FirstGroup gives up rail franchise

The company has an option to extend the franchise beyond March 2013 but said it would rather re-bid for a longer-term contract under the new Greater Western franchise which will accompany investment in the region’s network.

FirstGroup said: “The Government has committed significant investment to transform rail services in the region and we believe that, through our unrivalled expertise and experience, we are best placed to manage these projects and we intend to bid for the new Greater Western franchise.”

The move in relation to First Great Western, which covers services from London Paddington to the Thames Valley and West Country, will reportedly save the company more than £800 million in repayments to the Government.

First Great Western’s record on punctuality and reliability has been much criticised in recent years and led to a “strike” by passengers in 2008.

In annual results today, FirstGroup said the franchise’s performance over the last year had been affected by infrastructure issues and that, while punctuality improved in February and March, there remained more to do.

The group, which also runs the Capital Connect, ScotRail and TransPennine Express services, said it increased rail revenues by 6.5% to £2.27 billion in the year to March 31, while profits rose 23% to £108.7 million.

Including UK bus and overseas operations such as the US-based Greyhound coach service, FirstGroup’s profits fell 27% to £127.2 million.

FirstGroup’s profits were impacted by a “particularly disappointing” result at its First Student school transport business in North America.

As school boards reduced their transport costs as a result of budgetary constraints, revenues reduced by 2.5% and profits for the division slumped to £128.3 million from £180.9 million a year earlier.

The Aberdeen-based group is restructuring the business but has already admitted that its margins will remain under pressure this year.

In its UK bus division, which operates a fleet of 8,500 vehicles and runs one in five of all local bus services, revenues reduced by 2.8% to £1.14 billion after the company cut mileage in response to trading conditions.

Operating profits for the division rose by 19% to £148.8 million due to lower fuel costs and operating efficiencies.