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Annual Report
and Accounts
2023/24
Bytes Technology Group plc | Annual Report and Accounts 2023/24
Delivering progress
through technology
Contents
As a creative and innovative business,
we help our customers and our
peopleget the most out of the
transformative technologies
thatareshaping our world today.
Sam Mudd
CEO
1
Strategic report
2 BTG at a glance
Our business
4 Chair’s statement
6 CEO’s review
9 Our business model
10 Our strategy
12 Our market environment
14 Feature – Advising our customers
16 Key performance indicators
Review of the year
20 CFO’s introduction
22 Operational review
26 Financial review
30 Sustainability review
32 Our people
36 Our communities
38 Our planet
44 Task Force on Climate-related
Financial Disclosures (TCFD)
53 Risk report
63 Non-financial information statement
64 Our viability statement
65 Section 172 statement
66
Governance report
68 Chair’s introduction to
corporategovernance
72 Board of directors
75 Executive Committee
76 The Board’s year
78 Stakeholder engagement
(s.172 compliance)
83 Audit Committee report
94 Nomination Committee report
98 Compliance with the UK
CorporateGovernance Code
102 Directors’ remuneration report
128 Directors’ report
132 Statement of directors’
responsibilities
134
Financial statements
136 Independent auditor’s report
146 Consolidated financial statements
150 Notes to the consolidated
financialstatements
182 Parent company financialstatements
184 Notes to the financial statements
Other information
194 Glossary
195 Appendix
196 Company information
196 Financial calendar
Advising
our customers
We build lasting, trust-based relationships
with customers, providing them with
thesolutions they need.
Read more on page 14
Partnering
with our vendors
We work hand in hand with world-leading
technology vendors to deliver the
bestresults for our customers.
Read more on page 25
Mentoring
our people
We strive to continually develop
ourpeople and keep them
engagedandfulfilled.
Read more on page 35
1Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
Gross invoiced income (GII)
1
£1,823.0m
(2023: £1,439.3m) +26.7%
Revenue
2
£ 2 07.0 m
(2023: £184.4m) +12.3%
Gross profit
£145.8m
(2023: £129.6m) +12.5%
Average gross profit percustomer
£24,400
(2023: £21,800) +11.9%
Operating profit
£56.7m
(2023: £50.9m) +11.4%
Adjusted operating profit
3
£63.3m
(2023: £56.4m) +12.2%
Employees
1,0 5 7
(up from 930)
Customers
5,978
(up from 5,941)
1 ‘Gross invoiced income’ (GII) is a non-IFRS financial measure that reflects gross income billed to customers,
adjusted for deferred and accrued revenue items. The reconciliation of GII to revenue is set out in note 3(b)
totheconsolidated financial statements.
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, that is, the gross profit achieved on the contract and not the
grossincome billed to the customer.
3 ‘Adjusted operating profit’ is a non-IFRS alternative performance measure that excludes from operating profit the
effects of significant items of expenditure that are non-recurring events or do not reflect our underlying operations.
Amortisation of acquired intangible assets and share-based payment charges are excluded. The reconciliation
ofadjusted operating profit to operating profit is set out in note 2(b) to the consolidated financial statements.
2 Bytes Technology Group plc
BTG AT A GLANCE
Bytes Technology Group plc
(BTG)is one of the UK and
Ireland’s leading software, security,
AI and cloud services specialists.
Strong history,
strong prospects
We’re made up of two companies with one
shared culture: Bytes Software Services (Bytes),
which supports corporate and public sector
organisations, and Phoenix Software (Phoenix),
focusing primarily on the public sector.
Our purpose is to empower andinspire our
peopleto fulfil theirpotential, so they can help
ourcustomers make smarter buying decisions and
meet their business objectives through technology.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
3
Patrick De Smedt
Chair
Chair’s statement
Our people’s passion for our customers and for technology shone
through in 2023/24, helping us achieve strong financial performance
andsetting us up well for the future under our new CEO, Sam Mudd.
Navigating a change of CEO
On 10 May 2024, BTG announced the
appointment of new CEO Sam Mudd, whose
wealth of experience in technology and senior
leadership complements and enhances the
existing skills and experience of the Board.
Sam was initially appointed as Interim CEO
following the resignation with immediate
effect of former CEO, Neil Murphy, on
21 February 2024. While these circumstances
brought considerable challenges, they have
also been an opportunity to strengthen our
Board and ourgovernance processes, which
will remainan area of the upmost importance
forthe Board over the coming year.
>> You will find detailed disclosure on
this and other related Board changes
inmy introduction to corporate
governance on pages 68 to 71.
Our thanks to the team
We achieved our aim of double-digit growth across our
main metrics, gaining market share and demonstrating
the resilience of our business model, despite the
uncertainty in the business world, with concerns
about high interest rates and global conflict stalling
investment in many sectors. But there’s another key
factor that allowed us to achieve these financial
results, and our impressive customer net promoter
scores and vendor accreditations and awards. That
factor is our people, whose commitment, hard work,
passion and contribution to good causes are such
important parts of our culture. I know I speak for my
fellow directors in saying how very proud and grateful
we are for what they accomplished during the year.
New Board members to support our growth
We welcomed two new directors to Board in the year.
The promotion of Sam Mudd to the Board in July 2023
made her subsequent move into the role of CEO a
natural evolution for BTG. Sam has an impressive
track record. As Managing Director (MD) of Phoenix
she led the tremendous growth of that business, and
is a role model for women across BTG. On the Board,
she has proved herself to be an inspiring fellow director.
4 Bytes Technology Group plc
OUR BUSINESS
Diversity on the Board
As of the date of this Annual Report, we are
aligned to the FCA Listing Rules, with 60%
women on the Board and at least one director
from a minority ethnic background. We also
have women intheroles of CEO andsenior
independent director.
Shareholder dividends
BTG’s dividend policy is to distribute 40%
ofpost-tax pre-exceptional earnings to
shareholders. The Board is pleased to propose
a gross final dividend of 6.0 pence per share.
The proposed dividend is £14.4 million. Given
the company’s continued strong performance
and cash generation, we are also proposing a
cash return to shareholders with a special
dividend of 8.7 pence per share, equating to
£20.9 million. If approved by shareholders, the
final and special dividend will be paid on
2 August 2024.
Alison Vincent stepped down as a non-executive
director at the end of her three-year term this year,
sowe were delighted to welcome Shruthi Chindalur as
anon-executive director at the start of February 2024.
Shruthi brings a wealth of commercial and operational
experience in the technology sector tothe role. She
also takes on the role of designated non-executive
director for employee engagement. Wealso announced
the resignation with immediate effect of Mike Phillips
asanon-executive director towards the end of March.
On 1 June 2024, we will also welcome Ross Paterson
and Anna Vikström Persson as independent
non-executive directors, adding even more to the skills
and experience of the Board. Ross will become Chair of
the Audit Committee, while Anna will become Chair of the
newly constituted ESG Committee. You can find details
about Ross and Anna’s expertise at bytesplc.com.
Engaging and investing in
people for the long term
Engaging with our stakeholders is an important cultural
attribute of our company, and an example ofhow we
take a long-term perspective. We listen closely to our
customers and our employees, and I’m pleased that the
respective net promoter scores of 82 and 71 remain
high. We held a Board meeting in our City of London
office this year, for example, and so had an opportunity
to talk to our employees there, which was greatly
insightful. Our most senior executives also spend a lot
oftime talking to investors. This all gives us confidence
aswe continue toinvest in our systems, in developing
new services and,especially, inourpeople.
To support our future growth, we’ve expanded our
headcount by 13.7% this year. It is also important to
make sure we increase the management capabilitiesas
our workforce grows. Besides ongoing training and
promotion, we have been assessing leadership skills
thisyear to identify gaps, so we can implement the
necessary development and coaching programmes. At
the same time, Sam, in her previous role as MD Phoenix,
set up a female leadership acceleration programme,
which the Phoenix leadership team is continuing.
Monitoring the opportunities
andrisksfromAI products
Turning to Board activity, we’ve been focused onmonitoring
the vast potential of the emerging technologies around
artificial intelligence (AI), bothfor our business internally
and externally as wesupport our customers. This year
we’ve been increasing the use of AI-enabled tools in
ouroperations, to see how they canhelp us be more
productive. The feedback we’ve hadfrom people is
promising. Our customers have alsoshown lots of interest
in AI-supported products, especially Microsoft 365 Copilot.
For us, the emerging technology presents an opportunity
– to help customers prepare for AI. We are positioned not
just to provide licences to customers, but also to help
them consider the potential of the technology and to put
the requisite security and data management practices in
place before deploying it.
Our commitment to sustainability
It takes more than great products and services to make a
great company – you need a commitment to sustainability,
which means looking after people, governance and, of
course, the planet, given the considerable challenges
ofclimate change. This is a focus area for the Board and,
as noted earlier, we are setting up a Board-level ESG
Committee, with effect from 1 June 2024. During the
year, our Group sustainability manager helped guide our
journey to net zero, and ensure a coordinated approach
between our two businesses. We also submitted our
carbon reduction targets to the Science Based Targets
initiative and expanded our efforts to calculate all our
Scope 3 emissions for the first time, both of which are
important milestones.
A confident outlook
Looking ahead, we are confident about our prospects,
and excited by the refreshed skills and experience onthe
executive team and the Board. We see encouraging
growth opportunities in cloud migration and the hybrid
cloud environment, in our security solutions business
and in AI-enabled tools. Strong foundations, an excellent
management team and a broad range of talent across
the business mean the Board is looking forward to
supporting and challenging the executive to achieve
another year of success.
Patrick De Smedt
Chair
22 May 2024
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
5
CEO’s review
This was a year in which we showed our resilience as a company.
Inatime of geopolitical and macroeconomic challenges, and Board
and leadership changes, our business proved strong, dependable
and agile, allowing us to extend our long run of double-digit growth.
By investing in our great people, ourculture and
thetechnical capability to deliver thesolutions
thatour customers need, we are wellplaced
forourgrowthto continue.
I’m very excited to be part of that growth, having been
appointed as BTG’s new CEO. What has become even
clearer in the past few months is the strength of our
relationships with customers and the depth of our
vendor partnerships. All this is underpinned by the
quality of our people, who I truly believe are some of
the best in the industry. It’s an honour to lead them
and the wider company in its next chapter.
Robust demand drives strong financial
yearperformance
BTG’s performance this year was strong and in
linewithexpectations, in keeping with our track
record since listing in 2020. Though the broader
business environment was at times challenging,
thedemandfor the wide-ranging suite of products
and services we provide, especially cloud services
andcybersecurity, remained robust in both the
corporateand public sectors. We saw double-digit
growth in both operations of Bytes and Phoenix.
Grossinvoiced income (GII) rose by 26.7% to
£1.8 billion, and profit before tax increased by 22.2%
to £61.6 million, as we continued to increase the share
of our customers’ business. These results are testament
tothe commitment of our people – their ongoing
willingness to go above and beyond for our customers
is a constant inspiration. I would like to take this
opportunity to thank them for all their hard work.
Doing more for our customers
To maintain our edge in a competitive market, we
aimto provide the highest level of service to our
customers, offering the right, cost-effective advice
fortheir needs and expert guidance when it comes
tonew technologies. This commitment to quality and
our ability to get things done is crucial if we are to
achieve our ultimate strategic goal each year, which
isto do more business with our existing customers
and to win new ones.
Sam Mudd
CEO
6 Bytes Technology Group plc
OUR BUSINESS
We increased our gross profit (GP) from existing
customers by 109%, and added £5.1 million of GP
fromnew customers, with our total customer base now
being just short of 6,000. Besides continued success
inthe corporate sector, we won several long-term,
large-value contracts in the public sector, including
theNHS and HMRC. The new five-year agreement with
the NHS, for example, has a sales value of £775 million
over the life of the contract, supporting our longer-term
growth ambitions. We have a track record of growing
the profitability of these contracts over time, and
opening up other software, hardware and
serviceopportunities.
Even after our impressive GII growth of 26.7%
thisyear, our share of the overall total addressable
market in the UK is still less than 4%. This, along with
our high customer net promoter score of 82, gives
usa lot of confidence that we can keep winning new
customers, while deepening relationships with those
we already serve.
The potential of tools supported byAI
In our sector, agility is crucial: when new technologies
emerge, we must be ready to help customers prepare
for and adapt to them. We have already seen strong
interest from our customers in AI-enabled software
solutions, such as Microsoft 365 Copilot, which use
the power of large language models and a user’s data to
help improve productivity. And while we understand their
excitement, we’re also urging caution. We believe that
careful consideration and planning is essential before
implementing AI products. This includes putting in
place the right guidelines, frameworks and guard rails
for data protection and security, and providing training
for users. By doing things in the right sequence, the
positive outcomes can be far greater.
We’ve been following this approach ourselves,
whichwill help us provide even better support to our
customers. During the last few months of the year,
100 people at BTG, including myself and many of
oursenior managers, enrolled in Microsoft’s early
access programme for Copilot. As we advance our
understanding of these tools, we are very optimistic
about the technology, and planto gradually roll it
outto the majority of our employees in line with the
considered approach that we advise our customers
to take. We believe that, over time, adopting AI in this
measured, careful way will make our organisation
more productive, help us respond more quickly to
our customers and other stakeholders, free up time
for creativity and innovation, and give us a head start
in advising customers on how to implement Copilot.
Ultimately, then, our approach positions us well to be
aleader in the implementation of AI and so drive our
growth for the rest of the decade, and beyond. When
we look back at this pivotal moment in years to come,
we will have played our role in helping our customers
to benefit from this new wave of technology.
Investment case
Proven track record and growth strategy
We have a long track record of delivering strong financial
performance, enabled by highly motivated employees delivering
the latest technology to a diverse and loyal customer base.
Ourstrategy is to grow organically by doing more with existing
customers and winning new customers – this supports strong
free cash flow that allows us to invest in our businesses.
6-year GP compound average growth rate
18%
Customers served in 2023/24
5,978
Attractive market positioning
We have strategic relationships and partnerships with many
ofthe world’s leading software vendors and distribution
channels. This includes a long and deeply embedded
relationship with Microsoft, as one of its largestpartners
intheUK by revenue.
Number of vendors and distributors
>800
One of the biggest UK partners with Microsoft by revenue
Compelling growth opportunity
We operate in a vast, growing market, boosted by technological
tailwinds from digital transformation agendas, cloud products,
cybersecurity and AI-enabled tools. Our share of our total
addressable market is less than 4%, so we have plenty of
roomto grow.
Strong GII growth
26.7%
Strong team culture
Our dynamic culture drives our operational excellence
andhighemployee retention rates. Our culture also
increasessales productivity, customer satisfaction andrepeat
business.
Employee net promoter score
71
04
03
02
01
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
7
CEO’s review continued
Staying true to our culture
Driving growth is only possible with a brilliant, highly
engaged team with a can-do attitude. When BTG
was formed at our IPO in December 2020 we were
650 people; this year we celebrated passing the
1,000-employee mark, attracting great talent in
acompetitive market for skills. During the year, our
headcount grew by 13.7% as we looked to make
surewe have the right number of people with the
right technical and commercial skills for where
themarket will be in the coming years.
Though we have grown significantly over the
years,we’re always mindful of the importance of
maintaining the ‘family’ culture thathasbrought us
so much success. That means recognising every
employee as an individual whoneeds to be guided,
motivated, challenged and offered a clear career
path. We encourage a workplace culture where
employees gain value and personal satisfaction
fromtheir work. This can lead to substantial benefits
for both individualand organisation, and promote
wellbeing andproductivity. We continually aim to
create an environment where these outcomes can be
achieved and where people can thrive and be fulfilled.
Our approach to flexible working is one example of
howwe do this. Some companies, including in the
technology sector, prefer their staff back in the office
full time. In contrast, we believe that face-to-face
interaction and collaboration is important to maintain
our culture, and we have plenty of people who are
inthe office five days a week, because they like the
environment and work well that way. But we have others
who prefer to work from home for part of the week,
because it suits their personality and circumstances
or the type of work they do. We learnt during the
pandemic that everyone will find their own best way
ofworking, and of being productive. As long as it
continues to deliver the right results, then we’re happy.
Deepening ties with our vendors
Just like with our people, building lasting
relationships is crucial when it comes to our many
vendors, including our largest and longest-standing
partner, Microsoft, with which we continued to
deepen our relationship this year. I was really
pleased to get the opportunity to meet Microsoft’s
CEO, Satya Nadella, and many senior Microsoft
executives when I went to Seattle for the awards
ceremony for Phoenix winning Microsoft Global
Modern Endpoint Management Partner of the Year
for 2023. By working closely with our vendors over
many years, and investing in our capabilities to stay
ahead of the technology curve, we benefit from early
access to new product development, such as Copilot.
We also gettotake part in high-level discussions that
help influence our strategic thinkingand awareness
ofmarket opportunities.
This year, we strengthened our partnership with
Cloud Bridge Technologies, an Amazon Web
Services (AWS) partner. In April 2023, we acquired
an interest in Cloud Bridge, and this investment gives
usaccess to resources that will help underpin our
multicloud strategy in the coming years.
Strengthening our commitment
totheenvironment
Another area in which we look to the outside world,
and the expectations of businesses today, is
sustainability. The environment, and climate change
in particular, is becoming an ever-bigger issue for all
businesses – and rightly so, as the world looks for a
manageable transition to net zero. We’re particularly
mindful of the impact on the environment of growth in
technologies like AI, which require vast computing
power and cloud storage and consume a lot of
energy. And so, while as a company we’re not a big
carbon emitter, we’re doing everything we can to
mitigate our impact. I’m pleased with our progress
this year: we expanded our Scope 3 reporting,
andsubmitted our carbon reduction targets to
theScience Based Targets initiative for validation.
The road ahead
I’m excited about the prospects for 2024/25 as we
continue to work with our customers to be more
productive through advancements in technology.
Webelieve that tailwinds will continue to favour our
industry, ascompanies look to the latest technologies,
including AI, to become more efficient, and as
thecybersecurity threat continues to grow. More
important to us, however, are the investments and
innovations we’re making to support that growth:
increasing our technical skills, expanding our teams
while maintaining our strong culture, strengthening
our vendor relationships and building new services
and solutions. Together, these investments are setting
us up strongly for the years to come, and Ilook
forward to the future with great optimism.
Sam Mudd
CEO
22 May 2024
8 Bytes Technology Group plc
OUR BUSINESS
Our business model
What we do
We’re a value-added IT reseller, focusing on cloud and security software developed by leading vendors.
We also provide professional and managed IT services, and hardware, to deliver complete tailored solutions.
Bytes Technology Group
comprises two independent and
complementary operating companies.
Bytes Software Services
focuses on corporate enterprise clients,
small to medium-sized businesses and
public sector customers.
Phoenix Software
serves mainly public sectorcustomers.
Our corporate centre drives strategy and provides guidance and support on finance, governance,
legal compliance, and sustainability, ensuring our organisation’s smooth operation and success.
Why we’re different How we do it differently
We build lasting, mutually beneficial partnerships with
ouremployees, customers and vendors – this enables
us to achieve consistent growth.
We live by our values in all we do: be passionate, act
with integrity, work together, be kindand respectful,
getbusiness done and have fun doing it.
Our people
We employ people who are passionate abouttechnology and
our customers, including many who arelong serving and have
ahigh level of technical skills.
Our experience and expertise
With more than 30 years of serving the UK IT market,
wehaveaccumulated vast knowledge and expertise.
Ourleadership team is highly experienced.
Our vendors and broad product portfolio
We have deep relationships with many of the world’s biggest
software companies. We were one of Microsoft’s first resellers
in the UK, and are one of its largest UK partners by revenue.
Our trusted relationships with a broad baseofcustomers
We serve customers across the corporate and public sectors,
many of whom have been with us for a long time.Ourstrategy
isto grow by doing more with our existingcustomers each year,
and to win new ones.
Putting customers first
We’re trusted because we understand our customers and
always act in their best interest. We work with them to provide
the right advice for their needs so theycanmake smarter
buyingdecisions and meet their businessobjectives
throughtechnology.
Unique team culture
We’re proud of our dynamic, enjoyable and supportive
culture.Our people foster talent, enthusiasm, confidence
andteam spirit.
Continual investment in our people and technology
We empower and inspire our employees to fulfil their potential,
training them on the latest technologies and providing a clear
career path. We strive to stay ahead of the technology curve by
developing new solutions to meet customers’ emerging needs.
Sustainable approach
Our commitment to sustainability goes beyond our concerted
efforts to cut carbon emissions: volunteering and fundraising
forgood causes is an integral part of our culture.
How this creates value
Customers
Engaged partnerships,
supporting customers’
growth aspirations
NPS
82
Employees
Fulfilled, engaged
employees in an
enjoyable, healthy
andethical workplace
eNPS
71
Shareholders
Consistent dividends
in line with policy and
attractive returns from
special dividends
18.5%
3-year CAGR
Communities
Contribution to
localemployment
andcommunities
1,5 0 0
hours volunteered
Vendors
Trusted partnerships
and shared knowledge
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
9
Our strategy
We aim to grow organically by winning new customers
and doing more for existing customers. We will
complement this approach, as appropriate, with
carefullyselected acquisitions that boost our value.
Our strategy is rooted firmly in our meaningful
values and in our purpose, which is
toempower and inspire our people to
fulfil their potential, so they can help
ourcustomers make smarter buying
decisions and meet their business
objectives through technology.
Underpinning this foundation are our
long-standing, trust-based relationships
with our customers and vendors, our
investment in our people, and our dynamic,
customer-focused culture. Our strategy
islinked to, and measured by, our key
performance indicators.
Winning new customers
683
customers delivering £5.1m
new gross profit
Doing more for
existingcustomers
£11.1m
additional gross profit generated
from existing customers
New customer
winsinclude
Customers who asked
us to do more include
From AI to cybersecurity, technology
continues to advance rapidly. We invest
ininnovation to help our customers stay
ahead of the pace of change, manage the
risks and make the most of the benefits.
Sam Mudd
CEO
10 Bytes Technology Group plc
OUR BUSINESS
We pursue our strategy by focusing on three key areas:
putting customers first, investing in our people and
our business and investing in innovation.
Putting customers first
We focus relentlessly on our customers, helping them find innovative ways to use technology
to improve the way they work, to control costs and to deliver a better service to their own clients.
This means we:
• • Give them impartial, expert advice for their needs based
on our knowledge of the leading products and services of
hundreds of leading vendors
• • Aim to exceed customer expectations, always – we see
ourselves as part of their team
• • Keep up with the latest technologies and standards to
meet customers’ evolving preferences.
This year:
We continued to win new customers and increase
theamount of work we did for existing customers. Our
customers’ great experiences with us encouraged many
tohighly recommend our services, with our customer net
promoter score (NPS) increasing from 77 to 82, high by
industry standards.
Investing in our people and our business
Our people drive our success: we need to retain our exceptional employees to continue to sell effectively,
and to meet our growth ambitions we need to keep increasing our headcount.
This means we:
• • Work continually to develop, engage and fulfil our people
• • Maintain a dynamic, supportive and fun culture
• • Remain alert for potential acquisitions that would
complement our offering and support our strategy.
This year:
We grew our headcount by almost 13.7% and expanded
ourtraining and development programmes. Employee
satisfaction remained stable with an eNPS of 71, and staff
turnover waslow. We acquired a 25.1% interest in AWS
partner Cloud Bridge Technologies, which will complement
our multicloud business, offering both Microsoft and AWS
cloud options according to what fits best with our customers.
Investing in innovation
From AI to cybersecurity, technology is advancing rapidly. We invest in innovation to help our customers
stay ahead of the pace of change, manage the risks and make the most of the benefits.
This means we:
• • Monitor market trends and develop innovative IT
solutions that meet customers’ evolving needs and help
them update or supplement their technology
• • Invest in our technical capabilities to be able to give the
best advice and support
• • Advance our knowledge and expertise by partnering with
specialist providers, updating our training and hiring
employees with specific skills.
This year:
We continued to invest in the multicloud environment, which
enables organisations to use the cloud systems of more than
one vendor, giving them more flexibility to control costs and
optimise performance. By rolling out Microsoft’s Copilot AI
tool to a number of our employees, we improved our own
ways of working and our understanding of the technology.
And we enhanced our managed security services offerings,
which have been in high demand with our customers.
Our strategy works because we focus relentlessly on:
• • Providing – and being experts in – great value, innovative IT products and services that customers need
• • Identifying and targeting those customers
• • Being straightforward and enjoyable to do business with.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
11
Our market environment
The resilience of the technology market was again on show in 2023/24.
Despite the challenging macroeconomic environment, spending on IT
continued to grow, as businesses looked to technology to make them
more efficient, more productive and more secure. With the emergence
of transformative technologies such as AI, that trend is set to persist.
The trends shaping UK technology today
Digitalisation
Organisations are choosing digital
technology to improve their operations
and create efficiencies.
Cybersecurity
As online attacks – and the risk of
breaking privacy laws – increase, so does
the need for multilayered protection.
$5tn
forecast worldwide
IT spending in 2024
The move to the cloud
Switching from on-premise to hosted
software offers more flexibility, scope for
analytics and sustainable credentials.
Cost optimisation
Inflation-linked vendor price rises
andother economic pressures mean
customers are looking for greater value.
$11 7.1 b n
projected revenue in the UK
ITservices market in 2028
Artificial intelligence
Organisations are recognising the vast
potential of AI-enabled tools to help
their people become more productive
and creative.
One in ten
organisations globally hit
byattempted ransomware
attacks in 2023
Our target segments
9 .1%
projected compound annual
growthrate in the UK public
cloudsector from 2024 to 2028
Software (94% of GII)
We sell both cloud-based software, which is
hosted for our customers in third-party data
centres, and on-premise software, which is
installed on our customers’ own networks.
In both cases, the vast majority is licensed
under subscription agreements, providing
ahigh level of repeat (annuity) business.
IT services (4% of GII)
These include IT-managed services around
a wide range of vendor technologies,
including 24x7 support for critical security
offerings, as well as software asset
management services and project-oriented
consulting services such as IT deployment
assistance, cloud migrations and software
cost optimisation.
Hardware (2% of GII)
We sell a wide range of hardware, including
desktops, monitors, mobile phones, servers
and networking equipment.
12 Bytes Technology Group plc
OUR BUSINESS
Global IT spending forecast
setto continue rising
Worldwide technology spending is
expected to rise to $5 trillion in 2024, an
increase of 8% from 2023, according to
the research firm Gartner, as organisations
invest in efficiency and optimisation
projects.
1
For Europe, the picture is
evenmore positive, with IT expenditure
inthe UK, Germany and France forecast
togrow by 9.8% in 2024, to $588 million.
2
“ITspending in Europe continues to be
recession-proof,” aGartner analyst noted.
Cloud and cybersecurity
software and services to
leadtheway in 2024/25
In keeping with the trend in recent years,
software and IT services – BTG’s main
business areas – will continue to be the
two biggest areas of technology, with
each expected to see robust growth. In
the UK, revenue from enterprise software,
which is mainly cloud-based, is projected
to grow by 7.5%
3
annually, between 2024
and 2028, the research company Statista
said. Over the same period, spending
onIT services should increase by 8.8%.
4
Meanwhile, revenues in the public cloud
1 gartner.com/en/newsroom/press-releases/2024-04-16-gartner-forecast-
worldwide-it-spending-to-grow-8-percent-in-2024
2 gartner.com/en/newsroom/press-releases/2023-11-09-gartner-forecasts-it-
spending-in-europe-to-record-9-percent-growth-in-2024
3 statista.com/outlook/tmo/software/enterprise-software/united-
kingdom?currency=GBP
4 statista.com/outlook/tmo/it-services/united-kingdom
5 statista.com/outlook/tmo/public-cloud/united-kingdom
6 statista.com/outlook/tmo/cybersecurity/united-kingdom
7 blog.checkpoint.com/research/check-point-research-2023-the-year-of-mega-
ransomware-attacks-with-unprecedented-impact-on-global-organizations/
8 gartner.com/en/newsroom/press-releases/2023-10-16-gartner-says-cios-must-
prioritize-their-ai-ambition-and-ai-ready-scenarios-for-next-12-24-months
9 gartner.com/en/newsroom/press-releases/2023-10-11-gartner-says-more-than-80-
percent-of-enterprises-will-have-used-generative-ai-apis-or-deployed-generative-
ai-enabled-applications-by-2026
and cybersecurity markets are expected to
rise by 9.46% and 12.6% respectively.
5,6
The investment in security stems from the
ever-increasing threat from cyberattacks,
with one in ten organisations worldwide
hit by attempted ransomware attacks
in2023, up from one in 13 in 2022,
according to Check Point Research.
7
AI to help drive longer-term
growth
Interest in AI surged in 2023/24, and while
it is not yet a major spending priority for
many businesses, it is expected that it
soon will be.
2
The usefulness of AI as a
productivity tool is reasonably well known.
But it is the more advanced ‘generative
AI’ (GenAI), which has the power to create
output that will be ‘game-changing’ and
will ‘disrupt business models and entire
industries,’ Gartner says.
8
The research
company predicts that, by 2026, more
than 80% of businesses will have used
GenAI alongside their human workforce.
9
At BTG, we’re already using Microsoft’s
Copilot AI tool internally, and we’re
determined to lead the way in helping
customers to prepare for and implement
the right AI solutions for their needs.
Weexpect that this fast-evolving
technology will help drive our growth
forthe next decade, and beyond.
A focus on cost, value and agility
While IT spending has persisted in the
challenging economic environment,
customers have increased their scrutiny
ofpotential new projects, which can take
longer to get approved. There is a strong
focus on maximising value and, at the
same time, controlling costs. This plays to
our strengths, because we always focus on
what organisations need, not what we want
to sell. Customers are seeking flexibility, so
they can quickly respond to changes in the
business environment. Cloud computing,
where the costs can be variable, is
attractive for this reason, as is hybrid
infrastructure, which offers a mix of on-site
and cloud-based systems. Managed
services, in particular security, are also
becoming increasingly popular, as the
expertise required to protect companies
from cyberattacks continues to grow. All of
this means we are being asked to provide
more guidance and support to customers
– which is why we keep growing our teams
and investing in our technical capabilities.
How we fit into the UK technology sector
We’re one of the UK’s leading value-added resellers (VARs),
providing IT products from a broad range of technology
vendors to a large and diversified base of corporate and
public sector organisations. Our potential market is large.
UK business-to-business customers buy the majority of
their technology products from VARs and other resellers
and distributors. Currently, our share of the UK VAR business
isstill in single digits. And because no one company
dominates the market, we have a lot of room to expand.
For vendors, there are several advantages to selling through
companies like ours, rather than directly to customers.
Wecan promote their products using our skilled salesforce,
market to thousands of customers, advise on latest customer
requirements and work on promotional campaigns with them.
Our partnerships with vendors also benefit our customers
because the discounts and rebates we receive from the
vendors enable us to charge lower prices. This saves money
for ourcustomers and deepens our relationships with them.
Case study
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
13
Advising
our customers
Helping CFC Underwriting
boost its cybersecurity
It’s great working with Bytes. It feels like we are two companies that are closely aligned
– they understand what we are trying to achieve and our goals over the next few years.
Andy Clarke, Technology Operations Manager, CFC Underwriting
CFC Underwriting delivers specialist insurance products
and is trusted by more than 130,000 businesses around
the world. Like many businesses after the pandemic,
CFC had embraced hybrid working, with employees
operating from home and in the company’s offices in
theUK and overseas. But the existing technology
infrastructure did not adequately support this new
wayof working, especially when it came to security.
‘We did not have the resilience we needed for our business,
and we wanted greater visibility of our network traffic,’ says
Andy Clarke, Technology Operations Manager at CFC.
‘Weneeded something that would meet our current
challenges and scale with us as we grow our business.
That’s the reason we reached out to Bytes.’
The Bytes team set about understanding what was needed
from a technical, commercial and time perspective. Together
with CFC, they agreed that the best solution was a ‘Secure
Access Service Edge’, or SASE, a cloud-based architecture
that delivers network and security services to protect users,
data and applications.
Guiseppe Damiano, pre-sales solution consultant at Bytes,
said a second big consideration was ensuring the proposed
technology ‘would not disrupt the existing environment,
users and applications. You want to solve the problem at
hand without introducing any new ones.’
Using their expertise and understanding of the business, the
Bytes team was able to identify the suitable vendors before
moving ahead with the implementation of the SASE. The
result? Another highly satisfied customer that considers
Bytes as ‘our trusted partner’.
14 Bytes Technology Group plc
FEATURE
Using modern technology to make
council services more accessible
Being able to work flexibly is really important because my job is all around people and
noteveryone is available between nine and five. It enables me to be able to deliver the
service to those people.
Karen Sweeney, Senior Homelessness Prevention & Intervention Officer, St Helens Borough Council
Phoenix has worked with St Helens Borough Council for
years. When the council wanted to realise the benefits
of using modern technology, Phoenix worked
alongside it to implement the solutions it needed.
The council created a detailed ‘ways of working’
programme to highlight the areas it needed to focus on to
improve processes and inclusivity. Phoenix supported this
journey, ensuring the modernisation of St Helens Borough
Council’s infrastructure, devices and data platforms. With
an alignment of Microsoft Power BI and SQL, the processes
are now simpler and more effective, for the benefit of its
employees and the residents they serve.
‘Having Phoenix as a trusted partner from a strategic
perspective is really important,’ says Ste Sharples,
AssistantDirector, People Management, ICT and Digital,
StHelens Borough Council. ‘I can approach them on a
technical level and that trusted relationship we have had over
the years means I am guaranteed to get the right advice.’
Following the process improvements, Phoenix provided
thecouncil with a simple rollout of Microsoft Surface
devices, Azure cloud infrastructure and Microsoft 365.
Since implementation, these products have driven cost
savings, improved sustainability practices and increased
collaboration.
Craig Taylor, Director of Cloud Solutions at Phoenix, says
the relationship between St Helens, Microsoft and Phoenix
was critical to the success of the project. ‘It’s resulted in
excellent staff and citizen engagement, and I think a lot of
councils can learn from St Helens because they have done
itwith such conviction.’
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
15
Financial
Measuring progress
We track our progress against financial,
strategicand sustainability KPIs.
Gross invoiced income (GII)
1
£1,823.0m +26.7% Revenue
2, 3
£2 07.0 m +12.3%
2024 £1,823.0m
2023 £1,439.3m
2022 £1,208.1m
2021 £958.1m
2024 £207.0m
2023 £184.4m
2022 £145.8m
2021 £393.6m
Adjusted operating profit (AOP)
4
£63.3m +12.2% Gross profit (GP) £145.8m +12.5%
2024 £63.3m
2023 £56.4m
2022 £46.3m
2021 £37.5m
2024 £145.8m
2023 £129.6m
2022 £107.4m
2021 £89.6m
Operating profit £56.7m +11.4% Cash £88.8m +21.6%
2024 £56.7m
2023 £50.9m
2022 £42.2m
2021 £26.8m
2024 £88.8m
2023 £73.0m
2022 £67.1m
2021 £20.7m
Gross margin
3
70.4% AOP as a percentage of gross profit 43.4%
2024 70.4%
2023 70.3%
2022 73.7%
2021 22.8%
2024 43.4%
2023 43.5%
2022 43.2%
2021 41.8%
Cash conversion
5
104.3%
2024 104.3%
2023 84.3%
2022 131.9%
2021 130.7%
1 ‘Gross invoiced income’ is a non-IFRS financial measure that reflects gross income billed to customers, adjusted for deferred and accrued revenueitems.
The reconciliation of gross invoiced income to revenue is set out in note 3(b) to the consolidated financial statements.
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, i.e. the gross profit achieved on the contract and not the gross income billed to the customer.
3 The 2022 figures for revenue and gross margin reflect the change in accounting policy under IFRS 15, which took effect from that year and has been applied in all subsequent periods.
4 ‘Adjusted operating profit’ is a non-IFRS alternative performance measure that excludes from operating profit theeffects of significant items ofexpenditure which are
non-recurring events or do not reflect our underlying operations. IPO costs, (2020/21 only) amortisation of acquired intangible assets andshare-based payment charges are
allexcluded. Thereconciliation of adjusted operating profit to operating profit is set out in note 2(b) to the consolidated financial statements.
5 ‘Cash conversion’ is a non-IFRS alternative performance measure that divides cash generated from operations less capital expenditure (together, ‘free cash flow’) by adjusted
operating profit.
16 Bytes Technology Group plc
OUR BUSINESS
Strategic Sustainability
Customer numbers 5,978 +0.6% Employee numbers 1,057 +13.7%
2024 5,978
2023 5,941
2022 5,330
2021 5,147
2024 1,057
2023 930
2022 773
2021 685
Average gross profit per customer £24,400 +11.9% Employee net promoter score 71
2024 £24,400
2023 £21,800
2022 £20,100
2021 £17,400
2024 71
2023 70
2022 69
2021 69
Renewal rate 109%
2024 109%
2023 116%
2022 111%
2021 107%
As
part of our ongoing commitment to support positive
change in our environment and communities where we
operate, we continue to make contributions in various
ways to corporate social responsibility activities.
Customer net promoter score 82
2024 82
2023 77
2022 64
2021 63
% GP from existing customers 97%
2024 97%
2023 96%
2022 93%
2021 95%
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
17
Our people, customers and
vendorshelped us achieve
anotherimpressive year
Bytes Technology Group plc18
REVIEW OF THE YEAR
Review of
the year
20 CFO’s introduction
22 Operational review
26 Financial review
30 Sustainability review
32 Our people
36 Our communities
38 Our planet
44 Task Force on Climate-related
Financial Disclosures (TCFD)
53 Risk report
63 Non-financial information statement
64 Our viability statement
65 Section 172 statement
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
19Annual Report and Accounts 2023/24
CFO’s introduction
During the year, we continued to focus on three areas that drive our business:
providing quality service and doing more with our customers, staying close
to our primary vendors and investing in our people. This allowed us to
achieve good financial results, despite uncertainty in the broader market.
I am proud of the efforts of the team across BTG that
allowed us to increase our gross profit by 12.5% to
£145.8 million in 2023/24, and our gross invoiced
income by 26.7% to £1.8 billion. We grew our adjusted
operating profit by 12.2% to £63.3 million and ended
the year with strong cash conversion at 104.3%.
Broadening our customer base
withnotable contract wins
Our track record of service excellence helped
usachieve our goal of doing more business with
eachcustomer this year. Gross profit from existing
customers increased by £11.1 million, these
customers making up 97% of our total gross profit.
The balance of our gross profit growth at £5.1 million
came from new customers, supporting our overall
strategy of doing more with existing customers
andwinning new ones.
One of the highlights this year was winning several
major, multi-year contracts with government
organisations, including the NHS and HMRC.
Thissupports our long-term sales strategy and adds
toour strong repeat (annuity) income. While these
contracts are typically won at reduced margins due
tothe competitive nature of the tenders, we are
confident that they will open up additional software,
hardware and service opportunities over time.
The growth this year was spread across the business,
with the gross invoiced income in software, services
and hardware increasing by 27.9%, 8.6% and 8.1%
respectively. We grew by17.6% in the corporate
sector, and by 32.8% inthepublic sector. Our
continued disciplined approach to cost management
and operating efficiency is evidenced by our adjusted
operating profit(AOP) to gross profit (GP) ratio of
43.4% (2022/23 43.5%).
Andrew Holden
CFO
20 Bytes Technology Group plc
REVIEW OF THE YEAR
Continued robust demand in our market
The world in general this year was marked by
uncertainty and unease. The war in Ukraine
continued and conflict erupted in the Middle East.
Inflation started to fall but interest rates did not.
Whilethese issues have had no material impact
onour business so far, we continue to keep a close
eye on the external environment while it remains
souncertain. We did see some reticence about
committing to new investments in hardware, but
because of our heavy focus on software, a largely
subscription model that accounts for around 94%
ofour business, this did not noticeably affect us.
Indeed, demand from public sector customers and
corporate customers from all sectors remained
robust, as organisations sought to boost their
efficiency and productivity through technology.
Investing for future growth
Our biggest investment is in people. As a consistently
growing business, we need to attract and retain the
right people so we can maintain our high levels of
service as our customer base expands. During
2023/24 we increased our headcount by 13.7%,
from930 to 1,057 across the business, including
salesand support, which came on top of a 20.3%
headcount increase in the previous financial year.
Wespent a lot of time and effort on integrating
andtraining our new employees, making sure they
understood our culture, which is integral to our
business. It’s about high performance and high
reward as well as flexibility and enjoyment. We
invested in our existing workforce too. Besides
training, this included identifying and promoting
talented people into leadership roles, to give
ustheright managers for the larger team.
We also invested in our workspaces and our cloud
capabilities. In March 2023, we opened an office in
the City of London, bringing us closer to prospective
employees and customers, and in April 2023 we
acquired a 25.1% interest in Cloud Bridge Technologies,
an AWS partner, as part of our multicloud strategy.
Looking ahead
Thanks to all the investments in people and systems
that we’ve made in recent years, as well as our strong
culture and the positive trends in our sector, I’m
confident we will be able to keep expanding our
business in the coming year. However, we know that
as we grow, processes and internal controls need to
evolve too so that they keep in step with the larger
business. Since we listed the company in 2020, we
have been taking ongoing steps to strengthen our
processes and internal controls, including around
risk and governance, and embedding them into
thenew systems we are implementing in 2024/25.
This will include increased automation and greater
efficiency in a number of areas as we increase
ourvolume of business.
Andrew Holden
CFO
22 May 2024
Demand from corporate
andpublic sector customers,
across all sectors, remained
robust as organisations sought
toboost their efficiency and
productivity through technology.
Strong cash management
We are fortunate to operate in an environment
where, for the most part, customers pay us
before we are required to pay our suppliers.
This means we don’t have to borrow to fund
ourgrowth and carry a certain amount of cash
on the balance sheet on a day-to-day basis.
Byactively managing our cash reserves on the
money markets this year, when bank deposit
rates rose to more than 5%, we earned
£5.1 million in interest. This offset the increase
inour tax charge which was dueto both growth
in profits and the rise in the corporate tax rate
from 19% to 25% towards the start of our financial
year. As a result, ourEPS has grown by 15.8%.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
21
Operational review
Our two complementary businesses share one culture, and
deepcommitment to our people, our customers and our vendors.
In2023/24, this again proved to be a winning formula. Both Bytes
and Phoenix expanded on all fronts as we increased our customer
numbers, headcount, gross profit and our offerings.
Strong demand from the
corporate and public sectors
Amid robust demand from existing and
new customers, Bytes and Phoenix grew
strongly across software, hardware and
services, led by:
• • Security – as cyberattacks and
threats continue to mount, businesses
continue to invest in a wide array of
advanced tools and managed security
services, to strengthen their defences
• • Subscription software – most
software contracts are now based
onsubscriptions, rather than one-off
licences, providing a strong
annuity-based revenue stream
• • Cloud-based solutions –
organisations continue to migrate their
systems to the cloud while also seeking
to manage costs and take advantage
of the latest cloud-based technologies,
including AI, which bolsters our annuity
business given its repeat nature
• • Hybrid infrastructure – to better
manage their entire IT ecosystem,
businesses combine the security and
control of on-site data centres with
the flexibility of cloud services
• • IT services – increasingly advanced
technology has led to greater demand
for expert support, from security to
compliance, both on a project basis
and via annual support contracts.
Innovating to provide even
betterservice and solutions
As our customer base expands, we need
to be innovative to maintain our high level
of service, and to create new solutions to
help our clients get the most out of the
latest technology. A good example of
thisis Bytes’ Marketplace platforms.
Extending this offering from the existing
Microsoft CSP platform, both businesses
have added Adobe Marketplace in
2023/24. These platforms offer a one-stop
shop that allows customers to self-serve
their Microsoft and Adobe subscriptions,
giving them greater control and clarity
over costs and a more personalised
experience, while Bytes continues to
manage the order processing and billing.
Phoenix, meanwhile, has boosted its
technical capabilities and professional
services. This includes the governance,
risk and compliance service, which helps
organisations to keep their users and
theirclients safe from the risk of data
compromise and regulatory breaches.
Both Bytes and Phoenix continued to
develop their strong managed security
services, in partnership with leading
vendors, as the risk of cyberattacks
continues to increase.
Using AI tools to boost
ourproductivity and help
ourcustomers boost theirs
As a Group, we were invited by Microsoft
to form part of its early access programme
for Copilot, the AI-supported tool that
uses large language models and an
organisation’s data to boost productivity.
One hundred of our employees – 50 each
from Bytes and Phoenix – started using
the premium version of Copilot during the
year, learning how it could help them in
their day-to-day tasks.
While this is good for us internally, it also
gave us valuable experience and insights
before rolling out the product to our
customers, who have expressed great
interest in the technology. Bytes and
Phoenix each held webinars for existing
and prospective customers about Copilot,
with more than 2,000 people registering to
attend. We believe AI products, including
GenAI, which enables users to quickly
create content, will be a big driver for
ourbusiness in the years ahead.
What Bytes and Phoenix share:
• • BTG’s values, strategic ambitions,
governancestructures
• • Insights and good practice
• • Industry-leading skills
• • Can-do culture
• • Representation and engagement in Group
ExecutiveCommittee and steering committees
• • Comparable products and services.
The businesses have their own:
• • Identities
• • Management teams
• • Individual but complementary routes to market
• • Customer bases and markets
• • Offices.
22 Bytes Technology Group plc
REVIEW OF THE YEAR
Expanding our teams and
strengthening our culture
We’ve continued to invest in our teams to
serve our ever-growing business, passing
the 1,000-employee mark for the first time.
The headcount at Bytes and Phoenix rose
by 14% and 13% respectively, impressive
numbers in a competitive jobmarket. Our
apprentice and sales academy schemes
continue to grow and are creating a strong
pipeline of talent.
We also recruited people with specialist
skills, including AI, to ensure we stay
ahead of the technology curve and ready
to respond to customer demand. Both
businesses have worked hard to ensure
that our culture is protected and
maintained asthey grow, through their
onboarding programmes, training and, in
the case ofPhoenix, the use of a specialist
cultureconsultant, Craft Your Culture.
Read more on pages 32 to 33.
Key facts
Employees
6 31
Customers
3,344
HQ
Leatherhead,
Surrey
Markets
Corporate and public sectors across a broad range of
industries, including professional services, manufacturing,
retail, central and local government, and technology,
mediaand telecoms.
Vendors
Some of our partners – Microsoft, AWS, Check Point,
Mimecast, Adobe, Darktrace, Palo Alto and Security HQ
In the AI gold rush, we’re selling the
equivalent of picks and shovels. That
meansusing our own experience with
AItoprovide advice and guidance on
preparation – all the way through to
implementation and deployment.
Jack Watson
MD Bytes
Key facts
Employees
420
Customers
2,634
HQ
Pocklington,
North Yorkshire
Markets
Mostly public sector, across a wide range of areas, including
central and local government, charities, education, emergency
services, healthcare and housing. Its own License Dashboard
offering has clients in the US and Canada.
Vendors
Some of our partners – Microsoft, VMware, Dell, Adobe, Sophos,
Citrix, Mimecast, Rubrik, ServiceNow, Tanium, Wasabi and Verkada
Expanding our team while
safeguardingourculture ensures
we sustain the spirit ofcollaboration
andexcellence – somethingthat
trulydefines Phoenix.
Clare Metcalfe
MD Phoenix
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
23
Operational review continued
Doing more with existing customers – and winning new ones
Our close customer relationships are crucial to our success. We monitor our progress using three key metrics:
customernumbers, our share of their business and our customer net promoter score (NPS).
Growing our business in 2023/24
In keeping with our strategy of expanding our business with existing customers and winning new ones, we:
Total number of customers Maintained a high renewal rate
5,978
This year
5,941
Last year
109%
This year
116 %
Last year
We did business with a number of new customers this year
including Trainline, RSS Global and OCS atBytes and
Thames Valley Police, Aberdeenshire Council and Northern
Trains at Phoenix.
This metric tracks the growth in gross profit from existing
customers. Phoenix did more business with established
customers such as Lancashire County Council,
CityofLondon and University of Essex, and Bytes
withCostain, Anglian Water and CFC Underwriting.
Improved our NPS Increased gross profit per customer
82
This year
77
Last year
11.9 %
Across the Group
The score measures the likelihood of our customers
recommending us to others and can range from -100 to +100.
We strive to create lasting relationships with our customers.
However, the marketplace is competitive, and they are not
tied to us. For that reason, we try not to depend too much
onspecific customers. In 2023/24, no single customer
represented more than 1% of our gross profit.
A trusted partner to our customers
We’re dedicated to helping our customers use the latest technology
to improve their businesses. It’s about much more than just greater
productivity and efficiency; we also want to save them money,
secure their systems and data as cyberattacks increase, and make
them more sustainable in a world threatened by climate change. Our
customers choose Bytes and Phoenix, and stay with us, because:
• • We always act in their best interest. We don’t sell to
customers what we want – we provide what they need.
• • We understand their business. Our people are experts in
abroad range of the latest technology. They’re also experts
in their customers, because we give themthe time to really
understand each customer, andthecustomer’s industry.
• • We provide continuity and a friendly, can-do culture.
Given our high staff retention rates, our customers often
deal with the same account manager and team, year
afteryear. We propose solutions to problems and bring
apositive attitude.
• • We are committed to excellence and honesty. We
always aim to exceed our customers’ expectations – but,
ifwe don’t or we make a mistake, we’re honest about it
andtry to fix it quickly.
• • We support wider communities. For many of our
customers, especially in the public sector, we go beyond
thescope of the project with social value offerings,
forthebenefit of local communities.
24 Bytes Technology Group plc
REVIEW OF THE YEAR
Strong partnerships with
industry-leading vendors
We enjoy close relationships with the
more than 100 vendors who make or
distribute the software, hardware and
other IT products that we provide to our
customers. Some have been with us for
several decades, including Microsoft,
ourbiggest partner. Others are new
companies, and work in cutting-edge
areas such cybersecurity and AI.
In 2023/24, we saw robust demand for
cloud services, including Microsoft Azure
and AWS, and for cybersecurity solutions,
where we did more with Sophos,
Crowdstrike and Palo Alto. At Phoenix,
our Microsoft business grew rapidly across
all product areas. In addition to our other
main vendors, we also strengthened our
partnerships with ServiceNow, Tanium,
Wasabi andVerkada.
Awards in 2023/24
Bytes
• • Mimecast VAR Customer Excellence Partner of the Year 2023
• • Forcepoint Partner Excellence Award 2023
• • Tenable Growth Partner of the Year 2023
• • Rubrik Top Growth Partner of the Year 2023
• • Check Point Cloud Partner of the Year 2023
Phoenix
• • Microsoft Global Modern Endpoint Management Partner
of the Year Award 2023
• • VMware Industry Award 2023 winner
• • Sophos Public Sector Partner of the Year Award – EMEA North 2023
• • Adobe Best Retention Program 2023
• • Bitdefender Marketing Campaign of the Year Award 2023
Why our vendors partner with us
We’re independent of the vendors whose products we sell, so we’re impartial
when making recommendations to our customers. At the same time, we
consider the vendors to be our partners, and we work hand in hand with
themto deliver the best results for our customers. Vendors choose to
workwith Bytes and Phoenix because we:
• • Continually invest in training and development. That means we can
promote our vendors’ products with knowledge and skill. And if we
don’thave the right expertise in our business, we hire people who do.
• • Act with integrity. Before committing to a partnership with a vendor,
wedo ourdue diligence and make sure that we have the technical
deliverycapability and the market to make it worthwhile. Then we
deliveron time,against the plan.
• • Collaborate with them. By hosting seminars and events that bring
togetherrepresentatives of leading vendors, we strengthen our
mutualunderstanding of the challenges faced by customers,
andthetechnologies that can help.
• • Have a strong record of growth. Vendors can see where we’ve
comefrom – and where we’re going – and want to align with that.
Some of our top vendors:
We have always considered ourselves to be a trusted advisor to our
customers. And today, when customers have more choice than ever
before in terms of vendor product solutions, they need our advice.
Jack Watson
MD Bytes
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
25
Financial review
Income statement
Year ended
29 February 2024
£’m
Year ended
28 February 2023
£’m
Change
%
Gross invoiced income (GII) 1,823.0 1,439.3 26.7%
GII split by product:
Software 1,722.0 1,346.1 2 7. 9%
Hardware 41.4 38.3 8.1%
Services internal
1
31.5 28.5 10.5%
Services external
2
28.1 26.4 6.4%
Netting adjustment (1,616.0) (1,254.9) 28.8%
Revenue 207.0 184.4 12.3%
Revenue split by product:
Software 130.4 114.1 14.3%
Hardware 41.4 38.3 8 .1%
Services internal
1
31.5 28.5 10.5%
Services external
2
3.7 3.5 5.7%
Gross profit (GP) 145.8 129.6 12.5%
GP/GII % 8.0% 9.0%
Gross margin % 70.4% 70.3%
Administrative expenses 89.1 78.7 13.2%
Administrative expenses split:
Employee costs 71.2 63.3 12.5%
Other administrative expenses 17.9 15.4 16.2%
Operating profit 56.7 50.9 11.4%
Add back:
Share-based payments 5.7 4.2 35.7%
Amortisation of acquired intangible assets 0.9 1.3 (30.8)%
Adjusted operating profit (AOP) 63.3 56.4 12.2%
Interest income 5.1 –
Finance costs (0.4) (0.5)
Share of profit of associate
3
0.2 –
Profit before tax 61.6 50.4 22.2%
Income tax expense (14.7) (10.0) 47.0%
Effective tax rate 23.9% 19.9%
Profit after tax 46.9 40.4 16.1%
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 since April 2023.
How we performed in 2023/24
26 Bytes Technology Group plc
REVIEW OF THE YEAR
Overview of 2023/24 results
2023/24 has seen continued double-digit growth across all our key
performance measures. Customers have continued to engage with
us to support their move into the cloud, or to extend their presence
init, with demand for more sophisticated and resilient security,
support and managed service solutions.
This has resulted in operating profit increasing by 11.4% to
£56.7 million (2022/23: £50.9 million) and AOP growing by 12.2%
year on year from £56.4 million to £63.3 million. The adjusted
operating profit excludes the impact of amortisation of acquired
intangible assets and share-based payment charges, which do
notreflect the underlying day-to-day performance of the Group.
Gross invoiced income (GII)
GII reflects gross income billed to our customers, with some small
adjustments for deferred and accrued items (mainly relating to
managed service contracts where the income is recognised over
time). We believe that GII is the most useful measure to evaluate our
sales performance, volume of transactions and rate of growth. GII
has a direct influence on our movements in working capital, reflects
our risks and demonstrates the performance of our sales teams.
Therefore, it is the income measure that is most recognisable
among our staff, and we believe most relevant to our customers,
suppliers, investors and shareholders for them to understand
ourbusiness.
GII has increased by 26.7% year on year, with growth spread
acrossall the business’s income streams, but most significantly
forsoftware, which remains the core focus, contributing 94% of
thetotal GII for the year (2022/23: 94%). The Group’s already
substantial presence in the public sector has been bolstered by
several very large strategic wins relating to government Microsoft
Enterprise Agreements. The Group bids 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 process.
This 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 £280.9 million, up32.8%, to
£1,137.5 million (2022/23: £856.6 million). Our corporate GII
increased by £102.7 million to £685.5 million (2022/23:
£582.7 million), representing a very pleasing rise of 17.6%.
This means that our overall GII mix has moved slightly compared
tolast year, with 62% in public sector (2022/23: 60%) against
corporate of 38% (2022/23: 40%).
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.
Our judgements around this area are set out in notes 1.4 and 1.10
ofthe full-year financial statements for 2023/24 but in summary,
software and external services revenue is treated on an agency basis
while hardware and internal services revenue is treated as principal.
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.
With the significant increase in software GII, as noted above, and a
squeeze on software margin as noted below, its treatment on a net,
or agency, basis, means that the 12.3% increase in revenue in the
year is therefore lower than the rise in GII.
Gross profit (GP)
Gross profit increased by 12.5% to £145.8 million
(2022/23:£129.6 million).
This growth is less than that for GII given the high level of new or
renewed GII derived from the public sector and the highly competitive
nature of the tendering process, governed under the Crown
Commercial Services framework agreements. This has meant that
large software contracts, most notably with Microsoft, have been won
or renewed at reduced margins. This tends to be particularly prevalent
in the first year of new agreements with public sector entities and,
asa result, we have seen a reduction on our GP/GII% in the year to
8.0% (2022/23: 9.0%). That said, if the impact of the two largest new
contracts is removed from the calculation, the percentage rises to
8.9%, virtually in line with last year and demonstrating the continued
strong performance of the business in maintaining its margins.
Deals such as these are consistent with 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 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 2023/24 with 97%
ofour GP coming from customers that we also traded with last year
(2022/23: 96%), at a renewal rate of 109% (which measures the
GPfrom existing customers this period compared to total GP in the
prior period). This demonstrates our ability to increase our share
ofwallet with average GP per customer growing from £21,800 in
2022/23 to £24,400 in 2023/24.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
27
Financial review continued
Administrative expenses
This includes employee costs and other administrative
expensesasset out below.
Employee costs
Our success in growing GII and GP continues to be as a direct result
of the investments we have made over 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. This is at the very heart of our
low employee churn rate, the growth in gross profit per customer
and our high customer retention rate.
During the year we have seen total staff numbers rise above 1,000
forthe first time, to 1,057 on our February 2024 payroll, up by 13.7%
from the year-end position of 930 on 28 February 2023. Employee
costs included in administrative expenses rose by 12.5% to
£71.2 million (2022/23: £63.3 million), in line with our GP growth
and reflecting the balanced and proportional way in which staff
investments are made. Indeed, after excluding share-based payments
of £5.7 million (2022/23: £4.2 million), the rise was lowerat 10.8%.
Other administrative expenses
Other administrative expenses increased by 16.2% to £17.9 million
(2022/23: £15.4 million). This increase included additional spend
oninternal systems, professional fees, staff welfare and travel
costs. This reflects the costs of running, and investing in, a growing
organisation and in operating a listed Group, including evolving our
governance structure, controls, and processes with the support of
our professional advisors.
Adjusted operating profit and operating profit
Adjusted operating profit excludes, from operating profit, the effects of:
• • Share-based payment charges because, while new employee
share schemes are being launched, the charge to the income
statement will increase each year. Accordingly, the charge
forthe current year has risen to £5.7 million, compared
to£4.2 million last year.
• • Amortisation of acquired intangibles because this cost only
appears as a consolidation item and does not arise from
ordinary operating activities.
We believe that adjusted operating profit is a meaningful measure
that the Board can use to effectively evaluate our profitability,
performance, and ongoing quality of earnings. Adjusted operating
profit in 2023/24 increased to £63.3 million (2022/23: £56.4 million),
representing growth of 12.2%. Our operating profit increased from
£50.9 million to £56.7 million, equating to an increase of 11.4%.
Adjusted operating profit as a percentage of GP is one of the
Group’s key alternative performance indicators, being a measure
ofthe Group’s operational effectiveness in running day-to-day
operations. We aim to sustain it in excess of 40% and have
achievedthis, with a ratio of 43.4% (2022/23: 43.5%).
Interest receivable and finance costs
This year has seen significant interest being earned from money
market deposits, totalling £5.1 million (2022/23: nil).
Our finance costs largely 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 the introduction of a 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 we have accounted for the Group’s share of its profits
since the date of our investment, £0.2 million for the 11-month period.
Profit before tax
The combined impact of increased operating profits and high levels
of interest received has seen our profit before tax increasing by an
impressive 22.2% to £61.6 million (2022/23: £50.4 million).
Income tax expense
The £4.7 million (47.0%) rise in our income tax expense to
£14.7 million (2022/23: £10.0 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.
Nevertheless, our effective rate of tax at 23.9% is lower than the
taxcharge would be at the standard rate, primarily because of
deductions available in relation to the share options exercised by
staff during the year. The reconciliation is set out in note 8 to the
financial statements.
Profit after tax
Profit after tax increased by 16.1% to £46.9 million (2022/23:
£40.4 million), underlining our growth in operating profits and
withthe impact of higher taxes more than offset by the increase
ininterest income.
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 15.8% from
16.88 pence to 19.55 pence, while adjusted earnings per share
haverisen 15.7% to 21.78 pence (2022/23: 18.83 pence). The
adjusted figure removes the effects of share-based payment
charges and amortisation of intangible assets.
28 Bytes Technology Group plc
REVIEW OF THE YEAR
Balance sheet and cash flow
Balance sheet
As at
29 February 2024
£’m
As at
28 February 2023
£’m
Investment in associate 3.2 –
Property plant and equipment 8.5 8.4
Intangible assets 40.6 41.5
Other non-current assets 4.9 1.2
Non-current assets 57.2 51.1
Trade and other receivables 221.8 185.9
Cash 88.8 73.0
Other current assets 11.8 10.7
Current assets 322.4 269.6
Trade and other payables 277.9 231.7
Lease liabilities 0.4 0.1
Other current liabilities 19.6 23.9
Current liabilities 297.9 255.7
Lease liabilities 1.3 0.9
Other non-current liabilities 2.1 2.6
Non-current liabilities 3.4 3.5
Net assets 78.3 61.5
Share capital 2.4 2.4
Share premium 633.7 633.6
Share-based payment reserve 11.0 7. 2
Merger reserve (644.4) (644.4)
Retained earnings 75.6 62.7
Total equity 78.3 61.5
Closing net assets stood at £78.3 million (2022/23: £61.5 million)
including the Group’s £3.2 million interest (25.1%) in Cloud Bridge
Technologies (which includes our £0.2 million share of profits since
it wasacquired in April 2023).
Net current assets closed at £24.5 million (2022/23: £13.9 million).
This includes growth in the trade and other receivables of 19.3%,
and similar growth in trade and other payables of 19.9%, both
reflecting the increase in our GII.
Our debtor days at the end of the year stood at 34, down from
37at28 February 2023, and our average debtor days for the year also
reduced to 37 (2022/23: 39). While we have increased our closing
loss allowance provision to £2.5 million (2022/23: £1.5 million), this is
a prudent position given the £35.0 million increase in our gross trade
receivables and, in fact, we have come through the year with only
£0.3 million in bad debt write-offs against total GII of £1.8 billion.
This strong performance in respect of collecting customer
receivables has contributed to the positive cash conversion
figuresdescribed below.
The Group has paid its suppliers on schedule through the year,
withits average creditor days remaining in line with prior year at 47
and standing at 44 at the end of the year (2022/23: 42).
The consolidated cash flow is set out below along with the key flows
which that affected it:
Cash flow
Year ended
29 February
2024
£’m
Year ended
28 February
2023
£’m
Cash generated from operations 67.3 48.9
Payments for fixed assets (1.3) (1.3)
Free cash flow 66.0 47.6
Net interest received/(paid) 4.7 (0.5)
Taxes paid (15.1) (10.3)
Lease payments (0.2) (0.2)
Dividends (36.6) (30.7)
Investment in associate (3.0) 0.0
Net increase in cash 15.8 5.9
Cash at the beginning of the year 73.0 67.1
Cash at the end of the year 88.8 73.0
AOP 63.3 56.4
Cash conversion (annual) 104.3% 84.3%
Cash conversion (since IPO) 109.9% 112.4%
Cash at the end of the period was £88.8 million (2022/23: £73.0 million),
which is after the payment of dividends totalling £36.6 million during
the year – being the final and special dividends for 2022/23 and the
interim dividend for 2023/24 – and after making the £3.0 million
investment in Cloud Bridge.
Cash flow from operations after payments for fixed assets (free
cashflow) generated a positive cash flow of £66.0 million (2022/23:
£47.6 million). Consequently, the Group’s cash conversion ratio for
the year (free cash flow divided by AOP) was 104.3% (2022/23:
84.3%). Our cumulative cash conversion since we first reported as a
PLC in 2020/21 stands at 109.9% over the four years, which is ahead
of our sustainable cash conversion target of 100% and reflects the
Group’s longer-term performance against this measure.
If required, the Group has access to a committed revolving credit
facility (RCF) of £30 million with HSBC. The facility commenced on
17 May 2023, replacing the Group’s previous facility for the same
amount and runs for three years, until 17 May 2026, with an optional
one year extension to 17 May 2027. To date, the Group has not
utilised the facility.
Proposed dividends
As stated above, the Group’s dividend policy is to distribute 40%
ofpost-tax pre-exceptional earnings to shareholders. Accordingly,
the Board is pleased to propose a gross final dividend of 6.0 pence
per share. The aggregate amount of the proposed dividend
expected to be paid out of retained earnings at 29 February 2024,
butnot recognised as a liability at the end of the financial year,
is£14.4 million. In light of the company’s continued strong
performance and cash generation, the Board also considers it
appropriate to propose a cash return to ordinary shareholders with
aspecial dividend of 8.7 pence per share, equating to £20.9 million.
If approved by shareholders, the final and special dividend will be
payable on Friday, 2 August 2024 to all ordinary shareholders who
are registered as such at the close of business on the record date
ofFriday, 19 July 2024.
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
29
This has been an excellent year for progress in environmental
andsocial goals. In fully understanding and quantifying our carbon
emissions across Scope 3 and submitting our targets toSBTi,
wehave achieved two big milestones.
Lisa Prickett, Group Sustainability Manager
At Phoenix, we take sustainability seriously. Ourinvestments
this year have opened up opportunities to reduce our carbon
emissions and build new partnerships to make a positive
impact in our customer communities.
Jennifer Clewley, Sustainability Lead, Phoenix
Sustainability review
30 Bytes Technology Group plc
REVIEW OF THE YEAR
We’re a responsible business, with a duty to everyone who works
for us, with us and around us. This philosophy is underpinned by our
core values of integrity, respect and kindness. We strive to do the
right thing by our people, our communities and our planet.
Our people
We aim to attract, engage and retain employees, helping them build
fulfilling and rewarding careers in a supportive and fun environment.
• • Our headcount rose from 930 to 1,057.
• • Our employee net promoter score reached 71.
>> Read more on pages 32 to 35
Our planet
In our own actions, and by supporting our customers to use IT more
sustainably, we’re helping to protect the planet for future generations.
• • We made major progress in more fully measuring our Scope 3 emissions – the
indirect emissions across our value chain.
• • We submitted our carbon reduction targets to the Science Based Targets
initiative for validation.
>>
Read more on pages 38 to 43
Our communities
By extending our long track record of volunteering our time and giving
money in the areas where we work, we’re creating stronger communities.
• • Our people devoted more than 1,500 hours to voluntary work.
• • We donated money and goods to numerous good causes, from the
Turkey–Syria earthquake appeal to charities supporting young people
frommarginalised communities.
>>
Read more on pages 36 to 37
Our Sustainability
Framework
Our Sustainability Framework is
published as a separate document
and is available at bytesplc.com.
We support all the UN Sustainable Development Goals,
but focus on the seven where we can have the most impact:
Annual Report and Accounts 2023/24
FINANCIAL STATEMENTSSTRATEGIC REPORT GOVERNANCE REPORT
31
Sustainability review continued
Our people
Our talented people drive our success as a business, and we strive
tohelp them build fulfilling careers, with clear progression paths. In
2023/24, for the first time, we had more than 1,000 employees, as we
continued to expand our teams to serve our growing customer base.
Two leading brands,
one set of values
Our two businesses, Bytes and
Phoenix, have 631 and 420 people
respectively. Each business operates
autonomously and has its own
identity, headquarters and
management team, but they have
many commonalities. These include
similar employment policies,
industry-leading knowledge and,
most importantly, the same values
and culture. The businesses also look
for opportunities to share good practice
and insights, for the benefit of BTG.
Communicating with
ouremployees
Along with the regulatory announcement
tothe market, communicating with
employees was one of our primary
concerns after the former CEO’s
resignation. New CEO, and former MD
Phoenix, Sam Mudd communicated with
all staff to introduce herself to those at
Bytes and reassure employees that Neil’s
resignation would have minimal impact on
the continuity of the business. We also
prepared an interview piece about Sam
that went out to all employees. Throughout
this period, Samled by example with her
honest, open approach, which helped all
managers and employees do the same.
We were pleased to hear that people
generally feltthat the situation was,
aswecharacterised it, the ac