FirstGroup has continued to steady investor nerves with a second announcement in two days on extending its rail franchises.
It has signed an agreement with the Department for Transport to operate its flagship First Great Western franchise for another four and possibly five years, at a time when a £7.5billion programme of modernisation along the routes is already under way.
Last Friday FirstGroup said the DfT had extended its Trans-Pennine franchise for another 12 months until the start of a new agreement.
Now the Aberdeen-based group can rely on income from the Great Western until April 1 2019 while a further 12 months is at the DfT's discretion. In last week's Budget, the chancellor promised a "new rail franchise" for the region, but it now appears that this referred only to yesterday's long-expected renewal.
Tim O'Toole, chief executive said the deal would "deliver for passengers and taxpayers". He went on: "As the proud operators of this important franchise, we will be using our unrivalled knowledge and experience of the network to help deliver significant upgrades over the next few years, in particular the introduction of new trains as the mainline is electrified.
"This investment is the biggest on the route since Brunel, and will transform a key part of the country's transport infrastructure."
FirstGroup would introduce new or refurbished trains on every part of the network, resulting in more seats and more frequent and faster journeys.
The deal includes a £2.2m fund to target station and train service improvements around areas of social need and lower income communities, more funding for community rail partnerships on local branch lines, and free wifi across all fleets.
First Great Western is the current Rail Business of the Year, for its work with Network Rail to re-open the main line after the collapse of the sea wall at Dawlish in Devon and for the `Building a GreaterWest' marketing campaign.
But that did not help FirstGroup elsewhere in 2014, as it lost out on five rail franchises and saw its market value battered. The shares have fallen from 138p a year ago to a low of under 93p last week - not far above the 85p at which rights issue shares were priced in June 2013. They edged up 3.45p to 98.5p yesterday, down 29per cent on the 12 months.
FirstGroup produced a positive market update in January, sparking a 7per cent rise in the shares at the time, and earlier this month it unveiled Wolfhart Hauser as its next £280,000-a-year chairman, when John McFarlane steps down in July to become chairman of Barclays. It has also announced a bid to challenge Virgin on the east coast route by running its own services to undercut the main operator and compete with low-fare airlines.
FirstGroup will submit its Trans-Pennine bid later this year, in a three-way fight with its big rivals Stagecoach and Keolis-GoAhead, and will cite a doubling of passenger numbers to 26m since it began running the new franchise in 2004.
Stagecoach in the shape of Virgin Rail has since 2012 seen off FirstGroup's bids to run both the west and east coast Anglo-Scottish routes, while Keolis backed by the French government has been mopping up franchise wins around the network. Dutch government-backed Abellio meanwhile has grabbed First ScotRail and will take over next month.
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