Annual Report and Accounts
for the year ended 29 June 2019
Taking care of
every journey
Taking care of every journey
Regional bus
London & International bus
Stagecoach: 26%
FirstGroup: 21%
Go-Ahead: 11%
National Express: 7%
Regional bus market share (%)
Arriva: 14%
Others: 21%2621
Others: 3%2318
London bus market share (%)
Arriva: 18%
Abellio: 8%
RATP: 13%
Go-Ahead: 23%
Metroline: 18%
Stagecoach: 13%
Tower Transit: 4%
Market share data not yet reported for bus markets in Singapore
and Ireland.
Rail
FirstGroup: 20%
UK rail market share (%)
Arriva: 13%
Govia: 22%
Others: 24%2220
Abellio: 11%
Stagecoach: 10%
Market share data not yet reported for German rail market.
We run fully owned commercial bus businesses through our eight
bus operations in the UK. Our 8,550 people and 3,055 buses provide
excellent services for our customers in towns and cities on the south
coast of England, in north east England, East Yorkshire and East Anglia
as well as in vibrant cities like Brighton, Oxford and Manchester.
Go-Ahead’s bus customers are the most satisfied in the UK; recently
achieving our highest customer satisfaction score of 92%. One of our
key strengths in this market is our devolved operating model through
which our experienced management teams deliver customer focused
strategies in their local areas. We are proud of the role we play in improving
the health and wellbeing of our communities through reducing carbon
emissions with cleaner buses and taking cars off the road.
In London, we operate tendered bus contracts for Transport for London
(TfL), running around 157 routes out of 16 depots. TfL specify the routes
and service frequency with the Mayor of London setting fares. Contracts
are tendered for five years with a possible two year extension, based on
performance against punctuality targets. In addition to earning revenue
for the mileage we operate, we have the opportunity to earn Quality
Incentive Contract bonuses if we meet these targets. Internationally,
Go-Ahead Singapore has provided bus services in the Loyang district
of the city since 2016 through a tendered contract for the Land Transport
Authority. Go-Ahead Ireland has operated bus services in Dublin since
September 2018, for the National Transport Authority. Our second bus
contract in Ireland will begin operation in late 2019, taking the total
number of routes to 30. Our contracts in Singapore and Ireland which
operate under a similar model to TfL’s in London, are five years in length
with a two-year extension option based on punctuality performance.
In the UK, Go-Ahead operates two UK rail franchises, GTR and
Southeastern, for the Department for Transport. Around 30% of all UK
rail journeys are made on our services. GTR is a management contract,
whilst Southeastern requires us to take revenue risk. Internationally,
Go-Ahead Bahn and Bus began operating regional rail services in
Germany in June 2019 through two 13-year contracts. A further three
rail contracts in Germany have been awarded to Go-Ahead; one will
begin operations in late 2019 while the remaining two are due to
commence in 2021 and 2022 respectively. In Norway, Go-Ahead will
start running its first eight-year rail contract in late 2019. The operation
covers both long distance and suburban routes. Go-Ahead also provides
rail consultancy services to Transport for New South Wales in Sydney,
Australia. This small contract, which runs for five years is the first
of its kind for the Group.
All of our bus operations and international rail businesses are fully owned by Go-Ahead. Our UK rail operation, comprising
Southeastern and GTR, is operated through Govia, a 65% owned joint venture with Keolis.
+
14
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11
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7
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21
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L
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18
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13
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13
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8
+
4
+
3
+
L
+
13
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11
+
10
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24
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Our purpose is to
be the local partner
taking care of journeys
that enhance the lives
and wellbeing of our
communities across
the world.
Our year in review
• Group operating result slightly ahead of expectations
• Record punctuality levels in both in GTR and in
• Good progress made against all three strategic pillars:
protect and grow the core; win new bus and rail
contracts; develop for the future of transport
• Bus operating profit pre-exceptional items up 4.7% at
£95.7m (2018: £91.4m); improvement driven by strong
operational performance in London & International
division, regional bus achieved highest ever passenger
satisfaction score of 92%
• Rail operating profit at £25.4m (2018: £44.5m); prior
year included part year of London Midland franchise
Southeastern, and improved customer satisfaction
of 81% and 80% respectively
• Southeastern rail franchise extended to April 2020
• Four new international contracts won; started
operating our first two German rail contracts and
our first bus contract in Ireland
• Improved free cash generation of £74.1m (2018: £57.7m)
and continuing strong balance sheet
• Maintained full year dividend of 102.08p (2018: 102.08p)
2019 highlights
Total operating profit
(pre-exceptional items)
£121.1m
2018: £135.9m
Total operating profit
(post-exceptional items)
Dividend per share
£104.3m
2018: £161.0m
102.08p
2018: 102.08p
Earnings per share
(pre-exceptional items)
169.4p
2018: 181.6p
Free cashflow
Regional bus customer
satisfaction
Rail customer satisfaction
£74.1m
2018: £57.7m
92%
2018: 91%
81%
2018: 75%
Carbon emissions
per vehicle mile
1.15kgs
2018: 1.28kgs (restated)
Economic contribution
Through our activities we generate financial and
non-financial value for our stakeholders. We are a
major employer, directly employing 29,000 people.
Over a billion journeys are made on our services a year,
enabling access to work, education, retail and leisure.
We are at the heart of the communities we serve and
our operations support growth in local economies.
We also make direct contributions to the economy
through the taxes, interest, salaries and dividends
we pay and the payments we make to our suppliers.
This chart shows how our revenue is utilised and
demonstrates the economic contribution we make.
Read more about the financial and non-financial value
we create for our stakeholders on page 21
Total
revenue of
£3,807.1m
£15.0m61+
£6.8m
£72.6m
£43.8m
£111.2m
Payments to suppliers:
£2,363.7m
Employee costs inclusive of
PAYE: £1,161.5m
National insurance costs:
Finance costs:
Capital expenditure:
Corporation tax payments
to government:
£32.5m
Dividends paid to shareholders:
Retained in equity:
31
+
3
+
2
+
0
+
1
+
1
+
1
+
M
Taking care
of every
journey
Non-financial information statement
The table below constitutes Go-Ahead’s Non-Financial Information
statement, produced to comply with Sections 414CA and 414BA of the
Companies Act 2006 and also with the requirements of the Non-Financial
Reporting Directive. The information listed is incorporated by cross reference.
Reporting requirement
Policies and standards which
govern our approach
Information necessary to understand
our business and its impact, policy
due diligence and outcomes
Environmental
matters
• Sustainability policy
• Environment policy
• Energy and climate change
Communities pages 30 to 32
GHG emissions page 31
Employees
Human rights
• Whistleblowing policy
• Conflicts of Interest
• Equals Opportunity policy
• Code of Conduct
& Ethics policy
Our people pages 25 to 27
Audit committee report
pages 84 to 89
Directors report pages 116 to 118
• Human rights policy
• Modern slavery policy
• Code of Conduct
• Sustainable supply
chain charter*
Our people pages 25 to 27
Strategic partners and suppliers
page 28
Social matters
• Charity and Community policy
• Sustainable supply
chain charter*
Communities page 30
Strategic partners and suppliers
page 28
Anti-corruption
and anti-bribery
• Anti-bribery and
corruption policy
Our people pages 25 to 27
Audit committee report
pages 84 to 89
* Available on go-ahead.com/sustainability/sustainability-reports
In this report, the financial year ended 29 June 2019 is referred to as 2019 and the financial year
ending 27 June 2020 is referred to as 2020.
In this report
Strategic report
2 Why Go-Ahead?
6 Chairman’s letter
8 Our markets
10 Our strategy
11 Chief Executive’s review
16 Group Q&A
20 Our business model
22 Our stakeholders
34 Our key performance indicators
38 Business and finance review
40 Bus
42 Rail
44 Financial review
46 Risk management
Corporate governance
56 Chairman’s introduction to
corporate governance
60 Board of directors
62 Corporate governance report
80 Nomination committee report
84 Audit committee report
90 Directors’ remuneration report
116 Directors’ report
119
Statement of directors’ responsibilities
Group financial statements
120 Independent
auditor’s report
129 Consolidated income statement
130 Consolidated statement of
comprehensive income
131
Consolidated statement of changes
in equity
132 Consolidated balance sheet
134 Consolidated cashflow statement
136 Critical accounting judgements and key
sources of estimation uncertainty
138
Notes to the consolidated
financial statements
Company financial statements
187 Company balance sheet
188 Company statement of changes
in equity
189 Directors’ responsibilities in relation
to the Company financial statements
190 Notes to the company
financial statements
Shareholder information
204 Shareholder information
207 Appendix
209 Corporate information
210 Glossary
1
Why Go-Ahead?
We are one of
the UK’s leading
public transport
providers with
a compelling
investment case…
1 Stable cash generative UK bus business
2 Value adding UK rail expertise
3 Growing international operations
4 Devolved customer focused management
and engaged colleagues
5 Focus on sustainability and innovation
6 Strong financial profile
2
The Go-Ahead Group plc Annual Report and Accounts 2019
1 Stable cash generative
UK bus business
• Well established regional bus operator with a focus
on urban areas with prospects for growth
• Largest bus operator in London with strategically
located depots providing competitive advantage
• Efficient operations supported by consistent
investment in high quality fleet
• Good cash generation in our regional and
London bus businesses
Read more on page 40
Employees: 2,086
Buses: 679
Employees: 1,923
Buses: 803
Employees: 557
Buses: 190
Employees: 6,955
Buses: 2,169
Employees: 841
Buses: 286
Employees: 372
Buses: 190
Employees: 1,513
Buses: 438
Employees: 563
Buses: 177
Employees: 696
Buses: 292
2 Value adding UK
rail expertise
• Leading change and transformation as the
operator of the UK’s busiest rail franchises
• Track record of UK rail franchises contributing
to Group profits and cashflows
• Low levels of capital deployment
Read more on page 42
Employees: 7,220
Daily services: 3,419
Contract end date:
September 2021
Employees: 4,383
Daily services: 1,792
Contract end date:
April 2020
Bus regions
Rail networks
Annual Report and Accounts 2019 The Go-Ahead Group plc
3
Strategic report Why Go-Ahead? continued
3 Growing international
operations
• Clear and disciplined strategy for low risk
international diversification
• Ten international contracts won to date in five countries
• Strong pipeline of opportunities in targeted markets
• Target to deliver 15–20% of Group operating profits
from international activities by 2022
Read more on page 14
Employees: 1,020
Buses: 433
Contract end date:
September 2021
Employees: 421
Buses: 140
Contract end dates:
Late 2023 and 2024
Employees: 118
Contract end dates:
Late 2031 to 2034
Contract duration:
December 2019
to November 2027
United Kingdom
Ireland
Norway
Germany
Singapore
Australia*
* Our small consultancy contract in Australia is scheduled to end in 2024.
4
The Go-Ahead Group plc Annual Report and Accounts 2019
4 Devolved customer
focused management
and engaged colleagues
• Devolved local management teams embedded in their local
communities to optimise performance and service
• Award winning customer service with an industry leading regional
bus customer satisfaction score
• Playing a key role in the communities we serve by supporting local
economies enabling access to work, education, leisure and retail
• Our inclusive culture empowers our people to be accountable
for delivering excellent customer service
Read more on pages 23 to 27
5 Focus on sustainability
and innovation
• Addressing socio-economic dynamics impacting
public transport
• Continued innovation and deployment of technology
to make passenger transport easier and more efficient
• Committed to minimising our impact on climate change
and improving the environment and air quality, and
maximising the benefits public transport offers
• Focus on remaining a sustainable and responsible business
Read more on page 14
5
6 Strong
financial profile
• Robust balance sheet with low levels
of net debt
• Disciplined approach to capital allocation
and risk management
• Committed to paying an attractive dividend,
having never reduced it
Read more on page 38
Annual Report and Accounts 2019 The Go-Ahead Group plc Chairman’s letter
We place great importance on innovation
in all we do. This often involves working in
collaboration with industry partners, experts
in new markets and young, entrepreneurial
businesses, such as those participating in
our Billion Journey Project, which I’ve been
proud to support.
It is our sustained focus on customer
experience and innovation that enables
us to deliver the services that make us
Britain’s most loved bus operator, with
levels of customer satisfaction unseen
by some industries at 92%. This approach
has also enabled us to significantly improve
the performance of our GTR and
Southeastern rail franchises.
As well as recognising the value we
bring to individuals and society through
our convenient and reliable services, it is
critical that decision makers at local and
national levels understand the role we, as
mass transit providers, can play in tackling
climate change and improving air quality.
By attracting more people on to public
transport, we can significantly reduce the
number of cars on the roads, thereby
minimising the adverse environmental
impact associated with travel.
Of course we recognise that our operations
themselves have an environmental impact.
We are therefore continually investing
in upgrading our bus fleet and working
practices to increase the net environmental
benefit our activities create. These actions
have resulted in our carbon emissions per
vehicle mile reducing by 35% over four years.
Looking after the interests
of our stakeholders and creating
sustainable value
Looking after the interests of all
our stakeholders is inextricably linked
to creating long term value for our
shareholders. When we talk about
operating in a sustainable way, we mean
that in the broadest sense of the word; our
actions and approaches today determine
the success of our business into the
future. In my experience, doing the right
thing for one stakeholder group results
in better outcomes for all. Our business
model (set out on pages 20 to 21) illustrates
how we deliver financial and non-financial
value to all our stakeholders through our
strategy and by doing business in the right
way. It is a model that gives me great
confidence that Go-Ahead will continue
to provide excellent transport solutions
for the long term.
Read about our sustainability strategy and
stakeholders on pages 22–33
Andrew Allner
Chairman
Creating value for all
our stakeholders
This will be my last statement as your
Chairman as I will be retiring from the
Board at the AGM in October after
11 years, including six as Chairman.
In my first report to you in 2013, I wrote
that the Group had strong and experienced
management, a clear strategy, good values
and high integrity, a strong commitment
to high standards of health and safety and
considerable opportunity for the future.
Building on this strong foundation, my time
as Chairman has indeed seen a period
of opportunity and also of challenge for
Go-Ahead. The Group has developed
a new strategy for growth, moved into
international markets and reinvigorated
its purpose and culture. We have positioned
ourselves for the future of transport,
whilst facing the most challenging period
in the history of our rail business as we
have supported the major Thameslink
infrastructure changes needed to build
resilience and facilitate growth in a key
part of the UK’s rail network.
This has all been made possible by the
people within Go-Ahead who diligently
strive to deliver better service, greater
value for all our stakeholders, and a more
sustainable business. Without their
outstanding commitment, the one billion
journeys made on our services every year
would not be possible.
6
Today, the Group is in a strong position.
We have an important and worthwhile
purpose, strong values and culture, a clear
strategy addressing the short, medium
and longer term, a well defined business
model serving the interests of all our
stakeholders, a robust balance sheet,
and a strong leadership team, all of which
position us well for the opportunities
and challenges that lie ahead.
A changing world
At Go-Ahead we have a set of values that
we live and breathe each day, underpinning
everything we do. They are designed for
a world of rapid change and increasing
demand for high quality services. Now is
a time of great political transformation,
which creates uncertainty for businesses,
individuals and society alike. The way people
live and work continues to change and the
way they engage with businesses is different
to even a few years ago. These changes,
together with increasing customer
expectations, more engaged colleagues
and accelerating climate change, require
us to evolve our business at the same pace.
We see public transport as an important
contributor and force for good in this
changing world, a prospect we face with
commitment and enthusiasm.
The Go-Ahead Group plc Annual Report and Accounts 2019 The Board has long understood the
value and importance of dividends to our
shareholders, who have provided capital
to support the Group, and for this reason
Go-Ahead has never reduced its dividend.
In line with our dividend policy, the Board
is recommending a final dividend of 71.91p
per share, bringing the full year dividend
to 102.08p per share reflecting the resilient
performance for the year and the Board’s
confidence in the Group’s outlook.
Subject to shareholder approval, the final
dividend will be paid on 22 November 2019
to shareholders on the register on
1 November 2019.
Board changes
I welcome Clare Hollingsworth, who
joined the Board on 1 August 2019 as
Non-Executive Chairman Designate and
will succeed me as your Chairman with
effect from the conclusion of our Annual
General Meeting (AGM) on 31 October 2019.
Clare brings a wide range of experience
from both within and outside the transport
sector and I have every confidence that
she will be an excellent Chairman.
I am also very pleased to welcome
Elodie Brian to the Board as Group
Chief Financial Officer. Elodie’s experience,
intellect and style will be of great value
to the Group and I am particularly pleased
that we have been able to make an internal
appointment for this important role,
demonstrating our successful succession
planning in action.
Katherine Innes Ker has served more
than nine years on the Board and must
now be considered as not independent.
She will be replaced by Adrian Ewer
as Senior Independent Director and
by Leanne Wood as Remuneration
Committee Chair after the 2019 AGM.
Katherine will, however, remain on the
Board as a non-independent non-executive
director for a further period to ensure
continuity following my retirement and
to support the transition of Chairman,
whose recruitment process she led.
Further details of these Board changes can be
found in the nomination committee report on
pages 80 to 83
Inclusion and diversity
We have a diverse Board, comprising
directors with a broad spectrum of
complementary skills, personalities and
competencies. With the recent changes
to Board composition, our female
representation has increased from 29%
to 50%, exceeding the 33% target set by
the Hampton-Alexander Review. This will
further increase to 57% when I step down
from the Board.
The Board remains committed to
improving diversity in all its forms and
it has been encouraging to see the wide
range of inclusion and diversity initiatives
and strategy now being embedded across
the business.
Read about these initiatives on page 27
Effective corporate governance
The importance of strong and effective
corporate governance both at Board
level and throughout the Group is not
underestimated by the Board and we
pride ourselves on clear and transparent
reporting. Our corporate governance
report on pages 56 to 119 sets out our
robust governance framework and
describes the excellent progress we have
made in adopting early many provisions
of the new UK Corporate Governance
Code 2018.
Additionally, it sets out the results of
the internal Board evaluation led by the
Group Company Secretary and our
progress against outputs from last year’s
review such as the development of a new
Board Mandate.
Read about our Board Mandate on page 64
Looking to the future
I believe the Group’s strong foundations in
the UK will provide a solid base to respond to
changing social, political and environmental
factors, whilst also enabling the Group to
develop and thrive in new international
markets. I am absolutely convinced that
private operation of public transport with
close community and local authority
partnerships can and should be a force
for good in society and that Go-Ahead
will continue to be a vital part of the
communities it serves into the future.
It has been a privilege to be your
Chairman. I have been extremely well
supported by an excellent Board and by
dedicated colleagues across the Group.
I have also been fortunate to work with
a Chief Executive, who has strong values,
integrity and resilience. I would like to thank
David and all colleagues at Go-Ahead for
their support and wish them good luck
and future success.
I am leaving Go-Ahead in good shape and
I look forward to watching the Group’s
progress as it continues on its journey.
Andrew Allner
Chairman
4 September 2019
Section 172
The Board considers the interests of the Group’s employees
and other stakeholders, including the impact of its
activities on the community, environment and the Group’s
reputation, when making decisions. The Board, acting fairly
between members, and acting in good faith, considers what
is most likely to promote the success of the Group for its
shareholders in the long term.
Read more about:
• how the views and interests of all our stakeholders were
represented in the boardroom during the year together
with the key topics raised and how we responded on
pages 72 to 75
• the Group’s goals, strategy and business model in the
Strategic report on pages 8 to 21
• how we manage risks on pages 46 to 55
• corporate governance on pages 56 to 79 including how
governance supported the delivery of our strategic
objectives in 2019 and how we are responding to the UK
Corporate Governance Code 2018
7
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Our markets
Responding
to a changing
environment
Within our bus and rail markets
changes in economic, political,
societal and environmental trends
affect how we operate, interact
with our stakeholders and shape
our strategy for the future.
Economic and political
Societal
Economic and political
The change taking place
There are a number of changes taking place in global
economic and political arenas. Politics in our main UK
market is dominated by the Government’s preparations
to leave the European Union (EU) in October 2019, which
in turn is creating economic uncertainty and limiting
gross domestic product (GDP) growth.
Transport remains a topical political issue brought more into
focus by the recently appointed Secretary of State for
Transport and the soon-to-be published Williams Rail
Review. Internationally, a number of transport markets are
becoming more open to foreign operators.
Potential impact and Go-Ahead approach
We are an agile, forward looking business which takes a long
term view and allows us to respond to economic and political
changes. We operate in markets that have growth potential
and we prioritise customer service delivery which we believe
is vital to our success.
While lower economic growth has the potential to reduce
the demand for our services as fewer people travel for work
and leisure, this could be offset by a modal shift away from
the private car as costs of motoring become prohibitive.
In relation to Brexit, our risk management considerations
have led us to make extensive preparations, as a disruptive
departure from the EU by the UK could impact our supply
chains and increase competition for a declining pool of
EU workers.
Significant changes in UK transport policy, such as increased
regulation in the regional bus market, could present challenges
to the way we operate but may also offer opportunities for
growth. Similarly, we have contributed to the Williams Rail
Review. As a long standing operator in the UK, we actively
engage with policy makers both directly and through
industry groups.
The opening up of certain international markets provides
us with opportunities to expand and diversify our activities.
We adopt a disciplined and targeted approach to our
international expansion.
Environmental
£143.7m
contributed directly to the
Government through tax
and National Insurance
8
The Go-Ahead Group plc Annual Report and Accounts 2019
Societal
The change taking place
Society is changing in many ways from broad trends such as
an ageing population through to changes in work patterns and
in customer, leisure and spending behaviour, often facilitated
through technology. There is a trend towards an increase
in working from home and part time working; more home
entertainment through online gaming, social media and streaming
services like Netflix; and more online shopping with 20% of all
UK retail sales now online and parcel volumes up 13% year on
year. Technological change is evident with more people using
mobile technology for transacting and communicating through
their smartphones, and an increase in customer demand for
convenience, flexibility and ease of doing business. There is
also an increase in awareness and desire to tackle air quality,
congestion and public health issues in our cities with these
factors moving up the public and government policy agenda.
Potential impact and Go-Ahead approach
These changes provide us with both challenges and opportunities.
An ageing demographic, combined with increasing numbers
of younger urban dwellers choosing not to drive, provides scope
for additional demand for our services provided we meet
evolving customer needs. A greater appreciation of mass public
transport being a solution to air quality and congestion should
also play a part in encouraging modal shift away from private
vehicles that account for over 60% of trips and over 75% of
distance travelled in the UK. Conversely, some of the other
trends are a dampener of demand. All of these drivers impact
the way we think about our business, how we target different
market segments and how we adapt and deliver our customer
offering. Within the first pillar of our strategy to protect and
grow the core, we focus on improving our offering to meet
evolving customer demands. We continually use technology
to make travel easier and more convenient with all of our buses
now accepting contactless payment, and many offering free
WiFi and USB ports, improved Delay Repay on our train services,
and apps providing real time passenger information. The third
pillar of our strategy is directed specifically to develop for the
future of transport. We have launched demand responsive
transport trials in Oxford and Sutton, and our Billion Journey
Project is helping to develop improving transport solutions.
We are extending this further by developing Mobility as a
Service as a pilot scheme in Brighton to enable easier end to end
journeys across different transport modes. We have also been
promoting the wider benefits of public transport, including
through our Active Travel and Chatty Bus campaigns, and we
are working in partnership with other companies under a
Business in the Community initiative aiming to regenerate
local High Streets and communities.
100%
of our buses now accept
contactless payment
Environmental
The change taking place
The world is facing rapid climate change with rising temperatures,
changing weather patterns, and detrimental effects on ecosystems
and human health. It has been well documented that unless the
trajectory of global warming significantly changes there will be
irreversible effects. CO2 in the atmosphere is the main cause of
global warming and it is at its highest level in history, having
risen by around 30% since 1960. Global legislation and society’s
impetus for change have created an accelerated agenda to
slow the rate of climate change.
Potential impact and Go-Ahead approach
We all have a part to play in ensuring the world’s sustainability.
We take our role in this very seriously and have made a
commitment to effect meaningful change. We are part of the
solution and continually seek innovative ways to maximise the
benefits we bring and minimise our adverse impacts on the
environment. Examples include our first air-filtering bus which
cleans the air as it drives, and hybrid vehicles that switch to
electric power in the areas most in need of protection, such
as around schools. As the UK works towards its net zero 2050
targets, and concern around air quality increases, the volume
and nature of vehicles in our towns and cities need to change
with more people travelling in fewer less polluting vehicles.
Go-Ahead has the opportunity to reduce the number
of vehicles on the roads by carrying more people on our
services leading to fewer journeys made in private cars.
However, if the benefits created by public transport operators
in tackling climate change aren’t fully recognised by local
and national decision makers, provision of bus and rail services
in certain areas could be impacted by future regulations. It is
important that the benefits public transport brings to this
agenda are understood. Go-Ahead aims to influence and
educate decision makers, through initiatives such as our
involvement in the campaign for a national bus strategy
to encourage greater bus use.
While over 99% of our train fleet is electric and we operate
an all-electric bus depot in London, electric power isn’t always
possible or practical for bus services. A good alternative is
Euro 6 diesel. We are continually increasing the proportion
of these less polluting vehicles in our fleet while aiming to
increase the number of passengers each bus carries. By making
our services as convenient and reliable as possible, we provide
an attractive alternative to the private car, reducing the
number of vehicles on the roads.
One double decker bus can reduce
the number of cars on the road by 75
Annual Report and Accounts 2019 The Go-Ahead Group plc
9
Strategic report Our strategy
Our vision
A world where every
journey is taken care of
Delivered by our three strategic objectives
Protect and grow
the core
Win new bus
and rail contracts
Develop for the
future of transport
With responsibility as a business for safer and:
Better
teams
Happier
customers
Stronger
communities
Smarter
technology
Cleaner
environment
We are committed to
attracting, developing
and retaining the best
talent and driving
high levels of
motivated and
engaged colleagues.
Our customers are
at the heart of what
we do. We aim to
provide high levels
of customer
service across all
our operations.
We enable
communities to
flourish by providing
access to education,
retail, leisure and
employment, allowing
people to
stay connected.
We invest in
technological
solutions and utilise
our market leading
retail capabilities
to drive growth
and innovation.
We promote the
benefit that public
transport has over
private in improving
air quality and strive
to reduce any
negative impact
we may have on
the environment.
Underpinned by our core beliefs and attitudes
Trusting people
Being can do people
Building relationships
Accountable
Down to earth
Collaborative
We believe in
Being one step ahead
We are
Agile
10
The Go-Ahead Group plc Annual Report and Accounts 2019 Chief Executive’s review
Adapting to a
changing world
“ As well as our continual
focus on providing attractive
returns for our shareholders,
we take our corporate
responsibilities seriously
and are committed to
providing both financial
and non-financial value
to all our stakeholders.”
David Brown
Group Chief Executive
Our people
Our ability to meet the needs of our
stakeholders is only possible through the
hard work and dedication of our people.
I would like to thank my 29,000 colleagues
across the Group who are integral to
the success of our business. Colleague
engagement is a key focus for us and
we continue to invest in training
and development.
We want to be considered as a great
company that people want to work for.
Our inclusive culture plays a big part
in this and we’re working hard to make
a career in public transport a great
choice for all irrespective of gender, age,
ethnicity, sexual orientation, religion or
disability. In particular, there’s a lot of
great work taking place around the Group
to redress the gender imbalance in bus
and rail. We are heavily involved in the
industry wide Women In Rail movement
and recently launched our own Women
In Bus network.
Read more on our people in our stakeholder
engagement section on pages 25–27
I am pleased to report the good progress we
have made during the year. Our commitment
to provide better services for our customers
has delivered improvements in reliability
and satisfaction in both our bus and rail
divisions, many of which reached record
levels during the period. We began
contracts in three new countries and
won four more international contracts.
Our financial performance for the year
exceeded our initial expectations in
both our bus and rail businesses, and
our balance sheet remains strong.
In Southampton, we operate the UK’s first
air filtering bus which cleans the air as it
travels and we will be introducing more
of these buses into our fleet in the next
few months. I was pleased to be awarded
European CEO of the Year for Sustainable
Transportation in the 2019 CEO Magazine
Awards, which is recognition of the
commitment with which we all approach
sustainability across the Group and across
our supply chains.
Read more on our approach to sustainability in our
stakeholder engagement section on pages 22–33
Operating responsibly
As well as our continual focus on providing
attractive returns for our shareholders,
we take our corporate responsibilities
seriously and are committed to providing
both financial and non-financial value to
all our stakeholders.
Safety is our priority and our policies and
processes throughout the Group reflect this.
Playing our part in protecting the
environment is also of paramount
importance to us. Not only do our services
minimise emissions and congestion through
reducing car journeys, but we are also active
in lowering our own carbon footprint, and
over the last four years we have reduced
carbon emissions per vehicle mile by 35%.
We are the largest operator of electric
buses in the UK and run an all-electric bus
garage in London. We will be introducing
30 new electric buses next year in our
Brighton & Hove and Go North East
bus businesses.
Customer and community focus
We aim to innovate in all areas of our
business and use technology to deliver
improvements for customers, drive
efficiencies and position us for the future.
In Brighton, we will soon be launching a
pilot Pay As You Go bus payment system
outside of London. This allows passengers
to pay by tapping their phone or bank
card on the reader, simplifying the
customer experience and speeding
up the boarding process.
Our businesses are at the heart of the
communities they serve; connecting
people with friends and family, work and
leisure, and supporting local economies.
We promote health, wellbeing and inclusion
and during the year launched a range
of initiatives, such as ‘Active Travel’
and ‘Chatty Bus’ which support better
physical and mental health.
Read more on our communities in our stakeholder
engagement section on pages 30–32
11
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Chief Executive’s review continued
Protect and grow the core
Our core bus and rail activities, which
take care of more than a billion passenger
journeys a year, remain at the heart of the
Group. We are the largest bus operator
in London and have a well established
regional bus business. We are responsible
for around 30% of all train journeys in the
UK and have a growing presence in
international markets. The first pillar of
our strategy centres around protecting
and growing these activities through a
collaborative and agile culture, an intense
customer focus and by using our financial
strength to continue investing in these
businesses to ensure long term success.
£95.7m
Bus division operating profit
(pre-exceptional items)
Bus
Operating profit before exceptional items
in our bus division grew to £95.7m (2018:
£91.4m) with a significant improvement
in our London & International bus division
offsetting a slightly lower result in our
regional bus business.
Regional bus
In regional bus, we increased like for like
growth in passenger journeys by 3.3%,
with each of our operating companies
reporting higher volumes than last year.
Once again, this represented a clear
outperformance against the broader
UK bus market which saw a 0.7% decline
in volumes for the year to March 2019.
We have introduced targeted campaigns
to grow passenger volumes often aimed
at younger passengers to get them into
the bus habit so they continue using our
services as they get older. We have invested
in a number of initiatives including utilising
cleaner vehicles and technology, rolling
out Lean engineering, and introducing
new routes and frequencies where
volumes and revenues take time to build.
These initiatives will all help to deliver an
improved performance in the future, but
during this implementation period, they
impacted regional bus operating profit
which reduced to £44.5m before exceptional
items this year (2018: £45.8m).
12
We have plans in place to gradually
improve yields whilst continuing to grow
our passenger numbers alongside active
management of our cost base.
Our approach to target attractive markets
serving local communities with customer
focused services delivered the industry’s
highest ever customer satisfaction score
of 92% in the annual survey by Transport
Focus, with Go-Ahead topping the league
table for punctuality and journey time.
Towards the end of the year, we completed
the acquisition of the Queens Road bus
depot, along with 163 buses, in Manchester.
This acquisition, under the new branding
Go North West, provides us with an exciting
opportunity to participate in Britain’s second
largest urban area. We look forward to
working in partnership with Transport
for Greater Manchester (TfGM) to deliver
operational excellence, innovation and
great customer service. It also provides
us with a platform to explore further
opportunities in the region.
We continually consider opportunities for
growth in the regional bus market ensuring
alignment with our risk appetite and strong
financial discipline. East Yorkshire, acquired
in June 2018, is performing well and in the
year made a positive contribution to our
profitability that was ahead of our initial
expectations, demonstrating our ability
to improve the performance of our newly
acquired businesses.
London & International bus
Our London & International bus division,
which comprises our contracted bus
activities in London, Singapore and Ireland,
reported an operating profit before
exceptional items of £51.2m (2018: £45.6m),
with its pre-exceptional operating margin
expanding to 9.0% (2018: 8.3%).
In London, our operated mileage reduced
as anticipated due to previous contract
losses. The impact of this was more than
offset by better service performance
leading to an increase in Quality Incentive
Contract income (QICs). Far less of our
own contracted mileage and revenues
was retendered during the reporting
period than in the previous two financial
years, so our bidding activity has focused
on new contracts. We continue to bid
with financial discipline and have had
an encouraging level of success. In the
coming year we expect operating mileage
to return to levels similar to those in the
second half of 2018.
During the year, our London bus operations
supported the major rail infrastructure
works on the Brighton mainline, keeping
passengers moving on replacement
bus services.
Our bus operation in Singapore
also performed well in the year, with
improvements in both operational
and financial performance.
The Go-Ahead Group plc Annual Report and Accounts 2019 On-time performance during the year
improved by over four percentage points
to 93.5% and we have contributed to the
significant improvement in bus customer
satisfaction in Singapore over the past
three years.
In Ireland, the first of our two contracts,
which operates 24 routes, began in
September 2018 and made a small positive
contribution to operating profitability
in the year. Our second contract, covering
a further six commuter routes around
Dublin, is planned to start at the end
of the calendar year.
Rail
As expected operating profit in our rail
division at £25.4m (2018: £44.5m) declined
significantly from last year primarily due
to the expiry of the London Midland
franchise in December 2017.
£25.4m
Rail division operating profit
Following the year end, we were disappointed
that the Department for Transport (DfT)
took the decision to terminate the new
South Eastern franchise competition. We
submitted a strong bid designed to provide
value for both passengers and taxpayers
and to build on the significant improvements
we have delivered in our period of operating
the franchise. In our 13 years of operation
passenger numbers have grown 36%, and
we have added 5,000 extra seats.
Customer satisfaction as reported in the
latest National Rail Passenger Survey
(NRPS) for Spring 2019 also improved by
five percentage points to 80% as we grew
passenger journeys by 3.7%.
The existing Southeastern franchise
has been extended to 1 April 2020 and
we are engaging with the DfT about the
future of the franchise beyond that date.
We continue to focus on colleague
engagement, punctuality, reliability and
excellent customer service. We are also
strengthening our partnership with
Network Rail which is the most integrated
and collaborative in the industry, operating
on one of the UK’s most complex networks.
GTR reached agreement with the DfT during
the year to settle contractual issues,
significantly reducing the uncertainty over
the future of the franchise and providing
funding for £15m of passenger benefits.
Through focused interventions on
operational and customer service delivery
we have seen significant improvements,
with punctuality reaching a record level
of 89.3% in April 2019. Southern services
achieved a year on year increase in
customer satisfaction of 12 percentage
points in the latest NRPS to 81% whilst
Gatwick Express also improved further
to reach its highest level for seven years.
Customer satisfaction on Thameslink
services was also at its second highest
ever level.
Looking ahead, we await the details
of the rail industry review being led
by Keith Williams and we hope to see
reforms that will deliver value for money
for passengers and taxpayers, and
improvements for customers.
13
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Chief Executive’s review continued
Develop for the future
of transport
As a forward looking business, we believe
being prepared for the future of transport,
and helping to shape changes in travel
patterns, are crucial to our long term
sustainability. We continue to invest
in innovation to ensure that we remain
relevant to customers as their lifestyles
and mobility needs evolve.
Our Demand Responsive Transport (DRT)
trial in Oxford, PickMeUp, celebrated its
first anniversary in June. During the first
year, it provided more than 140,000 rides
for its customers whilst contributing to
a reduction of traffic, noise and carbon
pollution in the Oxford area. PickMeUp
currently has over 30,000 registered users
and is averaging around 600 rides per day.
On the back of this successful pilot, we are
working with TfL and ViaVan on a year long
contract to trial an on-demand bus service
across the London borough of Sutton which
began operating in May.
Our Billion Journey Project, which is the
largest privately funded transport accelerator
programme in Europe, has partnered with
eight small companies to develop a raft of
innovative new services for passengers.
We are piloting Citi Logik which provides
crowding information to Thameslink
passengers as well as AirPortr which
provides a service that collects and
carries air travellers’ luggage from
home to their destination.
We are developing a pilot of Mobility as
a Service that will provide customers with
more convenient access to multi-mode
journeys in and around Brighton.
Hammock, our consulting business that
specialises in retail solutions for the
transport sector, completed several
projects in the year.
The Group continues to explore new ways
of meeting changing customer needs and
improving the use of digitisation across
the business.
Outlook
The world is changing rapidly and so is
the way that we get around. With a rise
in flexible working, working from home
and self-employment, the traditional
daily commute is increasingly no longer
the norm. Markets for online shopping,
take-away food deliveries and home
entertainment mean people are making
fewer journeys in their free time. It is
vital that we adapt our services to
meet the changing travel patterns of
our customers.
Amidst these changes, climate change
and air quality are moving up the public
and political agenda and the volume of
traffic on the roads is having a detrimental
effect on the environment. Public transport
has an important role to play in tackling
these challenges, providing a solution by
carrying more people in fewer vehicles.
Win new bus and rail contracts
We have had a busy year in our international
markets and made good progress with our
strategy in this area. We were pleased to
secure several new contracts, including
our fourth and fifth rail contracts in
Germany. The fourth contract covers the
E-Netz Allgau routes and the fifth covers
the Augsburger Netze routes awarded
by the Bavarian rail authority and the
Baden-Württemberg public transport
authority. These two awards will run
almost 10 million train kilometres per
year using electric trains. When the final
contract commences in 2022, the five
German rail contracts that we have
secured to date will operate around
20 million train kilometres per year.
In October, we were awarded our first
contract in Norway to run the Oslo South
package of rail services – the first rail
contract to be let by the country. It covers
a combination of long distance and
suburban routes comprising 5.5 million
train kilometres. Mobilisation is well
underway for operations to begin in
December 2019.
In December, we were awarded our first
contract in Australia, bringing our extensive
expertise in signalling and train control
systems to New South Wales by supporting
the Network Rail Consulting team. Work
on this modernisation programme, which
will improve frequency and reliability for
passengers of Sydney Trains, began in January.
The first two of our five German rail
contracts started operating in June 2019.
Mobilisation continued for our third
German rail contract, our first rail contract
in Norway, and our second bus contract in
Ireland, all of which are scheduled to begin
at the end of the calendar year.
To date, we have secured ten international
contracts across five countries. We expect
these to deliver combined annualised
turnover of over £400m when they are all
fully operational. There remains a strong
pipeline of contract opportunities in our
target markets, and our international
development teams are continuing to
pursue these in line with our well defined
framework for overseas activity. We are
making good progress towards our goal
of generating 15–20% of our Group
operating profit from international
activities by 2022.
14
The Go-Ahead Group plc Annual Report and Accounts 2019 S
t
r
a
t
e
g
i
c
r
e
p
o
r
t
What we achieved in 2019
Protect and grow the core
• Strategies further developed to
grow passenger numbers, resulting
in an increase of 3.3% in regional bus
• Invested £50.0m in bus division,
including 123 new low or zero
emission buses
• Southeastern achieved record
punctuality of 89.4%
• GTR performance improved
significantly with contract
agreement reached with the
DfT in December 2018
• Purchase of a FirstGroup bus depot
in central Manchester
Win new bus and rail contracts
• Positive momentum in our
international expansion, with
ten contract awards to date
• Awarded first contract in Norway,
fourth and fifth contract in Germany
and a first small consultancy
contract in Australia
• Remain on track to deliver 15% to
20% of Group operating profit from
international operations by 2022
• Mobilised and launched first two
contracts in Germany, with ongoing
mobilisation of three other contracts
• Ongoing mobilisation of operations
in Ireland, with a further tendered
contract won due to begin in late 2019
Develop for the future of transport
• PickMeUp, our Demand Responsive
Transport operation in Oxford, has
grown to 30,000 registered users
and is providing 4,000 weekly rides
• Launched a further demand
responsive pilot in Sutton
• Two pilots commenced under our
Billion Journey Project, creating
opportunities with dynamic
start-up businesses
• Hammock, our IT consultancy,
completed two contracts
• Plans progressed to pilot Mobility
as a Service in Brighton & Hove
15
We are calling for a national bus strategy
to address these issues and collectively
leverage the benefits bus travel can bring
to the UK. Go-Ahead is committed to
remaining at the forefront of public
transport provision and I am confident
that we are well positioned to face the
opportunities and challenges ahead.
My confidence is underpinned by a
portfolio of bus businesses that have
again demonstrated resilience during
the year. In our regional bus businesses,
we will concentrate on delivering excellent
service to our customers and converting
passenger growth to the bottom line. In
our new Manchester business, we will
focus on providing better services to
passengers and attracting more people
onto our buses. In London bus, amidst the
backdrop of TfL’s budgetary constraints,
we have good visibility for 2020 and we
expect the route wins, which we have
secured during the past year, to contribute
to an increase in volumes and revenues.
Overall, we expect to deliver consistent
profitability from the bus division
compared with 2019.
In rail, we are focused on building on the
operational improvements that we have
made in the past year in both Southeastern
and GTR. While Southeastern’s profitability
will be lower year on year, GTR is expected
to generate a modest profit margin in 2020.
Over its franchise term, GTR is still expected
to achieve an operating margin of between
0.75 and 1 percent.
We are engaging with the DfT regarding
the future of the Southeastern franchise
beyond 1 April 2020.
Internationally, we will continue to progress
against our strategy for growth. In the
first half of the year, our emphasis will
be on the start of new operations and the
introduction of additional services in Ireland,
Norway and Germany. In conjunction with
those activities, our bid teams continue to
pursue other targeted opportunities.
Our Chairman, Andrew Allner, will retire
from the Board in October 2019. I would
like to thank Andrew for his contribution
to the Group, especially bringing our values
to life at Board level. I wish him all the best
for the future. Clare Hollingsworth will
succeed Andrew as Chairman. I am
pleased to welcome Clare to the Board
and look forward to working with her. She
brings a wide range of experience that will
be invaluable as we continue to deliver
value for all our stakeholders.
Overall for 2020, we expect the Group
to deliver another robust performance
as we continue to execute our clear and
well defined strategy; strengthening our
core business, diversifying into international
markets and developing new ways of
responding to a changing world. By striving
to deliver our strategy and by doing business
in the right way we can provide the best
possible services for customers and generate
sustainable value for all our of stakeholders.
We have strong management teams
across the business, leading our people
and inspiring commitment and passion as
we position ourselves for the future and
move closer to achieving our vision.
Read more in our Business and finance review on
pages 38–45
David Brown
Group Chief Executive
4 September 2019
Group Q&A
Q&A
Go-Ahead’s Chairman,
Chief Executive and
Chief Financial Officer
answer the topical
questions that we get
asked by our stakeholders.
What is your appetite and
criteria towards consolidation
in the UK public transportation
market given the potential
sales in the industry?
We believe that there is scope for
consolidation within the UK bus
market. While we do not comment or
speculate on any potential opportunities
unless there is something specific to
announce, our general approach is to
consider opportunities that may arise
and make sensible, rational decisions
with due regard to capital allocation,
financial returns and shareholder value.
Our purchase of the Queens Road
depot in Manchester along with 163
buses from FirstGroup in June is an
exciting example for us, as was the
acquisition of our East Yorkshire bus
business in June 2018. We are interested
in opportunities that bolt-on to our
existing businesses and create synergies,
or that enable us to enter vibrant new
markets at an attractive price.
When can we expect a resumption
of dividend increases?
The provision of an attractive dividend
is important to us and we recognise
that it is also important to our current
and potential future shareholders.
Our dividend policy announced a year
ago provides greater certainty and
flexibility around continuing to pay
an attractive dividend, and the level
is determined as a percentage of our
pre-exceptional net earnings in the
range of 50–75%. The Board considers
this on a six-monthly basis taking into
account cash generation, balance
sheet strength, and potential future
cash requirements for the business.
We are proud to have never cut our
annual dividend since privatisation
25 years ago in 1994 and aim to build
on this record in the years ahead.
16
The Go-Ahead Group plc Annual Report and Accounts 2019
Is your net debt to EBITDA target
still appropriate given that you
are consistently below the desired
range, and what will bring you
within the range?
It is worth noting that our target and
covenant are expressed on a pre-IFRS
16 basis and we – and our lenders
– continue to think about it in those
terms. We have a robust balance sheet
and are comfortable with a conservative
level of gearing, particularly as there
are uncertainties around the economic
environment and the future of the
Southeastern franchise. If we cease
operation of Southeastern when the
current franchise ends in April 2020,
the ratio could naturally fall into the
target range. We are also keen to
retain some balance sheet headroom
to provide us with the scope to invest
in value creating opportunities.
“ We are still in the early
stages of our international
expansion and we have
made good progress in
securing contracts that
have combined annualised
revenues of over £400m
when they are fully up
and running.”
Why are you continuing to allocate
capital to the regional bus business
where the market appears to be in
structural decline and your margins
are falling?
We take a long term view and focus
on areas where we believe there are
longer term profitable growth
opportunities. Yes, the broader market
has seen volumes decline for several
years, but we have consistently
outperformed the market. There
is a growing need for urban centres
to reduce congestion to achieve net
zero targets and comply with the
requirements of Ultra Low Emission
Zones. This can only be achieved
through reducing private car use
and increasing mass transit. We are
convinced that there is a future for
bus and believe that there are
opportunities for improved, better
connected networks and so we have
been going through a period of adding
mileage and associated cost up front
where the revenue builds more slowly.
We also firmly believe that providing
safe, reliable, convenient and easy-to-use
services is paramount to longer term
success and so continue to invest in
cleaner buses, technology and customer
service that we are confident will
deliver value for all of our stakeholders.
Have the risks associated with UK rail
franchises changed fundamentally
and why don’t you seek to exit these
activities as your peers seem to
be doing?
We continue to believe that UK rail,
when bid for sensibly, can be an
attractive business. It has provided
us with good levels of profitability
and returns in recent years as well as
enhanced credibility when bidding for
international contracts, particularly
when we’re able to demonstrate our
record breaking punctuality. Our
approach remains to bid on contracts
that we believe will bring value to
customers, shareholders and to the
taxpayer over the contract lives.
Following the DfT’s decision to extend
Southeastern to 1 April 2020, we are
engaging with them about plans
for the franchise and we await the
outcome of the Williams Rail Review.
Read more in our risks on pages 46–55
Wouldn’t it make more sense for
rail to be nationalised as proposed
by the Labour Party?
We firmly believe that private sector
operation, with its customer focus and
expertise along with the access to
private investment that it can bring,
provides the best model for running
rail services. Whilst the number of
passenger journeys on rail was stagnant
or falling whilst in the public sector, it has
more than doubled since privatisation.
We also continue to have one of the
safest railways in the world and customer
satisfaction across the UK rail network
has improved since last year and remains
amongst the highest for a major
railway in Europe. The train operating
companies also continue to make
net contributions to the Government
with 2018 representing the eighth
consecutive year of such contributions
that have totalled around £3.3bn over
that period.
How much do you invest on your
future of transport activities and
when will they contribute to the
bottom line?
Our financial investment in this
strategic area has not been extensive
to date, and while some of our ventures,
such as Hammock, have delivered low
level profitability, this strategy is less
about short term gains and more
about building strategic opportunities
and partnerships to leverage our
strengths into the future. Our aim is
to seek new ways to use our skills,
knowledge and assets to enable
sustainable growth for the long term.
Across all areas of our business we are
exploring a range of initiatives, often
working in partnership with others
who bring expertise outside of our
skillset or experience of a new market.
What is the proportion of operating
profit from international activities
and when will you split these out
so that we can monitor progress
towards your 2022 target?
We are still in the early stages of our
international expansion and have made
good progress in securing contracts that
have combined annualised revenues
of over £400m when they are fully
up and running. With the first two of
our German rail contracts having only
started operating three weeks before
the year end, the only international
contracts to have been operating for
any significant period through the year
were our bus contracts in Singapore
and Ireland. Both of these have made
a positive contribution to profitability.
Some contracts, notably our German rail
contracts, have significant mobilisation
periods between contract award and
start of operations which is why our
target relates to 2022. When our
international activities are operating
at a scale that we believe is sufficient
to separate them, we will do so.
17
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Group Q&A continued
our values. By only bidding for work
that plays to our strengths, we minimise
execution risk as we set up new depots,
recruit new people and introduce
new services.
Read more in our risks on pages 46–55
What are your hopes and
expectations in relation to outcomes
from the Williams Rail Review?
We’re keen to hear Keith Williams’
recommendations for the rail industry
and share his view that the review
should lead to improvements for
customers and value for taxpayers.
Through the Rail Delivery Group we
have contributed our views which
would see simplification and
devolution across the industry.
We would like to see the introduction
of different franchise models for
different customer markets, including
changes to the size of contracts and
an overhaul of the fares and ticketing
structure. Furthermore, we believe
there should be a rebalance of risk
and reward for operators through
different contract models designed
to drive accountability.
What are you doing to contribute
to the UK’s net zero target by 2050?
We are supportive of the net zero
target and are working towards our
own target for our bus fleet to be
emission free by 2035. Over the last
four years, we’ve delivered a 35%
reduction in carbon emissions per
vehicle mile through measures including
increasing the proportion of cleaner
Euro 6 buses in our fleet, introducing
zero emission electric buses and
reducing energy use on our premises.
While we, of course, acknowledge that
we need to work faster to decarbonise
our fleets and improve our environmental
credentials, it’s important that people
understand the net benefit that a good
public transport network delivers as
we all work together towards the 2050
net zero target.
We are part of the solution to the
worrying issue of climate change.
We have the ability to reduce the
number of cars on our roads, lowering
emissions, improving air quality and
minimising congestion. It’s important
that UK public transport is supported
at a national and local level to enable
these benefits to be realised.
Read more in our environment section in our
stakeholders pages 30–32
Do you see the possibility of
regulation in UK regional bus
markets as more of a threat
or an opportunity and why?
Our view on the prospect of reregulation
hasn’t changed over the number
of years it has been on the political
agenda. We believe that the regional
bus network best serves customer
and communities through a model of
partnership working between private
operators and local authorities.
Our customer satisfaction levels have
averaged 90% since independent
records began, demonstrating that
Go-Ahead’s approach in these markets
works. Our focus is on delivering for our
customers; we have the flexibility to
make changes that benefit passengers
and the capacity to invest capital into
improvements. We have also operated
very successfully within the regulated
London bus market for decades and have
demonstrated our ability to transfer the
value of our experience and expertise
to recently regulated bus markets in
Singapore and Ireland. Should selective
UK regional bus markets become more
regulated in the future, we are well placed
to transfer our skillsets and gain a
greater share of the market, delivering
excellent service for more customers.
Read more in our market review on page 8
How are you managing the
risks associated with your
international expansion?
Managing risk effectively starts with
having a solid strategy. Our international
growth strategy clearly sets out our
disciplined approach to diversification
in our target markets. We’re taking an
inherently low risk approach, targeting
countries with stable political and legal
systems, and preferring to grow in
open markets through medium term
contracts rather than through
acquisition. By nature, many of these
contracts are relatively capital light
and share characteristics with contracts
we have decades of experience
operating in the UK. Through this
approach, the risk we’re taking is on
the terms of the contract, not on the
market, and we’re comfortable with
this. We always bid with financial
discipline and will not waiver from
this approach. One of the keys to our
success is the roll-out of our successful
devolved management structure
to our new international businesses,
with teams comprising both local
individuals who understand the
market and local culture and have
established relationships with key
stakeholders; and experienced
Go-Ahead colleagues who have
worked within our businesses and can
share our best practice and embody
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The Go-Ahead Group plc Annual Report and Accounts 2019
What preparations have you
made for a no-deal Brexit?
In response to the uncertainty around
the terms of the UK’s departure from
the EU, we conducted a risk review
during the year and put practical
mitigation measures in place against
identifiable risks. The most significant
internal risks associated with a no deal
Brexit that we’ve identified relate to
our supply chain and driver recruitment.
We have accelerated procurement of
operation critical supplies in our bus
and rail businesses to ensure we have
adequate parts and materials to
maintain our fleets.
In order to mitigate recruitment risk
we have schemes across the business
designed to attract candidates. These
include building on the success of our
graduate programme, promoting
a career as a bus driver to people
who have been unsuccessful in their
applications for train driving roles and
developing apprenticeship schemes.
A no deal Brexit is not expected to
have any impact on our international
expansion strategy or the way we
operate our business in the UK
and outside of it.
Read more on our Brexit case study on page 48
What progress are you making
on inclusion and diversity?
Our aim is for Go-Ahead’s people to
reflect the diversity of the communities
we serve. We believe this enables us to
provide the highest possible levels of
customer service, and make our bus
and train services more inclusive and
accessible for all. Our commitment to
inclusion and diversity starts at the top
of the organisation with the Board,
which, following our AGM in October,
will have 57% female representation.
While we have longer term goals across
the business to increase diversity in all
its forms, we have chosen to initially
focus predominately on gender diversity.
We have specific targets in our bus
and rail businesses aligned with the
U.N. Sustainable Development Goal
of ‘Gender Equality’. As part of a
historically male dominated industry,
we recognise we have a long way to go
to address the imbalance but progress
is already being made through bus and
rail driver recruitment diversity targets
and networks designed to support the
development of our female colleagues.
As well as striving to boost the number
of women in our industry, we’re also
working towards reducing the gender
pay gap.
Read more about our approach to addressing
the gender pay gap on page 82, and about our
wider commitments to inclusion and diversity
on page 27
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Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report
Our business model
Our purpose is to be the local partner
taking care of journeys that enhance
the lives and wellbeing of our
communities across the world.
Delivered through our strategy
Read about our strategy on page 10
Supported by a strong financial profile
Revenue generation
Cost control
Capital allocation
We generate revenue in two
main ways:
• Through the fares we
receive from our bus and
rail passengers
• Through contract payments
we receive from our transport
authority customers for
which we operate services
At local and Group levels we
closely manage our costs
without compromising on
safety or quality. We have a
particular focus on good cost
control around employee
utilisation, fuel efficiency,
and contractual negotiations
and management.
Our capital principles ensure
our focus on maintaining an
investment grade rating, paying
a dividend in line with our policy
and remaining in the lower half
of our target gearing range.
Read more about our capital allocation
principles and priorities on our website
Reasons we’re successful
Approach
Resources and relationships
Management
Clear strategy
Customer focused
decision making
Innovative and agile approach
Long-term focus on
sustainable outcomes
Empowered people
Expertise, experience
and influence
Strong relationships with
strategic partners and
stakeholders
Investment in fleets and depots
Devolved structure
Financial discipline
Risk appetite and
management
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The Go-Ahead Group plc Annual Report and Accounts 2019
Creates financial and non-financial
value for all our stakeholders
Financial value
Non financial value
We provide value for money services,
offering convenient alternatives to
car travel against a backdrop of rising
costs of private motoring.
We look after our people, paying
competitive salaries and offering
attractive benefit packages.
We support suppliers in the UK
and internationally through the
procurement of goods and services.
Our payment practices are aligned
with the Prompt Payment Code.
Customers
Our people
Strategic
partners and
suppliers
Our contribution to the Government
includes corporate tax, national insurance
contributions and contracted income
generated through our rail operations.
We are accredited by the Fair Tax Mark.
Government
Our services enable and promote
economic activity in our communities;
providing access to retail and leisure
facilities, and work and education.
Communities
We are committed to driving strong
shareholder returns. We have never
cut our dividend.
Investors
Our services facilitate our customers’
lives; connecting people with friends
and family and enabling access to
services, facilities, work and education.
Our buses and trains provide safe and
convenient places for people to use
their travel time as they wish.
We create safe and enjoyable inclusive
working environments in which people
are empowered and enabled to develop
personally and professionally. We
offer occupational health and other
wellness services for both physical
and mental health.
Through our Sustainable Supply Chain
Charter we demonstrate high standards
of integrity, responsibility and professional
conduct. We endeavour to support our
suppliers to improve the sustainability
of their business.
Through our experience and expertise
we help shape policies at national and
local levels through our contribution to
reviews and consultations. Through our
activities we support government targets
and objectives in areas such as climate
change, diversity and social inclusion.
We strive for our services to be accessible
and inclusive. We promote social inclusion in
our communities, often providing vital
transport links to vulnerable people. We
operate responsibly and are committed to
maximising the role we play in slowing
global climate change and improving
air quality for our communities.
Shareholders’ interests are safeguarded
through the Board’s strong commitment
to good governance. Investor confidence
in the long term sustainability of the
Group is built through our approach
to operating responsibly, such as
measuring and reducing our impact
on climate change.
Read about our engagement with stakeholders on pages 22–33
Annual Report and Accounts 2019 The Go-Ahead Group plc
21
Strategic report Our stakeholders
Stakeholder partnerships
Customers
Our people
Strategic partners
and suppliers
Government
Communities
Investors
Our business impacts the lives of million of people,
each with different needs. Our relationship
with these stakeholders are key to our success.
We play an important role providing a vital service for the
communities we serve, through to the people we employ and
the taxes we pay. We place great importance on partnership,
adopting a collaborative approach with governments, local
communities and strategic partners; developing and running
services that create long term value for all of us. By engaging
our key stakeholders meaningfully, we gain insights into their
needs and expectations and identify the material issues they
have. This feedback forms part of our decision making process
and helps us continuously improve, and progress towards our
vision and long term ambitions.
How we run our business has a direct impact on
our stakeholders. We operate with responsibility for safer
and; Better teams, Happier customers, Stronger communities,
Smarter technology and a Cleaner environment. This approach
enables us to run a profitable, sustainable and responsible
business to deliver long term benefits for all our stakeholders.
Sustainable Development Goals
As a responsible business, we play an important role
in society and can contribute positively to the United
Nations (UN) vision for a more sustainable planet.
From the UN’s Sustainable Development Goals
(SDGs) goals, we have identified five where we
believe we can make a positive impact for all
our stakeholders.
22
The Go-Ahead Group plc Annual Report and Accounts 2019
Customers
Customers are at the heart
of Go-Ahead and it is our
goal to provide them with
a safe, convenient and
reliable service.
Responsible business pillars
Better teams
Happier customers
Stronger communities
Smarter technology
Cleaner environment
Sustainable Development Goals
We build relationships with our customers
through our passenger-facing colleagues,
customer ambassadors and social media
channels. These interactions and customer
research allow us to better understand
the needs of our passengers and where to
focus improvements, which allows us to
provide a better all-round service.
Simplifying travel
We have continued to work on a range of
flexible and easy payment options to make
travelling with us simple. All our buses
across the country accept contactless
payment and we have a range of mobile
apps with real time information that make
planning and paying for journeys easy
and convenient. As users plan their route,
tickets are suggested and can be bought
using a full range of payment options,
often with promotional offers.
From Autumn 2019, customers on our
Brighton & Hove buses are able to pay via
a Pay As You Go method. This, the first
payment scheme of its kind outside of
London, is made possible using
geolocation technology which tracks
customers’ journeys using the tap-on,
tap-off method, automatically charging
the best value fare. Capping means
customers can make unlimited daily
journeys and never pay more than the
cost of a day ticket.
During the year, Southeastern also
delivered smart ticketing initiatives
including the availability of day tickets on
its smartcard known as ‘the Key’, making
travel better value and more convenient.
In 2018, Southeastern also invested in
the on-board customer experience,
introducing free on-board WiFi and
updating one third of its train fleet in
a £30m refurbishment programme.
Harnessing innovation
Our Demand Responsive Transport
service in Oxford, PickMeUp, was the
largest of its kind when it was introduced
in June 2018. The service is tailored to
customer demand and passengers can
conveniently request a minibus pick-up
within 15 minutes at a virtual bus stop.
Using a real time app, passengers can
receive updates on arrival time, driver and
route details, as well as an estimated time
of arrival. In May 2019, the Group launched
GoSutton, a year long trial of a new
responsive transport service, similar to
PickMeUp, across the borough of Sutton,
working with TfL and ViaVan, Europe’s
leading provider of on-demand transport.
We are also investing in research and
development and looking at how we
can harness the latest technological
developments in transport to improve
services for our customers.
23
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Our stakeholders continued
Harnessing innovation continued
Our landmark transport accelerator
programme, Billion Journey Project, supports
innovative start-up and scale-up businesses,
bringing Go-Ahead’s expertise in improving
customer experience together with new
technology and innovative thinking. Since
launching last July, 20 scale-ups have been
taken through the programme, with plans
to pilot Citi Logik, an app offering train
crowding information to Thameslink
passengers and AirPortr, a service that
collects and carries air travellers’ luggage
from home all the way to their destination.
Punctual service, satisfied customers
We are passionate about delivering great
public transport and were pleased to see
our performance improvements on our
rail services recognised by our passengers
over the last year.
Southeastern was one of only three train
operators to show a significant year on year
improvement in passengers’ overall
satisfaction, according to the National
Rail Passenger Survey (NRPS). The
improvements were driven by record
breaking punctuality, investment in
station improvements and the introduction
of free WiFi on board.
GTR’s performance has also seen
significant improvements with the latest
figures from the Office of Rail and Road
reporting the highest levels of punctuality
on record for GTR.
The introduction of the new timetables
throughout the year significantly improved
the number and performance of train
services across the network, giving our
customers more flexibility and travel options.
In regional bus, we have maintained our
sector leading position in the annual Bus
Passenger Survey from Transport Focus.
Go-Ahead scored the highest level any
UK national bus operator has ever
achieved at 92%.
Go South Coast – National Transport
Awards Bus operator of the year
While we’ve delivered improvements
in punctuality and reliability, we
acknowledge that sometimes things
do go wrong and people’s journeys
can be delayed. We want to make it
as easy as possible for customers to
be compensated if they do experience
disruption. Having been the first train
operator to introduce Delay Repay 15 last
year on our GTR network, Southeastern
also introduced the scheme meaning
passengers delayed by 15 minutes or
more can claim compensation.
24
The Go-Ahead Group plc Annual Report and Accounts 2019
Transport for everyone
We are committed to providing an
inclusive service. All our bus and rail
operators strive to make their services
as accessible as possible to everyone.
Last year we launched our Helping Hand
card across our UK bus network which
helps passengers with accessibility
needs, specifically hidden disabilities,
communicate with bus drivers. All of our
customer facing colleagues have training
in assisting people living with dementia
and those who are blind or partially sighted.
Our buses and trains are accessible to
wheelchair users and we continue to
increase audible announcements and
information screens across our services.
We are leading the transport industry in
active travel by looking at ways that our
customers can improve their health while
using our services. We partnered with
active travel experts RunFriendly and the
University of Leeds, to publish a study
examining the health benefits of active
travel combined with public transport,
offering a compelling alternative to
driving for all or part of daily commutes.
People
Our business is built by
colleagues whose
commitment, innovation
and ambition help deliver
the best possible transport
service to our customers.
Responsible business pillars
Better teams
Happier customers
Stronger communities
Smarter technology
Cleaner environment
Sustainable Development Goals
Engagement and recognition
We are committed to creating safe
environments which promote high levels
of engagement and a sense of belonging.
We use a range of methods across the
Group to ensure our colleagues are engaged.
We keep them informed through internal
media, newsletters and functional and
business updates. We also conduct an
independent survey annually across our
whole organisation. This allows colleagues
to voice their views and opinions on all
aspects of their workplace environment,
leadership, training and development.
The results provide a measure of colleague
engagement and help us identify areas
where we can improve as an employer.
In order to be seen as an employer of
choice and maintain a high level of
employee retention, we aim to provide
market competitive remuneration and
a comprehensive benefits package.
We ensure that all colleagues are
recognised and rewarded for their
contribution and commitment.
29,000
people employed across
the Group
Learning and development
We recognise the importance of learning
and development, aimed at growing
talent from within, and have a culture
of continuous improvement to support
ongoing development. We have biannual
performance reviews and encourage
regular discussions with line managers
to identify any training requirements,
discuss future objectives, career
aspirations or challenges.
Our high potential programmes provide
the tools to enable participating colleagues
to become the future leaders of our
business. This year we redesigned the
Executive and Senior Management
Development programmes increasing the
degree of experiential learning to accelerate
personal development to enable ‘ready
now’ candidates for promotion.
We also have a responsibility to ensure no
physical harm comes to our people while
they are at work. We take preventative
actions and invest in training and awareness
activities to ensure the safety of our
colleagues. It is important to us that we
not only support our people in relation
to occupational health related issues,
but also in any non-work related health
matters which may arise.
25
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Our stakeholders continued
Learning and development continued
Our head office colleagues have access
to an Employee Assistance Program (EAP)
which provides information, advice,
training and services to help them deal
with events and issues in both their work
and personal lives. Go-Ahead is also a
signatory of the ‘Time to Change’ pledge
– a major commitment to recognising and
supporting mental illness. Southeastern
has rolled out new Mental Health
Advocates, who provide an invaluable
peer support service to colleagues across
the network.
Graduates and apprenticeships
We have made a significant commitment
to the recruitment of the next generation
of our future leaders.
Our Graduate Programme enables
employees to learn on the job through
placements in different parts of the
business and formal training programmes,
focusing on self awareness, business skills
and technical understanding. Last year,
Go-Ahead became the first transport
operator to be accredited as a provider
of apprenticeships across bus and rail.
This year, Go-Ahead London opened a
new recruitment and training academy
in South London. The academy is the first
of its kind and delivers all aspects of
apprenticeships, from traditional engineering
and technical programmes to customer
service and business administration.
As part of the National Apprenticeship
Week, Southeastern became a signatory
of the ASLEF Apprenticeships Charter,
a robust framework to validate and
ensure that their apprenticeships are
of the highest value to colleagues and
the wider community. GTR currently
hires more engineering apprentices
than any other train company in the
UK, with most joining the scheme after
completing A-Levels as an alternative
to going to university. All apprenticeships
at GTR combine college study with
hands-on experience, resulting in UK
recognised qualifications.
26
The Go-Ahead Group plc Annual Report and Accounts 2019
Our performance
73%
increase of graduate
applications over the year
96%
graduate retention rate
during the programme
500
apprentices training with
Go-Ahead’s bus and rail
companies
Our targets
1,000
apprentice target by the end
of the year
20%
commitment to increase the
number of women employees
in rail by 2020
Get into Railways programme
GTR and The Prince’s Trust have a
seven year partnership, committed
to delivering the ‘Get into Railways’
programme, which aims to support
young people aged between 18
and 25, who are facing barriers to
move into employment. We were
pleased have won the award for
‘Advancing Social Mobility in
the Workplace’ at this year’s
Employers Network for Equality
& Inclusion awards for our work
on the programme. To date, 182
young people have taken part in
the programme, with the majority
securing a customer service role
across Southern, Great Northern,
Gatwick Express and Thameslink.
14% of GTR colleagues based at
London Bridge station graduated
through the programme.
Inclusion and diversity
Equality, inclusion and diversity are
important to us. We believe that the best
teams are diverse and inclusive and that
our workforce should reflect the diverse
communities that we serve.
We have developed a Inclusion and
Diversity Steering committee to increase
integration of inclusion and diversity into
our policies and procedures and reflect
our commitment to this. We actively
promote the inclusion of females across
the business and have set ourselves a
range of diversity targets. In July 2019,
we launched an industry first ‘Women
in Bus’ colleague led network event,
designed to support and empower our
1,550 female colleagues across our bus
divisions. The purpose of the network is
to create a workplace where women feel
free to be their true selves at work and is
underpinned by our workforce strategy
to have 20% female representation in
our bus division by 2025.
Go-Ahead was a finalist at the 2019
International Association of Public
Transport Awards, in the Improving
Diversity category for the industry leading
work in recruiting female train drivers. The
project goal was to significantly increase
the number of female train drivers across
GTR and Southeastern. As a result, we
have seen a 32.5% increase in female
trainee drivers in the past two years.
Both Southeastern and GTR’s overarching
target is that by 2021, at least 40% of
applicants for train driver roles will
be female.
Of course, diversity is not only about
gender and we recognise that building
an inclusive culture is key to our future
success. In June, GTR, Southeastern
and Network Rail held the first joint
Rail Inclusion and Diversity conference.
The conference highlighted how the
industry can do more to improve inclusion
and diversity, which includes engaging
with schools, advertising jobs in BAME
networks and ensuring that the industry
offers a safe and inclusive environment
for people.
Male: 4
Female: 4
Board gender
diversity
5050
Senior management
gender diversity
8416
Male: 68
Female: 13
Overall Group
gender diversity
8614
Male: 24,160
Female: 4,079
Our policies
We believe in equal opportunities regardless of gender,
age, religion or belief, sexual orientation, race and, where
practicable, disability. This approach is underpinned by our
commitment to providing equal opportunities to our current
and potential employees and applying fair and equitable
employment practices. We give full and fair consideration
to job applications from people with disabilities, considering
their skills and abilities. In respect of existing colleagues who
may become disabled, the Group’s policy is to provide
continuing employment, training and career development.
Our Equal Opportunity policy forms part of our Code of
Conduct and Ethics policy.
Our respect for human rights is embedded in how we
operate. Our Code of Conduct provides that all employees
are to be treated with respect, and their health, safety and
basic human rights protected and promoted. All colleagues
within Go-Ahead are expected to act with integrity as well as
treat people with respect and communicate openly. We also
expect our suppliers to comply with the provisions of our
code or meet the same standard through their own operations.
Go-Ahead has a zero tolerance approach to bribery and
corruption and all our employees are expected to adhere to
our Anti-bribery and Corruption policy. The policy prohibits
the giving or receiving of bribes in any form. Colleagues are
expected to act with honesty, integrity and fairness and
adhere to the highest ethical and legal standards in business
dealings. Conflicts of interest that interfere with proper
performance or independent judgement are prohibited.
We also have well established whistleblowing procedures
where employees can, in confidence, raise legitimate
concerns about wrongdoing within their workplace,
without fear of criticism, discrimination or reprisal.
Further information on our policies
can be found on our website:
www.go-ahead.com/sustainability/policies
27
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report+
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Strategic partners
Our strategic partners include local
authorities, TfL and Network Rail. They
provide the public sector infrastructure on
which we rely such as railway tracks and
local authority bus and train stations and
road networks.
Working collaboratively
A collaborative approach is essential to
ensure that we meet our stakeholders’
expectations. We believe that the only
way to achieve successful outcomes and
meet our stakeholders needs is through
mutually beneficial relationships. By finding
common objectives, listening with open
minds and building trust, we can
achieve more.
In London, we have developed a strong
working relationship with TfL where our
combined efforts ensure we can identify
and investigate matters raised by local
councillors or MPs and collectively achieve
a positive outcome. We work in partnership
with local authorities where our bus
operating companies are delivering locally
designed services for passengers. We
support councils in helping with their
broader economic development and social
priorities, and on how public transport can
help to deliver in these areas.
During the year we expanded our working
relationship with Network Rail to take
our rail expertise abroad and are currently
working on a Digital Systems Programme
which will improve rail frequency and
reliability for passengers of Sydney Trains.
We are also working with UGL, an Australian
asset management company to utilise
comprehensive local knowledge of the
sector, to deliver the best solution for
our stakeholders.
Suppliers
Suppliers play an essential role in our
business; providing the fleet and the
infrastructure parts we need to ensure
our customers receive a reliable service.
We operate in accordance with the
ISO 20400:2017 standard on sustainable
procurement including accountability,
transparency, respect for human rights
and ethical behaviour. We engage with
our suppliers regularly to effectively
monitor, manage and mitigate risks in our
supply chain. We also conduct periodic
surveys of our current suppliers to
monitor how we are perceived and use
that feedback to enhance our working
relationships. Contract managers are
assigned to work closely with core
suppliers, holding regular meetings to
ensure effective delivery of the contract.
We are members of the Prompt Payment
Code and are committed to paying our
suppliers fairly and on time.
Prioritising sustainability
We held our annual Sustainable Supplier
Awards, recognising suppliers that support
us in delivering social, economic and
environmental benefits. Since launching
last year, the awards have built on
Go-Ahead’s commitment to sustainability
within our supply chain. Further
demonstrating this commitment we
launched an industry first Sustainable
Supply Chain Charter in the UK that
establishes minimum criteria in core areas
of corporate social responsibility. Under
the charter, suppliers must demonstrate
a commitment to sustainable innovation,
employee wellness and diversity. It also
encourages innovative solutions to
improve air quality, with health and safety
as a critical priority. The Sustainable
Supply Chain Charter ensures closer
alignment of values between us and
our suppliers, leading to better
relationships and outcomes.
Our stakeholders
continued
Strategic
partners &
suppliers
We work collaboratively
with strategic partners
and build professional
relationships with core
suppliers to deliver
efficient, high
quality services.
Responsible business pillars
Better teams
Happier customers
Stronger communities
Smarter technology
Cleaner environment
Sustainable Development Goals
28
Government
Policy and regulatory
change affect our bus and
rail businesses and create
the framework in which
we operate.
Responsible business pillars
Better teams
Happier customers
Stronger communities
Smarter technology
Cleaner environment
Sustainable Development Goals
Working closely with both central and
local government we can align our private
sector experience and expertise with the
public agenda and produce better policy
outcomes and service delivery.
Active approach
We engage with and respond to
government directly and through our
involvement with industry organisations.
For example, the Group Chief Executive,
David Brown, sits on the Board of the Rail
Delivery Group (RDG) which governs all
activities carried out by the organisation.
RDG brings together passenger freight
and infrastructure providers to give the
industry one voice.
We participate in a number of technical
committees within the Confederation of
Passenger Transport (CPT) covering areas
including engineering, road operations,
skills and training, insurance and risk.
Go-Ahead’s Managing Director of Bus
Development, Martin Dean, is President
and acting Chairman of the CPT. In this
role, he has led the review and reorganisation
of the liaison process with the DfT on
policy issues.
Regulatory change
Throughout the year we actively engaged
with the Transport Select Committee calling
for the creation of a national strategy for
buses to provide a framework for effective
delivery of local solutions. We believe
national government, supported by the
bus industry, needs to set a framework
that can encourage effective collaboration
at the local level to increase bus use for
the benefit of all communities.
Also during the year we were involved
in the Government’s rail review, being
led by Keith Williams, contributing our
views to further our shared aim of
ensuring that our vital rail system
continues to benefit passengers and
support a stronger economy.
Go-Ahead awarded
with the Fair Tax mark
for a fifth consecutive
year. We were the
first FTSE 350
company to receive
the award in 2014
29
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Our stakeholders
continued
Communities
As an operator of public
transport, we provide
a vital service to
communities and support
local economies.
Responsible business pillars
Better teams
Happier customers
Stronger communities
Smarter technology
Cleaner environment
Sustainable Development Goals
30
Our local approach
Being part of local communities underpins
Go-Ahead’s devolved management
approach and enables our bus and rail
companies to respond directly to
customers’ needs. Our services transport
millions of passengers to work, education
and services every day. We also help
encourage social inclusion and signed
the Government’s Employers Pledge
committing firms to improving social
connections and tackling loneliness at all
levels. In response to this, we launched
a ‘Chatty Bus’ campaign across our
operations, encouraging passengers to
talk to someone new every day. We are
part of the three year Business in the
Community Place campaign, aimed to
bring together and build trust between
businesses and their neighbours in
communities across the UK. The
campaign is about mutual benefit and
helping our local communities whilst
adding value to our business.
Charity and community support
Our businesses regularly join in national
fundraising events and work to raise
awareness of important causes. Many
of our colleagues raise funds for good
causes in their spare time, and we aim
to match those fund-raising efforts
wherever possible.
At a group level, Go-Ahead supports
two UK based charities which have a
transport focus; Railway Children and
Transaid, and our operating companies
support local charities often selected by
our people. We have implemented the
London Benchmarking Group model to
measure and evaluate our community
investment and have more than doubled
our contributions to over £1m since
incorporating this measurement in 2015.
Improving on our environmental impact
Bus and rail travel is a force for good and
we take our role seriously as being part
of the solution in tackling climate change
and poor air quality, as well as continuously
seeking to enhance the benefits we bring
by taking more cars off the roads and
reducing congestion.
This year, we became the first transport
company to secure the ISO 50001
certification for best practice in energy
management after reducing carbon
emissions by 30% in just three years and
by nearly 70% over the past ten years.
25%
target reduction in carbon emissions
per vehicle mile by 2021
Greenhouse gas emissions
Our carbon footprint in tonnes of equivalent carbon dioxide (CO2e)
Performance and targets
We are committed to operating our businesses in an increasingly sustainable manner and seek to reduce our environmental
impact year on year.
Overall, in absolute terms, equivalent carbon dioxide (CO2e) emissions in 2019 were 7.1% lower year on year and are 19.3% lower
than in our baseline year 2017. The absolute reduction in CO2e emissions in 2019 compared to the previous year and our 2017
baseline year is partly due to the loss of the London Midland franchise in December 2017, although this has been offset by the
additional energy consumption and CO2 emissions caused by the acquisition or start-up of Go-Ahead Singapore, Go-Ahead
Ireland, East Yorkshire and Go North West, and a significant expansion of GTR operations. Lower CO2e conversion factors for
UK grid electricity also contributed.
We have set ourselves a target to achieve a 25% reduction on CO2e per vehicle mile by 2021 from our 2017 baseline performance.
This target is supported by secondary targets over the same timescale to improve bus fuel efficiency (fleet average miles per
gallon) by 5% and to improve traction electricity energy efficiency (fleet average vehicle miles/kwh) at GTR by 15%, (not including
Southeastern which is scheduled to end in April 2020).
In 2019 we achieved a 10.2% year on year reduction in CO2 emissions per vehicle mile; a reduction of 21.8% against our
2017 baseline.
Scope 1
Total
Scope 2*
Total Scope 2 – location
Total Scope 2 – market
Scope 3
Electricity – Transmission and distribution (total)
Out of scopes – biogenic content of bio-diesel
Scope 1, 2 & 3 and out of scopes
Total – location
Total – market
Total bus and rail mileage
All scopes kgs CO2e/vehicle mile
YoY % change
% change on 2017 baseline
2019
Tonnes CO2e
2018
Tonnes CO2e
2017
(current
baseline)
Tonnes CO2e
395,474
406,564
426,153
371,449
422,644
520,541
32,719
35,269
38,406
31,508
36,012
48,669
12,447
7,858
9,373
810,878
472,148
873,078
485,703
1,004,736
522,601
1.1476
(10.19%)
(21.81%)
1.2779
(12.94%)
(12.94%)
1.4678
(7.95%)
n/a
We report our emissions on both a ‘location’ and a ‘market’ basis. This dual reporting applies to CO2e emissions arising from our electricity consumption only.
The location-based method uses the national average carbon factors for UK mains electricity that are issued annually by the Department for Business, Energy
and Industrial Strategy (BEIS) and take the whole mix of fuels used to generate UK electricity into account. The market-based method uses supplier-specific carbon
factors that reflect supply contract specifications agreed between supplier and customer, e.g. if the customer specifies that electricity must be generated from
renewable sources or a green tariff is chosen. In these circumstances, the carbon factor/CO2e emissions using the market-based method will be much lower than
if using the location-based method.
Read more on pages 207 and 208
31
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Our stakeholders continued
reporting going forward. This year we
are seeking to maintain or improve on
our B score and will be conducting a gap
analysis to highlight opportunities for
future improvements.
As part of our long term commitment for
a cleaner environment, we have started
work on developing a new and ambitious
Science-Based Target for our GHG
emissions. The target we set will be in
line with the GHG reduction pathways
required to limit global warming to 1.5°C
and will help frame Go-Ahead’s climate
mitigation actions in the short, medium
and long term.
Go-Ahead’s Chief
Executive, David Brown,
was named the Best
CEO in Sustainable
Transportation
Industry by the 2019
European CEO Awards
Improving on our environmental
impact continued
We participate in the Carbon Disclosure
Project (CDP) Climate Change Survey.
This year we improved our score to B
which is higher than the transport services
average of C. During the year we started
the process of exploring our climate-related
risks and opportunities in the medium and
long term. We conducted a number of
workshops to establish the financial,
operational and reputational risks that
come with climate change and the likelihood
of occurrence and the potential impact
of them on our business. Following these
workshops, we developed appropriate
business responses in the form of adaptation
and mitigation measures in line with
recommendations from the Task Force
on Climate-related Financial Disclosures
(TCFD). We are developing processes
around building climate change resilience
into our businesses and are considering
the incorporation of the financial
implications of climate change in our
Read more about our formal assessment in
line with TCFD on the sustainability section
of our website.
32
Greener travel
In September 2018, Go-Ahead
company, Bluestar, unveiled the
UK’s first air filtering bus that
removes ultrafine particles from
the air and traps them as the bus
moves through streets. The
specially designed filter, fitted
onto the roof of the bus, drew 65g
of particulates from the air over
100 days – just over the weight of
a tennis ball. This pilot showed
that buses not only help reduce
congestion, but can also provide a
solution to poor air quality and the
pilot has been expanded to another
five buses in Southampton.
Our Demand Responsive
Transport (DRT) service,
PickMeUp, in Oxford seeks to
alleviate congestion and offer a
more environmentally friendly
transport alternative to high
numbers of low occupancy cars.
With nearly 600,000 miles
covered by the buses so far, the
service is actively contributing to
reducing traffic, noise and carbon
emissions in the Oxford area.
We run the UK’s only all-electric
bus depot in London and across
our regional bus network, we
have continued to roll out more
environmentally friendly buses.
Go North East is investing in 54
high specification buses including
34 of the latest low emission Euro 6
double decker buses. Carrying
100 people these buses can take
dozens of cars off the roads.
Brighton & Hove has started to
build a network of local expertise
in climate change that can enable
the sharing of research, expertise,
resilience strategies and risk
planning by working with local
councils, universities and
community groups. They have set
a target of running a zero emission
fleet by 2035 and recently
introduced 30 electric buses on
some of their most popular city
routes. At our recently acquired
business, Go North West, a
number of our fleet is currently
being retrofitted to Euro 6 engine
standard – the cleanest available.
The Go-Ahead Group plc Annual Report and Accounts 2019 Investors
We operate our business
responsibly and with
strong financial discipline
to deliver sustainable value
to shareholders.
Responsible business pillars
Better teams
Happier customers
Stronger communities
Smarter technology
Cleaner environment
Sustainable Development Goals
We remain committed to retaining a strong
balance sheet, maintaining financial
discipline and monitoring our leverage.
We are thoughtful in our approach to
capital allocation and carefully evaluate
investment opportunities to support
income and returns for investors. With an
experienced management team, we aim to
deliver a level of growth and returns that
enables us to provide a reliable dividend
which is a key priority for us and many of
our shareholders.
Maintaining high levels of engagement
We place great importance on our
relationships with our shareholders and
understand the mutual benefit of engaging
with our investors to maintain high levels
of transparency and to build trust. Feedback
from the investors and analysts forms part
of strategic Board discussions. The Group’s
dedicated Investor Relations team advises
the Board on its engagement with the
investment community. This includes a
monthly Board report on market views
and expectations, sector updates and
changes in our shareholder register.
In addition, we engage in a programme
of investor and analyst meetings, broker
conferences and roadshows through
the year.
In June 2019 we also held a site visit for
analysts and institutional investors to our
London Waterloo bus depot. Waterloo
was the first bus depot in Europe to
become fully electric and emissions free.
Investor timeline
> September 2018
• Full year results
presentation
• Investor roadshows:
London and Edinburgh
• Broker conference
• Sales desk briefings
> November 2018
• AGM
• Trading update
> February 2019
• Half year results
presentation
• Investor roadshows:
London and Edinburgh
> April 2019
• Sales desk briefings
> June 2019
• Trading update
• Investor and analyst
site visit
• Sales desk briefing
• Broker conference
33
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Our key performance indicators
Measuring our performance
Our selected set of KPIs are the measures we use to assess the Group’s progress
against our strategy and allow us to effectively monitor our performance.
Protect and grow the core
Financial
Like for like revenue
growth (%)
4.0 Regional bus
0.4 London & International bus
7.3 Rail
Operating profit* (£m)
121.1
6
2
.
8
1
.
15
.
7
0
2
1
3
7
.
3
7
.
.
2
6
0
4
.
.
1
3
.
4
0
18
.
4
0
19
.
6
4
4
4
.
4
2
.
.
5
0 1
1
.
16
17
.
)
5
0
(
Description: For our rail operations,
we measure revenue generated
through the provision of passenger
transport services. In our bus
division, we measure total revenue
as non-passenger revenue is
less material.
Performance: Each of the divisions
delivered growth which was
particularly marked in the regional
bus and rail businesses. Growth
in London & International bus in
the year was more muted as a
result of lower contracted mileage
in London, as expected, reflecting
the timing of contract end dates.
.
6
2
6
1
.
6
0
5
1
.
*
9
5
3
1
*
1
.
1
2
1
Description: The Group’s operating
profit measures the profit earned
from our ongoing business
operations excluding exceptional
items and deductions of interest
and tax. This helps us measure the
underlying performance of our
operating companies.
Performance: Reduction from the
previous year reflects lower profit
in rail primarily due to the expiry
of the London Midland franchise in
December 2017 partially offset by
better performance at Southeastern
and higher operating profit from
our London bus operations.
* Pre-exceptional items.
15
16
17
18
19
Cashflow/EBITDA (X)
1.09
6
9
0
.
1
7
0
.
7
6
0
.
3
7
0
.
9
0
.
1
Description: The cashflow to
EBITDA ratio is used to monitor
the conversion of profit into cash.
Cashflow is the cash we generate
from our operations, after working
capital movements and after cash
tax paid during the year.
Performance: Cash conversion
improved significantly from last
year and exceeded 1x helped by
a significant improvement in
working capital.
Adjusted net debt/
EBITDA (X)
1.32
15
16
17
18
19
0
3
.
1
0
3
.
1
2
3
.
1
7
1
.
1
8
0
.
1
15
16
17
18
19
Description: The adjusted net debt/
EBITDA ratio is used to indicate the
Group’s ability to pay down its debt
from earnings. Adjusted net debt,
which is total net debt excluding
restricted cash in our rail division,
is measured against earnings before
interest, tax, depreciation and
amortisation (EBITDA).
Performance: Stable at 1.3x and
remains below our target range
of 1.5x to 2.5x and well below
our bank covenant limit of 3.5x.
A conservative level provides
protection against possible
headwinds and the ability to
take advantage of potential
market opportunities.
Dividend payout ratio (%)
1
6
0
6
6
5
9
4
4
4
Description: We measure the
proportion of our net income that
is paid to shareholders by way of
dividend. It is calculated as dividend
per share divided by earning
per share.
Performance: Slight increase
from the prior year and within
our dividend policy of a payout
in the range of 50% to 75%.
15
16
17
18
19
60
34
The Go-Ahead Group plc Annual Report and Accounts 2019 Protect and grow the core
Non-financial
Like for like passenger
volume growth (%)
3.3 Regional bus
6.3 Rail
.
3
6
3
3
.
9
.
1
9
3
.
1
.
3
0
0
.
4
.
1
-
.
)
2
0
(
)
9
.
1
(
)
6
.
1
(
15
16
17
18
19
Description: We measure the
number of passenger journeys taken
on our regional bus and rail services
compared with the previous year.
This is measured on a like for like
basis, adjusting for significant
acquisitions and new franchises.
For our London & International bus
division, we are contracted on
the basis of mileage and do not
report passenger numbers.
Performance: Growth delivered
in regional bus for the first time in
five years and well above broader
industry trends which saw passenger
numbers decline by 0.7% in the year
to March 2019. Very strong growth
in rail at both GTR, boosted by
additional services, and at
Southeastern, helped by
resumption of full services at
London Bridge in January 2018.
Customer satisfaction (%)
0
9
9
8
6
7
5
7
92 Regional bus
81 Rail
0
9
2
8
1
9
2
9
1
8
5
7
15
16
17
18
19
Regional bus punctuality (%)
85.3
.
9
6
8
.
2
6
8
.
9
4
8
.
6
5
8
.
3
5
8
15
16
17
18
19
London bus punctuality
(minutes)
1
2
.
1
2
2
.
1
0.86
4
0
.
1
1
9
0
.
6
8
0
.
Rail punctuality (%)
86.2
15
16
17
18
19
.
7
6
8
.
8
2
8
9
.
1
8
.
6
0
8
.
2
6
8
15
16
17
18
19
Description: Customer satisfaction
is measured by the independent
passenger watchdog Transport
Focus. Surveys are conducted twice
a year for our rail franchises and
annually for our regional bus
operations. Our primary customer
in London bus is TfL. We measure
satisfaction by performance
against TfL performance targets,
such as excess waiting time.
Description: The punctuality of
our regional bus operations is
measured as the percentage of
buses which arrive at their stop
between one minute before and
five minutes after their scheduled
time. Therefore, the higher the
percentage the better.
Performance: Our continuing
drive to deliver high quality locally
focused services enabled us to
achieve an improved industry
leading score in regional bus
that set a new record. In rail, our
score also showed a significant
improvement of six percentage
points from the prior year level.
Performance: Stable performance
compared to last year with the
Group also receiving the highest
score in the industry for punctuality
as part of the Transport Focus
survey on passenger satisfaction.
Description: The punctuality of
London bus operations is measured
by excess waiting time. This is the
time passengers have to wait for a
bus above the average scheduled
waiting time. The lower the
excess waiting time, the better
the performance.
Performance: Continued focus
on operational performance
and working in partnership with
TfL helped to deliver further
improvement during the year
with excess waiting time now
having been reduced by 30%
over the past three years.
Description: The punctuality of
our rail operations is measured
on the basis of the DfT’s Public
Performance Measure (PPM) on a
moving annual average basis. PPM
is the percentage of trains that
arrive at their final destination
within five minutes of their
scheduled arrival time.
Performance: Significant
improvement of 5.6 percentage
points achieved compared to last
year with GTR and Southeastern
both performing better and both
hitting all-time monthly records
during the year. Overall rail
punctuality reached its best
level for four years.
35
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Our key performance indicators continued
Protect and grow the core continued
Non-financial continued
Employee engagement
index (%)
62 Bus
75 Rail
5
7
7
5 6
6
2
6
3
6
9
5
0
8 6
5
6
4
7
4
Description: We measure how
engaged our people are through
annual independent employee
surveys, conducted independently
by ORC, across all of our businesses.
15
16
17
18
19
Absenteeism
(% of working hours)
3.8
9
3
.
9
3
.
8
3
.
.
2
4
8
3
.
Description: We measure
employee absence by the
percentage of scheduled hours
not worked due to unplanned
absence from work, across the
whole Group.
Performance: Our rail operations
recorded a second consecutive year
of strong improvement reflecting
the focus we have on colleague
involvement, personal development
and performance management.
Whilst a similar approach is
adopted in our bus operation, our
score dipped slightly reflecting a
time lag between action being
taken and colleague feedback.
To address this, the timing of the
next survey will be delayed.
Performance: Absenteeism
fell in the year largely due to
an improvement at GTR.
15
16
17
18
19
4
.
1
1
.
5
0
1
.
5
0
1
3
.
1
1
0
.
1
1
Employee turnover (%)
11.00
15
16
17
18
19
SPADs (per million miles)
0.76
5
8
0
.
7
7
0
.
9
6
0
.
6
7
0
.
3
6
0
.
RIDDOR accidents
(per 100 employees)
0.61
15
16
17
18
19
0
7
0
.
2
6
0
.
1
6
0
.
1
5
0
.
2
4
0
.
15
16
17
18
19
Description: Employee turnover
is measured by the percentage of
employees who leave the Group
during the year.
Performance: The slight
improvement in the year was
driven primarily by lower levels
of employee turnover at GTR.
Description: Across the rail
industry train operating companies
report signals passed at danger
(SPADs). Many SPADs happen each
year and most have little or no
potential to cause harm. All SPADs
are given a risk ranking which
considers the actual and possible
consequences of each incident.
Performance: After a substantial
reduction in the prior year, SPADs
increased but remained below
the levels of two years ago.
Our performance is significantly
better than industry average of
1.2 SPADs per million miles.
Description: RIDDOR (reporting
of injuries, diseases and dangerous
occurrences regulations) relates to
a workplace incident that results
in any absence from work for over
seven days or any legally reportable
incident to the Health and
Safety Executive.
Performance: After last year’s
significant fall, RIDDOR accidents
increased but were 20% below
five years ago. We maintain a high
priority in ensuring that our people
have the necessary tools and
training to do their jobs safely.
36
The Go-Ahead Group plc Annual Report and Accounts 2019 Protect and grow the core
Non-financial continued
Bus accidents
(per million miles)
37.40
Carbon emissions
per vehicle mile (kgs)
1.15
.
2
8
3
.
3
7
3
1
.
8
3
1
.
6
3
.
4
7
3
15
16
17
18
19
8
7
.
1
9
5
.
1
7
4
.
1
*
8
2
.
1
5
1
.
1
15
16
17
18
19
* Restated.
Description: We monitor the
number of bus accidents which
result in a notification to a claims
handler for every million miles
we operate, including cases
where we are not at fault.
Performance: A slight increase
from last year but remains lower
than two years ago. Our investment
in training and monitoring the
performance of our drivers
continues, and we are looking
at technological solutions to
improve this further.
Description: We monitor all of the
energy used within our operations
and calculate our CO2e emissions
which we divide by the number of
vehicle miles operated to establish
CO2e per vehicle mile.
Performance: Further reduction of
around 10% during the year as we
continue to improve the efficiency
of our bus and rail fleet, invest in
low carbon vehicles and reduce
energy used in our premises.
Carbon emissions per vehicle mile
have reduced by around 40% over
the past five years. We have a target
to achieve a 25% reduction in CO2
emissions per vehicle mile by 2021
from our 2017 baseline performance.
Win new bus and rail contracts
Annualised revenue secured
on international contracts
£400m
Description: Annualised revenue consists of revenue
secured through international contracts we have won
in our target markets as part of our international
strategy. Many of these contracts have not yet begun
so this revenue has not yet been earned.
Performance: Increase to over £400m from the £250m
that had been secured a year ago reflecting an additional
four contracts awarded during the year in Germany,
Norway and Australia. We continue to see an attractive
pipeline of opportunities in our target markets.
Develop for the future of transport
Projects and initiatives
actively being tested
and trialled
We have several initiatives and projects underway as we continue to look ahead to the transport needs of the
future. These projects which include Demand Responsive Transport (DRT) in Oxford and Sutton, the Billion Journey
Project which is our transport accelerator programme, our consultancy business Hammock, and Mobility as a
Service (MaaS) are at various stages of development or implementation. All projects are monitored and measured
using a range of metrics in a way that is relevant for each specific project.
37
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Business and finance review
Elodie Brian
Chief Financial Officer
Resilient
financial
performance
“ Operating profit has been
better than expected, we have
had good cash generation,
a healthy dividend, a reduction
in debt, and a balance sheet
that remains in good shape”.
Elodie Brian
Group Chief Financial Officer
38
Group revenue
£3,807.1m
2018: £3,461.5m
Group operating profit
(pre-exceptional items)
£121.1m
2018: £135.9m
Group operating profit
(post-exceptional items)
£104.3m
2018: £161.0m
Adjusted net debt
£270.3m
2018: £289.0m
Revenue
£3,807.1m
Operating profit*
74+
21+
£121.1m
* Pre-exceptional items
Rail:
£2,804.9m
Regional Bus:
£433.0m
London & International Bus:
£569.2m
Rail:
£25.4m
Regional Bus:
£44.5m
London & International Bus:
£51.2m
11
15
+
L
37
42
+
L
All references to operating profit, EBITDA and margins
are on a pre-exceptional basis unless otherwise detailed.
A full reconciliation between pre- and post-exceptional
operating profit is shown within the income statement
and associated notes.
Financial overview
Revenue for the year was £3,807.1m, up £345.6m, or 10.0%, on last
year (2018: £3,461.5m). This increase was primarily attributable
to additional services operated by GTR within the rail division
partially offset by the end of the London Midland franchise.
Excluding exceptional items, profits attributable to shareholders
decreased by £5.2m or 6.7% to £72.8m (2018: £78.0m) and
earnings per share by 6.7% to 169.4p (2018: 181.6p). Profit
attributable to shareholders for the year decreased by £30.2m,
or 33.9%, to £58.8m (2018: £89.0m) and earnings per share fell
by 34.0% to 136.8p (2018: 207.2p) with exceptional losses
following the GMP equalisation in bus pensions and lower rail
profit. The prior year had included an exceptional gain relating
to a change in the reference inflation index for the purpose of
annual increases to the majority of pensions payable by the
Group’s bus pension schemes.
Adjusted net debt (excluding restricted cash) at the year end
was £270.3m (2018: £289.0m), as reconciled below the cashflow
statement on page 135. The lower net debt largely reflects
improved free cash generation, lower capital expenditure reflecting
the timing of contract renewal commitments in London, vehicle
purchases in regional bus and working capital requirements in the
rail business. The adjusted net debt (excluding restricted cash)
to EBITDA ratio of 1.32x (2018: 1.30x) remains below our target
range of 1.5x to 2.5x.
Group overview
Group revenue
Regional bus operating profit
London & International bus operating profit
Total bus operating profit
Rail operating profit
Group operating profit (pre-exceptional items)
Exceptional operating items
Group operating profit (post-exceptional items)
Share of result of joint venture
Net finance costs
Profit before tax
Total tax expense
Profit for the period
Non-controlling interests
Profit attributable to shareholders
Profit attributable to shareholders (pre-exceptional items)
Weighted average number of shares (m)
Earnings per share (pre-exceptional items) (p)
Earnings per share (post-exceptional items) (p)
2019
£m
2018
£m
Increase/
(decrease)
£m
Increase/
(decrease)
%
3,807.1
3,461.5
345.6
44.5
51.2
95.7
25.4
121.1
(16.8)
104.3
(0.5)
(6.8)
97.0
(21.9)
75.1
(16.3)
58.8
72.8
43.0
45.8
45.6
91.4
44.5
135.9
25.1
161.0
(1.1)
(14.2)
145.7
(36.4)
109.3
(20.3)
89.0
78.0
43.0
(1.3)
5.6
4.3
(19.1)
(14.8)
(41.9)
(56.7)
0.6
7.4
(48.7)
14.5
(34.2)
4.0
(30.2)
(5.2)
—
169.4p
136.8p
181.6p
207.2p
(12.2)p
(70.4)p
10.0
(2.8)
12.3
4.7
(42.9)
(10.9)
(166.9)
(35.2)
54.5
52.1
(33.4)
(39.8)
(31.3)
(19.7)
(33.9)
(6.7)
—
(6.7)
(34.0)
Proposed dividend per share (p)
102.08
102.08
—
—
39
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Business and finance review continued
Bus
Go-Ahead is a leading bus operator.
Over two million passenger journeys
are made on our services every day
in the UK, Singapore and Ireland.
Bus overview
Total bus operations
Revenue (£m)
Operating profit (£m)
Operating profit margin
Regional bus
Revenue (£m)
Operating profit (£m)
2019
2018
Increase/
(decrease)
£m
Increase/
(decrease)
%
1,002.2
934.2
95.7
9.5%
91.4
9.8%
68.0
4.3
7.3
4.7
n/a (0.3ppt)
433.0
383.7
44.5
45.8
49.3
(1.3)
12.8
(2.8)
Our bus financial highlights
Operating profit margin
10.3% 11.9%
n/a (1.6ppt)
London & International bus
Revenue (£m)
Operating profit (£m)
Operating profit margin
569.2
550.5
51.2
9.0%
45.6
8.3%
18.7
5.6
3.4
12.3
n/a 0.7ppt
Like for like revenue growth
Regional bus
4.0% 0.4%
n/a
3.6ppt
London & International bus
0.4%
3.1%
n/a (2.7ppt)
Like for like volume growth
Regional bus passenger
journeys
London & International
bus miles operated*
3.3% (1.6%)
n/a 4.9ppt
(3.4%)
(1.0%)
n/a (2.4ppt)
* Miles operated does not include operations in Singapore and Ireland.
Overall bus performance
Total bus revenue increased by 7.3%, or £68.0m, to £1,002.2m
(2018: £934.2m) including the contribution of acquisitions and
nine months of trading in Ireland. While operating profit was
ahead of the prior year at £95.7m (2018: £91.4m), the operating
profit margin decreased slightly by 0.3ppts to 9.5%. This reflected
a good performance in London & International bus and a lower
level of profit in the regional bus business.
Regional bus
Regional bus revenue was £433.0m (2018: £383.7m), up £49.3m,
or 12.8%, including the contribution of acquisitions. Like for like
revenue growth of 4.0% was broadly in line with our expectations
reflecting our local yield management strategies. Growth in
passenger journeys across all businesses delivered an increase
in like for like passenger volumes of 3.3%. Reported growth in
revenue and passenger journeys was 12.8% and 11.6% respectively
following the acquisitions of Go North West in June 2019, East
Yorkshire in June 2018 and Oxford City Sightseeing in December 2017.
Operating profit in the regional bus division fell £1.3m, or 2.8%,
to £44.5m (2018: £45.8m), with operating profit margin down
1.6ppts to 10.3% (2018: 11.9%). The lower level of operating profit
in regional bus compared to last year reflects passenger yields
rising by less than the aggregate of general net cost inflation
including higher engineering costs and additional depreciation
resulting from our continued investment.
Go-Ahead London: £493.1m
Go South Coast: £104.0m
Go North East: £101.0m
Brighton and Hove: £98.9m
Go-Ahead Singapore: £59.6m
Oxford Bus Company: £53.6m
East Yorkshire: £31.1m
Plymouth CityBus: £26.0m
Go East Anglia: £16.5m
Go-Ahead Ireland: £16.5m
Go North West: £1.9m
Employee costs: 65.0%
Fuel costs: 11.4%
Engineering costs: 9.3%
Depreciation: 7.2%
Bus revenue
£1,002.2m (2018: £934.2m)
4910
Other: 7.1%6512
Bus operating cost base
£906.5m (2018: £842.8m)
Bus operating profit*
£95.7m (2018: £91.4m)
48.5
47.1
45.8
44.5
Regional bus
London &
International bus
42.7
43.6
45.6
51.2
40.2
19
40.5
2015
2016
2017
2018
2019
* Pre-exceptional items.
40
9
+
7
+
7
+
+
L
10
+
10
+
6
+
5
+
3
+
3
+
2
+
2
+
0
+
L
2018 operating profit
Changes:
Net impact of acquisitions and new ventures
Passenger volume
Net cost inflation exceeding passenger yield
Depreciation
2019 operating profit
£m
45.8
1.1
1.3
(2.4)
(1.3)
44.5
London & International bus
Results for the London & International bus division include
our bus operations in London, Singapore and Ireland. Divisional
revenue grew by 3.4%, to £569.2m in the year (2018: £550.5m).
Operating profit in the London & International bus division was
£51.2m (2018: £45.6m), up £5.6m, or 12.3%, with operating profit
margin slightly higher at 9.0% (2018: 8.3%). Quality Incentive
Contract bonuses (QICs) in London rose to £18.3m (2018: £13.2m)
as a result of improved performance against quality targets.
This has been achieved through a further strengthening of our
service control capabilities and TfL’s approach to implementing
more bus prioritisation measures and fewer roadworks on our
routes. As anticipated, like for like mileage for the division
decreased by 3.4% mainly due to the timing of contract renewals
and TfL’s route restructuring. We also benefited from some
additional contract work contributing around £2.0m that is not
expected to repeat in the following year. Our bus operations
in Singapore continue to perform well, both operationally and
financially. We also successfully began bus operations in Ireland
during the year which have made a small positive contribution
to the reported result.
2018 operating profit
Changes:
QIC bonuses
Additional contract work
Volume reductions
Net cost inflation
Singapore and Ireland
2019 operating profit
Capital expenditure and depreciation
Regional bus fleet (inc. vehicle
refurbishment)
London & International bus fleet
(inc. vehicle refurbishment)
Technology and other
Depots
Total capital expenditure
2019
£m
27.1
5.4
10.4
7.1
50.0
£m
45.6
5.1
2.0
(3.6)
(0.1)
2.2
51.2
2018
£m
41.1
46.2
8.4
3.9
99.6
The average age of our buses is 7.3 years (2018: 6.5 years). In London,
the purchase of 14 new buses (2018: 135 buses) reflects the timing
of contract renewals. In regional bus, in line with our commitment
to maintain a young and increasingly greener fleet, 109 new buses
(2018: 173 buses) were bought.
Depreciation for the division was £65.1m (2018: £61.8m), reflecting
the increased capital spend in recent years.
In 2020, we expect total capital expenditure for the bus division
to be around £90m with a higher level in London due to the
timing of known contract wins and renewals as well as continued
investment in our regional bus services including improvements
in our recent acquisitions in East Yorkshire and Manchester.
Fuel
In the year, the bus division required around 143 million litres
of fuel, with a net cost of £103.2m.
Bus fuel hedging prices
We have continued our bus fuel hedging programme which uses
fuel swaps to fix the price of our diesel fuel in advance. Our core
policy is to be fully hedged for the next financial year before the
start of that year, at which point we aim to have also fixed 50%
of the following year and 25% of the year after that. This hedging
profile is then maintained on a month by month basis.
The table below reflects the year end position; no significant
purchases have been made following the year end.
% hedged
Price (pence per litre)
2020
Fully
36.8
2021
50%
36.7
2022
25%
38.9
At each period end, the fuel hedges are marked to market price.
Bus financial outlook
In regional bus, we expect market conditions to remain challenging.
We will also face some external cost pressures, for example,
on fuel. However, with our focus on gradual yield improvement
and cost containment, we expect to mitigate those headwinds
and deliver a similar operating result.
Within London & International bus, our London bus business has
already secured all its expected revenue for the current year through
successful contract bidding. While this remains a challenging and
competitive market, new contract awards during 2019 are expected
to result in an increase in mileage and revenues for 2020. We also
have the opportunity to bid for around £20m of additional annual
revenue in 2020, most of which will begin to be realised in the
following year.
In Singapore, we remain focused on building on the improved
operational and financial performance we have delivered to date.
In Ireland, we look forward to introducing our second contract
in late 2019 and will see a full year of operating the first contract.
Overall, we expect the London & International bus division to
deliver an operating result in 2020 that is consistent with
the level achieved in 2019.
41
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Business and finance review continued
Rail
Go-Ahead’s rail operations carry more
train journeys than any other operator
in the UK, responsible for around 30%
of all passenger journeys.
Our rail financial highlights
Southeastern: £983.6m
London Midland: £2.6m
Rail revenue
£2,804.9m (2018: £2,527.3m)
GTR: £1,816.1m
Germany: £2.6m6334
Other: 23.1%2420
Rail operating cost base
£2,779.5m (2018: £2,482.8m)
Fuel: 0.1%
Rail operating profit
£25.4m (2018: £44.5m)
Employee costs: 25.3%
Track access: 21.3%
Rolling stock lease payments: 22.6%
Traction electricity: 5.1%
Engineering: 2.0%
Depreciation: 0.5%
71.4
59.9
40.0
44.5
2015
2016
2017
2018
2019
42
Rail performance
The rail division has delivered a financial result slightly ahead
of the Board’s expectations, but behind that of the prior year.
Overall margins have remained at historically low levels,
impacted in particular by GTR.
Rail overview
2019
2018
Increase/
(decrease)
£m
Increase/
(decrease)
%
Total rail operations
Total revenue (£m)
Operating profit (£m)
2,804.9 2,527.3
44.5
25.4
277.6
11.0
(19.1)
(42.9)
Operating profit margin
0.9%
1.8%
n/a (0.9ppt)
Like for like revenue growth
Southeastern
GTR
6.0%
8.0%
3.8%
7.7%
n/a
2.2ppt
n/a 0.3ppt
Like for like passenger
growth
Southeastern
GTR
3.7%
7.7%
1.4%
2.1%
n/a
2.3ppt
n/a 5.6ppt
Revenue
Total revenue increased by 11.0%, or £277.6m, to £2,804.9m
(2018: £2,527.3m), consisting of:
2019
2018
Increase/
(decrease)
£m
Increase/
(decrease)
%
Passenger revenue
GTR
Southeastern
Germany
London Midland
1,643.6 1,271.3
786.3
828.3
0.7
—
42.0
0.7
372.3
29.3
— 156.2
(156.2)
5.3
n/a
n/a
11.7
Total passenger revenue
2,472.6 2,213.8
258.8
Other revenue
GTR
Southeastern
Germany
London Midland
172.9
23.0
1.3
2.6
139.5
33.4
23.9
34.1
0.3
35.1
(11.1)
(32.6)
1.0
3.3
(32.5)
(92.6)
Total other revenue
199.8
209.0
(9.2)
(4.4)
Subsidy and revenue support
Southeastern subsidy
Southern revenue support*
Germany revenue support
London Midland subsidy
132.2
(0.4)
0.7
—
67.3
0.6
—
64.9
96.4
(1.0)
(166.7)
0.7
36.6
(36.6)
n/a
n/a
Total subsidy and
revenue support
132.5
104.5
28.0
26.8
25.4
Total revenue
2,804.9 2,527.3
277.6
11.0
* Southern revenue support relates to the Southern franchise which ended in
July 2015.
1
+
2
+
L
22
+
5
+
3
+
2
+
1
+
23
+
L
Premium, profit share and revenue share payments
Core premium, profit share and revenue share payments to the
DfT are included in operating costs.
2019
2018
Increase/
(decrease)
£m
Increase/
(decrease)
%
Southeastern profit share
19.7
16.2
3.5
21.6
London Midland profit share
—
4.4
(4.4)
n/a
Operating profit
Operating profit in the rail division was down £19.1m at £25.4m
(2018: £44.5m), with the operating profit margin decreasing to
0.9% (2018: 1.8%) as expected. The operating profit reduction was
driven by the London Midland franchise ending in December 2017
and the impact of the GTR settlement with the DfT with a resulting
passenger enhancement charge. These factors were partially
offset by an improvement in Southeastern following continued
strong passenger growth and operational performance.
2018 operating profit
Changes:
London Midland
Southeastern
GTR/Southern
Bidding, international development and other costs
2019 operating profit
£m
44.5
(21.1)
4.4
(3.2)
0.8
25.4
Individual franchise performance
GTR
The business reported like for like growth in passenger
journeys of 7.7% (2018: 2.1%) and in passenger revenue
of 8.0% (2018: 7.7% rise).
Agreement was reached in December 2018 with the Department
for Transport (DfT) regarding contractual matters. This agreement
resolved the matters relating to the industry wide failures concerning
the introduction of the May 2018 timetable, as well as bringing to
a close, discussions around other outstanding contractual variations.
As part of the agreement, a plan for the remainder of the franchise
term to September 2021 was agreed, aimed at building on recent
performance improvements and delivering a better customer
experience. As part of this agreement GTR provided for £15m of
funding during the year for passenger enhancements and separately
accounted for the fine from the Office of Rail and Road (ORR).
A profit-sharing mechanism with the DfT is now in place for the
remainder of the franchise. As part of this mechanism, no profit
was made in the year. The operating profit margin over the whole
franchise term is expected to be between 0.75 and 1 per cent.
Southeastern
Southeastern recorded good trading performance and has
delivered excellent operating performance in recent months, with
a marked improvement in customer satisfaction and punctuality.
On a like for like basis, passenger revenue rose by 6.0% (2018: 3.8%)
while passenger numbers increased by 3.7% (2018: 1.4%). The
improvement was supported by a full year of complete service
operation through London Bridge station from January 2018,
following three years of partial closure.
Southeastern’s strong financial performance enabled a
contribution of £19.7m to be made to the DfT during the year
through the contract’s profit sharing mechanism included in
the directly awarded contract that it has operated under since
October 2014.
Bidding and international developments
Bidding and international development cost in the year were
£16.0m (2018: £15.9m), primarily relating to bidding for Southeastern,
bids in Germany and Nordic countries, and preparation for the
start of secured rail contracts in Germany and Norway.
Capital expenditure and depreciation
Capital expenditure for the rail division was £22.6m (2018: £27.1m),
predominantly relating to the building of a depot in Germany
as part of the mobilisation of the first two contracts there.
Depreciation was £14.2m (2018: £20.9m), reflecting the timing
of capex which is being depreciated over the life of the franchises.
In 2020, capital expenditure for the rail division is expected
to be around £20m, including mobilisation of and continued
investment in our international rail operations.
Rail financial outlook
In August 2019, we were informed by the DfT of its decision to
terminate the competition for the new South Eastern franchise
Following the DfT’s decision to extend the current Southeastern
franchise term, we will operate the franchise until 1 April 2020.
We are engaging with the DfT regarding the future of the operation
beyond that date. Passenger journeys and revenue growth for
Southeastern is expected to continue the improvement shown in
the second half of 2019.
GTR is expected to return a modest operating profit margin for
2020 following the break even result reported in 2019. Over its
franchise term, GTR is still expected to achieve an operating
margin of between 0.75 and 1 per cent.
In Germany, following a four year mobilisation period, two
of the five secured rail contracts have now started operating.
In December 2019, additional services associated with these
first two contracts will begin, along with the introduction of the
third contract. In the same month we will also begin operating
rail services in Norway.
Overall for the rail division, we expect lower operating profit for
2020 with increased profitability at GTR being more than offset
by a reduction in Southeastern reflecting its new contractual
arrangements and a part year of operation.
43
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Business and finance review continued
Financial review
Group capital expenditure
Free cashflow
£72.6m
2018: £126.7m
£74.1m
2018: £57.7m
Earnings per share
Excluding exceptional items, earnings were £72.8m, resulting
in decrease of pre-exceptional earnings per share from 181.6p in
2018 to 169.4p. Earnings were £58.8m (2018: £89.0m), resulting in
a decrease in earnings per share from 207.2p to 136.8p. The weighted
average number of shares was 43.0 million and the number of shares
in issue, net of treasury shares, was 43.1 million.
Earnings per share
169.4p
181.6p 207.7p 218.2p
147.9p
2019 *
2018 *
2017
2016
2015
* Pre-exceptional items.
Dividend
The Board is proposing a total dividend for the year of 102.08p
per share (2018: 102.08p), consistent with the prior year. This includes
a proposed final payment of 71.91p per share (2018: 71.91p) payable
on 22 November 2019 to shareholders registered at the close of
business on 1 November 2019. Dividends of £43.8m (2018: £43.8m)
paid in the year represent the payment of the prior year’s final
dividend of 71.91p per share (2018: 71.91p) and the interim
dividend in respect of this year of 30.17p per share (2018: 30.17p).
Dividends paid to non-controlling interests were £12.7m (2018:
£13.9m), and dividend payout was 60% (2018: 56%) on a
pre-exceptional earnings basis.
Summary cashflow
EBITDA
2019
2018
Increase/
(decrease)
£m
205.5
221.9
(16.4)
Working capital/other items (excluding
restricted cash movements)
4.4
10.9
(6.5)
Cashflow generated from operations
209.9
232.8
(22.9)
Tax paid
Net interest paid
Net capital investment
(32.5)
(28.7)
(3.8)
(9.5)
(13.3)
(81.1)
(119.2)
Dividends paid – minority partner
(12.7)
(13.9)
Free cashflow
Net acquisitions
Other
Net cash on issue/purchase of shares
Dividends paid
74.1
(11.5)
0.4
(0.5)
57.7
(7.5)
(9.1)
(0.5)
(43.8)
(43.8)
Increase/decrease in adjusted net debt*
18.7
(3.2)
Opening adjusted net debt*
(289.0) (285.8)
Closing adjusted net debt*
(270.3) (289.0)
* Adjusted net debt is net cash less restricted cash.
44
3.8
38.1
1.2
16.4
(4.0)
9.5
—
—
21.9
n/a
n/a
Cashflow
Cash generated from operations before tax and excluding
movements in restricted cash was £209.9m (2018: £232.8m).
This decrease of £22.9m is largely due to reduction in EBITDA
due to the London Midland franchise ending. Tax paid of £32.5m
(2018: £28.7m) comprised payments on account in respect of
the current and prior years’ liabilities. Net interest paid of £9.5m
(2018: £13.3m) was higher than the net charge for the period of
£6.8m (2018: £14.2m) including the impact of non-cash interest
on pensions, the unwinding of discounting on provisions and the
payment of the interest accrued on the HMRC Capital Allowances
settlement. Capital expenditure, net of sale proceeds, was £38.1m
lower in the year at £81.1m (2018: £119.2m), predominantly due to lower
investment in our London bus fleet from the prior year’s elevated
level, and timing of vehicle purchases in regional bus. Net Group
capital investment is expected to be around £110m in 2020.
During the year, as part of a planned programme of monthly
share purchases to satisfy future share awards, the Group
purchased 56,482 ordinary shares for a total consideration of
£1.0m (2018: 64,012 ordinary shares for a total consideration of £1.1m).
At the year end, significant medium-term finance was available
through a £280m five year syndicated facility, and a £250m
sterling bond. The syndicated facility had a maturity of July 2023
with two one year extension options. On 9 July 2019, one of the
additional one year extensions was exercised extending the
maturity of the facility to July 2024.
Capital expenditure
Expenditure on capital during the year can be summarised as:
Regional bus
London & International bus
Total bus
Rail
Group total
2019
£m
40.4
9.6
50.0
22.6
72.6
2018
£m
47.9
51.7
99.6
27.1
126.7
Net cash
Net cash of £214.6m (2018: £149.9m) comprised debt arising from
the £250m sterling bond, amounts drawn down against the £280m
five year syndicate facility of £144.7m (2018: £136.0m), amounts
drawn down against the Euro loan facilities of £15.4m (2018: £11.2m),
and hire purchase and lease agreements of £6.1m (2018: £9.4m),
offset by cash and short term deposits of £630.8m (2018: £556.5m)
including £484.9m of restricted cash in rail (2018: £438.9m).
There were no overdrafts in use at the year end (2018: £nil).
Our primary financial covenant under the syndicated facility
is an adjusted net debt to EBITDA ratio of not more than 3.5x.
Adjusted net debt (excluding restricted cash) to EBITDA of 1.32x
(2018: 1.30x) remains below the target range of 1.5x to 2.5x.
The Go-Ahead Group plc Annual Report and Accounts 2019 Capital structure
Syndicated facility 2024
7 year £250m 2.5% sterling
bond 2024
Euro financing facilities
Total core facilities
Amount drawn down at 29 June 2019
Balance available
Restricted cash
Net cash
Adjusted net debt
EBITDA
Adjusted net debt/EBITDA
2019
£m
2018
£m
280.0
280.0
250.0
16.7
546.7
410.1
136.6
484.9
(214.6)
270.3
205.5
1.32x
250.0
16.5
546.5
397.2
149.3
438.9
(149.9)
289.0
221.9
1.30x
Investment grade ratings from Moody’s (Baa3, stable outlook)
and Standard & Poor’s (BBB-, stable outlook) were reconfirmed
recently and remain unchanged.
Exceptional items
On 26 October 2018, the High Court ruled that Guaranteed
Minimum Pensions (GMP) should be equalised between men
and women. As a result, pension scheme trustees will be obliged
to adjust benefit payments in order that benefits received by
male and female members with equivalent age, service and
earnings histories are equal. The judgement has implications
for many defined benefit schemes, including those in which
the Group participates.
We have worked with our actuarial advisors to understand the
implications of the judgement and the £16.8m pre-tax exceptional,
non-cash expense in the year reflects our best estimate of the
effect on our reported pension liabilities.
The exceptional gain in the prior year of £25.1m relates to changes
made by the Group and the Trustee of The Go-Ahead Group
Pension Plan in relation to the reference inflation index for the
purpose of annual increases to the majority of pensions payable
by the bus pension schemes and to the carrying value of goodwill
and associated tangible assets on its regional bus businesses.
Amortisation
The amortisation charge for the year was £4.8m (2018: £3.3m),
which relates to the non-cash cost of amortising software costs,
franchise mobilisation costs and customer contracts.
Net finance costs
Net finance costs for the year were lower than the prior year at
£6.8m (2018: £14.2m) including finance costs of £11.9m (2018: £16.7m)
less finance revenue of £5.1m (2018: £2.5m). Finance costs do not
include any exceptional items (2018: £2.6m cost in respect of a
HMRC enquiry). The average net interest rate for the period was
3.4% (2018: 4.1%).
Taxation
Net tax for the year was £21.9m (2018: £36.4m), equivalent to an
effective rate of 22.6% (2018: 25.0%). A provision in the prior year
in relation to a HMRC enquiry was shown as exceptional and was
settled during the current year. Excluding the impact of this
one-off provision and the impact of exceptional items, the prior
year tax rate would have been 21.0%. In the reporting period, the
effective tax rate was higher due to the non-deductible items
such as bid costs in Germany and other international areas.
The statutory rate in the UK will reduce to 17.0% in 2020.
We expect our effective tax rate to be 2% to 3% above the
UK statutory rate in future years.
Non-controlling interest
The non-controlling interest in the income statement of £16.3m
(2018: £20.3m) arises from our 65% holding in Govia Limited,
which owns 100% of our current UK rail operations and therefore
represents 35% of the profit after taxation of these operations.
Pensions
Operating profit includes the net cost of the Group’s defined
benefit pension plans for the year of £35.3m (2018: £35.5m)
consisting of bus costs of £2.0m (2018: £1.8m) and rail costs
of £33.3m (2018: £33.7m). Group contributions to the schemes
totalled £41.5m (2018: £40.3m).
An exceptional charge of £16.8m (2018: £35.2m gain) was
recognised in the year as explained above.
Bus pensions
Under accounting valuations, the net surplus after taxation on
the bus defined benefit schemes was £40.2m (2018: a surplus
of £30.3m), consisting of pre-tax assets of £48.7m (2018: assets
of £36.8m) less a deferred tax liability of £8.5m (2018: deferred
tax liability of £6.5m). The pre-tax asset consisted of assets of
£858.8m (2018: £829.3m) less estimated liabilities of £810.1m
(2018: £792.5m). The percentage of assets held in higher risk,
return seeking assets was 35.3% (2018: 48.5%).
Rail pensions
As the long term responsibility for the rail pension schemes
rests with the DfT, the Group only recognises the share of surplus
or deficit expected to be realised over the life of each franchise.
As a result, our pre-tax liability continues to be £nil (2018: £nil).
IFRS 16
A new accounting standard has been introduced that will have a
significant impact on the financial statements going forward.
IFRS 16 ‘Leases’ will affect the accounting for the Group’s operating
leases and will result in an increase in the number of leases being
recognised on the balance sheet as the distinction between
operating and finance leases is removed and operating leases
will be recognised as right-of-use assets. Prior periods will not
be retrospectively restated.
The new standard will come into effect for the Group for the
accounting year ending 27 June 2020. On the date of implementation,
right-of-use assets and lease liabilities of around £0.8bn were
recognised. Based on the current lease portfolio, this is expected
to be closer to £0.4bn at 27 June 2020, and the impact on EBITDA
is expected to be an increase of around £350m and operating
profit to be higher by less than £10m. Further details are provided
in note 2 in the financial statements.
Elodie Brian,
Group Chief Financial Officer
4 September 2019
45
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Risk management
Identifying and managing our risks and uncertainties
Emerging risks
The assessment of emerging risks is embedded within the day-to-day
operations of each operating company. Such assessments are
consolidated and reviewed as part of their monthly board reporting,
as well as being reported to management on a bi-annual basis.
The reporting includes an explanation of the procedures in place
to mitigate and manage such risks.
Our risk appetite
Risk appetite is the level of risk the Group is willing to take to achieve
its strategic objectives, together with the level of risk shock that it
can withstand. The Board is responsible for setting and monitoring
the Group’s risk appetite, which is communicated through its risk
appetite statement outlined on page 50. During its annual Strategy
Day held in May 2019, the Board considered the risk appetite of the
Group in the context of its regulatory environment, its culture and
the sectors in which it operates, as well as its three strategic pillars.
Following this review, and the subsequent review of the Group’s
principal risks and uncertainties as at the period ended 29 June 2019,
the Board discussed and approved the Group’s risk appetite
statement during their August 2019 meeting.
The Group risk appetite statement provides a reference point against
which the operational companies can benchmark their bi-annual
risk management reporting, with any key risks being identified by
management and discussed with the audit committee and Board.
Those key risks are aggregated and reported as the Group’s principal
risks, as outlined on pages 51 to 55.
Focus during the year
During the year, the Board spent time discussing a number of key risk
focus areas, with scheduled in-depth presentations provided by the
executive directors and senior management. The Board regularly
discussed GTR’s operational performance and financial forecasts and
was kept up to date on a wide range of matters including the agreement
reached between GTR and the Department for Transport (DfT) on
the implementation of the December 2018 and May 2019 timetable
revisions. Cyber security also remained a key focus area. Specifically,
this included an increased focus around General Data Protection
Regulation (GDPR) and Network and Information System (NIS)
compliance, as well as the formalising of an information security
management system framework. Monthly KPI reporting into all
operating companies was introduced, with initiatives planned to
increase awareness of cyber risk, including phishing.
Regular health and safety updates from the Group Corporate Services
Director, with an emphasis on Go-Ahead’s new and international
operations, remained a critical element of the Board’s ongoing risk
analysis during the year. During the Board’s December 2018 meeting,
this included an overview of the Group’s recent Safety Leadership
Conference. For further information on this conference and the
Group’s safety culture, please see page 89.
As part of the Board’s assessment of the key risks and uncertainties
for the half year ended 29 December 2018, the updated risk disclosures
submitted by each operating company were reviewed. This resulted
in a new principal risk in relation to the failure to mobilise international
rail contracts within timescales. Further information on this new
principal risk can be found on page 55.
In response to the uncertainty around the terms of the UK’s departure
from the EU, the Board also assessed the Group’s risks and uncertainties
relating to Brexit and put practical mitigation measures in place against
identifiable risks. For further information on this review, read about
our preparations for the United Kingdom’s (UK) exit from the
European Union (EU) on page 48.
Adrian Ewer
Audit Committee Chair
“ The Board has overall responsibility
for measuring, managing and
monitoring the Group’s existing
and emerging principal risks.”
How we manage risk
Our governance
Ultimate accountability for risk management lies with the
Board, supported by the audit committee and executive
directors. The Board is mindful of the detrimental impact
that the Group’s principal risks and uncertainties, including
emerging risks, could have on its strategic objectives.
The Board’s means of mitigating and managing these
risks are set out within the Group’s policies and procedures
manual. Compliance with these policies and procedures
is mandatory, with local senior management tasked with
ensuring compliance, and confirming this as part of their
bi-annual risk reporting to the executive directors.
Our risk management framework
Our approach combines a top down strategic assessment
of risk and risk appetite, with a bottom up operational
identification and reporting process.
The risk management framework includes a robust means
of measuring risks associated with bids, contract mobilisation
and acquisitions. This disciplined approach to bidding for
future rail and bus opportunities ensures risks are identified
and, where possible, mitigated.
Through our vision and culture, we empower all our
colleagues to manage risk. This approach is designed to
highlight potential problems at an early stage, so prompt
action can be taken to minimise any negative impact to our
customers and stakeholders. For more information on the
Group’s culture, please see pages 56 to 79.
46
The Go-Ahead Group plc Annual Report and Accounts 2019 Risk management framework
Board
I
Ultimate accountability for risk management
• Sets strategic
priorities
• Assesses risks and
tolerance levels
• Sets delegated levels
of authority
• Agrees the Group’s
appetite for risk
• Top down risk
identification
• Approves Group
policy and procedures
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Audit committee
Monitors risk management and assurance arrangements
Reviews the effectiveness of key risk management and control processes through:
• Internal audit
• Insurance
• Health and safety
• External audit
• Risk surveys
auditing
Executive directors
Monitors performance and changes in key risks
• Provide regular reports and updates to the Board
• Report to the Board and the audit committee on the status of key risks
• Provide guidance and advice to operating companies to assist with:
– Identifying risks, assessing extent
of risks’ impact and implementing
mitigating actions
– Health and safety auditing
– Insurance
Operating companies
Identify, manage and report local risks
• Maintain local risk
management plans
• Assessment of
emerging risks
• Implement
mitigating actions
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Viability statement
Assessment of prospects
In accordance with the provision of the UK Corporate Governance
Code, and having considered the “Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting”
published by the Financial Reporting Council in September 2014,
the directors have assessed the Group’s viability over a three-year
period to June 2022. This is consistent with the period covered
by the Group’s more detailed Corporate Plan which is the basis
for the three years of the strategic plan, though longer periods
are reviewed by management with no issues being identified.
This gives the Board greater certainty over the forecasting
assumptions used.
The assessment process and key assumptions
In making its assessment, the Board took account of the Group’s
current financial position, operational performance, banking
covenants, other key financial ratios (including those maintaining
the Group’s existing investment grade status), committed and
future funding and both its contracted and anticipated capital
expenditure. A key assumption is that funding for the Group is
reasonably available in the form of capital markets debt, bank
debt or alternatives and sufficient funding will be available in all
plausible market conditions.
The directors then assessed the potential financial and operational
impacts, in severe but plausible scenarios, of the principal risks
and uncertainties set out on pages 51 to 55, the likely mitigating
actions and the effectiveness of those mitigating actions.
Their scenarios took account of the following:
1.
2.
The UK Bus Services Act 2017 and its impact on the Group’s
regional bus business in the period under review
The Williams Rail Review, its anticipated impact on the
structure of the British rail industry and the way passenger
rail services are delivered. This includes the failure to retain
the Southeastern franchise and to deliver an acceptable profit
margin for GTR
3.
A risk that a reduction in punctuality is reflected in the
financial performance of London Bus
4. Failure to effectively mobilise on our international contracts.
Conclusion
Based on their assessment of the prospects and viability of the
Group, the directors have concluded that they have a reasonable
expectation that the Group will be able to continue in operation
and meet all of its liabilities as they fall due during the viability
review period.
Going concern
The directors also assessed, in light of current and anticipated
economic conditions, the Group’s ability to continue as a going
concern. For further information on the directors’ going concern
assessment and confirmation, please see page 119 within the
directors’ report.
47
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report
Risk management continued
Preparations for the UK’s departure from the EU
To ensure appropriate preparations were made in the event of a no-deal Brexit, the Board
undertook a review of the associated risks and noted the practical mitigation measures
in place against identifiable risks. As part of the review, the following risks and mitigating
actions were identified and agreed.
Risks:
People risk mitigations:
• General economic slowdown could adversely impact
• Communicated with our EU colleagues across the businesses
demand for our services
about the Government’s Brexit-related arrangements
• Supply chain risks (short term material supply risk,
i.e. engineering spares and ticket stocks, shorter term
labour supply risk and medium term cost inflation)
• Tightening of the labour market
• Congestion and logistical disruption, specifically traffic
disruption in East Kent, where Southeastern operates.
Group-wide mitigating initiatives:
• Brexit-related risks have been captured as part of our
regular risk management process
• A specific supply chain working group is being led by the
Group Procurement team
Supply chain risk mitigations:
• A risk analysis was undertaken on the rail and bus supply
chain and we worked with high risk suppliers to establish
their preparedness
• Ensuring we have adequate parts and materials to
maintain our fleets, we have accelerated procurement of
operation-critical supplies in our bus and rail businesses
• Work ongoing with suppliers to improve resilience of
engineering repairable component stock
• Extra engineering consumable stockholding ordered to
hold on bus operating company sites for greater resilience
• We have written to our bus and train suppliers as part of
this process
• We have schemes across the business designed to attract
candidates, including promoting a career as a bus driver
to people who have been unsuccessful in their applications
for train driving roles
• Developed apprenticeship and graduate programmes
in rail and bus
Southeastern operational risk mitigations:
• A cross functional working group has been set up in
Southeastern, due to the specific risk associated with
the proximity of our operations to the key border entry
point of Dover
• Active involvement in the Kent Resilience Forum, working
with Network Rail, HS1 and the DfT on operational
planning supporting Operation Fennel, a multi-agency
contingency plan, in East Kent
• Identification of opportunities to increase fleet availability
to cope with potential demand for the additional freight
paths that have been requested to ease traffic in Kent
Conclusion:
While there remains considerable uncertainty regarding
the UK’s planned exit from the EU on 31 October 2019, as a
business we have reviewed a range of potential scenarios
and are satisfied that they can be appropriately managed.
48
The Go-Ahead Group plc Annual Report and Accounts 2019 Risk management plan for the year ahead
Q1 2020
(July 2019–September 2019)
Q2 2020
(October 2019–December 2019)
Q3 2020
(January 2020–March 2020)
Q4 2020
(April 2020–June 2020)
Board
• Review and approval of the
• Internal audit update from PwC
• Assessment and approval of
• Internal audit update from PwC
principal risks and uncertainties
at the year ended 29 June 2019
• Review of the Group’s internal
risk management and control
procedures and processes
• Review and approval of the
Group’s risk appetite statement
• Internal audit update from PwC
In-depth risk reviews
the key risks and uncertainties
for the half year ending
28 December 2019
• Internal audit update from PwC
The in-depth risk review areas approved for the year ahead include the following:
• Rail pensions
• Climate change
• Cyber security and GDPR
Audit committee
• Review of each non-executive
director’s top ten principal risks
• Health and safety audit review
• Recommendation to the Board
for the principal risks and
uncertainties at the year
ended 29 June 2019
Executive directors
• Consolidation of the risks
submitted by each operating
company and a review of
the aggregate risks and
uncertainties across
the Group
• Principal risks for the year
under review are included
within the Group Board
and audit committee
meeting papers
Operating companies
• Health and safety audit review
• Recommendation to the Board
• Health and safety audit review
• Undertake a Group wide
review of the operating
company risk report templates
for the principal risks and
uncertainties at the year
ending 28 December 2019
• Health and safety audit review
• Consolidation of the risks
submitted by each operating
company and a review of
the aggregate risks and
uncertainties across
the Group
• Principal risks for the year
under review are included
within the Group Board
and audit committee
meeting papers
• Review non-executive
directors’ top ten risks
• Year end risk reporting:
• Ongoing management and
• Half year risk reporting:
• Ongoing management and
identify and report local risks
to executive directors
mitigation of risk
identify and report local risks
to executive directors
mitigation of risk
• Ongoing management and
mitigation of risk
• Compliance sign-off
• Ongoing management and
mitigation of risk
• Compliance sign-off
49
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Risk management continued
Risk appetite
Our risk appetite statement below sets out how we balance risk and opportunity in pursuit of achieving our business objectives.
It forms an integral part of the development of our corporate strategy, governance and reporting framework. During the year, the
principal risks were reviewed by the Board in the context of the Group’s risk appetite statement, which helped determine the level
of mitigation and resource required to reduce the potential impact of each principal risk.
Go-Ahead’s risk appetite statement:
Safety and security: The Group has no tolerance for safety risk exposure, including an incident such as a major passenger
accident or an act of terrorism.
Protect and grow the core
The Group will only tolerate low risk with regard to the
management of its core activities.
Win new bus and rail contracts
The Group is willing to accept moderate risk within stable
and regulated markets as it bids for new bus and rail contracts.
Develop for the future of transport
In pursuit of its objective to develop the future of transport,
the Group recognises that innovation and striving to be one
step ahead of our competitors comes with some inherent
risk. Moderate risks, in some circumstances, will be accepted
in pursuit of objectives.
Definitions
Low: The level of risk will not substantially impede
the ability to achieve the Group’s strategic
objectives. Controls are prudent and robust.
Moderate: The level of risk may delay or disrupt
achievement of the Group’s strategic objectives.
Controls are adequately designed and are
generally effective.
Controls: Consist of policies, procedures, employee
behaviour or activities that could reduce the
likelihood and/or impact of risk events.
Our principal risks
A robust assessment has been undertaken by the Board to assess
the principal risks facing the Group and consideration has been
given to those that threaten our business model and could
impact on our future performance, solvency or liquidity as well
as our strategic objectives.
This heat map shows the position of our principal risks in relation
to others and their movement during the financial year ended
29 June 2019. Further details of the key risks within each of
the Group’s principal risk areas is shown on pages 51 to 55.
External risks
Operational risks
1 Economic environment and society
6 Catastrophic incident or severe
2 Political and regulatory framework
Strategic risks
3 Sustainability of rail profits or
loss of franchise
4 Inappropriate investment
5 Competition
infrastructure failure
7 Large scale infrastructure projects
8 Employee relations, resource
planning and talent management
9 Information technology failure/
interruption/ security breach
10
Mobilisation of international
rail contracts (new risk)
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Low
Likelihood
High
Increase in risk during the year
Decrease in risk during the year
50
The Go-Ahead Group plc Annual Report and Accounts 2019
Key:
Protect and grow the core
Win new bus and rail contracts
Develop for the future of transport
External risks
1. Economic environment and society
2. Political and regulatory framework
Lower economic growth or reduction in economic activity,
changing travel patterns.
Changes to the legal and regulatory framework, the implementation
of the Bus Services Act 2017, and the impact of the UK leaving the EU.
Risk movement:
Strategic objectives impacted:
Risk movement:
Strategic objectives impacted:
No change
Increased
Potential impact
Reduced revenue as:
Potential impact
• If bus services are nationalised, the Group could lose revenue
• Customers make fewer journeys (due to flexible working,
in some areas
online shopping etc)
• Changes in passenger travel patterns reduce
passenger revenue
• Customers switch mode (to walking, cycling, private car, etc)
Note: Commercial revenue exposure is limited on Southeastern
due to its limited life span and not relevant in GTR or Go-Ahead
London due to the nature of those contracts
Mitigating actions
• Adverse change to the rail franchising model, including
increase in state control of rail franchises
• Reduced funding for public transport
• The impact of Brexit on economic growth, material supply
and availability of employees, especially in a no-deal scenario
Mitigating actions
• Maintain strong levels of punctuality and customer satisfaction
• Limit exposure to local authority funding, through largely
• Continue to focus our operations in more resilient
commercial operations
geographical areas
• Local management constantly assesses the needs of local
markets and directs services and products accordingly
• Active participation in key industry, trade and government
steering and policy development groups, including the
Williams Rail Review
• Provide attractive services and products such as young people
• Collaboration and partnership working with local authorities
fares, smart ticketing and contactless technology
• Focus on driving volumes through innovative and
targeted marketing
• Devise strategy for bus franchising
Opportunity
• Generate customer loyalty and establish travel habits through
initiatives such as smart ticketing
• Proactive cost control and back-office synergies
• Make public transport easier to access and use
• Robust bid modelling considering differing economic scenarios,
including the UK’s exit from the European Union
Opportunity
• Maximise geographic and product diversification opportunities
• There are variances between geographical areas in the rate
of recovery
Change in risk in the year
No material change in risk during the year, as UK growth rates
remain volatile and the UK is at risk from political instability.
• Passenger growth has, however, been higher than expected
in Southeastern and resilient in regional bus
• The political and regulatory framework provides us with the
opportunity to influence decisions through close dialogue with
the government, local authorities and other key parties
• The Bus Services Act 2017 could provide business
opportunities in new markets, and facilitate the consolidation
of existing relationships
Change in risk in the year
Increase in risk during the year, as the UK’s political landscape has
become increasingly uncertain.
• Labour’s ongoing campaign for rail and regional bus nationalisation
• Failures or known financial difficulties in rail franchises run by
other operators
• Ongoing political and economic uncertainty prior to the UK’s
scheduled departure from the European Union on 31 October 2019
and increasing risk of a no-deal Brexit
• Increased budget pressure for our client Transport for London
• Moves by some local authorities (e.g. Oxford and Brighton)
to implement zero or ultra low emission zones
• Following the Group’s acquisition of the Queens Road bus depot
in June 2019, exposure to Greater Manchester’s aspirations for
bus franchising
51
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Risk management continued
Strategic risks
3. Sustainability of rail profits or loss of franchise
4. Inappropriate investment
Failure to retain Southeastern franchise on acceptable terms
and deliver target profit range in GTR.
Failure to deliver strategy or make appropriate investment decisions.
Risk movement:
Strategic objectives impacted:
Risk movement:
Strategic objectives impacted:
Reduced
No change
Potential impact
Potential impact
• Group profitability and cashflow could fall over the next
• Shareholder value could be lost and the Group could suffer
three years
Mitigating actions
reputational damage
Mitigating actions
• Flexible and experienced management team which responds
• Comprehensive strategic discussions with main Board
quickly and expertly to changing circumstances
and advisors
• Shared risk through the Govia joint venture, which is 65%
• Extensive valuation and due diligence, supported by
owned by Go-Ahead and 35% by Keolis
external expertise
• Invest in performance improvements
• Maintain strong financial discipline when assessing viability
• Work constructively with industry partners, such as Network
of opportunities
Rail and the DfT, to deliver long term economic and
infrastructure benefits
• Cautious approach to investment opportunities overseas
and outside our core operating areas
• Regular Board review of rail performance, and Board approval
• The Board has a clear stated risk appetite that governs the
of overall rail bidding strategy
acceptable level of risk in pursuit of objectives
• Compliance with franchise conditions closely monitored
Opportunity
• Continual focus on and review of strategy ensures the Board is
well placed to assess value adding opportunities as they arise
• Growth opportunities in the UK, Singapore, Ireland, Australasia,
Germany and Nordic region
Change in risk in the year
No change in risk during the year, as the Board Strategy Day
did not determine any material change to the Group’s strategy.
• Good strategic progress has been made during the year.
Continued focus on delivering profit growth, as evidenced in
successful bids and start of operations in Ireland and Germany
• Go-Ahead has a clear strategy, communicated at all levels
of the organisation
• Reduce head office costs
• Develop international rail profit stream
Opportunity
• Growing portfolio of German rail contracts
• Growth opportunities within the Nordic region
• GTR two year extension option and further extension of
Southeastern
Change in risk in the year
Reduction in risk during the year due to:
• GTR settlement with the DfT in December 2018
• Organic international expansion, including winning the 12-year
“Augsburger Nets” rail contract in Germany
• Southeastern franchise extension to April 2020, with
competition for the next South Eastern franchise terminated
following the year end
• The Pension Regulator’s investigation into rail pensions is
underway and led to a resubmission of the Southeastern
franchise bid
52
The Go-Ahead Group plc Annual Report and Accounts 2019 Key:
Protect and grow the core
Win new bus and rail contracts
Develop for the future of transport
Strategic risks continued
Operational risks
5. Competition
6. Catastrophic incident or severe infrastructure failure
Competition from existing and new market participants, loss
of business to other modes and threats from market disruptors.
An incident, such as a major accident, an act of terrorism,
a pandemic, or a severe failure of rail infrastructure.
Risk movement:
Strategic objectives impacted:
Risk movement:
Strategic objectives impacted:
Increased
No change
Potential impact
• Loss of revenue and profits
• Reputational damage
Potential impact
• Serious injury to the public, our passengers or our people
• Service disruption with financial losses and reputational damage
• Rapid change required to business model and structure
• Acts of terrorism, even if not directly targeting public
Mitigating actions
• Disciplined and focused bidding
• Adapt to changing customer requirements and technological
advancements
• Foster close relationships with stakeholders to ensure we are
meeting requirements including service quality and price
• Work in partnership with local authorities and other operators
• Promote multi-modal travel, improving the overall door-to-door
experience for passengers
• Remain at the forefront of promoting and introducing
inter-operable ticketing schemes
• Focus on customer needs and expectations, including more
channels for ticket purchase and journey planning
Opportunity
• Strategic partnerships provide opportunities and aim to
improve the passenger experience and perception of public
transport as a whole
• Increased competition in the market encourages innovation
which improves the customer experience. For example,
demand responsive transport or Mobility as a Service
• Further acquisition opportunities may arise through
market consolidation
Change in risk in the year
Increase in risk during the year, as innovative forms of competition
(for example, the expansion of Uber into rural areas) continue
to challenge the Group’s core markets.
• The reduction in oil price, leading to lower fuel prices for
motorists, could result in passengers taking more trips in
private cars rather than choosing public transport
• Technology based start-ups are entering transport market
transport, may discourage travel and tourism
Mitigating actions
• Rigorous, high profile health and safety programme throughout
the Group
• Promotion of safety culture and Go-Ahead Safety Conference
held in December 2018
• Crisis management policy updated and rolled out across the
operating companies
• Appropriate and regularly reviewed and tested contingency
and disaster recovery plans
• Thorough and regular training of colleagues
• Work closely with our industry partners, such as rail
infrastructure provider Network Rail and government agencies
• We have maintained high levels of safety performance,
demonstrating our continuing efforts to minimise this risk
Opportunity
• The threat of such an event requires our colleagues to be well
trained and prepared at all times
• Continuous review of processes and procedures can identify
areas for operational improvement and improve overall safety
on our networks
Change in risk in the year
No change in risk during the year, as the likelihood of an act of
terror impacting the Group’s transport network has not changed
• The threat level is currently “severe” as the likelihood of
terrorist-related attacks remains high
53
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Risk management continued
Operational risks
7. Large scale infrastructure projects
8. Employee relations, resource planning and
talent management
Large scale infrastructure projects on and around the networks
on which we operate, such as the Thameslink Programme,
HS2 and major roadworks.
Failure to effectively engage with our people and trade unions in
managing costs and driving change. Failure to attract, retain and
develop talent.
Risk movement:
Strategic objectives impacted:
Risk movement:
Strategic objectives impacted:
Reduced
No change
Potential impact
Potential impact
• Reduced capacity decreases resilience and creates congestion
• Failure to attract, retain and develop the diverse talent required
causing lower reliability which impacts service levels and
contractual performance
for robust succession planning
• Ageing workforce leading to a shortage in labour supply, skills
• Inadequate planning or execution can cause severe disruption
and knowledge
• Slowdown in passenger numbers in regional bus as road
• Service disruption, costs and reputational damage arising from
networks become more congested
industrial action
Mitigating actions
• Work constructively with industry partners, such as Network Rail,
to minimise the impact of any disruption on our passengers
• Strong engagement with stakeholders, including our customers,
to enable effective communication, especially during structural
change programmes and disruption to the service
• Good relationships with local authorities and industry bodies,
such as the DfT
Opportunity
• Low levels of morale and engagement lead to inadequate
customer service
• Inability to deploy new technology and work practices for the
benefit of customers
• Wage costs increase or are higher than necessary
• Slowdown of labour resources from Europe and increase
in labour turnover from employees returning to Europe
• Inability to recruit enough employees in Go-Ahead Singapore
to meet required ratios set by the Land Transport Authority
• Investment in railway infrastructure and roads will deliver long
• Due to the increased economic activity in Ireland there is a
term benefits to passengers travelling on our services
Change in risk in the year
Reduction in risk during the year, following the implementation of
the December 2018 and May 2019 rail timetable changes
54
considerable expansion in bus services; which is placing pressure on
the market for the number of bus drivers and resulting in increased
competition for ready trained employees at Go-Ahead Ireland
Mitigating actions
• Work to maintain good relationships with colleagues and
trade unions
• Robust workforce planning with skill requirements identified
• Robust and regularly reviewed recruitment and retention policies,
training schemes, resource planning and working practices
• Experienced approach to wage negotiations
• Proactive management of pension risks
• Employee engagement surveys across all businesses to
identify and address issues
• Engaging all our people in the Group’s vision, beliefs and attitudes
• Apprenticeship, graduate and leadership development programmes
• Widening the recruitment pool through initiatives aimed at
attracting diverse talent, for example the launch of the Women
in Bus network and active recruitment of female drivers
Opportunity
• Through fostering positive employee relations and offering good
employment packages we have a motivated and committed
workforce, with low employee turnover across all businesses
• We are monitoring the impact of changes in the employment
market which may affect our ability to retain and recruit staff
• Workforce planning and critical skills shortage identified to
ensure critical shortages are addressed and there is a large
enough pool of resources to deploy
Change in risk in the year
No change in risk during the year; however the Pension Regulator’s
review into rail pensions could lead to changes in the scheme
The Go-Ahead Group plc Annual Report and Accounts 2019 Key:
Protect and grow the core
Win new bus and rail contracts
Develop for the future of transport
Operational risks continued
9. Information technology failure/interruption/
security breach
10. Mobilisation of international rail contracts
Prolonged or major failure of the Group’s IT systems, a significant
cyber attack or data breach.
Failure to fully mobilise contracts within contractual timescales,
especially driver recruitment and delivery of rolling stock.
Risk movement:
Strategic objectives impacted:
Risk movement:
Strategic objectives impacted:
Increased
Potential impact
New risk introduced
during the year
Potential impact
• Disruption to trading and/or operational service delivery
• Financial losses
• Reputational damage and regulatory breach from misuse of data
• Reputational damage impacting future international
• Enforcement action against rail companies under the
NIS framework
• Financial loss
Mitigating actions
business opportunities
• Safety incident
Mitigating actions
• Experienced local teams
• Implementation of the Group-wide GDPR project, to
• Strong governance processes in place
ensure compliance
• Appointment of a Group Data Protection Officer with data
protection officers now in place in all operating companies
• Building strong relationships with local authorities
• Compliance with strong local regulation, established Safety
Management Systems and Group Safety Audits
• Robust processes and procedures in place to ensure
compliance with the relevant laws and best practices
Opportunity
• Further international opportunities arising from strong
reputation based on successful mobilisation and operation
of services
Change in risk in the year
New risk introduced in the year due to international contract
wins and phased start of operations. Both rail contracts in
Germany, Baden-Württemberg started operations in June 2019.
Our third German rail starts operations in December 2019 with
two further German contracts starting between 2022 and 2023.
Our first rail contract in Norway starts operations in December
2019. Mobilisation is progressing well for all contracts
• Process standardisation and continued investment in best
practice systems
• Design Authority Board in place for change control
• Clear and tested business continuity plans
• Achieved Cyber Essentials, a Government backed cyber
security certification scheme, and undertaking external
maturity assessment
• GTR and Southeastern successfully audited against the
NIS framework
• Continued investment in and maintenance of IT systems
across the Group
• Test scenarios conducted across the Group
• Adoption of a cyber security strategy and information security
management system (ISMS) framework across the Group,
with the publication of monthly KPIs measuring mitigating
measures (laptop encryption, USB port lockdown, anti-virus
protection, etc)
Opportunity
• Ensuring our systems and processes are efficient and reliable
strengthens day-to-day operations across the Group
Change in risk in the year
Increase in risk during the year considering significant
cyber-attacks, including ransomware attacks, across the
public and private sector during the year
55
Annual Report and Accounts 2019 The Go-Ahead Group plcStrategic report Chairman’s introduction to corporate governance
Dear Shareholder
I am a firm believer that business done the right way should be a
force for good in society. At Go-Ahead, this has been central to
our thinking as the Board seeks to ensure that we are at the
forefront of best governance practice and have the framework
and processes in place to fulfil our role effectively.
Corporate governance
The successful development and execution of Go-Ahead’s strategy
cannot happen without the support of a strong and effective
system of governance throughout the Group. This starts with the
Board and permeates throughout all levels of the organisation.
Our review of the new UK Corporate Governance Code 2018
(the 2018 Code) has highlighted that we already comply with many
of the changes introduced. This is encouraging as the Board prides
itself on ensuring the highest standards of corporate governance.
Excellent progress is also being made where we need to enhance
our governance practices and I am pleased to report that we
anticipate complying in full next year. For further information
on the work we have undertaken during the year, please read
pages 70 and 71.
Board effectiveness and development are always of utmost
importance, with the internal evaluation led by the Group Company
Secretary this year highlighting that the Board continues to develop
and build upon its success. The results of this review can be found
on pages 78 and 79. One of the key outputs from last year’s
review was the development of a new Board Mandate, which
has helped us to articulate collectively the Board’s purpose and
accountabilities in delivering the Group’s strategy. Our Board
Mandate also ensures that our governance and risk management
framework effectively supports the Board in fulfilling its
responsibilities. For more information, please read page 64.
Purpose, values and culture
The Board recognises that strong governance supports a healthy
culture which, in turn, brings benefits to the Group, our
colleagues and other stakeholders.
One of the Board’s key responsibilities is to assess and monitor
culture, to ensure it is aligned to the Group’s purpose, values
and strategy. In recent years, considerable progress has been
made embedding a culture across the Group which supports our
vision and strategy. In addition to measuring and monitoring our
key cultural indicators such as inclusion and diversity initiatives,
colleague engagement survey results, succession planning and
talent pipelines, our rolling programme of visits to local operating
companies allow the Board to get a real sense of the culture that
exists at the heart of our business. These visits also provide an
opportunity for the non-executive directors to engage in a way which
models and reinforces the Group’s values and supports the message
from executive management. Read more about the Board’s rolling
programme of visits to operating companies on pages 76 and 77.
Board changes and planning for the future
In June 2019, I announced my intention to stand down as Chairman.
I am grateful to Katherine Innes Ker, our Senior Independent
Director, for leading a rigorous process with the nomination
committee to appoint my successor. Clare Hollingsworth joined
the Board as Non-Executive Chairman Designate on 1 August 2019
and will succeed me with effect from the conclusion of the
forthcoming Annual General Meeting (AGM).
In June 2019, Elodie Brian was appointed as Group Chief Financial
Officer, having been the Group’s Interim Group Chief Financial
Officer since December 2018.
Andrew Allner
Chairman
“ Business done the right way
should be a force for good
in society.”
Key responsibilities
• Strategy development and objectives
• Corporate planning and KPIs
• Health and Safety
• Stakeholder and workforce engagement
• Purpose and culture
• Contracts, bids and acquisitions
• Risk management and appetite
• Board development and effectiveness
• Governance and regulatory compliance
Key focus areas during the year
• Strategic challenge and oversight
• International strategy
• GTR
• In-depth risk reviews
• Purpose and culture
• Governance
• Sustainability
See page 57
Key focus for next year
• Strategy development and objectives
• Purpose, strategy and culture
• 2018 Code compliance
• Chairman’s induction
• Continued Board development
• Strengthen the employee voice
• Build upon stakeholder relationships
56
As Katherine Innes Ker has served on the Board for over nine years,
she must no longer be considered independent. Katherine will
continue to serve as a non-independent Non-Executive Director
to ensure continuity immediately following my retirement and
to support the transition to the new Chairman. Katherine will be
succeeded as Senior Independent Director by Adrian Ewer and as
Remuneration Committee Chair by Leanne Wood at the conclusion
of the 2019 AGM. On behalf of the Board, I thank Katherine for
her long standing and extensive contribution to the Board in both
of these important roles.
Further information on these Board changes together with an
overview of the search and recruitment process involved for the
new Chairman Designate and Group Chief Financial Officer can be
found in the nomination committee report on pages 80 to 83.
Inclusion and diversity
The Board remains committed to improving inclusion and diversity
in the broadest sense and our approach is detailed in the nomination
committee report on pages 80 to 83. Information on our Group wide
inclusion and diversity initiatives can also be found on page 27.
Stakeholder engagement
The Board continues to listen and engage with our stakeholders.
We believe it is important to work collaboratively, and in
partnership, so we can address expectations, needs and concerns.
Our relationships with our stakeholders are central to our long
term success and the Board always has due regard to its duties
under Section 172 of the Companies Act 2006 to promote the
success of the Group.
We also believe that it is important to continually review and
improve how we engage with our stakeholders, with the 2018 Code
providing a timely opportunity to do so this year. For workforce
engagement in particular, we have carefully considered how this
will most effectively work within our devolved management
framework. It is particularly important that our local operating
companies retain autonomy and responsibility for engagement
with their own colleagues and external stakeholders. The work
we have undertaken during the year has therefore sought to
preserve this, whilst also ensuring there is an effective two-way
mechanism for engagement with colleagues across all of our
operating companies. For further information, please read
pages 72 to 75.
Looking ahead
During my time at Go-Ahead, we have always strived to deliver
best practice corporate governance. This year our policies and
practices have further evolved, particularly as we have worked
towards ensuring compliance with the 2018 Code.
The Board has a clear purpose and is ever mindful of the Group’s
contribution to society. Our focus on reputation and colleague
engagement, a positive and healthy culture and developing a
sustainable business, supports the creation of long term value
for all our stakeholders. This, together with the Board’s robust
governance framework and clearly defined strategy, reinforced
by the strength and the quality of the people we have in our
business, positions the Group well for the future.
Andrew Allner
Chairman
4 September 2019
Key focus areas for the Board during the year:
Strategic challenge and oversight
The Board developed and monitored progress
against strategy through regular updates and
discussion, a clear forward looking agenda and the
annual Board Strategy Day. Focus on innovation
and resilience has remained a key focus area with
the Group’s culture, reputation, workforce and
stakeholder engagement continuing to be
an integral part of the Board’s deliberations.
International strategy
The Board monitored the development and
implementation of our international strategic
targets. Recommendations to explore new contract
opportunities in the Nordic countries and Australasia
were endorsed as well as providing governance and
oversight for the mobilisation of the German rail
and Irish bus operations.
GTR
In the first half of the year the Board scrutinised
management’s progress in stabilising and improving
GTR’s operational performance and monitored
progress towards reaching the contractual
agreement with the Department for Transport
in December 2018. This resolved the majority
of past issues relating to GTR.
In-depth risk reviews
In-depth risk reviews were undertaken on matters
such as Brexit, GDPR and reputation. The Board also
continued to monitor developments around IT-related
risks, including resilience and cyber security.
Governance
The Board developed a new Board Mandate
articulating the Board’s role in delivering the
Group’s purpose through our governance and
risk management framework. The Board also
established plans to address the key implications
of the 2018 Code, with particular emphasis on
workforce and stakeholder engagement.
Sustainability
The Board’s oversight of our sustainability strategy
included a review of progress against our five key
priority areas of climate change, air quality, local
communities, inclusion and diversity, and
sustainable procurement.
Allocation of time
4020
Strategy development and
implementation: 40%
Financial planning and
monitoring: 20%
Operations, safety and risk: 15%
Governance, culture and Board
effectiveness: 15%
Sustainability: 10%
Annual Report and Accounts 2019 The Go-Ahead Group plc
57
Corporate governance15
+
15
+
10
+
L
Corporate governance
Governance at a glance
Our governance framework
(described in this report) facilitates
the monitoring, review, development
and implementation of the policies,
procedures and culture that support
our high governance standards.
Highlights at a glance
Dividend per share
102.08p
(2018: 102.08p)
Female representation on our
Board as at 4 September 2019
50%
(2018: 29%)
Total single remuneration figure for
the Group Chief Executive for the
year ended 29 June 2019
£1,269k
(2018: £1,175k)
Colleague engagement score
66%
(2018: 66%)
Compliance with the UK Corporate Governance Code
Go-Ahead complied in full with the provisions of the
UK Corporate Governance Code published in April 2016
(the Code) which applied throughout the financial year ended
29 June 2019. The Code is issued by the Financial Reporting
Council (FRC) and is available for review on the FRC’s website:
www.frc.org.uk.
The UK Corporate Governance Code issued by the FRC in July 2018
(the 2018 Code) will be applied by the Group during the 2020
financial year. We already comply with many of the changes
introduced and excellent progress is also being made where
we need to enhance our governance practices.
Board changes
Board succession planning was a key priority during the year.
• Andrew Allner will retire from the Board with effect from
the conclusion of the AGM on 31 October 2019
• On 1 August 2019, Clare Hollingsworth was appointed as
Non-Executive Chairman Designate, a position she will hold
until the conclusion of the 2019 AGM when she will become
Chairman in succession to Andrew Allner
• On 5 June 2019, Elodie Brian was appointed as Group Chief
Financial Officer, having served as Interim Group Chief
Financial Officer since December 2018
• As Katherine Innes Ker is now a non-independent
Non-Executive Director having served nine years on the
Board, Adrian Ewer and Leanne Wood will succeed her as
Senior Independent Director and Remuneration Committee
Chair respectively at the conclusion of the 2019 AGM
Read more on pages 80 to 83
Governance highlights of the year
• Evolved Group strategy and purpose
• Developed a new Board Mandate
• Embraced corporate governance best practice
• Improved quality of colleague and stakeholder engagement
• Assessed key cultural indicators
• Increased focus on sustainability
• Improved inclusion and diversity reporting
• Built upon Board effectiveness
Read more on pages 64 to 83
58
The Go-Ahead Group plc Annual Report and Accounts 2019
A robust governance
framework
Board of directors
Our Board is led by highly skilled professionals who bring the right skills,
experience and behaviours to the Boardroom and business. Biographical
details of the Board can be found on pages 60 and 61.
Governance in action
Our robust governance framework is set out on pages 62 and 63 and
underpins our culture and values, with the Board committed to leading
by example. It establishes a clear division of responsibilities for the Board
and supports management in delivering the Group’s strategy.
Board leadership and purpose
Our Board is collectively responsible for creating and delivering the long
term sustainable success of the Group, generating value for stakeholders
and contributing to wider society.
Pages 64 to 77 describe the role of the Board and its key activities
during the year. It also sets out how the Board ensures that the views
and interests of all stakeholders, including the workforce, are represented
in the Boardroom and considered as part of the Board’s deliberations.
Evaluation
Ensuring the Board is as effective as it can be is always a priority with the
Board’s annual review providing an opportunity to reflect on the
effectiveness of the Board and its committees.
To read more on the outcome of this year’s internal Board effectiveness
review, see pages 78 and 79.
Board composition and succession
The nomination committee has responsibility for ensuring that the
Board has a diversity of skills, background and personal strengths and
that succession planning supports the progressive refreshing of the
Board. To read more, see pages 80 to 83.
Accountability and transparency
The audit committee report demonstrates how it has ensured that the
annual report is fair, balanced and understandable on pages 84 to 89.
It also describes the support the audit committee provides to the Board
in relation to risk management and the system of internal controls.
Remuneration
The directors’ remuneration report on pages 90 to 115 sets out
how executive remuneration is aligned to our strategy and supports
our culture.
59
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Board of directors
adjust images again
Andrew Allner, Chairman
N
R
Appointment: Andrew Allner joined the
Board in October 2008 and was appointed
as Chairman of the Group in April 2013.
Andrew will retire from the Board with
effect from the conclusion of the 2019 AGM.
Skills, experience and qualifications: Significant Board experience across a broad range of
UK and multinational companies and sectors. Former Partner at PricewaterhouseCoopers
LLP and a Fellow of the Institute of Chartered Accountants in England & Wales. Graduate of
Oxford University. Former Non-Executive Director of AZ Electronic Materials SA, CSR plc,
Moss Bros Group plc and Northgate plc. Former Non-Executive Chairman of Marshalls plc.
Independent: On appointment
Other appointments: Non-Executive Chairman of SIG plc (Chairman of the nomination
committee) and Non-Executive Chairman of Fox Marble Holdings plc (Chairman of the
nomination committee and member of the remuneration committee)
David Brown, Group Chief Executive
Appointment: David Brown was
appointed to the Board as Deputy Chief
Executive on 1 April 2011 before his
accession to the post of Group Chief
Executive on 3 July 2011.
Skills, experience and qualifications: Over 36 years of experience in the industry with
particular expertise in the London bus market. Former Managing Director of Surface
Transport at Transport for London. Thorough knowledge and understanding of the
Group’s business, having been Chief Executive of Go-Ahead’s London bus business
from 2003 to 2006 and advisor to the main Board.
Independent: Not applicable
Other appointments: Director of Rail Delivery Group Limited, Director of ATOC Limited
(Chairman of the remuneration committee) and Non-Executive Director of Renew
Holdings plc (Chairman of the remuneration committee)
Elodie Brian, Group Chief Financial Officer
Appointment: Elodie Brian was appointed
to the Board as Group Chief Financial
Officer on 5 June 2019.
Independent: Not applicable
Skills, experience and qualifications: Wealth of understanding of the rail business with
a proven track record of driving and delivering results. Over ten years with Southeastern,
latterly as the Finance and Contracts Director, leading the financial negotiations with the
Department for Transport resulting in the current Direct Award contract. Knowledge and
technical experience of accounting principles, financial planning and analysis to support
operating/commercial decisions.
Other appointments: None
Katherine Innes Ker, Senior Independent Director
N A
R
Appointment: Katherine Innes Ker joined
the Board in July 2010 and was appointed
as Senior Independent Director in April 2013.
Following nine years on the Board, Katherine
will step down as Senior Independent
Director and Remuneration Committee
Chair from the conclusion of the Group’s
2019 AGM and will continue to serve on
the Board as a non-independent
Non-Executive Director.
Independent: No
Skills, experience and qualifications: Former city financial analyst. Extensive executive
and non-executive experience in helping to grow successful and dynamic organisations.
Held many previous non-executive directorships including Gigaclear plc, St Modwen
Properties plc, Victoria plc, Taylor Wimpey plc, Taylor Woodrow plc, The Television
Corporation plc, Fibernet plc, Williams Lea plc, Shed Media plc and Gyrus Group plc.
Former Non-Executive Chairman of Readypower Group Limited.
Other appointments: Non-Executive Chairman of The Mortgage Advice Bureau
(Chairman of the remuneration and nomination committees and member of the audit
committee), Non-Executive Director of Forterra plc (Chairman of the remuneration
committee and member of the audit and nomination committees) and Non-Executive
Director of Bovis Homes Group PLC (member of the remuneration, audit and
nomination committees)
Adrian Ewer, Non-Executive Director
N A
R
Appointment: Adrian Ewer joined the
Board in April 2013. Adrian will succeed
Katherine Innes Ker as Senior Independent
Director with effect from the conclusion
of the 2019 AGM.
Independent: Yes
Skills, experience and qualifications: Became a chartered accountant in 1977 and, as a
Fellow of the Institute of Chartered Accountants, has sound recent and relevant financial
experience. Former Chief Executive Officer of John Laing plc and associated limited
companies. Wealth of experience of major long term contracts. Strong customer focus
and flair for strategy and finance. Experience in bidding and operating heavy and light
rail franchises as well as rail infrastructure procurement.
Other appointments: None
60
The Go-Ahead Group plc Annual Report and Accounts 2019 Harry Holt, Non-Executive Director
N
A
R
Appointment: Harry Holt joined the
Board in October 2017.
Independent: Yes
Skills, experience and qualifications: Served 24 years in the British Army fulfilling some
of the Defence’s most demanding appointments. Extensive experience working as a
commander on combat operations, as a senior executive in the Ministry of Defence and
in government relations. A wealth of experience in strategic planning, operations, culture
and transformation through leadership positions held at Rolls-Royce plc from 2011 to date.
Former Non-Executive Chairman of the Royal Foundation’s Endeavour Fund.
Other appointments: Chief People Officer at Rolls-Royce plc
Leanne Wood, Non-Executive Director
N
A
R
Appointment: Leanne Wood joined the
Board in October 2017. Leanne will succeed
Katherine Innes Ker as Remuneration
Committee Chair with effect from the
conclusion of the 2019 AGM.
Independent: Yes
Skills, experience and qualifications: Extensive corporate experience working in several
senior international executive roles at Diageo plc from 2000 to 2015, Burberry Group plc from
2015 to 2019 and, more recently, Vodafone Group plc. An international career background
with significant experience of leading corporate strategy and organisational transformation.
Other appointments: Chief Human Resources Officer at Vodafone Group plc and
non-independent Non-Executive Director of Vodacom
Carolyn Ferguson, Group Company Secretary
N
A
R
Appointment: Carolyn Ferguson was
appointed as Group Company Secretary
in July 2006.
Independent: Not applicable
Skills, experience and qualifications: A Fellow of the Institute of Chartered Secretaries and
Administrators. Qualified and practising coach and mentor. Extensive company secretarial,
compliance, governance and pensions experience. Began working as Assistant Company
Secretary in 2001, before being appointed to Group Company Secretary in 2006. Previous
employment includes working for Northern Electric, predominantly in the field of pensions.
Other appointments: None
Statutory appointment after the year ended 29 June 2019
Clare Hollingsworth, Chairman Designate
N
R
Appointment: Clare Hollingsworth was
appointed to the Board as Non-Executive
Chairman Designate on 1 August 2019.
Clare will succeed Andrew Allner as
Non-Executive Chairman following the
conclusion of the 2019 AGM.
Skills, experience and qualifications: Extensive Board experience both at executive and
non-executive level across a range of sectors. Former Non-Executive Chairman of Eurostar
International Ltd, former Non-Executive Director at Savills plc and Assura plc and former
Managing Director of Caledonian Airways. A wealth of experience within the healthcare
sector serving previously as CEO of Spire Healthcare and Bupa Hospitals, and previously
as Non-Executive Director of Virgin Healthcare Holdings Ltd.
Independent: On appointment
Other appointments: Non-Executive Director of UK Government Investments and
Molnlycke AB and Senior Independent Director of The LTA (Chairman of the audit
committee and member of the nomination committee).
Key
Executive directors
Chairman and non-executive directors
Group Company Secretary and Committee Secretary
N Nomination committee
A Audit committee
R Remuneration committee
Committee Chair
61
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Governance in action
Governance
framework
The Board is responsible for maintaining
a strong and effective system of
governance throughout the Group.
Experienced leadership
As illustrated in our governance framework on pages 62
and 63, the Group operates a devolved management
approach. Day-to-day management of the Group’s
activities, governance and oversight has been delegated
to the executive directors. They are supported in this role
by a team of highly skilled senior managers who are
empowered to operate our companies as autonomous
business units.
The senior management team comprises individuals
responsible for the key centralised Group functions and
the managing directors in each operating company.
The executive directors meet with the senior management
leadership team on a monthly basis, through local
operating company board meetings and Group executive
team meetings. These more formal meetings are
supported by a number of cross-business forums that
serve to facilitate the sharing of knowledge, ideas and
best practice. These meetings and forums are an essential
part of the Group’s devolved management approach,
facilitating quality discussion and decision making while
also preserving the management and autonomy of local
operations. We believe that this approach allows the
right balance between local and Group initiatives and
the sharing of best practice and expertise across the
Group, while ensuring that collectively we can deliver
more than operating independently.
62
The Board
Go-Ahead is headed by a Board
which is collectively responsible for
creating and delivering long term
sustainable value for the business.
The Board is accountable for
balancing the interests of the
Group, including our shareholders,
colleagues, customers and the
communities we serve.
D
e
l
e
g
a
t
i
o
n
Board committees
Delegated to by the Board and
responsible for maintaining effective
governance. The specific responsibilities
of the Board’s three committees are set
out in their terms of reference, available
on our website.
Senior management team
Responsible for executing strategic
objectives and realising competitive
business performance in line with
our risk management framework,
compliance policies, internal control
systems and reporting requirements.
A world where every journey is taken care of
Roles and responsibilities
Chairman
Group Chief Executive
Group Chief Financial Officer
• Leads the Board, sets the agenda
and promotes a culture of open
and constructive debate
• Leads the senior management
team, including development
and succession planning
• Supports the Group Chief Executive
in developing and implementing the
Group’s strategy
• Ensures individual director and
• Promotes the Group’s purpose,
• Provides strategic and financial
collective Board effectiveness and
Board succession planning
• Promotes the highest standards of
corporate governance, in line with
best practice
• Ensures effective engagement with all
stakeholders, including shareholders
and colleagues
vision and culture agenda
• Ensures the execution of strategy,
with responsibility for the Group’s
overall performance
guidance to ensure that the Group’s
financial commitments are met
• Responsible for the preparation and
integrity of financial reporting
• Facilitates effective two-way
• Ensures maintenance of effective
communication between the Board,
the business and the workforce
internal controls and risk
management procedures
Non-Executive Directors
Senior Independent Director
Group Company Secretary
• Contribute to strategy development
• Provides a sounding board to the
• Acts as an independent advisor
• Scrutinise and challenge management’s
execution of strategy within the Group’s
risk appetite and control framework
• Provide a range of external perspectives
and encourage robust debate
Chairman and appraises the
Chairman’s performance
• Acts as an intermediary for other
directors, if needed
• Available to respond to shareholder
concerns when contact through the
normal channels is inappropriate
• Responsible for corporate
governance, good information flows,
ensuring best practice and that the
decisions of the Board are implemented
• Provides a sounding board for
all directors
• Supports the Chairman to facilitate
induction programmes, Board
development and effectiveness
Roles and responsibilities
Nomination committee
Audit committee
Remuneration committee
Ensures the Board and its committees
have the correct balance of skills,
experience and behaviours and that
adequate succession plans are in place.
Read more on pages 80 to 83
Oversees the Group’s financial reporting,
maintains an appropriate relationship
with the external auditor and monitors
the Group’s internal control and risk
management system.
Establishes the Group’s remuneration
policy and ensures there is a clear link
between performance and executive
remuneration.
Read more on pages 90 to 115
Read more on pages 84 to 89
y
t
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l
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t
n
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c
A
Roles and responsibilities
Operating company boards
• Operated autonomously by local
Cross-business rail and bus
steering groups
senior management
• Comprise the managing directors in
each operating company
Group executive committee
• Comprises senior managers
responsible for the key centralised
Group functions
• Board meetings held on a monthly
basis with the executive directors
in attendance
• Local senior management report to
the executive directors directly on
day-to-day management issues
including risk
• Local senior management ensure
operating compliance with Group
policies and procedures
• Acting as intermediary with the Board,
executive directors ensure there is
meaningful two-way feedback with
operating company boards
• Meet with the executive directors on
a regular basis to explore and identify
new opportunities and initiatives
• Meets monthly with the executive
directors to review the business
and policies
• Share knowledge, experience and best
• Monitors the people agenda and
practice across operations
• Supported by cross-business forums
such as health and safety, engineering,
HR, and inclusion and diversity
assesses the extent to which vision
and culture have been embedded
throughout the Group
• Identifies synergies which can then
be cascaded through cross-business
groups and forums
• Shares knowledge and collaborates
on key Group wide projects
63
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Board leadership and purpose
The Board’s role
The Board has ultimate responsibility for setting the Group’s
strategic direction, leading and overseeing culture, delivering
value sustainably, understanding the risks the Group faces
and ensuring that we uphold the highest standards of
corporate governance.
A full description of the Board’s role, including its specific
responsibilities, is available on our website.
Board meetings
The Board agenda is set in collaboration between the
Chairman, Group Chief Executive and Group Company Secretary.
The Board holds nine scheduled formal face-to-face meetings
a year including a meeting dedicated to discussing the
Group’s strategy.
Informal meetings and Board dinners are held usually either
before or after Board meetings. Unscheduled meetings are
held as required where topics warrant more time or decisions
need to be made outside of the normal cycle of meetings.
The table on the next page sets out the Board and committee
attendance for the year ended 29 June 2019. Attendance is shown
as the number of meetings attended out of the total number
of meetings possible for the individual director during the year.
All directors are expected to:
• Attend all meetings of the Board and of those committees
on which they serve
• Attend the AGM
• Devote sufficient time to the Group’s affairs to enable them
to fulfil their duties as directors
image of Andrew and
Harry to be supplied
Board Mandate
During the year, a new Board Mandate was
adopted which helped the Board to articulate
its purpose and accountabilities in delivering
our strategy. In developing the mandate, the
Board spent time reviewing the Group’s
governance and risk management framework,
how we engaged with colleagues and key
stakeholders and the culture of the business.
Director duties under Section 172 of the
Companies Act 2006 and the Board’s
development and effectiveness were also
key considerations.
The Board Mandate is now an important
reference for the Board in its deliberations
and decision making, also supporting
effectiveness reviews and the induction
of new Board members.
A full copy of the Board Mandate can be
found on our website.
Board
Why
PURPOSE
How
VALUES AND
CULTURE
What
STRATEGY
R
i
s
k
m
a
n
a
g
e
m
e
n
t
Who
STAKEHOLDERS
e
c
n
a
Govern
64
The Go-Ahead Group plc Annual Report and Accounts 2019
Board and committee meeting attendance
Board
Audit committee
Remuneration committee
Nomination committee
Board attendance
Scheduled
Unscheduled4
Scheduled
Unscheduled
Scheduled
Unscheduled5
Scheduled
Unscheduled6
Total meetings
Andrew Allner1
David Brown2
Elodie Brian2,3
Katherine Innes Ker
Adrian Ewer
Harry Holt
Leanne Wood7
Patrick Butcher2,8
9
9/9
9/9
5/5
9/9
9/9
9/9
8/9
4/4
2
2/2
2/2
1/1
2/2
2/2
2/2
1/2
—
4
—
—
—
4/4
4/4
4/4
3/4
—
—
—
—
—
—
—
—
—
—
6
6/6
—
—
6/6
6/6
6/6
5/6
—
3
2/2
—
—
3/3
3/3
3/3
3/3
—
2
2/2
—
—
2/2
2/2
2/2
2/2
—
6
5/5
—
—
6/6
6/6
6/6
6/6
—
1.
The Chairman attends audit committee meetings by invitation as appropriate, which have not been included. The Chairman was not eligible to attend one unscheduled
nomination and remuneration committee meeting given these meetings related to the appointment and remuneration of the new Chairman Designate.
2.
The executive directors attend committee meetings by invitation as appropriate, which have not been included.
3.
Elodie Brian attended five scheduled Board meetings as Interim Group Chief Financial Officer prior to her permanent statutory appointment on 5 June 2019. Between 5 June 2019
and 29 June 2019, one unscheduled Board meeting was held which she attended in her formal capacity as statutory director.
4.
Unscheduled Board meetings were held on 4 June 2019 and 26 June 2019 to approve the appointment of the new Group Chief Financial Officer and Chairman Designate respectively.
5.
Unscheduled remuneration committee meetings were held on 6 December 2018, 4 June 2019 and 18 June 2019 to discuss executive and non-executive remuneration.
6.
7.
Unscheduled nomination committee meetings were held on 31 October 2018, 6 December 2018, 14 February 2019, 22 May 2019, 4 June 2019 and 18 June 2019 primarily
to discuss Board succession planning.
Leanne Wood was unable to attend one scheduled Board, audit and remuneration committee meeting on 12 July 2018 due to this date conflicting with the Burberry Group
plc 2018 annual general meeting, the date for which had been set before Leanne’s appointment to Go-Ahead. Leanne was also not able to attend one unscheduled Board
meeting on 26 June 2019 due to this meeting being held at short notice and conflicting with a long standing prior commitment.
8. Patrick Butcher resigned as Group Chief Financial Officer with effect from 30 November 2018.
The Board is confident that all of its members have the
knowledge, ability and experience to perform the functions
required of a director of a UK listed company.
Information and support
The Board is supplied with high quality information, presented
in a form designed to enhance Board effectiveness. In addition
to the Board Mandate, a comprehensive Board Procedures
Manual is maintained. This includes formal procedures for the
working of the Board and its committees, delegated authorities,
the timely provision of appropriate information and the duties
and responsibilities of directors, including standards of conduct
and compliance.
The Group Company Secretary ensures all Board procedures are
complied with and that Board and committee papers are circulated
to all directors in a timely manner by secure electronic means.
All directors may take independent professional advice, at the
Group’s expense, if they believe it to be necessary for the proper
discharge of their duties as directors.
Training and development
The Chairman is responsible for ensuring that all non-executive
directors receive ongoing training and development to ensure
they have the relevant knowledge, expertise and skills for their
role on the Board and its committees. During the year, ongoing
development included:
• Regular presentations from senior management. Examples
included presentations on health and safety, IT resilience and
cyber security, stakeholder engagement and sustainability
• Regular updates on corporate governance, legislative and
regulatory issues. A key example was the changes arising from
the new UK Corporate Governance Code 2018
• A planned programme of non-executive director visits to
operating companies
• Opportunity to attend the Group’s annual management
conference
• Participation in formal and informal training. An example was all
Board members completing anti-bribery and corruption and
competition law training
In addition, individual directors are expected to fully participate
in the internally facilitated Board effectiveness review. As part of
this process, directors are also given the opportunity to discuss
any of their own additional training and development needs.
Directors are expected to take responsibility for identifying
additional training needs and to take steps to ensure each is
adequately informed about the Group and their responsibilities
as a director.
Annual Report and Accounts 2019 The Go-Ahead Group plc
65
Corporate governance
Board leadership and purpose continued
Board induction programme
All new directors receive an extensive and tailored induction programme either shortly before or upon joining the Board. The Group
Company Secretary, working closely with the Chairman, agrees the personalised induction plan which is designed for each individual,
taking into account their existing knowledge, specific areas of expertise and proposed committee appointments.
Group Chief Financial Officer’s induction
“ My induction process has been well
paced, thorough and tailored to my
needs. It has enabled me to quickly
develop my knowledge and I have
valued the opportunity to meet
with key stakeholders.”
Elodie Brian
Group Chief Financial Officer
With over ten years of experience in our Southeastern
business (latterly as the Finance and Contracts
Director), Elodie Brian knows the business well and
brings a wealth of understanding, particularly with
respect to the Group’s rail division. While Elodie’s
ongoing induction programme followed a similar
structure to those undertaken by Harry Holt and
Leanne Wood last year, particular focus was given
to Elodie’s role and responsibilities as director of a
listed company, investor relations and ensuring she
was well informed about the Group and bus divisions.
Overview of induction programme
• Access to Board and audit committee meeting papers
Key focus areas
• Board – how we lead by example, perform our directors’
• Meetings with members of the Board, the Group Company
duties and strive for excellence
Secretary and the senior management team
• Governance – our devolved management approach and
• Meeting independently with both the internal and
external auditors and the key advisors to the Group and
the Board
governance framework
• Strategy – how we create and deliver long term
sustainable value
• Meeting with key financial stakeholders, providing the
• Risk – our key risks, internal controls and risk appetite
opportunity to discuss investor views on Go-Ahead and
the public transport sector
• Attending investor roadshow meetings, sales desks
briefings and conferences, in addition to meeting with
covering analysts
• Reviewing investor feedback reports and introductory
meetings with a number of major shareholders
• Stakeholders – how we listen to and balance the interests
of our stakeholders
• Culture – how our vision, beliefs and attitudes underpin
our culture change programme
66
The Go-Ahead Group plc Annual Report and Accounts 2019 How governance supported the delivery
of our strategic objectives in 2019
Board activities were structured to enable the Board to support the executive directors and senior management to deliver our strategic
objectives. We have set out below how the Board’s governance role ensured focus on each of our strategic objectives for the year
ended 29 June 2019. The Board also ensures that the key performance indicators specific to each strategic objective are incorporated
into our executive directors’ performance-related remuneration targets.
Board governance role
Protect and
grow the core
Win new
bus and
rail contracts
Develop for
the future
of transport
• Ensure our core businesses are
safeguarded
• Understand market developments
and changing trends
• Track evolving strategic
opportunities
• Approve and monitor strategy
and delivery
• Oversee and approve organic
growth initiatives, bolt-on
acquisitions and
strategic partnerships
• Assess and agree the viability,
including risk of rail and bus
contract opportunities
• Ensure detailed oversight and
understanding of bid process,
strategy and risks
• Approve all key bid and contract
submissions
• Oversee mobilisation of contracts
already won
• Ensure knowledge, experience and
best practice are shared across
the Group
• Agree new and emerging
strategic initiatives
• Rolling programme of in-depth
reviews into innovation projects
• Monitor progress on a regular basis
• Monitor evolving competitor and
macro trends
• Provide support and resources to
support innovation
Read more about what we achieved in 2019 in our Group Chief Executive’s review on pages 11 to 15
67
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Board leadership and purpose continued
Our Board
Strategy Day
The Board values the opportunity to discuss in
detail Go-Ahead’s strategy and implementation
of plans at our annual Board Strategy Day.
This year’s Board Strategy Day took place in May 2019, the
agenda for which was set through collaboration between the
executive and non-executive directors, with the key strategic
questions being agreed in advance.
The Group Chief Executive provided an overview of the day
which involved setting the context and background. The Group’s
financial advisor, Rothschild, then presented a market and
valuation update and the Group Chief Financial Officer provided
an update on 2019 financial performance. The Board then
discussed the macro trends and competitive landscape facing
the business. Debate focused on the challenges that these changing
trends presented, how the Group was responding and the level
of risk the Board was prepared to take in pursuit of its objectives.
The morning concluded with an overview of UK rail industry trends
including the UK rail franchising schedule, the general market
dynamics and the anticipated impact of the Williams Rail Review.
The afternoon’s discussions focused on our three
strategic objectives.
68
The Go-Ahead Group plc Annual Report and Accounts 2019
Protect and grow the core
For this strategic objective, the Board discussed
the wide range of initiatives underway to
safeguard and develop our core businesses.
The potential financial returns and risks were
assessed and the Board discussed the market
disruptors and new competition impacting the
transport industry.
Win new bus and rail contracts
For this strategic objective, presentations were
given on target opportunities and strategy,
acquisition, bidding and pipelines. Progress
against our international target was also
assessed by the Board.
Develop for the future of transport
The Board discussed the progress made against
this strategic objective. Building upon last year’s
work, the Board considered the key workstreams
that would be focused on over the year ahead to
deliver innovative and sustainable growth for
the long term.
Throughout the Board Strategy Day, the interests
of all stakeholders were at the forefront of the
Board’s considerations. The non-executive directors
contributed personal perceptions and views,
based on their own business experience. The
participation of external advisors and senior
managers also provided interesting and stimulating
insights which contributed to the Board’s debate.
Strategy was at the core of the Board’s
activities during the year, with the strategic
and measurable objectives that will underpin
the Board’s deliberations over the year ahead
also agreed at this year’s Board Strategy Day.
Board considerations when implementing
our international strategy
We have a clear international strategy to win new bus and rail contracts.
As the business has grown it has become more geographically dispersed
and more complex. The Board’s main considerations during the year are
summarised below:
• Reviewing the target geographies, in the current and future pipeline,
to ensure they remain consistent with our selection criteria. This year
the Board agreed to add Australasia to the existing target markets
• Approving the allocation of investment resources to support the
growth plan including resource costs, bid costs and the creation of
new corporate entities
• Ensuring new corporate structures are compliant with our tax policies
• Approving target contracts within the pipeline, based on alignment with
our prioritisation criteria such as competitive landscape, bid resources,
financial returns, capital requirements and strategic growth opportunities
• Approving the submission of bids
• Monitoring performance against the plan and endorsing tactical changes
as required
• Governance and oversight of the mobilisation activities required to convert
newly won contracts into operational businesses that are integrated within
the Group company architecture, systems and policies
• Ensuring post-live reviews are recorded and disseminated to ensure that
lessons learnt are shared from project to project and country to country
• Integrating the new businesses and/or contracts into the wider corporate
governance architecture
• Monitoring compliance with Group requirements and stakeholder
expectations, including safety management, regulatory compliance,
financial reporting requirements and operational performance
United Kingdom
Ireland
Norway
Germany
Singapore
Australia
Annual Report and Accounts 2019 The Go-Ahead Group plc
69
Corporate governance Board leadership and purpose continued
Preparing for the
2018 UK Corporate
Governance Code
Leading in governance
The 2018 Code applies to the Group from the 2020 financial year.
To ensure appropriate preparations were made in advance of the
effective date, the Board received an early briefing from the
Group Company Secretary addressing the key themes and initial
response to the changes. More detailed discussions were then
incorporated into the Board’s Forward Planner during the year.
Given our devolved management structure, we have also spent
time working with our local operating companies to establish the
most effective way of gathering and assessing the information
required for the wider workforce. Some of the key highlights from
the year are as follows:
Workforce engagement
Our devolved management structure means it is important that
our operating companies retain autonomy and responsibility
for engagement with their own colleagues. The work we have
undertaken during the year has therefore sought to preserve this.
Acting as intermediary with the Board, operating companies
have been delegated responsibility for ensuring that there is an
effective mechanism for genuine two-way engagement between
their operating company boards and colleagues. Feedback will
be generated from each operating company on a biannual basis
and reported up to the Board. In turn, the Board will review the
feedback and consider what Board information should be
cascaded back down to the operating companies for them
to share with their colleagues.
The Board will also designate a non-executive director to review and
support these arrangements as they evolve and become embedded
across the business, to ensure they are effective and provide a
genuine means of two-way engagement with the workforce.
More details will be included in next year’s Annual Report.
Workforce and remuneration policies
It has been an important part of our work this year to ensure that
management within our local operating companies understand
what the 2018 Code means to them and the value it can add.
Briefings have therefore been provided by the Group Company
Secretary to senior management and new reporting processes
introduced to gather the information the Board needs. Over the
year ahead, the Board will review this information in conjunction
with our operating companies to ensure that workforce and
remuneration policies and practices are consistent with our
values and support a healthy culture.
70
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Contrib
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Purpose
and
strategy
Effective
stakeholder
engagement
Governance
Diverse and
effective
Board
Proportionate
executive
remuneration
H
e
a
l
t
h
y
c
o
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ulture
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P o s i t i v e r
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The Go-Ahead Group plc Annual Report and Accounts 2019
Our purpose
With a lot of work already undertaken to develop vision and
values as part of our wider culture change programme, a project
was recently undertaken to articulate a new Group purpose.
Our purpose statement, which was developed in partnership
with colleagues from across the business is “to be the local
partner taking care of journeys that enhance the lives and
wellbeing of our communities across the world”. The Board
will monitor the culture, policies and behaviours across the
business to ensure that these are aligned with our purpose,
values and strategy.
Early adoption of remuneration provisions
from the 2018 Code
Separately, the Board has also already made the following
key decisions in response to the 2018 Code:
Executive pensions
• With the appointment of our new Group Chief Financial
Officer, we have aligned executive director pension
contributions with the majority of employees who are
auto-enrolled into the Workplace Savings Section of
The Go-Ahead Group Pension Plan. Members of the
Workplace Savings Section receive an employer
contribution rate of 3% of qualifying earnings
Senior management remuneration policy
• We have adopted a new policy which consolidates and
formalises all the information already reviewed by the
remuneration committee. While the committee has
always had more than an oversight role in senior
management remuneration, this will help facilitate
its new extended obligation of “setting” senior
management remuneration going forward
Malus and clawback policy
• We have adopted a new policy which aligns our malus
and clawback provisions with best practice. In addition
to providing more adequate protection for the Group,
our new policy has been extended to include the
recovery of remuneration in circumstances such as
corporate failure and/or reputational damage
Long Term Incentive Plan
• While already operating in practice, we have updated our
Plan Rules to include a discretionary power to override
formulaic outcomes and ensure that the holding period
extends to the fifth anniversary of the award grant
71
Stakeholder engagement
The Board already listens and interacts with stakeholders in
a way which informs decision making and is consistent with
the ethos of Section 172 of the Companies Act 2006. During
the year, we explored how we could build upon the engagement
strategies already in place to strengthen the stakeholder voice
in the Boardroom.
One of the changes we made was to increase the regularity of
updates to the Board and improve the quality of briefings
received from senior management on the key views and areas
of focus for each of our stakeholder groups.
This has enabled more constructive and meaningful input into
the Board’s decision-making process. Read more about how the
Board listens to our stakeholders and the outcome of doing so
on pages 72 to 75.
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Board leadership and purpose
continued
Listening to
our stakeholders
At Go-Ahead, listening to and
engaging effectively with our
wide variety of stakeholders is key
to ensuring responsible decisions
are made. At the same time, the
Board understands its duties under
Section 172 of the Companies
Act 2006. The following pages
provide some insight into how
the views and interests of all our
stakeholders were represented
in the Boardroom during the year
together with the key topics raised
and examples of how we responded.
Our people
Customers
Strategic partners
and suppliers
Government
Communities
Investors
72
Our people
People are the core of our business. Our people
strategy is to build a culture which enables our
people and business to thrive. Go-Ahead places a
premium on an inclusive and diverse workforce,
enabling all colleagues to reach their full potential,
to be empowered and engaged with a strong
commitment to personal development.
How did we listen to our stakeholders?
• Annual management conference
• Colleague engagement survey
• Investors In People
• Leadership and talent development review
• Training and needs analysis
• Colleague forums, groups and panels
• Colleague-led networks
• Site visits
What key topics were raised?
• Southeastern franchise
• Assaults on colleagues
• Inclusion and diversity
• Personal development
• Health and wellbeing
• Line manager contact and communication
• Colleague recognition
How did we respond?
• Colleague empowerment and enablement initiatives
• Review of communication and feedback channels
• Launch of colleague-led networks
• Review of how the Board engages with the
wider workforce
• Regular business updates, with a particular focus
on the Southeastern franchise
• Managers empowered to deliver local engagement
survey action plans
• Inclusion and diversity initiatives, including the
introduction of diversity KPIs
• Greater focus on health and wellbeing
• Training for colleagues, with a particular focus
on customer service
Customers
Strategic partners and suppliers
We understand our local markets and strive to
exceed our customers’ expectations. A core part
of our strategy is to make travel on our services
better and easier for our customers.
We work collaboratively with strategic partners,
including Transport for London (TfL), Network Rail
and Keolis, and build strong relationships with
core suppliers.
How did we listen to our stakeholders?
• Social media – news and updates
• Customer satisfaction surveys
• Continual review of feedback and complaints
• Direct feedback via call centres, emails and social
media messages
• Focus groups and other consumer research
• Customer-facing colleague feedback
• Customer panels, especially for special interest
groups such as people with disabilities
What key topics were raised?
• Overall on-board experience
• Reliability and punctuality of services
• Value for money, including ticket price
• Quality and amount of delay and disruption
information including timetable changes
• Station amenities
• Contactless payment
• Colleague helpfulness
How did we respond?
In rail:
• Capital investment of £22.6m with improvements
to stations and facilities
• Improved operational reliability at GTR
• £75k upgrade made to passenger information systems
in Southeastern during the year, with a further £106k of
enhancements to be delivered by Autumn 2019
• Trial of a new passenger assistance app to improve
customer experience
• Customer ambassadors introduced at more stations
• Introduced Delay Repay 15 and improved awareness
of compensation
In bus:
• £50.0m of investment in our bus operations including
123 new buses
• Rolled out contactless payment systems to 100% of our
regional bus fleet
• Simpler fares, including flat rate under 18 fares, rolled out
at all bus companies
• Ongoing updates to bus app to improve journey planning
• Enhanced coaching and training for drivers
• Improved connects between services and other
transport modes
How we listen to our stakeholders
• Formal written contracts, negotiated using the principle
of transparency and our beliefs and attitudes
• Annual supplier surveys
• Regular meetings to discuss contract performance
• Early supplier engagement
• Annual procurement sustainability supply chain event
• Stakeholder surveys
• Regular stakeholder meetings
What key topics were raised?
• Open and equitable relationships
• Working in partnership to deliver the best
customer outcomes
• TFL’s “Central London Bus Services Review”
• Results of the supplier surveys
How did we respond?
• Supported Network Rail on the development of capacity
studies, timetabling modelling and providing a more
resilient infrastructure
• Secured further progress with suppliers in delivering
value, consistency, engagement and better planning
• Introduced a comprehensive Sustainable
Procurement Charter
• Worked together with our suppliers to tackle
sustainability challenges
• Stakeholder newsletter introduced across the Group
73
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Board leadership and purpose continued
Government
Communities
Working closely with both central and local
government enables us to contribute our private
sector experience and expertise to the public
agenda and produce better policy outcomes
and service delivery.
Our businesses are at the heart of the communities
they serve. Our aim is to provide the social and
economic benefits of affordable and accessible
travel in the towns and cities in which we operate.
How did we listen to our stakeholders?
• Working in partnership with the DfT on improving
customer satisfaction, air quality, safety and
customer satisfaction
• Key partner in the Thameslink programme which is
transforming north–south travel through London
• Ongoing dialogue with local MPs as well as participating
in government and industry working groups to represent
our key strategy and customer needs
• Stakeholder newsletters
• Working with relevant departments to improve
policies on loneliness, active travel and health benefits
of public transport
What key topics were raised?
• The Williams Rail Review including the structure
of the rail industry passenger service delivery
• Timetable changes and industrial relations
• The Transport Select Committee investigation into
the health of the bus market and calls for national
bus strategy
• GTR passenger disruptions following the May 2018
timetable changes
• Bus franchising
How did we respond?
• Contributed to the Williams Rail Review to further our
shared aim of ensuring that the rail system continues to
benefit passengers and support a stronger economy
• Rolled out and shared campaigns on loneliness, active
travel and air quality
• Ongoing engagement with the DfT Ministerial team
• Continued development of bus strategy and response to
the Transport Select Committee’s inquiry into the health
of the bus market
• Enhanced communication strategy around GTR service
improvements, including December 2018 and May 2019
timetable changes
• Meetings with key government departments
• Developed bus mandate to explain the benefits of a
partnership model for buses
How did listen to our stakeholders?
• Two-way communication stream with local businesses
and organisations
• Stakeholder conferences
• Open days at depots
• Surgeries in community centres
• Participation in local community groups such as low
emission zone (LEZ) networks
What key topics were raised?
• Communications around GTR December 2018
timetable changes
• Go-Ahead’s air filtering bus
• “Access for All” funding consultation
• “Oxford Zero Emission Zone” debate
• Investment priorities and how the bus division
can support them
How did we respond?
• Regular stakeholder newsletters from Southeastern
and GTR to local MPs and Transport Focus on the
December 2018 timetable changes
• Local meetings with MPs, Chamber of Commerce and
Local Economic Partnership Boards
• Joined a multisector working group which engages with
our communities on three key areas – economic growth
and high streets, health and air quality and positive
social impact
• Launched the “Chatty Bus” initiative
• Developed active travel plans for customers at bus
and rail stations
• Ran ‘how to use a bus’ learning sessions at schools
and charities for adults with learning difficulties
74
The Go-Ahead Group plc Annual Report and Accounts 2019 Investors
Go-Ahead is listed on the London Stock Exchange,
forming part of the FTSE 250. We provide investors
with open and transparent information and
encourage two-way communication. Feedback
from our shareholders forms part of the strategic
Board discussions.
How did we listen to the stakeholders?
• Annual General Meeting
• Analyst and broker meetings
• Individual investor meetings
• Feedback from results announcements and
trading updates
• Participation in investor relations forums and
best practice events
• Attendance at broker conferences
• Online communications
• Site visits
What key topics were raised?
• Dividend sustainability
• Scope for recurring earnings growth
• Sustainability of bus profitability
• Rail industry challenges
• International expansion
• Capital structure
• Political backdrop
How did we respond?
• Dividend policy updated last year, providing the
appropriate flexibility to safeguard an attractive dividend
• Clear presentation of our initiatives, innovation and
aggregation of marginal benefits
• Bus division profitability supported by plans to translate
volume growth into profit
• Maximised value from existing rail franchises
• Clear international strategy with defined target markets
• Disciplined approach to bidding in the UK and internationally
• Progress achieved against our international profit target
• Engaging with industry bodies and Government to
influence policy and regulatory developments
Engagement with shareholders
The Board believes that effective communication and
proactive engagement with shareholders is paramount in
establishing a mutual understanding of both the Group’s
and shareholders’ objectives.
The Group has a dedicated Investor Relations team which
acts as the primary point of contact with the investor
community. Throughout the year, we maintained open
and frequent dialogue with investors, providing updates
on significant events affecting the Group, including
business strategy and financial performance.
The Group Chief Executive and Group Chief Financial Officer
are the Board’s principal contacts with institutional
investors. The Chairman, the Senior Independent Director
and the Committee Chairs are also available to shareholders
to discuss strategy, governance and concerns they may have.
The Group Chief Financial Officer and the Investor
Relations team provide to the Board regular reports
and updates, including analysts’ reviews and analysis of
the shareholder register. Ensuring effective two-way
engagement with shareholders forms an important
part of the Board’s strategic discussions.
Institutional investors and analysts receive regular
communications from the Group. This includes formal
full year and half year results presentations followed by
face-to-face meetings to promote a better understanding
of the business and its strategic plans. In the intervening
periods, Go-Ahead continues its dialogue with the investor
community by meeting key investor representatives and
attending conferences. This year, our investor relations
activity also included a site visit for investors and analysts
to our all-electric bus depot in Waterloo, London.
We communicate with the wider investment community,
including our smaller shareholders, through regulatory
news releases and trading updates via the London
Stock Exchange, which are also published on our website.
Our corporate website was relaunched in July 2019 and now
provides a more interactive experience and user-friendly
navigation system. In particular, the investor relations
section provides a wealth of information including a
dedicated results centre, access to reports, factsheets,
latest news and presentations, as well as a share price
analysis. Investors, and other interested parties, can
subscribe to receive news through email updates by
registering their details on our website, which is fully
responsive to mobile devices.
Annual General Meeting (AGM)
The AGM is an opportunity for the Board to
communicate with and answer questions from
shareholders. All Board members are available to
meet informally with shareholders before and after
the meeting. Full details of the business to be
discussed at the Group’s next AGM on Thursday
31 October 2019 can be found in the Notice of
AGM. This is posted to registered shareholders at
least 20 working days in advance of the meeting
and will also be available on our website.
At last year’s AGM, all resolutions were passed
with votes in support ranging from 87% to 100%.
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Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Board leadership and purpose
continued
How the Board focused on colleague
engagement during the year
> July 2018
• A visit to Oxford Bus Company enabled the
Board to meet colleagues operating our new
demand responsive transport operation,
PickMeUp
• The Group’s Annual Management Conference
provided an opportunity for the Board to
meet with senior management from across
the Group and operating companies
> September 2018
• It was important for the Board to visit GTR
to meet with customer-facing colleagues
who were working hard to deliver the best
customer service for our passengers
> October 2018
• A key focus area of the October 2018 Board
meeting was the Board’s engagement with
colleagues across the business
• As part of the visit to Southeastern,
there was a tour of Victoria Station
where the Board met with both
colleagues and customers
> November 2018
• A visit to Go South Coast enabled the Board
to meet with local company directors and
gain a valuable insight into the company’s
approach to stakeholder engagement
> December 2018
• During their visit to Brighton & Hove, the
Board enjoyed meeting with colleagues
working on maintenance systems as they
toured the depot
> February 2019
• A highlight of the visit to Go-Ahead
London’s Waterloo Garage was meeting
drivers of the new electric buses
> April 2019
• At the Board’s April 2019 meeting, an
update was given on the Group wide
colleague engagement survey results and
action plans in each operating company
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The Go-Ahead Group plc Annual Report and Accounts 2019
Board visit to Go-Ahead London
Site visits are an important part of the Board’s engagement with colleagues across the
business and the Board has a rolling programme of visits to Go-Ahead’s operating companies.
In February 2019, Andrew Allner, Katherine Innes Ker and Adrian Ewer visited Go-Ahead
London’s Waterloo and Camberwell Garages.
John Trayner, Go-Ahead London’s Managing Director, met the
Board at Victoria Station. From there, they travelled by electric
bus to Waterloo Garage, where they were welcomed by other
senior management and the local team. The Board were updated
on the recent conversion works, garage performance, lessons
learned and application elsewhere in the business. This was
followed by a tour of the depot, providing the Board with the
opportunity to speak with colleagues at all levels in the business.
The Board then travelled to Camberwell Garage, where they
were given a tour of the training school facility and were able to
review recent building works. The training school management
provided an update on year one of Go-Ahead London’s driver
apprenticeship scheme. The visit concluded with a tour of
Camberwell Garage itself before returning to Waterloo by
electric bus.
The Board found the visit very informative. By spending time
with management, customer-facing and operational colleagues,
they were able to hear first hand about the work and initiatives
underway and gain valuable insight into how Go-Ahead’s vision
and culture were being demonstrated in a day-to-day setting.
“ It is so important for the Board to meet our
colleagues who are at the heart of our Group
and see all of the good work that is going on in
our local operations. The advancement of our
electric buses provides an excellent example
of how we as an organisation can reduce our
environmental impact and improve air quality.
The valuable insight gleaned from these visits
is taken back to the Boardroom where it
helps us with our consideration of other
environmental initiatives as we work towards
progressing our sustainability strategy.”
Andrew Allner
Chairman
77
Corporate governance Evaluation
Board evaluation cycle
Year 2
2018
Internal review
facilitated by the Group
Company Secretary
Year 1
2017
Independent externally
facilitated review and
Board development
programme
Year 3
2019
Internal review
facilitated by the
Group Company
Secretary
Process
The Group Company
Secretary met with each
Board member on a
one-to-one basis. The
Board considers the Group
Company Secretary to be a
suitable and independent
sounding board for this
process, particularly given
her insight into the
day-to-day working of the
Board and its committees.
Reflection
Progress was reviewed
against the actions from
the previous year’s internal
review. Directors then
shared their observations
of Go-Ahead’s Board and
its governance and
dynamics, with specific
discussion on how the
Board can leverage the
skills and experience each
individual director brings
into the Boardroom.
Focus
Discussion centred around
where the principal areas of
Board focus should be over
the year ahead to improve
Board effectiveness.
Deliberations took into
account the recent
changes to Board
composition, the Group’s
evolving strategy and
best practice corporate
governance.
Progress against actions arising from the 2018 Board effectiveness review
Area of focus
Progress
Sustainable
value creation
There was now a more structured focus on developing the key drivers of sustainable value creation. This was
delivered through executive reporting and the Board spending more time on key focus areas, both in scheduled
meetings and as part of the annual Board Strategy Day. The Board also developed a Board Mandate which
collectively articulates the Board’s role in delivering sustainable long term value.
Stakeholder
engagement
There was more focus on evolving the engagement strategy with stakeholders, measuring progress and
ensuring their interests were considered as part of Board discussion and decision making. A particular focus
area was workforce engagement, where new processes and reporting have been introduced during the year.
It was agreed that a non-executive director would be appointed to oversee this work going forward.
Culture
There was a continued assessment of cultural indicators throughout the business to ensure that the Group’s
culture continues to evolve and remains aligned to our values. The new processes put in place during the year
also provided the Board with increased oversight in support of ensuring workforce policies and practices were
consistent with values and aligned to promote a healthy culture.
Inclusion and
diversity
There was an increased quality of reporting on people strategy during the year with more comprehensive
inclusion and diversity updates in particular. Group wide diversity KPIs were also introduced, with clear action
plans to be monitored by the Board. In accordance with the 2018 Code, work was underway to ensure the Board
takes an even more active role in this area going forward.
Governance
The Board had undertaken a detailed review of the changes arising from the 2018 Code and have adopted them
early wherever possible. The Board anticipates complying in full with the 2018 Code next year.
Individual director effectiveness
The Chairman also met with each director on an individual basis to discuss the findings from the Board review. The Senior Independent
Director led the process of evaluating the performance of the Chairman, in consultation with the non-executive directors and with
input from the executive directors.
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The Go-Ahead Group plc Annual Report and Accounts 2019
Key topics for discussion
Discussions with the Group Company Secretary focused on a number of key topics relating to the
2018 Code, examples of which included:
• Leadership and purpose
• Composition and evaluation
• Remuneration policy
• Division of responsibilities
• People strategy
• Governance
• Diversity and culture
The Group Company Secretary then shared the findings with the Chairman on an anonymous basis, ahead of a full
discussion at the July 2019 Board meeting. An action plan was then agreed for the year ahead.
Conclusions
The review highlighted the Board’s key strengths and made recommendations as to how the Board could continue to develop
and improve effectiveness. A summary of the feedback and the principal areas of focus for the year ahead are as follows:
Key strengths
Principal areas of Board focus for 2020
The Board continues to operate effectively
and to a high standard
The Chairman’s stewardship of meetings was viewed highly
positively, actively encouraging an open and transparent
style in Board meetings. The small size of the Board was
cited as a positive, primarily as it provided the opportunity
for everyone to contribute and enabled the non-executive
directors to draw parallels, based on their experience.
Board discussions were supportive, constructive
and well balanced
Board members felt well supported, with comprehensive
pre-reads to support discussions sent out in a timely
manner. The quality of Board reporting continued to
improve, ensuring a more focused and better balanced
discussion. The non-executive directors welcomed the
updates they received from the senior management team.
The Board’s governance framework was
considered robust
Governance support was of a very high standard, with the
work undertaken on the Board Mandate during the year
being a valuable exercise in collectively articulating the
Board’s purpose. Board development and effectiveness
remained a key priority, in addition to maintaining a good
reputation for best practice and transparent reporting.
Board committees were all considered to work well
Committees were considered to be well chaired and
managed, with the Board able to rely on its committees
to ensure focus on key areas as delegated by the Board.
In particular, the nomination committee’s work during the
year which led to the recommendation of two important
Board appointments was cited as being positive, supportive
and well managed. Risk reporting and assurance through
the audit committee was also identified as being effective
and robust.
Composition and succession planning
Ensure a well managed transition and induction of the
new Chairman. Continue to focus on Board succession
planning so that the Board is well positioned for the future,
with the right balance of skills, experience and diversity to
support the achievement of the Group’s strategic objectives.
Colleague and stakeholder engagement
Maintain the focus on developing two-way channels
of communication with stakeholders. Particular focus will
be on colleague engagement, to support effective decision
making and the Board’s fulfilment of responsibilities under
Section 172 of the Companies Act 2006.
People strategy and culture
Develop the work undertaken to date to support an even
broader oversight of the Group’s wider workforce. This will
involve ensuring that (i) policies and practices are aligned
to culture; (ii) diversity policy and targets are progressive;
and (iii) the processes supporting leadership development
and the executive pipeline are robust.
Strategy and structure
Continue to review the impact of new business and
international expansion on the current organisational
model to ensure that the governance framework and
resourcing can support the development and delivery
Annual Report and Accounts 2019 The Go-Ahead Group plc
of strategy.
Governance
Building upon the progress made during the year, continue
to focus on ensuring full compliance with the 2018 Code
over the year ahead.
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Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Board composition and succession
Nomination committee report
Dear Shareholder
I have been asked by Andrew Allner to report on the work
undertaken by the nomination committee during the year,
given that a key focus over the latter part of the year was to
identify a suitable successor to Andrew, who will retire from
the Board at the conclusion of the 2019 AGM.
It has been a busy and productive year for the nomination committee.
In addition to appointing a Chairman Designate to succeed
Andrew, we also appointed a new Group Chief Financial Officer.
In conjunction with these appointments, a key focus area for
the committee was to ensure we had the appropriate balance
of skills, experience, diversity and capability on the Board.
The behaviours and values of our new Board members were
also important considerations to ensure that they were aligned
to the Group’s values and culture.
Appointment of new Chairman
We were pleased to recommend to the Board the appointment
of Clare Hollingsworth as Non-Executive Chairman Designate
with effect from 1 August 2019. Clare will succeed Andrew Allner
as Chairman with effect from the conclusion of the 2019 AGM.
Clare brings extensive commercial and Board experience to
Go-Ahead, both as an executive and a non-executive director
and as a Chairman in transport and across a range of sectors.
This is particularly important as our strategy evolves, with
Clare’s expertise and knowledge being invaluable as we
continue to create value for all of our stakeholders.
Appointment of new Group Chief Financial Officer
Having served as Interim Group Chief Financial Officer since
December 2018, the Board was pleased to appoint Elodie Brian
as permanent Group Chief Financial Officer with effect from
5 June 2019. Elodie worked previously as Finance and Contracts
Director at Southeastern and brings a wealth of experience,
particularly in the rail business, which will contribute considerably
in ensuring our strategic and financial commitments are met.
This appointment is also a testament to Elodie’s leadership skills
and evidence of the strength of the talent we have within
Go-Ahead’s executive pipeline.
Details of the search and recruitment process carried out for the
appointments of our new Chairman and Group Chief Financial
Officer can be found on page 83.
Other Board changes
As July 2019 marked my ninth anniversary of serving on the Board,
in accordance with best practice, I must now be considered as
non-independent. I will therefore be stepping down as Senior
Independent Director and Remuneration Committee Chair with
effect from the conclusion of the 2019 AGM, to be succeeded by
my fellow non-executive directors, Adrian Ewer and Leanne Wood
respectively. The Board has agreed that I will continue to serve as
a non-independent Non-Executive Director for a period to ensure
continuity and to support the transition of our new Chairman.
Katherine Innes Ker
Nomination committee member
“ Board composition supports
our evolving strategy.”
Key responsibilities
• Board composition, structure and size
• Balance of skills, knowledge, experience and diversity
• Board and senior management succession planning
• Board inclusion and diversity policy
• Oversight of Group wide inclusion and
diversity initiatives
• Gender pay gap results
• Oversight of the leadership talent
development pipeline
• Committee effectiveness, including terms
of reference
Key focus areas during the year
• Succession planning for Group Chief Financial
Officer and Chairman
• Succession planning for Senior Independent
Director and Remuneration Committee Chair
• Inclusion and diversity
• Gender pay gap
• Leadership and development pipeline
• Tailored induction for Interim Group
Chief Financial Officer
Key focus for next year
• Tailored induction for the new Chairman Designate
• Ensure the changes arising from the 2018 Code
are implemented effectively
• Board and senior management succession planning
• Oversight of talent management and
leadership development
• Review of diversity KPIs and the impact
of strategic initiatives
8080
Board experience by sector
Transport services, transport infrastructure and transport engineering
Finance, accounting and audit services
Property, building construction and building materials
Retail, fashion and consumer markets
Telecommunications, broadcasting, marketing and software solutions
Health, public service and charity
Non-executive director
Executive director
Time commitments and independence
The committee has reviewed the time commitments for the
Chairman Designate and received assurance that she has the
capacity to fulfil this role. It has also been established that there
are no conflicts of interest.
The committee also reviews the time commitment of each
non-executive director on at least an annual basis. This is to
ensure that they have sufficient time to fulfil their responsibilities
and are able to be fully engaged and actively involved with the
Group’s business throughout the year. Following the review this
year, which includes the guidance from the Institutional
Shareholder Services (ISS) on overboarding, the committee was
satisfied that each non-executive director had sufficient time to
meet their Board responsibilities.
The committee is satisfied that all non-executive directors are
independent non-executive directors in accordance with the
UK Corporate Governance Code’s recommendations. This year,
a more detailed review of Adrian Ewer’s independence was
undertaken, as he had served on the Board for six years.
Male: 50%
Board gender diversity5050
Female: 50%
Inclusion and diversity
The nomination committee is committed to achieving diversity
in its broadest sense in the composition of the Board and senior
management. Our approach to inclusion and diversity on the
Board is set out in the Board’s diversity policy which is reviewed
annually by the committee. For our recent Board appointments,
we discussed the Board’s policy with the external search
consultancies to ensure that diversity of gender, social and ethnic
backgrounds, and cognitive and personal strengths were promoted
in the selection of candidates.
Following Clare Hollingsworth’s appointment as Non-Executive
Chairman Designate on 1 August 2019 and Elodie Brian’s appointment
as Group Chief Financial Officer on 5 June 2019, 50% of our Board
roles are held by women. This will further increase to 57% when
Andrew Allner steps down from the Board at the conclusion of
the 2019 AGM. This exceeds the 25% and 33% targets set out in
the Davies Report and Hampton-Alexander Review respectively.
The nomination committee is also responsible for overseeing
the inclusion and diversity strategies across the Group. We are
developing our senior talent pipeline and culture to support
career progression and improve the representation of women,
disabled, LGBT+ and BAME people, specifically in senior management
positions. We have been encouraged by the enthusiasm and
progress made during the year and in particular the introduction
of diversity KPIs in each of our operating companies. The committee
looks forward to taking on a more active role in setting and meeting
diversity objectives and strategies for the wider Group, and in
monitoring the impact of such initiatives, as is required by the
2018 Code. Read more about our Group wide inclusion and
diversity initiatives on page 27 together with our Board and
senior management gender diversity statistics.
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Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance+
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Board composition and succession continued
Gender pay gap
In April 2019, we published our second tranche of gender pay
gap data for our bus and rail divisions. Our median pay gap across
the UK bus business is 7.5%, which is substantially lower than
the UK average of 17.9%. Our median pay gap in UK rail is 20.1%.
More information on the gender pay gap analysis results is
available on our website.
The committee’s role was to review the results and, as the data
was independently calculated, obtain assurance regarding the
accuracy of the published data. The committee also reviewed the
strategies underway to improve the representation of women
throughout our bus and rail divisions and narrow the gender pay
gap. Read more about these initiatives on page 27.
Leadership and talent pipeline
A key area of focus for the committee has been ensuring the
Group has a diverse leadership and talent pipeline. Through
our annual leadership review, we are able to assess succession
plans in place for the senior management positions below Board
level. This includes understanding the current leadership profile
compared with future leadership requirements as well as the key
age, ethnicity and gender influencer demographics across the
Group. The committee was also updated on the inclusion
and diversity initiatives underway to promote gender balance,
which included, increasing the number of female apprentices
in key roles. Additionally, the committee discussed the increased
mobility initiatives now available to support leadership and talent
development, particularly in relation to the Group’s joint venture
contracts and international bids.
During the year, the committee reviewed the initiatives underway
to provide a more aligned and better consistency approach to
assessing talent across the business. Our Graduate Programme,
now in its eighth year, is an important way of introducing talent
into both bus and rail operations and the committee tracks the
careers of graduate entrants. It is pleasing to note that retention
during the programme is higher than the industry average, with
96% of graduate entrants choosing to stay with the Group.
Additionally, 100% of all retained graduates have progressed
into management positions within two years of starting
the programme.
The committee recognises that, in addition to developing our
own people, identifying external talent fulfils a vital role in
improving organisational effectiveness and it is important that
we continue to attract high calibre and diverse talent into senior
roles both in the UK and internationally.
Read more about our Graduate Programme and our initiatives
to attract talent on pages 25 and 26.
Katherine Innes Ker
Nomination committee member
4 September 2019
82
Membership, meetings, terms of reference
and effectiveness
Membership
• During the year, the nomination committee
comprised the Chairman and four independent
non-executive directors, who together bring a
diverse and complementary range of backgrounds,
personal attributes and experience
• The Senior Independent Director chaired
nomination committee meetings which related
to the appointment of the Chairman’s successor
Meetings
• The committee usually meets at least twice
a year, excluding meetings held to review its
effectiveness as part of the annual performance
evaluation. This year, a number of additional
meetings were held to focus on the search
process for the new Group Chief Financial Officer
and Chairman
• By invitation, the Group Chief Executive and
Group Chief Financial Officer attend meetings
and there are regular presentations from the
Group People Director
Terms of reference
• The committee’s terms of reference are reviewed
annually and approved by the Board. During the
year, the terms of reference were updated in
accordance with the 2018 Code and a copy is
available on our website or upon request from
the Group Company Secretary
Effectiveness
• A review of the committee’s effectiveness was
carried out internally this year as part of the
Board’s evaluation. The review concluded that the
committee was fulfilling its duties effectively,
with the process followed for both the appointment
of Group Chief Financial Officer and Chairman,
being cited as positive. The committee also
welcomed the increased quality of reporting on
people strategy, including more comprehensive
inclusion and diversity updates and the introduction
of diversity KPIs across the business. The committee
has agreed that it will be important to monitor
the impact of these KPIs over the year ahead, in
addition to considering whether more in-depth
focus reviews should be given to key initiatives
during the year
Allocation of time5020
Board succession planning
and composition: 50%
Talent development
and pipeline: 20%
People strategy, diversity and
gender pay gap: 20%
Governance and committee
effectiveness: 10%
The Go-Ahead Group plc Annual Report and Accounts 201920
+
10
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Search and recruitment process for Chairman Designate
and Group Chief Financial Officer
Set out below is the process we followed for the appointment of the new
Chairman Designate and Group Chief Financial Officer. The incumbent
Chairman did not attend any committee meetings at which the process
for his succession was discussed and he was not involved in the selection
or appointment of his successor.
Step
Objective
External search
consultancy
appointed to assist
committee with search
Key elements of
candidate profile
Chairman Designate/Chairman
Group Chief Financial Officer
To find a candidate with the skills, experience,
values and capability to lead the Board and the
delivery of the Group’s strategy and create long
term sustainable value for all our stakeholders
To find a candidate with the skills, experience,
values and capability to provide strategic support
to the Group Chief Executive and to provide
financial guidance, discipline and integrity to
the Board
MWM Consulting (no other connection to
the Group)
Russell Reynolds (no other connection to
the Group)
Ability to lead and manage the business of the
Board and ensure the Board’s contribution to
strategy creation and development
Familiarity with the regulated sector and
customer-facing businesses
Experience of complex governance and
contractual arrangements
Proven and credible track record of driving and
delivering results
Experience of commercial finance and complex
contractual arrangements
Knowledge and technical experience of accounting
principles, financials planning and analysis to
support operating/commercial decisions
Strong business ethics and values, with
a natural authority
Commercial acumen, innovative thinker
and influencer
Facilitator of Board relationships, development
and effectiveness
Strong business ethics and values and experience
of leadership and people development
Search process led by
Senior Independent Director
Group Chief Executive
Selection
Interviews
Appointment
Induction
Nomination committee and sub-committee
meetings held with MWM Consulting to agree
a “long list” and then a “short list” of candidates.
A comparator of each candidate’s characteristics
was provided against the requirements of the
candidate brief
Meetings held between the Group Chief Executive,
Board committee members and Russell Reynolds
to agree a “long list” and a “short list” of candidates.
A comparator of each candidate’s characteristics
was provided against the requirements of the
candidate brief
Candidates initially interviewed by the Senior
Independent Director, Audit Committee Chair
and/or Non-Executive Director, Leanne Wood,
before meeting all other Board members,
including the Group Company Secretary
Candidates initially interviewed by the Group
Chief Executive, Audit Committee Chair and
Group Company Secretary, before meeting
with all other Board members
Clare Hollingsworth identified as preferred
candidate, committee recommendation, Board
approval, agreement of letter of appointment
and announcement
Elodie Brian identified as preferred candidate,
committee recommendation, Board approval,
agreement of letter of appointment
and announcement
The committee will play an active part in providing
an induction that will be tailored to the skills and
experience of the new Chairman. Full details will
be disclosed in next year’s Annual Report
The new Group Chief Financial Officer is following
a structured and tailored induction process, details
of which are set out on page 66
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Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Accountability and transparency
Audit committee report
Dear Shareholder
As Audit Committee Chair, I am pleased to present the committee’s
report for the year ended 29 June 2019. This report aims to give
you some insight into the committee’s activities and the key
governance role it plays in protecting shareholder interests
by ensuring robust and transparent financial reporting.
Financial reporting
As in previous years, one of the committee’s utmost priorities has
been to ensure that the nature of the relationship between the
external auditor and the Group is rigorous, objective and not in
any way compromised. Further details on how we do this can be
found on pages 88 and 89.
In conjunction with the external auditor, the committee spent
considerable time discussing those significant judgements that
could have a material impact on the financial statements. Again
this year, these were in relation to GTR and the discussions with
the DfT regarding a number of contractual matters. The agreement
reached between GTR and the DfT in December 2018 resolved
matters relating to the industry-wide failures concerning the
introduction of the May 2018 timetable, as well as bringing to
a close discussions around other contractual variations.
The committee has also spent time considering the potential
impact of the new International Financial Reporting Standards
accounting standard on leases (IFRS 16). This will represent a
material change to the Group’s financial statements for the year
ending 27 June 2020 onwards and our assessment has included
understanding how the new standard impacts the Group’s
leasing arrangements, its financial impact and the appropriate
new accounting policy. Further details of all the Group’s critical
accounting judgements and the key sources of estimation certainty
discussed during the year are disclosed on pages 136 and 137.
As reported at the half year, the impact of the recent High Court
ruling on the Guaranteed Minimum Pension was assessed in the
context of the Group’s pension schemes. For the bus division’s
defined benefit pension schemes, this resulted in a charge of
£16.8m as an exceptional item, as estimated by the actuaries. This
reflects the pension scheme trustees’ obligation to equalise the
benefit payments between men and women, the work for which
is now progressing with our pension scheme administrators.
Risk management and internal controls
We believe that an effective risk management and internal controls
system is key to the long term sustainable growth of the Group.
The Board has delegated responsibility to the audit committee
for monitoring the Group’s risk management and assurance
arrangements. The committee also recommends the in-depth risk
areas for Board review, with a key focus this year continuing to be
around IT-related risks, including resilience and cyber security.
Using our robust risk framework as a basis for discussion, the
committee has assessed the Group’s risks and uncertainties as
set out on pages 46 to 55 including the controls in place to ensure
they are adequately managed and mitigated. These are kept
under regular review by management and the committee
to ensure that prevailing and emerging risks are appropriately
identified and prioritised and kept within the Group’s risk appetite.
Adrian Ewer
Audit Committee Chair
“ The committee protects shareholder
interests by ensuring robust and
transparent financial reporting.”
Key responsibilities
• Monitoring the integrity of the Group’s
financial reporting
• Reviewing the system of risk management and
internal controls
• Reviewing and monitoring the external auditor’s
independence and effectiveness
• Setting and monitoring the internal audit plan
and internal auditor effectiveness
• Monitoring and reviewing whistleblowing and
anti-bribery procedures
• Committee effectiveness, including terms of reference
Key focus areas during the year
• Integrity of reporting
• Guaranteed Minimum Pension
• IFRS 16 Leases
• GTR financial reporting
• Risk management and internal controls
• Health and safety standards
• IT-related risks and mitigation controls
Key focus for next year
• Effectiveness of risk management and internal controls
• Continued focus on IT-related risks, including
resilience and cyber security
• Overview of accounting in international operations
• Assess external and internal auditors’ effectiveness
• Continued oversight of significant financial judgements
• Challenge external auditor to continue to audit
the Group’s financial statements robustly
• Ensure continued committee effectiveness
84
Health and safety
We remain committed to continually improving our health, safety
and environmental standards. During the year, the committee
reviewed the findings from the audit programmes in each of our
operating companies, with a particular focus on the international
and new business audit arrangements. A key focus area again this
year was contractor safety management, where there has been
an extensive review of contractor management procedures to
validate supplier competence and provide corporate assurance.
In December 2018, the Group also held a Safety Leadership
Conference, which senior managers from across the business
attended. More details can be found on page 89.
Whistleblowing
During the year, the committee reviewed the whistleblowing
policies in place across the Group. In the spirit of the 2018 Code,
we also extended our review to establish what other channels for
raising concerns were in place in each of our operating companies.
Our findings were positive, confirming that colleagues have
access to a wide range of alternative and more informal channels
through which to raise concerns. We believe that this is a positive
reflection of our culture, which also supports the formal
whistleblowing policies we have in place.
Engagement with the FRC
The Group has received correspondence, as part of a wider review,
from the Financial Reporting Council regarding the Group’s accounting
treatment for its sections of the Railways Pension Scheme which has
been actively considered by me as Audit Committee Chair and the
comments received discussed with the audit committee. Whilst not
changing the accounting treatment adopted and announced on 29
November 2016 we were requested to enhance the disclosure provided
so that the impact of the accounting approach could more clearly be
identified and understood. We have included this on pages 134, 142
and 143 reflecting that we concur that the suggested enhancements
would be helpful to the users of the financial statements.
Prompt payment of suppliers
The committee welcomes the Government’s ongoing review into the
prompt, fair and effective payment of suppliers. The latest payment
performance data published by the Group, in accordance with the
Reporting on Payment Practices and Performance Regulations 2017,
evidenced 96% of invoices received having been paid within 60 days.
Fair, balanced and understandable
As requested by the Board, the committee has reviewed the
content of this Annual Report and Accounts and advised that,
taken as a whole, it is fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Group’s position, performance, business model and strategy.
A more detailed analysis of the committee’s review can be found
within this audit committee report on page 88.
New Group Chief Financial Officer
During the year, it was important to oversee the arrangements
for the appointment and induction of the new Group Chief
Financial Officer, specifically with regard to the committee’s
remit and requirements.
Adrian Ewer
Audit Committee Chair
4 September 2019
Membership, meetings terms
of reference, and effectiveness
Membership
• Adrian Ewer is a Fellow of the Institute of Chartered
Accountants and has chaired the committee since
April 2013. He has recent and relevant financial
experience in the UK listed environment, enabling
him to fulfil his role
• During the year, the committee comprised four
independent non-executive directors. Detailed
information on the experience, skills and qualifications
of all committee members can be found on pages
60 and 61. The Board has confirmed it is satisfied
that the committee members have the appropriate
range of financial, commercial and sectoral expertise
Meetings
• Meetings of the committee generally take place
immediately prior to a Board meeting to maximise
the effectiveness of Board meetings
• Meetings are attended by the independent non-
executive directors. By invitation, the Chairman,
Group Chief Executive, Group Chief Financial Officer,
Group Financial Controller and internal and external
auditors also regularly attend meetings
• The Audit Committee Chair holds pre-audit
committee meetings with management and key
advisors between scheduled committee meetings
• At least once a year, the committee members
hold separate meetings with the external and
internal auditors, without the executive
directors being present
Terms of reference
• The committee’s terms of reference are reviewed
annually and approved by the Board. During the
year, the terms of reference were updated in
accordance with the 2018 Code, and a copy is
available on our website or upon request from the
Group Company Secretary
Effectiveness
• A review of the committee’s effectiveness was carried
out internally this year as part of the Board’s evaluation.
The review concluded that committee continued to be
thorough and fully effective in discharging its duties
and responsibilities. In particular, the Group’s risk
process and reporting was viewed as effective and
robust, with in-depth risk reviews continuing to be
undertaken on a regular basis.
Allocation of time
5020
External audit and financial
reporting: 50%
Risk management and internal
controls: 20%
Internal audit including health
and safety: 20%
Governance and committee
effectiveness: 10%
85
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance20
+
10
+
L
Accountability and transparency continued
Risk management and internal controls
A summary of the key features of the Group’s risk management
and internal controls system is set out below:
Group structure
The Group’s devolved organisational structure supports an
effective top down/bottom up approach to risk management
and control
Leadership
Clear leadership from the Board with the executive directors
playing an integral role in working with operating companies
Board reporting
Regular review of reports received from the Group’s
internal auditor, external auditor, executive directors and
senior management
Health and safety reporting
Regular review of health and safety reports and audits,
including best practice and standards across
operating companies
Financial reporting
A comprehensive Group wide system of financial reporting,
budgeting and cash forecasting and control through which
the consolidated financial accounts are prepared and
submitted to the Board and from which the consolidated
financial reporting is derived
Compliance management
Annual certification by each operating company that it has
adhered to the Group’s Policies and Procedures Manual, which
reinforces the Group’s corporate governance, internal control
processes and management of risk
Assessment of the Group’s risk management
and internal control system
The Board has confirmed that, through the committee’s
review of the key financial and internal control matters
for 2019 as detailed on page 87, it has reviewed the
effectiveness of the system of internal, financial, operational
and compliance controls and risk management and
considers that this system of internal controls operated
effectively throughout the financial year and up to the
date on which the financial statements were signed.
86
Internal audit
The Group’s internal audit function has been outsourced to
PricewaterhouseCoopers LLP (PwC), with overall responsibility
and direction being retained by the audit committee. PwC
provides assurance over the effectiveness of key internal controls
as identified as part of the risk assessment process. In addition to
meetings with local management, PwC reports to the committee
at least four times a year.
In accordance with the previously agreed internal audit plan for the
year ended 29 June 2019, the committee reviewed reports confirming
the findings from the internal audit reviews undertaken, the
actions to implement the recommendations and the status of
progress against previously agreed actions. In addition to our
rolling programme of financial control reviews in all operating
companies, examples of some of the other reviews undertaken
during the year included bus maintenance and inventory reviews,
cyber security, payroll and claims and incident management.
Reviews are often scheduled where there has been significant
change in operational or financial teams so that areas of expected
increased internal control risk can be speedily identified. This also
enables a focus on monitoring and swift resolution.
During the year, the committee also approved the internal audit
plan for the year ending 27 June 2020. The detail of the plan was
developed through a number of discussions with the committee,
the Group Chief Financial Officer and the Group Financial
Controller. Meetings were also held with operating companies,
finance and business assurance teams to understand key focus
areas before finalising the plan with the committee.
The committee keeps under review the internal audit relationship
with PwC and maintains the procedures necessary to ensure
appropriate independence of the internal audit function.
Internal audit function effectiveness
The committee monitors the effectiveness of the internal audit
function throughout the year and undertakes a more formal
review on an annual basis. This review is led by the Audit
Committee Chair, supported by the Group Chief Financial Officer
and Group Financial Controller. Input is sought from various
sources with feedback then reviewed by the wider committee.
The committee also holds a meeting with the internal auditor
on an annual basis, without management present.
Following the formal review this year, the committee concluded
that the internal audit function was operating effectively and
provided sufficient assurance over the Group’s risk and controls
environment. There were no significant concerns raised. The
necessary procedures were also in place to ensure the appropriate
independence of the internal audit function.
Competition law, anti-bribery and corruption
The Group is committed to the highest standards of ethical
conduct, honesty and integrity in our business practices and has
zero tolerance of corruption, fraud, criminality (including financial
crime), or the giving or receiving of bribes for any purpose.
The Group’s Code of Conduct sets out what is expected from our
colleagues and stakeholders to ensure that they protect themselves
as well as the Group’s reputation and assets. Additionally, the Group
has tailor-made online training for competition law, anti-bribery
and corruption, which colleagues in high risk areas (including the
Board and senior management) are required to complete each
year. Any breaches of procedures will be regarded as serious
misconduct, potentially justifying immediate dismissal.
The Go-Ahead Group plc Annual Report and Accounts 2019 Key financial and internal control matters
During 2019, the committee considered the following key financial and internal control matters in relation to the
Group’s financial statements and disclosures, with input from management and the external auditor:
Key financial and internal control
matters for 2019
How the committee addressed these key financial and internal control matters
Compliance with franchise terms and
conditions relating to the rail components
of the Group, specifically relating to the
accounting for related income and costs
arising from franchise agreements.
See page 136 for more information
The committee regularly reviews the accounting policies relating to income and
costs arising from franchise agreements and considers a range of reasonably
probable outcomes. At interim and year end reviews, a full schedule of material
income statement and balance sheet figures is assessed against the committee’s
expectations and discussed with the Group Chief Executive, the Group Chief
Financial Officer and, where appropriate, the external auditor.
Ongoing review of provisions for
liabilities, specifically relating to
third-party claims, lease return and
dilapidation provisions for rolling stock,
stations, depots and other properties
and measurement of uninsured liabilities.
See note 23 of the consolidated financial statements
Impairment testing in respect of the value
of goodwill on the Group’s investments.
See note 12 of the consolidated financial statements
At interim and year end, the levels of provision for third-party claims, lease return and
dilapidation provisions are reviewed with the Group Chief Executive and the Group
Chief Financial Officer. Management’s review is supported by reports from appropriate
third-party experts who independently assess the required provision based on their
industry knowledge and an understanding of the Group’s specific circumstances.
Increases in provisions, utilisation and release of provisions are all reviewed for
reasonableness in light of these reports and the Group’s specific circumstances.
The ongoing review of goodwill and carrying value of investments, as presented by
management, is challenged by the committee. This is done by assessing the expected
performance of the individual cash generating units and ensuring that relevant risk
factors are imputed to the rate of return used to assess net present value of future
cash flows. The committee also reviews historical performance against expectations
set in previous years.
Assumptions underpinning the
calculation of the Group’s defined
benefit pension liabilities.
See note 27 of the consolidated financial statements
Pension scheme liabilities are assessed on behalf of the Group by independent actuaries.
Additionally, management reviews and challenges the underlying assumptions
with other professional advisors to ensure that the actuaries’ own assumptions
are appropriate for the Group. The committee also discusses the appropriateness
of the assumptions with the Group’s external auditor.
Understanding and treatment
of exceptional items in the year
end accounts.
See note 6 of the consolidated financial statements
The committee has considered separate disclosure of exceptional income or costs
in light of the FRC recommendations of a balanced and consistent approach. The
committee is mindful of the need to understand the underlying trends of each division
within the business with the impact of large and unusual items separated out as
necessary to avoid distortions from such non-recurring aspects.
Preparing for the introduction of IFRS 16
which applies for the first time for the
year ending 27 June 2020.
IFRS 16 establishes principles for the recognition, measurement, presentation and
disclosure of leases. A full assessment has been carried out and concluded that
IFRS 16 does have a material impact on the Group’s balance sheet. Further details
can be found in note 2 of the consolidated financial statements.
Ensuring operating company compliance
with Group policies and procedures and
maintaining the required financial
control environment.
The committee, together with the Group Chief Executive and the Group Chief Financial
Officer, approves the scope of internal audit including the cycle of visits to test
operating company compliance and financial controls, based on a risk assessment.
The results of the internal audit visits are considered by the committee, together
with management’s responses to any improvement points. Control matters and
reporting issues identified as part of the external auditor interim and year end audits
are also reviewed by the committee which considers the adequacy of any management
responses, which in particular, was in respect of IT controls during the period. In addition,
management ensures that the recruitment and review process for operating company
directors gives confidence in the calibre of the operating company teams and their
management, and the control environment in which they operate.
87
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Accountability and transparency continued
Fair, balanced and understandable
At the request of the Board, the committee has considered whether, in its opinion, the 2019 Annual Report and Accounts
(collectively the Annual Report), taken as a whole, are fair, balanced and understandable, and whether it provides the
information necessary for shareholders to assess the Group’s position, performance, business model and strategy.
The process was led by the internal Annual Report Team
(ART), consisting of members drawn from the Group Finance,
Group Company Secretariat and Investor Relations teams.
The inclusion of these various departments, with input from
the executive directors and senior management within the
Group and its operating companies as appropriate, ensures
the balance, completeness and accuracy of the Annual Report.
The ART was responsible for regularly reviewing work and
ensuring balanced reporting with appropriate links between
key messages and sections of the Annual Report.
The committee reviewed the Annual Report in its later stages
and advised of any areas which would benefit from further
clarity. Feedback was then incorporated ahead of final
approval by the Board.
When forming its opinion, the committee reflected on the
information it had received and its discussions throughout
the year. In particular, the committee considered:
Is the Annual Report fair?
• Is the whole story presented, has equal weight been given
to all messages and has any sensitive material been
omitted which should have been included?
Is the Annual Report balanced?
• Is there a good level of consistency between the narrative
reporting in the front and the financial reporting in the
back of the Annual Report and does the messaging
reflected in each remain consistent when read
independently of the other?
• Is the Annual Report a comprehensive document
for shareholders?
• Are the key judgements referred to in the narrative
reporting and the key financial and internal control matters
reported in this audit committee report consistent with
the disclosures of key estimation uncertainties and critical
judgements set out in the financial statements?
• How do these compare with the risks which the external
auditor Deloitte includes in its report?
Is the Annual Report understandable?
• Is there a clear and understandable framework to the
Annual Report with the important messages highlighted
appropriately throughout?
• Is the layout clear with good linkage throughout in a
manner which reflects the whole story?
• Is the narrative reporting consistent with the financial
reporting, with key messages reflected in both?
Conclusion
• Is the description of the business, principal risks and
uncertainties, strategy and objectives in the Annual Report
consistent with the Board’s understanding?
• Are KPIs disclosed at an appropriate level?
Following its review, the committee was able to provide
assurance to the Board that the Annual Report for the year
ended 29 June 2019 is representative of the year and presents
a fair, balanced and understandable overview, providing the
necessary information for shareholders to assess the Group’s
position, performance, business model and strategy.
External audit
The committee has primary responsibility for overseeing the relationship with, and performance of, the external auditor. This includes
making the recommendation as to the appointment, reappointment and removal of the external auditor, assessing its independence
on an ongoing basis and negotiating the audit fee.
During the year, the committee agreed parameters of how the annual audit effectiveness review would be undertaken in advance of
the 2019 audit. As always, the approach taken was fully independent and objective. The process was based on constructive, honest and
open dialogue with the external auditor to ensure that optimum assurance was being derived from the audit.
The process of assessment was divided into five key areas:
Objectives
Clear objectives and desired outcomes were agreed at the outset.
Timing
Resources
A timetable with appropriate milestones was agreed, with assessments being incorporated at both the
planning and completion stages.
The committee considered whether the external auditor had appropriate resources and expertise to conduct
the audit.
Evaluation and
assessment
The committee challenged and scrutinised the external auditor’s strategy based on its own internal assessment. Key risks
to audit quality were discussed with assurance provided by the external auditor on how these risks would be mitigated.
Reporting
The committee reviewed the quality of reporting from the external auditor and its recommendations.
88
The Go-Ahead Group plc Annual Report and Accounts 2019 Using the FRC’s Audit Quality Practice Aid as guidance to support
the committee, effectiveness was also assessed against a range
of valuation components including mindset and culture, quality
control, judgement and skills and knowledge.
The committee’s assessment took into account views from the
Group Chief Financial Officer, the Group Company Secretary and
Group Financial Controller. Deloitte also provided feedback on
its own performance, measured against its internal performance
objectives. Feedback arising from the process was fed back to
theGroup’s lead audit engagement partner so that any areas
of improvement could be followed up.
The observations from the assessment were presented and
discussed at a committee meeting and it was concluded that
Deloitte had performed its 2018 audit effectively. Appropriate
focus had been given to understanding the key areas of audit risk
and Deloitte had applied robust challenge throughout the audit.
The committee continues to review the external auditor
appointment and the need to tender the audit, ensuring the
Group’s compliance with the UK Corporate Governance Code
and the reforms of the audit market by the UK Competition and
Markets authority. Accordingly, the Group confirms that it
complies with the provisions of the Competition and Markets
Authority’s Order for the financial year under review.
Consequently, the committee has recommended to the Board
that Deloitte be reappointed at the 2019 AGM.
Independence, objectivity and fees of external auditor
The Board recognises the importance of auditor independence
and is aware of the situations which may give rise to the impairment
of auditor independence. The audit committee considers carefully
the objectivity of the auditor on an annual basis in relation to both
the audit process and the relationship with the Group.
The audit committee is responsible for developing, implementing
and monitoring the Group’s policy on the engagement of the
external auditor to supply non-audit services. The principal
requirements of that policy are:
• The auditor will only be used for the provision of non-audit
work if it can be demonstrated that the engagement will not
impair independence, is a natural extension of its audit work
or there are other overriding reasons that make it the most
suitably qualified to undertake the work
• The auditor will not provide certain categories of non-audit
services to the Group, such as internal audit and litigation
support, the full list of which can be found in the committee’s
terms of reference
• The provision of certain non-audit services (including
accounting and tax services if the fees exceed a cumulative
£50,000) is subject to approval by the audit committee
During the financial year, the Group external auditor’s fees
were £0.9m (2018: £0.8m); in addition non-audit fees of £0.1m
(2018: £0.1m) were payable to the Group’s external auditor.
Safety Leadership Conference
The audit committee was provided with an update on
Go-Ahead’s recent Safety Leadership Conference, where
the focus had been on the influence leaders had on safety
behaviours across the Group.
Over 60 senior managers attended the day, including
managing directors and colleagues from overseas.
Opening the conference, the Group Chief Executive
emphasised that ensuring the health, safety and wellbeing
of our colleagues, passengers, contractors and visitors
was a key function of leadership.
The Group Health, Safety and Security Director for
Merlin Entertainments Group was invited to speak at
the conference. A thought-provoking and honest review
of the events leading up to, and following, the accident on
the Smiler rollercoaster ride at Alton Towers amusement
park in June 2015 was provided. This generated a good
deal of debate amongst the delegates.
A number of Go-Ahead operating company managing
directors then showcased safety-related projects and
initiatives within their own businesses. These included
presentations on Southeastern’s Railway’s Safety Week,
Plymouth Citybus’ experience of effective contractor
management and Go-Ahead London’s annual risk and
safety competition, which is now in its 16th year.
In the final session of the day, the leadership group worked
in teams to come up with “Five Golden Rules” of great safety
leadership, with the following Go-Ahead Leadership Safety
Pledge developed:
As a senior leader I will...
Always
1
2
3
4
5
Set the example
Make time for safety
Recognise great behaviours
Walk past a problem
Duck the difficult question
• The ratio of the external auditor’s audit to non-audit fees
during the year, as a proportion of the annual external audit fee,
is kept under review by the committee
Never
Auditor rotation timeline
2016
2020
2025
Deloitte appointed following full
competitive tender, with Chris Powell
as lead audit partner
Five-year rotation of lead audit partner,
following completion of the 2020 audit
Competitive tender to take place unless
required earlier
89
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration
Katherine Innes Ker
Remuneration Committee Chair
“ We are committed to ensuring
that executive pay remains
aligned with the Group’s strategic
objectives and best practice.”
Key responsibilities
• Designing and implementing executive director
remuneration policy
• Assessing effectiveness of the remuneration policy
• Approving the design, targets and total payments
for performance-related pay
• Setting the remuneration for the Chairman and
new directors
• Engaging with shareholders on remuneration matters
• Operating within the recognised principles of good
corporate governance
• Ensuring adherence to the executive remuneration
policy, including recruitment and departing executive
director policies
Key focus areas during the year
See page 93
Key focus for next year
• Ensure the changes arising from the 2018 Code are
implemented effectively
• Review the alignment of executive directors’
remuneration arrangements to support and
deliver Go-Ahead’s strategy
• Review and determine remuneration for
senior management
• Greater oversight of wider pay practices
across the Group
• Review the effectiveness and transparency
of remuneration reporting
90
Directors’ remuneration report
Dear Shareholder
On behalf of the Board, I am pleased to present the directors’
remuneration report for the year ended 29 June 2019. The report
is divided into three principal sections:
• This annual statement, which provides the context for the
committee’s decisions during the year
• The remuneration policy, which was adopted at the 2018 AGM
• The annual report on remuneration, which provides details
of remuneration paid to the Board during the 2019 financial
year and how we will apply the remuneration policy for the
forthcoming year 2020
Group Chief Executive – 2019 pay outcome
The committee assessed the 2019 annual performance-related
bonus against financial (75%) and strategic (25%) measures.
Based on this assessment, details of which can be found on
pages 105 and 106, the committee concluded that an annual
performance-related bonus of 75.8% of maximum bonus (113.6%
of salary) should be payable to the Group Chief Executive shortly
after the 2019 AGM.
The Long Term Incentive Plan (LTIP) award, granted to the
Group Chief Executive in November 2016, will lapse in full from
November 2019 as none of the performance measures were
achieved following the completion of the three year performance
period ended 29 June 2019.
The Group Chief Executive received an inflationary increase
of 2.5% to his base salary from 1 April 2019, this being the same
or less than the average inflationary increase awarded to all
employees across the Group.
The total single remuneration figure for our executive directors
for the year ended 29 June 2019 is shown below:
Total single remuneration figure for 2019 (£’000)
Group Chief Executive,
David Brown
Group Chief Financial Officer,
Elodie Brian (from 5 June 2019)
2019
2018
1,269
1,175
46
N/A
Former Group Chief Financial Officer,
Patrick Butcher (to 30 November 2018)
195
630
Departure of former Group Chief Financial Officer
The former Group Chief Financial Officer, Patrick Butcher, resigned
on 30 November 2018 and continued to receive salary and benefits
until that date. In accordance with our remuneration policy, all LTIP
and deferred shares lapsed upon his cessation of employment,
including half of the 2018 annual performance-related bonus,
the deferred share element of which was not awarded.
Performance in 2019
The Group is in a strong financial position and has delivered
good strategic progress in the year against all three core
strategic pillars: protect and grow the core, win new bus and
rail contracts and develop for the future of transport.
Key highlights include:
• Resilient financial performance, with operating profit
higher than initial expectations and solid financial profile
• Highest ever Bus Passenger Survey satisfaction score
of 92% in regional bus
• Growth in passenger volumes and revenues in all
regional bus businesses
• Southeastern remained the best performing large UK
train franchise, with the highest levels of punctuality
in its history
• Further sixth extension granted to the Southeastern
franchise which will now run to 1 April 2020 rather than
expiring on 10 November 2019
• Continued improvements in GTR operational performance
• Completed acquisition of FirstGroup bus depot in
central Manchester
• Successful mobilisation of first contract in Ireland, with
a second contract commencing prior to the end of the
calendar year
• International bus operations in Singapore and Ireland
traded higher than expectations
• Continued progress in our international strategy: won
our fourth and fifth rail contracts in Germany, first rail
contract in Norway and first consultancy contract
in Australia
• Operations mobilised for two of five secured rail
contracts in Germany
• PickMeUp in Oxford has continued to grow in popularity,
with a further demand responsive pilot being launched
in Sutton in partnership with TfL and leading shared
transport provider Via
• Proposed full year dividend to be maintained at 102.08p
To read more about our achievements against each of our
strategic objectives during the year, see page 15
Appointment and remuneration –
Group Chief Financial Officer
Elodie Brian was appointed as Group Chief Financial Officer on
5 June 2019, following six months in post as Interim Group Chief
Financial Officer. In conjunction with her permanent statutory
appointment, the committee reviewed her remuneration, taking
into account factors such as experience, the pay level of her
predecessor and the principles of our remuneration policy. The
committee determined that the remuneration package for the
Group Chief Financial Officer should comprise the following:
Group Chief Financial Officer remuneration*
Base salary
£335,000 per annum
Annual
performance-
related bonus
Maximum of 150% of base salary, half
being paid in cash and half paid in
shares which are deferred for a period
of three years
LTIP
Maximum of 100% of base salary
Shareholding
requirement
Pension
200% of base salary
Eligibility to join Go-Ahead’s
Workplace Savings Section (which is
the pensions auto-enrolment vehicle
for the majority of employees) or
receive a cash alternative equivalent
* Elodie Brian was appointed as a statutory director of The Go-Ahead
Group plc with effect from her permanent appointment on 5 June 2019.
No compensation was paid for incentives lost from her previous role.
Disclosures in relation to the annual performance-related bonus and LTIP
are therefore not applicable for the year ended 29 June 2019.
Executive remuneration policy
and engagement with shareholders
The current remuneration policy was approved by shareholders
at last year’s AGM and received 99% votes in favour. The current
intention is that this policy will apply until the 2021 AGM and, as
such, we will not be asking shareholders to vote on the policy at
the 2019 AGM.
During the year, in conjunction with its independent remuneration
advisors, New Bridge Street, the committee spent time exploring
alternative options to the current LTIP for the executive directors,
concluding that the LTIP remained fit for purpose. The committee
is therefore not proposing any changes to the remuneration
policy for the year ended 29 June 2019. However, the committee
does have the discretion to vary the weighting and choice of LTIP
metrics prior to each award and will shortly be consulting with
the Group’s major shareholders and shareholder representative
bodies on proposed changes to the LTIP’s performance targets
and weightings for the next award to be granted in November
2019. The outcome of this consultation will be confirmed
before the 2019 AGM, in addition to being disclosed in next
year’s Annual Report.
Annual Report and Accounts 2019 The Go-Ahead Group plc
91
Corporate governance Remuneration continued
New accounting standard IFRS 16
During the year, the Committee considered the impact of the
new statutory accounting standard IFRS 16 on outstanding and
future executive remuneration measures and targets. It was
agreed that the impact on executive remuneration should be
neutralised (by converting IFRS 16 outturns back to IAS 17) to ensure
that the executive directors were neither rewarded or penalised
vis-à-vis the basis on which their awards were based.
Executive remuneration reforms
The past year has seen the publication of the revised UK
Corporate Governance Code 2018 (the 2018 Code) and The
Companies (Miscellaneous Reporting) Regulations 2018 (the
Regulations), both of which will apply to Go-Ahead for the first
time from next year. We welcome the greater stakeholder focus
and development of UK corporate governance in a way that
supports existing good business practice.
A key focus for the committee this year has been preparing for
the changes arising from remuneration related elements of the
2018 Code and I am pleased to say we have made good progress
in many areas, which you can read about on page 97. In addition
to aligning executive pension provision with our wider workforce,
we have approved a new malus and clawback policy and senior
management remuneration policy. As evidence of our commitment
to best practice reporting, we have also chosen to adopt early
the share price impact and scenario reporting as well as an early
indication of the CEO pay ratio requirements on pages 101 and
113 respectively.
We have also already started to address how both wider
colleague pay alignment and cultural context can be woven into
the committee’s remit. To read more about how the committee
addresses the factors of clarity, simplicity, risk, predictability,
proportionality and alignment to culture, see pages 94 and 95.
Focus for the year ahead
With effect from the conclusion of the 2019 AGM, Leanne Wood
will succeed me as Remuneration Committee Chair. Under Leanne’s
chairmanship, the committee will continue to ensure that executive
pay remains aligned with the Group’s strategic objectives and
best practice. Our overarching objective remains unchanged: that
is to ensure we continue to attract and retain the highest quality
leaders who are incentivised to deliver the Group’s strategic aims
whilst balancing reward, performance and stakeholder interests.
We intend to build upon the progress we have made in relation
to the changes arising from the 2018 Code and Regulations, to
ensure we are in a position to comply in full by next year. Continuing
our work to understand how the policies in each of our businesses
are aligned to culture and reward will also be a key focus. The
committee believes it is important for our colleagues to understand
how the remuneration of executive directors is determined, with
the work we are doing on wider colleague engagement assisting
the Board in establishing what information will add most value
to colleagues.
Katherine Innes Ker
Remuneration Committee Chair
4 September 2019
92
Membership, meetings, terms
of reference and effectiveness
Membership
• During the year, the remuneration committee
comprised the Chairman and four independent
non-executive directors. Following the conclusion
of the 2019 AGM, Katherine Innes Ker will step down
as Remuneration Committee Chair and be succeeded
by Leanne Wood, who has served on the Board
and remuneration committee since October 2017.
Katherine will continue to serve the committee
as a non-independent Non-Executive Director
• The members of the committee have no
personal interests in the matters to be decided
by the committee other than as shareholders
and have no conflicts of interest arising from
cross-directorships
• During the year ended 29 June 2019, no individual
was present when his or her own remuneration
was being determined
Meetings
• The committee met nine times during the year.
Six of these meetings were scheduled, with three
additional meetings held to discuss the review
of executive remuneration policy and the
remuneration for new Board members
Terms of reference
• The committee’s terms of reference are reviewed
annually and approved by the Board. During the
year, the terms of reference were updated in
accordance with the 2018 Code and a copy is
available on our website or upon request from
the Group Company Secretary
Effectiveness
• A review of the committee’s effectiveness was
carried out internally this year as part of the
Board’s evaluation. The review concluded that
the committee continued to work effectively.
In particular, it was noted that the additional
meetings held throughout the year, where
discussion around alternative options to the
LTIP warranted more time, proved very effective
at arriving at the right outcome.
Allocation of time
5025
Executive remuneration
policy: 50%
Annual target setting
and outcomes: 25%
Senior management
remuneration and policy: 15%
Governance and committee
effectiveness: 10%
The Go-Ahead Group plc Annual Report and Accounts 201915
+
10
+
L
Key focus areas for the remuneration committee during the year
> July 2018
• Set targets for 2019 annual performance-related
bonus taking into account long term strategy
and review outcomes
• Set targets for 2018 Long Term Incentive Plan
August 2018 <
• Approved 2018 annual performance-related
bonus payout
(LTIP) award
• Approved nil vesting of the 2015 LTIP award
> October 2018
• Approved the directors’ remuneration report
for the year ended 30 June 2018
• Received update on CEO pay ratio
disclosure requirements
• Reviewed overall remuneration policy for
senior management including structure and
related payout of annual performance-related
bonuses for the year ended 30 June 2018
• Approved remuneration payable to former
Group Chief Financial Officer
> December 2018
• Reviewed remuneration committee related
changes arising under the 2018 Code
• Detailed review of executive remuneration
policy, including the continued appropriateness
of the current LTIP
February 2019 <
• Continued review of executive performance-
related pay policy
> April 2019
• Considered and noted senior management
salary review from 1 April 2019
• Considered and approved Chairman’s fees
from 1 April 2019
• Continued review of executive performance-
related pay policy
• Noted indicative CEO pay ratio for the year
ended 29 June 2019
• Considered and approved Group Chief
Executive’s salary from 1 April 2019
> May 2019
• Approved recommendation of annual share
plans hedging review
• Continued review of executive performance-
related pay policy
• Approved the alignment of executive and
workforce pension contribution rates
June 2019 <
• Concluded review of executive
remuneration policy
> July 2019
• Approved final remuneration package for new
Group Chief Financial Officer
• Approved fees payable to new Chairman
• Adopted a new malus and clawback policy
• Approved and adopted a new senior
management remuneration policy
• Reviewed and approved amendments to
the LTIP and DSBP Rules in accordance
with the 2018 Code
Annual Report and Accounts 2019 The Go-Ahead Group plc
93
Corporate governance
Remuneration continued
Remuneration continued
Alignment of remuneration policy with the 2018 Code
Leading in governance
When determining executive remuneration policy, the remuneration committee takes into account a wide range of factors
including legal and regulatory requirements, associated guidance and views of shareholders and their representative bodies.
Below is how the committee addresses the following principles as set out in the revised 2018 Code.
2018 Code provision: Clarity
Remuneration arrangements should
be transparent and promote effective
engagement with shareholders and
the workforce
2018 Code provision: Simplicity
Remuneration structures should avoid
complexity and their rationale and
operation should be easy to understand
• Overall remuneration policy is structured to support both the financial objectives
and the strategic priorities of the Group in a manner which is aligned with
shareholders’ and stakeholders’ long term interests
• Go-Ahead’s Board is committed to reporting in a fair, balanced and
understandable way and places great importance on transparent, relevant and
timely communication with all of our stakeholders, including shareholders. To read
more about how we engage with our stakeholders, see pages 72 to 75
Go-Ahead’s remuneration framework is simple, with three main elements:
• Fixed element: comprises base salary, taxable benefits (e.g. family healthcare)
and pension scheme membership which is aligned to that offered to the majority
of the workforce
• Short term element: an annual performance-related bonus which incentivises and
rewards the delivery of a balanced selection of financial and non-financial targets
over the financial year. Half of this bonus is paid in cash and half is paid in shares
deferred for a period of three years
• Long term element: a Long Term Incentive Plan (LTIP) which incentivises
financial performance over a three year period, promoting long term sustainable
value creation
2018 Code provision: Risk
Remuneration arrangements should ensure
reputational and other risks from excessive
rewards, and behavioural risks that can arise
from target based incentive plans, are
identified and mitigated
• The combination of a capped reward for short term and longer term strategic
decisions, with holding periods and malus and clawback, drive the right
behaviours to incentivise the executive directors to deliver long term sustainable
shareholder returns
• Remuneration incentives are designed to be aligned with the Group’s risk policies
and systems
• The remuneration committee has discretion to override formulaic outcomes
2018 Code provision: Predictability
The range of possible values of rewards
to individual directors and any other limits
or discretions should be identified and
explained at the time of approving
the policy
• The charts on page 101 provide estimates of the potential future reward
opportunity for the executive directors split between fixed, target and maximum
remuneration scenarios. In addition, the effect of future share price increases on
the LTIP has been illustrated assuming share price growth of 50% over the period
94
The Go-Ahead Group plc Annual Report and Accounts 2019 2018 Code provision: Proportionality
The link between individual awards, the
delivery of strategy and the long term
performance of the Company should be
clear and outcomes should not reward
poor performance
2018 Code provision: Alignment to culture
Incentive schemes should drive behaviours
consistent with the Company purpose,
values and strategy
• The committee assesses performance through a balanced range of measures to
ensure all aspects of our executive directors’ performance are covered
• There is a clear link between the performance of the Group and the payments
made to the executive directors and senior managers
• Performance-related elements of remuneration are relevant, transparent,
stretching and rigorously applied
• Care is taken to avoid paying more than necessary and due regard is given to pay
and employment conditions elsewhere in the Group
• The committee has the power to apply certain operational discretions as set out
on page 100
In reviewing the alignment between our executive directors’ incentives and rewards,
and the Group’s culture, the committee considers the following elements:
Metrics
The committee ensures that metrics employed across executive incentive plans
are not driving or over-emphasising behaviour which is counter-cultural. Group
profit, cash and individual strategic goals are key performance indicators for the
annual performance-related bonus. A quality of earnings review and a health and
safety threshold underpin also apply to the overall bonus. Consideration is given
to other relevant underpins on an annual basis, such as the additional rail customer
service threshold included in recent years. For the LTIP, recent key performance
indicators have been growth in adjusted earnings, total shareholder return and
customer satisfaction ratings, all of which are reviewed on an annual basis in relation
to their continued appropriateness.
Governance
It is important that the committee remains at the forefront of best practice.
As reported on page 97, the committee has introduced a new malus and clawback
policy, with a more substantial list of trigger events such as corporate failure and
reputational damage. While already operating in practice, the LTIP rules have also
been updated in line with best practice to introduce discretion to override formulaic
vesting outcomes and the extension of holding periods. The LTIP and Deferred Share
Bonus Plan (DSBP) Rules now also allow for the compulsory roll-over of awards in the
event of a change of control.
Together, these initiatives enable the committee to satisfy itself that the right steps
are being taken to ensure executive director and senior manager remuneration is
appropriate from a cultural context.
Engagement
Understanding our wider workforce remuneration policies and ensuring pay
decisions are aligned with culture forms part of the work we are undertaking on
wider stakeholder and colleague engagement. We expect our practice in this area
to continue to evolve over the year ahead. Progress made to date includes early
adoption of the CEO pay ratio (see page 113), alignment of executive and workforce
pension contribution rates and improved quality of stakeholder engagement (see
pages 70 and 71).
95
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration continued
Remuneration continued
Remuneration 2019 at a glance
Group Chief Executive,
David Brown
Group Chief Financial Officer,
Elodie Brian
(from 5 June 2019)
Former Group Chief Financial Officer,
Patrick Butcher
(to 30 November 2018)
Basic salary and pension
Base salary (£’000)
% increase from prior year
Pension
£582
2.5%
£335
N/A
£388
N/A
Does not receive any form of
pension provision
Eligible to receive 3% of qualifying
earnings as pension provision 1
Received a non-pensionable cash
supplement of 13% of base salary
2019 annual performance-related bonus
Maximum opportunity
(% of salary)
Actual bonus
(% of salary)
Cash amount
Amount satisfied
in shares
2016 LTIP award
Maximum opportunity
(% of salary)
Number of shares
initially granted
Number of shares vested
Number of shares lapsed
Total single figure remuneration
2019 (£’000)
Shareholding
Shareholding
requirement
Current shareholding
as at 29 June 2019
(as a % of base salary)
150%
113.6%
£330
£330
150%
39,698
Nil vesting
39,698
£1,269
N/A 2
N/A
N/A
N/A
N/A4
N/A
N/A
N/A
£46
150%3
Nil
Nil
Nil
100%5
18,073
Nil
18,073
£195
200% of base salary
200% of base salary
200% of base salary
290%
0% 6
N/A
1. Under her remuneration package, the Group Chief Financial Officer is eligible to participate in the Workplace Savings Section of The Go-Ahead Group Pension Plan
(which is the pensions auto-enrolment vehicle for the majority of employees) or receive a cash alternative equivalent.
2. The Group Chief Financial Officer will first be eligible for an annual performance-related bonus in respect of the 2020 financial year.
3. The former Group Chief Financial Officer was not eligible to receive any 2019 annual performance-related bonus on account of his resignation with effect from
30 November 2018.
4. The Group Chief Financial Officer’s first LTIP award will be granted in November 2019 for the three year performance period 2020–2022.
5. The former Group Chief Financial Officer’s 2016 LTIP award lapsed in full upon cessation of his employment
6. Excludes the Group Chief Financial Officer’s 2014 and 2015 deferred share bonus awards which vested on 25 November 2017 and 19 November 2018 respectively
but remain unexercised. For further information on the Group Chief Financial Officer’s interests in outstanding share awards and options, see page 110.
96
The Go-Ahead Group plc Annual Report and Accounts 2019 Executive directors’ remuneration – actual vs policy (£’000)
The charts show a comparison of the total single remuneration figure received by the executive directors for the year ended 29 June 2019
compared with the maximum opportunity that was available under Go-Ahead’s remuneration policy. Pursuant to The Companies
(Miscellaneous Reporting) Regulations 2018 (the Regulations), we have also included an illustration of the maximum opportunity
available following 50% share price growth (SPG) on the maximum LTIP award value.
David Brown – Group Chief Executive
Elodie Brian2 – Group Chief Financial Officer
Actual
Max
Max plus SPG
£1,269
Actual2
£46
£2,332
Max
£2,769
Max plus SPG
£1,173
£1,340
(cid:31) Fixed
(cid:31) Bonus (cid:31) LTIP (cid:31) Other remuneration1 (cid:31) 50% SPG
(cid:31) Fixed
(cid:31) Bonus (cid:31) LTIP (cid:31) 50% SPG
1. The value of the gross cumulative dividend payment in relation to the 2015 deferred share bonus award which vested in October 2018 following the end of the
three year deferral period.
2. Elodie Brian was appointed as a statutory director from 5 June 2019. Her salary for the role of permanent Group Chief Financial Officer was backdated to 1 April 2019
in recognition of the qualifying services she performed during April and May in advance of her formal appointment.
About this report
This report sets out the Group’s policy on remuneration for
executive and non-executive directors (the Policy), describes the
implementation of the approved Policy and sets out the remuneration
received by the directors for the year ended 29 June 2019.
No changes have been made to our Policy since its approval
at the 2018 AGM. Our approved Policy has therefore been
reproduced on pages 98 to 103 exactly as it was set out in the
2018 Annual Report and Accounts with the exception of updating
the following sections: service agreements of executive directors,
letters of appointment for Chairman and non-executive directors,
retirement and re-election of directors and external appointments.
This directors’ remuneration report complies with the Companies
Act 2006, Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment) Regulations
2013 and the Listing Rules of the Financial Conduct Authority and
applies the main principles relating to remuneration which are set
out in the UK Corporate Governance Code published in April
2016. Additionally, the committee has considered and, where
possible, adopted early the new requirements set out in the
revised UK Corporate Governance Code published in July 2018
(the 2018 Code) and The Companies (Miscellaneous Reporting)
Regulations 2018 (the Regulations). The 2018 Code and
Regulations apply to the Group for the first time for the year
ending 27 June 2020.
Leading in governance
As described on pages 70 and 71, in the spirit of the 2018 Code
and Regulations, we have adopted a number of best practice
changes early. Whilst the following changes will not be
incorporated into the current remuneration policy until the
next opportunity, they are immediately effective:
• Pensions – pension provision for executive directors has
been aligned with the majority of the workforce. Executive
directors are now only eligible to participate in the
Workplace Savings Section of The Go-Ahead Group Pension
Plan, with an employer contribution of 3% of qualifying
earnings. Executive directors may also elect for an equivalent
cash alternative. The existing Policy as approved at the 2018
AGM allowed for a cash allowance of up to 15% of salary
• LTIP – LTIP Plan Rules have been updated so that LTIP awards
granted from 2019 will extend their holding periods to the
fifth anniversary from grant and contain discretionary
override provisions. Under the existing Policy, LTIP awards
vest on the third anniversary of the grant date and are
subject to a holding period which applies until the second
anniversary of the vesting date. There is also no stated
intention which refers to overriding formulaic outcomes,
though in practice this has always been the case
• Malus and clawback – a new malus and clawback Policy has
been adopted to include new additional malus and clawback
triggers which apply in the event of corporate failure, serious
downturn in financial or operational performance and serious
reputational damage. Under the existing Policy, recovery and
withholding provisions could only be applied as a result of
misconduct, material misstatement or error in calculation
of performance
• Compulsory rollover – DSBP and LTIP Plan Rules have been
updated so that for awards granted from 2019, the committee
will have discretion to require compulsory rollover of awards
in the event of a change of control. Under the existing Policy,
awards vest on the occurrence of a change of control and
participants have a contractual right to receive their awards
(in full, in the case of the DSBP, or subject to proration and
performance testing, in the case of LTIP)
• Performance remuneration scenarios – the charts on page
101 have been updated to take into account current salary
levels and the impact of 50% share price appreciation of the
maximum LTIP award value
• CEO pay ratio – page 113 provides the CEO pay ratio
97
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance
Remuneration continued
Remuneration policy
The Group’s remuneration policy (the Policy) is set out in this section. The Policy was approved by shareholders at the 2018 AGM, held
on 1 November 2018, and is effective until the 2021 AGM. The table below provides detail on each key element of remuneration,
including the maximum potential value of each element, a brief summary of how it works and details of any performance metrics.
Remuneration policy for executive directors
Element and
maximum
Purpose and link
to strategy
Base salary
• Salary is the core reward for the
role and enables the Group to
recruit and retain individuals of
the calibre required to deliver
its strategic objectives and lead
its management team, without
paying more than is necessary
• Base salary also reflects the
individual’s skills, expertise,
experience and role within
the Group
Performance-
related bonus
• Focuses on the key strategic
objectives for the year ahead
• Deferral of half of bonus
into Group shares aligns
executive directors’ interests
with those of shareholders
Operation
• Paid monthly in cash
• Salaries are set by the committee which reviews all the relevant factors, including:
Maximum
Performance targets
• Annual salary increases for executive directors
• N/A
– The scope of the role and responsibilities
– Experience in post, skills and potential
– Sustained performance in the role
– Pay and conditions elsewhere in the Group
– Appropriate market data
• Salaries are normally reviewed annually
• The committee may also review salaries on an ad hoc basis if an executive director is
promoted and/or there is an increase in their responsibilities
will not normally exceed the average increase
awarded to other UK based employees
• However, larger increases may be awarded in
certain circumstances, including but not
limited to:
– Increase in scope of responsibilities of the role
– To apply salary progression for a newly
appointed director
– Where a director’s salary has fallen
significantly below market position
• Normally, annual non-pensionable payments made after the AGM
• Maximum of 150% of salary
• The committee will review performance measures and targets at the start of the year.
• Half of any bonus is normally paid in cash following the AGM and half is paid in shares
deferred for a period of three years
• Based on the achievement of specific financial and non-financial objectives
• Subject to recovery and withholding provisions for three years following the award1
Long Term
Incentive Plan
(LTIP)
• Aligned to the strategic
• Annual grant of performance shares that vest three years after grant (subject to the
• Maximum of 150% of salary for the Group
• Awards will be granted subject to a combination of financial and/or non-financial
objectives of the Group to
deliver long term returns
to shareholders
satisfaction of performance conditions)
• Participation and individual award levels will be determined at the discretion of the
committee within the Policy
• Vested awards must be retained (other than to pay tax or national insurance
contributions due on receipt of the shares) for two further years
• Subject to recovery and withholding provisions, for three years following vesting1
• The committee has the discretion in certain circumstances to grant and/or settle an
award in cash. In practice this will only be used in exceptional circumstances for
executive directors
• Dividend equivalents may be paid
Performance criteria will be aligned to the Group strategic objectives at that time. The
majority of the bonus will be subject to challenging financial targets
• Performance below threshold results in zero payment, with no more than 25% bonus
available at threshold. Payments rise from 0% to 100% of the maximum opportunity
levels for performance between threshold and maximum targets
• A quality of earnings review applies to the full bonus
• A health and safely underpin applies to the full bonus which enables the committee to exercise
its discretion to reduce or not pay a bonus if health and safety performance is not satisfactory
Chief Executive and 100% of salary for other
measures, tested over a period of at least three years. Performance conditions will
executive directors
measure the long term success of the Group
• Exceptional circumstances maximum
• In respect of each performance measure, performance below the threshold results in
(e.g. on recruitment) of 200% of salary
zero vesting. The starting point for the vesting of each performance element will be no
higher than 25% and rises on a straight-line basis to 100% for attainment of levels of
performance between threshold and maximum targets. There is no opportunity to retest
• The committee may introduce or reweight performance measures so that they are
directly aligned with the Group’s strategic objectives for each performance period
• Performance metrics currently include compound annual growth in adjusted earnings per
share (EPS2) and relative total shareholder return (TSR) with each accounting for at least
25% of the award. The committee has the discretion to vary the weighting and choice of
metrics including the comparator groups prior to each award. However, it would consult
with shareholders before introducing significantly different metrics
Pension
allowance3
Other
benefits
• Provides a cash alternative to
pension contributions in line
with market practice
• Ensures package is competitive
with market practice and
employees have a minimum
level of insured benefits
• Monthly, non-pensionable payment, normally paid in cash
• Up to 15% of salary may be provided
• N/A
• Incorporates various cash/non-cash benefits which may include: family private
healthcare, death in service and life assurance cover (4x base salary), free travel
on the Group’s services and professional membership subscriptions
• Any reasonable business-related expense (including tax thereon) can be reimbursed
if determined to be a taxable benefit
• Executive directors are eligible for other benefits which are introduced for the wider
workforce on broadly similar terms
All employee
share plans
• Executive directors are
• Executive directors may participate in these plans in line with HMRC guidelines
eligible to participate in all
employee schemes which
encourage share ownership
currently prevailing (where relevant), on the same basis as other eligible employees
Share
ownership
• To align the financial interests
of the executive directors
with those of shareholders
• Executive directors are required to retain 50% of the post-tax gain on vested LTIP and
deferred share awards until such time as the executive directors have a holding of
200% of base salary
1. Recovery and withholding provisions may be applied as a result of misconduct, material misstatement or error in calculation of performance. For deferred share bonus and
LTIP awards granted from 2019, the additional malus and clawback triggers of corporate failure, serious downturn in financial or operational performance and serious
reputational damage will also apply.
98
• Benefits are intended to be market competitive
• N/A
but are not subject to a maximum as the cost
of providing the insured benefits is set by third
party providers and can vary from year to year
• Participation levels operate in accordance
• N/A
with HMRC limits as amended from time
to time
• No maximum
• N/A
The Go-Ahead Group plc Annual Report and Accounts 2019 Remuneration policy
The Group’s remuneration policy (the Policy) is set out in this section. The Policy was approved by shareholders at the 2018 AGM, held
on 1 November 2018, and is effective until the 2021 AGM. The table below provides detail on each key element of remuneration,
including the maximum potential value of each element, a brief summary of how it works and details of any performance metrics.
Remuneration policy for executive directors
Element and
Purpose and link
maximum
to strategy
Operation
Base salary
• Salary is the core reward for the
• Paid monthly in cash
• Salaries are set by the committee which reviews all the relevant factors, including:
role and enables the Group to
recruit and retain individuals of
the calibre required to deliver
its strategic objectives and lead
its management team, without
paying more than is necessary
• Base salary also reflects the
individual’s skills, expertise,
experience and role within
the Group
– The scope of the role and responsibilities
– Experience in post, skills and potential
– Sustained performance in the role
– Pay and conditions elsewhere in the Group
– Appropriate market data
• Salaries are normally reviewed annually
• The committee may also review salaries on an ad hoc basis if an executive director is
promoted and/or there is an increase in their responsibilities
Performance-
related bonus
objectives for the year ahead
• Half of any bonus is normally paid in cash following the AGM and half is paid in shares
• Deferral of half of bonus
deferred for a period of three years
into Group shares aligns
executive directors’ interests
with those of shareholders
• Based on the achievement of specific financial and non-financial objectives
• Subject to recovery and withholding provisions for three years following the award1
Long Term
Incentive Plan
(LTIP)
• Aligned to the strategic
• Annual grant of performance shares that vest three years after grant (subject to the
objectives of the Group to
satisfaction of performance conditions)
deliver long term returns
to shareholders
committee within the Policy
• Participation and individual award levels will be determined at the discretion of the
• Vested awards must be retained (other than to pay tax or national insurance
contributions due on receipt of the shares) for two further years
• Subject to recovery and withholding provisions, for three years following vesting1
• The committee has the discretion in certain circumstances to grant and/or settle an
award in cash. In practice this will only be used in exceptional circumstances for
executive directors
• Dividend equivalents may be paid
Maximum
Performance targets
• Annual salary increases for executive directors
will not normally exceed the average increase
awarded to other UK based employees
• N/A
• However, larger increases may be awarded in
certain circumstances, including but not
limited to:
– Increase in scope of responsibilities of the role
– To apply salary progression for a newly
appointed director
– Where a director’s salary has fallen
significantly below market position
• Focuses on the key strategic
• Normally, annual non-pensionable payments made after the AGM
• Maximum of 150% of salary
• The committee will review performance measures and targets at the start of the year.
Performance criteria will be aligned to the Group strategic objectives at that time. The
majority of the bonus will be subject to challenging financial targets
• Performance below threshold results in zero payment, with no more than 25% bonus
available at threshold. Payments rise from 0% to 100% of the maximum opportunity
levels for performance between threshold and maximum targets
• A quality of earnings review applies to the full bonus
• A health and safely underpin applies to the full bonus which enables the committee to exercise
its discretion to reduce or not pay a bonus if health and safety performance is not satisfactory
• Maximum of 150% of salary for the Group
Chief Executive and 100% of salary for other
executive directors
• Awards will be granted subject to a combination of financial and/or non-financial
measures, tested over a period of at least three years. Performance conditions will
measure the long term success of the Group
• Exceptional circumstances maximum
(e.g. on recruitment) of 200% of salary
• In respect of each performance measure, performance below the threshold results in
zero vesting. The starting point for the vesting of each performance element will be no
higher than 25% and rises on a straight-line basis to 100% for attainment of levels of
performance between threshold and maximum targets. There is no opportunity to retest
• The committee may introduce or reweight performance measures so that they are
directly aligned with the Group’s strategic objectives for each performance period
• Performance metrics currently include compound annual growth in adjusted earnings per
share (EPS2) and relative total shareholder return (TSR) with each accounting for at least
25% of the award. The committee has the discretion to vary the weighting and choice of
metrics including the comparator groups prior to each award. However, it would consult
with shareholders before introducing significantly different metrics
Pension
allowance3
Other
benefits
Share
ownership
• Provides a cash alternative to
• Monthly, non-pensionable payment, normally paid in cash
• Up to 15% of salary may be provided
• N/A
pension contributions in line
with market practice
• Ensures package is competitive
• Incorporates various cash/non-cash benefits which may include: family private
with market practice and
healthcare, death in service and life assurance cover (4x base salary), free travel
employees have a minimum
on the Group’s services and professional membership subscriptions
level of insured benefits
• Any reasonable business-related expense (including tax thereon) can be reimbursed
• Executive directors are eligible for other benefits which are introduced for the wider
if determined to be a taxable benefit
workforce on broadly similar terms
• Benefits are intended to be market competitive
but are not subject to a maximum as the cost
of providing the insured benefits is set by third
party providers and can vary from year to year
• N/A
All employee
share plans
• Executive directors are
• Executive directors may participate in these plans in line with HMRC guidelines
eligible to participate in all
currently prevailing (where relevant), on the same basis as other eligible employees
employee schemes which
encourage share ownership
• Participation levels operate in accordance
with HMRC limits as amended from time
to time
• To align the financial interests
• Executive directors are required to retain 50% of the post-tax gain on vested LTIP and
• No maximum
of the executive directors
deferred share awards until such time as the executive directors have a holding of
with those of shareholders
200% of base salary
• N/A
• N/A
2. In line with our commitment to transparent reporting, EPS is reported on a statutory basis. Where targets have been based on adjusted EPS (EPS before exceptional items),
vesting will be determined by a calculation on an adjusted basis, based on reported Group operating profit adding back any exceptional items, which is consistent with
prior years.
3. Pension provision for executive directors has been aligned with the majority of the workforce who are eligible to participate in the Workplace Savings Section of
The Go-Ahead Group Pension Plan. Under her remuneration package, the Group Chief Financial Officer is eligible to participate in the Workplace Savings Section, with an
employer contribution of 3% of qualifying earnings or receive an equivalent cash allowance.
99
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration continued
Remuneration continued
Considerations when determining remuneration policy
• Determining the extent of vesting based on the assessment
The committee considers shareholder feedback and guidance
from shareholder representative bodies more generally when
reviewing the remuneration policy, in addition to best practice
and the UK Corporate Governance Code.
A substantial proportion of the executive directors’ pay is
performance related, with half of the annual bonus also normally
subject to deferral into the Group’s shares. A broad range of
financial and non-financial targets are included in our incentive
structure and recovery and withholding provisions apply to both
the annual performance-related bonus and LTIP. In addition,
awards granted under the LTIP since 2015 are subject to an
additional two year holding period following the vesting of awards.
Working with the audit committee, the committee ensures that
risk is properly considered in setting the overall remuneration
policy. The executive directors are also incentivised to take
environmental, social and governance matters seriously and to
consider the long term implications of their decision making.
Accordingly, in line with the Investment Association Guidelines
on Responsible Investment Disclosure, the committee has linked
a proportion of the annual performance-related bonus to the
achievement of safety and good governance objectives.
In setting the Policy, the committee considers the remuneration
packages offered to colleagues across the Group, as well as the
senior management team. As a principle, salaries, benefits,
pensions and other elements of remuneration are benchmarked
regularly to ensure they remain competitive in the markets in
which we operate.
As would be expected, we have differences in pay and benefits
across the businesses which reflect individual responsibility,
market and geographical location. When considering annual
salary increases, the committee reviews the proposals for salary
increases for the colleague population generally, as it does for
any other changes to remuneration policy being considered.
The committee did not formally consult with colleagues when
drawing up the Policy. However, the committee considers any
informal feedback through colleague engagement surveys or
other channels, with workforce engagement to continue to
be a key focus area for the Board over the year ahead. For the
remuneration committee specifically, this will also include matters
of executive pay and wider Company pay policy.
Committee discretions
The committee operates the Group’s variable incentive plans
according to their respective rules and in accordance with HMRC
rules where relevant. To ensure the efficient administration of
these plans, the committee will apply certain operational
discretions. These include the following:
• Selecting the participants in the plans on an annual basis
• Determining the timing of grants of awards and/or payment
• Determining the quantum of awards and/or payments (within
the limits set out in the policy table on (pages 98 and 99)
of performance
• Making the appropriate adjustments required in certain
circumstances (e.g. change of control, rights issues, corporate
restructuring events and special dividends)
• Determining good leaver status for incentive plan purposes
and applying the appropriate treatment
• Undertaking the annual review of performance measures and
their weightings, and setting targets for the annual
performance-related bonus and LTIP from year to year
• Ability to recognise exceptional events within existing
performance conditions
If an event occurs which results in the annual performance-related
bonus or LTIP performance conditions and/or targets being deemed
no longer appropriate (e.g. a material acquisition or divestment), the
committee will have the ability to adjust appropriately the measures
and/or targets and alter weightings, provided that the revised
conditions or targets are not materially less difficult to satisfy.
The committee would only expect to exercise discretion to deal
with exceptional circumstances and would always provide context
and explanation of the extent to which the discretion has been used.
Outstanding share incentive awards that remain unvested or
unexercised at the date of this report, as detailed on pages 109 to
110, remain eligible for vesting or exercise based on their original
award terms.
Consistency with remuneration for the wider Group
Remuneration arrangements are determined throughout the
Group based on the same principles: that reward should be
sufficient to attract and retain high calibre talent and that reward
should support the delivery of business strategy. The committee
reviews the remuneration for those colleagues immediately
below the executive directors to ensure that this incentivises
the delivery of the Group’s strategy and business objectives.
Through our devolved structure, local management is empowered
to create tailored remuneration packages on an individual
business-by-business basis. As a result, the components and
levels of remuneration for different colleagues will differ from
the Policy. Colleagues may receive bonus, pension and share
awards which vary according to the local business and market
practice. The maximum provision and incentive opportunity
available are determined by the seniority and responsibility of
the role.
Participation in the LTIP is currently limited to executive directors
only, while participation in the DSBP is limited to executive
directors and senior management.
It is an important part of Go-Ahead’s values that all colleagues,
not just management, have the opportunity to become shareholders
in the Group. All colleagues with at least six months’ continuous
service have the opportunity to participate in our Share Incentive
Plan and Save As You Earn Schemes.
100
The Go-Ahead Group plc Annual Report and Accounts 2019 Performance measure selection
With the exception of base salary, benefits, pension allowance and participation in all employee share plans, all other elements of
the remuneration packages of the executive directors are linked to performance. A significant proportion of executive directors’
potential remuneration is therefore performance-related.
In choosing the performance metrics and targets we ensure that there is a strong and demonstrable link between management
incentives and the Group’s strategic objectives. We have also set a performance-based framework for remuneration which is
consistent with the Group’s scale and unique structure. This enables the executive directors and senior managers to share in the
long term success of the Group without delivering excessive benefits or encouraging short termism or excessive risk taking. It also
aligns their interests with those of our shareholders.
The choice of performance measures for the annual performance-related bonus is based on a mixture of financial, non-financial
and strategic targets, with a clear alignment to the Group’s key strategic objectives for the year ahead. The choice of performance
measures for the LTIP is a combination of financial and non-financial measures, aligned to the strategic objectives of the Group,
to deliver long term returns to shareholders and measured over a three year period.
The charts below provide estimates of the potential future reward opportunity (excluding dividends) for the executive directors
split between fixed, target and maximum remuneration scenarios. Pursuant to the Regulations, the scenarios also illustrate the
maximum opportunity available following a 50% share price appreciation of the maximum LTIP award value.
Total remuneration by performance scenario for 2020 financial year (£’000)
David Brown – Group Chief Executive
Elodie Brian – Group Chief Financial Officer
Fixed
Target
Max
Max plus share
price growth
£586
Fixed
£335
£1,241
Target
£670
£2,332
Max
£1,173
£2,769
Max plus share
price growth
£1,340
(cid:31) Fixed
(cid:31) Bonus (cid:31) LTIP (cid:31) 50% SPG
(cid:31) Fixed
(cid:31) Bonus (cid:31) LTIP (cid:31) 50% SPG
The assumptions underlying each scenario are described below:
Fixed remuneration: for the Group Chief Executive this included base salary as at 1 April 2019 and benefits received in 2019. For the
Group Chief Financial Officer this is base salary from her statutory appointment as a director on 5 June 2019.
Target: fixed remuneration plus half of the maximum annual performance-related bonus award (75% of base salary) plus threshold
vesting under the LTIP awards (37.5% of base salary for the Group Chief Executive and 25% of base salary for the Group Chief
Financial Officer).
Maximum: fixed remuneration plus the maximum annual performance-related bonus award (150% of base salary) plus full vesting
of LTIP awards (150% of base salary for the Group Chief Executive and 100% of base salary for the Group Chief Financial Officer).
Recruitment remuneration
On appointing a new executive director, the committee would
seek to align the remuneration package for the relevant individual
with the Group’s remuneration policy as set out on pages 98 to
103. It would aim not to pay more than necessary to secure the
right candidate and the package would take into account the
experience and calibre of the individual concerned. The remuneration
package for a new executive director would be set in accordance
with the terms of the approved remuneration policy in force at
the time of appointment. Salaries would reflect the skills of the
individual, and may (but not necessarily) be set at a level to allow
future salary progression to reflect performance in the role.
Depending on the timing of the appointment, the committee may
deem it appropriate to set different annual performance-related
bonus or LTIP performance conditions to the current executive
directors for the first performance year of appointment.
A newly appointed executive director may be granted a normal
annual LTIP award shortly following appointment (assuming the
Group is not in a closed period) in addition to any awards made to
compensate for awards from previous employment being forfeited.
Where a newly appointed executive director is required to relocate,
the committee may provide an allowance or reimbursement of
any reasonable expenses (including tax thereon). Any ongoing
costs will be met by the Group for a period of normally no more
than 12 months.
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Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration continued
Remuneration continued
For an overseas appointment, the committee will have discretion
to offer cost-effective benefits and pension provisions which
reflect local market practice and relevant legislation. Any
executive director promoted internally may remain eligible for
payments under incentive plans joined and/or contractual
arrangements entered into before joining the Board. However,
the committee will have regard to best practice in reviewing the
treatment of any such entitlements.
The committee assesses on an individual basis whether it is
necessary to compensate executive directors for incentives lost
from their previous employers. The level and timing of such
compensation will normally seek to reflect or take account of the
value, term and performance conditions of the payments or
awards forgone on a like for like basis.
Compensation will normally take the form of conditional awards
or options over Group shares but cash and/or time vested payments
may be made where the committee believes these would offer
better value for money for shareholders. Existing arrangements
will be used where possible; however, the committee also reserves
the ability to make use of the flexibility provided under the Listing
Rules without prior shareholder approval. The committee is
sensitive to investor concerns about such arrangements and will
endeavour to take cost-effective approaches.
The appointment terms of newly appointed non-executive
directors will be on terms substantially similar to those of the
existing non-executive directors and in accordance with the
remuneration policy in force at the time.
Service agreements of executive directors
The Group Chief Executive and the Group Chief Financial Officer
entered into a service agreement with The Go-Ahead Group plc
on 1 April 2011 and 5 June 2019 respectively. The term of each
service agreement is undefined and is terminable by either the
Group on one year notice or by the executive director on six months’
notice. The directors’ service agreements are available for inspection
at the Group’s registered office. The service contract policy for a
new appointment will be on similar terms as existing executive
directors, with the facility to include a notice period of no more
than twelve months.
Departure of executive directors
Executive directors’ service agreements contain a provision,
exercisable at the discretion of the Group, to pay an amount
in lieu of notice on early termination of the agreement. Such
payments are limited to base salary plus pension allowance
and other benefits (such as family private healthcare and
life assurance cover), but would not automatically include
entitlement to bonus or share awards.
The Group can also pay legal fees and outplacement services.
There are no provisions for special pension benefits, such as
beneficial early retirement terms. Other than the notice periods
specified above, the executive directors are not due any contractual
compensation payments in the event of early termination of a
service agreement. The committee believes that the agreements
provide appropriate protection of the interests of shareholders
when negotiating a termination, at which time the committee
would take into account the departing director’s duty to mitigate
his/her loss when determining the amount of any compensation.
Loss of office payments
The treatment of remuneration for executive directors whose service with Go-Ahead terminates will be considered on a case-by-case
basis. However, the table below sets out the treatment of elements of remuneration that would normally apply:
Reason for termination
Salary and contractual
benefits
Performance-related
bonus (cash)
Retirement, redundancy, disability, death or change of
ownership or as otherwise determined by the committee
Other leavers
Payment equal to the aggregate of the base salary and the value of
any contractual benefits for the notice period including any accrued
but untaken holiday
Paid to date of termination,
including pay for any accrued
but untaken holiday
Bonus awarded (subject to satisfaction of performance targets)
for the relevant financial year, pro-rated accordingly for the period
of employment to the date of cessation of employment and
normally paid in cash
No award for year of termination
Performance-related
bonus (deferred
shares)
Awards generally vest in accordance with the timetable. Exceptional
cases of death or ill health retirement are reviewed by the committee
on a case-by-case basis
Awards lapse in full on cessation
of employment
Unvested LTIP awards
Awards normally vest at the normal vesting date unless the
remuneration committee determines the award should vest
on the date of cessation of employment
Awards lapse in full on cessation
of employment
The amount of award vesting will be subject to the satisfaction of
performance conditions and will normally be reduced pro-rata to
reflect time elapsed between grant and cessation of employment
although the committee has discretion to waive pro-rating where
it believes it would be appropriate to do so
102
The Go-Ahead Group plc Annual Report and Accounts 2019 Policy table for Chairman and non-executive directors
The remuneration policy for the Chairman and the non-executive directors is set out in the table below. Non-executive directors are
not involved in any discussions or decisions about their own remuneration.
Element
Fees
Purpose and link to strategy
Operation
The basic fee for the Chairman and non-executive
directors is a fixed annual fee commensurate with
the time each director is expected to spend on the
Group’s business and with the responsibility
assumed as director of a listed company
Fees are set at a level to attract and retain
individuals with appropriate expertise to
complement the Group’s strategy
The remuneration of the non-executive directors
takes the form solely of fees, which are set
annually by the Board
The level of fees set is subject to the current limits
as set out in the Group’s articles of association
(currently aggregate fees of £500,000 for all
non-executive directors)
Fees are reviewed annually each year with
reference to comparable listed companies
Additional fees
payable for duties
Additional fees may be paid to non-executive
directors who are Chairs of a Board committee
and/or who occupy the role of Senior Independent
Director to reflect the additional responsibility and
time commitment required
Non-executive directors are not eligible to
receive performance-related remuneration or
pension entitlements or to participate in share
option schemes
Letters of appointment for Chairman and non-executive directors
Each non-executive director has a letter of appointment which provides for a notice period of six months. The terms of appointment
contain no entitlement to compensation for early termination. The letters of appointment are available for inspection at the Group’s
registered office during normal business hours and will also be available for inspection prior to and during the AGM.
The appointment dates and notice periods for the non-executive directors are shown in the table below:
Director
Date of appointment
Notice period from the Group
Notice period from the director
Andrew Allner1
October 2008
Katherine Innes Ker
July 2010
Adrian Ewer
April 2013
Harry Holt
October 2017
Leanne Wood
October 2017
Clare Hollingsworth2
August 2019
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
1. Andrew Allner will retire from the Board at the conclusion of the 2019 AGM.
2. Clare Hollingsworth was appointed as Chairman Designate on 1 August 2019 until the conclusion of the 2019 AGM when she will become Chairman in succession
to Andrew Allner.
Retirement and re-election of directors
In accordance with the Group’s articles of association and the provisions of the Code, all directors are required to submit themselves for
re-election at each AGM. At the 2019 AGM, all directors will be submitting themselves for re-election, with the exception of Andrew Allner,
Clare Hollingsworth and Elodie Brian. Andrew Allner will retire from the Board at the conclusion of the 2019 AGM and Clare Hollingsworth
and Elodie Brian will offer themselves for election by shareholders for the first time.
External appointments
In accordance with their service agreements, the executive directors are able to accept external appointments and are permitted
to retain any fees paid for such services, provided that approval is given by the Board. The Group Chief Executive is a director of the
Rail Delivery Group Limited and ATOC Limited and he does not receive any fees for either of these roles. He is also a non-executive
director of Renew Holdings plc, for which he received £45,000 for the period 1 July 2018 to 29 June 2019 (2018: £39,514). The Group
Chief Financial Officer does not have any external appointments.
103
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration continued
Annual report on remuneration
The remuneration committee presents the annual report on remuneration which, together with the annual statement from the
Remuneration Committee Chair, will be put to shareholders as an advisory vote at the Annual General Meeting (AGM) to be held
on Thursday 31 October 2019.
The annual report on remuneration is divided into three sections:
Section 1: Single figure tables
Section 2: Additional information on 2019 remuneration
Section 3: Implementation of remuneration policy in 2020
The external auditor has reported on certain sections of this report and stated whether, in its opinion, those sections have been
properly prepared. Those sections which have been subject to audit are clearly indicated.
Section 1: Single figure tables
Executive directors’ single figure table (audited)
The table below summarises all remuneration that was earned by each executive director during the year.
The remuneration committee reviews all incentive awards prior to payment and uses judgement to ensure that the final assessments
of performance are fair and appropriate.
Short term incentives
(Performance-related bonuses)
Salary 1
£’000
Taxable
benefits 2
£’000
Cash bonus 3
£’000
Deferred
share bonus 3
£’000
Long Term
Incentive
Plan (LTIP) 4
£’000
Pension
allowance 5
£’000
Other
remuneration 6
£’000
Total single
remuneration
figure
£’000
Executive directors
Group Chief Executive,
David Brown
Group Chief Financial
Officer, Elodie Brian*
(from 5 June 2019)
Former executive director
Group Chief Financial
Officer, Patrick Butcher
(to 30 November 2018)
2019
2018
2019
2018
2019
2018
571
556
46
N/A
172
380
4
3
—
—
1
2
330
291
—
—
—
198
330
291
—
—
—
—
—
—
—
—
—
—
—
—
—
—
22
50
34
34
—
—
—
—
1,269
1,175
46
—
195
630
* Elodie Brian was appointed as a statutory director from 5 June 2019. The salary received between 5 June 2019 and 29 June 2019 was backdated to 1 April 2019 in recognition
of the qualifying services she performed during April and May in advance of her permanent statutory appointment.
104
The Go-Ahead Group plc Annual Report and Accounts 2019 Commentary on the executive directors’ single figure table
1. Salary
Base salary levels for the executive directors are shown below and will remain in place until April 2020 when they will be reviewed again:
Executive directors
Group Chief Executive, David Brown
Group Chief Financial Officer, Elodie Brian
Former executive director
From
1 April 2019
From
1 April 2018
%
increase
£581,710
£567,520
£335,000
N/A
2.5
N/A
Former Group Chief Financial Officer, Patrick Butcher
N/A
£387,590
N/A
2. Taxable benefits
The taxable benefit for the Group Chief Executive comprises family healthcare membership.
3. Cash bonus and deferred share bonus (annual performance-related bonus)
The table below illustrates the components of the annual performance-related bonus award at maximum and actual payouts
for business objectives set at the start of the year for the Group Chief Executive only.
Based on the assessment of performance against targets, the Group Chief Executive was awarded an overall bonus of 113.6%.
Half of this bonus is payable in cash and half is awarded as deferred shares to be held for a period of three years. The full bonus
is subject to malus and clawback provisions for three years following vesting.
Metric
Performance measure
Group profit
Group cashflow
Strategic KPIs
Total
Group operating profit 2019
Net debt after adding back restricted cash
See page 106
Weighting
(percentage
of maximum)
Actual payout
(percentage
of salary)
Achieved
65%
10%
25%
45.8%
68.6%
10%
20%
15%
30%
100%
75.8%
113.6%
The following tables illustrate in more detail the actual performance against each individual metric.
Group operating profit (65%)
For Group operating profit for the year ended 29 June 2019, target vesting was proportionately weighted between the operating profit
contribution from bus (45.5%) and rail (19.5%), with payout on a sliding scale. The actual Group operating profit for bus, before exceptional
items, was £95.7m resulting in the maximum payout for bus. The actual Group operating profit for rail was £25.4m resulting in a small
payout for rail.
Measure
Bus (70%)
Rail (30%)
Weighting
(% of bonus)
Actual payout
(Bus)
Actual payout
(Rail)
Group operating
profit 2019
Threshold vesting: £84.2m
Threshold vesting: £25.2m
Target vesting: £88.6m
Target vesting: £30.2m
Maximum vesting: £93.0m
Maximum vesting: £40.2m
0%
50%
100%
70%
0.4%
Cashflow (10%)
The target for Group cashflow (defined as net debt after adding back restricted cash) was £259.6m, with maximum vesting at £246.6m.
Actual Group cashflow for the year ended 29 June 2019 was £237.4m (2018: £289.0m) and included unbudgeted cash outflows of £32.9m.
This included the extension of the Southeastern franchise (£11.0m), the purchase of the trade and assets of Go North West (£11.2m)
and the purchase of East Yorkshire Motor Services (£10.7m). In conjunction with the audit committee, an assessment was made of these
non-budgeted cash flows and the remuneration committee agreed that discretion should be applied to take these into account.
Measure
Target
Net debt 2019
Target vesting: £259.6m
Maximum vesting: £246.6m
Weighting
(% of bonus)
Actual
net debt
Adjusted
actual net debt
Actual payout
0%
100%
£270.3m
£237.4m
100%
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Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration continued
Strategic KPIs (25%)
The committee determined that 20% out of 25% should be payable for the strategic element of bonus. This took into account the
committee’s assessment of the five key strategic targets outlined below, with an additional 3% awarded in relation to the significant
progress made across a range of other strategic objectives:
Target
Weighting
Assessment
Stabilising GTR timetable operation/
satisfactorily concluding the ‘Big Change’
with DfT
5%/5%
Winning the South Eastern franchise
4%/5%
Exploring opportunities, such as a
major change or a major transaction
Mobilisation plans for Dublin
and Germany
4%/5%
2%/5%
Lean Engineering
2%/5%
Agreement was reached during the year between GTR and the DfT
to settle contractual issues, significantly reducing the uncertainty
over the future of the franchise and providing funding for £15m
of passenger benefits. Reliability had significantly improved during
the year, in addition to the successful implementation
of the December 2018 timetable change.
In August 2019 the DfT confirmed the final of six extensions
for the current Southeastern franchise to 1 April 2020 and that
the competition for the next South Eastern franchise had been
terminated. It was the committee’s decision that 4% of the 5%
attributable to this strategic objective should be awarded on
the basis that management, through extensive negotiations with
the DfT, had retained the current franchise on good terms for
six years beyond the original end date with many improvements
for passengers.
A number of opportunities were considered by the Board during
the year.
Go-Ahead Ireland’s first bus contract successfully mobilised
operations from September 2018 and, in Germany, two rail
contracts were mobilised in June 2019. Preparations are still
underway to mobilise a second bus contract in Ireland, a third rail
contract in Germany and a first rail contract in Norway by the end
of the calendar year.
Progress had been made rolling out Lean Engineering across a
number of bus operating companies, with further efficiencies of
operations to be targeted over the year ahead.
Health and safety target threshold
The annual performance-related bonus includes a health and safety underpin that enables the committee to use its discretion
to reduce bonus payments potentially to zero should it be considered appropriate. The committee concluded that no scaling
back of bonus was required in light of the Group’s health and safety performance having been maintained during the year.
Rail customer service threshold
There was an additional underpin that enabled the committee to use its discretion if customer satisfaction across the Group’s train
operating companies in Spring 2019 (as measured by the Transport Focus National Rail Passenger Survey (NRPS) averaged across
the Group’s rail operating companies) was less than the London and South East Sector NRPS score of 79% in Spring 2018. As the
Spring 2019 NRPS score for the Group’s train operating companies was 81% and higher than the NRPS threshold, the committee
agreed that no scaling back of bonus was required.
106
The Go-Ahead Group plc Annual Report and Accounts 2019 4. Nil vesting of 2016 LTIP award – Group Chief Executive only
The table below summarises the performance conditions for the Group Chief Executive’s 2016 LTIP award and the actual performance
achieved. This award was subject to performance conditions measured over the three financial years ending with the 2019 financial period.
As shown below, none of the performance measures were achieved for this award.
The customer service targets for rail and bus (each with 10% target respectively) were measured by the independent passenger
watchdog Transport Focus (formerly Passenger Focus):
• For the rail customer service target, the benchmark was the London and South East Sector National Rail Passenger Survey (NRPS)
score, with the threshold being the Spring 2016 London and South East Sector NRPS of 78%. The target was to increase the score to
82% over the three year performance period. The Spring 2019 score averaged for the Group’s train operating companies was 81%.
• For the bus customer service target, the threshold was to maintain the 2015 and 2016 Bus National Passenger Survey (NPS) score
of 90%, with the target to increase the score to 93% over the three year performance period. The 2019 score was 92%.
There was, however, an additional profit threshold for the overall customer service target, which was that earnings per share (EPS)
growth over the three year period must be greater than RPI + 2% before any element of this award could vest. For the year ended
29 June 2019, EPS growth was -9.35% resulting in 0% vesting for the customer service element of the award.
Performance conditions and actual performance achieved for the 2016 LTIP award
EPS payout
(% of each
element)
Compound
annual growth in
adjusted EPS
Payout
(% of TSR
element)
Relative TSR vs
FTSE 250
(excluding
certain sectors)
Payout
(% of each
customer
element)
Rail customer
service target
Bus customer
service target
40%
—
40%
—
10%
10%
Weighting
(% of total award)
Below threshold
—
0%
Threshold
10%
RPI + 2% p.a.
25%
Median
Less than RPI
+ 2% p.a.
0% Below median
0%
10%
Less than
78%
Less than
90%
78%
90%
Between threshold
and maximum
Between
10% and
100%
Between RPI
+ 2% p.a. and RPI
+ 10% p.a.
Between 25%
and 100%
Between
median and
upper quartile
Between 10%
and 100%
Between 78%
and 82%
Between 90%
and 93%
Maximum
100%
RPI + 10% p.a.
100%
Performance
achieved
Adjusted EPS
of 169.4p.
From a base of
225.4p this is
equivalent to RPI
-12.38% p.a.
Upper
quartile
85th out of
123 “live”
companies
100%
82%
93%
81%
92%
Actual % vesting
0%
0%
0%
0%
0%
0%
0%
In line with our commitment to transparent reporting, EPS and Group operating profit are now reported on a statutory basis. At the
time of this LTIP award, the targets were based on adjusted EPS and adjusted Group operating profit (before amortisation and exceptional
items). The vesting of the 2016 LTIP award has therefore been calculated on an adjusted basis, based on reported Group operating
profit adding back amortisation and any exceptional items, which is consistent with prior years.
5. Pension allowance
The Group Chief Executive does not receive any form of pension provision from the Group. Under her remuneration package, the
Group Chief Financial Officer is eligible to participate in the Workplace Savings Section of The Go-Ahead Group Pension Plan, with
a contribution rate of 3% of qualifying earnings, or receive an alternative cash equivalent allowance.
6. Other remuneration
The value of the gross cumulative dividend payment is in relation to the Group Chief Executive’s deferred share bonus award which
was granted on 29 October 2015, for the year ended 27 June 2015, and which vested on 29 October 2018 following the end of the three
year deferral period.
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Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration continued
Non-executive directors’ remuneration for the year ended 29 June 2019 (audited)
The table below sets out the total single remuneration figure received by each non-executive director for the year ended 29 June 2019
and the prior year:
Committee membership and other responsibilities
Total single remuneration figure
Non-executive director
Andrew Allner
Katherine Innes Ker
Adrian Ewer
Harry Holt*
Leanne Wood*
Nomination
committee
Audit
committee
Remuneration
committee
Other
Chair
Member
Member
Member
Member
—
Member
Chairman
Member
Chair
Senior Independent Director
Chair
Member
Member
Member
Member
Member
—
—
—
2019
£’000
185
65
60
52
52
2018
£’000
181
63
58
35
35
* Harry Holt and Leanne Wood were appointed to the Board on 23 October 2017. Their 2018 total single remuneration figures reflect the fees paid during the period from
23 October 2017 to 30 June 2018.
Fees payable to the Chairman and non-executive directors (audited)
The fee level for the Chairman was reviewed on 1 April 2019 and increased by 2.5%. The base fee levels for the non-executive directors
were also reviewed on 1 April 2019 and similarly increased by 2.5% in line with those of the general workforce and the wider Board.
There was no change to the additional fees paid for chairing the remuneration and audit committees, or for the role of Senior
Independent Director.
The annual fees payable to the Chairman and non-executive directors from 1 April 2019 are set out in the table below.
Chairman and non-executive directors’ annual fees with effect from 1 April 2019
Chairman1
Non-Executive Director
Senior Independent Director2
Audit Committee Chair
Remuneration Committee Chair2
£’000
189
53
5
8
8
1. Clare Hollingsworth joined the Board as Non-Executive Chairman Designate on 1 August 2019 and will succeed Andrew Allner as Chairman with effect from the
conclusion of the 2019 AGM. Clare will receive the same fees as those paid to Andrew Allner, these being £188,800 per annum.
2. Katherine Innes Ker will step down as Senior Independent Director and Remuneration Committee Chair with effect from the conclusion of the 2019 AGM. At this
time, Katherine will be succeeded in these roles by Adrian Ewer and Leanne Wood respectively. Katherine will continue to serve the Board as a non-independent
Non-Executive Director.
108
The Go-Ahead Group plc Annual Report and Accounts 2019 Section 2: Additional information on 2019 remuneration
Directors’ shareholdings and share plan interests (audited)
A summary of all directors’ shareholdings and share plan interests as at 29 June 2019 are shown in the table below:
Outstanding scheme interests as at 29 June 2019
Actual shares held6
Unvested
scheme
interests
(subject to
performance
measures) 1
Unvested
scheme
interests
(not subject to
performance
measures) 2
2016 LTIP
award
eligible for
vesting 2019 3
Vested but
unexercised
share options
Total shares
subject to
outstanding
scheme
interests
Total of all
share scheme
interests and
shareholdings
as at
29 June 2019 8
As at
1 July 2018
As at
29 June 2019
Executive directors
David Brown
Elodie Brian
Former Executive director
Patrick Butcher9
Non-executive directors
Andrew Allner
Katherine Innes Ker
Adrian Ewer
Harry Holt
Leanne Wood
143,603
—
—
—
—
—
—
—
18,612
1,276
—
—
—
—
—
—
—
—
—
—
—
—
—
—
94 4
1,163 5
162,309
2,439
—
—
—
—
—
—
—
—
—
—
—
—
80,528
86,583 7
248,892
—
7,663
1,242
116
—
—
1,242
116
3,009 10
3,018 10
—
294
—
294
2,439
—
1,242
116
3,018
—
294
1. LTIP awards still subject to performance measures. Excludes LTIP awards which will be granted in November 2019.
2. Deferred share bonus plan awards that have not vested.
3. Relates to the 2016 LTIP award, which would have been eligible to vest from November 2019 in respect of the three year performance period ended 29 June 2019.
The remuneration committee has determined a nil vesting for this LTIP award as performance conditions have not been met. Further details can be found on page 107.
4. Relates to sharesave options which matured on 1 May 2019 but have not yet been exercised.
5. Relates to vested but unexercised 2014 and 2015 deferred share bonus awards which were granted on 25 November 2014 and 19 November 2015 respectively when
Elodie Brian was Finance and Contracts Director of Southeastern.
6. Actual shares are beneficial holdings which include the directors’ personal holdings and those of their spouses. They also include the beneficial interests in shares which
are held in trust under the Group’s Share Incentive Plan.
7. During the year, David Brown’s beneficial shareholding increased by 6,055 ordinary shares. This consisted of 5,951 ordinary shares acquired through the post-tax gain on
the 2015 deferred share bonus award which vested in October 2018 and was exercised in March 2019. For further details of the vesting of the 2015 deferred share bonus
award, please see page 110. During the period 1 July 2018 to 29 June 2019, David Brown purchased 104 shares under the Group’s Share Incentive Plan. In the period 30 June 2019
to 4 September 2019, David Brown’s ordinary shareholding increased from 86,583 to 86,597 as a result of shares purchased under the Group’s Share Incentive Plan.
There have been no other changes in the shareholdings of the executive directors between 30 June 2019 and the date of this Annual Report and Accounts.
8. All share plan interests, vested, unvested and unexercised, together with any holdings of ordinary shares.
9. Patrick Butcher resigned as Group Chief Financial Officer with effect from 30 November 2018. Patrick’s shareholding disclosed in the above table is therefore reflective
for the period 1 July 2018 to 30 November 2018.
10. Restated from 3,003 last year and increased by a further nine ordinary shares during the year following the reinvestment of dividend income.
Directors’ share ownership guidelines (audited)
All executive directors are required to hold shares equivalent in value to 200% salary. For the Group Chief Financial Officer, this is to be
achieved within five years from the date of her appointment on 5 June 2019.
As at 29 June 2019, the Group Chief Executive beneficially held 86,583 shares equating to 290% of base salary (based on the average
share price between the period 1 June 2019 and 29 June 2019) and therefore meets the shareholding requirement.
As the Group Chief Financial Officer does not currently hold any beneficial shares yet, her shareholding as a percentage of salary is nil.
Executive directors are required to retain 50% of the post-tax gain on vested LTIP and deferred share awards until the shareholding
requirement is met. Additionally, LTIP awards must be retained for a further two years from the vesting (other than to pay tax and NICs due
on receipt of shares). For LTIP awards granted from 2019, this holding period has been extended to the fifth anniversary from date of grant.
David Brown
Elodie Brian
Shares held as at
29 June 2019
Guideline on
share ownership
as % of salary
Share
ownership
as % of salary
Guideline met
86,583
0
200%
200%
290%
0%*
Yes
No
* Excludes Elodie Brian’s 2014 and 2015 deferred share bonus awards which vested on 25 November 2017 and 19 November 2018 respectively but remain unexercised.
For further information on the Group Chief Financial Officer’s interest in outstanding share awards and options, see page 110.
109
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance
Remuneration continued
Executive directors’ interests in outstanding share awards and options (audited)
The following tables set out details of the executive directors’ outstanding share awards (which will vest in future years subject to
performance conditions and/or continued service).
Group Chief Executive, David Brown
Mid-market
price on
date
of grant
(£)
Date of
grant
Plan
Option
price
(£)
Balance at
1 July
2018
Granted
in year
Vested
in year
Lapsed
in year
Sharesave2
22.03.16
—
19.11
94
—
—
94
11,331 3
Balance at
29 June
2019
94
—
18,612
—
—
—
32,618 4
—
— 39,698
— 49,993
— 53,912
—
—
—
—
—
—
—
—
—
—
11,331
—
18,612
32,618
— 39,698
49,993
—
—
—
—
53,912
2016 LTIP award eligible
for vesting 20191
Balance
post
lapsing of
2016 LTIP
award
94
—
18,612
—
—
Vested
Lapsed
—
—
—
—
—
—
—
—
— 39,698
—
—
— 49,993
— 53,912
133,734
75,524
11,425
32,618 162,309
— 39,698
122,611
Deferred Share
Bonus Plan
LTIP
Total
29.10.15
16.11.18
04.11.15
16.11.16
17.11.17
16.11.18
24.13
15.61
25.46
20.47
16.58
15.79 5
1. Relates to the 2016 LTIP award following the three year performance period ended 29 June 2019.
2. Sharesave is an all-employee share option plan and has no performance condition as per HMRC Regulations. David Brown’s sharesave options were granted in 2016 and
matured in May 2019.
3. The 2015 deferred share bonus award vested on 29 October 2018 and was exercised on 26 March 2019 with a share price of £20.0035. David Brown’s gain on his 2015 DSBP
was therefore £226,660.
4. As none of the performance conditions were achieved, the 2015 LTIP lapsed in full.
5. The number of shares over which the award was granted was calculated using a share price of £15.79, this being the average of the middle market quotations during the
period of five dealing days immediately prior to the date of grant in accordance with the plan rules.
Group Chief Financial Officer, Elodie Brian
Plan
Deferred Share Bonus Plan1
Total
Date of
grant
25.11.14
19.11.15
15.11.16
17.11.17
16.11.18
Mid-market price
on date of grant
(£)
Balance at
1 July
2018
Granted
in year
Lapsed
in year
Balance at
29 June
2019
24.74
25.17
20.81
17.27
15.61
505 2
658 3
374
402
—
1,939
—
—
—
—
500
500
—
—
—
—
—
—
505
658
374
402
500
2,439
1. Relates to the deferred share bonus awards granted to Elodie Brian between 2014 and 2018, prior to her statutory appointment to the Board in June 2019, and during her
employment as Finance and Contracts Director for Southeastern.
2. Relates to the 2014 deferred share bonus award which vested on 25 November 2017 and remains unexercised.
3. Relates to the 2015 deferred share bonus award which vested on 19 November 2018 and remains unexercised.
Former Group Chief Financial Officer, Patrick Butcher
Plan
Deferred Share Bonus Plan
LTIP
Total
Date of
grant
15.11.16
16.11.16
17.11.17
Mid-market price
on date of grant
(£)
Balance at
1 July
2018
Granted
in year
20.81
20.47
16.58
6,770
18,073
22,762
47,605
—
—
—
—
Lapsed
in year *
6,770
18,073
22,762
47,605
Balance at
29 June
2019
—
—
—
—
* The former Group Chief Financial Officer resigned on 30 November 2018. All deferred share bonus and LTIP awards made in 2016 and 2017 lapsed upon his cessation of employment.
110
The Go-Ahead Group plc Annual Report and Accounts 2019
Long Term Incentive Plan
2018 LTIP award granted during the year ended 29 June 2019 (audited)
An LTIP award was granted to the Group Chief Executive during the year ended 29 June 2019, structured as a nil cost option, exercisable at
the end of a three year performance period. This commenced with the start of the 2019 financial period and is subject to the satisfaction of
performance conditions. The vested award will then be subject to a further two year holding period other than for sales to settle any
tax or NIC liability on exercise of the awards. The 2019 grant policy was to grant an award with a face value of 150% of base salary as follows:
Executive director
Basis of
award granted
Share price
at grant date
Number of
shares over
which award
was granted 1
Face value
of award 2
£’000
David Brown
150% of salary
£15.74
53,912
849
% of award which
vests as threshold
Vesting determined
by performance over
10% for EPS, 25% for
TSR and 10% for each
customer element
Three financial
years ending on
3 July 2021
1. The number of shares over which the award was granted was calculated using a share price of £15.79, this being the average of the middle market quotations during the
period of five dealing days immediately prior to the date of grant in accordance with the plan rules.
2. The face value of the award has been calculated on a share price of £15.74. This was the share price on 16 November 2018, the date of grant.
Performance conditions attaching to the 2018 LTIP award
The EPS, TSR and customer service measures and targets for the 2018 LTIP award are detailed below:
Weighting (% of
total award)
Below threshold
EPS payout
(% of each
element)
Compound
annual growth in
adjusted EPS *
Payout
(% of TSR
element)
Relative TSR vs
FTSE 250
(excluding
certain sectors)
Payout
(% of each
customer
element)
Rail customer
service target
Bus customer
service target
—
40%
—
40%
—
10%
10%
0% Less than RPI +
2% p.a.
0% Below median
0% Less than 79% Less than 91%
Threshold
10%
RPI + 2% p.a.
25%
Median
10%
79%
91%
Between threshold
and maximum
Between 10%
and 100%
Between RPI 2%
p.a. and RPI 10%
p.a.
Between 25%
and 100%
Between
median and
upper quartile
Between
10% and
100%
Between 79%
and 83%
Between 91%
and 94%
Maximum
100%
RPI + 10% p.a.
100%
Upper
quartile
100%
83%
94%
* The above EPS targets are based on current accounting policies and will be adjusted should there be any changes to these policies. Awards will continue to vest three
years after grant, subject to the performance conditions being met over broadly the same period.
111
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration continued
Total shareholder return (TSR) performance graph
The graph below shows a comparison of The Go-Ahead Group plc cumulative TSR against that achieved by the FTSE 250 Index
for the last ten financial years to 29 June 2019. The chart also shows cumulative TSR over the same period for the other major UK
transportation groups. In assessing the performance of the Group’s TSR, the Board believes the FTSE 250 index comparator group
it has chosen represents an appropriate and fair benchmark upon which to measure the Group’s performance for this purpose.
(cid:31) The Go-Ahead Group plc (cid:31) National Express (cid:31) FirstGroup (cid:31) Stagecoach Group (cid:31) FTSE 250
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
400
350
300
250
200
150
100
50
0
27/06/2009
3/07/2010
2/07/2011
30/06/2012
29/06/2013
28/06/2014
27/06/2015
2/07/2016
1/07/2017
30/06/2018
29/06/2019
This graph shows the value, by 29 June 2019, of £100 invested in The Go-Ahead Group on 27 June 2009, compared with the value of
£100 invested in the FTSE 250 Index and the peer group (National Express, FirstGroup and Stagecoach Group) on the same date.
The other points plotted are the values at intervening financial year ends.
Remuneration of the Group Chief Executive over last ten years
The table below shows the remuneration of the Group Chief Executive for the period from 28 June 2009 to 29 June 2019. The total
remuneration figure includes the performance-related bonus and LTIP awards (and the percentage of the maximum opportunity that
these represent).
Group Chief Executive’s remuneration history
Year
2019
2018
2017
2016
2015
2014
2013
2012
2011
2011
2010
Group Chief Executive
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
Keith Ludeman
Keith Ludeman
Single total
remuneration figure
£’000
Annual performance-related bonus
(actual award vs maximum opportunity)
£’000 (and % vesting)
Long term incentive vesting
(vesting vs maximum opportunity)
£’000 (and % vesting)
1,269
1,175
782
1,214
2,134
1,960
942
1,022
251 6
1,564
1,349
660 (75.8%) 1
582 (68.3%) 3
Nil 5
Nil 5
558 (69.6%)
766 (97.5%)
422 (55.3%)
513 (68.0%)
125 (100.0%)
530 (100.0%)
689 (100.0%)
0 2
0 4
220 (54%)
647 (90%)
1,067 (100.0%)
666 (80.0%)
—
—
—
—
73 (21.7%)
1. Based on the assessment of performance against targets, the Group Chief Executive was awarded an overall bonus of 75.8% of the maximum bonus opportunity (113.6% of
base salary).
2. The 2016 LTIP award will lapse in full from November 2019 on account of none of the performance measures being met following the three year performance period ended
29 June 2019.
3.
In accordance with the executive directors’ request to reduce any performance-related bonus by 25%, the committee exercised discretion and reduced the Group Chief
Executive’s overall 2018 bonus by 25% resulting in an actual bonus of 68.3% of maximum bonus (102.4% of salary).
4. The 2015 LTIP award lapsed in full in November 2018 on account of none of the performance measures being met following the three year performance period ended
30 June 2018.
5. At the request of the Group Chief Executive, there were no annual performance-related bonuses paid for the years 2017 and 2016.
6. Following his appointment in April 2011, the Group Chief Executive was paid a pro-rata performance-related bonus for the financial year 2011.
112
The Go-Ahead Group plc Annual Report and Accounts 2019
Remuneration for the Group Chief Executive compared with all other employees of the Group
The table below shows the percentage change in the Group Chief Executive’s total remuneration between the financial years 1 July 2018
and 29 June 2019, compared to the average change for all employees of the Group.
Group Chief Executive
Average employees
% change from 2018 to 2019
Salary
Benefits
Bonus
2.5% 1
2.9% 4
18.7 2
0.0%
13.7% 3
4.2%
1. From 1 April 2019, the Group Chief Executive’s base salary increased from £567,520 to £581,710.
2. The Group Chief Executive received family healthcare membership in the amount of £4,030 for the year ended 29 June 2019 (2018: £3,395).
3. The Group Chief Executive was awarded an annual performance-related bonus of £660,822 for the year ended 29 June 2019 (2018: £581,000). Half of this bonus is payable in
cash and half is awarded as deferred shares.
4. Reflects the average increase in salary for all employees across the Group, including overseas. This increases to 3.4% if salary increases offered but not yet accepted by
employees are taken into consideration.
Group Chief Executive pay ratio
The table below sets out the ratios of the Group Chief Executive
to the equivalent pay for the lower quartile, median and upper
quartile UK employees (calculated on a full time basis). The
ratios have been calculated in accordance with the Companies
(Miscellaneous Reporting) Requirements 2018 (the Regulations),
which were published during 2018, and will first apply to
Go-Ahead at the next financial year end. The disclosure will
build up over time to cover a rolling ten-year period.
Year
2019
Method
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
Option A
47:1
37:1
29:1
The committee believes that the median pay ratio is consistent
with the Group’s pay, reward and progression policies. Base
salaries of all colleagues, including the executive directors, are
set with reference to a range of factors including market
comparators, individual experience and performance in role.
1.
2.
“Option A” methodology was selected on the basis that it
provides the most robust and statistically accurate means of
identifying the median, lower and upper quartile colleagues.
The Group Chief Executive remuneration is the total single
figure remuneration for the year ended 29 June 2019
contained on page 104.
Pay data (£’000)
Group Chief Executive remuneration
UK employees 25th percentile
UK employees 50th percentile
UK employees 75th percentile
Base salary
Total pay
and benefits
3.
571
9
32
23
1,269
27
34
44
The Group Chief Executive’s remuneration package comprises
of a fixed element (base salary and family healthcare membership),
an annual performance-related bonus (maximum of 150%
of base salary with half paid in cash and half paid in shares
deferred for a period of three years under the DSBP and LTIP
(maximum of 150% of base salary). A significant proportion
of the Group Chief Executive’s potential remuneration
is therefore performance-related and dependent on the
achievement of a broad range of challenging financial and
non-financial targets. In addition, a significant proportion
of the Group Chief Executive’s remuneration is delivered
in Go-Ahead Group shares. This means that the ratios will
depend significantly on the CEO’s annual performance-related
bonus and LTIP outcomes and may fluctuate significantly
from year to year. Only the Group Chief Executive, participated
in the LTIP during the year, however, other senior employees,
including the Group Chief Financial Officer also receive part
of their remuneration in shares through participation in the
DSBP and all employees with at least six months’ notice are
eligible to participate in share-based incentives via the
Company’s HMRC approved Share Incentive Plan.
The workforce comparison is based on actual payroll data
for the period 1 July 2018 to 31 March 2019, annualised to
provide a full data set for the year ended 29 June 2019. This
annualisation has been carried out for each employee using
the ratio of contracted hours to their full time equivalent
hours. Any employee who has been employed for less than
30 days has been excluded on the grounds that their
annualisation is less likely to be accurate.
4. The total single figure remuneration calculated for each
employee includes full time equivalent base pay, annual
bonuses for the 2018 performance year, overtime, benefits,
allowances and employer pension contributions.
5.
Due to the timing constraints of when employee annual
bonuses are determined and paid across the Group, the
value of employee annual bonus payments included in the
calculation is in respect of the year ended 30 June 2018.
6. Part time workers have been included by calculating the
full time equivalent value of their pay and benefits.
7.
All overtime earned during the period 1 July 2018 to
31 March 2019 has been annualised for all employees
and included in the calculation.
8. Leavers, joiners and employees on reduced pay (due to sick
pay, maternity leave, etc.) have been included.
9.
Smart pension reductions have been excluded on the basis
that these are a voluntary arrangement whereby a employee
foregoes part of their salary in exchange for additional
pension contributions rather than a reduction in the
salary provided.
113
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Remuneration continued
Relative importance of spend on pay
The following table sets out the percentage change in dividends and overall spend on pay in the financial year being reported on
compared with the previous year.
Dividends
Overall expenditure on pay
2019
£m
2018
£m
£43.8
£43.8
£1,272.7
£1,224.4
%
change
0
3.9
The Group has not made any other significant distributions and payments or other uses of profit or cashflow deemed by the directors
to assist in understanding the relative importance of spend on pay.
Payments to former directors and payments for loss of office (audited)
There were no payments made to former executive directors during the year ended 29 June 2019 (2018: £nil).
Material contracts
There have been no other contracts or arrangements during the financial year in which a director of the Group was materially
interested and/or which were significant in relation to the Group’s business.
External advisors to the committee
New Bridge Street (NBS) (part of Aon plc) acts as an independent remuneration advisor to the committee. The advisor was selected
through a thorough process led by the Remuneration Committee Chair and was appointed by the committee.
Neither Aon Hewitt Limited nor the wider Aon plc provided any other services to the Group during the year and therefore the committee
was satisfied that it provided objective and independent advice. NBS is a member of the Remuneration Consultants Group and complies
with its code of conduct. The fees payable to NBS for advice throughout the year were £64,300 (2018: £49,579).
Statement of voting at Annual General Meeting
At last year’s AGM (1 November 2018) the directors’ remuneration report and policy received the following votes from shareholders:
Remuneration policy
Remuneration report
Votes for and
discretionary
Votes against
Total votes
Withheld
30,249,362
307,034 30,556,396
19,230
99.00%
1.00%
100.00%
29,886,078
291,604
30,177,682
397,944
99.03%
0.97%
100.00%
114
The Go-Ahead Group plc Annual Report and Accounts 2019
Section 3: Implementation of remuneration
policy in 2020
The committee is not proposing any changes to the
remuneration policy for the financial year 2020.
Executive directors’ 2020 base salaries
The base salaries of the executive directors were last reviewed
with effect from 1 April 2019 and will remain unchanged until the
next annual review.
Benefits
The benefits for both executive directors will be adopted in line
with the remuneration policy, approved during the last AGM as
outlined on pages 98 to 103.
Pensions
Pension provision for executive directors has been aligned with
the majority of the workforce which will remain effective for the
forthcoming financial year.
2020 performance-related bonus
The performance measures and weightings for 2020, which
remain unchanged from 2019, are as follows:
Metric
Weighting (% of maximum bonus)
Operating profit
Group cashflow
Strategic KPIs
65%
10%
25%
Operating profit will be weighted between the bus and rail divisions.
Operating profit, cashflow and strategic KPI targets will be
stretching for the 2020 financial year and more information
on the specific targets and performance against them will be
provided retrospectively in next year’s remuneration report to
the extent that they are not commercially sensitive at the time.
The key strategic KPIs will be in support of the delivery of our
three strategic pillars which are to protect and grow the core,
win new bus and rail contracts and develop for the future
of transport.
A rail customer service underpin will also continue to apply to
the bonus, with the remuneration committee having discretion
to scale back the bonus if there was a significant decline in rail
customer satisfaction.
Any bonus payable will be satisfied 50% in cash and 50% in
deferred shares. Malus and clawback provisions will apply to
the full performance-related bonus and the audit committee
will undertake a formal end-of-year quality of profit and budget
review in conjunction with the auditor before approval of any
bonus payment.
2019 LTIP awards
For the year commencing 30 June 2019, the LTIP award for the
Group Chief Executive and the Group Chief Financial Officer will
have a face value of 150% and 100% of salary respectively.
The LTIP award will be subject to malus and clawback provisions
for three years following vesting. Awards will also be subject to a
holding period that applies until the later of (i) the fifth anniversary
of the grant date (ii) or the second anniversary of vesting. During
this time, any vested awards may not be sold (other than to pay
any tax and NICs due on exercise). This will result in an overall
five year period before executives can realise the gain on
vested shares.
The committee is not proposing any changes to the remuneration
policy for the financial year 2020. However, the committee does
have discretion to vary the weighting of and choice of LTIP
metrics prior to each award. In accordance with best practice, the
committee will be consulting with the Group’s major shareholders
and shareholder representative bodies on proposed changes
to the LTIP’s performance targets and weightings for the next
award to be granted in November 2019. The outcome of this
consultation will be confirmed to the Group’s major shareholders
and shareholder representative bodies before the 2019 AGM, in
addition to being disclosed in next year’s Annual Report.
Non-executive directors’ fees
The non-executive directors’ fees will remain unchanged until
the next annual fee review is undertaken.
A health and safety underpin will continue to apply to the
full bonus, with the remuneration committee having discretion
to reduce or not pay the bonus if health and safety performance
was not satisfactory.
Katherine Innes Ker
Remuneration Committee Chair
4 September 2019
115
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Directors’ report
The directors present their report and audited financial statements for the year ended 29 June 2019. This directors’ report
forms part of the management report as required under the Disclosure Guidance and Transparency Rules.
Information incorporated by reference
The following information is provided in other appropriate sections of this Annual Report and Accounts and is incorporated by reference:
Information
Reported in
Corporate governance
Corporate governance statement
Directors’ statement of responsibilities
Directors
Board of directors
Employees
Directors’ remuneration report – directors’ shareholdings
and share interests
Strategic report – employee policies (including those
concerning the employment of disabled persons),
employee engagement and information on the Group
equal opportunities, inclusion and diversity policy
Business model
Strategic report
Likely future developments in the business
Strategic report
Important events since 29 June 2019
Strategic report
Greenhouse gas emissions
Appendix to shareholder information
Risk factors and principal risks
Strategic report
Viability statement
Going concern
Strategic report
Directors’ report
Page(s)
56 to 79
119
60 to 61
90 to 115
25 to 27
20 to 21
6 to 55
13
207 to 208
46 to 55
47
119
Listing Rule 9.8.4R disclosures
The table below sets out where information required to be disclosed under Listing Rule 9.8.4R can be found in this Annual Report and
Accounts (to the extent applicable to the Group).
Listing
Rule 9.8.4
Required disclosure
Interest capitalised and tax relief
Reference
Not applicable
Publication of unaudited financial information
Not applicable
Details of long term incentive schemes
Note 5 of the financial statements and directors’
remuneration report on pages 90 to 115
Waiver of emoluments by a director
Not applicable
Waiver of future emoluments by a director
Not applicable
Non pre-emptive issues of equity for cash
Non pre-emptive issues of equity for cash by major
subsidiary undertakings
Not applicable
Not applicable
Parent participation in a placing by a listed subsidiary
Not applicable
Contracts of significance
Not applicable
Provision of services by a controlling shareholder
Not applicable
Shareholder waivers of dividends
Directors’ report on page 118
Shareholder waivers of future dividends
Directors’ report on page 118
Agreements with controlling shareholders
Not applicable
1
2
3
4
5
6
7
8
9
10
11
12
13
116
The Go-Ahead Group plc Annual Report and Accounts 2019 Group’s Articles of Association (Articles)
The Articles may only be amended by a special resolution at a
general meeting of shareholders. Shareholders of the Group can
request a copy of the Articles by contacting the Group Company
Secretary at the registered office.
Directors’ conflicts of interests
The Board has established robust procedures for ensuring that its
power to authorise conflicts of interest is operated in accordance
with the Articles. The Board considers that the procedures in
respect of this power, which have been properly followed, have
operated effectively during the year and the conflicts register has
been updated accordingly. The Board is aware of its directors’
other commitments and any changes to these commitments are
advised to and approved by the Board.
Appointment and removal of directors
The appointment and removal of directors are governed by
the Articles, the UK Corporate Governance Codes published in
April 2016 and July 2018, the Companies Act 2006 (the Act) and
related legislation. Directors may be appointed by the Company,
by ordinary resolution or by the Board. A Director appointed by
the Board holds office until the next Annual General Meeting
(AGM) of the Company after their appointment and is then
eligible to stand for election. In line with the Articles, they are
then required to stand for re-election at every AGM thereafter.
The Company may, by ordinary resolution, remove any director
before the expiry of the director’s period of office. The powers of
the directors are set out in the Articles and the Act.
In accordance with the Board’s succession plan, Andrew Allner
will retire from the Board at the conclusion of the 2019 AGM and
will therefore not be standing for re-election. All other directors
will be submitting themselves for re-election at the 2019 AGM
with the exception of Elodie Brian and Clare Hollingsworth,
who will be offering themselves for election for the first time
following their appointment to the Board on 5 June 2019 and
1 August 2019 respectively.
The Board is satisfied that each director is qualified for election/
re-election by virtue of their skills, experience and contribution to
the Board. Biographical details of all directors for the year ended
29 June 2019 can be found on pages 60 and 61.
Directors’ indemnities
In accordance with our Articles, and to the extent permitted by
law, directors are granted an indemnity from the Group in respect
of liability incurred as a result of their office. In addition, we
maintained a directors’ and officers’ liability insurance policy
throughout the year. Neither an indemnity nor the insurance
provides cover in the event that a director is proven to have
acted dishonestly or fraudulently. Qualifying third party
indemnity provisions (as defined in Section 234 of the Act)
were in force during the year ended 29 June 2019 and continue
to remain in force.
Change of control
Details of the change of control provisions in place across the
Group can be found on page 205.
There are no agreements between the Group and its directors
or employees providing for compensation for loss of office or
employment (whether through resignation, purported redundancy
or otherwise) that occurs because of a takeover bid.
Dividends
The Board continues to recognise the importance of dividends to
shareholders and accordingly targets a dividend payout ratio of
50% to 75% of net income. Details of the proposed final dividend
payment for the year ended 29 June 2019 are shown on the
consolidated income statement on page 129 of the report.
Political donations and expenditure
It is the Group’s policy not to make political donations and,
accordingly, no such payments were made in the year (2018: £nil).
Additionally, the Group did not incur any political expenditure as
defined in the Act (2018: £nil).
Post balance sheet events
On 7 August 2019, the Department for Transport confirmed a
further extension to the current Southeastern franchise which will
now run to 1 April 2020 rather than expiring on 10 November 2019.
For further information on this post balance sheet event, please
see page 186.
Financial instruments
Details of the Group’s financial risk management in relation to its
financial instruments are available in note 21 of the consolidated
financial statements.
117
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Directors’ report continued
Auditor
Resolutions to reappoint Deloitte LLP as auditor of the Group and
to authorise the audit committee to determine its remuneration
will be proposed at the 2019 AGM. Further details are provided on
page 89.
Share capital and substantial shareholdings
All information relating to the Group’s capital structure, rights
attaching to shares, dividends, any restrictions on the transfer
of shares, the policy to repurchase the Group’s own shares,
substantial shareholdings and other shareholder information
is shown on pages 204 to 206.
Share schemes
Employee Benefit Trust
Computershare Trustees (Jersey) Limited, the Trustee of The
Go-Ahead Group Employee Trust (the Trust), holds shares for the
benefit of the Group’s executive directors and senior managers,
and in particular for the satisfying of awards made under the
Group’s Long Term Incentive Plan (LTIP) and Deferred Share
Bonus Plan (DSBP). During the financial period, as part of a
planned programme of monthly share purchases, the Trust
purchased a total of 56,482 ordinary shares at a total price of
£965,969 (including all associated costs). The average price was
£17.32 per share. As at 4 September 2019 (being the latest
practicable date prior to the date of this report) the Trust held
172,299 ordinary shares representing 0.4% of the issued share
capital of the Group, less treasury shares, in trust for the benefit
of the executive directors and senior managers of the Group
under the LTIP and DSBP. The voting rights in relation to these
shares are exercised by the Trustee and dividends are waived
while the shares are held by the Trustee.
Share Incentive Plan
The Group operated a Share Incentive Plan during the year under
review, enabling employees of the Group to acquire shares in
The Go-Ahead Group plc. In order to preserve certain tax benefits,
these shares are held in a trust by EES Corporate Trustees Limited
for participating employees. Whilst these shares are held in
trust, the voting rights attached to them will not be exercised
by the Trustee or the employees for whom they are held. As at
4 September 2019 (being the latest practicable date prior to the
date of this report), 1% of the issued share capital of the Group,
less treasury shares, was held by EES Corporate Trustees Limited.
In the event of an offer being made to acquire these shares, the
employees are entitled to direct EES Corporate Trustees Limited
to accept an offer in respect of the shares held on their behalf.
Save As You Earn Scheme
The Go-Ahead Group plc 2013 Savings-Related Share Option
Scheme which launched in February 2016 (Sharesave 2016)
matured this year on 1 May 2019. Under Sharesave 2016, all
permanent employees who had completed at least six months’
continuous service with a participating company were invited to
make monthly savings of between £5 and £50 over a period of
three years. At the end of the savings term, participants were
given the choice of taking their money back, or to purchase
Go-Ahead Group shares at a 20% discount of the market price
set at the date of invitation. Sharesave 2016 participants have
six months from the maturity date to exercise their options.
By order of the Board
Carolyn Ferguson
Group Company Secretary
4 September 2019
118
The Go-Ahead Group plc Annual Report and Accounts 2019 Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report
and Accounts in accordance with applicable United Kingdom
law and regulations. Detailed below are statements made by
the directors in relation to their responsibilities, disclosure
of information to the auditor and going concern.
Directors’ responsibilities in respect of the preparation
of the financial statements
UK company law requires the directors to prepare Group financial
statements for each financial year. The directors are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted
by the European Union.
Under company law, the directors must not approve the Group
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group at the end
of the financial year and of the profit or loss of the Group for
that period.
In preparing the Group financial statements, the directors are
required to:
• Select suitable accounting policies and apply them consistently
• Make judgements and estimates that are reasonable and prudent
• State whether applicable IFRSs as adopted by the European Union
(EU) have been followed, subject to any material departures
disclosed and explained in the financial statements
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will
continue in business
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Group, and enable them to ensure
that the Group financial statements and the directors’
remuneration report comply with the Companies Act 2006
(the Act) and, as regards the Group financial statements,
Article 4 of the IAS Regulation.
The directors are also responsible for safeguarding the assets
of the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the Group’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The directors consider that the Annual Report and Accounts,
taken as whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s
performance, business model and strategy.
Each of the directors, whose names and functions are listed on
pages 60 to 61 of the Annual Report and Accounts, confirm that,
to the best of their knowledge:
• The Group financial statements, which have been prepared in
accordance with the IFRSs as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Group
• The strategic report includes a fair view of the development
and performance of the business and the position of the Group
and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and
uncertainties that they face
Disclosure of information to the auditor
Each person who is a director at the date of approval of this
report confirms that:
• So far as the directors are aware, there is no relevant audit
information (as defined in Section 418(3) of the Act) of which
the Group’s auditor is unaware
• The directors have taken all the steps they ought to have
taken to make themselves aware of any relevant audit
information and to establish that the Group’s auditor is
aware of that information
This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the Act.
Going concern
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position, are set out in the strategic report. The financial
position of the Group, its cashflows, liquidity position and
borrowing facilities are described in the financial review on
pages 44 and 45. In addition, note 21 to the financial statements
includes the Group’s objectives, policies and processes for
managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and
its exposures to price risk, credit risk, liquidity risk and
cashflow risk.
Cash generation from the Group’s bus and rail operations was
strong and the balance sheet remains robust. Core financing is
provided by a £250m sterling bond entered into on 6 July 2017
securing financing to 2024 and committed bank facilities of
£280.0m to July 2024, with a further one year extension
available. The directors believe that the Group is well placed
to manage its business risks successfully despite the current
uncertain economic outlook.
The directors have assessed, in light of current and anticipated
economic conditions, the Group’s ability to continue as a
“going concern”. The directors confirm they are satisfied that
the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they
continue to adopt the “going concern” basis in preparing
the Annual Report and Accounts.
The directors are also required to provide a broader assessment
of viability over a longer period, which can be found on page 47.
The directors’ going concern confirmation and viability
statement have both been considered in accordance with the
“Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting” published by the Financial
Reporting Council in September 2014.
By order of the Board
Carolyn Ferguson
Group Company Secretary
4 September 2019
119
Annual Report and Accounts 2019 The Go-Ahead Group plcCorporate governance Independent auditor’s report to the members of The Go-Ahead Group plc
Report on the audit of the financial statements
• the critical accounting judgements and key sources of
Opinion
In our opinion:
• the financial statements of The Go-Ahead Group plc
(the ‘parent company’) and its subsidiaries (the ‘group’) give
a true and fair view of the state of the group’s and of the parent
company’s affairs as at 29 June 2019 and of the group’s profit
for the year then ended;
• the group financial statements have been properly prepared in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and IFRSs as issued
by the International Accounting Standards Board (IASB);
• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting
Standard 101 “Reduced Disclosure Framework”; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as
regards the group financial statements, Article 4 of the
IAS Regulation.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and company statements of changes
in equity;
• the consolidated and company balance sheets;
• the consolidated cashflow statement;
estimation uncertainty;
• the notes to the consolidated financial statements 1 to 29
and to the parent company financial statements 1 to 19.
The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law
and IFRSs as adopted by the European Union. The financial
reporting framework that has been applied in the preparation of
the parent company financial statements is applicable law and
United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in
the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the group and the parent company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the Financial
Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
We confirm that the non-audit services prohibited by the
FRC’s Ethical Standard were not provided to the group or the
parent company.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Franchise compliance and associated income under rail contracts
• Rail franchise, dilapidation and other provisions and accruals
• Valuation of uninsured liabilities
• Valuation of pension scheme liabilities and related disclosures
• Revenue recognition for the bus division
Materiality
Scoping
Within this report, any new key audit matters are identified with >
same as the prior year identified with >> .
> and any key audit matters which are the
The group materiality that we used in the current year was £5.8m (2018: £6.0m) which was determined as 5%
of pre-tax profit (pre-exceptional items).
Full audit procedures were performed over 95.1% of the group’s total assets, 97.6% of the group’s revenue, and
99.1% of the group’s profit before tax.
Significant changes
in our approach
In the prior year, the key audit matter surrounding the GTR franchise was considered and disclosed separately
in the audit report (“Govia Thameslink Railway – Ongoing operational and financial challenges”). Following the
agreement reached with the Department for Transport (DfT) during the year and with the associated risk
relating to the franchise provisions reduced, it is deemed appropriate to consolidate this risk into the “Other
rail franchise, dilapidations, other accruals and provisions” key audit matter.
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The Go-Ahead Group plc Annual Report and Accounts 2019 Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the directors’ statement in note 2 to the financial statements about whether they
considered it appropriate to adopt the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the group’s and company’s ability to continue to do so
over a period of at least twelve months from the date of approval of the financial statements.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of going concern.
We considered as part of our risk assessment the nature of the group, its business model and related
risks including where relevant the impact of Brexit, the requirements of the applicable financial reporting
framework and the system of internal control. We evaluated the directors’ assessment of the group’s
ability to continue as a going concern, including challenging the underlying data and key assumptions
used to make the assessment, and evaluated the directors’ plans for future actions in relation to their
going concern assessment.
We are required to state whether we have anything material to add or draw attention to in relation to
that statement required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent
with our knowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were consistent with
the knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation
of the directors’ assessment of the group’s and the company’s ability to continue as a going concern,
we are required to state whether we have anything material to add or draw attention to in relation to:
• the disclosures on pages 46–55 that describe the principal risks and explain how they are being
managed or mitigated;
• the directors' confirmation on page 50 that they have carried out a robust assessment of the principal
risks facing the group, including those that would threaten its business model, future performance,
solvency or liquidity; or
• the directors’ explanation on page 47 as to how they have assessed the prospects of the group, over
what period they have done so and why they consider that period to be appropriate, and their statement
as to whether they have a reasonable expectation that the group will be able to continue in operation
and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to report whether the directors’ statement relating to the prospects of the group
required by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of the directors’
disclosure of principal
risks and viability.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current year and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
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Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc Independent auditor’s report to the members of The Go-Ahead Group plc continued
Franchise compliance and associated income under rail contracts >>
Key audit matter
description
How the scope of
our audit responded
to the key audit
matter
In respect of the two train operating companies (TOCs) a franchise agreement details the arrangements
covering entitlement to revenue, certain costs and performance conditions. Due to the complexity of the
arrangements there is a risk that the financial statements do not appropriately reflect the correct revenue and
costs in terms of completeness, measurement and occurrence, and/or income/penalties that can arise based
on the actual performance of the individual TOC under the franchise agreement. Revenue for the year-ended
29 June 2019 totalled £2,804.9m (2018: £2,527.3m) for the rail operating segment, as disclosed in note 3 of the
consolidated financial statements. This is noted in the critical accounting judgements and key sources of
estimation uncertainty note on pages 136–137 of the Annual Report and in the key financial and internal
control matters in the Audit Committee report on pages 86–87 of the Annual Report.
Due to the complexity of the franchise arrangements, and the level of management judgement involved, we
deemed this a potential fraud risk for our audit.
• We read the key elements of the franchise agreements to understand the critical elements, inform the audit
approach and challenge the accounting treatments adopted.
• We tested all significant assets, provisions and accruals, significant being quantitatively or qualitatively material.
We also tested the associated revenue or costs recognised to assess whether their recognition and quantum
was appropriately stated, and whether there were any indicators that the balances held should no longer be
recognised due to the passage of time, changes in contractual commitments, or legal requirements.
• We held meetings with each of the franchise compliance managers to assess whether there were any new
issues of non-compliance or expected non-compliance, and whether any franchise committed obligations
will not be delivered.
• We tested the supporting documentation for these balances as prepared by management to source information,
evaluated whether it was compliant with the franchise agreements, and tested the calculations applied
including recalculation where relevant.
• We held meetings with the Finance Directors and members of the finance team to assess on a case by case
basis the movements in the provisions and accruals, during the period under audit, and challenged management
both on the recognition of new provisions and accruals, and also the continued recognition of long standing
provisions and accruals.
• We reviewed board minutes and board papers to assess whether there was any inconsistency in the
determination of the provisions and accruals balances or any significant judgements which have not
been accounted for by management.
• We reviewed relevant legal documentation and minutes of meetings held with the DfT.
• We assessed disclosure of this area within the financial statements as a critical judgement against the
requirements of IAS 1.
Key observations
The results of our procedures were satisfactory. We concur with the judgements made which are based on
industry practice and relevant supporting data.
Rail franchise, dilapidation and other provisions and accruals >>
Key audit matter
description
This key audit matter relates to the valuation of contractual and property related liabilities, in particular
third party claims; and dilapidation provisions relating to rolling stock, depots and stations (see note 23 of
the financial statements).
During the reporting period, GTR reached an agreement with the DfT which settles the majority of past issues
and significantly reduces the uncertainty over the future of the franchise. This agreement incorporated a
margin guidance of 0.75% to 1.0% over the remaining life of the franchise, with an agreement for GTR to make
no profit in the current year. As a result, there is an increased focus on provisions and the recognition of costs
during the year within GTR, due to the risk that provisions could be overstated and released in future periods.
Franchise commitments total £64.0m as at 29 June 2019 (2018: £51.9m) as shown in consolidated note 23.
This is noted in the critical accounting judgements and key sources of estimation uncertainty note on pages
136–137 and in the key financial and internal control matters in the Audit Committee report on pages 86–87
of the Annual Report. Due to the level of management judgement involved in determining the correct value
of provisions to be held, we deemed this a potential fraud risk for our audit.
122
The Go-Ahead Group plc Annual Report and Accounts 2019 How the scope of
our audit responded
to the key audit
matter
• We gained an understanding of each significant accrual or provision, the basis of estimate and the range of
possible outcomes with the Finance Directors and relevant members of the finance teams.
• We have completed a review of supporting documentation and evidence for the existence of the obligation,
obtaining directly from third parties where relevant. We have re-performed management’s calculations to
assess the quantum of the obligation outstanding at year-end, challenging whether the obligation exists.
• We assessed whether the provisions meet the criteria for recognition per IAS 37 and whether they have
been appropriately classified as provisions or as an accrual.
• We assessed whether the third parties used to estimate relevant valuations have the appropriate experience,
qualifications and knowledge of the business, and agreed the findings from their surveys into the provision.
• We reviewed relevant legal documentation and correspondence with Network Rail.
• We reviewed reports from Rolling stock leasing companies (ROSCOs) and management’s valuation experts
on their inspections and surveys.
• We held a meeting with LSER external legal counsel in relation to the Collective Proceedings Application to
assess whether this should be classified as a provision or contingent liability.
• We assessed the implications to GTR as a result of the agreement with DfT. Our audit procedures have
included critically evaluating whether further provisions are held in the current year with a view to release
these when GTR’s profit will not be restricted by this agreement.
• We assessed disclosure of this area within the financial statements as a critical judgement against the
requirements of IAS 1.
Key observations
The results of our procedures were satisfactory. We concur with the judgements made which are based on
industry practice and relevant supporting data.
Valuation of uninsured liabilities >>
Key audit matter
description
How the scope of
our audit responded
to the key audit
matter
This key audit matter relates to the valuation of insurance related provisions and in particular the completeness
of motor and other provisions relating to transport incidents. Judgement was required in the assessment of
the recognition criteria in each individual circumstance and the level of the provision held. The calculation of
the self-insurance provision also required significant levels of management judgement regarding the level of
provision required in respect of claims incurred but not reported (IBNR) based on historic trends. Due to the
level of management judgement involved we deemed this a potential fraud risk for our audit.
The uninsured claims provision held in the Group financial statements at 29 June 2019 was £43.4m (2018: £45.3m)
(see note 23: Provisions). The IBNR element represents £8.3m (2018: £9.7m) of the £43.4m (2018: £45.3m) total
self-insurance provision.
It is noted in the critical accounting judgements and key sources of estimation uncertainty note on pages 136–137 and
in the key financial and internal control matters in the Audit committee report on pages 86–87 of the Annual Report.
• We gained an understanding of the Group’s obligations under its insurance policies with relevant members
of the finance team and reviewed the documents to confirm these.
• We assessed the methodology used to calculate the claims incurred liabilities.
• We assessed the approach used to determine the provision for claims incurred but not received and tested
this provision against historical trends.
• We tested completeness of the self-insurance claims provision by sampling individual claims reported to
the individual operating companies and confirmed they appropriately flowed through to the claim handlers'
reports, and the provision held at group.
• We reviewed group and subsidiary Board minutes, Board papers and held discussions with management to
identify any significant matters which should have been considered when creating the provision and to identify
any inconsistencies between the minutes and our understanding from the review of provisions performed.
• We assessed the self-insurance provision to settle claims for incidents which arose prior to the balance
sheet date (including those for incidents incurred but not reported) for completeness and accuracy through
discussions held with the finance team and a review and testing of third party reports.
• We assessed disclosure of this area within the financial statements as a critical judgement against the
requirements of IAS 1.
Key observations
The results of our procedures were satisfactory and we concurred with the level of provisions held. Whilst we
have historically considered the IBNR provision to have been conservatively derived, in the current year we consider
the provision to fall within a reasonable benchmark range.
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Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc
Independent auditor’s report to the members of The Go-Ahead Group plc continued
Valuation of pension scheme liabilities and related disclosures >>
Key audit matter
description
Given the size of the Group, managing the pension liabilities is complex and significant judgement is required
in determining the value of the liabilities provided as set out in the critical accounting judgements and key sources
of estimation uncertainty note on pages 136–137. Total defined benefit liabilities were £810.1m as at 29 June 2019
(2018: £792.5m). The significant judgements made relate to the assumptions underpinning the calculation
of the Group’s defined benefit pension liability and also relate to the accounting treatment for the Rail
Pension Scheme.
The liabilities of the schemes are highly sensitive to any changes in long-term assumptions year on year which
could materially impact the Group’s balance sheet position. Judgement is also involved in assessing the impact
of the High Court ruling relating to the guaranteed minimum pension (GMP) equalisation (£16.8m income
statement charge) recognised as an exceptional item in the financial statements.
The values and associated disclosures are set out in note 27 and also discussed in the key financial and internal
control matters in the Audit Committee report on pages 86–87 of the Annual Report. The assessment of this
balance as a key source of estimation uncertainty is discussed on page 137.
How the scope of
our audit responded
to the key audit
matter
• We involved our actuarial experts to assess whether the values used by management’s actuaries for key
assumptions at the year-end are within Deloitte’s acceptable range with a focus on estimations of future
changes in salaries, inflation and longevity of current and deferred members and the selection of a suitable
discount rate.
• We involved our actuarial experts to assess the appropriateness of the methodology used by
management’s actuaries to calculate the liabilities for the pension schemes.
• We tested the membership data utilised by the actuaries to calculate the liabilities for the pension scheme.
• We reviewed the accounting treatment of the Rail Pension Scheme for compliance with the Group’s
accounting policy and IFRS.
• We assessed the pension disclosures in the financial statements and considered their compliance with the
requirements of IAS19 revised.
• We engaged actuarial experts to assess the GMP provision recognised.
• We assessed disclosure of this area within the financial statements as a critical judgement against the
requirements of IAS 1.
Key observations
The results of our procedures were satisfactory and we concurred with the assumptions applied in respect of
the valuation of the scheme liabilities. These assumptions fall within the middle of our acceptable range.
Revenue recognition for the bus division >>
Key audit matter
description
In the bus division the key audit matter over revenue recognition has been focused on whether recognising
revenue in relation to concessionary fare income, contract sales and most significantly Quality Incentive Contract
premiums (QICs) in London Bus is appropriate. Judgement is involved in determining QICs revenue which is
based on performance measures associated with the contract. QICs income reflects the area of most
judgement in the Bus division reflecting that it requires an assessment of the likely additional revenue
receivable under the contractual terms with Transport for London for performance in the period.
Revenue for the year ended 29 June 2019 totalled £1,002.2m (2018: £934.2m) for the bus operating segment
(see segmental analysis note 3 of the Annual Report). Due to the management judgement involved in
determining QICs revenue we deemed this a potential fraud risk for our audit. QICs revenue increased from
£13.2m in the prior year to £18.3m in the current year as a result of improved performance.
How the scope of
our audit responded
to the key audit
matter
• We assessed the process undertaken to recognise revenue in the bus businesses with the finance team and
the associated reviews and controls performed.
• We evaluated the design and implementation of controls related to revenue processes determine whether
they have been implemented regarding the correct recording of revenue.
• We performed detailed testing to supporting documentation, being third party where relevant, of the key
revenue balances at each in scope bus business including a focus on the QICs premium income recognised
in London Bus.
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The Go-Ahead Group plc Annual Report and Accounts 2019 Key observations
The results of our procedures were satisfactory and we concurred with the recognition of revenue in the
bus division.
Our application of materiality
Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit
work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£5.8m (2018: £6.0m)
£2.3m (2018: £2.4m)
Basis for
determining
materiality
5% of pre-tax profit (2018: 5%) pre-exceptional items.
(Exceptional items have been defined in the critical
accounting judgements and key sources of estimation
uncertainty section of the Annual Report, amount
disclosed in note 6).
Rationale for
the benchmark
applied
Pre-tax profit was selected as the appropriate measure
on which to determine materiality as it is considered an
area of focus for the users of the accounts. We excluded
exceptional items from pre-tax profit so that the basis
removed volatility from the materiality determination.
Determined based on 3% of equity (2018: 3%) but
capped at 40% of group materiality
Equity has been selected as an appropriate measure on
which to determine materiality as the parent company is
a Holding company.
PBT (pre exceptional)
£113.8m
PBT (pre exceptional)
Group materiality
Group materiality
£5.8m
Component
materiality range
£4.1m to £2.3m
Audit Committee
reporting threshold
£0.3m
Performance materiality
As part of our audit, we determine a performance materiality which is used to assess the risks of material misstatement for the audit
and determine the nature, timing and extent of audit procedures to be performed.
Performance materiality has been determined at 70% of materiality, giving a performance materiality of £4.06m for FY19.
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole. In determining performance materiality, we considered
the following factors:
• the quality of the financial reporting and control environment; and
• the level of unadjusted misstatements in the current and prior year.
Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.3m (2018: £0.3m),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the
Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
125
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc
Independent auditor’s report to the members of The Go-Ahead Group plc continued
An overview of the scope of our audit
Our Group audit scope was determined after obtaining an understanding of the Group and its environment, including Group-wide
controls, and assessing the risks of material misstatement at the Group level. Based on that assessment, we focused our Group audit
scope primarily on the audit work at 11 (2018: 12) principal locations including both of the UK rail businesses which were subject to a
full audit. The change being reflective of our continued assessment of financial significance of each component to the Group. The
locations in scope represent the principal business units and account for 95.1% of the Group’s total assets, 97.6% of the Group’s revenue
and 99.1% of the Group’s profit before tax, with the bus businesses out of scope contributing an immaterial loss. The locations were
selected to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above. Our
audit work at the principal locations was executed at levels of materiality applicable to each individual entity which were lower than
Group materiality and within the range disclosed above.
Our scoping decisions considered a number of factors including the individual financial significance of a component, whether key audit
matters were applicable to the components, newly acquired or newly operational components.
In the current year our audit scoping has risk assessed recent acquisitions in Dublin and Manchester and also the commencement
of rail operations in Germany. Specified procedures have been performed in these locations where deemed appropriate.
A component materiality was used to perform the audit work at all component locations and for the FY19 this ranged from £2.3m to
£4.1m (FY18: £2.6m – £4.4m). Component materiality is used to reduce to an appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements in the Group financial statements exceeds materiality for the Group financial
statements as a whole.
The group audit team continued to follow a programme of planned visits that has been designed so that either the Senior Statutory
Auditor or a senior member of the group audit team visits each of the locations where the group audit scope was focused at least once
every year and the most significant of them at least twice a year. In addition, we attended close meetings with them and component
management teams, and reviewed their component reporting.
At the parent entity level we also tested the consolidation process and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the aggregated financial information of the remaining components
not subject to audit or audit of specified account balances.
Other information
The directors are responsible for the other information. The other information comprises the information
included in the Annual Report other than the financial statements and our auditor’s report.
Our opinion on the financial statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
We have nothing to
report in respect of
these matters.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material
misstatements of the other information include where we conclude that:
• Fair, balanced and understandable – the statement given by the directors that they consider the Annual
Report and financial statements taken as a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the group’s position and performance, business model
and strategy, is materially inconsistent with our knowledge obtained in the audit; or
• Audit Committee reporting – the section describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’
statement required under the Listing Rules relating to the company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule
9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
126
The Go-Ahead Group plc Annual Report and Accounts 2019 Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design
and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide
a basis for our opinion. Our work is designed to identify errors that we consider are likely to be material to those that seek to rely on the
financial statements either by their monetary value or because of their nature.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws
and regulations, we considered the following:
• the nature of the industry and sector, franchise compliance and communication with DfT of the train operating companies.
• the control environment and business performance including the design of the group's remuneration policies being driven by both
financial and strategic measures;
• the group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was approved by the
board;
• results of our enquiries of management, internal audit and the audit committee about their own identification and assessment of the
risks of irregularities;
• any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures relating to:
a.
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
b. detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
c. the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
• the matters discussed among the audit engagement team including significant component audit teams and involving relevant
internal specialists, including tax, pensions, and IT specialists regarding how and where fraud might occur in the financial statements
and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified potential for fraud in the following areas; revenue recognition and compliance with rail franchise and bus contracts, and in
relation to key provisions and accruals such as rail franchise and dilapidation provisions and uninsured liabilities. In common with all
audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on those laws and
regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations of the Group.
The key laws and regulations we considered that had a direct effect on the financial statements included the UK Companies Act,
Listing Rules, pension legislation and tax legislation. In addition, compliance with the terms of the Group’s schedules of the franchise
agreements for the train operating companies which are fundamental to the Group’s business operations.
Audit response to risks identified
As a result of performing the above, we identified the following key audit matters;
• Franchise compliance and associated income under rail contracts
• Rail franchise, dilapidation and other provisions and accruals
• Valuation of uninsured liabilities
• Valuation of pension scheme liabilities and related disclosures
• Revenue recognition for the bus division
The key audit matters section of our report explains the matters in more detail and also describes the specific procedures we
performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with relevant laws and
regulations described above as having a direct effect on the financial statements;
• enquiring of management, the audit committee and in-house/external legal counsel concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
127
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc Independent auditor’s report to the members of The Go-Ahead Group plc continued
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with
the DfT in relation to the rail operating franchises; and
• in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members, including
internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws
and regulations throughout the audit.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and of the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to
report in respect of
these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made or the part of the directors’ remuneration report to be audited is not in
agreement with the accounting records and returns.
We have nothing to
report in respect of
these matters.
Other matters
Auditor tenure
Following the recommendation of the audit committee, we were appointed by the Company’s members on 22 October 2015 to audit
the financial statements for the year ending 2 July 2016 and subsequent financial periods. The period of total uninterrupted engagement
including previous renewals and reappointments of the firm is 4 years, covering the years ending 2 July 2016 to 29 June 2019.
Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Christopher Powell, FCA (Senior statutory auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
4 September 2019
128
The Go-Ahead Group plc Annual Report and Accounts 2019 Consolidated income statement
for the year ended 29 June 2019
Group revenue
Operating costs
Group operating profit
Share of result of joint venture
Finance revenue
Finance costs
Profit before taxation
Tax expense
Profit for the year from continuing
operations
Attributable to:
Equity holders of the parent
Non-controlling interests
Earnings per share
– basic
– diluted
Dividends paid (pence per share)
Final dividend proposed (pence per share)
7
7
8
9
9
10
10
Pre-
exceptional
2019
£m
3,807.1
(3,686.0)
Notes
3
4, 6
Exceptional
items
2019
£m
Post-
exceptional
2019
£m
Pre-
exceptional
2018
£m
Exceptional
items
2018
£m
3,807.1
(3,702.8)
3,461.5
(3,325.6)
—
(16.8)
(16.8)
—
—
—
(16.8)
2.8
104.3
(0.5)
5.1
(11.9)
97.0
(21.9)
121.1
(0.5)
5.1
(11.9)
113.8
(24.7)
89.1
(14.0)
75.1
72.8
16.3
89.1
(14.0)
—
(14.0)
58.8
16.3
75.1
135.9
(1.1)
2.5
(14.1)
123.2
(24.9)
98.3
78.0
20.3
98.3
Post-
exceptional
2018
£m
3,461.5
(3,300.5)
161.0
(1.1)
2.5
(16.7)
145.7
(36.4)
109.3
89.0
20.3
109.3
—
25.1
25.1
—
—
(2.6)
22.5
(11.5)
11.0
11.0
—
11.0
169.4p
169.0p
(32.6)p
(32.5)p
136.8p
136.5p
181.6p
181.2p
25.6p
25.5p
207.2p
206.7p
102.08p
71.91p
102.08p
71.91p
The consolidated income statement includes the majority of our income and expenses for the year with the remainder
recorded in the consolidated statement of comprehensive income
Highlights of the movements in the year are set out below:
Revenue
Revenue increased by 10.0% to £3,807.1m (2018: £3,461.5m). The rail operations comprised 73.7% of the total revenue and increased
by 11.0% during the year to £2,804.9m. Regional bus comprised 11.4% of revenue, growing by 12.8% to £433.0m whilst London & International
bus comprised the remaining 14.9%, growing by 3.4% to £569.2m. Divisional performance is shown in note 3.
Operating profit
Overall, the operating profit, before exceptional items, decreased 10.9% from £135.9m to £121.1m with reduced profitability in rail and
a slight increase in bus. Rail profit margins decreased from 1.8% to 0.9%, the regional bus margins declined from 11.9% to 10.3% whilst
London & International bus increased to 9.0% from 8.3%. While cost control is a central focus across the business, rail profitability
declined following the expiry of the London Midland franchise.
Exceptional operating item
During the year, an exceptional charge of £16.8m arose on The Go-Ahead Group Pension Plan (the Go-Ahead Plan) following the
High Court ruling on 26 October 2018 that Guaranteed Minimum Pensions (GMP) should be equalised between men and women.
Finance costs
Net finance costs have decreased due to higher interest receivable from increased cash and cash equivalents and lower interest
payable. In the prior year this included an accrued interest charge on an HMRC taxation enquiry, which has now been settled,
and increased interest on the timing of the bonds.
Tax expense
The tax expense decreased from £36.4m in 2018 to £21.9m. In the prior year, the tax expense included an amount accrued in relation to
a HMRC taxation enquiry and the impact of exceptional items. The 2019 effective tax rate is 22.6% (2018: 25.0%). The effective rate is
higher than the statutory rate in both years due to the impact of non-tax-deductible costs such as overseas bid costs and, in the prior
year, the impact of an HMRC enquiry, which was settled during the current year.
129
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc Consolidated statement of comprehensive income
for the year ended 29 June 2019
Profit for the year
Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurement gains on defined benefit pension plans
Tax relating to items that will not be reclassified
Items that may subsequently be reclassified to profit or loss:
Unrealised (losses)/gains on cashflow hedges
Gains on cashflow hedges taken to income statement – operating costs
Tax relating to items that may be reclassified
Foreign exchange gain
Other comprehensive gains for the year, net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Notes
27
8
8
2019
£m
75.1
21.6
(3.7)
17.9
(4.9)
(8.8)
2.4
—
(11.3)
6.6
81.7
65.4
16.3
81.7
2018
£m
109.3
18.9
(3.3)
15.6
30.5
(2.3)
(5.2)
0.8
23.8
39.4
148.7
128.4
20.3
148.7
The consolidated statement of comprehensive income records all of the income and losses generated for the year
Highlights of the movements in the year are set out below:
Profit for the year
The profit for the year after taxation is £75.1m and includes amounts attributable to equity shareholders and non-controlling interests.
Remeasurement of defined benefit pension plans
As analysed in note 27 the remeasurement gains on defined benefit pension plans were £21.6m, which consisted of rail pension plans
showing remeasurements of £nil and bus pension plans showing remeasurements of £21.6m.
Unrealised gains on cashflow hedges
The Group manages its exposure to the future cost of diesel through a programme of hedging. At each period end, the derivatives used
are marked to a market price and the amounts attributable to future periods are revalued through the statement of comprehensive
income. Due to decreases in market prices a loss in the year arose.
130
The Go-Ahead Group plc Annual Report and Accounts 2019 Consolidated statement of changes in equity
for the year ended 29 June 2019
At 1 July 2017
Profit for the year
Net movement on hedges
(net of tax)
Remeasurement on defined
benefit retirement plans
(net of tax) (note 27)
Foreign exchange gain
Total comprehensive income
Exercise of share options
Share based payment charge
(and associated tax) (note 5)
Acquisition of own shares
Share issue
Dividends (note 10)
At 30 June 2018
Profit for the year
Net movement on hedges
(net of tax)
Remeasurement on defined
benefit retirement plans
(net of tax) (note 27)
Total comprehensive income
Exercise of share options
Share based payment charge
(and associated tax) (note 5)
Acquisition of own shares
Share issue
Dividends (note 10)
Share
capital
£m
73.6
—
Reserve for
own shares
£m
Hedging
reserve
£m
(71.9)
—
(8.2)
—
—
—
—
—
—
—
—
0.6
—
74.2
—
—
—
—
—
—
—
0.5
—
—
23.0
—
—
—
1.7
—
(1.1)
—
—
(71.3)
—
—
—
23.0
—
—
—
—
—
14.8
—
—
(11.3)
—
—
1.0
—
(1.0)
—
—
—
(11.3)
—
—
—
—
—
Share
premium
reserve
£m
Capital
redemption
reserve
£m
1.6
—
—
—
—
—
—
—
—
—
—
1.6
—
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
—
—
—
—
Retained
earnings
£m
206.3
89.0
Total
shareholders’
equity
£m
Non-
controlling
interests
£m
202.1
89.0
25.1
20.3
—
23.0
15.6
0.8
105.4
(1.7)
1.7
—
—
(43.8)
267.9
58.8
15.6
0.8
128.4
—
1.7
(1.1)
0.6
(43.8)
287.9
58.8
—
(11.3)
17.9
76.7
(1.0)
1.1
—
—
(43.8)
17.9
65.4
—
1.1
(1.0)
0.5
(43.8)
—
—
—
20.3
—
—
—
—
(13.9)
31.5
16.3
—
—
16.3
—
—
—
—
(12.7)
Total
equity
£m
227.2
109.3
23.0
15.6
0.8
148.7
—
1.7
(1.1)
0.6
(57.7)
319.4
75.1
(11.3)
17.9
81.7
—
1.1
(1.0)
0.5
(56.5)
At 29 June 2019
74.7
(71.3)
3.5
1.6
0.7
300.9
310.1
35.1
345.2
The consolidated statement of changes in equity shows the movements in equity shareholders’ funds and
non-controlling interests
Equity shareholders’ funds increased from £287.9m to £310.1m as a result of retained profit for the year exceeding dividend payments,
plus gains on the remeasurement of defined benefit retirement plans offset by losses on the fuel hedge derivatives.
Non-controlling interests have increased from £31.5m to £35.1m and consist of the appropriate share of rail profits, less dividends paid
to non-controlling interests during the year.
The hedging reserve reflects the movements on the fuel hedge derivatives which are marked to a market price. The decrease is due to
decreases in market prices resulting in a loss in the year.
131
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc Consolidated balance sheet
as at 29 June 2019
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments
Other financial assets
Retirement benefit obligations
Current assets
Inventories
Trade and other receivables
Other financial assets
Assets classified as held for sale
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Other financial liabilities
Interest-bearing loans and borrowings
Current tax liabilities
Provisions
Non-current liabilities
Trade and other payables
Other financial liabilities
Interest-bearing loans and borrowings
Retirement benefit obligations
Deferred tax liabilities
Provisions
Total liabilities
Net assets
Capital and reserves
Share capital
Reserve for own shares
Hedging reserve
Share premium reserve
Capital redemption reserve
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Notes
2019
£m
2018
£m
11
12
8
28
22
27
15
16
22
14
17
18
22
19
8
23
18
22
19
27
8
23
24
24
24
24
24
24
631.9
108.8
0.2
—
1.5
53.8
796.2
16.8
350.3
4.4
2.7
630.8
1,005.0
628.7
91.5
0.1
0.3
8.1
41.4
770.1
15.2
342.9
10.0
13.1
556.5
937.7
1,801.2
1,707.8
(847.7)
(0.8)
(7.3)
(13.1)
(34.8)
(804.8)
—
(8.4)
(20.5)
(29.6)
(903.7)
(863.3)
(9.0)
(0.8)
(405.9)
(5.1)
(49.5)
(82.0)
(1.0)
—
(394.8)
(4.6)
(51.0)
(73.7)
(552.3)
(525.1)
(1,456.0)
(1,388.4)
345.2
319.4
74.7
(71.3)
3.5
1.6
0.7
300.9
310.1
35.1
345.2
74.2
(71.3)
14.8
1.6
0.7
267.9
287.9
31.5
319.4
The financial statements were approved by the Board of Directors on 4 September 2019 and were signed on its behalf by:
Andrew Allner
Chairman
132
Elodie Brian
Group Chief Financial Officer
The Go-Ahead Group plc Annual Report and Accounts 2019
The consolidated balance sheet shows all of our assets and liabilities at the year end
Further details of the major movements of our assets and liabilities in the year are set out below:
Assets
Property, plant and equipment
Overall, property, plant and equipment totalled £631.9m, up £3.2m on the prior year, with the vast majority held in the bus division in
freehold land and buildings and bus vehicles. During the year, the Group spent £72.6m on assets, £50.0m in the bus division as part of
our commitment to the investment in our bus fleet, and £22.6m in the rail division; offsetting this were depreciation charges of £79.3m,
£65.1m in bus and £14.2m in rail.
Intangible assets
The total intangible balance of £108.8m is up £17.3m on the prior year. Other additions comprised £6.1m of software costs and £16.1m
of franchise set-up costs. The amortisation charge for the year totalled £4.8m.
Other current assets
The Group’s current assets totalled £1,005.0m, up £67.3m on the prior year. Of this increase, £74.3m was in cash, mainly as a result
of cash held in the rail business.
Other financial assets and liabilities
Included in current assets is £4.4m and in non-current assets is £1.5m, offset by current liabilities of £0.8m and non-current liabilities
of £0.8m. These represent the mark to market value of the fuel hedges, split between those due within one year and those due in more
than one year.
Trade and other payables
Trade and other payables have increased by £42.9m to £847.7m, mainly attributable to the timing of year-end and the payment of trade
payables within the rail division.
Interest-bearing loans and borrowings
Non-current interest-bearing loans and borrowings totalled £405.9m, up from £394.8m in 2018. Principal balances within this are
amounts drawn on our revolving credit facility of £144.7m and the £250.0m corporate bond, offset by deferred debt issue costs.
Current interest-bearing loans and borrowings totalled £7.3m, £8.4m in 2018. Interest rates and movements on these balances are
shown in full in note 19.
Retirement benefit obligations
Further details of the retirement benefit obligations in both bus and rail are shown in note 27. The net surplus on the bus schemes totals
£48.7m and represents the excess of current assets compared to future liabilities in the pension fund. An asset-backed off-balance
sheet funding arrangement is in place, as agreed with the scheme trustees. Under the terms of the agreement with the scheme trustees,
cash payments of £3.9m per annum, payable for 21 years, commencing on 31 December 2013 and increasing at a growth rate of 3% each
year, are made by the Group. The rail deficit is £nil reflecting that the franchise adjustment (for the amounts which are the ongoing
responsibility of the DfT or others beyond the franchise term) offsets the pension scheme deficit calculated.
Provisions
As shown in note 23, the Group provides for both uninsured claims and for rail franchise commitments including property and rolling
stock dilapidations.
The total provision for uninsured claims of £43.4m is £1.9m lower than in 2018. Rail franchise commitments are higher than prior year
at £64.0m. The Group engages with external third party professionals to assist in the calculation of these provisions.
Total equity
Movements in equity and reserves are described in the commentary on the consolidated statement of changes in equity.
133
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc Consolidated cashflow statement
for the year ended 29 June 2019
Profit after tax for the year
Net finance costs
Tax expense
Depreciation of property, plant and equipment
Amortisation of intangible assets
Investment/asset/goodwill impairment
Share of result of joint venture
Loss/(profit) on sale of assets held for sale
Profit on sale of property, plant and equipment
Share based payment charges
Difference between pension contributions paid and amounts recognised in the income
statement
Pension scheme exceptional items
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Movement in provisions
Cashflows generated from operations
Taxation paid
Net cashflows from operating activities
Cashflows from investing activities
Interest received
Proceeds from sale of property, plant and equipment
Proceeds from sale of assets held for sale
Purchase of property, plant and equipment
Purchase of property, plant and equipment held for sale
Purchase of intangible assets
Purchase of businesses
Cash acquired with subsidiary
Transferred with franchise
Acquisition of investments
Net cashflows used in investing activities
Cashflows from financing activities
Interest paid
Dividends paid to members of the parent
Dividends paid to non-controlling interests
Payment to acquire own shares
Foreign exchange gain
Repayments of borrowings
Proceeds from borrowings
Proceeds from issue of shares
Payment of finance lease and hire purchase liabilities
Net cash outflows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 30 June 2018
Cash and cash equivalents at 29 June 2019
Notes
7
8
11
12
5
6
8
13
10
17
17
2019
£m
75.1
6.8
21.9
79.3
4.8
0.3
0.5
0.1
(0.2)
1.0
(7.1)
16.8
(1.6)
(10.6)
55.6
13.5
256.2
(32.5)
223.7
5.0
3.4
12.4
(72.6)
(2.1)
(22.2)
(11.5)
—
—
—
(87.6)
(14.5)
(43.8)
(12.7)
(1.0)
—
(0.7)
13.7
0.5
(3.3)
(61.8)
74.3
556.5
630.8
2018
£m
109.3
14.2
36.4
82.7
3.3
10.1
1.1
(0.9)
(7.3)
2.2
(6.3)
(35.2)
1.5
(1.9)
(18.9)
0.7
191.0
(28.7)
162.3
2.5
15.4
1.7
(126.7)
(11.4)
(10.1)
(9.2)
2.0
(23.5)
(0.3)
(159.6)
(15.8)
(43.8)
(13.9)
(1.1)
0.8
(222.5)
260.2
0.6
(0.9)
(36.4)
(33.7)
590.2
556.5
Cash balances of £484.9m (2018: £438.9m) were restricted at 29 June 2019; further details are shown in note 17.
134
The Go-Ahead Group plc Annual Report and Accounts 2019 The consolidated cashflow statement shows the cashflows from operating, investing and financing activities for the year
Net cash/debt
Closing adjusted net debt was £270.3m, a decrease of £18.7m from opening adjusted net debt of £289.0m.
Cashflow reconciliation
A reconciliation of cash generated by operations to free cashflow and net debt, two non-GAAP measures used by management, is
shown below. Free cashflow and adjusted net debt are measures used by management, which reflect the impact of restricted cash
on cashflows.
Summary cashflow
EBITDA
Working capital/other items (excluding restricted cash movements)
Cashflow generated from operations (excluding restricted cash movements)
Tax paid
Net interest paid
Net capital investment
Dividends paid to non-controlling interests
Free cashflow
Net acquisitions
Other
Payments to acquire own shares
Proceeds from issue of shares
Dividends paid to members of the parent
Movement in adjusted net debt*
Opening adjusted net debt*
Closing adjusted net debt*
* Adjusted net debt represents net cash less restricted cash.
2019
£m
205.5
4.4
209.9
(32.5)
(9.5)
(81.1)
(12.7)
74.1
(11.5)
0.4
(1.0)
0.5
(43.8)
2018
£m
221.9
10.9
232.8
(28.7)
(13.3)
(119.2)
(13.9)
57.7
(7.5)
(9.1)
(1.1)
0.6
(43.8)
18.7
(289.0)
(3.2)
(285.8)
(270.3)
(289.0)
Increase/
(decrease)
£m
(16.4)
(6.5)
(22.9)
(3.8)
3.8
38.1
1.2
16.4
(4.0)
9.5
0.1
(0.1)
—
21.9
n/a
n/a
EBITDA (earnings before interest, tax, depreciation and amortisation) decreased to £205.5m mainly due to reduced profits in rail
following the cessation of the London Midland franchise.
Capital expenditure, net of sale proceeds, was £38.1m lower in the year at £81.1m (2018: £119.2m) predominantly due to reduced bus
vehicle purchases in the London bus fleet.
Tax payments in the year increased by £3.8m to £32.5m primarily due to lower tax charge in the prior year, offset by the settlement
of the HMRC taxation enquiry.
EBITDA reconciliation
Profit after tax for the year
Exceptional operating items
Net finance costs
Tax expense
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share of result of joint venture
Impairment of investment
2019
£m
75.1
16.8
6.8
21.9
79.3
4.8
0.5
0.3
205.5
2018
£m
109.3
(25.1)
14.2
36.4
82.7
3.3
1.1
—
221.9
135
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements requires management
to make judgements, estimates and assumptions. Although
these judgements and estimates are based on management’s
best knowledge, actual results ultimately may differ from
these estimates.
No areas of critical accounting judgements or key sources of
estimation uncertainty have been identified in relation to Brexit.
to be covered by contributions paid during the franchise but
expected to transfer at the end of the franchise is treated as an
adjustment to the income statement. Under circumstances
where contributions are renegotiated, for example, following
a statutory valuation, an adjustment will be recognised in the
income statement, whilst changes in actuarial assumptions
continue to be recognised through the statement of other
comprehensive income.
Critical accounting judgements
The following are the critical judgements, apart from those
involving estimations, that the directors have made in the
process of applying the Group’s accounting policies and that
have the most significant effect on the amounts recognised
in the financial statements:
Exceptional operating items
In certain years the Group presents as exceptional operating
items on the face of the income statement material items
of revenue or expense which, because of the size or the nature
and expected infrequency of the events giving rise to them,
merit separate presentation to allow better understanding
of financial performance. The determination of whether items
merit treatment as exceptional in a particular year is therefore
a matter of judgement.
During the year, a charge in relation to the impact of the
Guaranteed Minimum Pensions (GMP) ruling on the Group
defined benefit schemes has been classified as exceptional
and further details are given in note 6. In the comparative year,
a gain on the change in pension plan assumptions from RPI to
CPI, certain goodwill and asset impairments and provisions in
respect of an HMRC capital allowances taxation enquiry were
classified as exceptional.
Accounting for the rail pension schemes
The UK train operating companies participate in the Railways
Pension Scheme (RPS), a defined benefit pension scheme which
covers the whole of the UK rail industry. In contrast to the pension
schemes operated by most businesses the RPS is a shared cost
scheme which means that costs are formally shared 60% employer
40% employee. The Group only recognises amounts in relation to
its share of costs in the income statement. The RPS is partitioned
into sections and the Group is responsible for the funding of these
sections whilst it operates the relevant franchise. At the end of
the franchise term, responsibility for the funding, and consequently
any deficit or surplus existing at that date, is passed to the next
franchisee. At each balance sheet date a franchise adjustment is
recognised to the IAS 19 net pension asset or liability to reflect
that portion expected to pass to the next franchisee.
The directors view this arrangement as synonymous to the
circumstances described in paragraphs 92–94 of IAS 19 Employee
Benefits (Revised), with a third party taking on the obligation
for future contributions. As there is no requirement to make
contributions to fund the current deficit, then it is assumed
that all of the current deficit will be funded by another party and
hence none of the deficit is attributable to the current franchisee.
In respect of the future service costs, there is currently no pension
obligation in respect of those costs. When the costs are recognised
in the income statement, the extent to which the committed
contributions fall short determines the amount that is to be
covered by contributions of another party in the future, which
is recognised as an adjustment to service cost in the income
statement. As a result, any portion of service cost not expected
The directors deem this to be the most appropriate interpretation
of IAS 19 to reflect the specific circumstances of the RPS where
the franchise commitment is only to pay contributions during
the period in which we run the franchise. An alternative approach
would involve not limiting the measurement of the service cost
through the recognition of an income statement franchise
adjustment, but recognising all movements on the franchise
adjustment as a movement in a reimbursement right in other
comprehensive income. For the year ended 29 June 2019 the
impact of this alternative treatment, on a post tax basis, would
be an increase in costs of £59.5m (2018: £69.8m) to the income
statement and a debit to other comprehensive income of £74.5m
(2018: credit of £112.5m). Since the franchise contract only refers
to the contribution requirements during the franchise term, and
not any reimbursement rights, the directors consider that viewing
the treatment as contribution sharing with the next franchisee
is most appropriate.
Uninsured claims
The measurement of uninsured liabilities is based on an
assessment of both the expected settlement of known claims
and of the cost of claims not yet reported to the Group, as
detailed in note 23. In order to assess the appropriate level
of provisions the Group engages with its brokers and claims
handlers to ensure external expertise is adequately factored
into the provision for known claims.
Key sources of estimation uncertainty
The key sources of estimation uncertainty that have a significant
risk of causing material adjustments to the carrying value of assets
and liabilities within the next financial year are in relation to:
Contract and franchise accounting
The commercial entities in the UK rail industry were created at
the time of privatisation and the relationships between them
are governed by a number of contracts between the major
participants, the DfT, Network Rail and train operating companies.
These contracts include detailed performance regimes which
determine the allocation of financial responsibility relating to the
attribution of delays. The processes for attribution, whilst well
understood, require detailed assessment and can take significant
time to resolve, particularly in unusual circumstances.
The Group makes provision for income and costs relating to
performance regimes and contractual obligations relating to
operating delays caused by Network Rail, or caused by our own
operating companies. This process can be based primarily on
previous experience of settling such claims, or, in certain
circumstances, based on management’s view of the most likely
outcome of individual claims. The Group has significant internal
expertise to assess and manage these aspects of the agreements
and the issues relating to delay attribution to enable management
to assess the most probable outcomes; nonetheless significant
judgements are required, which can have material impacts on the
financial statements.
136
The Go-Ahead Group plc Annual Report and Accounts 2019 Accordingly judgements in these and other areas are made on a
continuing basis with regard to amounts due and the recoverable
carrying value of related assets and liabilities arising from franchises
and other contracts. Regular reviews are performed on the expected
outcome of these arrangements, which require assessments and
judgements relating to the expected level of revenues and costs.
As previously announced, an agreement was reached with the
DfT during the year regarding contractual matters in relation
to the GTR franchise. This agreement resolved matters relating
to the industry-wide failures concerning the introduction of the
May 2018 timetable, as well as bringing to a close the discussions
around other outstanding contractual variations. As part of the
agreement, a plan for the remainder of the franchise term to 2021
was agreed, aimed at building on recent performance
improvement and improving customer journeys. GTR has provided
£15m of funding this year for passenger enhancements and
separately accounted for the impact of the fine from the Office of
Rail and Road (ORR). The agreement reduces uncertainty around
the future of the GTR franchise and its financial performance. A
profit-sharing mechanism with the DfT has been introduced for
the remainder of the franchise. The margin over the franchise
term is now expected to be between 0.75 to 1 per cent (previously
0.75 to 1.5 per cent), with no profit expected in the current
financial year.
Contract and franchise accounting specific to the rail business
is disclosed in the segmental analysis in note 3.
Measurement of franchise commitments
The measurement of franchise commitments, comprising
dilapidation provisions on rolling stock, depots and stations and
also income claims from other rail franchise operators, is set out
in note 23. Significant elements of the provisions required are
subject to interpretation of franchise agreements and rolling
stock agreements. The Group has significant internal expertise
to assess and manage these aspects of the agreements and to
enable management to assess the most probable outcomes.
Where appropriate, and specifically in assessing dilapidation
provisions, this process is supported by valuations from
professional external advisors to support provision levels. If the
estimations were to change by 10% the impact would be c£6.4m.
Retirement benefit obligations – bus schemes
The measurement of defined benefit pension obligations requires
the estimation of future changes in salaries, inflation, longevity
of current and deferred members and the selection of a suitable
discount rate, as set out in note 27. The Group engages Willis
Towers Watson, a global professional services company whose
specialisms include actuarial advice, to support the process of
establishing reasonable bases for all of these estimates, to ensure
they are appropriate to the Group’s particular circumstances.
Management also benchmark these assumptions on a periodic
basis with other professional advisors. Sensitivity analysis on the
bus retirement defined benefit schemes are detailed in note 27.
137
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc Notes to the consolidated financial statements
1. Authorisation of financial statements and statement
of compliance with International Financial Reporting
Standards (IFRSs)
The consolidated financial statements of The Go-Ahead Group
plc (the Group) for the year ended 29 June 2019 were authorised
for issue by the Board of directors on 4 September 2019 and the
balance sheet was signed on the Board’s behalf by Andrew Allner
and Elodie Brian. The Group is a public limited company that is
incorporated, domiciled and has its registered office in England
and Wales. The Group’s ordinary shares are publicly traded on the
London Stock Exchange and it is not under the control of any
single shareholder.
IFRS 9 and IFRS 15 came into effect on 1 January 2018 and have
been applied by the Group for the first time in the current year.
The nature and effect of the changes from adopting these new
accounting standards are described below. The other standards
and interpretations also apply for the first time in the current
year, but their adoption has not had any significant impact on
the financial statements.
IFRS 9 Financial instruments
IFRS 9 is split into three areas: classification and measurement
of financial assets and liabilities, impairment of financial assets
and hedging.
The consolidated financial statements of the Group have been
prepared in accordance with IFRSs. The financial statements
have also been prepared in accordance with IFRSs adopted by
the European Union (EU) and therefore the Group financial
statements comply with Article 4 of the EU IAS regulations.
The classification and measurement of the Group’s financial assets
and liabilities has not changed under the new standard. IFRS 9
states that impairment provisions should be based on expected
credit losses rather than incurred credit losses and the impact
of this change in accounting policy is not material to the Group.
The Group is required to comply with IFRSs under IAS 1
Presentation of Financial Statements, except in extremely rare
circumstances where management concludes that compliance
would be so misleading that it would conflict with the objective
to “present fairly” its financial statements.
2. Summary of significant accounting policies
Basis of preparation
This note details the accounting policies which have been applied
in the Group’s consolidated financial statements. New accounting
standards and interpretations which require adoption in future
years have also been listed and our current view of the impact
they will have on financial reporting.
The financial statements are prepared under the historical cost
convention, as modified by the fair value of financial instruments.
The consolidated financial statements are presented in pounds
sterling and all values are rounded to the nearest one hundred
thousand (£0.1m) except when otherwise indicated.
Going concern
The directors have considered the Group’s current and future
prospects, risks and uncertainties set out in the risk management
objectives and policies, and its availability of financing, and are
satisfied that the Group can continue to pay its liabilities as they
fall due for a period of at least twelve months from the date of
approval of these financial statements. For this reason, the directors
continue to adopt the going concern basis of preparation for
these financial statements. Further information is detailed in
the directors’ report.
New standards
The following new standards or interpretations are mandatory
for the first time for the financial year ended 29 June 2019:
• IFRS 9 Financial Instruments
• IFRS 15 Revenue from Contracts with Customers
• IFRS 4 (amendments) Applying IFRS 9 Financial Instruments
with IFRS 4 Insurance Contracts
• IAS 40 (amendments) Transfers of Investment Property
• IFRIC 22 Foreign Currency and Advance Consideration
The Group has also applied the standard on its hedging instruments,
which comprise fuel derivatives; again there is no impact and the
Group’s hedging instruments continue to be effective and qualify
as continuing hedges under IFRS 9.
The increased disclosure requirements of IFRS 9 have been
reflected in these financial statements. The Group has applied
the new rules prospectively from 1 July 2018.
IFRS 15 Revenue from contracts with customers
IFRS 15 establishes the principles that an entity is required to
apply regarding the nature, amount, timing and uncertainty of
revenue and cashflows arising from a contract with a customer.
The new model is based on a five-step approach which identifies
whether, how much and when revenue is recognised.
The standard has been applied prospectively from 1 July 2018, the
adoption of the standard has not had a material impact on the
Group’s revenue recognition for the period and no adjustments
were required to opening retained earnings.
The disclosure requirements of IFRS 15 are set out in note 3 and
the accounting policies in respect of each revenue stream are
outlined in the revenue recognition policy.
Other new standards
Adoption of the other standards and interpretations had no material
impact on the Group’s financial position or related performance.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Group and the entities it controls (its subsidiaries)
as at 29 June 2019. Control is achieved when the Group:
• Has the power over the investee
• Is exposed, or has rights, to variable returns from its
involvement with the investee
• Has the ability to use its power to affects its returns
The Group reassesses whether or not it controls an investee
if facts and circumstances indicate that there are changes
to one or more of the three elements of control listed above.
138
The Go-Ahead Group plc Annual Report and Accounts 2019 When the Group has less than a majority of the voting rights of
an investee, it considers that it has power over the investee when
the voting rights are sufficient to give it the practical ability to
direct the relevant activities of the investee unilaterally. The Group
considers all relevant facts and circumstances in assessing whether
or not the Group’s voting rights in an investee are sufficient to
give it power, including:
• The size of the Group’s holding of voting rights relative to
the size and dispersion of holdings of the other vote holders
• Potential voting rights held by the Group, other vote holders
or other parties
• Rights arising from other contractual arrangements
• Any additional facts and circumstances that indicate that the
Group has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made,
including voting patterns at previous shareholders’ meetings
Subsidiaries are consolidated from the date on which control
is transferred to the Group and cease to be consolidated from
the date on which control is transferred out of the Group. The
financial statements of subsidiaries for use in the consolidation
are prepared for the same reporting year as the parent company
and are based on consistent accounting policies. All intra-group
balances and transactions, including unrealised profits arising
from intra-group transactions, have been eliminated in full.
Non-controlling interests represent the equity interests not held
by the Group in Govia Limited, a 65% owned subsidiary, and are
presented within equity in the consolidated balance sheet,
separately from shareholders’ equity.
Joint ventures represent the 50% equity interest held by the
Group in respect of On Track Retail Limited, which is accounted
for as a joint arrangement (as below), and disclosures are limited
in this Annual Report as the business is currently immaterial to
the Group.
Joint arrangements
A joint arrangement is defined as an arrangement by which two
or more parties have joint control and rights to the net assets.
Joint control is the contractually agreed sharing of control, which
exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control. Interests in
joint arrangements are accounted for as either a joint venture or
a joint operation in accordance with IFRS 11 Joint Arrangements.
A joint arrangement is accounted for as a joint venture when the
Group, along with other parties, has joint control and rights to
the net assets of the arrangement. Joint ventures are equity
accounted in accordance with IAS 28 Investments in Associates
and Joint Ventures (Revised). A joint arrangement is accounted
for as a joint operation when the Group, along with other parties,
has joint control of the arrangement, rights to the assets and
obligations for the liabilities relating to the arrangement. Joint
operations are accounted for by including the Group’s share of
the assets, liabilities, income and expense on a line by line basis.
Revenue recognition
The revenue of the Group mainly comprises income from road
passenger transport and rail passenger transport.
Revenue is recognised to the extent that it is probable that
the income will flow to the Group and the value can be reliably
measured. Revenue is measured at the fair value of the
consideration received or receivable, excluding discounts,
rebates, VAT and other sales taxes or duty. An explanation
of the main revenue streams is set out below:
Passenger revenue
Passenger revenue mainly relates to revenue from ticket sales
in the regional bus and rail divisions.
In regional bus, revenue generated from ticket sales is recognised
in income on receipt of cash or card payment.
In rail, revenue comprises amounts based principally on agreed
models of route usage, by Railway Settlement Plan Limited
(which administers the income allocation system within the UK
rail industry), in respect of passenger receipts and other related
services such as rolling stock maintenance and commission on
tickets sold. In relation to the GTR franchise, passenger revenue
is collected and remitted to the DfT net of management charges
payable by DfT as revenue.
Passenger revenue is recognised by reference to the stage of
completion of the customer’s journey or for other services based
on the proportion of services provided. The attributable share of
season ticket or travel card income is deferred within liabilities
and released to the income statement over the life of the relevant
season ticket or travel card.
Contract revenue
Contract revenue mainly relates to the London & International
bus division and comprises contractual income from government
bodies which are recognised in the period to which they relate.
Quality incentive contracts (QICs) are received as part of the
contract revenue and the potential premiums or penalties are
assessed cumulatively on a contract by contract basis, at the end
of each period based on key performance obligations. The whole
of cumulative penalties/premiums are recognised in the income
statement on a pro rata basis to the contract year.
In regional bus, revenue generated from services provided on
behalf of local transport authorities is also recognised as income
in the period to which it relates.
Other revenue
Other revenue mainly relates to revenue for ancillary services to
other bus and rail passenger service providers, for services such
as rail replacement, maintenance and cleaning. Other revenue is
recognised in the period to which it relates.
Other revenue also includes rental income which is generated from
rental of surplus properties and subleasing of rolling stock and
railway infrastructure access. It is accounted for on a straight-line
basis over the lease term.
139
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc Notes to the consolidated financial statements continued
2. Summary of significant accounting policies continued
Franchise subsidy
Franchise subsidy revenue arises in the rail division and comprises
receipts from the DfT and local Passenger Transport Executives
(PTEs) which are receivable under the terms of the franchise
agreements. The franchise agreements include minimum
specifications of passenger services to be provided, which is
the key performance obligation. Franchise premium payments
to the DfT, for amounts due under the terms of the franchise,
are recognised in operating costs. The subsidy is recognised in
the period to which it relates.
Profit and revenue sharing/support agreements
The rail companies have certain revenue and profit sharing
agreements with the DfT. An accrual is made within amounts
payable to central government for the estimated cost to the
Group of the relevant amounts accrued at the balance sheet
date. Payments are charged to operating costs.
Revenue support is provided by the DfT typically in the last
two years of a franchise. Receipts are shown in revenue.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost
on transition to IFRSs less accumulated depreciation and any
impairment in value. Freehold land is not depreciated.
Assets held under finance leases are depreciated over the shorter
of their expected useful lives and the lease terms.
Residual values and useful economic lives are reviewed annually.
Depreciation is charged on all additions to, or disposals of,
depreciating assets in the year of purchase or disposal and over
their expected useful life on a straight-line basis as follows:
Leasehold land and buildings
The life of the lease
Freehold buildings
Over 50 to 100 years
Bus vehicles
Over 8 to 15 years
Plant and equipment
Over 3 to 15 years
The carrying values of items of property, plant and equipment are
reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. Any impairment
in value is recognised immediately in the income statement.
Government grants
Government grants are recognised at their fair value where there
is reasonable assurance that the grant will be received and all
attaching conditions will be complied with. When the grant
relates to an expense item, it is recognised in operating costs
within the income statement over the period necessary to match
on a systematic basis to the costs that it is intended to compensate.
Where the grant relates to a non-current asset, value is credited
to a deferred income account and is released to the income
statement over the expected useful life of the relevant asset.
Franchise set-up costs
A key part of the Group’s activities is the process of bidding
for and securing franchises, principally to operate rail services
in the UK and bus and rail services internationally. In the UK,
all franchise bid costs incurred prior to achieving preferred
bidder status are treated as an expense in the income statement
irrespective of the ultimate outcome of the bid. Internationally,
all franchise bid costs incurred prior to a contract win are treated
as an expense in the income statement irrespective of the ultimate
outcome of the bid. Directly attributable, incremental costs incurred
after achieving preferred bidder status, entering into a franchise
140
extension or winning an international bid are capitalised as an
intangible asset and amortised on a straight-line basis over the
life of the franchise/franchise extension, which ranges from 5 to
13 years.
Share based payment transactions
The cost of options granted to employees is measured by
reference to the fair value at the date at which they are granted,
determined by an external valuation using an appropriate pricing
model. In granting equity-settled options, conditions are linked to
some or all of the following: the price of the shares of the Group
(market conditions); conditions not related to performance or
service (non-vesting conditions); performance conditions (a
vesting condition); and service conditions (a vesting condition).
The cost of options is recognised in the income statement over
the period from grant to vesting date, being the date on which
the relevant employees become fully entitled to the award, with
a corresponding increase in equity. The cumulative expense
recognised at each reporting date reflects the extent to which
the period to vesting has expired and the directors’ best estimate
of the number of options that will ultimately vest or, in the case
of an instrument subject to a market or non-vesting condition,
be treated as vesting as described above. This includes any award
where non-vesting conditions within the control of the Group or
the employee are not met.
No cost is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market or
non-vesting condition. These are treated as vesting irrespective
of whether or not the market or non-vesting condition is satisfied,
provided that all other performance and/or service conditions are
satisfied. Where an equity-settled award is cancelled, it is treated
as if it had vested on the date of cancellation, and any cost not
yet recognised for the award is recognised immediately.
Exceptional operating items
The Group presents as exceptional operating items on the face
of the income statement material items of revenue or expense
which, because of the size or the nature and expected infrequency
of the events giving rise to them, merit separate presentation to
allow better understanding of financial performance.
Finance revenue
Interest on deposits is accrued on a time basis, by reference
to the principal outstanding and at the effective interest
rate applicable.
Interest-bearing loans and borrowings
Debt is initially stated at the amount of the net proceeds, being
the fair value of the consideration received after deduction of
issue costs. Following initial recognition the carrying amount is
measured at amortised cost using the effective interest method.
Amortisation of liabilities and any gains and losses arising on the
repurchase, settlement or other derecognition of debt are
recognised directly in the income statement.
Leases
Assets held under finance leases, which are leases where
substantially all of the risks and rewards of ownership of the
asset have passed to the Group, and hire purchase contracts are
capitalised in the balance sheet, with a corresponding liability
being recognised, and are depreciated over the shorter of their
useful lives and the lease terms.
The capital elements of future obligations under leases and hire
purchase contracts are included as liabilities in the balance sheet.
The Go-Ahead Group plc Annual Report and Accounts 2019
The interest element of the rental obligations is charged to the
income statement over the periods of the leases and hire
purchase contracts and represents a constant proportion of the
balance of capital repayments outstanding.
Leases where a significant proportion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. Rentals payable under operating leases, and the amortisation
of lease incentives and initial direct costs in securing leases, are
charged to the income statement on a straight-line basis over
the lease term.
Taxation
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities
on an undiscounted basis at the tax rates that are expected to
apply when the related asset is realised or the liability is settled,
based on tax rates and tax laws that have been enacted or
substantively enacted at the balance sheet date.
Deferred tax is provided, using the liability method, on temporary
differences at the balance sheet date between the tax base of
assets and liabilities for taxation purposes and their carrying
amounts in the financial statements. It is provided for on all
temporary differences, except:
• On the initial recognition of goodwill or of an asset or liability
in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit
nor taxable profit or loss
• In respect of taxable temporary differences associated with
investments in subsidiaries where the timing of the reversal
of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse
in the foreseeable future
Deferred tax assets are only recognised to the extent that it is
probable that the temporary differences will be reversed in the
foreseeable future and taxable profit will be available to allow all
or part of the deferred income tax asset to be utilised. The carrying
amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Tax relating to items recognised outside the income statement
is recognised in other comprehensive income, or directly, in equity
in correlation with the underlying transaction. Otherwise, tax
is recognised in the income statement.
Software
Software, that is not integral to the related hardware, is capitalised
as an intangible asset and stated at cost less amortisation and
any impairment in value. Amortisation is charged to the income
statement evenly over its expected useful life of three to five years.
Business combinations and goodwill
Business combinations are accounted for under IFRS 3 Business
Combinations (revised) using the acquisition method. The cost of
an acquisition is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value and the
amount of any non-controlling interest in the acquiree. The
choice of measurement of non-controlling interest, either at fair
value or at the proportionate share of the acquiree’s identifiable
assets, is determined on a transaction by transaction basis.
Acquisition costs incurred are expensed and included in
administrative expenses.
When the Group acquires a business, it assesses the financial
assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic
circumstances and pertinent conditions as at the acquisition
date. This includes the separation of embedded derivatives in
host contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration which
is deemed to be an asset or liability will be recognised in
accordance with IAS 39 in the income statement.
Goodwill is initially measured at cost, being the excess of the
aggregate of the acquisition-date fair value of the consideration
transferred and the amount recognised for the non-controlling
interest (and where the business combination is achieved in
stages, the acquisition-date fair value of the acquirer’s previously
held equity interest in the acquiree) over the net identifiable
amounts of the assets acquired and the liabilities assumed in
exchange for the business combination. Assets acquired and
liabilities assumed in transactions separate from the business
combinations, such as the settlement of pre-existing relationships
or post-acquisition remuneration arrangements, are accounted
for separately from the business combination in accordance with
their nature and applicable IFRSs. Identifiable intangible assets,
meeting either the contractual-legal or separability criterion,
are recognised separately from goodwill. Contingent liabilities
representing a present obligation are recognised if the
acquisition-date fair value can be measured reliably.
If the aggregate of the acquisition-date fair value of the
consideration transferred and the amount recognised for the
non-controlling interest (and where the business combination is
achieved in stages, the acquisition date fair value of the acquirer’s
previously held equity interest in the acquiree) is lower than the
fair value of the assets, liabilities and contingent liabilities and
the fair value of any pre-existing interest held in the business
acquired, the difference is recognised in the income statement.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group’s cash-generating
units (or groups of cash-generating units) that are expected to
benefit from the combination, irrespective of whether other
assets or liabilities of the acquiree are assigned to those units.
Each unit or group of units to which goodwill is allocated shall
represent the lowest level within the entity at which the goodwill
is monitored for internal management purposes and not be larger
than an operating segment before aggregation.
Where goodwill forms part of a cash-generating unit and part
of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the
carrying amount of the operation when determining the gain
or loss on disposal of the operation. Goodwill disposed of in this
circumstance is measured based on the relative values of the
operation disposed of and the portion of the cash-generating
unit retained.
141
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 2. Summary of significant accounting policies continued
Customer contracts
Customer contracts relate to the value attributed to contracts
and relationships purchased as part of the Group’s acquisitions.
The value is based on the unexpired term of the contracts at the
date of acquisition. Customer contracts have a residual value of
£nil and are amortised on a straight-line basis over the unexpired
contract term, which is determined on an individual customer basis.
The amortisation expense is taken to the income statement as
operating costs.
Impairment of assets
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired. If any such indication
exists, or when annual impairment testing for an asset is required,
the Group makes an estimate of the asset’s recoverable amount,
being the higher of the asset’s or cash-generating unit’s fair value
less costs to sell and its value in use. Value in use is determined
for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets
or groups of assets, and the estimated future cashflows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset.
Where the carrying amount of an asset exceeds its recoverable
amount, the asset is considered to be impaired and is written
down to its recoverable amount.
Impairment losses (including goodwill impairment) of continuing
operations are recognised in the income statement in those expense
categories consistent with the function of the impaired asset.
An assessment is made at each reporting date as to whether there
is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication
exists, the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in
the estimates used to determine the asset’s recoverable amount
since the last impairment loss was recognised. Goodwill impairment
losses are not reversed. The reinstated amount cannot exceed
the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the
asset in prior years. After such a reversal, the depreciation charge
is adjusted in future periods to allocate the asset’s revised
carrying amount, on a systematic basis less any residual value,
over its remaining useful life.
Non-current assets held for sale
Non-current assets classified as held for sale are measured
at the lower of carrying amount and fair value less costs to sell.
Non-current assets are classified as held for sale if their carrying
amount will be recovered through a sale transaction rather than
through continuing use. This condition is regarded as met only when
the sale is highly probable and the asset is available for immediate
sale in its present condition. Management must be committed to
the sale which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
Inventories
Inventories of fuel and engineering spares are valued at the lower
of cost and net realisable value on a first in first out basis after
making due allowance for obsolete and slow moving items.
Cost comprises direct materials and costs incurred in bringing
the items to their present location and condition. Net realisable
value represents the estimated selling price less costs of sale.
Cash and cash equivalents
Cash and short term deposits in the balance sheet comprise cash
at bank and in hand, and short term deposits with an original
maturity of three months or less. For the purpose of the
consolidated cashflow statement, cash and cash equivalents
consist of cash and cash equivalents as defined above, net of
outstanding bank overdrafts.
Financial assets and derivatives
The Group uses derivatives to hedge its risks associated with
fuel price fluctuations, and interest derivatives to hedge its risks
associated with interest rate fluctuations. Such derivatives are
initially recognised at fair value by reference to market values for
similar instruments, and subsequently remeasured at fair value
at each balance sheet date.
Financial assets are accounted for in accordance with IFRS 9.
Financial assets are initially recognised at fair value, being the
transaction price plus, in the case of financial assets not recorded
at fair value through profit or loss, directly attributable
transaction costs.
Changes in the fair value of financial instruments that are
designated and effective as hedges of future cashflows are
recognised in other comprehensive income and the ineffective
portion is recognised immediately in the income statement.
When the cashflow hedge results in the recognition of a
non-financial asset or a liability, then at the time that asset
or liability is recognised, the associated gains or losses on
the derivative that had previously been recognised in other
comprehensive income are included in the initial measurement
of that non-financial asset or liability. For hedges that do not
result in the recognition of an asset or a liability, amounts
deferred in equity are recognised in the income statement
in the period in which the hedged item affects net profit or loss.
For derivatives that do not qualify for hedge accounting, any
gains or losses arising from changes in fair value are taken
directly to the income statement as they arise.
Hedge accounting is discontinued when the derivative expires or
is sold, terminated or exercised without replacement or rollover,
or otherwise no longer qualifies for hedge accounting. At that
point in time, any cumulative gain or loss on the hedging
instrument recognised in other comprehensive income is kept in
equity until the forecast transaction occurs, at which point it is
taken to the income statement or included in the initial carrying
amount of the related non-financial asset as described above.
If a hedged transaction is no longer expected to occur, the net
cumulative gain or loss recognised in other comprehensive
income is transferred to the income statement.
142
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Fair value measurement
The Group measures financial instruments (derivatives) and
non-financial assets at fair value at each balance sheet date.
Fair values of financial instruments measured at amortised cost
are disclosed in note 22.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability
• In the absence of a principal market, in the most advantageous
market for the asset or liability
The principal or the most advantageous market must be
accessible to the Group.
The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing
the asset or liability, assuming that market participants act in
their economic best interest.
A fair value measurement of a non-financial asset takes into account
a market participant’s ability to generate economic benefits by
using the asset in its highest and best use or by selling it to another
market participant that would use the asset in its highest and
best use.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable
inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed
in the financial statements are categorised within the fair value
hierarchy, described as follows, based on the lowest level input
that is significant to the fair value measurement as a whole:
• Level 1 – Quoted (unadjusted) market prices in active markets
for identical assets or liabilities
• Level 2 – Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable
• Level 3 – Valuation techniques for which the lowest level input
that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level input
that is significant to the fair value measurement as a whole)
at the end of each reporting period.
At each reporting date, the Group analyses the movements in the
values of assets and liabilities which are required to be re-measured
or reassessed as per the Group’s accounting policies. For this
analysis, the Group verifies the major inputs applied in the latest
valuation by agreeing the information in the valuation computation
to contracts and other relevant documents.
The Group also compares the changes in the fair value of each
asset and liability with relevant external sources to determine
whether the change is reasonable.
When required, the Group presents the valuation results to
the audit committee. This includes a discussion of the major
assumptions used in the valuations.
For the purpose of fair value disclosures, the Group has determined
classes of assets and liabilities on the basis of the nature,
characteristics and risks of the asset or liability and the level
of the fair value hierarchy as explained above.
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation, and a reliable estimate of the amount can be made.
If the effect is material, expected future cashflows are discounted
using a current pre-tax rate that reflects, where appropriate, the
risks specific to the liability.
Where the Group expects some or all of a provision to be
reimbursed, the reimbursement is recognised as a separate asset
but only when recovery is virtually certain. The expense relating
to any provision is presented in the income statement net of any
reimbursement. Where discounting is used, the increase in the
provision due to unwinding the discount is recognised as a
finance cost.
The Group provides for property, station and fleet dilapidations,
where appropriate, based on the future expected repair costs
required to restore them to their fair condition at the end of their
respective lease terms, where it is considered a reliable estimate
can be made.
Uninsured liabilities
The Group limits its exposure to the cost of motor, employer and
public liability claims through insurance policies issued by third
parties. These provide individual claim cover, subject to high excess
limits for total claims within the excess limits. A provision is
recognised for the estimated cost to the Group to settle claims
for incidents occurring prior to the balance sheet date.
The estimation of this provision is made after taking appropriate
professional advice and is based on an assessment of the expected
settlement on known claims, together with an estimate of
settlements that will be made in respect of incidents occurring
prior to the balance sheet date but that have not yet been
reported to the Group by the insurer.
Treasury shares
Re-acquired shares in the Group, which remain uncancelled, are
deducted from equity. Consideration paid and the associated
costs are also recognised in shareholders’ funds as a separate
reserve for own shares. Any gain or loss on the purchase, sale,
issue or cancellation of the Group’s shares is transferred from
the reserve for own shares to revenue reserves.
Investments
Investments are held at cost.
Retirement benefits
The Group operates a number of pension schemes, both defined
benefit and defined contribution. The costs of these are
recognised in the income statement.
143
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 2. Summary of significant accounting policies continued
Bus schemes
The cost of providing benefits under the defined benefit plans
is determined separately for each plan using the projected unit
credit method, which attributes entitlement to benefits to the
current period (to determine current service cost) and to the
current and prior periods (to determine the present value of
defined benefit obligation) and is based on actuarial advice.
Net interest is calculated by applying the discount rate to the
net defined benefit liability or asset.
Remeasurements, comprising actuarial gains and losses, the effect
of the asset ceiling (excluding net interest) and the return on plan
assets (excluding net interest) are recognised in the statement
of comprehensive income in the period in which they occur.
The current service cost is recognised in the income statement
within operating costs. The net interest expense or income is
recognised in the income statement within finance costs.
The defined benefit pension asset or liability in the balance sheet
comprises the total for each plan of the present value of the
defined benefit obligation (using a discount rate based on high
quality corporate bonds), less the fair value of plan assets out of
which the obligations are to be settled directly. Fair value is based
on market price information and in the case of quoted securities
is the published bid price.
Past service costs are recognised in the income statement on
the earlier of the date of the plan amendment or curtailment, and
the date that the Group recognises restructuring-related costs.
When a settlement (eliminating all obligations for benefits already
accrued) or a curtailment (reducing future obligations as a result
of a material reduction in the scheme membership or a reduction
in future entitlement) occurs, the obligation and related plan
assets are remeasured using current actuarial assumptions and
the resultant gain or loss is recognised in the income statement
during the period in which the settlement or curtailment occurs.
Contributions payable under defined contribution schemes are
charged to operating costs in the income statement as they fall due.
Rail schemes
The Group’s UK Train Operating Companies (TOCs) participate
in the Railways Pensions Scheme (RPS), which is an industry-wide
defined benefit scheme. The Group is obligated to fund the
relevant section of the scheme over the period for which the
franchise is held.
All the costs, and any deficit or surplus, are shared 60% by the
employer and 40% by the members. In addition, at the end of
the franchise, any deficit or surplus passes to the subsequent
franchisee with no compensating payments from or to the
outgoing franchise holder. The Group’s obligations are therefore
limited to its contributions payable during the period over which
it operates the franchise, these contributions being subject to
change on consideration of future statutory valuations. The net
liability reflects the Group’s obligation to fund the statutory
deficits of the relevant RPS sections over the franchise term.
The last statutory valuation of the RPS scheme sections in which
the Group is involved, carried out on 31 December 2013 as noted
in note 27, and its IAS 19 actuarial valuation are carried out for
different purposes and may result in materially different amounts.
There are ongoing funding deficits across the RPS schemes in
which the Group participates and the IAS 19 valuation is set out
in the disclosures below.
The accounting treatment for the time based risk-sharing feature
of the Group’s participation in the RPS is not explicitly considered
by IAS 19 Employee Benefits (Revised). Since the contributions
currently committed to being paid to each TOC section are lower
than the share of the service cost (for current and future service)
than would normally be calculated under IAS 19 Employee
Benefits (Revised), the Group does not account for uncommitted
contributions towards the sections current or expected future
deficits. This reflects the legal position that some of the existing
deficit and some of the service costs in the current year will be
funded in future years beyond the term of the current franchise
and committed contributions. As a result, the Group consequently
reduces any section deficit balance and reduces any service costs
that would give rise to an increase in such deficit through the use
of a franchise adjustment. The franchise adjustment reflects the
extent to which third parties are expected to contribute towards
the cost of the plan as a consequence of the deficit transferring
at the end of the franchise, which is deemed, in the directors’
view, in line with paragraphs 92–94 of IAS 19 Employee Benefits
(Revised). Under circumstances where contributions are
renegotiated, for example, following a statutory valuation, an
adjustment will be recognised in the income statement, whilst
changes in actuarial assumptions continue to be recognised
through the statement of other comprehensive income.
Please refer to note 27 for further details.
144
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued
New standards and interpretations not applied
The International Accounting Standards Board has issued the following standards and interpretations with an effective date after the
date of these financial statements:
International Accounting Standards
(IAS/IFRSs)
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatments
Amendments to IFRS 9 Prepayment features with negative compensation
Amendment to IAS 28 Long term interests in associates and joint ventures
Amendments to IAS 19 Plan amendment, curtailment or settlement
Amendments to references to conceptual framework in IFRS standards
IFRS 17 Insurance contracts
Effective date
(periods beginning on or after)
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2019
1 January 2020
1 January 2021
The directors do not anticipate adoption of these standards and interpretations will have a material impact on the Group’s financial
statements, except as noted below:
IFRS 16 Leases
IFRS 16 is effective for accounting periods commencing on or after 1 January 2019 and will be adopted by the Group on 30 June 2019
using the modified retrospective approach. The cumulative effect of adopting IFRS 16 will therefore be recognised as an adjustment to
the opening balance of retained earnings at 30 June 2019, with no restatement of comparative information.
IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases. The new standard eliminates the
operating lease classification and therefore lessees will be required to recognise right-of-use assets and lease liabilities for all leases on
the balance sheet, unless they have a lease term of less than twelve months or are of low value. In the income statement, the operating
lease expense will be replaced by a combination of depreciation and interest.
The Group has performed a detailed assessment of IFRS 16, focusing on the Group’s existing lease portfolio as well as considering any
wider contractual arrangements, to determine if they constitute a lease under the definitions of the new standard.
At 29 June 2019, the Group held a significant number of operating leases that are expensed over the lease term. The total non-cancellable
operating lease commitments at 29 June 2019 was £2.6bn, which represents the gross value and is before the discounting of commitments
to their present value, as required by IFRS 16.
Of these commitments, the following have been identified as not meeting the definition of a lease under IFRS 16:
• £0.8bn of commitments relate to track, station and depot charges within UK rail to which the Group does not have the right to
obtain substantially all the economic benefit from the use of the asset throughout the period of use and the lessor directs how
and for what purpose the assets are used
• £0.5bn of commitments relate to rolling stock leases in the international rail business which are not considered to be right-of-use assets
• £0.2bn of commitments relate to leases where the lease term ends within 12 months from the date of initial application
• <£0.1bn of commitments relate to leases the Group has entered into but where the commencement date is after 30 June 2019
• £0.3bn of commitments are components of leases which do not meet the definition of a lease under IFRS 16 as they relate to the
ongoing maintenance of the assets
Taking the above into account, the remaining lease commitments discounted to present value will result in the Group recognising
right-of-use assets and lease liabilities of approximately £0.8bn as at 30 June 2019.
145
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 3. Segmental analysis
The Group’s businesses are managed on a divisional basis. Selected financial data is presented on this basis below.
For management purposes, the Group is organised into three reportable segments: regional bus, London & International bus and rail.
Operating segments within those reportable divisions are combined on the basis of their long term characteristics and similar nature
of their products and services, as follows:
The regional bus division comprises UK bus operations outside London.
The London & International bus division comprises bus operations in London under the control of Transport for London (TfL), rail
replacement and other contracted services in London, bus operations in Singapore under the control of the Land Transport Authority
(LTA) of Singapore and bus operations in Ireland under the control of the National Transport Authority (NTA) of Ireland. These are
aggregated as a segment for internal management purposes given the similar contractual nature of the businesses.
The rail division comprises UK and overseas rail operations. The UK rail operation, through an intermediate holding company, Govia Limited,
is 65% owned by Go-Ahead and 35% by Keolis and comprises two rail franchises: Southeastern and GTR. The division is aggregated for
the purpose of segmental reporting under IFRS 8 as each operating company has similar objectives, to provide passenger rail services
and achieve a modest profit margin through its franchise arrangements with the Department for Transport (DfT). Each company
targets similar margins, has similar economic risks and is viewed and reacted to as one segment by the chief operating decision maker,
considered to be the Group Chief Executive. The registered office of Keolis (UK) Limited is in England and Wales.
Overseas rail operations commenced on 9 June 2019 in Germany. A further three contracts in Germany and contracts in the Nordics are
currently being mobilised. These operations are 100% owned by Go-Ahead. The international rail franchises are included with the UK
rail operations for reporting purposes and will be considered in further detail during the next financial year.
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, on a pre-and post-exceptional basis below.
Transfer prices between operating segments are on an arm’s length basis similar to transactions with third parties.
The following tables present information regarding the Group’s reportable segments for the year ended 29 June 2019 and the year
ended 30 June 2018.
Year ended 29 June 2019
Passenger revenue
Contract revenue
Other revenue
Franchise subsidy
Segment revenue
Inter-segment revenue
Group revenue
Operating costs
Group operating profit (pre-exceptional items)
Exceptional operating items
Group operating profit (post-exceptional items)
Share of result of joint venture
Net finance costs
Profit before tax and non-controlling interests
Tax expense
Profit for the year
Regional
bus
£m
384.1
69.1
14.4
—
467.6
(34.6)
433.0
(388.5)
London &
International
bus
£m
—
592.4
4.5
—
596.9
(27.7)
569.2
(518.0)
Total
bus
£m
384.1
661.5
18.9
—
Rail
£m
2,472.7
—
242.8
132.5
Total
operations
£m
2,856.8
661.5
261.7
132.5
1,064.5
(62.3)
1,002.2
(906.5)
2,848.0
(43.1)
3,912.5
(105.4)
2,804.9
(2,779.5)
3,807.1
(3,686.0)
44.5
51.2
95.7
25.4
121.1
(16.8)
104.3
(0.5)
(6.8)
97.0
(21.9)
75.1
The exceptional operating items relate to central activities and therefore cannot be allocated between the operating segments.
146
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Other segment information
Capital expenditure:
– Additions
– Acquisitions
– Intangible assets
Depreciation
Regional
bus
£m
London &
International
bus
£m
40.4
11.9
3.1
36.9
9.6
—
4.8
28.2
Total
bus
£m
50.0
11.9
7.9
65.1
Rail
£m
Total
operations
£m
22.6
—
14.3
14.2
72.6
11.9
22.2
79.3
At 29 June 2019, there were non-current assets included within the London & International bus segment of £12.1m (2018: £7.2m) relating
to operations in Singapore and Ireland. Operations in Singapore generated a revenue of £59.6m (2018: £52.1m) during the year.
Operations in Ireland commenced in September 2018 and were fully operational by the end of the year. The revenue generated during
the period of operation was £16.5m.
Non-current assets included within rail of £37.7m (2018: £11.0m) relate to operations being mobilised in Germany and the Nordics.
Operations in Germany commenced on 9 June 2019 and the revenue generated in the period to 29 June 2019 was £2.6m.
We have two major customers which individually contribute more than 10% of Group revenue, one of which contributed £1,643.6m
(2018: £1,278.5m), and the other contributed £486.2m (2018: £491.8m).
Year ended 30 June 2018
Passenger revenue
Contract revenue
Other revenue
Franchise subsidy
Segment revenue
Inter-segment revenue
Group revenue
Operating costs
Group operating profit (pre-exceptional items)
Exceptional operating items
Group operating profit (post-exceptional items)
Share of result of joint venture
Net finance costs
Profit before tax and non-controlling interests
Tax expense
Profit for the year
Other segment information
Capital expenditure:
– Additions
– Acquisitions
– Intangible assets
Depreciation
Regional
bus
£m
348.6
56.5
13.7
—
418.8
(35.1)
383.7
(337.9)
London &
International
bus
£m
—
566.2
5.0
—
571.2
(20.7)
550.5
(504.9)
Total
bus
£m
348.6
622.7
18.7
—
990.0
(55.8)
934.2
(842.8)
Rail
£m
2,213.8
—
236.4
104.5
2,554.7
(27.4)
2,527.3
(2,482.8)
45.8
45.6
91.4
44.5
Total
operations
£m
2,562.4
622.7
255.1
104.5
3,544.7
(83.2)
3,461.5
(3,325.6)
135.9
25.1
161.0
(1.1)
(14.2)
145.7
(36.4)
109.3
Regional
bus
£m
London &
International
bus
£m
47.9
20.7
4.6
34.1
51.7
—
2.0
27.7
Total
bus
£m
99.6
20.7
6.6
61.8
Rail
£m
Total
operations
£m
27.1
—
5.4
20.9
126.7
20.7
12.0
82.7
147
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 4. Operating costs
Detailed below are the key amounts recognised in arriving at our operating costs. For accounting policies see ‘Profit and revenue
sharing/support agreements’, ‘Property, plant and equipment’, ‘Government grants’ and ‘Franchise set-up costs’ in note 2.
Employee costs (note 5)
Operating lease payments (see below)
Energy costs (see below)
DfT franchise agreement payments/(receipts)
Depreciation of property, plant and equipment (see below)
DfT profit share
Intangible amortisation
Auditor’s remuneration (see below)
Trade receivables not recovered
Loss on sale of assets held for sale
Other operating income
Government grants
Profit on disposal of property, plant and equipment
Other operating costs
2019
£m
1,272.7
1,247.2
262.7
89.9
79.3
19.7
4.8
1.0
0.9
0.1
(28.7)
(2.7)
(0.2)
739.3
2018
£m
1,224.4
1,165.2
249.5
(24.6)
82.7
20.6
3.3
0.9
0.2
(0.9)
(24.0)
(4.7)
(7.3)
640.4
Total operating costs (pre-exceptional operating items)
3,686.0
3,325.6
Further analysis of the above operating costs is as follows:
Operating lease payments
– bus vehicles
– non-rail properties
– other non-rail
– rail rolling stock
– other rail
Total lease and sublease payments recognised as an expense (excluding rail access charges)1
– rail access charges
2019
£m
16.1
2.1
0.1
522.7
173.9
714.9
532.3
2018
£m
14.5
2.0
0.1
478.1
188.1
682.8
482.4
Total lease and sublease payments recognised as an expense2
1,247.2
1,165.2
Depreciation of property, plant and equipment
– owned assets
– leased assets
Total depreciation expense
Auditor’s remuneration
– audit fee for the audit of the parent financial statements
– audit fee for the audit of the subsidiary financial statements
Total audit fees for the audit of the financial statements
– other non-audit3
Total non-audit fees
Total auditor’s remuneration
Energy costs
– bus fuel
– rail diesel fuel
– rail electricity
– cost of site energy
Total energy costs
78.0
1.3
79.3
0.1
0.8
0.9
0.1
0.1
1.0
103.2
3.1
140.9
15.5
262.7
82.1
0.6
82.7
0.1
0.7
0.8
0.1
0.1
0.9
98.2
7.0
128.1
16.2
249.5
1. The total lease and sublease payments recognised as an expense (excluding rail access charges) are made up of minimum lease payments of £727.3m (2018: £696.4m),
net of sublease payments of £12.4m (2018: £13.6m) relating to other rail leases.
2. The total lease and sublease payments recognised as an expense (including rail access charges) are made up of minimum lease payments of £1,259.6m (2018: £1,178.8m),
net of sublease payments of £12.4m (2018: £13.6m) relating to other rail leases.
3. Other non-audit services of £0.1m (2018: £0.1m) are detailed on page 89.
Government grant income of £2.7m (2018: £4.7m) is mainly attributable to the release of grants received to support the mobilisation
of international business operations and service improvements including smart ticketing, deliverable over a period of up to five years.
148
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 5. Employee costs
This note shows total employment costs, inclusive of share based payment charges. We have a number of share plans used to award
shares to directors and employees. A charge is recognised over the vesting period in the consolidated income statement, based on the
fair value of the award at the date of grant. The note also shows the average number of people employed by the Group during the year.
For accounting policies see ‘Share based payment transactions’ in note 2.
Wages and salaries
Social security costs
Other pension costs
Share based payments charge
The average monthly number of employees during the year, including directors, was:
Administration and supervision
Maintenance and engineering
Operations
2019
£m
1,109.7
111.2
50.8
1.0
2018
£m
1,067.5
105.1
49.6
2.2
1,272.7
1,224.4
2019
3,489
2,581
22,125
2018
3,263
2,583
22,308
28,195
28,154
The information required by Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 is provided in the directors’ remuneration report.
Sharesave scheme
Shareholder approval was obtained at the 2013 AGM for Savings-Related Share Option Scheme, known as The Go-Ahead Group plc
2013 Savings-Related Share Option Scheme (the Sharesave scheme) for employees of the Group and its operating companies.
The Sharesave scheme is open to all full time and part time employees (including executive directors) who have completed at least six
months of continuous service with a Go-Ahead Group company at the date they are invited to participate in a scheme launch. To take
part, qualifying employees have to enter into a savings contract for a period of three years under which they agree to save a monthly
amount, from a minimum of £5 to a maximum (not exceeding £500) specified by the Group at the time of invitation. For the February 2016
launch (Sharesave 2016), the maximum monthly savings limit set by the Group was £50. Participants were given the choice of taking
their money back, or to purchase Go-Ahead Group Shares at a 20% discount of the market price set at the date of invitation. Sharesave
2016 participants have six months from the maturity date to exercise their options. Sharesave 2016 matured on 1 May 2019.
The fair value of equity-settled share options granted is estimated as at the date of grant using the Black-Scholes model, taking into
account the terms and conditions upon which the options were granted. The key assumptions input into the model are future share
price volatility, future dividend yield, future risk-free interest rate, forfeiture rate and option life.
There are savings-related options at 29 June 2019 as follows:
Scheme maturity
Option price (£)
No. of options unexercised at 29 June 2019
No. of options exercised during the year
No. of options exercisable at 29 June 2019
The expense recognised for the scheme during the year to 29 June 2019 was £nil (2018: £0.6m).
1 May
2019
19.11
174,606
21,938
174,606
149
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 5. Employee costs continued
The following table illustrates the number and weighted average exercise price (WAEP) of share options for the Sharesave scheme:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2019
2018
No.
249,242
—
(52,698)
(21,938)
174,606
WAEP
£
19.11
—
19.11
19.11
19.11
No.
589,744
—
(306,148)
(34,354)
249,242
WAEP
£
18.32
—
17.79
17.36
19.11
The weighted average exercise price at the date of exercise for the options exercised in the period was £19.11 (2018: £17.36).
At the year end 174,606 (2018: no options) were exercisable and the weighted average exercise price of the options was £19.11 (2018: £nil).
The options outstanding at the end of the year have a weighted average remaining contracted life of nil years (2018: 0.83 years).
Long Term Incentive Plans
The executive directors participate in The Go-Ahead Group Long Term Incentive Plan 2015 (LTIP). The LTIP provides for executive
directors to be awarded nil cost shares in the Group conditional on specified performance conditions being met over a period of
three years. Refer to the directors’ remuneration report for further details of the LTIP.
The expense recognised for the LTIP during the year to 29 June 2019 was £0.4m (2018: £0.8m).
The fair value of LTIP options granted is estimated as at the date of grant using a Monte Carlo model, taking into account the terms
and conditions upon which the options were granted. The inputs to the model used for the options granted in the year to 29 June 2019
and 30 June 2018 were:
The Go-Ahead Group plc:
Future share price volatility
FTSE Mid-250 index comparator:
Future share price volatility
Correlation between companies
The following table shows the number of share options for the LTIP:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2019
% per annum
2018
% per annum
33.0
25.0
30.0
29.0
25.0
30.0
2019
2018
163,144
53,912
(73,453)
—
111,724
72,755
(9,815)
(11,520)
143,603
163,144
The LTIP award granted to the Group Chief Executive in November 2016 will lapse in full from November 2019 as none of the performance
measures were achieved following the three-year performance period ending 29 June 2019. The weighted average share price of the
options at the year end was £19.72 (2018: £15.88).
The weighted average fair value of options granted during the year was £15.74 (2018: £12.92). The weighted average remaining
contractual life of the options was 1.10 years (2018: 1.25 years). The weighted average exercise price at the date of exercise for the
options exercised in the period was £nil (2018: £16.23).
The estimated amounts due to the relevant tax authorities in relation to the above transactions are detailed in the Directors’
remuneration report.
150
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Deferred Share Bonus Plan
The Deferred Share Bonus Plan (DSBP) provides for executive directors and certain other senior employees to be awarded shares in the
Group conditional on the achievement of financial and strategic targets. The shares are deferred over a three-year period. Refer to the
directors’ remuneration report for further details of the DSBP. The DSBP options are not subject to any market based performance
conditions. Therefore the fair value of the options is equal to the share price at the date of grant.
The expense recognised for the DSBP during the year to 29 June 2019 was £0.6m (2018: £0.8m).
The following table shows the number of share options for the DSBP:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2019
2018
147,233
59,677
(6,770)
(49,720)
176,258
34,804
(7,654)
(56,175)
150,420
147,233
The weighted average fair value of options granted during the year was £15.74 (2018: £16.30). At the year end, 21,956 options related
to DSBP awards, which vested before the year end, which have not yet been exercised by participants. Of these 21,956 options, 942
options related to the award granted in November 2013, 4,941 related to the award granted in November 2014 and 16,073 related to
the award granted in November 2015. 34,254 options, relating to the DSBP award granted in November 2016, will be eligible to vest
from November 2019 following the end of a three-year deferral period. The weighted average share price of the options at the year
end was £19.72 (2018: £15.88).
The weighted average remaining contractual life of the options was 1.02 years (2018: 0.67 years). The weighted average exercise price
at the date of exercise for the options exercised in the period was £17.72 (2018: £16.01).
Share incentive plans
The Group operates a share incentive plan, known as The Go-Ahead Group plc Share Incentive Plan (SIP). The SIP is open to all Group
employees (including executive directors) who have completed at least six months’ continuous service with a Group company at the
date they are invited to participate in the plan.
The SIP permits the Group to make four different types of awards to employees (free shares, partnership shares, matching shares
and dividend shares), although the Group has, so far, made awards of partnership shares only. Under these awards, the Group invites
qualifying employees to apply between £10 and £150 per month in acquiring shares in the Group at the prevailing market price.
Under the terms of the scheme, certain tax advantages are available to the Group and employees.
151
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 6. Exceptional items
This note identifies items of an exceptional nature that have a significant impact on the results of the Group in the period.
For accounting policies see ‘Exceptional items’ in note 2.
Charge in relation to GMP equalisation
Gain on change in RPI/CPI assumptions
Goodwill and asset impairment
Exceptional operating items
2019
£m
(16.8)
—
—
(16.8)
2018
£m
—
35.2
(10.1)
25.1
Year ended 29 June 2019
Total exceptional operating items in the year comprised a charge of £16.8m to the income statement.
On 26 October 2018, the High Court ruled that Guaranteed Minimum Pensions (GMP) should be equalised between men and women.
As a result, pension scheme trustees will be obliged to adjust benefit payments in order that benefits received by male and female
members with equivalent age, service and earnings histories are equal. The judgement has implications for many defined benefits
schemes, including those in which the Go-Ahead Group participates.
We have worked with our actuarial advisors to understand the implications of the judgement and the £16.8m pre-tax exceptional
expense in the year (2018: £nil) reflects our best estimate of the effect on our reported pension liabilities.
Year ended 30 June 2018
Total exceptional operating items in the year were £25.1m.
During the year ended 30 June 2018, The Go-Ahead Group Pension Plan (the Go-Ahead Plan) changed the reference inflation index
used to estimate the annual increases to the majority of pensions payable. From 1 April 2018, the Consumer Price Index (CPI) has been
used to increase pensions in payment rather than the Retail Price Index (RPI). The change reduced the financial risks of the Go-Ahead
Plan and enhances the long term sustainability of the scheme, providing an improvement in the security of Plan members’ benefits.
A one-off gain of £35.2m was recognised in respect of this change.
During the year ended 30 June 2018, goodwill of £8.4m was impaired relating to Konectbus, Thames Travel and Carousel bus operations,
following a period of underperformance in all three individual cash-generating units. The carrying value of the goodwill in Konectbus,
Thames Travel and Carousel is now £nil. Assets with a carrying value of £2.4m were also deemed to be impaired within the East Anglian
and Oxford bus operations.
During the year, negative goodwill of £0.7m arose on the business combinations in the year.
The tax impact of the above exceptional items plus accrued amounts relating to an HMRC taxation enquiry was £11.5m. In addition, an
accrued amount of £2.6m was provided for within finance costs in relation to the interest payable on the enquiry. The enquiry was closed
and fully settled during the year ended 29 June 2019.
7. Finance revenue and costs
Finance revenue mainly comprises interest received from bank deposits. Finance costs mainly arise from interest due on the bond
and bank loans. For accounting policies see ‘Finance revenue’ and ‘Interest-bearings loans and borrowings’ in note 2.
Bank interest receivable on bank deposits
Interest on net pension asset
Other interest receivable
Finance revenue
Interest payable on bank loans and overdrafts
Interest payable on £200m sterling 7.5 year bond
Interest payable on £250m sterling 7 year bond
Other interest payable
Unwinding of discounting on provisions
Interest payable under finance leases and hire purchase contracts
Interest on net pension liability
2019
£m
4.1
0.9
0.1
5.1
(2.7)
—
(6.3)
(1.7)
(0.8)
(0.3)
(0.1)
2018
£m
2.5
—
—
2.5
(2.5)
(2.6)
(6.3)
(4.3)
(0.4)
(0.2)
(0.4)
Finance costs
(11.9)
(16.7)
In the prior year, other interest payable included an exceptional accrued interest charge of £2.6m in relation to an HMRC taxation
enquiry. The enquiry was closed and fully settled in the current year.
152
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 8. Taxation
This note explains how our Group tax charge arises. The deferred tax section of the note sets out the deferred tax assets and liabilities
held across the Group. For accounting policies see ‘Taxation’ in note 2.
The Group taxation policy can be found at www.go-ahead.com.
a. Tax recognised in the income statement and in other comprehensive income
Tax relating to items charged or credited in the income statement:
Current year tax charge
Adjustments in respect of current tax of previous years
Total current tax
Deferred tax relating to origination and reversal of temporary differences at 19.0% (2018: 19.0%)
Adjustments in respect of deferred tax of previous years
Impact of opening deferred tax rate reduction
Total deferred tax
Tax reported in consolidated income statement
2019
£m
26.4
(1.3)
25.1
(3.3)
0.1
—
(3.2)
21.9
2018
£m
23.9
13.3
37.2
6.6
(7.4)
—
(0.8)
36.4
The tax reported in the consolidated income statement includes exceptional amounts arising on the GMP equalisation charge.
In the prior year it included exceptional amounts arising on the change in RPI/CPI assumptions on The Go-Ahead Group Pension Plan
(the Go-Ahead Plan) and amounts in relation to the HMRC enquiry. See note 6 for further details.
Tax relating to items charged or credited outside of the income statement:
Tax on remeasurement gains on defined benefit pension plans
Deferred tax on cashflow hedges
Deferred tax on share based payments (taken directly to equity)
Tax reported outside of profit or loss
2019
£m
3.7
(2.4)
(0.1)
1.2
2018
£m
3.3
5.2
0.5
9.0
b. Reconciliation
A reconciliation of income tax applicable to accounting profit before taxation, at the statutory tax rate, to tax at the Group’s effective
tax rate for the years ended 29 June 2019 and 30 June 2018 is as follows:
Accounting profit before taxation
At United Kingdom tax rate of 19.0% (2018: 19.0%)
Share scheme costs not allowable for tax purposes
Non-qualifying depreciation
Expenditure not allowable for tax purposes
Adjustments in respect of deferred tax of previous years
Movement on unrecognised deferred tax on losses carried forward
Effect of the difference between current year corporation tax and deferred tax rates
Adjustments in respect of current tax of previous years
Overseas tax rate difference
Tax reported in consolidated income statement
Effective tax rate
2019
£m
97.0
18.4
—
0.7
1.8
0.1
1.6
0.3
(1.3)
0.3
21.9
2018
£m
145.7
27.7
0.7
1.1
2.0
(7.4)
(0.2)
(0.8)
13.3
—
36.4
22.6%
25.0%
The Group had subsidiary companies in Germany, Ireland, the Nordics and Singapore during the year. The tax residencies of these
companies are the same as the countries of incorporation, which are disclosed in note 28.
Singapore and Ireland profits are generated through the provision of bus passenger services and have been taxed at the appropriate
local taxation rates of 17.0% and 12.5% respectively and have been included in the total statutory tax charge. Germany commenced
trading on 9 June 2019 and its trading result for the financial year is immaterial. The Nordics are currently in mobilisation and so have
not made a profit in the financial year.
The Group has not recognised a deferred tax asset of £5.1m (2018: £1.1m) based on a taxation rate of 30.0% (2018: 30.0%) in respect
of losses incurred in Germany carried forward.
153
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 8. Taxation continued
c. Reconciliation of current tax liabilities
A reconciliation of the current tax liability is provided below:
Current tax liability at the start of year
Corporation tax reported in consolidated income statement
Paid in the year
Current tax liability at the end of year
d. Deferred tax
The deferred tax included in the balance sheet is as follows:
Deferred tax liability
Accelerated capital allowances
Other temporary differences
Revaluation of land and buildings treated as deemed cost on conversion to IFRS
Cashflow hedges
Retirement benefit obligations
Deferred tax liability included in balance sheet
Deferred tax asset
Share based payments
Deferred tax asset included in balance sheet
2019
£m
20.5
25.1
(32.5)
13.1
2019
£m
(20.1)
(9.1)
(10.9)
(0.9)
(8.5)
(49.5)
0.2
0.2
2018
£m
12.0
37.2
(28.7)
20.5
2018
£m
(20.2)
(9.6)
(11.4)
(3.3)
(6.5)
(51.0)
0.1
0.1
The deferred tax asset is recognised as it is considered probable that there will be future taxable profits available.
The deferred tax liabilities and assets included in the balance sheet have been calculated using applicable enacted rates.
The movements in deferred tax in the income statement and other comprehensive income for the years ending 29 June 2019
and 30 June 2018 are as follows:
Year ended 29 June 2019
Accelerated capital allowances
Asset backed funding pension arrangement
Other temporary differences
Revaluation of land and buildings treated as deemed
cost on conversion to IFRS
Retirement benefit obligations
Cashflow hedges
Share based payments
At 1 July
2018
£m
Recognised in
income
statement
£m
Recognised
in other
comprehensive
income
£m
Recognised
directly in
equity
£m
Acquisitions
£m
At 29 June
2019
£m
(20.2)
(9.9)
0.3
(11.4)
(6.5)
(3.3)
0.1
(50.9)
0.5
0.2
0.3
0.5
1.7
—
—
3.2
—
—
—
—
(3.7)
2.4
—
(1.3)
—
—
—
—
—
—
0.1
0.1
(0.4)
—
—
—
—
—
—
(0.4)
(20.1)
(9.7)
0.6
(10.9)
(8.5)
(0.9)
0.2
(49.3)
154
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Year ended 30 June 2018
At 1 July
2017
£m
Recognised in
income
statement
£m
Recognised
in other
comprehensive
income
£m
Recognised
directly in
equity
£m
Acquisitions
£m
At 30 June
2018
£m
Accelerated capital allowances
Asset backed funding pension arrangement
Other temporary differences
Revaluation of land and buildings treated as deemed
cost on conversion to IFRS
Retirement benefit obligations
Cashflow hedges
Share based payments
(25.0)
(10.1)
(0.7)
(12.0)
3.6
1.9
0.6
(41.7)
5.8
0.2
1.0
0.6
(6.8)
—
—
0.8
—
—
—
—
(3.3)
(5.2)
—
(8.5)
—
—
—
—
—
—
(0.5)
(0.5)
The deferred tax included in the Group income statement is as follows:
Accelerated capital allowances
Revaluation
Retirement benefit obligations
Other temporary differences
Adjustments in respect of prior years
Deferred tax expense
(1.0)
—
—
—
—
—
—
(20.2)
(9.9)
0.3
(11.4)
(6.5)
(3.3)
0.1
(1.0)
(50.9)
2019
£m
(0.5)
(0.5)
(1.7)
(0.6)
(3.3)
0.1
(3.2)
2018
£m
0.5
(0.6)
6.7
—
6.6
(7.4)
(0.8)
e. Factors affecting tax charges
The standard rate of UK corporation tax reduced from 20% to 19% from 1 April 2017. A rate of 19% therefore applies to the current tax
charge arising during the year ended 29 June 2019.
Further reductions in the rate to 17% from 1 April 2020 were substantively enacted prior to the balance sheet date and have been
applied where applicable to the Group’s deferred tax balance at the balance sheet date.
The deferred tax relating to origination and reversal of temporary differences includes a movement of £2.8m which relates to the
exceptional charge arising on the impact of the GMP equalisation ruling on the Group’s bus pension schemes. The prior year included
movements in relation to an exceptional gain arising on the change in RPI/CPI assumptions on The Go-Ahead Group Pension Plan and
adjustments in respect of deferred tax of previous years in relation to an HMRC taxation enquiry.
In addition, in the prior year, the current tax charge reported in the consolidated income statement of £37.2m included amounts
provided for in relation to this HMRC enquiry. The HMRC enquiry was closed and fully settled during the current year.
155
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 9. Earnings per share
Basic earnings per share is the amount of profit generated for the financial year attributable to equity shareholders divided by the
weighted average number of shares in issue during the year.
Basic and diluted earnings per share
Net profit attributable to equity holders of the parent
72.8
(14.0)
58.8
78.0
11.0
89.0
Pre-
exceptional
2019
£m
Exceptional
items
2019
£m
Post-
exceptional
2019
£m
Pre-
exceptional
2018
£m
Exceptional
items
2018
£m
Post-
exceptional
2018
£m
Basic weighted average number of shares
in issue (’000)
Dilutive potential share options (’000)
Diluted weighted average number of shares
in issue (’000)
Earnings per share:
Basic earnings per share (pence per share)
Diluted earnings per share (pence per share)
Pre-
exceptional
2019
£m
Exceptional
items
2019
£m
Post-
exceptional
2019
£m
Pre-
exceptional
2018
£m
Exceptional
items
2018
£m
Post-
exceptional
2018
£m
42,985
97
43,082
—
—
—
42,985
97
42,958
101
43,082
43,059
—
—
—
42,958
101
43,059
169.4
169.0
(32.6)
(32.5)
136.8
136.5
181.6
181.2
25.6
25.5
207.2
206.7
The weighted average number of shares in issue excludes treasury shares held by the Group, and shares held in trust for the LTIP
and DSBP arrangements.
No shares were bought back and cancelled by the Group in the period from 29 June 2019 to 4 September 2019.
10. Dividends paid and proposed
Dividends are one type of shareholder return, historically paid to our shareholders in April and November.
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2018: 71.91p per share (2017: 71.91p)
Interim dividend for 2019: 30.17p per share (2018: 30.17p)
Proposed for approval at the AGM (not recognised as a liability as at 29 June 2019)
Equity dividends on ordinary shares:
Final dividend for 2019: 71.91p per share (2018: 71.91p)
Payment of proposed dividends will not have any tax consequences for the Group.
2019
£m
30.9
12.9
43.8
2019
£m
2018
£m
30.9
12.9
43.8
2018
£m
31.0
31.0
156
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 11. Property, plant and equipment
The Group holds significant investments in land and buildings, bus vehicles and plant and equipment, which form our tangible assets.
All assets (excluding freehold land) are depreciated over their useful economic lives. For accounting policies see ‘Property, plant and
equipment’ in note 2.
Freehold land
and buildings
£m
Long term
leasehold land
and properties
£m
Short term
leasehold land
and properties
£m
Bus vehicles
£m
Plant and
equipment
£m
15.6
1.7
—
—
0.4
—
—
17.7
1.5
—
—
—
19.2
10.1
1.2
—
—
—
11.3
0.9
—
Cost
At 1 July 2017
Additions
Acquisitions
Disposals
Transfer categories
Transfer of assets held for sale
Transfer of intangible assets
At 30 June 2018
Additions
Acquisitions
Disposals
Transfer categories
At 29 June 2019
Depreciation and impairment
At 1 July 2017
Charge for the year
Disposals
Impairment of assets
Transfer assets held for sale
At 30 June 2018
Charge for the year
Disposals
At 29 June 2019
Net book value
At 29 June 2019
At 30 June 2018
At 1 July 2017
209.4
4.8
3.5
(24.1)
—
0.5
—
194.1
17.6
4.6
—
1.2
217.5
33.1
2.1
(22.9)
—
0.4
12.7
1.2
—
13.9
203.6
181.4
176.3
0.4
2.0
1.2
—
(0.4)
—
—
3.2
1.1
—
—
(1.2)
3.1
—
—
—
—
—
—
0.5
—
0.5
2.6
3.2
0.4
The net book value of leased assets and assets acquired under hire purchase contracts is:
Bus vehicles
317.2
54.6
(44.3)
1.9
—
329.4
56.7
(35.3)
12.2
350.8
7.0
6.4
5.5
356.4
374.7
330.3
647.5
87.3
15.7
(45.8)
(0.6)
—
—
704.1
32.5
7.3
(37.2)
0.5
235.3
30.9
0.3
(47.4)
0.6
—
0.3
220.0
19.9
—
(5.0)
(0.5)
Total
£m
1,108.2
126.7
20.7
(117.3)
—
0.5
0.3
1,139.1
72.6
11.9
(42.2)
—
707.2
234.4
1,181.4
172.6
24.8
(40.9)
0.5
—
157.0
20.0
(4.9)
172.1
62.3
63.0
62.7
2019
£m
8.9
533.0
82.7
(108.1)
2.4
0.4
510.4
79.3
(40.2)
549.5
631.9
628.7
575.2
2018
£m
14.7
157
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 12. Intangible assets
The consolidated balance sheet contains significant intangible assets mainly in relation to goodwill, software, franchise set-up costs and
customer contracts. Goodwill, which arises when the Group acquires a business and pays a higher amount than the fair value of the
net assets primarily due to the synergies the Group expects to create, is not amortised but is subject to annual impairment reviews.
Software is amortised over its expected useful life. Franchise set-up costs are amortised over the life of the franchise/franchise
extension. Customer contracts are amortised over the life of the contract. For further details see ‘Software’, ‘Franchise set-up costs’,
‘Business combinations and goodwill’, ‘Impairment of assets’ and ‘Customer contracts’ in note 2.
Cost
At 1 July 2017
Additions
Acquisitions
Transfer from tangible fixed assets
At 30 June 2018
Additions
Disposals
At 29 June 2019
Amortisation and impairment
At 1 July 2017
Charge for the year
Impairment
At 30 June 2018
Charge for the year
On disposal
At 29 June 2019
Net book value
At 29 June 2019
At 30 June 2018
At 1 July 2017
Goodwill
£m
Software
costs
£m
Franchise
set-up costs
£m
Rail franchise
asset
£m
Customer
contracts
£m
86.4
0.4
0.6
—
87.4
—
—
87.4
4.9
—
8.4
13.3
—
—
13.3
74.1
74.1
81.5
23.1
3.3
—
(0.3)
26.1
6.1
(5.4)
26.8
18.9
2.3
—
21.2
2.8
(5.3)
18.7
8.1
4.9
4.2
14.6
6.4
—
—
21.0
16.1
—
37.1
10.1
0.8
—
10.9
1.7
—
12.6
24.5
10.1
4.5
16.7
—
—
—
16.7
—
—
16.7
16.7
—
—
16.7
—
—
16.7
—
—
—
13.4
—
1.3
—
14.7
—
—
14.7
12.1
0.2
—
12.3
0.3
—
12.6
2.1
2.4
1.3
Total
£m
154.2
10.1
1.9
(0.3)
165.9
22.2
(5.4)
182.7
62.7
3.3
8.4
74.4
4.8
(5.3)
73.9
108.8
91.5
91.5
Software costs
Software costs capitalised exclude software that is integral to the related hardware. Software is amortised on a straight-line basis over
its expected useful life of three to five years.
Franchise set-up costs
A part of the Group’s activities is the process of bidding for and securing franchises to operate rail and bus services in the UK and overseas.
Directly attributable, incremental costs incurred after achieving preferred bidder status, entering into a franchise extension or winning
an international bid are capitalised as an intangible asset and amortised on a straight-line basis over the life of the franchise/franchise
extension, currently between 5 and 13 years.
Rail franchise asset
This reflects the cost of the right to operate a rail franchise, and relates to the cost of the intangible asset acquired on the handover
of the franchise assets relating to the Southeastern rail franchise. The intangible asset was being amortised on a straight-line basis over
the original life of the franchise.
Customer contracts
This relates to the value attributed to customer contracts and relationships purchased as part of the Group’s acquisitions on a straight-line
basis. The value is calculated based on the unexpired term of the contracts at the date of acquisition and is amortised over that period.
The unexpired terms range between 8 and 11 years.
158
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Goodwill
Goodwill acquired through acquisitions has been allocated to individual cash-generating units for impairment testing on the basis
of the Group’s business operations. The carrying value of goodwill is tested annually for impairment by cash-generating unit and
is as follows:
Go South Coast
Brighton & Hove
Plymouth Citybus
Go-Ahead London
Go North East
Oxford
2019
£m
34.6
12.7
13.0
10.5
2.7
0.6
74.1
2018
£m
34.6
12.7
13.0
10.5
2.7
0.6
74.1
The recoverable amount of goodwill has been determined based on a value in use calculation for each cash-generating unit, using
cashflow projections based on financial budgets and forecasts approved by senior management covering a three-year period which
have then been extended over an appropriate period. The directors feel that the extended period is justified because of the long term
stability of the relevant income streams. Growth has been extrapolated forward, using a growth rate of 2.0%, from the end of the
three-year forecasts over a total period of ten years plus a terminal value using a growth rate of 2.0% which reflects the directors’ view
of long term growth rates in each business, and the long term recurrent nature of the businesses.
The Group’s weighted average cost of capital has been initially calculated as 5.5% (2018: 5.2%). Given the current low weighted average
cost of capital the calculation of value in use has been initially derived based on the internal rate of return that the Group uses to appraise
investments, currently 8.0%, to identify any goodwill balances requiring further consideration and review. The economic conditions
that the cash-generating units operate in are considered similar enough, primarily being UK based, to use the same discount rate.
The calculation of value in use for each cash-generating unit is most sensitive to the forecast operating cashflows, the discount rate
and the growth rate used to extrapolate cashflows beyond the budget period. The operating cashflows are based on assumptions of
revenue, employee costs and general overheads. These assumptions are influenced by several internal and external factors. The directors
consider the assumptions used to be consistent with the historical performance of each unit and to be realistically achievable in light
of economic and industry measures and forecasts.
A 0.5% increase in the internal rate of return or revenue growth falling by 1.0% are considered the most likely sensitivities that could
impact recoverable amounts. Following the impairment reviews the cash-generating units have significant headroom when the
impairment testing has been completed and accordingly these sensitivities would not cause the carrying value to exceed their
recoverable amount.
159
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 13. Business combinations
This note details acquisition transactions carried out in the current and prior periods. For accounting policies see ‘Business
combinations and goodwill’ and ‘Customer contracts’ in note 2.
Year ended 29 June 2019
On 2 June 2019, the Group acquired the Queen’s Road bus depot in Manchester along with the associated trade and assets, from
FirstGroup plc, in line with the Group’s strategic vision and its objective to win new bus and rail contracts.
Aggregate net assets at date of acquisition:
Property, plant and equipment
Inventories
Trade and other receivables
Deferred tax liabilities
Net assets
Negative goodwill arising on acquisition
Cash
Total consideration
Total acquisitions –
provisional fair value
to Group
£m
11.9
0.2
0.2
(0.4)
11.9
(0.4)
11.5
11.5
Acquisition costs of £0.3m have been expensed through operating costs.
Negative goodwill of £0.4m has been included within operating costs.
From the date of acquisition in the period, the acquisition recorded an operating profit of less than £0.1m and revenue of £1.9m. The trade
and assets acquired were an integral part of First’s overall Manchester operation and therefore included within its wider results. As a
result, it cannot be assessed as to what the impact on operating profits and revenues would have been, had the acquisitions been
completed on the first day of the financial period.
Year ended 30 June 2018
As disclosed in the 2018 Annual Report, Go-North East Limited, a wholly owned subsidiary of the Group, acquired 100% of the
East Yorkshire Motor Services Group of companies on 16 June 2018 and The City of Oxford Motor Services Limited, a wholly owned
subsidiary of the Group, acquired 100% of Tom Tappin Limited on 7 December 2017. The total consideration paid was £9.2m and
no significant changes to the fair value previously reported were subsequently identified. Given the size and prior year disclosures
further detail is not replicated in this Annual Report.
14. Assets classified as held for sale
This note identifies any non-current assets or disposal groups that are held for sale. The carrying amounts of these assets will be
recovered principally through a sale rather than through continuing use. For accounting policies see ‘Non-current assets held for sale’
in note 2.
At 29 June 2019, assets held for sale, with a carrying value of £0.6m, related to property, plant and equipment available for sale, and
were included in the regional bus segment (2018: £1.7m). Assets held for sale with a carrying value of £2.1m related to bus rolling stock
available for sale and were included in the London & International bus segment (2018: £11.4m).
The Group expects to sell £2.7m within 12 months of them going onto the “for sale” list and being actively marketed or reflecting
contracts already in place for certain bus assets. Assets held for sale of £0.6m relate to land and buildings, within property, plant and
equipment, whereby offers have been made which management is currently assessing. The value at each balance sheet date represents
management’s best estimate of their resale value less disposal costs.
During the year ended 29 June 2019, assets held for sale were sold for a loss of £0.1m (2018: profit of £0.9m), which is included within
operating costs in the income statement.
15. Inventories
Inventory primarily consists of vehicle spares and fuel and is presented net of allowances for obsolete products. For accounting policies
see ‘Inventories’ in note 2.
Raw materials and consumables
The amount of any write down of inventories recognised as an expense during the year is immaterial.
2019
£m
16.8
2018
£m
15.2
160
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 16. Trade and other receivables
Trade and other receivables mainly consist of amounts owed by principal contracting authorities and other customers, amounts paid
to suppliers in advance, amounts receivable from central government and taxes receivable. Trade receivables are shown net of an
allowance for bad or doubtful debts.
Current
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Other receivables
Prepayments
Accrued income
Receivable from central government
2019
£m
2018
£m
163.0
(2.1)
160.9
18.9
27.8
42.0
100.7
350.3
168.1
(1.7)
166.4
10.8
76.7
29.2
59.8
342.9
Accrued income and amounts receivable from central government principally comprises amounts relating to contracts with customers.
As at 29 June 2019 and 30 June 2018, the ageing analysis of trade receivables and the provision for impairment of receivables based on
expected credit losses, was as follows:
Year ended 29 June 2019
Expected rate of credit losses
Trade receivables
Provision for impairment
of receivables
Year ended 30 June 2018
Expected rate of credit losses
Trade receivables
Provision for impairment
of receivables
Neither past
due nor
impaired
£m
—
149.3
Total
£m
1.3%
163.0
2.1
—
Neither past
due nor
impaired
£m
—
152.5
Total
£m
1.0%
168.1
1.7
—
Less than
30 days
£m
—
4.7
—
Less than
30 days
£m
—
9.5
—
30–60 days
£m
60–90 days
£m
90–120 days
£m
—
3.3
—
7.4%
2.7
0.2
—
0.7
—
30–60 days
£m
60–90 days
£m
90–120 days
£m
—
1.6
—
9.1%
1.1
0.1
—
1.1
—
Past due but
not impaired –
more than
120 days
£m
82.6%
2.3
1.9
Past due but
not impaired –
more than
120 days
£m
69.6%
2.3
1.6
Trade receivables at nominal value of £2.1m (2018: £1.7m) were impaired and fully provided for. Movements in the provision for
impairment of receivables were as follows:
At 1 July 2018
Charge for the year
Utilised
Unused amounts reversed
On acquisitions
At 29 June 2019
2019
£m
1.7
0.9
(0.6)
0.1
—
2.1
2018
£m
2.1
0.2
(0.4)
(0.3)
0.1
1.7
The credit risk associated with the Group’s trade and other receivables and the impact of the adoption of IFRS 9 is explained in note 21.
161
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 17. Cash and cash equivalents
The majority of the Group’s cash is held in bank deposits which have a maturity of three months or less to comply with DfT short term
liquidity requirements. For accounting policies see ‘Cash and cash equivalents’ in note 2.
Cash at bank and in hand
Cash and cash equivalents
2019
£m
86.8
544.0
630.8
2018
£m
89.9
466.6
556.5
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying
periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the
respective deposit rates. The fair value of cash and cash equivalents is not materially different from book value.
Amounts held by rail companies included in cash at bank and on short term deposit can be distributed only with the agreement of the
DfT, normally up to the value of distributable reserves or based on a working capital formula. As at 29 June 2019, balances amounting
to £484.9m (2018: £438.9m) were restricted. Part of this amount is to cover deferred income for rail season tickets, which was £167.8m
at 29 June 2019 (2018: £162.8m).
18. Trade and other payables
Trade and other payables mainly consist of amounts owed to suppliers that have been invoiced or accrued, deferred income and
deferred season ticket income. They also include taxes and social security amounts due in relation to our role as an employer and
amounts owed to central government.
Current
Trade payables
Other taxes and social security costs
Other payables
Deferred season ticket income
Accruals
Deferred income
Payable to central government
Government grants
2019
£m
152.8
31.3
61.8
167.8
224.2
50.3
156.6
2.9
847.7
Deferred season ticket income and deferred income principally comprise amounts relating to contracts with customers.
Non-current
Government grants
2019
£m
9.0
9.0
2018
£m
240.9
31.8
53.0
165.9
133.5
45.0
130.9
3.8
804.8
2018
£m
1.0
1.0
Terms and conditions of the above financial liabilities are as follows:
• Trade payables are non-interest bearing and are normally settled on 30-day terms
• Other payables are non-interest bearing and have varying terms of up to 12 months
Movements in trade payables and accruals reflect the impact of the timing of year-end to certain settlements and invoicing within the
UK rail division as well as other changes in the classification of certain items between the two balances.
162
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 19. Interest-bearing loans and borrowings
The Group’s sources of borrowing for funding and liquidity requirements come from a range of committed bank facilities and a capital
market bond. For accounting policies see ‘Interest-bearing loans and borrowings’ and ‘Cash and cash equivalents’ in note 2.
Net cash/debt and interest-bearing loans and borrowings
The net cash/debt position comprises cash, short term deposits, interest-bearing loans and borrowings, and can be summarised as:
Year ended 29 June 2019
Current
Effective
interest rate
%
Maturity
1.0 Over 5 years
2.5 Over 5 years
1.3
0–1 years
2.79 Over 5 years
0–4 years
7.6
Current
Effective
interest rate
%
Maturity
1.00 Over 5 years
2.50 Over 5 years
1.30
0–1 years
1.50 Over 5 years
0–5 years
7.74
Syndicated loans
Debt issue costs on syndicated loans
£250m sterling seven-year bond
Debt issue costs on £250m sterling seven-year bond
€8m revolving credit facility
€10.6m financing facility
Finance leases and HP commitments (note 20)
Total interest-bearing loans and borrowings
Debt issue costs
Total interest-bearing loans and borrowings
(gross of debt issue costs)
Cash and short term deposits (note 17)
Net cash
Restricted cash*
Adjusted net debt
Year ended 30 June 2018
Syndicated loans
Debt issue costs on syndicated loans
£250m sterling seven-year bond
Debt issue costs on £250m sterling seven-year bond
€8m revolving credit facility
€10.6m financing facility
Finance leases and HP commitments (note 20)
Total interest-bearing loans and borrowings
Debt issue costs
Total interest-bearing loans and borrowings
(gross of debt issue costs)
Cash and short term deposits (note 17)
Net cash
Restricted cash*
Adjusted net debt
Within
one year
£m
After one year
but not more
than five years
£m
Non-current
After
more than
five years
£m
—
(0.4)
—
(0.6)
5.7
0.8
1.8
7.3
1.0
8.3
(630.8)
(622.5)
—
(0.4)
—
(1.6)
—
3.5
4.3
5.8
2.0
7.8
—
7.8
144.7
—
250.0
—
—
5.4
—
400.1
—
400.1
—
400.1
Within
one year
£m
After one year
but not more
than five years
£m
Non-current
After
more than
five years
£m
—
(0.3)
—
(0.6)
6.5
—
2.8
8.4
0.9
9.3
(556.5)
(547.2)
—
(0.3)
—
(2.2)
—
1.6
5.9
5.0
2.5
7.5
—
7.5
136.0
—
250.0
—
—
3.1
0.7
389.8
—
389.8
—
389.8
Total
£m
144.7
(0.8)
250.0
(2.2)
5.7
9.7
6.1
413.2
3.0
416.2
(630.8)
(214.6)
484.9
270.3
Total
£m
136.0
(0.6)
250.0
(2.8)
6.5
4.7
9.4
403.2
3.4
406.6
(556.5)
(149.9)
438.9
289.0
* Restricted cash balances are amounts held by rail companies which are included in cash and cash equivalents. The restricted cash can only be distributed with the agreement of
the DfT, normally up to the value of revenue reserves or based on the working capital formula.
163
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 19. Interest-bearing loans and borrowings continued
Analysis of Group net cash
Cash and cash
equivalents
£m
Syndicated
loan facility
£m
Hire purchase/
finance leases
£m
£200m
sterling bond
£m
£250m
sterling bond
£m
€RCF
£m
€10.6m loan
£m
At 1 July 2017
Cashflow
On acquisition
At 30 June 2018
Cashflow
590.2
(35.7)
2.0
556.5
74.3
(156.0)
20.0
—
(136.0)
(8.7)
At 29 June 2019
630.8
(144.7)
(3.0)
0.9
(7.3)
(9.4)
3.3
(6.1)
(200.0)
200.0
—
—
—
—
—
(250.0)
—
(250.0)
—
(250.0)
(0.9)
(5.6)
—
(6.5)
0.8
(5.7)
—
(4.7)
—
(4.7)
(5.0)
(9.7)
Total
£m
230.3
(75.1)
(5.3)
149.9
64.7
214.6
Reconciliation of liabilities arising from financing activities
At 1 July 2017
Cashflow
On acquisition
At 30 June 2018
Cashflow
At 29 June 2019
Syndicated
loan facility
£m
Hire purchase/
finance leases
£m
£200m
sterling bond
£m
£250m
sterling bond
£m
(156.0)
20.0
—
(136.0)
(8.7)
(144.7)
(3.0)
0.9
(7.3)
(9.4)
3.3
(6.1)
(200.0)
200.0
—
—
—
—
—
(250.0)
—
(250.0)
—
(250.0)
€RCF
£m
€10.6m loan
£m
Total liabilities
from financing
activities
£m
(0.9)
(5.6)
—
(6.5)
0.8
(5.7)
—
(4.7)
—
(4.7)
(5.0)
(9.7)
(359.9)
(39.4)
(7.3)
(406.6)
(9.6)
(416.2)
Syndicated loan facility
On 16 July 2014, the Group refinanced and entered into a £280.0m five-year syndicated loan facility. The loan facility is unsecured and
interest is charged at LIBOR + margin, where the margin is dependent upon the gearing of the Group. The facility had an initial maturity
of July 2019, with two one-year extensions, the second of which was agreed on 20 June 2016, extending the maturity of the facility to
July 2021 from that date. On 20 July 2018, an additional extension of two years was agreed, extending the maturity of the facility to
July 2023. On 9 July 2019 a further one-year extension was agreed extending the maturity to July 2024. A further one-year extension
is available which, if exercised, would extend the maturity to July 2025.
As at 29 June 2019, £144.7m (2018: £136.0m) of the facility was drawn down.
£200m sterling bond
On 24 March 2010, the Group raised a £200.0m bond of 7.5 years which matured, and was repaid, on 29 September 2017. The bond had
a coupon rate of 5.375%.
£250m sterling bond
On 6 July 2017, the Group raised a £250.0m bond of seven years maturing on 6 July 2024, with a coupon rate of 2.5%.
€8m revolving credit facility (RCF)
On 27 April 2017, the Group’s subsidiary, Go-Ahead Verkehrgesellschaft Deutschland GmbH, entered into a €20m one-year RCF.
On 24 October 2017, €12.0m of this facility was replaced with a €10.6m 10.5 year loan facility with the Group’s subsidiary, Go-Ahead
Facility GmbH, leaving an €8.0m RCF.
As at 29 June 2019, €6.4m or £5.7m (2018: €7.4m or £6.5m) was drawn down. The facility is unsecured and interest is charged at 1.3%
plus EURIBOR.
€10.6m loan facility
On 24 October 2017, the Group’s subsidiary, Go-Ahead Facility GmbH, entered into a €10.6m loan facility.
As at 29 June 2019, €10.8m or £9.7m (2018: €5.2m or £4.7m) was drawn down and is repayable over the 10.5 year term. The facility is
secured against the German land and buildings included within plant, property and equipment. Interest was charged at 1.5% plus
EURIBOR until 1 June 2019 from when interest is charged at a fixed rate of 2.79%.
Debt issue costs
There are debt issue costs of £0.8m (2018: £0.6m) on the syndicated loan facility.
The £250m sterling seven-year bond has debt issue costs of £2.2m (2018: £2.8m).
The Group is subject to two covenants in relation to its borrowing facilities. The covenants specify a maximum adjusted net debt
to EBITDA and a minimum net interest cover. At the year end and throughout the year, the Group has not been in breach of any
bank covenants.
164
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 20. Finance lease and hire purchase commitments
This note details finance lease and hire purchase commitments. For accounting policies see ‘Interest-bearing loans and borrowings’ in
note 2.
The Group has finance leases and hire purchase contracts for bus vehicles and various items of plant and equipment. These contracts
have no terms of renewal or purchase option escalation clauses. Future minimum lease payments under finance leases and hire
purchase contracts, together with the present value of the net minimum lease payments, are as follows:
Within one year
After one year but not more than five years
Over five years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
2019
2018
Minimum
payments
£m
Present value
of payments
£m
Minimum
payments
£m
Present value
of payments
£m
1.9
4.5
—
6.4
(0.3)
6.1
1.8
4.3
—
6.1
—
6.1
2.9
6.3
0.7
9.9
(0.5)
9.4
2.8
5.9
0.7
9.4
—
9.4
21. Financial risk management objectives and policies
This note details our treasury management and financial risk management objectives and policies, as well as the exposure and
sensitivity of the Group to interest rate, liquidity, foreign exchange and credit risk, and the policies in place to monitor and manage
these risks.
Financial risk factors and management
The Group’s principal financial instruments comprise bank loans, a sterling bond, hire purchase and finance lease contracts, and cash
and short term deposits. The main purpose of these financial instruments is to provide an appropriate level of net debt to fund the
Group’s activities, namely working capital, fixed asset expenditure, acquisitions and dividends. The Group has various other financial
instruments such as trade receivables and trade payables, which arise directly from its operations.
It is Group policy to enter into derivative transactions, primarily fuel swaps and interest rate swaps. The purpose of these is to manage
the fuel price and interest rate risks arising from the Group’s operations and its sources of finance. At the year end, the Group did not
hold any interest rate swaps.
It is, and has been throughout 2017/18 and 2018/19, the Group’s policy that no trading in derivatives shall be undertaken and derivatives
are only purchased for internal benefit.
The main financial risks arising from the Group’s activities are interest rate risk, liquidity risk, credit risk and commodity price risk,
managed via fuel derivatives.
Brexit
In light of the uncertainty around the terms of the UK’s departure from the EU, the Group has conducted a risk review process and
has put practical mitigation measures in place against identified risks related to supply chain, people and Southeastern operations.
Read about these risks and our mitigating actions on page 48.
165
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 21. Financial risk management objectives and policies continued
Interest rate risk
The Group borrows and deposits funds and is exposed to changes in interest rates. The Group’s policy toward cash deposits is to
deposit cash short term on UK money markets.
The Group manages interest rate risk through a combination of fixed rate instruments and/or interest rate derivatives. During the
years ended 29 June 2019 and 30 June 2018 the Group had no interest rate swaps in place. The Group has net cash and hence the
present adverse risk is a decrease in interest rates.
The maturity and interest rate profile of the financial assets and liabilities of the Group (excluding unamortised debt issue costs)
as at 29 June 2019 and 30 June 2018 is as follows:
Year ended 29 June 2019
Floating rate (assets)/liabilities
Syndicated loans
Euro revolving credit facility
Gross floating rate liabilities
Cash assets
Net floating rate (assets)/liabilities
Fixed rate liabilities
£250m sterling seven-year bond
€10.6m financing facility
Obligations under finance lease and
hire purchase contracts
Net fixed rate liabilities
Year ended 30 June 2018
Floating rate (assets)/liabilities
Syndicated loans
Euro revolving credit facility
€10.6m financing facility
Gross floating rate liabilities
Cash assets
Net floating rate (assets)/liabilities
Fixed rate liabilities
£250m sterling seven-year bond
Obligations under finance lease and
hire purchase contracts
Net fixed rate liabilities
Average
rate
%
Within
1 year
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
More than
5 years
£m
Total
£m
1.00
1.30
2.50
2.79
7.60
—
5.7
5.7
(630.8)
(625.1)
—
0.8
1.8
2.6
—
—
—
—
—
—
0.8
1.4
2.2
—
—
—
—
—
—
0.9
1.4
2.3
—
—
—
—
—
—
0.9
1.0
1.9
—
—
—
—
—
—
0.9
0.5
1.4
Average
rate
%
Within
1 year
£m
1–2 years
£m
2–3 years
£m
3–4 years
£m
4–5 years
£m
144.7
—
144.7
—
144.7
5.7
150.4
(630.8)
144.7
(480.4)
250.0
5.4
250.0
9.7
—
6.1
255.4
265.8
More than
5 years
£m
Total
£m
1.00
1.30
1.50
2.50
7.74
—
6.5
—
6.5
(556.5)
(550.0)
—
2.8
2.8
—
—
0.4
0.4
—
0.4
—
2.0
2.0
—
—
0.4
0.4
—
0.4
—
1.5
1.5
—
—
0.4
0.4
—
0.4
—
1.4
1.4
—
—
0.4
0.4
—
0.4
—
1.0
1.0
136.0
—
3.1
139.1
—
139.1
136.0
6.5
4.7
147.2
(556.5)
(409.3)
250.0
250.0
0.7
9.4
250.7
259.4
The expected maturity of the financial assets and liabilities in the table above is the same as the contractual maturity of the financial
assets and liabilities.
Interest on financial instruments classified as floating rate is repriced at intervals of less than one year. Interest on financial instruments
classified as fixed rate is fixed until the maturity of the instrument. The other financial instruments of the Group that are not included
in the tables above are non-interest bearing and are therefore not subject to interest rate risk.
166
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Interest rate risk table
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held
constant, of the Group’s profit before tax (through the impact on floating rate borrowings) based on recent historic changes.
2019
GBP
GBP
2018
GBP
GBP
Increase/
decrease in
basis points
Effect on profit
before tax
£m
Effect on
equity
£m
50.0
(50.0)
50.0
(50.0)
(0.6)
0.6
(0.6)
0.6
0.6
(0.6)
(0.6)
0.6
Liquidity risk
The Group has in place a £280.0m syndicated loan facility which allows the Group to maintain liquidity within the desired gearing range.
On 16 July 2014, the Group refinanced and entered into a £280.0m five-year syndicated loan facility, with two one-year extensions
replacing the previous £275.0m five-year syndicated loan facility. The second of the one-year extensions was agreed on 20 June 2016,
extending the maturity of the current facility to July 2021. On 20 July 2018, an additional extension of two years was agreed, extending
the maturity of the facility to July 2023. On 9 July 2019 a further one-year extension was agreed extending the maturity to July 2024.
A further one-year extension is available which, if exercised, would extend the maturity to July 2025.
On 24 March 2010, the Group raised a £200.0m bond of 7.5 years which matured, and was repaid, on 29 September 2017. The bond had
a coupon rate of 5.375%.
On 6 July 2017, the Group raised a £250m bond of seven years maturing on 6 July 2024 with a coupon rate of 2.5% which replaced the
£200m sterling bond.
On 27 April 2017, the Group’s subsidiary, Go-Ahead Verkehrgesellschaft Deutschland GmbH, entered into a €20m one-year revolving
credit facility. On 24 October 2017, €12.0m of this facility was replaced with a €10.6m 10.5 year loan facility with the Group’s subsidiary,
Go-Ahead Facility GmbH.
The level of drawdowns and prevailing interest rates are detailed in note 19.
Available liquidity as at 29 June 2019 and 30 June 2018 was as follows:
Syndicated loans
£250m seven year 2.5% sterling bond 2024
Euro revolving credit facility
€10.6m financing facility
Total core facilities
Amount drawn down at year end
Headroom
2019
£m
280.0
250.0
7.2
9.5
546.7
410.1
136.6
2018
£m
280.0
250.0
7.1
9.4
546.5
397.2
149.3
The Group’s bus vehicles can be financed by hire purchase or finance lease arrangements, or term loans at fixed rates of interest over
two to five year primary borrowing periods. This provides a regular inflow of funding to cover expenditure as it arises.
Currency risk
The Group has foreign exchange exposure in respect of cashflow commitments to its operations in Germany, Singapore, the Nordics
and Ireland. These are currently not material to the Group.
Credit risk
The Group’s credit risk is primarily attributable to its financial assets, comprising trade and other receivables (see note 16), cash and
cash equivalents (see note 17) and fuel hedge derivatives (see note 22). The maximum credit risk exposure of the Group as at the
year end was £959.2m (2018: £840.8m) and comprises amounts from a number of unconnected parties.
The majority of the Group’s receivables are with public (or quasi-public) bodies (such as the DfT). The Group does not consider these
counterparties to be a significant credit risk. Risk of exposure to non-return of cash on deposit is managed through a treasury policy of
holding deposits with banks rated A- or A3 or above by at least one of the credit rating agencies. The treasury policy outlines the
maximum level of deposit that can be placed with any one given financial institution.
In relation to provisions for impairments of trade receivables, the Group applies the IFRS 9 simplified approach and provisions are made
based on the expected credit losses at each reporting date. Expected credit losses are assessed based on the number of days past due,
the customer type, customer rating and past experience. Provisions for the impairment of trade receivables are recorded within
operating costs within the income statement, with any subsequent recoveries being offset against these.
167
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 21. Financial risk management objectives and policies continued
Commodity price risk
The Group is exposed to commodity price risk as a result of fuel usage. The Group closely monitors fuel prices and uses fuel derivatives
to hedge its exposure to increases in fuel prices, when it deems this to be appropriate. The Group operates a bus fuel hedging policy
which uses fuel hedges to fix the price of diesel fuel in advance. The core policy is to be fully hedged for the next financial year before
the start of that year, with at least 50% of the following year fixed and 25% of the year thereafter. This hedging profile is then maintained
on a month by month basis. Additional purchases can be made to lock in future costs, subject to Board approval. Risk component hedging
has been adopted under IFRS 9, meaning that the hedged price risk component of the purchased fuel matches that of the underlying
derivative commodity. The hedged risk component is considered to be separately identifiable and reliably measurable. Gasoil is considered
to be the risk component and there is a strong correlation between the movements in the price of the derivative and the fuel price purchased.
Variances in pricing between the derivative commodity and the purchased price relate to underlying costs such as duty and delivery
and are excluded from the hedge relationship. Further details are given in note 22.
Contractual payments
The tables below summarise the maturity profile of the Group’s financial liabilities at 29 June 2019 and 30 June 2018 based on
contractual undiscounted payments.
Year ended 29 June 2019
Interest-bearing loans and borrowings
£250m sterling seven year bond
Trade and other payables
Year ended 30 June 2018
Interest-bearing loans and borrowings
£250m sterling seven year bond
Trade and other payables
On demand
£m
—
—
49.3
49.3
On demand
£m
—
—
24.6
24.6
Less than
3 months
£m
0.3
5.7
455.4
461.4
Less than
3 months
£m
0.3
6.1
424.2
430.6
3–12 months
£m
1–5 years
£m
7.9
—
90.7
98.6
7.8
—
—
7.8
More than
5 years
£m
150.2
248.3
—
Total
£m
166.2
254.0
595.4
398.5
1,015.6
3–12 months
£m
1–5 years
£m
7.2
—
110.3
117.5
6.7
—
—
6.7
More than
5 years
£m
139.2
247.4
—
386.6
Total
£m
153.4
253.5
559.1
966.0
Managing capital
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios
in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it,
in light of changes in economic conditions. Details of the issued capital and reserves are shown in note 24. Details of interest-bearing
loans and borrowings are shown in note 19.
To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders
or issue new shares. No changes were made in the objectives, policies or processes during the years ended 29 June 2019 and 30 June 2018.
The Group applies the primary objective by managing its capital structure such that net debt (adjusted to exclude restricted cash)
to EBITDA* is within a range which retains an investment grade debt rating of at least BBB-.
In the year ended 2 July 2011, the Group obtained investment grade long term credit ratings from Standard & Poor’s and Moody’s as follows:
Standard & Poor’s
BBB- (stable outlook)
Moody’s
Baa3 (stable outlook)
Those ratings have been maintained in the year ended 29 June 2019 and recently reconfirmed.
The Group’s policy is to maintain an adjusted net debt to EBITDA ratio of 1.5x to 2.5x. The Group’s calculation of adjusted net debt is set
out in note 19 and includes cash and short term deposits, interest-bearing loans and borrowings, and excludes restricted cash. During
the year no specific actions were required to be taken by the Group with regard to this ratio or to ensure the investment grade debt rating.
Our primary financial covenant under the 2024 syndicated loan facility is an adjusted net debt to EBITDA ratio of not more than 3.5x
and at 29 June 2019 it was 1.32x (2018: 1.30x).
* Operating profit before interest, tax, depreciation and amortisation.
Operating leases
The Group uses operating leases for bus and coach purchases across the Group primarily where the vehicles service specific contracts
to mitigate the risk of ownership at the end of the contract. The majority of assets in the rail division are financed by operating leases,
in particular rolling stock.
IFRS 16 Leases is effective for the Group from 30 June 2019. The impact that this standard will have on the Group is disclosed in note 2.
168
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued
22. Derivatives and financial instruments
A derivative is a security whose price is dependent upon or derived from an underlying asset. The Group uses energy derivatives to
hedge its risks associated with fuel price fluctuations. For accounting policies see ‘Financial assets and derivatives’, ‘Fair value
measurement’ and ‘Interest-bearing loans and borrowings’ in note 2.
a. Fair values
The fair values of the Group’s financial instruments carried in the financial statements have been reviewed as at 29 June 2019
and 30 June 2018 and are as follows:
Non-current financial assets: fuel price derivatives
Current financial assets: fuel price derivatives
Current financial liabilities: fuel price derivatives
Non-current financial liabilities: fuel price derivatives
Net financial derivatives
The carrying value of the Group’s financial assets and liabilities are as follows:
Year ended 29 June 2019
Financial assets and derivatives
Trade and other receivables
Cash and cash equivalents
Fuel price derivatives
Financial liabilities and derivatives
Interest-bearing loans and borrowings
Trade and other payables
Fuel price derivatives
Year ended 30 June 2018
Financial assets and derivatives
Trade and other receivables
Cash and cash equivalents
Fuel price derivatives
Financial liabilities and derivatives
Interest bearing loans and borrowings
Trade and other payables
Fuel price derivatives
2019
£m
1.5
4.4
5.9
(0.8)
(0.8)
(1.6)
4.3
2018
£m
8.1
10.0
18.1
—
—
—
18.1
Amortised
cost
£m
Derivatives
used for
cash-flow
hedging
£m
Total
carrying value
£m
Fair value
£m
322.5
630.8
—
953.3
(413.2)
(626.7)
—
—
—
5.9
5.9
—
—
(1.6)
322.5
630.8
5.9
959.2
322.5
630.8
5.9
959.2
(413.2)
(626.7)
(1.6)
(411.7)
(626.7)
(1.6)
(1,039.9)
(1.6)
(1,041.5)
(1,040.0)
Amortised
cost
£m
Derivatives
used for
cash-flow
hedging
£m
Total
carrying value
£m
Fair value
£m
266.2
556.5
—
822.7
(403.2)
(590.1)
—
(993.3)
—
—
18.1
18.1
—
—
—
—
266.2
556.5
18.1
266.2
556.5
18.1
840.8
840.8
(403.2)
(590.1)
—
(398.6)
(590.1)
—
(993.3)
(988.7)
169
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 22. Derivatives and financial instruments continued
The fair values of all other assets and liabilities in notes 16, 18 and 19 are not significantly different from their carrying amount, with the
exception of the £250m sterling seven-year bond which has a fair value of £248.5 (2018: £245.4m) but is carried at its amortised cost of
£250.0m (2018: £250.0m). The fair value of the £250m sterling seven-year bond has been determined by reference to the price available
from the market on which the bond is traded. The fuel price derivatives were valued externally by the respective banks by comparison
with the market fuel price for the relevant date.
All other fair values shown above have been calculated by discounting cashflows at prevailing interest rates.
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
• Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly
or indirectly
• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data
As at 29 June 2019 and 30 June 2018, the Group has used a level 2 valuation technique to determine the fair value of the fuel price
derivatives. The valuations are based on the external Mark-to-Market (MtM) valuations provided by the derivative providers and
are prepared in accordance with the providers own internal models and calculation methods based upon well recognised financial
principles, relevant current market conditions and reasonable estimates about relevant future market conditions.
There are a small number of foreign currency hedges in place as at 29 June 2019 (2018: none). The foreign currency hedge valuations
are based on the external MtM valuations and are currently not material to the Group.
During the year ended 29 June 2019, there were no transfers between valuation levels.
b. Hedging activities
Fuel derivatives
As discussed in note 21, the Group is exposed to commodity price risk as a result of fuel usage.
Bus
As at 29 June 2019, the Group had derivatives against bus fuel of 188 million litres for the three years ending June 2022. The fair value
of the asset or liability has been recognised on the balance sheet. The value has been generated since the date of the acquisition of the
instruments due to the movement in market fuel prices.
As at 29 June 2019 the Group’s external hedging profile is as follows:
Actual percentage hedged
Litres hedged (million)
Average hedged rate (pence per litre)
* Assuming consistent usage and that hedging is completed at June 2019 market price.
The changes in the fair values of the fuel derivatives during the year are as follows:
Changes in fair value of hedged item
Changes in fair value of hedging instrument
Changes in fair value through the hedging reserves (net of tax)
< 1 year
100%
108
36.8
1–2 years
2–5 years
Total
50%
54
36.7
25%
26
38.9
2019
£m
(13.7)
13.7
(11.3)
188
37.7
2018
£m
28.2
(28.2)
23.0
The maturity of the hedge profile is between July 2019 and June 2022.
Rail
As at 29 June 2019 the Group had no derivatives against rail fuel for the 2019 financial year (2018: nil).
170
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 23. Provisions
A provision is a liability recorded in the consolidated balance sheet, where there is uncertainty over the timing or amount that will
be paid, and is therefore often estimated. The main provisions we hold are in relation to uninsured claims and dilapidation provisions
relating to franchise commitments. For accounting policies see ‘Provisions’ and ‘Uninsured liabilities’ in note 2.
At 1 July 2017
Provided (after discounting)
Utilised
Released
On acquisition
Unwinding of discounting
At 30 June 2018
Provided (after discounting)
Utilised
Released
Unwinding of discounting
At 29 June 2019
Current
Non-current
Franchise
commitments
£m
Uninsured
claims
£m
53.0
24.1
(16.1)
(9.0)
—
(0.1)
51.9
33.7
(19.6)
(2.2)
0.2
64.0
44.3
18.3
(14.8)
(3.1)
0.9
(0.3)
45.3
15.1
(11.8)
(4.8)
(0.4)
43.4
Other
£m
4.9
1.5
—
(0.6)
0.3
—
6.1
3.6
(0.2)
(0.1)
—
9.4
2019
£m
34.8
82.0
116.8
Total
£m
102.2
43.9
(30.9)
(12.7)
1.2
(0.4)
103.3
52.4
(31.6)
(7.1)
(0.2)
116.8
2018
£m
29.6
73.7
103.3
Franchise commitments
Franchise commitments comprise £64.0m (2018: £51.5m) dilapidation provisions on vehicles, depots and stations across our two
(2018: two) active rail franchises, and £nil (2018: £0.4m) provisions relating to other franchise commitments. Of the dilapidations
provisions, £21.6m (2018: £15.1m) are classified as current. In the prior year, all of the £0.4m provision relating to other franchise
commitments is classified as current. During the year £2.2m (2018: £9.0m) of provisions previously provided were released following
the successful renegotiation of certain contract conditions. The dilapidations will be incurred as part of a rolling maintenance contract
over the next three years. The provisions are based on management’s assessment of most probable outcomes, supported where
appropriate by valuations from professional external advisors.
Uninsured claims
Uninsured claims represent the cost to the Group to settle claims for incidents occurring prior to the balance sheet date based on an
assessment of the expected settlement, together with an estimate of settlements that will be made in respect of incidents that have
not yet been reported to the Group by the insurer. Of the uninsured claims, £12.6m (2018: £13.4m) are classified as current and £30.8m
(2018: £31.9m) are classified as non-current based on past experience of uninsured claims paid out annually. It is estimated that the
majority of uninsured claims will be settled within the next six years. Both the estimate of settlements that will be made in respect of
claims received as well as the estimate of settlements made in respect of incidents not yet reported are based on historical trends
which can alter over time reflecting the length of time some matters can take to be resolved. No material changes to carrying values
are expected within the next 12 months.
Other
The other provisions of £9.4m (2018: £6.1m) relate to dilapidations in the bus division of which £0.6m (2018: £0.7m) are classified as
current, and £8.8m (2018: £5.4m) are classified as non-current. It is expected that the dilapidations will be incurred within two to six
years. Reflecting the nature of the judgements associated with the provisioning for dilapidations it is not practicable to provide further
sensitivity analysis of the extent by which these amounts could change in the next financial year.
171
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 24. Issued capital and reserves
Called up share capital is the number of shares in issue at their par value. For accounting policies see ‘Treasury shares’ in note 2.
As at 29 June 2019 and 30 June 2018
Allotted, called up and fully paid
Millions
47.1
2019
£m
4.7
Millions
47.0
2018
£m
4.7
The Group has one class of ordinary shares which carry no right to fixed income and have a par value of 10p per share.
Share capital
Share capital represents proceeds on issue of the Group’s equity, both nominal value and share premium.
Reserve for own shares
The reserve for own shares is in respect of 4,066,037 ordinary shares (8.6% of share capital), of which 163,807 are held for LTIP and
DSBP arrangements.
The remaining shares were purchased in order to enhance shareholders’ returns and are being held as treasury shares for future issue
in appropriate circumstances. During the year ended 29 June 2019 the Group has repurchased 56,482 shares for LTIP and DSBP arrangements
(2018: 64,012 shares repurchased). The Group has not cancelled any shares during the year (2018: no shares cancelled).
Hedging reserve
The hedging reserve records the movement in value of fuel price derivatives, offset by any movements recognised directly in equity.
Share premium reserve
The share premium reserve represents the premium on shares that have been issued to fund or part fund acquisitions made by the
Group. This treatment is in line with Section 612 of the Companies Act 2006.
Capital redemption reserve
The redemption reserve reflects the nominal value of cancelled shares.
Translation reserve
The translation reserve records exchange differences arising from the translation of the balance sheets of foreign currency
denominated subsidiaries.
25. Commitments
A commitment is a contractual obligation to make a payment in the future, mainly in relation to operating leases and agreements to
procure assets. These amounts are not recorded in the consolidated financial statements as we have not yet received the goods or
services from the supplier.
Capital commitments
Contracted for but not provided – acquisition of property, plant and equipment
2019
£m
69.6
2018
£m
34.8
Operating lease commitments – Group as lessee
The Group has entered into commercial leases on certain properties and other items. Renewals are at the option of the lessee.
There are no restrictions placed upon the lessee by entering into these leases.
The Group’s train operating companies hold agreements under which they lease rolling stock from rolling stock operating companies,
and agreements with Network Rail and DB netz AG for access to the railway infrastructure (track, stations and depots).
172
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 25. Commitments continued
Future minimum rentals payable under non-cancellable operating leases as at 29 June 2019 and 30 June 2018 were as follows:
As at 29 June 2019
Within one year
In the second to fifth years inclusive
Over five years
As at 30 June 2018
Within one year
In the second to fifth years inclusive
Over five years
Bus vehicles
and other
£m
Bus property
£m
Rail rolling
stock
£m
Rail access
charges
£m
15.7
28.2
—
43.9
4.4
12.8
7.9
25.1
558.1
725.7
267.8
1,551.6
376.3
281.1
6.7
664.1
Rail other
£m
150.8
186.4
22.9
Total
£m
1,105.3
1,234.2
305.3
360.1
2,644.8
Bus vehicles
and other
£m
Bus property
£m
11.0
27.2
—
38.2
1.3
5.0
5.2
11.5
Rail rolling
stock
£m
575.8
1,060.8
162.4
Rail access
charges
£m
361.4
239.1
—
1,799.0
600.5
Rail other
£m
134.9
243.2
—
378.1
Total
£m
1,084.4
1,575.3
167.6
2,827.3
Operating lease commitments – Group as lessor
The Group’s rail operating companies sub lease access to stations and depots to other commercial organisations.
Future minimum rentals receivable under non-cancellable operating leases as at 29 June 2019 and 30 June 2018 were as follows:
Within one year
In the second to fifth years inclusive
Over five years
2019
2018
Land and
buildings
£m
Other rail
agreements
£m
Land and
buildings
£m
Other rail
agreements
£m
1.1
1.6
—
2.7
23.9
39.2
—
63.1
2.3
0.4
—
2.7
11.1
62.7
—
73.8
26. Contingencies
Performance bonds and other guarantees
The Group has provided bank guaranteed performance bonds of £67.1m (2018: £76.9m), a loan guarantee bond of £36.3m (2018: £36.3m),
and season ticket bonds of £151.9m (2018: £154.1m) to the DfT in support of the Group’s UK rail franchise operations. In addition the Group,
together with Keolis, has a joint parental company commitment to provide funds of £136.0m (2018: £136.0m) to the DfT in respect of
the Govia Thameslink Railway franchise, of which Group has a 65% share equating to £88.4m (2018: £88.4m). At the year end £nil
(2018: £nil) has been provided.
To support subsidiary companies in their normal course of business, the Group has provided parental company guarantees and
indemnified certain banks and insurance companies who have issued certain performance bonds and a letter of credit. The letter
of credit at 29 June 2019 is £58.0m (2018: £58.0m).
The Group has a bond of $4.2m SGD (2018: $4.2m SGD) to the Land Transport Authority (LTA) of Singapore in support of the Group’s
Singapore bus operations. At the year end exchange rate this equates to £2.5m (2018: £2.4m).
The Group has a bond of €5.0m (2018: €5.0m) in favour of the Ministry of Transport of BW, bonds of €1.1m (2018: €1.1m) in favour of the
Ministry of Transport of BW and the Bavarian Rail Authority and €5.0m (2018: €nil) in favour of Bavarian Rail Authority. All are in support
of the Group’s German rail operations. At the year end exchange rate these equate to £9.9m (2018: £5.4m). The Group has provided a
parental company guarantee to provide funds of €35.0m (2018: €35.0m) in respect of the Germany operations, of which €nil (2018: €nil)
has been provided for at year end. At the year end exchange rate this equates to £31.3m (2018: £31.0m).
The Group has bonds of €10.0m (2018: €8.0m) in favour of the National Transport Authority in Ireland in support of the Group’s Irish
bus operations. At the year end exchange rate this equates to £9.0m (2018: £7.1m).
The Group has a bond of 200m NOK (2018: nil NOK) in favour of Jernbanedirectwatet in Norway in support of the Group’s Nordic rail
operations. At the year end exchange rate this equates to £18.4m (2018: £nil).
173
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 26. Contingencies continued
Contingent liabilities
On 27 February 2019 a Collective Proceedings Application was filed at the Competition Appeal Tribunal under section 47B of the
Competition Act 1998 against one of the Group’s subsidiary companies, London and Southeastern Railway Limited. The Claim alleges
that the company failed to make Boundary Zone Fares sufficiently available to those rail passengers who held TfL travelcards across
its multiple sales channels and failing to ensure that customers are aware of these. Equivalent applications were made against
South West Trains and South Western Railway.
The proceedings are at a very early stage with the next step being if the Competition Appeal Tribunal will initially decide whether this
is a claim that meets the legislative criteria for this type of claim. A hearing in relation to this is scheduled for November 2019. If the
criteria were met, it would allow the claim to proceed to a full trial.
The claim is disputed in respect of its technical merits and the basis of the claim appears to be an initial estimate with assumptions
that cannot initially be substantiated. No provision associated with the claim (other than legal costs) has accordingly been made.
There is no legal precedent both in respect of this type of claim or how it would be valued if found to be a valid claim. Finally, determining
how such a claim would be allocated amongst the various parties, and other stakeholders including the Department for Transport (DfT),
is highly uncertain.
Accordingly the Group cannot make a reliable estimate of any contingent liability in respect of this matter at the time of publishing
the Annual Report and Accounts.
27. Retirement benefit obligations
The Group operates a defined contribution pension scheme and a workplace saving scheme for our employees. We also administer a
defined benefit pension scheme, which is closed to new entrants and future accruals. The train operating companies participate in the
Rail Pension Scheme, a defined benefit scheme which covers the whole of the UK rail industry. This is partitioned into sections and the
Group is responsible for the funding of these schemes whilst it operates the relevant franchise. For accounting policies see ‘Retirement
benefits’ in note 2.
Retirement benefit obligations consist of the following:
Pre-tax pension scheme asset
Deferred tax liability
Post-tax pension scheme asset
2019
2018
Bus
£m
48.7
(8.5)
40.2
Rail
£m
—
—
—
Total
£m
48.7
(8.5)
40.2
Bus
£m
36.8
(6.5)
30.3
Rail
£m
—
—
—
Total
£m
36.8
(6.5)
30.3
The net surplus before taxation on the bus defined benefit schemes was £48.7m (2018: surplus of £36.8m), consisting of estimated
assets of £858.8m (2018: £829.3m) less liabilities of £810.1m (2018: £792.5m). During the year an exceptional charge of £16.8m has been
taken to the income statement as a result of the GMP equalisation ruling which directly impacted the bus pension scheme liabilities
(2018: gain of £35.2m as a result of RPI/CPI change).
The net deficit before taxation on the rail schemes was £nil (2018: £nil). The nature of these schemes means at the end of the franchise,
any deficit or surplus in the scheme passes to the subsequent franchisee with no compensating payments from or to the outgoing
franchise holder. The Group’s obligations are therefore limited to its contributions payable to the schemes during the period over
which it operates under the franchise.
Remeasurement gains/(losses) due to:
Experience on benefit obligations
Changes in demographic assumptions
Changes in financial assumptions
Return on assets greater than discount rate
Franchise adjustment movement
Remeasurement gains on defined
benefit pension plans
2019
2018
Bus
£m
Rail
£m
Total
£m
24.3
22.5
(54.5)
29.3
—
—
—
(156.7)
67.0
89.7
24.3
22.5
(211.2)
96.3
89.7
Bus
£m
(4.7)
—
16.4
7.2
—
Rail
£m
Total
£m
(23.8)
38.3
58.5
62.6
(135.6)
(28.5)
38.3
74.9
69.8
(135.6)
21.6
—
21.6
18.9
—
18.9
174
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Bus schemes
The Go-Ahead Group Pension Plan
For the majority of bus employees, the Group operates one main pension scheme, The Go-Ahead Group Pension Plan (the Go-Ahead Plan),
which consists of funded defined benefit sections and defined contribution sections as follows.
The defined contribution sections of the Go-Ahead Plan are not contracted-out of the State Second Pension Scheme. The Money
Purchase Section is now closed to new entrants, except by invitation from the Company, and has been replaced by the Workplace
Saving Section, which is also a defined contribution plan. The expense recognised for the Money Purchase Section of the Go-Ahead
Plan is £9.3m (2018: £9.9m), being the contributions paid and payable. The expense recognised for the Workplace Saving Scheme is
£6.4m (2018: £4.0m), being the contributions paid and payable.
The defined benefit sections of the Go-Ahead Plan are contracted-out of the State Second Pension Scheme and provide benefits based
on a member’s final pensionable salary. The assets of the defined benefit sections are held in a separate trustee-administered fund.
Contributions to these sections are assessed in accordance with the advice of an independent qualified actuary. The defined benefit
sections of the Go-Ahead Plan have been closed to new entrants and closed to future accrual from 31 March 2014.
The Go-Ahead Plan is a plan for related companies within the Group where risks are shared. The overall costs of the Go-Ahead Plan
have been recognised in the Group’s financial statements according to IAS 19 (revised). Each of the participating companies account
on the basis of contributions paid by that company. The Group accounts for the difference between the aggregate IAS 19 (revised)
cost of the scheme and the aggregate contributions paid.
The Go-Ahead Plan is governed by a Trustee Company in accordance with a Trust Deed and Rules. It is also subject to regulation from
the Pensions Regulator and relevant UK legislation. This regulatory framework requires the Trustees of the Go-Ahead Plan and the
Group to agree upon the assumptions underlying the funding target, and the necessary contributions as part of each triennial
valuation. The last actuarial valuation of the Go-Ahead Plan had an effective date of 31 March 2018, and the next will have an effective
date of 31 March 2021.
The investment strategy of the Go-Ahead Plan, which aims to meet liabilities as they fall due, is to invest plan assets in a mix of equities,
other return seeking assets and liability driven investments to maximise the return on plan assets and minimise risks associated with
lower than expected returns on plan assets. Trustees are required to regularly review investment strategy.
Other pension plans
Some employees of Plymouth Citybus Limited are members of a Devon County Council defined benefit scheme. This scheme is
externally funded and no further entrants can join. Contributions to the scheme are assessed in accordance with the advice of an
independent qualified actuary.
Some employees of East Yorkshire Motor Services Limited are members of the EYMS Group pension defined benefit scheme.
The scheme was closed to future accrual with effect from 6 January 2011 having previously been closed to new entrants with effect
from 6 April 2001. Contributions to the scheme are based on advice from an independent qualified actuary. Existing contributions
are based on the 5 April 2017 valuation.
The actuarial assumptions disclosed are in respect of both the Go-Ahead Plan and EYMS plan only, given the respective sizes of the
three bus pension schemes.
Summary of bus schemes year end assumptions
Retail price index inflation
Consumer price index inflation
Discount rate
Rate of increase in salaries
Rate of increase of pensions in payment and deferred pension
2019
%
3.2
2.2
2.3
n/a
2.3
2018
%
3.1
2.1
2.7
n/a
1.8
The discount rate is based on the anticipated return of AA rated corporate bonds with a term matching the maturity of the
scheme liabilities.
The most significant non-financial assumption is the assumed rate of longevity. The table below shows the life expectancy
assumptions used in the accounting assessments based on the life expectancy of a male member of each pension scheme at age 65.
Pensioner
Non-pensioner
2019
Years
21
23
2018
Years
21
22
175
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 27. Retirement benefit obligations continued
Bus schemes continued
Sensitivity analysis
In making the valuation, the above assumptions have been used. For bus pension schemes, the following is an approximate sensitivity
analysis of the impact of the change in the key assumptions. In isolation, the following adjustments would adjust the pension deficit
as shown.
Discount rate – increase of 0.1%
Price inflation – increase of 0.1%
Rate of increase in salaries
Rate of increase of pensions in payment – increase of 0.1%
Increase in life expectancy of pensioners or non-pensioners by one year
2019
Pension deficit
%
2018
Pension deficit
%
(1.5)
1.4
n/a
1.0
4.3
(1.7)
1.5
n/a
0.9
3.6
The sensitivity analysis presented above has been calculated using approximate methods. The use of 0.1% and 1 year in the sensitivity
analysis is considered to be a reasonable illustrative approximation of possible changes, as these variations can regularly arise.
Maturity profile of bus schemes defined benefit obligation
The following tables shows the expected future benefit payments of the plan at 29 June 2019.
June 2020
June 2021
June 2022
June 2023
June 2024
June 2025 to June 2029
Category of assets at the year end
Equities
Bonds
Property
Liability driven investment portfolio
Cash/other
2019
£m
27.6
28.7
30.0
31.3
32.2
172.8
%
11.5
13.2
6.5
29.8
39.0
100.0
2019
2018
£m
75.8
77.6
57.0
399.1
249.3
%
8.8
9.0
6.6
46.5
29.1
858.8
100.0
£m
95.3
109.3
53.9
246.9
323.9
829.3
All of the asset categories above are held within pooled funds and are classed as quoted in an active market where the underlying
assets are exchanged, traded or can be valued with a reasonable degree of certainty based on market data. Any liquidity funds have
been classed as unquoted in active markets.
Funding position of the Group’s pension arrangements
2019
£m
2018
£m
(810.1)
858.8
(792.5)
829.3
48.7
36.8
Employer’s share of pension scheme:
Liabilities at the end of the year
Assets at fair value
Pension scheme asset
176
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Pension cost for the financial year
Administration costs
Settlement charge/(gain)
Interest cost on net liabilities
Total pension costs
2019
£m
2.0
16.8
(0.8)
18.0
2018
£m
1.7
(35.2)
0.4
(33.1)
On 26 October 2018, the High Court ruled that Guaranteed Minimum Pensions (GMP) should be equalised between men and women.
As a result, pension scheme trustees will be obliged to adjust benefit payments in order that benefits received by male and female
members with equivalent age, service and earnings histories are equal. The judgement has implications for many defined benefit
schemes, including those in which the Group participates.
As a result of this change, a pre-tax, non-cash exceptional settlement charge of £16.8m has been recognised in the income statement.
In the prior year, the £35.2m settlement gain is due to the change from the Retail Price Index (RPI) to the Consumer Price Index (CPI)
for the purpose of annual increases to the majority of pensions payable by the bus schemes.
Analysis of the change in the pension scheme liabilities over the financial year
Pension scheme liabilities – at start of year
Interest cost
Settlement loss/(gain)
Remeasurement (gains)/losses due to:
Experience on benefit obligations
Changes in demographic assumptions
Changes in financial assumptions
Benefits paid
On acquisition
Pension scheme liabilities – at end of year
Analysis of the change in the pension scheme assets over the financial year
Fair value of assets – at start of year
Interest income of plan assets
Remeasurement gains due to return on assets greater than discount rate
Administration costs
Group contributions
Benefits paid
On acquisition
Fair value of plan assets – at end of year
Estimated contributions for future
Estimated Group contributions in financial year 2020
Estimated employee contributions in financial year 2020
Estimated total contributions in financial year 2020
2019
£m
792.5
20.9
16.8
(24.3)
(22.5)
54.5
(27.8)
—
810.1
2019
£m
829.3
21.7
29.3
(2.0)
8.2
(27.7)
—
858.8
2018
£m
805.5
20.5
(35.2)
4.7
—
(16.4)
(28.5)
41.9
792.5
2018
£m
784.6
20.1
7.2
(1.7)
6.6
(28.5)
41.0
829.3
£m
8.0
—
8.0
177
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 27. Retirement benefit obligations continued
Rail schemes
The Railways Pension Scheme (RPS)
The majority of employees in our train operating companies are members of sections of the Railways Pensions Scheme (RPS), an
industry-wide defined benefit scheme. The Group is obligated to fund the relevant section of the scheme over the period for which
the franchise is held.
The RPS is governed by the Railways Pension Trustee Company Limited and is subject to regulation from the Pensions Regulator and
relevant UK legislation.
All the costs, and any deficit or surplus, are shared 60% by the employer and 40% by the members. The RPS sections are all open to new
entrants and the assets and liabilities of each company’s section are separately identifiable and segregated for funding purposes.
In addition, at the end of the franchise, any deficit or surplus in the scheme passes to the subsequent franchisee with no compensating
payments from or to the outgoing franchise holder. The Group’s obligations are therefore limited to its contributions payable to the
schemes during the period over which it operates the franchise.
Changes in financial assumptions includes the effect of changes in the salary cap agreed to offset additional national insurance costs
as a result of the schemes no longer “opting out”.
The accounting policy for the Railways Pension Scheme (RPS) is covered on page 134 and pages 142–3 above.
British Railways Additional Superannuation Scheme (BRASS) matching AVC Group contributions of £0.3m (2018: £0.6m) were paid in
the year.
Summary of year end assumptions
Retail price index inflation
Consumer price index inflation
Discount rate
Rate of increase in salaries
Rate of increase of pensions in payment and deferred pension
2019
%
3.2
2.2
2.4
3.5
2.2
2018
%
3.1
2.1
2.7
3.4
2.1
The discount rate is based on the anticipated return of AA rated corporate bonds with a term matching the maturity of the
scheme liabilities.
The most significant non-financial assumption is the assumed rate of longevity. The table below shows the life expectancy assumptions
used in the accounting assessments based on the life expectancy of a male member of each pension scheme at age 65.
Pensioner
Non-pensioner
2019
Years
21
23
2018
Years
21
23
The mortality assumptions adopted as at 29 June 2019 and 30 June 2018 are based on the results of the latest funding valuation as at
31 December 2013.
Sensitivity analysis
Due to the nature of the franchise adjustment, the balance sheet position in respect of the rail pension schemes is not sensitive to small
movements in any of the assumptions and therefore we have not included any quantitative sensitivity analysis.
Category of assets at the year end
Equities
Property
Cash
2019
£m
2,023.0
26.7
2.0
%
98.6
1.3
0.1
2,051.7
100.0
2018
£m
1,859.3
34.1
3.8
1,897.2
%
98.0
1.8
0.2
100.0
All of the asset categories above are held within pooled funds and therefore quoted in active markets.
178
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued 2019
£m
2018
£m
(2,790.0)
2,051.7
(738.3)
738.3
(2,474.1)
1,897.2
(576.9)
576.9
—
—
2019
£m
85.7
3.4
(55.8)
15.9
(15.9)
33.3
2018
£m
95.4
3.5
(65.2)
18.9
(18.9)
33.7
2018
£m
3,010.9
(785.5)
2,225.4
80.9
95.4
49.6
(18.9)
(65.2)
23.8
(38.3)
(58.5)
(61.3)
(628.4)
157.1
135.6
1,897.2
576.9
Funding position of the Group’s pension arrangements
Employer’s 60% share of pension scheme:
Liabilities at the end of the year
Assets at fair value
Gross deficit
Franchise adjustment
Pension scheme liability
Pension cost for the financial year
Service cost
Administration costs
Franchise adjustment to current period costs
Interest cost on net liabilities
Interest on franchise adjustments
Pension cost
Analysis of the change in the employer’s 60% share of pension scheme liabilities over the financial year
Pension scheme liabilities less members’ share (40%) of the deficit – at start of year
Franchise adjustment (100%)
Liability movement for members’ share of assets (40%)
Service cost (60%)
Interest cost (60%)
Interest on franchise adjustment (100%)
Franchise adjustment to current period costs (100%)
Remeasurement losses/(gains) due to:
Experience on benefit obligations (60%)
Changes in demographical assumptions (60%)
Changes in financial assumptions (60%)
Benefits paid (100%)
Transfer of franchise
Franchise adjustment on transfer of franchise
Franchise adjustment movement (100%)
Franchise adjustment (100%)
2019
£m
2,474.1
(576.9)
1,897.2
85.1
85.4
47.0
(15.9)
(55.8)
—
—
156.7
(58.3)
—
—
(89.7)
2,051.7
738.3
Pension scheme liabilities less members share (40%) of the deficit – at end of year
2,790.0
2,474.1
179
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 27. Retirement benefit obligations continued
Rail schemes continued
Analysis of the change in the pension scheme assets over the financial year
Fair value of assets – at start of year (100%)
Interest income of plan assets (60%)
Remeasurement gains due to return on assets greater than discount rate (60%)
Administration costs (100%)
Group contributions (100%)
Benefits paid (100%)
Transfer of franchise
Members’ share of movement of assets (40%)
2019
£m
1,897.2
31.1
67.0
(5.7)
33.0
(58.3)
—
87.4
2018
£m
2,225.4
30.7
62.5
(5.9)
33.1
(61.3)
(471.3)
84.0
Fair value of plan assets – at end of year (100%)
2,051.7
1,897.2
Estimated contributions for future
Estimated Group contributions in financial year 2020
Estimated employee contributions in financial year 2020
Estimated total contributions in financial year 2020
Franchise adjustment
The effect of the franchise adjustment on the financial statements is provided below:
Balance sheet
Defined benefit pension plan
Deferred tax asset
Other comprehensive income
Remeasurement losses/(gains)
Tax on remeasurement (losses)/gains
Income statement
Franchise adjustment to current period costs
Interest on franchise adjustments
Deferred tax charge
£m
26.6
17.8
44.4
2019
£m
2018
£m
(738.3)
125.5
(576.9)
98.1
(612.8)
(478.8)
89.7
(15.2)
74.5
(55.8)
(15.9)
12.2
(59.5)
(135.6)
23.1
(112.5)
(65.2)
(18.9)
14.3
(69.8)
180
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Risks associated with defined benefit plans
Rail schemes
Despite remaining open to new entrants and future accrual, the risks posed by the RPS are limited as under the franchise arrangements,
the train operating companies are not responsible for any residual deficit at the end of a franchise. As such, there is limited short term
cashflow risk within this business and, if agreed, it would also be proportionately borne by the employees as well as the Group. Following
the conclusion of The Pension Regulator’s ongoing investigation into rail pensions, the risks associated with the Group’s rail schemes
will be reviewed.
Bus schemes
The number of employees in defined benefit plans is reducing, as these plans are closed to new entrants, and, in the case of the
Go-Ahead Plan and the EYMS Plan, closed to future accrual.
The key risks relating to the defined benefit pension arrangements and the steps taken by the Group to mitigate them are as follows:
Risk
Description
Mitigation
Asset volatility
The liabilities are calculated using a discount rate set
with reference to bond yields with maturity profiles
matching pension maturity; if assets underperform
this yield, this will create a deficit. Most of the defined
benefit arrangements hold a proportion of return-seeking
assets (equities, diversified growth funds and global
absolute return funds) and, to offset the additional risk,
hold a proportion in liability driven investments, which
should reduce volatility.
Inflation risk
A significant proportion of the UK benefit obligations
are linked to inflation, and higher inflation will lead to
higher liabilities.
Life expectancy The majority of the scheme’s obligations are to provide
Legislative risk
benefits for the life of the member, so increases in life
expectancy will result in an increase in the liabilities.
Future legislative changes are uncertain. In the past
these have led to increases in obligations, introducing
pension increases, and vesting of deferred pensions,
or reduced investment return through the ability
to reclaim Advance Corporation Tax. The UK
government has legislated to end contracting out
in 2016. On 26 October 2018 the High Court ruled
that Guaranteed Minimum Pensions (GMP) should be
equalised between men and women. The judgement
has had an impact on the Plan’s defined benefit pension
liabilities (see note 6 for further details).
Asset liability modelling has been undertaken recently
in all significant plans to ensure that any risks taken are
rewarded and that we have a balance of risk seeking
and liability driven investments.
The business has some inflation linking in its revenue
streams, which helps to offset this risk. During the 2018
financial year, changes in assumptions were made from
RPI to CPI when looking at future pension payments,
which have helped to offset the risk.
The Group final salary scheme has closed to future
accrual, reducing exposure to increases in life
expectancy risk.
The Group final salary scheme has closed to
future accrual, reducing risk to legislative change.
The Group takes professional advice to keep abreast
of legislative changes.
181
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 28. Related party disclosures and Group undertakings
Our subsidiaries listed below each contribute to the profits, assets and cashflow of the Group. The Group has a number of related
parties including joint ventures, pension schemes and directors. For accounting policies see ‘Interests in joint arrangements’ in note 2.
The consolidated financial statements include the financial statements of The Go-Ahead Group plc and the following Group undertakings:
Name
Trading subsidiaries
Go-Ahead Holding Limited
Go North East Limited
London General Transport Services Limited
Go-Ahead London Rail Replacement Services Limited
Brighton & Hove Bus and Coach Company Limited
The City of Oxford Motor Services Limited
Go South Coast Limited
Plymouth Citybus Limited
Konectbus Limited
Thames Travel (Wallingford) Limited
Carousel Buses Limited
Hedingham & District Omnibuses Ltd.
Anglian Bus Limited
HC Chambers & Son Limited
Aviance UK Limited
New Southern Railway Limited
London & South Eastern Railway Limited
London & Birmingham Railway Limited
Southern Railway Limited
Govia Thameslink Railway Limited
Govia Limited
Go-Ahead Scotland Limited
Tom Tappin, Limited
EYMS Group Limited
East Yorkshire Motor Services Limited
Go-Ahead Verkehrsgesellschaft Deutschland GmbH
Go-Ahead Baden Württemberg GmbH
Go-Ahead Facility GmbH
Go-Ahead Bayern GmbH
Go-Ahead Seletar PTE. Ltd
Go-Ahead Singapore PTE. Ltd
Go-Ahead Sverige AB
Go-Ahead Norge AS
Go-Ahead Finland Oy
Go-Ahead Transport Services (Dublin) Limited
Go North West Limited
Jointly controlled entities
On Track Retail Limited
Investments
Mobileeee GmbH
Country of incorporation
and principal place of business
2019
2018
% equity interest
United Kingdom 2
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom 1
United Kingdom 1
United Kingdom 1
United Kingdom 1
United Kingdom 1
United Kingdom 1
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Germany
Germany
Germany
Germany
Singapore
Singapore
Sweden
Norway
Finland
Ireland
United Kingdom
United Kingdom 3
Germany 4
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
65
65
65
65
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
50
12
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
65
65
65
65
65
100
100
100
100
100
100
100
—
100
100
100
100
—
100
100
50
12
1. The rail companies are 65% owned by The Go-Ahead Group plc and 35% owned by Keolis (UK) Limited and held through Govia Limited.
2. Held by The Go-Ahead Group plc. All other companies are held through subsidiary undertakings.
3. On Track Retail Limited is a joint venture with Assertis Limited.
4. Mobileeee GmbH is an investment of Go-Ahead Verkehrsgesellschaft Deutschland GmbH.
The above trading subsidiaries have one class of ordinary shares which carry no right to fixed income, with the exception of On Track
Retail Limited, which also has redeemable preference shares.
The registered office of all trading subsidiaries incorporated in the United Kingdom is: 3rd Floor, 41–51 Grey Street,
Newcastle upon Tyne, NE1 6EE.
182
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued The registered offices of trading subsidiaries incorporated outside of the United Kingdom are as follows:
Subsidiary
Registered office
Go-Ahead Verkehrsgesellschaft Deutschland GmbH
Go-Ahead Baden Württemberg GmbH
Go-Ahead Facility GmbH
Go-Ahead Bayern GmbH
Go-Ahead Sverige AB
Go-Ahead Norge AS
Go-Ahead Finland Oy
Go-Ahead Seletar PTE Ltd and Go-Ahead Singapore PTE Ltd
Go-Ahead Dublin Services (Transport) Limited
Jean-Monnaie-Straße 2, D-10557, Berlin, Germany
Büchsenstraße 20, D-73457, Stuttgart, Germany
Bahnhof 2, D-73457, Essingen, Germany
Bahnhofstr. 6, 86150 Augsburg
Mäster Samuelsgatan 20, SE 101 39, Stockholm, Sweden
Filipstad Brygge 1, NO 0125, Oslo, Norway
Bulevardi 1A, 00100 Helsinki, Finland
2 Loyang Way, Singapore 508776
Holmes O’Malley Sexton Solicitors 2–4 Ely Place Dublin 2
% equity interest
Name
Company number
Country of incorporation
2019
2018
Dormant subsidiaries
East Midlands Railway Limited
Go Wear Buses Limited
Go-Reading Limited
GA Retail Services Limited
The Go-Ahead Group Trustee Company limited
Go-Ahead Property Development Limited
GHI Ltd
Southern Vectis Limited
Birmingham Passenger Transport Services Limited
Go Coastline Limited
Go London Limited
Go West Midlands Limited
Levers Coaches Limited
MetroCity (Newcastle) Limited
Thames Trains Limited
Victory Railway Holdings Limited
Thameslink Rail Limited
London and South East Passenger Rail Services Limited
London & East Midlands Railway Limited
London and West Midlands Railway Limited
Abingdon Bus Company Limited
Reed Investments Limited
Gatwick Handling Limited
GH Heathrow Ltd.
GH Manchester Ltd
GH Stansted Limited
Midland Airport Services Limited
Oxford Newco Limited
London General Trustee Company Limited
Go-Ahead Finance Company
Hants & Dorset Motor Services Limited
Hants & Dorset Trim Limited
Solent Blue Line Limited
Marchwood Motorways (Services) Limited
Marchwood Motorways (Southampton) Limited
The Southern Vectis Omnibus Company Limited
Tourist Coaches Limited
Wilts and Dorset Bus Company Limited
Wilts & Dorset Investments Limited
Wilts & Dorset Holdings Limited
Dockland Buses Limited
7164882
2019645
3158846
4173713
2125799
7128594
4262016
2005917
2901263
2018469
2849983
2490584
2524573
4153866
3007943
3147927
3013232
6537238
5814586
5537947
3151270
4236536
2984113
2813292
1883900
1983429
1592083
9542008
6953098
4699524
2752603
2017829
2103030
2201331
1622531
0241973
3006529
1671355
4613075
2091878
3420004
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom 1
United Kingdom 1
United Kingdom 1
United Kingdom 1
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
65
65
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
65
65
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
183
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 28. Related party disclosures and Group undertakings continued
% equity interest
Name
Company number
Country of incorporation
2019
2018
Dormant subsidiaries continued
Blue Triangle Buses Limited
Go-Ahead Leasing Limited
Go Northern Limited
London Central Bus Company Limited
Metrobus Limited
Hants & Dorset Transport Support Services Limited
Thamesdown Transport Limited
Excelsior Coaches Limited
Excelsior Transport Ltd.
Excelsior Travel Limited
East Yorkshire Concert Tours Limited
East Yorkshire Coach Holidays Limited
Bus UK Limited
Buscall Limited
Connor and Graham Limited
East Yorkshire Buses Limited
East Yorkshire Coaches Limited
East Yorkshire Properties Limited
East Yorkshire Tours Limited
East Yorkshire Travel Limited
East Yorkshire Holiday Tours Limited
Frodingham Coaches Limited
Hull and District Motor Services Limited
Hull Park and Ride Limited
Kingstonian Travel Services Limited
EYMS Bus & Coach Training Limited
Scarborough and District Motor Services Limited
Name
Jointly controlled dormant entities
South Tyneside Smartzone Limited
Newcastle Smartzone Limited
North Tyneside Smartzone Limited
Sunderland Smartzone Limited
3770568
5262810
0132492
2328565
1742404
8669065
1997617
4329621
4329645
4342549
2142740
0243051
2232813
3887602
0546796
0254844
0331077
2256485
0172326
3225828
2140988
2135501
2183936
3886603
3561955
2123369
2133854
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company number
Country of incorporation
2019
2018
% equity interest
09907829
09907839
09907842
09907836
United Kingdom
United Kingdom
United Kingdom
United Kingdom
50
33
33
33
50
33
33
33
1. The rail companies are 65% owned by The Go-Ahead Group plc and 35% owned by Keolis (UK) Limited and held through Govia Limited.
The registered office of all dormant subsidiaries incorporated in the United Kingdom is: 3rd Floor, 41–51 Grey Street,
Newcastle upon Tyne, NE1 6EE.
The registered office of all jointly controlled dormant entities is: Kepier House, Belmont Business Park, Durham, DH1 1TH.
All dormant companies listed above, incorporated in the United Kingdom, have taken advantage of the UK Companies Act 2006, S480
exemption from audit.
184
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Transactions with other related parties
The Group meets certain costs of administering the Group’s retirement benefit plans, including the provision of meeting space and
office support functions to the trustees. Costs borne on behalf of the retirement benefit plans amounted to £0.2m (2018: £0.2m).
Joint ventures
The Group’s joint venture, On Track Retail Limited (OTR), has its principal place of business in the United Kingdom. The principal
activity of OTR is the development and provision of web ticketing applications for the rail industry. The activities of the joint venture
are strategically important to the business activities of the Group. The Group owns 50% of the ordinary share capital of OTR and the
Group’s share of OTR’s result for the year is disclosed on the face of the income statement.
Investments
The Group’s subsidiary, Go-Ahead Verkehrsgellschaft Deutschland GmbH acquired a 12% shareholding in Mobileeee
Betriebsgesellschaft mbh & Co KG, an all-electric car-sharing service based in Germany.
Compensation of key management personnel of the Group
The key management are considered to be the directors of the parent company.
Short term employee benefits
Long term employee benefits1
Post-employment benefits
1. The long term employee benefits relate to LTIP and DSBP.
Material partly owned subsidiaries
Financial information of subsidiaries that have material non-controlling interests is provided below:
Proportion of equity interest held by non-controlling interests:
Country of incorporation
and operation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Govia Limited
London and South Eastern Railway Limited1
Southern Railway Limited1
London and Birmingham Railway Limited1
Govia Thameslink Railway Limited1
Thameslink Rail Limited1
New Southern Railway Limited1
1. Subsidiary of Govia Limited.
Accumulated balances of material non-controlling interest:
Govia Limited
Total comprehensive income allocated to material non-controlling interest:
Govia Limited
2019
£m
1.8
0.4
—
2.2
2019
35%
35%
35%
35%
35%
35%
35%
2019
£m
33.0
16.3
The summarised financial information of these subsidiaries is provided below. The information is based on amounts before
inter-company eliminations:
2018
£m
2.0
0.4
0.1
2.5
2018
35%
35%
35%
35%
35%
35%
35%
2018
£m
31.1
20.3
185
Group financial statementsAnnual Report and Accounts 2019 The Go-Ahead Group plc 28. Related party disclosures and Group undertakings continued
Summarised income statement of Govia Limited and its subsidiary companies for the year ended 29 June 2019 and 30 June 2018:
Revenue
Operating costs
Finance revenue
Finance costs
Profit before taxation
Tax expense
Profit for the year from controlling operations
Total comprehensive income
Attributable to non-controlling interests
Dividends paid to non-controlling interests
2019
£m
2,802.3
(2,745.6)
4.1
(1.9)
2018
£m
2,527.0
(2,457.7)
2.4
(1.8)
58.9
(12.7)
46.2
46.2
16.3
12.7
69.9
(11.9)
58.0
58.0
20.3
13.9
Summarised balance sheet of Govia Limited and its subsidiary companies as at 29 June 2019 and 30 June 2018:
Current assets – inventories, trade and other receivables, cash
Non-current assets – property, plant and equipment, intangible assets, deferred tax
Current liabilities – trade and other payables, provisions
Non-current liabilities – provisions
Total equity
Attributable to:
Equity holders of the parent
Non-controlling interest
2019
£m
873.6
41.1
(766.9)
(53.4)
2018
£m
807.1
46.5
(704.4)
(60.2)
94.4
89.0
61.4
33.0
57.8
31.1
These balance sheet amounts are shown before intercompany eliminations.
Summarised cashflow information of Govia Limited and its subsidiary companies for the year ended 29 June 2019
and 30 June 2018:
Operating
Investing
Financing
Net decrease in cash and cash equivalents
2019
£m
103.4
(5.7)
(38.2)
59.5
2018
£m
12.9
(9.4)
(41.4)
(37.9)
29. Post balance sheet events
On 7 August 2019, the Department for Transport (DfT) confirmed a further extension to the current Southeastern franchise which
will now run to 1 April 2020 rather than expiring on 10 November 2019.
The commitments in note 25 in relation to future minimum rentals payable and receivable under non-cancellable operating leases
as at the balance sheet date do not include amounts for the further 5 period extension. The estimated future contributions payable
in relation to the Railways Pension Schemes (RPS) in note 27 also excludes the additional periods.
In addition, there is no impact in relation to the IFRS 16 Leases disclosures in note 2 as all leases are less than 12 months and therefore
out of scope.
186
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the consolidated financial statements continued Company balance sheet
as at 29 June 2019
Registered No. 02100855
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Trade and other receivables
Financial assets
Retirement benefit obligations
Current assets
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Financial assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Financial liabilities
Non-current liabilities
Trade and other payables
Provisions
Financial liabilities
Deferred tax liabilities
Total liabilities
Net assets
Capital & reserves
Share capital
Share premium
Revaluation reserve
Share premium reserve
Capital redemption reserve
Reserve for own shares
Retained earnings
Total equity
Profit for the year ended 29 June 2019 was £71.0m (2018: £104.8m).
Elodie Brian
Group Chief Financial Officer
4 September 2019
Notes
2019
£m
2018
£m
5
6
7
8
11
14
8
11
9
11
9
12
11
13
15
15
15
5.3
185.6
215.1
11.6
1.5
53.8
472.9
737.4
9.7
0.6
4.4
752.1
3.9
181.2
215.1
10.8
8.1
42.1
461.2
709.9
0.9
—
10.0
720.8
1,225.0
1,182.0
(68.0)
—
(0.8)
(68.8)
(71.5)
(2.7)
—
(74.2)
(314.2)
(321.4)
(8.0)
(0.8)
(37.1)
(9.7)
—
(27.0)
(360.1)
(358.1)
(428.9)
(432.3)
796.1
749.7
4.7
70.0
63.7
1.6
0.7
(71.3)
726.7
796.1
4.7
69.5
67.1
1.6
0.7
(71.3)
677.4
749.7
187
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements Company statement of changes in equity
for the year ended 29 June 2019
Share
premium
£m
Revaluation
reserve
£m
68.9
70.4
Share
premium
reserve
£m
Capital
redemption
reserve
£m
1.6
—
—
—
—
—
—
—
—
—
—
1.6
—
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
—
—
—
—
Reserve of
own shares
£m
(71.9)
—
—
—
—
—
—
(1.1)
—
1.7
—
(71.3)
—
—
—
—
—
(1.0)
—
1.0
—
Retained
earnings
£m
597.5
104.8
15.3
0.8
120.9
(43.8)
3.3
—
1.2
(1.7)
—
677.4
71.0
18.3
89.3
Total
equity
£m
671.9
104.8
15.3
0.8
120.9
(43.8)
—
(1.1)
1.2
—
0.6
749.7
71.0
18.3
89.3
(43.8)
(43.8)
3.4
—
1.4
(1.0)
—
—
(1.0)
1.4
—
0.5
—
—
—
—
—
(3.3)
—
—
—
—
67.1
—
—
—
—
(3.4)
—
—
—
—
63.7
1.6
0.7
(71.3)
726.7
796.1
—
—
—
—
—
—
—
—
—
0.6
69.5
—
—
—
—
—
—
—
—
0.5
70.0
At 1 July 2017
Profit for the year
Remeasurement on defined benefit
retirement plans (net of tax)
Foreign exchange gain
Total comprehensive income
Dividend paid (note 4)
Movement on revaluation reserve
(note 15)
Acquisition of own shares
Share based payment charge
(and associated tax) (note 2)
Reserves transfer
Share issue
At 30 June 2018
Profit for the year
Remeasurement on defined benefit
retirement plans (net of tax)
Total comprehensive income
Dividend paid (note 4)
Movement on revaluation reserve
(note 15)
Acquisition of own shares
Share based payment charge
(and associated tax) (note 2)
Reserves transfer
Share issue
At 29 June 2019
Share
capital
£m
4.7
—
—
—
—
—
—
—
—
—
—
4.7
—
—
—
—
—
—
—
—
—
4.7
188
The Go-Ahead Group plc Annual Report and Accounts 2019 Directors’ responsibilities in relation to the Company financial statements
The directors are responsible for preparing the Annual Report and
Accounts in accordance with applicable UK law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors have elected
to prepare the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law) including FRS 101
“Reduced Disclosure Framework”. Under company law the
directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company
for that period. In preparing these financial statements, the
directors are required to:
• Select suitable accounting policies and then apply
them consistently
• Make judgements and accounting estimates that are
reasonable and prudent
• State whether applicable United Kingdom Accounting Standards
have been followed, subject to any material departures
disclosed and explained in the financial statements
• Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company, and to enable them to
ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
189
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements
Notes to the Company financial statements
1. Company accounting policies
Authorisation of financial statements and statement of
compliance with Financial Reporting Standard 101 (FRS 101)
The Company financial statements of The Go-Ahead Group plc
for the year ended 29 June 2019 were authorised for issue by
the Board of directors on 4 September 2019 and the balance
sheet was signed on the Board’s behalf by Elodie Brian. The Go-
Ahead Group plc is a public limited company that is incorporated
and domiciled in England and Wales. The registered office is 3rd
Floor, 41–51 Grey Street, Newcastle-upon-Tyne, NE1 6EE. The
Company’s ordinary shares are publicly traded on the London
Stock Exchange and it is not under the control of any single
shareholder.
These financial statements were prepared in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework
(FRS 101) and in line with the recognition and measurement
criteria of International Financial Reporting Standards (IFRSs).
No income statement is presented by the Company as permitted
by Section 408 of the Companies Act 2006.
Basis of preparation
The accounting policies which follow set out those policies which
apply in preparing the financial statements for the year ended
29 June 2019.
The financial statements are prepared under the historical
cost convention as modified by financial instruments recognised
at fair value.
The financial statements are prepared in pounds sterling and
are rounded to the nearest one hundred thousand (£0.1m).
In these financial statements, the Company has applied the
exemptions available under FRS 101 in respect of the following
disclosures and standards not yet effective:
• The requirements of paragraph 45(b) and 46–52 of IFRS 2 Share
Based Payment
• The requirements of paragraphs 62, B64(b), B64(e), B64(g),
B64(h), B64(j) to B64(m), B64(n)(ii), B64(o)(ii), B64(p), B64(q)
(ii), B66 and B67 of IFRS 3 Business Combinations
• The requirement of IFRS 7 Financial Instruments: Disclosures
• The requirement of paragraphs 91–99 of IFRS 13 Fair
Value Measurement
• The requirement in paragraph 38 of IAS 1 Presentation of Financial
Statements to present comparative information in respect of:
– paragraph 79(a)(iv) of IAS 1
– paragraph 73(e) of IAS 16 Property, Plant and Equipment
– paragraph 118(e) of IAS 38 Intangible Assets
• The requirements of paragraphs 10(d), 10(f), 16, 39(c), 40A,
40B, 40C, 40D, 111 and 134–136 of IAS 1 Presentation of
Financial Statements
• The requirements of IAS 7 Statement of Cashflows
• The requirements of paragraphs 30 and 31 of IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors
• The requirements of paragraph 17 of IAS 24 Related
Party Disclosures
• The requirements of paragraphs 134(d)-134(f) and 135(c)-135(e)
of IAS 36 Impairment of Assets;
• The requirements in IAS 24 Related Party Disclosures to disclose
related party transactions entered into between two or more
members of a group, provided that any subsidiary which is a
party to the transaction is wholly owned by such a member;
• The requirements of paragraphs 110 (2nd sentence), 113(a), 114,
115, 118, 119(a)-119(c), 120–127 and 129 of IFRS 15 Revenue from
Contracts with Customers; and
• The requirements of paragraph 52, 89 (2nd sentence), 90, 91
and 93 of IFRS 16 Leases and the requirements of paragraph 58
of IFRS 16, provided that the disclosure of details of
indebtedness required by paragraph 61(1) of Schedule 1 to the
Regulations is presented separately for lease liabilities and
other liabilities, and in total.
Critical accounting judgements and key sources
of estimation uncertainty
The preparation of the financial statements requires management
to make estimates and assumptions about the carrying amounts
of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based on
historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future periods
if the revision affects both current and future periods. Although
these judgements and estimates are based on management’s
best knowledge, actual results ultimately may differ from
these estimates.
Critical judgements in applying the Company’s
accounting policies
The following are the critical judgements, apart from those
involving estimations, that the directors have made in the
process of applying the Company’s accounting policies and that
have the most significant effect on the amounts recognised in
the financial statements:
Uninsured claims
The measurement of uninsured liabilities is based on an
assessment of both the expected settlement of known claims
and of the cost of claims not yet reported to the Company, as
detailed in note 12. In order to assess the appropriate level of
provisions the Company engages with its brokers and claims
handlers to ensure external expertise of our claims development
history is adequately built into the provision.
Key sources of estimation uncertainty
The key sources of estimation uncertainty that have a significant
risk of causing material adjustments to the carrying value of assets
and liabilities within the next financial year are in relation to:
Retirement benefit obligations
The measurement of defined benefit pension obligations requires
the estimation of future changes in salaries, inflation, longevity of
current and deferred members and the selection of a suitable
discount rate, as set out in note 14. The Company engages with
Willis Towers Watson, a global professional services company
whose specialisms include actuarial advice, to support the process
of establishing reasonable bases for all of these estimates, to
ensure they are appropriate to our particular circumstances.
190
The Go-Ahead Group plc Annual Report and Accounts 2019 Accounting policies
Revenue recognition
Revenue is recognised to the extent that it is probable that the
income will flow to the Company and the value can be reliably
measured. Revenue is measured at the fair value of the consideration
received or receivable and comprises intercompany management
charges and property rental.
The defined benefit pension asset or liability in the balance sheet
comprises the present value of the defined benefit obligation
(using a discount rate based on high quality corporate bonds),
less the fair value of plan assets out of which obligations are to be
settled directly for The Go-Ahead Group Pension Plan. Fair value
is based on market price information and in the case of quoted
securities is the published bid price.
Tangible assets
Property, plant and equipment is stated at cost or deemed cost
on transition to IFRSs less accumulated depreciation and any
impairment in value. Freehold land is not depreciated.
Assets held under finance leases are depreciated over the shorter
of their expected useful lives and the lease terms.
Depreciation is charged to the income statement based on
deemed cost or valuation, less estimated residual value of each
asset, evenly over its expected useful life as follows:
Leasehold land and buildings The life of the lease
Freehold buildings
Over 50 to 100 years
Plant and equipment
Over 3 to 15 years
The carrying values of items of property, plant and equipment are
reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. If any such
indication exists the assets are written down to their recoverable
amount, being the higher of value in use or fair value less costs
of disposal.
Investments
Fixed asset investments in subsidiaries and associates are shown
at cost less provision for impairment.
Pension benefits
The cost of providing benefits under the defined benefit plan is
determined using the projected unit credit method, which attributes
entitlement to benefits to the current period (to determine
current service cost) and to the current and prior periods (to
determine the present value of defined benefit obligation) and is
based on actuarial advice. Net interest is calculated by applying
the discount rate to the net defined benefit liability or asset.
Remeasurements, comprising actuarial gains and losses, the effect
of the asset ceiling (excluding net interest) and the return on plan
assets (excluding net interest) are recognised in the statement of
comprehensive income in the period in which they occur.
The current service cost is recognised in the income statement
within operating costs. The net interest expense or income is
recognised in the income statement within finance costs.
Past service costs are recognised in the income statement on
the earlier of the date of the plan amendment or curtailment, and
the date that the Group recognises restructuring-related costs.
When a settlement (eliminating all obligations for benefits
already accrued) or a curtailment (reducing future obligations
as a result of a material reduction in the scheme membership
or a reduction in future entitlement) occurs, the obligation
and related plan assets are remeasured using current actuarial
assumptions and the resultant gain or loss is recognised in the
income statement during the period in which the settlement
or curtailment occurs.
For the defined contribution schemes, the amount charged to
the income statement in respect of pension costs and other
post-retirement benefits is the contributions payable in the year.
Differences between contributions payable in the year and
contributions actually paid are shown as either accruals or
prepayments in the balance sheet.
Share based payments
The cost of options granted to employees is measured by reference
to the fair value at the date at which they are granted, determined by
an external valuation using an appropriate pricing model. In granting
equity-settled options, conditions are linked to some or all of the
following: the price of the shares of The Go-Ahead Group plc
(market conditions); conditions not related to performance or
service (non-vesting condition); performance conditions (a
vesting condition); and service conditions (a vesting condition).
The cost of options is recognised in the income statement over
the period from grant to vesting date, being the date on which
the relevant employees become fully entitled to the award, with
a corresponding increase in equity. The cumulative expense
recognised, at each reporting date, reflects the extent to which
the period to vesting has expired and the directors’ best estimate
of the number of options that will ultimately vest or, in the case
of an instrument subject to a market or non-vesting condition,
be treated as vesting as described above. This includes any award
where non-vesting conditions within the control of the Group
or the employee are not met.
No cost is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market or
non-vesting condition. These are treated as vesting irrespective
of whether or not the market or non-vesting condition is satisfied,
provided that all other performance and/or service conditions are
satisfied. Where an equity-settled award is cancelled, it is treated
as if it had vested on the date of cancellation, and any cost not
yet recognised for the award is recognised immediately.
Taxation
Current tax assets and liabilities are measured at the amount
expected to be recovered from or paid to the taxation authorities
on an undiscounted basis at the tax rates that are expected to
apply when the related asset is realised or the liability is settled,
based on tax rates and tax laws that have been enacted or
substantively enacted at the balance sheet date.
Deferred tax is provided, using the liability method, on temporary
differences at the balance sheet date between the tax base of
assets and liabilities for taxation purposes and their carrying
amounts in the financial statements. It is provided for on all
temporary differences, except:
• In respect of taxable temporary differences associated with
investments in subsidiaries where the timing of the reversal of
the temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the
foreseeable future
191
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements 1. Company accounting policies continued
Deferred tax assets are only recognised to the extent that it is
probable that the temporary differences will be reversed in the
foreseeable future and taxable profit will be available to allow all
or part of the deferred income tax asset to be utilised. The carrying
amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Tax relating to items recognised outside the income statement is
recognised in other comprehensive income or directly in equity in
correlation with the underlying transaction. Otherwise, tax is
recognised in the income statement.
Uninsured liabilities
The Company limits its exposure to the cost of motor, employer
and public liability claims through insurance policies issued by
third parties. These provide individual claim cover, subject to high
excess limits and an annual aggregate stop loss for total claims
within the excess limits. A provision is recognised for the estimated
cost to the Company to settle claims for incidents occurring prior
to the balance sheet date, subject to the overall stop loss.
The estimation of this provision is made after taking appropriate
professional advice and is based on an assessment of the expected
settlement on known claims, together with an estimate of
settlements that will be made in respect of incidents occurring
prior to the balance sheet date but that have not yet been
reported to the Company.
Treasury shares
Re-acquired shares in the Company, which remain uncancelled,
are deducted from equity. Consideration paid and the associated
costs are also recognised in shareholders’ funds as a separate
reserve for own shares. Any gain or loss on the purchase, sale,
issue or cancellation of the Company’s shares is transferred from
the reserve for own shares to revenue reserves.
Interest-bearing loans and borrowings
Debt is initially stated at the amount of the net proceeds, being
the fair value of the consideration received after deduction of
issue costs. Following initial recognition, the carrying amount is
measured at amortised cost using the effective interest method.
Amortisation of liabilities and any gains and losses arising on the
repurchase, settlement or other derecognition of debt are
recognised directly in the income statement.
Assets held under finance leases, which are leases where
substantially all of the risks and rewards of ownership of the asset
have passed to the Company, are capitalised in the balance sheet,
with a corresponding liability being recognised, and are depreciated
over the shorter of their useful lives and the lease terms.
The capital elements of future obligations under leases are
included as liabilities in the balance sheet.
The interest element of the rental obligations is charged
to the income statement over the periods of the leases and
represents a constant proportion of the balance of capital
repayments outstanding.
Leases where a significant proportion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Rentals payable under operating leases, and the amortisation
of lease incentives and initial direct costs in securing leases, are
charged to the income statement on a straight-line basis over the
lease term.
192
Provisions for liabilities
A provision is recognised when the Company has a legal or
constructive obligation as a result of a past event; it is probable
that an outflow of economic benefit will be required to settle the
obligation; and a reliable estimate can be made of the amount of
the obligation. Where the effect of the time value of money is
material, provisions are discounted. Where the Company expects
some or all of a provision to be reimbursed, the reimbursement
is recognised as a separate asset but only when recovery is
virtually certain.
Financial instruments
The Company uses interest derivatives to hedge its risks
associated with interest rate fluctuations. Such derivatives are
initially recognised at fair value by reference to market values for
similar instruments, and subsequently remeasured at fair value at
each balance sheet date.
Financial instruments are accounted for in accordance with IFRS 9.
Financial instruments are initially recognised at fair value, being
the transaction price plus, in the case of financial instruments not
recorded at fair value through profit or loss, directly attributable
transaction costs.
Changes in the fair value of financial instruments that are
designated and effective as hedges of future cashflows are
recognised in other comprehensive income and the ineffective
portion is recognised immediately in the income statement.
When the cashflow hedge results in the recognition of a
non-financial asset or a liability, then at the time that asset
or liability is recognised, the associated gains or losses on
the derivative that had previously been recognised in other
comprehensive income are included in the initial measurement
of that non-financial asset or liability. For hedges that do not
result in the recognition of an asset or a liability, amounts
deferred in equity are recognised in the income statement in
the period in which the hedged item affects net profit or loss.
For derivatives that do not qualify for hedge accounting, any
gains or losses arising from changes in fair value are taken
directly to the income statement as they arise.
Hedge accounting is discontinued when the derivative expires or
is sold, terminated or exercised without replacement or rollover,
or otherwise no longer qualifies for hedge accounting. At that
point in time, any cumulative gain or loss on the hedging instrument
recognised in other comprehensive income is kept in equity until
the forecast transaction occurs, at which point it is taken to the
income statement or included in the initial carrying amount of
the related non-financial asset as described above. If a hedged
transaction is no longer expected to occur, the net cumulative
gain or loss recognised in other comprehensive income is
transferred to the income statement.
Software
Software, that is not integral to the related hardware, is capitalised
as an intangible asset and stated at cost less amortisation and
any impairment in value. Amortisation is charged to the income
statement evenly over its expected useful life of three to five years.
New standards
Details relating to new accounting standards and the impact of
adoption are detailed in note 2 of the Group financial statements.
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the Company financial statements continued 2. Employee costs
This note shows total employment costs, inclusive of share based payment charges. We have a number of share plans used to award
shares to directors and employees. A charge is recognised over the vesting period, based on the fair value of the award at the date of
grant. The note also shows the average number of people employed by the Company during the year. For accounting policies see
‘Share based payments’ in note 1.
Wages and salaries
Social security costs
Other pension costs
Share based payments charge
The average monthly number of employees during the year, including directors, was:
Administration and supervision
2019
£m
15.9
1.5
2.4
0.6
20.4
2019
£m
225
2018
£m
11.8
1.3
2.1
0.7
15.9
2018
£m
190
The information required by Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 is provided in the directors’ remuneration report.
Sharesave scheme
Shareholder approval was obtained at the 2013 AGM for a Savings-Related Share Option scheme, known as The Go-Ahead Group plc
2013 Savings-Related Share Option Scheme (the Sharesave scheme) for employees of the Group and its operating companies.
The Sharesave scheme is open to all full time and part time employees (including executive directors) who have completed at least six
months of continuous service with a Go-Ahead Group company at the date they are invited to participate in a scheme launch. To take
part, qualifying employees have to enter into a savings contract for a period of three years under which they agree to save a monthly
amount, from a minimum of £5 to a maximum (not exceeding £500) specified by the Group at the time of invitation. For the February 2016
launch (Sharesave 2016), the maximum monthly savings limit set by the Group was £50. Participants were given the choice of taking
their money back, or to purchase Go-Ahead Group Shares at a 20% discount of the market price at the date of invitation. Sharesave
2016 participants have six months from the maturity date to exercise their options. Sharesave 2016 matured on 1 May 2019.
The fair value of equity-settled share options granted is estimated as at the date of grant using the Black-Scholes model, taking into
account the terms and conditions upon which the options were granted. The key assumptions input into the model are future share
price volatility, future dividend yield, future risk-free interest rate, forfeiture rate and option life.
There are savings-related options at 29 June 2019 as follows:
Scheme maturity
Option price (£)
No. of options unexercised at 29 June 2019
No. of options exercised during the year
No. of options exercisable at 29 June 2019
1 May 2019
19.11
2,547
94
2,547
The expense recognised for the scheme during the year to 29 June 2019 was £nil (2019: less than £0.1m).
The following table illustrates the number and weighted average exercise price (WAEP) of share options for the Sharesave scheme:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2019
2018
No.
3,120
—
(479)
(94)
2,547
WAEP
£
19.11
—
19.11
19.11
19.11
No.
6,896
—
(3,364)
(412)
3,120
WAEP
£
18.43
—
17.93
17.34
19.11
The weighted average exercise price at the date of exercise for the options exercised in the period was £19.11 (2018: £17.34).
At the year end, 2,547 (2018: no) options were exercisable and the weighted average exercise price of the options was £19.11 (2018: £nil).
The options outstanding at the end of the year have a weighted average remaining contracted life of nil years (2018: 0.83 years).
193
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements 2. Employee costs continued
Long Term Incentive Plans
The executive directors participate in The Go-Ahead Group Long Term Incentive Plan 2015 (LTIP). The LTIP provides for executive
directors to be awarded nil cost shares in the Group conditional on specified performance conditions being met over a period of three
years. Refer to the directors’ remuneration report for further details of the LTIP.
The expense recognised for the LTIP during the year to 29 June 2019 was £0.4m (2018: £0.8m).
The fair value of LTIP options granted is estimated as at the date of grant using a Monte Carlo model, taking into account the terms
and conditions upon which the options were granted. The inputs to the model used for the options granted in the year to 29 June 2019
and 30 June 2018 were:
The Go-Ahead Group plc:
Future share price volatility
FTSE Mid-250 index comparator:
Future share price volatility
Correlation between companies
The weighted average fair value of options granted during the year was £15.74 (2018: £12.92).
The following table shows the number of share options for the LTIP:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2019
% per annum
2018
% per annum
33.0
25.0
30.0
29.0
25.0
30.0
2019
2018
163,144
53,912
(73,453)
—
111,724
72,755
(9,815)
(11,520)
143,603
163,144
The LTIP award granted to the Group Chief Executive in November 2016 will lapse in full from November 2019 as none of the performance
measures were achieved following the three-year performance period ending 29 June 2019. The weighted average share price of the
options was £19.72 (2018: £15.88).
The weighted average fair value of options granted during the year was £15.74 (2018: £12.92).
The weighted average remaining contractual life of the options was 1.10 years (2018: 1.25 years). The weighted average exercise price
at the date of exercise for the options exercised in the period was £nil (2018: £16.23).
Deferred Share Bonus Plan
The Deferred Share Bonus Plan (DSBP) provides for executive directors and certain other senior employees to be awarded shares in the
Group conditional on the achievement of financial and strategic targets. The shares are deferred over a three-year period. Refer to the
directors’ remuneration report for further details of the DSBP.
The expense recognised for the DSBP during the year to 29 June 2019 was £0.2m (2018: £0.4m).
The DSBP options are not subject to any market based performance conditions. Therefore the fair value of the options is equal to the
share price at the date of grant.
The weighted average fair value of options granted during the year was £15.74 (2018: £16.30).
The following table shows the number of share options for the DSBP:
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2019
2018
58,660
35,060
(6,770)
(26,798)
76,069
11,794
—
(29,203)
60,152
58,660
At the year end, 1,482 options related to DSBP awards, which vested before the year end, which have not yet been exercised by participants.
Of these 540 options related to the award granted in November 2015 and 942 options related to the grant awarded in November 2013.
11,816 options, relating to the DSBP award granted in November 2016, will be eligible to vest from November 2019 following the end of a
three-year deferral period. The weighted average share price of the options at the year end was £19.72 (2018: £15.88).
The weighted average remaining contractual life of the options was 1.36 years (2018: 0.72 years). The weighted average exercise price
at the date of exercise for the options exercised in the period was £18.51 (2018: £15.98).
194
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the Company financial statements continued Share incentive plans
The Group operates a share incentive plan, known as The Go-Ahead Group plc Share Incentive Plan (SIP). The SIP is open to all Group
employees (including executive directors) who have completed at least six months’ continuous service with a Group company at the
date they are invited to participate in the plan.
The SIP permits the Group to make four different types of awards to employees (free shares, partnership shares, matching shares
and dividend shares), although the Group has, so far, made awards of partnership shares only. Under these awards, the Group invites
qualifying employees to apply between £10 and £150 per month in acquiring shares in the Group at the prevailing market price.
Under the terms of the scheme, certain tax advantages are available to the Group and employees.
3. Exceptional operating items
Charge in relation to GMP equalisation
Gain on change in RPI/CPI assumptions
Exceptional operating items
2019
£m
(15.7)
—
(15.7)
2018
£m
—
35.2
35.2
Year ended 29 June 2019
Total exceptional operating items in the year were a charge of £15.7m to the income statement.
On 26 October 2018, the High Court ruled that Guaranteed Minimum Pensions (GMP) should be equalised between men and women.
As a result, pension scheme trustees will be obliged to adjust benefit payments in order that benefits received by male and female
members with equivalent age, service and earnings histories are equal. The judgement has implications for many defined benefits
schemes, including those in which the Company participates.
We have worked with our actuarial advisors to understand the implications of the judgement and the £15.7m pre-tax exceptional
expense in the year (2018: £nil) reflects our best estimate of the effect on our reported pension liabilities.
Year ended 30 June 2018
Total exceptional operating items in the year were £35.2m.
In the prior year, The Go-Ahead Group Pension Plan (the Go-Ahead Plan) changed the reference inflation index used to estimate the
annual increases to the majority of pensions payable. From 1 April 2018 onwards, the Consumer Price Index (CPI) has been used to
increase pensions in payment rather than the Retail Price Index (RPI). The change reduces the financial risks of the Go-Ahead Plan
and enhances the long term sustainability of the scheme, providing an improvement in the security of Plan members’ benefits.
A one-off gain of £35.2m was recognised in respect of this change.
The tax impact of the above exceptional items plus accrued amounts relating to a HMRC taxation enquiry was £11.5m. In addition, an
accrued amount of £2.6m was provided for within finance costs in relation to the interest payable on the enquiry. The enquiry was settled
during the current year.
4. Dividends
Dividends are one type of shareholder return, historically paid to our shareholders in April and November.
Declared and paid during the year
Equity dividends on ordinary shares:
Final dividend for 2018: 71.91p per share (2017: 71.91p)
Interim dividend for 2019: 30.17p per share (2018: 30.17p)
Proposed for approval at the AGM (not recognised as a liability as at 29 June 2019)
Equity dividends on ordinary shares:
Final dividend for 2019: 71.91p per share (2018: 71.91p)
2019
£m
30.9
12.9
43.8
2019
£m
2018
£m
30.9
12.9
43.8
2018
£m
31.0
31.0
195
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements 5. Intangible assets
Cost
At 30 June 2018
Additions
Disposals
At 29 June 2019
Amortisation
At 30 June 2018
Charge for the year
Disposals
At 29 June 2019
Net book value
At 29 June 2019
At 30 June 2018
Software
£m
15.4
2.8
(4.8)
13.4
11.5
1.4
(4.8)
8.1
5.3
3.9
Software costs capitalised exclude software that is integral to the related hardware. Software is amortised on a straight-line basis over
its expected useful life of three to five years.
6. Property, plant and equipment
Freehold land
and buildings
£m
Short term
leasehold land
and buildings
£m
Plant and
equipment
£m
Cost
At 30 June 2018
Additions
Disposals
At 29 June 2019
Depreciation
At 30 June 2018
Charge for the year
Disposals
At 29 June 2019
Net book value
At 29 June 2019
At 30 June 2018
192.4
6.8
(1.2)
198.0
15.2
1.1
(0.1)
16.2
181.8
177.2
4.8
—
—
4.8
1.9
0.2
—
2.1
2.7
2.9
Total
£m
208.2
7.2
(4.4)
211.0
27.0
1.7
(3.3)
25.4
11.0
0.4
(3.2)
8.2
9.9
0.4
(3.2)
7.1
1.1
1.1
185.6
181.2
Freehold land and buildings include non-depreciable land amounting to £121.5m (2018: £122.8m).
7. Investments
Cost
At 29 June 2019 and 30 June 2018
Provisions
At 29 June 2019 and 30 June 2018
Net carrying amount
At 29 June 2019 and 30 June 2018
Loans to
Group
£m
Shares in Group
companies
£m
Total
£m
63.2
151.9
215.1
—
—
—
63.2
151.9
215.1
During the year ended 28 June 2014, The Go-Ahead Group plc undertook a transaction involving certain properties used by the Group.
This has been accounted for as a sale and leaseback and results in a long term investment of £63.2m in an intermediate Group company.
For details of the subsidiary undertakings as at 29 June 2019, refer to note 28 of the Group financial statements.
196
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the Company financial statements continued 8. Trade and other receivables
Amounts falling due within one year
Amounts owed by Group companies
Corporation tax
Other debtors
Amounts falling due after more than one year
Amounts owed by Group companies
9. Trade and other payables
Amounts falling due within one year
Amounts owed to Group undertakings
Trade and other creditors
Finance leases (note 10)
Amounts falling due after more than one year
Interest-bearing loans and borrowings repayable:
After more than five years
Finance leases (note 10)
Amounts owed to Group undertakings
2019
£m
715.5
11.0
10.9
737.4
2019
£m
11.6
2019
£m
45.6
20.5
1.9
68.0
2019
£m
247.7
65.0
1.5
314.2
2018
£m
698.9
—
11.0
709.9
2018
£m
10.8
2018
£m
49.0
20.8
1.7
71.5
2018
£m
246.5
66.8
8.1
321.4
Included in finance leases is an amount of £66.8m (2018: £68.5m) owing to Group undertakings.
The Company has no security over its liabilities.
10. Finance leases
During the year ended 28 June 2014, The Go-Ahead Group plc undertook a sale and leaseback of certain properties used by the Group.
This arrangement has no terms of renewal or purchase option escalation clauses and there are no restrictions imposed by the
arrangement. Future minimum lease payments under finance leases, together with the present value of the net minimum lease
payments, for the sale and leaseback of these properties are as follows:
Within one year
After one year but not more than five years
After five years
Total minimum lease payments
Less amounts representing finance charges
Present value of minimum lease payments
2019
2018
Minimum value
of payments
£m
Present value
of payments
£m
Minimum value
of payments
£m
Present value
of payments
£m
4.8
20.5
70.7
96.0
(29.2)
66.8
1.9
9.9
55.0
66.8
—
66.8
4.6
19.9
76.1
100.6
(32.1)
68.5
1.7
8.9
57.9
68.5
—
68.5
197
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements 11. Financial instruments at fair value
The fair values of the Company’s financial instruments carried in the financial statements have been reviewed as at 29 June 2019 and
30 June 2018 and are as follows:
Non-current financial assets: fuel price derivatives
Current financial assets: fuel price derivatives
Current financial liabilities: fuel price derivatives
Non-current financial liabilities: fuel price derivatives
Net financial derivatives
2019
£m
1.5
4.4
5.9
(0.8)
(0.8)
(1.6)
4.3
Further information on the financial derivatives can be found in note 22 of the Group consolidated financial statements.
12. Provisions
As at 1 July 2017
Provided (after discounting)
Released
Utilised
Unwinding of discounting
As at 1 July 2018
Provided (after discounting)
Released
Utilised
Unwinding of discounting
As at 29 June 2019
Uninsured
claims
£m
Other
£m
8.6
0.3
—
0.6
(0.1)
9.4
0.5
(1.6)
(0.7)
0.1
7.7
0.3
—
—
—
—
0.3
—
—
—
—
0.3
2018
£m
8.1
10.0
18.1
—
—
—
18.1
Total
£m
8.9
0.3
—
0.6
(0.1)
9.7
4.7
—
(6.5)
0.1
8.0
Uninsured claims represent the cost to the Company to settle claims for incidents occurring prior to the balance sheet date based on
an assessment of the expected settlement, together with an estimate of settlements that will be made in respect of incidents that
have not yet been reported to the Company by the insurer, subject to the overall stop loss. It is estimated that the majority of uninsured
claims will be settled within six years. Both the estimate of settlements that will be made in respect of claims received, as well as the
estimate of settlements made in respect of incidents not yet reported, are based on historical trends which can alter over time reflecting
the length of time some matters can take to be resolved. No material changes to carrying values are expected within the next 12 months.
The other provision relates to dilapidation costs. It is expected that the dilapidations will be incurred within five to six years.
198
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the Company financial statements continued 13. Deferred taxation
Deferred taxation provided at the enacted rate is as follows:
Accelerated capital allowances
Other timing differences
Revaluation of land and buildings treated as deemed cost on conversion to IFRS
Retirement benefit obligations
Deferred taxation
2019
£m
6.1
11.0
10.9
9.1
37.1
2018
£m
(2.8)
11.2
11.4
7.2
27.0
The movements in deferred tax in the income statement and other comprehensive income for the year ended 29 June 2019 are as follows:
Accelerated capital allowances
Asset backed funding pension arrangement
Other temporary differences
Revaluation of land and buildings treated as deemed cost
on conversion to IFRS
Retirement benefit obligations
Share based payments
At 1 July
2018
£m
Recognised in
income
statement
£m
Recognised
in other
comprehensive
income
£m
Recognised
directly in
equity
£m
At 29 June
2019
£m
2.8
(9.9)
(1.4)
(11.4)
(7.2)
0.1
(27.0)
(8.9)
0.2
—
0.5
1.6
—
(6.6)
—
—
—
—
(3.5)
—
(3.5)
—
—
—
—
—
—
—
(6.1)
(9.7)
(1.4)
(10.9)
(9.1)
0.1
(37.1)
14. Retirement benefits
During the year ended 29 June 2019, the Company participated in the defined contribution scheme of The Go-Ahead Group Pension Plan (the
Go-Ahead Plan). This scheme is not contracted-out of the State Second Pension Scheme. It is now closed to new entrants and has been replaced
by a workplace saving scheme, which is also a defined contribution pension scheme. The expense recognised in these accounts for the year in
respect of the defined contribution scheme of the Go-Ahead Plan was £0.4m (2018: £0.3m), being the contributions paid and payable. The
expense recognised for the workplace saving scheme was less than £0.1m (2018: less than £0.1m), being the contributions paid and payable.
Defined benefit
During the year ended 29 June 2019, the Company participated in a scheme which is part of the Go-Ahead Plan. The assets of the
scheme are held separately from those of the Company in an independently administered fund.
The defined benefit section of the Go-Ahead Plan has been closed to new entrants and to future accrual.
The most recent actuarial valuation of the scheme was at 31 March 2018 and was updated by Willis Towers Watson to take account
of the requirements of IAS 19 (revised) in order to assess the liabilities of the scheme at 29 June 2019 and 30 June 2018.
The total net assets and liabilities of the scheme are recognised on the Company balance sheet.
The following disclosures provide details of the entire defined benefit scheme.
The main assumptions are:
Rate of increase in salaries
Rate of increase of pensions in payment and deferred pensions
Discount rate
Retail price index inflation
Consumer price index inflation
2019
%
n/a
2.2
2.3
3.2
2.2
2018
%
n/a
1.9
2.7
3.1
2.1
The most significant non-financial assumption is the assumed rate of longevity. The table below shows the life expectancy
assumptions used in the accounting assessments based on the life expectancy of a male member of the pension scheme at age 65.
Pensioner
Non-pensioner
2019
Years
21
22
2018
Years
21
22
199
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements 14. Retirement benefits continued
Sensitivity analysis
In making the valuation, the above assumptions have been used. For the Go-Ahead Plan, the following is an approximate sensitivity
analysis of the impact of the change in the key assumptions. In isolation, the following adjustments would adjust the pension deficit
as shown.
Discount rate – increase of 0.1%
Price inflation – increase of 0.1%
Rate of increase in salaries – increase of 0.1%
Rate of increase of pensions in payment – increase of 0.1%
Increase in life expectancy of pensioners or non-pensioners by one year
2019
Pension deficit
%
2018
Pension deficit
%
(1.5)
1.5
n/a
0.8
4.3
(1.7)
1.5
n/a
0.9
3.6
The sensitivity analysis presented above has been calculated using approximate methods. The use of 0.1% and one year in the
sensitivity analysis is considered to be a reasonable approximation of possible changes, as these variations can regularly arise.
Maturity profile of defined benefit obligation
The following table shows the expected future benefit payments of the plan.
June 2020
June 2021
June 2022
June 2023
June 2024
June 2025 to June 2028
Category of assets at the year end
Equities
Bonds
Property
Liability driven investment portfolio
Cash/other
2019
£m
25.6
26.4
27.7
29.0
29.9
160.9
%
8.5
14.0
6.8
30.2
40.5
100.0
2019
2018
£m
44.9
77.1
56.1
385.0
239.0
802.1
%
5.6
9.6
7.0
48.0
29.8
100.0
£m
66.0
108.6
52.8
234.4
314.2
776.0
All of the asset categories above are held within pooled funds and are classed as quoted in an active market where the underlying
assets are exchanged, traded or can be valued with a reasonable degree of certainty based on market data. Any liquidity funds have
been classed as unquoted in active markets.
Funding position of the Group’s pension arrangements
2019
£m
2018
£m
(748.3)
802.1
(734.6)
776.0
53.8
(9.1)
44.7
41.4
(9.9)
31.5
Employer’s share of pension scheme:
Liabilities at the end of the year
Assets at fair value
Pension scheme asset
Deferred tax liability
Post-tax pension scheme asset
200
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the Company financial statements continued Pension cost for the financial year
Administration costs
Settlement gain
Interest cost on net liabilities
Total pension costs
Analysis of the change in the pension scheme liabilities over the financial year
Pension scheme liabilities – at start of year
Interest cost
Remeasurement (gains)/losses due to:
Experience on benefit obligations
Changes in demographic assumptions
Changes in financial assumptions
Settlement gain
Benefits paid
Pension scheme liabilities – at end of year
Analysis of the change in the pension scheme assets over the financial year
Fair value of assets – at start of year
Interest income on plan assets
Remeasurement gains due to return on assets greater than discount rate
Administration costs
Group contributions
Benefits paid
Fair value of plan assets – at end of year
Estimated contributions for future
Estimated Group contributions in financial year 2020
Estimated employee contributions in financial year 2020
Estimated total contributions in financial year 2020
Risks associated with the defined benefit plan are outlined in note 27 to the Group financial statements.
Compensation of key management personnel are detailed in note 28 of the Group financial statements.
2019
£m
1.7
15.7
(0.9)
16.5
2019
£m
734.6
19.4
(24.3)
(23.1)
51.0
15.7
(25.0)
2018
£m
1.7
(35.2)
0.3
(33.2)
2018
£m
788.4
20.1
4.7
—
(15.7)
(35.2)
(27.7)
748.3
734.6
2019
£m
776.0
20.3
25.7
(1.7)
6.8
(25.0)
2018
£m
772.3
19.8
6.7
(1.7)
6.6
(27.7)
802.1
776.0
£m
6.7
—
6.7
201
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements 15. Issued capital and reserves
As 29 June 2019 and 30 June 2018
Allotted, called up and fully paid
Millions
47.1
2019
£m
4.7
Millions
47.0
2018
£m
4.7
The Company has one class of ordinary shares which carry no right to fixed income and have a par value of 10p per share.
The reserve for own shares is in respect of 4,066,037 ordinary shares (8.6% of total share capital), of which 163,807 are held for LTIP
and DSBP arrangements. The remaining shares were purchased in order to enhance shareholders’ returns and are being held as treasury
shares for re-issue in appropriate circumstances. During the year ended 29 June 2019 the Company has repurchased 56,482 shares
(2018: 64,012 shares repurchased) for LTIP and DSBP purposes. The Company has not cancelled any shares during the year (2018: no
shares cancelled).
The revaluation reserve represents the value of properties involved in an asset backed funding transaction with the Go-Ahead Pension
Plan, adjusted for amortisation, together with historical revaluation balances. The movement on the revaluation reserve represents the
write down of the revaluation reserve over the expected useful life of the properties, offsetting the depreciation charges being taken
to the profit or loss account.
The share premium reserve represents the premium on shares that have been issued to fund or part fund acquisitions made by the
Group. This treatment is in line with Section 612 of the Companies Act 2006.
The information required by Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 is provided in the directors’ report.
The audit fee for the audit of the financial statements payable in respect of the Company was £0.1m (2018: £0.1m). Please refer to note 4
of the Group consolidated financial statements.
16. Operating lease commitments
The Company’s future minimum rentals payable under non-cancellable operating leases as at 29 June 2019 and 1 July 2018 are as follows:
Within one year
In second to fifth years
More than five years
Bus property
2019
£m
2.4
7.1
3.6
13.1
2018
£m
1.0
4.0
2.7
7.7
17. Capital commitments
There were capital commitments of £nil at 29 June 2019 (2018: £nil).
18. Contingent liabilities
The Company provides guarantees in respect of bank and equipment finance borrowings of the subsidiaries of The Go-Ahead Group plc.
The Company has issued guarantees dated 30 March 2006 to participating subsidiaries of The Go-Ahead Group Pension Plan in respect
of scheme liabilities arising. Total assets in respect of this guaranteed scheme were £44.7m as at 29 June 2019 (2018: assets of £31.5m).
At 29 June 2019 letters of credit amounting to £58.0m (2018: £58.0m) were provided by a Company banker, guaranteed by the
Company, in favour of the Group’s insurers, to cover liabilities of the Company and its subsidiaries.
202
The Go-Ahead Group plc Annual Report and Accounts 2019Notes to the Company financial statements continued 19. Related party transactions
The Company has taken advantage of the exemption under FRS 101, and transactions with 100% subsidiaries of The Go-Ahead Group plc
have not been disclosed.
The Company owns 65% of the ordinary shares in Govia Limited. London and Southeastern Railway Limited (Southeastern), London and
Birmingham Railway Limited (London Midland), Thameslink Rail Limited (Thameslink), New Southern Railway Limited (New Southern),
Southern Railway Limited (Southern) and Govia Thameslink Railway Limited (GTR) are 100% owned by Govia Limited and hence the
Company owns a 65% interest.
Govia
Southeastern
London Midland
Thameslink
New Southern
GTR
100% owned group
subsidiaries
2019
£m
2018
£m
—
—
—
—
—
—
2019
£m
0.3
—
—
2018
£m
0.3
—
—
2019
£m
—
—
2.7
2018
£m
—
—
2.8
703.1 668.9
26.6
27.5
—
—
2019
£m
—
—
—
—
2018
£m
—
—
1.4
0.5
2019
£m
2018
£m
2019
£m
2018
£m
—
—
—
—
—
—
—
—
—
—
—
—
2019
£m
—
—
3.9
2018
£m
—
—
3.0
—
—
—
— 11.6
12.8
38.5
43.2
—
—
1.2
1.4
0.1
—
0.6
0.6
3.8
3.8
—
—
Interest paid to related party
Repayment of loan from
related party
Management charges
Amounts owed from
related party
Amounts owed to
related party
During the year Southeastern and GTR have traded with wholly owned subsidiaries of the Company; £43.0m (2018: £27.4m) of costs
were incurred by Southeastern and GTR on an arm’s length basis.
203
Annual Report and Accounts 2019 The Go-Ahead Group plcCompany financial statements Shareholder information
Financial calendar
Annual General Meeting
31 October 2019
Final dividend record date
1 November 2019
Final dividend payment date
22 November 2019
Trading update
28 November 2019
Half year end
28 December 2019
Half year results announcement
19 March 2020
Half year dividend payment
17 April 2020
Trading update
Next financial year end
4 June 2020
27 June 2020
Full year results announcement
10 September 2020
Annual General Meeting (AGM)
The thirty-second AGM of the Group will be held at the
Hilton Newcastle Gateshead, Bottle Bank, Gateshead, NE8 2AR
on Thursday 31 October 2019 at 11.00am. Details of the business
to be considered can be found in the Notice of AGM which will be
available on the Group’s corporate website (www.go-ahead.com)
from 27 September 2019.
Dividends
For the year ended 29 June 2019, The Go-Ahead Group plc’s
final year dividend will be 71.91p per share, making the 2019 total
dividend 102.08p. Go-Ahead understands the importance of
the ordinary dividend for our shareholders and is committed to
maintaining an appropriate balance between total cash returns
to shareholders, investing in the business and maintaining a
strong capital position.
To save time and receive your dividends faster, we recommend
that you arrange for your dividends to be paid directly into your
bank or building society account. This avoids the risk of losing a
cheque in the post and also ensures that your money will be paid
into your account on the dividend payment date. To select this
method of dividend payment, please contact Equiniti directly
using the details on page 209. Following each dividend payment
date, we will send a dividend confirmation voucher to your home
address. It is therefore important that you ensure that Equiniti
has your correct address and bank details.
Managing your shares online
The Group’s Registrar, Equiniti, is responsible for maintaining our
register of members. Shareholders with queries relating to their
shareholding should contact Equiniti directly.
Go-Ahead shareholders can go online to manage their shareholdings
and find out about Go-Ahead’s performance by joining Shareview.
Through Shareview, you can:
• Select how you wish to receive Go-Ahead communications –
either direct to your email or via post;
• Update your address and bank details online;
• Vote in advance of general meetings; and
Shareholder profile by size of holding as at 29 June 2019
• Sell or purchase shares in the Group
No. of
holdings
Total shares
held
% of issued
share capital
%
1–10,000
2,849
92.08
1,950,950
10,001–100,000
100,001–500,000
500,001–1,000,000
Over 1,000,001
177
51
6
11
5.72
1.65
0.19
6,077,012
10,615,961
3,980,658
0.36 24,425,889
Total
3,094
100 47,050,470 *
* This total includes 3,902,230 shares held in treasury.
Shareholder profile by category as at 29 June 2019
No. of
holdings
Number of
shares
% of
holdings
Treasury shares
Directors
1
5
3,902,230
91,253
0.03
0.16
Other individuals
2,499
3,541,878
80.77
4.15
12.92
22.56
8.46
51.91
100
% of
shares
8.29
0.19
7.53
Institutional
investors
589
39,515,109
19.04
83.99
Total
3,094 47,050,470
100
100
It should be noted that many private investors hold their shares
through nominee companies. Therefore, the percentage of shares
held by private holders is likely to be higher than that shown.
To register, go to www.shareview.co.uk and click on “Register”
and “Open Portfolio Account”. You will need your 11 digit
shareholder reference which is shown on your last dividend
confirmation voucher or share certificate. As far as possible,
the Group provides shareholder documents via the corporate
website. By electing to receive shareholder communications
electronically you will be allowing us to communicate with
you securely in a more environmentally friendly way.
Duplicate documents
If you have more than one registered shareholder account,
you will receive duplicate documentation and split dividend
payments. To request that your accounts be combined, please
contact Equiniti.
Shareholder security
Shareholders should be aware that they may be targeted by
certain organisations offering unsolicited investment advice or
the opportunity to buy or sell worthless or non-existent shares.
Should you receive any unsolicited calls or documents to this
effect, you are advised not to give out any personal details or
to hand over any money without ensuring that the organisation
is authorised by the UK Financial Conduct Authority (FCA)
and doing further research.
204
The Go-Ahead Group plc Annual Report and Accounts 2019 If you are unsure or think you may have been targeted,
please inform the FCA using the share fraud reporting form
at fca.org.uk/scams. You can also call the FCA helpline on
0800 111 6768 or through Action Fraud on 0300 123 2040.
More detailed information, guidance and key contact details
are available on the FAQs page within the investor information
section of our corporate website.
By law, the Group’s register of members is open to public
inspection. However, we do not endorse any specific share
dealing facilities, will not pass on shareholder information to any
third party and any requests for access to the register are subject
to “proper purpose” requirements which ensure those personal
data are not used unlawfully.
Shareholder and control structure
As at 29 June 2019, the Group’s issued share capital comprised
a single class of shares referred to as ordinary shares, with a
nominal value of 10p each. As at this date, there were 47,050,470
ordinary shares in issue, of which 3,902,230 were held in treasury.
The Group did not purchase any of its own shares during the year
either for cancellation or to hold as treasury shares, and no such
shares were purchased between the period end and the date of
this report. However, Computershare Trustees (Jersey) Limited,
the Trustees of The Go-Ahead Group Employee Trust (the Trust),
purchased 56,482 ordinary shares of 10p each in the Group as
part of a planned programme of share purchases (2018: 64,012) to
satisfy awards made under the Group’s Long Term Incentive Plan
and Deferred Share Bonus Plan awards. Since the period end and
the date of this report, the Trust has purchased 8,492 ordinary
shares of 10p each in the Group.
The Group is not aware of any agreements between shareholders
that may result in restrictions on the transfer of securities or on
voting rights other than:
• Certain restrictions which may from time to time be imposed
by laws and regulations (for example, insider trading laws)
• Restrictions pursuant to the Listing Rules of the FCA whereby
certain employees of the Group require the approval of the
Group to deal in the Group’s securities
All shareholders have the same voting rights for each share,
regardless of the total number of shares held. On a show of hands
at a general meeting of the Group, every holder of shares present
in person or by proxy and entitled to vote shall have one vote
(except in the circumstance where a proxy has been appointed
by more than one member, in which case he or she will have one
vote for and one vote against if he or she has been instructed by
one or more members to vote for the resolution and by one or
more members to vote against). On a poll, every member present
in person or by proxy and entitled to vote has one vote for every
ordinary share held. The Notice of AGM specifies deadlines for
exercising voting rights either in person or by proxy in relation
to resolutions to be passed at the 2019 AGM. All proxy votes
are counted and the numbers for, against or withheld in relation
to each resolution are announced as soon as practicable
following the AGM and published on the Group’s corporate
website (www.go-ahead.com).
The directors currently have no intention to allot shares other than
in connection with employee share schemes. The authorities for
the Group to allot relevant securities (up to an aggregate nominal
amount of £1,437,513, and for the disapplication of pre-emption rights
on the allotment of equity securities) for cash up to an aggregate
nominal amount of £215,627, as passed by ordinary and special
resolutions at the 2018 AGM, were not utilised in the financial
year or up to the date of this report.
These authorities will expire at the 2019 AGM and approval for
new authorities will be sought. In the last three years, no shares
have been issued on a non-pre-emptive basis, other than those
issued under all employee share schemes which are not included
for the purposes of this authority.
The authority for the Group to make market purchases of its own
ordinary shares, as passed by special resolution at the 2018 AGM,
was still in effect at the end of the financial year and will expire at
the 2019 AGM when approval for a new authority will be sought.
Under the existing authority the maximum aggregate number
of shares that can be purchased is 4,312,540. The authority also
limits the maximum number of shares held in treasury to 10%
of the issued share capital of the Group and states minimum
and maximum prices payable for shares purchased under the
authority. During the financial year this authority was not utilised.
Each of the Group’s rail franchise agreements are subject to
change of control criteria that would mean, on a change of
control, there would be deemed to be an “event of default” that
could potentially terminate the rail franchise. This is, however,
subject to the discretion of the Secretary of State. Additionally,
the Group’s sterling bond issue dated 6 July 2017, and the
revolving credit and loan facilities dated 16 July 2014, 27 April 2017,
23 October 2017, 20 July 2018 and 9 July 2019 are subject to
change of control clauses that contain certain specified conditions
which could lead to a compulsory prepayment of the bond and
loans respectively. Transport for London, The Land Transport
Authority in Singapore and the National Transport Authority in
Ireland all have powers to prevent the operation of, respectively,
London Bus, Go-Ahead Loyang PTE. Limited and Go-Ahead
Transport Services (Dublin) Limited contracts by an existing
operator which is the subject of a change of control. In Germany,
certain of our franchise arrangements contain change of control
provisions which require approval from the Passenger Transport
Authority. These are the E-Net Allgäu Bavaria and ABN Lot 1
franchise arrangements.
205205
Annual Report and Accounts 2019 The Go-Ahead Group plcAnnual Report and Accounts 2019 The Go-Ahead Group plcShareholder information Shareholder information continued
Major shareholders
As at 4 September 2019, the following percentage interests in the ordinary share capital of the Group, disclosable under the Disclosure
Guidance and Transparency Rules (DTR) have been notified to the directors.
Standard Life Aberdeen plc
HSBC Global Custody Nominee (UK) Limited
4,725,222
—
10.96
—
No change
No change
4,273,107
9.90%
Number of
ordinary shares held as at
29 June 2019
Percentage of voting
rights held as at
29 June 2019
Number of
shares held as at
4 September 2019
Percentage of voting
rights held as at
4 September 2019
Corporate website
Our corporate website, www.go-ahead.com, provides up-to-date, detailed information on the Company’s operations and brands.
It includes a dedicated investor relations section that has a wealth of information including access to reports, factsheets, latest
news and presentations, as well as share price analysis. Stakeholders are encouraged to sign up to receive email notification of
results and press announcements as they are released by registering at www.go-ahead.com/investors/email-alerts.
In the interests of improving engagement and sharing more relevant material with our stakeholders, we have continued to add new
features and up-to-date information across our website, as detailed below:
What information is available on the website?
What is new?
Corporate information
• An overview of who we are, what we do and the markets
in which we operate
• Our strategy and business model
• Profiles of our Board of directors
• A total shareholder return calculator
• Profiles of our executive committees as well as our
local managers from our bus and rail operations
• Details of our work on innovation and how we are
preparing for the future of transport
• A detailed account of our approach to corporate governance
• How to contact us across our operating companies
• All the latest Go-Ahead news and press releases
• A local news section on our rail and bus companies
• Blogs on Go-Ahead’s latest research and executive
discussions on industry matters
Investor relations information
• A copy of our full Annual Report and Accounts
• A record of all trading updates, half year and full year
announcements and investor presentations
• Our dividend policy, dividend history and dividend calculator
• Our financial calendar
• Share price information, including a download function
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The Go-Ahead Group plc
4 Matthew Parker Street
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Share price
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The Go-Ahead Group plc Annual Report and Accounts 2019 Appendix
Greenhouse gas emissions
Our carbon footprint in tonnes of equivalent carbon dioxide (CO2e):
2019
2018
2017
Consumption
TCO2e
Consumption
TCO2e
Consumption
TCO2e
Scope 1
Gas (buses) kwhs
Gas premises (Bus)
Gas premises (Rail)
Bus diesel (10% bio-diesel blend) ltrs1
Gas oil (Rail) ltrs
Total
Scope 2
Traction electricity kwhs2
Mains Electricity premises (Bus)3
Mains Electricity premises (Rail)
Mains Electricity premises
(Head Office)
Mains electricity electric bus
Solar electricity generated and
consumed in premises (Bus) (kwhs)
Solar electricity generated and
consumed in premises (Rail) (kwhs)
Solar electricity generated and
consumed in premises (total) (kwhs)
Total Scope 2 – location
Total Scope 2 – market
Scope 3
Electricity – transmission
and distribution (total)
Scopes 1–3 by country
UK
Singapore
Ireland
Total
Out of scopes
(biogenic content of bio-diesel)
Scope 1, 2 & 3 and Out of Scopes
Total (location)
Total (market)
YoY % change
% change on 2017 baseline
% change on 2015 baseline
Total bus and rail mileage
All scopes kgs CO2e/vehicle mile
YoY % change
% change on 2017 baseline
% change on 2015 baseline
6,015,533
23,240,221
26,956,877
142,744,304
5,381,957
1,106
4,273
4,956
370,294
14,845
395,474
6,075,632
22,081,195
31,305,147
137,374,506
11,698,766
1,118
4,062
5,759
3,721,896
19,100,488
34,298,860
360,875
138,863,052
34,751
18,475,417
406,565
1,356,323,985
346,676
1,389,289,129
393,266
1,371,415,035
18,770,456
74,428,638
5,117
19,024
18,374,050
82,862,076
5,387
23,456
17,722,995
90,603,259
95,683
822,497
114,661
0
114,661
117,315
2,352,029
172,583
389,762
562,345
30
601
0
0
0
371,448
32,719
31,508
372,288
48,014
6,680
426,982
12,447
810,878
472,148
(7.12%)
(19.29%)
(26.14%)
162,890
1,726,965
102,836
0
102,836
46
489
0
0
0
422,644
35,269
36,012
397,152
45,424
0
442,576
7,858
873,078
485,703
(13.10%)
n/a
(20.47%)
685
3,518
6,316
361,066
54,567
426,153
482,135
6,231
31,852
34
289
0
0
0
520,541
38,406
48,669
437,581
37,241
0
474,822
9,373
1,004,736
522,601
(6.62%)
n/a
(8.48%)
706,561,838
683,223,210
684,511,871
Location
Location
Location
1.1476
(10.19%)
(21.81%)
(35.49%)
1.2779
(12.94%)
(12.94%)
(28.17%)
1.4678
(7.95%)
n/a
(17.49%)
1. UK CO2e conversion factors have been used to account for diesel consumption in Ireland and in Singapore as local factors are not available.
2. Local CO2e conversion factors for 2018 have been used to account for electricity and gas consumption in Ireland and for electricity consumption in Singapore as the 2019 factors
are not yet available.
3. Traction electricity consumption data relates to the period from 1 April 2018 to 31 March 2019.
4. Energy consumption for the one month of operation of operation of German rail has not yet been established.
The Go-Ahead Group’s energy consumption and CO2e figures have been verified by Bureau Veritas.
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Annual Report and Accounts 2019 The Go-Ahead Group plcAnnual Report and Accounts 2019 The Go-Ahead Group plcShareholder information
Appendix continued
Greenhouse gas emissions
We report on greenhouse gas (GHG) emissions in accordance
with the GHG Protocol Corporate Accounting and Reporting
Standard, and the UK Government’s Environmental Reporting
Guidance methodologies together with the emissions conversion
factors from the Department for Business, Energy & Industrial
Strategy (BEIS) conversion factors for Company Reporting 2019.
In line with this guidance, we have reported the emissions
sources* which are required. These sources fall within the
businesses included in our consolidated financial statements.
Emissions are expressed in terms of equivalent carbon dioxide
(CO2e). Our relative performance metric has always been
kilogrammes of CO2e emissions per passenger journey but as
stated in last year’s annual report, we have moved to a new
relative performance metric of kilogrammes of CO2e per vehicle
mile operated. This new metric ensures there is a much closer link
between our performance and the measures we are taking to
improve our energy efficiency and that performance is not
masked by fluctuating passenger numbers. To maintain
transparency and enable stakeholders to see our performance
trends over time, we provide historic data for both our absolute
CO2e emissions and for our relative performance metric.
We report our emissions on both a ‘location’ and a ‘market’ basis.
This dual reporting applies to CO2e emissions arising from our
electricity consumption only. The location-based method uses
the national average carbon factors for UK mains electricity that
are issued annually by the BEIS and take the whole mix of fuels
used to generate UK electricity into account. The market-based
method uses supplier-specific carbon factors that reflects supply
contract specifications agreed between supplier and customer,
e.g. if the customer specifies that electricity must be generated
from renewable sources or a green tariff is chosen. In these
circumstances, the carbon factor/CO2e emissions using the
market-based method will be much lower than if using the
location-based method.
We define our organisational reporting boundary by applying the
financial control approach with a materiality threshold set at 5%.
Actions that were implemented during 2019 to improve
energy efficiency and enable us to achieve our targets
include the following:
• On-going investment in our bus fleet; in line with the Group’s
vehicle procurement policy to only purchase Low Emission
Buses (LEB) other than in exceptional circumstances, virtually
all of these new buses are certified as LEB or better. These new
buses are significantly more fuel efficient than the older buses
that they replace and contributed to an overall improvement
in fleet average miles per gallon of 2.1% year on year and 4.2%
better than in 20117. We are therefore on track to achieve our
5% improvement target by 20221.
• We have also purchased or ordered additional new electric
buses which is what has caused the electricity consumption
by electric buses to increase in 2019. However, these electric
buses also contributed to lower overall CO2e emissions from
the fleet as they have generally replaced diesel buses. Additionally,
following extensive feasibility studies carried out in 2019,
Go-Ahead successfully bid for funding to assist with the
purchase of 20 new hydrogen buses which are due to be
ordered imminently. These hydrogen buses are scheduled to
be delivered and enter service with Brighton and Hove Buses
in 2020 and clearly demonstrate the Group’s innovative and
sector leading approach to adopting low carbon vehicle
technologies that also contribute to reducing air pollution.
• Trial of solar panels currently being installed on the roofs of
20 buses. The electricity generated by the panels will reduce
the load on the vehicles’ alternators/drivetrain, and so contribute
to a marginal improvement in fuel efficiency. One of the trial
buses is also fitted with a roof mounted filter designed to
remove particulates from the air and so contribute to
improving air quality.
• New rolling stock that are significantly more energy efficient
than the units it replaced were introduced on the GTR franchise.
This new rolling stock contributed to an overall year on year
improvement in electric fleet energy efficiency (miles/kwh) of
6.0%. For GTR only, the year on year improvement was 9.7% and
against the 2017 baseline a 16.6% improvement was achieved,
hitting the 15% improvement target two years earlier than planned.
• Solar PV was installed at four Southeastern Railway depots in
2019 added to the existing installations at Oxford and Hull bus
depots, increasing the amount of self-generated, zero carbon
electricity that we consumed.
• From 1 July 2019, all electricity supplied to Group premises
within our central Group electricity supply contract will be
entirely generated from fully renewable sources, (wind, solar,
hydro etc.) and will be zero rated for CO2e under a market
based reporting approach.
• Go-Ahead’s bus division achieved ISO 50001 certification in
September 2018, and with the existing certifications held by
the Group’s two train operating companies, all of Go-Ahead’s
UK operations are covered by ISO 50001 certification,
recognised as best practise for energy management.
• During 2019 Go-Ahead has also carried out a review of Climate
Change Risks and Opportunities, including scenario planning,
as recommended by the Task Force on Climate-related Financial
Disclosures (TCFD) and has investigated the feasibility
of setting a Science-Based Target for longer term carbon
reductions. Both of these workstreams are still on-going and
the outcomes will be included in next year’s Annual Report.
• Go-Ahead also continued to collaborate with partners on a
variety of innovative future of transport initiatives such as
Demand Responsive Transport (DRT) services in London and
Oxford and potential tie ups with logistics companies that will
achieve nett reductions in carbon emissions as well as reducing
air pollution from transport and congestion.
* Emissions from air conditioning equipment in our premises and vehicles are not included in this analysis due to the difficulty in obtaining this data. A screening exercise was
carried out that established that these emissions account for less than 0.5% of our total GHG emissions and are therefore not considered material. Additionally, our German rail
company began operating in June 2019 and energy consumption data for the one month of operations within the reporting period has not yet been established, and therefore
German rail CO2e emissions are also excluded from this year’s reporting.
208
The Go-Ahead Group plc Annual Report and Accounts 2019 Corporate information
www.go-ahead.com
Secretary and Registered Office
Carolyn Ferguson
The Go-Ahead Group plc
3rd Floor, 41–51 Grey Street
Newcastle upon Tyne
NE1 6EE
Head Office
The Go-Ahead Group plc
4 Matthew Parker Street,
Westminster
London
SW1H 9NP
Tel switchboard: 0191 232 3123
Registrar
Equiniti Ltd
Aspect House, Spencer Road
Lancing
West Sussex
BN99 6DA
Tel: 0371 384 2193*
* Lines are open 8:30am to 5:30pm Monday to Friday
(excluding public holidays in England and Wales)
Auditor
Deloitte LLP
1 New Street Square
London
EC4A 3HQ
Joint Corporate Broker
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
Joint Corporate Broker
Jefferies Hoare Govett Ltd
Vintners Place
Upper Thames Street
London
EC4V 3BJ
Principal Banker
The Royal Bank of Scotland plc
Corporate Banking
9th Floor, 280 Bishopsgate
London
EC2M 4RB
209209
Annual Report and Accounts 2019 The Go-Ahead Group plcAnnual Report and Accounts 2019 The Go-Ahead Group plcShareholder information Glossary
ASLEF
The Associated Society of Locomotive Engineers and Firemen (ASLEF) is a British trade union representing train drivers
BAME
BAME is a used in the UK to refer to black, Asian and minority ethnic people
Bus fuel hedging
Contractual tool used to reduce exposure to volatile and potentially rising fuel costs
Business in the Community
Is a British business community outreach charity promoting responsible business, CSR, corporate responsibility, and is one of the
Prince’s Charities of Charles, Prince of Wales
CDP
Carbon Disclosure Project is an organisation based in the United Kingdom which works with shareholders and corporations to
disclose the greenhouse gas emissions of major corporations
Corporate Governance Code
The Code is part of a framework of legislation, regulation and best practice standards which aims to deliver high quality corporate
governance with in-built flexibility for companies to adapt their practices to take into account their particular circumstances
CPT
The Confederation of Passenger Transport UK is recognised by Government as the voice of the bus and coach industry, and the
focus for consultation on national and international legislation, local regulations, operational practices and engineering standards
Delay Repay
National scheme train companies use to compensate passengers for delays
DfT
The Department for Transport is the government department responsible for the UK transport network
DRT
Demand Responsive Transport (DRT) is a form of transport where vehicles alter their routes based on particular transport demand
rather than using a fixed route or timetable
EAP
An employee assistance program (EAP) is a work-based intervention program designed to assist employees in resolving personal
problems that may be adversely affecting the employee’s performance
Euro 6 emission standards
Define the acceptable limits for exhaust emissions of new vehicles sold in EU and EEA member states
Fair Tax Mark
Independent accreditation awarded after an assessment based on transparency and tax rate, disclosure and avoidance
210
The Go-Ahead Group plc Annual Report and Accounts 2019 FRC
The Financial Reporting Council is the UK’s and the Republic of Ireland’s independent regulator responsible for promoting high
quality corporate governance and reporting to foster investment
GDPR
The General Data Protection Regulation 2016 is a regulation in EU law on data protection and privacy for all individuals within the
European Union and the European Economic Area
GHG
A greenhouse gas is any gas in the atmosphere which absorbs and re-emits heat, and thereby keeps the planet’s atmosphere warmer
than it otherwise would be
IFRS
Set of accounting standards that is becoming the global standard for the preparation of public company financial statements
IFRS 16
Is an International Financial Reporting Standard promulgated by the International Accounting Standards Board providing guidance
on accounting for leases
ISO 50001
Certification for best practice in energy management achieving continual improvement of energy performance, including energy
efficiency, energy security, energy use and consumption
ISO 20400
Is an international standard for sustainable procurement, providing guidance to organisations on integrating sustainability
within procurement
Lean engineering
Is a continuous improvement process designed to increase the efficiency and horsepower of engineering departments to make them
more competitive in their marketplace
LGBT+
An umbrella term to refer to all LGBT+ individuals (lesbian, gay, bisexual, transgender, queer, intersex and asexual and those who do
not identify with any category). It is also a term used by individuals who see their sexual orientation and/or gender identity as fluid
Like for like
An adjusted measurement which is made so that a correct comparison can be made with a previous period. The adjusted measure
takes into consideration only those activities that were in effect during both time periods and so excludes, for example, any effects
of acquisitions, discontinued operations or any other one-off event
LTA
The Land Transport Authority is a statutory board under the Ministry of Transport of Government of Singapore
MaaS
Mobility as a Service is the integration of various forms of transport services into a single mobility service which is accessible on demand
211211
Annual Report and Accounts 2019 The Go-Ahead Group plcAnnual Report and Accounts 2019 The Go-Ahead Group plcShareholder information Glossary continued
NTA
The National Transport Authority is the transport authority for Greater Dublin and the public transport licensing agency for Ireland
ORR
Office of Road and Rail is an independent regulator which regulates the rail industry’s health and safety performance and ensures
the rail industry is competitive and fair
PPM
The Public Performance Measure is a measure of the punctuality and reliability of passenger trains in Britain
QICs
Quality Incentive Contracts are performance targets set by TfL to encourage the provision of punctual services. Operators receive
bonus payments when targets are met and are penalised for poor performance
RDG
The Rail Delivery Group is an unincorporated association membership body in the British railway system, owned by its members
Restricted cash
Restricted cash balances are amounts held by rail companies which are included in cash and cash equivalents. The restricted cash is
not available for immediate or general business use and can only be distributed with the agreement of the DfT, normally up to the
value of revenue reserves or based on a working capital formula
Science Based Targets
Targets adopted by companies to reduce GHG emissions which are in line with the level of decarbonisation required to keep global
temperature increase below 2°C compared to pre-industrial temperatures
TCFD
The Task Force on Climate related Financial Disclosures are recommendations for more effective climate related disclosures
TGfM
Transport for Greater Manchester is the public body responsible for co-ordinating transport services throughout Greater Manchester
in North West England
TfL
Transport for London is a local government body responsible for the transport system in Greater London
TSR
Is a measure of the performance of different companies’ stocks and shares over time. It combines share price appreciation and
dividends paid to show the total return to the shareholder expressed as an annualised percentage
Williams Rail Review
The Williams Rail Review, led by independent chair Keith Williams, was established in September 2018 by the UK Government to look
at the structure of the whole rail industry and the way passenger rail services are delivered. The review will make recommendations
for reform that prioritise passengers’ and taxpayers’ interests
212
The Go-Ahead Group plc Annual Report and Accounts 2019 Summary Verification Statement
from Bureau Veritas UK Ltd
Bureau Veritas UK Ltd (Bureau Veritas) has provided
verification for The Go-Ahead Group plc. (Go-Ahead)
over selected sustainability indicators contained within
the Group’s Annual Report. The information and data
reviewed in this verification process covered the period
1 July 2018 to 29 June 2019.
The full verification statement including Bureau Veritas’
verification opinion, methodology, recommendations
and a statement of independence and impartiality will
be released alongside the Group’s Sustainability Report
and can be found on the Go-Ahead Group website:
www.go-ahead.com
Bureau Veritas UK Ltd
August 2019
Registered office
The Go-Ahead Group plc
3rd Floor 41–51 Grey Street
Newcastle Upon Tyne
NE1 6EE
+44 (0) 191 232 3123
Head office
The Go-Ahead Group plc
4 Matthew Parker Street
Westminster
London
SW1H 9NP
+44 (0) 20 7799 8999
Visit our new website!
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