Pinewood Technologies Group PLC

Good morning everyone and welcome to the Pinewood H1 FY24 results presentation. I'm Bill Berman and with me today is the group CFO and my partner, Olly Mann. I will begin with a short summary and a reminder of the Pinewood business model. Olly will then take you through the financials for the first half of FY24 before I run through an operational review and strategic summary. If there are any questions, we'll be happy to take these at the end of the presentation. In the first half of FY24, we had a great start as a standalone SaaS business, achieving double-digit growth in both revenue and gross profit. The priority for us in the first six-month period has been the system rollout in the XJardine Motor Group, Lithia UK stores. Based on our customer feedback, we are happy that these have been best-in-class system implementations. Our teams have really excelled and gone the extra mile trying to make the implementations at every Lithia dealer a seamless and positive experience. We expect to conclude the rollout to Lithia UK stores in December of 2024. We are keen to expand our market penetration throughout the rest of the UK market. And as a result of this, we have restructured our UK sales teams to allow us to maximize our UK market penetration in the short and medium term. We should start to see the results of this in FY25. Our largest opportunity for the group is the North American market, which has been opened up for us by our partnership with Lithia Motors. In the first half of FY24, we started the discovery and planning stage of our rollout into North America. We'll share a lot more of this detail as well as our other aspects of a long-term strategy at our upcoming Capital Markets Day on the 24th of October in London. Next on slide five, for those of you that do not know Pinewood, we'd like to give you an overview of our system and our business. We are a software as a service or SaaS group and our product is 100% cloud-based, Azure hosted, highly secure automotive retail ecosystem. Our system is used in automotive dealerships in 21 different countries and is used by the vast majority of the employees in those stores where our system is installed. Our system covers all aspects of the customer journey, the front of house reception team, the vehicle sales team, the service technicians, and the back of house accounting team. Uniquely, we have a cloud-based system and have been installing our system in automotive dealerships for over 20 years. No other automotive ecosystem provider has this combination of technical architecture and automotive experience. We offer omni-channel sales and service products that allow our customers to effectively operate off of a single platform. Our system is multi-tenanted and the same version is used by all customers, whichever country in the world you are located in, and it's language agnostic. We have a very high levels of customer retention and have partnerships with 50 OEM brands worldwide. Many of whom are longstanding partners. We're continually evolving our system, which is powered by our product and development teams out of a total of 263 people. All of our developers are based in the UK. We have sales and implementation teams in Sweden, Japan. We have partners in South Africa, the Netherlands, and the Middle East with the rest of our team based in the UK. I will now hand the call over to Ali to cover the numbers.

Thank you, Bill. Good morning, everyone. I'll start with the statutory underlying income statement. In our first set of half-year results as a standalone SaaS business, we have no discontinued operations. In our comparatives, we do still have the dealers and leasing business sold to Lithia within discontinued operations. In the first half of FY23, as this was before the Lithia transaction completed, there are still intercompany revenue and gross profit amounts that have to be stripped out of the numbers on a statutory basis, which is the reason for the very large year-on-year increases in continuing operations, statutory revenue and gross profit. For transparency, we have split the PLC costs and legacy US Motor business operating costs out within the underlying operating profits. I'll move on to the next slide, where we include the intercompany revenue and gross profit, which enables us to give a much better comparison between the first halves of FY24 and FY23. On slide 8, the continuing group performance for the first half of FY24 is compared to the first half of FY23. You can see that revenue increased by 11%. Key drivers for the revenue increase were a 3.6% increase in user numbers for the first half of FY24, upselling products to existing customers, and the impact of our inflation link price rises. The vast majority of our cost of sales are our Azure hosting costs. We have a number of ongoing initiatives to minimize these costs while ensuring that we have the hosting capability we need for the system. This continued focus on hosting costs led to a gross margin improvement, with gross profit increasing by 12.4% compared to the 11% revenue increase. As expected, our costs have increased year on year, as we have invested in the business across a number of areas to ensure we are in as strong a position as possible going forward. Again, as expected, our underlying profit before tax reduced from £4.6 million to £4 million due to this cost investment. Underlying EBITDA marginally decreased by just £0.1 million to £6.9 million. Slide 9 shows the non-underlying items for H1-FI24. There were 1 million pounds of one-off transaction costs in a period. These primarily related to the Lithia transaction that completed on the 31st of January, 2024, and where costs incurred as a result of the share consolidation and transaction dividends that occurred post 31st of January, 2024. Stock exchange costs for issuing new shares and advisor costs that were received post transaction completion. The share of losses from the JV with Lithia was 0.3 million pounds. the £4.3 million of non-underlying interest receivable was interest earned on cash held, while the Group was finalising the £358 million dividend to shareholders that related to the Lithia transaction. On slide 10, you can see the balance sheet position at the end of July 2024, compared to the end of January 2024. The majority of the group's assets and liabilities were sold to Lithia at the end of January 2024, with the cash being received from Lithia on 1 February 2024. This is the reason for the large receivables and shareholders' funds balances at the end of January. The £9.7 million investment is the £10 million investment in the North American JV with Lithia, less £0.3 million, which is our share of JV operating losses in H1FY24. The £14.9 million of other intangible assets relates to capitalised development costs. Within the receivables balance of £16.6 million, the largest balance is £9.9 million receivable from Lithia UK, which relates to historic tax losses that they will be able to utilise and reimburse Pinewood as the tax losses are utilised. The payables balance of £9.7 million is made up from a combination of trade creditors, accruals and VAT creditors. There was 13 million pounds of cash at the end of July, which was before our $4.2 million investment in the AI company SEIZ, which equates to approximately 3.1 million pounds. I will now hand back to Bill, who will cover the operating highlights and a strategy update.

Thanks, Ollie. Next, turning to slide 12. Operational highlights for H1FY24 include our double-digit growth in both revenue and gross profit. At the end of July 2024, we had approximately 27,000 users in the UK, with the remainder of our 34,300 users being our international customers. Our international expansion continued in a selective manner as we are keen to ensure that our international growth is now targeted on areas where we can generate the best return on investment. The Lithia UK system rollout is approaching completion and we're very pleased with the way these implementations have gone. Customer feedback is extremely important to us and the reaction we have received from the Lithia teams following their system implementations has been very positive. Our UK sales teams has been restructured in the first half of the year to put us in the best possible position to maximize our UK market penetration. We should start to see the impact of this as we move into FY25. We have started the discovery and planning stages of our system rollout in North America. I'll talk about this a little bit more detail shortly. Finally, in September, 2024, we made a $4.2 million investment in an automotive AI company, CEEZ. CEEZ provides AI chatbots for automotive retailers, as well as suite of e-commerce and online channel products. The Commercial Strategic Partnership with SEAS will bolster Pinewood's product offering as the company prepares for expansion into the U.S. market alongside Lithium Motors, and it offers Pinewood exclusive distribution rights to the SEAS products in the U.S. market as well as with existing customers. onto slide 13 in our strategy. We're gonna do a full strategy update during our Capital Markets Day in London on the 24th of October, 2024. This will include running through all the key areas of our long-term strategy out to 2030, as well as the financials associated with this. The strategy update on the Capital Markets Day will include the discovery work done by a subject matter expert, consultant on the North American automotive market. On air, looking forward to sharing all of this with you on the 24th. On to slide 14, our strategic partnership with Lothair means key to creating access to the extremely lucrative North American market. Following the discovery work that we have undertaken in conjunction with the expert automotive market consultant, we're now starting to engage with North American OEMs. Once we have a liaison with a number of key OEMs on technical requirements, we'll be able to start the development work needed for the North American market in Q4 of 2024. We then anticipate piloting our system and number of Lithia stores in the second half of 2025 with the first quarter of 26 before the full North American system rollout starts during 2026. A key point to highlight is the size of North American opportunity. Although Lithia are the largest automotive retail in the world, they represent just one and a half percent of the North American market. So as the huge potential came further market share in North America on top of the Lithia system implementations. Turning lastly to slide 16. In terms of Outlook, we've had a good start to FY24 with a lot of focus on the system rollout in the XJardine Group Lithia UK stores. All of our associates that have been involved in this rollout have done a superb job, really going the extra mile and trying to make it as smooth as possible. There are only a handful of stores left to go on to our system now. We're in well-progressed discussions with a number of potential new customers from both the UK and internationally. And although there are some challenges in the broader economic environment, we do not see these as having a material impact on trading to our relatively sticky customer base. We expect underlying profit before tax for FY24 to be in line with our current market expectations. Thank you very much. Ali and I will now take any questions.