Stronger Together the Go-Ahead Group Plc
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Annual Report and Accounts for the year ended 27 June 2015 STRONGER TOGETHER THE GO-AHEAD GROUP PLC GROUP GO-AHEAD THE Annual Report and Accounts for the year ended June 27 201 5 2 The Go-Ahead Group plc Annual Report and Accounts 2015 Strategic report Governance Financial statements Shareholder information OUR LEADERSHIP TEAM DISCUSSES • Read about our markets OUR RESULTS, THE POSITION OF on page 14 THE GROUP AND PROSPECTS FOR THE FUTURE • Information on our corporate governance report from page 52 Our Chairman’s statement Our Group Chief Executive’s Our Finance review • See how we are managing on page 4 review on page 6 on page 48 our risks on page 34 OUR STRATEGY AND OUR OUR INTEGRATED APPROACH OUR STRATEGY AND INTEGRATED APPROACH Sustainability and corporate responsibility are integral to our strategy and the way we operate at every level of the business. BUSINESS MODEL This is our third integrated annual report which aims to present a Our business model is a continuous comprehensive view of the Group. cycle, supporting our strategy. Read more on page 10 Our strategic priorities: OUR BOARD SOCIETY CUSTOMERS OUR PEOPLE FINANCE Our Board has a wide range of skills and experience. To run our To provide high To be a leading To run our business Read more on page 54 companies in a quality, locally employer in the with strong financial safe, socially and focused passenger transport sector. discipline to environmentally transport services. deliver sustainable responsible manner. shareholder value. GOVERNANCE We are committed to maintaining a robust governance framework. Read more on page 56 Read more about our strategic priorities on page 17 CONTENTS STRATEGIC REPORT 86 Directors’ report 139 Parent Company statement 87 Directors’ statement of comprehensive income 2 Our performance at a glance of responsibility 140 Parent Company statement 4 Chairman’s statement of changes in equity FINANCIAL STATEMENTS 6 Group Chief Executive’s 141 Parent Company balance sheet review and Q&A 88 Independent auditor’s report 142 Directors’ responsibilities in relation 10 Our business model to the members of to the Parent Company financial 12 Our core business units The Go-Ahead Group plc statements 14 Our markets 92 Consolidated income statement 143 Notes to the Parent Company 17 Our strategy and key 94 Consolidated statement financial statements performance indicators of comprehensive income 34 Managing risk 95 Consolidated statement SHAREHOLDER 40 Business review of changes in equity INFORMATION 96 Consolidated balance sheet 48 Finance review 153 Shareholder information, financial 98 Consolidated cashflow statement calendar and cautionary statement GOVERNANCE 100 Critical accounting judgements 155 Corporate information 101 Notes to the consolidated 52 Introduction to 156 More information for investors corporate governance financial statements 54 Board of directors 138 Independent auditor’s report to the members of 56 Corporate governance report The Go-Ahead Group plc 70 Directors’ remuneration report GO-AHEAD ONLINE For more information about The Go-Ahead Group and our operating companies, visit: www.go-ahead.com SOCIAL MEDIA FOLLOW US ON: linkedin.com/company/The-Go-Ahead-Group-PLC facebook.com/TheGoAheadGroupPLC twitter.com/TheGoAheadGroup www.go-ahead.com 1 OUR PERFORMANCE AT A GLANCE STRENGTH IN OUR RESULTS OVERVIEW SOCIETY CUSTOMERS The Group has delivered good growth in revenue and operating profit during 90% the year, with operating profit growth Carbon Trust Satisfaction Standard triple Independent bus of 11.1%. Supported by this performance, accreditation survey the Board is pleased to propose an increase in the final dividend of 5.5p per OUR PEOPLE FINANCE share up 6.5%, in line with the Group’s progressive dividend policy. We have also made good progress £4.6m 1st against our non-financial KPIs. Invested in Fair Tax Mark training in FTSE 350 Read more about our strategy and KPIs on page 17 REVIEW OF THE YEAR DIRECTORS’ REMUNERATION FINANCIAL STRENGTH We report a single remuneration figure for executive directors which includes salary, annual performance-related bonus, long term incentive • Overall profits up 11.1%, slightly ahead of our expectations bonus and other benefits. as a result of a stronger performance in rail 2015 2014 • Record bus profits, up 6.6% £’000 £’000 • Improvement in rail profits albeit at historically low margins Group Chief Executive David Brown 2,163 1,960 Group Finance Director Keith Down 1,265 1,299 • Continued strong free cashflow and robust balance sheet • Proposed full year dividend up 6.5% to 90.0p in line with our A large proportion of the executive directors’ remuneration is payable in progressive policy 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 STRATEGIC AND OPERATIONAL PROGRESS recovery and withholding provisions. Awards under the long term incentive • Continued progress in bus division with sector-leading plan (LTIP) are also made in shares, which further aligns the interests of customer satisfaction in regional bus operations our executive directors with those of our shareholders. A substantial part of executive directors’ remuneration is performance-related and linked to • Expect to deliver £100m of bus operating profit in key performance indicators. The remuneration committee’s unanimous 2016/2017, a year later than originally anticipated view was that the Group’s performance supported the executive directors’ • Record passenger numbers in rail division remuneration this year. Overall operating profit rose 11.1% in the year to 27 June 2015 and the Group’s share price rose 13.9%. Over the three • Group’s net increase in contributions to the DfT in year period to the same date, the share price increase was 124.1%. the year was £191.9m, up to £255.9m • Challenging start in GTR – working closely with industry The remuneration above includes the vesting of the LTIP award from 2012, which has rewarded the successful implementation of long term partners to improve performance and manage contract changes value strategic targets set three years ago. • Submitted bids for Northern and TransPennine Express rail franchises and shortlisted for the London Overground contract For the next tranche of LTIP awards in November 2015, we are proposing a customer satisfaction measure recognising that providing • Continue to explore selective opportunities in high levels of customer service is fundamental to our success. overseas markets Our directors’ remuneration report can be found on page 70 2 The Go-Ahead Group plc Annual Report and Accounts 2015 Strategic report Governance Financial statements Shareholder information GROUP HIGHLIGHTS TOTAL REVENUE (£m) TOTAL OPERATING PROFIT (£m) ADJUSTED EARNINGS PER SHARE (p) £3,215.2m +19.0% £114.7m +11.1% 150.8p +1.5% Regional bus London bus Rail Regional bus London bus Rail 2,500 120 200 2,397.4 48.0 25.7 40.0 100 19.7 2,000 1,901.9 1,810.3 150 148.6 150.8 1,732.5 11.5 42.3 141.9 1,654.6 80 41.6 135.2 1,500 38.8 117.6 33.4 34.8 60 100 1,000 46.7 40 41.9 33.7 35.4 36.4 449.7 457.9 50 500 378.4 423.9 351.5 20 290.9 312.9 337.6 350.8 359.9 0 11 12 13 14 15 0 11 12 13 14 15 0 11 12 13 14 15 Group revenue rose £512.8m, or 19.0%, in the year Group operating profit increased by £11.5m, or Adjusted earnings per share (3ps) rose by 2.2p, with growth in all divisions. 14.6% of the increase 11.1%, ahead of the Board’s initial expectations. This or 1.5%, reflecting increasing operating profit and is attributable to the introduction of the GTR rail strong performance was driven by our rail division. taking the non-controlling interest in our rail division franchise in September 2014. We refer to operating profit excluding the impact into account. of one off charges and credits to show a clearer We use adjusted eps as a KPI as it excludes the trend. Our operating profit after exceptional items impact of one off charges or credits in any year to and amortisation was £96.8m (2014: £109.5m). provide a clearer trend. Our basic eps was 121.6p, down 25.9% due to the impact of exceptional costs in 2015 and an exceptional credit in 2014 (see note 7). DIVIDEND PAID AND PROPOSED REDUCTION IN CO2 EMISSIONS CUSTOMER SATISFACTION (%) PER SHARE (p) PER PASSENGER JOURNEY (%)1 Regional bus 90% -2ppts 90.0p +6.5% 9.3% -2.9ppts Rail 76% -1ppts Regional bus Rail 100 15 15.0 100 14.0 90.0 91 90 90 92 90 84.5 83 80 81.0 81.0 81.0 12 12.3 12.2 80 82 78 77 76 60 9 9.3 60 40 6 40 20 3 20 0 11 12 13 14 15 0 11 12 13 14 15 0 11 12 13 14 15 Further to a 4.3% increase in the interim dividend, Year on year performance in this metric declined, Our regional bus passenger satisfaction scores the Board is pleased to propose a final dividend largely due to the introduction of the GTR rail remain industry leading. The overall score in our of 63.4p per share (2014: 59.0p), increasing the full franchise, which has higher than Group average rail division declined in the year, impacted by the year dividend to 90.0p (2014: 84.5p), up 5.5p CO2 emissions per passenger journey. Compared significant infrastructure improvements taking or 6.5%. to our 2007/08 baseline data, overall Group CO2 place as part of the Government’s £6.5bn emissions per passenger journey have improved Thameslink Programme.