Detailed Financial Analysis and Projections for Trainline (2013-2019)

This report provides a comprehensive financial analysis of Trainline, a UK-based SME, focusing on its performance from 2013 to 2016 and projecting cash flow through 2019. The analysis includes a critical evaluation of Trainline's performance using ratio analysis, highlighting profitability, liquidity, and efficiency trends. A projected cash budget for the years 2017-2019 is presented, along with an evaluation of financing sources within the Statement of Financial Position (SOFP) and investment appraisal techniques. Furthermore, the report discusses the entrepreneurial ecosystem's role in Trainline's development and explores ethical considerations crucial for an IPO issuance. The report uses financial statements and various financial tools to assess the financial health of the company and provide insights into its financial strategies and future prospects. The report includes key financial ratios, cash flow projections, and discussions on investment and financing strategies, offering valuable insights into Trainline's financial operations and potential future growth.

Finance in an SME context

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Q1. Critical analysis of Trainline’s performance over 2013-2016 using ratio analysis..............3
Q2. Projected Cash Budget For the year 2017, 2018, 2019.........................................................5
Q3. Critically evaluate the sources of finance in SOFP and techniques to evaluate investment
proposal........................................................................................................................................6
Q.4. Discuss the extent to which the entrepreneurial ecosystem has been responsible for the
development of Trainline.............................................................................................................8
Q.5. Critical discussion of ethical consideration that must be taken into account for IPO
issuance........................................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Since this present scenario has been seen as a domination of small medium sized firms
who are growing at a rapid pace equally contributing in the growth of the economy as well
through continuously contributing towards the GDP and different factors which generate
employment and satisfy customer needs up to an extent. When we talk about startups or small
business who marks their presence in industry with innovative and creative set of services these
days, they execute their routine functions by acquiring funds and utilizing them in an efficient
and effective manner. As per this report it is emphasized on one of the small and medium sized
firms of UK which is Trainline. Trainline delivers quality services , in its portfolio of services it
includes railway ticket, distribution and other ancillary facilities to the consumers. The report
here is undertaken in order to put emphasis on performance evaluation and financial status of
Trainline. Further it will also look upon the variety of financial sources and ethical
considerations that firms need to take into consideration at the time of IPO issue.
Q1. Critical analysis of Trainline’s performance over 2013-2016 using ratio analysis
For the purpose of calculating the Ratio's comparative balance sheet of Trainline is
mentioned above:
2012 2013 2014 2015 2016
Intangible assets 4035 4418 6206 7913 19931
Tangible assets 20784 20149 15537 9859 2035
Non-current(Fixed)
assets 24819 24567 21743 17772 21966
Inventories 61 63 56 34 31
Accounts
receivables 148873 189072 91043 124455 153121
Cash at bank and in
hand 42280 50747 43949 77886 44408
Current assets 191214 239882 135048 202375 197560
Total Assets 216033 264449 156791 220147 219526
Equity and liabilities
Accounts payable 120227 128772 114502 143067 162990
Provision for
liabilities 91 142 222 259 378
Current Liabilities 120318 128914 114824 143326 163368

Called up share
capital 35882 35882 1131 1131 1131
Share premium
reserve 44249 44249
Profit and loss
account 15581 55151 10836 75690 55027
Equity capital and
reserves 95715 135585 41967 76821 56158
TOTAL Equity and
liabilities 216033 264499 156791 220147 219526
Ratio analysis is a quantitative and financial technique that is often used by the number of
businesses to measure their operational performance. It express quantitative relationship between
two or more variables of the financial statements and used to measure and compare the
profitability, liquidity, efficiency and solvency position of the firm. It is considered as an
effective method to examine and evaluate business performance over an accounting year.
There are different accounting ratios for the purpose of evaluating operational efficiency
of the firm and that is Profitability ratio, Debt-equity ratio, and many more. For the purpose of
evaluating Trainlines operational efficiency Six ratios which are taken are:
KEY RATIOS
Profitability Ratios
Return on equity 29% 93% 45% 59%
Return on assets 15% 25% 16% 15%
Return on sales 38% 36% 30% 24%
Gross profit margin 63% 66% 68% 66%
Asset turnover ratio 40% 69% 53% 61%
Leverage and Liquidity Ratios
Current ratio 1.86 1.18 1.41 1.21
Profitability ratios like gross profit ratio and net profit ratio are used to attain the
efficiency of business to generate return on their total sales. High ratio is a good sign of business
performance or vice-versa. Gross profit ratio examine profit percentage on total sales whereas
net profit ratio measure relation between net yield and total turnover. As per the results, it can be

seen that trainline's net profit is continuously declining which is it came down from 38% to 24%
in 4 years. Trainline needs to think on this issue immediately. Trainline's turnover has been
increased but still due to high proportionate increase in cost of sales. Effective managerial
control over indirect spending and overheads like rent, salaries, general, office and
administration and marketing expenditures may be the reason behind increase net profit
indicating that in 2015, TUI performed comparatively well than earlier year.
On the other hand, liquidity ratios measure relationship between short-term (current
assets) and short-term obligations (current liabilities). It is used to examine that whether trainline
has improved its capability or not to repay their short-term debts on decided time. Current ratio
and quick ratio are the best way of examining liquidity performance of the firm. Current Ratio
measure relationship CA and CL, whereas QR examine liquidity position without taking into
account closing inventory balance. Trainline's liquidity ratio does not show an increasing trend as
well as decreasing trend. In 2013 it is 1.86 and further it decreases and then increases but in 2016
it again decreases. Rising trend reflects that Trainline improved its current assets like debtors,
receivables and cash to repay short-term obligations on correct time. Besides this, efficiency
ratios are used to measure that managers have effectively utilized business assets or not to gather
maximum revenues through operational activities. On the contrary to this, solvency ratios helps
to measure firm’s capability to repay their long-term debt like loans as per repayment schedule.
But in the case of Trainline since debt is not there no solvency ratios can be calculated for
measuring the payable capacity of the firm.
Q2. Projected Cash Budget For the year 2017, 2018, 2019
Since trainline needs to have an IPO in future and for the growth of the business they
need to think on the financial matters of the company. So in order they need to set up its
projected cash budget to be used in future. They need to forecast their cash needs as per the
current operations of the businesses. Through projected cash needs they want in future they will
be draw conclusions on their operation and try to make use of the resources in an efficient and
effective manner so that in future they meet the required amount of cash needed to pay the
people from cash has been taken or the funds have been acquired.

Particulars 2017 2018 2019
Beginning cash balance 44408 127202.72 223859.58
Sources of cash
Cash sales 143203.01 152396.64 162180.51
Receipts from debtors 153121
Total cash available 340732.01 279599.36 386040.09
Disposal of cash
Expenditures 50539.2896 55739.78 61475.4061
Cash payment to payable 162990
Total cash expenses 213529.29 55739.78 61475.4061
Ending cash position 127202.72 223859.58 324564.68
They have not borrowed from somewhere else. There may be certain reasons for which
firm has not borrowed funds from anywhere else and they can be, the cost of debt may be high,
volatile market demand, risk taking capability of funds, being not sure of their future earnings.
Moving further they have seen a excellent profit in which has made their total equity capital
raise. But being so good in 2013 it was a decline in the profits due to transfer of premium
reserves and payment to equity shareholders.
Q3. Critically evaluate the sources of finance in SOFP and techniques to evaluate investment
proposal
Having a balance between your paying ability and savings ability that's what a company
strive for and it is the need for them too, in order to make their business stable. The present case
of Trainline's financial performance can be evaluated by having a look at its financial statements
which is stated above in question 1. As it is seen that in financial year 2012, Trainline's total
equity capital & reserve was 95,715, among which share capital is 35882, Share premium
reserve is 44,249 and profit and loss account showed the balance 15,584. This depicts that
trainline is not having any investment in the form of debts. They have not borrowed from
somewhere else. There may be certain reasons for which firm has not borrowed funds from
anywhere else and they can be, the cost of debt may be high, volatile market demand, risk taking
capability of funds, being not sure of their future earnings. Moving further they have seen a
excellent profit in 2013, which has made their total equity capital raise its bar to 135,585. But
being so good in 2013 it was a decline in the profits in 2014 due to transfer of premium reserves

and payment to equity shareholders. Further in 2015 and 2016 profits were noted as 76821 and
56158 respectively. Among the years of operations Trainline has never been into borrowing of
funds, their capital structure was consisting of only equity capitals may be due to high cost of
borrowings on debt capitals. Since they have not been familiar with debt capitals there capital
structure cannot be considered as efficient.
Further if Trainline have thought of investing in some projects in order to have a look
what they will be gaining in future for the funds invested today, they need to go through a deep
study of techniques which will be best for them in order to make decisions regarding the projects
that in which projects they should be investing. So, in order to make right decisions regarding the
best investment proposal to be chosen, here are the techniques which can be used by Trainline: Net Present Value: In Net present value investors discount their associated project’s cash
flows using an appropriate discounting rate based on cost of capital. The discounting
rates can be fixed and can be variable too, it depends on the projects nature too. It is
because; the amount that investors gain today will not be of the same value in future, So,
Trainline require to discount their successive cash inflows and determine current value.
After that, NPV is the difference between cash inflows and outflows of a company. If
NPV is positive and Zero then Trainline should adopt the investment proposal and if
NPV is negative then the proposal should not be accepted. Internal Rate of Return: Likewise NPV, IRR also is of the belief that worth of currency
that an investor have today is more than receiving a specified amount in forthcoming
period. IRR refers to the discounting rate which equates both the present value of future
cash flows and initial outlay. IRR is that rate at which present cash inflow is equal to
present cash outflow. Lower the rate much better it is. Pay-back Period: It is the simplest method of assessing and comparing various projects
by just identifying the length of time that the project will take to repay the initial
investment. It will enable Trainline to prefer such project that indicates quick payback. It
also avoids giving higher weight to risky project and long-term projection also.
 Accounting rate of return: Accounting rate of return compares expected profit
percentage on the amount of initial investment that Trainline need to invest. In case of
single project, company can compare expected ARR with the desired or targeted return

whilst in case of having number of proposals, obviously, Trainline will prefer higher
ARR generating project.
Q.4. Discuss the extent to which the entrepreneurial ecosystem has been responsible for the
development of Trainline
Trainline known as UK rail ticket retailers and variety of services in its pocket it is a
company which is founded and funded by Vrigin rail group, it sells its ticket through a call
center. When it comes to the role of entrepreneurs who were part of the firm and contributed
their services in developing the business. there are some entrepreneurs or rather chief executive
officers they have impacted the business of company in many ways, whether it is about
increasing customer base or hitting new segments or targets. In 2008 Murray Hennessy joined
trainline.com as chief executive officer and by joining it in a span of one year he increased
investment of organization in advertisements which eventually benefited them in hitting new
customers. The company with its first TV advertisements campaign launched the ability for
customers to print their own tickets containing a secure bar code. So what this did was customers
were attracted to this feature and the practice of booking tickets from trainline.com was
increased in a rapid manner. Further more in 2009, Trainline launched its first I Phone mobile
app and started to new era of development of smartphone applications. Many further
establishments and developments have been done in leadership of Murray Hennessy. This shows
that trainline without a CEO or the leader of Murray's kind was nothing, after the joining of
Murray only these amendments have taken place so this shows the entrepreneur thinking skills
and how can a entrepreneur can lift the entire business with its capabilities.
Further more in 2014 Clare Gilmartin was recruited as the chief executive officer of the
firm and in 2015 what he did was he rejuvenated the whole concept of company to Trainline
only which means he with his entrepreneurial thinking and capabilities not just changed the name
of the company he changed the color combination and logos and everything which was looking
old and set up a new trainline company which was new in every manner and matching with the
modern world. The presence of current trainline is bold, positive, friendly and is a mordern
brand, just as it was imagined by Gilmartin.
So, as per the history of trainline it is pretty clear that behind the developments in the
decade the two entrepreneurs have played their part in most of them. Thus the emphasis which

was on entrepreneurship system as the factor of affecting trainline business have been clearly
understood with the introduction of certain important measures by the two CEO's.
Q.5. Critical discussion of ethical consideration that must be taken into account for IPO issuance
An IPO is a huge task which can make the companies future and can destroy it too, so in
order to make initial public offer a company should undertake a explicit examination of its
environment internal and external both. The factors that trainline managers or financial advisers
need to examine before IPO issuance are some of these:
1. Performance and Growth over the years: A finance manager should
consider its profitability levels over the years, Considering what has been the
performance of the company in terms of profitability as well as the 'year on
year' growth in the company should be undertaken by a manager in order to
know that IPO which needs to be undertaken will be fruitful or not. Revenue
growth is one of the most important factors to consider while determining
whether an IPO is worth investing in. Trainline should follow above
discussed things in order to be successful in its IPO.
2. Promoter's Standing: promoter plays important role in an IPO since he is
the person who manages all the work of an IPO on the behalf of company. So
his status and symbol is important for the trainline in order to make their IPO
successful i9n the markets.
3. Post IPO Promoter Share Holding: Financial analyst of the company should
consider the shareholding of promoter in the company post IPO. If the
promoter have high share holding in the companies shares they have great
confidence in the future growth and profitability of the company.
4. Objective of the Issue: Consider what are the objectives of the current issue
and how the proceeds from the issue is to be utilised by the company?
Whether the company will utilise the proceeds to fund an expansion plan or
merely repay existing debt, are issues to be considered in this regard.
5. P/E Ratio: P/E Ratio or the Price-Earning ratio is an effective tool to
determine how attractively the issue price is valued. P/E Ratio is simply the

ratio between the Market Price of a share and its Earnings per Share (EPS).
A higher P/E ratio could mean that the IPO is over-valued. Note that P/E ratio
should not be considered in isolation but combined with other meaningful
data to arrive at your conclusion.
6. Post IPO Debt-Equity Ratio: What would be the post listing Debt-Equity
Ratio of the company. The debt equity ratio refers to the ratio which shows
the proportion of equity and debt that a firm uses in its capital structure. Here
trainline does not have a debt so the future prospects should be kept in mind
by the firm in order to implement successful IPO.
7. Outlook of the company: What is the future outlook of the company? How
well are they placed in terms of competition? What opportunities lie before
the company and how well are they equipped to explore and take advantages
of such opportunities? What immediate threats the company faces?
8. Future Outlook of the Industry: Keeping up with the future operations that
firm is going to undertake should be known and considered because this will
effect the price of its shares. Future outlook of the industry in which the
company is operating is an important factor to consider while determining
whether to invest in an IPO. A country's demographic structure, its economic
and political environment as well as its laws and regulations have a
significant impact on the future outlook of any industry.
CONCLUSION
From this report it has been concluded that Trainline has developed at a very
rapid pace in the recent 10 years and continues to do so with its thinking of offering
IPO to public. Further Trainline has been into delivery of rail tickets then they have
been personalized their apps for I Phone and now they are offering IPO to public.
This all has been done by two of the entrepreneurs. So from this report it has been
concluded that for every small business who needs to be at the top have to have a
good leader so that he can take decisions towards the growth of the sector. From
this report it has been concluded that Trainline in order to make his impact on the

world in the coming years should acquire funds from financial institutions or
somewhere else so that they can grow with a steady rate.

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