REG - Bytes Technology Grp - Preliminary Results
23/05/2023 07:00
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RNS Number : 2662A Bytes Technology Group PLC 23 May 2023
23 May 2023
BYTES TECHNOLOGY GROUP plc
('BTG', 'the Group')
Audited preliminary results for the year ended 28 February 2023
Strong performance extending track record of double-digit growth
Bytes Technology Group plc (LSE: BYIT, JSE: BYI), one of the UK's leading
software, security, and cloud services specialists, today announces its
financial results for the year ended 28 February 2023 ('FY23').
Neil Murphy, Chief Executive Officer, said:
"I am delighted to be reporting another positive set of results, with strong
double-digit growth driven by contributions from all areas of the business.
This performance was underpinned by continued growth from both our public
sector and corporate clients, with customers showing a sustained appetite to
invest in their IT requirements. We have seen our gross profit increase by
20.7% as we have expanded our customer base and increased our share of wallet
among existing customers. At the same time, we believe that our
customer-oriented proposition has enabled us to take market share from
competitors.
"A key part of our success can be traced to the high-quality customer service
that sits at the centre of our business and makes us so competitive in our
markets. For this, I would like to extend my thanks to our people who do an
outstanding job supporting our clients. We continue to focus on recruitment
and training to ensure we have the right expertise and resources in place to
service our clients' evolving needs. Looking ahead, we have made a positive
start to the current year, and we believe our strategy leaves us well
positioned to benefit from the growth opportunities we see in our chosen
markets."
Financial performance
£'million FY23 (year ended 28 February 2023) FY22 (year ended 28 February 2022) % change year-on-year
(restated)
Gross invoiced income ('GII')(1) £1,439.3m £1,208.1m 19.1%
Revenue(2) £184.4m £145.8m 26.5%
Gross profit ('GP') £129.6m £107.4m 20.7%
Gross margin % (GP/Revenue) 70.3% 73.7%
GP/GII % 9.0% 8.9%
Operating profit £50.9m £42.2m 20.6%
Adjusted operating profit ('AOP')(3) £56.4m £46.3m 21.8%
( )
AOP/GP % 43.5% 43.1%
Cash £73.0m £67.1m 8.8%
Cash conversion(4) 84.3% 131.9%
Earnings per share (pence) 16.88 13.72 23.0%
Adjusted earnings per share(5) (pence) 18.83 15.30 23.1%
Final dividend per share (pence) 5.1 4.2 21.4%
Special dividend per share (pence) 7.5 6.2 21.0%
The restatement in FY22 is in respect of the Revenue and Gross margin % as
described below.
Financial highlights
- GII increased 19.1% to £1,439.3 million (FY22: £1,208.1 million).
Strong growth spread across software, hardware, and services, driven by
continued demand from both corporate and public sector customers.
- Revenue increased 26.5% to £184.4 million (FY22: £145.8 million -
restated).
- Growth in the customer base to 5,941 (FY22: 5,330 customers); higher
GP per customer of £21,800 (FY22: £20,100) supported GP growth of 20.7% to
£129.6 million (FY22: £107.4 million).
- Operating profit increased by 20.6% to £50.9 million (FY22: £42.2
million).
- AOP increased by 21.8% to £56.4 million (FY22: £46.3 million); AOP
as a percentage of GP has remained in line with the previous year at 43.5%.
- Adjusted earnings per share increased 23.1% to 18.83 pence (FY22:
15.30 pence).
- Full year cash conversion of 84.3% reflects a very strong conversion
in the second six months of the financial year.
- The Board proposes a final dividend of 5.1 pence per share and a
special dividend of 7.5 pence per share.
§ The final dividend represents a 21.4% increase over last year's payment,
reflecting the strong growth in AOP and takes the full year dividend to 7.5
pence per share, an increase of 21.0%.
§ The special dividend has increased by 21.0% compared to last year, matching
the full year dividend.
Operational highlights
- Customer appetite for security, cloud adoption, digital
transformation, hybrid datacentres and remote working solutions underpinned
the Group's continued growth in FY23.
- 96% of GP came from customers that traded with BTG last year (FY22:
93%), at a renewal rate of 116%.
- Increased headcount by 20% to 930 in the year to service high levels
of customer demand.
- Bytes Software Services named Microsoft Partner of the Year for
Operational Excellence in 2022 from over 3,900 partner entries globally.
- Phoenix Software named Dell Technologies Public Sector Partner of the
Year 2022.
- Both the Group's businesses, Bytes Software Services and Phoenix
Software, becoming Great Place to Work certified.
- In April 2023, we acquired a 25.1% interest in AWS partner, Cloud
Bridge Technologies. As a long term partner of Bytes, Cloud Bridge and its
significant technical work force gives us additional access to resources which
will underpin our multi-cloud strategy over the years to come.
Current trading and outlook
We delivered another year of very positive performance in FY23, extending our
track record of delivering strong double-digit growth across our key financial
metrics. The business has continued to trade strongly since the beginning of
March, bringing the momentum delivered last year into FY24.
Looking ahead to the coming year, we remain mindful of continuing
macroeconomic headwinds. However, we are confident that the Group's proven
strategy of acquiring new customers and then growing our share of wallet,
building on our strong vendor relationships and the technical and commercial
skills of our people, ensures we are well placed to make further progress in
FY24.
Analyst and investor presentation
A presentation for analysts and investors will be held today via webcast at
9:30am (BST). Please find below access details for the webcast:
Webcast link:
https://stream.brrmedia.co.uk/broadcast/644be818ef37f7f001dea767
(https://stream.brrmedia.co.uk/broadcast/644be818ef37f7f001dea767)
A recording of the webcast will be available after the event at
www.bytesplc.com (http://www.bytesplc.com) .
The announcement and presentation will be available at www.bytesplc.com
(http://www.bytesplc.com) from 7.00am and 9.00am (BST), respectively.
Enquiries
Bytes Technology Group plc Tel: +44 (0)1372 418 500
Neil Murphy, Chief Executive Officer
Andrew Holden, Chief Financial Officer
Headland Consultancy Ltd Tel: +44 (0)20 3805 4822
Stephen Malthouse
Henry Wallers
Jack Gault
Forward-looking statements
This announcement includes statements that are, or may be deemed to be,
'forward-looking statements'. By their nature, forward-looking statements
involve risk and uncertainty since they relate to future events and
circumstances. Actual results may, and often do, differ materially from
forward-looking statements.
Any forward-looking statements in this announcement reflect the Group's view
with respect to future events as at the date of this announcement. Save as
required by law or by the Listing Rules of the UK Listing Authority, the Group
undertakes no obligation to publicly revise any forward-looking statements in
this announcement following any change in its expectations or to reflect
events or circumstances after the date of this announcement.
About Bytes Technology Group plc
BTG is one of the UK's leading providers of IT software offerings and
solutions, with a focus on cloud and security products. The Group enables
effective and cost-efficient technology sourcing, adoption, and management
across software services, including in the areas of security and the cloud. It
aims to deliver the latest technology to a diverse range of customers across
corporate and public sectors and has a long track record of delivering strong
financial performance.
The Group has a primary listing on the Main Market of the London Stock
Exchange and a secondary listing on the Johannesburg Stock Exchange.
(1) 'Gross invoiced income' ('GII') is a non-International Financial Reporting
Standard (IFRS) alternative performance measure that reflects gross income
billed to customers adjusted for deferred and accrued revenue items. GII has a
direct influence on our movements in working capital, reflects our risks and
shows the performance of our sales teams.
(2) 'Revenue' is reported in accordance with IFRS 15, Revenue from Contracts
with Customers. Under this standard the Group is required to exercise judgment
to determine whether the Group is acting as principal or agent in performing
its contractual obligations. Revenue in respect of contracts for which the
Group is determined to be acting as an agent is recognised on a 'net' basis
(the gross profit achieved on the contract and not the gross income billed to
the customer). Following recent guidance issued by the IFRS Interpretation
Committee, and in line with developing clear and consistent practice within
our industry, we are now accounting for all software revenue on an agency, or
"net" basis. Previously, the element of software revenue comprising indirect
licence sales of non-cloud licences and licences not requiring critical
updates had been recognised "gross". Hence this change in judgement has
resulted in a reduction in our statutory revenue figures. The prior year
revenue and cost of sales figures have been re-stated accordingly and further
details of this change are set out in the Chief Financial Officer's review and
in note 1.6 of the financial statements. Our key financial metrics of gross
invoiced income, gross profit, adjusted operating profit and cash conversion
are unaffected by this change.
(3) 'Adjusted operating profit' is a non-IFRS alternative performance measure
that excludes from operating profit the effects of significant items of
expenditure which are non-recurring events or do not reflect our underlying
operations. Amortisation of acquired intangible assets and share-based payment
charges are both excluded. The reconciliation of adjusted operating profit to
operating profit is set out in the Chief Financial Officer's review below.
(4) 'Cash conversion' is a non-IFRS alternative performance measure that
divides cash generated from operations less capital expenditure (together,
'free cash flow') by adjusted operating profit.
(5) 'Adjusted earnings per share' is a non-IFRS alternative performance
measure that the Group calculates by dividing the profit after tax
attributable to owners of the company, adjusted for the effects of significant
items of expenditure which are non-recurring events or do not reflect our
underlying operations ('Adjusted earnings'), by the weighted average number of
ordinary shares in issue during the year. Amortisation of acquired intangible
assets and share-based payment charges are excluded in arriving at Adjusted
earnings. The calculation is set out in note 29 of the financial statements.
_________________________________________________________________________________________
Chief Executive Officer's Review
A strong half year performance delivering on our strategy
We are delighted with the strong performance in FY23, which saw the Group
deliver growth in adjusted operating profit ('AOP') of 21.8% and gross profit
('GP') of 20.7%, driven by a 19.1% increase in gross invoiced income ('GII').
Our revenue, stated after the netting adjustment for software and external
services sales, under IFRS 15, was up 26.5%.
We have maintained our track record of strong double-digit year-on-year growth
despite ongoing uncertainty caused by the geopolitical outlook and
macro-economic conditions, with our business benefiting from our wide-ranging
product offering, with a substantial suite of software, services and IT
hardware solutions from the world's leading vendors and software publishers.
Encouragingly, we have seen continued strong double-digit growth for GII and
GP from both our public sector customers and corporate clients. This is also
reflected in our 18.5% growth in software GII and 30.7% increase in our
internal services GII during FY23, the two areas of our business that are key
drivers in delivering our growth targets. These have been supported by
hardware growth of 33.0% and external services growth of 22.8%. The
double-digit growth across all our sectors and product sets reflects the
continued demand from our customers to invest in resilient and efficient IT
services.
Our customers' appetite for security, cloud adoption, digital transformation,
hybrid datacentres and remote working solutions have underpinned our continued
growth in FY23. These investments increasingly take the form of annualised
contracts and, accordingly, we remain confident in the Group's growth
prospects going forward. This reinforces our belief in the potential for
future up-selling and cross-selling opportunities into existing clients. The
double-digit growth in GII and GP reflects the buoyant and robust nature of IT
spend across the UK and Ireland.
We continue to expand our IT services capability, underpinned by our Microsoft
Azure Expert status, along with many other key vendor accreditations, in the
provision of managed services, augmented with our own IP in the form of
Quantum and Licence Dashboard. These services, together with additional
cybersecurity services and consultancy, enable us to expand our relevance to
clients who need support and assurance as they seek to strengthen their IT
resilience and security.
We are investing in, and evolving, our internal systems both to continue to
improve user experiences and to drive efficiencies. At the same time, with the
removal of most restrictions associated with the Covid-19 pandemic, our staff
have been able to re-engage face to face with customers, suppliers and
partners resulting in a small increase in travel and entertainment costs.
Nevertheless, our AOP as a percentage of GP has remained in line with the
previous year at 43.5%, and therefore achieving our target to exceed 40%.
We remain proud of the energy, enthusiasm and professionalism demonstrated by
our people. Our future growth will be supported by both increasing headcount
and training and development in key areas. As a management team, we are
extremely pleased with the way our people continue to embrace our
collaborative, team-based culture. Our flexible working regime continues to
deliver positive results for our business, while also meeting our people's
aspirations for a healthy work/life balance. In June 2022, we launched our
second Share Save Plan which has been well received by our workforce following
the inaugural plan a year before. An encouraging 50% of employees now
participate in one, or both, of these plans.
Our partnerships with key partners go from strength to strength and we are
especially pleased to have been recognised by leading industry vendors.
Following Phoenix Software being awarded the Microsoft Partner of the Year for
the UK for 2021, Bytes Software Services was named Microsoft Partner of the
Year for Operational Excellence in 2022 from over 3,900 partner entries
globally. This recognises us for supporting our customers with digital and
business transformation through the adoption of Microsoft tools and
automation. These awards reflect the status and high esteem which the Group
has with global technology leaders and is testament to the expertise of our
staff and the customer success stories that we deliver.
We remain committed to executing our strategy in a responsible manner, with
sustainability rooted in everything we do. Our sustainability framework aims
to deliver positive impacts for our stakeholders across key themes which we
have identified as most relevant for the environment in which we operate.
Within each theme - financial sustainability, corporate responsibility,
stakeholder engagement and good governance - we set ourselves focus areas
which drive our activities. Through our staff led working groups, we allocate
time and resources to various environmental initiatives, and to corporate
social responsibility activities. We remain committed to supporting diversity
across our business and are proud of the balance represented across our
people. We continue our efforts to align with broader diversity targets to
reflect the society in which we, and our stakeholders, operate. Further
details in respect of our Environment, Social and Governance (ESG) action plan
are set out below.
Our dividend policy is to distribute 40% of the Group's post-tax
pre-exceptional earnings to shareholders by way of normal dividends.
Accordingly, we are pleased to confirm that the Board has proposed a final
dividend of 5.1 pence per share and an additional special dividend of 7.5
pence per share that, subject to shareholder approval, will both be paid on 4
August 2023 to shareholders on the register at 21 July 2023.
I wish to extend my gratitude to all my colleagues for their hard work and
dedication to the business during FY23. Finally, I would like to thank our
clients for their support and entrusting their business with us; together, our
staff and customers are our lifeblood and will always be our top priority.
Continued focus on Environment, Social and Governance (ESG)
Our approach to responsible business and ESG is aimed at helping to build a
sustainable future and create long term value for BTG and its stakeholders.
Our strategy is underpinned by our purpose and values, which fosters an
aligned culture across the organisation. During the period, we further
progressed our ESG initiatives in the following ways.
Evolving our Low Carbon Journey
This year we partnered with an external environmental consultant to help
refine our carbon reduction plan through expanding our emissions reporting and
aligning this with Science Based Targets with the aim to make an application
for our plan to be recognised by the Science Based Targets initiative (SBTi).
We continued to develop our Taskforce for Climate-Related Financial
Disclosures (TCFD) with our second iteration in FY23, further embedding its
risk and financial disclosure recommendations into our processes. Following
our first submission to Carbon Disclosure Project in the year, we will
continue with this on an annual basis.
In March 2023, our first Group Sustainability Manager was appointed to drive
forward social and environmental initiatives and align processes with both our
operating companies.
Positively impacting our society
Employee support and wellbeing remains key focus areas for the Group,
particularly in light of the continuing cost-of-living crisis. In FY23 we
introduced Wellness Days and partnered with vendors to offer broader health
and wellbeing benefits to our employees. Our strong culture remains a driving
force behind our successful growth. This is an aspect which we continue to
support through staff events and the development of our people with continued
learning and training opportunities.
During the period, we supported our communities through volunteer days,
donations, and fundraising events, such as our Charity Matched Funding project
and making contributions to charities such as Shelter.
Building on our robust corporate governance
As announced on 12 April 2023, Sam Mudd will be appointed as an Executive
Director, with effect from the conclusion of the next Annual General Meeting
to be held on 12 July 2023. Sam is currently the Managing Director of Phoenix
Software Limited, a wholly owned subsidiary of the Group, and she will
continue in this role following her appointment to the Board. It was also
announced that after 23 years with the Group, David Maw will be stepping down
as a non-executive director at the 2023 AGM. We are satisfied that the size,
structure, and composition of our Board and committees remain appropriate in
serving the best interests of the company and our stakeholders, while
maintaining a focus on our Board and senior leadership diversity targets.
Following Sam's appointment, our female representation on the Board will stand
at 43%.
We have continued to improve our internal controls in conjunction with ongoing
internal audit engagement, along with enhancing our process documentation and
management reporting.
Chief Financial Officer's review
FY23 FY22 Change
(restated(3))
Income statement £'m £'m %
Gross invoiced income (GII) 1,439.3 1,208.1 19.1%
GII split by product:
Software 1,346.1 1,136.0 18.5%
Hardware 38.3 28.8 33.0%
Services internal(1) 28.5 21.8 30.7%
Services external(2) 26.4 21.5 22.8%
Netting adjustment (3) (1,254.9) (1,062.3) 18.1%
Revenue (3) 184.4 145.8 26.5%
Revenue split by product:
Software 114.1 91.6 24.6%
Hardware 38.3 28.8 33.0%
Services internal(1) 28.5 21.8 30.7%
Services external(2) 3.5 3.6 (2.8)%
Gross profit (GP) 129.6 107.4 20.7%
GP / GII % 9.0% 8.9%
Gross margin %(3) 70.3% 73.7%
Administrative expenses 78.7 65.2 20.7%
Administrative expenses split:
Employee costs 63.3 53.5 18.3%
Other administrative expenses 15.4 11.7 31.6%
Operating profit 50.9 42.2 20.6%
Add back:
Share-based payments 4.2 2.5 68.0%
Amortisation of acquired intangible assets 1.3 1.6 (18.8)%
Adjusted operating profit (AOP) 56.4 46.3 21.8%
Finance costs (0.5) (0.6) (16.7)%
Profit before tax 50.4 41.6 21.2%
Income tax expense (10.0) (8.7) 14.9%
Effective tax rate 19.9% 20.7%
Profit after tax 40.4 32.9 22.8%
(1) Provision of services to customers using the Group's own internal
resources
(2) Provision of services to customers using third party contractors
(3) The prior year comparative is restated as discussed in the revenue section
below
Overview of FY23 results
FY23 has seen continued double-digit growth across all our key performance
measures, reinforcing the strong start the Group has made since listing at the
end of 2020. As the country and the economy have emerged from the Covid-19
restrictions imposed three years ago, we have seen the new ways of working
with our customers and partners continue, which has enabled us to expand and
evolve our offerings further in FY23.
With hybrid working now widespread across our whole customer base, and
heightened requirements around cybersecurity, customers have continued to
engage with us to support their move into the cloud, or extending their
presence in it, with more sophisticated and resilient security, support, and
managed service solutions. This has resulted in operating profit increasing by
20.6% to £50.9 million (FY22: £42.2 million) and AOP growing by a slighter
higher 21.8% year on year from £46.3 million to £56.4 million. The adjusted
operating profit excludes the impact of amortisation of acquired intangible
assets and share-based payment charges which do not reflect the underlying
day-to-day performance of the Group.
Gross invoiced income (GII)
GII reflects gross income billed to our customers, with some small adjustments
for deferred and accrued items (mainly relating to managed service contracts
where the income is recognised over time). We believe that GII is the most
useful measure to evaluate our sales performance, volume of transactions and
rate of growth. GII has a direct influence on our movements in working
capital, reflects our risks and demonstrates the performance of our sales
teams. Therefore, it is the income measure which is most recognisable amongst
our staff, and we believe most relevant to our customers, suppliers,
investors, and shareholders for them to understand our business.
GII has increased by 19.1% year on year, with growth spread across all areas
of the business, software, services, and hardware. Software remains the core
focus, contributing a consistent 94% of the total GII in both the current year
and prior year. The Group benefits from a substantial presence in the public
sector, with continued high levels of government investment in IT technologies
resulting in our public sector GII increasing by £130.0 million, up 17.9%, to
£856.6 million (FY22: £726.6 million). Our corporate GII increased by
£101.2 million to £582.7 million (FY22: £481.5 million), representing an
even stronger rise of 21.0%.
This means that our overall GII mix has remained consistent with last year at
60% in public sector against corporate of 40%.
Revenue
Revenue is reported in accordance with IFRS 15 Revenue from Contracts with
Customers. Under this reporting standard, we are required to exercise judgment
to determine whether the Group is acting as principal or agent in performing
its contractual obligations. Revenue in respect of contracts for which the
Group is determined to be acting as an agent is recognised on a 'net' basis,
that is, the gross profit achieved on the contract and not the gross income
billed to the customer.
Our judgement around this area has been updated since the publication of the
full year accounts for the year ended 28 February 2022 following recent
guidance issued by the IFRS Interpretation Committee, and in line with
developing clear and consistent practise within our industry. Previously we
treated most of our indirect software sales (those comprising cloud-based and
critical security licences) on an agency basis, with the remainder of indirect
software sales treated as principal. The change in judgement for FY23 is to
treat all indirect software sales on an agency basis (including those
previously treated as principal). Full details are set out in note 1.6 of the
financial statements. This has resulted in a reduction in our revenue and the
prior year figures have been restated accordingly as follows.
- Prior year (FY22) revenue and cost of sales decrease by a further
£302 million on top of the reported agency adjustment for that year.
- Gross invoiced income, gross profit, operating profit, and profit
before and after taxes is unchanged in both years. The consolidated statements
of financial position, cashflows and changes in equity also remain unchanged.
For our other income streams, there has been no revision in the accounting
treatment, with hardware and internal services revenue treated as principal
whilst external services revenue is treated on an agency basis.
The growth in revenue of 26.5% against the prior year re-stated figure
reflects this revised judgement, but nevertheless shows the growth in the
business alongside the reported GII increase.
Gross profit (GP) and gross profit/GII (GP/GII%)
Gross profit increased by 20.7% to £129.6 million (FY22: £107.4 million)
with this growth coming from across the business.
Corporate GP grew by 19.6% to £83.7 million (FY22: £70.0 million) with the
corporate GP/GII% remaining in line with the prior year at just over 14%. This
reflects the continued strengthening of demand from corporate clients post the
pandemic.
In the public sector, GP grew by 22.7% to £45.9 million (FY22: £37.4
million) with an increase in GP/GII% from 5.2% to 5.4%. This is notable
considering the level of competition within tenders and the growing trend
towards aggregated bids where several public sector bodies may require pricing
to be submitted on a combined basis. Where new large agreements have been won
at a lower margin, management is acutely focused on tracking these customers
individually to ensure that the strategy delivers value for the business, and
our other stakeholders by complementing them with higher margin services over
the duration of the contract.
Our overall GP mix remains balanced in favour of the corporate sector due to
the higher GP/GII% which is generated there, contributing 65% versus the
public sector's 35% (also 65% and 35% respectively in FY22).
Our overall GP/GII% has increased to 9.0% from 8.9% last year, which is a
strong outcome. It remains a key priority to increase this measure further by
focusing on selling our wide range of solutions offerings and higher margin
security products, whilst maximising our vendor incentives through achievement
of technical certifications.
In FY22 we reported 5,330 customers trading with us whilst in this year the
figure has risen to 5,941, a net gain of 611 (up 11%). In FY23, 96% of our GP
came from customers that we also traded with last year (FY22: 93%), at a
renewal rate of 116% (which measures the GP from existing customers this year
compared to total GP in the prior year) (FY22: 111%).
Administrative expenses
This includes employee costs and other administrative expenses as set out
below.
Employee costs
Our success in growing GII and GP continues to be as a direct result of the
investments we have made over the years in our front-line sales teams, vendor
and technology specialists, service delivery staff and technical support
personnel, backed up by our marketing, operations, and finance teams. It has
been, and will remain, a carefully managed aspect of our business where we
strive to invest in line with actual growth, not before.
In addition to continuing to hire in line with growth, another successful
strategy that has delivered results is our commitment to develop, promote and
expand from within the existing employee base, giving our people careers
rather than just employment. This, in turn, has encouraged long tenure from
our employees that align with the long relationships we have with our
customers, vendors, and partners. This is at the very heart of our low
employee churn rate, the growth in gross profit per customer and our high
customer retention rate.
Employee costs included in administrative expenses rose by 18.3% to £63.3
million (FY22: £53.5 million) but excluding share-based payments of £4.2
million (FY22: £2.5 million), the rise was 15.9%, notably lower than the
20.7% rise in GP and reflecting the balanced and proportional way in which
vital staff investments are and will continue to be made. During the year we
have seen total staff numbers rise to 930 on our February 2023 payroll, up by
20% from the year-end position of 773 on 28 February 2022.
Other administrative expenses
Other administrative expenses increased by £3.7 million to £15.4 million
(FY22: £11.7 million). This increase included additional spend on internal
systems, professional fees, staff welfare and travel costs. This reflects the
costs of running, and investing in, a growing organisation and in operating a
listed Group, including evolving our governance structure, controls, and
processes with the support of our professional advisors.
Travel and entertaining expenses have not yet reverted to pre-lockdown levels
but have increased by £0.3 million compared with those incurred last year. We
expect these costs to increase gradually in the coming year but to remain far
lower than previously experienced pre Covid-19.
Our trade and other receivables balance at this year end is up on last year by
£28.3 million (18.0%), in line with the growth of GII. We have therefore
increased our closing impairment allowance by £0.79 million
to £1.54 million from the £0.75 million provided at 28
February 2022. However, we are not seeing any indication of customer
non-payments and have come through the year with only £0.1 million in bad
debt write-offs. Accordingly, the increased allowance represents a small
percentage of the gross receivables balance of £179.9 million.
Adjusted operating profit and operating profit
Adjusted operating profit excludes, from operating profit, the effects of:
- Share based payment charges as, whilst new employee share schemes are
being launched, the charge to the income statement will increase each year.
Accordingly, the charge for the current year has risen to £4.2 million,
compared to £2.5 million last year.
- Amortisation of acquired intangibles as this cost only appears as a
consolidation item and does not arise from ordinary operating activities.
We believe that adjusted operating profit is a meaningful measure which the
Board can use to effectively evaluate our profitability, performance, and
ongoing quality of earnings. Adjusted operating profit in FY23 increased to
£56.4 million (FY22: £46.3 million), representing growth of 21.8%. Our
operating profit increased from £42.2 million to £50.9 million equating to
an increase of 20.6%.
Adjusted operating profit as a percentage of GP is one of the Group's key
alternative performance indicators, being a measure of the Group's operational
effectiveness in running day-to-day operations. We set a target of no less
than 40% and we have again achieved this, with a ratio of 43.5% (FY22: 43.1%).
Income tax expense
The effective rate of tax charged for the year is 19.9% of profit before tax
(FY22: 20.7%). Excluding the impact of the non-deductible share-based payments
costs and amortisation of intangibles, the underlying adjusted rate reverts to
close to the standard rate of corporation tax of 19% for FY23 (FY22: 19%).
Balance sheet and cashflow
As at
28 February 29 February
2023 2022
Balance sheet £'m £'m
Property plant and equipment 8.4 8.0
Intangible assets 41.5 42.8
Other non-current assets 1.2 1.1
Non-current assets 51.1 51.9
Trade and other receivables 185.9 157.6
Cash 73.0 67.1
Other current assets 10.7 6.9
Current assets 269.6 231.6
Trade and other payables 231.7 217.6
Lease liabilities 0.1 0.2
Other current liabilities 23.9 14.5
Current Liabilities 255.7 232.3
Lease liabilities 0.9 1.0
Other non-current liabilities 2.6 2.7
Non-current liabilities 3.5 3.7
Net assets 61.5 47.5
Share capital 2.4 2.4
Share premium 633.6 633.6
Share-based payment reserve 7.2 3.1
Merger reserve (644.4) (644.4)
Retained earnings 62.7 52.8
Total equity 61.5 47.5
Closing net assets stood at £61.5 million (FY22: £47.5 million) with net
current assets of £13.9 million (FY22: net current liabilities £0.7 million)
Growth in the trade and other receivables of 18.0% reflects the growth in our
GII, whilst the growth in trade and other payables is lower at 6.5%. The
impact on cash flow and cash conversion is explained below.
The increase in other current liabilities primarily relates to deferred income
connected to our managed service contracts, a growing and strategically
important part of our business, where we receive customer payments up front.
The consolidated cash flow is set out below along with the key flows which
have affected it:
FY23 FY22
Cashflow £'m £'m
Cash generated from operations 48.9 61.7
Payments for fixed assets (1.3) (0.6)
Free cash flow 47.6 61.1
Net Interest paid (0.5) (0.5)
Taxes paid (10.3) (9.1)
Lease payments (0.2) (0.3)
Dividends (30.7) (4.8)
Net increase/(decrease) in cash 5.9 46.4
Cash at the beginning of the year 67.1 20.7
Cash at the end of the year 73.0 67.1
Cash Conversion 84.3% 131.9%
Cash as at the end of the year has increased by 8.8% to £73.0 million (28
February 2022: £67.1 million) which is after the payment of dividends
totalling £30.6 million during the past 12 months. Final and special
dividends for FY22 accounted for £24.9 million of this figure and the
remaining £5.7 million was the interim dividend for FY23.
The Group's cash conversion ratio for the year (free cash flow divided by AOP)
was 84.3% (FY22: 131.9%), against its target of 100%. With all other key
performance measures moving in a positive direction, the movement from last
year to the current year, illustrates the sensitivity of this particular ratio
to even small delays in payment from customers, given that it is measured at a
point in time at the year-end rather than as a rolling average. This makes it
susceptible to short-term, but potentially high value, timing of customer
receipts. Further, the Group does not delay payments to suppliers, when due,
as a means of mitigating any such delays in customer receipts with its average
creditor days remaining just above 45.
Nevertheless, after reporting a negative cash conversion for the first six
months of FY23, the full-year position reflects a very strong conversion in
the second six months, equating to 180%, and hence moving the full-year figure
substantially back towards the Group's target sustainable cash conversion
ratio of 100%.
The differences between the two halves, whilst unusually wide in FY23, is in
line with our expectations due to the timing of receipts and payments in
relation to some our largest Microsoft software enterprise agreements where,
for our public sector customers, many of the agreement anniversaries fall on 1
April, aligned to the public sector year end. With these orders needing to be
placed at least 30 days ahead of anniversary we often see the customers pay us
prior to the end of our financial year, whilst our payments to Microsoft do
not fall due until the first quarter of the next year.
As a more general trend across the year, we also saw our customers continuing
their digital transformation into the cloud under usage-based licensing
models, typically with monthly billing based on customer usage rather than
fixed amounts per licence or agreement. This has been most notable within
Microsoft's Cloud Solution Provider (CSP) program and has led to some delays
in payments where customers requested additional analysis around their usage.
This has contributed to an increase in debtor days from an average 33 in FY22
to 39 in FY23.
As customers become more familiar with usage-based programs, combined with our
development of improved systems to provide greater clarity around CSP
invoicing, and a policy to on-board new customers with direct debit as the
standard payment method, we expect to see a general reduction in queries and
fewer delays in payments as we go forward.
FY23 can therefore be seen as a transitional year for the business as well as
for its customer base when it comes to the expansion of usage-based licensing
programs. Whilst we still expect to see the seasonal variation in cash
conversion from H1 to H2 during FY24, as explained above, we feel confident
that the two halves will not see such a disparity as in FY23 and we are
focused on a return to our targeted 100% for the full year in FY24. This is a
key performance target at both operating company and Group levels.
If required, the group has access to a committed revolving credit facility
(RCF) of £30 million with HSBC. The facility commenced on 17 May 2023,
replacing the Group's previous facility for the same amount and runs for three
years, until 17 May 2026. To date, the Group has not been required to use
either it's previous or new facilities.
Proposed dividends
As stated above, the Group's dividend policy is to distribute 40% of post-tax
pre-exceptional earnings to shareholders. Accordingly, the Board is pleased to
propose a gross final dividend of 5.1 pence per share. The aggregate amount of
the proposed dividend expected to be paid out of retained earnings at 28
February 2023, but not recognised as a liability at the end of the financial
year, is £12.2 million. In light of the company's continued strong
performance and cash generation, the Board also considers it appropriate to
propose a cash return to ordinary shareholders with a special dividend of 7.5
pence per share, equating to £18.0 million. If approved by shareholders, the
final and special dividend will be payable on Friday, 4 August 2023 to all
ordinary shareholders who are registered as such at the close of business on
the record date of Friday, 21 July 2023. The salient dates applicable to the
dividend are as follows:
Dividend announcement date Tuesday, 23 May 2023
Currency conversion determined and announced together with the South African Monday, 3 July 2023
(SA) tax treatment on SENS by 11.00
AGM at which dividend resolutions will be proposed Wednesday, 12 July 2023
Last day to trade cum dividend (SA register) Tuesday 18 July 2023
Commence trading ex-dividend (SA register) Wednesday 19 July 2023
Last day to trade cum dividend (UK register) Wednesday 19 July 2023
Commence trading ex-dividend (UK register) Thursday 20 July 2023
Record date Friday, 21 July 2023
Payment date Friday, 4 August 2023
Additional information required by the Johannesburg Stock Exchange:
1. The GBP:ZAR currency conversion will be determined and published on
SENS on Friday, 30 June 2023
2. A dividend withholding tax of 20% will be applicable to all
shareholders on the South African register unless a shareholder qualifies for
exemption not to pay such dividend withholding tax.
3. The dividend payment will be made from a foreign source (UK).
4. At Tuesday 23 May 2023, being the declaration announcement date of
the dividend, the Company had a total of 239,482,333 shares in issue (with no
treasury shares).
5. No transfers of shareholdings to and from South Africa will be
permitted between Friday 30 June 2023 and Friday 21 July 2023 (both dates
inclusive). No dematerialisation or rematerialisation orders will be permitted
between Wednesday 19 July 2023 and Friday 21 July 2023 (both dates inclusive).
Principal risks
The Group Board has overall responsibility for risk. This includes
establishing and maintaining our risk management framework and internal
control systems and setting our risk appetite. In doing this it receives
support from our Audit Committee and executive management teams. However,
through their skills and diligence, everyone in the Group plays a part in
protecting our business from risk and making the most of our opportunities.
We have identified principal risks and uncertainties that could have a
significant impact on the Group's operations, which we assign to four
categories: financial, strategic, process and systems, and operational. BTG's
management review each principal risk looking at its level of severity, where
it overlaps with other risks, the speed at which it is changing, and its
relevance to the Group. We consider the principal risks both individually and
collectively, so that we can appreciate the interplay between them and
understand the entire risk landscape.
We are continuing to review the uncertain economic picture, exacerbated by the
crisis in Ukraine, the changing market, and the development of our internal
governance in evolving our principal risks and uncertainties. The current
principal risks and uncertainties that the Board believes could have a
significant effect on the Group's financial performance are:
FINANCIAL 1 ECONOMIC DISRUPTION Risk owner CEO
The risk How we manage it
This includes the impact of the crisis in Ukraine, the uncertainties caused by We have so far continued to perform well during the conflict in Ukraine, and
global economic pressures and geopolitical risk within the UK post-Brexit. under the current effects of inflation, the cost-of-living crisis and leaving
the EU.
Despite the economic shocks of the past year and continued pressure from the
Ukraine conflict, we have not seen an impact on our business.
These real-life experiences have shown us to be resilient through tough
economic conditions. The diversity of our client base has also helped to
maintain and increase business in this period. We are not complacent, however
- economic disruption remains a risk and we keep operations under constant
review.
The impact
Major economic disruption - including the risk of continuing high inflation
(see below) and potentially higher taxes - could see reduced demand for
software licensing, hardware and IT services, which could be compounded by
government controls. Lower demand could also arise from reduced customer
budgets, cautious spending patterns or clients 'making do' with existing IT.
Economic disruption could also affect the major financial markets, including
currencies, interest rates and the cost of borrowing. Economic deterioration
like this could have an impact on our business performance and profitability.
2 MARGIN PRESSURE Risk owner MDs of subsidiary businesses
The risk How we manage it
BTG faces pressure on profit margins from myriad directions, including Profit margins are affected by many factors at customer and micro levels.
increased competition, changes in vendors' commercial behaviour, certain
offerings being commoditised and changes in customer mix or preferences.
We can control some of the factors that influence our margins; however, some
factors, such as economic and political ones, are beyond our control.
In the past year we have sought to increase margins where possible; cost
increases from vendors have grown our margins organically. Our diverse
portfolio of offerings, with a mix of vendors as well as a mix of software and
services, has enabled us to absorb any changes. Services delivered internally
are consistently measured against competition to ensure we remain competitive
and maximise margins.
We aim to agree acceptable profit margins with customers upfront.
Keeping the correct level of certification by vendor, early deal registration
and rebate management are three methods deployed to ensure we are procuring at
the lowest cost and maximising incentives earned.
This risk area is reviewed monthly.
The impact
These changes could affect our business performance and profitability.
3 CHANGES TO VENDORS' COMMERCIAL MODEL Risk owner CEO
The risk How we manage it
BTG receives incentive income from our vendor partners and their distributors. We maintain a diverse portfolio of vendor products and services. Although we
This partially offsets our costs of sales but could be significantly reduced receive major sources of funding from specific vendor programmes, if one
or eliminated if the commercial models are changed significantly. source declines, we can offset it by gaining new certifications in, and
selling, other technologies where new funding is available.
We closely monitor incentive income and make sure staff are aligned to meet
vendor partner goals so that we don't lose out on these incentives. Close and
regular communication with all our major vendor partners and distributors
means we can manage this risk appropriately. In some areas we have seen a
positive change from vendor commercials, where we have been able to adapt
practices.
The impact
These incentives are very valuable and contribute to our operational profits.
Significant changes to the commercial models could put pressure on our
profitability.
4 INFLATION Risk owner CFO
The risk How we manage it
Inflation in the UK, as measured by the Consumer Price Index (CPI), is Our ongoing focus on software asset management means that we continue to
currently 10.4% in the year to February 2023, which is driven by three main advise customers in the most cost-effective ways to fulfil their software
drivers: electricity/gas, transport costs and food/non-alcoholic beverages. needs. Changes to economic conditions mean many organisations will look to IT
to drive growth and/or efficiency.
Staff costs are the largest part of our overheads, so our attention is focused
on our staff and their ability to cope with the rising cost of living.
Externally, we have seen an increase in customers looking to avoid increased
staff costs by outsourcing their IT through managed services. This may create
an opportunity to accelerate our service offerings.
The impact
This could create an environment in which customers redirect their spending
from new IT projects to more pressing needs.
Wage inflation and increased fuel and energy costs have a direct impact on our
underlying cost base.
5 INCREASING DEBTOR RISK Risk owner CFO
The risk How we manage it
As customers face the challenges of inflation and rising interest rates in the Our credit collections teams are focused on collecting customer debts on term
current economic environment, there is a greater risk of an increasing aged and maintaining our debtor days at targeted levels. Debt collection is
debt profile, with customers slower to pay and the possibility of bad debts. reported and analysed continually and escalated to senior management as
required.
A large part of a successful outcome is maintaining strong, open relationships
with our customers, understanding their issues and ensuring our billing
systems deliver accurate, clear and timely invoicing, so that queries can be
quickly resolved.
The impact
This could adversely affect our businesses' profitability and/or cashflow
STRATEGIC 6 VENDOR CONCENTRATION Risk owner CEO
The risk How we manage it
Over-reliance on any one technology or supplier could pose a potential risk, We work with our vendors as partners - it is a relationship of mutual
should that technology be superseded or be exposed to economic down cycles, or dependency because we are their route to the end customer. We maintain
if the vendor fails to innovate ahead of customer demands. excellent relationships with all our vendors, and have a particularly good
relationship with Microsoft, which relies on us as a key partner in the UK.
Our growth plans, which involve developing business with all our vendors, will
naturally reduce the risk of relying too heavily on any single one.
Hardware is not a core element of our business, but is a growing sector, so we
will be monitoring supply closely. However, we monitor the geopolitical
situation continuously and work closely with suppliers to stay fully informed,
so that we can respond quickly should the landscape change. With a diverse
portfolio of suppliers and vendors, we are able to offer alternatives to
customers if there is a particular vendor with a supply issue. Given this risk
is largely driven by geopolitical and macroeconomic factors, we maintain a
watching brief so that we can react swiftly if we need to.
The impact
Too heavy a reliance on any one vendor could have an adverse effect on our
financial performance, should that relationship break down.
Global shortages of computer hardware and components could also reduce
customers' ability to purchase hardware for internal use. This could lead to
delays in customers purchasing software, which is linked to or dependent on
the hardware being available. Reduced access to computer chips could also slow
down vendor innovation, leading to delays in the creation of new technology to
resell to customers.
7 COMPETITION Risk owner CEO
The risk How we manage it
Competition in the UK IT market, or the commoditisation of IT products, may We closely watch commercial and technological developments in our markets.
result in BTG being unable to win or maintain market share.
The threat of disintermediation by vendors has always been present. We
Mergers and acquisitions have consolidated our distribution network and minimise this threat by continuing to increase the added value we bring to
absorbed specialist services companies. This has caused overlap with our own customers directly. This reduces clients' desire to deal directly with
offerings. vendors.
A move to direct vendor resale to end customers (disintermediation) could Equally, vendors cannot engage with millions of organisations globally without
place more pressure on the market opportunity. the sort of well-established network of intermediaries that we have.
Platforms, like marketplaces, with direct sales to customers could also be We currently work with AWS Marketplace and can sell to our vendors through
seen as disintermediation. their platform, which gives discounts to the customer versus buying directly.
Currently, there is no sign of any commoditisation that would be a serious
threat to our business model in the short or medium term.
The impact
This would have a material adverse impact on our business and profitability.
A huge change would need a big shift in business operations, including a
strategic overhaul of the products, solutions and services that we offer to
the market.
More consolidation could lead to less competition between vendors and cause
prices to value-added resellers, like us, to rise and service levels to fall.
Direct resale to customers could also increase.
This could erode reseller margins, given the purchase cost is less for the
distributor than the reseller. This could reduce our market, margin and
profits.
8 RELEVANCE AND EMERGING TECHNOLOGY Risk owner CEO
The risk How we manage it
As the technology and security markets evolve rapidly and become more complex, We stay relevant to our customers by:
the risk exists that we might not keep pace and so fail to be considered for
new opportunities by our customers. - Continuing to offer them expert advice and innovative solutions
- Specialising in high-demand areas
- Holding superior levels of certification
- Maintaining our good reputation and helping clients find the right
solutions in a complex, often confusing IT marketplace.
We defend our position by keeping abreast of new technologies and the
innovators who develop them. We do this, for example, by running a Cyber
Accelerator Programme for new and emerging solution providers, joining
industry forums and sitting on new technology committees. We have expanded the
number and range of our subject matter experts, who stay abreast of
developments in their areas and communicate this internally and externally.
By identifying and developing bonds with emerging companies, we maintain good
relationships with them as they grow and give our customers access to their
technologies. This is core to our business, so the risk from this is
relatively low.
The impact
As customers have wide choice and endless opportunities to research options,
if we do not offer cutting-edge products and relevant services, we could lose
sales and customers, which would affect our profitability.
PROCESSES AND SYSTEMS 9 CYBERTHREATS - DIRECT AND INDIRECT Risk owner Chief Information Security Officer
The risk How we manage it
Breaches in the security of electronic and other confidential information that We use intelligence-driven analysis, including research by our internal
BTG collects, processes, stores and transmits may give rise to significant digital forensics team, to protect ourselves.
liabilities and reputational damage.
This work provides insights into vulnerable areas and the effects of any
breaches, which allow us to strengthen our security controls.
We have established controls that separate customer systems and mitigate
cross-breaches. Our cyberthreat-level system also lets us tailor our approach
and controls in line with any intelligence we receive.
The impact
If a hacker accessed our IT systems, they could infiltrate one or more of our
customer areas. This could provide indirect access to, or the intelligence
required to compromise or access, a customer environment.
This would increase the chance of first- and third-party risk liability, with
the possible effects of regulatory breaches, loss of confidence in our
business, reputational damage and potential financial penalties.
OPERATIONAL 10 BUSINESS CONTINUITY FAILURE Risk owner CFO
The risk How we manage it
Any failure or disruption of BTG's IT infrastructure or business applications Our Chief Technology Officer and Head of IT effectively manage and oversee our
may negatively affect us. Not keeping pace with changes in technology might IT infrastructure, network, systems and business applications. All our
also mean we are unable to advise our customers and so lose market share. operational teams are focused on the latest vendor products and educate sales
teams appropriately.
Regular IT audits have identified areas of improvements and ongoing reviews
make sure we have a high level of compliance and uptime. This means our
systems are highly effective and fit for purpose.
For business continuity, we use different locations, sites and solutions to
limit the impact of service outage to customers. Where possible, we use active
resilience solutions - designed to withstand or prevent loss of services in an
unplanned event - rather than just disaster-recovery solutions and facilities,
which restore normal operations after an incident.
Increased automation means a heavier reliance on technology. Although it
reduces human error, it could potentially increase our reliance on other
vendors.
The impact
Systems and IT infrastructure are key to our operational effectiveness.
Failures or significant downtime could hinder our ability to serve customers,
sell solutions or invoice.
Major outages in systems that provide customer services could limit clients'
ability to extract crucial information from their systems or manage their
software.
11 ATTRACT AND RETAIN STAFF WHILE KEEPING OUR CULTURE Risk owner CEO
The risk How we manage it
The success of BTG's business and growth strategy depends on our ability to We continually strive to be the best company to work for in our sector.
attract, recruit and retain a talented employee base. Being able to offer
competitive remuneration is an important part of this.
One of the ways we manage this risk is by growing our own talent pools. We've
used this approach successfully in our graduate intakes for sales staff, for
Three factors are affecting this: example. BTG also runs an extensive apprenticeship programme to create a new
security skill set. We also look to make sure management has enough time to
- The CPI is driving wage inflation coach new staff.
- There is a skills shortage in the IT sector
- With remote or hybrid working becoming the norm, potential Maintaining our culture is important to retain current staff. Our
employees in traditionally lower-paid geographical regions are able to work small-company feel is maintained through regular communications, clubs,
remotely in higher-paying areas like London. charity events and social events.
Maintaining BTG culture also affects how we attract and retain staff, which
growth can change.
The impact
Excessive wage inflation could either drive up costs or mean we are unable to
attract or retain the talent pool we need to continue to deliver our planned
growth.
Going concern disclosure
The Group has performed a full going concern assessment for the year ended 28
February 2023. As outlined in the Chief Financial Officer's review above,
trading during the year demonstrated the Group's strong performance in the
period and our resilient operating model. The Group has a healthy liquidity
position with £73.0 million of cash and cash equivalents available at 28
February 2023. The Group also has access to a committed revolving credit
facility that covers the going concern period to 31 August 2024 and which
remains undrawn. The directors have reviewed trading and liquidity forecasts
for the Group, as well as continuing to monitor the effects of macro-economic,
geopolitical and climate related risks on the business. The directors have
also considered a number of key dependencies which are set out in the Group's
principal risks report, and including BTG's exposure to inflation pressures,
credit risk, liquidity risk, currency risk and foreign exchange risk. The
Group continues to model its base case, severe but plausible and stressed
scenarios, including mitigations, consistently with those disclosed in the
annual financial statements for the year ended 28 February 2022, with the key
assumptions summarised within the financial statements below. Under all
scenarios assessed, the Group would remain cash positive throughout the whole
of the going concern period without needing to utilise the revolving credit
facility.
Going concern conclusion
Based on the analysis described above, the Group has sufficient liquidity
headroom through the forecast period. The directors therefore have reasonable
expectation that the Group has the financial resources to enable it to
continue in operational existence for the period up to 31 August 2024.
Accordingly, the directors conclude it to be appropriate that the consolidated
financial statements be prepared on a going concern basis.
Responsibility statement pursuant to the Financial Services Authority's
Disclosure and Transparency Rule 4 (DTR 4)
Each director of the company confirms that (solely for the purpose of DTR 4)
to the best of his/her knowledge:
· The financial information in this document, prepared in accordance
with the applicable UK law and applicable accounting standards, gives a true
and fair view of the assets, liabilities, financial position, and result of
the Group taken as a whole.
· The Chief Executive Officer's and Chief Financial Officer's reviews
include a fair review of the development and performance of the business and
the position of the Group taken as a whole, together with a description of the
principal risks and uncertainties that they face.
On behalf of the Board
Neil Murphy Andrew Holden
Chief Executive Officer Chief Financial Officer
23 May 2023
Consolidated statement of profit or loss
Year ended 28 February Year ended 28 February
2023 2022
(Restated)
Note £'000 £'000
Revenue 1.6, 3 184,421 145,836
Cost of sales (54,848) (38,475)
Gross profit 129,573 107,361
Administrative expenses 4 (77,753) (65,057)
Impairment on trade receivables 16 (937) (149)
Operating profit 50,883 42,155
Finance costs 7 (491) (589)
Profit before taxation 50,392 41,566
Income tax expense 8 (9,971) (8,712)
Profit after taxation 40,421 32,854
Profit for the period attributable to owners of the parent company 40,421 32,854
Pence Pence
Basic earnings per ordinary share 29 16.88 13.72
Diluted earnings per ordinary share 29 16.28 13.42
The consolidated statement of profit or loss has been prepared on the basis
that all operations are continuing operations.
There are no items to be recognised in other comprehensive income and hence,
the Group has not presented a statement of other comprehensive income.
Consolidated statement of financial position
As at As at
28 February 28 February
2023 2022
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 8,380 8,049
Right-of-use assets 10 783 928
Intangible assets 11 41,526 42,832
Contract assets 12 397 125
Total non-current assets 51,086 51,934
Current assets
Inventories 14 58 96
Contract assets 12 10,684 6,591
Trade and other receivables 16 185,920 157,610
Current tax asset - 219
Cash and cash equivalents 17 73,019 67,118
Total current assets 269,681 231,634
Total assets 320,767 283,568
Liabilities
Non-current liabilities
Lease liabilities 10 (917) (992)
Contract liabilities 13 (1,976) (1,495)
Deferred tax liabilities 8 (635) (1,189)
Total non-current liabilities (3,528) (3,676)
Current liabilities
Trade and other payables 18 (231,717) (217,612)
Contract liabilities 13 (23,914) (14,528)
Current tax liabilities (36) -
Lease liabilities 10 (75) (185)
Total current liabilities (255,742) (232,325)
Total liabilities (259,270) (236,001)
Net assets 61,497 47,567
Equity
Share capital 19 2,395 2,395
Share premium 19 633,636 633,636
Share-based payment reserve 20 7,235 3,072
Merger reserve 21 (644,375) (644,375)
Retained earnings 22 62,606 52,839
Total equity 61,497 47,567
The consolidated financial statements were authorised for issue by the Board
of directors on 22 May.
Consolidated statement of changes in equity
Attributable to owners of the company
Share-based payment
Share Share Merger Retained Total
capital premium reserve reserve earnings equity
Note £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 March 2021 2,395 633,636 317 (644,375) 24,775 16,748
Total comprehensive income for the year - - - - 32,854 32,854
Dividends paid 25(b) - - - - (4,790) (4,790)
Deferred tax 8 - - 192 - - 192
Share-based payment transactions 28 - - 2,563 - - 2,563
Balance at 28 February 2022 2,395 633,636 3,072 (644,375) 52,839 47,567
Total comprehensive income for the year - - - - 40,421 40,421
Dividends paid 25(b) - - - - (30,654) (30,654)
Deferred tax 8 - - (25) - - (25)
Share-based payment transactions 28 - - 4,188 - - 4,188
Balance at 28 February 2023 2,395 633,636 7,235 (644,375) 62,606 61,497
Consolidated statement of cash flow
Year ended 28 February 2023 Year ended 28 February 2022
Note £'000 £'000
Cash flows from operating activities
Cash generated from operations 23 48,889 61,719
Interest paid 7 (443) (532)
Income taxes paid (10,295) (9,138)
Net cash inflow from operating activities 38,151 52,049
Cash flows from investing activities
Payments for property, plant and equipment 9 (1,363) (617)
Net cash outflow from investing activities (1,363) (617)
Cash flows from financing activities
Principal elements of lease payments 10 (233) (258)
Dividends paid to shareholders 25(b) (30,654) (4,790)
Net cash outflow from financing activities (30,887) (5,048)
Net increase in cash and cash equivalents 5,901 46,384
Cash and cash equivalents at the beginning of the financial year 67,118 20,734
Cash and cash equivalents at end of year 17 73,019 67,118
Notes to the financial statements
1.1 General information
Bytes Technology Group plc, together with its subsidiaries ('the Group' or
'the Bytes business') is one of the UK's leading providers of IT software
offerings and solutions, with a focus on cloud and security products. The
Group enables effective and cost-efficient technology sourcing, adoption and
management across software services, including in the areas of security and
cloud. The Group aims to deliver the latest technology to a diverse and
embedded non-consumer customer base and has a long track record of delivering
strong financial performance. The Group has a primary listing on the Main
Market of the London Stock Exchange (LSE) and a secondary listing on the
Johannesburg Stock Exchange (JSE).
1.2 Basis of preparation
The Group's consolidated financial statements have been prepared in accordance
with UK-adopted International Accounting Standards (IAS) in conformity with
the requirements of the Companies Act 2006.
The Group's accounting and presentation considerations on both the current and
comparative periods are detailed below.
In adopting the going concern basis for preparing the financial statements,
the directors have considered the business activities and the Group's
principal risks and uncertainties in the context of the current operating
environment. This includes the current geo-political environment, the current
challenging economic conditions, and reviews of future liquidity headroom
against the Group's revolving credit facilities, during the period under
assessment. The approach and conclusion are set out fully in note 1.3.
The consolidated financial statements have been prepared on a historical cost
basis, as modified to include derivative financial assets and liabilities at
fair value through the consolidated statement of profit or loss.
1.3 Going concern
The going concern of the Group is dependent on maintaining adequate levels of
resources to continue to operate for the foreseeable future. The directors
have considered a number of principal risks which are set out in the Group's
risk report within the strategic report in addition to ever present risks such
as the Group's exposure to credit risk as described in note 16 and liquidity
risk, currency risk and foreign exchange risk as described in note 24.
When assessing the going concern of the Group, the directors have reviewed the
year-to-date financial actuals, as well as detailed financial forecasts for
the period up to 31 August 2024, being the going concern assessment period.
The assumptions used in the financial forecasts are based on the Group's
historical performance and management's extensive experience of the industry.
Taking into consideration the impact of the current economic conditions and
geopolitical environment, along with future expectations, the forecasts have
been stress tested to ensure that a robust assessment of the Group's working
capital and cash requirements has been performed.
Operational performance and operating model
The Group is now reporting its third year of strong growth since it listed in
December 2020. In the current year of reporting, the Group has achieved
double-digit growth in gross invoiced income, revenue, gross profit, and
operating profit, all in the high teens or low twenties percentages, and
finished the year with £73.0 million of cash compared to the prior year
£67.1 million.
During the year customers have continued to move their software products and
data off-site and into the cloud, requiring the Group's advice and ongoing
support around this, as well as needing flexibility and added security with
hybrid working now the norm for many customers.
Resilience continues to be built into the Group's operating model from its
wide customer base, high levels of repeat business, strong vendor
relationships, increased demand driven by heightened IT security risks, and
the back-to-back nature of most of its sales. This is explained further below.
· The Group's income includes a large volume of non-discretionary spend
from UK corporates as IT is vital to establish competitive advantage in an
increasingly digital age. Public sector organisations have similarly sought
efficiencies, resilience, and security within their IT infrastructures. This
mix of private and public customers means that a downturn in one area can be
compensated for by upturns in others. Risk is further mitigated by the fact
that none of the Group's wide range of customers contributes more than 5% of
total gross invoiced income or more than 1.5% of total gross profit.
· Due to the nature of licensing schemes and service contracts, a high
proportion of business is repeatable in nature with subscriptions needing to
be renewed for the customer to continue to enjoy the benefit of the product or
service. The largest software contracts, Microsoft enterprise agreements
(EAs), run for three years and it is rare to lose a contract mid-term which
mitigates the risk of income reducing rapidly. The Group has a high success
rate in securing renewals of existing EA agreements and winning new ones.
Increasingly customers transact their cloud software requirements under
usage-based cloud solution provider (CSP) contracts which provide flexibility
but also makes the running of many of their key business functions dependent
on maintaining these agreements, and reliant on the Group's support managing
them.
The high level of customer retention and growth is illustrated by the renewal
rate for the year of 116%, a measure of the rate of growth in gross profit
from existing customers, who also contributed 96% of total gross profit in the
year. The Group will continue to focus on increasing its customer base and
spend per customer during the going concern period.
· With 65% of the Group's gross invoiced income and over 50% of gross
profit generated from sales of Microsoft products and associated service
solutions, this is a very important partnership for both parties. As from the
customer side, the licensing of a large proportion of EA software over
three-year terms reduces the risk of income falling away quickly. Also, with
the notable move towards more agile 'pay as you go' CSP contracts around
cloud-based applications, this makes those agreements even more 'sticky' by
increasing the dependency of the customer on the cloud infrastructure and
products which Microsoft provides.
· Further, it has created the opportunity for the Group to develop a
host of skill sets so it is best placed to advise and support the customers in
whatever direction they choose to fulfil their licensing requirements from a
programmatic, purchasing and consumption perspective. To this end, the Group
has attained high levels of Microsoft expert status, specialisations, and
solution partner designations in numerous Microsoft technology areas. In turn,
Microsoft rewards partners who have these awards with additional levels of
funding. The Board is engaged directly with Microsoft executives in developing
the partnership further and Microsoft business is currently growing at
double-digit rates.
· Within the Microsoft program offerings, and also those of other
vendors, including dedicated security software providers, the Group has seen
an increased demand for security products and functionality to protect
customer IT systems. This has arisen from the increased risk of cyber threats
and attacks, and has generated additional requirements for the Group's support
in this area.
· The Group's business is substantially derived from the sale of
software which it transacts on a 'back-to-back' basis, meaning all orders
placed with vendors follow the receipt of a customer order, and the intangible
nature of software products means that the Group is not exposed to inventory
risk. Hardware sales are also made on a back-to-back basis, and delivered
direct from suppliers to customers, so the Group is not required to invest in,
or hold, stock.
As a result of these factors described above, the directors believe that the
Group operates in a resilient industry, which will enable it to continue its
profitable growth trajectory but are also very aware of the risks which exist
in the wider economy.
Whilst the Covid-19 pandemic has had limited negative impact over the past
three years, as illustrated by the Group results over that period, the
business remains vigilant around the safety of staff at work and who are all
fully equipped to work from home if required to enable smooth and undisrupted
service provision to customers.
Over the past year other risks have become more prominent around energy, wage,
and commodities inflation; supply problems caused by the conflict in Ukraine;
product shortages; and climate change. These risks align to those identified
in our principal risks statement, notably economic disruption, inflation, and
attraction and retention of staff. The Board monitor these macroeconomic and
geopolitical risks on an ongoing basis. They are considered further below.
Macroeconomic risks
· Energy cost inflation - Our businesses are not naturally heavy
consumers of energy, and hence this element of our overall cost base is very
small at less than 0.5% of the total group administrative expenses. Even a
substantial percentage rise would not have a significant impact on our
operating profit.
· Cost of sale inflation - Pricing from our suppliers may be at risk of
increasing, particularly those whose underlying currency is USD. However, our
commercial model is based on passing on supplier price increases to our
customers. During the year the maintenance of our gross profit/gross invoiced
income (GP/GII%) has demonstrated this, despite the fall in the value of
sterling over that period. This is one of the biggest focus areas in our
business and has been maintained despite market and competitive pressures.
Software sales is the biggest component of our GP, hence it's the most
susceptible to price pressures and margin squeeze, and yet we have maintained
its GP/GII% during the year.
· Wage inflation - the business has been facing pressure from wage
inflation since the Covid-19 restrictions were eased and the labour market
opened up again. Where strategically required we have increased salaries to
retain key staff in the light of approaches from competitors, especially where
staff have specialist or technical skills, but there is always a line which we
will not cross. We monitor our staff attrition rate and maintained a level
below 15% which is consistent with last year. We do not believe there has been
any significant outflow of staff due to being uncompetitive with salaries. We
have a strong, collaborative, and supportive culture and offer our staff
employment in a business which is robust and which they are proud of, and this
is a key part of our attraction and retention strategy.
Moreover, when we look at our key operational efficiency ratio of adjusted
operating profit/gross profit (AOP/GP) we have achieved 43.5% which is in line
with the 43.1% from last year, hence demonstrating the control over rising
staff costs in response to the growth of the business. Whilst we have already
aligned staff salaries to market rates, further expected rises have been
factored into the financial forecasts in line with those awarded in the past
year.
· Interest rates - interest rates rising rapidly in the UK and
internationally will have a negative financial impact on many organisations
and households. The Group however does not have any debt, nor has it ever
needed to call upon its revolving credit facility. Therefore, this does not
currently, or in the foreseeable future, affect our income statement or cash
flow.
· Foreign currency rate changes - as already mentioned above, we have
withstood significant reductions in the value of the pound throughout the year
and yet maintained our GP/GII%. Our foreign currency transactions are only a
very small part of our business. At the end of the year, we have just £1.5
million net exposure in USD and £0.1 million net in Euros.
· Inflation and rising interest rates impacting on customer spending -
whilst customers may consider reducing spending on IT goods and services, if
it is seen as non-essential, we have seen increased spending by our customers
as these areas may in fact be a means to efficiency and savings elsewhere.
During the Covid-19 pandemic we saw many customers undergo significant IT
transformation, trending to the cloud, automation, and managed service and
with growing cybersecurity concerns also heightening the requirements for IT
security. We are seeing a continuation in this movement and no let-up in
demand, as illustrated by our reported trading performance. This is supported
by our very robust operating model which has been explained above, with
business spread over many customers in repeat subscription programs and
service contracts, and high renewal rates.
· Inflation and rising interest rates impacting on customer payments -
whilst we saw an increase in debt collection periods during the year, with
some customers taking longer to pay, this has reduced towards the end of the
year. In part, this is connected with the trend to more cloud-based software
programs as noted above under our operating model analysis, whereby customers
pay in arrears based on software usage rather than upfront. However, there has
been no evidence that customers ultimately do not pay, and we have suffered
only a small level of bad debt during the year, £145,000 against gross
invoiced income of £1.4 billion (see note 16). As in the previous year 60% of
our GII came from the public sector, traditionally very safe and with low
credit risk, whilst our corporate customer base includes a wide range of
blue-chip organisations and with no material reliance on any single customer.
Geopolitical risks
The current geopolitical environment, most notably the conflict in Ukraine,
has created potential supply problems, product shortages and general price
rises particularly in relation to fuel, gas and electricity.
· As noted above, increasing energy prices are not having a noticeable
impact on our profitability.
· In terms of supply chain, we are not significantly or materially
dependent on the movement of goods and hence physical trade obstacles are not
likely to affect us directly. Hardware only made up 3% of our GII during the
year and 3% of GP. Whilst we are conscious of the fact that lead times for
hardware supply have increased, and this has been a trend over the past two or
three years, we have ensured that we have a number of suppliers with
substitute, or alternative, technologies which we can rely on if one supplier
cannot meet our requirements or time scales; this indicates that we have
managed the supply chain well.
· Software sales though continue to be the dominant element of our
overall GII and hence is not inherently affected by cross-border issues.
Climate change risks
The Group does not believe that the effects of climate change will have a
material impact on its operations and performance over the going concern
review period considering:
· The small number of UK locations it operates from
· A customer base substantially located within the UK
· A supply chain which is not reliant on international trade and does
not source products and services from parts of the world which may be impacted
more severely by climate change
· It sells predominantly electronic software licences and so has no
manufacturing or storage requirements
· Its workforce can work seamlessly from home should any of their normal
work locations be impacted by a climatic event, although in the UK these tend
to be thankfully infrequent and not extreme.
Climate risks are considered fully in the Task Force on Climate-related
Financial Disclosures (TCFD) included in the Annual Report.
Liquidity and financing position
At 28 February 2023, the Group held instantly accessible cash and cash
equivalents of £73.0 million.
The balance sheet shows net current assets of £13.9 million at year end, this
amount is after the Group paid final and special dividends for the prior year
totalling £24.9 million and an interim dividend for the current year of £5.7
million. Post year end the Group has remained cash positive and this is
expected to remain the case with continued profitable operations in the future
and customer receipts collected ahead of making the associated supplier
payments.
The group has access to a committed revolving credit facility (RCF) of £30
million with HSBC. The facility commenced on 17 May 2023, replacing the
Group's previous facility for the same amount and runs for three years, until
17 May 2026. The new facility includes an optional one-year extension to 17
May 2027 and a non-committed £20 million accordion to increase the
availability of funding should it be required for future activity. To date,
the Group has not been required to use either its previous or new facilities,
and we do not forecast use of the new facility over the going concern
assessment period.
Approach to stress testing
The going concern analysis reflects the actual trading experience through the
financial year to date, as well as detailed financial forecasts for the period
up to 31 August 2024, being the going concern assessment period. The Group has
taken a measured approach to its forecasting and has balanced the expected
trading conditions with available opportunities.
In its assessment of going concern, the Board has considered the potential
impact of the current economic conditions and geopolitical environment as
described fully above, most notably general inflation, wage inflation, the
conflict in Ukraine and, climate change. If any of these factors leads to a
reduction in spending by the Group's customers, there may be an adverse effect
on the Group's future gross invoiced income, gross profit, operating profit,
and debtor collection periods. Under such downsides the Board have factored in
the extent to which they might be offset by reductions in headcount,
recruitment freezes, and savings in pay costs (including commissions and
bonuses). As part of the stressed scenario, where only partial mitigation of
downsides is possible, the Board confirmed that the RCF would not need to be
used during the going concern period up to 31 August 2024.
Details of stress testing
The Group assessed the going concern by comparing a base case scenario to two
downside scenarios and in each of the downside cases taking into consideration
two levels of mitigation, 'full' and 'partial'. These scenarios are set out
below:
· Base case was forecast using the Board-approved budget for the year
ending 28 February 2024 and extended across the first six months of the
following year to 31 August 2024
· Downside case 1, Severe but plausible, modelled gross invoiced income
reducing by 10% year on year, gross profit reducing by 15% year on year and
debtor collection periods extending by five days, in each case effective from
June 2023
· Downside case 2, Stressed, modelled both gross invoiced income and
gross profit reducing by 30% year on year and debtor collection periods
extending by ten days, again in each case effective from June 2023
· Partial mitigation measures modelled for the downsides were to freeze
future pay and new recruitment from March 2024 and 'self-mitigating' reduction
of commissions in line with falling gross profit
· Full Mitigation additionally modelled headcount reductions from March
2024 in line with falling gross profit.
The mitigations applied in the downside scenarios relate to pay costs and
headcount which are within the control of the Group to implement quickly in
response to any downward trends should they be necessary. While these
mitigating actions have only been forecast from March 2024 for the purposes of
the going concern assessment, they could be implemented much sooner, notably
an earlier recruitment freeze and non-replacement of natural leavers, either
immediately or within a small number of months following the decline in income
and profits.
Under all scenarios assessed, the Group would remain cash positive throughout
the whole of the going concern period with dividends forecast to continue to
be paid in line with the Group's dividend policy to distribute 40% of the
post-tax pre-exceptional earnings to shareholders.
The directors consider that the level of stress testing is appropriate to
reflect the potential collective impact of all the macroeconomic and
geopolitical matters described and considered above.
Going concern conclusion
Based on the analysis described above, the Group has sufficient liquidity
headroom through the forecast period. The directors therefore have reasonable
expectation that the Group has the financial resources to enable it to
continue in operational existence for the period up to 31 August 2024, being
the going concern assessment period. Accordingly, the directors conclude it
to be appropriate that the consolidated financial statements be prepared on a
going concern basis.
1.4 Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires the use of
accounting estimates which, by definition, will seldom equal the actual
results. Management also needs to exercise judgement in applying the Group's
accounting policies.
This note provides an overview of the areas that involved significant
judgement or complexity. Estimates and judgements are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the
circumstances. Detailed information about each of these estimates and
judgements is included in other notes, together with information about the
basis of calculation for each affected line item in the consolidated financial
statements.
(i) Key accounting judgements
The areas involving key accounting judgements are:
· Revenue recognition - Principal versus agent, see note 1.11.
Under IFRS 15, Revenue from Contracts with Customers, when recognising
revenue, the Group is required to assess whether its role in satisfying its
various performance obligations is to provide the goods or services itself (in
which case it is considered to be acting as principal) or arrange for a third
party to provide the goods or services (in which case it is considered to be
acting as agent). Where it is considered to be acting as principal, the Group
recognises revenue at the gross amount of consideration to which it expects to
be entitled. Where it is considered to be acting as agent, the Group
recognises revenue at the amount of any fee or commission to which it expects
to be entitled or the net amount of consideration that it retains after paying
the other party.
To determine the nature of its obligation, the standard primarily requires
that an entity shall:
(a) Identify the specified goods or services to be provided to the customer
(b) Assess whether it controls each specified good or service before that good
or service is transferred to the customer by considering if it:
a. is primarily responsible for fulfilling the promise to provide the
specified good or service
b. has inventory risk before the specified good or service has been
transferred to a customer
c. has discretion in establishing the price for the specified good or
service.
Judgement is therefore required as to whether the Group is a principal or
agent against each specified good or service, noting that a balanced weighting
of the above indicators may be required when making the assessment.
The specific judgements made for each revenue category are discussed in the
accounting policy for revenue, note 1.11 and 1.6, as disclosed below.
(ii) Significant accounting estimates and uncertainties
There are no major sources of estimation uncertainty at the end of the
reporting period that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within the next
financial year.
(iii) Other accounting estimates and uncertainties
The other areas involving accounting estimates as follows have been included
in this review for the current year. Further, the effect of climate change has
been considered to determine any critical judgements or adjustments required
in the preparation of the Group's financial statements. During the current
year, and within the next financial year, the impact, if any, is not expected
to create any significant risks which result in a material misstatement to the
financial statements occurring. However, the effects of climate change over
the longer term are more uncertain and may be more significant.
· Property, plant and equipment (see notes 1.21 and 9) and leases (see
notes 1.15 and 10).
The Group's net assets under these categories primarily comprise freehold land
and buildings and leasehold buildings with much smaller net book values
reported for computer equipment, furniture and fittings. IAS 16 Property,
Plant and Equipment requires an item of property, plant and equipment (PPE) to
be recognised if it is probable that future economic benefits associated with
the item will flow to the entity and its cost can be measured reliably.
Consideration has been made as to whether climate-related matters may affect
the value of any items of PPE, their economic life or residual value. As noted
in the Task Force on Climate-related Financial Disclosures (TCFD) statement
with the strategic report, none of the Group's items of PPE, the properties
and the assets included within them, are deemed to be at risk or prone to
damage from acute or chronic weather events which could arise as part of
climate change. Also, none of the items of PPE is deemed susceptible to being
phased out, replaced or made redundant under any climate-related legislative
changes.
Hence it is judged that there is no material risk from climate change to the
carrying values of any items of PPE on the balance sheet at 28 February 2023.
· Estimation of recoverable amount of goodwill (see notes 1.16 and 11).
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in note 1.16. The recoverable
amounts of cash generating units (CGUs) have been determined based on
value-in-use calculations which require the use of assumptions. The
calculations use cash flow projections based on forecasts approved by
management covering a five-year period. The growth rates used in the forecasts
are based on historical growth rates achieved by the Group. Cash flows beyond
the five-year period are extrapolated using the estimated growth rates
disclosed in note 11. The forecast cash flows are discounted, at the rates
disclosed in note 11, to determine the CGUs value-in-use. The sensitivity of
changes in the estimated growth rates and the discount rate are disclosed in
note 11.
· Impairment of intangible assets (see notes 1.16, 1.22 and 11).
The Group's net assets under this category comprise goodwill, customer
relationships and brands, arising on acquisition of subsidiaries. Goodwill is
not amortised but is tested for impairment at least annually at the level of
the cash generating unit (CGU) to which it relates. Customer relationships and
brands are recognised at fair value after deduction of accumulated
amortisation over their useful lives. IAS 36 Impairment of Assets requires an
entity to assess, at the end of each reporting period, whether there are any
impairment indicators for an entity's assets. Impairment indicators include
significant changes in the technological, market, economic or legal
environment in which the entity operates.
Consideration has been made as to whether climate-related matters may affect
any of these conditions which in turn may affect the economic performance of
an asset or CGU, or its long-term growth rates. For example, customer buying
behaviours, requirement to make significant investments in new technologies,
or an increase in costs generally charged by suppliers. Further, climate
change indirectly resulting in an increase in market interest rates is likely
to affect the discount rate used in calculating an asset's or CGU's value in
use. This, in turn, could decrease the asset's or CGU's recoverable amount by
reducing the present value of the future cash flows and result in a lower
value in use.
However, as noted in the TCFD statement with the strategic report, the Group
continually monitors the regulatory and legal environment and takes external
advice as required. It expects the impact from changing customer behaviours to
be small given the Group's primary business is the supply of critical cloud,
security and software products and IT services. Further, the Group does not
rely on overseas operations, or require colleagues to work on-site at all
times. Nor does it need to have physical products transported to maintain the
economic performance of its CGUs.
Hence it is judged that there is no material risk from climate change to the
carrying values of any intangible assets on the balance sheet at 28 February
2023.
· Provisions (see note 1.25)
IAS 37 Provisions, Contingent Liabilities and Contingent Assets requires a
provision to be recognised when an entity has a present obligation (legal or
constructive) because of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate can be made of the obligation. If any of
the conditions for recognition are not met, no provision is recognised, and an
entity may instead have a contingent liability. Contingent liabilities are not
recognised, but explanatory disclosures are required, unless the possibility
of an outflow in settlement is remote. In the case of an onerous contract, the
provision reflects the lower of the costs of fulfilling the contract and any
compensation or penalties from a failure to fulfil it.
Consideration has been made as to whether climate-related matters may result
in the recognition of new liabilities or, where the criteria for recognition
are not met, new contingent liabilities may have to be disclosed. Further
consideration has been made as to whether climate change, and any resulting
associated legislation, may require past judgements to be reconsidered.
The Group has judged that there is no material risk from climate change which
requires new provisions to be made or existing provisions to be reconsidered
at 28 February 2023.
The Group will continue to review and assess potential climate change impacts
when making judgements in relation to its accounting for assets and
liabilities or for its future earnings and cash flows. However, for the
financial statements for the year ended 28 February 2023, the Group believes
there is no material impact or risk of misstatement.
1.5 New standards, interpretations and amendments adopted by the Group
(a) New and amended standards adopted by the Group
There are no new standards applied for the first time in the annual reporting
period commencing 1 March 2022.
(b) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for 28 February 2023 reporting periods and have not been
adopted early by the Group. These standards are not expected to have a
material impact on the Group in the current or future reporting periods and on
foreseeable future transactions.
1.6 Changes in accounting policy and disclosures
The following change in accounting policy is effective in the year to 28
February 2023. Other than the one mentioned below, there are no further
changes to accounting policies applicable in the period.
Change in accounting policy - IFRS 15
During the year, the IFRS Interpretation Committee (the 'Committee') concluded
on a response to a request to clarify whether a company should recognise
revenue from the resale of standard software licences on a gross or net basis
under IFRS 15, Revenue from Contracts with Customers ('IFRS 15'). The fact
pattern provided to the Committee was very similar to that faced by the Group
when transacting software sales with customers.
The Committee did not provide direct clarification on the topic, as they
stated that the specifics of each case may vary and must be analysed in
detail, and that the assessment of whether an entity is a principal or agent
might require judgement, in particular when the specified good or service is
intangible. The Committee concluded that the principles and requirements in
IFRS 15 already provided an adequate basis for a reseller to determine whether
it is a principal or agent for software licences provided to a customer based
on the control criteria set out in the standard and summarised under our key
accounting judgements policy, note 1.4 (iii), above.
However, following the Committee's conclusion, and in line with developing
clear and consistent practice within its industry, the Group further
considered the balance of the guidance around control indicators provided in
IFRS 15.
In the previous year, the Group recognised revenue from indirect software
licence sales relating to cloud-based licences and licences requiring critical
updates on an agency, 'net', basis. This is because these do not meet the
control criteria noted under IFRS 15 due to the primary responsibility for
fulfilling the promise to provide these licences to the customer resting with
the software vendor and requiring the vendors ongoing involvement.
All remaining indirect software licence sales, those which were non-cloud
based and without critical updates, were treated on a 'gross' basis as a
principal. However, this previous gross conclusion required significant
judgement as these sales comprise elements which can also be indicative of a
net treatment with the conclusion being dependent on an assessment of the
relative weighting of the various factors. Whilst the Group does have
discretion in establishing the price of the software previously treated on a
gross basis, the other key control indicators highlighted in note 1.4 (ii)
were not being satisfied. The Group is not exposed to any inventory risk, it
is the vendor who has primary responsibility for fulfilling the promise to
provide the licences to the customer, and the Group does not control the
software licences prior to their transfer.
As a result of its reassessment of the above control indicators outlined under
IFRS 15, the Group has amended its judgement and now concludes that an
accounting policy change in favour of agent (and net) presentation should be
adopted for all software sales that were previously recorded as principal and
presented gross.
In accordance with IAS 8, the Group has applied this accounting policy change
retrospectively, so the prior year and current year are presented
consistently.
The impact of this change in accounting policy on the prior year financial
statements is set out below:
• Revenue and cost of sales decreased by £302 million, being the
additional cost of transactions assessed as being recognised on an agency
basis
• The consolidated statements of profit or loss, financial position,
cash flows and of changes in equity remain unchanged in both years and there
is no impact on basic and diluted earnings per share.
The prior year impact is summarised in the following table noting that the
Group continues to report Gross Invoiced Income as an Alternative Performance
Measure, and this is unaffected. The impact on the current year has not been
quantified as it is impractical to do so.
Previous accounting policy Revised accounting policy
Gross invoiced income Agency Revenue Gross invoiced income Agency adjustment £'000 Revenue
£'000 Adjustment £'000
£'000 £'000 £'000
28 February 2022 1,208,124 (760,187) 447,937 1,208,124 (1,062,288) 145,836
1.7 Principles of consolidation
1.7.1 Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group
controls an entity where the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the transferred
asset. Accounting policies of subsidiaries have been changed where necessary
to ensure consistency with the policies adopted by the Group.
1.8 Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker who views the Group's
operations on a combined level, given they sell similar products and services,
and substantially purchase from the same suppliers and under common customer
frameworks. The Group has therefore determined that it has only one reportable
segment under IFRS 8, which is that of 'IT solutions provider'.
1.9 Finance income and costs
Finance income comprises interest income on funds invested. Interest income is
recognised as it accrues in profit or loss, using the effective interest
method.
Finance costs comprises interest expense on borrowings and the unwinding of
the discount on lease liabilities, that are recognised in profit or loss as it
accrues using the effective interest method.
1.10 Foreign currency translation
(i) Functional and presentation currency
Items included in the consolidated financial statements of each of the Group's
entities are measured using the currency of the primary economic environment
in which the entity operates ('the functional currency').
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions, and from
the translation of monetary assets and liabilities denominated in foreign
currencies at year-end exchange rates, are generally recognised in profit or
loss. They are deferred in equity if they relate to qualifying cash flow
hedges and qualifying net investment hedges or are attributable to part of the
net investment in a foreign operation.
All foreign exchange gains and losses are presented in the statement of profit
or loss on a net basis, within 'other gains/(losses)'.
1.11 Revenue recognition
Revenue recognition principles across all revenue streams
The Group recognises revenue on completion of its performance obligations at
the fixed transaction prices specified in the underlying contracts or orders.
There are no variable price elements arising from discounts, targets, loyalty
points or returns. Where the contract or order includes more than one
performance obligation, the transaction price is allocated to each obligation
based on their stand-alone selling prices. These are separately listed as
individual items within the contract or order.
In the case of sales of third-party products and services, the Group's
performance obligations are satisfied by fulfilling its contractual
requirements with both the customer and the supplier (which may be direct with
the product vendor), ensuring that orders are processed within any contractual
timescales stipulated. In the case of sales of the Group's own in-house
products and internal services, this includes the Group fulfilling its
contractual responsibilities with the customer.
That primary areas of judgement for revenue recognition as principal versus
agent are set out above under our key accounting judgements policy and
described further below for each revenue category.
Software
The Group acts as an advisor, analysing customer requirements and designing an
appropriate mix of software products under different licensing programs. This
may include a combination of cloud and on-premise products, typically used to
enhance users' productivity, strengthen IT security or assist in
collaboration. The way in which the Group satisfies its performance
obligations depends on the licensing program selected.
Direct software sales - the Group's performance obligation is to facilitate
software sales between vendors and customers, but the Group is not party to
those sales contracts. Supply and activation of the software licences,
invoicing and payment all take place directly between the vendor and the
customer. The transaction price for the customer is set by the vendor with no
involvement from the Group. Therefore, the Group does not control the licences
prior to their delivery to the customer and hence acts as agent. The Group is
compensated by the vendor with a fee based on fixed rates set by the vendor
applied to the customer transaction price and determined according to the
quantity and type of products sold. Revenue is recognised as the fee received
from the vendor on a point in time basis when the vendor's invoicing to the
customer takes place.
Indirect software sales - the Group's performance obligation is to fulfil
customers' requirements through the procurement of appropriate on-premise
software products, or cloud-based software, from relevant vendors. Operating
as a reseller, the Group invoices, and receives payment from, the customer
itself. Whilst the transaction price is set by the Group at the amount
specified in its contract with the customer, the software licensing agreement
is between the vendor and the customer. The vendor is responsible for issuing
the licences and activation keys, for the software's functionality, and for
fulfilling the promise to provide the licences to the customer. Therefore, the
Group acts as agent and revenue is recognised as the amount retained after
paying the software vendor. As a reseller, the Group recognises indirect
software sales revenue on a point-in-time basis once it has satisfied its
performance obligations. This takes two main forms as follows:
In the case of cloud-based software sales, the Group arranges for third-party
vendors to provide customers with access to software in the cloud. As the
sales value varies according to monthly usage, revenue is recognised once the
amount is confirmed by the vendor and the Group has analysed the data and
advised the customer. This is because the responsibilities of the Group to
undertake such activities mean that these performance obligations are
satisfied at each point usage occurs and the Group has a right to receive
payment.
In the case of licence sales (non cloud-based software) arising from
fixed-price subscriptions where the customer makes an up-front payment, the
Group recognises revenue when the contract execution or order is fulfilled by
the Group because its performance obligation is fully satisfied at that point.
Typically, these take the form of annual instalments where the Group is
required to undertake various contract review activities at each anniversary
date.
Hardware - resale of hardware products
The Group's activities under this revenue stream comprise the sale of hardware
items such as servers, laptops and devices. For hardware sales, the Group acts
as principal, as it assumes primary responsibility for fulfilling the promise
to provide the goods and for their acceptability, is exposed to inventory risk
during the delivery period and has discretion in establishing the selling
price.
Revenue is recognised at the gross amount receivable from the customer for the
hardware provided and on a point-in-time basis when delivered to the customer.
Services internal - provision of services to customers using the Group's own
internal resources
The Group's activities under this revenue stream comprise the provision of
consulting services using its own internal resources. The services provided
include, but are not limited to, helpdesk support, cloud migration,
implementation of security solutions, infrastructure, and software asset
management services. The services may be one-off projects where completion is
determined on delivery of contractually agreed tasks, or they may constitute
an ongoing set of deliverables over a contract term which may be multi-year.
When selling internally provided services, the Group acts as principal as
there are no other parties involved in the process. Revenue is recognised at
the gross amount receivable from the customer for the services provided. The
Group recognises revenue from internally provided consulting services on an
over-time basis. This is because the customer benefits from the Group's
activities as the Group performs them. For service projects extending over
more than one month the Group applies an inputs basis by reference to the
hours expended to the measurement date, and the day rates specified in the
contract. For managed services and support contracts the revenue is recognised
evenly over the contract term.
Services external - provision of services to customers using third-party
contractors
The Group's activities under this revenue stream comprise the sale of a
variety of IT services which are provided by third-party contractors. These
may be similar to the internally provided consulting services, where the Group
does not have the internal capacity at the time required by the customer or
may be services around different IT technologies and solutions where the Group
does not have the relevant skills in-house.
Whilst the transaction price is set by the Group at the amount specified in
its contract with the customer, when selling externally provided services, the
Group acts as agent because responsibility for delivering the service relies
on the performance of the third-party contractor. If the customer is not
satisfied with their performance, the third party will assume responsibility
for making good the service and obtaining customer sign-off. The Group will
not pay the third party until customer sign-off has been received. Revenue is
recognised at the amount retained after paying the service provider for the
services delivered to the customer on a point-in-time basis. The Group does
not control the services prior to their delivery and its performance
obligations are satisfied at the point the service has been delivered by the
third party and confirmed with the customer.
1.12 Contract costs, assets and liabilities
Contract costs
Incremental costs of obtaining a contract
The Group recognises the incremental costs of obtaining a contract when those
costs are incurred. For revenue recognised on a point-in-time basis, this is
consistent with the transfer of the goods or services to which those costs
relate. For revenue recognised on an over-time basis, the Group applies the
practical expedient available in IFRS 15 and recognises the costs as an
expense when incurred because the amortisation period of the asset that would
otherwise be recognised is less than one year.
Costs to fulfil a contract
The Group recognises the costs of fulfilling a contract when those costs are
incurred. This is because the nature of those costs does not generate or
enhance the Group's resources in a way that enables it to satisfy its
performance obligations in the future and those costs do not otherwise qualify
for recognition as an asset.
Contract assets
The Group recognises a contract asset for accrued revenue. Accrued revenue is
revenue recognised from performance obligations satisfied in the period that
has not yet been invoiced to the customer.
Contract assets also include costs to fulfil services contracts (deferred
costs) when the Group is invoiced by suppliers before the related performance
obligations of the contract are satisfied by the third party. Deferred costs
are measured at the purchase price of the associated services received.
Deferred costs are released from the consolidated statement of financial
position in line with the recognition of revenue on the specific transaction.
Contract liabilities
The Group recognises a contract liability for deferred revenue when the
customer is invoiced before the related performance obligations of the
contract are satisfied. A contract liability is also recognised for payments
received in advance from customers. Contract liabilities are recognised as
revenue when the Group performs its obligations under the contract to which
they relate.
1.13 Rebates
Rebates from suppliers are accounted for in the period in which they are
earned and are based on commercial agreements with suppliers. Rebates earned
are mainly determined by the type and quantity of products within each sale
but may also be volume-purchase related. They are generally short-term in
nature, with rebates earned but not yet received typically relating to the
preceding month's or quarter's trading. Rebate income is recognised in cost of
sales in the consolidated statement of profit or loss and rebates earned but
not yet received are included within trade and other receivables in the
consolidated statement of financial position.
1.14 Income tax
The income tax expense or credit for the period is the tax payable on the
current period's taxable income, based on the applicable income tax rate for
each jurisdiction, adjusted by changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated based on the tax laws enacted or
substantively enacted at the end of the reporting period in the countries
where the company and its subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation.
It establishes provisions, where appropriate, based on amounts expected to be
paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction
other than a business combination that, at the time of the transaction,
affects neither accounting nor taxable profit or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially
enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised, or the deferred income tax
liability is settled.
Deferred tax assets are recognised only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary
differences between the carrying amount and tax bases of investments in
foreign operations where the Group is able to control the timing of the
reversal of the temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset current tax assets and liabilities and where the
deferred tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle on a net basis, or to
realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent
that it relates to items recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
1.15 Leases
Lessee
The Group leases a property and various motor vehicles. Lease agreements are
typically made for fixed periods but may have extension options included.
Lease terms are negotiated on an individual basis and contain different terms
and conditions. The lease agreements do not impose any covenants, but leased
assets may not be used as security for borrowing purposes.
Leases are recognised as a right-of-use asset and a corresponding liability at
the date at which the leased asset is available for use by the Group. Each
lease payment is allocated between the liability and finance cost. The finance
cost is charged to profit or loss over the lease period to produce a constant
periodic rate of interest on the remaining balance of the liability for each
period. The right-of-use asset is depreciated over the shorter of the asset's
useful life and the lease term on a straight-line basis. The Group is
depreciating the right-of-use assets over the lease term on a straight-line
basis.
Assets and liabilities arising from a lease are initially measured at the net
present value of the minimum lease payments. The net present value of the
minimum lease payments is calculated as follows:
· Fixed payments, less any lease incentives receivable
· Variable lease payments that are based on an index or a rate
· Amounts expected to be payable by the lessee under residual value
guarantees
· The exercise price of a purchase option if the lessee is reasonably
certain to exercise that option
· Payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the
lease; where this rate cannot be determined, the Group's incremental borrowing
rate is used.
Right-of-use assets are measured at cost comprising the following:
· The net present value of the minimum lease payments
· Any lease payments made at, or before, the commencement date less any
lease incentives received
· Any initial direct costs.
Payments associated with short-term leases and leases of low-value assets are
recognised on a straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 12 months or less. Low-value
assets comprise IT equipment and small items of office furniture.
Depreciation
Depreciation is recognised in profit or loss for each category of assets on a
straight-line basis over the lease term.
The estimated useful lives for the current and comparative periods are as
follows:
· Buildings, 8 years
· Motor vehicles, 2 to 3 years.
The depreciation methods, useful lives and residual values are reassessed
annually and adjusted if appropriate. Gains and losses arising on the disposal
of leased assets are included as capital items in profit or loss.
1.16 Impairment of non-financial assets
Goodwill and intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount might not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets (cash
generating units). Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at the end of
each reporting period.
1.17 Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial institutions
repayable without penalty on notice of not more than 24 hours. Cash
equivalents are highly liquid investments that mature in no more than three
months from the date of acquisition and that are readily convertible to known
amounts of cash with insignificant risk of change in value.
1.18 Trade receivables
Trade receivables are amounts due from customers for merchandise sold or
services rendered in the ordinary course of business. Trade receivables are
recognised initially at the amount of consideration that is unconditional,
i.e. fair value and subsequently measured at amortised cost using the
effective interest method, less loss allowance. Prepayments and other
receivables are stated at their nominal values.
1.19 Inventories
Inventories are measured at the lower of cost and net realisable value
considering market conditions and technological changes. Cost is determined on
the first-in first-out and weighted average cost methods. Work and contracts
in progress and finished goods include direct costs and an appropriate portion
of attributable overhead expenditure based on normal production capacity. Net
realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
1.20 Financial instruments
Financial instruments comprise investments in equity, loans receivable, trade
and other receivables (excluding prepayments), investments, cash and cash
equivalents, restricted cash, non-current loans, current loans, bank
overdrafts, derivatives and trade and other payables.
Recognition
Financial assets and liabilities are recognised in the Group's statement of
financial position when the Group becomes a party to the contractual
provisions of the instruments. Financial assets are recognised on the date the
Group commits to purchase the instruments (trade date accounting).
Financial assets are classified as current if expected to be realised or
settled within 12 months from the reporting date; if not, they are classified
as non-current. Financial liabilities are classified as non-current if the
Group has an unconditional right to defer payment for more than 12 months from
the reporting date.
Classification
The Group classifies financial assets on initial recognition as measured at
amortised cost, fair value through other comprehensive income (FVOCI), or fair
value through profit or loss (FVTPL) based on the Group's business model for
managing the financial asset and the cash flow characteristics of the
financial asset.
Financial assets are classified as follows:
· Financial assets to be measured subsequently at fair value (either
through other comprehensive income (OCI) or through profit or loss)
· Financial assets to be measured at amortised cost.
Financial assets are not reclassified unless the Group changes its business
model. In rare circumstances where the Group does change its business model,
reclassifications are done prospectively from the date that the Group changes
its business model.
Financial liabilities are classified and measured at amortised cost except for
those derivative liabilities and contingent considerations that are measured
at FVTPL.
Measurement on initial recognition
All financial assets and financial liabilities are initially measured at fair
value, including transaction costs, except for those classified as FVTPL which
are initially measured at fair value excluding transaction costs. Transaction
costs directly attributable to the acquisition of financial assets or
financial liabilities at FVTPL are recognised immediately in profit or loss.
Subsequent measurement: financial assets
Subsequent to initial recognition, financial assets are measured as described
below:
· FVTPL - these financial assets are subsequently measured at fair
value and changes therein (including any interest or dividend income) are
recognised in profit or loss
· Amortised cost - these financial assets are subsequently measured at
amortised cost using the effective interest method, less impairment losses.
Interest income, foreign exchange gains and losses and impairments are
recognised in profit or loss. Any gain or loss on derecognition is recognised
in profit or loss
· Equity instruments at FVOCI - these financial assets are subsequently
measured at fair value. Dividends are recognised in profit or loss when the
right to receive payment is established. Other net gains and losses are
recognised in OCI. On derecognition, gains and losses accumulated in OCI are
not reclassified to profit or loss.
Subsequent measurement: financial liabilities
All financial liabilities, excluding derivative liabilities and contingent
consideration, are subsequently measured at amortised cost using the effective
interest method. Derivative liabilities are subsequently measured at fair
value with changes therein recognised in profit or loss.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from
the assets have expired or have been transferred and the Group has transferred
substantially all risks and rewards of ownership. Financial liabilities are
derecognised when the obligations specified in the contracts are discharged,
cancelled or expire. On derecognition of a financial asset or liability, any
difference between the carrying amount extinguished and the consideration paid
is recognised in profit or loss.
Offsetting financial instruments
Offsetting of financial assets and liabilities is applied when there is a
legally enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis or realise the asset and settle the
liability simultaneously. The net amount is reported in the statement of
financial position.
Impairment
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables.
To measure the expected credit losses, trade receivables have been grouped
based on credit risk characteristics and the days past due.
The expected credit loss (ECL) rates are based on the payment profiles of
sales over a 12-month period before 28 February 2023, 28 February 2022 and 1
March 2021 respectively and the corresponding historical credit losses
experienced within this period. The historical loss rates are reviewed and
adjusted to reflect current and forward-looking information on macroeconomic
factors affecting the ability of the customers to settle the
receivables.
Trade receivables are written off where there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery
include, among others, the failure of a debtor to engage in a repayment plan
with the Group, and a failure to make contractual payments for a period of
greater than 120 days past due.
Impairment losses on trade receivables are presented as net impairment losses
within operating profit. Subsequent recoveries of amounts previously written
off are credited against the same line item.
Derivatives
Derivatives are initially recognised at fair value on the date that a
derivative contract is entered into as either a financial asset or financial
liability if they are considered material. Derivatives are subsequently
remeasured to their fair value at the end of each reporting period, with the
change in fair value being recognised in profit or loss.
1.21 Property, plant and equipment
Owned assets
Property, plant and equipment is measured at cost less accumulated
depreciation and impairment losses. When components of an item of property,
plant and equipment have different useful lives, those components are
accounted for as separate items of property, plant and equipment.
Cost includes expenditure that is directly attributable to the acquisition of
the asset. Purchased software that is integral to the functionality of the
related equipment is capitalised as part of that equipment.
Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and
equipment the cost of replacing part of such an item when the cost is
incurred, if it is probable that future economic benefits embodied within the
item will flow to the Group and the cost of such item can be measured
reliably. The carrying amount of the replaced item of property, plant and
equipment is derecognised. All other costs are recognised in profit or loss as
an expense when incurred.
Depreciation
Depreciation is recognised in profit or loss for each category of assets on a
straight-line basis over their expected useful lives up to their respective
estimated residual values. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as
follows:
· Buildings, 20 to 50 years
· Leasehold improvements (included in land and buildings), shorter of
lease period or useful life of asset
· Plant and machinery, 3 to 20 years
· Motor vehicles, 4 to 8 years
· Furniture and equipment, 5 to 20 years
· IT equipment and software, 2 to 8 years.
The depreciation methods, useful lives and residual values are reassessed
annually and adjusted if appropriate. Gains and losses arising on the disposal
of property, plant and equipment are included as capital items in profit or
loss.
1.22 Intangible assets
Goodwill
Goodwill is measured as described in note 1.16. Goodwill on acquisitions of
subsidiaries is included in intangible assets. Goodwill is not amortised, but
it is tested for impairment annually, or more frequently if events or changes
in circumstances indicate that it might be impaired and is carried at cost
less accumulated impairment losses. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash generating units for the purpose of impairment
testing. The allocation is made to those cash generating units or groups of
cash generating units that are expected to benefit from the business
combination in which the goodwill arose. The units or groups of units are
identified at the lowest level at which goodwill is monitored for internal
management purposes.
Brands and customer relationships
Brands and customer relationships acquired in a business combination are
recognised at fair value at the acquisition date. They have a finite useful
life and are subsequently carried at cost less accumulated amortisation and
impairment losses.
The useful lives for the brands and customer relationships are as follows:
· Customer relationships, 10 years
· Brands, 5 years.
Software
Costs associated with maintaining software programs are recognised as an
expense as incurred. Development costs that are directly attributable to the
design and testing of identifiable and unique software products controlled by
the Group are recognised as intangible assets where the following criteria are
met:
· It is technically feasible to complete the software so that it will
be available for use
· Management intends to complete the software and use or sell it
· There is an ability to use or sell the software
· It can be demonstrated how the software will generate probable future
economic benefits
· Adequate technical, financial and other resources to complete the
development and to use or sell the software are available
· The expenditure attributable to the software during its development
can be reliably measured.
Research and development
Research expenditure and development expenditure that do not meet the criteria
above are recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a subsequent
period.
1.23 Trade and other payables
Trade payables, sundry creditors and accrued expenses are obligations to pay
for goods or services that have been acquired in the ordinary course of
business from suppliers. They are accounted for in accordance with the
accounting policy for financial liabilities as included above. Amounts
received from customers in advance, prior to confirming the goods or services
required, are recorded as other payables. Upon delivery of the goods and
services, these amounts are recognised in revenue. Other payables are stated
at their nominal values.
1.24 Borrowings
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount, is recognised in profit or loss over the period of the borrowings
using the effective-interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the drawdown occurs. To the extent that there
is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
1.25 Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation because of past events, for which it is probable that an outflow of
economic benefits will be required to settle the obligation, and where a
reliable estimate can be made of the amount of the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax discount
rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
1.26 Employee benefits
Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual
leave and accumulating sick leave, that are expected to be settled wholly
within 12 months after the end of the period in which the employees render the
related service are recognised in respect of employees' services up to the end
of the reporting period and are measured at the amounts expected to be paid
when the liabilities are settled. The liabilities are presented as current
employee benefit obligations in the balance sheet.
Post-employment obligations
The Group operates various defined contribution plans for its employees. Once
the contributions have been paid, the Group has no further payment
obligations. The contributions are recognised as employee benefit expense when
they are due. Prepaid contributions are recognised as an asset to the extent
that a cash refund or a reduction in the future payments is available.
Termination benefits
Termination benefits are payable when employment is terminated by the Group
before the normal retirement date, or when an employee accepts voluntary
redundancy in exchange for these benefits. The Group recognises termination
benefits at the earlier of the following dates: (a) when the Group can no
longer withdraw the offer of those benefits; and (b) when the Group recognises
costs for a restructuring that is within the scope of IAS 37 and involves the
payment of termination benefits. In the case of an offer made to encourage
voluntary redundancy, the termination benefits are measured based on the
number of employees expected to accept the offer. Benefits falling due more
than 12 months after the end of the reporting period are discounted to present
value.
Share-based payments
Equity settled share-based payment incentive scheme
Share-based compensation benefits are provided to particular employees of the
Group through the Bytes Technology Group plc share option plans. Information
relating to all schemes is provided in note 28.
Employee options
The fair values of options granted under the Bytes Technology Group plc share
option plans are recognised as an employee benefit expense, with a
corresponding increase in equity. The total amount to be expensed is
determined by reference to the fair value of the options granted.
The total expense is recognised over the vesting period, which is the period
over which all the specified vesting conditions are to be satisfied. At the
end of each period, the Group revises its estimates of the number of options
issued that are expected to vest based on the service conditions. It
recognises the impact of the revision to original estimates, if any, in profit
or loss, with a corresponding adjustment to equity.
1.27 Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares are recognised as a deduction
from equity, net of any tax effects.
1.28 Dividends
Dividends paid on ordinary shares are classified as equity and are recognised
as distributions in equity.
1.29 Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
· The profit attributable to owners of the company, excluding any costs
of servicing equity other than ordinary shares
· By the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued
during the year and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of
basic earnings per share to consider:
· The after-income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares
· The weighted average number of additional ordinary shares that would
have been outstanding, assuming the conversion of all dilutive potential
ordinary shares.
1.30 Rounding of amounts
All amounts disclosed in the consolidated financial statements and notes have
been rounded off to the nearest thousand, unless otherwise stated.
2 Segmental information
2(a) Description of segment
The information reported to the Group's Chief Executive Officer, who is
considered to be the chief operating decision maker for the purposes of
resource allocation and assessment of performance, is based wholly on the
overall activities of the Group. The Group has therefore determined that it
has only one reportable segment under IFRS 8, which is that of 'IT solutions
provider'. The Group's revenue, results, assets and liabilities for this one
reportable segment can be determined by reference to the consolidated
statement of profit or loss and the consolidated statement of financial
position. An analysis of revenues by product lines and geographical regions,
which form one reportable segment, is set out in note 3.
2(b) Adjusted operating profit
Adjusted operating profit is an alternative performance measure which excludes
the effects of intangible assets amortisation and share-based payment charges.
Adjusted operating profit reconciles to operating profit as follows:
Year ended 28 February 2023 Year ended 28 February 2022
Note £'000 £'000
Adjusted operating profit 56,377 46,329
Share-based payment charges 28 (4,188) (2,563)
Amortisation of acquired intangible assets 4 (1,306) (1,611)
Operating profit 50,883 42,155
3 Revenue from contracts with customers
3(a) Disaggregation of revenue from contracts with customers
The Group derives revenue from the transfer of goods and services in the
following major product lines and geographical regions:
Year ended 28 February 2023 Year ended 28 February 2022
(Restated)
Revenue by product ((1)) £'000 £'000
Software 114,108 91,663
Hardware 38,355 28,807
Services internal 28,454 21,761
Services external 3,504 3,605
Total revenue from contracts with customers 184,421 145,836
(1) Revenue from contracts with customers have been restated as noted in
note 1.6 above. This arises from all software sales being classified as
agent and presented on a 'net' basis, thereby reducing Software revenue from
£393.8 million to £91.7 million.
Software
The Group's software revenue comprises the sale of various types of software
licences (including both cloud-based and non-cloud-based licences),
subscriptions and software assurance products.
Hardware
The Group's hardware revenue comprises the sale of items such as servers,
laptops and other devices.
Services internal
The Group's internal services revenue comprises internally provided consulting
services through its own internal resources.
Services external
The Group's external services revenue comprises the sale of externally
provided training and consulting services through third-party contractors.
Year ended 28 February 2023 Year ended 28 February 2022
(Restated)
£'000 £'000
Revenue by geographical regions
United Kingdom 177,882 140,382
Europe 4,358 4,235
Rest of world 2,181 1,219
184,421 145,836
3(b) Gross invoiced income by type
Year ended 28 February 2023 Year ended 28 February 2022
(Restated)
£'000 £'000
Software 1,346,110 1,136,039
Hardware 38,355 28,807
Services internal 28,454 21,761
Services external 26,395 21,517
1,439,314 1,208,124
Gross invoiced income 1,439,314 1,208,124 ((1))
Adjustment to gross invoiced income for income recognised as agent (1,254,893) (1,062,288)
Revenue 184,421 145,836
(1) The adjustment to gross invoiced income for income recognised as an
agent has been restated, refer note 1.6 above.
Gross invoiced income reflects gross income billed to customers adjusted for
deferred and accrued revenue items amounting to £5.5 million (2022: £4.3
million). The Group reports gross invoiced income as an alternative financial
KPI as management believes this measure allows further understanding of
business performance and position particularly in respect of working capital
and cash flow.
4 Material profit or loss items
The Group has identified several items included within administrative expenses
which are material due to the significance of their nature and/or amount.
These are listed separately here to provide a better understanding of the
financial performance of the Group:
Year ended 28 February 2023 Year ended 28 February 2022
Note £'000 £'000
Depreciation of property, plant and equipment 9 1,029 828
Depreciation of right-of-use assets 10 145 169
Loss on disposal of property, plant and equipment 3 15
Amortisation of acquired intangible assets 11 1,306 1,611
System support and maintenance 2,991 2,215
Share-based payment expenses 28 4,188 2,563
Operating lease charges - property 10 25 16
Foreign exchange gains (32) (38)
5 Employees
Year ended 28 February 2023 Year ended 28 February 2022
Employee benefit expense: £'000 £'000
Employee remuneration (including directors' remuneration ((1))) 40,725 34,027
Commissions and bonuses 22,299 18,552
Social security costs 8,158 6,437
Pension costs 1,413 1,169
Share-based payments expense 28 4,188 2,563
76,783 62,748
Classified as follows:
Cost of sales 13,527 9,282
Administrative expenses 63,256 53,466
76,783 62,748
(1) Directors' remuneration is included in the directors' remuneration
report.
Year ended 28 February 2023 Year ended 28 February 2022
The average monthly number of employees during the year was: Number Number
Sales - account management 285 228
Sales - support and specialists 199 209
Service delivery 204 146
Administration 173 141
861 724
Employee numbers has been reclassified this year to split sales support and
specialists from service delivery. We believe this provides a more useful
presentation of how the Group's employees are deployed. The employee benefit
expenses in relation to the service delivery employees are included within
cost of sales.
6 Auditors' remuneration
During the year, the Group obtained the following services from the company's
auditors and its associates:
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Fees payable to the company's auditors and its associates for the audit of the 281 198
parent company and consolidated financial statements
Fees payable to the company's auditors and its associates for other services:
Audit of the financial statements of the company's subsidiaries 372 317
Other fees 14 -
Non-audit services ((1)) 95 75
762 590
(1) Non-audit services in the current and prior year relate to the
auditors' review of our interim report issued in October 2022 (October 2021).
7 Finance costs
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Finance costs
Interest expense on financial liabilities measured at amortised cost (443) (532)
Interest expense on lease liability (48) (57)
Finance costs (491) (589)
8 Income tax expense
The major components of the Group's income tax expense for all
periods are:
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Current income tax charge in the year 10,483 8,561
Adjustment in respect of current income tax of previous years 66 150
Foreign taxation - 1
Total current income tax charge 10,549 8,712
Current year (402) (434)
Adjustments in respect of prior year (75) 5
Effect of changes in tax rates (101) 429
Deferred tax credit (578) -
Total tax charge 9,971 8,712
Reconciliation of total tax charge
The tax assessed for the year differs from the standard rate of
corporation tax in the UK applied to profit before tax:
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Profit before income tax 50,392 41,566
Income tax charge at the standard rate of corporation tax in the UK of 19% for 9,574 7,898
all periods
Effects of:
Non-deductible expenses 507 229
Foreign tax credits - 1
Adjustment to previous periods (9) 155
Effect of changes in tax rate (101) 429
Income tax charge reported in profit or loss 9,971 8,712
Amounts recognised directly in equity
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Aggregate deferred tax arising in the reporting period and not recognised in
net profit or loss or other comprehensive income but directly credited to
equity:
Deferred tax: share-based payments (24) 192
(24) 192
Changes affecting the future tax charge
Effective from 1 April 2023 the UK corporate tax rate increases to 25%, this
change has been used to rebase the deferred tax liability in both the current
and prior year.
As at 28 February 2023 As at 28 February 2022
Deferred tax liabilities £'000 £'000
The balance comprises temporary differences attributable to:
Intangible assets (1,008) (1,309)
Property, plant and equipment (884) (769)
Employee benefits 3 145
Provisions 65 53
Share-based payments 1,189 691
(635) (1,189)
As at 28 February 2023 As at 28 February 2022
Deferred tax liabilities £'000 £'000
At 1 March (1,189) (1,381)
Credited to profit or loss 578 -
(Charge)/credited to equity (24) 192
Carrying amount at end of year (635) (1,189)
The deferred tax asset and deferred tax liabilities carrying amounts at the
end of the year are set-off as they arise in the same jurisdiction and as such
there is a legally enforceable right to offset.
9 Property, plant and equipment
Freehold land and buildings Furniture, fittings and equipment
Computer equipment Computer software Motor vehicles
Total
£'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 March 2021 8,880 3,666 1,303 624 89 14,562
Additions 41 435 2 122 17 617
Disposals - (226) - - (5) (231)
At 28 February 2022 8,921 3,875 1,305 746 101 14,948
Additions 484 590 8 271 10 1,363
Disposals - (126) - - (7) (133)
At 28 February 2023 9,405 4,339 1,313 1,017 104 16,178
Depreciation
At 1 March 2021 1,791 2,943 913 601 39 6,287
On disposals - (213) - - (3) (216)
Charge for the year 352 353 76 25 22 828
At 28 February 2022 2,143 3,083 989 626 58 6,899
On disposals - (122) - - (8) (130)
Charge for the year 373 508 54 72 22 1,029
At 28 February 2023 2,516 3,469 1,043 698 72 7,798
Net book value
At 28 February 2022 6,778 792 316 120 43 8,049
At 28 February 2023 6,889 870 270 319 32 8,380
10 Leases
(i) Amounts recognised in the balance sheet
Motor vehicles
Buildings Total
Right-of-use assets £'000 £'000 £'000
Cost
At 1 March 2021 1,377 245 1,622
At 28 February 2022 and 28 February 2023 1,377 245 1,622
Depreciation
At 1 March 2021 304 221 525
Charge for the year 145 24 169
At 28 February 2022 449 245 694
Charge for the period 145 - 145
At 28 February 2023 594 245 839
Net book value
At 1 March 2021 1,073 24 1,097
At 28 February 2022 928 - 928
At 28 February 2023 783 - 783
As at As at As at
28 February 28 February 1 March 2021
2023 2022
Lease liabilities £'000 £'000 £'000
Current 75 185 202
Non-current 917 992 1,176
992 1,177 1,378
There were no additions to the right-of-use assets in the financial year ended
28 February 2023 (financial year ended 28 February 2022: £Nil).
(ii) Amounts recognised in the statement of profit or loss
The statement of profit or loss shows the following amounts relating to
leases:
Year ended 28 February 2023 Year ended 28 February 2022
Depreciation charge of right-of-use assets £'000 £'000
Buildings 145 145
Motor vehicles - 24
145 169
Interest expense (included in finance cost) 48 57
Expense relating to short-term leases (included in administrative expenses) 25 16
(iii) Changes in liabilities arising from financing activities
As at 1 March 2022 Cash flows As at 28 February 2023
Interest
£'000 £'000 £'000 £'000
Lease liabilities 1,177 (233) 48 992
Total liabilities from financing activities 1,177 (233) 48 992
1 March 2021 Cash flows 28 February 2022
Interest
£'000 £'000 £'000 £'000
Lease liabilities 1,378 (258) 57 1,177
Total liabilities from financing activities 1,378 (258) 57 1,177
11 Intangible assets
Customer relationships
Goodwill Brand Total
£'000 £'000 £'000 £'000
Cost
At 1 March 2021, 28 February 2022 and 28 February 2023 37,493 8,798 3,653 49,944
Amortisation
At 1 March 2021 - 3,007 2,494 5,501
Charge for the year - 880 731 1,611
At 28 February 2022 - 3,887 3,225 7,112
Charge for the year - 878 428 1,306
At 28 February 2023 - 4,765 3,653 8,418
Net book value
At 28 February 2022 37,493 4,911 428 42,832
At 28 February 2023 37,493 4,033 - 41,526
Determination of recoverable amount
The carrying value of indefinite useful life intangible assets and goodwill
are tested annually for impairment. For each CGU and for all periods
presented, the Group has assessed that the value in use represents the
recoverable amount. The future expected cash flows used in the value-in-use
models are based on management forecasts, over a five-year period, and
thereafter a reasonable rate of growth is applied based on current market
conditions. The recoverable amount of Bytes Software Services and Phoenix
Software is £720.1 million and £261.6 million respectively. For the
purpose of impairment assessments of goodwill, the goodwill balance is
allocated to the operating units which represent the lowest level within the
Group at which the goodwill is monitored for internal management purposes.
A summary of the goodwill per CGU, as well as assumptions applied for
impairment assessment purposes, is presented below:
Goodwill carrying amount
Long-term growth rate Discount rate
28 February 2023 % % £'000
Bytes Software Services 2 9.10 14,775
Phoenix Software 2 9.10 22,718
37,493
Goodwill carrying amount
Long-term growth rate Discount rate
28 February 2022 % % £'000
Bytes Software Services 2 8.54 14,775
Phoenix Software 2 8.54 22,718
37,493
Growth rates
The Group used a conservative growth rate of 2% which was applied beyond the
approved budget periods. The growth rate was consistent with publicly
available information relating to long-term average growth rates for the
market in which the respective CGU operated.
Discount rates
Discount rates used reflect both time value of money and other specific risks
relating to the relevant CGU. Pre-tax discount rates have been applied.
Sensitivities
The impacts of variations in the calculation of value-in-use of assumed growth
rate and pre-tax discount rates applied to the estimated future cash flows of
the CGUs have been estimated as follows:
Bytes Software Services Phoenix Software
28 February 2023 £'000 £'000
Headroom 675,427 229,245
1% increase in the pre-tax discount rate applied to the estimated future cash (94,815) (32,956)
flows
1% decrease in the pre-tax discount rate applied to the estimated future cash 126,339 43,885
flows
0.5% increase in the terminal growth rate from 2024 to 2028 45,179 15,660
0.5% decrease in the terminal growth rate from 2024 to 2028 (39,234) (13,599)
Bytes Software Services Phoenix Software
28 February 2022 £'000 £'000
Headroom 738,557 240,596
1% increase in the pre-tax discount rate applied to the estimated future cash (104,467) (36,204)
flows
1% decrease in the pre-tax discount rate applied to the estimated future cash 142,534 49,408
flows
0.5% increase in the terminal growth rate from 2023 to 2027 51,412 17,836
0.5% decrease in the terminal growth rate from 2023 to 2027 (44,109) (15,302)
None of the above sensitivities, taken either in isolation or aggregated,
indicates a potential impairment. The directors consider that there is no
reasonable possible change in the assumptions used in the sensitivities that
would result in an impairment of goodwill.
12 Contract assets
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Contract assets 11,081 6,716
As at 28 February 2023 As at 28 February 2022
Contract assets is further broken down as: £'000 £'000
Short-term contract assets 10,684 6,591
Long-term contract assets 397 125
11,081 6,716
Contract assets include £3.8 million (2022: £2.1 million) of deferred costs
relating to internal services contracts, and the recognition of accrued
revenue of £7.3 million (2022: £4.6 million) for certain large software
orders where performance obligations were satisfied in the period but not yet
invoiced to the customer at the period end.
13 Contract liabilities
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Contract liabilities 25,890 16,023
As at 28 February 2023 As at 28 February 2022
Contract liabilities is further broken down as: £'000 £'000
Short-term contract liabilities 23,914 14,528
Long-term contract liabilities 1,976 1,495
25,890 16,023
During the year, the Group recognised £14.5 million (2022: £10.0 million) of
revenue that was included in the contract liability balance at the beginning
of the period. The increase in contract liabilities reflects the rise in
internal services business where revenue has been deferred when the customer
is invoiced before the related performance obligations of the contract are
satisfied, and the deferral of certain large payments received in advance from
customers.
14 Inventories
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Inventories 58 96
58 96
Inventories include asset management subscription licences purchased in
advance for a specific customer that as yet haven't been consumed.
Inventories recognised as an expense in cost of sales during the year amounted
to £38,000 (28 February 2022: £495,000).
15 Financial assets and financial liabilities
This note provides information about the Group's financial instruments,
including:
· An overview of all financial instruments held by the Group
· Specific information about each type of financial instrument
· Accounting policies
· Information about determining the fair value of the instruments,
including judgements and estimation uncertainty involved.
The Group holds the following financial instruments:
As at 28 February 2023 As at 28 February 2022
Financial assets Note £'000 £'000
Financial assets at amortised cost:
Trade receivables 16 178,386 154,928
Other financial assets 16 5,896 1,501
184,282 156,429
As at 28 February 2023 As at 28 February 2022
Financial liabilities Note £'000 £'000
Financial liabilities at amortised cost:
Trade and other payables - current, excluding Payroll tax and other statutory 18 217,253 208,183
tax liabilities
Lease liabilities 10 992 1,177
218,245 209,360
The Group's exposure to various risks associated with the financial
instruments is discussed in note 24. The maximum exposure to credit risk at
the end of the reporting period is the carrying amount of each class of
financial assets mentioned above.
16 Trade and other receivables
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Financial assets
Gross trade receivables 179,928 155,678
Less: impairment allowance (1,542) (750)
Net trade receivables 178,386 154,928
Other receivables 5,896 1,501
184,282 156,429
Non-financial assets
Prepayments 1,638 1,181
1,638 1,181
Trade and other receivables 185,920 157,610
(i) Classification of trade receivables
Trade receivables are amounts due from customers for goods sold or services
performed in the ordinary course of business. They are generally due for
settlement within 30 days and are therefore all classified as current. Trade
receivables are recognised initially at the amount of consideration that is
unconditional, unless they contain significant financing components, in which
case they are recognised at fair value. The Group holds the trade receivables
with the objective of collecting the contractual cash flows, and so it
measures them subsequently at amortised cost using the effective interest
method. Details about the Group's impairment policies are provided in note
1.20.
(ii) Fair values of trade receivables
Due to the short-term nature of the current receivables, their carrying amount
is considered to be the same as their fair value.
(iii) Credit risk
Ageing and impairment analysis (excluding finance lease assets)
Current Past due 0 to 30 days Past due 31 to 60 days Past due 61 to 120 days Past due 121 to 365 days
Total
28 February 2022 £'000 £'000 £'000 £'000 £'000 £'000
Expected loss rate 0.06% 0.56% 6.67% 20.25% 100%
Gross carrying amount - trade receivables 133,031 16,968 5,027 514 138 155,678
Loss allowance 78 95 335 104 138 750
Current Past due 0 to 30 days Past due 31 to 60 days Past due 61 to 120 days Past due 121 to 365 days
Total
28 February 2023 £'000 £'000 £'000 £'000 £'000 £'000
Expected loss rate 0.09% 0.55% 6.39% 16.34% 92.68%
Gross carrying amount - trade receivables 145,832 25,343 6,760 1,310 683 179,928
Loss allowance 124 139 432 214 633 1,542
The closing loss allowances for trade receivables reconcile to the opening
loss allowances as follows:
As at 28 February 2023 As at 28 February 2022
Trade receivables £'000 £'000
Opening loss allowance at 1 March 750 724
Increase in loss allowance recognised in profit or loss during the period 937 149
Receivables written off during the year as uncollectable (145) (123)
Closing loss allowance 1,542 750
Trade receivables are written off where there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery
include, among others, the failure of a debtor to engage in a repayment plan
with the Group, and a failure to make contractual payments for a period of
greater than 120 days past due.
Impairment losses on trade receivables are presented as net impairment losses
within operating profit. Subsequent recoveries of amounts previously written
off are credited against the same line item.
(iv) Other receivables
Other receivables include accrued rebate income.
17 Cash and cash equivalents
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Cash at bank and in hand 73,019 67,118
73,019 67,118
18 Trade and other payables
As at 28 February 2023 As at 28 February 2022
£'000 £'000
Trade and other payables 138,307 129,430
Accrued expenses 78,946 78,753
Payroll tax and other statutory liabilities 14,464 9,429
231,717 217,612
Trade payables are unsecured and are usually paid within 45 days of
recognition.
The carrying amounts of trade and other payables are considered to be the same
as their fair values, due to their short-term nature.
19 Share capital and share premium
Number of shares Nominal value Share premium Total
Authorised, allotted, called up and fully paid £'000 £'000 £'000
At 1 March 2021 239,482,333 2,395 633,636 636,031
Shares issued during the year ((1)) - - - -
At 28 February 2022 and 28 February 2023 ((2), (3)) 239,482,333 2,395 633,636 636,031
(1) Shares issued during the prior year
During the current and prior year no new ordinary shares were issued by the
company.
(2) Ordinary
shares
Ordinary shares have a nominal value of £0.01. All ordinary shares in issue
rank pari passu and carry the same voting rights and entitlement to receive
dividends and other distributions declared or paid by the Group. The company
does not have a limited amount of authorised share capital.
(3) Share options
Information related to the company's share option schemes, including options
issued during the financial year and options outstanding at the end of the
reporting period is set out in note 28.
20 Share-based payment reserve
The following table shows the movements in these reserves during the year. All
movements relate to the Group's share-based payment schemes, further details
are provided in note 28.
Share-based payment reserve
Note £'000
Balance at 1 March 2021 317
Share-based payment expenses 28 2,563
Deferred tax 8 192
At 28 February 2022 3,072
Share-based payment expenses 28 4,188
Deferred tax 8 (25)
At 28 February 2023 7,235
21 Merger reserve
Year ended 28 February Year ended 28 February
2023 2022
£'000 £'000
Balance at 1 March 2021, 28 February 2022 and 28 February 2023 (644,375) (644,375)
(644,375) (644,375)
The merger reserve of £644.4 million arose in December 2019, on the date that
the Group demerged from its previous parent company. This is an accounting
reserve in equity representing the difference between the total nominal value
of the issued share capital acquired in Bytes Technology Limited of £1.10 and
the total consideration given of £644.4 million.
22 Retained earnings
Year ended 28 February Year ended 28 February
2023 2022
Movements in retained earnings were as follows: Note £'000 £'000
Balance at 1 March 52,839 24,775
Net profit for the period 40,421 32,854
Dividends 25(b) (30,654) (4,790)
62,606 52,839
23 Cash generated from operations
Year ended 28 February 2023 Year ended 28 February 2022
Note £'000 £'000
Profit before taxation 50,392 41,566
Adjustments for:
Depreciation and amortisation 4 2,480 2,608
Loss on disposal of property, plant and equipment 4 3 15
Non-cash employee benefits expense - share-based payments 4 4,188 2,563
Finance costs 7 491 589
(Increase)/decrease in contract assets (4,365) 677
Increase in trade and other receivables (28,310) (50,946)
Decrease in inventories 38 495
Increase in trade and other payables 14,105 60,491
Increase in contract liabilities 9,867 3,661
Cash generated from operations 48,889 61,719
24 Financial risk management
This note explains the Group's exposure to financial risks and how these risks
could affect the Group's future financial performance. Current year
consolidated profit or loss and statement of financial position information
has been included where relevant to add further context.
Management monitors the liquidity and cash flow risk of the Group carefully.
Cash flow is monitored by management on a regular basis and any working
capital requirement is funded by cash resources or access to the revolving
credit facility.
The main financial risks arising from the Group's activities are credit,
liquidity and currency risks. The Group's policy in respect of credit risk is
to require appropriate credit checks on potential customers before sales are
made. The Group's approach to credit risk is disclosed in note 16.
The Group's policy in respect of liquidity risk is to maintain readily
accessible bank deposit accounts to ensure that the company has sufficient
funds for its operations. The cash deposits are held in a mixture of
short-term deposits and current accounts which earn interest at a floating
rate.
The Group's policy in respect of currency risk, which primarily exists as a
result of foreign currency purchases, is to either sell in the currency of
purchase, maintain sufficient cash reserves in the appropriate foreign
currencies which can be used to meet foreign currency liabilities, or take out
forward currency contracts to cover the exposure.
24(a) Derivatives
Derivatives are only used for economic hedging purposes and not speculative
investments.
The Group has taken out forward currency contracts during the periods
presented but has not recognised either a forward currency asset or liability
at each period end as the fair value of the foreign currency forwards is
considered to be immaterial to the consolidated financial statements due to
the low volume and short-term nature of the contracts. Similarly, the
amounts recognised in profit or loss in relation to derivatives were
considered immaterial to disclose separately.
24(b) Foreign exchange risk
The Group's exposure to foreign currency risk at the end of the reporting
period, was as follows:
As at 28 February 2023 As at 28 February 2022
USD EUR NOK USD EUR NOK
£'000 £'000 £'000 £'000 £'000 £'000
Trade receivables 13,529 1,900 - 5,375 1,423 -
Cash and cash equivalents 250 214 - 3,093 75 -
Trade payables (15,286) (1,981) (221) (15,243) (2,078) (97)
(1,507) 133 (221) (6,775) (580) (97)
The following table demonstrates the profit before tax sensitivity to a
possible change in the currency exchange rates with GBP, all other variables
held constant.
As at 28 February 2023 As at 28 February 2022
GBP:USD GBP:EUR GBP:NOK GBP:USD GBP:EUR GBP:NOK
£'000 £'000 £'000 £'000 £'000 £'000
5% increase in rate 72 (6) 11 323 28 5
5% decrease in rate (79) 7 (12) (357) (31) (5)
The aggregate net foreign exchange gains/losses recognised in profit or loss
were:
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Total net foreign exchange gains in profit or loss 32 38
24(c) Liquidity risk
(1) Cash management
Prudent liquidity risk management implies maintaining sufficient cash to meet
obligations when due. The Group generates positive cash flows from operating
activities and these fund short-term working capital requirements. The Group
aims to maintain significant cash reserves and none of its cash reserves is
subject to restrictions. Access to cash is not restricted and all cash
balances could be drawn on immediately if required. Management monitors the
levels of cash deposits carefully and is comfortable that for normal operating
requirements, no further external borrowings are currently required.
At 28 February 2023, the Group had cash and cash equivalents of £73.0
million, see note 17. Management monitors rolling forecasts of the Group's
liquidity position (which comprises its cash and cash equivalents) on the
basis of expected cash flows generated from the Group's operations. These
forecasts are generally carried out at a local level in the operating
companies of the Group in accordance with practice and limits set by the Group
and take into account certain down-case scenarios.
(2) Revolving Credit Facility
On 17 May 2023 the Group entered into a new three-year committed Revolving
Credit Facility (RCF) for £30 million including an optional one-year
extension to 17 May 2027, and a non-committed £20 million accordion to
increase the availability of funding should it be required for future
activity. The new facility replaced the previous RCF which was entered into in
December 2020 and reduced to £30 million in December 2022. This was set to
expire in December 2023 but was cancelled, without penalty, on 17 May 2023, on
commencement of the new RCF. In December 2020, the Group incurred arrangement
fees of £0.4 million representing 0.75% of the initial £50 million facility
available at the time. The new facility has incurred an arrangement fee of
£0.1 million, being 0.4% of the new funds available. The Group has so far not
drawn down any amount on either the previous or new facility and to the extent
that there is no evidence that it is probable that some or all of the facility
will be drawn down, the fees are capitalised as a prepayment and amortised
over the initial three-year period of the facility. The facility also incurs a
commitment fee and utilisation fee, both of which are payable quarterly in
arrears. Under the terms of both the previous and new facilities, the Group is
required to comply with the following financial covenants:
· Interest cover: EBITDA (earnings before interest, tax, depreciation
and amortisation) to net finance charges for the past 12 months shall be
greater than 4.0 times
· Leverage: net debt to EBITDA for the past 12 months must not exceed
2.5 times.
The Group has complied with these covenants throughout the reporting period.
As at 28 February 2023, EBITDA to net finance charges was approximately 109
times (2022: 76 times). The Group has been in a net cash position as at 28
February 2023 and 28 February 2022 and has therefore complied with the Net
debt to EBITDA covenant.
(3) Contractual maturity of financial liabilities
The following table details the Group's remaining contractual maturity for its
financial liabilities based on undiscounted contractual payments:
Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total contractual cash flows Carrying amount
28 February 2023 Note £'000 £'000 £'000 £'000 £'000 £'000
Trade and other payables 18 217,253 - - - 217,253 217,253
Lease liabilities 10 116 463 545 - 1,124 992
217,369 463 545 - 218,377 218,245
Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total contractual cash flows Carrying amount
28 February 2022 Note £'000 £'000 £'000 £'000 £'000 £'000
Trade and other payables 18 208,183 - - - 208,183 208,183
Lease liabilities 10 231 116 694 313 1,354 1,177
208,414 116 694 313 209,537 209,360
25 Capital management
25(a) Risk management
For the purpose of the Group's capital management, capital includes issued
capital, ordinary shares, share premium and all other equity reserves
attributable to the equity holders of the parent. The primary objective of
the Group's capital management is to maximise shareholder value.
The Group manages its capital structure and makes adjustments in light of
changes in economic conditions and the requirements of shareholders. To
maintain or adjust the capital structure, the Group may adjust the dividend
payment to shareholders, return capital to shareholders or issue new shares.
To ensure an appropriate return for shareholders' capital invested in the
Group, management thoroughly evaluates all material revenue streams,
relationships with key vendors and potential acquisitions and approves them by
the Board, where applicable. The Group's dividend policy is based on the
profitability of the business and underlying growth in earnings of the Group,
as well as its capital requirements and cash flows. The Group's dividend
policy is to distribute 40% of the Group's post-tax pre-exceptional earnings
to shareholders in respect of each financial year. Subject to any cash
requirements for ongoing investment, the Board will consider returning excess
cash to shareholders over time.
25(b) Dividends
2023 2022
Pence per share Pence per share
Ordinary shares £'000 £'000
Interim dividend paid 2.40 5,748 2.00 4,790
Special dividend paid 6.20 14,848 - -
Final dividend paid 4.20 10,058
Total dividends attributable to ordinary shareholders 12.80 30,654 2.00 4,790
Dividends per share is calculated by dividing the dividend paid by the number
of ordinary shares in issue. Dividends are paid out of available distributable
reserves of the company.
The Board has proposed a final ordinary dividend of 5.1 pence and a special
dividend of 7.5 pence per share for the year ended 28 February 2023 to be paid
to shareholders on the register as at 21 July 2023. The aggregate of the
proposed dividends expected to be paid on 4 August 2023 is £30.2 million. The
proposed dividends per ordinary shares are subject to approval at the Annual
General Meeting and are not recognised as a liability in the consolidated
financial statements.
26 Capital commitments
At 28 February 2023, the Group had £Nil capital commitments (28 February
2022: £Nil).
27 Related-party transactions
In the ordinary course of business, the Group carries out transactions with
related parties, as defined by IAS 24 Related
Party Disclosures. Apart from those disclosed elsewhere in the consolidated
financial statements, material transactions
for the year are set out below:
27(a) Transactions with key management personnel
Key management personnel are defined as the directors (both executive and
non-executive) of Bytes Technology Group plc, Bytes Software Services Limited
and Phoenix Software Limited. Details of the compensation paid to the
directors of Bytes Technology Group plc as well as their shareholdings in the
Group are disclosed in the remuneration report.
Compensation of key management personnel of the Group
The remuneration of key management personnel, which consists of persons who
have been deemed to be discharging managerial responsibilities, is set out
below in aggregate for each of the categories specified in IAS 24 Related
Party Disclosures.
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Short-term employee benefits 4,158 3,598
Post-employment pension benefits 92 79
Total compensation paid to key management 4,250 3,677
The amounts disclosed in the table are the amounts recognised as an expense
during the reporting period related to key management personnel including
executive directors.
Key management personnel received a total of 565,782 share option awards
(2022: 391,000) at a weighted average exercise price of £1.33 (2022: £4.91).
Share-based payment charges include £1,006,423 (2022: £512,908) in respect
of key management personnel, refer to note 28 for details on the Group's
share-based payment incentive schemes.
27(b) Subsidiaries
Interests in subsidiaries are set out in note 30.
27(c) Outstanding balances arising from sales/purchases of services
There were no outstanding balances at the end of each reporting period.
28 Share-based payments
The Group established new equity-settled share-based payment incentive schemes
with effect from IPO. These share option awards have been accounted for as
equity-settled share-based payments. The fair value of the awards granted is
recognised as an expense over the vesting period. As noted in the prior year
Annual Report one-third of the annual bonus for the financial year ended 28
February 2022 awarded to each of the Company's executive directors is deferred
in shares for two years. This deferral has resulted in the granting of the
awards under the Deferred Bonus Plan during the year.
Performance Incentive Share Plan
Options granted under the Performance Incentive Share Plan (PISP) are for
shares in Bytes Technology Group plc. The exercise price of the options is a
nominal amount of £0.01. Performance conditions attached to the awards
granted in the current year are employee specific, in addition to which,
options will only vest if certain employment conditions are met. The fair
value of the share options is estimated at the grant date using a Monte Carlo
option pricing model for the element with market conditions and Black Scholes
option-pricing model for non-market conditions. The normal vesting date shall
be no earlier than the third anniversary of the grant date and not later than
the day before the tenth anniversary of the grant date. There is no cash
settlement of the options available under the scheme. During the year the
Group granted 552,480 (2022: nil) options. For the year ended 28 February
2023, 30,589 (2022: 45,153) options were forfeited, and no options were
exercised or expired.
Company Share Option Plan
Options granted under the Company Share Option Plan (CSOP) are for shares in
Bytes Technology Group plc. The exercise price of the options granted in the
current year was determined by the average of the last three dealing days
prior to the date of grant. There are no performance conditions attached to
the awards, but options will only vest if certain employment conditions are
met. The fair value at grant date is estimated at the grant date using a Black
Scholes option-pricing model. The normal vesting date shall be no earlier than
the third anniversary of the grant date and not later than the day before the
tenth anniversary of the grant date. There is no cash settlement of the
options available under the scheme. During the year the Group granted
2,904,100 (2022: 2,802,000) options. For the year ended 28 February 2023,
127,400 (2022: 63,000) options were forfeited, and no options were exercised
or expired.
Save as You Earn Scheme
Share options were granted to eligible employees under the Save As You Earn
Scheme (SAYE) during the year. Under the SAYE scheme, employees enter a
three-year savings contract in which they save a fixed amount each month in
return for their SAYE options. At the end of the three-year period, employees
can either exercise their options in exchange for shares in Bytes Technology
Group plc or have their savings returned to them in full. The exercise price
of the options represents a 20% discount to the exercise price of the CSOP
awards. The fair value at grant date is estimated using a Black Scholes
option-pricing model. There is no cash settlement of the options. During the
year the Group granted 722,863 (2022: 1,103,220) options. For the year ended
28 February 2023, 523,974 (2022: 49,815) options were forfeited, and no
options were exercised or expired.
Deferred Bonus Plan
Options granted under the Deferred Bonus Plan (DBP) are for shares in Bytes
Technology Group plc. The exercise price of the options is a nominal amount of
£0.01. There are no performance conditions attached to the awards, but
options will only vest if certain employment conditions are met. The fair
value at grant date is estimated at the grant date using a Black Scholes
option-pricing model. The normal vesting date shall be no earlier than the
second anniversary of the grant date. During the year the Group granted 35,842
options. No options granted under the DBP were forfeited, exercised or
expired.
Share-based payment employee expenses
Year ended 28 February 2023 Year ended 28 February 2022
£'000 £'000
Equity settled share-based payment expenses 4,188 2,563
There were no cancellations or modifications to the awards in 2023 or 2022.
Movements during the year
The following table illustrates the number and weighted average exercise
prices (WAEP) of, and movements in, share options during the year:
28 February 2023 28 February 2023 28 February 2022 28 February 2022
Number WAEP Number WAEP
Outstanding at 1 March 5,227,362 £3.43 1,480,110 £0.01
Granted during the year 4,215,285 £3.84 3,905,220 £4.72
Forfeited during the year (681,963) £3.98 (157,968) £3.26
Outstanding at 28 February 8,760,684 £3.59 5,227,362 £3.43
Exercisable at 28 February - - - -
The weighted average expected remaining contractual life for the share options
outstanding at 28 February 2023 was 2.9 years (2022: 3.2 years).
The weighted average fair value of options granted during the year was £1.63
(2022: £1.29).
The range of exercise prices for options outstanding at the end of the year
was £0.01 to £5.00 (2022: £0.01 to £5.00).
The tables below list the inputs to the models used for the awards granted
under the below plans for the years ended 28 February 2023 and 28 February
2022:
28 February 2023 28 February 2023 28 February 2023 28 February 2023
PISP CSOP SAYE DBP
Assumptions
Weighted average fair value at measurement date £4.06 £1.20 £1.38 £4.52
Expected dividend yield 1.52% 1.52% 1.54% 0.00%
Expected volatility 37% 34% 37% 35%
Risk-free interest rate 1.59% 1.72% 1.59% 1.53%
Expected life of options 3 years 5 years 3 years 2 years
Weighted average share price £4.53 £4.53 £4.48 £4.53
Model used Black Scholes and Monte Carlo Black Scholes Black Scholes Black Scholes
28 February 2022 28 February 2022
CSOP SAYE
Assumptions
Weighted average fair value at measurement date £1.26 £1.38
Expected dividend yield 1.26% 1.26%
Expected volatility 35% 35%
Risk-free interest rate 0.16% 0.22%
Expected life of options 5 years 3 years
Weighted average share price £5.00 £4.82
Model used Black Scholes Black Scholes
The expected life of the options is based on current expectations and is not
necessarily indicative of exercise patterns that may occur. The expected
volatility reflects the assumption that the historical volatility of the
company and publicly quoted companies in a similar sector to the company over
a period similar to the life of the options is indicative of future trends,
which may not necessarily be the actual outcome.
29 Earnings per share
The Group calculates earnings per share (EPS) on several different bases in
accordance with IFRS and prevailing South Africa requirements.
Year ended 28 February 2023 Year ended 28 February 2022
pence pence
Basic earnings per share 16.88 13.72
Diluted earnings per share 16.28 13.42
Headline earnings per share 16.88 13.72
Diluted headline earnings per share 16.28 13.42
Adjusted earnings per share(1) 18.83 15.46
Diluted adjusted earnings per share(1) 18.16 15.12
1 Refer note 29(c), had the prior year adjusted operating profit
included the effects of deferred tax on the adjusting items the adjusted
earnings per share would have been 15.30 and the diluted adjusted earnings per
share would have been 14.97.
29(a) Weighted average number of shares used as the denominator
Year ended 28 February 2023 Year ended 28 February 2022
Number Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share and headline earnings per share
239,482,333 239,482,333
Adjustments for calculation of diluted earnings per share and diluted headline
earnings per share:
- share options ((1)) 8,760,684 5,385,330
Weighted average number of ordinary shares and potential ordinary shares used
as the denominator in calculating diluted earnings per share and diluted
headline earnings per share
248,243,017 244,867,663
(1) Share options
Share options granted to employees under the Save As You Earn Scheme, Company
Share Option Plan and Bytes Technology Group plc performance incentive share
plan are considered to be potential ordinary shares. They have been included
in the determination of diluted earnings per share on the basis that all
employees are employed at the reporting date, and to the extent that they are
dilutive. The options have not been included in the determination of basic
earnings per share. Details relating to the share options are disclosed in
note 28.
29(b) Headline earnings per share
The Group is required to calculate headline earnings per share (HEPS) in
accordance with the JSE Listing Requirements. The table below reconciles the
profits attributable to ordinary shareholders to headline earnings and
summarises the calculation of basic and diluted HEPS:
Year ended 28 February 2023 Year ended 28 February 2022
Note pence pence
Profit for the period attributable to owners of the company 40,421 32,854
Adjusted for:
Loss on disposal of property, plant and equipment 4 3 15
Tax effect thereon (1) (3)
Headline profits attributable to owners of the company 40,423 32,866
29(c) Adjusted earnings per share
Adjusted earnings per share is a Group key alternative performance measure
which is consistent with the way that financial performance is measured by
senior management of the Group. It is calculated by dividing the adjusted
operating profit attributable to ordinary shareholders by the total number of
ordinary shares in issue at the end of the year. Adjusted operating profit is
calculated to reflect the underlying long-term performance of the Group by
excluding the impact of the following items:
· Share-based payment charges
· Acquired intangible assets amortisation.
The table below reconciles the profit for the financial year to adjusted
earnings and summarises the calculation of adjusted EPS:
Year ended 28 February 2023 Year ended 28 February 2022
Note £'000 £'000
Profits attributable to owners of the company 40,421 32,854
Adjusted for:
- Amortisation of acquired intangible assets 4 1,306 1,611
- Deferred tax effect on above((1)) (301) -
- Share-based payment charges 28 4,188 2,563
- Deferred tax effect on above((1)) (522) -
Adjusted profits attributable to owners of the company 45,092 37,028
(1) The prior year has not been restated to include the deferred tax
effect on the adjusting items as the impact was considered to be immaterial.
Had the prior year been restated the adjusted profits attributable to owners
of the company would have been £36.6 million.
30 Subsidiaries
The Group's subsidiaries included in the consolidated financial statements are
set out below. The country of incorporation is also their principal place of
business.
Country of incorporation Ownership interest
Name of entity Principal activities
Bytes Technology Holdco Limited ((1)) UK 100% Holding company
Bytes Technology Limited UK 100% Holding company
Bytes Software Services Limited UK 100% Providing cloud-based licensing and infrastructure and security sales within
both the corporate and public sectors
Blenheim Group Limited ((2)) UK 100% Holding company in prior year. The company transferred its investment in
Phoenix Software Limited to Bytes Technology Limited and became dormant during
February 2022.
Phoenix Software limited UK 100% Providing cloud-based licensing and infrastructure and security sales within
both the corporate and public sectors
License Dashboard Limited ((2)) UK 100% Dormant for all periods
Bytes Security Partnerships Limited ((2)) UK 100% Dormant for all periods
Bytes Technology Group Holdings Limited ((2)) UK 100% Dormant for all periods
Bytes Technology Training Limited ((2)) UK 100% Dormant for all periods
Elastabytes Limited ((2)) UK 50% Dormant for all periods
(1) Bytes Technology Holdco Limited is held directly by the company. All
other subsidiary undertakings are held indirectly by the company.
(2) Taken advantage of the audit exemption set out within section 479A of
the Companies Act 2006 for the year ended 28 February 2023.
The registered address of all of the Group subsidiaries included above is
Bytes House, Randalls Way, Leatherhead, Surrey, KT22 7TW.
31 Events after the reporting period
With effect from 18 April 2023 the Group acquired 25.1% interest in Cloud
Bridge Technologies Limited for £3.0 million. As disclosed in note 24(c)(2)
the Group replaced the current Revolving Credit Facility (RCF) with a new RCF.
These have no impact on the results reported for the year ended 28 February
2023. There are no other events after the reporting period that require
disclosure in these financial statements.
Corporate Information
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company's website.
Legislation in the UK governing the preparation and dissemination of financial
information differs from legislation in other jurisdictions.
Directors at the date of this report
PJM De Smedt
NR Murphy
AJ Holden
MS Phillips
E Schraner
A Vincent
DN Maw
Group Company Secretary
WK Groenewald
Company registration number
12935776
Bytes LEI
213800LA4DZLFBAC9O33
Registered office
Bytes House
Randalls Way
Leatherhead
Surrey
KT22 7TW
Corporate brokers and financial advisers
Numis Securities Limited
45 Gresham Street
London
EC2V 7BF
JSE sponsor
Investec Bank Limited
100 Grayston Drive
Sandton
Johannesburg
2196
South Africa
Auditor
Ernst & Young LLP
1 More London Place
London
SE1 2AF
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