Last checked at 19 Sep 2023 07:00
FirstGroup Plc - National Rail Contract for West Coast PartnershipFirstGroup Plc - National Rail Contract for West Coast Partnership
PR Newswire
LONDON, United Kingdom, September 19
FIRSTGROUP PLC
NATIONAL RAIL CONTRACT FOR WEST COAST PARTNERSHIP
FirstGroup plc (‘FirstGroup’ or ‘the Group’) is pleased to announce that a new National Rail Contract (‘NRC’) has been agreed with the Department for Transport (‘DfT’) for the West Coast Partnership (‘WCP’), which is a partnership between FirstGroup (70%) and Trenitalia UK Ltd (30%).
The WCP NRC comprises Avanti West Coast (‘Avanti’) and the West Coast Partnership Development (‘WCPD’), the shadow operator for the HS2 programme. Key terms of the new contract are as follows:
The new NRC will commence on 15 October 2023, when WCP’s current contractual agreement ends.The contract is for nine years and has a minimum core three-year term to 18 October 2026, following which a further six years until 17 October 2032, subject to ongoing DfT approval. The NRC is a management contract under which the DfT retains all revenue risk and substantially all cost risk. WCP will earn a fixed management fee of £5.1m per annum to deliver the contract with the opportunity to earn a variable fee of up to £15.8m per annum based on a number of criteria. Punctuality and other targets required to achieve the maximum variable fee are designed to incentivise the highest level of performance. Fees are also linked to milestones in WCPD’s programme.
Since the introduction of Avanti’s new timetable in mid-December 2022, the operator has delivered a significant recovery in operational performance, and customer satisfaction. Over the last six months, cancellations that Avanti is responsible for stabilised at below 2% of scheduled services.
Avanti is working through a £117m refurbishment programme for its 56-strong electric Pendolino fleet which is delivering a step change in onboard customer experience. Further improvements for customers have included the introduction of a new Standard Premium travel class, a new low-cost flexible ticket and initiatives to support customers who require additional assistance.
FirstGroup’s ambition is to be the partner of choice for low- and zero-emission transport. As part of the new contract, WCP will continue to develop and implement initiatives to reduce its impact on the environment and, as such, Avanti has placed a £350m order for 23 brand new electric or bi-mode Hitachi trains. These trains will reduce our carbon footprint, and the operator will continue its work to improve air quality and increase waste recycling.
Commenting, Graham Sutherland, FirstGroup Chief Executive Officer, said:
“Our West Coast Partnership team has worked hard over recent months to deliver improvements for Avanti passengers, including an increase in the number of services in the timetable and high levels of reliability for customers. The new National Rail Contract agreed today will allow our team to use its expertise on further improvements. These include programmes to refurbish the existing fleet and to introduce new, more environmentally friendly trains, which will encourage more passengers to return to the network and help deliver the UK’s decarbonisation agenda.”
Notes
Additional background on financial terms of the WCP National Rail Contract
The DfT retains all revenue risk, and substantially all cost risk up to the agreed annual business plan budgetary levels, with contractual change mechanisms that allow the annual budget to be increased for items outside of the operating company’s control, like inflation, or changes requested by the DfT.The Variable Fee is scored against five performance categories (Operational Performance, Customer Satisfaction, Financial Performance, HS2 Shadow Operator Delivery and HS2 Shadow Operator Financial Management). There is a mix of quantitative metrics and qualitative assessments with three levels (‘below acceptable’, ‘acceptable’, ‘good’) – an ‘acceptable’ rating results in approximately 65% of the Variable Fee element being payable.The fixed fee and variable fee potential remains flat for the contractual term and is only subject to escalation only after the core term and only if CPI inflation is outside agreed bands. The NRC makes provision for additional incentive fees to be earned for participation in significant industry change projects outside normal operation to be agreed between WCP and the DfT.Combined with operating Avanti West Coast, WCP also acts as the shadow operator for the HS2 programme. The shadow operator role involves the development, mobilisation and the eventual operation of high-speed services.The Group is obliged to retain its share of the £45m parent company support and £10m Performance Bond for the previous WCP agreement until final settlement of any net assets or liabilities between WCP and the DfT relating to it. Thereafter, the Group’s contingent capital reduces to its share of the £14m in total, half of which is bonded.WCP will continue to be fully consolidated in the Group financial statements, with the net cost of operations and capex to be funded in advance by the DfT.The Group financial statements for FY 2024 will include Right of Use assets of c.£0.3bn recognised under IFRS 16 rules. Other impacts under IFRS 16 compared to an IAS 17 basis include EBITDA +c.£160m, EBIT +c.£10m and interest cost +c.£10m.
Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR 6 Annex 1R: 3.1.
| Contacts at FirstGroup: Marianna Bowes, Head of Investor Relations Stuart Butchers, Head of Corporate Communications corporate.comms@firstgroup.co.uk Tel: +44 (0) 20 7725 3354 | Contacts at Brunswick Group: Andrew Porter / Simone Selzer Tel: +44 (0) 20 7404 5959 |
| Contacts at Liberum Capital Limited: Nicholas How / John Fishley Tel: +44 (0) 20 3100 2000 | Contacts at RBC Europe Limited: James Agnew / Jack Wood Tel: +44 (0) 20 7653 4000 |
About FirstGroup
FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public transport services. With £4.8 billion in revenue and around 30,000 employees, we transported more than 1.8m passengers a day in 2022/23. We create solutions that reduce complexity, making travel smoother and life easier. Our businesses are at the heart of our communities and the essential services we provide are critical to delivering wider economic, social and environmental goals. Each of our divisions is a leader in its field: First Bus is the second largest regional bus operator in the UK, serving two-thirds of the country’s 15 largest conurbations with a fleet of more than 4,500 buses, and carrying more than a million passengers a day. First Rail is the UK’s largest rail operator, with many years of experience running long-distance, commuter, regional and sleeper rail services. We operate a fleet of more than 3,500 locomotives and rail carriages through three management fee-based train operating companies (Avanti West Coast, GWR, SWR) and two open access routes (Hull Trains and Lumo). We are formally committed to operating a zero-emission First Bus fleet by 2035, and First Rail will help support the UK Government’s goal to remove all diesel-only trains from service by 2040. In February 2023 FirstGroup was named as one of the world’s cleanest 200 public companies for the fourth consecutive year by sustainable business media group Corporate Knights in partnership with US not-for-profit organisation, As You Sow. We provide easy and convenient mobility, improving quality of life by connecting people and communities. Visit our website at www.firstgroupplc.com and follow us @firstgroupplc on X.
About Avanti West Coast
Avanti West Coast, the operator of intercity rail services on the West Coast Main Line, is a joint venture between FirstGroup and Trenitalia, delivering a cleaner, greener railway that drives the West Coast forward. We’re on a mission to revolutionise train travel. Our refurbed Pendolinos are returning to the rails, with a £117m investment delivering best in class comfort. Rebuilt using sustainable materials wherever possible, including tables made from recycled plastic bottles, our upgraded fleet offers 25,000 brand new seats, free Wi-Fi, onboard recycling and much more. New Hitachi trains are set to replace our Voyager trains, leading to a 61% cut in carbon emissions. Quieter and roomier, with more reliable Wi-Fi, wireless charging for electrical devices and a real-time customer information system, the new 23-strong fleet is the result of a £350m investment in sustainable travel. We’re tackling climate change wherever we can, from reducing energy and water use to training drivers in eco-driving techniques and sourcing food and drink from local suppliers. Our goal is to be net zero carbon by 2031. We’re on track.
About West Coast Partnership Development
West Coast Partnership Development is the Shadow Operator for services on the West Coast route corridor following the opening of HS2. Over the life of the contract WCPD will design, deliver and then operate an integrated high-speed and intercity train service that meets the needs and expectations of passengers and maximises the benefits of significant public investment. Our team of experts are working closely with HS2 and DfT to ensure the infrastructure, stations, train and timetable are fit for purpose, ready for launch and customer focused.
Forward-looking statements
Figures presented in this announcement are not audited. Certain statements included or incorporated by reference within this announcement are, or may be deemed to be, forward-looking statements. These forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this announcement and include, but are not limited to, statements regarding FirstGroup and its intentions, beliefs or current expectations concerning, among other things, the business, results of operations, prospects, growth and strategies of the Group, or parts thereof. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance and the actual results of operations of the Group, or parts thereof, and the developments in the industries in which they operate, may differ materially from those described in, or suggested by, the forward-looking statements contained in this announcement. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, changes in law and regulation, currency fluctuations, changes in business strategy and political and economic uncertainty. Forward-looking statements may, and often do, differ materially from actual results. Any forward-looking statements in this announcement reflect FirstGroup’s current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to FirstGroup and its operations, results of operations and growth strategy. Other than in accordance with its legal or regulatory obligations (including under the Listing Rules, the Disclosure Guidance and Transparency Rules and the Prospectus Rules), the Group is not under any obligation and the Group expressly disclaims any intention or obligation (to the maximum extent permitted by law) to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.