Annual Report (ESEF) • Jun 1, 2022
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Throug h our customer-centric, scalable platform, we a re commi tted t o dr iv in g respon si ble a nd sustainabl e business growth, by: Making rail travel easier , championing a m uch greener wa y to trav el Leveraging scale, data and techno logy to oer a sup erior customer e xperience O ering our carrier partners global distribution at a lower cost to ser ve Ove r v ie w Strategic Report Gover nanc e Financial Statements 01 Chair ’ s statement Over the last year Tr ainline has played a leading role in the rail industry’s recovery fr om the signicant disruption of Covid-19. Having continued to invest in product and technology through the pandemic, the business was in a strong position to encourage people back to train travel and accelerate the mark et shift to online and mobile. The unwavering focus of the business reects a team and organisational culture centred around a cor e purpose – to increase greener tr avel. Looking forward, the business is in a strong position to gro w and further support the rail industry reco very. Financial and st rategic per formance The Board is focused on the Group’ s nancial and strategic performance. We were pleased with the nancial recovery in FY2022, with net tick et sales recovering well and the business returning to positive EBITDA despite the impact of Covid-19. The Group made further good progress against its strategic priorities, enhancing the customer experience, building demand, increasing customer lifetime value and growing T rainline Partner Solutions. We invested behind an enhanced ‘new commuter’ proposition in the UK and stepped up our investment in our International business as the domestic rail markets in Europe increasingly liberalise. Y ou can read more about progr ess on our strategy this year and our future priorities on pages 24 and 25. Williams- Shapps Plan for Rail Following the publication by the Department for Tr ansport of the Williams-Shapps white paper in May 2021, the Group has continued to engage with the UK Government and the wider rail industry to help formulate the detail of its proposals and support their delivery. The white paper included proposals to replace many of the sub-scale train operating company websites and apps with a Great British Railways (‘GBRʹ) branded app and website. At this stage, neither the UK Government nor the GBR Tr ansition T eam have conrmed how they plan to de velop and operate an online retailing platform for GBR. The Company engaged with Rail Delivery Groupʹs (‘RDGʹ) consultative revie w of the broader retailing landscape and the commercial framework. W e have reached agreement with RDG on a memorandum of understanding to amend the third-party retail licence, including a back stop arrangement we estimate would result in a c.0.25% net reduction in our commission rate, effective 1 April 2025. You can r ead more about the Williams-Shapps Plan for Rail and our response on page 17. Looking ahead While there may continue to be some bumps ahead, the rail industry is on a path to recovery and Tr ainline continues to benet from signicant structural tailwinds. With increased awareness of the environmental benets of rail tr avel, growing investment in the industry , a continuing shift to online and mobile ticketing and liberalisation tr ends in European rail, we ar e condent in the huge opportunity ahead. By maintaining investment in product and tech through the pandemic, the business is well-positioned to drive long-term growth and create value for customers and shareholders. I would like to thank the T rainline team for the resilience and dedication they have demonstrated thr ough the pandemic. While it has been a challenging time the team has continued to prioritise the needs of our customers and remained focused on delivering our strategic goals. Brian Mc Bride Chair 5 May 2022 T rain l in e has p la y e d a lea di ng role in t he ra il i ndustry’ s reco very . Brian Mc Bride Chair T rainline Annual Report and Accounts 2022 02 Highlights FY2022 Strategic highlights Financial highlights Enhancing the customer ex perience Launched new pro ducts and features for commuters in the UK while position ing ourselves as the rail aggregator app in France, Italy and Spain Buil ding dem and Strong rebound in new app customers to record levels, customer engagement back to pre- Covid-19 levels and launched our rst major brand c ampaign in Italy Gr owing T ra inline partner solut ions Expanding white label into E urope with new client NT V Italo Increasing c ustomer life time value Growing relevance for more of our customers ʹ travel ne ed s, s elling >1milli on digital railcards and growing n umber of customers travelling 2 + times a month by 39% in the UK ov er the last two years Net tick et sales + 222 % Increased to £2.5 billion, from £783 million last year, and recovering to 68% of FY2020 Reve nu e +1 8 1 % Recovered to £189 million fr om £67 million last year as a result of the reco very in net ticket sales Adjuste d E BITDA £ 3 9m At the top end of previously stated guidance expectations, versus £25 million loss in FY2021 Operati ng f ree casho w £ 166m £312 million improvement since FY2021, reecting EBITDA generation and r ecovery in net working capital as business recover ed EPS +1 6 . 6 p Improved to -2.5p loss, from -19.1p loss in FY2021 Find our strategic objectiv es on page 24 Find our KPIs on page 32 Strategic Report Gover nanc e Financial Statements 03 A t a glance W e enab le m i l l io ns of tr a v el lers t o sea mlessl y sea rch, boo k and m an age th ei r j ou rn e ys through our highly r ated T r ainline website, mob i le a pp a nd B2B p artne r ch an nels. W e are Eu rope ʹ s l e a ding i ndependen t rai l pla t for m T rainline Annual Report and Accounts 2022 04 2 70+ rail and coach companies 44m cumulativ e app downloads >7 5 0 people in our T rainline team from >50 nationalities. 4 . 9/5 star app rating 8 4% of our UK transactions are through our app 1 75 + countries where o ur customers come from 45 countries t ravelled in and across by T rainline customers W e work w it h mor e th an 270 ra il a nd coach c ompanies acro ss 45 count ries. Thro ug h ou r broad ran ge of car ri er pa rtners w e cov er ov er 80 % of ra il rou tes in Euro pe. By bringing all of the major carriers and new entrants onto one platform, we provide tr avellers with an unrivalled set of journey options. Our smart technology, data driven features and real-time information help our customers to stay one step ahead. For our carrier and B2B partners, Tr ainline Partner Solutions offers access to a huge supply of rail carrier inventory across the UK and continental Europe through our proprietary platform. With tested and proven technology – we enable them to offer best in class customer experience at low cost. 10 currencies and multiple payment methods including Apple P ay , Google Pay , PayP al, SOFORT and iDEAL Strategic Report Gover nanc e Financial Statements 05 Over the last year we have continued to innovate to make r ail travel easier for millions of people, which in turn encourages them to make travel choices that are better for the environment. We belie ve our actions will have a huge impact, with a 5-million tonne annual CO 2 saving for every 1% of air and car journeys that switches to rail in the UK alone. Our innovation focuses on creating a simple, consistent, friction-free experience for booking and managing travel. We bring together all carriers into one app while providing smart, real-time travel information and self- serve capabilities like journey changes and refunds. As a platform business, we offer our innovative retailing e xperience directly to customers through our Tr ainline-branded businesses, while also giving carrier partners and other travel businesses access to our retail solutions to offer to their customers. As a business we benet from structural tailwinds that pro vide signicant and long-term growth opportunities. We operate in a large market, set to benet from signicant investment in capacity expansion across Europe and gr owing awareness of the environmental benets of switching to rail. Within that, the ongoing market transition to digital ticketing offers signicant upside opportunity, as does market liberalisation in Europe, with growing carrier competition enhancing Tr ainline’s r ole as a third-party aggregator. Acceler ating grow th of our International business Domestic competition between rail carriers in Europe is stepping up meaningfully, with the r ecent launch of new entrants Ouigo in Spain and Tr enitalia in France. Carrier competition now exists on six of the top ten high-speed routes in Europe. As already evidenced in mark ets like Italy , greater competition increases the value and choice for consumers in rail. Against this backdrop, we have the opportunity and ambition to signicantly scale our international business in France, Italy and Spain over the medium term. T o accelerate our pace of growth, we have stepped up investment in the customer experience. We ar e progressing well against our plan to hire 150 people, predominantly software developers and data scientists, while expanding our performance marketing capability and launching new, abo ve-the-line brand marketing campaigns. Goo d progr ess again st our strateg ic priorities Having maintained investment in product and technology throughout the pandemic, we have enjoyed strong momentum of delivery against our four strategic priorities. These priorities are: enhancing the customer experience, building demand, increasing customer lifetime value and growing Tr ainline Partner Solutions. Enhancing the customer e xperience Online penetration for the UK rail industry increased to 52% by February 2022, up from 39% pre-Covid-19. Within this, etick et penetration has doubled over the last two years to reach 42% in Q4. This reected a greater pr evalence of people buying train tickets thr ough our 4.9-star app. With Covid-19 changing the way we work and travel, we invested behind an enhanced ‘new commuter’ proposition in the UK, including new features like Save Y our Commute journey personalisation and ticket rebooking in just two clicks. We also launched exi tick ets on our app and will roll-out our new digital season ticket product ne xt year. In International we are gaining ground as the aggregator for newly liberalised routes, giving customers an easy way to compare carriers, fares and journey options all in one place. At the same time we are enhancing our offering, launching airline style seatmaps in France and Italy and recently upgrading our Récupʹ Retard (delay-repay) pr oduct feature. Building demand As Covid-19 related r estrictions eased, we scaled up our performance marketing and ran brand-led leisur e campaigns. This generated a sharp rebound in new customers – with record levels of ne w app customer acquisition. Likewise customer engagement recovered, with unique monthly active users (‘MAUsʹ) reaching the same level as its pre-Co vid-19 peak. In the UK we increased our reach, integrating T rainline into the Google Maps app for Android, while in Italy we launched our rst brand campaign as we begin to grow consumer awareness in Europe. Increas ing custome r lifetime value We deepened our relationship with customers, growing our rele vance for more of their travel needs. Ther e was a signicant step up in our transaction I n no v at i ng t o ma k e rai l tr a v el easier for mil li ons of p eople. CEO ’ s statement T rainline Annual Report and Accounts 2022 06 frequency (the number of tickets purchased by existing customers), particularly in the UK where customers purchasing 2+ tickets per month grew 39% vs pr e-Covid-19 in Q3. In Europe we delivered a meaningful step up in regional travel, increasing 125% in Italy and 106% in France in H2 versus the same period two years ago. In the UK we also made progress scaling digital railcards, selling over 1 million in FY2022, a signicant performance considering there were an estimated 6 million railcards in use when we launched the product in FY2021. Growing T rainline Partne r Solutions ( ‘ TPS ʹ ) Demand for business travel remained subdued, but TPS saw some signs of recovery as r estrictions eased – with TPS net ticket sales 88% up between H1 and H2 this year. We rene wed contracts for all our existing white label train carrier clients, giving them access to our industry-leading core platform functionality and upgraded customer experience features. We also signed a multi-year deal in Italy with challenger brand NTV Italo, enabling them to sell regional transport connections to their customers. Within our Global Distribution and Business Solutions segment, we continued to scale the Global API platform, giving B2B partners the ability to offer European rail options to their customers through one simple, seamless connection. We have continued to sign B2B customers, including the recent addition of Tr avelport, one of the top three Global Distribution Systems (‘GDSʹ). Strong re covery We have taken a leading r ole in the rail industry’s recovery , encouraging people back on to trains and helping accelerate the market shift to online and digital channels, leveraging our continued investment in product, technology and marketing. As a result, the business delivered a strong recovery , with a nancial performance in line with expectations despite the effects of the Omicron variant in the fourth quarter. Net ticket sales were £2.5 billion, 222% higher year-on-year, and 68% of the same period in FY2020. We delivered revenue of £189 million, up 181%, and adjusted EBITDA of £39 million. Next year, assuming no travel disruption, we expect sales and revenue for the Gr oup to be above FY2020 (the last pre-Covid-19 year). Jod y Ford Chief E xecutive O cer The on goi ng mar k et tra nsi ti on t o di gital t ick eti ng oers si gn ica nt upsid e oppo rtuni t y , as does market libe rali sat ion in Eur op e, w ith growin g rail c arrier co mpe tition enh ancing T rainline ʹ s role as a third-part y aggregator . New hires to the Managem ent T eam We further evolved our Management T eam based on the needs of our organisation and broader strategy , with the addition of Milena Nikolic as Chief T echnology Ocer to lead our tech engineering teams, Mike Hyde as Chief Data Ocer to unlock our signicant data opportunity, and Martin Sheehan as Chief Corporate Affairs Ocer to further enhance our engagement with government and industry stakeholders. People and culture I continue to be impressed with the way our teams actively engage with our purpose, working tirelessly every day to innovate and impro ve the customer experience, and in doing so empower people to make gr eener travel choices. This year we welcomed our people back to our oces, rolled out our new ‘exi-rst’ hybrid-working approach, and introduced objective and key results (‘OKRʹ) methodology to align the team behind a set of common objectives, improving focus and transparency . Jod y Ford Chief E xecutive O cer 5 May 2022 Strategic Report Gover nanc e Financial Statements 07 Purp o s e driven sus tai nabi l it y What sus tainability m eans to us Empower people to make greener tr avel choices At Tr ainline, environmental sustainability is fundamental to our purpose. Through our technology and data, we make rail travel easier, empo wering people to make travel choices that are better for the environment. Rail offers travellers a greener alternative to ying or driving, generating less than 1/20 of the CO 2 emissions of air travel and approximately 1/7 of the C O 2 emissions compared with car travel, per passenger. It can move millions of people quickly and cleanly, for leisure or business, across countries and continents. We believe we have a key r ole to play in supporting the rail industry , businesses and governments in meeting their emissions targets by promoting modal shift and encouraging greater use of rail and coach. This is why when the UK hosted the 26th UN Climate Change Conference of the Parties (‘COP26ʹ) we were pr oud to be Provider of Rail T ravel. T o ensure we support the transition to a lower carbon economy , in June 2021 we set a ve-year climate strategy . In FY2023, we will create a dedicated cross-functional team that will work across all areas of the business to drive modal shift through use of our platform as well as reduce the impact of our own operations. T ra v el i ng b y rai l genera tes le ss th an 1 / 20 of th e CO em issions of a i r tr a v el and a ppro xi mat ely 1/ 7 of th e CO em issions p er passenger of tra v e ll in g b y car . ¹ 1. Eur op ea n En vi ro n me nt A ge n c y St u dy ( 20 14) T rainline Annual Report and Accounts 2022 08 The exte rnal contex t UK and European governments have continued to encourage modal shift to rail and increase their investment in rail in order to meet their net-zer o emissions goals. The EU is targeting a 55% reduction target for CO 2 emissions by 2030, and the UK a reduction target of at least 78% by 2035. Tr ansport is the largest contributor to UK domestic greenhouse gas emissions, contributing 28% of UK domestic emissions in 2018, and the main source of these emissions is the use of petrol and diesel in road transport. Similarly , in Europe, transport accounts for more than a fth of greenhouse gas emissions, almost 72% of which come from road transport whilst less than 0.4% comes from rail tr ansport. Strategic priority one of the UK Decarbonising Tr ansport plan is to accelerate modal shift by making public transport “the natural rst choice for our daily activities” and, where the car remains attractive for longer journeys, increasing “ competition from high-speed decarbonised rail and zero emissions coaches”. The UK Decarbonising Tr ansport plan highlights rail as “the greenest form of motorised transport”. It sets a target of achieving net-zero greenhouse gas emissions from trains by 2050, thr ough increased electrication of the rail network and introduction of new technologies such as hydrogen-powered tr ains. The EU Commission have highlighted rail as playing a ke y role in the EU becoming climate-neutral by 2050. They target the doubling of high- speed rail trac by 2030 and a tripling of high-speed rail by 2050. Thir d-party ticket vendors such as T rainline have been identied as having a key r ole to play in the delivery of elements of this plan. European governments are also starting to take steps to encourage modal shift from cars and planes to rail to achieve their carbon r eduction targets, for example France is introducing a ban on internal ights where the equivalent rail journe y is less than two and a half hours. Also, as part of its Covid-19 crisis support programme for Austrian Airlines, Austria has introduced a similar prohibition where the equivalent rail journey is under thr ee hours as well as a tax on ights spanning less than 350 km. Produc t and promo tion Our aim is to empower people to make greener tr avel choices, driving a modal shift that benets the world. In October 2021 we conducted a survey across the UK. Thr ee in every ve respondents stated the y feel a sense of pride to travel by train, knowing it’s better for the environment. Like wise, 85% of respondents wanted to see more publicity about the sustainability benets of rail. Howe ver only 4% of respondents knew quite how much their carbon footprint could be reduced by choosing to tr avel by train rather than car. The majority estimated a reduction of between 10-30%, when in reality it is closer to 80%. In FY2023 we are making green data more accessible and transparent on our platform to allow customers to better understand and reduce the carbon impact of their journey and continue to build awareness around the benets of using rail and coach instead of car or plane. We will also continue to steer customers to digital tickets where available to r educe paper ticket waste, promote digital railcards and encourage modal shift more broadly . What we’re doing internally In September 2021, through the Science Based T argets initiative (‘SB Ti’) we committed to set an SBTi aligned Net-Zero target, achievable no later than 2050, and to reduce emissions from our own operations (Scopes 1 & 2) in line with 1.5°C and from our value chain (Scope 3) in line with the Well-Below 2 o C scenario. We also signed up to the Business Ambition for 1.5°C and UNFCC Race to Zero campaigns. Since then, we have completed a greenhouse gas inventory of our full value chain and modelled our near-term science-based targets. We have offset our operational greenhouse gas emissions for FY2022, including the impact of our people working from home as well as scope 1, 2, waste, water and business travel. We did this by investing in the Gandhi Wind Project, which plays a vital part in India’s shift to wards a low carbon economy. The project is fully certied by the Veried Carbon Standar d and spans the Indian states of Rajasthan, Gujarat, T amil Nadu, Maharashtra and Madhya Pradesh. The Gandhi Wind Project aims to ensure access to affordable, reliable, sustainable modern energy as well as promote sustained, inclusive and sustainable economicgrowth. The SDGs for this project are: Ensure access to aordable, reliable, sustainable modern energy . Promote sustained, inclusive and sustainable economic gro wth. Strategic Report Gover nanc e Financial Statements 09 Market worth over € 2 2 5 bn Inv estm ent ple dged in UK Integrate d Rail Plan £9 6 bn T o tal inv estm ent acros s continental Euro pe planne d ov er the nex t ten years totals £ 1 76 b n Mark et o v erview Pre-Covid-19, the global r ail and coach market’s worth was estimated to be over €225 billion per annum. Europe represents o ver €70 billion of this total, giving Tr ainline signicant headroom to grow acr oss existing and future geographies. In the UK, rail usage effectively doubled over the 20 years prior to 2019, growing faster than any other mode of transport. Since then, the rail industry has been dealing with the impacts of the coronavirus pandemic, at times with a signicant downturn in passenger numbers. However, the easing of Covid-19 related tr avel restrictions has resulted in passengers returning to rail in all our markets. While ther e have continued to be setbacks on the road to reco very, such as the coronavirus Omicron variant, the trends over the past 12 months have been positive for Tr ainline, as set out for the UK below . UK Ra il m ar k et recov er y - F Y 202 2 Leisure trav el – re cov ered to growth on pre -pan demic levels Tr aditionally Tr ainline’s str ongest market segment – responded str ongly to easing of Covid-19 restrictions. Befor e and after the Omicron wave, it recovered br oadly to pre-pandemic levels Recovered to ~50% of pr e-pandemic levels. Historically underserved with digital options, Tr ainline is priming its features and digital ticket options to make rail tr avel easier for commuters Commuter tra vel – pa rtly re cov ered but higher d igita l share Partially recover ed to ~40% of pre-pandemic levels. Whilst behind the recovery of other segments, demand should increasingly benet fr om growing environmental r eporting requirements for corpor ates Business trav el – slow est to recover bu t longer term gro wth due to greener trav el choices A la rge a nd rec o v er i n g ma r k et set for long-term gro w th T rainline Annual Report and Accounts 2022 10 As passengers returned to rail, there was a notable shift in people booking online – avoiding queues at station counters and ticket machines – and choosing the contactless travel experience provided b y digital tickets and our great mobile app. The accelerated shift to online and mobile ticketing has enabled T rainline to disproportionately benet as people return to rail tr avel. Governments’ ongoing investment into rail across Eur ope will further facilitate recovery and gr owth. In the UK, this includes £96 billion announced in the Integrated Rail Plan in November 2021. The stated objectives of the investment are to support continued growth, impro ve eciency and reliability , and to further facilitate the transition of travellers to more sustainable modes of transport including rail. In continental Europe, governments are seeking to double passengers on high-speed rail by 2030 and triple passengers by 2050, with the most signicant network expansion planned in Spain, France, Italy and Germany. Investments planned over the next ten years total £176 billion, in line with government commitments to net zero greenhouse gas emissions and the European Green Deal initiatives. Strategic Report Gover nanc e Financial Statements 11 eticket pen etratio n in the UK 4 0% F Y2 0 21% 40% 30% F Y2 1 F Y2 2 1 Shift to online and mobile tick eti ng acceler ated Online bookings in the UK increased to 52% of total rail industry sales by February 2022, up from 39% pre-Co vid-19. Industry penetration of mobile ticketing (etickets) gr ew to 42% in Q4 FY2022, double where it was in FY2020, reecting a greater prevalence of people buying tr ain tickets through T rainlineʹs 4.9-star app. UK eticket availability grew from 7 1% in FY202 0 to over 80% in FY202 2 > 8 0% Signicant headroom remains for etick et penetration to gro w further, particularly as etickets become increasingly available to use on all rail journeys. Over 80% of journe ys in the UK are now etick et-enabled, up from c.75% at the end of 2021, following Scotrail’ s roll-out across its network. Within the next year, etick ets are expected to be available on mor e than 90% of the UK network, with Southeastern having commenced their roll-out from April 2022. Our st ruc tural tailwinds: Shi ft to on l in e and m obi le tick e ti ng acc elerated Driv in g Moda l Shift wit h si gn i can t in vestm ent s in ra il Greater supply frag mentat ion in ou r core E urope an geog rap hi es 1 2 3 Mark et o v erview co nti nued T r a i nl in e oper a t es i n a la rge m a r k et th at enjo ys signi can t s truc tural tailwin ds T rainline Annual Report and Accounts 2022 12 2 Driving M odal Shif t with signicant in vestments in rail Governments are investing to drive modal shift to rail as a greener mode of transport amid growing environmental awareness and ambitious net zero targets. Governments and businesses continue to recognise that achieving net zero emissions targets will requir e a modal shift to more sustainable travel options. In comparison to air and road transport, rail is a signicantly lower carbon form of transport, generating less than 1/20 of the CO 2 emissions of air travel and less than 1/7 of the CO 2 emissions compared with car travel. Rail is also a very ecient way of moving people into city centres and over long distances, reducing road congestion and pollution. Strategic priority one of the UK Decarbonising Tr ansport plan is to accelerate modal shift by making public transport “the natural rst choice for our daily activities” and where the car remains attr active for longer journeys increasing “competition fr om high-speed decarbonised rail and zero emissions coaches”. The UK government has set a reduction target for CO 2 emissions of at least 78% by 2035 and plans to invest a record £48 billion b y 2024 to “maximise the shift of users to rail”. The EU is targeting a 55% reduction for CO 2 emissions by 2030. The EU Commission highlighted rail as playing a key r ole in the EU becoming climate-neutral by 2050, with 2030 targets to double high-speed rail trac (triple it by 2050) and for scheduled travel of under 500 km to be carbon-neutral. Third-party ticket vendors such as T rainline have been identied as having a key r ole to play in the delivery of elements of this plan. European governments have also begun taking action to promote rail over internal ights in or der to meet their net-zero targets and we anticipate more governments will introduce similar regulations in the coming years. With growing environmental awareness by travellers, it is e xpected that over time road tr avel will become increasingly less attractive, with congestion, slowing road speeds in urban areas, growing taxation on certain fuel types and congestion charge zones in major cities (already including London, Stockholm, Milan and Gothenburg) set to increase. Sustainability is increasingly becoming a necessity for corporations of all sizes around the world and implementing sustainable business practices includes the introduction of sustainable travel policies. A recent SAP Concur report found that 97% of business travellers would increase their journey time if it signicantly reduced the environmental impact, and 69% of travel managers have updated their company’s travel guidelines to have a greater focus on sustainability . Several large Eur opean companies have said they will reduce their carbon emissions from ights including Deloitte, PwC, Lloyds Banking Group, ABN Amro and Nestlé. Strategic Report Gover nanc e Financial Statements 13 Mark et o v erview co nti nued 3 Greater supply fragmentation in our core European geographies Tr ainline operates in an increasingly complex and fragmented rail mark et, where we provide tr ansparency and choice for our customers and partner with carriers, governments and the wider rail industry . There are appro ximately 400 rail carriers and more than 120 long- distance bus operators in the UK and continental Europe. With ongoing liberalisation and investment in rail and greener modes of transport, we expect these numbers to increase. The liberalisation of domestic rail has opened a new chapter of competition between operators in continental Europe – with major carriers from France, Italy and Spain starting to compete in each other’s domestic markets. France’s SNCF enter ed the Spanish market under its low-cost br and Ouigo Spain in May 2021 on the busy Madrid-Barcelona route. In turn, the incumbent rail operator Renfe launched its own low-cost offshoot Avlo on the same route and is planning to enter the French market in 2024. Italy’s Tr enitalia followed suit in late 2021, entering the French market with services between Paris, Lyon and Milan. This trend is set to continue: Iryo, for example, a new br and joint-owned by T renitalia, will start running train services in the Spanish market before the end of 2022. We are also witnessing the advent of smaller new operators in mark ets across Europe – such as Lumo, who commenced a competing service between London and Edinburgh in 2021. Railcoop is aiming to offer a new service between Bordeaux and Lyon in France and has received the approval to operate on six r outes – Le Tr ain and Midnight Tr ains are further examples of new operators planning to launch services. With these operators offering new and different customer propositions – from low-cost (Lumo, Ouigo Spain and Avlo) to premium service (T renitalia France and Iryo) – such competition will provide mor e choice, convenience and quality for customers, as well as more competitive fares. As competition grows, passengers will increasingly need help to nd the right ticket at the best value. T rainline will full this role by positioning ourselves as the rail app of choice for European rail travel. W e will aggregate all the carriers, fares and journey options in one place, so customers can compare and select the right option for them. For carrier partners seeking to grow or enter new mark ets, we can rapidly add their inventory and offer access to a diverse global customer base across our B2C and B2B channels – connecting to consumers, business travellers and travel resellers. T rainline also offers carriers world-class digital distribution solutions through Platform One – our single global tech platform – which enables them to outsource the technology behind their retail channels at a lower cost. T ra i nl in e opera tes i n a large ma rk et tha t enjoys signican t s truc tur al tailwin ds T rainline Annual Report and Accounts 2022 14 rail carriers in Europ e 4 0 0+ Selected k ey r ai l rou tes in con tinen ta l Europ e wit h c ompe tition Strategic Report Gover nanc e Financial Statements 15 Europe Working t owards more comp etitive mobilit y Liberalisation of the national rail and coach markets continues to unfold, promoted by a series of Eur opean Commission initiatives aimed at encouraging competition across Europe’s r ailways and facilitating ecient transport systems that operate effectively across bor ders. The Fourth Railway Package (proposed by the European Commission in 2013) is one such initiative and comprises a series of measures aimed at creating a truly integrated European Railway Ar ea and making EU railways more attr active, innovative and competitive. This process started in 2019 with the opening of the market for domestic passenger transport services by rail and aims to be nalised by the end of 2023 with the opening of competition for public service contracts for rail domestic passenger transport services. These legislative initiatives are helping to create an environment which is supportive of further competition and market volume growth, expanding opportunities for new rail oper ators to enter the rail markets in other geographies as well as for independent retailers who have played a key part in supporting these new entrants. Independent retailers do so by aggregating, combining and showcasing a multitude of operators on their platforms and provide much needed transparency and optionality to rail users. Working t owards digital mobility The Commission’s Eur opean Green Deal had established a goal of becoming climate-neutral by 2050 and committed to a rethink of EU policies for clean energy in the transport sector. This priority was conrmed and reiterated with the Smart & Sustainable Mobility Strategy (‘SSMSʹ) in December 2020, which the Commission started to deliver on in 2021. The EU’s ambitions for rail stated above wer e promoted by making 2021 the European Y ear of Rail. As part of this promotional initiative the EU organised a series of events throughout the year and a special EU train toured the continent from 2 September to 7 October 2021, stopping in over 100 cities in 26 countries. The initiative showcased rail to encourage its use for carrying people and freight. Working t owards green mo bility Concluding the European Y ear of Rail, in late 2021 the European Commission presented its “ Action Plan on boosting long-distance and cross-border passenger rail” as part of a package of initiatives to foster green mobility. The Action Plan is a follo w-up to the Smart & Sustainable Mobility Strategy and presents a r oadmap for concrete priority measures to achie ve the goals of doubling high-speed rail trac by 2030 and tripling it b y 2050. Objectives of the Action Plan include the promotion of more user-friendly ticketing and access to the rail system such as allowing passengers to nd the best tickets at the most attractive price and better support when faced with disruption. The category of third- party ticket vendors (e.g. T rainline) have been identied as having a key role to play in the delivery of this plan. Mark et o v erview co nti nued 2x high-speed rail t rac Sche duled collec tive tra vel of u nder 500km should b e carb on- neu tra l wi thin th e EU 3x hi gh -speed rail t rac European Y ear of Ra il By 2030 By 205 0 2021 Regu lator y and polit ical en viron ment T rainline Annual Report and Accounts 2022 16 UK Passenger rail services are curr ently delivered by 34 tr ain operators including those let as franchises to private companies by the Department for Tr ansport, Tr ansport Scotland, and Tr ansport for Wales; and those run by private companies under an Open Access model (where track access rights are bought from Network Rail for specic routes). The UK railway is, however, currently going through a period of industry reform, led by the Department for Tr ansport. This was announced through the Williams-Shapps Plan for Rail, published in May 2021, which sets out the government’s plans for the implementation of changes to the management of the railways. The current franchising model is due to be replaced by a ne w structure in which a central organisation called Great British Railways (‘GBRʹ) may grant concessions to companies to run train services in different areas. Most existing tr ain operator brands are likely to be r etired and replaced with a single GBR brand as agreements run to an end. The process of restructuring the industry is complex and is expected to take sever al years, requiring legislation to complete. Another aspect of the Williams- Shapps Plan for Rail is the proposal for a new GBR website and app for the sale of rail tickets online, which is expected to subsume most existing train operator websites. At the same time, the Department for Tr ansport recognised the importance of the role of independent retailers in the market. It was acknowledged that independent retailers will continue to operate alongside GBR’s dir ect retail channels. At this stage, neither the UK Government nor the GBR T ransition T eam have conrmed how they plan to develop and operate an online retailing platform for GBR. Howe ver, RDG has taken preliminary steps ahead of a formal procurement exer cise under which it may look to procure a Consolidated Online Retailing Solution (‘CORSʹ) for the sale and purchase of Great British Rail tickets. Pro visional documentation outlines the proposed scope for a ‟cost effective, market leading, online ecommerce serviceˮ. The proposed contract length is four years, with the potential opportunity to extend for a further four years. It is expected that the contract would be entered into by RDG and novated to GBR at some future stage. The estimated contract notice (effectively the ocial process start date) was 1 April 2022, but no formal procurement ex ercise has yet started at time of writing. We have engaged with the preliminary stages of the CORS procur ement exercise and are ready to engage more fully once the ocial process begins. RDG Retail Review Along with other third-party retailers, Tr ainline was invited by RDG to take part in a re view process of the broader retailing landscape and the commercial framework, including industry commission rates. As an output of the revie w, we have reached agreement with RDG on a memorandum of understanding (‘MOUʹ) to amend our third-party retail licence. Tr ainline and other third- party retailers will now enter into a collaborative phase of engagement with RDG to mutually agree new contractual licence terms. In the event new contr actual terms cannot be mutually agreed, under the provisions of the MOU , RDG has the right to implement a legally binding minimum set of commercial terms. We estimate this would result in a c.0.25% net reduction in commission rate for T rainline, effective 1 April 2025. The minimum terms applicable to Tr ainline include: • A 0.5% reduction in the base B2C online sales commission rate, from 5% to 4.5% • An offsetting removal of shared central industry costs. T rainline estimates this to be c.0.25%. The Williams-Shapps Plan for Rail Grea t British Railway s CP 423 Strategic Report Gover nanc e Financial Statements 17 W e aggregate data from >270 car ri ers across E urope on our plat form W e apply the br il li ant m ind s of ou r people, o ur sm art technol ogy and cus tom er ins ight s... We hav e in te gra te d ov er 270 car rier pa r t ne r s to da te , mo s tl y a cro s s th e UK and E urope, bringing togethe r the maj or i t y o f rai l an d co ach o p era to r s on to on e pl at fo rm , co ve ri ng a ll of th e UK rail n et wo rk a nd ~ 80 % of th e European net work . Th is b re ad th a ll ow s us t o of fe r al l th e journey s, fares and tick et options to our cus tomers , whenever and whereve r they may be travelling. Our propriator y te chnolog y - Platform O ne Pla t f or m O ne is o ur a gi le a nd p ro pr ia tor y t ec hno lo g y. It is the engine behind our T rainline consumer app and website, an d it a ls o po we r s th e bo ok i ng an d re t ai li ng s ol ut io ns f or o ur pa r t ne r s an d B2B clients such as rail carriers , travel sellers, businesses and public sector orga nisations. Powerful data as set s We un de r s t and t h e tra ve l ne e ds an d p at t er n s of ou r customers in over 45 c ountries through our B2C and B2B channels with around 78 million visit s to our platfor m each month . Market-speci c features an d per sonalisation Usi ng o ur p ro du c t an d te ch no lo g y ex p er ti se p lu s th e un iq ue dat a i ns ig ht s g en er ate d ac ro ss o ur l ar ge c us to me r b as e, we continue to enh ance ou r customer propos ition and tailor it to th e ne ed s of d if fe re nt m ar ket s . Rev enue mode l We ear n a co mm is si on a nd f ee s on t ic ket s al es . We a ls o generate revenu e from advertising and ancill ar y serv ices such as travel insurance and multi- cur renc y payment options. B2B pa r t ne r s pa y a com mi ss io n an d /or tra ns a c t ion f e e on ti cke t sa le s , as w ell a s ot he r re la te d te chn o lo gy s e r v i ce fe e s for the provision of our solutions. C u s t o m e r s + D a t a + I n s i g h t s S u p p l y Build ing the wor ld’ s #1 rail plat form B usiness model carriers acr oss Europ e >2 7 0 T rainline Annual Report and Accounts 2022 18 T o generate our hi ghly rat ed user experi ence and partner solutions Highly rated cus tomer expe rience for trav ellers globally • 4 .9 /5 s t ar r at ed a pp • Search and book train tickets fo r jo ur ne y s in 45 countr ies • Available ticket ty pes, journey combinations an d far es a cr os s c ar ri er s i n on e pl ace • Seamle ss, fric tion -f ree booking exper ience • Mult iple languages, currencies and payment options • Digit al tickets, smar t perso nalisation, real- time tr ave l in fo rm at io n an d ma ny mo re f ea tu res We pro vide end-to - end digital retailing solution s for carriers • Fa s t an d se cu re te ch p la t f or m fo r re t ai lin g an d ti cke ti ng a t a lo wer c os t t o se r v e • D ee p ra il te ch e x pe r t is e – c us to mi se d, h ig h conver ting and high- qualit y solutions We giv e travel sellers acce ss to our rail content via our gl obal API • A cce ss o ur r ail c on te nt w it h al l lo c al features thr ough one connection • A ll ow s t ra vel s e lle r s to i nt egr at e rai l in to t he ir of fe ri ng , he lp in g th em g ro w th ei r bu sin es s We oer smar t rail book ing solutions for companie s of all sizes • T rainline branded business por t al for businesses and public s ector clients of all siz es • A ll i n on e pl ace f or f u ll t rav el v i sib il it y, cost control, and s ust ainability repor ting For tra vel lers F or businesse s Strategic Report Gover nanc e Financial Statements 19 C re a t in g v a l u e fo r ou r ap p and onl ine customers B usiness model c ontinued At Tr ainline, our purpose is to empower greener tr avel choices, connecting people and places. Our vision is to be the world’s Number One rail platform, pro viding us with the scale and reach to achieve our purpose. Offering smarter travel, T rainline unlocks the power of our platform and data, offering unrivalled value, a friction-free experience and motivating greener habits – ther eby encouraging customers to switch from car and air to r ail. We work tirelessly to pr ovide the best possible product t in our target markets – tailoring our app and website experience to the needs of our local customers, providing high-quality and relevant features and services. Smarter trav el • Simpl e, intuitive user inter face • Digi tal ticketing including seasons • S et multiple commute favourites • Real- time information • Se lf-ser v ice change of journey, automate d refund cap abilit y • Modern payment options F riction free Enabling c ustomers to ge t it righ t Unrival led value Unearthing the g reatest, most truste d value for your journey Greener habi ts Mo tivati on an d prid e to swi tch fro m car an d air to r ail • A ll carrier s, fares and rai lc ar ds i n on e pl ace • Mon ey-s aving features include: Split Save, Price Predic tion, T icke t A le r t s , B es t Fa re F in de r , Railcard Finder • Route emission info • C ampaigns to d rive awareness of sustainabilit y of rail K ey features K ey features K ey features Unrivall ed val ue F riction fre e Greener habits T rainline Annual Report and Accounts 2022 20 Through T rainline Partne r Solutions , we provide retailing capabilities and s olutions to trav e l sellers, busi nesses, and rail carrier s. Dist ribution Solutions for T rav el Sellers For over 20 years we’ve been powering some of the largest travel brands and online booking tools to help them provide a seamless rail booking experience for their customers and travellers. We aim to be the leading distributor of global rail content, providing unrivalled reach and access for our partners at lower cost as well as opening new points of sale for carriers. Our Global API and Agent T ools allow our partners to maximise revenues by providing e xtensive customer-rst, feature-rich rail content all thr ough one simple connection. It is quick and easy to integrate with T rainlineʹs continuous support to ensure a seamless go-live through to transaction gro wth. T r ainline B usine ss f or companies o f all sizes For businesses of all sizes we provide a suite of products that ensures full employee travel visibility , better cost eciencies and controls as well as CO 2 reporting, and gives millions of employees an effortless way to book rail for business travel in and across 45 countries. IT Solutions fo r Carriers Through Platform One, we enable digital innovation in the rail industry . Our tailored retailing solutions meet the needs of our carrier partners, lowering their cost to serve and simplifying their innovation process. Carrier partners can access our innovative suite of products and features, beneting from our scale and expertise: • One-stop shop (front-end and back-end retailing needs) • Customer-centric ecommerce experience • Deep inventory connections • Security, payments, fullment, fraud safeguards • Dedicated customer team For the ra il ind ustr y Across our whole platform ecosystem, we provide cutting-edge r ail technology and digital ticketing innovation that encourages mor e people to travel by tr ain versus other less sustainable modes of transport, at a lower cost to the industry . On the ipside, we bring incremental demand from customers, and provide our carrier partners and the rail industry more broadly with access to travellers all over the world. C re a t in g v a l u e fo r ou r partne rs, business cus t omers and the industr y Strategic Report Gover nanc e Financial Statements 21 Our technology T rainline Annual Report and Accounts 2022 22 Our ability to bring together teams comprising developers, designers, infrastructure and data scientists to cr eate a world-class experience for our customers and carrier partners is what denes us and allows us to continually innovate and maintain our superior customer experience. Reliable, scalabl e, secure • > 50 0 micr oser v ices, increasing speed of development, flex ibility and scalabilit y • c .400 engineer s, data and tech specialists • 600 + releases per week Deep inventor y connec tions • Rail and coach • Pr e - an d p os t-s a le s • Re al - t im e dat a • Add - on travel ser vices: insurance, etc. Personalised AI data products • >4 TB dat a p ro ce ss e d pe r day • B e sp o ke AI - dr iven feat ures • Personalised UX an d CRM Customer-centric ecommerce • S imp le ‘ on e cli ck ’ u se r in ter f ace: hides industr y complexity ; multi- produc t basket • Proprie tar y multi - carr ier /modal journey planner • 10 + payment options including Go og le Pa y an d A pp le Pa y Securit y , payments, fullment , fraud safe guards • PC I - DSS Le ve l 1 (Merchant & Se r v ice Pr ov id er ) sinc e 2 0 13 • C yber Essentials cer tif ication sin ce 2 0 17 • Pa r t ne r sh ip w it h NCSC & NCA • Internal s tandards aligned wi t h IS O2 7 0 0 1 cer tif ic ation & NIST frame work • Busine ss Continuit y Planning ( I SO 22 301 ) compl ia nt • 3DS ver sion 2 i mplemented • Payme nt Ser v ices Direc ti ve II Secure C ustomer Authentication ready • Indus tr y -leadin g fraud to s al es r at io • Indus tr y -leadin g payment accept an ce rates 3.8m origin -de s tination pairs p er mon th 6 0 0+ relea ses a we ek >5 0 0 microse r vice s 2 96 searc hes p er sec ond c.4 0 0 engine ers, d ata and tech specialist s 4 +T B data pro ce sse d a day A t T rainl in e, w e pr ide ou rselv es on our prop ri etary , moder n, scal abl e tech pl atfor m creat ed and ma in tai ned b y our c .400 brigh t prod uct, data a nd tech m ind s Plat form O ne Systems and tools for smart access and use of our unique data set to provide services for our B2C and B2B customers. Supp ly d ata UK & E U Global A P I and White L abel ecommerce Ticketing an d settlement Pa yments and fr aud Jour ney pl anner and r eal-tim e Cus tom er accoun t Strategic Report Gover nanc e Financial Statements 23 St rategy Our str ategic growt h priorities: By maki ng rai l tra vel easier a nd more acce ssible, we a re in viti ng new generations of tra v el lers to d it ch the car or p lane and sw it ch t o trai n tra vel i nstead . Providing a smart, intuitive and seamless experience for our customers is at the heart of our business – we are continually improving and optimising our user experience on our mobile app and web interface, removing friction for customers while offering them access to unrivalled value and the widest choice. Through customer insights and research, personalisation, data and machine learning, we invest in designing features that enhance the journeys of our customers at every stage, from planning and booking through to post sales. We have created a platform that consolidates rail and coach inventory for carriers across our European markets, pr oviding one convenient online experience for customers. We remain committed to delivering the best possible user experience through a pipeline of new , innovative products and features, for deployment to all our customers globally . Our key focus is to strengthen demand b y deploying our marketing playbook. We have built a strong brand, notably in the UK , with opportunity to grow customer awareness in Eur ope. Our addressable customer base remains large and the headroom for T rainline to grow acr oss our core markets remains significant. We continue to deploy our marketing playbook in or der to drive customer acquisition, encouraging more customers to choose more environmentally sustainable modes of transport. Increasing customer lifetime value means, for us, our customers use us more frequently for more of their tr avel needs – be it commuting, shopping trips, getting to university, business trips, family days out, buying a railcard or international travel. Through our enhanced product offering and broader mark eting, we are significantly increasing our ability to help people mak e these everyday travel choices. While helping to drive faster growth, increasing customer lifetime value is also improving our customer economics, allowing us in turn to invest more in customer acquisition. Tr ainline Partner Solutions (‘TPSʹ) is playing a key role in providing reach and scale to r ail operators. TPS has primarily focused on opportunities in the UK to date, but we are now starting to break through into Eur opean markets with our retailing solutions for carriers as well as distribution capabilities for travel sellers. Our solutions for Distribution, Carrier IT and Businesses offer further and significant growth headroom for T rainline. We remain focused on increasing demand fr om our existing accounts and winning new accounts in all three areas. Enhance the customer experi ence Build demand Increase customer life time valu e Gr ow T rainlin e Partner Solutions T rainline Annual Report and Accounts 2022 24 K ey measures Progres s in F Y 202 2 Prioritie s fo r 20 2 2 /23 • App rating • Conversion rate growth • eticket penetration • Monthly Active Users • New customers • App share of transactions • Customer transaction frequency • Customer retention • Digital railcards sold • B2B win/retention rate • Growth in international business travel market share • Supporting our Carrier IT Solutions clients through Covid-19 • 4.9/5 star rated app • Enhanced ‘new commuter’ experience – with ex citing new features • New ‘Favouritesʹ tab – allowing customers to personalise their journey and rebook in two clicks • Real-time push notifications – alerting customers to delays • We upgraded Récup’ Retard (Delay Repay) in Fr ance, making it even easier to submit a claim • We introduced airline style seatmap reservation capability in France and Italy • We partnered with every Eur opean high-speed rail entrant as they launched their services, including Lumo in the UK, Avlo and Ouigo in Spain and Tr enitalia in France • Customer engagement recovered to pr e-Covid-19 levels of c.30m unique monthly active users in Q3 (prior to Omicron) • Scaled our marketing investment as Covid-19 restrictions eased – with particular focus on performance marketing • Generated a sharp rebound in new app customer acquisition reaching its highest ever levels in the UK and Europe • UK Consumer app share of transactions up 1 percentage point to 84% • Increased our reach by integr ating Tr ainline into Google Maps for Android users, who are now able to click thr ough to us to book their travel • Google Pay now integrated into our app alongside other payment options such as Apple Pay • Notable increase in repeat usage with customers booking their commute and regional travel through T rainline • Strong progress in scaling digital r ailcards with >1 million railcards sold during FY2022 • Launched UK Flexi Season Tickets in the app and are in the process of rolling out further digital season tickets • New Global API wins and growth in Distribution (e.g. Tr avelport, CTM ) • Renewed contracts for all UK white label train carrier clients, giving them access to our industry-leading core platform functionality and upgraded customer experience features • Signed a multi-year deal in Italy with challenger brand NTV Italo, enabling them to sell regional transport connections to their customers • Investing in our strong pipeline of innovation with a particular focus on features that differentiate our offer and meet specific local market needs in our European target markets • Continuing to innovate for the returning commuter market in the UK • Adding new supply as it hits the European markets, offering our customers better choice and value whilst enabling our carrier partners to reach a wide userbase • Flexible ramping of performance marketing and customer acquisition as Covid-19 restrictions ease, supporting the marketʹs recovery • Significant investment in brand awareness in ke y European markets • Continuing to win and retain high value and loyal customers • Investing in and building out monetisation levers beyond commission in the UK and International • Making Trainline more r elevant for more of our customers’ journeys • Completing the full roll-out of digital season tickets • Retaining and growing existing UK customer base • Expanding into European markets Strategic Report Gover nanc e Financial Statements 25 C ase study B rin g in g c o m m ute r s and fr e qu ent tra v e l ler s on b o ar d A t T ra inl ine , we are d riv en b y ma ki ng r ai l tra vel ea si er . W e hel p t ra v el lers fi nd t he best va lue j ou rne y fo r t hei r needs i n an intu itiv e and seamle ss experie nce. Link to strategic o bjec tives: Enhance the c ustomer exper ience Build demand Increas e custome r lifetime value T rainline Annual Report and Accounts 2022 26 Digitalising commuter tic kets Despite being the most frequent rail users, until recently commuters had to put up with an antiquated, paper-based ticketing experience. Tr ainline deployed the industryʹs new commuter ticket offering with the launch of in-app digital exi tickets last summer – for our carrier partners as well as Tr ainline customers – with digital season tickets to come next year. In order to be able to offer all season tickets digitally we have taken etick et barcodes to the next le vel. We have developed the sTicket – a secur e eticket, which has been established as an ocial ticketing standard for high-value barcode tickets with Rail Delivery Group. It includes extr a smart security features such as time limited barcodes in the app and also allows for passenger photos to be embedded directly in the digital ticket, removing the need for a separate physical photo card. Season tickets have historically been the largest ticket type not available through T rainline digitally . Pre-Covid-19 about 20% of the market were season tick ets. After successfully piloting digital season tickets in early 2022, we now have the technical ability to offer all types of season tickets in-app, offering a much improved customer e xperience on commuter routes. New commuter and frequent t raveller features and func tionality Finding journey options and buying tickets for your favourite routes has never been easier – with our new Favourites experience, commuters can save their most frequent journeys, buy a ticket in just a few taps, and track their daily commute in real time. Further enhancements of our Favourites experience are underway including push notications of real- time updates. Enhance d digital railcard exp erience In 2020, we launched our in-app digital railcard in the UK – allo wing our customers to buy, stor e and use a digital railcard alongside their tickets in our app, without the hassle of keeping and renewing a paper version. In 2021 and 2022, we have continued to enhance the railcard e xperience for our customers in the UK and in France, making buying and applying railcards in the app and online even easier. Making Del ay Repa y easier fo r our custome rs For some time, Delay Repay has been one of our top unmet customer needs, consistently coming out top in customer research. We do listen to our customers! In response, we introduced Récup’ Retard in 2020, helping our French customers to request compensation for delayed journeys. This year, Récup’ Retard v2 simplied this even further – unique automation capabilities allow our customers to submit their compensation claim from within the app in just two taps. Our customers are clearly loving it, around 65% of notied customers submitted a compensation claim through our app. Thi s y ear , we la un ched e xci ti ng ne w feat ures add ressi ng need s of t he f requ en t t ra v el ler a nd comm ut er across a l l ou r ma rk ets. In t he UK, thi s incl udes th e la unch o f th e di gita l season t ick et. Strategic Report Gover nanc e Financial Statements 27 C ase study A c c e ler ati ng g r o w t h i n In t er nat iona l Grea t er co m pet it io n i n ra il i ncre ases va lue a nd c ho ice f or cust omers an d en ha nces t he role o f T ra i nl ine a s a thi rd-part y aggregator . B y p osit ioni ng T ra i nl ine as t he mar k etp la ce of c ho ic e fo r E urope an ra il t ra v el , we ar e we l l pl aced t o sig nic an t ly sca le our Int ernationa l business. Link to strategic o bjec tives: Enhance the c ustomer exper ience Build demand Increas e custome r lifetime value T rainline Annual Report and Accounts 2022 28 Aggregator advantage in liber alising markets Since December 2020, the EU’s Fourth Railway Package has opened domestic rail passenger services to competition. At that point, Italy was the only large country with major competition across its high-speed routes, following NTV Italo’ s market entry several years earlier. Over the last year, domestic competition between rail carriers in Europe has stepped up meaningfully: • In France, the new Tr enitalia service launched on the Paris-Lyon route in December 2021, with Tr ainline the only place where travellers wer e able to compare and book tickets across all operators (SNCF , OuiGo and Trenitalia). Following the recent ight ban on journeys that can be made by train in less than 2.5 hours, this is a route ripe for modal shift to rail. • In Spain, three different rail carrier brands now run services on the Barcelona to Madrid route – Renfe, Avlo and SNCFʹs low-cost brand OuiGo. More competition is expected in late 2022 when Iryo (a Tr enitalia joint venture) is due to enter the market. The 386-mile journey can be done by tr ain in 2.5 hours – a great alternative to ying on what was the busiest domestic airline route in Europe pre-Covid-19. Competition in domestic European rail markets incr eases the need for an aggregator like T rainline, where customers can compare fares, ticket types and journey options across all the different operators – and then book the combination they want. Inv esting in pro duct market fit , marketing and brand awarenes s By positioning Tr ainline as the marketplace of choice for European rail travel, we ar e well placed to signicantly scale our International business in France, Italy and Spain over the medium term. We are scaling up our organisation as we invest to enhance our product offering in our target markets – including integrating all carriers and fare options – and to build brand awareness. • We are growing headcount – predominantly software developers and data scientists – increasing the pace at which we can launch innovation in our digital and online channels and integrate new carriers onto our platform. We have also opened oces in Milan and a tech hub in Barcelona to ensure we have a localised presence in our emerging markets. • To meet the specic needs of local customers, we innovate and integrate new features. For example, we recently launched airline-style seatmap selection in France and Italy , so customers can now choose a specic seat to enjoy for their journey . All new features are developed with the broadest possible applicability across markets in mind. • We are scaling our marketing investment, utilising our deep in-house expertise developed from our marketing playbook, expanding our performance marketing capability , and launching our rst major brand marketing campaigns to grow awareness. We will r emain agile and disciplined, only investing where the unit economics are attractive and sustainable. Strategic Report Gover nanc e Financial Statements 29 G r owin g T r a in lin e P ar tn e r S o lutio n s C ase study Dist ribution Solutions – G lobal API Our vision is to build the world’s Number One rail travel platform, pioneering the technology behind rail content and ticketing globally to pr ovide access to nearly 1.8 billion unique rail routes, acr oss 11 different markets, through one simple connection. Tr ainline Partner Solutions provides a mark et- making role for the rail industry b y bringing incremental customers to rail thr ough its multi-channel reach. For over 20 years we’ve been powering some of the largest travel brands and online booking tools to help them provide a seamless r ail booking experience for their customers and travellers. Our Global API allows our partners to maximise revenues by pr oviding extensive customer-rst, feature-rich rail content all thr ough one simple connection. It is quick and easy to integrate with Tr ainline’s continuous support to ensur e a seamless go-live through to transaction gr owth. Connecti ng t o 45k train s tatio ns 4 5k Access t o nearly 1.8bn uni que ro ut es 1 . 8 bn Access t o 11 mar k ets through our API 11 Grow T r ainline Partn er Solution s T rainline Annual Report and Accounts 2022 30 Leading corporate tr avel platform T ripActions partnered with T rainline to enhance their customer proposition thr ough launching their European r ail oer . TripActions, the only all-in-one travel, corporate car d, and expense management solution partnered with Tr ainline to enhance their customer proposition by launching their European r ail offer. TripActions became the rst partner to go live on Tr ainline’s Global API, offering their appr oximately 8,800 corporate customers a seamless rail booking e xperience that also provides a sustainable tr avel option – all through one simple connection. Tr ainline’s Global API enables T ripActions to provide their customers with a superior and feature-rich customer service. As well as offering a wide choice of routes and fares, customers have the freedom to manage their own booking, empower ed by self-service capabilities such as obtaining refunds on-the-go, saving both time and money . ‟TripActions believes in helping customers deliver sustainable business travel, giving the business traveller the tools and resources to make a mor e informed choice to reduce their impact on carbon emissions. Our partnership with Tr ainline has strengthened and broadened our train offering acr oss Europe, giving travellers an additional mode of transport to consider when looking to offset their carbon footprint,ˮ said Danny Fink el, Chief Commercial Ocer, T ripActions. Ca s e s tud y Strategic Report Gover nanc e Financial Statements 31 F Y2 2 39 FY21 (25) F Y2 0 85 UK Consumer UK TPS International UK Consumer UK TPS International F Y2 2 2,520 F Y2 1 783 F Y2 0 3,7 2 7 F Y2 2 189 F Y2 1 67 F Y2 0 261 FY21 (11 ) F Y2 0 8 FY21 (1 9) FY20 (1 8) F Y2 2 166 F Y2 1 (14 6 ) F Y2 0 59 K ey per f ormance indicators W e use the follo wi ng financ ial and non-fina ncia l KPIs t o measure the strategic per formance of ou r business. Net tic ket sales 1 (£ m) Adju ste d ba sic e arnin gs p er sh are 1 ( p) Re ve n u e (£ m) Ba sic ea rnin gs p er sh are ( p) Adjusted E BITDA 1 (£ m) Op era ting f re e cas h ow 1 (£ m) Description Net ticket sales represents the gr oss value of ticket sales to customers, less the value of refunds issued, during the year. Net ticket sales does not represent the Group’ s revenue. Description Adjusted basic EPS is prot / loss after tax for the year, excluding ex ceptional items, amortisation of acquired intangibles, gain on repurchase of covertible bonds, and shar e- based payment charges together with the tax impact of these items, divided by the weighted average number of ordinary shares. Description The Group generates the majority of its revenue in the form of commissions earned from the rail and coach industry on ticket sales based on a percentage of the value of the transaction. The Group also earns fees and other service charges billed directly to the customer, on a per transaction basis. Description Basic EPS is prot / loss after tax for the year divided by the weighted average number of ordinary shares. Description Adjusted EBITDA is prot or loss after tax before net nancing expense, tax, depreciation and amortisation, exceptional items and share-based payment charges. Description Operating free cash ow is cash gener ated from operating activities adding back exceptional items, and deducting cash ow in relation to capital expenditur e. Performance Net ticket sales increased to 322% of prior year at £2,520 million, with UK Consumer at 383%, International at 178% and TPS at 384% of prior year. Performance Adjusted EPS was (0.8) pence, a 10 pence increase on the prior year, reecting the recovery from Co vid-19. Performance Revenue increased to 281% of prior year at £189 million, with UK Consumer at 348%, International at 185% and TPS at 126% of prior year. Performance Basic earnings per share was (2.5) pence, an increase of 16.6 pence on the prior year, reecting the recovery fr om Covid-19. Performance Adjusted EBITDA increased to £39 million from a loss of £25 million last year, reecting the recovery from Co vid-19. Performance Operating free cash ow was £166 million versus (£146) million in the prior year. This reected EBITDA generation and working capital inows as the business recover ed. F Y2 2 F Y2 2 (1) (2) 1. S ee p ag e 162 to 16 4 f or t he d e f in i ti on o f t hi s K PI . T rainline Annual Report and Accounts 2022 32 FY22 (1 0) FY21 (1 0 0) F Y2 0 2 F Y2 2 27 .5 F Y2 1 1 0.9 F Y2 0 3 0 .1 F Y2 2 40 F Y2 1 30 F Y2 0 21 90 FY21 241 F Y2 0 71 F Y2 2 44 F Y2 1 36 F Y2 0 32 F Y2 2 84 F Y2 1 83 F Y2 0 76 F Y2 2 Operating ( loss )/ profit ( £m ) Monthly activ e users ( m) Cumul ative a pp dow nloa ds (m) UK industry etick et penetration ( %) T ransactions through mobile app ( %) Description Operating loss/prot is a prot measur e reecting prot or loss after tax before net nancing income/expense and tax. Description Net debt is a measure used by the Group to measure the overall debt position after taking into account cash held by the Group. Description Number of unique visitors to Trainline ’s sites and mobile apps each month as at end of February. Description Cumulative number of app downloads in UK Consumer and International. Description Internally calculated value of eticket sales as a percentage of total rail ticket sales value for the UK rail industry. Description Gross transactions through the mobile app as a percentage of total gross transactions o ver the year for UK Consumer. Performance Operating loss improved to £10 million from £100 million last year, reecting the recovery from Co vid-19. Performance Net debt reduced to £90 million at the end of February 2022 from £241 million a year before, primarily as a result of the positive operating free cash ow . Performance MAUs recovered to 27.5 million in February FY2022, reaching 30 million in Q3 (prior to impact of Omicron). Performance Total cumulative do wnloads of the Tr ainline app increased to 44 million. Performance In FY2022, eticket penetration increased to 40% (42% in Q4) from 21% in FY2020, reecting heightened demand for etickets during Covid-19 and growing availability . Performance The percentage of transactions that went through the Tr ainline mobile app increased by 1 percentage point to 84%. Net de bt 1 (£ m) 1. S ee p ag e 163 f or t h e de f i ni ti o n of t hi s K PI . Strategic Report Gover nanc e Financial Statements 33 UK Consumer Net ticket sales for UK Consumer were £1.8 billion, 283% higher YoY , and 89% of FY2020. Net ticket sales were materially higher prior to Omicron, with Q3 up 14% versus the same period in FY2020. UK Consumer revenue reco vered to £153 million, 248% higher than the prior year given the increase in net ticket sales. Gross pr ot increased to £129 million, a 279% increase on the prior year. T rainline P artner Solutions ( ‘ TP S ʹ ) Net ticket sales for TPS were £290 million, 284% higher than the prior year and 24% of FY2020 sales. While business travel remained subdued, net ticket sales stepped up 88% in H2 versus H1, and in Q3 reached 35% of the same period in FY2020. TPS revenue gre w 26% Y oY to £15 million while gross prot was 31% higher at £11 million, with increased net ticket sales partly offset by lower project r evenue from white label clients. International Net ticket sales were £418 million, 78% higher YoY , and 85% of FY2020 sales. Net ticket sales impro ved throughout the year and in Q3 were at 99% of the same period two years ago, despite travel restrictions continuing to impede the return of inbound customers to Europe. In Q4, International net ticket sales reached 106% of FY2020 levels, although this was lapping a quarter of French rail strik es and the onset of Covid-19 in Europe. Gr o up ove r v ie w Group net ticket sales reco vered to £2.5 billion, 222% higher year-on-year (‘YoY’), and 68% of FY2020. They wer e also within our guidance range of £2.4-2.8 billion despite the impact of the Omicron variant in the fourth quarter. Net ticket sales were materially higher prior to Omicron, with Q3 at 86% of the same period in FY2020. As a result of the reco very in net ticket sales, Group revenue r ecovered to £189 million, 181% higher YoY , and gross prot increased b y 214% to £153 million. The business returned to positive EBITDA, with adjusted EBITDA of £39 million – at the top end of the £35-40 million guidance range – versus an EBITDA loss in the prior year of £25 million. International revenue gr ew 85% Y oY to £21 million given the increase in net ticket sales. Gross pr ot increased to £13 million, 105% higher than the prior year. Adjuste d EBITDA The Group returned to positive adjusted EBITDA of £39 million (adjusted EBITDA loss of £25 million in FY2021). Adjusted EBITDA was at the top of the £35-40 million guided range set out in the Group’ s half year trading update last September. The UK business contributed £98 million, £78 million higher than the prior year driven by the reco very in the UK Consumer business. The net investment in the International business was £9 million (£4 million last year) as we stepped up investment in marketing and customer experience from the second half of this year. Central administrative costs wer e £51 million, up from £41 million in FY2021 and £45 million in FY2020, reecting a normalisation of our costs as trading conditions recover ed and as we make progress against our International growth investment plans. Net ticket sal es Adjuste d EB ITDA £2 .5b n £ 39m See our KPIs on page 32 S tro ng g ro w th i n net t ic k et sal es a nd a r et ur n t o pos it iv e EBI TD A CFO ’ s financial highlights Oper ating free c ash ow Basic lo ss pe r share £ 166m ( 2 . 5) p T rainline Annual Report and Accounts 2022 34 FY2022 £m FY2021 £m Change from PY % FY2020 £m % of FY2020 Net ticket sales UK Consumer 1,812 473 28 3% 2,0 4 6 89% UK TPS 290 75 2 8 4% 1, 191 2 4% UK total 2 ,1 0 2 548 283% 3,23 7 65% International 41 8 235 7 8% 490 8 5% T otal Group 2,520 783 222% 3 ,72 7 6 8% Reven ue UK Consumer 153 44 24 8% 178 86% UK TPS 15 12 26% 57 27% UK total 168 56 200% 235 7 1% International 21 11 8 5% 26 80% T otal Group 189 67 18 1% 261 72% Gross profit UK Consumer 129 34 2 7 9% 144 90% UK TPS 11 8 31% 40 27% UK total 139 42 23 1% 184 76% International 13 7 10 5% 17 7 7% T otal Group 153 49 2 14% 201 76% Adjusted EBITDA 39 (25) 85 Operating (loss)/profit (1 0 ) ( 100 ) 2 Shaun McC abe Chief Finan cial O f ficer We ’ re back on t rack with strong g ro w th e xpected in F Y2 0 2 3 . Strategic Report Gover nanc e Financial Statements 35 Statement of f inancial position FY2022 £m FY2021 £m Change from PY % FY2020 £m Change from FY2020 % Non-current assets 525 532 (1 %) 557 (6%) Cash and cash equivalents 68 37 84% 92 (2 6 %) Other current assets 50 25 100% 52 (4%) Current liabilities (2 3 3) (4 2 ) (4 5 4 %) (1 69 ) (3 8 %) Non-current liabilities (1 5 1 ) (267 ) 4 3% (1 5 9) 5% Net assets & total equity 259 284 (9 %) 373 (3 1 %) Outlo ok for F Y 20 23 Assuming no signicant disruption to rail travel, T rainline expects strong growth in FY2023, gener ating: • Net ticket sales in the range of £3.8-£4.2 billion • Revenue in the range of £280-£310 million • Adjusted EBITDA in the range of £70-£75 million, factoring in higher investment for growth in our International business Statement of f inancial position T otal net assets at the end of FY2022 were £259 million, a decrease from £284 million in FY2021. Net current assets decreased to £(114m) million from £19 million in FY2021. The decrease was predominantly the result of a signicant working capital inow as our sales reco vered, reversing the outo w seen in the prior year. Oper ating loss The Group reported an operating loss of £10 million versus a £100 million loss last year. The operating loss included: • Depreciation and amortisation charges of £43 million, slightly higher than last year given our continued investment in product and technology throughout the pandemic (FY2021: £41 million) • Share-based payment charges of £7 million, in line with prior year (FY2021: £7 million) Loss af ter ta x Loss after tax was £12 million, reecting the £10 million operating loss and a net nance charge of £5 million (which beneted from a £4 million gain on our repurchase of convertible bonds in the year), partly offset by a tax credit of £4 million arising from the operating loss. This compares to a £91 million loss last year, reecting the strong r ecovery of the business. Earnings per s hare ( ‘ EPS ʹ ) Adjusted basic loss per share was 0.8 pence versus a loss of 10.8 pence in FY2021. Adjusted basic earnings per share adjusts for ex ceptional one-off costs in the period (of which there were none), gain on repurchase of convertible bonds, amortisation of acquired intangibles, gain on the repurchase of convertible bonds and share-based payment charges, together with the tax impact of these items. Basic loss per share was 2.5 pence versus a loss of 19.1 pence in FY2021. Non-current liabilities decreased to £151 million from £267 million in FY2021. The reduction was predominantly driven by using surplus cash to reduce the drawn down balance of our Revolving Credit Facility , and by repurchasing £35.2 million of convertible bonds. Net debt reduced to £90 million at the end of February 2022 from £241 million a year before, primarily as a result of the positive operating fr ee cash ow. Cash ow Operating free cash ow was £166 million, a £312 million improvement year-on-year. This reected our return to positive EBITDA and working capital inows as the business recovered, as well as the timing of industry settlement payments. This was partly offset by capital expenditure in the period of £29 million, slightly higher than the prior year (FY2021: £26 million) as we step up investment in product and technology for our International business. Cash and cash equivalents ended the year at £68 million, a net cash inow of £31 million. Shaun McC abe Chief Finan cial O cer 5 May 2022 CFO ’ s financial highlights c ontin ued T rainline Annual Report and Accounts 2022 36 Viability statement In accordance with the requirements of the UK Corporate Governance Code 2018, the Directors have assessed the long-term viability of the Group and its ability to meet its liabilities over a three-year period. The Directors carried out a robust assessment of the Group’ s principal and emerging risks as set out on pages 38 to 47 and the potential impact of any of these risks on the long- term viability of the Group. Forecasting period Three years was considered an appropriate assessment period. Given the fast pace of the digital environment in which the Group operates, a longer forecasting period would become less reliable as it is dicult to pr edict digital trends and the pace of change over a longer period. The three-year period is also aligned to the Group’s annual strategic planning process. The base case reects the Group’ s three-year plan, which includes the current best estimate of outlook. The key assumptions in the three-year plan which could be impacted by the principal risks are: the legacy of Covid-19 and its impact on trading; the rate of net ticket sales gro wth and the associated revenue gro wth; and the level of cost required, including cape x, to meet sales and revenue forecasts. How viability was con sidere d T o assess the viability of the business, sensitivity scenarios were modelled from the base case taking into consideration the Group’ s principal risks if they were to occur. This involved exing some of the ke y assumptions by downside changes, incorporating severe but plausible downside scenarios and quantifying the potential impact of one or more of the principal risks crystallising over the assessment period. None of the scenarios modelled include any mitigating actions. The viability assessment considered the liquidity of the Group and whether the covenant requirements would be met in all applicable periods. The Board has reasonable condence that the Gr oup will be able to renance its existing £350 million revolving credit facility and intends to do so in advance of its contractual maturity in June 2024. Management have considered covenant requir ements for public listed companies seeking nance under curr ent market conditions. The most likely covenant tests do not indicate a risk to viability and requirements would be met by the Group in all applicable periods. The outcome of RDG’s Retail Revie w as disclosed on page 17 is not expected to come into effect until 1 April 2025, and as such falls outside of the assessment period. Sens itivities app lied The sensitivity scenarios applied were as follows: Scenario 1 • A signicant reduction in sales with no corresponding reduction in costs, resulting in a c.15% decrease in adjusted EBITDA in each year during the assessment period Link to pri ncipa l risk s: all Scenario 2 • 20% additional marketing spend with no upside in sales/revenue Link to pri ncipa l risk s: market s hoc k / ec onom ic disru ption, I T sec urit y an d cyb erc rime, c omp etitive l ands cap e, regulat ory and polit ical en vironment Scenario 3 • £10 million additional capex in each year with no upside in sales/revenue Link to pri ncipa l risk s: IT se curit y and cy be rcri me, pe op le, co mpe titive landscape Scenario 4 • Data breach in FY2024, resulting in reduced r evenue, compliance nes and ongoing increased IT security costs Link to pri ncipa l risk s: IT se curit y an d cybercrime, complia nce, regul atory and polit ical environment Conclusion The Group is forecast to meet covenant requirements in all periods in which they are applicable under the base case and under all scenarios considered. Although existing covenant requirements would no longer be applicable when the Group’s e xisting revolving cr edit facility expires in June 2024, the Group is expected to comply with management’s best estimate of covenant requir ements imposed as part of renancing under the base case and under all scenarios considered. The Board conrms that it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next thr ee years. Strategic Report Gover nanc e Financial Statements 37 Our risk manag ement fram ework The Gr oup has a dened Enterprise Risk Management (‘ERMʹ) fr amework that governs our risk management and methodologies. The process allows a r obust identication and assessment of the risks facing the Group. Our risk management framework and processes ar e described in detail opposite. P rincipal risks and uncer tainties A t T rain li ne, w e ad opt a rob ust ri sk ma na gemen t strat egy t o ens ure w e cont in ue t o grow o ur b usi ness in a susta i nab le w ay , ach ie ve o ur o bj ectiv es and pr o vi de v alu e to our c ustomers, shareholders and other stakeho lders. T rainline’s framework for risk managem ent spans all levels of our business The Board of Directors has ultimate responsibility for our risk management programme and for setting the risk parameters within which Tr ainline’s Management T eam operates. The Board also sets the tone for risk management; the culture, as well as the context, for how decisions are made when evaluating risk. The Board is also responsible for assessing events and circumstances which could threaten T rainline’ s current and/or future strategy , business operations or business model, and for providing guidance and advice to our Management T eam on navigating risks. The Board is supported by the Group, through Tr ainline’s Management T eam and the Audit and Risk Committee, in particular, to revie w, report on and manage risk. The Audit and Risk Committee is responsible for re viewing the effectiveness of Tr ainline’s internal controls and risk management processes, and for reporting such matters to the Board. The responsibility for re viewing T rainline’ s risk register also belongs to the Audit and Risk Committee. The Committee makes sure that T rainline’s risk register is: frequently updated and revie wed; comprehensive; monitored and managed; and effectively communicated back to the Board on a regular basis. T r ainline B oard Overall responsibility for T rainline’s risk managementprogramme. Audit & Risk Commit tee Responsible for reviewing the effectiveness of T rainline’s internal controls and risk management processes, and for reporting such matters to the Board. Managem ent T eam Supports and contributes to internal risk management systems and processes. Internal Risk Com mittee ( ‘ IRC ʹ ) The IRC serves as a forum to consider new risks facing the business, discuss the existing risk register and the mitigation in place and identify emerging risks facing the Group and reports regularly to the Audit and Risk Committee and the Board. T rainline Annual Report and Accounts 2022 38 This helps to ensure that the Board remains up to date with T rainline’ s risk prole, allows them to dene appropriate strategic objectives for the Group and consider the effectiveness of the risk management process. During our annual long-term business planning process, all high- level strategic, nancial, r egulatory and reputational risks are formally assessed by the Board. A ow of clear, timely and rele vant communication exists between the Audit and Risk Committee and the Board, which continues from the Board to T rainline’ s wider business and vice versa. This clear ow of communication seeks to ensure that our leadership remains aligned on our risk appetite, how decisions around risk are made and how our strategy is ex ecuted in line with Tr ainline’s risk par ameters. Procureme nt proc ess and assessing our su ppliers Tr ainline’s pr ocurement processes reect our commitment to sustainability and governance. All material suppliers are assessed to ensure they ar e t for purpose and meet Tr ainline’s ethical standar ds, security requirements, envir onmental and corporate responsibilities, and comply with relevant legislation, wherever they ar e in the world. Complianc e and risk management processes Enterprise risks are formally assessed bi-annually as part of dedicated ‘Risk Workshopsʹ held with responsible risk owners. The Head of Risk and Internal Audit joined the business in October 2021 and has been tasked to co-ordinate our risk management practices. As part of the enterprise risk management framework, potential emerging risks and longer- term threats are consider ed to identify new trends, competitor actions, regulations, government interventions, or business disruptors that could impact the Group’ s business strategy and plans. The enterprise risk management process has been in place throughout FY2022 up to the date of this Annual Report. T rainline identied risks and mitigants At Tr ainline, risk management is an integral part of our business culture and organisation. The Board holds ultimate responsibility for risk management, supported by the Audit and Risk Committee which has responsibility for revie wing and maintaining Tr ainline’s risk r egister, and approach to risk management and compliance. Our Management T eam takes an active role in managing risk throughout day-to-day operations at Tr ainline, guided by the Board and the risk parameters as set through Tr ainline’s str ategic objectives. By providing input to the risk register process, as overseen by the Audit and Risk Committee, the Management T eam helps to determine the risk appetite for the business which is approved by the Boar d. Emerging risks Other than the Principal Risks, the Board also considers potential emerging risks and their impact on our operations. Though we believe the Group is well-positioned to take advantage of the increased push for sustainable travel, there are potential uncertainties around the climate change related legislative agenda in our markets. Though we continue to proactively monitor these developments, if we are unable to proactively demonstrate our sustainability credentials (e.g. ‘Net Zeroʹ commitments) or fail to comply with the reporting requirements (e.g. T ask Force on Climate-related Financial Disclosures), our corporate reputation may be negatively impacted. Further information on climate-related risks is available on page 55. Probability of realisation of Tr ainlineʹs principal risks Moderate High Major Moderate significance High significance Major significance Ke y Market shock / economic d isruption Prolonged Covid- 1 9 I T s ec ur i t y a nd c y be rc r im e People Competitive landscape Compliance Supply and par tner ships Regulator y and political enviro nment Principal risks heat map Strategic Report Gover nanc e Financial Statements 39 1. Market shoc k / eco nomic disruption Status: With the easing of the impact of Covid-19 on the over all economic landscape in our principal markets, we have seen a partial recovery in net tick et sales. This has consequently improved our nancial position and r educed our exposure to uncertainties ar ound external funding and debt levels. Howe ver, slower reco very of the commuter and corporate market as well as additional economic headwinds (e.g. inationary pr essures and other macroeconomic repercussions due to the Russian sanctions) could still impact our nancial performance. Description of risk How we mitigate the risk How we monitor t he r isk Status of risk E xp os ure t o mar ket risk s including foreign currency rat es , ge ne ra l mar ket sentiment and the ri sk of g lo ba l mar ket shock s, including a recession. Sig ni c an t mar ke t eve nt s c oul d damage T rainline’s competitiveness, credit wor thiness and the spending po wer o f ou r cli en t s and customers, ultimatel y impact ing our na nci al re sul t s and t he s uc ces s of o ur pro du c t o f f er in g. Link to Strategic Objec tives: As part of our operations, we conduct detailed and careful analysis and modelling of cash balances and debt levels to ensure T rainline’s liquidity, access to financial facilities and sustainable business operations all support our long-term gro wth. Through this analysis, we create for ecasts and projections, including contingencies that help us cater for any negative impacts on our business – operationally or financially . Tr ainline has a large and diverse portfolio of investors, banks and advisers, allowing us to maintain access to global capital markets and funding. • Duration and cost of debt • Monitoring of financial and investment markets • Investor engagement • Engagement with banking and finance partners • Monitoring our credit rating • Analysis of industry , economic and financial drivers High Change P rincipal risks and uncer tainties continued T rainline Annual Report and Accounts 2022 40 2 . Prolonge d Covid-19 Status: Though the scale and duration of the Covid-19 pandemic r emain uncertain and may continue to negatively impact the corporate and commuter passenger travel, we continue to see r ail travel reco vering in all of our major markets, resulting in a gr adual improvement in our nancial performance across all our mark ets. We continue to maintain the appropriate health and safety protocols implemented to ensur e the safety and wellbeing of our people and remain committed to working with our customers, clients, and industry partners to support longer-term reco very. Whilst we remain vigilant around the potential r esurgence of Covid-19 and other virus variants and remain committed to implementing the required r emediation measures, if necessary, we belie ve the potential impact of this risk on our overall business has become mor e moderate. Description of risk How we mitigate the risk How we monitor t he r isk Status of risk Increases in Covid-19 case numbers, emerging variants and any future government travel restrictions may impact domestic leisure, corporate and commuter travel, as well as cross- border travel into and around Europe and International inbound travel into the UK and Europe from overseas. Link to Strategic Objec tives: Throughout Covid-19 T rainline’s priorities have remained the safety and wellbeing of our people, supporting our customers and engaging with industry and governments to plan and support recovery in r ail travel. Protecting our shar eholders against the economic impact of Covid-19 has also been a priority for us, and we’ve taken sever al actions to manage and mitigate the Group’ s financial position. We continue to monitor developments closely across all our markets and adapt our responses accordingly . Tr ainline carefully manages its operations to sustain a profitable and stable business in the long term. Should there be a significant resurgence in Co vid-19 we can take the following actions, amongst others, to mitigate the impact on our business: • Evaluate and reduce oper ating costs and cash outflows • Reduce marketing and other discr etionary spend • Effective management of our working capital • Secure debt co venant waivers from Lenders We have maintained wellbeing activities for all team members including online fitness sessions and activities including regular and frequent all- company meetings; virtual wellbeing sessions; meditation and yoga; 24-hour, free, confidential, one-on-one counselling. We also continue to monitor employee engagement through our annual ‘Have Your Sayʹ surve ys. • Engagement with key government organisations and representatives as well as monitoring announcements. • Monitoring customer contact, refund rates and sentiment across markets • Engagement with carrier partners • Monitoring financial performance and updating financial projections • Staying close to our employees via engagement surveys and check-ins Moderate Change Key Enhancing the customer experience Increase customer lifetime value Growing T rainline Partner Solutions Build demand Strategic Report Gover nanc e Financial Statements 41 3. IT securit y and cyber crime Status: The fast-moving nature of IT security and cyber risks mean that T rainline will always face a level of vulnerability. Due to the pandemic and changes in ways of working there has been a greater focus on ensuring that de vices are secured appropriately to mitigate against the incr ease in threats as a result of r emote working practices. With the expansion into new and e xisting markets, data privacy legislation risks will remain high for the for eseeable future. We have increased our investment in cyber security , data privacy and related IT security systems, processes and r esources. Description of risk How we mitigate the risk How we monitor t he r isk Status of risk Tr ainline is a processor of large amounts of customer data. There is a risk that data is intercepted or leaked impacting negatively on our customers, business and reputation. Link to Strategic Objec tives: The Group’s cr oss-functional Security Steering Committee regularly re views and monitors existing and emerging threats as well as our current mitigation strategies and privacy matters to validate that we continue to adhere to data privacy regulations across our mark ets. Tr ainline is certified PCI Level 1 compliant. We perform detailed access management revie ws and have prioritised mitigating activities in place around our information processing systems. We remain focused on our business continuity activities around critical systems to ensure that in case of disruptions, recovery is managed with the highest priority. All new T rainline employees ar e required to complete a cyber security and privacy related training course as part of their on-boarding. The Chief Information Security Officer (‘CISOʹ), Security and Privacy teams provide additional periodic and, if r equired, targeted training to T rainline employees to up-skill and ensur e good practices are follo wed. We have policies and procedures in place to monitor systems access and remote working practices ar e continuously revie wed and reinforced to help us monitor potential cyber and data security risks. F or more information on o ur technology , see page 22 • Regular, independent review of detection and prevention systems / process operating effectiveness and remedial activity • Annual targeted threat assessments tailored to Tr ainline’s specific circumstances • Threat and vulnerability monitoring by cross-functional, executive- level committees High Change P rincipal risks and uncer tainties continued T rainline Annual Report and Accounts 2022 42 4. People Status: As a fast-growing technology business, attr acting and retaining the best talent is a critical element of our strategy . The technology market is particularly competitive, which creates challenges when hiring for technology r oles and retaining talent. T rainline has taken numer ous steps to ensure it continues to be an attractive place to work and develop. T o further mitigate this risk, we have launched another technology hub in Barcelona, Spain with a planned initial staff of 60 engineers and developers. Though the over all risk remains high, the actions implemented help mitigate our exposure. Description of risk How we mitigate the risk How we monitor t he r isk Status of risk Tr ainline’s business depends on hiring and retaining first- class talent in the highly competitive tech industry. Inability to attract and retain critical skills and capabilities could hinder our ability to deliver on our strategic objectives. Link to Strategic Objec tives: We work hard to develop and sustain our highly collaborative, agile and innovative culture, which incorporates the wellbeing and professional development of team members across each site. We continue to build capabilities and grow our teams, in particular focusing on Engineering, Data, Industry and Government Relations. New joiners are r ecruited and carefully screened by our in-house talent team. Organisational revie ws are undertaken on a r egular basis to ensure that teams are built to succeed and that we r emain competitive to r etain and attract talent. We continue to place a high priority on the mental health and wellbeing of our people, through our well-developed and continuously improving wellbeing initiatives. T o help us deliver our strategic goals and ambitious growth plans we have made a number of k ey hires to our Management T eam with the addition of a Chief T echnology Officer, Chief Data Officer and Chief Corporate Affairs Officer. We have also expanded our Management Team in Europe. Highlighting the strength of our succession planning process, we have also promoted internal talent to senior leadership roles. F or more information on o ur people and culture , see page 48. • We conduct regular employee engagement surveys and monitor and act on employee feedback • Regretted attrition rate monitoring • External benchmarking High Change Key Enhancing the customer experience Increase customer lifetime value Growing T rainline Partner Solutions Build demand Strategic Report Gover nanc e Financial Statements 43 5. Co mpetitive landsc ape Status: There is an increasingly competitive online tr avel environment as existing tr avel service providers continuously improve their offerings and ne w disruptive technologies may emerge. The Williams-Shapps Plan for Rail may further increase competitive pressur e. We continue to closely monitor the market and pr oactively manage our technology portfolio. Description of risk How we mitigate the risk How we monitor t he r isk Status of risk As we operate in the fast-moving technology sector, we are faced with new and emerging technologies as well as new entrants in our markets. Ensuring that Tr ainline meets the needs of its consumers – both B2C and Tr ainline Partner Solutions customers – is of paramount importance in building, growing and sustaining a healthy business. Failure to ensure our technology and user experience meets those needs and that Tr ainline’s offering remains ahead of competitor products could have an adverse impact on our future results. Link to Strategic Objec tives: At Tr ainline, we recognise the importance of building and sustaining both a strong team and strong relationships. Our leadership, e xceptional team, strong industry networks and agile way of working help to ensure that we stay ahead of our competitors, up to date and innovative. We continue to make targeted product investments and proactively monitor our brand health. With c.400 engineers, data and tech specialists, we use our skills and experience across our Pr oduct and T ech teams, to innovate for, engage with and listen to our customers. We work closely with industry groups and leaders to understand key tr ends to proactively respond to emerging changes and requirements. We also undertake regular mark et and competitor analysis to understand potential competitive threats and opportunities for partnerships and growth. We have created a strategic partnership with Google, as part of which we are now able to integr ate our product offering with Google Maps on the Android platform. • Monitoring and analysis of competitor behaviours • Clearly defined performance indicators to monitor customer engagement statistics • Regular evaluation of industry and consumer trends High Change P rincipal risks and uncer tainties continued T rainline Annual Report and Accounts 2022 44 6. Co mpliance Status: The Group has maintained its focus on compliance with ke y regulations and mandatory training programmes have continued throughout the year. As we continue to e xpand our operations within the EU, we r emain fully committed to maintaining our compliance processes by r ecruiting, training and deploying legal and compliance professionals in those markets. Description of risk How we mitigate the risk How we monitor t he r isk Status of risk The Group works within various licence terms and with licensing bodies and regulatory structures in order that it may retail rail and coach tickets to customers across the world. Should Tr ainline not comply with licences, legislation, regulatory requirements or other such frameworks, this could affect the reputation of the Group and the Group’ s ability to conduct business operations. Non-compliance could also result in legal or financial penalties, the inability to retail rail and coach tickets and the loss of revenue. Link to Strategic Objec tives: At Tr ainline, we take a comprehensive and r obust approach to compliance, which is overseen b y the Audit and Risk Committee, our Board and by our Management, Legal, Finance, T echnology and Security teams on an operational basis. We have dedicated resources and tr aining to ensure that each member of our team is appropriately trained on compliance topics. Security , privacy and data, as well as corporate hospitality , bribery, gifting and political and charitable donation compliance training are mandatory for all at T rainline. We also ensure that extr a training is given to team members, relative to their roles at T rainline. We operate a whistleblo wing policy, whereb y any member of our team is able to quickly and confidentially raise concerns and feedback through an appropriate, procedural channel. We employ dedicated staff members and teams, where appropriate locally in countries wher e we operate, who help to track and monitor legal, contractual and regulatory compliance r equirements in each of the major markets in which we operate. Where required, annual assessments ar e performed and reported to the rele vant party on compliance. Under some contracts and regulations, T rainline is subject to third-party re views on either a regular or ad hoc basis to assess its compliance with the underlying requirements and the results of such revie ws are reported to the rele vant third parties. • Regular assessment of laws and regulations across geographies in which we operate • Regular re view and maintenance of risk register • Monitoring of customer, industry and Board concerns • Audit and Risk Committee revie ws of compliance processes Moderate Change Key Enhancing the customer experience Increase customer lifetime value Growing T rainline Partner Solutions Build demand Strategic Report Gover nanc e Financial Statements 45 7 . Supply and partnerships Status: The successful execution of T rainline’s strategy is reliant upon r etaining its existing licences with carriers and also integrating new carriers as they launch via e xisting licences or by agreeing ne w licences where requir ed. Successful contractual arrangements with partners to pro vide access to T rainline’ s supply remains key as the industry continues to recover from Co vid-19 and with growing inter est in rail as a more sustainable means of business tr avel. Description of risk How we mitigate the risk How we monitor t he r isk Status of risk Tr ainline retails rail and coach tickets across many countries and to customers across the world. We therefore rely on secure and reliable connections from all rail and coach operators. A unilateral termination or variation by a rail or coach carrier of its licence terms with Tr ainline, including a significant reduction in the levels of commissions which Tr ainline receives, or a significant or prolonged disruption to traveller services or systems would have an adverse impact on Tr ainline’s r esults. In order to ensure a superior customer experience for our customers, we also rely on accurate and relevant information and data from carrier partners. Lack of or incomplete information would also impede Tr ainline’s ability to offer a useful product to meet the needs of customers. Link to Stra tegic Objec tives: By working closely with our carrier partners and by remaining actively engaged with the industry across all geographies in which we have supply , we ensure we remain up to date on any industry or service issues. We also believe r elevant competition laws may limit the scope of carriers’ abilities to amend or otherwise treat T rainline unfairly . As our presence in Europe continues to gro w and our relationships with the train oper ators continue to expand, we have been expanding our team of commercial and technology resour ces. Though our business-to-business and corporate travel services were significantly impacted b y the Covid-19 related lock downs, we have continued to reinforce our Sales and Account Ex ecutive teams. • Long-standing relationships with the industry, our carrier partners • Highly experienced Supply and Government Relations teams responsible for monitoring and responding to the needs of our partners, as well as identifying new supply opportunities • We have been continuing to add experienced, senior level resour ces to the European supply and partnership teams • We have effective processes in place to support informed, data-led decision making High Change P rincipal risks and uncer tainties continued T rainline Annual Report and Accounts 2022 46 8. Regulator y and p olitical environment Status: The UK operating environment has seen opportunities and risks generated b y the Williams-Shapps Plan for Rail. This could impact our commercial environment in the UK, with changes e xpected to our licence counterparty, the Rail Delivery Group (‘RDGʹ). We ar e engaged closely with relevant go vernment and industry stakeholders to proactively monitor and mitigate risk. We have recently agr eed a Memorandum of Understanding with RDG to set a back-stop for commission should we be unable to agree a mutually acceptable outcome to the Retail Revie w, curr ently being undertaken by RDG. This back-stop would result in a net 25bps r eduction in T rainline UK Consumer economics, being a ~50bps reduction in commission offset by a r emoval of central industry costs pr eviously recharged to T rainline to the value of ~25bps. In our European markets, the continued liber alisation of the rail industry presents signicant growth opportunities. Description of risk How we mitigate the risk How we monitor t he r isk Status of risk Tr ainline’s oper ations could be affected by changes to policy or regulation by government, regulators and industry. Changes to state- owned carriers, which operate in most geographies in continental Europe, as a result of government activity in their respective jurisdictions could also affect Tr ainline’s oper ation and/or financial prospects, in the short to medium term. Link to Strategic Objec tives: Tr ainline recognises the importance of developing strong and effective relationships with go vernments and rail industry partners. The Corporate Affairs team proactively engages with UK and EU national governments, institutions and carrier partners as part of a structured programme of stak eholder engagement. We work to ensure our voice is hear d in key debates. In the last 12 months this has included the Williams- Shapps Plan for Rail, the RDG Retail Review and Europe-wide liberalisation initiatives such as the EU Plan for Rail. This engagement is joined with our overall communication and brand positioning, to present a coherent message to all our audiences. A range of tactical work including attendance at industry and political events, thought leadership and media and social media interventions amplifies this voice. Through doing this, we ensure that T rainline’s external operating envir onment remains as supportive as possible to our growth ambitions. • By utilising specialised monitoring tools, we track changes to laws and regulations across all geographies in which we operate • We undertake comprehensive risk analysis and modelling, both in-house and through specialist consultancies • We monitor public sentiment and trends via polling, focus groups and other methods • We have programmatic engagement with key industry partners and government representatives with monitoring of sentiment shifts High Change Key Enhancing the customer experience Increase customer lifetime value Growing T rainline Partner Solutions Build demand Strategic Report Gover nanc e Financial Statements 47 Our people and culture O u r P eo p l e a r e at the hear t of ou r busi ne ss It ’ s our innovativ e team a ccomp lishing brill iant th ing s ev er y da y tha t ma k es it si mple r , easi er , cheaper and greener for pe ople t o plan thei r journeys and see the world. T rainline Annual Report and Accounts 2022 48 Inv esting in our Peopl e Investing in l eade rship A number of key hires to our Management T eam are helping us deliver on our strategic goals and ambitious growth plans, with the addition of Milena Nikolic from Google as Chief T echnology Ocer, Mike Hyde from Facebook as Chief Data Ocer and Martin Sheehan from Portland as Chief Corporate Affairs Ocer. Highlighting the strength of our succession planning process we also promoted James Hanratty , who Emplo y ees 75 0 + Promotions 11 0 Nationalities >5 0 Engineers, dat a and t ech specialists c. 400 I wa nt t o mai ntain a d yna mic t ech cult ure a t T rain li ne so people rea l ly en jo y wor kin g here . I dra w a lot of jo y out of seei ng us, as a t eam, uti lisin g our d at a and ex pertise t o shi p gre at prod ucts that e nha nce the u ser ex peri ence a nd gro ws our c ustome r base so t hat w e encoura ge more people to reduce the en vironmen tal impact of their trav el choices. Milena Nik olic Chief T echn olog y O cer joined Tr ainline in 2009, to General Counsel. As part of our commitment to promoting diversity , all executive search shortlists achieved a 50:50 balance of male and female candidates. Inv esting in tec h talent Leveraging our position in Eur ope, we opened new oces in both Milan and Barcelona this year, giving us access to new talent markets. These new oces pro vide an important strategic opportunity for us to attain the expertise and technical skills we need to deliver on our transnational expansion. Strategic Report Gover nanc e Financial Statements 49 Our people and culture cont inued A culture built for succ ess Empower ing pe ople to ma ke green er travel ch oice s, conn ec ting pe ople a nd plac es, si ts at the h ear t of o ur busine ss . Greener workplaces By revie wing all the suppliers and products we use across our oces, we can ensure we choose more sustainable options. This helped us reduce the environmental impact of our oces in FY2022. Communication and engagement Our green purpose is at the forefront of regular communications with our People and a programme of ‘green-focused’ e vents. This included the launch of our rst ever ‘Green Week’ in November 2021, which saw employees from our London, Edinburgh and Paris oces taking direct action to benet our local communities, and the launch of a dedicated ‘Green’ learning hub on our training platform. Perks for good As part of Green Week, we launched our Tr ainline Forest in partnership with our charity partner, onHand, who will plant two trees in the Bosawas Biosphere Reserve in Nicaragua for each of our employees. OnHand also help provide our People with access to volunteering opportunities and sustainability knowledge. Another tree planting initiative was also put in place, where we committed to planting a tree every time a ne w employee passes probation. This enables each of us to actively have a positive, direct and long-lasting impact on the environment. High per formanc e Keeping our People and teams connected to our business goals is key to our continued success and growth. This year we have intr oduced Objectives and Key Results (‘OKRs’) as our goal setting methodology, to help us simplify the process and better align teams to the things that matter most. This way of working will also demonstrate to our People how the y can directly shape and contribute to our success, increasing job satisfaction and engagement. T o help us embed this new way of working, we have established a partnership with a leading OKR platform, including investment in enablement services for our People. We started on this journey in late FY2022 and will continue to roll out OKRs in our key str ategic activities and across all departments during FY2023. Encouraging innov ation We are proud of the bright minds that work here at T rainline, constantly innovating, problem-solving and obsessing over making our customer experience ever better. W e celebrate new ideas and encourage our People to stretch their minds, share their knowledge and be inspired. Our values We’ re b uilding the future of rail We focus on ev er y customer , par tner and journey We mak e a positive impac t We are one team T rainline Annual Report and Accounts 2022 50 An inclusi ve a nd diverse w orkforc e Our app roac h to diver sit y , inc lusion and b elong ing foc uses o n rem oving barrie rs, c reating c onne ction s and bein g a plac e wher e ever yone c an bel ong andthr ive. People Le d Group s People Led Groups (‘PLGs’) play a k ey role in our diversity and inclusion agenda as inclusive communities developed and led by our People with sponsorship and support from senior leaders. They ar e all about empowering and supporting underrepresented groups, b y providing a safe space to talk, a place to come up with new ideas and a channel for voices to be heard. We’ve worked to deliver a pr ogramme of events that celebrate and r aise awareness of key diversity and inclusion calendar moments such as International Women’ s Day, Black History Month, Pride and Autism Awareness Week. Senior W omen’ s Ne twork The Senior Women’ s Network focuses on supporting and helping to develop our female leaders, accelerate gender parity and encourage more women to take up leadership positions. Family friendly Family friendly policies that are both supportive and competitive help us increase diversity and inclusivity and attract and retain talent. Apprentices There is an enormous opportunity to increase diversity in the technology sector. Our apprenticeship programme was launched this year to provide car eer opportunities to a cross-section of young people from under-represented communities. Partnering with Multiverse, we welcomed our very rst apprentices to our Engineering, Data and People teams in September 2021 and we expect to welcome our second group of apprentices in September 2022. Joinin g T rain line has given me a grea t opportu nity t o learn from man y people who com e from d iverse back grou nds and a va riety of sectors. I’ m particu la rly enjo ying w orking alongside ex perienced progra mmers, it’ s a very wel comi ng, f r iend ly and suppor tiv e envi ronment! T ymoteu sz Hylin ski Sof tware Engi neer Apprent ice Diver se hiring pr ac tice s T o recruit across diverse communities we partner with diversity-focused job boards and platforms, such as Women in T ech and Diversity in Tech. Our relationships with Academy and Bootcamp training providers help us develop an inclusive early career programme. Tr aining for our hiring managers is provided to help r emove any bias from decision making and ensure that our internal hiring process is fair and inclusive for all. Further information on our workforce diversity is available on page 77. Strategic Report Gover nanc e Financial Statements 51 Our people and culture cont inued Growing a care er Suppor ting our mana gers Management and leadership development is offered to ensure managers have the skills and expertise they need to lead their teams. Our Leading at Tr ainline New Manager accelerator programmes deliver leadership coaching, leveraging our experienced Management T eam to host talks and workshops on specic management topics. Inv esting in our T e chnolog y teams Supporting our thriving T ech community with events, resour ces and tools to keep building world- class talent is key . We’ve gr own our partnerships with some of the leading technology-focused capability platforms to ensure we are building the cutting-edge skills required to keep our teams at the forefr ont of developments in technology . Our focus o n wellbeing Looking after our People Over the course of FY2022, we continued to place great importance on the wellbeing of our teams, to help support each of our People professionally and personally during Covid-19 restrictions and the transition back to oce life. Our annual cross-company wellbeing weeks and celebrations tied to ke y wellbeing calendar moments help our People take care of their mind, body and spirit. I’ve been at T ra in li ne fo r o v er v e yea rs and ha ve p rogressed f rom a n Ag ile Busin ess Anal yst t o a BA M ana ger in th at ti me . I’ve l o v ed bein g able t o carve ou t m y own pat h in m y time he re and cr eat e a progress ion f rame wor k wit h m y tea m to aid the ir ca reer dev elopment . I also take adv antage of ment ors and the in credi ble people arou nd me to ensu re I’ m al wa ys learn ing a nd growing . Karen Mar tin Business Analyst Manager T rainline Annual Report and Accounts 2022 52 Giving back Future Frontiers, Ada T ech School, onHand and Railway Children are partners that we are proud to work with, helping us support our communities and champion future talent. Inspirin g T o do our part in fullling potential we partnered with the award- winning charity, Future Fr ontiers, to help equip students from disadvantaged backgrounds with the information, skills and mindset to achieve their career aspir ations. Since our partnership began, our teams in London and Edinburgh have mentored more than 170 secondary school students, encouraging them to dream big, explore opportunities and achieve their career aspir ations. Educating T ackling gender imbalance and championing talent within the tech industry is a core focus for T rainline. Women represent only 26% of professionals in the tech sector, of which only 11% are in leadership positions. We believe the k ey is to inspire women to choose a career in tech from an early stage. One of our partners, the Ada T ech School in Paris, enables us to support young people’s aspirations to become developers. Supp or ting Across the world many children are forced to nd refuge in r ailway stations. For many years we’ve partnered with and supported Railway Children, the charity that pro vides safety, protection and opportunity I’ m real ly ex cited abo ut ho w much gro w th opportuni ty there is a t T rai nl ine . Since I’ve j oi ned, I’v e been cont in uou sly lea r ni ng ne w thi ngs, b ui ldi ng my sk il l-set and bec oming more knowledgeable within m y f ield. Sahid Miah HR & T alent A pprentic e for these vulnerable young people. Through our fundraising activities we help Railway Children continue the fundamental work they do for some of the most vulnerable in our societies. We moved quickly to help Ukr ainian refugees by launching and maintaining a help page for refugees travelling from Ukr aine to other countries in Europe which included advice on where they could access free transport, accommodation and support from governments and charities. We also donated in-product advertisement space to Unicef and the Disaster Emergency Committee in addition to a cash donation to the Unicef Ukraine Appeal. Strategic Report Gover nanc e Financial Statements 53 T ask F orce on Climat e-related Financial Disclos ures (‘ T CFD ’) Tr ainline has made strong progr ess during the year in setting its sustainability goals and developing a strategy to achieve them. T o a ch iev e our sustainability goals we recognise the importance of disclosing climate- related risks and opportunities in line with the TCFD and SASB frameworks so that investors and other stakeholders have a better understanding of the climate-related risks and opportunities that apply to Tr ainline. We have structured this report in line with the four core themes and the eleven recommended TCFD disclosures. In implementing the TCFD framework we have provided a summary of the actions we have taken to re view the key risks and opportunities arising from climate change and the transition to a lower carbon economy and their potential impacts on Tr ainline. Due to the nature of our business, Tr ainline has an inherently lower carbon intensity compared to other business sectors with the majority of our greenhouse gas (‘GHG’) emissions arising from the use of third-party cloud computing services. We have limited ability to inuence the emissions created by these third parties but we apply pressure where we can to encour age the transition to rene wable energy sources and we welcome the net-zero carbon emission commitments that have been made. Whilst the GHG emissions we have direct control o ver – predominantly the operation of our oce spaces – are not substantial we are taking steps to reduce them. Gov ernance Our governance for climate-related risks and opportunities: TCFD Rec ommendation How we apply t he recommendation Describe the Board ’s over si ght o f cli mate - rel ate d ri sk s a nd oppor tunities The Board is ultimately responsible for T rainline’s strategy and approach to climate- related risks and opportunities. During the year the Board discussed the climate-related risks for T rainline and the opportunities arising from the transition to a lo wer carbon economy including the importance of sustainability to our stakeholders and their particular focuses. The Board also received an update on our sustainability strategy and discussed its ambitions, goals, the roadmap for the implementation of sustainability elements into our products and the sustainability strategy investment plan. The Board was particularly focused on the steps T rainline can take to pr omote the sustainability of rail and the implementation of the sustainability strategy . Further updates on the sustainability programme will form part of the Boar d’s annual agenda to enable it to monitor and oversee progr ess against our sustainability goals. The Audit and Risk Committee received an update on the inclusion of climate-related risks into Tr ainline’s risk management fr amework as part of the FY2022 risk management process. This update included all of the risk types identied in tables A1 and A2 of the TCFD implementation recommendations. The Audit and Risk Committee will continue to monitor the effectiveness of the risk management process in regar ds to the appropriate inclusion of climate-related risks. The Remuneration Committee will also receive updates on performance on sustainability measures included in any Executive Dir ector’s remuneration. See page 89 for further information on the inclusion of sustainability measures in remuner ation. Describe manageme nt ’s ro le in asse ssing and managing climate - rel ate d ri sk s a nd oppor tunities • The CEO is ultimately responsible for delivering T rainline’s sustainability strategy and reports to the Board on sustainability matters. • The CEO is supported by the Sustainability Steering Committee (the ‘Committee ’) which is responsible for developing and managing delivery of the sustainability str ategy and identifying climate-related risks and opportunities. The Committee is chaired by the Chief Product Ocer and includes senior members of teams that ar e crucial to the success of the sustainability strategy . The Committee provides updates to the Management T eam via monthly team meetings. • In turn the Sustainability Delivery Group r eports to the Committee and is responsible for executing the sustainability str ategy. The Sustainability Delivery Gr oup is made up of representatives fr om the teams executing the sustainability str ategy. T rainline Annual Report and Accounts 2022 54 Strat egy Our climate-related risks and opportunities: TCFD Rec ommendation How we apply t he recommendation Describe the climate- rel ate d ri sk s a nd oppor tunities the organis ation has ide nti e d ove r the shor t , medium and long term The transition to a lower-carbon economy will r equire increasing use of r ail and coach which in turn provides opportunities for T rainline over the short, medium and long term. Further information on these opportunities is available on page 8. The Committee has identied and considered a number of climate-related risks that ar e relevant to T rainline, in particular: Shor t-term (0 - 5 years) • Policy and Legal: policies and legal requir ements in relation to climate-related matters continue to develop as the signicance and need for action gro ws. We operate in a lower carbon intense industry so we do not currently e xpect related policy and legal changes to have a negative material nancial impact on Tr ainline, however, we recognise the need to continually monitor developments in this ar ea to ensure we remain compliant. • T echnology: no fundamental technology issues arising from climate-related risks have been identied but we have noted the current market diculties in hiring people with relevant skills and e xperience and the potential need to invest further in developing our technology platform and data to enhance Tr ainline’s sustainability offering to our customers. • Reputational: as sustainability is a ke y part of our purpose there is reputational risk to Tr ainline that could arise as a result of us failing to live up to our purpose and through poor execution of our sustainability str ategy. Me dium -t er m (5 -10 years) • Market: the tr ansition to a lower-carbon economy and the resulting r equirement for increased use of rail and coach is fundamentally an opportunity for T rainline, however, there is the risk of increased competition as the size of the mark et opportunity increases, in particular if we fail to ex ecute our strategy . Lon g - te rm (10 + yea rs) • Acute and chronic physical risks: risks to T rainline’s day-to-day operations are minimal as we operate via a relatively small oce footprint and have a pr oven ability to transition to remote working r apidly when required. Expected increases in e xtreme weather events arising from climate change would r esult in increased disruption or cancellation of rail services which could cause short-term pressur e on customer service capacity. Ho wever we are well placed to mitigate the impact due to our investment in simple automated processes that are available to our customers in our app and website. The above risks were included in the FY2022 risk management pr ocess. All were assessed to have no material potential nancial impact (<1% of annual revenue) or r equire additional responses or mitigations at this time. The process to assess climate-r elated risks will develop as our ability to analyse them matures in the coming years. De sc rib e the i mpa c t of climate - related ris ks and opportunities on the organisation ’s business, strategy and nancial planning Our purpose is anchored in environmental sustainability and as a r esult climate-related risks and opportunities impact all areas of our business. During FY2022 this included: • using a sustainability measure in the FY2023 annual bonus to ensur e that executives and senior management are incentivised to achieve our sustainability goals; • making sustainability one of our Objectives and Key Results; and • using our brand recognition to champion r ail as the future of sustainable travel. Strategic Report Gover nanc e Financial Statements 55 T ask F orce on Climat e-related Financial Disclos ures (‘ T CFD ’) continued TCFD Rec ommendation How we apply t he recommendation Describe the re sil ien ce of t he organisation ’s stra tegy , taki ng into consideration di erent climate - related sce narios, including a 2 o C or lower scenar io When considering the following scenarios the Network Rail Third Adaptation Report and the Climate Change Committee Independent Assessment of UK Climate Risk were used to help qualitatively determine the impact of each scenario on Tr ainline: The increased use of rail and coach r equired for the transition to a lo wer-carbon economy consistent with a 2 o C or lower scenario would create a larger and e xpanded market which is a strategic opportunity for T rainline. We closely monitor policy and legal de velopments related to rail and fr equently engage with regulators and policymakers on rail industry policy so are well placed to understand the impact of developments and identify opportunities. Whilst there would be risks that arise from this scenario the y would be predominantly mitigated through the successful e xecution of our strategic goals. A climate-related scenario resulting in a 4 o C or more scenario in which the modal shift from cars and planes to rail and coach does not occur would not materially impact Tr ainline’s str ategy as the long-term structural tailwinds for the business would endure, in particular the transition to online and digital ticketing. Ther e would be increased risk of short-term pressure on customer service capacity due to incr eased disruption and cancellation of rail services arising from e xtreme weather events but this would be mitigated by our investment in simple automated processes that ar e available to our customers in our app and website. Risk manage ment Our risk management process for climate-related risks: TCFD Rec ommendation How we apply t he recommendation Describe the organisatio n’s proce ss for identif ying and asse ssin g climate - related ris ks The Committee meets to discuss our sustainability strategy and climate-related matters. These meetings help to identify relevant climate-r elated risks that are then assessed by the Committee. Describe the organisatio n’s proce ss for managing climate - related ris ks As part of its assessment of climate-related risks the Committee considers: the probability and signicance of each climate-related risk identied; and the mitigants in place, their suitability and appropriate actions where r equired. The Committee utilises the expertise of its members and external service pro viders to determine the materiality of identied climate-related risks. If an identied climate-related risk is deemed to have a high probability and/or signicance, the Committee will consider appropriate actions that can be taken to introduce optimal controls and/or mitigants. The Committee will then r eport to the Management T eam in line with the wider risk management framework. Describe how proc esses fo r identif ying, assessing and managing climate - related ris ks are integrated into the organisation ’s overall ris k manageme nt A member of the Committee is also a member of the Internal Risk Committee to ensure the Internal Risk Committee has relevant e xpertise on climate-related matters. During FY2022 the risk management framework was updated to help identify risks that included a climate-related factor so that the Committee could include them in their discussions. More detail on our risk management framework is available on page 38. T rainline Annual Report and Accounts 2022 56 Metric s and targe ts Our climate-related metrics and targets: TCFD Rec ommendation How we apply t he recommendation Disclose the me tri cs u se d by th e organisation to asse ss climate - related ris ks and oppor tunitie s in line w it h it s st rat eg y and risk man agement proces s Our ability to meet our net-zero commitment is partly dependent on our suppliers meeting their own net-zero commitments, in particular Amazon W eb Services’ (‘ AWS’) commitment to power their operations with 100% r enewable energy by 2025. Whilst our ability to inuence AWS is limited we have discussed our e xpectations of them in accordance with our supplier code of conduct and will continue to monitor their progress towar ds their net-zero commitment. Disclose Scope 1, Scope 2 and, if appropri ate, Sc op e 3 gre enh ou se gas (‘GHG’ ) emissions and t he re lat ed r is k s This is Tr ainline’s thir d year of Streamlined Energy and Carbon Reporting (‘SECR’) reporting. In alignment with SECR reporting r equirements, emissions have been reported on a ‘like-for-like’ basis with the pr evious year’s data for comparative purposes. Global G HG emis sions and en ergy us e data Current reporting year FY2022 Previous reporting year FY2021 UK Global UK Global Emissions from activities which the Company owns or controls including combustion of fuel & operation of facilities (Scope 1)/tCO 2 e 5 9 .1 2 2 6 . 41 69. 8 5 41. 8 1 Emissions from purchase of electricity , heat, steam, and cooling purchased for own use (Scope 2, location-based)/tCO 2 e 169 . 4 0 3 .7 1 14 8 . 3 4 2.89 T otal gross Scope 1 & Scope 2 emissions/tCO 2 e 22 8. 52 3 0 .1 2 2 18 . 2 0 4 4 .71 T otal energy consumption used to calculate above emissions: /kWh 1 ,1 1 8 , 4 5 1 21 2, 59 6 1, 0 16 , 2 0 0 280,8 79 Intensity ratio: tCO 2 e gross gure based fr om mandatory elds above/m² of oce space 0.05 0 .01 0.05 0.02 Intensity ratio: tCO 2 e gross gure based fr om mandatory elds above/FTE 0.3 5 0.56 0. 3 3 0.89 Emissions from purchased goods and services (Scope 3)/tC O 2 e 1.1 5 0 .1 8 2 .7 8 0.4 6 Emissions from employee business tr avel by rail (Scope 3)/tCO 2 e 1 0 .1 2 0. 47 - - Emissions from employee business tr avel by air (Scope 3)/tC O 2 e 9.4 6 7 7. 0 3 - - Emissions from employee business travel b y passenger vehicle (Scope 3)/tCO 2 e 1. 2 7 0 .1 9 0.62 - Emissions from disposal of waste generated in operations (Scope 3)/tCO 2 e 0.68 0. 02 0. 31 0. 02 Emissions from energy use in data centres (Scope 3)/tCO 2 e 36. 21 4.49 18 . 6 9 5.5 4 Estimate of emissions associated with our workforce working from home due to the Covid-19 pandemic (Scope 3, Cat.7)/tC O 2 e 3 6 0.7 1 3 7. 4 5 3 69. 2 3 44 .25 Strategic Report Gover nanc e Financial Statements 57 T ask F orce on Climat e-related Financial Disclos ures (‘ T CFD ’) continued Scope: The data detailed in the table represents emissions and energy use for which Trainline is responsible, including energy use in oces: Gas (Scope 1); and Electricity (Scope 2). We have also included emissions associated with business operations are also accounted for, including: purchased goods and services, water (Scope 3, Category 1); waste sent for recycling and reco very (Scope 3, Category 5); business travel for passenger vehicles, rail and air (Scope 3, Category 6) and; workforce working from home due to Covid-19 restrictions (Scope 3, Category 7); and energy use in data centres (Scope 3, Category 8). Methodology: As a large, quoted company, T rainline is required to report its energy use and carbon emissions in accordance with the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. We have used the main requir ements of the Greenhouse Gas Protocol Corporate Standard to calculate our emissions, along with the UK Government GHG Conversion Factors for Company Reporting 2021 and the IEA Emissions Factors 2021. The sum of all emissions included within this report are for the r eporting period 1 March 2021 to 28 February 2022. Calculation: Emission calculations for energy use in oces (Scope 1 and 2) are based on conversion of energy used (kWh) to emissions (tCO 2 e). Emissions from water consumption (Scope 3, Category 1) were calculated based on total water consumed (m3) with water supply and treatment emissions factors applied. Emissions for waste (recycling and reco very) were calculated based on total mass of waste produced (tonnes) with recycling and reco very emissions factors applied accordingly. Emissions for business travel (passenger vehicles, rail and air) were calculated based on distances derived from departure and arrival locations (km), distances were then converted to emissions (tCO 2 e) using appropriate travel conversion factors. Emissions for workforce working from home were calculated using the EcoAct Homeworking and Commuting T ool v3, where emissions are based upon full-time employees (‘FTE’) and percentage of FTE working from home to derive total emissions. Emissions for energy use in data centres have been calculated by a third party , AWS. These are based on estimates for Tr ainline energy consumption with an ROI grid emission factor applied. AWS procur es renewable ener gy for use in data centres, therefor e although power and computer usage has increased, emissions from data centre use have not. Omissions and Estimates: estimations were made where no data was provided. Wher e gaps were observed in annual single data sets, estimates were based upon actual data and extrapolations made. Where no annual data was provided estimations were used either based upon the previous year’s reported data or calculated using best available benchmarks for oce environmental benchmarks. Energy eciency actions: For reporting period 1 March 2021 to the 28 February 2022, we have not employed any additional energy eciency actions from the previous reporting year. TCFD Compliance Statem ent We have set out above our climate- related nancial disclosures that are consistent with all four recommendations and eleven recommended disclosures from Section C of the Annex entitled “Implementing the Recommendations of the T ask Force on Climate-related Financial Disclosures”, published in October 2021 by the TCFD . Reducing our carbon f ootprint Oce We have taken steps to r educe the environmental impact of our workplaces during the year and have conducted reviews of all suppliers and products we use across our oces to ensure we choose more sustainable options. For example, we have transitioned to reusable glass milk bottles – plastic free catering and recycled toiletry products, as well as increased waste separation to impro ve recycling. Infrast ructure Our extensive use of cloud computing services is more environmentally sustainable, up to 88% more energy ecient according to Amazon Web Services, than utilising equivalent on-premises data centres. W e intend to continue migrating to cloud computing services when opportunities arise to do so. People We have educated our People in how to reduce their environmental impact by welcoming inspirational guest speakers to discuss sustainability, provided guidance and knowledge via our learning and development platform and given them opportunities for direct action to benet the environment in our local communities. We also introduced our sustainable travel policy which asks our teams to travel by the most environmentally sustainable mode of transport. T rainline Annual Report and Accounts 2022 58 S ustainability Acco unting Standar ds Board (‘SA SB ’) Disclos ures SASB Index 20 22 Tr ainline is committed to transparent r eporting to provide our stak eholders with a comprehensive overvie w of the Environmental, Social and Governance (‘ESG’) metrics that ar e material to our business. As such we have aligned the below disclosures to the SASB Internet and Media Services standar ds for the Group, covering our activities during FY2022. SASB Acc ounting Metric SASB code T rainline Disclosure (1) T otal energy consumed, (2) percentage grid electricity , (3) percentage renewable TC-IM-130a.1 1) 1,331,047kWh. 2) and 3) Tr ainline uses an energy brok er that determines our energy supplier based on market rates. T rainline therefore does not tr ack the percentage grid electricity or renewable energy used b y our oce suppliers. (1) T otal water withdrawn, (2) total water consumed, percentage of each in regions with High or Extremely High Baseline Water Stress TC-IM-130a.2 1) 3,154m 3 ; 2) Tr ainline does not track where water is withdr awn. Discussion of the integration of environmental considerations into strategic planning for data center needs TC-IM-130a.3 Environmental considerations ar e incorporated into our procurement process. T rainline has prioritised providers that have long-term commitments to use 100% renewable energy and which are able to lever age economies of scale to signicantly reduce carbon emissions compared to typical business infrastructure. Description of policies and practices relating to behavior al advertising and user privacy TC-IM-220a.1 Tr ainline recognises the importance of information security and privacy for Tr ainline’s business. The Company has a Chief Information Security Ocer who oversees dedicated teams responsible for cybersecurity and privacy , including the Data Protection Ocer. In order to pr epare for and respond to cybersecurity and privacy issues, Tr ainline maintains a programme that is designed to protect and pr eserve the condentiality, integrity and availability of all information owned by , or in the care of, T rainline. Trainline does not have policies relating to behavioural advertising. Number of users whose information is used for secondary purposes TC-IM-220a.2 Where personal data is processed, T rainline protects it along its lifecycle by ensuring appropriate policies and pr ocesses are in place. We pro vide transparency to customers and staff via published privacy and cookies notices. We use privacy impact assessments in order to assess any level of risk involved in ne w or novel processing activities. As soon as personal data is no longer required for pro vision of services offered or for legal or regulatory requirements that we ar e subject to, we make sure it’s either deleted or anonymised. T rainline does not sell user data to third parties. T otal amount of monetary losses as a result of legal proceedings associated with user privacy TC-IM-220a.3 Tr ainline does not disclose this. Strategic Report Gover nanc e Financial Statements 59 S ustainability Acco unting Standar ds Board (‘SA SB ’) Disclos ures conti nued SASB Acc ounting Metric SASB code T rainline Disclosure (1) Number of law enforcement requests for user information, (2) number of users whose information was requested, (3) percentage resulting in disclosure TC-IM-220a.4 1) 1,305. 2) Tr ainline does not track this metric. 3) 100%. T rainline complies with such requests from law enfor cement and discloses the requested information. Each disclosure is consider ed in accordance with internal process and disclosures ar e only made where there is a lawful basis to do so and it is consider ed proportionate in relation to the rights and fr eedoms of the affected user, for example for the prevention of suspected fr aud. List of countries where core products or services are subject to government- required monitoring, blocking, content ltering, or censoring TC-IM-220a.5 Tr ainline does not operate in countries where cor e products or services are subject to government-r equired monitoring, blocking, content ltering, or censoring. Number of government requests to remove content, percentage compliance with requests TC-IM-220a.6 There have been no government r equests for Tr ainline to remove content. (1) Number of data breaches, (2) percentage involving personally identiable information (‘PII’), (3) number of users affected TC-IM-230a.1 Tr ainline was not required to r eport any data breaches to regulators over the past year. Description of approach to identifying and addressing data security risks, including use of third-party cybersecurity standards TC-IM-230a.2 Tr ainline maintains a suite of information security and privacy related policies, standards, procedur es, and guidelines, specically leveraging accepted industry fr ameworks such as the PCI security standards. For more information see page 22. Percentage of employees that are foreign nationals TC-IM-330a.1 5% of all employees. T rainline works closely with external legal counsel to ensure sponsorship requirements ar e met for all visa-holding employees working within the jurisdictions where Tr ainline operates. Employee engagement as a percentage TC-IM-330a.2 Tr ainline conducted an all-employee engagement questionnaire in which 83% of respondents noted that they wer e proud to work at Tr ainline. Our overall engagement scor e increased to 65% (59% in FY2021). Percentage of gender and racial/ethnic group representation for (1) management, (2) technical staff, and (3) all other employees TC-IM-330a.3 Female representation: (1) management 1 36%; (2) technical 23%; and (3) all other employees 52%. T rainline has chosen not to disclose racial/ethnic group r epresentation metrics for FY2022 due to legal restrictions on the ability to gather a reliable dataset of such information. T otal amount of monetary losses as a result of legal proceedings associated with anti-competitive behavior regulations TC-IM-520a.1 Tr ainline has not been subject to legal proceedings associated with anti-competitive behaviours and as a result has not suffered any losses nor has it had to take any actions (such as changes in operations, management etc). (1) Data processing capacity , (2) percentage outsourced TC-IM-000.B Omitted as privileged and condential. (1) Amount of data storage, (2) percentage outsourced TC-IM-000. C Omitted as privileged and condential. 1. A s de ne d in U K Co rp o ra te G ov er na nc e Co de 2 018, Pr ov i si on 2 3 T rainline Annual Report and Accounts 2022 60 Stak eholder engagement A t T rainl ine , engaging wi th our stak eholders is in teg ral t o how w e ach iev e our vi sio n and stra teg y . Through appropriate, timely and proactive engagement with our stakeholders, we aim to look after our team, provide the best possible experience for our customers, generate sustainable value and continue to grow our business. The following table summarises: our key stak eholders; what’s important to them; how we have engaged with them directly and through r elevant organisations; and highlights of the results of that engagement during the nancial year. Our key stak eholders and their signicance to our business What is important to them How we engage wit h them Highlight s of our engagement Our custom ers Customer experience is at the heart of Tr ainline’s business. Understanding our customers’ travel needs is key to us delivering and continually improving our best-in- class product experience. Accessing the latest information on their planned journey and understanding its environmental impact. Finding the cheapest, fastest and most convenient tickets for their journeys, saving them money, time and hassle. A secure, reliable and robust product experience. Greater accessibility to more sustainable modes of transport. We spend as much time as possible engaging with and learning from our customers. Our quarterly customer barometer programme and our customer experience programme help us understand how well we’re serving our customers across their purchase and travel experience and where they want us to impro ve. We also undertake targeted research to better understand specic issues; for example, during FY2022 we investigated awareness of and preferences for using more sustainable travel methods. During FY2022 we also accelerated our engagement in Europe. Launch of Delay Repay notications in the UK. Providing and maintaining a best-in-class customer experience. Tr ainline continues to be Europe’s leading independent rail platform, with a 4.9/5 star app rating. Strategic Report Gover nanc e Financial Statements 61 Our key stak eholders and their signicance to our business What is important to them How we engage wit h them Highlight s of our engagement 2 Our carrier par tner s In order to pro vide our customers with the best possible rail and coach journey experience, it’s paramount we establish and maintain strong relationships with our carrier partners. Tr ainline also provides white label services to a number of carriers. The opportunity to increase their reach, ticket sales and the number of customers and corporate travellers using their services in their home market or when expanding into new liberalised foreign markets. Lower cost to serve customers by transitioning to digital. Support by helping customers nd the right information for their planned journeys and travel safely . Access to Tr ainline’s operational ex cellence and innovation, through our white label service. Tr ainline has carrier partners in the UK, across Europe and in other parts of the world. We have a dedicated, multi-national team of rail and coach travel specialists responsible for establishing and growing relationships with our carrier partners. Beyond this team, we work with carrier partners at every level of the organisation to drive collaboration, deliver marketing campaigns and improve processes to enhance customer experience. During the year we have been especially focused on: • integrating ne w entrants to European markets into our product • migrating our white label partners to Platform One • aligning closely to adapt frequently and rapidly as Covid-19 restrictions were introduced • supporting recovery through digital marketing activities when restrictions were lifted Introduction of new ticketing solutions, for example Flexi Seasons in the UK. Partnered with all the new European high-speed rail entrants in FY2022 as they launched their services. Supporting promotions to encourage a return to travel when restrictions were lifted. Improved processes to support fraud prevention measures in the UK and allow for targeted re venue protection on routes. Using our expertise to help the industry provide better r eal-time disruption information to UK rail passengers. Providing new points of sale for European carriers through our T ravel Agency/ Tr avel Management partners via our Global API. Stak eholder engagement c onti nued T rainline Annual Report and Accounts 2022 62 Our key stak eholders and their signicance to our business What is important to them How we engage wit h them Highlight s of our engagement 3 Gov ernment and regulators Government and regulatory policy determine much of the business environment in which Tr ainline operates. The recovery of the r ail industry as we emerge from Covid-19. A reduction in carbon emissions, by increasing modal shift to rail from other less environmentally-friendly travel modes. In the UK, implementing the industry reforms contained in the Williams- Shapps Plan for Rail. In Europe, implementing the liberalisation of rail travel, including the introduction of a variety of private sector train operators. Tr ainline regularly attends forum discussions, engages in consultations and meets with key policymak ers, government representatives and industry bodies across the UK and wider Europe. During the year, our focus has been on: • engaging on GBR industry reform • participating in EU consultations on increasing rail use and encouraging modal shift from cars and planes in Europe In the UK, a commitment to the ongoing involvement of independent retailers in the future UK rail industry as laid out in the Williams- Shapps Plan for Rail. In Europe, the EU Action Plan for Rail provided positives for independent retailers in facilitating the conclusion of commercial agreements between carriers and third-party ticket sellers, including level playing eld and access to data provisions. 4 Our people Ensuring that we attract, nurture and retain our people and focus them on achieving our strategy is key to T rainline’s success. Tr ainline’s Boar d is keenly aware that the interests of our people should be considered when making decisions that may impact them and the wider business. The ability to develop and progress at a business that has an environmentally sustainable purpose. An opportunity to contribute, take ownership and deliver to a clear and shared strategy . Working with a diverse and gender-balanced team. The opportunity to give back through charitable and social causes. Work/life balance. The opportunity to share in the success of the business. The use of OKRs as a goal- setting tool to provide transparency , focus and alignment. Every six months we undertake a Group-wide engagement survey so we can evaluate how our whole team are doing and measure our progress against our ke y engagement indicators. Every month all our people across all our oces get together at our All Hands sessions so our Management T eam can bring everyone up to speed on our latest projects, the progress towar ds our strategy and our business performance. Over 70% of our people contributed to our annual engagement survey and our overall engagement score increased to 65% (59% in FY2021). Maintained high levels of employee satisfaction, with 83% of our people saying they ‘ are proud to work at Tr ainline’. Implemented Flexi-First ways of working and enhanced support for working from abroad following engagement survey feedback. Increased promotion of our sustainability strategy and provided updates at All Hands sessions. All our people have access to share schemes and over 95% hold an interest in shares of the Company . Strategic Report Gover nanc e Financial Statements 63 Stak eholder engagement c onti nued Our key stak eholders and their signicance to our business What is important to them How we engage wit h them Highlight s of our engagement 5 Our shareholders The Board is accountable to shareholders. Tr ainline aims to ensure that a good dialogue with shareholders, investors and analysts is maintained, and that their issues and concerns are understood and considered by the Boar d, the Management T eam and our people. Understanding the strategy and operations of the Group. Financial performance and commercial success. Understanding the exposure to macr o- economic and political risk. Opportunity for dialogue with management on key matters, e.g. performance and executive remuneration. Sustainability and the environmental and ethical impact of the Group. The governance structures that are in place and changes to them. Despite Covid-19 restrictions the Investor Relations T eam, Executives and Chair of the Board have continued to meet regularly with investors via calls, conferences and roadshows. The Company has also held a face-to-face investor and analyst presentation for the Group’s half-year r esults announcement. Met with 341 existing shareholders and prospective investors during FY2022. Over 91% of our issued share capital was voted at our AGM with the majority of resolutions receiving over 99% support. Continued to develop our sustainability disclosures to give shareholders insight into our sustainability programme at its initiation. Engaged with our largest shareholders, representing 78% of our issued share capital, on our proposed remuneration policy refresh. Sec tion 1 72 ( 1) statement Section 172 of the Companies Act 2006 requires a dir ector of a company to act in the way he or she considers, in good faith, would most likely promote the success of the company for the benet of its members as a whole. In doing this s.172 requires a dir ector to have regard, amongst other matters, to the: • likely consequences of any decision in the long term; • interests of the company’s employees; • need to foster the company ’s business relationships with suppliers, customers and others; • impact of the company ’s operations on the community and envir onment; • desirability of the company maintaining a reputation for high standards of business conduct; and • need to act fairly as between members of the company. The Board understands that how we behave matters not only to our people but also to the many stak eholders who have an interest in our business. We belie ve that productive business relationships with our suppliers, customers and other key stak eholders are key to the success of the Gr oup and that the interests of rele vant parties should be considered when making decisions that may impact them. Though engagement is carried out by those most r elevant to the stakeholder or issue in question, the Board r eceives updates on the engagement that has been undertaken, the reoccurring questions, concerns raised and the feedback pro vided by the Group ’s ke y stakeholders. When making decisions the Board takes the course of action that it considers best leads to the success of the Company over the long term, and when doing so also considers the interests of the stak eholders that we interact with. The Board acknowledges that every decision made will not necessarily r esult in a positive outcome for all of our stakeholders but by considering the Group’s purpose and values together with its strategic priorities the Board aims to make sur e its decision is consistent and predictable. We set out opposite and on page 71 some examples of ho w the Directors have had regar d to the matters set out in section 172(1)(a) to (f) when discharging their section 172 duty and the effect of that on certain of the decisions taken b y them. By considering these matters the Directors have had regar d to the matters set out in section 172(1)(a) to (f) of the Companies Act 2006 when performing their duty under section 172. T rainline Annual Report and Accounts 2022 64 International growth acceler ation The Board considered the International gr owth acceleration plan proposed b y the Executive Directors, in particular the forecasted implications on budget, expected additional investment and the wider mark et context. The Board r ecognised that whilst the additional investment required for the International gr owth plan might impact adjusted EBITDA in the short term the acceleration in new r ail entrants in Europe and the r esulting fragmentation of supply provided a windo w of opportunity to grow the International business. Annual str ategy review The Board carries out a re view of the Company’s strategy on an annual basis. This includes appro ving the business plan for the following year and considering future years. In the most r ecent strategic re view the Board received pr esentations from our Management T eam which included potential market, product and investment opportunities. In making its decision to approve the business plan and future str ategy of the Company, the Boar d considered the feedback received from engagement ex ercises with our stakeholders. As a r esult of that consideration, the business plan and future strategy were focused to ensur e that they aligned with the issues and factors that are most r elevant to our ke y stakeholders where these did not impact the long-term success of the Company or the enhancement of its reputation. Non- nancial information s tatement The following table sets out where non-nancial information can be found within this Annual Report, further to the Financial Reporting Directive requir ements contained in sections 414CA and 414CB of the Companies Act 2006. Where possible, it also states where additional information can be found that supports these r equirements. Reporting requirement Relevant T rainline policies and procedures Where to read more in this report Pag e Business model N/A Our business model 18 Non - nan cia l KP I s N/A Key performance indicators 33 Principal risks Tr ainline risk management process Principal risks and uncertainties 38 Environment al matter s Environmental policy Market overvie w Sustainability Global GHG emissions & data 10 08 57 Human rights Human rights policy Principal risks and uncertainties Our people and culture Stakeholder engagement 38 48 61 Our people Tr ainline staff handbook and accompanying policies and procedures Principal risks and uncertainties Our people and culture Stakeholder engagement 38 48 61 Soc ial matte rs N/A CEO's statement Our people and culture 06 48 Anti - co rruption and anti -b riber y Anti-bribery and corruption policy Principal risks and uncertainties Report of the Audit and Risk Committee 38 78 The Strategic Report, which has been prepared in accor dance with the requirements of the Companies Act 2006, has been approved by the Boar d and signed on its behalf. On behalf of the Board Martin McIntyre Company Secre tar y 5 May 2022 Strategic Report Gover nanc e Financial Statements 65 In this sec tio n Chair’s governance statement 68 Our Board of Directors 72 Report of the Nomination Committee 76 Report of the Audit and Risk Committee 78 Directors’ remuner ation report and policy 82 Directors’ report 100 Statement of Directors’ responsibilities 105 G o v er na nc e T rainline Annual Report and Accounts 2022 66 NEW Elmstead W oods 12:43 13:00 London Bridge Elmstead W oods Thu 5 Ma y 17m, Direct View tickets Financial Statements 67 Strat egic Report Governa nce Chair ’ s gov ernance stat ement On beh alf of the B oard, I am please d to provide an ov er view of the B oard ac tivities during the year , T rainline’s corporate governance and repo rt s from the Bo ard’s Committees . Compan y purpose Tr ainline’s distinct purpose, empowering people to make greener travel choices, connecting people and places, is uniquely suited to a post-Covid-19 world where the transition to a net zero economy is a priority for many. As the Board is responsible for promoting the alignment of culture with purpose, values and strategy we have taken a keen interest in Tr ainline’s increasing focus on sustainability and the development and ongoing execution of the International gr owth acceleration plan which began during the year. You can r ead more on the International growth acceleration plan on page 6 and what sustainability means to Tr ainline on page 8. Board l eadership The Board believes that cultur e plays a fundamental role in the delivery of Tr ainline’s purpose and the successful execution of its str ategy. The Board is ultimately responsible for ensuring that its activities reflect the culture we wish to instil in our people and therefore sets a clear emphasis on setting the tone from the top and leading by example. With the lifting of Covid-19 measures the Board has been able to spend more time meeting in person which has given us the opportunity to once again be present in our London office and engage with the workforce in person. The Board intends to hold meetings in Tr ainline’s other significant offices, Edinburgh and Paris, in the year ahead to provide the Board with opportunities to engage with and be seen by the whole business. More information on how the Boar d has monitored culture and engaged with the workforce is available on page 74. Diversity and inclusion The Board and the Nomination Committee recognise the importance and benefits of diversity and inclusion and wholeheartedly support all the work Tr ainline undertakes to create a diverse workforce. The Group is involved in a number of initiatives to encourage and promote diversity in technology and leadership positions which you can read more about on page 51. In particular we hope that the appointment of Milena Nikolic as our CTO, one of the fe w female CTOs at a FTSE 250 company, will inspire more women to consider careers and leadership roles in the technology sector. As Chair, I am keenly aware that we are not currently aligned with the Hampton- Alexander recommendations for female representation on the Board due in part to the relatively short tenure of our Non-executive Dir ectors, all of whom have been appointed for less than three years following our IPO in 2019. We have taken steps to address this, which we have detailed on page 76. I am focused on ensuring that we align, in due course, with the upcoming Listing Rule changes on Board diversity which build upon the Hampton-Alexander and the Parker recommendations. Board e ec tiveness A Board effectiveness revie w, externally facilitated by Lintstock Ltd, was undertaken during the year which concluded that the Chair, the Board and its Committees operate effectively . A holistic and tailored approach was taken to ensure the re view included the specific complexities and challenges of the business, the views of members of senior management and third-party service providers who regularly attend Board meetings and the outcomes and actions from the internally facilitated review undertaken in FY2021. Brian Mc Bride Chair Uni que ly su it ed to a post-Covi d- 19 wo rld w here th e trans it ion t o a net zero eco nom y is a priori ty for man y . T rainline Annual Report and Accounts 2022 68 New external auditor PricewaterhouseCoopers LLP (‘PwC’) was formally appointed as external auditor to Tr ainline following our 2021 AGM. The Audit and Risk Committee has closely monitored the work of PwC and its relationship with Tr ainline to promote a smooth transition process and ensure that PwC has a sufficient understanding of the business and systems to provide suitable challenge to Senior Management and the Board. Further information on the assessments the Audit and Risk Committee has made when considering the effectiveness of the external audit process and the work of the external auditor is available on page 80. Remuneration policy The Remuneration Committee has spent considerable time developing the refreshed remuner ation policy being proposed to shareholders at our upcoming AGM. The proposed changes will encompass all employees to encourage retention and includes stretching targets to incentivise and drive exceptional performance, reflecting the Group’ s ambitious long-term growth targets. Kjersti Wiklund, Chair of the Remuneration Committee, has consulted extensively with our largest shareholders on the proposed changes and I would like to pass on my thanks for their pragmatic and constructive feedback. I encourage you to read Kjersti’ s commentary on page 82 and the proposed remuneration policy on pages 86 to 92 and hope that we can count on your support when you consider how to vote at the AGM. Annual Ge neral Me eting Following the lifting of Covid-19 restrictions we will be holding our upcoming AGM at 10am on 30 July in person at Tr ainline’s offices at 120 Holborn, London. This will be the first opportunity for shareholders to meet the Board in person since our IPO and I encourage you to attend and take advantage of this chance to ask questions of the Board. Alternatively , shareholders may submit questions to the Board via email to [email protected] before the AGM takes place. W e will maintain a list of responses to frequently asked questions in relation to our AGM on our website at https://investors.thetrainline.com/AGM. I also wish to strongly encourage shareholders to submit a pro xy vote in advance of the AGM and appoint the chair of the AGM as your pro xy with directions as to how to cast your vote on the resolutions proposed. In doing so your vote will be cast should you be unable to attend the AGM in person. Brian Mc Bride Chair 5 May 2022 The positive outcomes of the revie w were well received and plans wer e agreed for the few areas wher e improvements were identified. Details of the revie w process, outcomes and resulting plans are set out on page 75. Stak eholder engagement Tr ainline has undertaken significant key stakeholder engagement during the year, in particular in relation to the implementation plans for GBR, the recent UK rail ticketing r etail revie w and with carriers entering newly liberalised rail markets in Eur ope. The Board has discussed the regular key stak eholder updates it receives to ensure we truly understand the views of our key stak eholders and so we can consider their interests when making decisions that are critical to the long- term success of the Group. Y ou can read more on the highlights of our stakeholder engagement on page 61. Accountabilit y and risk Tr ainline has a robust frame work for managing strategic and operational risks in accordance with the Group’ s risk appetite. As part of its annual risk revie w the Board ensured that the impact of Covid-19 and the uncertainty resulting from the UK rail ticketing r etail revie w and GBR implementation were appropriately considered when revie wing the Group’s principal and emer ging risks. Our Internal Audit function has developed significantly during the year following the appointment of our Head of Risk and Internal Audit. The Audit and Risk Committee has been particularly focused on supporting the successful implementation of this function and on the enhancements made to our risk management framework. Financial Statements 69 Strat egic Report Governa nce Go v ernance st r ucture Audit and Risk Commit tee Provides o versight of the integrity of the Group’ s financial statements and reports to the Board on the Annual Report and Financial Statements and other disclosures. Oversees the external auditor and monitors their independence. Monitors and revie ws the internal control and risk management system. Revie ws whistleblowing, fraud, bribery and other compliance policies and procedur es. Remuneration Commit tee Develops the Group’ s policy on Board remuner ation and monitors its ongoing appropriateness. Oversees workforce policies and takes colleague r emuneration into account when setting the policy for Directors’ remuner ation. Determines the levels of remuner ation for Executive Directors, the Chair and the Company’s senior management. Nomination Committee Reviews the composition of the Boar d and its Committees, including the effectiveness of its members. Leads the process for Board appointments, plans for the or derly succession of Board and senior management positions and oversees the development of a diverse pipeline. T rainline’s Management T eam Led by our CEO , Tr ainline’s Management T eam is comprised of the Group’s senior ex ecutives who are responsible for developing, informing and monitoring the str ategy as set by the Board. The executives o versee the day-to-day operations of T rainline and come together to re view , assess and agree on actions to be taken to achie ve the objectives of the Group. The Management T eam meets regularly to discuss the operational and financial performance of the Gr oup. A number of sub-committees, chaired by members of the Management T eam, provide expertise and oversight on significant matters for the Group. These sub-committees include the Sustainability Steering Committee, Internal Risk Committee and Disclosure Committee. T o see more information about T rainline’ s Management T eam, visit: investors.thetrainline.com Board o f Direc tors Collectively responsible for establishing T rainline’ s purpose, values and strategy to enable the long-term success of the Group for the benefit of our shareholders and stakeholders. Responsible for ensuring that T rainline achieves its purpose and that the purposes is embedded at all levels of the business. Assesses and monitors the Group’ s culture, promoting its alignment with the purpose, values and strategy , and ensuring that the Group operates within a frame work of effective controls and risk management. The Board oper ates with the assistance of three permanent Boar d Committees and delegates authority on specific matters to other committees where it considers it appr opriate to do so. T rainline Annual Report and Accounts 2022 70 The role of t he Boar d The Board is the driving force of Tr ainline’s str ategy, cultur e and governance, ensuring that our high standards are consistent across the business. It is accountable to Tr ainline’s shar eholders and seeks to represent the inter ests of other stakeholders when setting our long- term focus, strategy , culture and policies, ensuring that the Group has the right resources, o verseeing risk and corporate governance, and monitoring progress towar ds meeting our strategic objectives, sustainability goals and annual plans. Our Directors are collectively responsible for the success of Tr ainline. The Non-executive Directors ex ercise independent, objective judgement in respect of Board decisions, and scrutinise and challenge management. They also have various responsibilities concerning the integrity of financial information, internal controls and risk management. The Board conducts an annual revie w of the Group’s o verall strategy . The CEO, CFO and the Management T eam take the lead in developing our strategy , which is then reviewed, constructively challenged and approved by the Boar d. As part of the business of each Board meeting, the CEO typically submits a Company update, giving details of progress against goals and the macro-environment in which T rainline operates. The Board also r eceives accounting and other management information about Tr ainline’s resources, and presentations on legal, governance and regulatory developments. T o ensure that the Board has good visibility of the key oper ations of the business, members of the Management T eam attend Board meetings regularly to update the Board on their specific areas of expertise and the ex ecution of the Group’s str ategy. The Board works to ensure that the Company generates and maintains value over the long term. By embodying and promoting T rainline’ s culture, the Board works to monitor and assess Tr ainline’s objectives in developing world-class technology and maintaining Tr ainline’s r obust and scalable business model with due regard to T rainline’s customers, people, carrier partners and other key stak eholders. Division of responsibilities The role of the Chair, the Chief Executive Officer and the Senior Independent Non-executive Dir ector. There is a clear division between executive and non-e xecutive responsibilities to ensure accountability and appropriate oversight. The roles of Chair and Chief Executive Officer are separ ately held and their responsibilities are well defined in writing and in practice. Chair • leads the Board and is responsible for its overall effectiveness in directing the Group; • shapes the culture in the boardroom, in particular by promoting openness and debate; • sets a Board agenda primarily focused on strategy, performance, value creation, culture, stakeholders and accountability , ensuring that issues relevant to these areas are r eserved for Board decision; and • demonstrates objective judgement. Chief Executive Oc er • develops the Group’s pr oposed strategy , plans, commercial and other objectives for the Board to consider and then deliver the Board’s decisions; • manages the Group on a day- to-day basis within the authority delegated by the Board; • keeps the Chair and the Board informed of potentially complex, contentious or sensitive issues affecting the Group; and • manages the Group’s risk profile in line with the assessment made by the Board. Senior Independent Non- executive Direc tor • acts as a sounding board for the Chair; • understands the views of the workforce and communicates them to the Board; • is available to shareholders if they have concerns which have not been resolved through the normal channels of communication with the Company or for which such contact is inappropriate; and • at least annually, leads a meeting of the Non-executive Dir ectors, without the Chair present, to appraise the performance of the Chair, taking into account the views of the Executive Dir ectors. Financial Statements 71 Strat egic Report Governa nce T rainline Annual Report and Accounts 2022 72 Our Board of Directors Brian McBride Chair Committees: Skills and experience: Brian has a strong track recor d in leading businesses having held many senior positions throughout his career including Chair of ASOS from 2012 to 2018 and Chief Executive Officer of Amazon.co.uk from 2006 to 2011. He has also held Non-executive Director positions at AO World plc, Computacenter PLC, SThree PLC and Celtic FC PLC. He was previously on the Board of the BBC and was a member of the Advisory Board of Huawei UK. Other appointments: Non-executive Director at Abrdn plc and Kinnevik AB. Brian is also a Senior Adviser to Scottish Equity Partners and Lead Non-executive Director on the Defence Board of the UK Ministry of Defence. Jody F ord Executiv e Director and Chief Executiv e Officer Skills and experience: Prior to Tr ainline, Jody held the position of CEO at Photobox Group, Europe’ s leading personalisation business, encompassing the Moonpig and Photobox brands. Prior to Photobox Group, he spent ten years at eBay, latterly in California, leading the Growth function globally. Jody holds an MBA from INSEAD and a BA in Economics and Politics from Exeter University . Other appointments: None Shaun McC abe Executiv e Director and Chief Financial Officer Skills and experience: Shaun joined the Group and became Chief Financial Officer in September 2016. Prior to this, Shaun held the position of International Director for ASOS, and previously as Chief Financial Officer for Amazon Europe. Shaun is a Chartered Accountant (ICAEW ) and holds a bachelor’s degree in Finance and Economics from the University of Essex. Other appointments: Non-executive Director for AO, an online retailer operation in the UK and Germany, and Non-ex ecutive Director and Chair of the Audit Committee of boohoo, an online fashion retailer with operations worldwide. Jennifer Duvalier Senior Independent Non-executiv e Director Committees: Skills and experience: Jennifer was Executive Vice President, People, for ARM Holdings plc with responsibility for all People and Internal Communications globally from 2013 to 2017. Prior to ARM, Jennifer was Group People and Culture Director at UBM plc from 2007 to 2013 and Group HR Director at Emap plc from 2003 to 2007. Jennifer holds an MA (Hons) from the University of Oxford in English and French. Other appointments: Non-executive Director and Chair of the Remuneration Committee of Mitie plc and Remuneration Committee Chair of NCC Group plc. Jennifer is also a Non-executive Director and Chair of the Remuneration Committee of Guardian Media Group plc and a Non- executive Director and Chair of the Sustainability, People and Diversity Committee of The Cranemere Group Ltd. Board composition Chair Executive Independent Non-executive Gender split Male Female Length o f tenure of Non- executive Direc tors 0 - 3 years 3 - 6 years 6+ years 1 2 2 4 5 100 Financial Statements 73 Strat egic Report Governa nce Duncan T atton-Brown Independent Non-executiv e Director Committees: Skills and experience: Duncan was Chief Financial Officer of Ocado plc from September 2012 to November 2020. Prior to joining Ocado, Duncan held the Chief Financial Officer’s role at Fitness First plc, and prior to that, Duncan was Group Finance Director of Kingfisher plc. He has also been Finance Director of B&Q plc and Chief Financial Officer of Virgin Entertainment Group and held various senior finance positions at Burton Group Plc. Until July 2018, Duncan was a Non-executive Director and Senior Independent Director of Zoopla Property Group PLC. Prior to this, he was a Non- executive Director and Audit Committee Chair of Rentokil Initial plc. Duncan holds a Master’s degree in Engineering from King’s College, Cambridge. He is also a member of the Chartered Institute of Management Accountants. Other appointments: Non-executive Director of Cazoo Group Ltd, Chair of Loveholidays.com and Senior Adviser to Ocado Group and Non-executive Director of certain Ocado Group subsidiaries. Kjersti Wiklund Independent Non-executiv e Director Committees: Skills and experience: Kjersti has held senior roles, including Director, Group T echnology Operations of Vodafone, and Chief Operating Officer of VimpelCom Russia, Deputy Chief Executive Officer and Chief T echnology Officer of Kyivstar in Ukraine, Executive Vice President and Chief T echnology Officer of Digi T elecommunications in Malaysia, and Executive Vice President and Chief Information Officer at T elenor in Norway. Kjersti was also a Non-executive Director of Laird PLC in the United Kingdom, Cxense ASA in Norway, Fast Search & Tr ansfer ASA in Norway and T elescience Inc in the United States. She holds a Master of Business Management from BI Norwegian Business School and an MSc in Electronical Engineering from Chalmers University of T echnology, Sweden. Other appointments: Non-executive Director of Babcock International Group plc, Spectris plc, Zegona Communications plc and Nordea Bank Abp. Andy Phillipps Independent Non-executiv e Director Committees: Skills and experience: Andy brings a wealth of experience in e-commerce and significant knowledge of technology and marketplaces from his previous r ole as CEO of Priceline International and Chair of T optable.com, both now part of Booking. com. Andy is currently an adviser for iQ Capital, a deep technology venture capital firm, and was previously a Non-executive Director of Albion Development VCT PLC, an investor in higher growth businesses with a strong focus on technology companies. Most recently Andy was a Fellow at Stanford University’s Distinguished Career Institute. Other appointments: Member of the investment Committee of iQ Capital, Non-executive Director of Thought Machine, Cambridge Angels and Prodigy Finance, Fellow at the Judge Business School at Cambridge University and regular lecturer at the London Business School and INSEAD (France). Ke y Audit & Risk Committee member Remuneration Committee member Nomination Committee member Denotes Committee Chair Attendanc e during the financial year Board Member Meetings Brian McBride 10/10 Jody Ford 10/10 Shaun McCabe 10/10 Jennifer Duvalier 10/10 Andy Phillipps 9/10 1 Duncan T atton-Brown 10/10 Kjersti Wiklund 10/10 1 . Andy Phillipps was unable to attend one meeting due to illness. Ad hoc meetings were also convened to deal with specific matters arising. Board in action W orkforce engagement The workforce engagement programme has intensified during FY2022 with the lifting of Covid-19 restrictions. Jennifer Duvalier, designated Non- executive Dir ector for Workforce Engagement, has visited Tr ainline’s Edinburgh office in person to meet with leaders and spend time engaging with the customer service team. Jennifer also took part in virtual focus groups during the year with our teams in Edinburgh, Paris and London and provided support for our cultural workshops and People Led Groups. Key themes identified were then shared with the Board by Jennifer following her engagement sessions. In addition, Kjersti Wiklund, Remuneration Committee Chair, has engaged with the People and T echnology teams to understand the wider workforce’s sentiment on remuneration and support T rainline in addressing the challenges identified. T o further help understand the views and concerns of our People, the Board receives detailed engagement updates which include metric tracking against targets, an overview of comments made in the biannual employee questionnaires and the actions being taken to address ar eas of improvement. The Boar d has valued the candid and constructive tone of these updates. The Board uses these and other sources of insight to assess and monitor whether the culture and behaviours the Group strives for aligns with reality . Accordingly, the Board is satisfied that the Group’ s culture is a positive one and is conducive to the successful execution of T rainline’s purpose and strategy. International grow th acceleration plan With domestic competition between rail carriers in Europe incr easing meaningfully, Management proposed the international growth acceler ation plan to significantly scale Tr ainline’s business in Europe over the medium term. The Board discussed in detail the investment case, impact on budget and the level of investment required to deliver the ambitious targets before appro ving the plan. UK rail ref orm The Board considers the evolving UK rail market to be a k ey strategic priority for the Group and has closely monitored the Williams-Shapps Plan for Rail, the rail retail tick eting revie w and the implementation plans for GBR. The Board has received r egular updates from members of the Management T eam and has utilised the knowledge and experience of the Non-executive Dir ectors to provide support and guidance on stakeholder engagement and planning. C ovi d-1 9 re c ove r y Throughout the year the Board has continued to closely monitor the impact of Covid-19 on the Group, our People and our stakeholders. The Board received r egular updates on the recovery of the r ail industry and the steps Tr ainline has taken to encourage travel as Co vid-19 restrictions were r elaxed. Various Covid-19 scenarios were tak en into account when considering and approving the annual budget, risk revie w and strategy. The principal mat ters co nsidere d by the Board during the year were: Strategy and performance The detailed review of the Gr oup’s strategy and budget, updates on initiatives, discussions of short and long-term priorities and setting medium-term plans Tr ainline’s performance and reco very throughout the year, in particular Covid-19 reco very Operational Product development and marketing str ategy Shareholders and stakeholders UK rail reform Investor relations and key stak eholder updates Reporting and risk management Annual review of the Gr oup’s principal and emerging risks, including the impact of Co vid-19 and the uncertainty arising from UK rail reform Specific risk areas that are significant to T rainline including information security and privacy Review and appro val of annual and half-yearly reporting Leadership and people Considered and received updates on the hiring of new Vice Pr esidents to drive the Board’s str ategy Culture and workforce engagement The impact of remote working on our People, the implementation of new hybrid ways of working and the feedback received Governance , corporate responsibility and sustainability The results of the Board effectiveness re view and agreement on the development opportunities identified Disclosures, including the gender pay gap statement, modern slavery statement and Group tax strategy Tr ainline’s sustainability strategy and net-zer o commitments T rainline Annual Report and Accounts 2022 74 C omposition, succession and e valuation Skills, knowle dge and experien ce of the B oard High-growth business Digital & ecommerce Government & regulatory People Oper ations T echnology Finance Risk management Andy Phillipps Brian McBride Duncan T atton-Brown Jennifer Duvalier Jody F ord Kjersti Wiklund Shaun McCabe Board c omposition and succession Appointments to the Board are made solely on merit with the objective of ensuring that the Board contains an appropriate balance of skills and knowledge of the Group and its business, and length of service. Appointments are made based upon the recommendations made by the Nomination Committee with due consideration given to diversity . In compliance with the Governance Code, at least half of the Board, excluding the Chair, is composed of Independent Non-executive Directors (‘INEDs’). The Board received updates from Management on succession planning for the Executive Directors and the Management T eam during FY2022. Skills, knowle dge and experien ce As set out in the table below, each Director provides a r ange of skills, knowledge and experience that is relevant to the success of the Group and enables strong independent judgement and constructive challenge. Board an d Commit tee ee ctivenes s evaluation In 2021, Tr ainline engaged Lintstock Ltd to facilitate a revie w of Board performance. The review was undertaken to comply with the UK Governance Code and provide the Board, its Committees and Directors with an opportunity to reflect on their operation and effectiveness. A number of external re view service providers were appr oached, with shortlisted candidates being subject to an interview . The Chair and Senior Independent Non-executive Dir ector discussed the merits of each provider before agreeing the appointment with the Board. Lintstock Ltd has not undertaken a revie w on behalf of the Company before, and has no other connection with Tr ainline. The first stage of the review involved Lintstock engaging with the Chair, the Senior INED and Company Secretary to set the context for the evaluation, and to tailor survey content to the specific complexities and challenges of Tr ainline’s business. The scoping of the exercise also took into account the outcomes of the most recent internally facilitated review . All Board members completed an online survey on the performance of the Board, its Committees and the Chair. Members of senior management and third-party service providers who regularly attend Board meetings were also invited to provide feedback on the performance of the Board. As well as addressing core aspects of Board and Committee performance, the exer cise had a particular focus on the following areas: • potential implications of the Williams-Shapp Review , and the organisation’s pr eparations for any changes that may impact thebusiness; • clarity of Trainline’s str ategy, and the main challenges to the delivery of Tr ainline’s str ategic priorities; • skills and experience of the Directors, the geographical representation amongst members, and the diversity of representation more br oadly; • monitoring of colleague sentiment, diversity & inclusion and culture throughout the business; • views and perspectives of key external stakeholders including shareholders, carrier partners, customers, Government and regulators; and • top priorities for both the CEO and the CFO, in or der to best succeed in their roles. All feedback in Lintstock’s reports was presented in anonymous form, to promote an open exchange of vie ws. The reports also provided a comparison with the Lintstock Governance Index, which helps to place the performance of the Tr ainline Board into context. Participants were also invited to privately discuss any matters with the Chair and/or the Senior Independent Non-executive Director. The results of the Revie w were positive overall. The Boar d considered opportunities for further development including additional reporting on the regulatory environment in Eur ope, and to reflect on the amount of time devoted to people and strategy topics at meetings. The results of the evaluation were revie wed by the Nomination Committee and individual meetings were held with Board members to discuss the results and proposed actions. The outcome and proposed actions were recommended to the Board and accepted in full. In addition the Non-executive Dir ectors, led by the Senior Independent Non-executive Director, met privately to appraise the performance of the Chair. Financial Statements 75 Strat egic Report Governa nce R epor t of the Nomination Committ ee I am pleased to present T rainline’ s Report of the Nomination Committee which provides a summary of the Committee’s r ole and activities. Membership The Committee comprises five Independent Non-executive Dir ectors: Andy Phillipps, Jennifer Duvalier, Kjersti Wiklund, Duncan T atton-Brown, and myself (Brian McBride) as its Chair. The Commit tee’s k ey ac tivities Key matters discussed by the Committee during FY2022 included a review of: • Trainline’ s diversity and inclusion programme; • the effectiveness of the Board, its Committees and individual Directors; and • the structure, size and composition of the Board, including the skills, knowledge, independence, experience and diversity of its members. The Commit tee’s k ey ac tivities planned f or FY202 3 The Committee recognises the importance and benefits of the Board having an appropriate balance of skills, experience, independence and knowledge to enable the Directors to discharge their respective duties and responsibilities effectively . Due in part to the relatively short tenure of our Non-executive Directors, all of whom have been appointed for less than three years following our IPO in 2019, the Committee recognises that the Board does not cu r re n t ly align with the upcoming Listing Rule changes on Board diversity. In order to address this the Committee will continue to ensure that candidates from ethnically , racially and gender diverse backgrounds are always included in shortlists for Board positions with the intention of maximising the opportunity to make appointments that allow the Board to r eflect the diversity at Tr ainline and the wider community. The Committee is confident that by ensuring the candidates included on shortlists for Board appointments are genuinely diverse the Board will align with the upcoming Li sti ng R ule changes in due course. Prior to the Committee’s ne xt report it intends to undertake the following key activities: • the implementation of the recommendations arising from the externally facilitated Board evaluation; • continuing to monitor succession planning and the development of a diverse pipeline of talent; and • an update on the Group’s strategy on diversity and inclusion and progress against objectives. Brian Mc Bride Chair of the Nomin ation Commit tee 5 May 2022 Our responsibilities • Monitor the composition of the Board and its Committees, including the effectiveness of its members • Lead the process for Board appointments • Plan for the orderly succession of Board and Management T eam positions and oversee the development of a diverse pipeline of talent Brian Mc B ride Chair of the Nomination Commit tee Committee Member Meetings Brian McBride (Chair) 2/2 Jennifer Duvalier 2/2 Andy Phillipps 2/2 Duncan T atton-Brown 2/2 Kjersti Wiklund 2/2 T rainline Annual Report and Accounts 2022 76 One of the pivotal considerations on any appointment to the Board and the Management T eam is diversity. The Committee takes an active role in setting and meeting diversity objectives and strategies for the Group as a whole. The Board’ s policy is to continue to seek and encourage diversity within long and shortlists, including with regard to gender, as part of the overall selection process for Director r oles. The Committee believes we have a diverse Management T eam which is able to effectively serve the Group’ s interests. The Committee revie wed the Group’s diversity and inclusion policies during FY2023, how they link to the Gr oup’s objectives and strategy , how they are being implemented, and progress towards achieving diversity and inclusion objectives. Tr ainline is committed to having a diverse and inclusive workplace and the Committee supports this goal and the recommendations set out in the Hampton-Alexander Revie w and the Parker Report wholeheartedly . The Committee recognises that technology is a male-dominated sector and that despite progress being made the Group must continue to strive to achieve its diversity and inclusivity goals. Further information on Tr ainline’s diversity and inclusivity initiatives is available on page 51. Compo sition of the B oard and its Co mmitte es The Committee is satisfied with the current composition of the Board and its Committees though it will continue to monitor and refresh their composition where appropriate. The Committee also considers the Directors to possess the skills, knowledge, independence and experience necessary to effectively fulfil their duties but recognises that the Board does not currently align with the upcoming Listing Rule changes on board diversity which build upon the Hampton-Alexander and the Parker recommendations. Director reappo intment In accordance with the provisions of the Governance Code, all Directors will retire at the forthcoming AGM of the Company and the Board has recommended their reappointment. In reaching its decision to recommend reappointment, the Board acted on the advice of the Committee. The Committee is satisfied that all the Directors devote sufficient time to their duties and demonstrate great enthusiasm and commitment to their roles. The Committee applied particular scrutiny to the performance of Brian McBride, Duncan T atton-Brown and Kjersti Wiklund who are completing the three-year term of their current letters of appointment which will be renewed subject to their r eappointment at the AGM. The Committee revie wed the independence of the Non-executive Directors and confirmed to the Board that it considers each of the Chair and the Non-executive Dir ectors to be independent in accordance with the Code. Succe ssion planning The Committee recognises the importance of developing and maintaining a diverse talent pipeline to provide succession options for the Management T eam. The Committee held a private session during FY2022 to consider and approve the succession pipeline and welcomed the promotion of James Hanratty and the appointment of Milena Nikolic, Mike Hyde and Martin Sheehan to the Management T eam. During FY2023 the Committee will continue to monitor succession planning arrangements for the Board and the Management T eam and assess whether the succession planning arrangements and the Board appointment process continue to support the development of a diverse pipeline of candidates. K ey areas of focu s for the Nomination C ommitte e during F Y202 2 Board e ec tiveness evaluation After a careful selection process involving several pro viders and in line with the Financial Reporting Council’s Guidance on Board Effectiveness, the Nomination Committee invited Lintstock Ltd to externally facilitate the FY2022 Board evaluation. Brian McBride as Chair of the Nomination Committee and Jennifer Duvalier as Senior INED took an active role in working with Lintstock to ensure questions took into account the strategy and complexities of the business. Further information on the evaluation is available on page 75. Policy on diversity and inclus ion The Committee welcomed the appointment of Milena Nikolic as CTO , one of the few female CTOs at a FTSE company and notes that with Jennifer Duvalier as our Senior INED and workforce engagement NED we have female representation in a senior Board position. Board o f Direc tors Male 71.4% Female 28.6% Gen der balance (actual headco unt as at 2 8 Februar y 20 22) Managem ent T eam and their direc t re por t s 1 Male 64.0% Female 36.0% All our People Male 62.7% Female 37.3% 5 18 293 493 32 2 1 As defined in the UK Corporate Governance Code 2018, Provision 23. Financial Statements 77 Strat egic Report Governa nce R epor t of the A udit and Risk C ommittee I am pleased to present T rainline’ s Report of the Audit and Risk Committee which provides a summary of the Committee’s r ole and activities. Membership The Committee comprises four Independent Non-executive Dir ectors: Jennifer Duvalier, Kjersti Wiklund, myself (Duncan T atton-Brown) as its Chair, and with effect from 1 March 2022, Andy Phillipps. The biography of each member of the Committee is set out on page 72. The Board is satisfied that the Committee as a whole has the competence relevant to the sector in which the Group operates and that I have recent and relevant financial knowledge and the experience to be the Chair of the Committee. Role and work of the Audit & Risk Commit tee Meetings are held to coincide with key events, in particular the reporting and audit cycle for the Group. The Chair of the Committee reports at the next subsequent Board meeting on the business concluded at the previous Committee, the discharge of its responsibilities and informs the Board of any recommendations made by the Committee. The Commit tee’s k ey activ ities during F Y 20 2 2 Key matters undertaken by the Committee during FY2022 included: • the transition of the Gr oup’s e xternal audit from KPMG LLP (‘KPMG LLP’) to PricewaterhouseCoopers LLP (‘PwC LLP’); • the development of the internal audit function and approving the role and mandate of the Internal Audit function and the Head of Risk and Internal Audit; • considering the going concern and viability statements; • re viewing the Group’ s accounting policies, the use of Alternative Performance Measures, significant financial reporting issues, judgements and estimates; • considering the FRC re view of the FY2021 Annual Report; • the integrity of the Financial Statements of the Group and all formal announcements relating to its financial performance; • considering whether this Annual Report, taken as a whole, is fair, balanced and understandable, provides shareholders with the information necessary to assess the Company’s position, performance, business model and strategy, and the completeness of the included disclosures; and • monitoring the adequacy and effectiveness of the Group’s internal control systems. The Commit tee’s k ey ac tivities planned f or FY202 3 Prior to the Committee’s ne xt report for FY2023 it intends to undertake the following ke y activities: • monitor the effectiveness of the external auditor; • oversee the continued development of the internal audit function; and • review the risk management and internal control systems. Dunc an T at ton- Br own Chair of the Audit and Risk Co mmi tte e 5 May 2022 Our responsibilities • Monitor the integrity of the Company’s Financial Statements and report to the Board on the Annual Report and Financial Statements and other disclosures • Oversee the external auditor and monitor their independence • Monitor and re view the internal control and risk management system and internal audit function • Revie w whistleblowing, fraud, bribery and other compliance policies and procedures Duncan T at ton- Brown Ch ai r of t he Aud it a nd Risk Co mmittee Committee Member Meetings Duncan T atton-Brown (Chair) 4/4 Andy Phillipps 1 n/a Jennifer Duvalier 4/4 Kjersti Wiklund 4/4 1 . Joined the Committee 1 March 2022 . T rainline Annual Report and Accounts 2022 78 Internal Audit A Head of Risk and Internal Audit was appointed toward the end of FY2022 with responsibility for the Group’s enterprise risk management framework and the implementation of the Internal Audit function of the Group. Deloitte LLP was appointed as the internal audit co-source partner to provide assistance and r elevant subject matter expertise as and when needed. Utilising a risk-based audit programme, the internal audit function conducts detailed risk assessments with key stak eholders of the Group’s internal contr ols and processes to provide an independent and objective view of the effectiveness of the Group’s internal contr ol environment. The audit plan, which covers ke y business processes, is approved annually by the Committee. The Committee has received updates from the Head of Risk and Internal Audit during FY2022, including private meetings. The Committee will continue to monitor the implementation of the Internal Audit function and will undertake an effectiveness revie w for FY2023. Going con cern and viability a sse ssme nts The Committee revie wed and advised the Board on the Group’ s going concern and viability statements included in this Annual Report and the calculations and reports prepared by Management in support of such statements. The external auditor discussed the statements with the Committee and revie wed the conclusions reached by Management regarding going concern and viability . Accounting judgeme nts and key source s of estima tion uncer taint y The Committee assessed whether suitable accounting policies had been adopted and the reasonableness of the judgements and estimates that had been made by Management. The Committee, alongside Management and the external auditor, identified the areas set out in the table below as the key areas of judgement and estimation. Internal contr ols review The Board monitors the key elements of the Group’s internal contr ol and risk management framework supported by the Committee. The Committee advised the Board on its revie w of the effectiveness of the systems and processes including financial, operational and compliance controls. K ey areas of focu s for the Audit & Risk Commit tee during F Y 20 22 Ex ternal audit t ransition The Committee conducted a competitive tender for the provision of external audit services during FY2021. The Board accepted the Committee’s recommendation to appoint PwC LLP as external auditors and a resolution for the appointment of PwC LLP was put to shareholders which was approved at the 2021 Annual General Meeting by 99.5% of voted shares. KPMG LLP did not raise any areas of concern when confirming its resignation as auditor following the completion of the audit of the Group’s FY2021 Financial Statements. During the FY2021 audit, PwC LLP joined Committee meetings as part of the transition process. The Chief Financial Officer and Committee Chair have met with the PwC LLP lead audit partner, Jaskamal Sarai, on a regular basis to discuss the transition. The Committee places great importance on ensuring that the external audit is effective and of a high standard and has therefore received r egular updates and met privately with the PwC LLP lead audit partner to discuss the transition. Issue considered How t he issue was addressed Going concern The going concern disclosure is an area of judgement. Given the impact of Covid-19 the level of uncertainty around this judgement is considered higher in the current environment. The Committee considered the work performed by Management in assessing the Group ’s ability to continue as a going concern, particularly around its consideration of the potential future impact of Covid-19. The Committee reviewed management’ s base case and downside scenarios which all showed the Group has sufficient cash and liquidity headroom to continue for a period of at least 12 months after the approval of these financial statements. This led the Committee to conclude there is no material uncertainty around the Group ’s ability to continue as a going concern and as such the disclosures in this area are consider ed appropriate. Carrying value of International goodwill The carrying value of International goodwill depends on the future cash flow forecast supporting the carrying value. There is inherent uncertainty in forecasting future cash flows and as such this area of estimate is a focus for the Committee. The Committee reviewed and discussed Management’ s conclusions around the carrying value of goodwill, including: the methodology applied; the achievability of the business plans and how the potential future impact of Covid-19 had been r eflected in the plans; considering the appropriateness of discount rates and long-term gro wth rates applied; and considering the outcome of sensitivity analysis. The Committee agreed with Management’s conclusion that the carrying value of goodwill is supported by the expected future cash flo ws of the International business. Financial Statements 79 Strat egic Report Governa nce R epor t of the A udit and Risk C ommittee continued FRC review The Financial Reporting Council (‘FRC’) undertook a revie w of Tr ainline’s FY2021 Annual Report as part of their regular re view programme for public and large private companies. In the case of FTSE 250 companies, annual reports are revie wed on a rotational basis. The FRC revie w was based solely on the FY2021 Annual Report and was conducted by the staff of the FRC who have an understanding of the relevant legal and accounting framework but do not benefit from detailed knowledge of T rainline’ s business or an understanding of the underlying transactions entered into. The revie w of the FY2021 Annual Report did not raise any questions or queries, and no substantive response was required. The FRC pro vided suggestions around the clarity and content of certain disclosures which, after considering their materiality and relevance, were incorpor ated into this Annual Report. Financial Statement s and repo rting The Committee monitored the financial reporting process for the Group, which included receiving reports from, and discussing these with, the external auditor. The Committee also considered the areas of corporate reporting focus for the FRC and their relevance to the Group’s r eporting. As part of the year end reporting process the Committee re viewed this Annual Report, a management report on: accounting estimates and judgements; Alternative Performance Measures; and Fair, Balanced and Understandable, the external auditor’s report on internal controls, accounting and reporting matters, and management representation letters concerning accounting and reporting matters. Monitoring the integrity of the Company’s financial statements, the financial reporting process and revie wing the significant accounting issues are ke y roles of the Committee. Measures are in place to provide r easonable assurance regarding the r eliability of financial reporting. The measures include: a comprehensive system of planning, budgeting, monitoring and reporting; clearly defined policies for capital expenditure including revie ws by senior management; and frequent monitoring of cash flows against forecasts. The measures provide reasonable, though not absolute, assurance against material misstatement or loss. The Committee plays an important role in advising the Board when it considers whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy . Assessing the eectiveness of the ex ternal audit proce ss and the ex ternal auditor The Committee recognises that the transition of the external audit to PwC LLP creates a risk to the effectiveness and standard of the external audit. T o ensure that PwC LLP is effective in its role as external auditor the Committee: • invited PwC LLP to join Committee meetings during the FY2021 audit as part of the transition process; • r eviewed and appr oved the annual audit plan to ensure it was consistent with the scope of the audit engagement. In reviewing the audit plan, the Committee discussed the areas identified by the external auditor as most likely to give rise to a material financial reporting error or those that are perceived to be of higher risk and requiring additional audit emphasis (including those set out in the Independent Auditor’s Report); • considered the audit scope and materiality threshold; and • met privately with PwC LLP without Company Management present, to discuss its remit and issues arising from its work. During FY2022 the Committee noted that the external auditor had introduced a new and enhanced, data driven testing method over revenue, as opposed to the tr aditional sample testing method, using data techniques, automation and software integration. The Committee supports Management’s objective of increasing the use of technology and automation in the external audit process. The Committee considered the safeguards in place to protect the external auditor’s independence. PwC provided a letter of independence to the Committee reporting that it had considered its independence in relation to the audit and confirmed that it complies with UK regulatory and professional requirements and that its objectivity is not compromised. The Committee took this into account when considering the external auditor’s independence and concluded that PwC remained independent and objective in relation to the audit. The Group confirms that it has complied with the CMA Order 2014 (Article 7.1). Non- audit work carried out by the ex ternal auditor The Committee has set a policy around the provision of non-audit services by the external auditor. This policy is designed to comply with the FRC guidance on the provision of non- audit services and helps maintain the independence and integrity of the Group’s e xternal auditor. The policy sets out specific considerations around the provision of non-audit services and requires appro val by part or all the Committee for any proposed services with an expected fee of more than £50,000. T rainline Annual Report and Accounts 2022 80 The fees paid for non-audit services during the year ended 28 February 2022 amounted to £52,000, all of which relate to audit-related assurance services for the 31 August 2021 half-year revie w undertaken by the external auditor. Further details of these amounts can be found in Note 4 of the Financial Statements. Only certain types of work, as defined by the FRC, are explicitly permitted to be provided to the Group which does not include specific tax advisory services and internal audit services. A detailed list of non-permitted services is included in the Committee’s non- audit services policy. Audit fe es The Committee was satisfied that the level of audit fees payable in respect of the audit services provided, being £351,000 of which £43,000 related to the audit transition fee, were appropriate and that an effective audit and transition could be conducted for such a fee. Risk The Group’s risk toler ance is set by the Board and is the level of risk it is willing to accept to sustainably achieve our strategic objectives. The Board is supported by the Int ern al Risk Committee (‘IRC’), composed of senior stakeholders, that meets biannually to review and calibr ate the Group’s risk landscape. An enterp rise risk management framework pro vides a comprehensive risk management methodology for the conduct of revie ws and which is summarised in the Group Risk Policy . These revie ws provide a robust assessment of the Group’ s principal and emerging risks, which takes into account the risks that threaten our business model, future performance, solvency or liquidity and the Group’ s strategic objectives. Further information on the Group’s principal and emerging risks are ava ila ble on pages 38 to 47. Risk manage ment review The Committee received updates from the Head of Risk and Internal Audit, in particular on the Company’s risk register and whistleblowing system and policies, prior to the Board determining the Company’s overall risk appetite, tolerance and strategy . The Committee, in supporting the Board in its annual assessment of the effectiveness of the enterprise risk management and internal control processes, relies on r eporting by the IRC, management, compliance reports and the assurance pro vided by the external auditor. The Committee noted that during FY2022 the example risks included in tables 1 and 2 of the T ask Force for Climate-related Financial Disclosures (‘TCFD’) Final Recommendations Report were considered and rele vant climate-related transition and physical risks were formally integrated into the Group’ s enterprise risk managementframework. The Board discussed and revie wed the Group’s risk appetite when r eviewing the principal risks and the strategy for the Group. Regular revie ws of the risk appetite ensures that the Company’s risk exposure remains appr opriate and acceptable in enabling the Group to achieve its strategic objectives. The Committee considers the Group’ s risk appetite and principal risks when considering the effectiveness of the risk management system. Further information on the Group’s risk management framework is available on page 38. Over view of our anti-brib er y , corruption and w histle blowing policies an d proce dures: Anti-bribery Tr ainline adopts a zero-tolerance approach to bribery and corruption. Any of our people found to have br eached the Group’s policies will face disciplinary action which could include dismissal for gr oss misconduct. These policies are passed on to our supply chain, where appropriate, as part of our procur ement and contracting procedures. Receiving corporate hospitality and gif ts Should be refused if they could influence or appear to influence decisions made on behalf of the Group. Colleagues are required to update the Gr oup Gift Register. Substantial physical gifts should be passed onto the Group for donation to charity or disposal. Offering corporate hospitality and gif ts Must be fully documented, approved by the r elevant member of the Management T eam and recorded in the Gr oup Gift Register. Any hospitality above a set value must also be approved b y the Business Review and Appro vals Group. F acilitation payments Are strictly prohibited, no matter the value, even wher e such payments are perceived as a common part of local business practice or law. This pr ohibition also applies to those who work on behalf of the Group. Whistleblo wing If anyone has a concern they wish to raise they can contact an independent r eporting line for anonymous reporting of concerns. Promotional activities are undertaken to pr omote awareness of the whistleblowing policy . The Committee and the Board receive reports thr oughout the year on whistleblowing arrangements and activities. Corruption All our people are made aware of the Group ’s Anti-Fraud and Corruption Strategy when the y join. Concerns should be reported in accordance with the Group ’s Whistleblowing Policy . Disciplinary action and other appropriate measures will be taken as necessary . Financial Statements 81 Strat egic Report Governa nce Directors ’ rem uneration repor t Dear Shareholder , On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for FY2022 and our proposed Remuneration Policy which shareholders will be invited to vote upon at our upcoming AGM. Ke y ar eas of fo cus for th e Remuner ation Co mmitte e during F Y202 2 Proposed Remunerat ion P olicy Over the last 12 months the Committee has spent considerable time revie wing how T rainline’ s remuneration structure, appr oved at the 2020 AGM, can reinfor ce Tr ainline’s ambitious long-term growth targets and addr ess how certain external developments outside of the Company’s control, Covid-19’s unpr ecedented impact, the Williams-Shapps Plan for Rail, and the RDG Retail Review , have made the roles of the Executive Directors far more challenging. The external developments have weighed heavily on Tr ainline’s share price and have also had a considerable impact on existing incentive schemes, as evidenced by the nil vesting of the FY2020 PSP grant and the expected nil vesting of the FY2021 PSP grant. Given the PSP schemes have a three-year cliff vesting, this would result in no long-term incentives being paid out to participants for a period of at least five years following T rainline’ s IPO in 2019. This would likely result in remuneration outcomes which benchmark far below peers and would leave the CEO with no effective long-term compensation scheme and very little shareholding, other than his own personal share purchases. The Committee strongly believes that a refresh of the r emuneration structure is requir ed to reflect the external developments, ensur e that Tr ainline can attract and retain talent in what is an extremely competitive sector, and fully motivate the Executive Directors to deliver exceptional performance for shareholders. We concluded that the fundamental structure of the remuneration package is appropriate, but that some changes are required to the PSP structure which requir e us to propose a new Remuneration Policy at the 2022 AGM. We consulted extensively with our largest shareholders, repr esenting 78% of our shares, on the proposed policy and we would like to thank them for their time and pragmatic discussions. These discussions helped us refine our original proposals to those disclosed in this report, and gave the Committee confidence that our investors have strong faith in the executive team. I urge you to read the proposed Remuneration Policy on pages 86 to 92 in full, but an overview of the revised structur e follows: The PSP will comprise a core award and kicker award, with vesting continuing to be based on a three-year performance period, followed by a two-year post-vest holding period. The PSP core award will be increased from 200% to 250% of salary; the PSP kicker award will provide an e xceptional award opportunity but only for delivering exceptional financial r eturns and value for our shareholders, and be set at 300% of salary in FY2023, reducing to 100% in FY2024 and FY2025. Our responsibilities • Develop the Group’s policy on executive remuner ation and monitor its ongoing appropriateness • Determine the levels of remuneration for Executive Directors, the Chair and the Management T eam • Revie w employee remuner ation and administer the Group’s share schemes Kjersti Wiklund Chai r of the Remu nerati on Commit tee Committee Member Meetings Kjersti Wiklund (Chair) 4/4 Andy Phillipps 4/4 Duncan T atton-Brown 4/4 Jennifer Duvalier 4/4 Ad hoc meetings were also convened to deal with specific matters arising. T rainline Annual Report and Accounts 2022 82 The Committee recognises that the Tr ainline share price is, at the time of writing, low relative to historical levels, and therefor e considered the various approaches to ensuring the PSP structure avoids re warding windfall gains and excessive outcomes, taking into account recent guidance from major investors in this area. Consequently, the r evised PSP also provides pr otection against the rewarding of performance which is not attributable to the management team, through the application of a vest-date value cap which will be applied to the PSP awards to be granted under the new Policy . Specifically, any value at vest which is in excess of 2.75 times the value of the FY2023 grant will be forfeited. The changes being proposed for the Executive Directors r eflect that which the Company has already adopted for employees throughout the organisation, for whom we have increased PSP award le vels, and we expect the vast majority of the value of the PSP will be delivered to the population outside the Executive Directors. In addition all other employees received SIP Fr ee Share and RSU awards with principles and performance requirements aligned with the proposed Executive Dir ector PSP awards. This reflects the k ey principle that value at Tr ainline requires all staff to be appr opriately motivated and incentivised, not just the highest echelons. Given the value cap, and the toughness of the performance targets required for full vesting of the PSP kicker award, our advisers have estimated that the increase in the value of the remuneration package, taking into account the likely probability of achie ving these performance levels, is c.15% for the Executive Directors. No other changes are being proposed to the Policy . The Committee has spent considerable time over the past year considering various remuneration structures and consulting with major shareholders in order to develop the proposed remuneration policy . We strongly belie ve that the new remuneration policy will str ongly incentivise management and help resolve hiring and retention challenges facing Tr ainline whilst also creating significant value for shareholders. The Committee recognises that the proposed PSP changes represent a considerable increase in the awar d opportunity available under the PSP , and is conscious of the sensitivity of increases in award opportunity in the current environment. Howe ver, we believe the proposed Remuneration Policy is in the best interests of shareholders as the performance levels requir ed for full vesting will be set at exceptionally high le vels, and we have sought to mitigate the potential for excessive outcomes through the inclusion of the vest- value cap. We respectfully ask for your support for the proposed remuneration policy and the revised PSP rules at the 2022 A GM. The FY2023 PSP performance measures will be based on a Company scorecard of financial and strategic metrics being cumulative EPS, average Revenue gro wth, and relative TSR. The performance level required for full vesting of the core award will be at a level which is consistent with the performance required for full vesting under a typical FTSE long- term incentive; the performance level required for any vesting of the kick er award will be extr emely demanding as, for each measure, it will be set at the full vesting level requir ed for the core award and will be in e xcess of that typically required at other FTSE companies; the full vesting level for the kicker award will be higher still, set at levels which we believe will translate into considerable value creation for shareholders. The performance targets for each respective measure ar e set out on page 99. The Committee discussed with investors during the consultation the possibility of using an ESG metric in the PSP , but concluded that the most appropriate approach, at least for FY2023, is to include ESG measures in the annual bonus only, and intr oduce science-based targets in the PSP in FY2024 at the earliest, once a robust basis for their measurement has been determined. Financial Statements 83 Strat egic Report Governa nce Remuneration out comes f o r F Y2 0 2 2 The total annual bonus opportunity was based 75% on core financial targets (25% each for Group net sales, Group revenue and Gr oup adjusted EBITDA) and 25% for ke y strategic and personal targets for the Executive Directors with a gate requir ement that Group adjusted EBITDA must at least break even for pay-out of any bonus. Despite the continued impact of Covid-19, in particular the reintroduction of work from home guidance and travel restrictions in ke y markets as a result of the Omicron variant, Tr ainline performed very well in FY2022. Financial performance exceeded target and was to wards the top end of the stretch performance range with adjusted EBITDA ex ceeding the stretch target. The CEO and CFO also performed strongly against their non-financial targets, in particular on their respective employee engagement and net debt measures. As a result of this strong performance the CEO and CFO both achieved 83.4% of their FY2022 Annual Bonus total opportunity. Directors ’ rem uneration repor t continued Due to the unprecedented impact of Covid-19 over the past two years none of the threshold performance targets for the FY2020 PSP granted to the CFO were achieved and ther efore the grant resulted in zero payout. The Committee considered the perspective of stakeholders when discussing the outcomes of the FY2022 Annual Bonus and FY2020 PSP and determined that they were a fair reflection of the stakeholder experience over the r elevant performance periods and that no discretion should be ex ercised. In particular the Committee noted that Tr ainline did not receive any government Covid-19 support in the form of furlough or other schemes during FY2022 and has repaid all UK government Covid-19 support received in prior years. Wider work force Tr ainline faces intense competition to attract and retain the best talent. As a Committee, we engaged with Tr ainline’s People and T echnology teams to understand the wider workforce’s sentiment on remuneration and support the business in addressing the hiring and retention challenges identified. Following this engagement, the Committee considered the remuneration arrangements for employees and supported management in implementing changes to encourage the achievement of T rainline’ s strategy , in particular the issuance of share awards to all employees for the period FY2023 - 2025 with principles aligned with the proposed Executive Director PSP . The Committee considers carefully the wider employee experience when making decisions around senior executive pay . The Committee received an update on the Group’ s reward objectives and wider workforce remuneration during FY2022 which provided an o verview of employee sentiment on remuneration that has been collated through surveys, feedback and any matters raised through the workforce engagement mechanism. Kjers ti Wiklund Chair of the Remune ration Co mmi tte e 5 May 2022 T rainline Annual Report and Accounts 2022 84 R emuneration at a glance This sec tion is a snap shot of t he Company’s per formance over FY202 2 and th e remuner ation rece ived by our Executive Directors . Ful l details can b e found in the A nnual Repor t on Remuner ation on page s 93 to 101 . FY202 2 re muneration outc omes Annual bonus The annual bonus was based on a mix of financial (weighted 75% of the total) and strategic (weighted 25%) performance measures. The performance targets and actual performance are set out belo w: Performance targets Measures W eighting (% of total bonus) Threshold T arget Stretch Actual FY2022 achievement Resulting bonus outcome (% of total bonus) Group Net Sales 25% £ 1 ,9 56.0m £2 ,4 45.0 m £ 2 ,6 8 9. 5m £2,520.3m 16 . 3 % Group Revenue 25% £ 13 7. 7 m £ 17 2 .1m £18 9 . 3 m £18 8 . 5 m 24. 4% Group Adjusted EBITDA 1 25% £ 11 . 0 m £ 2 1. 9 m £ 26 . 3m £3 9.0 m 25 .0% T otal 75% 65.8% out of 75% 1 Se e pa ge 162 f o r th e de ni t io n of G ro up A d ju s te d EB I T DA . W eighting (% of to tal bonus) Resulting bonus outcome (% of total bonus) Strategic objectives 25% Jody Ford 17 .6 % ou t of 2 5% Shaun McCabe 1 7 .6 % ou t of 2 5% Based on actual outturn as set out above, the CEO and the CFO will receive 83.4% of their maximum bonus, r epresenting 166.7% and 125.0% of salary respectively . The amounts earned above 100% of salary , representing 66.7% of salary for the CEO and 25.0% of salary for the CFO will be deferred in shares under the Deferr ed Share Bonus Plan. PSP awards vesting in F Y202 2 Due to the unprecedented impact of Covid-19 the thr eshold performance targets for the CFO’s FY2020 PSP gr ant were not achieved which resulted in zer o payout. Implementat ion of the R emunerati on Pol icy i n FY 202 3 For FY2023 and subject to approval of the pr oposed remuneration policy , the Executive Dir ectors will be remunerated as summarised in the table below . Element of pay Implementation for FY2023 Fixed remuneration Base salary Cur re nt l y £ 575 ,0 0 0 fo r Jo d y F or d an d £4 0 0, 0 0 0 fo r Sh au n Mc C ab e. T he C om mi t te e i nte n ds t o un de r t a ke a re v ie w of C EO an d CF O s a lar y i n F Y 202 3 a nd w il l di sc lo se t h e re sul t o f th is re v ie w in t he F Y 20 2 3 A nn ual R ep o r t . Pension The CEO’s pension contributions, at c.5.5% of salary , align with the broader workforce. The CFO’s pension contributions will be 10.5% of salary during FY2023 but will reduce to c.5.5% b y the end of FY2023 which will be aligned with the broader workforce. Benefits A s p er F Y 20 2 2. V ariable pay Annual bonus and DSBP Aw ard s of u p to 2 0 0 % of s al ar y f or C EO an d 150 % of s al ar y f or C FO, b a se d on t he a ch ie ve me n t of Gr ou p f in an ci al t ar ge t s an d sp ec if ic an d qu an ti f ia b le s tr at eg ic (w ei gh te d 75% of ma x im um) an d pe r so nal o bj ec ti v es (w ei gh te d 25%) . Awa rd s ear ne d ab ov e 100 % of s ala r y wi ll be d ef er re d in s har es f or t wo y ea r s. PSP Awards of 550% of salary for the CEO and CFO based on cumulative EPS, average Revenue gr owth and Relative TSR comprising core awards of 250% of salary and additional ex ceptional awards of 300% of salary based on the achievement of exceptional performance le vels. Financial Statements 85 Strat egic Report Governa nce This sec tion of th e repor t se ts out the pr opose d 20 2 2 Remuneration Policy which will be p ut befor e shareho lders fo r approval at the 20 22 AGM. The C ommit tee intends that t he 20 2 2 Remuneration Policy will come into ee ct fr om that date (30 June 2 02 2) for a pe riod of up to thre e years. The basic elements of the 2022 Remuneration Policy align with the existing Remuner ation Policy but provide for greater stretch opportunity in the long-term incentive to fully motivate the Ex ecutive Directors to deliver ex ceptional performance in achieving the Group’ s ambitious growth tar gets. The 2022 Policy includes two changes from that approved by shar eholders at the 2020 AGM: • the PSP award opportunity has increased from 250% to up to 550% of salary , comprising a core award of up to 250% of salary and a kicker award of 300% of salary in FY2023 r educing to 100% of salary in FY2024 and FY2025; and • a cap of 2.75 times the value of the FY2023 grant will be applied to the PSP vest-date values in FY2025, FY2026 and FY2027 to ensure that maximum remuner ation opportunities rewar d exceptional performance but are not e xcessive or as a result of windfall gains. Any vesting of share value o ver and above the cap would be forfeited. The Committee consulted extensively with our largest shareholders, r epresenting 78% of our shares, on the pr oposed policy and we would like to thank them for their time and pragmatic discussions. These discussions helped us r efine our original proposals to those disclosed in this report, and gave the Committee confidence that our investors have str ong faith in the executive team. The Committee recognises that the proposed PSP changes r epresent a considerable increase in the awar d opportunity available under the PSP , and is conscious of the sensitivity of increases in award opportunity in the current envir onment. However, we believe the pr oposed Remuneration Policy is in the best interests of shar eholders as the performance levels required for full vesting will be set at e xceptionally high levels, and we have sought to mitigate the potential for excessive outcomes through the inclusion of the vest-value cap. Executive Direc tors’ Remune ration Policy table The table below sets out the individual elements of Executive Dir ectors’ remuneration, ho w each element operates, and the maximum opportunity and any applicable performance measures. Element Purpose and link to strategy Operation Maximum opportunity Performance measures Salary T o recruit and retain high-calibre Executive Directors. Salaries are typically revie wed annually, on 1 April, though the Committee reserves the right to make salary increases from any other time where considered appropriate. Base salaries are determined taking into account a number of factors, including: • the individual’s role, r esponsibilities, and performance; • salary levels at comparable companies, adjusted to reflect scale; and • salary increases for the wider workforce. Whilst there is no maximum salary, increases will normally be in line with the average increase for the wider workforce. The Committee retains the discretion to make increases above this le vel in certain circumstances, for example following an increase in responsibility or scope, or where an individual is appointed on a below-market salary . Not applicable. Pension T o provide appropriate retirement plans. The Executive Directors currently participate in the Company’s pension scheme, and the Company makes contributions on their behalf. The Committee retains the discretion to provide a cash allowance in lieu of pension contribution during the term of the Policy. The Company’s maximum contributions/cash allowance for the CEO is aligned with that of the workforce at 5.5% of salary, and 10.5% of salary for the CFO but which will reduce such that alignment with the broader workforce is achieved b y the end of FY2023. For new appointments to the Board, the Committee will set a pension contribution rate which is in line with the contributions available to the wider workforce at that time. Not applicable. R emuneration policy T rainline Annual Report and Accounts 2022 86 Element Purpose and link to strategy Operation Maximum opportunity Performance measures Benefits To ensure that the overall package is competitive. Executive Directors receive private medical and dental insurance for the individual and their immediate family, and life assurance. Other benefits may be provided at the discretion of the Committee based on individual circumstances and business requirements, such as relocation allowances. The value of benefits is based on the cost to the Company and is not pre-determined. The Committee retains the discretion to approve a higher than typical cost in exceptional circumstances (e.g. relocation) or in circumstances driven by factors outside the Company’s control (e.g. material increases in insurance pr emium). Not applicable. Annual Bonus & Deferred Share Bonus Plan (‘DSBP’) T o incentivise and reward the achievement of annual financial and non-financial targets, in line with the Company’s strategic priorities. T o directly align the interests of Executive Directors and shareholders and support retention through long- term deferral in shares. Performance objectives are revie wed at the beginning of each year to ensure that the bonus opportunity, performance measures, targets and weightings are appropriate. The level of pay-out is determined by the Committee after the year-end, based on performance against targets and any additional factors they deem relevant. Any annual bonus earned above a threshold of 100% of salary will be deferred in shares for a period of two years. Dividends may accrue over the deferral period in respect of DSBP awards that vest. The maximum bonus opportunity is 200% of salary. The CEO and the CFO currently have opportunities of 200% and 150% of salary, respectively . For threshold and target performance, the bonus earned is 0% and up to 50% of maximum, respectively. The bonus is determined based on annual performance against financial and strategic metrics, and personal objectives. Performance measures and weightings will be determined at the start of the year to align with the Company’s short-term financial and strategic priorities. No more than 25% of the bonus opportunity will be based on personal objectives. Details of the measures applicable for the year under review ar e provided in the Annual Report on Remuneration. Performance Share Plan (‘PSP’) T o incentivise and reward the delivery of long-term shareholder value and the achievement of long-term financial targets. Awards of nil-cost options, market value options or conditional shares are made annually, with vesting dependent on the achievement of performance conditions. Performance conditions are reviewed prior to gr ant to ensure that the award level, performance measures, targets and weightings are appropriate. Awards normally vest based on performance measured over a minimum of three years. The level of vesting is determined by the Committee after the performance period, based on the degree to which the performance conditions have been met. In adjudicating the final vesting outcome, the Committee will also consider the underlying performance of the business, as well as the value created for shareholders. A two-year holding period will apply to vested PSP awards during which vested shares may not be sold save to cover tax liabilities. Dividends may accrue over the vesting period in respect of awards that vest. The maximum annual award level is up to 550% of salary for FY2023, comprising a core award of up to 250% of salary and an additional ‘kicker’ award in FY2023 of 300% of salary linked to exceptional performance. The core award will be maintained at 250% of salary over the three-year period of the Remuneration Policy but the additional exceptional kicker awar d opportunity will reduce to 100% of salary in FY2024 and FY2025. For threshold performance, up to 20% of the core award vests. A cap of 2.75 times the value of the FY2023 grant will apply to the vest-date values for each of the PSP grants made in FY2023, FY2024 and FY2025. Any vesting of share value over and above the cap would be forfeited. Performance conditions and weightings will be determined prior to grant each year to align with the Company’s longer- term strategy. Details of the measures applicable for the year under review ar e provided in the Annual Report on Remuneration. Share Incentive Plan (‘SIP’) T o encourage employee share ownership and further support shareholder alignment. The Company operates an HMRC- approved plan that pro vides all employees with a tax-efficient way of purchasing Partnership Shares and allows the grant of Free and/or Matching Shares. Executive Directors are entitled to participate in the SIP on the same terms as other employees. In line with the award limits set by HMRC (or any lower limit as determined by the Committee). Not applicable. Financial Statements 87 Strat egic Report Governa nce Notes to th e Policy table: Executive Direc tor shareho lding guidelines Shareholding guidelines are in place whereb y Executive Directors ar e encouraged to build and maintain over time a shareholding in the Company with a value of equivalent to at least 200% of their base salary commencing on the date of their appointment to the Board. Executive Directors are subject to a post-emplo yment shareholding guideline. Executive Dir ectors will normally be expected to maintain a holding of Tr ainline shares at a level equal to the lo wer of the in-post shareholding guideline and the individual’s actual shareholding for a period of two years from the date the individual ceases to be a Director. The specific application of this shareholding guideline will be at the Committee’ s discretion. The post-employment guideline will be policed through the holding of vested PSP awards granted after the 2020 AGM and thr ough the monitoring of shareholdings by the Company . Pa yments from previ ously agreed remunerat ion ar rangements The Committee reserves the right to make any r emuneration payments where the terms of the payment wer e agreed (i) prior to the Company’s Listing, or (ii) before the Policy came into effect, or (iii) at a time when the rele vant individual was not a Director of the Company and, in the opinion of the Committee, the payment was not in consideration for the individual becoming a Director of the Company . This does not apply to pension contributions for new appointments to the Board. Details of any such payments will be set out in the Annual Report on Remuneration as the y arise. Discretion The Committee may make minor amendments to the Policy (e.g. for regulatory , ex change control, tax or administrative purposes or to take account of a change in legislation) without obtaining shareholder appr oval for that amendment. There are a number of specific areas in which the Committee may e xer cise discretion, including: • To vary the annual bonus and PSP performance measures and weightings each year to r eflect strategic priorities; • To adjust the formulaic annual bonus and PSP outcomes positively or negatively based on a holistic assessment, to ensure the final outcome is a fair and true reflection of underlying business performance and stakeholder e xperience; • To adjust the performance conditions for in-flight PSP awards in e xceptional circumstances, pr ovided the new conditions are no tougher or easier than the original conditions; • To adjust in-flight PSP awards in the e vent of a variation of the Company’s share capital or a demerger, delisting, special dividend, rights issue or other event, which may , in the Committee’s opinion, affect the curr ent or future value of awards; and • To settle awards in cash (for e xample, on a termination). The exercise of any discr etion will be fully disclosed in the rele vant Annual Report on Remuneration. Malus and clawback Awards under the annual bonus (including deferred awards under the DSBP) and PSP ar e subject to malus and clawback provisions. Pr ovisions apply for a period of two years from date of payment in r espect of the cash bonus, and for a period of five years from date of grant in r espect of awards under the DSBP and the PSP . Clawback refers to the reco very of paid or vested amounts, and may be applied in certain circumstances including the following: • Material misstatement of the Company ’s financial statements; • Conduct by the individual resulting in significant reputational damage to the Company; • Fraud, negligence or gross misconduct by the individual. Malus refers to the reduction, including to nil, of unvested or unpaid awar ds. The Committee is able to apply malus to awards in the circumstances set out abo ve. R emuneration policy contin ued T rainline Annual Report and Accounts 2022 88 Sele ction o f per formanc e measure s The annual bonus is currently based on a combination of financial and strategic measur es, and personal objectives which are selected annually to reflect the Gr oup’s str ategy. The intention is for the PSP o ver the policy period to be based on EPS, revenue and relative TSR metrics, all of which ar e either ke y internal metrics for the Company or represent a key indicator of value for our shar eholders. A sustainability related metric will also be included when the Committee determines it is appropriate to do so. Weightings for measur es will focus on: financial performance; the successful execution of T rainline’s strategy; and creating value for shar eholders. The Executive Directors do not curr ently participate in the SIP but if an Executive Director wer e to choose to do so the Committee would ensure the Executive Dir ector has the same performance measures required of an emplo yee participant. The mix of annual and long-term measures is discussed in further detail in the Annual Report on Remuneration. T argets are set taking into account a number of factors including internal and external for ecasts, and market practice. The Committee keeps the performance measures, weightings and targets of both the annual bonus and the PSP under review and r eserves the right to adjust these if they ar e no longer considered to be appropriate. Remuneration arran gement s throughout t he Group Remuneration arrangements throughout the Gr oup are based on the same high-level r emuneration principles as for the Executive Directors. Annual salary r eviews tak e into account personal performance, Group performance, local pay and market conditions, and salary levels for similar r oles in comparable companies. For FY2023 all staff received SIP Free Shar e awards plus a kicker RSU or PSP awar d, depending upon their seniority, with principles and performance requirements aligned with the proposed Ex ecutive Director PSP grants. Mid-le vel staff are also eligible to participate in annual bonus schemes; opportunities and performance measures vary by organisational level, and an individual’s r ole. Senior executives ar e eligible for annual PSP awards on similar terms to Executive Directors, although award opportunities are lo wer and vary by organisational le vel; other staff are eligible to participate in a restricted stock plan. All UK employees ar e eligible to participate in the Share Incentive Plan on identical terms and we also offer similar all-employee share plans to o verseas colleagues. Non- executive Direc tors’ Remune ration Policy The table below sets out details of the Company’s Policy on Non-executive Dir ectors’ remuneration. Element Purpose and link to strategy Operation Maximum opportunit y Performance measures Fees T o recruit and retain high- calibre Non- executive Directors. Non-executive Directors ar e paid a base fee for membership of the Board, with additional fees being paid for membership of Committees and the role of Chair of a Board Committee, to take into account the additional responsibilities and workload required. The Company has the discretion to pay an additional fee to a Non-executive Director, should the Company require significant additional time commitment in exceptional or unforeseen circumstances. Any such fees will be time-limited in nature. Fees are determined based on the responsibility and time commitment required, and with reference to appropriate mark et comparisons. Fees are normally paid in cash. The maximum annual aggregate fee for all Non-executive Directors is currently £1.5 million. Any proposed revision to this limit would be subject to shareholder approval, as required under the Company’s Articles of Association. Not applicable. Other payments T o have the flexibility to provide additional fees/benefits, if required. Non-executive Directors do not curr ently receive any benefits. However, benefits may be pro vided in the future if, in the view of the Company , this is considered appropriate. Tr avel and other reasonable expenses (including fees incurred in obtaining professional advice in the furtherance of their duties) incurr ed in the course of performing their duties are reimbursed. Not applicable. Not applicable. Financial Statements 89 Strat egic Report Governa nce 100% 21% £4,345 £3,24 5 £945 £445 68% 51% 25% Fixed P ay Annual Bonus Long-term Incentive Share price growth Minimum 100% 20% £6,503 £4,922 £1,472 £609 64% 24% 49% On-target 41% 39% Maximum Maximum +5 0% 13% 23% 9% 18% 47% 32% 14% 18% 10% 14% Fixed P ay Annual Bonus Long-term Incentive Share price growth Remuneration Policy for new hires an d internal promo tions The remuneration package for a new Ex ecutive Director will be set br oadly in line with the prevailing appro ved Remuneration Policy at the time of the appointment. The Committee will ensure that the package is sufficient to attr act the appropriate individual, having regard to the calibr e, skills and experience requir ed, whilst being cognisant of not paying more than is appropriate. The annual bonus and PSP award opportunities will be limited to those detailed in the Remuneration Policy table on pages 86 to 87. In addition, the Remuneration Committee may offer additional cash and/or share-based awar ds when it considers these to be in the best interests of the Company and its shareholders, to tak e account of remuneration forfeited when leaving the former employer. Any such buyout awards would r eflect, as far as practicable, the nature, time horizons and performance conditions attaching to that remuneration. The Committee will seek to use the curr ent remuneration structure in making awar ds, but in some cases it may be required to use the fle xibility afforded by Listing Rule 9.4.2R, if appropriate. Shareholders will be informed of any such awar ds or payments at the time of appointment. Where an Executive Dir ector is required to r elocate from their home location to take up their r ole, the Committee may provide reasonable assistance with r elocation in line with local market norms for a period of up to two years. Remunerat ion opportuniti es in d ierent performance scenarios The charts below illustrate the potential futur e value and composition of the Executive Directors’ r emuneration opportunities in four performance scenarios: minimum, on-target (i.e. in line with the Company’s expectations), maximum, and maximum plus 50% share price appreciation, a scenario wher e 50% share price appreciation is included. The potential remuneration opportunities ar e based on the proposed 2022 Policy , applied to the Executive Directors’ salaries as at 1 March 2022. The charts below e xclude the effect of any Company share price appr eciation except in the ‘Maximum+50%’ scenario. Assumptions: Performance scenario Includes Minimum Salary, pension and benefits (fix ed r emuneration) No bonus payout No vesting under the PSP On-target Fixed remuneration 50% of maximum annual bonus payout (i.e. 100% and 75% of salary for the CEO and the CFO, r espectively) 20% vesting of the core award under the PSP (i.e. 50% of salary for the CEO and the CFO) Maximum Fixed remuneration 100% of maximum annual bonus payout (i.e. 200% and 150% of salary for the CEO and the CFO, r espectively) 100% vesting of the FY2023 PSP award (i.e. 550% of salary for the CEO and the CFO) Maximum +50% Fixed remuneration 100% of maximum annual bonus payout 100% vesting of the FY2023 PSP award, plus 50% share price appreciation R emuneration policy contin ued CFO £000 CEO £000 T rainline Annual Report and Accounts 2022 90 Executive Direc tors’ se r vice contr act s and termination remune ration policy The Executive Directors have service contr acts with an indefinite term, which are terminable by either the Company or the Executive Director on 12 months’ notice. The service contr acts make pro vision, at the Board’s discr etion, for early termination involving payment of salary, benefits and pension contributions in lieu of notice. Payment in lieu of notice can be paid either as a lump sum or in equal monthly instalments over the notice period and will normally be subject to mitigation. Effective dates of Executive Director service contr acts are set out in the table below and ar e available for inspection at the Company’s registered office. Executiv e Director Date of contract Jody Ford 21 September 2020 Shaun McCabe 12 June 2019 The table below summarises how the awar ds under incentive plans are typically treated in specific cir cumstances, with the final treatment remaining subject to the Committee’ s discretion. When considering the use of discr etion, the Committee revie ws all potential incentive outcomes to ensure that any application of discretion is fair to both shareholders and participants. Plan Scenario Timing and calculation of payment/v esting Annual bonus All leavers (except the cir cumstances set out belo w) No bonus is paid. Death; injury, disability or ill-health; the sale of the participant’s employing company or business, or in other circumstances at the discretion of the Remuneration Committee The Committee may determine that an Executive Director is eligible to receive a bonus for the year. The Committee will determine the level of bonus taking into account performance. Change of control The Committee will assess the most appropriate treatment for the outstanding bonus period according to the circumstances. DSBP All leavers (e xcept the circumstances set out below) Awards lapse. Death; injury, disability or ill-health; the sale of the participant’s employing company or business, or in other circumstances at the discretion of the Remuneration Committee Awards will vest on the original vesting date, or, if the Committee so determines, as soon as practicable after the date of cessation. Change of control Awards vest immediately, and will be pr o-rated for time, unless the Committee determines otherwise. Alternatively, participants may choose, or at the discretion of the Committee may be required, to accept an ex change for new equivalent awards in the acquirer. PSP All leavers (except the cir cumstances set out belo w) Awards lapse. Death; injury, disability or ill-health; the sale of the participant’s employing company or business, or in other circumstances at the discretion of the Remuneration Committee Awards will vest on the original vesting date, or, if the Committee so determines, as soon as practicable after the date of cessation. The extent to which awards vest will be determined by the Committee, taking into account the extent to which the performance conditions have been satisfied. Awards will be pro- rated for time based on the proportion of the performance period elapsed, unless the Committee determines otherwise. Change of control Awards vest immediately, subject to the Committee ’s assessment of performance. Awards will be pro-rated for time based on the proportion of the performance period elapsed, unless the Committee determines otherwise. Alternatively, participants may choose, or at the discretion of the Committee may be required, to accept an ex change for new equivalent awards in the acquirer. In respect of vested PSP awards that ar e still subject to a holding period, awards will normally be released at the end of the holding period, however the Committee has discr etion to determine otherwise, taking into account the circumstances at the time. Financial Statements 91 Strat egic Report Governa nce Non- executive Direc tor let ters of app ointment The Non-executive Dir ectors have letters of appointment, the terms of which recognise that their appointments are subject to the Company’s Articles of Association and their services are at the discretion of the shar eholders. The appointment letters for the Non-executive Dir ectors provide that no compensation is payable on termination, other than any accrued fees and expenses. The table below sho ws the appointment and expiry dates for the Non-executive Dir ectors. Non-exec utive Director Effective date of appoint ment Expiry of appointment Andy Phillipps 1 January 2021 AGM 2023 Brian McBride 10 June 2019 A GM 2022 Duncan T atton-Brown 10 June 2019 A GM 2022 Jennifer Duvalier 1 October 2020 AGM 2023 Kjersti Wiklund 10 June 2019 A GM 2022 Conside ration of wide r employee views and shareholde rs In revie wing remuneration outcomes for FY2022, the Committee has tak en into account the internal context, including the remuneration arrangements that apply for other emplo yee groups, recent de velopments in the UK governance landscape for executive r emuneration, and the views of our shareholders. The Committee Chair and the designated Non-executive Dir ector for Workforce Engagement pro vide insight on the wider workforce for the Committee to consider via their direct engagement with emplo yees on remuneration sentiment. The remuneration structures and r eward opportunities for the wider workfor ce were used when determining the appropriateness of the proposed Remuneration Policy . The Committee is dedicated to ensuring open dialogue with shareholders in relation to r emuneration. The Committee Chair consulted with major shareholders during FY2022 on the proposed 2022 Remuner ation Policy (and its implementation in FY2023). The Committee took on board the comments received, and commits to further engagement in advance of any significant changes. Further information on the consultation process is set out on page 82. Summar y of de cision- making pro cess The Committee has spent considerable time re viewing how T rainline’s remuneration structur e, approved at the 2020 AGM, can reinforce T rainline’s ambitious long-term gro wth targets and address how certain e xternal developments outside of the Company’s control, Covid-19’ s unprecedented impact; the Williams-Shapps Plan for Rail; and the RDG Retail Review , have made the roles of the Ex ecutive Directors far more challenging. The external developments have weighed heavily on T rainline’s share price and have also had a considerable impact on existing incentive schemes, as evidenced b y the nil vesting of the FY2020 PSP grant and the expected nil vesting of the FY2021 PSP grant. Given the PSP schemes have a three-year cliff vesting, this would r esult in no long-term incentives being paid out to participants for a period of at least five years following T rainline’ s IPO in 2019. This would likely result in remuneration outcomes which benchmark far below peers and would leave the CEO with no effective long-term compensation scheme and very little shareholding, other than his own personal shar e purchases. The Committee strongly believes that a r efresh of the remuner ation structure is required to r eflect the external developments, ensure that T rainline can attract and retain talent in what is an extremely competitive sector, and fully motivate the Executive Directors to deliver e xceptional performance for shareholders. We consulted extensively with our largest shar eholders, representing 78% of our shar es, on this proposed policy . These discussions helped us refine our original proposals to those in this pr oposed policy, and gave the Committee confidence that our investors have strong faith in the ex ecutive team. The Committee ensured that no individual was involved in discussions on their own r emuneration arrangements to manage any potential conflicts of interests. R emuneration policy contin ued T rainline Annual Report and Accounts 2022 92 The following sec tion se ts out our Annual Repo rt o n Remuneration, out lines deci sions made by the Commit tee in relation to D irec tors’ re muneration in re spe ct of F Y202 2 and how the C ommitte e intends to apply the pr opose d Remuneration Policy in F Y 202 3 sho uld it be approved by sharehol ders at the A GM. Th e Annual Repor t on Remune ration will be subje ct to an advis or y shareho lder vote at the A GM to be he ld on 30 J une 20 2 2 . Where informatio n has be en audited, this ha s been s tated. All other info rmation in this rep or t is unaudited. Role and res ponsibilities of t he Remuneratio n Commit tee Detailed responsibilities are set out in the Committee’ s terms of refer ence, which may be found at: www.investors.thetrainline.com. The Committee currently consists of four independent Non-ex ecutive Directors. The Committee invites other individuals such as the Chair of the Board, Chief Executive Officer, Chief Financial Officer, Chief People Officer and e xternal consultants to attend its meetings when appropriate. No Director tak es any part in any decision affecting his or her own remuneration. Advisers Ellason has continued to advise the Committee during FY2022. Ellason was appointed by the Committee in FY2021 as a result of the lead adviser to the Committee moving to Ellason. Ellason attends Committee meetings, r eports directly to the Committee Chair, and is a signatory and adheres to the Code of Conduct for Remuneration Consultants (which can be found at www.remuner ationconsultantsgroup.com). The Committee is satisfied that the advice pro vided by Ellason is objective and independent. Ellason was paid fees of £81,920 for its services to the Committee during the year, excluding expenses and VA T, in accor dance with its letter of engagement. Fees are charged on a time and materials basis. Shareholder v oting The table below sets out the voting outcome for the remuner ation report at the 2021 AGM and the r emuneration policy at the 2020 AGM. V otes For V otes Against V otes Withheld Number of shares (m) Perc entage Number of shares (m) Perc entage Number of shares (m) Remuneration report 428.8 97.7 10.3 2.3 0.0 Remuneration policy (2020 AGM) 428.7 99.9 0.6 0.2 3.6 Implementat ion of the Remu neration P olicy in FY 202 2 Single gure of t otal remuneration for Executive Directors (Audited) The following table sets out the single figure of total r emuneration for Executive Dir ectors in FY2022 and FY2021. Financial year Salary (00 0) Pension (00 0) Benefits (00 0) T otal fixed (00 0) Annual bonus (00 0) PSP (00 0) T otal variable (00 0) T otal remuneration (00 0) Jody Ford 2 FY2022 £575 £32 £3 £609 £959 £0 1 £959 £1,568 FY2021 £227 £11 £1 £239 £0 £0 1 £0 £239 Shaun McCabe FY2022 £400 £42 £3 £445 £500 £0 3 £500 £945 FY2021 £377 £41 £3 £421 £0 £0 1 £0 £421 1 No P SP v es t in g o cc ur re d in t h e pe r io d. 2 Jo dy F o rd j oi n ed t he B o ar d as CO O o n 21 Se p te mb e r 202 0 an d b ec a me C EO o n 1 Ma rc h 20 21. 3 Due t o t he u np re ce de n te d im pa c t o f Cov i d -1 9 th e th re sh o ld p er fo r ma nc e t ar ge t s fo r t he C F O ’s F Y 20 20 P SP g ra n t we re n ot a ch ie ve d w hi ch r es u lt ed i n zero payout. In recognition of the uncertainty generated b y Covid-19, Shaun McCabe volunteered to tak e a salary reduction of 20%, which was effective from 20 April 2020 to 1 August 2020 and deferred payment of his FY2020 annual bonus until October 2020. Ann ual repor t on remuneration Financial Statements 93 Strat egic Report Governa nce Single gure of tot al remunera tion for Non -executive Direc tors (Audited) The single figure of total remuner ation for Non-executive Dir ectors for FY2022 and FY2021 (audited) was: Financial year Fees (00 0) T axable benefits (00 0) T otal Fees (00 0) Andy Phillipps 1 F Y 202 2 £60 £0 £60 F Y 20 21 £10 £0 £10 Brian McBride F Y 202 2 £265 £0 £265 F Y 20 21 £250 £0 £250 Duncan T atton-Brown F Y 202 2 £75 £0 £75 F Y 20 21 £72 £0 £72 Jennifer Duvalier 2 F Y 202 2 £70 £0 £70 F Y 20 21 £29 £0 £29 Kjersti Wiklund F Y 202 2 £75 £0 £75 F Y 20 21 £72 £0 £72 1 Joi n ed t he B o ar d on 1 J an ua r y 2021. 2 Joi n ed t he B o ar d on 1 O c t ob e r 202 0. In recognition of the uncertainty generated b y Covid-19, from 20 April 2020 to 1 August 2020, the Chair and the Non-executive Dir ectors volunteered a 20% reduction to their base fees. Notes to th e tables (Audited) Base s alar y During FY2022 the annual salaries of the Executive Directors wer e £575,000 (FY2021: £500,000 for his previous r ole as COO) for Jody Ford as CEO and £400,000 (FY2021: £400,000) for Shaun McCabe as CFO . Pension During FY2022, Jody Ford and Shaun McCabe received pension benefits b y way of cash allowances equal to 5.5% and 10.5% of salary respectively . Discretion No discretion was applied by the Committee to FY2022 r emuneration outcomes. Annual bonus (Audited) The maximum bonus opportunities for FY2022 were 200% of salary for Jody Ford as CEO and 150% of salary for Shaun McCabe as CFO. The annual bonus is based on the achie vement of Group financial targets weighted 75% and a set of specific and quantifiable strategic objectives weighted 25%. Performance targets and actual outturn are set out belo w. Financial element Measure Performance targets Actual FY2022 achievement Resulting bonus outcome (% of total bonus) W eighting (% of total bonus) Threshold 1 T arget 2 Stretch Group Net Sales 25% £ 1 , 956.0m £2 ,4 45.0 m £ 2, 6 89. 5m £2,520.3m 16.3% Group Revenue 25% £ 13 7. 7 m £ 17 2 .1m £18 9. 3 m £18 8 . 5 m 24.4% Group Adjusted EBITDA 3 25% £ 11 . 0 m £ 2 1. 9 m £ 26 . 3m £3 9.0 m 25.0% T otal 75% 65.8% out of 75% 1 Achievement results in 0% of maximum payout. 2 Achievement results in 50% of maximum payout. 3 Se e pa ge 162 f o r th e de ni t io n of G ro up A d ju s te d EB I T DA . Ann ual repor t on remuneration cont inued T rainline Annual Report and Accounts 2022 94 Strat e gic element CEO - Jody Ford Measure W eighting (% of total bonus) K ey progress during FY2022 Actual FY2022 achievement Resulting bonus outcome (% of total bonus) Enhance customer experience & build demand 10% Strong Co vid-19 recovery and an enhanced focus on the Commuter segment resulted in strong active customer numbers and increased segment share. Stretch 7.6% Grow T rainline Partner Solutions 5% TPS reco very stepped up in H2 with sales, though continued to be hampered by slo wer recovery than other segments. Key strategic customer wins wer e made during the year. T arget 1.8% Employee Engagement 5% Staff engagement increased during the period, with ne w initiatives to ensure the best tech talent is attracted to the Tr ainline business and brand. Stretch 5.0% Investor Engagement 5% Increase in alignment of the investor gr oup with Tr ainline’s sustainability credentials and delivered incr eased hold positions from key tar get investors. Stretch 3.1% T otal 25% 17.6% out of 25% CFO - Shaun McCabe Measure W eighting (% of total bonus) K ey progress during FY2022 Actual FY2022 achievement Resulting bonus outcome (% of total bonus) Enhance customer experience & build demand 10% Strong Co vid-19 recovery and an enhanced focus on the Commuter segment resulted in strong active customer numbers and increased segment share. Stretch 7.6% Grow T rainline Partner Solutions 5% TPS reco very stepped up in H2 with sales, though continued to be hampered by slo wer recovery than other segments. Key strategic customer wins were made during the year. T arget 1.8% Net Debt 5% A significant step down in net debt in the period was achie ved as the Company returned to positive cash flow; e xcess funds were utilised to repay bank debt and convertible bonds. Stretch 5.0% Investor Engagement 5% Increase in alignment of the investor gr oup with Tr ainline’s sustainability credentials and delivered incr eased hold positions from key tar get investors. Stretch 3.1% T otal 25% 17.6% out of 25% Despite the continued impact of Covid-19, in particular the reintroduction of work fr om home guidance and travel restrictions in key markets as a r esult of the Omicron variant, T rainline performed well in FY2022. Financial and str ategic performance exceeded targets and was to wards the top end of the stretch performance r ange with adjusted EBITDA ex ceeding the stretch target. The resulting bonus outcomes for FY2022 for the Executive Dir ectors are set out below . Annual bonus outcome (% of maximum) Annual bonus outcome (% of salary) Annual bonus outcome (00 0) Jody Ford 83.4% 166.7% £959 Shaun McCabe 83.4% 125.0% £500 In line with the FY2020 Remuneration Policy 100% of salary will be paid in cash, and the balance, being £383,609 for the CEO and £100,144 for the CFO, will be paid in deferr ed bonus shares under the DSBP . PSP awards vesting in F Y202 2 Due to the unprecedented impact of Covid-19 the threshold performance tar gets for the CFO’s FY2020 PSP grant wer e not achieved which resulted in zero payout. For further information on the FY2020 PSP award see page 71 of the FY2020 Annual Report. Financial Statements 95 Strat egic Report Governa nce PSP awards grante d in FY202 2 (Audited) The Executive Directors wer e granted conditional share awards under the PSP as set out in the table belo w: Date of grant Number of shares granted Share price at grant Face value Award as % of salary V esting date Jody Ford 1 June 2021 490,470 £2.93 £1.44m 250% 2 May 2024 Shaun McCabe 1 June 2021 341,196 £2.93 £1.00m 250% 2 May 2024 The vest period for these awards is three years fr om grant followed by a two-year post-vest holding period. The awar ds were made using the average of the shar e prices for the seven dealing days immediately preceding 1 June 2021, the date the shares were awarded. Dividend equivalents will not accrue in r espect of the awards o ver the period from the date of grant to the vesting date. Vesting of the FY2022 award is based 25% on EPS, 25% on Re venue and 50% on Relative TSR, with performance measured over the period 1 Mar ch 2021 to 29 February 2024. The targets set for each measure are set out belo w and are based around a Threshold-Max-Ex ceptional range which would earn vesting of 16%, 80% and 100% r espectively of the award, equivalent to in aggregate 40%, 200% and 250% of salary . The Exceptional le vel of performance is judged by the Committee to be extremely str etching. Performance targets Measure W eighting Threshold (16% vesting) Max (80 % vesting) Exceptional (100% v esting) EPS in FY2024 1 25% 6.0p 7.5p 9.4p Revenue in FY2024 25% £318m £397m £496m Relative TSR vs. FTSE 250 2 50% Median Upper quartile Upper decile 1 Th e EP S me a su re i s Ba si c EP S w i th t he i mp a c t of s ha re - ba se d p ay m en t s e xcl ud e d. 2 Ex cl ud in g in ve s t me nt t r us t s . The Committee will ensure that any vesting of the FY2022 PSP cycle is consistent with the stakeholder e xperience over this uncertain period, taking into account perspectives of shareholders, employees and customers, as well as other factors such as the mitigation of any windfall gains. Defe rred share b onus plan (‘D SBP ’) awards to be g ranted in F Y 20 23 DSBP awards in relation to the FY2022 annual bonus will be gr anted in FY2023. Half of the DSBP awards will be subject to a one-year deferral period and the remaining half a two-year deferr al period, both of which will be subject to continued service requirements. No DSBP awar ds were granted in FY2022. Payments for loss o f oce (Audited) No payments for loss of office were made during the year under re view. Payments to past Dir ec tors (Audited) No payments were made to past Directors during the year under r eview . Relative impor tance of sp end on pay The table below shows the change in total emplo yee pay alongside Revenue and Group Adjusted EBITDA as these ar e two key measur es of Group performance. No dividends or share buybacks have occurred since Listing. % change FY2022 FY2021 T otal gross employee pay 1 20% £72m £60m Revenue 181% £189m £67m Group Adjusted EBITDA 2 257% £39m £(25)m 1 Se e No te 5 o f th e nan c ia l s ta t em en t s . 2 Se e pa ge 162 f o r th e de ni t io n of G ro up A d ju s te d EB I T DA . Ann ual repor t on remuneration cont inued T rainline Annual Report and Accounts 2022 96 T o tal pay ratio The table below discloses the ratio between the CEO’ s total remuneration and that of the 25th, 50th and 75th per centile UK-based employee. Financial year Method 25th percentile pa y ratio 50t h percentile pay ratio 75th percentile pay ratio FY2022 A 41.3:1 22.1:1 17.0:1 FY2021 A 14.4:1 8.4:1 6.3:1 FY2020 1 A 32.1:1 19.6:1 14.3:1 1 Th e g ur es f o r F Y 2 02 0 ar e fo r th e 10 mo nt hs f r om A dm is s io n to t he e n d of t he na nc ia l ye ar. The 25th, 50th and 75th percentile employees wer e determined using calculation methodology A which involved calculating the actual full-time equivalent remuneration for all UK emplo yees employed on 28 February 2022 for 1 March 2021 to 28 February 2022. From this analysis, thr ee employees were then identified as r epresenting the 25th, 50th and 75th percentile of the UK employee population. T rainline chose this method as it is the preferred approach of the government and that of shareholders, and the Company had the systems in place to undertak e this method. The Committee has considered the pay data for the three employees identified and belie ves that it fairly reflects pay , reward and pr ogression for these percentiles amongst our UK workfor ce taken as a whole. The three individuals identified were full-time employees during the year. None received an e xceptional incentive award which would otherwise inflate their pay figures. Assumptions were made regar ding taxable benefits for employees given some data was unavailable, however the methodology used was consistent with the methodology used to calculate the single figure of the CEO . The total pay ratio is based on comparing the CEO’s pay to that of T rainline’s UK-based workforce, the largest pr oportion of whom work in our T echnology teams developing and maintaining our platform. Last year, the CEO pay ratio was based on comparing the former CEO’s pay to that of T rainline’ s UK-based workforce, and during FY2021 no bonus was payable. The ratio for the median employee reduced fr om 19.6:1 in FY2020 to 8.4:1 in FY2021 primarily as a result of no annual bonus payout being made for FY2021 (compared to a 58% achievement in FY2020) which has a more significant impact on the CEO’s pay outcomes given the greater weighting on variable pay for our mor e senior executives. For FY2022 a bonus is payable and this has had a significant impact on the total pay ratio resulting in the year-on-year increase in the r atio for the median employee to 22.1:1. The Committee expects that the ratios will continue to be lar gely driven by the CEO’s incentive pay outcomes, which will likely lead to greater variability in pay than that observed for employees at lo wer levels who, consistent with market practices, have a greater pr oportion of their pay linked to fixed components. The Committee tak es into account these ratios when making decisions around the Executive Dir ector pay packages. T rainline takes seriously the need to ensur e competitive pay packages across the organisation and has taken steps during FY2022 to str engthen the competitiveness of pay for the wider workforce. The table below provides additional information r elating to the CEO’s salary and total r emuneration and that of the 25th, 50th and 75th percentile UK-based employee. Y ear Met hod 25th percentile 50t h percentile 75th percentile C EO FY2022 A T otal remuneration (£000) £38 £71 £92 £1,568 Salary ratio 16.4:1 8.8:1 6.3:1 Salary (£000) £35 £65 £91 £575 FY2021 A T otal remuneration (£000) £41 £70 £93 £588 Salary ratio 13.3:1 7.4:1 5.7:1 Salary (£000) £36 £65 £85 £480 FY2020 1 A T otal remuneration (£000) £29 £47 £64 £920 Salary ratio 16.4:1 9.3:1 7.1:1 Salary (£000) £24 £42 £56 £392 1 Th e g ur es f o r F Y 2 02 0 ar e fo r th e 10 mo nt hs f r om A dm is s io n to t he e n d of t he na nc ia l ye ar. Financial Statements 97 Strat egic Report Governa nce Ann ual repor t on remuneration cont inued Percentage c hange in Dire ctor s’ and employees’ re muneration The table below shows the per centage change in individual Directors’ salary , benefits and annual bonus compared to the average percentage change for all employees of the Gr oup for the same elements of remuneration. T o provide a more accurate percentage change the remuner ation data for FY2020 to FY2021, which repr esents the 10-month reporting period following our Listing, has been prorated to a 12-month period. Salary/ fees (FY % change) Benefit s (FY % change) Annual bonus (FY % change) 2021 to 2022 2020 t o 2021 2021 to 2022 2020 t o 2021 2021 to 2022 2020 t o 2021 Executi ve Direc tors Jody Ford 1 15% n/a 12% n/a 100% n/a Shaun McCabe 6% (6)% 2 3% (3)% 100% (100)% Non- e xecutive Di rectors Andy Phillipps 3 0% n/a n/a n/a n/a n/a Brian McBride 6% 2 53% 2 4 n/a (100)% n/a n/a Duncan T atton-Brown 5% 2 (4)% 2 n/a n/a n/a n/a Jennifer Duvalier 5 0% n/a n/a n/a n/a n/a Kjersti Wiklund 5% 2 (5)% 2 n/a n/a n/a n/a Empl oyee s 3% 6% 26% 2% 100% (100)% 1 Joi n ed t he B o ar d as CO O o n 21 Se p te mb e r 202 0 w it h a s al ar y of £ 5 0 0 ,0 0 0 a n d be c am e CE O on 1 M ar ch 2 021 w i th a s a la r y o f £ 575 ,0 0 0. 2 In re co gn i ti on o f t he u nc er t ai nt y ge ne r at ed b y Co vi d -1 9 th e Di re c to r v ol un t ar il y r ed u ce d th ei r s al ar y/ fe e f ro m A pr i l 202 0 to A ug u s t 202 0. 3 Joi n ed t he B o ar d on 1 J an ua r y 2021. 4 Br ian M c Br id e ’ s fe e as C ha ir o f t he B o ar d ha s no t ch an ge d . Th e p er ce nt a g e cha n ge r ep re s en t s hi s re v is e d fe e fo l lo wi n g hi s ch an ge i n ro le f r om De pu t y Ch ai r an d S en io r In d ep en d en t No n - e xe cu t i ve D ir ec t o r to C ha ir o f th e Bo a rd o n 4 No ve mb e r 20 20. 5 Joi n ed t he B o ar d on 1 O c t ob e r 202 0. Historical T SR per fo rmance and re muneration outco mes for th e CEO The graph below compares the Company’s TSR against the FTSE 250 Inde x excluding investment trusts, of which the Company is now a constituent. Performance, as requir ed by legislation, is measured by TSR o ver the period from commencement of conditional dealing (21 June 2019) to 28 February 2022. 0 06/ 2019 02/2020 08/ 2020 02/2021 08/ 2021 02/2022 20 40 180 160 140 120 100 80 60 T rainlin e F TS E 25 0 In dex The table below illustrates CEO single figur e of total remuneration o ver the same period. FY2020 1 FY2021 FY2022 Clare Gilmartin Clare Gilmartin Jody Ford Single figure (£000) 920 588 1,568 Annual bonus outcome (% of max) 57.6% 0% 83.4% PSP vesting (% of max) n/a n/a n/a 1 Th e g ur es f o r F Y 2 02 0 ar e fo r th e 10 mo nt hs f r om A dm is s io n to t he e n d of t he na nc ia l ye ar. T rainline Annual Report and Accounts 2022 98 Implementat ion of the Remu neration P olicy in FY 202 3 Executive Direc tor remuner ation in F Y 202 3 A summary of how the proposed Remuneration Policy will be applied to Ex ecutive Director r emuneration for FY2023 is set out below . Long-term i ncentive - FY2023 PS P grant under the propose d new Remuneration P o licy Subject to the approval b y shareholders of the new Remuneration Policy at the 2022 A GM, the intention is for the CEO and the CFO to receive awards under the PSP comprising a ‘ core’ award of 250% of salary, and a ‘kick er’ award, rewarding only truly exceptional performance, of 300% of salary . Vesting of both awar ds will be based on several measures as summarised in the table below , with performance measured over the three-year period 1 Mar ch 2022 to 28 February 2025. The performance measures and targets are intended to incentivise or ganic growth; if a materially significant acquisition were to take place, the Committee would consider applying discr etion to adjust the calculation methodology of the measures in a way that ex cludes the impact of that acquisition. The vesting of the award will be based on the following targets: Performance targets for core award P er formance targets for kicker award Measure W eighting Threshold (20% vesting of cor e award) Core award max (100% v esting of core award) Kicker award max (100% v esting of kicker award) Cumulative EPS¹ 25% 11.9p 14.9p 18.6p Average annual Revenue growth 25% 22% 27% 33% Relative TSR vs. FTSE 250 2 50% Median Upper quartile 95th percentile 1 Th e EP S me a su re i s cu mu la ti v e Ba s ic E PS w i th t h e im pa c t o f sh ar e - ba s ed p ay m en t s e xcl u de d. 2 Ex cl ud in g in ve s t me nt t r us t s . The performance ranges of the kicker award have been set to ensur e vesting will occur only once the core awar d has vested in full in each respective measure e.g. for the cumulative EPS measur e the kicker award will begin to vest at 14.9p and fully vests at 18.6p. Full vesting will require a significant incr ease in our financial performance, as well as delivering exceptional r eturns to our shareholders. A cap of 2.75 times the value of the grant will be applied to the PSP vest-date value with any value over and above the cap to be forfeited. Base s alar y The current Executive Dir ector salaries for FY2023 are set out in the table below . The Committee intends to undertake a revie w of CEO and CFO salary in FY2023 and will disclose the result of this re view in the FY2023 Annual Report. The wider workforce received on aver age a 5.3% pay rise for FY2023. Executiv e Director FY2022 FY2023 Jody Ford £575 ,0 0 0 £ 575,0 0 0 Shaun McCabe £400 ,000 £400, 000 Pensi on and benets For FY2023, the CEO and the CFO will receive pension benefits by way of cash allo wances of 5.5% and 10.5% of salary respectively , in line with the Remuneration Policy . The CFO’s pension benefit will reduce to 5.5% of salary b y the end of FY2023 to be consistent with that offered to the broader workfor ce. Financial Statements 99 Strat egic Report Governa nce Ann ual repor t on remuneration cont inued Annual b onus The FY2023 annual bonus will be consistent with that detailed in the Remuneration Policy being proposed to shareholders for approval at the 2022 A GM, with maximum opportunities of 200% and 150% of salary for the CEO and the CFO, r espectively, and with measures based on a r ange of financial and strategic metrics, and personal objectives. The Company considers the targets to be commercially sensitive but intends to disclose them in the FY2023 Annual Report. The Committee will ensure any payout of the FY2023 annual bonus is consistent with the stakeholder experience over the period, taking into account perspectives of shar eholders, employees and customers. Non- executive Direc tor fees in F Y202 3 Non-executive Dir ector fees are determined by the Boar d within the limit approved b y shareholders in the Articles of Association, with the exception of the Chair of the Boar d, whose remuneration is determined b y the Committee. Effective 1 March 2022 a Committee Membership fee of £5,000 per committee has been introduced to r ecognise the investment in time required b y committee members. This fee is not in addition to the Committee Chair fee. Fee at 1 M arch 2021 Fee from 1 M ar 2022 Ba sic f e e Company Chair £265,000 £265,000 Non-executive Dir ector £60,000 £60,000 Additional fees Senior Independent Director £10,000 £10,000 Audit and Risk Committee Chair £15,000 £15,000 Remuneration Committee Chair £15,000 £15,000 Committee Membership N/A £5,000 Ex ternal appoint ments We recognise the opportunities and benefits to both the Company and to the Ex ecutive Directors of them serving as Non-executive Dir ectors of other companies. The Executive Directors ar e permitted to hold one significant external appointment and are entitled to retain the fees earned fr om such appointments. All Directors are r equired to seek approval from the Boar d prior to accepting external appointments. T rainline Annual Report and Accounts 2022 100 Outs tanding share awards (Audited) Details of outstanding share awards in the Company’s share schemes gr anted to the Directors as at 28 February 2022, are set out in the table below . Director Award type Date of grant Number of shares granted Share price of grant Face value Award as % of salary V esting date Jody Ford PSP 16 Nov 2020 566,358 £3.53 £2.0m 400% 1 22 May 2023 PSP 1 Jun 2021 490,470 £2.93 £1.4m 250% 1 Jun 2024 Shaun McCabe PSP 22 May 2020 264,476 £3.78 £1.0m 250% 22 May 2023 PSP 1 June 2021 341,196 £2.93 £1.0m 250% 1 Jun 2024 Brian McBride RSU 26 Jun 2019 28,572 £3.50 £0.1m 38% 26 Jun 2022 2 1 In li ne w i th t h e Po li c y an d t he r u le s of t h e PS P , J od y F o rd ’s i ni ti al P S P gra n t on j oi ni ng t h e Com p an y wa s fo r 4 0 0 % of s a la r y, of w h ic h 35 0 % of s a la r y i s fo r co re p er fo r ma nc e wi t h up t o an a dd i ti on al 5 0 % of s a la r y s t r uc tu re d a s a ki cke r b as e d on e xce p ti on al E P S an d re la ti v e T SR p e r f or ma nc e. 2 Ves ti n g su bj ec t t o B ri an M cB r id e ’s c on ti nu e d ap po i nt me n t to t he B oa r d in e qu al t ra nc h es o ve r th e t hr ee y ea r s fo ll ow i ng A dm is s io n an d re q ui re d to ho ld t h e ve s te d sh ar es s o l on g as h e re m ai ns a D ir ec to r of t he C om pa ny. Statement of D irec tors’ shar eholding and sh are interes ts (Audited) The table below shows the beneficial interests of Dir ectors on 28 February 2022 (including the beneficial interests of their spouses, civil partners, children and stepchildren) in the Or dinary Shares of the Company , as well as unvested awards. Director Ordinary Shares held at 1 March 2021 Ordinary Shares held at 28 Feb 2022 Subject to deferral/ holding period Unvested and subject to performance conditions Shareholding requirement as % of salary Current Shareholding as % of salary 1 Shareholding requirement met? E xecu ti ve Di re ct or s Jody Ford 69,287 105,354 0 1,056,828 200% 37% No Shaun McCabe 2,012,879 2,012,879 0 605,672 200% 1,025% Ye s Non - e xecu ti ve Di re ct or s Andy Phillipps 74,237 74,237 Brian McBride 57,142 77,540 28,572 Duncan T atton-Brown 28,571 63,981 Jennifer Duvalier 0 4,587 Kjersti Wiklund 2,142 2,142 1 Ca lc ul at ed u si n g th e £ 2 .0 36 p e r sh ar e cl os in g pr i ce o n 28 F e br u ar y 20 22 b e in g th e la s t ma r ket d ay o f F Y 202 2 . Approved by the Boar d on 5 May 2022. Kjers ti Wiklund Chair of the Remune ration Co mmitte e 5 May 2022 Financial Statements 101 Strat egic Report Governa nce Directors ’ repor t The Directors present their report , together with the audi ted Fina ncial S tatements f or the y ear ended 28 Februar y 2 02 2 . Complianc e with the UK C orporate G overnance Code 2 01 8 This Annual Report has been prepared with refer ence to the UK Corporate Governance Code 2018 published b y the UK Financial Reporting Council (‘FRC’) in July 2018 (the ‘Governance Code’). During the year the Company applied the principles and complied with the relevant pr ovisions set out in the Governance Code. The Dir ectors note that the pension contribution for the CFO is due to align with the workforce by the end of FY2023 in or der to comply with Provision 38. Details demonstrating how the principles and r elevant provisions of the Go vernance Code have been applied can be found below in the Directors’ Report and thr oughout the Corporate Governance Report, each of the Board Committee reports and the Strategic Report. The Corpor ate Governance Report, each of the Board Committee r eports and the Strategic Report for their Corporate Go vernance disclosures all form part of the Directors’ Report. The Financial Reporting Council (‘FRC’) is responsible for the publication and periodic re view of the Governance Code, which can be found on the FRC website www.frc.or g.uk. Diversity and inclusion Our Diversity and Inclusion policies support managers and employees in creating a diverse and inclusive cultur e where everyone is welcome. Our policies demonstrate our commitment to pr oviding equal opportunities to all employees, irrespective of age, disability , gender, marriage and civil partnership, pregnancy or maternity, r ace, religion or belief, sex or sexual orientation. Disclosure of information t o audit ors The Directors who held office at the date of appro val of this Annual Report confirm that, so far as they are each awar e, there is no rele vant audit information of which the Company’s auditors are unaware; and each Director has tak en all the steps that he or she ought to have taken as a Director to mak e himself or herself aware of any rele vant audit information and to establish that the Company’s auditors are aware of that information. Insuranc e and indemnities The Company maintained Directors’ and Officers’ Liability Insurance co ver throughout the period. The Directors ar e also able to obtain independent legal advice at the expense of the Company , as necessary, in their capacity as Dir ectors. The Company has entered into a deed of indemnity in favour of each Board member. These deeds of indemnity ar e still in force and provide that the Company shall indemnify the Dir ectors to the fullest extent permitted b y law and the Articles, in respect of all losses arising out of, or in connection with, the ex ecution of their powers, duties and responsibilities as Directors of the Company or any of its subsidiaries. This is in line with current mark et practice and helps us attract and retain high-quality , skilled Directors. Subsidiaries, b ranche s and principal ac tivities The Company is the holding company for a group of subsidiaries (‘the Group’) whose principal activities ar e described in this Annual Report. The Group’s subsidiaries and their locations ar e set out in Note 22 in the Financial Statements. In accordance with the Companies Act 2006, the Board confirms that ther e were no branches of the Company or its subsidiaries during the financial year. Ar ticles of As sociation an d powers of the D irec tors The Company’s Articles of Association contain the rules relating to the powers of the Company’s Directors and their appointment and replacement. The Company’s Articles of Association may only be amended by special resolution at a general meeting of the shareholders. Subject to the Company’s Articles of Association, the Companies Act and any directions given by special r esolution, the business of the Company will be managed by the Board which may e xercise all the powers of the Company , whether relating to the management of the business of the Company or not. T rainline Annual Report and Accounts 2022 102 Share cap ital Details of the Company’s share capital including changes during the period are given in Note 16 to the Financial Statements. There are no r estrictions on voting rights or the transfer of shares in the Company and the Company is not aware of agreements between holders of securities that r esult in such restrictions. No shareholder holds securities carrying special rights with regards to contr ol of the Company. The Company had been notified under Rule 5 of the FCA ’s Disclosure Guidance and T ransparency Rules of the following interests in voting rights in its shar es. The latest information on major shareholders is available via the Regulatory Information Service or on the Company’s Investor Relations website. % of total voting rights as at 28 Feb 20 22 % of total voting rights as at the date of t his report T. Ro we Price Group 15 . 6 6 % 15 . 2 1% Baillie Gifford & Co Ltd (SC) 11. 9 4 % 10 . 8 2 % Capital Group Companies Inc 9. 5 4% 9. 5 4 % FIL Limited 5.9 2% 5.92% Liontrust Investment Partners LLP (UK) 5 . 3 1% 5 . 3 1% Jupiter Asset Management Limited (UK) 5. 09% 5.09% The Company was authorised by shareholders to purchase its o wn shares in the market up to a maximum of approximately 10% of its issued shar e capital. No shares were pur chased under that authority during FY2022 (FY2021: £nil). The Company is seeking to renew the authority at the forthcoming A GM, within the limits set out in the notice of that meeting and in line with the recommendations of the Pre-emption Gr oup. Shares held by the Company’s Employee Benefit Trust (the ‘T rust’) rank pari passu with the shares in issue and have no special rights. V oting rights and rights of acceptance of any offer relating to the shares held in the T rust rests with the trustees, who may take account of any recommendation from the Company . Voting rights are not e xercisable b y the colleagues on whose behalf the shares are held in trust. Signicant agree ments Convertible B onds due 2 026 lis ted on t he unregulate d open market of th e Frankfur t Stock Exchange (‘F reiv erk ehr’) The Company issued £150 million of senior unsecured Convertible Bonds due 2026 (the ‘Bonds’) on 7 January 2021. The net proceeds of the Bonds are used to pr ovide liquidity and flexibility to invest in possible futur e growth opportunities. The Bonds were issued at par and carry a coupon of 1.0% per annum payable semi-annually in arrears in equal instalments on 14 January and 14 July in each year, with the first interest payment date being 14 July 2021. The Bonds will be convertible into ordinary shares of the Issuer (the ‘Or dinary Shares’). The initial conversion price shall be £6.6670, representing a premium of 50% abo ve the reference shar e price of £4.444698, being the volume weighted average price (the ‘VWAP’) of an Ordinary Shar e on the London Stock Exchange on 7 January 2021. The conversion price will be subject to adjustment in certain circumstances in line with market pr actice. Unless previously r edeemed, or purchased and cancelled, the Bonds will be convertible at the option of the bondholders on any day during the conversion period. The Company has the option to redeem all, but not some only , of the Bonds on or after 4 February 2024, at par plus accrued interest, if the parity value (as described in the T erms and Conditions relating to the Bonds) on each of at least 20 dealing days in a period of 30 consecutive dealing days exceeds £130,000 (130%). The Company also has the option to r edeem all outstanding Bonds, at par plus accrued interest, at any time if 85% or more of the principal amount of the Bonds shall have been previously converted or r epurchased and cancelled. During FY2022 the Company announced that it had repurchased in aggr egate £35.2 million of the bonds which were subsequently cancelled. The Company announced the repurchase of an additional £13.7 million of the bonds on 10 March 2022 which were subsequently cancelled. Follo wing this cancellation £101.1 million in aggregate principal amount of the Bonds remain outstanding. Following a change of control of the Company , the holder of each of the Bonds will have the right to requir e the Company to redeem that Bond at its principal amount, together with the accrued and unpaid interest or the bondholders may exercise their conversion right using the formula as described in the T erms and Conditions relating to the Bonds. Financial Statements 103 Strat egic Report Governa nce Ev ents af ter the b alance she et date There have been no balance sheet events since the end of FY2022. Going con cern The UK Corporate Governance Code 2018 r equires the Board to assess and r eport on the prospects of the Group and whether the business is a going concern. In considering this requirement, the Dir ectors have taken into account the Group’s for ecast cash flows, liquidity , borrowing facilities and r elated covenant requir ements including the next covenant test on 31 August 2022, and the expected operational activities of the Gr oup. Having due regard to these matters and after making appropriate enquiries, the Directors have a r easonable expectation that the Group and the Company have adequate resources to remain in oper ation until at least 12 months after the appro val of these Financial Statements. The Board has therefore continued to adopt the going concern basis in pr eparing the consolidated Financial Statements. Political and charitable donatio ns The Group did not make any political donations (FY2021: £nil) or incur any political e xpenditure during the year (FY2020: £nil). During the year the Company made charitable donations totalling £53k in addition to charitable donations via matched funding under the reporting threshold to support the charitable fundraising efforts of our people. Additiona l disclosures Other information which is incorporated by r eference into this report can be located as follo ws: Page Pa ge Likely future de velopments 2 to 47 Engagement with other stakeholders 6 1 to 6 4 Research and development 24 to 25 Long-term incentive schemes 82 to 101 Group employees 4 8 to 5 3 Directors’ interests in shar es 101 Directors of the Company 72 t o 73 Statement of capitalised interest 13 0 Employee engagement 63 & 74 Sustainability , TCFD, Energy and Greenhouse Gas Reporting 5 4 to 6 0 Financial instruments and financial risk management 15 0 t o 15 2 The Directors’ Report, which has been prepared in accor dance with the requirements of the Companies Act 2006, has been approved by the Boar d and signed on its behalf by: Martin McIntyre Company Secre tar y 5 May 2022 Directors ’ repor t continued T rainline Annual Report and Accounts 2022 104 Stat ement of Directors ’ responsibilities Statement of D irec tors’ res pon sibilitie s in re spe ct of the Annual Rep or t and the Financial Stateme nts The Directors are r esponsible for preparing the Annual Report and the Group and Parent Company Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Par ent Company Financial Statements for each financial year. Under that law they are requir ed to prepare the Group Financial Statements in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and applicable law and have elected to prepare the Parent Company Financial Statements in accordance with UK accounting standards and applicable law, including FRS 101 Reduced Disclosure Framework. In addition the Group Financial Statements are required under the UK Disclosure Guidance and Tr ansparency Rules to be prepar ed in accordance with International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (‘IFRSs as adopted b y the EU’). Under company law the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of the Group’s pr ofit or loss for that period. In preparing each of the Group and Parent Company Financial Statements, the Directors are r equired to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable, r elevant, reliable and prudent; • for the Group Financial Statements, state whether they have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (‘IFRSs as adopted by the EU’); • for the Parent Company Financial Statements, state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the Parent Company Financial Statements; • assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations or have no realistic alternative but to do so. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its Financial Statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. Under applicable law and regulations, the Directors are also r esponsible for preparing a Strategic Report, Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that law and those regulations. The Directors are r esponsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions. Respon sibility st atement of the Dire ctor s in respe ct o f the Annual Financial Rep or t We confirm that to the best of our knowledge: • the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • the Strategic Report includes a fair revie w of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. We consider the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’ s position and performance, business model and strategy . Shaun McC abe Chief Finan cial O cer 5 May 2022 Financial Statements 105 Strat egic Report Governa nce In this sec tio n Independent auditor’s report 108 Consolidated income statement 119 Consolidated statement of other comprehensive income 120 Consolidated balance sheet 121 Consolidated statement of changes in equity 122 Consolidated statement of cash flow 123 Notes to the Group Financial Statements 124 Parent Company balance sheet 157 Parent Company statement of changes in equity 158 Notes to the Parent Company Financial Statements 159 Alternative performance measures 162 Fi n an cial S tatem e nt s T rainline Annual Report and Accounts 2022 106 NEW L y on P ar t-Dieu 15: 18 1 7:14 Paris Gare de L yon L yon Part-Dieu Thu 5 Ma y 1 h 56m, Direct View tickets Financial Statements 1 07 Strat egic Report Gove rnanc e Financial Statements Independent au ditor ’ s repor t to the members of T rainline plc R epor t on the audit of the nancial statements Opinio n In our opinion: • Trainline plc’s gr oup nancial statements and parent company nancial statements (the “nancial statements”) give a true and fair view of the state of the group’ s and of the parent company’s affairs as at 28 February 2022 and of the group’s loss and the gr oup’s cash o ws for the year then ended; • the group nancial statements have been properly prepared in accor dance with UK-adopted international accounting standards; • the parent company nancial statements have been properly prepared in accor dance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosur e Framework”, and applicable law); and • the nancial statements have been prepared in accordance with the requir ements of the Companies Act 2006. We have audited the nancial statements, included within the Annual Report and Accounts 2021/22 (the “ Annual Report”), which comprise: Consolidated and Parent Company balance sheet as at 28 February 2022; Consolidated income statement, Consolidated statement of other comprehensive income, Consolidated and Parent Company statement of changes in equity, Consolidated statement of cash o w for the year then ended; and the notes to the nancial statements, which include a description of the signicant accounting policies. Our opinion is consistent with our reporting to the Audit and Risk Committee. Basis for opinion We conducted our audit in accordance with International Standar ds on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ r esponsibilities for the audit of the nancial statements section of this report. We belie ve that the audit evidence we have obtained is sucient and appropriate to provide a basis for our opinion. Independence We remained independent of the group in accor dance with the ethical requirements that ar e relevant to our audit of the nancial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public inter est entities, and we have fullled our other ethical responsibilities in accordance with these r equirements. T o the best of our knowledge and belief, we declare that non-audit services pr ohibited by the FRC’ s Ethical Standard were not provided. Other than those disclosed in the Report of the Audit and Risk Committee, we have provided no non-audit services to the parent company or its controlled undertakings in the period under audit. Our audit a pproach Co ntex t Tr ainline is an independent rail and coach travel platform, pr edominantly operating in the UK, but also with a gro wing presence in Europe. The Group focuses on the sale of tr ain tickets in the UK and Europe, as well as pr oviding retailing capabilities for carriers, businesses and travel sellers. The Gr oup’s consolidated nancial statements are primarily an aggregation of two legal entities; T rainline.com Limited, the UK trading entity , and T rainline SAS, the European tr ading entity. As T rainline.com Limited makes up approximately 90% of the group’ s revenue, our audit work focused on this entity . Our audit was underpinned by 2022 being our rst year as external auditors of the Gr oup. As part of our audit transition, we performed specic procedures o ver opening balances by shadowing the prior year audit undertak en by the predecessor auditor, which consisted of being present at Audit and Risk Committee meetings when the r esults of the work of the previous auditor wer e presented and the signicant judgements discussed, revie wing the predecessor auditor’s working papers and risk assessment, and re-evaluating their conclusions in respect of k ey sources of estimation uncertainty in the opening balance sheet at 1 March 2021. We performed pr ocess walkthroughs to understand and evaluate the ke y nancial processes and controls across the Gr oup. Following this work, we performed early audit procedures in advance of the year-end. The objective of this audit work was: – to perform initial testing in r elation to the design and operating effectiveness of the controls we planned to place r eliance on; – to ensure that we had a clear plan as to what work needed to be done when and where at year-end; – to perform initial substantive testing, including T rainline Annual Report and Accounts 2022 108 the use of digital audit testing; and – to enable early consideration of the ke y sources of estimation uncertainty before the year-end. The audit transition, half year re view and pre year-end audit work wer e important in determining our FY22 Group audit scope, areas of focus and detailed testing appr oach. As we undertook each phase of this rst year audit, we regularly reconsider ed our risk assessment to reect audit ndings, including our assessment of the Group’ s control environment and the impact on our planned audit appr oach. In terms of risk assessment: the Covid pandemic introduced volatility into the environment faced b y Tr ainline during both FY21 and FY22 and as a consequence there have been signicant changes to the levels of re venue and protability; we therefor e identied Recoverability of international Goodwill (group) and Company’s investment in subsidiary undertakings (parent) as ke y audit matters. We also included a ke y audit matter on the Inappropriate capitalisation of intangibles (group) due to the magnitude of costs capitalised and the potential for fraud and error in determining whether internal emplo yee costs meet the requirements of IAS 38 ‘Intangible Assets’. As part of our audit we also made enquiries of management to understand the process they have adopted to assess the potential impact of climate change on the nancial statements. Management considers that the impact of climate change does not give rise to a material nancial statement impact in the current year and we used our knowledge of the Group and the industry to evaluate management’s assessment. W e particularly considered the impact on future cash ow forecasts used both in going concern and impairment assessments, including the potential for disruption caused to the rail industry by unusual weather e vents as set out in the T ask Force on Climate-Related Financial Disclosur es, and the potential increase in demand as a result of people looking for a gr eener way to travel. Ove r v ie w Audit scope • We identied one trading entity within the Group which, in our view , requir ed a full scope audit based on its contribution of revenue to the gr oup. In addition, we determined that specic audit procedures were r equired at a further three legal entities to address specic risk char acteristics and provide sucient o verall Group co verage of all material consolidated nancial statement line items • All work was undertaken by the Group team who also performed procedur es over several differ ent nancial statement line items, including complex and judgemental areas pr epared by the head oce nance function, to provide sucient o verall Group cover age. In addition, the consolidation and nancial statement disclosures were also audited by the Group team. • The balances on which we performed audit procedures accounted for 92% of Group re venue, 85% of Group loss before tax and 98% of Group total assets. Our audit scope pr ovided sucient appropriate audit e vidence as a basis of our opinion on the Group nancial statements as a whole. Key audit matters • Recoverability of international Goodwill (group) • Inappropriate capitalisation of intangibles (group) • Company ’s investment in subsidiary undertakings (parent) Materiality • Overall group materiality: £1,700,000 based on 1% of average re venue for the last 3 years being FY20, FY21 and FY22. • Overall parent company materiality: £19,000,000 based on 1% of total assets. • Performance materiality: £1,275,000 (group) and £14,250,000 (parent company). The scop e of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the nancial statements. In particular, we looked at where the dir ectors made subjective judgements, for example in respect of signicant accounting estimates that involved making assumptions and considering future e vents that are inherently uncertain. Ke y audit matter s Key audit matters are those matters that, in the auditors’ pr ofessional judgement, were of most signicance in the audit of the nancial statements of the current period and include the most signicant assessed risks of material misstatement (whether or not due to fraud) identied by the auditors, including those which had the gr eatest effect on: the overall audit str ategy; the allocation of resources in the audit; and dir ecting the efforts of the engagement team. These matters, and any comments we make on the results of our pr ocedures thereon, were addr essed in the context of our audit of the nancial statements as a whole, and in forming our opinion thereon, and we do not pro vide a separate opinion on these matters. This is not a complete list of all risks identied by our audit. 109 Strat egic Report Gove rnanc e Financial Statements K ey audit matter How our audit addressed t he key audit matter Reco verability of international Goodwill (group ) The Group holds a signicant amount of international goodwill (£66.1m) on the balance sheet. This goodwill primarily arose from the acquisition of Capitaine Tr ain SAS (now T rainline SAS), with a small contribution from the acquisition of Tr ainline.com. The carrying value of international goodwill is dependent on the overall valuation of the international business, based on forecast discounted cash ows to determine a value in use. This business is in a growth phase incurring losses as it establishes itself in these markets. In the prior period the assessment concluded that the carrying value was greater than the discounted present values of the future cash o ws and accordingly an impairment of £25m was recorded in the prior year. In accordance with the IAS 36 ’Impairment of assets’ the Group performs an annual impairment assessment to determine whether an impairment of the carrying value of international goodwill is required. An impairment had been recognised in the previous year. In the curr ent year this assessment has been performed which has concluded that no further impairment is required. The impairment assessment includes the following estimates: • The 3 year Board approved for ecast cash ows extrapolated for a further 2 years including the estimated growth rates for Net Ticket Sales (‘NTS’), Revenue and Cost of Sales (CoS); • The growth rate to extr apolate forecasts beyond the 5 year forecast; and • The discount rate applied to futur e cash ows. These matters are complex and involve a high degree of estimation and judgement which means future performance of the business could vary signicantly. Accordingly, our audit devoted signicant resources to assessing the validity of the models used by the directors and obtaining evidence to inform our view on the reasonableness of the assumptions and disclosures that the directors have made. Please refer to note 10 of the consolidated nancial statements. Management has performed the impairment assessment at a CGU level, with the International businesses being treated as separate CGU . No change was made to the level at which impairment testing was performed compared to the prior periods. We consider management’s assessment to be appropriate and have not identied any instance of management bias. We critically challenged the assumptions made by the dir ectors and sought to obtain evidence which contradicts or corr oborates these. We have applied professional scepticism throughout and considered whether there is evidence of management bias applied to the assumptions. W e have performed the following procedures o ver the value in use model which supports the impairment assessment. • Evaluating management’s future cash o w forecasts by obtaining the model prepared by management and: • T esting the mathematical accuracy and integrity of the models; • Agreeing the amounts used in the model to the Boar d approved forecasts; • Assessing the reliability of cash o w forecasts by comparing past performance to previous forecasts; • Identifying assumptions and inputs within the model, which mainly comprise of the following: • Month on month growth in NTS, Revenue and CoS: We compar ed management’s assumptions to industry benchmarks including market trends and market share, as well as pr e Covid level performance. • Gross margin for ecast: We compared this assumption to historical margins and understood the reason for any material differences. • Long term gro wth rate: We compared the r ate used to long term ination projections for the countries in which the international business CGU operates. In addition, our specialists r eviewed the rate used to ensure that it was within our e xpected range. • Discount rates: comparing key inputs, where r elevant, to externally derived data or data for comparable listed organisations. We used our specialists to calculate a range of possible values for the discount rate used by management which included comparing ke y inputs used in management’s calculation to externally derived data or data for comparable listed organisations. As a result of this testing, management increased the discount rate used in the calculations. We did not nd any material ex ceptions in these tests other than where highlighted above. In addition, to these specic procedur es, we also performed a stand back assessment to determine whether the conclusion of our ndings were appropriate, this involved: • Evaluating the sensitivity of the outcomes to reasonably possible changes to the key assumptions and assessing whether the Group ’s disclosures about the sensitivity of the outcomes were reective of the risks and uncertainties surrounding the valuation of international goodwill. • Considering whether any factors Tr ainline had not considered indicated that an impairment trigger existed at the year end that would require an updated impairment assessment and concluded that there were none. Based on the results of the procedur es described above, we consider that the carrying amount of the international goodwill is materially accurate. We have assessed the related disclosur es in the consolidated nancial statements, including signicant estimates and the sensitivities provided and consider them to be appropriate. Independent au ditor ’ s repor t co nti nued to the members of T rainline plc T rainline Annual Report and Accounts 2022 11 0 K ey audit matter How our audit addressed t he key audit matter Inappropriate capitalisation of intangibles (group ) The Group has signicant capital expenditure on intangibles (FY22: £25.1m, FY21: £24.1m), which gives rise to the risk of both fraud and error that the costs are inappropriately capitalised. All of the expenditure in the year was on software development, the majority of which comprise internal spend on employees through payroll and payroll related costs. The risk arises due to the magnitude of costs capitalised and the judgement required in determining whether internal employee costs meet the requirements of IAS 38. Further, ther e could be considered an incentive to capitalise costs which do not meet the criteria of IAS 38, in order to improve adjusted EBITD A, being a key performance indicator for the business. After capitalisation, if there are indications that the carrying value of the intangible software assets will no longer be recover able then an impairment assessment would be performed. As intangibles do not have a clear market price to assist with their valuation, and the ongoing judgement involved as to whether previously capitalised costs continue to meet the requirements of IAS 38 such as whether a project remains technically feasible, we have considered there to be a risk that the balance in relation to the intangibles could be subject to potential impairment. Please also refer to note 10 of the consolidated nancial statements. We have performed the following procedur es to gain sucient and appropriate evidence over capitalisation of intangible softwar e additions: • Understood, evaluated and tested the contr ols in place to ensure that only those costs that meet the criteria of IAS 38 are capitalised. • Performed testing over additions thr ough to underlying support to ensure that the amount capitalised accurately r eects a cost incurred by the business and meets the capitalisation criteria of IAS 38. This included discussions with the Company’s developers to understand the nature of the assets being capitalised. • Understood the expected tr ansaction ow for capitalised additions and performed journals testing for transactions that do not follow this expected ow . In addition, we obtained management’s assessment to determine whether any previously capitalised assets should be tested for impairment. We have also considered e xternal data including regulatory changes, technological advancements, behavioural changes and Covid-19 to consider if there are any e xternal indicators of impairment. Based on the results of the procedur es described above we did not nd any material exceptions in these tests, and ther efore we consider that the carrying amount of the intangibles to be materially accurate. We have assessed the related disclosur es in the Group nancial statements and consider them to be appropriate. 111 Strat egic Report Gove rnanc e Financial Statements K ey audit matter How our audit addressed t he key audit matter Company’ s investment in subsidiary undertakings (parent) The Company holds a signicant investment in its subsidiary undertaking (£1,892m). In accordance with FRS 101, this asset is subject to impairment testing when a triggering event or change in circumstances indicates that the carrying value may not be recover able. The carrying value of Investments is dependent on the overall valuation of the company to which the investment relates and is therefor e dependent on the higher of the value of fair value less costs to sell or, based on forecast discounted cash ows, the value in use. As a result of the signicant fall in the share price in the last 12 months, the market capitalisation of the group no longer exceeds the carrying value of the investment, we determined there to be a heightened risk in respect of the impairment assessment of this balance. Management used a value in use model to perform an impairment assessment of this balance. No impairment charge has been recorded against the Company’s investment in subsidiary undertakings in the current year. Our audit focused on the risk that the carrying value of the investment in subsidiaries could be overstated. Please also refer to note 2 of the Parent Company nancial statements. We have performed the following procedur es to test the impairment assessment: We evaluated management’s assessment of whether any indication of impairment existed, and conrmed that there was an impairment indicator by comparing the carrying value of the investments in subsidiary undertakings to the market capitalisation of the Group as at 28 February 2022 and in the period subsequent to the year end. In order to assess whether an impairment was requir ed we have tested Management’s calculation of the Value in use of the investments. Evaluating management’s future cash ow for ecasts by obtaining the model prepared by management and: • T esting the mathematical accuracy and integrity of the models; • Agreeing the amounts used in the model to the Boar d approved forecasts; • Assessing the reliability of cash o w forecasts by comparing past performance to previous forecasts; • Identifying the ke y assumptions applied in the model, which namely comprise of the following • Month on month gro wth in NTS, Revenue and CoS: We compared management’s assumptions to industry benchmarks including market trends and market shar e, as well as pre Covid level performance. • Gross margin for ecast: We compared this assumption to historical margins and understood the reason for any material differences. • Long term gro wth rate: Our specialists re viewed the rate used to ensure that it was within our expected r ange. • Discount rates: comparing k ey inputs, where rele vant, to externally derived data or data for comparable listed organisations. Our specialists revie wed the discount rates to ensure that management’s estimates were within our expected r ange. We did not nd any material ex ceptions in these tests. In addition, to these specic procedures, we also performed a stand back assessment to determine whether the conclusion of our ndings were appropriate, this involved: • Conrming that the forecast performance of these entities is in line with the underlying performance that is used in the Group’ s forecast results. • Our other audit procedur es performed on the value in use model which supports the impairment assessment are described in the ‘Recoverability of International Goodwill’ k ey audit matter above. Based on the results of the procedur es described above, we consider that the carrying amount of the investment in subsidiaries is materially accurate. We have assessed the r elated disclosures in the consolidated nancial statements, including signicant estimates and the sensitivities provided and consider them to be appropriate. Independent au ditor ’ s repor t co nti nued to the members of T rainline plc T rainline Annual Report and Accounts 2022 11 2 How we tailored the audit sc ope We tailored the scope of our audit to ensur e that we performed enough work to be able to give an opinion on the nancial statements as a whole, taking into account the structure of the group and the par ent company, the accounting processes and controls, and the industry in which the y operate. The Group’s accounting pr ocess is structured around a Gr oup nance function located across London and Edinburgh, who maintain accounting records and controls for the majority of the gr oup, and a local nance function at the Group’ s reporting unit in France. In establishing the overall Gr oup audit strategy and plan, we determined whether for each legal entity within the group we required an audit of its complete nancial information (‘full scope audit’), or whether specic audit procedur es to address a certain risk characteristic or nancial statement line item would be sucient. The main tr ading entity of the Group, T rainline.com Limited, is the only entity that is considered to be individually nancially signicant and ther efore the only reporting unit where a full scope audit was r equired. In addition, we determined that specic audit procedures over certain account balances were r equired in a further three legal entities to addr ess specic risk characteristics and provide sucient o verall Group cover age. In addition to procedures performed on specic r eporting entities, work was performed over the consolidation, including consolidation entries relating to equity and goodwill, and o ver nancial statement disclosures. All of the audit procedur es are performed by the Group audit engagement team with no use of component auditors. Specically we used data audit testing, where possible, to obtain more audit e vidence than would have been obtained from sample based substantive testing. We ar e able to use these techniques as part of our audit of commission fee income from UK rail tick et sales and to select journal entries for testing. The Group team also performed audit procedures o ver the Company’s nancial position and results. In aggregate, our audit procedures co vered 92% of Group r evenue; 85% of Group loss befor e tax and 98% of Group total assets. In addition, the Group audit team performed analytical re view procedur es over the remaining, untested, legal entities within the Group. This included an analysis of year-on-year movements, at a le vel of disaggregation to enable a focus on higher risk balances and unusual movements. Those not subject to analytical re view procedures were individually , and in aggregate, immaterial. This gave us the evidence we needed for our opinion on the nancial statements as a whole. 11 3 Strat egic Report Gove rnanc e Financial Statements Materialit y The scope of our audit was inuenced by our application of materiality . We set certain quantitative thresholds for materiality. These, together with qualitative consider ations, helped us to determine the scope of our audit and the nature, timing and extent of our audit pr ocedures on the individual nancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the nancial statements as a whole. Based on our professional judgement, we determined materiality for the nancial statements as a whole as follows: Financial statements - group Financial statements - parent company Overall materiality £1,700,000. £19,000,000. How we determined it 1% of average re venue for FY20, FY21 and FY22 1% of total assets Rationale for benchmark applied Based on the benchmarks used in the annual report, revenue is one of the nancial statement line item of key focus for investors and management. Further, the primary measure of performance of the business through the Covid-19 pandemic has been revenue, and therefore we considered r evenue to be the appropriate basis for materiality . As a result of the volatility in business performance due to the pandemic in both FY21 and FY22, we have used a 3 year average benchmark versus a single year benchmark as the nature of the Group’ s business has not changed. We believe that total assets is the primary measure used by the shareholders in assessing the performance and position of the entity and reects the Company’s principal activity as a holding Company. For each component in the scope of our group audit, we allocated a materiality that is less than our over all group materiality . The range of materiality allocated across components was between £1.6m and £1.4m. We use performance materiality to reduce to an appr opriately low level the pr obability that the aggregate of uncorrected and undetected misstatements ex ceeds overall materiality . Specically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for e xample in determining sample sizes. Our performance materiality was 75% of overall materiality , amounting to £1,275,000 for the group nancial statements and £14,250,000 for the par ent company nancial statements. In determining the performance materiality, we consider ed a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit and Risk Committee that we would r eport to them misstatements identied during our audit above £0.09m (group audit) and £0.1m (par ent company audit) as well as misstatements below those amounts that, in our view , warranted reporting for qualitative reasons. Our Conclusions relating to going concern Our evaluation of the directors’ assessment of the gr oup’s and the parent company’s ability to continue to adopt the going concern basis of accounting included: • Obtaining from management their assessment which supports the Board’s conclusions with respect to going concern basis of preparation of the nancial statements; • Testing the mathematical integrity of the cash ow for ecasts and the models and reconciled these to the Board approved budgets; • Identifying the key assumptions applied in the base case scenario, which comprises growth in Net tick et sales and the associated Revenue and Cost of sales gro wth. We evaluated these ke y assumptions by: – Comparing management’s assumptions to external factors including market tr ends, Tr ainline’s mark et share and pre-Co vid-19 levels of performance. – Comparing gross margin for ecasts to historical margins. Independent au ditor ’ s repor t co nti nued to the members of T rainline plc T rainline Annual Report and Accounts 2022 114 • Identifying and assessing management’s alternate downside scenarios, and considering whether these were reasonable and appropriate scenarios, particularly in the light of uncertainty surr ounding Covid-19 and possibility of new variant infections globally , impacting customers ability and condence to resume travelling. • Considering the availability of additional mitigating actions, in particular assessing the reasonableness of potential mitigating actions based on historical execution and feasibility . • Examining the debt agreements in place to understand the terms and conditions of these borrowings, including associated covenants, so as to ensure these wer e appropriately considered in management’s going concern assessment • Conrming all the borrowings to third party evidence as at 28 February 2022 and consider ed the Group’ s available nancing and maturity prole. • Assessing the completeness of the going concern disclosures; and • Assessing the reliability of cashow forecasts by comparing actual performance to for ecasts, specically performing look back testing over the forecast r esults of FY22. Based on the work we have performed, we have not identied any material uncertainties relating to events or conditions that, individually or collectively , may cast signicant doubt on the gr oup’s and the parent company’s ability to continue as a going concern for a period of at least twelve months from when the nancial statements are authorised for issue. In auditing the nancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the nancial statements is appr opriate. However, because not all futur e events or conditions can be predicted, this conclusion is not a guar antee as to the group’s and the par ent company’s ability to continue as a going concern. In relation to the directors’ r eporting on how they have applied the UK Corpor ate Governance Code, we have nothing material to add or draw attention to in relation to the dir ectors’ statement in the nancial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the dir ectors with respect to going concern are described in the r elevant sections of this report. Reporting on other information The other information comprises all of the information in the Annual Report other than the nancial statements and our auditors’ report thereon. The directors ar e responsible for the other information, which includes reporting based on the T ask Force on Climate-related Financial Disclosur es (TCFD) recommendations. Our opinion on the nancial statements does not cover the other information and, accordingly , we do not express an audit opinion or, e xcept to the e xtent otherwise explicitly stated in this report, any form of assur ance thereon. In connection with our audit of the nancial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the nancial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are requir ed to perform procedures to conclude whether there is a material misstatement of the nancial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are r equired to report that fact. We have nothing to report based on these r esponsibilities. With respect to the Strategic r eport and Directors’ report, we also consider ed whether the disclosures required b y the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requir es us also to report certain opinions and matters as described below. Strategic re por t and Dire ctor s’ rep or t In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic r eport and Directors’ report for the year ended 28 February 2022 is consistent with the nancial statements and has been prepared in accordance with applicable legal r equirements. In light of the knowledge and understanding of the group and parent company and their envir onment obtained in the course of the audit, we did not identify any material misstatements in the Strategic report and Dir ectors’ report. 11 5 Strat egic Report Gove rnanc e Financial Statements Directors’ Remunerat ion In our opinion, the part of the Directors’ remuner ation report to be audited has been properly prepar ed in accordance with the Companies Act 2006. Corporate go v ernance stat ement The Listing Rules require us to r eview the dir ectors’ statements in relation to going concern, longer-term viability and that part of the corporate governance statement r elating to the parent company’s compliance with the provisions of the UK Corporate Governance Code specied for our r eview . Our additional responsibilities with respect to the corpor ate governance statement as other information are described in the Reporting on other information section of this r eport. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the nancial statements and our kno wledge obtained during the audit, and we have nothing material to add or draw attention to in relation to: • The directors’ conrmation that they have carried out a robust assessment of the emerging and principal risks; • The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these ar e being managed or mitigated; • The directors’ statement in the nancial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identication of any material uncertainties to the group’ s and parent company’s ability to continue to do so over a period of at least twelve months from the date of appr oval of the nancial statements; • The directors’ explanation as to their assessment of the group ’s and parent company’s pr ospects, the period this assessment covers and why the period is appropriate; and • The directors’ statement as to whether they have a reasonable e xpectation that the parent company will be able to continue in operation and meet its liabilities as they fall due o ver the period of its assessment, including any related disclosures drawing attention to any necessary qualications or assumptions. Our revie w of the directors’ statement regarding the longer-term viability of the gr oup was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the relevant pr ovisions of the UK Corporate Go vernance Code; and considering whether the statement is consistent with the nancial statements and our knowledge and understanding of the group and parent company and their environment obtained in the course of the audit. In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the nancial statements and our kno wledge obtained during the audit: • The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the gr oup’s and parent company’s position, performance, business model and strategy; • The section of the Annual Report that describes the review of effectiveness of risk management and internal contr ol systems; and • The section of the Annual Report describing the work of the Audit and Risk Committee. We have nothing to report in r espect of our responsibility to report when the dir ectors’ statement relating to the parent company’s compliance with the Code does not properly disclose a departure from a r elevant pro vision of the Code specied under the Listing Rules for revie w by the auditors. Responsibil ities for the nanc ial statements and the aud it Respon sibilities of the dire ctors f or the nancial s tatement s As explained more fully in the Statement of Dir ectors’ responsibilities, the directors ar e responsible for the prepar ation of the nancial statements in accordance with the applicable frame work and for being satised that they give a true and fair view. The dir ectors are also responsible for such internal contr ol as they determine is necessary to enable the preparation of nancial statements that ar e free from material misstatement, whether due to fr aud or error. In preparing the nancial statements, the directors ar e responsible for assessing the group’ s and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the par ent company or to cease operations, or have no realistic alternative but to do so. Independent au ditor ’ s repor t co nti nued to the members of T rainline plc T rainline Annual Report and Accounts 2022 11 6 Auditors’ resp onsibilities for t he audit of the nan cial stateme nts Our objectives are to obtain reasonable assur ance about whether the nancial statements as a whole are free fr om material misstatement, whether due to fraud or error, and to issue an auditors’ r eport that includes our opinion. Reasonable assurance is a high level of assur ance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fr aud or error and are considered material if, individually or in the aggregate, the y could reasonably be expected to inuence the economic decisions of users taken on the basis of these nancial statements. Irregularities, including fraud, are instances of non-compliance with laws and r egulations. We design procedur es in line with our responsibilities, outlined above, to detect material misstatements in r espect of irregularities, including fraud. The extent to which our procedur es are capable of detecting irregularities, including fraud, is detailed belo w. Based on our understanding of the group and industry , we identied that the principal risks of non-compliance with laws and regulations related to legal and go vernance requirements of T rainline operating as a publicly listed company, and we considered the extent to which non-compliance might have a material effect on the nancial statements. W e also considered those laws and regulations that have a dir ect impact on the nancial statements such as UK tax legislation and the Companies Act 2006. We evaluated management’s incentives and opportunities for fr audulent manipulation of the nancial statements (including the risk of override of controls), and determined that the principal risks wer e related to manipulation of the nancial statements to overstate r evenue through the posting of inappr opriate journal entries, or EBITDA through manipulating expense classication or inappr opriately capitalising costs to intangibles. Audit procedures performed by the engagement team included: • Identifying and testing of journal entries based on our risk assessment criteria, in particular any journals with unusual account combinations which inate revenue or EBITD A; • Evaluation of controls designed to prevent and detect irregularities; • Reviewing board minutes throughout the nancial year and post year end to identify any unusual items such as suspicious activity, non-compliance, br eaches of laws or potential litigation; • Review of nancial statements disclosures for compliance with Companies Act 2006; • Assessing compliance with the tax legislation through our audit work over the payroll, V A T and corporation tax; • Performing enquiries of the Directors, management and legal counsel and inspection of regulatory and legal correspondence; and • Incorporating unpredictability into our audit plan; • Performing testing over the intangible asset additions in the period to ensure that there is no evidence of inappropriately capitalised costs; and • Challenging assumptions made by management in determining signicant accounting estimates and judgements. This has included testing signicant accounting estimates and judgements to supporting documentation, considering alternative information where available. There are inherent limitations in the audit pr ocedures described above. W e are less likely to become awar e of instances of non-compliance with laws and regulations that are not closely r elated to events and transactions r eected in the nancial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from err or, as fraud may involve deliberate concealment by , for example, forgery or intentional misrepresentations, or thr ough collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, r ather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population fr om which the sample is selected. A further description of our responsibilities for the audit of the nancial statements is located on the FRC’s website at: www.frc.or g.uk/auditorsresponsibilities. This description forms part of our auditors’ report. 11 7 Strat egic Report Gove rnanc e Financial Statements Use of this report This report, including the opinions, has been prepared for and only for the par ent company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is sho wn or into whose hands it may come save where expr essly agreed by our prior consent in writing. O ther required reporting Companies Act 200 6 ex ception reporting Under the Companies Act 2006 we are requir ed to report to you if, in our opinion: • we have not obtained all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the par ent company, or returns adequate for our audit have not been received from branches not visited b y us; or • certain disclosures of directors’ remuneration specied b y law are not made; or • the parent company nancial statements and the part of the Directors’ remuneration r eport to be audited are not in agreement with the accounting recor ds and returns. We have no ex ceptions to report arising from this r esponsibility. Appointment Following the recommendation of the Audit and Risk Committee, we wer e appointed by the members on 8 September 2021 to audit the nancial statements for the year ended 28 February 2022 and subsequent nancial periods. This is therefore our rst year of uninterrupted engagement. O ther matter As required by the Financial Conduct Authority Disclosur e Guidance and T ransparency Rule 4.1.14R, these nancial statements form part of the ESEF-prepared annual nancial report led on the National Stor age Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory T echnical Standard (‘ESEF RTS’). This auditors’ report provides no assurance o ver whether the annual nancial report has been prepar ed using the single electronic format specied in the ESEF RTS. Jaskamal Sarai (Senior Statutory Auditor) for and on behalf of P ricewaterhous eCoopers LLP Chartered Accountants and Statut ory Auditors Reading 5 May 2022 Independent au ditor ’ s repor t co nti nued to the members of T rainline plc T rainline Annual Report and Accounts 2022 11 8 C onsolidated income statement F or the year ended 28 F ebr uary 2022 Notes 2022 £’000 2021 £’000 Continuing operations Net ticket sales 2,520,272 783,084 Reven ue 3 188,513 67,084 Cost of sales (35,717) (18,408) Gross prot 152,796 48,676 Administrative expenses (163,109) (148,380) Adjusted EBITD A 39,046 (24,904) Depreciation and amortisation 10,11 (42,576) (41,199) Share-based payment charges 15 (6,783) (7,093) Exceptional items 6 – (26,508) Operating loss (10,313) (99,704) Finance income 7 3,950 578 Finance costs 7 (9,179) (7,636) Net nance costs 7 (5,229) (7,058) Loss before tax (15,542) (106,762) Income tax credit 8 3,637 15,458 Loss after tax (11,905) (91,304) Earnings per share (pence ) Basic and Diluted 2 9 (2.49) p (19.10) p 1 Non - G A A P me as ur e – se e a lt er n at i ve p er fo r ma nc e me as ur es s e c t io n on p a ge 162 . 2 As t h e Gr ou p ha s in c ur re d a l os s in F 202Y 2 an d F Y 202 1 th e im pa c t o f it s p o te nt ia l di lu t iv e o rd in ar y sh ar es h av e be e n ex cl ud ed a s t he y wo ul d be anti- diluti ve. The notes on pages 124 to 156 form part of the Financial Statements. 119 Strat egic Report Gove rnanc e Financial Statements Notes 2022 £’000 2021 £’000 Loss after tax (11,905) (91,304) Items that ma y be reclassied to t he income statement: Remeasurements of dened benet liability 17 10 27 Foreign ex change movement (1,393) 876 Other comprehensive (loss )/income, net of tax (1,383) 903 T otal comprehensive loss (13,288) (90,401) The notes on pages 124 to 156 form part of the Financial Statements. C onsolidated statement of other comprehensiv e income F or the year ended 28 F ebr uary 2022 T rainline Annual Report and Accounts 2022 120 Notes 2022 £’000 2021 £’000 Non-current assets Intangible assets 10 69,794 81,379 Goodwill 10 417,360 419,457 Property, plant and equipment 11 24,877 25,871 Deferred tax asset 8 12,565 5,083 524,596 531,790 Current assets Cash and cash equivalents 68,496 36,575 Tr ade and other receivables 12 48,314 16,994 Current tax receivable 8 1,599 7,522 118,409 61,091 Current liabilities Tr ade and other payables 13 (227,729) (37,990) Loan and borrowings 14 (4,914) (4,167) (232,643) (42,157) Net current assets/(liabilities) (114,234) 18,934 T otal asset s less current liabilities 410,362 550,724 Non-current liabilities Loan and borrowings 14 (149,996) (266,369) Provisions (873) (850) (150,869) (267,219) Net assets 259,493 283,505 Equity Share capital 16 4,807 4,807 Share premium 16 1,198,703 1,198,703 Foreign ex change reserve 16 1,455 2,848 Other reserves 16 (1,136,661) (1,124,992) Retained earnings 191,189 202,139 T otal equit y 259,493 283,505 The notes on pages 124 to 156 form part of the Financial Statements. These Financial Statements were appro ved by the Board of Directors of T rainline plc (registered number 11961132) on 5 May 2022 and were signed on its behalf by Jody F ord Shaun McCabe Chief Executiv e Officer Chief Financial Officer 5 May 2022 5 May 2022 C onsolidated balance sheet A t 28 F ebruar y 2022 121 Strat egic Report Gove rnanc e Financial Statements Notes Share capital £’000 Share premium £’000 Preference shares £’000 Other reserves £’000 Foreign exchange reserve £’000 Retained earnings £’000 T otal equity £’000 Balance as at 1 March 2021 4,807 1,198,703 – (1,124,992) 2,848 202,139 283,505 Loss after tax – – – – – (11,905) (11,905) Other comprehensive income – – – – (1,393) 10 (1,383) Acquisition of Tr easury Shares – – – (16,600) – – (16,600) Share-based payments 15 – – – 5,876 – – 5,876 Tr ansfer between reserves – – – (945) – 945 – Balance as at 28 F ebr uary 2022 4,807 1,198,703 – 1,136,661 1,455 191,189 259,493 F or the year ended 28 F ebr uary 202 1 Notes Share capital £’000 Share premium £’000 Preference shares £’000 Other reserves £’000 Foreign exchange reserve £’000 Retained earnings £’000 T otal equity £’000 Balance as at 1 March 2020 4,807 1,198,703 50 (1,125,755) 1,972 293,136 372,913 Loss after tax – (91,304) (91,304) Other comprehensive income – – – 876 27 903 Preference share r edemption – – (50) – – – (50) Acquisition of Tr easury Shares – – – (4,123) – – (4,123) Share-based payments 15 – – – 5,166 – – 5,166 Tr ansfer between reserves (280) 280 – Balance as at 28 F ebr uary 2021 4,807 1,198,703 – (1,124,992) 2,848 202,139 283,505 The notes on pages 124 to 156 form part of the Financial Statements. C onsolidated statement of changes in equity F or the year ended 28 F ebr uary 2022 T rainline Annual Report and Accounts 2022 122 Notes 2022 £’000 2021 £’000 Cash ows from op erating ac tivities Loss before tax (15,542) (106,762) Adjustment for non-cash items: Depreciation and amortisation 10,11 42,576 41,199 Goodwill impairment 10 – 25,195 Net nance costs 1 7 5,229 7,058 Share-based payment charges 15 6,783 7,093 39,046 (26,217) Changes in working capital Tr ade and other receivables (33,562) 33,021 Tr ade and other payables 189,683 (128,058) Cash generated from operating activities 195,167 (121,254) T axes refunded/(paid) 4,439 159 Net cash generated from operating activities 199,606 (121,095) Cash ows from investing activitie s Purchase of intangible assets (24,787) (25,096) Purchase of property , plant and equipment (4,557) (1,239) Net cash ow from inv est ing activities (29,344) (26,335) Cash ows from nancing a ctivities Purchase of treasury shares (16,600) (4,123) Proceeds from Revolving Cr edit Facility 97,000 95,000 Repayment of Revolving Credit Facility and other borr owings (177,116) (137,184) Proceeds from issuance of convertible bonds – 150,000 Issue costs and fees (110) (2,690) Buyback of convertible bonds (31,307) – Payments of lease liabilities (3,794) (2,676) Payment of interest on lease liabilities (477) (536) Interest paid (5,103) (4,940) Net cash ows from nancing activities (137,507) 92,851 Net decrease in cash and cash equivalents 32,755 (54,579) Cash and cash equivalents at beginning of the year 36,575 92,120 Effect of foreign exchange on cash (834) (966) Closing cash and cash equivalents 68,496 36,575 1 In cl ud in g ga in o n co nv e r t ib le b o nd b u yb a ck a s di s cl os ed i n N ot es 7 a nd 14. The notes on pages 124 to 156 form part of the Financial Statements. C onsolidated statement of cash o w F or the year ended 28 F ebr uary 2022 123 Strat egic Report Gove rnanc e Financial Statements 1. Signicant acc ounting policies a) Ge neral information Tr ainline plc (the ‘Company’) and subsidiaries controlled by the Company (together, the ‘Group’) ar e Europe’ s leading independent rail and coach travel platform selling r ail and coach tickets worldwide. The Company is publicly listed on the London Stock Exchange (‘LSE’) and is incorporated and domiciled in the United Kingdom. The Company’s register ed address is 120 Holborn, London EC1N 2TD . The Group Financial Statements for the year ended 28 February 2022 were appr oved by the Dir ectors on 5 May 2022. On 31 December 2020, IFRS as adopted by the European Union at that date was br ought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. T rainline plc transitioned to UK-adopted International Accounting Standar ds in its Group Financial Statements on 1 March 2021. This change constitutes a change in accounting frame work. However, ther e is no impact on recognition, measurement or disclosur e in the period reported as a result of the change in fr amework. The Group Financial Statements of T rainline plc have been prepar ed in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies r eporting under those standards. b ) B asis of consolidation The Gr oup Financial Statements consolidate those of the Company and its subsidiaries (together referred to as the ‘Group’). The Financial Statements presented herein is for the year fr om 1 March 2021 to 28 February 2022. (i) Subsidiarie s Subsidiaries are entities controlled b y the Group. The Group controls an entity when it is e xposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those r eturns through its power o ver the entity. The Financial Statements of subsidiaries ar e included in the Consolidated Financial Statements from the date on which control commences until the date on which control ceases. Contr ol is achieved when the Group: (i) has po wer over the investee; (ii) is exposed, or has rights to variable r eturns from its involvement with the investee; and (iii) has the ability to use its power to affect the returns. (ii) T rans actions eliminat ed on consolidation Intra-Group balances and transactions, and any unr ealised income and expenses arising from intr a-Group transactions, are eliminated. c ) Basis of measurement The Financial Statements are prepar ed on the historical cost basis except for the follo wing: • Non-current assets are stated at the lower of the carrying value and the reco verable amount • Derivative nancial instruments are measured at fair value • Financial instruments at fair value through the income statement are measured at fair value The accounting policies set out in the sections below have, unless otherwise stated, been applied consistently to all periods presented within the Financial Statements and have been applied consistently by all subsidiaries. d) Fu nctio nal and pres entation currency The Financial Statements are presented in sterling, which is the functional curr ency of the Parent Company . All amounts have been rounded to the nearest thousand, unless otherwise indicated. e ) Going conc ern The Consolidated Financial Statements have been prepared on a going concern basis, which assumes that the Gr oup will be able to meet its liabilities as they fall due over at least the ne xt 12 months from the date of the appro val of these Financial Statements (the ‘going concern assessment period’) including consideration of the co venants associated with the Group’s Re volving Credit Facility at the ne xt covenant test dates on 31 August 2022 and 28 February 2023, being the two relevant dates in this period. The UK Corporate Governance Code r equires the Board to assess and report on the pr ospects of the Group and whether the business is a going concern. The Directors have undertaken a rigor ous assessment of going concern and liquidity, taking into account nancial forecasts, ke y uncertainties and sensitivities, including the prolonged impact of Covid-19 on the future performance of the Group, borro wing facilities and covenant requir ements. Notes t o the Group F inancial S tatements T rainline Annual Report and Accounts 2022 124 Following strong reco very as Covid-19 tr avel restrictions were lifted, ther e have been material improvements in Tr ainline’s net tick et sales and protability during FY2022. Performance has impro ved as restrictions lifted and public condence in travel returned to wards pre-pandemic demand levels. Although protability continued to be impacted by Co vid-19 in FY2022, the Group has returned to positive adjusted EBITDA, reduced its net debt, and generated positive cash o ws. Positive adjusted EBITDA of £39 million was earned in the period (FY2021: £25 million EBITDA loss) and net debt at 28 February 2022 was £90 million (FY2021: £241 million). For the duration of FY2022 the Group had in place a co venant waiver with a minimum liquidity requirement which was obtained during FY2021. The covenant waiver period ended on 28 February 2022, and the Group is no longer subject to the £75 million minimum liquidity requirement for the dur ation of the going concern assessment period. The Group is next subject to its net debt to adjusted EBITDA co venant test on 31 August 2022. As at 28 February 2022 the Group was in a net current liability position of £114 million driven b y the negative working capital cycle (FY2021: £19 million net current asset position). Despite the net current liability position, the Gr oup has access to £274 million additional funds under its revolving cr edit facility. As such the Gr oup has sucient liquidity to easily cover the net current liability position. The Directors performed a detailed going concern revie w using Board appro ved forecasts (the ‘base case’) as well as considering two severe but plausible do wnside scenarios, without any mitigations, and their potential impact on the Group’s for ecast, specically considering varying degrees of prolonged impact fr om Covid-19. Two se vere but plausible downside scenarios were modelled: (1) permanent r eduction in the size of the rail market, primarily manifesting as a 25-30% reduction in the size of the UK rail segment versus FY2020; and (2) ongoing winter r estrictions in December 2022 and January 2023, based on actual performance from December 2021 and January 2022 which were impacted b y the UK Government’s ‘Plan B’ restrictions (including asking people to work fr om home if they were able to) and similar restrictions across Eur ope. In the base case and both severe but plausible do wnside scenarios the Group is able to continue in operation and meet its liabilities as they fall due. This includes complying with the net debt to adjusted EBITDA co venant requirement at the 31 August 2022 and 28 February 2023 test dates. Following the assessment described above, the Dir ectors are condent that the Group has adequate resour ces to continue to meet its liabilities as they fall due and to remain in oper ation for the going concern assessment period. The Board has therefore continued to adopt the going concern basis in pr eparing the Consolidated Financial Statements. f) C os t of sales Cost of sales include costs in relation to the provision of r ail tickets, ancillary services, settlement and fullment costs and are recognised as incurred (at the point of sale). g) Foreign currency trans actio ns Tr ansactions in foreign currencies ar e translated to the respective functional curr encies of Group companies at ex change rates applicable on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies ar e translated to the functional currency at e xchange rate at the reporting date. Non-monetary assets and liabilities that ar e measured at fair value in a foreign curr ency are translated to the functional curr ency at the exchange rate when the fair value was determined. For eign currency differences arising on translation are gener ally recognised in the income statement. Non-monetary items that ar e measured based on historical cost in foreign curr ency are not retranslated. For the purpose of presenting the Consolidated Financial Statements, the assets and liabilities of entities with a functional currency other than sterling are e xpressed in sterling using exchange r ates prevailing at the r eporting period date. Income and expense items and cash ows ar e translated at the average e xchange rates for each month and exchange differences arising ar e recognised directly in other compr ehensive income. h ) Use of judgem ents and es timates In preparing these Financial Statements, management has made judgements, estimates and assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are revie wed on an ongoing basis. Revisions to estimates are r ecognised prospectively . 125 Strat egic Report Gove rnanc e Financial Statements 1. Signicant acc ounting policies ( continued) The following estimate is deemed signicant as it has been identied by Management as one which could r esult in a material adjustment in the next nancial year: • Note 10 – Goodwill impairment test: key assumptions underlying reco ver able amounts The Group tests goodwill for impairment annually by comparing the carrying amount against the r ecoverable amount. The recoverable amount is the higher of the fair value less costs of disposal and value in use. Ther e is judgement in estimating the future cash ows, the time period o ver which they will occur, and in arriving at an appropriate discount rate to apply to the cash o ws as well as an appropriate terminal gro wth rate. As part of the impairment revie w for the year ended 28 February 2022, the prolonged impacts of Covid-19 have been tak en into account in the forecasting. Each of these assumptions have an impact on the over all value of cash ows expected and therefore the headroom between the cash o ws and carrying values of the cash-generating units. i) New standard s and interpretatio ns adopte d A number of new standards are effective fr om 1 March 2021, but they do not have a material effect on the Gr oup’s Financial Statements. The following adopted IFRSs have been issued but have not been applied by the Gr oup in these consolidated Financial Statements. Their adoption is not expected to have material effect on the Financial Statements unless otherwise indicated: • Amendments to IAS 37: Onerous Contracts – Cost of Fullling a Contract (effective date to be conrmed); • Amendments to References to the Conceptual Framework in IFRS 3 (effective date to be conrmed); • Amendments to IAS 16: Property, Plant and Equipment – Proceeds befor e Intended Use (effective date to be conrmed); and • Annual Improvements to IFRS Standards 2018-2020 (effective date to be conrmed). In April 2021 the IFRS Interpretations Committee nalised their agenda decision regar ding conguration and customisation costs in Cloud Computing Arrangements (Software as a Service, ‘SaaS’) under IAS 38. The Gr oup has assessed costs incurred associated with the implementation of SaaS noting that all material costs incurred in the past have been expensed on the basis that they wer e determined to be related to services pro vided during the relevant period. As such, the agenda decision has no material effect on the Group’ s Financial Statements. 2. Op erating seg ments In accordance with IFRS 8 Operating Segments the Gr oup determines and presents its operating segments based on internal information that is provided to the Boar d, who is the Group’ s chief operating decision maker (‘CODM’). The Group has three operating and r eportable segments which are considered: • UK Consumer 1 – Tr avel apps and websites for individual travellers for journeys within the UK; • UK Trainline Partner Solutions (‘TPS’) 1 – Branded travel portal platforms for corpor ates and travel management companies and white label ecommerce platforms for T rain Operating Companies within the UK; and • International – Travel apps and websites for individual travellers for journe ys outside the UK. 1 UK Co ns um er a n d UK Trai nl in e Pa r t ne r S ol ut i on s ar e co ll ec ti v el y r ef er r ed t o as t h e UK . The Group’s global oper ating model means that investments in platform technology and central o verheads are leveraged across the business, and ar e reported to the CODM at the Gr oup level, rather than being allocated to segments. No single customer accounted for 10% or more of the Group’ s sales. The CODM monitors: • The three operating segments, results at the level of net tick et sales, revenue and gr oss margin; • Results split by UK and International at the level of net ticket sales, re venue, gross margin, and contribution (as shown in this disclosure); and • No results at a loss before/after tax or in relation to the statement of nancial position are r eported to the CODM at a lower le vel than the consolidated Group. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 126 Segm ental analysis for th e year ended 2 8 Februar y 20 2 2: UK Consumer £’000 UK T rainline Partner Solutions £’000 To t a l UK £’000 International £’000 To t a l Group £’000 Net ticket sales 1, 8 11,715 29 0,08 2 2 , 1 01 ,797 418 , 4 7 5 2,520,2 72 Reven ue 152 , 5 3 8 15 , 2 4 5 16 7 ,7 8 3 20, 730 18 8 , 51 3 Cost of sales (2 3 , 9 0 9) (4 , 4 5 3) (2 8 , 3 6 2) ( 7, 3 5 5 ) ( 3 5 , 7 17 ) Gross prot 12 8 , 6 2 9 10 ,7 9 2 13 9, 4 2 1 13 , 3 7 5 152 ,7 9 6 Direct administrative e xpenses ( 4 1 ,1 1 2 ) (22 , 03 0) ( 6 3 ,1 4 2 ) Contribution 98,309 (8 , 65 5) 89,6 5 4 Central administrative e xpenses (50 ,608) Adjusted EBITD A 39, 0 4 6 Depreciation and amortisation (4 2 , 5 7 6 ) Share-based payment charges (6 ,7 8 3) Exceptional items – Operating loss (10 , 3 13) Net nance costs (5 , 2 2 9) Loss before tax (15 , 5 4 2 ) Ta x 3,637 Loss after tax (11 , 9 0 5 ) Segm ental analysis for th e year ended 2 8 Februar y 20 21: UK Consumer £’000 UK T rainline Partner Solutions £’000 To t a l UK £’000 International £’000 To t a l Group £’000 Net ticket sales 4 72,808 75 , 476 54 8,28 4 234,800 783,0 8 4 Reven ue 4 3 ,7 9 8 12 , 0 8 7 55,885 11,1 9 9 6 7, 0 8 4 Cost of sales (9,8 8 5) ( 3 , 8 4 3) ( 13 , 7 2 8 ) (4 , 6 8 0 ) (18 , 4 0 8 ) Gross prot 3 3 , 9 13 8 ,24 4 4 2 ,1 5 7 6 , 519 4 8 , 676 Direct administrative e xpenses ( 2 1, 5 4 0 ) ( 1 0,986) (32 ,5 26) Contribution 2 0 , 617 ( 4,46 7) 1 6, 1 50 Central administrative e xpenses (4 1, 0 5 4 ) Adjusted EBITD A (2 4 ,9 0 4 ) Depreciation and amortisation ( 4 1 ,1 9 9 ) Share-based payment charges ( 7, 0 9 3 ) Exceptional items (26,508 ) Operating loss (99,70 4) Net nance costs ( 7, 0 5 8 ) Loss before tax (10 6 , 76 2 ) Ta x 15 , 4 5 8 Loss after tax (91 , 3 0 4) 127 Strat egic Report Gove rnanc e Financial Statements 3. Revenue Accoun ting po licy Con sumer Commission revenue is earned fr om carriers on net ticket sales and service charges billed to customers. Each sale or refund transaction repr esents a separate performance obligation, and the related r evenue is recognised at the time of the sale or refund. The Group acts as an agent in these tr ansactions, as it does not control the services prior to transferring them to its customers. T rainline Partner Solutions Revenue earned from branded tr avel portal platforms is recognised in three k ey elements repr esented by bespoke feature builds, monthly maintenance, and commission and service fees earned per transaction pr ocessed. Each of these elements represent a separ ate performance obligation. Revenue is recognised over time for bespok e feature builds and at point in time for maintenance and commission and service fees earned per transaction processed. The Group’s oper ations and main revenue str eams are those described in these Financial Statements. The Group ’s revenue is derived fr om contracts with customers and are disaggregated b y primary geographical market and timing of revenue recognition. 2022 £’000 2021 £’000 Timing of revenue recognition At point in time 1 8 7,1 6 6 6 4 , 516 Over time 1, 3 47 2,56 8 T otal revenue 18 8 , 513 6 7, 0 8 4 Ge ographic informatio n In presenting the below information based on geography , revenue is based on the geographical location of the customers. This differs from Note 2 which discloses revenue based on the geogr aphical location of the journey undertaken. 2022 £’000 2021 £’000 UK 166 ,74 6 54,643 Rest of the world 21, 76 7 12 , 4 4 1 T otal revenue 18 8 , 513 6 7, 0 8 4 Contr act balan ces The Group’s contr act balances consist of trade receivables, contr act assets and contract liabilities. T rade receivables are disclosed in Note 12. The contract assets primarily relate to the Group ’s rights to consideration for services pr ovided but not invoiced at the reporting date. The contract assets are tr ansferred to receivables when invoiced. The Gr oup’s contr act assets amounted to £2.8 million (FY2021: £1.9 million) which are included in Note 12. The contract liabilities primarily relate to the advance consider ation received from customers, for which r evenue is recognised when the services are deemed to be pr ovided. The contract liabilities amounted to £0.2 million (FY2021: £0.2 million) which are included within deferred r evenue in Note 13. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 128 4. Auditor remune ration This note details a breakdo wn of the auditor remuneration recognised acr oss the Group. During the year, the Group obtained the following services fr om its auditor 1 : 2022 £’000 2021 £’000 Audit of these Financial Statements 3 51 285 Audit of Financial Statements of subsidiaries pursuant to legislation 80 73 Audit-related assurance services 52 40 Other non-audit services – 10 T otal auditor remuneration 483 408 1 In F Y 20 22 , a ll a mo un t s ot h er t ha n £ 3 4 k pa i d to K PM G in r el at i on t o th e s t at u to r y a u di t of Trai nl in e S A S ( F Y 2 021: £ 39 k in r el a ti on t o th e s t at u to r y a u di t of Trai nl in e Fr an ce S A S an d Train li ne S A S) w e re p ai d to m em b er rm s o f P w C, b e in g th e G ro up ’ s au di to r f or t hi s n an c ial y ea r. In F Y 20 21, all a mo u nt s we re p ai d to K P MG , b ei ng t h e Gr ou p ’s p re d ec es s or a ud i to r . 5. Emplo yee benet e xpenses Staff costs presented in this note reect the total wage, tax, pension and shar e-based payment cost relating to employees of the Group. These costs ar e allocated between administrative expenses, cost of sales or capitalised wher e appropriate as part of software development intangible assets. The allocation between these ar eas is dependent on the area of business the employee works in and the activities the y have undertaken. Av erage numbe r of full-time equivalent e mploy ees 2022 Number of employ ees 2021 Number of employ ees Sales and marketing 95 10 3 Operations 13 5 12 6 T echnology and product 348 3 19 Management and administration 112 111 T otal number of employ ees 690 6 59 Emplo yee benets e xpense 2022 £’000 2021 £’000 Wages and salaries 55,3 80 4 5 , 2 15 Social security contributions 7, 6 8 6 5, 889 Contributions to dened contribution plans 2 , 3 13 1, 8 4 9 Share-based payment expense 6 ,78 3 7, 0 9 3 T otal employee benets 7 2 ,1 6 2 60,0 4 6 Details of Directors’ remuneration ar e disclosed in Note 23 under T ransactions with ke y management personnel of the Group. 6. Excep tional items Exceptional items are oper ating costs or credits that, by virtue of their natur e and incidence, have been disclosed separately in order to impr ove a reader’s understanding of the Financial Statements. Exceptional items ar e one-off in nature or are not consider ed to be part of the Group’s underlying tr ade. There were no e xceptional items in FY2022. Res truc turin g cos ts Restructuring costs incurred as part of a strategic/management r eorganisation. Go odwill im pairme nt This is the impairment charge on the goodwill on the International CGU. Refer to Note 10 for disclosur e. 129 Strat egic Report Gove rnanc e Financial Statements 6. Excep tional items continued 2022 £’000 2021 £’000 Restructuring costs – 1, 3 13 Goodwill impairment charge – 25, 1 95 Net ex ceptional costs – 26,508 7 . Financ e income an d nance cos ts Net nance costs comprise bank interest income and interest e xpense on borrowings and lease liabilities, as well as foreign exchange gains/losses and gains/losses on the r epurchase of convertible bonds. Accoun ting po licy Interest income and expense is r ecognised as it accrues in the income statement, using the effective interest method. Foreign ex change gains and losses are recognised in the income statement in accor dance with the policy for foreign currency transactions set out in Note 1g. Convertible bonds bought back and cancelled ar e derecognised from non- current liabilities as set out in Note 14, with any gains and losses arising recognised in nance income and nance costs. 2022 £’000 2021 £’000 Bank interest income 36 22 Gain on convertible bond buyback 3 , 9 14 – Foreign ex change gain – 556 Finance income 3,950 57 8 Interest and fees on bank loans (5 ,777) (6 ,7 2 9 ) Foreign ex change loss (92 7 ) – Loss on interest rate swap – (6 ) Interest and fees on convertible bonds (1, 8 7 8) ( 18 9 ) Interest on lease liability (59 4) (69 4) Other interest (3) ( 18 ) Finance costs ( 9 ,1 7 9 ) ( 7, 6 3 6 ) Net nance costs recognised in the inc ome statement (5, 2 2 9) ( 7, 0 5 8 ) 8 . Ta x a t i o n This note analyses the tax income for this nancial year, which includes both current and deferred tax. It also details tax accounting policies and presents a reconciliation between loss befor e tax in the income statement multiplied by the rate of corporation tax and the tax credit for the year. The deferred tax section pro vides information on expected future tax charges and sets out the assets and liabilities held across the Group. Accoun ting po licy Income tax expense/credit comprises curr ent and deferred tax. It is recognised in the income statement e xcept to the extent that it relates to a business combination, or items r ecognised directly in equity or in other comprehensive income. (i) Current ta x Current tax comprises the expected tax payable or r eceivable on the taxable income or loss for the period and any adjustment to tax payable or receivable in respect of pr evious years. It is measured using tax r ates enacted or substantively enacted at the reporting date. (ii) Deferre d tax Deferred tax is recognised in r espect of temporary differences between the carrying amounts of assets and liabilities for nancial reporting purposes and the amounts used for taxation purposes. Deferred tax is not r ecognised for: Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 130 • temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable prot or loss; • temporary differences related to investments in subsidiaries, to the extent that the Gr oup can control the timing of the reversal of the tempor ary differences and it is probable that the y will not reverse in the for eseeable future; and • taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets are r ecognised for unused tax losses, unused tax credits and deductible temporary differ ences to the extent that it is probable that futur e taxable prots will be available against which they can be used befor e their expiry . Deferred tax assets are r eviewed at each reporting date and ar e reduced to the extent that it is no longer pr obable that the related tax benet will be realised. Amounts will be recognised rst to the extent that taxable tempor ary differences exist and it is consider ed probable that they will re verse and give rise to future taxable prots against which losses or other assets may be utilised befor e their expiry . Assets will then be recognised to the extent that for ecasts or other evidence support the availability of future prots against which assets may be realised. Deferred tax is measured at the tax rates that ar e expected to be applied to temporary differ ences when they re verse, using tax r ates enacted or substantively enacted at the reporting date. The measurement of deferred tax reects the tax consequences that would follow from the manner in which the Group e xpects, at the reporting date, to reco ver or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset only if certain criteria are met. Amounts recognised in the income statemen t 2022 £’000 2021 £’000 Current tax charge/( credit) Current year corporation tax 315 ( 3, 205) Adjustment in respect of prior years 3, 444 (2, 6 0 8) T otal current tax charge/(credit) 3,75 9 ( 5 , 8 13 ) Deferred tax ( credit)/ charge Current year ( 1 ,364 ) ( 1 1 ,777) Adjustment in respect of prior years (3,948) 1 , 511 Effect of change in tax rates (2 ,0 8 4) 621 T otal deferred tax credit ( 7, 3 9 6 ) (9,6 45) T ax credit (3,63 7) ( 15 , 4 5 8 ) Corporation tax was calculated at 19% (FY2021: 19%) of the taxable prot for the year. T axation for territories outside of the UK was calculated at the rates pre vailing in the respective jurisdictions. The total tax credit of £3.6 million (FY2021: credit of £15.5 million) is made up of a current corpor ation tax charge of £3.8 million (FY2021: credit of £5.8 million) arising in the UK, and a deferred tax credit of £7.4 million (FY2021: £9.6 million). A current tax prior period adjustment has been recognised to adjust the Gr oup’s tax receivable, as the Gr oup’s Financial Statements in FY2021 included an expected tax repayment for a loss carry back claim to taxable pr ots in FY2020 which was not claimed on submission of the UK tax returns, instead carrying these losses forward to utilise against e xpected future prots. A corresponding deferr ed tax prior period adjustment has also been recognised in respect of those losses which were not carried back. The Group has continued to recognise a deferred tax asset on unutilised losses carried forwar d. This is on the basis that it is probable that future taxable pr ot will be available against which the unutilised tax losses and credits can be set against. This is supported by the Group’ s latest prot and cash ow for ecasts approved b y the Board, which show improved trading performance follo wing market reco very from the impact of Covid-19. The deferr ed tax credit in FY2022 also includes the unwind of deferred tax liabilities arising on acquired intangibles and deferr ed tax on equity-settled share-based payment charges issued during the period, where tax r elief is obtained in the year the shares vest. The release of these deferred tax assets and liabilities ar e accounting adjustments and do not impact the corporation tax payable or receivable by the Gr oup. The Group has remeasured its deferr ed tax asset to take into account the future change in the r ate of UK corporation tax from 19% to 25%, as substantively enacted in May 2021. This has given rise to a one-off deferred tax cr edit in FY2022. 1 31 Strat egic Report Gove rnanc e Financial Statements 8 . Ta x a t i o n c ontinued Amounts recognised in the income statemen t continued 2022 £’000 2021 £’000 Loss before tax (15 , 5 4 2 ) (10 6 , 76 2 ) T ax on loss at standard UK rate of 19% (FY2021: 19%) (2 , 9 7 1) (20, 28 5) Effect of: Expenses not deductible/income not deductible 1 ,1 4 7 4 , 8 49 Amounts not recognised 1 1 ,1 4 8 924 Effect of changes in tax rates (2 , 626) 621 Adjustment in respect of prior years (50 4) ( 1, 0 9 7 ) Difference in overseas tax r ates 2 19 Deferred tax credited to equity 85 – Losses utilised – (48 9 ) Other 82 – T otal tax credit (3,63 7) ( 15 , 4 5 8 ) Eective tax rate 2 3% 14 % 1 Pri ma r il y re la te s t o un re co gn is e d lo ss e s wh i ch a re e it h er n ot e x pe c t ed t o be r e cov er ab l e or u t il is ed i n t he s ho r t t er m a nd t he re f or e no t re co g ni se d as deferred t ax ass ets. The effective tax rate is higher than the UK corporation tax r ate of 19% (FY2021: lower) which primarily reects the remeasurement of deferred tax balances for the incr ease in the UK corporation tax rate to 25%. T ax de btor per t he cons olidated balanc e shee t: 2022 £’000 2021 £’000 Current tax receivable 1 1, 5 9 9 7, 5 2 2 1 Re e c t s th e c ur re n t ta x c ha rg e /cre d it f or t h e ye ar, les s a ny co r po ra t io n t ax p a ym e nt s o n ac co un t ma de d ur i ng t h e yea r, les s t he R es ea rc h an d De ve l op me nt e x p en di t ur e cr ed it ( ‘ RD EC ’ ). T h e F Y 202 2 c ur re n t t ax r ec ei v ab l e ba la nc e re ec t s a £1.6 mi ll io n R DE C. N o co r po ra t io n t ax w as p a ya bl e by th e G ro up i n F Y 2 02 2 . (F Y 20 21: Cur re nt t a x re ce i va b le o f £7.5 m il li on m ad e up o f £ 2. 0 mi ll io n R DE C pl us £ 5 . 5 mi ll io n of c ur r en t t a x cre d it .) Defe rred tax a sset a s at 28 Februar y 2 02 2 : Acquired intangible assets £’000 T angible assets and other £’000 Share-based payments £’000 Losses carried forward £’000 To t a l £’000 At 1 March 2021 (4 , 3 6 5 ) (1, 5 6 0 ) 1, 2 2 7 9 ,78 1 5 ,083 Effect of increased tax rate on opening balance (63 6) (4 41) 174 2,98 7 2 ,0 84 Adjustment in respect of prior years – (1, 6 0 0) – 5,5 4 8 3,94 8 Adjustments posted through equity – (9) 94 – 85 Credit/(charge) to consolidated income statement 1, 3 4 6 232 (2 58) 45 1, 3 6 5 At 28 F ebruar y 2022 (3 ,65 5) ( 3 , 3 78) 1, 2 3 7 18 , 3 61 12 , 5 6 5 Defe rred tax a sset /(liability ) as at 28 Februar y 2 02 1: Acquired intangible assets £’000 T angible assets and other £’000 Share-based payments £’000 Losses carried forward £’000 To t a l £’000 At 1 March 2020 (5 , 29 8) (5 0 8) 1, 4 61 – (4 , 3 45 ) Adjustments posted through equity – 37 ( 25 4) – ( 2 17 ) Credit/(charge) to consolidated income statement 933 (1, 0 8 9 ) 20 9,781 9,6 45 At 28 F ebruar y 2021 (4 , 3 6 5 ) ( 1, 5 6 0 ) 1, 2 2 7 9,781 5 ,08 3 Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 132 9. Earnings per share This note sets out the accounting policy that applies to the calculation of earnings per share, and how the Gr oup has calculated the shares to be included in basic and diluted earnings per share (‘EPS’) calculations. Accoun ting po licy The Group calculates earnings per share in accor dance with the requirements of IAS 33 Earnings Per Share. Four types of earnings per share are r eported: (i) Basic earnings per share Earnings attributable to ordinary equity holders of the Group for the period, divided b y the weighted average number of ordinary shares outstanding during the period. (ii) Diluted earnings per share Earnings attributable to ordinary equity holders of the Group, divided b y the weighted average number of shares outstanding used in the basic earnings per share calculation adjusted for the effects of all dilutive ‘potential or dinary shares’. (iii) Adjusted basic earnings per share Earnings attributable to ordinary equity holders of the Group for the period, adjusted to r emove the impact of exceptional items, gain on pur chase of convertible bonds, share-based payment charges, amortisation of acquired intangibles and the tax impact of these items; divided by the weighted average number of or dinary shares outstanding during the period. (iv) Adj usted dilut ed earnings per share Earnings attributable to ordinary equity holders of the Group for the period, adjusted to r emove the impact of exceptional items, gain on r epurchase of convertible bonds, share-based payment charges, amortisation of intangibles and the tax impact of these items; divided by the weighted average number of shar es outstanding used in the basic earnings per share calculation adjusted for the effects of all dilutive ‘potential or dinary shares’. 2022 No. shares 2021 No. shares Weighted aver age number of ordinary shar es: Weighted average number of ordinary shar es 4 80, 680,508 4 80,68 0,5 08 Weighted average number of treasury shar es (3 , 0 9 6 ,7 3 3) ( 2 , 6 7 8 ,111 ) W eighted av erage number of ordinary shares 1 4 77 ,583, 775 4 78,0 02, 397 1 As t h e Gr ou p ha s in c ur re d a l os s in F Y 2 02 2 an d F Y 202 1, the i mp ac t of i t s p ote n ti al d il ut i ve o r di nar y s ha re s ha s be e n ex cl ud e d as t he y wo u ld b e an t i- dilutive. 2022 £’000 2021 £’000 Loss after tax (11 , 9 0 5 ) (91, 30 4) Earnings attributable to equity holders (11, 9 0 5 ) (91,3 0 4) Adjusted earnings 1 (3 , 8 4 4) (5 1 ,678) 2022 pence 2021 pence Loss per share Basic (2.49)p (19.10)p Diluted 2 (2.49)p (19.10)p Adjusted loss per share Basic (0.80)p (10.81)p Diluted 2 (0.80)p (10.81)p 1 R ef e r to t he a lt e rn at i ve p e r f or ma nc e me as ur e s se c t io n fo r t he c a lc ul at io n of a d ju s te d ea r ni ng s. 2 As t he G r ou p ha s in cu r re d a lo s s in F Y 20 2 2 an d F Y 2 021, th e im p ac t o f i t s po te nt i al d il ut i ve o rd in ar y sh ar e s ha s be e n exc l ud ed a s t he y wo ul d b e an ti - di lu ti v e. 133 Strat egic Report Gove rnanc e Financial Statements 10. Intangible a sset s and goo dwill The consolidated balance sheet contains a signicant goodwill carrying value which arose when the Group acquir ed subsidiaries and paid a higher amount than the fair value of the acquired net assets. Goodwill is not amortised but is subject to an annual impairment revie w. Impairment re views of goodwill make use of estimates (see Note 1h). Other intangible assets predominantly arise on acquisition of subsidiaries or are internally de veloped. These intangible assets are amortised and tested for impairment when an indicator of impairment exists. Accoun ting po licy (i ) G oo dwill Goodwill is initially measured at cost, being the ex cess of the aggregate of the consideration tr ansferred and the amount recognised for non-controlling inter ests, and any previous interest held, o ver the net identiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in ex cess of the aggregate consideration tr ansferred, the Group reassesses whether it has corr ectly identied all of the assets acquired and all of the liabilities assumed and revie ws the procedures used to measure the amounts to be r ecognised at the acquisition date. If the reassessment still results in an ex cess of the fair value of net assets acquired over the aggr egate consideration transferred, then the gain is recognised in the income statement. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-gener ating units that are expected to benet fr om the combination, irrespective of whether other assets or liabilities of the acquired business are assigned to those units. (ii) Sof t ware development costs Expenditure on research activities is r ecognised in the income statement as incurred. External and internal development expenditur e is capitalised only if the expenditure can be measur ed reliably, the product or process is technically and commer cially feasible, future economic benets are pr obable, and the Group intends to and has sucient resources to complete de velopment and to use or sell the asset. Otherwise, it is recognised in the income statement as incurred. Subsequent to initial recognition, de velopment expenditure is measur ed at cost less accumulated amortisation and any accumulated impairment losses. Internal development expenditur e is managed by the development team and the amount capitalised is monitor ed through time charged to projects. (iii) Brand and customer list s Brand and customer lists that are acquir ed by the Group have nite useful lives and ar e measured at cost less accumulated amortisation and any accumulated impairment losses. (iv ) Subsequent e xpendit ure Subsequent expenditure is capitalised only when it incr eases the future economic benets embodied in the asset to which it relates. All other expenditur e, including expenditure on internally gener ated goodwill and brands, is recognised in the income statement as incurred. ( v ) Amor tisation Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight- line method over their estimated useful lives and is recognised in the income statement. Goodwill is not amortised. The estimated useful lives are as follows: Software development 3–5 years Brand valuation 10 years Customer lists 5–7 years Amortisation methods, useful lives and residual values are r eviewed at each r eporting date and adjusted if appropriate. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 134 Intangible as sets an d goodwill as at 2 8 Februar y 2 02 2 : Software development £’000 Brand valuation 3 £’000 Customer lists 3 £’000 Goodwill £’000 To t a l £’000 Cost: At 1 March 2021 13 2 ,7 5 5 51, 7 3 8 92 ,6 90 444, 65 2 721 ,835 Additions 1 25,0 90 – – – 25,0 90 Disposals (10, 4 3 5 ) – – – (10 , 4 3 5 ) FX 2 – – – (2 ,0 97 ) (2 ,09 7) At 28 F ebruar y 2022 1 4 7, 4 1 0 51, 7 3 8 92 ,6 90 4 42 ,555 734,393 Accumul ated amortisation and impairment: At 1 March 2021 (7 4,328) (30 ,800) (90,676) ( 2 5 ,1 9 5 ) (220 ,999 ) Amortisation ( 2 9, 59 5) ( 5 ,1 6 7 ) (1, 9 13) – (3 6,6 75) Disposals 10, 4 3 5 – – – 10 , 4 3 5 At 28 F ebruar y 2022 (93 , 4 8 8) (35,967) (92 , 5 8 9) ( 2 5 ,1 9 5 ) ( 2 4 7, 2 3 9 ) Carrying amounts: At 28 F ebruar y 2022 53,922 15 ,7 7 1 101 4 1 7, 3 6 0 4 8 7,1 5 4 1 T otal additions include £24. 2 million of internally developed intangible asset s. 2 Ef f ec t s of f or ei gn e xc ha n ge r at e ch an ge s . 3 At F Y 2 02 2 , th e re m ai ni ng u se f ul e co n om ic l if e wa s t hr ee y ea r s fo r br an d v al ua ti on a n d ve y ea rs f o r cu s to me r li s t s . Intangible as sets an d goodwill as at 2 8 Februar y 2 02 1: Software development £’000 Brand valuation 3 £’000 Customer lists 3 £’000 Goodwill £’000 To t a l £’000 Cost: At 1 March 2020 10 8 , 6 21 51 ,7 3 8 92,69 0 4 43 , 357 69 6, 4 0 6 Additions 1 2 4 ,13 4 – – – 2 4 ,13 4 FX 2 – – – 1, 2 9 5 1, 2 9 5 At 28 F ebruar y 2021 13 2 , 7 5 5 51, 7 3 8 92,69 0 444, 6 5 2 7 2 1, 8 3 5 Accumul ated amortisation and impairment: At 1 March 2020 ( 4 6 ,1 8 1 ) (25 ,6 3 3) ( 8 7, 6 8 0 ) – (15 9 , 4 9 4 ) Amortisation ( 2 8 ,1 4 7 ) ( 5 ,1 6 7 ) ( 2 ,9 9 6 ) – (36, 31 0) Impairment charge – – – (25, 1 95) (25, 1 95) At 28 F ebruar y 2021 ( 74 , 3 2 8 ) (30,800) ( 90,676) (25, 1 95) (22 0, 999) Carrying amounts: At 28 F ebruar y 2021 58 ,427 2 0 ,93 8 2 , 0 14 419 , 4 5 7 50 0,8 36 1 T ot al a dd i ti on s of £ 24 . 1 mi ll io n al l re la te t o in te r na ll y de v el op e d in t an gi bl e a ss e t s. 2 Ef f ec t s of f or ei gn e xc ha n ge r at e ch an ge s . 3 At F Y 2 021, th e r em ai ni ng u se f ul e co n om ic l if e wa s f ou r ye ar s f or b ra nd v a lu at io n an d s ix y ea r s fo r cu s to m er l is t s . Of the amortisation charge for the year £7.1 million (FY2021: £8.2 million) related to the amortisation of intangible assets which were recognised on the Gr oup’s acquisition of T rainline.com Limited and Trainline SAS, while £29.6 million (FY2021: £28.1 million) related to internally developed and pur chased intangible assets recognised at historical cost. Disposals in the year of £10.4 million (FY2021: £nil) fully amortised internally developed software assets and £2.8 million of fully amortised software development assets. 135 Strat egic Report Gove rnanc e Financial Statements 10. Intangible a sset s and goo dwill continued Go odwill im pairme nt tes ting The Group tests goodwill annually for impairment by r eviewing the carrying amount against the r ecoverable amount of the investment. The recover able amount is the higher of fair value less costs of disposal and value in use. However, in line with IAS 36 Impairment of Assets, fair value less costs of disposal is only determined where value in use would result in impairment. Goodwill acquired in a business combination is allocated on acquisition to the cash-generating units (‘C GUs’) that are expected to benet from that business combination. Management monitors goodwill no lo wer than the geographical operating segments, hence, CGUs are the same as the geogr aphical operating segments. The Group has gross goodwill balances totalling £442.6 million (FY2021: £444.7 million) which comprise: i. £336.4 million (FY2021: £336.4 million) fr om the FY2016 acquisition of T rainline.com ii. £106.2 million (FY2021: £108.3 million) from the FY2017 acquisition of T rainline SAS (formerly Capitaine T rain SAS) The majority of goodwill arising from the acquisition of T rainline.com was attributed to the UK Consumer CGU with a small proportion allocated to the International CGU . The goodwill related to the Capitaine T rain SAS acquisition was mostly attributed to the International CGU, with the r emainder allocated to the UK Consumer CGU. The carrying amount of goodwill has been allocated as follows: CGU 2022 £’000 2021 £’000 UK Consumer 35 1 , 271 3 51, 2 7 1 UK Tr ainline Partner Solutions – – International 66,0 89 6 8 ,1 8 6 T otal goodwill 4 1 7, 3 6 0 4 19 , 4 5 7 For all CGUs the reco verable amount was determined by measuring their value in use (‘VIU’). Assumption s The key value in use assumptions wer e: 2022 UK Consumer 2021 UK Consumer 2022 International 2021 International Pre-tax discount rate 1 9.7 % 11 . 6 % 12 . 0 % 18 . 6 % T erminal growth r ate 2 2 . 5% 1. 5 % 2 . 5% 1. 0 % Number of years forecasted before terminal growth r ate applied 5 5 5 5 1 Th e pr e - t ax d is co u nt r at e is b as e d up on t h e we ig ht ed a ve r ag e co s t of c ap i t al r e e c t in g sp e ci c pr in ci p al r is k s an d u nc er t ai nt ie s . Th e d is co un t ra te t ake s in to a cc ou nt t h e ri sk- f re e ra te o f re t ur n , th e ma r ket r i sk p re mi um a nd b e t a fa c to r. 2 Th e te rm in al g ro w t h r at e re e c t s t h e ex p ec te d gr ow th i nt o pe r pe t ui t y of t he b us in e ss , t a ki n g in to a cco u nt t he c ur r en t ma rk et a nd s e c to r r is k s . There has been no impairment charge for any CGU during the year (FY2021: UK Consumer C GU £nil, International CGU £25.2 million). The Group prepares cash ow for ecasts using ve-year projections which are e xtrapolated fr om the Boar d appro ved three- year plan. The forecasts have been used in the VIU calculation along with risk-adjusted discount rates. Cash ows be yond the ve-year period are extr apolated using a terminal gro wth rate. The forecasts reect management’s expectations and best estimates for each CGU. Where costs or assets in the for ecast are not reported to the C ODM at a CGU level, as disclosed in Note 2, a reasonable and consistent allocation basis is applied for the purposes of impairment testing. Forecasts used for the purposes of the impairment re view as at 28 February 2022 remain impacted b y the long-term effects of Covid-19. T rading assumptions are based on estimates of mark et size, estimates of market share and long- term economic forecasts. As the International CGU is currently loss-making, the cash o ws are more sensitive to a change in assumptions in the initial ve-year forecast period than the UK Consumer CGU . T o reect the higher level of uncertainty in the International forecasts, a premium is applied to the discount r ate. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 136 Sensitivity analysis The Group has conducted sensitivity analysis for reasonably possible changes to k ey assumptions on each CGU’ s value in use. This included either increasing the discount rates, r educing the terminal growth rate, or r educing the anticipated future cash ows through changes to r evenue or costs in each of the years through to the terminal year. The sensitivity assumptions applied to the value in use calculations are set out in the table below . 2022 UK Consumer 2021 UK Consumer 2022 International 2021 International Increase in discount rate 1p t 1p t 1p t 1p t Reduction in long-term growth r ate applied in terminal year 0. 5pts 0.5pt s 0 .5pt s 0. 5pt s Decrease in Adjusted EBITDA forecast in each year 15% 15 % 20% 20% None of the individual reasonably possible scenarios listed above r esulted in an impairment charge to any of the CGUs. 11. Prope r ty , plant an d equipment This note details the physical assets used by the Gr oup in running its business. Accoun ting po licy Items of property , plant and equipment (‘PPE’) are measured at cost less accumulated depr eciation and any accumulated impairment losses. Any gain or loss on disposal of an item of property , plant and equipment is recognised in the income statement. Depreciation is calculated to write off the cost of items of property , plant and equipment less their estimated residual values using the straight-line method o ver their estimated useful lives and is generally recognised in the income statement. The estimated useful lives of property , plant and equipment are as follows: Plant and equipment 3–7 years Leasehold improvements 3–10 years/remaining lease length if shorter Right-of-use assets Lease length The Group tests the carrying value of assets including right-of-use (‘ROU’) assets for impairment if there is an indicator of impairment. PPE is included in the carrying value of the Group’ s CGUs and have been included in the CGU impairment assessments (see Note 10). There were no additional indicators of specic impairment identied during the year r elating to PPE (FY2021: no indicators). Proper t y , plant and e quipment as at 2 8 Februar y 2 02 2: Plant and equipment £’000 Leasehold improvements £’000 Right-of-use assets £’000 To t a l £’000 Cost: At 1 March 2021 9,6 71 4,448 26,8 6 1 40,98 0 Additions 1,7 7 1 2 ,53 6 60 0 4 ,907 Disposals (4 , 0 6 3) – – (4 , 0 6 3 ) At 28 F ebruar y 2022 7, 3 7 9 6,984 2 7, 4 6 1 41, 8 2 4 Accumul ated depreciation and impairment: At 1 March 2021 ( 7, 3 6 2 ) (1, 8 9 0) (5, 857 ) ( 1 5 ,1 0 9 ) Depreciation ( 1 , 511 ) (62 5 ) (3 ,76 5 ) (5 , 9 0 1) Disposals 4,0 63 – – 4 ,0 63 At 28 F ebruar y 2022 ( 4,81 0) ( 2 , 515 ) (9,62 2) (16 , 9 4 7 ) Carrying amounts: At 28 F ebruar y 2022 2,5 69 4 ,4 69 1 7, 8 3 9 24,877 137 Strat egic Report Gove rnanc e Financial Statements 11. Prope r ty , plant an d equipment c ontinued Proper t y , plant and e quipment as at 2 8 Februar y 2 02 1: Plant and equipment £’000 Leasehold improvements £’000 Right-of-use assets £’000 To t a l £’000 Cost: At 1 March 2020 8 ,278 4,4 48 17, 6 9 2 3 0 , 418 Additions 1 , 4 11 – 4 ,9 4 8 6 , 3 59 Disposals (18 ) – – (18 ) Lease extensions 1 – – 4 , 2 21 4 , 2 21 At 28 F ebruar y 2021 9,671 4,4 4 8 2 6 , 8 61 4 0,9 8 0 Accumul ated depreciation and impairment: At 1 March 2020 (6, 075 ) ( 1, 4 4 5 ) ( 2 , 7 14 ) ( 1 0,234 ) Depreciation (1 , 3 0 1) (4 4 5 ) ( 3 ,1 4 3 ) ( 4,889) Disposals 14 – – 14 At 28 F ebruar y 2021 ( 7, 3 6 2 ) ( 1, 8 9 0 ) ( 5, 857 ) ( 1 5 ,1 0 9 ) Carrying amounts: At 28 F ebruar y 2021 2,3 09 2, 558 21 ,004 2 5 , 871 1 Rel at e s to l ea se e x t en si on s w hi ch d o no t co ns t i tu t e a ne w le a se a dd i ti on p ur s ua nt t o IF R S 16. 12 . T rade and ot her re ceivables Tr ade and other receivables include amounts due from cr edit card companies for consumer ticket sales and amounts due from business customers and T rain Operating Companies on account. Receivables are held with the objective to collect the contractual cash o ws and are therefor e recognised initially at fair value and subsequently measured at amortised cost using the effective interest r ate method, less provision for impairment. A provision for the e xpected loss on trade receivables is established at inception. This is modied when there is a change in the credit risk. The amount of the e xpected loss is considered immaterial for the Group. 2022 £’000 2021 £’000 Tr ade receivables 3 7, 5 8 0 9, 0 4 3 Other receivables 2 , 9 15 59 0 Prepayments 5,03 3 5,4 34 Contract assets 2 ,7 8 6 1, 9 2 7 T otal trade and other receivables 4 8 , 3 14 16 , 9 9 4 There is no material difference between the carrying value and fair value of tr ade and other receivables. See Note 19 for more detail on the trade and other r eceivables accounting policy. 13 . T rade an d other p ay ables Tr ade and other payables include liabilities for ticket sale monies to be passed on to carriers, as well as accounts payable and accruals for general business expenditure and deferr ed revenue. 2022 £’000 2021 £’000 Tr ade payables 1 9 0 , 6 61 2 1, 9 0 8 Accruals 34,043 1 5 ,1 3 3 Other creditors 2,800 615 Deferred revenue 225 334 T otal trade and other pay ables 2 2 7, 7 2 9 3 7, 9 9 0 There is no material difference between the carrying value and fair value of tr ade and other payables presented. See Note 19 for more detail on the trade and other payables accounting policy . Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 138 14. L oans and borr owings This note details a breakdo wn of the various loans and borrowings of the Group. It also pr ovides the terms and repayment dates of each of these. Accoun ting po licy Borrowings are r ecognised initially at fair value less attributable transaction costs incurr ed. Subsequent to initial recognition, interest-bearing borro wings are stated at amortised cost using the effective inter est method. At the date borrowings are r epaid any attributable transaction costs are r eleased as an exceptional nance cost. 2022 £’000 2021 £’000 Non-current liabilities Revolving Credit Facility 1 21, 8 0 0 10 0 , 4 17 Convertible bonds 2 112 , 6 6 3 1 4 7, 3 7 8 Other term debt 37 2 16 Lease liabilities 15, 4 9 6 18 , 3 5 8 T otal non-current liabilities 14 9 , 9 9 6 266 , 3 69 Current liabilities Accrued interest 1,4 2 5 8 31 Lease liabilities 3,48 9 3,336 T otal current liabilities 4, 9 14 4 ,1 6 7 1. In cl ud e d wi t hi n th e Re v ol v in g Cr e di t Fac il i t y i s th e pr i nc ip al a m ou nt o f £ 2 5. 0 mil li o n (F Y 20 21: £ 104 .9 m il li on) an d d ir ec t l y a t t ri bu t a bl e tr an s ac ti on co s t s of £ 3 . 2 mi ll io n (F Y 2 021: £4 . 5 mi ll io n). 2. In cl ud e d wi t hi n th e co nv e r t ib le b o nd s is t h e pr in ci p al a mo un t of £11 4 . 8 mi ll io n ( F Y 2 021: £1 50 .0 mi ll io n) an d di re c t l y at tr i bu t ab l e tr an s ac t i on co s t s of £ 2 .1 mill io n (F Y 2 021: £2 .6 m il li on) . D ur in g F Y 202 2 t he G r ou p bo u gh t ba ck a n d ca nc el l ed £ 3 5. 2 m il li on ( fa ce v al ue) o f i t s ow n co nv er ti b le b on d s fo r £ 31.3 m il li on , r es ul t in g in a g ai n of £ 3 .9 mi ll io n p re se nt e d on t he i nc om e s t a te me nt w i th in na n ce in co m e. T erms and repa yment schedul e Agreement Interest rate Y ear of maturity Fac e value £’000 Carrying amount £’000 Revolving Credit Facility LIBOR/SONIA 1 + 1-2% 202 4 25, 000 2 1, 8 0 0 Convertible bonds 1.00% 2 026 1 1 4,800 112 , 6 6 3 Lease liabilities Various 2 Var io u s 20, 2 81 18 , 9 8 5 Other term debt 0.0% 202 2 37 37 T otal borrowings 16 0 ,11 8 1 53, 485 1 Th e in te re s t ra te a pp l ic ab l e to t he R ev ol v i ng C re di t Fa ci li t y w as L IB OR p l us 2 % un ti l 31 D ec em b er 2 021. Fo ll ow i ng t h e ce ss a ti on o f L I BO R , t he i nt er es t ra te a pp li c ab le t o th e R ev ol v in g Cr e di t Fac il i t y w as S ON I A p l us c re di t a dj us t me n t sp re ad p lu s 1-2% f r om 1 J an ua r y 2 02 2 . 2 Th e av er ag e in te r es t r at e of l ea s e lia bi li t ie s is 4 . 0 %. The following are the r emaining contractual maturities of nancial liabilities at the reporting date. The amounts ar e gross and undiscounted, and include estimated future interest payments, so will not necessarily r econcile to amounts disclosed on the statement of nancial position. T otal contractual cash ows £’000 Less than 1 year £’000 Between 1 and 2 years £’000 Between 2 and 5 years £’000 Over 5 years £’000 Revolving Credit Facility 26,456 51 0 625 25, 321 – Convertible bonds 119 , 2 1 3 1 ,1 4 8 1 ,1 4 8 11 6 , 9 17 – Lease liabilities 20, 2 81 3,9 40 9, 32 3 6,0 81 93 7 Other term debt 37 37 – – – T otal cash ows 16 5, 9 8 7 5,635 11 , 0 9 6 14 8 , 3 19 93 7 139 Strat egic Report Gove rnanc e Financial Statements 14. L oans and borr owings continued Revolving Cre dit Facilit y The Revolving Credit Facility became effective on 26 June 2019. The total facility amount is £350.0 million. The facility allows draw downs in cash or non-cash to co ver bank guarantees. At 28 February 2022 the cash dr awn amount is £25.0 million (FY2021: £104.9 million), the non-cash bank guarantee drawn amount is £51.3 million (FY2021: £21.9 million) and the undrawn amount on the facility is £273.7 million (FY2021: £223.2 million). The Group’s Re volving Credit Facility is secur ed by a xed and oating charge o ver certain assets of the Group. Interest is payable on a margin of 1.0% to 2.0% above LIBOR until 31 December 2021, and on a margin of 1.0% to 2.0% abo ve SONIA plus credit adjustment spread fr om 1 January 2022. The Group is subject to certain bank covenants under this facility , howe ver, those nancial covenants were waived by the Group’s loan syndicate until and including February 2022, to support the business thr ough the Covid-19 pandemic and the related impact on trading. The Gr oup was in compliance with bank covenants on 28 February 2022, albeit with the covenant waiver remaining in place on this date. As part of the waiver, the Gr oup was required to maintain a minimum liquidity headroom of £50 million on a monthly basis from April 2020 to December 2020. This r equirement was increased to £75 million on a monthly basis subsequent to the issuance of the convertible bonds in January 2021 and until February 2022. The Group was in compliance with the liquidity requir ement throughout all applicable periods. Conv ertible bonds On 7 January 2021, Tr ainline plc announced the launch of an offering of £150.0 million of senior secured convertible bonds due in 2026. Settlement and delivery of convertible bonds took place on 14 January 2021. The total bond offering of £150.0 million covers a ve-year term beginning on 14 January 2021 with a 1% per annum coupon payable semi-annually in arrears in equal instalments. The initial conversion price was set at £6.6670 representing a premium of 50% abo ve share price on 7 January 2021 (£4.4447). The bonds were accounted for as a liability of £150.0 million upon issuance. Directly allocable fees wer e offset against the liability and will be unwound over the lifetime of the instrument. The bonds were accounted for as a liability as certain terms within the terms and conditions attached to the bonds meant Tr ainline plc has an unavoidable obligation to settle in cash. During FY2022, the Group bought back and cancelled £35.2 million (face value) of its own convertible bonds for £31.3 million, resulting in a gain of £3.9 million presented on the income statement within nance income. As at FY2022, the Group had convertible bonds with a principal amount of £114.8 million in issuance (FY2021: £150.0 million). 15. Share- based pay ments During the year the Group has operated a number of equity-settled shar e-based payment schemes. Accoun ting po licy Equity-settled share-based payment schemes are initially measur ed at fair value at the grant date and recognised as a charge in the income statement over the vesting period based on the Group ’s estimate of the share that will eventually vest and adjusted for the effect of non-market vesting conditions. A corr esponding increase in reserves is also recognised in equity . Share -ba sed payment char ges re cognis ed within administ rative cost s 2022 £’000 2021 £’000 Share-based payment schemes 6 ,78 3 7, 0 9 3 T otal income statement impact 6 ,78 3 7, 0 9 3 Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 14 0 The Group operates the follo wing equity-settled share-based payment schemes with a £nil ex ercise price: Share Inc entive Plan The Share Incentive Plan (‘SIP’) was offered to all UK Company staff emplo yed at both 26 June 2019 and 31 July 2019, being the IPO date and grant date respectively . The awards will vest on 31 July 2022 and all emplo yees that have not opted out or left the business between 26 June 2019 and 31 July 2022 will be entitled to shares in T rainline plc worth £3,600 at grant date. International Shar e Incentive Plan The International Share Incentive Plan (‘International SIP’) was offered to all non-UK Company staff emplo yed at both 26 June 2019 and 31 July 2019, being the IPO date and grant date respectively . The awards will vest on 31 July 2022 and all employees that have not opted out or left the business between 26 June 2019 and 31 July 2022 will be entitled to shares in T rainline plc worth £3,600 at grant date. Restric ted Shar e Plan The Restricted Share Plan (‘RSP’) awards Restricted Shar e Units (‘RSUs’) to certain members of the executive team and senior management. The majority of awards vest evenly in thr ee tranches over a thr ee-year period. All participants that have not left the business on the vesting date will be entitled to RSUs which each represent the right to r eceive one ordinary share in T rainline plc. Perfo rmance Shar e Plan The Performance Share Plan (‘PSP’) award is offer ed to certain members of the Board and ex ecutive team. Awards vest three years after the grant date and ar e subject to the Group meeting specied performance conditions. Only participants that have not left the business at the vesting date will be entitled to PSPs which each represent the right to receive one ordinary shar e in Tr ainline plc. Spe cic RSU Award In addition to the above schemes and as detailed in the prospectus, one member of the Boar d received a grant of RSUs with a grant date value of £300,000 (calculated by r eference to the offer price) vesting subject to continued appointment to the Board in equal tranches o ver the three years following Admission. Matchi ng Sha res From 20 April 2020, all Company employees wer e entitled to one free matching share for e very one partnership share they purchase under the Share Incentive Plan (‘SIP’), subject to r emaining employees for the thr ee-year vesting period. The Group operated two additional equity-settled shar e-based payment schemes with a £nil exer cise price in FY2021: 1,00 0 RSU IP O Award The 1,000 Restricted Share Unit (‘RSU’) IPO award was offer ed to all Company staff employed on both 26 June 2019 and 31 July 2019, being the IPO date and grant date respectively . The awards vested on 31 July 2020, all employees that had not opted out or left the business between 26 June 2019 and 31 July 2020 were entitled to 1,000 RSUs which each represented the right to r eceive one ordinary share in T rainline plc. 12 -month RS U IPO Award The 12-month RSU IPO award was offered to certain members of the e xecutive team and senior management. The awards vested on 26 June 2020, all participants that had not left the business at this date were entitled to RSUs which each represented the right to r eceive one ordinary share in T rainline plc. 1 41 Strat egic Report Gove rnanc e Financial Statements Key assumptions used in valuing the share-based payments wer e as follows: 15 . Share -ba sed payments c ontinued 1,000 RSU IPO award 1 Share Incentive Plan International Share Incentive plan 12-month RSU IPO award Annual RSU award Annual PSP award Specic RSU award Matching Shares Exit date 31 July 2020 31 July 2022 31 July 2022 26 June 2020 3 years after grant date 3 years after grant date 26 June 2020 2 3 years after grant date Attrition rate 17% 36% 36% 23% 26% - 35% 20% - 30% 30% 41% Weighted average fair value 428p 420p 420p 350p 367p 396p 350p 366p 1 Sc he me f u ll y ve s t ed i n F Y 2 021. Ke y as su mp t io ns r e e c t t he na l as s um pt io n s us ed i n F Y 202 1. 2 Ex i t da te f or r s t tr an c he a nd t h en a nn ua ll y f or f ol lo w in g t w o ye ar s ’ a wa rd s . Carry ing value and fair value of share -base d payment liabilities The carrying value and fair value of the Group’ s equity-settled share-based payment arrangements were determined using option pricing models. The expense recognised in the year for shar e-based payments is £6.8 million (FY2021: £7.1 million), including the relevant emplo yer’s social security contributions. 2022 £’000 2021 £’000 1,000 RSU IPO Award – 1 ,11 5 Share Incentive Plan 199 486 International Share Incentive Plan 36 54 12-month RSU IPO Award – 2 ,1 2 0 Restricted Share Plan 2,7 0 5 2 ,29 4 Performance Share Plan 3 ,7 3 2 89 0 Specic RSU Award 15 10 9 Matching Shares 96 25 T otal income statement impact 6 ,78 3 7, 0 9 3 The movements in share awar ds are summarised as follows: Outstanding 1,000 RSU IPO Award number Share Incentive Plan number International Share Incentive Plan number 12-month RSU IPO Award number Restricted Share Plan number Performance Share Plan number Specic RSU Awar d number Matching Shares At 1 March 2020 52 5 , 000 4 0 7, 9 3 2 43 ,70 7 1, 5 0 0 ,7 5 5 42 2, 493 1, 5 4 1,9 2 5 8 5 , 7 14 – Granted – – – – 5 74 , 8 9 8 2, 5 4 3 ,0 91 – 5 2 ,1 9 1 Lapsed (36,000) (84,843) ( 5 ,1 3 9 ) (2 8 , 82 3) ( 1 5 4 , 4 11 ) ( 1 , 4 8 7, 8 1 9 ) – ( 4 ,13 6 ) Exercised ( 4 89 ,000 ) – – (1, 4 7 1, 9 3 2 ) (8 4 , 527 ) – – (1, 0 8 0 ) At 28 F ebruar y 2021 and 1 March 2021 – 323,0 89 38,568 – 758 ,4 53 2 , 5 9 7,1 9 7 8 5 , 714 4 6,975 Granted – – – – 1,9 3 3 , 6 2 9 3,53 3,470 – 74 , 0 9 3 Lapsed – (67 ,703) ( 1 4 ,1 9 5 ) – (20 8,0 02) ( 1,8 13 ,806) – (11 , 3 17 ) Exercised – – (2 , 9 4 8) – (8 6 5, 5 4 8) – ( 5 7,1 4 2 ) ( 2 , 8 9 1) At 28 F ebruar y 2022 – 255,386 2 1, 4 2 5 – 1 , 618 , 5 3 2 4,31 6,86 1 28,5 72 10 6 , 8 6 0 The weighted average share price at the date shar e options were exer cised was 299p (FY2021: 355p). Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 142 16 . Capital and rese r ves Share cap ital Share capital repr esents the number of shares in issue at their nominal value. Ordinary shares in the Gr oup are issued, allotted and fully paid up. The holders of ordinary shares ar e entitled to receive dividends as declared from time to time and ar e entitled to one vote per share at meetings of the Company . Shareh olding at 28 Februar y 2 02 2 and 2 8 Februar y 2 02 1 Number £’ 000 Ordinary shares – £0.01 480,680,508 4,807 Share pr emium Share premium repr esents the amount over the nominal value which was received b y the Group upon the sale of the ordinary shares. Upon the date of listing the nominal value of shar es was £1.00 but the initial offering price was £3.50. Share premium is stated net of any dir ect costs relating to the issue of shares. Retained earning s Retained earnings represents the prot the Gr oup makes that is not distributed as dividends. No dividends have been paid in any year. Foreign exchange The foreign exchange r eserve represents the net differ ence on the translation of the statement of nancial position and income statements of foreign operations fr om functional currency into reporting currency o ver the period such operations have been owned by the Gr oup. Other reser ves Merger reserve £’000 T reasury reserve £’000 SBP 1 reserve £’000 T otal other reserves £’000 At 1 March 2020 ( 1 ,12 2 , 2 1 8 ) (10 , 8 9 7 ) 7, 3 6 0 (1 , 1 25,755) Addition of treasury shares – ( 4 ,12 3 ) – ( 4 ,1 2 3 ) Share-based payment charge – – 5,420 5 ,420 Allocation of treasury shares to full shar e-based payment – 7 ,268 (7 ,268 ) – Deferred tax on share-based payment – – ( 25 4) (2 5 4) Tr ansfer to retained earnings 1 – – (28 0) (2 8 0) At 28 F ebruar y 2021 ( 1 ,12 2 , 2 18 ) ( 7, 7 5 2 ) 4 ,9 78 ( 1 ,12 4 , 9 9 2 ) Addition of treasury shares – (1 6 , 6 0 0 ) – (16 , 6 0 0 ) Share-based payment charge – – 5,98 4 5, 98 4 Allocation of treasury shares to full shar e-based payment – 2 ,621 (2,823 ) (202) Deferred tax on share-based payment – – 94 94 Tr ansfer to retained earnings 1 – – (9 4 5) (9 4 5) At 28 F ebruar y 2022 ( 1 ,1 2 2 , 2 1 8 ) (2 1,7 3 1) 7 , 288 ( 1 ,1 3 6 , 6 6 1 ) 1 T r an s f er t o re t ai ne d ea r ni ng s re la t es t o th e di f fe re nc e be t w e en t he s ha re p r ic e at g ra nt d at e of t h e exe r ci se d sh ar e s an d th e ac tu al c os t o f th e tr ea su r y s ha re s p ur ch as ed t o f ul l th e sh ar e - b as ed p a ym e nt . Merger reser ve Prior to the initial public offering (‘IPO’) the ordinary shares of the pr e-IPO top company, Victoria Investments S. C.A., were acquired by T rainline plc. As the ultimate shareholders and their relating rights did not change as part of this transaction, this was treated as a common contr ol transaction under IFRS. The balance of the merger reserve r epresents the difference between the nominal value of the reserves fr om the Victoria Investments S.C.A. Gr oup and the value of reserves in T rainline plc prior to the restructur e. 14 3 Strat egic Report Gove rnanc e Financial Statements 16 . Capital and rese r ves continued T reasur y reserve Tr easury shares reect the value of shar es held by the Group’ s Employee Benet T rusts (‘EBT’). At 28 February 2022 the Group’ s EBT held 8.0 million shares (FY2021: 2.1 million) which have a historical cost of £21.7 million (FY2021: £7.8 million). Share-based payment reserve The share-based payment reserve is built up of charges in r elation to equity-settled share-based payment arrangements which have been recognised within the prot and loss account. 17 . O ther emplo y ee benets This note explains the accounting policies governing the Gr oup’s pension schemes and details the calculations and actuarial assumptions related to these. The majority of the Group’ s employees are members of a dened contribution pension scheme. Additionally , the Group operates one dened benet pension plan which is closed to new entr ants. For dened contribution schemes, the Group pays contributions into separate funds on behalf of the emplo yee and has no further obligations to employees. The risks associated with this type of plan are assumed b y the member. Contributions paid by the Group in r espect of the current year are included within Note 5. The dened benet scheme is a pension arrangement under which participating members receive a pension benet at retirement determined b y the scheme rules, salary and length of pensionable service. The income statement charge for the dened benet scheme is the current/past service cost and the net interest cost which is the change in the net dened benet liability that arises from the passage of time. The Group underwrites both nancial and demogr aphic risks associated with this type of plan. Accoun ting po licy (i) Short- ter m emplo yee benets Short-term employee benets are e xpensed as the related service is pro vided. A liability is recognised for the amount expected to be paid if there is a pr esent legal or constructive obligation to pay this amount as a result of past service provided by the emplo yee and the obligation can be estimated reliably . (ii) Dene d contribut ion plans Obligations for contributions to dened contribution plans are expensed as the r elated service is provided. Pr epaid contribution is recognised as an asset to the extent that a cash r efund or a reduction in future payments is available. (iii) Dened benet plans The Group participates in a dened benet scheme which is closed to new members. The assets of the scheme ar e held separately from those of the Gr oup. Pension scheme assets are measured using market values. The Group’s net obligation in r espect of dened benet plans is calculated separately by estimating the amount of future benet that employees have earned in the curr ent and prior periods, discounting that amount and deducting the fair value of any plan assets. The calculation of dened benet obligations is performed every period end by a qualied actuary using the projected unit credit method and discounted at the curr ent rate of return on a high-quality corporate bond of equivalent term and currency to the liability . When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic benets available in the form of any futur e refunds from the plan or reductions in future contributions to the plan. T o calculate the present value of economic benets, consideration is given to any applicable minimum funding requir ements. The scheme is subject to an asset ceiling, meaning when the scheme is remeasured and sho ws a net asset position an ‘asset ceiling’ is applied equal to this amount, meaning the Gr oup recognises no asset on its statement of nancial position. This is because the Group does not have an irre vocable right to the surplus of the scheme. If the scheme is in a net decit the Group would recognise the liability . Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 14 4 Remeasurement of the net dened benet liability , which comprise actuarial gains and losses, the return on plan assets (excluding inter est) and the effect of the asset ceiling (if any, e xcluding interest), ar e recognised immediately in other comprehensive income. The Group determines the net inter est expense (income) on the net dened benet liability (asset) for the period by applying the discount rate used to measur e the dened benet obligation at the beginning of the annual period to the then-net dened benet liability (asset), taking into account any changes in the net dened benet liability (asset) during the period as a result of contributions and benet payments. Net interest expense and other e xpenses related to dened benet plans are recognised in the income statement. When the benets of a plan are changed or when a plan is curtailed, the resulting change in benet that r elates to past service or the gain or loss on curtailment is recognised immediately in the income statement. The Group recognises gains and losses on the settlement of a dened benet plan when the settlement occurs. (iv) T ermination benets T ermination benets are expensed at the earlier of when the Gr oup can no longer withdraw the offer of those benets and when the Group recognises costs for a restructuring. If benets ar e not expected to be settled wholly within 12 months of the end of the reporting period, then they ar e discounted. Dened benet pension plan ( a) The Scheme Qjump Limited, a subsidiary of the Group, operates a dened benet pension scheme which is closed to ne w entrants. The Qjump Shared Cost Section of the Railways Pension Scheme (‘the Scheme’) is a funded scheme and provides benets based on nal pensionable pay . The assets of the Scheme are held separately fr om those of the Company and are managed by RPMI. As the Scheme is curr ently in an asset position no contributions are expected from the Group in the coming year, apart fr om to cover the Scheme administration costs. T riennial valuation The most recent published actuarial valuation was carried out by the Scheme Actuary as at 31 December 2019. IAS 19 Employee Benets valuation The IAS 19 valuations of the dened benet pension scheme have been updated at each period end, the latest being 28 February 2022 by qualied independent actuaries Willis T owers Watson Ltd. The main nancial assumptions applied in the valuations and an analysis of Schemes’ assets are as follows: (i) Actuarial assumptions The following were the principal actuarial assumptions at the r eporting date (expressed as weighted aver ages). 2022 % pa 2021 % pa Discount rate 2 .65 2.20 Price ination (RPI measure) 3.50 3.05 Increases to deferred pensions (CPI measur e) 3 .1 0 2.6 0 Pension increase (CPI measure) 3 .1 0 2.6 0 Salary increase n /a n /a Assumptions regarding future mortality have been based on published statistics and mortality tables. The curr ent longevities underlying the values of the dened benet obligation at the reporting date wer e as follows: 2022 years 2021 years Longevity at age 65 for current pensioners Males 19. 8 19 . 9 Females 2 2 .7 2 2 .7 Longevity at age 65 for current members aged 45 Males 21. 2 2 1. 3 Females 24.2 24. 3 14 5 Strat egic Report Gove rnanc e Financial Statements 17 . O ther emplo y ee benets continued Assumptions used are best estimates from a r ange of possible actuarial assumptions, which may not necessarily be borne out in practice. Given the net position is not signicant, changes in assumptions are not likely to impact the valuation signicantly . When dened benet funds have an IAS 19 surplus, they are r ecorded at the lower of that surplus and the future economic benets available in the form of a cash refund or a reduction in futur e contributions. Any adjustment to the surplus is recorded in other compr ehensive income. 2022 £’000 2021 £’000 Liability Deferred members ( 3 ,7 0 6 ) (3 ,6 8 8) Pensioner members (including dependents) (1, 0 8 8) (1,14 4 ) To t a l (4 ,7 9 4 ) (4,832 ) Value of assets at end of year 5,2 32 4 ,9 4 6 F unded status at end of year 438 11 4 Adjustment for the member’s share of surplus (17 5 ) (4 6 ) Effect of asset ceiling (2 6 3) (6 8) Net dened benet at end of year – – 2022 £’000 2021 £’000 Employer’s share of administration cost 11 27 T otal employer’s share of service cost 11 27 Employer’s share of net interest on net dened benet (1) – Employ er ’ s share of pension expense 10 27 (ii) Other comprehensiv e income ( ‘OCI’) 2022 £’000 2021 £’000 (Gain)/loss due to the liability expense (77) 10 5 Loss due to the liability assumption changes 25 61 Adjustment for the members’ share 13 6 43 Return on plan assets greater than discount rate (28 7) ( 269) Change in effect of the asset ceiling 19 3 33 T otal gain recognised in OCI (10) ( 27) Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 14 6 (b ) Movements in net dened b enet asse t /liability The following table shows the r econciliation from the opening balances to the closing balances for net dened benet liability/asset and its components. 2022 £’000 2021 £’000 Dened benet obligation Opening balance 4,832 4,6 33 Interest cost 10 5 85 Dened benet obligation 4,93 7 4 , 7 18 Actuarial gain arising from: Financial assumptions 30 12 1 Experience adjustment (77) 10 5 Demographic adjustment (5) (60) (52) 16 6 Other Benets paid ( 9 1) (52) Closing balance 4 ,7 9 4 4,832 Reconciliation of value of assets: 2022 £’000 2021 £’000 Opening value of Scheme assets 4 ,94 6 4,6 89 Interest income on assets 10 8 86 Return on plan assets greater than discount rate 287 269 Employer and employee contributions – – Actual benet payments (9 1) (5 2) Administration costs (18) (4 6 ) Closing value of Scheme assets 5,2 32 4 ,9 4 6 ( c) P lan assets Plan assets comprise: 2022 £’000 2021 £’000 Growth assets 1 3 , 0 17 3 ,117 Government bonds 1, 2 9 5 1, 2 4 0 Non-government bonds 919 57 8 Other assets 1 11 T otal plan assets 5,2 32 4 ,9 4 6 1 I ncludes funds with a g rowth focus, predominantly comprising global equit y securities and infrastruc ture assets. All equity securities and government bonds have quoted prices in active markets. 147 Strat egic Report Gove rnanc e Financial Statements 17 . O ther emplo y ee benets continued ( d) Risk exposure Through its dened benet pension plans, the Group is exposed to a number of risks, the most signicant of which are detailed below: • Asset volatility: There is a risk that a fall in asset values is not matched by a corresponding reduction in the value placed on the Scheme’s dened benet obligation. The Scheme holds a pr oportion of growth assets, which are expected to outperform corporate and government bond yields in the long term, but give e xposure to volatility and risk in the short term. • Change in bond yields: A decrease in corporate bond yields will increase the value placed on the Scheme’ s dened benet obligation, although this will be partially offset by an increase in the value of the Scheme’ s corporate bond holdings. • Ination risk: The majority of the Scheme’s dened benet obligation is linked to ination, where higher ination will lead to a higher value being placed on the dened benet obligation. Some of the Scheme’s assets ar e either unaffected by ination or loosely correlated with ination (e.g. gr owth assets), meaning that an increase in ination will generally increase the decit. • Life expectancy: An increase in life expectancy will lead to an increased value being placed on the Scheme’ s dened benet obligation. Future mortality rates cannot be pr edicted with certainty. ( e ) Sensitivit y analysis A quantitative sensitivity analysis for signicant assumptions as at 28 February is as shown below: Approximate change in dened benet obligation 2022 £’000 2021 £’000 Discount rate 0.25% decrease 2 51 270 0.25% increase (2 3 4) ( 2 51) Price ination ( CPI measure ) 0.25% decrease (22 6) ( 246) 0.25% increase 234 26 4 Life expectancy Decrease by 1 year 18 6 18 5 Increase by 1 year (1 8 6 ) (18 5 ) ( f ) Fundi ng arrangeme nts Under the UK’s scheme-specic funding regime, contributions ar e payable in line with the Schedule of Contributions from the most recent formal actuarial valuation. Ther e are no contributions expected for ne xt year. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 14 8 18 . Changes in liabilities arising fr om nancing ac tivities The table below details changes in liabilities arising from nancing activities, including both cash and non-cashchanges. Loans & borrowings (c urrent & non- current) £’000 Lease liabilities £’000 To t a l £’000 Balance at 1 March 2021 24 8 , 8 41 21, 6 9 5 2 70,5 36 Changes from cash ows Interest paid ( 5 ,1 0 3 ) (47 7 ) (5, 58 0) Issue costs and fees (11 0 ) – (110 ) Buyback of convertible bonds ( 3 1, 3 0 7 ) – ( 3 1, 3 0 7 ) Proceeds from Revolving Cr edit Facility 97 ,000 – 97 ,000 Repayment of Revolving Credit Facility and other borr owings (1 7 7,1 1 6 ) – ( 1 7 7,1 1 6 ) Repayment of lease liability – ( 3 ,7 9 4) ( 3 ,7 9 4 ) T otal changes from nancing cash ows (11 6 , 6 3 6 ) (4 , 2 7 1) ( 12 0 , 9 0 7 ) Changes in fair value – – – Other changes Capitalised borrowing cost r eleases 1, 9 11 – 1, 9 11 Net interest expense 5,7 2 2 59 4 6 , 316 Gain on convertible bond buyback (3,91 4) – (3,914 ) Remeasurement of lease liabilities – 9 67 967 Balance at 28 F ebr uary 2022 13 5 , 9 2 4 18 , 9 8 5 15 4 , 9 0 9 Loans & borrowings (c urrent & non- current) £’000 Lease liabilities £’000 To t a l £’000 Balance at 1 March 2020 141, 7 5 4 1 5,346 1 5 7,1 0 0 Changes from cash ows Interest paid (4 ,9 4 0) (536) ( 5 , 476) Issue costs relating to loans and borro wings (2 ,69 0) – (2,69 0) Proceeds from issuance of convertible bonds 1 50 ,000 – 1 50 ,000 Proceeds from Revolving Cr edit Facility 95,000 – 95,0 0 0 Repayment of Revolving Credit Facility and other borr owings ( 1 3 7, 1 8 4 ) – ( 1 3 7,1 8 4 ) Repayment of lease liability – (2 , 676 ) ( 2 , 676 ) T otal changes from nancing cash ows 1 0 0 ,1 8 6 ( 3 , 21 2) 9 6 , 9 74 Changes in fair value – – – Other changes Capitalised borrowing cost r eleases 1, 4 2 8 – 1, 4 2 8 Interest expense 5, 47 3 69 4 6 ,1 6 7 Additional lease liabilities – 4 , 6 31 4 , 631 Remeasurement of lease liabilities – 4 , 2 61 4 , 2 61 Foreign ex change revaluation – (2 5) (25) Balance at 28 F ebr uary 2021 2 4 8 , 8 41 2 1, 6 9 5 270, 53 6 149 Strat egic Report Gove rnanc e Financial Statements 19. Financial inst ruments Financial instruments comprise nancial assets and nancial liabilities. The fair values and carrying amounts are set out in the table below . Accoun ting po licy Categorisation within the hierarchy , measured or disclosed at fair value, has been determined based on the lo west level of input that is signicant to the fair value measurement as follows: • Level 1 – valued using quoted prices in active markets for identical assets or liabilities • Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1 • Level 3 – valued by reference to valuation techniques using inputs that ar e not based on observable market data Measurement level 2022 £’000 2021 £’000 Cash and cash equivalents 1 68, 496 3 6, 575 Tr ade and other receivables 2 4 0, 495 9, 63 3 T otal nancial asset s 10 8 ,9 91 4 6 ,20 8 Tr ade and other payables 2 (19 3 , 4 61) ( 2 2, 5 2 3) Loans and borrowings 2 (13 4 , 5 0 0 ) (248 ,01 1) Lease liabilities 2 (18 , 9 8 5 ) (21 ,695) T otal nancial liabilities (34 6,94 6) (292, 2 2 8) There have been no transfers between le vels in any of the years. Other non-current liabilities are valued using mark et established valuation techniques. Accounting de nitions Financial assets The Group classies its non-derivative nancial assets into the following categories: cash and cash equivalents and tr ade and other receivables. The classication depends on the purpose for which the assets are held. The classication is rst performed at initial recognition and then re-e valuated at every reporting date for nancial assets other than those held at fair value through the income statement. (i) Cash and ca sh equivalents Cash and cash equivalents comprise cash balances and call deposits. The carrying value of cash in the statement of nancial position is valued at amortised cost. (ii) T ra de and other receivable s Tr ade and other receivables are initially r ecognised at fair value. Subsequent to initial recognition, they ar e measured at amortised cost using the effective interest method, less any impairment losses. T rade and other receivables ar e presented in current assets in the statement of nancial position, e xcept for those with maturities greater than one year after the reporting date. Tr ade and other receivables, classied as nancial assets, ex clude prepayments and contract income. Fina ncia l liabili ties The Group classies its nancial liabilities into the following categories: tr ade and other payables, loans and borrowings, other non-current liabilities and lease liabilities. (i) T rade and other payables Tr ade payables and accruals, which include amounts owed to carriers in respect of tick et sale monies that the Group has collected on their behalf and amounts due to other suppliers for general business expenditur e, are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial r ecognition, these liabilities are measured at amortised cost using the effective interest method. Tr ade and other payables are classied as nancial liabilities, ex cluding deferred re venue and accruals. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 150 (ii) Loans and b orrowings The nancial liabilities recognised in this category include secured loan facilities, convertible bonds and pr eference shares held by the Gr oup and are presented in borro wings in both current and non-current liabilities in the statement of nancial position. Borrowings are r ecognised initially at fair value less attributable transaction costs incurr ed. Subsequent to initial recognition, interest-bearing borro wings are stated at amortised cost using the effective inter est method. (iii ) Le ase liabilitie s The Group recognises lease liabilities for leases within the scope of IFRS 16 Leases. Financial risk manag ement The Group’s activities e xpose it to a variety of nancial risks: market risk (including inter est rate risk), credit risk and liquidity risk. The Group’ s overall risk management frame work seeks to minimise potential adverse effects on the Group’s nancial performance. (i) Risk management framework The Group’s Dir ectors have overall r esponsibility for the establishment and oversight of the Group ’s risk management framework. The Group’s risk management policies ar e established to identify and analyse the risks faced by the Gr oup, to set appropriate risk limits and controls and to monitor risks and adher ence to conditions and the Group’s activities. The Group, through its training and management standar ds and procedures, aims to maintain a disciplined and constructive control environment in which all emplo yees understand their roles and obligations. (ii) Market risk The Group is exposed to mo vements in LIBOR (up to 31 December 2021) and SONIA (from 1 January 2022) on its variable rate Revolving Cr edit Facility (see Note 14) and the Group has transactional for eign currency exposur es, which arise from sales and purchases by the r elevant segment in currencies other than the Gr oup’s functional curr ency. Based on sensitivity analysis performed, an increase in the interest r ate of 100 basis points would have increased FY2022 loss after tax by £0.9 million (FY2021: increase b y £2.2 million), and a decrease in the interest r ate of 100 basis points would have decreased FY2022 loss after tax by £0.9 million (FY2021: decr ease of £2.2 million). (iii) Cre dit ri sk Credit risk is the risk of nancial loss to the Group if a customer or counterparty to a nancial instrument fails to meet its contractual obligations and arises principally from the Gr oup’s r eceivables from customers. T rade receivables are assessed for risk of default by customers on a periodic basis and terms of tr ade are adjusted accordingly . T rade receivables are insur ed on risk and cost grounds. Under the terms of the Group’ s retail licences, carriers requir e certain security arrangements with the Group in order to mitigate its credit risk under the payment and settlement procedur es outlined in the licences. The Group satises these security arrangements through letters of cr edit from the Group’ s lenders. The letters of credit are pr ovided under the Group’s £350 million Re volving Credit Facility , details of which are included in Note 14. Debt is revie wed on a weekly basis and any customers who fall overdue ar e chased immediately; if payment is not received, the account is put on hold until pre vious debts are cleared. (iv) Liquidity risk Liquidity risk is the risk that the Group will encounter diculty in meeting the obligations associated with its nancial liabilities that are settled by delivering cash or another nancial asset. The Gr oup’s appr oach is to ensure, as far as possible, that it will have sucient liquidity to meet its liabilities when they are due, under both normal and str essed conditions, without incurring unacceptable losses or risking damage to the Group’ s reputation. The Group maintains a daily cash forecast in or der to ensure that it has sucient liquidity to cover all e xpected cash ows including scheduled repayment of debt. 1 51 Strat egic Report Gove rnanc e Financial Statements 19. Financial inst ruments continued In addition, a Revolving Credit Facility under which the Group is able to dr aw down cash of up to £350 million is in place. Of the £350 million, £34.9 million (FY2021: £8.2 million) was utilised by a guarantee provided to the Rail Settlement Plan Limited. A further £15.9 million (FY2021: £13.2 million) was utilised by guar antees pro vided to Eur opean T rain Oper ating Companies and £0.5 million (FY2021: £0.5 million) for other guar antees. The r emaining headroom on the Re volving Credit Facility at 28 February 2022 was £273.7 million (FY2021: £223.2 million). This is available to draw in cash or bank guarantees. Under the Revolving Credit Facility , the Group’ s covenant requir es the ratio of consolidated net debt to consolidated Adjusted EBITDA to be no more than 3.75x. This co venant ratio is tested on a semi-annual basis. As disclosed in Note 14, this nancial covenant was waived by the Gr oup’s loan syndicate until and including February 2022. The Gr oup was in compliance with the bank covenant on 28 February 2022, despite the covenant waiver r emaining in place on this date. As part of the waiver, the Group was requir ed to maintain a minimum liquidity headroom of £50 million on a monthly basis from April 2020 to December 2020. This requir ement was increased to £75 million on a monthly basis subsequent to the issuance of the convertible bonds in January 2021 and until February 2022. The Group was in compliance with the liquidity requirement thr oughout all applicable periods. Capital managem ent The Group denes capital as equity , borrowings (Note 14) and cash and cash equivalents. The Gr oup’s policy is to maintain a strong capital base that ensures nancial stability and pr ovides a solid foundation for ongoing development of business operations and maintains investor and creditor condence. The Gr oup’s objectives when managing capital are to ensure the Gr oup’s ability to continue as a going concern in or der to provide returns for shar eholders and benets for stakeholders. The Group currently has sucient capital for its needs. The Group has requirements under the Re volving Credit Facility of how dr awn amounts can be used. This RCF agreement states drawings should be used for nancing or renancing for general corpor ate purposes and working capital requirements, including capital e xpenditure and acquisitions. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 152 20. Leases Accoun ting po licy At inception of a contract, the Group assesses whether or not a contr act is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to contr ol the use of an identied asset for a period of time in exchange for consideration. When a lease is recognised in a contr act the Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease prepayments made at or before the commencement date, plus any initial dir ect costs incurred and an estimate of costs to dismantle and remove the underlying asset or to r estore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the str aight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property , plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any , and adjusted for certain remeasurements of the lease liability . The lease liability is initially measured at the present value of the lease payments that ar e not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that r ate cannot be readily determined, the Group’s incr emental borrowing r ate based on the rate of interest that the Gr oup paid on borrowings at the date of lease inception. The lease liability is measured at amortised cost using the effective interest method. It is r emeasured when there is a change in future lease payments arising from a change in an inde x or rate, or if the Group changes its assessment of whether it will exer cise a purchase, extension or termination option. If ther e is an extension on the lease term that is not considered a new lease, the lease liability is r emeasured using re vised payments and a revised discount r ate at the date of the modication. A corresponding adjustment is made to the right-of-use asset. The Group presents right-of-use assets in pr operty, plant and equipment and lease liabilities in loans and borr owings in the statement of nancial position. The Group leases assets including land and buildings that are held within pr operty, plant and equipment. Information about leases for which the Group is a lessee is presented belo w. 153 Strat egic Report Gove rnanc e Financial Statements 20. Leases continued ( a) R ight - of -use asset s Details of right-of-use assets are disclosed in Note 11. (b ) Lease liabilit ie s in the statement of nancial position 2022 £’000 2021 £’000 Current liabilities 3,489 3 , 337 Non-current liabilities 15, 4 9 6 18 , 3 5 8 18 , 9 8 5 2 1, 6 9 5 The maturity analysis of lease liabilities is disclosed in Note 14. ( c ) A mounts charged in the income s tatement 2022 £’000 2021 £’000 Depreciation expense of right-of-use assets 3 ,76 5 3 ,1 4 3 Interest expense in lease liabilities 594 69 4 4, 359 3 ,8 37 ( d) Cash outow 2022 £’000 2021 £’000 T otal cash outow for leases 4, 2 71 3 , 2 12 21. G overnment grants Accoun ting po licy Government grants are r ecognised when there is reasonable assur ance that the grant will be received and all attached conditions will be complied with. Government grants that compensate the Gr oup for expenses incurred are r ecognised in the prot or loss in the periods in which the expenses ar e recognised and are pr esented as a deduction from the related expense. UK government grants There were no grants r eceived from the UK government in FY2022. During FY2021, the Group participated in the UK government’s Cor onavirus Job Retention Scheme (‘CJRS’). The Group received a grant aggregating to £0.5 million. Ther e were no unfullled conditions or contingencies attached to the gr ant. The Group voluntarily repaid all amounts claimed under the CJRS in February 2021. Frenc h gover nment gran ts During FY2022 the Group participated in a scheme introduced b y the French government to support certain eligible businesses amidst the Covid-19 pandemic and received gr ants aggregating to £0.3 million (FY2021: £1.3 million). There are no unfullled conditions or contingencies attached to any of the gr ants. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 154 22 . Lis t of subs idiaries The Group holds/held, directly or indir ectly, share capital in the follo wing companies: Name of company Country of incorporation Ownership Registered address Nature of business Victoria Intermediate T opco Limited 1,2 Jersey 100% b In liquidation Victoria Investments Finco Limited United Kingdom 100% a Holding Victoria Investments Intermediate Holdco Limited United Kingdom 100% a Holding Victoria Investments PIKCo Limited 2 United Kingdom 100% a In liquidation Victoria Investments Midco Limited 2 United Kingdom 100% a In liquidation Victoria Investments Bidco Limited 2 United Kingdom 100% a In liquidation Victoria Investments Newco Limited 1,2 Jersey 100% b In liquidation Tr ainline Investments Holdings Limited 2 United Kingdom 100% a In liquidation Tr ainline International Limited United Kingdom 100% a Holding Tr ainline France SAS France 100% c Holding Tr ainline SAS France 100% c T rading Tr ainline Group Investments Limited 2 United Kingdom 100% a In liquidation Tr ainline Junior Mezz Limited 2 United Kingdom 100% a In liquidation Tr ainline Holdings Limited 2 United Kingdom 100% a In liquidation Tr ainline.com Limited United Kingdom 100% a T rading Qjump Limited United Kingdom 100% a T rading Tr ainline Rail Enquiry Services Limited 2 United Kingdom 100% a In liquidation Tr ainline Short Breaks Limited 2 United Kingdom 100% a In liquidation Tr ainline Italia S.R.L Italy 100% d Holding Tr ainline España, S.L. Spain 100% e Holding Railguard Limited United Kingdom 100% a Trading Tr ainline Holdco Limited United Kingdom 100% a Holding Victoria Investments S.C.A 3 Luxembourg 100% f In liquidation Victoria Manager S.a.r.l 3 Luxembourg 100% f In liquidation 1 Vi c t or ia I nv es t m en t s Ne w co L im it ed a n d V ic t or ia I n te rm e dia t e T op co L im i te d ar e in co rp o ra te d in J e rs e y bu t t a x do mi ci le d i n th e UK . 2 Denoted subsidiaries went into liquidation on 26 F ebruar y 2021 . 3 Denoted subsidiaries went into liquidation on 28 Februar y 2022. Registered a ddress key: a 120 Holborn, London, EC1N 2TD b 47 Esplanade, St Hellier, Jersey, JE1 0BD c 20 rue Saint Georges, 75009 Paris d Corso Vercelli, 40 20145 Milan, Italy e Carrer d’ Avila 112, 08018, Barcelona, Spain f 2, rue Edward Steichen, L-2540 Lux embourg The following subsidiaries are e xempt from the Companies Act 2006 requir ements relating to the audit of their individual accounts by virtue of Section 479A of the Act as the Company has guaranteed the subsidiary companies under Section 479C of the Act: Victoria Investments Finco Limited registered no. 09394939 Qjump Limited registered no. 04124436 Railguard Limited register ed no. 09621101 Tr ainline Holdco Limited registered no. 12098773 Victoria Investments Intermediate Holdco Limited registered no. 09451259 155 Strat egic Report Gove rnanc e Financial Statements 23 . Related par ties During the year, the Group entered into tr ansactions in the ordinary course of business with related parties. T ran sac tions with key management p ersonn el of the G roup Key management personnel are dened as the Boar d of Directors, including Non-executive Dir ectors. During the period key management personnel have received the follo wing compensation: short-term employee benets £2,499,799 (FY2021: £1,545,336); post-employment benets £73,625 (FY2021: £136,795); and ongoing share-based payment schemes £889,234 (FY2021: £419,856). No other long-term benets or termination benets were paid (FY2021: £nil). The highest paid Director received: short-term emplo yee benets £1,152,611 (FY2021: £380,090); post-employment benets £31,625 (FY2021: £40,647); and ongoing share-based payment schemes £586,982 (FY2021: £202,676). There were two Dir ectors to whom retirement benets ar e accruing under dened contribution schemes (FY2021: two). Information on the emoluments of the Directors who served during the year, together with information regar ding the benecial interest of the Directors in the or dinary shares of the Company is included in the Directors’ Remuner ation Report on pages 82 to 84. At 28 February 2022 key management personnel held 2,340,720 shar es in Tr ainline plc (FY2021: 9,947,734 shares). 24 . Capital commitme nts This note details any capital commitments in contracts that the Group has enter ed into which have not been recognised as liabilities on the balance sheet. The Group’s capital commitments at 28 February 2022 ar e £nil (FY2021: £2.4 million). 25 . Post balanc e shee t events There have been no material post balance sheet events between 28 February 2022 and the date of the appr oval of these Financial Statements. Notes t o the Group F inancial S tatements continued T rainline Annual Report and Accounts 2022 156 Notes 2022 £’000 2021 £’000 Non-current assets Investments 2 1, 8 92 , 4 0 9 1 ,888,364 Deferred tax asset 3 1, 5 7 0 9 81 1 ,893,979 1 ,889 ,345 Current assets Cash and cash equivalents 2 , 016 1,9 7 2 Tr ade and other receivables 1 , 2 51 1, 0 5 3 Amounts owing from subsidiaries 4 10, 8 0 4 3 7, 7 6 9 14 , 0 7 1 4 0 ,7 9 4 Current liabilities Tr ade and other payables ( 2 ,1 2 6 ) (83 6) Amounts owing to subsidiaries 4 (10 3 , 3 7 5) ( 14 , 0 6 3 ) Loan and borrowings 5 (1, 414 ) ( 8 3 1) (10 6 , 9 15 ) (15 , 7 3 0 ) Net current assets (92 , 8 4 4 ) 25,0 64 T otal asset s less current liabilities 1, 8 0 1, 13 5 1,9 14 , 4 0 9 Non-current liabilities Loan and borrowings 5 (13 4 , 4 6 3 ) ( 2 4 7, 7 9 5 ) (13 4 , 4 6 3) ( 2 4 7, 7 9 5 ) Net assets 1,666,67 2 1, 6 6 6 , 614 Equity Called up share capital 6 4,807 4,807 Share premium account 6 1 ,1 9 8 , 7 0 3 1 ,19 8 , 7 0 3 Retained earnings 6 4 5 5 , 8 74 4 5 8 ,1 2 6 Share-based payment reserve 6 7 ,288 4 ,9 78 T otal equit y 1,666,67 2 1, 6 6 6 , 614 The notes on pages 159 to 161 form part of the Financial Statements. These Financial Statements were appro ved by the Board of Directors of T rainline plc (registered number 11961132) on 5 May 2022 and were signed on its behalf by: Jody F ord Shaun McCabe Chief Executiv e Officer Chief Financial Officer 5 May 2022 5 May 2022 P arent C ompany balance sheet A t 28 F ebruar y 2022 157 Strat egic Report Gove rnanc e Financial Statements Share capital £’000 Share premium £’000 Preference shares £’000 Retained earnings £’000 SBP reserve £’000 To t a l equity £’000 At 1 March 2021 4,807 1 ,1 9 8 , 7 0 3 – 4 5 8 ,1 2 6 4 ,978 1,666,61 4 Loss after tax – – – ( 3 ,1 9 7 ) – ( 3 ,1 9 7 ) Share-based payments – – – – 3 ,2 55 3, 255 Tr ansfer between reserves 1 – – – 945 (9 4 5 ) – Balance as at 28 F ebr uary 2022 4,807 1 ,1 9 8 , 7 0 3 – 4 5 5 , 8 74 7 ,288 1,66 6,672 1 T r an s f er b e t we e n re se r ve s re la te s to t h e di f f e re nc e be t w ee n t he s ha re p r ic e at g ra nt d at e of t he e xe rc is e d sh ar es a nd t h e ac tu al c os t o f th e tr ea su r y sh ar es p ur ch as e d to f ul l th e s ha re - b as e d pa y me nt . For the year ended 2 8 Februar y 20 21 Share capital £’000 Share premium £’000 Preference shares £’000 Retained earnings £’000 SBP reserve £’000 To t a l equity £’000 At 1 March 2020 4,807 1,1 9 8 , 7 0 3 50 4 62,68 4 – 1 ,666,244 Preference share r edemption – – (5 0) – – (50) Loss after tax – – – (4,838 ) – (4,838 ) Share-based payments – – – – 5,25 8 5,258 Tr ansfer between reserves 1 – – – 28 0 (2 8 0) – Balance at 28 F ebr uary 2021 4,807 1 ,1 9 8 , 7 0 3 – 4 5 8 ,12 6 4 ,97 8 1, 6 6 6 , 614 1 T r an s f er b e t we e n re se r ve s re la te s to t h e di f f e re nc e be t w ee n t he s ha re p r ic e at g ra nt d at e of t he e xe rc is e d sh ar es a nd t h e ac tu al c os t o f th e tr ea su r y sh ar es p ur ch as e d to f ul l th e s ha re - b as e d pa y me nt . The notes on pages 159 to 161 form part of the Financial Statements. P arent C ompany statement of changes in equity F or the year ended 28 F ebr uary 2022 T rainline Annual Report and Accounts 2022 158 1. Ba sis of prep aration The Financial Statements are presented in pounds sterling, r ounded to the nearest thousand, unless otherwise stated. These Financial Statements were prepar ed in accordance with Financial Reporting Standard 101 Reduced Disclosur e Framework (‘FRS 101’). In pr eparing these Financial Statements, the Company applies the recognition, measurement and disclosure requirements of International Accounting Standar ds in conformity with the requirements of the Companies Act 2006 (‘ Adopted IFRSs’), but makes amendments where necessary in or der to comply with the Companies Act 2006 and has set out below where advantage of the FRS 101 disclosur e exemptions has been tak en. These Financial Statements have been prepared on a going concern basis. Further details ar e given in the Going Concern Statement on pages 124 to 125. After due consideration the Directors consider that the Company has adequate resources to meet its liabilities as the y fall due and remain in operation for the going concern assessment period. Accordingly the Board ar e satised that it is appropriate to adopt the going concern basis of accounting in preparing these Parent Company Financial Statements. As permitted by FRS 101, the Company has taken advantage of the disclosur e exemptions available under that standard in relation to shar e-based payments, nancial instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash o w statement, standards not yet effective, impairment of xed and intangible assets and certain related party tr ansactions. Where required, equivalent disclosur es are given in the Consolidated Financial Statements. As permitted by section 408(4) of the Companies Act 2006, a separate income statement and statement of comprehensive income for the Company has not been included in these Financial Statements. The principal accounting policies adopted are described below . They have all been applied consistently to all years pr esented. Amounts receivable by the Company’s auditor and its associates in respect of services to the Company and its associates, other than the audit of the Company’s Financial Statements, have not been disclosed as the information is required instead to be disclosed on a consolidated basis in the Consolidated Financial Statements. 2 . Inv estm ent in subsidiaries Investments in subsidiaries are stated at cost less any pro vision for impairment. The investment relates to the Company’s investment in Tr ainline Holdco Limited. 2022 £’000 2021 £’000 Opening balance 1,888 ,364 1, 7 5 9 , 3 0 6 Capital contribution 4,0 45 12 9 , 0 5 8 Closing balance 1, 8 9 2 , 4 0 9 1 ,888,364 During FY2022, the Company made a capital contribution not remunerated b y shares to Victoria Manager S.a.r.l. During FY2021, the Company made an additional capital contribution to Tr ainline Holdco Limited in exchange for ne w shares issued to the Company . Notes t o the P arent C ompany Financial Stat ements 159 Strat egic Report Gove rnanc e Financial Statements Asse ssmen t of carr ying value of inv estm ents in subsidiarie s The carrying value of investments in subsidiaries have been tested for impairment in accordance with IAS 36 Impairment of Assets. The carrying value is compared to the asset’s reco verable amount and has been assessed by r eference to value in use. The value in use has been calculated upon a discounted cash ow methodology using the most recent for ecasts prepared by management of the T rainline Group. The Group prepares cash o w forecasts using eight-year projections which ar e extrapolated fr om the Board appro ved three-year plan. The forecasts have been used in the VIU calculation along with risk-adjusted discount r ates. Cash ows beyond the eight-year period are e xtrapolated using a terminal growth r ate. The key assumptions for the value in use calculation ar e the discount rate and terminal gro wth rate. The discount rate is based on the weighted average cost of capital reecting specic principal risks and uncertainties, taking into account the risk-free rate of r eturn, the market risk premium and beta factor. The rate used to discount the cash o ws is 9.7% pre-tax (FY2021: 11.6% pre-tax). The terminal gro wth rate of 2.5% (FY2021: 1.5%) reects the e xpected growth into perpetuity of the business, taking into account the current market and sector risks. As a r esult of this analysis, the Directors have determined that no impairment charge is required. 3. De ferred ta x asse t The Company has continued to recognise a deferred tax asset on unutilised losses carried forwar d. This is on the basis that it is probable that future taxable pr ot will be available against which the unutilised tax losses and credits can be set against. This is supported by the latest prot and cash o w forecasts approved b y the Board, which show impr oved trading performance following market r ecovery from the impact of Co vid-19. 4. Am ounts owing from and to subsidiarie s Amounts owing from and to subsidiaries is comprised of inter company loans with companies within the Group. IFRS 9 expected credit losses have been assessed as immaterial in r elation to these balances. 5. Loan s and borrowings Loans and borrowings relate to the Re volving Credit Facility and the convertible bonds. Please r efer to Note 14 of the Consolidated Financial Statements for details. 6. Capital and r eser ves Share cap ital Share capital repr esents the number of shares in issue at their nominal value. Ordinary shares in the Company ar e issued, allotted and fully paid up. The holders of ordinary shares are entitled to receive dividends as declared fr om time to time and are entitled to one vote per share at meetings of the Company . On incorporation on 24 April 2019, the Company issued 50,000 prefer ence shares for a total consideration of £50,000, with 1 ordinary share to be issued. The pr eference shares were r edeemed in full on 20 August 2020. On 26 June 2019, the Company allotted 449,095,131 ordinary shares as part of a shar e for share ex change in consideration for: the transfer of the entir e issued share capital of Victoria Investments S. C.A to the Company; the acquisition of the Convertible Preferred Equity Certicates (‘CPECs’) and r elating interest held by Victoria Investments S.C.A; and the acquisition and e xtinguishment of the liability relating to T racker shar es held by Victoria Investment S. C.A. The nominal value of these shares was £1.00 and the consideration per shar e was £3.50. Notes t o the P arent C ompany Financial Stat ements continued T rainline Annual Report and Accounts 2022 160 On 26 June 2019, the Company issued 31,526,093 ordinary shares in its primary listing. The nominal value of these shares was £1.00 and the consideration per share was £3.50. Share pr emium is stated net of directly attributable fees of £3.0 million. On 26 June 2019, the Company issued an additional 59,284 ordinary shares. The nominal value of these shar es was £1.00 and the consideration per share was £3.50. Following a reduction in capital the nominal value of or dinary shares was reduced from £1.00 to £0.01 each. The reduction of capital had no effect on the net asset position of the Company . Shareh olding at 28 Februar y 2 02 2 and 2 8 Februar y 2 02 1 Number £’000 Ordinary shares – £0.01 480,680 ,508 4,807 Share pr emium Share premium repr esents the amount over the nominal value which was received b y the Company upon the sale of the ordinary shares. Upon the date of listing the nominal value of shar es were £1.00 but the initial offering price was £3.50. Share premium is stated net of any dir ect costs relating to the issue of shares. Retained earning s Retained earnings represents the prot the Company mak es that is not distributed as dividends. Share-based payment reserve The share-based payment reserve is built up of charges in r elation to equity-settled share-based payment arrangements which have been recognised within the prot and loss account. The Company allocates the share-based payment charges to the entities in which the employees’ emplo yment contracts sit through the amounts owing from/to subsidiaries. When assessing and discussing nancial performance, certain alternative performance measures (‘ APMs’) of historical or future nancial performance, nancial position or cash ows ar e used which are not dened or specied under IFRS. APMs are used to improve the compar ability of information between reporting periods and operating segments. APMs should be considered in addition to, not as a substitute for, or as superior to, measures r eported in accordance with IFRS. APMs are not uniformly dened by all companies. Accor dingly, the APMs used may not be comparable with similarly titled measures and disclosures made b y other companies. These measures are used on a supplemental basis as they are considered to be indicators of the underlying performance and success of the Gr oup. 1 61 Strat egic Report Gove rnanc e Financial Statements Net ticket sal es Net ticket sales repr esent the gross value of ticket sales to customers, less the value of r efunds issued, during the accounting period. The Group acts as an agent in these transactions. Net tick et sales do not represent the Gr oup’s revenue. Management believe net ticket sales ar e a meaningful measure of the Group’ s operating performance and size of operations as this reects the value of tr ansactions processed on the Group’ s platform. The rate of gro wth in net ticket sales may differ to the rate of gr owth in re venue due to the mix of commission rates and service fees. Adjuste d EB ITDA The Group believes that adjusted EBITD A is a meaningful measure of the Group’ s operating performance and debt servicing ability without regard to amortisation and depr eciation methods which can differ signicantly. Adjusted EBITDA is calculated as prot/(loss) after tax befor e net nancing income/(expense), tax, depreciation and amortisation, exceptional items and shar e-based payment charges. Exceptional items are e xcluded as management believe their natur e could distort trends in the Group’ s underlying earnings. This is because they are often one-off in natur e or not related to underlying trade. Shar e-based payment charges are also ex cluded as they can uctuate signicantly year on year. A reconciliation of operating pr ot to adjusted EBITDA is as follows: Notes 2022 £’000 2021 £’000 Operating loss (10 , 3 13) (9 9,70 4) Adjusting items: Depreciation and amortisation 1 0 ,11 4 2 , 576 4 1,1 9 9 Share-based payment charges 15 6 ,7 8 3 7, 0 9 3 Exceptional items 6 – 26,508 Adjusted EBITD A 39, 0 4 6 ( 2 4 ,9 0 4) Adjus ted e arning s Adjusted earnings are a measure used by the Gr oup to monitor the underlying performance of the business, excluding certain non-cash and exceptional costs. Adjusted earnings is calculated as loss after tax with share-based payment charged in administrative e xpenses and nance costs, exceptional costs, gain on r epurchase of convertible bonds and amortisation of acquired intangibles added back, together with the tax impact of these adjustments also added back. Alternativ e per formanc e measur es T rainline Annual Report and Accounts 2022 162 Exceptional items are e xcluded as management believe their natur e could distort trends in the Group’ s underlying earnings. This is because they are often one-off in natur e or not related to underlying trade. Shar e-based payment charges are also ex cluded as they can uctuate signicantly year on year and are a non-cash char ge to the business. Amortisation of acquired intangibles is a non-cash accounting adjustment relating to pr evious acquisitions and is not linked to the ongoing trade of the Gr oup. A reconciliation from the loss after tax to adjusted earnings is as follo ws: Notes 2022 £’000 2021 £’000 Loss after tax (11 , 9 0 5 ) (91,3 0 4) Earnings attributable to equity holders ( 11 , 9 0 5 ) (91,3 0 4) Adjusting items: Exceptional items 6 – 26,508 Gain on convertible bond buyback 7 (3,914 ) – Amortisation of acquired intangibles 1 10 7, 0 8 3 8, 563 Share-based payment charges 15 6 ,7 8 3 7, 0 9 3 T ax impact of the above adjustments (1, 8 9 1) (2 , 53 8) Adjusted earnings ( 3, 8 4 4) (5 1 ,678) 1 Th is co n si s t s of t he a m or ti s at io n of b ra n d va lu at io n o f £5 . 2 mi ll io n ( F Y 2 021: £5 . 2 mi ll io n), c u s to me r va lu a ti on o f £1.9 mill io n ( F Y 2 021: £3 .0 m il li on) a nd so f t wa re d ev el o pm en t of £ ni l ( F Y 2 021: £0. 4 mi ll io n). Net deb t Net debt is a measure used by the Gr oup to measure the over all debt position after taking into account cash held by theGroup. The calculation of net debt is as follows: Notes 2022 £’000 2021 £’000 Loan and borrowings 1 14 (15 8 , 8 2 1) ( 2 7 7, 6 8 1 ) Cash and cash equivalents 68,49 6 3 6, 575 Net debt (9 0, 32 5 ) ( 2 4 1 ,1 0 6 ) 1 Th is a mo un t is t h e ag gr eg a te am o un t of l oa n s an d bo r ro wi n gs a s di sc l os ed i n No te 14 am o un ti ng t o £153. 5 m il li on ( F Y 2 021: £2 70 . 5 mi ll io n) an d th e ca p it a li se d na nc e ch ar ge s am ou n ti ng t o £ 5. 3 m il li on ( F Y 202 1: £7 .1 mil li on) . 16 3 Strat egic Report Gove rnanc e Financial Statements Oper ating free c ash ow The Group uses operating free cash o w as a supplementary measure of liquidity . The Group denes operating free cash o w as cash generated from oper ating activities adding back cash exceptional items, and deducting cash ow in relation to pur chase of property, plant and equipment and intangible assets, e xcluding those acquired through business combinations or trade and asset pur chases. The calculation of operating free cash o w is as follows: 2022 £’000 2021 £’000 Cash generated from/(used in) operating activities 1 9 5 ,1 6 7 (12 1, 2 5 4 ) Cash exceptional items – 1, 3 13 Purchase of property , plant and equipment and intangible assets (2 9, 3 4 4) ( 26, 3 35) Operating free cash ow 165,823 ( 14 6 , 2 7 6 ) Liquidity The Group uses liquidity as a measure of available funds. Liquidity headr oom is cash and cash equivalents plus the undrawn, unencumbered balance on the Revolving Cr edit Facility. 2022 £’000 2021 £’000 Cash and cash equivalents 68,49 6 3 6, 575 Undrawn balance on the Revolving Cr edit Facility 27 3 ,6 76 2 2 3 ,1 5 2 Liquidity headroom 3 4 2 ,1 7 2 2 5 9,7 27 Alternativ e per formanc e measur es continued T rainline Annual Report and Accounts 2022 164 CBP00019082504183028 T rainline Annua l Repo r t and Ac count s 20 22 tr ai n li n e. com
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