FirstGroup PLC (LSE:FGP) shares zoomed higher after the FTSE 250-listed group won a £3 billion contract to run the London Overground rail network franchise, following Transport for London's decision to switch operators from Arriva after almost a decade.
The contract, to be operated by First Rail London Limited, is set to begin in May 2026 and run for an eight-year term, with an option to extend for up to two additional years.
TfL will retain all passenger revenue risk under the concession model, while FirstGroup will be responsible for operating the service, managing stations, and delivering customer service and performance improvements.
Graham Sutherland, chief executive officer of FirstGroup, said: “We are delighted to have been named as the preferred operator for the service from next May and look forward to welcoming employees who will be joining the group and to play our part in the success of this vital rail network.”
The contract includes plans for increased service levels on certain lines, customer service improvements, and initiatives to reduce environmental impact. FirstGroup will also maintain a £30 million performance bond and an £80 million parent company guarantee.
Sutherland added: “Our successful bid for this contract represents another significant step in our strategy to diversify and grow our portfolio, and we will continue to evaluate further growth opportunities like this.”
Now covering 100 miles of railway, 113 stations and carrying more than three million passengers each week, London Overground was launched in 2007 to provide better connections between areas outside of the capital city's centre, integrating older suburban networks with new routes to create an orbital network around the capital.
The network spans six routes across the capital, such as connections between Stratford in the east with Richmond in the west, Euston north to Watford Junction, Liverpool Street to Chingford in Essex, Highbury & Islington to Clapham in the south.
Shares in FirstGroup jumped 5.7% to 185.1p in early trading.
** Update: Adds share price, network details **