Pinewood.AI’s last results make the case for leaving the market

Pinewood Technologies Group, the automotive dealer software company that trades as Pinewood.AI, published half-year results on 30 September that are set to be its last as a listed company. The High Court is due to consider its sale to Ridgeview Partners, a US private equity firm, on 7 October, and the scheme is expected to take effect two days later.

The figures, for the six months to 30 June, show a business growing and spending at the same time. Underlying revenue rose 18.4% to £23.2m and underlying EBITDA rose 11.4% to £8.8m, according to the results announcement. But underlying profit before tax fell 13.6% to £3.8m, and cash stood at £23.9m against £30.3m a year earlier. On a statutory basis the group made a loss before tax of £9.7m, which includes a £9.1m loss from its North American subsidiary that the company reports outside its underlying numbers.

That pattern is the one the board described on 19 August, when it recommended Ridgeview’s cash offer of £4.48 a share, which values the company at about £545m. The announcement said the next phase of growth needs “a step-change in technology investment and capital expenditure” that is “better aligned with private market ownership”. The board said it was “mindful that such substantial near-term investment would inevitably impact operating profit, EBITDA margins, and free cash flow, potentially resulting in negative short-term share price reaction”.

Read together, the two announcements carry a lesson for other listed UK software businesses. Pinewood’s board concluded, in effect, that public investors might not look past the near-term cost of the investment its growth plan needed. For a board planning an expensive expansion, the question of who pays for it is best answered before the costs reach the income statement, not once they are already there.

Where the money is going

Underlying administrative expenses rose 23.3% to £15.9m, which the company puts down mainly to higher resource costs and software amortization. The underlying EBITDA margin slipped to 37.9% from 40.3%.

The biggest commitment is North America. Lithia Motors, which bought Pendragon’s UK motor and leasing businesses for £280m in January 2024, signed a $60m (£45m) contract to roll Pinewood.AI out across its North American dealerships. Two Lithia dealers in the US are due to go live on the platform in the fourth quarter of 2026, with the wider rollout expected to start in the first half of 2027 and finish in 2028. The company puts the North American market for dealer management systems at $2.4bn (£1.8bn). The results also say the North American subsidiary’s losses will move into the underlying figures once 20 dealerships there are on the system.

Delays the market would have priced

The board’s August case rested as much on execution risk as on investment. A rollout for Marshall Motor Group, signed in October 2024 and first targeted for the second half of 2025, slipped to the first quarter of 2026 and then to the second half of 2026. A pilot at a small number of Lithia sites in North America, first expected in the second half of 2025, gave way to a system rollout expected in the second half of 2026, with full deployment not expected until the end of 2028.

Staying independent, the board said, would require “flawless execution of the delayed US pilot”. Against that it set a price of about 13 times 2025 revenue and 31 times 2025 EBITDA, and a 43% premium to the 314p close on 23 July, the last trading day before the offer period began. The board had rejected two earlier Ridgeview proposals, in April and May.

What shareholders keep and give up

Shareholders who want to stay in can take a rollover alternative: unlisted units in a vehicle administered by Ridgeview, capped at £250m in value and not freely transferable. The board made no recommendation on it. Bill Berman, chief executive since February 2020, and two other directors undertook to roll over their own holdings. Lithia was among the holders that gave irrevocable undertakings to back the deal; with a letter of intent, commitments covered about 48.7% of the shares when the offer was announced. At the court meeting on 25 September, 99.76% of the scheme shares voted were cast in favor.

Berman said in the results: “We believe Ridgeview will provide the investment, expertise and backing needed to accelerate our growth and make the most of the significant market opportunity ahead, particularly in North America.”

The lesson for listed tech boards

Pinewood’s shareholders are being paid for the growth they backed: at the offer price, the board put the simple total shareholder return since Berman became chief executive at about 137%. But the sale also shows the cost of reaching an investment phase without a funding plan the market will wait for. Investors who roll over swap a listed share for illiquid private equity. Those who take cash give up the outcome of the North American rollout and the £62m of underlying EBITDA the board still expects in its 2028 financial year.

Boards of other listed UK tech businesses with a costly expansion ahead should model how the investment years will look in reported profit and cash, and show investors that path early rather than defend it later. They should decide whether public shareholders are the right owners for those years. And if a sale is the answer, they should run it while the plan is on schedule, not after the delays are on the record. The next board to face Pinewood’s choice should make it on its own timetable, before the spending makes the case for it.