FGP Firstgroup Plc

 
TIDMFGP 
 
Embargoed until 7:00am on 15 August 2012 
 
                         FIRSTGROUP PLC ("The Group") 
 
       FIRSTGROUP WELCOMES AWARD OF INTERCITY WEST COAST RAIL FRANCHISE 
 
  Delivering benefits for passengers, value for taxpayers, opportunities for 
                    employees and returns for shareholders 
 
FirstGroup, the leading transport provider in the UK and North America, is 
delighted to have been awarded the contract by the Department for Transport 
("DfT") to operate the new InterCity West Coast rail franchise until 2026. 
 
The new franchise will offer substantial improvements in the quality and 
frequency of services which will attract far greater numbers of passengers, 
enabling InterCity West Coast to achieve a modal share comparable to other 
intercity franchises in the UK. This growth will create greater long term 
opportunities for employees; generate solid returns for shareholders and 
justify the substantial Government investment of GBP9 billion that this railway 
has received by providing better value for taxpayers. 
 
InterCity West Coast is unique because it has a considerable amount of unused 
capacity that will expand further with the addition of 106 new Pendolino 
coaches by the start of our new franchise. This capacity exists on the key 
growth corridor for the UK economy, linking a number of the UK's largest and 
growing major urban areas including London, the West Midlands, Greater 
Manchester, Liverpool and Glasgow. We will add to that capacity through the 
introduction of 11 new 125mph six-car electric multiple units to operate on 
Birmingham-Glasgow services, which will free up the Voyager trains to deliver 
direct services and improve connectivity to even more destinations. 
 
The new franchise will commence on 9 December 2012 and run for 13 years and 4 
months. The route, which currently has annual revenues of around GBP900m, is 
expected to generate an operating margin of approximately 5% over the life of 
the franchise, and will return a premium to the Government of GBP5.5 billion at 
net present value over the franchise term. Over the past ten years revenues on 
the franchise have increased at a compound annual growth rate (CAGR) of 10.2%, 
despite limited incentive to increase passenger revenues as a result of revenue 
share/support arrangements during the last five years. For the new franchise a 
CAGR of 10.4% is expected, which is supported by passenger and revenue focused 
operating investment and backed by substantial capacity increases. Improvements 
to drive additional passenger growth will be supported by operating investment 
of GBP350m in the first five years of the new franchise. 
 
Commenting, Tim O'Toole, Chief Executive said: 
 
"We are delighted to be selected by Government to operate this unique railway 
which connects communities across the country and plays a vital role in the 
UK's economic growth. Our winning bid is a deliverable proposition that is 
compelling for all who want to see a greater use of our rail networks. We will 
be making significant improvements including reduced journey times and 
introducing new direct services. We will improve marketing and deliver a smart 
ticketing system, refreshed and improved train interiors, station upgrades and 
even better catering. In support of our commitment to generate increased 
passenger growth we will be reducing Standard Anytime fares by 15% on average. 
 
"With a strong focus on service quality we will continue to invest in front 
line staff and look forward to welcoming new employees to the Group, providing 
them with long term opportunities from an enhanced and reinvigorated railway. 
Our bid also delivers value for taxpayers by returning premiums to the 
Government underpinned by sustainable growth in passenger numbers and revenues 
from the utilisation of significant available capacity. The new franchise will 
provide an economic return for our shareholders and is value enhancing from day 
one. 
 
"As the UK's largest rail operator with a highly experienced management team, 
we have established a vast wealth of knowledge with unrivalled expertise in 
operating every type of rail franchise. We have a proven track record of 
generating growth from investment in customer service enhancements and 
innovation, together with a strong focus on operational delivery and financial 
discipline. 
 
"The award of Intercity West Coast marks a key milestone in renewing and 
developing our long-term UK Rail portfolio. We look forward to bringing an 
exciting mix of innovation, and customer and service improvements to InterCity 
West Coast and creating a better railway for all." 
 
Key highlights of the new franchise include the following benefits for 
customers: 
 
Timetable and trains 
 
  * Transforming the on-board environment with a major refurbishment of 
    Pendolino and Voyager interiors, with new seats throughout and improved 
    luggage space 
 
  * Introducing 11 new 125mph six-car electric trains for Birmingham - Scotland 
    services which will create 12,000 additional seats per day. This is on top 
    of the 28,000 new seats that will be provided by the additional 106 
    Pendolino carriages that are coming into service in time for the start of 
    the new franchise. This means there will be 40,000 extra seats by 2016, 
    compared with 2011 
 
  * Improved journey time of 15 minutes for trains between London and Glasgow 
 
  * Introducing new direct services from London to Blackpool, Telford, 
    Shrewsbury and Bolton providing a new direct link to the capital for more 
    than 500,000 people 
 
  * Doubling frequency of London to Preston services and adding capacity to 
    Chester and North Wales 
 
  * Improving connectivity with more stops at Nuneaton and Milton Keynes 
 
  * Reliability and punctuality improvements to increase Public Performance 
    Measure to over 90% (from current level of 85.9%) through targeted 
    investment and a new alliance with Network Rail 
 
Fares and ticketing 
 
  * Reducing Standard Anytime fares by 15% on average 
 
  * Installation of automatic ticket gates at 21 stations, including the major 
    terminals of London Euston, Manchester Piccadilly, Liverpool Lime Street 
    and Glasgow Central 
 
  * Investment in greater yield management capability to help grow demand with 
    increased marketing and introducing a new customer loyalty programme 
 
Enhanced customer offering and innovation 
 
  * Smart ticketing system introduced across the network 
 
  * Free upgraded high speed Wi-Fi and enhanced mobile phone coverage following 
    train refurbishment 
 
  * Enhanced catering service offered with increased at seat catering for 
    customers 
 
  * Improved information systems including new customer mobile apps 
 
  * Station investment includes improving accessibility, security and passenger 
    information 
 
  * Commitment to high quality service including a greater emphasis on customer 
    facing staff on trains and at stations 
 
Additional information: 
 
New franchise capital requirements and guarantees: 
 
  * Minimal cash requirement - GBP10m ordinary share capital in cash 
 
Contingent capital: 
 
  * GBP190m subordinated revolving loan facility, supported by 3 year bank 
    guarantees, no indexation 
 
  * GBP45m performance bond increasing at RPI per annum, no requirement to be 
    cash backed 
 
  * GBP5m limited liability season ticket bond increasing by RPI. Matching 
    advance cash for season ticket travel 
 
  * GBP15m station repair unsecured guarantee increasing by RPI 
 
 
 
 
A conference call for analysts and investors will be held at 9:00am today. 
 
An accompanying presentation will be available at www.firstgroup.com from 8:30 
                                      am 
 
  Please call +44 (0) 20 7291 0507 or 0512 in advance to register and receive 
                               joining details. 
 
Contacts FirstGroup: 
 
Tim O'Toole, Chief Executive 
 
Nick Chevis, Acting Finance Director 
 
Rachael Borthwick, Group Corporate Communications Director 
 
Tel: +44 (0) 20 7291 0508 / +44 (0) 7771 945432 
 
Brunswick PR: 
 
Andrew Porter 
 
Tel: +44 (0) 20 7404 5959 
 
Michael Harrison 
 
Tel: +44 7834 502406 
 
 
 
END 
 

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