Trainline Plc

Good morning, everyone. Thank you for joining the call today for our half-year results presentation. I'm Jamie Ford, CEO of Trainline, and it's great to be joined by Pete Wood, our interim CFO. Pete stepped up into the role in September, but has been deputising for our previous CFO for the last few years.

Let's first go through the disclaimer. Onto the agenda for today.

I'll intro with the key highlights for the first half of the year. I'll then bring to life how we are promoting environmental sustainability, the core theme behind our purpose. Pete will talk you through our financial performance, and then I'll update you on progress against our strategic priorities.

After that, we'll open the floor for questions.

In the first half, the group delivered a strong trading performance with net ticket sales up 17% and revenue up 28% versus pre-COVID levels. This was led by our consumer businesses across UK and international. which in aggregate were up 53% versus the pre-COVID level. EBITDA grew significantly too, while the business increased its investment in the European opportunity. In the UK, we continue to unlock value for customers, increasingly relevant given the rising cost of living, including scaling active digital railcard users to 1.7 million. In international consumer, we further positioned ourselves as the aggregator on high-speed routes, This included launching Urio in Spain, the fourth carrier brand in that market, and attracting a strong uplift in customers from outside of Europe, particularly tourists from the US. And we continue to significantly increase transaction frequency. Double the number of customers were transacting more than once a month in the UK and France versus pre-COVID, while in Italy, it was four times as many. That's a pretty remarkable step up. As you know, at Trainline, we have a core purpose to empower greener travel choices. Our vision is to build the world's leading rail platform, making it easy for customers to find the right ticket at the right price online and delivering that experience through our own branded channels or through travel partners. In doing so, we're making rail travel more attractive, encouraging millions of people to take the train instead of driving or flying. We're enhancing our app to encourage mobile shift to rail and help our customers travel more sustainably. In the first six months of the year, we launched a carbon comparison tool showing customers emission savings versus other forms of transport. And soon, we'll launch bike reservation within the app, helping the millions of cyclists in the UK to take their bike onto a train. However, there's a lot more we can do. With emissions from the energy sector having significantly reduced, transport is now the largest emitting sector in the UK. A key way to reduce these transport emissions is by switching to rail, given it emits far less carbon than flying or driving per passenger kilometer. I believe Trainline has a key role to play in promoting modal shift and encouraging greater use of rail. We will continue to do that by leading on product innovation, but now we want to lead the industry agenda as well. We recently launched I Came by Train, a new initiative focused on growing the public's awareness of the relative benefits of train travel and inspiring pride in those that take positive action. The initiative gives people the opportunity to pledge to swap a journey by car or plane to rail. We've launched brand campaigns, are leveraging influences on social media, and to top it off, the artist Craig David has written and released his own track. It's called Better Days, I Came By Train, and you've just heard it prior to the call started. Overall, our mission is to make rail famous for being the most sustainable form of transport. And with that, I'll hand over to Pete to talk to our financial performance.

Thanks, Jodie, and good morning, everyone. I'm Pete Wood, and I'm delighted to have stepped up into the role of interim CFO. Having been at Trainline a number of years, I remain hugely excited about the growth opportunity ahead and the momentum we are building. As Jodie discussed, the group achieved strong growth in net ticket sales, revenues, and gross profits in the first half. Net ticket sales were up 17% versus three years ago, the year before COVID. Within that, our UK consumer business was up 45%, international consumer was up 81%, while train line solutions, given a slow recovery in business travel, remains less than half its pre-COVID size. Revenue was up 28% versus three years ago. Its growth outpaced net ticket sales supported by a strong rebound in global inbound customers, who we monetize at a higher level. And gross profit was up 33% versus three years ago, with the gross margin improving as we continue to scale. The business delivered a strong step up in EBITDA, even while increasing investments to support growth. In the first half, adjusted EBITDA was 45 million, up 30 million year on year. In the UK, we increased marketing investment to attract new customers to rail and to support the recovery of the rail industry. In international, as laid out last year, we have increased our marketing to build brand awareness and drive demand in our target European markets. But as we increase investments, we continue to focus on marketing efficiency. In the first half, we grew the number of international customers acquired for free through SEO channels by 50% versus pre-COVID. We also scaled our team, hiring 150 more people to further accelerate product innovation in international consumers. This included optimizing the user experience, launching new value features relevant to each core market, and aggregating new entrant rail carriers. Dodi will discuss the exciting progress we're making here. As we process a much higher level of transactions in the first half, the cost to run our platform also increased, as reflected in the other cost bar. This includes investment in the platform to ensure it remains resilient at higher levels of scale. Notwithstanding these investments, we continue to see operating leverage come through. further supported by our continued focus on cost discipline that we hone through COVID. As Jodie outlined earlier, the rail industry has significantly recovered from the impact of COVID-19. As you can see on the chart, UK passenger volumes have returned to around 85% of pre-COVID levels over the last few months. This recovery is very encouraging and a sizeable step up from a year ago, but it's not without some volatility given the ongoing industrial action. It's not yet clear when this will conclude, with more strikes happening in the UK over the next few days. However, I want to emphasise that post-period end, underlying demand remains strong. The pressure on disposable income from the cost of living crisis is likely to impact many consumer-facing businesses across Europe. However, recent survey data gives us some reassurance, suggesting rail should prove more resilient than other modes of transport, in part given it is experiencing lower rates of price inflation. The cost of living crisis also brings into focus how we can help customers save money when travelling, leveraging our broad set of value features like split save and digital rail cards.

Dodie will come on to talk about this in more detail later.

Given the better than expected recovery in rail travel, in July we lifted our guidance for fiscal year 2023. While acknowledging the industry headwinds, we reaffirm our upgraded expectations today. The business is in good shape and remains on a strong growth trajectory.

Thank you, and I'll now hand back to Jody. Thanks, Pete. Let's now talk about our progress against our strategy. As a reminder, here are our four strategic priorities. Let's first discuss our UK consumer business before discussing international consumer and then finally train line solutions. Our first key priority in the UK is to provide customers with an excellent user experience, removing friction when searching for trains and booking tickets while offering them unrivaled value. In doing so, we have shifted more people to online. in particular digital ticketing, with e-tickets a core part of our mobile app proposition. Availability of rail journeys where e-tickets can be used has continued to grow. Southeastern, the last major rail operator yet to have enabled e-tickets, began its rollout in H1. As you can see on the chart on the left, e-ticket adoption from customers tends to grow quickly once they are made available on a specific operator. Once complete, this will take e-ticket availability north of 90%, broadly resolving the supply issue. Transport for London being the only notable part of the network not to have e-tickets. On the right-hand side, you can see how industry e-ticket penetration in the UK has grown significantly. This is driven in part by greater availability, as well as demand growing, as more people opt to buy tickets through their phone rather than queue up at a station. At 43%, there's plenty of runway and clear tailwinds for future growth. The commuter segment represents a significant growth opportunity for digital ticketing. This includes season tickets, which have so far recovered to around 800 million in sales. Season tickets have historically had limited digital ticket options available. When I spoke to you in May, I said we would roll out a digital season product this year following a successful pilot. Six months later, we are now selling digital seasons on 10 train operators in the UK. Prior to COVID, many commuters used our app, but due to a lack of digital ticket options, only a minority bought their tickets through Trainline. We have a large cohort of app users we specifically call time checkers who serve as a good proxy for commuters. As I've spoken about before, we've been priming our app to serve such customers with features like favorites to personalize their journeys. In H1, we saw well over a million favorites set up, helping to grow the time checker cohort by 58%. We've also grown the number of time checkers that then go on to buy their tickets through Trainline by 63%. This is a strong start, but there's clearly still a lot of headroom to go after. And now with a fuller suite of commuter tickets in digital format, we're in a strong position to convert more of these time checkers into ticket purchases.

In the first half, we also enhanced SplitSafe, our split ticketing feature.

We ran a data-led optimization process to make the product even better, expanding the number of journeys in which split tickets are offered. This helped grow availability of split-save tickets to 76% of all journeys, up from 64% at launch. And having previously only been available on a mobile app, we recently made split-save available to customers that booked via web as well.

By improving the availability of split-save, we can help more customers save money. Moving on to our second priority in the UK, building demand, but sticking with the theme of saving customers money.

Our broad value proposition is becoming increasingly important as the cost of living becomes more of a concern. All carriers, and we offer customers all carriers and journey options on key routes, including coach, allowing them to compare and select the best value fares. We provide customers a seamless way to book tickets in advance of travel, often making it considerably cheaper than buying a ticket on the day. And with digital rail cards and split-save, customers can unlock further savings on their train fare. So all of this together provides an easy and convenient way to save money. And we're telling customers all about the value we offer in a brand campaign in the UK. It highlights how they can save up to 35% on their ticket when booking through Trainline. This is further reinforcing Trainline's reputation with customers as a key way to get value or money when using the rail network.

Let's move on to our third priority, increasing customer lifetime value in the UK and step into digital rail cards.

Rail cards are a key loyalty proposition for the rail industry, giving customers access to discounted tickets. We estimated that there were around 6 million in circulation when we started marketing our digital version 18 months ago. Last year alone, we sold 1 million digital rail cards. Since then, we continue to make significant progress with 1.7 million active digital railcard users in August. And our new railcard renewal process will further support retention, with customers able to renew their digital railcard in just a few clicks. Priming our app for commuters and scaling digital railcards are good examples of how we are helping people make better travel choices every day. They're also helping increase our relevance for more of our customer travel needs. This is driving a notable increase in repeat usage, with the number of customers transacting more than once a month doubling versus pre-COVID. This is a huge acceleration in our UK business and underpins the 45% year-on-three rate of net ticket sales we saw in the UK. Now let's turn to progress against our strategic priorities for international consumer. I'll start first with enhancing the customer experience in our priority markets, France, Italy, and now Spain. In these markets, we are striving to be the aggregator for rail travel, offering all the couriers on all the key routes. By positioning Trainline as the aggregator, we believe we are well-placed to win in Europe and significantly grow our share.

This is playing out on the two routes that we have most recently opened up to competition. Madrid to Barcelona and Paris to Lyon.

When I spoke to you in May, I said tickets sold on Madrid to Barcelona were five times higher than pre-COVID. Well, it's now seven times the size. Likewise, for Paris to Lyon, I said tickets sold had doubled since Trenitalia launched its service in December. That number has now tripled. European markets are opening up to new competition, and this is happening most rapidly in Spain. Last summer, SNCF launched their low-cost challenger brand, Wigo, on the Madrid to Barcelona route. They've competed fiercely since then, with average ticket prices on the route halving. This month, Trenitalia's Irio will launch their premium service. This will give customers even more choice, and we have already begun selling tickets. With four carrier brands now competing on train's busiest routes, almost doubling total daily service, this represents a great aggregation opportunity.

Competition is also expanding to other routes across Spain, most notably Madrid to Valencia.

Wego launched a new service last month, with Irio set to follow before the end of the year. And next year, both carriers plan to extend their operations further with new services between Madrid, Seville, Malaga, and Alicante. This means four different carrier bands will compete on high-speed routes right across Spain. Taken together, we estimate these liberalized routes will represent a 1.3 billion euro aggregation opportunity. We've accelerated and scaled our pace of product innovation for international customers, driven in part by having now fully hired the 150 new people I highlighted six months back. We are rapidly rolling out new features across each market, as shown by these examples in H1.

By doing so, we are optimizing the user experience while differentiating ourselves from the other retailers. As I mentioned earlier, we have a broad value proposition in the UK.

We are building the same in our target markets too. Across these markets, we made it easy to book in advance and give customers the ability to book all carriers and journey options. We then tailor our feature set to reflect the nuances of each market. For example, In France, we have digital rail cards, but in Italy, rail cards don't exist. Instead, we have Trinitalia discount codes. So in each market, a localized set of features increasingly provide customers an easy and convenient way to save money.

As we said we would, we have meaningfully increased marketing investment to drive up customer demand and brand awareness of our value proposition.

This includes a nationwide brand campaign in Italy, which has significantly grown brand awareness helping to triple the number of new app customers year on year. Our brand campaign focuses on the benefits Trainline brings to customers as the market aggregator. It highlights how we allow them to compare all carriers, prices, and journey options to find the right ticket at the best price. Global inbound customers made a strong recovery in the first half, led primarily by US tourists. We positioned ourselves well for their return. Net ticket sales to global inbound customers was up 66% versus pre-COVID levels, with sales to U.S. customers almost doubling. As a result, U.S. inbound sales into mainland Europe were twice as large than into the U.K., which is notable given we're still at an early stage in developing our international business. As we acquire more customers, we are driving up customer lifetime value by increasing the frequency in which they transact with us. In the first half, the number of customers transacting more than once in a month doubled in France and quadrupled in Italy versus pre-COVID.

Finally, our fourth priority, growing train line solutions.

Before we step into our progress here, I'd like to briefly talk about TBR. Published in May last year, the William Shapps White Paper included proposals to create TBR, a new central governing body to control and manage all aspects of the railway in the UK. Those reforms require legislation. However, last month the government confirmed this legislation would be delayed with no definitive timing on when it would resume. The white paper also included proposals for GBR to launch its own retailing app and website. In December last year, Rail Delivery Group took preliminary steps ahead of a formal tender process to procure retailing platform service. However, this process is also delayed and at this stage we have no further details to share. Finally, we continue to work with RDG on a shared agenda to reform rail retail, following our MOU agreement early in the year.

Whilst we're making some progress, I don't think we'll see any outcome just yet. We continue to leverage the strength of our platform to support our travel partners.

In the UK, we signed a contract extension with ScotRail, whilst in Italy, sales for our first white-label carrier partner, Islo, went live. We continue to position our global API platform for growth giving more B2B partners the ability to offer European rail options to their customers through one simple, seamless connection. We also signed up travel management companies, including CWT, Agito, and Havas, and added new inventory to the global API, expanding our content offering in core European markets.

Before we open the floor to questions, let me recap on some key takeaways.

The business delivered a strong trading and financial performance in the first half, with a notable step up in net ticket sales, revenue and profitability. And with that, we today reaffirm our recently approved guidance for the full year, expecting robust growth to continue into the second half. Our UK consumer business is growing strongly as we shift more customers towards digital ticketing, particularly in the commuter segment. Likewise, in an increasingly cost-conscious environment, we continue to unlock value for customers. We've enhanced products like SpitSafe, scaled digital railcars, and made customers aware of our broader value proposition. In Europe, we are aggregating all new carriers on key routes and increasing the pace at which we roll out new value features. We are already seeing this accelerate our sales growth, including now with global inbound travelers. Looking forward, I remain hugely excited about the opportunity ahead, our long-term growth tailwind, and the progress we continue to make in delivering to our customers in the UK and across Europe. Thank you very much for listening. We'll now hand back to the operator for questions.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. Please stand by while we compile the Q&A roster. Once again, a star 1-1 for questions. Our first question comes from the line of Navina Ranjan from Morgan Stanley. Please ask your question.

Yeah, morning, Jodie and Peter. Congrats on the result and the collab with Craig as well. I enjoyed that. Just a few questions from me. The liberalized route opportunity, interesting that you've put some numbers around it, the 1.3 billion opportunity you mentioned. Can you just clarify that net ticket sales? How do you sort of get there? And then regarding the similar markets where you're doing similar initiatives, France and Italy, do you sort of see the opportunity in those sort of routes, Paris-Lyon and such, being similar? My second question is on the sort of near-term trading environment, I understand rail probably poses a down-trading sort of proposition for the consumer. especially due to sort of high fuel prices. But in international where travel and U.S. inbound is quite a big part of your business, as well as tourism, how do you see sort of a weak consumer environment playing out there? And then lastly, just on solutions, how should we think about the earnings profile of that business, given that it's relatively a new segment? Thanks.

Thank you very much for the questions, Davina. I'll take the first one and then Pete will probably chime in on the other two as well. So first up, the point around liberalized routes and the 1.3 billion we're highlighting in Spain. So the sort of math to get there is looking at our best understanding of that market. of the Spanish market and saying of the effectively high speed routes, what part of them are going, are effectively, everything is sort of liberalized, but where will we see competition occurring and where can we point to competition entering the market? And I think that the really good news here around Spain for us is that we, it is happening and it's already we are selling tickets and madrid barcelona is a very significant part of that market it's one of the top routes in europe so that's already there and within four weeks we'll see area launch and we're already selling tickets on that route and then valencia is the number two route the same is already happening there and then these points around um seville malaga and alicante they are all coming online and so when we look at those routes We get to a TAM of 1.3 billion. How that plays out between those four carriers, I don't know. And the other thing which I think could drive that number actually significantly higher will be substitution from road and from air. And if you take a route like Madrid-Barcelona, we estimate less, around third, maybe up to 40% is currently on rail. A lot of people drive and a lot of people fly that route. Gareth J. And with the competition and to keep the low cost carriers like avalon we go, we expect to see. Gareth J. More substitution as prices drop that's kind of the only direction we think prices will go so that's how we get to that number and then your question on Italy and on France so Italy, and that is really. most of the high-speed network in Italy has two carriers in Trenitalia and in Italo. And so we already have a strong proposition there as we talked about with regard to our marketing. And so we will continue to push that and to bring together and ensure we have all the fares and the customers understand that they don't need to look at two apps, they can do it all on one. And we'll obviously keep a watching brief to see if there's any new entrants potentially coming into Italy in the next year or so. And then finally, on France, Paris-Lyon is absolutely the number one route in France. And that has, as we've discussed a couple of times, been liberalised. I can't share at the moment any further plans for other routes that will have competition yet. Clearly, Spain is where the focus is and where we're seeing new routes launching. But what if we kind of forward five years and then 10 years? Do I expect that we'll see competition on many routes in France and frankly throughout Europe? Absolutely yes. It's just the train sets that the players need to buy are fairly expensive and to kind of get through the various national health and safety rules, it takes time to do that. So I think we will continue to see them launch and we've highlighted the ones we know with certainty are launching. So that was the first question. And then I think international and U.S. inbound and the potential in consumer environment playing out there. I guess the first thing to say is that as we think about those markets, we are still majority domestic demand. And that is absolutely our strategy is around driving that domestic demand and building up. What's been very pleasing and we think is still a significant opportunity and, you know, Gareth J. Multi billion opportunity is this international part, and I think what makes that interesting is that we think we are only currently around maybe five ish. Gareth J. Mid mid single digit part of the market and there's therefore a lot of opportunity to grow and we are clearly the number one. Gareth J. player there with just a very strong proposition and Pete you want to speak to kind of consumer demand and any thoughts on how that plays out.

Yes, of course. So the first point I'd make is that the underlying performance that we see continues to be strong and we're confident in our improved guidance range. But that said, of course, yes, it is a tougher environment. We believe that transport may be a bit more insulated than some other sectors. In the global financial crisis, we saw the proportion of budget spent on transport actually grow as consumers made other choices in where they saved. And rail may be more insulated than other modes of transport too. The cost of car ownership has been going up meaningfully over the last two years and certainly is outstripping the rail fare growth that we see. And then your question on train line solutions. So yes, this is a slightly different part to our segmentation. And really there are two parts to this. You should think about two different parts to the revenue generation here. The first is the TPS business, and we continue to see recovery and tailwind of recovery in the B2B space, particularly as the environmental aspect comes into play. So switching business travel from air and into rail is certainly a tailwind for this part of the business. And then there's a pipeline of business here that we have built up and that will continue to play out and drive growth in this segment. And then of course, the other part of the business here is the revenue generated for the platform from the UK consumer and international consumer businesses. And that will further drive this segment of our business.

Great, thank you. Thank you for the question.

Right. Thank you very much for your questions. Our next question comes from the line of Eva Billford-Kelly from UBS. Please ask your question, Eva.

I'm just following up a little bit on terms of the current volumes that you're seeing. I mean, given that the national recovery has stalled a little bit, we're looking at about 85% of pre-COVID volumes over the last couple of months. what have you seen over the last couple of months for yourselves in terms of your gaining market share? And secondly, in terms of the cost of living crisis that we have, I mean, clearly, train is more attractive now. But of course, if we get fare increases coming through next year, which may well be high single digit or potentially even higher, I mean, how do you expect that to actually impact your affairs and your ticket sales and your revenues? And thirdly, this is a little bit I have a different one, but it seems like Uber has finally started to dip their toe into the market a little bit. And granted, it's a clunky proposition at the moment, but do you have any views on how their entry into the market might benefit you or alternatively how they might compete against you? And frankly, anything you can tell us about operational or financial impacts, either positive or negative, would be great.

Gareth J. Thanks for the for the questions that there's a lot in now what i'll do is i'll pick the one off first and then speak a little bit to the the first one of volume and able to be so yeah over entering the market and. Gareth J. Look, I generally we welcome competition, we think it's really healthy to have a market where there are multiple multiple players and entering. It's aligned with our broader purpose here, getting new people to find rail, whether that's a new type of journey or a wholly new person, we think is a good thing. And if Uber can do that or any other player, then we clearly welcome that. I'd say moving on from that, we absolutely back ourselves with 500 rail engineers, to to come up with the very strongest proposition and to win those new customers over um into train line um and and that's really a function when you think about it we talked about it in our product session we did um a couple of months back it rarely is complex we have a 4.9 star app but when you think through what we do with regard to the ux regards to the the features um whether that's all of the different suppliers we now integrate whether all of the the implementation of rail cards, value features, and so on and so forth. And I think that's what regular rail users absolutely will expect. And then just one more reflection as I think about Uber, which is to say, when we talk to customers, Really, the booking, the train bit comes first. And so if you're booking a weekend in Edinburgh or going to Barcelona, you use your rail app to find and secure a great fare and then nearer the time, and you look at how you're going to get to the station whether that's with a ride hailing app or a bike or whatever it might be and so actually we think in a longer term there's actually interesting partnerships for us because we believe we start with the primary traffic on that so that's kind of quick thoughts around Uber and then in terms of volume and just your comment on over the last 10 weeks this kind of 85% I clearly that data we know that there's volatility volatility and this is for a period of um you know a number of strikes in the uk market what we have seen um and pete spoke to the underlying strong demand um we have seen um that peak up more in the kind of mid 90s at times in terms of those those volumes which i think is interesting and as we talked about before we believe leisure is already fully recovered more than 100% in terms of demand. And we are seeing pickup definitely around commuting some of those products that we have put live there. And I think one other feature is the booking window is later this year for Christmas because of some of the sort of challenges around getting those things live. And so I think that we remain confident and believe there's strong demand there. Pete, do you want to add anything else on that one or speak to kind of fare increases and how we're thinking about sales?

Yeah, I think you've covered the points on the volume increase. With regards to fare increases, so we are expecting an increase in fares in March 2023. The government hasn't shared exactly what that increase would look like, but they have stated that it will be below inflation levels. We've also seen some fair increases in Europe in the mid-single digits. So our planning assumption is that it would be similar to that in the UK as well. And then in terms of how that might impact us, we've got some good tailwinds and we have some opportunities to grow nonetheless. So e-ticket adoption, Jodie just spoke about. still had some strong headroom growth there. And of course, we have a really great value proposition, which becomes all the more important at this time. So ensuring that customers understand that they can save money by booking in advance or making use of features like digital rail cards or split save will really support customers through this difficult time. Thanks for the question.

Thank you very much.

Next question comes from the line of Steve Lischty from Numis. Please ask your question, Steve.

Yeah, hi there.

Steve Lischty here from Numis. I've got two, actually. The first one, you may or may not be able to say much on it, given what you said on GBR needing legislation and the delay there. Have you got any sort of view from your end and what you see Is there any sort of timeline or things that need to be put in place that will restart the timeline on that GDR thing? Anything color-wise you can give us there. That's the first question. And then second question, just on tap and go, I'm interested how aggressively that's being rolled out in various different places. I know it's been talked about before. And any updated thoughts on it in terms of threats and opportunities there? Thanks.

Thanks for the question, Steve. Yeah, I'll speak first to the sort of pay-as-you-go and the opportunity there. And for those who follow closely, this has been a government objective sort of since the Williams review. And I think we can probably break that into two halves. One is what's happening in London and one is what could happen in the future in the region. And so what is confirmed, and I think to sort of think over the next couple of years is the way to think about this, is the oval, and I'm sure many people on the call are familiar with this, but that ability to sort of tap in and tap out is being extended beyond sort of Greater London into a sort of broader region, which goes about far north with Bedford and Cambridge and goes south to Brighton on a number of those routes there. And we think that takes about two years to fully implement and then probably have some form of impact on our ticket sales. It's hard to say exactly, but probably heading up towards about 150 million is the number where we think there may be some risk associated with that. But what I'm going to stress is that that particular proposition actually lacks quite a lot of what customers want. So, you know, moving around London, people tend not to worry too much about a few pounds. But as you get into more expensive fares, you go to Cambridge or to Bedford, actually, it's kind of tough to tap in and tap out without really a sense of control. And for the customers that the government is really keen to get traveling, that's going to be an even more of an increased challenge. It also doesn't allow rail cards, so young person, senior citizens and so forth. And it's very difficult to travel with a family with that. So actually a lot of the market won't want to use that system so actually we see an opportunity here in in the medium term for training this is something we think we could do well um and we could work um really with the industry um on this one in the same way as we've innovated across a number of other ticket types this is something um we think is very interesting and we we are looking pretty hard at how we could support uh that and then um just to the point on the regions as sort of as you intimated This whilst it remains kind of high level has been talked about a lot by the government. There really is no clear sort of strategy, policy, investment level, or even a technology yet of what that would look like. I mean, again, I think it probably is an opportunity for train line, but it's definitely medium term plus. So I'd be quite surprised if there was any product like for customers in the next four plus five years to go up, but we'll wait and see. And then I'll come back to the GDR piece here, which really is tough to answer. Obviously there's, We are just awaiting confirmation of the rail minister coming in. We heard about the Secretary of State just last week, and they are obviously getting to understand their briefs at the moment, and they are going to form an opinion of exactly the direction they want to take this. And I think the governments have got questions. They need to philosophically And then strategically, what direction do they want to take this, specifically with regards to the GBR app? Look, we stand ready, as we have always been, to engage if the government would like to work and run a broad procurement exercise. But I don't think it's as clear cut anymore, it being a free standalone app. I think there's shades of gray of what this ultimately could look like, which is probably not that helpful to speculate on where that goes. All of that said, I think, you know, at the end of the day, where we've got to really is that we have incredibly high trust with customers. You've seen this sort of the growth in our innovation and feature development. Eighty six percent of customers rate train line is sort of highly trustworthy. And that's very significantly ahead. And I think whatever government sort of policy or it turns out, we have an opportunity to work with them to help them deliver their policy. And we have the technology to do that. I'll thank you very much, though, for the questions. We'll move on to the next one.

Great. Thank you. Our next question comes from the line of Simon Davis from Deutsche Bank. Please ask your question, Simon.

Morning. A couple from me. Firstly, on your obviously big step up in marketing spend, can you talk a bit about what you're seeing in terms of trends for CPAs in Europe? Are they beginning to push upwards? Are you still very comfortable in terms of the value you're extracting from those in terms of customer lifetime value? Secondly, you've mentioned previously strike action is assumed within your guidance. Can you give us some color around what you are assuming in terms of the number of strike days and some kind of color around what the cost is now per strike day? And just lastly, how much are you beginning to rebuild?

when might dividends come onto the agenda thank you for the question simon um look why don't i start um on number one and i think they sound like good questions that people pick up on on two and three and maybe some of one so i think So how we think about marketing is we are long time, we've got a good performance marketing muscle. We have been using that in Europe for a number of years, but we have stepped that up and we are broadening the number of channels we use beyond Google and paid search into app downloads. and more broadly into social and other channels, as you'd expect. But we've also made significant investments, as you've seen and we've talked about, around brand campaigns in France and in Italy, particularly targeting those aggregated routes, because we just think this is the moment in time to tell the populations and rail users that they have choice. And so that's where we're going. With regard to the performance marketing and the channels, Gareth J. We we set you know, have a fairly clear delineation and kind of guardrails around how we spend and we remain kind of comfortable with the investment levels that we're seeing and the clv that we're seeing, but I think there's a number of. Gareth J. stats between Peter night that we spoke to that really speak to engagement and more frequency driving up across those user bases, which obviously, as you know, drives the clv and if you want to give give any more on that one, and then talk to the other two.

Yeah, I think Jodie's right. We're really encouraged with the way in which that European business is evolving. And of course, in terms of rolling out the playbook, it lags the UK, but it is taking all the right steps that we need and gives us confidence to continue to invest. And then your second question regarding strike action so that we're not going to share the specifics of how it impacts on a day by day basis or anything but. A couple of things to note that the first is that the the impact we see is fairly be shaped right, so we see a good recovery once the the strike is over, and if you if you. analyse out and look to see what's happening behind the strikes, we see a strong underlying demand. So that's very encouraging for us. And of course, in the medium term, we expect this to be resolved. And really our focus in the meantime is to help customers through these industrial action days. And then your final question regarding capital allocation. So look, our focus is on ensuring that our business is well-fueled and that our expansion into Europe is supported. And there may be some inorganic opportunities along the way as well. And beyond that, all options remain on the table regarding how we drive shareholder value.

Thank you for the question.

Next question comes from the line of Owen Shirley from Barenburg. Please ask your question, Owen.

Morning. Thanks for taking the questions. The first one was a follow-up on the Uber point. Just really wondering whether you engaged with them at all or they engaged with you about using your sort of API from the train line solutions business. The second question was on the retail review where you've sort of negotiations are ongoing. I just wondered if you could sort of shed any light on what the main sticking points are. And then on the international opportunity, clearly sort of very big. Are you seeing competitors spend more on marketing in the way that you are? I suppose just more broadly, any behavior from the competitors in Europe that you think is worth calling out? Thanks.

Sure. I'll start with that final question and then sort of work through the other two. So with regard to international, we really feel like we are really the only European proposition operating all of those markets at the scale that we're operating at. So we don't spend a lot of time focused on the competitors, which are, frankly, pretty small and pretty focused on individual markets. So, no, I think the broader point is actually our principal competitor remains the sort of state monopoly, if you like, the state incumbent operator who have spent back in, I guess, you know, at this time a year ago, we were talking about how we were sometimes, you know, those players had pulled back in terms of spend because of COVID and so forth. they are back in those markets and, you know, as you'd expect, frankly. So that's kind of the position there. I think the sort of what's been especially pleasing is actually to see how our proposition, as we talked about earlier, has played out with those inbound customers and in the US particularly, where we just have such a clear, strong proposition. You also potentially know that the commission rates are indeed kind of higher and more interesting, even more interesting for us on those types of things so they're particularly good from a CLV point of view and actually what we're seeing is they are not just taking one journey they might book a couple from let's say New York in their apartment but they're actually beginning to book further as they come to London and then they go up to Oxford and then they actually take the Eurostar with us and then they sometimes book all the way down to the south of France or into Italy or whatever it might be Coming back to the Uber point, look, I won't speak to any specifics, but we remain in open conversations with a number of different players around the use of our API and some of those travel management companies, but also businesses that might look a lot like Uber. I think we have the broadest set of APIs and we have the most robust set of APIs. And I think the way I characterize what we've been doing at the moment is a test And so we'll have to see how that test goes and where they might go in the future and who they might decide to partner with. And then retail review, again, there's really very little I can say about this, but I think the context I can give is this is just, I mean, it's just not the top priority for the DFT right now. As you can probably understand, there's such radical sort of you know, been changed, if you like, over the last few months, and there's such a broad agenda of potential change, sort of what are the finer points, which is how we kind of characterize it, third party players is not something that is, you know, top of the top of that list. And so that's why we sort of six months ago, I said, look, I didn't think we'd be returning anytime soon with a conclusion. Now I suspect this is something that goes on for several months into the future. But as we talked about six months ago, the important thing for us was the backstop agreement and the, um and the sort of the the conclusion if you like of the discussion around the the commission level which is very helpful for us and allows us to continue to invest it in in the way we want um i think that covered up anything no thank you for the questions thank you our next question comes from the line of laura simpson from jp morgan please ask your question laura

Yes, good morning, and thank you for taking my questions. I was wondering if you could talk a bit more about your online share development, clearly making strong inroads there with market penetration now at around 53%. Where do you think that could go in the next two years, both UK and international? Any color on that would be helpful. And then my second question, more of a follow-up, again, on international. If you could talk about your marketing strategy there, how we should think about investments as you look to drive growth in those markets. Thank you.

Thanks, Laura, for the question. I'll pick up that first one on international marketing first and speak a bit to share how we think about that. You know, as I sort of previously referenced, we are really building up a new capability around brand marketing. And that takes the form of, you know, we showed some pictures of outdoor, you know, around stations with TV campaigns that focus TV campaigns very much focused on value and the value of aggregation. And then, as you'd expect, sort of digital marketing, delivering that to the, particularly Gen Z, which is a particular area of focus for us. We think the younger users are the most likely to convert and move away from the SNCF and the Trinitallias of this world. And then more broadly, performance marketing, we are just, without getting into all the technical stuff here, we're really looking for the sort of growth loops that bring the new user in and get them through exploring things like coupons and future tickets, if you like, that will drive further growth there or maybe pairing that with a rail card or something like that. And then around that, building a set of value features. So we showed that chart earlier, save for later. We've launched split save in France and then bringing the fact that we've got these differentiated features versus the incumbent player. That is our angle and that is our proposition as we go through that. And then in terms of broader performance market, I think we probably spoke to that one earlier. And then in terms of market share, International, I'll cover that one off first. Look, we continue to see really accelerated growth in those markets. And we are increasingly kind of highlighting, if you like, like we talked about the 1.3 billion in Spain, fairly clear slices where we think we have a very strong proposition and we are going hard at those shares and looking to get into double the share growth quickly within those areas. And we have seen that we can be actually on a new challenger brand, we are seeing sometimes we are north of 30% of their ticket sales on some of these challenger brands, which is very encouraging. Overall, I think what we've said historically is we want to as quickly as possible get to double digit share in those markets and kind of get on the trajectory that we've seen historically in the UK. And then to speak to the UK, yes, we think and continue to believe there's opportunity to expand our share we see good underlying performance and growth in that area I think the area and the part of the TAM that we're pretty interested in, we've both spoken to today, is around commuter tickets and season tickets. And that's an area that we've really had very little of historically. I said today that's recovered to 800 million. Historically, that was a 2 billion market. And we think we can play a significant role in that, given our product innovation and digital season tickets. So that remains an encouraging area for us. Pete, anything you want to add on that?

Yeah, the only thing I'd add is that we're also investing, you know, by investing in the product, removing friction, it's growing rail. And, you know, the investment that we're making in sustainability and making rail famous as the most sustainable mode of transport, right? This is to grow the whole market. And, of course, you know, we will all benefit from that. Thanks for the question, Mark.

Thank you. Our next question comes from James Lockyer from Peel Hunt. Please ask your question, James.

Hi, yes, good morning. Three questions for me, please. Firstly, just on the 10 carriers you're doing season tickets with so far, can you tell me what the pipeline's looking like there and what are the blockages to getting all of them digitized? How should we think about the end of the year in terms of number of season tickets live? Secondly, just on the UK, you mentioned new value-add services such as the bike reservations. But how should we think about that going forward? What other options could you bring to the UK? I mean, given that, I think you mentioned earlier that actually rail, you know, the decision before rail in terms of how you get to the station, things like car journeys, for example. And then thirdly, just in terms of recruitment and nutrition rates and salaries, could you give us a bit of colour around that and how that's going to plan?

Thanks very much, James.

And you slightly broke up on that, but I think we got it. So I'll just pick off the final one now in terms of recruitment As I said, we've hired those new 150 engineers and data scientists, and we feel really good about that. I'd say just more broadly, it's kind of sentiment-wise, the market has definitely eased a little over the last six months. I think you will understand why, and we are finding it easier to recruit engineers than perhaps 12 months. previously we were, which is a good thing. And so we kind of hit the run rate we need and we feel good about the engineers we have. And I'll just call out our Barcelona Tech Hub that I think we spoke to six months ago has been a great source of kind of expertise in engineer hiring. Well, a very good sort of overall compensation package in value terms. So that's there. To speak to the first question, which was the digital season tickets and what might be future blockages. Look, actually, that's going really pretty well. I mean, anytime you deal with sort of physical infrastructure and gate lines and so forth, it always just takes longer than launching a purely digital package. And so what needs to happen here is to ensure in each of these, particularly the London terminuses, there's enough barcode reasons on the gate line for that to happen. Generally speaking, that's gone well and the employees at the station are trained. We've generally been very well supported by the government on this. very much behind this as an initiative and the industry more broadly and we're getting good feedback and traction with those those tops the train operating companies around rolling this out and we've been able to also deliver it for some of the white label uh come uh talks that we support so look i think in the coming months um and i think you know over the I don't know, six to 12 months would be a good time zone to be thinking about ultimately enabling it. And then once we've got it enabled, we then can really start focusing in on educating people around the feature and driving it. And ultimately, this drives to us having the full suite and bringing our intelligence and data smarts to be able to help people make the right choice, which is something we think we do that others won't be able to. And then I'll just touch on the final kind of question around bikes. reservations and other features. Look, I would just say this remains a sort of watching brief. We do invest here around partner services and there's a few things that we are beta testing right now and working with different types of providers. And I don't think anything here is going to surprise you. All I would say, and we said this, I've said this the last couple of years, is we are laser focused on the core proposition and then the growth of that, and then not just in the UK, but into Europe. And there's just a whole wide range of things that We will keep working out, but they aren't our top priority. And over time, they will become things that we will get much more invested in when we're looking more to drive value around given customers. But at the moment, we're in that earlier stage of growth. Thanks for the question.

Great. Thank you. Our next question comes from Kieran Donnelly from Librem. Please ask your question, Kieran.

Hi. Thanks, guys. Just a couple of clarifications first. Just on the retail review, look, clearly the timing's unclear, but with respect to the implementation of any change, would it be affected by the completion of these negotiations, or does the timing refer back to when the MOU was signed? I think you said at that time any change would be effective kind of April 2025, but if we do have an elongated process from here, could that potentially be pushed back? Two, just on the percentage of UK rail volumes that Southeastern accounts for, if you just have that information. And then just two kind of higher level questions from me. One, I've noticed kind of in the customer journey that you're adding on kind of post-travel options in terms of carrying on your journey. Is there any kind of plans to start looking at potential monetization processes for post-customer journeys. And then just finally, I think Peter talked about as part of the capital allocation inorganic opportunities, what will be the priority when you're looking for any potential inorganic opportunities in the future? Thanks.

I think we've worked here and just worked through your questions. I think we just covered off the Southeastern Gareth J. be thinking around that six to 7% of UK volume, and then I think the retail review I covered off doesn't quite know if we'll cut off, but I think use the planning. Gareth J. What we talked about six months ago that that is three years time net 25 basis points impact and whatever the conclusion of that retail review whenever I don't see any real possibility of a delay to that impact or anything significantly different as it stands. But thank you very much for those questions.

Thank you very much for all your questions. We have now reached the end of the question and answer session. I'll now turn the call back for closing remarks.

Thank you very much. So thanks everyone for joining today. As Pete and I have said, we have delivered a strong financial performance in H1 and are pleased to reaffirm our enhanced guidance for the year. We have clear strategic priorities and are making significant progress against them. And we remain positive as ever about the opportunities that lie ahead. Thank you everyone for joining.