Trainline Plc

And good morning, everyone. Thank you for joining us for our half-year results presentation. I'm Claire Gilmartin, our CEO. I'm joined this morning by Sean McCabe, our CFO, and Jodie Ford, our COO and future CEO. Let's first get through the disclaimer. And now on to the agenda for today. As an introduction, I'll give a quick summary of performance in the first half. the progress we've made against our strategic priorities and our long-term opportunity. Sean will then run you through our financial performance in more detail, after which Jody will provide further detail on our strategic priorities for growth and how we've delivered against each of them in the half. We'll then hand back to the operator for questions. So to kick us off, let's recap on our aim at Trainline to make rail and coach travel easier. For our travelers and our travel company partners, we do that by combining all carriers into one app. On top of which, we have created a simple, consistent and friction-free experience. No paper, no ticket machines, no queuing at stations, which is especially relevant in the COVID era. Beyond that, we use our scale in data to create smart, real-time and AI-driven information. And then for our carrier partners, We help them drive revenue by offering access to a much bigger pool of customers at a lower cost to serve than their alternatives. Taking all of this together, we champion a much greener way to travel. So as everybody knows, it has been a challenging environment across our market so far this year, and we've seen significant impact from COVID restrictions. In response, we acted quickly and decisively, significantly reducing our costs and ensuring we have sufficient liquidity for the long term, whilst also protecting our investment in our strategic priorities. As lockdowns were gradually lifted, we saw encouraging signs of recovery in Q2 and over the summer months, reflecting a greater shift to online and mobile as anticipated. We made good progress in the half against our strategic growth priorities, And although COVID disruption is ongoing, we continue to have strong confidence in the long-term tailwinds and our growth opportunity ahead. So let's look in a bit more detail at Q2. As you can see from the chart, the impact from lockdowns across our markets was felt most acutely in Q1, and I should state that's our Q1 from March. Lockdowns were then gradually lifted throughout Q2, against which we saw encouraging signs of recovery across all of our markets. This recovery was most pronounced in our largest international markets, where restrictions lifted earlier than in the UK, and in our top three international markets, we saw a return to growth over the summer months. This was against a backdrop of some continued supply restrictions, such as seat capacity restrictions and lower than normal booking horizons, which of course we believe will unwind in the long run. As you can see, continued regional and national restrictions are impacting Q3, albeit not as severe as Q1 to date. In the UK, where restrictions lifted later than Europe, Our UK consumer business also saw some recovery in Q2, albeit more gradual than elsewhere in Europe. Within that, our relative position in the market strengthened, meaning our recovery considerably outpaced the market. As anticipated, this reflected an accelerated shift to online and to mobile, as travellers sought out contactless ticketing and wanted to avoid queuing at stations. Over the half, we continued to make progress against our strategic priorities. As I said, we maintained our investment in those throughout the period. We enhanced our customer experience, launching new innovations like digital rail cards and delay repay, while helping to drive up industry e-ticket penetration further to 29%. We drove a strong rebound in new customers across our markets, taking advantage of considerably lower customer acquisition costs over the half. and in train line for business we took further steps to scale our global api platform with 15 b2b clients now signed up including three of the top five largest global travel management companies looking longer term and past covid the long-term structural tailwinds for our business will endure We operate in a large and expanding market, set to benefit from significant investment in capacity expansion across Europe, particularly in high-speed rail. Awareness of the environmental benefits of switching to rail and coach continues to grow, while governments face stretching targets to bring transport emissions down. To give some recent examples, the German government recently announced plans to increase its investment in rail by almost 60% per annum and pledged to double rail passenger numbers by 2030. And the UK government has committed to 48 billion to maximize the shift to rail for more polluted forms of transport. There remains significant digital migration opportunity in our market also. Having stepped through COVID, the shift to online and digital ticketing still has more room to run. Finally, the liberalisation trends of the European rail industry continue, leading in turn to a more fragmented supply landscape. From December this year, the EU's fourth railway package will open up domestic passenger services to commercial competition. In response, several major European rail carriers are preparing to enter new markets. For example, SNCF are due to enter Spain next year. And as we've seen elsewhere, greater competition like this brings an increased customer need for an aggregator like Trainline. We firmly believe that these structural tailwinds represent significant and long-term growth opportunities for Trainline. I'll now hand over to Sean to talk through our financial performance in more detail.

Thanks Claire and good morning everyone. So as expected Covid has had a significant impact on our financial performance in the first half. Group net ticket sales reduced to 358 million, 19% of the prior year. Revenue declined to 31 million, 24% of the prior year and gross profit reduced to 22 million, 22% of the prior year. However, As Claire highlighted, when the lockdown restrictions began to ease and trading conditions improved into Q2, our net ticket sales also began to recover quickly. UK consumer net ticket sales increased from 13% of prior year in Q1 to 30% in Q2, exiting the quarter at 46%. International set up even more substantially, from 10% of prior year sales in Q1 to 74% in Q2. And although T4B's recovery was slower, reflecting a more subdued business travel market. It improved from 1% of prior year sales in Q1 to 7% in Q2 and exit in the quarter at 15%. As COVID impacted all of our markets, we took quick and decisive steps to mitigate its impact. We paused marketing spend, held discretionary spend, we furloughed certain teams, particularly teams most impacted by the drop in demand. We introduced a recruitment freeze, we paused annual pay reviews, and we implemented executive and voluntary salary reductions to protect the business. Back in April, we said that our monthly cash outflow would be in the range of eight to nine million a month. A combination of better revenue than expected and the rapid and decisive actions to reduce costs meant that we were able to reduce monthly cash burn to an average of five million a month during Q2. Looking ahead, We'll obviously continue to monitor lockdown developments closely and we'll adapt our response accordingly, whether that's investment in marketing to support the recovery or further cost mitigation actions as required. While scaling back costs, we also ensured that we had sufficient liquidity to withstand even the most extended downturn. At the end of August, we had 162 million of available liquidity through a combination of cash and undrawn RCF. Again, better than our previous expectations given the lower than expected operating costs and the improved trading in Q2. Given the strength of our liquidity position, we remain very confident we have sufficient liquidity to operate for the long term. As a result of our operational cost management, we reduced our cost base by a third from 57 million last year to 38 million this year, helping mitigate the impact of COVID on profitability. And we reported an adjusted EBITDA loss of 16 million in the period compared to a profit of 42 million last year. Net debt increased from 71 million to 166 million and a half. This was mainly driven by the 90 million working capital outflow in the first quarter as lockdown resulted in a sharp drop off in sales and an unprecedented number of refunds. However, as expected, we saw a partial reversal of the working capital as trading improved into Q2, resulting in a 41 million cash inflow. And this, of course, will fully reverse when ticket sales recover further. The increase in net debt also reflects our cash burn over the period, including our EBITDA loss and our capex investment. As we said we do, we maintained our capex investment in the period as we continue to invest in our strategic priorities to drive long-term growth to create value for our customers and our shareholders and position the business for recovery when the market improves. And with that, I'll hand over to Jody.

Thanks, Sean. And good morning, everyone. It's great to be here. And while clearly these are unusual times, as COO over the last couple of months, it's been very encouraging to see the opportunities in front of TrainLiner to get to know the strong team that Claire has assembled. And I'm very much looking forward to meeting you as I transition over the coming months to CEO. Today I'll be discussing our progress against our strategic priorities before we take your questions. We have a clear strategy to drive long-term growth and create value for our customers and shareholders. As a reminder, our four stated strategic priorities are to enhance the customer experience, continually improving and optimizing app and web, build customer demand, scaling up customer acquisition and increasing their engagement with us, optimize the revenues we generate from net ticket sales, and grow train lines of business, serving the B2B and white label markets. As Claire and Sean have mentioned, we are continuing to invest in these long-term priorities, which we believe will position us well to drive growth as conditions recover. Let's step through some of these. We focused heavily on enhancing the customer experience in the first half. We drove the further adoption of e-tickets in the UK leveraging the strength of our 4.9-star rated mobile app. Industry penetration is up more than a third since last year at 29%, with Trainline making up around 70% of all e-ticket sales in the first half. We continue to see significant runway for further e-ticket adoption, with customers having a greater preference for contactless solutions given the COVID backdrop. We are lowering the cost of travel for customers and recently launched digital rail cards, This provides customers a seamless in-app solution that gives them up to a third of rail ticket fares. For context, rail cards are used in more than 40% of all train line transactions in the UK. Customers can now store their rail card in the app, making it far easier for them to apply a discount when booking and far harder to forget their rail card when travelling. Digital Rail Cards follows our launch of Split Save earlier in the year, a feature that allows customers to make significant savings by splitting their tickets. and which can be used on two-thirds of UK journeys. We've made the Smart Travel Companion features on app even smarter, launching crowd alerts in the first half to help customers identify busy trains. This adds to the broad suite of features our customer app customers use every day, like lifetimes, journey planning, and disruption alerts, using our scaling data to give them real-time insight and reassurance on the go. We improved our self-serve functionality with the recent launch of delay repay notifications in France. This feature notifies customers when they're entitled to compensation as a result of a delayed train, solving for what is one of the top two customer pain points there. And this is something we can roll out to other markets beyond France. As COVID lockdowns hit in the first quarter, we quickly enhanced our automated change in refund functionality allowing us to process the significant number of inbound requests. As a result, 99% of all free funds are now self-served, improving the customer experience and reducing our customer service costs. Looking ahead, we'll keep up the pace with our innovation. We have a number of products due to launch over the next year, designed to meet the needs of our customers and enhance their travel experience. Having paused marketing in Q1, we resumed investment in the second quarter as COVID restrictions lifted and passenger demand began to recover. At this point, we leaned into the customer acquisition opportunity, predicting and optimizing for post-lockdown demand, while benefiting from reduced bidding competition for paid marketing channels. With customer acquisition costs down by more than 50% in international and 30% in the UK, we drove a strong rebound in new customers. New app customer acquisition in international surpassed pre-COVID levels, while the UK rebounded to more than 80%. We drove a recovery in customer engagement in the second quarter, increasing monthly active users to around three quarters of pre-COVID levels. And we continue to make strong progress in shifting customers to our mobile app, with its share of transactions increasing further to 81%. Finally, we are making good progress in positioning Trainline for Business for future growth. As a reminder, we developed and built a global API platform to scale B2B distribution internationally, increasing our addressable B2B market from 1 billion to 6 billion. The global API offers B2B clients one-stop shop access to our European rail supply, meeting the growing demand from travel management companies and other travel platforms. Our good momentum has continued in the first half. We now have 15 European B2B clients, signing 12 since the end of last year, including three of the top five global travel management companies. And this is just the start. We're in contract discussion with a strong pipeline of travel platforms and other European carriers. At the same time, we're continuing to build and deliver innovative solutions for our white label carrier partners, helping them solve for COVID-related ticketing and refund issues, and prepare for industry recovery. Before we take questions, let me briefly recap on our key takeaways. COVID have had a significant impact. We have responded quickly and decisively and have sufficient liquidity for the long term. When conditions improved in Q2, we saw the business recover strongly. Our international business led the recovery with net ticket sales across the top three European domestic markets returning to growth. Our UK consumer business followed, where we made a faster recovery than the wider industry. And we delivered a strong rebound in new customers while acquisition costs remained low. By continuing to invest in our growth priorities, we are building our customer base and positioning ourselves to benefit when consumer demand returns. And finally, as the future CEO of the business, I can say I'm very excited about the huge headroom for growth, as well as the structural tailwinds this business enjoys. And we remain confident that these will play out over the medium term. Thank you very much for listening. We'll now hand over to the operator for questions.