Trainline plc (TRN) Earnings Call Transcript & Summary

Thank you. Good day, and thank you for standing by. Welcome to the Trainline First Half Full Year 2023 Results Presentation. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. And now I would like to hand the conference over to Mr. Jody Ford, Chief Executive Officer of Trainline. Thank you. Please go ahead.

Good morning, everyone. Thank you for joining the call today for our half year results presentation. I'm Jody Ford, CEO of Trainline, and it's great to be joined by Pete Wood, our Interim CFO. Pete stepped up into the role in September, but he's been deputizing for our previous CFO for the last few years. Let's first go through the disclaimer. On to the agenda for today. I'll intro with the key highlights for the first half of the year. I'll then bring to light how we are promoting environmental sustainability, the core theme behind our purpose. Pete will talk you through our financial performance, and then I'll update you on progress against our strategic priorities. After that, we'll open the floor for questions. In the first half, the group delivered a strong trading performance with net ticket sales up 17% and revenue up 28% versus pre-COVID levels. This was led by our consumer businesses across U.K. and International, which in aggregate were up 53% versus the pre-COVID level. EBITDA grew significantly, too, while the business increased its investment in the European opportunity. In the U.K., we continue to unlock value for customers, increasingly relevant given the rising cost of living, including scaling active digital railcard users to 1.7 million. In International Consumer, we further positioned ourselves as the aggregator on high-speed REITs. This included launching Iryo in Spain, the fourth carrier brand in that market and attracting a strong uplift in customers from outside of Europe, particularly tourists from the U.S. And we continue to significantly increase transaction frequency. Double the number of customers were transacting more than once a month in the U.K. and France versus pre-COVID, while initially, it was 4x as many. That's a pretty remarkable step up. As you know, at Trainline, we have a core purpose to empower greener travel choices. Our vision is to build the world's leading rail platform, making it easy for customers to find the right ticket at the right price online and delivering that experience through our own branded channels or through travel partners. In doing so, we're making rail travel more attractive, encouraging millions of people to take the train instead of driving off-line. We're enhancing our app to encourage modal shift to rail and help our customers travel more sustainably. In the first 6 months of the year, we launched a carbon comparison tool, showing customers emission savings versus other forms of transport. And soon, we'll launch bike reservation within the app, helping the millions of cyclists in the U.K. to take their bike onto a train. However, there's a lot more we can do. With a mission from the energy sector having significantly reduced, transport is now the largest emitting sector in the U.K. A key way to reduce these transport emissions is by switching to rail, given it emits far less carbon than flying or driving per passenger kilometer. I believe Trainline has a key role to play in promoting modal shift and encouraging greater use of rail. We will continue to do that by leading on product innovation, but now we want to lead the industry agenda as well. We recently launched I came by train, a new initiative focused on growing the public's awareness of the relative benefits of trade travel and inspiring pod in those that take positive action. The initiative gives people the opportunity to pledge to swap a car -- a journey by car or plan to rail. We've launched brand campaigns, our leveraging influencers on social media. And to top it off, the artist, Craig David, has written and released his own track. It's called Better Days, I came by train, and you've just heard it prior to the call start. Overall, our mission is to make rail famous for being the most sustainable form of transport. And with that, I'll hand over to Pete to talk through our financial performance.

Thanks, Jody, and good morning, everyone. I'm Pete Wood, and I'm delighted to have stepped up into the role of interim CFO. Having been at Trainline a number of years, I remain hugely excited about the growth opportunity ahead and the momentum we are building. As Jody discussed, the group achieved strong growth in net ticket sales, revenues and gross profits in the first half. Net ticket sales were up 17% versus 3 years ago, the year before COVID. Within that, our U.K. consumer business was up 45%. International Consumer was up 81%, while Trainline solutions, given a slow recovery in business travel remains less than half its pre-COVID size. Revenue was up 28% versus 3 years ago. Its growth outpaced net ticket sales supported by a strong rebound in global inbound customers to be monetized at a higher level. And gross profit was up 33% versus 3 years ago, with the gross margin improving as we continue to scale. The business delivered a strong step-up in EBITDA even while increasing investments to support growth. In the first half, adjusted EBITDA was EUR 45 million, up EUR 30 million year-on-year. In the U.K., we increased marketing investment to attract new customers to rail and to support the recovery of the rail industry. In international, as laid out last year, we have increased our marketing to build brand awareness and drive demand in our target European markets. But as we increase investments, we continue to focus on marketing efficiencies. In the first half, we grew the number of international customers acquired for 3 through SEO channels by 50% versus pre-COVID. We also scaled our team, hiring 150 more people to further accelerate product innovation in International Consumers. This included optimizing the user experience, launching new value features relevant to each core market and aggregating new entrant rail carriers. Jody will discuss the exciting progress we're making here. As we process a much higher level of transactions in the first half, the cost to run our platform also increased as reflected in the other cost part. This includes investments in the platform to ensure it remains resilient at higher levels of scale. Notwithstanding these investments, we continue to see operating leverage come through, further supported by our continued focus on cost discipline that we hone through COVID. As Jody outlined earlier, the rail industry has significantly recovered from the impact of COVID-19. As you can see on the chart, U.K. passenger volumes have returned to around 85% of pre-COVID levels over the last few months. This recovery is very encouraging and a sizable step up by a year ago. But it's not without some volatility given the ongoing industrial action. It's not yet clear when this will conclude with more strikes happening in the U.K. over the next few days. However, I want to emphasize that post period end, underlying demand remains strong. The pressure on disposable income from the cost of living crisis is likely impact many consumer-facing businesses across Europe. However, recent survey data gives us some reassurance suggesting rail should prove more resilient than other modes of transport. In part, given it is experiencing lower rates of price inflation. The cost of living crisis also brings into focus how we can help customers save money when traveling, leveraging our broad set of value features like SplitSave and digital railcards. Jody will come on to talk about this in more detail later. Given the better-than-expected recovery in rail travel, in July, we lifted our guidance for fiscal year 2023. While acknowledging the industry headwinds, we reaffirm our upgraded expectations today. The business is in good shape and remains on a strong growth trajectory. Thank you, and I'll now hand back to Jody.

Thanks, Pete. Let's now talk about our progress against our strategy. As a reminder, here are our 4 strategic priorities. Let's first discuss our U.K. consumer business before discussing International Consumer and then finally, Trainline solutions. Our first key priority in the U.K. is to provide customers with an excellent user experience, removing friction when searching for trains and booking tickets while offering an unrivaled value. In doing so, we have shifted more people to online, in particular, digital ticketing with e-tickets a core part of our mobile app proposition. Availability of rail journeys, where e-tickets can be used has continued to grow. Southeastern, the last major rail operator, yet to have enable e-tickets, began its rollout in H1. As you can see on the chart on the left, e-ticket adoption from customers tends to grow quickly once they are made available on a specific operator. Once complete, this will take e-ticket availability north of 90%, broadly resolving the supply issue. Transport for London being the only notable part of the network, not to have e-tickets. On the right-hand side, you can see how industry e-ticket penetration in the U.K. has grown significantly. This is driven in part by greater availability as well as demand growing as more people opt to buy tickets through their phone rather than to our participation. At 43%, there's plenty of runway and clear tailwinds for future growth. The commuter segment represents a significant growth opportunity for digital ticketing. This includes season tickets, which are so far recovered to around EUR 800 million in sales. Season tickets have historically had limited digital ticket options available. When I spoke to [ inmate ], I said we would roll out a digital season product this year following a successful pile up. 6 months later, we are now selling digital seasons on 10 train operators in the U.K. Prior to COVID, many commuters used our app, but due to a lack of digital ticket options, only a minority bought their tickets through Trainline. We have a large cohort of app users we specifically call time checkers who serve as a good proxy for commuters. As I've spoken about before, we've been priming our app to serve such customers with features like favorites to personalize their journeys. In H1, we saw well over 1 million favorite setup, helping to grow the time checker cohort by 58%. We've also grown the number of time trackers that then go on to buy their tickets through Trainline by 63%. This is a strong start, but there's clearly still a lot of headroom to go after. And now with the fullest week of commute tickets in digital format, we're in a strong position to convert more of these time checkers into ticket purchases. In the first half, we also enhanced SplitSave, our split ticketing feature. We ran a data-led optimization process to make the product even better, expanding the number of journeys in which split tickets are offered. This helped grow availability of split same tickets to 76% of all journeys, up from 64% at launch. And having previously only been available on our mobile app, we recently made SplitSave available to customers that are boo through our web as well. By improving the availability of SplitSave, we can help more customers save money. Moving on to our second priority in the U.K., building demand, but sticking with the theme of saving customers' money. Our broad value proposition is becoming increasingly important as the cost of living becomes more of a concern. All carriers and -- we offer customers all carrier and journey options on the key routes, including coach, allowing them to compare and select the best value fares. We provide customers a seamless way to book tickets in advance of travel, often make it considerably cheaper than buying a ticket on the day. And with digital railcards and SplitSave, customers can unlock further savings on their train set. So all of this together provides an easy and convenient way to save money. And we're telling customers all about the value we offer in a brand campaign in the U.K. It highlights how they can save up to 35% on their ticket when booking through Trainline. This is further reinforcing Trainline's reputation with customers as a key way to get value for money when used in the rail network. Let's move on to our third priority, increasing customer lifetime value in the U.K. and step into digital railcards. Railcards are a key loyalty proposition for the rail industry, giving customers access to discounted tickets. We estimated that there were around EUR 6 million in circulation when we started marketing our digital version 18 months ago. Last year alone, we sold 1 million digital railcards. Since then, we continue to make significant progress with 1.7 million active digital railcard users in August. And our new railcard renewal process will further support retention with customers able to renew their digital railcard in just a few clicks. Priming our app for commuters and scaling digital railcard are good examples of how we are helping people make better travel choices every day. They're also helping increase our relevance for more of our customer travel needs. This is driving a notable increase in repeat usage, with the number of customers transacting more than once a month doubling versus pre-COVID. This is huge acceleration in our U.K. business and underpins the 45% year-on-3-year growth of net ticket sales we saw in the U.K. Now let's turn to progress against our strategic priorities for international consumer. I'll start first with enhancing the customer experience in our priority markets, France, Italy and now Spain. In these markets, we are striving to be the aggregator for rail travel, offering all the carriers on all the key routes. By positioning Trainline as the aggregator, we believe we are well placed to win in Europe and significantly grow our share. This is playing out on the 2 routes that we have most recently opened up to competition. Madrid to Barcelona and Paris to Leon. When I spoke to you in May, I said tickets sold on Madrid to Barcelona were 5x higher than pre-COIVD. Well, it's now 7x as high. Likewise, for Paris to Leon, I said tickets sold has doubled since Trenitalia launched its service in December. That number has now tripled. European markets are opening up to new competition, and this is happening most rapidly in Spain. Last summer, SNCF launched their low-cost challenger brand, Ouigo, on the Madrid to Barcelona route. They've competed fiercely since then with average ticket prices on the route [ half that ]. This month, Trenitalia's area will launch their premium service. This will give customers even more choice and we have already begun selling tickets. With 4 carrier brands now competing on train's busiest routes, almost doubling total daily service, this represents a great aggregation opportunity. Competition is also expanding to other routes across Spain, most notably, Madrid to Valencia. Ouigo launched a new service last month with area set to follow before the end of the year. And next year, both carriers plan to extend their operations further with new services between Madrid, Seville, Malaga and Alicante. This means 4 different carrier brands will compete on high-speed reach right across Spain. Taken together, we estimate these liberalized routes will represent a EUR 1.3 billion aggregation opportunities. We've accelerated and scaled our pace of product innovation for our international customers, driven in part by having now fully hired the 150 new people I highlighted 6 months back. We are rapidly rolling out new features across each market, as shown by these examples in H1. By doing so, we are optimizing the user experience while differentiating ourselves from the other retailers. As I mentioned earlier, we have a broad value proposition in the U.K. We are building the same in our target markets team. Across these markets, we made it easy to book in advance to give customers the ability to book all carriers in journey options. We then tailor our feature set to reflect the nuances of each market. For example, in France, we have digital railcards, but in Italy, railcards don't exist. Instead, we have Trenitalia discount rates. So in each market, a localized set of features increasingly provides customers an easy and convenient way to save money. As we said we would, we have meaningfully increased marketing investments to drive up customer demand and brand awareness of our value proposition. This includes a nationwide brand campaign in Italy, which has significantly growing brand awareness, helping to triple the number of new app customers year-on-year. Our brand campaigns focused on the benefits Trainline brings to customers as the market aggregator. It highlights how we allow them to compare all carriers, prices and G&A options to find the right ticket at the best price. Global inbound customers made a strong recovery in the first half, led primarily by U.S. tourists. We positioned ourselves well for their return. Net ticket sales to global inbound customers was up 66% versus pre-COIVD levels with sales to U.S. customers almost doubling. As a result, U.S. inbound sales into Mainland Europe were twice as large than into the U.K., which is notable given we're still at an early stage in developing our international business. As we acquire more customers, we are driving our customer lifetime value by increasing the frequency in which they transact with us. In the first half, the number of customers transacting more than once in the month doubled in France and quadrupled in Italy versus pre-COVID. Finally, our fourth priority, growing Trainline solutions. Before we step into our progress here, I'd like to briefly talk about GBR. Published in May last year, the William Shacks white paper included proposals to create GBR, a new central governing body to control and manage all aspects of the railway in the U.K. That performance require legislation. However, last month, the government confirmed this legislation will be delayed with no definitive timing on when it would resume. The white paper also included proposal for GBR to launch its own retailing app and website. In December last year, Rail Delivery Group took preliminary steps ahead of a formal tender process to procure retailing platform service. However, this process is also delayed. And at this stage, we have no further details to share. Finally, we continue to work with our RDG on a shared agenda to reform rail retail, following our MOU agreement early in the year. Whilst we are making some progress, I don't think we'll see any outcome just yet. We continue to leverage the strength of our platform to support our travel partners. In the U.K., we signed a contract extension with Scott Rowe, whilst in Italy, sales for our first white label carrier partner, [ Isla ], went live. We continue to position our global API platform for growth, giving more B2B partners the ability to offer European rail options to their customers through one simple, seamless connection. We also signed up travel management companies, including CWP, Agiito and Havas and added new inventory to the global API expanding our content offering in core European markets. Before we open the floor to questions, let me recap on some key takeaways. The business delivered a strong trading and financial performance in the first half with a notable step-up in net ticket sales revenue and profitability. And with that, we today reaffirm our recently improved guidance for the full year, expecting robust growth to continue into the second half. Our U.K. consumer business is growing strongly as we shift more customers towards digital ticketing, particularly in the commuter segment. Likewise, in an increasingly cost-conscious environment, we continue to unlock value for customers. We've enhanced products like SplitSave, scale digital railcards and make customers aware of our broader value proposition. In Europe, we are aggregating all new carriers on key route and increasing the pace at which we roll out new value features. We are already seeing this accelerate our sales growth, including now with global inbound travelers. Looking forward, I remain hugely excited about the opportunity ahead, our long-term growth tailwinds and the progress we continue to make in delivering to our customers in the U.K. and across Europe. So thank you very much for listening. We'll now hand back to the operator for questions.

[Operator Instructions] Our first question comes from the line of Navina Rajan from Morgan Stanley.

Yes. Jody and Peter, congrats on the results and the collab with Craig as well, enjoyed that. Just a few questions from me. The liberalized routes opportunity, interesting that you've put some numbers around it, the EUR 1.3 billion opportunity you mentioned, can you just clarify that net ticket sales? How do you sort of get there? And then regarding the similar markets where you're doing some initiatives found in Italy, do you sort of see that opportunity in those sort of routes partially on such being similar? My second question is on the sort of near-term trading environment. I understand rail probably poses a down trading sort of proposition for the consumer, especially due to sort of high fuel prices. But in international, where travel and U.S. inbound is quite a big part of your business as well as tourism. How do you see sort of a weak consumer environment playing out there? And then lastly, just on solutions, how should we think about the earnings profile of that business, given that it's relatively a new segment [ back ]?

Thank you very much for the question, Navina. I'll take the first one and then Pete will probably chime in on the other 2 as well. So first up, the point around liberalized routes and the EUR 1.3 billion we're highlighting in Spain. So the sort of math to get there is looking at our best understanding of that market, of the Spanish market and saying, of the effectively high-speed routes, what part of them are going -- effectively everything is sort of liberalized, but where will we see competition occurring and where can we point to competition entering the market? And I think the really good news here around Spain for us is that we -- it's happening, it's already -- we are selling tickets and Madrid, Barcelona is a very significant part of that market. It's one of the top routes in Europe. So that's already there. And within 4 weeks, we'll see area launch. And we're already selling tickets on that route. And then Valencia is the #2 route. The same is already happening there. And then these points around the Seville, Malaga and Alicante, they are all coming online. And so when we look at those roots, we get to a sort of TAM of EUR 1.3 billion. How that plays out between those 4 carriers. I don't know. And the other thing which I think could drive that number actually significantly higher will be substitution from road and from air. If you take a route like Madrid, Barcelona, we estimate less around 1/3, maybe up to 40% is currently [ airline ], a lot of people drive and a lot of people fly that route. With the competition and particularly the low-cost carriers like Avlo and Ouigo, we expect to see more substitution as prices drop. That's kind of the only direction we think prices will go. So that's how we get to that number. And then to your question on Italy and on France. So Italy, that is really -- most of the high-speed network in Italy have 2 carriers in Trenitalia and in [ Isla ]. And so we already have a strong proposition there as we talked about with regard to our marketing. And so we will continue to push that and to bring together and ensure we have all the fares and the customers understand that they don't need to look at 2 apps they can do it all on one. And we'll obviously keep a watching brief to see if there's any new entrants potentially coming into Italy in the next year or so. And then finally, on France, Paris, Leon is absolutely the #1 route in France, and that has, as we discussed a couple of times, been liberalized. I can't share at the moment any further plans for other routes that will have competition yet. Clearly, Spain is where the focus is and where we're seeing new routes launching. But when -- if we kind of forward 5 years and then 10 years, do I expect that we'll see competition on many routes in France and frankly, throughout Europe? Absolutely, yes. It's just the train sets that these players need to buy are fairly expensive and to kind of get through the various national health and safety rules, it takes time to do that. So I think we will continue to see them launch and we've highlighted the ones we know with certainty are launching. So that was the first question. And then I think international and U.S. inbound and the potential in the consumer environment playing out there. I guess the first thing to say is that as we think about those markets, we are still majority domestic demand, and that is absolutely our strategy is around driving that domestic demand and building up what's been very pleasing, and we think it's still a significant opportunity and multibillion opportunity is this international part. And I think what makes that interesting is that we think we are only currently around maybe 5-ish -- mid-single-digit part of the market, and there's therefore a lot of opportunity to grow. And we are clearly the #1 player there with just a very strong proposition. Pete, do you want to speak to kind of consumer demand and any thoughts on how that plays out?

Yes, of course. So the first point I'd make is that the underlying performance that we see continues to be strong, and we're confident in our improved guidance range. But that said, of course, yes, it is a tougher environment. We believe that transport may be a bit more insulated than some other sectors. In the global financial crisis, we saw the proportion of budget spent on transport actually grow as consumers made other choices in where they save. And rail may be more insulated than other modes of transport to the cost of car ownership has been going up meaningfully over the last 2 years and certainly is outstripping the rail fare growth that we see. And then your question on Trainline solutions. So yes, this is a slightly different part to our segmentation. And really, there are 2 parts to this. You should think about 2 different parts to the revenue generation here. The first is the TPS business, and we continue to see recovery and tailwind of recovery in the B2B space, particularly as the environmental aspect comes into play. So switching business travel from rail -- from air and into rail, is certainly a tailwind for this part of the business. And then there's a pipeline of business here that we have built up, and that will continue to play out and drive growth in this segment. And then, of course, the other part of the business here is the revenue generated for the platform from the U.K. consumer and international consumer businesses, and that will further drive this segment of our business. Thank you for the question.

Our next question comes from the line of Ivar Billfalk-Kelly from UBS.

Just following up a little bit in terms of the current volumes that you're seeing. I mean given that the national recovery has stalled a little bit, we're looking at about 85% for the last -- 85% of pre-COVID volumes over the last couple of months. What have you seen over the last couple of months for yourselves in terms of you're gaining market share? And secondly, in terms of the cost of living crisis that we have, I mean, clearly, train is more attractive now. But of course, if we get fare increases coming through next year, which may well be high single digit or potentially even higher, I mean, how do you expect that to actually impact your affairs -- sorry, your ticket sales and your revenues? And thirdly, this is a little bit a different one, but it seems like Uber has finally started to dip their toe into the market a little bit and granted it's a clunky proposition at the moment. But do you have any views on how their entry into the market might benefit you or be alternatively competitive like compete against you? And frankly, anything you can tell us about operational or financial impacts, either positive or negative would be great.

Thanks for the question. There's a lot in there. What I'll do is I'll pick the Uber one off first and then speak a little bit to the first one on volume and then hand over to Pete. So yes, over entering the market. Look, generally, we will welcome competition. We think it's really healthy to have a market where there are multiple players entering. It's aligned with our broader purpose here, right, getting new people to find rail, whether that's a new type of journey or a wholly new person, we think is a good thing. And if Uber can do that or any other player than we really welcome that. I'd say sort of moving on from that, we absolutely back ourselves, right, with 500 rail engineers to come up with the very strongest proposition to win those new customers over into Trainline. And that's really a function when you think about it. We talked about it in our product session we did a couple of months back, it really is complex. We have a 4.9 star app. But when you think through what we do with regard to the UX, with regards to the features, whether that's all of the different suppliers we now integrate, whether all of [indiscernible] ahead the implementation of railcards, value features and so forth, so on and so forth. And I think that's what regular revenues is absolutely we'll expect. And then just one more reflection as I think about Uber, which is to say when we talk to customers, really, the booking, the train bit comes first. And so if you're booking a weekend in Edinburgh or going to Barcelona, you use your rail app to find and secure a great fare. And then nearer the time, you look at how you're going to get to the station, whether that's with a ride-hailing app or a bike or whatever it might be. And so actually, we think longer term, there's actually interesting partnerships for us because we believe we start with the primary traffic on that. So that's kind of quick thoughts around Uber. And then in terms of volume, and just your comment on over the last 10 weeks, and it's kind of 85%. Clearly, that data, we know that there's volatility, and this is for a period of a number of strikes in the U.K. market. What we have seen, and Pete spoke to the underlying strong demand, we have seen that peak up more in the kind of mid-90s at times in terms of those volumes, which I think is interesting. And as we've talked about before, we believe leisure is already fully recovered more than 100% in terms of demand, and we are seeing pickup definitely around commute and some of those products that we have put live there. And I think one other features is the booking window is later this year for Christmas because of some of the sort of challenges around getting those things like. And so I think that we remain confident and believe there's strong demand there. Pete, do you want to add anything else on that one? I'll speak to kind of fare increases and how we're thinking about sales.

Yes, I think you've covered the points on the volume increase. With regards to fare increases, so we are expecting an increase in fares in March 2023. The government hasn't shared exactly what that increase would look like, but they have stated that it will be below inflation levels. We've also seen some fare increases in Europe in the mid-single digits. So our planning assumption is that it would be similar to that in the U.K. as well. And then in terms of how that might impact us, we've got some good tailwinds and we have some opportunities to grow, nonetheless. So e-ticket adoption Jody just spoke about, still had some strong headroom growth there. And of course, we have a really great value proposition, which becomes all the more important at this time. So ensuring that customers understand that they can save money by booking in advance or making use of features like digital railcards or SplitSave will really support customers through this difficult time.

Our next question comes from the line of Steven Liechti from Numis.

Yes, Steve Liechti here from Numis. I've got 2, actually. The first one, you may or may not be able to say much on it. Given what you said on GBR needing legislation and the delay there, have you got any sort of view from your end and what you see, or is there any sort of time line or things that need to be put in place that will restart the time line on that GBR thing? Anything color-wise you can give us there. That's the first question. And then second question, just on tap-and-go, I'm interested how aggressively that's being rolled out in various different places. I know it's something that we talked about before. And any updated thoughts on it in terms of threats and opportunities there.

Thanks for the question, Steve. Yes, I'll speak first to the sort of pay as you go and the opportunity there. And for those who follow closely, this has been a government objective sort of since the Williams review. And I think we can probably break that into 2 halves. One is what's happening in London and one is what could happen in the future in the region. And so what is confirmed, and I think you sort of think over the next couple of years is the way to think about this, is the overall -- and I'm sure many people on the call are familiar with this, but that ability to sort of tap in and tap out is being extended beyond sort of Greater London into a sort of broader region, which goes back far north of Bedford and Cambridge and go south to Brighton on a number of those routes there. And we think that takes about 2 years to fully implement and then probably have some form of impact on our ticket sales of -- it's hard to say exactly, but probably heading up towards about EUR 150 million is the number where we think there may be some risk associated with that. But what I'm going to stress is that, that particular proposition actually lacks quite a lot of what customers want. So moving around London, you don't -- people tend not to worry too much about a few pounds. But then you get into more expensive areas, as you go to Cambridge or to Bedford, actually -- it's kind of tough to tap in and tap out without really a sense of control. And for the customers that the government is really keen to get traveling, that's going to be even more of an increased challenge. It also doesn't allow railcards for young person, senior citizens and so forth. And it's very difficult to travel with a family with that. So actually, a lot of the market won't want to use that system. So actually, we see an opportunity here in the medium term for Trainline. This is something we think we could do well and we could work really with the industry on this one. In the same way as we've innovated across a number of other ticket types, this is something we think is very interesting, and we would are looking pretty hard at how we could support that. And then just to the point on the regions as sort of as you intimated, this -- whilst it remains kind of high level, has been talked about a lot by the government. There really is no clear sort of strategy, policy, investment level or even a technology yet of what that would look like. I mean, again, I think, it probably is an opportunity for Trainline, but it's definitely medium-term plus. So I'd be quite surprised if there was any product like for customers in the next 4-plus, 5 years to go up, but we'll wait and see. And then I'll come back to the GBR piece here, which really is tough to answer. Obviously, there's -- we are just awaiting confirmation of the Rail Minister coming in. We heard about the Secretary of State just last week, and they're, obviously, kind of getting to understand their briefs at the moment, and they are going to form an opinion of exactly the direction they want to take this. And I think the governments have got questions, they need -- kind of philosophically and then strategically, what direction do they want to take this, with -- specifically with regards to the GBR app. Look, we stand ready as we have always been to engage if the government would like to work and run a broad procurement exercise. But I don't think it's a clear cost anymore being a free standalone app. I think the shades of gray of what this ultimately should look like, which is probably not that helpful to speculate on where that goes. All of that said, I think, at the end of the day, where we've bought to really is that we have incredibly high trust with customers. You've seen the sort of the growth and our innovation and feature development, 86% of customers rate Trainline is sort of highly trustworthy. And that's fairly significantly ahead. And I think whatever government sort of policy, or it turns out we have an opportunity to work with them to help them deliver their policy, and we have the technology to do that. Thank you very much, so for the questions.

Our next question comes from the line of Simon Davies from Deutsche Bank.

A couple from me. Firstly, on your -- obviously, a big step-up in marketing spend. Can you talk a bit about what you're seeing in terms of trends for CPAs in Europe? Are they beginning to push upwards? Are you still very comfortable in terms of the value you're extracting from those in terms of customer lifetime value? Secondly, you mentioned previously, strike action, is it assumed within your guidance. Can you give us some color around what you are assuming in terms of the number of strike days and some kind of color around what the cost is now per strike day? And just lastly, how much you're beginning to rebuild when might dividends come on to the agenda?

Thanks for the questions, Simon. Look, why don't I start on number one. And I think they sound like questions Pete will pick up on 2 and 3 and maybe some of one. So I think how we think about marketing is we are -- long time we've got a good performance marketing muscle. We have been using that in Europe for a number of years, but we have stepped that up, and we are broadening the number of channels we use beyond Google and paid search into app downloads and more broadly into sort of social and other channels as you'd expect. But we've also made significant investments as you've seen and we've talked about around brand campaigns in France and initially, particularly targeting those aggregated routes because we just think this is the moment in time to tell the sort of populations and rail users that they have choice. And so that's where we're going. With regard to the performance marketing and the channels, we set -- we have a fairly clear delineation and kind of guardrails around how we spend, and we remain kind of comfortable with the investment levels that we're seeing and the CLVs that we're seeing. But I think there's a number of stats between Pete and I that we spoke to that really speak to engagement and more frequency driving up across those user bases, which obviously, as you know, drives the CLV. Pete, I don't know if you want to give any more on that one or not. And then you talk to the other 2.

Yes. I think Jody is right, we're really encouraged with the way in which that European business is evolving. And of course, it's -- in terms of rolling out the playbook, it lags the U.K., but it is taking all the right steps that we need and gives us confidence to continue to invest. And then your second question regarding strike action. So we're not going to share the specifics of how it impacts on a day-by-day basis or anything. But a couple of things to note. The first is that the impact we see is fairly B shapes, right? So we see a good recovery once the strike is over. And if you analyze out and look to see what's happening behind the strike, we see a strong underlying demand. So that's very encouraging for us. And of course, in the medium term, this is -- we expect this to be resolved. And really, our focus in the meantime is to help customers through these industrial action days. And then your final question regarding capital allocation. So look, we -- our focus is on ensuring that our business is well fueled and that our expansion into Europe is supported. And there may be some inorganic opportunities along the way as well. And beyond that, all options remain on the table regarding how we drive shareholder value. Thanks for your question.

Next question comes from the line of Owen Shirley from Berenberg.

The first one is a follow-up on the Uber point. Just really wondering whether you engage with them at all or they engage with you about using your sort of API from the Trainline solutions business. The second was on the retail review where you -- sort of negotiations are ongoing. I just wondered if you could sort of shed any light on what the main sticking points are. And then on the international opportunity, clearly sort of very big. Are you seeing competitors spend more on marketing in the way that you are? I suppose just more broadly, any behavior from the competitors in Europe that you think is worth calling out?

Sure. I'll start with that final question and then sort of work through the other 2. So with regard to international, we really feel like we are really the only European proposition operating in all of those markets at the scale that we're operating at. So we don't spend a lot of time focused on the competitors, which are, frankly, pretty small and pretty focused on individual markets. So no, I think, the broader point is actually our principal competitor remains the sort of state monopoly, if you'll like the state incumbent operator who have spent back in, I guess, at this time a year ago, we were talking about how we were sometimes -- those players have pulled back in terms of spend because of COVID and so forth. They are back in those markets, and as you'd expect, frankly. So that's kind of the position there. I think the sort of -- what's been especially pleasing is actually to see how our proposition is that we talked about earlier has played out with those inbound customers and in the U.S. particularly, where we just have such a clear strong proposition as you also potentially now the commission rates are indeed come a higher and more interesting, even more interesting for us on those types of things. And so they're particularly good from a CLV point of view. And actually, what we're seeing is they are not just taking one journey, they might book a couple from U.S.A. New York in their apartment, but they're actually beginning to book further as they come from London and then they got the Oxford and then they actually take the Eurostar with us and then they sometimes book way down to the south of France or into Italy or whatever it might be. Coming back to the Uber point. Look, I won't speak to any specifics, but we remain in open conversations with a number of different players around the use of our API and then some of those sort of travel management companies, but also businesses that might look a lot like Uber. I think we have a very -- the broadest set of APIs, and we have the most robust set of APIs. And I think the way I'd characterize what we were doing at the moment is a test, and so we'll have to see how that test goes and where they might go in the future and who they may decide to partner with. And then retail review, again, there's really very little I can say about this. But I think the context I can give is this is just -- I mean, it's just not the top priority for the DSP right now. As you can probably understand, there's such radical sort of been changed, if you like, over the last few months, and it's such a broad agenda of potential change sort of what are the finer points, which is how we kind of characterize it of third-party players is not something that is top of that list. And so that's why we sort of -- 6 months ago, I said, look, I didn't think we'd be returning anytime soon with the conclusion. I suspect this is something that goes on for sort of several months into the future. But as we talked about 6 months ago, the important thing for us was the backstop agreement and the sort of the conclusion, if you like, of the discussion around the commission level, which is very helpful for us and allows us to continue to invest in the way we want. I think that covered that. I don't know if there's anything, Pete? No? Thank you for the questions.

Our next question comes from the line of Lara Simpson from JPMorgan.

I was wondering if you could talk a bit more about your online share development and clearly making strong inroads there with market penetration at around 53%. And where do you think that could go in the next 2 years, both U.K. and international? Any color on that would be helpful. And then my second question, more of a follow-up again on international. If you could talk about your marketing strategy there, how we should think about investments as you look to drive growth in those markets?

Thanks, Lara, for the question. I'll pick up the first one on international marketing first, then speak a bit to share and how we think about that. As I sort of previously referenced, we are really building up a new capability around brand marketing, and that takes the form of -- we showed some pictures of outdoor and have patients with TV campaigns, both the TV campaigns very much focused on value and the value of aggregation. And then as you'd expect, sort of digital marketing delivering that to the particularly Gen-Z, which is a particular area of focus for us. We think the younger users are the most likely to convert and move away from the SNCF and the Trenitalias of this world. And then more broadly, performance marketing, we are just -- we're getting into sort of the technical -- stop there. We're really looking for the sort of growth loops that they're bringing the user in and get them through exploring things like coupons and future tickets, if you like, that will drive further growth there or maybe pairing that with a railcard or something like that. And then around that, building a set of value features. So we showed that chart earlier, save for later. We've launched SplitSave in France and then bringing the fact that we've got these differentiated features versus the incumbent player. That is our angle in that is our proposition as we go through that. And then in terms of broader performance market, I think we probably spoke to that one earlier. And then in terms of market share, international, I'll cover that one off first. Look, we continue to see really accelerated growth in those markets, and we are increasingly kind of highlighting, if you like, like we talked about, the EUR 1.3 billion in Spain. Fairly clear slices where we think we have a very strong proposition, and we are going hard at those shares and looking to get into double share growth quickly within those areas. And we have seen that we can be actually on a new challenger brand, we are seeing sometimes we are north of 30% of their ticket sales on some of these challenger brands, which is very encouraging. Overall, I think, what we've said historically is we want to, as quickly as possible, get to double-digit share in those markets and kind of get on the trajectory that we've seen historically in the U.K. And then to speak to the U.K., yes, we think and continue to believe there's opportunity to expand our share. We see good underlying performance and growth in that area. I think the area and the part of the TAM that we're pretty interested and we've both spoken to you today is around commuter tickets and season tickets. And that's an area that we've really had very little of historically. We -- I said today that's recovered to EUR 800 million. Historically, that was a EUR 2 billion market. And we think we can play a significant role in that, given our product innovation and digital season tickets. So that remains an encouraging area for us. Pete anything you want to add on that?

Yes. The only thing I'd add is that we're also investing by investing in the product removing friction, it's growing rail. And the investment that we're making in sustainability and making rail famous as the most sustainable mode of transport, right? This is it is to grow the whole market. And of course, we will all benefit from that.

Our next question comes from James Lockyer from Peel Hunt.

Three questions for me, please. Firstly, just on the 10 carriers you're doing season tickets with so far. Can you tell me what the sort of pipeline is looking like there? And what are the blockages to getting all of them digitized? How should we think about the end of the year in terms of number of seasons to get live? And secondly, just on the U.K., you mentioned new value-add services such as the bike reservations. And how should we think about that going forward? What other options could you bring to the U.K.? I mean given as I think you mentioned earlier that actually rail, the decision before rail, how you get to the station, as like car journeys, for example. And then thirdly, just in terms of recruitment and attrition rates and salaries, could you give us a color around that and how that's going to plan?

Thanks very much, James. You slightly broke up on that. I think we got out on them. So I'll just pick up the final one now in terms of recruitment. As I said, we've hired those new 150 potentially kind of engineers and data scientists, and we feel really good about that. I'd say just more broadly, it's going to sentiment why the market has definitely eased a little over the last 6 months. I think you will understand why, and we are finding it easier to recruit engineers than perhaps 12 months previously, we were, which is a good thing. And so we kind of hit the run rate we need and we feel good about the engineers. We haven't though just called out our Barcelona Tech up, I think, we spoke to 6 months ago, has been a great source of kind of expertise and engineer are hiring well a very good sort of overall compensation package in value terms. So that's there. To speak to the first question, which was the season -- digital season tickets and what might be future blockages, look, actually, that's going really pretty well. I mean any time you deal with sort of physical infrastructure and gate lines and so forth, they always just take longer than launching a purely digital feature. And so what needs to happen here is to ensure each of these sort of particularly the London terminates, there's enough barcode revers on the gate line for that to happen. Generally speaking, that's gone well and that the employees at the station are trained. We've generally been very well supported by the government on this. They are very much behind this as an initiative and the industry more broadly. And we're getting good feedback and traction with those talks with train operating companies around rolling this out, and we've been able to also deliver it for some of the white label talks that we support. So look, I think, in the coming months, and I think over the -- probably, I don't know, 6 to 12 months would be a good time zone to be thinking about ultimately enabling it. And then once we've got it enabled, we then can really start focusing on educating people around the feature and driving it. And ultimately, this drives to us having the full suite and bringing our intelligence and data smart to be able to help people make the right choice, which is something we think we do that others won't be able to. And then I'll just touch on the final kind of question around bike reservations and other features. Look, I would just say this remains sort of watching brief. We do invest here around partner services, and there's a few things that we are beast testing right now and working with different types of providers. And I don't think anything here is going to surprise you. All I would say, and we said this, I've said this over the last couple of years, is we are laser-focused on the core proposition and then the growth of that and then not just in the U.K. but into Europe. And there's just a whole wide range of things. But we will keep working out, but they aren't on top priority. And over time, they will become things that we will get much more invested in when we're looking more to sort of drive value around given customers. So at the moment, we're in that earlier stage of work. Thanks a lot for the question.

Our next question comes from Ciaran Donnelly from Liberum.

Just a couple of clarifications first. Just on the retail review. Look, clearly, the timing is unclear. But with respect to the implementation of any change, would it be affected by the completion of these negotiations? Or does the timing refer back to when the MOU was signed? I think you said at that time, any change would be effective kind of April 2025. But if we do have an elongated process from here, could that potentially be pushed back? Two, just on the percentage of U.K. rail volumes that Southeastern accounts for, if you just have that information. And then just 2 kind of higher-level questions for me. One, I've noticed kind of in the customer journey that you're adding on kind of post travel options in terms of carry on your journey. Is there any kind of plans to start looking at potential monetization processes for post customer journeys? And then just finally, I think Peter talked about as part of the capital allocation inorganic opportunities, what will be the priority when you're looking for any potential inorganic opportunities in the future? [Technical Difficulty]

Please remain on the line. Your conference will resume shortly.

Apologies around that. We have some -- I don't quite know the technical issue. I think we -- Ciaran, just work through your questions. I think we just covered off the Southeastern, be thinking around that 6% to 7% of U.K. volumes. And then I think the retail review, I covered off in quite know if we were cut off. But I think used the planning what we talked about 6 months ago that, that is 3 years' time net 25 basis point impact. And whatever the conclusion of that retail review whenever happens, I don't see any real possibility of a delay to that impact or anything significantly different as it stands. But thank you very much for those questions.

Thank you very much for all your questions. We have now reached the end of the question-and-answer session. I'll now turn the call back for closing remarks.

Thank you very much. So thanks, everyone, for joining today. As Pete and I have said, we have delivered strong financial performance in H1 and are pleased to reaffirm our enhanced guidance for the year. We have clear strategic priorities and are making significant progress against them, and we remain positive as ever about the opportunities that lie ahead. Thank you, everyone, for joining.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.