Online travel platform Trainline (TRN) has been under a cloud ever since the government announced plans in May 2021 for a new state-owned body, Great British Railways, to sell e-tickets.
There was therefore huge relief for shareholders today after Trainline said it had reached an agreement to amend its third-party license.
The terms of the deal are far less damaging than feared, sending the shares up 21% to 239.2p.
The FTSE 250 company will join other third-party retailers in a ‘collaborative phase of engagement’ with the RDG (Rail Delivery Group) to thrash out a new agreement.
BETTER THAN EXPECTED
In the event an agreement cannot be mutually agreed the RDG has the right to impose a ‘minimum set’ of commercial terms. This includes reducing the commission Trainline earns on ticket sales by 0.5% to 4.5%.
This is less than harmful than feared and even better after a reduction in central industry costs is factored in which the company estimates are worth around a 0.25% offset.
Chief executive Jody Ford commented: ‘This is a step forward in providing greater certainty to Trainline. It allows us to invest further in product innovation and marketing to encourage more people back to rail.’
EXPERT VIEW
Investment director at AJ Bell Russ Mould said:’ Trainline’s slice of the pie looks like it will go from 5% to 4.5% which in the grander scheme of things is not a bad deal.
‘The rail sector has been through very difficult times during Covid, and it would have been easy to slash commission rates to the bone, leaving Trainline in a pickle.
‘So far so good, but it’s too early for Trainline to start celebrating properly. There is a bigger issue to overcome which is the rail industry’s new ticketing platform which poses a risk to Trainline’s market share.’
The best-case scenario would be for Trainline to be picked as the behind-the-scenes platform provider, effectively providing a white label version of its own website.
A further upside for Trainline would be a finding a resolution which trumps the minimum commercial terms laid out in the agreement.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Martin Gamble) and the editor (James Crux) own shares in AJ Bell.
