REG - Bytes Technology Grp - Update on investigation

Bytes TechnologyAnnouncement

18/03/2024 07:15

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RNS Number : 1462H  Bytes Technology Group PLC  18 March 2024

 

18 March 2024

 

Bytes Technology Group plc

Update on investigation into resignation of

former Chief Executive Officer ("CEO")

 

Bytes Technology Group plc ("BTG", "the Company" or "the Group"), one of the
UK's leading software, security and cloud services specialists, provides the
following update on the Board's investigation into the circumstances related
to the resignation on 21 February 2024 of BTG's former CEO, Neil Murphy.

 

In a separate announcement today, the Company provides a scheduled trading
update on its financial performance in the year ended 29 February 2024, a
record year for the Group.

 

Circumstances around Mr Murphy's resignation

 

Mr Murphy's resignation was prompted by a voluntary request for information
("RFI") from the Financial Conduct Authority ("FCA"), which was sent to Mr
Murphy on 14 February 2024. The RFI indicated that Mr Murphy may have
conducted additional transactions that were not disclosed to the market or the
FCA since the Company's IPO. Mr Murphy informed the Board that he would share
his draft response to the FCA's inquiries at a scheduled Board meeting on 21
February 2024. However, on the morning of this meeting, Mr Murphy unexpectedly
resigned with immediate effect, indicating that he had failed to make
disclosures related to his share dealings, and this was announced by the
Company on the same day.

 

As subsequently notified to the Company and announced on 23 February 2024, it
transpired that Mr Murphy had engaged in unauthorized and undisclosed trading
of the Company's Ordinary Shares on 66 trading days between 6 January 2021 to
10 November 2023, totalling 119 transactions. This revelation came as a shock
to the other Board members, especially considering the Company's previous
investigation during 2023 into an unrelated share dealing disclosure matter
(as further described below) which had clearly highlighted to all Board
members the importance of absolute accuracy and transparency in all matters
related to share dealings by directors, PDMRs, and persons closely associated
with them ("PCAs").

 

Subsequently, on 12 March 2024, Mr. Murphy's lawyers provided the Company with
additional information outlining 15 additional transactions on 10 different
trading days conducted by Mr Murphy on behalf of his wife, between 29 December
2021 and 20 November 2023. The Company disclosed this information to the
London Stock Exchange (LSE) and Johannesburg Stock Exchange (JSE) on 13 March
2024. Additionally, on 12 March 2024, Mr. Murphy, through his legal
representatives, reiterated that there were no further relevant transactions.

 

Given Mr Murphy's longstanding leadership position in the Company, the Board
of Directors is saddened as well as shocked by Mr Murphy's actions, which it
finds hard to comprehend. His actions were entirely at odds with the values of
openness, honesty, and transparency which have been and which remain central
to the Group's culture and to its ongoing success.

 

Revised Director's Shareholding information

 

As a result of these undisclosed trades, BTG is aware that each Annual Report
and Accounts for the three years ended 28 February 2021 (FY21), 28 February
2022 (FY22) and 28 February 2023 (FY23) had incorrect Directors' Shareholding
disclosures for Mr Murphy despite him having represented those disclosures to
the Company and the Group's Auditors, Ernst & Young LLP ("EY") as part of
the External Audit. Taking all the disclosed and undisclosed transactions
known by the Company to date into account in respect of Mr Murphy and his
wife, the Company has produced the following reconciliations to the previously
announced PDMR notifications issued by the Company in respect of Mr Murphy and
the disclosed positions in the FY21, FY22 and FY23 Annual Report and
Accounts.  Mr Murphy, through his lawyers, has been provided with the
Company's reconciliations and has confirmed that the information is correct
and there are no other transactions that need to be considered.

 

Neil Murphy's PDMR announcements

 

 Date       PDMR announcement holding  Announced change in holding  Intervening undisclosed trades  Revised  holding (unaudited)   Note  Disclosed vs Revised
 17-Dec-20  4,190,941                  -                            -                               4,190,941                            -
 14-Jan-22  3,690,941                  (500,000)                    235,085                         3,926,026                      1     (235,085)
 06-Jan-23  3,735,424                  44,483                       93,322                          4,063,831                      2     (328,407)
 01-Feb-23  3,786,218                  50,794                       (63,740)                        4,050,885                      2     (264,667)
 22-Jun-23  2,836,218                  (950,000)                    326                             3,101,211                      2     (264,993)
 27-Nov-23  2,890,218                  54,000                       (264,993)                       2,890,218                            -

 

Annual Report Disclosures

 

 FY    Disclosure date  Disclosed holding  Total undisclosed trades  Revised holding (unaudited)  Note  Disclosed vs Revised
 FY21  28-Feb-21        4,190,941          8,852                     4,199,793                          (8,852)
 FY22  28-Feb-22        3,690,941          267,421                   3,958,362                    1     (267,421)
 FY23  28-Feb-23        3,786,218          264,667                   4,050,885                    2     (264,667)

 

Notes

Of Mr Murphy's revised holding:-

1.   as at these dates, 6,556 Ordinary Shares were beneficially owned by his
wife, Alison Murphy.

2.   as at these dates, 14,992 Ordinary Shares were beneficially owned by
his wife, Alison Murphy.

 

The Company is cooperating fully with the FCA and provided a response to FCA's
RFI on 9 March 2024 that pertains to the Company's processes and procedures
and will respond to any further requests to assist the FCA in a timely manner.

 

Previous investigation during year ended 29 February 2024 ("FY24")

 

Earlier in FY24, the Board undertook an externally facilitated review of the
circumstances relating to a share purchase by a PCA of former non-executive
director Alison Vincent not being notified to the Company.  The Board has
since implemented the recommendations from that investigation.

 

On 14 July 2023, the Company issued a notification to the market detailing a
purchase of 608 ordinary shares by a PCA of Alison Vincent that had taken
place on 29 March 2022. The Company was not properly notified of the full
details of this trade until 30 May 2023. At that time, the Company did not
issue a notification to the market regarding this trade as the value of this
PCA transaction fell below the de minimis threshold of EUR 5,000 under Article
19(8) of the Market Abuse Regulation (EU) 596/2014, which is part of English
law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR"). At the
Company's Board meeting on 11 July 2023, the Board confirmed that the
Company's Securities Dealing Code did not include this de minimis exclusion
and its policy was to disclose all PDMR Dealings notified to the Company to
the market via RNS. The Company then issued the 14 July 2023 RNS.

 

The Board also noted that: (i) the transaction had occurred during a Company
Closed Period (but not in a Closed Period under UK MAR and not at a time where
any Inside Information existed) and it was the Company's policy under its
Securities Dealing Code that PDMRs are required to notify their PCAs of
Company Closed Periods and take steps to prevent them dealing in such periods;
and (ii) the Directors' Shareholding information in the FY22 and FY23 Annual
Report and Accounts for the years was incorrect with respect to the
shareholding of Alison Vincent and her PCAs.

 

To establish the root cause of these issues and make recommendations for
improvement, the Board appointed an independent committee of the Board. The
committee engaged PwC to undertake independent investigative work to establish
the facts of what had happened and to advise whether the FY22 or FY23 Annual
Report and Accounts would need to be revised. Furthermore, Travers Smith LLP,
the Company's external legal counsel, provided advice as to whether certain
regulations had been breached. Both firms were asked to make recommendations
for improvement in the Company's corporate governance and PDMR share dealing
processes. The committee also engaged with EY, the Company's external
auditors, in respect of the incorrect disclosure in the Directors'
Remuneration Report on the Directors' shareholdings in the FY22 and FY23
Annual Reports.

 

The committee completed its work in early October 2023. The conclusion of its
investigation was that the FY23 Annual Report and Accounts did not need to be
reissued. There will be a prior year adjustment to the Directors'
shareholdings table in this year's Directors' Remuneration Report and
recommendations from the committee provided by both PwC and Travers Smith have
been implemented and the Company is maintaining records of ongoing activities
to monitor progress.

 

Throughout this investigation, it was emphasised with great clarity to all
Directors and PDMRs that any share dealings involving the Company's shares
must be reported to the Company. At no time during the period from 14 July
2023 to 20 February 2024 did Mr Murphy disclose to the Board his own nor his
PCA's incorrect shareholding position in the FY21, FY22 and FY23 Annual Report
and Accounts.

 

 

Current investigation

 

The Board has now appointed another independent committee of the Board to
investigate the resignation of Mr Murphy and his undisclosed share
transactions that were not in accordance with the Company's Securities Dealing
Code. PwC and Travers Smith are advising the committee.  The outcome of the
committee's investigation will be shared with EY, the external auditors, in
the context of their current year Audit. The independent committee will work
with the Audit and the Remuneration Committees to ensure the proper
disclosures are made, and a further prior year adjustment made, to the
Directors' shareholdings table in this year's Directors' Remuneration Report.

Once the committee has completed its investigation and reported to the Board,
the Company will be able to provide a date for the release of its preliminary
results for FY24.  It is currently envisaged that this will be in late May or
early June 2024.

 

End

 

Bytes Technology Group plc

Patrick De Smedt, Chairman

Mike Phillips, Senior Independent Director and Chair of Audit Committee

Tel: +44 (0)1372 418 500

 

Headland Consultancy
Stephen Malthouse

Henry Wallers

Jack Gault

Tel: +44 (0) 20 3805 4822

Email: bytes@headlandconsultancy.com (about:blank)

 

About Bytes Technology Group plc:

BTG is one of the UK and Ireland's leading providers of IT software offerings
and solutions, with a focus on cloud and security products. The Company
enables effective and cost-efficient technology sourcing, adoption and
management across software services, including in the areas of security, cloud
and AI solutions. It 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 Company has a primary listing on the Main Market of the London Stock
Exchange and a secondary listing on the Johannesburg Stock Exchange.

 

 

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