15
October 2024
BYTES TECHNOLOGY GROUP
plc
('BTG', 'the
Group')
Results for the six months
ended 31 August 2024
Strong performance,
capitalising on continued demand
Bytes Technology Group plc (LSE:
BYIT, JSE: BYI), one of the UK's leading software, security, cloud
and AI services specialists, today announces its half year results
for the 6 months ended 31 August 2024 (H1 FY25).
Sam
Mudd, Chief Executive Officer, said:
"I am pleased to report another set
of positive results for BTG, with a strong increase in operating
profit, driven by continued demand for our broad range of software,
solutions and services. Despite the challenging economic climate
and political uncertainty over the past six months, we have
increased our share of wallet amongst our existing customers as
they continued to invest in their IT needs. We have also expanded
our client base in both the public and corporate
sectors."
"The Group has again made strategic
investments in personnel, internal systems, and new vendor
accreditations to drive future growth and support our customers in
navigating the complexities of agile, yet secure, IT environments.
Our strong relationships with Microsoft and other top tier vendors
allow us to seize exciting opportunities in cloud adoption,
workload migrations, storage, security, and virtualisation
technologies. Meanwhile, we continue to collaborate with our
customers to enable their teams to roll-out the use of emerging AI
technology, such as Copilot. With sustained demand in all these
areas, and our expanding technical capabilities, these will be our
key focus areas in the remainder of FY25 and beyond."
"Our passionate, talented, and
experienced staff continue to position BTG to provide high-quality
licensing advice, technical enablement and support to meet our
customers' needs. This differentiates us from the competition and
underpins our confidence for continued growth during the remainder
of the year."
Financial
performance
|
£'million
|
H1 FY25 (six months ended 31
August 2024)
|
H1 FY24 (six months ended 31
August 2023)
|
% change year on
year
|
|
|
|
|
|
|
Gross invoiced income (GII)1
|
£1,230.2m
|
£1,081.6m
|
13.7%
|
|
Revenue2
|
£105.5m
|
£108.7m
|
(2.9)%
|
|
|
|
|
|
|
Gross profit (GP)
Gross margin % (GP/Revenue)
GP/GII %
|
£82.1m
77.8%
6.7%
|
£75.3m
69.3%
7.0%
|
9.0%
|
|
Operating profit
Operating profit/GP%
|
£35.6m
43.4%
|
£30.6m
40.6%
|
16.3%
|
|
|
|
|
|
|
Cash
|
£71.5m
|
£51.7m
|
38.3%
|
|
Cash
conversion3
|
56.2%
|
54.0%
|
|
|
Cash
conversion (rolling 12 months)3
|
112.6%
|
119.7%
|
|
|
|
|
|
|
|
Earnings per share (pence)
|
12.67
|
10.60
|
19.5%
|
|
|
|
|
|
|
Interim dividend per share (pence)
|
3.1
|
2.7
|
14.8%
|
Financial
highlights
- GII increased by
13.7% to £1,230.2 million (H1 FY24 : £1,081.6 million), primarily
driven by software. There continued to be a strong contribution
from the public sector and the large prior year contract wins from
NHS & HMRC have seen further growth.
- Revenue reduced by
2.9% to £105.5 million (H1 FY24 : £108.7 million) primarily
due to a decrease in hardware GII (all of which is booked as
revenue) and which exceeded the growth in software GP (where only
the GP is included in revenue rather than the full GII). This has
resulted in an increase in gross margin % (GP/revenue) from 69.3%
to 77.8% with GP increasing against the slight decline in
revenue.
- Growth in GP of
9.0% to £82.1 million (H1 FY24 : £75.3 million) in part reflects a
greater weighting towards aggregated public sector sales under
competitive tendering processes. This led to a corresponding small
reduction in GP/GII from 7.0% last year to 6.7% this year. Behind
this figure however we saw growth in our two key income streams,
software and internal services, by 11.3% and 28.1%
respectively.
- Operating profit
increased by 16.3% to £35.6 million (H1 FY24: £30.6 million), with
a corresponding rise in the ratio of operating profit to GP from
40.6% to 43.4%, reflecting the balance achieved between investing
in the business whilst driving efficiencies.
- Earnings per share
increased 19.5% to 12.67 pence (H1 FY24: 10.6 pence).
- Half year cash
conversion of 56.2% is in line with our expectations reflecting the
seasonal timing of cash flows, with a stronger weighting in the
second-half of the financial year (H1 FY24: 54.0%). Our rolling
cash conversion for the 12 months ended 31 August 2024 stood at
112.6%, meeting our sustainable annual target of 100%.
- Closing cash was
£71.5 million (H1 FY24: £51.7 million).
Interim
dividend
- Interim dividend
of 3.1 pence per share, a 14.8% increase on last year's interim
dividend (H1 FY24: 2.7 pence).
Operational
highlights
- Customers that
traded with BTG in H1 FY24 contributed 98% of our GP in this half
year (H1 FY24: 98%), at a renewal rate of 107%.
- Increased
headcount in the period by 7% to 1,130 (29 February 2024: 1,057)
with particular focus on bolstering sales and service delivery
teams.
- Continued to grow
our physical footprint with the opening of offices in Sunderland
and Portsmouth and expansion of floorspace in London.
- Sold over 130,000
Copilot licenses across our client base to date, generating
annualised GII of circa £39 million, and Copilot now also used
widely within our business.
- Renewed our
Microsoft Azure Expert MSP status and secured further security and
cloud specialisms.
- Received multiple
vendor awards including from Palo Alto, HP, Nutanix, Checkpoint,
Sophos, Cato Networks, Bitdefender, Adobe and Druva.
- Both Bytes
Software Services and Phoenix Software named among the UK's top 50
Best Workplaces 2024.
- Vesting of our
first Share Save Plan from 2021 which has seen participating staff
able to exercise their options to become shareholders in
BTG.
Current trading and
outlook
The Group traded strongly in the
first half of FY25 whilst operating in highly competitive markets
and despite challenging macroeconomic conditions. Our focus
remains on executing our growth strategy by nurturing customer
relationships, extending our strong vendor partnerships, and
leveraging the technical and commercial skills of our teams. We are
well positioned to benefit from the structural demand drivers we
see in our markets including cloud computing, cyber security and AI
for the remainder of FY25.
Analyst and investor
presentation
A presentation for sell-side analysts
and investors will be held today at 9:30am (BST) via a video
webcast that can be accessed using the link:
https://brrmedia.news/BYIT_HY_24
A recording of the webcast will be
available after the event at www.bytesplc.com.
The announcement and presentation will be available at
www.bytesplc.com
from 7.00am and 9.00am (BST),
respectively.
Enquiries
|
Bytes Technology Group plc
|
Tel: +44
(0)1372 418 500
|
|
Sam Mudd, Chief Executive
Officer
Andrew Holden, Chief Financial
Officer
|
|
|
|
|
|
Headland Consultancy Ltd
|
Tel: +44
(0)20 3805 4822
|
|
Stephen Malthouse
|
|
|
Henry Wallers
|
|
|
Jack Gault
|
|
Forward-looking
statements
This announcement includes statements
that are, or may be deemed to be, 'forward-looking statements'. By
their nature, forward-looking statements involve risk and
uncertainty since they relate to future events and circumstances.
Actual results may, and often do, differ materially from
forward-looking statements.
Any forward-looking statements in
this announcement reflect the Group's view with respect to future
events as at the date of this announcement. Save as required by law
or by the 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.
About Bytes Technology Group
plc
BTG is one of the UK's leading
providers of IT software offerings and solutions, with a focus on
cloud, security, and AI products. The Group enables effective and
cost-efficient technology sourcing, adoption and management across
software services, including in the areas of security and the
cloud. It aims to deliver the latest technology to a diverse range
of customers across corporate and public sectors and has a long
track record of delivering strong financial performance.
The Group has a primary listing on
the Main Market of the London Stock Exchange and a secondary
listing on the Johannesburg Stock Exchange.
1 'Gross invoiced income' (GII) is a
non-International Financial Reporting Standard (IFRS) alternative
performance measure that reflects gross income billed to customers
adjusted for deferred and accrued revenue items. GII has a direct
influence on our movements in working capital, reflects our risks
and shows the performance of our sales teams.
2 'Revenue' is reported in accordance with IFRS 15 Revenue from
Contracts with Customers. Under this standard, the Group is
required to exercise 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 gross profit achieved on the contract and not the gross income
billed to the customer). Our key financial
metrics of gross invoiced income, gross profit, 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. It is
calculated over both the current 6 month reporting period and over
a rolling 12 months, the latter taking the previous 12 months free
cash flow divided by the previous 12 months operating profit, in
order to reflect seasonal variations between the two halves of the
year.
_______________________________________________________________________________
Chief Executive Officer's
review
A
strong performance delivering on our strategy
H1 FY25 was another set of strong
results for BTG, with a 13.7% increase in gross invoiced income, a
9.0% rise in gross profit, and a 16.3% increase in operating
profit. Despite the challenging economic climate, we have
delivered a strong performance underpinned by our diverse
range of software and IT services offerings from leading vendors
and software publishers, and reflecting the robust nature of IT
spending across the UK and Ireland.
Our continued success in securing
large public sector contracts again illustrates our credibility and
strength in bidding for significant government software
opportunities under the Crown Commercial Services and other
framework agreements. While these sales are initially won at
reduced margins, due to the competitive tendering process, we have
a strategy and track record of growing the size and profitability
of these contracts over time as they predominantly take the form of
multi-year agreements. This provides confidence in our future
growth prospects and the potential for up-selling and cross-selling
opportunities.
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, 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 further in pre-sales and specialist technical skills,
allowing us to service a larger market and scale up to meet our
customers' needs.
Examples of our services delivery
capability includes a consultancy team with expertise across the
entire Microsoft Cloud and AI portfolio and our Security Operation
Centre (SOC), plus Governance, Risk and Compliance (GRC) and
Software Asset Management (SAM) offerings, including licensing
spend optimisation supported by our own IP in the form of Quantum
and Licence Dashboard. The expansion of our IT services capability
is further enhanced by the renewal of our Microsoft Azure Expert
status for the provision of managed services, along with attaining
11 service delivery specialisations (4 in security solutions) and 6
solution partner designations from Microsoft.
We have seen strong interest in AI products, including Microsoft's Copilot
for M365, selling over 130,000 licenses into our customer base
since its launch in H2 FY24, and we continue to develop associated
in-house services to support customer readiness and adoption. We
will further expand our existing in-house AI-dedicated teams,
creating repeatable sector specific solutions with broader data and
GenAI services across our vendor offerings as this income stream
continues to grow in the second half of FY25 and beyond.
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, HP, Nutanix, Checkpoint, 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 and the
customer success stories that we deliver.
We work with our vendors to align our
sales efforts and service offerings with their strategic
objectives, and they incentivise us accordingly. While not yet
finalised, a change to one of the key vendor's incentive plans is
scheduled to take effect from 1 January 2025 as part of the
evolution of their partner program, and while this might result in
lower incentives in a few areas, the overall incentive opportunity
is expected to grow. We have a long track record of successfully
adapting to such changes and do not expect there to be a material
impact in the current or next financial year.
We are proud of the energy,
enthusiasm and professionalism demonstrated by our people,
now totalling 1,130 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 attracting talent into
front-end sales, delivery teams and all supporting
areas, and from 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. Our flexible working regime continues to deliver positive
results for our business, while also meeting our people's
aspirations for a healthy work/life balance. In August 2024, we
launched our fourth Share Save Plan, which has again been well
received by our employees, with over 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. This will improve our staff user experiences and
drive internal efficiencies, whilst more closely supporting our
customers and making it easier for them to do business with
us.
We are committed to executing our
strategy in a responsible manner, with sustainability rooted in
everything we do. Our sustainability framework aims to deliver
positive impacts for our stakeholders across 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 in respect of our sustainability initiatives
are set out below.
Our dividend policy is to distribute
40%-50% of the Group's post-tax pre-exceptional earnings to
shareholders by way of normal dividends. Accordingly, we are
pleased to confirm that the Board has declared an interim dividend
of 3.1 pence per share to be paid on 22 November 2024 to
shareholders on the register at 8 November 2024.
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 the first half of
FY25 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.
Continued focus on
environment, social and governance (ESG)
Our approach to responsible business
and ESG is aimed at helping to build a sustainable future and
create long-term value for 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
further progressed our ESG initiatives in the following
ways.
Achieved Science Based Targets
initiative (SBTi) validation
At the end of June 2024 we received
SBTi validation for our near-term and net zero carbon reduction
targets and, further to this, we continue to align our activities
to our Scope 1 and 2 targets for FY26. As part of the continual
publication of our net zero efforts, we have submitted our annual
Carbon Disclosure Project (CDP) for FY25.
We continue to monitor the progress
of the IFRS S1 and S2 standards being adopted by the UK Government,
through the UK Sustainability Disclosure Standards and will align
to 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 last 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 FY24 which has expanded further in H1 FY25 across
the business. Early in FY25 our York office saw the addition of
solar panels, which further supports carbon reduction and increases
energy security. Self-generated energy is also being assessed for
our other owned offices.
Unity through diversity and
inclusion
Employee support and wellbeing
continue to be key focus areas for the Group, with wellbeing days
an important part in driving a healthier and happier workforce,
which we continue to measure 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 aid in attracting and retaining 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, incentive trips and the development of 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
are made based on their ideas and initiatives. During H1 FY25, we
have 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
In H1 FY25 there have been some
changes to the composition of the Board and committee
memberships. On 25 March 2024, Erika Schraner was appointed as
Senior Independent Director and Interim Chair of the Audit
Committee, replacing Mike Phillips, who resigned as an Independent
Non-Executive Director. At the same time Shruthi Chindalur
assumed the role of Designated Non-Executive Director (DNED) for
employee engagement. On 10 May 2024 Sam Mudd was appointed as
CEO.
On 1 June 2024 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 member of the Nomination,
Remuneration and ESG Committees. Anna Vikström Persson was
appointed as an Independent Non-Executive Director, Chair of the
ESG Committee, and member of the Audit, Nomination and Remuneration
Committees.
Following the aforementioned
appointments of Ross Paterson and Anna Vikström Persson, we are now
again compliant with provisions 24 and 32 of the UK Corporate
Governance Code 2024.
Chief Financial Officer's
review
|
|
H1 FY25
|
H1 FY24
|
Change
|
|
Income statement
|
£'m
|
£'m
|
%
|
|
Gross invoiced income (GII)
|
1,230.2
|
1,081.6
|
13.7%
|
|
GII split by product:
|
|
|
|
|
Software
|
1,187.2
|
1,027.3
|
15.6%
|
|
Hardware
|
12.5
|
24.1
|
(48.1)%
|
|
Services
internal1
|
16.6
|
15.5
|
7.1%
|
|
Services
external2
|
13.9
|
14.7
|
(5.4)%
|
|
|
|
|
|
|
Netting adjustment
|
(1,124.7)
|
(972.9)
|
15.6%
|
|
|
|
|
|
|
Revenue
|
105.5
|
108.7
|
(2.9)%
|
|
Revenue split by product:
|
|
|
|
|
Software
|
74.7
|
67.1
|
11.3%
|
|
Hardware
|
12.5
|
24.1
|
(48.1)%
|
|
Services
internal1
|
16.6
|
15.5
|
7.1%
|
|
Services
external2
|
1.7
|
2.0
|
(15.0)%
|
|
|
|
|
|
|
Gross profit (GP)
|
82.1
|
75.3
|
9.0%
|
|
GP/GII %
|
6.7%
|
7.0%
|
|
|
Gross margin %
|
77.8%
|
69.3%
|
|
|
|
|
|
|
|
Administrative expenses
|
46.5
|
44.7
|
4.0%
|
|
Administrative expenses
split:
|
|
|
|
|
Employee costs
|
37.2
|
35.7
|
4.2%
|
|
Other administrative
expenses
|
9.3
|
9.0
|
3.3%
|
|
|
|
|
|
|
Operating profit
|
35.6
|
30.6
|
16.3%
|
|
Add back:
|
43.4%
|
40.6%
|
|
|
Share-based
payments
|
2.5
|
2.9
|
(13.8)%
|
|
Amortisation of acquired
intangible assets
|
0.4
|
0.4
|
0.0%
|
|
|
|
|
|
|
Adjusted operating profit (AOP)
|
38.5
|
33.9
|
13.6%
|
|
|
|
|
|
|
Interest income
Finance costs
Share of profit of
associate3
|
6.0
(0.2)
0.1
|
2.9
(0.3)
0.1
|
106.9%
(33.3)%
0.0%
|
|
Profit before tax
|
41.5
|
33.3
|
24.6%
|
|
|
|
|
|
|
Income tax expense
|
(11.1)
|
(7.9)
|
40.5%
|
|
Effective tax rate
|
26.7%
|
23.7%
|
|
|
Profit after tax
|
30.4
|
25.4
|
19.7%
|
|
|
|
|
| |
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 profits
Overview of H1 FY25
results
H1 FY25 has continued to see
customers engaging with us for our core software licencing
offerings. We have experienced increasing demand in areas such
as cloud computing, cyber security and AI,
which we have responded to by expanding our technical and service
solutions.
This demand contributed to
operating profit increasing by 16.3% to
£35.6 million (H1 FY24: £30.6 million) and profit before tax rising by 24.6% to £41.5 million (H1 FY24:
£33.3 million).
Gross invoiced income
(GII)
GII reflects gross income billed to
our customers, with some small adjustments for deferred and accrued
items (mainly relating to managed service contracts where the
income is recognised over time). We believe that GII is the
measure which best enables us to evaluate our sales performance,
volume of transactions and rate of growth. GII has a direct
influence on our movements in working capital, reflects our risks
and demonstrates the performance of our sales teams. Therefore, it
is the income measure that is most recognisable among our staff,
customers, suppliers and shareholders for them to understand our
business.
GII increased by 13.7% year on year,
with growth coming from our core software and internal services
income streams. Software remains the largest contributor, providing
97% of the total GII for the period (H1 FY24: 95%). Whilst growth
has reduced compared to FY24, the prior year saw some exceptionally
large public sector contracts won. These are now in their second
year in H1 FY25, with the agreements running over five
years.
Hardware, whilst not the primary
focus for the Group (representing only 1% of GII), has seen a 48%
reduction, reflecting the more one-off nature of sales as they
typically reflect the timing of large infrastructure projects by
customers, and a more general reduction in hardware spend across
the IT sector.
We have seen a small reduction in GII
from external services delivered in the period, which will
fluctuate according to customer requirements and whether we have
the capability and capacity to deliver these projects in house.
Correspondingly we have seen a rise in our internally delivered
services figure and will continue to invest in this part of the
business to meet future demand.
The continued high level of
government investment in IT, and the Group's success in winning
those new contracts, has resulted in our public sector GII
increasing by £141.0 million, up 19.5%, to £862.8 million (H1 FY24:
£721.7 million). Our corporate GII has been more impacted by
the ongoing economic uncertainty
but still increased by 2.1% to £367.4 million (H1
FY24: £359.9 million).
This means that our overall GII mix
has moved slightly compared to last year, with 70% in public sector
(H1 FY24: 67%) against corporate of 30% (H1 FY24: 33%).
Revenue
Revenue is reported in accordance
with IFRS 15 Revenue from Contracts with Customers. Under this
reporting standard, we are 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, that is, the gross profit
achieved on the contract and not the gross income billed to the
customer.
It should be noted that GII, gross
profit, operating profit, and profit before and after taxes are not
affected by these judgements, and neither are the consolidated
statements of financial position, cash flows and changes in
equity.
Our judgements around this area are
set out in notes 1.4 and 1.10 of the financial statements for FY24
but in summary, software and external services revenue is treated
on an agency basis while hardware and internal services revenue is
treated as principal. With software being our dominant income
stream, this therefore gives rise to our GII being subject to a
substantial "netting adjustment" to arrive at a much lower revenue
position.
This reporting of revenue as a mix of
GP and GII across the four income streams has given rise to a 2.9%
reduction to £105.5 million (H1 FY24: £108.7 million) as the growth
in software GP (where only the GP is
included in revenue rather than the full GII) is outweighed by the reduction in the hardware GII
(all of which is taken to revenue). Hence, due to
revenue being a mix of metrics, we focus on
GII to provide a consistent measure of our sales performance and
billed income.
Gross profit
(GP)
GP increased by 9.0% to £82.1 million
(H1 FY24: £75.3 million).
Breaking this down by income stream,
for the Group's two most strategic focus areas, we have seen both
achieving double digit growth, software GP up by 11.3%, and with
only a very small decline in its GP/GII%, while internal services
GP is up by 28.1%, driving it's GP/GII margin up to over 20%.
Against these positive trends, the declining hardware GII noted
above, and to a smaller degree the reduction in external services,
have brought about corresponding reductions in GP for those income
streams.
Looking across our two main customer
segments, the Group has seen strong growth in public sector GII,
bidding under highly competitive tenders, either for single
contracts or for several public body contracts in aggregate, the
latter enabling us to gain multiple new clients from a single bid.
Despite more pressure on margins under this process the public
sector GP has grown by over 20%. Against this, the relatively low
growth in GII from the corporate sectors is mirrored by GP growth
there of 3%.
Lower margins in public sector are as
expected but in fact our GP/GII% for both public and corporate
sectors has improved slightly from the previous year. However, the
greater mix of GII derived from public sector has resulted in an
overall reduction in GP/GII from 7.0% in H1 FY24 to 6.7% this year.
When comparing GP to revenue, we have seen an increase in the gross
margin % from 69.3% to 77.8% due to the GP increasing against the
slight decline in revenue noted above.
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 further enhanced by focusing on selling our wide range
of solutions offerings and higher-margin security products, while
maximising our vendor incentives through achievement of technical
certifications. We track these customers individually to ensure
that the strategy delivers value for the business, and our other
stakeholders, over the duration of the contracts.
Our long-standing relationships with
our customers and high levels of repeat business was again
demonstrated in H1 FY25 with 98% of our GP coming from customers
that we also traded with last year (H1 FY24: 98%), at a renewal
rate of 107% (which measures the GP from existing customers this
period compared to total GP in the prior period).
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 front-line sales teams, vendor and technology
specialists, service delivery staff and technical support
personnel, backed up by our marketing, operations, and finance
teams. It has been, and will remain, a carefully managed aspect of
our business.
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 long
relationships we have established with our customers, vendors, and
partners.
During the half year we have seen
total staff numbers rise to 1,130 on our August 2024 payroll, up by
6.9% from the year-end position of 1,057 on 29 February 2024 and up
10.1% over the full year period since 31 August 2023.
Employee costs, included in
administrative expenses, rose by 4.2% to £37.2 million (H1 FY24:
£35.7 million). However, this figure has been impacted by the
effects of:
· a
reduction in share-based payment charges by £0.4 million as our
first three share option schemes issued post-IPO have now vested
and the cost of the new schemes launched in FY24 and FY25 have been
slightly lower.
· capitalising £0.7 million of staff costs onto 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 which can be
found in our Annual Report and Accounts.
Without the impact of these two
items, the underlying increase in our employee costs is 7.3%, hence
in line with the increase in headcount and less than our GP growth,
reflecting the balanced and proportional way in which staff
investments are made.
Other administrative
expenses
Other administrative expenses
increased by 3.3% to £9.3 million (H1 FY24: £9.0 million) including
continued investment in staff welfare and internal
systems.
As part of the software development
project referred to above, we have also spent £0.9 million with a
third party development company to supplement our own internal
resources. This engagement was taken wholly for this purpose, hence
not in the prior year figures, and the cost has been capitalised in
full alongside our own salary costs, making a total of £1.6 million
added to intangible software assets during the period (see balance
sheet below).
Operating profit and adjusted
operating profit (AOP)
Our operating profit increased by
16.3% from £30.6 million to £35.6 million, which shows the balance
we have achieved between growing GP in a challenging market whilst
effectively managing our cost base.
Some of this increase has been
positively impacted by the £0.7 million capitalisation of software
developers staff costs noted above (previously expensed in the
prior half year when their work was focused on maintaining legacy
systems). Even after adjusting for this, the increase remains very
positive at 14.1% with a like for like comparative operating profit
figure of £34.9 million in H1 FY25.
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 in excess of 40% and have achieved this, with an increased ratio
of 43.4% (H1 FY24: 40.6%). Excluding the capitalised staff costs,
the ratio for this period is 42.5%.
In previous results announcements we
have also focused on AOP which removes the effects of share-based
payment (SBP) charges and amortisation of acquired intangibles,
notably due to the growth of the SBP over the time since IPO from a
near zero starting position in FY21 of £0.3 million to £5.7 million
in FY24. Given that we have now moved out of that growth cycle (as
older schemes vest and new schemes are introduced), the current SBP
are now viewed to be stable and normalised as business as usual
recurring expenses. Similarly, our amortisation charges are stable
at £0.4 million for the current and prior half year. Hence 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 13.6% to £38.5 million (H1 2024: £33.9 million) and the ratio of
AOP to GP increased from 45.0% to 46.9%.
Interest income and finance
costs
This half year has seen significant
interest being earned from money market deposits, totalling £6.0
million (H1 FY24: £2.9 million). Whilst last half year included
only four 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.
This effort has been so effective
that our half year figure has already exceeded the £5.1 million we
generated in the whole of FY24. There is some seasonal impact here,
due to the timing of the largest Microsoft enterprise agreements
which primarily transact in our first six months, and hence our
interest earnings will be lower in our second half.
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 have accounted for
the Group's share of its profits amounting to £0.1 million for H1
FY25 (H1 FY24: £0.1 million).
Profit before
tax
The combined impact of increased
operating profits and high levels of interest received has seen our
profit before tax increasing by 24.6% to £41.5 million (H1 FY24:
£33.3 million).
Income tax
expense
The £3.2 million (40.5%) rise in our
income tax expense to £11.1 million (H1 FY24: £7.9 million)
reflects the growth in profits described above and the increase in
the UK corporate tax rate from 19% to 25% effective from 1 April
2023. Hence March 2023 in the prior year was at the lower rate
giving rise to an effective rate of tax of 23.7% last year. The
higher effective rate in H1 FY25 of 26.7% is also attributed to a
re-statement of the deferred tax asset from February 2024 relating
to our unexercised share options, given the reduction in the share
price since year end.
Profit after
tax
Profit after tax increased by 19.7%
to £30.4 million (H1 FY24: £25.4 million), underlining our growth
in operating profits 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 (post tax), our
earnings per share have risen accordingly. Basic earnings per share
are up 19.5% from 10.6 pence to 12.67 pence.
Balance sheet and cash
flow
|
|
As at
|
|
|
31 August
|
29 February
|
|
|
2024
|
2024
|
|
Balance sheet
|
£'m
|
£'m
|
|
|
|
|
|
Investment in associate
Property plant and
equipment
|
3.3
8.2
|
3.2
8.5
|
|
Intangible assets
|
41.9
|
40.6
|
|
Other non-current assets
|
3.3
|
4.9
|
|
Non-current assets
|
56.7
|
57.2
|
|
|
|
|
|
Trade and other
receivables
|
211.8
|
221.8
|
|
Cash
|
71.5
|
88.8
|
|
Contract assets
|
10.9
|
11.8
|
|
Current assets
|
294.2
|
322.4
|
|
|
|
|
|
Trade and other payables
|
250.6
|
277.9
|
|
Lease liabilities
|
0.5
|
0.4
|
|
Contract and tax
liabilities
|
18.8
|
19.6
|
|
Current liabilities
|
269.9
|
297.9
|
|
|
|
|
|
Lease liabilities
|
1.3
|
1.3
|
|
Other non-current
liabilities
|
2.1
|
2.1
|
|
Non-current liabilities
|
3.4
|
3.4
|
|
|
|
|
|
Net
assets
|
77.6
|
78.3
|
|
|
|
|
|
Share capital
|
2.4
|
2.4
|
|
Share premium
|
635.6
|
633.7
|
|
Share-based payment
reserve
|
12.5
|
11.0
|
|
Merger reserve
|
(644.4)
|
(644.4)
|
|
Retained earnings
|
71.5
|
75.6
|
|
Total equity
|
77.6
|
78.3
|
Closing net assets stood at £77.6
million (29 February 2024: £78.3 million and 31 August 2023: £60.0
million) including the Group's £3.3 million interest (25.1%) in Cloud Bridge Technologies (which includes
our £0.3 million share of profits since it was acquired in April
2023).
Intangible assets includes the £1.6
million addition in the period of capitalised software development
costs, a combination of internal staff costs of £0.7 million and
£0.9 million of external contractor costs, both referred to above.
As this work continues through the second-half of the year, we
expect this asset to stand at £3.2 million by our February 2025
year end, and ultimately to be in the region of £5.0 million when
the work is complete. Currently, while we are in development phase,
there is no amortisation of the asset, this will commence once we
move to live production mode, scheduled for FY26.
There is an unrelated £0.4 million
amortisation which is included in the current income statement in
respect of the historic customer relationships intangible asset
carried on the balance sheet.
Net current assets closed at £24.3
million (29 February 2024: £24.5 million and 31 August 2023: £5.3
million).
Our debtor days at the end of the
half year stood at 41, in line with August 2023, and our average
debtor days for the period was 37 (H1 FY24: 36). Our closing loss
allowance provision at 31 August 2024 reduced to £2.2m, down from
£2.5 million at the February 2024 year end, with £0.4 million bad
debts written off against the provision but a further £0.1 million
added to reflect our current expected loss calculated under IFRS9.
We believe this remains a prudent position given that our gross
trade receivables have reduced since year end and the level of
write offs is very low considering our GII of £1.2
billion.
The Group has paid its suppliers on
schedule through the year, with its average creditor days remaining
in line with prior year at 48 for the six months and standing at 49
at the end of the period.
The consolidated cash flow is set out
below:
|
|
H1 FY25
|
H1 FY24
|
|
Cash
flow
|
£'m
|
£'m
|
|
|
|
|
|
Cash
generated from operations
|
22.0
|
17.4
|
|
Payments for fixed and intangible
assets
|
(2.0)
|
(0.9)
|
|
Free
cash flow
|
20.0
|
16.5
|
|
|
|
|
|
Net interest received
|
5.9
|
2.7
|
|
Taxes paid
|
(9.5)
|
(7.2)
|
|
Lease payments
|
(0.2)
|
(0.1)
|
|
Dividends
|
(35.4)
|
(30.2)
|
|
Issue of share capital
|
1.9
|
-
|
|
Investment in associate
|
-
|
(3.0)
|
|
Net decrease in cash
|
(17.3)
|
(21.3)
|
|
Cash at the beginning of the
period
|
88.8
|
73.0
|
|
Cash
at the end of the period
|
71.5
|
51.7
|
|
|
|
|
|
Operating Profit
|
35.6
|
30.6
|
|
Cash
conversion
|
56.2%
|
54.0%
|
|
Cash
conversion (rolling 12 months)
|
112.6%
|
119.7%
|
Cash at the end of the period was
£71.5 million (31 August 2023: £51.7 million), which is after the
payment of dividends totalling £35.4 million during the period -
being the final and special dividends for FY24.
Cash flow from operations after
payments for fixed and intangible assets (free cash flow) generated
a positive cash flow of £20.0 million (H1
FY24: £16.5 million). 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 56.2% in the
period (H1 FY24: 54.0%). Whilst we target
our long term sustainable cash conversion at 100%, a figure closer
to the 50% we have seen in H1 this year and H1 last year is in line
with our expectations given the seasonality of our cash flows,
particularly around the timing of receipts and payments for our
large Microsoft enterprise agreements. For reference, our rolling
12 month cash conversion measured across the full year up to the
end of August has exceeded the 100% target.
The £1.9 million cash received from
the issue of share capital relates to the exercising of circa
500,000 share options by participating staff, primarily under our
2021 CSOP & 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 £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, with an
optional one year extension to 17 May 2027. To date, the Group has
not utilised the facility.
Interim
dividend
The Group's dividend policy is to
distribute 40-50% of post-tax pre-exceptional earnings to
shareholders. Accordingly, the Board is pleased to declare a gross
interim dividend of 3.1 pence per share. The aggregate amount of
the interim dividend expected to be paid out of retained earnings
at 31 August 2024, but not recognised as a liability at the end of
the half year, is £7.5 million.
The salient dates applicable to the
dividend are as follows:
|
Dividend announcement date
|
Tuesday,
15 October 2024
|
|
Currency conversion determined and
announced together with the South African (SA) tax treatment on
SENS by 11:00
|
Monday, 4
November 2024
|
|
Last day to trade cum dividend (SA
register)
|
Tuesday, 5
November 2024
|
|
Commence trading ex-dividend (SA
register)
|
Wednesday,
6 November 2024
|
|
Last day to trade cum dividend (UK
register)
|
Wednesday,
6 November 2024
|
|
Commence trading ex-dividend (UK
register)
|
Thursday,
7 November 2024
|
|
Record date
|
Friday, 8
November 2024
|
|
Payment date
|
Friday, 22
November 2024
|
Additional information required by
the Johannesburg Stock Exchange:
1. The GBP:ZAR
currency conversion will be determined and published on SENS on
Monday, 4 November 2024.
2. A dividend
withholding tax of 20% will be applicable to all shareholders on
the South African register unless a shareholder qualifies for
exemption not to pay such dividend withholding tax.
3. The dividend
payment will be made from a foreign source (UK).
4. At Tuesday, 15
October 2024, being the declaration announcement date of the
dividend, the company had a total of 240,917,315 shares in issue
(with no treasury shares).
5. No transfers of
shareholdings to and from South Africa will be permitted between
Monday, 4 November 2024 and Friday, 8 November 2024 (both dates
inclusive). No dematerialisation or rematerialisation orders will be permitted between Wednesday,
6 November 2024 and Friday, 8 November 2024 (both dates
inclusive).
Principal
risks
The Group Board has overall
responsibility for risk. This includes maintaining our risk
management (ERM) framework and internal control systems and setting
our risk appetite. In doing this, it receives support from our
Audit Committee, our internal audit partner and our executive
management teams. However, through their skills and diligence,
everyone in the Group plays a part in protecting our business from
risk and making the most of our opportunities.
We have identified principal risks
and uncertainties that could have a significant impact on the
Group's operations, which we assign to five categories: financial,
strategic, process and systems, operational and regulatory. BTG's
management reviews each principal risk looking at its level of
severity, where it overlaps with other risks, the speed at which it
is changing and its relevance to the Group. We consider the
principal risks both individually and collectively, so that we can
appreciate the interplay between them and understand the entire
risk landscape.
For us, risk management is a
continuous journey, requiring review throughout the year. It starts
with defining our risk appetite, which was unchanged this year, as
we maintained our cautious approach. Our ERM framework enables us
to identify and manage risk, and we believe that it continues to
serve us well with the inclusion of risk management as a standing
agenda item at each of the subsidiary board meetings illustrating
the Group's bottom-up approach to risk.
The ongoing unsettled geopolitical
and macroeconomic environment, particularly Russia's war in Ukraine
and the continuing tensions across the Middle East has served as a
strong reminder of the importance of having a robust, agile
approach to managing risk. Our ongoing risk monitoring process
enables us to assess current and emerging risks, and while we
remain vigilant, our business has performed strongly through
various external crises in recent years, demonstrating its
resilience.
Our 14 principal risks which were set
out in our last Annual Report have been updated and included below.
Whilst the risks themselves have not changed, with no additions or
deletions, in some cases we have updated the status of the risk
with increased focus, and for one there is now a decrease in
focus.
Additionally, we continue to monitor
our three emerging risks relating to the
physical risk from climate change, keeping pace with social change,
and the impact of AI.
|
Financial
|
1
Economic disruption
increase focus due to conflict escalations in Middle
East
|
Risk owner CEO
|
|
The
risk
This risk includes the impact of the
conflicts in the Middle East and in Ukraine. It encompasses
the uncertainties caused by global economic pressures and
geopolitical risk within the UK.
|
How
we manage it
We have so far continued to perform
well during high inflation, the conflict in Ukraine and the UK
leaving the EU, as well as with the conflict in the Middle
East.
The recent real-life experiences of
high inflation, rising cost of living, Covid-19, exchange rate
fluctuations and the UK leaving the EU have shown us to be
resilient through tough economic conditions. The diversity of our
client base has also helped us maintain and increase business in
this period. We are not complacent, however - economic disruption
remains a risk and we keep our operations under constant
review.
Our continued focus on software asset
management means that we advise customers of the most
cost-effective ways to fulfil their software needs. 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 through
outsourcing their IT to managed services. This may create
an opportunity to accelerate our service offerings.
|
|
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
and the cost of borrowing. The high inflation rates seen in 2022
and 2023 have decreased but are still above target rates. Economic
deterioration like this could have an impact on 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
no
change
|
Risk owner MDs of subsidiary
businesses
|
|
The
risk
BTG faces pressure on profit margins
from a myriad of directions, including increased competition,
changes in vendors' commercial behaviour, certain offerings being
commoditised and changes in customer mix or preferences.
|
How
we manage it
Profit margins are affected by many
factors at customer and micro levels.
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 again sought
to increase margins where possible, while cost increases from
vendors have grown our margins organically. 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.
We aim to agree acceptable profit
margins with customers upfront.
Keeping the correct level of
certification by vendor, early deal registration and rebate
management are three methods 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
increase focus for potential upcoming
changes
|
Risk owner CEO
|
|
The
risk
We receive incentive income from our
vendors and their distributors. This partially offsets our
costs of sales but could be significantly reduced or
eliminated if the commercial models are changed
significantly.
|
How
we manage it
We maintain a diverse portfolio of
vendor products and services. Although we receive major sources of
funding from specific vendor programmes, if one source declines, we
can offset it by gaining new certifications in, and selling, other
technologies where new funding is available.
Vendors, such as Microsoft, which
form a significant part of BTG's gross profit, have previously
changed their commercial models and are again doing so in the near
future. The Group has successfully adapted to different commercial
models over time. So, although we see this risk increasing,
we are confident in our ability to adapt and maintain
profitability.
We closely monitor incentive income
and make sure staff are aligned to meet vendors' goals so that we
don't lose out on 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
the commercial models could put pressure on our
profitability.
|
|
4
Inflation
decrease focus as CPI has reduced to close to BoE
target
|
Risk owner CFO
|
|
The
risk
Inflation in the UK, as measured by
the Consumer Price Index (CPI), was 10.1% in March 2023 and more
than halved to 3.2% by March 2024. At September 2024 this is now
2.2%. This rate is above the Bank of England's target of
2%.
|
How
we manage it
Staffing costs make up most of our
overheads, so our attention has been focused on our employees and
their ability to cope with the rising cost of living.
|
|
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 have a risk for
retaining and attracting employees and customers.
|
|
5
Working capital
increase focus in line with rise in economic
disruption
|
Risk
owner CFO
|
|
The
risk
As customers face the challenges of
inflation and elevated interest rates in the current economic
environment, there is a greater risk of an increasing aged
debt profile, with customers slower to pay and the possibility of
bad debts.
Vendors' changing payment terms could
also have a significant impact.
We have seen debtor days stabilise as
inflation has reduced, but the number of days is yet to return to
historic low levels.
|
How
we manage it
Our credit collections teams are
focused on collecting customer debts on time and maintaining our
debtor days at or below target levels. Debt collection is reported
and analysed continually and escalated to senior management as
required. In the past financial year, BTG hasn't had any
significant bad debt or write-offs.
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
no
change
|
Risk owner CEO
|
|
The
risk
Over-reliance on any one technology
or supplier could pose a potential risk, should that technology be
superseded or exposed to economic down cycles, or if the vendor
fails to innovate ahead of customer demands
|
How
we manage it
We work with our vendors as partners
- it is a relationship of mutual dependency because we are their
route to the end customer. We maintain 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.
Group has a diversified vendor list,
as well as a focus on services, 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, the development of
AI by a handful of companies, including Microsoft, has the
potential to further concentrate revenue and profit across fewer
vendors.
An increase in the use of
marketplaces, heightens the risk of more transactions going through
the same route.
This risk is also heightened by
changes to shipping routes, if certain channels are made
unsafe.
|
|
7
Competition
no
change
|
Risk owner CEO
|
|
The
risk
Competition in the UK IT market, or
the commoditisation of IT products, may result in BTG being
unable to win or maintain market share.
Mergers and acquisitions have
consolidated our distribution network and absorbed specialist
services companies. This has caused overlap with our own
offerings.
A move to direct vendor resale to end
customers (disintermediation) could place more pressure on
the market opportunity. Platforms, like marketplaces,
with direct sales to customers, could also be seen
as disintermediation.
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 not
part of these frameworks.
AI risks becoming a partial
competitor, if it becomes able to provide accurate and beneficial
licensing and infrastructure advice direct to customers.
|
How
we manage it
We closely watch commercial and
technological developments in our markets.
The threat of disintermediation by
vendors has always been present. We minimise this threat by
continuing to increase the added value we bring to customers
directly. This reduces clients' desire to deal directly with
vendors.
Equally, vendors cannot engage with
myriad organisations globally without the sort of well-established
network of intermediaries that we have.
We currently work with the dominant
marketplace providers and can sell to our vendors through its
platform, which gives discounts to the customer versus buying
directly.
AI/machine learning has been
identified as a new emerging risk, and so will be explored and
monitored for risks and opportunities to our business.
Currently, there is no sign of any
commoditisation that would be a serious threat to our business
model in the short or medium term.
|
|
The
impact
This risk could have a material,
adverse impact on our business and profitability, potentially
needing 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
no
change
|
Risk
owner CEO
|
|
The
risk
As the technology and security
markets evolve rapidly and become more complex, the risk exists
that we might not keep pace and so fail to be considered for new
opportunities by our customers.
|
How
we manage it
We stay relevant to our customers
by:
· Continuing to
offer them expert advice and innovative solutions
· Specialising in
high-demand areas
· Holding superior
levels of certification
· Maintaining our
good reputation and helping clients find the right solutions
in a complex, often confusing IT marketplace.
We defend our position by keeping
abreast of new technologies and the innovators who develop them.
We do this, for example, by running a cyber accelerator
programme for new and emerging solution providers, joining industry
forums and sitting on new technology committees. We have expanded
the number and range of our subject-matter experts, who stay
ahead of developments in their areas and communicate this
internally and externally.
By identifying and developing bonds
with emerging companies, we maintain good relationships with them
as they grow and give our customers access to their
technologies. This is core to our business, so the risk
from this is relatively low.
|
|
The
impact
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
increase focus as this is a growing risk
worldwide
|
Risk owner Chief Information
Security Officer
|
|
The
risk
Breaches in the security of
electronic and other confidential information that BTG collects,
processes, stores and transmits may give rise to significant
liabilities and reputational damage.
|
How
we manage it
We use intelligence-driven analysis,
including research by our internal digital forensics team, 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.
|
|
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
no
change
|
Risk
owner CTOs of subsidiary
businesses
|
|
The
risk
Any failure or disruption of BTG's
people, processes and IT infrastructure may negatively affect our
ability to deliver to our customers, cause reputational damage and
lose us market share.
|
How
we manage it
Our Chief Technology Officer and Head
of IT manage and oversee our IT infrastructure, network,
systems and business applications. All our operational teams
are focused on 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.
Increased automation means a heavier
reliance on technology. Although it can reduce human error, it can
also potentially increase our reliance on other
vendors.
The risk is also mitigated through
policies and process implementation such as Phoenix achieving ISO
22301 and Bytes Software Services 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 vulnerability
assessments.
|
|
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.
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
increase focus due to scarcity of suitable applicants, as well
as higher salary expectations
|
Risk
owner CEO
|
|
The
risk
The success of BTG's business and
growth strategy depends on our ability to attract, recruit and
retain a talented employee base. Being able to offer competitive
remuneration is an important part of this.
Three factors are affecting
this:
· Salary and benefit
expectations
· BTG's high rate of
growth
· Skills shortage in
emerging, high-demand areas, such as AI and machine
learning
· 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.
|
How
we manage it
We continually strive to be the best
company to work for in our sector.
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 example. BTG
also runs an extensive apprenticeship programme across multiple
business divisions. We also review the time that management has to
coach new staff.
Maintaining our culture is important
to retaining current staff. BTG regularly engages with employees
through surveys, such as the employee Net Promoter Score (eNPS) and
Great Places to Work, feedback from this and other feedback avenues
is used to review and develop our employee benefits. We maintain
our small company feel through regular communications, clubs,
charity events and social events. We aim to absorb growth while
keeping our culture.
|
|
The
impact
Double impact from 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.
In addition, we may lose talented
employees to competitors.
|
|
|
12
Supply chain management
no
change
|
Risk
owner CEO
|
|
The
risk
Failure to understand suppliers may
lead to regulatory, reputational and financial risks, if they
expose our business to practices that we would not tolerate in
our own operations. The time and effort to monitor and audit
suppliers is considered a risk.
There is a risk to our business if we
engage with suppliers that:
· Provide unethical
working conditions and pay.
· Are involved in
financial mismanagement and unethical behaviour.
· Cause
environmental damage.
· Operate in
sanctioned regions.
|
How
we manage it
Supplier set-up forms include
questions to ask suppliers to disclose information relating to
compliance and adherence to our Supplier Code of Conduct. Any
unethical, illegal or corrupt behaviour that comes to light is
escalated and appropriate action is taken.
Onboarding questionnaires have been
reviewed and improved.
Phoenix has appointed a procurement
manager, and Bytes has established a cross-disciplinary group to
work on managing suppliers.
We consider the impact from shipping
risks to be lower, given that only a small part of our profit and
revenue come from hardware.
|
|
The
impact
The impact to the business is across
multiple streams from legal, financial, reputational, ethical and
environmental.
Escalating conflicts could also
affect our supply chain - for example, rerouting shipping around
southern Africa adds journey time and increases carbon
emissions.
|
|
Regulatory
|
13
Sustainability/ESG
no
change
|
Risk
owner CEO
|
|
The
risk
The growing importance of
sustainability and ESG for our customers, investors and employees
means we need to stay at the forefront of reporting and disclosure,
especially given that requirements and standards are continually
updated.
|
How
we manage it
Our Board manages and monitors this
risk closely, with oversight from the ESG and Audit
Committees.
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,
through the creation of the Board's ESG
Committee.
Disclosures are made through several
channels, including 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
increase focus as regulations expand
|
Risk
owner CEO
|
|
The
risk
Our business faces inherent risks
from evolving regulatory and compliance landscapes. Changes in
laws, regulations and industry standards could significantly affect
our operations, financial stability and reputation.
|
How
we manage it
We engage external experts. BTG works
closely with external authorities, including through internal and
external audits and paid-for consultancy, to 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 signoffs 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 31 August 2024 for the period up to 28
February 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 £71.5 million of cash
and cash equivalents available at 31 August 2024. The Group also
has access to a committed revolving credit facility that covers the
going concern period to 28 February 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, with the key assumptions summarised within the
financial statements below. Under all scenarios assessed, the Group
would remain cash positive throughout the whole of the going
concern period without needing to utilise the revolving credit
facility.
Going concern conclusion
Based on the analysis described
above, the Group has sufficient liquidity headroom through the
forecast period. The directors therefore have reasonable
expectation that the Group has the financial resources to enable it
to continue in operational existence for the period up to 28
February 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
his/her knowledge:
·
The financial information in this document,
prepared in accordance with the applicable UK law and applicable
accounting standards, gives a true and fair view of the assets,
liabilities, financial position and result of the Group taken as a
whole.
·
The Chief Executive Officer's and Chief Financial
Officer's reviews include a fair review of the development and
performance of the business and the position of the Group
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
On behalf of the Board
Sam
Mudd
Andrew Holden
Chief Executive
Officer Chief
Financial Officer
15 October 2024
Interim condensed
consolidated statement of profit or loss
For the six months ended 31
August
|
|
|
|
|
|
|
Six months
ended
|
Year ended
|
|
|
|
|
|
|
|
31 August
|
31 August
|
29 February
|
|
|
|
|
|
|
|
2024
|
2023
|
2024
|
|
|
|
|
|
|
|
Unaudited
|
Unaudited
|
Audited
|
|
|
|
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
|
Revenue
|
|
|
|
|
3
|
105,472
|
108,699
|
207,021
|
|
Cost of sales
|
|
|
|
|
|
(23,355)
|
(33,365)
|
(61,243)
|
|
Gross profit
|
|
|
|
|
|
82,117
|
75,334
|
145,778
|
|
Administrative expenses
|
|
|
|
|
|
(46,377)
|
(44,725)
|
(87,839)
|
|
Increase in loss allowance in trade
receivables
|
|
|
|
|
|
(127)
|
-
|
(1,227)
|
|
Operating profit
|
|
|
|
|
|
35,613
|
30,609
|
56,712
|
|
Finance income
|
|
|
|
|
4
|
5,979
|
2,859
|
5,111
|
|
Finance costs
|
|
|
|
|
4
|
(158)
|
(244)
|
(393)
|
|
Share of profit of
associate
|
|
|
|
|
7
|
72
|
120
|
166
|
|
Profit before taxation
|
|
|
|
|
|
41,506
|
33,344
|
61,596
|
|
Income tax expense
|
|
|
|
|
5
|
(11,059)
|
(7,956)
|
(14,745)
|
|
Profit after taxation
|
|
|
|
|
|
30,447
|
25,388
|
46,851
|
|
Profit for the period attributable to owners of the parent
company
|
30,447
|
25,388
|
46,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pence
|
Pence
|
Pence
|
|
Basic earnings per ordinary
share
|
|
|
|
|
15
|
12.67
|
10.60
|
19.55
|
|
Diluted earnings per ordinary
share
|
|
|
|
|
15
|
12.19
|
10.17
|
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.
Interim condensed
consolidated statement of financial position
|
|
|
|
|
|
As at
31 August
|
As at
31 August
|
As at
29 February
|
|
|
|
|
|
|
2024
|
2023
|
2024
|
|
|
|
|
|
|
Unaudited
|
Unaudited
|
Audited
|
|
|
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
|
Assets
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Property, plant and
equipment
|
|
|
|
|
8,215
|
8,654
|
8,478
|
|
Right-of-use assets
|
|
|
|
|
1,517
|
1,134
|
1,411
|
|
Intangible assets
|
|
|
|
6
|
41,848
|
41,086
|
40,646
|
|
Investment in associate
|
|
|
|
|
3,265
|
3,147
|
3,193
|
|
Contract assets
|
|
|
|
|
1,327
|
3,020
|
2,689
|
|
Deferred tax assets
|
|
|
|
|
525
|
436
|
834
|
|
Total non-current assets
|
|
|
|
|
56,697
|
57,477
|
57,251
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
|
|
17
|
58
|
60
|
|
Contract assets
|
|
|
|
|
10,898
|
13,985
|
11,756
|
|
Trade and other
receivables
|
|
|
|
8
|
211,756
|
180,148
|
221,815
|
|
Cash and cash equivalents
|
|
|
|
9
|
71,507
|
51,663
|
88,836
|
|
Total current assets
|
|
|
|
|
294,178
|
245,854
|
322,467
|
|
Total assets
|
|
|
|
|
350,875
|
303,331
|
379,718
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Lease liabilities
|
|
|
|
|
(1,337)
|
(1,170)
|
(1,314)
|
|
Contract liabilities
|
|
|
|
|
(2,049)
|
(1,567)
|
(2,137)
|
|
Total non-current liabilities
|
|
|
|
|
(3,386)
|
(2,737)
|
(3,451)
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
|
10
|
(250,593)
|
(222,909)
|
(277,917)
|
|
Contract liabilities
|
|
|
|
|
(17,059)
|
(16,046)
|
(19,348)
|
|
Current tax liabilities
|
|
|
|
|
(1,732)
|
(1,460)
|
(243)
|
|
Lease liabilities
|
|
|
|
|
(520)
|
(188)
|
(423)
|
|
Total current liabilities
|
|
|
|
|
(269,904)
|
(240,603)
|
(297,931)
|
|
Total liabilities
|
|
|
|
|
(273,290)
|
(243,340)
|
(301,382)
|
|
Net
assets
|
|
|
|
|
77,585
|
59,991
|
78,336
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
|
|
2,408
|
2,395
|
2,404
|
|
Share premium
|
|
|
|
|
635,554
|
633,636
|
633,650
|
|
Other reserves
|
|
|
|
|
12,539
|
10,516
|
11,050
|
|
Merger reserve
|
|
|
|
|
(644,375)
|
(644,375)
|
(644,375)
|
|
Retained earnings
|
|
|
|
|
71,459
|
57,819
|
75,607
|
|
Total equity
|
|
|
|
|
77,585
|
59,991
|
78,336
|
Interim condensed
consolidated statement of changes in equity
(unaudited)
|
|
|
|
Attributable to owners of the
company
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
|
Share
|
Other
|
Merger
|
Retained
|
Total
|
|
|
|
capital
|
premium
|
reserves
|
reserve
|
earnings
|
equity
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 March 2024
|
|
2,404
|
633,650
|
11,050
|
(644,375)
|
75,607
|
78,336
|
|
Total comprehensive income for the
period
|
-
|
-
|
-
|
-
|
30,447
|
30,447
|
|
Dividends
paid
12
|
-
|
-
|
-
|
-
|
(35,373)
|
(35,373)
|
|
Shares issued during the
year
|
4
|
1,904
|
|
-
|
-
|
1,908
|
|
Transfer to retained
earnings
|
-
|
-
|
(778)
|
-
|
778
|
-
|
|
Share-based payment
transactions
14
|
-
|
-
|
2,489
|
-
|
-
|
2,489
|
|
Tax adjustments
|
-
|
-
|
(222)
|
-
|
-
|
(222)
|
|
Balance at 31 August 2024
|
2,408
|
635,554
|
12,539
|
(644,375)
|
71,459
|
77,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 March 2023
|
2,395
|
633,636
|
7,235
|
(644,375)
|
62,606
|
47,567
|
|
Total comprehensive income for the
period
|
-
|
-
|
-
|
-
|
25,388
|
25,388
|
|
Dividends paid
|
12
|
-
|
-
|
-
|
-
|
(30,175)
|
(30,175)
|
|
Share-based payment
transactions
|
14
|
-
|
-
|
2,900
|
-
|
-
|
2,900
|
|
Tax adjustments
|
|
-
|
-
|
381
|
-
|
-
|
381
|
|
Balance at 31 August 2023
|
|
2,395
|
633,636
|
10,516
|
(644,375)
|
57,819
|
59,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 March 2023
|
|
2,395
|
633,636
|
7,235
|
(644,375)
|
62,606
|
61,497
|
|
Total comprehensive income for the
period
|
-
|
-
|
-
|
-
|
46,851
|
46,851
|
|
Dividends paid
|
12
|
-
|
-
|
-
|
-
|
(36,641)
|
(36,641)
|
|
Shares issued during the
year
|
|
9
|
14
|
-
|
-
|
-
|
23
|
|
Transfer to retained
earnings
|
|
-
|
-
|
(2,791)
|
-
|
2,791
|
-
|
|
Share-based payment
transactions
|
14
|
-
|
-
|
5,708
|
-
|
-
|
5,708
|
|
Tax adjustments
|
|
-
|
-
|
898
|
-
|
-
|
898
|
|
Balance at 29 February 2024
|
|
2,404
|
633,650
|
11,050
|
(644,375)
|
75,607
|
78,336
|
Interim condensed
consolidated statement of cash flows
|
|
|
Period ended 31
August
2024
|
Period ended 31
August
2023
|
Year ended 29
February
2024
|
|
|
|
|
Unaudited
|
Unaudited
|
Audited
|
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
Cash generated from
operations
|
11
|
22,009
|
17,417
|
67,333
|
|
|
Interest received
|
|
5,979
|
2,859
|
5,111
|
|
|
Interest paid
|
|
(113)
|
(196)
|
(330)
|
|
|
Income taxes paid
|
|
(9,483)
|
(7,222)
|
(15,109)
|
|
|
Net
cash inflow from operating activities
|
|
18,392
|
12,858
|
57,005
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
Payments for property, plant and
equipment
|
|
(354)
|
(885)
|
(1,334)
|
|
|
Payments for intangible
asset
|
|
(1,642)
|
-
|
-
|
|
|
Investment in associate
|
|
-
|
(3,027)
|
(3,027)
|
|
|
Net
cash outflow from investing activities
|
|
(1,996)
|
(3,912)
|
(4,361)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Proceeds from issue of
shares
|
|
1,908
|
-
|
23
|
|
|
Principal elements of lease
payments
|
|
(260)
|
(127)
|
(209)
|
|
|
Dividends paid to
shareholders
|
12
|
(35,373)
|
(30,175)
|
(36,641)
|
|
|
Net
cash outflow from financing activities
|
|
(33,725)
|
(30,302)
|
(36,827)
|
|
|
|
|
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents
|
|
(17,329)
|
(21,356)
|
15,817
|
|
|
Cash and cash equivalents at the
beginning of the financial year
|
88,836
|
73,019
|
73,019
|
|
Cash and cash equivalents at end of year
|
9
|
71,507
|
51,663
|
88,836
|
|
|
|
|
|
|
|
|
|
| |
Notes to the interim
condensed consolidated financial statements
1. Accounting policies
1.1
General information
The interim condensed consolidated
financial statements of Bytes Technology Group plc, together with
its subsidiaries ("the Group" or "the Bytes business") for the six
months ended 31 August 2024 were authorised for issue in accordance
with a resolution of the directors on 14 October 2024.
The Company is a public limited
company, incorporated and domiciled in the UK. Its registered
address is Bytes House, Randalls Way, Leatherhead, Surrey, KT22
7TW.
The Group 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 annual consolidated financial
statements of the Group will be prepared in accordance with
UK-adopted International Accounting Standards.
The interim condensed consolidated
financial statements for the six months ended 31 August 2024 have
been prepared in accordance with UK-adopted International
Accounting Standard ("IAS") 34 Interim Financial
Reporting.
The interim condensed consolidated
financial statements have been reviewed, but not audited, by Ernst
& Young LLP and were approved by the Board of Directors on 14
October 2024. The financial information contained in this report
does not constitute statutory accounts within the meaning of
section 434 of the Companies Act 2006. The interim condensed
consolidated financial statements should be read in conjunction
with the annual consolidated financial statements for the year
ended 29 February 2024, which were prepared in accordance with
UK-International Accounting Standards in conformity with the
requirements of the Companies Act 2006. The annual financial
statements for the year ended 29 February 2024 were approved by the
Board of Directors on 22 May 2024 and have been delivered to the
registrar. The auditor's report on those financial statements was
unqualified, did not contain an emphasis of matter paragraph and
did not contain any statement under section 498(2) or (3) of the
Companies Act 2006.
The Group's interim condensed
consolidated financial statements comprise the interim condensed
consolidated statement of profit or loss, interim condensed
consolidated statement of financial position, interim condensed
consolidated statement of changes in equity and interim condensed
consolidated statement of cash flows and a summary of significant
accounting policies and the notes thereto.
All amounts disclosed in the Group's
interim condensed consolidated financial statements and notes have
been rounded off to the nearest thousand, unless otherwise
stated.
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 above, in
addition to ever-present risks such as the Group's exposure to
credit risk, liquidity risk, currency risk and foreign exchange
risk.
When assessing the going concern of
the Group, the directors have reviewed the year-to-date financial
actuals, as well as detailed financial forecasts for the period up
to 28 February 2026, being the going concern assessment period.
This represents 18 months from the end of the reporting period,
rather than the minimum 12 months required under International
Accounting Standard (IAS) 1, to reflect the possible effect of
events occurring after the end of the reporting period up to the
date that the interim condensed consolidated financial statements
are authorised for issue.
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 Groups 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, in the current period of reporting the Group has
again achieved double-digit growth in gross invoiced income and
operating profit and high single digit growth in gross profit. It
finished the period with £71.5 million of cash.
Resilience is built into the Group's
operating model from its wide customer base, high levels of repeat
business, strong vendor relationships, and the back-to-back nature
of most of its sales, with increased demand driven by our customers
navigating the complexities of agile, yet secure, IT environments.
The key elements of the model are explained in further detail on
pages 150-151 in the annual financial statements for the year ended
29 February 2024. Our strong relationships with Microsoft and our
other top tier vendors allows us to take advantage of opportunities
in cloud adoption, workload migrations, storage, security, and
virtualisation technologies. Additionally, we continue to
collaborate with our customers to enable their teams to experiment
with, trial, and internalise the use of emerging AI technology,
such as Copilot which has generated huge interest since its
launch.
As a result, the directors believe
that the Group continues to operate in a resilient industry, which
will enable it to continue its profitable growth trajectory but are
also very aware of the risks which exist in the wider economy and
political landscape. These risks align to those identified in our
principal risks statement, notably economic disruption, inflation,
and attraction and retention of staff. The Board monitor these
macroeconomic and geopolitical risks on an ongoing basis. They are
considered further below.
Macroeconomic risks
• 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. Our sales mix has moved a
little in favour of public sector during the period, hence
resulting in a reduction in our gross profit/gross invoiced income
(GP/GII%) although underlying this impact of the change in mix, the
respective margins in each of our public and corporate customer
bases have improved slightly, and this remains one of the biggest
focus areas in our business.
• Wage inflation -
The business has been facing pressure from wage inflation in recent
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
16%, which is consistent with last year. We do not believe there
has been any significant outflow of staff due to being
uncompetitive with salaries. We have a strong, collaborative and
supportive culture and offer our staff employment in a business
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/gross profit, we
have achieved 43%, which is up on last year, demonstrating the
control over 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 -
The Group has only a very small level of debt in respect of its
property and vehicle leases and so minimal interest cost exposure,
nor has it ever needed to call on its revolving credit facility
(RCF). During the period we have continued to take advantage of the
recent high interest rates to generate a significant £6.0 million
of interest income in the reporting period by placing available
cash on the money markets through our monthly cash cycle. While
there are indications that interest rates may start to fall in the
coming months, as inflation comes down, we still see substantial
earnings opportunity over the going concern period.
• Foreign currency
rate changes - The vast majority of our business is transacted in
GBP. Where we do transact in foreign currencies, fluctuations in
the value of the pound sterling can have both positive and negative
impacts but we have the ability to self-hedge as we make both sales
and purchases in US dollars and euros.
• 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 very robust
operating model, with business spread over many customers in repeat
subscription programs and service contracts, and high renewal
rates.
• Economic
conditions impacting on customer payments - Across the period we
have seen our average debtor days maintained year on year at 37,
and with minimal evidence that customers ultimately do not pay. We
have suffered only a small level of bad debt during the period:
£0.4 million against GII of £1.2 billion. As in previous years, the
majority of our GII (70%), came from the public sector,
traditionally very safe and 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.
Geopolitical risks
The current geopolitical
environment, most notably the 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.
• Increasing
energy prices are not having a noticeable impact on our
profitability.
• In terms of
supply chain, we are not significantly or materially dependent on
the movement of goods, so physical trade obstacles are not likely
to affect us directly, with hardware only making up 1% of our GII
during the period. 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
so 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 review period
considering:
• The small number
of UK locations it operates from.
• A customer base
substantially located within the UK.
• A supply chain
which is not reliant on international trade and does not source
products and services from parts of the world which may be impacted
more severely by climate change.
• It sells
predominantly electronic software licences and so has no
manufacturing or storage requirements.
• Its workforce
can work seamlessly from home should any of their normal work
locations be impacted by a climatic event, although in the UK these
tend to be thankfully infrequent and not extreme.
Climate risks are considered fully
in the Task Force on Climate-related Financial Disclosures (TCFD)
included in the Annual Report for the year ended 29 February
2024.
Liquidity and financing position
At 31 August 2024, the Group held
instantly accessible cash and cash equivalents of £71.5 million and
the balance sheet shows net current assets of £24.3 million; these
amounts are after the Group paid final and special dividends for
the prior year totalling £35.4 million.
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.
Going concern assessment
The Group continues to forecast
cashflows under a base case scenario modelled on continued growth,
and then two downside scenarios, severe but plausible and stressed,
both of which include certain appropriate mitigations. This
approach to stress testing is consistent with the disclosure on
pages 153 and 154 in the annual financial statements for the year
ended 29 February 2024.
In its assessment, the Board has
considered the potential impact of the current economic conditions
and geopolitical environment as described above. Whilst there is
resilience against such pressures, if any of these factors leads to
a reduction in spending by the Group's customers, there may be an
adverse effect on the Group's future gross invoiced income, gross
profit, operating profit, and debtor collection periods.
In the most stressed scenario, we
have forecast both gross invoiced income and gross profit falling
by 30% year on year, commencing in December 2024, and debtor days
increasing by 10 at that same point in time. 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.
Under such downsides the Board have
factored in the extent to which they might be partially offset by
freezes in recruitment, pay rises and general costs (including a
natural reduction in commissions and bonuses if gross profit falls)
and with further mitigation measures including reductions in
headcount (through natural attrition by not replacing leavers).
These mitigations are within the control of the Group to implement
quickly in response to any downward trends should they be
necessary.
Under all scenarios assessed, the
Group would remain cash positive throughout the whole of the going
concern period, 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% of the post-tax
pre-exceptional earnings to shareholders.
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 28
February 2026, being the going concern assessment period.
Accordingly, the directors conclude it to be appropriate that the
interim condensed consolidated financial statements be prepared on
a going concern basis.
1.3
Critical accounting estimates and judgements
The preparation of the interim
condensed 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.
The accounting estimates and
judgements adopted for these interim condensed consolidated
financial statements are consistent with those of the previous
financial year as disclosed in the Group's annual report and
accounts for the year ended 29 February 2024.
1.4
New standards, interpretations and amendments adopted by the
Group
There were no new standards,
interpretations and amendments adopted by the Group during the
period to 31 August 2024 that have a material impact on the interim
condensed consolidated financial statements of the
Group.
1.5
Changes in accounting policies and disclosures
The accounting policies adopted in
the preparation of the interim condensed consolidated financial
statements are the same as those set out in the Group's annual
consolidated financial statements for the year ended 29 February
2024.
2. Segmental information
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 interim condensed consolidated statement of profit
or loss and the interim condensed 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.
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:
|
|
|
|
Period ended 31 August
2024
|
Period ended 31 August
2023
|
Year ended 29 February
2024
|
|
|
|
|
Unaudited
|
Unaudited
|
Audited
|
|
Revenue by product
|
|
|
£'000
|
£'000
|
£'000
|
|
Software
|
|
|
74,719
|
67,088
|
130,365
|
|
Hardware
|
|
|
12,464
|
24,112
|
41,389
|
|
Services internal
|
|
|
16,619
|
15,473
|
31,517
|
|
Services external
|
|
|
1,670
|
2,026
|
3,750
|
|
Total revenue from contracts with customers
|
|
|
105,472
|
108,699
|
207,021
|
|
|
|
|
|
|
|
Software
The Group's software revenue
comprises the sale of various types of software licences from a
range of software vendors.
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.
|
Revenue by geographical regions
|
|
|
Period ended 31 August
2024
Unaudited
£'000
|
Period ended 31 August
2023
Unaudited
£'000
|
Year ended 29 February
2024
Audited
£'000
|
|
United Kingdom
|
|
|
102,178
|
105,296
|
199,912
|
|
Europe
|
|
|
1,928
|
2,111
|
4,326
|
|
Rest of world
|
|
|
1,366
|
1,292
|
2,783
|
|
|
|
|
105,472
|
108,699
|
207,021
|
|
|
|
|
|
|
|
|
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
3(b)
Gross invoiced income by type
|
|
|
£'000
|
£'000
|
£'000
|
|
Software
|
|
|
1,187,279
|
1,027,305
|
1,721,993
|
|
Hardware
|
|
|
12,464
|
24,112
|
41,389
|
|
Services internal
|
|
|
16,619
|
15,473
|
31,517
|
|
Services external
|
|
|
13,887
|
14,751
|
28,103
|
|
|
|
|
1,230,249
|
1,081,641
|
1,823,002
|
|
|
|
|
|
|
|
|
Gross invoiced income
|
|
|
1,230,249
|
1,081,641
|
1,823,002
|
|
Adjustment to gross invoiced income
for income recognised as agent
|
(1,124,777)
|
(972,942)
|
(1,615,981)
|
|
Revenue
|
|
|
105,472
|
108,699
|
207,021
|
Gross invoiced income reflects gross
income billed to customers adjusted for deferred and accrued
revenue items amounting to a net increase of £1.0 million (2023:
£15.7 million increase; 29 February 2024: £8.5 million increase).
The Group reports gross invoiced income as an alternative financial
KPI as management believes this measure allows further
understanding of business performance and position particularly in
respect of working capital and cash flow.
4. Finance income and costs
|
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
|
|
|
£'000
|
£'000
|
£'000
|
|
Bank interest received
|
|
|
5,979
|
2,859
|
5,111
|
|
Finance income
|
|
|
5,979
|
2,859
|
5,111
|
|
Interest expense on financial
liabilities
|
|
|
(113)
|
(219)
|
(330)
|
|
Interest expense on lease
liability
|
|
|
(45)
|
(25)
|
(63)
|
|
Finance costs expensed
|
|
|
(158)
|
(244)
|
(393)
|
|
Net
finance income
|
|
|
5,821
|
2,615
|
4,718
|
5. Income tax expense
Income tax expense is recognised
based on management's estimate of the weighted average effective
annual income tax rate expected for the full financial year. The
estimated average annual rate used for the period to 31 August 2024
is 26.6%, compared to 23.9% for the period to 31 August 2023. The
tax rate is higher in the current period, due primarily to the
increase in the UK corporate tax rate from 19% to 25% effective
from 1 April 2023.
The
major components of the Group's income tax expense for all periods
are:
|
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
|
|
|
£'000
|
£'000
|
£'000
|
|
Current income tax charge
|
|
|
10,972
|
8,646
|
15,807
|
|
Deferred tax
charge/(credit)
|
|
|
87
|
(690)
|
(1,062)
|
|
Total tax charge
|
|
|
11,059
|
7,956
|
14,745
|
|
|
|
|
Period ended 31
August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
Amounts recognised directly in equity
|
|
|
£'000
|
£'000
|
£'000
|
|
Aggregate deferred tax arising in
the reporting period and not recognised in net profit or loss or
other comprehensive income but directly charged or credited to
equity:
|
|
|
|
|
|
|
Deferred tax: share-based payments
(charge)/credit
|
|
|
(222)
|
381
|
407
|
|
Current tax: share-based payments
credit
|
|
|
-
|
-
|
491
|
|
|
|
|
(222)
|
381
|
898
|
|
|
|
|
|
|
|
6. Intangible assets
|
|
Goodwill
|
Customer
relationships
|
Brand
|
Software
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cost
|
|
|
|
|
|
|
At 1 March 2023, 31 August 2023 and
29 February 2024
|
37,493
|
8,798
|
3,653
|
-
|
49,944
|
|
Additions
|
-
|
-
|
-
|
1,642
|
1,642
|
|
At
31 August 2024
|
37,493
|
8,798
|
3,653
|
1,642
|
51,586
|
|
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
|
|
At 1 March 2023
|
-
|
4,765
|
3,653
|
-
|
8,418
|
|
Charge for the period
|
-
|
440
|
-
|
-
|
440
|
|
At 31 August 2023
|
-
|
5,205
|
3,653
|
-
|
8,858
|
|
Charge for the period
|
-
|
440
|
-
|
-
|
440
|
|
At 29 February
|
-
|
5,645
|
3,653
|
-
|
9,298
|
|
Charge for the period
|
-
|
440
|
-
|
-
|
440
|
|
At
31 August 2024
|
-
|
6,085
|
3,653
|
-
|
9,738
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
|
|
|
|
At 31 August 2023
|
37,493
|
3,593
|
-
|
-
|
41,086
|
|
At 29 February 2024
|
37,493
|
3,153
|
-
|
-
|
40,646
|
|
At
31 August 2024
|
37,493
|
2,713
|
-
|
1,642
|
41,848
|
7. 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; and
·
information about determining the fair value of
the instruments, including judgements and estimation uncertainty
involved.
The Group holds the following
financial instruments:
|
Financial assets
|
|
|
As at 31 August
2024
Unaudited
|
As at 31 August
2023
Unaudited
|
As at 29 February
2024
Audited
|
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
|
Financial assets at amortised
cost:
|
|
|
|
|
|
|
Trade receivables
|
|
8
|
194,709
|
165,293
|
212,432
|
|
Other receivables
|
|
8
|
13,854
|
12,015
|
7,415
|
|
|
|
|
208,563
|
177,308
|
219,847
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
As at 31 August
2024
Unaudited
|
As at 31 August
2023
Unaudited
|
As at 29 February
2024
Audited
|
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
|
Financial liabilities at amortised
cost:
|
|
|
|
|
|
|
Trade and other payables - current,
excluding Payroll tax and other statutory tax
liabilities
|
10
|
246,843
|
218,970
|
259,661
|
|
Lease liabilities
|
|
|
1,857
|
1,358
|
1,737
|
|
|
|
|
248,700
|
220,328
|
261,398
|
|
|
|
|
|
|
|
8. Trade and other receivables
|
|
|
As at 31 August
2024
Unaudited
|
As at 31 August
2023
Unaudited
|
As at 29 February
2024
Audited
|
|
Financial assets
|
|
£'000
|
£'000
|
£'000
|
|
Gross trade receivables
|
|
196,881
|
166,835
|
214,922
|
|
Less: loss allowance
|
|
(2,172)
|
(1,542)
|
(2,490)
|
|
Net trade receivables
|
|
194,709
|
165,293
|
212,432
|
|
Other receivables
|
|
13,854
|
12,015
|
7,415
|
|
|
|
208,563
|
177,308
|
219,847
|
|
Non-financial assets
|
|
|
|
|
|
Prepayments
|
|
3,193
|
2,840
|
1,968
|
|
|
|
3,193
|
2,840
|
1,968
|
|
Trade and other receivables
|
|
211,756
|
180,148
|
221,815
|
|
|
|
|
|
|
9. Cash and cash equivalents
|
|
|
As at 31 August
2024
Unaudited
|
As at 31 August
2023
Unaudited
|
As at 29 February
2024
Audited
|
|
|
|
£'000
|
£'000
|
£'000
|
|
Cash at bank and in hand
|
|
71,507
|
51,663
|
88,836
|
|
|
|
71,507
|
51,663
|
88,836
|
|
|
|
|
|
|
10. Trade and other
payables
|
|
|
As at 31 August
2024
Unaudited
|
As at 31 August
2023
Unaudited
|
As at 29 February
2024
Audited
|
|
|
|
£'000
|
£'000
|
£'000
|
|
Trade and other payables
|
|
190,137
|
172,447
|
168,777
|
|
Accrued expenses
|
|
56,706
|
46,523
|
90,884
|
|
Payroll tax and other statutory
liabilities
|
|
3,749
|
3,939
|
18,256
|
|
|
|
250,592
|
222,909
|
277,917
|
|
|
|
|
|
|
11. Cash generated from
operations
|
|
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
|
|
|
Note
|
£'000
|
£'000
|
£'000
|
|
Profit before taxation
|
|
|
|
41,506
|
33,344
|
61,596
|
|
Adjustments for:
|
|
|
|
|
|
|
|
Depreciation and
amortisation
|
|
|
|
1,286
|
1,145
|
2,379
|
|
Non-cash employee benefits expense -
share based payments
|
15
|
2,489
|
2,900
|
5,708
|
|
Finance (Income)/costs -
net
|
|
|
|
(5,821)
|
(2,615)
|
(4,718)
|
|
Share of profit of
associate
|
|
(72)
|
(120)
|
(166)
|
|
Decrease/(increase) in contract
assets
|
|
2,220
|
(5,924)
|
(3,364)
|
|
Decrease/(increase) in trade and
other receivables
|
|
10,059
|
5,772
|
(35,895)
|
|
Decrease/(increase) in
inventories
|
|
|
|
43
|
-
|
(2)
|
|
(Decrease)/increase in trade and
other payables
|
|
(27,324)
|
(8,808)
|
46,200
|
|
Decrease in contract
liabilities
|
|
(2,377)
|
(8,277)
|
(4,405)
|
|
Cash
generated from operations
|
|
|
22,009
|
17,417
|
67,333
|
|
|
|
|
|
|
|
|
| |
12. Dividends
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
Declared and paid during the period
|
|
£'000
|
£'000
|
£'000
|
|
Interim dividend
|
|
-
|
-
|
6,466
|
|
Final dividend
|
|
14,438
|
12,214
|
12,214
|
|
Special dividend
|
|
20,935
|
17,961
|
17,961
|
|
Total dividends attributable to ordinary
shareholders
|
|
35,373
|
30,175
|
36,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Dividends not recognised at
31 August 2024
Since the end of the half year the
directors have recommended the payment of an interim dividend of
3.1 pence per fully paid ordinary share (2023: 2.7 pence). The
aggregate amount of the proposed dividend expected to be paid on
22 November 2024 out of retained earnings at 31 August 2024,
but not recognised as a liability at the end of the half year, is
£7.5 million.
13.
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'. Group companies made
purchases from the associate of £2.3 million during the six months
ended 31 August 2024, with a trade payable of £0.3 million at 31
August 2024.
14. Share-based payments
For the six months ended 31 August
2024, 1,427,638 share options were granted to eligible employees
under the PISP, SAYE and DBP schemes (2023: 1,578,955 share options
were granted).
|
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
|
|
|
£'000
|
£'000
|
£'000
|
|
Share-based payment employee
expenses
|
|
|
2,489
|
2,900
|
5,708
|
|
|
|
|
2,489
|
2,900
|
5,708
|
15. Earnings per share
The Group calculates earnings per
share (EPS) on several different bases in accordance with IFRS and
prevailing South Africa requirements. The Group is required to
calculate headline earnings per share (HEPS) in accordance with the
JSE Listing Requirements.
|
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
|
|
|
pence
|
pence
|
pence
|
|
Basic earnings per share
|
|
|
12.67
|
10.60
|
19.55
|
|
Diluted earnings per share
|
|
|
12.19
|
10.17
|
18.85
|
|
Headline earnings per
share
|
|
|
12.67
|
10.60
|
19.55
|
|
Diluted headline earnings per
share
|
|
|
12.19
|
10.17
|
18.85
|
15(a) Weighted average number of shares used as the
denominator
|
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31
August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
|
|
|
Number
|
Number
|
Number
|
|
Weighted average number of ordinary
shares used as the denominator in calculating both basic EPS and
HEPS
|
240,222,961
|
239,482,333
|
239,693,670
|
|
Adjustments for calculation of both
diluted EPS and diluted HEPS:
|
|
|
|
|
- share
options(1)
|
|
|
9,515,378
|
10,105,688
|
8,813,260
|
|
Weighted average number of ordinary
shares and potential ordinary shares used as the denominator in
calculating both diluted EPS and diluted HEPS
|
249,738,339
|
249,588,021
|
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.
15(b) Headline earnings per share
The table below reconciles the
profits attributable to owners of the company to headline profits
attributable to owners of the company:
|
|
|
|
Period ended 31 August
2024
Unaudited
|
Period ended 31 August
2023
Unaudited
|
Year ended 29 February
2024
Audited
|
|
|
|
|
£'000
|
£'000
|
£'000
|
|
Profits attributable to owners of the
company
|
|
|
30,447
|
25,388
|
46,851
|
|
Adjusted for:
|
|
|
|
|
|
|
- Loss on disposal of property, plant and equipment
|
|
|
-
|
-
|
-
|
|
- Tax effect thereon
|
|
|
-
|
-
|
-
|
|
Headline profits attributable to
owners of the company
|
|
|
30,447
|
25,388
|
46,851
|
16. Events after the reporting
period
There were no events after the
period that require disclosure.