Statement re South Western rail franchise award.(First Group)

FirstGroup plc and MTR Corporation Limited welcome today's announcement by the
Department for Transport ('DfT') of its intention to award the new South
Western rail franchise to our 70:30 joint venture First MTR South Western
Trains Limited (the 'Franchise Operator'). The new franchise will operate from
20 August 2017 until at least August 2024.

Over the course of the franchise, £1.2bn will be invested to raise the quality
of every aspect of train journeys on the South Western network. We are giving
customers and community groups a say in setting priorities for that investment
by focusing on the following areas, based on their feedback:

State of the art trains: We will introduce 750 new, spacious train carriages
for the Windsor, Reading and London Suburban routes by December 2020, as well
as 18 additional, fully refurbished trains (90 carriages) on the
London-Portsmouth route from December 2018. We shall deliver 52,000 more peak
seats per day at London Waterloo compared to today's services by December 2020.
The rest of our mainland fleet will be refreshed and will have free, more
reliable Wi-Fi, at-seat charging points and free infotainment as well as real
time travel and connection information screens.

Additional and faster services: From December 2018 our plans will deliver
faster journey times to stations including Hounslow, Reading, Southampton,
Bournemouth, Weymouth, Portsmouth and Salisbury; double the service to both
Reading and Windsor throughout the day; double the off-peak service between
Southampton and Portsmouth and re-introduce through services between
Portsmouth, Southampton, Bournemouth and Weymouth to aid regional connectivity.
We will also significantly improve weekend services with more than 400 extra
Sunday trains across the network.

Easier tickets and fares: We will introduce simpler fares with mobile and smart
ticketing. These will include flexible season tickets and new lower fares for
16-18 year olds, recognising the importance of accessible rail travel. Claiming
compensation will also be made simpler with the introduction of an easy-to-use
'delay repay' scheme for the first time on the network. Our new passenger app
will be a key gateway to all travel options throughout the region.

Station improvement: £90m will be invested in our stations, including a major
refurbishment at Southampton Central station. Car parks will be extended at key
locations with at least 1,500 extra spaces and new electric vehicle charging
points. We will use station buildings to host community projects and
independent retailers. Passengers will also benefit from this summer's London
Waterloo platform extension project that is scheduled for completion within
days of the start of the new franchise. Further capacity at Waterloo will be
introduced at the end of 2018 when the former Waterloo International platforms
are fully redeveloped and brought back into use.

People and communities: An important objective is to increase engagement with
customers, employees, local authorities and community groups to give them a
real stake in the future of rail travel in their area. We will launch a £2.6m
annual fund to support community projects across the franchise from April 2020.
Connections between other local rail and bus services will deliver genuine
joined up journeys, and we plan to introduce the biggest rail operator
apprenticeship scheme in Britain.

Commenting on today's announcement, Secretary of State for Transport Chris
Grayling said:

"This is great news for rail passengers. FirstGroup and MTR will deliver the
improvements that people tell us they want right across the South Western
franchise area, from Southampton and Portsmouth, to Bristol and Exeter, to
Reading, Windsor and London.

"We are delivering the biggest rail modernisation programme for over a century
and this franchise will deliver real changes for passengers, who can look
forward to modern trains, faster journeys and a more reliable service."

FirstGroup Chief Executive Tim O'Toole said:

"We are delighted that our partnership with MTR has been selected by the DfT to
run the South Western rail franchise, a key part of the country's railway
network which millions of people rely on every day. Our successful bid will
deliver the tangible improvements that customers and stakeholders have told us
they want from this franchise. Passengers can look forward to new and better
trains, more seats and services, quicker journey times, improved stations and
more flexible fare options."

Jeremy Long, CEO - European Business, MTR Corporation said:

"MTR is known across the world for the excellent quality of its rail services,
and we look forward to working with FirstGroup to provide a best-in-class
travel experience for passengers in London and the South West. Together we will
deliver a major programme of upgrades, including improvements to both rail
services and customer experience, for passengers travelling across the South
Western network."

Key franchise terms

The new franchise will start on 20 August 2017 and is planned to run for a core
period of seven years, with an extension option of up to eleven months at the
DfT's discretion. Under the contract, the Franchise Operator will deliver £
2.6bn real NPV* in premium payments to the Government over the core period. The
JV shareholders will provide a loan of up to £30m, and £88m (of which 50% is
bonded) in subordinated contingent loan facilities to the Franchise Operator,
as well as a £15m performance bond and a season ticket bond of up to £80m. The
franchise terms include GDP and Central London Employment revenue protection
mechanisms to mitigate the financial impact of exogenous economic factors
outside the control of the Franchise Operator, and a profit sharing arrangement
whereby a proportion of profit in excess of pre-specified thresholds will be
payable to the DfT.

The franchise will benefit from investment of £1.2bn, primarily during the
first four years of the franchise, leading to enhanced customer experience and
passenger capacity. Approximately £80m of investment will be directly funded by
the Franchise Operator. Franchise passenger revenues, which were £991m in 2015/
16, are expected to increase from the additional capacity created. FirstGroup
expects to achieve margins comparable with the recent overall industry average
and to earn an appropriate return over the life of the contract, reflecting the
franchise risk profile. FirstGroup expects a working capital inflow of
approximately £100m principally relating to season ticket monies, to be treated
as restricted cash.

The franchise award is subject to the customary 'standstill period' of ten
days, after which formal contracts will be signed by the DfT. As with other UK
rail franchise awards, the Competition and Markets Authority is also required
by law to carry out a 'phase one review'.

* Net present value of forecast premium payments over the seven year core
franchise period, expressed in 2017/18 prices and discounted using the DfT's
'real' discount rate of 3.5%.

Key benefits of the new South Western franchise:

        New trains - 750 new carriages for suburban services

  * Introduce 750 carriages by December 2020, forming 90 brand new trains
    primarily for London Suburban routes and Windsor/Reading lines

  * Average age of the entire fleet coming down by almost half by December 2020

  * New fleet will provide over 46% more peak capacity for our customers than
    today's trains on the Windsor, Reading and London Suburban routes

  * Enhanced travelling experience for customers - free reliable Wi-Fi, at-seat
    charging points, air conditioning, toilets, wide gangways and wide doors to
    improve ease of boarding and alighting

    Improved carriages - 90 for Portsmouth fast services / comfortable seating
    on all fast services

  * 18 trains / 90 carriages refurbished to 'as new' for Portsmouth to London
    services by December 2018

  * Comfortable 'two plus two' seating on all Portsmouth fast trains to London
    by December 2018

    More seats - 22,000 extra morning peak seats into Waterloo and 30,000 in
    evening peak from Waterloo

  * Boosting peak seats each weekday by around 30% by December 2020

    Increased frequency, better weekend services and quicker journeys from
    December 2018

  * Mainline journey times reduced, including Weymouth-London and Poole-London
    journey times reduced by up to 14 minutes; Bournemouth-London reduced by up
    to nine minutes and Southampton Central-London reduced by up to eight
    minutes. Trips from Portsmouth will be quicker with an average five minutes
    cut from fast journeys and up to seven minutes from slower trips

  * Better connectivity on the South Coast, with four trains an hour between
    London and Portsmouth, direct service along the South Coast connecting
    communities from Portsmouth to Weymouth, and a second hourly semi-fast
    service between Portsmouth and Southampton

  * Sunday afternoon services will match weekdays on most routes for the first
    time from 2018 with almost 400 more services; number of fast trains to
    Portsmouth will double on Sunday afternoons. West of England will see two
    trains per hour earlier on a Sunday than currently and we will speed up
    Weymouth services by deploying a standard weekday stopping pattern

  * Double the number of trains each hour to Reading and Windsor from two to
    four - Reading will see two semi-fast and two stopping services every hour
    and Windsor will receive two extra semi-fast services via Hounslow

  * We will improve late evening frequencies and later last trains across the

    Free and fast Wi-Fi on trains and stations

  * Free Wi-Fi both on-board mainland trains and at stations, with up to five
    times greater bandwidth than today

  * Introduce free infotainment to many of our mainland trains by December
    2018, making films, catch-up TV, newspapers and magazines available - and
    full coverage of our mainland fleet by December 2020

    Real-time information on all trains ensuring customers have a smooth and
    rapid, door-to-door journey

  * Live updates to passenger information screens on all our mainland trains

    Charging points accessible from every seat for all our mainland trains

  * Our new suburban trains, introduced by December 2020, will all have
    charging points

  * We will introduce charging points on all other mainland trains - Class
    442s, Class 444s and 450s by December 2018, Class 158s and 159s by December

    New innovative customer app

  * New customer app will make it the primary source of travel advice for our
    customers making it easier to use our trains, pointing customers towards
    less busy trains or less busy coaches within trains

    Mobile ticketing and new smartcards

  * Mobile phone barcode tickets will be available on the network for the first
    time, covering a wide range of journeys

  * We will implement our smartcard scheme across the franchise including
    pay-as-you-go functionality

  * We will offer flexible season products

    Automatic Delay Repay

  * We will bring in Delay Repay for the first time, making it simple and easy
    for our customers to claim for late trains with a fully automated process
    offered to those buying season and advance tickets direct on smartcards

    £90m station investment

  * £90m station investment programme, including the refurbishment of
    Southampton Central

  * At least 1,500 new car parking spaces across the network and 60 electric
    vehicle charging points at stations

  * New stations: we will work with stakeholders to progress plans for new
    stations such as Park Barn, Merrow and Wilton Parkway and others during the

    Working with the Isle of Wight community to develop proposals for Island
    Line's future

  * We will engage with the Isle of Wight community to develop plans to secure
    a more sustainable Island Line

  * Proposal to be submitted to Government with Island support

  * Annual £50,000 Customer and Communities Improvement Fund for Island Line

    More than 100 apprenticeships each year

  * We plan to introduce the biggest rail operator apprenticeship scheme in
    Britain - we will launch our apprenticeship programme from franchise start
    on a wide range of courses

    Customer and Communities Improvement Fund

  * £2.6m annual fund for community projects across the franchise to be
    launched from April 2020

Investor information

A conference call for investors and analysts will be held at 8:30am today.
Please call +44 (0) 20 7725 3354 in advance of the call to register and receive
joining details. A presentation pack together with a pdf copy of this
announcement and a playback facility will be available at

Contacts at FirstGroup:
Faisal Tabbah, Head of Investor Relations
Stuart Butchers, Group Head of Media
Tel: +44 (0) 20 7725 3354

Michael Harrison / Andrew Porter, Brunswick PR
Tel: +44 (0) 20 7404 5959

Contacts at MTR:
Nick Collins, MHP Communications
+44 (0) 7824 462 091

Figures presented in this announcement are not audited. Certain statements
included or incorporated by reference within this announcement may constitute
'forward-looking statements' with respect to the business, strategy and plans
of FirstGroup 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 which may cause actual results, performance or
achievements of FirstGroup to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Shareholders are cautioned not to place undue reliance on the
forward-looking statements. Except as required by the UK Listing Rules and
applicable law, FirstGroup does not undertake any obligation to update or
change any forward-looking statements to reflect events occurring after the
date of this announcement.