FirstGroup will 'double' private rail operations to counter Government's nationalisation push
FirstGroup has upgraded 2025 profit guidance after a better than expected showing from its rail division over the last year.
The FTSE 250 Avanti West Coast and Great Western Railway owner expects higher than forecast variable operator fees from the Department of Transport, while its non-taxpayer funded open access operations continued to perform well.
The Government passed a bill last year that will bring rail passenger services back into public ownership by appointing a public sector operator when existing contracts expire.
While the timing of nationalisations has not been confirmed, FirstGroup's South Western Railway will see its DfT contract expire in May.
GWR and Avanti core terms will come to an end in June 2025 and October 2026, respectively, at which point their contracts go into an extension period.
The DfT will then give notice as to whether it will take the contracts over.
FirstGroup said its open access operations like Lumo and Hull Trains, which manage trains on mainline routes without government funding, had benefited from 'strong demand, effective yield management and continued high levels of customer satisfaction'.
Open access: Operators like FirstGroup's Lumo manage trains on mainline routes without government funding
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It has acquired track access rights for two new open access services and signed a £500million agreement to lease 14 new UK-manufactured trains, to facilitate the growth of its open access operations.
Boss Graham Sutherland said First Rail has agreements in place to 'double the size of our open access operations with potential to go much further'.
Its First Bus division also saw revenue accelerate in the second half, buoyed by the January introduction of the £3 fare cap in England and the December acquisition of RATP London.
FirstGroup re-entered the London bus market with a 12 per cent share after agreeing the takeover worth £90million.
The firm said: 'Reflecting the stronger financial performance in First Rail and in-line performance at First Bus, the Group anticipates that its FY 2025 adjusted operating profit and adjusted earnings per share will be ahead of the Group's previous expectations.'
It added that its balance sheet 'remains strong' and it expects net debt to come in lower than expected at £85million to £90million for the 12 months to 29 March.
Sutherland said: 'We have continued our strong financial and operational delivery in the second half of our financial year and have committed significant capital to further grow and diversify our portfolio.'
FirstGroup shares were up 1.8 per cent to 162.1p in early trading, trimming 2025 losses to 0.6 per cent.
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