Stagecoach Group Annual Report
and Financial Statements 2023
Strategic and operational highlights
• Growth in passenger demand in UK Bus (regional bus)
• £2 fare cap schemes supporting increased demand for bus
• Free bus travel scheme for under-22s is supporting strong growth in bus travel by young people in Scotland
• Proactive management of labour shortages and re-shaping of local bus networks to reflect new travel patterns
• Expansion in contracted London bus operations
• Acquisition of two businesses with more than 300 buses and 28 routes contracted with Transport for London, providing good
strategic fit with existing depot footprint
• Positive long-term outlook, leveraging the benefits of new ownership and supportive government policy and funding
Financial highlights
• Growth in adjusted profit reflecting recovery in passenger volumes and payments from national governments to protect public
transport services for customers
• Net debt plus net train operating company liabilities down from £271.0m (restated) to £265.8m, notwithstanding additions to net
debt resulting from two acquisitions of businesses in London and the resumption of dividends during the year
• Substantial strengthening of pensions position:
• Pensions assets (net of taxes) of £195.9m at 29 April 2023, a £214.9m improvement in the year
• Proactive de-risking of pension schemes
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Annual Report and Financial Statements 2023
Contents
Section Page
1 Strategic report 2
2 Directors’ report 38
3 Corporate governance report 41
4 Audit Committee report 44
5 Remuneration and Nomination Committee report 46
6 Health, Safety and Environmental Committee report 49
7 Responsibility statement 50
8 Independent auditors’ report 51
9 Consolidated financial statements 59
– Notes to the consolidated financial statements 64
10 Separate financial statements of the parent company 128
– Notes to the Company financial statements 130
11 Subsidiary and related undertakings 137
12 Corporate information 139
STAGECOACH GROUP LIMITED
COMPANY No. SC100764
YEAR ENDED 29 APRIL 2023
Financial summary
“Adjusted” results
Results excluding separately disclosed items*
“Statutory” results
2023
£m
2022
(restated)
£m
2023
£m
2022
(restated)
£m
Revenue 1,372.6 1,176.5 1,372.6 1,176.5
Total operating profit 77.8 72.8 47.5 82.8
Net finance costs (22 .1) (28.6) (21.5) (27. 6 )
Profit before taxation 55.7 44.2 26.0 55.2
* See definitions in note 32 to the consolidated financial statements.
** See details of restatement in note 1(b).
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Annual Report and Financial Statements 2023
1.1 Introduction
Stagecoach Group Limited (“the Company”) is the parent company of a group of companies (“the Group”) principally involved in the sale and operation
of passenger transport. The directors of Stagecoach Group Limited (“the Directors”) are pleased to present their report on the Group for the year ended
29 April 2023.
This section contains the Strategic report, which includes the information that the Group is required to produce to meet the need for a strategic report in
accordance with the Companies Act 2006. The Directors’ report is set out in section 2.
This Strategic report is a consolidated report relating to the Group as a whole. It includes matters relating to the Company and its subsidiary undertakings.
1.2 Cautionary statement
The Strategic report has been prepared for the shareholders of the Company, as a body, and for no other persons. Its purpose is to inform shareholders of
the Company and to help them assess how the Directors have performed their duty to promote the success of the Company. This Strategic report contains
forward-looking statements that are subject to risk factors associated with, amongst other things, the economic, regulatory, policy and business circumstances
occurring from time to time in the countries, sectors and markets in which the Group operates. It is believed that the expectations reflected in these statements
are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated.
No assurances can be given that the forward-looking statements in this Strategic report will be realised. The forward-looking statements reflect the knowledge
and information available at the date of preparation.
1.3 Overview
Introduction
We have delivered a positive set of financial results for the year ended 29 April 2023 as we work in partnership with national and local government to maximise
the opportunities from public transport for consumers and the country while navigating the current economic environment. This past year has seen a continuing
trend of closer engagement with local transport authorities in re-shaping our local bus networks to reflect new travel patterns and investing in services to make
them more attractive to existing and new customers.
There has been a recovery in demand for our public transport services, with year-on-year growth in regional bus passenger journeys of 17.3% during the year.
Concessionary travel volumes have recovered less quickly than fare-paying passenger volumes, although we are seeing positive growth in bus travel under
the Scottish Government’s under-22 free bus travel scheme.
UK Bus (regional operations)
Our services are central to delivering economic growth, social equity and objectives around improved air quality and decarbonisation. This is reflected in the
continued government investment in buses, in particular, as we transition to a net zero future.
We are continuing with the delivery of Bus Service Improvement Plans across England along with our partner regional and local transport authorities. In
addition, we are pleased to have seen a positive impact from the £2 single fares initiatives in England by the Department for Transport and several metro
mayor combined authorities.
In Scotland, we are seeing positive growth in bus travel linked to the under-22 free bus travel scheme, and we have also been working with Transport Scotland
and other operators on a marketing campaign to boost bus use. The Scottish Government has also recently launched the second phase of the Scottish Zero
Emission Bus Challenge Fund (“ScotZEB”), with up to £58m of funding available. The Welsh Government has announced a further £46m to support the existing
Bus Emergency Scheme (“BES”) and successor arrangements for the year to 31 March 2024.
We are continuing to engage with our national and local government partners on the importance of long-term investment in bus networks, and around policy
proposals we believe will help maximise the potential of public transport for the country. We published new research in November 2022 on modal shift, which
demonstrates that consumers support partnership working between local authorities and bus operators to deliver a balanced package of incentives. It is clear
this approach can deliver significant modal shift from car to public transport and active travel.
We fully established our new dedicated UK customer contact centre during the year, and have rolled out new flexible ticketing options for passengers. We are
progressing a £48m investment in around 200 Euro VI buses and we plan to increase our electric bus fleet by over 80% by the end of 2023. This follows the
launch of the UK’s first all-electric bus city in Inverness in February 2023, with other all-electric bus cities to follow.
In June 2023, it was announced that we had been awarded three contracts from Transport for Greater Manchester (“TfGM”) under its new franchising system.
We are delighted with this outcome and look forward to operating these services under TfGM’s new Bee network from the Middleton, Oldham and Queens
Road depots from March 2024.
Stagecoach is also continuing to lead the sector on transport innovation. During the year, we have expanded our involvement in the development of
autonomous bus technology. As well as completing initial passenger trials of our CAVForth project in East Scotland and confirming plans to extend the
route, we have partnered with local transport authorities on new UK Government-backed trials in Cambridge and Sunderland.
UK Bus (London)
We have grown our operations in London with the acquisition of bus operations previously operated by Kelsian Group and HCT Group. In total, these
operations involve around 950 employees and more than 300 buses, and we have taken over responsibility for delivering 28 routes on behalf of Transport
for London (“TfL”). The depot locations are a good strategic fit for our existing London operation and extend the area previously served.
1. Strategic report
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
1. Strategic report (continued)
Trading in our London bus operations has been challenging with a substantial reduction in profitability over the course of the year, consistent with the
experience of other operators in that market. The London bus business is contracted to run specified services on behalf of Transport for London and cannot
unilaterally reduce service levels. Accordingly, staff shortages have resulted in higher levels of lost mileage and weaker operational performance, which have
resulted in higher contractual penalties and lower quality incentive income. In addition, staff and other costs have increased significantly because of the staff
shortages, as well as high inflation. However, we expect profitability to recover over the medium-term as we address labour market challenges, benefit from
lagged inflationary increases in contract revenues and seek to re-price contracts as they are tendered.
Macro-economic factors
We are actively managing the current inflationary environment by taking a balanced approach to protecting our customers and employees from the cost-of-
living pressures as far as possible, while ensuring we maintain properly funded and sustainable bus networks.
Our proactive steps to manage labour shortages in the UK economy has also resulted in a more reliable level of service for customers. During the year we
have recruited and trained more than 4,000 new bus drivers to protect our services. We remain grateful for the huge commitment and professionalism of our
people who are delivering services safely in our communities day in, day out.
Financial results
For the year ended 29 April 2023, revenue grew to £1,372.6m (2022: £1,176.5m) and adjusted total operating profit grew to £77.8m (2022 restated: £72.8m).
Revenue excludes COVID-19 grant income from government, which is reported as other operating income. The growth in revenue reflects recovering passenger
demand across our regional bus and tram services as pandemic-related restrictions have eased and confidence has returned, as well as the effect of new
businesses acquired in London during the year. The growth in adjusted total operating profit reflects that revenue growth and payments from governments to
support the recovery of public transport networks vital to the future of the country, partly offset by the reduced profitability in London arising from staff shortages
and the lagged inflationary increases in contract revenues. Unadjusted operating profit was £47.5m (2022 restated: £82.8m), with the decrease principally due
to the growth in adjusted total operating profit being offset by transaction costs in the year related to the two offers to acquire the Company, and non-recurring
separately disclosed gains in the prior year.
During the year net debt increased slightly from £230.8m (restated) to £241.1m, reflecting the resumption of dividends and impact of acquisitions of two bus
businesses in London, largely offset by good underlying cash generation.
In addition, we saw a substantial strengthening of our pensions position during the year, as we made excellent progress on de-risking our pensions schemes.
At 29 April 2023, our net pre-deferred tax pension assets were £195.9m, a £214.9m improvement over the year.
Dividend
In light of the Group’s substantial available liquidity and its strong recovery in financial performance and position, the Board has proposed and paid dividends
of £47.5m in respect of the year ended 29 April 2023.
The Group takes account of its performance, financial position and prospects when setting dividends. It does not have a prescribed formula for determining
each year’s dividends, other than the desire to maintain sufficient liquidity to fund available capital expenditure and growth opportunities, taking into account
expected cash flow from the business together with the ongoing commitment to seek to maintain an investment grade credit rating.
Outlook
We remain positive on the long-term outlook for Stagecoach and our sector, despite the short-term macro-economic challenges. National and local government
transport strategies in England, Scotland and Wales provide a good platform for long-term growth and will require closer partnership between bus operators
and transport authorities, particularly through an expansion of bus service franchising. Public transport, and buses in particular, will be critical to delivering a
greener, healthier and more inclusive country, and more connected local communities.
We are confident that our strong financial position and our continuing momentum means that we can deliver further benefits to our customers, employees,
investors and wider stakeholders.
Summary of financial results
Revenue, split by segment, is summarised below and excludes COVID-19 grant income from government. COVID-19 grant income is reported within other
operating income:
Revenue
2023
£m
2022
£m
Growth
%
UK Bus (regional operations) 1,029.9 892.2 15.4%
UK Bus (London) 327. 5 272.6 20.1%
UK Rail 15.2 11.7
1,372.6 1,176.5
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Annual Report and Financial Statements 2023
1. Strategic report (continued)
Operating profit, split by segment, is summarised below:
Operating profit
2023
£m
2023
% margin
2022
(restated – see
note 1(b))
£m
2022
% margin
UK Bus (regional operations) 77.0 7.5% 57. 9 6.5%
UK Bus (London) 0.4 0.1% 20.8 7.6%
UK Rail 4.4 0.2
Group overheads (9.5) (9.3)
Restructuring costs (0.1) (0.2)
Operating profit before joint ventures and separately disclosed items 72.2 69.4
Joint ventures – share of profit after tax
WCT Group (formerly Virgin Rail Group) 0.2 2.9
Citylink 4.8 0.4
Crown Sightseeing 0.6 0.1
Total operating profit before separately disclosed items 77.8 72.8
Non-software intangible asset amortisation (0.9) –
Other separately disclosed items (29.4) 10.0
Total operating profit: Group operating profit and share of joint ventures’
profit after taxation 47.5 82.8
More details on the financial results for the year are provided in section 1.5 of this Annual Report.
1.4 The Stagecoach Group
1.4.1 Overview of the Stagecoach Group and its business model
Stagecoach Group’s purpose
What we do
Why we do it
Our purpose is to connect communities to the people and places that matter most. We aim to connect people in a sustainable way, which is better for the
environment. To achieve that, we seek to provide safe, high quality, sustainable and reliable transport at good value for money for customers.
We support, directly and indirectly, many businesses and thousands of sustainable jobs.
How we create stakeholder value
By applying our commitment to operational and commercial excellence, we aim to provide a great experience to our customers and our people.
Through our sustainable transport services, we can create a healthier environment for our communities. We believe that in these ways, we can create
long-term sustainable value for shareholders and other stakeholders.
Stagecoach Group is a leading public transport group. The Group employs around 23,000 people and operates bus, coach and tram services. The Group
has three main segments – UK Bus (regional operations), UK Bus (London) and UK Rail.
We offer greener, smarter travel in the UK and our principal business is providing passenger transport services, primarily by transporting people by bus, coach
or tram.
This section 1.4.1 summarises the Group’s business model. The remaining parts of section 1.4 are also important to an understanding of our business model
and we cross-reference them where appropriate.
Stagecoach Group Limited is a private limited company that is incorporated, domiciled and has its registered office in Scotland. Until 28 June 2022, the
Company’s ordinary shares traded on the London Stock Exchange. The Company is now owned by Inframobility UK Bidco Limited , which is indirectly
owned by an international infrastructure fund managed and advised by DWS Infrastructure.
Throughout this Annual Report, Stagecoach Group Limited is referred to as “the Company” and the group headed by it is referred to as “Stagecoach”
and/or “the Group”.
Section 1.4.2 summarises our strategy and section 1.4.3 explains what we do and provides a description of each of our key business segments, markets
and where appropriate, market share.
Business culture
We are committed to conducting business in a socially responsible way and we believe this to be consistent with our business objectives and strategy. Indeed,
by taking a responsible approach towards the environment and the wider community, we believe we will enhance our objective to deliver organic growth.
Our culture encourages sensible risk taking while managing risks appropriately and responding to risks that do crystallise. It is inevitable and appropriate for a
group of its size that the Group has a number of policies and procedures to ensure appropriate behaviours but these are designed to avoid stifling our agility.
More information on the Group’s core values and policies is provided in section 1.7.6 of this Annual Report.
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
We operate a relatively devolved management structure. That reflects our view that in operating local transport services, day-to-day decision making should be
made by local managers who understand the dynamics of their particular markets. We aim to have relatively short chains of command that facilitate the effective
exchange of information and enable timely decision making. Delegated authorities and other policies and procedures are in place to achieve an appropriate
balance between the benefits we perceive of devolved management and the need for proportionate management of overall risk.
Sources of revenue
We have a number of revenue streams, principally arising from:
• amounts we receive from individuals or groups of individuals to travel on our transport services;
• amounts we receive from government bodies in respect of travel by individuals on our transport services – for example, in the UK, older people, people
with disabilities and younger people in some parts of the country, are legally entitled to travel on our bus services at certain times free of charge but we
receive revenue from government bodies in respect of that travel;
• amounts we receive from government bodies as payment to us for operating transport services under contract – for example, Transport for London pays
us to run specified bus services. Any amount payable by individual passengers flows to Transport for London and our revenue would be from that authority;
• amounts we receive from corporations or others for operating transport services under contract – for example, a university might pay us to operate a bus
service to shuttle students around its campus;
• subsidy we receive from government bodies to financially support the operation of transport services they consider to be socially or economically desirable;
• commissions for selling travel on other operators’ transport services;
• undertaking maintenance work on other operators’ vehicles;
• selling fuel to other transport operators.
We also receive other income, which may include income from:
• property rental;
• selling advertising space on vehicles and premises we operate;
• government grant income to support transport networks affected by the COVID-19 situation.
Key costs and inputs
Our main tangible fixed assets are property, buses, coaches and technology. Some of the property, buses and coaches we operate are leased.
Our people are key to providing our services. Notwithstanding developments in technology, our business remains relatively labour intensive. Over half
of our consolidated operating costs are staff costs. Relationships with our people and their trade unions are important to the success of the business.
Our other major operating costs are:
• diesel and electricity to fuel or power our buses, coaches and trams;
• insurance costs and claims costs;
• materials and consumables, including replacement parts for vehicles;
• depreciation charges for the vehicles, properties and technology that we operate.
Competitive advantages
We see our key sources of competitive advantage as being:
• Our operational excellence – providing safe, reliable, good quality, value for money, customer-focused transport services;
• Innovation – we have a long record of innovation;
• Our commercial expertise in designing transport networks, pricing our services and marketing our services;
• Our brands – our operational excellence and commercial expertise is reflected in our generally high customer satisfaction scores meaning that our
key brands are well regarded in their respective markets;
• Our relationships – we view our relationships with employees, trade unions and government bodies, in particular, as key advantages to our business;
• The economies of scale of being a relatively large transport provider.
Value for other stakeholders
As well as the financial value we generate for our investors, lenders and people, we provide value to a wider group of stakeholders, including:
• Public transport offers environmental benefits versus wide-scale car usage and can contribute to efforts to reduce pollution and improve air quality,
benefiting the public in general;
• Our services connect people to jobs, to education, to training, to healthcare, to leisure and to each other. We contribute to social inclusion and our
services can be critical for people without access to a car;
• Our business generates significant tax contributions to public finances across employee, sales, corporation, property and other taxes;
• We contribute to charities as well as providing non-financial support to charities and the communities in which we operate.
Risks
We do face a number of risks. Section 1.4.5 sets out the principal risks to the achievement of our strategy and objectives. Our overall risk management
approach has not changed as a result of COVID-19.
Key performance indicators
Section 1.4.6 describes how we measure and monitor progress against our objectives and strategy, and how we are performing.
Impact of COVID-19
We believe our business model remains appropriate for a post COVID-19 world. Our business model adjusted during the pandemic, with more of our income
being from COVID-19 grants from government. We expect our business model will continue to evolve to reflect the opportunities presented from changes
in government policy and climate change, and to respond to a closer relationship with government.
1. Strategic report (continued)
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Annual Report and Financial Statements 2023
1.4.2 What we look to achieve (business objectives and long-term strategy)
Group strategy
Our strategy remains focused on maximising our core business’ potential in the UK, underpinned by four key areas:
• Optimise our fleet and infrastructure
• Pursue franchising and growth opportunities
• Enhance customer experience
• Build a lean and agile model and invest in our people
1.4.3 What we do (description and strategy of each business segment)
UK Bus (regional operations)
Description The UK Bus (regional operations) business connects communities in more than 100 towns and cities across the UK on bus networks
stretching from the Highlands of Scotland to south west England.
The business operates a fleet of around 6,700 buses and coaches across a number of regional operating units. Each regional
operating unit is led by a managing director. In addition to local bus services in towns and cities, Stagecoach operates inter-urban
services linking major towns within its regional operating company areas.
Stagecoach has a joint venture (Scottish Citylink Coaches Limited) with international transport group, ComfortDelGro. The joint
venture is responsible for the Scottish Citylink express coach network and megabus.com branded services to, from and within the
UK. Stagecoach owns 37.5% of the share capital of Scottish Citylink Coaches Limited and ComfortDelGro owns the remaining
62.5%. The joint venture is the leading retailer of scheduled, inter-city coach services in Scotland.
Regulatory
environment
The current structure of the bus market in Great Britain (outside London) was established by the Transport Act 1985 and since
varied by the Bus Services Act 2017 (see below). This is essentially a deregulated structure: any holder of a Public Service Vehicle
operator’s licence may operate bus services, having first registered various details with the relevant traffic commissioner. The traffic
commissioners are responsible for enforcing compliance with these registered details, including standards of maintenance,
reliability and punctuality.
The UK Bus (regional operations) bus and coach services are operated on a commercial basis in a largely deregulated market.
Most of the revenue is ordinarily from customers paying for their own travel by bus. The business also operates tendered services,
including schools contracts, on behalf of local authorities. Pre-COVID, around 10% of the UK Bus (regional operations) revenue was
receivable from local authorities in respect of such tendered and school services. For some services, the Group receives revenue from
passengers as well as tendered revenue from a local authority. Pre-COVID, around 24% of the UK Bus (regional operations) revenue
was earned from statutory concessionary fare schemes, whereby the Group is reimbursed by public authorities for carrying older
people and people with disabilities, at no charge to the passenger, on the same bus services that are also available to the wider public.
The Group would typically receive both revenue from passengers and also, concessionary revenue from a local authority in respect
of a single bus service and in some cases, may also receive tendered revenue for the same service.
Responsibility for buses in the UK is devolved. The devolved governments in Scotland and Wales have responsibility for buses in their
areas. In England, outside London, the Department for Transport oversees buses but with local authorities playing an important role.
The Bus Services Act 2017 provides a legislative framework to help bus operators and local authorities in England to improve local bus
services. It includes several possible models for bus services: Advanced Quality Partnerships, Enhanced Partnerships and franchising.
Franchising is an established model for providing bus services and is used in London and in many cities and regions across Europe.
In a franchising scheme, local authorities will determine the details of the services to be provided – where they run, when they run and
the standards of the services. Typically bus operators provide their services under contract to the local authority who can let whatever
sort of contract it feels is appropriate. No other local bus services can operate in the franchised area without the agreement of the
franchising authority.
Strategy The strategy of the UK Bus (regional operations) business is to deliver value over time driven by organic growth in revenue and passenger
volumes as a result of providing safe, reliable, good quality, customer-focused bus services at a reasonable price to customers. This may
be supplemented by winning new tendered or contract work and/or acquiring businesses where appropriate opportunities arise.
Market opportunity The Group has around 26% of the UK bus market excluding London. The UK Department for Transport’s National Travel Survey
(“NTS”) is a household survey of personal travel within Great Britain by residents of England. The NTS found that in 2021, there
was an average of 757 trips per person per year, up from 739 in 2020, principally reflecting the recovery following the COVID-19
pandemic. Trips by car or van accounted for 80% of distance travelled, bus trips accounted for only 3%, rail trips accounted for
9% and walking, cycling and other modes accounted for 8%. There therefore continues to be a significant market opportunity
to stimulate modal shift from car to bus. According to the NTS in 2021, around 25% of bus journeys outside of London were for
commuting and business, 27% for shopping, 12% for education, 24% for leisure, 12% were for personal business (e.g. visits to
services such as banks, medical consultations etc.) and for other purposes.
Macroeconomic
factors
Although the UK Bus (regional operations) revenue is not immune to macroeconomic changes, it is less exposed than many other types of
business. In addition, the Group can adjust the pricing and frequency of the majority of its services and is therefore well placed to respond
to any changes in demand for particular services. We estimate that around 70% of the costs vary with operating miles.
Competition The UK Bus (regional operations) face competition for customers not only from other operators of buses and coaches but also
from other modes of transport. The Group regards its primary competitor as the private car and aims to encourage modal shift from
car to public transport. The other major groups that operate buses in the UK outside of London are FirstGroup, National Express
Group, Go-Ahead Group and Arriva. New, potential, sources of competition are emerging, often enabled by digital developments.
Newer competitors include ride-sharing websites, digitally-driven taxi services and aggregators of travel services.
1. Strategic report (continued)
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
UK Bus (regional operations)
Future market
developments
Although we see ongoing forecasting uncertainty in relation to passenger demand and cost inflation, we expect continued good
profitability for the year ending 27 April 2024, as we return to a more commercial model for regional bus services, underpinned by
greater certainty around government funding for the year ahead.
Looking further ahead, we expect a lasting effect of the COVID-19 pandemic on travel patterns with an acceleration in trends of
increased working from home, shopping from home, telemedicine and home education. At the same time, we see positive drivers
for the business from a renewed societal focus on health, wellbeing and the environment. Buses across the UK can play a major
role in a cleaner, greener and more resilient economy and society, tackling climate change with strong government action to reduce
car use.
The business does continue to face risks related to regulatory changes and availability of public funding as noted in section 1.4.5.
Technological developments present both opportunities and threats to growing passenger volumes. While people’s reducing
propensity to travel is a risk to the business, there are positive long-term conditions for further growth in demand for UK bus
services created by population growth, increasing urbanisation, rising road congestion, supportive government policy and public
concerns for the environment.
As Britain’s biggest bus and coach operator, we have clear opportunities to grow our regional bus business and contribute to
thriving communities. We continue to believe that by working together, the private sector and our local authority partners can
deliver the bus services our customers want.
UK Bus (London)
Description The Group is the second largest operator in the London bus market, operating from 13 depots with a fleet of over 1,600 buses
serving routes in and around east and south-east London.
Regulatory
environment
The UK Bus (London) business operates bus services under contract to Transport for London, receiving a fixed fee (subject to
adjustment for inflation) and generally taking the cost and capital risk. Bus operators bid to win contracts and each contract is
typically for a five to seven year period and some have the potential to be extended by two years. The UK Bus (London) business
currently has over 120 separate contracts to provide bus services on behalf of Transport for London – this spreads the risk
of financial performance being adversely affected when a contract expires and the business is unsuccessful in winning the
replacement contract.
Strategy Our strategic focus in the London bus market is on maintaining good operational performance and tight control of costs while
seeking to bid competitively for new contracts.
Market opportunity The Group operates approximately 17.6% of the bus operating mileage contracted by Transport for London. The Group does not
seek to gain market share for its own sake and remains disciplined in ensuring that its bids for new contracts offer an acceptable
trade-off of risk and reward.
Macroeconomic
factors
The UK Bus (London) operations are not especially exposed to short-term changes in macroeconomic conditions because the
business receives a fee from Transport for London for operating services irrespective of the passenger volumes on those services.
Its costs and in particular, labour costs, can vary due to macroeconomic changes and also, in the longer term, the level of services
that Transport for London offers for tender might be affected by the macroeconomy. The financial performance of the business has
been impacted adversely in the current year due to upwards wage pressure, consistent with the challenges facing other sectors of
the UK economy.
Competition UK Bus (London) faces competition to win Transport for London contracts from other bus operators, the largest of which are
Go-Ahead Group, Arriva, Metroline, RATP and Abellio.
Future market
developments
We have significantly expanded our London business during the year ended 29 April 2023, with the acquisition of bus operations
previously operated by Kelsian Group and HCT Group. In total, these operations involve around 950 employees and more than 300
buses, and we have taken over responsibility for delivering 28 routes on behalf of Transport for London. While financial pressure on
Transport for London does present risks for the business, we have not significantly changed our London bus strategy.
In the short-term, revenue growth could come from inflationary contract price increases, retaining work on tender but at higher
rates and/or winning contracts from other operators. While bus mileage reductions by Transport for London present a risk to the
business, positive government policy on public transport can contribute to a positive long-term outlook for the business.
Rail
Description The Group continues progressing with the unwinding of the affairs of its former UK franchised rail businesses as we seek to exit from
this segment of our operations.
The Group’s rail operations are now limited to the Sheffield Supertram operation of a 28km light rail network incorporating three routes
in the city of Sheffield, on a concession running until 2024.
1.4.4 What we need, to do what we do (resources and relationships)
Stagecoach Group has a range of resources and relationships, including contractual relationships that underpin its business and support its strategy.
These assist in giving the Group a competitive advantage in the markets in which it operates.
Customers
Our relationship with our customers is important to us. To deliver organic growth, we need to provide services that people want to use.
We conduct customer research to monitor our performance and to determine how we can improve the quality, delivery and accessibility of our services.
1. Strategic report (continued)
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Stagecoach Group
Annual Report and Financial Statements 2023
We are passionate about providing good customer service and our businesses have regular and ongoing discussions with bus user groups. This includes
presentations from managers on aspects of our service as well as consultation and information sharing on particular issues.
An important element of the Group’s success in growing its customer base lies in its record of product innovation and new ideas on developing effective
public transport systems.
Employees
Human resources are key to the Group’s business and the Group’s relationship with its employees is therefore fundamental to achieving its objectives. We aim
to recruit and retain the best employees in our sector, offering an excellent package of benefits, which allows us to deliver good customer service. The Group
invests significantly in the training and development of people. We have established strong working relationships with trade unions and work in partnership with
them on a range of issues, including training and development, occupational health matters, pensions and other employee benefits. We also communicate with
our people face to face and through a number of internal publications.
The financial community
Our investors and lenders are critical to our business success. We provide updates to them on our performance.
We have contractual arrangements with banks and other finance providers for the provision of funds and financial products to the Group.
Government and regulatory bodies
Our managers have ongoing relationships with national and local government to ensure the effective delivery of government transport policy and to assist
in meeting wider objectives. We work with local authorities, including passenger transport executives, in the delivery and planning of bus and rail services.
Many of our businesses have partnership agreements in place to improve the delivery of public transport in their areas. We work closely with the Department
for Transport, the Scottish Government, Transport Scotland, the Welsh Government and Transport for London.
We contract with local authorities, government bodies and other parties for the supply of bus services on a contracted or tendered basis.
We have constructive dialogue with organisations such as the Campaign for Better Transport.
Suppliers
We rely on a range of suppliers to provide goods and services linked to our bus, coach and tram operations. Our businesses have contractual relationships
with suppliers, including purchase contracts with fuel suppliers, vehicle suppliers, IT companies and spare part suppliers.
Information technology is increasingly important to effectively operate our services and to meet our customers’ expectations. Significant investment, internal
management resource and external supplier input support the development and operation of IT systems.
Corporate reputation, brand strength and market position
Stagecoach is one of the best known public transport operators in the UK and is consistently rated highly for the quality of its services in research by independent
organisations. We value our reputation, both as a public transport provider and as a key part of the communities in which we operate. The Group has a strong
set of brands that support our strategy of organic growth in our business and that help maintain our leading market position.
Natural resources and manufacturing technology
Operating our bus, coach and tram services requires considerable use of natural resources, including diesel and electricity. We have arrangements in place
to ensure that these resources are sourced efficiently and that our supplies are maintained to ensure the smooth functioning of our business. A number of
experienced manufacturers supply our buses, coaches and trams, which are produced to detailed specifications relevant to the individual markets in which
they are required.
Licences
We hold various licences giving authority to operate our public transport services and these are maintained up to date as required.
Transport and industry representation groups
We are active members of industry groups, such as the Confederation of Passenger Transport UK and UKTram.
1.4.5 The challenges we face (principal risks and uncertainties)
Like most businesses, there is a range of risks and uncertainties facing the Group and the matters described below are not intended to be an exhaustive list
of all possible risks and uncertainties.
Generally, the Group is subject to risk factors both internal and external to its businesses. External risks include global political and economic conditions,
competitive developments, supply interruption, regulatory changes, materials and consumables (including fuel) prices, pensions funding, climate change and
environmental risks, industrial action, litigation and the risk of terrorism. Internal risks include risks related to capital expenditure, acquisitions of businesses,
regulatory compliance and failure of internal controls.
The Board of Directors determines the nature and extent of the principal risks that it is willing for the Group to take in achieving its strategic objectives.
Information on the risk management process is provided in section 2.5 of this Annual Report. The focus below is on those specific risks and uncertainties that
the Directors believe are the most significant to the Group, taking account of the likelihood of occurrence of each risk and the potential effect on the Group.
Where appropriate, the principal risks and uncertainties below include emerging risks.
1. Strategic report (continued)
9
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
The Group’s principal risks and uncertainties remain consistent with the prior year.
Description of risk Management of risk Developments in year ended
29 April 2023 and since
Section in
Annual Report
Major event such as a serious accident
There is a risk that the Group is involved (directly
or indirectly) in a major operational incident
resulting in significant human injuries
or damage to property. This could have a
significant impact on claims against the Group,
the reputation of the Group and its chances
of winning and retaining contracts or franchises.
In extreme cases, services could be suspended
or structural changes imposed on the Group
as a result of regulatory or other action.
A series of less severe incidents could have
similar consequences.
While it is not possible to fully
eliminate these risks, the Group has
a proactive culture that puts health
and safety at the top of its agenda
in order to mitigate the potential for
major incidents. In the event that a
major incident did occur, the Group
has procedures in place to respond.
The Group periodically rehearses
its response to a hypothetical major
incident. The Group has insurance
arrangements in place to reduce the
financial effect on the Group of certain
claims against it.
• We have implemented a new driver
risk management system across
our operating companies to enhance
our monitoring and support of driver
performance.
Economy
The economic environment in the geographic
areas in which the Group operates affects the
demand for the Group’s services. The revenue
and profit of the Group could therefore be
positively or negatively affected by changes
in the economy.
The COVID-19 situation had a substantial,
adverse effect on the UK economy, though
we currently have limited visibility over its longer
term economic effect, which may lead to a
prolonged period of economic, consumer and
political uncertainty. That may in turn affect
asset values and foreign exchange rates, which
have a bearing on the amounts of our pensions,
financial instruments and other balances.
Ongoing geopolitical risk may prolong high
levels of inflation, on both pay and other costs,
impacting profit margins while also potentially
suppressing passenger demand due to
reduced disposable income.
Management monitors actual and
projected economic trends in order
to match capacity to demand and
where possible, minimise the impact
of adverse economic trends on the
Group. External forecasts of economic
trends form part of the Group’s
assessment and management
of economic risk.
Further information on the relevance
of macroeconomic factors to each
business segment is provided in
section 1.4.3.
Hedging arrangements are in place to
manage volatility in fuel and electricity
costs.
Inflation and other economic factors
are considered when pricing our
services.
• Current higher inflation presents both
opportunities and risks to the Group.
Our fuel hedging programme provides
our cost base with some short to
medium-term protection from higher
fuel prices. Our past experience is that
higher fuel prices drive incremental
demand for bus and tram services
over other modes of transportation.
Combined with a wider cost of living
crisis, in many cases, bus and tram
travel presents a cheaper mode of travel
than car use, and we are positioning our
marketing to focus on our good value
fares. The principal risk from higher
inflation is around the availability
and cost of staff, which is discussed
further under “People and culture”.
1.3, 1.5.1
and 1.6
Terrorism
There have been multiple acts of terrorism on
public transport systems and other terrorist
attacks that, whilst not directly targeting public
transport, have discouraged travel. There is a
risk that the demand for the Group’s services
could be adversely affected by a significant
terrorist incident. Such a fall in demand would
have a negative effect on the Group’s revenue
and financial performance.
The Group has plans in place designed
to reduce the operational and financial
impact of a terrorist incident. It also
has checks in place such as vehicle
inspections to reduce the risk.
• No significant matters to report.
1. Strategic report (continued)
10
Stagecoach Group
Annual Report and Financial Statements 2023
Description of risk Management of risk Developments in year ended
29 April 2023 and since
Section in
Annual Report
Changing customer habits
There are opportunities for the Group to shape
its services and its interaction with its customers
in response to changes in customer habits such
as their working patterns and shopping. People
travel on the Group’s bus and tram services for
a variety of reasons, including in some cases,
to get to and from work and/or to get to and
from shopping locations.
Changes in people’s working patterns, shopping
habits and/or other preferences could affect
demand for the Group’s transport services,
which could in turn affect the Group’s financial
performance and/or financial position.
For example, increases in the proportion of
working time that people spend at home, or in
the level of shopping undertaken online, could
affect demand for travel. A sustained reduction
in international travel may boost the appeal
of “staycations”, and increase demand for
our services.
It is likely that the longer term effects of
COVID-19 will accelerate trends of increased
home working, home shopping, telemedicine
and home schooling. To the extent the effects
of that on travel patterns are not offset by modal
shift to bus/tram, there will be a longer term
adverse effect on the Group’s revenue and
potentially its financial performance and/or
financial position.
The Group monitors trends in
revenue and journey numbers
across its businesses. In forecasting
future revenue and journey numbers,
including in respect of bids for new
contracts, the Group considers
research and evidence on changing
customer behaviour.
The Group will, from time to time,
vary its timetables, pricing, range of
ticket types and transport networks
in response to actual or anticipated
changes in demand.
• We have rolled out a major investment
in new Optibus software across our
operating companies, which helps
plan the bus networks of the future
to match the changes in how people
travel emerging from the COVID-19
pandemic. It will help deliver more
efficient timetables and rosters that
offer passengers both attractive
frequencies and reliability.
1.5.1 and 1.6
1. Strategic report (continued)
11
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Description of risk Management of risk Developments in year ended
29 April 2023 and since
Section in
Annual Report
Pension scheme funding
The Group participates in a number of
defined benefit pension schemes. There is
a risk that the reported net pension asset/
liability and/or the cash contributions required
to these schemes increases or decreases
due to changes in factors such as investment
performance, the rates used to discount
liabilities and life expectancies. Intervention by
regulators could also affect the contributions
required. Any increase in contributions will
reduce the Group’s cash flows. Any significant
increase in pension liabilities could affect the
Group’s credit ratings.
Decisions on pension scheme
funding, asset allocation and benefit
promises are taken by management
and/or pension scheme trustees in
consultation with trade unions and
suitably qualified advisors.
The Board oversees the Group’s overall
pensions strategy and participates in
major decisions on the funding and
design of pension schemes.
• We saw a substantial strengthening of
our pensions position during the year,
as we made excellent progress on
de-risking our pension schemes. At
29 April 2023, our net pre-deferred
tax pension assets were £195.9m, a
£214.9m improvement over the year.
• The Stagecoach Group Pension
Scheme is the Group’s largest defined
benefit pension scheme exposure
comprising almost 90% of the total
retirement benefit obligations. During
the year, the Trustees took advantage
of the exceptional rise in gilt yields to
transition from its equity and multi-asset
led growth strategy to a liability-driven
investment (“LDI”) strategy, locking in
an overall funding surplus with hedging
ratios achieved of 96 – 97% of interest
and inflation liabilities.
• To update and to align to its new
investment and funding strategies,
the Scheme undertook an out-of-cycle
valuation as at 31 October 2022. This
showed a funding surplus of £87.3m,
being a further improvement on the
30 September 2021 out-of-cycle
valuation surplus of £48.7m. At the
balance sheet date, taking the various
sections in aggregate, the Scheme was
fully funded at around 106% against its
long term self-sufficiency target using a
gilts plus 0.5% discount rate.
• As a result of the improved funding and
hedged positions, the Scheme Trustees
and employers agreed amendments
to the long term Funding Agreement
providing for the employers to make
deficit payments to the Scheme of
£4.4m spread over 12 months from
1 May 2023. Further to this the
employers have agreed in principle to
make payments into an escrow account
of £4.1m for each of FY2024/25 and
FY2025/26, to be used to underpin the
funding position of the Scheme through
to April 2031, when the escrow funds
may be released back to the employers
or paid into the Scheme depending on
its funding position.
1.3, 1.5.10.2
Insurance and claims environment
The Group receives claims in respect of traffic
incidents and employee claims. The Group
protects itself against the cost of such claims
through third party insurance policies. An
element of the claims is not insured as a
result of deductibles (“excess”) and loss
corridors on insurance policies.
There is a risk that the number or magnitude of
claims are not as expected and that the cost to
the Group of settling these claims is significantly
higher or lower than expected. There is also
a risk of fines and other regulatory action
in relation to incidents.
The Group has a proactive culture
that puts health and safety at the top
of its agenda and this helps mitigate
the potential for claims arising. Where
claims do arise, they are managed
by dedicated insurance and claims
specialists in order to minimise the cost
to the Group. Where appropriate, legal
advice is obtained from appropriately
qualified advisors. The balance
between insured and retained risks
is re-evaluated at least once a year
and insurance and claims activity is
monitored closely.
• The Group continues to retain some
of the risks associated with the US
insurance and claims arrangements
that were in place prior to the disposal
of its US business in April 2019 through
its exposure to letters of credit and
guarantees being left in place in respect
of current insurance policies for up to
five years post-disposal. The quantum
of the risk continues to reduce as the
US business settles claims.
1. Strategic report (continued)
12
Stagecoach Group
Annual Report and Financial Statements 2023
Description of risk Management of risk Developments in year ended
29 April 2023 and since
Section in
Annual Report
Climate change
We see public transport as a critical part of the
battle against climate change. At the same time,
we recognise that climate change presents a
number of risks to the Group.
Section 1.7.2.4.1 of this Annual Report sets
out in more detail our assessment of climate
change risks.
Section 1.7.2.5.2 of this Annual Report
sets out how we are managing climate
change risks.
• We see the transition of our bus fleet to
zero emission vehicles, and the related
activities, as the principal measures we
are taking to reduce carbon emissions.
This requires collaboration between
operators and government, and we
are pleased to have utilised the Zero
Emission Buses Regional Areas
(“ZEBRA”) scheme in England and the
Zero Emission Bus Challenge Fund
(“ScotZEB”) in Scotland to support
investment new zero emission buses.
• Section 1.7.2 more broadly sets out the
impact of the Group’s business on the
environment, our environmental policy,
actions we are taking to reduce our
impact on the environment and the
effectiveness of our environmental
policies.
• There has been a continued increase in
the impact and occurrence of extreme
weather events, including floods and
wildfires, which increases the risk that
we incur additional costs or experience
service disruption to our services.
1.7. 2
1. Strategic report (continued)
13
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Description of risk Management of risk Developments in year ended
29 April 2023 and since
Section in
Annual Report
Regulatory changes and availability of public funding
Public transport is subject to varying degrees
of regulation across the locations in which the
Group operates. There is a risk that changes
to the regulatory environment could impact
the Group’s prospects. There remains a
possibility that some bus services in the UK
outside London become subject to franchising
(whereby a government body specifies the
bus services and puts them out to tender)
compared to the current model where
commercial bus operators are free to
design and operate their own services.
Similarly, many of the Group’s businesses
benefit from Government investment in bus and
tram services, including grants, tax rebates, the
provision of equipment, contracted services and
concessionary travel schemes for passengers.
There is a risk that the availability of government
finances changes due to political, regulatory or
other reasons.
In the year ended 29 April 2023, the UK Bus
(regional operations) earned £56.7m of bus
operating grants. Those operations also
earned £126.5m in tender/school revenue and
£268.5m in concessionary revenue from local
government bodies. Also, the vast majority of
the reported revenue of the UK Bus (London
operations) is earned from contracts with
Transport for London.
The Group is also receiving significant payments
from government to support the recovery of
public transport services following the impact
of the COVID-19 situation. There is a risk that
the extent of the payments available to the
Group reduces faster than improvements
in the underlying financial performance of
its businesses. That could adversely affect
the Group’s financial performance and
financial position.
There is a risk that government policy
decisions to improve air quality and/or lessen
road congestion result in increased capital
expenditure and/or operating costs for the
Group and that such additional costs are not
fully offset by increased revenue.
There is also a risk that the Group suffers
financial or reputational damage as a result
of non-compliance with laws or regulations
or as a result of the Group having a different
interpretation of laws or regulations from others.
In addition, in the case of tax, there is a risk the
Group suffers reputational damage because of
how others perceive the Group’s approach to a
tax matter even where the Group has complied
with the applicable laws and regulations.
Management, including at a senior
level, has been closely engaged with
government and industry colleagues
throughout the COVID-19 pandemic
and beyond. Engagement has focused
on ensuring the health and wellbeing of
our people and customers, determining
the appropriate level of services to
operate, and discussing the level of
payments from government for those
services.
Management closely monitors relevant
proposals for changes in the regulatory
environment and communicates the
Group’s views to key decision makers
and bodies. The Group actively
participates in trade bodies and
government forums.
The Group seeks to maintain good,
cooperative relationships with all levels
of government, by developing and
promoting ideas that offer cost effective
ways of improving public transport.
Where regulatory changes are known
or reasonably likely, the Group develops
plans to seek to mitigate any adverse
effects on it, but also capitalise on
potential growth opportunities.
The Group uses internal and/or
external experts to advise it on
compliance and management in
specialist areas such as tax and
transport law.
• The Group has received COVID-19
related payments from government for
periods since mid-March 2020, which
has enabled the continuation of transport
services as customer demand has
continued to recover. We have received
Bus Recovery Grant (“BRG”) support for
local bus services in England throughout
the year, whereby funding was allocated
to operators with reference to revenue
and mileage operated. The Department
for Transport has announced that further
funding will be available for bus services
in England until 2025.
• The COVID-19 Support Grant Restart
(“CSG”) payments for continuing bus
services in Scotland ended on 31 March
2023.
• In Wales, a voluntary partnership
arrangement, Bus Emergency Scheme
3 (“BES 3”), runs until July 2023. A
successor scheme, Bus Transition
Fund, will run until March 2024 to
support continuing bus services.
• We have worked closely with local
transport authorities to help shape Bus
Service Improvement Plans (“BSIPs”)
submitted to the Department for
Transport in October 2021 as part of
the National Bus Strategy for England.
The BSIPs include initiatives to deliver
better services and grow bus use, and
envisage local transport authorities either
entering into enhanced partnerships
with operators or pursuing franchising
schemes. While this additional funding
has the potential to reverse the long-term
decline in passenger volumes, there is
a risk that franchising of bus services or
new partnership working could adversely
affect the revenue and profit of the
Group’s existing bus businesses in
England (outside London). Equally,
we recognise that franchising also
presents us with opportunities
for growth.
• The Mayor of Greater Manchester
decided in March 2021 to proceed with
plans for a bus franchising scheme in
the region. We have participated in the
tenders for the first two tranches of
Manchester bus franchises, and were
delighted to be informed in June 2023
that we have been successful in our bids
for the Middleton, Oldham and Queens
Road depots, which will commence in
March 2024. Other parts of the country
that are actively considering proposals
for bus franchising, include North
East England, Yorkshire, Merseyside
and Wales.
1. Strategic report (continued)
14
Stagecoach Group
Annual Report and Financial Statements 2023
Description of risk Management of risk Developments in year ended
29 April 2023 and since
Section in
Annual Report
People and culture
There is a risk that the Group is unable to
attract, develop and retain an appropriately
skilled, diverse and responsible workforce
and leadership team, and maintain a
healthy business culture which encourages
and supports ethical behaviours and
decision making.
As explained in section 1.7.6 of
this Annual Report, we have clear,
established corporate values, which
are set out in our Code of Conduct.
We value an open, transparent and
safe working environment where our
people feel able to speak up and can
raise serious concerns constructively
without fear of victimisation, subsequent
discrimination or disadvantage. Our
whistleblowing policy and guide helps
employees understand their rights and
responsibilities. It sets out how the
Group will investigate any concerns
raised and the action it may take.
We have employment policies in place
as described in section 1.7.3.2 of this
Annual Report. Employees’ roles and
responsibilities are defined and we aim
to reward employee contributions
through fair pay and benefits.
We recognise the value and benefit
of having an inclusive and diverse
workforce, as further explained in
section 1.7.4 of this Annual Report.
Training, development and succession
planning arrangements are in place,
which take account of the potential
future skills that the business may
require.
The Board monitors the Group’s
culture, including through, the results
of staff surveys, reports from the Risk
Assurance function, reports of any
employee fraud and reports from the
whistleblowing process.
• Following the marked increase in driver
turnover during the previous year,
we reviewed our recruitment strategy
during the year ended 29 April 2023
to increase attraction and reach
through digital marketing campaigns
to support improvement of the diversity
of frontline employees.
• Improvements have been made to the
Workday recruitment system to provide
a quicker and more user friendly
candidate application and provide
greater insights on source of application.
to inform future advertising decisions.
• We have a targeted campaign to
ensure high diversity and gender split
of new starts on Stagecoach Graduate
programme 2023.
• Our sustainability strategy includes
goals and targets around workforce
diversity, training and development,
internal succession, employee wellbeing
and recruitment.
1.4.1, 1.7.3,
1.7.4 a n d 1.7.6
Disease
There is a risk that demand for the Group’s
services could be adversely affected by a
significant outbreak of disease. Such a fall in
demand would have a negative impact on the
Group’s revenue and financial performance.
This was identified by the Board as a principal
risk some years ago but the COVID-19 situation
was a clear and substantial crystallisation of
the risk.
The Group has plans in place to
respond to any significant outbreak
of disease. As a result, it was able to
respond swiftly and decisively to the
COVID-19 situation.
• No significant matters to report.
Information security
There is a risk that confidential and/or
commercially sensitive information relating
to and/or held by the Group is subject
to unauthorised access, use, disclosure,
modification, perusal, recording or destruction.
There is also a risk that the Group’s information
and/or systems are subject to disruption,
corruption or failure due to security breaches.
An Information Security Board
oversees the management of
information security risks, and takes
appropriate advice from suitably
experienced third party consultants
and internal experts.
Investment is made in appropriate
policies, people and technology to
reduce the severity and likelihood of
information security risks crystallising.
• We have assessed our information
security maturity against the NIST Cyber
Security Framework, and increased the
number of security domains assessed,
as we make continued improvements in
this area.
1. Strategic report (continued)
15
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Description of risk Management of risk Developments in year ended
29 April 2023 and since
Section in
Annual Report
Information technology
The Group is reliant on information technology
for sales, operations and back office functions.
Information technology failures or interruptions
could adversely affect the Group.
An increasing proportion of the Group’s sales
are made digitally. There is a risk that the
Group’s capability to make sales digitally either
fails or cannot meet levels of demand and the
time taken to implement restorative actions is
unacceptably long due to insufficient resource
being available and/or over reliance on a small
number of service providers. This risk could
result in significant levels of lost revenue.
The Group is continually investing
in its information technology systems,
people and suppliers to ensure
the robustness of its information
technology. It is developing new
digital platforms and continues to
look to ensure that it secures reliable
service provision.
• We continue to make targeted
investment in fleet and technology
enhancements, and were pleased
to introduce a new asset management
systems for our engineering and fleet
activities during the year.
Competition
Loss of business to existing competitors or new
entrants to the markets in which we operate
could have a significant impact on our business.
We face competition for customers not only from
other operators of trams, coaches and buses but
also from other modes of transport. The Group
regards its primary competitor as the private car
and aims to encourage modal shift from car to
public transport.
Developments in new technology and/or new
business models could affect the competitive
environment in which the Group operates.
Technological developments could enable
new competitors and/or business models
to be developed that disrupt or compete with
the Group’s business.
Section 1.4.3 of this Annual Report includes
comments on competition in the context of
each of the Group’s key segments.
We monitor competitive developments
in each of our markets and respond as
appropriate. That includes monitoring
developments in technology and
business models that could affect
the competitive landscape.
We work with local authorities,
including passenger transport
executives and regional transport
committees, in the delivery and
planning of bus and tram services.
• Private car usage has recovered
more quickly than public transport
as the country recovers from the
pandemic. We believe this is partly
attributable to the messaging during
the pandemic to discourage use of
public transport. Over the longer term,
we believe there is an opportunity to
stimulate modal shift from car to public
transport over time, through public
policy initiatives, like the National Bus
Strategy for England.
Details of the Group’s treasury risks are discussed in note 23 to the consolidated financial statements, and include the risk to operating costs arising from
movements in fuel prices.
1.4.6 How we measure our performance (key performance indicators)
The Group uses a wide range of key performance indicators (“KPIs”) across its various businesses and at a Group level to measure the Group’s progress
in achieving its objectives. The most important of these KPIs at a Group level focus on five key areas:
• Profitability
• Organic growth
• Safety
• Service delivery
• Carbon saved by modal shift
KPI 1 – profitability
The overall strategy of the Group is intended to promote the success of the Group and create long-term value to shareholders. In the shorter term, we measure
progress towards this overall aspiration by monitoring Earnings before Interest, Tax, Depreciation and Amortisation before separately disclosed items.
KPI 2 – organic growth
To create long-term value, we aim to deliver organic growth in revenue. We measure progress on this by segment, looking at like-for-like growth in passenger
volumes and/or revenue as we consider most appropriate for the particular business.
KPIs 3 and 4 – safety and service delivery
To deliver organic growth in revenue, we aim to provide safe and reliable transport services that people want to use. We measure safety and service delivery
using a range of measures appropriate for each business.
Further details on how we calculate these key performance indicators, our targets and our recent performance is summarised below.
KPI 5 – carbon saved by modal shift
The Board uses a number of metrics in respect of climate change matters. We view carbon saved by modal shift as a key metric because it captures not
only the direct emissions from our operations, but also the emissions saved from replacing car journeys with public transport. Details of the metrics we use
to manage relevant climate-related risks and opportunities are set out in section 1.7.2.6 of this Annual Report.
1. Strategic report (continued)
16
Stagecoach Group
Annual Report and Financial Statements 2023
Profitability
Earnings before Interest, Tax, Depreciation and Amortisation, before separately disclosed items (“Adjusted EBITDA”) is used to measure the profitability of the
Group for the year.
Adjusted EBITDA was as follows:
Year ended
29 April 2023
£m
Year ended
(restated)
30 April 2022
Year ended
1 May 2021
Adjusted EBITDA 190.3 183.9 166.7
Sections 1.3 and 1.5 of this Annual Report include comments on the development of the Group’s profitability.
Organic growth
The following measures of organic growth are monitored:
• UK Bus (regional operations) – growth in passenger journeys measured as the percentage increase in the number of passenger journeys relative to
the equivalent period in the previous year.
• UK Bus (London) – growth in revenue measured as the percentage increase in revenue relative to the equivalent period in the previous year.
The measures vary by business reflecting differences in the underlying businesses – for example, almost all of the revenue in UK Bus (London) is not
determined on a “per passenger” basis.
Throughout this Annual Report, references to passenger volume growth mean growth determined on the basis set out here. Passenger journey metrics
reported involve a degree of estimation. All of the organic growth KPIs are normalised to exclude businesses that have not been held by the Group for the
whole of the relevant year and the preceding year. The growth figures are also normalised for differences in the number of days in each year.
Target
Year ended
29 April 2023
Growth %
Year ended
30 April 2022
Growth %
Year ended
1 May 2021
Growth %
UK Bus (regional operations) like-for-like passenger journeys growth
Positive
growth
each year
17.3% 79.9% (58.0)%
UK Bus (London) like-for-like revenue growth 1.3% 4.2% 8.3%
We have continued to see a recovery in passenger demand across our UK Bus (regional operations) during the year ended 29 April 2023. The higher growth
in passenger journeys in the year ended 30 April 2022 reflected the impact of the easing of COVID-19 restrictions across the UK.
The significant increase in UK Bus (London) revenue in the years ended 30 April 2022 and 1 May 2021 principally reflects the commencement of new
contracts won in the prior years. In addition, the revenue growth in the year ended 1 May 2021 is boosted from operating a full service from the early part of
that year, having made temporary reductions in collaboration with Transport for London at the outset of the pandemic. Revenue for the year ended 29 April
2023 has been suppressed in London due to the impact of higher contractual penalties and lower quality incentive income, which is attributable to the
operating challenges arising from staff shortages.
Safety
Safety is monitored in various ways, including through a range of KPIs. Businesses acquired or disposed of in the year are excluded from the safety KPIs.
Two of the more important safety KPIs are reported below:
Target
Year ended
29 April 2023
Year ended
30 April 2022
Year ended
1 May 2021
UK Bus (regional operations) – number of avoidable accidents per 1 million miles
travelled
To decrease
each year –
ultimate target
is zero
32.0 26.5 16.7
UK Bus (London) – number of avoidable accidents per 1 million miles travelled 41.9 42.5 3 4.1
We believe the low levels of avoidable accidents across both our UK Bus (regional operations) and UK Bus (London) businesses in the year ended 1 May 2021
principally reflects the impact of COVID-19, due to a decrease in private road vehicle usage, reflecting government restrictions around non-essential travel.
Accordingly, we had expected increases in the number of avoidable accidents across all our businesses, as traffic levels and passenger journeys on our
services increased as we recovered from the pandemic. The level of avoidable accidents across our UK Bus (regional bus) business is higher than we
experienced pre-COVID, and we believe that is partly attributable to increased levels of staff turnover, with driver inexperience being a leading cause of minor
property-related incidents. In addition, we consider heightened traffic congestion is another factor which is driving the increase in reported accidents.
Service delivery
Our measures of service delivery include reliability measured as the percentage of planned vehicle miles to be operated that were operated.
Service delivery KPIs are not reported for businesses acquired or disposed of in the year.
The service delivery KPIs were as follows:
Target
Year ended
29 April 2023
%
Year ended
30 April 2022
%
Year ended
1 May 2021
%
UK Bus (regional operations) reliability >99.0% 96.9% 97. 5% 99.7%
UK Bus (London) reliability >99.0% 97.7% 98.5% 99.2%
During the year ended 29 April 2023, operational reliability across the business has been adversely impacted by staff shortages, resulting in higher lost mileage
than we would typically expect in our business. The improved operational reliability in the year ended 1 May 2021 reflects the reduced disruption to bus services
due to less traffic congestion during the COVID-19 pandemic and increased vehicle availability whilst lower levels of vehicle mileage were being operated.
1. Strategic report (continued)
17
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
1.5 Financial review
1.5.1 UK Bus (regional operations)
Summary
• Strong growth in revenue and operating profit reflecting recovering customer demand and payments from government for continuing bus services
• Operationally challenging period with lost mileage arising from staff shortages
• Positive long-term outlook for the business
Financial performance
The financial performance of the UK Bus (regional operations) for the year ended 29 April 2023 is summarised below:
2023
£m
2022
£m Change
Revenue 1,029.9 892.2 15.4%
Like-for-like revenue* 1,018.8 87 7.1 16.2%
Operating profit* 77.0 57.9 33.0%
Operating margin* 7.5% 6.5% 100bp
* See definitions in note 32 to the consolidated financial statements – segment operating profit and operating margin excludes separately disclosed items.
We have been pleased with the recovery in passenger demand for our services, which has contributed to the rise in operating profit from the prior year. We
continue to see journeys by fare-paying passengers currently recovering faster than concessionary journeys, supported by government initiatives such as the
£2 fare cap schemes. We continue to progress a number of ticketing initiatives to reflect the changes we are seeing in travel patterns.
It has been an operationally challenging year for the business, with staff shortages resulting in planned reductions in our services and unplanned cancellations
of services. Staff shortages are being seen across the economy, and combined with higher inflation, is feeding higher pay demands. We have selectively
increased fares to reflect increased costs, while aiming to take a balanced approach that recognises the cost of living pressures on many of our customers.
The operating profit for the year includes £87.1m of COVID-related bus support scheme grant income from governments (2022: £108.3m). We have continued
to benefit from the financial commitments made by governments across the UK to secure the continuity of bus services while passenger volumes recover, and
we welcome the recently announced two-year funding settlement for operators in England, which provides increased certainty in planning our services.
Like-for-like vehicle miles operated in the year were 6.2% lower than the prior year, reflecting adjustments to our network to take account of customer demand
and staff shortages. Like-for-like revenue per vehicle mile increased 23.9% and like-for-like revenue per journey reduced 1.0%. The increase in revenue per
mile reflects the COVID-related increase in year-on-year revenue despite the year-on-year decrease in vehicle mileage. The reduction in revenue per journey is
largely attributable to the rise in concessionary journey numbers not being matched by an equivalent increase in concessionary revenue, recognising that prior
year concessionary revenue payments were maintained at close to pre-COVID revenue rates despite the substantially lower concessionary journey numbers
in the prior year.
Like-for-like revenue was built up as follows:
2023
£m
2022
£m Change
Commercial on and off bus revenue 555.7 472.7 17.6%
Concessionary revenue 268.5 248.5 8.0%
Commercial & concessionary revenue 824.2 721.2 14.3%
Tendered and school revenue 126.5 110.7 14.3%
Contract and other revenue 68.1 45.2 50.7%
Like-for-like revenue 1,018.8 87 7.1 16.2%
The year-on-year recovery in passenger demand for our bus services is reflected in the growth in commercial revenue.
As expected, having generally maintained concessionary revenue payments at closer to pre-COVID levels during the pandemic, public authorities have been
reducing their concessionary revenue payments during the period to better reflect the reductions in concessionary patronage. This reduction in concessionary
revenue has been more than offset by revenue received from the Department for Transport and combined authorities in respect of £2 fare cap schemes, in
addition to the introduction of the under-22 free bus travel scheme in Scotland, which has seen strong growth in travel by young people.
The substantial increase in tendered and school revenue reflects some previously commercial services being converted to tendered services, in addition to
a continuation of the effects of operators exiting the market and growth in demand responsive transport (“DRT”) contracts.
The principal reasons for the increase in contract and other revenue from the prior year are the work undertaken for the 2022 Commonwealth Games and
contracted coach services for the Scottish Citylink Coaches Limited joint venture, in respect of megabus services in England and Wales.
Outlook
We will continue to work collaboratively with national and local governments across the country to re-shape local bus networks to reflect new travel patterns.
Although we see ongoing forecasting uncertainty in relation to passenger demand and cost inflation, we currently forecast continued good regional bus
profitability for the year ahead, as we return to a more commercial model for regional bus services. We are delighted with our recent wins in the Manchester
franchising market and look forward to commencing these new contracts in March 2024.
We continue to see positive long-term prospects for the business, and believe the current economic environment is helping to demonstrate the good value of
our public transport services and encourage modal shift away from the car.
1. Strategic report (continued)
18
Stagecoach Group
Annual Report and Financial Statements 2023
1.5.2 UK Bus (London)
Summary
• Short-term financial performance challenging arising from impact of staff shortages
• Significant expansion with acquisitions from Kelsian Group and HCT Group
Financial performance
The financial performance of UK Bus (London) for the year ended 29 April 2023 is summarised below:
2023
£m
2022
£m Change
Revenue 327. 5 272.6 20.1%
Like-for-like revenue 276.1 272.6 1.3%
Operating profit 0.4 20.7 (9 8 .1)%
Operating margin 0.1% 7.6% (750)bp
The financial performance of our London business has been disappointing. The significant reduction in profit reflects the operational challenges experienced
during the year due to the effects of upward wage pressure and increased staff turnover and staff shortages. The impact of lost mileage has resulted in
significant contractual penalties and lost quality incentive income. We expect profitability to improve as we address labour market challenges, benefit from
lagged inflationary increases in contract revenues and seek to re-price contracts as they are tendered.
Our tender results during the year have been satisfactory, and we continuously review our bid models, contract pricing and cost efficiency to identify opportunities
to further improve our performance on tenders for Transport for London contracts. We will continue to tender at contract prices that reflect our revised cost base
and are designed to deliver financial returns that reflect the capital investment required.
We have significantly expanded our operations in London with the acquisition of bus operations previously operated by Kelsian Group and HCT Group, growing
our business by around 950 employees and more than 300 buses. The consolidated financial statements reflect the provisional acquisition accounting for the
acquired businesses, including the recognition of onerous contract provisions for loss-making Transport for London contracts assumed by the Group as part of
the transactions. However, we forecast cost synergies from integrating the acquired businesses and expect them to boost our long-term London bus profitability.
Further detail on the acquisitions is provided in note 9 to the consolidated financial statements.
Outlook
We expect a modest improvement in financial performance in the year ending 27 April 2024, with the benefit from higher inflation indexation of contract revenue.
We believe the business will recover its profitability over the medium-term, and we see good prospects for growth from the integration of our recent acquisitions.
1.5.3 UK Rail
Summary
• Continuing positive progress on unwinding our former train operating companies
• Strong recovery in passenger demand at Sheffield Supertram
Financial performance
The financial performance of UK Rail for the year ended 29 April 2023 is summarised below:
2023
£m
2022
£m Change
Revenue 15.2 11.7 29.9%
Like-for-like revenue 14.9 11.3 31.9%
Operating profit 4.4 0.2
The like-for-like revenue is in respect of the ongoing Sheffield Supertram business, with the year-on-year increase principally reflecting the recovery in
passenger demand as COVID-related restrictions have been eased.
The operating profit for the year reflects further positive progress in concluding matters in relation to our former rail franchises.
Outlook
In October 2022, South Yorkshire Mayoral Combined Authority decided to transition the Supertram system in Sheffield to a publicly owned operator when
the Group’s concession ends in 2024. We are proud of the service we have delivered over the past 25 years and will continue to work hard to deliver a safe,
high quality and professional service to our customers, meet our obligations and ensure a smooth transition to the new operator. We continue to hold an
onerous contract provision for the estimated net costs of fulfilling our contractual obligation. The business is anticipated to incur losses in fulfilling its contractual
obligations over the remaining period of its concession to March 2024, reflecting the withdrawal of COVD-19 related grant funding in the second half of last year.
Our commercial and business development team continues to explore, and bid for, new opportunities in the UK. We will continue to balance the costs of those
business development activities with our assessment of the prospective risk-reward of the available opportunities.
1. Strategic report (continued)
19
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
1.5.4 Adjusted EBITDA, depreciation and intangible asset amortisation
Earnings before interest, taxation, depreciation, software amortisation and separately disclosed items (“adjusted EBITDA”) increased to £190.3m (2022
restated: £183.9m). Adjusted EBITDA can be reconciled to the financial statements as follows:
2023
£m
2022
(restated – see
note 1(b))
£m
Total operating profit 47.5 82.8
Separately disclosed items 30.3 (10.0)
Software amortisation 1.0 1.4
Depreciation 106.9 104.9
Impairment losses 3.3 4.4
Add back joint venture finance income & tax 1.3 0.4
Adjusted EBITDA 190.3 183.9
The year-on-year increase in adjusted EBITDA principally reflects the recovery in passenger demand for public transport in response to the easing of
COVID-19 restrictions, partially offset by reduced profitability in London due to the impact of staff shortages.
Depreciation and software amortisation of £107.9m is higher than the £106.3m for the prior year, and principally reflects the increase in capital expenditure,
following a period of constrained investment during the COVID-19 pandemic.
1.5.5 Separately disclosed items
The Directors believe that there are certain items that we should separately disclose to help explain the consolidated results. We summarise those “separately
disclosed items” in note 4 to the consolidated financial statements and further explain them below.
Reassessment of onerous contract provision
As at 1 May 2021, an onerous contract provision of £13.3m was held in respect of the Sheffield Supertram concession.
In estimating that onerous contract provision, COVID-related payments to the Group’s Sheffield Supertram business from the Department for Transport and
South Yorkshire Combined Mayoral Authority were only taken account of to the extent they were confirmed on or prior to the applicable balance sheet date.
We have re-assessed the amount of the onerous contract provision as at 29 April 2023, taking account of the further COVID-related payments and other
developments that affect the estimated net cost of fulfilling the contractual obligations. That re-assessment resulted in a £0.9m increase (2022: £5.3m
reduction) in the level of the provision, with the reduction, as well as the £1.9m (2022: operating loss £1.6m) of Sheffield Supertram’s other operating profit
in the year, credited to the consolidated income statement for the year ended 29 April 2023 and presented as a separately disclosed item.
Transaction costs
The Group has recorded expenses of £18.2m, predominantly professional fees, accelerated shared based payment expenses (see below) and accelerated
management incentives, in relation to the offer from DWS Infrastructure and the lapsed all-share combination with National Express Group plc (2022: £8.6m).
Due to the non-recurring nature of the expenses, the Directors consider that it is helpful for understanding the Group’s financial performance to disclose
separately the expenses incurred.
Acquisition costs
£0.2m (2022: £Nil) of costs incurred in connection with the acquisition of two London bus businesses in the year ended 29 April 2023 have been presented
as a separately disclosed item, because the costs are not related to the ongoing trading of the Group and due to the irregularity of business acquisitions.
Restructuring and associated costs
Following the acquisition of the Group during the year a detailed review of the Group’s structure and operations was undertaken. This included the use of an
external consultancy agency along with the management experience of the new owner. The Group expects to implement the remaining actions arising from
that review during the year ending 27 April 2024.
In the year ended 29 April 2023 the Group incurred redundancy and related costs of £9.5m and management and external consultancy costs of £1.7m.
Expired rail franchises
As part of concluding matters in relation to its former involvement in the UK train operating market, the Group has recorded a separately disclosed loss of
£2.3m in the year ended 29 April 2023 (2022: £7.0m gain). The loss is presented as a separately disclosed item as it relates to costs that were previously
recorded as separately disclosed items.
Disposal of megabus retail and Falcon
In August 2022, the Group disposed of the following businesses to its joint venture, Scottish Citylink Coaches Limited:
• the megabus retail platform and customer-service business, which sells and markets inter-city coach services in England and Wales
• Falcon South-West, which retails tickets for the coach route between Plymouth and Bristol Airport.
We have assessed the assets transferred to Scottish Citylink Coaches and consider them to constitute a business as defined in International Financial
Reporting Standard 3 (“IFRS 3”), Business Combinations. The carrying value of the Group’s interest in Scottish Citylink has been increased by the cost of the
additional investment, being the estimated fair value of the business transferred to Scottish Citylink. The gain resulting from the sale of the business to Scottish
Citylink has been recognised in full in the year ended 29 April 2023 and has not been restricted to the extent of the other investor’s interest in the joint venture.
The consideration received in respect of the disposal was an increase in the Group’s share of Scottish Citylink Coaches Limited, from 35% to 37.5%, which has
resulted in a gain on disposal of £1.5m being recognised during the year ended 29 April 2023. Due to the irregular occurrence of business disposals, the Directors
consider that it is helpful for understanding the Group’s financial performance to disclose separately the gain realised in respect of the business disposal.
1. Strategic report (continued)
20
Stagecoach Group
Annual Report and Financial Statements 2023
Change in fair value of Deferred Payment Instrument
We received a Deferred Payment Instrument as deferred consideration for the sale of the North American business in April 2019. The instrument, which
is accounted for as fair value through profit or loss, has a maturity date of October 2024 and due to credit and other recoverability risks associated with the
instrument, its carrying value is at a discount to its face value. The Group’s exposure to the purchaser of the North American business ranks behind all of
the secured lenders. The carrying value of the instrument was £2.9m as at 30 April 2022. At 29 April 2023, the carrying value of the instrument was estimated
to be £3.5m, resulting in a gain of £0.6m being recognised as finance income in the year ended 29 April 2023, compared to a gain of £1.0m recognised as
finance income in the year ended 30 April 2022.
Tax
The separately disclosed taxation credit of £4.1m (2022 restated: charge of £16.1m) in relation to the taxation effect of the pre-tax separately disclosed items.
1.5.6 Net finance costs
Net finance costs, excluding separately disclosed items, for the year ended 29 April 2023 were £22.1m (2022: £28.6m) and can be further analysed as follows:
2023
£m
2022
£m
Finance costs
Interest payable and other facility costs on bank loans, loan notes, overdrafts and trade finance 1.5 1.4
Lease interest payable 3.7 2.5
Interest payable and other finance costs on bonds 16.8 16.9
Interest payable on Covid Corporate Financing Facility commercial paper – 1.6
Effect of interest rate swaps 3.5 0.3
Unwinding of discount on provisions 1.9 1.2
Interest charge on defined benefit pension schemes – 5.4
27.4 29.3
Finance income
Interest income on defined benefit pension schemes (0.2) –
Interest receivable on cash and money market deposits (5.1) (0.7)
(5.3) (0.7)
Net finance costs, excluding separately disclosed items (“adjusted net finance costs”) 22 .1 28.6
The decrease in adjusted net finance costs is principally due to the lower pensions finance charges arising from the prior year reduction in net pension liabilities.
1.5.7 Taxation
Our share of profit from joint ventures is reported after tax in arriving at the profit before tax in the consolidated income statement. To better understand the
Group’s effective tax rate, we show below the Group’s tax charge, including our share of joint ventures’ tax, relative to the Group’s profit before tax excluding
joint ventures’ tax. On that basis, the effective tax rate for the year ended 29 April 2023, excluding separately disclosed items, was 14.4% (2022: 13.3%).
The tax charge on profit can be analysed as follows:
Year ended 29 April 2023
Pre-tax profit
£m
Tax
£m
Rate
%
Excluding separately disclosed items 57.0 (8.2) 14.4%
Separately disclosed items (29.7) 4.1
With joint venture taxation gross 27. 3 (4.1)
Reclassify joint venture taxation for reporting purposes (1.3) 1.3
Reported in income statement 26.0 (2.8)
The effective tax rate on profit, excluding separately disclosed items, of 14.4% is lower than the 19.5% rate of UK corporation tax for the year, principally due
to tax relief for pension contributions where pension schemes are in surplus (and no corresponding deferred tax is recognised) and the benefit of current year
tax losses which will be realised at 25% in the future (rather than the current rate of 19.5%).
The cash tax paid in the year of £6.6m (2022: £6.4m) compares to the tax charge for Group companies of £2.8m. The difference of £3.8m principally relates to
net fuel hedge gains on fuel derivatives over 2022 and 2023 which impact cash tax paid but not tax charge.
The separately disclosed tax credit of £4.1m (2022 restated: charge of £16.1m) is explained in section 1.5.5.
Taking account of the increase in the rate of UK corporation tax to 25%, which was effective from 1 April 2023, assuming there are no changes to tax laws in
the UK and assuming that the composition of the Group remains broadly unchanged, we expect the Group’s effective tax rate (excluding separately disclosed
items) to be around 24% to 26% going forward.
1.5.8 Cash flows and net debt
Consolidated net debt (as analysed in note 27(c) to the consolidated financial statements) has increased slightly from 30 April 2022. During the year ended
29 April 2023, net debt increased by £10.3m from £230.8m (restated) to £241.1m and net debt plus net train operating company liabilities reduced by £5.2m
from £271.0m (restated) to £265.8m. We recognise that the negative underlying cash flow largely reflects the recommencement of dividend payments that
were previously paused and an increase in this year’s capital expenditure following a period of constraint during the COVID-19 period.
We anticipate increasing capital expenditure in the year ending 27 April 2024, partly reflecting further investment in the transition to zero emission vehicles.
1. Strategic report (continued)
21
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
As at 29 April 2023, all of the major rail franchises previously operated by Group subsidiaries had ended. However, the settlement of the train operating company
assets, liabilities and contractual positions continues for some time following the end of the relevant franchises. As at 29 April 2023, the consolidated net assets
included net liabilities (excluding cash) of £24.7m (2022: £40.2m) in respect of such items. Accordingly, if all items were to be settled at their 29 April 2023 carrying
values, consolidated net debt would increase by £24.7m (2022: £40.2m). Consolidated net debt plus those outstanding train operating company net liabilities as at
29 April 2023 was £265.8m (2022: £271.0m restated).
Net cash from operating activities before tax for the year ended 29 April 2023 was £131.3m (2022 restated: £139.8m) and can be further analysed as follows:
2023
£m
2022
(restated – see
note 1(b))
£m
EBITDA of Group companies before separately disclosed items 183.4 18 0.1
Cash effect of current year separately disclosed items (16.7) (0.1)
Loss on disposal of property, plant and equipment 1.3 1.6
Capital grant amortisation (3.4) (1.5)
Loss on disposal of intangible assets 0.1 –
Share based payment movements 0.2 3.5
Working capital movements (14.0) (27. 2)
Net interest paid (22 .1) (19.5)
Dividends from joint ventures 2.5 2.9
Net cash flows from operating activities before taxation 131.3 139.8
The movement in net debt was:
Year ended 29 April 2023 £m
Net cash flows from operating activities before taxation 131.3
Tax paid (6.6)
Investing activities (86.7)
Financing activities (47.5 )
Other (0.8)
Movement in net debt (10.3)
Opening net debt (230.8)
Closing net debt (241.1)
Net cash flows from operating activities were slightly lower than the prior year principally due to the higher costs of separately disclosed items.
The £14.0m working capital outflow in the year ended 29 April 2023 is principally in relation to £12.5m additional pension contributions made in the year (see
above), and £10.7m recognised in relation to COVID-19 related payments from governments.
The net impact on net debt of purchases and disposals of property, plant and equipment (“net capital expenditure”), split by segment, was:
2023
£m
2022
£m
UK Bus (regional operations) 42.4 24.3
UK Bus (London) 34.0 14.1
Net capital expenditure 76.4 38.4
Net capital expenditure reconciles to the consolidated financial statements as follows:
2023
£m
2022
£m
Cash flow from:
– Purchase of property, plant and equipment 66.6 38.7
– Disposal of property, plant and equipment (4.4) (1.5)
– Capital grants received (19.8) (15.4)
Decrease in net debt from disposal (2022: partial disposal) of a lease (0.3) (2.4)
Increase in net debt from other new leases in year 13.5 19.0
Increase in net debt from leases acquired in business combinations 20.8 –
Net capital expenditure 76.4 38.4
In addition to the amounts shown in the table above, the impact of purchases of intangible assets was £2.9m (2022: £3.1m).
As we transition our bus fleet to zero emission vehicles, in line with our ambition of having a 100% zero emission bus fleet in the UK by 2035, we are mindful
of the additional up-front capital cost of zero emission buses (versus their diesel equivalents) as well as the potentially higher total cost of ownership.
We comment on this further in section 1.7.2.4.1.3 of this Annual Report.
1. Strategic report (continued)
22
Stagecoach Group
Annual Report and Financial Statements 2023
1.5.9 Financial position and liquidity
The Group is in a good financial position, as evidenced by:
• We have available liquidity of over £420m.
• We have comfortably complied with the covenants for the year ended 29 April 2023.
• The ratio of net debt at 29 April 2023 to adjusted EBITDA for the year ended 29 April 2023 was 1.3 times (2022: 1.2 times).
• Adjusted EBITDA for the year ended 29 April 2023 was 8.6 times (2022: 6.4 times) to adjusted net finance charges (including our share of joint venture
net finance income).
• Two major credit rating agencies – S&P and Moody’s – continue to assign investment grade credit ratings to the Group’s £400m bonds.
1.5.10 Year-end financial position of the Group
1.5.10.1 Net assets
Net assets as at 29 April 2023 were £497.8m (2022 restated: £402.1m).
The improvement in the net assets reflects the actuarial gains on defined benefit pension schemes, gains on cash flow hedges and the profit for the year
ended 29 April 2023.
1.5.10.2 Retirement benefits
The reported net assets of £497.8m (2022 restated: £402.1m) that are shown on the consolidated balance sheet are after taking account of net retirement
benefit assets, net of withholding tax payable on surpluses, of £195.9m (2022 restated: £19.0m retirement benefit liabilities), and associated deferred tax
assets of £3.5m (2022: £21.6m).
The Group recognised pre-tax actuarial gains of £269.3m in the year (2022 restated: £264.3m), net of withholding tax. The discount rate used to determine
pension scheme liabilities as at 29 April 2023 was 4.9%, which was an increase on the discount rate of 3.2% applied as at 30 April 2022.
The Stagecoach Group Pension Scheme is the Group’s largest defined benefit pension scheme exposure comprising almost 90% of the total retirement
benefit obligations. Following the change of ownership of the Company to a company managed by DWS Infrastructure, and based on a legally binding
agreement entered into between the Company and the Trustees, we expected employer funding contributions, in excess of salary related contributions, to
increase to £12.5m per annum, increasing at 3% per annum compound, for ten years or until the Scheme’s long-term funding objective is met, whichever is
earlier. During the year, the Trustees took advantage of the exceptional rise in gilt yields to transition from its equity and multi-asset led growth strategy to a
liability-driven investment (“LDI”) strategy, locking in an overall funding surplus with hedging ratios achieved of 96 – 97% of interest and inflation liabilities.
To update and to align to its new investment and funding strategies, the Scheme undertook an out-of-cycle valuation as at 31 October 2022. This showed a
funding surplus of £87.3m, being a further improvement on the 30 September 2021 out-of-cycle valuation surplus of £48.7m. At the balance sheet date, taking
the various sections in aggregate, the Scheme was fully funded at around 106% against its long term self-sufficiency target using a gilts plus 0.5% discount rate.
As a result of the improved funding and hedged positions, the Scheme Trustees and employers agreed amendments to the long term Funding Agreement
providing for the employers to make deficit payments to the Scheme of £4.4m spread over 12 months from 1 May 2023. Further to this the employers have
agreed in principle to make payments into an escrow account of £4.1m for each of the years to 3 May 2025 and 2 May 2026, to be used underpin the funding
position of the Scheme through to April 2031, when the escrow funds may be released back to the employers or paid into the scheme depending on the funding
position of the Scheme.
1.5.11 Dividend policy
In light of the Group’s substantial available liquidity and its strong recovery in financial performance and position, the Board has proposed and paid dividends
of £47.5m in respect of the year ended 29 April 2023.
The Board takes account of the Group performance, financial position and prospects when setting dividends. It does not have a prescribed formula for
determining each year’s dividends, other than the desire to maintain sufficient liquidity to fund available capital expenditure and growth opportunities, taking
into account expected cash flow from the business together with the ongoing commitment to seek to maintain an investment grade credit rating.
1.5.12 Treasury policies and objectives
Treasury risk management is carried out by a treasury committee and a central treasury department (together, “Group Treasury”) under policies approved by the
Board. Group Treasury identifies, evaluates and hedges financial risks in co-operation with the Group’s operating units. The Board provides written principles for
overall treasury risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative
financial instruments and investing excess liquidity.
The funding policy is to finance the Group through a mixture of bank and lease debt, capital markets issues and cash generated by the business.
1.5.13 Use of non-GAAP measures
Our consolidated financial statements are prepared in accordance with UK-adopted International Accounting Standards. In measuring our performance, the
financial measures that we use include those which have been derived from our reported results in order to eliminate factors which distort period-on-period
comparisons. These are considered non-GAAP financial measures, and include measures such as like-for-like revenue, adjusted EBITDA and net debt. We
believe this information, along with comparable GAAP measurements, is useful in providing a basis for measuring our financial performance. Note 32 to the
consolidated financial statements provides further information on these non-GAAP financial measures.
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1.6 Outlook
We remain positive on the long-term outlook for the Group. Public transport delivers the sustainable connectivity people need to access work, education,
healthcare, shopping, leisure, and meeting family and friends. As we transition towards a post-pandemic world, we are focused on further rebuilding profitability
and adapting our services to meet new and emerging travel patterns.
Whilst the next General Election may lead to some change in the detail of transport policy, there is broad cross-party support for the role that buses play in
delivering government objectives on social equity and inclusion, economic development and levelling-up, and in transport decarbonisation. We look forward to
playing a central role in delivering government ambitions around decarbonisation, levelling up of communities, driving economic recovery, and securing better
health outcomes for citizens.
While there remains some uncertainty around the pace of recovery, there is no change to our expected outlook for the year ending 27 April 2024, with continuing
government support to maintain bus networks. We have worked closely with local and national government in maintaining bus services through the pandemic
and into recovery. We anticipate that this close partnership will be a continuing feature of transport policy, including through an expansion of bus service
franchising, and we are engaging closely with national and local policy-makers to maximise the opportunities that this will offer.
1.7 Non-financial and sustainability information statement
The non-financial information statement provided in this section 1.7 is a consolidated report relating to the Group as a whole.
Section 1.4.1 of this Annual Report contains a description of the Group’s business model, while section 1.4.5 contains a description of the Group’s principal
risks and uncertainties.
1.7.1 Corporate social responsibility
We are one of Britain’s leading public transport businesses, helping to connect communities for over 40 years. Our team of around 23,000 people and our
c.8,400 buses, coaches and trams are part of the fabric of daily life in the UK. We connect people sustainably with jobs, skills and training, bring customers
to our high streets, connect tourists with visitor attractions and draw, families, friends and communities together.
Sustainability is at the heart of our core business strategy and our Environmental, Social and Governance (“ESG”) roadmap is aligned with UN Sustainable
Development Goals.
As well as improving the sustainability of our own business, we are also focused on bringing wider benefits to our planet, our communities, our customers and
our employees.
We want to play our part in building sustainable communities. Our aim is to generate long-term value through employment and wealth generation, paying
our way in taxes which fund vital public services, contribution towards a fairer society, challenging convention and championing new ideas. Our purpose is
set out in section 1.4.1 of this Annual Report.
This section 1.7 of our report includes an overview, and selected examples of our work, to demonstrate the steps we are taking to meet our responsibilities.
Further information on our approach to corporate social responsibility can be found on our website at the following link:
https://www.stagecoachgroup.com/sustainability.aspx
1.7.2 Environmental matters and climate change
1.7.2.1 Introduction
Climate change, air quality and a green recovery from the COVID-19 pandemic continue to be national and international priorities for governments. The UK
Government and the Welsh Government are targeting to achieve net zero greenhouse gas emissions by 2050, while the Scottish Government is targeting that
by 2045. We see huge opportunity as these targets cannot be met without modal shift from the car to mass transit. Continued positive political action, such as
the commitment from the UK Government to support the purchase of at least 4,000 new zero emission buses over this Parliament, is a positive for the future
development, performance, and position of the Group.
Buses are the most efficient use of road space, with every full double-decker bus taking up to 75 cars off the road. A full bus emits a significantly lower per
passenger kilometre emission than a standard car.
The Department for Business, Energy and Industrial Strategy, 2022 UK provisional greenhouse gas emissions summary, shows that emissions in the UK were
2.4% lower in 2022 than 2021, and 2.2% lower than 2019. Warmer than average temperatures and higher energy prices are considered the main reasons for
this. There was an increase in emissions from the Transport Sector as the UK emerged from the pandemic and travel restrictions eased. The Transport Sector
remains the UK’s largest contributor to carbon emissions, at about 34% in 2022. This highlights the important role zero emission buses and modal shift from
private vehicle use to public and active travel, must play in helping the UK achieve its net zero ambition. The Cebr report for Stagecoach, published in early
2020 and based on data from 2017, estimates the benefit of modal shift to our UK bus services: “Without Stagecoach bus services, there would be an annual
increase of 190,000 tonnes of CO
2
through passengers using alternative transport, mainly cars.” These factors mean that the forecast for the rate of CO
2
reduction from transport is too slow to meet the UK Government’s net zero target for 2050. There needs to be a switch to electric vehicles and a reduction
in car mileage to achieve this.
Bus operators and governments across the UK are taking action to support the shift to net zero through the decarbonisation of the bus network. We believe
a successful transition to zero emission buses in the UK, as part of a wider programme to boost bus use, has the potential to reduce the carbon impact of the
transport network. It will help: achieve national emissions and clean air targets; improve the environment in local communities; support modal shift from cars
to buses; grow active travel for the right journeys, and drive up bus passenger numbers as part of a thriving public transport system.
1.7.2.2 Policy
1.7.2.2.1 Environmental policy
We have refreshed the Group Environmental Policy to align with the requirements of ISO 14001. This policy is reviewed annually, applicable to all entities within
the financial control of Stagecoach Group Limited, signed by the Executive Chairman and available in the public domain:
https://www.stagecoachbus.com/group-policies-and-statements
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1.7.2.2.2 Actions we are taking to reduce our impact on the environment
We see the transition of our bus fleet to zero emission vehicles, and the related activities, as the principal measures we are taking to reduce carbon emissions.
We have made progress with that in the year ended 29 April 2023 but there is still much to do.
Around 95% of our carbon emissions are from the operation of vehicles. Over the past 12 years to 29 April 2023, we have acquired new vehicles that emit fewer
emissions for the UK with a value of over £1 billion. New Euro 6 buses emit fewer emissions overall than a Euro 6 car, as well as having up to 20 times the carrying
capacity. Almost all of our vehicles are Euro 3 or above, and around 56% are Euro 6, ultra-low emission or zero emission, up from 49% as at 1 May 2022. The first
National Bus Strategy for England was published by the UK Government in March 2021 and sets out a vision of fewer journeys by car, more journeys by bus, and
a reduction in greenhouse gas emissions. Through the development of Bus Services Improvement Plans and ongoing engagement, we are working with local
and national Government to put in place policies and measures to support a modal shift away from high-impact transport modes such as private car use, to lower
impact modes of bus and tram services. The strategy also sets out a vision for a future of zero emission buses, and a UK Government consultation has recently
concluded to set a date for the end of the sale of new diesel buses. An announcement on the outcome of this is expected in the Autumn. We continue to work
towards purchasing zero emission buses with the target of having a fully zero emission UK bus fleet by 2035. The Scottish Government is targeting a reduction
in car use by 20% by 2030, investing £500m to improve bus infrastructure and tackle road congestion, and government investment in zero emission buses.
In March 2022 we released a thought leadership report “Road map to zero; the transition to 100% zero emission buses, what it means for people, and the
journey to get there”. The report highlights that zero emission buses can be a powerful tool to drive bus patronage and that, based on people’s stated intentions,
between 1.03m and 1.70m people who never or seldom use the bus would increase their use of buses if zero emission buses replaced diesel, and assuming
fares as well as service frequency remained the same.
We continued procuring 100% renewable electricity across our estate and the investment in upgrading our heating energy management systems to reduce
energy use. At the time of writing we are engaged in negotiations with a local Manchester-based company to upgrade our depot heating control system to
a Wireless Energy Management System. This upgrade aims to reduce energy use from heating of between 10% and 20%. Our print management refresh
project is nearing completion. We have exceeded our target to reduce the number of printers across our estate by about 50%, by achieving a 61% reduction.
We are a Business Ambition for 1.5ºC campaign member and joined the Race to Zero and submitted our Science Based Targets (“SBT”) to the Science Based
Targets Initiative (“SBTi”)i, which is waiting validation.
1.7.2.2.3 Effectiveness of environmental policies
Our environmental targets are aimed at reducing emissions, cutting resource use, and increasing the proportion of waste diverted from landfill. Our targets
covered our wholly owned bus and tram operations in the UK.
We work with a trusted partner to understand better our water use and identify opportunities to save. In 2022/23 we identified one major leak, saving an
estimated 2,792m³. Engineering waste, mainly from coolant disposal has decreased significantly, due to process changes with our waste management
partner and technology introduced to separate the constituent fluids.
1.7.2.3 Governance
This section 1.7.2.3 summarises our governance around climate-related risks and opportunities.
1.7.2.3.1 The Board’s oversight of climate-related risks and opportunities
The Board of Directors of the Company has oversight of environment and climate-related matters across the Group. Our Health, Safety and Environmental
Committee typically meets four times each year and reports to the Board after each meeting. The Committee has delegated responsibility from the Board for
overseeing environmental and climate-related matters, allowing it to consider such matters in more detail. In recognition of the importance of these matters,
the Committee’s responsibilities include:
• considering the environmental aspects of the Group’s strategy and making recommendations to the Board on those;
• considering environmental (including climate change) risks and opportunities affecting the Group;
• reviewing the implementation of the environmental aspects of the Group’s strategy and reporting to the Board on this implementation;
• providing support and encouragement to those executives implementing the environmental aspects of the Group’s strategy and providing a forum for
those executives to test ideas;
• reviewing the Group’s performance against its environmental targets and ambitions, including in respect of the composition of its bus fleet;
• considering the Group’s public reporting on environmental matters prior to its release (including in the Group’s Annual Report and in any separate
Sustainability Report);
• monitoring and considering any regulatory changes in relation to environmental matters that affect the business and/or strategy of the Group;
• reviewing the suitability of, and making recommendations to the Remuneration Committee in relation to, any environmental metrics forming part of
determining the variable remuneration of the Directors and senior management.
Further information on the work of the Health, Safety and Environmental Committee is set out in section 6 of this Annual Report.
The Audit Committee also considers climate-related issues to the extent they might affect considerations on financial reporting and disclosure. The Directors
have considered the relevance of material climate-related matters, including the risks of climate change and transition risks associated with the goals of the
Paris Agreement, when preparing and signing the consolidated financial statements. For example, as explained in note 1(e)(ii) to the consolidated financial
statements, the Directors noted estimation uncertainty arising from climate change considerations in estimating the useful lives of passenger service vehicles.
As further examples, the Directors considered how climate change might affect forecast amounts used in: determining the valuation of the Deferred Payment
Instrument, assessing the existence and valuation of onerous contracts, and assessing non-current assets for impairment.
The Board and its committees consider climate-related issues when reviewing and guiding strategy. The Board also considers climate-related issues when
considering: major plans of action; risk management; annual budgets; business plans; setting performance objectives; monitoring performance; overseeing
major capital expenditure; acquisitions and disposals.
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1.7.2.3.2 Management’s role in assessing and managing climate-related risks and opportunities
The Executive Chairman is responsible for the day-to-day running of the Group, including managing climate change responsibilities. He is supported by
the UK Managing Director in managing the UK business, and she is supported by a dedicated Health, Safety & Environment Director. Each of those senior
executives regularly attends meetings of the Health, Safety and Environmental Committee. The executive monitor performance against environmental and
climate-related goals and targets. The executive is supported by the Group Head of Sustainability, responsible for delivering the Group’s sustainability strategy,
who also attends the meetings. Subject matter experts, including the Finance Business Partner for sustainability provide further support as needed.
The Executive Chairman chairs a Sustainability Group, which brings together a number of our executives with a wide range of expertise and insights. The
Sustainability Group includes individuals with expertise in environmental matters, operations, risk management, communications, and financial disclosures.
The focus of the Sustainability Group is the implementation of the Sustainability Strategy, which forms part of our overall corporate strategy. The governance
structure is presented below:
Stagecoach Group Limited Board
Sustainability Group
UK Safety Forum
Health, Safety and Environmental Committee
Stagecoach Operations Board
Net Zero
Working Group
Resource Use and
Waste Working Group
Stagecoach Cares
Charity Committee
Operating company Safety Forums
1.7.2.4 Strategy
This section 1.7.2.4 summarises what we see as the actual and potential impacts of climate-related risks and opportunities on our businesses, strategy, and
financial planning.
1.7.2.4.1 Climate-related risks and opportunities
We have identified a range of climate-related risks and opportunities, which we summarise in this section 1.7.2.4, and which are taken account of in the
development of our corporate strategy.
1.7.2.4.1.1 Planning horizons
Our most valuable physical assets are our vehicles. Our vehicles generally have economic lives from new of up to 16 years, although we do operate some
vehicles beyond their sixteenth anniversary. Our next most valuable physical assets are our land and buildings, particularly our portfolio of operating depots
(garages). Our buildings generally have economic lives of up to 50 years, although again we do operate some buildings beyond that.
Taking into account the economic lives of our assets and infrastructure, we view our short-term planning horizon as up to three years, our medium-term as
three to 10 years, and our long-term as 10 to 30 years. While it is difficult to forecast with certainty even over the short-term, we recognise that climate-related
issues often manifest themselves over the medium and longer term. In addition, some of our own climate-related goals are long-term goals such as our target
to have a zero emission UK bus fleet by 2035, but that target is also supported by short-term and medium-term targets that work towards the long-term
target.
1.7.2.4.1.2 Climate-related opportunities
In June 2019, the UK became the first major economy in the world to pass laws to end its contribution to global warming by 2050. As a result, the UK is
committed to a legally binding target of net zero emissions by 2050. As noted in section 1.7.2.1, that commitment cannot be achieved without a reduction in
car journeys and an increased use of public transport. The UK Government strengthened further its commitment in April 2021, announcing it would reduce
emissions by 78% by 2035, compared to 1990 levels.
The opportunity to grow passenger usage of bus services is central to the National Bus Strategy for England; the Wales 2021 Transport Strategy; and the
Scottish National Transport Strategy. We agree that driving up patronage should be a primary objective of the transition to 100% Zero Emission Buses. Our
recent zero emissions bus report, “Road map to zero; the transition to 100% zero emission buses, what it means for people, and the journey to get there”,
highlights that between 1.03m and 1.70m people who never or seldom use the bus would increase their use of buses if zero emission buses replaced diesel
buses, and assuming fares plus service frequency remained the same.
We support the Government’s ambitions for increased bus use, and less car journeys. By working in partnership with government, we see a significant
opportunity for growing demand for public transport services.
We expect that public concern about the climate emergency and the need to protect our environment will influence individuals to make choices based on
those concerns. We see a significant climate-related opportunity for more individuals to choose bus/tram travel and align with our brands, as we contribute
to a reduction in overall emissions from transport. To strengthen transparency, we continue to report to the CDP climate-change questionnaire about our
climate-related impact and actions and recently maintained our “B” rating. Recognising the importance of biodiversity reporting and the role transparency
can play in driving change we will, for the first time in 2023, also report to the CDP water questionnaire. Following on from our first EcoVadis submission,
we have improved our rating to a Bronze Medal and are targeting further improvements year on year. We also expect to become participants of the United
Nation Global Compact (UNGC) in 2023, and become the first UK bus and coach company to do so. The commitment to the principle-based approach of
the UNGC framework will further reinforce transparency of our sustainable business practices.
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We see the climate-related opportunity to grow bus use as a short to medium-term opportunity. In England, for example, which accounts for approximately
79% of our regional bus business, the UK Government has set out an ambitious National Bus Strategy. In Scotland, the devolved Government has set
ambitious short to medium-term climate-related targets, including to cut car use by 20% by 2030. To support this, we engage with local and national
governments to encourage and implement policies and measures that support a modal shift away from higher emission impact modes, such as that from
private car use, to lower emissions impact modes of transport, such as bus and tram services.
There have been several aspirational air quality and low carbon improvement objectives proposed by a number of local authorities in areas where we provide
bus services. In line with our net zero objective, we will continue to engage with local authorities on the development and delivery of enhanced partnerships
under the National Bus Strategy for England with a view to supporting our transition to zero emissions.
1.7.2.4.1.3 Climate-related risks
Public transport can play a major role in addressing fiscal and environmental cost of climate change, air quality and road congestion. Positive political action
in tackling these threats should also be positive for the Group’s future development, performance and position.
At the same time, climate change presents a number of risks to the Group, including:
Transitional impacts
• Changing customer habits. The risk of changing customer habits is also explained in the summary of the Group’s principal risks and uncertainties
in section 1.4.5 of this Annual Report. Demand for public transport could change in response to climate change concerns. Actions by environmentally
conscious corporations and other organisations could add to a trend of increased working from home. As demand for our services recovers from the
effects of COVID-19, we may see a lasting effect on travel patterns accelerating a trend of increased working from home, shopping from home or more
locally, telemedicine and home learning. We continue to see the risk of changing customer habits as highest in the short-term. While we do see changing
customer habits over the medium-term and long-term as being a risk, we expect those changes to be more gradual.
• Technology. We anticipate that future zero emission vehicles deployed by the Group will be mostly battery electric. We have previously operated
hydrogen-powered buses, and some local transport authorities in areas that we serve are considering further deployment of hydrogen power buses.
Electric vehicle technology and related infrastructure technology is still developing, and there remains some uncertainty about the full life costs and expected
useful lives of the vehicles. Policy interventions might continue to be needed to address higher costs. The current capital cost of new zero emission vehicles
is significantly greater than the equivalent diesel vehicles. An electric bus is broadly twice the cost of the comparative diesel vehicle, while a hydrogen bus
is even more expensive. Furthermore, investment in new infrastructure is often required to enable the introduction of zero emission vehicles. While the
electricity cost of powering electric vehicles is currently less than the equivalent fuel cost for powering diesel vehicles, the saving does not fully offset the
additional capital cost. There is a risk that the transition to zero emission vehicles increases our costs. There is a risk that we will be unable to fully offset
these additional costs through increased revenue, which may result in an adverse effect on profitability. There are, however, a number of factors that reduce
the likelihood and severity of those risks. Reflecting the ambition of governments in the UK to grow bus journeys, reduce car journeys and lower emissions,
financial support has been available from governments towards the cost of zero emission buses. While there is no certainty of the extent to which such
support will continue, the UK governments continue to consider how best to incentivise the transition to zero emission vehicles. In addition, the cost of
electric cars also exceeds their diesel and petrol equivalents and so the competitive position of bus versus car might be less affected. The bus can offer a
convenient, cost-effective alternative to electric cars for some individuals and journeys. We see this as a short-term, medium-term and long-term risk as we
transition from a largely diesel bus fleet to a fully zero emission UK bus fleet over our target timeframe to 2035. How government policy, the relative cost of
cars, the capital and operational costs of new buses each evolve over that period will have a bearing on the Group’s financial performance.
• Public policy and legislative changes. The broader risk of regulatory changes is explained in the summary of our principal risks and uncertainties in
section 1.4.5 of this Annual Report. We know that the Government’s legally binding and ambitious carbon commitments cannot be met without significant
modal shift to mass transit. Conversely, requirements restricting the use of certain vehicle types or adding to the cost of operating certain vehicle types (for
example, requiring payments for diesel buses to operate in city centres) could result in increased costs for us. The UK Government will shortly consult on a
date (expected to be between 2025-2032) after which the sale of new diesel buses will be prohibited in the UK. We consider this to be manageable. There
are no currently disclosed intentions to stipulate a date from when diesel vehicles may not be operated on the roads, and the Government is currently
considering whether to stipulate a date after which the sale of new diesel coaches (as opposed to buses) will be prohibited. There is an opportunity
and a risk that the Group’s competitiveness for new UK contract opportunities is affected by the requirement introduced by the UK Government. From
September 2021, bidders for public sector contracts over £5m per annum need to commit to net zero by 2050 and to have published a carbon reduction
plan. There is a risk that public policies intended to tackle climate change (or be seen to tackle climate change or have other motives with the justification
being climate change) have an adverse effect on the Group. For example, requiring payment for certain types of buses to enter a city centre while not
requiring payment for any types of private car, is unlikely to materially mitigate climate change but could adversely affect public transport operators. We see
the risk of public policy and regulatory changes as highest in the short-term as we await clarity on: the impact of actions within the National Bus Strategy
in England; which local authorities in England seek to develop bus franchising; regulatory changes in Wales and Scotland; and government policy on the
transition to zero emission vehicles. It is also an enduring risk over the medium-term and long-term as government policy can change at any time.
• Operational risks. The transition from diesel vehicles to zero emission vehicles presents several operational considerations and risks. There is a risk
that accommodating new infrastructure to support zero emission vehicles adversely affects the operating costs, capacity and/or efficiency of bus depots
(garages). There is a risk that the efficiency of our bus services and/or the number of buses required is affected by the re-scheduling of bus services to
take account of the capabilities of zero emission vehicles. That could include adjustments to allow for the mileage that an electric vehicle is capable of on
a single charge, being less than the mileage an equivalent diesel vehicle is capable of on a single tank of diesel. There is a risk that the availability of power
from the electricity grid could adversely affect operating costs and the practicalities of operating sufficient electric vehicles.
• Accounting risks. As explained in note 1(e)(ii) to the consolidated financial statements, the Directors noted estimation uncertainty arising from climate
change considerations in estimating the useful lives of passenger service vehicles. Changes in regulation around the use of vehicles could result in
impairment losses or increased depreciation charges.
Physical impacts – acute and chronic physical risks
• Weather patterns. We have clear evidence that demand for our bus and tram services is influenced by weather. Demand drops during periods of
particularly poor weather such as heavy rainfall, snow and strong winds. Extreme weather can also impair our ability to reliably operate all of our services.
Accordingly, there is a risk that both our revenue and operating costs are adversely affected by climate change causing an increased frequency of more
extreme, bad weather. There is also a risk that we incur additional costs or experience disruption to our services from such factors, for example, as a
result of bus depots flooding. There is also the risk of low or no water availability, for example drought conditions or failing infrastructure. Our experience
shows that bus and coach services are less impacted by severe weather events than other transport modes, such as rail services that operate on a fixed
infrastructure. We see this as a long-term risk and see less risk of changing weather patterns materially affecting our financial performance or financial
position over the short to medium-term.
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1.7.2.4.2 The impact on Stagecoach businesses, strategy and financial planning
Our corporate strategy takes account of climate-related risks and opportunities. Our strategy is designed to grow demand for our bus and tram services
over time by replacing car journeys with more carbon-efficient bus and tram journeys. Government policy currently supports that strategy. Our strategy also
recognises a need to adopt new technology as we migrate our bus fleet to zero emission buses and our plans reflect that.
We generally prepare financial forecasts for the short-term (up to three years). We take account of medium to long-term risks in financial planning through
scenario modelling. For example, we model the implications on financial performance and financial position for differing levels of government financial support
for the introduction of zero emission vehicles over the medium-term.
1.7.2.4.3 Climate change scenarios
In 2021, we undertook a scenario planning exercise to assess the resilience of the Company’s business model and strategy to climate change risks. Our initial
work on scenario planning was led by an external consultant, with input from colleagues with responsibility for strategy, business development, external affairs,
corporate communications, finance, health, safety and environment.
The question we chose is “How could climate change plausibly impact Stagecoach’s UK bus and coach operations by 2050?” We chose 2050 to align with
the UK Government’s legally binding net zero carbon target. Our tram operations were excluded from our considerations as they represent a small (c.1%)
proportion of our Group and the current concession has less than one year to run.
We see the principal climate-related risks we face being primarily transition risks related to public policy, regulatory change, technology, and customer habits.
While we are exposed to physical risks, such as those related to weather, we see the potential financial impact on us to be greater from transition risks than
physical risks. In light of that, we have not yet undertaken quantified climate-related scenario analysis and we have not quantitatively considered a 2°C or lower
scenario, or other scenarios consistent with increased physical climate-related risks.
We reviewed publicly available scenarios and proprietary models but concluded these were not particularly helpful for our scenario analysis and so we
decided to develop our own exploratory scenarios. However, to help with future scenario analysis development, we will leverage the outcomes from our
recently commissioned zero emissions bus report.
The key drivers initially identified for consideration, and still relevant today, are shown below.
Social Technology Economic
Shift in working patterns Cost differential between zero emission vehicles
and diesel equivalents
Decoupling of GDP and growth in transport
Rebirth or repurposing of the High Street Automated vehicle technology Changing cost of car ownership
Changing leisure and business travel Digital technology for customer experience Rise in economic inequality
Rise of sharing economy and retail platforms Environmental Political
Change in car use Adaptation to changing weather Declining revenue for fuel/car tax
Concern about quality of local environment Devolved power to the regions
Focus on technology, infrastructure, behaviour
change or levelling up
From this work, we derived the two major themes to create the scenarios based on their potential impact and uncertainty. These themes were: 1. Net zero
policy quickly and centrally driven or slowly and inconsistently implemented; and 2. Higher overall travel demand or lower overall travel demand. For each
scenario, we considered the implications for our business and prepared a narrative description of the key features and implications of the scenario, including
in respect of: public policy, travel demand, transport infrastructure, transport modes, technology and customer experiences.
The results of our scenario planning are used to inform our strategy, our ongoing assessment of risks and opportunities, and our action plans. We have
reasonable confidence that we can adapt our strategy for any of the four core scenarios considered, while recognising that our strategy would not be resilient
to more extreme public policy or demand outcomes.
1.7.2.5 Risk Management
1.7.2.5.1 Processes for identifying and assessing climate-related risks
We identify climate-related risks in a number of ways, including:
• We held a climate-related risk workshop in 2021 with executives from a range of areas, and an external expert, to generate ideas on climate-related risks;
• We have set up an ongoing Sustainability Group, chaired by the Executive Chairman, which considers climate related risks as part of its remit, as well as
actions to reduce greenhouse gas emissions;
• We consider regional and functional risk trackers (see section 1.7.2.5.3) for climate-related risks identified by colleagues across the business;
• Our Health, Safety and Environmental Committee reviews and considers climate-related risks, with non-executive directors bringing insight from their
experience with other businesses;
• We review reports from other transport operators and consider the extent to which climate-related risks they identify are also applicable to us;
• We review reports from selected businesses in other sectors and consider the extent to which climate-related risks they identify are also applicable to us;
• We monitor and consider existing and emerging regulatory requirements related to climate change, including sector-specific requirements such as those
related to vehicle types;
• We maintain relationships with government bodies to understand, anticipate and help shape future policy and regulatory changes related to climate change.
For each risk identified, we assess the nature, potential severity and likelihood of its impact by involving appropriate executives and/or external experts.
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1.7.2.5.2 Processes for managing climate-related risks
Consistent with other risks, we determine the potential severity and likelihood of each climate-related risk occurring, and prioritise risks based on that.
We consider if and how to mitigate, transfer, accept or control each risk. Section 1.7.2.4.1.3 summarises the principal climate-related risks we have identified,
and we seek to manage these risks by:
• Seeking to work in partnership with government bodies to achieve shared objectives to grow bus journeys, reduce car journeys, tackle climate change,
improve air quality and reduce road congestion;
• Monitoring public policy proposals, seeking to influence decision makers to avoid tokenistic policies and implement transport policies that can meaningfully
and affordably help reduce emissions;
• Lobbying government and others to promote public transport as part of the solution to climate change with an objective to reduce car journeys by
promoting the alternative of public transport;
• Encouraging positive public policies that discourage car use such as funding to improve public transport, car congestion charging etc. Given the
significance we see of this, we appointed a new Policy & External Affairs Director in 2021;
• Promoting the environmental benefits of public transport versus car to the general public;
• Developing our corporate sales offering, leveraging the environmental benefits of bus and tram travel versus car travel;
• Reducing the emissions per vehicle mile of our vehicle fleet over time by increasing the percentage of Euro 6, ultra-low emission and zero emission vehicles
in the fleet, working towards our target of a fully zero emission bus fleet in the UK by 2035;
• Continuing our broader programme to reduce our own carbon emissions; in light of this, when new service vehicles or vans are requested an assessment
on mileage and frequency of use is conducted, where no good reason for an internal combustion engine is given, the request is rejected and an electric
vehicle option must be taken;
• Considering climate change factors (e.g. flood risk) in decision making on our property portfolio.
1.7.2.5.3 Integration with the Group’s overall risk management
Climate-related risks and opportunities are considered as part of our risk management process and in conjunction with our consideration of strategy.
Our strategy is set by the Board. The Board considers the key risks to achieving the Group’s strategic objectives. Risk discussions are embedded in
strategic planning and decision making. Twice yearly, the Board will review and consider the principal risks, being those risks that present the greatest
threats to achieving our strategic objectives. The report of principal risks is supported by more detailed risk trackers for each region and for certain “functional”
areas. A climate change risk assessment has been undertaken as part of that wider risk assessment. The Director of Risk & Assurance, who co-ordinates the
risk management process, reviews the regional and functional risk trackers and ensures that overall principal risks reflect those where appropriate. Input is
obtained from a range of executives, as well as the Board, with the breadth of functional representation assisting in identifying and assessing not only current
risks but also emerging risks.
1.7.2.6 Metrics and Targets
In this section 1.7.2.6, we consider the metrics and targets that we use to assess and manage relevant climate-related risks and opportunities where such
information is material.
Not all of the climate-related risks and opportunities that we have identified can be easily assessed and managed by quantified metrics. For example, the
climate-related risks and opportunities arising from changes in government policy are difficult to reduce to quantified metrics. However, we do use a number
of metrics to assess climate-related risks and opportunities.
Each of the main metrics we use to assess climate-related risks and opportunities are described below. For each metric, we also describe any targets we
use to manage climate-related risks and opportunities, and performance against those targets.
We have already taken steps over a number of years to reduce our environmental impact, meaning that our baseline position already reflects more progress
than some other organisations. That is relevant in comparing targets for future percentage changes between organisations.
The metrics and targets reported in this section 1.7.2.6 have not been independently audited.
1.7.2.6.1 Greenhouse gas (“GHG”) emissions
We measure our Scope 1, 2 and 3 greenhouse gas (“GHG”) emissions and explain later in this section the emissions that are included within our reported
Scope 3 GHG emissions. We seek to reduce our GHG emissions over time as we believe that the lower our emissions are, the less our business will be
exposed to the risks of public policy and regulatory change and changing customer habits.
Certain of the values shown in this section 1.8.2.6 for the prior year ended 30 April 2022 have been restated from the values presented in the 2022 Annual
Report. The restatement relates to reallocation of scope 3 emissions for leased vehicles with a tenure over one year, into scope 1. The reallocation is in line
with GHG protocol standards for leased vehicles. The restatement equates to a 0.3% revision in total 2021/22 GHG emissions from 608,429 tCO
2
e to 610,351
tCO
2
e and energy consumption from 2,056.69 GWh to 2,067.11 GWh.
For the year ended 29 April 2023, our total energy consumption was 2,083,199,485 kWh (2022: 2,067,101,603 kWh) and the total carbon emissions associated
with our reported energy use were 615,412 tonnes of CO
2
e (2022: 610,351 tCO
2
e).
During the COVID-19 pandemic, demand for our bus services reduced and we reduced our vehicle mileage. As a result our GHG emissions reduced. In the
year ended 29 April 2023, our GHG emissions increased again. This is due mainly to the acquisition of two London businesses.
1. Strategic report (continued)
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
A comparison of the Group’s total energy consumption and location-based GHG emissions for 2022/23 and 2021/22 is summarised as follows:
Total energy use in GWh 2022/23 2021/22 % change
Fuel
– Gas 49.10 52.51 (6.5)%
– Liquid fuel 1,978 .14 1,964.02 0.7%
– Biomass 0.08 n/a
Electricity 55.88 50.58 10.5%
Total energy use 2,083.20 2,0 67.11 0.8%
Resource consumption 2022/23 2021/22 % change
Liquid fuel (litres) 193,074,576 191,125,9 67 1.0%
Refrigerants (kg) 1,961 1,378 42.3%
The data below shows our greenhouse gas emissions for the year ended 29 April 2023 with comparative data for the year ended 30 April 2022.
Total Greenhouse Gas emission by scope in tCO
2
e 2022/23 2021/22 % change
Scope 1 483,230 480,324 0.6%
Scope 2 10,740 10,625 1.1%
Scope 1 & 2 emissions 493,970 490,949 0.6%
Scope 3 121,442 119,4 0 2 1.7%
Total emissions 615,412 610,351 0.8%
Scope 1 & 2 Greenhouse Gas emissions breakdown in tCO
2
e 2022/23 2021/22 % change
Scope 1
– Fuel (Gas) 8,963 9,617 (6.8)%
– Fuel (Liquid) 471,318 468,570 0.6%
– Biomass 1 n/a
Refrigerants 2,948 2,137 38.0%
Scope 1 total emissions 483,230 480,324 0.6%
Scope 2 purchased electricity (Location-based) 10,740 10,625 1.1%
This table below further breaks down our reported scope 3 GHG Emissions:
Scope 3 Greenhouse Gas emissions breakdown in tCO
2
e 2022/23 2021/22 % change
Upstream emissions (Well to Tank) 115,18 3 115,3 87 (0.2)%
Electricity transmission and distribution losses 3,786 3,011 25.7%
Waste 413 n/a
Business travel & grey fleet (air, sea and land transport) 1,343 555 142.0%
Business travel (hotel nights) 365 212 72.2%
Company leased vehicles 352 237 48.5%
Total emissions (Location-based) 121,442 119,4 0 2 1.7%
We are reporting against the Streamlined Energy and Carbon Reporting (“SECR”) framework. The 2022/23 reporting period is 1 May 2022 to 29 April 2023.
To comply with SECR guidance, the methodology used is the WBCSD/WRI Greenhouse Gas Protocol. A financial control approach has been taken.
Stagecoach has a 37.5% shareholding in Scottish Citylink Coaches Limited. Under the financial control approach, Scottish Citylink Coaches Limited is
excluded from Stagecoach’s organisational boundary because the joint venture is categorised as an Associated/Affiliated Company as per the definition in
the GHG Protocol. We have used the UK Government greenhouse gas conversion factors for company reporting 2022. Scope 2 emissions from purchased
electricity have been measured using a location-based approach.
Materiality was set at 1% of the organisation’s GHG emissions for each emissions source and we use a materiality threshold for the Group of 5%. We are not
aware of any emissions that have been excluded on the grounds of materiality. We have reported on all the emissions sources required under the Companies
Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013. All these sources fall within businesses that are included in our consolidated financial
statements.
The Group uses biodiesel fuel blend for some of its bus fleet and a biofuel blend for some of its support vehicles. As recommended in the UK Government
Environmental Reporting Guidelines, biogenic CO
2
from this was reported separately, whereas biogenic CH4 and N2O emissions were accounted for in
Scope 1 fuel combustion. Out of scope emissions factors from BEIS (2022) were used to calculate out of scope emissions from petrol and diesel. To estimate
energy use for Scope 1 and 2 emissions from fuel, the fuel volumes used were converted to kWh. We used BEIS GHG emissions conversion factors for 2022
to convert the 2022/23 fuel volumes to energy use.
Scope 3 emissions are indirect emissions which take place outside of the Group’s direct operations. The Scope 3 emissions that we have reported above
include emissions from:
• Business travel by means not owned or controlled by us.
• Hotel night stays.
• Waste.
Fuel and energy related activities. For us, this is “well to tank” for all scope 1 energy, and “transmission and distribution” for scope 2.
1. Strategic report (continued)
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Annual Report and Financial Statements 2023
Scope 1 emissions increased in 2022/23 by 0.6%. This can be explained with reference to:
• During the year ended April 2023, we acquired two new business’ within our London division. These new additions increased the miles operated within
London and increased our estate and building emissions. The new additions increased our absolute emissions by 2.5%.
• We ran a large scale, exceptional event for the commonwealth games. This event resulted in incremental mileage being operated, and increased our
absolute emissions by 0.2%.
• Conversely, BEIS emission factors changes are favourable versus our position last year. This change reduced our absolute emissions by 0.5%.
These changes result in an absolute increase of 2.2%. However, absent of these factors, our overall scope 1 and 2 location-based emissions have reduced
by 1.1%.
We have not set specific targets for our Scope 1, 2 and 3 GHG emissions but we have set targets for our GHG emissions normalised for revenue, vehicle miles
and passenger journeys (see sections 1.7.2.6.3 to 1.7.2.6.5 below).
1.7.2.6.2 Carbon saved by modal shift
In 2021/22 as bus use began to rebound from the pandemic, so too did emissions saved. We track our “Carbon saved by modal shift”, being the estimated direct
greenhouse gas emissions of our operations less the estimated greenhouse gas emissions saved by reducing car journeys and other modes of transport. While
that does involve some estimation, we consider it to better reflect the environmental impact of our business than a consideration of our direct emissions alone.
Our Carbon saved by modal shift metric helps us assess and manage that by focusing not just on our own GHG emissions but on the net position. Our Carbon
saved by modal shift metric helps us assess and manage that by focusing not just on our own GHG emissions but on the net position. The numbers in the table
below clearly show the pre-pandemic environment against the dip caused by the lockdowns and then the recovery to where we are today.
2022/23
Emissions (tCO
2
e)
2021/22
Emissions (tCO
2
e)
2020/21
Emissions (tCO
2
e)
2019/20
Emissions (tCO
2
e)
Total Scope 1 & 2 emissions (see table in section 1.7.2.6.1 above) (493,970) (490,949) (416,758) (49 3,112)
Estimated emissions saved by replacing journeys by other modes 733,814 508,026 291,600 681,776
Net carbon saved by modal shift/(emissions) 239,844 17, 07 7 (125,15 8) 188,664
– Target disclosed in 2022 Annual Report 57,814
We are targeting to improve our Carbon saved by modal shift, principally by:
• Reducing the emissions of our fleet by moving more of our fleet to cleaner diesel, ultra-low emission and zero emission vehicles, and ultimately to having
a fully zero emission UK bus fleet by 2035;
• Growing bus journeys, replacing car journeys and increasing our load factors.
Our short, medium and long-term targets for Carbon saved by modal shift are as follows:
2023/24 2024/25 2031/32 2050/51
Carbon saved by modal shift (tCO
2
e) 62,004 65,977 8 7, 8 5 2 67,9 9 3
Over the coming years, we are targeting an increase in our carbon saved by modal shift, driven by an increasing portion of our UK bus fleet becoming zero
emission buses and modal shift from other modes of transport to bus. Our targets also take account of an increasing proportion of zero emission private cars
– while that sees our target carbon saved by modal shift reducing between 2031/32 and 2050/51, we still envisage a significant carbon saving in 2050/51 even
with a high proliferation of zero emission cars.
1.7.2.6.3 Emissions per £ of revenue
We have chosen to use a revenue intensity metric and as such, report emissions as kilograms of carbon dioxide equivalent per total revenue (kgCO
2
e/£ of
revenue). Our emissions per £ of revenue are summarised below:
2022/23 2021/22
Revenue (£m) 1,372.3 1,176.1
Total Scope 1 & 2 emissions tonnes (tCO
2
e) (location based) 493,970 490,949
Intensity ratio
Total Scope 1 & 2 emissions (kgCO
2
e/£ of revenue) (location based) 0.36 0.42
– Target disclosed in 2022 Annual Report 0.34 0.39
Our intensity ratio for kgCO
2
e/£ of revenue has decreased compared to last year as a result of recovery after the pandemic. This is slightly short of target due
to factors which have increased our carbon emissions above what was expected. This has been discussed in section 1.7.2.6.1.
The revenue figures shown in the consolidated income statement reconcile to the revenue figures in the table above as follows:
2022/23
£m
2021/22
£m
Revenue shown in consolidated income statement 1,372.6 1,176.5
Exclude revenue items relating to expired rail franchises, for which there are no associated emissions in the year (0.3) (0.4)
Revenue shown in preceding table 1,372.3 1,176.1
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Our short, medium and long-term targets for emissions per £ of revenue are as follows:
2023/24 2024/25 2031/32 2050/51
Total Scope 1 & 2 emissions (kgCO
2
e/£ of revenue) 0.31 0.28 0.12 Net zero
1.7.2.6.4 Emissions per vehicle mile
We also report emissions per vehicle mile as:
Group metrics 2022/23 2021/22
Vehicle miles (m) 343.1 346.9
Total Scope 1 & 2 emissions tonnes (tCO
2
e) (location based) 493,970 490,949
Intensity ratio
Total Scope 1 & 2 emissions (kgCO
2
e/vehicle mile) (location based) 1.44 1.42
– Target disclosed in 2022 Annual Report 1.21 1.27
Our intensity ratio for kgCO
2
e/vehicle mile has increased compared to last year due to the disparity between our carbon emissions and miles ran. We
decreased our mileage by 1%, however our overall emissions have increased by 1%.
Our short, medium and long-term targets for emissions per vehicle mile are as follows:
2023/24 2024/25 2031/32 2050/51
Total Scope 1 & 2 emissions (kgCO
2
e/vehicle mile) 1.13 1.06 0.54 Net zero
1.7.2.6.5 Emissions per passenger journey
We also report emissions per passenger journey. This provides data to compare our emissions per journey with other modes of transport, as we seek to
manage the risks and opportunities associated with changing customer habits.
Emissions per passenger journey in 2022/23 and 2021/22 were as follows:
2022/23 2021/22
Passenger journeys (m) 780.5 635.8
Total Scope 1 & 2 emissions tonnes (tCO
2
e) 493,970 490,949
Intensity ratio
Total Scope 1 & 2 emissions (kgCO
2
e/passenger journey) 0.63 0.77
– Target disclosed in 2022 Annual Report 0.56
Our intensity ratio for kgCO
2
e/passenger journey has decreased compared to last year as a result of recovery after the pandemic. This is short of target due to
factors which have increased our carbon emissions above what was expected.
Our short, medium and long-term targets for emissions per passenger journey are as follows:
2023/24 2024/25 2031/32 2050/51
Total Scope 1 & 2 emissions (kgCO
2
e/passenger journey) 0.49 0.46 0.24 Net zero
1.7.2.6.6 Fleet composition
We also track our bus and coach fleet composition as we assess and manage risks associated with the cost of new vehicles and regulatory changes. The
below table details our progress in reducing the emissions impact of our bus and coach fleet. We remain at the early stages of our journey towards a 100%
zero emissions UK bus fleet, and recognise we have to accelerate our investment in order to meet our medium and long-term targets.
29 April 2023
% of fleet
30 April 2022
% of fleet
Percentage of fleet which is Euro 3 or above, ultra-low emission or zero emission 99.7% 99.7%
Percentage of fleet which is Euro 6 or above, ultra-low emission or zero emission 56.2% 49.1%
Percentage of fleet which is ultra-low emission or zero emission 14.0% 12.6%
Percentage of fleet which is zero emission 3.3% 2.2%
– Target disclosed in 2022 Annual Report 9.5%
Our short, medium and long-term targets for the percentage of the UK bus and coach fleet which is zero emission are as follows:
2023/24 2024/25 2031/32 2034/35
Percentage of fleet which is zero emission 17.4% 25.2% 76.5% 100.0%
1. Strategic report (continued)
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Annual Report and Financial Statements 2023
1.7.2.6.7 Government net promoter score
Given the importance of our relationship with government in the context of growing public transport use and public policy, we measure our government net
promoter score through an independently conducted survey of key government stakeholders. Key government stakeholders for this purpose include
passenger transport executives, local transport authorities, combined authorities, the UK Government and devolved governments.
2022/23 2021/22
Government net promoter score (13) +39
Our Net Promoter Score in 2022/2023 saw a very significant reduction, with survey respondents citing the operational challenges in autumn 2022 because
of industry-wide driver resource shortages as the main factor in the reduction. Actions are under way to restore service reliability and engage with local
stakeholders to recover confidence in service delivery.
1.7.2.6.8 Carbon prices
We do not use any internal carbon prices.
1.7.3 Social – Employees
1.7.3.1 Our employees
We are passionate about putting our people at the front and centre of what we do. Our employees are fundamental to the successful development and
performance of the business. We aim to recruit and retain the best employees in our sector, offering a competitive package of benefits, which enables us
to deliver good customer service.
We are building a strong and trusting culture integrated with our values, where our people are empowered to do the right thing and be themselves at work.
We are supporting our people to realise their full potential through delivering our three-year people plan:
• INVOLVE
Continuing to build a strong and trusting culture in which we celebrate our differences. Our colleagues are empowered to do the right thing and feel that
they are part of an inclusive business where everyone is supported and can flourish.
• INSPIRE
Providing opportunities for our people to thrive both personally and professionally.
• INNOVATE
Investing in technology to transform and modernise our ways of working to create a future-focused approach to our people offering.
1.7.3.2 Employment policies
Being an inclusive and diverse employer is key to our success. It is our policy that all people should be treated fairly and with respect, whether they are
applying to join Stagecoach or they are a current employee. Each of our businesses has detailed employment policies in place that are appropriate to the
relevant business and its employees. Across the Group, we aim to have a motivated team of people that will meet the expectations of our customers, improve
our business and be rewarded for their commitment.
We value, and have a policy of, equality of opportunity, regardless of disability, gender, sexual orientation, religion, belief, age, nationality, race or ethnic origin.
We also provide training, career development and equal consideration for promotion.
1.7.3.3 Effectiveness of employment policies
Our employment policies give our people and managers the guidance they need to support a positive culture. We measure the effectiveness of our employment
policies in a number of ways. The results of our annual employee engagement survey help us understand how our people feel about key areas such as diversity,
reward, training and development, health and safety and speaking up. Our individual businesses have worked with their teams to create action plans that will drive
improvements that will have the biggest impact for our people, for example improving the workplace environment, communications, training and development,
and rewards and benefits. We monitor employee attrition rates and investigate the reasons for any unusual trends.
1.7.3.4 Employee training and development
Our training priority remains essential Driver Certificate of Professional Competence (“CPC”) and apprenticeship training to ensure we equip our drivers and
engineers with the skills they need to perform their roles effectively.
We increased our membership with the 5% Club to Gold Status for our commitment to “earn and learn” programmes as a result of our continued commitment to
our apprenticeship programmes. The 5% Club is a UK-wide charity that aims to contribute to the alleviation of poverty through increased levels of employment.
We’re committed to increasing the number of apprenticeships and providing further development for our managers and leaders of the future to grow our talent
pipelines across the business.
1.7.3.5 Employee engagement
Our engagement strategy is built around gaining meaningful insights so we can continually improve and help people feel part of our business.
In the year ended 29 April 2023 we conducted an employee engagement pulse survey designed as a temperature check of a reduced number of survey
questions to track engagement levels, focus on key topics, and track progress against action plans from the group-wide employee survey completed in the
year ended 30 April 2022.
Our employee communications app, Blink, continues to be a pivotal tool to increase our employee voice and reach a wider audience quickly with important
updates through a modern digital platform. We also continue to utilise more than 300 digital screens across our sites as another more modern, timely,
engaging, and accessible way of reaching our people with key updates, allowing us to share both national and local messages with our colleagues. Our
employee magazine, Focus, enables us to share our people’s stories and help everyone understand how they contribute towards the success of our business.
It especially helps us celebrate and thank our employees who go above and beyond, as well as showcasing good news stories about “what the business is
doing” to ensure we are sustainable for the future.
1. Strategic report (continued)
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
We continued with our successful Stagecoach Star of the Month recognition scheme, which recognises and rewards our people for their outstanding
performance and behaviours.
We continue to focus on strengthening our relationships with the recognised trade unions to ensure that they develop a shared understanding of the
challenges that we face as a business. We have twice-yearly meetings with trade unions through the Joint Negotiation and Consultation Forum (“JNCF”) in
place. There have been a number of disputes over pay during the last year due to the rising cost of living and increased competitiveness in front line workers
pay. However, these have been settled and we will continue to build on creating a positive culture where our people feel fairly rewarded and recognised.
Section 1.8 of this Annual Report summarises, amongst other matters, how the Directors have regard to employee interests, and the effect of that regard,
including on decisions taken during the year ended 29 April 2023.
1.7.3.6 Employee health and wellbeing
The health and wellbeing of our people continues to be a focus for us, particularly on physical, financial and mental wellbeing. During 2022/23, we appointed
our first dedicated Diversity, Equity & Inclusion (DEI) Partner to drive forward the health, wellbeing and inclusion and diversity agenda.
This year there has been a continued focus on Mental Health First Aid training for wellbeing champions and managers across the business.
Our benefits platform provides our employees with easy access to a whole host of wellbeing resources, such as the Employee Assistance Programme,
alongside offering discounts for shopping and entertainment. Now more than ever, we are aware of the growing need to improve the support we provide
around financial wellbeing.
To further enhance our benefit offering and encourage employees to become more active we launched a Cycle2Work scheme in April 2023 via our benefits
platform. It provides a quick and easy way for employees to apply for and benefit from a more affordable way to access bikes and cycling equipment.
1.7.4 Social – Workforce diversity and inclusion
1.7.4.1 Workforce diversity policy
We continue to build on our inclusive culture where differences are celebrated and we attract, retain and develop more diverse talent throughout the organisation.
We have continued to grow our employee-led networks; Veterans; Parents; Women@Stagecoach; LGBTQ+ community; Carers; and members of multi-faith/
multi-ethnic communities, and have recently introduced a new network aimed at young managers. We now have over 600 members of the networks helping to
shape the agenda and bring about lasting change. We recognise the importance of employee networks to support diversity and inclusion in our business, and to
enable us to better represent the customers and communities we serve.
We have recently submitted our 2022 Gender Pay Gap Report, which shows a mean gender pay gap of 4.93%, substantially lower than the UK average
of 14.9%. For further detail on the 2022 Gender Pay Gap report, please go to:
https://www.stagecoachgroup.com/about/managing-the-business/governance/gender-pay-gap-reporting.aspx
1.7.4.2 Actions to strengthen diversity and inclusion
We continue to seek to improve the gender balance throughout the Group. Diversity, Equity and Inclusion (“DEI”) remains a key focus for our businesses and
our approach to strengthening DEI further is focused on three key areas:
Improved support for our female colleagues
Resource and embedding
We have recently invested additional resource and appointed a DEI Partner in September 2022. This role brings in expertise and will deliver our DEI plan
and vision for the future, ensuring we remain focused and committed to our sustainability targets and building our inclusive culture.
Policy refresh
During 2022 we enhanced a number of our family friendly suite of policies (including enhanced maternity leave) with the support of our Women@
Stagecoach network, which we hope will encourage employees to progress within Stagecoach and elevate potential blockers. We hope that these
policy enhancements encourage more females to consider us as an employer. We continue to encourage flexible and part-time working in management
roles through our Future of Work vision. We’ve also set up a working party and various trials to help us further encourage more flexible working to attract
more female drivers and engineers into our business.
Awareness and understanding
We are helping Stagecoach colleagues with their awareness and understanding to mitigate the impact of unintentional gender biases through delivery of
unconscious bias “Let’s Talk” sessions as well as mandatory e-learning modules. As part of our commitment to developing our colleague and line manager
inclusion capability, we have training available to help educate colleagues and give them the tools to move the dial on DEI. We continue to make sure that
there’s no gender bias in any of our training and development initiatives, and everyone has the same access to development relevant to their roles.
In addition, we continue to encourage our female drivers, engineers and supervisors to develop their careers further through recognition in our Shine
Pool, enhancing the diversity within this vital future leader population.
1.7.5 Social – Community matters
1.7.5.1 Social and community policies
We seek to work with a wide range of stakeholders to help shape our services and support our drive to get a better deal for sustainable public transport.
We are focused on working with national and local governments to deliver a broad network of high quality, accessible and sustainable transport services.
We have worked closely with local authorities across our network in England to develop ambitious bus service improvement plans (“BSIPs”) as part of the
government’s national bus strategy. These BSIPs include initiatives to lower fares, speed up bus journeys, boost accessibility and connections, and improve
customer information. We continue to work with local authorities to deliver the joint plans for improvement in bus services. We are also working closely with
the devolved governments to develop future bus service plans for Scotland and Wales.
1. Strategic report (continued)
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Annual Report and Financial Statements 2023
1.7.5.3 Promote social inclusion through our services and operations
Our customer transformation programme continues to build on our leading investment in contactless technology with a focus on developing simplified
products and pricing which offer a simple and affordable experience for customers. We are also continuing to work with local authorities and other operators
to develop multi-operator ticketing.
Our customer contact centre makes it easier for customers to reach us from anywhere in the UK, with a one-stop phone and digital contact point that people
can use to speak to a member of our team on any queries they have, including questions about timetables, feedback on services, help with smartcards and
lost property.
Making our services more accessible and delivering better value travel is central to our strategy to encourage people to switch from single use car trips
to more sustainable public transport.
We continue to take steps to deliver fare simplification to improve customer perception of value for money and help drive more use of our buses, coaches
andtrams.
Contactless payment facilities cover all of our regional bus fleet, making it easier for people to use our services and providing a platform for further ticket
simplification. Our on bus contactless technology enables customers to use electronic tickets stored on their mobile phone instead of requiring a printed ticket.
All of our local bus fleets in the UK are fully accessible as a result of significant investment over many years. Our new vehicles feature CCTV and USB charging
points, and “talking bus” audio visual systems are fitted as standard, providing next-stop information. This is designed to improve accessibility for blind and
partially sighted people and we have worked with sight loss organisations, including the Royal National Institute of Blind People and Guide Dogs, to raise
awareness of potential barriers to travel among excluded groups.
Automatic vehicle location technology is fully deployed across our UK regional bus fleet, providing real time service information to customers via our
smartphone app and online.
Efficient connectivity is vital to ensure people in our local communities have access to jobs, the services they need and can play a full part in society. We have
taken a leading role in the development of demand responsive transport services, helping to serve people in rural areas or those employed in specialist sectors.
We have a number of ticketing initiatives in place to support the local communities we serve, including our national jobseekers discounted travel initiative,
the only scheme of its kind in the UK and offering discounted bus travel for Scottish NHS workers. Our Stagecoach Solutions service also offers a range
of service for businesses and corporates to work with us to develop personalised transport solutions.
For further information on our initiatives, please go to: https://www.stagecoachgroup.com/sustainability/accessibility-affordability.aspx
1.7.5.4 Foster community development through our charitable activities
Since we were founded in 1980, we have played a huge role in supporting the communities we serve and sharing our success with local people and
communities by funding the work of local, national and international charities. We continue to make a significant contribution towards the communities we serve
through time, resource, money and sponsorship, and have committed to donating 0.5% of pre-tax profits to charitable and community causes eachyear.
More information on our community support and programmes is available at: https://www.stagecoachgroup.com/sustainability/community.aspx
1.7.6 Governance – Our corporate values
1.7.6.1 Corporate values and Code of Conduct
We have a set of core values and policies, which are detailed in our Group Code of Conduct. Our five shared values to drive our people and the brands they
represent across our business are: We’re go getting; We do the right thing; We’re in it together; We keep it simple and We care. We promote a culture of
openness across all our businesses and our objective is to ensure the highest standards of probity and accountability.
The Code of Conduct sets out key principles and provides practical examples and guidance to help shape employees’ behaviour across all levels of the
business. The Board of Directors remains committed to ensuring appropriate processes, controls, governance and culture exists to support the maintenance
of these values and behaviours. The Code of Conduct is subject to periodic review and can be found at the following link:
https://www.stagecoachgroup.com/~/media/Files/S/Stagecoach-Group/Attachments/pdf/code-of-conduct-may-2021.pdf
1.7.6.2 Whistleblowing
The Board ensures that appropriate arrangements are in place to receive and act proportionately upon a complaint about malpractice. Our “Speak Up”
whistleblowing platform is now well established in the business, and this provides a channel for employees to anonymously report concerns they have,
while enabling us to ensure that all reported concerns are systematically investigated and tracked.
The “Speak Up” whistleblowing policy sets out how the Group will investigate any concerns raised and the action it may take. We value an open,
transparent and safe working environment where our people feel able to speak up and can raise serious concerns constructively without fear of victimisation,
subsequent discrimination or disadvantage. A copy of the document is available at:
https://www.stagecoachgroup.com/~/media/Files/S/Stagecoach-Group/Attachments/pdf/whistleblowing-policy-may-2021.pdf
The Board reviews summaries of matters raised through the “Speak Up” platform and through other whistleblowing reporting channels.
1.7.7 Governance – Health and safety
We have a clear vision to consistently strive for excellence in health and safety in all our operating companies. Our approach to safety management is
articulated through the Stagecoach Strategic Safety Framework. Understanding safety risk and being compliant with, or exceeding, the health and safety
regulations for the different modes of transport our business delivers is core to this Framework. We have published improvement targets in our Sustainability
Strategy “Driving Net Zero – better places to live and work” with an update published in November 2022. We have a Safety Plan detailing the actions we are
taking to drive system, technological and cultural improvements.
1. Strategic report (continued)
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
We have continued to invest in and develop technology to reduce risk. This includes a bespoke system to support drivers and make interventions before there
is a risk of an incident happening. We also continue to invest in our people and enable our management teams and Health and Safety Representatives to
attain a safety qualification via our externally delivered, IOSH Managing Safety training. Our operating companies work hard to engage with their people to
improve safety through company Safety Forums.
The Health, Safety and Environment Committee monitors performance and reports to the Board on health and safety matters. Our operating companies have
safety management systems in place which are appropriate for their respective risk profile and regulatory requirements for the industry in which they operate.
This includes policies, risk assessments and safe working procedures to make sure that safety risks are managed and controlled. Performance of leading and
lagging indicators are measured and reviewed at operating company and Group level. This is supported by analysis of audit results and review of civil liabilities
claims to address any issues around policies and working procedures.
Our approach to safety across Stagecoach is collaborative. Our local leadership teams have clear accountability for the delivery and continuing improvement
of safety in their business. To support them in doing this we have a team of Safety Professionals. There are multiple channels through which our people can
report safety concerns, confidentially should they choose to do so. These include near miss reporting systems and externally and, via CIRAS, an independent
organisation.
1.7.8 Governance – Human rights
The Group does not see human rights matters as presenting material issues or risks for the Group and therefore the Group does not have specific,
detailed policies in respect of human rights. However, in the Group’s Code of Conduct (see section 1.7.6), the Group recognises the fundamental civil,
political, economic and social human rights and freedoms of every individual and strives to reflect this in its business. A respect for human rights is reflected
in our wider policies and in how we do business with customers, suppliers, employees and other stakeholders.
It is our policy to respect the rights of individuals to hold personal political views, to undertake political activity and to personally support or be members
of particular organisations. We support the objectives of the Modern Slavery Act 2015 of eliminating slavery and human trafficking. We have provided a
statement on these matters at: https://www.stagecoachgroup.com/~/media/Files/S/Stagecoach-Group/Attachments/modern-slavery-act-transparency-
statements/modern-slavery-act-transparency-statement-2021.pdf
1.7.9 Governance – Anti-corruption and anti-bribery
1.7.9.1 Anti-corruption and anti-bribery policy
The Group has an anti-bribery and anti-corruption framework in place. The Group’s attitude to bribery and corruption is set by the Board of Directors and
is reflected in the Group Code of Conduct (see section 1.7.6). It is our policy:
• not to tolerate any form of bribery or inducements for any purpose whether directly or through a third party;
• to prohibit the giving of “facilitation payments” or “grease payments” even in jurisdictions where these might be legally permitted or expected by local custom;
• that officers, employees and representatives of the Group shall not seek, accept, offer or provide gifts from/to any other party that has, could have or
might be perceived to have a business relationship or potential business relationship with the Group unless the value of the gift(s) is clearly insignificant;
• that officers, employees and representatives of the Group shall not accept, offer or provide hospitality from/to any other party that has, could have or might
be perceived to have a business relationship or potential business relationship with the Group unless the hospitality is reasonable in terms of its frequency,
nature and cost;
• that officers, employees and representatives of the Group should seek to avoid actual, perceived or potential conflicts of interest, as these may jeopardise
their reputation as well as the Group’s;
• that bond price-sensitive information must be properly safeguarded and no individual should profit from undisclosed price-sensitive information;
• that we do not make political contributions and, therefore, no company within the Group is permitted to make political contributions; and
• that all officers, employees and representatives of Stagecoach must use the Group’s property and information technology appropriately and responsibly.
1.7.9.2 Effectiveness of anti-corruption and anti-bribery polices
Any known instance of fraud, bribery or attempted bribery that was designed to give an advantage to the Group is reported to the Audit Committee for
consideration and appropriate follow up. There were no such matters arising during the year ended 29 April 2023 that were material. The whistleblowing policy
(see section 1.7.6.2) provides a channel for the reporting of fraud, bribery or attempted bribery where reporting through other channels is not appropriate.
1.7.9.3 Anti-corruption and anti-bribery procedures
A Group Compliance Committee is in place to monitor compliance with laws and regulations and to monitor the effectiveness of the anti-corruption
framework, policies and procedures. The Group Compliance Committee assesses the nature and extent of the risks relating to bribery and corruption
to which the Group is exposed. The Committee considers not only bribery and corruption risks within the Group itself but also within the Group’s supply
chain. Our procurement group considers anti-corruption and anti-bribery risks in the supply chain and what steps should be taken to reduce those risks. We
generally consider such risks to be low given the countries in which we operate and the countries in which the majority of our suppliers are based. Supplier
due diligence is undertaken as considered appropriate. All centrally contracted suppliers are requested to complete a questionnaire as part of the Group’s
supplier due diligence. Further follow up may be undertaken based on the responses to questionnaires, such as requesting further evidence on specific
matters. For suppliers that are considered to be of particularly high inherent risk (for example, suppliers of clothing manufactured overseas), we make
reference to third party audits of the suppliers and countries involved.
The Group’s Director of Risk and Assurance periodically reviews the Group’s anti-corruption framework and report their findings to the Group’s Audit
Committee. A list of “Relevant Employees” is maintained, which comprises employees in those groups of staff that are considered to be most likely to have
the opportunity to participate in or have knowledge of material corruption. Specific anti-bribery and anti-corruption training is provided to these Relevant
Employees, including case studies. These employees are required to certify annually their continuing compliance with the Group’s Code of Conduct that
contains the Group’s anti-corruption policy.
1.7.10 Non-financial key performance indicators
Section 1.4.6 describes key performance indicators relevant to the Group’s business, including non-financial key performance indicators.
Section 1.7.2.6 describes key metrics and targets that we use to assess and manage relevant climate-related risks and opportunities.
1. Strategic report (continued)
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Annual Report and Financial Statements 2023
1.8 Section 172 statement
The Directors believe that in the decisions taken during the year ended 29 April 2023, they have acted, both individually and together, in the way they consider,
in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole. In doing so, the Directors have had
regard to, amongst other things, the matters set out in section 172(1)(a–f) of the Companies Act 2006.
This Board’s general approach to decision making and stakeholder engagement is set out below.
Our approach to decision making
Strategy
• The Group’s strategy is set out in section 1.4.2.
• The Board’s decision making is undertaken in the context of that strategy.
Culture and values
• We have a business culture reflecting a commitment to conduct business in a socially responsible way – this is described further in section 1.4.1.
• Our culture is supported by our corporate values – more information is provided in section 1.7.6.
• Our culture and values are supported by our Code of Conduct and whistleblowing arrangements – see section 1.7.6.2.
• The Board’s decision making reflects our culture and values.
• The Board monitors the Group’s culture through the results of staff surveys, reports from the Risk Assurance function, reports from the whistleblowing
process and activity outside of “the Boardroom” such as meetings with various staff from across the Group and visits to operational locations.
Delegated authorities
• Clear delegated authorities are in place to provide clarity as to where in the Group decision making responsibility lies.
• The Group Authorisation Policy, which sets out delegated authorities, includes a reminder of directors’ duties, including under section 172. That serves as
a reminder not only to directors of the Company but to directors of all of the Company’s direct and indirect subsidiaries, and to other decision makers.
• Certain matters are reserved for decision making by the Board. A copy of the latest matters reserved for the Board is available on our website at https://
www.stagecoachgroup.com/about/managing-the-business/governance/matters-reserved.aspx
• Each committee of the Board has clear, written terms of reference and those are available on our website as indicated in the report from each
Committee in this Annual Report.
Recognising the Directors’ duty to have regard to stakeholders, the Board engages with, and receives updates from various stakeholders as explained
elsewhere in this annual report, including:
Stakeholder Engagement
Stakeholder Group Example sources of information and engagement Section(s) in this Annual Report
Employees • Staff survey
• Whistleblowing process
• Other meetings and events outside scheduled Board meetings with staff
from across the Group
1.4.4, 1.7.3, 1.7.4, 1.7.6
Suppliers • Reports from management on its engagement with suppliers
• Reserved responsibility on major expenditure such as vehicle purchases
• Board attendance at events where suppliers are represented
1.4.4
Customers • Customer satisfaction surveys
• Other bespoke customer surveys
• Regular summaries of media reports
1.4.4
Government and regulatory bodies • Reports from management on its engagement with various
governmental and regulatory bodies
• Regular summaries of media reports
1.4.4
The financial community (including
lenders and credit rating agencies)
• Reports from management on lender and rating agency feedback
• Regular summaries of media reports
1.4.4
Pension scheme members • Presentation to Board from Pensions Director
Shareholder • Four Board members appointed by DWS Infrastructure
The community • Regular summaries of media reports
The Board considers the impact of the Group’s operation on the environment through reports from its Health, Safety and Environmental Committee. Section
1.7.2 of this Annual Report provides more detail on environmental matters and climate change.
1. Strategic report (continued)
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
In the year ended 29 April 2023, the Group transitioned from public ownership to ownership by DWS Infrastructure and the Board composition was adjusted to
one more appropriate for that ownership. The Board also commissioned a review of the management structure and organisation of the Group to identify possible
efficiencies and reviewed its strategy in this context. The Group substantially reduced the funding risk of its main pension scheme. The Group submitted bids for
operations in the first and second tranches of the Greater Manchester bus franchises. The Group also purchased two bus operating businesses in the Greater
London area to consolidate its position in that market and give a broader footprint on which to build its London operations. In common with many businesses, the
Group has faced a significant challenge to recruit sufficient employees (particularly drivers and engineering staff) to allow for the operation of its services to a high
standard. The Board has worked to ensure that relationships with customers and other stakeholders were maintained in this difficult environment. We outline
below how discharging their duties under section 172 influenced the Board’s decision making:
• The services provided by the Group can help the government to achieve its stated ambitions around decarbonisation, levelling up of communities, driving
economic recovery, and securing better health outcomes for citizens. The Board considers the Group’s core business of delivering public transport to have
good long-term prospects and that these services can be considered as part of the infrastructure on which society will continue to rely over a long term.
The Group’s goals and strengths align well with those of its shareholder.
• In each of the decisions referred to above, the Board was taking action that it believed would benefit the Group in the long term, such as by increasing the
sustainability of long-term revenue, growing its revenue base and reducing risk.
• During the movements in gilt and other asset prices following the autumn 2022, “mini budget” the Board identified and was able to take advantage of an
opportunity to de-risk the Stagecoach Group Pension Scheme (“the Scheme”). The trustees were able to sell the majority of its equity holdings and buy
lower risk assets, including government gilts and corporate bonds. The outcome of these changes has been to significantly accelerate the Scheme’s
journey to self-sufficiency across the three sections of the Scheme. The Scheme trustees and Board have continued to monitor the Scheme’s funding
position and the support of the employer covenant during these changes, ensuring the interests of beneficiaries of the Scheme were considered
throughout the process.
• The interests of the Group’s employees were considered within the Board’s decision-making throughout the year. Some of the changes made to the
business have unfortunately resulted in redundancies, mainly at a middle and senior management level. The Group has good relationships with government
and the Board recognises that strong partnership working between bus operators, national government and local transport authorities is fundamental to
transforming the country’s bus networks.
• The Board also remained mindful of the Group’s impact on the community, underpinned by our clear purpose of connecting people and communities.
The Group generally has good relations with the communities it serves, and we see scope for these to improve further, as the transition to zero emission
vehicles should help improve air quality and emissions in local communities. Challenging recruitment conditions led to a deterioration in bus service levels
in some areas and the Board has worked closely with senior management to find solutions to improve recruitment and retention of the employees who are
key to our future success. This has resulted in improved service operation in the later part of the year.
• Some of the climate-related risks and opportunities we face are long-term in nature and in developing the Group’s sustainability strategy, the Board has
considered the consequences of its decisions on the long-term.
• DWS Infrastructure has expressed a desire to invest in the Group’s sustainability strategy, including supporting the transition to zero emission vehicles. The
significant capital DWS Infrastructure has to invest should benefit the environment. Board members have met with management of suppliers to understand
how the Group’s business can align with their businesses to facilitate the roll-out of low carbon technologies.
• In considering proposals throughout the year the Board has considered whether they would impact the Group’s reputation for high standards of business
conduct. Under DWS Infrastructure’s ownership the Group continues to target maintaining investment grade status, supports the continuation of the Code
of Conduct and the values set out in that code and facilitates whistleblowing through its “Speak Up” policy. The Board has reviewed and approved the
continuance of a number of its other policies and procedures that aim to foster high standards of conduct in its businesses.
This Strategic report was approved by the Board of Directors and signed on its behalf by:
Mike Vaux
Company Secretary
29 June 2023
1. Strategic report (continued)
38
Stagecoach Group
Annual Report and Financial Statements 2023
2. Directors’ report
2.1 Group results and dividends
The results for the year are set out in the consolidated income statement on page 59.
On 9 March 2022, the boards of Inframobility UK Bidco Limited and the Company announced that they had reached agreement on the terms of a
recommended all-cash offer from Inframobility UK Bidco Limited for the entire issued and to be issued share capital of the Company. That offer became
unconditional on 20 May 2022. Accordingly, with effect from 20 May 2022, Inframobility UK Bidco Limited controls the Company. Inframobility UK Bidco
Limited owns 100% of the issued share capital of the Company. The parent entities of Inframobility UK Bidco Limited (i.e. Inframobility UK Midco Limited,
Inframobility UK Holdco Limited, Inframobility UK Topco Limited, PEIF III LUXCO Two S.a.r.l, PEIF III LUXCO One S.a.r.l and Pan-European Infrastructure III
SCSp) indirectly control the same percentage of the Company’s issued ordinary shares (excluding shares held in treasury) and voting rights.
Interim dividends of 8.453p per ordinary share were paid in the year ended 29 April 2023.
2.2 Board of Directors
The names of the individuals who acted as directors in the year is as follows:
Ray O’Toole
Martin Griffiths (resigned 10 January 2023)
Ross Paterson (resigned 31 January 2023)
Bruce Dingwall (appointed 1 February 2023)
Gregor Alexander (resigned 30 June 2022)
Scott Auty (appointed 27 May 2022)
James Bilefield (resigned 30 June 2022)
Miguel Costa (appointed 27 May 2022)
Florian Hubel (appointed 27 May 2022)
Hamish Mackenzie (appointed 27 May 2022)
Sir Brian Souter (resigned 30 June 2022)
Karen Thomson (resigned 30 June 2022)
Lynne Weedall
Graeme Charnock (appointed 21 April 2023)
Further information on each of the current Board members, including a short biography of each director can be found on the Group’s website at
https://www.stagecoachgroup.com/who-we-are/managing-the-business/governance/our-board.aspx.
No director has any interest in the share capital of the company.
2.3 Compliance with Corporate Governance Principles
This Annual Report and Financial Statements have been prepared in adherence with The Wates Governance Principles for Large Private Companies which can
be found at https://www.frc.org.uk.
2.4 Indemnification of directors and officers
The Company maintains Directors’ and Officers’ Liability Insurance in respect of legal action that might be brought against its directors and officers. In accordance
with the Company’s Articles of Association, and to the fullest extent permitted by law, the Company has indemnified each of its directors and other officers of the
Group against certain liabilities that may be incurred as a result of their positions with the Group.
2.5 Risk Management
The Board, including the Audit Committee members, consider the nature and extent of the risk management framework, including the risk profile that is
acceptable in order to achieve the Group’s strategic objectives. The Board has carried out a review of the effectiveness of the Group’s risk management and
internal control environment and such reviews are supported on an ongoing basis by the work of the Audit Committee. The Board is satisfied that processes
are in place to ensure that risks are appropriately managed. The most significant strategic, corporate and operational risks and uncertainties, and the Group’s
approach to their management, are detailed in sections 1.4.5.
2.6 Statement of Directors’ responsibilities in respect of the Annual Report, the Remuneration and
Nomination Committee report and the financial statements
The Directors are responsible for preparing the Annual Report, including the Strategic report, the Directors’ report, the Remuneration and Nomination
Committee report and the consolidated and parent company financial statements, in accordance with applicable United Kingdom law and regulations
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the consolidated
financial statements in accordance with UK-adopted International Accounting Standards, and elected to prepare the parent company financial statements in
accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial
Reporting Standard 101, Reduced Disclosure Framework, (“FRS 101”). 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 the Group and of the profit or loss of the Group for the relevant period.
In preparing those financial statements, the Directors are required to:
• select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, and then apply
them consistently;
• make judgements and estimates that are reasonable and prudent;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements in UK-adopted International Accounting Standards (or in respect of the
parent company financial statements, FRS 101) is insufficient to enable users to understand the impact of particular transactions, other events and
conditions on the Group’s financial position and financial performance;
• in respect of the consolidated financial statements, state whether UK-adopted International Accounting Standards have been followed, subject to any
material departures disclosed and explained in the consolidated and parent company financial statements respectively;
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
2. Directors’ report (continued)
• in respect of the parent company financial statements, state whether applicable UK Accounting Standards, including FRS 101, have been followed,
subject to any material departures disclosed and explained in the financial statements; and
• prepare the consolidated and parent company financial statements on the going concern basis unless it is inappropriate to presume that the Group
or as the case may be, the Company, will continue in business.
The Directors also confirm that they consider the Annual Report and consolidated financial statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Group’s position, performance, business model and strategy.
The approach taken in reaching this conclusion is explained in the Audit Committee report in section 4 of this Annual Report.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s and the Group’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and the Group and 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 the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of financial information
on the Company’s corporate website, www.stagecoachgroup.com. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
2.7 Conflicts of interest
Under the Companies Act 2006, a director has a statutory duty to avoid a situation where he or she has, or can have, a direct or indirect interest that conflicts,
or may possibly conflict, with the relevant company’s interests. The Companies Act 2006 allows directors of public companies to authorise conflicts and
potential conflicts where appropriate, if the relevant company’s articles of association contain a provision to this effect. The Company’s Articles of Association
give the Directors authority to approve conflict situations including other directorships held by a director of the Company.
There are safeguards in place that apply when the Directors decide whether to authorise a conflict or potential conflict. Firstly, only the Directors who have
no interest in the matter being considered are able to take the relevant decision and secondly, in taking any decision, the Directors must act in a way that they
consider, in good faith, will be most likely to promote the Company’s success. The Directors are able to impose limits or conditions when giving authorisation
if they think that is appropriate.
For the period from 29 April 2023 until the date of this report, the Board considers that the Directors’ powers of authorisation of conflicts have operated
effectively and those procedures set out above have been properly followed.
2.8 Financial risk management
Information regarding the Group’s use of financial instruments, its financial risk management objectives and policies, and its exposure to price, credit, liquidity
and cash flow risks can be found in note 23 to the consolidated financial statements.
2.9 Political donations
It is the Group’s policy not to make political contributions and accordingly there were no material contributions for political purposes during the year or in the
prior year.
2.10 Charitable donations
Charitable donations made by the Group during the year totalled £0.2m (2022: £0.2m). The donations were all made to recognised local and national charities
for a variety of purposes.
2.11 Going concern
International Accounting Standard 1, Presentation of Financial Statements, 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 Company’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 29 April 2023
were approved by the Board on 29 June 2023.
The directors have considered the forecast cash flow and liquidity of the Group, including the impact of the wider economic environment, for a period to
26 October 2024, and resulting forecast cash headroom and financial covenants associated with the Group’s financing arrangements, at each required
measurement date, when assessing the going concern position of the Group.
As the future performance of the Group as a whole will significantly influence the Company’s ability to continue as a going concern, we consider going
concern for the Group, including the Company.
2.11.1 Going concern assessment
During the year ended 29 April 2023, we have delivered a positive set of financial results and made progress on delivering our key objectives. We have seen a
continued recovery in passenger demand, as we work in partnership with national and local government to maximise the opportunities from public transport
for consumers and the country while navigating the current economic environment. There has also been a substantial strengthening in the Group’s pension
position, with a net pension asset at 29 April 2023 of £195.9m (2022 restated: deficit of £19.0m).
The Board considered the liquidity position in the Group’s financial forecasts, which cover the period from 29 June 2023 to 26 October 2024 (“the going concern
period”), recognising the challenges around reliably estimating and forecasting the effects of economic recovery in the UK on our regional bus business.
The key areas of forecasting uncertainty include:
• The timing and extent of the recovery in demand for regional bus journeys;
• Increased and uncertain cost inflation; and
• The nature and extent of payments from government for continuing regional bus services.
Our base case forecast assumes that regional bus commercial revenue returns to 98% of pre-COVID levels for the period ending 26 October 2024, reflecting
consistent patronage with that achieved in the year ended 29 April 2023 along with inflationary fare increases already implemented. Concessionary revenue
for the year ending 27 April 2024 is forecast at 100% of pre-COVID levels, increasing to 102% pre-COVID levels for the remainder of the going concern period.
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Stagecoach Group
Annual Report and Financial Statements 2023
2. Directors’ report (continued)
Our base case forecast reflects the recently announced two-year funding settlement for bus operators in England, which included £300m of further funding
for the wider bus sector to protect bus services until 2025, in addition to further funding for the £2 fare cap to 31 October 2023, increasing to £2.50 until
30 November 2024.
Our severe and plausible downside scenarios contemplate lower regional bus commercial revenue over the forecast period, in addition to more cautious
assumptions around our levels of cost increases and government funding support. The downside scenario considered in the going concern period was:
• passenger numbers at 75%-76% of pre-COVID levels in the going concern period;
• commercial revenue at 90%-91% of pre-COVID levels in the going concern period;
• concessionary revenue at 91% of pre-COVID levels for the remainder of the going concern period;
• no additional government funding of zero emission buses, beyond awards already made; and
• failure to win the majority of its bus franchise bids resulting in the loss of services in a number of its depots.
2.11.2 Mitigating actions
To the extent any severe downside scenarios materialised, we consider that the Group would have sufficient controllable, mitigating actions to avoid a breach
of the covenant tests in our committed bank facilities entered into in March 2020 and amended in November 2022.
Having constrained the Group’s capital expenditure over the past three years, our base case forecast assumes we increase our investment in capital expenditure,
as we progress our plans to transition to a zero emission bus fleet. Accordingly, reducing or deferring this capital expenditure would be the key mitigation available.
In addition, we would be able to further reduce the Group’s cost base, in particular reducing vehicle mileage to better match customer demand, which would
result in variable cost savings. These mitigations are within the Group’s control and do not have any associated penalties.
2.11.3 Covenant headroom
Under the base case and downside scenarios, the Group remains in compliance with the covenant tests in our committed core bank facilities entered into
in March 2020 and amended in December 2022 following the change of ownership of the Group in May 2022. In the reverse stress test scenario, headroom
against the covenant tests exists throughout the going concern period, after taking account of controllable, mitigating actions.
2.11.4 Public policy context
During the COVID-19 pandemic to date, the governments in England, Scotland and Wales demonstrated a concern to ensure the continuity of bus services.
They do not want to see cuts in bus services that hinder people connecting with work, shops, education, healthcare, or leisure. They do not want reports of
key workers unable to get to work or people needing healthcare unable to access it.
As we continue to emerge from the long-term effects of the pandemic and work through a cost of living crisis, the governments have a desire to get bus usage
back to what it was pre-pandemic and then increase patronage and grow buses’ mode share. Public transport is key to various components of the current
public policy agenda in the UK: post-COVID economic recovery, building back better, decarbonisation, levelling up and tackling the cost of living crisis. We
believe we can be very confident that governments will continue to act, including providing financial support, to avoid significant cuts in regional bus services.
The recent two-year £500m funding announcement in May 2023 is further evidence of government commitment to the bus sector. Accordingly, that provides
us with some confidence in the sustainability of regional bus profitability over that period, which we believe underpins the Group’s ability to continue as a going
concern over the period until October 2024.
2.11.5 Going concern conclusion
Taking account of the recent change in the Company’s ownership, the continuing economic background in the UK, and other relevant factors, the Board
concluded that it remained appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements and the parent
company financial statements. The Board has a reasonable expectation that the Company and the Group will each continue to operate as a going concern
for the period to 26 October 2024.
2.12 Auditors
In the case of each of the persons who were directors of the Company at the date when this report was approved:
• so far as each of the Directors is aware, there is no relevant audit information (as defined in section 418 of the Companies Act 2006) of which the
Company’s auditors are unaware; and
• each of the Directors has taken all the steps that he/she ought to have taken as a director to make himself/herself aware of any relevant audit information
(as defined) and to establish that the Company’s auditors are aware of that information.
A resolution to re-appoint Ernst & Young LLP as auditors of the Company will be proposed at the next Annual General Meeting. A resolution will also be
proposed that the Audit Committee be authorised to fix the remuneration of the auditors.
2.13 Material included in the Strategic report
The Strategic report in section 1 includes information on the following matters that would otherwise be required to be presented in the Directors’ report:
• Employment policies – see section 1.7.3.2;
• Employee engagement – see section 1.7.3.5;
• Fostering relationships with suppliers, customers and others – see sections 1.4.4 and 1.8;
• Future developments in the business – see, amongst others, sections 1.3 and 1.6; and
• Greenhouse gas emissions – see section 1.7.2.6.1.
By order of the Board
Mike Vaux
Company Secretary
29 June 2023
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
3. Corporate governance report
3.1 Statement of corporate governance arrangement
This section 3 is our statement of corporate governance arrangements, as required by The Companies (Miscellaneous Reporting) Regulations 2018. As a large
private company, we now follow The Wates Corporate Governance Principles for Large Private Companies issued by the Financial Reporting Council (“The
Wates Principles”). The principles can be found at https://www.frc.org.uk.
Until June 2022, the Company’s shares were traded on the London Stock Exchange and the Company’s corporate governance reflected that. In our 2022
Annual Report, we reported our corporate governance arrangements with reference to the Financial Reporting Council’s UK Corporate Governance Code.
On 9 March 2022, Inframobility UK Bidco Limited made an all-cash offer to acquire the entire issued and to be issued share capital of the Company. That offer
became unconditional on 20 May 2022. On 28 June 2022, the listing of the Company’s shares was cancelled. On 15 August 2022, Inframobility UK Bidco
Limited completed the acquisition of the Company’s entire issued share capital, and on 17 October 2022, the Company re-registered as a private company.
Inframobility UK Bidco Limited is a Company managed by DWS Infrastructure, a long-term infrastructure investment management business.
During the year ended 29 April 2023, we adjusted our corporate governance arrangements to reflect the change in ownership of the Company and the
de-listing of its shares, transitioning from applying the UK Corporate Governance Code to applying the Wates Principles. The sections that follow set out how
we applied the Wates Principles in the year.
3.2 Purpose and leadership
In line the Wates Principles, our Board develops and promotes the purpose of the Company and ensures its values, strategy and culture align with that purpose.
The Company’s purpose and business model are explained in section 1.4.1 of this Annual Report, its corporate values are set out in section 1.7.6.1 and its
strategy is summarised in section 1.4.2. The Board determines the Group’s strategy and develops it as circumstances change. From time to time, the Board
meets for an entire day to focus exclusively on strategy.
The Company engages directly with DWS Infrastructure, which manages the shareholder’s investment in the Company. Four representatives of DWS
Infrastructure are directors of the Company and the Company’s management also has regular discussions with other representatives of DWS Infrastructure.
Those representatives of DWS Infrastructure also share the views of the investors in the fund that is the ultimate owner of the Company. Accordingly, the
Board has a clear understanding of the views of the shareholder and the fund’s investors.
The Directors seek to act with integrity and lead by example, setting the tone from the top. They seek to maintain positive relationships with all stakeholders,
particularly the workforce. Section 1.7.3.5 of this Annual Report explains our engagement with the workforce.
As explained in section 1.4.1 of this Annual Report, we are committed to conducting business in a socially responsible way and we believe that to be consistent
with our business objectives and strategy. We look to maintain a healthy corporate culture. Our description of our principal risks and uncertainties in section
1.4.5 includes consideration of risks related to people and culture, including steps we take to manage such risks. The Board monitors the Group’s culture
through a variety of ways including employee surveys, summaries of matters raised through the “Speak Up” platform and through other whistleblowing reporting
channels, management engagement with trade unions on a range of matters, the results of internal audits, reports of any frauds affecting the Group, Board and/
or Committee visits to operational locations, and key performance indicators on matters such as customer complaints and employee turnover. Section 1.7.6.2
explains the whistleblowing process, which together with policies and processes overseen by our compliance functions, provide a basis for concerns about
misconduct and unethical practices to be raised and properly reviewed.
Section 2.7 of this Annual Report explains how we manage conflicts of interest.
3.3 Board Composition
The Board currently comprises eight directors, being:
• An Executive Chairman and a Chief Financial Officer;
• Four non-executive directors, who are representatives of DWS Infrastructure; and
• Two independent non-executive directors.
The Directors bring a range of skills, backgrounds, experience, and knowledge to the Board, which ensures an effective Board to lead and control the Group,
ensures no one director or viewpoint is dominant in the decision-making process. The Board delegates the operational management of the Group to the
Executive Directors. Four non-executive directors appointed by DWS Infrastructure ensure that the views of the shareholder and its investors are represented
on the Board. Two independent non-executive directors brings an independent viewpoint and create an overall balance.
Following the retirement of Martin Griffiths, the roles of Chairman and Chief Executive have been combined. The Executive Chairman, Ray O’Toole, is
responsible for the running of the Board and for ensuring that the Board plays a full and constructive part in the development and determination of the
Group’s strategy and overall commercial objectives. The Executive Chairman is responsible for the Board’s overall effectiveness, promoting open debate and
facilitating constructive discussion. The Executive Chairman, with the support of the Company Secretary and the executive team, ensures that all directors
have appropriate information and sufficient time is made available for meaningful discussion at Board meetings. The Executive Chairman is responsible for
proposing and developing the strategy with support from the executive team. The Executive Chairman is responsible for the running of the Group’s business
and reports to the Board. All other members of the executive management team report either directly or indirectly to the Executive Chairman.
The Board keeps its size and structure, and the roles and contribution made by each director, under review and changes in responsibilities are made where
appropriate to improve the Board’s effectiveness.
The six non-executive directors offer constructive challenge to the executive team. The Board includes two non-executive directors, who are independent
of the shareholder. The appointment of independent non-executive directors is subject to a transparent procedure overseen by the Remuneration and
Nomination Committee.
Each director receives induction training on appointment and subsequently such training, briefings and site visits as are considered necessary to keep abreast
of matters affecting their roles as directors. The Executive Chairman reviews the Directors’ training and development needs in conjunction with the Company
Secretary. Training can encompass health, safety, environmental, social and governance matters.
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3. Corporate governance report (continued)
The Board assesses its own performance annually. That assessment is co-ordinated and directed by the Executive Chairman with the support of the
Company Secretary. The Chairman obtains feedback from each individual director on the performance of the Board. A questionnaire-based process is
undertaken to assess the performance of each of the Board’s committees. The Board has considered the results of these assessments and has concluded
that, overall, the Board and its committees continue to operate in an effective and constructive manner.
3.4 Director responsibilities
The Board maintains practices and policies that provide clear accountability and responsibilities to support effective decision-making. The matters reserved
for the Board are set out in writing, and the Group Authorisation Policy sets clear limits of delegated authority throughout the Group. The Group Treasury
Policy, which is approved by the Board, sets clear policies and limits of delegated authority in respect of treasury matters. The Group has a written policy
in place for managing conflicts of interest. Maintaining written records of these matters helps ensure that the Board and individual directors have a clear
understanding of their accountability and responsibilities, as well as helping to ensure effective decision-making and independent challenge.
The Executive Chairman and the Company Secretary keep the Company’s corporate governance arrangements under review and make changes, as appropriate,
to ensure the arrangements remain fit for purpose. Opportunities to strengthen the governance of the Company are given appropriate consideration.
To provide a more manageable process and better control, certain of the Board’s powers have been delegated to committees: the Health, Safety and
Environmental Committee; the Audit Committee; and the Remuneration and Nomination Committee. Each Committee’s terms of reference are set out in
writing and approved by the Board.
The Group has processes in place to ensure its internal systems and controls are operating effectively, and to ensure that the quality and integrity of information
provided to the Board is reliable. The Group’s Director of Risk and Assurance function provides the Audit Committee and Board with assurance around internal
systems and control. Board papers and supporting information are provided to the Board sufficiently ahead of scheduled meetings.
3.5 Opportunity and risk
The Board considers opportunities for the Group to create value for its stakeholders and reflects those, as appropriate, in the Group’s strategy. The Group’s
Authorisation Policy sets out limits of delegated authority, ensuring that new business opportunities of a certain value are considered and approved by the
Board. At the same time, the Board recognises the importance of maintaining a sound risk culture throughout the Group such that risks are identified, evaluated,
and managed appropriately.
The Board considers that it is in the interests of the Group’s stakeholders for the Group to evaluate and accept risk.
The Group has an ongoing process for identifying, evaluating, and managing the principal risks that it faces, including any environmental, social and
governance risks.
The Board considers acceptance of appropriate risks to be an integral part of business and unacceptable levels of risk are avoided or reduced and, in some
cases, transferred to third parties. Internal controls are used to identify and manage risk. The Directors acknowledge their responsibility for establishing and
maintaining the Group’s system of internal control, and for reviewing its effectiveness. The Group’s system cannot provide absolute assurance but is designed
to provide the Directors with reasonable assurance that any significant risks or problems are identified on a timely basis and dealt with appropriately. The Group
has established an ongoing process of risk review and certification by the business heads of each operating unit.
3.6 Remuneration
The Board has established a Remuneration and Nomination Committee, chaired by an independent non-executive director, to ensure executive remuneration
structures are designed to align with the long-term sustainable success of the Group, taking account of pay and conditions throughout the Group.
In determining appropriate levels of remuneration for the Executive Directors, the Remuneration and Nomination Committee aims to provide overall packages of
terms and conditions that are competitive and will attract, retain and motivate high quality executives capable of achieving the Group’s objectives. The Committee
also aims to ensure that the Executive Directors are fairly rewarded for their individual responsibilities and contributions to the Group’s overall performance.
The Remuneration and Nomination Committee believes that remuneration packages for the Executive Directors should contain meaningful and effective
performance-related elements, and that the performance-related elements should be designed to align the interests of the Executive Directors with the
interests of the shareholder.
The Remuneration and Nomination Committee can consider all relevant factors when setting the Executive Directors’ remuneration, including environmental,
social and governance matters. Performance targets are established to achieve consistency with the interests of the shareholder, with an appropriate balance
between short-term and long-term targets. Performance targets can include financial measures as well as non-financial targets, such as environmental and
safety objectives. The incentive arrangements for the Executive Directors are structured so as not to unduly increase environmental, social and governance
risks by inadvertently motivating irresponsible behaviour.
The Remuneration and Nomination Committee regularly reviews the existing remuneration of the Executive Directors, making comparisons with peer companies
of similar size and complexity and with other companies in the public transport industry. Proposals are then discussed in the light of the prospects for the Group
as a whole. The Committee also reviews and sets the remuneration arrangements of other senior executives employed by the Group. The approach is consistent
with that applied for the workforce, aiming to pay competitively with reference to the market rate for a job.
The Remuneration and Nomination Committee considers pay and conditions of the wider workforce and the Group’s gender pay gap when designing the
executive remuneration structures.
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3. Corporate governance report (continued)
3.7 Stakeholder relationships and engagement
Recognising the Directors’ duty to have regard to stakeholders, the Board engages with, and receives updates and feedback from various stakeholders.
Further information on the Board’s sources of information and engagement in respect of stakeholders is provided in the section 172 statement in section 1.8
of this Annual Report.
The section 172 statement also explains how the Directors consider stakeholders when making decisions.
The Annual Report and consolidated financial statements, which are made available to all stakeholders, are intended to provide a fair, balanced, and
understandable assessment of the Group’s position and prospects.
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Annual Report and Financial Statements 2023
4. Audit Committee report
4.1 Introduction from Graeme Charnock, Chairman of the Audit Committee
As Chairman of the Audit Committee, I am pleased to present our Audit Committee report for the financial year ended 29 April 2023.
During the year the membership of the Audit Committee changed, reflecting the change in ownership of the Group. Gregor Alexander, James Bilefield and
Karen Thomson attended one meeting in the year until stepping down from their roles as non-executive directors of the Group. I wish to thank them for their
contributions to the smooth and successful running of the Audit Committee.
4.2 Composition of the Audit Committee
The current composition of the Audit Committee is summarised as:
• Graeme Charnock (Chairman)
• Ray O’Toole
• Lynne Weedall
4.3 Operation of the Audit Committee
The Audit Committee met formally three times during the year. The Committee retains discretion as to who from outside the Committee should attend its
meetings but generally invites the following to attend:
• The Chief Financial Officer;
• The Group Financial Controller;
• The Director of Risk and Assurance;
• The Company Secretary, who is Secretary to the Committee;
• Representatives from the external auditors;
• Representatives from the Risk Assurance (internal audit) Function (until 23 June 2022).
In addition, the Group Tax Director and the Group Head of Treasury are expected to present to the Committee at least annually. The Committee may also invite
other directors of the Company to attend meetings of the Committee and does so from time to time. The external auditor has the opportunity to meet the
members of the Committee and/or the Committee’s Chair, without executive management present.
The Committee as a whole has an appropriate and experienced blend of audit, financial and commercial expertise to assess the issues it is required to address.
The Board is satisfied that, through the range of skills and business experience possessed by each member of the Audit Committee, throughout this financial
year, the Audit Committee as a whole had the competence relevant to the sectors in which the Group operates.
4.4 Activities of the Audit Committee
The Audit Committee is responsible, primarily, for monitoring the Group’s financial statements, the adequacy and effectiveness of its internal control systems
(including financial controls), the operation of its risk management frameworks and whistleblowing procedures, and for reviewing the appointment,
independence, performance and cost effectiveness of the Group’s external auditor.
During the year, the Audit Committee:
• reviewed the Annual Report and Accounts and Interim Report including going concern considerations and accounting for the various pension scheme
arrangements that the Group participates in;
• reviewed and updated the Treasury Policy;
• reviewed and updated the Tax Strategy and Tax Policy;
• monitored the Group’s cyber security activity and key controls;
• considered the impact of changes to the accounting and financial reporting regimes applicable to the Group;
• reviewed the Group’s internal control and risk management systems, and the outcomes of risk management and risk-based internal audit work;
• considered internal audit skills and resources available within the Group and satisfied itself that these are adequate to meet the needs of the business and
will be supplemented with co-sourced independent specialist support as and when necessary;
• reviewed and challenged management in relation to findings from internal audit reviews;
• assessed the adequacy of the Group’s insurance claims provision;
• review of alternative performance measures and adjusted items;
• evaluated the external audit activity, specifically in relation to the key risks (impairment of non-financial assets, going concern and valuation of investment
property) and key judgemental areas (pensions and tax);
• in the course of satisfying itself as to the independence and objectivity of the external auditor, analysed the level of fees paid to the external auditor for audit
and non-audit work, and the performance of the external auditor;
• reviewed compliance with the Group’s Code of Conduct and the Board oversees use of the Group’s “Speak Up” Whistleblowing policy, which provides
a mechanism for employees with serious concerns about the conduct of the Group, or its employees, to report those concerns. The Board ensures that
appropriate arrangements are in place to receive and act proportionately upon a complaint about malpractice; and
• considered the extent to which the current and future effects of climate change are appropriately reflected in the consolidated financial statements; and
• assessed the reasonableness of the assumptions made about the Group’s prospects when assessing going concern.
The Audit Committee also reviewed the evidence that supported the conclusion that the Board has a reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as they fall due over the period ending 26 October 2024, noting it was consistent with the disclosure given
in section 2.11 of this Annual Report. The Committee reviewed and challenged management on its financial modelling and scenario analysis.
The Committee has considered a range of other matters at its meetings over the last year and received various reports and presentations as follows:
• As part of an assessment of the Group’s readiness for any future implications from the consultation on reforming UK Corporate Governance,
audit and reporting, the Committee received a presentation from the Director of Risk and Assurance around the Group’s internal controls.
• A presentation was received on the Group’s tax affairs and related accounting judgements and risks. The Group Head of Treasury gave a presentation
on the Group’s treasury affairs and management of treasury risks.
• As part of the Committee’s ongoing training and development, both management and the external auditors updated the Committee on developments
in accounting standards, auditing standards, the Financial Reporting Council UK Corporate Governance Code, legislation affecting the Group more
generally and other relevant regulatory developments and guidance.
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4. Audit Committee report continued
4.5 Fair, Balanced and Understandable assessment
The Audit Committee advised the Board on whether it considers the Annual Report and financial statements, taken as a whole, to be fair, balanced and
understandable and to provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.
The Committee assessed the controls and processes in place in respect of the production of the Annual Report and financial statements as operating
effectively during the year, and was able to provide positive assurance to the Board on the fair, balanced and understandable conclusion.
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Annual Report and Financial Statements 2023
5. Remuneration and Nomination Committee report
5.1 Introduction from, Lynne Weedall, Chair of the Remuneration and Nomination Committee
I am pleased to present the Remuneration and Nomination Committee’s report for the year ended 29 April 2023.
Since the end of our last financial year on 30 April 2022, Inframobility UK Bidco Limited (“Bidco”), a company managed by DWS Infrastructure, took control
of the Company. Following the change of control to Bidco, four representatives of DWS Infrastructure joined the Board of the Company on 26 May 2022.
On 28 June 2022, the listing of the Company’s shares on the premium listing segment of the Official List, and the trading of the Company’s shares on the
London Stock Exchange’s main market for listed securities, were cancelled.
As indicated in the Group’s Annual report last year the structure and composition of the Board’s committees was under review and during the year ended
29 April 2023 the Board reviewed the corporate governance arrangements for the Group. The Board amalgamated the Remuneration and Nomination
Committees, reflecting the change in ownership and governance requirements for those committees. New terms of reference were approved and it was
agreed that I would chair the combined committee unless it was dealing with matters in its terms that were specific to the business of the former Nomination
Committee, when Hamish Mackenzie would take the chair.
Martin Griffiths (Chief Executive) and Ross Paterson (Chief Financial Officer), together with non-executive directors, Sir Brian Souter, Gregor Alexander,
James Bilefield and Karen Thomson, stepped down from the Board during the year ended 29 April 2023.
Ray O’Toole and Lynne Weedall continued on the Board throughout the year. On 27 May 2022, Hamish Mackenzie, Scott Auty, Florian Hubel and Miguel Costa
joined from DWS Infrastructure and Graeme Charnock was appointed to the role of the independent Chairman of the Audit Committee. Bruce Dingwall, previously
the Director of Finance, was appointed to the Board as Chief Financial Officer on 1 February 2023. Graeme Charnock was appointed as a non-executive director
on 21 April 2023.
An effective board needs to maintain balance over time, taking account of planned and unplanned changes to membership and the changing needs of the
business. The Committee ensures that it regularly reviews our Board composition and ensures that the mix of skills and experience available is appropriate.
We are aware that talented individuals can come from diverse backgrounds and we aimed to promote diversity in the recommendations that we made to
the Board. The Committee considers the Group’s key strategic priorities when setting remuneration and ensures that all remuneration packages are linked to
the long-term sustainable financial performance of the Group. The Committee ensures that any incentive structure drives performance that will enhance the
experience of our customers, shareholder and our employees.
The Group is also committed to operating as a good corporate citizen. In carrying out its activities the Group is committed to doing the right thing for our
various stakeholders and local communities. The Committee supports the Group in areas such as fairness, gender pay and diversity and inclusion.
The Committee is also guided by the following principles:
• attract and retain talent – allow the Group to attract, motivate and retain senior executives of high-calibre who are capable of delivering the Group’s
stretching objectives;
• performance-driven – link rewards to both individual and corporate performance, responsibility and contribution over both the short and long term;
• market aligned – position the Group competitively in the principal markets (both private and listed companies) where it competes for talent;
• fair – fairly designed and applied with consideration to market positioning, internal relativity and individual contribution, in the context of pay within the wider
workforce; and
• simple – rewards are simple and understandable with a clear link between performance expectations, outcomes and rewards.
The Committee was satisfied that the remuneration policy was in the best interests of shareholders and did not promote excessive risk taking. As part of
the Directors’ remuneration policy, the Committee reserved the right to make minor amendments to the policies set out for regulatory, exchange control,
administrative or tax purposes. Looking forward, now that the Company’s shares have been de-listed, we will be reviewing the remuneration policy and
adjusting it, as appropriate, to reflect the Company’s new ownership and its latest objectives.
As set out below, I am satisfied that the Remuneration and Nomination Committee met its responsibilities during the year ended 29 April 2023.
5.2 Composition of the Remuneration and Nomination Committee
The current composition of the Remuneration and Nomination Committee is summarised as:
• Lynne Weedall (Chair)
• Ray O’Toole
• Hamish Mackenzie
• Scott Auty
Lynne Weedall is the Chair of the Committee except on matters specific to nomination matters within its remit, where Hamish Mackenzie takes the chair.
5.3 Operation of the Remuneration and Nomination Committee
The Remuneration and Nomination Committee keeps under review the overall structure, size and composition of the Board, and is responsible for evaluating
the balance of skills, knowledge and experience of the Board and its committees. Where appropriate, the Committee will suggest adjustments to achieve that
balance. For a proposed appointment, the Committee will prepare a description of the role and the attributes required of the candidates, which will include
a job specification and the estimate of the time commitment expected. In making any appointment, the Group’s policy on directors having other significant
commitments will be taken into account and potential candidates will be asked to disclose their other commitments and confirm that they will have sufficient
time to meet what is expected of them.
The Directors are also required to report any significant changes in their other commitments as they arise. The Committee identifies and evaluates suitable
candidates and makes proposals for each appointment, although final appointments are the responsibility of the Board as a whole. The appointments process
takes account of the benefits of diversity of the Board, including gender and ethnic diversity, and in identifying suitable candidates, the Committee considers
candidates from a range of backgrounds. Recruitment consultants are selected based, amongst other factors, on their ability to access a diverse pipeline
of talent.
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
5. Remuneration and Nomination Committee report (continued)
During the year ended 29 April 2023, in anticipation of the succession of the position of chairman of the Group’s Audit Committee, the Company engaged the
services of the executive search firm, Sam Allen Associates, to assist with the search for a candidate with recent and relevant financial experience for appointment
to the Board. The search for a candidate was undertaken on the basis of search specifications that set out the key experience, skills and attributes that had been
identified by the Company. That appointment was cancelled following the takeover by DWS.
Sam Allen Associates has also supported the process of the orderly succession of the internal candidate, Bruce Dingwall, in place of Ross Paterson as Chief
Financial Officer, providing external benchmarking and an assessment process.
Non-executive directors, other than the representatives of DWS Infrastructure, receive a letter of appointment. For any new appointments, the expected time
commitment is agreed with the director and included in the letter of appointment.
5.4 Appointments of Chairman and Chief Executive
Hamish Mackenzie, who chairs the Committee when dealing with nomination matters, would lead any process to appoint a Chief Executive or Chairman.
Following the retirement of Martin Griffiths from the Board, the Committee has engaged Spencer Stuart to assist in providing a diverse range of candidates for
recruitment to the position of Chief Executive Officer.
5.5 Board diversity and inclusion policy
The Company believes strongly that its Board benefits from being comprised of talented people with a range of perspectives and from differing backgrounds.
It is our policy to maintain diversity on the Board with regards to aspects such as age, social and ethnic backgrounds, cognitive and personal strengths.
The objective of this diversity policy is to maintain a Board with directors that collectively have a broad range of skills appropriate to pursuing the Group’s
strategy and objectives, to ensure that the Board benefits from a range of perspectives and viewpoints and to ensure that no one director or viewpoint is
dominant in the decision-making process.
The diversity policy has been implemented by ensuring that the terms of reference of the Committee reflect diversity in the criteria for identifying suitable
candidates for nomination to the Board. The policy is also reflected in any discussions the Committee has with external search consultancies in relation
to any search process for a new director.
We consider that our policy in respect of Board diversity has remained effective during the financial year ended 29 April 2023.
In addition to board diversity, the Company believes in promoting diversity and inclusion at all levels of the organisation, further details of which are provided
in section 1.7.4 of the Strategic report.
Fixed elements of pay
Basic salary
Purpose and link to strategy objectives
To attract, retain and motivate executives, ensuring basic salaries are
competitive in the market.
Operation
Basic salaries are generally reviewed as at 1 May each year but the
Remuneration and Nomination Committee also has discretion to adjust
them at other times of the year. Account is taken of changes in individual
responsibilities that may have occurred and the salaries for similar roles in
comparable companies. Account is also taken of pay conditions throughout
the Group.
Pensions and life assurance arrangements
Purpose and link to strategy objectives
To provide relevant life assurance and pension benefits that are competitive
in the market.
Operation of reward element for Executive Directors and
senior executives
The Company provides pension benefits to eligible employees through legacy
defined benefit arrangements or through the Stagecoach Defined Contribution
arrangements (“SDC”), which is a defined contribution arrangement. The SDC
is available for newly eligible employees and provides money purchase
pension benefits.
Executive directors and senior executives are entitled to receive a cash
allowance in lieu of pension contributions.
Benefits in kind and other allowances
Purpose and link to strategy objectives
Designed to be competitive in the market.
Operation
Benefits in kind and other allowances can include:
• Healthcare benefits, life assurance cover, company car allowance,
and telephone and communications costs
• Relocation assistance upon appointment if/when applicable.
Business related travel and subsistence costs will be met or reimbursed
including directors’ partners attending corporate events or management
conferences. Where the Committee considers it appropriate, other benefits
may be provided, such as paying reasonable legal fees or other costs related
to recruitment, relocation or any proposed changes to terms and conditions
of employment.
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Annual Report and Financial Statements 2023
Variable pay
Performance-related annual bonuses
Purpose and link to strategy objectives
Aims to focus the Executive Directors on achieving demanding annual targets
relating to Group performance.
The part deferral of the bonus is designed to align managers’ and
shareholders’ interests, and incentivise managers to remain with the Group.
Operation
Around the start of each financial year, the Committee agrees specific
objectives for each executive director and senior leader. Following the end of
each financial year, the Remuneration and Nomination Committee determines
the performance-related annual bonus for each executive director or senior
leader for the year just ended. This is based on their performance in achieving
the set objectives, and affordability for the Group.
Bonus awards are settled in cash, and in accordance with the rules of the
Deferred Bonus Plan up to 50% of any actual bonus award will be paid
shortly after the end of the relevant financial year with the balance being
subject to deferral of up to three years.
It is an important part of this Policy that the level of bonuses paid, including
for any personal or non-financial elements, are considered and are subject to
the overall discretion of the Committee after taking into account the financial
performance and standing of the Group and the overall individual performance
of the relevant executive. The Committee will also retain the flexibility to
change the number and the nature of the financial performance measures
in the annual performance and bonus plan at the start of each financial year,
or over the course of a year, depending on the financial priorities of the Group
and other relevant economic or business factors.
There are no further specific performance conditions attaching to the release
of Deferred Cash Bonus because the annual bonus under which the deferral
earned was subject to performance conditions.
5. Remuneration and Nomination Committee report (continued)
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
The Board has appointed a Health, Safety and Environmental committee. The Committee is currently made up of the following:
• Ray O’Toole (Chairman)
• Florian Hubel
• Miguel Costa
Representatives from the executive management are invited to attend the meetings.
With the support of the Group’s Health, Safety and Environment Director, the Committee assists the Board to fulfil its responsibilities by recommending Group
policy in these areas and monitoring compliance with those policies. The Committee approves the Group’s overall strategic safety framework. The Committee
challenges the management team to continually strengthen its proactive safety culture and management processes, to identify and address emerging risks,
and to respond to events. It has access to internal safety executives and also external consultants, where required. Health and safety is always the priority of
the Committee.
The Committee also focuses on the environmental part of its remit. The Group has appointed a Head of Sustainability who reports to the committee on
measurement and reduction of the environmental impact of the Group’s operations. The Board has approved the Group’s Sustainability Strategy, 2021:
“Driving Net Zero: Better Places to Live and Work” https://www.stagecoachgroup.com/~/media/Files/S/Stagecoach-Group/Attachments/pdf/stagecoach-
group-sustainability-strategy-2021.pdf. This is our long-term vision to make a difference for our planet, the people we employ, the communities we serve,
and the health and wellbeing of us all. The Committee has oversight of the strategy and its implementation.
We involve a range of contributors from the Group’s businesses in the work of the committee and the Committee actively engages with those businesses to help
the Group to evolve its health, safety and environmental strategy and culture. Members of the Committee are encouraged to be visible to the Group’s managers
and staff through regular site visits. During the year, the members of the Committee visited the Group’s bus operations in Cambridge. The Committee was able
to see the opportunities for growth in a region which has always valued alternative modes of transport to the private car. The Committee members were able to
experience the guided busway operations and to see the part it plays in providing rapid mass transit in the area. During a visit to suppliers made by the whole
Board, the Committee members saw the production line of electric vehicles and discussed the future direction of electric vehicle technology. We strongly believe
that electric vehicles will be a key part of the path to a net zero future and will work with the supply chain to enable the move to a cleaner, low carbon fleet.
Senior managers attend meetings of the Committee, providing the Committee with an opportunity to question and challenge them on matters within its
remit and to share best practice across the Group. The Committee also invites more junior members of the team to engage with the Committee. By bringing
contributors together at its meetings, the Committee aims to promote a strong safety culture, share knowledge between the Group’s businesses and to
challenge its business managers and safety advisers to create sustained improvement over time.
As incidents occur, the Committee, aided by the safety management teams, can analyse those incidents and learn lessons to further improve the Group’s
safety processes. The Committee and its members visit operational locations to observe health, safety, and environmental management in practice.
The Committee allocates time in its agendas for deep dive discussions on areas of specific interest or concern to it. During the year, additional briefings and
deep dive discussions covered a range of topics, including:
• A briefing to new members of the committee on the regulatory safety framework for the industry
• The Group’s safety reporting channels – Speak Up and CIRAS
• Low bridge avoidance system roll-out
• Driver risk management tool
• ESG metrics benchmarking review
• Results of Group safety culture survey
• 5-year safety plan and Group sustainability strategy
The Committee receives reports on trends in health and safety leading and lagging key performance indicators across the Group as well as information on
significant safety or environmental incidents involving the Group. These key performance indicators are regularly reviewed to ensure that they remain relevant
and appropriate.
The Safety Team has developed a five-year Safety Plan and has developed a safety dashboard to provide the Committee with regular updates on progress
against that plan. Training, where relevant, is provided to the Committee on health, safety, and environmental matters. The Committee liaises with the
Remuneration and Nomination Committee in determining any health, safety and environmental objectives that form part of the Executive Directors’ personal
objectives and to assess performance against these.
The safety and security of our customers, our people and others is fundamental to our business and we believe that Stagecoach has a key role to play in the
future of environmentally sustainable public transport.
6. Health, Safety and Environmental Committee report
50
Stagecoach Group
Annual Report and Financial Statements 2023
The Directors confirm that to the best of their knowledge:
• The consolidated financial statements, prepared in accordance with UK-adopted International Accounting Standards, give a true and fair view of the
assets, liabilities, financial position and profit of the parent company and the undertakings included in the consolidation taken as a whole; and
• The Annual Report, including the Strategic report and the Directors’ report include a fair review of the development and performance of the business
and the position of the parent company 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 Directors also confirm that they consider the Annual Report and consolidated financial statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to assess the Group’s position, performance, business model and strategy. The approach taken in
reaching this conclusion is explained in the Audit Committee report in section 4.3 of this Annual Report.
Signed on 29 June 2023 on behalf of the Board by:
Ray O’Toole
Executive Chairman
Bruce Dingwall
Chief Financial Officer
7. Responsibility statement
51
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
8. Independent auditors’ report to the members of
Stagecoach Group Limited (Company No. SC100764)
Opinion
In our opinion:
• Stagecoach Group Limited’s consolidated financial statements (the “consolidated financial statements”) and separate financial statements of the parent
(the “Company financial statements”) give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 29 April 2023 and of
the Group’s profit for the year then ended;
• the consolidated financial statements have been properly prepared in accordance with UK adopted International Accounting Standards;
• the Company financial statements have been properly prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework
(“FRS 101”); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Stagecoach Group Limited (the “parent Company”) and its subsidiaries (together, the “Group”) for the year ended
29 April 2023 which comprise:
Group Parent company
Consolidated income statement for the year the ended 29 April 2023 Company balance sheet as at 29 April 2023
Consolidated statement of comprehensive income for the year ended
29 April 2023
Company statement of changes in equity
Consolidated balance sheet (statement of financial position) as at 29 April 2023 Related notes 1 to 14 to the financial statements including a summary
of significant accounting policies
Consolidated statement of changes in equity
Consolidated statement of cash flows for the year the ended 29 April 2023
Related notes 1 to 33 to the financial statements, including a summary of
significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted International Accounting Standards. The
financial reporting framework that has been applied in the preparation of the parent Company financial statements is applicable law and United Kingdom
Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent
Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 and parent Company’s ability to continue to adopt the going concern
basis of accounting included:
Risk assessment procedures
• We confirmed our understanding of the going concern process and engaged with management early to ensure all key matters were considered in its
assessment;
• We performed our own assessment of the going concern risks at the planning and execution stages of the audit.
Management’s method
• We obtained management’s forecast cash flows, going concern assessment and covenant calculations covering the review period from the date of signing
to 26 October 2024, being the going concern assessment period.
Assumptions
• We assessed management’s future passenger assumptions by comparing these to historical data trends and through considering actual passenger data
trends from May 2022 through to May 2023;
• We reviewed industry reports and market data for indicators in relation to passenger volumes for contradictory evidence to challenge the going concern
assessment;
• We reviewed existing government assistance and government support schemes, including the bus fare cap scheme, that continue to support the Group,
assessing the impact of the assistance on future cash flows;
• We reviewed management’s historic forecasting accuracy against actual results;
• We challenged the impact of increasing inflation and performed sensitivity analysis on potential cost increases.
Stress testing and management’s plans for future actions
• We assessed management’s reverse stress test of their forecasts which included a crystallisation of contingent liabilities and a further significant
deterioration in operating profit to understand how severe the downside scenarios would have to be to result in the elimination of liquidity headroom
or a covenant breach;
• We reviewed management’s assessment of controllable mitigations available to the Group to reduce cash flow spend in the going concern period,
including the reduction in capital expenditure, in order to determine whether such actions could be affected and would be within the Group’s control.
52
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Annual Report and Financial Statements 2023
Debt facilities, liquidity and banking covenants
• We performed a review of the Group’s principal committed debt facilities to understand the terms and conditions in relation to covenants;
• We reviewed the accuracy of management’s covenant forecast model, verifying inputs to board approved forecasts and facility agreement terms;
• We agreed cash balances as at 29 April 2023 to externally received bank confirmations.
Disclosures
• We considered whether management’s disclosures, in the Annual Report and financial statements, were appropriate.
The audit procedures performed in evaluating the Directors’ assessment were performed by the Group engagement team.
Key observations
As reported to the Audit Committee, we noted that the Group is forecast to maintain both liquidity and covenant headroom in the base case and downside
scenarios. The base case assumes passenger volumes remaining consistent with those currently being achieved and government support announced in
May 2023. The reverse stress test scenario indicated that the Group would need to be exposed to a material downturn in trading, profitability and cash flows,
including a crystallisation of contingent liabilities, in order to firstly breach covenants and then exhaust available liquidity. The Directors do not consider this
scenario to be plausible and are satisfied that the impact can be mitigated by capital expenditure reduction which is within their control during the going
concern period.
Conclusion
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 from when the financial statements are authorised for issue
to 26 October 2024.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. However,
because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s or parent Company’s ability to continue
as a going concern. Going concern is not a Key Audit Matter.
Overview of our audit approach
Audit scope • We performed an audit of the complete financial information of 21 components and audit procedures on specific balances for
a further 17 components.
• The components where we performed full or specific audit procedures accounted for 99% of adjusted Earnings before Interest,
Tax, Depreciation and Amortisation, 99% of Revenue and 99% of Total assets.
Key audit matters • Valuation of provision for claims.
• Valuation of Stagecoach Group Pension Scheme (“SPS”) pension liabilities.
• Accounting for Local Government Pension Schemes.
• Management override of controls in relation to revenue recognition.
Materiality • Overall Group materiality of £4.6m which represents 2.5% of adjusted Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA).
An overview of the scope of the parent and group audits
Components
Percentage of EBITDA
(2022: percentage of
adjusted profit before tax )
Percentage
of revenue
Percentage
of total assets
2023 2022 2023 2022 2023 2022 2023 2022
Full scope 21 16 76% 41% 86% 74% 86% 77%
Specific scope 17 20 23% 37% 13% 25% 13% 22%
Total full and specific scope 38 36 99% 78% 99% 99% 99% 99%
Parent and consolidation adjustments 0% 19% 0% 0% 0% 0%
Overall coverage 99% 97% 99% 99% 99% 99%
In the current year we have amalgamated the parent Company and the consolidation entries.
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within
the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation
of the Group and effectiveness of group wide controls, changes in the business environment, the potential impact of climate change and other factors such as
recent Internal audit results when assessing the level of work to be performed at each company.
In assessing the risk of material misstatement to the consolidated financial statements, and to ensure we had adequate quantitative coverage of significant
accounts in the financial statements, of the 55 reporting components of the Group, we selected 38 components covering entities within the UK Bus (regional
components), UK Bus (London) segments and UK Rail which represent the principal business units within the Group.
Of the 38 components selected, we performed an audit of the complete financial information of 21 components (“full scope components”) which were
selected based on their size or risk characteristics. For the remaining 17 components (“specific scope components”), we performed audit procedures on
specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements
either because of the size of these accounts or their risk profile.
8. Independent auditors’ report to the members of
Stagecoach Group Limited (Company No. SC100764) (continued)
53
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
8. Independent auditors’ report to the members of
Stagecoach Group Limited (Company No. SC100764) (continued)
The reporting components where we performed audit procedures accounted for 99% (2022: 97% of adjusted Profit before Tax) of the Group’s adjusted
Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”), 99% (2022: 99%) of the Group’s Revenue and 99% (2022: 99%) of the Group’s Total
assets. For the current year, the full scope components contributed 76% (2022: 41% of adjusted profit before tax) of the Group’s EBITDA, 86% (2022: 74%) of
the Group’s Revenue and 86% (2022: 77%) of the Group’s Total assets. The specific scope component contributed 23% (2022: 37%) of the Group’s EBITDA,
13% (2022: 25%) of the Group’s Revenue and 13% (2022: 22%) of the Group’s Total assets. The audit scope of these components may not have included
testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group.
Of the remaining components none is greater than 1% of the Group’s adjusted Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA). For
these components, we performed other procedures, including analytical review to respond to any potential risks of material misstatement to the Group
financial statements.
Changes from the prior year
A key change in the year was bringing Scottish Citylink Coaches Limited into scope to gain sufficient audit evidence over the joint venture balances reported
by management. We engaged the services of EY Ireland to support us in concluding on these balances.
Involvement with component teams
The audit work for the majority of in scope reporting units, was performed directly by the Group engagement team. We engaged the services of EY Ireland
to perform Group Reporting procedures over Scottish Citylink Coaches Limited as this was brought into scope during the year.
During the current year’s audit cycle, the audit team performed on site procedures at all key locations across the Group. The audit work was delivered on site
in Perth and Stockport with the remainder delivered remotely whilst maintaining regular dialogue with local finance management via videoconference. The
performance of the audit was supported through the use of EY software collaboration platforms to facilitate information sharing.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact the Group. The Group has determined (see note 1(e) (iii)) that
the most significant future impacts on the consolidated financial statements from climate change on their operations will be from the estimation uncertainty
arising from estimating the useful lives of passenger service vehicles. Change in regulation around the use of passenger service vehicles could also result in
impairment losses or increased depreciation charges.
Climate-related risks are explained in section 1.7.2 of the Annual Report, which form part of the “Other information,” rather than the audited financial
statements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially inconsistent with the consolidated
financial statements or our knowledge obtained in the course of the audit or otherwise appear to be materially misstated, in line with our responsibilities on
“Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential material impact
on its financial statements.
Our audit effort in considering the impact of climate change was focused on ensuring that the effects of material climate risks disclosed in section 1.7.2 of
the Annual Report have been appropriately reflected in asset values and associated disclosures where values are determined through modelling future cash
flows, being the carrying value of goodwill, carrying value of the parent Company’s investments in subsidiaries and the recoverability of fixed assets. We also
challenged the Board’s considerations of climate change in their assessment of going concern and associated disclosures.
Whilst the Group has stated its commitment to the aspirations of the Paris Agreement to achieve net zero emissions by 2050 and targeting to have a zero
emission UK bus fleet by 2035, the Group is currently unable to determine the full future economic impact on their medium to long-term business model,
operational plans and customers to achieve this and therefore, as set out above, the potential impacts are not fully incorporated in these financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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 our opinion thereon, and we do not provide a separate opinion on
these matters.
54
Stagecoach Group
Annual Report and Financial Statements 2023
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Valuation of provision for claims
The bus insurance claims provision is a key source of
estimation uncertainty that includes a forecast-based
element that relies on actuarial assessments and
management judgement. The key audit matter is
unchanged compared to 2022.
Refer to the accounting policies in note 1 and note 22
to the consolidated financial statements.
As at 29 April 2023, the Group recognised total claims
provisions amounting to £100.6m (2022: £97.9m),
of which £91.0m (2022: £87.0m) relates to amounts
payable on individual claims in relation to the bus
businesses.
The Group protects against the cost of bus claims
through third party insurance policies. The Group
has exposure primarily relating to an “excess” it is
responsible for paying per claim and this is provided
for on a discounted basis.
The estimate is based on an assessment of the
expected settlement of known claims and claims
not yet reported but related to incidents prior to the
balance sheet date.
The provisions are based on an independent actuarial
computation, with adjustment by management to
reflect its view of volatility in actuarial estimates from
year to year.
The significant risk arises due to the inherent
uncertainty in actuarial assessments and the level
of management judgement exercised in determining
the appropriate level of volatility adjustment.
We gained an understanding of management’s key controls and
processes in place to assess claims and related provisions.
We evaluated the appropriateness of the processes, methodologies
and assumptions used by management through performance of our
process walkthrough tests.
We assessed the terms and conditions within the insurance policy
documents to ensure all relevant terms have appropriately been
considered in the provision calculation.
Through the involvement of our insurance actuarial specialists,
we evaluated the independence, competence, capabilities and
objectivity of management’s external actuarial specialists, and
the appropriateness of the processes, methodologies and
assumptions used by them.
We challenged management’s assumptions and methodology
in relation to the volatility adjustment, by using EY insurance
actuarial specialists, corroborating to comparable benchmarks
and considering contra indicators. We also considered a number
of other client specific risk factors (e.g. claims experience and
claims development trends) in assessing the appropriateness
of the amount of the claims provisions recorded.
We corroborated a sample of both open and closed claims,
and reserve movements to source documentation.
We recalculated the arithmetical accuracy of the model used
by management.
We assessed the appropriateness of disclosures.
All audit work in relation to this key audit matter was undertaken by
the Group engagement team, with the assistance of EY insurance
actuarial specialists.
Based on our consideration
of management’s actuarial
experts’ report and testing
of source claims data, we
concluded that the
methodology, assumptions
and approach used by
management’s specialists
was appropriate.
We have also confirmed that
management’s adjustments to
the actuarial central estimate
are appropriate and we did not
note any material exceptions
based on our testing of the
claims and settlement
information.
We concluded management’s
external actuarial specialists
are competent and objective.
We concluded that the
valuation of the bus insurance
claims provision is appropriate
and are satisfied with the
appropriateness of the
related disclosures within
the financial statements.
8. Independent auditors’ report to the members of
Stagecoach Group Limited (Company No. SC100764) (continued)
55
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Valuation of Stagecoach Group Pension Scheme
(“SPS”) pension liabilities
The valuation of pension liabilities is a key source of
estimation uncertainty that includes a forecast-based
element that relies on actuarial assessments and
management judgement.
Refer to the accounting policies in note 1, and notes 6
and 23 to the consolidated financial statements.
At 29 April 2023, the Group recognised a net SPS
pension surplus of £163.1m (2022: deficit £29.5m).
The significant risk relates to the potential misstatement
of the gross SPS pension liabilities of £1,115.5m (2022:
£1,502.8m) due to the significant judgements being
exercised by management in determining the
appropriate underlying actuarial assumptions.
We understood and walked through management’s process
and methodology for calculating the pension liability for the
pension scheme.
We evaluated the competence and objectivity of management’s
external actuarial specialists.
Through the involvement of our EY pension actuarial specialists,
we corroborated key assumptions (including discount rate, life
expectancies of scheme members and inflation rate) using external
third party data and independently assessed the assumptions
to allow us to determine whether the Group’s assumptions are
within an acceptable range.
We tested a sample of the membership data used by the actuaries
to source documentation. We assessed the appropriateness of
disclosures within the financial statements.
All audit work in relation to this key audit matter was undertaken
by the Group engagement team, with the assistance of EY
pension actuarial specialists.
We concluded that
management’s judgements
in relation to the underlying
actuarial assumptions are
appropriate and that the
recorded balances lie within
our acceptable range.
We concluded management’s
external actuarial specialists
are competent and objective.
We are satisfied with the
appropriateness of the related
disclosures within the financial
statements.
Accounting for Local Government Pension
Scheme (“LGPS”) liabilities
Refer to note 1, notes 6 and 23 to the consolidated
financial statements. This key audit matter is new
in 2023 following the restatement of the LGPS
pensions accounting as described in note 1(b)
to the consolidated financial statements.
As set out in note 1(b), management have restated
the prior year LGPS accounting to measure the
defined benefit obligation to the anticipated date
of exit from the scheme, being the date that the
last member ceases to be an active member of the
scheme, including any anticipated exit credit or exit
payment receivable or payable by the company. No
restriction to a net asset is required as any asset will
represent the present value of an expected refund.
The significant risk relates to the adjustments to
the gross LGPS pension liability of £130.7m (2022:
£160.3m) and gross LGPS pension assets of £160.3m
(2022: £185.3m) following the restatement set out in
note 1(b) due to the judgements being exercised by
management in determining the estimated cash flows
required to eliminate the Company’s obligations from
these schemes, including the estimated cash flows
arising on an exit.
We understood and walked through management’s process
and methodology for calculating the pension liability for the
pension scheme.
We evaluated the competence and objectivity of management’s
external actuarial specialists.
Through the involvement of our EY pension actuarial specialists,
we corroborated key assumptions (including discount rate, life
expectancies of scheme members and inflation rate) using external
third party data and independently assessed the assumptions
to allow us to determine whether the assumptions are within an
acceptable range. We also evaluated management’s estimate
of the estimated cash flows required to eliminate the Company’s
obligations from the schemes and the estimated cash flows arising
on an exit.
We assessed the appropriateness of the restatement disclosures
as set out in note 1(b) of the consolidated financial statements.
All audit work in relation to this key audit matter was undertaken by
the Group engagement team, with the assistance of EY pension
actuarial specialists.
On the basis of the procedures
performed, we have concluded
that the LGPS restatement has
been recognised and disclosed
appropriately in the financial
statements.
8. Independent auditors’ report to the members of
Stagecoach Group Limited (Company No. SC100764) (continued)
56
Stagecoach Group
Annual Report and Financial Statements 2023
Risk Our response to the risk
Key observations communicated
to the Audit Committee
Management override of controls in relation
to revenue recognition
This is a risk of error in revenue due to the non-routine
nature of the timing and valuation of certain revenue
and manual revenue journals. The key audit matter is
unchanged compared to 2022.
Refer to the accounting policies in note 1, and notes 2
and 3 to the consolidated financial statements.
For the year ended 29 April 2023, the Group
recognised revenue of £1,372.6m (2022: £1,176.5m).
Revenue recognition is a particular area of focus for
our audit in considering possible areas of management
bias and fraud, arising from management override
of controls. Revenue arrangements for customer
travel are generally routine. However, in some
instances, manual adjustments are required to
reflect appropriately the timing and valuation of
revenue recognised, for example cash received
for the sale of season tickets or travel cards.
The relevant government bodies have continued
to make concession and tender payments as a
percentage of pre-COVID levels in order to help
provide support to operators in order to maintain
a level of service required. Additionally, Transport
for London has paid contractual revenue amounts.
The accuracy of recording any such material
adjustments to revenue related transactions may
represent a fraud risk of material misstatement to
revenue. This includes material manual adjustments
to accrued or deferred income balance sheet items
that impact revenue in the income statement.
We obtained an understanding of the key controls and processes
in place over revenue recognition and the recording of manual
revenue journal entries.
We assessed whether the Group’s accounting policy is in
compliance with IFRS 15, Revenue from Contracts with Customers.
On full and specific scope components, we employed data
analytic techniques to correlate sales journals to cash journals and
then vouched a sample of those journals to supporting evidence.
We tested non-correlating entries to third party evidence to ensure
that revenue had been appropriately recognised.
On full and specific scope components, we used risk-based
filters to test material manual journal entries to revenue through to
supporting evidence to confirm that the revenue recognised was
appropriate and was in line with the Group’s accounting policy.
In relation to Transport for London revenues and UK Bus regional
concession and tender revenues, we reviewed correspondence
with Transport for London, the Department for Transport and local
authorities as appropriate to confirm the terms and conditions
of amounts received and receivable, ensuring that revenue was
recognised appropriately and in accordance with IFRS 15.
We assessed the appropriateness of disclosures within the
financial statements. All audit work in relation to this key audit
matter was undertaken by the Group engagement team.
On the basis of the procedures
performed, we have concluded
that revenue has been
recognised and disclosed
appropriately in the financial
statements.
In the prior year, our auditor’s report included a key audit matter in relation to Accounting for Local Government Pension Schemes, and this was shown
separately from the key audit matter table as a result of it being the reason for the qualified audit opinion. In the current year, we continue to consider this
to be a key audit matter but this year include it within our key audit matter table above as there is no longer any qualification in the audit opinion.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our
audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions
of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Group to be £4.6m (2022: £4.1m based on revenue), which is 2.5% (2022: 0.35% of revenue) of adjusted Earnings before
Interest, Tax, Depreciation and Amortisation (“EBITDA”). We believe that adjusted EBITDA provides us with a better representation of the interests of the key
stakeholders of the Group following its change of ownership.
We determined materiality for the Parent Company to be £4.6 million (2022: £4.1m), which is 1% (2022: 0.3%) of Total Equity.
During the course of our audit, we reassessed initial materiality and there was no reason to change it.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance
materiality was 75% (2022: 75%) of our planning materiality, namely £3.4m (2022: £3.1m). We have set performance materiality at this percentage due to the
past history of misstatements, our ability to assess the likelihood of misstatements, the effectiveness of the internal control environment and other factors
affecting the Group and its financial reporting.
Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on a
percentage of total performance materiality. The performance materiality set for each component is based on the relative scale and risk of the component to
the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the range of performance materiality allocated
to components was £0.7m to £2.2m (2022: £0.6m to £2.0m).
8. Independent auditors’ report to the members of
Stagecoach Group Limited (Company No. SC100764) (continued)
57
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.2m (2022: £0.2m), which is set at 5%
of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative
considerations in forming our opinion.
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 this 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 the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by 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 Directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
• 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 Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ Remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement in section 3.4, 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 and 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.
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.
Explanation as to what extent 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 irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the Group and parent
Company, and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant include
compliance with applicable health & safety, environmental and data protection regulations, competition and consumer protection laws, labour regulations
and employee rights laws.
• We understood how the Group is complying with those frameworks to the extent that could materially impact the financial statements by making enquiries
of management, internal audit, those responsible for legal and compliance procedures, and the Company Secretary. We corroborated our enquiries
through our review of board minutes, papers provided to the Audit Committee and correspondence received from regulatory bodies.
8. Independent auditors’ report to the members of
Stagecoach Group Limited (Company No. SC100764) (continued)
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• We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by meeting with management
within various parts of the business to understand where they considered there was susceptibility to fraud. We also considered performance targets and
their influence on efforts made by management to manage earnings or influence the perceptions of analysts. Where this risk was considered to be higher,
we performed audit procedures to address each identified fraud risk. These procedures included testing manual journals and were designed to provide
reasonable assurance that the financial statements were free from fraud or error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved
a review of board minutes to identify any non-compliance with laws and regulations and enquiries of senior management.
• We identified any relevant instances of non-compliance with laws and regulations at Group components through the direction and oversight of our
component audit teams. We discussed any findings with senior management.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Other matters we are required to address
• Following the recommendation from the audit committee we were appointed by the company on 23 June 2022 to audit the financial statements for the
year ending 29 April 2023 and subsequent financial periods.
• The period of total uninterrupted engagement including previous renewals and reappointments is seven years, covering the years ending 29 April 2017
to 29 April 2023.
• The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the parent Company and we remain independent of
the Group and the parent Company in conducting the audit.
• The audit opinion is consistent with the additional report to the audit committee.
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.
Julie Cavin
(Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Edinburgh
30 June 2023
8. Independent auditors’ report to the members of
Stagecoach Group Limited (Company No. SC100764) (continued)
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
9. Consolidated financial statements
Consolidated income statement
For the year ended 29 April 2023
2023
2022
(restated – see note 1(b))
Notes
Performance
excluding
separately
disclosed items
£m
Separately
disclosed items
(note 4)
£m
Results for
theyear
£m
Performance
excluding
separately
disclosed items
£m
Separately
disclosed items
(note 4)
£m
Results for
the year
£m
CONTINUING OPERATIONS
Revenue 2(a) 1, 3 7 2 . 6 – 1, 3 72 . 6 1 , 1 7 6.5 – 1 , 1 76.5
Operating costs and other operating
income 3 (1, 3 0 0 . 4 ) (30.3 ) (1,3 3 0 .7 ) (1 ,1 0 7.1 ) 10 . 0 (1, 0 9 7.1 )
Operating profit of Group
companies 2(b) 72 . 2 (30. 3 ) 41. 9 69.4 10 .0 79.4
Share of profit of joint ventures after
finance income and taxation 2(c) 5.6 – 5.6 3 .4 – 3.4
Total operating profit: Group
operating profit and share of joint
ventures’ profit after taxation 2(b) 7 7. 8 (3 0.3 ) 4 7. 5 72.8 10. 0 82.8
Finance income 5 5.3 0.6 5.9 0 .7 1. 0 1.7
Finance costs 5 (2 7. 4 ) – (2 7. 4 ) (29.3 ) – (2 9.3 )
Profit/(loss) before taxation 5 5 .7 (2 9 .7 ) 26.0 4 4.2 11 . 0 55. 2
Taxation 7 (6.9 ) 4 .1 (2 . 8 ) (5.5 ) (1 6 .1 ) (2 1. 6 )
Total profit/(loss) for the year 48.8 (25.6 ) 23.2 3 8 .7 (5 .1 ) 33 .6
Attributable to:
Equity holders of the parent 48.8 (25 .6 ) 23.2 3 8 .7 (5.3 ) 3 3.4
Non-controlling interest – – – – 0.2 0. 2
The accompanying notes form an integral part of this consolidated income statement.
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9. Consolidated financial statements (continued)
Consolidated statement of comprehensive income
For the year ended 29 April 2023
2023
£m
2022
(restated –
see note 1(b))
£m
Profit for the year 23.2 33.6
Items that may be reclassified to profit or loss
Cash flow hedges:
– Net fair value (losses)/gains on cash flow hedges (19.7 ) 111 . 0
– Reclassified and reported in profit for the year (66 .4 ) (12 . 0 )
– Tax effect of cash flow hedges 16. 8 (18 . 8 )
Total items that may be reclassified to profit or loss (69. 3 ) 80. 2
Items that will not be reclassified to profit or loss
Actuarial gains on Group defined benefit pension schemes 203.8 2 4 2 .1
Tax effect of actuarial gains on Group defined benefit pension schemes (1 8.8 ) (32.3 )
Total items that will not be reclassified to profit or loss 18 5 . 0 20 9. 8
Other comprehensive income for the year 11 5 . 7 2 90.0
Total comprehensive income for the year 13 8 . 9 323.6
Attributable to:
Equity holders of the parent 13 8 . 9 323.4
Non-controlling interest – 0.2
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Consolidated balance sheet (statement of financial position)
As at 29 April 2023
Notes
2023
£m
2022
(restated –
see note 1(b))
£m
ASSETS
Non-current assets
Goodwill 10 9 2 .1 5 1. 9
Other intangible assets 11 7.1 4. 3
Property, plant and equipment: 12(a) 7 11 . 3 7 3 2 .1
Right-of-use assets 12(b) 80. 2 74 . 9
Interests in joint ventures 13 12 . 0 7. 2
Derivative instruments at fair value 23(f) 11. 5 36.2
Retirement benefit assets – net of withholding tax payable 22 19 9 . 4 5 5.8
Other receivables 15 15 . 4 20 .4
Current assets
Inventories 14 12 . 3 12 . 3
Trade and other receivables 15 11 2 .1 13 3 . 5
Derivative instruments at fair value 23(f) 13 . 9 6 1. 2
Current tax recoverable 0.4 –
Cash and cash equivalents 17 245 .6 24 8 . 9
Assets classed as held for sale 12(c) 3.4 2.4
Total assets 2(d) 1, 516 .7 1, 4 41.1
LIABILITIES
Current liabilities
Trade and other payables 18 24 8.3 268. 5
Current tax liabilities – 18 . 2
Borrowings:
– Lease liabilities 19 25.0 23. 5
– Other borrowings 19 1. 8 –
Derivative instruments at fair value 23(f) 9 .1 2. 2
Provisions 21 56.4 3 6 .7
Non-current liabilities
Other payables 18 51.7 2 7. 9
Borrowings:
– Lease liabilities 19 6 0.3 5 7. 4
– Other borrowings 19 4 0 7.1 4 0 4 .7
Derivative instruments at fair value 23(f) 12 . 4 1. 6
Deferred tax liabilities 20 5 9.8 4 8.4
Provisions 21 8 3.5 7 5 .1
Retirement benefit obligations 22 3.5 74 . 8
Total liabilities 2(d) 1, 0 18 . 9 1, 0 3 9 . 0
Net assets 2(d) 4 9 7. 8 4 0 2 .1
EQUITY
Ordinary share capital 24 3.2 3. 2
Share premium account 26 8 .4 8.4
Retained earnings 26 1 26.8 (38 . 2 )
Capital redemption reserve 26 422.8 422. 8
Own shares 26 (6 9.6 ) (69.6 )
Cash flow hedging reserve 26 6 .1 75 .4
Total equity attributable to the parent 4 9 7. 7 4 02. 0
Non-controlling interest 0 .1 0 .1
Total equity 4 9 7. 8 4 0 2 .1
These financial statements have been approved for issue by the Board of Directors on 29 June 2023. The accompanying notes form an integral part of this
consolidated balance sheet.
Ray O’Toole
Executive Chairman
Bruce Dingwall
Chief Financial Officer
9. Consolidated financial statements (continued)
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9. Consolidated financial statements (continued)
Consolidated statement of changes in equity
Ordinary
share
capital
£m
Share
premium
account
£m
Retained
earnings
(restated
– see note
1(b))
£m
Capital
redemption
reserve
£m
Own
shares
£m
Cash flow
hedging
reserve
£m
Total equity
attributable
to parent
£m
Non-
controlling
interest
£m
Total
equity
£m
As at 1 May 2021 as previously presented 3.2 8.4 (29 9.0 ) 42 2.8 (69.6 ) (4 .8 ) 61. 0 – 6 1.0
Effect of prior year adjustment – see note 1(b) – – 14 .1 – – – 1 4 .1 – 1 4 .1
As at 1 May 2021 restated 3.2 8 .4 (284.9 ) 422. 8 (69.6 ) (4.8 ) 7 5 .1 – 7 5 .1
Profit for the year – – 33.4 – – – 3 3.4 0.2 3 3.6
Other comprehensive income, net of tax – – 209.8 – – 8 0.2 2 9 0.0 – 2 90.0
Total comprehensive income – – 24 3 . 2 – – 8 0.2 32 3.4 0.2 323.6
Credit in relation to equity-settled share based payments – – 3.5 – – – 3.5 – 3.5
Dividends paid to non-controlling interest – – – – – – – (0 .1 ) (0 .1 )
As at 30 April 2022 3.2 8.4 (38 . 2 ) 422. 8 (69.6 ) 75. 4 4 02 .0 0 .1 4 0 2 .1
Profit for the year – – 23 .2 – – – 23.2 – 23.2
Other comprehensive income, net of tax – – 18 5 . 0 – – (6 9.3 ) 11 5 . 7 – 11 5 . 7
Total comprehensive income – – 20 8.2 – – (69. 3 ) 13 8 . 9 – 13 8 . 9
Credit in relation to equity-settled share based payments – – 3.9 – – – 3.9 – 3.9
Tax credit in relation to equity settled share based payments – – 0.4 – – – 0.4 – 0.4
Dividends paid on ordinary shares – – (47 .5 ) – – – (4 7. 5 ) – (4 7. 5 )
As at 29 April 2023 3.2 8.4 12 6 . 8 422. 8 (69.6 ) 6 .1 4 9 7. 7 0 .1 4 9 7. 8
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Consolidated statement of cash flows
For the year ended 29 April 2023
Notes
2023
£m
2022
(restated –
see note 1(b))
£m
Cash flows from operating activities
Cash generated by operations 27 15 0 . 9 15 6 . 4
Interest paid (2 7. 2 ) (20. 2 )
Interest received 5 .1 0 .7
Dividends received from joint ventures 2.5 2. 9
Net cash flows from operating activities before tax 131. 3 13 9 . 8
Tax paid (6.6 ) (6 .4 )
Net cash from operating activities after tax 12 4 .7 13 3 . 4
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (13 . 6 ) –
Purchase of property, plant and equipment (66.6 ) (3 8 .7 )
Disposal of other property, plant and equipment 4.4 1. 5
Receipt of capital grants 19. 8 15 . 4
Purchase of intangible assets (2. 9 ) (3. 1 )
Loan repaid by joint venture 0 .1 0 .1
Net cash outflow from investing activities (58.8 ) (24 . 8 )
Cash flows from financing activities
Payments of principal portion of lease liabilities (29.6 ) (25.4 )
Repayment of Covid Corporate Financing Facility – (30 0.0 )
Repayment of other borrowings – (1 7. 4 )
Receipts of loan from joint ventures 6 .1 –
Dividends paid on ordinary shares (4 7. 5 ) –
Dividends paid to non-controlling interest – (0 .1 )
Net cash outflow from financing activities (71. 0 ) (3 4 2.9 )
Net decrease in cash and cash equivalents (5 .1 ) (23 4.3 )
Cash and cash equivalents at beginning of the year 248.9 483.2
Cash and cash equivalents at end of year 17 243. 8 24 8 . 9
Cash and cash equivalents shown in the above consolidated statement of cash flows include the cash and cash equivalents of £245.6m (2022: £248.9m)
shown on the consolidated balance sheet, less bank overdrafts of £1.8m (2022: £Nil) included in other borrowings within current liabilities in the consolidated
balance sheet.
International Accounting Standard 7, Statement of Cash Flows, states that investments will normally qualify as cash equivalents only if the maturity, at acquisition,
is less than three months. The Group’s cash equivalents can include deposits with well-rated financial institutions with a maturity, at acquisition, of up to
twelve months but only where the Group considers that any “break cost” in converting the deposits to cash in advance of their maturity is insignificant.
Cash equivalents include investments in certain money market funds. The Group’s investments in money market funds can generally be converted to cash
with less than one days’ notice and the risk of day-to-day changes in the value of the investments is considered to be insignificant.
The accompanying notes form an integral part of this consolidated statement of cash flows.
9. Consolidated financial statements (continued)
64
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65
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
(b) Basis of preparation (continued)
66
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Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
(b) Basis of preparation (continued)
67
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
68
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Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
(e) Critical accounting judgements and key sources of estimation uncertainty (continued)
69
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
(e) Critical accounting judgements and key sources of estimation uncertainty (continued)
(ii) Key sources of estimation uncertainty (continued)
70
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Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
71
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
(i) Revenue (continued)
72
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Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
73
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
74
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Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
75
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
(u) Leases (continued)
Effect of lease extensions and break clauses on lease terms (continued)
76
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Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
77
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
(z) Financial instruments (continued)
78
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Notes to the consolidated financial statements (continued)
Note 1 IFRS accounting policies (continued)
(z) Financial instruments (continued)
79
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
80
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Notes to the consolidated financial statements (continued)
Note 2 Segmental information (continued)
81
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 2 Segmental information (continued)
82
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Notes to the consolidated financial statements (continued)
83
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 3 Operating costs and other operating income (continued)
84
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Notes to the consolidated financial statements (continued)
Note 4 Separately disclosed items (continued)
85
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
86
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Notes to the consolidated financial statements (continued)
Note 6 Staff costs (continued)
87
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 7 Taxation (continued)
88
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Notes to the consolidated financial statements (continued)
Note 9 Business combinations and disposals (continued)
(a) Lea Interchange Bus Company Limited (continued)
89
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 9 Business combinations and disposals (continued)
(b) Bus operations previously operated by HCT Group (continued)
90
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Notes to the consolidated financial statements (continued)
Note 10 Goodwill (continued)
91
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
92
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Notes to the consolidated financial statements (continued)
Note 12 Property, plant and equipment (continued)
93
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 12 Property, plant and equipment (continued)
(b) Leases (continued)
94
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Notes to the consolidated financial statements (continued)
95
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 13 Interests in joint ventures (continued)
96
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Notes to the consolidated financial statements (continued)
Note 13 Interests in joint ventures (continued)
(e) Summarised financial information of joint ventures (continued)
97
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
98
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Notes to the consolidated financial statements (continued)
99
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
100
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Notes to the consolidated financial statements (continued)
101
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
102
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Notes to the consolidated financial statements (continued)
103
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
104
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Notes to the consolidated financial statements (continued)
Note 22 Retirement benefits (continued)
105
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 22 Retirement benefits (continued)
(d) Funding arrangements and schemes (continued)
106
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Notes to the consolidated financial statements (continued)
Note 22 Retirement benefits (continued)
107
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 22 Retirement benefits (continued)
108
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Notes to the consolidated financial statements (continued)
Note 22 Retirement benefits (continued)
109
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
110
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Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
(b) Carrying values of financial assets and financial liabilities (continued)
111
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
112
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Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
(c) Nature and extent of risks arising from financial instruments (continued)
(i) Market risk (continued)
11 3
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
(c) Nature and extent of risks arising from financial instruments (continued)
(i) Market risk (continued)
114
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Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
(c) Nature and extent of risks arising from financial instruments (continued)
115
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
(c) Nature and extent of risks arising from financial instruments (continued)
(ii) Credit risk (continued)
116
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Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
(c) Nature and extent of risks arising from financial instruments (continued)
(iii) Liquidity risk (continued)
117
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
118
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Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
(f) Financial derivatives and hedge accounting (continued)
Cash flow hedges – fuel (continued)
119
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 23 Financial instruments (continued)
(f) Financial derivatives and hedge accounting (continued)
120
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Notes to the consolidated financial statements (continued)
121
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 25 Share based payments (continued)
122
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Notes to the consolidated financial statements (continued)
123
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 27 Consolidated cash flows (continued)
124
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Notes to the consolidated financial statements (continued)
Note 27 Consolidated cash flows (continued)
(d) Liabilities arising from financing activities (continued)
125
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
126
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Notes to the consolidated financial statements (continued)
127
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FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the consolidated financial statements (continued)
Note 32 Definitions (continued)
(a) Alternative performance measures (continued)
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10. Separate financial statements of the parent company,
Stagecoach Group Limited
Company balance sheet
As at 29 April 2023
Notes
2023
£m
2022
£m
ASSETS
Non-current assets
Property, plant and equipment
– Owned assets 2(a) 3.1 3.2
– Right-of-use assets 2(b) 3.9 3.7
Investments 3 1,049.4 1,045.5
Deferred tax asset 6 3.2 3.6
Other receivables 4 6.2 15.6
Retirement benefit assets 8 6.7 3.7
Derivative instruments at fair value 7 11.5 36.2
1,084.0 1,111.5
Current assets
Other receivables 4 14.8 11. 2
Current tax assets 1.4 –
Derivative instruments at fair value 7 13.9 61.2
Cash and cash equivalents 212.3 196.0
242.4 268.4
Total assets 1,326.4 1,379.9
LIABILITIES
Current liabilities
Trade and other payables 5 3 07. 3 274.9
Current tax liabilities – 6.4
Derivative instruments at fair value 7 9.1 2.2
316.4 283.5
Non-current liabilities
Other payables 5 409.4 406.8
Derivative instruments at fair value 7 12.4 1.6
Retirement benefit obligations 8 2 .1 2.3
423.9 410.7
Total liabilities 740.3 694.2
Net assets 5 86.1 685.7
EQUITY
Ordinary share capital 9 3.2 3.2
Share premium account 10 8.4 8.4
Retained earnings 10 221.3 320.9
Capital redemption reserve 10 422.8 422.8
Own shares 10 (69.6) (69.6)
Total equity 586.1 685.7
In accordance with the concession granted under section 408 of the Companies Act 2006, the income statement and statement of comprehensive income
of the Company have not been separately presented in these financial statements. The loss of the Company was £56.4m (2022: profit of £62.4m).
These financial statements were approved for issue by the Board of Directors on 29 June 2023. The accompanying notes form an integral part of this
balance sheet.
Ray O’Toole
Executive Chairman
Bruce Dingwall
Chief Financial Officer
129
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Company statement of changes in equity
Ordinary
share
capital
£m
Share
premium
account
£m
Retained
earnings
£m
Capital
redemption
reserve
£m
Own
shares
£m
Total equity
£m
Balance at 1 May 2021 3.2 8.4 255.0 422.8 (69.6) 619.8
Profit for the year and total comprehensive expense – – 62.4 – – 62.4
Credit in relation to equity-settled share based payments – – 3.5 – – 3.5
Balance at 30 April 2022 3.2 8.4 320.9 422.8 (69.6) 685.7
Loss for the year and total comprehensive income – – (56.4) – – (56.4)
Credit in relation to equity-settled share based payments – – 3.9 – – 3.9
Tax credit in relation to equity settled share based payments – – 0.4 – – 0.4
Dividends paid on ordinary shares – – (47.5) – – (47.5)
Balance at 29 April 2023 3.2 8.4 221.3 422.8 (69.6) 58 6.1
10. Separate financial statements of the parent company,
Stagecoach Group Limited (continued)
130
Stagecoach Group
Annual Report and Financial Statements 2023
Notes to the Company financial statements
Note 1 Parent company accounting policies
These financial statements are presented in respect of Stagecoach Group Limited. Stagecoach Group Limited is a private limited liability company limited by
shares. It is incorporated, domiciled and has its registered office in Scotland. Its registered number is SC100764 and its registered address is 10 Dunkeld Road,
Perth PH1 5TW.
The Company financial statements are prepared in accordance with Financial Reporting Standard 101, Reduced Disclosure Framework (“FRS 101”).
(a) Basis of preparation
These financial statements have been prepared on a going concern basis and under the historical cost accounting convention, as modified by the revaluation
of certain financial assets and financial liabilities (including derivative financial instruments) at fair value, in accordance with the Companies Act 2006.
These financial statements have been prepared on a going concern basis. Taking account of the continued recovery from COVID-19, and other relevant
factors, the Directors concluded that it remained appropriate to adopt the going concern basis of accounting in preparing the Company financial statements.
The Directors have a reasonable expectation that the Company will continue to operate as a going concern for the duration of the going concern period, being
the period to 26 October 2024.
The Strategic report in section 1 of this Annual Report includes information on the outlook for the Group (including in sections 1.3 and 1.6) and the Group’s
financial position and liquidity (including in section 1.5.9). Section 2.11 of this Annual Report provides additional information on the Directors’ assessment of the
Group’s ability to continue as a going concern. Section 4.4 of this Annual Report includes information on the Audit Committee’s consideration of going concern,
and the work and conclusions of the Audit Committee in respect of that.
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (“FRS 100”) issued by the Financial Reporting Council.
The parent company financial statements have therefore been prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law), including FRS 101 as issued by the Financial Reporting Council. The Company has taken
advantage of the legal dispensation contained in section 408 of the Companies Act 2006 allowing it not to publish a separate income statement and
related notes. The Company has also taken advantage of the legal dispensation contained in section 408 of the Companies Act 2006 allowing it not to
publish a separate statement of other comprehensive income. The following exemptions from the requirements of IFRS have been applied in the preparation
of these financial statements, in accordance with FRS 101:
• Paragraphs 45(b) and 46-52 of IFRS 2, Share-based payments
• IFRS 7, Financial Instruments: Disclosures
• Paragraphs 10(d), 10(f) and 134-136 of IAS 1, Presentation of financial statements
• IAS 7, Statement of cash flows
• Paragraphs 30 and 31 of IAS 8, Accounting policies, changes in accounting estimates and errors
• Paragraph 17 of IAS 24, Related party disclosures
• 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 party to the transaction is wholly owned by such a member
• Paragraphs 91-99 of IFRS 13, Fair Value Measurements
(b) New accounting standards adopted during the year
There are no amendments to accounting standards, or IFRIC interpretations that are effective for the year ended 29 April 2023 that have a material impact on
the Company’s financial statements.
(c) Critical accounting judgements and key source of estimation uncertainty
Preparation of the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 101,
requires directors to make judgements and estimates that affect the reported amounts in the Company financial statements and accompanying notes.
The Directors believe that the key source of estimation uncertainty discussed below represents that requiring the greatest exercise of judgement.
The discussion below should be read in conjunction with the full statement of accounting policies.
(i) Judgements
Apart from those involving estimations (see (ii) below), the Directors do not consider there to be significant judgements involved in the process of applying
the Company’s accounting policies.
(ii) Key source of estimation uncertainty
The Directors consider the following to be the most significant source of estimation uncertainty. The Directors have used their best judgement in determining
the estimates and assumptions used in this area but a different set of judgements could result in material changes to the Company’s reported financial
performance and/or financial position.
Carrying value of investments in subsidiary undertaking
The carrying value of the Company’s investment in Stagecoach Transport Holdings Limited, a wholly owned subsidiary, was £1,049.4m as at 29 April 2023
(2022: £1,045.5m). Stagecoach Transport Holdings Limited holds investments in a number of businesses within the Group, including the UK regional bus
business. The estimated value in use of the investment was £1,270.2m as at 29 April 2023 (2022: £1,080.0m) but alternative assumptions could result in an
impairment loss.
The value in use of the Company’s investment in Stagecoach Transport Holdings Limited is most sensitive to assumptions regarding the future financial
performance of the Group’s regional bus business.
Further information on the estimation uncertainty, including sensitivity analyses, is provided in note 3 to the Company financial statements.
131
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Notes to the Company financial statements (continued)
Note 1 IFRS accounting policies (continued)
(d) Property, plant and equipment
Property, plant and equipment are shown at their original historic cost net of depreciation and any provision for impairment. Cost includes the original
purchase price of the asset and costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its estimated useful
life (or lease term, if shorter), as follows:
Freehold buildings 50 years
IT and other equipment, furniture and fittings 3 to 10 years
Motor cars and other vehicles 3 to 5 years
The need for any impairment is assessed by comparing the carrying value of the asset against the higher of net realisable value and value in use.
(e) Leases
The Company leases company cars, vans and other vehicles not for passenger service.
For contracts that convey the right to control the use of an identified asset for a period of time in exchange for consideration, the Company recognises lease
liabilities to make lease payments and right-of-use assets representing the right to use the underlying asset.
Contracts can contain lease and non-lease components. For all current motor vehicle leases, the Company has elected not to separate lease and non-lease
components but instead accounts for these as a single lease component.
The lease agreements do not generally impose any financial covenants.
Measurement of lease liabilities
Liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of fixed lease payments, less any
lease incentives receivable.
There are no leases with any form of variable payment.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Company’s incremental borrowing
rate is used, being the rate that the Company 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.
To determine the incremental borrowing rate, the Company:
• uses recent third party financing received by it as a starting point, adjusted to reflect changes in financing conditions since third party financing was received;
• makes adjustments to the rate to reflect the terms and conditions specific to the lease. These will include adjustment for items such as the lease term
and the right-of-use asset being leased.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the income statement over the lease period so as to produce
a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets
Right-of-use assets are measured at cost comprising the amount of the initial measurement of lease liability.
Right-of-use assets are generally depreciated on a straight-line basis over the shorter of the asset’s useful life and the lease term.
(f) Investments
Investments in subsidiary undertakings are stated at cost, less provision for impairment.
(g) Taxation
Tax, current and deferred, is calculated using tax rates and laws enacted or substantively enacted at the balance sheet date.
Corporation tax is provided on taxable profit at the current rate applicable. Tax charges and credits are accounted for through the same primary statement
as the related pre-tax item.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred income tax is measured at tax rates that are expected to apply in periods in which the temporary
differences reverse based on tax rates and law enacted or substantively enacted at the balance sheet date.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences
can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries except where the timing of the reversal of the temporary
difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.
Management estimates amounts relating to uncertain tax treatments based on the applicable law and regulations, historic outcomes of similar matters,
independent specialist advice and consideration of the progress on, and nature of, current discussions with the tax authorities. Where management
determines that a greater than 50% probability exists that the tax authorities would accept the position taken in the tax return, amounts are recognised in
the financial statements on that basis. Where the amount of tax payable or recoverable is uncertain, the Group recognises a liability or asset based on either:
management’s judgement of the most likely outcome; or, when there is a wide range of possible outcomes, a probability weighted average approach.
132
Stagecoach Group
Annual Report and Financial Statements 2023
Note 1 IFRS accounting policies (continued)
(h) Foreign currencies
Foreign currency transactions arising during the year are translated into sterling at the rate of exchange ruling on the date of the transaction. Foreign currency
monetary assets and liabilities are retranslated into sterling at the rates of exchange ruling at the year-end. Any exchange differences so arising are dealt
with through the income statement.
For the principal rates of exchange used, see note 1(o) to the consolidated financial statements.
(i) Share based payments
The Company issued equity-settled and cash-settled share based payments to certain employees of its subsidiary companies.
Share based payment awards made by the Company to employees of its subsidiary companies are recognised in the Company’s financial statements
as an increase in its investments in subsidiary undertakings rather than as an expense in the income statement to the extent that the amount is not recharged
to each subsidiary company.
Equity-settled transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted and is recognised
as an expense (or as an increase in investments in subsidiary undertakings) over the vesting period. In valuing equity-settled transactions, no account is taken
of any non-market based vesting conditions and no expense or investment is recognised for awards that do not ultimately vest as a result of a failure to satisfy
a non-market based vesting condition. None of the Company’s equity-settled transactions had any market based performance conditions.
Fair value for equity-settled share based payments is determinable from the Company’s quoted share price at the time of the award.
At each balance sheet date, before vesting, the cumulative expense or investment is calculated based on management’s best estimate of the number
of equity instruments that will ultimately vest taking into consideration the likelihood of achieving non-market based vesting conditions.
Cash-settled transactions
The cost of cash-settled transactions is measured at fair value. Fair value is estimated initially at the grant date and at each balance sheet date thereafter
until the awards are settled. Market based performance conditions are taken into account when determining fair value. At each balance sheet date, the liability
recognised is based on the fair value of outstanding awards (ignoring non-market based vesting conditions) at the balance sheet date, the period that fell
prior to the balance sheet date and management’s estimate of the likelihood and extent of non-market based vesting conditions being achieved.
Changes in the carrying amount of the liability are recognised in the income statement for the period. Fair value for cash-settled share based payments
relating to the Long Term Incentive Plan is estimated by use of a simulation model.
Choice of settlement
The Company could choose to settle awards under the Executive Participation Plan and the Restricted Share Plan in either cash or equity, although until its
recent change of control, generally expected to settle all such outstanding awards in equity. Awards under the Executive Participation Plan and the Restricted
Share Plan are accounted for as equity-settled transactions (see above).
(j) Dividends
Dividends on ordinary shares are recorded in the financial statements in the period in which they are approved by the Company’s shareholders, or in the case
of interim dividends, in the period in which they are paid.
(k) Financial instruments
Financial instruments are accounted for in accordance with IFRS 9 “Financial Instruments”, and IFRS 7 “Financial instruments: Disclosures” which is
the same as the accounting policy for the Group. Therefore, for details of the Company’s accounting policy for financial instruments, refer to note 1(z)
to the consolidated financial statements.
The Company holds derivative financial instruments that hedge financial risks of the Group as a whole and to which hedge accounting is applied in the
consolidated financial statements. Interest rate derivatives that are accounted as fair value hedges in the consolidated financial statements are accounted
for in the same manner in the Company financial statements. However, all fuel derivatives are accounted for in the Company financial statements at fair value
through profit or loss.
(l) Investment in own shares
Own shares held in treasury by the Company are classified as deductions from equity.
(m) Retirement benefit obligations
The Company is the “principal employer” of the main section of the Stagecoach Group Pension Scheme (“SPS”). Where other participating employers are unable
to meet their liabilities to the main section of the SPS, the Company is liable for the remaining liabilities. No liability has been recognised in the Company’s financial
statements for that as the participating employers are expected to meet their liabilities to SPS. The Company provides benefits to certain employees of subsidiary
undertakings under an unapproved employer financed retirement benefit scheme in the UK. The liability of this scheme is unfunded, as no contributions are
made to the scheme, but the Company has set aside assets to meet its obligations under the scheme. The scheme holds a guarantee over assets which the
Company has set aside. The Company considers that the assets set aside are in substance pension assets and so the amounts of those assets are included
within the net pension amounts reported in the Company balance sheet.
The Company is not liable for a share in any of the other funded Group defined benefit schemes that are disclosed in note 22 to the consolidated financial
statements. It does have unfunded liabilities in respect of former employees and these are reflected in the balance sheet.
Notes to the Company financial statements (continued)
133
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Note 2 Property, plant and equipment
(a) Owned assets
The movements in owned property, plant and equipment were as follows:
Land &
Buildings
2023
£m
Other plant &
equipment
2023
£m
Total
2023
£m
Cost
At beginning of year 3.2 1.4 4.6
Disposals – (0.2) (0.2)
At end of year 3.2 1.2 4.4
Depreciation
At beginning of year – (1.4) (1.4)
Depreciation charged to income statement (0.1) – (0.1)
Disposals – 0.2 0.2
At end of year (0.1) (1.2) (1.3)
Net book value at beginning of year 3.2 – 3.2
Net book value at end of year 3.1 – 3.1
(b) Leases
(i) Movements in right-of-use assets
The movements in right-of-use assets were as follows:
Other plant &
equipment
2023
£m
Other plant &
equipment
2022
£m
Cost
At beginning of year 7.2 6.7
Additions 1.9 1.8
Disposals (1.4) (1.3)
At end of year 7.7 7. 2
Depreciation
At beginning of year (3.5) (2.9)
Depreciation charged to income statement (1.8) (1.9)
Disposals 1.5 1.3
At end of year (3.8) (3.5)
Net book value at beginning of year 3.7 3.8
Net book value at end of year 3.9 3.7
(ii) Lease liabilities
2023
£m
2022
£m
Current 1.6 1.7
Non-current 2.3 2.1
3.9 3.8
(iii) Amounts recognised in the income statement
The income statement includes the following depreciation charges and other costs relating to leases:
2023
£m
2022
£m
Depreciation on right-of-use assets 1.8 1.9
Lease costs included within operating profit 1.8 1.9
Interest expense included in finance costs 0.1 0.1
Lease costs included within profit before tax 1.9 2.0
(iv) Amounts recognised in statement of cash flows
Cash flows for leases were:
2023
£m
2022
£m
Total cash outflow for leases 1.9 1.8
Notes to the Company financial statements (continued)
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Annual Report and Financial Statements 2023
Note 3 Investments
The movements in investments were as follows:
Subsidiary undertakings
2023
£m
2022
£m
Cost and net book value
At beginning of year 1,045.5 1,042.0
Additions 3.9 3.5
At end of year 1,049.4 1,045.5
The carrying value of the Company’s investment in Stagecoach Transport Holdings Limited, a wholly owned subsidiary, was £1,049.4m as at 29 April 2023
(2022: £1,045.5m). Stagecoach Transport Holdings Limited holds investments in a number of businesses within the Group, including the UK regional bus
business. The estimated value in use of the investment was £1,270.2m (2022: £1,080.0m) as at 29 April 2023 but alternative assumptions could result in an
impairment loss.
The value in use of the Company’s investment in Stagecoach Transport Holdings Limited is most sensitive to assumptions regarding the future financial
performance of the Group’s regional bus business.
Our base case forecast assumes that regional bus commercial revenue returns to 98% of pre-COVID levels in the year ending 27 April 2024, reflecting the
assumed return in patronage as the country emerges from the long-term effect of the pandemic. Concessionary revenue for the year ending 27 April 2024 is
forecast at 100% of pre-COVID levels. We have discounted our cash flow projections using a pre-tax discount rate of 11.2% (2022: 9.1%), and a growth rate
of 2.4% (2022: 2.1%) per annum is used to extrapolate cash flows beyond management’s base forecasting period.
As at 29 April 2023, the value in use of the investment exceeded its carrying amount by £220.8m (2022: £34.5m). Our sensitivity analysis indicates that this
headroom would be eliminated if the assumed regional bus revenue over the forecasting period was 2.8% (2022: 0.8%) lower, the assumed regional bus
costs over the forecasting period were 3.1% (2022: 0.9%) higher, the assumed regional bus long-term growth rate fell by more than 667 basis points
(2022: 31 basis points).
Note 4 Other receivables
Other receivables were as follows:
2023
£m
2022
£m
Non-current:
Amounts owed by Group undertakings 19.9 67.4
Less: provision for impairment (13.7) (51.8)
Amounts owed by Group undertakings – net 6.2 15.6
Current:
Amounts owed by Group undertakings 4.2 –
Less: provision for impairment – –
Amounts owed by Group undertakings – net 4.2 –
Other receivables 10.6 10.9
Prepayments and accrued income – 0.3
14.8 11. 2
Of amounts owed by Group undertakings, £11.6m (2022: £50.9m) accrue no interest and are repayable on demand. The remaining £12.5m (2022: £16.5m) owed
by Group undertakings accrue interest at 4.7% per annum (2022: 2.5%). These are all repayable on demand.
Notes to the Company financial statements (continued)
135
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Note 5 Payables
Trade and other payables were as follows:
2023
£m
2022
£m
Current:
Amounts owed to Group undertakings 294.7 2 67.0
Accruals and deferred income 11.0 6.2
Lease liabilities 1.6 1.7
307. 3 274.9
Non-current:
Sterling 4.00% Notes 4 07.1 404.7
Lease liabilities 2.3 2.1
409.4 406.8
Of amounts owed to Group undertakings, £244.7m (2022: £199.9m) accrue no interest and are repayable on demand. The remaining £50m owed to
Group undertakings (2022: £67.1m) accrue interest at 6 month SONIA rate plus margin (2022: 6 month SONIA rate plus margin). These are all repayable
on demand.
Borrowings are repayable as follows:
2023
£m
2022
£m
On demand or within 1 year
Lease liabilities 1.6 1.7
Repayable after 2 years, but within 5 years
Lease liabilities 2.3 2.1
Sterling 4.00% Notes 4 07.1 404.7
Total borrowings 411.0 408.5
Note 6 Deferred tax
The movement in the deferred tax asset during the year was as follows:
2023
£m
2022
£m
At beginning of year 3.6 2.8
Charge to the income statement (0.4) 0.8
At end of year 3.2 3.6
Deferred taxation is analysed as follows:
2023
£m
2022
£m
Pension temporary differences 3.1 3.5
Accelerated capital allowances 0.1 0.1
At end of year 3.2 3.6
Gross deductible temporary differences of £12.8m (2022: £15.7m) have been recognised as it is probable that sufficient taxable profit will be available in the
future to utilise these and there is no restriction on their use.
Note 7 Derivative financial instruments
The fair values of derivative financial instruments, none of which are intra-Group, are set out below:
2023
£m
2022
£m
Non-current assets
Fuel derivatives 11.5 36.2
Current assets
Fuel derivatives 13.9 61.2
Current liabilities
Interest rate derivatives (4.7) (2.2)
Fuel derivatives (4.4) –
(9.1) (2.2)
Non-current liabilities
Interest rate derivatives – (1.6)
Fuel derivatives (12.4) –
(12.4) (1.6)
Notes to the Company financial statements (continued)
136
Stagecoach Group
Annual Report and Financial Statements 2023
Notes to the Company financial statements (continued)
Note 8 Retirement benefit obligations
2023
£m
2022
£m
Retirement benefit asset 6.7 3.7
Retirement benefit obligations (2.1) (2.3)
4.6 1.4
The Company no longer has any employees but has retirement benefit assets and liabilities in respect of former employees and current employees of
subsidiary undertakings, which are shown above. See note 1(m) to the Company financial statements and note 22 to the consolidated financial statements
for more details on retirement benefits.
Note 9 Share capital
Information on share capital is provided in note 24 to the consolidated financial statements.
Note 10 Equity reserves
The loss of £56.4m (2022: profit of £62.4m) shown in the statement of changes in equity is consolidated in the results of the Group. There were dividends paid
during the year ended 29 April 2023 of £47.5m (2022: None).
The retained earnings are distributable but the amount available for distribution under the Companies Act 2006 by reference to these financial statements is
reduced by the own shares reserve of £69.6m (2022: £69.6m). The other components of equity shown in the statement of changes in equity are not distributable.
The remuneration of the Directors is borne by other Group companies and is detailed in section 6 to the consolidated financial statements. The remuneration
of the auditors is shown in note 3 to the consolidated financial statements.
Note 11 Share based payments
For details of share based payment awards and fair values, see note 25 to the consolidated financial statements. The Company accounts for the equity-settled
share based payment charge for the year of £3.9m (2022: £3.5m) by recording an increase to its investment in subsidiaries for this amount and recording
a corresponding entry to retained earnings to reflect the fact that the Company has no employees (2022: none) and all share based payment awards are to
employees of subsidiary companies. The Company accounts for the cash-settled share based payment credit for the year of £Nil (2022: £0.1m) by recording
an adjustment to the liability for this amount and recording a corresponding entry as a charge through the income statement. The cash-settled share based
payment charge is recharged in full to subsidiary companies and the recharge income and related expense are both included in the income statement.
Note 12 Guarantees, other financial commitments and contingent liabilities
(a) Guarantees
The Company has provided certain guarantees and indemnities to third parties in respect of liabilities and obligations of its subsidiary companies. Not all
of those guarantees are subject to a specified monetary limit and they include performance guarantees in respect of subsidiaries’ performance under certain
contracts, including contracts with Transport for London to provide bus services. In light of that, it is not possible to determine the Company’s maximum liability
under the guarantees, although the Company currently does not expect to incur any liability in respect of those guarantees. The Company estimates that it
could be liable for up to £196.1m (2022: £210.1m) in relation to guarantees of subsidiaries’ obligations in respect of insurance/claims, local government pension
schemes, payment processing arrangements and leases. Of that, £89.8m (2022: £89.1m) is included as liabilities in the consolidated financial statements.
The Company is also party to cross-guarantees whereby any bank overdrafts and Value Added Tax liabilities of it and certain of its subsidiaries are cross-
guaranteed by it and all of the relevant subsidiaries.
None of the above contingent liabilities of the Company are expected to crystallise.
The Company may be found to be liable for some of the contingent liabilities referred to in note 28 to the consolidated financial statements.
(b) Capital commitments
Capital commitments (where the Company has contracted to acquire assets on behalf of its subsidiaries) are as follows:
2023
£m
2022
£m
Contracted for but not provided:
For delivery in one year 39.1 19.0
Note 13 Related party transactions
The Company has taken advantage of the exemption under FRS 101 from disclosing related party transactions entered into between two or more members
of a group. Related party disclosures provided by the Group can be found in note 30 to the consolidated financial statements.
Note 14 Employees
The Company has no (2022: none) employees. The Company’s directors and some other head office personnel are employed by a subsidiary company,
Stagecoach Holdings Limited.
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Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
The Company owns the following subsidiary and related undertakings. The Company indirectly owns 100% of each undertaking through its holding of the
stated class or classes of share or other interest unless otherwise stated.
Company Country of registration Class of shares/other interest Registered office address
Bluebird Buses Limited Scotland Ordinary shares Perth
Busways Travel Services Limited England Ordinary shares and Ordinary-A shares Stockport
Cambus Limited England Ordinary shares Stockport
Cheltenham and Gloucester Omnibus Company Limited England Ordinary and Preference shares Stockport
Cleveland Transit Limited England Ordinary shares Stockport
Crown Sightseeing Limited (33.3%) England Ordinary shares London 2
East Coast Main Line Company Limited (90%) England Ordinary shares Stockport
East Kent Road Car Company Limited England Ordinary shares Stockport
East London Bus and Coach Company Limited England Ordinary shares Stockport
East London Bus Group Property Investments Limited England Ordinary shares Stockport
East London Bus Ltd. England Ordinary shares Stockport
East Midlands Trains Limited England Ordinary shares Stockport
Fife Scottish Omnibuses Limited Scotland Ordinary shares Perth
Go West Travel Limited England Ordinary shares Stockport
Greater Manchester Buses South Limited England Ordinary shares Stockport
Highland Country Buses Limited Scotland Ordinary shares Perth
Inter City Railways Limited (90%) England A shares Stockport
Lea Interchange Bus Company Limited England Ordinary shares Stockport
Lincolnshire Road Car Company Limited England Ordinary shares Stockport
Midland Red (South) Limited England Ordinary shares Stockport
Nicecon Limited (50%) Scotland Ordinary shares Aberdeen
Planet Coach BVBA Belgium Ordinary shares Brussels
PSV Claims Bureau Limited England Ordinary shares Stockport
Red & White Services Limited England Ordinary shares Stockport
Redstar Ticketing Limited (49%) England Ordinary shares London
Ribble Motor Services Limited England Ordinary shares Stockport
SCOTO Limited England Ordinary shares Stockport
SCOTO US Subsidiary Limited LLC United States LLC Units Wilmington
Scottish Citylink Coaches Limited (37.5%) Scotland Ordinary shares Glasgow
SCUSI Limited England Ordinary A and B shares Stockport
SCUSI US Subsidiary Limited LLC United States LLC Units Wilmington
South East London & Kent Bus Company Limited England Ordinary shares Stockport
South Yorkshire Supertram Limited England Ordinary shares Stockport
Stagecoach (North West) Limited England Ordinary shares Stockport
Stagecoach (South) Limited England Ordinary shares Stockport
Stagecoach Bus Holdings Limited Scotland Ordinary shares Perth
Stagecoach Bus Services LLC United Arab Emirates Ordinary shares Dubai
Stagecoach Devon Limited England Ordinary shares Stockport
Stagecoach Holdings Limited Scotland Ordinary shares Perth
Stagecoach International Limited Scotland Ordinary shares Perth
Stage-coach International Services Limited Scotland Ordinary shares Perth
Stagecoach Rail Holdings Limited Scotland Ordinary shares Perth
Stagecoach Rail Replacement (East) Limited England Ordinary shares Stockport
Stagecoach Services Limited England Ordinary shares Stockport
Stagecoach South Western Trains Limited England Ordinary shares Stockport
Stagecoach Supertram Maintenance Limited England Ordinary shares Stockport
Stagecoach Transport Holdings Limited* Scotland Ordinary shares Perth
Thames Transit Limited England Ordinary shares Stockport
The Yorkshire Traction Company Limited England Ordinary shares Stockport
WCT Group Holdings Limited (49%) England Common stock B shares London
WCT Group Limited (49%) England Ordinary and Preference shares London
WCT Sales Limited (49%) England Ordinary shares London
West Coast Partnership Limited (50%) England Ordinary shares Stockport
West Coast Trains Limited (49%) England Ordinary shares London
Western Buses Limited England Ordinary shares Stockport
* Company is directly held by Stagecoach Group Limited.
11. Subsidiary and related undertakings
138
Stagecoach Group
Annual Report and Financial Statements 2023
All subsidiary undertakings are included in the consolidated financial statements.
Registered office Registered office address
Perth 10 Dunkeld Road, Perth PH1 5TW
Stockport c/o Stagecoach Services Limited, One Stockport Exchange, 20 Railway Road, Stockport SK1 3SW
Glasgow Buchanan Bus Station, Killermont Street, Glasgow G2 3NP
Aberdeen 395 King Street, Aberdeen AB24 5RP
Brussels Koningsstraat 97, 1000 Brussels
Wilmington 1209 Orange Street, Wilmington, DE 19801
London 66 Porchester Road, London, W2 6ET
London 2 120 Southampton Row, London, England, WC1B 5AB
Dubai Office 13/14, Ground Floor, The Iridium Building, Umm Suqeim Road, Al Barsha 1, Dubai, United Arab Emirates
11. Subsidiary and related undertakings (continued)
139
Stagecoach Group
Annual Report and Financial Statements 2023
FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
Corporate Information
Company Secretary
Mike Vaux
Registered Office
10 Dunkeld Road
Perth PH1 5TW
Telephone: +44 (0) 1738 442 111
Facsimile: +44 (0) 1738 447 588
Email: info@stagecoachgroup.com
Company Number
SC100764
12. Corporate information
www.stagecoachgroup.com
Registered Office:
10 Dunkeld Road, Perth PH1 5TW, Scotland
T: 01738 442111 | F: 01738 447588 | E: info@stagecoachgroup.com
Registered in Scotland | Number: SC100764
140
Stagecoach Group
Annual Report and Financial Statements 2023
Registered Office:
10 Dunkeld Road
Perth PH1 5TW
Scotland
T: 0173 8 442111
F: 01738 447588
E: info@stagecoachgroup.com
stagecoachgroup.com
Registered in Scotland, number: SC100764