 26 March 2012 and this rate came into effect on 1 April 2012 instead of the 25% rate. A further reduction to 23% was enacted when the Finance Act 2012 received Royal Assent on 17 July 2012.

As the 23% rate had not been substantively enacted at the balance sheet date it has no effect on current or deferred tax liabilities in these accounts. However, as the 24% rate was substantively enacted at the balance sheet date, this rate has been applied to the deferred tax assets/liabilities at the year end.

If the reduction to 22% had been enacted by 30 June 2012 the Group's deferred tax liability would have been reduced by a further £4.3m to £47.3m and the deferred tax asset would have been reduced by a further £0.6m to £6.7m.

7. Earnings per share

Basic and diluted earnings per share

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

No shares were bought back and cancelled by the Group in the period from 30 June 2012 to 5 September 2012.

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

Adjusted earnings per share

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

Year ended 30 June 2012

Year ended 2 July 2011

* Exceptional items include the one-off impact of releasing a £7.8m deferred tax liability to the income statement, relating to the agreement of tax efficient financing by HMRC, and the impact of the rate change on the opening deferred tax balance.

For total operations this is analysed as follows:

Year ended 30 June 2012

The adjusted earnings per share for total operations was 141.9p, as there were no discontinued operations in the year. Refer to the continuing operations table for further details.

Year ended 2 July 2011

* Exceptional items include the one-off impact of releasing a £7.8m deferred tax liability to the income statement, relating to the agreement of tax efficient financing by HMRC, and the impact of the rate change on the opening deferred tax balance.

8. Dividends paid and proposed

9. Property, plant and equipment