REG - Bytes Technology Grp - Audited Results
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RNS Number : 3698I Bytes Technology Group PLC 13 May 2025
13 May 2025
Bytes Technology Group Plc
("BTG" or "the Group" or "the Company")
Audited results for the year ended 28 February 2025
Strong partnerships drive consistent growth
Bytes Technology Group plc (LSE: BYIT, JSE: BYI), one of the UK and Ireland's
leading software, security, AI and cloud services specialists, today announces
its financial results for the year ended 28 February 2025 (2024/25).
Financial performance
Year ended 28 February 2025 Year ended 29 February 2024 % change year on year
Gross invoiced income (GII)(1) £2,099.8m £1,823.0m 15.2
Revenue(2) £217.1m £207.0m 4.9
Gross profit (GP) £163.3m £145.8m 12.0
Operating profit £66.4m £56.7m 17.1
Operating profit/GP% 40.7% 38.9%
Cash £113.1m £88.8m 27.4
Cash conversion(3) 113.8% 116.4%
Earnings per share (pence) 22.78 19.55 16.5
Final dividend per share (pence) 6.9 6.0 15.0
Special dividend per share (pence) 10.0 8.7 14.9
Financial highlights
- GII exceeded £2bn for the first time, increasing by 15.2%, primarily
driven by software.
- GP growth of 12.0%, with 8.9% corporate growth and 18.2% public sector
growth, and double-digit growth in software and services.
- Operating profit increased by 17.1%, with the operating profit / GP
margin increasing to 40.7%.
- Final ordinary dividend of 6.9p, resulting in a full-year dividend of
10.0p, up 15.0%, together with a special dividend of 10.0p.
- Strong balance sheet with closing cash of £113m and 114% cash
conversion.
(1) GII is a non-International Financial Reporting Standards (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.
(2) Revenue is reported in accordance with IFRS 15 Revenue from Contracts with
Customers. Under this standard, the Group is required to exercise judgement 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 GP
achieved on the contract and not the gross income billed to the customer). Our
key financial metrics of GII, GP, adjusted operating profit and cash
conversion are unaffected by this judgement.
(3) Cash conversion is a non-IFRS alternative performance measure that divides
cash generated from operations less capital expenditure (together, free cash
flow) by operating profit. In prior years, the measure divided 'free cash
flow' by adjusted operating profit. Accordingly the previously reported cash
conversion for the year ended 29 February 2024 of 104.3% has been revised to
116.4% above.
Operational highlights
- Existing customers contributed 97% of our GP in this year (2023/24:
97%), at a renewal rate of 109% (2023/24: 109%).
- Headcount growth of 17.8% to 1,245 (29 February 2024: 1,057), with
focus on bolstering sales and service delivery teams while ensuring support
areas also grow to support the expanding business.
- Continued to grow our physical footprint by opening offices in
Sunderland and Portsmouth, expanding floorspace in London and, towards the end
of the year, the acquisition of two buildings adjacent to our Leatherhead
office to cater for our further expansion
- Renewed our Microsoft Azure Expert status for provision of managed
services and secured more security and cloud specialism.
- Received multiple vendor awards, including from Palo Alto Networks,
Axonius, Check Point, Sophos, Cato Networks, Bitdefender, Adobe and Druva.
- Both Bytes Software Services and Phoenix Software named among the UK's
top 50 Best Workplaces 2024.
Sam Mudd, Chief Executive Officer, said:
"I am proud to report another strong set of results for BTG, marked by a
significant rise in operating profit. This performance reflects robust and
sustained demand for our comprehensive suite of software, solutions, and
services. Despite a challenging macroeconomic environment, we have not only
deepened our relationships with existing clients-securing a greater share of
their IT spend-but also successfully expanded our footprint across both public
and corporate sectors.
The Group continues to make investments in personnel, systems, services and
new vendor accreditations to drive growth and support our customers to
navigate the complexities of the evolving IT market where innovation, cloud
and security are only becoming more important. The strength of our
relationships with Microsoft and many other top-tier vendors, such as Adobe,
AWS, Check Point, Dell, VMware and Service Now, allows us to seize exciting
opportunities in cloud adoption, data and workload migrations, storage,
security and virtualisation technologies. We continue to expand our
collaboration with customers as they roll out emerging AI technologies like
Copilot, working closely with their teams to embed these tools into their
businesses to support growth and drive efficiency.
The sustained demand in structural growth areas such as cloud, security and
AI, our commitment to customer service, our expanding technical capabilities
and our high levels of accreditation underpin our confidence for continued
strong growth in our financial year 2025/26.
I have been hugely impressed by the commitment and professionalism of all of
our staff as they remained focused on delivering our strategic priorities in
2024/25, and wish to extend my gratitude for their hard work and dedication to
the business. Finally, I would like to thank our clients for their support and
entrusting their business to us. Together, our staff and customers are our
lifeblood and will always be our top priority."
Outlook
The Group traded strongly in financial year 2024/25, while operating in highly
competitive markets and despite challenging macroeconomic conditions. Our
focus remains on executing our growth strategy by nurturing existing customer
relationships, extending our strong vendor partnerships, and leveraging the
technical skills of our service delivery teams. We are well positioned to
respond to the evolving demands we see in our markets, including cloud
computing, cybersecurity, AI and managed services and deliver another year of
double-digit gross profit growth together with high single-digit operating
profit growth in financial year 2025/26.
Analyst and investor presentation
A presentation for sell-side analysts and investors will be held today at
09:30 (BST) via a video webcast that can be accessed at:
https://sparklive.lseg.com/BytesTechnologyGroup/events/5e028343-b396-4384-a339-1cb2d82ae8eb/btg-plc-full-year-results
(https://url.uk.m.mimecastprotect.com/s/KKeLCyJDMurPOzcZfGfxecvQ?domain=sparklive.lseg.com)
A recording of the webcast will be available after the event at bytesplc.com
(http://www.bytesplc.com/) . The announcement and presentation will be
available at bytesplc.com (http://www.bytesplc.com/) from 07:00 and 09:00
(BST), respectively.
Enquiries:
Bytes Technology Group plc Tel: +44 (0)1372 418500
Sam Mudd, Chief Executive Officer
Andrew Holden, Chief Financial Officer
James Zaremba, Investor Relations
Sodali & Co Tel: +44 (0)2072 501446
Elly Williamson
Jane Glover
Maria Zander
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 because 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. Except as
required by law or by the UK Listing Rules of the Financial Conduct 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.
_________________________________________________________________________________________
Chief Executive Officer's review
Performance overview
At BTG we are driven by a clear vision: to help organisations succeed in a
world of change, through trusted partnerships and transformative technology.
I'm proud to say that in 2024/25 we lived up to this vision. Thanks to our
great people, across Bytes Software Services and Phoenix Software, our loyal
customers and our vendor partners, we helped more businesses and public sector
organisations than ever to meet their objectives through innovative IT
solutions.
In doing so we achieved another strong set of financial results, with a 15.2%
increase in gross invoiced income, a 12.0% rise in gross profit, a 17.1%
increase in operating profit and over 100% cash conversion. We have doubled
all these income metrics in our five years as a listed entity, while achieving
more than 100% cash conversion, enabling us to distribute the majority of
these growing earnings to shareholders while maintaining a strong balance
sheet - and, our track record of double-digit gross profit growth now runs
well over a decade, with most of our current senior management with us
throughout this period.
This strong performance comes despite the challenging economic climate,
underpinned by our broad range of software and IT services offerings from
leading vendors and software publishers, the robust nature of IT spending
across the UK and Ireland, our highly diversified customer base and our
ability to gain market share. We estimate that our share of the UK and Irish
markets is around 4%, and we have updated our medium-term plan to ensure we
continue to take advantage of this market share opportunity and our positive
exposure to some of the faster-growing areas of IT budgets in cloud, security,
data and AI.
Value proposition
Customers choose to partner with BTG because of the broad range of solutions
and services we offer, including multi-cloud migration and adoption, digital
transformation, storage, AI and a wide array of security products. Many have
built long-standing relationships with us over many years, underpinned by our
excellent software advisory expertise and knowledge around procurement routes,
which enables us to guide customers on best value. We intend to double down on
this strength by investing more in pre-sales and specialist technical skills,
allowing us to service a larger market and scale up to meet our customers'
needs. We are also actively monitoring opportunities to accelerate our
capability through M&A, with a focus on cross-sell potential, vendor
specialism and solutions expertise, benchmarking for quality and cultural fit
against our existing business.
Examples of our services delivery capability include a consultancy team with
expertise across the entire Microsoft Cloud and AI portfolio; our security
operation centre and 24x7 Microsoft Cloud Solutions Provider (CSP) support
offering; plus governance, risk and compliance (GRC), and software asset
management (SAM) and IT asset management (ITAM) solutions, including licensing
spend optimisation supported by our own IP in the form of Quantum and License
Dashboard. The expansion of our IT services capability is further enhanced by
the renewal of our Microsoft Azure Expert status for providing managed
services, along with attaining 11 service delivery specialisations (four in
security solutions) and six solution-partner designations from Microsoft.
We have seen strong interest in AI products, including Microsoft's Copilot for
M365 and we continue to develop associated in-house services to support
customer readiness and adoption. We will continue to expand our existing
in-house AI-dedicated teams, creating repeatable sector-specific solutions
with broader data and generative AI (GenAI) services across our vendor
offerings as this income stream continues to grow.
In addition to our partnership with Microsoft, we have also continued to
deepen our relationships with other key partners, and are especially pleased
to have been recognised by leading industry vendors including Palo Alto
Networks, HP, Nutanix, Check Point, Sophos, Cato Networks, Bitdefender, Adobe
and Druva, reflecting the status and high esteem that the Group has with
global technology leaders. These awards are highly competitive, and our
success is testament to the expertise of our staff, our collaborative approach
with partners and the customer success stories that we deliver.
Vendor alignment
We work with our vendors to align our sales efforts and service offerings with
their strategic objectives, and they incentivise us accordingly. This means
staying agile to adapt to vendors' incentive programme updates - an ongoing
part of our business with which we are well accustomed. Microsoft channel
incentives are frequently changed, and we have a good track record of reacting
to these while maintaining gross profit levels.
This year, Microsoft communicated a particular amendment to its enterprise
agreement program, reducing certain transactional incentives, in advance of it
taking effect in January 2025. This provided time for us to prepare and to
realign our software and services offerings, as we have often done in the
past, with heightened focus on transitioning corporate customers to CSP and
providing more services, both in line with our existing strategy. We were able
to manage the impact in the final two months of our financial year with our
gross profit growth in that period remaining in line with the overall gross
profit growth rate for the full year. We were also pleased that Microsoft
recognised that enterprise agreements remain a key part of public sector
procurement, with a smaller rate reduction applied, which helped mitigate the
impact of the changes as we entered the new financial year with March and
April being higher volume months for public sector contracts.
Going forward we believe our wide vendor landscape and extensive range of
products and services will enable us to absorb individual program changes such
as this and drive our continued growth, and that our focus on customers with
fewer than 5,000 employees remains a sweet spot with our vendors who value our
efficient reach into this part of the market.
People
We are proud of the energy, enthusiasm and professionalism demonstrated by our
people, now totalling 1,245 staff across multiple offices and regions. They do
a tremendous job supporting our customers and providing outstanding service.
We continue to focus on targeted recruitment and training, and on attracting
talent into front-end sales, delivery teams and all supporting areas, and on
apprentices through to senior roles to help with our ambitious growth plans.
As a management team, we are extremely pleased with the way our people
continue to work hard in these challenging times, and embrace our
collaborative, team-based culture. People are at the heart of business and
following a year of external and internal transition I am committed to
improving this year's Employee Net Promoter Score ('eNPS') of 57 which, while
still above the industry average, is below the previous high level of 71. To
harness the strength of our business further, and protect our culture as we
grow, we will appoint our first chief people officer in the 2025/26 financial
year.
In August 2024 we launched our fourth Share Save Plan, which has again been
well received by our employees, with more than 50% participating in one or
more of these plans. August 2024 also saw the vesting of our first Share Save
Plan, which was launched in 2021, with participants now able to exercise their
options and become shareholders in the BTG Group.
To support the growth in sales and people, we are investing in both our
internal and customer-facing systems and in our office environments, including
expanding our regional presence with new offices in Sunderland and Portsmouth
and purchasing the two buildings immediately adjacent to our existing offices
in Leatherhead, to cater for our further expansion. This will improve our
staff user experience and drive internal efficiencies, while more closely
supporting our customers and making it easier for them to do business with us.
As an evolution of our customer-centric approach, we have realigned our
corporate sales teams from a generalist structure into enterprise (>10k
seats), corporate (2-10k seats), and mid-market (<2k seats) focused teams.
This includes investing in senior leadership for these teams, to increase the
relevance of their go-to-market approaches and customer experiences to their
customer bases. This also bodes well with our vendors, especially Microsoft,
which align in this manner and mirrors the successful segmentation we have
operated in our public sector team for some time.
Sustainability
We are committed to implementing our strategy in a responsible manner, with
sustainability rooted in everything we do. Our Sustainability Framework aims
to deliver positive outcomes for our stakeholders across the key themes 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 that
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
throughout 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. More details
of our sustainability initiatives are set out below.
Dividend
Our dividend policy is to distribute 40-50% of the Group's post-tax
pre-exceptional earnings to shareholders by way of normal dividends increasing
from 40% in 2023/24 to reflect share-based payments no longer being treated as
exceptional. Accordingly, we are pleased to confirm that the Board has
proposed a final dividend of 6.9 pence per share and an additional special
dividend of 10.0 pence per share that, subject to shareholder approval, will
both be paid on 25 July 2025 to shareholders on the register at 11 July 2025.
Continued focus on environment, social and governance
Our approach to responsible business and environment, social and governance
(ESG) is aimed at helping to build a sustainable future and create long-term
value for the Group and its stakeholders. Our strategy is underpinned by our
purpose and values, which foster an aligned culture across the organisation.
During the period, we continued to progress our ESG initiatives in the
following ways.
Achieved Science Based Targets initiative validation and improved rating
scores
At the end of June 2024, we received Science Based Targets initiative (SBTi)
validation for our near-term and net zero carbon reduction targets - and, we
continue to align our activities to our Scope 1 and 2 targets for 2025/26. As
part of the continual commitment to disclosures and transparency, we made our
annual submission to the CDP for 2024/25 and were pleased to receive a B
rating - an increase from a C rating in 2023/24. This comes in addition to our
ISS ESG Corporate Rating, which also increased in 2024/25 from a C- to a B-,
and which is well within the top decile for our peer group. To move our
sustainability goals forward, we initiated a carbon literacy awareness
programme to educate, inform and engage employees.
We continue to monitor the progress of the IFRS S1 and S2 standards being
adopted by the UK Government through the UK Sustainability Reporting
Standards, and will align with these as required. The standards will
incorporate the recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD), so we expect to be in a good position to transition,
having fully complied with the TCFD's recommendations in our previous Annual
Report. Within our businesses, we are supporting the evolution to greener
transport to reduce business travel and commuting emissions. The Group
successfully implemented an electric vehicle scheme in 2023/24, which has
continued to expand across the business in 2024/25. Our York office added
solar panels early in 2024/25, which continues to support carbon reduction and
increases energy security. Self-generated energy is also being assessed for
our other owned offices.
Strong inclusive culture
Employee support and wellbeing continue to be key focus areas for the Group,
with our hybrid working policy supporting a healthier work-life balance. We
continue to measure the impact of our wellbeing initiatives through the annual
employee net promoter score (eNPS) survey. Understanding diversity within our
business has also been a focus across the Group, with the roll-out of
voluntary self-reporting for gender, ethnicity, disability and neurodiversity.
A more detailed understanding of the demographics of our business will help to
attract and retain talent and support innovation through diversity of thought.
Our strong culture remains a driving force behind our successful growth. We
continue to support this through staff events and incentive trips and by
developing our people with continued learning and training opportunities.
There has been an expansion of our apprenticeship scheme into more areas of
the business and into degree-level apprenticeship programmes. We engage with
staff through various channels and several improvements have been made based
on their ideas and initiatives. During 2024/25, we continued to support our
communities through donations, fundraising events and volunteer days, such as
with the Wildlife Aid Foundation, the Rainbow Trust and St Leonard's Hospice.
Board composition and committee memberships
On 25 March 2024, Erika Schraner was appointed as senior independent director
and Interim Chair of the Audit Committee, following the resignation of Mike
Phillips as an independent non-executive director. At the same time, Shruthi
Chindalur assumed the role of designated non-executive director for employee
engagement. Sam Mudd was appointed as Interim CEO on 21 February 2024 and as
CEO on 10 May 2024.
On 1 June 2024, two additional Board appointments were made, and the ESG
Committee was established. Ross Paterson was appointed as an independent
non-executive director, Chair of the Audit Committee and a member of the
Nomination, the Remuneration and the ESG Committees. Anna Vikström Persson
was appointed as an independent non-executive director, Chair of the ESG
Committee and a member of the Audit, the Nomination and the Remuneration
Committees.
Chief Financial Officer's review
Year ended 28 February 2025 Year ended 29 February 2024 Change
Income statement £'m £'m %
Gross invoiced income (GII) 2,099.8 1,823.0 15.2
GII split by product:
Software 2,005.3 1,722.0 16.5
Hardware 33.2 41.4 (19.8)
Services internal(1) 34.0 31.5 7.9
Services external(2) 27.3 28.1 (2.8)
Netting adjustment (1,882.7) (1,616.0) 16.5
Revenue 217.1 207.0 4.9
Revenue split by product:
Software 146.0 130.4 12.0
Hardware 33.2 41.4 (19.8)
Services internal(1) 34.0 31.5 7.9
Services external(2) 3.9 3.7 5.4
Gross profit (GP) 163.3 145.8 12.0
GP/GII% 7.8% 8.0%
Administrative expenses 96.9 89.1 8.8
Administrative expenses split:
Employee costs 78.1 71.2 9.7
Other administrative expenses 18.8 17.9 5.0
Operating profit 66.4 56.7 17.1
Operating profit/GP% 40.7% 38.9%
Add back:
Share-based payments 5.1 5.7 (10.5)
Amortisation of acquired intangible assets 0.9 0.9 -
Adjusted operating profit (AOP) 72.4 63.3 14.4
Interest income 8.5 5.1 66.7
Finance costs (0.3) (0.4) (25.0)
Share of profit of associate(3) - 0.2 (100.0)
Profit before tax 74.6 61.6 21.1
Income tax expense (19.8) (14.7) 34.7
Effective tax rate 26.5% 23.9%
Profit after tax 54.8 46.9 16.8
Add back:
40.7%
38.9%
Share-based payments
5.1
5.7
(10.5)
Amortisation of acquired intangible assets
0.9
0.9
-
Adjusted operating profit (AOP)
72.4
63.3
14.4
Interest income
Finance costs
Share of profit of associate(3)
8.5
(0.3)
-
5.1
(0.4)
0.2
66.7
(25.0)
(100.0)
Profit before tax
74.6
61.6
21.1
Income tax expense
(19.8)
(14.7)
34.7
Effective tax rate
26.5%
23.9%
Profit after tax
54.8
46.9
16.8
(1) Provision of services to customers using the Group's own internal
resources.
(2) Provision of services to customers using third-party contractors.
(3) Cloud Bridge Technologies, 25.1% share of profit of associate.
Gross invoiced income
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 - and has a direct influence on our
movements in working capital. However, it does not capture all the IT spend we
help our customers with because, in some cases, our vendor partners invoice
the customer directly and pay us a fee which is a percentage of their sales
value, and which we recognise within our GII, revenue and GP.
GII has increased by 15.2% year on year, exceeding £2bn for the first time to
reach £2,099.8m (2023/24: £1,823.0m), driven by software and with continued
strong growth in public sector which contributed 65% of total GII (2023/24:
62%). While growth has reduced compared to 2023/24 (26.7%), the prior year was
boosted by some exceptionally large public sector contract wins. These are now
in their second year and have become established in our annuity income, with
the agreements running over three to five years.
Revenue
Revenue is reported in accordance with IFRS 15 with hardware and internal
services reported gross (principal) and software and external services
reported net (agent), which means revenue reflects changes in the mix of
business but is often not a good indicator of underlying growth.
This reporting of revenue as a mix of GP and GII across the four income
streams has given rise to a 4.9% increase, because the growth in software GP
(reported net) is outweighed by the reduction in the hardware GII (reported
gross). So, given revenue is a mix of metrics, we focus on GP to provide a
consistent measure of our sales and profit performance.
Gross profit
GP, our primary measure of sales performance, has grown by £17.5m, up 12.0%
year on year to £163.3m (2023/24: £145.8m), with the second six months
showing strongly at more than 15% growth (compared to 9% in the first half).
Breaking this down by income stream, the Group's two most strategic focus
areas, software and internal services, have both achieved double-digit growth.
Software GP is up by 12.0% to £146.1m (2023/24: £130.4m), and with only a
very small decline in GP/GII%. This achievement includes the effects of the
first two months of Microsoft incentive changes, where we have implemented
mitigation plans to help offset the impact.
Internal services GP is up by 27.9% to £8.7m (2023/24: £6.8m), as we
continue to invest significantly in our delivery staff to drive our security,
cloud and AI solutions. We have been supported in these areas by increasing
levels of Microsoft funding, for both internal investments and customer
engagements.
Hardware GP declined by 6.1% to £4.6m (2023/24: £4.9m), with strong growth
in the second half offsetting a large decline in the first six months.
We have seen good performances from both public and corporate sectors, each
contributing around half of the £17.5m growth in GP in absolute terms. Public
sector growth has been achieved while bidding under highly competitive
tenders, either for single contracts or for several contracts in aggregate,
the latter enabling us to gain multiple new clients from a single bid. Despite
more pressure on margins under this process, public sector GP has grown by
18.2%. Our corporate GP has grown by 8.9%, increasing by 14.8% in our second
half after seeing lower growth in the first half, in part driven by the weaker
hardware performance during that period.
The growth in the public sector again demonstrates the Group's strategy of
winning new customers and then expanding share of wallet. Our objective is to
ensure we build our profitability within each contract over its term -
typically three to five years - by adding additional higher-margin products
into the original agreement as the customers' requirements grow and become
more advanced. Adding AI products such as Copilot will become part of these
contract expansions going forward. This process is also enhanced by focusing
on selling our wide range of solutions offerings and higher-margin security
products, while maximising our vendor incentives by achieving technical
certifications. We track these customers individually to ensure that the
strategy delivers value for the business, and for our stakeholders, over the
duration of the contracts.
As in previous years, the higher margins available in the corporate sector
means that our overall GP mix for the year continues to stand at 65% in
corporate and 35% in the public sector. Despite public sector competition, our
margin (GP/GII) has stood up well, dropping only slightly from 8.0% in 2023/24
to 7.8% this year - and, behind this figure, the corporate margin has improved
year on year.
Our long-standing relationships with our customers and high levels of repeat
business were again demonstrated in 2024/25, with 97% of our GP coming from
customers that we also traded with last year (2023/24: 97%), at a renewal rate
of 109% - which measures the GP from existing customers this period compared
to total GP in the prior period. Included within our GP increase of £17.5m
was £4.3m from new customers. Aligned to this, we saw a 1.5% increase in
customer numbers (defined as those generating more than £100 of GP) from
5,828 to 5,913, while the average GP per customer increased from £25,000 in
2023/24 to £27,600 in 2024/25. 1 (#_ftn1)
Administrative expenses
This includes employee costs and other administrative expenses as set out
below.
Employee costs
Our success in growing the business continues to be as a direct result of the
investments we have made over the years in our frontline 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.
In addition to continuing to hire in line with growth and to ensure we have
the expertise required to provide our clients with the best service, our
commitment to develop, promote and expand from within the existing employee
base, giving our people careers rather than just employment, is at the heart
of our progress as a business. This has contributed to long tenure from our
employees, which in turn supports the lasting relationships we have
established with our customers, vendors and partners.
During the year we have seen total staff numbers rise to 1,245 on our February
2025 payroll, up by 18% from the year-end position of 1,057 on 29 February
2024.
Employee costs included in administrative expenses rose by 9.7% to £78.1m
(2023/24: £71.2m). However, this figure has been affected by:
- A reduction in share-based payment charges of £0.6m given our first
three share option schemes issued post-IPO have now vested and given the cost
of the new schemes launched in 2023/24 and 2024/25 have been slightly lower
- Capitalising £1.4m of staff costs on to the balance sheet. This
relates to the salaries of employees who are developing new IT platforms - one
to provide a 'marketplace' gateway for our customers to more seamlessly
purchase products online from a range of vendors, and the other to enable us
to improve our operational processes around customer order processing. This
treatment is in line with our accounting policy for intangible assets.
Without the impact of these two items, the underlying increase in our employee
costs is 13.7%.
Other administrative expenses
Other administrative expenses increased by 5.0% to £18.8m (2023/24: £17.9m),
including continued investment in staff welfare and internal systems.
Operating profit
Our operating profit increased by 17.1% from £56.7m to £66.4m, which shows
the balance we have achieved between growing GP in a challenging market while
effectively managing our cost base.
Some of this increase has been positively affected by the £1.4m
capitalisation of software developers' staff costs (expensed in the prior year
when their work was focused on maintaining legacy systems) and the £0.6m
lower share-based payment charge noted above. After adjusting for these, the
increase remains strong at 13.4%.
Our operating efficiency ratio, which measures operating profit as a
percentage of GP, is a key performance indicator in understanding the Group's
operational effectiveness in running day-to-day operations. We aim to sustain
it at around 38-40%. The ratio increased to 40.7% (2023/24: 38.9%) but would
have been 39.8% excluding the capitalised staff costs.
In previous results announcements we have also focused on adjusted operating
profit (AOP) which removes the effects of share-based payment (SBP) charges
and amortisation of acquired intangibles - notably because of the growth of
these SBP charges over the time since IPO from a near-zero starting position
in 2020/21 of £0.3m to £5.1m this year. Given that we have now moved out of
that growth cycle, as older schemes vest and new schemes are introduced, the
current charges are now viewed to be normalised as business-as-usual recurring
expenses. Similarly, our amortisation charges are stable at £0.9m for the
current and prior year. So, AOP is no longer considered to add value to
understanding our results. We will therefore now focus on operating profit,
which brings us in line with other similar businesses in our market segment.
For reference, our AOP has increased by 14.4% to £72.4m (2023/24: £63.3m),
and the ratio of AOP to GP increased from 43.4% to 44.3%.
Interest income and finance costs
This year has seen significant interest being earned from money-market
deposits, totalling £8.5m (2023/24: £5.1m). While last year included only
ten months of earnings, we have nevertheless substantially increased this
income stream - backed up by our strong cash management, which has enabled us
to place more cash on deposit and for longer periods.
Our interest income benefits from often having materially higher cash balances
than reported at period ends around our largest months of trading in March and
April (around the UK Government's fiscal year end) and June and December
(around some key vendors' fiscal year ends).
Our finance costs primarily comprise arrangement and commitment fees
associated to our revolving credit facility (RCF), noting that to date the
Group has not drawn down any amount. This balance also includes a small amount
of finance lease interest on our right-of-use assets, including from our staff
electric vehicle (EV) scheme.
Share of profit in associate
Following the acquisition of a 25.1% interest in Cloud Bridge Technologies in
April 2023, in accordance with IAS 28 Investments in Associates and Joint
Ventures we account for the Group's share of its profits. For 2024/25 we have
not recognised any profit as Cloud Bridge's set up costs of investing in
overseas operations have offset its UK profits (2023/24: £0.2m).
Profit before tax
The combined impact of increased operating profits and high levels of interest
received has seen our profit before tax increase by 21.1% to £74.6m (2023/24:
£61.6m).
Income tax expense
The £5.1m (34.7%) rise in our income tax expense to £19.8m (2023/24:
£14.7m) reflects the growth in profit before tax and, in part, that last year
there was one month included at the previous UK corporate tax rate of 19%
(2024/25 fully at 25%) - giving rise to an effective rate of tax of 23.9% in
2023/24. The higher effective rate in 2024/25 of 26.5% is also because of
timing difference movements between current and deferred tax, with the latter
seeing a reduction in our closing deferred tax asset. We therefore expect our
long term effective tax rate to align to the UK corporate tax rate as the
differences between accounting profit and taxable profit are substantially
timing in nature.
Profit after tax
Profit after tax increased by 16.8% to £54.8m (2023/24: £46.9m), underlining
our growth in operating profit and interest income, offset by the higher
effective rate of tax.
Earnings per share
As a result of this strong growth in profits attributable to owners of the
company, our earnings per share have risen accordingly. Basic earnings per
share are up 16.5% from 19.55 pence to 22.78 pence.
Balance sheet and cash flow
28 February 29 February
2025 2024
Balance sheet £'m £'m
Investment in associate 3.2 3.2
Property, plant and equipment 13.6 8.5
Intangible assets 43.5 40.6
Other non-current assets 3.4 4.9
Non-current assets 63.7 57.2
Trade and other receivables 268.4 221.8
Cash 113.1 88.8
Contract assets 10.0 11.8
Current assets 391.5 322.4
Trade and other payables 327.5 277.9
Lease liabilities 0.7 0.4
Contract and tax liabilities 25.7 19.6
Current liabilities 353.9 297.9
Lease liabilities 1.3 1.3
Other non-current liabilities 2.0 2.1
Non-current liabilities 3.3 3.4
Net assets 98.0 78.3
Share capital 2.4 2.4
Share premium 636.4 633.7
Share-based payment reserve 14.9 11.0
Merger reserve (644.4) (644.4)
Retained earnings 88.7 75.6
Total equity 98.0 78.3
Closing net assets stood at £98.0m (29 February 2024: £78.3m), including the
Group's £3.2m interest (25.1%) in Cloud Bridge Technologies - which includes
our £0.2m share of profits since we acquired it in April 2023.
The increase in the value of property, plant and equipment is primarily
attributable to the £5.1m purchase of 27,000 square feet of office property
immediately adjacent to the existing Group and Bytes Software Services offices
in Leatherhead. This space has the potential to accommodate around 300
employees and will provide for current and future capacity requirements for
business growth in the coming years.
Intangible assets include the £3.7m addition of capitalised software
development costs, a combination of internal staff costs of £1.4m and £2.3m
of external contractor costs. As this work continues through the new financial
year, we expect around a further £3m of costs to be capitalised in completing
this work. While we are in the development phase, there is no amortisation of
the asset - this will start once we move to live production mode, scheduled
for the latter part of 2025/26.
Net current assets closed at £37.6m (29 February 2024: £24.5m).
Our debtor days at the end of the year stood at 32, and our average debtor
days for the year was 38 (2023/24: 37). Our closing loss allowance provision
reduced to £1.7m, down from £2.5m at the February 2024 year end, with £0.7m
bad debts written off against the provision and another £0.1m reduction to
reflect our current expected loss calculated under IFRS 9. We believe this
remains a prudent position, given that the level of write-offs is very low
considering our GII of £2.1bn.
The Group has paid its suppliers on schedule throughout the year, with its
average creditor days remaining broadly in line with prior year at 46
(2023/24: 47) and standing at 36 at the end of the year (2023/2024: 44).
The consolidated cash flow is set out below:
Year ended 28 February 2025 Year ended 29 February 2024
Cash flow £'m £'m
Cash generated from operations 85.6 67.3
Payments for fixed assets (6.4) (1.3)
Payments for intangible assets (3.7) -
Free cash flow 75.5 66.0
Net interest received 8.3 4.7
Taxes paid (18.9) (15.1)
Lease payments (0.6) (0.2)
Dividends (42.8) (36.6)
Issue of share capital 2.8 -
Investment in associate - (3.0)
Net increase in cash 24.3 15.8
Cash at the beginning of the period 88.8 73.0
Cash at the end of the period 113.1 88.8
Operating profit 66.4 56.7
Cash conversion (against operating profit) 113.8% 116.4%
Cash conversion (against AOP) 104.3% 104.3%
Cash at the end of the period was £113.1m (29 February 2024: £88.8m), which
is after the payment of dividends totalling £42.8m during the period - being
the final and special dividends for 2023/24 and the interim dividend for
2024/25.
Cash flow from operations after payments for fixed and intangible assets (free
cash flow) generated a positive cash flow of £75.5m (2023/24: £66.0m),
noting that the current year figure is after the purchase of the new
properties and the capitalisation of software development costs - a combined
outflow of £8.8m.
The Group's cash conversion ratio for the year has historically been measured
as free cash flow divided by AOP but, in line with the other profit and
efficiency measures referred to above, we are now measuring free cash flow
against operating profit, which was 113.8% for the year (2023/24: 116.4%). For
reference, the cash conversion against AOP of 104.3% is in line with last
year. We target our long-term sustainable cash conversion at 100%.
The £2.8m cash received from the issue of share capital relates to
participating staff exercising 711,000 share options, primarily under our 2021
CSOP and SAYE (Share Save) plans, which vested in June 2024 and August 2024,
respectively. There is a corresponding increase in the share premium value in
the balance sheet above.
If required, the Group has access to a committed RCF of £30m 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, with an optional
one-year extension to 17 May 2027. To date, the Group has not used the
facility.
Proposed dividends
As stated above, the Group's dividend policy is to distribute between 40% and
50% of post-tax pre-exceptional earnings to shareholders. Accordingly, the
Board is pleased to propose a gross final dividend of 6.9 pence per share. The
aggregate amount of the proposed dividend expected to be paid out of retained
earnings at 28 February 2025, but not recognised as a liability at the end of
the financial year, equates to £16.6m. Our capital allocation policy is that
excess cash following organic investment and any M&A is returned to
shareholders. We consider both special dividends and share buybacks as methods
to return excess capital, preferring share buybacks when our shares are
materially undervalued. 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 10.0 pence per
share, equating to £24.1m. If approved by shareholders, the final and special
dividend will be payable on 25 July 2025 to all ordinary shareholders who are
registered as such at the close of business on the record date of 11 July
2025.
The salient dates applicable to the dividend are as follows:
Dividend announcement date Tuesday, 13 May 2025
AGM at which dividend resolutions will be proposed Wednesday, 2 July 2025
Currency conversion determined and announced together with the South African Monday, 7 July 2025
(SA) tax treatment by 1100 (SAST)
Last day to trade cum dividend (SA register) Tuesday, 8 July 2025
Commence trading ex-dividend (SA register) Wednesday, 9 July 2025
Last day to trade cum dividend (UK register) Wednesday, 9 July 2025
Commence trading ex-dividend (UK register) Thursday, 10 July 2025
Record date Friday, 11 July 2025
Payment date Friday, 25 July 2025
Additional information required by the Johannesburg Stock Exchange:
1. The GBP:ZAR currency conversion will be determined and published on
SENS on 7 July 2025.
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 12 May 2025, being the declaration announcement date of the dividend,
the company had a total of 241,142,169 shares in issue (with no treasury
shares).
5. No transfers of shareholdings to and from South Africa will be
permitted between 7 July 2025 and 11 July 2025 (both dates inclusive). No
dematerialisation or rematerialisation orders will be permitted between 9 July
2025 and 11 July 2025 (both dates inclusive).
Managing new and emerging risks
We assess current and emerging risks as part of our ongoing risk monitoring
progress. While we remain vigilant, we take confidence from the resilience
that our business has shown through various external crises in recent years.
In our last Annual Report, we identified 14 principal risks that could have a
significant impact on our operations. While the risks themselves are unchanged
in 2024/25, with no additions, deletions or reclassifications, we have in some
cases updated the status of the risk. We changed the status to 'increase' for
the following four risks:
· Working capital, in line with the heightened risk of economic
disruption because of the expanded Middle East conflict
· Direct and indirect cyberthreats, because of evolving and elevated
global risk to IT security
· Attract and retain staff while keeping our culture, because of the
scarcity of suitable applicants and higher salary expectations
· Changes to vendors' commercial model because of changes in certain
vendor programmes in 2024/25.
However, vendors have previously changed their commercial models, and we have
a strong track record of successfully adjusting to these, aided by close and
regular communication with all our major vendors and distributors. We remain
confident in our ability to adapt to vendor changes and to maintain our
profitability.
For the risks of Vendor concentration and Supply chain management, we changed
the status from 'increase' to 'no change', to reflect mitigation actions this
year.
We also identified three emerging risks in our previous Annual Report: the
physical and transition risks from climate change, keeping pace with social
change, and the impact of AI. These risks remain relevant in 2024/25, and we
continue to monitor them. In the case of AI, we also see the fast-evolving
technology as an opportunity for our business, internally and externally.
Summary of changes since 2023/24
Risk name Changes we made
1. Economic disruption Noted UK budget changes to employer National Insurance, international
political uncertainty and trade tariffs, and public sector budgets.
2. Margin pressure Made no changes.
3. Changes to vendors' commercial model At the half year, changed the status to 'increase', in light of Microsoft
changes.
4. Inflation Updated risk with latest figures.
5. Working capital At the half year, changed the status to 'increase'. Noted upcoming UK
Government Procurement Act 2024.
6. Vendor concentration At the half year, changed the status to 'no change'. Noted impact from
marketplaces.
7. Competition Noted impact from anti-competition regulations.
8. Relevance and emerging technology Made no changes.
9. Cyberthreats - direct and indirect At the half year, changed the status to 'increase', adding extra mitigation
measures. Also changed ownership to the chief technology officers (CTOs) of
our subsidiary companies.
10. Business continuity failure At the half year, added extra mitigation measures. Changed ownership to the
CTOs of our subsidiary companies.
11. Attract and retain staff while keeping our culture At the half year, changed the status to 'increase', because of scarcity of
suitable applicants and salary expectations.
12. Supply chain management At the half year, changed the status to 'no change', adding extra mitigation
measures. Also made small changes to operational measures.
13. Sustainability/ESG At the half year, changed the status to 'no change', but later returned it to
'increase' because of trickle-down effects of regulations and requirements.
Also changed ownership to the Group Sustainability Manager.
14. Regulatory and compliance Made no changes.
Our principal risks and uncertainties
Financial 1 Economic disruption Risk owner CEO
No change
The risk How we manage it
This risk includes the impact of UK tax changes, in particular raising We have so far continued to perform well during high inflation, the conflicts
National Insurance (NI) contributions from 13.8% to 15% and lowering the in the Middle East and Ukraine, and the UK leaving the EU.
employer NI threshold from £9,000 to £5,600.
The recent real-life experience of these, and of the rising cost of living and
Internationally, there is political uncertainty with the new US exchange rate fluctuations, have shown us to be resilient through tough
administration. Imposing tariffs on China for trade into the US, resulting in economic conditions. The diversity of our client base has also helped us
reciprocal tariffs, and threatening tariffs on other countries, could lead to maintain and increase business in this period. We are not complacent, however
inflation. - economic disruption remains a risk, and we keep our operations under
constant review.
In addition, the conflicts in the Middle East and Ukraine continue.
We cannot mitigate the NI increases directly, but indirectly we are aiming to
increase productivity by using AI tools. Three quarters of our employees have
a GenAI licence and, in a recent assessment of usage, the productivity
This risk also includes the uncertainties caused by global economic pressures increase was equivalent to 26 full-time-equivalent roles.
and geopolitical risk within the UK.
Our continued focus on software asset management means that we advise
There is the potential for public sector funding to be cut, although the size customers of the most cost-effective ways to fulfil their software needs.
of this is still unknown. Changes to economic conditions mean many organisations will look to IT to
drive growth and/or efficiency.
Externally, we have seen more customers looking to avoid increased staff costs
by outsourcing their IT to managed services. This may create an opportunity to
accelerate our service offerings.
We will keep a watching brief on the impacts to the public sector from any
government cuts to funding or policy changes, and how these effect the
business.
The impact
Major economic disruption 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, trade and the cost of borrowing. Economic
deterioration like this could affect our business performance and
profitability. Inflationary pressure could still create an environment in
which customers redirect their spending from new IT projects to more pressing
needs.
2 Margin pressure Risk owner MDs of subsidiary businesses
No change
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 but some, such
as economic and political factors, are beyond our control.
In the past year we have sought to maintain margins where possible. Our
diverse portfolio of offerings, with a mix of vendors, software and services,
has enabled us to absorb any changes - and we continue to innovate to find new
ways to deliver more value for our customers. Services delivered internally
are consistently measured against our competition to ensure we remain
competitive and maximise margins.
Keeping the correct level of certification by vendor, early deal registration
and rebate management are three methods we use to make sure we are procuring
at the lowest cost and maximising the incentives we earn.
This risk area is reviewed monthly.
The impact
These changes could have an impact on our business performance and
profitability.
3 Changes to vendors' commercial model Risk owner CEO
Increase focus
The risk How we manage it
We receive incentive income from our vendors and their distributors. This We maintain a diverse portfolio of vendor products and services. Although we
partially offsets our costs of sales but could be significantly reduced or receive major sources of funding from specific vendor programmes, if one
eliminated if 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. Microsoft forms a
significant part of BTG's gross profit, and has consistently reviewed its
incentive programmes to help it achieve its strategic objectives. BTG has
consistently shown its ability to adapt in line with these changes. Although
we see this risk increasing, we are confident in our ability to maintain
growth over time).
We closely monitor incentive income and make sure staff are aligned to meet
vendors' goals so that we don't lose these incentives. Close and regular
communication with all our major vendors and distributors means we can manage
this risk appropriately. In some areas we have seen a positive change in
vendors' commercial terms, where we have been able to adapt practices.
The impact
These incentives are very valuable and contribute to our operational profits.
Significant changes to commercial models could put pressure on our
profitability.
4 Inflation Risk owner CFO
Decrease focus
The risk How we manage it
Inflation in the UK, as measured by the Consumer Price Index (CPI), was 3.2% Staffing costs make up most of our overheads, so we focus our attention on our
in March 2024. At January 2025, this was 3.0%. This rate is above the Bank of employees and their ability to cope with the rising cost of living. Beyond
England's target of 2%. salaries, we have also focused on providing attractive benefits packages to
attract and retain talent.
The effects of both NI changes and global trade tariffs are inflationary.
While we cannot dictate our customers' budget, our business model is to build
trusted relationships - where account managers understand our customers and
are able to have pragmatic conversations about what their IT priorities should
be in the current technology landscape.
The impact
Wage inflation and increased fuel and energy costs have a direct impact on our
underlying cost base.
If our competitors increase wages to a higher level, then we potentially risk
retaining and attracting employees and customers.
Our customers will also have increased costs, which will change their budgets
and spending priorities.
5 Working capital Risk owner CFO
Increase focus
The risk How we manage it
As customers face the challenges of the current economic environment, with Our credit collections teams are focused on collecting customer debts on time
inflation and elevated interest rates, there is a greater risk of an and maintaining our debtor days at or below target levels. Debt collection is
increasing aged debt profile, with customers slower to pay and the possibility reported and analysed continually and escalated to senior management as
of bad debts. required.
The implementation of the UK Government's Procurement Act (2023) will affect We have invested in larger credit collection teams and risk management.
the payment terms of public sector customers and affect our supply chain.
In the past financial year, BTG has seen a higher level of write-offs than
Vendors' changing payment terms could also have a significant impact. before, but these still aren't significant: all our write-offs are from
companies that have become insolvent or gone into administration.
We have seen debtor days stabilise as inflation has reduced, but the number of
days is yet to return to historically low levels. 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 cash flow.
Strategic 6 Vendor concentration Risk owner CEO
No change
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 exposed to economic down cycles, or if dependency because we are their route to the end customer. We maintain
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.
We have a diversified vendor list, as well as a focus on services and using
in-house and third-party specialists, which diversifies and mitigates some of
the vendor concentration risk.
The impact
Relying too heavily on any one vendor could have an adverse effect on our
financial performance, should that relationship break down.
Uptake of AI is expected to increase rapidly. While this represents an
opportunity, AI development by a handful of companies, including Microsoft,
has the potential to further concentrate revenue and profit across fewer
vendors.
7 Competition Risk owner CEO
No change
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 myriad organisations globally without the
place more pressure on the market opportunity. Platforms, like marketplaces, sort of well-established network of intermediaries that we have.
with direct sales to customers, could also be seen as disintermediation.
We currently work with the dominant marketplace providers and can sell from
An increase in the use of marketplaces also heightens the risk of more multiple vendors to our customers through their platforms. By matching
transactions going through the same route. customer requirements to the vendor's value proposition, we can better serve
our customers' needs.
Frameworks, particularly in the public sector, are a procurement route of
choice for some customers. We risk narrowing our route to customers if we are We continue to develop and improve our systems and processes to make
not part of these frameworks. transactions easier for our customers, including expanding and improving our
own self-service portals.
AI risks becoming a partial competitor, if it becomes able to provide accurate
and beneficial licensing and infrastructure advice direct to customers. AI/machine learning has been identified as a new emerging risk, so we will
explore and monitor for risks and opportunities to our business.
The regulatory environment will change the competitive landscape too, as
regulators look to decrease monopolies. Currently, there is no sign of any commoditisation that would be a serious
threat to our business model in the short or medium term.
We are aware of the opportunities from regulatory changes and partnerships to
expand our vendor, solution and services portfolio.
The impact
This risk could have a material, adverse impact on our business and
profitability, potentially requiring a 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
No change
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 solutions providers, joining
industry forums and sitting on new technology committees. We have expanded the
number and range of our subject-matter experts, who stay ahead of developments
in their areas and communicate this internally and externally.
We are giving more focus to customer communications and marketing, to increase
brand awareness.
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 is relatively low.
The impact
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 CTOs of subsidiary businesses
Increase focus
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 and analysis generated by threat intelligence systems
liabilities and reputational damage. to protect ourselves.
This work provides insights into vulnerable areas and the effects of any
breaches, which allow us to strengthen our security controls.
Internal IT policies and processes are in place to mitigate some of these
risks, including regular training, working abroad procedures and the use of
enterprise-level security software.
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. Our two subsidiaries
share insights and examples of good practice on security controls with one
another. Both businesses use a security operations centre and have internal
specialists to provide up-to-date threat analysis.
We maintain ISO 27001, CE and CE+ certifications to protect our and our
customers' data.
The impact
If a hacker accessed our IT systems, they might infiltrate one or more of our
customer areas. This could provide indirect access, 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 CTOs of subsidiary businesses
No change
The risk How we manage it
Any failure or disruption of BTG's people, processes and IT infrastructure may Our CTOs and heads of IT manage and oversee our IT infrastructure, network,
negatively affect our ability to deliver to our customers, cause us systems and business applications. All our operational teams are focused on
reputational damage and lose us market share. the latest vendor products and educate sales teams appropriately.
Regular IT audits have identified areas for improvement, while 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 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.
Employees are encouraged to work from home or take time off when sick, to
avoid transmitting illness within the workplace. We also have processes to
make sure there isn't a single point of failure, and that resiliency is built
into employees' skillsets.
The risk is also mitigated through policies and process implementation, such
as Phoenix achieving ISO 22301 certification and Bytes implementing an
incident management policy.
Our efforts to reduce the risk from insider threats are multifaceted and
involve pre-employment screening, contracts, training, identifying higher-risk
individuals and technology to reduce potential data loss. This risk is
reviewed through frequent risk assessments and BCP testing.
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.
Increased automation means a heavier reliance on technology. Although it can
reduce human error, it can also potentially increase our reliance on other
vendors.
People are a huge part of our operational success, and processes rely on
people as much as technology to deliver effectively to our customers. Insider
threats, intentional or otherwise, could compromise our ability to deliver and
damage our reputation. Employee illness and absence - if in significant
numbers, such as a communicable disease in a particular team - could make
effective delivery difficult.
11 Attract and retain staff while keeping our culture Risk owner CEO
Increase focus
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, for
Several factors are affecting this: example. BTG also runs an extensive apprenticeship programme across multiple
business divisions. We also review the time that management has to coach new
- Salary and benefit expectations staff.
- BTG's high rate of growth
- Skills shortage in emerging, high-demand areas, such as AI and We've also organically grown and set up new geographical offices, to attract
machine learning local talent.
- With remote or hybrid working becoming the norm, potential
employees in traditionally lower-paid geographical regions being able to work
remotely in higher-paying areas like London. Maintaining our culture is important to retaining current staff. BTG regularly
engages with employees through surveys, such as the eNPS and Great Places to
Work. Feedback from these and elsewhere is used to review and develop our
employee benefits. We maintain our small-company feel through regular
communications, clubs, and charity and social events. We aim to absorb growth
while keeping our culture.
The impact
The double impact of scarcity of appropriate candidates for new roles and
salary expectations will challenge our ability to attract and retain the
talent pool we need to deliver our planned growth.
We may also lose talented employees to competitors.
12 Supply chain management Risk owner CEO
No change
The risk How we manage it
Failure to understand suppliers may lead to regulatory, reputational and Supplier set-up forms include questions to ask suppliers to disclose
financial risks, if they expose our business to practices that we would not information relating to compliance and adherence to our Supplier Code of
tolerate in our own operations. The time and effort to monitor and audit Conduct. Any unethical, illegal or corrupt behaviour that comes to light is
suppliers is considered a risk. escalated and appropriate action is taken. Onboarding questionnaires have been
reviewed and improved.
There is a risk to our business if we engage with suppliers that:
Phoenix has appointed a supply chain manager, and Bytes has appointed a
- Provide unethical working conditions and pay third-party compliance officer focused on supply chain management. Bytes has
also established a cross-disciplinary group to work on managing suppliers.
- Are involved in financial mismanagement and unethical behaviour
- Cause environmental damage
- Operate in sanctioned regions.
The impact
The impact to the business is across multiple streams, from legal, financial
and reputational to ethical and environmental.
Escalating conflicts could also affect our supply chain.
Regulatory 13 Sustainability/ESG Risk owner Group Sustainability Manager
No change
The risk How we manage it
The growing importance of sustainability and ESG for our customers, investors Our Board manages and monitors this risk closely, with oversight from the ESG
and employees means we need to stay at the forefront of reporting and and Audit Committees.
disclosure, especially given that requirements and standards are continually
updated.
The Group Sustainability Manager continues to drive sustainability reporting
and initiatives, and to work with an appointed third party to provide guidance
and assurance on reported data. Environmental management systems are also in
place and certified by ISO 14001.
Our Sustainability Steering Committee enables decision makers from across the
Group and our two operating companies to work towards a common goal and report
on challenges. In June 2024, we enhanced the governance of ESG, by creating a
Board-level ESG Committee.
Disclosures are made through several channels, including ISS ESG ratings, CDP
and EcoVadis. We had our near-term and net zero targets validated by the SBTi
in June 2024, as part of our programme to drive sustainability through best
practice approaches. Feedback from disclosures is used to guide changes in the
business. So, as disclosure methodologies stay current, so should the
business, where possible and relevant.
The impact
Falling behind expectations or our peers may lead to challenges around:
- Legal compliance, such as adhering to global standards
- Retaining customers, as they push to reduce emissions
- Investor relations, such as meeting criteria for ESG funds
- Attracting and retaining employees, as younger generations seek to
work for more purpose-driven businesses.
14 Regulatory and compliance Risk owner CEO
No change
The risk How we manage it
Our business faces inherent risks from evolving regulatory and compliance We engage external experts. BTG works closely with external authorities,
landscapes. Changes in laws, regulations and industry standards could including through internal and external audits and paid-for consultancy, to
significantly affect our operations, financial stability and reputation. advise on expected changes to regulations and the Group's response to them.
We monitor regulatory developments. Individuals with responsibilities in the
business stay up to date with changes in their field through professional
memberships and trade publications, and through directly following regulatory
and compliance bodies.
We work to enhance internal controls. Compliance teams in each operating
company hold a register of policies and organise reviews, updates and
sign-offs with policy owners to make sure policies are kept current.
Our steering committees, operating company board meetings and BTG Board
meetings are forums for raising and discussing changes that affect multiple
areas of the business.
The impact
Operational teams and processes face administrative burdens and effects under
rapidly changing regulations.
Failing to keep up with regulatory, reporting and compliance changes could
lead to fines, legal challenges and reputational damage.
If regulatory compliance is not maintained, there are risks to the Group and
to individuals, which could lead to expensive legal challenges and
reputational damage to the business among all stakeholders.
Going concern disclosure
The Group has performed a full going concern assessment from 28 February 2025
for the period up to 31 August 2026. 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 £113.1m of cash and cash equivalents
available at 28 February 2025. The Group also has access to a committed RCF
that covers the going concern period to 31 August 2026 and that remains
undrawn. The directors have reviewed trading and liquidity forecasts for the
Group, as well as continuing to monitor the effects of macroeconomic,
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 29 February 2024, and 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 use the RCF.
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 2026.
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 Conduct 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 their knowledge that:
· 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.
Sam Mudd
Andrew Holden
Chief Executive Officer Chief Financial Officer
13 May 2025
Consolidated statement of profit or loss
Year ended 28 February 2025 Year ended 29 February 2024
Note £'000 £'000
Revenue 3 217,134 207,021
Cost of sales (53,880) (61,243)
Gross profit 163,254 145,778
Administrative expenses 4 (96,936) (87,839)
Decrease / (increase) in loss allowance on trade receivables 17 108 (1,227)
Operating profit 66,426 56,712
Finance income 7 8,486 5,111
Finance costs 7 (291) (393)
Share of profit of associate 12 (8) 166
Profit before taxation 74,613 61,596
Income tax expense 8 (19,772) (14,745)
Profit after taxation 54,841 46,851
Profit for the period attributable to owners of the parent company 54,841 46,851
Pence Pence
Basic earnings per ordinary share 28 22.78 19.55
Diluted earnings per ordinary share 28 21.95 18.85
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 28 February 2025 As at 29 February 2024
Note £'000 £'000
Assets
Non-current assets
Property, plant and equipment 9 13,581 8,478
Right-of-use assets 10 1,641 1,411
Intangible assets 11 43,475 40,646
Investment in associate 12 3,185 3,193
Contract assets 13 1,773 2,689
Deferred tax asset 8 59 834
Total non-current assets 63,714 57,251
Current assets
Inventories 15 14 60
Contract assets 13 9,973 11,756
Trade and other receivables 17 268,454 221,815
Cash and cash equivalents 18 113,076 88,836
Total current assets 391,517 322,467
Total assets 455,231 379,718
Liabilities
Non-current liabilities
Lease liabilities 10 (1,269) (1,314)
Contract liabilities 14 (2,034) (2,137)
Total non-current liabilities (3,303) (3,451)
Current liabilities
Trade and other payables 19 (327,533) (277,917)
Contract liabilities 14 (25,245) (19,348)
Current tax liabilities (439) (243)
Lease liabilities 10 (668) (423)
Total current liabilities (353,885) (297,931)
Total liabilities (357,188) (301,382)
Net assets 98,043 78,336
Equity
Share capital 20 2,411 2,404
Share premium 20 636,432 633,650
Share-based payment reserve 14,879 11,050
Merger reserve 21 (644,375) (644,375)
Retained earnings 88,696 75,607
Total equity 98,043 78,336
The consolidated financial statements were authorised for issue by the Board
on 12 May 2025.
Consolidated statement of changes in equity
Attributable to owners of the company
Share capital Share premium Share-based payment reserve Merger reserve Retained earnings Total equity
Note £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 March 2023 2,395 633,636 7,235 (644,375) 62,606 61,497
Total comprehensive income for the year - - - - 46,851 46,851
Dividends paid 24(b) - - - - (36,641) (36,641)
Shares issued during the year 20 9 14 - - - 23
Transfer to retained earnings 27 - - (2,791) - 2,791 -
Share-based payment transactions 27 - - 5,708 - - 5,708
Tax adjustments 8 - - 898 - - 898
Balance at 29 February 2024 2,404 633,650 11,050 (644,375) 75,607 78,336
Total comprehensive income for the year - - - - 54,841 54,841
Dividends paid 24(b) - - - - (42,843) (42,843)
Shares issued during the year 20 7 2,782 - - - 2,789
Transfer to retained earnings 27 - - (1,091) - 1,091 -
Share-based payment transactions 27 - - 5,049 - - 5,049
Tax adjustments 8 - - (129) - - (129)
Balance at 28 February 2025 2,411 636,432 14,879 (644,375) 88,696 98,043
Consolidated statement of cash flows
Year ended 28 February 2025 Year ended 29 February 2024
Note £'000 £'000
Cash flows from operating activities
Cash generated from operations 22 85,635 67,333
Interest received 7 8,486 5,111
Interest paid 7 (224) (330)
Income taxes paid (18,930) (15,109)
Net cash inflow from operating activities 74,967 57,005
Cash flows from investing activities
Payments for property, plant and equipment 9 (6,358) (1,334)
Payments for intangible asset 11 (3,709) -
Investment in associate - (3,027)
Net cash outflow from investing activities (10,067) (4,361)
Cash flows from financing activities
Proceeds from issues of shares 2,789 23
Principal elements of lease payments 10 (606) (209)
Dividends paid to shareholders 24(b) (42,843) (36,641)
Net cash outflow from financing activities (40,660) (36,827)
Net increase in cash and cash equivalents 24,240 15,817
Cash and cash equivalents at the beginning of the financial year 88,836 73,019
Cash and cash equivalents at end of year 18 113,076 88,836
Notes to the consolidated financial statements
1 Accounting policies
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 material accounting policies and presentation considerations on
both the current and comparative periods are detailed below.
The financial information contained in this preliminary announcement does not
constitute the Group's statutory accounts for the years ended 28 February 2025
or 29 February 2024. The statutory accounts for the year ended 28 February
2025
will be filed with the Registrar of Companies in due course. The auditors
report on these accounts was not qualified or
modified and did not contain any statement under Sections 498(2) or (3) of the
Companies Act 2006. A separate
announcement will be made in accordance with Disclosure and Transparency Rules
(DTR) 6.3 when the annual report and audited financial statements for the year
ended 28 February 2025 are made available on the Company's website,
which is expected to be in May 2025.
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 geopolitical 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 comprise the financial statements of the
Company and its subsidiaries, see note 1.6.1 and 1.6.2, and 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 the principal risks, which are set out in the Group's
strategic report, in addition to ever-present risks such as the Group's
exposure to credit risk as described in note 17, and liquidity risk, currency
risk and foreign exchange risk as described in note 23.
When assessing the going concern of the Group, the directors have reviewed the
year-to-date financial results, as well as detailed financial forecasts for
the going concern assessment period up to 31 August 2026, being 15 months
after the authorisation of these financial statements.
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 Group's principal risks, the impact of the
current economic conditions and geopolitical environment, and future
expectations, the forecasts have been stress-tested through a number of
downside scenarios to ensure that a robust assessment of the Group's working
capital and cash requirements has been performed.
Operational performance and operating model
Following the previous years of strong growth since it listed in December
2020, the Group has again achieved double-digit growth in gross invoiced
income (GII), gross profit (GP) and operating profit, and finished the year
with £113.1 million of cash compared to the prior year £88.8 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 continuing to be significant for many customers.
We are also seeing growing requirements for artificial intelligence (AI)
functionality within IT applications and a demand for guidance and support
from our customers. While we also recognise this as an emerging risk, due to
the potential of this technology to change the IT and working landscape and
the associated risks from security, moral, legal and ethical standpoints, we
primarily consider AI and machine learning an opportunity for our business, as
we expand sales into areas such as Microsoft's Copilot and support our
customers to capitalise on this emerging technology.
Resilience continues to be built into the Group's operating model from its
wide customer base, high levels of repeat business, strong vendor
relationships and incentive funding, increased demand driven by heightened IT
security risks, and the back-to-back nature of most of its sales. This is
explained further below.
· Wide ranging customer base - The Group's income includes a large volume
of non-discretionary spend from UK corporates because IT is vital to run their
day-to-day operations and to establish competitive advantage in an
increasingly digital age. Public sector organisations have similarly sought
efficiencies, resilience, and security within their IT infrastructures. This
is evident from the 15.2% increase in GII during the year, and our mix of
private and public customers, across multiple sectors means that a downturn in
one area can be compensated by upturns in others.
Sales risk is further mitigated by the fact that none of the Group's wide
range of customers contributes more than 1.3% of GP. Indeed, during the year
only six customers generated GP in excess of £1 million out of a total Group
GP of £163.2 million, the largest £2.1 million and the six combined at £8.3
million (5.1% of total GP). While we have some significant contributions to
our GII by individual customers, most notably the NHS, these are primarily
long-term (three-year) contracts within the public sector, which makes our
income even more secure and provides the opportunity to develop and monetise
those accounts further. Even then, the largest customer has provided only 9.1%
of our total GII of £2.1 billion during the year.
· High levels of repeat business - 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. Indeed, excluding sales of
hardware and services, the remaining dominant balance of our GII - some £2.0
billion (95%) of software - falls into this bracket. 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 make the running of many of their key business functions dependent on
maintaining these agreements and reliant on the Group's support to manage
them.
The high level of customer retention and growth is illustrated by the renewal
rate for the year of 109%, a measure of the rate of growth in GP from existing
customers, who also contributed 97% of total GP in the year. The Group will
continue to focus on increasing its customer base and spend per customer
during the going concern period.
· Microsoft relationship strength - With around 68% of the Group's GII
and around 50% of GP generated from sales of Microsoft products and associated
service solutions, this continues to be a very important partnership for both
sides. These contributions from Microsoft remain in line with previous years
in percentage terms; in absolute terms, as our largest vendor, we have now
seen their contribution to GII and GP exceed £1.4 billion and £80 million
respectively.
As with 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, the Microsoft partnership 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.
The Board and operating company Directors are engaged directly with Microsoft
executives on a regular basis in developing the partnership further and
Microsoft business is currently growing at double-digit rates.
In two areas in particular we are seeing high levels of interest leading to
increased demand. The first is 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 second has arisen from Microsoft's launch of its AI product, Copilot. The
Group has been highly engaged this year in educating customers and supporting
them in improving their productivity using Copilot within their Microsoft 365
applications, and we have developed associated services to support customer
readiness and adoption. We will continue to carefully expand our internal
skills in line with this increasing AI momentum in the next year and beyond
and to complement the existing Microsoft solutions we sell.
While vendor concentration, and over-reliance on any one supplier, is
identified as one of our principal risks, the very close daily workings
between the two sides, the mutually beneficial growth in business, and the
increase in accreditations and awards, makes the Group a key partner to
Microsoft, as they are to us. We therefore believe the risk of cessation of
the Microsoft relationship to be remote.
· Microsoft incentives - Microsoft rewards partners with a range of
incentives comprising transactional rebates and fees for licence sales plus
additional levels of funding for partners who have attained their technical
specialisations through a range of programmes aligned to customer engagement
in areas such as cloud migrations, and technology onboarding, adoption and
consumption. This latter funding corresponds strongly to the Group's strategic
focus on services and solutions expansion, so is a growing income stream which
supplements the traditional transactional schemes.
Hence while recent Microsoft EA incentive changes will see certain
transactional rebates and fees reduced, the Group has the opportunity to
offset this through the growth of other services linked incentives. Further,
any negative impact on EA profitability will diminish as we move through the
going concern period as new and renewing contracts are re-priced to reflect
the new level of EA incentives available, which affects all Microsoft partners
similarly, and hence we will compete for future business on a level playing
field. The Group is therefore well positioned to manage such changes, backed
by our long track record of successfully adapting to shifts in Microsoft, and
other vendor, programmes generally. We therefore believe our stress tests,
detailed below, consider downsides around reducing gross profit that are
sufficiently severe to cater for any adverse impacts from these incentive
changes, should they arise.
· Back-to-back sales model - The Group's business is substantially
derived from the sale of software that 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 it remains very aware of the risks that
exist in the wider economy.
Over the past year we have seen continued risks arising from macroeconomic and
geopolitical factors which align to those identified in our principal risks
statement, notably economic disruption, inflation, and attraction and
retention of staff. The Board monitors these macroeconomic and geopolitical
risks on an ongoing basis. These risks are considered further below.
Macroeconomic risks
· Cost of sales inflation and competition leading to margin pressure -
While pricing from our suppliers may be at risk of increasing, as they too
face the same macroeconomic pressures as ourselves, our commercial model is
based on passing on supplier price increases to our customers. We also see
pressure from our customers, notably in the public sector space where new
business must often be won under highly competitive tendering processes. So,
while there has been a small reduction in our GP/GII margin from 8.0% last
year to 7.8% this year, it has been substantially contained and remains one of
the biggest focus areas in our business.
· Wage inflation - The business has been facing pressure from wage
inflation over the past two to three years. 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. We
monitor our staff attrition rate and have maintained a level around 14%, which
is down on last year's 16%. 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 that is robust and they are proud of. This is a key part of our
attraction and retention strategy.
In addition, when we look at our key operational efficiency ratio of operating
profit/GP, we have achieved just over 40% which is in line with last year,
demonstrating the control over rising staff costs in response to the growth of
the business. While 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 - While interest rates have been high in the past two
years, they have now appeared to stabilise and started to fall. The Group has
no debt exposure, nor has it ever needed to call on its revolving credit
facility (RCF). Due to the timing difference we see in our cash flow model
between customer receipts and supplier payments, we place cash on the money
markets through our monthly cash cycle. While interest rates may fall further
in the coming months we still see substantial interest income opportunity over
the going concern period. We take have taken advantage of the recent higher
interest rates to generate a significant £8.5 million of interest income in
the reporting period and with projected growth in profits and cash we should
be able to offset rate reductions.
· Economic conditions impacting on customer spending - While customers
may consider reducing spending on IT goods and services, if they are seen as
non-essential, we have seen increased spending by our customers, because IT
may be a means to efficiencies and savings elsewhere. As our customers undergo
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 no let-up in demand, as illustrated by our reported
trading performance. This is supported by our robust operating model, with
business spread over many customers in repeat subscription programmes and
service contracts, and high renewal rates.
· Economic conditions impacting on customer payments - Across the year we
have seen our average debtor days of 38 remaining close to that in the
previous two years of 37 and 39 respectively and with our closing debtor days
standing at just 32. There is limited evidence that customers ultimately do
not pay and we have only suffered £0.7 million of bad debt during the year
against GII of £2.1 billion (see note 17). We were carrying sufficient loss
allowance to cover this.
As in previous years, the majority of our GII (65%), came from the public
sector, traditionally with low credit risk, while our corporate customer base
includes a wide range of blue-chip organisations and with no material reliance
on any single customer.
· Tariffs impacting the Group directly or indirectly - Recently we have
seen the introduction of import tariffs by certain countries which will
increase the cost of imported goods within the global supply chain. As we are
neither a significant exporter nor importer of goods, we do not expect this
will have a direct material impact on the profitability of the business
within the going concern period. This is a fast moving matter which we will
therefore continue to monitor closely for further changes, and in particular
for any indirect impact on our customers' spending and payments, as noted
above.
Geopolitical risks
The current geopolitical environment, including the ongoing conflicts in
Ukraine and the Middle East, has created potential supply problems, product
shortages and general price rises, particularly in relation to fuel, gas and
electricity.
· In terms of supply chain, we are not significantly or materially
dependent on the movement of goods, so physical trade obstacles are not likely
to affect us directly, with hardware making up less than 2% of our GII during
the year. Nevertheless, we have ensured that we have a number of suppliers
with substitute, or alternative, technologies that we can rely on if one
supplier cannot meet our requirements or timescales. 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 are 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
assessment period. 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 2025, the Group held instantly accessible cash and cash
equivalents of £113.1 million.
The consolidated balance sheet shows net current assets of £38.2 million at
year end; this amount is after the Group paid final and special dividends for
the prior year totalling £35.4 million and an interim dividend for the
current year of £7.5 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 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 cash flow forecasts and downside testing
The going concern analysis reflects the actual trading experience through the
financial year to date, Board-approved budgets to 28 February 2026 and
detailed financial forecasts for the period up to 31 August 2026, 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 above. 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
GII, GP, operating profit, and debtor collection periods. Under such
downsides, the Board has 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
2026.
Details of downside 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 2026 and extended across the first six months of the
following year to 31 August 2026.
· 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 2025.
· 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 2025.
· Partial mitigation measures modelled immediate "self-mitigating"
reduction of commission in line with falling gross profit, freezing
recruitment of new heads and not replacing natural leavers from September
2025, freezing future pay from March 2026 (as current year rises are already
committed) and freezing rises in general overheads from March 2026.
· Full mitigation measures modelled additional headcount reductions
from March 2026, in line with falling gross profit.
The pay and headcount mitigations applied in the downside scenarios are within
the Group's control and, depending on how severe the impacts of the modelled
downside scenarios are, the Group could activate further levels of mitigation.
For example:
· those relating to headcount freezes or reductions could be implemented
even more quickly than indicated above to respond to downward trends as,
considering the sudden and significant falls in profitability and cash
collections modelled under both downsides, we would not wait for a full three
months before taking any action.
· we would also be able to take more action to lower our operating cost
base, given the flexibility of our business model.
· a natural reduction in the level of shareholder dividends would follow,
in line with the modelled reductions in profit after tax.
Therefore, the Board believes that all mitigations have been applied prudently
and are within the Group's control.
Under all scenarios assessed, the Group would remain cash positive throughout
the whole of the going concern period and therefore with no requirement to
call upon the revolving credit facility and remaining compliant with the
facility covenants. Dividends are forecast to continue to be paid in line with
the Group's dividend policy to distribute 40-50% 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 2026, 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. 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.
This note provides an overview of the areas that involved estimates or
judgements and whether any are considered critical due to their complexity or
risk impact.
(i) Critical estimates and judgements
There are no critical areas of judgement. There are no critical areas of
estimation uncertainty that may have a significant risk of resulting in a
material adjustment to the carrying amounts of assets and liabilities in the
next financial year.
(ii) Other estimates and judgements
Areas involving non-critical accounting estimates and judgements are:
· Principal versus agent (see note 1.10).
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 themselves (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.
The specific judgements made for each revenue category are discussed in the
accounting policy for revenue as disclosed in note 1.10. The Group considers
the determination of principal versus agent to be well established within the
business processes. Therefore management has concluded that the level of
judgement is no longer considered to be significant.
· Estimation of recoverable amount of goodwill (see notes 1.15 and 11).
The Group tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in note 1.15. The recoverable
amounts of the relevant cash generating units (CGUs) have been determined
based on value-in-use calculations in respect of future forecasts which
require the use of assumptions. The growth rates used in the short-term
forecasts are based on historical growth rates achieved by the Group and
longer term cash flow forecasts (beyond a 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.
· Provisions (see note 1.24).
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. The Group makes provision for future
tax liabilities and assets in relation to its unexercised share options. This
requires judgement to be made in respect of the Group share price at the time
of exercise which crystalises the future liability or asset.
· Property, plant and equipment (see note 1.20).
The Group classifies owner occupied properties as property, plant and
equipment. Where tenancies were assumed upon acquisition of the properties and
rental income are earned, this requires judgement as to whether the properties
are property, plant and equipment or investment property taking into account
the evaluation of terms and conditions of the arrangement and intention of
future use.
· Estimation of recoverable amount of investment in associate (see note
12).
The Group tests annually whether its investment in associate has suffered any
impairment, in accordance with the accounting policy stated in note 1.15
Impairment of non-financial assets. The recoverable amount of the Group's
investment has been estimated based on value-in-use calculations in respect of
future forecasts which require the use of assumptions. The growth rates used
in the short-term forecasts are based on historical growth rates achieved and
longer-term cash flow forecasts (beyond a five-year period) are extrapolated
using the estimated growth rates disclosed in note 12. The forecast cash flows
are discounted, at the rates disclosed in note 12, to determine the
value-in-use. The sensitivity of changes in these rates are disclosed in note
12.
1.5 New standards, interpretations and amendments adopted by the Group
(a) New and amended standards adopted by the Group
The Group has applied the following standard or amendments for the first time
in the annual reporting period commencing 1 March 2024:
· Classification of liabilities as current or non-current - Amendments
to IAS 1
· Non-current liabilities with covenants - Amendments to IAS 1
· Lease liability in a sale and leaseback - Amendments to IFRS16
· Supplier finance arrangements - Amendments to IAS 7 and IFRS 7
The amendments listed above did not have any impact on the amounts recognised
in current or prior periods and are not expected to affect future periods.
(b) New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been published that
are not mandatory for the year ended 28 February 2025 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.
· Lack of exchangeability - Amendments to IAS 21
· Classification and measurement of financial instruments - Amendments
to IFRS 7 and IFRS 9
The Group is assessing the impact of IFRS 18 Presentation and disclosure in
financial statements which, if adopted by the UK Endorsement Board, will be
effective for reporting periods beginning on or after 1 January 2027.
1.6 Principles of consolidation
1.6.1 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.
1.6.2 Associate
An associate is an entity over which the Group has significant influence.
Significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint control
over those policies. The Group's investment in its associate is accounted for
using the equity method.
Under the equity method, the investment in an associate is initially
recognised at cost. The carrying amount of the investment is adjusted to
recognise changes in the Group's share of net assets of the associate since
the acquisition date. The statement of profit or loss reflects the Group's
share of profit of the associate. Where there is objective evidence that the
investment in associate is impaired, the amount of the impairment is
recognised within 'Share of profit of associate' in the statement of profit or
loss.
1.7 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'.
1.8 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.
1.9 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)'.
1.10 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.
Software
The Group acts as an advisor, analysing customer requirements and designing an
appropriate mix of software products under different licensing programmes.
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 programme 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 and control has
passed 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 managed service or support contract 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, unless they are short term one-off projects. This is because
the customer benefits from the Group's activities as the Group performs them.
Where one-off projects are completed in less than a month the revenue is
recognised when the work has been completed and the customer has confirmed all
performance conditions have been satisfied. For longer 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, subject to sign off of milestones agreed with the
customer. 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.
1.11 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.
1.12 Incentives from suppliers
As a value-added IT reseller, the Group can earn incentive income from
suppliers in addition to any profit made on the underlying transactions.
Rebates from software and hardware sales
Where the Group invoices a customer directly, it may receive additional
rebates from suppliers. These 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.
Fees from software sales
Where the Group sells on behalf of a vendor who invoices the customer
directly, the Group is paid a fee from the vendor for our service in managing
the customer relationship and providing licensing advice and support to them.
As noted above in note 1.10 under Direct software sales, the fee is recognised
in revenue when the vendor's invoicing to the customer takes place. Fees
recognised but not yet received are included within trade and other
receivables in the consolidated statement of financial position.
Fees from service engagements
Where the Group provides internal services in relation to certain vendor
technologies, the activity may be funded by the vendor themself rather than by
the customer, for example where the vendor is seeking to increase awareness
and/or uptake in certain technical solution areas, refer to note 1.10 revenue
recognition - services internal.
1.13 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 for 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.
1.14 Leases
Group as a 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.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and
rewards incidental to ownership of an asset are classified as operating
leases. Rental income arising accounted for on a straight-line basis over the
lease term and is included in the statement of profit or loss.
1.15 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.
1.16 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.
For purposes of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and short-term deposits as defined above.
1.17 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.
1.18 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.
1.19 Financial instruments
Financial instruments comprise investments in equity, loans receivable, trade
and other receivables (excluding prepayments), investments, cash and cash
equivalents, 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 2025, 29 February 2024, and 1
March 2023 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.
1.20 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.
Property acquired and held for future use and development as owner-occupied
property is included in owned property.
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 in profit or loss.
1.21 Intangible assets
Goodwill
Goodwill is measured as described in note 1.15. 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.
The useful lives for software is 2 to 8 years.
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.
1.22 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.
1.23 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.
1.24 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.
1.25 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 27.
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
share-based payment reserve comprises the fair value of share awards granted
which are not yet exercised. The amount will be reversed to retained earnings
as and when the related awards vest and are exercised by employees.
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.
1.26 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.
1.27 Dividends
Dividends paid on ordinary shares are classified as equity and are recognised
as distributions in equity.
1.28 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.
1.29 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 acquired intangible assets amortisation and share-based payment
charges. It is used as one of the performance measures determining executive
bonus payments in the current and prior reporting periods. It reconciles to
operating profit as follows:
Year ended 28 February 2025 Year ended 29 February 2024
Note £'000 £'000
Adjusted operating profit 72,355 63,300
Share-based payment charges 27 (5,049) (5,708)
Amortisation of acquired intangible assets 4 (880) (880)
Operating profit 66,426 56,712
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 2025 Year ended 29 February 2024
Revenue by product £'000 £'000
Software 146,002 130,365
Hardware 33,216 41,389
Services internal 34,032 31,517
Services external 3,884 3,750
Total revenue from contracts with customers 217,134 207,021
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 2025 Year ended 29 February 2024
£'000 £'000
Revenue by geographical regions
United Kingdom 209,854 199,912
Europe 4,112 4,326
Rest of world 3,168 2,783
217,134 207,021
3(b) Gross invoiced income by type
Year ended 28 February 2025 Year ended 29 February 2024
£'000 £'000
Software 2,005,289 1,721,993
Hardware 33,216 41,389
Services internal 34,032 31,517
Services external 27,267 28,103
2,099,804 1,823,002
Gross invoiced income 2,099,804 1,823,002
Adjustment to gross invoiced income for income recognised as agent (1,882,670) (1,615,981)
Revenue 217,134 207,021
Gross invoiced income reflects gross income billed to customers adjusted for
movements in deferred and accrued revenue items amounting to a £7.7 million
reduction (2024: £8.5 million increase). The Group reports gross invoiced
income as an alternative performance measure as management believes this
measure allows further understanding of business performance and volume of
activity in respect of working capital and cash flow.
4 Material administrative expenses
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 2025 Year ended 29 February 2024
Note £'000 £'000
Depreciation of property, plant and equipment 9 1,255 1,236
Depreciation of right-of-use assets 10 509 263
Amortisation of acquired intangible assets 11 880 880
System support and maintenance 4,670 3,872
Share-based payment expenses 27 5,049 5,708
Expenses relating to short-term leases 10 348 250
Rental income (105) -
Foreign exchange losses 55 137
5 Employees
Year ended 28 February 2025 Year ended 29 February 2024
Employee benefit expense: £'000 £'000
Employee remuneration (including directors' remuneration ((1))) 55,497 49,791
Commissions and bonuses 24,837 21,623
Social security costs 9,762 9,479
Pension costs 2,009 1,794
Share-based payments expense 27 5,049 5,708
97,154 88,395
Classified as follows:
Cost of sales 19,098 17,211
Administrative expenses 78,056 71,184
97,154 88,395
(1) Directors' remuneration is included in the directors' remuneration
report.
Year ended 28 February 2025 Year ended 29 February 2024
The average monthly number of employees during the year was: Number Number
Sales - account management 378 335
Sales - support and specialists 251 228
Service delivery 290 263
Administration 231 202
1,150 1,028
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 2025 Year ended 29 February 2024
£'000 £'000
Fees payable to the company's auditors and its associates for the audit of the 316 688
parent company and consolidated financial statements ((1))
Fees payable to the company's auditors and its associates for other services:
Audit of the financial statements of the company's subsidiaries 450 398
Non-audit services ((2)) 105 101
871 1,187
(1) Other fees of £0.4 million in the prior year has been included within
fees of the parent company.
(2) Non-audit services in the current and prior year relate to the
auditors' review of our interim report issued in October of each year.
7 Finance income and costs
Year ended 28 February 2025 Year ended 29 February 2024
£'000 £'000
Finance income
Bank interest received ((1)) 8,486 5,111
Finance income 8,486 5,111
Finance costs
Interest expense on financial liabilities measured at amortised cost (224) (330)
Interest expense on lease liability (67) (63)
Finance costs (291) (393)
(1) Interest received on cash deposited on money market
8 Income tax expense
The major components of the Group's income tax expense for all
periods are:
Year ended 28 February 2025 Year ended 29 February 2024
£'000 £'000
Current income tax charge in the year 19,175 15,892
Adjustment in respect of current income tax of previous years (18) (85)
Total current income tax charge 19,157 15,807
Deferred tax charge / (credit) in the year 604 (1,109)
Adjustments in respect of prior year 11 70
Effect of changes in tax rates - (23)
Deferred tax charge / (credit) 615 (1,062)
Total tax charge 19,772 14,745
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 2025 Year ended 29 February 2024
£'000 £'000
Profit before income tax 74,613 61,596
Income tax charge at the standard rate of corporation tax in the UK of 25% 18,653 15,085
(2024: 24.49%)(1)
Effects of:
Non-deductible expenses 1,124 (261)
Adjustment to previous periods (7) (15)
Effect of changes in tax rate - (23)
Effect of share of profit of associate 2 (41)
Income tax charge reported in profit or loss 19,772 14,745
(1) Prorated rate for change in tax rate from 19% to 25% on 1
April 2023
Year ended 28 February 2025 Year ended 29 February 2024
Amounts recognised directly in equity £'000 £'000
Aggregate current and deferred tax arising in the reporting period and not
recognised in net profit or loss or other comprehensive income but directly
credited/(charged) to equity:
Deferred tax: share-based payments (160) 407
Current tax: share-based payments 31 491
(129) 898
On 23 May 2023, the International Accounting Standards Board (the Board)
issued International Tax Reform - Pillar Two Model Rules - Amendments to IAS
12. On 20 June 2023, Finance (No.2) Act 2023 was substantively enacted in the
UK introducing a global minimum effective tax rate of 15% for large groups,
with revenues exceeding €750 million, for financial years beginning on or
after 31 December 2023. These rules are not expected to affect the Group.
As at 28 February 2025 As at 29 February 2024
Deferred tax asset - net £'000 £'000
The balance comprises temporary differences attributable to:
Intangible assets (568) (788)
Property, plant and equipment (2,088) (1,059)
Employee benefits 6 1
Provisions 74 73
Share-based payments 2,635 2,607
59 834
As at 28 February 2025 As at 29 February 2024
Net deferred tax asset reconciliation £'000 £'000
At 1 March 834 (635)
Intangible assets 220 220
Property, plant and equipment (1,029) (175)
Employee benefits 5 (2)
Provisions 1 8
Share-based payments 188 1,011
(Charge) / credit to profit or loss (615) 1,062
Share-based payments (160) 407
(Charge)/credit to equity (160) 407
Carrying amount at end of year 59 834
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 2023 9,405 4,339 1,313 1,017 104 16,178
Additions 373 692 11 249 9 1,334
Disposals - (25) - - (27) (52)
At 29 February 2024 9,778 5,006 1,324 1,266 86 17,460
Additions 5,760 549 46 - 3 6,358
Disposals - (1) - - (24) (25)
At 28 February 2025 15,538 5,554 1,370 1,266 65 23,793
Depreciation
At 1 March 2023 2,516 3,469 1,043 698 72 7,798
On disposals - (25) - - (27) (52)
Charge for the year 421 584 51 163 17 1,236
At 29 February 2024 2,937 4,028 1,094 861 62 8,982
On disposals - (1) - - (24) (25)
Charge for the year 384 600 47 211 13 1,255
At 28 February 2025 3,321 4,627 1,141 1,072 51 10,212
Net book value
At 29 February 2024 6,841 978 230 405 24 8,478
At 28 February 2025 12,217 927 229 194 14 13,581
During the year the Group acquired property, for £5.4 million, adjacent to
its offices in Leatherhead. Part of the property acquired is subject to
existing operating lease agreements. Since the property was acquired by the
Group for use as owner-occupied offices, the property has been included in
owned property.
10 Leases
Group as a lessee
Amounts recognised in the balance sheet
Buildings Motor vehicles Total
Right-of-use assets £'000 £'000 £'000
Cost
At 1 March 2023 1,377 245 1,622
Additions - 891 891
Disposals - (245) (245)
At 29 February 2024 1,377 891 2,268
Additions - 739 739
At 28 February 2025 1,377 1,630 3,007
Depreciation
At 1 March 2023 594 245 839
Disposals - (245) (245)
Charge for the period 144 119 263
At 29 February 2024 738 119 857
Charge for the period 145 364 509
At 28 February 2025 883 483 1,366
Net book value
At 1 March 2023 783 - 783
At 29 February 2024 639 772 1,411
At 28 February 2025 494 1,147 1,641
As at 28 February 2025 As at 29 February 2024 As at 1 March 2023
Lease liabilities £'000 £'000 £'000
Current 668 423 75
Non-current 1,269 1,314 917
1,937 1,737 992
There were additions of £0.7 million to the right-of-use assets in the
financial year ended 28 February 2025 (2024: £0.9 million).
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 2025 Year ended 29 February 2024
£'000 £'000
Depreciation charge of right-of-use assets 509 263
Interest expense (included in finance cost) 67 63
Expense relating to short-term leases (included in administrative expenses) 348 250
Changes in liabilities arising from financing activities
As at 1 March 2024 Additions Cash flows Interest As at 28 February 2025
£'000 £'000 £'000 £'000 £'000
Lease liabilities 1,737 739 (606) 67 1,937
Total liabilities from financing activities 1,737 739 (606) 67 1,937
As at 1 March 2023 Additions Cash flows Interest As at 29 February 2024
£'000 £'000 £'000 £'000 £'000
Lease liabilities 992 891 (209) 63 1,737
Total liabilities from financing activities 992 891 (209) 63 1,737
Group as a lessor
Contractual maturity of undiscounted operating lease receipts
The following table details the Group's remaining contract maturity for
operating leases on the Group during the year. There were no operating lease
receivables in the prior year. The table is based on undiscounted contractual
receipts.
Within 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years Over 5 years
28 February 2025 £'000 £'000 £'000 £'000 £'000 £'000
Operating lease receivables 464 464 464 244 87 159
11 Intangible assets
Goodwill Customer relationships Brand Software Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 March 2023 and 29 February 2024 37,493 8,798 3,653 - 49,944
Additions - - - 3,709 3,709
At 28 February 2025 37,493 8,798 3,653 3,709 53,653
Amortisation
At 1 March 2023 - 4,765 3,653 - 8,418
Charge for the year - 880 - - 880
At 29 February 2024 - 5,645 3,653 - 9,298
Charge for the year - 880 - - 880
At 28 February 2025 - 6,525 3,653 - 10,178
Net book value
At 29 February 2024 37,493 3,153 - - 40,646
At 28 February 2025 37,493 2,273 - 3,709 43,475
During the year the Group capitalised internal software development costs of
£3.7 million. The project was still in production phase at the year end and
as such there is no amortisation charge in the current financial year.
Determination of recoverable amount
The carrying value of indefinite useful life intangible assets, being
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 estimated to be £755.3 million and £245.7 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:
Long-term growth rate Discount rate Goodwill carrying amount
28 February 2025 % % £'000
Bytes Software Services 2 9.20 14,775
Phoenix Software 2 9.20 22,718
37,493
Long-term growth rate Discount rate Goodwill carrying amount
29 February 2024 % % £'000
Bytes Software Services 2 9.15 14,775
Phoenix Software 2 9.15 22,718
37,493
Growth rates
The Group used what it considers to be 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. Post-tax discount rates have been applied. The
difference between the value-in-use calculated using the post-tax discount
rates and the value-in-use calculated using pre-tax discount rates is not
material.
Sensitivities
The impacts of variations in the calculation of value-in-use of assumed growth
rate and post-tax discount rates applied to the forecast future cash flows of
the CGUs have been estimated as follows:
Bytes Software Services Phoenix Software
28 February 2025 £'000 £'000
Headroom 702,044 212,605
1% increase in the post-tax discount rate applied to the forecast future cash (94,207) (31,522)
flows
1% decrease in the post-tax discount rate applied to the forecast future cash 124,953 41,843
flows
0.5% increase in the terminal growth rate 44,492 14,940
0.5% decrease in the terminal growth rate (38,714) (13,000)
Bytes Software Services Phoenix Software
29 February 2024 £'000 £'000
Headroom 688,344 273,935
1% increase in the post-tax discount rate applied to the forecast future cash (97,592) (38,628)
flows
1% decrease in the post-tax discount rate applied to the forecast future cash 129,792 51,351
flows
0.5% increase in the terminal growth rate 46,379 18,323
0.5% decrease in the terminal growth rate (40,316) (15,928)
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 Investment in an associate
With effect from 18 April 2023 the Group acquired 25.1% interest in Cloud
Bridge Technologies Limited for £3.0 million, settled in cash. The Group's
interest in Cloud Bridge Technologies Limited is accounted for using the
equity method.
As at 28 February 2025 As at 29 February 2024
£'000 £'000
Current assets 7,980 8,302
Non-current assets 108 123
Current liabilities (5,016) (6,078)
Non-current liabilities (771) (11)
Equity 2,301 2,336
Group's share in equity - 25% 578 586
Goodwill 2,607 2,607
Group's carrying amount of the investment 3,185 3,193
28 February 2025 Acquisition to 29 February 2024
£'000 £'000
Revenue 28,920 13,851
Cost of sales (26,755) (11,789)
Administrative expenses (2,340) (1,171)
Finance costs (56) (6)
Profit before tax (231) 885
Income tax expense 198 (222)
Profit for the period (33) 663
Group's share of profit for the period (8) 166
The associate requires the Group's consent to distribute its profits. The
Group does not foresee giving such consent at the reporting date. The
associate had no contingent liabilities or capital commitments as at 28
February 2025.
In preparing the financial statements, the Group has considered whether there
are impairment indicators present in relation to the net assets of the
associate which would require an adjustment to be made to the £3.2 million
carrying amount of the investment as at 28 February 2025. The Group has
assessed its share of the value in use of the associate using future expected
cash flows based on management forecasts over a five-year period, and
thereafter a reasonable rate of growth of 2% is applied based on current
market conditions and using a discount rate of 9.2% (post-tax rate) in line
with that of the Group (see note 11). Based on this, the Group's share in the
recoverable amount of Cloud Bridge is estimated to be £3.8 million which
provides a headroom against the carrying value of £0.6 million. The
calculation of future cashflows uses estimates of revenue growth, gross
margin, and administrative costs. In making its assessment, management have
considered several qualitative factors in respect of the Cloud Bridge business
including historic track record of revenue growth, increase in customer
opportunities and pipeline, attainment of key vendor accreditations,
development of internal systems to deliver cost savings and efficiencies, and
expansion of operations in other territories. Gross margin changes create the
greatest sensitivity and a 2% reduction across the assessment period would
lead to an impairment to the carrying value of £1.2 million. The value in use
is also sensitive to changes in the discount rate applied. A 2% increase in
the rate would give rise to an impairment to the carrying value of £0.4
million. Taking the base headroom forecast and the qualitative factors
together, the Group concludes there is no impairment of the carrying amount of
the investment at the reporting date.
13 Contract assets
As at 28 February 2025 As at 29 February 2024
£'000 £'000
Contract assets 11,746 14,445
As at 28 February 2025 As at 29 February 2024
Contract assets is further broken down as: £'000 £'000
Short-term contract assets 9,973 11,756
Long-term contract assets 1,773 2,689
11,746 14,445
Contract assets include £1.7 million (2024: £2.4 million) of deferred costs
relating to internal services contracts, and the recognition of accrued
revenue of £10.0 million (2024: £12.0 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.
14 Contract liabilities
As at 28 February 2025 As at 29 February2024
£'000 £'000
Contract liabilities 27,279 21,485
As at 28 February 2025 As at 29 February 2024
Contract liabilities is further broken down as: £'000 £'000
Short-term contract liabilities 25,245 19,348
Long-term contract liabilities 2,034 2,137
27,279 21,485
During the year, the Group recognised £19.3 million (2024: £23.9 million) of
revenue that was included in the contract liability balance at the beginning
of the period. This liability arises 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.
15 Inventories
As at 28 February 2025 As at 29 February2024
£'000 £'000
Inventories 14 60
14 60
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 £46,000
(29 February 2024: £nil).
16 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 2025 As at 29 February 2024
Financial assets Note £'000 £'000
Financial assets at amortised cost:
Trade receivables 17 259,224 212,432
Other receivables 17 6,917 7,415
266,141 219,847
As at 28 February 2025 As at 29 February 2024
Financial liabilities Note £'000 £'000
Financial liabilities at amortised cost:
Trade and other payables - current, excluding payroll tax and other statutory 19 301,669 259,661
tax liabilities
Lease liabilities 10 1,937 1,737
303,606 261,398
The Group's exposure to various risks associated with the financial
instruments is discussed in note 23. 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.
17 Trade and other receivables
As at 28 February 2025 As at 29 February 2024
£'000 £'000
Financial assets
Gross trade receivables 260,883 214,922
Less: impairment allowance (1,659) (2,490)
Net trade receivables 259,224 212,432
Other receivables 6,917 7,415
266,141 219,847
Non-financial assets
Prepayments 2,313 1,968
2,313 1,968
Trade and other receivables 268,454 221,815
(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
1.19.
(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 2025 £'000 £'000 £'000 £'000 £'000 £'000
Expected loss rate 0.07% 0.26% 2.90% 10.93% 44.84%
Gross carrying amount - trade receivables 232,118 17,495 5,201 4,189 1,880 260,883
Loss allowance 162 45 151 458 843 1,659
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
29 February 2024 £'000 £'000 £'000 £'000 £'000 £'000
Expected loss rate 0.07% 0.41% 4.16% 7.62% 80.02%
Gross carrying amount - trade receivables 180,289 23,688 4,994 3,744 2,207 214,922
Loss allowance 134 97 208 285 1,766 2,490
The closing loss allowances for trade receivables reconcile to the opening
loss allowances as follows:
As at 28 February 2025 As at 29 February 2024
Trade receivables £'000 £'000
Opening loss allowance at 1 March 2,490 1,542
(Decrease) / increase in loss allowance recognised in profit or loss during (108) 1,227
the period
Receivables written off during the year as uncollectable (723) (279)
Closing loss allowance 1,659 2,490
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 and other vendor incentive income of
£5.6 million (2024: £5.7 million).
18 Cash and cash equivalents
As at 28 February 2025 As at 29 February 2024
£'000 £'000
Cash at bank and in hand 6,276 88,836
Short-term deposits 106,800 -
113,076 88,836
Short-term deposits are made for varying periods of between one day and one
month, depending on the immediate cash requirements of the Group and earn
interest at the respective short-term deposit rates.
19 Trade and other payables
As at 28 February 2025 As at 29 February 2024
£'000 £'000
Trade and other payables 179,003 168,777
Accrued expenses 122,666 90,884
Payroll tax and other statutory liabilities 25,864 18,256
327,533 277,917
Trade payables are unsecured and are usually paid within 45 days of
recognition. Accrued expenses includes accruals for purchase invoices not
received and other accrued costs such as bonuses and commissions payable at
year end.
The carrying amounts of trade and other payables are considered to be the same
as their fair values, due to their short-term nature.
20 Share capital and share premium
Number of shares Nominal value Share premium Total
Allotted, called up and fully paid £'000 £'000 £'000
At 1 March 2023 239,482,333 2,395 633,636 636,031
Shares issued during the year 874,565 9 14 23
At 29 February 2024 240,356,898 2,404 633,650 636,054
Shares issued during the year 711,367 7 2,782 2,789
At 28 February 2025 241,068,265 2,411 636,432 638,843
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.
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 27.
21 Merger reserve
As at 28 February 2025 As at 29 February 2024
£'000 £'000
Balance at 1 March 2023, 29 February 2024 and 28 February 2025 (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 Cash generated from operations
Year ended 28 February 2025 Year ended 29 February 2024
Note £'000 £'000
Profit before taxation 74,613 61,596
Adjustments for:
Depreciation and amortisation 4 2,644 2,379
Non-cash employee benefits expense - share-based payments 4 5,049 5,708
Share of profit of associate 8 (166)
Finance income 7 (8,486) (5,111)
Finance costs 7 291 393
Decrease/(increase) in contract assets 2,699 (3,364)
Increase in trade and other receivables (46,639) (35,895)
Decrease/(increase) in inventories 46 (2)
Increase in trade and other payables 49,616 46,200
Increase/(decrease) in contract liabilities 5,794 (4,405)
Cash generated from operations 85,635 67,333
23 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 17.
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.
23(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.
23(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 2025 As at 29 February 2024
USD EUR NOK USD EUR NOK
£'000 £'000 £'000 £'000 £'000 £'000
Trade receivables 11,348 3,945 - 10,247 2,661 -
Cash and cash equivalents 3,627 155 - 176 1,647 -
Trade payables (18,663) (3,529) (53) (16,640) (4,253) (580)
(3,688) 571 (53) (6,217) 55 (580)
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 2025 As at 29 February 2024
GBP:USD GBP:EUR GBP:NOK GBP:USD GBP:EUR GBP:NOK
£'000 £'000 £'000 £'000 £'000 £'000
5% strengthening in GBP 176 (27) 3 296 (3) 28
5% weakening in GBP (194) 30 (3) (327) 3 (31)
The aggregate net foreign exchange gains/losses recognised in profit or loss
were:
Year ended 25 February 2025 Year ended 29 February 2024
£'000 £'000
Total net foreign exchange losses in profit or loss 55 137
23(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 2025, the Group had cash and cash equivalents of £113.1
million, see note 18. 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 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 2025 and 29 February 2024, the Group had net finance income
and has therefore complied with the interest cover covenant. The Group has
been in a net cash position as at 28 February 2025 and 29 February 2024 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 2025 Note £'000 £'000 £'000 £'000 £'000 £'000
Trade and other payables 19 301,669 - - - 301,669 301,669
Lease liabilities 10 726 689 627 - 2,042 1,937
302,395 689 627 - 303,711 303,606
Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total contractual cash flows Carrying amount
29 February 2024 Note £'000 £'000 £'000 £'000 £'000 £'000
Trade and other payables 19 259,660 - - - 259,660 259,660
Lease liabilities 10 495 495 869 - 1,859 1,737
260,155 495 869 - 261,519 261,397
24 Capital management
24(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 40-50% 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.
24(b) Dividends
2025 2024
Pence per share Pence per share
Ordinary shares £'000 £'000
Interim dividend paid 3.1 7,469 2.7 6,466
Special dividend paid 8.7 20,936 7.5 17,961
Final dividend paid 6.0 14,438 5.1 12,214
Total dividends attributable to ordinary shareholders 17.8 42,843 15.3 36,641
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 6.9 pence and a special
dividend of 10.0 pence per share for the year ended 28 February 2025 to be
paid to shareholders on the register as at 11 July 2025. The aggregate of the
proposed dividends expected to be paid on 25 July 2025 is £40.7 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.
25 Capital commitments
At 28 February 2025, the Group had £Nil capital commitments (29 February
2024: £Nil).
26 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:
26(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 2025 Year ended 29 February 2024
£'000 £'000
Short-term employee benefits 4,591 3,653
Post-employment pension benefits 121 97
Total compensation paid to key management 4,712 3,750
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 376,082 share option awards
(2024: 170,360) at a weighted average exercise price of £0.21 (2024: £0.04).
Share-based payment charges include £1,570,816 (2024: £1,257,326) in respect
of key management personnel, refer to note 27 for details on the Group's
share-based payment incentive schemes.
26(b) Subsidiaries and associates
Interests in subsidiaries are set out in note 29 and the investment in
associate is set out in note 12.
26(c) Outstanding balances arising from sales/purchases of services
Group companies made purchases from the associate of £4.9 million (2024:
£3.1 million) and sales to the associate of £0.1 million (2024: £nil)
during the year with a trade payable balance of £0.1 million (2024: £0.5
million) at the year end.
27 Share-based payments
The Group accounts for its share option awards as equity-settled share-based
payments. The fair value of the awards granted is recognised as an expense
over the vesting period. The amount recognised in the share-based payment
reserve will be reversed to retained earnings as and when the related awards
vest and are exercised by employees. As noted in the prior year Annual Report,
one third of the annual bonus for the financial year ended 28 February 2025
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 961,569 (2024: 1,195,700) options. For the year ended 28
February 2025, 47,463 (2024: 298,561) options were forfeited, 57,583 options
were exercised (2024: 819,416) and no options 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 no (2024: nil) options. For the year ended 28 February 2025,
174,897 (2024: 176,600) options were forfeited, 217,000 (2024: nil) options
were exercised and no options 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 449,394 (2024: 337,890) options. For the year ended 28
February 2025, 214,641 (2024: 213,832) options were forfeited, 425,868 (2024:
3,625) options were exercised and 32,865 (2024: nil) options 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 16,675
(2024: 45,365) options. For the year ended 28 February 2025, no (2024: 50,526)
options were forfeited and 10,916 options were exercised. No options expired
in the current or prior period.
Share-based payment employee expenses
Year ended 28 February 2025 Year ended 29 February 2024
£'000 £'000
Equity settled share-based payment expenses 5,049 5,708
There were no cancellations or modifications to the awards in 2025 or 2024.
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 2025 28 February 2025 29 February 2024 29 February 2024
Number WAEP Number WAEP
Outstanding at 1 March 8,813,260 £3.52 8,760,684 £3.59
Granted during the year 1,428,249 £1.44 1,666,660 £0.80
Forfeited during the year (437,001) £3.96 (739,519) £2.28
Exercised during the year (711,367)(1) £3.92 (874,565)(1) £0.03
Expired during the year (32,865) £4.00 - -
Outstanding at 29 February 9,060,276 £3.14 8,813,260 £3.52
Exercisable at 29 February 2,802,279 £4.02 609,272 £0.01
(1) The weighted average share price at date of exercise was £5.09 (2024:
£5.85).
The weighted average expected remaining contractual life for the share options
outstanding at 28 February 2025 was 1.53 years (2024: 2.2 years).
The weighted average fair value of options granted during the year was £3.93
(2024: £4.21).
The range of exercise prices for options outstanding at the end of the year
was £0.01 to £5.00 (2024: £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 2025 and 29 February
2024:
28 February 2025 28 February 2025 28 February 2025
Assumptions PISP SAYE DBP
Weighted average fair value at measurement date £5.11 £1.33 £5.58
Expected dividend yield 1.56% 1.76% 0.00%
Expected volatility 34% 34% 33%
Risk-free interest rate 4.31% 3.74% 4.47%
Expected life of options 3 years 3 years 2 years
Weighted average share price £5.59 £4.94 £5.59
Model used Black-Scholes and Monte Carlo Black-Scholes Black-Scholes
29 February 2024 29 February 2024 29 February 2024
Assumptions PISP SAYE DBP
Weighted average fair value at measurement date £4.86 £1.79 £5.15
Expected dividend yield 1.53% 1.53% 0.00%
Expected volatility 31% 30% 30%
Risk-free interest rate 4.29% 4.79% 4.44%
Expected life of options 3 years 3 years 2 years
Weighted average share price £5.16 £5.11 £5.16
Model used Black-Scholes and Monte Carlo 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.
28 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 2025 Year ended 29 February 2024
pence pence
Basic earnings per share 22.78 19.55
Diluted earnings per share 21.95 18.85
Headline earnings per share 22.78 19.55
Diluted headline earnings per share 21.95 18.85
Adjusted earnings per share 25.07 21.78
Diluted adjusted earnings per share 24.16 21.01
28(a) Weighted average number of shares used as the denominator
Year ended 28 February 2025 Year ended 29 February 2024
Number Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share and headline earnings per share
240,750,619 239,693,670
Adjustments for calculation of diluted earnings per share and diluted headline
earnings per share:
- share options ((1)) 9,060,276 8,813,260
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
249,810,895 248,506,930
(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 27.
28(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 2025 Year ended 29 February 2024
Note pence pence
Profit for the period attributable to owners of the company 54,841 46,851
Adjusted for:
Loss on disposal of property, plant and equipment 4 - -
Tax effect thereon - -
Headline profits attributable to owners of the company 54,841 46,851
28(c) Adjusted earnings per share
Adjusted earnings per share is an alternative performance measure used as a
target for the PSP awards made in 2022, 2023 and 2024. It is calculated by
dividing the adjusted profits attributable to ordinary shareholders by the
total number of ordinary shares in issue at the end of the year. Adjusted
profit is calculated 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 2025 Year ended 29 February 2024
Note £'000 £'000
Profits attributable to owners of the company 54,841 46,851
Adjusted for:
- Amortisation of acquired intangible assets 4 880 880
- Deferred tax effect on above (220) (220)
- Share-based payment charges 27 5,049 5,708
- Deferred tax effect on above (188) (1,011)
Adjusted profits attributable to owners of the company 60,362 52,208
29 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
Phoenix Software 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% Dormant for all periods
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
(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 2025.
The registered address of all of the Group subsidiaries included above is
Bytes House, Randalls Way, Leatherhead, Surrey, KT22 7TW.
30 Events after the reporting period
There were no events after the period that require disclosure.
1 (#_ftnref1) FY24 customer numbers and average GP per customer have been
revised from 5,978 and £24,400 in the 2023/24 annual report to remove year on
year fluctuations caused by very small customer variations under a single
parent.
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