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The shares of transport company FirstGroup (FGP) were up 2% at 601.5p after it unveiled that the Scottish government has extended the First ScotRail franchise for three years to November 2014.

The agreement creates an investment fund of more than £70 million, for control by Transport Scotland, to make further improvements to Scotland’s railway. This has been achieved by converting future estimated revenue share payments into an investment fund in return for a change in First ScotRail’s revenue share and support arrangements.

The initial franchise was awarded to FirstGroup in August 2004 for seven years. The franchise is one of the largest in the UK with more than 2,000 trains a day and 79 million passenger journeys a year.

‘First ScotRail’s commitment to deliver the best service for Scotland every day has driven a programme of continuous improvement and led to this franchise extension,’ says chief executive Moir Lockhead.

Shares says: Positive news but the stock remains a hold until performance issues at its First Great Western franchise are fully resolved. Second term for FirstGroup

by: Rachel Robson