Member Info for MarkOfLoxley

In the 32 years that I was an accountant in the motor industry there were really only 2 players in dealer management software, one was Kerridge the other Pinewood. Both have a large user base and when a dealer group commits to one, they rarely change unless a larger group buys them and forces a change.

Pendragon were able to build their market share of Pinewood users by doing just that. Groups small and large were purchased during the early to mid 2000’s and the Pinewood system was implemented.

With Pinewood being spun off from the dealership group other large groups will now be “happier” to implement Pinewood, the fear being before that Pendragon would “spy” on the competitor user/financial/customer data. That would never happen yet it was natural to be suspicious.

Without that worry, Pinewood should be and is attracting new customers. The SAAS model is readily accepted across most businesses these days and so tie-in and repeat licence fees mean churn should be kept to a minimum.

It will be dealerships going out of business that will be the biggest reason for the loss of licences.

The US market is huge, there are more players out there with a lot more financial backing, Reynolds & Reynolds for one.

Profit wise, there is no major risk other than a complete meltdown in the car market. I have been out of the loop for the last 5 years, but there was never a need for any silly off-book financing deals. The business generates cash with a steady income flow.

I believe the recent surge was on the back of the AI bubble and I had bought more at nearly £5 but I am surmising the drop now “post” halfyear results was from some sellers taking profits after the Trump tariff fallout when the price fell below £3.

Also, it would have been on the radar of FTSE250 buyers, I have not checked if it has now fallen below that threshold and so suffering the cycle of FTSE250 sellers. ?

As for a buy-out, every company is for sale at a price.

I worked 24 years in the corporate finance team for Pendragon the original holding company of Pinewood before it was demerged with the Lithia dealer sell off. Pinewood was always a very profitable division of the group.

I left the company at the start of lockdown but followed it closely with a large share holding through the highs and lows.

I was pleased with the initial growth and the opening up to the US market but am surprised at the harsh downward trend of the price since the recent results were released.

I am wondering if it was overblown due to the “AI” tag, which I personally feel is a bubble in general and wonder if they have fallen victim to the hype.

It is a solid product with a great reputation in the dealer network. There may be issues with the current news from manufacturers in closing plants, but it would be good to see this find its level soon.

Hi,

Your £4000 investment is reduced by the £2450 dividend payout and so it has now cost you £1500 to buy 500 shares... ie £3 per share

When Pendragon got into a bidding war with Lookers over Reg Vardy back in 2006, the resulting to'n'fro pushed the price of Vardy through the roof and took it to 800p per share from a previous 'pre-bid' average of around 660p, such that Pendragon ended up paying millions more for the dealerships just to block Tony Bramall getting them back through Lookers. It would be nice to see a similar excitable bid jump happening here. Though probably only 5p or 6p upside, better than nothing. Each party has had full 'eyes-on' time to cover their due-diligence for any concerns they may have about pension shortfalls or any other unresolved legal cases. This is the last leg now.

Another consideration is the fact that the 16p offer is as a dividend and not capital return. So unless your shares are held in a SIPP or ISA then that return will be subject to normal income tax rules. As there is precious little dividend allowance from HMRC these days, then you need to consider that 16p being diluted again by the taxman taking his wedge.

It really is hard to call where the Pinewood valuation could go. A lot of complaints about the lack of growth in PDGs share over the years are because it is in an unfashionable sector and gets lumped in with other motor dealers. If PinewoodPendragon is moved to a tech share sector then it will be on the radar of funds that buy into tech shares for example.

This is the case https://cardealermagazine.co.uk/publish/exclusive-car-dealer-group-pendragon-facing-260m-claim-in-high-court-battle/277389

It's to do with the Pinewood Computers subsidiary.

You are fortunate to be at a 5.2p average, I would need to put in another £105,000 to get down to 5.2p. I think I will take the hit on the £20k now rather than chance losing another £105k on the off-chance it may recover in time. I will just sit on the capital loss and offset it against future CGT on profitable share disposals.

Hi FrayaBentos, maybe you do, or maybe you don't know that being in the FTSE100, 250 or whatever is based on the market capitalisation of a business at a set point in time.

Fund managers per-se do not 'vote' them in, but share prices often suffer a double drop when a company falls out of the top 100 or top 250 because some funds, pension funds, trackers etc, only invest in the shares of the companies that are in the top 100 or top 250.

It is the general market as an entirety that determine who is in or out and has no relevance to a company being good, bad or indifferent in its management quality, but based purely on what investors are prepared to pay for the open market shares, certainly badly managed companies may well fail, but equally so they can rise.
Apologies if your comments were TIC.
Regards

The only downside to the Special Dividend is that it's classed as Income Tax so HMRC will want their cut of it so further degrading it's return value. I have a 3.1p average holding so will be underwater on this regardless.

This article explains it in detail , it was banned by HMRC back in 1998

https://www.investopedia.com/terms/b/bed-and-breakfast-deal.asp

Not a loss as such, but you will have to account for the 'gain' as CGT if it pushes you over this years allowance. Bed and breakfast rules on averaging down in this manner only apply if there is a 30 day gap between selling the shares at a higher price and then buying them back at a lower price. Otherwise, HMRC deem the shares held to be at the original price. So you have got shares for less cash 'now', but have a potential future tax bill, so marginally a small cost to the deal, that's all.

At the end of the day, Cineworld is a 'cash generating' business in simple terms. So as soon as life gets back to a 'bit more normal', the coffers will start to fill up again. Yes, there is a lot of debt to satisfy and the court case is concerning, but every decent movie release will be dropping £'s and $'s into the pot. There are no returns or refunds, nobody watches a movie and then at the end asks the manager for their money back because they didn't enjoy the film or they have found a cheaper place to watch it. It's solid cash flow, that is one of the reasons why it is still here, it can generate huge amounts of money... we just need the doors to be fully open. I am underwater on this, but I am new to CINE. I bought in near the bottom at the start of the pandemic, rode it up from 38p and took a nice profit at 105p . I left it alone for several months and then decided to get back in at £1 when lockdown seemed like it was easing just before the court case news, but who would have reasonably expected a judgement where the 'fine' was as much as the asking price. CINE may as well have just bought CINEPLEX and at least had the income from the deal, so I don't see that fine ever being paid at that level.

Hi Aubery,
When I saw the price start to drop I called him and he told me he had just sold in a few batches, a 1 mill , 2 mill and a few hundred thousand.
Mark

The drop may be due to a friend who just sold a few million shares this morning. No other reason than taking profit as he has been in this since it was 40p and averaged down during the lean years.