- Net ticket sales up 16%, a miss on 18% to 27% guidance
- Industrial action costing £5 million to £6 million per day
- Shares down 10% this year as investors mull Trainline pros and cons
Trainline’s (TRN) rapid recovery from Covid rattles on, even if business travel is slower coming back. But with the pandemic behind it, there’s 1970s-style strikes to contend with, costing the ticketing platform an estimated £5 million to £6 million per strike day in lost sales.
‘Its’ ‘I Came by Train’ campaign is all very well if the locomotives are running yet ‘Help, My Train Has Been Cancelled’ feels like a more appropriate contemporary slogan for the masses,’ said AJ Bell’s investment director, Russ Mould.
Strikes on the rail network are out of its control so it’s stuffed if trains are not running.
RAPID RECOVERY OF RAIL TRAVEL
Today’s update (15 Mar) highlights total revenue up 74% to £327 million, or 25% ahead of pre-Covid fiscal 2020 levels, led by strong growth in UK consumer journeys and increased e-ticket adoption. Continental Europe traveller numbers were also strong, up 125% (95% vs 2020) to £915 million thanks to market share gains.
Net ticket sales growth of 16% against fiscal 2020 levels, to £4.3 billion (72% up year-on-year) missed guidance of 18% to 27%, although analysts seem largely relieved/impressed.
‘We had feared downside risk to our estimates given strike action since we last wrote on the company, but net ticket sales, revenue and EBITDA (earnings before interest, tax, depreciation and amortisation) are all in line with our estimates,’ said Numis.
Investors perhaps less so, hence today’s modest dip in the share price, down 1.35% at 248p. The stock is down 10% so far this year.
In simple terms, Trainline wants to make life easier and more convenient for travellers, offering consumers the cheapest tickets for each journey and hoping that’s enough to get people to pay the extra booking fee that isn’t applicable when you book through a train operator’s website.
COST OF TRAIN VERSUS ALTERNATIVES
Things are seldom simple, however. ‘Positively, Trainline clearly has a lever it can pull to squeeze more margin from its ticket sales by raising transaction fees,’ said Jack Wilson-Fowler, analyst at Megabuyte, yet antidotally, many train journeys are already eye-wateringly expensive compared to alternatives.
For example, a standard train ticket (from trainline) to get from London to Edinburgh and back on 15 June 2023 will cost you £159.50. You can make the same journey, at roughly the same times via an EasyJet (EZY) flight for £63.98.
Of course, the EasyJet option involves getting to Luton Airport. Trains will also travel to far more destinations that a plane, but the principle stands - train travel in the UK is expensive versus alternatives and the size of the convenience premium consumers will pay remains to be seen long-term.
That too is out of its hands since train operators set prices, not Trainline.
Either way, Trainline needs to hope acceptable pay deals are reached in the rail industry soon and it can get back to its long-term growth plan without these disruptions.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Steven Frazer) and the editor (James Crux) own shares in AJ Bell.
