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The London and European markets ended this week on an upbeat note as the market sentiments were optimistic with reopening of economic activities, signs of improving China-US relations and inspiring China’s export data. Following the optimism, the travel & leisure stock, Trainline PLC (LON:TRN) surged 8 per cent, while antennas manufacturer MTI Wireless Edge Ltd (LON:MWE) remained flat against the previous day closing (at the close of trade as on 7th May 2020). The big leap of Trainline was coupled with its full-year 2020 results, reflecting a solid financial performance, which was ahead than expectations. Further, the TRN unveiled the actions taken to navigate COVID-19 disruption for growth in the long run. Meanwhile, both the Companies have delivered decent revenue growth in the financial year 2019. Let’s dive through their operational and financial performance to throw light on the outlook and prospects.
Trainline PLC – Sustainable Business Model with Decent Revenue Growth Trajectory Reported
Trainline PLC (LON:TRN) is a travel & leisure company providing a platform for independent rail and coach travel with an aim to make travel easier. The group also encourage its customers to make travel choices which are more environmentally sustainable. The group is working in sync with governments from different countries globally to reduce emissions from transport and making public transport better with increased investments.
(Source: Company Website)
The group provides access to train and carriers to millions of customers worldwide with consistent, friction-free, and easy travel experience. The company has a unique travel information system which used AI and offers a one-stop-shop for travellers. The group provide its services to customers from the UK, International and businesses. The company sells rail tickers on behalf of UK rail carriers and has partnered with major European rail carriers and JTB to offer rail passes in the Japanese region.
At Present, Trainline operates in 45 countries, offering services to 270 carriers in 14 languages support and accept payments in 10 currencies. The group has partnered with many big carrier providers, which include, DB, Eurostar, national express, Southern, OBB, Thalys, Flixbus, Ouibus, Trenitalia, GWR, Renfe, Virgin trains, Italo, SNCF, and West Bahn. The company’s business model gets support from the two-sided network.
Strong Top-line Performance for FY2020 (29 February 2020)
- For the financial year ending 29th February 2020, due to increased adoption of eticket in the UK resulted in a surge in mobile demand, the net ticket sales stood at GBP 3,727 million versus GBP 3,194 million in the financial year 2019, reflecting an increase of 17 per cent for the period.
- Driven by an increase in the net ticket sales growth by 17 per cent, new revenue streams loss and optimisation in the revenue for the period, the group’s revenue surged by 24 per cent to GBP 261 million in FY2020 as against GBP 210 million in the financial year 2019.
- Driven by an operating leverage achieved around its cost base and growth in volumes, the adjusted EBITDA surged significantly by 62 per cent from GBP 53 million in the financial year 2019 to an adjusted EBITDA of GBP 85 million in the financial year 2020.
- Due to an increase in the IPO related exceptional costs, the group’s operating profit declined by 78 per cent to GBP 2 million in the financial year 2020 from an operating profit of GBP 11 million in the financial year 2019.
- The adjusted basic earnings per share surged by 5.6 per cent to 8.1 pence in the financial year 2020 versus adjusted basic earnings per share of 2.4 pence in FY2019. The reported basic loss per share stood at 17.7 pence in the financial year 2020 versus a basic loss per share of 3.3 pence in the financial year 2019, reflecting a decline of 14.4 pence for the period.
- Reflecting reduced capital expenditure and strong adjusted EBITDA, the operating free cash flow surged by 39 per cent to GBP 59 million in the financial year 2020 from GBP 42 million in the financial year 2019.
- Driven by strong cash flow generation and IPO primary proceeds benefits, the leverage reduced from 3.7x in FY2019 to 0.8x in FY2020.
(Source: Annual Report, Company Website)
Share Price Performance
Daily Chart as of 7th May 2020, after the market close (Source: EODHD/Others, Thomson Reuters)
On 7th May 2020, shares of Trainline Plc closed at GBX 378.00, up by 8 per cent from the previous day closing price. Stock's 52 weeks High is GBX 559.58 and Low is GBX 187.20.
Decent Progress in Strategic Priorities and Actions taken to Mitigate Covid-19 Impact
The company has made decent progress in its strategic priorities for the period. To enhance the customer experience, the company launched the split-ticketing feature in its mobile app, which resulted in strong conversion growth in UK Consumer and International markets. The group witnessed an increase in monthly visits by 19 per cent to around 90 million with an increase in mobile transactions by 10 per cent building strong demand. Driven by ancillary revenues, the company increased its take-rate by around 40bps and 110bps in UK Consumer and International businesses, respectively. The company made progress in T4B (Trainline for Business), and its First clients came live on its Global API platform. Due to the outbreak of Covid-19, the group operations were impacted significantly in the Q1 FY2020 and passenger volumes declined by over 95 per cent due to imposed travel restrictions and lockdowns across multiple regions. The company has liquidity headroom of around GBP 150 million in the May end and approximately GBP 8 million – GBP 9 million of monthly cash outflow.
MTI Wireless Edge Ltd – Business Operations Spread Across Multiple Regions
MTI Wireless Edge Ltd (LON:MWE) is engaged in the business of designing, developing, and manufacturing of antenna systems for wireless markets. The group’s product range is used for commercial use, military use and for RFID tracking. The company has its operations in multiple geographic regions, including Africa, Asia, Europe, Australia, New Zealand, the middle east, North America, and South America. MTI has collaborated with Nokia to develop innovative antenna systems with multi-band for 5G networks.
MTI Wireless Edge announced that its subsidiary company Mottech (Mottech Water Solutions Ltd) had secured a contract in East China-based landscape project for more than USD 300 thousand. The group’s total orders, including other small orders earlier received stood at around USD 0.5 million from China at the end of April 2020.
(Source: Annual Report, Company Website)
Decent Financial Performance for the Financial year 2019
- For the financial year ending 31st December 2019, the company delivered strong growth in revenue and surged by 13 per cent to USD 40 million as against USD 35.5 million in the financial year 2018.
- The group’s PBT (profit before tax) increased by 29 per cent to USD 3.4 million in the financial year 2019 versus a PBT (profit before tax) of USD 2.65 million in FY 2018, reflecting improved profit margins and increased scale benefits.
- The earnings per share stood at 3.27 US cents in the financial year 2019 versus earnings per share of 2.70 US cents, reflecting an increase of 21 per cent for the period.
- The operating cash flow stood at USD 5.6 million in FY2019, and net cash surged to USD 7.7 million for the period.
- The shareholder’s equity increased to USD 22.3 million as on 31st December 2019 from USD 20.6 million as on 31st December 2018. The dividend per share stood at $ 0.02 for the period.
(Source: Annual Report, Company Website)
Share Price Performance
Daily Chart as of 7th May 2020, after the market close (Source: EODHD/Others, Thomson Reuters)
On 7th May 2020, shares of MTI Wireless Edge Ltd closed at GBX 38 and remained flat the previous day closing price. Stock's 52 weeks High is GBX 43.00 and Low is GBX 20.47.
Growth Drivers for Operational growth and long-term outlook
The group witnessed strong demand for products and solutions across multiple sectors and geographic regions. The macro trends provided support to growth in the financial year 2019 and are expected to continue in FY2020 and beyond. Due to water shortages and climate change, the demand for water management solutions by Mottech increased, and military antenna sales and solutions increased, reflecting an increase in global defense spending. As the mobile operators move to next-generation networks, the demand for 5G backhaul antennas by MTI increased by large OEM suppliers. MTI Wireless Edge acquired 50 per cent stake in Australia based Parkland and is assessing other acquisition opportunities for increasing the value for shareholders in the long-term.
