Shares in Trainline (TRN) surged as much as 22% to 349p in morning trading as the ticketing platform welcomed the news the UK government would not create its own ‘Great British Railways’ ticket retailing website and app.

The proposals were originally outlined by the Department for Transport (DfT) in May 2021 as part of the Williams-Shapps plan for the UK rail white paper.

BACK ON TRACK

The UK government said yesterday afternoon: ‘Train operators will continue to retail to passengers online alongside existing third-party retailers while we develop measures to spur further competition in the online rail ticket retail market to make things better for passengers.’

Having been down in the dumps trading below 220p as recently as August, the shares have staged an impressive recovery after Shares flagged analysts were positive on the firm's prospects.

Why analysts are so excited about Trainline's potential - projecting 20% earnings growth

In September, the firm posted better-than-expected interim results and announced a maiden £50 million buyback, sending its shares to the top of the FTSE 250 leader board, a feat it has repeated today.

Group net ticket sales for the six months to the end of August were up 23% to £2.65 billion thanks to commuters and day-trippers booking online rather than visiting their local ticket office.

The company also said new website features like BuyAgain and SplitSave, which allow travelers to make cost savings by splitting their journey into multiple tickets that cost less in total than one ticket for the whole route, had gone down well with customers, while UK rail travel as a whole had ‘regularly’ come close to pre-Covid levels despite on-off strikes.

In November, Trainline raised its outlook for full-year revenue growth to between 15% and 20% and for net ticket sales to between 17% and 22%

EXPERT VIEWS

Russ Mould, investment director at AJ Bell said: ‘This removes a potential competitive threat for the business in its core market and unsurprisingly investors have reacted accordingly and climbed aboard.

‘Focus can now turn to the company’s efforts to expand in Europe, where rail travel is more reliable and affordable, and as it consolidates its position in its domestic market.

‘Trainline is a well-known brand, and its app has good functionality but the initial reaction to plans for a state-backed app, when the shares fell more than 20% intraday, shows it is vulnerable to fresh competition.

‘Barriers to entry are relatively modest and Trainline can’t afford to rest on its laurels. But for now, the business appears to be on the right track.’

Shore Capital analysts commented: ‘Trainline appears well placed to continue the strong momentum that has been experienced during the first half and, as such, management is now guiding towards the top end of the prior guidance range; net ticket sales growth is now between 17-22%, revenue growth between 15-20% and adjusted earnings before interest taxation depreciation and amortisation (EBITDA) 2.15-2.25% of net ticket sales.’

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DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Ian Conway) own shares in AJ Bell.

 

 

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