Good morning, everyone. It's is great to see you all in person, and thank you for joining us today for our full-year results presentation. I am Jody Ford, CEO of Trainline, and I am joined by Pete Wood, our CFO. Let us first go through the disclaimer. Onto the agenda for today. First, we will recap on the year and then discuss our strategic growth priorities. That will include a deep dive into the international opportunity. After that, we will open to the floor for questions. This year, the group delivered a record operating performance. We grew net ticket sales 12% to GBP 6 billion, and also revenue 12% to GBP 442 million. In the U.K., net ticket sales were up 13% as we continued to drive the adoption of digital tickets, with e-ticket penetration rising to 52%.
In international, we further position Trainline as the aggregator of choice, particularly in Spain, where sales have almost tripled over the last two years. In Trainline Solutions, we are scaling our global API with sales from international B2B distribution up 63%. Our strong top-line growth, together with the benefits of operating leverage, resulted in a 30% increase in adjusted EBITDA to GBP 159 million. We are Europe's number one rail app, having built a market-leading user experience and a significant customer base. As we have previously flagged, there are a few near-term headwinds, and people talk about those later in more detail. I want to make it clear upfront that our strategy remains strong. We are building long-term value, adapting quickly to the changing e-commerce landscape while staying focused on the significant long-term growth opportunities ahead.
These include deploying our aggregation playbook on routes across Europe as they open to carrier competition, helping us scale our base of 27 million customers. Rolling out innovation like digital pay-as-you-go, where we have a solution ready ahead of pilots in the U.K. later this year. Growing B2B sales internationally through our global API. Leveraging AI, which has the vast potential to transform our user experience. With our scale and our leadership in product and tech, we are in a compelling position to capitalize on these growth opportunities. Before I hand over to Pete, let me discuss the regulatory backdrop in the U.K. It has been more than two months since the government published its wide-ranging consultation document, the precursor to its railways bill. This clarified that the government is considering replacing TOC online retail sites with a single public sector app and website.
However, it also made an unequivocal commitment to a fair and open retail market, while expressing the fundamental role that independent retailers play, which we welcome. Since its publication, we've had time to reflect and decide how best to respond. Alongside other independent retailers, we are taking an increasingly assertive stance to ensure the U.K. government delivers on its commitment to a fair and open retail market. This includes escalating issues that prevail today, including examples where operators self-preference their own channels so that they don't persist in the future. At the highest level, we expect level playing field safeguards for independent retailers. Such safeguards are typically seen in other regulated markets in the U.K., including telecoms, water, and energy. Our view is supported by the CMA, who advocate for building these safeguards into the design of the future retailing market.
With that, I'll hand over to Pete to talk through our financial performance.
Thanks, Jody, 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 13% to GBP 3.9 billion, an outperformance versus expectations and the main driver behind our increasing guidance during the year. This was partly driven by our success in growing e-ticket adoption, particularly for on-the-day travel. E-tickets now represent 52% of all industry sales. It was further supported by increased industry rail fares, a market that's returned to normal, and less impact from rail strikes. In February, we saw the first phase of Project Oval, the expansion of TFL's contactless zone. Rolling out over the next year or so, in total, we estimate Project Oval will put GBP 150 million of our sales at risk. Despite that, we continue to expect good growth in the year ahead.
Turning next to international, where net ticket sales grew 4% to GBP 1.1 billion. Within that, different markets grew at different speeds, aligned with their degree of market liberalization. Web sales remained subdued, given further changes to Google's search results page. Let's spend a couple of minutes unpacking these points. This slide shows the different market segments within international. Note each segment includes domestic and foreign travel sales. As you can see, their respective growth rates vary as we actively manage marketing, focusing investment on the routes with carrier competition. This is most evident in Spain, which represents around 15% of net ticket sales and grew 41%. Across France and Italy, which represents around 70% of net ticket sales, growth was flat as we await the arrival of further carrier competition, while non-core markets like Germany and the rest of Europe were down 6%.
This year, Google made further industry-wide changes to its search results page. This further suppressed organic results while increasing the prominence of paid ads, in turn impacting web sales. Web sales represents around 30% of all international transactions, though higher in foreign travel and lower in domestic. Alongside the post-COVID surge in inbound travel leveling off, particularly from the U.S., this resulted in foreign travel sales reducing 2 percentage points year on year. However, we are proactively responding to these changes, bringing customers direct to our website and app by investing in brand and doubling down on our own channels, including CRM, and increasingly utilizing affiliates and partnerships. Now turning to Trainline Solutions, which grew 20% to GBP 941 million. As a reminder, this business unit provides B2B retailing capabilities to rail carriers and other travel platforms. Its growth was led by B2B distribution, up 25%.
This was particularly the case in Europe, with international sales through our global API up 63%. This reflects travel management companies realizing the benefit of aggregated supply through a single API. We also saw strong growth in white-label carrier sales, supported by feature releases and market recovery. Bringing that together, the group delivered another strong set of results. Net ticket sales increased 12% to almost GBP 6 billion, and revenue grew by 12% to GBP 442 million, as non-commissioned revenue generation offset the dilutive effect on our take rate from faster growth in on-the-day travel in the U.K. This included hotel bookings and insurance sales, which together more than doubled year on year. Gross profit was up 15% to GBP 352 million. This outpaced top-line growth, in part due to a reduction of the fulfillment fee we pay in the U.K. to the industry when a customer uses a barcode ticket.
Marketing costs increased 5% this year to GBP 71 million, and other admin costs were up 6% to GBP 122 million. Bringing this all together, you see the benefits of operating leverage. Adjusted EBITDA grew 30% to GBP 159 million, outpacing both net ticket sales and revenue growth. Adjusted EBITDA, as a percent of net ticket sales, increased 39 basis points to 2.69%, a significant margin expansion. Strong EBITDA growth is translating into strong EPS growth. Adjusted EPS of GBP 0.19 was up 56% year on year, and 2.5 times higher than it was two years ago. At the same time, the business is generating strong cash flows. Operating free cash flow grew 20% to GBP 110 million, driven by increased EBITDA. This was partly offset by a GBP 43 million capex charge, reflecting our continued investment in product and tech innovation, as well as working capital movements.
As we generate cash, we continue to return excess capital to shareholders, with GBP 154 million of shares repurchased and cancelled as at the end of April. In March, we commenced our third buy back program, committing to buy back up to GBP 75 million of shares in 12 months. As we grow, we increasingly benefit from operating leverage. Our cost-to-income ratio fell 11 percentage points in two years against the backdrop of continued investment in international. Next year, we will see the benefits of our cost optimization plan, which we announced last November and completed in Q4. As a reminder, this exercise delivers GBP 12 million of annual cash savings, GBP 8 million from operating expenses, and GBP 4 million from CapEx. That said, we expect total CapEx next year of around GBP 50 million, which will include one-off costs from relocating our London office.
In the year ahead, we expect our growth to continue despite flagged headwinds, including the ongoing impact of Google search changes in international. While domestic rail travel continues to demonstrate resilience, as in previous economic downturns, recent macro uncertainty is impacting foreign travel, including U.S. inbound. We therefore expect net ticket sales to grow between 6% and 9%. Given a reduction in the U.K. commission rate, as announced in 2022, we expect revenue to grow slower than net ticket sales in a range between 0% and 3%. However, despite that, we expect adjusted EBITDA to grow broadly in line with net ticket sales at a rate of 6%-9%, reflecting the benefit of operating leverage and our cost optimization exercise. Thank you, and I'll now hand back to Jody.
Thanks, Pete. Let's now talk about the progress we're making against our strategic priorities, starting with our U.K. consumer business, where our priorities are to grow supply, provide customers with an excellent user experience, build demand, and increase customer lifetime value. We are proud to be the U.K.'s number one travel app. However, we're not standing still. We continue to invest in our proposition, enhancing how we help customers and, in doing so, deepening our relationship with them. We particularly focus upon unlocking value, making it quick and easy to book, particularly on the day, helping customers navigate rail disruption, and increasingly using AI to supercharge the experience. We continue to innovate and scale our range of value-saving products and features. This includes digital railcards. We grew our base 9% this year to GBP 2.3 million. Within that, our share of railcards of 16- to 30-year-olds reached 43%.
This is notable, given railcard users are typically amongst our most frequent and loyal customers. By storing their railcards in our app, we make it easier for them to save up to a third on travel while encouraging them to stay within the Trainline ecosystem. We're also the home of SplitSave, where we help customers save GBP 13 per booking on average. We continue to grow the routes where we offer splits, which are now available on 88% of the U.K. network. We launched our new app home screen, which makes it easier to search and quicker to book, reducing time to purchase by 36%. This is encouraging customers to book more of their on-the-day travel through Trainline, supported by our best price guarantee. While making it easier for customers to search and purchase tickets, our app helps customers navigate rail disruption too.
Two out of three customers in the U.K. say they have experienced disruption when traveling by train. Our app serves as a travel companion, providing features like real-time delay and disruption alerts. Soon, we'll have notifications to inform customers if they're entitled to delay repay compensation. Now we are transforming our travel companion experience. We are introducing the new AI Travel Assistant, giving customers their own rail expert in their pocket. It's just been rolled out to all iPhone users, and it includes real-time travel and disruption information, personalized for the customer's specific journey. It is not just a chatbot. Our assistant gets things done. It performs tasks on behalf of the customer, such as processing refunds, saving them time and hassle. In fact, we see the Travel Assistant as a key differentiator for Trainline. This is just the start.
The AI Travel Assistant is underpinned by a scalable agentic AI system built on proprietary multi-agent architecture. As it expands, we will build more agents to handle more tasks. This will include a disruption planning agent recommending alternative routes for the customer to get from A to B. We're also exploring how we can use AI to build customer demand. We're running a small trial with OpenAI to integrate into their ChatGPT operator tool. It provides a valuable learning opportunity, particularly given the potential for AI to revolutionize organic search. Moving on to building demand, under our Great Journey Start with Trainline campaign, we highlight to customers how we can help them find the best value rail tickets. Our campaign tends to focus on younger audiences and hero rail as a more sustainable way to travel.
This year, our I Came By Train initiative partnered with several Premier League football clubs, as well as Glastonbury, allowing fans to access discounted travel through Trainline. As a result, our customer base has grown from 15 million to 18 million in two years. As we grow our customer base, we are increasing the frequency in which they transact with us. Monthly active customers now transact 2.8 times per month, up from 2.6 times two years ago. This reflects our focus on commute and short-distance travel, with on-the-day bookings now representing more than two-thirds of all the transactions in the U.K. That is driving strong growth in net ticket sales, as Pete outlined earlier. Moving on to Trainline Solutions, but sticking with the theme of commute and short-distance travel in the U.K., our digital pay-as-you-go solution offers another way to grow in this space.
It leverages geolocation technology we acquired through the Signalbox deal. Given its app base, it can offer capabilities not typically available through traditional tap-and-go, like integrated railcards, real-time pricing, and family tickets. We are bidding to participate in RDG trials running later this year. We hope these trials will offer us a great opportunity to ready our digital pay-as-you-go solution for the mass market. Within Trainline Solutions, business travel represents our biggest growth opportunity. We estimate business travel in rail to be worth about EUR 6 billion across our markets. We focus on growing business travel sales through our own branded channels, as well as through our B2B travel partners, leveraging our global API. The global API gives partners the ability to offer European rail options to their customers through one simple, seamless connection, rather than tackle the complexity of connecting to multiple different carrier APIs.
Many of the world's largest B2B travel providers and platforms have already connected to our global API, accessing its rich feature set and content options. Sales are beginning to scale, with international B2B distribution up 63% this year. It is helping to take more share in Europe, adding another 10% to international overall sales. Now, turning to our international business. Our growth in Europe depends upon liberalization, and significant proof points unfold. The aggregation opportunity, I'm more confident than ever it will enable Trainline to win in Europe. Let's start with Spain, Europe's most liberalized rail market. There are now four carrier brands competing across the top five high-speed routes, following Ouigo's launch on the southern corridor. New entrant competition is coming to France and Italy too. In France, liberalization is due to arrive in three waves.
Wave one starts next month, when Trenitalia expands its presence on the South-East network. Following that, Renfe are due to launch services too. For context, the South-East network is worth more than EUR 1 billion, which is around two-thirds the size of aggregated routes in Spain. The second wave will arrive from around 2027 to 2028. Three new carrier brands are to launch high-speed domestic services across France, liberalizing a further EUR 1.5 billion of routes. The new challengers are already ordering rolling stock and obtaining the regulatory clearances needed to operate services in France. In the third wave, several new entrant challengers are also planning to launch services on the lucrative EUR 1.7 billion channel-tunnel network towards the end of the decade. This includes London to Paris, a major cross-border route that until now has been held back by relatively high fares.
The three waves of liberalization are expected to transform the French rail market, providing a growth runway for Trainline into 2030 and beyond. Similarly, in Italy, carrier competition is expected to ramp up in the next couple of years. Today, two carriers run service on its EUR 2 billion high-speed network. However, experience shows us that aggregation flywheel really starts to spin when three carriers compete. As such, we see SNCF's planned launch nationwide from 2027 as a pivotal moment. Today, the combined rail market of Spain, Italy, and France together are worth about EUR 17 billion. Within those markets, liberalized high-speed routes account for around EUR 4.5 billion. By 2030, we expect our core markets to grow to around EUR 23 billion, providing considerable headroom. Over that same period, we expect liberalized high-speed routes to scale to around EUR 12 billion, creating a significant catalyst for growth.
Let's discuss how we plan to leverage this growth opportunity, starting with Spain. Liberalization has transformed the Spanish high-speed rail market. In just a few years, new entrants have expanded across the high-speed network. Of the top five routes, new brands have taken about 50% share. Average fares have reduced by 45%, while industry passenger volumes have increased by 80%. During this period, we have honed our aggregation playbook in Spain, where we: one, rapidly add new inventory, including most recently Ouigo's service on the southern corridor; two, make it easy for the customer to find the best value option and make the right choices. Three, build demand and grow awareness, particularly in cities served by the new services, like our recent sponsorship of Seville-based football club Real Betis.
In Spain, our brand awareness is now almost four times larger than it was three years ago, and four, increase customer engagement, growing transaction frequency, integrating non-aggregated routes such as the Circunes network, and growing retention, with repeat customers now making up 54% of our sales in Spain. As we position ourselves as the aggregator of choice, we are also creating the virtuous cycle of the marketplace. As we add more inventory, we become more attractive for passengers, generating incremental demand. As we generate incremental demand, we become increasingly relevant for rail operators. In Spain, we have gone from having next to no footprint a few years ago to now being the carrier's number one retailing partner by sales. As you can see, we have grown our share across the top five high-speed routes from 5% to 12% in two years.
Over the same period, we have almost tripled our net ticket sales, making Spain a EUR 200 million business. This provides a positive read across to France and Italy, where our app is primed and ready to aggregate all new entrants, bringing clear benefits to our customers who can search all the options to find the best value. Through TopCombo, they can stitch together different carriers for return and multi-leg journeys. They can rely on our Travel Companion features and post-sale support, too. Likewise, we start in a strong position in both markets. Our customer base in both France and Italy is bigger than in Spain. Likewise, we already have strong brand recognition and trust scores, so we do not have to start from a low base like we did in Spain a few years ago.
All of this gives us confidence we can scale quickly in France and Italy as they liberalize. Before we finish up, I'd like to spend a few minutes discussing France's South-East network, our next aggregation opportunity. In the next couple of months, new entrant Trenitalia will almost double its current service between Paris and Lyon, the busiest domestic route in France. They will launch four daily services on Paris to Marseille, France's third busiest domestic route. Thereafter, there are more carriers set to launch, including the Spanish operator Renfe. To date, we've made good progress on Paris to Lyon, with sales up 58% over the last two years. Ahead of Trenitalia launching new services, we are seeing encouraging pre-sales across the South-East network. We have strong brand awareness across all three cities, notably more than 45% in Paris and over 50% in Lyon.
Having paused brand spend in France two years ago, we are now increasing our investment to further grow awareness in the region. This includes our recent sponsorship of Olympique Lyonnaise Football Club. Before we open the floor for questions, let me recap on some key takeaways from today's presentation. This year, we have once again delivered strong growth, outperforming our original expectations while increasingly benefiting from operating leverage. We have made further good progress against our strategic growth priorities. In the U.K., as the number one traveler, we continue to invest to drive adoption of rail travel and digital ticketing. We are taking an increasingly assertive stance with government to ensure it delivers on its commitment for a fair, open, and competitive future retail market.
In international, we are positioning ourselves as the market aggregator, particularly in Spain, the most liberalized rail market, where our net ticket sales have almost tripled in two years. This creates a highly positive read across for when we deploy our playbook on high-speed routes in France and Italy as they liberalize over the coming years. Next up will be the South-East network in France, where we already have a great starting position and are generating positive pre-sale numbers. Looking beyond that to 2030, we expect liberalized high-speed routes across our core markets to be worth EUR 12 billion, providing a significant catalyst for Trainline's growth in Europe. Thank you very much for listening. I'll now open the floor for questions. Raise your hand if you'd like to ask a question. When asking, please state your name and your organization.
Thanks. Good morning. I'm Alastair Reid from Investec.
Three from me, please. Firstly, you've obviously given us a sense today of the kind of addressable market in Europe on those liberalized routes. Can you talk a little bit more about sort of market share? I think you've cited your sort of 12% in Spain. Is that a sort of sensible, realistic sort of aim for sort of that market as a whole over that period, or maybe you'd hope for more? Secondly, in terms of kind of more recent trends, whether it's with the impact of Google on international or maybe a sort of weaker dollar on sort of foreign travel, just give a bit of an update on sort of the latest trends you're seeing, any signs of improvement or worsening in those.
Lastly, sort of longer term on the regulatory front in the U.K., could you give us your latest thoughts on what a financially independent, standalone GBR app might do in terms of future reviews of your commission rate? Thank you.
Great, great set of questions. Why don't we start, and I think we'll tag team through what is going to be a long set. I guess the first point around market share across those markets, yeah, 12% is the average of all of the routes that we operate on in Spain. Some of those routes have been more mature and have had more competition for longer, particularly as you look out to kind of Valencia and Madrid, Barcelona. We see a higher market share in those routes.
We think we've previously talked about 16%, which we've seen nudge upwards. I think that when we think about our ambitions and expectations, we talk about openly within the company of getting beyond 20%. I don't think that's at all ridiculous. That's very much our ambition, and then pushing beyond 20%. Obviously, it depends on the maturity. It depends on the intensity of the competition. Overall, that's certainly what we talk about. I would be looking for those sorts of numbers down in the Southeast corridor again. In terms of the latest trends and in terms of kind of Google and what that looks like, I'll sort of do a little bit of a step back here. I think it's probably worth talking a little bit about AI.
Pete, maybe you can pick up on what we're sort of seeing day to day. I think what's going on here with regard to Google, and it's not just happening in rail or travel, it's kind of happening across e-commerce, right? You're seeing the search page on Google having significantly more AI features. It's not just about a rail module. That's meaning that there is a sort of SEO is being pushed down the page. I think what's pretty interesting and exciting for us is that we are indexing very well on those AI new kind of areas that Google is indexing. As we look at the data, which we're now beginning to report, we see ourselves as the number we can now compare ourselves to competition.
We see ourselves as the number one in Europe in terms of the number of clicks we're getting from those pages. That's really a function of two things. One is our on-going SEO authority. We've always been strong at SEO. As you know, we've generally been number one in the U.K. always, but generally number two in any European market behind the incumbent. The other thing they index against is content. We have really significant, fantastic rail content. That is meaning in some markets, we're now indexing and getting more clicks than the incumbent themselves because we're kind of ahead of this. Actually, whilst it's not yet kind of meaningful at a great scale, it's 3x'd since January, the number of clicks we're getting. It's growing very, very fast.
It's the sort of thing I think within the next 6-12 months will become meaningful at a kind of SEO scale as that grows faster. That is really encouraging. I think the other thing just to mention here would be ChatGPT. We are increasingly seeing clicks come through from other LLMs and ChatGPT being the lead there. That is growing fast. Over the last six months, we again see very strong growth there. Actually, we see opportunity here. It's a way to differentiate ourselves versus the other players where scale, again, helps you index here. Pete, I'll let you talk a little bit about all of this.
I think it's worth remembering that the majority of our business is through app, right? In the U.K., that's north of 90%. In international, it's 70%.
The web bit is it impacts us, but it is the minority there. Really what we're doing is where we are investing in Google, we're still looking to iterate and improve the efficiency that we have got there. CPAs, as a result of there being more ads at the top of the page and SEO being suppressed, there is pressure, upward pressure on the CPAs that we're facing right now. It is a question of diversification. Where we've got opportunities to lean in in brand, where we've got good signals that it's working well, we're exploring how we might go and do more there. Partnerships and affiliates have been a good source of diversification. It allows us to get into, say, young audiences. We'll continue to explore that as well, as well as looking at other channels like CRM.
As Jody said, we're kind of pivoting our SEO efforts into generative engine optimization at this point as well. That's kind of we're rolling with the evolution that's unfolding in front of us. As that relates to foreign travel, which you mentioned, of course, they typically are doing—they're a bit more web-based in general. They're doing more research about what their trip to Europe might look like. There's a kind of the impact is felt a bit more keenly there. It's great that we're seeing traffic build from ChatGPT and others as well. We are beginning to capture some of that demand shift.
If I take the third question on really GBR, it's probably worth a bit of a standby because there's quite a lot in this space.
I'll kind of give you a high-level view, and then we can dive into what it might look like as financially independent and any commission implications. I think just stepping back, we have faced a number of different competitors over the last decade. Most recently, Uber coming into the market, what, nearly three years ago now, that's a very well-funded West Coast tech company which has got its kind of the number two travel app, has got a large user base. After almost three years, we see them, we still triangulate at less than 2% in terms of market share. That kind of gives me huge confidence.
We can compete with kind of whatever comes of this, including a GBR app, the kind of combination of our kind of 18 million customers, the trust in the brand, the app UX, the broader ecosystem we've got around kind of railcards and features, and the broader personalization coupled with being able to do the things we're talking about around AI. I think it's important you hear that from me. As we think about GBR, just to give a little bit more color on this level playing field and where we get to, what the government have clearly said already is they've committed to an open and fair kind of competition in third-party retail. I think what we're pushing for now is the codification of what that means.
We very much talk about a separation between the rail operator and then the GBR retailer, which is, I think, where the question's going with no cross-subsidy, and have an expectation equally of parity of access to all of the fares and all of the services. When we talk about being kind of more assertive, if you like, here, there have been increasingly kind of abuses of what we consider that open and fair basis. Things here I'm talking about are like access to one-click delay repay, where we believe, obviously, that Trainline customers should have access to that. Expect us to be pushing the government, as in the near term, frankly, to get to a position where that truly is level and fair. I think more broadly, we're not going to stand still. We will keep pushing, as you see here today.
We do not know how many years away the GBR app could be. Our expectation is that it is ultimately a way in terms of where you are going, independent and standalone, and having to operate within the same commission structure that we and all other third-party retailers are needing. I think standing back on all of that, we will continue to invest, we will continue to compete, and we will wait and see exactly what comes from GBR.
Great. Peter? Yes, please, just for the pool. Thank you.
Hi, Peter McNally from Stifel. Just following on that last one. Look, the pay-as-you-go backbone is going to be, what, 2027 maybe by its completion date. Once we get there, what is your consumer value proposition? Because, I mean, historically, it has been ease of use and value.
Now, if GBR has an app, they obviously won't market it probably as much as you guys will. If it's there, how will it, what's the value proposition to the consumer at that stage? The second question is customer data. I mean, I think one of the reasons the government wants to have an app is so it can collect more customer data to provide better service. Do you plan to share customer data with the government? Is that one of the reasons, or is that something that you would consider going forward, or do you have a view on that? The third question, just on marketing. You've waited for carrier liberalization for some time. At what point, because you know it's coming, did you just say, "OK, let's just go for it"?
Sure. I'll deal with the first one.
Pete, you should come in on this one. I think there are sort of two parts to break off here. Are you referencing pay-as-you-go? If we sort of forward out, we do not really know how that landscape is going to expand. We have been pretty clear that there is GBP 150 million sort of at risk, if you like, from the tap-in, tap-out pay-as-you-go that many people in this room will use to get in and out around London. That expands to a certain point. I do not expect it to expand further than that. What that does well, I think, is for commute. It is an ease of travel where you have high confidence for many other users and pretty much all leisure users.
When you think about using it with your family, when you think about railcard users, and when you think about being in control of what can become by the edge of that zone, maybe GBP 50 return, that does not really work for most people. That is why we have invested in our digital kind of app-based pay-as-you-go platform. We think that has got a very strong kind of value proposition for, if you like, all of those users and for the rest of the country. The proposition for, if you like, the government and GBR and kind of the treasury in many ways is the cost to roll that out is nothing like as high because you do not need gates. You can do it all kind of location-based. That is why we think that is so interesting. We have seen that technology in various other European markets begin to take off.
It gives the customer control. It allows them to get the value and helps drive travel. It actually gives the government a real sense of understanding in terms of what's going on to your later point around data. I think it's a kind of the commute and the smaller, shorter-distance regional market. I think just because I think there's a risk of conflating it with a broader point vis-à-vis the GBR app, there are lots of apps out there that already sell tickets. I think the Trainline value proposition sits very clearly on top of that. That relates to what we do to customers to help them find great value. Whether that's around railcards, whether that's around SplitSave, whether it's about alerts, price recos, those are things that we continue to build on. We are on the customer's side.
They trust us to find the best value for them. That has been what our value proposition has been around, frankly, for the last 10 years and will be going forward. We will continue to innovate, if you like, well ahead of all of the other apps because we have the scale to do that. I think that's the core part. What you're seeing us do today, which I think is pretty exciting, is beginning to add to that value proposition through supporting the journey around disruption because we know that is an area that customers, when you think about rail travel, rail travel is great until you are disruptive on that journey. Being there for them and helping them understand what's going on, what they should do in those difficult moments, we can be even more trusted.
We're evolving our value proposition on that point. That's, I think, the first question. Do you want to take the second one around customer data?
Yeah, certainly. In short, yes. We're open to sharing more data with the government and the industry in order to support the development of the rail industry. Of course, we already do some of that today. For each journey pair, there's an origin and a destination. They understand that. I think maybe what you're getting at is the customer data on top of that and understanding what services and how they might evolve to better suit customer needs. I think sharing data that would support that would certainly help the industry and, in turn, help us. We already do a good job today in developing demand and trying to sell rail.
Kind of as ever, the private sector works best when you incentivize them to deliver on certain outcomes. That is what we have been doing, driving the digitization of the industry and removing certain costs associated with that shift as well. Yes, in short, I think there is an opportunity there.
The final question was around international marketing. At what point do we pull the trigger? We have had sort of ongoing conversations around this over the last two or three years. Look, we are always running tests, just to assume that we are doing that in marketing. I think when you break that into the two kind of parts, right, we have got the ongoing kind of almost evergreen performance marketing. In each of those markets, we have pretty tight cycles and attribution frameworks. We continue to sort of lean in.
Wherever we can, we continue to invest there because we understand the ROI. As it relates to more kind of top-of-funnel brand building, again, we continue to test there. It is very clear when we look in Spain, we just see the number of new customers we get can justify really quite significant kind of marketing to drive up the awareness. We have kept kind of on-going marketing in Italy. As you know, we pulled back in France about two years ago because we just could not justify that level of spend at that moment in time. Now we are leaning back in on a kind of regional basis. It is encouraging to see the awareness going up, frankly, in Lyon and Marseille. It has always been relatively good in Paris on that route.
We will continue to lean into those other regions as they come on over the next two or three years. At some point, there will be a tipping point where bringing customers on in one region will encourage them to take tickets elsewhere. We will begin to understand that better. It was not true two years ago. We will look at that over the next 12 months.
Great. Katie?
Thank you. Katie Cousins, Shore Capital. Just on that marketing and international, appreciate the trends and when you ramp up that spend. How should we think about that in terms of EBITDA? Should we continue to expect that to improve year on year? Is there a balance there? You still want to keep that trend? Also, Japan. I have heard a marketing thing that you offer and trains in Japan.
Just wondering what your plan there is that region. Also, in that digital pay-as-you-go trials, just a bit more clarity on who you're competing against, if possible?
Sure. I'll take the Japan question and maybe pass back to you on the EBITDA and stuff. You should definitely buy a ticket in Japan if that's where the question's going. What we're doing there is we are tipping our toe in the water, if you like, to sell the travel around Japan. Actually, we did previously have this. It's something pre-COVID that kind of then got removed. We are doing that and selling rail passes in Japan because it's a lucrative market. It allows us to begin to kind of build relationships there. There's no plans beyond that at the moment for Japan. I think that's the Japan question.
Do you want to go on the international market?
Yeah, certainly. So, look, we are trying to unlock longer-term value creation here. A little bit to the question we had earlier, there might be moments where we need to accelerate marketing investment ahead of the curve. The point at which liberalization in France really takes hold, we do not want to be shy and miss the moment. We are kind of driven more by that than trying to manage some EBITDA profile per se. We do not have false floors or anything like that. We will narrate and indicate ahead of time as we get towards that. Do you want to pick up? Yeah. The digital pay-as-you-go trials. We are in the process of going through the tender process at the moment. We do not know exactly who else might be interested.
I'm sure there'll be names like FAIRTQ, which is a Swiss-based company, Tracsis, for example, might be interested in these things. At the moment, we're focused on putting our submission in and seeing what comes.
Great.
Ivar Kelly from UBS. For the train operating companies in Spain and Italy and France, it makes an awful lot of sense for them to work with you as they're trying to build up their market share. Looking at some of the routes in Spain, that market share seemed to have stabilized. Is there a risk that actually they don't want to work with you in the future or maybe, put it a different way, that commission rates could get negotiated down? Do we have a view on when that will happen or if it could happen?
Secondly, in a lot of the press that I read seems to suggest that capacity allocations between the different countries are not quite fair. Looking at Italy specifically, the SNCF seems to be not being given as much capacity as they actually want to run their services. Competition in Europe has been a big pillar of your growth for a long time. It seems to be pushed out further and further to the right. At what point do we actually have comfort that we are going to see meaningful competition there coming up? In the U.K., and this may be a small element, it seems like you are investing more and more to keep people within the app.
Is there a chance that actually the time people spend in the apps is increasing, so can your take rates increase from higher commission rates, from a higher share of eye balls?
Great. I'll start at the top and we can kind of tag team. The relationship with carriers, it's a sort of evolving relationship. We're kind of in some of these markets, they've never worked with third-party retailers in a meaningful way. Equally, they are new entrants. All I can tell you is the direction of travel is actually counter to what you suggest might happen. As we've been in the Spanish market, rail market, we have seen that effectively our take rate has continued to go up as we have understood that we actually can provide double-digit share for them. As that goes forward, they begin to bake that into their models.
They begin to meet those customers as they go forward into the following year. That is really encouraging. I think the other thing that we have not talked a huge amount about today, but you will begin to see if you went on the app, is we are beginning to build tools for those rail operators to be actually able to help them drive share, to explain their proposition. Those are obviously additional kind of monetization tools. As I think about the evolution of where do I imagine this going in two, three years' time, I think there are lots and lots of marketplace models, whether in retail or food delivery, where actually they have created tools that are not just about negotiating a take rate per se, but are about having demand that these suppliers or train operators are actually able to buy that demand.
That kind of creates a mechanic, which I think is very helpful and sort of lets us almost step back and let them decide how that goes forward. I think it's always worth remembering the unique inventory we bring in terms of cross-border travel and inbound is really, really special and very hard to get. Actually, many of those customers that we're bringing from the U.K., from the U.S., and increasingly from those domestic bases that we're building up across Europe into other European countries almost wouldn't buy rail travel if we didn't make it so easy. They get very good take rates and commissions along the way. That's always the door opener that it's very interesting. I have to say, I'm getting kind of encouraged. We talked a little bit about the international distribution business.
Of all the customers, maybe after U.S., tourists, the next one they want are business travelers. Actually, we're beginning to get some really great relationships, as we're saying. That is flowing through. It does take time. When they arrive, they are very sticky. That is another part of the discussion with those suppliers. Let me pick off the last one and hand over to the middle one, sorry. International capacity allocation and kind of when's it happening? Look, I think we've always said this comes in fits and starts. Like four and a half years ago or whatever it was, we were not quite sure how Spain was opening up. Then Spain opened up very quickly and at scale, almost like big bang all at once. Clearly, that is there. The Spanish market is open.
There is another phase coming, a smaller phase. That is kind of open. I think even nine months ago, we are somewhat surprised by the scale of Trenitalia's entry to Marseille. They are not just running additional trains to Lyon. They are now increasing the size of those trains. That means there is more capacity, more tickets to sell. That means it is a helpful dynamic for customers and in turn for our Trainline. That is, I think, how it has been. There are other things we are a bit disappointed. Things have dropped back six months. I think that is always going to be the way it works. In the end, I kind of go forward to this 2029, 2030. You think about the top 100 routes in Europe. Many of them will be liberalised, particularly across Italy, Spain, and France.
Then I think you reference particularly Italy in terms of the sort of noise and the allocation. I mean, frankly, you're hearing some of the same noise in France at the moment around allocation. Sometimes that turns into a safety conversation of, are the trains past the safety certificate? There will be jostling and noise. In the end, I think there's only one outcome, right, which is that ultimately, we're going to have competition from many operators on most of those high-speed lines across those three countries. I am very encouraged with the direction of travel. If you want to pick up with that.
Yeah, certainly. The last question around app and the take rate there. Yes, I think there is an opportunity here.
We obviously had success with hotels and insurance where the kind of the ability to be able to scale it without having a material impact on the primary objective of selling rail tickets is kind of what we've managed to achieve. That has really doubled over the last year. That is a good lead indicator for us. It comes down to how do we allocate the resource and what are we focused on, where developing the AI assistance or building out new revenue streams. There are some trade-offs to make. Of course, we have the structural headwind of selling more on-the-day tickets without the booking fee, which kind of offsets that. In the year ahead, I think you should expect a bit of dilution net of those moving parts. That does not mean in the longer run that we do not see some opportunity here. Gareth.
Yeah, hi, Gareth Davies from Deutsche Numis. A follow-up on pay-as-you-go. In terms of what you're bidding for at the moment, do you envisage that being Trainline branded, or is it more white label type contract? Are they going for kind of one exclusive partner in each region for now to trial? It sort of makes, if you're branding it Trainline, then why would you not allow more than one as long as the technology was suitable and sensible? How does pay-as-you-go sit within level playing field? Is that something you're kind of pushing on to ensure that it isn't sort of one big contract, I suppose, on a U.K. level?
Second one, just in terms of gross margin, decent step up this year, but as in, sorry, the year to February 2025, but clearly feels like there could be a very meaningful shift in 2026 given the 25 basis point reduction in underlying cost. Can you just talk about the puts and takes in gross margin in the U.K. in particular? And then final one, you may not want to answer, but I'll ask it. I think you said two-thirds of transactions are on-the-day in the U.K. Can you give a feel for the value of the on-the-day?
Great. Do you want to not answer the third one and then go to the second one?
Yeah, so second one, gross margin, you're right. There are the costs that sit in this line or in cost of sale. There's payment costs.
Of course, we're forever trying to seek optimization within that. However, there's only so much you can do there. We have fulfillment costs. When the tickets are issued, we pay a certain amount to the industry. As you heard me say, there's a benefit, partial year benefit last year. It will follow through into this year where that cost has reduced somewhat because the CapEx of getting certain gate lines installed has dropped away. We're paying an OpEx charge at this point. There are some industry costs. As you rightly pointed out, those will drop away or have now dropped away when the commission change came through. That kind of net 50 basis point reduction is offset by 25 basis points of cost forgiveness. Net-net, there is another step forwards to come as a result of those drivers.
We will, of course, share more in due course as that unfolds. Yeah, the last one- yes, two-thirds on the day, not on-the-day, I do not have the data to hand. Typically, they are a bit less expensive. And the buy-in-advance are typically for longer journeys and are a bit more expensive. That is probably the only color I can give you on that one.
I will just pick up. You can by all means add, Pete. I think the thing to say around the pay-as-you-go piece is this is very much in process to get a trial that we cannot talk a huge amount around at the moment. I think after that trial, the government would be in a better position to understand how they would ultimately want to go forward with that.
We very much want to be in the kind of heart of that, working with them. Really, we've done a small-scale trial with our technology. We think it looks really interesting. It really is a very strong customer proposition. We'd love to kind of get it tested with a scaled group of customers. I think where you're going on the level playing field is right. My point about the sort of parity of access, ultimately, that's about being able to retail at any fare, however it's deployed, whether it's selling a kind of post or prepaid ticket, if you like. We believe we should be able to do that. I don't know if there's anything you'd like to add.
Okay, thanks.
Great. James.
Hi, James Lockey from Peel Hunt. There are three questions.
Just on the assertive stance you're taking with the government, what does this mean in practice? What's the stance change in terms of what you were doing historically? Perhaps a sort of link to that. Historically, you've spoken about when it comes to the commission and where that should sit. You've articulated it around either your financials or how that might impact the customer experience. You've also spoken historically about how Trainline is the lowest cost to serve. Is there a way you can articulate your fee in respect to the other options that the train carriers have? Are you cheaper? Is there a way of actually articulating that numerically, which would be quite useful? As a follow-up from that, given your scale, your unique data set, what more could you be doing to help carriers have better margins? So yield or fleet management.
Or simply, you're a scale player, take away costs from them, do it at better margins to help the carriers make more money as well. Thanks.
Great. Thanks for the questions. I'll take number one, maybe take number two. Look, the assertive point, I sort of briefly touched on it earlier. Just to go a little bit further there, I think we are engaged, as you would expect, in the longer term in terms of how the bill ultimately, the consultation process is closed. The bill, the legislation kind of comes out in draft form, autumn, we expect, and ultimately goes into law next year. GBR gets stood up in 2027. It's hugely important that those points on the level playing field, and it's the codification of their commitment to open and fair basis.
There are open questions like, who will be the regulator of this, for example? Obviously, there are a lot of other questions for the government to answer around the whole of the railways, not just as it relates to retail. I think the assertive point really comes to, for the last couple of years, we have been given space, if you like, for the government to work out its direction of travel and to decide what it was going to do. Obviously, there was a change of government there. I think what we are being very clear on now is that these short-term abuses, if you like, need to be resolved ahead of GBR's being stood up. The point I make here is around Delay Repay.
We do not believe it is fair in their language for GBR, sorry, for LNER customers to have one-click Delay Repay or maybe some of those relatively rich loyalty programs that are beginning to exist with some of the government-owned TOCs. It does not feel appropriate that they are not offered to Trainline customers. I think leaning in and just making that point clearly to the government is what we are doing there. Pete, do you want to take the cost to serve other options?
Yeah, certainly. I think there is research out there, but I do not have the figures to hand. I think if you look at 4.5% commission, which is what we charge today, an efficient kind of payment cost would be around a point. At 3.5 points, it is very attractive. Compared with the CapEx of putting machines in the ground, it does compare favorably.
I don't have the comparative figures to hand. In terms of, can we help carriers and essentially yield management? I think there is an opportunity. We have a good data set, very strong data set. We understand customer dynamics. We have the right engineering capabilities. To date, it's never really emerged as an opportunity where we would then want to be able to or need to control the pricing. You get different pricing in different channels. There is a more holistic kind of paradigm shift that carriers would need to get their head around in order to offer that up. That's not really gone anywhere to date.
My one add-on on that would be in the nearer term, what we're increasingly doing is working with carriers in the U.K. and throughout Europe on those ticket types that do offer higher margin.
That could be first-class tickets, for example. We're increasingly leaning into supporting that or helping customers potentially upgrade and so forth in that journey or bringing those inbound tourists in and making sure they are marketing appropriately to them. Those are the types of things. That's a kind of jumping-off point, I think, for some of the stuff that Pete was talking about. I think we're going to have to kind of cut there. We're just coming up onto the top of ours. Thank you again, everybody, for all the questions and for attending the presentation. To recap, we've had another strong year. We're making really good progress against our strategic priorities for growth. We're excited about the growth opportunity ahead. I look forward to speaking to you all again soon. Thank you, guys.
Thank you.