National Express Group PLC
7 March 2002
7 March 2002 -
NATIONAL EXPRESS GROUP PLC
NEW TERMS FOR CENTRAL TRAINS AND SCOTRAIL FRANCHISES
National Express Group PLC ('National Express'), the UK's largest train
operator, today announces it has agreed new terms with the Strategic Rail
Authority ('SRA') for its Central Trains ('Central') and ScotRail franchises.
National Express and the SRA have also settled a number of outstanding issues
relating to the businesses acquired from Prism Rail PLC ('Prism') in September
Central and ScotRail
National Express won the seven year Central and ScotRail franchises in March and
April 1997 respectively. To date they have remained the only two regional
franchises which have not been re-negotiated with the SRA.
Both Central and ScotRail suffered badly from the speed restrictions imposed on
the network following the Hatfield accident in October 2000. As a result both
franchises have lost a high proportion of leisure and discretionary travel
business, which they had grown significantly post-privatisation and on which
their profitability is heavily based. As a result, there is little prospect of
these franchises returning to profitability before they expire in 2004.
In order, therefore, to put these two franchises on a stable financial footing,
the SRA has agreed to provide £115 million additional subsidy to achieve a
breakeven position between 1 January 2002 and the end of the franchise period.
In return, National Express will make a cash payment to the SRA of £59 million
and has undertaken to continue to operate additional services above the minimum
level required in the franchise agreements.
The SRA and the West Midlands Passenger Transport Executive have also agreed to
enter into good-faith negotiations with National Express to extend the Central
franchise by two years to March 2006. This extension was set out in the SRA's
Strategic Plan published earlier this year.
As part of the overall agreement on Central and ScotRail, National Express and
the SRA have also settled a number of outstanding issues relating to the
businesses acquired from Prism:
• National Express will continue to operate the Great Northern part of
its West Anglia Great Northern franchise until March 2004;
• National Express has agreed terms to operate the Wales & Borders and
Wessex franchises until 31 December 2002. We have agreed to continue to operate
these franchises until the earlier of the SRA reletting these franchises or 1
• In full and final settlement of the undertaking inherited from Prism to
invest £20.5 million in the c2c franchise, National Express will invest £8
million on capital improvements on the c2c and Great Northern franchises; and
• In full and final settlement of the outstanding £13.3 million of the
£25 million that National Express undertook to invest across its franchises as
part of the acquisition of Prism, National Express will pay the SRA £3.5 million
SRA Chairman Richard Bowker said:
'It has long been clear that the financial basis for the regional franchises was
unworkable - a situation compounded by Hatfield and the foot and mouth outbreak,
which affected tourism revenue. The SRA and National Express have worked
together over the last six months to hammer out the right solution for this
problem. Negotiations have been rigorous on both sides. I am convinced that
the outcome is a great step forward for passengers, the SRA and the operators.
There is now a firm basis on which to plan for the future development of the
franchises before they are re let, or extended, on expiry in 2004, in line with
the objectives of our Strategic Plan.'
Commenting on the agreement, Phil White, Chief Executive, National Express
'We are delighted to be working with the SRA to deliver solutions for the UK
train industry that will benefit passengers. We believe in the opportunities
that rail travel can provide and the growth that can be achieved in the longer
term. Today's agreement resolves a number of fundamental issues affecting our UK
rail operations where at least one year's growth has been lost since the
Hatfield incident. Working in partnership with the SRA, we can now look to the
future with greater certainty. '
- ENDS -
For further information contact:
Phil White, Chief Executive
William Rollason, Finance Director
Nicola Marsden, Director of Group Communications
National Express Group PLC 020 7529 2000
Andrew Dowler/Ben Foster
Financial Dynamics 020 7831 3113
This information is provided by RNS
The company news service from the London Stock Exchange