Travel ticketing firm Trainline (TRN) surprised investors with a stronger-than-expected performance in the first half of the financial year and news it would buy back up to £50 million of shares.

The stock price jumped as much as 16% to 287p before settling back to trade 12% higher at 278p by mid-morning, making the company the leading gainer on the FTSE 250 mid-cap index.

GROWING FASTER THAN EXPECTED

Group sales for the six months to the end of August were up 23% to £2.65 billion, with the core UK consumer bus and rail ticketing business seeing 19% growth to £1.71 billion as more commuters and day-trippers opted to book online rather than queue up at their local ticket office.

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

International consumer sales were up 24% to £559 million with growth led by Spain and Italy as the firm positions itself as the ‘aggregator of choice’.

Sales were also boosted by the Trainline app which has been revamped for a better customer experience and reduces the firm’s dependence on the web, where traffic has slowed and the cost of advertising has risen.

Trainline Solutions, which offers ticketing technology to other travel firms and businesses, saw the fastest growth with sales up 38% to £378 million thanks in part to a recovery in business travel and higher transaction fees.

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

SHARE BUYBACK SHOWS CONFIDENCE

‘Our performance in the first half of the year shows continued strong growth with net ticket sales and revenues increasing across the UK and Europe’, commented chief executive Jody Ford.

While the firm’s capital allocation priorities are to invest in the business and reduce its leverage, if it finds itself with surplus capital beyond what it considers to be a ‘prudent and appropriate level of liquidity’, it has said it will start returning cash to shareholders, hence today’s announcement of a £50 million share buyback.

‘Given our continued growth and the strength and maturity of our business, we are today launching a share buyback programme to begin returning capital to shareholders.’

EXPERT VIEWS

‘Investors are getting on board the love train for online rail ticketing platform Trainline’, said AJ Bell investment director Russ Mould.

‘The group has seen an eye-catching increase in ticket sales, suggesting it is gaining traction with travelers not just in the UK but overseas too. This is an exciting development given European rail is cheaper, more reliable, has better infrastructure and therefore potentially wider appeal.

‘Trainline’s brand is becoming increasingly entrenched, which should provide it with a measure of protection from any prospective rivals.

‘A share buyback puts shareholders on track for added returns and the one big threat in its UK market – the launch of a Great British Railways state-backed hub for tickets – seems to have receded into the distance’, concluded Mould.

Disclaimer: Financial services company AJ Bell owns Shares magazine. The author of the article (Ian Conway) and the editor of the article (Martin Gamble) own shares in AJ Bell.

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