If you look back as recently as 20 years ago, people booked planes, trains, and coach tickets through local agents or in person at the station. The strength and evolution of technology ultimately led to people being able to book pretty much any mode of transport on tailor-made websites and apps.
Trainline (LSE:TRN) is a provider of such sites, and offers a one-stop shop for booking trains and coaches across the country and now further afield into Europe.
Origins and rise
Trainline was established in 1999 by Virgin Group UK, and Stagecoach purchased a 49% shareholding in the company a short time later. Trainline proceeded to swallow up its main competitor, Qjump, in 2004. Stagecoach sold up and Trainline was then owned by Virgin Group (86%) and National Express (14%).
As well as selling tickets directly to customers using its own brands, Trainline also provides website services to eight out of the 20 UK train operating companies who sell the tickets under their own brand. As of June 2019, Trainline comfortably boasted 80 million visitors per month to its websites, resulting in 100,000 tickets sold every day – one every three seconds – for 44 train companies across 24 European countries. All this before its IPO.
IPO and subsequent performance
In January 2015, the sale of Trainline to KKR was announced. KKR decided to take the plunge and undertake an IPO in June 2019, which turned out to be a highly successful move. The initial shares of the tech travel phenomenon were offered at 350pp and rose 18% by the end of the first day’s trading.
Trainline has enjoyed solid performance, and the share price is climbing regularly. Its international division performed particularly strongly in the six months to 31 August 2019, with revenue up 99% to £14m. This is particularly promising as Trainline looks to diversify from its core UK market.
One must note, however, that in the six months to 31 August 2019, the firm reported a £89m loss after tax, compared to an £11m loss the prior year. Trainline attributed the loss mostly to the costs of its IPO.
According to head of research at Megabuyte, Lee Prout, the future for Trainline is a positive one. He commented, “With the majority of tickets for travel still being bought offline and Trainline the clear digital enabler the future looks very bright for the company.”
Trainline is aiming to exploit the increasing digitalisation of rail and coach ticketing across Europe, as well as at further international expansion. Rail travel is also expected to increase in the coming decades as lower-carbon transport becomes a priority.
I believe this could be a good earner as part of your portfolio. The tech travel sector is still a relatively new one. and Trainline’s position within it is a prominent one. To put this into context, from the IPO in June 2019 to the time of writing, there has been an increase of over 50% in the share price. I expect this to get better as time goes on.
Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.