FirstGroup and MTR welcome
South Western rail franchise award
FirstGroup plc and MTR Corporation Limited welcome today’s
announcement by the Department for Transport (‘DfT’) of its
intention to award the new South Western rail franchise to our
70:30 joint venture First MTR South Western Trains Limited (the
‘Franchise Operator’). The new franchise will operate from
20 August 2017 until at least
August 2024.
Over the course of the franchise, £1.2bn will be invested to
raise the quality of every aspect of train journeys on the South
Western network. We are giving customers and community groups a say
in setting priorities for that investment by focusing on the
following areas, based on their feedback:
State of the art trains: We will introduce 750 new,
spacious train carriages for the Windsor, Reading and London Suburban routes by
December 2020, as well as 18
additional, fully refurbished trains (90 carriages) on the
London-Portsmouth route from December 2018. We shall deliver 52,000 more peak
seats per day at London Waterloo compared to today’s services by
December 2020. The rest of our
mainland fleet will be refreshed and will have free, more reliable
Wi-Fi, at-seat charging points and free infotainment as well as
real time travel and connection information screens.
Additional and faster services: From December 2018 our plans will deliver faster
journey times to stations including Hounslow, Reading, Southampton, Bournemouth, Weymouth, Portsmouth and Salisbury; double the service to both
Reading and Windsor throughout the day; double the
off-peak service between Southampton and Portsmouth and re-introduce through services
between Portsmouth, Southampton, Bournemouth and Weymouth to aid regional connectivity. We will
also significantly improve weekend services with more than 400
extra Sunday trains across the network.
Easier tickets and fares: We will introduce simpler fares
with mobile and smart ticketing. These will include flexible season
tickets and new lower fares for 16-18 year olds, recognising the
importance of accessible rail travel. Claiming compensation will
also be made simpler with the introduction of an easy-to-use ‘delay
repay’ scheme for the first time on the network. Our new passenger
app will be a key gateway to all travel options throughout the
region.
Station improvement: £90m will be invested in our
stations, including a major refurbishment at Southampton Central
station. Car parks will be extended at key locations with at least
1,500 extra spaces and new electric vehicle charging points. We
will use station buildings to host community projects and
independent retailers. Passengers will also benefit from this
summer’s London Waterloo platform extension project that is
scheduled for completion within days of the start of the new
franchise. Further capacity at Waterloo will be introduced at the
end of 2018 when the former Waterloo International platforms are
fully redeveloped and brought back into use.
People and communities: An important objective is to
increase engagement with customers, employees, local authorities
and community groups to give them a real stake in the future of
rail travel in their area. We will launch a £2.6m annual fund to
support community projects across the franchise from April 2020. Connections between other local rail
and bus services will deliver genuine joined up journeys, and we
plan to introduce the biggest rail operator apprenticeship scheme
in Britain.
Commenting on today's announcement,
Secretary of State for Transport Chris
Grayling said:
“This is great news for rail passengers. FirstGroup and MTR will
deliver the improvements that people tell us they want right across
the South Western franchise area, from Southampton and Portsmouth, to Bristol and Exeter, to Reading, Windsor and London.
“We are delivering the biggest rail modernisation programme for
over a century and this franchise will deliver real changes for
passengers, who can look forward to modern trains, faster journeys
and a more reliable service.”
FirstGroup Chief Executive
Tim O'Toole said:
“We are delighted that our partnership with MTR has been
selected by the DfT to run the South Western rail franchise, a key
part of the country’s railway network which millions of people rely
on every day. Our successful bid will deliver the tangible
improvements that customers and stakeholders have told us they want
from this franchise. Passengers can look forward to new and better
trains, more seats and services, quicker journey times, improved
stations and more flexible fare options.”
Jeremy
Long, CEO – European Business, MTR Corporation said:
“MTR is known across the world for the excellent quality of its
rail services, and we look forward to working with FirstGroup to
provide a best-in-class travel experience for passengers in
London and the South West.
Together we will deliver a major programme of upgrades, including
improvements to both rail services and customer experience, for
passengers travelling across the South Western network.”
Key franchise terms
The new franchise will start on 20 August
2017 and is planned to run for a core period of seven years,
with an extension option of up to eleven months at the DfT's
discretion. Under the contract, the Franchise Operator will deliver
£2.6bn real NPV* in premium payments to the Government over the
core period. The JV shareholders will provide a loan of up to £30m,
and £88m (of which 50% is bonded) in subordinated contingent loan
facilities to the Franchise Operator, as well as a £15m performance
bond and a season ticket bond of up to £80m. The franchise terms
include GDP and Central London Employment revenue protection
mechanisms to mitigate the financial impact of exogenous economic
factors outside the control of the Franchise Operator, and a profit
sharing arrangement whereby a proportion of profit in excess of
pre-specified thresholds will be payable to the DfT.
The franchise will benefit from investment of £1.2bn, primarily
during the first four years of the franchise, leading to enhanced
customer experience and passenger capacity. Approximately £80m of
investment will be directly funded by the Franchise Operator.
Franchise passenger revenues, which were £991m in 2015/16, are
expected to increase from the additional capacity created.
FirstGroup expects to achieve margins comparable with the recent
overall industry average and to earn an appropriate return over the
life of the contract, reflecting the franchise risk profile.
FirstGroup expects a working capital inflow of approximately £100m
principally relating to season ticket monies, to be treated as
restricted cash.
The franchise award is subject to the customary ‘standstill
period’ of ten days, after which formal contracts will be signed by
the DfT. As with other UK rail franchise awards, the Competition
and Markets Authority is also required by law to carry out a ‘phase
one review’.
* Net present value of forecast
premium payments over the seven year core franchise period,
expressed in 2017/18 prices and discounted using the DfT's 'real'
discount rate of 3.5%.
Key benefits of the new South Western
franchise:
New trains –
750 new carriages for suburban services
-
Introduce 750 carriages by December
2020, forming 90 brand new trains primarily for London
Suburban routes and Windsor/Reading lines
-
Average age of the entire fleet coming down by almost half by
December 2020
-
New fleet will provide over 46% more peak capacity for our
customers than today’s trains on the Windsor, Reading and London Suburban routes
-
Enhanced travelling experience for customers – free reliable
Wi-Fi, at-seat charging points, air conditioning, toilets, wide
gangways and wide doors to improve ease of boarding and
alighting
Improved carriages – 90 for
Portsmouth fast services /
comfortable seating on all fast services
-
18 trains / 90 carriages refurbished to ‘as new’ for
Portsmouth to London services by December 2018
-
Comfortable ‘two plus two’ seating on all Portsmouth fast trains to London by December
2018
More seats – 22,000 extra morning peak
seats into Waterloo and 30,000 in evening peak from Waterloo
-
Boosting peak seats each weekday by around 30% by December 2020
Increased frequency, better weekend
services and quicker journeys from December
2018
-
Mainline journey times reduced, including Weymouth-London and Poole-London
journey times reduced by up to 14 minutes; Bournemouth-London reduced by up to nine minutes and
Southampton Central-London reduced by up to eight minutes. Trips
from Portsmouth will be quicker
with an average five minutes cut from fast journeys and up to seven
minutes from slower trips
-
Better connectivity on the South Coast, with four trains an hour
between London and Portsmouth, direct service along the South
Coast connecting communities from Portsmouth to Weymouth, and a second hourly semi-fast
service between Portsmouth and
Southampton
-
Sunday afternoon services will match weekdays on most routes for
the first time from 2018 with almost 400 more services; number of
fast trains to Portsmouth will
double on Sunday afternoons. West of England will see two trains per hour earlier
on a Sunday than currently and we will speed up Weymouth services by deploying a standard
weekday stopping pattern
-
Double the number of trains each hour to Reading and Windsor from two to four – Reading will see two semi-fast and two
stopping services every hour and Windsor will receive two extra semi-fast
services via Hounslow
-
We will improve late evening frequencies and later last trains
across the network
Free and fast Wi-Fi on trains and
stations
-
Free Wi-Fi both on-board mainland trains and at stations, with
up to five times greater bandwidth than today
-
Introduce free infotainment to many of our mainland trains by
December 2018, making films, catch-up
TV, newspapers and magazines available – and full coverage of our
mainland fleet by December 2020
Real-time information on all trains
ensuring customers have a smooth and rapid, door-to-door
journey
-
Live updates to passenger information screens on all our
mainland trains
Charging points accessible from every
seat for all our mainland trains
-
Our new suburban trains, introduced by December 2020, will all have charging points
-
We will introduce charging points on all other mainland trains –
Class 442s, Class 444s and 450s by December
2018, Class 158s and 159s by December
2020
New innovative customer app
-
New customer app will make it the primary source of travel
advice for our customers making it easier to use our trains,
pointing customers towards less busy trains or less busy coaches
within trains
Mobile ticketing and new
smartcards
-
Mobile phone barcode tickets will be available on the network
for the first time, covering a wide range of journeys
-
We will implement our smartcard scheme across the franchise
including pay-as-you-go functionality
-
We will offer flexible season products
Automatic Delay Repay
-
We will bring in Delay Repay for the first time, making it
simple and easy for our customers to claim for late trains with a
fully automated process offered to those buying season and advance
tickets direct on smartcards
£90m station investment
-
£90m station investment programme, including the refurbishment
of Southampton Central
-
At least 1,500 new car parking spaces across the network and 60
electric vehicle charging points at stations
-
New stations: we will work with stakeholders to progress plans
for new stations such as Park Barn,
Merrow and Wilton Parkway and others during the franchise
Working with the Isle of Wight community to develop proposals
for Island Line’s future
-
We will engage with the Isle of
Wight community to develop plans to secure a more
sustainable Island Line
-
Proposal to be submitted to Government with Island support
-
Annual £50,000 Customer and Communities Improvement Fund for
Island Line
More than 100 apprenticeships each
year
-
We plan to introduce the biggest rail operator apprenticeship
scheme in Britain – we will launch
our apprenticeship programme from franchise start on a wide range
of courses
Customer and Communities Improvement
Fund
-
£2.6m annual fund for community projects across the franchise to
be launched from April 2020
Investor information
A conference call for investors and analysts will be held at
8:30am today. Please call +44 (0) 20
7725 3354 in advance of the call to register and receive joining
details. A presentation pack together with a pdf copy of this
announcement and a playback facility will be available at
www.firstgroupplc.com/investors.
Contacts at FirstGroup:
Faisal Tabbah, Head of Investor
Relations
Stuart Butchers, Group Head of Media
Tel: +44 (0) 20 7725 3354
Michael
Harrison / Andrew Porter,
Brunswick PR
Tel: +44 (0) 20 7404 5959
Contacts at MTR:
Nick Collins, MHP Communications
nick.collins@mhpc.com
+44 (0) 7824 462 091
Notes
Figures presented in this announcement are not audited. Certain
statements included or incorporated by reference within this
announcement may constitute ‘forward-looking statements’ with
respect to the business, strategy and plans of FirstGroup and our
current goals, assumptions and expectations relating to our future
financial condition, performance and results. By their nature,
forward-looking statements involve known and unknown risks,
assumptions, uncertainties and other factors which may cause actual
results, performance or achievements of FirstGroup to be materially
different from any future results, performance or achievements
expressed or implied by such forward-looking statements.
Shareholders are cautioned not to place undue reliance on the
forward-looking statements. Except as required by the UK Listing
Rules and applicable law, FirstGroup does not undertake any
obligation to update or change any forward-looking statements to
reflect events occurring after the date of this announcement.
About FirstGroup
FirstGroup plc (LSE: FGP.L) is a leading transport operator in the
UK and North America. With £5.2
billion in revenues and 110,000 employees, we transported around
2.2 billion passengers last year. Each of our five divisions is a
leader in its field: In North America, First Student is the largest
provider of student transportation with a fleet of around 47,000
yellow school buses, First Transit is one of the largest providers
of outsourced transit management and contracting services, while
Greyhound is the only nationwide operator of scheduled intercity
coach services. In the UK, FirstGroup is one of Britain's largest bus operators running a
fleet of some 6,200 buses, and we are one of the country's most
experienced passenger rail operators, carrying around 140 million
passengers last year. Our vision is to provide solutions for an
increasingly congested world... keeping people moving and
communities prospering. Visit our website at www.firstgroupplc.com
and follow us @firstgroupplc on Twitter.
About MTR Corporation
MTR Corporation is headquartered in Hong
Kong and is acknowledged as one of the world’s leading
operators of metro, commuter, inter-city and airport rail systems
with rail operations in Hong Kong,
China, Australia,
Sweden and the UK. It is also a
property developer, and manages shopping malls, retail units,
apartments and other major buildings along some of its lines.
In the UK, MTR is the operator of the Elizabeth Line concession
(the name for the Crossrail route), and currently runs TfL Rail
services between Liverpool Street and Shenfield. MTR was a joint
venture partner in London Overground Rail Operations Ltd (LOROL)
between November 2007 and
November 2016.
Listed on the Hong Kong stock
exchange, MTR has a market capitalisation of approximately £22.3
billion, and is included on the FTSE4Good and Dow Jones
Sustainability Indexes. It won over 50 awards in 2016 for quality,
customer service and sustainability.