Shares in online travel ticket platform Trainline (TRN) gained 1.6% to 391p as it managed to post a lower than expected loss despite collapsing revenue and passenger volumes as a result of the Covid-related lockdown.
In a trading update for the six months to 31 August, Trainline reported a whopping 76% drop in total group revenue to £31 million. Passenger volumes fell to just 5% of the same period in the prior year through April and May, with similar declines across international markets.
Total net ticket sales amounted to £358 million, down 81% compared to the same period last year, with UK sales falling 85% to £241 million and international sales recording a less steep decline of 55% to £117 million.
COST SAVINGS NARROW LOSSES
But it wasn’t all bad for Trainline. Due to outperformance on cost savings, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) are expected to register a loss between £14 million and £19 million, an improvement on prior guidance.
Cost saving actions taken by Trainline during the period included pausing marketing and other discretionary spend, furloughing certain staff under the Government’s Job Retention Scheme, introducing a recruitment freeze, and deferring staff pay reviews.
With the travel industry now on a path to recovery, albeit more slowly than previously expected, Trainline said it is phasing its operations back to normal, having brought back most of its furloughed staff and now dialing up discretionary spend, including marketing activity, in step with customer demand in each of its respective markets.
TRAINLINE’S ROUTE TO GROWTH
However, AJ Bell investment director Russ Mould warned that most industry observers don’t expect a full recovery in demand for several years, if at all, and that the only route to growth for Trainline therefore is to gain a greater share of the number of tickets sold.
‘However, it feels like there is a natural limit here,’ Mould said. ‘Booking in advance makes sense when it can result in big savings on a longer journey which would typically see a traveller make plans in advance. But for short, one-off trips there’s little point as it would only make them less flexible.’
While Dan Thomas, senior analyst at research firm Third Bridge, said Trainline is a natural beneficiary of consumers’ preference for e-ticketing during the pandemic, but pointed out advance purchase rail ticket sales only account for around one in ten rail ticket purchases overall, adding that the headroom for growth by Trainline in other ticket categories is limited.
He said, ‘Future growth at Trainline will likely come from two areas - greater extension into, and integration with, the European rail travel market, plus additional reach into UK destinations that don't currently have the appropriate revenue protection capabilities to support digital tickets.’
