Annual Report and Accounts
for the year ended 3 July 2021
Introduction
2021 overview
Our purpose is
to be the local
partner taking
care of journeys
that enhance
the lives and
wellbeing of our
communities
across the world
Operating profit
(pre-exceptional items)
£115.5m
(2020: £76.4m, restated1)
Exceptional charge2
£104.1m
(2020: £93.7m, restated1)
Operating profit
(post-exceptional items)
£11.4m
(2020: £(17.3m), restated1)
Headroom on facilities plus
unrestricted cash
£240.3m
(2020: £229.8m)
Adjusted net debt/EBITDA3
1.56x
(2020: 1.98x, restated1)
To find out more visit:
www.go-ahead.com
Announcement of full year results
• Publication of full year results for the year ended 3 July 2021 delayed as a result
of matters relating to London & South Eastern Railway (LSER)
• Trading in Go-Ahead’s shares and corporate bond suspended between 4 January 2022
and the publication of the results
• Waivers obtained from the Group’s banks in relation to the information covenant
requirements to submit accounts within a defined timeframe
Financial and operational performance
• Financial performance overshadowed by matters relating to LSER and challenges in
International Rail
• Group operating profit4 £115.5m (2020: £76.4m, restated)
– Regional Bus operating profit4 of £17.9m (2020: £20.5m)
– London & International Bus division operating profit of £68.5m (2020: £50.0m, restated)
– UK Rail operating profit4 of £56.7m (2020: £50.7m, restated)
– International Rail operating loss4 of £(27.6m) (2020: £(44.7m))
• Exceptional charge of £104.1m (2020: £93.7m) primarily relating to onerous contract
provisions and asset impairments in Norway of £76.7m and a provision for a potential
financial penalty in relation to LSER of £30.0m
• Leverage at lower end of target range of 1.5 to 2.5x at 1.56x (2020: 1.98x, restated)
• Passenger numbers had been recovering steadily in most markets and have returned
to these levels after temporarily declining following emergence of the Omicron
variant. Regional Bus volumes are now around 80 per cent of pre-pandemic levels.
• Around 90 per cent of revenues secured through contracts with no revenue risk from
changes in passenger demand
London & South Eastern Railway Ltd
• Operator of Last Resort took over operation of Southeastern franchise on 17 October
2021 reflecting the Department for Transport (DfT)’s decision not to award a National
Rail Contract to LSER as a consequence of matters regarding the calculation of historic
profit share payments and treatment of certain overpayments made by the DfT
to LSER
• Notwithstanding the complexity of LSER’s franchise agreements, Go-Ahead accepts
that serious errors were made in relation to the LSER franchise with respect to
engagement with the DfT over several years
• A total of £49.2m has been paid by LSER to the DfT
• Acknowledging the DfT’s power to impose a financial penalty, the Group has provided
£30.0m in its financial statements
New leadership and a refreshed Board
• Christian Schreyer took over the role of Group Chief Executive Officer on 5 November
2021. He joined from global mobility company, Transdev, bringing a great depth
of experience and expertise to address the challenges and opportunities ahead
• Well advanced recruitment process for new Group Chief Financial Officer
• David Blackwood and Dominic Lavelle were appointed Senior Independent Director and Audit
Committee Chair, respectively, on 19 January 2022, having joined the Board as independent
non-executive directors on 1 January 2022
An important purpose
• Public transport remains critical to environmental sustainability, economic recovery,
the delivery of health and wellbeing outcomes, and keeping communities connected
• Climate change strategy launched alongside Science Based Target to reduce carbon
emissions by 75 per cent by 2035 and become a net zero business by 2045
1. Prior year adjustments have been made, please see note 2 of the financial statements.
2. Exceptional charge consists of £0.2m for Regional Bus, £32.4m for UK Rail and £71.5m for International Rail.
3. On a pre-IFRS basis, in line with bank covenants. Adjusted net debt represents net cash less restricted cash.
4. Before exceptional charge.
N.B. The adjusted profit measures included here are defined and reconciled in the business and finance review
on pages 40 to 55
Strategic report
Compliance with Section 172(1) of the Companies Act 2006
The directors are mindful of the duty they have under Section 172(1) to promote
the success of the Company over the long term for the benefit of shareholders
as a whole, having regard to the interest of a range of other key stakeholders. In
doing so, the Board’s desire to act fairly between members, maintain a reputation
for high standards of business conduct, and consider the long term
consequences of the decisions it takes, underpins the way it operates at every
level of the business. For further information see pages 2 to 68 of the strategic
report and pages 69 to 146 of the corporate governance report.
Read more about:
• Why and how we engage with our stakeholders, the key topics of engagement
during the year and how we responded, pages 20 to 23
• The Group’s goals, strategy and business model in the strategic report,
pages 2 to 68
• The interests of the Group’s employees, pages 28 and 29
• Our approach to sustainability including our impact on the community
and environment, pages 28 to 39
• How we manage risks, pages 56 to 64
• How our corporate governance principles:
– Underpin the decisions we take, page 84
– Set the high standards that enable and support our culture, page 78
– Ensure stakeholders are considered in the decision making process and their
views are understood in the boardroom, pages 81 to 85
• Examples of key decisions taken by the Board during the year, page 85
Non-financial information statement
We aim to comply with the Non-Financial Reporting Directive requirements.
The table below sets out where relevant information can be found within
this report*:
Reporting requirement and policies and standards
which govern our approach
Information necessary to understand our business
and its impact, policy due diligence and outcomes
Environmental matters
• Environment policy
• Group energy and climate change policy
• Task-Force on Climate-related Financial
Disclosures (TCFD)
• Climate change strategy
• Sustainability within our strategic framework
Cleaner environment, page 36
TCFD, page 38
Climate change strategy, page 26
Our approach to sustainability, page 25
GHG emissions, page 283
Employees
• Whistleblowing policy
• Conflicts of interest policy
• Equal opportunities, diversity and
inclusion policy
• Code of conduct policy
• Health and safety policy
• Health and wellbeing policy
Human rights
• Human rights policy
• Modern slavery policy
• Code of conduct policy
• Sustainable supply chain charter
Better teams, page 28
Culture, page 78
Nomination Committee report, page 93
Directors’ report, page 143
Our business model, page 18
Better teams, page 28
Stronger communities, page 32
Culture, page 78
Social matters
• Community and charitable investment policy
• Sustainable supply chain charter
• Health and safety policy
Our business model, page 18
Stronger communities, page 32
Safer working, page 34
Anti-bribery and anti-corruption
• Anti-bribery and anti-corruption policy
Better teams, page 28
Principal risks and impact
on business activity
Risk management, page 56
Audit Committee report, page 98
Description of the business model
Our business model, pages 18 and 19
Non-financial key performance indicators Non-financial key performance
* Further details on our policies and procedures are available on our corporate website www.go-ahead.com
indicators, pages 28 to 37
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The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report
1
London & South Eastern Railway
Section 172(1) and non-financial
information statements
Our strengths
Chair’s letter
2
4
7 Group Chief Executive’s review
10
12 Group Q&A
16 Our markets
18 Our business model
20 Our stakeholders
24 Our strategy
26 Climate change strategy
28 Responsible business pillars
28 Better teams
30 Happier customers
Stronger communities
32
Safer working
34
36 Cleaner environment
38 TCFD
40 Business and finance review
Financial performance
41
42 Bus
46 Rail
51
Financial review
56 Risk management
64 Viability statement
66 Going concern
Corporate governance
70 2021 UK Corporate Governance Code
compliance statement
71 Chair’s introduction to governance
73 Board overview
74 Board of directors
76 Key focus areas of the Board
78 Culture
80
Board activities during the year
ended 3 July 2021
Stakeholder engagement
81
86 Evaluation
89 Division of responsibilities
93 Board composition and succession
98 Audit, risk and internal control
108 Remuneration
143 Directors’ report
146
Statement of directors’ responsibilities
Group financial statements
148
Independent auditor’s report to the
members of The Go-Ahead Group plc
167 Consolidated income statement
168 Consolidated income statement narrative
169
Consolidated statement of
comprehensive income and narrative
170 Consolidated statement of changes
in equity
171 Consolidated statement of changes in
equity narrative
172 Consolidated balance sheet
173 Consolidated balance sheet narrative
174 Consolidated cashflow statement
175 Consolidated cashflow and reconciliations
176 Critical accounting judgements and
key sources of estimation uncertainty
182 Notes to the consolidated
financial statements
Company financial statements
255 Company balance sheet
256 Company statement of changes
in equity
257 Directors’ responsibilities in relation
to the company financial statements
258 Notes to the company
financial statements
Shareholder information
280 Shareholder information
283 Greenhouse gas emissions
288 Corporate information
Our strengths
We have a clear and
important purpose
Delivering
vital services
Delivering vital services
essential to society and
for economic growth
• Bringing our communities
together, providing key links
to friends and family
• Critical importance of public
transport reflected in ongoing
government support during
the pandemic
• Essential to economic
recovery, enabling access
to work, education, leisure
and retail
Part of
the solution
Integral part of climate
change and air quality
agendas in our towns
and cities
• Recognition by policy makers
that mass transport is key to
achieving air quality and
climate-related targets
• Aside from walking and
cycling, rail travel is the most
carbon efficient mode of
transport, followed by bus.
An average journey by petrol
car emits 120 per cent more
CO2 than the same journey
by a diesel bus
• Leading industry change in
transition to cleaner transport,
introducing the UK’s first
all-electric bus depot and our
own innovative air-filtering
bus technology
Experts in
our field
Extensive experience
and expertise in bus
and rail markets
• Largest bus operator in
London with strategically
located depots providing
competitive advantage
• Successful bus operations
in Singapore and Ireland
• Well established regional
bus operator with a focus
on urban areas
• Leading change and
transformation as the
operator of the UK’s largest
rail franchise, GTR
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The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report “Despite the challenges in International Rail
and LSER our fundamental strengths have
supported us well throughout the COVID-19
crisis. As we move into the Group’s next
phase, we are well positioned to further
establish our role as a leading operator
of vital public transportation services.”
Clare Hollingsworth
Chair
A proven
approach
Local customer focused
management, innovative
approach and engaged
colleagues
An important
partner
Working collaboratively
with transport
authorities and
policy makers
Financial
profile
Disciplined and
sustainable
decision making
• Agile and responsive local
• Around 90 per cent of
management teams embedded
in their local communities
optimising performance and
award-winning customer service
revenue generated through
contracts with transport
authorities and industry
partners
• Continual improvement
driven by an innovative
approach in all areas of
the business
• Engaged colleagues
promoting our inclusive
culture which encourages
diversity in all its forms,
aiming to reflect the diverse
communities which we serve
• A leading voice on the issues
most critical to our business
and industry
• Integral to major infrastructure
change projects in UK rail
delivered collectively with
industry partners
• Actively supporting local
authorities and communities
in developing shared
transport goals
• Robust balance sheet; adjusted
net debt to EBITDA at lower
end of target range at 1.56x*
• Positive cashflow and good
liquidity; £240.3m of cash and
available facilities
• Financial profile will support
the resumption of dividend
payments when appropriate
to do so
• Disciplined approach to
capital allocation and
risk management
* Presented on a pre-IFRS 16 basis, in line
with our bank covenant. On an IFRS 16 basis
adjusted net debt to EBITDA is 0.88x
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The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report
Chair’s letter
Rebuilding
for the future
Clare Hollingsworth
Chair
London & South Eastern Railway Ltd
As well as an important purpose,
Go-Ahead has strong values. I am
therefore very disappointed that these
values were not reflected in the
behaviours that contributed to failings
in relation to LSER, resulting in the
Department for Transport (DfT)’s
decision to appoint the Operator of Last
Resort to take over the operation of
Southeastern services, at the end of the
franchise term on 17 October 2021, rather
than awarding LSER a National Rail
Contract (NRC). This decision was as a
consequence of discussions with the DfT
regarding the calculation of profit share
payable by LSER under franchise
agreements and the treatment of certain
overpayments made by the DfT to LSER
over the course of the franchise
agreements. Whilst the Group hoped to
be awarded a NRC to continue operating
Southeastern services beyond the
contract end date of 17 October 2021, the
Group’s financial planning did not assume
any such contract award or extension.
An Independent Committee, comprising
the Chairs of LSER’s shareholders
(Go-Ahead and Keolis UK), commissioned
an Independent Review, supported by
external legal and accounting advisers,
into LSER’s performance of its contractual
obligations under the franchise
agreements. The findings of this review
were shared with the DfT shortly after its
completion. Go-Ahead has been focused
on open, collaborative and constructive
engagement with the DfT with a view to
reaching a full and satisfactory
settlement.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Notwithstanding the complexity of LSER’s
franchise agreements, the Group accepts
that serious errors were made in relation
to the LSER franchise with respect to
engagement with the DfT over several
years. In particular, the Group accepts
that by failing to notify the DfT of certain
overpayments or monies due, LSER
breached its contractual obligations of
good faith contained in the franchise
agreements. Accordingly, the Group has
apologised to the DfT.
The complexity around this matter
resulted in Go-Ahead and its auditor,
Deloitte, concluding that additional time
was required to consider the implications
of the findings of the Independent Review.
Consequently, there was a delay to the
announcement of the Group’s full year
results for the year ended 3 July 2021 and
publication of the Annual Report and
Accounts 2021. This delay resulted in a
temporary suspension in trading of
Go-Ahead’s shares and corporate bonds
from 4 January 2022. The Board has
applied to the FCA for the restoration of
the listing and trading in the Group’s
shares and corporate bonds. I sincerely
apologise to our investors for the
uncertainty and inconvenience these
circumstances have caused.
Acknowledging the DfT’s power to
impose a financial penalty under the
Railways Act 1993, but in the absence of a
specific precedent or relevant guidance, it
is difficult to estimate precisely the likely
quantum of any penalty. The Group,
having considered independent legal
advice received by the Independent
Committee, has included a provision for
£30.0m in the financial statements of the
year, which reflects the Group’s current
best estimate of any penalty.
Dear Shareholder
Without a doubt, this has been one of
the most challenging periods in living
memory; for individuals, communities,
and businesses across the globe. The
continuation of the COVID-19 pandemic
has had a profound effect not only on our
business, but on almost every aspect of
our lives. We have been faced with
lockdowns across all our markets, and
even when the associated restrictions
were eased, government guidance has
often encouraged people to stay at home,
causing significant disruption to our
normal way of life.
We have also seen significant policy
change in our industry, with the launch of
new government strategies relating to
both bus and rail in the UK. In March 2021,
the UK Government published its Bus
Back Better strategy, followed by the
Williams-Shapps Plan for Rail in May 2021,
both of which we welcomed.
At the same time, our business has been
challenged by matters arising in relation
to the London & South Eastern Railway
(LSER) franchise and International Rail.
The scale of the challenges faced by our
business cannot be overstated, and I have
deep admiration for all our people who
have demonstrated immense skill,
resilience, and dedication throughout
this time. I would like to thank every
colleague across our business for their
continued commitment to Go-Ahead
and our customers.
Go-Ahead has an important purpose,
supporting our communities even in the
most challenging times. I am incredibly
proud that we have truly lived up to this,
more now than ever before.
The remuneration of all Board
appointments and leavers was in
accordance with the remuneration policy,
details of which can be found on pages
117-128.
Financial performance
A strong financial performance from our
Bus and GTR businesses was
overshadowed by the need to make
provisions in respect of International
Rail and LSER, resulting in an exceptional
charge of £104.1m (2020: £93.7m restated).
Despite these challenges, the Group’s
balance sheet remains robust.
Read more about the overall financial performance
on pages 40-55
Dividend
The Board understands the importance
of dividends to Go-Ahead’s shareholders,
demonstrated by our record of attractive
dividend payments for 24 consecutive
years up until the unprecedented impact
of COVID-19.
While the Board has concluded that it would
not be prudent or right to resume dividend
payments currently, it remains committed to
doing so at the appropriate time.
I would like to thank our shareholders
for their loyalty, patience and
continued support.
Enhancing our corporate
governance arrangements
The behaviours which contributed to the
failings in relation to the management of
LSER’s franchise with the DfT do not
reflect the values that the Group expects
of its colleagues, nor do they meet the
high standards of conduct and
governance set by the Board.
In addition to the Independent
Committee’s review into the matters at
LSER, a wider business review was
conducted. Following this review the
Board has identified a requirement to
enhance corporate governance
arrangements, particularly relating to the
way in which we oversee our complex rail
operations. Work is already underway in
this area, particularly in GTR where
measures are being taken to improve the
ability of Go-Ahead and the Board of GTR
to better safeguard and assure the
compliance obligations of its complex
contract. These steps include increasing
the remit and scope of Internal Audit to
include oversight of the compliance
arrangements and ensuring deeper
understanding and closer scrutiny of
contractual obligations and commercial
terms. The new Group Audit Committee
Chair will be appointed to the Board of
GTR in the event of a new contract award,
to provide a clear line of sight to the
Group Audit Committee and Group Board.
Further detail on these measures is
provided on pages 98-107 of the Audit
Committee Report.
In addition, the Group Chief Executive’s
review of the business, following his
appointment in November 2021, is
considering, among other things,
the optimum division of roles and
accountabilities between the Group’s
operating companies and its
central functions.
Board changes
Established plans to refresh our Board and
leadership team have been accelerated.
Following the retirement of Group Chief
Executive, David Brown, in late 2021,
Christian Schreyer was appointed as our
new Group Chief Executive. Joining from
global mobility company, Transdev,
Christian has a strong background of
building relationships and collaborating
with public stakeholders and a solid
record of driving efficiency and better
service for passengers and clients. His
experience of international markets,
particularly in rail, and innovation in urban
mobility, will enable our business to
respond well to both the challenges and
opportunities ahead.
To further bolster the senior leadership
team, Christian has been supported by an
experienced Interim Chief Financial
Officer, Gordon Boyd, who will remain in
the role until the end of March 2022,
having been appointed in September 2021.
His appointment followed the resignation
of the former Group Chief Financial
Officer, Elodie Brian. A process is well
underway to recruit a permanent Group
Chief Financial Officer.
As part of our plans to refresh and
strengthen the Board, I was pleased to
welcome David Blackwood and Dominic
Lavelle to the Board on 1 January 2022.
David and Dominic succeeded Adrian
Ewer as Senior Independent Director and
Audit Committee Chair respectively on 19
January 2022. Both bring significant
insight and experience from numerous
finance roles encompassing audit and risk.
The step taken to separate the roles of
Audit Committee Chair and Senior
Independent Director adds greater
robustness and independence to the roles
and responsibilities of the Board.
Read more about the Group Chief Executive’s review
of the business on pages 7 to 9
5
The Go-Ahead Group plc Annual Report and Accounts 2021
Our role in environmental sustainability
Our ambition is to enhance the lives and
wellbeing of the communities that we
serve. An increasingly important
component of this is the vital role we
play in environmental sustainability,
particularly in tackling climate change. In
the wake of the UN Climate Change
Conference (COP26) in Glasgow and
governments around the globe setting
ever more ambitious targets on carbon
reduction, environmental responsibility is
moving higher up the agenda. This is a
global problem which requires a global
solution, and we must all work together
to fundamentally change the way things
are done.
At Go-Ahead, we fully recognise our
responsibility in this area and take this
very seriously. We maintain a strong focus
on the role we play in reducing society’s
environmental footprint, by promoting a
modal shift from the private car to greener
options like walking, cycling and public
transport, as well as the actions we are
taking to minimise the direct environmental
impacts of our operations and supply chain.
This commitment is demonstrated by our
ambitious Science Based Target to reduce
carbon emissions by 75 per cent by 2035
as we strive to be a net zero business
by 2045. This was announced in 2021
alongside our wider climate change
strategy (see page 26). We have strong
foundations upon which to deliver these
targets, having already achieved
an absolute reduction of 27 per cent
since 2016.
Our endeavours are reflected in
Go-Ahead’s latest Carbon Disclosure
Project (CDP) 2021 rating of ‘A minus’, the
highest score of any transport operator in
the UK. Our credentials in this area were
also acknowledged in the Financial Times’
European Climate Leaders list 2021,
where Go-Ahead was one of only two bus
and rail operators in Europe featured in
the report.
Read more on pages 26 and 27
Social importance of public transport
The COVID-19 pandemic has emphasised
that the provision of safe and convenient
public transport services is critical for the
health and wellbeing of our communities.
By enabling social contact, enhancing
environmental sustainability, supporting
economic recovery, and maintaining vital
links with employment, education, leisure
and healthcare, public transport plays a
huge role in the overall health of society.
Chair’s letter continued
At Go-Ahead, we are proud of the
longstanding commitment of our people
to our passengers and communities.
The pandemic has presented our
communities with enormous challenges
and our people have risen to these,
supporting and serving them in new
ways throughout the crisis.
As societies and economies seek to
recover, effective, safe, and reliable public
transport networks will be vital. Go-Ahead
has a strong belief in the value of
partnerships and this means we work
collaboratively towards social and
economic recovery.
Policy and partnership
Our government and local authority
partnerships, that have evolved and
grown through the pandemic, have
enabled the continued operation of safe,
clean and socially distanced services.
The financial support these services
have received from governments
reflects strong recognition of the
essential nature of public transport.
These partnerships are more important
than ever as we, along with the wider
industry, navigate new developments in
UK Government policy for both bus
and rail.
Go-Ahead has a longstanding ethos of
devolved local management teams which
bring together an entrepreneurial mindset
with deep knowledge of their markets and
strong relationships with local stakeholders.
This approach is proving to be particularly
effective as we work with our industry
partners to shape the future of our public
transport networks across the UK.
Looking forward
The Group has faced unprecedented
challenges over the past two years.
Our International Rail businesses remain
challenging and the impacts of COVID-19
continue to be felt across our business.
There is much work to do in the coming
months and years, including rebuilding
confidence in Go-Ahead that may have
been undermined for some of our
stakeholders following the matters in
relation to LSER. This is a transitional
period for Go-Ahead. We embrace new
leadership and a refreshed Board to take
the Group forward at a pivotal time for
our industry, and our business.
Our priority over the coming months is
helping passengers return to our services
and welcoming new passengers who may
be looking for a greener, value-for-money
travel choice. Whilst the pace and nature
of recovery from the pandemic is not yet
clear, I have no doubt that public transport
will play a crucial role.
We welcome the increased focus public
transport is receiving, in the form of
government reviews, strategies and
funding, which are moving the provision
of bus and rail services higher up the
national agenda. We look forward to
playing our role in shaping the future
of public transport.
Clare Hollingsworth
Chair
23 February 2022
“Our priority over the
coming months is helping
passengers return to our
services and welcoming
new passengers who may
be looking for a greener,
value-for-money
travel choice.”
6
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Group Chief Executive’s review
Important purpose supported
by great people
I have had a 25 year career in public
transport and mobility services, and I have
never been so proud to be part of the
industry as throughout the COVID-19
pandemic. Transport workers all over the
world stepped up and kept vital services
moving at a time when much of the world
appeared to stop. Working from home
was not an option for these people and
they continued to show up because they
knew it was important. And they know it
continues to be so as the challenges
posed by the pandemic persist and an
even greater challenge, climate change,
looms large.
It is clear that we need to act now to
minimise the potentially devastating
impact of climate change. I truly believe
that the public transport industry is vital
in supporting the transition to net zero;
providing efficient, reliable mobility
solutions enabling people to make more
sustainable transport choices and deliver
a modal shift away from cars.
It is, therefore, with much enthusiasm and
a great sense of responsibility that I take
on the role of Group Chief Executive at a
pivotal time for Go-Ahead, as we face
global challenges and begin to rebuild
from a global crisis.
Whilst I have the honour of leading this
Group, it is our 27,000 colleagues who are
responsible for the millions of journeys
that take place on our services each week.
Since I arrived in November, I have been
fortunate to meet the teams running
our bus and rail services, and I have been
impressed by the energy and commitment
demonstrated by everyone from customer-
facing colleagues to senior leadership.
Christian Schreyer
Group Chief Executive
I place huge importance on strong
relationships and transparent
engagement with our stakeholders and
was disappointed that failings in this
regard resulted in the Department for
Transport (DfT)’s decision to appoint the
Operator of Last Resort, from 17 October
2021, to take over the operation of
Southeastern services. Go-Ahead has
made a valuable contribution to UK rail for
25 years and we continue to do so through
our operation of the UK’s largest
franchise, GTR.
Since becoming Group Chief Executive,
I have been conducting a review of the
business’s existing operations and
exploring how we can maximise
opportunities in a growing global public
transport market. As part of this review,
I take forward the lessons we have learned
from the failings in relation to LSER and
challenges in International Rail.
A pivotal moment
This is a pivotal time, both for Go-Ahead
and the wider public transport market.
At the confluence of changing travel
patterns and policy change, our business
must evolve if it is to continue meeting
the needs of all our stakeholders.
COVID-19
The role of public transport during the
COVID-19 pandemic has been fundamental
in national responses to the crisis with its
critical importance reflected in ongoing
government support.
However, the scale of the global impact
of the COVID-19 pandemic is something
none of us could have anticipated and,
while the pandemic is not yet over, its
implications are far reaching in terms of
travel patterns, with volumes still heavily
7
The Go-Ahead Group plc Annual Report and Accounts 2021
suppressed from their pre-pandemic
levels. It will, of course, take time for these
patterns to stabilise but in the meantime
we cannot stand still. Now is the time
for us to build a transport network for
the future.
Read about the impact of COVID-19 on travel
patterns in Our Markets on pages 16 and 17
Policy change
In the UK, our core market, public
transport is high on the Government’s
agenda, with 2021 seeing two major
government announcements: the Bus
Back Better National Bus strategy and the
William-Shapps Plan for Rail. We are
supportive of the broad objectives of
both. We welcome the additional
investment the UK Government is putting
into local bus services. And we agree with
the need for the creation of Great British
Railways, providing an appropriate
structure is in place to incentivise rail
operating companies to bring innovation
onto the network and to grow passenger
numbers. More recently, the ‘Levelling Up’
White Paper emphasised the importance
of public transport in enhancing regional
economies. These policies will shape the
future of public transport in the UK, and
their significance should not be
underestimated.
At the heart of both the bus and rail plans
is the need for closer collaboration
between government (central and local)
and industry, between public bodies and
private operators. Through decades of
experience in our local markets, Go-Ahead
knows that working collaboratively
delivers better outcomes for everyone,
particularly our customers.
Group Chief Executive’s review continued
Policy change continued
While the need for reform in both bus and
rail was present before the emergence of
COVID-19, the current context of
suppressed passenger volumes makes this
more important than ever. Public
transport has a huge role to play not only
in economic recovery but also in
addressing many of society’s challenges,
including climate change, physical and
mental health, social isolation and
loneliness, and equal access to education
and employment. But to effect real change
we need to truly shift the balance from
today’s dependence on private car use to
the more sustainable options of bus and
rail travel.
The future of transport
Our industry is only going to become
more important to society over the years
ahead. A number of overarching societal
trends will shape a broader, but evolving,
role for public transport.
First and foremost, climate change is an
issue that requires swift and global action.
For industrialised countries to achieve
their legally binding net zero goals, there
will need to be a huge shift away from
private cars to walking, cycling and public
transport. Our role in this is significant –
we must build on the momentum initiated
by governments by promoting this modal
shift. Simultaneously, we must minimise
and mitigate the negative direct and
indirect environmental impacts our
operations have. Go-Ahead’s first climate
change strategy was published in July 2021,
with a commitment to be net zero by 2045,
five years before the UK Government’s
collective national target of 2050.
Meanwhile, digitalisation is radically
changing the way customers make
transport choices. People want to make
smart decisions on how they get from ‘A’
to ‘B’ based on mapping apps and journey
planners spanning bus, rail, bicycles and
car clubs. They no longer necessarily want,
nor expect, to purchase travel separately
for each. Mobility is increasingly viewed as
a consolidated service at the point of sale,
and we intend to deliver. The UK is behind
its continental neighbours in mobility as
a service, and Go-Ahead needs to be at
the forefront.
The steady urbanisation of societies is
putting pressure on road space,
increasingly creating both congestion and
pollution. A double-decker bus can take
75 cars off the road, and a train can
replace as many as 500 private vehicles.
As a society we must encourage and
incentivise greater use of public transport
to maintain, and enhance, quality of life in
towns and cities.
Demographics will shape our business,
too. Ageing populations in our key
markets will lead to greater demand for
accessibility. For many, buses and trains
will be vital in accessing key public
services and we will see the emergence
of an older generation which is less car
reliant, and has more leisure time. We
must work with transport authorities,
therefore, to ensure a reliable and
consistent provision of services across
regions, as aspired to in the UK
Government’s ‘Levelling Up’ plans.
Finally, the long-term legacies of the
COVID-19 pandemic are yet to become
clear. We know that commuting patterns
have changed for good, with hybrid
working here to stay for many people.
There will be other changes, too – in where
people choose to live, and in the make-up
of our high streets. Neighbourhoods are
set to benefit from home working, with
more money and time spent close by
– which bodes well for local buses.
To avoid a car-based recovery, we must,
as a society, invest in local bus services,
including bus priority measures to service
this demand and support a resurgence
in our neighbourhoods.
Performance in the year
Despite the challenges posed by
COVID-19, we delivered a strong financial
performance in our Bus businesses and
GTR, supported by limited exposure to
changes in passenger demand with
around 90 per cent of our revenues
secured through contracts. This strong
performance was, however, overshadowed
by the need to make material provisions
in respect of International Rail and LSER.
Despite these challenges, our balance
sheet remains strong and leverage has
returned to pre-crisis levels, at the lower
end of our target range of 1.5 to 2.5x at
1.56x, well below the 3.5x bank covenant.
Exceptional charges in the year of £104.1m
(2020: £93.7m restated) included a
provision for a potential financial penalty
of £30.0m from the DfT in respect of the
matters relating to LSER (full details of
which can be found on pages 10 and 11)
and an onerous contract provision of
£66.2m in respect of our rail contract in
Norway. We have been required to take
this provision to cover potential losses
resulting from a possible reduction in
government support of rail services in
Norway, while passenger volumes remain
suppressed following the impact of
COVID-19. Following the year end,
constructive discussions have been
ongoing with the Norwegian Railway
Directorate and we are hopeful of
reaching a more satisfactory outcome.
In addition to the onerous contract
provision, associated assets of £10.5m
in Norway have been impaired.
The prior year exceptional charge has
been restated by £37.1m. This was required
due to an understatement in the onerous
contract provision relating to rail
contracts in Bavaria, Germany, in the 2020
financial year. Full details of which can be
found on page 49.
To address the challenges we face in the
Germany, we have appointed Fabian
Amini, a highly experienced leader in
international rail markets, as Chief
Executive of our German rail operations.
Fabian has an exceptional track record of
delivery from his time with Deutsche Bahn
and Transdev.
Based upon my review of the business to
date, and reflecting on the challenges we
have faced in International Rail and LSER,
I will be introducing a new operating
model across the Group which will
enhance internal controls. Supporting the
introduction of the new operating model
will be our new Group Strategy and
Transformation Director, Louis Rambaud.
Drawing on his experience in similar roles
at Roland Berger and Transdev, Louis will
focus on cost drivers across all our
businesses – labour, maintenance, energy,
fleet and overheads – to optimise efficiency.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report I am committed to shaping a successful
future for the Group which delivers value
to customers, colleagues, partners,
shareholders and all our other
stakeholders, and I am excited by the
opportunities we have as we move
forward.
While none of us have a clear line of sight
into the future, I am firmly of the belief
that although travel patterns will change
and public transport will evolve, it will
continue to be vital to societies and
economies long into the future. The
environmental and societal trends that we
are seeing are set to drive strong growth
in the years ahead. I am excited about the
role Go-Ahead will play in building a
transport network for the future.
Christian Schreyer
Group Chief Executive
23 February 2022
While our clear priority throughout the
COVID-19 pandemic has been the delivery
of safe and reliable services, we have
continued to make progress against our
other objectives, like delivering high
standards of customer service.
We have also not lost sight of the things
that make Go-Ahead a leading employer,
which include increasing and improving
diversity and inclusion, attracting and
developing talent across the Group, and
pursuing a culture of continuous
improvement.
“Our industry is only
going to become more
important to society over
the years ahead. A number
of overarching societal
trends will shape a
broader, but evolving role
for public transport. ”
Looking forward
There is no doubt that the past two years
have been the most challenging in the
Group’s history. I do not underestimate
the task ahead. There is a lot of work to
do; as a business, as an industry and as a
society, to ensure that public transport
continues on the trajectory of being part
of the solution, improving health and
wellbeing, creating opportunities for
individuals and communities and
addressing climate change.
Since my appointment, I have visited the
Group’s operating businesses across the
UK and the rest of the world, and have
found good fundamentals. We have highly
motivated teams in place. The extent to
which they are part of the communities
they serve and the strength of their
relationships with stakeholders is clearly
evident – both of which are central to the
delivery of good local transport solutions.
The new leadership team at Go-Ahead
has established a strong dialogue with key
stakeholders, including transport
authorities and clients. fully understand
the importance of being a trusted and
reliable partner to all our public
stakeholders, and of regaining the
confidence in Go-Ahead that some
stakeholders may have lost in recent
months. Acknowledging the challenges
with LSER and our International Rail
businesses, action is being taken to
strengthen the Group’s governance
framework.
I am fortunate to be supported by a
strong team, comprising longstanding
Go-Ahead colleagues as well as others
who are new to the Group.
Over the months ahead, positive changes
will be introduced as a result of my
business review. My priorities include
enhancing the basics by focusing on
performance improvement of the core
business, building on our strengths by
securing new business in existing
markets and exploring new services and
opportunities. I look forward to presenting
my plans in greater detail in the coming
weeks following the completion of
my review.
9
The Go-Ahead Group plc Annual Report and Accounts 2021
London & South Eastern Railway
Addressing key questions about the matters relating to London &
South Eastern Railway (LSER)
Why is Southeastern no longer part of Go-Ahead?
What are the financial implications of the matters of
concern at LSER?
On 28 September 2021, the Department for Transport (DfT)
announced its decision to appoint the Operator of Last Resort to
take over delivery of passenger services on the Southeastern
franchise when LSER’s existing contract expired on 17 October 2021.
The DfT’s decision not to award a National Rail Contract to LSER
was a consequence of discussions with the DfT regarding the
calculation of profit share payments under the terms of the relevant
franchise agreements and the treatment of certain overpayments
made by the DfT to LSER over the course of the franchise
agreements.
What action did Go-Ahead take to address these matters?
In August 2021, an Independent Committee comprising the respective
Chairs of Go-Ahead and Keolis UK, Clare Hollingsworth and
Sir Derek Jones, commissioned an Independent Review, supported
by external legal and accounting advisers, into LSER’s performance
of its contractual obligations under its franchise agreements.
Following the conclusion of the Independent Review, the findings
were shared with the DfT and the Group’s auditor, Deloitte.
Throughout the process, the Independent Committee has been
focused on open, collaborative and constructive engagement with
the DfT with a view to reaching a full and satisfactory settlement.
What did the Independent Review conclude?
The Independent Committee concluded that, notwithstanding the
complexity of LSER’s franchise agreements, serious errors had been
made in relation to the LSER franchise with respect to engagement
with the DfT over several years. In particular, by failing to notify the
DfT of certain overpayments or monies due to the DfT, LSER
breached contractual obligations of good faith contained in the
franchise agreements.
The Independent Committee has determined that the following
amounts are due to the DfT in connection with the matters of
concern at LSER:
• £27.0m (previously disclosed as £25.0m) in respect of
overpayments made by the DfT to LSER relating to HS1 Track
Access and Depots in respect of the period 12 October 2014 and
29 February 2020. The amount had been accrued and no further
adjustments to the financial statements are required.
• £17.3m in respect of overpayments of subsidy made by the DfT to
LSER in respect of the period 1 April 2006 and 29 February 2020.
This amount has been recognised as a prior year adjustment.
• £7.0m of interest payable in respect of the above overpayments.
Of this amount, £6.1m has been recognised as a prior year adjustment.
Under the Railways Act 1993, the DfT has the power to impose a
financial penalty. In the absence of specific precedent or relevant
guidance, it is difficult to estimate precisely the likely quantum of
any penalty. The Group, having considered independent legal advice
received by the Independent Committee, has included a provision
for £30.0m in the financial statements of the year, which reflects the
Group’s current best estimate of any penalty.
Are there any other ongoing matters relating to LSER?
In addition to the matters of concern identified by the Independent
Committee, there are other ongoing commercial negotiations under
discussion with the DfT in relation to:
• a historic profit share dispute (recorded as a contingent liability
of £8.0m in the 2020 Annual Report and Accounts), in respect of
which an amount of £7.2m has been recognised in the current
year financial statements.
•
levels of affiliate trading in respect of the period 12 October 2014
to 29 February 2020, and the implications this has on the
assessment of profit share payable to the DfT, in respect of which
an amount of £14.1m has been recognised as a prior year
adjustment.
N.B. London & South Eastern Railway Ltd is the name of the legal entity. Southeastern was the
trading name used for this franchise during period of Govia’s operation from 2006 to 2021.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report “As well as an important purpose, Go-Ahead has strong values. I am therefore very
disappointed that these values were not reflected in the behaviours that contributed
to failings in relation to London & South Eastern Railway. I sincerely apologise to our
stakeholders who have been impacted by these failings, including our investors for the
uncertainty and inconvenience these circumstances have caused.”
Clare Hollingsworth
Chair
How much has been paid to the DfT?
To date, a total of £49.2m has been paid by LSER to the DfT. If we
settle the outstanding commercial discussions in line with our
provisions, an estimated additional £23.4m will be payable to the
DfT, which is expected to be paid from restricted cash.
Why was the publication of the financial results delayed
and what impacts has the delay had?
The complexity around this matter resulted in Go-Ahead and its
auditor, Deloitte, concluding that additional time was required to
consider the implications of the findings of the Independent Review.
Consequently, the announcement of the results and publication of the
Annual Report and Accounts were delayed. This resulted in a
temporary suspension in trading of Go-Ahead’s shares and corporate
bond from 4 January 2022. The Board has applied to the FCA for the
restoration of the listing and trading in the Group’s shares and
corporate bonds.
Due to the delayed publication of the results, credit rating agency,
Moody’s, withdrew its rating of the Group in January 2022.
Waivers were obtained from the Group’s banks in relation to the
information covenant requirements in the Group’s borrowing facilities
to submit accounts within a defined timeframe.
What action has the Board taken in response to
this situation?
The behaviours which contributed to the failings in relation to the
management of LSER’s franchise with the DfT do not reflect the
values that the Group expects of its colleagues, nor do they meet
the high standards of conduct and governance set by the Board.
In addition to the Independent Committee’s review, the Group
conducted a wider business review, and the new Group Chief
Executive is taking forward the lessons learned in relation to the
matters at LSER, as part of the review of the business he initiated
after joining the Group in November 2021.
The Board has identified a need to enhance corporate governance
arrangements, particularly relating to the way in which complex rail
operations are overseen.
Specifically in GTR, measures are being taken to improve the ability
of Go-Ahead and GTR’s Board to better safeguard and assure the
compliance obligations of complex long term rail contracts.
Measures include:
• the appointment of the Group Audit Committee Chair to the Board
of GTR in the event of a new contract award. This will provide a clear
line of sight to the Audit Committee and Group Board;
• the introduction of specific annual briefings/updates on
contractual and compliance obligations; and
• the extension of the remit and scope of Group Internal Audit to
include oversight of operating company compliance functions and
closer scrutiny of contractual obligations and commercial terms.
Established plans to refresh the Board and leadership team have
been accelerated. Christian Schreyer, who has 25 years’ experience
in international transport markets, was appointed as Group Chief
Executive in November 2021. Having been supported by an Interim
Group Chief Financial Officer since his appointment, Christian and
the Board will welcome a new permanent Group Chief Financial
Officer when the well-advanced recruitment process concludes.
The Board has been strengthened by the appointment of two new
non-executive directors, both of whom have a strong financial
background encompassing audit and risk. The roles of Senior
Independent Director and Audit Committee Chair have been
separated and the senior leadership team has been strengthened.
Further details of senior leadership appointments are set out on
page 9.
As described on pages 7 to 9, the new Group Chief Executive’s
review of the Group’s businesses and operations is well underway.
It includes robust consideration of the areas described above, with
a particular focus on the roles and responsibilities of the Group’s
operating companies and its central functions to enhance corporate
governance arrangements.
Acknowledging that this situation may have undermined the
confidence Go-Ahead’s stakeholders have in the Group, the Board
is committed to rebuilding this through demonstrable action, under
the Group’s new leadership.
11
The Go-Ahead Group plc Annual Report and Accounts 2021
Group Q&A
Answering the topical questions
we get asked by our stakeholders.
Is the Department for
Transport (DfT)’s decision
not to award Southeastern
another contract likely to
have implications for GTR
or future rail contract
tenders in the UK?
Why is there such a large
provision for the rail
contract in Norway?
Discussions between GTR and the DfT regarding a potential National Rail Contract (NRC)
following the expiry of the current contract on 31 March 2022 are ongoing, and Go-Ahead
continues to engage in industry-wide discussions about the future of the industry following
the publication of the William-Shapps Plan for Rail earlier in the year. The Group’s financial
planning does not assume the award of an NRC for GTR or extension of existing
arrangements.
Read more about the matters relating to Southeastern on pages 10 and 11 including measures taken to better safeguard
and assure the compliance obligations of complex long term contracts
We operate a contract which is structured to generate revenue largely through passenger
fares. During the COVID-19 pandemic, rail services in Norway have received government
support to ensure reliable service delivery. We have been required to take an onerous contract
provision of £66.2m to cover potential losses resulting from a possible reduction in
government support while passenger volumes remain suppressed following the impact of
COVID-19. Following the year end, constructive discussions have been ongoing with the
Norwegian Railway Directorate and we are hopeful of reaching a more satisfactory outcome.
In addition to the onerous contract provision, associated assets of £10.5m in Norway have
been impaired.
What does the ‘Bus Back
Better’ strategy mean for
buses in the UK?
We have been calling for a national bus strategy for a number of years and we are pleased to
see regional bus provision on the Government’s agenda. Having a Government who believes in
buses creates a new impetus for change and we are ready to put our strong partnerships to
the test in delivering even better services that will attract more customers. We are starting
from a base of excellent customer experience, with an industry leading passenger satisfaction
score of 91 per cent in the last independent Transport Focus bus survey in autumn 2019 (the
most recent independent survey to be concluded).
12
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report A lot more people are likely
to work from home, at least
some of the time. If
volumes don’t return to
pre-crisis levels, what can
you do to recover margins?
What does the creation of
Great British Railways
mean for the rail industry?
It will take some time for travel patterns to stabilise and longer still for clear trends to be
identified. The Government recognises this and is continuing to support the provision of
regional bus services with the £255m Bus Recovery Grant announced in July 2021 running from
September 2021 to March 2022. The bus industry is in discussion with the Government on
potential further funding beyond March 2022.
Before the pandemic, through our devolved model, our skilled local management teams have
always had the flexibility to adjust service frequency to best serve passenger demand. Going
forward, we anticipate being able to work with our local authority partners to flex our service
provision according to travel patterns. We have invested in systems which provide detailed
analytics that enable our local management teams to make informed decisions about
individual routes and to take quick action. The cost base of this division is largely semi-
variable, giving us flexibility to make necessary adjustments to align with changes in revenue
on a route by route basis.
Following the publication of the Williams-Shapps Plan for Rail in May 2021, the full scope of the
role of Great British Railways is not known with certainty. However, it is widely expected that
contracts will remain on a management contract basis, following the industry-wide
introduction of this style of contract during the pandemic. We welcome the stated intention
in the Plan that revenue incentives will be built into new contracts as this will help provide
further impetus to customer recovery following the pandemic and enable best use of the
commercial skills that exist within train operating companies. As a longstanding member of
the rail community, Go-Ahead, along with other private operators, is engaging in discussions
about how the future of UK rail will take shape. Since privatisation in the mid-1990s, rail
passenger volumes have doubled, modern fleets have been introduced, innovative customer
solutions have been developed and passenger satisfaction has risen. As we move forward, it is
important that customers are at the forefront of decision making, with operators able to
deliver continual improvements and innovation to enhance the overall experience of
passengers and, ultimately, grow customer numbers. The skillsets private operators have
honed, and the expertise we have acquired over the past two decades, can continue to bring
value to the railway.
13
The Go-Ahead Group plc Annual Report and Accounts 2021
Transport for London (TfL)
has had financial
challenges for some time,
worsened by the crisis.
Does this inevitably mean
the overall size of the
London bus market
will reduce?
COVID-19 will have lasting
implications on a lot of
businesses. What do you
consider to be permanent
changes for Go-Ahead
and the public transport
industry?
We are already beginning
to see consolidation in the
industry. Do you see this as
an opportunity for
Go-Ahead?
Group Q&A continued
Go-Ahead has worked closely with TfL for decades to provide good value for our client and
deliver a high standard of service to Londoners and visitors to the Capital. We continue to
work together through this challenging period to ensure London has the bus network it
requires to be a thriving capital city. Even at the current time, when passenger numbers
remain suppressed, bus travel continues to be the most popular mode of public transport in
London. This is particularly evident in the suburbs where people rely most heavily on buses for
their travel needs.
Passenger volumes are up to around 80 per cent of typical journeys in London and it is clear
there is demand for bus travel, so maintaining a robust bus network is crucial for societal and
economic recovery. And, as we look to the urgent call for action to tackle climate change,
there is more need than ever to encourage a modal shift from private cars and taxis to greener
alternatives such as walking, cycling and public transport. The Intergovernmental Panel on
Climate Change report published in August 2021 points to human greenhouse gas emissions
as the primary cause of global warming and leaves us in no doubt that change needs to take
place now.
Bus networks do, and should, change. Routes are expanded or reduced in response to changing
travel patterns and customer demand. We have seen this both before the crisis and since. It is
difficult to foresee a circumstance, however, where the bus network that has for so long been
the backbone of London, shrinks in a meaningful way. Population growth has always been a
strong driver of demand for London bus services, and with population forecasts exceeding
10 million by 2035, this demand isn’t expected to diminish. A core aim of the current Mayor’s
Transport Strategy is that, by 2041, 80 per cent of journeys in London will be made by walking,
cycling or using public transport. This kind of ambition requires robust infrastructure
and networks to be in place.
Nobody yet knows for certain how we will live and work in the years following the pandemic
but, with a hybrid approach to desk-based work commonly expected to become the new
norm, a longer term shift in travel patterns is highly likely. We have already seen people using
our services in different ways. Although people may not be commuting to the office five days a
week any more, they may be taking a bus to their local high street on their lunch break, or after
work to meet friends or family. It is, of course, too soon to comment on how changing patterns
will translate into longer term trends but we can envisage a future with a flatter peak at the
beginning and end of the working day and more off-peak journeys being taken.
Go-Ahead has always sought to improve the customer experience through innovation. The
introduction of customer apps and real-time information has made travelling on our services
even easier. While many customers used contactless payment methods before COVID-19, the
pandemic has driven a material increase in this payment channel. On our regional bus services,
over 40 per cent of journeys are now paid for using contactless, up from around 20 per cent in
early 2020. This is not a change that we expect to reverse and we welcome the benefits it brings,
which include speeding up journey times, customer convenience and reduced cash handling.
The period since March 2020 has brought societal issues and environmental concerns
into sharper focus. As people seek to find alternatives to car travel that support their physical
and mental health and are kinder to the environment, public transport can deliver many
benefits to individuals, communities and society.
This is a pivotal time for our industry. We are beginning to emerge from the COVID-19 crisis,
assessing what future travel patterns will look like, at the same time as shaping evolving
structures and strategies for bus and rail. With change comes opportunity and Go-Ahead’s
approach has always been to assess opportunities on their own merits.
The Group’s devolved structure naturally lends itself to bolt-on acquisitions that allow for
synergies with existing businesses and we have had success adopting this approach in the
past. We have also grown into new areas, most recently Manchester, and utilise internal
knowledge, skills and experience to integrate new businesses and improve performance.
We have a strong balance sheet, which is now back to pre-pandemic strength, towards the
lower end of our 1.5 to 2.5x target leverage range. This strength supports growth, giving the
Board options to consider value adding opportunities in line with our strategy and appetite
for risk.
14
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report There have been no recent
international contract wins.
Are you stepping away
from this growth strategy?
Our international development strategy, which has been in place for a number of years, has
guided our activities outside of our core UK market and has delivered some great successes,
particularly in the regulated bus markets of Singapore and Ireland. Whilst contract tendering
has continued throughout the pandemic, we believe travel restrictions as a result of COVID-19
may have impacted our ability to win work.
Having joined Go-Ahead in November 2021, new Group Chief Executive, Christian Schreyer, is
conducting a review of the business which includes identifying optimal opportunities in
international markets.
Your recently announced
Science Based Target to reach
net zero by 2045 is ambitious.
With the majority of the bus
fleet yet to be decarbonised,
how should we think about
the capital implications
of the transition?
Your workforce doesn’t
demonstrate gender
diversity. What are you
doing to redress the
balance across the
business?
You haven’t paid a dividend
since late 2019. When can we
expect dividend payments
to resume?
At 1.56x, your leverage ratio
is close to the bottom of your
target range. Could you be
deploying capital more
effectively within the
business, or returning more
to shareholders?
Climate change is a global problem that requires collaborative solutions and that is no
different for decarbonising transport. We currently operate nearly 300 zero-emission buses in
the UK, each one has been funded through a combination of Go-Ahead’s financing and
government grants or transport authority budgets, and we expect this collaborative model to
continue to be the case as we work towards fully decarbonising our fleet. We expect the cost
of zero-emission buses to continue to decrease over the years ahead, making the investment
case more commercially attractive.
Public transport has historically been, and remains, a male dominated industry. We believe a
diverse workforce that is representative of the communities we serve, is in the best interests
of all of our stakeholders and over a number of years we have made great strides in attracting
more women into a wide range of roles traditionally undertaken by men.
Read more on page 28
We are committed to increasing diversity, in all its forms, at all levels of the business. In terms
of ethnic diversity, our overall workforce is more representative of the communities it serves but
ethnic minority groups are not currently represented on the Board, or adequately across senior
management. This is something we are committed to addressing. As well as sourcing the
best senior talent, we believe it is important to tackle the underlying reason for under-
representation at a senior level across the majority of UK PLCs. This is why we are driving
forward initiatives, such as our apprenticeship and graduate schemes, and supporting
development so people can build successful, long term careers with Go-Ahead. A high proportion
of senior public transport executives began their careers in the industry. We believe that by
increasing diversity in entry level jobs and putting the right processes in place to support
development, we can grow our own diverse talent pool from which Go-Ahead’s future leaders
will come. It is for this reason we invest in our award-winning apprenticeship schemes.
The Board remains committed to resuming the dividend when it is appropriate to do so. As a
responsible business, it is important that we balance the needs and expectations of all our
stakeholders and therefore the Board has concluded that it would not be prudent or right to
resume dividend payments at the current time.
The strength of our balance sheet has been an attractive feature of our investment case over
time. During the pandemic, protecting it has been of utmost importance to us and we are
pleased that our decisive and disciplined action has resulted in such a strong position. While
restrictions have eased, the crisis is not yet over and we continue to exercise great prudence
over the allocation of capital. As societal and economic recovery continues and we gain
greater insight into customers’ travel patterns, and clarity around government policy, our
approach to capital allocation may evolve. This will also be considered as part of the business
review being undertaken by the new Group Chief Executive, Christian Schreyer.
15
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report
Our markets
Public transport is central
to recovery and a greener future
Bus and rail travel will be key to supporting economy-boosting activities
and has a key role to play in many of the macro challenges society faces today,
like climate change and public health.
The new world
For almost two years, we have continued
to witness the extraordinary effects of
the COVID-19 pandemic. Fundamental
changes to the way in which people live,
work, and socialise have influenced trends
which directly impact Go-Ahead and
its operations.
Some trends, like increasing awareness of
climate change (highlighted further by
COP26, held in the UK during 2021) or a
renewed focus on healthy living, have
been emerging for some time, and our
business has been evolving alongside
them. Others, like the shift to home and
hybrid working, have been accelerated by
the pandemic. We are responding to these
with agility, working alongside local,
regional, and national authorities to serve
communities in the best possible way.
The impact of the pandemic
The world around us has changed, and
while there remains some uncertainty
around long term trends, some permanent
shifts in attitudes and behaviours are
expected. Many people across our core
UK market experienced months of
exclusive homeworking during 2020 and
into 2021. However, as restrictions were
lifted and people returned to offices or
other places of work, hybrid working,
where employees split their time between
home and office, is emerging as the
preferred choice for desk-based work
for employers and employees alike.1
Recent research by the Office of
National Statistics (ONS) shows that
by mid-autumn 2021, around 67 per cent
of working adults in Great Britain were
travelling into work at some point within
a seven-day period, and approximately
30 per cent stated that they were working
from home.2 Reflecting this split between
home and office-based working, a broader
mix of public transport use, in terms of
both mode and frequency, is likely to be
maintained going forward. This will
include subtle shifts in the busiest times
of the day for commuters as flexible
working is embraced, as well as an
increase in local journeys as many
continue to spend at least part of the
working week closer to home. As
restrictions on movement and travel
eased earlier this year and hybrid working
practices were adopted, Go-Ahead saw
high numbers of people travelling
midweek versus the start and end of the
week, though such patterns are likely to
fluctuate as new commuter norms
emerge over a longer period.
“Recent research by the
Office of National
Statistics shows that 85
per cent of those currently
homeworking expect to
split working time
between their home and
workplace in the future.”
Also, phenomena experienced during the
national lockdowns, such as huge surges
in online retail and other digital variations
of everyday activities, are beginning to slow.
According to the British Retail Consortium
retail footfall saw an uplift in October3
while data from the ONS showed the
proportion of retail sales online falling
to its lowest level since March 2020.4
Supported by the pace of the vaccination
rollout and easing of pandemic-related
restrictions, journeys on public transport
steadily rose over the summer and into
the autumn. The COVID-19 Omicron
variant which emerged in late autumn
resulted in a temporary dip in travel, which
had, by February 2022, returned to
pre-Omicron levels. Consumers returning
to physical stores, restaurants, and other
leisure facilities, has presented the
opportunity to attract more people to
bus and rail services.
And it is not only retail, hospitality and
leisure that are experiencing an uplift.
Despite changes to guidance around
international travel, many people continue
to book domestic holidays (compared
with the same period in 2019, overseas
visits by UK residents declined by
95 per cent between April and June 20215).
More and more people are also embracing
‘active travel’ with its proven benefits to
overall health, taking to the streets to
walk or cycle. The UK Chief Medical Officer
recommends that to stay physically and
mentally healthy, adults should do at least
150 minutes of moderate or 75 minutes of
vigorous activity per week6. Walking and
cycling as part of routine travel, whether
for an entire journey or to access public
transport can help people increase
activity levels; on average, those using
public transport get 26 minutes more daily
exercise than private car users. Many who
have experienced deteriorating levels of
fitness and subsequently, health, because
of the pandemic are now more
1. ONS: Business and individual attitudes to the future
3. BRC-KPMG retail Sales Monitor – May 2021.
5. ONS: Overseas travel and tourism: 2020.
of homeworking, UK: April to May 2021.
2. Coronavirus (COVID-19) latest insights:
Work (published 19 November 2021).
4. ONS monthly business survey, retail sales inquiry.
6. Department of Health & Social Care.
16
The Go-Ahead Group plc Annual Report and Accounts 2021
determined than ever to embark on a
more active lifestyle. This growing trend,
combined with policy changes and local
initiatives like extended congestion
charging and low traffic neighbourhoods,
supports the move closer to a world
where the car is no longer seen as ‘king’.
Public transport is also an essential service
for those dealing with loneliness, a very
real threat to public health, and one that
has been exacerbated by the pandemic,
with almost 24 per cent of adults saying
that they had experienced feelings of
loneliness and hopelessness at the end of
20207. By facilitating social contact, vital
for good mental health, public transport is
instrumental to addressing this challenge,
helping people connect more with the
world around them. Since the start of 2021
levels of anxiety have been improving8, as
unease around social interaction, brought
around the pandemic, gradually subsides.
Sadly, as well as driving seismic changes
to everyday life, the pandemic has also
been a significant contributor to greater
economic hardship for many individuals
and families. In England, 24 per cent of
families do not own a car9 and rely heavily
on public transport for essential journeys
to work and education, and access to
other services and social participation. It
is vital for social mobility, with inadequate
transport a key barrier to employment
for many residents living in low-income
neighbourhoods. Go-Ahead has a
responsibility to continue to provide
affordable, accessible and ever-improving
public transport to the communities
we serve.
We continue our work to reassure the
public that travelling on buses and trains
is safe, and are pleased to see that overall
confidence in public transport is rising.
A recent survey10 shows that almost
90 per cent of those using trains feel safe
doing so. We do recognise however that
some of our passengers remain nervous
about using public transport, and we
continue to be vocal and transparent
about our commitment to passenger
safety, addressing misconceptions and
bridging the gap between perception
and reality.
We have an opportunity to adapt to
changes driven by the pandemic in a
positive way. We are facilitating and
embracing the rise in local journeys driven
by hybrid working and an increase in
home-based small businesses, welcoming
back returning commuters, and safely
carrying people around the country for
holidays, or to be reunited with loved ones.
Climate change at the forefront
The impact of climate change is already
evident in our day-to-day lives. More
frequent instances of hotter and wetter
weather impacts infrastructure and
disrupts passenger services. It is an issue
that is top of the agenda for multiple
stakeholders, from investors expecting
ESG considerations in allocating capital,
to consumers striving to make ‘greener’
choices in their daily lives. The pandemic
has also driven a renewed awareness of air
quality as people increasingly focus on
mental health and wellbeing and head
outdoors to walk or cycle.
“Decisions to leave cars
behind are also driving
more supplementary
journeys by bus or train
and are also, perhaps,
moving us closer to a
world where the car
is no longer ‘king’.”
We, and many others, agree that public
transport is a vital part of the solution to
climate change, not only by taking more
cars off the road, but by replacing those
journeys with a greener alternative. The
UK Government’s Decarbonising
Transport Plan includes a strategic
objective to “accelerate modal shift to
public and active transport”, and echoes a
similar commitment in its wider Ten Point
Plan for a Green Industrial Revolution.
Our commitment to reducing carbon
emissions across our own operations is
well-established and has been gaining
momentum for some time. Since 2016,
Go-Ahead has recorded an absolute
reduction in carbon emissions of
27 per cent despite our international
expansion.
With around 300 vehicles, we currently
have the largest electric bus fleet in the
UK, committing to a full zero-emission UK
bus fleet by 2035. We also achieved an
‘A minus’ rating from the Carbon
Disclosure Project (CDP) in 2021, the
highest score ever achieved by a UK
transport operator. We have publicly
committed to becoming a net zero
business by 2045 and achieving 75 per cent
reduction in carbon emissions by 2035.
The pandemic has reinforced beyond
doubt the benefits of fewer cars on the
roads, with national lockdowns across
the UK leading to an unprecedented
10 per cent11 reduction in emissions in
2020. It is therefore vitally important that
we remind people that buses and trains
are an important part of the solution to
climate change.
Transport accounts for a quarter of
greenhouse gas emissions, but buses
account for just 3 per cent, and trains,
only 1 per cent. In terms of UK carbon
emissions overall, rail accounts for just
0.5 per cent while private cars account for
55 per cent12; a fully loaded double decker
bus can take 75 cars off the road, and a
train can replace even more. In its sixth
Carbon Budget, the Committee on
Climate Change assessed that around
9-12 per cent of trips could be switched
to buses by 2030, increasing to 17-
24 per cent by 2050. We are therefore
working alongside government and other
public bodies to reinforce messaging that
tells passengers to “walk and cycle if you
can, use buses and trains, only take the car
if you need to”, demonstrating how public
transport can complement active travel.
Go-Ahead recognises that there is an
opportunity to support and sustain the
gradual modal shift away from private
car use and play a part in building a
decarbonised transport industry.
We remain steadfastly committed to
facilitating this.
7. Mentalhealth.org.
9. Department for Transport.
8. Office for National Health Improvement &
10. Transport Focus.
Disparities Nov 2021.
11. Department for Business, Energy & Industrial
Strategy, 2020 UK greenhouse gas emissions,
provisional figures (25 March 2021).
12. ORR.
17
The Go-Ahead Group plc Annual Report and Accounts 2021
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 24
Supported by a strong financial profile
Revenue generation
Cost control
Capital allocation
We generate revenue in two main ways:
• Through contract payments we
receive from our transport
authority customers for which we
operate services (around 90 per cent
of total revenue).
• Through the fares we receive from
our bus and rail passengers (around
10 per cent of revenue). During the
COVID-19 pandemic, revenue has
been supported by governments
committed to maintaining essential
transport networks.
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.
During the COVID-19 pandemic,
we have taken action to reduce our
cost base, with both temporary and
permanent savings delivered.
Our capital principles ensure our focus
on maintaining an investment grade
rating, safeguarding the interests of
our shareholders and remaining within
our target gearing range.
During the COVID-19 pandemic,
we have maintained strong financial
discipline and have limited the
allocation of capital to preserve
cash within the Group.
How we achieve this
Approach
Resources and relationships
Management
Clear strategy
Customer focused
decision making
Empowered people
A transparent operating model
Expertise, experience
Devolved structure with
clearly defined reponsibilities
Financial discipline
Innovative and agile approach
and influence
Risk appetite and management
Long term focus on
sustainable outcomes
Strong relationships with
strategic partners and
stakeholders
Investment in fleets and depots
Executive remuneration
Executive’s remuneration is aligned to both shareholders’ and other key stakeholders’ interests and operates in line with our business
model, long term strategy, culture and values. See page 108 for more details on the executive directors’ remuneration.
18
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Creating financial and non-financial
value for all our stakeholders
Financial value
Non-financial value
We look after our people, paying
competitive salaries and offering
attractive benefit packages.
Our people
Through our commercial operations,
and on behalf of our transport authority
clients, we provide value for money
services, offering convenient alternatives
to car travel against a backdrop of rising
costs of private motoring.
Customers
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. Our target to allocate
33 per cent of our influenceable spend
to SMEs by 2023 supports smaller
businesses and local economies.
Our contribution to the Government
includes corporation tax and National
Insurance contributions.
Strategic
partners and
suppliers
Government
Our services enable and promote
economic activity in our communities,
providing access to retail and leisure
facilities, work and education.
Communities
We aim to provide attractive total
shareholder returns. We increased or
maintained the dividend to shareholders
every year between 1994 and 2019. While
a dividend has not been declared for the
current year, the Board is committed to
resuming returns when it is appropriate
to do so.
Investors
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.
Our services facilitate our passengers’
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.
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.
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 to 25
19
The Go-Ahead Group plc Annual Report and Accounts 2021
Our stakeholders
Stakeholder engagement
Our relationships with our stakeholders are key to our success. By engaging meaningfully, we gain insights into their needs.
This feedback forms part of our decision making process at every level of the business, from the Board to our local
management teams. The examples which follow demonstrate consideration of the matters set out in Section 172
of the Companies Act 2006. Further information on how we understand the views of stakeholders in the boardroom
and consider them in our decision making framework, together with examples of key decisions taken during the year,
is provided on pages 81 to 85.
Stakeholders
Why we engage
How we engage
Key topics of engagement during 2021 financial year
How we responded
Our people
Our business is built by colleagues
whose commitment, innovation and
ambition help deliver the best possible
transport service to our customers.
We have an experienced, diverse
and dedicated workforce who we
recognise as a key asset of our
business and to whom we have
a strong commitment to
personal development.
Customers
Customers are at the heart of
Go-Ahead and we are dedicated to
providing them with safe, convenient
and reliable services. We understand
our local markets and strive to
exceed our customers’ expectations.
Strategic partners
and suppliers
Collaborative strategic partnerships
are core to our business model. We
build strong relationships with
transport authorities and industry
bodies to deliver efficient, high quality
services. Our suppliers, which range
from large multinational companies
to small independently run businesses,
partner with us in delivering innovative
solutions for our customers.
• To maintain a highly engaged
and motivated workforce
• To create a constructive, two-way
dialogue, ensuring colleagues have
a platform to have their voices heard
• To promote wellbeing and ensure the
safety of our people
• To understand how we can best provide
a supportive and collaborative workplace
• To ensure alignment between people
agenda and business strategy
• To encourage equal opportunities
and a more diverse workforce
• To ensure we develop colleagues through
professional development and training
• Colleague engagement surveys
• Communication through the Group
intranet, newsletters, forums
and ad hoc meetings
• Performance and development reviews
• Colleague training programmes
and workshops
• Focus on development
and succession planning
• Lunch and learn sessions
• Business update presentations
• Board and senior management
site visits
• Annual management conference
• To identify priority areas for improvement
in order to maintain our high level of
customer satisfaction
• Online communications – website,
newsletters, emails, social media
and blogs
• To respond quickly and effectively to meet
changes in customers’ needs and preferences
• Customer satisfaction surveys
• Continual review of customer
• To fully understand the needs of our
feedback
different and diverse customer groups
• To improve or maintain a high quality, reliable
and safe passenger transport service
• To enable us to deliver new and
innovative products and integrated,
customer focused solutions
• To maintain a reputation for high
standards of business conduct
• Customer-facing colleague feedback
• Customer panels and focus groups
• Customer, industry and on-site events
• Collaboration on product innovation
and service design
• To develop strong relationships
• Joint membership of industry groups
• To ensure closer alignment of values
• Collaborative working with partners
• To provide collaborative and innovative
to deliver specific solutions
solutions to societal challenges
• Engagement groups to build long
• To ensure those with whom we work
demonstrate a commitment to
sustainability, employee wellness
and diversity
term relationships
• Periodic surveys of our current
suppliers
• A dedicated contract manager
• To ensure the effective delivery of contracts
for each supplier
• To enhance competitive advantage
• Regular meetings to discuss supplier
• To effectively monitor, manage and
mitigate risks in our supply chain
performance and areas for
improvement, identifying risk
and mitigating plans
20
The Go-Ahead Group plc Annual Report and Accounts 2021
• Health, safety and wellbeing
• Diversity and inclusion
• Increased colleague engagement and communication
• Development of health and wellbeing initiatives
• Maintaining and continually improving
• Continued dialogue to understand likely scenarios around return
colleague engagement
to office working
• Development and training opportunities
• Continued focus on diversity and inclusion, including the introduction
• Opportunity to share ideas and make a difference
• Introduced employee apps across operations for safer and more
of relevant KPIs
efficient working
• Reshaped Executive Development and Senior Management
Development Programmes
• Support for remote working practices to balance childcare/home-
schooling, etc. where appropriate
• Opportunities for progression
• Flexible working
• Modernising and transforming
working environments
• Colleague recognition and reward
• Working throughout the COVID-19 pandemic,
job security and pay
• Reliability and punctuality of services
• Enhanced safety features and cleaning regimes
• Safety measures
• Local interaction regarding timetable changes during lockdown
• Travel during the COVID-19 pandemic
• Overall on-board experience
• Value for money, including ticket price
• Quality and amount of delay and disruption
information including timetable changes
• Station amenities
• Route and timetable enquiries
• Colleague helpfulness
• Accessibility and passenger support
• Active travel initiatives
• Specific industry solutions
• Long term partnerships
• Collaborative approach
• Raising standards and delivering long term goals
• Delivering value, consistency, engagement
and better planning
• Sustainability challenges
• Open terms of business
• Fair contract and payment terms
• Prompt payment
• Brexit contingency plan
to meet key worker needs
• Improved experience for customers contacting us and our carrier partners
through the provision of additional automation and live chat facilities
• Continued rollout of tap-on/tap-off contactless ticketing,
and increasing emphasis on non-cash transactions
• Ongoing updates to bus app to improve journey planning
• Worked with Rail Delivery Group to accelerate flexi season ticket rollout
• Rail station improvements with significant cycle hubs to make active
travel easier
• Proactively contacting pre-booked passengers with accessibility
requirements to tailor assistance
• Introduced key principles to our pre-qualification and tender
documents in relation to ethical employment practices, the
environment, health and wellbeing and community cohesion
• Independently assessed as working in compliance with the
sustainable procurement standard ISO 20400
• Setting targets on payment performance and complying
with the Prompt Payment Code
• Enhanced our Sustainable Procurement Charter with a target
of 33 per cent controllable spend on local businesses by 2023
• Continued engagement with Network Rail and local transport
authority provider at multiple levels
Strategic report Stakeholders
Why we engage
How we engage
Key topics of engagement during 2021 financial year
How we responded
• To maintain a highly engaged
and motivated workforce
• Colleague engagement surveys
• Communication through the Group
• To create a constructive, two-way
intranet, newsletters, forums
dialogue, ensuring colleagues have
a platform to have their voices heard
• To promote wellbeing and ensure the
safety of our people
• To understand how we can best provide
a supportive and collaborative workplace
• To ensure alignment between people
agenda and business strategy
• To encourage equal opportunities
and a more diverse workforce
• To ensure we develop colleagues through
professional development and training
and ad hoc meetings
• Performance and development reviews
• Colleague training programmes
and workshops
• Focus on development
and succession planning
• Lunch and learn sessions
• Business update presentations
• Board and senior management
site visits
• Annual management conference
• To identify priority areas for improvement
• Online communications – website,
in order to maintain our high level of
newsletters, emails, social media
customer satisfaction
and blogs
• To respond quickly and effectively to meet
• Customer satisfaction surveys
changes in customers’ needs and preferences
• Continual review of customer
• To fully understand the needs of our
feedback
different and diverse customer groups
• To improve or maintain a high quality, reliable
and safe passenger transport service
innovative products and integrated,
customer focused solutions
• To maintain a reputation for high
standards of business conduct
• Customer-facing colleague feedback
• Customer panels and focus groups
• Customer, industry and on-site events
• Collaboration on product innovation
and service design
• To develop strong relationships
• Joint membership of industry groups
• To ensure closer alignment of values
• Collaborative working with partners
• To provide collaborative and innovative
to deliver specific solutions
solutions to societal challenges
• Engagement groups to build long
• To ensure those with whom we work
demonstrate a commitment to
sustainability, employee wellness
and diversity
term relationships
• Periodic surveys of our current
suppliers
• A dedicated contract manager
• To ensure the effective delivery of contracts
for each supplier
• To effectively monitor, manage and
mitigate risks in our supply chain
performance and areas for
improvement, identifying risk
and mitigating plans
Our people
Our business is built by colleagues
whose commitment, innovation and
ambition help deliver the best possible
transport service to our customers.
We have an experienced, diverse
and dedicated workforce who we
recognise as a key asset of our
business and to whom we have
a strong commitment to
personal development.
Customers
Customers are at the heart of
Go-Ahead and we are dedicated to
providing them with safe, convenient
and reliable services. We understand
our local markets and strive to
Strategic partners
and suppliers
Collaborative strategic partnerships
are core to our business model. We
build strong relationships with
transport authorities and industry
services. Our suppliers, which range
from large multinational companies
to small independently run businesses,
partner with us in delivering innovative
solutions for our customers.
bodies to deliver efficient, high quality
• To enhance competitive advantage
• Regular meetings to discuss supplier
exceed our customers’ expectations.
• To enable us to deliver new and
• Health, safety and wellbeing
• Diversity and inclusion
• Increased colleague engagement and communication
• Development of health and wellbeing initiatives
• Maintaining and continually improving
• Continued dialogue to understand likely scenarios around return
colleague engagement
to office working
• Development and training opportunities
• Continued focus on diversity and inclusion, including the introduction
• Opportunities for progression
• Opportunity to share ideas and make a difference
• Flexible working
• Modernising and transforming
working environments
• Colleague recognition and reward
• Working throughout the COVID-19 pandemic,
job security and pay
of relevant KPIs
• Introduced employee apps across operations for safer and more
efficient working
• Reshaped Executive Development and Senior Management
Development Programmes
• Support for remote working practices to balance childcare/home-
schooling, etc. where appropriate
• Reliability and punctuality of services
• Enhanced safety features and cleaning regimes
• Safety measures
• Local interaction regarding timetable changes during lockdown
• Travel during the COVID-19 pandemic
• Overall on-board experience
• Value for money, including ticket price
• Quality and amount of delay and disruption
information including timetable changes
• Station amenities
• Route and timetable enquiries
• Colleague helpfulness
• Accessibility and passenger support
• Active travel initiatives
• Specific industry solutions
• Long term partnerships
• Collaborative approach
• Raising standards and delivering long term goals
• Delivering value, consistency, engagement
and better planning
• Sustainability challenges
• Open terms of business
• Fair contract and payment terms
• Prompt payment
• Brexit contingency plan
to meet key worker needs
• Improved experience for customers contacting us and our carrier partners
through the provision of additional automation and live chat facilities
• Continued rollout of tap-on/tap-off contactless ticketing,
and increasing emphasis on non-cash transactions
• Ongoing updates to bus app to improve journey planning
• Worked with Rail Delivery Group to accelerate flexi season ticket rollout
• Rail station improvements with significant cycle hubs to make active
travel easier
• Proactively contacting pre-booked passengers with accessibility
requirements to tailor assistance
• Introduced key principles to our pre-qualification and tender
documents in relation to ethical employment practices, the
environment, health and wellbeing and community cohesion
• Independently assessed as working in compliance with the
sustainable procurement standard ISO 20400
• Setting targets on payment performance and complying
with the Prompt Payment Code
• Enhanced our Sustainable Procurement Charter with a target
of 33 per cent controllable spend on local businesses by 2023
• Continued engagement with Network Rail and local transport
authority provider at multiple levels
21
The Go-Ahead Group plc Annual Report and Accounts 2021
Our stakeholders continued
Stakeholders
Why we engage
How we engage
Key topics of engagement during 2021 financial year
How we responded
Government
Policy and regulatory change affect
our bus and rail businesses and create
the framework through which we
operate. 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.
• To secure recovery in passenger
volumes that supports economic
development, environmental targets
and social priorities
• Ongoing engagement with
government bodies and clients, such
as the Department for Transport
(DfT)
• To raise public transport higher up
• Membership of the All Party
government agendas
Parliamentary Group on environment
• To influence and inform policy making
• Participating in various expert
• To represent the views of other
stakeholders: customers, colleagues,
communities and shareholders
• To formulate innovative and
attractive bids as opportunities arise
• We operate services on behalf of the
Government via the DfT in the UK
and other transport authorities and
continually engage on matters
relating to the contracts we operate
working groups, select committees
and government consultations
• Engaging in policy discussions over
key industry topics and advising
on delivery implementation
• Ongoing dialogue with local MPs
• Membership of the Zemo
Partnership
• Membership of International
Association of Public Transport
• Partnering with campaign groups
such as Campaign for Better
Transport and Sustrans
• To maintain our role at the heart
• Meetings with councillors, planning
• Effectively managing our environmental impact
• Direct contributions through community volunteering,
Communities
As an operator of public transport, we
provide a vital service to communities,
transporting passengers to work,
education, facilities and services.
We strive to provide the social
and economic benefits of affordable
and accessible travel in the towns
and cities in which we operate.
of our communities and play our part
in helping communities thrive
• To address economic, social and
officers and other key officials to work
in partnership for common
community goals
environmental issues and priorities
• Continual two-way communication
• To find the best solutions for
connecting people with family,
friends, work and facilities
• To enable us to respond appropriately
to the needs of our communities
• To maintain our focus on operating
responsibly within society
• To achieve our environmental
objectives and targets
• To support social inclusion
and tackle isolation
with local businesses and organisations
• Onsite community engagement
events to understand the needs
of the local community
• Collaboration with local charities,
participating in volunteering and
fundraising initiatives
• Regular updates through social media,
our website and apps to keep
communities informed
• To ensure that our long term
• Face-to-face meetings and phone calls
• Strategy and business model
• Commitment to transparent reporting with clear communication
Investors
We provide investors with open
and transparent information and
encourage two-way communication.
Feedback from our shareholders
forms part of the strategic Board
discussions. We operate our business
responsibly and with strong financial
discipline to protect the interests
of our investors.
strategy is aligned with the interests
of shareholders
• To explain how we aim to deliver
sustainable growth and maximise
the growth potential of the business
• To provide updates relating to the
financial performance and position
of the business
• Trading updates including full year
and half year results
• Results presentations and webcasts
• Investor roadshows and conferences
• Annual General Meeting
• Annual report
• Investor section of the website
• To ensure the views of shareholders
are considered in policy setting and
aligned to their ESG investment criteria
• Independent disclosure platforms
for investors such as the Carbon
Disclosure Project
• Shareholder returns
• Financial performance
• Liquidity and balance sheet strength
• Risk management
• Passenger demand and travel pattern
• Future of UK rail franchising
• ESG performance
• Growth potential
• Succession planning
• Executive remuneration
• International development strategy
• Political environment
of the business model and strategic priorities
• Regular equity market updates as COVID-19 scenarios evolved
• Strong financial discipline and cash control
• Increased engagement with investment community
• Disciplined approach to growth in international markets
• Recognised by FTSE4Good Index and the Green Economy Mark
22
The Go-Ahead Group plc Annual Report and Accounts 2021
• Passenger volume recovery
• Financial support for the provision of bus and
rail services
• Contractual arrangements and features
• National Bus Strategy and rail reform
• Regional bus service provision
• Environmental policy and compliance, including
climate change and transition to zero-emission
• Active travel
• Apprenticeships, skills and diversity
• Engagement with DfT and industry partners on rail reform:
Williams-Shapps Rail for Rail and the National Bus Strategy
• Response and participation at Transport Select Committee’s
enquiry into emergency measures for the rail industry
• Campaigns on customer recovery and confidence, tackling
loneliness, active travel and air quality, including through
speaking engagements
• Responses to consultations including on future of mobility
(urban and rural), and on zero-emission vehicles
• Ongoing engagement with transport authority clients in the UK
and internationally regarding financial support for bus and rail
• Proactive engagement with local authorities
services and contractual arrangements and features
• Support for local economic plans and strategies
• Ongoing engagement with the DfT and in response to matters of
• Sharing experience and expertise
• LSER matters of concern (extended beyond year end)
(read more on pages 10 and 11)
concern at LSER an Independent Committee commissioned an
Independent Review. The findings of the Indpendent Review were
shared with the DfT (read more on pages 10 and 11)
• Investment in local infrastructure
• Engaging and responding to community needs
• Direct contributions through utilising local suppliers,
community volunteering, sponsorship and fundraising
• Providing timely and accurate travel information
• Local meetings with MPs, the Chamber of Commerce and Local
sponsorship and fundraising
Economic Partnership Boards
• Regular stakeholder newsletters
• Active member of Business in the Community ‘Place’ campaign
to ensure safety and adherence to government
• Contributing to policy discussion
guidelines on public transport
• Investigating and investing in sustainable
transport solutions
• Providing safe and affordable public transport
solutions to support social mobility
• Developed active travel plans for customers at bus and rail stations
• Open days at depots to educate local communities on the
importance of public transport
• Champions of the Government’s ‘Tackling Loneliness Network’
Strategic report Stakeholders
Why we engage
How we engage
Key topics of engagement during 2021 financial year
How we responded
our bus and rail businesses and create
• To influence and inform policy making
• Participating in various expert
Government
Policy and regulatory change affect
the framework through which we
operate. 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.
• To secure recovery in passenger
• Ongoing engagement with
volumes that supports economic
government bodies and clients, such
development, environmental targets
as the Department for Transport
and social priorities
(DfT)
• To raise public transport higher up
• Membership of the All Party
government agendas
Parliamentary Group on environment
• To represent the views of other
stakeholders: customers, colleagues,
working groups, select committees
and government consultations
communities and shareholders
• Engaging in policy discussions over
• To formulate innovative and
attractive bids as opportunities arise
• We operate services on behalf of the
key industry topics and advising
on delivery implementation
• Ongoing dialogue with local MPs
Government via the DfT in the UK
• Membership of the Zemo
and other transport authorities and
Partnership
continually engage on matters
relating to the contracts we operate
• Membership of International
Association of Public Transport
• Partnering with campaign groups
such as Campaign for Better
Transport and Sustrans
• To maintain our role at the heart
• Meetings with councillors, planning
of our communities and play our part
officers and other key officials to work
in helping communities thrive
in partnership for common
• To address economic, social and
community goals
environmental issues and priorities
• Continual two-way communication
to the needs of our communities
• Collaboration with local charities,
friends, work and facilities
• To enable us to respond appropriately
• To maintain our focus on operating
responsibly within society
• To achieve our environmental
objectives and targets
• To support social inclusion
and tackle isolation
with local businesses and organisations
• Onsite community engagement
events to understand the needs
of the local community
participating in volunteering and
fundraising initiatives
• Regular updates through social media,
our website and apps to keep
communities informed
strategy is aligned with the interests
of shareholders
• To explain how we aim to deliver
sustainable growth and maximise
the growth potential of the business
• To provide updates relating to the
• Trading updates including full year
and half year results
• Results presentations and webcasts
• Investor roadshows and conferences
• Annual General Meeting
• Annual report
of the business
• Investor section of the website
• To ensure the views of shareholders
• Independent disclosure platforms
are considered in policy setting and
for investors such as the Carbon
aligned to their ESG investment criteria
Disclosure Project
Communities
As an operator of public transport, we
• To find the best solutions for
provide a vital service to communities,
connecting people with family,
transporting passengers to work,
education, facilities and services.
We strive to provide the social
and economic benefits of affordable
and accessible travel in the towns
and cities in which we operate.
encourage two-way communication.
financial performance and position
Investors
We provide investors with open
and transparent information and
Feedback from our shareholders
forms part of the strategic Board
discussions. We operate our business
responsibly and with strong financial
discipline to protect the interests
of our investors.
• Passenger volume recovery
• Financial support for the provision of bus and
rail services
• Contractual arrangements and features
• National Bus Strategy and rail reform
• Regional bus service provision
• Environmental policy and compliance, including
climate change and transition to zero-emission
• Active travel
• Apprenticeships, skills and diversity
• Proactive engagement with local authorities
• Support for local economic plans and strategies
• Sharing experience and expertise
• LSER matters of concern (extended beyond year end)
(read more on pages 10 and 11)
• Engagement with DfT and industry partners on rail reform:
Williams-Shapps Rail for Rail and the National Bus Strategy
• Response and participation at Transport Select Committee’s
enquiry into emergency measures for the rail industry
• Campaigns on customer recovery and confidence, tackling
loneliness, active travel and air quality, including through
speaking engagements
• Responses to consultations including on future of mobility
(urban and rural), and on zero-emission vehicles
• Ongoing engagement with transport authority clients in the UK
and internationally regarding financial support for bus and rail
services and contractual arrangements and features
• Ongoing engagement with the DfT and in response to matters of
concern at LSER an Independent Committee commissioned an
Independent Review. The findings of the Indpendent Review were
shared with the DfT (read more on pages 10 and 11)
• Effectively managing our environmental impact
• Direct contributions through community volunteering,
• Investment in local infrastructure
• Engaging and responding to community needs
• Direct contributions through utilising local suppliers,
community volunteering, sponsorship and fundraising
• Providing timely and accurate travel information
to ensure safety and adherence to government
guidelines on public transport
• Investigating and investing in sustainable
transport solutions
• Providing safe and affordable public transport
solutions to support social mobility
sponsorship and fundraising
• Local meetings with MPs, the Chamber of Commerce and Local
Economic Partnership Boards
• Regular stakeholder newsletters
• Active member of Business in the Community ‘Place’ campaign
• Contributing to policy discussion
• Developed active travel plans for customers at bus and rail stations
• Open days at depots to educate local communities on the
importance of public transport
• Champions of the Government’s ‘Tackling Loneliness Network’
• To ensure that our long term
• Face-to-face meetings and phone calls
• Strategy and business model
• Commitment to transparent reporting with clear communication
of the business model and strategic priorities
• Regular equity market updates as COVID-19 scenarios evolved
• Strong financial discipline and cash control
• Increased engagement with investment community
• Disciplined approach to growth in international markets
• Recognised by FTSE4Good Index and the Green Economy Mark
• Shareholder returns
• Financial performance
• Liquidity and balance sheet strength
• Risk management
• Passenger demand and travel pattern
• Future of UK rail franchising
• ESG performance
• Growth potential
• Succession planning
• Executive remuneration
• International development strategy
• Political environment
23
The Go-Ahead Group plc Annual Report and Accounts 2021
Our strategy
Our vision
A world where every journey
is taken care of
Will be delivered by our strategy to
Protect and grow
the core
Win new bus
and rail contracts
Develop for the
future of transport
With responsibility as a business for
Better
teams
Happier
customers
Stronger
communities
Safer
working
Cleaner
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
To fulfil our purpose
To be the local partner taking care of journeys that enhance the lives
and wellbeing of our communities across the world.
24
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Sustainability lies at the heart of our strategy
Our five responsible business priorities: Better teams, Happier customers, Stronger communities, Safer working
and Cleaner environment, underpin the delivery of our corporate strategic objectives.
As an international transport operator, our businesses have a far reaching impact on our customers, colleagues,
suppliers, regulators, shareholders and the communities we serve. We aim to align our business values, purpose
and strategy with the social, economic and environmental needs of our stakeholders, embedding responsible
and ethical business policies and practices in everything we do.
Our approach to sustainability
External recognition
Better teams
We are committed to
attracting, developing
and retaining the best talent
and driving high levels
of motivated and
engaged colleagues
Stronger
communities
We enable communities
to flourish by providing
access to education,
retail and employment,
allowing people to
stay connected
Our five
responsible
business
priorities
Happier customers
Our customers are at
the heart of what we
do. We aim to provide
high levels of customer
service across all
our operations
Safer working
Our responsibilities
around health and safety
extend to our colleagues,
passengers, and the
communities in which we
operate, including other
road users
Cleaner environment
We recognise our
responsibility to manage
the impact of our
businesses on the
environment and strive
to reduce any negative
impact we may have
Our framework reflects how sustainability is at the centre of our strategy and drives
our decision making in line with our purpose. Our five priorities build on our competitive
strengths and underpin our investment and operational decisions so that we can
continue creating value in a sustainable way into the future.
Businesses have a leading role to play in helping to deliver the UN Sustainable
Development Goals (SDGs) and we have identified five for which we believe we can
make a meaningful, positive impact and deliver long term value to all our stakeholders.
25
The Go-Ahead Group plc Annual Report and Accounts 2021
Awarded the London Stock Exchange
Green Economy Mark, an accreditation
which recognises businesses with at least
50 per cent green revenues
Received an A minus grade from the Carbon
Disclosure Project Climate Change Survey –
the highest score achieved by any UK
transport operator
Various ISO accredited standards for our
work processes include: ISO 50001 for energy
management, ISO 45001 for occupational
health and safety management system, and
ISO 14001 for environmental management
system at our UK train businesses. We are
also aligned with ISO 20400 standard for
sustainable procurement
Ranked 99 FTSE4Good percentile rating
out of a maximum of 100
Achieved the top score for all transport
companies in the category of ‘Community and
Environmental Responsibility’ on the annual
Britain’s Most Admired Companies study
Awarded ‘Prime’ status as part of the ISS ESG
corporate rating
Rated AAA by MSCI ESG Ratings assessment
– the highest rating
Rated as ‘Low Risk’ by Sustainalytics, ranking
in the top 8 per cent of companies in the
transport sector
Climate change strategy
Our climate change strategy
Public transport is part of the solution for combatting poor air quality
and fighting climate change.
Overview
Around the globe, we all have a
responsibility to take action against
climate change. As a responsible
business, we understand the part we
have to play in reducing our emissions
and adapting to the impacts of our
changing world. The most important role
we can play is to enable people to reduce
private car usage and make more use
of greener public transport options,
but we are also committed to reducing
the impact our operations have on
the environment.
Our approach to this commitment is
addressed in our climate change strategy,
published in July 2021, which outlines our
key initiatives to reduce carbon emissions
and mitigate the impacts of climate
change in our business. This includes
decarbonising our transport fleet,
reducing the negative impact of our
operations on air quality, reducing our
water consumption and increasing our
waste recycling rate. We have set a
Science Based Target to reduce our
carbon emissions by 2035 and to become
a net zero carbon business by 2045, with
ambitious milestones along the way.
Read more on pages 281 - 284
This strategy sets out how we will become a net zero business by 2045
Climate change
adaptation
Identify how climate change
impacts our businesses,
passenger services, premises and
supply chains, and identify
adaptation plans
Mitigation:
Decarbonisation
Decarbonise our fleet
and operations
1. Identify risks and vulnerabilities
1. Bus fleet decarbonisation
2. Quantify costs and source funding
2. Rail fleet decarbonisation
3. Identify risks to properties
3. Ancillary fleet decarbonisation
4. Work with suppliers to
4. Decarbonisation of properties
identify and reduce exposure
and vulnerabilities
5. Develop business cases
for adaptation measures
6. Work with partners
5. Develop net/carbon zero
commitment
Net zero business by 2045
Zero-emission bus fleet
in the UK by 2035
Non-diesel rail fleet by 2035
By 2035 reduce carbon
emissions by 75%
Management principles and governance
26
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report This strategy sets out how we will become a net zero business by 2045
At the heart of Go-Ahead’s climate
change strategy is a pressing need to
reduce the greenhouse gas emissions
generated by day-to-day bus and rail
operations. This is a top priority for the
business and will continue to inform our
investment decisions.
Achieving these goals will require many
smaller steps along the way. These will
include investment in new technology
– including purchasing zero-emission buses,
electrifying bus depots and improving the
power efficiency of railway rolling stock.
water leaks, unnecessary use of energy,
or idling of engines. Wherever possible we
will reduce, reuse and recycle materials.
It is also vital to consider how we will be
required to adapt to changes in the climate,
and what this will mean for our business.
We are identifying the ways in which
climate change will impact our business and
quantifying key climate risks, so we can take
steps both to mitigate them, and to adapt
to them. There will also be opportunities to
improve our operations, attract new
customers and talent to our teams.
We also have plans to improve air quality
and reduce wastage, whether through
Programmes to achieve these objectives
will be embedded at all levels across our
business, with rigorous monitoring of
targets through a robust accountability
structure overseen by the Group’s
Executive Committee and the Board.
More information on the Board’s approach to
climate change can be found on page 85
Our approach to climate change is as
important to our stakeholders as it is to
us. As we progress towards our goals, we
will listen to and engage with colleagues,
customers, suppliers, investors and other
stakeholders. We look forward to taking
this journey together.
Visit www.go-ahead.com to read our climate change
strategy in full
Mitigation:
Mitigation:
Mitigation:
Air quality
Reduce our negative impact on
air quality by reducing emissions:
CO, HCs, NOx, PM
Water
Reduce our water footprint by
embedding responsible water
management practices
1. Improve bus fleet by procuring
1. Address leaks better
2. Reduce third party use
of our water
3. Reduce water use
4. Improve water sourcing
electric vehicles
2. Purchase new buses at the
latest emissions standards
3. Remove older, lower emissions
standards vehicles from the fleet
4. Work on bus priority solutions
with local authorities
By 2025, reduce:
Carbon monoxide (CO) by 17%
Hydrocarbons (HC) by 49%
Nitrogen oxides (NOx) by 63%
Particulate matter (PM) by 55%
Waste
Reduce our overall waste
volumes and increase reuse and
recycling, by implementing
waste initiatives
1. Improve rail and bus waste
management contracts
2. Increase recycling rates
3. Behaviour change programmes
for customers and colleagues
4. Reduce waste in supply chain
and operational activities
By 2025, reduce water use
by 25%
By 2025, increase waste
recycling rate to 60%
Identify projects for investing, influencing stakeholders,
driving behaviour change and finding external funding
Prioritise solutions by their impact on customers,
colleagues, carbon and cost
27
The Go-Ahead Group plc Annual Report and Accounts 2021
Responsible business pillars
Better
teams
Our colleagues are the
foundation of our business.
Their dedication, innovation
and ambition drive our success.
KPIs
Employee engagement index (%)*
R
71 UK bus
72 UK rail
7
5 6
6
9
6
2
6
0
8 6
5
2
7
1
7
2
7
a
/
n
17
18
19
20
21
* Excludes international divisions.
R Linked to executive annual performance-related
bonus, see pages 108 to 142
Description: We measure how engaged
our people are through surveys across our
businesses. The results provide a measure of
colleague engagement and help us identify
areas where we can improve as an employer.
Performance: Following the decision to
suspend the 2020 bus employee engagement
surveys in order to better align the timing of
colleague feedback with action being taken,
we introduced quarterly pulse surveys across
our UK bus businesses in 2021. The results
showed strong improvement compared with
2019, reflecting an increased focus on
colleague engagement, health and wellbeing,
personal development and performance
management. In UK rail, where an annual
survey approach is used, we were pleased to
maintain high levels of colleague
engagement despite the ongoing challenges
associated with COVID-19.
At Go-Ahead, we believe in a world where every journey is taken
care of. These journeys can only happen thanks to our 27,000
strong team, working across the UK, Ireland, Germany, Norway,
Singapore and Australia.
Engagement
Throughout the COVID-19 pandemic, employee wellbeing has
been more important than ever and has been at the heart of the
Group’s engagement strategy.
Across our UK bus businesses, we have introduced quarterly
seasonal pulse surveys, enabling management to respond quickly
to feedback and effect positive change. The first result of these
pulse surveys was 71 per cent, whilst our annual engagement
survey for UK rail was maintained at 72 per cent. These results
showed how the increased level of engagement across our
businesses, and additional levels of support provided to
employees, played in achieving these results.
Across all operations, we were pleased to see that 77 per cent of
employee participants noted that they enjoyed working for the
Group and 79 per cent of people said that their managers treated
them with respect.
During 2021, Go-Ahead’s head office was reaccredited as Gold
by Investors in People (IiP). The accreditation places Go-Ahead
eighth out of 61 companies in the ‘transportation and storage’
category. The IiP assessment process, which involves interviewing
and surveying colleagues, determined that 90 per cent of
respondents believe Go-Ahead has a positive impact on society,
and 100 per cent would recommend working for Go-Ahead.
Learning and development
Our colleagues are our most valuable assets, and we recognise
the importance of investing in their development.
Equipping our leaders, and future leaders, with the skills to
manage our businesses, lead our teams and deliver on our
strategy is a key area of focus. Throughout the year, we reshaped
our two talent programmes – the Executive and Senior
Management Development Programmes – to more effectively
align with our business strategy. Both programmes, aimed at
accelerating the development of our brightest talent, grew
during the year, with an increase in the number of delegates and
female representation within these programmes. We also rolled
out an online ‘Train the Trainer’ behaviour-led programme,
to allow nominated colleagues to run training at a local level
for supervisors.
Despite the challenges posed by lockdown restrictions, GTR
launched its first sector-based Work Academy Programme with
East Sussex College in November 2021. Targeted at those who are
long term unemployed and are not in training or education, the
programme has given candidates the opportunity to develop
essential employability skills whilst gaining qualifications. This new
partnership builds on the success of the operator’s established
‘Get into Railways’ programme with the Prince’s Trust, which is
now in its seventh year. So far, 89 per cent of participants have
successfully completed the programme. In our international rail
operations, 15 people who had sought asylum in Germany were
recruited to become train drivers, successfully undertaking the
year long training and securing permanent employment.
New talent
Our graduate programme is an important source of new
talent, helping us identify the future leaders of our operations.
The scheme, now in its tenth year, has been enhanced to
expedite development and monitor personal performance more
effectively, leading to better outcomes for participants and the
Group. Investment in this scheme is worthwhile; retention rates
following the scheme are very high, at 94 per cent, 7 per cent
higher than industry average.
Go-Ahead is the only public transport operator registered as an
approved provider of apprenticeships across both bus and rail.
During the year, the Group received an official stamp of approval,
passing the Ofsted New Provider Monitoring Visit.
Throughout the pandemic, Go-Ahead recruited more than 50
apprentices a month despite the disruption caused by COVID-19.
Training was adapted to the challenges of the pandemic and our
28
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report
teams pioneered new ways of remote working and social
distancing in our academies to ensure colleagues were always
safe. We hired more than 1,000 apprentices across bus and rail in
2021. The theme of the programme, ‘Build the Future’, focuses on
the importance of training and retaining apprentices, delivering a
return on investment.
Health and wellbeing
There has been a sustained focus on health and wellbeing
throughout the year, communicating with and signposting
colleagues to the available support. Both rail and bus have
increased the pool of health and wellbeing advocates, wellbeing
champions and mental health first aiders to provide additional
support to colleagues during this challenging year. And with
health and wellbeing programmes now an integral feature of our
day-to-day business, examples of best practice are evident across
Group. Southeastern launched the railway industry’s first ever
Mental Health Charter in May 2021, which set out eight actions
that can be taken by organisations to identify mental health
hazards, address problems and train supportive managers.
GTR recently won an ‘Inside Out’ award for its mental health
initiatives. This includes a network of more than 100 ‘Wellbeing
Champions’ and a volunteer support group for colleagues.
Meanwhile, Go-Ahead is training mental health champions at all
of its bus companies in the UK and Ireland. Champions are trained
to spot triggers, reassure people in distress and seek support.
Go-Ahead London is going one step further, setting a target to
train every depot manager in mental health awareness, while
Brighton & Hove was the first Go-Ahead bus company to launch
the mental health first aider programme in 2020. Over a tenth of
the workforce has since used the scheme, with the majority of
calls regarding mental wellbeing.
Diversity and inclusion
Gender diversity remains an issue for the transport sector and we
are committed to driving change in the industry and promoting
public transport as an attractive career choice for women. We
want our workforce to be representative of the communities we
serve and believe a more equal gender balance will deliver better
outcomes for Go-Ahead’s many stakeholders.
We have female-focused recruitment campaigns, open days and
initiatives to showcase opportunities, each with the aim of
increasing the opportunities available to women to work in the
industry over the coming years. The Go-Ahead ‘Women in Bus’
network continues to offer online workshops focusing on topics
that are pertinent to the members, including emotional resilience
and building self-confidence. We maintain our initiatives to
support, develop and empower women across our bus companies,
with the main goal to increase female representation in bus to
20 per cent by 2025.
We also support the ‘Women in Rail’ initiative and are targeting
female representation of 21 per cent across our rail business by
2025. GTR doubled the number of female train driver applicants
in a year – from 413 in 2019 to 825 in 2020. Go-Ahead has
launched numerous initiatives to promote careers in rail to
women, including recruitment campaigns, such as working with
Mumsnet, and launching unconscious bias training to help make
the organisation a more inclusive place to work.
While our focus has been on increasing gender diversity across
the Group for a number of years, we recognise the importance
of diversity in all its forms. Building a diverse colleague base
supported by an inclusive culture is key to our success.
We were pleased to learn that 80 per cent of colleagues surveyed
as part of our employee engagement consider Go-Ahead’s
culture to be inclusive to all. Our apprentice intake has strong
ethnic representation with 70 per cent of new apprentices from
ethnic minorities backgrounds.
We are sharing best practice across the Group to make all our
workplaces more inclusive. This includes introducing new ways
to attract and recruit talented people from diverse backgrounds,
reinvigorating the women’s network group, rolling out unconscious
bias training for all managers and updating relevant policies and
practices to support our communities.
Our policies
We have a comprehensive range of policies at Group and local
levels. We believe in equal opportunities and apply fair and
equitable employment practices. Our Code of Conduct states
that all employees should be treated with respect and that their
health and safety should be protected. Respect for human rights
and ethical behaviour underpins this with our human rights policy
setting out how we are committed to conducting our business in
a manner that respects and upholds the rights of all of those
people with whom we engage and who are affected by our
actions. Go-Ahead has a zero-tolerance approach to bribery and
corruption and all our colleagues are required to adhere to our
anti-bribery and corruption policy. Conflicts of interest, which
interfere with proper performance or independent judgement,
are prohibited. We also have well established whistleblowing
procedures where colleagues can, in confidence, raise legitimate
concerns about wrongdoing within their workplace. In addition
to the above, colleagues are required to comply with our equal
opportunities, diversity and inclusion policy; health and wellbeing
policy; and health and safety policy. Compliance with these
policies is mandatory and is incorporated within all new joiner
induction programmes.
Board gender diversity
Direct reports of senior
management gender
diversity
3
3
149
263
Female Male
Female Male
Senior management
gender diversity
Overall Group gender
diversity
17
4,740
77
26,082
Female Male
Female Male
As at 3 July 2021
The composition of the Board has changed since year end. See page 73 for
the current composition of the Board.
29
The Go-Ahead Group plc Annual Report and Accounts 2021
Responsible business pillars continued
Happier
customers
Our passengers expect reliable,
easy to use services wherever
they may be travelling.
Customer satisfaction is a top
priority for us. We strive
to continually improve all
aspects of our services and
constantly innovate to enhance
the customer experience.
KPIs
Customer satisfaction (%)*
R
91 UK regional bus
83 UK rail
0
9
2
8
1
9
2
9
1
9
1
8
3
8
5
7
Description: Customer satisfaction is a strong
measure of how well we are meeting our customers’
needs. For regional bus and UK rail, customer
satisfaction is measured by the independent
passenger watchdog, Transport Focus.
Performance: Before COVID-19, independent
surveys were conducted by Transport Focus
biannually for rail franchises and annually for
regional bus operations. Due to the pandemic,
these surveys were suspended. The 2020
survey results are, therefore, the most recent
independently verified scores assessing the
level of satisfaction of customers.
a
/
n
a
/
n
17
18
19
20
21
* Transport Focus suspended its bus and rail
passenger surveys during the COVID-19 pandemic.
Therefore, the latest scores are from the March
2020 bus survey and July 2020 rail survey.
R Linked to executive annual performance-related
bonus and LTIP awards, see pages 108 to 142
Continuous innovation
We provide high quality, locally focused services. This is
enabled by our devolved structure, which facilitates a strong
understanding of our customers in each region. Our aim is to
deliver bus and rail travel that is as convenient and accessible as
possible for customers, from ticketing and live running information
to seat capacity forecasts and passenger assistance.
We are increasingly using app technology to make travelling on
our buses and trains easier. During the year, all Go-Ahead bus
operating companies have launched a new smartphone app in
partnership with Passenger, a specialist provider of transport
technology. These apps allow customers to plan journeys, view
real-time information for arrival times, purchase tickets and create
favourite stops or journeys. By providing this technology and
information, we enable passengers to plan their journeys with
confidence, and make informed decisions about which bus to
take based on how busy each service is.
In rail, we introduced a new app with accessibility at its core. In
addition to ticketing and up-to-date travel information, the app
allows customers to check how busy the train is with a ‘SeatFinder’
function and to book assistance, for those with accessibility
needs. ‘SeatFinder’ timetables also allow longer term journey
planning. We offer on-demand information through popular
social media apps such as WhatsApp and Facebook Messenger,
providing real-time updates direct from the control rooms.
In response to changing working habits accelerated by the
COVID-19 pandemic, flexible season tickets have been launched
in Go-Ahead’s rail operations. These use existing smartcard and
app technology to provide an improved offering to commuters
who are not travelling for the whole week. We launched a new
online Season Ticket Calculator, providing passengers with
greater transparency when it comes to choosing tickets and
fares. The calculator enables commuters with flexible work
schedules to identify and buy the right ticket for the number of
days they wish to travel.
Acknowledging changing customer habits and travel patterns,
Go-Ahead Nordic has launched the ‘Sørpasset’, an interrail-type
ticket across its routes, which enables passengers to hop-on and
hop-off the train for a week, significantly saving on purchasing a
single ticket for each journey.
All of our buses accept contactless payment, and we are rolling
out tap-on/tap-off technology across our network, which is
currently available on around 60 per cent of our bus fleet. Not
only does this simplify the payment process, it also provides
customers with peace of mind that they are paying the best value
fare for their trip.
There is a greater focus on health, fitness and wellbeing than ever
before. As people begin to travel more following the pandemic,
there is an opportunity to improve fitness and wellbeing, while
building a more sustainable transport system. As part of Go-
Ahead’s commitment to sustainable living, we are increasingly
including features on our apps that offer suggestions for active
30
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report travel. For example, Go South Coast’s app links with regional bike
hire services to show locations to pick up a bike on journey
planning maps. Through a partnership with Arup, Go-Ahead is
developing concepts for mobility hubs which will provide safe,
accessible spaces for customers to switch from one mode
of travel to another, bringing together facilities for cycling, shared
vehicles and public transport.
Keeping customers safe during the pandemic
The pandemic has posed unique challenges for public transport
operators. Our priority has been to keep both our customers and
colleagues safe through high quality cleaning regimes, highly
visible passenger advice and enhanced training for our colleagues.
Our bus and rail companies have worked within government
guidelines at every stage of the pandemic. We have introduced
protective equipment for colleagues, restricted the use of seats
on our vehicles to allow for social distancing, provided hand
sanitiser and enhanced standards of hygiene in our premises and
on our buses and trains. Where restrictions have been eased or
lifted, our local teams have been running reassurance campaigns
for returning and new customers. These have included online
information, on-board signage, station and bus stop signage,
advertising, videos showing cleaning routines and updates to apps
on COVID-19 regulations and precautions.
Customer satisfaction
We use a range of research methods to capture the voice of our
customers across our bus and rail operations. This enables us to
place the customer at the heart of all our decision making.
Methodologies include an online passenger panel, a ‘One Pulse’
quick answer survey tool, brand tracking and mystery passengers
who observe and report back on services.
We entered the pandemic with a strong base of satisfied
customers. Pre-COVID-19, customer satisfaction according to
Transport Focus was 81 per cent for GTR, while Southeastern
delivered its best ever result of 83 per cent. On regional bus, we
achieved the industry’s highest level of customer satisfaction in
2020 for the sixth year running, scoring 91 per cent. With both the
rail and bus Transport Focus surveys being paused during the
pandemic, we introduced our own similar surveys to ensure
customers’ voices were being heard. With a regional bus score of
91 per cent, we are pleased to have maintained the high levels of
satisfaction to which our regional bus passengers have become
accustomed. In rail, Southeastern customers reported being happy
with the service they received, up to 88 per cent, with satisfaction
on GTR services being reported as 73 per cent.
Accessibility
Our aim is to make our transport services as accessible as
possible. While all our bus and rail services are accessible to
passengers with wheelchairs, pushchairs and guide dogs, we
also aim to equip colleagues to support passengers with hidden
disabilities. Many of our customer-facing staff are trained in
assisting people living with dementia and those who are blind
or partially sighted.
Travelling can be a difficult experience for some people, so it is
important to us that our passengers feel empowered to use our
services with confidence. We rolled out our ‘Helping Hand’ card
scheme across our bus operations, that enables the holder to
discreetly advise the bus driver if they need further assistance.
To make travelling as easy as possible for all customers, we are
working towards introducing audio-visual ‘next stop’ technology
on all our buses.
Brighton and Hove Buses were one of only two public transport
providers in England to be given the ‘Highest Leader’ status
under the Department for Transport (DfT)’s Inclusive Transport
Leaders scheme. The bus company has improved its screens and
audio announcements while ensuring its buses do not have black
floors, which can be problematic for people who experience black-
out seizures, and those with dementia.
In UK rail, we are a member of the ‘Sunflower Lanyard’ scheme
whereby customers wearing the lanyard, can discreetly indicate
to transport staff that they have a hidden condition and may
require a little more time or support when travelling. GTR hosts
‘Try a Train’ sessions, which supports people who may encounter
barriers when travelling – from buying a ticket, to identifying
station facilities and looking at information boards.
We have passenger accessibility panels, made up of disabled
passengers who frequently travel by train. This year, GTR
retrained all 3,000 customer-facing colleagues in courses
refreshed by experts who themselves have disabilities.
GTR has pledged to reduce the time needed to pre-book
assistance, with a goal to reduce pre-booked assistance to two
hours before travel in April 2022 and has plans to trial new ‘turn
up and go’ services for 41 smaller, unstaffed or partly-staffed
stations, where mobile support teams can reach stations within
20 minutes to give assistance to passengers who need a ramp
to board.
Read about our engagement with transport authority customers on pages 20 to 23
31
The Go-Ahead Group plc Annual Report and Accounts 2021
Responsible business pillars continued
Stronger
communities
Our services provide vital links
to work, education and health
services. They enable social
inclusion and connect people
with friends, family and
leisure activities.
KPIs
Community investment (£m)
1.03
7
1
.
1
0
8
0
.
7
0
.
1
0
0
.
1
3
0
.
1
17
18
19
20
21
Description: We contribute to the
communities we serve across the UK and
internationally. Such contributions include
cash donations, the value of time spent
volunteering, gifts in-kind such as travel
tickets, as well contributions made through
salary sacrifice schemes.
Performance: Throughout the year, we
contributed over £1m to our local
communities. Through initiatives that include
cash donations and time spent volunteering,
we applied specific expertise to benefit
communities through our involvement with
Business in the Community and at a national
level, contributed to the National Bus Strategy
and William-Shapps Plan for Rail.
Providing vital links
As a provider of an essential service, we know how important
public transport is for our communities across the UK and
overseas. Not only does it enable access to employment,
education, essential facilities and amenities, and recreation, it also
offers increased social inclusion by providing a means for people
to stay connected. The Group’s devolved operating model enables
our local management teams to actively participate in the areas
they serve and deliver services that are directly informed by the
needs of those passengers.
Supporting local communities
Public transport has continued to play a vital role in keeping
essential services going and supporting communities throughout
the pandemic. During the national lockdowns, we continued to
provide services for those who needed to travel, particularly
ensuring that timetables met the needs of those accessing local
hospitals and other vital services. We continued to support wider
community efforts such as bottling and distributing hand
sanitiser for key workers, delivering food packages to those in
need, and transporting medical equipment.
In response to the Government’s strategy on loneliness, in 2019,
we launched an initiative called ‘Chatty Bus’, which was a
company wide campaign that involved encouraging passengers
to talk to someone new every day on one of our bus services.
Since then, our operating companies have shaped and moulded
the initiative to suit the passengers within their communities.
This has included working with local charities and organisations
to help spark conversations with passengers. This was adapted
during the COVID-19 crisis, with some of our bus companies
organising telephone calls with community members in need.
In 2021, we became a champion of the Government’s ‘Tackling
Loneliness Network’; a group of high-profile charities, businesses
and public figures formed to help connect groups of people at
risk of isolation. Within this network, we represent the role public
transport plays in preventing loneliness and social isolation,
whilst also helping people to remain independent and access
their communities.
We supported the vaccination programme by partnering with
the NHS to provide one of the UK’s first mobile vaccination
units in Crawley on one of our buses. We also provided on-bus
vaccination centres in Newcastle, Brighton and Surrey. Free-to-use
vaccination centre shuttle buses were operated in the North East
in partnership with Nexus, and our train companies provided
free car parking at train stations near to vaccination centres
for volunteers, staff members and people receiving
their vaccinations.
Go-Ahead’s East Yorkshire Buses won the ‘Heart of East
Yorkshire’ award and a Business in the Community prize for
colleagues’ efforts to enable communities and key workers to
keep moving during the COVID-19 pandemic.
Go-Ahead is an active member of the Place Leadership Team
with Business in the Community, looking at how businesses,
local authorities and non-governmental organisations can
come together to improve the health and wellbeing of local
32
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Southeastern pioneered the ‘Rail to Refuge’ scheme with the
charity Women’s Aid, which was then rolled out nationwide over
the pandemic. Under the scheme, train operators anywhere in
mainland UK cover the cost of train tickets for women, men and
children travelling to refuge accommodation. On average, four
survivors a day have used the scheme to access free train travel
since April 2020. Of those who have made use of Rail to Refuge,
62 per cent said they would not have travelled if the scheme had
not been in place.
Go-Ahead’s seven-year partnership with Transaid has gone
from strength to strength. In April 2021, Go-Ahead London
delivered virtual driver training sessions to Transaid’s partner
driver training schools in Africa. This enabled important
knowledge sharing opportunities between Ugandan, Zambian
and Tanzanian trainers, and a fantastic learning and development
opportunity for our team. Go-Ahead’s Managing Director of
Business Development, Martin Dean, is a member of Transaid’s
Road Safety Advisory Board, which facilitates sharing industry
best practice, supporting with efficiency, quality assurance and
generating ideas.
We have long-standing partnerships with community
organisations in the areas where our companies provide
transport services. Our operating companies make a large
contribution to their local communities and have built mutually
beneficial relationships over time. Through our corporate
donations, colleague fundraising and volunteering efforts, we
have invested nearly £5m in our local communities over the last
five years.
communities across the country. We recognise that we have the
ability to influence how our suppliers and partners operate their
businesses, and we make every attempt to work with them to
create positive outcomes.
Through our Code of Business Conduct and ethics, we set
expectations for how we expect our partners to behave. We work
in accordance with ISO 24001 for sustainable procurement, which
has been independently verified and Go-Ahead has once again
met the criteria to remain as signatories to the ‘Prompt Payment
Code’ with 95 per cent of all invoices paid within 60 days.
We work closely with our suppliers to ensure continuous
improvement. More than 3,200 of these suppliers are small and
medium-sized enterprises (SMEs), which represent 75 per cent
of the Group’s suppliers. SMEs include smart ticketing software
suppliers, independent rail station cafes, mobile app providers,
infrastructure improvement suppliers and bus spare parts
providers. SMEs form the backbone of our society, providing
livelihoods and services to thousands of people every day. We
know we can make a big difference to local economies and the
communities we serve by increasing our proportion of spend
with SMEs, especially those local to our operations. We have a
target to allocate 33 per cent of our influenceable spend to
SMEs by 2023 and have pledged to spend at least £250m with
SMEs each year from 2022. In August, we set out our SME strategy
on how we plan to achieve this.
Read about our SME strategy on our website www.go-ahead.com
This follows our 2019 industry first Sustainable Supply Chain
Charter in the UK, which established minimum criteria in core
areas of corporate responsibility and outlined our priorities
within our supply chain and included SMEs as an area of focus.
Doing our bit
We believe it is important that there is resonance between the
work we do and our charity partners and a defined community
and charitable investment policy is in place. In line with this policy.
our businesses regularly join in national and local fundraising
events and we support our colleagues in their volunteering
activities within local communities.
Earlier this year, Go South Coast’s Isle of Wight Community
Bus Partnership received The Queen’s Award for Voluntary
Service, recognising the outstanding work by volunteer groups
to benefit their local communities. The partnership provides
essential bus services to areas across the Isle of Wight – using
vehicles from Southern Vectis and volunteer drivers. These
services are vital to those who may otherwise find it difficult
to travel across the island. Every year, 33,000 journeys are taken
on these three services.
33
The Go-Ahead Group plc Annual Report and Accounts 2021
Responsible business pillars continued
Safer
working
We have a responsibility to
provide a safe and supportive
working environment for our
colleagues, and we understand
that there is nothing more
important to customers than us
providing a safe way for them
to travel. Our responsibilities
around health and safety also
extend to our communities,
including other road users.
KPIs
UK rail SPADs (per million miles)
0.66
5
8
0
.
3
6
0
.
6
7
0
.
0
8
0
.
6
6
0
.
17
18
19
20
21
RIDDOR accidents
(per 100 employees)*
R
0.47
1
6
0
.
1
5
0
.
2
4
0
.
4
4
0
.
7
4
0
.
17
18
19
20
21
* Excludes Singapore bus and international rail.
R Linked to executive annual performance-related
bonus, see pages 108 to 142
Bus accidents (per million miles)
32.4
1
.
8
3
1
.
6
3
.
4
7
3
.
6
6
3
.
4
2
3
17
18
19
20
21
Description: Across the UK rail industry, train
operating companies report signals passed at
danger (SPADs). The majority of SPADs have
little or no potential to cause harm.
Performance: SPADs saw an improvement of
21 per cent compared with last year, as a result
of reduced services, tighter controls and exacting
standards of driver training to minimise risks.
We have very tight controls around safety and
high standards of driver training which minimise
the likelihood of SPADs and we investigate
every SPAD that occurs on our services.
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 across our
UK operations.
Performance: RIDDOR accidents increased
slightly for the prior year but remain 30 per
cent below five years ago reflecting our
increased efforts to maintain the highest
standards in health and safety, which included
the provision of appropriate tools and
training to colleagues.
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: An improvement of 13 per cent
compared with last year, due to continual
investment in training and monitoring the
performance of our drivers as well as the
reduced number of services and other road
users during the height of the pandemic.
34
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report The health and safety of our passengers, colleagues, suppliers
and those within our communities is of paramount importance to
us. Go-Ahead’s 27,000 colleagues, have a personal responsibility for
their own health and safety and those around them, and for the
wellbeing of everyone that is affected by our activities.
Safety culture
Health and safety is a vitally important management focus. We
have a culture of continual improvement and are always striving
to reduce our exposure to safety risk, with the aim of eliminating
all injuries and health concerns resulting from our operations.
Our policy and strategic framework set out the Group standards
and expectations, which our local management teams put into
practice effectively through their own health and safety
management systems. Each of our operating companies’ systems
go through a bi-annual audit to ensure they meet legal
requirements, are relevant for the risks faced by each business,
and are linked to the specific operational needs of the respective
bus and rail sectors, with which the results and lessons learned
reported to the Group Board and the Audit Committee.
Senior leaders across all our bus and rail operations ensure they
are accessible to their teams to discuss health and safety matters
and they maintain a continual dialogue about the topic. This is
often achieved through ‘Safety Tours’ or ‘Director Audits’. The
insights from these safety tours improve thematic analysis and
trends across the Group and complement the assurance and
auditing process by providing regular pulse checks, in-between
audits. Additionally, we have achieved accreditation to the global
ISO 45001 Health and Safety Management System Standard
across a number of our UK bus operations, further demonstrating
our commitment to provide safe and healthy workplaces.
Harnessing technology
We are developing a wide-ranging Incident Management Process
and a ‘Go-Report-it’ app for our bus division, which will enable
colleagues and managers to report and log a wide variety of
safety concerns and other types of incidents, allocate
responsibility for their resolution and track progress. This will
provide data at local and bus division level, so we can learn from,
and pre-empt similar incidents. Our business analytics solution,
Power BI, will be used to identify key data and significantly raise
the profile of incidents and their management.
GTR has been at the forefront in the use of app technology
through the pandemic, providing up to date information in real
time across its operations, for customers and colleagues,
including apps related to social distancing, cleaning and desk
booking. With the use of apps being embraced by colleagues,
development has continued at pace. GTR recently launched a
safety reporting app enabling faster, more accurate reporting
of all safety-related incidents. With instant notifications, the
app has enabled initial responses to be managed quicker and
subsequently be investigated in a more timely manner.
From this, lessons are learned, shared and risks mitigated.
Continuous improvements and shared best practice
Go-Ahead encourages an environment of continuous
improvement. Through our ‘Better Together Forums’, insights
are shared across the Group and best practice implemented.
A clear example of this is the response to vehicle and pedestrian
movement incidents, where ‘Good Practice Guidance’ was
developed for our bus division to ensure that risk identification
and controls were based on internal and external good practice.
Each operating company has now conducted a gap analysis per
depot and developed an action plan where new or amended
controls can be implemented.
We have also implemented a new supplier pre-qualification
process for our UK bus division, which has simplified and
streamlined our onboarding process and is based on an external
standard of pre-qualification developed by government, industry
and the Health & Safety Executive (HSE), called Safety Schemes in
Procurement (SSIP). Any supplier that undertakes on-site working
will be required to satisfy the standard via one of the SSIP
registered member schemes, saving time and financial cost.
COVID-19
The health, wellbeing and safety of our colleagues and
passengers has been our top priority during the pandemic.
Building on an already strong safety culture, we have focused on
safety measures, social distancing, cleaning regimes, guidance
and information, and personal protective equipment to ensure
that every possible step is being taken to minimise any harm to
our colleagues and our passengers.
We have continued with the enhanced cleaning, disinfection and
protection processes in vehicles, trains, and facilities. Through a
robust process of adenosine triphosphate (ATP) testing, we are
able to identify where additional measures are required. To
ensure we remain at the forefront of available technologies, we
launched a trial of a new fogging/misting product on our vehicles
that is effective for longer, thereby enhancing protection for
everybody onboard.
We continue to fully support our frontline bus and rail colleagues
in every capacity. In line with the latest government guidance we
are constantly evaluating our response. Many of the measures
introduced or expanded at the height of the pandemic have been
retained to protect our people and our customers, including
facilitating contactless payments throughout our services,
the wearing of face masks and retaining temporary screens in
bus drivers’ cabs. Our office-based colleagues have been
supported as they have returned to our COVID-safe offices.
We remain in regular contact with our colleagues about latest
guidance and we continue to support them with their mental
and physical health.
35
The Go-Ahead Group plc Annual Report and Accounts 2021
Responsible business pillars continued
Cleaner
environment
We manage our businesses
in a responsible way, helping
to create a thriving economy
whilst aiming to reduce our
impact on the environment.
KPIs
Carbon emissions per vehicle mile
(kgs)
R
0.98
7
4
.
1
8
2
.
1
5
1
.
1
7
0
.
1
8
9
0
.
Description: We monitor all energy used
within our operations and calculate our CO2
emissions (CO2e) which we divide by the
number of vehicle miles operated to establish
CO2e per vehicle mile.
Performance: A nine per cent year on year
reduction in CO2e per vehicle mile was
achieved in the year due to reduced road
congestion throughout the COVID-19 period,
improvements in the efficiency of our bus and
rail fleet, investment in low-carbon vehicles
and reduced energy used in our premises.
17
18
19
20
21
R Linked to executive LTIP awards, see pages 108
to 142
Go-Ahead aims to be a leader in the transition to a low-carbon
economy. We continue to work to maximise the environmental
benefits of mass transport while at the same time working to
address and overcome the negative environmental impacts of our
operations. We have a comprehensive environment policy and
energy and climate change policy at Group and local levels. These
set out the reasonable measures we are taking to tackle the
environmental impacts caused by our activities including reducing
our carbon footprint. Policies, objectives and performance are
monitored and reviewed periodically, and colleagues are provided
with information and training to help them contribute towards
achieving our objectives and targets. Since 2016, the Group has
achieved a 27 per cent absolute reduction in carbon emissions
– during a period in which our operations have expanded into
Ireland, Germany, Norway and Singapore.
In July 2021, we set out our strategy to lead the transport industry
in carbon reduction by reducing our emissions by 75 per cent
by 2035, and by becoming a net zero business by 2045. Approved
by the Science Based Targets initiative (SBTi), the timetable is in
keeping with an overall mission set under the Paris Agreement to
limit global warming to 1.5°C by 2050.
Read about our climate change strategy on page 26
Sustainable transport solutions
Go-Ahead is the largest operator of electric buses in the UK
and we have a goal to run a zero-emission bus fleet by 2035.
We opened the UK’s first all-electric bus depot in Waterloo,
preventing 1,918 tonnes of CO2 emissions since the depot started
operations in 2016. This was followed by a larger electric fleet in
Northumberland Park in August 2020, with capacity for overnight
charging of 117 buses. This depot is set to become a ‘virtual power
station’, taking surplus energy from the batteries of parked buses
and feeding it back into the grid. In November 2020, we launched
the first fully electric bus fleet in the North East of England,
providing 55,000 journeys a year and covering 300,000 miles
across Newcastle and Gateshead each year. In September,
work completed at Go-Ahead London’s Merton depot, to
enable 17 new electric buses to charge overnight.
We recognise the unique role that buses can play in combatting
poor air quality and congestion and are committed to investing
in pioneering technology with environmental objectives. In
September 2018, our Bluestar bus company in Southampton unveiled
the UK’s first air filtering bus that removed ultrafine particles from
the air, trapping them through a filter as the bus moved through the
streets. We have now installed a filter on six buses of our Bluestar
fleet, meaning we can remove 1.25kg of particulate matter from
Southampton’s air each year. The buses remove 99.5 per cent of
ultra-fine particles and consume and filter the same amount of air as
6,000 people breathe an hour. In November 2020, the scheme won a
UK Fleet Champions Award in the category ‘Sustainable Journeys’
recognising the work done to reduce risk and fuel.
In Brighton, we introduced the UK’s first hybrid ‘geo-location’ electric
bus route, where buses automatically switch to zero-emission mode
when driving through the city centre. We now have a total of 54 of
these buses covering 244,000 zero-emission miles a year.
We are piloting the use of solar panels on the roofs of our buses and
depots, and are presently carrying out a feasibility study to identify
further potential sites for solar PV across all UK bus premises so
that we can increase the amount of self-generated, zero carbon
electricity that we consume. Over the last 12 months, energy
produced from these solar panels equated to over 1 million kWh
of electricity. All the Group’s UK premises – including rail stations
and bus depots – are powered by zero-carbon electricity generated
from fully renewable sources, such as solar, wind and hydro power.
In rail, we are showing what it is possible to achieve with
electrification, alternate non-diesel technology operation, and
zero-carbon energy. Go-Ahead is the UK’s largest operator of
electric trains, at the year end, 98 per cent of our fleet comprised
electric trains. GTR’s Class 700 fleet recycles 15.8GWh of energy
each month from its braking system and returned it into the
network. This equates to a 50 per cent reduction in energy
demand compared with the previous fleet of trains.
One of the identified causes of carbon emissions in urban areas is
the increase in traffic for delivery of online orders. To help reduce the
numbers of stops required by delivery vans, we have installed Amazon
36
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report lockers at 51 locations across the Southern network, increasing
convenience for our customers as well as reducing the environmental
impact of deliveries. The lockers are placed in locations where
customers can collect their goods while using the station or while in
the local area. This scheme will be expanded across Thameslink and
Great Northern stations in the coming months.
Disclosure and verification
The recognition our progress has received reflects the focus and
commitment Go-Ahead has to its environmental performance.
We were proud to be named as one of Britain’s Most Admired
Companies, coming first place in the transport sector for
‘Community and Environmental Responsibility’, highlighting our
position as a leader in sustainable transport. Go-Ahead has also
been awarded with the London Stock Exchange Green Economy
Mark, an accreditation which recognises businesses with at least
50 per cent green revenues.
In December 2021, we maintained our highest ever rating from the
Carbon Disclosure Project’s (CDP) Climate Change Survey for our
commitment in reducing carbon emissions, keeping our A minus
grade, the highest score of any UK transport operator. This year,
Go-Ahead was named one of the top 300 ‘European Climate
Leaders’ by the Financial Times for our carbon cutting initiatives.
Notably, we have cut carbon emissions over a time period of
meaningful national and international growth.
Go-Ahead was the first major public transport company to
achieve the ISO 50001 certificate in 2018 for energy management
for all of our UK operations. The certification independently
verifies our energy management processes and data and
supports compliance with mandatory disclosures.
Performance and targets
Overall, in absolute terms, on a location-basis, our equivalent
carbon dioxide (CO2e) emissions in 2021 were 8.35 per cent lower
year on year and 27.1 per cent lower than 2017, our baseline year.
The absolute reduction in CO2e compared to our 2017 baseline is
partially due to the significant changes in the composition of the
Group.
In 2019 we set ourselves a target to achieve a 25 per cent
reduction on our CO2e per vehicle mile by 2021 from our 2017
baseline performance and not only achieved our target a year
early, but also exceed it with an overall reduction of 33.4 per cent.
Greenhouse gas emissions
Our carbon footprint in tonnes of equivalent carbon dioxide (CO2e)
Read more on page 283
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
2021
Tonnes CO2e
2020
Tonnes CO2e
2019
Tonnes CO2e
2018
Tonnes CO2e
2017
Tonnes CO2e
366,372
383,082
394,878
406,564
426,130
318,099
43,242
27,945
20,144
369,439
67,279
31,554
15,188
370,297
61,971
31,510
12,436
422,644
63,306
36,012
7,858
520,508
61,037
48,666
9,373
Total kWhs
2,917,925,461
3,032,726,257
2,983,369,795
3,042,437,920
3,207,016,101
Scope 1, 2 & 3 and out of scopes
UK – location
Non-UK – location
Total – location
UK – market
Non-UK – market
Total – market
Total vehicle miles operated
Energy consumption
UK
Non-UK
Total kWhs
642,572
89,987
732,559
350,386
107,318
457,703
749,034,991
715,861
83,403
799,263
401,947
95,156
497,104
733,702,870
—
—
809,121
—
—
500,795
706,393,581
—
—
873,078
—
—
513,740
683,223,210
—
—
1,004,677
—
—
545,207
684,511,871
2021
kWhs
2020
kWhs
2,578,251,899
2,728,037,565
339,673,561
304,688,691
2,917,925,461
3,032,726,257
Total bus and rail mileage (locations)
2021
2020
2019
All scopes kgs CO2e (location)/vehicle mile
YoY % change
% change on 2017 baseline
0.9780
-10.22%
-33.37%
1.0894
-4.90%
-25.78%
1.1454
-10.37%
-21.96%
2018
1.2779
-12.93%
-12.93%
2017
1.4677
n/a
n/a
For more information on methodology, scope and exclusions see page 284
Annual emissions figures for prior years have been restated to reflect the collation of subsequent changes in consumption data and the correction of emissions.
37
The Go-Ahead Group plc Annual Report and Accounts 2021
Responsible business pillars continued
Task Force on Climate-related Financial Disclosures (TCFD)
The Task Force on Climate-related Financial Disclosures (TCFD), established by the Financial Stability Board (FSB), was set up to define
how reporting could take account of climate-related issues. The Go-Ahead Group will incorporate the TCFD recommendations fully
into reporting next year. The table below gives an overview of where we stand today.
Governance
Governance section, pages 71 to 146
Group Board
The Board is ultimately responsible for the Group’s business
strategy and long term performance, which includes climate
change. The Board receives updates at least twice annually
on progress against targets, changes in legislation, and risks
and opportunities arising from climate change. The Group
Chief Executive is responsible for leading discussion on
climate-related topics at Board and Group Executive
Committee meetings.
The Board has ultimate accountability for the Group’s risk
management, supported by the Audit Committee, to which
the Board has delegated responsibility for reviewing the
effectiveness of the Group’s risk management and internal
control systems. Strategic climate-related risks and
opportunities are identified, assessed and responded to
within this risk management process in the same way as all
other risks to the Group. As such, the Board has full oversight
on these risks, their current status and the measures being
implemented to manage and mitigate them.
Group Executive Committee
The Group’s Executive Committee, which includes the Group
Chief Executive and Group Chief Financial Officer, recommends
and oversees the Group strategy and targets (including targets
for tackling climate change) and decides upon investment
priorities for the Group.
Operating companies
Senior leadership teams in the Group’s individual operating
companies are responsible for implementing the climate
change strategy within their business and reporting
performance back to the Group Executive Committee.
Through our business planning cycle reports, and our risk
registers, our localised companies feed into the risk process,
both of which are reported to the Group Board and reviewed
on a regular basis. They also monitor the impact of climate
change on their business and ensure this is communicated to
the Group.
Strategy
Climate change strategy, pages 26 to 27
Climate change strategy
The Group’s overarching target is to become a net zero
carbon business by 2045. The strategy to achieve the target
considers short, medium and long term horizons and focuses
on five workstreams:
• Climate change adaptation – identifies how climate
change impacts the business and develops plans to adapt
to present and future climate-related changes
• Decarbonisation – works towards the decarbonisation
of our fleet and operations
• Air quality – aims to reduce emissions of CO, HCs, NOx,
and PM
• Water – aims to reduce our water usage
• Waste – aims to reduce our overall waste volumes
and increase reuse and recycling
Climate Change Task Force (CCTF)
Data, metrics and detailed action plans are managed by
our CCTF, a multi-functional team drawn from Go-Ahead’s
operating companies and the Group’s head office. The CCTF
formulates the plans which enable a programme of climate-
related projects to be delivered across Go-Ahead’s
businesses and is responsible for monitoring its progress.
Scenario analysis
We conducted climate change scenario analysis, looking at
scenarios of temperature increases of +2°C and +4°C by
2030 to test the organisation’s robustness under a variety
of future outcomes. For our study, the two scenarios chosen
were: an ‘aggressive mitigation’ scenario whereby global
warming is limited to 2°C by the end of the century; and a
‘rapid warming’ scenario whereby global GHG emissions
continue on an upward trajectory and global warming
reaches 4°C by the end of the century.
These scenarios were chosen because they represent two
opposing pathways: one of rapid policy and technological
change, which helps to limit the extent of the physical
impacts of climate change; and another representing
‘business as usual’ from a policy perspective, such that rising
GHG emissions result in significant physical climate impacts.
Our scenario analysis closely informed the work that we have
carried out over the last 12 months to develop our Climate Change
Strategy. We have built on the broad-brush risks and opportunities
identified in the scenario analysis by conducting an in-depth
climate change risk and opportunity assessment in line with the
TCFD recommendations and have ensured that our strategy
addresses the substantive risks and opportunities identified.
38
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Strategy continued
Risks and opportunities
We have identified a range of risks and opportunities relating
to the impact of climate change on our business. They have
been incorporated into our risk registers and operating
company business planning, which is reported to the Board
on an annual basis. We consider the areas around which the
most material risks and opportunities exist to be:
• Delivery of our operations and contractual obligations
• The infrastructure through which our buses and trains
operate, e.g. premises, third-party infrastructure (such
as roads and rail networks)
• Our colleagues and passengers
• Our reputation
• Our financial position and performance
Risk management
Principal Risks, pages 60 to 64
Our approach to risk management
Our approach to risk management combines a top-down
strategic assessment of risk with a bottom-up operational
identification and reporting process. All risks are assessed for
their potential impact over the short, medium and long term
in a multi-disciplinary, Group-wide risk management process.
As previously mentioned, the ultimate accountability for risk
management sits with the Board, supported by the work of
the Audit Committee, to which the Board has delegated
responsibility for reviewing the effectiveness of the Group’s
risk systems.
Monitoring climate-related risks
In 2020, as part of the work to develop our new climate
change strategy, a complete review of climate-related
risks and opportunities was carried out by the CCTF. This
process identified over 100 risks and opportunities, which
were scored qualitatively. The main output of this review
is the ‘Group Register of all Climate Change-related Risks and
Opportunities’, which is maintained, reviewed and updated
as required twice annually by the CCTF, and enables the
executive directors to look across the business and
consider aggregate Group-wide risks, as well as to
challenge any inconsistencies.
Embedding and responding to climate-related risks
As the executive directors review the Group-wide strategic
risks identified by the CCTF, they can include them within the
Group’s Risk Register Report and take them to be discussed
at the Audit Committee and Group Board meetings.
The Group’s response to climate-related risks is no different
to other material risks identified by the Group.
Metrics and targets
Climate change strategy, page 26 and GHG emissions table, page 283
Climate-related KPIs
We have a range of KPIs to help us manage climate-related
risks and opportunities, performance against targets, and
monitor our scope 1, scope 2 and scope 3 GHG emissions,
as well as the related risks. Performance-related KPIs such
as fuel efficiency, ultra low emission vehicles, and carbon
footprint are embedded into operating company monthly
reporting and reviewed in more detail biannually, which
allows clear oversight of progress and review of risks
and opportunities against targets.
Science Based Targets for scope 1 and 2
Go-Ahead intends to reduce emissions across all three scope
categories. We have set a Science Based Target (SBT) to
reduce our scope 1 and 2 CO2 missions by 75 per cent by 2035
as well as action plans to achieve these targets. We are
currently in the process of developing our scope 3 emissions
reduction activity. A scope 3 screening exercise was
carried out in 2021 to quantify these emissions as part of the
work in setting a SBT, which established that our scope 3
emissions are under the 40 per cent threshold specified by
the Science Based Targets initiative (SBTi). Therefore, we did
not have to set reduction targets for our scope 3 emissions.
The baseline for the strategy is an independently verified
measure of Go-Ahead’s emissions for the financial year
ended 27 June 2020. We used this reference to project future
emissions over a 15 year horizon and calculated that, to meet
the 1.5°C threshold, we must reduce emissions by at least
4.2 per cent on average annually. However, we can do more and
have set a target to decarbonise our business by 75 per cent
by 2035, and to become a net zero business for scopes 1 and 2
emissions by 2045, which considers that the residual carbon
that cannot be removed, will be offset.
39
The Go-Ahead Group plc Annual Report and Accounts 2021
Business and finance review
Gordon Boyd
Interim Group Chief Financial Officer
Revenue
Operating profit pre-exceptional items*
£4,058.5m
(2020: £3,897.2m restated)
11+
Regional bus: £427.7m
London & International bus: £660.9m
UK rail: £2,829.7m
International rail: £140.2m
£115.5m
(2020: £76.4m restated*)
68.5
56.7
17.9
International
rail
Regional bus
London &
International
bus
UK rail
(27.6)
Regional bus: £17.9m
London & International bus: £68.5m
UK rail: £56.7m
International rail: (£27.6m)
* Pre-exceptional items of £104.1m (2020: £93.7m restated).
Group operating profit/(loss)
(post-exceptional items)
£11.4m
(2020: loss of (£17.3m) restated)
Regional bus: £17.7m
London & International bus: £68.5m
UK rail: £24.3m
International rail: (£99.1m)
Group overview
Group revenue
Regional Bus operating profit
London & International Bus operating profit
Total Bus operating profit
UK Rail operating profit
International Rail operating loss
Total rail operating profit
Group operating profit (pre-exceptional items)
Exceptional operating items
Group operating (loss)/profit (post-exceptional items)
Results of equity accounted investments
Net finance costs
Loss before tax
Total tax expense
Loss for the period
Non-controlling interests
Loss attributable to shareholders
Profit attributable to shareholders (pre-exceptional items)
Weighted average number of shares (m)
Earnings per share (pre-exceptional items) (p)
Loss per share (post-exceptional items) (p)
Proposed dividend per share (p)
2021
£m
4,058.5
17.9
68.5
2020
Restated
£m
3,897.2
20.5
50.0
86.4
56.7
(27.6)
29.1
115.5
(104.1)
11.4
(0.2)
(18.1)
(6.9)
(33.8)
(40.7)
(5.3)
(46.0)
46.6
43.0
70.5
50.5
(44.6)
5.9
76.4
(93.7)
(17.3)
(0.6)
(21.6)
(39.5)
(11.4)
(50.9)
(15.0)
(65.9)
21.5
43.0
108.4p
(107.0)p
50.0p
(153.3)p
—
—
Increase/
(decrease)
£m
Increase/
(decrease)
%
161.3
(2.6)
18.5
15.9
6.2
17.0
23.2
39.1
(10.4)
28.7
0.4
3.5
32.6
(22.4)
10.2
9.7
19.9
25.1
—
58.4p
46.3p
—
4.1
(12.7)
37.0
22.6
12.3
38.1
393.2
51.2
11.1
(165.9)
(66.7)
(16.2)
(82.5)
196.5
(20.0)
(64.7)
(30.2)
116.7
—
116.8
30.2
—
40
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report16
+
70
3
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Financial performance
We continue to work closely with our clients and partners to operate essential transport
services and plan for the future.
The Group’s UK and International Bus operations delivered a solid set of results, however,
challenges in International Rail and the circumstances relating to the end of the
Southeastern franchise have overshadowed the Group’s performance.
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/loss is shown
within the income statement and associated notes. The year
ended 3 July 2021 was a 53 week period whereas the year ended
27 June 2020 was a 52 week period. Like-for-like comparatives
have been referenced below where meaningful.
Financial overview
The Group delivered a solid financial performance in our Bus
businesses and GTR, supported by limited exposure to changes in
passenger demand, with around 90 per cent of our revenues
secured through contracts. This performance was, however,
overshadowed by the need to make material provisions in respect
of International Rail and LSER.
Prior year restatements
A number of restatements and adjustments were identified during
the year. Note 2 in the financial statements summarises the
impact of the adjustments to each financial year and to each of
the primary financial statements. As a result of the prior year
adjustments, 2020 loss before tax increased by £39.3m, 2020 net
assets decreased by £77.2m and 2020 opening retained earnings
has decreased by £23.2m.
The misstatements can be aggregated based on their nature and
cause into the following: i) London & South Eastern Railway
Limited (LSER) matters of concern, other historic franchises, and
affiliate trading; ii) correction of errors, including the German rail
onerous contract provision; and iii) presentational adjustments
and reclassifications.
The misstatements relating to LSER matters of concern, historic
other franchises and affiliate trading reduced 2020 operating
profit by £3.9m, profit after tax by £4.2m and profit attributable
to the parent by £2.7m. Within the 2020 balance sheet, trade and
other payables increased by £40.3m, current tax liabilities
decreased by £0.9m, retained earnings reduced by £26.1m and
non-controlling interests reduced by £13.3m.
In Germany, an understatement has been identified in respect of
the accounting for the onerous contract provision in the rail
contracts in Bavaria in the prior year and the Group’s 2021 half
year results. This reduced 2020 operating profit (after
exceptional items) by £36.6m. Within the 2020 balance sheet, the
2020 provision was determined to be understated by £37.1m
(including the £25.9m subsequently provided for in the 2021 half
year results), retained earnings reduced by £36.6m and the
translation reserve by £0.5m.
The correction of errors primarily relates to provisions and
accruals balances which were not appropriate. These
misstatements increased 2020 operating profit by £2.4m, and
profit after tax and profit attributable to the parent by £2.0m.
Within the 2020 balance sheet, there were restatements to
multiple items, the net asset impact was a decrease of £0.7m.
The presentational adjustments and reclassifications primarily
relate to balance sheet reclassifications, cashflow statement
reclassifications and other presentational adjustments within the
financial statements. Within the 2020 balance sheet, current
assets and liabilities both increased by £22.0m.
Revenue for the year was £4,058.5m, up £161.3m, or 4.1%, on last
year (2020: £3,897.2m restated). This increase includes the first
full year of operating rail services in Norway. Higher revenue
within London & International Bus reflects contract revenue
growth in London and the timing benefit from a change in the
recognition profiling of Quality Incentive Contract (QIC) revenue.
Loss before tax was £6.9m (2020: loss of £39.5m restated),
including £104.1m of exceptional items (2020: £93.7m restated).
The movement reflects higher exceptional costs, partly offset by
higher profits in London & International Bus and reduced losses in
International Rail. The loss attributable to shareholders for the
year decreased, to a loss of £46.0m (2020: loss of £65.9m
restated) and loss per share reduced by 30.2% to a loss per share
of 107.0p (2020: loss per share 153.3p restated).
Exceptional items of £104.1m (2020: £93.7m restated) include
£71.5m in International Rail, £32.4m in UK Rail and £0.2m in
Regional Bus. They consist mainly of an onerous contract
provision and an asset impairment in Norway, as well as a
potential financial penalty from the Department for Transport
(DfT) and associated costs relating to LSER matters of concern.
Excluding exceptional items, profit attributable to shareholders
increased by £25.1m or 116.7% to £46.6m (2020: £21.5m restated),
driven by performance in bus operations in London and GTR, with
earnings per share (excluding exceptional items) increasing to
108.4p (2020: 50.0p restated).
Adjusted net debt (excluding restricted cash) on a pre-IFRS 16
basis was £305.9m at 3 July 2021 (2020: £321.6m) as reconciled in
the cashflow statement on page 52. The decrease in net debt
reflects improved EBITDA (excluding exceptional items) and
continued measures taken to mitigate the impact of COVID-19
including limiting capital investment and the suspension of
dividends. The pre-IFRS 16 adjusted net debt (excluding restricted
cash) to EBITDA (excluding exceptional items) ratio of 1.56 times
(2020: 1.98 times restated) is at the lower end of our target range
of 1.5 times to 2.5 times, and well below our primary bank
covenant of 3.5 times.
Prior to 2021, UK Rail and International Rail were reported
together as one rail segment. They are now reported separately
due to growth in the international businesses and in response to
differences in characteristic and challenges between UK and
international rail contracts.
41
The Go-Ahead Group plc Annual Report and Accounts 2021
Business and finance review continued
Bus
Go-Ahead is a leading bus operator transporting passengers
on our bus services across the UK, Ireland and Singapore.
Our bus financial highlights
Bus overview
2020
Restated
2021
Increase/
(decrease)
£m
Increase/
(decrease)
%
Bus revenue
£1,088.6m (2020: £1,012.9m)
Go-Ahead London: £566.3m
Go South Coast: £91.3m
Go North East: £86.7m
Brighton and Hove: £81.5m
Go-Ahead Singapore: £55.4m
Oxford Bus Company: £46.5m
Go South West: £45.0m
Go-Ahead Ireland: £39.2m
Go North West: £32.2m
East Yorkshire: £28.5m
Go East Anglia: £16.0m
Bus operating cost base
£1,002.2m (2020: £942.4m restated)
549
Other: 4.1%6811
Bus operating profit pre-exceptional items*
£86.4m (2020: £70.5m restated)
Employee costs: 67.5%
Engineering costs: 10.5%
Fuel costs: 8.9%
Depreciation: 9.0%
47.1
45.8
44.5
Regional bus
London &
International bus
17.9
68.5
20.5
43.6
45.6
51.2
50.0
2017
2018
2019
2020
2021
* Exceptional costs of £0.2m (2020: £26.7m).
Total bus operations
Revenue (£m)
1,088.6 1,012.9
Operating profit1 (£m)
Operating profit margin1
86.4
7.9%
70.5
7.0%
75.7
15.9
n/a
7.5
22.6
0.9ppt
Regional Bus
Revenue (£m)
Operating profit1 (£m)
Operating profit margin1
London & International Bus
Revenue (£m)
Operating profit1 (£m)
Operating profit margin1
Like for like revenue growth
Regional Bus2
London &
International Bus3
Like for like volume growth
Regional Bus
passenger journeys4
London & International
Bus miles operated5
427.7
17.9
4.2%
408.8
20.5
5.0%
18.9
(2.6)
n/a
4.6
(12.7)
(0.8ppt)
660.9
68.5
10.4%
604.1
50.0
8.3%
56.8
18.6
n/a
9.4
37.0
2.1ppt
(1.9%) (11.4%)
n/a
9.5ppt
6.7%
3.0%
n/a
3.7ppt
(42.1%) (24.7%)
n/a
(17.4ppt)
3.8% 0.4%
n/a
3.4ppt
Stagecoach: 26%
FirstGroup: 21%
Go-Ahead: 11%
National Express: 7%
Arriva: 14%
Regional bus market share (%)
London market share (%)
Others: 21%2621
CT Plus: 2%2518
Arriva: 17%
Abellio: 9%
RATP: 12%
Go-Ahead: 25%
Metroline: 18%
Stagecoach: 14%
Tower Transit: 3%
42
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report
9
+
9
+
3
+
+
+
L
8
+
7
+
5
+
4
+
4
+
3
+
3
+
2
+
1
+
+
L
14
+
11
+
7
+
21
+
+
L
17
+
14
+
12
+
9
+
3
+
2
+
+
L
1. Excluding exceptional items.
2. Like for like revenue is calculated after removing £23.2m from 2021 revenue and £4.3m of 2020 revenue relating to contracts
started part way through the previous year. £7.6m was removed in 2021 to adjust for the 53 week year.
3. Like for like revenue is calculated after removing £4.7m from 2021 revenue and £0.6m of 2020 revenue relating to contracts started
part way through the previous year. £12.4m was removed in 2021 to adjust for the 53 week year.
4. On a like for like basis, excluding the impact of the 53 week year in the current year.
5. On a like for like basis, excluding the impact of Go-Ahead Ireland’s first year of operation and excluding the impact of the 53 week
year in the current year.
Overall bus performance
The Bus division had a strong year owing to good performance in
London & International Bus. Regional Bus performance reflects
the continued impact of COVID-19 and funding received for
operating essential bus services.
Total Bus revenue increased by £75.7m, or 7.5%, to £1,088.6m
(2020: £1,012.9m) reflecting an additional week of operations with
2021 being a 53 week financial year, contract revenue growth in
London & International Bus and a full year of operating contracted
bus services in Cornwall, which commenced in April 2020.
Operating profit was £86.4m (2020: £70.5m restated) and the
operating profit margin increased by 0.9ppts to 7.9% (2020:
7.0% restated). This reflects a good performance in London &
International Bus largely driven by a £14.0m timing benefit in
London relating to a change in the recognition profile of Quality
Incentive Contracts (QICs) and the COVID-19 related
government receipts in Singapore.
Regional Bus
Regional Bus performance reflected the continued impact of
COVID-19 on travel patterns and the receipt of COVID-19 Bus
Service Support Grant (CBSSG) funding which was in place to
support the provision of essential bus services throughout the
year. Services were operating at between 90% and 100% of
pre-COVID-19 levels at the year end and more passengers were
travelling on our services than at any point during the pandemic,
with volumes increasing as restrictions eased recovering to
around 70% of pre-COVID-19 levels by the year end.
Regional Bus revenue for the year was £427.7m (2020: £408.8m),
up £18.9m, or 4.6%, reflecting the first full year of operation of
contracts in Cornwall, a full year of CBSSG receipts and an
element of prior year CBSSG funding recognised in the current
year. Nine months of the 2020 financial year took place before the
impact of COVID-19 was felt in our business, we estimate the
profit in that financial year up to the end of February 2020 was
£15.7m. 2021 has been impacted by the pandemic throughout the
period with reductions in passenger revenue mitigated by
government support and cost savings. Like for like revenue
reduced by 1.9% (2020: reduction 11.4%).
Operating profit (excluding exceptional items) in Regional Bus
reduced by £2.6m, or 12.7%, to £17.9m (2020: £20.5m) with the
operating profit margin down 0.8 percentage points to 4.2%
(2020: 5.0%). This reflects the breakeven performance of bus
operations under the CBSSG mechanism, the one-off recognition
of an element of prior year CBSSG reconciliation settlements and
property income in respect of Go-Ahead owned facilities.
Operating profit (excluding exceptional items) excluding prior
year CBSSG of £7.2m was £10.7m.
The UK Government maintained CBSSG from its inception in
March 2020 until the end of August 2021. The funding received
was subject to a reconciliation process every 12-16 weeks. At the
year end, the reconciliations for the periods to 21 December 2020
had been concluded providing greater certainty over revenue
recognition. Following completion of the first reconciliation,
£7.2m was recognised in the first half of the 2021 year in respect
of services delivered in the second half of 2020.
Although some reconciliations are yet to be completed, improved
clarity around the process and greater certainty over revenue
recognition has resulted in £120.0m of expected CBSSG income
being recognised in the year end result (2020: £20.1m). Overall the
net increase in operating profit on operations covered by CBSSG
was £1.2m, while costs not covered by CBSSG were £2.5m higher
in 2021 than in 2020.
Local authorities across the country have largely continued to
provide funding for services at pre-crisis levels, this is consistent
with prior year. The Bus Service Operators Grant (BSOG), relating
to fuel duty, was also maintained at pre-COVID-19 levels
throughout the year.
Exceptional items relate to the profit on sale of previously
impaired assets sold above their written down value and the
reversal of a prior year exceptional provision. These credits were
partially offset by the additional impairment of coaches relating
to services not supported by CBSSG and provisions for loss
making contracts. The net impact of these items is a £0.2m cost
in the year, £26.5m lower than in the prior year.
43
The Go-Ahead Group plc Annual Report and Accounts 2021
Business and finance review continued
Bus continued
The most material movement in the year related to QICs income.
During the year, Transport for London (TfL) moved from annual to
quarterly settlement of QICs. This created greater levels of certainty
and accelerated the recognition of this revenue, giving a significant
timing benefit in the first half of the year and crystallising additional
QICs in the second half of the year. As a result, QICs rose by £14.0m
to £28.4m (2020: £14.4m).
The full year performance was also supported by good results in the
international businesses, contract revenue growth including route
wins in London and an additional week of operations generated a
£2.0m benefit against the prior year. The contract revenue growth in
London helped mitigate the impact of reduced commercial and
ancillary revenue due to COVID-19.
The following table illustrates the key drivers of the movements
in segmental operating profit which are summarised in the
preceding narrative:
Regional Bus continued
The table below illustrates the key drivers of the movements in
segmental operating profit which are summarised in the above
following narrative:
£m
Post-exceptional
£m
Pre-exceptional
2020 operating profit/(loss)
(6.2)
20.5
CBSSG not recognised in 2020 due
to uncertainty
2020 including CBSSG recognised
in 2021
Changes:
Estimate of prior year profit for period
pre-COVID-19
Operating profit movement on
operations covered by CBSSG
Costs not covered by CBSSG
Exceptional items
2021 excluding CBSSG recognised
related to 2020
Recognition of confirmed prior
year CBSSG
2021 operating profit
7.2
1.0
7.2
27.7
(15.7)
(15.7)
1.2
(2.5)
26.5
1.2
(2.5)
—
2020 operating profit restated
10.5
10.7
Changes:
QICs
7.2
17.7
7.2
17.9
London contract revenue growth
Singapore
Ireland
2021 operating profit
Operating profit post exceptional items of £17.7m increased £23.9m
from a prior year operating loss £6.2m with exceptional costs
reducing by £26.5m in the year to £0.2m.
London & International Bus
London & International Bus, which includes our operations in
London, Singapore and Ireland, performed well as a result of its
resilient business model; Singapore up £1.9m and Ireland up £0.7m
against the prior year.
Our contracts are operated on behalf of transport authority clients
on a gross cost basis without exposure to changes in passenger
demand and therefore revenue continued to be generated at
pre-crisis levels. Like for like mileage increased by 3.8% mainly due to
contract renewals and route wins in London.
Revenue grew by £56.8m or 9.4%, to £660.9m in the year (2020:
£604.1m), reflecting a full year’s operation of contracts in Ireland,
contract revenue growth including route wins in London bus, timing
benefits in London relating to the recognition profile of Quality
Incentive Contract (QICs) and COVID-19 related government
receipts in Singapore. An additional week of operation in the 2021
financial year also supported revenue growth.
Operating profit in London & International Bus was £68.5m (2020:
£50.0m restated), up £18.5m, or 37.0%, resulting in an increase in
operating profit margin to 10.4% (2020: 8.3% restated).
Capital expenditure and depreciation
Regional Bus fleet
(inc. vehicle refurbishment)
London & International Bus fleet
(inc. vehicle refurbishment)
Technology and other items
Depots
Intangible expenditure
Total capital expenditure
2021
£m
26.4
16.4
4.9
2.3
0.9
50.9
Total capital expenditure for Bus was £50.9m (2020: £61.0m). While
this investment is materially below typical pre-pandemic levels, the
average age of our buses remains low at 7.9 years (2020: 7.6 years).
The majority of capital costs in the year related to previously
committed purchases deferred from 2020 and essential expenditure
to fulfil contractual requirements.
In London, the purchase of 41 new buses (2020: 39 buses) reflects
the timing of contract wins and renewals. In Regional Bus, 98 new
buses (2020: 133 buses) were purchased. Over half of the total buses
44
The Go-Ahead Group plc Annual Report and Accounts 2021
£m
50.0
14.0
1.9
1.9
0.7
68.5
2020
£m
31.2
13.5
8.8
3.1
4.4
61.0
Strategic report
purchased were electric (74 buses) and the remainder comprised
extended hybrid and Euro 6 buses. Vehicle procurement is aligned
with our climate change strategy and target to operate a zero-
emission bus fleet by 2035.
Depreciation on owned assets for Bus was £65.1m (2020: £66.2m),
reflecting the net impact of prior year coach impairments and
the higher cost of vehicles as we transition to a greener fleet.
Depreciation on right of use assets was £25.5m (2020: £21.7m),
slightly higher than the prior year, reflecting additional leased
vehicles due to route wins in London and our bus contract in
Cornwall which commenced operation in April 2020.
We expect total capital expenditure for Bus to be around £55.0m in
2022. Investment in Regional Bus is linked to availability of grants
and government funding which reduces the net cash cost to the
Group. Capital spend in London is driven by contract wins and
renewals while we do not have any capital commitments for fleet
replacement in Ireland or Singapore.
Fuel
During the year, Bus required around 135 million litres of fuel, with a
net cost of £89.4m. (2020: 135 million litres of fuel, with a net cost of
£98.3m). Fuel costs and the cost per litre were lower in the year due
to lower market rates for fuel as preferable hedging prices were
obtained in the prior year, in particular during the final quarter of the
2020 financial year as market rates dropped.
Bus fuel hedging prices
Our bus fuel hedging programme has continued, using fuel swaps to
fix the price of our diesel fuel in advance. As shown in the table
below, the year end position was aligned with our core policy to be
fully hedged for the next financial year before that year begins, and
50% and 25% hedged for the two following years respectively.
% hedged
Price (pence per litre)
2022
fully
32.8
2023
50%
32.1
2024
25%
31.2
This hedging profile is then maintained on a month by month basis..
The position as at February 2022 is as follows:
% hedged
Price (pence per litre)
2022
fully
32.8
2023
77%
34.0
2024
39%
34.1
At each period end, the fuel hedges are marked to market price.
Bus financial outlook
Regional Bus
Following year end, passenger volumes increased over the first five
months of the 2022 financial year, with a slowing in the recovery
towards the end of 2021 following the emergence of the COVID-19
Omicron variant, in line with the industry. Since the lifting of the UK
Government’s “Plan B” restrictions, passenger volumes have
returned to pre-Omicron levels.
While we are reassured by the extent of the recovery to date,
the remaining uncertainty regarding the speed and extent of
recovery over the remainder of the financial year could impact the
full year performance of Regional Bus, assuming particularly if BRG
funding ceases in March 2022 as planned.
We expect passenger numbers to continue to increase over
the medium term as workers return to offices, airport travel
accelerates and self-isolation rules are relaxed. Longer term, we
remain confident that Regional Bus will deliver attractive margins
and returns given its strong local market positions and networks.
The Department for Transport (DfT) maintained Regional Bus
funding throughout the year and has continued to support the
provision of services in line with its August 2020 commitment that
support would continue until no longer required. As the number of
journeys taken on our bus services has grown, the required level of
government support for these services has reduced.
We have worked with the DfT to establish a framework to transition
back to a commercial operating model. CBSSG ended on 31 August
2021 and was replaced by the Bus Recovery Grant (BRG), with
£255m of funding being made available for bus services in England
until March 2022. The bus industry is engaging with the DfT
regarding a potential continuation of funding beyond this date, to
ensure vital bus services remain in place for our communities.
Following the publication of the UK Government’s first national bus
strategy in March 2021, our local management teams have worked
in close collaboration with their local authorities to produce Bus
Service Improvement Plans focused on providing high quality,
reliable and value-for-money bus services which support climate
change targets in our towns and cities. These plans will form the
basis of Enhanced Partnerships in the majority of our bus markets.
As we emerge from the pandemic, and in the context of ambitious
national climate change targets, it is more important than ever for
bus travel to be on the Government’s agenda and receive the focus
and investment it warrants.
London & International Bus
Through its robust business model we have already secured our
expected contractual revenue for the 2022 financial year through
successful contract bidding. In London, while the market remains
challenging and competitive, quarterly QICs settlements will
continue until the end of March 2022, which provides greater
visibility of income.
45
The Go-Ahead Group plc Annual Report and Accounts 2021
Business and finance review continued
Rail
Go-Ahead operates rail services in the UK, Germany and Norway.
Our rail financial highlights
Rail revenue
£2,969.9m (2020: £2,884.3m restated)
Throughout the year, UK franchises were operated by Govia, a
65% owned subsidiary, while our international contracts are
100% owned by Go-Ahead.
The Department for Transport (DfT) appointed the Operator of
Last Resort to take over the operation of Southeastern services
at the end of the franchise term on 17 October 2021.
GTR: £1,773.9m
Southeastern: £1,095.7m
Germany: £96.8m
Norway: £43.5m
Rail overview
2020
Restated
2021
Increase/
(decrease)
£m
Increase/
(decrease)
%
Rail operating cost base
£2,940.8m (2020: £2,878.4m restated)
5937
2723
Rail operating profit pre-exceptional items*
£29.1m (2020: £5.9m restated)
2020
2021
50.7
56.7
UK rail
International rail
(27.6)
(44.6)
* Exceptional items of £71.5m (2020: £67.0m).
Employee costs: 26.7%
Track access: 23.2%
Other: 18.8%
Depreciation: 16.1%
Rolling stock lease payments: 7.5%
* Excluding exceptional items.
Traction electricity: 5.9%
Engineering: 1.8%
Total Rail operations
Total revenue (£m)
2,969.9 2,884.3
Operating profit* (£m)
Operating profit margin*
29.1
1.0%
5.9
0.2%
85.6
23.2
3.0
393.2
n/a
0.8ppt
UK Rail
Total revenue (£m)
Operating profit* (£m)
2,829.7 2,814.3
50.5
56.7
Operating profit margin*
2.0%
1.8%
15.4
6.2
n/a
0.5
12.3
0.2ppt
International Rail
Total revenue (£m)
140.2
70.0
70.2
100.3
Operating profit* (£m)
Operating profit margin*
(27.6)
(44.6)
(19.7%) (63.7%)
17.0
n/a (44.0ppt)
38.1
FirstGroup: 28%
Govia: 23%
Others: 20%
Abellio: 17%
Arriva: 12%
UK rail market share (%)*
2823
* During the 2021 financial year
Prior year restatements
As detailed on page 188, a number of restatements and
adjustments were identified during the year and the 2020
financial statements have been restated accordingly. The 2019
consolidated balance sheet has also been restated as some of
these adjustments affect the opening reserves of the comparative
balance sheet given the historical period to which they relate.
46
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report
19
+
16
+
8
+
5
+
2
+
+
L
+
3
+
1
+
L
+
20
+
17
+
12
+
L
The misstatements can be aggregated based on their nature and
cause and grouped into the following: i) LSER matters of concern,
other historic franchises, and affiliate trading; ii) correction of
errors, including the German rail onerous contract provisions;
and iii) presentational adjustments and reclassifications.
The misstatements relating to LSER matters of concern and
historic other franchises and affiliate trading reduced 2020
operating profit by £3.9m, net assets reduced by £39.4m and
retained earnings reduced by £26.1m.
It was noted that under-provisions had been made in LSER in
respect of the Southeastern franchise agreements. In the 2020
financial statements, this has resulted in a £0.1m decrease of
profit before tax and a £2.3m decrease to net assets which also
reflects adjustments to opening reserves.
In GTR, certain balances with the DfT and Network Rail had been
presented as net rather than as gross payables and receivables.
Both current trade and other receivables and current trade and
other payables increased by £22.0m in the 2020 consolidated
balance sheet and by £2.4m in the 2019 consolidated
balance sheet.
In addition to the Independent Committee’s review into the
matters at LSER, a wider business review was conducted which
identified a matter relating to a historic closed rail franchise.
This relates to amounts totalling £3.5m which should have
been reflected in the end of franchise settlement with the DfT.
The amounts noted above in relation to LSER matters of concern
and other historic franchises and affiliate trading includes this
amount and a prior year adjustment in the financial statements
with £3.5m to be paid to the DfT in the 2022 financial year in
respect of this matter. Interest of £0.1m has also been recognised
in relation to this.
In Germany, an understatement has been identified in respect of
the accounting for the onerous contract provision in Bavaria in
the prior year and the Group’s 2021 half year results. The 2020
provision was determined to be understated by £37.1m (including
the £25.9m subsequently provided for in the 2021 half year
results) and has been restated in the prior year figures in the 2021
results. This has a corresponding impact of £36.6m to 2020
exceptional operating items and £0.5m to the translation reserve.
Overall Rail performance
There have been changes in how Rail is reported from 2021. Due
to the growth of the German and Norwegian businesses, and also
due to the different characteristics and challenges faced between
International and UK Rail franchises, we now report under two
segments – UK Rail and International Rail. Due to the different
contractual arrangements in UK Rail between the current and
prior years and the start of the Norwegian contract in the prior
year, no like for like comparison adjusting for just the 53 week
year is presented.
Challenges in International Rail and the circumstances relating to
LSER have dominated the financial performance of our rail
operations.
Total Rail revenue increased by 3.0%, or £85.6m, to £2,969.9m
(2020: £2,884.3m) which included a full year of operating rail
services in Norway. Operating profit excluding exceptional items
was up £23.2m or 393.2% at £29.1m (2020: £5.9m restated) as a
result of lower losses in Germany due to improved operational
and financial performance. Overall rail operating profit margin
increased by 0.8 percentage points to 1.0% (2020: 0.2%).
Including exceptional items of £103.9m, Rail made an operating
loss of £74.8m (2020: loss of £61.1m restated). International Rail
recognised exceptional items of £71.5m (2020: £67.0m restated)
relating to an onerous contract provision and asset impairments
in Norway. UK Rail recognised £32.4m (2020: nil) relating to the
£30.0m provision for a potential financial penalty from the DfT in
respect of LSER along with legal and professional fees associated
with these matters.
Passenger revenue
GTR
Southeastern
Germany
Norway
2020
Restated
2021
Increase/
(decrease)
£m
Increase/
(decrease)
%
412.2 1,242.7
666.3
249.4
28.9
33.2
11.1
17.6
(830.5)
(416.9)
4.3
6.5
(66.8)
(62.6)
14.9
58.6
Total passenger revenue
712.4 1,949.0
(1,236.6)
(63.4)
Other revenue
GTR
Southeastern
Germany
Norway
Other
87.5
9.0
5.8
1.5
—
151.0
19.5
4.6
—
0.9
(63.5)
(10.5)
1.2
1.5
(0.9)
(42.1)
(53.8)
26.1
n/a
n/a
Total other revenue
103.8
176.0
(72.2)
(41.0)
Subsidy and
revenue support
GTR EMA & ERMA1
Southeastern EMA
Germany subsidy
Norway subsidy
Other
Total subsidy and
revenue support
1,234.2
837.3
57.8
24.4
—
375.5
359.4
17.9
7.4
(0.9)
858.7
477.9
39.9
17.1
0.9
228.7
133.0
222.9
229.7
n/a
2,153.7
759.3
1,394.4
183.6
Total revenue
2,969.9 2,884.3
85.6
3.0
1. Emergency Measures Agreement (EMA); Emergency Recovery Measures
Agreement (ERMA).
47
The Go-Ahead Group plc Annual Report and Accounts 2021
Business and finance review continued
Rail continued
Operating profit
UK Rail
Operating profit excluding exceptional items was up £6.2m or
12.3% at £56.7m (2020: £50.5m restated) mainly due to pre-EMA
items in GTR of £14.7m, a GTR contract benefit of £3.8m and a
reduction in head office and bid costs of £8.1m. This was partially
offset by Southeastern’s margin reducing under the EMA
contract, with a £13.8m reduction in operating profit, and
non-recurring gains of £6.8m in the prior year from the close out
of balances on previous rail contracts. The UK Rail operating
profit margin increased by 0.2 percentage points to 2.0% (2020:
1.8%).
The following table illustrates the key drivers in of the
movements in segmental operating profit which are summarised
in the narrative following:
2020 operating profit restated
50.5
50.5
Post-exceptional
£m
Pre-exceptional
£m
Changes:
GTR
GTR pre-EMA items
Southeastern
Head office & bid costs
Historic franchises
Exceptional items - LSER and other
matters of concern
2021 operating profit
3.8
14.7
(13.6)
8.1
(6.8)
(32.4)
24.3
3.8
14.7
(13.6)
8.1
(6.8)
—
56.7
Operating profit including exceptional items was down £26.4m
at £24.3m (2020: £50.5m) due to exceptional costs of £32.4m
(2020: nil) relating to LSER matters of concern.
Individual franchise performance
GTR
GTR began the financial year operating under an Emergency
Measures Agreement (EMA) which commenced in April 2020
and, along with the majority of UK rail franchises, transitioned
to an Emergency Recovery Measures Agreement (ERMA) on
19 September 2020. Like the EMA, GTR’s ERMA is a management
contract with no revenue risk.
While the maximum margin under the EMA was 2.0%, comprising
a 1.5% fixed management fee and 0.5% performance based fee,
the ERMA’s margin is capped at 1.5% comprising a 0.5% fixed
management fee and 1.0% performance based fee.
GTR delivered a strong operational performance through its
EMA, with good levels of customer satisfaction, resulting in the
achievement of the majority of the 0.5% performance fee. The
DfT confirmed the award of the EMA performance payment of
£3.8m in December 2020.
The ERMA performance fee recognised in the year was £11.6m.
This included £8.3m of performance payments confirmed up until
March 2021 and £3.3m of accrued performance fee at year end.
The accrued income has subsequently been confirmed by the
DfT after year end.
Pre-EMA settlements of £14.7m in the year have also improved
performance.
GTR was not subject to any termination sum payable to the DfT
on transition to the ERMA agreement. In June 2021, the DfT
extended GTR’s ERMA under the same contractual terms, from
its original end date of September 2021 to March 2022.
Southeastern
Throughout the period, the Southeastern franchise was operated
by LSER under an EMA contract, which commenced in April 2020
and ended on 17 October 2021. Unlike the majority of UK rail
franchises, which moved to ERMA contracts, the franchise
continued to operate under EMA terms, with operating profit
margins capped at 2.0%.
Operating performance was strong throughout the period resulting
in the achievement of £3.9m in EMA performance fee in the year.
The DfT appointed the Operator of Last Resort to take over the
operation of Southeastern services at the end of the franchise
term on 17 October 2021. The DfT’s decision not to award a
National Rail Contract to LSER was as a consequence of
discussions with the DfT regarding the calculation of profit share
payments under the terms of the relevant franchise agreements
and the treatment of certain overpayments made by the DfT to
LSER over the course of the franchise agreements.
Matters of concern
The Independent Committee has determined that the following
amounts are due to the DfT in connection with the matters of
concern at LSER:
• £27.0m (previously disclosed as £25.0m) in respect of
overpayments made by the DfT to LSER relating to HS1 Track
Access and Depots in respect of the period 12 October 2014
and 29 February 2020. The amount had been accrued and no
further adjustments to the financial statements are required.
• £17.3m in respect of overpayments of subsidy made by the DfT
to LSER in respect of the period 1 April 2006 and 29 February
2020. This amount has been recognised as a prior year
adjustment.
• £7.0m of interest payable in respect of the above
overpayments. Of this amount, £6.1m has been recognised as a
prior year adjustment.
Commercial negotiations
In addition to the matters of concern identified by the
Independent Committee, there are other ongoing commercial
negotiations under discussion with the DfT in relation to:
48
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report
• The historic profit share dispute (recorded as a contingent
liability of £8m in the 2020 Annual Report and Accounts) in
respect of which an amount of £7.2m has been recognised in
the current year financial statements.
• Levels of affiliate trading in respect of the period 12 October
2014 to 29 February 2020, and the implications this has on the
assessment of profit share payable to the DfT in respect of
which an amount of £14.1m has been recognised as a prior year
adjustment, in respect of a sum under dispute with the DfT
of £23.6m.
Payments made to the DfT
To date, a total of £49.2m has been paid by LSER to the DfT.
This includes £22.2m relating to an initial assessment in respect
of historic profit share and associated matters. If we settle the
outstanding commercial discussions in line with our provisions
then an estimated additional £23.4m will be payable to the DfT
which is expected to be paid from restricted cash.
Provision for potential financial penalty
Under the Railways Act 1993, the DfT has the power to impose a
financial penalty. In the absence of specific precedent or relevant
guidance, it is difficult to estimate precisely the likely quantum
of any penalty. The Group, having considered independent legal
advice received by the Independent Committee, has included
a provision for £30.0m in the financial statements of the year,
which reflects the Group’s current best estimate of any penalty.
Historic closed franchises
In addition to the Independent Committee’s review into the
matters at LSER, a wider business review was conducted which
identified a matter relating to a historic closed rail franchise.
This relates to amounts totalling £3.5m which should have
been reflected in the end of franchise settlement with the DfT.
Prior year adjustments have been made in the financial statements
and £3.5m will be paid to the DfT in the 2022 financial year in
respect of this matter. Interest of £0.1m has been recognised in
relation to this.
International Rail
Operating loss excluding exceptional items reduced by £17.1m to
£27.6m (2020: £44.7m) as a result of lower losses in Germany due
to improved operational and financial performance. Germany was
up £14.8m on the prior year, with Norway up £1.4m and head
office and bid costs £0.9m better.
Operating loss including exceptional items decreased by £12.7m
to a loss of £99.1m (2020: £111.8m restated) due to exceptional
costs of £71.5m (2020: £67.0m restated). Exceptional costs relate
to an onerous contract provision of £66.2m and asset impairments
of £10.5m in Norway.
The following table illustrates the key drivers in of the movements
in segmental operating profit which are summarised in the
preceding narrative:
2020 operating (loss)
(111.6)
(44.6)
Post-exceptional
£m
Pre-exceptional
£m
Changes:
Germany
Norway
Head office & bid costs
Exceptional items – Onerous
contract provision
Exceptional items
2021 operating (loss)
14.7
1.4
0.9
(32.9)
28.4
(99.1)
14.7
1.4
0.9
—
—
(27.6)
Germany
The German rail business operates under management contracts
and is not exposed to changes in passenger demand. As a result,
the impact of COVID-19 on the financial performance of the
business has been limited.
Financial performance for our rail operations in Baden-Württemberg
was broadly in line with our expectations in the year and operational
results were in line with our structured improvement plan.
Operational and financial performance has improved with a new
train fleet in full operation, improved driver recruitment, lower
and stable levels of operational penalties and improved cost
controls. As previously guided, losses from these operations
diminished in the year and are expected to reduce further in the
2022 financial year.
Following the year end, we performed a detailed review of all
material contracts across the Group to consider the completeness
of the onerous contract provisions. This involved a detailed
review and challenge of the assumptions within each contract.
The review identified an understatement of £37.1m in respect of
the accounting for the onerous contract provision in the rail
contracts in Bavaria. The provision has been restated to reflect
these findings resulting in a £10.6m increase to the total value
which has been treated as a prior year adjustment, as well as the
re-allocation of the £25.9m reported in the Group’s 2021 half year
results to the prior year. The calculation of the understatement
was determined based on the assessment of information
available that should reasonably have been included in the
assumptions underpinning the 2020 provision.
Having become aware of the issue, we have identified a number
of control weaknesses that are being addressed as part of the
broader controls review referred to on page 56. No onerous
provision has been recognised for the Baden-Wurttemberg contracts.
Whilst a significant proportion of the cost base of these contracts
is fixed, providing visibility and certainty, we continue to manage
risk and seek to reduce the extent of expected losses. The level
of provision will remain under review as we progress through the
remaining mobilisation period and into the start of operations.
The provision is included within franchise commitments and further
details can be found in note 24 of the financial statements.
49
The Go-Ahead Group plc Annual Report and Accounts 2021
Business and finance review continued
Rail continued
Norway
In December 2019, we began operating rail services in Norway;
our first contract in this market and the first commercially run
network in the country. The effects of the pandemic were felt just
three months into this contract.
As the original contract included exposure to changes in
passenger demand, the Norwegian Government introduced a
package of financial support early in the COVID-19 crisis,
resulting in a broadly breakeven operating performance. Losses
were covered in full at the start of the year and this support
reduced slightly to 90-95% by the end of the year.
We have been required to record an onerous contract provision
charge of £66.2m to cover potential losses resulting from an
expected reduction in government support of rail services, while
passenger volumes remain suppressed following the impact of
COVID-19. Following the year end, constructive discussions have
been ongoing with the Norwegian Railway Directorate and we
are hopeful of reaching a more satisfactory outcome. In addition
to the onerous contract provision, associated assets of £10.5m
have been impaired.
The model upon which the provision is based is most sensitive to:
passenger demand, government support, service performance,
energy costs, employee costs and the exercise of the contract’s
two extension years.
The level of the contract provision involves inherent
uncertainties, and the directors are taking every possible measure
to mitigate the expected losses associated with the contract. The
provision will remain under review as we progress through the
discussions with the Rail Directorate as we aim to renegotiate
this contract to reflect post-pandemic passenger demand levels.
Capital expenditure and depreciation
Total capital expenditure for UK and International Rail was £4.2m
(2020: £30.0m), predominantly relating to short term improvement
programmes in Southeastern and software costs in Norway.
Depreciation on owned assets for UK and International Rail was
£16.4m (2020: £17.9m), reflecting the timing of capital expenditure
which is being depreciated over the lives of the franchises.
Depreciation on right of use assets was £461.0m (2020: £353.8m).
The increase reflects the full year of IFRS 16 leases in Southeastern
which came into the scope of IFRS 16 in April 2020 following
receipt of the previous year’s direct award contract.
In 2022, capital expenditure for the UK and International Rail is
expected to be around £5.0m.
Rail outlook
UK Rail
The DfT extended GTR’s ERMA under the same contractual
terms, from its previous end date of 20 September 2021 to 31
March 2022. This provides visibility of financial performance for
the remainder of the contract, transferring full revenue risk to the
DfT in return for a tight operating profit margin range.
Discussions relating to a potential National Rail Contract (NRC),
to follow the current GTR contract, are taking place with the DfT.
In May 2021, we welcomed the publication of the Government’s
“Williams-Shapps Plan for Rail” White Paper detailing its blueprint
for the future of UK rail and establishing a direction of travel for
the industry. As the operator of the UK’s largest rail contract, we
are actively working with the Government to shape the future of
the industry.
International Rail
In Germany, we continue to deliver against our improvement
plans to reduce financial penalties and costs in Baden-
Württemberg. Our financial expectations relating to the
Baden-Württemberg contracts remain unchanged and we
forecast losses will diminish in 2022.
The first of two contracts in Bavaria started on 12 December 2021
and the second will commence in December 2022. Following the
successful mobilisation of the first contract, work is underway to
ensure a smooth introduction of the remaining contract.
The successful mobilisation contains risk and it depends on many
factors, including driver recruitment. The estimation involved
when assessing these factors contains inherent uncertainties.
The contracts are performing in line with our current financial
expectations which reflect the impairments and provisions
recognised. As the mobilisation process progresses, the visibility
of future income and costs increases.
In August 2021, an agreement was reached with the rolling stock
provider in relation to liquidated and consequential damage
claims resulting in a post-year end settlement of €10m. €5m has
been paid in the 2022 financial year and the balance will be
settled over the next three years.
In Norway, where passenger volumes are currently at around 65%
of pre-crisis levels, the recently elected Government has
confirmed that financial support for rail services will remain in
place until at least March 2022, covering 85% of losses.
Although COVID-19 restrictions were removed in Norway in
February 2022, the speed and extent of passenger recovery
remains unclear.
50
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Financial review
Profit/(loss) before taxation
Profit before tax excluding exceptional items of £97.2m (2020:
£54.2m restated) increased due to higher profits in London &
International Bus and reduced losses in International Rail. Loss
before tax was £6.9m (2020: loss of £39.5m restated), the
movement reflects the increase in exceptional costs to £104.1m
(2020: £93.7m restated).
Earnings per share
Excluding exceptional items, earnings attributable to the equity
shareholders of the parent was £46.6m (2020: £21.5m restated),
resulting in an increase in pre-exceptional earnings per share
from 50.0p (restated) in 2020 to 108.4p. Losses, including
exceptional items, were £46.0m (2020: loss of £65.9m restated),
resulting in an improvement in loss per share from 153.3p
(restated) in 2020 to a loss per share of 107.0p in 2021. The
weighted average number of shares was 43.0 million and the
number of shares in issue, net of treasury shares, was 43.0 million.
2021
2020 *
2019 *
2018 *
2017
Earnings per share
pre-exceptional items
108.4p 50.0p 169.4p 181.6p 207.7p
Earnings per share after
exceptional items
(107.0p) (153.3p) 136.8p 207.2p 207.7p
* Restated.
Dividends
Whilst the Board has concluded that it would not be prudent or
right to resume dividend payments currently, it remains
committed to doing so at the appropriate time. No interim
dividend was paid in the current year (2020: £nil).
Dividends paid to non-controlling interests were £3.8m (2020:
£14.0m restated). This represents the 35% share of the UK Rail
business owned by Keolis UK through our subsidiary, Govia Ltd.
Cashflow
Net cashflows from
operating activities
Net cashflows used in
investing activities
Net cashflows used in
financing activities
Effect of foreign exchange
rate changes
Net increase/(decrease) in
cash and cash equivalents
2020
Restated
£m
Increase/
decrease
£m
2021
£m
677.2
464.8
212.4
(37.7)
(82.8)
45.1
(576.9) (443.0)
(133.9)
(1.8)
—
(1.8)
62.6
(61.0)
123.6
The Group’s cash increased by £62.6m to £630.6m (2020: £569.8m),
however restricted cash increased by £68.9m to £543.7m (2020:
£474.8m) meaning unrestricted cash in the Group reduced £8.1m
to £86.9m (2020: £95.0m).
Cash flow from operating activities increased by £212.4m to cash
generated of £677.2m (2020: £464.8m restated). The increase is
mainly due to favourable working capital movements and the
reclassification of cash flows. Southeastern had a full year of
reporting leases under IFRS 16, this resulted in the change in the
classification of cashflows from operating activities to financing
activities.
Cash flow from investing activities reduced by £45.1m to a cash
outflow of £37.7m (2020: £82.8m) due to lower net capital
expenditure as the Group continues to manage carefully its
capital requirements following the impact of COVID-19.
Net cashflow from financing activities increased by £133.9m to a
cash outflow of £576.9m (2020: £443.0m) with payment of lease
liabilities £534.5m (2020: £374.3m). The increase is largely due to
the reclassification of Southeastern lease payments from
operating activities to financing activities.
The Group’s cashflow statement is significantly impacted by UK
Rail’s working capital movements and restricted cash. In addition,
the Group’s banks covenants are reported on a pre-IFRS 16 basis.
51
The Go-Ahead Group plc Annual Report and Accounts 2021
Business and finance review continued
Financial review continued
Summary cashflow
2021
2020 Restated
Increase/(decrease)
EBITDA excluding exceptional items
Movement in restricted cash**
Working capital and other operating cashflows
Cashflow generated from operations (excluding restricted
cash movements)
Tax paid
Net interest paid
Net capital investment
Dividends paid – minority partner
Free cashflow
Net cash on issue/purchase of shares
Dividends paid
Inception of new leases & lease modifications
IFRS 16 ROU asset on to balance sheet
Other
Movement in adjusted net debt*
Opening adjusted net debt*
Closing adjusted net debt*
* Adjusted net debt is net cash less restricted cash.
IFRS 16
basis
£m
pre-IFRS 16
basis
£m
IFRS 16
basis
£m
pre-IFRS 16
basis
£m
IFRS 16
basis
£m
pre-IFRS 16
basis
£m
695.6
(68.9)
(6.5)
195.7
(68.9)
(48.5)
620.2
(12.1)
(19.2)
(47.2)
(3.7)
538.0
(0.6)
—
(198.3)
—
11.2
78.3
(12.1)
(10.2)
(47.2 )
(3.7)
5.1
(0.6)
—
—
—
11.2
546.3
(45.7)
2.5
503.1
(28.2)
(19.9)
(88.3)
(13.9)
352.8
(0.7)
(30.9)
(235.0)
(781.1)
(1.2)
162.4
(45.7)
(0.9)
117.6
(28.2)
(6.2)
(88.3)
(13.9)
(19.0)
(0.7)
(30.9)
—
—
(1.2)
149.3
(23.2)
(9.0)
117.1
16.1
0.7
41.1
10.2
185.2
(0.1)
30.9
36.7
781.1
12.4
350.3
(965.9)
15.7
(321.6)
(695.6)
(270.3)
(51.3)
(270.3)
1,045.9
(695.6)
(615.6)
(305.9)
(965.9)
(321.6)
350.3
33.3
(23.2)
(49.4)
(39.3)
16.1
(4.0)
41.1
10.2
24.1
(0.1)
30.9
—
—
12.4
67.0
(51.3)
15.7
** Restricted cash changes in the summary cashflow has been updated to be shown in the movement in the restricted cash line only. Last year, on commencement of the EMA,
£45.7m of restricted cash was reported separately in its own line in the summary cashflow. This was to distinguish it from the restricted cash movement resulting from working
capital changes which was reported in working capital and other operating cashflows.
Summary cashflow
Cash generated from operations before tax and excluding
movements in restricted cash was £620.2m (2020: £503.1m). The
increase of £117.1m is largely due to the impact of IFRS 16 and a full
year of leases in Southeastern which contributed to the £146.5m
increase in EBITDA (excluding exceptional items).
Cashflow generated from operations on a pre-IFRS 16 basis was
£78.3m (2020: £117.6m). The reduction of £39.3m is due to
increased restricted cash in UK Rail and working capital
movements offset by strong performance in London &
International Bus and reduced losses in International Rail.
Free cashflow on a pre-IFRS 16 basis was £5.1m, which is an
increase of £24.1m compared to prior year. This was due to
continued measures taken to mitigate the impact of COVID-19
and conserve the Group’s cash including limited capital
investment.
Tax paid of £12.1m (2020: £28.2m) comprised payments on
account in respect of the current and prior years’ liabilities. Net
interest paid of £19.2m (2020: £19.9m) was higher than the net
charge for the period of £18.1m (2020: £21.6m restated) due to the
timing of interest payments.
Total capital expenditure, net of sale proceeds and including
spend on intangible costs was £47.2m (2020: £88.3m). The £41.1m
reduction reflects continued disciplined capital expenditure since
the outset of the pandemic with the Group continuing to
conserve cash. The reduction related to a lower spend in Rail
and Regional Bus where capital expenditure is typically more
discretionary, unlike London Bus where capital expenditure is
driven more by contractual requirements.
Group capital investment is expected to be around £60.0m
in 2022 with investment in our London bus fleet to meet
contractual requirements. The net cash cost to the Group is
expected to be lower as investment in Regional Bus is linked
to the availability of grants and government funding.
52
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Net debt/cash
Net debt of £71.8m (2020: £491.1m) and adjusted net debt of
£615.6m (2020: £965.9m) have decreased primarily due to the
reduction in IFRS 16 lease liabilities as we approach the end of the
GTR contract and the end of the Southeastern contract.
In line with our covenants, adjusted net debt is calculated using
the outstanding principal value of debt and does not include
accrued interest and is gross of debt issue costs.
Adjusted net debt comprised debt arising from the £250m
sterling bond, amounts drawn down against the £280m syndicate
facility of £126.6m (2020: £147.4m), amounts drawn down against
the euro loan facilities of £13.2m (2020: £14.9m), and lease
agreements of £312.6m (2020: £648.6m), offset by cash and short
term deposits of £630.6m (2020: £569.8m) including £543.7m of
restricted cash in rail (2020: £474.8m). There were no overdrafts
in use at the year-end (2020: £nil).
Our primary financial covenant under the syndicated facility is
a ratio of adjusted net debt to EBITDA (excluding exceptional
items and on a pre-IFRS 16 basis) of no more than 3.5x.
Adjusted net debt on a pre-IFRS 16 basis of £305.9m (2020:
£321.6m) has decreased with the Group generating positive free
cash flow.
Adjusted net debt (excluding restricted cash) to EBITDA
(excluding exceptional items) of 1.56 times, (2020: 1.98 times
restated) is at the lower end of our target range of 1.5 times to
2.5 times reflecting both an increase in EBITDA (excluding
exceptional items) and a reduction in net debt due to continued
measures taken to mitigate the impact of COVID-19.
Following the further delayed announcement of the Group’s year
end results, waivers were obtained providing an extension to the
Group’s covenant reporting requirements which are now required
to be supplied by the end of February 2022. There were no
additional terms applied as a result of this extension.
Waivers have also been obtained in relation to the half year
covenant reporting requirements which are now required to be
delivered by the end of April 2022. As for previous extensions, no
additional terms have been applied.
Capital structure
Syndicated facility 2025
7-year £250m 2.5% sterling bond 2024
Euro financing facilities
Total core facilities
Amount drawn down at 3 July 2021
Balance available
Net debt
Total borrowing
Total lease liabilities
Total cash
Net debt
Adjusted net debt
Net debt/(cash)
Restricted cash
Adjusted net debt
EBITDA (excluding exceptional items)
Adjusted net debt/EBITDA (excluding
exceptional items)
Adjusted net debt (pre-IFRS 16)
Adjusted net debt
IFRS 16 lease liabilities
Adjusted net debt (pre-IFRS 16)
EBITDA (excluding exceptional items)
(pre-IFRS 16)
Adjusted net debt/EBITDA (excluding
exceptional items)
* Restated.
2021
£m
280.0
250.0
13.2
543.2
389.8
2020*
£m
280.0
250.0
17.1
547.1
412.3
153.4
134.8
389.8
312.6
(630.6)
412.3
648.6
(569.8)
71.8
491.1
71.8
543.7
615.6
695.6
491.1
474.8
965.9
546.3
0.88x
1.77x
615.6
965.9
(309.7) (644.3)
305.9
321.6
195.7
162.4
1.56x
1.98x
At the year end, significant medium term finance was available
through a £280.0m syndicated facility and a £250.0m sterling
bond. The £280.0m syndicated loan facility has had a number of
extensions, the most recent of which was agreed in July 2021,
extending the maturity to July 2025 with a value of £240.0m in
the final year.
53
The Go-Ahead Group plc Annual Report and Accounts 2021
Business and finance review continued
Financial review continued
Exceptional items
Exceptional costs of £104.1m (2020: £93.7m restated) were
recognised in the year relating to International Rail (£76.9m), UK
Rail (£32.4m) and Regional Bus (£0.2m).
German Bavaria franchise onerous
contract provision
Norway franchise onerous contract provision
and asset impairment
DfT potential financial penalty and associated
costs relating to LSER
Asset impairments and restructuring costs –
International Rail
Asset impairments, provisions and
restructuring costs – Regional Bus
Exceptional operating items
2021
£m
2020*
£m
—
43.8
76.7
32.4
—
—
(5.2)
23.2
0.2
104.1
26.7
93.7
Following the year end, a detailed review of all material contracts
across the Group was performed to consider the completeness of
the onerous contract provisions. This involved a detailed review
and challenge of the assumptions within each contract, including
those relating to 2020 and the Group’s 2021 half year results. An
understatement has been identified in respect of the accounting
for the onerous contract provision in the rail contracts in Bavaria
in the prior year and the Group’s 2021 half year results. The 2020
provision was determined to be understated by £37.1m (including
the £25.9m subsequently provided for in the 2021 half year
results) and has been restated in the prior year figures in the 2021
results. The calculation of the understatement was determined
based on the assessment of information available that should
reasonably have been included in the assumptions underpinning
the 2020 provision.
In Norway, as a result of the potential cessation of government
support, £66.2m was provided as this contract is now deemed
to be onerous. Intangible asset impairments of £10.5m were
also recognised.
In UK Rail, the DfT has confirmed that it is considering its options
for enforcement action including imposing statutory financial
penalties under the Railways Act 1993. This follows the failure
of LSER to notify the DfT of its rights to recover certain
overpayments or monies due to the DfT and in so doing breached
the contractual obligation of good faith contained with the
relevant franchise agreements. In the absence of specific
guidance or precedent, it is difficult to precisely estimate the
likely quantum. However, the Group has included a provision of
£30.0m in its financial statements which reflects the Group’s
current best estimate of any potential financial penalty.
The Group has also recognised legal and professional fees in
relation to this matter as exceptional.
In Germany, an exceptional gain of £5.2m was recognised relating
to the sale of previously impaired assets at a higher than
expected recoverable value. The asset impairments were in
respect of planning and land related to the construction of a
depot in Bavaria.
In Regional Bus, exceptional items reflect the profit on sale of
assets previously impaired and sold at a price above their written
down value as well as the reversal of prior year exceptional
restructuring costs. These were offset by the additional
impairment costs relating to coaches which were not covered by
CBSSG, therefore the carrying values were impaired as services
were either reduced, suspended or terminated and future losses
in relation to specific contracts. The net impact of these items is
an exceptional cost of £0.2m.
In addition to the exceptional items recognised in the current
year, a number of prior year adjustments have also been made in
relation to LSER. Further detail can be found in note 2 of the
financial statements.
Bidding and international developments
Total bidding and international development costs in the year
were £6.0m (2020: £7.4m), primarily relating to bidding in the
Nordic and Australasian markets.
Amortisation
The amortisation charge for the year was £6.3m (2020: £9.4m),
relating to software, franchise mobilisation and customer
contracts. The prior year amortisation charge contained an
accelerated amortisation charge of £2.0m in relation to franchise
set-up costs following an IFRIC update in March 2020.
Net finance costs
Net finance costs for the year were lower than the prior year at
£18.1m (2020: £21.6m restated).
Finance costs of £20.2m (2020: £27.0m restated) reflects lower
IFRS 16 interest charges as we approach the end of the UK rail
contracts and IFRS 16 lease liabilities diminish. The average
interest rate for finance costs for the period was 2.2% (2020: 2.1%).
Finance revenue of £2.1m (2020: £5.4m) reflects lower interest
rates and reduced cash held on deposit with more cash held in
instant access accounts. The average interest rate for finance
revenue for the period was 0.1% (2020: 0.3%).
54
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report 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 (2020: £nil).
Gordon Boyd
Interim Group Chief Financial Officer
23 February 2022
Taxation
Net tax for the year was £33.8m (2020: £11.4m restated) and the
Group made a post-exceptional loss before tax of £6.9m resulting in
an effective tax rate of 489.9%.
The tax charge includes a £14.4m charge in relation to the UK
corporation tax rate change and a current tax charge of £20.5m.
The loss before tax was due to the Group recognising £104.1m of
exceptional costs, as detailed in note 7 of the financial statements.
Tax on the exceptional items was immaterial as exceptional UK Rail
costs were non-deductible and there was no deferred tax asset in
respect of losses incurred in Germany and Norway.
The pre-exceptional effective tax rate is 35.3% (2020: 32.7%),
which includes a charge in relation to the change in the UK deferred
taxation rate from 19% to 25%. Excluding this, the effective tax rate
is 20.3% (2020: 22.4% restated).
Non-controlling interests
Non-controlling interests in the income statement of £5.3m post
exceptional (2020: £15.0m restated) arise from our 65% holding in
Govia Limited, which owns our 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 £41.2m (2020: £37.7m)
consisting of bus costs of £2.3m (2020: £0.9m) and rail costs of
£39.0m (2020: £35.6m). Group contributions to the schemes
totalled £47.5m (2020: £44.1m).
Bus pensions
Under accounting valuations, the net surplus after taxation on
the bus defined benefit schemes was £27.0m (2020: £42.9m),
consisting of pre-tax assets of £36.0m (2020: £53.0m) less a
deferred tax liability of £9.0m (2020: £10.1m). The pre-tax asset
consisted of assets of £906.0m (2020: £934.4m) less estimated
liabilities of £870.0m (2020: £881.4m). The percentage of assets
held in higher risk, return seeking assets was 31.1% (2020: 33.8%).
55
The Go-Ahead Group plc Annual Report and Accounts 2021
Risk management
Identifying and managing our
risks and uncertainties
How we manage risk
Our governance
The successful delivery of the
Group’s strategic objectives
depends on effective
identification, understanding
and mitigation of its principal
risks and uncertainties.
Ultimate accountability for
risk management lies with the
Dominic Lavelle
Audit Committee Chair
Board, supported by the Audit Committee, sub-committees and
executive directors. 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
biannual risk reporting to the executive directors.
The financial year ended 3 July 2021 was one of unprecedented
disruption and uncertainty, primarily due to the ongoing COVID-19
pandemic. Restrictions introduced to combat the pandemic,
including country-wide lockdowns, adversely affected passenger
volumes within the public transport sector. Against such a backdrop,
robust risk management has remained critical in protecting the
Group’s core strategic objectives.
The pandemic has also highlighted the importance of understanding
the inter-connectivity of principal risks. The majority of our principal
risks have been impacted by COVID-19, with a number of them
consequently seeing an increase in their risk profile. The operational
principal risk ‘catastrophic incident, severe infrastructure failure
or extreme weather’ has been most acutely impacted. For further
details on this principal risk, as well as the Group’s other principal
risks, please see pages 60 to 64.
As an outcome of the Independent Review into LSER, work is
already underway to enhance corporate governance and internal
controls, particularly in GTR where measures include increasing
the remit and scope of Internal Audit to include oversight of the
compliance arrangements and ensuring deeper understanding
and closer scrutiny of contractual obligations and commercial
terms. I will also be appointed to the Board of GTR in the event of
a new contract award, to provide a clear line of sight to the Group
Audit Committee and Group Board. Furthermore, the Group
recognises the need to enhance its financial reporting and
processing controls and this will be one of the key responsibilities
of our permanent Group Chief Financial Officer, once appointed.
Go-Ahead has a system of internal control, including financial,
operational and compliance controls, and risk management,
designed to safeguard shareholders’ investments, our assets and
our reputation. The systems and processes we have developed to
identify and manage the key risks facing each of our businesses
and the Group as a whole, were reviewed and a number of
improvements have been implemented, including Board and
leadership changes, improving bid investment decision making
and ongoing contract compliance monitoring. Our risk
management policies, systems and processes align to the
guidance contained within the UK Corporate Governance Code.
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 in a way that informs the Board’s
decision making in support of creating value in a sustainable way.
Through our purpose, values and strategy, we empower all our
colleagues to manage risk. This approach is designed to highlight
potential problems at an early stage, enabling prompt action to be
taken, minimising any negative impact to our customers
and stakeholders.
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, as set out in its risk
appetite statement outlined on page 59. The Group’s risk appetite
statement also provides a reference point against which our
operating companies can benchmark their biannual 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 60 to 64.
The Group’s risk appetite statement remains an active benchmark
through which the Board’s strategic objectives are determined
and maintained. The Board reviews its risk appetite on at least
an annual basis, in the context of the regulatory and economic
environment, particularly as it affects the sectors in which we
operate, but also within the broader framework of our strategic
ambition and the culture of the business. The Board also discusses
capital allocation, hierarchy and principles and whether its approach
is fit for purpose in the context of risk appetite and the current
business environment. Following the review this year, which was
in conjunction with the review of the Group’s principal risks and
uncertainties as at the period ended 3 July 2021, the Board confirmed
that there were no changes to the Group’s risk appetite statement.
Emerging risks
An important component of the Group’s risk management process
is the consideration of potential emerging risks and whether any
of those identified have the potential to become a principal risk in
the medium to long term. The greater uncertainty attached to these
risks means it can be more difficult to predict their likelihood, timing
and impact. Emerging risks are discussed at operating company board
meetings on an ongoing basis. These assessments are consolidated
before review and then more formally reported to the Board on a
biannual basis, with reporting including an explanation of the plans
in place to mitigate and manage these risks.
Focus during the year
COVID-19
The impact of COVID-19 on the business and its recovery has been
a factor in the Board’s consideration and assessment of risk during
the year. It has continued to inform the Board’s conversations
around the long term sustainability of the business and, in particular,
the decisions the Board takes around its three strategic pillars:
protect and grow the core; win new bus and rail contracts; and
develop for the future of transport.
56
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report During the year, the Board undertook a detailed review of the
lessons learnt from COVID-19. As part of that review, consideration
was given to the insights and lessons drawn from the pandemic,
as well as the actions in place to capitalise on the experience
gained to mitigate against related risks or to capture future
opportunities. For further details on how the Board sought to
mitigate and manage the principal risks associated with the
pandemic, as well as its recovery plan for the future, please see
pages 4 to 6 and 60 to 64.
recommendations and the Board will continue to monitor the
progress over the year ahead. The Board also discussed the main
cyber security risks that threaten the Group, including e-commerce
fraud, phishing, data loss, hacking, inappropriate access to data
and malware infection. These risks were articulated in detail, with
risk reduction plans agreed for each. Additionally, an assessment
of the international businesses was undertaken with a consistent
approach now adopted to embedding centralised systems and
platforms across all our operating companies.
Climate change
The risks and opportunities associated with climate change have
remained a key focus for the Board again this year, with regular updates
received from the Group’s climate change task force (Task Force). This
Task Force, drawn from across the Group’s Operations, Engineering,
Finance, Facilities, Procurement and Communication teams, has continued
to develop measures in line with the recommendations from the Task
Force on Climate-related Financial Disclosures (TCFD). It has
identified five key workstreams and defined achievements, priorities,
and plans. This has formed the structure of the Group’s climate
change strategy, launched in July 2021, and developed to articulate
and quantify the climate change related costs currently impacting the
Group, as well as to prepare for future climate related risks. Further
information on our climate change strategy can be found on pages 26
and 27.
Through a rigorous risk assessment and prioritisation process, the Task
Force developed the “Four Cs” framework to assess each element of the
Group’s response to climate change: the impact on ‘Customers’, the
impact on ‘Colleagues’, the benefit in ‘Carbon reduction’ and the ‘Cost’
to the business. The Task Force also classified and articulated the Group’s
top strategic risks (technology and dependencies) and strategic
opportunities (modal shift, emerging resource efficiencies and
enhancing the resilience of the Group).
Sustainability and climate change are very much a part of Go-Ahead’s
third strategic pillar, developing for the future of transport. During its
annual strategy meeting, the Board also discussed climate change in
the context of the Group’s broader sustainability strategy, in addition
to the impact of COVID-19 on its plans. Topics included environmental
reporting, consumer behaviour, decarbonisation, air quality and climate
change adaptation, with the Board receiving updates on each of these
against the previously agreed roadmap developed by the Task Force.
Climate change will remain a key priority for the Board over the year
ahead as we not only look to manage and mitigate the emerging risk
but also take advantage of the opportunities this provides. To read
more about the Group’s response to the TCFD, climate change related
risks and opportunities, as well as the Group’s adaptation plans and
climate change strategy, please see pages 26, 27, 38 and 39.
German rail bidding and mobilisation
During the year, the Board undertook a governance review of the
German bid and mobilisation processes. The review included a
robust assessment of the assumptions and judgements taken on
the risk profile of the Baden-Württemberg bid, including the
impact of cancellations on the performance regime and the
challenges around driver recruitment. The lessons learnt
following that review have been categorised into future bid
processes and contract mobilisations, including the ongoing
contract mobilisation in Bavaria. All future bidding now benefits
from a supplementary review process, through a new Board
Sub-Committee, established to review major tenders and
contracts and their associated mobilisation plans. This Board
Sub-Committee meets the teams working on the bid and probes
the judgements behind key judgements.
Cyber security
Go-Ahead has continued to strengthen its cyber security position
within its UK Rail and Bus companies, with cyber security risk
remaining a key focus area for the Board over the last year. In
addition to the regular briefings received, the Board analysed the
findings from the prior year’s external independent cyber security
assessment. Work is underway to embed the assessment’s
The Group’s Information Security Governance Board (InfoSec
Governance Board), which meets regularly and reports to the Board,
has been established to provide oversight on cyber related risks
and strengthen the Group’s cyber related governance structures.
The InfoSec Governance Board’s members include the Group IT
Director, Head of Information Security and Data, Information
Security and Compliance Manager, Group Head of Internal Audit,
Group Legal Director and the Group Data Protection Officer in
addition to three business representatives being the Group People
Director, Go South Coast Finance Director and GTR Head of IT. The
InfoSec Governance Board receives regular updates from key
internal stakeholders, including operational and assurance teams,
legal, and operating company finance directors. The Group IT
Director keeps the Interim Group Chief Financial Officer informed
on all cyber-related matters.
During the year ended 3 July 2021, resource within the Group’s
cyber security team was bolstered, which has further contributed
to the effectiveness of the InfoSec Governance Board’s oversight
of cyber security.
Health and safety
Health and safety remained a focus area for the Audit Committee
and Board during the year, with safeguarding the health and wellbeing
of our colleagues and customers a key priority during the pandemic.
The Board reviews the Group’s health and safety policy and bus
and rail health and safety targets annually. This year, the Board
also undertook a review of the safety cultures within both rail
and bus. It considered the incremental changes brought about
through the operating companies’ health and safety audits, as
well as how enhancements to processes might be embedded
within the Group. The implementation of the review
recommendations is underway, with an action and
recommendations tracker implemented during the year. The
tracker will further encourage and facilitate colleague engagement
and reporting, ensuring a robust Group wide health and safety
culture is maintained. In parallel, work was also undertaken during
the year to ensure that the Group’s international safety cultural
programme was aligned with the UK, with consistent metrics in
place across the UK and internationally.
Dominic Lavelle
Audit Committee Chair
23 February 2022
Focus for the 2022 financial year
In-depth risk areas for the Board will include:
• UK Rail franchise compliance to include lessons learned from LSER
• Cyber security and data protection
• German operations and Bavarian mobilisation
• National Rail Contract terms
• Regional Bus passenger demand recovery
• Enhanced partnerships
• Climate change and sustainability
• Norway operations and review of contractual arrangements
• Governance, financial reporting processes and reporting
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The Go-Ahead Group plc Annual Report and Accounts 2021
Risk management continued
Risk management framework
Board
During the year ended 3 July 2021,
excluding discussions on bids and
acquisitions, the Board discussed a
number of key risk focus areas as follows:
• Sustainability and climate change
• IT/cyber security
• Lessons learned from COVID-19 response
• Lessons learned from review of German
rail bidding and mobilisation
Subsequent to the year end, the Board
considered compliance with franchise
agreements and the matters of concern at
LSER
Ultimate accountability
for risk management
• Sets strategic priorities
• Agrees the Group’s appetite for risk
• Assesses risks and tolerance levels
• Top-down risk identification
• Sets delegated levels of authority
• Approves Group policy and procedures
InfoSec Governance Board
Climate Change Task Force
Board Sub-Committee
Audit
Committee
Monitors risk management and assurance arrangements
Reviews the effectiveness of key risk management and control processes through:
• Internal audit
• External audit
• Insurance
• Risk surveys
• Health and safety
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 the
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
• Assess
emerging risks
• Implement
mitigating actions
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The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report
Risk appetite
Our risk appetite statement below sets out how we balance risk and opportunity in pursuit of achieving our strategic 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. For further information on the Board’s assessment of the risk
appetite for each of the Group’s principal risks, please see pages 60 to 64.
Go-Ahead’s risk appetite statement:
In light of the impact of the COVID-19 crisis on the business, the Group recognises the distinction between risks which are
outside of the Group’s control or against which mitigations are limited, such as a pandemic or other extraordinary events, and
the risks the Group has an appetite for, which are categorised in this statement.
Safety and security
The Group has no tolerance for certain safety risk exposures, 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 regards 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
Zero tolerance for risk which may impact the
safety of employees, customers or general
public; reputation and brand; and/or legal
and regulatory compliance.
Low tolerance of risk within the Group’s
core operations.
Moderate level of risk in investing and
adopting technologies, pursuing new
markets and opportunities, etc.
Our principal risks
A robust assessment has been undertaken by the
Board to assess the principal risks facing the Group
that could seriously affect the Group’s prospects or
reputation. As part of this assessment, consideration
was 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 relative position of our
principal risks to each other and their movement
during the financial year ended 3 July 2021. Further
details of the key risks within each of the Group’s
principal risk areas are shown on pages 60 to 64.
External risks
Operational risks
1 Economic environment
and society post-COVID-19
6 Catastrophic incident, severe
infrastructure failure or
2 Political and regulatory
framework
Strategic risks
3 Sustainability of UK Rail
profits or loss of franchise
4 Inappropriate investment
5 Competition
extreme weather
7 Employee relations, resource
planning and talent
management
8 Information technology
failure/interruption/
security breach
9 Mobilisation of international
rail contracts
10 Rail contract compliance
(new risk)
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Low
Likelihood
High
Increase in risk during the year
59
The Go-Ahead Group plc Annual Report and Accounts 2021
Risk management continued
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 post-COVID-19
2. Political and regulatory framework
Slow recovery from the COVID-19 pandemic. Reduction in economic
activity and passenger demand accelerated by the pandemic.
Risk movement:
Business objective:
Risk tolerance:
Changes to the legal and regulatory framework, impact of the UK
leaving the EU, momentum around climate change adaptation, air
quality and decarbonisation agenda, and Bus Back Better national
bus strategy. Increased state control of transport.
No change
Low
Risk movement:
Business objective:
Risk tolerance:
Potential impact
Slow and partial rebuild of revenue and margin erosion as:
No change
Low
• Lockdown gradually eases and non-essential travel slowly recovers,
stifled by social distancing
• Customers make fewer journeys (higher level of unemployment, flexible
working, online shopping, slow resumption of leisure activities)
• Customers switch mode (to walking, cycling, private car, etc.),
accelerated by fear of public transport
Potential impact
• Increased state control in the UK of bus and rail through the national
bus strategy and Williams-Shapps reform
• Ceasing of public funding ahead of passenger demand recovery (Regional
Bus and Norway) and change in government policy towards private
operators (Norway)
• Williams-Shapps rail reform focused on cost control rather than
• Social distancing requirements generate inadequate demand to cover
passenger demand recovery
the cost base
• Contractual indexation mechanisms may not reflect reality of cost base
in London & International Bus
• Volatility of oil prices impacting the cost base
Mitigating actions
• 90 per cent of revenue is contract-based; discussing continuation of
funding with clients and governments. Main areas of exposure are
Regional Bus and Norwegian rail
• Take all required actions to provide a safe environment, reassure about
public transport and promote it as a safe and accessible form of travel
• Continue to focus our operations in more resilient geographical areas
• Constantly assess the needs of local markets and design services and
products accordingly
• Optimise the network and cost base through route rationalisation,
proactive cost control and back-office synergies; supported by robust
scenario modelling in Regional Bus
• Group fuel hedging in place
Opportunity
• Maximise opportunities arising from “localism” and “staycations”
• Climate change and environmental agenda driving modal shift towards
public transport
• Bus Back Better national bus strategy and Bus Services Improvement Plans
• Opportunities for market consolidation once government support rescinds
Change in risk in the year
No change in risk during the year due to the continuation of the COVID-19
pandemic, uncertain recovery and economic impact of Brexit. Publication of
the Bus Back Better national bus strategy and increasing awareness of
environmental agenda provide future prospects.
• Reduced funding for public transport, including reduction in bus concessionary
rates or the Bus Service Operators Grant (BSOG), as local authorities
come under pressure to reduce spend
• Additional investment requirements to comply with air quality
and decarbonisation requirements
• The impact of Brexit on economic growth, material supply
and availability of employees
• Pressure on Transport for London’s finances
Mitigating actions
• Maintain strong levels of punctuality and customer satisfaction
• Limit exposure to local authority funding through optimisation of
network and cost base and stimulation of passenger demand
• Active participation in key industry, trade and government steering and
policy development groups, including the Williams-Shapps Plan for Rail,
Bus Back Better national bus strategy and bus franchising
• Collaboration and partnership working with local authorities
• Strong track record on air quality initiatives: electric bus depots in
London, air filtering bus, Climate Change Task Force, fleet conversion
to cleaner emission standards
• The climate change strategy which plans how we will both decarbonise
and adapt to climate change
• Brexit contingency measures in place including increased stock levels of
spare parts maintained across bus and rail, apprenticeships and colleague
engagement plans to support recruitment and retention
Opportunity
• 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
• Working closely with local authorities on Bus Services Improvement Plans
• Proven ability to run profitable regulated bus contracts
• Political momentum around air quality: large number of cities
announcing transition to clean air zones and zero-emission zones,
further momentum for modal shift from cars to public transport
• Being able to showcase our expertise and decarbonisation and adaptation
plans can enable further strategic conversations with customers
Change in risk in the year
No change in risk during the year due to:
• Bus Back Better national bus strategy, Decarbonisation of Transport
review, and Williams-Shapps Plan for Rail published during the year all
reinforce the importance of public transport, and Go-Ahead’s role, in
supporting the Government’s agenda
• Although there continues to be budget pressure for our major client,
Transport for London, and emerging pressures on other clients and local
authorities as economies recover from COVID-19, the Government’s
agenda indicates that there is likely to be continued support of public
transport albeit the degree remains uncertain.
60
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Key:
Protect and grow the core
Win new bus and rail contracts
Develop for the future of transport
Strategic risks
3. Sustainability of UK Rail profits or loss of franchise
4. Inappropriate investment
Failure to retain UK Rail franchises on acceptable terms.
Failure to deliver strategy or make appropriate investment decisions.
Risk movement:
Business objective:
Risk tolerance:
Increased
Moderate
Potential impact
• Group profitability and cashflow could fall over the next three years
• Lower risk contract leading to lower margins as part of the
Williams-Shapps Plan for Rail; impact on profit of disallowable costs
and suboptimal performance payments
• Loss of UK Rail franchises could damage Go-Ahead’s credibility as an
operator in other markets
Mitigating actions
• EMA/ERMA and potential National Rail Contracts (NRCs)
withdrawing revenue and cost risk
• Flexible and experienced management team which responds quickly
and expertly to changing circumstances
• Shared risk through the Govia joint venture, which is 65 per cent owned
by Go-Ahead and 35 per cent by Keolis UK
• Close involvement through RDG and GTR to influence shape of NRCs
• The Group does not assume renewal of franchise agreements in its
corporate plan
Opportunity
• NRC of up to six years in GTR, leading to Passenger Services Contract
tender
Change in risk in the year
Increase in risk:
• Operator of Last Resort appointed to take over delivery of passenger
services at Southeastern when franchise expired in October 2021
• Although GTR is operated as a standalone operation there is the risk of
reputational damage arising from the LSER franchise loss
• Risk to rail profitability from split ticketing, boundary fare zone claims
and other historic claims
Failure to deliver expected returns in International Rail.
Failure to build sufficient investment capability to manage
decarbonisation of the bus fleet and priority adaptation
mechanisms to climate change.
Risk movement:
Business objective:
Risk tolerance:
Increased
Moderate
Potential impact
• Insufficient recovery of shareholder value and reputational damage
•
Impact on the Group’s cashflow generation and ability to distribute dividends
• Potential impact on asset value
Mitigating actions
• Comprehensive strategic discussions with the main Board and advisors
• Extensive valuation and due diligence, supported by external expertise,
and strong financial discipline when assessing viability of opportunities
• Restructure of the German business; early focus on Bavarian
mobilisation; decision to cease business development activities
in Germany and rail business development in new geographies;
negotiating share of revenue risk with Norwegian authorities
• Seek to renegotiate changes to the contractual arrangements in our
Norwegian rail operations with a view to reducing the Group’s exposure
• Cautious approach to investment opportunities overseas and outside
our core operating areas; clear risk appetite statement that governs
the acceptable level of risk in pursuit of strategic objectives
• Decarbonisation plan informing discussions with industry partners,
and climate change adaptation plans identifying priority impacts
and mitigating actions
Opportunity
• Strong ESG positioning with investors supporting investment case
and growth story
• 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
and Nordic region
• Improved decision making based on lessons learnt from Germany
• Strategic opportunities to provide expertise to clients on impact
of climate change on asset management, route planning
and infrastructure development
Change in risk in the year
Increase in risk during the year due to decarbonisation agenda
and continued challenges in Germany. In addition, subsequent to the year
end a new government was elected in Norway which is not supportive of
private companies operating rail services in Norway.
61
The Go-Ahead Group plc Annual Report and Accounts 2021
Risk management continued
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, severe infrastructure failure
or extreme weather
Competition from existing and new market participants, loss
of business to other modes and threats from market disruptors.
Risk movement:
Strategic objectives impacted:
Risk tolerance:
An incident, such as a major accident, an act of terrorism, a
pandemic or a severe failure of rail infrastructure. Extreme
weather impacts the reliability of services, the level of passenger
demand or the cost of maintaining our infrastructure.
No change
Moderate
Risk movement:
Strategic objectives impacted:
Risk tolerance:
Potential impact
• Loss of revenue and profits
• Reputational damage
• Rapid change required to business model and structure
• Fear of public transport in the context of the pandemic impacting ability
to drive modal shift
Mitigating actions
• Promote safe use of public transport
• 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 and offering climate
change (decarbonisation and adaptation) solutions
• Work in partnership with local authorities and other operators, including
through interoperability
• Promote multi-modal travel, improving the overall door-to-door
experience for passengers
• Focus on customer needs and expectations, including improved
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
• The economic crisis and shareholder drive for better sectoral returns
could lead to further consolidation opportunities
Change in risk in the year
No change in risk during the year.
Increased
Zero
Potential impact
• Risk of a lasting impact of the pandemic on economic recovery and use
of public transport
• Serious injury to the public, our passengers or our people
• Service disruption with financial losses and reputational damage
• Acts of terrorism, while not directly targeting rail/bus public transport,
may discourage travel and tourism
• Extreme weather impacting the reliability of services, the level of
passenger demand or the cost of maintaining our infrastructure
Mitigating actions
• Rigorous, high profile health and safety programme throughout the
Group; high levels of safety performance; promotion of safety culture;
and reassurance over the use of public transport
• 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
• Working closely with our industry partners, such as rail infrastructure
provider Network Rail and government agencies
• COVID-19 has created a precedent for strong government support
to the industry and reinforced its role within local communities
• Adaptation of workstreams as part of Climate Change Task Force
Opportunity
• COVID-19 has tested our response. Colleagues are now better trained
and prepared as a result
• Continuous review of processes and procedures can identify areas for
operational improvement and improve overall safety on our networks
• Vital role of public transport in local communities reinforced by the
COVID-19 crisis
• Environmental awareness drives modal shift towards public transport;
our preparedness can drive strategic conversations with customers
ahead of competitors
Change in risk in the year
Increase in risk during the year reflecting the risk of extreme weather.
62
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Key:
Protect and grow the core
Win new bus and rail contracts
Develop for the future of transport
Operational risks
7. Employee relations, resource planning
8. Information technology failure/interruption/
and talent management
security breach
Failure to effectively engage with our people and trade unions
in providing reassurance, managing costs and driving change.
Requirement to drive rail workforce reform could lead to
industrial dispute and service disruption.
Prolonged or major failure of the Group’s IT systems
or a significant data breach.
Risk movement:
Strategic objectives impacted:
Risk tolerance:
Failure to attract, retain and develop talent.
Increased
Low
Risk movement:
Strategic objectives impacted:
Risk tolerance:
Increased
Low
Potential impact
• Disruption to trading and/or operational service delivery
Potential impact
• Failure to attract, retain and develop the diverse talent required for
robust succession planning
• Reputational damage and regulatory breach from misuse of data
• Enforcement action against rail companies under the Networks &
Information Systems (NIS) framework
• Financial loss
• Ageing workforce, reduction in European labour resource, fear of public
transport and shielding requirements leading to a shortage in labour
supply, skills and knowledge
Mitigating actions
• Data protection officers in place in all operating companies to monitor
Group-wide GDPR compliance and full time Group Data Protection Officer
• Wage costs increase higher than necessary or affordable in light
• Robust processes and procedures in place to ensure compliance
of higher inflation exacerbated by tightening labour market as we
emerge from pandemic
with the relevant laws and best practices; process standardisation
and continued investment in best practice systems
• Service disruption, costs and reputational damage arising from
• IT function focused on operational delivery; continued investment
industrial action
• Rail workforce reform leading to industrial action
• Low levels of morale and engagement lead to inadequate customer
service or inability to deploy new technology and work practices for
the benefit of customers
in and maintenance of IT systems across the Group
• Design Authority Board in place for change control
• Clear and tested business continuity plans; test scenarios conducted
across the Group
• Achieved Cyber Essentials standard; GTR and Southeastern successfully
• Inability to recruit enough employees in Go-Ahead Singapore to meet
audited against the NIS framework during the year
• 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
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, especially during the COVID-19 period and heightened levels of
remote working. Mitigations have also improved accordingly.
required ratios set by the Land Transport Authority
• Inability to recruit and retain enough drivers for German operations
• Expansion in bus services leading to shortage of drivers in Go-Ahead
London and Go-Ahead Ireland
Mitigating actions
• People Strategy focusing on leadership, talent & succession, management,
culture & organisation, diversity & inclusion and employee experience
• Succession planning exercise carried out annually
• Apprenticeship, graduate and leadership development programmes
• High level of colleague engagement across our businesses supported
by regular pulse surveys and action planning; strong response and
relationships during the COVID-19 crisis
• Robust and regularly reviewed recruitment and retention policies,
training schemes, resource planning and working practices
• Experienced approach to wage negotiations and proactive engagement
on driver fatigue
• Proactive management of pension risks including active engagement with The
Pensions Regulator and DfT over the review of the Railways Pension Scheme
• Widening the recruitment pool through initiatives aimed at attracting
diverse talent, for example through apprenticeships, the Women in Bus
network, active recruitment of female drivers and defining our employee
proposition around ESG and climate change
Opportunity
• Through fostering positive employee relations and offering good
employment packages we have a motivated and committed workforce,
and offer a good employee value proposition
• The economic situation could ease recruitment challenges as the
employment market softens
• Workforce planning and identification of critical skills shortage
improves visibility and ability to plan
• Access to a wider recruitment pool through our focus on diversity
and inclusion and a purpose-driven employee proposition
Change in risk in the year
Increase in risk during the year due to expected rail workforce reform.
63
The Go-Ahead Group plc Annual Report and Accounts 2021
Risk management continued
Key:
Protect and grow the core
Win new bus and rail contracts
Develop for the future of transport
Operational risks continued
9. Mobilisation of international rail contracts
10. Compliance with rail franchise agreements
Failure to fully mobilise contracts within contractual timescales,
especially driver recruitment and delivery of rolling stock,
and to deliver required levels of operational performance.
Risk movement:
Strategic objectives impacted:
Risk tolerance:
No change
Moderate
Potential impact
• Significant financial losses
Failure to comply with contractual obligations.
Risk movement:
Strategic objectives impacted:
Risk tolerance:
New risk
introduced
during the year
Potential impact
• Financial penalties
• Loss of franchise
• Reputational damage
Zero
• Reputational damage impacting future international business opportunities
• Safety incident
Mitigating actions
• Experienced local teams; ability to mobilise internal UK Rail and Bus
expertise
Mitigating actions
• Specific annual briefings/updates of key commercial terms to wider
management team
• Strengthening of senior leadership team with the appointment of a new
Group Strategy and Transformation Director
• Strengthening of senior leadership team with the appointment of a new
• Develop KPIs to monitor contract performance
Group Strategy and Transformation Director
• Increase role of group assurance to complement assurance undertaken
• Building strong relationships with local authorities
at local level
• Compliance with local regulation; established Safety Management
• Group Audit Committee Chair to be appointed to rail operating
Systems and Group Safety Audits
company board
• Governance review of the German bid and mobilisation processes
• Open and transparent dialogue with contractual counterparty
undertaken, with all lessons learnt categorised into future bid processes
and contract mobilisations
• Chief Executive of Go-Ahead’s German rail operations and restructuring
consultancy have transformed operational performance and delivery in
Germany
• Remit and scope of Internal Audit is to be expanded, with a clear
responsibility for the compliance functions within our rail businesses
Opportunity
• Further international opportunities arising from strong reputation
based on successful mobilisation and operation of services
Change in risk in the year
No change in risk during the year.
• Remit and scope of Internal Audit is to be expanded, with a clear
responsibility for the compliance functions within our rail businesses
Opportunity
• Deploy lessons from LSER issues
• Work collaboratively with contractual counterparty
Change in risk in the year
New risk introduced in the year due to LSER matters of concern.
Viability statement
In accordance with the provision of the revised UK Corporate
Governance Code published in July 2018, and having considered
the “Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting” published by the Financial
Reporting Council (FRC) in September 2014, the directors are
required to state 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, drawing
attention to any qualifications or assumptions as necessary.
Time horizon
The directors have assessed the Group’s viability over the period
to June 2024. This is consistent with the period covered by the
Group’s annual detailed three-year Corporate Plan which is the
basis for strategic planning. Beyond three years, forecasts may be
affected by changes in government transport policy and/or major
contract wins and losses. The Group assumes that any contracts
due to end in this period do not continue.
Viability
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.
The directors assessed the potential financial and reputational
impacts arising from the matters of concern identified with
respect to LSER along with the principal risks and uncertainties
arising from the COVID-19 pandemic.
In assessing the future prospects of the Group in the current
situation, the Board has relied on a base case financial forecast
which has been stress tested by overlaying severe but plausible
scenarios of the principal risks and uncertainties set out on pages
59 to 64, and the likely effectiveness of mitigating actions.
64
The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report It is assumed that Regional Bus will continue to recover reaching
close to pre-pandemic passenger levels, relative to services run,
by the end of the forecast period and that contracts in London
and International Bus, which comprise contractual income from
government bodies, will operate in a similar manner to the
pre-pandemic environment. Within UK Rail , the GTR contract is
assumed to operate under the Emergency Recovery Measures
Agreement (ERMA) contract until the current contract ends in
March 2022 with no further extension, after which, as with previous
franchises, the usual settlement of outstanding liabilities will occur.
Contracts in International Rail, in Norway and Germany, are assumed
to continue. In Norway temporary support was in place until
December 2021, the recently elected Norwegian Government has
since announced that financial support will be in place has been
extended until at least March 2022.
The forecast assumes continued operations in all four segments:
Regional Bus, London & International Bus, UK Rail, albeit only
until the end of the current contract, and International Rail.
Although forecasts assume ongoing costs of bidding for
various international contract opportunities, no contract wins
are assumed.
While Regional Bus largely operates routes on a commercial
basis, contracts to operate services are also secured of varying
size and length with local authorities and other 3rd parties
varying in scope from annual contracts to run particular services
to the 8 year contract secured by Go South West running
services in Cornwall from April 2020.
Within London & International Bus the London bus contracts are
awarded in a rolling programme on a route basis and are generally
of 5–7 years in length, dependent on extensions. Ireland has two
5 year contracts which began in 2018 and 2019 while Singapore
secured a 2 year extension on its 5 year contract which is now due
to end in 2023.
Within UK Rail GTR’s current contract is due to end in March 2022.
Within International Rail Germany has five contracts, three of
which started in 2019, one which started in 2021 and a fifth
contract starting in 2023. These contracts are generally of 12-13
years duration. Norway has an 8 year contract with a potential
2 year extension which started in December 2019.
Funding for the Group is assumed to be reasonably available in
the form of capital markets debt, bank debt or alternatives.
Sufficient funding is also assumed to be available in all plausible
market conditions, including if required, additional finance facilities.
The scenarios reflected the following risks:
Regional Bus
• Slower recovery of passenger demand in regional bus with
passenger demand rising at half the rate assumed in the
base case.
• No government support for regional bus services, outside of
the Bus Services Operators Grant (BSOG) and concessionary
travel income, with BRG (Bus Recovery Grant) funding ending
in March 2022.
• Services are maintained within the range required to qualify
for BRG funding up to the end of March 2022 after which they
move towards alignment with passenger demand.
London & International Bus
• Reduced margin due to lower contractual income and Quality
Incentive Contract income in London Bus as a result of lower
passenger demand, financial pressures on Transport for
London and increased staff sickness.
UK Rail
• Acknowledging the DfT’s power to impose a financial penalty
under the Railways Act 1993 in respet of the matters relating
to LSER, but in the absence of a specific precedent or relevant
guidance, it is difficult to estimate precisely the likely quantum
of any penalty. The Group, having taken independent legal
advice, has included a provision for £30.0m in the financial
statements of the year, however additional stress testing has
been performed to assess the impact of a higher penalty.
International Rail
• Operational issues in our German operations leading to higher
operational losses than those already included in the base case.
• Government support for our Norwegian operations ends and
passenger demand recovering more slowly than our base case
assumes. While discussions with the Norwegian Government
continue our base case assumes the cessation of support for
ongoing operation on current terms. Within our base case an
onerous contract provision has been recognised based on the
expected losses from ongoing operation in Norway, however, a
slower recovery than assumed within the model that underpins
that provision would lead to a greater cash outflow.
Liquidity and covenant headroom
Under all the modelled scenarios, positive liquidity headroom
exists throughout the going concern period and the Group
remains in compliance with its covenants. There is significant
availability of liquidity, as explained on page 53 of this Annual
Report with committed bank facilities in place for the period to
June 2025 assuming an option to extend existing facilities by
12 months is exercised.
The Group also has a £250m bond which matures in July 2024.
It is expected that the Group would seek to refinance the bond
within the period covered by the viability assessment, prior to
its maturity in 2024, however, given the level of headroom on
existing covenants and forecast levels of net debt, there is no
reason not to assume that this could be done. Subsequent to the
year end, and following the delays in the announcement of the
Group’s results and the subsequent suspension of its shares,
Moody’s have announced that they have withdrawn their rating.
S&P reaffirmed its credit rating but considers the Group’s outlook
to be under review. Neither change is expected to have an impact
on viability.
Viability statement
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 its liabilities as they fall due during
the viability review period and that the likelihood of extreme
scenarios which would lead to a breach of covenant is remote.
The directors also confirm that in making this statement they
carried out a robust assessment of the principal and emerging
risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Going concern
UK Corporate Governance Code 2018
The revised UK Corporate Governance Code published in July 2018
(the Code) requires the Board to state whether it considers it
appropriate to adopt the going concern basis of accounting in
preparing the financial statements, and to identify any material
uncertainties to the Group’s ability to continue as a going concern
over a period of at least 12 months from the date of approval of the
financial statements.
The financial statements for the year ended 3 July 2021 were
approved by the Board on 23 February 2022.
We also have responsibilities in relation to going concern under
UK legislation, the Financial Conduct Authority’s Listing Rules and
International Accounting Standard 1 Presentation of Financial
Statements.
The Code further suggests that the Board should state whether
it has a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due over
a longer period of assessment, drawing attention to any
qualifications or assumptions as necessary.
It suggests that, taking account of the Group’s current position
and principal risks, the Board should explain how it has assessed
the prospects of the Group, over what period it has done so and
why it considers that period to be appropriate.
Background
The Group understands the importance of rebuilding confidence
in Go-Ahead that may have been undermined for some
stakeholders as a result of the matters at LSER. New leadership
and a refreshed Board look to take the Group forward at a pivotal
time for our industry, and our business. A priority over the coming
months is helping passengers return to the Group’s services and
welcoming new passengers who may be looking for a greener,
value-for-money travel choice. Whilst the pace and nature of
recovery from the pandemic remains uncertain, the Group
considers that public transport will play a crucial role.
The Group has a resilient business model, with exposure to
changes in passenger demand limited to Regional Bus and
Norway, and has received various forms of government support
across the business. Our businesses are key parts of the
communities they serve and have played a fundamental role in
supporting them through the pandemic.
Both governments and our clients recognised that it was critical
to maintain essential services for key workers to get to their places
of work and to provide appropriate funding to sustain services.
This funding has been testament to the importance of our
business and wider industry. In the UK support for Regional Bus
took the form of CBSSG (COVID-19 Bus Service Support Grant)
up to August 2021 and BRG (Bus Recovery Grant) thereafter,
with a current end date for support of March 2022. In Norway,
temporary support was in place until December 2021, the recently
elected Norwegian Government have since announced that
support has been extended until at least March 2022.
In all our geographies the rollout of vaccination programmes and
subsequent relaxation of restrictions has triggered a recovery in
passenger demand but the pace and nature of the recovery
remains uncertain. Governments have begun to reduce or
withdraw the more generalised COVID-19 support packages but
funding packages to rebuild demand, grow public transport and
encourage de-carbonisation continue to develop. In the UK the
Government has maintained an ongoing dialogue with operators
with respect to extending some form of BRG support beyond
March 2022 while in Norway discussions with the Norwegian
Government continue regarding the future of rail services as a
consequence of the cessation of support for ongoing operations.
In UK Rail, Acknowledging the DfT’s power to impose a financial
penalty under the Railway’s Act 1993 in respect of the matters
relating to LSER, but in the absence of a specific precedent or
relevant guidance, it is difficult to estimate precisely the likely
quantum of any penalty. The Group, having taken independent
legal advice, has included a provision for £30.0m in the financial
statements of the year, which reflects the Group’s current best
estimate of any penalty.
Going concern assessment
The Board used the financial forecasts prepared for business
modelling and liquidity projection purposes as the basis for its
assessment of the Group’s ability to continue as a going concern
for at least 12 months from the date of approval of the
financial statements.
As part of this assessment, the Group has also considered the
FRC Company Guidance (updated 4 December 2020) (COVID-19),
which has encouraged companies to assess current forecasts
(corporate plans) with more vigour, consider the impact of
different potential scenarios along with a likelihood assessment,
and consider both the uncertainty and the likely success of any
realistic mitigations.
The Board has recognised the impact of the matters of concern
relating to LSER and the challenge of reliably forecasting the pace
and nature of the recovery from the pandemic.
Key areas of forecasting uncertainty include:
• The pace and nature of the recovery from the pandemic in the
UK and across the world as vaccination coverage improves and
the final restrictions are removed.
• The outcome of ongoing discussions with the DfT around the
matters of concern with respect to LSER including any
potential financial penalty, settlement and potential impact
on debt covenants.
• Revenue recovery rates in Norwegian operations along with
the duration and scale of government support and the
potential to renegotiate or exit the contract.
• Recovery rates in Regional Bus revenue, including airline and
coach services, and the size of the network required to support
passenger demand after BRG funding ceases.
• Further losses on our German contracts following the
challenging operational performance which has impacted the
Baden-Württemberg franchise since its commencement and
the start of our Bavarian operations in December 2021.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report The forecasts were modelled using the base case described in the
viability assessment and based on the Group’s three-year
Corporate Plan updated, where relevant, with revised forecasts.
This included updated assessments of performance, changes in
government support and funding and an updated assessment of
wider political, environmental and market risks since the
preparation of the Corporate Plan.
The base case
The Regional Bus forecast assumes that:
• Regional Bus services are maintained at the level required to
qualify for BRG (Bus Recovery Grant) funding until the end of
March 2022 and, thereafter, at a level commensurate with
passenger demand.
• With passenger levels now recovered to the level obtained
prior to the impact of Omicron, and the associated changes
to guidance and restrictions, they continue to recover through
to 2023/24.
• Government support for Regional Bus services, outside of the
Bus Services Operators Grant (BSOG) and concessionary travel,
from BRG (Bus Recovery Grant) funding through to March 2022.
In London & International Bus , passenger demand risk is borne by
our transport authority clients. Whilst all clients are expected to
come under some financial pressure, there is currently no evidence
of any impact on contractual payments or financial support.
Consequently, the base case for the London & International Bus is
consistent with pre-COVID-19 operational performance.
In UK Rail, Southeastern remained under its EMA through to the
end of the contract in October 2021. GTR is contracted to remain
under an Emergency Recovery Measures Agreement (ERMA)
through to the end of the contract in March 2022. No assumption
is made regarding the award of a National Rail Contract to GTR
or an extension to the existing arrangements on expiry of
the ERMA.
In International Rail our German operations contractual
payments are protected and passenger revenue risk is borne by
the transport authority client.
In Norway, temporary support was in place until December 2021,
the recently elected Norwegian Government have since announced
that support has been extended until at least March 2022. After
this period there can be no guarantee that such support will be
available with future infection levels and imposed restrictions
unknown. As a result, an onerous contract provision has been
recognised based on expected losses from ongoing operations
which is also sufficient to cover the level of performance bonds
and parental guarantees.
In UK Rail, acknowledging the DfT’s power to impose a financial
penalty under the Railways Act 1993 in respect of the matters
relating to LSER, but in the absence of a specific precedent or
relevant guidance, it is difficult to estimate precisely the likely
quantum of any penalty. The Group, having taken independent
legal advice, has included a provision for £30.0m in the financial
statements of the year, which reflects the Group’s current best
estimate of any penalty.
In reaching its conclusion on the going concern assessment, the
Board considered the findings of the work performed to support
the statement on the long term viability of the Group.
Reasonable worst case scenario
As noted in the viability statement, this included assessing
forecasts of severe but plausible downside scenarios related to
our principal risks, notably the extent to which the recovery in
passenger demand and levels of government support are less
favourable than assumed in our base case forecasts. The
reasonable downside scenario assumptions, which together
reduce pre-IFRS 16 EBITDA by c. 20 per cent per annum were:
Regional Bus
• Slower recovery of passenger demand in Regional Bus with
passenger demand rising at half the rate assumed in the base
case with a resultant pre-IFRS 16 EBITDA reduction of c. 20 per
cent in 2022/23 and c. 13 per cent in 2023/24.
• Reduction of capex compared to the base case in 2022/23 and
2023/24 by fifty and twenty-five per cent respectively.
London & International Bus
• Reduced margin due to lower contractual income and Quality
Incentive Contract income in London Bus as a result of lower
passenger demand, financial pressures on Transport for
London and increased staff sickness with a resultant pre-IFRS
16 EBITDA reduction of c.12 per cent in 2022/23 and 2023/24.
UK Rail
• No downside was included for UK Rail in the reasonable worst
case scenario, however, as set out below, consideration was
given to potential outcomes during the revere stress tests.
International Rail
• Operational issues in our German operations leading to higher
operational losses than those already included in the base case.
• Slower recovery in passenger demand in Norway but in the
absence of additional government support.
Liquidity and covenant testing
The Group has no debt maturities ahead of July 2024. We have
a strong balance sheet and good liquidity with adjusted net debt
at 3 July 2021 of £615.4m (£305.9m on a pre-IFRS 16 basis) and
unutilised facilities and cash of £240.4m at the year end.
Funding is covered by a £250m corporate bond, which matures on
6 July 2024, and a Revolving Credit Facility of £280m which
matures in July 2025. Although these arrangements extend
beyond the viability review period, we would expect to refinance
prior to the end of the current viability period and, given the level
of headroom on existing covenants and forecast levels of net
debt, there is no reason not to assume that this could be done.
We maintain a positive dialogue with our lenders and keep
our current facilities under review. Subsequent to the year end,
and following the delays in the announcement of the Group’s
results and the subsequent suspension of its shares, Moody’s
have announced that they have withdrawn their rating. S&P
reaffirmed its credit rating but considers the Group’s outlook
to be under review.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Going concern continued
Liquidity and covenant testing continued
Our primary bank covenant continues to be assessed on a
pre-IFRS 16 basis. At the year end, adjusted net debt was £305.9m
on a pre-IFRS 16 basis (2020: £321.6m). Consequently, adjusted
net debt to pre-IFRS 16 EBITDA (excluding exceptional items) was
1.56 times, towards the bottom of our target range of 1.5 times to
2.5 times and allowing adequate headroom on our primary bank
covenant of 3.5 times. Our covenants are measured twice a year,
at year end and half year.
Due to the delay in publishing our financial results for the year
ended 3 July we sought, and obtained, waivers from our banking
group to extend the period by which we had to present our
results to 28 February 2022. Therefore, as at the date of the
publication of this annual report, we are in compliance with
this requirement.
Under the modelled scenarios as detailed above, positive liquidity
headroom exists throughout the going concern period and the
Group is forecasting to remain in compliance.
In addition to the base case and the reasonable worst case
scenario, the Board has reviewed reverse stress tests, in which
the Group has assessed the set of circumstances that would be
necessary for the Group to breach the limits of its covenant tests.
This includes the impact of potential penalties imposed by the
DfT in respect of LSER in range of up to a cash outflow of £110m
and further downside in Regional Bus and International Rail.
Even in the most severe of the downside scenarios as detailed
above, there remains sufficient liquidity with minimum thresholds
achieved throughout the going concern period after taking
account of controllable mitigating actions.
In applying the reverse stress tests, the directors have concluded
that the set of circumstances required to exhaust this level of
liquidity are remote.
Mitigating action
The Board has considered all mitigations that would be within
their control if faced with a short term material EBITDA reduction
that would reduce covenant headroom. These include cost
efficiencies, additional restructuring, reduction or postponement
of capital expenditure, extended suspension of dividend
payments, and sale of other assets. Whilst these mitigating
actions cover the entire business, they are particularly focused on
Regional Bus where, under the current government funding
arrangement, revenue risk has been reintroduced. Within
International Rail Norway is also subject to revenue risk and
active discussions of potential amendments to the contractual
arrangements with counterparties continue, however, the
outcome of these discussions remain uncertain.
Other mitigations could be considered in more severe circumstances,
including requests for amendments or waivers of covenants,
raising further equity, sale and leaseback of vehicles, disposal of
properties and disposal of investments or other assets.
Restructuring
All Regional Bus businesses have been considering optimal
solutions to respond to passenger demand levels between current
and pre-COVID levels, delivering variable cost reductions along
with specific targeted restructuring of parts of the business as
required. These mitigations would include a reduction in service
levels across the network to match demand, cessation of operation
of marginal cost routes, back office and discretionary spend
reductions and specific actions such as depot and outstation
closures. All of these are within the control of the business once
BRG funding ends and the associated restrictions on service
changes are removed.
Capital expenditure
Consideration was given to altering existing capital expenditure
plans by leasing or deferring purchase of vehicles planned to be
purchased during the 2022 financial year with minimal short term
impact on operational performance. Beyond year one of our
Corporate Plan, £50m–£60m of capital expenditure is forecast in
Regional Bus each year which could be postponed or leased,
reducing the overall levels of debt.
Going concern statement
The directors have assessed the Group’s ability to continue
as a going concern, in light of current and anticipated
economic conditions. The directors confirm they are
satisfied that the Group has adequate resources to continue
in operational existence for a period of 12 months from the
date of approval of the financial statements. For this reason,
they continue to adopt the going concern basis in preparing
the Annual Report and Accounts.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Strategic report Governance
In this section
70 UK Corporate Governance Code compliance statement
71 Chair’s introduction to governance
73 Board overview
74 Board of directors
76 Key focus areas of the Board
86 Evaluation
89 Division of responsibilities
93 Board composition and success
98 Audit, risk and internal control
108 Remuneration
143 Directors’ Report
146 Statement of directors’ responsibilities
Governance
Promoting the long term
sustainable success of the Group
2021 UK Corporate Governance Code compliance statement
The Group is subject to the principles and provisions of the UK Corporate Governance Code (the Code), issued by the Financial
Reporting Council (available from www.frc.org.uk). The table below outlines how the Group has structured the governance section
of this Annual Report and Accounts around the principles of the Code.
Throughout the year ended 3 July 2021, the Board considers that it has complied with the provisions of the Code except for Provision
36* and Provision 41**, and has consistently applied the principles.
Board leadership and
Group purpose
Division of responsibilities
Board composition,
succession and evaluation
• Chair’s introduction to governance
• Board overview
• Board of directors
• Key focus areas of the Board including:
• Culture
• Board activities during the year
• Stakeholder engagement including:
– Understanding views of stakeholders
– Our decision making framework
– Examples of key decisions
• How our governance framework operates
• Roles and responsibilities
• Board and Committee meetings
• Board training, development and induction
• Board evaluation
• Nomination Committee Report including:
• Chair letter including Board composition
and succession planning
• Committee’s responsibilities and activity during the year
• Search and recruitment process for the Group Chief Executive
• Board diversity policy
• Independence and time commitments
• Annual re-election of directors
• Gender pay gap
Audit, risk and internal
control
• Risk management
• Viability statement
• Going concern
• Audit Committee Report including:
• Chair letter
• Committee’s responsibilities and activity during the year
• Risk management and internal controls
• Internal Audit
• Key financial and internal control matters
• Fair, balanced and understandable
• External Audit
Remuneration
• Directors’ Remuneration Report including:
• Annual statement
• Committee’s responsibilities and activity during the year
• Remuneration at a glance
• Remuneration policy
• Alignment of remuneration policy with the Code
• Annual report on remuneration
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* Provision 36 – as reported last year, a formal policy for post-employment shareholdings has been introduced in conjunction with the new remuneration policy which will be put
to shareholders for approval at a General Meeting of shareholders to be convened in March 2022, further details of which can be found in the Directors’ Remuneration Report on
pages 108 to 142.
** Provision 41 – in conjunction with both the implementation of our new remuneration policy and the resumption of the Board’s rolling programme of visits to operating
companies which were postponed at the start of the pandemic, we are developing our remuneration-related engagement with the workforce over the year ahead.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Board leadership and Group purpose
Chair’s introduction to
governance
Clare Hollingsworth
Chair
Dear Shareholder
On behalf of the Board, I am pleased to present Go-Ahead’s
Corporate Governance Report for the year ended 3 July 2021.
You will have read in last year’s report how the Board adapted
quickly to the unprecedented external influences created by
the COVID-19 pandemic. The priorities we set at the outset of the
crisis to safeguard the health and wellbeing of our colleagues and
customers, to play our role in society and to protect our business
have remained at the top of the Board’s agenda. We had wide-
ranging discussions during the year covering the health and
wellbeing of colleagues, safety and risk management and
operational and financial performance both in the UK and our
international businesses. You can read more about our key areas
of focus throughout this Corporate Governance Report.
I am proud of what our people have achieved throughout the
pandemic and I thank all of our colleagues for the efforts they
have made to respond to the challenges.
Another key area of focus for the Board has been the
circumstances relating to London and South Eastern Railway
(LSER). As I mentioned in my introduction to the Strategic Report,
the behaviours which contributed to the failings in relation to the
management of LSER’s franchise with the DfT do not reflect the
values that the Group expects of its colleagues, nor do they meet
the high standards of conduct and governance set by the Board.
The Board has identified a requirement to enhance corporate
governance arrangements, particularly relating to the way in
which we oversee our complex rail operations. Work is already
underway in this area, particularly in GTR where measures are
being taken to improve the ability of Go-Ahead and the Board of
GTR to better safeguard and assure the compliance obligations
of its complex contract. These steps include increasing the remit
and scope of Internal Audit to include oversight of the
compliance arrangements and ensuring deeper understanding
and closer scrutiny of contractual obligations and commercial
terms. The new Group Audit Committee Chair will be appointed
to the Board of GTR in the event of a new contract award, to
provide a clear line of sight to the Group Audit Committee and
Group Board.
Further detail on these measures is provided on pages 98 and 107
of the Audit Committee Report.
In addition, the Group Chief Executive’s review of the business,
following his appointment in November 2021, is considering,
among other things, the optimum division of roles and
accountabilities between the Group’s operating companies and
its central functions.
Board changes and succession planning
The Nomination Committee reviews Board composition and
succession planning on behalf of the Board to ensure that we
have a diverse balance of skills, experience, independence and
knowledge to enable the Board to discharge its duties effectively.
Established plans to refresh our Board and leadership team have
been accelerated. Following the retirement of Group Chief
Executive, David Brown, in late 2021, Christian Schreyer, was
appointed as our new Group Chief Executive. To further bolster
the senior leadership team, Christian has been supported by an
experienced Interim Group Chief Financial Officer, Gordon Boyd,
who was appointed to the Board in September 2021 following the
resignation of the former Group Chief Financial Officer, Elodie
Brian. Gordon will remain in the role until the end of March 2022
and a process is well underway to recruit a permanent Group
Chief Financial Officer.
We were also pleased to welcome David Blackwood and Dominic
Lavelle to the Board as Non-Executive Directors on 1 January
2022. David and Dominic succeeded Adrian Ewer as Senior
Independent Director and Audit Committee Chair respectively on
19 January 2022.
As announced on 19 January 2022, Adrian Ewer stepped down
from the Board with immediate effect in light of of the discovery
of an error made by Equiniti, in their collection of certain proxy
votes submitted in relation to his reappointment at the 2021
AGM. The Board was very disappointed at the consequences of
this mistake and the manner of Adrian’s departure, given his
extensive commitment and valuable contribution over many
years.
At the 2020 AGM, the Board gave thanks to Katherine Innes Ker
who, after over ten years, stepped down as Non-Executive Director
having remained on the Board for an additional year to oversee
the transition of my leadership as Chair.
Full details for all new appointments and leavers can be found in
the Nomination Committee Report from page 93 and in the
Remuneration Committee Report from page 108.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Board leadership and Group purpose continued
Purpose, values and culture
The Board oversees and monitors culture in a number of ways to
ensure it is aligned to our purpose, values and strategy. Our
devolved operating model facilitates this by enabling senior
leadership to provide valuable insight into how our purpose and
values are brought to life across our business operations. The
Board has missed having the opportunity to make regular visits
to operating companies during the pandemic and we are pleased
that these have now resumed, enabling us to meet colleagues
again and experience personally the working practices and
culture that exist at the heart of our businesses. You can read
more about the Board’s oversight of culture on pages 78 and 79.
Our core values and safety culture have been pivotal to
safeguarding the health and wellbeing of our people, customers
and communities. During the year, the regular safety updates
provided to the Board were complemented with additional
in-depth reviews around the safety, health and wellbeing of our
colleagues. A review of health and safety reporting was also
undertaken, supported by one of the Board’s non-executive
directors Harry Holt.
We remain committed to increasing diversity across all levels of
the business. We believe that a diverse and inclusive workforce
underpins success. It improves our decision making by bringing
more diverse perspectives, it creates an inclusive culture that
attracts and retains the best talent and it meets the needs of our
customers by representing the communities we serve. You can
read more about the Nomination Committee’s work in this
important area on page 96.
“We remain committed to enhancing
diversity across all levels of the
business.”
Stakeholder engagement
We know that engaging with our stakeholders to understand their
views is central to ensuring the Board makes inclusive and
responsible decisions.
While it was not possible for the Board to meet with colleagues
across the business during the year, our local management teams
were empowered to drive forward their own engagement
agendas. The feedback generated was shared with the Board so
that we could understand and respond to the issues that matter
most to our colleagues.
I have also appreciated my own engagement with shareholders,
particularly on environmental, social and governance (ESG) matters,
Group Chief Executive succession and more latterly on the LSER
matters of concern. I thank shareholders for sharing their views
and insights.
During the year, Leanne Wood, Remuneration Committee Chair,
welcomed the feedback received from her consultation with
shareholders and shareholder representative bodies on the new
remuneration policy to be proposed for approval by shareholders
at the General Meeting in March 2022. Full details of the new
policy can be found on pages 117 to 128.
An overview of how and why we engage with our stakeholders
and the key topics raised, together with examples of how we
responded, can be found on pages 20 to 23. You can also find
out more about how the Board considers stakeholders in
decision making, how their views are understood in the
boardroom and examples of key decisions taken during
the year on pages 81 to 85.
“Engaging with our stakeholders
to understand their views is central
to ensuring the Board makes inclusive
and responsible decisions.”
ESG
ESG is another integral part of Board discussions and covers the
broad range of matters that are key to our business strategy and
long term success. The Group Chief Executive is responsible for
developing and delivering climate change strategy and leads
Board discussions on climate-related risks and opportunities. In
July 2021, we also published our first climate change strategy and
you can read more about this on pages 26 and 27.
Evaluation
The Board welcomes its annual effectiveness reviews as an
opportunity to review its performance. Both the external review,
completed during 2020 and the subsequent internal review
completed in completed during 2021, concluded that the Board
continued to operate effectively and had responded quickly,
decisively and appropriately to the challenges posed by COVID-19.
In particular, we found that the Board’s management of the
pandemic acted as a vehicle to enhance our culture, with our
governance framework being a critical component of the Group’s
resilience. For more information, please read pages 86 to 88. The
matters relating to LSER, which took place after the most recent
interim review, will form a substantative part of the Board’s next
effectiveness review.
Looking forward
I am very disappointed that Go-Ahead’s strong values were not
reflected in the behaviours that contributed to failings in relation
to LSER. There is much work to do in the coming months and
years, including rebuilding confidence in Go-Ahead that may have
been undermined for some of our stakeholders. This is a
transitional period for Go-Ahead. We embrace new leadership
and a refreshed Board to take the Group forward at a pivotal time
for our industry, and our business.
I would like to thank our shareholders for their loyalty, patience
and continued support.
Clare Hollingsworth
Chair
23 February 2022
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance
Board overview
Board members by gender
Balance of the Board
Non-executive directors’ tenure
Male: 50%
Female: 50%
Year ended
3 July 2021
5050
7129
As at
23 February
2022
Male: 71%
Non-executive: 67%
Year ended
3 July 2021
Year ended
3 July 2021
6733
L 7129
As at
23 February
2022
L 1147
2437
As at
23 February
2022
Non-executive: 71%
Executive: 33%
Female: 29%
Executive: 29%
Clare Hollingsworth:
1 year and 11 months
Adrian Ewer:
8 years and 2 months
Leanne Wood:
3 years and 8 months
Harry Holt:
3 years and 8 months
Clare Hollingsworth:
2 years and 6 months
Leanne Wood:
4 years and 4 months
Harry Holt:
4 years and 4 months
David Blackwood:
2 months
Dominic Lavelle:
2 months
Board and committee meeting attendance
The following table shows the directors’ attendance at scheduled meetings they were eligible to attend for the year ended 3 July 2021:
Board attendance
Total meetings
Clare Hollingsworth1
David Brown2
Elodie Brian2
Adrian Ewer
Leanne Wood
Harry Holt
Katherine Innes Ker3
Board 4
Audit Committee 5
Remuneration Committee 6
Nomination Committee 7
Scheduled
Scheduled
Scheduled
Scheduled
9
5
—
—
—
—
5
—
—
—
3
—
—
1. The Chair attended Audit Committee meetings by invitation as appropriate, which have not been included.
2. The executive directors attended committee meetings by invitation as appropriate, which have not been included.
3. Katherine Innes Ker retired as Non-Independent Non-Executive Director with effect from the conclusion of the 2020 AGM. She was eligible to attend three scheduled
Board meetings between 28 June 2020 and this date. Katherine also attended Audit and Remuneration Committee meetings by invitation which have not been included.
4. Unscheduled Board meetings were held on 22 September 2020, 11 February 2021, 6 April 2021, 7 April 2021, 9 April 2021 and 21 April 2021 with these meetings relating
to the consideration of bid submissions and strategic related matters.
5. An unscheduled Audit Committee meeting was held on 16 September 2020 to discuss outstanding audit related matters for the year ended 27 June 2020.
6. An unscheduled Remuneration Committee meeting was held on 19 May 2021 in respect of the executive remuneration policy review.
7. Unscheduled Nomination Committee meetings were held on 5 November 2020, 26 April 2021 and 10 May 2021 to discuss non-executive and executive succession
planning, including the retirement of the Group Chief Executive and the search for his successor.
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The Go-Ahead Group plc Annual Report and Accounts 2021
+
+
L
+
+
+
+
L
+
+
21
+
21
+
L
+
37
+
1
+
1
+
L
Board leadership and Group purpose continued
Board of directors
Clare Hollingsworth, Non-Executive Chair
N
R
Appointment: Clare Hollingsworth joined the Board as
Non-Executive Chair Designate on 1 August 2019 before becoming
Non-Executive Chair of the Group on 31 October 2019.
Independent: On appointment.
Relevant skills, experience and contributions: Extensive board
experience both at executive and non-executive level across a
range of sectors, including safety critical businesses in rail, aviation
and healthcare. Worked nationally and internationally, and within
different ownership models. Significant stakeholder management
experience, including across regulators and UK Government.
Former Non-Executive Chair of Eurostar International Ltd,
Non-Executive Director at UK Government Investments, Savills
plc and Assura plc and Chief Executive Officer of Caledonian
Airways Ltd, Bupa Hospitals Ltd and Spire Healthcare Ltd.
Other appointments: None.
Christian Schreyer, Group Chief Executive
Appointment: Christian was appointed to the Board on
1 November 2021 and became Group Chief Executive with
effect from 5 November 2021.
Independent: Not applicable.
Relevant skills, experience and contributions: A post-graduate
of Harvard Business School, Christian is a highly experienced
transport leader. As a former senior executive of Transdev, he
oversaw large scale bus and rail operations at an international
level with accountability for seven countries and more than
26,000 people. Prior to that, he worked at Deutsche Bahn where
he held several senior roles including Head of Corporate Strategy.
He brings to the Board a high level of corporate strategy and
strategic awareness, significant experience in sustainability and
decarbonisation, a deep understanding of the relationships
between government and public transport and a wealth of
experience of delivering outstanding transport services to
customers.
Other appointments: None.
Gordon Boyd, Interim Group Chief Financial Officer
Appointment: Gordon Boyd was appointed to the Board as Interim
Group Chief Financial Officer to Board on 28 September 2021.
treasury qualification and has completed the Advanced
Management Programme at Harvard Business School.
Independent: Not applicable.
Relevant skills, experience and contributions: A fellow member
of the Chartered Institute of Management Accountants, Gordon
is also a graduate of Edinburgh University, has an MBA, holds a
He has held a number of FTSE 250 Chief Financial Officer roles,
with a focus on interim roles in recent years, the latest of which
was Interim Chief Financial Officer of Capita plc.
Other appointments: None.
David Blackwood, Senior Independent Director
N A
R
Appointment: David Blackwood joined the Board as Independent
Non-Executive Director and Senior Independent Director
Designate with effect from 1 January 2022 and became Senior
Independent Director with effect from 19 January 2022.
Independent: Yes.
Relevant skills, experience and contributions: David has
extensive business and listed company experience, notably in
Finance, Audit and Risk. He has previously been Audit Committee
Chair and Senior Independent Director of Scapa plc and Dignity
plc, and, for both, served on the Nomination and Remuneration
Committees. David was formerly Chief Financial Officer of
Synthomer plc, prior to which he was Group Treasurer and Group
Financial Controller at Imperial Chemical Industries plc (ICI). David
has previously served as a member of the Cabinet Office Audit
and Risk Committee and on the Board for Actuarial Standards. He
is a member of the Institute of Chartered Accountants in England
and Wales (ICAEW) and a Fellow of the Association of Corporate
Treasurers (ACT).
Other appointments: Non-Executive Chair of Smiths News plc
(Chair of the Nomination Committee and a member of the
Remuneration Committee) and Deputy Chairman and Senior
Independent Director of FTSE SmallCap Esken Limited (previously
Stobart Group Limited)(Chair of the Audit Committee and
member of the Remuneration and Nomination Committees).
Key
Executive directors
Chair and non-executive directors
Group Company Secretary and Committee Secretary
N Nomination Committee
A Audit Committee
R Remuneration Committee
Committee Chair
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Dominic Lavelle, Non-Executive Director
N A
R
Appointment: Dominic Lavelle joined the Board as Independent
Non-Executive Director and Audit Committee Chair Designate
with effect from 1 January 2022 and became Audit Committee
Chair with effect from 19 January 2022.
Independent: Yes.
Relevant skills, experience and contributions: Dominic has
extensive corporate and financial knowledge, with previous
positions including Chief Financial Officer of SDL plc, Group
Finance Director of Alfred McAlpine plc and Group Finance
Director of Allders plc.
Other appointments: Non-Executive Director of McColls Retail
Group plc (Chair of the Audit and Risk Committee); Non-Executive
Director of AIM quoted company FIH group plc (Chair of the Audit
Committee); and Senior Independent Non-Executive Director of
AIM quoted company Fulcrum Utility Services Limited (Chair of
the Audit Committee).
Leanne Wood, Non-Executive Director
N A
R
Appointment: Leanne Wood joined the Board on 23 October 2017
and was appointed as Remuneration Committee Chair on
31 October 2019.
of remuneration decisions, drawing on her understanding of the
employee and wider business perspectives, allows her to be an
effective Remuneration Committee Chair.
Independent: Yes.
Relevant skills, experience and contributions: Leanne’s
contribution to the Board is enhanced by her broad expertise
in leading corporate strategy and organisational transformation
obtained while working in senior roles at major consumer brands,
including Vodafone, Burberry and Diageo. She has a particular
strength for customer insight, which is key in leading Board
discussions on stakeholder engagement and considering the
views of the workforce. Her ability to consider the consequences
Leanne has extensive corporate experience working in several
international executive roles. She is a graduate of the University
of Cambridge, holding both a Master of Arts in law and economics
and an MBA from Institut Européen d’Administration des Affaires
(INSEAD).
Other appointments: Chief Human Resources Officer at
Vodafone Group plc and non-independent Non-Executive Director
of Vodacom (member of the Remuneration, Nomination and
Social and Ethics Committees).
Harry Holt, Non-Executive Director
N A
R
Appointment: Harry Holt joined the Board on 23 October 2017 and
is the non-executive director responsible for workforce engagement.
Independent: Yes.
Relevant skills, experience and contributions: After a distinguished
career in the British Army, Harry is now a proven business leader
having fulfilled a number of senior executive positions at Rolls-Royce
including President of its Nuclear Business Division and, most
recently, as Chief People Officer, where he led an ambitious
transformation and restructuring programme across the company
before stepping down at the end of 2021 and taking up the post of
Chief Operating Officer at Vertical Aerospace. He is skilled in all
aspects of leadership, with a deep and practical experience of
leading large organisations through change to successful attainment
of their strategic ambitions. Harry brings to the Board a broad
range of experiences and capabilities including: operational
management, strategy, health and safety, employee engagement
and cultural transformation.
Harry previously served eight years as Chairman of the Royal
Foundation’s Endeavour Fund, complementing his listed company
experience with a non-corporate perspective.
Other appointments: Chief Operating Officer at Vertical Aerospace.
Carolyn Ferguson, Group Company Secretary
N A
R
Appointment: Carolyn Ferguson was appointed as Group
Company Secretary on 1 July 2006.
Independent: Not applicable.
Relevant skills, experience and contributions: Carolyn is an
experienced Company Secretary and governance professional
with a proven track record of working with the Group Board and
senior leadership team to the highest of ethical and professional
standards, supported by robust corporate governance principles.
She is also an effective driver of pensions de-risking strategy
for the Group’s defined benefit bus schemes. She is a fellow of
The Chartered Governance Institute and a qualified and practising
coach and mentor. Carolyn began working for the Group as Assistant
Company Secretary in 2001, before being appointed to Group
Company Secretary in 2006. Her previous employment includes
working for Northern Electric, predominantly in the field of pensions.
Other appointments: Non-Executive Director of Better Boards Ltd
and Trustee Director of The Go-Ahead Group Pension Plan.
Board changes
Adrian Ewer (Senior Independent Director and Audit Committee Chair), David Brown (Group Chief Executive), Elodie Brian (Group Chief Financial Officer) and
Katherine Innes Ker (Non-Executive Director) all served as directors of the Board during the year ended 3 July 2021. They stepped down from the Board with
effect from 19 January 2022, 5 November 2021, 27 September 2021 and 24 November 2020 respectively.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Board leadership and Group purpose continued
Key focus areas of the Board
The Board acknowledges the importance of working in collaboration
with government, partners and suppliers in order to deliver our
strategy and we will be monitoring our performance against the
targets we have set. You can read more about our climate change
strategy on pages 26 and 27.
Strategy
Last year, in response to the challenges with our German rail
operations, the Board took the decision to pause development
activities in new international rail markets. The lessons learned
from the supplementary governance review undertaken at that
time have now also been embedded into the bidding process. A new
Board Sub-Committee has been established, to ensure that
appropriate time and focus is given to assessing investment
opportunities with management and bid teams, in support of a
wider Board discussion. The Board is satisfied that these
enhanced arrangements allow it to appropriately assess
opportunities against modified criteria and to evaluate the merits
of each bid.
Strategic discussions also continued against heightened uncertainty
given the impact of COVID-19 and expected material changes to
government policy. The pandemic has reaffirmed the importance of
our purpose which continues to inform the Board’s decisions,
supported by our risk management framework, risk appetite and
strong financial discipline. While activities have continued under all
three strategic pillars, the pandemic has focused the attention of
the business and the Board on ‘protect and grow the core’, with the
emphasis on protecting our business, aligned with our pandemic
priorities.
London & South Eastern Railway Limited (LSER)
Subsequent to the year end, both the Board and the Audit
Committee carefully considered the Independent Committee’s
findings in relation to LSER. The Independent Committee has
been focused on open, collaborative and constructive
engagement with the DfT with a view to resolving matters. This
has identified to the Board a requirement to enhance corporate
governance arrangements, particularly relating to the way in
which we oversee our complex rail operations and further details
can be found on pages 10 and 11.
The Board held nine scheduled meetings during the year ended
3 July 2021, two of which were dedicated exclusively to discussing
the Group’s strategy. The majority of meetings took place via
video conference as a result of COVID-19 restrictions. Meetings
were attended by all Board members and attendance details can
be found on page 73. A schedule of the Board’s activities during the
year ended 3 July 2021 can be found on page 80.
Rebuilding from the impact of COVID-19
Recovery from the pandemic has naturally been at the forefront
of the Board’s agenda, shaping our conversations around the health
and wellbeing of colleagues, safety and risk management, stakeholder
partnerships and the long term sustainability of the business.
During the year, the Board undertook two reviews to identify
insights and lessons learned from the pandemic. The first was to
assess management’s crisis response, including the initial actions
taken in the first wave, lockdown and recovery, in addition to
leadership capability. A key outcome of this review was that our
senior leadership teams and colleagues alike had worked
incredibly hard, demonstrating commitment and
professionalism in responding to the challenges. Our devolved
operating model also proved particularly invaluable in enabling
our businesses to work in partnership with national and local
stakeholders to continue to provide vital transport services to
customers and communities.
The second review, which was undertaken as part of the annual
board effectiveness review, assessed the Board’s role in the
pandemic. Importantly, both reviews provided the Board with
assurance that its decisions and those of our senior leadership
teams, continued to be guided by our three strategic priorities,
underpinned by our core values and supported by our governance
framework. You can read more about both of these reviews on
pages 86 to 88.
ESG
Environmental, social and governance (ESG) matters are integral
to our long term strategy, particularly in the context of how our
business responds to changing environmental and societal trends.
Climate change has remained a key focus area for the Board
during the year, with an increase in the number of in-depth reviews
undertaken. The Group Chief Executive is ultimately responsible for
delivering our climate change strategy and a governance framework
has been put in place to support clear accountability and transparent
reporting structures. The Group Chief Executive leads discussion
on climate change response, risks and opportunities at Board
meetings and, in July 2021, the Board approved its first climate
change strategy for publication. This sets out how we will play
our part in reducing emissions to become a net zero business
by 2045.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance How the Board reviews strategy
Performance
Outlook
Strategic
objectives
Developing
strategy and
external
trends
New
opportunities
and adjacencies
Investment
case
Board strategic
discussion
Macro trends
UK industry
market
development
Risk appetite
and capital
allocation
International
development
Digitalisation
Climate
change
Board Strategy Day
The Board traditionally undertakes a dedicated annual review
of business strategy. Following a recommendation from last
year’s external effectiveness review, the Board reviewed its
approach to strategy development and during the year ended 3
July 2021 held two stand-alone strategy review meetings, rather
than one in previous years. The first meeting focused on the
short term corporate plan horizon over the next one to three
years and the second meeting focused on the longer term.
With detailed papers circulated in advance, the Board discussed
the key areas set out above.
The Board’s annual strategy review typically takes place in
May each year. Following the recent refresh of the Board,
including the appointment of our new Group Chief Executive,
Christian Schreyer, this year’s annual review will take place in
March 2022. This aligns with the conclusion of the business
review Christian has been undertaking since joining the Group
and which will also take into account the conclusions from the
Independent Committee’s work.
Board meetings
The Board also reviews strategy at each meeting, with the
executive directors providing updates on performance against
strategic objectives and any opportunities arising throughout
the year.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Board leadership and Group purpose continued
Culture
Cultural framework
The Board is responsible for shaping and monitoring the culture
of the Group to ensure it supports our purpose, values and
strategy and is a key driver of performance. A number of key
cultural indicators, examples of which are shown in the table
opposite, informed the Board’s assessment of culture across the
Group during the year.
Our devolved operating model, and senior leadership team
in particular, play a critical role in bringing our values and culture
to life. Our safety culture has been pivotal in underpinning our
response to the pandemic and, during the year ended 3 July 2021,
the regular safety updates provided to the Board at each meeting
were complemented with more comprehensive thematic updates to
give the Board further assurance around the safety, health and
wellbeing of colleagues.
With communication a key priority during our COVID-19
response, the Board reviewed employee engagement strategies
and the dedicated resources applied to ensure colleagues felt
supported both at work and in their personal lives. Examples of
other thematic updates included how safety culture was being
embedded into the business; suicide prevention on the railways
and accident prevention in the Bus division.
A review of health and safety reporting was also undertaken, which
included an assessment of the consistency and clarity on the metrics
set against their trends, aspirations and how progress was monitored.
This review was supported by Harry Holt, one of the Board’s
non-executive directors, who also attended a number of our virtual
rail safety forums.
“Our devolved operating model, and
senior leadership team in particular, play
a critical role in bringing our values and
culture to life.”
Supportive framework
In addition to a supportive culture where there is a genuine means
for the workforce to raise any concerns, the Group’s Code of
Conduct facilitates the understanding and embodiment of
behaviours that align colleagues with the culture as set by the
Board. It also sets out what is expected from colleagues and
stakeholders to ensure they protect themselves as well as the
Group’s reputation and assets. As explained on page 5, the Board is
disappointed that the behaviours which contributed to the failings in
LSER do not reflect the values the Board expects of its colleagues.
Policies are in place for the prevention of corruption, fraud and bribery.
We have bespoke online training for competition law, anti-bribery
and corruption which colleagues in high risk areas (including the
Board and senior leadership) are required to complete
periodically.
Our vision
A world where every journey is taken care of
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
Our purpose
To be the local partner taking care of journeys that enhance the lives and wellbeing of our communities across the world
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance How the Board monitors culture
Cultural indicator
Link to culture
Health and safety performance
KPI reporting on a range of safety metrics enables the Board to assess
the effectiveness of safety practices and behaviours and receive assurance
that the business continues to drive a culture of continuous improvement.
Thematic safety updates also provide additional insights and understanding.
Workforce and remuneration policies
The Group HR Director’s annual review of policies and update to the Board
provides assurance that policies are consistent with our values, support the
right behaviours and support a healthy culture.
Whistleblowing policies, incidents
or matters of concern
Colleague experience
Leadership and talent review
The Board’s review of the whistleblowing policies in place across the
business, and the nature of employee concerns, provides reassurance that
policies are clear and accessible with no adverse trends. The Board is also
satisfied that appropriate arrangements are in place for the proportionate
independent investigation of any such matters together with any follow up
action required.
Feedback from a number of channels provides the Board with an understanding
of the colleague experience, in addition to reviewing indicators such as employee
engagement index, absenteeism and employee turnover.
Regular updates provided by the Group HR Director enables the Board to
monitor and assess the robustness and diversity of our leadership and talent
pipeline. This is supported by a review of leadership, graduate and apprenticeship
demographics and targets.
Diversity and inclusion policies
and targets
The setting of targets and oversight of the programmes and initiatives
underway to support diversity policies enables the Board to see how these
measures demonstrably increase diversity and inclusion across our businesses.
Modern slavery statement
Stakeholder survey results
Other key cultural indicators
The Board’s annual review of the Group’s modern slavery policy supports its
oversight of the steps taken to prevent modern slavery and human trafficking
across the business and its supply chain.
Our annual stakeholder survey provides the Board with direct insights into
how our colleagues are perceived by key stakeholders and whether there are
any areas of improvement. This enables the Board to reflect on the decisions
it makes in the context of stakeholder input both prior to and after decisions
have been made.
The review of other key cultural indicators such as customer satisfaction
survey results, targets on promptness of payment to suppliers and results of
internal audit reviews, further supports the Board’s review of culture
throughout the business.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Board leadership and Group purpose continued
Board activities during the year
ended 3 July 2021
Performance
• Reviewed reports on operational and financial performance
• Received updates on ‘deep-dive’ risk areas, key contracts,
at each Board meeting
projects and other matters of significance
• Reviewed strategy and approved the budget
• Received reports from the investor relations team
• Approved significant contracts and bid submissions
• Reviewed capital allocation policy and dividend position
• Approved the Group’s 2020 Annual Report and Accounts, financial
results, trading updates and ancillary documents relating to the
2020 Annual General Meeting, including the Notice of Meeting
Health and safety
• Received routine health and safety update reports at each
• Received updates from Harry Holt, one of the Board’s
Board meeting
• Received thematic updates on health, safety and wellbeing
• Approved and monitored health and safety policy and targets
non-executive directors, following visits to local operating
company safety forums
• Received updates from the Audit Committee on health
and safety auditing
Audit and risk management
• Received verbal updates from the Audit Committee
• Reviewed and approved the Group’s appetite for risk
following each Committee meeting
and risk appetite statement
• Received reports on financial and accounting issues
• Approved the principal and emerging risks and risk
and contract and commercial issues
management framework
• Approved the going concern statement and assessment
• Approved recommendations from the Audit Committee
of viability
• Monitored ongoing performance and changes in key risks
and emerging risks, including top-down risk identification
relating to the fee and appointment of the external auditor
• Subsequent to the year end, the Audit Committee and Board
carefully considered the Independent Committee’s findings in
relation to the LSER matters of concern
Political and regulatory environment
• Received updates on government funding in relation
• Received regular updates on developments in the Group’s
to COVID-19
international markets
• Received updates on policy changes in the UK industry,
including Bus Back Better national bus strategy and the
Williams-Shapps Plan for Rail
• Received updates in relation to the Government’s
consultation on UK corporate reform
Governance
• Convened sub-committees of the Board to deal with specific
matters and additional unscheduled meetings where appropriate
• Board succession planning for the Group Chief Executive,
Senior Independent Director and Audit Committee Chair
• Reviewed Board policies and procedures
• Reviewed the formal matters reserved for the Board
and terms of reference for each Board committee
• Reviewed conflicts of interest and time commitments
• Annual evaluation of the Board, its committees
of directors
and individual directors
Culture
• See pages 78 and 79
Stakeholder engagement
• See pages 81 to 85
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Stakeholder engagement
A statement regarding our compliance with Section 172(1) of the Companies Act 2006
(‘Section 172’) can be found on page 1 of the Strategic Report. Pages 20 to 23 provide
further information on why we consider each of our stakeholders to be key as well as
insight into why and how we engage with each of our stakeholders, the key topics of
engagement during the year and how we responded.
The Board’s decision making is supported by the framework outlined on page 84.
This ensures the Board carefully considers all the relevant factors, identifying
the likely consequences of any decision on the Group’s long term success
and the impact those decisions may have on its stakeholders.
Our people
Customers
Investors
Key
stakeholders
Strategic
partners
and
suppliers
Communities
Government
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The Go-Ahead Group plc Annual Report and Accounts 2021
Board leadership and Group purpose continued
Understanding the views of stakeholders
The Board has a meaningful programme of stakeholder engagement.
Aimed at identifying and understanding the views of all of our
key stakeholder groups, it ensures that their interests are always
considered when decisions are taken. We engage with our
stakeholders in different ways and receive feedback updates at
least biannually. Whilst the executive directors typically lead on
the interface, the Chair and other non-executive directors also
have opportunities to talk directly with stakeholders.
Supplementing this programme is an annual stakeholder survey
which, for the last five years, has been conducted by the Group
and each of its operating companies. The results from all of these
independently run surveys are shared with the Board. This year’s
surveys provided helpful insights into key themes such as
reputation, communication, service delivery and performance,
as well as how the Group handled the pandemic and the
effectiveness of our partnerships with stakeholders.
Our people
Harry Holt is the non-executive director designated to review
and support workforce engagement across the business.
Having fulfilled a number of senior executive positions at
Rolls-Royce, including until recently the role of Chief People
Officer, the Board deemed Harry to have the depth of
experience and skills suitable for the role.
Supported by the Group HR Director and Group Company
Secretary, Harry undertakes an annual review of the effectiveness
of the arrangements in place to provide the Board with
assurance that its approach remains effective and provides a
genuine means of two-way engagement with the workforce.
Our devolved operating model means it is important for our
operating companies to retain responsibility for engagement
with their own colleagues. Acting as intermediaries for the Board,
operating company leadership teams have responsibility for
ensuring an effective mechanism for genuine two-way
engagement between their operating company boards and
colleagues. Feedback from each operating company is shared
with the Board and, in turn, the Board reviews this feedback
and considers what information should be cascaded back
to the operating companies for them to share with
their colleagues.
This approach has been particularly effective during the
pandemic as it has enabled management teams to drive
their own local engagement agendas forward in an agile
and responsive way. The Board discussed the key themes that
mattered most to colleagues across the business during the
year ended 3 July 2021, which were broadly the impact
of COVID-19 on working practices, safety and wellbeing,
job security and pay.
The Board was reassured that the results from the annual
stakeholder survey showed a positive sentiment across the
business, with the general consensus being that the Group and
its operating companies were professional, reliable and resilient
and had managed the pandemic well.
The Board understands the importance of assessing the
effectiveness of its engagement strategies. We work in
collaboration and partnership with all our stakeholders which has
the benefit of ensuring that ongoing dialogue is maintained
throughout the year. This, together with feedback and sentiment
from regular surveys, means we are regularly evolving our
engagement strategies to ensure they remain effective.
Complementing this approach is the Board’s longstanding
rolling programme of visits to operating companies, which
includes meeting with employee forum representatives.
Spending time with management, customer-facing and
operational colleagues and employee representatives enables
the Board to hear first hand from colleagues what is important
to them and to see how our values and culture are being
brought to life in a day-to-day setting. While all visits were
postponed during the year ended 3 July 2021 as a result of the
pandemic, they have now resumed, with the Chair and
members of the Board scheduled to visit most UK operating
companies through the year. This will include engaging with
employees on matters of executive pay and wider Group pay
policy.
As reported on page 78, Harry Holt also virtually attended
Southeastern’s Safety and Environment Board and GTR’s
Safety Executive in 2021 where he gained first-hand insights
into safety culture and engagement to support the wider
Board’s oversight.
The Board reviews the results of colleague engagement
surveys, where the approach has evolved over the last
financial year from annual surveys to pulse surveys which are
shorter, but more frequent, and tailored to specific topics.
Pulse surveys during the year were focused on colleague
engagement, health, safety and wellbeing. The focus of future
pulse surveys will be management effectiveness,
communication, leadership, colleague empowerment
and working together.
Further information on how and why we engage with our
workforce and the key topics raised during the year, together
with examples of how we responded, can be found on pages
20 and 21.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Customers, strategic partners and suppliers, government and communities
The pandemic has emphasised the importance of public
transport services to our customers, communities and society.
Engaging with our customers enables us to provide safe,
convenient and reliable services that serve our local markets
and communities. While the Transport Focus customer
satisfaction surveys that were paused in Spring 2020 will not
resume again until Autumn 2022, the Board has been updated
on the results of the surveys undertaken by our individual
operating companies to ensure that we have up to date
insights from our customers that help shape our decisions
to support our communities effectively.
We have continued to work closely and collaboratively
with key partners, regulators and our supply chain to ensure
that service provision remains at the right level and that
suitable funding is received to enable essential services to
continue to be delivered.
Investors
The Board maintains an open dialogue with its investors to
ensure that feedback informs decision making. This is achieved
through a programme of structured engagement. The
executive directors engage regularly with investors, with more
frequent discussions taking place this year on government
funding and our response to the pandemic. The Chair also
engaged with shareholders regarding ESG matters, Group
Chief Executive succession and more latterly on LSER matters.
The Board receives regular updates on investor sentiment.
The Chair, Senior Independent Director and Committee Chairs
are available to shareholders to discuss any matters of
concern shareholders may have and questions can also be put
to the Board at the Annual General Meeting or other shareholder
meetings.
During the year, Leanne Wood, Remuneration Committee
Chair also carried out an extensive consultation exercise with
our major shareholders and proxy voting agencies on our new
directors’ remuneration policy, which we are proposing to
shareholders at the General Meeting we are intending to
convene in March 2022. More details of this process and the
outcome of our engagement are available within the Directors’
Remuneration Report on pages 108 to 142.
Corporate website
Our corporate website has a dedicated investors section
which contains a suite of useful information, including:
• Published Annual Reports and Results announcements
• Regulatory news
• Details on environmental, social and governance matters
• A shareholder centre with share price tools and a
financial calendar
• Analyst consensus forecasts
Investors and other stakeholders can subscribe to receive news
through email updates by registering their details on our website.
Annual General Meeting (AGM)
The AGM is an opportunity for the Board to engage with and
answer questions from shareholders. Due to COVID-19
The majority of this engagement is through the Group
Chief Executive and members of the senior leadership
team, particularly in relation to the operation of our bus and
rail services, and in shaping the policy landscape within which
the business operates. The Board receives regular updates
on matters such as government strategy and funding, policy
changes, contract negotiations, contract performance of
existing contracts and changes in regulation or legislation
that are relevant to the business.
The Group accepts that serious errors were made in relation to
the LSER franchise with respect to its engagement with the DfT
and the Independent Committee has been focused on open,
collaborative and constructive engagement with the DfT with
a view to resolving matters.
restrictions, our 2020 AGM was held as a closed meeting at which
67 per cent of our shareholders (by voting capital) voted either
through the Chair of the AGM as their proxy, or by submitting
their proxy forms electronically or by post. We received in excess
of 92 per cent of votes in favour of all of our resolutions, including
over 98 per cent approval for our Directors’ Remuneration Report.
Shareholders were invited to submit questions to a dedicated
AGM mailbox in advance of the meeting.
The 2021 AGM was held on Tuesday 21 December 2021 at
11:00am. All resolutions, full details of which can be found in
the Notice of AGM available on our website, were voted on by
way of poll and passed. On 19 January 2022, the Group
announced that it had been informed by its Registrar, Equiniti,
that they had discovered an error in the collection of certain
proxy votes submitted in relation to the resolutions put to the
shareholders at the AGM. As a result of Equiniti’s error,
approximately 3.2 million proxy votes validly submitted by
shareholders were not included in the vote count produced by
the Registrar. Had these votes been included in the vote count,
Resolution 4 to re-elect Adrian Ewer as a director of the
Company would have received fewer than 50% of votes in
favour and, therefore, he would not have been re-elected as a
director of the Company. The outcomes in relation to the other
resolutions put to the AGM would not have been affected by
this error and those resolutions would still have been approved
by the requisite majority of shareholders. In light of this, Adrian
Ewer stepped down from the Board with effect from 19 January
2022.
Given the delay to the publication of the Group’s Annual
Report and Accounts for the year ended 3 July 2021 (the
Accounts), certain resolutions relating to the Annual Report
and Accounts, the appointment and remuneration of the
Group’s external auditor, the Directors’ Remuneration Report
and the Directors’ Remuneration Policy did not form part of
the business at the 2021 AGM. The Group intends to convene
a separate shareholder meeting to take place in March 2022
where resolutions on these matters will be tabled. Further
details of this meeting will be provided in due course.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Board leadership and Group purpose continued
Our decision making framework
Training and development
Ongoing training and development
refreshes the Board’s knowledge and
keeps it abreast with the wider legal
and regulatory landscape
Governance documentation
The Board Procedures Manual
documents how the Board and its
committees operate within the
governance framework. The Board
Mandate articulates the Board’s
purpose and accountabilities aligned
to our culture, values and strategy
Board papers
High quality information is circulated
in a timely manner and structured
to provide all relevant information
relating to Section 172 factors
Stakeholder feedback
Embedded into all Board reporting
to ensure stakeholder feedback
is considered, in addition to
regular stand-alone stakeholder
feedback updates
Resource centre
Found in the Board’s online portal,
this contains Board related policies,
reference documents and training
and support materials
Additional support
Directors have access to the advice and
services of the Group Company
Secretary and may also take
independent legal and/or financial
advice at the Group’s expense when it is
judged necessary in order to discharge
their responsibilities effectively
Culture
Ensures that there is proper
consideration of the potential
impacts of decisions
Director duties
As a matter of course, Section 172
matters are considered in the Board’s
discussions on strategy, including
how they underpin long term value
creation and the implications
for business resilience
Induction
Upon joining the Board, each director
receives training on directors’ duties
and the Board’s responsibilities
Board information
Board agenda
Set in collaboration with the Chair, Group Chief
Executive and Group Company Secretary to
ensure time is balanced appropriately and there
is adequate time for discussion
Board strategic discussion
Board decision
Board reflection of decisions
made through the annual Board
strategy meetings, effectiveness
review, post-investment reviews
and lessons learned
Board oversight of
the implementation
of decisions taken
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Key decisions
Under our devolved management operating model, the executive directors sit on the board of each operating company and also act
as intermediaries with the Board. This means that, where appropriate, key decisions may first be assessed at operating company level
before recommendation to the Board. This facilitates effective two-way engagement between the corporate entities and ensures that
the broader implications of any principal decisions are properly thought through in accordance with Section 172. The principal areas
of focus considered by the Board during the year ended 3 July 2021 can be found on pages 76 and 80 together with a full schedule
of Board activities.
Examples of key decisions taken by the Board during the year ended 3 July 2021 in accordance with Section 172 are set out below.
Decision
The Board’s
response to
COVID-19
The Group’s
climate change
strategy
The Board’s
consideration
of dividend
resumption
Stakeholders
considered
Section 172(1) stakeholder considerations and impacts
The Board recognises that safe and convenient public transport services are
critical for the health and wellbeing of our communities. Not only do they enable
social contact but they also enhance environmental sustainability, support
economic recovery and maintain vital links with employment, leisure and
healthcare. Throughout the year ended 3 July 2021, the Board’s decisions and
behaviours in response to COVID-19 continued to be guided by the Group’s three
priorities (to safeguard our people and customers, to play our part in society
during challenging times, and to protect our business). Of these three priorities,
safeguarding the health and wellbeing of our colleagues and customers continued
to be the Board’s foremost priority.
As societies and economies seek to recover, the priority over the next year will be
helping passengers to return to our services and welcoming new passengers who
may be looking for a greener, value-for money travel choice.
The Group’s climate change strategy was published in July 2021 and, when
formulating the strategy, stakeholder views remained at the forefront of the
Board’s agenda. This included consideration of the Group’s shareholders and
their environmental, social and governance values, as well as the impact of the
Group’s operations on the community and the environment. These interests
were collectively considered by the Board as it agreed the ambitious target
to reduce carbon emissions by 75 per cent by 2035, as the Group strives to
be a net zero business by 2045.
As the Board looks ahead to the implementation of the strategy, it will continue
to listen to, and engage with, colleagues, customers, suppliers, investors and other
stakeholders. It will also receive updates, at least twice annually, on progress against
targets, on changes in legislation, and on costs and opportunities arising from
climate change.
The Board concluded it would not be prudent or right to recommend the
resumption of dividends for the year ended 3 July 2021. However, the Board
remains committed to the resumption of dividends at the appropriate time and to
ensuring that the Group emerges from this unprecedented set of circumstances
in a robust position.
In reaching this decision, the Board reviewed safeguarding liquidity, cash
management and cost control measures for managing the impacts of COVID-19
along with the matters relating to LSER. It also considered the interests and
expectations of all the Group’s key stakeholder groups. This included the likely
impact on shareholders as well as on other stakeholders’ perceptions of the
Group. The Board’s most pressing priority remains safeguarding the long term
success and sustainability of the business. Therefore, in the current context, a
prudent approach to cash management remains appropriate.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Evaluation
Board evaluation
In 2020, in line with best practice, the Board undertook an
externally facilitated effectiveness review with Independent
Audit Limited (Independent Audit). The process for this external
review can be found on pages 76 and 77 of the 2020 Annual
Report and Accounts (the 2020 Annual Report).
Independent Audit does not have any other connection to the
Group or individual directors.
The timing of this review, which was delayed at the outset due to
COVID-19, meant that the findings were unable to be reported in
the 2020 Annual Report. A summary of the findings can now be
found below, in addition to the details and outcome of the
internally facilitated review undertaken in 2021 which are set out
opposite. The matters relating to LSER, which took place after the
most recent interim review, will form a substantive part of the
Board’s next review.
External review findings 2020
Independent Audit acknowledged the extraordinary
timing of their review, with the challenging and
changing circumstances of the pandemic putting
immense pressure on the business and on the Board.
Notwithstanding this, their review concluded that
the Board continued to operate effectively.
Built on a strong foundation of trust and respect,
the Board demonstrated healthy dynamics with a high
calibre group of people that operated within a culture
of openness, transparency and healthy challenge.
Relationships between Board members remained
appropriate and discussions were supportive,
constructive and well balanced with equal
participation from all directors.
The Board was supported by committees that were
working well and with clear remits. In particular,
committees were well chaired by non-executive directors
with relevant skills and provided appropriate challenge.
The Board and its committees had adjusted particularly
well to virtual meetings, with good engagement and
discussion helped by quality and timely information.
The absence of more informal interactions in and around
Board and committee meetings had been missed, as had
the chance to visit operating companies and talk directly
to colleagues across the Group. At the time of writing
this report, both physical meetings and Board site visits
had recommenced.
Independent Audit’s review concluded the Board was in
a strong position to develop and add value as the needs
of the business evolved. The areas the Board agreed to
focus on to further improve its effectiveness are set out
on page 88 together with progress achieved during
the year.
External review process 2020
March 2020
July – September 2020
October – November 2020
Independent Audit appointed by
the Board to undertake externally
facilitated evaluation
Preparatory planning meetings held
between Chair, Group Company
Secretary and Independent Audit
Draft findings and confidential
feedback provided to the Chair
and Group Company Secretary
Individual directors interviewed
by video conference
Independent Audit observed
Board and committee meetings
by video-conference
Independent Audit discussed
its final report findings with
wider Board
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Internal review findings 2021
The internally facilitated review was led by the Chair
and supported by the Group Company Secretary.
It followed an interview based approach allowing for
more in-depth discussion and deeper insights. As part
of this review, the Group Company Secretary also led
a separate stand-alone review of the role of the Board
during the pandemic.
The Chair’s review found that there was widespread
recognition that it had been an exceptional year. In addition
to the continuing challenges resulting from the pandemic,
the business saw the long heralded arrival of fundamental
changes to public transport policy in the UK. Exceptionally,
the Board had to devise and manage a robust process to
enable smooth Group Chief Executive succession later
in the year.
Despite the continued use of virtual meetings, the Board
felt that it had sustained a good level of engagement
and the quality of the debate had not been compromised.
Directors continued to feel that they had both the
opportunity and encouragement to make a full contribution.
Modification to the process for the annual review
of strategy enabled the non-executive directors to
contribute more of their experience from outside
the Group, and the Board had a deeper and broader
discussion as a result.
All committees were deemed to be operating effectively
in discharging their duties and responsibilities.
The Group Company Secretary’s review found that the
Board had performed well during the pandemic, with the
Board being clear about its role and the respective roles
of executive and non-executive directors. This was
largely due to the additional meetings held virtually
at the height of the pandemic and the quality and
timeliness of information provided by the executive
directors which had enabled the Board to assess the
impact of the pandemic, make well-informed and timely
decisions and provide support and strategic guidance.
There was a wide recognition of the importance
of the Board’s role in robustly assessing, mitigating
and managing risks and the need to continue to take
decisions aligned to risk appetite.
The executive directors were praised for their agility and
resilience in their response to the pandemic. Their good
relationships and close connections with all groups of
stakeholders had proved valuable at providing real-time
updates to the Board in a fast moving and dynamic
situation.
Whilst it was not possible for the non-executive directors
to meet directly with senior leadership or the workforce
during this period, the devolved structure had been
effective at empowering senior leadership to deal with
the crisis within their respective businesses. They were
supported in this role by the executive directors, who
were one of the main conduits to the Board during this
exceptional period of time.
December 2020
May – July 2021
July – August 2021
Internal review process 2021
Findings discussed with the Board
and key focus areas over the year
ahead agreed
Priority development areas agreed
and action plans prepared
Each individual Board member
held a 1:1 discussion with the:
• Chair focusing on continued
individual and collective Board
development
• Group Company Secretary
specifically focusing on the role of
the Board during the pandemic
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The Go-Ahead Group plc Annual Report and Accounts 2021
Evaluation continued
Chair and individual director effectiveness
The Senior Independent Director carries out an annual review of the performance of the Chair. This includes meeting with
non-executive and executive directors without the Chair present and a discussion with the Group Company Secretary. This year, the
review concluded that the Chair facilitates a cohesive and collegiate Board, setting the agenda, style and tone of Board meetings to
allow for constructive debate and inclusive and effective decision making. Meetings are particularly well chaired, ensuring that all
attendees have the opportunity to present their views.
The Chair meets with each director annually on an individual basis to discuss their personal performance and any training or development
needs. These reviews took place between May and July 2021 and the findings this year concluded that each director continues to have
sufficient time, knowledge and commitment to effectively contribute to the long term sustainable success of the business.
Progress and focus areas
As the external and internal reviews took place within a relatively short space of time, the findings from the internal review were very
much aligned to those of the external review.
The Board monitors progress against the key focus areas on an ongoing basis, in addition to more formally reviewing every six months.
Actions are expected to be addressed as a matter of priority and by the following review at the latest, unless there is a justified and
reasonable cause. At the time of writing this Report, good progress was being made against all of the key focus areas, all of which are
expected to be actioned by the year ended 2022.
External review
key focus areas
Roles on the Board
Board composition
and succession
planning
Strategy and
structure
Sustainable value
creation
Progress made against external review key focus areas
Internal review key focus areas
The Board considered how it could add
more value by taking a refreshed view of the
different roles on the Board. In addition, a new
Board Sub-Committee was established to review
major tenders and contracts and their associated
mobilisation plans.
Board succession planning processes have been
strengthened. In preparation for the change of
Group Chief Executive, early preparatory work
including key talent market scanning was instigated.
The size and composition of the Board were also
reviewed particularly in the context of succession
for the Audit Committee Chair and Senior
Independent Director.
The Board refreshed its approach to reviewing
strategy throughout the annual cycle of meetings.
Changes to the composition and terms of
reference of the Group Executive Committee and
Group Leadership Team were also made.
Review the lessons learned from the pandemic
to ensure the Board can add maximum value.
Continue to facilitate well balanced,
constructive and challenging debate to ensure
the Board remains aligned to Group purpose
and delivery of agreed strategic objectives.
Ensure a well managed transition and induction
of the new Group Chief Executive.
Continue to focus on wider Board succession
planning so that the Board is well positioned
for the future, with the right balance of skills,
experience and diversity to support strategic
objectives.
Following the review of the strategy and
operating company model being led by the
incoming Group Chief Executive, ensure that
the resource plan and governance framework
remains relevant and effective to facilitate the
desired changes.
Increased focus on long term shareholder value,
particularly in the context of the unprecedented
changes arising from the pandemic. More frequent
sustainability and climate change updates,
including approval of a climate change strategy
and increased engagement with stakeholders.
Maintain focus on rebuilding long term
shareholder value, particularly in the context of
environmental sustainability and social impact.
Maintain high engagement levels to ensure the
views of stakeholders continue to inform
decision making.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Division of responsibilities
How our governance
framework operates
The Board’s role
The Board is collectively responsible for creating and delivering
long term sustainable value for the business. It determines the
Group’s strategic direction and objectives, corporate plan and
dividend policy whilst ensuring the implementation of strategy is
within our risk management and governance framework. The
Board’s role is integral to setting and leading the Group’s culture,
values and wider sustainability goals. It considers the interests of
its key stakeholders in decision making and, in doing so, seeks to
ensure that its directors comply with their duties under Section
172 of the Companies Act 2006. A full description of the Board’s
role, including its specific responsibilities, is available on our website.
The Board delegates authority for specific matters to the
Nomination, Audit and Remuneration Committees. Each
Committee Chair Reports to the Board on their respective
committee’s activities after each meeting, making
recommendations to the Board as appropriate.
Devolved structure
The Group operates a devolved operating company model.
Responsibility for the 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 experienced senior managers who are encouraged and
empowered to manage our operating companies as autonomous
business units. The senior leadership team comprises the
managing directors of each operating company, along with the
individuals responsible for key centralised Group functions.
Further details of our senior leadership team can be found on
our website.
The executive directors formally meet with the senior leadership
team on a regular basis, through local operating company board
meetings, Group Executive Committee and Leadership Team
meetings. These more formal meetings are supported by several
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 within the Group’s core beliefs and attitudes. While we
believe that this approach encourages a good balance between
local and Group initiatives and facilitates the sharing of best
practice and expertise across the Group. Based upon the new
Group Chief Executive’s review of the business to date, and
reflecting on the challenges we have faced in International Rail and
LSER, a new operating model will be introduced across the Group
which will enhance internal controls and ensure the optimum
division of roles and accountabilities between the Group’s
operating companies and its central functions.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Division of responsibilities continued
Our governance framework
The framework set out below provides a high level summary of matters within scope at each level of the Group’s governance
framework and illustrates the flow of authority as it is delegated throughout the Group.
Board
• Strategic direction, purpose and values
• Culture and reputation
• Stakeholder engagement
• Decision making in accordance
• Cyber security
• Contracts, bids and acquisitions
with Section 172
• Risk management and risk appetite
• Corporate plan and KPIs
• Board development and effectiveness
• Financial reporting and dividends
• Non-executive director fees
• Health and safety
• Environmental, social
and governance factors
Board Committees
• Oversight of Group’s response to major
crises and other significant challenges
n
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D
A
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t
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i
t
y
Nomination Committee
Audit Committee
Remuneration Committee
• Board and committee composition,
• Financial reporting
• Design and implementation
structure and size
• Succession planning
• Board appointments
• Risk management and internal
of remuneration policy
controls system
• Consideration of exercise of discretion
• Health and safety auditing
• Implementation of remuneration policy
• Diversity and inclusion
• Internal audit
• Determination of executive and senior
• Time commitments and independence
• External audit
leadership remuneration
• Chair fees
Read more on pages 93 to 97
Read more on pages 98 to 107
Read more on pages 108 to 142
Senior Leadership Team
Local Senior Management
Group Executive Committee
Group Leadership Team
• Comprises the executive
directors, Strategy and
Transformation Director,
Managing Director of
Business Development and
Group HR Director
• Receives monthly updates
and representation from
the Group Leadership Team
including finance,
IT, corporate services
and strategy
• Oversees implementation of
Group strategy and provides
support to the bus and rail
businesses
• Identifies synergies which
can then be cascaded
through cross-business
groups and forums
• Comprises senior
managers responsible
for the key centralised
Group functions
• Meets monthly with
the Group Executive
Committee to share
function updates and
review the business
• Shares knowledge and
collaborates on key
Group-wide projects and
provides support to the
bus and rail businesses
• Integral to ensuring vision
and culture are embedded
throughout the Group
• Comprises managing
directors of each operating
company supported by other
local statutory directors
• Manages operating
company boards
• Board meetings held on a
monthly basis with the Group
Chief Executive chairing
• Reports to the executive
directors directly on
management issues
including risk
• Ensures compliance
with Group policies
and procedures
• Acts as an intermediary
facilitating two-way
engagement between
operating company
and the Group Board
• Ensures tailored response
to major crises and
significant challenges
Cross-business rail and bus
steering groups
• Comprise the managing
directors in each
operating company
• Meet regularly with
the executive directors
to explore and identify
new opportunities
and initiatives
• Share knowledge,
experience and best
practice across operations
• Implement synergies
as identified by the Group
Executive Committee
• Supported by a number
of cross-business forums
including safety, IT,
engineering, HR, diversity
and inclusion, commercial,
operations and finance
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Roles and responsibilities
As at the date of this Report, our Board comprises the Chair (Clare Hollingsworth), four independent non-executive directors (David
Blackwood, Dominic Lavelle, Leanne Wood and Harry Holt) and two executive directors (Christian Schreyer and Gordon Boyd
(Interim)). There is a clear division of responsibilities on the Board which ensures accountability and oversight and a summary of each
role can be found below.
The roles of the Chair and Group Chief Executive are separately held and their responsibilities are well defined, set out in writing, and
regularly reviewed by the Board.
Board skills and experience
Group Chair
• Leads the Board and demonstrates
objective judgement
• Advocates the highest standards
Group Chief Executive
• Responsible for the day-to-day
management of the Group
and the Group’s performance
Group Chief Financial Officer
(Interim)
• Supports the Group Chief Executive
in the execution of strategy
of corporate governance
• Leads the senior leadership team,
• Provides strategic and financial
• Sets the agenda and drives
Board effectiveness
• Promotes a culture of open
and constructive debate
• Engages with stakeholders and
ensures their views are understood
and considered appropriately in
Board decision making
• Ensures Board decisions are taken
on a sound and well-informed basis
including development
and succession planning
• Leads the development of strategy
and ensures its execution, with
responsibility for the Group’s
overall performance
• Facilitates effective two-way
communication between the Board,
the business and the workforce
• Represents Go-Ahead externally
to all stakeholders
guidance to ensure that the Group’s
financial commitments are met
• Responsible for the preparation
and integrity of financial reporting
• Ensures maintenance of effective
internal controls and risk
management procedures
• Oversees Go-Ahead’s relationships
with the investor community
• Represents Go-Ahead externally
to all stakeholders
Oversight
Independent Non-Executive Directors
• Contribute to strategy development
• Scrutinise and challenge management’s execution
of strategy within the Group’s risk appetite and
control framework
• Provide support to the executive directors through
external perspective and experience
• Serve on Nomination, Audit and Remuneration Committees
Senior Independent Director (SID)
• In addition to his responsibilities as a non-executive
director, the SID also:
– Acts as a sounding board for the Chair
– Appraises the Chair’s performance
– Acts as an intermediary for other directors
and shareholders, if needed
Independent Non-Executive Director Responsible for Workforce Engagement
Responsible for helping to ensure the views and concerns of the workforce are taken into account by the Board, in addition
to reviewing the effectiveness of the Board’s approach to engage with the workforce on an annual basis.
Governance
Group Company Secretary
The Board and its committees are supported by the Group Company Secretary who is responsible for advising the Board on all
governance matters, facilitating best practice and ensuring that the Board adheres to all of the requisite policies and processes.
Acting as an independent advisor to all Board members, the Group Company Secretary provides a sounding board where
appropriate and supports the Chair to facilitate induction programmes, development and effectiveness reviews.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Division of responsibilities continued
Board and Committee meetings
The Board agenda is set in collaboration between the Chair,
Group Chief Executive and Group Company Secretary. The
Board’s Forward Planner supports meeting agenda content
over the year to ensure that time is balanced between different
elements of strategy and operational performance, as well as the
Board’s wide-ranging governance and regulatory responsibilities.
Ensuring there is sufficient time allocated to key strategic
decisions is an important consideration for the Chair, to enable
directors to discharge their duties fully and effectively.
A clearly defined schedule of matters reserved for the Board and
the Group Company Secretary ensure all Board procedures are
complied with. To allow directors to utilise their time and skills
effectively at Board meetings, papers are circulated securely
and electronically to all directors a week before each meeting.
The Chair also speaks with directors prior to meetings to ensure
the Board discussion covers the right areas.
Members of the senior leadership team and advisors are invited
to attend and present at meetings, providing the non-executive
directors with a broader perspective and insight.
While the Board adjusted well to the virtual meetings held
throughout the year, it was pleased to recommence physical
meetings in July 2021. Unscheduled meetings are held as required
where topics warrant more time or decisions need to be made
outside of the normal cycle of meetings.
Each director is expected to attend all meetings of the Board
and of those committees on which they serve and is required
to devote sufficient time to the Group’s affairs allowing them
to fulfil their duties effectively.
Board induction programme
All new directors receive an extensive and tailored induction
programme either shortly before or upon joining the Board.
This programme ensures that new Board members have a full
understanding of the business and their responsibilities and
duties as directors so that they can be effective in their roles.
The Chair and the Group Company Secretary agree the
personalised induction plan which is designed for each individual,
taking into account their existing knowledge, specific areas
of expertise and proposed committee appointments.
The induction programme is designed to facilitate new Board
members’ understanding of the business as well as its purpose,
values and culture. An outline of what the induction programme
covers is detailed opposite.
Board training and development
The Board believes that continuous director training and
development supports Board effectiveness. With the ever-
evolving regulatory and policy landscape in which the Group
operates, it is critical that the Board maintains a good working
knowledge of the transport sector and how the Group operates
within this sector, as well as being aware of recent and upcoming
developments in the wider legal and regulatory environment.
To assist the Board in undertaking its responsibilities, regular
presentations are provided from the senior leadership team.
Examples during the year included updates on ESG and climate
change, health and wellbeing of colleagues, safety culture, cyber
security, stakeholder and workforce engagement and people
strategy. Additionally, the Group Company Secretary provides
regular updates on corporate governance, legislative and
regulatory matters.
Directors are encouraged to be proactive and identify areas
where they would like additional information to ensure that they
are adequately informed about the Group.
The Board confirms that all members have the requisite
knowledge, ability and experience to perform the functions
required of a director of a UK premium listed company, with the
more recent changes to the Board’s composition further
strengthening the skills and experience on the Board.
Key focus areas of induction
• Board – how we lead by example, discharge our directors’
duties and strive for excellence
• Strategy – how we review and evolve our strategy to deliver
long term sustainable value
• Sustainability – how environmental, social and governance
matters are aligned to our broader strategy
• Risk – understanding key risks, internal controls and the
Group’s articulated risk appetite
• Stakeholders – how we listen to the views of our stakeholders
and ensure they are part of our decision making
• Culture – how we monitor culture to ensure it underpins
our purpose, values and strategy
• Governance and regulation – how our governance
framework and regulatory compliance support the business
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Board composition and succession
Nomination Committee Report
Dear Shareholder
I am pleased to present the
Nomination Committee Report for
the year ended 3 July 2021. It has
been a busy year for the Committee,
with a number of additional
meetings held to discuss Board
changes and succession planning,
strengthening our focus on
diversity, and oversight of talent
and leadership development.
Clare Hollingsworth
Nomination Committee Chair
Board changes and succession planning
Since I joined the Board in 2019, Board composition and succession
planning has been one of my key priorities. We have sought to ensure
our succession planning is robust and the Board’s individual and
collective skills, experience and diversity best serve the Group’s
purpose, values and strategy.
In May 2021, David Brown notified the Board of his intention to
retire as Group Chief Executive at the end of 2021. With work
already undertaken to assess the market and potential candidates as
part of the Committee’s broader succession planning, we were able to
mobilise the formal search very quickly. In July 2021, we were pleased
to recommend the appointment of Christian Schreyer, who joined
the Board on 1 November 2021 and succeeded David as Group Chief
Executive with effect from 5 November 2021. Joining from global
mobility company, Transdev, Christian has a strong background of
building relationships and collaborating with public stakeholders and
a solid record of driving efficiency and better service for passengers
and clients. His experience of international markets, particularly in
rail, and innovation in urban mobility, will enable our business to
respond well to both the challenges and opportunities ahead. Details
of the process carried out for the appointment of Christian can be
found on page 95 and his biography, providing further details of his
skills and experience, is included on page 74.
To further bolster the senior leadership team, Christian has been
supported by an experienced Interim Group Chief Financial
Officer, Gordon Boyd, who was appointed in September 2021
following the resignation of the former Group Chief Financial
Officer, Elodie Brian. A process is well underway to recruit a
permanent Group Chief Financial Officer.
In January 2022, we announced that, after nearly nine years of
service, Adrian Ewer would be stepping down from the Board in
light of an error discovered by our Registrar, Equiniti, in their
collection of certain proxy votes submitted in relation to the 2021
AGM. The Board was very disappointed at the consequences of
this mistake and the manner of Adrian’s departure, given his
extensive commitment and valuable contribution over many years.
During the year, the Committee had already reviewed the
succession plan for the roles of Audit Committee Chair and
Senior Independent Director, given Adrian Ewer’s length of
service on the Board. Composition for the Board as a whole,
including the size and tenure, was also key to discussions to
ensure an appropriate mix of skills, experience and diversity.
respectively on 19 January 2022. The step taken to separate the
roles of Audit Committee Chair and Senior Independent Director
adds greater robustness and independence to the roles and
responsibilities of the Board.
Together, these two new appointments will enrich the expertise of
the Board. David brings a breadth of financial, City and international
experience, in addition to a commercial mindset. Dominic brings
considerable corporate and financial knowledge as well as broad
commercial and strategic experience from extensive involvement in
corporate restructuring and turnaround situations. Both are also
members of the Audit, Remuneration and Nomination Committees
and the new Group Audit Committee Chair will also be appointed to
the Board of GTR in the event of a new contract award, to provide a
clear line of sight to the Audit Committee and Board. The remuneration
of all Board appointments and leavers was in accordance with the
remuneration policy, details of which can be found on pages 117 to 128.
Leadership and talent
The Committee has also increased its focus on the executive
talent pipeline and senior leadership succession plans.
The Committee received regular updates from the Group HR
Director, with an emphasis on ensuring our leadership and talent
pipeline is diverse, robust and aligned to our culture and values.
The Committee was also briefed on the initiatives underway
to support and develop our senior leadership teams as well
as attract new talent into the business, with our ambition to
increase ethnic and gender diversity, in particular. More details
about the initiatives underway are included on pages 9, 28 and 29.
The Committee has supported key leadership changes at
executive and senior leadership level. To address the challenges
we face in our international operations, the senior leadership
team has been strengthened with the appointment of a Chief
Executive of our rail operations in Germany. The appointment of a
new Group Strategy and Transformation Director, who will also
sit on the Group Executive Committee, will also support the
introduction of our new operating model.
Diversity and inclusion
The Board’s diversity policy is an important part of the Group’s
wider diversity and inclusion strategy and page 96 summarises
its key policy objectives and the progress we are making against
them. While the pandemic has created challenges, particularly
with recruitment and training constraints, we have continued to
strengthen our focus on the diversity and inclusion agenda and
made progress against our key deliverables. We respect and
welcome diversity and the value it brings to the business. During
the year ended 3 July 2021, the time spent on reviewing diversity
and inclusion continued to increase in support of ensuring a
working environment in which everyone is treated with fairness
and respect, has equal access to opportunities and resources
and can contribute fully to the success of the business.
Having followed a thorough selection process, details of which
will be provided in next year’s report, the Committee was pleased
to welcome David Blackwood and Dominic Lavelle to the Board
on 1 January 2022. David and Dominic succeeded Adrian Ewer as
Senior Independent Director and Audit Committee Chair
Clare Hollingsworth
Nomination Committee Chair
23 February 2022
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The Go-Ahead Group plc Annual Report and Accounts 2021
Board composition and succession continued
Nomination Committee
Membership
• As at the date of this Report, the Nomination Committee
comprises the Committee Chair (Clare Hollingsworth) and
four independent non-executive directors (David
Blackwood, Dominic Lavelle, Leanne Wood and Harry Holt)
Conflicts of interest
• The Committee keeps under annual review any conflict
or potential conflict of interest situations authorised
by the Board in accordance with the Group’s articles
of association and conflicts of interest policy
Meetings
• The Committee held three meetings during the year ended
3 July 2021, in addition to three unscheduled meetings to
discuss executive and non-executive succession planning.
Attendance at Committee meetings can be found on page 73
• By invitation, the executive directors and Group HR
Director attend some of the meetings, with presentations
from external advisors as appropriate
• Following the last review in 2021, the Committee concluded
that no changes were required to the conflicts register
Effectiveness
• Both the external review of the Committee’s effectiveness
carried out at the end of 2020, and the internal review
carried out last Summer concluded that the Committee
was fully effective in discharging its duties and
responsibilities
Terms of reference
• The Committee’s terms of references are reviewed and
Future focus
• Tailored induction for the new Board members
approved by the Board annually. During 2021, the terms of
reference were updated in accordance with best practice
and a copy is available on our website.
• Completion of search and recruitment process for
permanent Group Chief Financial Officer
• Board and senior leadership succession planning
• Diversity and inclusion strategy
• Talent management and leadership development oversight
Committee responsibilities and activities during the year
Board composition and succession planning
• Reviewed the size and structure of the Board, including the
balance of skills, experience, independence and diversity
across the Board and committees
• Led a rigorous and transparent search and recruitment
process for the new Group Chief Executive, further details of
which can be found on page 95
Diversity, inclusion and gender pay gap
• Undertook annual review of the Board’s diversity policy
and progress against targets
• Reviewed approach to, and progress against, Group-wide
diversity policy and initiatives, including gender and ethnic
diversity targets
• Reviewed gender pay gap results and strategies in place
• Succession planning and separation of the roles of Audit
to narrow the gender pay gap
Committee Chair and Senior Independent Director
• Review of succession plans for senior leadership
Talent development and pipeline
• Provided oversight of talent management and
leadership development
• Ensured Group policies were appropriate to develop
a broad and diverse talent pipeline
Governance and Committee effectiveness
• Reviewed the independence, time commitments and tenure
of the non-executive directors
• Recommended the re-election of all non-executive directors
to the Board and the election for the first time of executive
directors, Christian Schreyer and Gordon Boyd, at the AGM
held on 21 December 2021
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Search and recruitment process for the Group Chief Executive
Set out below is the process the Committee followed for the appointment of Christian Schreyer as Group Chief Executive. David Brown,
the former Group Chief Executive, 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.
Search process led by
Selection process
Chair, supported by the Senior Independent Director.
Search consultancy
A Sub-Committee comprising the Chair and Senior
Independent Director, supported by the Group Company
Secretary, was created to undertake a competitive tender
process with executive search agencies. Odgers Berndtson
(OB) was engaged because of its strong credentials, knowledge
of the business and cultural fit. OB participates in the
Voluntary Code of Conduct for Executive Search Firms.
Beyond its engagement in this capacity, the only other
connection with the Group or its individual directors is to,
at times, provide support with the search and recruitment
of members of the senior leadership team. The Chair had also
worked with OB previously in her role on other boards.
Role profile highlights
Reporting to the Chair and to the Board, the successful
candidate would be responsible for the strategic and
operational performance of the business. The candidate
would work with the Board to develop a clear strategy,
addressing the fundamental changes underway in mobility
and climate change. With strategic and commercial acumen,
deep operational leadership experience obtained across
international markets and strong stakeholder engagement
skills, the candidate would lead the business as it emerged
from the COVID-19 pandemic and entered a new regime
of UK public transport policy. Possessing a strong value
set closely aligned to the purpose, values and culture
of the Group was also imperative.
Market scoping exercise: As part of the Committee’s long term
succession planning processes, OB was commissioned in summer
2020 to undertake a market mapping exercise to identify suitable
candidates for the position of Group Chief Executive if and
when a vacancy arose.
Stage 1: The Committee refined the detailed role specification
setting out the key responsibilities, experience, skills and personal
qualities required. The Committee also considered stakeholder
views, including feedback given to the Chair when talking to
shareholders and other critical stakeholders at the time the
former Group Chief Executive’s retirement was announced.
Stage 2: OB reviewed and updated the provisional candidate
long list, having assessed the potential candidates against
the refined role profile, and with specific regard to diversity.
An updated long list was reviewed by the Chair and Senior
Independent Director and a shortlist of candidates identified
to take through to the next stage.
Stage 3: Details of shortlisted candidates were shared with
the wider Committee for approval. Initial discussions then
took place between the prospective candidates and OB, at
which point the identity of Go-Ahead was disclosed and
interest, availability and potential conflicts were discussed.
Stage 4: Candidates held fireside chats with the Chair and
then first stage interviews were undertaken with the Chair and
Senior Independent Director. Final preferred candidates then met
with the wider Committee.
Stage 5: In conjunction with preferred candidates meeting
with the wider Board, OB carried out an executive leadership
assessment using psychometric tools and detailed referencing.
OB Longlist
Male: 56 per cent
Female: 44 per cent
Non-UK nationality: 22 per cent
Ethnically diverse: 22 per cent
OB Shortlist
Male: 50 per cent
Female: 50 per cent
Non-UK nationality: 25 per cent
Ethnically diverse: 0 per cent
Outcome
Following a robust process, the Committee recommended to the Board that Christian Schreyer be appointed as Group Chief Executive.
The Committee liaised with the Remuneration Committee on the remuneration payable in line with the new remuneration policy to be
proposed to shareholders at the forthcoming General Meeting in March 2022. The Board approved both the Nomination and
Remuneration Committees’ recommendations, following which a letter of appointment was agreed and the appointment
announced. Full biographical details are set out on page 74.
The Committee has played an active part in onboarding the new Group Chief Executive since his appointment and will continue to do
so over the year ahead to ensure a smooth transition of leadership.
Next steps
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The Go-Ahead Group plc Annual Report and Accounts 2021
Board composition and succession continued
Board diversity policy
Key objectives
Progress against objectives
To ensure Board membership
reflects as broad a combination
of skills, experience, age, disability,
ethnicity, gender, sexuality, education
and social background as possible
To ensure a minimum of at least
one third female Board members
The Committee’s primary role is to ensure that the Board has an appropriate blend of skills, knowledge,
experience and diversity to operate effectively and deliver our strategy. The Board’s annual effectiveness
review considers the composition, size and structure of the Board and its Committees. This includes
reviewing the skills and experience of Board members against the current and evolving needs of
the business, in addition to individual Board members’ independence and tenure in conjunction
with succession planning.
The Board supports the recommendations set out in the Hampton-Alexander Review on gender
diversity. Following Katherine Innes Ker’s retirement from the Board last year, 50 per cent of Board
roles were held by women for the year ended 3 July 2021, which exceeded the 33 per cent target set
out in the Hampton-Alexander Review. Following further changes to the Board’s composition after
the year ended 3 July 2021, 29 per cent of Board roles are held by women. With our current female
representation being slightly less than one third female Board members, this will be an important
consideration for the Committee.
To follow an inclusive and fair
process when making nomination
and/or appointment decisions
Board appointments are decided on the basis of individual competence, skills and expertise
with consideration given to the benefits diversity brings to the boardroom. Page 95 sets out full
details of the process we follow for new appointments and which was followed for the
appointment of the new Group Chief Executive. Details of the process we followed for the
appointments of the Senior Independent Director and Audit Committee Chair will be provided in
next year’s report.
To endeavour to have at least
one director from an ethnic
minority background on the Board
by 2024
With no such representation on the Board currently, this is an important consideration for the
Committee. It is a pre-requisite of any Board search that the Committee reviews as diverse a list
of candidates as possible, with specific focus on candidates from an ethnic minority background.
This, however, has not been without challenge to date, on account of the smaller pool of
candidates available and the suitability of such candidates for specific roles.
To take an active role in setting
diversity objectives and monitoring
progress against them
The Board believes that a diverse workforce is essential to the Group’s success. Supported by the
Group HR Director, the Committee takes an active role in setting diversity objectives and has
endorsed targets to reduce ethnicity non-disclosure rates and increase ethnic minority group
representation across the business. The Committee monitors progress against these targets, with
its oversight encompassing the Board, senior leadership team and wider workforce.
To develop and strengthen
the senior talent pipeline and
improve overall diversity in senior
leadership positions and their
direct reports
To engage search firms that
are accredited by the Department
for Business, Energy and Industrial
Strategy under the Voluntary
Code of Conduct for executive
search firms
The quality of our leadership and talent is core to our success and we continue our focus to attract,
identify and build better talent pools for current and future leaders whilst supporting diversity in
all its forms. This year saw the setting of ambitious apprenticeship targets; the redesign of our
graduate scheme and new talent programmes; and the introduction of initiatives for our
international businesses. Our annual leadership review enables the Committee to assess
succession plans for senior leadership positions below Board level, taking into consideration future
requirements and the key nationality, ethnicity and gender influencer demographics across the
Group. You can read more about our Group-wide diversity and inclusion initiatives and senior
leadership gender diversity on page 29.
The Board supports the provisions of the Voluntary Code of Conduct for Executive Search Firms and
only engages executive search firms which are signatories to this Code. During the year, our work on
succession planning work was supported by Odgers Berndtson which is a signatory to this Code.
96
The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Assessment of independence, time commitments and tenure
The majority of the Board, excluding the Chair (who was
independent on appointment), are independent non-executive
directors. Following Katherine Innes Ker’s retirement from the
Board last year, the Committee was satisfied that all non-executive
directors are independent as to both character and judgement
and in accordance with the recommendations of the UK Corporate
Governance Code (the Code). In carrying out this review, the
Committee gave full consideration to the current tenure of
individual Board members, in addition to the length of service of
the Board as a whole.
The Committee regularly reviews the time commitments of all
Board members, with full consideration given to the time required
for any external appointments. Following this year’s assessment,
the Committee was confident that no director was ‘overboarded’
and each director had sufficient time to fulfil their responsibilities
and was able to be fully engaged and actively involved with the
Group’s business throughout the year. This was evidenced again
during the year and beyond with the additional time
commitments each director has continued to devote to Board
and Committee matters.
Prior to appointment to the Board, any significant time
commitments must be disclosed and approved by the
Committee. The letters of appointment for the Chair and
non-executive directors also set out expected time commitments
to the Board, with any additional external appointments following
appointment requiring prior approval by the Board. No approvals
were sought during the year ended 3 July 2021 for any external
appointments and the full list of external appointments held by
our directors can be found on pages 74 and 75.
Gender pay gap
We support the fair treatment and reward of all employees,
regardless of gender, not only because it’s the right thing to do
but also because it is fundamental to performing successfully as a
company. The Committee annually reviews the Group’s gender pay
gap data and the strategies in place to recruit more women into all
positions throughout the business. As at the date of our 2020
gender pay gap report, the median pay gap was 7.9 per cent and 21.3
per cent across our UK Bus and Rail business respectively against
the national average median pay gap of 15.4% in the UK. Improving
our gender balance is key to narrowing our gender pay gap and we
are committed to recruiting and retaining women at every level
across the organisation – from management through to frontline
positions. Further information on the work underway across our
businesses to narrow the gender pay gap is provided on page 29.
Board skills and experience
The following chart illustrates the collective skills
and experience we have on the Board as at the date
of this Report:
Audit
Commercial
Data management
2
Employee
engagement
Financial/
capital markets
Governance
Technology/digital
Legal
Logistics
Marketing/
consumer
Operational
International
operations
Safety
Strategy
Transportation
4
4
3
3
3
3
3
6
5
5
5
5
7
7
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The Go-Ahead Group plc Annual Report and Accounts 2021
Audit, risk and internal control
Audit Committee Report
Dear Shareholder
Having been appointed in the
role of Audit Committee Chair
on 19 January 2022, I am
pleased to present the
Committee’s Report for the
year ended 3 July 2021.
Dominic Lavelle
Audit Committee Chair
The Committee has been
established by the Board
primarily for the purpose of
overseeing the accounting, financial reporting, internal control
and risk management processes and the audit of the financial
statements of the Group. Given the timing of my appointment, it
was imperative to quickly develop my knowledge of all parts of
the business to ensure that the Committee could fulfil its
responsibility of assisting the Board’s oversight of the quality and
integrity of the Group’s external financial reporting and
accounting policies and practices and ensure there was no
compromise in this regard. Through my ongoing induction
programme, meetings and briefings with the Board, external and
internal auditors and the senior leadership team, I was able to
undertake an informed review of this Annual Report and
Accounts (the 2021 Annual Report) to ensure that it was fair,
balanced and understandable. Details of the wider process myself
and the Committee followed to conclude that this 2021 Annual
Report provided the necessary information for the shareholders
to assess the Group’s position, performance, business model and
strategy can be found on page 104.
In addition to formal meetings of the Committee, it is the Audit
Committee Chair’s responsibility to maintain regular dialogue
with other members of the Committee, management, external
and internal auditors to ensure the Committee receives the
necessary information in order that they might make informed
decisions for recommendation to the Board.
On behalf of the Committee, I would like to acknowledge the
diligence and commitment of the Group’s management and the
external and internal audit teams which have supported the
Committee during the pandemic and throughout the extended
audit period over recent months.
Response to the matters relating to
London & South Eastern Railway Limited (LSER)
The Audit Committee has carefully considered the findings of the
Independent Review commissioned by the Independent
Committee into LSER’s performance of its contractual obligations
under the Southeastern franchise agreements. The Independent
Committee concluded that serious errors had been made. In
particular, LSER failed to notify the DfT of certain overpayments
made by the DfT and breached contractual obligations of good
faith contained in the franchise agreements. As a Committee we
reviewed these findings to ensure that, as far as possible, all
issues had been identified, understood, disclosed and
appropriately accounted for within the 2021 Annual Report in
order to ensure the relevant disclosures contained therein are
fair, balanced and understandable. We also considered the impact
on financial reporting, (including the accounting of any prior year
adjustments) and liquidity considerations, which encompassed
the potential financial penalty from the DfT.
In addition to the Independent Committee’s review into the
matter at LSER, a wider business review was conducted. This
identified a matter relating to a historic closed rail franchise. This
relates to amounts totalling £3.5m which should have been
reflected in the end of relevant franchise settlement with the DfT.
Prior year adjustments have been made in the financial
statements and £3.5m will be paid to the DfT in the 2022 financial
year in respect of this matter.
As an outcome of the Independent Review, measures are being
taken to enhance corporate governance arrangements, including
internal controls and the management and oversight of these
controls, particularly in our complex rail businesses. As Audit
Committee Chair, I will also be appointed to the Board of GTR in
the event of a new contract award, to provide a clear line of sight
to the Audit Committee and Board. The Committee will also be
increasing the remit and scope of Internal Audit to include
oversight of the compliance arrangements and ensuring deeper
understanding and closer scrutiny of contractual obligations and
commercial terms, in addition to ensuring adequate resource and
the right balance of skills are present within the finance
functions.
More broadly across the Group, we are reviewing internal
controls as part of the Group Chief Executive’s ongoing business
review, which is considering, among other things, the optimum
division of roles and accountabilities between the Group’s
operating companies and its central functions to enhance
corporate governance arrangements.
Response to onerous contract provisions in international rail
Consideration of the onerous contract provisions in both Norway
and Germany were a topic for review at the Audit Committee. For
both businesses, the Committee considered and challenged the
inputs of the relevant models and cashflow forecasts as
presented by management. The Committee agreed the revisions
to the onerous contract provision and disclosures to be included
in the 2021 Annual Report.
We have performed a detailed review of all material contracts
across the Group to consider the completeness of the onerous
contract provisions. This involved a detailed review and challenge
of the assumptions within each contract, including those relating
to 2020 and the Group’s 2021 half year results. An under-
statement has been identified in respect of the accounting for
the onerous contract provision in the rail contracts in Bavaria in
the prior year and the Group’s 2021 half year results. The 2020
provision was determined to be understated by £37.1m (including
the £25.9m subsequently provided for in the FY21 half year
results) and has been restated in the prior year figures in the 2021
results. The calculation of the understatement was determined
based on the assessment of information available that should
reasonably have been included in the assumptions underpinning
the 2020 provision. Having become aware of the issue, we have
identified a number of control weaknesses that are being
addressed as part of the broader controls review. No onerous
provision has been recognised for the Baden-Württemberg
contracts.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Going concern
The pandemic has continued to have a significant operational and
financial impact on the Group, with the associated implications
a consistent theme of focus for the Committee during the year
ended 3 July 2021. Focus areas have included financial reporting and
liquidity considerations, particularly in the context of the increased
level of uncertainty and complexity of certain estimates and
judgements, and ensuring senior leadership were able to maintain
rigorous financial control despite the circumstances.
The Group’s regular programme of deep dive risk reviews was
extended to include those areas of the business most impacted
by the pandemic. This included evaluating the accounting
treatment of the various government support contracts,
assessing the complexities associated with the going concern and
viability statements and increasing health and safety auditing.
The Committee frequently reviewed updated cash and liquidity
forecasts and supported the Board and management in
safeguarding liquidity, cash management and cost control
measures. This was of key importance due to the ongoing
impacts of COVID-19 and acknowledging the DfT’s power to
impose a financial penalty under the Railways Act 1993.
Health and safety
The Committee plays a key role in overseeing the safety culture
across the business. Despite the planned health and safety audit
programme being disrupted by the pandemic, all audits were
still completed by the end of the audit cycle with all businesses
performing well. These audits focus on driving continuous
improvement, the maturity of health and safety systems,
compliance with policies, procedures and legislative
requirements and ensuring alignment with the Group’s wider
safety culture which is embedded across our business. The
Committee’s remit was extended during the year to oversee the
increased and sustained focus on the health and wellbeing of
colleagues, where examples of best practice were evident across
the Group and recognised in many cases as industry leading. To
complement already robust processes, senior leaders across the
business now also undertake regular safety tours and director
audits provide a regular ‘pulse check’ between internal and
external audits, ensuring our safety culture is led from the top.
For the Group’s international businesses, the Committee also
oversaw work to ensure that their safety culture programme was
aligned to that of the UK programme. As part of this exercise,
consistent metrics were implemented across both our UK and
international businesses.
Risk management and internal controls
During the year, the Committee reviewed the risk management
and internal controls system through the review of the internal
audit reports and regular meetings with the internal auditors.
Specific risks relating to climate change and decarbonisation were
considered as part of processes and reporting for the first time.
As part of the Committee’s oversight of fraud prevention
arrangements, a review of the Group’s approach to fraud
management and reporting was also undertaken with a number
of enhancements to be implemented over the year ahead.
The Committee supported the Board’s annual review of risk
appetite, advising the Board on the key strategic risk exposures
and mitigations and recommending more in-depth reviews into
high risk business areas. The Group’s risk appetite, and the
Board’s assessment of the Group’s principal and emerging risks,
are set out on pages 56 to 64 of the Risk Management Section.
As outlined earlier in this letter, a critical component of the
Committee’s risk management and internal control oversight
during the year was our review of the Independent Committee’s
findings into the matters relating to LSER. Further detail on the
Group’s response to the LSER matters of concern is provided on
pages 10 and 11 within the Strategic Report.
Significant issues and judgements
At the half year and year end Audit Committee meetings, there is
a review of the significant accounting issues and judgements. The
matters the Committee considers to be significant for the 2021
Annual Report are disclosed on pages 102 and 103. As part of its
review, the Committee focused on assessing whether the
executive directors and management had made appropriate
judgements and estimates. These issues were subject to robust
challenge and debate between the executive directors,
management, the external auditor and the Committee.
The Independent Review into LSER undertaken by the Independent
Committee identified amounts estimated to be owed to the DfT
which had arisen over a number of years during the operation of the
franchise agreements. The Committee considered the appropriate
accounting treatment for each of the items. It concluded that
amounts identified as having arisen before 2021 were errors and
should be treated as prior year adjustments and appropriately
disclosed in the financial statements.
Engagement with the Financial Reporting Council (FRC)
During the year, the Group concluded its engagement with the
FRC regarding its accounting treatment in the 2019 Annual
Report and Accounts for passenger revenue in the GTR rail
franchise and the agreement reached between GTR and the DfT.
This correspondence was considered by the former Audit
Committee Chair and discussed with the wider Committee,
management and the external auditor. A rectification was made
in the 2020 Annual Report and Accounts in relation to passenger
revenue in the GTR rail franchise, details of which can be found on
page 147 of the 2020 Annual Report and Accounts. The rectification
was a reclassification between revenue and operating costs and
none of the Group’s KPIs were affected. This matter has now
been concluded with the FRC.
In October 2021, the FRC Audit Quality Review Team undertook
a review of the Group’s financial statements for the year ended
27 June 2020. Further details together with the outcome of this
review can be found in our ‘Assessing the effectiveness of the
external audit process’ section on page 105.
Dominic Lavelle
Audit Committee Chair
23 February 2022
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The Go-Ahead Group plc Annual Report and Accounts 2021
Audit, risk and internal control continued
Audit Committee
Membership
• As at the date of this Report, the Audit Committee comprises the
Terms of reference
• The Committee’s terms of references are reviewed by the
Committee Chair (Dominic Lavelle) and three independent
non-executive directors (David Blackwood, Leanne Wood and Harry
Holt)
Committee and approved by the Board annually. During 2021, the
terms of reference were updated in accordance with best practice
and a copy is available on our website.
• The Audit Committee Chair has recent and relevant financial
experience
• Detailed information on the experience, skills and qualifications of
all Committee members can be found on pages 74 and 75. The Board
has confirmed it is satisfied that the Committee members have the
appropriate range of financial, commercial and sectoral expertise
Effectiveness
• Findings from last year’s external effectiveness review undertaken
by Independent Audit Limited concluded that the Committee
continued to be effective in discharging its duties and
responsibilities. The internal review carried out last Summer
confirmed the external review’s findings.
Meetings
• Meetings of the Committee generally take place immediately prior
to a Board meeting to maximise the effectiveness of Board
meetings. Attendance at Committee meetings can be seen on page
73. Five scheduled meetings were held during the year ended 3 July
2021. In addition, one unscheduled meeting was held to discuss
outstanding audit related matters for the year ended 2020
• Following the delay to the year end announcement, a number of
additional meetings were held to cover the specific audit matters
relating to LSER
• The Chair, Group Chief Executive, Group Chief Financial Officer,
Group Financial Controller, Group Head of Internal Audit, Group
Safety Lead and internal and external auditors are regularly invited
to attend meetings
• The Audit Committee Chair holds pre-Audit Committee meetings
with the Group Chief Financial Officer, Group Financial Controller
and external and internal auditors between scheduled Committee
meetings and, at least once a year, the Committee members hold
separate meetings with the external and internal auditors, without
the executive directors or management being present
Future focus
• Governance, financial reporting processes and reporting
• Lessons learnt from the Independent Review in relation to LSER will
be used to reinforce our rail franchise compliance management
• Continue to analyse the long term impact of COVID-19 on the
Group’s financial viability
• Ensure the integrity of the Group’s financial reporting
• Review the effectiveness of the Group’s risk management and
internal control procedures
• Review remit of Internal Audit
• Monitor health and safety standards and auditing
• Oversee ESG reporting and related climate and financial disclosures
• Continue to monitor the UK Audit Reform recommendations and
developments
• IT-related risks including resilience and cyber security
Committee responsibilities and activities during the year
External audit and financial reporting
• Monitored the ongoing impact of COVID-19
Risk management and internal controls
• Reviewed the effectiveness of risk management and internal control
• Reviewed the 2020 Annual Report and Accounts, ensuring
procedures
information was fair, balanced and understandable
• Reviewed the approach to fraud management and reporting
• Monitored the integrity of the Group’s financial statements including
• Reviewed climate change risk reporting
related regulatory news announcements
• Reviewed significant financial reporting judgements and estimates
made by senior leadership
• Reviewed the going concern and long term viability assessment
• Reviewed the external auditor’s remuneration, terms of engagement
and reappointment
• Approved the use of external auditor for non-audit services in line
with policy
• Reviewed the effectiveness of the audit process, independence and
objectivity of the external auditor and agreed audit plan for
forthcoming year
• Reviewed external auditor and senior leadership reports on half and
full year results
• Subsequent to the year end, reviewed and assessed the impact of the
findings from the Independent Review into LSER’s performance of its
contractual obligations under the Southeastern franchise agreements
including the subsequent prior year restatements to the financial
statements
• Recommended deep dives into high risk business areas
Internal audit including health and safety
• Transitioned to new model for internal audit.
• Considered and reviewed reports from the co-sourced internal audit
function (PricewaterhouseCoopers LLP (PwC) and the Group Internal
Audit team) on the Group’s financial controls, disclosures and
accounting
• Approved new three year internal audit plan
• Reviewed results of health and safety audits across the business,
benchmarking against international and best practice standards
Governance and Committee effectiveness
• Considered the results of the external and internal
effectiveness review
• Monitored UK Audit Reform recommendations
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Assessment of the Group’s risk management and internal
controls system
The Board has confirmed that during the year, through the Audit
Committee’s rolling review of the key financial and internal control
matters, it has reviewed the effectiveness of the system of internal,
financial, operational and compliance controls, and risk management. The
Committee’s review took into account the Board’s biannual review of
significant risks and emerging risks, as well as the effectiveness of the new
co-sourced model for internal audit (see below). Following the year end,
the Board has acknowledged the weaknesses in the control environment
relating to franchise compliance identified as a result of issues and
challenges faced in relation to LSER and International Rail. Responding to
these weaknesses, the Committee has carefully considered both the
findings of the Independent Review commissioned into LSER’s
performance and the wider implications for governance and controls
relating to the Group’s complex long term rail contracts. A number of
improvements have been implemented, including Board and leadership
changes, improving bid investment decision making and ongoing contract
compliance monitoring. The process of improving governance and
controls will continue and this will be a key area of focus for the
Committee.
Internal Audit
During the year ended 3 July 2021, a comprehensive review of the scope,
effectiveness and integration of internal audit work across the business
was undertaken. No significant concerns were raised by this review which
concluded that the existing outsourced provision through
PricewaterhouseCoopers LLP (PwC) was independent, effective and
provided assurance over the Group’s risk and controls environment. The
review did however identify a number of areas of improvement. This
included operating companies benefiting from more practical support on
implementing the audit recommendations and the outsourced internal
audit provision being more efficiently and cost effectively integrated with
in-house resource.
Following an assessment of a number of options, the Committee approved
management’s recommendation to initially move to a co-sourced model,
with the appointment of a new Head of Internal Audit working with
existing and newly appointed in-house resource and the incumbent
internal auditor, PwC. PwC supported this transition, which has now taken
place, and will continue to provide resource, technical capability and
ad-hoc specialist internal audit work as required.
Management worked together with the Committee to appoint the new
Head of Internal Audit. Following this appointment, the Committee
considered and approved a new three-year internal audit plan (the plan),
which commenced from the final quarter of the year ended 3 July 2021.
This plan was developed by management, with input from finance and
business assurance teams across the business. Subsequent to the findings
of the Independent Committee, established to investigate the matters of
concern at LSER, the three year internal audit plan is being reviewed.
The Head of Internal Audit attends the Committee on a quarterly basis to
provide an update on progress against the plan. The Committee will assess
the effectiveness of these new arrangements on an ongoing basis, with a
more formal review to be undertaken later in the year and an update
provided in next year’s report. The Head of Internal Audit reports directly
to the Interim Group Chief Financial Officer with direct access to the Audit
Committee Chair.
During the year ended 3 July 2021, PwC continued to report to the
Committee on the internal audit plan agreed at the start of the financial
year. Updates included 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 the rolling programme of
operating company financial control reviews, a review of cyber and ethical
hacking and compliance with the UK Government’s Coronavirus Job
Retention Scheme was also carried out during the financial year.
For the year ended 3 July 2021, the Committee maintained the procedures
necessary to ensure appropriate independence of the relationship with
PwC and the new Head of Internal Audit.
An annual meeting between the Committee and PwC was also held,
without the executive directors or management present.
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 a
top-down/bottom-up approach to risk management and
control
Leadership
Clear leadership from the Board with the executive directors
working with operating companies
Board reporting
Review of reports received from the internal and external
auditors, executive directors and management
Fraud management reporting
Regular review of reports received on fraud, actions taken and
lessons learned
Health and safety reporting
Regular review of health and safety reports and audits,
including best practice and standards across UK and
international 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
The Group’s top-down/bottom-up approach enables a two-way
system of monitoring risk at all divisions and levels within the
Group. Internal Audit ensures regular and efficient reviews of the
Group’s internal control structure and systems, with the remit of
Internal Audit to be reviewed to better safeguard and assure the
compliance obligations of complex long term rail contracts
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Audit, risk and internal control continued
Key financial matters
During the year ended 3 July 2021 and, where applicable, up until the date of publication of this 2021 Annual Report, the Committee
considered the following key financial matters in relation to the Group’s financial statements and disclosures, with input from senior
leadership and the external auditor:
Key financial matters for 2021
How the Committee addressed these key financial matters
Review the accounting treatment of
income and costs arising from franchise
agreements in the rail components of the
Group.
See pages 174 and 179 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 executive directors and, where appropriate, the
external auditor.
The Committee also considered the accounting for rail as a consequence of the Emergency Measures
Agreements and Emergency Recovery Measure Agreements and agreed with the treatment that was
applied including the assessment and recognition of performance bonuses.
Assessment of provisions and contingent
liabilities in connection with the
Southeastern franchise, including
potential financial penalty.
Subsequent to the year end, the Committee reviewed the findings of the Independent Review carried
out by the Independent Committee to determine what accounting provisions were required with regard
to LSER matters of concern and items in commercial dispute. Where appropriate, independent advice
was sought to inform the Committee. Having considered the findings of the Independent Committee
the Committee agreed management’s proposed accounting treatment and related disclosures.
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 24 of the consolidated financial
statements
Under the Railways Act 1993, the DfT has the power to impose a financial penalty. In the absence of a
specific precedent or relevant guidance, it is difficult to estimate precisely the likely quantum of any
penalty. The Group, having considered independent legal advice, received by the Independent
Committee, has included a provision for £30.0m in the financial statements of the year, which reflects
the Group’s current best estimate of any penalty.
At interim and year end, the levels of provision for third-party claims, lease return and dilapidation
provisions are reviewed with the Committee. Subsequent to year end, this also included the impact of
the decision by the DfT to appoint the Operator of Last Resort (OLR) to take over delivery of passenger
services on the Southeastern franchise when LSER’s existing contract expired on 17 October 2021.
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. Specific legal advice is also taken, where appropriate, in relation to third-party
claims such as boundary fare claims. Increases in provisions, utilisation and release of provisions are all
reviewed for reasonableness in light of these reports and the Group’s specific circumstances and
having considered the proposed provisions and their reasonableness the Committee agreed with
management’s proposed treatment and disclosures.
Impairment testing in respect of the value
of goodwill and tangible and intangible
assets on the Group’s investments.
See note 14 of the consolidated financial
statements
The ongoing review of goodwill, tangible and intangible assets 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 cashflows. The Committee also reviews
historical performance against expectations set in previous years. Having considered the reviews
undertaken and financial projections, the Committee was satisfied that the impairments proposed
were reasonable based on currently available information.
Assessment of the Group’s German
rail contracts and carrying value of
associated assets.
See note 7 of the consolidated financial
statements
The German business commenced the operation of its rail services in June 2019 in Baden-Württemberg with two
further contracts in Bavaria, one of which commenced operation in December 2021 and the other final
contract due to commence in December 2022. Whilst initial operating losses were planned due to the initial
ramp up of services, the level of operating losses continues to be higher than was originally expected. In line
with IAS 36 and IAS 37, an assessment of the carrying value of assets and future contract liabilities has been
performed both at the half and full year with a full review of the future forecast and operational plans to
assess whether the contracts are onerous in nature.
Whilst the contracts in Bavarian had yet to commence at year end, changes in future estimated costs triggered
a need to update the assumptions made in the original bid and in past forecasts. This was done for the half year
end and resulted in an increase to the onerous contract provision in Bavaria. Following the year end, we
performed a detailed review of all material contracts across the Group to consider the completeness of the
onerous contract provisions. This involved a detailed review and challenge of the assumptions within each
contract, including those relating to 2020 and the Group’s 2021 half year results. An understatement has been
identified in respect of the accounting for the onerous contract provision in the rail contracts in Bavaria in the
prior year and the Group’s 2021 half year results. The 2020 provision was determined to be understated by
£37.1m (including the £25.9m subsequently provided for in the FY21 half year results) and has been restated in
the prior year figures in the 2021 results.The calculation of the understatement was determined based on the
assessment of information available that should reasonably have been included in the assumptions
underpinning the 2020 provision.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Key financial matters for 2021
How the Committee addressed these key financial matters
Assessment of the Group’s Norwegian
rail contracts and carrying value of
associated assets.
See note 7 of the consolidated financial
statements
The Norwegian business commenced the operation of its rail services in December 2019. As the contract
included exposure to changes in passenger demand, the Norwegian Government introduced a package of
financial support early in the COVID-19 crisis, resulting in a broadly breakeven position. Post-year end, the
Norwegian Government reduced the level of support to cover 70% of losses. This was then reduced again
to cover 50% of losses from November 2021. In December 2021 , the level of support was reviewed by the
Norwegian Government and increased to cover 90% of losses backdated for the period between July 2021
to October 2021, reducing to 85% for the period November 2021 to March 2022. Following the year end,
constructive discussions have been ongoing with the Norwegian Railway Directorate regarding financial
support in the future, and we are hopeful of reaching a satisfactory outcome.
The ongoing impacts of COVID-19 and the levels of Norwegian Government support triggered a
requirement to update the assumptions made in the original bid.
In line with IAS 36 and IAS 37 an assessment of the carrying value of assets and future contract liabilities
has been performed post-year end to assess whether the contract is onerous in nature.
The Committee considered and challenged the inputs of these models and cashflow forecasts as presented
by management and considered the appropriateness of the resulting disclosure with reference to IAS 1.
Assessment of the available resources to
support the going concern assumption
and the long term viability statement.
See page 64 to 68 for more information
The Committee reviewed and challenged management’s forecasts and the impact of various possible
downside scenarios including reverse stress assumptions. These took account of the potential ongoing
impact of COVID-19 on passenger volumes, the availability and duration of government funding
measures, the impact of ongoing discussions in relation to the Southeastern franchise and the impact
of a financial penalty and the mitigating actions that the Group may undertake.
In undertaking its going concern evaluation and sources of liquidity available to the Group, the
Committee concluded that existing debt facilities would continue to be available.
Following the review, which the Committee carried out at its meetings in January and February 2022,
the Committee recommended to the Board the adoption of both the going concern and viability
statements for inclusion in this Annual Report.
Assumptions underpinning the
calculation of the Group’s defined benefit
pension liabilities.
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.
See note 28 of the consolidated financial
statements
Understanding and treatment of
separately disclosed items in the year end
accounts.
The Committee has considered separately disclosed items in the 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.
See note 7 of the consolidated financial
statements
Ensuring operating company compliance
with Group policies and procedures and
maintaining the required financial control
environment.
For each item, the Committee has considered the judgements made by management, considering each item
in isolation, as well as the aggregate view of the impact on both alternative performance measures and
statutory profits. In addition, the Committee considers and takes account of any bias towards recording items
as exceptional which may have an impact on the covenant reporting.
The Committee agrees that it is appropriate to treat as exceptional the onerous contract provisions and
asset impairments relating to International Rail, and the provisions for a potential financial penalty in
relation to the LSER matters of concern and related costs. Whilst the Committee considered the
appropriate treatment of QICs in London Bus and pre-EMA settlements in GTR, it was determined that
they should not be treated as exceptional because material contractual settlements, such as these, are not
uncommon in the normal operation of these businesses. Asset impairments in Regional Bus have been
treated as exceptional. Although they do not meet the criteria to warrant this classification on the basis of
materiality, this treatment has been applied in line with the Group’s accounting policy for exceptional items,
ensuring a consistent approach with costs in prior years that are similar in nature, albeit more material.
The Committee, with input from the executive directors, 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, were in respect of IT controls during the year
ended 3 July 2021. 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.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Audit, risk and internal control continued
Key financial matters continued
Fair, balanced and understandable
At the request of the Board, the Committee has considered
whether, in its opinion, the 2021 Annual Report, taken as a
whole, is fair, balanced and understandable, and whether or
not 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,
with input from the executive directors and management
within the Group and its operating companies. This, together
with review from the Group’s external legal counsel and
external auditor, ensured the balance, completeness and
accuracy of the Annual Report. The ART was responsible for
regularly reviewing content and ensuring balanced reporting
with appropriate links between key messages and sections of
the Annual Report.
The structure of the Annual Report focuses strongly on the
key strategic messages in the Strategic Report. It was therefore
important for the Committee to ensure that this emphasis did
not dilute the overall transparency in the disclosures made
throughout the report, which it knows stakeholders find
useful, and that the messages presented by the business
are both clear and reflective of the Group as a whole.
The Committee received a full draft of the Annual Report 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 and has any sensitive material
been omitted that should have been included?
• When reporting on business performance, is the narrative
in the front of the report consistent with that used for
the financial reporting in the financial statements?
• Are the key messages in the narrative reflected in the
financial reporting?
• Are the KPIs disclosed at an appropriate level based
on the financial reporting?
Is the Annual Report balanced?
• Is there consistency between the narrative reporting in
the front and the financial reporting in the back of the report,
and does the messaging presented within each part remain
consistent when one is read independently of the other?
• Have all key events and issues reported to the Board by
management (both positive and negative) been adequately
referenced or reflected within the Annual Report?
• Are the statutory and adjusted measures explained clearly
with appropriate prominence?
• Are the key judgements referred to in the narrative reporting
and the significant issues 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 the significant issues identified compare with
the risks that Deloitte LLP plans to include in its report?
Is the Annual Report understandable?
• Is there a clear and understandable framework to the Annual
Report?
• Are the important messages highlighted throughout
the document?
• Is the layout clear with good linkage throughout in a manner
that reflects the whole story?
Conclusion
Following its review, the Committee was able to provide
assurance to the Board that the Annual Report for the year
ended 3 July 2021 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. Our fair, balanced
and understandable statement can be found in the directors’
responsibility statement on page 146 of this Annual Report.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance External audit
The Committee has primary responsibility for overseeing the
relationship with, and performance of, the external auditor,
Deloitte LLP (Deloitte). This includes making recommendations
to the Board concerning the appointment, reappointment and
removal of the external auditor, as well as assessing its
independence on an ongoing basis and negotiating the audit fee.
Assessing the effectiveness of the external audit process
The assessment of Deloitte’s audit effectiveness for the year
ended 27 June 2020 was undertaken during the financial year
ended 3 July 2021, following the completion of that audit. The
assessment was fully independent and objective. The process was
based on constructive, honest and open dialogue with the
external auditor to ensure that optimum assurance had been
derived from the audit.
The process of assessment was divided into five key areas:
Objectives
Clear objectives and desired outcomes
agreed at the outset.
Timing
A timetable with appropriate milestones
was agreed, with assessments being
incorporated at both the planning
and completion stages.
Resources
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.
The Committee’s assessment took into account views from the
former Audit Committee Chair, the former Group Chief Financial
Officer and the Group Financial Controller, in addition to feedback
from operating companies. Deloitte, also appraised its own
performance based on the feedback it received from
management, as well as against its internal performance
objectives. Feedback arising from the process was discussed
in detail with Deloitte’s lead audit engagement partner.
The observations from the assessment were presented and
discussed at a Committee meeting and it was concluded that
Deloitte had performed its 2020 audit effectively. In conjunction
with the recent change of lead audit engagement partner, a
number of changes were made to the audit approach going
forwards. This included working more closely with international
colleagues, local UK operational teams and management on the
scope and requirements of significant risk areas. In addition, a
commitment was made more generally to ensure communication
was improved and more regular updates were provided
throughout the audit timetable. A review was also undertaken by
the internal Annual Report Team, which included discussions held
with the external auditor. Changes for subsequent audits agreed
during these discussions included, but were not limited to, a new
traffic light system for audit comments and a more streamlined
approach to communication between the internal Annual Report
Team and the external auditor.
In October 2021, the FRC Audit Quality Review Team undertook a
review of the Group’s financial statements for the year ended
27 June 2020. The scope of the review was limited due to legal
privilege in respect of LSER and ‘profit share payments’. The focus
of the review and their reporting is on identifying areas where
improvements are required. The former Chair of the Audit
Committee received a full copy of the findings of the Audit
Quality Review Team and has discussed these with Deloitte LLP.
The review reported one key finding. Deloitte proposed a number
of actions as a result, which have been implemented in the FY21
audit. Having considered the results of the review, the actions
taken, and improvements made by Deloitte to address the area
identified, the Audit Committee concluded it was satisfied with
the response from the external auditor and that the audit was
effective.
The audit effectiveness review for the year ended 3 July 2021
audit is scheduled to take place following the completion of the
audit process this year and a summary of the conclusions from
that assessment will be provided in next year’s Annual Report.
Independence and objectivity 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 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.
In light of the matters of concern at LSER, the Committee
reconsidered auditor independence and, following discussions
with the external auditor, the Committee was satisfied that the
external auditor remained independent.
During the year, the technical expertise within the Group Finance
Team was bolstered with the appointment of two former
external auditor employees. To safeguard the independence of
the external auditor, a robust review was undertaken by the
former Group Chief Financial Officer and Group Financial
Controller prior to these appointments being made, with any
conflicts declared, considered and addressed in line with Group
policies. Any future appointments remain subject to Group
policies and would be reviewed by the Group Chief Financial
Officer and Group Financial Controller.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Audit, risk and internal control continued
External audit continued
Policy on the provision of non-audit services
The Committee is responsible for developing, implementing and
monitoring the Group’s policy on the engagement of the external
auditor to supply non-audit services. In line with the FRC’s Ethical
Standard, 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 or 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 is subject to
approval by the Committee
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.
Fees of external auditor
During the financial year, the Group external auditor’s fees were
£2.7m (2020: £1.2m). This amount includes a fee overrun of £1.2m
reflecting the additional audit fees incurred as a result of the LSER
matters of concern, as disclosed on page 205, and the impact this
has had on the wider Group audit. Additional assurance and audit
procedures have been required by the Group’s external auditor,
thereby increasing the number of reviews and time required to
complete the audit, as a result in order for them to gain comfort.
In addition, non-audit fees of £0.2m (2020: £0.1m) were payable to
the Group’s external auditor.
For further information on these external and non-audit fees,
please refer to the charts and table on page 107.
External audit partner rotation
On behalf of the Board, the Committee oversees the relationship
with the external auditor. Deloitte was appointed as the auditor
of the Group in October 2015 and most recently reappointed at
the 2020 AGM.
In line with the FRC’s Ethical Standard, Chris Powell, who held
the role of lead audit engagement partner since the audit
engagement began five years ago, stepped down from his role at
the conclusion of the 2020 financial year. Following approval from
the Committee, Scott Bayne assumed this role with effect from
the completion of the 2020 audit and has worked closely with the
Committee since then. This has included, but not been limited to,
agreeing the audit timetable for the half year and year end
results, ensuring that the scope of the external audit remained
appropriate, determining materiality, and assessing key
judgements raised during the audit.
External audit tenure
In accordance with requirements set out within the Competition
and Markets Authority’s regulations, the Committee is required
to retender the external audit contract by no later than the 2025
financial year, this being ten years since appointment.
The Committee has assessed the independence, quality,
effectiveness and continuity of the relationship with Deloitte as
the Group’s current external auditor. It has recommended to the
Board that it is in the best interests of the Group and
shareholders to tender the audit contract by a date no later than
that stipulated by the current regulations, 2025. Please see the
Auditor Rotation Timeline on page 107 for further information on
the dates associated with the external audit tenure.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Reappointment of external auditor
The Committee is satisfied with the objectivity and independence of the external auditor and, on this basis, has recommended to the
Board that Deloitte be reappointed at the General Meeting of shareholders to be convened in March 2022.
Auditor rotation timeline
2016
Deloitte appointed following full competitive
tender, with Chris Powell as lead audit partner
2020
Five-year rotation to lead audit partner,
with Scott Bayne appointed following
the completion of the 2020 audit
2025
Competitive tender to take place unless
required earlier
External auditor’s fees
Non-audit fees
2021
2020
£2.7m*
2021
£0.2m
£1.2m
2020
£0.1m
*
As explained on page 106, additional audit fees
of £1.2m were incurred for the year ended 3 July
2021 as a result of the LSER matters of concern
as outlined on pages 10 and 11 and the resulting
changes to the nature, timing and scope of the
audit work. This resulted in total external auditor
fees of £2.7m, £1.2m of which is classified as an
exceptional item.
Breakdown of non-audit fees
Non-audit work
Interim review
Rail Safety Levy
Nature of service
Analytical reviews in relation to the reasonableness of the
interim accounts
Preparation of auditor statements to accompany certificates
required by the franchise agreement and Office of Rail and Road
Annual financial statements (AFS)
Preparation and audit checks for AFS
Pre-Emergency Measures Agreements
(EMA) adjustments audit
Contractual requirement under the EMA to review all entries
made in respect of pre-EMA periods
Passenger experience measure (PEM) audit
Verification that the reported PEM calculation and payment was
completed in accordance with the GTR franchise agreement
with the DfT
Office of Rail and Road (ORR) Levy audit
Annual recurring audit required by the ORR under Regulation 4 of
the Railway Safety Levy Regulations 2006
Total 2021 non-audit fees
Fees (£’000)
137.5
6.5
4.0
43.5
5.0
3.5
200.0
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The Go-Ahead Group plc Annual Report and Accounts 2021
Remuneration
Directors’ Remuneration Report
Dear Shareholder
On behalf of the Board, I am
pleased to present the
Directors’ Remuneration
Report for the year ended
3 July 2021, my second as the
Remuneration Committee
Chair of Go-Ahead.
The role of the Remuneration
Committee is to ensure that
Leanne Wood
Remuneration Committee Chair
the Group’s remuneration structures and arrangements
encourage our executive directors and senior leadership team to
implement the corporate plan and deliver our strategy in a
responsible and sustainable way that creates value for our
stakeholders. With that in mind, a considerable amount of our
time over the last year was spent assessing the forthcoming
renewal of remuneration policy and executive director
remuneration following changes to the Board, further details of
which are provided on pages 117 to 128.
The Committee has also considered the continued consequences
of COVID-19 both on our business and on the transport sector as
a whole. At Go-Ahead, we have remained committed to providing
safe and reliable bus and rail services to all of our customers,
whilst also supporting our people and other stakeholders.
Building on our earliest efforts, focus has continued on safety
measures, social distancing, enhanced cleaning regimes and
personal protective equipment to minimise any harm to our
colleagues, passengers and communities.
Following the retirement of former Group Chief Executive, David
Brown, in late 2021, Christian Schreyer was appointed as our new
Group Chief Executive in November 2021. Christian has been
supported by an experienced Interim Group Chief Financial
Officer, Gordon Boyd, who was appointed to the Board in
September 2021 following the resignation of the former Group
Chief Financial Officer, Elodie Brian. A process is well underway to
recruit a permanent Group Chief Financial Officer.
This Directors’ Remuneration Report is divided into four
principal sections:
• This annual statement on pages 108 to 111, which provides
the context for the Committee’s decisions during the year
and other regulatory information
• The ‘remuneration at a glance’ section on page 114
• The proposed remuneration policy on pages 117 to 128,
which will be put to shareholder vote at the General Meeting of
shareholders to be convened in March 2022
• The annual report on remuneration which comprises
information on the activities of the Remuneration Committee
on pages 129 to 141 and provides details of remuneration paid
to the Board during the 2021 financial year and how we will
apply the remuneration policy in the 2022 financial year on
pages 141 and 142
Impact of COVID-19 on directors’ remuneration
COVID-19 has continued to have a serious impact on the Group’s
business and stakeholders throughout the year. The health and
wellbeing of our colleagues and customers continues to be at the
forefront of our decisions to ensure that we fulfil our responsibility
to society in such an unprecedented time. We are extremely proud
of and grateful to all our colleagues who have demonstrated their
commitment in ensuring that our public transport infrastructure
could continue to operate throughout the pandemic.
In considering directors’ remuneration, the Committee
acknowledges that government support and funding have been
essential to ensure we could maintain our vital services during
this time. In addition, we have taken into account the Board’s
decision not to award a dividend in respect of 2021. It is in this
context that the Committee has determined it inappropriate to
allow the executive directors’ annual bonus to pay out for the
2021 financial year, and therefore exercised its discretion to
reduce this to zero.
This decision was made in respect of both executive directors
prior to the announcement of the departure of the Group Chief
Financial Officer. Irrespective of this decision, the Group Chief
Financial Officer was not eligible to receive a 2021 annual bonus
under her leaving arrangements.
Given the exceptional circumstances as a result of the pandemic
at the time of publishing last year’s report, the Committee
decided to defer the 2020 Long Term Incentive Plan (LTIP) grants
and target setting until there was greater visibility of the
continuing impact of COVID-19. These awards were made in
December 2020 with details of the targets being disclosed in the
regulatory news announcement at this time. Full details are set
out again on page 137.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance Performance for the 2021 financial year
Following an extended period of COVID-19 restrictions limiting
travel, the Group has been reassured by the level of recovery to
date. Despite the challenges posed by the pandemic, we delivered
a solid financial performance in our Bus businesses and GTR,
supported by limited exposure to changes in passenger demand
with around 90 per cent of our revenues secured through
contracts. This solid performance was, however, overshadowed
by the need to make material provisions in respect of
International Rail and London & South Eastern Railway (LSER).
Despite these challenges, our balance sheet remains strong and
leverage has returned to pre-crisis levels, at the lower end of our
target range of 1.5x to 2.5x, well below the 3.5x bank covenant.
The remuneration policy operated over the 2021 financial year as
intended by the Committee. Given the increased focus on
cashflow, liquidity and ratios across the Group, the Committee
reassessed the performance measure weightings for the 2021
annual performance-related bonus at the start of the financial
year and deemed it appropriate to adjust these slightly. The
weighting for operating profit was reduced from 65 per cent to
60 per cent and Group cashflow was increased from 10 per cent
to 15 per cent. There was no change to the weighting of strategic
KPIs which remained at 25 per cent.
Given the significant external challenges, Group cashflow
performance (15 per cent) was below the threshold level at the
year end. Profitability, excluding exceptional items, exceeded the
operating profit measure (60 per cent) with both our rail and bus
divisions achieving 100 per cent against their respective targets.
Performance against the remaining strategic measures, whilst
also showing significant achievement, was not formally assessed
following the Committee’s decision that bonuses should not be
awarded.
The Committee considered its exercise of discretion very carefully
and in the context of the impact of COVID-19 on the Group’s wider
stakeholders, it was agreed that it would not be appropriate
to pay an annual performance-related bonus to the executive
directors for the 2021 financial year and the overall bonus payout
was therefore reduced to zero. Full details of the relevant targets
and performance achieved are set out on pages 130 to 131.
The Committee determined that there would be no vesting of
the Long Term Incentive Plan (LTIP) award granted to the former
Group Chief Executive in November 2018. Performance against
the Earnings per Share (EPS) and Total shareholder return (TSR)
metrics was below the threshold level and taking these financial
metrics into account, it was agreed that the customer service metrics
should not vest. Full details can be found on page 132.
The former Group Chief Financial Officer was not in role at the
time of the 2018 grant, and therefore did not participate in the
2018 LTIP.
The Committee believes that the 2021 pay outcomes are
appropriate in the context of aligning the executive directors’
interests with those of our stakeholders at this time.
Discretion
The Committee considers the exercise of discretion very carefully
when considering the total amounts earned under the annual
performance-related bonus and LTIP, including the overall
performance of the Group and any exceptional factors. As set
out above, the Committee determined that discretion should be
applied to override the formulaic annual bonus outcome for the
2021 financial year. No discretion was required in relation to the
2018 LTIP outcome. As a result of this no annual perfomance-
related bonus was awarded and the 2018 LTIP lapsed in full.
When determining the future vesting of any in-flight LTIP awards,
the Committee will carefully consider whether any discretion
is required to ensure outcomes are fair and appropriate.
Proposed remuneration policy
The current directors’ remuneration policy was approved by
shareholders at the 2018 AGM and therefore is due for renewal at
the General Meeting of shareholders to be convened in March
2022. During the last year, and more recently, the Committee has
carefully reviewed the remuneration structure, measures and
targets in the context of the evolving economic, transport sector
and governance landscape. It is important that our policy is
aligned to both shareholders’ and other key stakeholders’
interests and continues to operate in line with our long term
business strategy, culture and values.
The principal change proposed under the new remuneration
policy is to enable the grant of Restricted Share Plan (RSP) awards
to replace the existing LTIP awards. The key features of the RSP
awards (which will be granted under the rules of the Group’s
existing LTIP) are:
• Three-year vesting period and two-year post-vesting holding
period, in line with shareholder expectations to operate a
five-year time period between grant and release of shares
• Financial and non-financial underpins to ensure that any vesting
of the RSP is aligned with the overall performance of the business,
and to allow the Committee discretion to reduce the vesting in
the event that this is not considered to be the case. The
Committee will determine the underpins annually. For
information on the underpins, please see the ‘Implementation of
remuneration in 2022’ section on pages 141 and 142. These
underpins will apply to the first awards which will be made
shortly after the General Meeting of shareholders in March 2022
subject to approval of the new remuneration policy
• Quantum of awards set at a 50 per cent discount to the current
LTIP arrangements to account for the increased certainty
of vesting
The remuneration policy maximum in respect to the RSP will
therefore be 75 per cent of base salary. Subject to approval of the
revised policy, the new Group Chief Executive will be granted an
RSP award of 75 per cent of base salary. The Interim Group Chief
Financial Officer will not be eligible to receive an RSP award in the
2022 financial year. At the point of vesting, the Committee will
also consider whether to apply discretion to avoid windfall gains.
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The Go-Ahead Group plc Annual Report and Accounts 2021
The Committee believes an RSP structure is the most appropriate
for Go-Ahead for the following key reasons:
• Alignment with shareholder experience: Shared
ownership experience is the most effective way of ensuring
alignment of interests between shareholders and the
executive directors, incentivising them to achieve growth
in value of the business. One of the most important elements
of an RSP is that it provides the executive directors with
the opportunity to quickly build up a material equity
holding to provide this shared ownership experience.
• Long term locked-in shareholding: An RSP supports
the build-up of a long term locked-in shareholding by the
executive directors. It encourages a focus when making
decisions on considering the long term impact on the
business as opposed to those to meet comparatively short
term objectives. However, the Committee does believe
that it is important that the executive directors continue
to deliver shorter term objectives and the remuneration
policy, therefore achieves this dynamic tension through
the retention of the annual cash and deferred shares
bonus.
• Challenges inherent in target setting:
The implementation of the business changes required
in the aftermath of the global pandemic is unlikely to be
linear and the executive directors need to be flexible and
agile to exploit opportunities as and when they arise.
An RSP removes the perennial challenges exacerbated
by cyclical businesses setting relevant and appropriate
targets over a long term period and that have been a
feature of the existing LTIP. This is particularly critical
given the unique sector challenges faced by the business
at this time and the uncertainty that the impact of
COVID-19 poses on the future of the transport sector.
It is therefore considered best to focus on building up a
material shareholding, increasing shareholder alignment
and retention for the executive directors. Although RSP
awards will not be subject to performance targets,
financial and non-financial underpins will be included to
ensure that any vesting of the RSP awards is in line with
the overall performance of the business.
• Simplification: The Committee believes that moving from
the LTIP structure to an RSP simplifies the overall
remuneration for our executive directors. For all
the reasons set out above, it is the Committee’s view that
the build-up and retention of a material shareholding is
the best and simplest way to focus executive directors
on the long term sustainable performance of the Group.
Proposed remuneration policy continued
In addition to the move to the RSP awards, the other proposed
changes to our remuneration policy are to align with the UK
Corporate Governance Code (the Code) and best practice:
• Introduce a post-cessation shareholding requirement
equivalent to 100 per cent of the in-post shareholding
requirement for two years post-departure
• Equalise executive director notice periods such that the
notice period is 12 months from either the executive director
or the Group
• Formalise recent updates as to how we have operated pay
into our new remuneration policy. We have implemented
these amendments since 2019 and are taking the opportunity
to reflect them in the new remuneration policy:
– Executive director pension provision in line with that provided
to the majority of the workforce (currently 3 per cent of
qualifying earnings)
– Enhanced malus and clawback trigger events
At the time of writing this Report, the Committee continues to
believe that the changes set out above will most effectively
support our current strategic aims, whilst motivating our
executive directors. The Committee also believes that
implementing these changes will give us the tools to attract new
talent into the Group and are, therefore, in the interests of our
shareholders.
To the extent that the strategic direction of the business
materially changes during the next three years, the Committee
will consider whether it is necessary to revisit the new
remuneration policy. Any changes would be subject to
shareholder consultation and final approval.
Engagement with shareholders
The proposed changes were subject to a comprehensive
consultation process with our major shareholders and proxy
agencies. We thank our major shareholders and representative
bodies for their engagement in supporting the Committee in its
review of the new remuneration policy. We received overwhelming
support for the proposed changes from those who responded and,
as a result, the Committee decided to proceed with the proposals.
Board changes
David Brown retired as Group Chief Executive on 5 November
2021. In line with the 2021 remuneration policy, David will be
eligible for an annual performance-related bonus in respect of the
2022 financial year, subject to the achievement of targets and
pro-rated for time in post. Unvested LTIP awards will vest at the
normal time, subject to the achievement of performance
conditions and time pro-ration. Unvested deferred shares will
vest in full in accordance with the normal vesting timetable.
Malus and clawback provisions will continue to apply to all
awards.
Christian Schreyer joined the Board on 1 November 2021 and
succeeded David Brown as Group Chief Executive with effect
from 5 November 2021. Taking into account factors such as
experience, the pay level of his predecessor and the principles of
the proposed new remuneration policy, the Committee determined
that the remuneration package for the new Group Chief Executive
should comprise the following:
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued New Group Chief Executive remuneration
Base salary (not to
be reviewed again
until April 2023)
£550,000
Annual
performance-
related bonus
Maximum of 150 per cent of base
salary, half being paid in cash and half
paid in shares deferred for a period
of three years
RSP
Maximum of 75 per cent of base salary
Shareholding
requirement
Pension
200 per cent of base salary
Eligible 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 representing
3 per cent of qualifying earnings
Relocation
allowance
Monthly allowance of £8,333 for the
first 24 months of employment*
Other benefits
Eligible to join the Group’s family
healthcare membership
* The Committee felt that a relocation allowance spread over two years was
appropriate under the circumstances taking into account the specifics of the
international relocation to the UK including uncertainty around international travel
constraints.
Elodie Brian resigned as Group Chief Financial Officer on 27
September 2021. From the date of her resignation, Elodie
commenced her six-month notice period on garden leave, in
accordance with her contract of employment. During this period
Elodie has been, and will continue to be, available to assist the
Group with any matters arising, and will continue to receive her
contractual salary and benefits. No payment in lieu of notice is
therefore due.
Elodie is not eligible for an annual performance-related bonus for
2021 or 2022 and her unvested deferred share awards and long
term incentive awards will be forfeited on her leaving date.
Gordon Boyd, a highly experienced Interim Group Chief Financial
Officer, joined the Board on 28 September 2021. As he is on an
interim contract, Gordon will receive an all-inclusive base salary
of £100,000 per month and will not participate in any incentive
awards or receive any additional benefits, including pension.
The remuneration for both the former and Interim Group Chief
Financial Officer is in line with the remuneration policy.
David Blackwood and Dominic Lavelle joined the Board as
Non-Executive Directors at the beginning of January 2022 and
succeeded Adrian Ewer as Senior Independent Director and Audit
Committee Chair respectively on 19 January 2022 when Adrian
Ewer stepped down from the Board.
Implementation of remuneration policy in 2022
For information on how the proposed remuneration policy is to
be implemented for the 2022 financial year, please see pages 141
and 142.
Employee engagement in the year
Go-Ahead has a designated non-executive director, Harry Holt,
who is responsible for reviewing and supporting workforce
engagement, including on executive pay. While the Board’s rolling
programme of visits to operating companies was postponed at
the start of the pandemic, feedback has still been received from
colleagues through a number of different channels and, during
the year, the Committee considered the remuneration-related
themes which included employee pay. The Board’s programme
of visits to operating companies has now been resumed, with the
Chair and members of the Board due to visit most UK operating
companies through the year. For the Remuneration Committee
specifically, this will include considering how we engage with
employees on matters of executive pay and wider Group pay
policy. For further information on how the Board engages with
the workforce, see page 82.
The Committee also undertakes an annual review of
remuneration policies across the Group. The Committee
considers that it has always been kept well informed about the
pay and related policy arrangements for the Group’s wider
workforce and so has been able to consider wider employee pay
as context for any decisions taken with respect to the executive
directors.
Looking forward
The Group has faced unprecedented challenges over the past
two years and the Committee’s review of remuneration policy
took into account the context of the evolving economic,
transport sector and governance landscape. The Committee
believes that the proposed Policy is aligned to both shareholders’
and other key stakeholders’ interests and will operate in line with
our purpose, strategy and values and led by new leadership and a
refreshed Board who will take the Group forward at this pivotal
time.
In this context, it is important that our proposed remuneration
policy supports the delivery of our strategic goals and the
creation of our shareholder value.
We look forward to receiving shareholder support on the new
remuneration policy and hearing your views on the Annual Report
on Remuneration at the Group’s General Meeting of shareholders
to be convened in March 2022.
.
Leanne Wood
Remuneration Committee Chair
23 February 2022
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The Go-Ahead Group plc Annual Report and Accounts 2021
Remuneration Committee
Membership
• As at the date of this Report, the Remuneration Committee
comprises the Committee Chair (Leanne Wood), the Group
Chair (Clare Hollingsworth) and three independent
non-executive directors (David Blackwood, Dominic Lavelle
and Harry Holt)
Effectiveness
• Both the external review of the Committee’s effectiveness
carried out at the end of 2020, and the internal review
carried out last Summer, concluded that the Committee
was fully effective in discharging its duties and
responsibilities.
Future focus
• Subject to shareholder approval, implement the new
remuneration policy
• Ensure any remuneration payable to former and newly
appointed Board members is in line with policy
• Review the alignment of executive performance-related
pay targets to support and deliver Go-Ahead’s strategy,
taking into account the ongoing impact of COVID-19
• Review and determine senior leadership remuneration
• Review the effectiveness and transparency
of remuneration reporting
• Monitor compliance with the Code and develop further
remunerated-related engagement with the workforce
• 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
• The Group Chief Executive, Group Chief Financial Officer
and Group HR Director attended relevant parts of the
Committee meetings during the year ended 3 July 2021. No
individual was present when their own remuneration was
being determined
Terms of reference
• The Committee’s terms of reference are reviewed and
approved by the Board annually. During 2021, the terms of
reference were updated in accordance with best practice
and a copy is available on our website.
Meetings
• The Committee held five meetings during the year ended
3 July 2021, in addition to one unscheduled meeting.
Attendance by members at Committee meetings can be
found on page 73.
Committee responsibilities during the year
Remuneration policy
• Reviewed remuneration policy ahead of its three-year
• Considered the impact of COVID-19 on directors’
remuneration
renewal
Executive director target setting and outcomes
• Approved nil payment of the 2020 annual performance-
related bonus and nil vesting of the 2017 LTIP award
• Established targets for the 2020 LTIP award and 2021 annual
performance-related bonus
• Considered remuneration-related themes (including
employee pay) arising from colleague engagement
Governance and Committee effectiveness
• Approved the 2020 Directors’ Remuneration Report which
included reviewing the effectiveness and transparency
of remuneration reporting
• Liaised with Audit Committee on quality of earnings review
• Considered findings of external and internal
Board and senior leadership remuneration
• Reviewed and approved Chair fees and executive director
and senior leadership salaries
Shareholder engagement
• Consulted with major shareholders ahead of the proposed
new remuneration policy
• Consulted with major shareholders on 2020 LTIP award
metrics and weightings
• Ensured new remuneration policy promotes long term
shareholdings by executive directors that align with
shareholders’ interests
Wider stakeholders and COVID-19
• Reviewed wider workforce remuneration and related policies
to ensure consistency with Group values and culture
effectiveness reviews
• Kept under review the relationship with Committee’s
external advisors
• Undertook annual review of Committee’s terms of reference
• Monitored the Code as well as general updates on market
best practice provided by the Committee’s external advisors
Board changes during the year and subsequently
• Ensured that the remuneration for the former Group Chief
Executive and Group Chief Financial Officer upon leaving
was in accordance with policy
• Approved the remuneration for the new Group Chief
Executive and Interim Group Chief Financial Officer
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued External advisors to the Committee
PricewaterhouseCoopers LLP (PwC) acts as an independent remuneration advisor to the Committee. PwC was appointed by the
Committee in June 2020, following a rigorous tender process, full details of which can be found on page 94 of the 2020 Annual Report
and Accounts. PwC is one of the founding members of the Remuneration Consultants Group Code of Conduct and adheres to this
Code in its dealings with the Committee.
Previously, PwC has supported the Audit Committee with internal audit which, during the year ended 3 July 2021, transitioned to
in-house resource, further details of which can be found on page 101. Following this transition, PwC continues to provide resource,
technical capability and ad-hoc specialist internal audit work as required and the Remuneration Committee is satisfied that these
services do not impede PwC’s objectivity in providing remuneration advice. The Committee is also comfortable that the PwC
engagement partner and team, which provide remuneration advice to the Committee, do not have connections with the Group or
individual directors of the Group that might impair their independence and that the advice received is independent and objective.
The fees payable to PwC for advice during the year ended 3 July 2021 were £126,450 (excluding VAT), charged on a time and material
basis. As detailed within the last Committee Report, prior to the appointment of PwC, New Bridge Street (NBS) (part of Aon plc) acted
as an independent remuneration advisor to the Committee. The fees payable to NBS for advice during the year ended 27 June 2020
were £44,458 (excluding VAT), charged on a time and material basis.
Statement of voting at Annual General Meeting (AGM)
At the Company’s AGM held on 24 November 2020, the Directors’ Remuneration Report received the following votes from shareholders:
Remuneration Report
Votes for and
discretionary
28,900,644
99.91%
Votes against
Total votes
Withheld
25,645
0.09%
28,926,289
100.00%
4,546
The remuneration policy was last approved at the Company’s AGM held on 1 November 2018, the voting outcome of which was:
Remuneration policy
Votes for and
discretionary
30,249,362
99.00%
Votes against
Total votes
Withheld
307,034 30,556,396
100.00%
1.00%
19,230
A new remuneration policy will be put to shareholders for approval during the General Meeting of shareholders to be convened in
March 2022.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Remuneration at a glance
Summary of directors’ remuneration policy and implementation in 2022
The Group’s remuneration policy (the Policy), as determined by the Remuneration Committee, will be put to shareholders at
the General Meeting of shareholders to be convened in March 2022 and is set out in full on pages 117 to 128 (inclusive). This
Policy will take effect from the conclusion of the General Meeting (subject to shareholder approval), and supersedes that
approved by shareholders in 2018.
The key changes proposed to the Policy this year are to the long term incentive arrangements as follows:
• LTIP awards replaced with the new RSP awards
• Maximum opportunity reduced from 150 per cent of base salary to 75 per cent of base salary
• Three-year vesting and two-year post-vesting holding period since retained
• Financial and non-financial underpins apply. Underpins for the first grant are as follows:
– Cash generation/net debt ratio
– Colleague engagement
– Health and safety
– Climate change strategy
Other governance-led changes are also being proposed, as set out in detail on pages 118 and 119.
The diagram below sets out a summary of the proposed Policy and its implementation in 2022.
Summary of the proposed Policy and its implementation in 2022
Salary
• CEO: £550,000
• CFO: N/A
• Interim CFO: £100,000
per month*
Benefits
Pension (3 per cent of
qualifying earnings)
Annual bonus
• Policy maximum and
2022 implemented
maximum: 150 per cent
of base salary for both
executive directors
Restricted shares
• Policy maximum:
75 per cent of base salary
• 2022 grants:
– CEO: 75 per cent
of base salary
– CFO: 50 per cent
of base salary
Cash
bonus
paid
50 per cent of the bonus
is deferred for three years
Vesting period subject
to continued
employment and
rigorous financial and
non-financial underpins
(see page 142)
Deferred
shares
vest
Shares
vest
after
three
years
Two-year
holding
period
Vested
shares
released
after
two
years
Shareholding
guideline CEO and
CFO: 200 per cent
of salary (not
applicable for the
Interim CFO)
Applies for
two years post-
employment
* The Interim CFO will receive an all-inclusive base salary only and will not participate in any incentive awards or receive any additional benefits, including pension.
Year 0
+1
+2
+3
+4
+5
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued Summary e xecutive remuneration 2021
Basic salary and pension
Base salary (£’000)
% increase from prior year1
Temporary reduced base salary (£’000)1
Pension (£’000)2
2021 annual performance-related bonus
Maximum opportunity (% of salary)
Actual outcome following Remuneration
Committee discretion
(% of salary)
Cash amount
Amounts satisfied in shares
2018 LTIP award
Maximum opportunity (% of salary)
Award vesting (% of
maximum opportunity)
Former Group Chief Executive, David Brown
Former Group Chief Financial Officer, Elodie Brian
£582
0%
£465
£1
150%
0%3
£nil
nil
150%
nil 3
£335
0%
£268
£1
150%
0%3
£nil
nil
N/A4
N/A
1. For the second consecutive year, no salary increases were awarded on account of the ongoing COVID-19 pandemic. Between 1 April 2020 and 31 October 2020,
the executive directors volunteered to temporarily waive 20 per cent of their base salaries.
2. Pension provision for the executive directors is aligned with the majority of the workforce. The executive directors are therefore 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 an equivalent cash
allowance. Both executive directors opted to receive an equivalent cash allowance, representing 3 per cent of qualifying earnings, as set by the Government for automatic
enrolment.
3. Elodie Brian was not eligible to receive a 2021 annual performance-related bonus under her departure arrangements. As set out in the annual statement, prior to this the
Committee determined that discretion should be applied to override the formulaic annual performance-related bonus outcome for the 2021 financial year for both
executive directors, and that no discretion was required for the 2018 LTIP outcome. Please see page 109 for further details.
4. The former Group Chief Financial Officer’s first LTIP award was granted in November 2019 for the three-year performance period 2020–2022 and will lapse on her leaving date.
The total single remuneration figure for our executive directors for the year ended 3 July 2021 is shown below:
Total single remuneration figure for 2021 (£’000)
Former Group Chief Executive, David Brown
Former Group Chief Financial Officer, Elodie Brian
2021
548
314
2020
558
320
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The Go-Ahead Group plc Annual Report and Accounts 2021
Executive directors’ remuneration – actual vs Policy (£’000)
The charts show a comparison of the total single remuneration figure received by the former executive directors for the year ended
3 July 2021 compared with the fixed, target and maximum opportunity which was available under Go-Ahead’s remuneration policy.
Pursuant to The Companies (Miscellaneous Reporting) Regulations 2018, we have also included an illustration of the maximum
opportunity available following 50 per cent share price growth on the maximum LTIP award value.
David Brown – Group Chief Executive
Elodie Brian – Group Chief Financial Officer
Fixed
Target
Max
Max plus SPG
£587
£1,242
Fixed
Target
Max
£2,333
£2,770
Max plus SPG
£336
£713
£1,174
£1,341
Actual
£548
Actual
£314
(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
Executive remuneration compared with FTSE 250
When setting the remuneration for the executive directors, one of the factors the Committee considers is the relevant markets for the executive
directors, which we believe is the FTSE 250, and the size of the Group compared with industry peers (FirstGroup plc, Stagecoach Group plc
and National Express Group plc). The Committee believes that the FTSE 250 remains an appropriate benchmark for external comparison
as it reflects the size and complexity of the Group and executive roles. This benchmark, however, will continue to be regularly reviewed.
The charts below shows the relative position of the former Group Chief Executive’s and former Group Chief Financial Officer’s base
salaries in comparison with the lower median and upper quartiles of the FTSE 250.
David Brown – Group Chief Executive
Elodie Brian – Group Chief Financial Officer
Positioning of target total compensation of the Group relative to market benchmarks
(cid:31) FTSE 250 Lower Quartile (cid:31) FTSE 250 Median (cid:31) FTSE 250 Upper Quartile
Shareholding requirement as at 3 July 2021
David Brown – Group Chief Executive (% of salary)
Shareholding requirement
121, 443 shares
Current shareholding (as per table on page 135)
Net of tax value of unvested LTIP awards
(i.e. unvested awards subject to performance conditions)
106,329 shares
100,155 shares
Elodie Brian – Group Chief Financial Officer (% of salary)
0%
50%
100%
150%
200%
Shareholding requirement
69,937 shares
Current shareholding (as per table on page 135)
8,519 shares
Net of tax value of unvested LTIP awards
(i.e. unvested awards subject to performance conditions)
27,482 shares
0%
50%
100%
150%
200%
Notes:
Current shareholding includes: (a) beneficial holdings including beneficial interests in shares held under the Group’s Share Incentive Plan and (b) unvested and vested
but unexercised ordinary shares under the deferred share bonus plan (DSBP) (on a net-of-tax basis). Unvested shares under the LTIP have not been included.
The current shareholding and value of/gain on interests over shares as a percentage of salary have been calculated using the former Group Chief Executive’s and former
Group Chief Financial Officer’s full base salaries of £581,710 and £335,000 respectively.
The former Group Chief Executive purchased 200 shares under the Group’s Share Incentive Plan during the period 28 June 2020 and 3 July 2021.
The former Group Chief Financial Officer purchased 3,400 shares between the period 28 June 2020 and 3 July 2021.
The value of the ordinary shares shown above has been based on the average share price between the period 28 June 2020 and 3 July 2021, being £9.58.
Net of tax value of unvested LTIP awards comprises unvested 2018, 2019 and 2020 LTIP awards for the former Group Chief Executive and the unvested 2019 and 2020 LTIP
awards for the Group Chief Financial Officer on a net-of-tax basis.
Unvested LTIP shares do not count towards satisfaction of the shareholding guidelines.
Following Elodie Brian’s departure, her unvested deferred share awards and long term incentive awards will lapse on her leaving date. This lapse of awards is not reflected in
the table above due to this decision taking place following the year end.
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Corporate governanceRemuneration continued
Remuneration policy
The Group’s remuneration policy (the Policy) is set out in this section. This Policy, as determined by the Remuneration Committee, will
be put to shareholder vote at the General Meeting to be convened in March 2022. The new Policy, which is set out on pages 117 to 128
(inclusive), will take effect from the conclusion of the General Meeting (subject to shareholder approval). This Policy supersedes that
approved by shareholders in 2018.
In determining the new policy, the Committee went
through the following process:
The key proposed changes from the 2018 remuneration
policy are as follows:
• Considered the Group’s strategy and how alignment
• To replace performance-based Long Term Incentive Plan
could be increased through amendments to the
remuneration policy
• Considered market practice and governance
developments to ensure arrangements are market
leading in best practice and governance requirements
• Sought independent advice from its advisors
• Consulted with management to ensure that its views
were taken into consideration when developing the
proposed changes
• Reviewed the wider workforce remuneration and
incentives to ensure the approach to executive
remuneration is consistent
• Conducted a full consultation process with shareholders
and representative bodies on the changes and reflected
these views in the development of the final proposals
(LTIP) awards with new Restricted Share Plan (RSP)
awards and reduce the maximum quantum by 50 per
cent from 150 per cent of base salary to 75 per cent of
base salary. RSP awards will continue to be granted under
the rules of the Company’s current LTIP
• Introduce a post-cessation shareholding requirement
equivalent to 100 per cent of the in-post shareholding
requirement for two years post-departure, in line with
the UK Corporate Governance Code (the Code) and best
practice
• Equalise executive director notice periods such that the
notice period is twelve months from either the executive
director or the Group. Note that current arrangements
continue to apply for the former Group Chief Financial
Officer in respect of her departure (six months’ notice)
• Formalise recent updates to how we have operated pay
in line with emerging best practice and the Code into our
new Policy. We have implemented these amendments
since 2019 and are taking the opportunity to reflect them
in the new Policy:
– Pension provision for executive directors to be in line
with that provided to the majority of the workforce
(currently 3 per cent of qualifying earnings). Whilst the
2018 remuneration policy permits a maximum pension
contribution of 15 per cent of salary for executive
directors, the lower level of 3 per cent has applied to
executive directors since 2018 in order to align with
the Code
– Enhanced malus and clawback triggers that apply to
incentive plans to include corporate failure; serious
downturn in financial/operational performance; and
serious reputational damage
Remuneration linked to strategy
The Committee believes it is very important that our overall 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. The key
principles underpinning our new Policy remain unchanged as follows:
Prioritising long term shareholder value – COVID-19 poses unique circumstances for the business and uncertainty on the future of
the transport sector. It is therefore considered that it is best to focus on building up a material shareholding, increasing shareholder
alignment and retention for management. A large proportion of the executive directors’ remuneration is payable in shares. Half of the
total annual performance-related bonus is awarded as deferred shares, to be held for a period of three years and subject to recovery
and withholding provisions. Awards under the RSP are also made in shares, further aligning the interests of our executive directors
with those of our shareholders. Awards granted under the RSP are subject to an additional two-year holding period following the
vesting of awards.
Pay for performance – there is a clear link between the performance of the Group and payments made to the executive directors
and senior managers. Performance-related elements of remuneration are relevant, transparent, stretching and rigorously applied.
Stretching targets are set for the annual bonus, with a minimum of 50 per cent based on financial targets, and a significant weighting
towards strategic KPIs. In addition, rigorous underpins are applied to RSP awards such that a minimum level of performance must be
achieved to allow awards to vest. Care is taken to avoid paying more than necessary and due regard is given to pay and employment
conditions elsewhere in the Group.
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Alignment of remuneration policy with the UK Corporate Governance Code
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 UK Corporate Governance Code (the Code).
Clarity
Remuneration arrangements
should be transparent
and promote effective
engagement with
shareholders and
the workforce
Simplicity
Remuneration structures
should avoid complexity and
their rationale and operation
should be easy to understand
Risk
Remuneration arrangements
should ensure that
reputational and other risks
from excessive rewards, and
behavioural risks that can
arise from target based
incentive plans, are identified
and mitigated
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
• 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 why and how we engage with
our stakeholders, the key topics of engagement during the year and how we responded,
see pages 20 to 23. You can find out more about how the Board considers stakeholders in
decision making and how their views are understood in the boardroom on pages 81 to 85
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 Restricted Share Plan (RSP) which promotes long term sustainable value
creation. This is a simple structure which removes the challenges inherent in setting targets
for long term performance measures
• The combination of a capped reward for short term and longer term strategic decisions,
with holding periods and malus and clawback supports 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
• The charts on page 126 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 RSP has been illustrated assuming
share price growth of 50 per cent over the vesting period
• The introduction of the RSP significantly increases the predictability of the long term incentive
element of the package
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Corporate governanceRemuneration continued Proportionality
The link between individual
awards, the delivery of
strategy and the long term
performance of the Group
should be clear and outcomes
should not reward poor
performance
Alignment to culture
Incentive schemes should
drive behaviours consistent
with the Group’s 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
• The RSP provides a direct link to the long term sustainable performance of the business and
includes performance underpins that provide the Committee with the discretion to adjust the
level of vesting, where appropriate
• 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 125
In reviewing the alignment between our executive directors’ incentives and rewards,
and the Group’s culture, the Committee considers the following elements:
Metrics and performance underpins
The Committee ensures that metrics and performance underpins 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. For the RSP, underpins for the first grants will be cash generation/
net debt ratio, colleague engagement, health and safety and climate change strategy, all of
which will be reviewed on an annual basis in relation to their continued appropriateness.
Governance and best practice
It is important that the Policy and its implementation reflect the Committee’s approach to adopting
best practice in this area and, as reported on page 117, the proposed Policy now reflects the
governance-led amendments that were implemented in 2019 including in respect of malus and
clawback and executive directors’ pension contribution. In addition, a full review of latest governance
and market best practice was conducted as part of the development of the new Policy.
Wider scene and employee 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. Information on our engagement with employees and how the
Remuneration Committee considered the wider workforce is set out on page 124.
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Remuneration policy for executive directors
Element
and maximum
Base salary
Performance-
related bonus
Purpose and link to strategy
Operation
Maximum
Performance targets
• 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
• Paid monthly in cash
• Salaries are set by the Committee, which reviews
all the relevant factors, including:
– 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
No changes proposed from the 2018 remuneration policy
• Annual salary increases for executive directors will not
N/A
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
• Focuses on the key strategic objectives
• Normally, annual payments made after the AGM
• Maximum of 150 per cent of base salary
• The Committee will review performance measures and
for the year ahead
• Deferral of half of the bonus into Group
shares aligns executive directors’
interests with those of shareholders
• 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
(with the accrual of dividend equivalents) and subject
to continued employment
• Based on the achievement of specific financial
and non-financial objectives
• Subject to malus and clawback provisions for three years
following the award (see section on page 124)
• Amounts are non-pensionable
No changes proposed from the 2018 remuneration policy
Restricted Share
Plan (RSP)
• Aligned to the strategic aim of the
Group to provide attractive total
shareholder returns
• Annual grant of shares that vest three years after grant
(subject to the satisfaction of underpins)
• 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 NICs
due on receipt of the shares) for two further years
• Subject to malus and clawback provisions for three years
following vesting (see section below)
• 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
• Dividend equivalents may be paid
Changes proposed from the 2018 remuneration policy:
• Long Term Incentive Plan (LTIP) awards replaced with Restricted Share Plan (RSP) awards
• Removal of performance measures and introduction of performance underpins
• Maximum opportunity reduced by 50 per cent to reflect the increased certainty of the RSP versus LTIP
• Three-year vesting and two-year holding periods retained
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• Maximum of 75 per cent of base salary for the
• Vesting of awards granted will be subject to a combination
executive directors
of financial and non-financial underpins
• Exceptional circumstances maximum (e.g. on recruitment)
• Exact underpins to be determined and disclosed by the
of 100 per cent of base salary
Committee annually
targets at the start of the year. Performance criteria will
be aligned to the Group strategic objectives at that time.
At least 50 per cent of the bonus will be subject to
challenging financial targets
• Performance below threshold results in zero payment,
with no more than 25 per cent bonus available at threshold.
Payments rise from the threshold levels up to 100 per cent
of the maximum opportunity for achievement of the
maximum targets
• If underpins are not met then the Committee would
consider whether it is appropriate to scale back the level of
vesting. The Committee retains the discretion to determine
what level of scale-back is appropriate. There are no specific
weightings, the underpins are considered holistically. There
is no threshold or other level of performance that dictates
a certain outcome. Even if the underpins are met, which
would otherwise lead to full vesting, the Committee retains
discretion to reduce the vesting level in exceptional
circumstances, should it consider that it is not an accurate
reflection of the underlying performance of the business
over the relevant period
Corporate governanceRemuneration continued Element
and maximum
Purpose and link to strategy
Operation
Maximum
Performance targets
Base salary
• Salary is the core reward for the role and
• Paid monthly in cash
enables the Group to recruit and retain
individuals of the calibre required to
deliver its strategic objectives and lead
its management team, without paying
• Salaries are set by the Committee, which reviews
all the relevant factors, including:
– The scope of the role and responsibilities
more than is necessary
– Experience in post, skills and potential
• Base salary also reflects the individual’s
– Sustained performance in the role
skills, expertise, experience and role
within the Group
– 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
• Annual salary increases for executive directors will not
N/A
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
No changes proposed from the 2018 remuneration policy
Performance-
related bonus
for the year ahead
• Focuses on the key strategic objectives
• Normally, annual payments made after the AGM
• Maximum of 150 per cent of base salary
• Deferral of half of the bonus into Group
and half is paid in shares deferred for a period of three years
shares aligns executive directors’
(with the accrual of dividend equivalents) and subject
interests with those of shareholders
to continued employment
• Half of any bonus is normally paid in cash following the AGM
• 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.
At least 50 per cent of the bonus will be subject to
challenging financial targets
• Performance below threshold results in zero payment,
with no more than 25 per cent bonus available at threshold.
Payments rise from the threshold levels up to 100 per cent
of the maximum opportunity for achievement of the
maximum targets
No changes proposed from the 2018 remuneration policy
shareholder returns
Restricted Share
• Aligned to the strategic aim of the
• Annual grant of shares that vest three years after grant
• Maximum of 75 per cent of base salary for the
• Vesting of awards granted will be subject to a combination
Plan (RSP)
Group to provide attractive total
(subject to the satisfaction of underpins)
executive directors
of financial and non-financial underpins
• Exceptional circumstances maximum (e.g. on recruitment)
• Exact underpins to be determined and disclosed by the
of 100 per cent of base salary
Committee annually
• If underpins are not met then the Committee would
consider whether it is appropriate to scale back the level of
vesting. The Committee retains the discretion to determine
what level of scale-back is appropriate. There are no specific
weightings, the underpins are considered holistically. There
is no threshold or other level of performance that dictates
a certain outcome. Even if the underpins are met, which
would otherwise lead to full vesting, the Committee retains
discretion to reduce the vesting level in exceptional
circumstances, should it consider that it is not an accurate
reflection of the underlying performance of the business
over the relevant period
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The Go-Ahead Group plc Annual Report and Accounts 2021
• Based on the achievement of specific financial
and non-financial objectives
• Subject to malus and clawback provisions for three years
following the award (see section on page 124)
• Amounts are non-pensionable
• 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 NICs
due on receipt of the shares) for two further years
• Subject to malus and clawback provisions for three years
following vesting (see section below)
• 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
• Dividend equivalents may be paid
Changes proposed from the 2018 remuneration policy:
• Long Term Incentive Plan (LTIP) awards replaced with Restricted Share Plan (RSP) awards
• Removal of performance measures and introduction of performance underpins
• Maximum opportunity reduced by 50 per cent to reflect the increased certainty of the RSP versus LTIP
• Three-year vesting and two-year holding periods retained
Savings Section of The Go-Ahead Group Pension (which is
the pensions auto-enrolment vehicle for the majority of
employees) or receive a cash alternative equivalent
• Maximum in line with that provided to the majority of the
workforce, which is currently 3 per cent of qualifying
earnings as pension provision
• Benefits are intended to be market competitive but are not
N/A
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 with HMRC limits
N/A
as amended from time to time
Remuneration policy for executive directors continued
Element
and maximum
Purpose and link to strategy
Operation
Maximum
Performance targets
Pension
allowance
• Provides a cash alternative to pension
contributions in line with market practice
• Monthly, non-pensionable payment, normally paid in cash
• Executive directors are eligible to participate in the Workplace
N/A
Changes proposed from the 2018 remuneration policy:
Policy maximum reduced in line with that provided to the majority of the workforce. This level of pension has
been implemented since 2019, since the changes to the Code. However, this is the first time that this reduction
will be reflected in the Policy (executive director policy maximum was previously 15 per cent of base salary).
Other benefits
• Ensures package is competitive with
market practice and employees have
a minimum level of insured benefits
• 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
• The Company maintains directors’ and officers’ liability
insurance and may provide indemnities to directors as
referred to in the Directors’ Report
No changes proposed from the 2018 remuneration policy
All-employee
share plans
• Executive directors are eligible to
participate in HMRC approved
all-employee schemes which
encourage share ownership
• Executive directors may participate in these plans in line with
HMRC guidelines currently prevailing (where relevant), on the
same basis as other eligible employees
No changes proposed from the 2018 remuneration policy
Share
ownership
• To align the financial interests of
• Executive directors are required to retain 50 per cent of the
• 200 per cent of base salary holding for both executive directors
N/A
the executive directors with those
of shareholders
post-tax value of vested RSP and deferred share awards until
such time as the executive directors have a shareholding
equivalent to 200 per cent of base salary
• Executive directors are encouraged to achieve the shareholding
requirement as soon as possible and within five years of their
date of appointment
No changes proposed from the 2018 remuneration policy
Post-cessation
shareholding
requirement
• To continue alignment of financial
interests of the executive directors
with those of shareholders, post-
cessation of employment
• Executive directors are required to retain the lower of current
shareholding and minimum share ownership level, set out
above, on cessation of employment
• Lower of current shareholding and 100% of minimum share
N/A
ownership for two years post-cessation of employment for
both executive directors
Changes proposed from the 2018 remuneration policy:
Post-cessation shareholding requirement added, in line with the Code.
Legacy awards
LTIP awards granted under the 2018 remuneration policy will continue to operate under the terms of that
policy and the respective plan rules. This provision will continue to apply until all outstanding awards under the
2018 remuneration policy (as set out on page 136) have vested, been exercised or been forfeited, as per the
relevant policy and plan rules. Further details of these awards are included in the directors’ remuneration
reports for their respective years.
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Corporate governanceRemuneration continued and maximum
Purpose and link to strategy
Operation
Maximum
Performance targets
• Executive directors are eligible to participate in the Workplace
Savings Section of The Go-Ahead Group Pension (which is
the pensions auto-enrolment vehicle for the majority of
employees) or receive a cash alternative equivalent
N/A
• Maximum in line with that provided to the majority of the
workforce, which is currently 3 per cent of qualifying
earnings as pension provision
• 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
• Executive directors are eligible to
• Executive directors may participate in these plans in line with
• Participation levels operate in accordance with HMRC limits
N/A
HMRC guidelines currently prevailing (where relevant), on the
as amended from time to time
same basis as other eligible employees
• To align the financial interests of
• Executive directors are required to retain 50 per cent of the
• 200 per cent of base salary holding for both executive directors
N/A
Post-cessation
• To continue alignment of financial
• Executive directors are required to retain the lower of current
shareholding
requirement
interests of the executive directors
shareholding and minimum share ownership level, set out
with those of shareholders, post-
above, on cessation of employment
• Lower of current shareholding and 100% of minimum share
ownership for two years post-cessation of employment for
both executive directors
N/A
Element
Pension
allowance
• Provides a cash alternative to pension
• Monthly, non-pensionable payment, normally paid in cash
contributions in line with market practice
Changes proposed from the 2018 remuneration policy:
Policy maximum reduced in line with that provided to the majority of the workforce. This level of pension has
been implemented since 2019, since the changes to the Code. However, this is the first time that this reduction
will be reflected in the Policy (executive director policy maximum was previously 15 per cent of base salary).
Other benefits
• Ensures package is competitive with
• Incorporates various cash/non-cash benefits which may
market practice and employees have
include: family private healthcare, death in service and life
a minimum level of insured benefits
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
• The Company maintains directors’ and officers’ liability
insurance and may provide indemnities to directors as
referred to in the Directors’ Report
No changes proposed from the 2018 remuneration policy
participate in HMRC approved
all-employee schemes which
encourage share ownership
No changes proposed from the 2018 remuneration policy
All-employee
share plans
Share
ownership
the executive directors with those
post-tax value of vested RSP and deferred share awards until
of shareholders
such time as the executive directors have a shareholding
equivalent to 200 per cent of base salary
• Executive directors are encouraged to achieve the shareholding
requirement as soon as possible and within five years of their
date of appointment
No changes proposed from the 2018 remuneration policy
cessation of employment
Changes proposed from the 2018 remuneration policy:
Post-cessation shareholding requirement added, in line with the Code.
Legacy awards
LTIP awards granted under the 2018 remuneration policy will continue to operate under the terms of that
policy and the respective plan rules. This provision will continue to apply until all outstanding awards under the
2018 remuneration policy (as set out on page 136) have vested, been exercised or been forfeited, as per the
relevant policy and plan rules. Further details of these awards are included in the directors’ remuneration
reports for their respective years.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Malus and clawback
Malus and clawback applies to the cash element of the annual bonus, Deferred Share Bonus Plan (DSBP) awards and Long Term
Incentive Plan (LTIP) awards (including Restricted Share Plan (RSP) awards) in accordance with The Go-Ahead Group plc Malus
and Clawback Policy, as adopted by the Committee on 8 July 2019, which is summarised below.
“Clawback” means the recovery of amounts relating to awards that have been settled and “malus” means the withholding, reduction,
cancellation and/or forfeiture of awards that have not yet been settled.
The timeframe by which malus and clawback shall apply to awards is set out in the below table:
Name of relevant plan under which award is delivered
Period during which the malus and clawback policy may apply
Cash element of any annual bonus arrangements
Three years from the payment date
Deferred share bonus awards (whether granted under the DSBP
or any successor or similar arrangement)
Three years from the grant date of the relevant award
Long term incentive awards (whether LTIP, RSP or any
successor or similar arrangement)
Three years from the vesting date of the award
The Committee may determine that malus and/or clawback shall apply in certain circumstances, including: material misstatements
of financial results, calculation of award based on an error, dismissal for gross misconduct, corporate failure, material downturn
in performance of the Group due to management failure, or serious reputational damage to the business.
Considerations when determining remuneration policy
The Committee consulted with the Group’s major shareholders and proxy voting agencies, in addition to having regard to best practice
and the Code when formulating the new Policy. Engagement with shareholders during the consultation was constructive and positive,
with the majority of shareholders who responded confirming their support and no objections raised.
During the process, a number of clarification questions were raised in respect of the proposed underpins for the RSP. These included
the metrics to be used, the balance between financial and non-financial metrics, the share price which will be used to determine awards
and how the underpins will be assessed. The Committee carefully considered these questions, consulted with PwC, its independent
remuneration advisor, and concluded that the proposed underpins remained appropriate. Its conclusion was formed on the basis that
the RSP provides for the alignment of executive remuneration with shareholder experience, long term locked-in shareholding and
simplification, as well as significantly reducing the challenges inherent in target setting. Further information on each of these points
was included within the Remuneration Committee Chair’s responding letter to each shareholder.
In light of the strong support received during the consultation, the Committee agreed to proceed with the proposed new Policy,
including the RSP structure, details of which are set out within this Report on pages 117 to 128.
Working with the Audit Committee, the Committee ensures that risk is properly considered in setting the overall 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
leadership 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 was mindful in its development of the new Policy of any potential conflicts of interest and aimed to minimise them
through an open and transparent internal consultation process, by undertaking a full shareholder consultation exercise and by seeking
independent advice from its external advisors.
Employee engagement
In conjunction with the implementation of our new Policy and as part of the Board’s wider colleague engagement programme, the
Committee is developing its remuneration-related engagement with the workforce over the year ahead. You can read about the
Board’s engagement with the workforce on page 82. Whilst formal engagement on remuneration-related elements has not taken place
during the year, feedback has still been received from colleagues through a number of different channels and the Committee
considered the remuneration-related themes which included employee pay. The Committee also undertakes an annual review of
remuneration policies across the Group.
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Corporate governanceRemuneration continued 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 120 and 123)
• Determining the extent of vesting based on the assessment of performance
• Adjusting the formulaic outcome of any incentive to better reflect the underlying performance of the business. This will include
a review of health and safety performance, as previously included as a discrete underpin
• 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 underpin operation for the RSP 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 or RSP
underpins 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 or underpins 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 page 136, 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 sets 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. The Board reviews workplace policies and remuneration arrangements for the broader
colleague group. Reports for each of the operating companies are presented to the Committee on an annual basis.
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 RSP is currently limited to executive directors only, while participation in the DSBP is limited to executive directors
and senior leadership.
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, when applicable, Save As You Earn Schemes.
Performance measure selection
In choosing the performance metrics and targets for the annual performance-related bonus, and the underpin approach for the RSP,
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 proposed RSP is linked to the
long term performance of the business and aligned to the shareholder experience through the movement in share price over the period.
The RSP awards are subject to a combination of financial and non-financial performance underpins aligned to the strategic objectives
of the Group, to ensure outcomes are aligned to the overall performance of the business, and to deliver long term returns to shareholders.
Performance targets and underpins are set taking into account internal budgets and business plans, as well as analyst forecasts.
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Total remuneration by performance scenario for 2022 financial year (£’000)
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 Companies (Miscellaneous Reporting) Regulations
2018, the scenarios also illustrate the maximum opportunity available following a 50 per cent share price appreciation of the
maximum RSP award value.
Christian Schreyer – Group Chief Executive
Gordon Boyd – Interim Group Chief Financial Officer
Max + 50% share
price increase
Max
Target
28
31
40
41
46
£671
31
23
£1,995k
£1,789k
30
30
£1,376k
Minimum
100
£551k
(cid:31) Fixed
(cid:31) Bonus (cid:31) RSP
100
100
100
100%
Max
Target
Minimum
(cid:31) Fixed
£1,200k
£1,200k
£1,200k
The assumptions underlying each scenario are described below:
Minimum: for the new Group Chief Executive, this includes annual base salary as at his appointment to the Board on 1 November
2021 and pension provision representing 3 per cent of qualifying earnings.
Target: fixed remuneration plus half of the maximum annual performance-related bonus award (75 per cent of base salary) plus full
RSP awards (75 per cent of base salary for the new Group Chief Executive).
Maximum: fixed remuneration plus the maximum annual performance-related bonus award (150 per cent of base salary) plus full
vesting of RSP awards (75 per cent of base salary for the new Group Chief Executive).
Maximum + 50 per cent share price growth over the period: as per maximum above, and in addition shows the impact of a share
price increase of 50 per cent from the date of grant to the date of vesting of the RSP award.
The Interim Group Chief Financial Officer receives an all-inclusive base salary of £100,000 per month, is not eligible to participate in
any incentive arrangements, and does not receive any additional benefits or pension arrangements. The Interim Group Chief
Financial Officer’s arrangements are therefore the same under all performance scenarios.
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 Policy as set out on pages 117 to 128, and therefore the maximum aggregate of variable compensation that could be awarded is 250
per cent of base salary. 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
performance conditions or RSP performance underpins to the current executive directors for the first performance year of appointment.
A newly appointed executive director may be granted a normal annual RSP 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.
For an overseas appointment, the Committee will have discretion to offer cost-effective benefits 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.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued Service agreements of executive directors
Christian Schreyer, the new Group Chief Executive, entered into a service agreement with The Go-Ahead Group plc on 1 November
2021. The term of his service agreement is undefined and is terminable by either the Group or the Group Chief Executive on one year’s
notice.
The Interim Group Chief Financial Officer entered into a service agreement with The Go-Ahead Group plc in September 2021 for an
initial term of six months. From the end of the third month following the commencement date, either party may serve notice on the
other to terminate upon mutually agreed notice periods save that no such termination will take effect before the end of March 2022.
Service agreements for new directors will be on similar terms as the new Group Chief Executive.
The directors’ service agreements for the new Group Chief Executive and Interim Group Chief Financial Officer are available for
inspection at the Group’s registered office during normal business hours and were also available for inspection prior to and during the
2021 AGM held on Tuesday 21 December 2021.
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
ownership or as otherwise determined by the committee
Other leavers
Retirement, redundancy, disability, death or change of
Salary and contractual
benefits
Performance-related
bonus (cash)
Performance-related
bonus (deferred shares)
Unvested LTIP
and RSP awards
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
No award for year of termination
Awards lapse in full on cessation
of employment
Awards lapse in full on cessation
of employment
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
Awards normally vest at the normal vesting date.
However, the Remuneration Committee has the
discretion to determine that the award should
vest on or following the date of cessation of
employment and, in line with any other exercise of
discretion, will be disclosed accordingly. Exceptional
cases of death or ill health retirement are reviewed
by the Committee on a case-by-case basis
Awards normally vest at the normal vesting date.
The Remuneration Committee has the discretion to
determine that the award should vest on or following
the date of cessation of employment and in line with
any other exercise of discretion, will be disclosed
accordingly
The amount of award vesting will be subject to the
satisfaction of any performance conditions and/or
underpins 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
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Policy table for Chair and non-executive directors
The remuneration policy for the Chair 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
Additional fees payable
for duties
Purpose and link to strategy
Operation
The basic fee for the Chair 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
All reasonable travel and other expenses incurred by
non-executive directors in the course of performing
their duties are considered to be business expenses
and are reimbursed together with any tax payable
in respect of business expenses
The Company maintains directors’ and officers’
liability insurance and may provide indemnities to
directors as referred to in the Directors’ Report
Other benefits or additional payments may be
provided in the future if, in the view of the Board,
this is considered appropriate. Such benefits and/or
payments would be within the total annual limits as
approved by shareholders as described above
Additional fees may be paid to non-executive directors
who are Chairs of a Board Committee and/or for other
roles and responsibilities such as Senior Independent
Director, membership or chair of operating company
board or committees, to reflect the additional
responsibility and time commitment required
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
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 Chair 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 were also available for inspection prior to and during the 2021 AGM held on Tuesday 21 December 2021.
The appointment dates and notice periods for the non-executive directors as at the date of this Report are shown in the table below:
Director
Harry Holt
Leanne Wood
Clare Hollingsworth
David Blackwood
Dominic Lavelle
Date of appointment
Notice period from the Group
Notice period from the director
October 2017
October 2017
August 2019
January 2022
January 2022
6 months
6 months
6 months
3 months
3 months
6 months
6 months
6 months
3 months
3 months
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Corporate governanceRemuneration continued Annual report on remuneration
Set out below is the annual report on directors’ remuneration for the year ended 3 July 2021 which, together with the annual statement
from the Remuneration Committee Chair, will be put to shareholders for an advisory vote at a General Meeting of shareholders to be
convened in March 2022. The new remuneration policy, which is set out on pages 117 to 128, will also be submitted to shareholders for
approval at the General Meeting.
The Remuneration Committee has prepared this report on behalf of the Board in line with the Companies Act 2006, Schedule 8 of
The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) 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.
The annual report on remuneration is divided into three sections:
Section 1: Single figure tables
Section 2: Additional information on 2021 remuneration
Section 3: Implementation of remuneration policy in 2022
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 ended 3 July 2021.
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.
For further information on the figures footnoted within the table below, please see pages 130 to 132.
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
Total single
remuneration
figure
£’000
Total fixed
pay
£’000
Total variable
pay
£’000
Executive directors
Group Chief Executive, David Brown
2021
2020
543
553
Group Chief Financial Officer, Elodie Brian
2021
2020
313
319
4
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1
1
1
1
548
558
314
320
548
558
314
320
—
—
—
—
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The Go-Ahead Group plc Annual Report and Accounts 2021
Section 1: Single figure tables continued
Commentary on the executive directors’ single figure table
1. Salary
Base salary levels for the executive directors are shown below. David Brown retired as Group Chief Executive on 5 November 2021 and
Elodie Brian resigned as Group Chief Financial Officer with effect from 27 September 2021. No salary increases were awarded again in April
2021 on account of the ongoing COVID-19 pandemic.
Between 1 April 2020 and 31 October 2020, the executive directors volunteered to temporarily waive 20 per cent of their base salaries.
The base salary for the Group Chief Executive and Group Chief Financial Officer during this period was £465,368 and £268,000 respectively.
Executive directors
Group Chief Executive, David Brown
Group Chief Financial Officer, Elodie Brian
From
1 April 2021
From
1 April 2020
%
increase
£581,710
£335,000
£581,710
£335,000
—
—
2. Taxable benefits (audited)
The taxable benefit for the Group Chief Executive comprises family healthcare membership.
3. Cash bonus and deferred share bonus (annual performance-related bonus) (audited)
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 executive directors.
Metric
Performance measure
Group profit
Group cashflow
Strategic KPIs
Total
Group operating profit 2021
Net debt after adding back restricted cash
See page 131
Weighting
(percentage
of maximum) *
Maximum
opportunity
(percentage
of salary)
60%
15%
25%
100%
90%
22.5%
37.5%
150%
Actual payout
(percentage
of salary)
0%
0%
0%
0%
Achieved
100%
0%
N/A
60%
* As explained on page 109, given the increased focus on cashflow, liquidity and ratios across the Group, the Committee reassessed the performance measure weightings for the
2021 annual performance-related bonus at the start of the financial year and deemed it appropriate to adjust these slightly. The weighting for the operating profit was reduced
from 65 per cent to 60 per cent and Group cashflow was increased from 10 per cent to 15 per cent. There was no change to the weighting of strategic KPIs which remained at 25
per cent.
The following tables illustrate in more detail the actual performance against each individual metric. As discussed in the Remuneration
Committee Chair’s letter, in the context of the impact of COVID-19 on the Group’s wider stakeholders, the Committee exercised its
discretion to reduce the annual performance-related bonus for executive directors for the 2021 financial year to zero.
Group operating profit (60 per cent)
For Group operating profit for the year ended 3 July 2021, target vesting was proportionately weighted between the operating profit
contribution from bus (42 per cent) and rail (18 per cent), with payout on a sliding scale. The actual Group operating profit, before
exceptional items, for bus was £86.4m and the actual Group operating profit for rail was £29.1m resulting in a 100 per cent vesting for
both bus and rail. These figures have been calculated on a pre-IFRS 16 and a pre-exceptional basis. However, as explained on page 109,
the Committee considered its exercise of discretion very carefully and in the context of the impact of COVID-19 and the Group’s wider
stakeholders. It was therefore agreed that payout for the Group operating profit element of the annual performance-related bonus
should be reduced to zero.
Measure
Bus (70%)
Rail (30%)
Threshold: £59m
Threshold: £5m
Actual Group
operating
profit
(bus)
Actual
payout
(bus)
Actual Group
operating
profit
(rail)
Actual
payout
(rail)
Weighting
(% of bonus)
0%
Group operating
profit
Target: £64m
Target: £0m
50%
£86.4m
0%
£29.1m
0%
Maximum: £75m
Maximum: £5m
100%
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued
Cashflow (15 per cent)
The target for Group cashflow (defined as net debt on a pre-IFRS 16 basis after adding back restricted cash) was £252.4m, with maximum
vesting at £242.4m. Actual Group cashflow for the year ended 3 July 2021 was £305.9m (2020: £321.6m), resulting in a 0 per cent payout.
Measure
Target
Weighting
(% of bonus)
Actual
net debt
Actual payout
Threshold: £257.4m
0%
Net debt
Target: £252.4m
50%
£305.9m
0%
Maximum: £242.4m
100%
Strategic KPIs (25 per cent)
The Committee’s assessment of the three key strategic targets is outlined below. Following the Committee’s decision not to award
bonuses, there was no formal assessment of the extent to which the strategic targets had been achieved.
Strategic KPI Measure
Commentary
Germany operational performance – contractual penalties of
no more than 5 per cent by June 2021 in Baden-Württemberg
Contractual penalties currently tracking at c.4% (no
change from half year update)
Maintain investor confidence though credit ratings and
investor engagement
Subsequent to the year end, and following the delays in
the announcement of the Group’s results and subsequent
suspension of its shares, Moody’s have announced they
have withdrawn their rating. S&P reaffirmed the Group’s
credit rating at BBB but considers the Group’s outlook to
be under review
People strategy – progress against the current overall
engagement score of 66 per cent
Summer Pulse Survey (June 2021) indicated an
engagement score of 67%
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 would have been required in light of the Group’s health and safety performance having been maintained during the year.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Weighting
(% of total award)
Below threshold
—
0%
Section 1: Single figure tables continued
Commentary on the executive directors’ single figure table continued
4. Nil vesting of 2018 LTIP award – Group Chief Executive only (audited)
The table below summarises the performance conditions for the former Group Chief Executive’s 2018 LTIP award and the actual
performance achieved. This award was subject to performance conditions measured over the three financial years ending with the 2021
financial period.
As shown below, none of the performance measures were achieved for this award. Performance against the EPS and TSR metrics
was below the threshold level. In relation to the customer service metrics for rail and bus, the last customer satisfaction surveys were
undertaken by Transport Focus in Spring 2020 and will not resume again until Spring 2022 due to the pandemic. Since the targets which
had been set were unable to be measured, and taking into account the nil vesting under the financial metrics (EPS and TSR), the
Committee determined that no vesting was triggered in respect of the customer service metrics.
Performance conditions and actual performance achieved for the 2018 LTIP award
Earnings per share (EPS)
Total shareholder return (TSR)
Customer
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%
Threshold
10%
RPI + 2% p.a.
25%
Median
Less than RPI
+ 2% p.a.
0% Below median
0%
10%
Less than
79%
Less than
91%
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%
Performance
achieved
Adjusted EPS
of 120.1p.
From a base of
181.6p this is
equivalent to RPI
(14.8)% p.a.
80 out of 106
“live”
companies
0%
0%
Actual % vesting
0%
0%
0%
0%
0%
0%
0%
* Excludes: Financial Services, Oil & Gas Producers, Mining, Life Insurance, Banks, Non-Life Insurance, REITs and Real Estate Inv & Svs.
In line with our commitment to transparent reporting, EPS and Group operating profit are now reported on a statutory basis. At the
time the 2018 LTIP award was granted, the targets were based on adjusted EPS and adjusted Group operating profit (before amortisation
and exceptional items) and on a pre-IFRS 16 basis. The performance of the 2018 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 and it had also been 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 rewards were based.
5. Pension allowance
Both the former Group Chief Executive and former Group Chief Financial Officer opted to receive a cash allowance of 3 per cent of
qualifying earnings. This is equivalent to the employer contribution rate they would have received had they participated in the
Workplace Savings Section of The Go-Ahead Group Pension Plan (the pensions auto-enrolment vehicle for the majority of employees).
For the purposes of auto-enrolment legislation, qualifying earnings for the tax year 2021/22 are gross taxable earnings between £6,240
per annum and £50,270 per annum. The lower and upper thresholds are reviewed each year by the Government.
132
The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued Non-executive directors’ remuneration for the year ended 3 July 2021 (audited)
The table below sets out the total single remuneration figure received by each non-executive director for the year ended
3 July 2021 and the prior year:
Committee membership and other responsibilities as at 3 July 2021
Total single remuneration figure
Non-executive director
Clare Hollingsworth
Adrian Ewer
Harry Holt
Leanne Wood
Katherine Innes Ker*
Nomination
Committee
Audit
Committee
Remuneration
Committee
Other
Chair
Member
Member
Member
—
—
Chair
Member
Member
—
Member
Member
Member
Chair
—
Chair
Senior Independent Director
—
—
—
2021
£’000
176
61
49
57
17
2020
£’000
164
61
50
55
54
* Katherine Innes Ker stepped down as Senior Independent Director and Remuneration Committee Chair with effect from the 2019 AGM and ceased to be a member
of the Audit and Remuneration Committees. Katherine retired from the Board with effect from the conclusion of the 2020 AGM.
Fees payable to the Chair and non-executive directors
Base fee levels for the Chair and non-executive directors are shown below and will remain in place until April 2022 when they
are reviewed again. These fees will also apply to David Blackwood and Dominic Lavelle who joined the Board as Senior Independent
Director Designate and Audit Committee Chair Designate with effect from 1 January 2022 and succeeded Adrian Ewer as Senior
Independent Director and Audit Committee Chair respectively with effect from 19 January 2022.
No fee increases were awarded again on 1 April 2021 on account of the ongoing COVID-19 pandemic. In addition, the Chair and
non-executive directors volunteered to take a 20 per cent reduction in their fees between 1 April 2020 and 31 October 2020, the revised
annual fees for which are shown in the table below:
Chair
Non-Executive Director
Senior Independent Director
Audit Committee Chair
Remuneration Committee Chair
Annual fees reflecting
20% reduction
received between
1 April 2020 and
31 October 2020
£’000
From
1 April 2021
£’000
189
53
5
8
8
151
42
4
6
6
133
The Go-Ahead Group plc Annual Report and Accounts 2021
Section 2: Additional information on 2021 remuneration
Directors’ shareholdings and share plan interests (audited)
A summary of all directors’ shareholdings and share plan interests as at 3 July 2021 are shown in the table below. The unvested deferred
share awards and Long Term Incentive Plan (LTIP) awards held by the former Group Chief Financial Officer will lapse on her leaving
date. This lapse of awards is not reflected in the table below due to this decision taking place following the year end:
Outstanding scheme interests as at 3 July 2021
Actual shares held5
Unvested
scheme
interests
(subject to
performance
measures) 1
Unvested
scheme
interests
(not subject to
performance
measures) 2
Vested but
unexercised
share options
Total shares
subject to
outstanding
scheme
interests
Total of all
share scheme
interests and
shareholdings
as at
3 July 2021 8
As at
27 June 2020
As at
3 July 2021
188,973
51,853
34,735
3,003
—
1,939 3
223,708 4
56,795
87,719 6
2,500 7
87,919 6
5,900 7
311,627
62,695
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,290
3,022
—
294
116
2,290
3,022
—
294
N/A
2,290
3,022
—
294
N/A 9
Executive directors
David Brown
Elodie Brian
Non-executive directors
Clare Hollingsworth
Adrian Ewer
Harry Holt
Leanne Wood
Katherine Innes Ker
1. Nil cost options awarded under LTIP and subject to performance measures.
2. Nil cost options awarded under the Deferred Share Bonus Plan and are not subject to performance conditions.
3. Relates to vested but unexercised 2014, 2015, 2016 and 2017 deferred share bonus awards which were granted on 25 November 2014, 19 November 2015, 15 November 2016
and 17 November 2017 respectively when Elodie Brian was Finance and Contracts Director of Southeastern.
4. Of the 223,708 ordinary shares, 53,912 relate to the 2018 LTIP award which lapsed in November 2021 following the Remuneration Committee’s determination that there
should be a nil vesting for this LTIP award as performance conditions had not been met. Further details can be found on page 132.
5. 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.
6. During the year, David Brown’s beneficial shareholding increased by 200 ordinary shares. This was a result of 200 shares being purchased under the Group’s Share
Incentive Plan during the period 28 June 2020 to 3 July 2021. A further 64 shares were purchased under the Group’s Share Incentive Plan from 4 July 2021 up until the date
of his retirement as Group Chief Executive on 5 November 2021. There were no other changes in share scheme interests or shareholdings between 4 July 2021 and the date
of David Brown’s retirement.
7. During the year, Elodie Brian’s beneficial shareholding increased by 3,400 shares which she purchased on 2 October 2020. There were no other changes in share scheme
interests or shareholdings between 4 July 2021 and the date of Elodie Brian’s resignation from the Board.
8. All share plan interests, vested, unvested and unexercised, together with any holdings of ordinary shares.
9. Katherine Innes Ker retired from the Board as Non-Executive Director with effect from the conclusion of the 2020 AGM.
134
The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued
Directors’ share ownership guidelines (audited)
Executive directors are encouraged to build up a high level of personal shareholding to ensure a continuing alignment of interests
with shareholders as soon as possible and within five years of their date of appointment. The shareholding guidelines require executive
directors to hold ordinary shares equal in value to 200 per cent of their base salary as set out in the table below.
Executive directors are required to retain 50 per cent 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
National Insurance contributions 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.
As mentioned earlier in this Report, the Remuneration Committee intends to implement a formal policy for post-cessation
shareholdings as part of the new remuneration policy to be proposed at the General Meeting of shareholders to be convened in March
2022.
The table below sets out the number of shares held by the executive directors at the beginning and end of the financial year and the
impact on the value of these shares taking the average opening price and closing price for the year. The difference between the value of
their shares at the beginning and end of the financial year is £0.2m and £0.05m for David Brown and Elodie Brian respectively. The table
compares this to the executive directors’ 2021 total single remuneration figure.
The unvested deferred share awards and long term incentive awards of the former Group Chief Financial Officer will lapse upon her
leaving date. This lapse of awards is not reflected in the table below due to this decision taking place following the year end.
Number of
eligible
ordinary
shares
held at
27 June
2020 1
Value of
eligible
ordinary
shares
held at
27 June
2020 2
£m
Number of
eligible
ordinary
shares
held at
3 July 2021 1
106,129
1.1
106,329
Value of
eligible
ordinary
shares
held at
3 July 2021 3
£m
1.3
2021 total
single
remuneration
figure
£’000
Share
ownership
as % of
salary as at
3 July
2021 4
Guideline
on share
ownership
as %
of salary
Difference
£m
Guideline
met
0.2
548
217%
200%
Yes
5,119
0.05
8,519
0.1
0.05
314
30%
200%
No
Group Chief Executive
David Brown
Group Chief Financial Officer
Elodie Brian
1. Eligibility of shares: (a) beneficial holdings including beneficial interests in shares held under the Group’s Share Incentive Plan have been included; (b) unvested and vested
but unexercised ordinary shares under the deferred share bonus plan, which represent deferral of earned bonus, are eligible and count towards the requirement on a net
of tax basis; and (c) unvested ordinary shares under the LTIP are not eligible and do not count towards the requirement during the performance period.
2. Value of ordinary shares is based on the average share price between the period 1 June 2020 and 27 June 2020, being £10.46.
3. Value of ordinary shares is based on the average share price between the period 1 June 2021 and 30 June 2021, being £11.89.
4. Share ownership as a percentage of base salary has been calculated using David Brown and Elodie Brian’s full base salary of £581,710 and £335,000 respectively.
135
The Go-Ahead Group plc Annual Report and Accounts 2021
Section 2: Additional information on 2021 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, as at 3 July 2021, which, other than as noted
below, will vest in future years subject to performance conditions.
Group Chief Executive, David Brown
In line with this Policy, David Brown’s unvested LTIP awards will vest (subject to performance) on a pro-rated basis and unvested
deferred bonus awards will vest in full. Pro-rating is not taken into account in the table below.
Plan
Mid-market
price on
date
of grant
£
Date of
grant
Balance at
27 June
2020
Granted
in year
Exercised
in year
Lapsed
in year
Balance at
3 July
2021
Vested
Lapsed
2018 LTIP award eligible
for vesting 2021 5
Deferred Share Bonus Plan
16.11.18
15.61 1
18,612
LTIP
Total
15.11.19
20.49 2
16,123
17.11.17
16.11.18
15.11.19
15.12.20
16.58 3
15.79 3
20.49 3
9.44 3
49,993
53,912
42,580
—
—
—
—
—
—
92,481
181,220
92,481
—
—
—
—
—
—
—
—
—
18,612
16,123
49,993 4
—
— 53,912
— 42,580
— 92,481
49,993 223,708
—
—
—
—
—
—
—
Balance
post-
lapsing of
2018 LTIP
award
18,612
16,123
—
—
—
—
—
53,912
—
—
42,580
92,481
53,912
169,796
1. The number of shares over which the 2018 DSBP was granted was calculated using the average of the middle market quotations during the period of 20 dealing days
immediately prior to the date of grant in accordance with the Plan Rules.
2.
In accordance with emerging best practice, the number of shares over which the 2019 DSBP award was granted was calculated using the average of the middle market
quotations during the period of five dealing days immediately prior to the date of grant also in accordance with the Plan Rules.
3. The number of shares over which the 2017–2020 LTIP awards were granted was calculated using 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.
4. As none of the performance conditions was achieved, the 2017 LTIP lapsed in full in November 2020.
5. Relates to the 2018 LTIP award following the three-year performance period ended 3 July 2021.
Group Chief Financial Officer, Elodie Brian
Elodie Brian’s unvested deferred share awards and long term incentive awards will lapse upon her leaving date. This lapse of awards is
not reflected in the table below.
Plan
Deferred Share Bonus Plan
LTIP
Total
Date of
grant
25.11.14
19.11.15
15.11.16
17.11.17
16.11.18
15.11.19
15.11.19
15.12.20
Mid-market price
on date of grant
£
Balance at
27 June
2020
Granted
in year
Exercised
in year
Lapsed
in year
24.74 1
25.17 1
20.81 1
17.27 1
15.61 1
20.49 1
20.49 2
9.44 2
505 3
658 3
374 3
402 3
500 3
2,503
—
—
—
—
—
—
16,347
—
—
35,506
21,289
35,506
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance at
3 July
2021
505 4
658 4
374 4
402 4
500 4
2,503 5
16,347 5
35,506 5
56,795
1. The number of shares over which the 2014–2018 DSBP awards were granted was calculated using the average of the middle market quotations during the period of 20 dealing
days immediately prior to the date of grant in accordance with the Plan Rules. In accordance with emerging best practice, the number of shares over which the 2019 DSBP was
granted was calculated using 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 number of shares over which the 2019 and 2020 LTIP awards were granted was calculated using 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.
3. 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.
4. Relates to the deferred share bonus awards granted between 2014 and 2017 and vested on 25 November 2017, 19 November 2018, 15 November 2019, 17 November 2020 and 16
November 2021 and remain unexercised.
5. Unvested deferred share awards and long term incentive awards which will lapse upon Elodie Brian’s leaving date.
136
The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued
Long Term Incentive Plan (LTIP)
2020 LTIP award granted during the year ended 3 July 2021 (audited)
As outlined in the 2020 Directors’ Remuneration Report, the Committee decided last year to defer the 2020 LTIP grants and target setting
until there was greater visibility of the continuing impact of COVID-19. The 2020 LTIP grants were subsequently approved by the Committee
and granted on 15 December 2020, with full details of the targets outlined within a regulatory news announcement on 18 December 2020.
The 2020 LTIP awards were granted to the executive directors during the year ended 3 July 2021, structured as a nil cost option,
exercisable at the end of a three-year performance period commencing at the start of the 2021 financial period and ending with the
2023 financial period, subject to the satisfaction of performance conditions. The LTIP award is subject to The Go-Ahead Group plc
Malus and Clawback Policy which is enforceable for the period from the grant date until three years from the vesting date. Once
vested, it is also subject to an additional holding period that applies until the later of (i) the fifth anniversary of the grant date or (ii) the
second anniversary of vesting. During this time, any vested awards cannot be sold (other than to pay any tax or NICs due on exercise).
This results in an overall five-year period before executives can realise the gain on the vested shares.
The 2021 grant policy was to grant an award with a face value of 150 per cent of base salary for the former Group Chief Executive and 100
per cent of base salary for the former Group Chief Financial Officer as set out in the table below. Note that Elodie Brian’s 2020 LTIP
award will lapse upon her leaving date.
Executive director
David Brown
Elodie Brian
Basis of
award granted
Share price
at grant date
Number of
shares over
which award
was granted 1
Face value
of award 2
£’000
150% of base
salary
100% of base
salary
£9.235
92,481
854
£9.235
35,506
328
% of award which
vests at threshold
Vesting determined
by performance over
10% for EPS, 25% for
TSR, 10% for customer
element and 10% for
ESG element
10% for EPS, 25% for
TSR, 10% for customer
element and 10% for
ESG element
Three financial
years ending on
1 July 2023
Three financial
years ending on
1 July 2023
1. The number of shares over which the award was granted was calculated using a share price of £9.435, 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 £9.235. This was the share price on 15 December 2020, the date of grant.
Performance conditions attaching to the 2020 LTIP award (audited)
Following consultation with our major shareholders and shareholder representative bodies, the performance conditions attaching
to the 2020 LTIP award were as follows:
Payout
(% of EPS
element)
EPS to be
achieved in
Year 3
(2023)
Payout
(% of TSR
element)
Relative
TSR vs
FTSE 250
Payout
(% of
customer
service
element)
—
20%
—
50%
—
Customer service
Bus
10%
Rail
10%
0%
Less
than
110p
0%
Below
median
0%
Under
90%
Under
80%
Payout
(% of ESG
element)
—
0%
Weighting (%
of total award)
Below
threshold
Threshold
10%
110p
25% Median
10%
90%
80%
10%
ESG
Environment
5%
People
5%
Below 7.3%
compounded
reduction in CO2
emissions per
vehicle mile
Below 7.3%
(2.5% p.a.)
compounded
reduction in CO2
emissions per
vehicle mile
Below 17%
gender
diversity in bus
Below 22%
gender
diversity in rail
17% gender
diversity in bus
22% gender
diversity in rail
Between
threshold and
maximum
Between
10% and
100%
10% for
every 3p
Between
25% and
100%
Maximum
100%
140p
100%
Between
median
and upper
quartile
Upper
quartile
Between
10% and
100%
90% to
92%
80% to
83%
Between
10% and
100%
10% for every %
pt
10% for every
0.3% pt
100%
92%
83%
100%
18% reduction
in CO2 emissions
per vehicle mile
20% gender
diversity in bus
25% gender
diversity in rail
137
The Go-Ahead Group plc Annual Report and Accounts 2021
Section 2: Additional information on 2021 remuneration continued
Total shareholder return (TSR) performance graph 2011-2021
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 3 July 2021. 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 Committee believes that the FTSE 250 Index
comparator group is still an appropriate and fair benchmark in assessing the performance of the Group’s TSR. This benchmark,
however, will continue to be regularly reviewed.
(cid:31) The Go-Ahead Group plc (cid:31) National Express Group plc (cid:31) FirstGroup plc (cid:31) Stagecoach Group plc (cid:31) FTSE 250
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
350
300
250
200
150
100
50
0
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
27/06/2020
3/07/2021
This graph shows the value, by 3 July 2021, of £100 invested in The Go-Ahead Group plc on 2 July 2011, compared with the value of £100
invested in the FTSE 250 Index and the peer group (National Express Group plc, FirstGroup plc and Stagecoach Group plc) on the same date.
The other points plotted are the values at intervening financial year ends.
Remuneration of the Group Chief Executive over the last ten years
The table below shows the remuneration of the Group Chief Executive for the period from 2 July 2011 to 3 July 2021. The total remuneration
figure includes the annual performance-related bonus and LTIP awards (and the percentage of the maximum opportunity that these represent).
Group Chief Executive’s remuneration history
Year
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Group Chief Executive
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
David Brown
Total single
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)
548
558
1,269
1,175
782
1,214
2,134
1,960
942
1,022
nil 1
nil 3
660 (75.8%) 5
582 (68.3%) 7
nil 9
nil 9
558 (69.6%)
766 (97.5%)
422 (55.3%)
513 (68.0%)
nil 2
nil 4
nil 6
nil 8
220 (54%)
647 (90%)
1,067 (100.0%)
666 (80.0%)
—
—
1. The Group Chief Executive was awarded no annual performance-related bonus for the year ended 3 July 2021.
2. The 2018 LTIP award lapsed in full from November 2021 on account of none of the performance measures being met following the three-year performance period ended 3 July 2021.
3. The Group Chief Executive was awarded no annual performance-related bonus for the year ended 27 June 2020.
4. The 2017 LTIP award lapsed in full in November 2020 on account of none of the performance measures being met following the three-year performance period ended 27 June 2020.
5. Based on the assessment of performance against targets, the Group Chief Executive was awarded an overall annual performance-related bonus of 75.8 per cent of the
maximum bonus opportunity (113.6 per cent of base salary) for the year ended 29 June 2019.
6. The 2016 LTIP award lapsed 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.
7.
In accordance with the executive directors’ request to reduce any performance-related bonus by 25 per cent, the Committee exercised discretion and reduced the Group
Chief Executive’s overall 2018 bonus by 25 per cent resulting in an actual bonus of 68.3 per cent of maximum bonus (102.4 per cent of salary).
8. 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.
9. At the request of the Group Chief Executive, there were no annual performance-related bonuses paid for the years 2017 and 2016.
138
The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued
Annual change in directors’ remuneration compared to average employee remuneration
In accordance with The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019, the table
below shows the movement in the salary, benefits and annual bonus for all directors between the current and previous financial year
compared to that for the average change for all employees of the Group’s parent company.
David Brown
Elodie Brian
Clare Hollingsworth5
Adrian Ewer6
Harry Holt
Leanne Wood7
Katherine Innes Ker8
Average employees of parent company9
% change from 2020 to 2021
% change from 2019 to 2020
Salary /Fees
Benefits
Bonus
Salary /Fees
Benefits
Bonus
(1.8)% 1
(2.0)% 1
(1.8)% 1
0.9% 1
(1.8)% 1
3.0% 1
(9.6)% 1
2.6%
2.6% 2
0.0%
N/A
N/A
N/A
N/A
N/A
(10%)
0.0% 3
0.0% 3
N/A
N/A
N/A
N/A
N/A
N/A 10
(3.2)% 1
(4.8)% 1,4
N/A
1.7% 1
(3.2)% 1
6.3% 1
(16.0)% 1
3.6%
7.3% 2
0.0%
(100)% 3
0.0% 3
N/A
N/A
N/A
N/A
N/A
0.9%
N/A
N/A
N/A
N/A
N/A
(100)% 10
Given the parent company only employs a small proportion of the workforce (circa 200 employees), we also considered the average
change in salary for all employees across the Group in the UK as a comparator alongside the statutory disclosure. This demonstrates a
5.6% reduction from 2020 to 20211 1.
Notes
1. No executive or non-executive director was awarded a base salary or fee increase for the years ended 3 July 2021 or 27 June 2020. Each director volunteered to temporarily
waive 20 per cent of their base salaries/fees between 1 April 2020 and 31 October 2020.
2. The Group Chief Executive received family healthcare membership in the amount of £4,439 for the year ended 3 July 2021 and £4,325 for the year ended 27 June 2020
(2019: £4,030).
3. Neither the Group Chief Executive nor the Group Chief Financial Officer were awarded an annual performance-related bonus for the years ended 3 July 2021 or 27 June
2020 (2019: £660,882 and £nil respectively).
4. The Group Chief Financial Officer was appointed as statutory director from 5 June 2019. To provide a representative comparison, the percentage change has been
calculated as if she received her full base salary of £335,000 for the full year ended 29 June 2019.
5. Clare Hollingsworth was appointed to the Board as Non-Executive Chair Designate on 1 August 2019 before succeeding Andrew Allner as Non-Executive Chair at the
conclusion of the 2019 AGM. Remuneration for 2020 was part year from 1 August 2019 to 27 June 2020. To provide a representative comparison, the percentage change
has been calculated as if she received fees of £179,360 for the full year ended 27 June 2020. No remuneration was received for 2019.
6. Adrian Ewer succeeded Katherine Innes Ker as Senior Independent Director with effect from the conclusion of the 2019 AGM and received an additional £5,000 per annum
from assumption of that role.
7. Leanne Wood succeeded Katherine Innes Ker as Remuneration Committee Chair with effect from the conclusion of the 2019 AGM. She receives an additional £8,000 per
annum for this role.
8. Katherine Innes Ker stepped down as Senior Independent Director and Remuneration Committee Chair with effect from the conclusion of the 2019 AGM, following which
her annual fees for these roles reduced by £5,000 and £8,000 respectively. She subsequently stepped down from the Board with effect from the conclusion of the 2020
AGM. To provide a representative comparison, the 2020 to 2021 percentage change has been calculated as if she received fees of £49,126 for the full year ended 3 July 2021.
9. Reflects the average percentage change in salary, benefits and bonus for employees of the parent company for the current and previous financial year (excluding the
Board) on a full time equivalent basis. Leavers, joiners and employees on reduced pay (due to sick pay, maternity leave, etc.) have been excluded as have employees on
secondment. Where applicable, reduced salaries of 80 per cent in respect of furloughed employees have been included in the calculation plus any annual leave taken
during the furlough period which was paid at 100 per cent, whilst receiving a reduction in salary.
10. In total, employees of the Group’s parent company earned £1.0m in bonus for the year ended 3 July 2021. No bonuses were paid to employees of the Group’s parent
company for the year ended 27 June 2020.
11. Reflects the average percentage in salary for employees across the Group in the UK for the current and previous financial year (excluding the Board) on the same basis as
note 9 above. Additionally, salary comprises allowances and overtime, both of which have been impacted by adjustments in line with client and customer requirements
during the pandemic.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Section 2: Additional information on 2021 remuneration continued
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) Regulations 2018.
Year
2021
2020
2019
Method
25th percentile
pay ratio
50th percentile
pay ratio
75th percentile
pay ratio
Option A
Option A
Option A
22:1
22:1
47:1
17:1
17:1
37:1
14:1
13:1
29:1
Total pay and benefits
Year
2021
2020
2019
CEO
£’000
548
558
1,269
25th percentile
pay ratio
£’000
50th percentile
pay ratio
£’000
75th percentile
pay ratio
£’000
25
25
27
31
33
34
40
43
44
Base salary component of total pay and benefits
Year
2021
2020
2019
CEO
£’000
543
553
571
25th percentile
pay ratio
£’000
50th percentile
pay ratio
£’000
75th percentile
pay ratio
£’000
17
17
9
28
25
32
28
29
23
The Group Chief Executive’s remuneration package comprised
a fixed element (base salary, family healthcare membership
and a pension cash allowance), an annual performance-related
bonus (maximum of 150 per cent 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 per cent
of base salary). A significant proportion of the Group Chief
Executive’s potential remuneration was, 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 was delivered in The Go-Ahead
Group plc shares. This means that the ratios depend
significantly on the Group Chief Executive’s annual
performance-related bonus and LTIP outcomes and can
fluctuate significantly from year to year. Only executive
directors are eligible to participate in the LTIP. However, both
executive directors and other senior employees 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
Group’s HMRC approved Share Incentive Plan.
While the pay ratios have stayed reasonably constant from
2020 to 2021 there has been a slight increase at the 75th
percentile level. Across the business a proportion of salaries is
comprised of allowances and overtime. With services adjusted
in many areas to more closely align to customer and client
requirements, this has resulted in some reductions in the level
of such payments. The impact of this has been more pronounced
at higher pay levels with no change in total pay and benefits
at the 25th percentile level.
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.
3.
4.
5.
6.
7.
8.
“Option A” methodology was selected on the basis that
it provides the most robust and statistically accurate
means of identifying the median, lower quartile and
upper quartile colleagues.
The Group Chief Executive remuneration is the total single
figure remuneration for the year ended 3 July 2021
contained on page 129.
The workforce comparison is based on actual payroll data
for the period 28 June 2020 to 3 July 2021.
The total single figure remuneration calculated for each
employee includes full time equivalent base pay, annual
bonuses for the 2020 performance year, overtime, benefits,
allowances and employer pension contributions. For
furloughed employees, total single figure remuneration
is based on reduced salaries of 80 per cent.
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 27 June 2020.
Part time workers have been included by calculating the
full time equivalent value of their pay and benefits.
Leavers, joiners and employees on reduced pay (due to sick
pay, maternity leave, etc.) have been included.
Smart pension reductions have been excluded on the basis
that these are a voluntary arrangement whereby an employee
forgoes part of their salary in exchange for additional pension
contributions rather than a reduction in the salary provided.
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 ended 3 July 2021 being
reported compared with the previous financial year ended 27 June 2020.
For further information on the figures footnoted within the table below, please see page 141.
Dividends
Overall expenditure on pay
2021
£m
Nil
1,418.8
2020
£m
30.9
1,349.72
%
change
(100%) 1
4.6% 3
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued
1. Given the financial position of the Group, the Board took the decision not to propose an interim or final dividend to shareholders for the year ended 3 July 2021
(2020 total dividend: £30.9). The Board continues to work towards paying a dividend when it is appropriate to do so.
2. Restated from £1,355.9m. Please see note 2 on pages 182 to 200 for further information.
3. The 4.6 per cent increase in overall expenditure on pay has largely been driven by a rise in the average number of employees in the year. If these employees were removed
from the calculation the overall increase would be 2.5 per cent.
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 or payments for loss of office during the year ended 3 July 2021 (2020: £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.
Appointments – executive directors and non-executive directors service contracts
Details of the service agreements of executive directors, letters of appointment for the Chair and non-executive directors, retirement
and re-election of directors and external appointments are outlined within the proposed new remuneration policy on pages 126 to 128.
Section 3: Implementation of remuneration policy in 2022
The Committee is proposing changes to the Group’s remuneration policy (the Policy), to be put to vote at a General Meeting of shareholders
to be convened in March 2022. This section sets out the proposed implementation of the new Policy for the 2022 financial year.
Executive directors’ 2022 base salaries
From 1 November 2020, the base salaries for the former Group Chief Executive and former Group Chief Financial Officer were £581,710
and £335,000 respectively. The new Group Chief Executive receives a base salary of £550,000, which will not be reviewed again until
April 2023. The Interim Group Chief Financial Officer receives a base salary of £100,000 per month, which is not subject to review, and
he will not participate in any incentive awards, benefits or pension.
Benefits
The benefits for executive directors will be in line with the proposed new remuneration policy, as set out on pages 117 and 128. This
excludes the Interim Group Chief Financial Officer.
Pensions
Pension provision for executive directors has been aligned with the majority of the workforce, with the executive directors being
eligible to receive 3 per cent of qualifying earnings as pension provision or receive a cash alternative equivalent. This excludes the
Interim Group Chief Financial Officer.
2022 performance-related bonus
The former Group Chief Executive and the new Group Chief Executive will both be eligible for a performance-related bonus
opportunity for the 2022 financial year of up to 150 per cent of base salary, each pro-rated for their respective time in role during the
financial year. The former Group Chief Financial Officer will not receive a 2022 annual performance-related bonus opportunity and the
Interim Group Chief Financial Officer is not eligible to participate in the annual bonus arrangements.
The performance measures and weightings for 2022, which remain unchanged from 2021, are as follows:
Metric
Operating profit
Group cashflow
Strategic KPIs
Weighting (% of maximum bonus)
60%
15%
25%
Operating profit, cashflow and strategic KPI targets will be stretching for the 2022 financial year and more information on the specific
targets and performance against them will be provided retrospectively in next year’s Directors’ Remuneration Report to the extent that they
are not commercially sensitive at the time.
The Committee has the discretion to adjust the formulaic outcome of any incentive to better reflect the underlying performance
of the business, which will include a review of health and safety performance.
Any bonus payable will be satisfied 50 per cent in cash and 50 per cent in deferred shares. Malus and clawback provisions will apply
to the full annual performance-related bonus.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Section 3: Implementation of remuneration policy in 2022 continued
2021 Restricted Share Plan (RSP award)
As described earlier in this Report, it is proposed that an RSP award will be granted shortly after the General Meeting of shareholders in
March 2022. Subject to approval of the Policy at the General Meeting, the new Group Chief Executive will be granted an RSP award of
75 per cent of base salary. The former Group Chief Executive, former Group Chief Financial Officer and the Interim Group Chief
Financial Officer are not eligible to receive an RSP.
The Committee has carefully selected the proposed underpins as specific areas that will be considered in this assessment, and these
have been selected as the key performance indicators that are considered as critical to the business’ success:
• Cash generation/net debt ratio – maintain a healthy level of cash generation, maintain a net debt/EBITDA ratio (excluding
exceptionals) within the target range set by the Group’s capital allocation policy and resume appropriate returns to shareholders
• Colleague engagement – continue to progress the colleague engagement score as measured regularly through surveys and drive
the diversity and inclusion agenda to increase the proportion of female and ethnically diverse colleagues at all levels in the organisation
• Health and safety – maintain key safety metrics and avoid any major incident causing harm or reputational damage
• Climate change strategy – develop the business case for decarbonisation and progress towards net zero target
We note that customer satisfaction has historically been included in the LTIP measures. It has not been proposed as an underpin for the
2021 RSP grants due to the uncertainty at this time over Go-Ahead’s future contractual models. It is likely that fewer aspects of the customer
proposition will be controlled by Go-Ahead under the future operating model and the Committee is therefore of the view that, whilst
customer satisfaction remains important and will continue to be a target under in-flight LTIP awards, it is not appropriate to include
customer satisfaction as a stand-alone underpin for the 2021 awards. In determining the final vesting outcome of any award under
the RSP, the Committee will review performance of the business as a whole, including in respect of Go-Ahead’s various stakeholders,
including our customers.
During the remuneration policy review process, the Committee considered the appropriateness of the current share price when granting
RSP awards. The Committee recognises that executives should not benefit from windfall gains where an award is granted at a share
price below the historical level, which subsequently rebounds significantly prior to vesting. However, the Committee decided that it is
more appropriate to consider whether a windfall gain has arisen at the point of vesting than to apply an additional discount to share
awards on grant. This approach reflects the potential, volatility in the Go-Ahead share price and the uncertainty of any “bounceback”
recovery in the share price.
Relocation allowance
Due to the international relocation required to perform the role, the new Group Chief Executive will also receive a monthly relocation
allowance of £8,333 for the first 24 months of employment. The Committee felt that a relocation allowance spread over two years was appropriate
under the circumstances taking into account the specifics of the international relocation to the UK including the ongoing uncertainty around the
international travel constraints.
Group Chief Executive leaver arrangements
In line with the Policy, the former Group Chief Executive will be eligible for an annual performance-related bonus in respect of the 2022
financial year, subject to the achievement of targets and pro-rated for time in post. 50 per cent of any annual bonus earned will be paid
in cash, and 50 per cent will be paid in deferred shares.
Unvested LTIP awards will vest at the normal time, subject to the achievement of performance conditions and time pro-ration.
Unvested deferred shares will vest in full at their normal time. Malus and clawback provisions continue to apply to all awards, as normal.
Group Chief Financial leaver arrangements
From the date of her resignation, the former Group Chief Financial Officer will serve her six-month notice period on garden leave, in
accordance with her contract of employment. During this period she will be available to assist the Group with any matters arising, and
will continue to receive her contractual salary and benefits. No payment in lieu of notice is therefore due.
The former Group Chief Financial Officer will not be eligible for an annual bonus for 2021 or 2022 and her unvested deferred share
awards and long term incentive awards will be forfeited on her leaving date as a result of leaver status. She will continue to be able to
exercise her vested deferred bonus awards in respect of 2,439 shares whilst she remains in employment.
The Group agreed to make a contribution of £15,000 plus VAT towards the former Group Chief Financial Officer’s legal fees in
connection with her departure. Other than the amounts disclosed above, she will not be eligible for any other remuneration payments
or payments for loss of office.
Non-executive directors’ fees
The non-executive directors’ fees will remain unchanged until the next annual fee review is undertaken.
Leanne Wood
Remuneration Committee Chair
23 February 2022
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governanceRemuneration continued Directors’ Report
The directors present their Report and audited financial statements for the year ended 3 July 2021. 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 Report
Directors’ statement of responsibilities
Directors
Board of directors
Employees
Non-financial information statement
Directors’ Remuneration Report – directors’ shareholdings and share interests
Strategic Report – employee policies, employee engagement
and information on diversity and inclusion
Directors’ Report – employee involvement
(including policy on employment of disabled persons)
Business model
Strategic Report
Likely future developments in the business
Strategic Report
Important events since 3 July 2021
Strategic Report
Greenhouse gas emissions and energy
consumption
Strategic Report
Appendix to shareholder information
Risk factors and principal risks
Strategic report
Stakeholder engagement
Strategic Report
Corporate Governance Report
Viability statement
Going concern
Strategic Report
Strategic Report
Page(s)
69 to 92
146
74 and 75
108 to 142
1
28 and 29
144
18 and 19
1 to 68
144 and 145
36 and 37
284 to 287
56 to 64
20 to 23
81 to 83
64 and 65
66 to 68
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 9.8.4R
Required disclosure
Details of long term incentive schemes
Reference
Note 6 of the financial statements and Directors’
Remuneration Report on pages 108 to 142
Waiver of emoluments by a director
Directors’ Remuneration Report on pages 108 to 142
Shareholder waivers of dividends
Directors’ Report on page 144
Shareholder waivers of future dividends
Directors’ Report on page 144
Group’s articles of association (the articles)
The articles may only be amended by a special resolution at
a general meeting of shareholders and must comply with the
provisions of the Companies Act 2006 (the Act) and the Financial
Conduct Authority’s Disclosure Guidance and Transparency
Rules. Shareholders of the Group can request a copy of the
articles by contacting the Group Company Secretary at the
registered office.
143
The Go-Ahead Group plc Annual Report and Accounts 2021
Directors’ Report continued
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 Group’s articles of association and conflicts of interest
policy. All Board directors are required to make the Board aware
of any other commitments and potential conflicts of interest are
advised to and approved by the Board and recorded in the
conflicts register.
Where an employee may become disabled, whether through
accident, illness or injury, every reasonable and practicable
consideration will be given to ensure that they may remain in
employment. There may be some instances where reasonable
adjustments cannot be made; where this occurs the Company
will endeavour to find a suitable alternative position. The Group’s
Equal Opportunities, Diversity and Inclusion Policy forms part of
our Code of Conduct Policy.
The Board has delegated authority to the Nomination
Committee to keep under annual review any conflict or potential
conflict of interest situations authorised by the Board and to
determine whether it is appropriate for such matter(s) to remain so
authorised. Following a review in 2021, the Nomination
Committee concluded that no changes were required to the
conflicts register.
Appointment and removal of directors
The appointment and removal of directors are governed by the
articles, the UK Corporate Governance Code (the Code), the Act
and related legislation. Directors may be appointed by the
Company, by ordinary resolution or by the Board. 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.
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 3 July 2021 and continue to remain in force.
Employee involvement and equal opportunities
Go-Ahead is committed to employee involvement throughout
the business. The Group is intent on motivating staff, keeping
them informed on matters that concern them in the context
of their employment, and involving them through local
consultative procedures.
Employees are kept well informed on matters of interest and the
financial and economic factors affecting the Group’s performance.
This is done through management channels, Group forums, meetings,
publications and intranet sites. More detail on inclusion and
development, together with information on employee engagement
and learning and development, can be found in the ‘Better teams’
section of the Strategic Report.
Go-Ahead supports employee share ownership by providing,
whenever possible, employee share plan arrangements which are
intended to align employees’ interests with those of shareholders.
The Company operates an all-employee Share Incentive Plan, of
which approximately 1,850 colleagues currently participate in.
The Group believes 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.
The Group gives full and fair consideration to job applications
from people with disabilities, considering their skills and abilities.
Change of control
Details of the change of control provisions in place across
the Group can be found on page 281.
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.
Profit and dividend
The loss for the financial year, after taxation, amounts to £40.7m.
In the prior financial year, the loss, after taxation, amounted to
£50.9m (restated).
The Board understands the importance of dividends to Go-
Ahead’s shareholders, demonstrated by our record of attractive
dividend payments for 24 consecutive years up until the
unprecedented impact of COVID-19.
Whilst the Board has concluded that it would not be prudent or
right to propose a final dividend to shareholders for the year ended
3 July 2021 (2020 total dividend: £nil), it remains committed to the
resumption of dividends at the appropriate time.
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 (2020: £nil).
Additionally, the Group did not incur any political expenditure as
defined in the Act (2020: £nil).
Post-balance sheet events
German rail
On 12 August 2021, agreement in relation to liquidated and
consequential damage claims in Germany was reached with the
rolling stock provider with a post-year end settlement of €10m
with €5m payable in the 2022 financial year and the remainder
over the next three years. This was disclosed as a contingent
asset as at the year ended 3 July 2021, see note 27 on pages 238
and 240.
Norwegian rail
Since early in the COVID-19 crisis, the Norwegian Government
has supported the rail industry with a funding package initially
covering 100% of losses. As the pandemic continued, loss
coverage was reduced from this level down to 85%. This allowed
for a broadly breakeven operating performance during the
financial year ended 3 July 2021. As a non-adjusting post balance
sheet event in accordance with IAS 10, in December 2021
government support was subsequently prolonged to include
November and December. Whilst temporary support at an
equivalent level is in place until March 2022, after this period the
Government has indicated further support at an unconfirmed
level may be in place until at least August 2022. The inclusion of
government support at 85% loss coverage from November 2021
to the end of March 2022 in the calculation of the onerous
contract provision would reduce its size by £6.8m and there is
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The Go-Ahead Group plc Annual Report and Accounts 2021
Corporate governance ongoing dialogue with the Government in relation to a possible
renegotiation of the contract.
UK Rail
On 28 September 2021, the Department for Transport (DfT)
announced its decision to appoint the Operator of Last Resort to
take over delivery of passenger services on the Southeastern
franchise when London & South Eastern Railway (LSER)’s existing
contract expired on 17 October 2021. The DfT’s decision not to
award a National Rail Contract to LSER was a consequence of
discussions with the DfT regarding the calculation of profit share
payments under the terms of the relevant franchise agreements
and the treatment of certain overpayments made by the DfT to
LSER over the course of the franchise agreements.
In August 2021, an Independent Committee comprising the
respective chairs of Go-Ahead and Keolis UK, Clare
Hollingsworth and Sir Derek Jones, commissioned an
Independent Review, supported by external legal and accounting
advisers, into LSER’s performance of its contractual obligations
under its franchise agreements. Following the conclusion of the
Independent Review, the findings were shared with the DfT and
the Group’s auditor, Deloitte. Throughout the process, the
Independent Committee has been focused on open, collaborative
and constructive engagement with the DfT with a view to
reaching a full and satisfactory settlement.
The Independent Committee concluded that, notwithstanding
the complexity of LSER’s franchise agreements, serious errors had
been made in relation to the LSER franchise with respect to
engagement with the DfT over several years. In particular, by
failing to notify the DfT of certain overpayments or monies due
to the DfT, LSER breached contractual obligations of good faith
contained in the franchise agreements. Accordingly, the Group
has apologised to the DfT.
The Independent Committee has determined that it is estimated
the overpayments and associated interest of £23.4m made by
DfT in connection with LSER were incorrectly accounted for in
the financial statements over this period. See note 2 on pages 182
to 200 for further details in relation to these matters and the
resulting prior year adjustments.
Regional Bus
CBSSG funding ended on 31 August 2021 and from 1 September
2021 was replaced by the Bus Recovery Grant (BRG), with
£225.0m of funding available for UK bus services until March
2022. We welcome the continuation of support for essential bus
services in our communities. We have worked with the DfT to
establish a framework to transition back to a commercial
operating model and in March 2021, we welcomed the UK
Government’s announcement of its first national bus strategy.
We have strong partnerships with local stakeholders and our
local management teams are working in close collaboration with
their local authorities to produce Bus Service Improvement Plans
focused on providing high quality, reliable and value-for-money
bus services which support climate change targets in our towns
and cities. These plans will form the basis of Enhanced
Partnerships in the majority of our bus markets.
Financial instruments
Details of the Group’s financial risk management in relation to its
financial instruments are available in note 23 of the consolidated
financial statements.
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 280 to 282.
Share schemes
Employee Benefit Trust
Computershare Trustees (Jersey) Limited, the Trustees 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 57,176 ordinary shares at a total price of
£658,733 (including all associated costs). The average price
was £11.44 per share. As at 23 February 2022 (being the latest
practicable date prior to the date of this Report) the Trust held
178,667 ordinary shares representing 0.4 per cent 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 Computershare 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 23 February 2022 (being the latest practicable date prior to
the date of this Report), 1.8 per cent of the issued share capital of
the Group, less treasury shares, was held by Computershare
Trustees Limited. In the event of an offer being made to acquire
these shares, the employees are entitled to direct Computershare
Trustees Limited to accept an offer in respect of the shares held
on their behalf.
Approval
The Directors’ Report was approved for issue by the Board
of directors on 23 February 2022.
By order of the Board
Board changes
For information on Board changes that occurred subsequent to
the year ended 3 July 2021, please see the Nomination Committee
Report.
Carolyn Ferguson
Group Company Secretary
23 February 2022
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The Go-Ahead Group plc Annual Report and Accounts 2021
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report
and Accounts in accordance with applicable law and regulations.
Detailed below are statements made by the directors in relation
to their responsibilities and disclosure of information to the auditor.
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.
Directors’ responsibilities in respect of the preparation
of the financial statements
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors are required
to prepare the Group financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and International
Financial Reporting Standards (IFRS Standards) adopted pursuant
to Regulation (EC) No 1606/2002 as it applies in the European
Union. The financial statements also comply with International
Financial Reporting Standards as issued by the IASB. The directors
have also chosen to prepare the parent company financial
statements in accordance with Financial Reporting Standard
101 Reduced Disclosure Framework.
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 accounting estimates that are
reasonable and prudent
• Provide additional disclosures when compliance with the
specific requirements in IFRS Standards are insufficient
to enable users to understand the impact of particular
transactions, other events and conditions on the entity’s
financial position and financial performance
• Prepare the financial statements on a 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 at any time and with reasonable
accuracy the financial position of the Group, and to 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.
Each of the directors, whose names and functions are listed on
pages 74 and 75 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 applicable set of accounting standards,
give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group and the undertakings
included in the consolidation taken as a whole
• 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
• 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 position
and performance, business model and strategy
Disclosure of information to the auditor
Each of the persons who are directors at the date of approval
of this Report confirms that:
• There is no relevant audit information (as defined in Section
418(3) of the Act) of which the Group’s auditor is unaware
• They have taken all the steps they ought to have taken as
directors 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.
By order of the Board
Christian Schreyer
Group Chief Executive
Gordon Boyd
Interim Group Chief Financial Officer
23 February 2022
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Corporate governance Financial statements
In this section
Group financial statements
148 Independent auditor’s report to the members of The Go-Ahead Group plc
167 Consolidated income statement
168 Consolidated income statement narrative
169 Consolidated statement of comprehensive income and narrative
170 Consolidated statement of changes in equity
171 Consolidated statement of changes in equity narrative
172 Consolidated balance sheet
173 Consolidated balance sheet narrative
174 Consolidated cashflow statement
175 Consolidated cashflow and reconciliations
176 Critical accounting judgements and key sources of estimation uncertainty
182 Notes to the consolidated financial statements
Company financial statements
255 Company balance sheet
256 Company statement of changes in equity
257 Directors’ responsibilities in relation to the company financial statements
258 Notes to the company financial statements
Shareholder information
280 Shareholder information
283 Greenhouse gas emissions
288 Corporate information
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Independent auditor’s report to the members of The Go-Ahead Group plc
Report on the audit of the financial statements
1. 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 3 July 2021 and of the group’s loss for the 53 weeks then
ended;
• the group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006, 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.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated statement of comprehensive income;
• the consolidated and parent company statements of changes in equity;
• the consolidated and parent company balance sheets;
• the consolidated cash flow statement;
• the critical accounting judgements and key sources of estimation uncertainty; and
• the related notes to the consolidated financial statements 1 to 30 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,
international accounting standards in conformity with the requirements of the Companies Act 2006, IFRSs as adopted by the European
Union and as issued by the IASB. 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).
2. 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. The non-audit services
provided to the group and parent company for the year are disclosed in note 5 to the financial statements. We confirm that we have
not provided any non-audit services prohibited by the FRC’s Ethical Standard 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.
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Group financial statements 3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• the Department for Transport (‘DfT’) rail franchise investigation;
• onerous contracts within overseas rail operations;
• impact of control deficiencies;
• going concern;
• presentation of exceptional items;
• accounting treatment of franchise related accruals;
• accounting treatment for government support packages; and
• revenue recognition for the bus division.
Within this report, key audit matters are identified as follows:
! Newly identified
> Increased level of risk
>
<> Similar level of risk
>
> Decreased level of risk
Materiality
The materiality that we used for the group financial statements is £4.1m which has been determined on the
basis of 4.2% of profit before tax and before exceptional items. The basis of materiality represents a change
from the prior year benchmark of 2% of net assets. Further details concerning the determination of materiality
are provided in Section 6 below.
In response to the issues identified relating to the DfT rail franchise investigation and broader control
observations, we determined it appropriate to decrease performance materiality from 70% to 50% of
materiality, and therefore increased the extent of our audit procedures across the group.
Scoping
Full scope audit procedures were initially planned and performed on nine principal components.
Four further components were brought into group reporting scope in light of the DfT rail franchise
investigation, to ensure that the audit had appropriately addressed the issues identified from the DfT rail
franchise investigation and the potential implications for the wider group.
The components in full audit scope represent the principal business units and account for 97% (2020: 83%
before restatement) of the group’s net assets, 97% (2020: 91% before restatement) of the group’s revenue and
100% (2020: 99% before restatement) of the group’s operating profit.
Significant changes
in our approach
As a consequence of the DfT rail franchise investigation and the significant number of errors and control
weaknesses identified in the current year process, including the prior year restatements, we performed a
reassessment of our audit risks and approach, including potential fraud risks.
These issues impacted our approach to materiality as detailed in section 6 and the scope of the group audit as
detailed in section 7. Owing to the complexities arising, we involved a number of specialists to support the
audit including legal, forensic and rail industry experts. In conjunction with management, we also extended the
timetable to allow sufficient time to complete our audit procedures, particularly in light of the years affected
for the LSER franchise.
This resulted in additional Key Audit Matters and specific tailored procedures to respond to those risks as set
out in sections 5.1, 5.2, 5.3 and 5.6. Additional work was performed to challenge the valuation of the onerous
provisions arising as set out in section 5.2 including the evaluation of the risk of additional undetected onerous
contracts across the group.
Having reassessed our audit risks and the focus of our procedures, we did not consider the following prior year
key audit matters to be key audit matters in the current year due to the relative lack of complexity and
judgement in these areas and the lack of errors identified in our current and prior year testing:
• valuation of uninsured liabilities;
• valuation of pension scheme assets and liabilities and related disclosures; and
• recoverability and impairment of regional bus assets and investments in subsidiaries.
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4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis
of accounting is discussed in section 5.4.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
5. 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 period 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.
5.1. The DfT rail franchise investigation !
Key audit matter
description
In light of the fact that the Department for Transport (‘DfT’) has not yet concluded its investigation into certain
historical “Matters of Concern” at LSER, relating to LSER’s conduct in respect of various overpayments of subsidy
by the DfT in relation to the franchise, we have identified the completeness and accuracy of liabilities owing to the
DfT under existing rail franchise agreements as a key audit matter. Given their size and the judgement involved we
have also identified the assessment of fines and penalties under the Railways Act (1993) as a key audit matter.
Completeness and accuracy of liabilities due under franchise agreements
In response to the ongoing DfT rail franchise investigation, the group and its partner in the franchise established an
Independent Committee and conducted a joint investigation (‘management’s investigation’) into the franchise’s
previous accounting and conduct in respect of the LSER franchise between 2006 and 2020 as disclosed on page 4.
The Independent Committee engaged the support of legal and forensic specialists to assist with its work.
As a result of the management’s investigation, excluding the provision for fines and penalties which is discussed
below, the group identified liabilities (including interest) due to the DfT of £51.3m as disclosed on page 48 of the
Annual Report. These liabilities were attributed to overpayments of £44.3m from the DfT between 2006 and
2020. The total liabilities due also include interest of £7.0m. Additionally, a provision was recorded for profit
share payable to the DfT in respect of affiliate trading of £14.1m between 2014 and 2020 and a provision for the
estimated settlement of an historic profit share dispute with the DfT of £7.2m.
The group also considered the risk that matters similar to those identified in LSER relating to contract
compliance existed across the wider group. This identified a further liability of £5m relating to previously closed
franchises. The historical nature of the issues arising has resulted in prior year adjustments totalling £3.5m.
This DfT rail franchise investigation has caused us to increase the scope of our audit (as described above) and is also
reflected in our considerations of fraud risk, the going concern assessment (section 5.4), the adequacy of controls
(section 5.3), the adequacy of disclosures made in the Annual Report and the consideration of prior year items.
Completeness and accuracy of provision for fines and penalties under the Railways Act (1993)
On 28 July 2021 the DfT wrote to LSER setting out that they were considered to be a prima facie breach of the
Franchise Agreement, which could result in a financial penalty under Section 57A of the Railways Act 1993.
Whilst the DfT rail franchise investigation has not yet concluded, management have recognised a provision of
£30m for any fines and penalties arising based on the findings of their investigation. The Railways Act 1993
provides some guidance as to the level of fine or penalty that could be imposed by the Secretary of State.
However, the guidance is broad and has limited precedent as to how a financial penalty would be determined.
Additionally, in light of the fact that the DfT has yet to conclude its investigation, a contingent liability reflecting
the possibility of further liabilities arising, has been disclosed in note 27.
The DfT rail franchise investigation is discussed in the Audit Committee’s report on page 98.
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Group financial statements 5. Key audit matters continued
5.1. The DfT rail franchise investigation continued !
How the scope
of our audit
responded to the
key audit matter
Our audit procedures included:
Completeness and accuracy of liabilities due under franchise agreements
• engaged internal forensic specialists to support the audit team in evaluating the scope and findings of
management’s investigation which was supported by their legal and forensic advisers. Having challenged and
satisfied ourselves with the scope of management’s investigation, we read the final report and findings,
assessing the evidence pertaining to the Matters of Concern and the conduct element of the review, in
particular email searches completed as part of the management’s investigation and supporting the audit team
in tailoring the audit response to those findings. The audit team also made direct enquiries of management
and their advisers to reperform a sample of their work to validate the completeness and accuracy of the
liabilities arising;
• assessed the competence, capabilities and objectivity of the legal and forensic advisers used in management’s
investigation;
• making direct inquiries of the DfT through the course of their investigation to understand the status of their
investigation and to corroborate areas of inquiry as their investigation progressed;
• making direct inquiries of key individuals connected with the DfT rail franchise investigation to challenge and
understand their awareness and knowledge of the historical matters of concern;
• performing substantive testing to challenge the amounts recognised by management in respect of the
adjustments identified by management’s investigation;
• expanding our scope of journal entry testing within the LSER franchise across the 6 years since our
appointment as auditor;
• bringing additional resource onto the team, including at partner and director level, with relevant rail industry
experience who supported the audit team in challenging the findings arising from management’s
investigation. Using their experience of rail franchise agreements and financial models, the additional resource
also provided additional challenge to the procedures designed to assess completeness of the liabilities arising
from management’s investigation; and
• challenging the appropriateness of the disclosures included in the financial statements concerning the
matters of concern and associated prior year re-statements.
Also refer to section 5.3 for additional procedures we performed to address the risk of their being similar issues
elsewhere in the group.
Completeness and accuracy of provision for fines and penalties under the Railways Act (1993)
• engaging our own external legal experts to challenge the methodology, basis and assumptions used by
management and the group’s legal experts to calculate the provision. This included challenge of the
methodology applied by management in determining the provision due to the lack of guidance and precedent
under the Railways Act 1993 and the appropriateness of other legal framework precedent used by the group’s
legal experts to estimate a provision. In conjunction with our external legal experts we also challenged the
assumptions used by management and their legal experts to factors such as proportionality and severity of
fines and penalty, evaluating the evidence and support provided to justify the assumptions used;
• making inquiries of the DfT regarding their approach to the determination of fines or penalties; and
• considering the appropriateness of the disclosures included in the financial statements.
Key observations We concluded that the liabilities recognised in relation to the DfT rail franchise investigation, including the
provision for penalties, are reasonable, and that the adjustments recognised in respect of prior years and the
contingent liability disclosures are appropriate. However, we note that management’s estimates reflect
uncertainty, as set out in the disclosures included in note 1 of the Annual Report in respect of key sources of
estimation uncertainty and in note 27 in respect of the risk of further investigation.
Our observations in relation to the control deficiencies identified as a result of the DfT rail franchise
investigation are included in section 5.3 below.
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5. Key audit matters continued
5.2. Onerous contracts within overseas rail operations <>
Key audit matter
description
In the prior year, the group identified an onerous contract provision relating to its Bavarian franchise (‘GABY’)
that commenced in December 2021. The group has increased its onerous contract provision for GABY from
£7.2m (as previously reported in 2020) to £33.8m, reflecting the latest estimate of the losses to be incurred over
the life of the franchise. The GABY franchise is primarily exposed to cost risk due to the fixed nature of the
revenues over the life of the franchise. Consequently, key estimates included in the assessment of the onerous
provision include maintenance, dilapidation and demobilisation costs, energy costs, driver recruitment and
operational penalty levels. Furthermore, as the full contract is only expected to commence by December 2022,
there remains uncertainty as to the final mobilisation plan for the contract.
As reported on page 8 of the Annual Report, errors were identified in respect of the prior year financial
statements for the GABY franchise as information that was available within the group at the time of signing the
Annual Report had not been factored into the onerous provision calculations. This has subsequently been
corrected resulting in a £36.6m restatement of the 2020 provision.
In addition to the matters in Germany, an onerous provision has also been identified in relation to the group’s
Norwegian rail franchise, following our decision to bring Norway into full scope of the group audit. As reported
on page 8 the prolonged impact of Covid-19 on public transportation has resulted in a significant reduction in
passenger demand and slower than previously estimated recovery rates. Given the key estimation uncertainty
arising from the exposure to passenger revenue risk associated with the Norwegian franchise, an onerous
contract provision of £66.2m has been estimated, reflecting management’s best estimate of the likely cashflows
expected over the remaining life of the franchise, predominantly driven by estimates of the recovery rates of
passenger volumes.
Given the level of estimation uncertainty, management has included further information in the critical
accounting judgements and key sources of estimation uncertainty note on pages 176 to 181 of the Annual Report
and in the operational risks section of the Audit Committee report on page 64 of the Annual Report.
How the scope
of our audit
responded to the
key audit matter
We have challenged management’s assessment of the onerous contract provisions through the following procedures:
Germany:
• obtaining an understanding of the relevant controls in respect of the significant inputs and assumptions
of the estimate;
• inspecting the GABY contract to challenge completeness of matters included within the onerous
provision model;
• assessing the reasonableness of key assumptions, and any changes since the previous year end against
supporting evidence;
• in conjunction with our valuation specialists, challenging the appropriateness of the discount rate applied
in the onerous provision model;
• performing historical accuracy testing by comparing most recent budget information to actual performance;
• testing the arithmetical integrity of the model;
• challenging the completeness of costs included in the model. This included inspection of franchise
commitments for demobilisation and exit costs, subcontractor agreements, rolling stock agreements and
comparison to the existing German franchise cost experience;
• considering the latest performance and experience in the existing German franchise operation to challenge
the risk of optimism within the GABY model;
• challenging the accuracy of the prior year adjustment and management’s evidence concerning the availability
of evidence at the time of approval of the prior year financial statements; and
• assessing the adequacy of the financial statement disclosures.
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Group financial statements 5. Key audit matters continued
5.2. Onerous contracts within overseas rail operations continued <>
How the scope
of our audit
responded to the
key audit matter
continued
Norway:
• obtaining an understanding of the relevant controls in respect of the significant inputs and assumptions of
the estimate;
• reviewing the Norwegian contract to challenge completeness of matters to include within the onerous
provision model;
• assessing the reasonableness of key assumptions with specific focus on management’s assumptions in
relation to passenger demand. This included review of historical passenger levels, review of latest industry
data, discussion with industry experts and performance of sensitivity analysis;
• in conjunction with our valuation specialists, challenging the appropriateness of the discount rate applied in
the onerous provision model;
• testing the arithmetical integrity of the model;
• challenging the completeness of costs included in the model. This included inspection of franchise
commitments for demobilization and exit costs, third party agreements for key cost components and review
of historical cost performance of the franchise;
• considering the latest performance of the Norway rail franchise to challenge the assumptions in the model;
• challenging whether there was any evidence that the contract was onerous in the prior year; and
• assessing the adequacy of the financial statement disclosures.
Key observations
The results of our procedures were satisfactory and we concurred with the provisions recognised by
management of £33.8m and £66.2m in Germany and Norway respectively. The prior year adjustment to the
Germany onerous contract provision, and the audit adjustment that resulted in the current year onerous
contract provision being recorded for Norway have highlighted significant deficiencies in controls as referred to
in section 5.3.
5.3. Impact of control deficiencies !
Key audit matter
description
The DfT rail franchise investigation has highlighted significant control deficiencies in the management of the LSER
franchise, spanning a period of over a decade. The prior year adjustments in respect of the LSER matters that
resulted from the control deficiencies are detailed on page 189.
In addition, a significant number of misstatements were identified that, in aggregate, were material. These included
the need to recognise an onerous provision in Norway and for which an adjustment was subsequently corrected by
management – refer to section 5.2 for more details. Predominantly arising in the Rail segments, these
misstatements highlighted the complexity of the group’s franchise arrangements, the need to improve the
underlying controls that underpin the monitoring of contract compliance, the need to improve the controls that
monitor and evaluate the risk and measurement of onerous contract provisions and the need to improve the
precision of review controls to ensure that judgements are estimates are sufficiently precise.
As disclosed in note 2, in addition to the prior year adjustments arising from the DfT rail franchise investigation,
additional restatements relating to the Germany onerous contract provision and the correction of other errors
have also been required. As referred to in section 5.2, the German onerous provision has been restated to reflect
information that was available within the group at the time of the approval of the prior year accounts but was not
reflected in the onerous provision model. Similarly, adjustments arose in respect of contract compliance
monitoring due to the understatement of dilapidation, maintenance and demobilisation costs in a number of
segments as referred to in section 5.6.
The deficiencies in the control environment required significant management time to investigate matters fully and
a significant amount of additional time for our audit procedures to be completed. As a result, we considered this to
be a key audit matter. As disclosed on page 5 of the Annual Report, the Board has acknowledged the control
deficiencies arising and is committed to a plan of improvement.
For further details of the issues underpinning these control deficiencies refer to sections 5.1, 5.2 and 5.6.
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5. Key audit matters continued
5.3. Impact of control deficiencies continued !
How the scope
of our audit
responded to the
key audit matter
In order to respond to the pervasive and specific risks arising from deficiencies in the control environment, we
modified the nature, extent and timing of our audit procedures. Specifically:
• we reassessed our performance materiality judgement (as described in section 6.1) to determine performance
materiality as 50% of materiality as compared with 70% in the previous year. This increased the volume of
substantive testing completed in the current year;
• as detailed in section 7 below, we increased the scope of the audit, incorporating 4 additional components into
the year end audit scope to ensure that the audit had addressed the risk that issues identified from the DfT
rail franchise investigation and the broader controls observations;
• we revisited our risk assessment based on the information identified by DfT rail franchise investigation and
management’s investigation, evaluating each line of the financial statements to determine whether there is
heightened risk and involving specialists and experienced team members to challenge our assessment.
Enhanced substantive procedures were tailored to those areas where we considered there to be heightened
risk. This was considered across the group to assess the risk of similar matters to those identified in LSER
existing elsewhere in the group;
• we used internal forensic specialists to respond to the specific matters relating to the DfT rail franchise
investigation (as described in section 5.1), as well as to assist us in assessing the risk of matters similar to those
identified from the DfT rail franchise investigation existing across the group;
• we increased the level of senior input to the audit team including additional partner involvement with relevant
rail industry experience;
• we tailored enhanced procedures in areas including onerous provisions and franchise contract compliance;
• we challenged management’s assessment of the nature and cause of errors in specific components to
consider the risk that matters similar to those identified in the DfT rail franchise investigation could exist
across the broader group and impact on our audit;
• senior members of the audit team have performed audit testing directly in more complex areas of accounting
where control deficiencies had been identified including the DfT rail franchise investigation and the onerous
provision assessments in Norway and Germany;
• we engaged external legal experts to support the audit team with matters of a legal and regulatory nature;
• we modified the nature, extent and timing of procedures in relation to journal entries including increasing
unpredictability in our audit procedures for the testing of journal entries in specific areas relevant to the DfT
rail franchise investigation by reassessing the selection criteria we applied in our data analytics tools as a
result of our revised risk assessment. This included additional risk characteristics to search for an increased
range of keywords, combining those of importance from the investigation and searching for posts made by
certain members of management;
• we made direct enquiries of the DfT and other transportation authorities to assess franchise-related risks
and assumptions;
• extension of the group’s reporting timetable was required in order to give us additional time to perform the
incremental work required as a result of the control deficiencies identified. It has also enabled used to use
an extended hindsight period to assess the appropriateness of year end judgements.
Key observations Whilst we are satisfied that management and the Audit Committee have responded appropriately, including
considering the accuracy of the issues reported and extending their own procedures to consider the risk of
completeness of similar matters across the group, as reported on page 5 there is a need for the group to make
significant improvements to the control environment.
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Group financial statements 5. Key audit matters continued
5.4. Going concern <>
Key audit matter
description
The group operates public transport services in the United Kingdom, Ireland, Singapore, Norway and Germany.
Given the ongoing impact of Covid-19 on passenger numbers, the ongoing DfT rail franchise investigation, the
scale of onerous provisions recognised and the continued reliance on temporary government support contracts,
we consider management’s adoption of the going concern basis of accounting to be a key audit matter.
How the scope
of our audit
responded to the
key audit matter
A key focus for the going concern has included consideration of the impact of the issues arising as a result of
the DfT rail franchise investigation together with the impact of the errors and prior year adjustments on the
ongoing compliance with the group’s banking facilities.
The group has a £250m corporate bond which matures in July 2024, and a Revolving Credit Facility of £280m
which matures in July 2024. These facilities contain financial and other covenants, which the directors have
considered in their going concern assessment.
Management performed a detailed risk assessment and scenario modelling in order to reach their conclusion,
taking into consideration the risks and scenarios disclosed in note 2.
As disclosed in going concern statement in the directors’ report, based on their assessment of the current
and future prospects of the group, the directors have concluded that the going concern basis of accounting
is appropriate.
Our audit procedures included:
• we obtained an understanding of the relevant controls over the going concern process;
• working with our debt advisory specialists and our independent legal advisers, we evaluated the advice from
the group’s external legal advisers to challenge management’s conclusions as to the risk of impact of the DfT
rail franchise investigation and other matters noted in this opinion on ongoing compliance with the group’s
banking facilities;
• we performed accuracy, completeness and reasonableness checks on the underlying data in the base case
scenario by comparing to historic results and detailed knowledge of the business;
• we assessed the mathematical accuracy and integrity of the underlying model that management have used in
their assessment;
• we challenged each of management’s assumptions applied by agreeing to supporting evidence such as
contractual agreements, and performing additional sensitivity on assumptions where necessary;
• we assessed whether management’s assumptions were in line with our understanding of the external factors
and forecast market trends;
• we challenged management’s assumptions concerning their ‘break it’ scenario to assess management’s
conclusion that the scenario was remote;
• we assessed any contradictory evidence as part of our audit work and the impact on management’s
conclusion;
• we understood and assessed covenant requirements for the going concern period;
• we performed covenant compliance tests and sensitivities on key variables;
• we assessed the results of the group for the period after the reporting date compared to budget in order to
assess for indicators of management bias and optimism that would affect the going concern conclusion;
• we obtained evidence of the waivers provided by the group’s bankers in response to the delays in filing the
financial statements; and
• we evaluated the appropriateness of the disclosures made by management within the financial statements.
Key observations
The results of our procedures were satisfactory and we concurred with management’s conclusion that adopting
the going concern assumption for the group financial statements is appropriate.
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5. Key audit matters continued
5.5. Presentation of exceptional items !
Key audit matter
description
How the scope
of our audit
responded to the
key audit matter
Management presents a number of material items as exceptional items on the face of the Income Statement.
Management considers that the separate presentation of these exceptional items is appropriate due to the size,
nature and expected infrequency of events giving rise to them. Management considers the separate
presentation allows for an alternative understanding of financial performance. Exceptional items are not defined
by IFRS and therefore significant judgement is required in determining the appropriate classification. Profit
before tax pre exceptional items is a key focus of management as well as external users of the accounts and
creates an incentive to use the exceptional items to manipulate adjusted earnings. The use of non-GAAP or
Adjusted Performance Measures (“APMs”) within financial statements continues to be an area of increased
focus by the regulators, in particular the Financial Reporting Council (“FRC”) and the European Securities and
Markets Authority (“ESMA”).
The group has reported a profit before tax pre exceptional items of £97.2 million (2020: £54.2 million (restated),
which is derived from statutory loss before tax of £6.9 million (2020: £39.5 million, restated) adjusted for a number
of items totalling £104.1 million (2020: £93.7 million, restated) which the group considers meet their definition of
exceptional items. The most significant exceptional items in the year include a provision for the DfT fine (section
5.1) and exceptional costs relating to the DfT rail franchise investigation (£32.4m), an onerous provision expense
(section 5.2) and impairment charges relating to intangible and tangible assets relating to Norway (£76.7m). In
the prior year, exceptional items totalled £93.7m (restated) including £43.8m (restated) in respect of the German
rail franchise onerous contract provision and asset impairment and restructuring costs of £49.9m.
The audit procedures we performed in respect of this key matter included:
• gaining an understanding of relevant controls over management’s process for determining exceptional items;
• challenging the items identified as exceptional to understand the rationale for the separate classification and
the appropriateness by confirming alignment with the group’s exceptional items accounting policy;
• assessing the consistency of items treated as exceptional between the current and the prior years;
• assessing the financial report disclosures in respect of exceptional items and determining whether the
disclosures are fair, balanced, and understandable; and
• benchmarking the group’s APM reporting against emerging practice and the guidance from the FRC
and ESMA.
Key observations We are satisfied that the overall classification of exceptional items is reasonable with reference to the group
policy. Whilst profitability of franchise contracts is a normal part of business for the group, management’s
treatment of the German and Norwegian onerous provisions as exceptional is appropriate given the scale of the
losses arising in the current and prior periods.
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Group financial statements 5. Key audit matters continued
5.6. Accounting treatment for franchise related-accruals <>
Key audit matter
description
Due to the complexity of the franchise arrangements relating to the group’s two UK rail franchises, there is a risk
that transactions and accruals relating to the franchise agreements are not accounted for correctly. These
include income or penalties that can arise based on the actual performance of the individual train operating
company under the franchise agreement. The group will regularly use third party specialists to support
management in the determination of the franchise-related accruals, particularly by reference to property and
rolling stock dilapidations.
As disclosed in note 2 management recognised prior year adjustments relating to historical understatement of
provisions relating to franchise obligations for dilapidations, maintenance and demobilisation in LSER. These were
identified by management and the auditors following review and corroboration of contractual obligations. In
addition, our audit procedures identified material current year errors in GTR relating to engineering accruals that
were subsequently corrected by the group. In relation to the German rail franchise prior year restatement
included in section 5.2, we identified that management’s assessment of the provision in the prior year incorrectly
excluded franchise exit costs, including dilapidations obligations.
Given the level of estimation uncertainty, management has included further information in the critical accounting
judgements and key sources of estimation uncertainty note and in the key financial matters section of the Audit
Committee report on page 102 of the Annual Report.
How the scope
of our audit
responded to the
key audit matter
In addition to the work on the prior year adjustments discussed in section 5.3, we performed the following
audit procedures:
• we obtained an understanding of the group’s relevant controls over franchise-related accruals;
• we reviewed and challenged management’s paper and also reports from management’s experts where
surveys and valuations were performed;
• we assessed of the competence, capabilities and objectivity of management’s experts;
• we assessed the inputs, assumptions and methodology used in the determination of dilapidations and claims
provisions. This included the use of industry experts to support the audit team, inspection of evidence
pertaining to the existence of dilapidations, inquiry of engineers at the group and corroboration of costings to
supporting evidence;
• we challenged management on the range of outcomes for the dilapidation provisions for rolling stock, depots
and buildings and their estimate subsequently recognised. This included challenging the nature of expenditure
to be incurred to rectify dilapidations by reference to the franchise obligations;
• we read legal and DfT correspondence to assess the appropriateness of the estimates recognised by
management for relevant franchise-related accruals; and
• we evaluated the completeness of the provisions and accruals based on meetings with franchise compliance
officers, review of board minutes and other supporting and contradictory evidence, including DFT minutes
and legal correspondence.
Key observations
The result of our procedures in respect of LSER’s franchise related accruals were satisfactory.
As part of our procedures for the GTR franchise, we consider that the adjustments recognised by the group for
engineering accruals are appropriate. In light of the material adjustments, we identified the impact of control
deficiencies as a separate key audit matter (section 5.3).
In section 5.2 we have also discussed franchise-relating accounting errors in relation to the German onerous
contract provision prior year restatement. We consider these misstatements to indicate a significant deficiency
in internal control as discussed in section 5.3.
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5. Key audit matters continued
5.7. Accounting treatment for UK government support packages <>
Key audit matter
description
This key audit matter relates to the accounting treatment of UK government support packages
(excluding furlough support) received as a result of the impact of COVID-19 on the business operations
during the current year.
The group was the recipient of government support packages during the current and prior year following the
COVID-19 pandemic.
We focused on those businesses where the group has been dependent on revenue support schemes, the most
complex of which were in the UK. The Norway rail franchise has also been dependent on government support,
but that is considered as part of the key audit matter for onerous rail contracts in overseas rail operations as
detailed in section 5.2.
The UK support received was as follows:
• The group’s UK regional bus services received the COVID-19 Bus Services Support Grant (CBSSG) of £120.0m
(2020: £20.1m); and
• The group’s two UK rail companies received support through the Emergency Measures Agreement (EMA) and
the Emergency Recovery Measures Agreements (ERMAs).
Given the complexity of the government support contracts and judgement involved in determining
“disallowable costs”, this has been determined as a potential fraud risk for the current year audit in relation to
revenue recognition under IFRS 15 ‘Revenue from contracts with customers’.
The CBSSG funding is subject to periodic approvals by the DfT. At the date of the finalisation of the financial
statements, reconciliations to December 2021 had been approved by the DfT with no significant differences
arising in connection with the judgement of disallowable costs.
It is noted in the critical accounting judgements and key sources of estimation uncertainty note on page 181
of the Annual Report.
Our audit procedures included:
UK regional bus
• obtaining an understanding of the relevant controls over the accounting for transactions within the CBSSG
contractual arrangement within the bus business, focusing on the reconciliation process and the assessment
of disallowable costs;
• performing a recalculation of the CBSSG claims and assessed the disallowable cost adjustments made by
management in relation to the contractual terms to evaluate whether reconciliations were compliant with the
scheme conditions;
• challenging the appropriateness of management’s assessment of income that could not be recognised due to
uncertainty of the outcome of the open reconciliations with the DfT;
• testing the accuracy of historical claims to subsequent approvals by the DfT;
• performing testing over the accuracy and completeness of the data inputs (being passenger numbers and
mileage) into management’s calculation;
• assessing the disclosures made in the financial statements, particularly under IAS 1 where judgements or
estimates are present.
How the scope
of our audit
responded to the
key audit matter
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Group financial statements 5. Key audit matters continued
5.7. Accounting treatment for UK government support packages continued <>
How the scope
of our audit
responded to the
key audit matter
continued
UK rail
• obtaining an understanding of the relevant controls over the accounting for transactions within the EMA and
ERMA contracts in the UK rail businesses, in particular focusing on the controls over the identification of
disallowable costs;
• Inspecting the EMA and ERMA contracts to challenge the appropriateness of costs included or excluded
by management in the income reconciliations. This included:
i. tested a sample of allowable costs by agreeing to supporting evidence and made further enquires of
management to challenge that they are not disallowable;
ii. agreed the disallowable costs reported to the DfT to third party evidence to test the accuracy of
the submissions;
• assessing budget vs actuals for each period to identify any potential costs that may be deemed to not be
compliant with the “good & efficient operator” criteria;
• evaluating the affiliate (related party) trading submissions to the DfT to assess whether any costs would be
deemed to be allowable under the EMA and ERMA contracts; and
• considering the appropriateness of the disclosures included in the financial statements.
Key observations
The results of our procedures within the bus and rail divisions were satisfactory and we concurred with the
accounting treatment of the UK government support packages across the group.
5.8 Revenue recognition for the bus division <>
Key audit matter
description
How the scope
of our audit
responded to the
key audit matter
In the bus division the key audit matter over revenue recognition has been focused on the occurrence and
accuracy of revenue in relation to contract revenue in Regional Bus and the Quality Incentive Contract premiums
(QICs) in London Bus. 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 3 July 2021 totalled £1,089.6m (2020: £1,012.9m) for the bus operating segment (see
note 4 of the consolidated financial statements).
Our audit procedures included:
• obtaining an understanding of the relevant controls relating to contract revenue recognition and the
QICs revenue;
• assessing contract variations with local councils and authorities to source documentation;
• agreeing a sample of revenue recognised to underlying contractual evidence; and
• checking the accuracy of the estimation of QICS revenue receivable at the year end to third party confirmations.
Key observations
The results of our procedures were satisfactory and we concurred with the recognition of revenue in the
bus division.
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6. Our application of materiality
6.1. 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
£4.1m (2020: £4.3m)
£2.0m (2020: £1.5m)
Basis for
determining
materiality
We ultimately determined materiality of the group
based on 4.2% of profit before tax pre exceptional items
(2020: 2.2% of net assets).
Parent company materiality equates to less than 1%
of net assets (2020: less than 1%), which is capped at
approximately 50% of group materiality (2020: capped
at 40% of group materiality).
Rationale for
the benchmark
applied
In the current year, we initially determined materiality
as 1.5% of net assets adjusted for the pension surplus.
In response to the DfT rail franchise investigation and
various audit adjustments that significantly reduced
net assets, we reassessed our materiality.
Net assets have been selected as an appropriate
measure on which to determine materiality as the
parent company is a holding company. While parent
company materiality has increased, as set out below
parent company performance materiality has remained
at £1m.
Given the nature of the group’s activities and the scale
of the businesses remained consistent with prior years,
we did not consider it appropriate to reduce significantly
our materiality levels, although as set out below we did
reduce performance materiality.
We considered that profit before tax and before
exceptional items was an appropriate alternative
benchmark, being a key metric for users of the accounts.
We excluded exceptional items to mitigate the volatility
caused by the significant items recognised in the current
year. Materiality of £4.1m equates to 4.2% of profit
before tax and before exceptional items and 0.1% of
group revenue. The prior year materiality represented
7.9% of profit before tax and before exceptional items
and 0.1% of group revenue prior to the impact of
the restatements.
Profit before tax pre
exceptional items
(£97.2m)
Profit before tax pre exceptional items
Group materiality
Group materiality
£4.1m
Component
materiality £1m
Audit Committee
reporting threshold
£0.20m
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Group financial statements
6. Our application of materiality continued
6.2. Performance materiality
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.
Performance
materiality
Basis and rationale
for determining
performance
materiality
Group financial statements
Parent company financial statements
50% (2020: 70%) of group materiality
50% (2020: 70%) of parent company materiality
Whilst we initially used 70% of group materiality in determining our performance materiality, this was
reduced to 50%.
In determining our final performance materiality level we have considered factors such as:
• the DfT rail franchise investigation;
• the risk of regulatory and financial penalties and the consequence to the group;
• the impact of the control deficiencies identified during the audit and the nature and extent of errors
arising; and
• the risk of matters similar to those identified from the DfT rail franchise investigation existing across the
wider group.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.2m (2020: £0.2m), 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.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
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 initially focused our group
audit scope primarily on the audit work at 9 (2020: 8) principal components. In addition to this, we brought 4 further components into
full group reporting scope in light of the issues at LSER, to ensure that the audit had addressed the risk that issues identified from the
DfT rail franchise investigation were not pervasive across the group. These included the Norwegian and Irish franchises, along with Go
North East and Oxford bus. Our scoping decisions considered a number of factors including the individual financial significance of a
component, and whether the risks concerning contract compliance, revenue recognition, government support and onerous contract
provisions were applicable to the components. In response to errors identified in respect of the onerous contract provisions in
Germany and Norway, we performed a contract review across the group to assess the completeness of onerous contract provisions.
The components in full audit scope represent the principal business units and account for 97% (2020: 83%) of the group’s net assets
and 97% (2020: 91%) of the group’s revenue. The components were selected to provide an appropriate basis for undertaking audit
work to address the risks of material misstatement identified above. The comparatives presented are prior to the impact of the
restatements recognised in the financial statements.
Component performance materiality was used to perform the audit work at all components and for the current year audit, this was
£1.0m. Component performance materiality was lowered due to the DfT rail franchise investigation and the risk of there being similar
issues across the wider group as well as the broader control deficiencies noted during the audit as mentioned above. Component
performance 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.
At the group 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.
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7. An overview of the scope of our audit continued
7.2. Our consideration of the control environment
As noted on page 4, following the identification of matters of concern in LSER by the DfT on 28 July 2021 the Board established an
Independent Committee to investigate the matters. The Board has acknowledged that serious errors were made in LSER over several
years and, accordingly, that there was a failure in franchise-related controls in LSER. Our findings in respect of the DfT rail franchise
investigation have been discussed in section 5.1 above.
Additionally, the current year audit has identified a large number of errors that have affected both the current and prior years. As
referenced by the directors on page 5 of the Annual Report, these errors have highlighted significant control deficiencies across a
number of areas. The extent of the control deficiencies identified has had a significant impact on our audit which has required
extended time to complete the audit. This has included the use of forensic, legal and rail industry experts to support the audit response
of management’s investigation into the issues arising from the DfT rail franchise investigation. In addition, due to the extent of errors
and prior year adjustments, enhanced procedures, increased scope and reduced materiality were all required to address the risks
arising. Further detail of the impact of control deficiencies has therefore been included as Key Audit Matter (see section 5.3 above).
In relation to IT controls, we involved our IT specialists to assess relevant controls over the group’s information technology (“IT”)
systems. Given the importance of IT to the recording of financial information and transactions, we have tested General IT controls
relating to certain of the group’s systems where relevant to our audit work. As part of our IT controls testing, we obtained an
understanding of the group’s processes and tested controls through a combination of tests of inquiry, observation, inspection
and reperformance.
We recognise the level of focus from the group on driving improvement in the IT environment across the past few years. Whilst we
did not identify any significant control deficiencies, given the control issues identified above we did not consider it appropriate to seek
to rely on controls for any of the business cycles within the group.
7.3. Working with other auditors
The group audit team have directed and supervised the work of the component audit teams during the course of the year. As part of
our planning, we issued detailed instructions to our component audit teams and included all component teams in our team briefing,
discussed their risk assessment and remained in contact throughout the audit process. In addition, we attended planning and close
meetings with them and component management teams, and reviewed their component reporting.
In response to the group’s initial findings from the DfT rail franchise investigation, we issued updated referral instructions to all
components. We then subsequently increased the extent of communications and interactions with components including review and
challenge of the revised risk assessments by each component, regular meetings to review workpapers and challenge audit procedures
and a visit to Norway. The group engagement team led the response within the LSER component with members of the group
engagement team working with the component team to design and execute the necessary procedures. Due to the significance of the
onerous provisions in Germany and Norway, we led the tailored responses at each of the components to challenge the assumptions
adopted by management in the preparation of the onerous provision models as referred to in Section 5.3.
For all UK components, the Senior Statutory Auditor has access to the audit files and directly reviews the work performed in key risk
areas relevant to the group, including significant risk areas. For overseas components, we remained in close communication with them
throughout the audit process and reviewed significant work papers to gain sufficient oversight of the work performed.
8 Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual 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.
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 course of 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 this gives rise
to a material misstatement in the financial statements themselves. 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.
We have nothing to report in this regard.
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Group financial statements 9. 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.
10. 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.
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.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
11.1. 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, control environment and business performance including the design of the group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management and the audit committee about their own identification and assessment of the risks of
irregularities. These risks are summarised on page 59 of the Annual Report;
• any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– the group’s response to the DfT rail franchise investigation and subsequent communications with the DfT as discussed in section 5.1;
– the group’s consideration of the risk of similar matters of contract compliance identified from the DfT rail franchise investigation
existing across the wider group;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and
• the matters discussed among the audit engagement team including significant component audit teams and involving relevant
internal specialists, including tax, valuations, 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 the greatest potential for fraud and non-compliance with laws and regulations in the following areas: the DfT rail franchise
investigation, assessment of potential onerous contracts in overseas rail, going concern, accounting treatment of franchise related
accruals, revenue recognition for the bus division and accounting treatment for government support packages. 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 provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The
key laws and regulations we considered in this context included the UK Companies Act, UK Listing Rules, pension legislation, tax
legislation, franchise agreements and banking agreements.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty. These include the Railways
Act 1983 and 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.
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11. Extent to which the audit was considered capable of detecting irregularities, including fraud continued
11.2. Audit response to risks identified
As a result of performing the above, we identified the following key audit matters related to the potential risk of fraud or non-
compliance with laws and regulations:
• our response to the DfT rail franchise investigation, including the provision for fines or penalties and the risk of there being similar
issues across the wider group;
• assessment of potential onerous contracts in overseas rail;
• going concern;
• accounting treatment of franchise related accruals;
• accounting treatment for government support packages; and
• 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, other procedures to respond to risks identified included the following:
• reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
• challenging the nature of prior year adjustments identified, including understanding of the cause of those adjustments and tailoring
audit procedures to respond to those risks;
• enquiring of management, the audit committee and in-house and 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;
• reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with
the DfT and other transportation authorities in relation to the operating of the rail and bus franchises;
• involving specialists, including our forensic team to assist in designing and executing appropriate enhanced procedures to respond
to the risks arising from the DfT rail franchise investigation; 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
12. 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 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.
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Group financial statements 13. Corporate Governance Statement
The Listing Rules require us to review the directors' statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the group’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified set out on pages 66 to 68;
• the directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and why the period is
appropriate set out on pages 64 and 65;
• the directors' statement on fair, balanced and understandable set out on page 104;
• the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 59 to 64;
• the section of the annual report that describes the review of effectiveness of risk management and internal control systems set
out on pages 56 and 57; and
• the section describing the work of the audit committee set out on page 98.
14. Matters on which we are required to report by exception
14.1 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.
14.2. 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.
15. Other matters which we are required to address
15.1. 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 6 years, covering the financial years ending 2 July 2016 to
3 July 2021.
15.2. 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).
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16. 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.
Scott Bayne FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London
24 February 2022
166
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements Group financial statements
Consolidated income statement and narrative
53 weeks ended 3 July 2021
Group revenue
Operating costs
Impairment losses (including reversals) on
financial assets and contract assets
Group operating profit/(loss)
Results of equity accounted investments
Finance income
Finance costs
Profit/(loss) before taxation
Tax expense
Profit/(loss) 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)
* Restated - see note 2.
Pre-
exceptional
2021
£m
4,058.5
(3,935.9)
Exceptional
items
2021
£m
Post-
exceptional
2021
£m
—
(104.1)
4,058.5
(4,040.0)
Pre-
exceptional
2020*
£m
3,897.2
(3,818.4)
(7.1)
115.5
(0.2)
2.1
(20.2)
97.2
(34.3)
—
(104.1)
—
—
—
(104.1)
0.5
(7.1)
11.4
(0.2)
2.1
(20.2)
(6.9)
(33.8)
(2.4)
76.4
(0.6)
5.4
(27.0)
54.2
(17.7)
Exceptional
items
2020*
£m
—
(93.7)
—
(93.7)
—
—
—
(93.7)
6.3
Post-
exceptional
2020*
£m
3,897.2
(3,912.1)
(2.4)
(17.3)
(0.6)
5.4
(27.0)
(39.5)
(11.4)
62.9
(103.6)
(40.7)
36.5
(87.4)
(50.9)
46.6
16.3
62.9
(92.6)
(11.0)
(46.0)
5.3
(103.6)
(40.7)
21.5
15.0
36.5
(87.4)
—
(87.4)
108.4p
108.0p
(215.4)p
(214.7)p
(107.0)p
(106.7)p
50.0p
49.9p
(203.3)p
(202.8)p
—
—
(65.9)
15.0
(50.9)
(153.3)p
(152.9)p
71.91p
—
Notes
4
5–7
5, 17
8
8
9
10
10
11
11
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 4.1% to £4,058.5m (2020: £3,897.2m restated). UK Rail operations comprised 69.7% of the total revenue and
remained largely consistent with prior year at £2,829.7m (2020: £2,814.3m restated). International Rail operations comprised 3.5% of
total revenue and increased by 100.3% during the year to £140.2m due to the results including a full year of Norway operations which
commenced in December 2019. Regional Bus comprised 10.5% of revenue, increasing by 4.6% to £427.7m reflecting the first full year of
operation of contracts in Cornwall, a full year of CBSSG receipts and an element of prior year CBSSG funding recognised in the current
year. London & International Bus comprised the remaining 16.3%, growing by 9.4% to £660.9m reflecting a full year’s operation of
contracts in Ireland, contract revenue growth including route wins in London bus, one-off benefits in London relating to the
recognition profile of Quality Incentive Contracts (QICs) and COVID-19 related government receipts in Singapore. Segmental
performance is shown in note 4.
Operating profit
Overall, the operating profit, before exceptional items, increased 51.2% from £76.4m (restated) to £115.5m reflecting the strong
performance in London & International Bus. Operating profit in the London & International Bus segment has increased due to the one-
off benefit from a change in recognition profiling in London relating to QICs of £14.0m and COVID-19 related government receipts in
Singapore, with margins in this segment increasing from 8.3% (restated) to 10.4%. The pandemic has mostly impacted performance in
the Regional Bus segment and pre-exceptional margins have declined slightly from 5.0% to 4.2%. UK Rail profit margins (before
exceptional items) remained largely consistent at 2.0% (2020: 1.8%) and International Rail margins (pre-exceptional items) improved
from (63.7%) to (19.7%) due to the results including a full year of Norway operations which commenced in December 2019 and also
improved operational and financial performance in Germany.
167
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
Consolidated income statement narrative continued
53 weeks ended 3 July 2021
Exceptional operating items
During the year, an exceptional charge of £104.1m has been recognised, an increase of £10.4m compared to the prior year (2020:
£93.7m restated). The key items recorded as exceptional in the current year relate to onerous contract provisions and a potential fine,
as detailed below. Refer to note 7 for details of all exceptional items.
The directors have performed a detailed review of all material contracts across the Group to consider the completeness of the
onerous contract provisions. This involved a detailed review and challenge of the assumptions within each contract, including those
relating to FY20 and the Group’s FY21 interim results. A number of errors have been identified in respect of the assumptions used
when calculating the onerous provision in the Bavarian rail franchise in the prior year and the Group’s FY21 interim results. The prior
year provision was determined to be understated by £36.6m which has been restated in these financial statements. Correspondingly
there was a reduction of £25.9m charged to the consolidated income statement in the Group’s FY21 interim results.
There is a restatement in exceptional items in the prior year relating to the onerous contract provisions in an increase in the existing
Bavaria contract provision in Germany (charge of £36.6m). Refer to note 2 for further details. International Rail exceptional costs have
increased to £71.5m (2020: £67.0m restated) mostly as a result of a new onerous contract provision in relation to the contract in
Norway (charge of £66.2m). There has also been an impairment of £10.5m recognised in relation to intangible and tangible assets in
Norway.
Under the Railways Act 1993, the DfT has the power to impose a financial penalty in relation to LSER as outlined on pages 10 and 11. The
Group has included a provision of £30.0m as an exceptional charge in relation to this, which reflects the Groups current best estimate
of any potential penalty. The Group has also recognised associated legal and professional costs of £2.4m. Refer to note 7 for further
details.
Finance costs
Net finance costs for the year were lower than the prior year at £18.1m (2020: £21.6m restated). Finance costs of £20.2m (2020: £27.0m
restated) reflects lower IFRS 16 interest charges as we approach the end of the UK Rail contracts and IFRS 16 lease liabilities diminish.
Finance income of £2.1m (2020: £5.4m) reflects lower interest rates and reduced cash held on deposit with more cash held in instant
access accounts.
Tax expense
The tax expense increased from £11.4m (restated) in 2020 to £33.8m. On a pre-exceptional basis, the 2021 effective tax rate is 35.3%
(2020: 32.7% restated). This includes a £14.4m charge in relation to the change in the UK deferred taxation rate from 19% to 25%;
excluding this, the effective tax rate is 20.5% (2020: 22.5% restated).
168
The Go-Ahead Group plc Annual Report and Accounts 2021
Consolidated statement of comprehensive income and narrative
53 weeks ended 3 July 2021
Group financial statements
Loss for the year
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss:
Remeasurement losses 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
Tax relating to items that may be reclassified
Foreign exchange differences on translation of foreign operations
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive expense for the year
Attributable to:
Equity holders of the parent
Non-controlling interests
* Restated – see note 2.
Notes
2021
£m
(40.7)
2020*
£m
(50.9)
28
9
23
9
(23.2)
5.3
(17.9)
15.7
(3.1)
5.9
18.5
0.6
(40.1)
(45.4)
5.3
(40.1)
(3.1)
0.4
(2.7)
(25.3)
4.8
(2.3)
(22.8)
(25.5)
(76.4)
(91.4)
15.0
(76.4)
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:
Loss for the year
The loss for the year after taxation is £40.7m and includes amounts attributable to equity shareholders and non-controlling interests.
Remeasurement of defined benefit pension plans
As analysed in note 28 the remeasurement losses on defined benefit pension plans were £23.2m, which consisted of rail pension plans
showing remeasurements of £nil and bus pension plans showing remeasurements of £23.2m.
Unrealised losses/(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.
169
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
Consolidated statement of changes in equity
53 weeks ended 3 July 2021
Share
capital
£m
Reserve for
own shares
£m
Hedging
reserve
£m
Share
premium
reserve
£m
Capital
redemption
reserve
£m
Translation
reserve
£m
Retained
earnings
£m
Total
shareholders’
equity
£m
Non-
controlling
interests
£m
At 30 June 2019 (as previously
reported)
Restatements
At 30 June 2019 (restated)1
(Loss)/profit for the year
(restated)2
Movement on hedges (net of
tax) (note 23)3
Remeasurement on defined
benefit retirement plans (net
of tax) (note 28)
Foreign exchange
Total comprehensive
(expense)/income
Transfer of cash flow hedging
(gains)/losses and cost of
hedging to the initial carrying
amount of hedged items3
Exercise of share options
Share based payment charge
(and associated tax) (note 6)
Acquisition of own shares
(note 25)
Share issue
Dividends (note 11)4
At 27 June 20201
(Loss)/profit for the year
Movement on hedges (net of
tax) (note 23)
Remeasurement on defined
benefit retirement plans (net
of tax) (note 28)
Foreign exchange
Total comprehensive
income/(expense)
Transfer of cash flow hedging
(gains)/losses and cost of
hedging to the initial carrying
amount of hedged items
Exercise of share options
Share based payment charge
(note 6)
Acquisition of own shares
(note 25)
Deferred tax on share-based
payment transactions
Dividends (note 11)
74.7
—
74.7
—
—
—
—
—
—
—
—
—
0.5
—
75.2
—
—
—
—
—
—
—
—
—
—
—
(71.3)
—
(71.3)
—
3.5
—
3.5
—
—
(20.5)
—
—
—
—
—
(20.5)
—
0.7
—
(0.7)
—
—
(71.3)
—
4.7
—
—
—
—
—
(12.3)
—
—
12.6
—
—
—
—
0.6
—
(0.6)
—
—
—
—
12.6
5.5
—
—
—
—
—
1.6
—
1.6
—
—
—
—
—
—
—
—
—
—
—
1.6
—
—
—
—
—
—
—
—
—
—
—
0.7
—
0.7
—
—
—
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
—
—
—
—
—
—
Total
equity
£m
345.2
(38.6)
306.6
—
—
—
300.9
(23.2)
277.7
310.1
(23.2)
286.9
35.1
(15.4)
19.7
—
(65.9)
(65.9)
15.0
(50.9)
—
—
(20.5)
—
(20.5)
—
(2.3)
(2.7)
—
(2.7)
(2.3)
—
—
(2.7)
(2.3)
(2.3)
(68.6)
(91.4)
15.0
(76.4)
—
—
—
—
—
—
(2.3)
—
—
(0.7)
1.6
—
—
(30.9)
179.1
(46.0)
4.7
—
1.6
(0.7)
0.5
(30.9)
170.7
(46.0)
—
—
—
—
—
(14.0)
20.7
5.3
4.7
—
1.6
(0.7)
0.5
(44.9)
191.4
(40.7)
—
—
12.6
—
12.6
—
5.9
(17.9)
—
(17.9)
5.9
—
—
(17.9)
5.9
5.9
(63.9)
(45.4)
5.3
(40.1)
—
—
—
—
—
—
—
(0.6)
1.2
5.5
—
1.2
—
(0.6)
0.1
—
0.1
—
—
—
—
—
—
(3.7)
22.3
5.5
—
1.2
(0.6)
0.1
(3.7)
153.8
At 3 July 2021
75.2
(71.3)
5.8
1.6
0.7
3.6
115.9
131.5
170
The Go-Ahead Group plc Annual Report and Accounts 2021
Consolidated statement of changes in equity narrative continued
53 weeks ended 3 July 2021
Group financial statements
1. Opening reserves as at June 2019 have been restated by £38.6m as a result of corrections impacting the consolidated income statement. Retained earnings has been reduced by
£23.3m in relation to matters of concern relating to LSER and other historic franchises and affiliate trading, and an increase of £0.1m in relation to correction of errors. NCI has
been restated by £15.4m which is 35% of the restated transactions which relate to UK Rail franchises. See Note 2c. Consolidated balance sheets as at 27 June 2020 and 29 June
2019 on pages 184 and 185 and the respective notes in note 2 for further information.
2. Restated – Profit/(loss) in 2019 was restated given the impact of the prior year restatements which are set out in note 2.
3. Restated - These two lines have been restated for a reclassification of £4.7m of cashflow hedge in relation to fuel purchases between the statement of other comprehensive
income and statement of changes in equity - previously reported as the net figure of £15.8m as a movement on hedges (net of tax). See note 2c, presentational corrections and
reclassifications, point 5 IFRS 9 cashflow hedge reclassification on page 191 for further details.
4. Restated – Dividends relating to non-controlling interest have reduced by £0.7m from £14.7m previously reported due to the impact on distributable profits of the prior year
restatements – see note 2 for further information.
The consolidated statement of changes in equity shows the movements in equity shareholders’ funds and
non-controlling interests
Equity shareholders’ funds decreased from £170.7m (restated) to £131.5m as a result of the loss for the year.
Non-controlling interests have increased from £20.7m (restated) to £22.3m and consist of the appropriate share of UK 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 increase is due to
higher market prices resulting in a profit in the year.
171
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
Consolidated balance sheet
as at 3 July 2021
Notes
2021
£m
2020*
£m
2019*
£m
12
13
14
14
9
23
17
28
16
17
18
23
15
9
19
20
23
21
13
9
24
20
23
21
13
28
9
24
25
25
25
25
25
25
553.8
345.4
73.5
8.5
1.5
3.4
2.0
41.5
589.0
648.9
73.5
22.6
3.3
0.1
—
63.3
631.9
—
74.1
34.7
0.5
1.5
—
53.8
1,029.6
1,400.7
796.5
19.5
413.2
2.3
4.9
3.2
13.4
630.6
19.7
290.5
—
0.1
7.2
4.9
569.8
16.8
352.7
—
4.4
2.7
—
630.8
1,087.1
2,116.7
892.2
1,007.4
2,292.9
1,803.9
(883.4)
(0.6)
(12.0)
(263.9)
(17.6)
(159.1)
(765.3)
(11.0)
(12.3)
(517.3)
(0.9)
(51.2)
(875.0)
(0.8)
(11.7)
(1.8)
(13.5)
(40.5)
(1,336.6)
(1,358.0)
(943.3)
(13.5)
(0.3)
(382.5)
(48.7)
(5.5)
(59.7)
(116.1)
(15.6)
(5.6)
(403.9)
(131.3)
(10.3)
(48.9)
(127.9)
(9.0)
(0.8)
(401.6)
(4.3)
(5.1)
(49.5)
(83.7)
(626.3)
(743.5)
(554.0)
(1,962.9)
(2,101.5)
(1,497.3)
153.8
191.4
306.6
75.2
(71.3)
5.8
1.6
0.7
3.6
115.9
131.5
22.3
153.8
75.2
(71.3)
(12.3)
1.6
0.7
(2.3)
179.1
170.7
20.7
191.4
74.7
(71.3)
3.5
1.6
0.7
—
277.7
286.9
19.7
306.6
Assets
Non-current assets
Property, plant and equipment
Right of use assets
Goodwill
Other intangible assets
Deferred tax assets
Derivative financial assets
Trade and other receivables
Retirement benefit assets
Current assets
Inventories
Trade and other receivables
Finance lease receivables
Derivative financial assets
Assets classified as held for sale
Current tax assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Derivative financial liabilities
Interest-bearing loans and borrowings
Lease liabilities
Current tax liabilities
Provisions
Non-current liabilities
Trade and other payables
Derivative financial liabilities
Interest-bearing loans and borrowings
Lease liabilities
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
Translation reserve
Retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
* Restated – see note 2.
The consolidated notes 1 to 30 are an integral part of the consolidated financial statements.
The financial statements were approved and authorised for issuance by the Board of directors on 23 February 2022 and were signed on
its behalf by:
Clare Hollingsworth – Chair
Gordon Boyd – Interim Group Chief Financial Officer
172
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
Consolidated balance sheet narrative
as at 3 July 2021
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:
Property, plant and equipment
Overall, property, plant and equipment totalled £553.8m, down £35.2m 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 £52.9m on assets, £50.0m in the Bus division and
£2.9m in the Rail division; offsetting this were charges of £81.5m, £65.2m in the Bus division and £16.3m in the Rail division.
Right of use assets
Right of use assets decreased by £303.5m from the prior year, to £345.4m. This is primarily due to a depreciation charge of £486.5m in
the year which is significant as the majority of the leases relate to the UK Rail businesses which have short lease terms due to the
remaining terms of the franchises. This charge is partially offset by additions of £187.0m, which includes contract modifications of
£165.9m as a result of the franchise contract extension in Govia Thameslink Railway.
Goodwill and intangible assets
The total intangible balance of £82.0m is down £14.1m on the prior year as a result of the movement in other intangibles. This is due to
an impairment of £9.7m of franchise set-up costs and other intangible assets, and £0.8m of associated right of use assets within
Norway, along with the amortisation charge for the Group for the year totalling £6.3m which is offset by additions of £2.2m.
Current assets
The Group’s current assets totalled £1,087.1m, up £194.9m on the restated prior year. Of this increase, £60.8m was in cash and the
remainder of the movement was due to higher trade receivables. Both of these increases were mainly in the UK Rail businesses and
arose from the timing of working capital movements, the lifting of COVID-19 restrictions in the current year and the franchises
operating under the EMA and ERMA contracts.
Derivative financial assets and liabilities
Included in current assets is £4.9m and in non-current assets is £3.4m, offset by current liabilities of £0.6m and non-current liabilities of
£0.3m. 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 £118.1m to £883.4m, mainly attributable to the timing of working capital payments in the
UK Rail businesses, including timing of payments from and to the DfT in relation to the EMA and ERMA contracts.
Interest-bearing loans and borrowings
Non-current interest-bearing loans and borrowings totalled £382.6m, down from £403.9m in 2020. Principal balances within this are
amounts drawn on our revolving credit facility of £126.6m and the £250.0m corporate bond, offset by deferred debt issue costs.
Current interest-bearing loans and borrowings totalled £11.9m, down from £12.3m (restated) in 2020. Interest rates and movements on
these balances are shown in full in note 21.
Lease liabilities
Lease liabilities total £312.6m which is a decrease of £336.0m compared to 2020. This decrease is mainly due to the majority of the
leases relating to the rail businesses which have short term lease terms due to the remaining term of the franchises. During the year,
there was a contract modification of £165.9m in Govia Thameslink Railway as a result of the rail franchise being extended. The lease
liability comprises £263.9m of current liabilities and £48.7m of non-current liabilities which is reflective of the remaining term of the UK
Rail franchises at the year end.
Retirement benefit schemes
Further details of the retirement benefit schemes in both bus and rail are shown in note 28. The net surplus on the bus schemes totals
£36.0m 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. The rail deficit is £nil reflecting that the franchise
adjustment (for the amounts which are the ongoing responsibility of the Department for Transport (DfT) or others beyond the
franchise term) offsets the pension scheme deficit calculated.
Provisions
As shown in note 24, the Group provides for both uninsured claims and for rail franchise commitments including property and rolling
stock dilapidations. The total provisions balance has increased by £96.1m compared to 2020 provisions of £179.1m (restated). This is
primarily as a result of an onerous contract provision recognised in relation to the Norwegian rail franchise of £65.3m and a £30.0m
provision for the Group’s current best estimate of any potential penalty in relation to the matters of concern relating to LSER and other
historic franchises and affiliate trading outlined on pages 10 and 11. In addition to this, the total provision for uninsured claims of
£47.9m is £2.0m lower than in 2020 and franchise commitments are £7.3m higher than prior year at £79.3m.
Capital and reserves
Movements in equity and reserves are described in the commentary on the consolidated statement of changes in equity.
173
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
Consolidated cashflow statement
53 weeks ended 3 July 2021
Loss after tax for the year
Net finance costs
Tax expense
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets
Asset impairment, excluding exceptional items
Exceptional items
Share of result of joint venture
Profit on sale of property, plant and equipment
Share based payment charges
Difference between pension contributions paid and amounts recognised in the income statement
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Movement in provisions, excluding exceptional items
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 property, plant and equipment held for sale
Movement in finance lease receivables
Purchase of property, plant and equipment
Purchase of property, plant and equipment held for sale
Purchase of intangible assets
Net cashflows used in investing activities
Cashflows from financing activities
Interest paid on lease liabilities
Other interest paid
Dividends paid to members of the parent
Dividends paid to non-controlling interests
Proceeds from issue of shares
Payment to acquire own shares
Repayments of borrowings
Proceeds from borrowings
Payment of lease liabilities
Net cashflows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 27 June 2020
Effect of foreign exchange rate changes
Cash and cash equivalents at 3 July 2021**
* Restated – see note 2.
** Cash balances of £543.7m (2020: £474.8m) were restricted at 3 July 2021. Further details are shown in note 19.
Notes
8
9
12
13
14
7
6
9
18
11
19
19
2021
£m
(40.7)
18.1
33.8
81.5
486.5
6.3
5.7
104.1
0.2
0.1
1.2
(5.3)
0.2
(125.8)
120.7
2.7
689.3
(12.1)
677.2
1.1
6.3
7.3
8.4
(52.9)
(5.7)
(2.2)
(37.7)
(9.0)
(11.3)
—
(3.7)
—
(0.6)
(307.2)
289.4
(534.5)
2020*
£m
(50.9)
21.6
11.4
84.1
375.5
9.4
0.9
93.7
0.6
(0.9)
1.6
(7.3)
(2.9)
58.8
(113.2)
10.6
493.0
(28.2)
464.8
5.5
0.7
2.0
—
(72.6)
—
(18.4)
(82.8)
(13.9)
(11.5)
(30.9)
(13.9)
0.5
(0.7)
(361.9)
363.6
(374.3)
(576.9)
(443.0)
62.6
569.8
(1.8)
630.6
(61.0)
630.8
—
569.8
174
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
Consolidated cashflow and reconciliations
53 weeks ended 3 July 2021
The consolidated cashflow statement shows the cashflows from operating, investing and financing activities for the year
Net cash/debt
Closing adjusted net debt on a post-IFRS 16 basis was £615.6m, a decrease of £350.3m from opening adjusted net debt of £965.9m.
Closing adjusted net debt on a pre-IFRS 16 basis was £305.9m. In line with our debt covenants, net debt is pre-IFRS16 and adjusted for
restricted cash. Adjusted net debt Is calculated using the outstanding principal value of debt and does not include accrued interest
and is gross of debt issue costs.
Cashflow reconciliation
A reconciliation of cash generated from 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.
2021
2020*
Summary cashflow
EBITDA (excluding exceptional items)
Movement in restricted cash
Working capital and other operating cashflows
Cashflow generated from operations (excluding
restricted cash movements)
Tax paid
Net interest paid
Net capital investment
Dividends paid to non-controlling interests
Free cashflow
Payments to acquire own shares
Proceeds from issue of shares
Inception of new leases
Lease modifications
IFRS 16 lease liabilities onto balance sheet
Dividends paid to members of the parent
Other
Movement in adjusted net debt**
Opening adjusted net debt**
Closing adjusted net debt**
* Restated – see note 2.
** Adjusted net debt represents net cash less restricted cash.
IFRS 16
basis
£m
695.6
(68.9)
(6.5)
620.2
(12.1)
(19.2)
(47.2)
(3.7)
538.0
(0.6)
—
(31.7)
(166.6)
—
—
11.2
350.3
(965.9)
IFRS 16
effect
£m
499.9
—
42.0
541.9
—
(9.0)
—
—
532.9
—
—
(31.7)
(166.6)
—
—
—
334.6
(644.3)
Pre-IFRS 16
basis
£m
195.7
(68.9)
(48.5)
78.3
(12.1)
(10.2)
(47.2)
(3.7)
5.1
(0.6)
—
—
—
—
—
11.2
15.7
(321.6)
(615.6)
(309.7)
(305.9)
IFRS 16
basis
£m
546.3
(45.7)
2.5
503.1
(28.2)
(19.9)
(88.3)
(13.9)
352.8
(0.7)
0.5
(235.0)
—
(781.1)
(30.9)
(1.2)
(695.6)
(270.3)
(965.9)
IFRS 16
effect
£m
383.9
—
1.6
385.5
—
(13.7)
—
—
371.8
—
—
(235.0)
—
(781.1)
—
—
(644.3)
—
(644.3)
Pre-IFRS 16
basis
£m
162.4
(45.7)
0.9
117.6
(28.2)
(6.2)
(88.3)
(13.9)
(19.0)
(0.7)
0.5
—
—
—
(30.9)
(1.2)
(51.3)
(270.3)
(321.6)
EBITDA (excluding exceptional items) is defined as earnings before interest, tax, depreciation, amortisation and impairment and
excludes exceptional items. In the year to 3 July 2021, it increased to £695.6m (£195.7m on a pre-IFRS 16 basis) as a result of the ongoing
recovery from the impacts of the COVID-19 pandemic and continued COVID-19 support arrangements.
Capital expenditure, net of sale proceeds, was £41.2m lower in the year at £47.2m (2020: £88.3m restated) due to higher sales proceeds
and lower purchases. Tax payments in the year decreased by £16.1m to £12.1m primarily due the timing of payments made to HMRC.
EBITDA (excluding exceptional items) reconciliation
EBITDA (excluding exceptional items) is defined as earnings before interest, tax, depreciation, amortisation and impairment and
excludes exceptional items, as shown below. This metric is used in the calculation of our pre-IFRS 16 EBITDA (excluding exceptional
items) which is relevant to our debt covenants.
Loss after tax for the year
Exceptional operating items
Net finance costs
Tax expense
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets
Share of result of joint venture
Asset impairment, excluding exceptional items
EBITDA (excluding exceptional items)
* Restated – see note 2.
175
The Go-Ahead Group plc Annual Report and Accounts 2021
2021
£m
(40.7)
104.1
18.1
33.8
81.6
486.5
6.3
0.2
5.7
695.6
2020*
£m
(50.9)
93.7
21.6
11.4
84.1
375.5
9.4
0.6
0.9
546.3
Critical accounting judgements and key sources of estimation uncertainty
Group financial statements
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.
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:
Going concern
During the financial year, and up to the date of signing the Annual Report and Accounts, the COVID-19 pandemic has continued to
have a significant impact on the Group. Whilst the Group has seen positive trends emerging over the period since the balance sheet
date with the easing and cessation of many UK and international government restrictions, it is difficult to judge what the long-term
impact of the pandemic will be on the wider economy and, in particular, the transport sector in which the Group operates.
Under the Railways Act 1993, the DfT has the power to impose a financial penalty in relation to LSER as outlined on pages 10 to 11. In
the absence of specific precedent or relevant guidance, it is difficult to estimate precisely the likely quantum of any penalty. The Group,
having considered independent legal advice received by the Independent Committee, has included a provision of £30.0m which
reflects the Group's current best estimate of any penalty.
Owing to the above factors, and the difficulties in forecasting the resulting impact on ongoing compliance with the Group’s loan
facility covenants, the going concern assessment is considered a critical accounting judgement
However, the directors have considered the Group’s current and future prospects and judge that it is appropriate to continue to adopt
the going concern basis of preparation as they are satisfied that the Group can continue to pay its liabilities as they fall due for a period
of at least 12 months from the date of approval of these financial statements. Please refer to the Directors’ report for the Group’s
going concern statement.
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 (TOCs).
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 useful economic lives of assets within the TOCs are determined by reference to the length of the franchise and are matched to the
contractual franchise end date. The residual value of assets is determined by their condition at the franchise end date and by the level
of maintenance that has been undertaken during the period of operation.
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.
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.
Please refer to note 27 for details of contingent liabilities relating to these judgements and estimations.
As a result of the COVID-19 pandemic, on 23 March 2020 the UK Government suspended all rail franchise agreements and introduced
an industry-wide Emergency Measures Agreement (EMA) scheme to support train operating companies. The GTR EMA was in place
for an initial period to 19 September 2020. Since this date, GTR is operating under an Emergency Recovery Measures Agreement
(ERMA) now extended until the end of March 2022. The ERMA is similar in nature to that of the EMA with GTR continuing to receive a
management fee for the remainder of its franchise.
Contract and franchise accounting specific to the rail business is disclosed in the segmental analysis in note 4.
Exceptional operating items
In certain years the Group presents as exceptional operating items, on the face of the income statement, material items of income or
expense which, because of the size, nature or expected infrequency of the events giving rise to them, merit separate presentation to
allow an alternative understanding of financial performance. The determination of whether items merit presentation as exceptional in
a particular year is therefore a matter of judgement.
Items of income or expense that are considered by management for designation as exceptional include onerous contract provisions,
impairment of assets, restructuring provisions and fines or penalties, and the related tax on these items. Set out below are details of
the transactions against which management has considered the exceptional items accounting policy, outlined on page 193.
The Go-Ahead Group plc Annual Report and Accounts 2021
176
Group financial statements
Critical accounting judgements continued
Exceptional operating items continued
Asset impairments and restructuring costs – International Rail
During the prior year, freehold land and buildings were impaired by £4.4m in Germany and recognised as an exceptional operating item.
During the year ended 3 July 2021, a depot that had previously been impaired was sold for an amount greater than the previously
estimated recoverable amount. Further, as part of this sale agreement, there is no longer an obligation to pay break fees on the depot
which were provided for as of 27 June 2020, and therefore this provision has been released. This has resulted in an exceptional
operating credit of £5.2m.
Asset impairments, provisions and restructuring costs – Regional Bus
In Regional Bus, an impairment charge of £1.1m has been recognised in relation to property, plant and equipment following the
termination of contracts resulting from the effects of the COVID-19 pandemic. Additional costs of £1.2m have also been recognised in
relation to loss making contracts where passenger demand is not recovering at the same levels as the wider commercial network.
These costs have been offset by the release of restructuring provisions of £1.0m and an impairment reversal of £1.1m following the sale
of some coaches that were previously impaired and recognised as exceptional operating charges during the year ended 27 June 2020.
Whilst the costs and credits incurred this year do not meet the quantitative threshold to be classified as exceptional on a standalone
basis, management has concluded that these items should be classified as exceptional in line with the Group’s exceptional items
accounting policy, in order to ensure a consistent approach with similar costs incurred previously.
German Bavaria franchise onerous contract provision
The directors have performed a detailed review of all material contracts across the Group to consider the completeness of onerous
contract provisions. This involved a detailed review and challenge of the assumptions within each contract, including those relating to
full year 2020 and the 2021 interim results. A number of errors were identified in respect of the accounting for the onerous provision in
the Bavarian rail franchise in the prior year and the Group’s 2021 interim results.
The prior year provision was determined to be understated by £36.6m which has been restated in these financial statements.
Correspondingly there was a reduction in the onerous contract provision of £25.9m reported in the Group’s 2021 interim results. The
calculation of the understatement was determined following a review of historical information and consideration given to what
information then available could reasonably have been included that indicated errors in the previous cash flow assumptions
underpinning the provision.
The quantum of this provision and impairment is deemed to be sufficiently material to be classified as exceptional in line with the
Group’s accounting policy. See page 179 below for more information in the key sources of estimation uncertainty section.
Norway franchise onerous contract provision and asset impairment
As part of the detailed review of all material contracts performed by the directors, an onerous contract provision was also recognised
in relation to the Norway rail franchise.
In December 2019, the Group began operating rail services in Norway. As the contract involves exposure to changes in passenger demand,
the Norwegian Government introduced a package of financial support early in the COVID-19 crisis, initially with 100% loss coverage. As
the pandemic continued, loss coverage was reduced from this level down to 85%. The impact of the reduction and possible cessation of
funding, the fixed nature of the operating requirements and the longer than expected duration of lower passenger demand following the
impact of COVID-19 have resulted in a reduction to the estimated economic benefits in use of the contract. This is based on the expected
future cashflows and a risk-free discount rate, triggering the need to reassess the assumptions made in the onerous contract and
impairment models. This potential reduction in future revenue results in an onerous contract provision of £65.3m in the consolidated
balance sheet (and an exceptional operating charge of £66.2m in the consolidated income statement with £0.9m to the translation
reserve) and asset impairments of £10.5m being recognised at the year end. The quantum of this provision and impairment is deemed to
be sufficiently material to be classified as exceptional in line with the Group’s accounting policy. See page 179 below for more information
in the key sources of estimation uncertainty section.
Department for Transport penalty and associated costs relating to LSER
In UK Rail, as described above, a provision has been recognised of £30.0m relating to a potential penalty from the DfT. Associated
professional fees of £2.1m have also been recognised as an exceptional item. In aggregate, these costs are deemed to be sufficiently
material and non-recurring in nature to be classified as exceptional in line with the Group’s accounting policy. See page 179 below for
more information in the key sources of estimation uncertainty section.
The two items below were considered by management for designation as exceptional items but were determined not to meet the
criteria stated in the Group’s accounting policy.
London Bus – QICs
In London & International Bus, Quality Incentive Contracts (QICs) payments are received as part of the contract revenue and the
potential premiums or penalties are assessed cumulatively on a contract-by-contract basis from TfL, 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 the year, due to Transport for London (TfL) moving from annual to quarterly settlement of QICs, greater
levels of certainty were created allowing an accelerated recognition of this revenue. This was considered by management against the
Group’s accounting policy for designation as an exceptional operating item but determined not to meet the criteria due to the Group
regularly experiencing the timing benefits and detriments of settlement of amounts from its various contracts. As such this item was
not considered to be sufficiently infrequent and has been included in pre-exceptional revenue in the year.
177
The Go-Ahead Group plc Annual Report and Accounts 2021
Critical accounting judgements and key sources of estimation uncertainty
continued
Group financial statements
Critical accounting judgements continued
Exceptional operating items continued
Pre-EMA settlements
In the Rail division, provisions were held in respect of qualifying changes relating to pre-EMA periods and recovery of strike costs.
Agreement was reached in writing with the DfT that all outstanding qualifying changes will be settled based on the outcome of the
audited financial model. The DfT also confirmed that strike costs are considered already settled through the ‘big change’ settlement in
December 2018. As a result of the agreement and settlement with the DfT, the previously held provisions totalling £12.2m were
released to the P&L. This was considered by management per Group’s accounting policy for designation as an exceptional operating
item but determined not to meet the criteria due to the Group regularly transacting settlements in relation to these types of matters
in the UK Rail segment given the size, nature and complexity of these franchises. Further, previous precedent has been seen with both
similar costs and releases being taken to the income statement and not presented as exceptional in previous years.
During the prior year, charges in relation to Regional Bus restructuring and impairment of assets resulting from the impact of the
COVID-19 pandemic were classified as exceptional. Similarly, impairment of assets and contract provisions in relation to our German
business were classified as exceptional in the prior year.
Accounting for the Railways Pension Scheme (RPS)
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 and 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 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.
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 3 July 2021, the impact of this alternative treatment, on a post-tax basis, would be an increase in costs of £97.6m (2020:
£72.6m) to the income statement and a credit to other comprehensive income of £122.3m (2020: debit of £185.0m). 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.
COVID-19: Rail – Emergency Measures Agreements (EMAs) and Emergency Recovery Measures Agreements (ERMAs)
The COVID-19 pandemic continues to have a major impact on the global economy and has had an impact on the Group’s operational
performance during the current year. The Group has received government support in each area of its divisional operations. In the Rail
division, from 1 March 2020, UK operations saw all the revenue and cost risk being transferred to the Government by way of
Emergency Measures Agreements (EMAs) and later Emergency Recovery Measures Agreements (ERMAs).
LSER's EMA ended on 17 October 2021 when its Southeastern franchise expired and the DfT chose to appoint the Operator of Last
Resort (OLR). For GTR, the EMA term ended on 19 September 2020 at which point GTR transferred to an ERMA which has its term end
on 31 March 2022.
As part of these agreements, signed by the DfT, GTR and LSER in the prior year, there are two income streams; a management fee to
run business as usual and a performance based fee payable on achieving various target operational performance benchmarks. The
management fee is recognised within franchise subsidy revenue, in line with the revenue recognition policy for subsidy receipts
received from the DfT.
For EMAs and ERMAs, the performance payment is assessed by the DfT through a review process, which awards rail franchisees with a
score of 1, 2 or 3 against three criteria (four for the ERMA) over the entire term of the EMA in areas of operational performance,
customer experience and acting as a good and efficient operator and was extended to include collaboration for the ERMA.
Subsequent to the year end, the EMA performance payment has been confirmed and recognised at £3.9m for LSER. As a result, It Is no
longer considered a critical accounting judgement.
178
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
Critical accounting judgements continued
COVID-19: Rail – Emergency Measures Agreements (EMAs) and Emergency Recovery Measures Agreements (ERMAs) (continued)
GTR’s EMA performance payment was confirmed by the DfT in December 2020 to be £3.8m and this was recognised in the first half of
this financial year.
The ERMA is similar in nature to that of the EMA with GTR continuing to receive a base management fee for the remainder of its
franchise; however, the performance payment is assessed with a score of 1, 2 or 3 against the four criteria of operational performance,
customer experience, financial performance and collaborative behaviours.
The scores are assessed six monthly and the performance payment awarded and recognised for the period to 31 March 2021 was
£8.3m. The cumulative ERMA performance payment for GTR can range up to £18.3m over the ERMA term.
Using the fact that after year end, GTR’s performance scores in 3 of the 4 ERMA categories were confirmed and also using the EMA
performance outcome and the ERMA assessment completed to date as guides, a performance payment of £3.3m was accrued as at the
financial year end, covering the period from April 2021 to year end, in addition to the £8.3m recognised for the period to 31 March 2021.
As a result, judgement remains until the final performance score is confirmed.
In Germany, the rail contracts currently in operation are management contracts. Consequently, there is no material revenue risk
associated with these contracts.
In Norway, the rail contract is partly subject to revenue risk in relation to the unsubsidised part of the contract. Throughout the
financial year ended 3 July 2021, the Norwegian Government continued to support the rail industry with a package materially covering
revenue lost since March 2020. This support package has been extended to at least March 2022 with the possibility of further support
if COVID-19 restrictions remain and infection rates remain high. See further disclosures below in this section in relation to Norwegian
rail franchises.
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:
Measurement of franchise commitments
The measurement of franchise commitments, comprising dilapidation provisions on rolling stock, depots and stations, within the UK
Rail franchises, and a provision relating to the franchise set-up costs of the German Bavaria franchise, is set out in note 24.
Significant elements of the dilapidation provisions 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.
The forecasts in relation to the estimated value in use of the German franchise are subject to estimation due to the sensitivity of the
assumptions used. The most sensitive assumptions relate to the assessment of future performance penalties, driver costs and costs of
franchise set-up.
Sensitivity analysis with respect to franchise commitments is provided in note 24.
Retirement benefit schemes – bus
The measurement of defined benefit pension schemes 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 28. 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
benchmarks these assumptions on a periodic basis with other professional advisors. Sensitivity analysis on the bus retirement defined
benefit schemes is detailed in note 28.
179
The Go-Ahead Group plc Annual Report and Accounts 2021
Critical accounting judgements and key sources of estimation uncertainty
continued
Group financial statements
Key sources of estimation uncertainty continued
Norwegian rail franchises
In December 2019, the Group began operating rail services in Norway, its first contract in this market and the first commercially run
network in the country. After a successful start to operations, the effects of the COVID-19 pandemic were felt just three months into
this contract.
As the contract involves exposure to changes in passenger demand, the Norwegian Government introduced a package of financial
support early in the COVID-19 crisis, initially with 100% loss coverage. As the pandemic continued, loss coverage was reduced from
this level down to 95%, then 90% and subsequently to 85%.
IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires a provision to be made for an onerous contract where it is
probable that the future economic benefits to be derived from the contract are less than the unavoidable costs under the contract.
The impact of the reduction and possible cessation of funding, the fixed nature of the operating costs and the longer than expected
duration of lower passenger demand following the impact of COVID-19 have resulted in a reduction of the estimated value in use of
the contract, which is based on the expected future cashflows and a risk-free discount rate, triggering the need to reassess the
assumptions made in the onerous contract and impairment models. This reduction in future revenue results in an onerous contract
provision of £65.3m and asset impairments of £10.5m being recognised at the year end.
In December 2021, government support was subsequently prolonged to include November and December. Whilst temporary support
at an equivalent level is in place until March 2022, after this period the government has indicated further support may be in place until
at least August 2022, although at an unconfirmed level. The inclusion of government support at 85% loss coverage from November
2021 to the end of March 2022 in the calculation of the onerous contract provision would reduce its size by £6.8m and there is ongoing
dialogue with the Government in relation to a possible renegotiation of the contract.
The estimation of both the cashflow forecasts and discount rate involves a significant degree of judgement. Cashflow forecasts are
derived from the most recent Board approved corporate plan. Cashflows for the remainder of the contract years are based on the third
year of the corporate plan, updated to reflect the most recent experience of the franchises and other expected future developments.
In line with IAS 37 paragraph 47, the pre-tax risk-free discount rates applied to risk adjusted future cashflows are derived with
reference to relevant government bond yields in order to reflect the current market assessment of the time value of money. Whilst the
directors are taking every possible measure to mitigate the expected losses associated with the contract, the determination of the
onerous contract provision involves inherent uncertainties and the estimation of many inputs, including future variations in passenger
demand, the level of government support, service performance, energy costs, staff costs and the exercise of the contract’s two
extension years. The key areas of estimation uncertainty are expected to become clearer as recovery from the pandemic continues.
Considering reasonably possible favourable and adverse movements in these key inputs over each contract’s life gives a range of
estimation uncertainty whereby in the best-case scenario the contract would still be loss making at a discounted loss of £46.0m, and in
the reasonably possible worst-case scenario the contract would incur a discounted loss of £112.3m.
In accordance with IAS 1, this disclosure focuses on assumptions and other major sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of the provision within the
next financial year. The key areas of estimation uncertainty, and the associated sensitivities, are as follows:
• Passenger demand: Passenger demand is assumed to recover to 93% of pre-COVID levels by June 2024, with June being the
seasonal peak. If this took 12 months longer the provision would increase by £13.0m and if this happened 12 months earlier the
provision would decrease by £6.8m.
• Emergency government support: Government support being extended to August 2022 would reduce the provision by £11.8m.
• Variable costs: An increase or reduction in energy costs and staff costs by 50% and 2% respectively would increase or reduce the
provision by £8.7m.
The provision is included within onerous contract provisions and further details can be found in note 24.
German rail franchises
The Group has a number of contractual commitments in Germany in respect of its current rail franchises in Baden-Württemberg and
Bavaria. IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires a provision to be made for an onerous contract where
it is probable that the future economic benefits to be derived from the contract are less than the unavoidable costs under the contract.
In the prior year, the Group concluded that assets with a net book value of £16.5m in relation to the three Baden-Württemberg
franchises were impaired down to £1.7m and it maintains that view. However, it also continues to hold the view that the contract is not
onerous as the risk-adjusted discounted future cash inflows are expected to exceed the unavoidable costs over the life of the
contracts.
In relation to Bavaria, the Group has two rail contracts, each running for 12 years, which are collectively worth €2bn in lifetime revenues.
One of these contracts became operational in December 2021 and the other will become operational in December 2022. Whilst the
first contract commenced operations in December 2021 and the second contract is still in its mobilisation phase. based on the Group’s
current knowledge and expectations of the income and costs associated with these contracts, it has been deemed necessary under
IAS 37 to reassess the onerous contract provision. As a result, the provision recognised as at 3 July 2021 totals £33.8m (2020 restated:
£44.3m). Whilst the directors are taking every possible measure to mitigate the expected losses associated with these contracts, the
determination of the onerous contract provision involves inherent uncertainties and the estimation of many inputs which may give
rise to a material adjustment of the provision in future years. Key assumptions in the model relate to future variations in passenger
capacity (additional vehicle km), route pairing outcomes, service performance, energy costs and consumption levels, staff costs, and
maintenance costs.
180
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
Key sources of estimation uncertainty continued
German rail franchises continued
The degree of estimation uncertainty associated with the onerous contract provision is expected to reduce as operations commence
and develop, as some of the existing estimation uncertainty derives from the fact that the final operational plan, contractual terms and
operational model are still being determined. Considering reasonably possible favourable and adverse movements in these key inputs
over each contract’s 12-year life, gives a range of outcomes whereby in the best-case scenario the contracts would still be loss making
at a discounted loss of £17.5m, as a result of the costs of the mobilisation, and in the reasonably possible worst-case scenario the
contract would incur a discounted loss of £52.6m.
In accordance with IAS 1, this disclosure focuses on assumptions and other major sources of estimation uncertainty at the end of the
reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of the provision within the
next financial year. The key areas of estimation uncertainty, and the associated sensitivity, are as follows:
• Compensation for unpaired train kilometres (kms): A reduction or increase of 25% of the actual empty/unpaired kms being agreed
with the LTA will increase or reduce the provision by £5.2m.
• Energy cost management: A reduction in the assumed energy regeneration levels by 2% of those assumed in the onerous contract
provision calculation would increase the provision by £2.9m.
• Penalties: An increase or reduction of 20% in the level of penalties would increase or reduce the provision by £2.3m.
• Heavy maintenance reserve: the maintenance reserve to be paid back at the end of the two contracts is based on manufacturers’
cost estimates and will be based on the client’s final assessment, therefore an increase or reduction of 10% of the reserve would
increase or reduce the provision by £1.9m.
• Staff costs: the inclusion of a further 20% contingency for not realising the planned efficiencies or removing the 20% contingency
would increase or decrease the provision by £3.9m.
The estimates included in the onerous contract calculation are made based on the current level of agreed kilometres as per the
contract. However, should the agreed kilometres change there will be corresponding changes in the estimates around maintenance
costs, sales and marketing costs and energy costs. Further, estimates around rolling stock dilapidation costs and the renting out of
trained drivers may depend upon the outcome of future events and may need to be revised as circumstances change.
Franchise accruals
The Group has recognised £86.8m of franchise accruals relating to dilapidation, maintenance and end of life liabilities, which are
included in the overall accruals balance of £323.6m. These accruals in particular are subject to a greater level of estimation uncertainty
as there is a range of possible outcomes, of which the best estimate has been recognised. It is reasonably possible that changes to
these estimates could result in an increase or decrease in these accruals of c. 40% or 20% respectively.
Potential penalty to the Department for Transport relating to London & South Eastern Railway Limited (LSER)
Under the Railways Act 1993, the DfT has the power to impose a financial penalty in relation to LSER as outlined on pages 10 to 11. In
the absence of specific precedent or relevant guidance, it is difficult to estimate precisely the likely quantum of any penalty. The Group,
having considered independent legal advice received by the Independent Committee, has included a provision of £30.0m which
reflects the Group's current best estimate of any penalty.
Whilst the financial penalty should be proportionate to the nature of the matter it concerns, per the Railways Act 1993, the financial
penalty can range from zero to 10% of the total turnover of 2019 and 2020 at LSER (£204.4m).
COVID-19 Bus Service Support Grant (CBSSG)
CBSSG income recognition is no longer considered a key source of estimation uncertainty for the year ended 3 July 2021 as it was in the
prior year.
CBSSG was a grant payable to bus operators in respect of commercial services in return for making available sufficient capacity to run
an agreed level of commercial miles. In the prior year when the scheme was introduced, estimating the amount receivable involved
significant estimation uncertainty however there is now more evidence available in relation to settled scheme periods and as such
there is greater certainty over CBSSG income to be received. For the year ended 3 July 2021, the Group’s operating companies have
determined that they are potentially entitled to CBSSG income of £123.8m, inclusive of the £7.2m received in relation to the prior year.
This is £3.8m higher than the amount recognised in the financial statements due to uncertainty relating to unsettled CBSSG claims.
The new recovery funding package, the Bus Recovery Grant (BRG), running until the start of April 2022, reflects the Government’s
decision to continue to provide a level of support to bus operators to allow the provision of vital services to communities whilst
passenger numbers continue to recover from the effects of the COVID-19 pandemic.
181
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements
Group 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 3 July 2021 were authorised for
issue by the Board of directors on 23 February 2022 and the balance sheet was signed on the Board’s behalf by Clare Hollingsworth and
Gordon Boyd. The Group is a public company, limited by shares, that is incorporated, domiciled and registered in England and Wales.
The immediate and ultimate parent company of the Group is The Go-Ahead Group plc. The registered office is 3rd Floor, 41–51 Grey
Street, Newcastle upon Tyne, NE1 6EE, UK. The Group’s ordinary shares are publicly traded on the London Stock Exchange and it is not
under the control of any single shareholder.
The consolidated financial statements of the Group have been prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. The financial statements have also been prepared in accordance
with IFRSs as issued by the IASB.
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, along with 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 12 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 detailed information is provided in the going
concern statement in the directors’ report on pages 66 to 143 and is therefore not replicated here.
New standards
The following new standards or interpretations are mandatory for the first time for the financial year ended 3 July 2021:
• Impact of the initial application of Interest Rate Benchmark Reform amendments to IFRS 9 and IFRS 7 – phase 1
• Impact of the initial application of COVID-19 Related Rent Concessions amendment to IFRS 16
• Amendments to References to the Conceptual Framework in IFRS Standards
• Amendments to IFRS 3 Definition of a Business
• Amendments to IAS 1 and IAS 8 Definition of Material
Adoption of the standards and interpretations had no material impact on the Group’s financial position or related performance.
Prior year restatements
As detailed on page 41, a number of restatements and adjustments were identified during the year. This note summarises the impact
of the adjustments to each financial year and to each of the primary financial statements. A third balance sheet is required under IAS
1.40A as some of these adjustments affect the opening reserves of the comparative balance sheet year given the historical period to
which they relate.
For the purposes of this report, the adjustments have been aggregated where the nature and cause of the misstatement is similar.
These groupings are as follows:
• Matters of concern relating to LSER, other historic franchises and affiliate trading;
• Germany onerous contract provision;
• Correction of errors; and
• Presentational adjustments and reclassifications.
This note sets out the impact of the restatements on the primary statements and explains each of the restatements identified.
The Go-Ahead Group plc Annual Report and Accounts 2021
182
Group financial statements
2. Summary of significant accounting policies continued
Prior year restatements continued
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Matters of
concern
relating to
LSER and
other historic
franchises
and affiliate
trading (a)
£m
As
previously
reported
Pre-
exceptional
2020
£m
Correction
of
errors (c)
£m
As restated
Pre-
exceptional
2020
£m
As previously
reported
Exceptional
items
2020
£m
Germany onerous
contract provision
(b)
2020
£m
As restated
Exceptional
items
2020
£m
As previously
reported
Post-
exceptional
2020
£m
As
restated
Post-
exceptional
2020
£m
3,898.4
(3,818.1)
(1.2)
(2.7)
—
3,897.2
2.4 (3,818.4)
—
(57.1)
—
—
3,898.4 3,897.2
(36.6)
(93.7)
(3,875.2) (3,912.1)
(2.4)
77.9
(0.6)
5.4
(25.8)
56.9
(18.2)
—
(3.9)
—
—
(1.2)
(5.1)
0.9
—
2.4
—
—
—
(2.4)
76.4
(0.6)
5.4
(27.0)
2.4
54.2
(0.4)
(17.7)
—
(57.1)
—
—
—
(57.1)
6.3
—
—
(2.4)
(2.4)
(36.6)
(93.7)
20.8
(17.3)
—
—
—
(0.6)
5.4
(0.6)
5.4
(25.8)
(27.0)
—
—
—
(36.6)
(93.7)
(0.2)
(39.5)
—
6.3
(11.9)
(11.4)
38.7
(4.2)
2.0
36.5
(50.8)
(36.6)
(87.4)
(12.1)
(50.9)
22.2
16.5
38.7
(2.7)
(1.5)
2.0
—
21.5
15.0
36.5
(50.8)
—
(50.8)
(36.6)
(87.4)
(28.6)
(65.9)
—
—
16.5
15.0
(87.4)
(12.1)
(50.9)
Group revenue
Operating costs
Impairment (losses)/gains
(including reversals) on
financial assets and contract
assets*
Group operating profit/(loss)
Results of equity accounted
investments
Finance income
Finance costs
Profit/(loss) before taxation
Tax expense
Profit/(loss) for the year
from continuing operations
Attributable to:
Equity holders of the parent
Non-controlling interests
*
Impairment (losses)/gains on financial assets and contract assets has been presented on the face of the consolidated income statement in the current year and 2020 has been
split out for comparability.
183
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies continued
Prior year restatements continued
2b. Consolidated statement of other comprehensive income for the year ended 27 June 2020
Loss for the year
Other comprehensive income
Items that will not be reclassified to
profit or loss:
Remeasurement losses 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
Losses on cashflow hedges taken
to income statement
Tax relating to items that may
be reclassified
Foreign exchange differences on
translation of foreign operations
Other comprehensive expense for the
year, net of tax
Total comprehensive expense for
the year
Attributable to:
Equity holders of the parent
Non-controlling interests
Matters of concern
relating to LSER and
other historic
franchises and
affiliate trading (a)
2020
£m
As previously
reported
2020
£m
Germany onerous
contract provision
(b)
2020
£m
Presentational
corrections and
reclassifications
(d)
2020
£m
Correction
of errors (c)
2020
£m
As restated
2020
£m
(12.1)
(4.2)
(36.6)
2.0
—
(50.9)
(3.1)
0.4
(2.7)
(25.3)
5.7
3.8
(1.8)
(17.6)
(20.3)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(0.5)
(0.5)
(0.5)
(32.4)
(4.2)
(37.1)
(48.9)
16.5
(32.4)
(2.7)
(1.5)
(4.2)
(37.1)
—
(37.1)
—
—
—
—
—
—
—
—
—
2.0
2.0
—
2.0
—
—
—
(3.1)
0.4
(2.7)
—
(25.3)
(5.7)
1.0
—
(4.7)
—
4.8
(2.3)
(22.8)
(4.7)
(25.5)
(4.7)
(76.4)
(4.7)
—
(4.7)
(91.4)
15.0
(76.4)
184
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
2. Summary of significant accounting policies continued
Prior year restatements continued
2c. Consolidated balance sheets as at 27 June 2020 and 29 June 2019
Matters of concern
relating to LSER
and other historic
franchises and
affiliate trading (a)
2020
£m
As previously
reported
2020
£m
Germany onerous
contract provision
(b)
2020
£m
Correction of
errors (c)
2020
£m
Presentational
adjustments and
reclassifications
(d)
2020
£m
Assets
Non-current assets
Deferred tax assets
Other non-current assets
Current assets
Trade and other receivables
Other current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
2.9
1,397.4
1,400.3
268.5
601.7
870.2
2,270.5
—
—
—
—
—
—
—
(718.0)
(40.3)
Derivative financial liabilities
Interest-bearing loans and borrowings
Current tax liabilities
Provisions
Other current liabilities
(9.9)
(6.1)
(0.9)
(46.1)
(517.3)
—
—
0.9
—
—
(1,298.3)
(39.4)
Non-current liabilities
Provisions
Other non-current liabilities
Total liabilities
Net assets
Capital and reserves
Retained earnings
Translation reserve
Other capital and reserves
Total shareholders’ equity
Non-controlling interests
Total equity
(87.9)
(615.7)
(703.6)
(2,001.9)
268.6
239.6
(1.8)
(6.1)
231.7
36.9
268.6
—
—
—
(39.4)
(39.4)
(26.1)
—
—
(26.1)
(13.3)
(39.4)
—
—
—
—
—
—
—
—
—
—
—
0.6
—
0.6
(37.7)
—
(37.7)
(37.1)
(37.1)
(36.6)
(0.5)
—
(37.1)
—
(37.1)
0.4
—
0.4
—
—
—
0.4
7.7
—
—
(0.9)
(5.7)
—
1.1
(2.3)
0.1
(2.2)
(1.1)
(0.7)
2.2
—
—
2.2
(2.9)
(0.7)
185
The Go-Ahead Group plc Annual Report and Accounts 2021
As restated
2020
£m
3.3
1,397.4
1,400.7
290.5
601.7
892.2
2,292.9
(765.3)
(11.0)
(12.3)
(0.9)
(51.2)
(517.3)
—
—
—
22.0
—
22.0
22.0
(14.7)
(1.1)
(6.2)
—
—
—
(22.0)
(1,358.0)
—
—
—
(127.9)
(615.6)
(743.5)
(22.0)
(2,101.5)
—
—
—
—
—
—
191.4
179.1
(2.3)
(6.1)
170.7
20.7
191.4
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies continued
Prior year restatements continued
2c. Consolidated balance sheets as at 27 June 2020 and 29 June 2019 continued
Assets
Non-current assets
Deferred tax assets
Other non-current assets
Current assets
Trade and other receivables
Other current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Current tax liabilities
Provisions
Other current liabilities
Non-current liabilities
Provisions
Other non-current liabilities
Total liabilities
Net assets
Capital and reserves
Retained earnings
Other capital and reserves
Total shareholders’ equity
Non-controlling interests
Total equity
Matters of
concern relating
to LSER and
other historic
franchises and
affiliate trading
(a)
2019
£m
As previously
reported
2019
£m
Presentational
adjustments and
reclassifications
(d)
2019
£m
Correction of
errors (c)
2019
£m
As restated
2019
£m
0.2
796.0
796.2
350.3
654.7
1,005.0
1,801.2
(847.7)
(5.5)
(13.1)
(34.8)
(2.6)
—
—
—
—
—
—
—
(35.8)
—
—
—
—
(903.7)
(35.8)
(82.0)
(470.3)
(552.3)
(1,456.0)
345.2
300.9
9.2
310.1
35.1
345.2
—
—
—
(35.8)
(35.8)
(23.3)
—
(23.3)
(12.5)
(35.8)
0.3
—
0.3
—
—
—
0.3
4.7
—
(0.4)
(5.7)
—
(1.4)
(1.7)
—
(1.7)
(3.1)
(2.8)
0.1
—
0.1
(2.9)
(2.8)
—
—
—
2.4
—
2.4
2.4
3.8
(6.2)
—
—
—
0.5
796.0
796.5
352.7
654.7
1,007.4
1,803.9
(875.0)
(11.7)
(13.5)
(40.5)
(2.6)
(2.4)
(943.3)
—
—
—
(83.7)
(470.3)
(554.0)
(2.4)
(1,497.3)
—
—
—
—
—
—
306.6
277.7
9.2
286.9
19.7
306.6
186
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
2. Summary of significant accounting policies continued
Prior year restatements continued
2d. Consolidated cashflow statement for the year ended 27 June 2020
Matters of
concern
relating to LSER
and other
historic
franchises
and affiliate
trading (a)
£m
As previously
reported
2020
£m
Loss after tax for the year
Net finance costs
Tax expense
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets
Asset impairment, excluding exceptional items
Exceptional items
Share of result of joint venture
Profit on sale of property, plant and equipment
Share based payment charges
Difference between pension contributions paid and
amounts recognised in the income statement
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Movement in provisions, excluding exceptional items
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 property, plant and equipment held
for sale
Purchase of property, plant and equipment
Purchase of property, plant and equipment held for sale
Purchase of intangible assets
Net cashflows used in investing activities
Cashflows from financing activities
Interest paid on lease liabilities
Other interest paid
Dividends paid to members of the parent
Dividends paid to non-controlling interests
Proceeds from issue of shares
Payment to acquire own shares
Repayments of borrowings
Proceeds from borrowings
Payment of lease liabilities
Net cashflows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 29 June 2019
Effect of foreign exchange rate changes
Cash and cash equivalents at 27 June 2020
(12.1)
20.4
11.9
84.1
375.5
9.4
0.9
57.1
0.6
(0.9)
1.6
(7.3)
(2.9)
78.4
(128.1)
9.9
498.5
(28.2)
470.3
5.5
0.7
2.0
(72.6)
(4.8)
(18.4)
(87.6)
(13.9)
(11.5)
(30.9)
(14.6)
0.5
(0.7)
(0.8)
2.5
(374.3)
(443.7)
(61.0)
630.8
—
569.8
(4.2)
1.2
(0.9)
—
—
—
—
—
—
—
—
—
—
—
3.2
—
(0.7)
—
(0.7)
—
—
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
0.7
—
—
—
—
Germany
onerous
contract
provision (b)
£m
(36.6)
—
—
—
—
—
—
36.6
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Presentational
adjustments and
reclassifications
(d)
£m
Correction
of errors (c)
£m
2.0
—
0.4
—
—
—
—
—
—
—
—
—
—
—
(3.1)
0.7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(19.6)
14.8
—
(4.8)
—
(4.8)
—
—
—
—
4.8
—
4.8
—
—
—
—
—
—
(361.1)
361.1
—
—
—
—
—
—
As restated
2020
£m
(50.9)
21.6
11.4
84.1
375.5
9.4
0.9
93.7
0.6
(0.9)
1.6
(7.3)
(2.9)
58.8
(113.2)
10.6
493.0
(28.2)
464.8
5.5
0.7
2.0
(72.6)
—
(18.4)
(82.8)
(13.9)
(11.5)
(30.9)
(13.9)
0.5
(0.7)
(361.9)
363.6
(374.3)
(443.0)
(61.0)
630.8
—
569.8
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The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies continued
Prior year restatements continued
(a) Matters of concern relating to LSER, other historic franchises and LSER affiliate trading
1. Discussions with Department for Transport (DfT) regarding London & South Eastern Railway Limited ("LSER")
As a consequence of ongoing discussions with the DfT regarding historical matters relating to the Southeastern franchise, there have
been changes to the recognition of certain items. These changes have resulted in prior year restatements as set out below.
The Independent Review determined that LSER owed the DfT £27.0m in respect of overpayments made by the DfT to LSER during the
period 12 October 2014 to 29 February 2020. The sum had been correctly accounted for in the financial statements at the appropriate
time and has now been repaid to the DfT and the associated accrual reduced.
Discussions continue in respect of interest payable in relation to the overpayments. An estimated interest provision of £2.7m has been
recognised, with £2.2m of this treated as a prior year adjustment affecting the financial statements for multiple years resulting in a
restatement of the comparative balance sheet figures. An adjustment of £1.5m has been made to reduce opening reserves in the 2019
consolidated balance sheet, with a corresponding increase in non-current trade and other payables. Current trade and other payables
in the 2020 consolidated balance sheet have been increased by a further £0.7m with finance costs in the 2020 consolidated income
statement increasing by the same amount.
2. Overpayments in relation to the Integrated Kent Franchise (IKF) and Direct Award Contract (DAC)
In relation to the IKF operated by LSER between 1 April 2006 and 11 October 2014, the Independent Committee found that LSER owed
the DfT £14.7m in respect of overpayments received during that period. This has been recognised as a prior year adjustment in the
financial statements. A further £4.4m was identified in relation to overpayment of subsidy between 12 October 2014 and 29 February
2020. The DfT recovered £1.8m of this though the profit share arrangements in place in connection with the franchise arrangement. As
such, the net amount owing to the DfT in relation to this subsidy is £2.6m which has been recognised as a prior year adjustment in the
financial statements. Both these amounts result in a restatement of £17.3m to the prior year in the comparative balance sheet.
Of the £17.3m, an adjustment of £16.1m has been made to reduce opening reserves in the 2019 consolidated balance sheet with a
corresponding increase to non-current trade and other payables. Non-current trade and other payables in the 2020 consolidated
balance sheet have been increased by a further £1.2m with revenue in the 2020 consolidated income statement decreasing by the
same amount.
Interest payable on these amounts has been estimated at £4.3m and has been recognised in the financial statements. These items
result in a restatement of £3.9m relating to the prior year in the comparative balance sheet figures. An adjustment of £3.5m has been
made to reduce opening reserves in the 2019 consolidated balance sheet with a corresponding increase in non-current trade and other
payables on the consolidated balance sheet. Non-current trade and other payables in the 2020 consolidated balance sheet have been
increased by a further £0.4m with finance costs in the 2020 consolidated income statement increasing by the same amount.
3. Affiliate trading
LSER and DfT are in commercial discussions regarding levels of affiliate trading during the period 12 October 2014 to 29 February 2020,
the outcome of which affects the assessment of Profit Share payable to the DfT. There is a total of £23.4m in dispute, of this £14.1m has
been recognised as a liability. The adjustment of £14.1m has been made to reduce opening reserves in the 2019 consolidated balance
sheet, with a corresponding £14.1m increase to non-current trade and other payables. LSER and the DfT continue to discuss the
balance.
4. Other historic franchises
In addition to the Independent Committee’s review into the matters at LSER, a wider business review was conducted. This identified a
matter relating to a historic closed rail franchise. This relates to amounts totalling £3.5m which should have been reflected in the
relevant end of franchise settlement with the DfT. Prior year adjustments have been made in the financial statements and £3.5m will
be paid to the DfT in the 2022 financial year in respect of this matter. Interest of £0.1m has also been recognised in respect of this.
(b) Germany onerous contract provision
The directors have performed a detailed review of all material contracts across the Group to consider the completeness of the
onerous contract provisions. This involved a detailed review and challenge of the assumptions within each contract, including those
relating to FY20 and the Group’s FY21 interim results. A number of errors have been identified in respect of the assumptions used
when calculating the onerous provision in the Bavarian rail franchise in the prior year and the Group’s FY21 interim results.
The prior year provision was determined to be understated by £37.1m which has been restated in these financial statements. The
impact of this restatement to the 2020 consolidated income statement is an increase in exceptional items of £36.6m and an increase
of £0.5m to the translation reserve. Correspondingly there was a reduction of £25.9m charged to the consolidated income statement
in the Group’s FY21 interim results. The calculation of the understatement was determined following a review of historical information
and consideration given to what information then available could reasonable have been included in the previous cash flow
assumptions underpinning the provision.
188
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
2. Summary of significant accounting policies continued
Prior year restatements continued
(c) Correction of errors
During the year, it was identified that certain provisions and accruals balances were not appropriate, impacting the 2020 consolidated
income statement and 2020 consolidated balance sheet, and also the 2019 consolidated balance sheet. These consist of the following
adjustments:
a. Employee bonus accruals made for the years ended 2019 and 2020 were not fully utilised and have therefore been recorded as prior
year adjustments. This increases profit before tax by £3.1m in the 2020 consolidated income statement with a corresponding
decrease in current trade and other payables in the 2020 consolidated balance sheet. There is also a 2019 impact which decreases
current trade and other payables by £2.3m in the 2019 consolidated balance sheet.
b. There is a contract held with the Land Transport Authority (LTA) in Singapore where there is an obligation to maintain the vehicles
to a specified standard. It was noted that the future costs in relation to this current obligation had been underprovided for in both
2019 and 2020 and therefore these have been recorded as prior year adjustments. These adjustments decrease profit before tax in
the 2020 consolidated income statement by £0.6m, with a corresponding increase in non-current provisions. The impact on the
2019 consolidated balance sheet is an increase in non-current provisions of £1.7m.
c.
It was noted that under provisions had been made in costs in line with the Southeastern franchise agreement. This has resulted in a
£0.1m decrease of profit before tax in the 2020 consolidated income statement, with a corresponding increase in current
provisions in the 2020 consolidated balance sheet. There has also been an increase in current provisions in the 2019 consolidated
balance sheet of £5.7m, a decrease in current trade and other payables of £3.4m and a £2.3m decrease to equity.
Overall, there is a net nil impact on the tax charge in the 2020 consolidated income statement in relation to the above adjustments.
The tax impact of the above adjustments on the 2020 consolidated balance sheet is an increase in the deferred tax asset of £0.4m and
an increase in the deferred tax liability of £0.1m. The impact on the 2019 balance sheet is an increase in the deferred tax asset of £0.3m
and an increase in the current tax liability of £0.4m.
(d) Presentational corrections and reclassification errors
1. IAS 32 Balance Sheet Classifications
During the year, it was identified that some items had been presented as net within the balance sheet and associated notes rather than
presenting as gross receivables and payables in accordance with IAS 32. As a result, the 2020 and 2019 consolidated balance sheets
have been restated. These items relate to the presentation of balances with the DfT and Network Rail. The impact of these
reclassifications is to increase both current trade and other receivables and current trade and other payables by £22.0m in the 2020
consolidated balance sheet and by £2.4m in the 2019 consolidated balance sheet.
2. Gross presentation of repayments of and proceeds from borrowings
For the year ended 27 June 2020, in the consolidated cashflow statement, the repayment of borrowings and proceeds from
borrowings lines have been restated in order to present these lines gross and on the same basis as shown above for the year ended 3
July 2021 figures. This has resulted in an increase to repayment of borrowings of £361.1m and an increase to proceeds from borrowings
of the same amount. There is no effect on the cash and cash equivalent balances at the end of either year shown.
3. Interest reclassification
Interest on the Group’s loans and borrowings has been reclassified from other payables to interest bearing loans and borrowings to
reflect the fact that these loans and borrowings are held at amortised cost. This has been restated in the 2019 and 2020 consolidated
balance sheets. The impact is a decrease in current other payables of £6.2m and an increase in current interest bearing loans and
borrowings of the same amount for both years.
4. Correction of assets held for sale cashflow
For the year ended 27 June 2020, in the consolidated cashflow statement, a reclassification of £4.8m between the purchase of
property, plant and equipment held for sale and creditors lines has been made to correct for the fact that the property, plant and
equipment held for sale in question has not been paid for as at 27 June 2020.
5. IFRS 9 cashflow hedge reclassification
During the year, it was identified that when cash flow hedging purchases of fuel, the amount accumulated in hedging reserve was
incorrectly reclassified, once the forecast transaction happened, to the consolidated statement of other comprehensive income
instead of being removed directly from equity and included in cost of fuel (i.e. basis adjustment was not applied). As a result, £4.7m, net
of tax, in relation to this has been reclassified for the year ended 27 June 2020.
6. Derivative financial liability reclassification
A reclassification between trade and other payables and derivative financial liabilities of £1.1m has been made in the 2020 consolidated
balance sheet. This restatement has been made to adjust the value of the derivative financial liability for the amount of the June hedge
settlements.
189
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies continued
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and the entities it controls (its subsidiaries) as
at 3 July 2021. The financial year represents the 53 weeks ended 3 July 2021 (prior financial year 52 weeks ended 27 June 2020). For the
UK and the Republic of Ireland (UK and ROI), the results are for the 53 weeks ended 3 July 2021 (prior financial year 52 weeks ended
27 June 2020). For all other operations, the results are for the 52 weeks ended 30 June 2021 (prior financial year 52 weeks ended
30 June 2020).
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; and
• 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.
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; and
• 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, 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, arising from contracts with customers, mainly comprises income from road passenger transport and rail
passenger transport.
The Group has a number of revenue streams which consist of revenue from passengers, contracts and franchise subsidies as well as
other miscellaneous revenue streams. Revenue is recognised on satisfaction of performance obligations which are generally clear.
Revenue is measured based on the fair value of the consideration received or receivable (excluding discounts, rebates, VAT and other
sales taxes or duty) to which the Group expects to be entitled and excludes amounts collected on behalf of third parties.
As the Group has the right to consideration corresponding directly with the value of performance completed to date, customer
contract revenue is recognised consistent with the amount that the Group has the right to invoice. The Group is therefore exercising
the practical expedient not to explain transaction prices allocated to unsatisfied performance obligations at the end of the
reporting period.
An explanation of the main revenue streams is set out below.
190
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
2. Summary of significant accounting policies continued
Revenue recognition continued
Passenger revenue
Passenger revenue mainly relates to revenue from ticket sales in Regional Bus and the Rail divisions.
In Regional Bus, passenger revenue mainly consists of commercial and concessionary revenue. Commercial passenger revenue relates
to ticket sales for travel on the Regional Bus transport services and is recognised in the period in which the travel occurs. Season
tickets and travel cards enable passengers to use travel services over a period of time. Management assesses amounts received in the
period and future revenue is deferred, within liabilities, and subsequently recognised in the income statement within the applicable
accounting period.
Concessionary revenue is received from public bodies, such as local authorities, with a performance obligation to transport certain
eligible passengers free of charge. The transaction price varies between agreements and the revenue is recognised in the period of
travel.
In UK Rail, revenue comprises amounts based principally on agreed models of route usage by Railway Settlement Plan Limited (RSP)
(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. In accordance with the GTR franchise agreement and IFRS 15 Revenue
from Contracts with Customers, passengers are regarded as customers and therefore passenger income is regarded as revenue. In
situations where the entity receives an amount from the DfT, the DfT is regarded as a customer of the entity and therefore such
amounts received are recognised as revenue. Over their lifetime, the UK Rail franchises may switch between being in a “premium”
position (when the amounts payable to the DfT exceed the amounts received from it) and being in a “subsidy” position (when the
amounts received from the DfT exceed the amounts paid to it). When the franchises are in a subsidy position, subsidy revenue is
recognised, in addition to passenger revenue, in the period in which the performance obligations are satisfied. In relation to the
Southeastern franchise, passenger revenue is not remitted to the DfT; however, prior to the introduction of the Emergency Measures
Agreement, passenger revenue was subject to a profit sharing mechanism as described below on page 192.
In Germany, in line with the requirements of IFRS 15, passenger revenue is allocated by the tariff authority in each region between the
various transport providers based on ticket income declared, passenger counts, tariff authority estimates and historical trends.
Revenue is recognised based on the allocations made by the tariff authority or where these are not yet available, on the payments on
account made by the tariff authority or on other best estimates. The revenue is recognised as the service is provided to the passenger.
In Norway, rail passenger revenue is dependent on passenger numbers and the type of ticket purchased. It is recognised when the
passenger travels and when the service is delivered.
Contract revenue
Contract revenue mainly relates to London & International Bus and comprises contractual income from government bodies which are
recognised in the period to which they relate. Quality Incentive Contracts (QICs) income in London and Bus Service Reliability
Framework (BSRF) income in Singapore are received as part of 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, including reliability
performance measures. The whole of cumulative penalties/premiums is recognised in the income statement on a pro-rata basis in the
contract year.
When determining the QIC and BSRF income to be recognised, the Group utilises a weighted average approach to estimate the variable
consideration element but constrains this estimate to ensure that variable consideration is only included in revenue to the extent that it is
highly probable that it will not reverse when the final outcomes are known. The determination of this constrained estimate includes
consideration of past performance and other performance expectations. Reflecting the current consistent portfolio of contracts which
are spread throughout the year, there is not expected to be a material impact from this approach in year on year performance.
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.
191
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies continued
Revenue recognition continued
Other revenue
Other revenue mainly relates to revenue for ancillary services, such as rail replacement bus services, maintenance and cleaning. Other
revenue also includes rental income which is generated from rental of surplus properties and subleasing of railway infrastructure
access. Other revenue is recognised in the period to which it relates, for the transaction price specified in the contract.
Revenue in relation to the COVID-19 Bus Service Support Grant (CBSSG) has been recognised within other revenue and is recognised in the
period in which the operational revenue and costs it is supporting relate to. CBSSG requires that a minimum level of service is operated and
revenue is variable and includes areas of estimation when determining the transaction price with the actual revenue not confirmed until the
reconciliation process is complete. The Group has recognised revenue where the amount can be measured reliably and it is highly probable
that a significant reversal in the amount of cumulative revenue will not occur. Judgement is applied in determining whether some amounts
are allowable in applying the terms of the scheme.
Franchise subsidy
Franchise subsidy revenue arises in the Rail division and comprises receipts from the relevant local transport authorities which are
receivable under the terms of the franchise agreements. The franchise agreements include minimum specifications of passenger
services to be provided by the operator, which is determined to be the performance obligation within the contract. Franchise premium
payments to the DfT, for amounts due under the terms of the UK franchises, are recognised in operating costs.
The Emergency Measures Agreements (EMAs) and later Emergency Recovery Measures Agreements (ERMAs) in the UK transferred
all revenue and cost risk to the Government from 1 March 2020 until 17 October 2021 for the Southeastern franchise and to the end of
March 2022 for the GTR franchise. UK Rail companies are paid a small management fee to continue running a revised National Rail
timetable across the UK. Net EMA funding, including the management fee, is recognised as franchise subsidy within revenue. For
EMAs, the performance payment is assessed through a review process, which awards rail franchisees with a score of 1, 2 or 3 against
three criteria (four for the ERMA) over the entire term of the EMA in areas of; operational performance, customer experience and
acting as a good and efficient operator and was extended to include collaboration for the ERMA. The performance payment is
recognised in accordance with IFRS 15 paragraph 56 only to the extent that it is highly probable that a significant reversal in the
amount of cumulative revenue recognised will not occur. The most likely method is applied in estimating the variable consideration.
In Germany, the franchise contracts determine subsidy revenue without reference to the passenger revenue; the shortfall between
passenger revenue and franchise contract revenue is paid as a subsidy by the Public Transport Authority (PTA). Franchise contract
revenue is based, among other factors, on mileage and performance/quality levels. Revenue is recognised based on the performance
figures reported monthly to the PTA. In accordance with IFRS 15:70, costs payable to the PTA, such as rolling stock lease payments, are
netted against subsidy income as the PTA is regarded as the customer and provides the rolling stock under IFRIC 12.
In Norway, subsidy revenue is received from the Rail Directorate (the customer) as per the Traffic Agreement. This is mainly fixed,
although there are variable elements with bonuses and penalties payable based on performance. The revenue subsidy is inter-related with
a number of costs payable to the customer. These costs are payable to the state, are specified by the Traffic Agreement and are
accounted for as a reduction in transaction price in accordance with IFRS 15:70. Following the impact of COVID-19, the Norwegian
Government continues to support the rail industry with a package materially covering losses since March 2020. Whilst this temporary
support is confirmed to continue until March 2022, after this period the government has indicated further support at an unconfirmed
level may be in place until at least August 2022.
All franchise subsidies are recognised in the period to which they relate.
Profit and revenue sharing/support agreements
The UK 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. Costs are charged to
operating costs. The profit share agreements were terminated when the EMAs and ERMAs were put in place from 1 March 2020.
Costs of obtaining a contract
Costs of obtaining a contract are capitalised under IFRS 15 and amortised on a straight-line basis over the life of the franchise, which
ranges from 5 to 13 years. Refer to “Franchise set-up costs” section for further details on page 196.
192
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
2. Summary of significant accounting policies continued
Property, plant and equipment
Property, plant and equipment is stated at cost, or deemed cost, less accumulated depreciation, any impairment in value and any
residual value. Freehold land is not depreciated.
Residual values and useful economic lives are reviewed annually. Where there is a contract end date, useful economic lives are based
on this, not including any possible extensions not yet confirmed. 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, to operating costs in
the income statement, as follows:
Leasehold land and buildings
Freehold buildings
Bus vehicles
Plant and equipment
The life of the lease
Over 50 to 100 years
Over 8 to 15 years
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. 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, the value is credited to a deferred income account and is released to the income statement over
the expected useful life of the relevant asset.
Government grants have also been recognised in relation to the ongoing COVID-19 pandemic. These comprise amounts receivable
under the Coronavirus Job Retention Scheme (CJRS) in the UK and Jobs Support Scheme (JSS) in Singapore.
CJRS represents grants receivable in relation to the costs incurred by the Group for furloughed employees, and it is recognised in the
income statement, within operating costs, in the same period as the related costs when there is reasonable assurance that the grant
will be received.
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 income or expense which,
because of the size, nature and expected infrequency of the events giving rise to them, merit alternative presentation to allow an
alternative understanding of financial performance. In considering the nature of the event, management considers factors such as
ensuring consistent treatment between favourable and unfavourable transactions, the precedent for similar items, and the
commercial context for the particular transaction.
Items of income or expense that are considered by management for presentation as exceptional include onerous contract provisions,
impairment of assets, restructuring provisions and fines or penalties, and the related tax on these items. Refer to the critical
accounting judgements section on page 176 for further detail on why certain items have been presented as exceptional items.
Finance income
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. Issue costs relating to any term extensions are offset against the proceeds and amortised over the
life of the extension.
193
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies continued
Leases
Lease identification
At inception of a contract, the Group shall assess whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Right of use asset
Right of use assets are measured initially at cost based on the value of the associated lease liability, adjusted for any payments made
before inception, initial direct costs and an estimate of the dismantling, removal and restoration costs required in the terms of the
lease.
The right of use assets are subsequently depreciated on a straight-line basis over the shorter of the estimated useful life of the asset
or the lease term. The lease term shall include the period of an extension option where it is reasonably certain that the option will be
exercised. Where the lease contains a purchase option the asset is written off over the useful life of the asset when it is reasonably
certain that the purchase option will be exercised.
In addition, the right of use asset is periodically reduced by impairment losses, if applicable, and adjusted for certain remeasurements
of the lease liability.
Lease liability
At the commencement date of the lease, the lease liability is initially measured at the present value of lease payments to be made over
the lease term with payments discounted at the rate implicit in the lease or, where that cannot be measured, at the Group’s
incremental borrowing rate. being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an
asset of similar value to the right of use asset in a similar economic environment with similar terms, security and conditions. Due to the
capital structure of the Group, the Group’s cost of debt forms the base of the IBR with specific finance and lease adjustments made,
when applicable, which are linked to the lease term, country of lease and start date.
The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid by the Group under residual value guarantees. The lease
payments also include the exercise price of a purchase option if the Group is reasonably certain to exercise that option. Payments of
penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate the lease, are also included.
The lease liability is subsequently measured by increasing the carrying amount to reflect the interest on the lease liability and reducing
the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right of use asset) whenever:
• the lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of
exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a
revised discount rate;
• the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in
which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless
the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); and
• a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at
the effective date of the modification.
Short term and low value asset leases
The Group has elected not to recognise right of use assets and lease liabilities for short term leases that have a lease term of less than
12 months and leases of low value assets. Lease payments relating to short term leases and leases of low value assets are recognised as
an expense on a straight-line basis over the lease term.
Foreign currencies
In preparing the financial statements of the Group, transactions in currencies other than the entity’s functional currency (foreign
currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary
assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair
value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates
for the period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a foreign
exchange translation reserve (attributed to non-controlling interests as appropriate).
194
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
2. Summary of significant accounting policies continued
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.
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 IFRS 9 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.
Software
Software, which 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.
195
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies continued
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 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, which ranges
from 5 to 13 years. The amortisation expense is taken to the income statement within operating costs.
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.
Assets held for sale
Assets held for sale are measured at the lower of carrying amount and fair value less costs to sell. 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. Purchases of fuel may
be subject to cash flow hedges for commodity price risk. The initial cost of hedged fuel is adjusted by the associated hedging gain or
loss transferred from the cash flow hedge reserve (basis adjustment).
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 which are repayable on demand and form an integral part
of the Group’s cash management.
Financial instruments
Financial assets
The Group’s 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 in the income statement, directly attributable transaction costs. Financial assets are
subsequently classified as being measured at amortised cost, fair value through other comprehensive income, or fair value through the
income statement.
The Group’s financial assets at amortised cost are non-derivative financial assets held for collection of contractual cashflows where
those cashflows represent solely payments of principal and interest. Financial assets at amortised cost are subsequently measured
using the effective interest method and are subject to impairment. Gains and losses are recognised in the income statement when the
asset is derecognised, modified or impaired.
The Group does not have any financial assets held at fair value through the income statement.
196
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
2. Summary of significant accounting policies continued
Financial instruments continued
Financial assets continued
The Group does not have any financial assets held at fair value through other comprehensive income.
The Group uses an impairment model with impairment provisions based on expected credit losses. The Group applies the IFRS 9
simplified approach and measures the loss allowance on the lifetime expected credit losses at each reporting date for trade
receivables, contract assets, accrued income and lease receivables using a provision matrix based on the Group’s historical credit loss
experience. The loss allowance on the receivables from central government is measured at an amount equal to 12-months’ expected
credit losses because these assets have a low credit risk at the reporting date.
For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk (such as
changes to credit ratings) since initial recognition. However, if the credit risk on the financial instrument has not increased significantly
since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.
For the purposes of impairment assessment, receivables from governments are considered to be low risk as a result of the ability of
governments to meet contractual cashflows.
Trade receivables, amounts recoverable on contracts and accrued income are written-off when there is no reasonable expectation of
recovery. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent
recoveries of amounts previously written-off are credited against the same line item.
Financial assets are derecognised when the right to receive cash flows from the asset has expired, the right to receive cash flows has
been retained but an obligation to on-pay them in full without material delay has been assumed or the right to receive cash flows has
been transferred together with substantially all the risks and rewards of ownership.
Financial liabilities
The Group’s financial liabilities include trade payables, accruals, interest-bearing loans and borrowings and derivative financial
instruments. At initial recognition, the Group measures financial liabilities at fair value plus, in the case of a financial liability not at fair
value through the income statement, transaction costs that are directly attributable to the issue of the financial liability.
With the exception of derivative financial instruments, all other financial liabilities are subsequently measured on an amortised costs basis.
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired.
The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is
recognised in the income statement.
When the Group exchanges with the existing lender one debt instrument into another one with substantially different terms, such
exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the
original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted
present value of the cashflows under the new terms, including any fees paid net of any fees received and discounted using the original
effective rate, is at least 10% different from the discounted present value of the remaining cashflows of the original financial liability. If
the modification is not substantial, the difference between: (1) the carrying amount of the liability before the modification; and (2) the
present value of the cashflows after the modification should be recognised in profit or loss as the modification gain or loss within
other gains and losses.
Derivative financial instruments
The Group uses derivatives to hedge its risks associated with fuel price fluctuations. These derivatives are designated as cash flow
hedges. 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.
At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting
changes in fair values or cashflows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all
of the following hedge effectiveness requirements:
• There is an economic relationship between the hedged item and the hedging instrument
• The effect of credit risk does not dominate the value changes that result from that economic relationship
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group
actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management
objective for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship (i.e.
rebalances the hedge) so that it meets the qualifying criteria again.
Gains or losses on fuel derivatives are recycled from equity into inventory on qualifying hedges to achieve fixed rate fuel costs with
operating results.
Financial guarantees
Financial guarantees are accounted for in accordance with IFRS 9. Financial Guarantees are initially recognised at their fair value and
are subsequently measured at the higher of the IFRS 9 expected credit losses and the amount initially recognised less any cumulative
amount of income/amortisation recognised.
197
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies 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 23.
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; or
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 is 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 reassessing 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 remeasured
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.
The Group also provides for penalties where appropriate.
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 discounted
provision is recognised for the estimated cost 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.
Provisions are accounted for on a gross basis with a separate reimbursement asset recognised for amounts recoverable from
insurance providers.
198
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
2. Summary of significant accounting policies continued
Treasury shares
Reacquired 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.
Investments
Investments are held at cost less impairment.
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.
Bus retirement benefit 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. Any surplus is limited to the present value of any economic benefits available in the form of refunds from the plans
or reductions in future contributions to the plans.
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 in both Regional Bus and London & International Bus are charged to
operating costs in the income statement as they fall due.
Rail retirement benefit schemes
The Group’s UK train operating companies (TOCs) participate in the Railways Pension 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 28,
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 section’s 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.
Contributions payable under defined contribution schemes in Germany and Norway are charged to operating costs in the income
statement as they fall due.
Please refer to note 28 for further details.
199
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2. Summary of significant accounting policies continued
New standards and interpretations not applied
The International Accounting Standards Board (IASB) has issued the following standards and interpretations with an effective date
after the date of these financial statements:
International Accounting Standards
(IAS/IFRSs)
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest
Rate Benchmark Reform – Phase 2
Amendment to IFRS 16 COVID-19 Related Rent Concessions
beyond 30 June 2021
IFRS 17 Insurance Contracts
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets
Between an Investor and its Associate or Joint Venture
Amendments to IAS 1 Classification of Liabilities as Current
or Non-current
Amendments to IFRS 3 Reference to the Conceptual Framework
Amendments to IAS 16 Property, Plant and Equipment – Proceeds
Before Intended Use
Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling
a Contract
Annual Improvements to IFRS Standards 2018-2020 Cycle
Effective date
(periods beginning on or after)
1 January 2021
1 April 2021
1 January 2023
Not yet announced by IASB
1 January 2023
1 January 2022
1 January 2022
1 January 2022
1 January 2022
3. Reconciliation of alternative profit measures (APMs)
The Group uses a number of alternative performance measures (APMs) throughout the Annual Report and Accounts. Management
believes that adjusting for these items provides an alternate understanding of the Group’s operating performance and financial
position.
The APMs used by the Group are disclosed below:
Operating profit pre-exceptional items
Exceptional operating items represent material items of revenue or expenses because of the size or nature and the expected
infrequency of the events giving rise to them. This metric is a key metric reviewed by management and adjusting operating profit for
exceptional items gives an alternative understanding of the Group’s recurring performance.
Reconciliation of pre and post-operating profit:
Operating profit
Exceptional items:
– Asset impairments, provisions and restructuring costs – Regional Bus
– Asset impairments and restructuring costs – International rail
– German Bavaria franchise onerous contract provision
– Norway franchise onerous contract provision and asset impairment
Department for Transport potential financial penalty and associated costs relating to LSER
Operating profit pre-exceptional items
* Restated. Details of the restatements and the impact on the above table in respect of the year ending 27 June 2020 are explained in note 2.
Further detailed information on the exceptional items is given in note 7.
2021
£m
11.4
0.2
(5.2)
—
76.7
32.4
115.5
2020*
£m
(17.3)
26.7
23.2
43.8
—
—
76.4
200
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
3. Reconciliation of alternative profit measures (APMs) continued
Operating profit pre-exceptional items continued
A summary of the impact of the exceptional items on other statutory measures is as follows:
Group operating profit
Profit/(loss) before taxation
Tax expense
Profit/(loss) for the year from continuing
operations
Attributable to:
– Equity holders of the parent
– Non-controlling interests
Earnings per share
– Basic
– Diluted
Pre-
exceptional
2021
£m
115.5
97.2
(34.3)
Exceptional
2021
£m
(104.1)
(104.1)
0.5
Post-
exceptional
2021
£m
Pre-
exceptional
2020*
£m
11.4
(6.9)
(33.8)
76.4
54.2
(17.7)
Exceptional
2020*
£m
(93.7)
(93.7)
6.3
Post-
exceptional
2020*
£m
(17.3)
(39.5)
(11.4)
62.9
(103.6)
(40.7)
36.5
(87.4)
(50.9)
46.6
16.3
62.9
(92.6)
(11.0)
(46.0)
5.3
(103.6)
(40.7)
21.5
15.0
36.5
(87.4)
—
(87.4)
(65.9)
15.0
(50.9)
108.4p
108.0p
(215.4)p
(214.7)p
(107.0)p
(106.7)p
50.0p
49.9p
(203.3)p
(202.8)p
(153.3)p
(152.9)p
*
Restated. Details of the restatements and the impact on the above table in respect of the year ending 27 June 2020 are explained in note 2.
Headroom on facilities plus unrestricted cash
Headroom on facilities plus unrestricted cash is the total amounts available on the facilities listed below, added to the value of
unrestricted cash available as of the year-end date, as shown below. This is a key metric reviewed by management to help assess the
liquidity of the Group.
Syndicated loans
£250m sterling seven-year bond
€8m revolving credit facility
€10.85m loan
Total core facilities
Amount drawn down at year end
Headroom on facilities
Unrestricted cash
Headroom on facilities and unrestricted cash
2021
£m
280.0
250.0
5.5
7.7
543.2
389.8
153.4
86.9
240.3
2020
£m
280.0
250.0
7.3
9.8
547.1
412.3
134.8
95.0
229.8
Adjusted net debt
Adjusted net debt is the net cash/debt position of the Group adjusted to reflect the impact of restricted cash on cashflows. Net
cash/debt is the value of cash and cash equivalents offset by borrowings, including interest-bearing loans and borrowings and lease
liabilities. Restricted cash represents amounts held in UK Rail which can only be distributed with the agreement of the relevant local
transport authorities and are therefore outside of management’s control.
Management presents adjusted net debt on pre and post-exceptional item bases. Management also present adjusted net debt
excluding the impact of the adoption of IFRS 16 in line with the requirement of debt covenants. The components of adjusted net debt
are shown within note 21.
Free cashflow
Free cashflow is used by management to determine the amount of cash the Group has generated in the year from its operations that
can be utilised for strategic purposes. A summary of free cashflow and the reconciliation between the cashflow statement and the
adjusted net debt position is presented as part of the consolidated cashflow statement. Free cashflow is calculated as cashflow
generated from operations (excluding restricted cash movements) less tax paid, net interest paid, net capital investment and
dividends paid to non-controlling interests.
Management also presents free cashflow on a pre-IFRS 16 basis. This is presented to aid review of the free cashflow excluding the
impacts of IFRS 16 on the Group.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
4. Segmental analysis
The Group’s businesses are managed on a divisional basis. Selected financial data is presented on this basis below.
For management purposes, from 2021, the Group is organised into four reportable segments: Regional Bus, London & International Bus,
UK Rail, and International Rail. International Rail has been separated from UK Rail during 2021 due to the growth of the German and
Norwegian businesses and also due to the different characteristics and challenges faced between International and UK Rail franchises.
The comparatives for these segments for 2020 are presented for comparability. Operating segments are reported to the chief
operating decision maker, considered to be the Group Chief Executive, on a periodic basis for the purposes of resource allocation and
assessment of segmental performance. Segments are organised based on the long-term economic characteristics as well as the similar
nature of the business activities and are reported as follows:
Regional Bus comprises UK bus operations outside London.
The London & International Bus segment 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 single segment for internal management purposes given the similar contractual nature of the services and how these
services are provided, the type of customer, the similar economic characteristics and the similar regulatory environment. The
operations are also governed and controlled by a distinct management team.
The UK Rail segment comprises UK Rail operations. The UK Rail operation, through an intermediate holding company, Govia Limited, is
65% owned by Go-Ahead and 35% by Keolis and at year end include two rail franchises: Southeastern and GTR. The registered office of
Keolis (UK) Limited is in England and Wales. The UK Rail operating companies have similar business activities and objectives, to
provide passenger rail services and to achieve a modest profit margin through franchise agreements.
The International Rail segment comprises overseas rail operations in Germany and Norway. International Rail operations commenced
on 15 June 2019 in Germany and on 15 December 2019 in Norway. A further two contracts were being mobilised in Germany at year
end. One contract successfully started on 12 December 2021 with the final contract due to commence in December 2022. These
operations are 100% owned by Go-Ahead. These are aggregated as a single segment for internal management purposes given the
similar business activities and objectives and the fact that they each operate services under heavily controlled regimes and
specifications, set by the local transport authorities in their respective countries.
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 3 July 2021 and the year ended
27 June 2020.
Year ended 3 July 2021
Passenger revenue
Contract revenue
Other revenue
Franchise subsidy
Segment revenue
Inter-segment revenue
Regional
Bus
£m
London &
International
Bus
£m
233.6
70.6
127.5
—
431.7
(4.0)
—
682.9
1.6
—
684.5
(23.6)
Total
Bus
£m
233.6
753.5
129.1
—
UK Rail
£m
661.6
0.5
132.2
2,071.5
1,116.2
(27.6)
2,865.8
(36.1)
International
Rail
£m
Total
Rail
£m
Total
Operations
£m
50.8
—
7.2
82.2
140.2
—
712.4
0.5
139.4
2,153.7
3,006.0
(36.1)
946.0
754.0
268.5
2,153.7
4,122.2
(63.7)
Group revenue
Operating costs including impairment losses
427.7
(409.8)
660.9
(592.4)
1,088.6
2,829.7
(1,002.2) (2,773.0)
140.2
(167.8)
2,969.9
(2,940.8)
4,058.5
(3,943.0)
Group operating profit/(loss)
(pre-exceptional items)
Exceptional operating items
Group operating profit/(loss)
(post-exceptional items)
Share of result of joint venture
Net finance costs
Loss before tax and non-controlling interests
Tax expense
Loss for the year
17.9
(0.2)
68.5
—
86.4
(0.2)
56.7
(32.4)
(27.6)
(71.5)
29.1
(103.9)
115.5
(104.1)
17.7
68.5
86.2
24.3
(99.1)
(74.8)
11.4
(0.2)
(18.1)
(6.9)
(33.8)
(40.7)
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The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
4. Segmental analysis continued
Year ended 3 July 2021
Further information on exceptional operating items is disclosed in note 7.
Other segment information
Capital expenditure:
– Additions
– Intangible assets
– Right of use assets
Depreciation:
– Owned assets
– Right of use assets
Amortisation:
– Intangible assets
Year ended 27 June 2020
Passenger revenue
Contract revenue
Other revenue
Franchise subsidy
Segment revenue
Inter-segment revenue
Group revenue
Operating costs including
impairment losses
Group operating profit (pre-
exceptional items)
Exceptional operating items3
Group operating profit/(loss)
(post-exceptional items)
Share of result of joint venture
Net finance costs
Loss before tax and non-
controlling interests
Tax expense
Loss for the year
Regional
Bus
£m
London &
International
Bus
£m
Total
Bus
£m
UK Rail
£m
International
Rail
£m
Total
Rail
£m
Total
Operations
£m
28.5
0.9
7.9
37.5
5.3
21.5
—
9.9
27.6
20.2
50.0
0.9
17.8
65.1
25.5
2.3
0.4
168.2
15.3
460.6
0.7
2.1
2.8
1.6
0.6
0.9
1.0
1.1
0.4
1.9
2.9
1.3
169.2
16.4
461.0
52.9
2.2
187.0
81.5
486.5
3.5
6.3
London &
International
London &
Bus
Restatements to
International
Total
Bus
Regional
Bus (as
restated2)
(as previously
reported)
London &
International Bus1
£m
£m
315.2
67.6
31.6
—
—
627.3
3.7
—
414.4
631.0
(5.6)
(26.9)
408.8
604.1
£m
—
—
—
—
—
—
—
Bus
(as
(as previously
UK Rail
Restatements
to UK Rail1
UK Rail
International
Total
Rail
(as restated)
restated)
reported)
£m
(as restated)
Rail
(as restated)
Total
Operations (as
restated1)
£m
£m
£m
£m
£m
£m
£m
— 315.2
627.3 694.9
1,909.0
0.6
35.3
206.4
3.7
—
— 1,909.0
0.6
—
—
206.4
40.0
—
4.7
25.3
1,949.0
0.6
211.1
759.3
2,264.2
695.5
246.4
759.3
—
735.2
(1.2)
734.0
631.0 1,045.4 2,851.2
(1.2) 2,850.0
70.0
2,920
3,965.4
(26.9) (32.5)
(35.7)
—
(35.7)
—
(35.7)
(68.2)
604.1 1,012.9 2,815.5
(1.2) 2,814.3
70.0 2,884.3
3,897.2
(388.3)
(555.6)
1.5
(554.1) (942.4) (2,762.0)
(1.8) (2,763.8)
(114.6)
(2,878.4)
(3,820.8)
20.5
(26.7)
48.5
—
1.5
—
50.0
70.5
— (26.7)
53.5
—
(3.0)
—
50.5
—
(44.6)
5.9
(67.0)
(67.0)
76.4
(93.7)
(6.2)
48.5
1.5
50.0
43.8
53.5
(3.0)
50.5
(111.6)
(61.1)
(17.3)
(0.6)
(21.6)
(39.5)
(11.4)
(50.9)
1 Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2, including restatements to the Group’s net finance costs and tax expense.
2
In addition to the restatements outlined in note 2, the presentation of Regional Bus revenue for the year ended 27 June 2020 has also been restated in order to disclose this on a
consistent basis with the equivalent disclosure for the year ended 3 July 2021. This restatement’s effect is limited to equal and opposite adjustments to the Regional Bus
segment’s passenger revenue and inter-segment revenue lines of £31.9m such that Group revenue line is unaffected. This restatement removes the revenue pertaining to The
Go-Ahead Group plc’s activities as a Group company from each affected line.
3
International Rail exceptional items have been restated as a result of the Germany onerous contract provision adjustment, as outlined in note 2.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
4. Segmental analysis continued
Year ended 27 June 2020 continued
Further information on exceptional operating items is disclosed in note 7.
Other segment information
Capital expenditure:
– Additions
– Intangible assets
– Right of use assets
Depreciation:
– Owned assets
– Right of use assets
Amortisation:
– Intangible assets
Regional
Bus
£m
London &
International
Bus
£m
Total
Bus
£m
UK Rail
£m
International
Rail
£m
Total
Rail
£m
Total
Operations
£m
39.1
2.0
8.2
38.0
5.0
17.5
2.4
23.6
28.2
16.7
56.6
4.4
31.8
66.2
21.7
6.1
0.5
204.0
17.0
353.4
1.7
4.0
5.7
1.4
9.9
13.5
1.1
0.9
0.4
2.3
16.0
14.0
205.1
17.9
353.8
72.6
18.4
236.9
84.1
375.5
3.7
9.4
Inter-segment revenue relates to transactions between the Group’s operating segments and includes rail replacement bus services
and sub-leasing of rolling stock.
At 3 July 2021, there were non-current assets included within the London & International Bus segment of £9.4m (2020: £12.4m) relating
to operations in Singapore and Ireland. Operations in Singapore generated a revenue of £55.4m (2020: £56.9m) and operations in
Ireland generated a revenue of £39.2m (2020: £33.4m) during the year.
Non-current assets included within International Rail of £23.1m relate to international operations in Germany (2020: £23.0m in
Germany and £11.6m in Norway). Operations in Norway generated a revenue of £43.5m (2020: £18.5m) and operations in Germany
generated a revenue of £96.7m (2020: £51.4m).
We have two major customers which individually contribute more than 10% of Group revenue, one of which contributed £2,195.6m
(2020: £736.2m restated), and the other contributed £560.5m (2020: £506.4m). The increase during the year is due to increased
government assistance as a result of the continuing COVID-19 pandemic. No other individual customer contributed 10% or more to
the Group’s revenue in either the current or prior year.
5. 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. Exceptional items are outlined in note 7.
Employee costs (note 6)
Rail operating charges (see below)
Energy costs (see below)
DfT franchise agreement (receipts)/payments
Depreciation (see below)
Intangible amortisation
Auditor’s remuneration (see below)
Impairment losses (including reversals) on financial assets and contract assets**
Reimbursement of operating costs
Government grants
Government grants: COVID-19
Profit on disposal of property, plant and equipment
Other operating costs
2021
£m
1,418.8
1,101.7
278.8
(10.9)
568.0
6.3
1.7
7.1
(13.5)
(2.8)
(22.8)
(0.2)
610.8
2020
(as previously
reported)
£m
Restatements*
£m
1,355.9
990.8
(3.1)
—
2020
(as restated)
£m
1,352.8
990.8
261.8
93.3
459.6
9.4
1.3
2.6
(27.1)
(3.6)
(27.2)
(0.9)
704.6
—
—
—
—
—
(0.2)
—
—
—
—
3.6
0.3
261.8
93.3
459.6
9.4
1.3
2.4
(27.1)
(3.6)
(27.2)
(0.9)
708.2
3,820.8
Total operating costs (pre-exceptional operating items)
3,943.0
3,820.5
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
** In addition to the restatements outlined in note 2, a reclassification of £0.2m has been made between impairment losses on trade receivables and other operating costs, as
presented in the table above. This is to reflect that the impairment charge for the year should be presented net of any amounts unused and reversed during the year.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
5. Operating costs continued
Further analysis of the above operating costs is as follows:
Rail operating charges
– Rail rolling stock
– Other rail
Total lease and sublease payments recognised as an expense (excluding rail access charges)
– Rail access charges
Total lease and sublease payments recognised as an expense
Depreciation
– Owned assets
– Right of use 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
– Additional audit fees incurred as a result of the matters of concern relating to LSER and other historic
franchises and affiliate trading*
Total audit fees for the audit of the financial statements*
Total non-audit fees
Total auditor’s remuneration (post-exceptional)*
Energy costs
– Bus fuel
– Rail diesel fuel
– Rail electricity
– Cost of site energy
Total energy costs
2021
£m
214.7
215.7
430.4
671.3
1,101.7
81.5
486.5
568.0
0.1
1.4
1.2
2.7
0.2
2.9
89.4
2.3
171.6
15.5
278.8
2020
£m
212.9
194.4
407.3
583.5
990.8
84.1
375.5
459.6
0.1
1.1
—
1.2
0.1
1.3
98.3
2.4
145.1
16.0
261.8
* Additional audit fees were incurred during the year as a result of the matters of concern relating to LSER and other historic franchises and affiliate trading outlined on page 188.
This results in total audit fees of £2.7m, £1.2m of which is recorded within exceptional items.
The Group’s rail operating companies hold agreements with different entities for access to the railway infrastructure (track, stations
and depots). These are classified as rail operating charges as they do not constitute a right of use asset.
Government grant income of £2.8m (2020: £3.6m) 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 15 years.
Government grant income in relation to the COVID-19 pandemic of £22.8m (2020: £27.2m) primarily relates to the Coronavirus Job
Retention Scheme (CJRS) in the UK, and the equivalent schemes in our international operations. The amounts recognised reflect the
grants receivable in respect of the year ended 3 July 2021 and relate to the costs reclaimable for furloughed employees to the extent
that it is reasonably certain that the grant will be received.
205
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
6. 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
2020 (as
previously
presented)
£m
1,181.2
117.0
56.1
1.6
Restatements*
£m
(3.1)
—
—
—
2021
£m
1,234.5
121.3
61.8
1.2
2020 (as
restated)
£m
1,178.1
117.0
56.1
1.6
1,418.8
1,355.9
(3.1)
1,352.8
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
The average monthly number of employees during the year, including directors, was:
Administration and supervision
Maintenance and engineering
Operations
2021
3,614
2,787
24,172
2020
3,643
2,763
23,594
30,573
30,000
The detailed 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. Aggregate directors’ emoluments are also disclosed
in note 29.
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 must 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 purchasing Go-Ahead Group shares at a 20% discount of the market price set at the date of invitation.
Sharesave 2016 participants had six months from the maturity date to exercise their options. Sharesave 2016 matured on 1 May 2019.
There are no current active Sharesave schemes in place.
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 no savings-related options at 3 July 2021.
The expense recognised for the scheme during the year to 3 July 2021 was £nil (2020: £nil).
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
Forfeited during the year
Exercised during the year
Outstanding at the end of the year
2021
No.
—
—
—
—
WAEP
£
—
—
—
—
2020
No.
174,606
(144,554)
(30,052)
—
WAEP
£
19.11
19.11
19.11
—
The weighted average exercise price at the date of exercise for the options exercised in the period was £nil (2020: £19.11).
At the year end nil options (2020: nil) were exercisable and the weighted average exercise price of the options at year end was £nil
(2020: £nil).
The options outstanding at the end of the year have a weighted average remaining contracted life of nil years (2020: nil years).
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The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
6. Employee costs continued
Long Term Incentive Plans
The former executive directors participated in The Go-Ahead Group Long Term Incentive Plan 2015 (LTIP). The LTIP provided 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 3 July 2021 was £0.1m (2020: £0.7m).
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 3 July 2021
and 27 June 2020 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
2021
% per annum
2020
% per annum
40.0
31.0
25.0
30.0
25.0
30.0
2021
2020
162,832
127,987
(49,993)
—
143,603
58,927
(39,698)
—
240,826
162,832
The LTIP award granted to the former Group Chief Executive in November 2018 lapsed in full from November 2021 as none of the
performance measures were achieved following the three-year performance period ending 3 July 2021.
The weighted average share price of the options at the year end was £11.40 (2020: £9.06). The weighted average fair value of options
granted during the year was £9.44 (2020: £21.12). The weighted average remaining contractual life of the options was 1.81 years (2020:
1.05 years). The weighted average exercise price at the date of exercise for the options exercised in the period was £nil (2020: £nil).
The estimated amounts due to the relevant tax authorities in relation to the above transactions are detailed in the directors’
Remuneration Report.
Deferred Share Bonus Plan
The Deferred Share Bonus Plan (DSBP) provides for certain 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 3 July 2021 was £1.2m (2020: £0.9m).
207
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
6. Employee costs continued
Deferred Share Bonus Plan continued
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
2021
2020
180,055
135,084
(7,369)
150,420
63,125
(1,476)
(30,758)
(32,014)
277,012
180,055
The weighted average fair value of options granted during the year was £8.32 (2020: £21.12). At the year end, 27,316 options related to DSBP
awards, which vested before the year end, which have not yet been exercised by participants. Of these 27,316 options, 524 options related to
the award granted in November 2013, 3,276 related to the award granted in November 2014, 2,904 related to the award granted in November
2015, 3,917 related to the award granted in November 2016 and 16,695 related to the award granted in November 2017. 55,631 options, relating
to the DSBP award granted in November 2018, will be eligible to vest from November 2021 following the end of a three-year deferral period.
The weighted average share price of the options at the year end was £11.40 (2020: £9.06).
The weighted average remaining contractual life of the options was 1.59 years (2020: 0.91 years). The weighted average exercise price
at the date of exercise for the options exercised in the period was £8.83 (2020: £20.86).
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 where eligible.
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.
7. 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.
Asset impairments, provisions and restructuring costs – Regional Bus
Asset impairments and restructuring costs – International Rail*
German Bavaria franchise onerous contract provision*
Norway franchise onerous contract provision and asset impairment
Department for Transport potential financial penalty and associated costs relating to
LSER
Exceptional operating items
As previously
reported
2020
£m
Restatements
2020**
£m
As restated
2020
£m
26.7
23.2
7.2
—
—
57.1
—
—
36.6
—
—
36.6
26.7
23.2
43.8
—
—
93.7
2021
£m
0.2
(5.2)
—
76.7
32.4
104.1
* In the prior year, the German onerous contract provision was included in ‘Asset impairments, provisions and restructuring costs – rail’. Given the additional provisions made in
Germany and Norway, and the quantum of them, the onerous contract provisions have now been presented separately.
** Details of restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
Year ended 3 July 2021
Total exceptional operating items in the year were a charge of £104.1m to the income statement.
Asset impairments and restructuring costs – Regional Bus
During the year ended 3 July 2021, an impairment charge of £1.1m was recognised in relation to property, plant and equipment
following the termination of further contracts in Regional Bus. Further, costs of £1.2m have also been recognised in relation to loss
making contracts where passenger demand is not recovering at the same levels as the wider commercial network.
This has been offset by the release of restructuring provisions of £1.0m and an impairment reversal of £1.1m following the sale of some
coaches that were previously impaired and recognised as exceptional operating charges during the year ended 27 June 2020.
Asset impairments and restructuring costs – International Rail
During the prior year, freehold land and buildings were impaired by £4.4m in Germany and recognised as an exceptional operating item.
During the year ended 3 July 2021, a depot that had previously been impaired was sold for an amount greater than the previously
estimated recoverable amount. Further, as part of this sale agreement, there is no longer an obligation to pay break fees on the depot
which were provided for as of 27 June 2020, and therefore this provision has been released. This has resulted in an exceptional
operating credit of £5.2m.
208
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
7. Exceptional items continued
Year ended 3 July 2021 continued
Norway franchise onerous contract provision and asset impairment
In December 2019, the Group began operating rail services in Norway, its first contract in this market and the first commercially run
network in the country. After a successful start to operations, the effects of the COVID-19 pandemic were felt just three months into
this contract.
As the contract involves exposure to changes in passenger demand, the Norwegian Government introduced a package of financial
support early in the COVID-19 crisis, initially with 100% loss coverage. As the pandemic continued, loss coverage was reduced from
this level down to 85%.
The impact of the reduction and possible cessation of funding, the fixed nature of the operating requirements and the longer than
expected duration of lower passenger demand following the impact of COVID-19 have resulted in a reduction of the net economic
benefits of the contract. This is based on the expected future cashflows and a risk-free discount rate, which triggered the need to
reassess the assumptions made in the onerous contract and impairment models. This reduction in future revenue results in an onerous
contract provision charge of £66.2m and asset impairments of £10.5m being recognised at the year end.
As a non-adjusting post balance sheet event in accordance with IAS 10, in December 2021 government support was subsequently
prolonged to include November 2021 to March 2022. Whilst temporary support at an equivalent level is in place until March 2022,
after this period the government has indicated further support at an unconfirmed level may be in place until at least August 2022. The
inclusion of government support at 85% loss coverage from November 2021 to the end of March 2022 in the calculation of the
onerous contract provision would reduce its size by £6.8m. There is ongoing dialogue with the Government in relation to a possible
renegotiation of the contract. Refer to the critical accounting judgements section on page 145 for further details.
Department for Transport potential financial penalty and associated costs relating to LSER
Under the Railways Act 1993, the DfT has the power to impose a financial penalty in relation to LSER as outlined on pages 10 to 11. In
the absence of specific precedent or relevant guidance, it is difficult to precisely estimate the likely quantum of any penalty. The Group,
having considered independent legal advice received by the Independent Committee, has included a provision of £30.0m which
reflects the Group's current best estimate of any penalty. The Group has also recognised associated legal and professional costs in
relation to this of £2.4m.
Year ended 27 June 2020
Total exceptional operating items in the prior year comprised a charge of £93.7m (restated) to the income statement.
Asset impairments and restructuring costs – Regional Bus
During the prior year, strategic reviews were carried out following a decline in the operational performance of Regional Bus and the
impact of COVID-19. As a result of these reviews, several restructuring programmes of varying degrees were initiated during 2020 and
a number of specific contracts, services and routes were terminated. In addition, COVID-19 has had a significant impact on certain bus
operations, in particular coaching contracts, airline and other holiday routes. Related assets have also been impaired to reflect the
changing environment. An exceptional item of £26.7m has been recognised and comprises £15.9m of property, plant and equipment
impairments, £3.8m of intangible asset impairments (including £0.6m of goodwill), £5.5m of restructuring costs, £0.5m impairment of
assets held for sale and £1.0m impairment of right of use assets.
Asset impairments, provisions and restructuring costs – International Rail
German rail operations commenced on 15 June 2019 and have faced a number of challenges during the first year of operation. A
comprehensive review of the overall business, including future franchises, has been undertaken and this has identified that there were
indicators for possible impairments across the business. A full impairment review was subsequently carried out and an exceptional
item of £23.2m has been recognised during the year. Impairments and provisions have been identified in relation to intangible assets
and committed, irrecoverable franchise set-up costs. These include £16.4m of franchise set-up costs and £0.7m of software, plus a
£4.4m impairment of the freehold land and buildings. Restructuring costs of £1.7m have also been recognised as an exceptional charge.
German Bavaria franchise onerous contract provision
The directors have performed a detailed review of all material contracts across the Group to consider the completeness of the
onerous contract provisions. This involved a detailed review and challenge of the assumptions within each contract, including those
relating to FY20 and the Group’s FY21 interim results. A number of errors have been identified in respect of the assumptions used
when calculating the onerous provision in the Bavarian rail franchise in the prior year and the Group’s FY21 interim results.
The prior year provision was determined to be understated by £36.6m which has been restated in these financial statements.
Correspondingly there was a reduction of £25.9m charged to the consolidated income statement in the Group’s FY21 interim results.
The calculation of the understatement was determined following a review of historical information and consideration given to what
information then available could reasonable have been included in the previous cash flow assumptions underpinning the provision.
209
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
8. Finance income and costs
Finance income 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 income’ and ‘Interest-bearings loans and borrowings’ in note 2.
Bank interest receivable on bank deposits
Interest on net pension asset
Interest receivable on net investment
Other interest receivable
Finance income
Interest payable on bank loans and overdrafts
Interest payable on £250m sterling seven year bond
Other interest payable
Unwinding of discounting on provisions
Interest payable on lease liabilities
Interest on net pension liability
Finance costs
2020
(as previously
reported)
£m
Restatements*
£m
3.8
1.3
—
0.3
5.4
(4.4)
(6.3)
(0.4)
(0.7)
(13.9)
(0.1)
(25.8)
—
—
—
—
—
—
—
(1.2)
—
—
—
(1.2)
2021
£m
0.7
1.0
0.1
0.3
2.1
(2.7)
(6.2)
(2.2)
—
(9.0)
(0.1)
(20.2)
2020 (as
restated)
£m
3.8
1.3
—
0.3
5.4
(4.4)
(6.3)
(1.6)
(0.7)
(13.9)
(0.1)
(27.0)
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
9. 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
25% (2020: 19.0%)
Adjustments in respect of deferred tax of previous years
Impact of opening deferred tax rate
Total deferred tax
Tax reported in consolidated income statement
2020
(as previously
reported)
£m
Restatements*
£m
2020
(as restated)
£m
11.2
(0.1)
11.1
(4.4)
(0.3)
5.5
0.8
11.9
(0.4)
—
(0.4)
(0.1)
—
—
(0.1)
(0.5)
10.8
(0.1)
10.7
(4.5)
(0.3)
5.5
0.7
11.4
2021
£m
21.0
(0.7)
20.3
(1.1)
0.2
14.4
13.5
33.8
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
The tax reported in the consolidated income statement in the current year includes exceptional amounts relating to the reversal of
asset impairments in Regional Bus. See note 7 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 the consolidated income statement
2021
£m
(5.3)
4.4
(0.1)
(1.0)
2020
£m
(0.4)
(3.8)
0.2
(4.0)
210
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
9. Taxation continued
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 3 July 2021 and 27 June 2020 is as follows:
2020
(as previously
presented)
£m
Restatements*
£m
(0.2)
(39.3)
Accounting loss before taxation
At United Kingdom tax rate of 19.0% (2020: 19.0%)
Share scheme costs not allowable for tax purposes
Non-qualifying depreciation
Expenditure not allowable for tax purposes
Income not taxable
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
Impact of opening deferred tax rate
Tax reported in consolidated income statement
2021
£m
(6.9)
(1.3)
(0.3)
1.0
7.0
(2.1)
0.2
16.1
0.1
(0.7)
(0.6)
14.4
33.8
—
0.3
0.9
1.1
—
(0.3)
4.5
—
(0.1)
—
5.5
11.9
Effective tax rate
(489.9%)
(5,950.0%)
2020
(as restated)
£m
(39.5)
(7.5)
0.3
0.9
1.1
—
(0.3)
11.5
—
(0.1)
—
5.5
11.4
(28.9%)
(7.5)
—
—
—
—
—
7.0
—
—
—
—
(0.5)
1.2%
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
The 2021 effective tax rate on a pre-exceptional basis is 35.3% (2020: 32.7% restated). The pre and post-exceptional effective tax rates
include a £14.4m (2020: £5.5m) charge in relation to the UK corporation tax rate change from an opening rate of 19.0% to a closing rate
of 25.0%. This change was substantively enacted at the balance sheet date. Excluding this charge, the effective tax rate is 20.5% (2020:
22.5% restated).
The Group had subsidiary trading companies in Germany, Ireland, Norway, Australia and Singapore during the year. The tax residencies
of these companies are the same as the countries of incorporation, which are disclosed in note 29.
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 and Norway
have faced trading difficulties which have resulted in a loss; therefore no taxation has been recognised during the financial year.
Australia’s trading results for the financial year are immaterial.
The Group has not recognised deferred tax assets of £26.0m (2020: £24.0m restated) based on a taxation rate of 30.0% (2020: 30.0%)
in respect of losses incurred in Germany carried forward and £16.9m (2020: £nil) based on a taxation rate of 22.0% (2020: 22.0%) in
respect of losses incurred in Norway carried forward. There is no time limit on the utilisation of these assets in Germany and Norway
and they have not been recognised due to the uncertainty over their recovery in future periods.
c. Reconciliation of net current tax (asset)/liability
A reconciliation of the net current tax (asset)/liability is provided below:
Current tax (asset)/liability at the start of the year
Corporation tax reported in consolidated income statement
Net paid in the year
Net current tax liability/(asset) at the end of the year
2020
(as previously
reported)
£m
Restatements*
£m
2020
(as restated)
£m
13.1
11.1
(28.2)
(4.0)
0.4
(0.4)
—
—
13.5
10.7
(28.2)
(4.0)
2021
£m
(4.0)
20.3
(12.1)
4.2
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
211
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
2020
(as previously
reported)
£m
Restatements*
£m
2020
(as restated)
£m
9. Taxation continued
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
Share based payments
2021
£m
(21.1)
(14.2)
(13.9)
(1.5)
(9.0)
—
(18.8)
(8.6)
(11.5)
—
(10.1)
—
Deferred tax liability included in balance sheet
(59.7)
(49.0)
Deferred tax asset
Other temporary differences
Share based payments
Cashflow hedges
Deferred tax asset included in balance sheet
0.9
0.6
—
1.5
—
—
2.9
2.9
—
0.1
—
—
—
—
0.1
—
0.4
—
0.4
(18.8)
(8.5)
(11.5)
—
(10.1)
—
(48.9)
—
0.4
2.9
3.3
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
The deferred tax asset, as shown above, 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 ended 3 July 2021 and
27 June 2020 are as follows:
Year ended 3 July 2021
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 27 June
2020 (as
previously
reported)
£m
(18.8)
(10.5)
1.9
(11.5)
(10.1)
2.9
—
(46.1)
At 30 June
2020 (as
restated)
£m
Recognised in
income
statement
£m
Recognised
in other
comprehensive
income
£m
Recognised
directly in
equity
£m
Restatements*
£m
—
—
0.1
—
—
—
0.3
0.4
(18.8)
(10.5)
2.0
(11.5)
(10.1)
2.9
0.3
(45.7)
(2.3)
(2.7)
(2.1)
(2.4)
(4.2)
—
0.2
(13.5)
—
—
—
—
5.3
(3.1)
—
2.2
—
—
—
—
—
(1.3)
0.1
(1.2)
At 3 July
2021
£m
(21.1)
(13.2)
(0.1)
(13.9)
(9.0)
(1.5)
0.6
(58.2)
212
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
9. Taxation continued
d. Deferred tax continued
Year ended 27 June 2020
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 30 June
2019 (as
previously
reported)
£m
(20.1)
(9.7)
0.6
(10.9)
(8.5)
(0.9)
0.2
(49.3)
Restatements*
£m
—
—
0.3
—
—
—
—
At 30 June
2019 (as
restated)
£m
(20.1)
(9.7)
0.9
(10.9)
(8.5)
(0.9)
0.2
0.3
(49.0)
Recognised in
income
statement
£m
Recognised
in other
comprehensive
income
£m
Recognised
directly in
equity
£m
1.3
(0.8)
1.1
(0.6)
(2.0)
—
0.3
(0.7)
—
—
—
—
0.4
4.8
—
5.2
—
—
—
—
—
(1.0)
(0.2)
(1.2)
At 27 June
2020 (as
restated)
£m
(18.8)
(10.5)
2.0
(11.5)
(10.1)
2.9
0.3
(45.7)
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
The deferred tax included in the Group income statement is as follows:
Accelerated capital allowances
Revaluation
Retirement benefit obligations
Other temporary differences
Share based payments
Adjustments in respect of prior years
Adjustment in respect of opening deferred tax rate
Deferred tax expense
2020 (as
previously
reported)
£m
Restatements*
£m
2020 (as
restated)
£m
(3.8)
(0.6)
1.4
(1.4)
—
(4.4)
(0.3)
5.5
0.8
—
—
—
(0.1)
—
(0.1)
—
—
(0.1)
(3.8)
(0.6)
1.4
(1.5)
—
(4.5)
(0.3)
5.5
0.7
2021
£m
(1.9)
(0.6)
1.6
—
(0.2)
(1.1)
0.2
14.4
13.5
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
e. Factors affecting tax charges
The standard rate of UK corporation tax is 19.0% and therefore 19.0% applies to the current tax charge arising during the year ended
3 July 2021. Legislation within the Finance Bill 2020 advised a UK corporation tax rate of 19.0% from 1 April 2020 and this rate was
applied, where applicable, to the Group’s deferred tax balance at the prior year end. Legislation substantively enacted in the Finance Bill
2021 amended this rate to 25.0% with effect from April 2023 and therefore 25.0% has been applied, where applicable, to the Group’s
deferred tax balance as at the balance sheet date for balances arising after this date.
213
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
10. Earnings per share
Basic earnings per share is the amount of profit after tax 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
Pre-
exceptional
2021
£m
Exceptional
items
2021
£m
Post-
exceptional
2021
£m
Pre-
exceptional
2020 (as
previously
reported)
£m
Restatements*
£m
Pre-
exceptional
2020 (as
restated)
£m
Exceptional
Items (as
previously
reported)
2020
£m
Restatements*
£m
Exceptional
Items (as
restated)
2020
£m
Post-
exceptional
2020 (as
previously
reported)
£m
Post-
exceptional
2020 (as
restated)
£m
Restatements*
£m
Net
profit/(loss)
attributable
to equity
holders of
the parent
46.6
(92.6)
(46.0)
22.2
(0.7)
21.5
(50.8)
(36.6)
(87.4)
(28.6)
(37.3)
(65.9)
Pre-
exceptional
2021
Exceptional
items
2021
Post-
exceptional
2021
Pre-
exceptional
2020 (as
previously
reported)
2020
Restatements*
£m
Pre-
exceptional
2020 (as
restated)
£m
Exceptional
Items (as
previously
reported)
2020
£m
Restatements*
£m
Exceptional
Items (as
restated)
2020
£m
Post-
exceptional
2020 (as
previously
reported)
£m
Post-
exceptional
2020 (as
restated)
£m
Restatements
£m
Basic
weighted
average
number of
shares in
issue (‘000) 42,988
— 42,988 42,998
—
42,998
—
—
— 42,998
— 42,998
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)
142
—
142
104
—
104
—
—
—
104
—
104
43,130
— 43,130 43,102
—
43,102
—
—
— 43,102
—
43,102
108.4
(215.4) (107.0)
51.6
(1.6)
50.0
(118.1)
(85.1)
(203.3)
(66.5)
(86.7)
(153.3)
108.0
(214.7) (106.7)
51.5
(1.6)
49.9
(117.9)
(84.9) (202.8)
(66.4)
(86.5)
(152.9)
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
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 3 July 2021 to 23 February 2022.
214
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
11. 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 2020: nil per share (2019: 71.91p)
Interim dividend for 2021: nil per share (2020: nil)
Proposed for approval at the AGM (not recognised as a liability as at 3 July 2021)
Equity dividends on ordinary shares:
Final dividend for 2021: nil per share (2020: nil)
Payment of proposed dividends does not have any tax consequences for the Group.
2021
£m
—
—
—
2021
£m
2020
£m
30.9
—
30.9
2020
£m
—
—
215
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
12. 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.
Cost
At 30 June 2019
Additions
Disposals
Transfer categories
Transfer of assets held for sale
Transfer of ROU assets
Effect of foreign exchange rate changes
At 27 June 2020
Additions
Disposals
Transfer of ROU assets
Effect of foreign exchange rate changes
At 3 July 2021
Depreciation and impairment
At 30 June 2019
Charge for the year
Impairment
Disposals
Transfer categories
Transfer of ROU assets
Effect of foreign exchange rate changes
At 27 June 2020
Charge for the year
Impairment
Disposals
Transfer of ROU assets
Effect of foreign exchange rate changes
At 3 July 2021
Net book value
At 3 July 2021
At 27 June 2020
At 29 June 2019
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
217.5
10.2
—
1.9
(2.3)
—
0.3
227.6
0.3
(4.8)
—
(1.1)
222.0
13.9
1.9
5.4
—
1.6
—
—
22.8
2.0
—
(4.4)
—
—
20.4
201.6
204.8
203.6
3.1
—
—
(3.1)
—
—
—
—
—
—
—
—
—
0.5
—
—
—
(0.5)
—
—
—
—
—
—
—
—
—
—
—
2.6
19.2
3.8
(8.0)
3.1
—
—
(0.1)
18.0
2.8
—
—
(0.2)
20.6
12.2
2.1
0.8
(7.2)
0.3
—
(0.1)
8.1
3.4
—
—
—
(0.1)
11.4
9.2
9.9
7.0
707.2
44.7
(24.9)
1.1
—
(11.4)
—
716.7
42.8
(25.7)
1.1
—
734.9
350.8
57.1
15.0
(24.8)
(0.4)
(4.2)
—
393.5
54.4
3.4
(24.5)
0.8
—
234.4
13.9
(58.1)
(3.0)
—
—
0.1
187.3
6.9
(1.7)
—
(0.3)
192.2
172.1
23.0
0.1
(58.1)
(1.0)
—
0.1
136.2
21.7
0.2
(1.6)
—
—
427.6
156.5
307.3
323.2
356.4
35.7
51.1
62.3
Total
£m
1,181.4
72.6
(91.0)
—
(2.3)
(11.4)
0.3
1,149.6
52.9
(32.2)
1.1
(1.6)
1,169.7
549.5
84.1
21.3
(90.1)
—
(4.2)
—
560.6
81.5
3.6
(30.5)
0.8
(0.1)
615.9
553.8
589.0
631.9
216
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
13. Leases
This note details right of use assets and the associated lease liabilities. For accounting policies see ‘Leases’ in note 2.
The Group has lease liabilities for land and buildings, rail rolling stock, bus vehicles and various items of plant and equipment. These
contracts have no terms of renewal or purchase option escalation clauses.
Right of use assets
The right of use assets were brought onto the balance sheet on 30 June 2019 on the Group’s transition to IFRS 16 Leases.
Leasehold land
and properties
£m
Rolling stock
£m
Plant and
equipment
£m
Cost
At 30 June 2019
On transition to IFRS 16
Additions
Disposals
Transfer from owned assets
Effect of foreign exchange rate changes
At 27 June 2020
Additions*
Disposals
Transfer to owned assets
Effect of foreign exchange rate changes
At 3 July 2021
Depreciation and impairment
At 30 June 2019
Charge for the year
Impairment
Disposals
Transfer from owned assets
Other
At 27 June 2020
Charge for the year
Impairment
Disposals
Transfer to owned assets
Effect of foreign exchange rate changes
Other
At 3 July 2021
Net book value
At 3 July 2021
At 27 June 2020
At 29 June 2019
—
25.0
4.6
—
—
0.1
29.7
1.7
(0.1)
—
(0.3)
31.0
—
5.7
—
—
—
1.1
6.8
6.7
0.8
0.1
—
(0.1)
0.2
14.5
16.5
22.9
—
—
757.4
232.3
(0.7)
11.4
—
1,000.4
184.8
(15.3)
(1.1)
—
—
0.3
—
—
—
—
0.3
0.5
—
—
—
Total
£m
—
782.7
236.9
(0.7)
11.4
0.1
1,030.4
187.0
(15.4)
(1.1)
(0.3)
1,168.8
0.8
1,200.6
—
369.7
1.0
(0.3)
4.2
—
374.6
479.3
3.2
(15.2)
(0.9)
—
(0.9)
840.1
328.7
625.8
—
—
0.1
—
—
—
—
0.1
0.5
—
—
—
—
—
0.6
0.2
0.2
—
—
375.5
1.0
(0.3)
4.2
1.1
381.5
486.5
4.0
(15.1)
(0.9)
(0.1)
(0.7)
855.2
345.4
648.9
—
* Additions includes £165.9m of contract modifications in relation to Govia Thameslink Railway as a result of the current rail franchise being extended during the year to 31 March
2022. This accounts for an increase in leasehold land and property additions of £0.6m, rolling stock of £165.2m and plant and equipment of £0.1m.
217
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
13. Leases continued
Lease liabilities
The balance sheet includes the following amounts:
Current
Non-current
The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
2021
£m
263.9
48.7
312.6
2021
£m
268.3
16.8
11.6
9.1
4.4
5.8
2020
£m
517.3
131.3
648.6
2020
£m
525.9
97.0
14.7
9.3
8.2
5.8
Total undiscounted lease liability
316.0
660.9
See note 21 for a reconciliation of the opening to closing lease liabilities.
Amounts recognised in the Group income statement
Depreciation expense on right of use assets
Interest payable on lease liabilities
Expenses relating to short term leases
Expenses relating to low value leases
Amounts recognised in the Group cashflow statement
Total cash outflow for leases
2021
£m
486.5
9.1
0.4
0.2
496.2
2021
£m
543.5
2020
£m
375.5
13.9
112.6
0.3
502.3
2020
£m
388.2
Sale and leaseback transactions
A number of bus vehicles in the Group are leased with some purchased and sold immediately at fair value and for the same value as the
carrying value of the asset at no gain or loss and leased back. This is to match vehicles to specific income streams. The cashflow
impact of these transactions results in the cash received for the sale of vehicles offsetting the payments made for the purchase of
vehicles. Cash payments are subsequently made over the life of the lease.
Service concession agreements
International Rail operations are similar in nature and consist of the operation of service concession agreements and the provision of
transport services on behalf of local government bodies. The Group has access to infrastructure whilst operating the service
agreement which is returned to the grantor at the end of the contract. Consideration received is determined by the franchise
agreement with variable elements attributable to performance and revenue is accounted for and classified in line with IFRS 15. There
are no construction or upgrade elements to the service agreement; therefore, no financial or intangible assets have been recognised.
Terminations
A significant number of the Group’s rolling stock lease contracts include extension options which mirror potential franchise and
revenue agreement extensions. The award of revenue extensions is at the discretion of the customer and outside the control of the
Group. Therefore, it is management’s judgement that it is not reasonably certain that the lease will be extended and therefore the
lease term excludes extension periods.
218
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
14. Goodwill and 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. Customer
contracts are amortised over the life of the contract. For further details see accounting policies for; “Software”, “Franchise set-up
costs”, “Business combinations and goodwill”, “Impairment of assets” and “Customer contracts” in note 2.
Goodwill
£m
Software
costs
£m
Franchise
set-up costs
£m
Rail franchise
asset
£m
Customer
contracts
£m
Cost
At 30 June 2019
Additions
Disposals
Effect of foreign exchange rate changes
At 27 June 2020
Additions
Disposals
Effect of foreign exchange rate changes
At 3 July 2021
Amortisation and impairment
At 30 June 2019
Charge for the year
Impairment
On disposal
At 27 June 2020
Charge for the year
Impairment
On disposal
Effect of foreign exchange rates
Other
At 3 July 2021
Net book value
At 3 July 2021
At 27 June 2020
At 29 June 2019
87.4
—
—
—
87.4
—
—
—
87.4
13.3
—
0.6
—
13.9
—
—
—
—
—
13.9
73.5
73.5
74.1
26.8
5.3
(3.5)
(0.1)
28.5
2.2
(0.7)
—
30.0
18.7
3.0
3.4
(3.4)
21.7
3.1
2.1
(0.4)
—
(0.2)
26.3
3.7
6.8
8.1
37.1
13.1
(0.1)
—
50.1
—
(2.5)
(1.4)
46.2
12.6
6.1
16.4
(0.1)
35.0
3.1
7.6
(2.5)
(1.2)
—
42.0
4.2
15.1
24.5
16.7
—
—
—
16.7
—
—
—
16.7
16.7
—
—
—
16.7
—
—
—
—
—
16.7
—
—
—
Total
£m
182.7
18.4
(8.3)
(0.1)
192.7
2.2
(10.3)
(1.4)
183.2
73.9
9.4
21.5
(8.2)
96.6
6.3
9.7
14.7
—
(4.7)
—
10.0
—
(7.1)
—
2.9
12.6
0.3
1.1
(4.7)
9.3
0.1
—
(7.1)
(10.0)
—
—
2.3
0.6
0.7
2.1
(1.2)
(0.2)
101.2
82.0
96.1
108.8
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,
currently between 5 and 13 years, in accordance with IFRS 15.
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 term is 6.5 years.
219
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
14. Goodwill and intangible assets continued
Goodwill
Goodwill acquired through acquisitions has been allocated to individual cash generating units (CGUs) 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 North East
Regional Bus
Go-Ahead London
Total
2021
£m
34.6
12.7
13.0
2.7
63.0
10.5
73.5
2020
£m
34.6
12.7
13.0
2.7
63.0
10.5
73.5
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. The assumptions used are consistent with the historical performance of each unit and are expected to be
realistically achievable in light of economic and industry measures and forecasts. The assessment of the value in use for Regional Bus
cash generating units sensitive to the return of passenger revenue to pre-COVID-19 levels. The directors have also considered the
implications of climate change, when assessing the medium to long term projections. The Group, as a public transport services provider,
has a vital role to play in helping reduce carbon emissions, and they therefore feel there is no adverse impact on the assumptions used.
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 five
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 given the continued focus on public transport initiatives in response to
government and public focus on climate change.
Separate discount rates have been calculated for the different cash generating units due to the varying impact of IFRS 16 on the
underlying cashflows.
Regional Bus
London Bus
Pre-tax and post-IFRS 16
discount rate
Terminal growth rate
2021
%
8.7
8.4
2020
%
6.7
6.6
2021
%
2.0
2.0
2020
%
2.0
2.0
Financial modelling adopting the assumptions outlined confirms that the carrying amount of the CGUs does not exceed their
recoverable amount and no impairment charge is required.
The principal assumptions in the goodwill models are the forecasted cashflows in the three-year forecast period, the extrapolated
growth rates and the discount rate. The calculation of value in use for each CGU is most sensitive to the discount rate and growth
rates applied. Sensitivity analysis has been performed to understand what the percentage change in the principal assumptions would
erode the headroom to zero. Details have been disclosed below of where a possible change in key assumptions would cause the
carrying amount of the Go South Coast CGU to exceed its recoverable amount. The other CGUs can tolerate a higher discount rate
and lower terminal growth rate before eroding the headroom to zero.
Discount rate
Terminal growth rate
Regional Bus
%
9.5
1.2
220
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
15. 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 3 July 2021, assets held for sale had a carrying value of £3.2m (2020: £7.2m) and related to property, plant and equipment. Assets
held for sale relating to bus rolling stock with a carrying value of £3.1m (2020: £4.8m) are included in London & International Bus. Assets
held for sale relating to land and buildings have a carrying value of £0.1m (2020: £2.4m). Of these, £0.1m (2020: £0.2m) are included
with Regional Bus and £nil (2020: £2.2m) are included within the Rail division.
The Group expects to sell £3.2m of these assets 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 £0.1m relate to land and buildings, within property,
plant and equipment. The value at each balance sheet date represents management’s best estimate of their resale value less disposal
costs.
During the year ended 3 July 2021, assets held for sale were sold for a profit of £0.3m (2020: £nil) which was included within
exceptional items and £nil (2020: £nil) was included in operating costs in the income statement.
16. 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
2021
£m
19.5
2020
£m
19.7
The amount of any write down of inventories recognised as an expense during the year is immaterial.
17. 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 a loss
allowance for expected credit losses.
Current
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Other receivables
Prepayments
Accrued income
Receivable from central government
2021
£m
146.0
(10.8)
135.2
31.9
77.5
40.6
128.0
413.2
2020
(as previously
reported)
£m
Restatements*
£m
2020
(as restated)
£m
55.4
(4.1)
51.3
16.5
76.4
33.2
91.1
13.7
—
13.7
—
—
—
8.3
69.1
(4.1)
65.0
16.5
76.4
33.2
99.4
268.5
22.0
290.5
Included within amounts receivable from central government is VAT of £47.1m (2020: £49.0m and 2019: £37.7m).
Contract assets
Contract assets**
2020
(as previously
reported)
£m
Restatements*
£m
2020
(as restated)
£m
2019
(as restated)
£m
124.3
(40.7)
83.6
105.0
2021
£m
121.5
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above.
** Included within amounts receivable from central government is VAT of £47.1m (2020: £49.0m and 2019: £37.7m). Contract assets are the sum of the accrued income and
amounts receivable from central government shown net of VAT. The 2020 and 2019 contract asset balances contract asset balances shown in the table above have been
restated as VAT balances were incorrectly included in contract assets in those years, net of the £8.3m in the above table.
Contract assets are the sum of accrued Income and amounts receivable from central government shown net of VAT.
Amounts receivable from central government consists of UK and overseas VAT balances and amounts due from the DfT in the UK.
Accrued income and amounts receivable from central government principally comprise amounts relating to contracts with customers
and make up the contract assets balance in the table above. Accrued income primarily comprises contract income which is billed on a
regular basis and which is reclassified to trade receivables, as time passes, at the point at which it is billed. Contract assets have
increased during the year as a result of amounts due under the CBSSG scheme and the timing of payments versus the recognition of
related income. The non-current prepayment of £2.0m (2020: £nil) relates to a maintenance contract in Germany.
221
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
17. Trade and other receivables continued
Non-current trade and other receivables
Prepayments
2021
£m
2.0
2020
£m
—
Ageing of trade receivables
As at 3 July 2021 and 27 June 2020, the ageing analysis of trade receivables and the provision for impairment of receivables based on
expected credit losses were as follows:
Year ended 3 July 2021
Expected rate of credit losses
Gross carrying value of trade
receivables
Provision for impairment of
receivables
Year ended 27 June 2020
Expected rate of credit losses (as
restated)
Gross carrying value of trade
receivables (as previously reported)
Restatements to trade receivables*
Gross carrying value of trade
receivables (as restated)
Provision for impairment of receivables
Total
£m
7.4%
Not overdue
£m
—
146.0
112.3
10.8
—
Total
£m
Not overdue
£m
Less than
30 days
£m
1.9%
5.3
0.1
Less than
30 days
£m
30–60 days
£m
60–90 days
£m
90–120 days
£m
Greater than
120 days
£m
1.8%
70.8%
23.3%
49.0%
5.6
0.1
2.4
1.7
4.3
1.0
16.1
7.9
30–60 days
£m
60–90 days
£m
90–120 days
£m
Greater than
120 days
£m
5.9%
—
2.9%
—
67.7%
9.8%
26.5%
55.4
13.7
69.1
4.1
39.0
3.3
42.3
—
6.9
3.4
10.3
0.3
3.6
0.8
4.4
—
3.1
—
3.1
2.1
1.1
3.0
4.1
0.4
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above.
Provision for impairment of receivables
Trade receivables at nominal value of £10.8m (2020: £4.1m) were impaired and fully provided for. Movements in the provision for
impairment of receivables were as follows:
At 27 June 2020
Charge for the year
Utilised
Unused amounts reversed
At 3 July 2021
2021
£m
4.1
7.6
(0.4)
(0.5)
10.8
Impairment losses (including reversals) on financial assets and contract assets is amounts charged in the year less amounts reversed
at £7.1m (2020: £2.4m).
Contract assets and accrued income were also considered for impairment but it was determined that provision for impairment was
trivial both for the year ended 3 July 2021 and the year ended 27 June 2020. Loss allowance for other receivables and receivables from
central government was measured as amount equal to 12-months’ expected credit losses. Due to very low credit risk, no provision was
required either for the year ended 3 July 2021 or the year ended 27 June 2020.
The provision for impairment of receivables has increased due to a mechanism agreed with the DfT under which certain receivables
are provided for rather than being written off and are then covered through the EMA and ERMA funding as required. The credit risk
associated with the Group’s trade and other receivables is explained in note 22.
222
The Go-Ahead Group plc Annual Report and Accounts 2021
1.7
3.2
4.9
1.3
2020
£m
2.1
2.6
(0.4)
(0.2)
4.1
Group financial statements
18. Finance lease receivables
On 1 September 2020 the Group entered into a new head lease for 30 train units. These train units were previously on a head lease with
another train operating company and as such it was agreed they would be cascaded to the Group over a 13-month period. The
remaining receivable for each train unit is being transferred into a right of use asset when each individual train unit is delivered to the
Group during the cascade period, at which time it is assessed to satisfy the requirement for recognition of the right of use asset.
Amounts receivable under finance leases
Year 1
After year 1
Undiscounted lease payments receivable
Present value of lease payments
Net investment in the lease
2021
£m
2.3
—
2.3
2.3
2.3
2020
£m
—
—
—
—
—
Included in the income statement is finance income on the net investment in finance leases of £0.1m (2020: £nil).
The Company’s finance lease arrangements do not include variable payments. The average effective interest rate approximates 1.87%
per annum.
None of the finance lease receivables at the end of the reporting period are past due and management considers that no finance lease
receivable is impaired.
19. 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 equivalents
2020
(as previously
reported)
£m
Restatements*
£m
2020
(as restated)
£m
139.6
430.2
569.8
138.5
(138.5)
—
278.1
291.7
569.8
2021
£m
410.9
219.7
630.6
* Cash has been reclassified from cash equivalents to cash at bank due to previous misclassification.
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 UK Rail companies included in cash at bank and on short term demand 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. Following the
introduction of the Emergency Measures Agreements (EMAs) and then the Emergency Recovery Measures Agreements (ERMAs)
under these emergency measures the calculation mechanism for restricted cash continues to be in place. From 19 September 2020
until the end of March 2022, GTR is operating under an Emergency Recovery Measures Agreement (ERMA). As at year end, under the
terms of the ERMA, all of GTR’s cash continues to be restricted. Southeastern was operating under the EMA agreement at year end
and its restricted cash balance is based on total cash less distributable reserves. As at 3 July 2021, balances amounting to £543.7m
(2020: £474.8m) were restricted. Part of this amount is to cover deferred income for rail season tickets, which was £18.3m at 3 July
2021 (2020: £21.3m).
223
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
20. 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 and other payables
Trade payables
Other taxes and social security costs
Other payables
Deferred season ticket income
Accruals
Deferred income
Payable to central government
Government grants
2020 (as
previously
reported)
£m
Restatements*
£m
2020 (as
restated)
£m
129.2
28.8
72.1
21.3
265.2
94.9
102.6
3.9
718.0
—
—
(6.8)
—
7.2
—
46.9
—
47.3
129.2
28.8
65.3
21.3
272.4
94.9
149.5
3.9
765.3
2021
£m
120.0
34.4
57.4
18.3
318.5
143.9
187.5
3.4
883.4
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above.
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
• Amounts payable to central government consist of amounts payable to the DfT in the UK.
• Other payables are non-interest bearing and have varying terms of up to 12 months
Deferred season ticket income and deferred income principally comprise amounts relating to contracts with customers:
Contract liabilities
Contract liabilities
2021
£m
162.2
2020
£m
116.2
2019
£m
218.1
Contract liabilities at each balance sheet date are expected to be recognised as revenue within the next financial year. The contract
liabilities balance as at 27 June 2020 was recognised as revenue during the year ended 3 July 2021. The balance as at 3 July 2021 has
increased primarily due to the timing of advanced funding received from the Department for Transport (DfT).
Non-current trade and other payables
Government grants
2021
£m
13.5
2020
£m
15.6
21. 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’, ‘Cash and cash equivalents’ and ‘Leases’ 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. In line with our debt
covenants, net debt is calculated using the outstanding principal value of debt and does not include accrued interest and is gross of
debt issue costs. It can be summarised as:
224
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
21. Interest-bearing loans and borrowings continued
Year ended 3 July 2021
Effective
interest rate
%
Maturity
0.63
1–4 years
2.5
1–4 years
2.1
0–1 years
2.79 Over 5 years
0–7 years
2.26
Effective
interest rate
%
Maturity
0.69
1–4 years
2.50
1–4 years
2.10
0–1 years
2.79 Over 5 years
0–8 years
2.07
Syndicated loans
Interest accrued on syndicated loans
Debt issue costs on syndicated loans
£250m sterling seven-year bond
Interest accrued on £250m sterling seven-year bond
Debt issue costs on £250m sterling seven-year
bond
€8m revolving credit facility
€10.85m loan
Lease liabilities (note 13)
Total interest-bearing loans and borrowings
Interest accrued
Debt issue costs
Total interest-bearing loans and borrowings
(gross of debt issue costs and interest)
Cash and short term deposits (note 19)
Net (cash)/debt
Restricted cash*
Adjusted net debt
Year ended 27 June 2020
Syndicated loans
Debt issue costs on syndicated loans
£250m sterling seven-year bond
Interest accrued on £250m sterling seven-year
bond (as previously reported)
Restatement*
Interest accrued on £250m sterling seven-year
bond (as restated)
Debt issue costs on £250m sterling
seven-year bond
€8m revolving credit facility
€10.85m loan
Lease liabilities (note 13)
Total interest-bearing loans and borrowings (as
restated)
Interest accrued (as previously reported)
Restatement*
Interest accrued (as restated)
Debt issue costs
Total interest-bearing loans and borrowings
(gross of debt issue costs and interest) (as restated)
Cash and short term deposits (note 19)
Net (cash)/debt
Restricted cash**
Adjusted net debt
Current
Within
one year
£m
Non-current
After one year
but not more
than five years
£m
After
more than
five years
£m
—
0.1
(0.1)
—
6.2
(0.5)
5.5
0.8
263.9
275.9
(6.3)
0.6
270.2
(630.6)
(360.4)
Current
Within
one year
£m
—
(0.1)
—
—
6.2
6.2
(0.6)
5.8
1.0
517.3
529.6
—
(6.2)
(6.2)
0.7
524.1
(569.8)
(45.7)
126.6
—
(0.4)
250.0
—
(0.7)
—
3.5
42.0
421.1
—
1.0
422.1
—
422.1
—
—
—
—
—
—
—
3.4
6.8
10.2
—
—
10.2
—
10.2
Non-current
After one year
but not more
than five years
£m
After
more than
five years
£m
147.4
(0.5)
250.0
—
—
—
(1.1)
—
3.6
124.3
523.7
—
—
—
1.6
525.3
—
525.3
—
—
—
—
—
—
—
—
4.5
7.0
11.5
—
—
—
—
11.5
—
11.5
Total
£m
126.6
0.1
(0.5)
250.0
6.2
(1.2)
5.5
7.7
312.7
707.2
(6.3)
1.6
702.5
(630.6)
71.9
543.7
615.6
Total
£m
147.4
(0.6)
250.0
—
6.2
6.2
(1.7)
5.8
9.1
648.6
1,064.8
—
(6.2)
(6.2)
2.3
1,060.9
(569.8)
491.1
474.8
965.9
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above.
** See note 19 (page 223) for further information in relation to the Group’s restricted cash balance.
225
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
21. Interest-bearing loans and borrowings continued
Analysis of Group net debt/(cash)
Cash and
cash
equivalents
£m
Syndicated
loan facility
£m
£250m sterling
bond (as
previously
reported)
£m
Lease
liabilities
£m
630.8
(61.0)
(144.7)
(2.5)
(6.1)
373.6
(250.0)
—
(3.8)
—
3.8
1.4
—
13.9
(235.0)
(1.4)
(13.9)
—
—
(0.2)
—
—
(781.1)
—
—
—
—
—
Restatement*
£m
(6.2)
—
6.2
—
(6.2)
—
At 30 June 2019
Net cashflow
Interest (received)/paid on
loans and borrowings
Inception of new leases
Interest income/(expense)
Effect of foreign exchange rate
changes
On transition to IFRS 16
£250m
sterling bond
(as restated)
£m
(256.2)
—
Euro RCF
£m
(5.7)
—
6.2
—
(6.2)
—
—
At 27 June 2020
569.8
(147.4)
(648.6)
(250.0)
(6.2)
(256.2)
Net cashflow
Interest paid on loans and
borrowings
Inception of new leases
Interest income/(expense)
Lease modifications
Effect of foreign exchange rate
changes
At 3 July 2021
Interest accrued
Net (cash)/debt
62.5
17.0
534.3
(0.7)
—
0.7
—
0.7
—
(0.8)
9.0
(31.7)
(9.0)
—
(166.6)
(1.7)
3.8
—
630.6
(126.7)
(312.6)
—
0.1
—
630.6
(126.6)
(312.6)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6.2
—
(6.2)
—
—
(256.2)
6.2
(250.0)
Euro loan
£m
(9.7)
0.8
0.3
—
(0.3)
(0.2)
—
(9.1)
0.8
0.4
—
(0.4)
Total
£m
208.4
310.9
18.0
(235.0)
(18.0)
(0.5)
(781.1)
(497.3)
614.6
15.6
(31.7)
(15.7)
—
(166.6)
0.6
(7.7)
—
3.0
(78.1)
6.3
(7.7)
(71.8)
—
—
—
(0.1)
—
(5.8)
—
—
—
—
—
0.3
(5.5)
—
(5.5)
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above.
226
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
21. Interest-bearing loans and borrowings continued
Reconciliation of liabilities arising from financing activities
Syndicated
loan
facility(as
previously
presented)
£m
Syndicated
loan
facility(as
restated)
£m
Restatement*
£m
£250m
sterling bond
(as previously
reported)
£m
Lease
liabilities
£m
Restatement*
£m
£250m
sterling bond
(as restated)
£m
Euro RCF
£m
Euro loan
£m
Total
liabilities
from
financing
activities
£m
At 30 June 2019
(144.7)
0.8
(143.9)
(6.1)
(250.0)
(4.0)
(254.0)
(5.7)
(9.7)
(419.4)
Net Cashflow (excluding
interest paid)
Interest paid on loans
and borrowings
Movement in debt issue
costs
Inception of new leases
Interest expense
Effect of foreign
exchange rate changes
On transition to IFRS 16
At 27 June 2020
Net Cashflow
Interest paid on loans
and borrowings
Movement in debt issue
costs
Inception of new leases
Interest expense
Lease modifications
Effect of foreign
exchange rate changes
At 3 July 2021
Interest accrued
Debt issue costs
Total interest-bearing
loans and borrowings
(gross of interest and issue
costs)
—
—
(0.2)
—
(147.4)
17.0
0.7
(0.1)
(0.8)
—
3.8
—
—
0.6
—
—
—
—
—
—
(2.5)
—
(2.5)
373.6
—
1.4
1.4
13.9
(0.2)
(0.2)
—
(1.4)
(1.4)
(0.2)
(235.0)
(13.9)
—
(781.1)
—
—
—
—
—
—
—
—
6.2
(0.5)
—
(6.2)
—
—
6.2
(0.5)
—
(6.2)
—
—
(146.8)
17.0
(648.6)
534.3
(250.0)
—
(4.5)
—
(254.5)
—
0.7
9.0
(0.1)
(0.8)
—
(31.7)
(9.0)
—
(166.6)
3.8
—
—
—
—
—
—
—
6.2
(0.6)
—
(6.2)
—
—
—
—
—
—
—
—
—
—
—
(126.8)
0.6
(126.2)
(312.6)
(250.0)
0.1
0.1
—
0.1
(0.6)
(0.5)
—
—
—
—
(255.1)
(5.5)
(7.7)
(707.1)
6.2
(1.1)
—
—
—
—
6.3
(1.6)
—
—
—
—
—
(0.1)
—
(5.8)
—
—
—
—
—
—
0.8
371.9
0.3
21.8
—
—
(0.3)
(0.2)
—
(0.7)
(235.0)
(21.8)
(0.5)
(781.1)
(9.1)
0.8
(1,064.8)
552.1
0.4
16.3
—
—
(0.4)
(0.7)
(31.7)
(16.4)
—
(166.6)
0.3
0.6
4.7
(126.6)
—
(126.6)
(312.6)
(250.0)
(250.0)
(5.5)
(7.7)
(702.4)
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above.
Syndicated loan facility
On 16 July 2014, the Group entered into a £280.0m 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 original facility was for a period of five years and
has had a number of extensions, the most recent of which was agreed in July 2021, extending the maturity to July 2025 with a value of
£240.0m in the final year.
Our primary financial covenant under the syndicated loan facility is an adjusted net debt to EBITDA (excluding exceptional items) ratio
of not more than 3.5x and at 3 July 2021 it was 1.56x (2020: 1.98x restated). This is on a pre-IFRS 16 basis.
As at 3 July 2021, £126.6m (2020: £147.4m) of the facility was drawn down.
£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%.
Euro RCF
On 24 October 2017, the Group’s subsidiary, Go-Ahead Verkehrsgesellschaft Deutschland GmbH, entered into an €8.0m one-year
revolving credit facility.
As at 3 July 2021, €6.4m or £5.5m (2020: €6.4m or £5.8m) was drawn down. The facility is unsecured and interest is charged at 2.1%
plus EURIBOR.
Euro loan
On 24 October 2017, the Group’s subsidiary, Go-Ahead Facility GmbH, entered into a €10.6m 10.5-year loan, which subsequently
increased to €10.85m.
As at 3 July 2021, €9.0m or £7.7m (2020: €10.0m or £9.1m) was outstanding. The loan is secured against the German land and buildings
included within property, plant and equipment. Interest is charged at a fixed rate of 2.79%.
227
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
21. Interest-bearing loans and borrowings continued
Debt issue costs
There are debt issue costs of £0.5m (2020: £0.6m) on the syndicated loan facility.
The £250m sterling seven-year bond has debt issue costs of £1.1m (2020: £1.7m).
The Group is subject to two covenants in relation to its borrowing facilities. The covenants specify a maximum adjusted net debt to
EBITDA (excluding exceptional items) and a minimum net interest cover. These covenants are on a pre-IFRS 16 basis. At the year end
and throughout the year, the Group has not been in breach of any bank covenants.
Subsequent to the year end, following delays to the publication of the year end financial statements waivers were obtained from the
Group's banks in relation to the information covenant requirements in the Group's borrowing facilities to submit accounts within a
defined timeframe.
22. 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, 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 relating to fuel swaps. The purpose of these is to manage the fuel price risks
arising from the Group’s operations.
It is, and has been throughout 2020-21 and 2019-20, 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.
Interest rate risk
The Group borrows and deposits funds and is exposed to changes in interest rates. The Group’s policy towards cash deposits is to
deposit cash short term on UK money markets.
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
3 July 2021 and 27 June 2020 is as follows:
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
Year ended 3 July 2021
Floating rate liabilities
Syndicated loans
€8m revolving credit facility
Gross floating rate liabilities
Fixed rate liabilities
£250m sterling seven-year bond
€10.85m loan
Lease liabilities
Net fixed rate liabilities
0.63
2.1
2.5
2.79
2.26
0.8
5.6
6.4
6.2
1.0
268.3
275.5
0.7
—
0.7
6.3
1.0
16.8
24.1
0.7
—
0.7
6.3
1.1
11.6
19.0
0.8
—
0.8
250.5
1.0
9.1
260.6
127.4
—
127.4
—
1.0
4.4
5.4
—
—
—
—
3.5
5.8
9.3
130.4
5.6
136.0
269.3
8.6
316.0
593.9
228
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
22. Financial risk management objectives and policies continued
Interest rate risk continued
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
Year ended 27 June 2020
Floating rate liabilities
Syndicated loans (as previously
reported)
Restatement*
Syndicated loans (as restated)
€8m revolving credit facility
(as previously reported)
Restatement*
€8m revolving credit facility
(as restated)
Gross floating rate liabilities
Fixed rate liabilities
£250m sterling seven-year bond
(as previously reported)
Restatement*
£250m sterling seven-year bond
(as restated)
€10.85m loan (as previously reported)
Restatement*
€10.85m loan (as restated)
Lease liabilities (as previously
reported)
Restatement*
Lease liabilities (as restated)
Net fixed rate liabilities
0.69
0.69
2.10
2.10
2.50
2.50
2.79
2.79
2.07
2.07
—
1.0
1.0
5.8
0.1
5.9
6.9
—
6.2
6.2
1.0
0.2
1.2
—
1.0
1.0
—
—
—
1.0
—
6.2
6.2
0.9
0.2
1.1
517.3
8.6
525.9
533.3
95.6
1.4
97
104.3
—
1.0
1.0
—
—
—
1.0
—
6.3
6.3
0.9
0.2
1.1
13.8
0.9
14.7
22.1
—
1.0
1.0
—
—
—
1.0
—
6.3
6.3
0.9
0.2
1.1
8.7
0.6
9.3
16.7
147.4
1.0
148.4
—
—
—
148.4
250.0
0.5
250.5
0.9
0.2
1.1
6.2
2
8.2
259.8
—
—
—
—
—
—
—
—
—
—
4.5
0.1
4.6
7.0
(1.2)
5.8
10.4
147.4
5.0
152.4
5.8
0.1
5.9
158.3
250.0
25.5
275.5
9.1
1.1
10.2
648.6
12.3
660.9
946.6
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above.
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.
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 historical changes.
2021
GBP
GBP
2020
GBP
GBP
Increase/
(decrease) in
basis points
Effect on profit
before tax
£m
50.0
(50.0)
50.0
(50.0)
(0.6)
0.6
(0.8)
0.8
229
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
22. Financial risk management objectives and policies continued
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 entered into a £280.0m 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 original facility was for a period of five years and
has had a number of extensions, the most recent of which was agreed in July 2021, extending the maturity to July 2025 with a value of
£240.0m in the final year.
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%.
On 24 October 2017, the Group’s subsidiary, Go-Ahead Verkehrsgesellschaft Deutschland GmbH, entered into an €8.0m one-year
revolving credit facility. The facility is unsecured and interest is charged at 2.1% plus EURIBOR. As at 3 July 2021, €6.4m or £5.5m (2020:
€6.4m or £5.8m) was drawn down.
On 24 October 2017, the Group’s subsidiary, Go-Ahead Facility GmbH, entered into a €10.6m 10.5-year loan which subsequently
increased to €10.85m. The loan is secured against the German land and buildings included within property, plant and equipment.
Interest is charged at a fixed rate of 2.79%.
The level of drawdowns and prevailing interest rates are detailed in note 21.
Available liquidity as at 3 July 2021 and 27 June 2020 was as follows:
Syndicated loans
£250m sterling seven-year bond
€8m revolving credit facility
€10.85m loan
Total core facilities
Amount drawn down at year end
Headroom
2021
£m
280.0
250.0
5.5
7.7
543.2
389.8
153.4
2020
£m
280.0
250.0
7.3
9.8
547.1
412.3
134.8
The Group’s rail rolling stock and bus vehicles can be financed by lease arrangements, or term loans at fixed rates of interest over two
to eight-year primary borrowing periods. This provides a regular inflow of funding to cover expenditure as it arises.
As at 3 July 2021, balances included in cash at bank and on short term deposit amounting to £543.7m (2020: £474.8m) were restricted.
See note 19 on page 223 for further details.
The tables below summarise the maturity profile of the Group’s financial liabilities at 3 July 2021 and 27 June 2020 based on
contractual undiscounted payments.
Year ended 3 July 2021
Interest-bearing loans and borrowings
£250m sterling seven-year bond
Lease liabilities
Derivative financial liabilities
Contractual trade and other payables
On demand
£m
—
—
—
—
63.8
63.8
Less than
3 months
£m
1.7
6.2
104.8
0.2
527.9
640.8
3–12 months
£m
1–5 years
£m
More than
5 years
£m
5.7
—
163.5
0.4
96.4
133.7
263.1
41.9
0.3
—
266.0
439.0
3.5
—
5.8
—
—
9.3
Total
£m
144.6
269.3
316.0
0.9
688.1
1,418.9
230
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
22. Financial risk management objectives and policies continued
Liquidity risk continued
Year ended 27 June 2020
On demand
£m
Less than
3 months
£m
3–12 months
£m
1–5 years
£m
More than
5 years
£m
Interest-bearing loans and borrowings (as previously
reported)
Restatements*
Interest-bearing loans and borrowings (as restated)
£250m sterling seven-year bond (as previously
reported)
Restatements*
£250m sterling seven-year bond (as restated)
Lease liabilities
Derivative financial liabilities
Contractual trade and other payables (as previously
reported)
Restatements*
Contractual trade and other payables (as restated)
—
—
—
—
—
—
—
—
101.1
—
101.1
101.1
0.3
—
0.3
6.2
—
6.2
131.5
2.5
368.3
48.3
416.6
557.1
6.5
1.3
7.8
—
—
—
394.4
7.4
99.8
—
99.8
151.1
4.7
155.8
250
19.3
269.3
129.2
5.6
—
—
—
4.4
0.2
4.6
—
—
—
5.8
—
—
—
—
Total*
£m
162.3
6.2
168.5
256.2
19.3
275.5
660.9
15.5
569.2
48.3
617.5
509.4
559.9
10.4
1,737.9
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above. In addition to the
restatements outlined in note 2, this table has been restated to include the estimated contractual future interest payments assuming that conditions existing at the year-end
continue.
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 25. Details of interest-bearing
loans and borrowings are shown in note 21.
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 3 July 2021 and 27 June 2020.
The Group applies the primary objective by managing its capital structure such that net debt (adjusted to exclude restricted cash) to
EBITDA* (excluding exceptional items) 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 were maintained in the year ended 3 July 2021.
Subsequent to the year end, due to delayed publication of the Group's results, Moody's withdrew its rating of the Group in January
2022. S&P reaffirmed its credit rating but considers the Group’s outlook to be under review. The Group’s policy is to maintain an
adjusted net debt to EBITDA (excluding exceptional items) ratio of 1.5x to 2.5x. The Group’s calculation of adjusted net debt is set out
in note 21 and includes cash and short term deposits, interest-bearing loans and borrowings, and excludes restricted cash. The Group
continues to take measures to protect its cash including suspension of dividend and careful management of discretionary expenditure
and capital investment. These actions were taken by the Board as a measure to protect this ratio .
* Operating profit before interest, tax, depreciation and amortisation.
Currency risk
The Group has foreign exchange exposure in respect of cashflow commitments to its operations in Germany, Singapore, the Nordics,
Ireland and Australia. These are currently not material to the Group.
231
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
22. Financial risk management objectives and policies continued
Credit risk
The Group’s credit risk is primarily attributable to its financial assets, comprising trade and other receivables (see note 17), cash and
cash equivalents (see note 19) and fuel hedge derivatives (see note 23). The maximum credit risk exposure of the Group as at the year
end was £930.1m (2020: £735.1m (restated to remove VAT balances, see note 17 for details)) and comprises amounts from a number of
unconnected parties.
The considerable majority of the Group’s receivables are with public (or quasi-public) bodies (such as the DfT), and the majority of
sales with other entities are paid as they arise historically the annual cost due to expected credit losses has been immaterial so limited
disclosures are therefore provided. The trade receivables from such public bodies are not considered to present a significant credit
risk, which is supported by cash payment performance.
Smaller sundry individual trade receivables with third parties that have arisen are assessed as required for credit loss and a provision
accrued when considered appropriate. The Group applies the IFRS 9 simplified approach and measures the loss allowance on the
lifetime expected credit losses at each reporting date. Expected credit losses are assessed based on the number of days past due, the
customer type, a judgement on credit risk, consideration of macroeconomic forecasts, as well as past experience when relevant.
Movement in the provisions for the impairment of trade receivables are recorded within operating costs within the income statement.
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.
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 23.
23. Derivatives and other financial instruments
A derivative is a security whose price is dependent upon or derived from an underlying asset. For accounting policies see ‘Financial
assets’, ‘Financial liabilities’, ‘Derivatives financial instruments’, and ‘Fair value measurement’ in note 2.
The carrying value of the Group’s financial assets and liabilities is as follows:
Year ended 3 July 2021
Financial assets and derivatives
Trade and other receivables
Cash and cash equivalents
Fuel price derivatives
Finance lease receivables
Financial liabilities and derivatives
Interest-bearing loans and borrowings
Lease liabilities
Trade and other payables classified as financial liabilities
Fuel price derivatives
Derivatives
used for
cashflow
hedging
£m
Amortised
cost
£m
Total
carrying value
£m
288.6
630.6
—
2.3
921.5
(394.5)
(312.6)
(683.0)
—
(1,390.1)
—
—
8.3
—
8.3
—
—
—
(0.9)
(0.9)
288.6
630.6
8.3
2.3
929.8
(394.5)
(312.6)
(683.0)
(0.9)
(1,391.1)
232
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
23. Derivatives and other financial instruments continued
Year ended 27 June 2020
Financial assets and derivatives
Trade and other receivables
Cash and cash equivalents
Fuel price derivatives
Financial liabilities and derivatives
Interest-bearing loans and borrowings
Lease liabilities
Trade and other payables classified as
financial liabilities*
Fuel price derivatives
Amortised Cost
(as previously
reported)
£m
Restatement*
£m
Amortised Cost
(as restated)
£m
Derivatives
used for
cashflow
hedging
£m
Total
carrying
value (as
restated)
£m
Fair value
£m
Restatement*
£m
Fair value (as
restated)
£m
192.1
569.8
—
(27.0)
—
—
761.9
(27.0)
165.1
569.8
—
734.9
(410.0)
(648.6)
(6.2)
—
(416.2)
(648.6)
—
—
0.2
0.2
—
—
165.1
569.8
0.2
192.1
569.8
0.2
(27.0)
—
—
165.1
569.8
0.2
735.1
762.1
(27.0)
735.1
(416.2)
(400.3)
(6.2)
(406.5)
(648.6)
(648.6)
—
n/a
(598.0)
—
(18.4)
—
(616.4)
—
—
(15.5)
(616.4)
(15.5)
(598.0)
(15.5)
(18.4)
—
(616.4)
(15.5)
(1,656.6)
(24.6)
(1,681.2)
(15.5)
(1,696.7) (1,662.4)
(24.6)
(1,038.4)
* Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above. In addition to the
restatements described in note 2, VAT balances of £47.1m (£49.0m) have been removed from trade and other receivables in order to correctly present this line excluding VAT.
See note 17 for details.
a. Fair values
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
The Group’s financial instruments carried at fair value in the financial statements have been reviewed as at 3 July 2021 and 27 June
2020 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
2020 (as
previously
presented)
£m
Restatement*
£m
2020
(as restated)
£m
0.1
0.1
0.2
(9.9)
(5.6)
(15.5)
(15.3)
—
—
—
(1.1)
—
(1.1)
(1.1)
0.1
0.1
0.2
(11.0)
(5.6)
(16.6)
(16.4)
2021
£m
3.4
4.9
8.3
(0.6)
(0.3)
(0.9)
7.4
As at 3 July 2021 and 27 June 2020, the fair value of the fuel price derivatives is based on the external Mark-to-Market (MtM)
valuations provided by the derivative providers. The valuations are prepared in accordance with the provider’s own internal models
and calculation methods based upon well-recognised financial principles. Only observable and relevant market inputs were used in the
valuation therefore the fair value measurement was classified as level 2 valuation.
There are a small number of foreign currency hedges in place as at 3 July 2021 and 27 June 2020. The foreign currency hedge valuations
are based on the external MtM valuations and are currently not material to the Group.
The fair values of all other assets and liabilities in notes 17, 19 and 20 are not significantly different from their carrying amount, with the
exception of the £250m sterling seven-year bond which has a fair value of £257.6m (2020: £240.3m) but is carried at its amortised cost
of £250.0m (2020: £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, and is therefore a level 1 valuation.
During the years ended 3 July 2021 and 27 June 2020, there were no transfers between valuation levels.
233
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
23. Derivatives and other financial instruments continued
b. Hedging activities
Fuel derivatives
As discussed in note 22, the Group is exposed to commodity price risk as a result of fuel usage.
As at 3 July 2021, the Group had derivatives against fuel of 177 million litres for the three years ending June 2024. 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 3 July 2021 the Group’s external hedging profile is as follows:
Actual percentage hedged
Litres hedged (million)
Average hedged rate (pence per litre)
<1 year
Fully
96
32.8
1–2 years
2–5 years
Total
50%
55
32.1
25%
26
31.2
177
32.3
Amounts that have affected the consolidated statement of comprehensive income as a result of applying hedge accounting during
the year are as follows:
Changes in fair value of hedged item used for calculating hedge ineffectiveness
Changes in fair value of hedging instrument used for calculating hedge ineffectiveness
Changes in fair value recognised in other comprehensive income (net of tax)
Amount removed from cash flow hedge reserve and included in the initial cost of inventory
The maturity of the hedge profile range is between July 2021 and June 2024.
In relation to the hedging reserve, the following balances are included with respect to the fuel derivatives:
Balance in the cashflow hedging reserve for continuing hedges
2021
£m
22.5
(22.5)
12.6
5.5
2020
£m
(19.6)
19.6
(15.8)
4.7
2021
£m
5.8
2020
£m
(12.3)
The potential sources of fuel hedge ineffectiveness include a change in the volume of litres than originally anticipated and variations
on the settlement date or amount. At the year end no (2020: nil) ineffectiveness was recognised on the cashflow hedges.
234
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
24. 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 onerous contracts in Norway and Germany,
uninsured claims and dilapidation provisions relating to franchise commitments. For accounting policies see ‘Provisions’ and
‘Uninsured liabilities’ in note 2.
Franchise
Commitments
(as previously
reported)
Restatement1
Onerous
contract
Franchise
provisions (as
Commitments
(as restated)3
previously
reported)3
Onerous
contract
Other (as
provisions (as
Uninsured
Potential DfT
previously
Restatement1
restated)
claims
penalty
reported)
Restatement1
£m
64.0
11.0
(7.0)
(2.0)
0.4
66.4
—
—
—
—
£m
5.7
0.1
—
—
—
5.8
—
—
—
—
£m
69.7
11.1
(7.0)
(2.0)
0.4
72.2
20.6
(6.0)
(3.3)
—
83.5
£m
—
7.2
—
—
—
7.2
—
—
—
—
At 30 June 2019
Provided (after
discounting)
Utilised
Released
Unwinding of
discounting
At 27 June 2020
Provided (after
discounting)2
Utilised
Released
Effect of foreign
exchange rate
changes
At 3 July 2021
Current
Non-current
£m
—
£m
—
£m
43.4
37.1
44.3
24.8
—
—
—
—
—
(16.2)
(1.8)
—
(0.3)
37.1
44.3
49.9
£m
—
—
—
—
—
—
—
—
—
66.5
(8.1)
—
19.6
30.0
(16.0)
(5.6)
—
—
£m
9.4
2.9
(1)
(0.8)
—
10.5
—
—
—
£m
1.7
0.6
—
—
—
2.3
—
—
—
Other (as
restated)
£m
11.1
3.5
(1.0)
(0.8)
—
12.8
4.1
(1.1)
(2.1)
Total1
£m
124.2
83.6
(24.2)
(4.6)
0.1
179.1
140.8
(31.2)
(11.0)
—
(2.4)
—
—
—
—
—
(2.4)
100.3
47.9
30.0
13.7
275.2
2020 (as
previously
reported)
£m
46.1
87.9
134
Restatements*
£m
5.1
40.0
45.1
2021
£m
159.1
116.1
275.2
2020 (as
restated)
£m
51.2
127.9
179.1
1 Details of the restatements in respect of the year ending 27 June 2020 are explained in Note 2 on pages 182 to 189 and are presented in the table above.
2 Amounts provided during the year of £20.6m of onerous contract provisions (2020: £44.4m restated) and £30.0m in relation to the potential DfT financial penalty and
associated costs (2020: nil) were recorded as exceptional items due to the size and expected infrequency. Refer to note 7 for further details.
3
In the prior year, the German onerous contract provision was included in franchise commitments. In the current year, given the additional provisions made and the quantum of
them, the onerous contract provisions have now been presented in a separate column. The prior year has been restated for consistency.
Franchise commitments
Franchise commitments of £83.5m (2020: £72.2m restated) relate to dilapidation provisions on vehicles, depots and stations across our
two (2020: two) UK Rail franchises. The current year balance includes provisions for ongoing matters of concern relating to LSER and
other historic franchises. Refer to pages 10 and 11 for further details. All of these provisions, £83.5m (2020: £25.2m), are classified as
current.
During the year £3.3m (2020: £2.0m) of dilapidation provisions which had been previously provided for were released. The remaining
dilapidation costs will be incurred as part of a rolling maintenance contracts. The provisions are based on management’s assessment
of most probable outcomes, supported where appropriate by valuations from professional external advisors.
Estimation uncertainties arise with respect to dilapidation provisions, due to the complex nature of the assets. Estimated dilapidations
can range significantly depending on the specific asset being considered. The range of outcomes are assessed on an asset-by-asset
basis and the range can vary between a plus or minus 5%–20% dependent on procurement, production or maintenance efficiencies as
well as potential economies of scale. Based on the individual assessments, the provision at the year end could fall within an estimated
range of £71m to £119m.
235
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
24. Provisions continued
Onerous contracts
The directors have performed a detailed review of all material contracts across the Group to consider the completeness of the
onerous contract provisions. This involved a detailed review and challenge of the assumptions within each contract, including those
relating to FY20 and the Group’s FY21 interim results. A number of errors have been identified in respect of the assumptions used
when calculating the onerous provision in the Bavarian rail franchise in the prior year and the Group’s FY21 interim results.
The prior year provision was determined to be understated by £37.1m which has been restated in these financial statements. The
impact of this restatement to the 2020 consolidated income statement is an increase in exceptional items of £36.6m and an increase
of £0.5m to the translation reserve. Correspondingly there was a reduction of £25.9m charged to the consolidated income statement
in the Group’s FY21 interim results. The calculation of the understatement was determined following a review of historical information
and consideration given to what information then available could reasonable have been included in the previous cash flow
assumptions underpinning the provision.
As of 3 July 2021, of the German onerous contract provision, £16.1m (2020: £6.5m restated) are classified as current. Considering
reasonably possible favourable and adverse movements in these key inputs over each of the Bavarian contracts' 12-year lives,
management have considered a range of estimation uncertainty. In the best case scenario the contracts would still be loss making at a
loss of £15.0m, where these expected losses are generated during the mobilisation phase, while in the reasonably possible worst case
scenario, the contract would incur a discounted loss of £50.2m.
In December 2019, the Group began operating rail services in Norway; its first contract in this market and the first commercially run
network in the country. After a successful start to operations, the effects of the COVID-19 pandemic were felt just three months into
this contract. As the contract involves exposure to changes in passenger demand, the Norwegian Government introduced a package
of financial support early in the COVID-19 crisis, initially with 100% loss coverage. As the pandemic continued, loss coverage was
reduced from this level down to 85%. The impact of the reduction and possible cessation of funding, the fixed nature of the operating
requirements and the longer than expected duration of lower passenger demand following the impact of COVID-19 resulted in a
reduction of the net economic benefits of the contract. This is based on the expected future cashflows and a risk free discount rate,
triggering the need to reassess the assumptions made in the onerous contract and impairment models. This assumed reduction in
future revenue results in an onerous contract provision charge of £66.2m being recognised at the year end. This has been recognised
as an exceptional operating charge.
As a non-adjusting post balance sheet event in accordance with IAS 10, in December 2021 government support was subsequently
prolonged to include November and December. Whilst temporary support at an equivalent level is in place until March 2022, after this
period the government has indicated further support at an unconfirmed level may be in place until at least August 2022. The inclusion
of government support at 85% loss coverage from November 2021 to the end of March 2022 in the calculation of the onerous contract
provision would reduce its size by £6.8m and there is ongoing dialogue with the Government in relation to a possible renegotiation of
the contract.
Regional Bus has recognised £1.2m in relation to loss making contracts where passenger demand is not recovering at the same levels
as the wider commercial network. Of the Regional Bus contract provisions £0.4m are classified as current.
Uninsured claims
The uninsured claims provision represent the cost 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. Claims can primarily be categorised as either motor insurance-related claims or
employers’ liability and public liability claims. Of the uninsured claims, £13.5m (2020: £17.2m) are classified as current and £34.4m (2020:
£32.7m) 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.
Uninsured claims are provided on a gross basis and a separate reimbursement asset, for amounts due back from the insurance
providers, of £2.3m is included within other receivables.
Potential DfT financial penalty
The provision relates to a potential penalty of £30.0m (2020: £nil) due to the Department for Transport, of which £30.0m (2020: £nil) is
classified as current. Under the Railways Act 1993, the DfT has the power to impose a financial penalty in relation to LSER as outlined
on page 10 to 11. In the absence of specific precedent or relevant guidance, it is difficult to estimate precisely the likely quantum of any
penalty. The Group, having considered independent legal advice received by the Independent Committee, has included a provision of
£30.0m which reflects the Group's current best estimate of any penalty.
For further Information please see the key source of estimation uncertainty relating to this matter on page 179.
236
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
24. Provisions continued
Other
The other provisions of £13.7m (2020: £12.8m restated) include dilapidations in the Bus division of £13.5m (2020: £12.8m restated), of
which £4.0m (2020: £2.3m) are classified as current and £9.5m (2020: £8.2m) are classified as non-current, and a current legal provision
of £0.2m in Norway. It is expected that the dilapidation costs 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.
25. 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.
At 3 July 2021 and 27 June 2020
Allotted, called up and fully paid
Millions
47.1
2021
£m
4.7
Millions
47.1
2020
£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. The nominal value is set out
above and the balance is share premium.
Reserve for own shares
The reserve for own shares relates to 4,094,851 ordinary shares (8.7% of share capital), of which 192,621 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 3 July 2021 the Group repurchased 57,176 shares for a total consideration of
£0.6m for LTIP and DSBP arrangements (2020: 39,770 shares repurchased for a total consideration of £0.7m). The Group has not
cancelled any shares during the year (2020: no shares cancelled).
Hedging reserve
The hedging reserve records the movement in value of fuel price derivatives designated in the effective cashflow hedges, 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.
Translation reserve
2020 (as
previously
reported)
£m
Restatements*
£m
2020 (as
restated)
£m
(1.8)
(0.5)
(2.3)
2021
£m
3.6
* Details of the restatements in respect of the year ending 27 June 2020 are explained in note 2 on pages 182 to 189 and are presented in the table above.
26. Commitments
A commitment is a contractual obligation to make a payment in the future, mainly in relation to rail operating charges 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.
237
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
26. Commitments continued
Capital commitments
Contracted for but not provided – acquisition of property, plant and equipment
Lease commitments
Contracted for but not commenced – right of use assets
2021
£m
26.0
2021
£m
—
2020
£m
37.4
2020
£m
268.9
Rail operating charges – Group as lessee
The Group’s train operating companies hold agreements with various different local entities for access to the railway infrastructure
(track, stations and depots). These are now classified as rail operating charges, as they do not result in an IFRS 16 right of use asset. The
agreements typically run for a period until the end of the relevant franchise.
Future minimum rentals payable under non-cancellable rail operating arrangements as at 3 July 2021 and 27 June 2020 were as follows:
As at 3 July 2021
Within one year
In the second to fifth years inclusive
Over five years
As at 27 June 2020
Within one year
In the second to fifth years inclusive
Over five years
Rail rolling
stock
£m
Rail access
charges
£m
Rail and other
£m
159.4
194.1
295.2
648.7
324.6
390.8
641.5
1,356.9
105.2
17.6
6.5
129.3
Rail rolling
stock
£m
Rail access
charges
£m
Rail and other
£m
252.4
176.3
171.7
600.4
668.2
198.2
12.1
878.5
135.2
44.7
9.1
189.0
Total
£m
589.2
602.5
943.2
2,134.9
Total
£m
1,055.8
419.2
192.9
1,667.9
Rail operating charges – 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 rail operating arrangements as at 3 July 2021 and 27 June 2020 were as
follows:
Within one year
In the second to fifth years inclusive
Over five years
2021
2020
Land and
buildings
£m
Other rail
agreements
£m
Land and
buildings
£m
Other rail
agreements
£m
0.2
0.4
—
0.6
0.7
—
—
0.7
1.2
1.6
—
2.8
8.0
1.7
—
9.7
27. Contingencies
Performance bonds and other guarantees
The Group has provided bank guaranteed performance bonds of £37.5m (2020: £70.7m), a loan guarantee bond of £36.3m (2020:
£36.3m) and season ticket bonds of £66.5m (2020: £165.0m) 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 £136.4m (2020: £136.0m) to
the DfT in respect of the Govia Thameslink Railway franchise, of which the Group has a 65% share equating to £88.4m (2020: £88.4m).
At the year end £nil (2020: £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 which have issued certain performance bonds and a letter of credit. The letter of
credit at 3 July 2021 is £59.8m (2020: £62.0m).
The Group has a bond of $4.2m SGD (2020: $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 £2.3m (2020: £2.5m).
238
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
27. Contingencies continued
Performance bonds and other guarantees continued
The Group has bonds of €34.5m (2020: €30.8m) in favour of the local rail authorities in support of the Group’s German rail operations.
At the year end exchange rate these equate to £29.6m (2020: £28.0m). The Group has provided a parental company guarantee to
provide funds of €158.2m (2020: €134.3m) in respect of the Germany operations, of which €nil (2020: €nil) has been provided for at
year end. At the year end exchange rate this equates to £135.7m (2020: £122.1m).
The Group has bonds of €10.0m (2020: €10.0m) 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 £8.6m (2020: £9.1m).
The Group has bonds of 271.3m NOK (2020: 271.3m NOK) in favour of the local rail authorities in Norway in support of the Group’s
Nordic rail operations. At the year end exchange rate this equates to £22.8m (2020: £22.5m). The Group has provided a parental
company guarantee to provide funds of 300.0m NOK (2020: 300.0m NOK) in respect of the Norway operations, of which €nil (2020:
€nil) has been provided for at year end. At the year end exchange rate this equates to £25.2m (2020: £24.9m).
Contingent liabilities
Boundary Zone Fare proceedings against London & South Eastern Railway Limited (LSER)
On 27 February 2019 a Collective Proceedings Application (CPA) was filed at the Competition Appeal Tribunal (CAT) under Section
47B of the Competition Act 1998 against one of the Group’s subsidiary companies, LSER. 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 failed to ensure that customers were aware of these. Equivalent applications were made against South West Trains and South
Western Railway.
The CAT heard the Application for a Collective Proceedings Order (CPO) between 9 and 12 March 2021. This hearing was an initial
stage in proceedings to decide whether this is a claim that meets the legislative criteria for this type of claim to proceed to a full trial.
On 19 October 2021, notice of the CPO judgement was received and the claim was certified, meaning it can proceed to trial as a collective
proceeding (the Decision). LSER requested the CAT’s permission to appeal the Decision on 8 November 2021, and the CAT refused to
give such permission at a case management conference on 18 November 2021. LSER has since been granted permission by the Court of
Appeal to appeal the Decision. The timetable in which the Court of Appeal will hear LSER's appeal is not known at the time of writing.
An application has been made to add The Go-Ahead Group plc and Govia Limited as additional defendants to the claim, but at the time
of writing the application had not been determined by the CAT.
The Proceedings remain at an early stage. Certification of the claim to proceed (subject to LSER’s appeal) is an initial procedural step
and does not entail any judgement on the merits of the claim or on the defendant’s potential liability. 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. At this early stage of the Proceedings, prior to consideration of the substantive merits of the claim and the filing of full
pleadings and evidence, it is not yet possible to assess the likely outcome of the case, or to quantify any potential liability of LSER. 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. 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.
Pricing practices proceedings against Govia Thameslink Railway Limited (GTR), The Go-Ahead Group plc and others
On 10 June 2021 a CPA was filed at the Competition Appeal Tribunal (CAT) under Section 47B of the Competition Act 1998, against
one of the Group’s subsidiary companies, GTR, as well as The Go-Ahead Group plc and Keolis (UK) Limited (together, the Proposed
Defendants). The proposed collective proceedings would combine claims against the Proposed Defendants caused by alleged
infringements of the Chapter II prohibition on abuse of dominance in Section 18 of the Competition Act 1998 in respect of alleged loss
suffered by rail passengers travelling on the London-Brighton mainline as a result of pricing and other practices of GTR.
Proceedings are at an early stage (and at an earlier stage than the collective proceedings against LSER in respect of Boundary Zone
Fares, see above). Before the claim can proceed to a full trial the CPA must be heard to decide whether this is a claim that meets the
legislative criteria for this type of claim. That hearing has been listed for July 2022.
At the initial Case Management Conference held in December 2021 it was determined that GTR’s response to the CPA and any
accompanying witness evidence be filed in February 2022. The CPA is not expected to be heard before April 2022. Should the CPA be
granted the DfT has permission to intervene.
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 be substantiated by GTR at this stage. It is therefore not yet possible to assess with any certainty the likely outcome of
this case, or to quantify any potential liability of GTR. 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.
239
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
27. Contingencies continued
Contingent liabilities continued
Boundary Zone Fare proceedings against Govia Thameslink Railway Limited (GTR) and others
On 24 November 2021 a Collective Proceedings Application was filed at the Competition Appeal Tribunal (CAT) under Section 47B of
the Competition Act 1998, against one of the Group’s subsidiary companies, GTR, as well as Govia Limited, The Go-Ahead Group plc
and Keolis (UK) Limited. The claim alleges, similarly to the allegations made against LSER in relation to Boundary Zone Fares, 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 failed to ensure that customers were aware of these.
On 15th December 2021 the CAT stayed proceedings pending the determination of any appeals in the Boundary Zone Fare
proceedings against LSER. Following this stay, and before the claim can proceed to a full trial, the Collective Proceedings Application
must be heard to decide whether this is a claim that meets the legislative criteria for this type of claim to proceed to a full trial. That
hearing has not yet been scheduled. This means that proceedings are at an earlier stage than both the collective proceedings against
LSER in relation to Boundary Zone Fares, and the proceedings against GTR in respect of pricing practices on the London-Brighton
mainline (see above).
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. It is not yet possible to assess with any certainty the likely outcome of this case, or to quantify
any potential liability of GTR.
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.
Enforcement action in relation to London & Southeastern Railway Limited
On 28 September 2021, the Department for Transport (DfT) announced its decision to appoint the Operator of Last Resort to take
over delivery of passenger services on the Southeastern franchise when London & South Eastern Railway (LSER)'s existing contract
expired on 17 October 2021. The DfT's decision not to award a National Rail Contract to LSER was a consequence of discussions with
the DfT regarding the calculation of profit share payments under the terms of the relevant franchise agreements and the treatment of
certain overpayments made by the DfT to LSER over the course of the franchise agreements.
In August 2021, an Independent Committee comprising the respective chairs of Go-Ahead and Keolis UK, Clare Hollingsworth and Sir
Derek Jones, commissioned an Independent Review, supported by external legal and accounting advisers, into LSER’s performance of
its contractual obligations under its franchise agreements.
The Independent Committee concluded that, notwithstanding the complexity of the LSER franchise agreements, serious errors had
been made in relation to the LSER franchise with respect to engagement with the DfT over several years. In particular, by failing to
notify the DfT of certain overpayments or monies due to the DfT, LSER breached contractual obligations of good faith contained in the
franchise agreements.
Following the conclusion of the Independent Review, the findings were shared with the DfT, the Board and the Group’s auditor,
Deloitte. Throughout the process, the Independent Committee has been focused on open, collaborative and constructive engagement
with the DfT with a view to reaching a full and satisfactory settlement. Discussions with the DfT are continuing and until such
settlement is reached, there does remain a risk of future outflows in relation to Southeastern and possibly also other historical
franchise commitments. Currently, the Group is unable to make a reliable estimate of any such outflows.
Contingent assets
Rail
For information on the contingent asset disclosed as at the year ended 3 July 2021 in relation to claims against the rolling stock
provider in Germany please refer to note 30 on page 254.
28. Retirement benefit schemes
The Group operates a defined contribution pension scheme and a Workplace Savings Scheme for our employees and administer a
defined benefit pension scheme which is closed to new entrants and future accruals. The UK train operating companies participate in
the Railways Pension Scheme (RPS), 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
2021
2020
Bus
£m
36.0
(9.0)
27.0
Rail
£m
—
—
—
Total
£m
36.0
(9.0)
27.0
Bus
£m
53.0
(10.1)
42.9
Rail
£m
—
—
—
Total
£m
53.0
(10.1)
42.9
The net surplus before taxation on the bus defined benefit schemes was £36.0m (2020: £53.0m), consisting of estimated assets of
£906.0m (2020: £934.4m) less liabilities of £870.0m (2020: £881.4m). The year end position of each bus scheme has been disclosed as a
gross value in the balance sheet which equates to both a surplus and a deficit.
240
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
28. Retirement benefit schemes continued
The net deficit before taxation on the rail schemes was £nil (2020: £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 losses on defined benefit
pension plans
2021
2020
Bus
£m
Rail
£m
Total
£m
Bus
£m
Rail
£m
Total
£m
3.7
1.3
(8.1)
(20.1)
—
(43.2)
92.9
(129.1)
230.4
(151.0)
(39.5)
94.2
(137.2)
210.3
(151.0)
5.5
(0.1)
(87.6)
79.1
—
42.8
—
(319.6)
48.4
228.4
48.3
(0.1)
(407.2)
127.5
228.4
(23.2)
—
(23.2)
(3.1)
—
(3.1)
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
Savings Section, which is also a defined contribution plan. The expense recognised for the Money Purchase Section of the Go-Ahead
Plan is £9.5m (2020: £10.0m), being the contributions paid and payable. The expense recognised for the Workplace Savings Scheme is
£8.2m (2020: £7.8m), 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 since 1 October 1994 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 2020 valuation.
The actuarial assumptions disclosed are in respect of the Go-Ahead Plan and EYMS Plan only, given the respective sizes of the three
bus pension schemes.
The Germany business operates a defined contribution scheme, the expense recognised for the scheme is £0.1m (2020: <0.1m).
The Ireland business operates the Go-Ahead Transport Services Ireland Pension Plan which is a defined contribution scheme. The
expense recognised for the scheme is £0.3m (2020: £0.2m).
The Nordic operation has a defined contribution scheme open to new entrants, the expense recognised for the scheme is £1.7m (2020:
£0.9m). Some employees are members of the Government Pension Fund (SPK) defined benefit scheme, which is now closed to new
members. The Norwegian Railway Directorate will cover the fulfilment of the regulatory obligation for these employees. The company
has no further payment obligations.
241
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
28. Retirement benefit schemes continued
Bus schemes continued
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
2021
%
3.2
2.7
1.8
n/a
2.7
2020
%
2.9
2.1
1.5
n/a
2.2
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
2021
Years
21
22
2020
Years
21
23
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 0.5%
Price inflation – increase of 0.5%
Rate of increase in salaries
Rate of increase of pensions in payment – increase of 0.5%
Increase in life expectancy of pensioners or non-pensioners by one year
2021
Pension deficit
%
2020
Pension deficit
%
(7.9)
7.4
n/a
4.1
4.2
(7.0)
6.8
n/a
4.8
4.3
The sensitivity analysis presented above has been calculated using approximate methods. The use of 0.5% and one year in the
sensitivity analysis is considered to be a reasonable illustrative approximation of possible changes, as these variations can regularly
arise. Note that as the Plymouth Citybus pension values are not material to the Group, the sensitivities have not been considered for
this analysis.
Maturity profile of bus schemes’ defined benefit obligation
The following table shows the expected future benefit payments of the bus schemes at 3 July 2021.
June 2022
June 2023
June 2024
June 2025
June 2026
June 2027 to June 2031
Category of assets at the year end
Equities
Bonds
Property
Liability driven investment portfolio
Cash/other
2021
£m
28.4
29.2
29.9
30.8
31.5
170.9
%
10.2
9.4
6.0
49.0
25.4
100.0
2021
£m
84.6
85.0
62.1
417.5
256.8
906.0
%
9.3
9.4
6.9
46.1
28.3
100.0
2020
£m
95.3
87.8
56.1
457.9
237.3
934.4
242
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
28. Retirement benefit schemes continued
Bus schemes continued
Category of assets at the year end continued
Most of the asset categories are held within pooled funds and are classed as quoted in an active market where the underlying assets
are exchanged or 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. Asset categories requiring judgement, mainly relating to property portfolios, are subject to
significant uncertainty due to the unknown market situation relating to COVID-19 and a higher degree of caution should be given than
in normal circumstances.
The plan invests a significant portion of its assets in a “liability driven investment” (LDI) portfolio which aims to match the Go-Ahead
Plan’s liabilities. This is expected to reduce the volatility of the Go-Ahead Plan’s funding level due to changes in interest rates and
inflation. The plan also has a “Journey Plan” in place, which means that over time as opportunities arise, the level of risk within the
investment strategy is expected to reduce, with a larger portion of the plan’s assets transitioned to matching assets. The plan
measures the LDI portfolio at fair value at each reporting date using the following fair value hierarchy:
• 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
At 3 July 2021, the LDI portfolio was valued, using a level 1 valuation, as follows:
• At the closing bid price or, if single priced, at the closing single price
• At the latest available net asset value (NAV)
Funding position of the Group’s pension arrangements
Employer’s share of pension scheme:
Liabilities at the end of the year
Assets at fair value
Pension scheme asset
Pension cost for the financial year
Administration costs
Past service cost
Settlement charge
Interest income on net liabilities
Total pension costs
2021
£m
2020
£m
(870.0)
906.0
36.0
(881.4)
934.4
53.0
2021
£m
2.2
1.0
—
(0.9)
2.3
2020
£m
2.1
—
—
(1.2)
0.9
On 20 November 2020, the High Court ruled that individual transfer payments made since 17 May 1990 would need to be equalised for
the effect of Guaranteed Minimum Pensions (GMP) between men and women. This judgement followed on from the previous
judgement on 26 October 2018, where the High Court ruled that schemes had a legal obligation to pay benefits allowed for GMP
equalisation. The previous judgement had not considered historical transfer values. 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, non-exceptional past service cost of £1m was recognised in the income statement.
Analysis of the change in the pension scheme liabilities over the financial year
Pension scheme liabilities – at start of year
Interest cost
Past service cost
Remeasurement (gains)/losses due to:
– Experience on benefit obligations
– Changes in demographic assumptions
– Changes in financial assumptions
Benefits paid
Pension scheme liabilities – at end of year
243
The Go-Ahead Group plc Annual Report and Accounts 2021
2021
£m
881.4
12.9
1.0
(3.7)
(1.3)
8.1
(28.4)
870.0
2020
£m
810.1
17.8
—
(5.5)
0.1
87.6
(28.7)
881.4
Notes to the consolidated financial statements continued
Group financial statements
28. Retirement benefit schemes continued
Bus schemes continued
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
Actuarial loss on assets
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 2022
Estimated employee contributions in financial year 2022
Estimated total contributions in financial year 2022
2021
£m
934.4
13.8
(20.1)
—
(2.2)
8.5
(28.4)
906.0
2020
£m
858.8
19.1
79.1
(0.4)
(2.1)
8.5
(28.6)
934.4
£m
8.4
—
8.4
Rail schemes
The Railways Pension Scheme (RPS)
The majority of employees in our train operating companies are members of sections of the Railways Pension 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 include 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 detailed in note 2 and the accounting judgements are covered in the
“critical accounting judgements and key sources of estimation uncertainty” section in the Group financial statements.
British Railways Additional Superannuation Scheme (BRASS) matching AVC Group contributions of £0.3m (2020: £0.3m) 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
2021
%
3.1
2.7
1.9
3.4
2.7
2020
%
2.8
2.1
1.6
3.1
2.1
244
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
28. Retirement benefit schemes continued
Rail schemes continued
Summary of year end assumptions continued
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
2021
Years
21
22
2020
Years
21
23
The mortality assumptions adopted as at 3 July 2021 are based on the initial results of the funding valuation as at 31 December 2019,
which has not yet been finalised, and 27 June 2020 are based on the results of the funding valuation as at 31 December 2016.
Sensitivity analysis
Due to the nature of the franchise adjustment, the balance sheet position in respect of the RPS 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
2021
£m
2,557.1
8.9
10.3
%
99.3
0.3
0.4
2020
£m
2,138.8
22.4
13.5
%
98.4
1.0
0.6
2,576.3
100.0
2,174.7
100.0
All of the asset categories above are held within pooled funds and therefore unquoted in active markets.
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
2021
£m
2020
£m
(3,602.2)
(3,231.0)
2,576.3
2,174.7
(1,025.9)
(1,056.3)
1,025.9
1,056.3
—
—
2021
£m
135.6
6.7
(103.3)
17.2
(17.2)
39.0
2020
£m
103.1
3.9
(71.4)
18.2
(18.2)
35.6
245
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
28. Retirement benefit schemes continued
Rail schemes continued
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 demographic assumptions (60%)
– Changes in financial assumptions (60%)
Benefits paid (100%)
Franchise adjustment movement (100%)
Franchise adjustment (100%)
Pension scheme liabilities less members’ share (40%) of the deficit – 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 (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%)
Members’ share of movement of assets (40%)
Fair value of plan assets – at end of year (100%)
Estimated contributions for future
Estimated Group contributions in financial year 2022
Estimated employee contributions in financial year 2022
Estimated total contributions in financial year 2022
2021
£m
3,231.0
(1,056.3)
2020
£m
2,790.0
(738.3)
2,174.7
2,051.7
187.9
135.5
37.3
(17.2)
(103.3)
43.2
(92.9)
129.1
(69.0)
151.0
2,576.3
1,025.9
3,602.2
2021
£m
2,174.7
20.2
230.3
(11.1)
38.7
(69.0)
192.5
73.0
102.9
47.9
(18.2)
(71.4)
(42.8)
—
319.6
(59.6)
(228.4)
2,174.7
1,056.3
3,231.0
2020
£m
2,051.7
29.8
48.4
(6.4)
35.3
(59.6)
75.5
2,576.3
2,174.7
£m
23.3
15.4
38.7
246
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
28. Retirement benefit schemes continued
Rail schemes continued
Franchise adjustment
The effect of removing the franchise adjustment on the financial statements is provided below:
Balance sheet
Defined benefit pension plan
Deferred tax asset
Other comprehensive income
Remeasurement losses
Tax on remeasurement losses
Income statement
Franchise adjustment to current period costs
Interest on franchise adjustments
Deferred tax charge
2021
£m
2020
£m
(1,025.9)
194.9
(1,056.3)
200.7
(831.0)
(855.6)
(151.0)
28.7
(122.3)
(103.3)
(17.2)
22.9
(97.6)
228.4
(43.4)
185.0
(71.4)
(18.2)
17.0
(72.6)
Risks associated with defined benefit plans
UK 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 Pensions Regulator’s ongoing investigation into rail pensions, the risks associated with the
Group’s rail schemes will be reviewed.
247
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
28. Retirement benefit schemes continued
Risks associated with defined benefit plans continued
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
Inflation risk
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 may lead to 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 relative to the liabilities.
A significant proportion of the UK benefit obligations are
linked to inflation, and higher expected inflation will lead
to higher liabilities.
Life expectancy
The majority of the scheme’s obligations are to provide
benefits for the life of the member, so increases in life
expectancy will result in an increase in the liabilities.
Legislative risk
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.
Asset liability modelling has been undertaken recently
in all significant plans to ensure that unrewarded risks
are hedged where appropriate 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, the key inflation measure for the Group
final salary scheme was changed from RPI to CPI when
looking at future pension increases, which has helped to
lower the magnitude of the inflation risk.
The Group final salary scheme has recently carried out a
pensioner buy-in for a small subset of the pensioner
population. This has mitigated the longevity risk for the
members included in the buy-in. The assumptions used
to fund the scheme are regularly reviewed and updated
to reflect changes in expected life expectancy.
The Group takes professional advice to keep abreast of
legislative changes.
248
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
29. 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
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 Singapore PTE Ltd
Go-Ahead Sverige AB
Go-Ahead Norge AS
Go-Ahead Transport Services (Dublin) Limited
Go North West Limited
GA Retail Services Limited
Go-Ahead Australia Pty. Limited
Jointly controlled entities
On Track Retail Limited
Investments
Mobileeee GmbH
Country of incorporation
and principal place of business
% equity interest
2021
2020
United Kingdom 1
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom2
United Kingdom 2
United Kingdom 2
United Kingdom 2
United Kingdom 2
United Kingdom 2
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Germany
Germany
Germany
Germany
Singapore
Sweden
Norway
Ireland
United Kingdom
United Kingdom
Australia
United Kingdom 3
Germany4
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
7
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
7
1. Held by The Go-Ahead Group plc. All other companies are held through subsidiary undertakings.
2. The rail companies are 65% owned by The Go-Ahead Group plc and 35% owned by Keolis (UK) Limited and held through Govia Limited.
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, UK.
249
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
29. Related party disclosures and Group undertakings continued
The registered offices of trading subsidiaries incorporated outside of the United Kingdom are as follows:
Subsidiary
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 Singapore PTE Ltd
Go-Ahead Dublin Services (Transport) Limited
Go-Ahead Australia Pty. Limited
Registered office
Zehdenicker Straße 1, D-10119, Berlin, Germany
Büchsenstraße 20, D-70174, Stuttgart, Germany
Bahnhof 2, D-73457, Essingen, Germany
Logwidstr 1, D-86150, Augsburg, Germany
Hamngatan 4, 211 22 Malmö, Sweden
Jernbanetorget 1, 0154 Oslo, Norway
2 Loyang Way, Singapore 508776
Ballymount Road Lower, Dublin 12, D12 X201, Ireland
DW Accounting & Advisory Pty Ltd, Level 4, 91-97 William
Street, Melbourne, Vic 3000, Australia
% equity interest
Name
Company number
Country of incorporation
2021
2020
Dormant subsidiaries
Go-Ahead Events Services Limited (previously East Midlands
Railway Limited)
Go Wear Buses Limited
Go-Reading Limited
The Go-Ahead Group Trustee Company limited
Go-Ahead Property Development Limited
GHI Limited
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
Abingdon Bus Company Limited
Gatwick Handling Limited
GH Heathrow Limited
GH Manchester Limited
GH Stansted Limited
Go-Ahead Finance Company
Go-Ahead Finland Oy
Go Ahead Seletar PTE Ltd
Go North West (2021) Limited
Hants & Dorset Motor Services Limited
Hants & Dorset Trim Limited
Solent Blue Line Limited
Marchwood Motorways (Southampton) Limited
The Southern Vectis Omnibus Company Limited
Tourist Coaches Limited
Wilts and Dorset Bus Company Limited
Wilts & Dorset Investments Limited
7164882
2019645
3158846
2125799
7128594
4262016
2005917
2901263
2018469
2849983
2490584
2524573
4153866
3007943
3147927
3151270
2984113
2813292
1883900
1983429
4699524
2958257-7
201541899Z
13275587
2752603
2017829
2103030
1622531
0241973
3006529
1671355
4613075
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
Finland
Singapore
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
100
100
100
100
100
100
100
100
100
100
250
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
29. Related party disclosures and Group undertakings continued
Name
Dormant subsidiaries continued
Wilts & Dorset Holdings Limited
Dockland Buses Limited
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 Limited
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
Hedingham & District Omnibuses Ltd.
Anglian Bus Limited
H.C.Chambers & Son Limited
Aviance UK Limited
Company number
Country of incorporation
2021
2020
% equity interest
2091878
3420004
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
0863658
1260689
0327497
1036291
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
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
100
100
100
100
100
100
100
100
100
100
100
100
Name
Company number
Country of incorporation
2021
2020
% equity interest
Jointly controlled dormant entities
South Tyneside Smartzone Limited
Newcastle Smartzone Limited
North Tyneside Smartzone Limited
Thameslink Rail Limited
London & South East Passenger Rail Services Limited
U-Go Mobility PTY Ltd
Sunderland Smartzone Limited
09907829
09907839
09907842
3013232
6537238
644573526
09907836
United Kingdom
United Kingdom
United Kingdom
United Kingdom1
United Kingdom 1
Australia
United Kingdom
50
33
33
65
65
50
33
50
33
33
65
65
50
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 above dormant entities have one class of ordinary shares which carry no right to fixed income.
The registered office of all UK dormant subsidiaries incorporated in the United Kingdom is 3rd Floor, 41–51 Grey Street, Newcastle
upon Tyne, NE1 6EE, UK. The registered office for Go-Ahead Finland Oy is Bulevardi 1A, 00100 Helsinki, Finland and the registered office
for Go Ahead Seletar PTE Ltd is 2 Loyang Way, Singapore 508776.
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,
Section 480 exemption from audit.
251
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
29. Related party disclosures and Group undertakings 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 (2020: £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 Verkehrsgesellschaft Deutschland GmbH holds a 7.4% shareholding in Mobileeee
Betriebsgesellschaft mbh & Co KG, an all-electric car-sharing service based in Germany. The value of this investment in the financial
statements is £nil (2020: £nil).
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 benefits*
Post-employment benefits
* The long term employee benefits relate to the 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:
Govia Limited
London & South Eastern Railway Limited*
Southern Railway Limited*
London & Birmingham Railway Limited*
Govia Thameslink Railway Limited*
Thameslink Rail Limited*
New Southern Railway Limited*
* Subsidiary of Govia Limited.
Country of incorporation
and operation
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
2021
£m
1.4
—
—
1.4
2021
35%
35%
35%
35%
35%
35%
35%
2020
£m
1.5
—
—
1.5
2020
35%
35%
35%
35%
35%
35%
35%
Accumulated balances of material non-controlling interest:
Govia Limited
Total comprehensive income allocated to material non-controlling interest:
Govia Limited
2020 (as
previously
reported)
£m
2021
£m
Restatements*
£m
2020 (as
restated)
£m
22.3
35.2
(14.5)
20.7
5.3
16.5
(1.5)
15.0
The summarised financial information of these subsidiaries is provided on the subsequent page. The information is based on amounts
before intercompany eliminations.
252
The Go-Ahead Group plc Annual Report and Accounts 2021
Group financial statements
29. Related party disclosures and Group undertakings continued
Summarised income statement of Govia Limited and its subsidiary companies for the years ended 3 July 2021 and 27 June 2020
Revenue
Operating costs
Exceptional items
Finance income
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
2020
(as previously
reported)
£m
2021
£m
Restatements*
£m
2,865.3
2,814.7
(2,798.3)
(31.8)
(2,744.8)
—
0.8
(9.2)
26.8
(11.4)
15.4
15.4
5.3
3.7
3.7
(14.1)
59.5
(12.1)
47.4
47.4
16.5
14.6
(0.9)
(2.9)
—
(0.1)
(1.3)
(5.2)
0.9
(4.3)
(4.3)
(1.5)
(0.6)
Summarised balance sheet of Govia Limited and its subsidiary companies as at 3 July 2021 and 27 June 2020
Current assets – inventories, trade and other receivables, and cash
Non-current assets – property, plant and equipment, intangible assets, and
deferred tax
Current liabilities – trade and other payables, and provisions
Non-current liabilities – provisions
Total equity
Attributable to:
Equity holders of the parent
Non-controlling interest
* Restated – see note 2.
2020 (as
previously
reported)
£m
2021
£m
Restatements*
£m
847.9
705.1
22.1
287.9
(1,069.6)
(2.3)
598.5
(1,075.8)
(127.3)
63.9
100.5
41.6
22.3
65.3
35.2
—
(64.8)
—
(42.7)
(28.2)
(14.5)
2020
(as restated)
£m
2,813.8
(2,747.7)
—
3.6
(15.4)
54.3
(11.2)
43.1
43.1
15.0
14.0
2020 (as
restated)
£m
727.2
598.5
(1,140.6)
(127.3)
57.8
37.1
20.7
These balance sheet amounts are shown before intercompany eliminations.
Summarised cashflow information of Govia Limited and its subsidiary companies for the years ended 3 July 2021 and 27 June 2020
Operating
Investing
Financing
Net increase/(decrease) in cash and cash equivalents
2021
£m
571.6
(2.0)
2020
£m
320.8
(3.1)
(515.7)
(408.3)
53.9
(90.6)
The non-controlling interests have no significant restrictions on the ability of the Group to access or use assets and settle liabilities.
There are no terms or conditions relating to any related party transactions which need to be separately disclosed.
253
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the consolidated financial statements continued
Group financial statements
30. Post balance sheet events
German rail
On 12 August 2021, agreement in relation to liquidated and consequential damage claims in Germany was reached with the rolling
stock provider with a post-year end settlement of €10m, with €5m payable in the 2022 financial year and the remainder over the next
three years. This was disclosed as a contingent asset as at the year ended 3 July 2021; see note 27 on page 238.
Norwegian rail
Since early in the COVID-19 crisis, the Norwegian Government has supported the rail industry with a funding package initially covering
100% of losses. As the pandemic continued, loss coverage was reduced from this level down to 85%. This allowed for a broadly
breakeven operating performance during the financial year ended 3 July 2021. As a non-adjusting post balance sheet event in
accordance with IAS 10, in December 2021 government support was subsequently prolonged to include November and December.
Whilst temporary support at an equivalent level is in place until March 2022, after this period the government has indicated further
support at an unconfirmed level may be in place until at least August 2022. The inclusion of government support at 85% loss coverage
from November 2021 to the end of March 2022 in the calculation of the onerous contract provision would reduce its size by £6.8m and
there is ongoing dialogue with the Government in relation to a possible renegotiation of the contract.
UK Rail
On 28 September 2021, the Department for Transport (DfT) announced its decision to appoint the Operator of Last Resort to take
over delivery of passenger services on the Southeastern franchise when London & South Eastern Railway (LSER)'s existing contract
expired on 17 October 2021. The DfT's decision not to award a National Rial Contract to LSER was a consequence of discussion with
the DfT regarding the calculation of profit share payments under the terms of the relevant franchise agreements and the treatment of
certain overpayments made by the DfT to LSER over the course of the franchise agreements.
In August 2021, an Independent Committee comprising the respective chairs of Go-Ahead and Keolis UK, Clare Hollingsworth and Sir
Derek Jones, commissioned an Independent Review, supported by external legal and accounting advisers, into LSER’s performance of
its contractual obligations under its franchise agreements. Following the conclusion of the Independent Review, the findings were
shared with the DfT and the Group’s auditor, Deloitte. Throughout the process, the Independent Committee has been focused on
open, collaborative and constructive engagement with the DfT with a view to reaching a full and satisfactory settlement. The
Independent Committee concluded that, notwithstanding the complexity of LSER's franchise agreements, serious errors had been
made in relation to the LSER franchise with respect to engagement with the DfT over several years. In particular, by failing to notify the
DfT of certain overpayments or monies due to the DfT, LSER breached contractual obligations of good faith contained in the franchise
agreements. Accordingly, the Group has apologised to the DfT.
The Independent Committee has determined that it is estimated that overpayments and associated interest of £24.3m made by DfT in
connection with LSER were incorrectly accounted for in the financial statements over this period. See note 2 on pages 182 to 189 for
further details in relation to these matters and the resulting prior year adjustments.
Regional Bus
CBSSG funding ended on 31 August 2021 and from 1 September 2021 was replaced by the Bus Recovery Grant (BRG), with £255.0m of
funding available for UK bus services until March 2022. We welcome the continuation of support for essential bus services in our
communities. We have worked with the DfT to establish a framework to transition back to a commercial operating model and in
March 2021, we welcomed the UK Government’s announcement of its first national bus strategy. We have strong partnerships with
local stakeholders and our local management teams are working in close collaboration with their local authorities to produce Bus
Service Improvement Plans focused on providing high quality, reliable and value-for-money bus services which support climate change
targets in our towns and cities. These plans will form the basis of Enhanced Partnerships in the majority of our bus markets.
Board Changes
For information on Board changes that occurred subsequent to the year ended 3 July 2021, please see page 71 of the Chair's
Introduction to Governance and page 93 of the Nomination Committee Report.
254
The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
Company balance sheet
as at 3 July 2021
Registered No. 02100855
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right of use assets
Investment property
Investments
Trade and other receivables
Derivative financial assets
Retirement benefit assets
Current assets
Trade and other receivables
Cash and cash equivalents
Assets held for sale
Derivative financial assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Provisions
Interest-bearing loans and borrowings
Lease liabilities
Derivative financial liabilities
Non-current liabilities
Trade and other payables
Provisions
Interest-bearing loans and borrowings
Lease liabilities
Derivative financial liabilities
Deferred tax liabilities
Total liabilities
Net assets
Capital and reserves
Share capital
Revaluation reserve
Share premium reserve
Capital redemption reserve
Reserve for own shares
Retained earnings
Total equity
* Restated - see note 1.
Notes
2021
£m
2020*
£m
4
5
6
7
8
9
12
15
9
12
10
12
11
6
12
10
13
11
6
12
14
16
16
16
16
16
2.4
0.6
2.5
190.3
215.1
539.2
3.4
41.5
2.6
0.9
3.0
194.7
215.1
521.5
0.1
63.3
995.0
1,001.2
226.4
36.4
0.1
4.9
267.8
181.3
30.5
0.2
0.1
212.1
1,262.8
1,213.3
(102.7)
(0.1)
(5.7)
(2.1)
(0.6)
(82.5)
—
(5.6)
(2.4)
(9.9)
(111.2)
(100.4)
(60.6)
(13.3)
(249.4)
(5.2)
(0.3)
(50.7)
(379.5)
(490.7)
772.1
75.2
56.9
1.6
0.7
(71.3)
709.0
772.1
(63.0)
(10.2)
(249.0)
(7.4)
(5.6)
(43.0)
(378.2)
(478.6)
734.7
75.2
60.3
1.6
0.7
(71.3)
668.2
734.7
The profit for the year ended 3 July 2021 was £49.0m (2020: loss of £31.2m restated). The Company notes 1 to 20 are an integral part of
the Company financial statements.
The financial statements were approved and authorised for issuance by the Board of directors on 23 February 2022 and were signed on
its behalf by:
Gordon Boyd
Interim Group Chief Financial Officer
23 February 2022
The Go-Ahead Group plc Annual Report and Accounts 2021
255
Retained
earnings
£m
726.7
(34.5)
2.5
(32.0)
(30.9)
3.4
—
1.7
(0.7)
—
668.2
57.7
Total
equity
£m
796.1
(34.5)
2.5
(32.0)
(30.9)
—
(0.7)
1.7
—
0.5
734.7
57.7
(20.6)
(20.6)
37.1
—
3.4
—
0.9
(0.6)
37.1
—
—
(0.6)
0.9
—
772.1
Company financial statements
Company statement of changes in equity
for the year ended 3 July 2021
At 30 June 2019
Loss for the year (restated)
Remeasurement on defined benefit retirement
plans (net of tax)
Total comprehensive income
Dividend paid (note 3)
Movement on revaluation reserve (note 16)
Acquisition of own shares
Net share-based payment charge
Exercise of share options
Share issue
At 27 June 2020 (restated)
Profit for the year
Remeasurement on defined benefit retirement
plans (net of tax)
Total comprehensive income
Dividend paid (note 3)
Movement on revaluation reserve (note 16)
Acquisition of own shares
Net share-based payment charge
Exercise of share options
Share
capital
£m
Revaluation
reserve
£m
Share
premium
reserve
£m
Capital
redemption
reserve
£m
74.7
—
—
—
—
—
—
—
—
0.5
75.2
—
—
—
—
—
—
—
—
63.7
—
—
—
—
(3.4)
—
—
—
—
60.3
—
—
—
—
(3.4)
—
—
—
1.6
—
—
—
—
—
—
—
—
—
1.6
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
—
—
—
—
0.7
—
—
—
—
—
—
—
—
Reserve of
own shares
£m
(71.3)
—
—
—
—
—
(0.7)
—
0.7
—
(71.3)
—
—
—
—
—
(0.6)
—
0.6
At 3 July 2021
75.2
56.9
1.6
0.7
(71.3)
709.0
256
The Go-Ahead Group plc Annual Report and Accounts 2021
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.
The Go-Ahead Group plc Annual Report and Accounts 2021
257
Company 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 3 July 2021 were authorised for issue by the Board
of directors on 23 February 2022 and the balance sheet was signed on the Board’s behalf by Gordon Boyd. The Go-Ahead Group plc is a
public company, limited by shares, that is incorporated, domiciled and registered in England and Wales. The Company is the immediate
and ultimate parent company of The Go-Ahead Group. The registered office is 3rd Floor, 41–51 Grey Street, Newcastle upon Tyne, NE1
6EE, UK. 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 3 July
2021. The financial year represents the 53 weeks to 3 July 2021 (prior financial year 52 weeks to 27 June 2020).
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 paragraphs 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 requirements of IFRS 7 Financial Instruments: Disclosures
• The requirements of paragraphs 91–99 of IFRS 13 Fair Value Measurement
• The requirements 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
• 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.
The Go-Ahead Group plc Annual Report and Accounts 2021
258
Company financial statements
1. Company accounting policies continued
Critical accounting judgements and key sources of estimation uncertainty continued
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:
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 scheme
The measurement of defined benefit pension schemes requires the estimation of future changes in salaries, inflation and longevity of
current and deferred members and the selection of a suitable discount rate, as set out in note 15. 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. Management
also benchmarks these assumptions on a periodic basis with other professional advisors. Sensitivity analysis on the retirement defined
benefit schemes is detailed in note 15.
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 Company recognises revenue when the entity satisfies a performance obligation by transferring the
management and property rental services to the customer.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost on transition to IFRSs less accumulated depreciation, any impairment in
value and residual value. Freehold land is not depreciated.
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, to operating costs in
the income statement, 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. Any impairment in value is recognised immediately in the
income statement.
Investments
Fixed asset investments in subsidiaries and associates are shown at cost less provision for impairment.
Investment property
The fair value of the land and property held as investment property was last revalued in 2007. Since this date, the Company has
transitioned to FRS101 and adopted the cost model. Any costs associated with the item are included within the carrying amount of the
property when it is probable that the future economic benefit associated with the item is probable and can be measured reliably. All
other repair and maintenance costs are charged to the income statement. Investment property is measured at cost and is reviewed in
line with the impairment review policy noted above.
Leases
Lease identification
At inception of a contract, the Company shall assess whether a contract is, or contains, a lease. A contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Right of use assets
Right of use assets are measured initially at cost based on the value of the associated lease liability, adjusted for any payments made
before inception, initial direct costs and an estimate of the dismantling, removal and restoration costs required in the terms of the lease.
The right of use assets are subsequently depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or
the lease term. The lease term shall include the period of an extension option where it is reasonably certain that the option will be
exercised. Where the lease contains a purchase option the asset is written off over the useful life of the asset when it is reasonably
certain that the purchase option will be exercised.
In addition, the right of use asset is periodically reduced by impairment losses, if applicable, and adjusted for certain remeasurements
of the lease liability.
259
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
1. Company accounting policies continued
Accounting policies continued
Leases continued
Lease liability
At the commencement date of the lease, the lease liability is initially measured at the present value of lease payments to be made over
the lease term with payments discounted at the rate implicit in the lease or, where that cannot be measured, at the Company’s
incremental borrowing rate.
The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid by the Company under residual value guarantees. The lease
payments also include the exercise price of a purchase option if the Company is reasonably certain to exercise that option. Payments of
penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate the lease, are also included.
The lease liability is subsequently measured by increasing the carrying amount to reflect the interest on the lease liability and reducing
the carrying amount to reflect the lease payments made. The carrying value is remeasured when there is a change in future lease
payments arising from the effective date of a change in an index or rate, if there is a change in the Company’s estimate of the amount
expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a
purchase, extension or termination option.
Short term and low value asset leases
The Company has elected not to recognise right of use assets and lease liabilities for short term leases that have a lease term of less
than 12 months and leases of low value assets. Lease payments relating to short term leases and leases of low value assets are recognised
as an expense on a straight-line basis over the lease term.
Sale and leaseback transactions
On transition to IFRS 16, the Company applied the modified retrospective approach. Under the modified retrospective approach, the
Company did not revisit and amend the sale and lease back transactions that were ongoing as of the date of transition.
Retirement 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.
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. Any surplus is limited to the present value of any economic benefits available in the form of refunds from the
plans or reductions in future contributions to the plans.
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.
260
The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
1. Company accounting policies continued
Accounting policies continued
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 Go-Ahead Group plc (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.
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
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 discounted provision is recognised for the estimated cost 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 Company by the insurer.
Provisions are accounted for on a gross basis with a separate reimbursement asset recognised for amounts recoverable from
insurance providers.
Impairment of assets
The Company 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 Company 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.
261
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
1. Company accounting policies continued
Accounting policies continued
Impairment of assets continued
Impairment losses 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. 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. We have considered indicators of impairment in the carrying value of the assets,
including the excess in value compared to both the market capitalisation and the consolidated net assets of the Group. In concluding
that there is no impairment required, we have considered different methods to value the assets, including the use of estimated future
cashflows, which 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 discounted forecast cashflows and using an appropriate multiple of forecasted
cashflows.
Treasury shares
Reacquired 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.
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.
Issue costs relating to any term extensions are offset against the proceeds and amortised over the life of the extension.
Provisions for liabilities
Provisions are recognised when the Company 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 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. 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.
Other liabilities include dilapidations provisions; reflecting the nature of the judgements associated with the provisioning for
dilapidations it is not practicable to provide sensitivity analysis of the extent by which these amounts could change in the next
financial year.
Financial instruments
Financial assets
The Company’s 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 the income statement, directly attributable transaction costs. Financial assets are subsequently
classified as being measured at amortised cost, fair value through other comprehensive income, or fair value through the income
statement.
The Company’s financial assets at amortised cost are non-derivative financial assets held for collection of contractual cashflows
where those cashflows represent solely payments of principal and interest. Financial assets at amortised cost are subsequently
measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the income statement
when the asset is derecognised, modified or impaired.
The Company’s impairment policies in relation to financial assets are consistent with those of the Group, with additional consideration
given to amounts owed by Group undertakings (note 10) and loans to Group companies (note 9). In respect of these assets, the
Company recognises lifetime ECL when there has been a significant increase in credit risk (such as changes to credit ratings) since
initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the
Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.
Financial assets are derecognised when the right to receive cash flows from the asset has expired, the right to receive cash flows has
been retained but an obligation to on-pay them in full without material delay has been assumed or the right to receive cash flows has
been transferred together with substantially all the risks and rewards of ownership.
262
The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
1. Company accounting policies continued
Accounting policies continued
Financial instruments continued
Financial liabilities
The Company’s financial liabilities include trade payables, accruals, interest-bearing loans and borrowings and derivative financial
instruments. At initial recognition, the Company measures financial liabilities at fair value plus, in the case of a financial liability not at
fair value through the income statement, transaction costs that are directly attributable to the issue of the financial liability.
With the exception of derivative financial instruments, all other financial liabilities are subsequently measured on an amortised cost
basis.
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or have
expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is
recognised in the income statement.
When the Company exchanges with the existing lender one debt instrument into another one with substantially different terms, such
exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.
Similarly, the Company accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the
original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted
present value of the cashflows under the new terms, including any fees paid net of any fees received and discounted using the original
effective rate, is at least 10 % different from the discounted present value of the remaining cashflows of the original financial liability. If
the modification is not substantial, the difference between: (1) the carrying amount of the liability before the modification; and (2) the
present value of the cashflows after modification should be recognised in profit or loss as the modification gain or loss within other
gains and losses.
Derivative financial instruments
The Company uses derivatives to hedge its risks associated with fuel price 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.
At the inception of the hedge relationship, the Company documents the relationship between the hedging instrument and the hedged
item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting
changes in fair values or cashflows of the hedged item attributable to the hedged risk, which is when the hedging relationships meet all
of the following hedge effectiveness requirements:
• There is an economic relationship between the hedged item and the hedging instrument
• The effect of credit risk does not dominate the value changes that result from that economic relationship
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Company
actually hedges and the quantity of the hedging instrument that the Company actually uses to hedge that quantity of hedged item
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management
objective for that designated hedging relationship remains the same, the Company adjusts the hedge ratio of the hedging relationship
(i.e. rebalances the hedge) so that it meets the qualifying criteria again.
Fair value measurement
The Company 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 12.
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 Company.
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 Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
1. Company accounting policies continued
Accounting policies continued
Fair value measurement continued
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 Company determines whether
transfers have occurred between levels in the hierarchy by reassessing 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 Company analyses the movements in the values of assets and liabilities which are required to be
remeasured or reassessed as per the Company’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 Company 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 Company 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 Company 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.
Software
Software, which 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
The following new standards or interpretations are mandatory for the first time for the financial year ended 3 July 2021:
• Impact of the initial application of Interest Rate Benchmark Reform amendments to IFRS 9 and IFRS 7 – phase 1
• Impact of the initial application of COVID-19 Related Rent Concessions amendment to IFRS 16
• Amendments to References to the Conceptual Framework in IFRS Standards
• Amendments to IFRS 3 Definition of a Business
• Amendments to IAS 1 and IAS 8 Definition of Material
Adoption of the standards and interpretations had no material impact on the Group’s financial position or related performance.
Parent company guarantee
For the year ended 3 July 2021, the following subsidiaries of the Company are exempt from the requirements of the Companies Act
2006 relating to the audit of individual accounts by virtue of Section 479A of that Act relating to subsidiary companies:
Subsidiary name
Company number
Subsidiary name
East Yorkshire Motor Services Limited
EYMS Group Limited
Carousel Buses Limited
Thames Travel (Wallingford) Limited
Tom Tappin, Limited
00216628
02065145
04062073
04184436
00350802
Konectbus Ltd
Plymouth Citybus Limited
Go North West Limited
GA Retail Services Limited
Go-Ahead Scotland Limited
Company number
03149258
02004966
08205871
04173713
SC447303
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The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
1. Company accounting policies continued
Accounting policies continued
Parent company guarantee continued
For the year ended 3 July 2021, the following subsidiaries of the Company are exempt from the requirements of the Companies Act
2006 relating to the preparation and filing of individual accounts by virtue of Section 394A and 394 of that Act relating to dormant
subsidiary companies:
Company number
07164882
04699524
05262810
07128594
03158846
00327497
02752603
02017829
00863658
02183936
03886603
03561955
02524573
02328565
02103030
02005917
01997617
03007943
Dormant subsidiary name
Company number Dormant subsidiary name
Abingdon Bus Company Limited
03151270
Go-Ahead Events Services Limited (previously East
Midlands Railway Limited)
Anglian Bus Limited
Aviance UK Limited
01260689
Go-Ahead Finance Company
01036291
Go-Ahead Leasing Limited
Birmingham Passenger Transport Services Limited 02901263
Go-Ahead Property Development Limited
Blue Triangle Buses Limited
03770568
Go-Reading Limited
Bus UK Limited
Buscall Limited
Connor and Graham Limited
Dockland Buses Limited
East Yorkshire Buses Limited
02232813
H.C.Chambers & Son Limited
03887602
Hants & Dorset Motor Services Limited
00546796
Hants & Dorset Transport Support Services Limited 08669065
03420004
Hants & Dorset Trim Limited
00254844
Hedingham & District Omnibuses Ltd.
East Yorkshire Coach Holidays Limited
00243051
Hull and District Motor Services Limited
East Yorkshire Coaches Limited
00331077
Hull Park and Ride Limited
East Yorkshire Concert Tours Limited
02142740
Kingstonian Travel Services Limited
East Yorkshire Holiday Tours Limited
02140988
Levers Coaches Limited
East Yorkshire Properties Limited
02256485
London Central Bus Company Limited
East Yorkshire Tours Limited
East Yorkshire Travel Limited
Excelsior Coaches Limited
Excelsior Transport Limited
Excelsior Travel Limited
00172326
Marchwood Motorways (Southampton) Limited
01622531
03225828
Metrobus Limited
04329621
Metrocity (Newcastle) Limited
01742404
04153866
04329645
Scarborough and District Motor Services Limited
02133854
04342549
Solent Blue Line Limited
EYMS Bus & Coach Training Limited
02123369
Southern Vectis Limited
Frodingham Coaches Limited
Gatwick Handling Limited
02135501
Thamesdown Transport Limited
02984113
Thames Trains Limited
GH Heathrow Limited
GH Manchester Limited
GH Stansted Limited
GHI Limited
Go Coastline Limited
Go London Limited
Go Northern Limited
Go Wear Buses Limited
02813292
The Go-Ahead Group Trustee Company Limited
02125799
01883900
The Southern Vectis Omnibus Company Limited
00241973
01983429
Tourist Coaches Limited
04262016
Victory Railway Holdings Limited
02018469 Wilts & Dorset Holdings Limited
02849983 Wilts & Dorset Investments Limited
00132492 Wilts and Dorset Bus Company Limited
02019645
Go West Midlands Limited
03006529
03147927
02091878
04613075
01671355
02490584
Partnership exemption
For the year ended 3 July 2021, by virtue of Regulation 7 of the Partnerships (Accounts) Regulations 2008, Go-Ahead Scottish Limited
Partnership (SL013471) is entitled to exemption from the requirement to prepare, publish and have its individual accounts audited
under Regulations 4 – 6 of the Partnerships (Accounts) Regulations 2008. The results of Go-Ahead Scottish Limited Partnership are
consolidated within the Go-Ahead Group plc consolidated results.
Prior year restatements
Bonus accrual
During the year, it was identified the bonus accrual presented in the balance sheet and associated notes in relation to the year ended
27 June 2020 was not appropriate. As a result, the 2020 Company balance sheet and Company loss for the year have been restated.
The impact of these restatements is to decrease current liabilities by £1.1m and decrease corporation tax receivables by £0.2m in the
2020 balance sheet and reduce the loss for the year by £0.9m.
265
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
1. Company accounting policies continued
Accounting policies continued
Prior year restatement continued
Derivative financial liability corrections
During the year it was identified that transactions with other Group companies has been incorrectly classified as derivative contracts.
The correction to the 2020 Company financial statements has resulted in a charge to the income statement of £4.1m and a
corresponding adjustment to intercompany balances reducing current receivables by £0.6m and non-current receivables by £2.9m and
increasing current liabilities by £0.1m and non-current liabilities by £0.1m. An associated tax credit of £0.8m has also been recognised in
the income statement and corporation tax receivable in the 2020 Company balance sheet.
In addition, a reclassification between trade and other payables and derivative financial liabilities of £1.1m has been made in the 2020
consolidated balance sheet. This restatement has been made to adjust the value of the derivative financial liability for the amount of
the June hedge settlements.
Inter-group receivables reclassification
The presentation of current and non-current trade and other receivables for the year ended 27 June 2020 has been restated to better
reflect the expected timing of settlement of these balances. The effect of the restatement is limited to a reclassification from current
trade and other receivables to non-current trade and other receivables of £537.1m, in relation to balances with other Group entities,
such that the total assets and net assets of the Company are unaffected.
Investment property and right of use assets classification
During the year, it was identified that a number of properties had not been correctly classified as investment properties in the
Company financial statements. It was also noted that a number of properties which had previously been recorded as finance leases in
accordance with IAS 17 had not been transitioned to right of use assets on adoption of IFRS 16. As a result, a prior year adjustment has
been made between property, plant and equipment and investment property with the former finance leased assets being presented as
right of use assets within investment property. The impact of this adjustment is to increase the net book value of investment property
and reduce the net book value of property plant and equipment by £194.7m in the 2020 Company balance sheet.
Interest reclassification
Accrued interest on the Company’s loans and borrowings has been reclassified from other payables to interest bearing loans and
borrowings to reflect the fact that these loans and borrowings are held at amortised cost. The impact on the Company balance sheet
for the year ended 27 June 2020 is a decrease in current other payables of £6.3m and an increase in current interest-bearing loans and
borrowings by the same amount.
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
* Restated – see note 1.
2021
£m
11.3
1.2
3.5
0.5
16.5
2020*
£m
10.6
1.4
2.3
1.1
15.4
On 20 November 2020, the High Court ruled that individual transfer payments made since 17 May 1990 would need to be equalised for
the effect of Guaranteed Minimum Pensions (GMP) between men and women. This judgement followed on from the previous
judgement on 26 October 2018, where the High Court ruled that schemes had a legal obligation to pay benefits allowed for GMP
equalisation. The previous judgement had not considered historical transfer values. 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, non-exceptional settlement charge of £1m was recognised in the income statement
within employee costs.
The average monthly number of employees during the year, including executive directors, was:
Administration and supervision
2021
No.
198
2020
No.
234
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.
266
The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
2. Employee costs continued
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 Company.
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 the 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 had six months from the maturity date to exercise their options. Sharesave 2016 matured on 1 May 2019. There are
currently no active Sharesave schemes in place.
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 no savings-related options at 3 July 2021.
The expense recognised for the scheme during the year to 3 July 2021 was £nil (2020: £nil).
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
2021
2020
No.
—
—
—
—
—
WAEP
£
—
—
—
—
—
No.
2,547
—
(2,077)
(470)
—
WAEP
£
19.11
—
19.11
19.11
—
The weighted average exercise price at the date of exercise for the options exercised in the period was £nil (2020: £19.11).
At the year end no options were exercisable (2020: no options).
Long Term Incentive Plans
The former executive directors participated 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 Company conditional on specified performance conditions being met over a
period of three years. Refer to the Directors’ remuneration report for further details of the LTIP.
The expense recognised for the LTIP during the year to 3 July 2021 was £0.1m (2020: £0.7m).
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 3 July 2021
and 27 June 2020 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
2021
% per annum
2020
% per annum
40.0
31.0
25.0
30.0
25.0
30.0
2021
No.
162,832
127,987
(49,993)
—
2020
No.
143,603
58,927
(39,698)
—
240,826
162,832
The LTIP award granted to the former Group Chief Executive, David Brown in November 2018 lapsed in full in November 2021 as none
of the performance measures were achieved following the three-year performance period ended 3 July 2021.
267
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
2. Employee costs continued
Long Term Incentive Plans continued
The weighted average share price of the options at the year end was £11.40 (2020: £9.06). The weighted average fair value of options
granted during the year was £9.44 (2020: £21.12).
The weighted average remaining contractual life of the options was 1.81 years (2020: 1.05 years). The weighted average exercise price
at the date of exercise for the options exercised in the period was £nil (2020: £nil).
The estimated amounts due to the relevant tax authorities in relation to the above transactions are detailed in the Directors’
remuneration report.
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
Company 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 3 July 2021 was £0.4m (2020: £0.4m).
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
2021
No.
79,588
16,485
(7,369)
2020
No.
60,152
30,821
—
(9,094)
(11,385)
79,610
79,588
The weighted average fair value of options granted during the year was £8.32 (2020: £21.12).
At the year end, 4,126 options related to DSBP awards, which vested before the year end, which have not yet been exercised by
participants. Of these 3,086 options related to the award granted in November 2017, 516 options related to the award granted in
November 2016 and 524 options related to the award granted in November 2013.
31,875 options, relating to the DSBP award granted in November 2018, are now eligible to vest following the end of a three-year
deferral period in November 2021. The weighted average share price of the options at the year end was £11.40 (2020: £9.06).
The weighted average remaining contractual life of the options was 1.21 years (2020: 1.21 years). The weighted average exercise price
at the date of exercise for the options exercised in the period was £10.81 (2020: £20.20).
Share incentive plans
The Company operates a share incentive plan, known as The Go-Ahead Group plc Share Incentive Plan (SIP). The SIP is open to all
Company employees (including executive directors) who have completed at least six months’ continuous service with the Company at
the date they are invited to participate in the plan.
The SIP permits the Company to make four different types of awards to employees (free shares, partnership shares, matching shares
and dividend shares), although the Company has, so far, made awards of partnership shares only. Under these awards, the Company
invites qualifying employees to apply between £10 and £150 per month in acquiring shares in the Company at the prevailing market
price. Under the terms of the scheme, certain tax advantages are available to the Company and employees.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
3. 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 2020: nil per share (2019: 71.91p)
Interim dividend for 2021: nil per share (2020: nil)
Proposed for approval at the AGM (not recognised as a liability as at 3 July 2021)
Equity dividends on ordinary shares:
Final dividend for 2021: nil per share (2020: nil)
4. Intangible assets
Cost
At 28 June 2020
Additions
At 3 July 2021
Amortisation and impairment
At 28 June 2020
Charge for the year
At 3 July 2021
Net book value
At 3 July 2021
At 27 June 2020
2021
£m
2020
£m
—
—
—
2021
£m
30.9
—
30.9
2020
£m
—
—
Software
£m
14.3
0.9
15.2
11.7
1.1
12.8
2.4
2.6
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.
During the year ended 27 June 2020 £2.0m of software assets were fully impaired to a net book value of £nil and were recognised as an
exceptional item. Please refer to note 3 for further details. There have been no impairments to software assets in the year ended
3 July 2021.
269
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
5. Property, plant and equipment
Cost
At 28 June 2020*
At 3 July 2021
Depreciation and impairment
At 28 June 2020*
Charge for the year
At 3 July 2021
Net book value
At 3 July 2021
At 27 June 2020*
Plant and
equipment
£m
8.4
8.4
7.5
0.3
7.8
0.6
0.9
* Restated to remove freehold and leasehold land and buildings which are now presented within investment property– see note 1 for details of the restatement.
6. Leases
The Company has lease liabilities for land and buildings. These contracts have no terms of renewal or purchase option escalation
clauses.
Right of use assets
The right of use assets were brought onto the balance sheet on 30 June 2019 on transition to IFRS 16 Leases.
Cost
At 28 June 2020*
At 3 July 2021
Depreciation and impairment
At 28 June 2020*
Charge for the year
At 3 July 2021
Net book value
At 3 July 2021
At 27 June 2020*
* Restated – see note 1.
Leasehold land
and buildings
£m
3.6
3.6
0.6
0.5
1.1
2.5
3.0
During the year ended 28 June 2014, The Go-Ahead Group plc undertook a sale and leaseback of certain properties used by the Group.
Lease liabilities for the inter-group leases are disclosed within note 9.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
6. Leases continued
Lease liabilities
The balance sheet includes the following amounts:
Current
Non-current
2021
Right of use
assets
£m
Investment
property - right
of use assets
£m
(0.1)
(2.2)
(2.3)
(2.0)
(3.0)
(5.0)
2020
Investment
property - right
of use assets
£m
(1.9)
(5.0)
(6.9)
Right of use
assets
£m
(0.5)
(2.4)
(2.9)
Total
£m
(2.1)
(5.2)
(7.3)
The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease liability
7. Investment property
Cost
At 28 June 2020*
At 3 July 2021
Depreciation and impairment
At 28 June 2020*
Charge for the year
At 3 July 2021
Net book value
At 3 July 2021
At 27 June 2020*
* Restated – see note 1.
2021
Right of use
assets
£m
Investment
property - right
of use assets
£m
(0.1)
(0.6)
(0.6)
(0.5)
(0.5)
—
(2.3)
(2.1)
(1.1)
(0.4)
(0.4)
(0.1)
(1.5)
(5.6)
2020
Investment
property - right
of use assets
£m
Right of use
assets
£m
(0.5)
(0.1)
(0.6)
(0.6)
(0.5)
(0.5)
(2.8)
(2.1)
(2.1)
(1.1)
(0.4)
(0.4)
(1.6)
(7.7)
Total
£m
(2.2)
(1.7)
(1.0)
(0.9)
(0.6)
(1.5)
(7.9)
Owned
property
£m
Inter-group
leasehold land
and buildings
£m
Right of use
assets
£m
130.4
130.4
17.6
2.1
19.7
110.7
112.8
76.6
76.6
1.9
0.3
2.2
74.4
74.7
9.0
9.0
1.8
2.0
3.8
5.2
7.2
Total
£m
(2.4)
(7.4)
(9.8)
Total
£m
(2.6)
(2.2)
(1.7)
(1.0)
(0.9)
(2.1)
(10.5)
Total
£m
216.0
216.0
21.3
4.4
25.7
190.3
194.7
Owned property includes non-depreciable land amounting to £68.1m (2020: £68.1m restated).
If investment properties had been revalued, they would have been included at the following fair value:
Owned property
Owned investment properties were valued on market value basis in April 2021 by a third party chartered surveyor.
2021
£m
113.8
2020*
£m
113.8
271
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
8. Investments
Cost
At 3 July 2021 and 28 June 2020
Provisions
At 3 July 2021 and 28 June 2020
Net carrying amount
At 3 July 2021 and 27 June 2020
Loans to
Group
companies
£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.
The Company expects that the loans to Group companies will be repaid in full at maturity or if the Group companies were unable to
repay loan balances, the Company expects that in such circumstances the counterparty would negotiate extended credit terms with
the Company. As such, the expected credit loss is either considered immaterial based on discounting the loan over the extended
payment term. No change in credit risk is deemed to have occurred since initial recognition and therefore a 12-month expected credit
loss has been calculated based on the assessed probability of default.
For details of the subsidiary undertakings as at 3 July 2021, refer to note 29 of the Group financial statements.
9. Trade and other receivables
Amounts falling due within one year
Amounts owed by Group companies
Other debtors
* Restated – see note 1.
Amounts falling due after more than one year
Amounts owed by Group companies
* Restated – see note 1.
2021
£m
217.2
9.2
226.4
2021
£m
539.2
2020*
£m
177.5
3.8
181.3
2020*
£m
521.5
All outstanding amounts owed by Group companies are repayable on demand and arise from funding provided by the Company to its
subsidiaries. No change in credit risk is deemed to have occurred since initial recognition, and therefore a 12-month expected credit
loss has been calculated based on the assessed probability of default. An impairment charge of £7.9m has been recognised as a result
in the year (2020: £11.9m).
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The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
10. Trade and other payables
Amounts falling due within one year
Amounts owed to Group undertakings
Trade and other creditors
* Restated – see note 1.
Amounts falling due after more than one year
Amounts owed to Group undertakings
2021
£m
88.4
14.3
102.7
2021
£m
60.6
2020*
£m
69.7
12.8
82.5
2020
£m
63.0
During the year ended 28 June 2014, The Go-Ahead Group plc undertook a sale and leaseback of certain properties used by the Group.
Included in the amounts owed to Group undertakings is an amount of £62.9m (2020: £65.0m) relating to this transaction. This
arrangement has no terms of renewal or purchase option escalation clauses and there are no restrictions imposed by the arrangement.
The remaining contractual maturities of these lease liabilities, which are gross and undiscounted, are as follows:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease liability
11. Interest-bearing loans and borrowings
Amounts falling due within one year
Accrued interest on £250m sterling seven-year bond
Debt issue costs
Amounts falling due after more than one year
£250m sterling seven-year bond (due in 1-4 years)
Debt issue costs
2021
£m
5.1
5.2
5.4
5.5
5.7
59.5
86.4
2021
£m
6.2
(0.5)
5.7
2021
£m
250.0
(0.6)
249.4
2020
£m
4.9
5.1
5.2
5.3
5.5
65.3
91.3
2020*
£m
6.2
(0.6)
5.6
2020*
£m
250.0
(1.1)
248.9
* Restated – see note 1.
Interest-bearing loans and borrowings comprise a £250m sterling bond, less issue costs. For further details refer to note 21 of the
Group financial statements. The Company has no security over its liabilities.
273
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
12. Financial instruments at fair value
The fair values of the Company’s financial instruments carried in the financial statements have been reviewed as at 3 July 2021 and 27
June 2020 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
Further information on the financial derivatives can be found in note 23 of the Group financial statements.
13. Provisions
At 30 June 2019
Provided (after discounting)
Released
Utilised
Unwinding of discounting
At 27 June 2020
Provided (after discounting)
Released
Utilised
At 3 July 2021
Uninsured
claims
£m
7.7
4.3
(1.2)
(1.0)
0.1
9.9
5.8
(2.3)
(0.9)
12.5
2021
£m
3.4
4.9
8.3
(0.6)
(0.3)
(0.9)
7.4
Other
£m
0.3
—
—
—
—
0.3
0.5
—
—
0.8
2020
£m
0.1
0.1
0.2
(9.9)
(5.6)
(15.5)
(15.3)
Total
£m
8.0
4.3
(1.2)
(1.0)
0.1
10.2
6.3
(2.3)
(0.9)
13.3
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.
Uninsured claims are provided on a gross basis and a separate reimbursement asset, for amounts due back from the insurance
providers, of £nil (2020: £nil) is included within other receivables.
The other provisions include £0.3m relating to dilapidation costs which are expected to be incurred within four to five years. The
remaining £0.5m relates to an onerous contract provision for a vacant property. Future costs relating to rental charges, business rates
and dilapidation costs have been provided for and will be utilised within one to four 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.
274
The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
14. Current and deferred taxation
Amounts falling due within more than one year
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
2021
£m
(12.7)
(13.8)
(13.8)
(10.4)
(50.7)
The movements in deferred tax in the income statement and other comprehensive income for the year ended 3 July 2021 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 27 June
2020
£m
Recognised in
income
statement
£m
Recognised
in other
comprehensive
income
£m
Recognised
directly in
equity
£m
(8.5)
(10.5)
(0.4)
(11.4)
(12.0)
(0.2)
(43.0)
(4.2)
(2.7)
(0.8)
(2.4)
(4.6)
0.7
(14.0)
—
—
—
—
6.2
—
6.2
—
—
—
—
—
0.1
0.1
2020
£m
(8.5)
(11.1)
(11.4)
(12.0)
(43.0)
At 3 July
2021
£m
(12.7)
(13.2)
(1.2)
(13.8)
(10.4)
0.6
(50.7)
The deferred tax asset related to the share-based payments was recognised in the prior year as it was considered probable that there
would be future taxable profits available.
15. Retirement benefits
Defined contribution scheme
During the year ended 3 July 2021, 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 Savings 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 (2020: £0.3m), being the
contributions paid and payable. The expense recognised for the Workplace Saving Scheme was less than £0.1m (2020: less than £0.1m),
being the contributions paid and payable.
Defined benefit scheme
During the year ended 3 July 2021, 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 3 July 2021 and 27 June 2020.
The total net assets and liabilities of the scheme are recognised on the Company balance sheet.
Pre-tax pension scheme asset
Deferred tax liability
Post-tax pension scheme asset
2021
£m
41.5
(10.4)
31.1
2020
£m
63.3
(12.0)
51.3
275
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
15. Retirement benefits continued
Defined benefit scheme continued
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
2021
%
n/a
2.7
1.8
3.2
2.7
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
2021
Years
21
22
2020
%
n/a
2.2
1.5
2.9
2.2
2020
Years
21
22
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 0.5%
Price inflation – increase of 0.5%
Rate of increase in salaries – increase of 0.5%
Rate of increase of pensions in payment – increase of 0.5%
Increase in life expectancy of pensioners or non-pensioners by one year
2021
Pension deficit
%
2020
Pension deficit
%
(8.0)
7.5
n/a
4.0
4.2
(8.0)
7.5
n/a
4.0
4.2
The sensitivity analysis presented above has been calculated using approximate methods. The use of 0.5% 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 2022
June 2023
June 2024
June 2025
June 2026
June 2027 to June 2031
Category of assets at the year end
Equities
Bonds
Property
Liability driven investment portfolio
Cash/other
2021
£m
26.4
27.1
27.8
28.6
29.3
158.9
%
7.6
9.9
6.3
50.7
25.5
100.0
2021
£m
68.7
84.0
61.1
406.3
228.2
848.3
%
8.1
9.9
7.2
47.9
26.9
100.0
2020
£m
66.7
86.9
55.3
445.2
223.9
878.0
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.
276
The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
15. Retirement benefits continued
Funding position of the Group’s pension arrangements
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
Pension cost for the financial year
Administration costs
Past service 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
Past service cost
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 Company contributions in financial year 2022
Estimated employee contributions in financial year 2022
Estimated total contributions in financial year 2022
2021
£m
2020
£m
(806.8)
(814.7)
848.3
41.5
(10.4)
31.1
2021
£m
2.0
1.0
—
(1.0)
2.0
2021
£m
814.7
12.0
(2.2)
—
7.0
1.0
(25.7)
806.8
2021
£m
878.0
13.0
(22.0)
(2.0)
7.0
(25.7)
848.3
878.0
63.3
(12.0)
51.3
2020
£m
1.7
—
—
(1.3)
0.4
2020
£m
748.3
16.5
(5.9)
—
81.5
—
(25.7)
814.7
2020
£m
802.1
17.8
78.2
(1.7)
7.0
(25.4)
878.0
£m
7.1
—
7.1
Risks associated with the defined benefit plan, the nature of the benefits provided by the plan, a description of the regulatory
framework and a description of the responsibilities for the governance of the plan are outlined in note 28 to the Group financial
statements.
Compensation of key management personnel is detailed in note 29 of the Group financial statements.
277
The Go-Ahead Group plc Annual Report and Accounts 2021
Notes to the Company financial statements continued
Company financial statements
16. Issued capital and reserves
At 3 July 2021 and 27 June 2020
Allotted, called up and fully paid
Millions
47.1
2021
£m
4.7
Millions
47.1
2020
£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.
Share capital
Share capital represents proceeds on issue of the Group’s equity, both nominal value and share premium. The nominal value is set out
above and the balance is share premium.
Revaluation reserve
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.
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.
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.
Capital redemption reserve
The capital redemption reserve reflects the nominal value of cancelled shares.
Reserve for own shares
The reserve for own shares is in respect of 4,094,851 ordinary shares (8.7% of share capital), of which 192,621 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 reissue in appropriate circumstances. During the year ended 3 July 2021, the Company has repurchased 57,176 shares for £0.6m for
LTIP and DSBP purposes (2020: 39,770 shares repurchased for £0.7m). The Company has not cancelled any shares during the year
(2020: no shares cancelled).
Retained earnings
The audit fee for the audit of the financial statements payable in respect of the Company was £0.1m (2020: £0.1m). Please refer to
note 5 of the Group financial statements.
17. Capital commitments
There were capital commitments of £nil at 3 July 2021 (2020: £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 on a post-tax basis in respect of this guaranteed scheme were £31.1m as at 3 July 2021
(2020: assets of £51.3m).
At 3 July 2021 letters of credit amounting to £59.8m (2020: £62.0m) 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.
278
The Go-Ahead Group plc Annual Report and Accounts 2021
Company financial statements
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 & South Eastern Railway Limited (Southeastern), London &
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.
100% owned Group
subsidiaries
Govia
Southeastern
London Midland
Thameslink
New Southern
GTR
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
2021
£m
2020
£m
Interest received from
related party
Repayment of loan by related
party
Management charges
Amounts owed from related
party
Amounts owed to related
party
—
—
0.1
0.3
—
—
—
7.7
—
7.4
35.0
—
—
—
—
2.8
—
3.0
—
—
—
731.9 681.6
5.8
28.7
3.4
0.3
1.7
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5.1
—
4.8
—
2.3
0.3
74.8
33.0
—
—
—
—
—
—
0.6
0.6
3.8
3.8
—
—
279
The Go-Ahead Group plc Annual Report and Accounts 2021
Shareholder Information
Annual General Meeting (AGM)
The 34th AGM of the Group was held at Herbert Smith Freehills
LLP, Exchange House, Primrose Street, London, EC2A 2EG on
Tuesday 21 December 2021 at 11.00am.
Details of the business considered can be found in the Notice of
AGM which is available on the Group’s corporate website (www.
go-ahead.com).
Given the delay to the publication of the Group’s Annual Report
and Accounts, certain items of business usually considered at the
AGM will be considered at a General Meeting of shareholders to
be convened in March 2022. Shareholders will be provided with
further details of this meeting in due course.
Dividends
The Board understands the importance of dividends to
Go-Ahead’s shareholders, demonstrated by our record of
attractive dividend payments for 24 consecutive years up until
the unprecedented impact of COVID-19.
Whilst the Board has concluded that it would not be prudent or
right to propose a final dividend to shareholders for the year ended
3 July 2021 (2020 total dividend: £nil), it remains committed to the
resumption of dividends at the appropriate time.
We would like to thank our shareholders for their loyalty,
patience and continued support.
Shareholder profile by size of holding as at 3 July 2021
No. of
holdings
% of
holdings
No. of
shares held
% of issued
share capital
1–10,000
10,001–100,000
100,001–500,000
500,001–1,000,000
Over 1,000,001
2,779
149
64
7
11
92.33
4.95
2.13
0.23
0.36
1,804,872
5,457,265
13,731,146
4,685,463
21,400,874
3.83
11.59
29.17
9.95
45.46
Total
3,010 100.00 47,079,620 *
100.00
* This total includes 3,902,230 shares held in treasury.
Shareholder profile by category as at 3 July 2021
No. of
holdings
% of
holdings
No. of
shares held
% of issued
share capital
Treasury shares
Directors
Other individuals
Institutional investors
1
5
2,504
500
0.03
0.17
83.19
16.61
3,902,230
99,425
3,578,686
39,499,279
8.29
0.21
7.60
83.90
Total
3,010 100.00
47,079,620
100.00
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.
Electronic communications
In order to reduce our impact on the planet, we encourage all
shareholders to consider receiving their communications from
the Group electronically instead of printed documents. By opting
for this service, you will be able to receive your communications
from the Group more quickly and securely. To register for this
service, you should go to our website: www.go-ahead.com/
investors/email-alerts or www.shareview.co.uk and follow the
steps detailed in “Managing your shares online” below.
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
• Sell or purchase shares in the Group
To register, go to www.shareview.co.uk and click on “Register”
where you will be prompted to provide your details. 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 account on the Share Register and
receive duplicate documentation from us as a result, please
contact Equiniti to request that your accounts be combined.
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.
If you are unsure or think you may have been targeted,
please inform the FCA using the share fraud reporting form at
https://www.fca.org.uk/consumers/report-scam-us. 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
section of our corporate website.
280
The Go-Ahead Group plc Annual Report and Accounts 2021
Shareholder information By law, the Group’s register of members is available for public
inspection. We do not, however, endorse any specific share
dealing facilities and 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
that personal data is not used unlawfully.
Shareholder and control structure
As at 3 July 2021, 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 47,079,620
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 57,176 ordinary shares of 10p each in the Group as part
of a planned programme of share purchases (2020: 39,770) 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 42,882 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 the 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 circumstances 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 member to vote for the resolution and by one or
more member 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 specified deadlines for exercising voting rights
either in person or by proxy in relation to resolutions to be passed
at the 2021 AGM. All proxy votes were counted, and the numbers
for, against or withheld in relation to each resolution were
announced following the AGM on 21 December 2021 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 £1,439,246 and for the disapplication of
pre-emption rights on the allotment of equity securities, for
cash up to an aggregate nominal amount of £215,886, as passed
by ordinary and special resolutions at the 2020 AGM, were not
utilised in the financial year or up to the date of the 2021 AGM.
These authorities expired at the 2021 AGM and approval for new
authorities were sought and passed. 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 2020 AGM,
was still in effect at the end of the financial year and expired at
the 2021 AGM.
Under the previous authority granted at the 2020 AGM, the
maximum aggregate number of shares that could be purchased
was 4,317,739. The authority also limited the maximum number of
shares held in treasury to 10% of the issued share capital of the
Group and stated minimum and maximum prices payable for
shares purchased under the authority. During the financial year
ended 3 July 2021 this authority was not utilised and at the 2021
AGM this authority was renewed by shareholders.
In January 2022, the Group was informed by its Registrar, Equiniti,
that an error in the collection of certain proxy votes had been
discovered in relation to resolutions put to shareholders at the
2021 AGM. For further information, please see page 83.
The Group’s UK Rail franchise agreement, and any successor
thereof, is 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, 9 July 2019 and 30 September
2021 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 areas 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. Also
in Norway there is a change of control clause in the agreement
stating that change of control must be approved by the client,
the Railway Directorate.
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Shareholder Information continued
Major shareholders
As at 3 July 2021, the following percentage interests in the ordinary share capital of the Group, disclosable under the Disclosure
Guidance and Transparency Rules (DTR), had been notified to the directors.
HSBC Global Custody Nominee (UK) Limited
abrdn plc*
Number of
ordinary shares disclosed
% of
voting rights disclosed
4,273,107
5,413,920
9.90
12.54
* Formerly called Standard Life Aberdeen plc, having changed its name to abrdn plc on 2 July 2021.
In the period from 3 July 2021 to the date of this report, we received five further notifications in accordance with the DTR. One
was received from Jupiter Fund Management plc on 25 October 2021 disclosing a holding of 2,179,783 ordinary shares (5.05% of
voting rights) and the remaining four notifications were received from abrdn plc, the most recent being 14 December 2021,
disclosing a holding of 5,731,658 ordinary shares (13.3% of voting rights).
Corporate website
Our corporate website, www.go-ahead.com, provides up-to-date, detailed information on the Group’s operations and brands. It includes a
dedicated investor relations section that has a wealth of information including access to reports, consensus estimates, 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.
Shareholder relations
To give us your feedback or if you have any questions, please contact: investorrelations@go-ahead.com.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Shareholder information
Greenhouse gas emissions
Our carbon footprint in tonnes of equivalent carbon dioxide (CO2e):
2021
2020
2019
2018
2017 (current baseline)
Scope 1
Consumption
tCO2e
Consumption
Gas buses (kWh)
6,363,349
1,166
5,640,483
Gas premises (Bus) (kWh)
28,954,884
5,303
25,327,060
Gas premises (Rail) (kWh)
23,238,039
4,256
23,026,795
tCO2e
1,037
4,657
4,234
Consumption
6,015,533
23,811,076
24,922,178
tCO2e
1,106
4,381
4,582
Consumption
6,075,632
22,081,195
31,305,147
tCO2e
1,118
4,062
5,759
Consumption
3,721,896
19,100,488
34,172,777
tCO2e
685
3,518
6,293
Bus diesel (10% biodiesel blend)(ltrs) 132,291,707 332,360
136,608,713
347,810
142,617,090 369,964
137,374,506 360,875
138,863,052 361,066
Gas oil (Rail) (ltrs)
3,862,768 10,656
4,325,028
11,927
5,381,957
14,845
11,698,766
34,751
18,475,417
54,567
Total scope 1 (tCO2e)
Scope 2
366,372
383,082
394,878
406,564
426,130
Traction electricity (kWh)
1,386,760,708 295,863
1,477,645,807 346,306
1,356,323,985 346,676
1,389,289,129 393,266
1,371,415,035 482,135
Mains electricity premises (Bus)
(including Singapore and Ireland)
(kWh)
Mains electricity premises (Rail)
(kWh)
Mains electricity premises
(Head office) (kWh)
19,861,682
5,010
19,264,512
5,179
18,789,409
3,953
18,374,050
5,387
17,722,995
6,231
71,293,912
15,165
71,999,941
16,814
74,410,676
19,019
82,862,076
23,456
90,511,067
31,820
Mains electricity electric bus (kWh)
9,181,299
2,036
4,729,277
115,257
24
122,954
29
1,110
183,629
2,352,029
47
601
162,890
1,726,965
46
489
Solar electricity generated and
consumed in premises (Bus) (kWh)
Solar electricity generated and
consumed in premises (Rail) (kWh)
222,800
857,865
Solar electricity generated and
consumed in premises (Total) (kWh)
1,080,665
0
0
0
Total scope 2 – location (tCO2e)
Total scope 2 – market (tCO2e)
318,099
43,242
211,301
734,430
945,731
0
0
0
369,439
67,279
175,415
431,706
607,121
0
0
0
370,297
61,971
95,683
822,497
114,661
0
114,661
34
289
0
0
0
102,836
0
102,836
0
0
0
422,644
63,306
520,508
61,037
Scope 3
Electricity – transmission
and distribution
Total (tCO2e)
Breakdown by division
Scope 1, 2 and 3
Bus (tCO2e)
Rail (tCO2e)
Group (tCO2e)
Total (tCO2e)
27,945
31,554
31,510
36,012
48,666
Location Market
Location Market
Location Market
Location Market
Location Market
354,396 349,260
368,761
364,115
381,314 382,413
372,677 373,666
372,611 372,057
357,993
88,297
415,283
117,798
416,169 105,084
492,755
132,155
622,869
163,728
27
2
31
2
51
63
50
60
37
33
712,415
437,559
784,075
481,916
797,534 487,559
865,482 505,881
995,516 535,819
Scopes 1-3 by country
Location Market
Location Market
Location Market
Location Market
Location Market
UK (tCO2e)
Singapore (tCO2e)
Ireland (tCO2e)
Norway (tCO2e)
Germany (tCO2e)
Total (tCO2e)
Out of scopes
Biogenic content of biodiesel (tCO2e)
Scope 1, 2 and 3 and Out of scopes
Total (tCO2e)
YoY % change
625,865
333,678
703,158 389,243
742,915 432,914
819,851 460,018
958,216 498,310
46,594
46,594
47,010
47,010
48,283
48,283
45,630
45,863
37,300
37,509
13,715
13,762
11,964
12,010
6,336
6,364
1,044
768
1,025
736
25,197
42,758
20,919
32,915
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
712,415
437,559
784,075
481,916
797,534 487,561
865,482 505,881
995,516 535,819
20,144
15,188
12,436
7,858
9,373
Location Market
Location Market
Location Market
Location Market
Location Market
732,559 457,703
799,263 497,104
809,121 500,795
873,078 513,740
1,004,677 545,207
-8.35% -7.93%
-1.22% -0.74%
-7.33% -2.52%
-13.10% -5.77%
% change on 2017 baseline
-27.10% -16.05%
-20.45% -8.82%
-19.46% -8.15%
n/a
n/a
Total vehicle miles operated
749,034,991
733,702,870
706,393,581
683,223,210
684,511,871
Total bus and rail mileage
All scopes kg CO2e/vehicle mile
YoY % change
0.9780
0.6111
1.0894
0.6775
1.1454
0.7089
1.2779
0.7519
1.4677
0.7965
-10.22% -9.81%
-4.90% -4.43%
-10.37% -5.72%
-12.93% -5.59%
n/a
n/a
n/a
n/a
n/a
n/a
% change on 2017 baseline
-33.37% -23.28%
-25.78% -14.94%
-21.96% -10.99%
-12.93% -5.59%
Total global energy consumption
(kWh)
2,917,925,461
3,032,726,257
2,983,369,795
3,042,437,920
3,207,016,101
Annual emissions figures for prior years have been restated to reflect the collation of subsequent changes in consumption data and the correction of emissions.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Greenhouse gas emissions continued
Emissions are expressed in terms of equivalent carbon dioxide
(CO2e). Our relative performance metric is kilogrammes of CO2e
per vehicle mile operated. This metric ensures there is a direct
correlation between our performance and the purchase of
increasing numbers of ultra-low carbon vehicles as well as the
measures we are taking to improve our energy efficiency. For 2020,
the mileage figures provided by our German and Norwegian rail
operations (1.1 per cent of total mileage) were for fleet mileage
rather than for vehicle mileage. Therefore, the total vehicle mileage
figure for 2020 was slightly understated. As our performance
metric is CO2e per vehicle mile, understating the mileage has a
negative impact on performance, so performance has also been
slightly understated. Correct vehicle mileage figures for 2021
have been obtained and reported.
To maintain transparency and enable stakeholders to see our
performance trends over time, we provide historical data for both
our absolute CO2e emissions and for our relative performance
metric. We restate figures for historical CO2e emissions and our
relative performance when there has been a subsequent change
in energy consumption data or if methodologies change or if
accounting errors were made.
Context
Performance over time must be seen in the context of the
changes in the composition of the Go-Ahead Group since our
2017 baseline year. The loss of the London Midland rail franchise
in December 2017 resulted in a significant absolute reduction in
our energy consumption and scope 1 and 2 CO2 emissions
(107,955 tCO2 for 2017 - the last full reporting year), from that
date onwards. However, that reduction has been offset by the
additional energy consumption and CO2 emissions caused by the
acquisition or start-up of Go-Ahead Singapore (September 2016),
East Yorkshire Motor Services (June 2018), Go-Ahead Ireland
(September 2018) and Go North West (June 2019), plus the start
of rail services we operate in Germany and Norway in 2020.
Additionally, the significant expansion of Govia Thameslink
Railway operations between 2018 and 2019 increased in traction
electricity consumption. Similarly, Go South West’s operations
and CO2 emissions increased by 40 per cent year on year in 2021
following the start of the contract to operate bus services
throughout Cornwall. The aggregate total of scope 1 and 2 CO2
emissions by the companies acquired since the start of our 2017
baseline year in 2021 was 110,532 tCO2e, so the net effect of these
changes in the Group since 2017 is that the additional CO2 from
additional operations/acquisitions is marginally higher than the
reduction that resulted from the loss of the London Midland rail
franchise. Lower CO2e conversion factors for grid electricity since
2017 have also contributed to our performance.
Methodology, scope and exclusions
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.
In line with the GHG Protocol and guidance, we have reported all
Scope 1 and 2 emissions, and CO2 relating to fugitive emissions
from air-conditioning equipment in our premises and fleet, the
consumption of ad blue (used in exhaust abatement technology
installed on some of our latest diesel buses to reduce NoX
emissions) and CO2 emissions relating to fuel consumption by
some ancillary vehicles that was not previously accounted for.
These additional sources of CO2 emissions were quantified as
part of work in setting a Science Based Target (SBT) for reducing
our CO2 emissions. The baseline year for our SBT is 2020, and
therefore the figures for 2020 have been restated to account for
these additional CO2 emissions. Historical data prior to 2020 has
not been restated. These additional CO2 emissions account for
less than 2 per cent of our total scope 1 and 2 CO2 emissions and
not accounting for them prior to 2020 is well within our 5 per cent
materiality threshold.
We do not currently report on our scope 3 emissions other than
those arising from losses within the electricity transmission and
distribution systems. A scope 3 screening exercise was carried
out in 2021 to quantify our scope 3 emissions as part of the work
in setting a SBT. This screening exercise established that our
scope 3 emissions are under the 40 per cent threshold specified
by the Science Based Target Initiative, (SBTi). Therefore, we did
not have to set reduction targets for our scope 3 emissions, but
plan to do so later this year as well as incorporating scope 3
emissions into future GHG reporting. We also report our ‘out of
scopes’ CO2e emissions which relate to the bio-genic content of
the bio-diesel that is used in our diesel bus fleet.
All scope 1 emissions are calculated by using the appropriate
CO2e conversion factor for each energy source. We report our
scope 2 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 emission factors for mains electricity
that take the whole mix of fuels used to generate electricity in
each country we operate in into account. The correct location
based CO2e conversion factors for 2021 were used for all
electricity consumed. The market-based method uses supplier or
product-specific carbon factors, (where available), that reflects
supply contract specifications agreed between supplier and
customer. In some instances, particularly for traction electricity
where we do not contract directly with the supplier, supplier or
product-specific market-based CO2 conversion factors are not
available. Where this occurs, we follow the hierarchy of market-
based factors as specified in the GHG Reporting Protocol and
have used the most recent national mix residual factors that are
available instead.
All the above emissions sources fall within the businesses
included in our consolidated financial statements. We define
our organisational reporting boundary by applying the financial
control approach with a materiality threshold set at 5 per cent.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Shareholder information Performance
Overall, in absolute terms, on a location-basis, our equivalent
carbon dioxide (CO2e) emissions in 2021 were 8.35% lower year
on year and are 27.1% lower than in our baseline year 2017.
We set ourselves a target to achieve a 25 per cent reduction
on CO2e per vehicle mile by 2021 from our 2017 baseline
performance. This target was supported by secondary targets
over the same timescale to improve bus fuel efficiency (fleet
average miles per gallon) by 5 per cent and to improve traction
electricity energy efficiency (fleet average vehicle miles/kWh)
at GTR by 15 per cent, (therefore not including Southeastern as
this franchise was originally due to end in April 2020).
In 2021, we achieved a 10.22 per cent year on year reduction in
CO2 emissions per vehicle mile and a reduction of 33.38 per cent
against our 2017 baseline, thus our headline CO2 reduction target
has been achieved. CO2 reduction performance has largely been
driven by improved fleet energy efficiency. Bus fuel efficiency has
improved by 4.98 per cent year on year and by 12.25 per cent since
2017. And, although GTR’s traction electricity efficiency fell by
0.9 per cent year on year in 2021, it has improved by 21.4 per cent
since 2017. Subsequently, both of the secondary efficiency
improvement targets have also been achieved.
Actions that were implemented during 2021 to reduce
energy consumption and improve energy efficiency to
drive down our CO2 emissions
• The financial impact of COVID-19, due to loss of revenue for
passengers, combined with the structural change of our UK rail
contracts and the imminent end of those contracts, has meant
that the number and/or scale of energy reduction/efficiency
improvement measures that we have been able to implement
in 2021 was reduced. The clearest demonstration of this is investment
in new buses. New buses are a significant driver of improved
fuel efficiency and were only purchased to service confirmed
new contract work and will remain this way for 2022.
• Conversely, both diesel and electric bus fleet efficiency has
improved significantly since the start of the pandemic. The
improvement in fleet efficiency pre-dates the pandemic but
it has undoubtedly accelerated the rate of improvement.
Lockdowns and other related restrictions significantly reduced
the amount of road traffic and congestion and buses were
therefore able to operate more efficiently. We are not able to
quantify exactly how much of the improvement in efficiency
that we have seen is attributable to COVID-19, but it did make
some contribution to our improved efficiency rates in 2021.
• Though investment in our bus fleet in 2021 was significantly
lower than normal due to the financial impact of COVID-19,
130 new diesel buses were purchased in 2021, all of which were
certified as Low Emission Buses (LEBs), LEBs are, by definition,
the most fuel-efficient and cleanest diesel buses available to us
to purchase. These new diesel buses would have contributed to
the 4.98 per cent year on year improvement seen in diesel fleet
average MPG across the whole of the Group in 2021. On the same
basis, diesel fleet fuel efficiency has improved by 12.3 per cent
since 2017. As noted above, some of this improvement is also
likely to be attributable to the impact of COVID-19.
• Notwithstanding the above, we also purchased 71 electric
buses in 2021, taking the total number of electric buses
operated by the Group to nearly 300 and making Go-Ahead by
far the largest operator of electric buses in the UK. Most of
these new electric buses were purchased to service route
contract wins in London, but Go North East also began
operating its first electric bus route, purchasing nine new
electric buses in 2021. The increase in the size of our electric
bus fleet and in the number of services operated on them,
accounts for the 149 per cent year on year increase in electric
bus mileage operated and the 94 per cent year on year increase
in electricity consumption by electric buses in 2020. Nearly all
of this additional mileage would previously have been operated
by diesel buses, so the increase in electric bus mileage and
consumption is the beginning of the transition from diesel
to low carbon bus fleets. Across all Go-Ahead’s electric bus
operations, CO2 per mile operated was 78.3 per cent lower than
CO2 per mile operated by all of Go-Ahead’s diesel bus operations,
demonstrating the positive impact that this transition will have
on our CO2 emissions. The partial transition achieved so far has
contributed to reducing our CO2 emissions per mile operated
by over 33 per cent since 2017, well ahead of our 25 per cent
reduction target.
• We recognise that electric buses are not the only option to
replace diesel buses and that there is a significant role for
hydrogen buses, particularly when operating long-distance
routes where constraints of battery technology mean that
electric buses are not a feasible option. Go-Ahead regional bus
company Brighton and Hove recently won external funding for
20 hydrogen buses. Delivery of these buses is expected at the
end of 2022.
• The purchase of these hydrogen buses, as well as the operation
of the largest fleet of electric buses in the UK and LEB-certified
diesel buses previously, such as the extended range electric/
diesel hybrids with ‘geo-fencing’, clearly demonstrates the
Group’s innovative and sector leading approach to adopting
low carbon vehicle technologies that also contribute to
reducing air pollution.
• The results of the trial of solar panels installed on the roofs of
18 buses at Go South Coast were promising but inconclusive,
partly because of the impact of COVID-19 on bus fuel efficiency,
but the trial has been extended to include buses operated by
Go-Ahead London and Go-Ahead Singapore. The electricity
generated by the panels will reduce the load on the vehicles’
alternators/drivetrain, and will contribute to a marginal
improvement in fuel efficiency. Go South Coast also has a
number of fitted with a roof mounted filter, designed to
remove particulates from the air and so contribute to
improving air quality.
• New rolling stock that is significantly more energy efficient
than the rolling stock that it replaced has been the main driver
of improved fleet energy efficiency (vehicle miles per kWh)
within our rail division. Very little new rolling stock was
introduced in 2021, which, combined with significant changes
in timetabling and services operated because of COVID-19,
impacted on our efficiency performance in 2021. Understated
train mileage figures were reported for German and Norwegian
rail operations in 2020. In addition to this, the 2020 figures for
Norwegian rail only accounted for part of the year as operations
started in December 2019. German Rail operations have also
grown significantly since 2020. Taking all these factors into
consideration means that year on year comparison of traction
electricity efficiency for the whole of the rail division is not
possible. For UK rail operations, traction electricity efficiency
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The Go-Ahead Group plc Annual Report and Accounts 2021
Greenhouse gas emissions continued
Actions that were implemented during 2021 to reduce
energy consumption and improve energy efficiency
to drive down our CO2 emissions continued
deteriorated by 1.7 per cent year on year in 2021, with both GTR
and Southeastern’s performance worsening slightly. As noted
above, GTR’s electric fleet efficiency in 2021 was 21.4 per cent
better than it was in 2017, so the target of improving electric
fleet efficiency by 15 per cent over the same period was still
achieved.
• Solar PV has been installed at four Southeastern railway
depots, Go-Ahead Germany’s Essingen depot and four bus
depots in the UK. We plan to install solar PV at two more bus
depots in 2022 and are presently carrying out a feasibility study
to identify further potential sites for solar PV across all UK bus
premises so that we can increase the amount of self-generated,
zero carbon electricity that we consume. Additionally, we have
continued to replace existing lighting with LED lighting to
reduce electricity consumption within our premises.
• From 1 July 2019, all electricity supplied to Group premises
within our central Group electricity supply contract has been
generated from fully renewable sources (wind, solar, hydro,
etc.) and is zero rated for CO2e under a market-based reporting
approach. Southeastern Railway operates train services on the
High Speed 1 (HS1) rail network. HS1, rather than Southeastern,
is responsible for procuring and supplying electricity to the HS1
network and the procurement specifications for this electricity
did not specify that it should be generated from renewables
and be zero rated for CO2. Southeastern is one of the main
users of this electricity and worked in partnership with HS1
so that electricity generated from renewables was specified,
starting from April 2020.
• Go-Ahead’s bus division achieved ISO 50001 certification in
October 2018. The scope of the certification was extended
during 2020 to include East Yorkshire Motor Services and Go
North West and extended again in 2021 to include Go-Ahead
Ireland. With the existing certifications already held by the
Group’s two UK train operating companies, all of Go-Ahead’s
UK and Ireland operations are now covered by ISO 50001
certification, recognised as best practice for energy management.
Our bus division’s ISO 50001 certification expires in October 2021
and we are currently working towards achieving re-certification.
• The main focus of our activities to reduce future energy
consumption and CO2 emissions in 2021 was the development
of our new climate change strategy which incorporates a Science
Based Target, validated by the Science Based Target Initiative,
to reduce our scope 1 and 2 CO2 emissions by 75 per cent by
2035 relative to our 2020 baseline performance and our
commitment to achieve net zero for scope 1 and 2 CO2
emissions by 2045. Further information about our climate
change strategy and how we will achieve it and our net zero by
2045 commitment can be found at: https://www.go-ahead.com/
sustainability/climate-change.
Actions that were implemented during 2019/20
to improve energy efficiency include:
• On-going investment in our bus fleet: The majority of new
buses purchased in the year were Euro VI and 172 new buses
entered service with our operating companies in the year.
In line with the Group’s vehicle procurement policy to only
purchase diesel buses certified as Low Emission Buses (LEB)
other than in exceptional circumstances, virtually all of these
new buses are certified as LEBs. Thirty of these new buses were
next generation extended range electric/diesel hybrid buses,
certified as ultra-low emission buses, that were purchased by
Brighton & Hove Bus Company. They use ‘geo-fencing’ to
enable them to operate in purely electric, zero-emissions mode
throughout the city’s Ultra-Low Emission Zone. These buses
are fully electric with an electric motor which drives the bus at
all times. They use a small on-board Euro 6 diesel generator for
recharging the buses’ batteries, when needed, which enables
them to operate longer routes than standard plug-in battery
electric buses. All of these new buses are significantly more
fuel efficient than those they have replaced and contributed
to an overall improvement in fleet average miles per gallon of
2.6% year on year and 6.9% better than in 2017.
• Notwithstanding the above, we also introduced over 100
electric buses to our fleet, bringing the total number of electric
buses operated by the Group to nearly 200 and making the
Group the largest operator of electric buses in the UK. This
increase in the size of our electric bus fleet, and the number
of services operated on them, accounts for the significant
increase in electric bus electricity consumption in 2020.
However, these ultra-low emission 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. Following delays caused
by issues with the manufacturer and COVID-19, these buses
will now be delivered to Brighton & Hove Bus Company in 2021
if funding arrangements can be carried forward. The purchase
of these buses, as well as those such as the extended range
electric/diesel hybrids with ‘geo-fencing’, 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 installed on 18 bus roofs at Go South Coast
with the trial shortly to be extended to buses at Go-Ahead
London and Brighton & Hove Bus Company. The electricity
generated by the panels will reduce the load on the vehicles’
alternators/drivetrain and contribute to a marginal
improvement in fuel efficiency. One of these trial buses is
also fitted with a roof mounted filter designed to remove
particulates from the air, contributing to improving air quality.
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The Go-Ahead Group plc Annual Report and Accounts 2021
Shareholder information Actions that were implemented during 2019/20
to improve energy efficiency include: continued
• New rolling stock, which is significantly more energy efficient
than the units it replaced, have continued to be introduced on
the GTR franchise. Excluding London Midland from 2017 and
the new German and Norwegian rail operations, this new
rolling stock contributed to an overall year on year improvement
in electric fleet energy efficiency (vehicle miles/kwh) of 1.5%
(6.4% better than in 2016/17). For GTR only, the year on year
improvement was 5.2% and against the 2017 baseline, a 22.6%
improvement was achieved, exceeding the 15% improvement
target a year earlier than planned.
• Solar PV was installed at four Southeastern Railway depots,
Thames Travel’s Didcot bus depot and Go North East’s
Hownsgill depot in 2019 adding to the existing installations
at Oxford and Hull bus depots, increasing the amount of
self-generated, zero-carbon electricity that we consumed.
Additionally, we have continued to roll out LED lighting to
reduce electricity consumption within our premises.
• From 1 July 2019, all electricity supplied to Group premises
within our central Group electricity supply contract was
entirely generated from fully renewable sources (wind, solar,
hydro, etc.) and is zero rated for CO2e under a market based
reporting approach.
• Go-Ahead’s bus division achieved ISO 50001 certification
in September 2018. The scope of the certification was extended
during 2020 to include East Yorkshire Motor Services and Go
North West bus operations and, with the existing certifications
held by the Group’s two train operating companies, all of
Go-Ahead’s UK operations are now covered by ISO 50001
certification, recognised as best practice for energy management.
• During 2019, Go-Ahead has also carried out a review of the
climate change risks and opportunities, including scenario
planning, as recommended by the Task Force on Climate-related
Financial Disclosures (TCFD). We are currently working on
incorporating the review findings into a new Group climate
change strategy which will also feature a long term science
based CO2 reduction target and a commitment to achieve net
zero by a specified date. These workstreams are still ongoing
and the outcomes will be included in our 2021 Annual Report
when our current energy and CO2 reduction targets expire.
• Go-Ahead also continued to collaborate with partners on a
variety of innovative ‘future of transport’ initiatives such as
demand-responsive transport (DRT) services and potential
tie-ups with logistics companies that will achieve net reductions
in carbon emissions as well as reducing air pollution from
transport and congestion.
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The Go-Ahead Group plc Annual Report and Accounts 2021
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
Tel switchboard: 0191 232 3123
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).
Corporate information
Principal Banker
The Royal Bank of Scotland plc
Corporate Banking
2nd Floor, 250 Bishopsgate
London
EC2M 4AA
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
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Legal Counsel
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2EG
288
The Go-Ahead Group plc Annual Report and Accounts 2021
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 28 June 2020
to 3 July 2021.
The full verification statement including Bureau Veritas’ verification
opinion, methodology, recommendations and a statement of independence
and impartiality can be found on the Go-Ahead Group website:
www.go-ahead.com
Bureau Veritas UK Ltd
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Registered office
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
+44 (0) 191 232 3123
+44 (0) 191 232 3123