Trainline rail ticket firm in ^500m stock market flotation

[whole diary]

[Chris from Nailsea]

From the BBC^» (British Broadcasting Corporation - home page):

Trainline rail ticket firm in ^500m stock market flotation

Trainline, the online rail booking system, is to float on the London Stock Market in a deal expected to value the business at about ^500m.

The company's private equity owners, which bought the business in 2006 for about ^160m, want to list in February.

Trainline started life in 1997 as a division of Virgin Rail, selling tickets through a call centre.

The value of ticket sales last year was ^978.1m, and Trainline said its apps have been downloaded 7.4 million times.

Private equity owners Exponent, Harbourvest and Northwestern Mutual Life Assurance will sell off part of their stakes in the business.

As part of the flotation they want to raise about ^75m to pay off existing debt and settle bank costs and fees.

Clare Gilmartin, chief executive of Trainline, said: "We are witnessing continued strong growth in rail and, having experienced first-hand the transformative effect of online and mobile in other e-commerce markets, I am hugely excited by the opportunity that the fast-developing online rail market offers."

The owners of Trainline attempted to sell the business in 2012 for around ^400m, with private equity firm KKR widely reported as a possible bidder.

[BerkshireBugsy]

Out of curiosity when a company such as trainline sells tickets what is the commission model ? Is it a percentage of the ticket price or does it vary per TOC^▸ (Train Operating Company) (or a combination of both)?

[JayMac]

The following document from ATOC^» (Association of Train Operating Companies See - here) should answer your questions:

RAIL INDUSTRY COMMISSION RATES (.pdf file)

TA: Travel Agents
TMC: Travel Management Companies
BTS: A train company's own Business Travel Sales
TSA^▸ (Ticketing and Settlement Agreement.): Ticketing and Settlement Agreement (.pdf file)
RSP: Rail Settlement Plan

The Office of Rail Regulation also recently conducted a Retail Market Review. Its Executive Summary said:

While use of the railways continues to grow, the way passengers buy tickets and the format of these tickets is changing, and is set to change further. Passengers are buying more tickets from retailers that aren^t a train company. There is also increased demand, which is beginning to be realised, for smarter and more flexible ticketing. We welcome industry^s effort to respond to these changes. For the future, it is essential that the regulation and industry arrangements and practices for ticket selling keep up with this change and, in particular, enable the market to offer passengers value for money, choice and quality that suits their different needs. Our initial consideration of the retail market for ticket selling suggests that the arrangements and practices protect passengers; provide convenience and flexibility to passengers by facilitating the benefits of an integrated, national network; enable retailers to collaborate to improve their service; and provide clarity to new entrants, thus encouraging new parties to sell tickets. However, there may also be some issues with the current approach. The cost of regulation and industry arrangements to facilitate an integrated, national network don^t fully reflect those retailers who make use of and benefit from the integrated nature of the network; they may inhibit innovation at the expense of improved services to customers; they may constrain retailers^ commercial flexibility in how they sell tickets; and they may create a conflict of interest among retailers. We welcome stakeholders^ views to help us assess what^s relevant and material. We intend to follow-up with a second consultation in early spring 2015, with potential recommendations to capture the opportunities and address the issues, where necessary.

The full review can be read at the following link:
http://orr.gov.uk/__data/assets/pdf_file/0007/14596/retail-market-review-consultation-september-2014.pdf

The Association of Train Operating Companies' (ATOC) response to the review can be read here:
http://orr.gov.uk/__data/assets/pdf_file/0012/15312/retail-market-review-sep14-atoc.pdf

[BerkshireBugsy]

The following document from ATOC^» (Association of Train Operating Companies See - here) should answer your questions:

RAIL INDUSTRY COMMISSION RATES (.pdf file)

TA: Travel Agents
TMC: Travel Management Companies
TSA^▸ (Ticketing and Settlement Agreement.): Ticketing and Settlement Agreement (.pdf file)
RSP: Rail Settlement Plan

Thanks bnm - I was expectng a complex and long document but that is very clear and concise

[JayMac]

Do note my subsequent edits though. Plenty more reading if you want to!

[trainer]

As a simple soul when it comes to buying train tickets, I wonder why anyone would want to pay a charge for such a purchase when the same product is available with no charge from another retailer, the most obvious being the TOCs^▸ (Train Operating Company).  I know there are variations in charges for ticket delivery if you wish to have them sent to your home and I have decided which ones to avoid should I require that option as opposed to collecting from a machine.

Is it like the directory enquiries situation, where people use the most heavily advertised services which tend to be the most expensive, not knowing that there is a cheaper alternative?  Clearly Trainline has a commercial value (and thanks BNM for your helpful addition to my knowledge), but other companies using their systems retail without a charge.  I'd be interested in what others think.

[Tim K]

I had exactly the same thoughts - I stopped using thetrainline a long time ago because they started charging and recently stopped using redspottedhanky for the same reason.

I think it will be similar to the directory enquiries businesses, infrequent users will use the most heavily advertised services and more regular ticket buyers will use other companies which don't charge a fee.  I wonder if that's mentioned in the prospectus?

[grahame]

Interestingly, we (community in these parts of Wiltshire) played with the idea of setting up agency a la Llandrindod Wells, and Chester-le-train, as the TransWilts improvements came along.   Idea being to make a profit and plough that back into community support for the service.  One big "selling point" was local community support, another that we wondered about giving personal advise on best way to legally make a journey.  However, with potential unhappyness for official quarters if we were to recommend things like split tickets, with the coming of TVMs^▸ (Ticket Vending Machine) to a couple of stations where they've not had them, with a drop from the 9% to 5% category being probable (out of which credit card fees come), with the need for expert staff, with less income on season tickets, with significant overheads and running costs it was an idea that wasn't followed seriously through.   And, yes, postage and credit card fees would have been an option to cover the aded values of advise and to let people know they were making a local contribution.

[Brucey]

I asked my stockbroker to send through the floatation documents.  Some interesting figures in there.

Market Share:
Consumer Online Sales 38%
B2B Online Sales 41%
TOC^▸ (Train Operating Company) Branded Websites 43%

Breakdown of Net Group Ticket Sales:
Consumer 46%
B2B 23%
TOC Solutions 31%

Gross Profit:
Consumer 64%
B2B 15%
TOC Solutions 21%

This bit under "Key Risks" proved to be interesting reading

If the Group is unable to charge some or all of the booking and other fees that it charges to the customers of its Consumer business, or if such fees are subject to reduction or mandated caps, the Group may not be able to generate profit at current levels or at all, which could have a material adverse effect on its business, financial condition and results of operations.

[Timmer]

Judging by the value being place on Trainline, it would appear that the message of not being charged when you use a TOC^▸ (Train Operating Company)'s booking site regardless of where you are travelling is not getting through.

Do Trainline still provide the booking service for Virgin? That would provide a fair chunk of their profits if they do.

[Super Guard]

I asked the question once of a Director of why we don't trumpet the fact we don't charge unlike the trainline.. The response is that a TOC^▸ (Train Operating Company)'s marketing budget doesn't justify the cost that TTL pay for all their advertising.

However, I think the advertising labels that have appeared in the coaches are supposed to help advertise no booking fees.

The clever marketing from TTL gives the impression that only they have access to these magical savings...

I personally think all the TOCs should chip in and run adverts on TV with no booking fees across the UK^▸ (United Kingdom), but then I have no idea on the cost/benefit.

[Brucey]

I asked the question once of a Director of why we don't trumpet the fact we don't charge unlike the trainline.. The response is that a TOC^▸ (Train Operating Company)'s marketing budget doesn't justify the cost that TTL pay for all their advertising.

However, I think the advertising labels that have appeared in the coaches are supposed to help advertise no booking fees.

Southern tried something similar on-board their trains.  This also extended to a message on the PIS^▸ (Passenger Information System) display, including the website address and the comment that there are no booking fees.

I have also seen similar "targeted" ads online boasting that Southern don't charge booking fees.  Not seen anything recently though, so I question whether it was a success.

[ChrisB]

I suspect that there may be some 'agreement' between the TrainLine (who run the TOCs^▸ (Train Operating Company) ticketing sections of their websites) & the TOCs about the TOCs not blatently advertising no booking fees. But I could be surprised and be wrong. Otherwise, why haven't they done so? It's a no-brainer.

[JayMac]

CrossCountry, a trainline customer, are quite blatant in their 'no booking fees' advertising. Such a strapline appears on all their advertisements for their online booking service.

I do find it mildly amusing when TOCs^▸ (Train Operating Company) say things like, "we won't charge a booking fee" in their advertising. The truth is they can't. The Ticketing and Settlement Agreement, which all operators have to abide by, expressly disallows them to charge booking fees for ticket retailing through any medium.

[Super Guard]

I suspect that there may be some 'agreement' between the TrainLine (who run the TOCs^▸ (Train Operating Company) ticketing sections of their websites) & the TOCs about the TOCs not blatently advertising no booking fees. But I could be surprised and be wrong. Otherwise, why haven't they done so? It's a no-brainer.

It's a no-brainer if you have the same marketing budget as TTL.  Company with short-term franchise extension vs company with long term business plan likely to yield different figures don't you think?