West Coast Mainline

6 December 2012

 Stagecoach Group plc

Virgin Rail Group West Coast rail franchise contract

 Stagecoach Group plc ("Stagecoach") is pleased to announce that its joint venture, Virgin Rail Group ("VRG"), has reached an agreement to continue operating train services on the West Coast Mainline.

 The agreement with the United Kingdom's Department for Transport ("DfT") ensures the continuity of train services for the period through to when the DfT is ready to commence a new long-term West Coast franchise.

 The contract is for the period from the end of the current franchise on 9 December 2012 to 8 November 2014. The agreement may be terminated earlier if a new long-term franchise is ready to commence prior to 8 November 2014.

 Under the new agreement, VRG will initially earn a fee equivalent to 1% of revenue with the DfT taking the risk that revenue and/or costs differ from those currently expected. However, VRG and the DfT have also agreed to seek to negotiate revised commercial terms that would see VRG take greater revenue and cost risk for the period to 8 November 2014 for a commensurate financial return.

 VRG has operated the West Coast rail franchise since 1997, transforming it from a heavily loss-making operation into one that makes significant payments to Government. Passenger journeys have more than doubled since 2005 to over 30 million a year and the franchise has the highest customer satisfaction of any long distance operator.

 This year, VRG has successfully delivered services for the period of the London 2012 Olympics and managed the introduction of more than 100 new Pendolino train carriages, which will increase standard class capacity by more than 40%.

 VRG has assisted with the recent Laidlaw review of the West Coast franchise process and looks forward to bidding for the long-term franchise under an improved process when it is re-tendered in due course.

 Martin Griffiths, Stagecoach Finance Director, said: "This is a good deal for passengers and taxpayers, as well as our business and Virgin Trains employees. It will ensure customers continue to benefit from the best customer service on the UK rail network and it brings continuity for our people. Our agreement also gives value for money to taxpayers and an appropriate return to the shareholders whose private investment underpins Britain's rail system.

 "We now want to press ahead and develop the West Coast business further, maintaining the high quality of service and bringing more improvements to our customers.

 "While this has been a difficult few months, we believe the future prospects for the West Coast franchise and the wider rail network are very positive. It is now crucially important that the rail franchise programme gets back on track on a sustainable basis as soon as possible. This will allow train operators to build on the already high quality of service to passengers and focus even more closely on ensuring the rail system delivers value for money."

ENDS

 For further information, please contact:

 Investors and analysts

 Martin Griffiths, Finance Director​​​​​01738 442111 Ross Paterson, Director of Finance & Company Secretary​01738 442111

 Media

 Steven Stewart, Director of Corporate Communications 07764 774680