REG - Pinewood Tech Gp PLC - Results for the 13 months ended 31 January 2024
25/04/2024 07:00
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RNS Number : 9379L Pinewood Technologies Group PLC 25 April 2024
25 April 2024
Pinewood Technologies Group PLC
Results for the 13 month period ended 31 January 2024
· Pinewood reports maiden results as a pure-play, Software-as-a-Service (SaaS) Group
· Strong double-digit growth in revenue and profit
· Continued global expansion of customer base and high levels of
customer retention
Pinewood Technologies Group PLC ("Pinewood" or the "Group", LSE: PINE), a leading pure-play SaaS business providing innovative automotive retail solutions to the automotive industry, today announces its audited financial results for the 13 months ended 31 January 2024.
Group Financial Summary
13m period ended 31 January 2024 (FY23) Year ended 31 December 2022 (FY22)
£m Continuing operations Discontinued operations Total Continuing operations Discontinued operations Total
Revenue 24.5 4,318.0 4,342.5 19.1 3,600.9 3,620.0
Gross Profit 21.8 485.4 507.2 17.1 440.1 457.2
Operating Profit before other income 10.0 105.8 115.8 7.0 86.3 93.3
Other income - profit on the sale of businesses and property, plant and - 41.8 41.8 - 7.7 7.7
equipment
Operating Profit 10.0 147.6 157.6 7.0 94.0 101.0
Interest (0.1) (65.7) (65.8) - (43.8) (43.8)
Profit Before Tax 9.9 81.9 91.8 7.0 50.2 57.2
The breakdown of continuing operations operating profit is as follows:
£m 13m period ended 31 January 2024 (FY23) Year ended 31 December 2022 (FY22)
Pinewood Core Business(1) 13.8 11.0
PLC Costs (2.8) (2.5)
Legacy US Motor Business (1.0) (1.5)
Group Total 10.0 7.0
(1) Previously reported as Pinewood segment
Pro-forma Comparative Information - Continuing Operations
£m, unless stated 13m period ended 31 13m period ended 31 % Change
January 2024 (FY23) January 2023
Revenue, including intercompany revenue(1) 32.0 27.7 15.5%
EBITDA(2) 15.6 12.4 25.8%
EBITDA Margin (%)(2) 48.8% 44.8% 4.0%
Profit Before Tax 9.9 7.7 28.6%
(1) Revenue includes intercompany amounts
(2) This is an Alternative Performance Measure (APM) - see note 8
Ian Filby, Chairman of Pinewood Technologies Group PLC, said:
"We are very pleased to be reporting the first set of financial results for
Pinewood following the successful sale of Pendragon's UK Motor and Leasing
divisions to Lithia Motors. Pinewood is a leading provider of cloud-based
Dealer Management Software and we have made positive progress during the year
to build on this market position. We have continued to expand our customer
base while sustaining high levels of customer retention, which is reflected in
a net user churn rate of c.2%. This contributed to strong growth in revenue
and profit in the period.
"We are excited by the opportunity that lies ahead for Pinewood as a
standalone business. Following the transaction with Lithia, the business is in
a robust financial position and is well positioned for growth through product
innovation, user growth in existing territories and accessing the North
American market in partnership with Lithia through a joint venture agreement.
We are confident in the quality of our products and our market proposition,
and we are looking forward to making further progress in the year ahead."
Note: Following the announcement on 30 June 2023 of Ian Filby's decision to
stand down as non-executive chairman, the Board has not yet appointed a
successor, primarily due to the process of disposing of the UK Motor and
leasing divisions, which took priority in the second half of 2023 and in early
2024 and hence Ian has continued as Chairman.
Continuing Operations Financial Highlights (FY23 was a 13 month period, FY22 was a 12 month period)
· Statutory revenue up 28.3% to £24.5m (FY22: £19.1m).
· Revenue including intercompany revenue(1) up 26.0% to £32.0m
(FY22: £25.4m), driven by both inflation-linked price increases and an
increase in international users.
· Statutory gross profit up 27.5% to £21.8m (FY22: £17.1m).
· Gross profit including intercompany gross profit(1) up 25.6% to
£28.5m (FY22: £22.7m).
· Core Business operating profit up 25.5% to £13.8m (FY22:
£11.0m).
Operational Highlights
· Total users increased by 4% to 33,100.
· Strong global expansion continuing:
o Record high international users at c.7,000, up 9%.
o New implementations in Denmark and Luxembourg.
o Expansion of the direct sales model in Asia Pacific.
· Continued high levels of customer retention with net user churn
of c.2%, as the rate at which existing customers increased users was nearly
sufficient to offset gross churn.
· Pinewood continues to build a strong partnership with Volkswagen
AG and Porsche, which led to initial user implementations with large
international dealer groups in both the European and the Asia Pacific market.
Strategy
· Transformation into a pure-play Software-as-a-Service (SaaS)
Group following the sale of the UK Motor and Leasing divisions
· Materially enhanced opportunity for growth following creation of
standalone SaaS business
· Entered into a strategic partnership with Lithia Motors Inc, post
period-end, creating access to the North American Market, through a £10m
Joint Venture investment
· We are looking forward to rolling out our system across the
Lithia network in both the UK and US
· Pinewood continued to demonstrate its growth potential, with
further growth in both user numbers and expansion into new geographies
· Post period end, the Group announced a £358m return of capital
to shareholders, by way of a special dividend of 24.5p.
· Pinewood will host a Capital Markets Day in October 2024, with
more details to be provided in due course.
Outlook
· We have had a good start to FY24 and although the broader
macro-economic environment remains challenging, particularly in the UK, we do
not envisage these as having a material impact on trading
· Our order bank of new customers remains strong and we are in
discussions with a number of potential new customers both in the UK and
internationally
· Whilst it remains early into the new financial year, the Board is
confident in the prospects for the Group and expects FY24 to be in line with
current market expectations.
(1) This is an Alternative Performance Measure (APM) - see note 8
Conference call and presentation
A presentation for sell-side analysts will be held at 9.00am (UK time) today
and this will be followed by a Q&A session with the management team.
Please use the following link to register and to join the livestream of the
presentation:
https://brrmedia.news/PINE_FY (https://brrmedia.news/PINE_FY) .
A webcast replay of the presentation will be made available on Pinewood's
website later in the day. The webcast will be published on:
https://investor.pinewoodtech.com/results-centre
(https://investor.pinewoodtech.com/results-centre)
For further enquiries please contact:
Headland
Henry Wallers Tel: 07876 562436
Jack Gault Tel: 07799 089357
Chief Executive's Review
A comprehensive strategic review was completed by the Board and its advisors
during FY23 in order to unlock the potential in the Group's share price and to
return value to the Group's shareholders and other stakeholders. This review
resulted in the disposal of the UK Motor and Leasing segments, together with
the debt and pension liabilities of the Group, which culminated in a fantastic
deal for our shareholders. The transformation strategy which enables Pinewood
to become a pure-play SaaS business, is an incredibly exciting prospect.
Pinewood was bought by Pendragon in 1998 and, under our ownership, has
steadily grown to become a profitable, high margin business and, importantly,
we have developed a product that is market-leading, not just in the UK, but
globally.
The fact that Pinewood has a genuine cloud-based automotive retail system sets
it apart from the vast majority of its competitors and means that the work
done by our development team can be continuously rolled out across our
customer base in 21 countries, with no disruption to our customers. This has
enabled rapid international expansion of our universal core product, providing
the same solution whatever the location. Our levels of functionality are
significantly higher than most of the current automotive retail system
providers, both at an individual store level but also at a Group management
level, enabling larger Groups to achieve additional control and efficiency
savings.
Although Pinewood was established c.40 years ago, we are treating this next
phase of Pinewood's expansion similar to that of a start-up. The removal of
barriers to accessing large parts of the UK customer base that existed under
Pendragon's ownership will facilitate rapid growth in the UK as well as
accelerating our international expansion.
Our international growth has historically been driven by two main routes.
Firstly, through our sales teams, who have enabled us to reach a significant
number of new countries in the last few years. Secondly, through our
manufacturer partners which we have very strong relationships with. In a
number of countries, manufacturers have mandated Pinewood as the system of
choice, where all retailers in a particular brand have to have the Pinewood
system installed.
On top of this, we have an exciting new driver of growth through our strategic
partnership with Lithia and we are looking forward to installing our system
across their network in the US and UK. Initially, the key pieces of work
relating to expanding in the US are focused on integrations with manufacturer
systems and other third party 'layered apps' that are widely used in the US
market. The development work will be done by our UK-based development team.
Once we are in a position to test in the US, it is likely we will run the
Pinewood system in parallel with current systems in pilot locations before
starting a full rollout across Lithia's US stores. Given the relatively
early stage of development, exact timings have not been confirmed, although we
are aiming to be testing in pilot locations in H1 FY25.
Finally, the past and future success of the Group is strongly linked to the
outstanding Pinewood team. The development team have built a world-class
product that is continually evolving and enabling dealerships to thrive in an
ever-changing auto retail landscape. In addition to this, the sales teams
have worked tirelessly to expand the business while being supported by the
back-office and admin teams. The low team turnover is testament to a dynamic
environment and a world class product and we look forward to growing the team
as we expand both in the UK and abroad.
Bill Berman
Chief Executive
25 April 2024
Business Review
The business was historically organised into 3 segments, analysed as follows:
o Software -Software as a Service provision to global automotive business users
o UK Motor - Discontinued segment
o Leasing - Discontinued segment
Software - Pinewood
Described above as 'Pinewood Core Business'.
Revenue and gross profit include intercompany amounts.
£m H1 FY23 H2 FY23 FY23 H1 2022 H2 2022 FY22 Change
%
Revenue including intercompany amounts(1) 14.5 17.5 32.0 12.4 13.0 25.4 26.0%
Gross Profit including intercompany amounts(1) 12.9 15.6 28.5 11.1 11.6 22.7 25.6%
Gross margin rate 89.0% 89.1% 89.1% 89.5% 89.2% 89.4% -0.3%
Core Business Operating Expenses (6.4) (8.3) (14.7) (5.6) (6.1) (11.7) 25.6%
Core Business Operating Profit(1) 6.5 7.3 13.8 5.5 5.5 11.0 25.5%
Operating margin rate 44.8% 41.7% 43.1% 44.4% 42.3% 43.3% -0.2%
(1) This is an Alternative Performance Measure (APM) - see note 8
Note: FY23 is a 13 month period ended 31 January 2024 and FY22 is the year
ended 31 December 2022
A more detailed breakdown of the Pinewood Core Business financials for FY23
can be seen below:
£m Contribution from Pendragon Contribution from external customers Pinewood PLC standalone result Share of Pendragon Group Overheads Pinewood segment as a reported in Pinewood Group accounts
Revenue including intercompany amounts(1) 7.5 24.5 32.0 -
32.0
Gross Profit including intercompany amounts(1) 6.7 21.8 28.5 -
28.5
Core Business Operating Expenses (2.4) (12.0) (14.4) (0.3) (14.7)
Core Business Operating Profit(1) 4.3 9.8 14.1 (0.3) 13.8
( )
(1) This is an Alternative Performance Measure (APM) - see note 8
A more detailed breakdown of the Pinewood Core Business financials for FY22
can be seen below:
£m Contribution from Pendragon Contribution from external customers Pinewood PLC standalone result Share of Pendragon Group Overheads Pinewood segment as a reported in Pinewood Group accounts
Revenue including intercompany amounts(1) 6.3 19.1 25.4 -
25.4
Gross Profit including intercompany amounts(1) 5.6 17.1 22.7 -
22.7
Core Business Operating Expenses (2.1) (9.3) (11.4) (0.3) (11.7)
Core Business Operating Profit(1) 3.5 7.8 11.3 (0.3) 11.0
( )
(1) This is an Alternative Performance Measure (APM) - see note 8
· As part of the transaction with Lithia Motors, Inc., Lithia UK
have signed a contract to install the Pinewood system.
· The contract is for an initial three year period, which then goes
onto a rolling 12 month basis.
· Strong international growth driven by expansion of the direct
sales model and new implementations in Europe.
· Strong partnerships with strategic OEMs.
Strategy delivery - Grow and diversify Pinewood
As part of its historic Group strategy presentation, Pendragon announced its
plan to 'grow and diversify Pinewood'. This included the key objectives of:
· Growing the international user base by 80% and the total user
base by 10%; and,
· Further product extension enabling turn-key digital automotive
retail solutions.
In FY23 Pinewood continued to focus on both elements of the 'grow and
diversify' strategy.
· Grow: strong international growth continued in FY23 with new
implementations in Denmark and Luxembourg as well as an expansion of the
direct sales model in Asia Pacific. The UK and Ireland market continued to
grow both in terms of users and revenues.
· Diversify: development of the core product continues. New
products designed to support digital automotive retail are being developed to
benefit both Lithia UK / Pendragon and the wider customer base. Moreover,
Pinewood's strategic partnership with Lithia is expected to unlock significant
opportunities in the North American Market.
Operating Review
Pinewood is a software business that provides Software as a Service ("SaaS")
in the UK and in a number of countries worldwide.
The automotive retail system market for Franchised Motor Dealers is estimated
to be worth over £100 million in the UK. Two providers dominate the UK
market. The global automotive retail system market which is highly
fragmented, is estimated to be worth approximately £3.8bn, with over 50
different providers within Europe alone.
Pinewood's unique approach to the market is characterised by:
· a single product capable of global deployment, which simplifies
future developments to the system and reduces operating costs;
· a feature-rich cloud-based solution, with no need for costly
third-party add-ons;
· focus on strong manufacturer partnerships and supporting dealer
profitability; and
· commitment to using the latest technology to reshape motor retail
Pinewood was an early adopter of the SaaS business model and has focused on
developing recurring revenue streams. Today, c.85% of Pinewood's revenues are
on a recurring basis. Whilst the former Pendragon dealers (now part of Lithia
UK) remain important customers to Pinewood, as Pinewood has grown, Pendragon's
proportion of the Pinewood total user base has been diluted to c. 15% with
intra-group charging maintained at a competitive market rate.
During FY23, overall user numbers increased by 4% to c.33,100 with the
expansion delivered both internationally as well as in the UK and Ireland.
Across Pinewood's international markets there was a 9% net increase in user
numbers to a record high of c.7,000 users. International user growth in FY23
was particularly strong in Europe with Pinewood benefiting from new
implementations in Denmark and Luxembourg.
In addition, Pinewood has further growth aspirations in the Asia Pacific
region and has incorporated a subsidiary in Japan and begun to recruit a local
Japanese team. This team are involved in the current implementations taking
place in the Porsche dealerships in Japan.
Pinewood's growth benefits not just from sales to new customers but also from
the expansion of its existing customer base. In FY23 net user churn in the UK
and Ireland (excluding Pendragon) was less than 2%, as the rate at which
existing customers grew users was nearly sufficient to fully offset gross
churn.
In FY23 Pinewood increased its investment in the platform as development capex
rose to £6.8m with 81% of development costs being capitalised (FY22 82%). New
system functionality has been developed for new markets as Pinewood expands in
Europe and Asia Pacific. Substantial investments have also been made in
platform architecture and security.
There has also been good further progress in terms of OEM support at an
international level. Pinewood continues to build a strong partnership with
Volkswagen AG and Porsche, which has enabled constructive dialogue and, in
some cases, initial user implementations with large international dealer
groups in both the European and the Asia Pacific market.
Financial Review
Total revenues including intercompany revenue increased by 26.0% to £32.0m
compared to FY22.
Gross profit including intercompany gross profit increased by 25.6% to
£28.5m. The gross margin was broadly flat compared to the prior period,
following the one-off transition to more extensive use of Microsoft Azure at
the end of FY21.
Core Business operating expenses increased by £3.0m or 25.6% compared to
FY22. In FY23 the amortisation charge of £5.2m made up over a third of
operating costs. Alongside rising personnel costs, the higher amortisation
charge drove the operating cost increase, both reflecting increased investment
in the development of the platform and Pinewood's operational capabilities.
As a result of these movements, Core Business operating profit was £13.8m, an
increase of 25.5% compared to FY22.
UK Motor
Following the sale of the UK Motor division to Lithia Motors, Inc on 31
January 2024, the UK Motor segment is now a discontinued operation.
Leasing - Pendragon Vehicle Management
Following the sale of the Leasing division to Lithia Motors, Inc on 31 January
2024, the Leasing segment is now a discontinued operation.
Disposal of UK Motor and Leasing segments
On 31 January 2024, the UK Motor and Leasing segments, together with related
central support functions, were disposed of to Lithia Motors, Inc. for
£377.5m. As a result, these segments have been presented as discontinued
operations. The revenue and gross profit from discontinued operations in the
period was £4,318.0m (FY22: £3,600.9m) and £485.4m (FY22: £440.1m)
respectively. The operating profit from discontinued operations, which
included the profit on disposal of businesses and property, plant and
equipment, was £147.6m (FY22: £94.0m).
The UK Motor and Leasing segments that were disposed of, were trading broadly
in line with management expectations for the 13 month period prior to the sale
to Lithia Motors, Inc.
The sale to Lithia Motors, Inc. resulted in a profit on disposal of £40.7m.
Consideration was received in cash on 1 February 2024. As announced on 5
April 2024, the Group proposes to pay a special dividend to shareholders of
24.5p per share on 7 May 2024.
Pension
Following the sale of the UK Motor and Leasing divisions to Lithia Motors, Inc
on 31 January 2024, all of the Group's pension obligations and liabilities
have been assumed by Lithia.
Revolving Credit Facility (RCF)
The Group has a £10m RCF which matures in February 2027. This facility was
arranged post period end in February 2024.
CONSOLIDATED INCOME STATEMENT
FOR THE 13 MONTH PERIOD ENDED 31 JANUARY 2024
13m period ended Year ended
31 Jan 2024 31 Dec 2022
Note £m £m
Continuing operations
Revenue 24.5 19.1
Cost of sales (2.7) (2.0)
Gross profit 21.8 17.1
Operating expenses (11.8) (10.1)
Operating profit 10.0 7.0
Finance expense (0.1) -
Finance income - -
Net finance costs (0.1) -
Profit before taxation 9.9 7.0
Income tax expense (1.6) (1.3)
Profit for the period/year from continuing operations 8.3 5.7
Discontinued operations
Profit for the period/year from discontinued operations, net of tax * 73.4 39.8
Profit for the period/year 81.7 45.5
Earnings per share
Basic earnings per share 2 117.0p ** 65.4p
Diluted earnings per share 2 117.0p ** 63.0p
Earnings per share - continuing operations
Basic earnings per share 2 11.9p ** 8.2p
Diluted earnings per share 2 11.9p ** 7.9p
* The discontinued operations in the 13m period to 31 January 2024 and the
year ended 31 December 2022 are in respect of the Group's motor and leasing
businesses.
** The Basic earnings per share and diluted earnings per share measure for
the current period/year apply to continuing and total operations.
On 5 April 2024, the Company announced that it would undertake a capital
reorganisation whereby 1 new Ordinary Share of 100 pence each will be issued
for every 20 existing Ordinary Shares of 5 pence each. This is an adjusting
post balance sheet event and therefore the earnings per share calculations for
the current period and prior period financial statements have been presented
reflecting the revised number of shares post the capital reorganisation.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 13 MONTH PERIOD ENDED 31 JANUARY 2024
13m period ended Year ended
31 Jan 2024 31 Dec 2022
£m £m
Profit for the period/year 81.7 45.5
Other comprehensive income/(expense)
Items that will never be reclassified to profit and loss:
Defined benefit plan remeasurement (losses)/gains (11.3) 8.2
Income tax relating to defined benefit plan remeasurement gains / (losses) 2.3 (1.6)
(9.0) 6.6
Items that are or may be reclassified to profit and loss:
Foreign currency translation differences of foreign operations (0.1) 0.5
(0.1) 0.5
Other comprehensive (expense)/income for the period/year, net of tax (9.1) 7.1
Total comprehensive income for the period/year 72.6 52.6
Total comprehensive income for the period attributable to equity shareholders
of the Group arises from:
Continuing operations 8.2 6.2
Discontinued operations 64.4 46.4
72.6 52.6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 13 MONTH PERIOD ENDED 31 JANUARY 2024
Share Share Capital redemption Other Translation reserve Retained earnings Total
capital
premium
reserve
reserves
£m
£m
£m
£m
£m
£m
£m
Balance at 1 January 2023 69.9 56.8 5.6 12.6 0.5 135.6 281.0
Total comprehensive income for 13m period ended 31 January 2024
Profit for the period - - - - - 81.7 81.7
Other comprehensive expense for the period, net of tax - - - - (0.1) (9.0) (9.1)
Total comprehensive income for the period - - - - (0.1) 72.7 72.6
Issue of ordinary shares 3.3 - - - - (3.3) -
Share based payments - - - - - 5.9 5.9
Reserve realised due to re-organisation - - - (12.6) - 12.6 -
Income tax relating to share based payments - - - - - (0.1) (0.1)
EBT consideration on repurchased shares - - - - - 1.0 1.0
Balance at 31 January 2024 73.2 56.8 5.6 - 0.4 224.4 360.4
Balance at 1 January 2022 69.9 56.8 5.6 12.6 - 80.7 225.6
Total comprehensive income for 2022
Profit for the year - - - - - 45.5 45.5
Other comprehensive income for the year, net of tax - - - - 0.5 6.6 7.1
Total comprehensive income for the year - - - - 0.5 52.1 52.6
Share based payments - - - - - 3.3 3.3
Income tax relating to share based payments - - - - - (0.1) (0.1)
Own shares issued by EBT - - - - - 0.1 0.1
Own shares purchased by EBT - - - - - (0.5) (0.5)
Balance at 31 December 2022 69.9 56.8 5.6 12.6 0.5 135.6 281.0
CONSOLIDATED BALANCE SHEET
AT 31 JANUARY 2024
Note 31 Jan 2024 31 Dec 2022
£m
£m
Non-current assets
Property, plant and equipment 1.1 515.9
Goodwill 0.3 144.6
Other intangible assets 13.8 12.4
Finance lease receivables - 14.8
Deferred tax assets - 11.6
Total non-current assets 15.2 699.3
Current assets
Inventories - 620.3
Trade and other receivables 420.8 115.7
Finance lease receivables - 2.4
Current tax assets 0.3 3.3
Cash and cash equivalents 3 47.4 171.9
Assets classified as held for sale - 6.1
Total current assets 468.5 919.7
Total assets 483.7 1,619.0
Current liabilities
Bank overdraft - (102.5)
Interest bearing loans and borrowings 4 (93.0) (1.7)
Lease liabilities 4 (0.4) (20.0)
Trade and other payables (22.0) (812.0)
Deferred income (6.5) (38.2)
Total current liabilities (121.9) (974.4)
Non-current liabilities
Interest bearing loans and borrowings 4 (0.2) (91.0)
Lease liabilities 4 (0.6) (197.9)
Trade and other payables - (35.7)
Deferred income - (36.4)
Deferred tax (0.6) -
Retirement benefit obligations 5 - (2.6)
Total non-current liabilities (1.4) (363.6)
Total liabilities (123.3) (1,338.0)
Net assets 360.4 281.0
Capital and reserves
Called up share capital 73.2 69.9
Share premium account 56.8 56.8
Capital redemption reserve 5.6 5.6
Other reserves - 12.6
Translation reserve 0.4 0.5
Retained earnings 224.4 135.6
Total equity attributable to equity shareholders of the Company 360.4 281.0
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 13 MONTH PERIOD ENDED 31 JANUARY 2024
Note 13m period ended Year ended
31 Jan 2024 31 Dec 2022
£m
£m
Cash flows from operating activities
Profit for the period/year 81.7 45.5
Adjustment for taxation 10.1 11.7
Adjustment for net financing expense 65.8 43.8
157.6 101.0
Depreciation and amortisation 30.7 33.5
Share based payments 5.9 3.3
Profit on disposal of own shares by EBT 0.5 -
Profit on sale of business and property, plant and equipment (41.8) (7.7)
Impairment of goodwill - 3.6
Impairment of property, plant and equipment - 1.2
Contribution into defined benefit pension scheme (14.2) (13.1)
Changes in inventories 38.5 (119.8)
Changes in trade and other receivables (44.9) (15.2)
Changes in trade and other payables 38.7 150.8
Movement in contract hire vehicle balances (57.3) (20.9)
Cash generated from operations 113.7 116.7
Taxation paid (6.6) (1.4)
Bank and stocking interest paid (45.4) (25.5)
Bank interest received 1.9 -
Lease interest paid (16.2) (14.7)
Finance lease interest received 1.0 1.0
Net cash from operating activities 48.4 76.1
Cash flows from investing activities
Proceeds from sale of business net of fees paid 1.3 3.9
Fees paid in advance of business completion on business disposal to Lithia (6.6) -
Cash disposed as part of business disposal (15.3) -
Purchase of property, plant, equipment and intangible assets (40.2) (44.3)
Proceeds from sale of property, plant, equipment and intangible assets 11.0 13.3
Receipt of lease receivables 2.4 2.0
Net cash used in investing activities (47.4) (25.1)
Cash flows from financing activities
Payment of lease liabilities (19.0) (22.2)
Repayment of loans (4.0) (90.5)
Proceeds from issue of loans (net of directly attributable transaction costs) - 93.8
Disposal of shares by EBT - 0.1
Purchase of shares by EBT - (0.5)
Net cash outflow from financing activities (23.0) (19.3)
Net (decrease)/increase in cash and cash equivalents (22.0) 31.7
Cash and cash equivalents at 1 January 69.4 37.6
Effects of exchange rate changes on cash held - 0.1
Cash and cash equivalents at 31 January 2024 / 31 December 2022 3 47.4 69.4
NOTES
1. Basis of Preparation
Pinewood Technologies Group PLC (the 'Group') is domiciled in England. The
address of the Group's registered office is Loxley House, 2 Oakwood Court,
Little Oak Drive, Annesley, Nottinghamshire, NG15 0DR. These condensed
consolidated financial statements of the Group as at and for the period ended
31 January 2024 consist of the consolidation of the financial statements of
the Group and its subsidiaries and the Group's interest in jointly controlled
and associated entities.
These condensed consolidated financial statements have been prepared in
accordance with UK adopted International Accounting Standards (IAS). They do
not include all the information required for full annual statements and should
be read in conjunction with the 2023 Annual Report.
The Board of Directors approved the condensed consolidated financial
statements on 25 April 2024. They are not statutory accounts within the
meaning of section 435 of the Companies Act 2006.
The Group's financial statements for the period ended 31 January 2024 were
approved by the Board on 25 April 2024. They have been reported on by the
Group's auditors and will be delivered to the registrar of companies in due
course. The report of the auditors was (i) unqualified, (ii) did not include a
reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
The comparative figures for the financial year ended 31 December 2022 have
been extracted from the statutory accounts for that financial year. Those
accounts have been reported on by the Group's auditor. The report of the
auditor (i) was unqualified and (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis without
qualifying their report.
In presenting continuing and discontinuing operations, it was necessary to
reconsider the allocation of expenses to the segments that are now classified
as a discontinued operation. Only those expenses which will cease to be
incurred on disposal of the discontinued operations are presented within
discontinuing operations i.e. corporate overhead expenses will continue to be
incurred and are therefore recognised within continuing operations within the
Consolidated Statement of Comprehensive Income. The full costs associated with
the crystallisation of long-term incentive plans (LTIPs) have been included
within discontinued operations given that the sale was the trigger for the
LTIPs ending earlier than scheduled. As disclosed in the directors'
remuneration report, the Group will discuss with shareholders the design and
costs associated with any future LTIPs.
Going concern
The Directors are, at the time of approving the financial statements,
satisfied that the Group has adequate resources to continue in operational
existence for the foreseeable future. Thus, they continue to adopt the going
concern basis of accounting in preparing the financial statements. The
Directors have considered the potential impact of a 10% reduction in revenue.
Given the Group's activity is Software as a Service (SaaS), with net customer
'churn' of c.2%, as well as annual price increases for all customers that are
out of their initial three year contract, this is a severe but plausible
downside scenario. When the 10% revenue reduction was applied in FY24, the
Group was still forecast to generate £2.9m of cash in the year.
The Group meets its day-to-day working capital requirements from operating in
a net cash position and being a highly cash generative business. As at 31
January 2024, the Group had cash of £47.4m and debt of £93.2m. Following
receipt of the proceeds from the sale of the UK Motor and Leasing business and
repayment of the debt on 1 February 2024, the group had net cash of
£372.3m. This will be used to pay a special dividend of £358.4m on 7 May
2024. The Group is forecasting a cash inflow of £5.9m in FY24. The Group
also has access to a £10m RCF, which expires in February 2027 and is not
forecast to be utilised in the forecast period.
In the context of the above, the directors have prepared cash flow forecasts
for the period to 30 April 2025 which indicate that, taking account of
reasonably possible downsides, the Group will have sufficient funds to meet
its liabilities as they fall due for that period. The Directors have modelled
scenarios as follows:
1. A base cash flow forecast. The 2024 figures in this forecast are based on
the Group's FY24 budget, which reflect current run-rates and expected
strategic improvements. The 2024 figures in the base cash flow forecast are
based on the 2024 budget.
2. A severe, but plausible downside scenario. The directors have also
prepared a sensitised forecast which considers the impact of a 10% reduction
in revenue when compared to the base case. In this scenario, the Group would
remain cash generative.
The Directors are mindful of the potential impacts to macro-economic
conditions but after assessing the risks do not believe there to be a material
risk to going concern.
Based on the above, the directors are confident that the Group and Company
will have sufficient funds to continue to meet its liabilities as they fall
due for at least 12 months from the date of approval of the financial
statements, and therefore the directors believe it remains appropriate to
prepare the financial statements on a going concern basis.
Adoption of new and revised standards
In 2023 the following amendments had been endorsed by the UK became effective
and therefore were adopted by the Group.
· IFRS 17 Insurance Contracts - this has not had a significant
impact on the Group's consolidated financial statements.
Other standards
A number of new standards, amended standards and interpretations are effective
for annual periods beginning after 1 January 2024 and earlier application is
permitted; however, the Group has not early adopted the new or amended
standards in preparing these consolidated financial statements. The following
new standards, amended standards and interpretations are not expected to have
a significant impact on the Group's consolidated financial statements.
· Amendment to IFRS 16 - Leases on sale and leaseback.
· Amendment to IAS 1 - Non-current liabilities with covenants.
· Amendment to IAS 7 and IFRS 7 - Supplier finance agreement
· Amendments to IAS 21 - Lack of Exchangeability
2. Earnings per share
13 month period ended 13 month period ended Year ended Year ended
31 Jan 2024 31 Jan 2024 31 Dec 2022 31 Dec 2022
Earnings per share Earnings total Earnings per share Earnings total
Pence £m Pence £m
Basic earnings per share from continuing operations 11.9 8.3 8.2 5.7
Basic earnings per share from discontinued operations 105.1 73.4 57.2 39.8
Basic earnings per share 117.0 81.7 65.4 45.5
Diluted earnings per share from continuing operations 11.9 8.3 7.9 5.7
Diluted earnings per share from discontinued operations 105.1 73.4 55.1 39.8
Diluted earnings per share 117.0 81.7 63.0 45.5
The calculation of basic, adjusted and diluted earnings per share is based on
the following number of shares in issue (millions):
13 month period ended Year ended
31 Jan 2024 31 Dec 2022
Number Number
Weighted average number of ordinary shares in issue 69.8 69.6
Weighted average number of dilutive shares under option - 2.6
Weighted average number of shares in issue taking account of applicable 69.8 72.2
outstanding share options
Non-dilutive shares under option - 1.0
On 5 April 2024, the Company announced that it would undertake a capital
reorganisation whereby 1 new Ordinary Share of 100 pence each will be issued
for every 20 existing Ordinary Shares of 5 pence each. This is an adjusting
post balance sheet event and therefore the earnings per share calculations for
the current period and prior period financial statements have been presented
reflecting the revised number of shares post the capital reorganisation.
3. Cash and cash equivalents
Carrying value & fair value Carrying value & fair value
31 Jan 2024 31 Dec 2022
£m
£m
Bank balances and cash equivalents 47.4 69.4
Cash and cash equivalents in the Balance Sheet 47.4 171.9
Bank overdrafts repayable on demand and used for cash management in the - (102.5)
Balance Sheet
Cash and cash equivalents in the statement of cash flows 47.4 69.4
Bank overdrafts reflect the aggregated overdrawn balances of Group companies
(even if those companies have other positive cash balances).
4. Summary of borrowings
Carrying value & fair value Carrying value & fair value
31 Jan 2024 31 Dec 2022
£m
£m
Non-current:
Senior Finance Agreement (SFA) - 90.8
Other loan notes 0.2 0.2
Lease liabilities 0.6 197.9
Total non-current 0.8 288.9
Current:
Senior Finance Agreement (SFA) 93.0 1.7
Bank overdraft - 102.5
Lease liabilities 0.4 20.0
Total current 93.4 124.2
Total borrowings 94.2 413.1
5. Business disposals
On 31 January 2024 the Group disposed of its entire motor retail and leasing
business together with related central support functions, to Lithia UK Holding
Limited for a consideration of £377.5m, resulting in a profit on disposal of
£40.7m. Consideration was received in cash on 1 February 2024.
Net assets at the date of disposal Total net book value
£m
Assets held for sale 305.4
Bank balances and cash in hand 15.3
320.7
Profit on sale of businesses 40.7
Total proceeds 361.4
Proceeds on sale comprise
Proceeds on sale satisfied by cash and cash equivalents - received 1 February 377.5
2024
Transaction fees (16.1)
361.4
On 2 October 2023, the Boards of Directors of Pendragon and of Lithia Motors,
Inc. announced that they had agreed the terms of a proposed sale by Pendragon
Group Holdings Limited of the entire issued share capital of Pendragon NewCo 2
Limited which will hold, either directly or indirectly through its
wholly-owned subsidiaries, the Company's entire UK motor business and leasing
business, to Lithia UK Holding Limited, a wholly-owned subsidiary of Lithia
Motors, Inc. for a gross aggregate consideration of £397m, subject to certain
financial adjustments including settlement the Group's net debt (borrowings
less cash in hand and at bank), settlement of any intercompany balances and
provision for a working capital facility for the remaining group, as of 31
January 2024 and a subscription for new ordinary shares in Pinewood
Technologies Group Plc totalling £30.0m.
Consideration analysis
Total consideration 397.0
Share subscription in Pinewood Technologies Group Plc by Lithia UK Holding (30.0)
Limited
Base consideration 367.0
Adjustment for settlement of net debt 37.8
Settlement of inter group balance (28.0)
Working capital adjustment 0.7
Proceeds recognised on sale 377.5
During the earlier part of the 13m period ending 31 January 2024 the Group
disposed of a single motor vehicle dealership business for net proceeds of
£1.3m which resulted in a loss on disposal of £0.1m. During the previous
year the Group disposed of its DAF businesses of £3.2m and realising a profit
of £0.3m on disposal and received a further £0.7m in the form of deferred
consideration relating to the sale of the US businesses in 2021.
6. Pension funds
The Group operated a number of defined benefit and defined contribution plans
during the period. At the balance sheet date, the Group had disposed of its
defined benefit plan, and its obligations under any defined contribution
arrangements in respect of the majority of its employees were similarly
disposed of with the departure of those Group employees on the sale of the
Group's interests in the motor and leasing divisions. The Group also operated
a Group Personal Pension Plan which is a defined contribution plan where the
assets are held by the insurance Group under a contract with each individual.
7. Alternative performance measures
The Group uses a number of key performance measures ('KPI's') which are
non-IFRS measures to monitor the performance of its operations. The Group
believes these KPIs provide useful historical financial information to help
investors and other stakeholders evaluate the performance of the business and
are measures commonly used by certain investors for evaluating the performance
of the Group. In particular, the Group uses KPIs which reflect the
performance on the basis that this provides a more relevant focus on the core
business performance of the Group. As a result of the disposal, the group is
now a pure play SaaS business and as such the alternative performance measures
used have changed, with comparatives also provided. The Group has been using
the following KPIs on a consistent basis and they are defined and reconciled
as follows:
Revenue including intercompany revenue - is reconciled in the annual accounts
to the nearest GAAP measure.
13 month period ended 31 January 2024 Continuing operations £m
Revenue including intercompany amounts 32.0
Inter-segment revenue (7.5)
Revenue from external customers 24.5
Operating profit 10.0
Finance expense (0.1)
Finance income -
Segmental profit before tax 9.9
Year ended 31 December 2022 Continuing operations £m
Revenue including intercompany amounts 25.4
Inter-segment revenue (6.3)
Revenue from external customers 19.1
Operating profit 7.0
Finance expense -
Finance income -
Segmental profit before tax 7.0
Gross profit including intercompany gross profit - is reconciled in the annual
accounts to the nearest GAAP measure.
Core business operating profit - is reconciled in the annual accounts to the
nearest GAAP measure.
Core business operating expenses - is reconciled in the annual accounts to the
nearest GAAP measure.
Continuing operations EBITDA - Continuing operations earnings before Interest,
Tax, Depreciation and Amortisation.
EBITDA Margin (%) - Continuing operations EBITDA divided by Revenue, including
intercompany revenue
8. Post balance sheet events
The sale of the Motor and Leasing business to Lithia UK Holding Limited was
concluded on 31 January 2024. The consideration for the sale of £377.5m was
received on 1 February 2024. At the same time the Senior Term Finance
Agreement, with an outstanding principal balance of £93m was repaid and the
existing Revolving Credit Facility of £75m was cancelled. A new £10m RCF was
agreed on 14 February 2024 expiring February 2027. On 1 February 2024 a
further 279,388,880 were issued to Lithia Motors, Inc. for a consideration of
10.7377 pence per share, totalling £30.0m pursuant to the business disposal
agreement. Also on 1 February 2024 the Group, through its Pendragon North
America Automotive, Inc. subsidiary, made a £10m investment into a joint
venture agreement with PNA Holding LLC (a subsidiary of Lithia Motors Inc.) in
Pinewood North America LLC.
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