REG-FirstGroup Plc: Open access rail acquisition and new services application

FirstgroupAnnouncement

05/12/2024 07:15

FIRSTGROUP PLC

open access rail acquisition and new services application

 

FirstGroup plc (the `Group') is pleased to announce that it has completed the
acquisition of Grand Union Trains GWML Holdings Limited which holds track
access rights for a new open access rail service between Carmarthen and London
Paddington. The Group has also today submitted an application to the Office of
Rail and Road (`ORR') to expand this service with additional paths to
Paignton, Devon.

 
* The new service between London Paddington and Carmarthen is anticipated to
be introduced in December 2027 and run to at least the end of 2037
* Customers will benefit from a new, value-for-money offering on the South
Wales route and additional capacity on the line
* Following mobilisation in 2027, the Group expects the service to contribute
annual revenues of c.£50m after two years, with a low double digit operating
margin
* A further open access application has been submitted to the Office of Rail
and Road (`ORR') for this service to incorporate an additional five return
trips per day between London Paddington and Paignton
 

Carmarthen - London Paddington open access rail service

The Group's acquisition of Grand Union Trains GWML Holdings Limited includes
its subsidiary Grand Union Trains No. 2 Limited which holds track access
rights already granted by the ORR to run open access rail services between
London Paddington and Carmarthen from December 2027, for a period of ten
years.

 

The new service will comprise five services a day between London Paddington
and Carmarthen, calling at intermediate stations in England and Wales
including Bristol Parkway, Newport, Severn Tunnel Junction, Cardiff Central,
Gowerton and Llanelli. Passengers can look forward to low fares on the c.400m
annual seat miles, with free Wi-Fi and on-board catering, all offered in one
comfortable class of travel. The service will not only create more customer
choice and much-needed additional capacity on the route but it will also
provide the first direct service to London from Severn Tunnel Junction and
Gowerton, and a vastly improved connection from Llanelli.

 

It will be operated under the Group's successful Lumo brand which, since its
launch in October 2021, has transformed long-distance connectivity between
London and Edinburgh and helped spur an overall shift from air to rail travel
on that route. From launch until the end of current track access agreements,
Lumo and Hull Trains are on track to deliver up to £1.4bn in economic
benefits for communities along their routes 1  (#_ftn1) and the Group believes
the new services will have a similarly positive effect for areas in South
Wales which are undergoing regeneration.

 

Following mobilisation in 2027, the Group expects the service to contribute
annual revenues of c.£50m after two years, with a low double digit operating
margin, pre IFRS 16. The new service is expected to create around 100 direct
jobs.

 

The Group is currently considering rolling stock options and further updates
will be provided in due course.

 

Together with the Group's recently announced acquisition of the track access
rights granted by the ORR to run a new open access rail service from London
Euston to Stirling, this will more than double FirstGroup's open access
capacity in the next few years. Furthermore, should the Group's recently
submitted applications be approved by the ORR this would almost treble the
Group's open access capacity over time.

 

Paignton - London open access expansion

The Group has also submitted an application to the ORR for track access rights
to expand the new operation to include five return Lumo services between
London Paddington and Paignton via stations including Bath Spa, Bristol Temple
Meads, Taunton, Exeter St David's and Torquay from May 2028, as well as a
sixth path between Highbridge & Burnham and London.

 

Currently the Torbay area only has three direct rail services to London a day,
and rail only has a 29% modal share on this route compared to 71% for road.
This is despite a car journey from Paignton to London taking between four and
five hours on average; the Group's planned London-Paignton service will take
around 3 hours 20 minutes. Similarly, Bath and Bristol tourist rail journeys
to Torbay have a lower modal share than comparable routes.  This service
should therefore accelerate tourism, drive growth and support jobs as the
Torbay area's tourism sector recovers from lower demand during the pandemic
and the resurgence in overseas travel.

 

By boosting rail connectivity and gaining mode share from car, Lumo will help
bring the South West closer together, and also provide additional options for
passengers to connect with the capital.

 

Commenting, FirstGroup Chief Executive Officer Graham Sutherland said:

"Growing our open access rail portfolio is a key priority for FirstGroup. The
introduction of our new Carmarthen to London Paddington service will
significantly bolster our footprint, and should our other applications be
successful, we will almost treble our current open access capacity over the
next few years. Our successful investment in open access through Lumo and Hull
Trains has helped connect communities and drive economic growth and we aim to
help spur similar effects along this route."

 

 

 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: Simone Selzer Tel: +44 (0) 20 7404 5959  

 

 Contacts at Panmure Liberum: Nicholas How / John More Tel: +44 (0) 20 3100 2000  Contacts at RBC Europe Limited: James Agnew / Jack Wood Tel: +44 (0) 20 7653 4000  

 

   

Notes

The acquiring entity is GB Railways Group Limited (the parent of Hull Trains,
and a wholly owned subsidiary of FirstGroup plc).

 

Forward-looking statements

Certain statements included or incorporated by reference within this document
may constitute `forward-looking statements' with respect to the business,
strategy and plans of the Group 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 that cause actual results,
performance or achievements of the Group to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. No statement in this document should be construed
as a profit forecast for any period. Shareholders are cautioned not to place
undue reliance on the forward-looking statements. Except as required by the UK
Listing Rules and applicable law, the Group does not undertake any obligation
to update or change any forward-looking statements to reflect events occurring
after the date of this document.

 

Legal Entity Identifier (LEI): 549300DEJZCPWA4HKM93. Classification as per DTR
6 Annex 1R: 3.1.

 

About First Rail Open Access

 

FirstGroup owns two open access operators, Hull Trains and Lumo, and also
operates Heathrow Express on behalf of Heathrow Airport Ltd.

 

Hull Trains has provided an open access service between Hull and London for 24
years. It runs seven services each day between Hull and London and saw the
introduction of a new fleet of bi-mode trains in 2019, that have reduced CO2
emissions by 65% compared to its previous fleet. Since Covid-19 it has
experienced a 32% increase in customers (bucking national trends) and recent
research shows using the service from Hull to London King's Cross produces 12
times less CO2 than driving. Hull Trains have increased seat capacity by 500%
thanks to FirstGroup's investment in new and longer trains.

 

Lumo has carried more than 3 million customers, on over 8,500 journeys between
London and Edinburgh since its launch in October 2021. Its entirely electric
fleet means that journeys on Lumo emit 95% less CO2 than flying, 21 times less
than a petrol car and six times less than electric vehicles.

Both Lumo and Hull Trains have collectively benefited from a £160m investment
from FirstGroup.

Market liberalisation in the EU with open access competing with state
operators has proven popular. Seven of the ten busiest rail routes in Europe
have competition between operators. On-Rail competition in a number of EU
countries has led to more services, increased efficiency and passenger demand,
lower fares, newer trains, better use of assets and reduced subsidy.

 

Open access businesses have demonstrated the innovation which private
operators can bring to the network - they have demonstrably proven additive to
rail market (often through modal shift away from less sustainable modes),
rather than abstractive of contracted operations. The East Coast Mainline has
recovered post-pandemic quicker than any other line of route and is the only
route in the UK where passenger numbers have grown; with open access operators
playing a key role in this.

 

About FirstGroup

FirstGroup plc (LSE: FGP.L) is a leading private sector provider of public
transport services. With £4.7 billion in revenue and around 30,000 employees,
we transported almost 2m passengers a day in FY 2024. 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 one of the largest
regional bus operators in the UK, serving more than 20% of the population in
the UK with a fleet of around c.4,800 buses, and carrying more than a million
passengers a day. First Rail is one of the UK's largest rail operators, with
many years of experience running long-distance, commuter, regional and sleeper
rail services. We operate a fleet of c.3,700 locomotives and rail carriages
through three DfT contracted train operating companies: WCP (incorporating
Avanti West Coast and West Coast Partnership Development), GWR and 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. During FY 2024 FirstGroup was named as one of the world's cleanest
200 public companies for the fifth consecutive year and achieved Industry
Top-Rated status for the first time with Sustainalytics. 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.

 

 

 

 

 

 1  (#_ftnref1) Lumo is forecast to contribute £470m to £740m to the UK
economy between 2021 and 2033: Passengers power equivalent of 7,500 homes
annually by choosing Lumo
(https://www.lumo.co.uk/who-we-are/lumonews/passengers-power-equivalent-of-7,500-homes-annually-by-choosing-lumo).
Hull Trains has an estimated total economic benefits delivery of £325m-700m,
from launch in 2000 through to 2032: Hull Trains Launches Independent
Economic Report into Benefits for the Region | News | Hull Trains
(https://www.hulltrains.co.uk/news/2024/hull-trains-launches-independent-economic-report-into-benefits-for-the-region)



Copyright (c) 2024 PR Newswire Association,LLC. All Rights Reserved