Trainline accelerates as profits surge

Trainline's (TRN) shares were marked up by over 8 per cent after it tightened up its guidance and revealed solid earnings growth despite ongoing industrial action headwinds. The digital ticketing company now expects full-year revenue growth of 15-20 per cent and net ticket sales growth of 17-22 per cent, up from previous forecasts of 13-22 per cent for each metric.

Revenue growth figures were already known after a trading update in September, with all three of the company’s divisions posting chunky double-digit growth. UK consumer was up 16 per cent, international consumer up 26 per cent, and Trainline solutions up 23 per cent.  

Management pointed to “continued rail industry recovery and more people switching to digital ticketing” as key top-line drivers in the UK. Industry e-ticket penetration hit 46 per cent in the first half, up from 43 per cent last year. 

In Europe, the company has a significant long-term opportunity to be the digital ticket aggregator as markets on the Continent continue to liberalise on the back of EU directives. Net ticket sales in Spain and Italy were up by 50 per cent on a combined basis, although growth in France slowed. Management still expects the international consumer division to near breakeven this year on an adjusted cash profit basis.

The £50mn share buyback programme announced in September looks well supported. Adjusted cash profits rose by a quarter to £57mn and operating free cash flow was up from £29mn to £77mn year on year. Strong cash generation meant that leverage fell from 1.6 times to 0.7 times. 

The shares are rated at 22 times forward consensus earnings, according to FactSet, which isn’t on the value end of the spectrum. But as we noted recently, “measured against sales, the stock is as cheap as it has ever been”. Buy.

Last IC View: Buy, 239p, 26 Oct 2023