Stagecoach Group PLC Rail Update (3022O)
May 16 2018 - 6:36AM
UK Regulatory
TIDMSGC
RNS Number : 3022O
Stagecoach Group PLC
16 May 2018
16 May 2018
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Stagecoach Group plc
Appointment of Operator of Last Resort at InterCity East
Coast
Stagecoach Group plc ("the Company") notes today's media
speculation regarding Virgin Trains East Coast ("VTEC").
We have now been advised by the Department for Transport that
the Secretary of State for Transport plans to announce today that
he intends to appoint the "Operator of Last Resort" ("the OLR") to
operate the InterCity East Coast trains services.
The Company's subsidiary company, East Coast Mainline Company
Limited ("ECML", trading as Virgin Trains East Coast) is the
current operator of the InterCity East Coast rail franchise under
an agreement with the Department for Transport ("DfT"). ECML has
been negotiating a new direct award franchise with the DfT but we
understand that the Secretary of State for Transport is no longer
considering entering into a new franchise with ECML. The financial
consequences of that are expected to be consistent with the
Company's announcement of 5 February 2018:
-- The Company has already impaired intangible assets and
provided for losses in relation to the current ECML franchise
agreement in its consolidated financial statements for the year
ended 29 April 2017. Consistent with the assumptions reflected in
the 2016/17 consolidated financial statements, the Company has
already funded its full GBP165m loan commitment to ECML.
-- In addition, the Company expects to fund an amount equivalent
to the current performance bond outstanding in respect of ECML. As
previously indicated, that is expected to result in a further net
cash outflow of up to around GBP19m (Stagecoach's 90% share) from
the Company to ECML or the DfT in addition to the amounts reflected
in the 2016/17 consolidated financial statements.
-- Any residual net assets of ECML are not expected to be
recoverable by ECML or the wider Stagecoach Group. An additional
one-off net expense is expected in the Company's consolidated
financial statements of up to around GBP75m (Stagecoach's 90%
share). As explained in the Company's announcement of 5 February
2018, the c.GBP75m expense does not affect consolidated non-rail
net debt.
Our understanding is that today's expected announcement does not
directly affect other franchises and bids for franchises in which
the Company has an involvement.
Stagecoach Group Chief Executive, Martin Griffiths, said: "We
are surprised and disappointed that the Department for Transport
has chosen not to proceed with our proposals. We believe our plans
offered a positive, value-for-money way forward for passengers,
taxpayers and local communities, ensuring the continuation of the
exciting transformation already underway on East Coast and a smooth
transition to the Government's new East Coast Partnership.
"However, we respect the Government's decision. We will work
constructively with the DfT and the OLR in the weeks ahead to
ensure a professional transfer to the new arrangements, supporting
our employees and maintaining the same clear focus on our customers
as we have over the past three years.
"Today's decision should not detract from the hard work and
dedication of our people at Virgin Trains East Coast, who have been
central to the transformation we have been delivering for our
customers over the past three years. During that time, we have
attracted more passengers, greatly increased investment, achieved
industry leading customer satisfaction and made significant
payments to the taxpayer to reinvest in public services.
"Despite today's news, we believe that we can continue to make a
positive contribution to the UK rail market, delivering long-term
customer benefits and sustainable returns for taxpayers and
investors."
For further information, please contact:
Stagecoach Group plc www.stagecoachgroup.com
Investors and analysts
Ross Paterson, Finance Director 01738 442111
Bruce Dingwall, Group Financial Controller 01738 442111
Media
Steven Stewart, Director of Corporate Communications
ENDS 07764 774680
This information is provided by RNS
The company news service from the London Stock Exchange
END
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May 16, 2018 07:36 ET (11:36 GMT)
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