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2012-08-15 FIR-001
FirstGroup plc

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FirstGroup welcomes award of Intercity West Coast rail franchise


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FirstGroup plc

FirstGroup welcomes award of Intercity West Coast rail franchise
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date
Embargoed until 7:00am on 15 August 2012
source FirstGroup plc
type Press release



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 £9 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 £900m, 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 £5.5 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 £350m in the first five years of the new franchise.

Commenting,Tim O ’Toole,Chief Executive said: “We are delighted to be selected by Governm ent to operate this unique railway which connects commun ities 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 I nterCity 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 - £10m ordinary share capital in cash
Contingent capital:
– £190m subordinated revolving loan facility, supported by 3 year bank guarantees, no indexation – £45m performance bond increasing at RPI per annum, no requirement to be cash backed
– £5m limited liability season ticket bond increasing by RPI. Matching advance cash for season ticket travel
– £15m 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 8:30am

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 5024


Railhub Archive ::: 2012-08-15 FIR-001





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