The period included the operation of South Western Railway (SWR), which FirstGroup took over from Stagecoach in August 2017 in a 70:30 joint venture with MTR. FirstGroup says SWR has experienced challenging trading with issues relating to infrastructure reliability, industrial relations and the effects of the revenue protection mechanisms included in the franchise.

The company says industry conditions remain challenging with macroeconomic uncertainty, infrastructure upgrades, and industrial action at SWR affecting its performance.

While like-for-like passenger revenue increased 5.5%, with solid financial contributions driven by Great Western Railway (GWR) despite infrastructure issues, like-for-like passenger volumes decreased by 1.9%, which FirstGroup says reflects the transfer of some of GWR’s London commuter services to Transport for London in May as part of the Crossrail project.

FirstGroup says recent passenger trends also reflect changing work patterns, resulting in a shift away from season tickets towards pay-as-you-go tickets.

GWR experienced an increase in capacity from the introduction of new Hitachi trains, although slower than expected electrification work by Network Rail led to issues with training drivers for the new fleet.

South West Railway

“SWR’s performance levels remain challenging, reflecting infrastructure issues that began before we took over the franchise,” the company says. “An independent review chaired by Sir Michael Holden has set out a blueprint for Network Rail and SWR to return service to levels that our passengers expect. As part of these plans, we are investing £5m in performance improvements and next year the first of our £895m new suburban fleet will arrive. We are also introducing more convenient ticketing options such as flexible and auto-renewing season tickets.”

FirstGroup says SWR passengers have also faced considerable disruption to their journeys due to continuing industrial action, which it views as completely unnecessary since no employees will lose their job.

“In fact we have guaranteed that a guard with safety critical competencies will be rostered on every train, and, given our plans envisage running more services, SWR will want more guards in future not fewer,” FirstGroup says.

The TransPennine Express (TPE) franchise delivered growth and financial results in line with FirstGroup’s revised expectations. The company says it plans to increase capacity on the network by more than 80%, with new trains to be introduced in the next few months.

Open access operator Hull Trains is performing in line with FirstGroup’s expectations despite train cancelations due to the problems with its existing 200km/h diesel trains. These will be replaced by new Hitachi bi-mode trains which are due to enter service next year.

“As a result of ongoing industry conditions and the tough operational environment our portfolio is experiencing, we continue to expect a smaller year-on-year adjusted operating profit contribution from rail,” FirstGroup says.