FirstGroup expands rail operations with new London-Stirling route

Investing.com -- FirstGroup plc (LON:FGP) on Monday said it has entered into rolling stock leases with Eversholt Rail to launch an open access rail service between London Euston and Stirling, set to begin in mid-2026. 

The service, operated under the Lumo brand, will run on five Class 222 six-car diesel trains, each providing 340 standard class seats. 

The new route will add around 447 million seat miles of annual capacity, with stops at several key locations, including Motherwell, Lockerbie, Preston, and Milton Keynes.

The service is expected to generate about £50 million in annual revenues, with a low double-digit operating profit margin before IFRS 16 adjustments, following a mobilisation period.

The route will be the first direct rail connection from Whifflet, Greenfaulds, and Larbert to London. 

This agreement, secured through FirstGroup’s acquisition of Grand Union Wcml in 2024, covers track access through 2030, with the option for future expansions.

RBC Capital Markets analysts view the open access growth as a key component of FirstGroup’s investment strategy. 

The acquisition of track access rights for this new route complements the company’s existing open access operations, including Lumo and Hull Trains. 

FirstGroup has also acquired track access rights for another route between London and Carmarthen, with similar revenue and margin expectations. These two new routes will nearly double FirstGroup’s open access capacity.

Additionally, FirstGroup has submitted applications to add capacity on existing routes and introduce more open access services. If approved, these could triple the company’s open access capacity. 

RBC analysts consider this progress a positive development, aligning with the company’s long-term growth strategy.

The new route between London and Stirling includes four daily return services (three on Sundays), with a fifth service between Preston and London. 

The track access agreement also allows FirstGroup to explore the potential for electric or bi-mode trains under a £500m rolling stock agreement. The company plans to assess future opportunities to extend the service beyond 2030.

Analysts also note that FirstGroup has capital allocation flexibility, with potential to increase leverage up to 2x adjusted EBITDA (estimated at £237 million for FY26), compared to a current adjusted net debt to EBITDA ratio of 0.4x.