University of Warwick: Go-Ahead Group Plc Financial Analysis Report

This report provides a detailed financial analysis of Go-Ahead Group Plc, a leading public transport organization in the UK, evaluating its strategic, operational, and financial performance. It examines the company's background, focusing on its regional bus, London & International bus, and Rail divisions, and analyzes its financial progress, including revenue recognition, cost control, and capital allocation strategies. The report also includes a comparative analysis with Stagecoach Group Plc, assessing their financial performances, revenues, and operational strategies. The analysis covers key financial metrics, including revenue growth, operating profit, and dividend payouts, providing insights into the companies' strengths, challenges, and investment potential. The report references the provided annual reports of both companies, aiming to offer a comprehensive understanding of the mass transport solutions sector.

Running head: ACCOUNTING AND FINANCIAL MANAGEMENT
Accounting and Financial management
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Section A:...................................................................................................................................2
Introduction............................................................................................................................2
Brief background to the company..........................................................................................2
Financial analysis of Go-Ahead Group Plc............................................................................2
Financial analysis of the Stagecoach Group Plc....................................................................6
Financial analysis between Go-Ahead and Stagecoach Group Plc........................................8
Conclusion............................................................................................................................11
Section B:.................................................................................................................................12
References................................................................................................................................15

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Section A:
Introduction
The report is presented upon the equity investment on the Go-Ahead, which is one of
the leading public transport organization in the United Kingdom. The purpose of the
organization is to take care of the journeys of general public which helps them in enhancing
their lived across the world. The report does provide all the information about the Go-ahead
so that the investors does get a clear idea about the investments related to the mass transport
solutions. All the factors that include the strategic, operational and financial performance of
the company are evaluated and presented in this report, so that, it becomes much easier for an
investor to understand about the current situation of Go-Ahead.
Brief background to the company
The Go-Ahead does focuses on the transport of regional bus, London & International
bus and Rail. These are the three areas of the transport, and does have leading market share in
the London bus market share and in the regional bus sector, the Stagecoach is the leading
market share. In the financial year 2019, Go-Ahead group has resulted great and has resulted
above the expectations (Go-Ahead Group plc, 2020).
Financial analysis of Go-Ahead Group Plc.
There has been a great progress in the three strategic pillars, which includes firstly,
protection and growth of the core; secondly, getting new contract of the bus and rail and
lastly, the development upon the future of transportation. The profit that comes for the bus
operating services, which has got up by 4.7 % which does amounts to £95.7 million in current
year, if it is being compared to the previous year it was £91.4 million. There was
improvement that helps with a strong performance in the region of the London and also in the

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International division (Coppin 2017). Thus, the customers have voted the regional bus
achieved to a highest percentage satisfaction arte with more than 92 %. Also, in the rail
operating profit has been increased and amounts to £25.4 million that has been included prior
to the year of London Midland franchise. One of the goodwill aspect that Go-Ahead enjoys is
that it does has a greater customer satisfaction rate. It also has gained four new international
contracts, where two of the German rail contracts has started operating and there is also first
bus contract in Ireland. It does also offer dividend to the investors and shareholders of 102.08
p throughout the year.
Upon the discussion of non-financial information statement of Go-Ahead, the
organizations have complied with the sections of 414CA and 414BA of the Companies Act
2006. On governing for the polices and standards that the organization does follow related to
the environmental matters are on sustainability policy, environmental policy and energy and
climate change policy. It is one of the stable cash generative business in the United Kingdom
bus business, it does have a well-established regional bus that does focus on the urban buses
which does have an aim for growth. It is the leading bus operator in London that has been
strategically located depots that has a competitive advantage over the competitors (Bayliss
and Mattioli 2018). The operations are being supported by the consistent investment with a
high quality fleet. There are growing international operations of Go-Ahead which does

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includes a disciplinary strategy for the lower risk of the international diversification (Go-
Ahead Group plc, 2020). Allover in the five countries it has own ten international contracts.
So there are more opportunities that has been in the targeted markets, that will help to deliver
the target of more than 15 % of the group profits from the international activities by the year
2022.
The management does focus on the demand of consumers and there is also engagement of
colleagues. The local management team does helps the local communities that also helps in
the optimizing the performance and services. The consumer service the Go-Ahead offers are
award winning as it does gets an overall great score of the bus customer satisfaction. It does
plays a key role in the communities as it does support the local economies that helps in
enabling access to work, education and also in retail (Kawugana and Faruna 2019). The
culture that is being empowered is that the people are accountable in delivering an excellent
consumer services. Go-Ahead does focuses on the sustainability and innovation, with the help
of addressing the issues of socio-dynamic impacting on the public transport (Go-Ahead
Group plc, 2020). There has been continuation of the innovation and also have the

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deployment of technology that will make the passenger transport that are lot easier and more
efficient. The management is committed upon minimizing the impact on the climate change
and also try to improve the environment and air quality that will help in maximizing the
benefits of the public transport that Go-Ahead offers.
Go-Ahead does have a strong financial profile and does have a robust balance sheet,
where there is low level of net debt. It does possess a disciplined approach upon the capital
allocation and on the risk management. The organization does have a commitment in paying
an attractive dividend that has been never reduced (Rahman 2019). The business model
which the Go-Ahead works on does have a several financial strategies and have a robust
financial profile, which has been described below:
 Revenue Recognition: The revenue of Go-Ahead, has been generated in usually two
ways, which are firstly with the fares that the consumers pay for the services they are
getting from the Go-Ahead with the buses and rails (Finley 2016). Another way through
which Go-Ahead earn revenue is that with the contract payments, which does include the
transport authority consumers through which the consumers operates.
 Cost Control: There are different work levels through which the operations are being
going on and the cost has been managed without compromising the quality or the safety
of the products. The main focus is on the measures of cost control which has been done
related to the employee utilization, fuel efficiency, contractual negotiations and
management.
 Capital Allocation: There are certain principles that helps in ensuring focus on
maintaining a good rating on investment grade, that has been done upon the payment of
dividend that is in line with the policy and the other lower half is of the target gearing
range.

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There are several approaches that has been taken through which Go-Ahead has been
successful, which includes clear strategy, customer focused decision-making, long-term focus
on the sustainable outcomes and innovative and agile approach. In the resources and
relationships, the people has been empowered and there is expertise that helps in experience
and influence (Go-Ahead Group plc, 2020). There have been strong relationships between
strategic partners and stakeholders. Lastly, there will be investments in fleets and depots.
Financial analysis of the Stagecoach Group Plc.
Stagecoach Group Plc. is the parent organization of the group that involves in the
operation of passenger transport. All that data is being taken from the annual report of
Stagecoach Group Plc and with the help of the strategic report all the analysis has been done
of the organization. The financial performance of Stagecoach Group Plc has been good
throughout the year (Stagecoach.com, 2020). The overall performance has been good as it
does offer public transport services which is of high quality and it does provide a true value
to the economy, environment and local communities. In the year 2019, the revenue that is
collected from the operations was £1,878.9 million, which was much lower if compared to
the previous year. The main reason is due to the South West Trains franchise that has ended
in the year 2017, August and there has been ending of Virgin Trains East Coast franchise in
June 2018 (White 2016).

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The total operating profit that are from the continued operations, which includes
before exceptional items and non-software intangible asset amortization which has increased
to £161.3 million. The unadjusted operating profit which has been from the continuing
operations are from the year £135.7 million. The earning per share that are before the
exceptional items and also from the non-software intangible assets amortization are in line
from the last year @ 22.1 p. The unadjusted earning per share has been reduced to 3.8 p,
which has been largely because of the exceptional charges, which are related to the
impairment and disposal of the North America business.
The net debt has been reduced of the Stagecoach Group Plc, which does tend to a
good financial year. In 27th April, 2019, the Consolidated net debt amounts to £253.3 million
and non-rail net debt amounts to £374.90 million, which was much lower to the prior year
that is largely due to the proceeds of the disposal of North America Division
(Stagecoach.com, 2020). It has been expected that the cash flow has been approximately
£100 million in the financial year 2020 of May, that has been in respect to the expired East
Coast rail business and there is also transfer of the East Midlands rail franchise. The full year
dividend that has been proposed of final dividend are of 3.9 p, that has been resulted of full

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year dividend of 7.7 p per share in the year ended 27th April, 2019. The final dividend that is
being proposed is of 3.9 per share that is being payable to the shareholders those who are
registered on the 23rd August 2019, if that has been approved their dividends are being paid
on the 2nd October, 2019.
The shareholders those who are wishing to participate in the dividend investment
plan, those who are elected that can send requests to the registrar of organizations that will be
arrived by 11th September 2019 (Bayliss and Mattioli 2018). The management team of
Stagecoach Group Plc are focused on the long term profit growth from the United Kingdom
bus business. With the help of multi-modal expertise and innovation in exploring the
opportunities in United Kingdom, which will have a positive outlook for the public transport
(Stagecoach.com, 2020). There is also involvement of the United Kingdom franchised train
operations that are ended in November 2019. The transportation services have to remain
centrally which has driven urban prosperity and help in building stronger communities (Grant
2016). With the help of new technology, there has been emphasis on the value travel and
helps in delivering improved financial performance. Thus, it helps in achieving an average of
more than 90 % customer satisfaction in England and more than 92 % in Scotland.

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Financial analysis between Go-Ahead and Stagecoach Group Plc
As per the annual report of the Go-Ahead, in measuring the performance the group is
progressing with the specified strategy that they have applied and the management does
effectively odes monitor the performance (Boyce and Ville 2017). There are three specific
areas in which the organization does focus on, one is on the regional bus, secondly it is on the
London & International bus and thirdly on the rail. In the rail operations the revenue is
usually generated through the services of passenger services. There is almost more than 4 %
growth in the regional bus, 0.4 % in the London & International Bus and 7.3 % in Rail. It has
been seen that the total revenue which has been measured of the non-passenger revenue is
less material. As far as the performance goes, each of the divisions does delivered growth that
are marketed particularly in the rail business and regional bus. There was less growth in the
Lower & International bus in that particular year which was due to the lower contracted
mileage in the region of London which has been reflected in the timing of contract end dates
(Osadchy et al. 2018). In the Stagecoach Plc, the financial performance of bus services in the
region of United Kingdom has increased from previous year to £ 252.80 million. Although, in
the operating profit there has been a decrease of 19.5 %, which does amounts to £ 10.70
million (Stagecoach.com, 2020). Therefore, the operating margin has reduced to 4.2 %, in the
financial year 2019, which was 5.3 % in the financial year 2018.
The operating profit of Go-Ahead amounts to £ 121.10 million, in which the operating
profit that are being measured are from the profit that has been earned from the ongoing
business operations and excluding the exceptional items and also the deduction of interest
and taxes. It does help in measuring the performance of the organizations that are operated
(Muda et al. 2017). There has been reduction of the previous year that has reflected the lower
profit due to the closure of the London Midland franchise, that was done as the performance
was better at the South eastern and higher operating profit from the London bus operations.

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The Stagecoach Plc has faced some changes related to the operating margin, the cost related
to the insurance and claims is of 0.6%, the cost of staffs has been reduced of 0.3%, the
operating lease costs has also increased of 0.8% (Stagecoach.com, 2020). The depreciation
was more of 0.4% and totally there was a change on more than 1%, which does lowers the
operating margin in the financial year 2018-19 to 4.2 %.
The cash flow of Go-Ahead resulted in 1.09 times, the cash flow is usually used to
monitor the conversation of the profit into cash. The cash flow is the cash that is being
generated from the operations, after the capital movement and after the cash has been paid
during that year. The cash conversation has been increased in the last year and it does exceed
1x, that helps in working capital (Robinson 2020). The cash flow of Stagecoach Plc related to
the costing of insurance and claims have reduced the cost and does have a self-insured
portions of claims. The management does have a strong focus on the safety and claims. The
lease cost that has increased is due to more vehicles are on the operating lease and the
provision on lease are occupied by the organizations.
The adjusted net debt EBITDA resulted in 1.32x, it does indicate the ability of the
organization to pay the debts from its own earnings. The net debt has been adjusted, which is
the net debt that does excludes cash that is restricted in rail division, which has been
measured against the earnings before interest, depreciation, tax and amortization (Ionici and
Adhikari 2017). The EBITDA is stable at 1.3x, which does remains below the target range of
1.5x and 2.5x. This level is being considered as conservative level that provides protection
which are against the possible headwinds and it has the ability to take the advantage of
potential market opportunities.
The Dividend payout ratio of Go-Ahead is of 60%, that are being measured of the
proportion of the net income that are being paid to the shareholders through the way of

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dividend. It is being calculated as the dividend per share by dividend earning per share
(Juárez, Pérez and Useche 2017). There is slight increase if compared to the previous year
and the dividend policy is of the payout in the range of 50 % to 75 %. In case of the
Stagecoach Plc, it has been stated as per the report that the distributable reserves that has
been totaled is of the £ 309.6 million, in which the dividend that has been paid in cash is of £
44.1 million (Stagecoach.com, 2020). It has been considered, as there has been a low risk in
the level of distributable reserves that has been a constraining factor upon the near future.
Conclusion
From the above analysis and discussion, it can be concluded that the Go Ahead
Company is having a good profitability for the last few years and there is a significant and
sustainable growth in the profitability of the company. On the other hand, the Stagecoach
Group is also having a good profitability and potentials too. As the Go Ahead group is a well-
established and having future growth potentials in their business with a sustainability, it can
be recommended for the investors to invest in the company.