15th Feb 2008 07:00
Go-Ahead Group PLC15 February 2008 15 February 2008 THE GO-AHEAD GROUP PLC ("Go-Ahead" or "the group") Interim Results for the half year ended 29 December 2007 The Go-Ahead Group plc is one of the UK's leading providers of passengertransport management services operating in the bus, rail and aviation sectors.Employing approximately 27,500 staff across the country, we provide services toover 900 million passengers each year. In addition to the travelling public,customers include Transport for London (TfL), BAA, major airlines, localauthorities and the Department for Transport (DfT). HIGHLIGHTS • Revenue increased by 12.3% to £1,027.9m (2006 - £915.2m) • Operating profit* rose by 16.8% to £64.5m (2006 - £55.2m) • Profit before tax, exceptional items and amortisation increased by 14.5% to £58.3m (2006 - £50.9m) • Profit before tax decreased by 3.6% to £45.2m (2006 - £46.9m) • Adjusted earnings per share* increased by 17.2% to 78.4p (2006 - 66.9p) • Interim dividend of 25.5p per share (2006 - 23.0p) is proposed • Demand for services remained strong with increased revenue in bus, rail and aviation services • London Midland rail franchise commenced on 11 November 2007 • Three new bus operations were acquired during the period • Further progress was achieved in aviation services • Share buy back programme continuing *before amortisation and exceptional items Commenting on Go-Ahead's strategy and prospects, Chairman, Sir Patrick Brown said: "To date, demand trends remain favourable. We intend to make further progress inour bus division, although this is likely to be adversely affected by increasedfuel costs. In rail, whilst passenger growth continues, reduced subsidies andincreased profit share are expected to result in a full year operating profitbelow last year. In aviation services, our aim is to continue the progress madein the first half to restore the businesses to profit. We will continue to look for value adding acquisition opportunities and maintainour share buy back programme and progressive dividend policy to return value toshareholders. Overall, we expect to deliver another good set of results for thesecond half of this year. " For further information, please contact: The Go-Ahead GroupKeith Ludeman, Group Chief Executive 15 February: 020 7067 0700Nick Swift, Group Finance Director Thereafter: 020 8929 8650 Weber Shandwick Financial 020 7067 0700Richard Hews / Rachel Martin / Hannah Marwood An analyst's presentation will be held at 9.30am at Weber Shandwick Financial's offices, Fox Court, 14 Gray's Inn Road, London, WC1X 8WS. Copies of the presentation will be available on the company's website: www.go-ahead.com. Notes to Editors BUSThe group's bus division operates over 3,600 buses, providing over 540 millionpassenger journeys and covering around 240 million vehicle kilometres each year.Operations consist of deregulated services in the north east; West Midlands;Oxford; the south east and southern England; and regulated services for TfL inthe capital. The newest additions to this division are Northumbria Coaches andStanley Taxis in the north east and FirstGroup's regulated bus operations inOrpington. RAILThe group's rail division, consisting of the Southern, Southeastern and LondonMidland franchises, operates a fleet of 776 trains on which over 330 millionpassenger journeys are undertaken. We operate a mix of suburban commuter andmainline routes around London and the south east, from London to Birmingham andLiverpool, and in the West Midlands. The Southeastern franchise will include theoperation of new high speed trains on the domestic Channel Tunnel Rail Link intoSt Pancras from 2009 while the Southern franchise will include the operation ofthe Gatwick Express rail services from May 2008. The London Midland railfranchise commenced on 11 November 2007. AVIATION SERVICESThe group's aviation services division undertakes a wide range of supportservices for national and international airlines. Services provided includecargo handling, passenger check-in, baggage handling, information desks,executive lounges, ground handling and customs clearance. In the last year, weprovided services to around 44 million passengers as well as over half a millionaircraft movements. The division includes Meteor Parking which is one of thelargest parking companies in the UK, managing over 65,000 parking spacespredominantly at BAA airports, with a range of customers, including BAA, localauthorities, retail outlets, NHS trusts, hotels and rail stations. Well knownbrands include 'Pink Elephant', 'Park 1' and 'eparking'. Chairman's Statement SUMMARY This has been a good six months for the group. Revenue increased by 12.3% to £1,027.9m (2006 - £915.2m) and operating profit*rose by 16.8% to £64.5m (2006 - £55.2m). Profit before tax, exceptional itemsand amortisation increased by 14.5% to £58.3m (2006 - £50.9m). Profit before taxdecreased by 3.6% to £45.2m (2006 - £46.9m). Adjusted earnings per share*increased by 17.2% to 78.4p (2006 - 66.9p). Demand for our services remained strong in the half year, and revenue increasedin each of our bus, rail and aviation services divisions. Our bus divisionperformed well with both our regulated London and deregulated operationscontributing to an increase in operating profit* of £4.5m, or 15.4%. Strongrevenue growth continued in our rail division supported by increases inpassenger numbers. Rail operating profit* increased by £5.8m or 22.7% despite areduction in subsidy income and an increased profit share which had a combinedimpact of approximately £20m in the period. Our aviation services division madefurther progress. Although the operating loss for the period of £0.6m was belowthe profit of £0.4m in the first half of last year, it was better than the £4.2mloss incurred in the difficult second half of last year. Overall, operatingprofit margin* for the group increased from 6.0% to 6.3%, led by improvements inour bus and rail operations. Acquisitions and the start of our London Midland franchise on 11 November 2007contributed £68.6m of additional revenue and £2.4m of operating profit* comparedto the first half of last year. We have recognised an exceptional charge of £8.2m against the carrying value ofour Go West Midlands bus operations whilst we review options for the business. The board proposes an interim dividend of 25.5p per share, an increase of 10.9%compared to last year's dividend of 23.0p. The dividend is payable on 11 April2008 to shareholders on the register at the close of business on 25 March 2008.2.5 million shares were purchased in the period at a cost of £65.1m. Outlook To date, demand trends remain favourable. We intend to make further progress in our bus division, although this is likelyto be adversely affected by increased fuel costs. In rail, whilst passengergrowth continues, reduced subsidies and increased profit share are expected toresult in a full year operating profit below last year. In aviation services,our aim is to continue the progress made in the first half to restore thebusinesses to profit. We will continue to look for value adding acquisition opportunities and maintainour share buy back programme and progressive dividend policy to return value toshareholders. Overall, we expect to deliver another good set of results for the second half ofthis year. Operating Result Six months to 29 Dec 2007 Six months to 30 Dec 2006 Year to 30 June 2007---------------------------------------------------------------------------------------------------- Operating Operating Operating Revenue Profit* Margin Revenue Profit* Margin Revenue Profit* Margin £m £m % £m £m % £m £m %---------------------------------------------------------------------------------------------------- Bus 277.0 33.7 12.2 253.0 29.2 11.5 514.0 55.8 10.9 Rail 616.5 31.4 5.1 539.8 25.6 4.7 1,071.3 66.1 6.2 Aviation Services 134.4 (0.6) (0.4) 122.4 0.4 0.3 241.6 (3.8) (1.6)---------------------------------------------------------------------------------------------------- 1,027.9 64.5 6.3 915.2 55.2 6.0 1,826.9 118.1 6.5---------------------------------------------------------------------------------------------------- * before amortisation and exceptional items DIVISIONAL REVIEW Bus Our bus operations performed well in the first half of this year. Externalrevenue grew by £24.0m, or 9.5%, to £277.0m and operating profit* increased by£4.5m, or 15.4%, to £33.7m. Margins* improved by 0.7 percentage points to 12.2%.Current and prior year acquisitions contributed £17.5m to the increase inrevenue and £1.0m to operating profit*. Costs included an increase ofapproximately £1.5m due to higher fuel prices, broadly offset by a reduction inpension costs of a similar amount. Operating profits* improved in both ourregulated and deregulated bus services. Regulated bus operations Regulated external revenue increased by 11.9%, benefiting from a 10.8% increasein the number of miles travelled. Approximately half of this growth was throughacquisitions, with the remainder from the net addition of new contracts. InDecember 2007, Metrobus acquired the 35 bus operations of FirstGroup, based atOrpington. Later in that month we learned that Metrobus had lost a net 27 peakvehicles from the Transport for London TfL tendering programme, which takeseffect in our 2008/09 financial year. Quality incentive bonuses were similar to last year, reflecting our excellentoperating performance in the face of increasingly difficult targets andextensive road works in London. An additional quality regime will be introducedin June 2008 to include measures such as bus cleanliness and driving standards.We aim to maintain our overall level of bonus from the two schemes. Cost control remains strong and we achieved a small increase in our overalloperating margin*. Deregulated bus operations External revenue increased by 8.7% and passenger journeys grew by 2.5% againstlast year's strong first half. The increase in passenger journeys was supportedby free concessionary travel, which now accounts for almost 30% of our passengernumbers and around 20% of our revenue. We continue to work with localauthorities to secure compensation which provides a proper return on capital.The number of concessionary passengers is likely to grow further from 1 April2008 when the scheme is extended to allow beneficiaries to use concessionarytravel throughout the UK. The number of fare paying passengers grew by around 1% on a like for like basisin the period, following a particularly strong increase of 11.4% in the firsthalf of last year. In general, demand for our services continues to grow,although passenger numbers did fall in Brighton and Oxford in December. Recoveryin January suggests that this was temporary and may have been linked to extendedholidays and weaker retail conditions. Our Go West Midlands bus operations reported a loss for the period and we arereviewing options for this business. Pending the outcome of this review, we haveassessed the carrying value of the assets and have recognised any onerous leaseobligations. This has resulted in an exceptional cost of £8.2m in the incomestatement. Rail Our rail operations again grew strongly and passenger numbers increased.External revenue rose by £76.7m, or 14.2%, to £616.5m and operating profit*increased by £5.8m, or 22.7%, to £31.4m. The operating profit margin* improvedby 0.4 percentage points to 5.1%. Our London Midland franchise started on 11 November 2007. It contributed £49.0mto revenue and £0.3m to operating profit* compared to a net £0.8m cost ofbidding incurred in the first half of last year. We have a strong managementteam running this franchise, passenger numbers are encouraging and we areconfident that it will make a good contribution to the group's results. Passenger revenue rose by 12.9% in Southern and 13.4% in Southeastern. Thenumber of passenger journeys increased by 6.1% in our Southern franchise and5.9% in our Southeastern franchise, somewhat slower than the full year increaseslast year of 9.1% and 7.0% respectively. The pricing regime of the franchises isset by the DfT and regulated fares are increased annually by RPI + 1% for ourSouthern and London Midland franchises and by RPI + 3% for Southeastern. Theseincreases reflect the significant investment in new trains and facilities,including the high speed services which we will introduce in Southeastern at theend of 2009. The increase in operating profit* was achieved despite a reduction in subsidyfor Southern and Southeastern and an increased profit share due to the DfT inSouthern, which had a combined impact of approximately £20m in the period. Aviation Services We have made further progress in our aviation services division. Externalrevenue increased by £12.0m, or 9.8%, to £134.4m. Although the £0.6m operatingloss* for the division was worse than the profit of £0.4m in the first half oflast year, it was significantly better than the £4.2m loss in the second half. The majority of this division consists of our UK ground handling and cargooperations. These businesses reported an operating loss* of £1.8m, compared to aloss of £0.6m in the first half of last year and a loss of £4.9m in the secondhalf of last year. We have strengthened the management teams in both groundhandling and cargo. Ground handling revenue grew by 14.8% compared to the first half of last year.Most of this increase was due to the new British Airways contract which startedin July at Aberdeen, Edinburgh, Glasgow and Manchester. This contract initially proved difficult due to the large numbers of staffchanges and we incurred some significant one-off costs in the period. Sincethen, the position has improved and we are confident that we will achieve theexpected benefits. Other contracts won in the period included Qantas atHeathrow. Cargo revenue increased by 6.2% compared to the first half of last year. Thiswas due largely to volume growth at Heathrow and Stansted, offset by decreasesat Gatwick. Our new 75,000 sq ft cargo facility at Heathrow, opened last year,means we can now handle 20% of all Heathrow's air cargo and the additional costsof the new facility should be more than offset by enhanced revenue in duecourse. In the period, the net loss from the new facility and the weakperformance at Gatwick meant that the operating profit* for cargo was slightlybelow the same period last year. Our Meteor car parking operations had a good six months. Operating profit* was£1.2m for the period (2006 - £1.0m) of which £0.3m came from acquisitions madeduring last year. The number of car parking transactions increased by 11.9%,with strong growth experienced at Heathrow and Stansted airports. We have alsoincreased our chauffeured parking services which are performing well. Additional Financial Matters Depreciation for the period was £24.1m (2006 - £22.4m). Operating profit beforedepreciation, amortisation and exceptional items (EBITDA) was £88.6m (2006 -£77.6m). The exceptional charge of £8.2m before tax relates to the Go WestMidlands bus operations. The amortisation charge of £4.9m (2006 - £4.0m)increased due to additional intangible assets acquired when we bought BlueTriangle at the end of last year. The net finance cost for the period increased to £6.2m (2006 - £4.3m), largelybecause of higher average net debt, plus an increase of around 1% in the averageinterest rate. Pensions The net pension cost of the group's defined benefit pension plans for the periodwas £12.8m (2006 - £12.5m), consisting of a rail related charge of £11.4m (2006- £9.8m) and a non rail cost of £1.4m (2006 - £2.7m). The reduction in thecharges in non rail defined benefit schemes was due to an increase in theexpected return on assets and additional contributions of £7.5m paid in earlyJuly 2007. The net deficit before taxation on the non rail defined benefitschemes increased slightly from £24.5m at 30 June 2007 to £24.9m at 29 December2007. Shortly before the end of the period, the proportion of non-rail schemeassets held in equities was reduced from 60.0% to 40.0%. Taxation The effective tax rate for the period was 25.9%, or 25.3% excluding the impactof exceptional items (2006 - 24.9%). The principal reason for the reductionagainst the statutory UK tax rate for the year of 29.5% was the effectivemanagement of asset finance arrangements. The minority interest in the incomestatement of £8.1m (2006 - £5.8m) went to our 35% minority partner in GoviaLimited. Cash flow Cash generated from operations after interest and taxation was £75.4m (2006 -£71.0m). This included a cash inflow of £5.6m arising from the start of theLondon Midland franchise, and positive working capital movements from the railfranchises at the end of the period Capital expenditure, net of disposalproceeds, was £27.3m (2006 - £22.3m) and acquisition spend totalled £5.1m (2006- £9.3m). In September and October, Go North East bought the bus operations ofNorthumbria Coaches and Stanley Taxis respectively and in December, Metrobusacquired the Orpington bus operations from FirstGroup. During the period we bought back 2.5million shares at a cost of £65.1m (2006 -0.8milion shares for £14.6m). This reduced the average number of shares in theperiod to 44.3million (2006 - 47.7million) and the closing number of shares at29 December to 43.4million. From 30 December 2007 to 8 February 2008, a further0.8million shares have been bought back at a cost of £18.0m. Net debt increased by £47.5m for the period to £192.0m and adjusted net debt(net debt excluding restricted cash) increased to £308.6m (2006 - £221.4m). Thisis equivalent to an adjusted net debt / EBITDA ratio of 1.78x based on EBITDAfor the last twelve months of £173.7m and is in line with our target range ofbetween 1.5x and 2.5x. Accounting policies As described in the notes to the interim report the group has changed itsaccounting policy of carrying land and buildings at valuation in favour of thecost model. Accordingly these financial statements reflect a prior yearadjustment to reverse the effect of revaluations since the group's transition toIFRS as at 3 July 2004. We believe the adoption of the cost model improvescomparability with other major transport companies and thereby provides morereliable and relevant information on the financial position and performance ofthe group. The majority of the £22.6m carrying value reduction has been writtenoff the revaluation reserve, with the balance of £1.4m and the deferred taxreversal of £6.6m being recognised as a credit to revenue reserves. Sir Patrick BrownChairman 14 February 2008 Interim consolidated income statementfor the six months ended 29 December 2007 Six months to Six months to Year to 29 Dec 07 30 Dec 06 30 Jun 07 £m £m £m Notes Unaudited Unaudited Audited---------------------------------------------------------------------------------------Group revenue 2 1,027.9 915.2 1,826.9Operating costs (excluding amortisation and exceptional items) (963.4) (860.0) (1,708.8)---------------------------------------------------------------------------------------Group operating profit (before amortisation and exceptional items) 2 64.5 55.2 118.1---------------------------------------------------------------------------------------Goodwill and intangible amortisation (4.9) (4.0) (8.4)Exceptional items 3 (8.2) - (6.9)---------------------------------------------------------------------------------------Group operating profit (after amortisation and exceptional items) 51.4 51.2 102.8Finance revenue 4.0 2.8 6.1Finance costs (10.2) (7.1) (14.1)---------------------------------------------------------------------------------------Profit on ordinary activities before taxation 45.2 46.9 94.8Analysed as: Before amortisation and ----- ----- ----- exceptional items 58.3 50.9 110.1 Amortisation and exceptional items (13.1) (4.0) (15.3) ----- ----- -----Tax expense 4 (11.7) (11.7) (23.6)---------------------------------------------------------------------------------------Profit for the period from continuing operations 33.5 35.2 71.2---------------------------------------------------------------------------------------Attributable to: Equity holders of the parent 25.4 29.4 58.6 Minority interest 8.1 5.8 12.6--------------------------------------------------------------------------------------- 33.5 35.2 71.2---------------------------------------------------------------------------------------Earnings per share from continuing operations - basic 5 57.4p 61.6p 124.2p - diluted 5 56.5p 61.2p 122.6p - adjusted 5 78.4p 66.9p 140.7pDividend paid (pence per share) 7 47.0p 38.0p 61.0pDividend proposed (pence per share) 7 25.5p 23.0p 47.0p Interim consolidated balance sheetas at 29 December 2007 Restated Restated 29 Dec 07 30 Dec 06 30 Jun 07 £m £m £m Unaudited Unaudited Audited---------------------------------------------------------------------------------------ASSETSNon-current assetsProperty, plant and equipment 430.8 418.0 424.7Intangible assets 143.2 121.7 129.4Trade and other receivables 2.2 1.2 1.8Other financial assets 3.6 - -Deferred tax assets 12.4 24.8 11.9--------------------------------------------------------------------------------------- 592.2 565.7 567.8---------------------------------------------------------------------------------------Current assetsInventories 12.8 9.5 9.3Trade and other receivables 214.5 189.1 171.7Cash and short-term deposits 158.2 95.3 128.9Other financial assets 3.3 - 0.7--------------------------------------------------------------------------------------- 388.8 293.9 310.6Assets classified as held for sale 1.9 3.3 0.9---------------------------------------------------------------------------------------TOTAL ASSETS 982.9 862.9 879.3 LIABILITIESCurrent liabilitiesTrade and other payables (463.7) (356.7) (365.3)Interest-bearing loans and borrowings (44.4) (45.6) (42.5)Current tax liabilities (12.3) (7.7) (14.0)Other financial liabilities - (1.3) ---------------------------------------------------------------------------------------- (520.4) (411.3) (421.8)Non-current liabilitiesInterest-bearing loans and borrowings (305.8) (187.5) (230.4)Retirement benefit obligations (30.9) (84.6) (26.8)Deferred tax liabilities (64.8) (61.3) (59.7)Provisions (1.0) - (1.3)Other liabilities (7.3) (3.2) (7.7)--------------------------------------------------------------------------------------- (409.8) (336.6) (325.9)---------------------------------------------------------------------------------------TOTAL LIABILITIES (930.2) (747.9) (747.7)------------------------------------------------------------------------------------------------------------------------------------------------------------------------------NET ASSETS 52.7 115.0 131.6--------------------------------------------------------------------------------------- CAPITAL & RESERVESShare capital 65.1 65.6 65.4Reserve for own shares (87.2) (80.4) (80.6)Hedging reserve 5.0 (1.3) 0.5Capital redemption reserve 0.6 - 0.2Other reserves 1.6 1.6 1.6Retained earnings 58.6 122.3 138.7---------------------------------------------------------------------------------------Total shareholders' equity 43.7 107.8 125.8Minority interest 9.0 7.2 5.8---------------------------------------------------------------------------------------TOTAL EQUITY 52.7 115.0 131.6--------------------------------------------------------------------------------------- Interim consolidated cash flow statementfor the six months ended 29 December 2007 Six months to Six months to Year to 29 Dec 07 30 Dec 06 30 Jun 07 £m £m £m Notes Unaudited Unaudited Audited---------------------------------------------------------------------------------------Profit for the period 33.5 35.2 71.2Net finance costs 6.2 4.3 8.0Tax expense 11.7 11.7 23.6Depreciation of property, plant and equipment 24.1 22.4 44.6Intangible asset charges 4.9 4.0 8.4(Profit) /loss on sale of property, plant and equipment (0.3) (0.3) 0.6Share based payments 1.2 0.6 2.0Impairment charges 6.2 - -Difference between pension contributions paid and amounts recognised in income statement (21.9) 1.3 (2.0)Movement in provisions (0.3) - (6.7)(Increase)/decrease in inventories (0.9) 0.5 0.8(Increase)/decrease in trade and other receivables (41.4) (16.2) 11.0Increase in trade and other payables 63.1 14.4 29.7---------------------------------------------------------------------------------------Cash flow generated from operations 86.1 77.9 191.2Taxation paid (10.1) (2.4) (11.5)Net receipt on transfer of rail franchises 6 5.6 - ----------------------------------------------------------------------------------------Net cash flows from operating activities 81.6 75.5 179.7--------------------------------------------------------------------------------------- Interest received 3.3 2.4 6.0Proceeds from sale of property, plant and equipment 3.9 1.1 3.7Purchase of property, plant and equipment (28.5) (23.4) (57.4)Purchase of intangible assets (2.7) - (1.2)Purchase of subsidiaries and businesses (5.1) (8.3) (22.9)Overdraft acquired with subsidiaries - (1.0) (0.1)---------------------------------------------------------------------------------------Net cash flows used in investing activities (29.1) (29.2) (71.9)--------------------------------------------------------------------------------------- Interest paid (9.5) (6.9) (14.1)Dividends paid to members of the parent 7 (20.5) (18.1) (28.9)Dividends paid to minority interests (5.0) (3.3) (14.7)Proceeds from issue of shares 0.1 - -Payment to acquire own shares (65.1) (14.6) (51.6)Repayment of borrowings (169.4) (125.6) (136.7)Proceeds from borrowings 250.0 144.2 188.8Proceeds from finance lease and hire purchase - - 21.2Payment of finance lease and hire purchase liabilities (6.0) (9.1) (23.4)Repayment of loan notes (0.1) - (0.2)---------------------------------------------------------------------------------------Net cash outflows on financing activities (25.5) (33.4) (59.6)--------------------------------------------------------------------------------------- Net increase in cash and cash equivalents 27.0 12.9 48.2 Cash and cash equivalents at start of period 128.6 80.4 80.4 ---------------------------------------------------------------------------------------Cash and cash equivalents at end of period 6 155.6 93.3 128.6--------------------------------------------------------------------------------------- Interim consolidated statement of recognised income and expensefor the six months ended 29 December 2007 Restated Restated Six months to Six months to Year to 29 Dec 07 30 Dec 06 30 Jun 07 £m £m £m Unaudited Unaudited Audited---------------------------------------------------------------------------------------Income and expense recognised directly in equityActuarial (losses)/gains on defined benefit pension plans (10.8) 20.4 75.0Gains/(losses) on cash flow hedges 4.5 (1.7) 0.7Tax recognised directly in equity 3.2 (5.7) (19.8)---------------------------------------------------------------------------------------Net (expense)/income recognised directly in equity (3.1) 13.0 55.9 Transferred to profit on cash flow hedges - 0.4 -Profit for the period 33.5 35.2 71.2---------------------------------------------------------------------------------------Total recognised income and expense for the period 30.4 48.6 127.1---------------------------------------------------------------------------------------Attributable to: Equity holders of the parent 22.2 41.9 110.5 Minority interest 8.2 6.7 16.6--------------------------------------------------------------------------------------- 30.4 48.6 127.1--------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------Effect of change in accounting policyDecrease in revaluation reserve - (12.4) (24.0)Reversal of impairment charges - 1.4 1.4Deferred tax on the above _ 3.4 6.6--------------------------------------------------------------------------------------- - (7.6) (16.0)--------------------------------------------------------------------------------------- Notes to the interim reportFor the six months ended 29 December 2007 1. Basis of preparation The interim financial statements for the six months ended 29 December 2007 havebeen prepared in accordance with the Disclosure and Transparency Rules of theFinancial Services Authority and IAS 34, 'Interim Financial Reporting', asadopted by the European Union. The interim financial information has beenprepared using the same accounting policies and methods of computation used toprepare the group's 2007 Annual Report except for the change in accountingpolicy, noted below and the adoption of new standards issued. The interim financial statements for the six months ended 29 December 2007 canbe viewed at www.go-ahead.com from 5 March 2008 and will also be available uponrequest from the Company Secretary, The Go-Ahead Group plc, 3rd Floor, 41-51Grey Street, Newcastle upon Tyne, NE1 6EE. Change in accounting policy The group has elected to change its accounting policy of carrying land andbuildings at valuation and apply the cost model under IAS 16 'Property, Plantand Equipment'. On first time adoption of IAS16 on 3 July 2004, the groupelected to measure properties at their fair value and use those fair values asdeemed cost as at that date. The directors still believe that the use of thiselection was appropriate since it allowed properties to be measured on aconsistent basis under IFRS. In addition, the group determined at the time toapply the revaluation model in IAS16, with property recognised initially at costand thereafter measured at fair value less any subsequent depreciation andimpairment. This policy of revaluation was adopted in part because it seemed to reflectbetter the underlying value of these properties to the business and because itwas believed that other transport companies would move to a revaluation model.However, this has proved not to be the case, with all our major peers adoptingthe cost model. After consideration, the group has decided that the use of thecost model improves comparability with other major transport companies andprovides more reliable and relevant information on the financial position andperformance of the group. Accordingly prior year comparatives have been restated to reflect this change inpolicy, as required by IAS8 'Accounting Policies, Changes in AccountingEstimates and Errors'. As a result of the change in the accounting policy thecarrying value of fixed assets has decreased by £11.0m at 1 July 2006 and afurther £22.6m at 30 June 2007 with a corresponding decrease in the revaluationreserve. The deferred tax liability has reduced by £3.4m at 1 July 2006 and£6.6m at 30 June 2007. Revenue reserves have increased by £4.8m at 1 July 2006and £8.0m at 30 June 2007. The impact of the change on the income statement isnot material. 2. Segmental Analysis Business segments The following tables present revenue and profit information regarding thegroup's business segments for the six months ended 29 December 2007, the sixmonths ended 30 December 2006 and the year ended 30 June 2007, respectively. Six months ended 29 December 2007 (unaudited) Aviation Bus Rail services Total £m £m £m £m--------------------------------------------------------------------------------------- Segment revenue 281.0 617.7 135.9 1,034.6Inter-segment revenue (4.0) (1.2) (1.5) (6.7)---------------------------------------------------------------------------------------Group revenue 277.0 616.5 134.4 1,027.9---------------------------------------------------------------------------------------Group operating profit (before amortisation and exceptional items) 33.7 31.4 (0.6) 64.5Goodwill and intangible amortisation (0.9) (3.8) (0.2) (4.9)Exceptional items (8.2) - - (8.2)---------------------------------------------------------------------------------------Segment result 24.6 27.6 (0.8) 51.4Net finance costs (6.2)---------------------------------------------------------------------------------------Profit before tax and minority interest 45.2Tax expense (11.7)---------------------------------------------------------------------------------------Profit for the period 33.5--------------------------------------------------------------------------------------- Six months ended 30 December 2006 (unaudited) Aviation Bus Rail services Total £m £m £m £m--------------------------------------------------------------------------------------- Segment revenue 259.5 540.9 123.6 924.0Inter-segment revenue (6.5) (1.1) (1.2) (8.8)--------------------------------------------------------------------------------------- Group revenue 253.0 539.8 122.4 915.2--------------------------------------------------------------------------------------- Group operating profit (before amortisation and exceptional items) 29.2 25.6 0.4 55.2Goodwill and intangible amortisation (0.2) (3.8) - (4.0)Exceptional items - - - ---------------------------------------------------------------------------------------- Segment result 29.0 21.8 0.4 51.2Net finance costs (4.3)--------------------------------------------------------------------------------------- Profit before tax and minority interest 46.9Tax expense (11.7)--------------------------------------------------------------------------------------- Profit for the period 35.2--------------------------------------------------------------------------------------- Year ended 30 June 2007 (audited) Aviation Bus Rail services Total £m £m £m £m--------------------------------------------------------------------------------------- Segment revenue 520.2 1,073.4 244.8 1,838.4Inter-segment revenue (6.2) (2.1) (3.2) (11.5)--------------------------------------------------------------------------------------- Group revenue 514.0 1,071.3 241.6 1,826.9--------------------------------------------------------------------------------------- Group operating profit (before amortisation and exceptional items) 55.8 66.1 (3.8) 118.1Goodwill and intangible amortisation (0.7) (7.5) (0.2) (8.4)Exceptional items - (6.9) - (6.9)--------------------------------------------------------------------------------------- Segment result 55.1 51.7 (4.0) 102.8Net finance costs (8.0)---------------------------------------------------------------------------------------Profit before tax and minority interest 94.8Tax expense (23.6)---------------------------------------------------------------------------------------Profit for the year 71.2--------------------------------------------------------------------------------------- 3. Exceptional items Six months to Six months to Year to 29 Dec 07 30 Dec 06 30 Jun 07 £m £m £m Unaudited Unaudited Audited---------------------------------------------------------------------------------------Impairment charges (8.2) - -EC4T - - (6.9)--------------------------------------------------------------------------------------- (8.2) - (6.9)--------------------------------------------------------------------------------------- The £8.2m exceptional expense in the period relates to impairment and operatinglease charges made following an assessment of the carrying value of the assetsof our Go West Midlands bus operations, pending a review of options for thatbusiness. EC4T is electricity purchased by the train companies to operate electric trainsfrom Network Rail. During the prior year our TOC's negotiated a new basis fordetermining the cost of electricity going forward. In return for agreeing torevise the terms of the related track access agreements to reflect this newbasis, Network Rail required the group to make a one-off compensation paymentduring the year to 30 June 2007. This cost was identified as an exceptionalitem, given the size of this payment and the fact that it was made to secure afundamental change to the basis on which the group is charged for EC4T. 4. Taxation The taxation charge is made up as follows: Six months to Six months to Year to 29 Dec 07 30 Dec 06 30 Jun 07 £m £m £m Unaudited Unaudited Audited---------------------------------------------------------------------------------------Current tax charge 8.4 3.6 19.1--------------------------------------------------------------------------------------- Deferred tax relating to origination and reversal of temporary differences 3.3 8.1 6.9Impact of deferred tax rate change 30% to 28% - - (1.7)Previously unrecognised deferred tax of a prior period - - (0.7)---------------------------------------------------------------------------------------Tax reported in consolidated income statement 11.7 11.7 23.6--------------------------------------------------------------------------------------- The taxation charge has been calculated by applying the directors' best estimateof the annual effective tax rate to the profit for the period after adjustingfor exceptional items. 5. Earnings per share Basic earnings per share Six months to Six months to Year to 29 Dec 07 30 Dec 06 30 Jun 07 Unaudited Unaudited Audited---------------------------------------------------------------------------------------Net profit attributable to equity holders of the parent (£m) 25.4 29.4 58.6Weighted average number of shares in issue (000) 44,254 47,707 47,188---------------------------------------------------------------------------------------Basic earnings per share (pence per share) 57.4 61.6 124.2--------------------------------------------------------------------------------------- The weighted average number of shares in issue excludes treasury shares held bythe company, and shares held in trust for the directors' Long Term Incentive Plan. Diluted earnings per share Six months to Six months to Year to 29 Dec 07 30 Dec 06 30 Jun 07 Unaudited Unaudited Audited---------------------------------------------------------------------------------------Net profit attributable to equity holders of the parent (£m) 25.4 29.4 58.6Weighted average number of shares in issue (000) 44,254 47,707 47,188Effect of dilution:Dilutive potential ordinary shares under share option schemes (000) 724 337 601---------------------------------------------------------------------------------------Adjusted weighted average number of shares (000) 44,978 48,044 47,789---------------------------------------------------------------------------------------Diluted earnings per share (pence per share) 56.5 61.2 122.6--------------------------------------------------------------------------------------- The dilution calculation assumes conversion of all potentially dilutive ordinaryshares. Adjusted earnings per share Adjusted earnings per share is also presented to eliminate the impact ofgoodwill and intangible amortisation and non-recurring exceptional costs andrevenues in order to show a 'normalised' earnings per share. This is analysed asfollows: Six months to Profit Exceptional 29 Dec 07 for the year items Amortisation Total £m £m £m £m Unaudited----------------------------------------------------------------------------------------------Profit before taxation 45.2 8.2 4.9 58.3Less: Taxation (11.7) (1.8) (0.9) (14.4)Less: Minority Interest (8.1) - (1.1) (9.2)----------------------------------------------------------------------------------------------Adjusted profit attributable to equity holders of the parent 25.4 6.4 2.9 34.7----------------------------------------------------------------------------------------------Adjusted earnings per share (pence per share) 78.4p---------------------------------------------------------------------------------------------- Six months to Profit Exceptional 30 Dec 06 for the year items Amortisation Total £m £m £m £m Unaudited----------------------------------------------------------------------------------------------Profit before taxation 46.9 - 4.0 50.9Less: Taxation (11.7) - (0.1) (11.8)Less: Minority Interest (5.8) - (1.4) (7.2)----------------------------------------------------------------------------------------------Adjusted profit attributable to equity holders of the parent 29.4 - 2.5 31.9----------------------------------------------------------------------------------------------Adjusted earnings per share (pence per share) 66.9---------------------------------------------------------------------------------------------- Year to Profit Exceptional 30 June 07 for the year items Amortisation Total £m £m £m £m Unaudited----------------------------------------------------------------------------------------------Profit before taxation 94.8 6.9 8.4 110.1Less: Taxation (23.6) (2.1) (1.7) (27.4)Less: Minority Interest (12.6) (1.7) (2.0) (16.3)----------------------------------------------------------------------------------------------Adjusted profit attributable to equity holders of the parent 58.6 3.1 4.7 66.4----------------------------------------------------------------------------------------------Adjusted earnings per share (pence per share) 140.7p---------------------------------------------------------------------------------------------- From 30 December 2007 to 8 February 2008 the group has bought back and cancelled790,000 shares. 6. Notes to the cash flow statement Analysis of group net debt (unaudited) Cash and Loan Hire purchase/ cash Loans notes finance leases equivalents Total £m £m £m £m £m---------------------------------------------------------------------------------------30 June 2007 (222.6) (0.4) (50.1) 128.6 (144.5)Cash flow (80.6) 0.1 6.0 27.0 (47.5)----------------------------------------------------------------------------------------29 December 2007 (303.2) (0.3) (44.1) 155.6 (192.0)---------------------------------------------------------------------------------------- Cash and cash equivalents includes overdrafts amounting to £2.6m (2006 - £2.0m)and amounts held by rail companies which can be distributed subject to DfTdispensation, up to the value of revenue reserves. As at 29 December 2007,balances amounting to £116.6m (2006 - £76.9m) were restricted. During the period, the group repaid its 364 day revolving facilities, replacingthem with a £340.0m 5 year syndicated revolving facility. Non cash flow movements On the handover of a rail franchise certain assets and liabilities aretransferred to the successful franchise holder. During the period the grouptransferred in certain assets and liabilities relating to the London Midlandfranchise. Initial cash received by the group as a result of the rail franchisehandover is detailed below: London Midland £m--------------------------------------------------------------------------------Intangible assets 11.1Tangible fixed assets 4.5Inventories 2.6Retirement benefit obligations (11.1)Receivables 0.7Payables (13.4)Cash 5.6-------------------------------------------------------------------------------- --------------------------------------------------------------------------------- 7. Dividends paid and proposed Six months Six months Year to to 29 Dec 07 to 30 Dec 06 30 Jun 07 £m £m £m Unaudited Unaudited Audited----------------------------------------------------------------------------------------------Declared and paid during the periodEquity dividends on ordinary shares:Final dividend for 2007: 47p per share (2006 - 38p) 20.5 18.1 18.1Interim dividend for 2007: 23p per share - - 10.8---------------------------------------------------------------------------------------------- 20.5 18.1 28.9---------------------------------------------------------------------------------------------- Six months Six months Year to to 29 Dec 07 to 30 Dec 06 30 Jun 07 £m £m £m Unaudited Unaudited Audited----------------------------------------------------------------------------------------------Dividend proposed (not recognised as a liability)Equity dividends on ordinary shares:Interim dividend for 2008: 25.5p per share (2007 - 23p) 12.0 10.8 21.6---------------------------------------------------------------------------------------------- 8. Acquisitions and disposals On 10 September 2007, Go North East Limited, a wholly owned subsidiary of thegroup, acquired the commercial bus operations and associated assets ofNorthumbria Coaches, a small independent Northumberland bus operator.Northumbria Coaches operates a fleet of approximately 17 vehicles on acombination of commercial bus operations and Tyne and Wear and Durham localauthority contracts. On 15 October 2007, Go North East Limited, a wholly owned subsidiary of thegroup, acquired the commercial bus operations and associated assets of StanleyTaxis, a small independent Durham bus operator. Stanley Taxis operates a fleetof approximately 13 vehicles on a combination of commercial bus operations andTyne and Wear and Durham local authority contracts. On 8 December 2007 Metrobus Limited, a wholly owned subsidiary of the group,acquired First Group's regulated bus operations in Orpington, consisting of 35vehicles and around £5m of annual revenue. The above acquisitions have been accounted for as acquisitions in accordancewith IFRS3. The acquisition balance sheets have been adjusted to reflectprovisional fair values. The contribution of the acquired businesses to the group's revenue and profitfor the six months to 29 December 2007 has been immaterial. Had the acquisitionsbeen completed on the first day of the financial year, it is estimated that thegroup's revenues for the six months would be £4.2m higher and operating profitwould have been £0.5m higher. A summary of the transactions is detailed below: Net assets at date of acquisition: Fair value Book value to group 29 Dec 2007 29 Dec 2007 £m £m-------------------------------------------------------------------------------- Intangible assets - 1.1Tangible fixed assets 3.8 3.3-------------------------------------------------------------------------------- 3.8 4.4Goodwill capitalised 0.7-------------------------------------------------------------------------------- 5.1-------------------------------------------------------------------------------- Cash 5.1Expenses --------------------------------------------------------------------------------- 5.1-------------------------------------------------------------------------------- The directors believe that the goodwill represents future growth opportunitiesand created value to the group in respect of non-contractual relationships,customer loyalty and an assembled workforce, for which the recognition of adiscrete intangible asset is not permitted. Intangible assets acquired represent customer contracts of £1.1m. 9. Publication of non-statutory financial statements The financial information contained in this interim statement does notconstitute statutory accounts as defined in section 240 of the Companies Act1985. The results are unaudited but have been reviewed by the auditors. Thefinancial information for the year to 30 June 2007 and the six months ended 30December 2006 has been extracted from the group's 2007 Annual Review and the2006 interim report. The 2007 Annual Review has been filed with the Registrar ofCompanies. The audit report on the Annual Review 2007 was unqualified and didnot contain a statement under Section 237 (2) or (3), of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
GOG.L