SGC.L Regulatory News (SGC)

27 October 2011

Virgin Rail Group agrees West Coast franchise extension

Stagecoach Group plc ("Stagecoach") is pleased to confirm that Virgin Rail Group ("VRG") has signed an agreement with the Department for Transport ("DfT") for an eight-month extension to the current West Coast rail franchise.

VRG is a joint venture between Stagecoach and Virgin Group and operates the West Coast franchise through its Virgin Trains brand.

The West Coast franchise was due to expire at the end of March 2012, but will now be extended to run until 8 December 2012.

The franchise extension will include management of the introduction of new Pendolino carriages that have been programmed to be available to go into passenger service by December 2012.

Stagecoach currently expects its share of VRG's profit after tax for the extension period to be below £10m. This expected return reflects the relatively low revenue risk in the extension period (given that the DfT will fund 80% of any passenger revenue shortfall) and the strategic importance to VRG of it remaining the franchise incumbent.

VRG is currently in receipt of contractual revenue support payments from the DfT under the West Coast franchise. The DfT's target revenue for the franchise extension is challenging and VRG expects to be in 80% revenue support for the extension period. If the revenue is higher than the DfT's target revenue then the DfT will receive 80% of the difference.

As previously announced, VRG has pre-qualified to bid for the new Intercity West Coast rail franchise. The Government has confirmed that the new franchise will start on 9 December 2012 and run until 31 March 2026, with an option to be extended by up to 20 months. The terms of the extension to the current West Coast franchise are not considered indicative of the terms of a new franchise.

Virgin Rail Group Chief Executive Officer Tony Collins said: "We are delighted to have agreed an extension to the current West Coast franchise. It is great news for passengers and will also deliver value for money to taxpayers.

"The extension will bring continuity and allow us to run services for passengers at an exciting and challenging time for the country with the London 2012 Olympic Games next year.

"We will also be working hard to introduce important extra capacity on the West Coast mainline with the introduction of more than 100 new Pendolino carriages. These would deliver an extra 28,000 seats for passengers every day, or more than 40per cent extra standard class Pendolino seats.

"Virgin Trains is delivering industry-leading levels of customer satisfaction and annual passenger numbers have grown from around 14 million to around 30 million in just 7 years. This reflects the high quality of service and investment in new trains and improved infrastructure, which has hugely benefitted customers using the backbone of the UK rail network."

ENDS

ENQUIRIES

Analysts

Martin Griffiths, Group Finance Director +44 (0) 1738 442111

Ross Paterson, Director of Finance & Company Secretary +44 (0) 1738 442111

Media

Steven Stewart, Director of Corporate Communications +44 (0) 1738 442111 or

+44 (0) 7764 774680

John Kiely, Smithfield Consultants +44 (0) 20 7360 4900

NOTES TO EDITORS

Virgin Rail Group, which has operated the West Coast passenger train franchise since 1997, is owned 51% by Virgin Group and 49% by Stagecoach Group.

Stagecoach Group is a leading international public transport group, with extensive operations in the UK, United States and Canada. The company employs around 35,000 people, and operates bus, coach, rail, and tram services.

Stagecoach operates the South Western rail franchise, which includes the South West Trains and Island Line networks. South West Trains, the UK's biggest commuter rail network, runs nearly 1700 trains a day in the south-west of England out of London Waterloo. Island Line, on the Isle of Wight, has been designated a Community Rail Partnership. In addition, Stagecoach runs the East Midlands rail franchise. East Midlands Trains operates high-speed long distance services from London St. Pancras to Sheffield, Derby and Nottingham, Liverpool - Norwich and regional services throughout Leicestershire, Nottinghamshire, Derbyshire and Lincolnshire. Stagecoach also operates the Supertram light rail network in Sheffield.