Trainline Plc

Hello everyone and thank you for joining the Trainline H1 FY2027 results presentation. My name is Lucy and I'll be coordinating your call today. During the presentation you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind please press star followed by 2 to remove yourself from the question queue. It is now my pleasure to hand over to Ian Brown, CEO to begin. Please go ahead when you're ready.

Good morning, everyone, and thank you for joining us this morning for Trainline's H1 FY2027 results presentation. I'm Ian Brown, CEO of Trainline. I'm joined today by Pete Wood, our CFO. This is my first set of results since joining Trainline, and I'm delighted to be here today. Before we begin, I just want to say how deeply saddened we all are by last week's tragic rail accident near Toledo in Spain. Our thoughts and prayers are with everyone affected. Let me take you through today's agenda. I'll start with my early impressions of the business and then provide an update on GBR. Pete will uncover our financial performance and provide a strategic update, including how AI is improving our product and the way we work. Then after the presentation, Pete and I will be happy to take your questions. For those of you I haven't yet met, by way of background, I spent the CEO part of my career scaling and transforming consumer and technology businesses. Most recently, I was CEO of Flutter UK and Ireland, where I led a collection of brands operating in highly regulated markets. Before that, I was CEO of ANS Group. I spent six years at Booking.com, including as CEO of its Trips business unit and as CEO of rentalcars.com. So I know international online travel marketplaces very well. I also created and built out the insurance business at Booking.com. My track record of these businesses has been underpinned by products and commercial innovation. I therefore have a good understanding of what it takes to deliver innovation-led growth and scale, as well as to lead businesses through periods of change. I joined just under two months ago, so it's still early days. Nonetheless, I've enjoyed spending time with many colleagues across our London, Edinburgh and Paris offices so far, talking with customers and progressively working my way around our business. As you might expect, I've also been busy meeting with industry partners and carriers, as well as meeting key stakeholders in government. I look forward to meeting shareholders on our upcoming Roadshow and I plan to engage broadly with our stakeholders in the coming months. What I've seen so far in my first two months has reconfirmed why I joined Trainline and I'm genuinely excited about what's ahead. First, our fundamentals are strong and genuinely hard to replicate. We have real scale. We're Europe's most downloaded rail app, serving 27 million customers. Our customers' behavior is habitual. Almost 2 million customers use our app every day to plan, book, and manage their rail travel. We have deep loyalty and trust. Our app is rated 4.9 stars, and we're the most trusted brand in UK rail. We're a leading technology platform built on years of deep rail expertise and investment in technology. The Trainline app, or API, connects our customers to hundreds of rail and coach carriers across Europe, many of them operating aging legacy systems. That's hard to build, and Hard to Copy. Our platform sits on an exceptional scale of data assets. AI is increasingly ingrained in our products and across our business processes, making us smarter and faster in how we deliver for customers and partners. We have an outstanding team. It's innovative and driven with a strong track record of delivery and execution. The opportunity ahead is very real. Across the UK, international, and our Trainline Solutions business, with Trainline well positioned to continue to scale each of them. So Trainline is exactly the kind of business that energizes me. It has some complex challenges to solve in a period of material change, but many opportunities ahead. The underlying strengths I just mentioned showed in the first half, with the business delivering a robust performance despite multiple headwinds. In the UK, we improved our proposition and continue to build trust and loyalty. We now have over 3 million digital rail card holders in our app of 26% year on year. In Europe, in a year without major aggregation moments, we rebalance growth and profitability. International is now profitable for the first time. Our B2B distribution business also continues to scale, led by strong growth from international customers. With broadly flat net ticket sales alongside strong cost management, We delivered 7% growth in adjusted EBITDA and 10% growth in adjusted EPS. The announcement of a new 100 million pound buyback in September also reflects both the strength of the underlying cash generation of our business and confidence in our output. Now, as you know, on the 9th of October, the ORR publishes draft retail code of practice for consultation. We see it as an important step forward. For the first time, there will be a regulatory framework governing how GBR interacts with all retail market participants. The overall future of our framework is, of course, wider than just the code. It also includes the GBR business plan, the public service contract, and GBR's own operating license. The draft confirms fair, transparent, and non-discriminatory access to fares, products, systems, and data for third-party retailers in line with the level playing field that the Rail Minister, Lord Henby, last week committed to. This reflects on progress to date with government engagement, for example, delay repay, where we secured future equivalents earlier this year. The government fact sheet, published alongside the draft code on 9th of October, also says GBR must act in a way that does not exclude competitors, distort the online retail market, or abuse a dominant position. and for the first time, an independent regulator, the ORR, will have a statutory responsibility to enforce compliance. These are all positive steps. However, we believe the framework needs strengthening. In particular, we're seeking stronger mechanisms and oversight to ensure equivalence of treatments with GBR online retail. In other sectors where state-backed entities or BT, there's a clear precedent for strong safeguards on economic equivalence and economic transparency. We're not yet seeing the same here. The government has, however, been clear on a continuing role independent retailers will play and on the need for safeguards. The government's fact sheet is clear that GVR should compete alongside other retailers in a fair and open online retail market. Indeed, as Lord Henley told the Lords on the 8th of September, when asked about the cross-subsidy, he said, and I quote, GBR will not be overcompensated to deliver retail functions in a way that distorts the market, unquote. So our focus is on seeing these very clearly stated principles translate into the strongest possible market framework. We continue to engage actively in the consultation process, and more broadly, we maintain our assertive stance. And with that, I'll hand over to Pete before joining from Q&A at the end of the presentation.

Thank you, Ian, and good morning, everyone. Before I share the group results, let me start by unpacking the performance of each of our business units, starting first with UK Consumer. Net ticket sales were up 2.1 billion, were 2.1 billion, up 0.4%. This reflected both strong underlying rail demand as well as fewer refunds as a result of a change to the industry refund policy in April 2026 which narrowed the window in which refunds could be claimed. As a reminder, there was no contribution to NTS from inflation in the half given the regulated fare freeze. We continue to face headwinds from train operating companies self-preferencing their own retail channels as well as the expansion of Project O. There were also additional headwinds from the very hot weather in the summer months alongside other disruptions to the rail network. Turning next to international, net ticket sales were $579 million, down 4% year-on-year. Performance was affected by a number of external factors, including softer foreign travel reflecting ongoing geopolitical tensions in the Middle East, weaker consumer sentiment in Spain following the tragic rail accidents earlier this year, and heat and strike-related disruption in the summer. which affected many parts of the European network. Performance also reflected our more disciplined approach to marketing, as we balanced growth and profitability in the half ahead of future aggregation moments. Meanwhile, in Southeast France, net ticket sales grew by double digits, sustaining growth a year off from Trend Italia's expansion into the market. This demonstrates our position as the aggregator of choice ahead of the next wave of carrier competition across Italy and France. Coming next to train line solutions, our B2B business. Net ticket sales grew 3% to 548 million. Within this, B2B distribution, which helps large travel management companies sell train tickets, led the way up 22%, with international B2B continuing to grow very strongly up 45% driven by new client widths across Europe. We are on track for international B2B sales to overtake UK sales by the end of the calendar year. As expected, this growth is partially offset by the roll off of two white label contracts, including ScotRail, which we stopped providing services to in the half, and the drag from cross country, which ended last November. Bringing this together, group net ticket sales were 3.3 billion, and revenue was $233 million, down 1%. This largely reflected a lower UK revenue take rate, which was the result of changes in the industry refund policy. This led to fewer refund transactions and therefore lower refund fee revenue. Despite lower revenue, growing profit increased 1% to $195 million, driven by an improvement in the settlement rate we paid to payment processes. This was achieved through renegotiated fee rates with our main payment providers. Cost of sales savings also came from lower customer service costs due to WhatsApp and voice AI handling more contacts. Turning to costs, where we delivered strong discipline across the business. Total OPEX and CAPEX were down 5% year on year. In addition to lower cost of sales, we drove marketing costs down reflecting efficiencies in both the UK and international and a more disciplined approach to marketing in international. CapEx was broadly flat, reflecting ongoing investment in our product and tech platforms. We continue to invest in AI and in our products, but we do it in an efficient way. Together, these savings offset an increase in other administrative costs. That increase was driven by inflation, investment in AI, and ongoing higher legal and public affairs costs. As a result of this cost discipline and on a slightly lower revenue base, adjusted EBITDA grew 7% to 100 million. This was driven by the improvement in international, which moved from an EBITDA loss of 8 million last year to a profit of 6 million. That is on a post-transaction fee basis, which means covering the cost of the platform serving these transactions. Furthermore, All of our markets in international were profitable, another milestone for us. Adjusted EPS grew a little faster at 10% to 13.8 pence, supported by continued accretion from our share buyback. Turning to cash, adjusted free cash flow was 45 million, with the year-on-year movement reflecting the timing of working capital as well as tax payments, and leverage at the end of the half was 1.2 times. Our capital allocation framework remains consistent to invest in the business at appropriate returns, maintain a strong balance sheet, and return surplus cash to shareholders. And in September, we announced the new £100 million share repurchase program. Over the last three years, we have returned 356 million to shareholders, equivalent to 28% of our share capital. This highlights both the cash-generative nature of our business and the continued confidence in our housing. Before turning to guidance, an update on the CMA's investigation of how booking fees are presented. We operate across multiple regulatory frameworks, each with its own requirements of how rail fares and fees are presented. At the same time, rail tickets are complex in themselves, with booking fees varying depending on the choices customers make. We have always engaged actively with the ORR on our fee presentations. Since the CMA letter in November and following the announcement of an investigation in August, we have continued to engage proactively with both the CMA and the ORR and are seeking a swift resolution. To conclude, I'm pleased with our financial performance. We delivered what we planned and grew earnings despite multiple headwinds. Looking ahead to the full year, we are reiterating our guidance. We continue to expect Net ticket sales are between 6.2 billion and 6.45 billion. Underlying revenue are between 440 million and 455 million. And EBITDA of around 2.9% of net ticket sales, with international consumer expected to be above breakeven for the full year. And with that, I'll move on to our strategic progress, starting with UK consumer. Trainline is the UK's number one travel app and customers rely on it for the best value, the most accurate information and peace of mind on their rail journey. That position is the result of investing over a number of years to build our technology platform and the best capability in rail. We make UK rail simple. Every ticket type, journey combination and fare is searchable in one place quickly and easily. We also offer products that help customers save money, including split save, Railcards and season tickets. In the first half, we invested in our UK proposition and railcards were a particular highlight. We have made it even easier for customers to buy or renew a railcard with relevant prompts, timely reminders and simpler eligibility checks. We have also grown railcard adoption through partnerships, including Monzo, which offers a free digital railcard to its Monzo Perks subscribers. and rail cards give customers real savings, an average saving of £175 per year. The results of these improvements are clear. We now have over 3 million customers with a digital rail card in our app, up 26% year on year. We hold over a third of the rail card market and we grew the number of rail cards at over three times the rate of the rest of the market. We're also growing in key categories. In 16 to 30 rail cards, shown in light blue in the middle chart, we have 47% of the market. Another example is network rail cards, shown in dark blue, which offer savings across the southeast. As we have made it easier to discover, buy, and use rail cards, more people in this part of the network are adopting them and unblocking the benefits. Holding a rail card also builds loyalty. Digital rail card holders transact more than four times as often as non-holders. and spend more than three times more, a competitive advantage that is hard to recognize. Railcars give customers a reason to join us. Our products give them a reason to stay. Our travel and disruption features help customers along their journey and are unique to Trainline, powered by our data and our technology. On the left, the live tracker. Maps are now available to all users so you can see your position, your stop and any disruption on your route In the middle, travel forecasts. We predict your arrival time using our own journey data, providing us with a more accurate forecast than the one you would see at the station or in the train. And on the right, when a delay happens, the app knows. Eligible customers are redirected to claim delay repay from the app. And more than half now do, nearly double since January. These features build habits. Today, 91% of eligible travelers see our disruption features, double the level since the start of the half, and customers come back month after month. We will continue to iterate and improve this feature set to give customers even more reasons to stay. In the half, we've also added products that give customers more value, flexibility, and convenience. Trainline Flex is a new ticket type that combines an advance ticket with insurance so customers can cancel for any reason. We are also using our scale to build advertising and partnership revenue with relevant discounts and promotions, such as through PayPal, available to customers in the app. Together, insurance and advertising help us grow UK ancillary revenue by 22%. That diversifies our revenue and gives us new ways to earn more from our large customer base. Trainline remains the most trusted brand in UK rail. In a recent survey, 51% of UK respondents said that we were the brand they would most likely consider for a ticket, well ahead of the competition. Our campaigns in the half widened our reach, particularly among families and new audiences. We launched a podcast series for families travelling with young children on trains, alongside a number of social media campaigns and a sponsorship opportunity of Arthur Ferry's team at Wimbledon. Moving on to international. While there are no major aggregation moments this year, international remains an aggregation story, and Trayline is ready for when each market further opens. Our business has three parts, each at a different stage of aggregation maturity. First, Spain and Southeast France, which are 21% of international net ticket sales. Here, the aggregation story is proven. Southeast France continues to grow at double digits, and Spain shows how we can invest to scare the market and then turn it profitable. Second, the rest of France and Italy, around two thirds of international net ticket sales. With no near-term competition, we are balancing spend carefully here while being ready to invest more ahead of aggregation moments. And third, Germany and the rest of Europe, the remaining 15%. These are longer term growth opportunities. For now, most of our customers there are travelling cross-border or away from home. We are building a more profitable base in Europe by applying the UK Playbook. French railcars are growing strongly through our sale and prompts. Railcar sales rose over 70% year-on-year in the half. And that is building a base of loyal French customers who are more likely to travel with Freightline. And CineRevenue also grew strongly, led by insurance and hotels. It contributed to a more than 30 basis points increase in the international take rate and makes our revenue in the region more diversified. Carrier competition remains the catalyst for the next phase of growth in Europe. In Spain, the market has gone from one high-speed carrier brand to four, competing across the five largest routes. In Italy, Trenitalia and Italo already compete on the high-speed network. SNCF is now expected to launch from mid-2028 a year later than we had originally anticipated. In France, Velvet is on track for a summer 2028 launch, having obtained its railway operating license in September. Alongside other entrants, we expect four competing carrier brands from mid-2028. On the Channel Tunnel, there has been recent progress, with Trenitalia ordering trains and Virgin Trains recently receiving its license to operate. Together, these markets represent 12 billion TAN by 2030, providing us with significant headspace for growth. Foreign travel is a further overlapping opportunity. We estimate the inbound market from the EU and the rest of the world at around 5 billion. It is a high margin, and our proposition is built for this customer. So international is a large market with clear catalysts. Until further aggregation moments arrive, We will keep deepening customer loyalty, driving engagement, and managing profitability. Now to Trainline Solutions, a business with over 1 billion annualized net ticket sales. Our focus is growing business travel through B2B distribution and branded B2B. European Rail is fragmenting, leaving travel management companies with a challenge of connecting to more APIs, including aging legacy systems. Our global API aggregates this supply into a single connection. Demand is building on both sides. Corporates want more rail and carriers want more B2B because business customers spend more per transaction and drive more first class demand, which helps carriers manage yield. Sustainability targets, more capacity and more competition are also making rail a genuine alternative to air. both cross-border and domestic. B2B distribution is a large and sticky segment. Our average customer has been with us for seven years and switching costs are high, which gives us recurring rents. It remains a success story for Trainline. In H1, we want 18 new customers, four of them large travel management companies. And finally, turning to AI, an area that remains a big opportunity for Trainline and where we continue to make good progress against our three pillars. First, AI-powered products, solutions tailored to each customer need. Over 1 million customers use travel assistant and voice AI in the first half, up 20%. They are ROI positive per conversation. We build efficiently, keep the cost to serve low, and customers resolve simple issues like refunds themselves. Second, new AI distribution channels. We are working alongside leading AI companies so customers can reach us wherever they start. We lead in Google AI rail citations in every market except France, and we are live in the chat GPT app. And while AI referrals remain under 1% of sales a day, we are building now and are ready if and as that grows. And third, using AI to move faster. Lead and cycle times are down 10% and defects are down 18% across the tech team. Where we use AI more heavily, the gains are much bigger, and we expect more to come. Our agent platform is live in our data business, completing workflows, and we are rolling it out across the organization. Taking a closer look at the impact of AI in distribution, today Over 90% of customers come direct to our app, mostly for everyday repeat purchases where speed matters. However, customers have more options on how to plan their journeys than ever before. They might start in Google, ask ChatGPT or Claude, or use an agent such as Metamuse. We have strong SEO and are well connected into these tools, so our ChatGPT app and our MCP infrastructure. So whether the buyer is a person or an agent, We can surface the journey options and complete the purchase. But a journey doesn't end when the ticket is sold. 60% of customers fear travel disruption, so after purchase they need live updates and help when things go wrong. They may need to change a ticket, get a refund, or claim delay repay. That is where our proprietary data and tools sit, and it is data we own. Rail is different from most things people plan with AI. It is live, the stakes are high when things go wrong, and customers need to trust what they are told. Our app is built for rail and nothing else. We make it visual. You check the map, you check the platform, and act on it all, all in one place and fast. These are the features that bring customers back. As we face an ever-changing market, whether it's through AI or GBR, Our structural advantages matter more. There are four, and they reinforce each other. To start with the foundation, we hold a retail license and direct integrations with every carrier, plus the contracts, accreditations, and bonding facilities. That position gives us data. Every search, booking, journey, and after-sales interaction sits in one place. on a leading technology platform built over many years with AI increasingly integrated. Better data builds better, more innovative products because we can see what travelers actually need and build for it. And better product builds habit and loyalty, so customers will choose us. We are the number one travel app in the UK and the number one rail aggregator in Europe. Active customers in the UK transact frequently with us and it takes just 23 seconds from search to purchase for Camino routes. and that in turn gives us trust and scale. AI strengthens each of these advantages. There's a position growth with every journey. In summary, this was a resilient first half. Net ticket sales were robust, margins improved and we've continued to return cash to shareholders. In the UK, we have a stronger proposition with a better travel experience, clearer value for money and more flexibility for customers. In Europe, in a year without major aggregation moments, we rebalanced growth and profitability with international now profitable, and we are building strong foundations for growth. In AI, we are executing faster and building a deeper competitive mode. Our balance sheet is strong, so we can keep returning cash while we navigate change and shifting markets, and we are confident in the outlook. Ian and I are now happy to take your questions. So I'll hand back to the operator.