TRN.LTRN.LLSE
Loading
Operator: Hello, everyone, and welcome to the Trainline HY 2026 Results. My name is Emily, and I'll be coordinating your call today. [Operator Instructions] I will now hand over to CEO, Jody Ford, to begin. Please go ahead.
Jody Ford: Good morning, everyone. Thank you for joining us today for our half year results presentation. I'm Jody Ford, CEO of Trainline, and I'm joined by Pete Wood, our CFO. Let's first go through the disclaimer. On to the agenda for today. I'll give an introduction, briefly discussing the progress we've made in the first half. I'll recap on the opportunity ahead and update on the regulatory backdrop in the U.K. Pete will talk you through our financial performance. I'll then update you on how we are progressing against our strategic priorities and finish with an overview of our digital pay-as-you-go trial, which we recently launched in the U.K. After that, we'll hand back to the operator for questions. As a reminder, we are Europe's #1 rail app, delivering a market-leading user experience for our customers. We aggregate all major carriers and fares, offering a comprehensive range of value-saving products and features. We focus on making the booking experience as seamless as possible. And we use machine learning and AI to supercharge the experience to get customers from A to B. It's our combination of value, convenience and innovation that sets us apart. And that is evident in our scale today with far more app downloads than any of our peers. The strength of our customer proposition is reflected across the group with all 3 of our business units leaders in their respective markets. In U.K. Consumer, we have the #1 travel app in the U.K. In international consumer, we are the largest rail aggregator in Europe. And in Trainline Solutions, we have the leading B2B rail platform across the U.K. and Europe, which now generates over GBP 1 billion of annualized net ticket sales. Looking ahead, we see significant headroom to scale all 3 business units. In U.K. Consumer, we will deepen our competitive moat while increasing the lifetime value of our 18 million strong customer base. In International Consumer, we will deploy our proven aggregation playbook across France, Italy and Spain. By 2030, these markets together should represent a TAM of around EUR 23 billion, including EUR 12 billion generated on aggregated high-speed routes. And in Trainline Solutions, we will scale into the EUR 6 billion business travel opportunity across rail. Our performance in the first half demonstrates the progress we are making against this headroom opportunity. In the U.K., we delivered robust growth, reflecting continued strength in leisure travel alongside the ongoing digitization of rail ticketing. In international, we delivered positive early momentum on the French Southeast high-speed network with sales up 34% following Trenitalia's expansion of services over the summer. And in Trainline Solutions, B2B sales grew strongly, particularly in Europe with international B2B distribution up 55%. Operating leverage amplified our top line growth and the benefits of our cost optimization exercise last year, driving a 14% increase in EBITDA. As a result, we have today increased our profitability guidance for the year, as Pete will discuss shortly. This follows our announcement in September of an enhanced share buyback program, underpinned by our strong cash generation. The enhanced buyback implies we will repurchase 350 million of shares over 3 years. That's around 1/3 of our market cap. Before I hand over to Pete, let me update you on the regulatory backdrop in the U.K. This morning, the government published the outcome of its consultation on the Railways Bill with primary legislation to follow later today. This will allow for the establishment of GBR as an organization as well as the appointment of its key leaders. Since our full year presentation in May, we have maintained an assertive stance with government, pushing them to deliver on the commitment to an open, fair and competitive future retail market. While in parallel, we've sought to resolve existing examples where train operating companies self-preference today. Self-preferencing is where talks offer features within the apps, but we are prevented from offering and market them in ways that we are not allowed to do. This undermines the fair and open competition. We've consistently put forward the case that these practices be rectified. We're making progress. As you can see on the left-hand side of this slide, Previously, Trainline was prevented from offering some temporary fares that could be found on operator websites, and we were blocked from advertising in almost all stations and trains. Following our sustained engagement, the government confirmed earlier this year on both fronts, independent retailers should not be discriminated against. This is a clear step forward. However, we still face blockers and obstacles when it comes to advertising at the station. Furthermore, notable examples of self-preferencing continue to persist. We are prevented from offering train operator loyalty schemes within our app, and we are unable to provide automated delay repay, a major pain point for our customers. We continue to engage with government stakeholders in the wider industry to remove these restrictions and in turn, level the playing field. At the same time, we are innovating to extend our market-leading user experience and cement the loyalty and engagement of our customers. With that, I'll hand over to Pete to talk through our financial performance.
Peter Wood: Thanks, Jay, and good morning, everyone. Before I step into the financial performance for the group, let's briefly unpack the performance of each of our business units. Starting first with U.K. Consumer, net ticket sales grew 8% to GBP 2.1 billion, reflecting continued strength in leisure travel and ongoing digitization of rail ticketing. Growth was supported by further market recovery, increased industry rail fares and lapping strikes the year before. As anticipated, growth was partly offset by the first phase of Transport for London's Project Oval expansion, which launched in February and will expand further in H2. Turning next to international, where net ticket sales grew 2% year-on-year to GBP 594 million. Growth was led by domestic customers, particularly on newly aggregated routes such as the high-speed network in Southeast France. This was offset by a 2% decline in foreign travel sales, primarily given changes to Google search results page and a leveling off of inbound demand from the U.S. for European rail travel. I'll now step through the underlying drivers in more detail. This slide breaks down the different market segments across our international business with each segment including domestic and foreign travel sales. You can see that the growth rates vary, reflecting how we are actively managing marketing investments and prioritizing routes with carrier competition. Turning first to Spain and Southeast France. We grew 11% across both markets as we positioned ourselves as the aggregator of choice, partly offset by downward pressures on Spanish rail fares. These markets now represent 22% of international net ticket sales. Elsewhere in France and in Italy, growth was more modest at 3%. Within these markets, which account for 2/3 of international net ticket sales, we continue to manage marketing spend as we await further carrier competition. In Italy, that's expected to happen from early 2027 with [ SECF ] granted slots to run high-speed rail services last month. And in the rest of France, carrier competition is set to expand shortly thereafter, which Jody will discuss later. Germany and the rest of Europe were down 16%. While these markets represent longer-term growth opportunities for Trainline, we are actively prioritizing the markets that have liberalized or are set to liberalize. While changes to Google search results page remained a drag on growth in H1, we are seeing encouraging early signs of traffic building from generative engines. We are the #1 cited rail app in ChatGPT across almost all our core markets, and we are leading in citations from Google's AI overview module, significantly ahead of our other rail aggregators. As a result, sales from generative engines have grown exponentially, increasing 13-fold since Q3 last year, albeit from a low base. Let's move next to Trainline Solutions. Net ticket sales grew 18% in the half to GBP 529 million. Growth was led by B2B distribution and our fastest growing subsegment up 36%. This reflected growing demand from corporate shifting to rail travel as well as our enabling travel management companies to scale their ticket sales in Europe, including the likes of Novan and SAP Concur. Jody will talk shortly in more detail about the strong momentum this business is generating. Bringing this together, top line growth for the group was towards the upper end of our full year expectations. Group net ticket sales grew 8% to GBP 3.2 billion. Revenue grew 2% to GBP 235 million, with growth slower than net ticket sales given the previously announced reduction in the U.K. commission rate. Gross profit was up 6% to GBP 193 million, with growth outpacing revenue given lower cost of sales. Turning to costs. We delivered a reduction of GBP 11 million across cost of sales and other admin expenses, more than offsetting the impact of the commission rate cut in the U.K. Cost of sales were down GBP 6 million, reflecting a reduction in the industry costs in the U.K. Other admin costs reduced by GBP 5 million, given the successful execution of our cost optimization plan in H2 last year. These savings enabled Trainline to deploy more marketing to Southeast France as carrier competition expanded. Our profit grew strongly, outpacing net ticket sales with adjusted EBITDA up 14% to GBP 93 million. This tracked above our previously stated guidance range for the year of between 6% and 9%, and it translated into strong earnings growth with adjusted earnings per share up 27% to GBP 0.126. Underlying free cash flow generation in the half was GBP 79 million. The strength of our cash generation underpins our enhanced share buyback program of up to GBP 150 million, which we announced in September. This is our fourth consecutive program. Over the last 2 years, we have bought back GBP 250 million worth of shares, equivalent to 15% of shares issued at IPO. With the addition of our enhanced program, it would equate to GBP 350 million of capital return to our shareholders over a 3-year period, reflecting our confidence in our outlook and the strength of our business. Altogether, I'm pleased with our performance in the first half, particularly our strong earnings growth and cash generation. Looking ahead to the full year, we continue to expect net ticket sales growth of 6% to 9% and revenue growth of 0% to 3%. Given our profitability performance in the first half, we now expect adjusted EBITDA to grow between 10% and 13% for the full year, above our originally stated guidance of 6% to 9%. Thank you. And I'll now hand back to Jay.
Jody Ford: Thanks, Pete. Let's now talk about the progress we're making against our strategic priorities, starting with our U.K. consumer business. As the U.K.'s #1 travel app, our scale and user experience is unmatched. This provides Trainline with a competitive moat, which we are deepening, strengthening the loyalty and engagement of our customer base. First, we'll unlock value for customers through products like SplitSave and price prediction. Second, we solve for our customers' travel needs, including the launch of our new rail disruption features. I'll give you more details on this shortly. Third, we build trust and loyalty, scaling products like digital railcards. And fourth, we increase customer engagement, for example, expanding ancillary services we offer our customers. Let's discuss some of these in more detail. Starting with solving customer needs where we are rolling out a set of new rail disruption features. The features will support customers when navigating disruption on the rail network, leveraging the power of our AI and data tools. It will include travel forecast, which provides personalized notifications to customers in advance if their train is likely to be delayed or canceled. Customers will be able to see the location of their train in real time with a map interface powered by a signal box technology. Our forecasting capabilities will continuously improve, leveraging real-world data sources, including our base of 18 million customers transversing the rail network. Delay repay notifications, which alert customers when they are entitled to compensation. These will be an interim solution until the industry allows third-party retailers to offer fully automated delay repay. Our notifications will provide estimates of what each customer is owed plus a punch out to the relevant top website to complete their claim. Our beta test over the summer enabled the processing around GBP 1 million in compensation claims. And finally, our AI travel assistant, which offers customers a live native chat experience with real-time travel information personalized to their specific journey. Since launch, we've been selective in deploying the AI system within the app, yet it's already done strong levels of customer engagement. So far, it's had over 1 million conversations with customers, almost 1/3 of repeat users. And it's answering most queries with less than 10% handed off to customer service representatives. We'll soon to deploy the assistant more widely across the app, increasing the opportunity for customers to engage with it while also expanding its breadth of real-time knowledge capabilities. Let's watch a short video that brings to life our suite of rail disruption features. [Presentation]
Jody Ford: Comes to building trust and loyalty of our customers Trainline has cultivated strong brand affinity over many years. In fact, we are the most trusted brand in the U.K. rail. And our brand consideration is at record levels, significantly outperforming all other retailers. This has supported Trainline's continued growth in the U.K., particularly when faced with notable competition, and it will become increasingly important in an AI-driven search world. One example of how we're building customer loyalty is through digital railcards. We've enhanced our selling within the booking flow, highlighting to customers how much they could save by buying a railcard alongside their ticket. This has scaled our user base 12% to 2.5 million in H1. By doing so, we are enhancing retention of highly engaged customers who transact 4x more often than non-railcard holders. And we're gaining particularly good traction with younger cohorts. Our share of the 16 to 30-year-old railcard segment has now increased to 44%. We're increasing the opportunity for customers to engage with Trainline, broadening our range of ancillary products and services and growing additional revenue streams. These include hotel bookings and insurance sales, which grew strongly in the first half. At the same time, we are optimizing how we monetize our existing products and services. For example, this year, we are focusing on enhancing advertising revenue and in the first half, improved the positioning of ad placements within the app. Likewise, we are currently running tests for a SplitSave fee. This could present a long-term option to supersede the booking fee where SplitSave applies. Now turning to our international business. We continue to position ourselves as the aggregator of choice as European markets liberalize. Over the summer, carrier competition expanded on the EUR 1 billion high-speed corridor in Southeast France. In June, Trenitalia launched 5 return services a day between Paris and Marseille. This is already having a noticeable impact with average fares down 27% on the route. In addition, Trenitalia almost doubled their operations between Paris and Lyon to 9 services a day, and that's due to increase again to 14 services a day from December. We are positioning ourselves as the aggregator of choice on the French Southeast high-speed corridor. We are leveraging our highly rated mobile app to showcase all the fares from all the high-speed carriers with features that help unlock value for customers like TopCombo, which allows customers to stitch together different carriers for return and [ multi-leg ] journeys. At the same time, we're positioning ourselves as the partner of choice for carriers, driving customer demand and in turn supporting their growth. As you know, we paused brand marketing in France a couple of years ago. With Trenitalia's recent expansion, we resumed our efforts to grow our awareness in the Southeast. We are sponsoring Lyon-based football team Olympique Lyonnais, and we are running large campaigns in online video and [ out of home ] at stations and transport hubs around Paris, Lyon and Marseille. We already have good levels of brand awareness across France at around 28%. Our focus on Southeast France has significantly increased brand awareness in the region. Across Paris, Lyon Marseille, our blended awareness score was up 12 points this year to 48%. That's supporting strong net ticket sales growth on the Southeast network, including sales between Paris-Lyon and Paris-Marseille, up 34% in the second quarter. France is a huge rail market worth about EUR 11 billion today. It is expected to grow to around EUR 14 billion or EUR 15 billion by 2030, of which around EUR 7 billion will come from aggregated high-speed routes. We see the Southeast network as a gateway for growth elsewhere in France as carrier competition expands over the coming years. This includes Proxima, who will operate under the Velvet brand. They will run trains between Paris and cities in Western France. This will include Paris de Bordeaux, France's second busiest rail route. In addition, Le Train, ilisto and Renfe are all due to launch domestic services in France too, while cross-border carrier competition is set to arrive in 2030 with Virgin Trains set to launch. In Spain, we're evolving the balance between growth and profitability. Spain has been an ideal market to hone our aggregation playbook, while carrier competition expanded across its EUR 1.5 billion high-speed rail market. We invested behind our user experience and our brand awareness. In turn, we have scaled our net ticket sales, giving us a considerable lead versus other market aggregators, and we continue to see runway for further growth. At the same time, we're increasing our focus on driving profitability in Spain. We are normalizing marketing spend while placing more emphasis upon customer engagement and growth of transaction frequency. Likewise, we are finding new ways to help carriers to grow. We recently launched Sponsored Journeys, a paid service that allows carriers to increase their prominence within our search function. We launched our first pay campaign with [ Durion ], which has been a real success, notably increasing customer demand. Across our international consumer business, increasing ancillary revenue remains a growth opportunity. Having made good progress in hotels last year, in H1, we bolstered our insurance offering with the launch of our new trip insurance product. Often alongside our existing Cancel for Any Reason product, this drove a material increase in insurance revenues. Moving on to Trainline Solutions, our fastest-growing business unit and now generating over GBP 1 billion in net ticket sales. Business travel is our main growth opportunity here and represents around 50% of Trainline Solutions sales. This is generated through our own branded channels as well as through our B2B distribution business. B2B distribution allows travel management companies and other business travel platforms to offer rail tickets to their respective customers. Primarily a U.K. business, we increasingly support our partners to sell tickets from multiple European carriers as well. They can do that all through one simple seamless connection on global API rather than tackle the complexity of connecting to multiple different carriers. As a result, international B2B distribution grew 55% in the first half. This business has good momentum. Many of the world's largest TMCs and travel platforms are now connected to our global API and trying to grow ticket sales. And in September, we expanded our partnership with the world's largest travel management company, Amex GBT, giving us confidence in our future growth. Finally, let's discuss our Digital Pay-as-you-go solution and its new trial in the U.K. As a recap, pay-as-you-go travel provides a convenient option for short distance journeys, also known as contactless or tap in, tap out. It's well established in cities like London where it is frequently used by commuters. However, prepaid ticketing generates most of the passenger revenue for the U.K. rail industry supported by price discrimination. It's far more suitable for long-distance trains where passengers tend to book in advance to get cheaper fares and reserve their seat, and we don't expect that to change. As you know, we've developed an in-app pay-as-you-go solution called digital pay-as-you-go. It leverages our geolocation technology from Signal Box and offers capabilities way beyond traditional tap in tap out systems. For customers, this includes real-time pricing, integrated railcard discounts and the ability to buy group and family tickets. For the industry, it requires no dating infrastructure, reducing the CapEx outlay and the time needed to deploy pay-as-you-go networks. We, therefore, see digital pay-as-you-go as a better solution, which when rolled out can increase our scope to serve commuters and travelers booking on the [ day ]. In September, digital pay-as-you-go trial went live on the East Midlands rail network. This represents a strategic opportunity to test our solution and demonstrate the benefits of digital pay-as-you-go in a live environment. Of the 4 trials awarded by RGG, the East Midlands trial is the most complex given it encompasses 3 different cities, Derby, Nottingham and Leicester. While it's still early days, we are learning fast and feedback that it worked flawlessly is highly encouraging. Before we wrap up, let me play a video showing our digital pay-as-you-go trial in action. [Presentation]
Jody Ford: Before I hand over to the operator for questions, let me summarize the key takeaways from the [ heart ]. We have delivered a robust operating performance, improved profitability and strong cash flow, underpinning our enhanced share buyback announcement. And today, we've increased profit guidance for the year, reflecting our disciplined approach to cost management. Looking ahead, I see sizable growth opportunities for our 3 business units, all of which are leaders in their respective markets. In U.K. consumer, we are deepening our competitive moat, launching new rail disruption features and scaling digital railcards. In International Consumer, we are positioning ourselves as the aggregator of choice in Spain and Southeast France as carrier competition increases. While in Training Solutions, we are supporting B2B travel partners as they expand their rail travel sales across Europe. And finally, as you've just seen, we're off to a great start with our digital pay-you-go trial in the U.K., increasing our scope to grow sales of commute and short distance travel. So thank you very much for listening. I'll now hand over to the operator for questions. When asking please state your name and organization.
Operator: [Operator Instructions] Our first question today comes from Gareth Davies with Deutsche Numis.
Gareth Davies: Just -- First one from me, probably the obvious in terms of PBR consultation document this morning. At face value, it appears to tick a lot of boxes in terms of sort of level playing field and operating in a fair and transparent way on an ongoing basis. Would just be really interested to get your sort of headline thoughts on the key points that are in there and possibly anything you felt should have been covered and isn't. The second one is on the digital pay-as-you-go trial. It sounds like that's going well. Just wondering, is there any scope for that trial to be expanded and you to be allowed to use your own app and go beyond the sort of 1,000 customers that are currently doing it with East Midlands?. And then final one, just on the -- Google was obviously a headwind, particularly salient in the international business. Just wondered, now that we're lapping comps, presumably that is becoming less of an explicit headwind. Can you just give us a little update around how that's evolved? I mean, taking on board that GEO is going very well. But clearly, Google is still pretty important for international inbounds.
Jody Ford: Thanks very much, Gareth. Yes, let me start at the top there with the GBR question. And look, there's been lots of news flow over the last sort of few months and an important day today. Let me go kind of right back up to the top and just sort of state that, look, I do think we're actually many years away from a GBR app launching and the 14 different sort of top existing apps ultimately closing down and those customers having to make a choice potentially to go to the GBR app. I think what's driving this is clearly the government's desire to consolidate from a customer point of view to take 14 apps into one and also to improve from a kind of cost base point of view. And then look, just to say right upfront for everyone, we look forward to that moment when it happens. We back ourselves to compete with whatever comes. And I think if you remember where we were 3 years ago with Uber launching, there was concerns and questions, a company that had huge backing that threw a lot of money at the sort of discounting tickets and massive kind of marketing campaigns. And I think 3 years later, you can see kind of how customers have reacted in terms of the strength of the Trainline offering. So sort of to set that out right at the front. Look, as you say, what we're seeing and as I mentioned earlier, principally today is about the launch of GBR primary legislation, which is about the creation of GBR. This sort of has to happen for the government to stand up GBR because of the sort of legal, financial, operational, health and safety and indeed organizational questions that need to be answered. And so that's a lot of the sort of priority for the government and GBR. As you also referenced the consultation document that was published this morning. Look, let me share a few thoughts on that. I think overall, we do actually see that, as you suggest, there's a sort of significant step forward, both in the context and direction of travel for the government. So let me sort of pick a few parts out where it's I think are encouraging. And I just upfront for those who've not had a chance to read that yet, it talks about the creation of a GBR retail unit within the overall GBR. And I think that's important to kind of note, and the elements within that, that I think are helpful. First is it talks about within that GBR retail unit, a separation of the industry management functions from the sort of commercial functions, where the former would be a lot of the RDG existing kind of organization and managing the relationship with -- amongst other third-party retailers like Trainline, whereas the latter of the commercial arm would clearly be the arm responsible for sort of standing up the app and the website and ultimately, we would compete with them. And I think that separation is really important and very helpful. Secondly, it talks about the establishment of a code of practice of how GBR interacts with all participants, obviously, third-party retailers being really important there. And that code of practice, and indeed, we've been pushing for a codification, right, of how this would operate. And I think that will be a really important step and the fact that, that will exist is really important and ultimately enforceable under GBR's license, future license. And then finally, what we get today is sort of laying out that there's the ability for -- if we felt that GBR weren't living up to or live in that code of practice for us to challenge GBR working with through the ORR and really to effectively ensure GBR do indeed operate within an open and fair market. So I think those elements are really helpful. And it's just worth noting these set of, if you like, safeguards don't exist today. And so that feels like very helpful. I think in terms of what we still need to see and it is somewhat self-evident, like this code of practice is not yet defined. And so I would anticipate, but don't have a clear time line, that work would begin on that in the early next year. And our understanding is it would be led by the ORR working with the DFT. And I would anticipate that the CMA would have significant input into that process along with obviously ourselves and other third-party retailers. So I think all of that together provides reassurance. And I think in the way you asked the question, that's I'm encouraged by kind of all of the above with important questions still to answer. What I would just note is this all relates to future design. And as I said, I think this is sort of multiple years kind of from fruition. What's also important in the interim is, as I just laid out in the presentation that we see kind of resolution on areas like delay repay in the interim so that kind of Trainline customers have access to that kind of one-click service. And so that's gone pretty deep on kind of retail and I just spend a minute then talking about the reality of what that means for the app, which is where a lot of the questions end up going. Why do I think it's potentially multiple years away? I think there will -- the next phase and the details of this will be some form of exercise that most likely is a procurement exercise from the government around working out what they want to procure. There would then be that process complete, and there would then be a build phase to develop what would be a relatively important app that would have to sort of handle a lot of different scenarios. It can't just do what [ LNER ] does on long distance or what Northern does on regional or some of the use cases of Southeastern coming in on community. It has to serve all of those. And so what I anticipate and I'm somewhat speculating here is that there would be a period of dual running. So even once the app was created, there would be a GBR app, which will be an important political win. But ultimately, that would dual run alongside the existing top apps and at various points, they would begin to fold those apps into GBR and the customers would then have to kind of restart on the new app. And to my very first point, we're excited for that opportunity. If you kind of think forward a few years and sort of the innovation we're laying out today and think forward another 3 years, I get pretty excited about where we'll be and GBR will kind of be just starting, if you like there. So that's sort of a bit of a state of the nation, right, in how we see all of the GBR points there. And to come to your second question, digital pay-as-you-go trial. Look, of course, I hope there is scope to expand and ultimately be able to put it into our B2C app. I think at this stage, we don't have visibility of that. This trial runs through to the summer. I think it's kind of early days. The government is learning. But I'm really encouraged just to underline like how well we have brought this to life. I think there have been apps that have kind of done the fare capping and the tapping now. But no one has really brought this all together with the route planning and the pricing and I think -- and the kind of UX. And so ultimately, if the government kind of wants -- or any government across Europe wants to sort of bring this to life at scale, having in the U.K., 18 million customers to help bring this to life, I do see that ultimately, it could be in the government's interest to see the third-party retailers offering this type of functionality. So look, that is obviously the aspiration. It's probably too early to speak with any precision on that yet. And then look on kind of Google headwinds and where we're at there. And I think if we sort of stand back on the international results, it's a portfolio of businesses. And as we reported over the last couple of years, we initially kind of Google trains and then we saw this expansion of the page as kind of the AI features coming in and so forth, and we did talk about that as a headwind. I think the way to think about that is that actually impacted different GEOs at different points. And I would say in the very earliest GEOs, we are, as you suggest, beginning to see that headwind turn into a tailwind and I begin to see some green shoots in some of our GEOs coming through as we've kind of entered the half, which is helpful. We don't actually begin to fully lap all of those GEOs and some of the domestic European GEos to later in this half. And so we don't yet see that. But look, I am encouraged in the spirit of the question that I do think that headwind turns into a little bit of a tailwind. So we'll keep close to that. Thanks, Gareth, for the questions.
Operator: Our next question comes from Alastair Reid with Investec.
Alastair Reid: A couple from me as well, sort of following up on some of those things. I guess, firstly, with the consultation today, with sort of GBR ticketing not being sort of structurally and commercially separated out, do you have any sort of concerns it could lead to potentially commission rates being reduced or the ticketing having sort of less need to cover its own costs, not being sort of overtly self-funding? And secondly, I think you touched on this already. Can you give us any examples you've seen in the past where talks have changed from one provider to another and kind of what share gains you have made in those switching moments? And then lastly, just on the topic of your sort of moats that protect the business from theoretically being disintermediated by sort of agentic AI. Can you talk about is the underlying market data in the industry sort of freely and easily available to all tech firms? And, Yes, I'll leave with that.
Jody Ford: Thanks very much. Let me pick up on the first one and then you can perhaps take the second one and come back on the third. So in terms of the broader consultation and how we see the structure of that, I think kind of the direction of the question is going to the very nature of the open and fair retail. Look, we absolutely anticipate that we will be retailing on a fair basis with GBR. And I think where you're going really is the code of practice and how that is defined and we're going to have to engage and wait to see that to come through. I think what I take kind of comfort from is this statement of the value of third-party retailers and the value they've driven in terms of innovation and driving up standards for passengers. So I think that's where we now need to see that kind of actually codified out. And look, the CMA is still involved, and they will be involved going forward and they've really committed to a level playing field. But those are areas that we'll be engaged with over the coming kind of months. Pete, do you want to pick up on the second question, the provider change?
Peter Wood: Yes. We've had a couple of examples in the past, Southwest Trains becoming Southwestern Rail, Virgin becoming Avanti were both kind of moments where there were shifts, and kind of as Jody outlined, there is this moment where customers have to make a choice. And from a traffic perspective, which doesn't fully represent sales necessarily, there's been quite significant shifts in the initial kind of period of time. So look, maybe around 30%, 40% in the first 6 weeks or so is something that we have seen in the past. So yes, it really does represent an opportunity for us as these things unfold.
Jody Ford: Great. And then to come back to the point on U.K. moats and I think the role of the agentic AI. Look, what I'll do is I'll go up a level. And if I haven't answered the question, please come back because there's quite a lot potentially in that. We think about AI within the business in sort of 3 different areas. The first is how we productize AI and into the Trainline app that really speaks to things like the AI assistant and going forward. We talk about the ecosystem where it's a way to get traffic kind of another surface and then we talk about kind of productivity. I think you're really picking up on that middle one around the broader ecosystem. But just to say we're excited for the first point on productizing. Really feel like that AI is giving us kind of ability to solve new customer problems as it relates to disruption, not just around an AI assistant, but the data sets and predicting travel patterns and potential delays. That's kind of cool stuff. And I think speaking to the kind of moat point here, I just don't believe that there's many other players who can have the data and the dataset the kind of data smart and AI capabilities in our organization and the ability to invest behind it. So we're really pretty excited for where that's going. Then to the ecosystem point. And look, I'll give you my perspective on this, which is I've been doing this for well over a couple of decades now and watch various players enter the market over that period of time and work with them to develop -- as they develop sort of as traffic sources. And I think we're at that phase. And I think the announcements we have seen from ChatGPT, for example, increasingly give me that sense that they really want to ultimately send traffic to us and find a way over time to monetize it, which we think is a good thing, right, because it's much better to have 3 players kind of Google, Meta and let's say, ChatGPT that we're effectively buying qualified high-quality traffic from rather than having a single player or 2 players. And look, I do think that's going to take some time. These things, whilst we see and we spoke to the growth, it still represents less than 1% of our total traffic. And so I think it's -- I think we're talking years for these ad products to develop. I don’t think it's happening in the next few months. And so that's kind of how we view it evolving. And then I think you specifically asked about moats. And I kind of break our moat into 2 sets. We've got what I call our consumer moat and our platform moat. And you were pushing on the platform moat. But just as a sort of reminder, we have a very strong consumer moat. And I think in many things transversing technology change, the consumer moat really stands and is hugely important. And that's about the quality of our brand. It's about the sentiment that exists towards it. It's about our really deep vertical UX. And it's about the app installed base, like the fact we have 18 million users in the U.K. or 27 million across Europe means we have this really strong engaged base that will want to keep using us. And I think when you extract out and say open AI would have to develop a great vertical UX, not just in trains, but in hotels. in planes, in cars, but also in black dresses and selling drones. So it gets very complicated. And so they will definitely work with the great brands and the great UXs that exist out there. And I think that's part of the moat. And then finally to finish, in terms of that platform moat, yes, we have a huge number of data feeds that go back to the industry all over Europe. And these are kind of complex and difficult to develop, and that's part of the moat. And then we have huge commercial agreements because as you know, we're basically selling billions of pounds worth of tickets every year, and that requires bonding and obviously, a lot of due diligence. You can't just initiate these things. It's not like we're selling a few thousand pounds worth. And so that is also a moat, which makes it incredibly difficult to just start a business and then even if you were to, to make it work at scale becomes even more challenging given the sort of size of the numbers we're talking about. Thank you for the question. I hope that picked it all. The next question operator.
Operator: Our next question comes from Ed Young with Morgan Stanley.
Edward Young: I've got 2 on numbers, please, and then one on strategy. So on the EBITDA guidance upgrade, you've laid out some of the drivers of the stronger EBITDA outlook. But I wonder if you can help us understand what changed specifically since you gave the guidance in September? Is it fair to say that stronger top line has endured into H2? Or is there other moving parts that led to your change in posture there? Second of all, free cash flow growth was suppressed by working capital movement a bit in H1. Should that reverse in H2? And so should free cash flow growth mirror profit growth for the full year? And then finally, on Spain, I know you touched on it in the presentation, but I'd love to hear a bit more color about why now is the right time to move to this more balanced posture for growth versus profitability in Spain?
Jody Ford: Great. I'll let Pete pick the first 2 up and come back around on Spain again.
Peter Wood: Yes. Thanks, Ed. Yes, let me talk with the top line and then get to EBITDA. And if I think about the U.K. business, we've had a robust first half performance. And there were a few benefits, as I've kind of highlighted, lapping strikes and finally get those behind us kind of supported that figure somewhat. And we do have the headwind of over expanding as the year further unfolds. We've obviously had the first 47 stations which dropped in February. There are another 50 or so which are expected either in December or in January, and there are more later in the year. So there's a kind of headwind that's building. And I think net-net of that, I would expect H2 to be growing at a slower rate overall versus H1. Nonetheless, the EBITDA has performed well in H1 and that confidence we're kind of taking forward into H2. Of course, there will be drop-through from that performance at the top line. I think the other thing of note really is how we are thinking about marketing spend in international. In H1, as Jody outlined, we put more into supporting the expansion of the France and the Southeast corridors there. And that will somewhat persist into H2, where there's more services being run by Trenitalia. So we'll keep pushing there. But in Spain, we're kind of balancing growth and profitability. And look, if I take a real step back here, we started what, 3, 4 years ago when aggregation in Spain was clearly going to be this kind of big all-in-one go moment and we had a very small footprint there. And so we really pushed hard to build brand awareness to make the most of this kind of very dynamic moment for the rail traveling public in Spain. And we pushed hard on the marketing spend, and we've been really pleased with the strong growth that we've seen there. What we've now reached though is a point of kind of evolution where we're developing the next bit of the playbook. We're thinking about how we balance the profitability and the growth. And so we should -- you should expect marketing in international as a result of that to step down a bit in H2 and net-net will be also additive to delivering on the EBITDA guidance that we have shared today. And then your question on free cash flow growth and the working capital movement. Yes, this is always a slightly tricky one because the day of the week and the slightly odd 13 periods of 4 weeks that the settlement process in the U.K. rail industry means that we get some oddities on the 2 points in the year that you see it. Fundamentally, there is a good guide here for cash from a working capital perspective. It is typically a bit better at August than it is in February just because of the cycle of these things. But, when it's a Monday or a Tuesday, that can impact it all as well. So net-net, I don't think you should pay too much attention to the kind of puts and takes that we see at the different points in time, just believe that there is a goodness that lies underneath. And it's normally around the kind of GBP 15 million to GBP 20 million across the year that we would see on average even if that's not at that particular point in the year.
Jody Ford: Thanks, Pete. And I think Pete mostly answered the third question around Spain, but let me just give you a little bit of a strategic overlay there. As Pete said, this was a moment in time when we saw what was happening in Spain. It was -- we were almost a 0% market share. We were in a position where all the lines and all the competitors were launching in a kind of 12-month window, and we knew we had to show up there with Trainline not really having a footprint to date. And through those 3 years, we've got to having double-digit market share. And I think importantly, we are now the #1 domestic operator by a distance, significantly ahead of [ Trez ], of Omio, of Uber and any of the other players and the kind of go-to place for aggregation. And so really, we're moving to what I would call balanced growth. We're still leaning forward into Spain and invest in that, but we just don't need this kind of launch level marketing spend. And as you've seen us over the last few years, we sort of play the overall portfolio. And we're now moving, if you like, that firepower into France as that launches to ensure that we become and remain, frankly, in France, the #1 domestic operator, and it's just a moment in time. And look, you have heard as it relates to Italy, we see a huge opportunity there in 2027, and we will think about marketing there again. But we have to kind of balance the overall portfolio and have these kind of launch phases and then what I call more balanced growth phases. Thanks for the questions, Ed. Should we take another? Operator?
Operator: Our next question comes from Andrew Ross with Barclays.
Andrew Ross: I've got 3, if that's okay. The first one is to follow up on Alastair's question on commission rates. Is it completely ruled out that there will be no review of commission rates for the industry as part of the detail of how GBR kind of comes together for next year? Or kind of more broadly, where are we at on that as we kind of transition from RDG into GBR around the industry commission rate? That's the first question. The second one is on pay-you-go and I guess, scenarios as to when a kind of nationwide contract may be awarded or how this might look and kind of what it might mean for you if you were or weren't to get it? And I guess I'm thinking about kind of the incremental take rate you might achieve if you were to kind of get a broader contract and any kind of cannibalization risk to your core business that you think may or may not happen, I think maybe not given the solution will be portable into your app, as I understand it. Third question is on Agentic AI. Kind of taking your view, Jody, that it's more likely for OpenAI partner with kind of a vertical specialist like yourself, which I agree with. Do you worry about any risk to kind of time spent based monetization, things like cross-selling hotels, ads, that type of thing if we move into a world of kind of agentic transactions and booking trains?
Jody Ford: Thanks, Andrew. Look, on that first point, this is -- we've discussed kind of many times, I guess, the idea of commission rates. Look, I'll give you the overall kind of answer here. They have been reviewed, I think, 3 times in the last 20 years every time they've essentially come back and concluded we were at the right commission rate apart from, as you know, at the last time where it was a net 25 basis points impact. We feel that the commission rate is absolutely at the right level and multiple independent players, every time this has been looked at, everyone has concluded we're at the right level. And so I think that's what gives us confidence the way we operate, we have a number of years, kind of 3-plus years of confidence in our commission rate. Look, it's never off the table forever, right? But there is no discussion of that. And so I look forward, as I've always done, believing we're set at the right commission rate. Pete, do you want to pick up on the second one.
Peter Wood: Yes. I think just as a reminder, the trials that we have are kind of the first step forward. And quite deliberately, the government is testing different technologies and really seeking to learn what those technologies offer, how customers engage and relate with the different aspects of what's being tested. So we're kind of really quite early on. And whilst we see some real political support for finding a solution for this, and there's mention of this in the [ condoc ]. So that kind of gives you an indication of the direction of travel. There's a lot of detail that still needs to be worked out in terms of how this will be implemented. And as we said in the presentation, I think whilst one route might be a kind of nationwide contract, we don't think this technology is particularly helpful or is likely to be implemented for long distance travel, right? So perhaps a nationwide contract might enable a series of different cities to pick it up. But even that's not a given at the moment as to the way forward, it could be rolled out more regionally. So there's still a lot to see there. Likewise, the commercials that would sit alongside this would need work. I think it is fair to say that on the basis of kind of fair and open, we would expect if there is some sort of national implementation that even if our technology wasn't chosen, there would be some way for us to partake and offer that to customers. So anyway, a lot of details still to be worked out. We're really pleased about the progress we're making and the political support for continuing down this path. We'll have to see how it goes.
Jody Ford: And then let me pick up on this sort of Agentic AI and the sort of role of transactions. If I understood, the question was, would we lose other services if it was kind of the transaction occurred within, let's say, text interface in a ChatGPT app or something. Whilst I do see that as a use case and one could imagine certain trains being booked that way, I think we have to assume the core use case is kind of what happens on Google and on Meta. If they fully want to realize the value of that customer, then ultimately, there needs to be a high quality conversion rate. And the best way to do that is for the customer to go into, in our case, a Trainline user experience or it could be any other shopping or commerce user experience where if you think about the pages we show and the clarification of which fare you want and the flexibility of it and frankly, what [ time ] train you want and the ability then to get customer support and to get your ticket and your barcode, that's clearly better done within our app or some experience that is effectively our app. So I still envisage a world where the full experience arrives and they have given us very qualified traffic. Worth knowing that we are absolutely developing and have developed the kind of frameworks of the MCP piece to allow the AI system to engage. And you could imagine the early stuff happening, if you like, within ChatGPT, where we work with ChatGPT, if you like that and then popping into our experience to actually make the transaction come to life. But look, we're all hypothesizing of how this will look. And just to say again, it's less than 1% of traffic right now in our most sort of forward GEOs. And so I kind of feel pretty good. We've got time, I think, for just one more question, and then we'll bring to [ a close ].
Operator: Our final question comes from James Lockyer with Peel Hunt.
James Lockyer: I'll just ask 2 at this stage, based on AI. So it's good that you've spoken about 1 million conversations or over 1 million handling customer queries but less than 10% being handed over. Based on the types of questions that are being asked versus the typical questions that your human agents are getting, once mature, where might that 10% land? And what level of cost savings might you be able to realize? And secondly, can you talk about how much -- how you're using AI internally? You mentioned that you are, but it would be good to hear about what we're doing there and what’s companies thinking they'd be able to grow the top line without growing headcount as fast as they might have done without AI. Is that something you're finding too? So any ROI productivity or hiring stuff you can provide there would be useful.
Jody Ford: Sure. And given we're kind of at the top of the hour, brief answers, I guess, I'd say overall, the types of questions, what it's allowing is customers to get reassurance, things that they kind of like just didn't know how to -- is this ticket valid on this train? And they would then go and try and find station staff or ask a friend or start reading very detailed conditions. And AI is doing a really great job of that. It wasn't that they were necessarily going to customer service. But where you're going is right, I do think it allows efficiency. It allows our customer service teams to work on the higher value questions, if you like, because it filters out a lot of the ones that can easily be handled by AI. And I think, yes, where you're pushing right, it does lead to kind of greater productivity. As it relates to what we're doing internally, the lots of good stuff and yes, in terms of using the kind of copilot style tools, in terms of helping engineers code and that is definitely seeing kind of productivity improvements. And I think the spirit is to be able to do more with our existing employee base is absolutely how we're looking at it. And then just allowing other things here, we have an experimentation GPT, right, which has got now all of the experiments that we've kind of almost ever done over the last few years in one place, which can be accessed by a UX or a product or an engineering or commercial really quickly versus having to frankly call 9 different people and try and find out, which is what happens in most companies up to this point. And so we're increasingly finding those use cases, which are driving a more cohesive workforce and allowing us to kind of better pull that knowledge and be quicker in the development. So I think again where you're going, delivering more with our existing base is very much how we're thinking about it. Thank you very much for the questions, James, and thank you all for listening today. That's all we've got time for. To recap, we've had a strong first half, delivering a robust operating performance and improving profitability. And in turn, we have today improved our guidance for the full year and see sizable growth opportunities across all 3 of our business units. And I look forward to speaking to you all again soon. Thank you.